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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|
| |
☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For The Quarterly Period Ended September 30, 2019
Or
|
| |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-7573
|
|
PARKER DRILLING COMPANY (Exact name of registrant as specified in its charter) |
|
| | |
Delaware | | 73-0618660 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
5 Greenway Plaza, Suite 100, Houston, Texas 77046
(Address of principal executive offices) (Zip Code)
(281) 406-2000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
|
| | |
Title of each class | Trading symbol | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | PKD | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
|
| | | | | | | | | | |
Large accelerated filer | ☐ | | Accelerated filer | ☑ | | Non-accelerated filer | ☐ | | Smaller reporting company | ☑ |
| | | | | | | | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
As of November 1, 2019 there were 15,044,739 common shares outstanding.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
|
| | | |
PARKER DRILLING COMPANY AND SUBSIDIARIES |
CONSOLIDATED CONDENSED BALANCE SHEETS |
(Dollars in Thousands, Except Per Share Data) |
|
| | | | | | | | |
| Successor | | | Predecessor |
| September 30, 2019 | | | December 31, 2018 |
| (Unaudited) | | | |
ASSETS | |
Current assets: | | | | |
Cash and cash equivalents | $ | 101,106 |
| | | $ | 48,602 |
|
Restricted cash | — |
| | | 10,389 |
|
Accounts and notes receivable, net of allowance for bad debts of $80 at September 30, 2019 and $7,767 at December 31, 2018 | 167,236 |
| | | 136,437 |
|
Rig materials and supplies | 22,367 |
| | | 36,245 |
|
Other current assets | 28,380 |
| | | 35,231 |
|
Total current assets | 319,089 |
| | | 266,904 |
|
Property, plant and equipment, net of accumulated depreciation of $37,341 at September 30, 2019 and $951,798 at December 31, 2018 | 297,213 |
| | | 534,371 |
|
Intangible assets, net (Note 4) | 15,117 |
| | | 4,821 |
|
Deferred income taxes | 4,608 |
| | | 2,143 |
|
Other non-current assets | 31,630 |
| | | 20,175 |
|
Total assets | $ | 667,657 |
| | | $ | 828,414 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
Current liabilities: |
|
| | |
|
|
Debtor in possession financing (Note 2) | $ | — |
| | | $ | 10,000 |
|
Accounts payable and accrued liabilities | 107,638 |
| | | 75,063 |
|
Accrued income taxes | 6,352 |
| | | 3,385 |
|
Total current liabilities | 113,990 |
| | | 88,448 |
|
Long-term debt (Note 6) | 177,032 |
| | | — |
|
Other long-term liabilities | 15,328 |
| | | 11,544 |
|
Long-term deferred tax liability | 6,491 |
| | | 510 |
|
Commitments and contingencies (Note 9) |
|
| | |
|
|
Total liabilities not subject to compromise | 312,841 |
| | | 100,502 |
|
Liabilities subject to compromise (Note 2) | — |
| | | 600,996 |
|
Total liabilities | 312,841 |
| | | 701,498 |
|
|
| | | |
PARKER DRILLING COMPANY AND SUBSIDIARIES |
CONSOLIDATED CONDENSED BALANCE SHEETS |
(Dollars in Thousands, Except Per Share Data) |
|
| | | | | | | | |
| Successor | | | Predecessor |
| September 30, 2019 | | | December 31, 2018 |
| (Unaudited) | | | |
Stockholders' equity: | | | | |
Predecessor preferred stock, $1.00 par value, 1,942,000 shares authorized, 500,000 shares issued and outstanding | — |
| | | 500 |
|
Predecessor common stock, $0.16 2/3 par value, 18,666,667 shares authorized, 9,385,060 shares issued and outstanding (9,384,669 shares issued and outstanding in 2018) | — |
| | | 1,398 |
|
Predecessor capital in excess of par value | — |
| | | 766,347 |
|
Predecessor accumulated other comprehensive income (loss) | — |
| | | (6,879 | ) |
Successor common stock, $0.01 par value, 500,000,000 shares authorized, 15,044,739 shares issued and outstanding | 150 |
| | | — |
|
Successor capital in excess of par value | 345,831 |
| | | — |
|
Successor accumulated other comprehensive income (loss) | 205 |
| | | — |
|
Retained earnings (accumulated deficit) | 8,630 |
| | | (634,450 | ) |
Total stockholders’ equity | 354,816 |
| | | 126,916 |
|
Total liabilities and stockholders’ equity | $ | 667,657 |
| | | $ | 828,414 |
|
See accompanying notes to the unaudited consolidated condensed financial statements.
