Parker Wellbore Registration of securities issued in business combination transactions

Registration of securities issued in business combination transactions

Parent, Guarantor, Non-Guarantor Unaudited Consolidating Condensed Financial Statements

Parent, Guarantor, Non-Guarantor Unaudited Consolidating Condensed Financial Statements

9 Months Ended

12 Months Ended

Sep. 30, 2013

Dec. 31, 2012

Parent, Guarantor, Non-Guarantor Unaudited Consolidating Condensed Financial Statements

14.

Parent, Guarantor, Non-Guarantor Unaudited Consolidating Condensed Financial Statements

Set forth on the following pages are the consolidating condensed financial statements of Parker Drilling. Our loans pursuant to the Credit Agreement, the 9.125% Notes, and the 7.50% Notes are guaranteed by substantially all of our direct and indirect domestic subsidiaries other than immaterial subsidiaries and subsidiaries generating revenues primarily outside the United States. There are currently no restrictions on the ability of the guarantor to transfer funds to Parker Drilling in the form of cash dividends, loans or advances. Parker Drilling is a holding company with no operations, other than through its subsidiaries. Separate financial statements for each guarantor company are not provided as the Company complies with the exception to Rule 3-10(a)(1) of Regulation S-X, set forth in sub-paragraph (f) of such rule. All guarantor subsidiaries are owned 100 percent by Parker Drilling, all guarantees are full and unconditional and all guarantees are joint and several.

We are providing consolidating condensed financial information of Parker Drilling, the guarantor subsidiaries, and the non-guarantor subsidiaries as of September 30, 2013 and December 31, 2012 and for the three and nine months ended September 30, 2013 and 2012. The consolidating condensed financial statements present investments in both consolidated and unconsolidated subsidiaries using the equity method of accounting.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED BALANCE SHEET

(Dollars in Thousands)

(Unaudited)


	September 30, 2013
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	89,516		$	21,273		$	51,668		$	—		$	162,457
Accounts and notes receivable, net		290,856			113,873			386,521			(541,627	)		249,623
Rig materials and supplies		—			2,364			37,838			—			40,202
Deferred costs		—			32			13,551			—			13,583
Deferred income taxes		—			12,363			1,110			—			13,473
Other tax assets		43,171			(46,939	)		22,201			—			18,433
Assets held for sale		—			1,183			6,302			—			7,485
Other current assets		—			14,238			6,668			—			20,906

Total current assets		423,543			118,387			525,859			(541,627	)		526,162

Property, plant and equipment, net		60			559,885			298,727			—			858,672
Investment in subsidiaries and intercompany advances		944,584			(220,110	)		1,593,743			(2,318,217	)		—
Other noncurrent assets		52,147			60,002			38,397			—			150,546

Total assets	$	1,420,334		$	518,164		$	2,456,726		$	(2,859,844	)	$	1,535,380

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	—		$	—		$	—		$	—		$	—
Accounts payable and accrued liabilities		81,524			101,207			263,709			(255,211	)		191,229
Accrued income taxes		—			529			6,732			—			7,261

Total current liabilities		81,524			101,736			270,441			(255,211	)		198,490

Long-term debt		653,968			—			—			—			653,968
Other long-term liabilities		4,289			5,806			13,953			—			24,048
Long-term deferred tax liability		—			47,684			(8,600	)		—			39,084
Intercompany payables		62,584			43,669			359,106			(465,359	)		—
Contingencies		—			—			—			—			—
Stockholders’ equity:
Common stock		20,050			18,049			43,003			(61,052	)		20,050
Capital in excess of par value		654,750			733,899			1,579,458			(2,313,357	)		654,750
Accumulated other comprehensive income		—			—			957			—			957
Retained earnings (accumulated deficit)		(56,831	)		(432,679	)		196,587			235,135			(57,788	)

Total controlling interest stockholders’ equity		617,969			319,269			1,820,005			(2,139,274	)		617,969

Noncontrolling interest		—			—			1,821			—			1,821

Total equity		617,969			319,269			1,821,826			(2,139,274	)		619,790

Total liabilities and stockholders’ equity	$	1,420,334		$	518,164		$	2,456,726		$	(2,859,844	)	$	1,535,380

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED BALANCE SHEET

(Dollars in Thousands)

(Unaudited)


	December 31, 2012
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	42,251		$	11,023		$	34,612		$	—		$	87,886
Accounts and notes receivable, net		289,957			98,747			292,644			(512,786	)		168,562
Rig materials and supplies		—			2,834			26,026			—			28,860
Deferred costs		—			—			1,089			—			1,089
Deferred income taxes		—			7,615			1,127			—			8,742
Other tax assets		46,249			(31,136	)		18,411			—			33,524
Assets held for sale		—			—			6,800			—			6,800
Other current assets		—			8,675			4,146			—			12,821

