Annual report pursuant to Section 13 and 15(d)

Reportable Segments

v3.19.1
Reportable Segments
 12 Months Ended
Dec. 31, 2018
Segment Reporting [Abstract]  
Reportable Segments Note 16 - Reportable Segments
Our business is comprised of two business lines: (1) Drilling Services and (2) Rental Tools Services. We report our Drilling Services business as two reportable segments: (1) U.S. (Lower 48) Drilling and (2) International & Alaska Drilling. We report our Rental Tools Services business as two reportable segments: (1) U.S. Rental Tools and (2) International Rental Tools.
Within the four reportable segments, we have aggregated our Arctic, Eastern Hemisphere, and Latin America business units under International & Alaska Drilling, one business unit under U.S. (Lower 48) Drilling, one business unit under U.S. Rental Tools, and one business unit under International Rental Tools, for a total of six business units. The Company has aggregated each of its business units in one of the four reporting segments based on the guidelines of the FASB ASC Topic No. 280 - Segment Reporting. We eliminate inter-segment revenues and expenses. We disclose revenues under the four reportable segments based on the similarity of the use and markets for the groups of products and services within each segment.
Drilling Services Business
In our Drilling Services business, we drill oil, natural gas, and geothermal wells for customers globally. We provide this service with both Company-owned rigs and customer-owned rigs. We refer to the provision of drilling services with customer-owned rigs as our operations and management (“O&M”) service in which operators own their own drilling rigs, but choose Parker Drilling to operate and manage the rigs for them. The nature and scope of activities involved in drilling an oil or natural gas well is similar whether it is drilled with a Company-owned rig (as part of a traditional drilling contract) or a customer-owned rig (as part of an O&M contract). In addition, we provide project-related services, such as engineering, procurement, project management, commissioning of customer-owned drilling rig projects, operations execution, and quality and safety management. We have extensive experience and expertise in drilling geologically challenging wells and in managing the logistical and technological challenges of operating in remote, harsh, and ecologically sensitive areas.
U.S. (Lower 48) Drilling
Our U.S. (Lower 48) Drilling segment provides drilling services with our Gulf of Mexico (“GOM”) barge drilling rig fleet and markets our U.S. (Lower 48)-based O&M services. We also provide O&M services for a customer-owned rig offshore California. Our GOM barge rigs drill for oil and natural gas in shallow waters in and along the inland waterways and coasts of Louisiana, Alabama and Texas. The majority of these wells are drilled in shallow water depths ranging from 6 to 12 feet. Our rigs are suitable for a variety of drilling programs, from inland coastal waters requiring shallow draft barges, to open water drilling on both state and federal water projects requiring more robust capabilities. Contract terms typically consist of well-to-well or multi-well programs, most commonly ranging from 20 to 180 days.
International & Alaska Drilling
Our International & Alaska Drilling segment provides drilling services, using both Company-owned rigs and O&M contracts, and project-related services. The drilling markets in which this segment operates have one or more of the following characteristics:
•
customers typically are major, independent, or national oil and natural gas companies or integrated service providers;
•
drilling programs in remote locations with little infrastructure, requiring a large inventory of spare parts and other ancillary equipment and self-supported service capabilities;
•
complex wells and/or harsh environments (such as high pressures, deep depths, hazardous or geologically challenging conditions and sensitive environments) requiring specialized equipment and considerable experience to drill; and
•
O&M contracts that generally cover periods of one year or more.
We have rigs under contract in Alaska, Kazakhstan, the Kurdistan region of Iraq, Guatemala, Mexico, and on Sakhalin Island, Russia. In addition, we have O&M and ongoing project-related services for customer-owned rigs in California, Kuwait, Canada, Indonesia, and on Sakhalin Island, Russia.
Rental Tools Services Business
In our Rental Tools Services business, we provide premium rental equipment and services to exploration & production companies, drilling contractors, and service companies on land and offshore in the U.S. and select international markets. Tools we provide include standard and heavy-weight drill pipe, all of which are available with standard or high-torque connections, tubing, drill collars, pressure control equipment, including blowout preventers, and more. We also provide well construction services, which include tubular running services and downhole tool rentals, well intervention services, which include whipstocks,
fishing and related services, as well as inspection and machine shop support. Rental tools are used during drilling and/or workover programs and are requested by the customer as needed, requiring us to keep a broad inventory of rental tools in stock. Rental tools are usually rented on a daily or monthly basis.

U.S. Rental Tools

Our U.S. Rental Tools segment maintains an inventory of rental tools for deepwater, drilling, completion, workover, and production applications at facilities in Louisiana, Texas, Wyoming, North Dakota and West Virginia. We also provide well construction and well intervention services. Our largest single market for rental tools is U.S. land drilling, a cyclical market driven primarily by oil and natural gas prices and our customers’ access to project financing. A portion of our U.S. rental tools business supplies tubular goods and other equipment to offshore GOM customers.
    International Rental Tools
Our International Rental Tools segment maintains an inventory of rental tools and provides well construction, well intervention, and surface and tubular services to our customers in the Middle East, Latin America, Europe, and Asia-Pacific regions.
The following table represents the results of operations by reportable segment:
 
Year Ended December 31,
Dollars in thousands
2018
 
2017
 
2016
Revenues: (1)
 
 
 
 
 