|
| | | | | | | | | | |
PARKER DRILLING COMPANY AND SUBSIDIARIES |
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS |
(Dollars in Thousands, Except Per Share Data) |
(Unaudited) |
|
| | | | | | | | |
| Successor | | | Predecessor |
| Three Months Ended September 30, | | | Three Months Ended September 30, |
| 2019 | | | 2018 |
Revenues | $ | 160,083 |
| | | $ | 123,395 |
|
Expenses: | | | | |
Operating expenses | 117,486 |
| | | 93,943 |
|
Depreciation and amortization | 20,329 |
| | | 27,520 |
|
| 137,815 |
| | | 121,463 |
|
Total operating gross margin | 22,268 |
| | | 1,932 |
|
General and administrative expense | (5,983 | ) | | | (14,495 | ) |
Loss on impairment | — |
| | | (43,990 | ) |
Gain (loss) on disposition of assets, net | (92 | ) | | | 9 |
|
Reorganization items | (211 | ) | | | — |
|
Total operating income (loss) | 15,982 |
| | | (56,544 | ) |
Other income (expense): | | | |
|
Interest expense | (7,118 | ) | | | (11,350 | ) |
Interest income | 362 |
| | | 23 |
|
Other | (258 | ) | | | (709 | ) |
Total other income (expense) | (7,014 | ) | | | (12,036 | ) |
Income (loss) before income taxes | 8,968 |
| | | (68,580 | ) |
Income tax expense | 4,979 |
| | | 2,371 |
|
Net income (loss) | 3,989 |
| | | (70,951 | ) |
Less: Predecessor preferred stock dividend | — |
| | | 906 |
|
Net income (loss) available to common stockholders | $ | 3,989 |
| | | $ | (71,857 | ) |
Basic earnings (loss) per common share: | $ | 0.27 |
| | | $ | (7.70 | ) |
Diluted earnings (loss) per common share: | $ | 0.27 |
| | | $ | (7.70 | ) |
Number of common shares used in computing earnings per share: | | | | |
Basic | 15,044,739 |
| | | 9,334,390 |
|
Diluted | 15,044,739 |
| | | 9,334,390 |
|
See accompanying notes to the unaudited consolidated condensed financial statements.
|
| | | | | | | | | | |
PARKER DRILLING COMPANY AND SUBSIDIARIES |
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS |
(Dollars in Thousands, Except Per Share Data) |
(Unaudited) |
|
| | | | | | | | | | | | |
| Successor | | | Predecessor |
| Six Months Ended September 30, | | | Three Months Ended March 31, | | Nine Months Ended September 30, |
| 2019 | | | 2019 | | 2018 |
Revenues | $ | 316,114 |
| | | $ | 157,397 |
| | $ | 351,673 |
|
Expenses: | | | | | | |
Operating expenses | 230,135 |
| | | 120,871 |
| | 277,111 |
|
Depreciation and amortization | 40,720 |
| | | 25,102 |
| | 83,205 |
|
| 270,855 |
| | | 145,973 |
| | 360,316 |
|
Total operating gross margin | 45,259 |
| | | 11,424 |
| | (8,643 | ) |
General and administrative expense | (11,593 | ) | | | (8,147 | ) | | (28,984 | ) |
Loss on impairment | — |
| | | — |
| | (43,990 | ) |
Gain (loss) on disposition of assets, net | (145 | ) | | | 384 |
| | (126 | ) |
Reorganization items | (1,173 | ) | | | (92,977 | ) | | — |
|
Total operating income (loss) | 32,348 |
| | | (89,316 | ) | | (81,743 | ) |
Other income (expense): | | | | | | |
Interest expense | (14,781 | ) | | | (274 | ) | | (33,787 | ) |
Interest income | 736 |
| | | 8 |
| | 76 |
|
Other | (902 | ) | | | (10 | ) | | (1,609 | ) |
Total other income (expense) | (14,947 | ) | | | (276 | ) | | (35,320 | ) |
Income (loss) before income taxes | 17,401 |
| | | (89,592 | ) | | (117,063 | ) |
Income tax expense | 8,771 |
| | | 656 |
| | 5,561 |
|
Net income (loss) | 8,630 |
| | | (90,248 | ) | | (122,624 | ) |
Less: Predecessor preferred stock dividend | — |
| | | — |
| | 2,719 |
|
Net income (loss) available to common stockholders | $ | 8,630 |
| | | $ | (90,248 | ) | | $ | (125,343 | ) |
Basic earnings (loss) per common share: | $ | 0.57 |
| | | $ | (9.63 | ) | | $ | (13.49 | ) |
Diluted earnings (loss) per common share: | $ | 0.57 |
| | | $ | (9.63 | ) | | $ | (13.49 | ) |
Number of common shares used in computing earnings per share: | | | | | | |
Basic | 15,044,739 |
| | | 9,368,322 |
| | 9,292,858 |
|
Diluted | 15,044,739 |
| | | 9,368,322 |
| | 9,292,858 |
|
See accompanying notes to the unaudited consolidated condensed financial statements.