Total current assets		378,457			97,758			384,855			(512,786	)		348,284

Property, plant and equipment, net		60			548,794			240,269			—			789,123
Investment in subsidiaries and intercompany advances		780,878			(233,388	)		1,467,429			(2,014,919	)		—
Other noncurrent assets		43,569			59,541			15,216			—			118,326

Total assets	$	1,202,964		$	472,705		$	2,107,769		$	(2,527,705	)	$	1,255,733

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	10,000		$	—		$	—		$	—		$	10,000
Accounts payable and accrued liabilities		65,839			93,243			205,864			(227,200	)		137,746
Accrued income taxes		—			612			3,508			—			4,120

Total current liabilities		75,839			93,855			209,372			(227,200	)		151,866

Long-term debt		469,205			—			—			—			469,205
Other long-term liabilities		3,933			6,129			13,120			—			23,182
Long-term deferred tax liability		—			36,894			(16,047	)		—			20,847
Intercompany payables		62,583			43,657			216,320			(322,560	)		—
Contingencies		—			—			—			—			—
Stockholders’ equity:
Common stock		19,818			18,049			43,003			(61,052	)		19,818
Capital in excess of par value		646,217			733,112			1,455,246			(2,188,358	)		646,217
Accumulated other comprehensive income		—			—			—			—			—
Retained earnings (accumulated deficit)		(74,631	)		(458,991	)		187,526			271,465			(74,631	)

Total controlling interest stockholders’ equity		591,404			292,170			1,685,775			(1,977,945	)		591,404

Noncontrolling interest		—			—			(771	)		—			(771	)

Total Equity		591,404			292,170			1,685,004			(1,977,945	)		590,633

Total liabilities and stockholders’ equity	$	1,202,964		$	472,705		$	2,107,769		$	(2,527,705	)	$	1,255,733

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

(Dollars in Thousands)

(Unaudited)


	Three months ended September 30, 2013
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Total revenues	$	—		$	119,223		$	170,609		$	(52,070	)	$	237,762
Operating expenses		—			64,297			141,514			(52,070	)		153,741
Depreciation and amortization		—			19,956			15,926			—			35,882

Total operating gross margin		—			34,970			13,169			—			48,139

General and administration expense(1)		(47	)		(14,028	)		(113	)		—			(14,188	)
Gain on disposition of assets, net		—			(34	)		1,128			—			1,094

Total operating income (loss)		(47	)		20,908			14,184			—			35,045
Other income and (expense):
Interest expense		(14,035	)		(107	)		(2,198	)		3,213			(13,127	)
Interest income		360			250			2,733			(3,213	)		130
Extinguishment of debt		(5,218	)		—			—			—			(5,218	)
Changes in fair value of derivative positions		—			—			—			—			—
Other		(1	)		(11	)		412			—			400
Equity in net earnings of subsidiaries		22,322			—			—			(22,322	)		—

Total other income (expense)		3,428			132			947			(22,322	)		(17,815	)

Income (benefit) before income taxes		3,381			21,040			15,131			(22,322	)		17,230

Total income tax expense (benefit)		(4,589	)		10,223			3,478			—			9,112

Net income (loss)		7,970			10,817			11,653			(22,322	)		8,118

Less: Net income (loss) attributable to noncontrolling interest		—			—			148			—			148

Net income (loss) attributable to controlling interest	$	7,970		$	10,817		$	11,505		$	(22,322	)	$	7,970

(1)	General and administration expenses for field operations are included in operating expenses.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

(Dollars in Thousands)

(Unaudited)


	Three Months Ended September 30, 2012
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Total revenues	$	—		$	98,969		$	94,749		$	(28,417	)	$	165,301
Operating expenses		—			45,850			84,051			(28,417	)		101,484
Depreciation and amortization		—			17,866			11,913			—			29,779

Total operating gross margin		—			35,253			(1,215	)		—			34,038

General and administration expense(1)		(47	)		(8,823	)		(35	)		—			(8,905	)
Gain on disposition of assets, net		—			553			53			—			606

Total operating income (loss)		(47	)		26,983			(1,197	)		—			25,739
Other income and (expense):
Interest expense		(9,105	)		(43	)		(1,840	)		2,817			(8,171	)
Interest income		95			179			2,573			(2,817	)		30
Changes in fair value of derivative positions		19			—			—			—			19
Loss on extinguishment of debt		(117	)		—			—			—			(117	)
Other		—			26			—			—			26
Equity in net earnings of subsidiaries		10,596			—			—			(10,596	)		—

Total other income (expense)		1,488			162			733			(10,596	)		(8,213	)

Income (loss) before income taxes		1,441			27,145			(464	)		(10,596	)		17,526

Income tax expense (benefit)		(9,495	)		10,451			5,739			—			6,695

Net income (loss)		10,936			16,694			(6,203	)		(10,596	)		10,831

Less: Net income (loss) attributable to noncontrolling interest		—			—			(105	)		—			(105	)

Net income (loss) attributable to controlling interest	$	10,936		$	16,694		$	(6,098	)	$	(10,596	)	$	10,936