U.S. (Lower 48) Drilling
$
11,729

 
$
12,389

 
$
5,429

International & Alaska Drilling
213,411

 
247,254

 
287,332

Total Drilling Services
225,140

 
259,643

 
292,761

U.S. Rental Tools
176,531

 
121,937

 
71,613

International Rental Tools
79,150

 
60,940

 
62,630

Total Rental Tools Services
255,681

 
182,877

 
134,243

Total revenues
$
480,821

 
$
442,520

 
$
427,004

Operating gross margin: (2)
 
 
 
 
 
U.S. (Lower 48) Drilling
$
(15,720
)
 
$
(20,656
)
 
$
(34,353
)
International & Alaska Drilling
(21,936
)
 
(6,248
)
 
9,272

Total Drilling Services
(37,656
)
 
(26,904
)
 
(25,081
)
U.S. Rental Tools
44,512

 
15,651

 
(22,372
)
International Rental Tools
(11,684
)
 
(24,087
)
 
(27,859
)
Total Rental Tools Services
32,828

 
(8,436
)
 
(50,231
)
Total operating gross margin (loss)
(4,828
)
 
(35,340
)
 
(75,312
)
General and administrative expense
(24,545
)
 
(25,676
)
 
(34,332
)
Loss on impairment
(50,698
)
 
—

 
—

Provision for reduction in carrying value of certain assets
—

 
(1,938
)
 
—

Gain (loss) on disposition of assets, net
(1,724
)
 
(2,851
)
 
(1,613
)
Pre-petition restructuring charges
(21,820
)
 
—

 
—

Reorganization items
(9,789
)
 
—

 
—

Total operating income (loss)
(113,404
)
 
(65,805
)
 
(111,257
)
Interest expense
(42,565
)
 
(44,226
)
 
(45,812
)
Interest income
91

 
244

 
58

Other
(2,023
)
 
126

 
367

Income (loss) before income taxes
$
(157,901
)
 
$
(109,661
)
 
$
(156,644
)
(1)
For the years ended December 31, 2018, 2017, and 2016, our largest customer, ENL, constituted approximately 25.7 percent, 31.3 percent, and 38.7 percent, respectively, of our total consolidated revenues and approximately 58 percent, 55.9 percent, and 57.5 percent, respectively, of our International & Alaska Drilling segment revenues.
Excluding reimbursable revenues of $47.2 million, $50.8 million, and $67.0 million, ENL constituted approximately 17.9 percent, 22.7 percent, and 27.5 percent, respectively, of our total consolidated revenues and approximately 48.0 percent, 46.1 percent, and 45.0 percent, respectively of our International & Alaska Drilling segment revenues.
(2)
Operating gross margin is calculated as revenues less direct operating expenses, including depreciation and amortization expense.
Other business segment information
The following table represents capital expenditures and depreciation and amortization by reportable segment:
 
Year Ended December 31,
Dollars in thousands
2018
 
2017
 
2016
Capital expenditures:
 
 
 
 
 
U.S. (Lower 48) Drilling
$
444

 
$
230

 
$
264

International & Alaska Drilling
7,444

 
3,673

 
5,258

U.S. Rental Tools
55,545

 
39,948

 
10,848

International Rental Tools
6,275

 
8,584

 
9,725

Corporate
859

 
2,098

 
2,859

Total capital expenditures
$
70,567

 
$
54,533

 
$
28,954

 
 
 
 
 
 
Depreciation and amortization: (1)
 
 
 
 
 
U.S. (Lower 48) Drilling
$
7,758

 
$
13,521

 
$
20,049

International & Alaska Drilling
36,072

 
46,950

 
55,236

U.S. Rental Tools
48,167

 
43,489

 
43,769

International Rental Tools
15,548

 
18,413

 
20,741

Total depreciation and amortization
$
107,545

 
$
122,373

 
$
139,795

(1)
For presentation purposes, for the years then ended December 31, 2018, 2017 and 2016 depreciation for corporate assets of $8.4 million, $8.7 million, and $8.3 million, respectively, has been allocated to the corresponding reportable segments.
The following table represents identifiable assets by reportable segment:
 
Year Ended December 31,
Dollars in Thousands
2018
 
2017
U.S. (Lower 48) Drilling
$
30,283

 
$
62,980

International & Alaska Drilling
366,856

 
421,753

U.S. Rental Tools
216,123

 
198,664

International Rental Tools
146,471

 
168,511

Total identifiable assets
759,733

 
851,908

Corporate
68,681

 
138,371

Total assets
$
828,414

 
$
990,279


Geographic information     
The following table represents selected geographic information:
 
Year Ended December 31,
Dollars in Thousands
2018
 
2017
 
2016
Revenues:
 
 
 
 
 
United States
$
207,612

 
$
177,630

 
$
127,596

Russia
123,767

 
139,144

 
142,538

EMEA & Asia
92,568

 
64,572

 
79,870

Latin America
14,631

 
11,594

 
12,952

Other CIS
13,703

 
23,768

 
33,659

Other (1)
28,540

 
25,812

 
30,389

Total revenues
$
480,821

 
$
442,520

 
$
427,004

 
 
 
 
 
 
Long-lived assets: (1)
 
 
 
 
 
United States
$
369,106

 
$
429,374

 
 
EMEA & Asia
89,696

 
108,621

 
 
Latin America
36,656

 
38,959

 
 
Other CIS
21,949

 
29,402

 
 
Russia
16,964

 
19,415

 
 
Total long-lived assets
$
534,371

 
$
625,771

 
 
(1)
Long-lived assets consist of property, plant and equipment, net.