|
| | | | | | | | | | | | | |
PARKER DRILLING COMPANY AND SUBSIDIARIES |
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
(Dollars in Thousands) |
(Unaudited) |
|
| | | | | | | | |
| Successor | | | Predecessor |
| Three Months Ended September 30, | | | Three Months Ended September 30, |
| 2019 | | | 2018 |
Net income (loss) | $ | 3,989 |
| | | $ | (70,951 | ) |
Other comprehensive income (loss), net of tax: | | | | |
Currency translation difference on related borrowings | (145 | ) | | | (315 | ) |
Currency translation difference on foreign currency net investments | 502 |
| | | 162 |
|
Total other comprehensive income (loss), net of tax: | 357 |
| | | (153 | ) |
Comprehensive income (loss) | $ | 4,346 |
| | | $ | (71,104 | ) |
See accompanying notes to the unaudited consolidated condensed financial statements.
|
| | | | | | | | | | | | | |
PARKER DRILLING COMPANY AND SUBSIDIARIES |
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
(Dollars in Thousands) |
(Unaudited) |
|
| | | | | | | | | | | | |
| Successor | | | Predecessor |
| Six Months Ended September 30, | | | Three Months Ended March 31, | | Nine Months Ended September 30, |
| 2019 | | | 2019 | | 2018 |
Net income (loss) | $ | 8,630 |
| | | $ | (90,248 | ) | | $ | (122,624 | ) |
Other comprehensive income (loss), net of tax: | | | | | | |
Currency translation difference on related borrowings | (225 | ) | | | 141 |
| | (484 | ) |
Currency translation difference on foreign currency net investments | 430 |
| | | (518 | ) | | (2,216 | ) |
Total other comprehensive income (loss), net of tax: | 205 |
| | | (377 | ) | | (2,700 | ) |
Comprehensive income (loss) | $ | 8,835 |
| | | $ | (90,625 | ) | | $ | (125,324 | ) |
See accompanying notes to the unaudited consolidated condensed financial statements.