(1)	General and administration expenses for field operations are included in operating expenses.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

(Dollars in Thousands)

(Unaudited)


	Nine Months Ended September 30, 2013
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Total revenues	$	—		$	345,434		$	388,912		$	(103,428	)	$	630,918
Operating expenses		—			186,708			331,056			(103,428	)		414,336
Depreciation and amortization		—			57,335			40,339			—			97,674

Total operating gross margin		—			101,391			17,517			—			118,908

General and administration expense(1)		(140	)		(48,942	)		(367	)		—			(49,449	)
Gain on disposition of assets, net		—			1,917			842			—			2,759

Total operating income (loss)		(140	)		54,366			17,992			—			72,218
Other income and (expense):
Interest expense		(36,734	)		(167	)		(9,494	)		12,521			(33,874	)
Interest income		3,366			1,584			9,963			(12,521	)		2,392
Extinguishment of debt		(5,218	)		—			—			—			(5,218	)
Changes in fair value of derivative positions		54			—			—			—			54
Other		—			(178	)		511			—			333
Equity in net earnings of subsidiaries		36,330			—			—			(36,330	)		—

Total other income (expense)		(2,202	)		1,239			980			(36,330	)		(36,313	)

Income (loss) before income taxes		(2,342	)		55,605			18,972			(36,330	)		35,905

Total Income tax expense (benefit)		(19,185	)		27,993			10,033			—			18,841

Net income (loss)		16,843			27,612			8,939			(36,330	)		17,064

Less: Net income (loss) attributable to noncontrolling interest		—			—			221			—			221

Net income (loss) attributable to controlling interest	$	16,843		$	27,612		$	8,718		$	(36,330	)	$	16,843

(1)	General and administration expenses for field operations are included in operating expenses.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

(Dollars in Thousands)

(Unaudited)


	Nine Months Ended September 30, 2012
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Total revenues	$	—		$	302,892		$	295,811		$	(77,908	)	$	520,795
Operating expenses		—			136,849			242,001			(77,908	)		300,942
Depreciation and amortization		—			49,127			36,230			—			85,357

Total operating gross margin		—			116,916			17,580			—			134,496

General and administration expense(1)		(137	)		(21,273	)		(412	)		—			(21,822	)
Gain on disposition of assets, net		—			1,168			1,298			—			2,466

Total operating income (loss)		(137	)		96,811			18,466			—			115,140
Other income and (expense):
Interest expense		(27,923	)		(115	)		(5,811	)		8,716			(25,133	)
Interest income		8,695			4,894			39,345			(52,825	)		109
Changes in fair value of derivative positions		8			—			—			—			8
Loss on extinguishment of debt		(1,766	)		—			—			—			(1,766	)
Other		—			64			(2	)		—			62
Equity in net earnings of subsidiaries		61,553			—			—			(61,553	)		—

Total other income (expense)		40,567			4,843			33,532			(105,662	)		(26,720	)

Income (loss) before income taxes		40,430			101,654			51,998			(105,662	)		88,420

Income tax expense (benefit)		(16,981	)		38,149			9,987			—			31,155

Net income (loss)		57,411			63,505			42,011			(105,662	)		57,265

Less: Net income (loss) attributable to noncontrolling interest		—			—			(146	)		—			(146	)

Net income (loss) attributable to controlling interest	$	57,411		$	63,505		$	42,157		$	(105,662	)	$	57,411

(1)	General and administration expenses for field operations are included in operating expenses.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Dollars in Thousands)

(Unaudited)


	Three Months Ended September 30, 2013
	Parent		Guarantor		Non-Guarantor			Eliminations			Consolidated
Comprehensive income:
Net income	$	7,970	$	10,817	$	11,653		$	(22,322	)	$	8,118
Other comprehensive gain, net of tax:
Currency translation difference on related borrowings		—		—		(577	)		—			(577	)
Currency translation difference on foreign currency net investments						2,098						2,098

Total other comprehensive gain, net of tax:		—		—		1,521			—			1,521

Comprehensive income		7,970		10,817		13,174			(22,322	)		9,639
Comprehensive (income) attributable to noncontrolling interest		—		—		(53	)		—			(53	)

Comprehensive income attributable to controlling interest	$	7,970	$	10,817	$	13,121		$	(22,322	)	$	9,586

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Dollars in Thousands)

(Unaudited)


	Nine Months Ended September 30, 2013
	Parent		Guarantor		Non-Guarantor			Eliminations			Consolidated
Comprehensive income:
Net income	$	16,843	$	27,612	$	8,939		$	(36,330	)	$	17,064
Other comprehensive gain, net of tax:
Currency translation difference on related borrowings		—		—		(1,542	)		—			(1,542	)
Currency translation difference on foreign currency net investments						2,499						2,499

