Annual report pursuant to Section 13 and 15(d)

Reportable Segments

v3.3.1.900
Reportable Segments
 12 Months Ended
Dec. 31, 2015
Segment Reporting [Abstract]  
Reportable Segments
Reportable Segments
Our business is comprised of two business lines: (1) Drilling Services and (2) Rental Tools Services. We report our Rental Tools Services business as one reportable segment (Rental Tools) and report our Drilling Services business as two reportable segments: (1) U.S. (Lower 48) Drilling and (2) International & Alaska Drilling. Within the three reportable segments, we have aggregated our U.S. and international rental tools business units under Rental Tools, one business unit under U.S. (Lower 48) Drilling, and our Arctic, Eastern Hemisphere and Latin America business units under International & Alaska Drilling for a total of six business units. The Company has aggregated each of its business units in one of the three reporting segments based on the guidelines of ASC Topic 280, “Segment Reporting” (“ASC Topic 280”). We eliminate inter-segment revenue and expenses. We disclose revenue under the three reportable segments based on the similarity of the use and markets for the groups of products and services within each segment.
Drilling Services Business Line
In our Drilling Services business, we drill oil and gas wells for customers in both the U.S. and international markets. 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 maintenance (O&M) service in which operators own their own drilling rigs but choose Parker Drilling to operate and maintain the rigs for them. The nature and scope of activities involved in drilling an oil and 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 and commissioning of customer owned drilling facility projects. We have extensive experience and expertise in drilling geologically difficult 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 through U.S. (Lower 48) based O&M services. Our GOM barge drilling fleet operates barge rigs that 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 hull depth capabilities. The barge drilling industry in the GOM is characterized by cyclical activity where utilization and dayrates are typically driven by oil and gas prices and our customers’ access to project financing. Contract terms tend to be well-to-well or multi-well programs, most commonly ranging from 45 to 150 days.
International & Alaska Drilling
Our International & Alaska Drilling segment provides drilling services, with Company-owned rigs as well as through O&M contracts, and project-related services. The drilling markets in which this segment operates have one or more of the following characteristics:
•
customers that 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
•
drilling and O&M contracts that generally cover periods of one year or more
Our Rental Tools Services Business
Our Rental Tools segment provides premium rental equipment and services to exploration and production (E&P) companies, drilling contractors and service companies on land and offshore in the United States (U.S.) and select international markets. Tools we provide include standard and heavy-weight drill pipe, tubing, pressure control equipment, including blow-out preventers (BOPs), drill collars and more. We also provide well construction services, which include tubular running services and downhole tools, and well intervention services, which include whipstock, fishing products and related services, as well as inspection and machine shop support. Our largest single market for rental tools is U.S. land drilling. Generally, rental tools are used for only a portion of a well drilling program and are usually rented on a daily or monthly basis.

With regard to FASB ASC 280-10-50-41, we respectfully note that the Reportable Segments note to the consolidated financial statements includes tabular disclosure by material geography of revenue, operating gross margins and long-lived assets.
The following table represents the results of operations by reportable segment:
 
Year Ended December 31,
Dollars in thousands
2015
 
2014
 
2013
Revenues:
 
 
 
 
 
Drilling Services:
 
 
 
 
 
U.S. (Lower 48) Drilling(1)
$
30,358

 
$
158,405

 
$
153,624

International & Alaska Drilling(1)
435,096

 
462,513

 
410,507

Total Drilling Services
465,454

 
620,918

 
564,131

Rental Tools(1)
246,729

 
347,766

 
310,041

Total revenues
712,183

 
968,684

 
874,172

Operating income:
 
 
 
 
 
Drilling Services:
 
 
 
 
 
U.S. (Lower 48) Drilling(2)
(28,309
)
 
46,831

 
54,203

International & Alaska Drilling(2)
45,211

 
34,405

 
23,080

Total Drilling Services
16,902

 
81,236

 
77,283

Rental Tools(2)
12,797

 
72,946

 
91,164

Total operating gross margin
29,699

 
154,182

 
168,447

General and administrative expense
(36,190
)
 
(35,016
)
 
(68,025
)
Provision for reduction in carrying value of certain assets
(12,490
)
 