|
| | | |
PARKER DRILLING COMPANY AND SUBSIDIARIES |
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS |
(Dollars in Thousands) |
(Unaudited) |
|
| | | | | | | | | | | | |
| Successor | | | Predecessor |
| Six Months Ended September 30, | | | Three Months Ended March 31, | | Nine Months Ended September 30, |
| 2019 | | | 2019 | | 2018 |
Cash flows from operating activities: | | | | | | |
Net income (loss) | $ | 8,630 |
| | | $ | (90,248 | ) | | $ | (122,624 | ) |
Adjustments to reconcile net income (loss): |
| | | | |
|
Depreciation and amortization | 40,720 |
| | | 25,102 |
| | 83,205 |
|
(Gain) loss on disposition of assets, net | 145 |
| | | (384 | ) | | 126 |
|
Reorganization items | — |
| | | 62,470 |
| | — |
|
Deferred tax expense (benefit) | 5,202 |
| | | (1,685 | ) | | (546 | ) |
Loss on impairment | — |
| | | | | 43,990 |
|
Expenses not requiring cash | 6,186 |
| | | 2,575 |
| | 4,491 |
|
Change in assets and liabilities: |
| | | | |
|
Accounts and notes receivable | 939 |
| | | (32,842 | ) | | (15,646 | ) |
Other assets | (7,482 | ) | | | (6,542 | ) | | 7,678 |
|
Accounts payable and accrued liabilities | (19,393 | ) | | | 55,780 |
| | (3,866 | ) |
Accrued income taxes | (1,329 | ) | | | 688 |
| | (324 | ) |
Net cash provided by (used in) operating activities | 33,618 |
| | | 14,914 |
| | (3,516 | ) |
Cash flows from investing activities: | | | | | | |
Capital expenditures | (46,738 | ) | | | (9,231 | ) | | (52,020 | ) |
Proceeds from the sale of assets | 374 |
| | | 101 |
| | 1,031 |
|
Net cash provided by (used in) investing activities | (46,364 | ) | | | (9,130 | ) | | (50,989 | ) |
Cash flows from financing activities: | | | | | | |
Payment of term loan | (35,158 | ) | | | — |
| | — |
|
Payments of debt issuance costs | (275 | ) | | | (490 | ) | | (1,443 | ) |
Proceeds from rights offering | — |
| | | 95,000 |
| | — |
|
Payment of amounts borrowed under debtor in possession financing | — |
| | | (10,000 | ) | | — |
|
Predecessor preferred stock dividend | — |
| | | — |
| | (3,625 | ) |
Shares surrendered in lieu of tax | — |
| | | — |
| | (248 | ) |
Net cash provided by (used in) financing activities | (35,433 | ) | | | 84,510 |
| | (5,316 | ) |
| | | | | | |
Net increase (decrease) in cash and cash equivalents and restricted cash | (48,179 | ) | | | 90,294 |
| | (59,821 | ) |
Cash and cash equivalents and restricted cash at beginning of period | 149,285 |
| | | 58,991 |
| | 141,549 |
|
Cash and cash equivalents and restricted cash at end of period | $ | 101,106 |
| | | $ | 149,285 |
| | $ | 81,728 |
|
See accompanying notes to the unaudited consolidated condensed financial statements.
|
| | | | | | | | | | | | | | | | | | |
PARKER DRILLING COMPANY AND SUBSIDIARIES |
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY |
(Dollars and Shares in Thousands) |
(Unaudited) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shares | | Preferred Stock | | Common Stock | | Treasury Stock | | Capital in Excess of Par Value | | Retained Earnings (Accumulated Deficit) | | Accumulated Other Comprehensive Income (Loss) | | Total Stockholders’ Equity |
Balances, December 31, 2017 (Predecessor) | 9,762 |
| | $ | 500 |
| | $ | 1,548 |
| | $ | (170 | ) | | $ | 766,508 |
| | $ | (468,753 | ) | | $ | (3,512 | ) | | $ | 296,121 |
|
Activity in employees’ stock plans | 21 |
| | — |
| | 3 |
| | — |
| | (126 | ) | | — |
| | — |
| | (123 | ) |
Amortization of stock-based awards | — |
| | — |
| | — |
| | — |
| | 979 |
| | — |
| | — |
| | 979 |
|
Predecessor preferred stock dividend | — |
| | — |
| | — |
| | — |
| | (906 | ) | | — |
| | — |
| | (906 | ) |
Comprehensive Income: | | | | | | | | | | | | | | |
|
|
Net income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | (28,796 | ) | | — |
| | (28,796 | ) |
Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (300 | ) | | (300 | ) |
Balances, March 31, 2018 (Predecessor) | 9,783 |
| | $ | 500 |
| | $ | 1,551 |
| | $ | (170 | ) | | $ | 766,455 |
| | $ | (497,549 | ) | | $ | (3,812 | ) | | $ | 266,975 |
|
Activity in employees’ stock plans | 37 |
| | — |
| | 6 |
| | — |
| | (53 | ) | | — |
| | — |
| | (47 | ) |
Amortization of stock-based awards | — |
| | — |
| | — |
| | — |
| | 833 |
| | — |
| | — |
| | 833 |
|
Predecessor preferred stock dividend | — |
| | — |
| | — |
| | — |
| | (907 | ) | | — |
| | — |
| | (907 | ) |