Total other comprehensive gain, net of tax:		—		—		957			—			957

Comprehensive income		16,843		27,612		9,896			(36,330	)		18,021
Comprehensive (income) attributable to noncontrolling interest		—		—		(83	)		—			(83	)

Comprehensive income attributable to controlling interest	$	16,843	$	27,612	$	9,813		$	(36,330	)	$	17,938

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)


	Nine Months Ended September 30, 2013
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	16,843		$	27,612		$	8,939		$	(36,330	)	$	17,064
Adjustments to reconcile net income (loss):
Depreciation and amortization		—			57,335			40,339			—			97,674
Loss on extinguishment of debt		5,218			—			—			—			5,218
Gain on disposition of assets		—			(1,917	)		(842	)		—			(2,759	)
Deferred income tax expense		(2,860	)		10,479			5,253			—			12,872
Expenses not requiring cash		10,494			591			(1,157	)		—			9,928
Equity in net earnings of subsidiaries		(36,330	)		—			—			36,330			—
Change in accounts receivable		(899	)		(7,951	)		(19,755	)		—			(28,605	)
Change in accrued income taxes		358			(85	)		2,604			—			2,877
Change in other assets		3,045			4,580			(8,971	)		—			(1,346	)
Change in liabilities		14,222			(2,116	)		306			—			12,412

Net cash provided by (used in) operating activities		10,091			88,528			26,716			—			125,335

Cash flows from investing activities:
Capital expenditures		—			(66,956	)		(35,900	)		—			(102,856	)
Proceeds from the sale of assets		—			2,751			2,782			—			5,533
Acquisition of ITS, net of cash acquired		—			(292	)		(117,699	)		—			(117,991	)

Net cash (used in) investing activities		—			(64,497	)		(150,817	)		—			(215,314	)

Cash flows from financing activities:
Proceeds from debt issuance		350,000			—			—			—			350,000
Repayments of long term debt		(125,000	)		—			—			—			(125,000	)
Paydown on term note		(50,000	)		—			—			—			(50,000	)
Payment of debt issuance costs		(10,981	)		—			—			—			(10,981	)
Excess tax benefit from stock-based compensation		531			—			—			—			531
Intercompany advances, net		(127,376	)		(13,781	)		141,157			—			—

Net cash provided by (used in) financing activities		37,174			(13,781	)		141,157			—			164,550

Net change in cash and cash equivalents		47,265			10,250			17,056			—			74,571
Cash and cash equivalents at beginning of year		42,251			11,023			34,612			—			87,886

Cash and cash equivalents at end of year	$	89,516		$	21,273		$	51,668		$	—		$	162,457

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)


	Nine Months Ended September 30, 2012
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	57,411		$	63,505		$	42,011		$	(105,662	)	$	57,265
Adjustments to reconcile net income (loss)to net cash provided by operating activities:
Depreciation and amortization		—			49,127			36,230			—			85,357
Loss on extinguishment of debt		1,766			—			—			—			1,766
Gain on disposition of assets		—			(1,168	)		(1,298	)		—			(2,466	)
Deferred income tax expense		5,940			4,868			(2,405	)		—			8,403
Expenses not requiring cash		13,264			689			1,770			1			15,724
Equity in net earnings of subsidiaries		(61,553	)		—			—			61,553			—
Change in accounts receivable		(291	)		766			24,173			—			24,648
Change in other assets		(32,874	)		61,320			(27,882	)		—			564
Change in accrued income taxes		(5,068	)		1,832			187			—			(3,049	)
Change in liabilities		12,917			(21,430	)		(1,672	)		—			(10,185	)

Net cash provided by (used in) operating activities		(8,488	)		159,509			71,114			(44,108	)		178,027

Cash flows from investing activities:
Capital expenditures		—			(139,618	)		(8,040	)		—			(147,658	)
Proceeds from the sale of assets		—			1,667			1,829			—			3,496
Intercompany dividend payment		(8,387	)		(4,357	)		(31,364	)		44,108			—

Net cash (used in) investing activities		(8,387	)		(142,308	)		(37,575	)		44,108			(144,162	)

Cash flows from financing activities:
Proceeds from debt issuance		130,000			—			—			—			130,000
Repayments of senior notes		(125,000	)		—			—			—			(125,000	)
Paydown on term note		(18,000	)		—			—			—			(18,000	)
Payment of debt issuance costs		(3,516	)		—			—			—			(3,516	)
Payment of debt extinguishment costs		(519	)		—			—			—			(519	)
Excess tax benefit from stock-based compensation		(572	)		—			—			—			(572	)
Intercompany advances, net		56,280			(13,507	)		(42,773	)		—			—

Net cash provided by (used in) financing activities		38,673			(13,507	)		(42,773	)		—			(17,607	)

Net change in cash and cash equivalents		21,798			3,694			(9,234	)		—			16,258
Cash and cash equivalents at beginning of year		55,670			4,212			37,987			—			97,869

Cash and cash equivalents at end of year	$	77,468		$	7,906		$	28,753		$	—		$	114,127

