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Parker Drilling reports Q4 2015 results

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Oilfield Technology,

The net loss included the following pre-tax charges:

  • US$6.1 million of asset and inventory write-offs, which include US$4.8 million to reduce the carrying value of two rigs and US$1.3 million in inventory writedowns, related to the Company's decision to no longer provide its drilling services in Colombia.
  • US$4.3 million of non-cash charges to increase the provision for the reduction in carrying value of certain drilling-related assets.
  • US$4.8 million loss associated with the sale of the Company's investment in a joint venture.
  • Excluding these pre-tax charges, the adjusted net loss was US$23.3 million, or US$(0.19) per share.

    Fourth quarter Adjusted EBITDA was US$28.6 million, compared with US$35.4 million for the preceding quarter.

    Gary Rich, the Company's Chairman, President and CEO said:

    "Cost reductions, particularly those implemented in the second half of the year, resulted in fourth quarter Adjusted EBITDA that was slightly higher than we anticipated despite a 14% sequential decline in revenues. We experienced activity declines across all three segments as low commodity prices continued to curtail customer activity across multiple geographic markets.

    2015 summary

    "In 2015, we successfully accomplished several initiatives aimed at navigating this difficult operating environment. We lowered our cost base through headcount reductions and minimised rig-related costs, maintained our working capital diligence, reduced capital expenditures and, where possible, sustained utilisation and market share.

    "We further strengthened our financial position by reducing our total debt by US$30 million during the year and enhanced our liquidity and financial flexibility by increasing our revolver capacity. By efficiently managing our cash receipts and spending, we ended the year with a cash balance of US$134 million and an undrawn revolver. Our total liquidity as of December 31, 2015 was approximately US$322 million as compared with approximately US$178 million at December 31, 2014.

    "From an operational perspective, our US rental tools business outperformed the US rig count as we maintained share and grew our Gulf of Mexico footprint. While the US rig count declined 47% in 2015, our US rental tools revenue was 37% lower. In addition, we increased gross margin as a percentage of revenue in our international rental tools business despite lower revenue as we inserted new management, consolidated and closed locations, reduced headcount, and improved the management of our supply chain.

    "Going forward, we believe rig utilisation and pricing will continue to come under pressure, especially as the deteriorating market fundamentals impact our international drilling customers. We also think the lower US rig count will further impact utilisation and pricing for our rental tools. In response, we will maintain our focus on managing our cash flows. As part of that strategy, our 2016 capital expenditures are expected to be approximately US$50 million as compared with US$88 million in 2015."

    Fourth quarter review

    Parker Drilling's revenues for the 2015 fourth quarter, compared with the 2015 third quarter, decreased 14.2% to US$148.7 million from US$173.4 million, operating gross margin excluding depreciation and amortisation expense (gross margin) decreased 22.7% to US$34.3 million from US$44.4 million and gross margin as a percentage of revenues was 23.1 percent, compared with 25.6% for the prior period.

    Drilling Services

    For the Company's Drilling Services business, which is comprised of the US (Lower 48) Drilling and International & Alaska Drilling segments, revenues declined 15.1% to US$99.0 million from US$116.6 million, gross margin decreased 24.6% to US$20.5 million from US$27.2 million, and gross margin as a percentage of revenues was 20.7%, compared with 23.3% for the prior period.

    US (Lower 48) Drilling

    US (Lower 48) Drilling segment revenues were US$3.5 million, a 41.7% decrease from 2015 third quarter revenues of US$6.0 million. Gross margin was a US$2.2 million loss as compared with a 2015 third quarter gross margin loss of US$1.9 million. The declines in revenues and margin were primarily the result of lower utilisation, partially offset by lower costs.

    International & Alaska Drilling

    International & Alaska Drilling segment revenues were US$95.5 million, a 13.7% decrease from 2015 third quarter revenues of US$110.7 million. Gross margin was US$22.6 million, a 22.3% decrease from 2015 third quarter gross margin of US$29.1 million. Gross margin as a percentage of revenues was 23.7% as compared with 26.3% in the 2015 third quarter. The decrease in revenues is primarily attributable to lower Latin America rig utilisation and project services activities, partially offset by lower operating costs.

    Rental Tools Services

    Rental Tools segment revenues were US$49.8 million, a 12.3% decrease from 2015 third quarter revenues of US$56.8 million. Gross margin was US$13.8 million, a 19.8% decrease from 2015 third quarter gross margin of US$17.2 million. Gross margin as a percentage of revenues was 27.7% as compared with 30.3% in the 2015 third quarter. Reduced revenues and gross margin were primarily due to the continued decline in US land drilling activity, as well as lower activity in certain international markets.

    General and Administrative expense decreased to US$6.9 million for the 2015 fourth quarter, from US$8.9 million for the 2015 third quarter.

    The Company's effective tax rate in the fourth quarter was 7%, primarily due to discrete items as well as receiving no tax benefit from certain charges incurred during the quarter.

    Capital expenditures in the fourth quarter were US$15.7 million, and were US$88.2 million for the year.

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    Adapted from a press release by Louise Mulhall

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