Comprehensive Income: |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Net income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | (22,877 | ) | | — |
| | (22,877 | ) |
Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (2,247 | ) | | (2,247 | ) |
Balances, June 30, 2018 (Predecessor) | 9,820 |
| | $ | 500 |
| — |
| $ | 1,557 |
| — |
| $ | (170 | ) | — |
| $ | 766,328 |
| — |
| $ | (520,426 | ) | — |
| $ | (6,059 | ) | | $ | 241,730 |
|
Activity in employees’ stock plans | 61 |
| | — |
| | 10 |
| | — |
| | (91 | ) | | — |
| | — |
| | (81 | ) |
Amortization of stock-based awards | — |
| | — |
| | — |
| | — |
| | 532 |
| | — |
| | — |
| | 532 |
|
Predecessor preferred stock dividend | — |
| | — |
| | — |
| | — |
| | (906 | ) | | — |
| | — |
| | (906 | ) |
Comprehensive Income: |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Net income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | (70,951 | ) | | — |
| | (70,951 | ) |
Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (153 | ) | | (153 | ) |
Balances, September 30, 2018 (Predecessor) | 9,881 |
| | $ | 500 |
| | $ | 1,567 |
| | $ | (170 | ) | | $ | 765,863 |
| | $ | (591,377 | ) | | $ | (6,212 | ) | | $ | 170,171 |
|
See accompanying notes to the unaudited consolidated condensed financial statements.
|
| | | | | | | | | | | | | | | | | | |
PARKER DRILLING COMPANY AND SUBSIDIARIES |
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY |
(Dollars and Shares in Thousands) |
(Unaudited) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shares | | Preferred Stock | | Common Stock | | Treasury Stock | | Capital in Excess of Par Value | | Retained Earnings (Accumulated Deficit) | | Accumulated Other Comprehensive Income (Loss) | | Total Stockholders’ Equity |
Balances, December 31, 2018 (Predecessor) | 9,885 |
| | $ | 500 |
| | $ | 1,568 |
| | $ | (170 | ) | | $ | 766,347 |
| | $ | (634,450 | ) | | $ | (6,879 | ) | | $ | 126,916 |
|
Activity in employees’ stock plans | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Amortization of stock-based awards | — |
| | — |
| | — |
| | — |
| | 1,446 |
| | — |
| | — |
| | 1,446 |
|
Predecessor preferred stock dividend | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Comprehensive Income: |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Net income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | (90,248 | ) | | — |
| | (90,248 | ) |
Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (377 | ) | | (377 | ) |
Balances, March 31, 2019 (Predecessor) | 9,885 |
| | 500 |
| | 1,568 |
| | (170 | ) | | 767,793 |
| | (724,698 | ) | | (7,256 | ) | | 37,737 |
|
Cancellation of predecessor equity | (9,885 | ) | | (500 | ) | | (1,568 | ) | | 170 |
| | (767,793 | ) | | 724,698 |
| | 7,256 |
| | (37,737 | ) |
Balances, March 31, 2019 (Predecessor) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Issuances of successor common stock | 15,044 |
| | — |
| | 150 |
| | — |
| | 328,800 |
| | — |
| | — |
| | 328,950 |
|
Issuances of successor warrants | — |
| | — |
| | — |
| | — |
| | 14,687 |
| | — |
| | — |
| | 14,687 |
|
Equity issuance costs | — |
| | — |
| | — |
| | — |
| | (837 | ) | | — |
| | — |
| | (837 | ) |
Balances, March 31, 2019 (Successor) | 15,044 |
| | $ | — |
| | $ | 150 |
| | $ | — |
| | $ | 342,650 |
| | $ | — |
| | $ | — |
| | $ | 342,800 |
|
Amortization of stock-based awards | — |
| | — |
| | — |
| | — |
| | 1,869 |
| | — |
| | — |
| | 1,869 |
|
Comprehensive Income: |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Net income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | 4,641 |
| | — |
| | 4,641 |
|
Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (152 | ) | | (152 | ) |
Balances, June 30, 2019 (Successor) | 15,044 |
| | $ | — |
| | $ | 150 |
| | $ | — |
| | $ | 344,519 |
| | $ | 4,641 |
| | $ | (152 | ) | | $ | 349,158 |
|
Amortization of stock-based awards | — |
| | — |
| | — |
| | — |
| | 1,312 |
| | — |
| | — |
| | 1,312 |
|
Comprehensive Income: | | | | | | | | | | | | | | |
|
|
Net income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | 3,989 |
| | — |
| | 3,989 |
|
Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 357 |
| | 357 |
|
Balances, September 30, 2019 (Successor) | 15,044 |
| | $ | — |
| | $ | 150 |
| | $ | — |
| | $ | 345,831 |
| | $ | 8,630 |
| | $ | 205 |
| | $ | 354,816 |
|
See accompanying notes to the unaudited consolidated condensed financial statements.