Note 16 — Parent, Guarantor, Non-Guarantor Unaudited Consolidating Condensed Financial Statements

Set forth on the following pages are the consolidating condensed financial statements of Parker Drilling. The Company’s 9.125% Notes are guaranteed by substantially all of the restricted subsidiaries of Parker Drilling. There are currently no restrictions on the ability of the restricted subsidiaries to transfer funds to Parker Drilling in the form of cash dividends, loans or advances. Parker Drilling is a holding company with no operations, other than through its subsidiaries. Separate financial statements for each guarantor company are not provided as the company complies with the exception to Rule 3-10(a)(1) of Regulation S-X, set forth in sub-paragraph (f) of such rule. All guarantor subsidiaries are owned 100 percent by the parent company, all guarantees are full and unconditional and all guarantees are joint and several.

We are providing consolidating condensed financial information of the parent, Parker Drilling, the guarantor subsidiaries, and the non-guarantor subsidiaries as of December 31, 2012 and December 31, 2011 and for the years ended December 31, 2012, 2011, and 2010. The consolidating condensed financial statements present investments in both consolidated and unconsolidated subsidiaries using the equity method of accounting.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

(Dollars in Thousands)

(Unaudited)


	Year ended December 31, 2012
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Total revenues	$	—		$	393,959		$	385,279		$	(101,256	)	$	677,982
Operating expenses		—			185,328			329,992			(101,256	)		414,064
Depreciation and amortization		—			65,354			47,663			—			113,017

Total operating gross margin		—			143,277			7,624			—			150,901

General and administration expense(1)		(182	)		(45,433	)		(437	)		—			(46,052	)
Gain on disposition of assets, net		—			775			1,199			—			1,974

Total operating income (loss)		(182	)		98,619			8,386			—			106,823

Other income and (expense):
Interest expense		(37,326	)		(151	)		(8,739	)		12,674			(33,542	)
Changes in fair value of derivative positions		55			—			—			—			55
Interest income		9,863			5,073			41,999			(56,782	)		153
Loss on extinguishment of debt		(2,130	)		—			—			—			(2,130	)
Other		—			(370	)		(12	)		—			(382	)
Equity in net earnings of subsidiaries		43,884			—			—			(43,884	)		—

Total other income (expense)		14,346			4,552			33,248			(87,992	)		(35,846	)

Income (benefit) before income taxes		14,164			103,171			41,634			(87,992	)		70,977
Income tax expense (benefit):
Current		(25,406	)		32,781			10,667			—			18,042
Deferred		2,257			15,429			(1,849	)		—			15,837

Income tax expense (benefit)		(23,149	)		48,210			8,818			—			33,879

Net income (loss)		37,313			54,961			32,816			(87,992	)		37,098

Less: Net (loss) attributable to noncontrolling interest		—			—			(215	)		—			(215	)

Net income (loss) attributable to controlling interest	$	37,313		$	54,961		$	33,031		$	(87,992	)	$	37,313

(1)	General and administration expenses for field operations are included in operating expenses.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

(Dollars in Thousands)

(Unaudited)


	Year ended December 31, 2011
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Total revenues	$	—		$	376,229		$	426,491		$	(116,074	)	$	686,646
Operating expenses		—			175,465			358,753			(116,074	)		418,144
Depreciation and amortization		—			62,744			49,392			—			112,136

Total operating gross margin		—			138,020			18,346			—			156,366

General and administration expense(1)		(218	)		(30,859	)		(237	)		—			(31,314	)
Impairment and other charges		—			(170,000	)		—			—			(170,000	)
Provision for reduction in carrying value of certain assets		—			(1,350	)		—			—			(1,350	)
Gain on disposition of assets, net		—			2,706			953			—			3,659

Total operating income (loss)		(218	)		(61,483	)		19,062			—			(42,639	)

Other income and (expense):
Interest expense		(26,654	)		(17,889	)		(8,865	)		30,814			(22,594	)
Changes in fair value of derivative positions		(110	)		—			—			—			(110	)
Interest income		18,131			750			12,189			(30,814	)		256
Other		—			(345	)		20			—			(325	)
Equity in net earnings of subsidiaries		(23,484	)		—			—			23,484			—

Total other income and (expense)		(32,117	)		(17,484	)		3,344			23,484			(22,773	)

Income (benefit) before income taxes		(32,335	)		(78,967	)		22,406			23,484			(65,412	)
Income tax expense (benefit):
Current		(13,402	)		27,169			19,841			—			33,608
Deferred		31,518			(57,030	)		(22,863	)		—			(48,375	)

Total income tax expense (benefit)		18,116			(29,861	)		(3,022	)		—			(14,767	)

Net income (loss)		(50,451	)		(49,106	)		25,428			23,484			(50,645	)

Less: Net (loss) attributable to noncontrolling interest		—			—			(194	)		—			(194	)