—

 
(2,544
)
Gain on disposition of assets, net
1,643

 
1,054

 
3,994

Total operating income (loss)
(17,338
)
 
120,220

 
101,872

Interest expense
(45,155
)
 
(44,265
)
 
(47,820
)
Interest income
269

 
195

 
2,450

Loss on extinguishment of debt
—

 
(30,152
)
 
(5,218
)
Other income (loss)
(9,747
)
 
2,539

 
1,503

Income (loss) from continuing operations before income taxes
$
(71,971
)
 
$
48,537

 
$
52,787

(1)
Exxon Neftegas Limited (ENL), was our largest customer in each of the years ended December 31, 2015, 2014, and 2013. ENL constituted approximately 27.9 percent, 18.7 percent, and 15.6 percent of our total consolidated revenues in the years ended December 31, 2015, 2014, and 2013, respectively, and approximately 45.6 percent, 39.2 percent, and 33.3 percent of our International & Alaska Drilling segment revenues in the years ended December 31, 2015, 2014, and 2013, respectively.
(2)
Operating income is calculated as revenues less direct operating expenses, including depreciation and amortization expense.

The following table represents capital expenditures and depreciation and amortization by reportable segment:
 
Year Ended December 31,
Dollars in thousands
2015
 
2014
 
2013
Capital expenditures:
 
 
 
 
 
U.S. (Lower 48) Drilling
$
2,731

 
$
43,120

 
$
23,796

International & Alaska Drilling
13,458

 
26,761

 
40,822

Rental Tools
67,189

 
95,340

 
76,928

Corporate
4,819

 
14,292

 
14,099

Total capital expenditures
$
88,197

 
$
179,513

 
$
155,645

Depreciation and amortization: (1)
 
 
 
 
 
U.S. (Lower 48) Drilling
$
22,420

 
$
21,260

 
$
15,212

International & Alaska Drilling
64,539

 
59,684

 
62,988

Rental Tools
69,235

 
64,177

 
55,853

Total depreciation and amortization
$
156,194

 
$
145,121

 
$
134,053

(1)
For presentation purposes, depreciation for corporate assets of $7.5 million, $5.0 million, and $3.5 million for the years then ended December 31, 2015, 2014 and 2013, respectively, has been allocated to the above reportable segments.
The following table represents identifiable assets by reportable segment:
 
Year Ended December 31,
  Dollars in Thousands
2015
 
2014
Identifiable assets:
 
 
 
U.S. (Lower 48) Drilling
$
102,121

 
$
124,701

International & Alaska Drilling
629,784

 
764,794

Rental Tools
429,281

 
444,195

Total identifiable assets
1,161,186

 
1,333,690

Corporate
215,718

 
186,969

Total assets
$
1,376,904

 
$
1,520,659




The following table represents selected geographic information:
 
Year Ended December 31,
Dollars in Thousands
 
 
 
 
 
Revenues by geographic area:
2015
 
2014
 
2013
Russia
$
165,193

 
$
154,817

 
$
131,037

Other CIS
61,145

 
59,881

 
54,296

EMEA & Asia
148,015

 
183,460

 
135,499

Latin America
69,989

 
86,651

 
101,154

United States
231,779

 
440,642

 
425,800

Other(1)
36,062

 
43,233

 
26,386

Total revenues
$
712,183

 
$
968,684

 
$
874,172

 
 
 
 
 
 
Long-lived assets by geographic area:(2)
 
 
 
 
 
Russia
$
22,607

 
$
25,728

 
 
Other CIS
44,675

 
49,883

 
 
EMEA & Asia
130,434

 
145,093

 
 
Latin America
63,919

 
85,492

 
 
United States(3)
544,206

 
589,744

 
 
Other
—

 
—

 
 
Total long-lived assets
$
805,841

 
$
895,940

 
 
(1)
This category includes our project services activities, as the revenue generated by our project service activities benefit our various geographic locations.
(2)
Long-lived assets consist of property, plant and equipment, net.
(3)
The long-lived assets for our project service activities primarily relate to office furniture and fixtures and are located in the United States; therefore, they have been included in the United States line item.