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Organization and Nature of Operations
Unless otherwise indicated, the terms “Company,” “Parker,” “we,” “us” and “our” refer to Parker Drilling Company, incorporated in Delaware, together with its wholly-owned subsidiaries, and “Parker Drilling” refers solely to the parent, Parker Drilling Company. Parker is an international provider of contract drilling and drilling-related services, as well as, rental tools and services. We have operated in over 60 countries since beginning operations in 1934, making us among the most geographically experienced drilling contractors and rental tools providers in the world.
Basis of Presentation
The consolidated condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and are unaudited. In the opinion of the Company, these consolidated condensed financial statements include all adjustments which, unless otherwise disclosed, are of a normal recurring nature, necessary for their fair presentation for the periods presented. The results for interim periods are not necessarily indicative of results for the entire year. The consolidated condensed financial statements presented herein should be read in connection with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.
Consolidation
The consolidated condensed financial statements include the accounts of the Company and subsidiaries in which we exercise control or have a controlling financial interest, including entities, if any, in which the Company is allocated a majority of the entity’s losses or returns, regardless of ownership percentage. If a subsidiary of Parker Drilling has a 50.0 percent or greater interest in an entity but Parker Drilling’s interest in the subsidiary or the entity does not meet the consolidation criteria described above, then that interest is accounted for under the equity method.
Reclassifications
Certain reclassifications have been made to prior period amounts to conform to the current period presentation. These reclassifications did not materially affect our consolidated financial results.
Use of Estimates
The preparation of our consolidated condensed financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect our reported amounts of assets and liabilities, our disclosure of contingent assets and liabilities at the date of the consolidated condensed financial statements, and our revenues and expenses during the periods reported. Estimates are typically used when accounting for certain significant items such as legal or contractual liability accruals, self-insured medical/dental plans, impairment, income taxes and valuation allowance, operating lease right-of-use assets, operating lease liabilities and other items requiring the use of estimates. Estimates are based on a number of variables, which may include third party valuations, historical experience, where applicable, and assumptions that we believe are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ from management estimates.
Cash, Cash equivalents and Restricted Cash
For purposes of the consolidated condensed balance sheets and the consolidated condensed statements of cash flows, the Company considers cash equivalents to be highly liquid debt instruments that have a remaining maturity of three months or less at the date of purchase.
|
| | | | | | | | |
| Successor | | | Predecessor |
Dollars in thousands | September 30, 2019 | | | December 31, 2018 |
Cash and cash equivalents | $ | 101,106 |
| | | $ | 48,602 |
|
Restricted cash | — |
| | | 10,389 |
|
Cash, cash equivalents and restricted cash at end of period | $ | 101,106 |
| | | $ | 58,991 |
|
The restricted cash balance as of December 31, 2018 includes $9.8 million in a cash collateral account to support the letters of credit outstanding and $0.6 million held as compensating balances in the ordinary course of business for purchases and utilities.
Impairment
We evaluate the carrying amounts of long-lived assets for potential impairment when events occur or circumstances change that indicate the carrying values of such assets may not be recoverable. We evaluate recoverability by determining the undiscounted estimated future net cash flows for the respective asset groups identified. If the sum of the estimated undiscounted cash flows is less than the carrying value of the asset group, we measure the impairment as the amount by which the assets’ carrying value exceeds the fair value of such assets. Management considers a number of factors, such as estimated future cash flows from the assets, appraisals, and current market value analysis in determining fair value. Assets are written down to fair value if the final estimate of current fair value is below the net carrying value. The assumptions used in the impairment evaluation are inherently uncertain and require management judgment.