Net income (loss) attributable to controlling interest	$	(50,451	)	$	(49,106	)	$	25,622		$	23,484		$	(50,451	)

(1)	General and administration expenses for field operations are included in operating expenses.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

(Dollars in Thousands)

(Unaudited)


	Twelve months ended December 31, 2010
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Total revenues	$	—		$	366,947		$	401,617		$	(109,089	)	$	659,475
Operating expenses		—			237,584			342,783			(109,089	)		471,278
Depreciation and amortization		—			63,402			51,628			—			115,030

Total operating gross margin		—			65,961			7,206			—			73,167

General and administration expense(1)		(225	)		(30,193	)		(310	)		—			(30,728	)
Provision for reduction in carrying value of certain assets		—			(1,952	)		—			—			(1,952	)
Gain on disposition of assets, net		—			2,067			2,553			—			4,620

Total operating income (loss)		(225	)		35,883			9,449			—			45,107

Other income and (expense):
Interest expense		(30,771	)		(35,640	)		(16,185	)		55,791			(26,805	)
Interest income		42,000			757			23,291			(65,791	)		257
Loss on extinguishment of debt		(7,209	)		—			—			—			(7,209	)
Other		—			88			67			—			155
Equity in net earnings of subsidiaries		(22,962	)		—			—			22,962			—

Total other income and (expense)		(18,942	)		(34,795	)		7,173			12,962			(33,602	)

Income (benefit) before income taxes		(19,167	)		1,088			16,622			12,962			11,505
Income tax expense (benefit):
Current		139			(189	)		27,571			—			27,521
Deferred		(4,845	)		2,323			1,214			—			(1,308	)

Total income tax expense (benefit)		(4,706	)		2,134			28,785			—			26,213

Net income (loss)		(14,461	)		(1,046	)		(12,163	)		12,962			(14,708	)

Less: Net (loss) attributable to noncontrolling interest		—			—			(247	)		—			(247	)

Net income (loss) attributable to controlling interest	$	(14,461	)	$	(1,046	)	$	(11,916	)	$	12,962		$	(14,461	)

(1)	General and administration expenses for field operations are included in operating expenses.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED BALANCE SHEET

(Dollars in Thousands)

(Unaudited)


	December 31, 2012
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	42,251		$	11,023		$	34,612		$	—		$	87,886
Accounts and notes receivable, net		289,957			98,747			292,644			(512,786	)		168,562
Rig materials and supplies		—			2,834			26,026			—			28,860
Deferred costs		—			—			1,089			—			1,089
Deferred income taxes		—			7,615			1,127			—			8,742
Other tax assets		46,249			(31,136	)		18,411			—			33,524
Assets held for sale		—			—			11,550			—			11,550
Other current assets		—			8,675			4,146			—			12,821

Total current assets		378,457			97,758			389,605			(512,786	)		353,034

Property, plant and equipment, net		60			548,794			237,304			—			786,158
Investment in subsidiaries and intercompany advances		780,878			(233,388	)		1,467,429			(2,014,919	)		—
Other noncurrent assets		43,569			59,541			13,431			—			116,541

Total assets	$	1,202,964		$	472,705		$	2,107,769		$	(2,527,705	)	$	1,255,733

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	10,000		$	—		$	—		$	—		$	10,000
Accounts payable and accrued liabilities		65,839			93,243			205,864			(227,200	)		137,746
Accrued income taxes		—			612			3,508			—			4,120

Total current liabilities		75,839			93,855			209,372			(227,200	)		151,866

Long-term debt		469,205			—			—			—			469,205
Other long-term liabilities		3,933			6,129			13,120			—			23,182
Long-term deferred tax liability		—			36,894			(16,047	)		—			20,847
Intercompany payables		62,583			43,657			216,320			(322,560	)		—
Contingencies		—			—			—			—			—
Stockholders’ equity:
Common stock		19,818			18,049			43,003			(61,052	)		19,818
Capital in excess of par value		646,217			733,112			1,455,246			(2,188,358	)		646,217
Retained earnings (accumulated deficit)		(74,631	)		(458,991	)		187,526			271,465			(74,631	)

Total controlling interest stockholders’ equity		591,404			292,170			1,685,775			(1,977,945	)		591,404

Noncontrolling interest		—			—			(771	)		—			(771	)

Total Equity		591,404			292,170			1,685,004			(1,977,945	)		590,633

Total liabilities and stockholders’ equity	$	1,202,964		$	472,705		$	2,107,769		$	(2,527,705	)	$	1,255,733

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED BALANCE SHEET

(Dollars in Thousands)

(Unaudited)


	December 31, 2011
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	55,670		$	4,212		$	37,987		$	—		$	97,869
Accounts and notes receivable, net		289,512			94,748			285,326			(485,663	)		183,923
Rig materials and supplies		—			762			29,185			—			29,947
Deferred costs		—			—			3,249			—			3,249
Deferred income taxes		—			5,311			853			486			6,650
Other tax assets		47,834			(25,218	)		2,742			—			25,358
Assets held for sale		—			—			5,315			—			5,315
Other current assets		788			6,381			8,133			—			15,302