Intangible Assets
Our intangible assets are related to customer relationships, developed technology and trade name, which are classified as definite lived intangibles, that are generally amortized over a weighted average period of approximately three to six years. We assess the recoverability of the unamortized balance of our intangible assets when indicators of impairment are present based on expected future profitability and undiscounted expected cash flows and their contribution to our overall operations. Should the review indicate that the carrying value is not fully recoverable, the excess of the carrying value over the fair value of the intangible assets would be recognized as an impairment loss. See Note 4 - Intangible Assets for further discussion.
Income Taxes
Income taxes are accounted for under the asset and liability method and have been provided for based upon tax laws and rates in effect in the countries in which operations are conducted and income or losses are generated. There is little or no expected relationship between the provision for or benefit from income taxes and income or loss before income taxes as the countries in which we operate have taxation regimes that vary not only with respect to nominal rate, but also in terms of the availability of deductions, credits, and other benefits. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled and the effect of changes in tax rates is recognized in income in the period in which the change is enacted. Valuation allowances are established to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In order to determine the amount of deferred tax assets or liabilities, as well as the valuation allowances, we must make estimates and assumptions regarding future taxable income, where rigs will be deployed, and other matters. Changes in these estimates and assumptions, including changes in tax laws and other changes affecting our ability to recognize the underlying deferred tax assets, could require us to adjust the valuation allowances.
The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50.0 percent likely of being realized and changes in recognition or measurement are reflected in the period in which the change in judgment occurs. See Note 8 - Income Taxes for further details.
Leases
As lessee, our leases are primarily operating leases. See Note 5 - Operating Leases for further details.
As lessor, our leases are primarily operating leases which are included in revenue in our consolidated condensed statement of operations. See Note 11 - Revenue for further details.
Legal and Investigative Matters
We accrue estimates of the probable and estimable costs for the resolution of certain legal and investigative matters. We do not accrue any amounts for other matters for which the liability is not probable and reasonably estimable. Generally, the estimate of probable costs related to these matters is developed in consultation with our legal advisors. The estimates take into consideration factors such as the complexity of the issues, litigation risks and settlement costs. If the actual settlement costs, final judgments, or fines, after appeals, differ from our estimates, our future financial results may be adversely affected.
Revenue Recognition
See Note 11 - Revenue for further discussion of our revenue recognition policy.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade receivables with a variety of national and international oil and natural gas companies. We generally do not require collateral on our trade receivables. We depend on a limited number of significant customers. Our largest customer, Exxon Neftegas Limited (“ENL”), constituted approximately 27.7 percent of our consolidated revenues for the six months ended September 30, 2019. Excluding revenues from reimbursable costs (“reimbursable revenues”) of $37.1 million, ENL constituted approximately 18.4 percent of our total consolidated revenues for the six months ended September 30, 2019. For the three months ended March 31, 2019, ENL constituted approximately 31.2 percent of our total consolidated revenues. Excluding reimbursable revenues of $26.3 million, ENL constituted approximately 17.7 percent of our total consolidated revenues for the three months ended March 31, 2019.
The following table includes our deposits in domestic banks in excess of federally insured limits and uninsured deposits in foreign banks:
|
| | | | | | | | |
| Successor | | | Predecessor |
Dollars in thousands | September 30, 2019 | | | December 31, 2018 |
Deposits in domestic banks in excess of federally insured limits | $ | 62,307 |
| | | $ | 27,520 |
|
Uninsured deposits in foreign banks | $ | 39,495 |
| | | $ | 32,907 |
|
Earnings (Loss) Per Share (EPS)
Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. The effects of dilutive securities such as Successor unvested restricted stock units, Successor unvested stock options, Successor warrants and Predecessor preferred stock are included in the diluted EPS calculation, when applicable. See Note 10 - Earnings (Loss) Per Common Share (“EPS”) for further details.
Bankruptcy
On December 12, 2018 (the “Petition Date”), Parker Drilling and certain of its U.S. subsidiaries (collectively, the “Debtors”) filed a prearranged plan of reorganization (the “Plan”) and commenced voluntary petitions under chapter 11 (the “Chapter 11 Cases”) of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”). The Plan was confirmed by the Bankruptcy Court on March 7, 2019, and the Debtors emerged from the bankruptcy proceedings on March 26, 2019. The consolidated financial statements included herein have been prepared as if we were a going concern and in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 852 - Reorganizations (“Topic 852”). See Note 2 - Chapter 11 Emergence and Note 3 - Fresh Start Accounting for further details.
Note 2 - Chapter 11 Emergence
On December 12, 2018, prior to the commencement of the Chapter 11 Cases, the Debtors entered into a restructuring support agreement (as amended on January 28, 2019, the “RSA”) with certain significant holders of (1) 7.50% Senior Notes, due 2020 (the “7.50% Note Holders”) issued pursuant to the indenture (the “7.50% Notes Indenture”) dated July 30, 2013 (the “7.50% Notes”), by and among Parker Drilling, the subsidiary guarantors party thereto and Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”), (2) 6.75% Senior Notes, due 2022 (the “6.75% Note Holders”) issued pursuant to the indenture (the “6.75% Notes Indenture”) dated January 22, 2014 (the “6.75% Notes” and together with the 7.50% Notes, the “Senior Notes”), by and among Parker Drilling, the subsidiary guarantors party thereto and the Trustee, (3) Parker Drilling’s existing common stock (the “Predecessor Common Stock”) and (4) Parker Drilling’s 7.25% Series A Mandatory Convertible Preferred Stock (the “Predecessor Preferred Stock” and such holders to support a restructuring (the “Restructuring”) on the terms set forth in the Plan.
On the Petition Date, the Debtors filed voluntary petitions for reorganization under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas pursuant to a prearranged plan of reorganization. The Plan was confirmed by the Bankruptcy Court on March 7, 2019, and the Debtors emerged from the bankruptcy proceedings on March 26, 2019.
References to “Successor” relate to the consolidated condensed statement of operations or consolidated condensed balance sheet of the reorganized Company as of and subsequent to March 31, 2019. References to “Predecessor” relate to the consolidated condensed balance sheet of the Company prior to, and consolidated condensed statement of operations through and including, March 31, 2019.
On March 26, 2019:
| |
(1) | the Company amended and restated its certificate of incorporation and bylaws; |
| |
(2) | the Company appointed new members to the Successor’s board of directors to replace directors of the Predecessor; |
| |
• | 2,827,323 shares of Successor Common Stock pro rata to 7.50% Note Holders; |
| |
• | 5,178,860 shares of Successor Common Stock pro rata to 6.75% Note Holders; |
| |
• | 90,558 shares of Successor Common Stock and 1,032,073 Successor warrants to purchase 1,032,073 shares of Successor Common Stock pro rata to holders of the Predecessor Preferred Stock; |
| |
• | 135,838 shares of Successor Common Stock and 1,548,109 Successor warrants to purchase 1,548,109 shares of Successor Common Stock pro rata to holders of the Predecessor Common Stock; |
| |
• | 504,577 shares of Successor Common Stock to commitment parties under that certain Backstop Commitment Agreement, dated December 12, 2018 and amended and restated on January 28, 2019, (as amended and restated, the “Backstop Commitment Agreement”) in respect of the commitment premium due thereunder; |
| |
• | 1,403,910 shares of Successor Common Stock to the commitment parties under the Backstop Commitment Agreement in connection with their backstop obligation thereunder to purchase unsubscribed shares of Successor Common Stock; and |
| |
• | 4,903,308 shares of Successor Common Stock to participants in the rights offering extended by Parker to the applicable classes under the Plan (including to the commitment parties party to the Backstop Commitment Agreement). |
Reorganization Items
Any expenses, gains and losses that are realized or incurred subsequent to and as a direct result of the Chapter 11 Cases are recorded under reorganization items on our consolidated condensed statement of operations.
Reorganization items consisted of:
|
| | | | | | | | |
| Successor | | | Predecessor |
| Three Months Ended September 30, | | | Three Months Ended September 30, |
Dollars in thousands | 2019 | | | 2018 |
Gain on settlement of liabilities subject to compromise | $ | — |
| | | $ | — |
|
Fresh start valuation adjustments | — |