Total current assets		393,804			86,196			372,790			(485,177	)		367,613

Property, plant and equipment, net		79			474,942			244,787			1			719,809
Investment in subsidiaries and intercompany advances		720,214			(212,883	)		1,347,719			(1,855,050	)		—
Other noncurrent assets		44,962			66,660			16,839			363			128,824

Total assets	$	1,159,059		$	414,915		$	1,982,135		$	(2,339,863	)	$	1,216,246

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	145,723		$	—		$	—		$	—		$	145,723
Accounts payable and accrued liabilities		60,120			94,056			181,010			(199,936	)		135,250
Accrued income taxes		(205	)		921			4,121			—			4,837

Total current liabilities		205,638			94,977			185,131			(199,936	)		285,810

Long-term debt		337,000			—			—			—			337,000
Other long-term liabilities		8,081			9,474			15,897			—			33,452
Long-term deferred tax liability		1,151			25,232			(11,296	)		847			15,934
Intercompany payables		62,583			43,657			111,619			(217,859	)		—
Contingencies		—			—			—			—			—
Stockholders’ equity:
Common stock		19,508			18,049			43,003			(61,052	)		19,508
Capital in excess of par value		637,042			733,120			1,444,091			(2,177,211	)		637,042
Retained earnings (accumulated deficit)		(111,944	)		(509,594	)		194,246			315,348			(111,944	)

Total controlling interest stockholders’ equity		544,606			241,575			1,681,340			(1,922,915	)		544,606

Noncontrolling interest		—			—			(556	)		—			(556	)

Total Equity		544,606			241,575			1,680,784			(1,922,915	)		544,050

Total liabilities and stockholders’ equity	$	1,159,059		$	414,915		$	1,982,135		$	(2,339,863	)	$	1,216,246

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)


	Year Ended December 31, 2012
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	37,313		$	54,961		$	32,816		$	(87,992	)	$	37,098
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		—			65,354			47,663			—			113,017
Loss on extinguishment of debt		2,130			—			—			—			2,130
Gain on disposition of assets		—			(775	)		(1,199	)		—			(1,974	)
Deferred income tax expense		2,257			15,429			(1,849	)		—			15,837
Expenses not requiring cash		16,558			33,644			(27,602	)		—			22,600
Equity in net earnings of subsidiaries		(43,884	)		—			—			43,884			—
Change in accounts receivable		(445	)		(1,788	)		17,474			—			15,241
Change in other assets		1,649			2,060			(9,200	)		—			(5,491	)
Change in accrued income taxes		(4,055	)		220			(2,267	)		—			(6,102	)
Change in liabilities		3,914			(4,158	)		(2,413	)		—			(2,657	)

Net cash provided by (used in) operating activities		15,437			164,947			53,423			(44,108	)		189,699

Cash flows from investing activities:
Capital expenditures		—			(176,333	)		(15,210	)		—			(191,543	)
Proceeds from the sale of assets		—			2,062			1,875			—			3,937
Proceeds from insurance settlements		—			—			—			—			—
Intercompany dividend payment		(8,387	)		(4,357	)		(31,364	)		44,108			—

Net cash (used in) investing activities		(8,387	)		(178,628	)		(44,699	)		44,108			(187,606	)

Cash flows from financing activities:
Proceeds from debt issuance		130,000			—			—			—			130,000
Proceeds from draw on revolver credit facility		7,000			—			—			—			7,000
Paydown on senior notes		(125,000	)		—			—			—			(125,000	)
Paydown on term note		(18,000	)		—			—			—			(18,000	)
Paydown on revolver credit facility		—			—			—			—			—
Payment of debt issuance costs		(4,859	)		—			—			—			(4,859	)
Payment of debt extinguishment costs		(555	)		—			—			—			(555	)
Proceeds from stock options exercised		—			—			—			—			—
Excess tax benefit from stock-based compensation		(662	)		—			—			—			(662	)
Intercompany advances, net		(8,393	)		20,492			(12,099	)		—			—

Net cash provided by (used in) financing activities		(20,469	)		20,492			(12,099	)		—			(12,076	)

Net change in cash and cash equivalents		(13,419	)		6,811			(3,375	)		—			(9,983	)
Cash and cash equivalents at beginning of year		55,670			4,212			37,987			—			97,869

Cash and cash equivalents at end of year	$	42,251		$	11,023		$	34,612		$	—		$	87,886

See accompanying notes to unaudited consolidated condensed financial statements.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)


	Year Ended December 31, 2011
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(50,451	)	$	(49,106	)	$	25,428		$	23,484		$	(50,645	)
Adjustments to reconcile net income (loss)to net cash provided by operating activities:
Depreciation and amortization		—			62,744			49,392			—			112,136
Loss on extinguishment of debt		—			—			—			—			—
Gain on disposition of assets		—			(2,706	)		(953	)		—			(3,659	)
Deferred income tax expense		31,518			(57,030	)		(22,863	)		—			(48,375	)
Impairment and other charges		—			170,000			—			—			170,000
Provision for reduction in carrying value of certain assets		—			1,350			—			—			1,350
Expenses not requiring cash		16,411			376			(3,954	)		—			12,833
Equity in net earnings of subsidiaries		23,484			—			—			(23,484	)		—
Change in accounts receivable		(288,333	)		347,344			(65,852	)		—			(6,841	)
Change in other assets		62,173			(16,724	)		16,404			—			61,853
Change in liabilities		(10,454	)		(53,404	)		41,091			—			(22,767	)

Net cash provided by (used in) operating activities		(215,652	)		402,844			38,693			—			225,885

Cash flows from investing activities:
Capital expenditures		—			(174,999	)		(15,400	)		—			(190,399	)
Proceeds from the sale of assets		—			4,335			1,200			—			5,535
Proceeds from insurance settlements		—			250			—			—			250
Intercompany dividend payment		—			—			—			—			—

Net cash provided by (used in) investing activities		—			(170,414	)		(14,200	)		—			(184,614	)

Cash flows from financing activities:
Proceeds from debt issuance		50,000			—			—			—			50,000
Proceeds from draw on revolver credit facility		—			—			—			—			—
Paydown on senior notes		—			—			—			—			—
Paydown on term note		(21,000	)		—			—			—			(21,000	)
Paydown on revolver credit facility		(25,000	)		—			—			—			(25,000	)
Payment of debt issuance costs		(504	)		—			—			—			(504	)
Payment of debt extinguishment costs		—			—			—			—			—
Proceeds from stock options exercised		183			—			—			—			183
Excess tax benefit from stock-based compensation		1,488			—			—			—			1,488
Intercompany advances, net		252,320			(230,535	)		(21,785	)		—			—

Net cash provided by (used in) financing activities		257,487			(230,535	)		(21,785	)		—			5,167

Net change in cash and cash equivalents		41,835			1,895			2,708			—			46,438
Cash and cash equivalents at beginning of year		13,835			2,317			35,279			—			51,431

Cash and cash equivalents at end of year	$	55,670		$	4,212		$	37,987		$	—		$	97,869

See accompanying notes to unaudited consolidated condensed financial statements.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)


	Year Ended December 31, 2010
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(14,461	)	$	(1,046	)	$	(12,163	)	$	12,962		$	(14,708	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		—			63,402			51,628			—			115,030
Loss on extinguishment of debt		7,209			—			—			—			7,209
Gain on disposition of assets		—			(2,067	)		(2,553	)		—			(4,620	)
Deferred income tax expense		(4,845	)		2,323			1,214			—			(1,308	)
Provision for reduction in carrying value of certain assets		—			1,952			—			—			1,952
Expenses not requiring cash		14,829			—			—			—			14,829
Equity in net earnings of subsidiaries		22,962			—			—			(22,962	)		—
Change in accounts receivable		16,178			(14,763	)		19,337			—			20,752
Change in other assets		(2,505	)		(13,454	)		15,365			—			(594	)
Change in liabilities		(144	)		7,793			(22,641	)		—			(14,992	)

Net cash provided by (used in) operating activities		39,223			44,140			50,187			(10,000	)		123,550

Cash flows from investing activities:
Capital expenditures		—			(169,784	)		(49,400	)		—			(219,184	)
Proceeds from the sale of assets		—			4,646			1,829			—			6,475
Intercompany dividend payment		—			—			(10,000	)		10,000			—

Net cash provided by (used in) investing activities		—			(165,138	)		(57,571	)		10,000			(212,709	)

Cash flows from financing activities:
Proceeds from debt issuance		300,000			—			—			—			300,000
Proceeds from draw on revolver credit facility		25,000			—			—			—			25,000
Paydown on senior notes		(225,000	)		—			—			—			(225,000	)
Paydown on term note		(12,000	)		—			—			—			(12,000	)
Paydown on revolver credit facility		(42,000	)		—			—			—			(42,000	)
Payment of debt issuance costs		(7,976	)		—			—			—			(7,976	)
Payment of debt extinguishment costs		(7,466	)		—			—			—			(7,466	)
Proceeds from stock options exercised		26			—			—			—			26
Excess tax benefit from stock-based compensation		1,203			—			—			—			1,203
Intercompany advances, net		(115,364	)		121,547			(6,183	)		—			—

Net cash provided by (used in) financing activities		(83,577	)		121,547			(6,183	)		—			31,787

Net change in cash and cash equivalents		(44,354	)		549			(13,567	)		—			(57,372	)
Cash and cash equivalents at beginning of year		58,189			1,768			48,846			—			108,803

Cash and cash equivalents at end of year	$	13,835		$	2,317		$	35,279		$	—		$	51,431