Quarterly report pursuant to Section 13 or 15(d)

Reportable Segments

v3.19.3
Reportable Segments
 9 Months Ended
Sep. 30, 2019
Segment Reporting [Abstract]  
Reportable Segments
Note 12 - Reportable Segments
Our business is comprised of two business lines: (1) rental tools services and (2) drilling services. We report our rental tools services business as two reportable segments: (1) U.S. rental tools and (2) International rental tools. We report our drilling services business as two reportable segments: (1) U.S. (lower 48) drilling and (2) International & Alaska drilling.
Within the four reportable segments, we have one business unit under U.S. rental tools, one business unit under international rental tools, one business unit under U.S. (lower 48) drilling, and we aggregate 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 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.
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 includes tubular running services and downhole tool rentals, well intervention services, which includes 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.
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 our customers 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 a 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 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 waters. 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 Alaska, California, Kuwait, Canada, Indonesia, and on Sakhalin Island, Russia.
The following table represents the results of operations by reportable segment:
 
Successor
 
 
Predecessor
 
Three Months Ended September 30,
 
 
Three Months Ended September 30,
Dollars in thousands
2019
 
 
2018
Revenues: (1)
 
 
 
 
U.S. rental tools
$
49,256

 
 
$
50,944

International rental tools
24,067

 
 
20,151

Total rental tools services
73,323

 
 
71,095

U.S. (lower 48) drilling
14,487

 
 
4,530

International & Alaska drilling
72,273

 
 
47,770

Total drilling services
86,760

 
 
52,300

Total revenues
160,083

 
 
123,395

Operating gross margin: (2)
 
 
 
 
U.S. rental tools
13,446

 
 
16,588

International rental tools
1,925

 
 
(2,713
)
Total rental tools services
15,371


 
13,875

U.S. (lower 48) drilling
2,505

 
 
(3,402
)
International & Alaska drilling
4,392

 
 
(8,541
)
Total drilling services
6,897

 
 
(11,943
)
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
)
Interest expense
(7,118
)
 
 
(11,350
)
Interest income
362

 
 
23

Other
(258
)
 
 
(709
)
Income (loss) before income taxes
$
8,968

 
 
$
(68,580
)

 
Successor
 
 
Predecessor
 
Six Months Ended September 30,
 
 
Three Months Ended March 31,
 
Nine Months Ended September 30,
Dollars in thousands
2019
 
 
2019
 
2018
Revenues: (1)
 
 
 
 
 
 
U.S. rental tools
$
102,192

 
 
$
52,595

 
$
127,775

International rental tools
46,222

 
 
21,109

 
57,563

Total rental tools services
148,414

 
 
73,704

 
185,338

U.S. (lower 48) drilling
26,966

 
 
6,627

 
9,167

International & Alaska drilling
140,734

 
 
77,066

 
157,168

Total drilling services
167,700

 
 
83,693

 
166,335

Total revenues
316,114

 
 
157,397

 
351,673

Operating gross margin: (2)
 
 
 
 
 
 
U.S. rental tools
31,317

 
 
17,289

 
30,903

International rental tools
2,626

 
 
(3,581
)
 
(9,402
)
Total rental tools services
33,943

 
 
13,708

 
21,501

U.S. (lower 48) drilling
3,485

 
 
(1,508
)
 
(12,443
)
International & Alaska drilling
7,831

 
 
(776
)
 
(17,701
)
Total drilling services
11,316

 
 
(2,284
)
 
(30,144
)
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
)
Interest expense
(14,781
)
 
 
(274
)
 
(33,787
)
Interest income
736

 
 
8

 
76

Other
(902
)
 
 
(10
)
 
(1,609
)
Income (loss) before income taxes
$
17,401

 
 
$
(89,592
)
 
$
(117,063
)
(1)
For the six months ended September 30, 2019, our largest customer, ENL, constituted approximately 27.7 percent of our total consolidated revenues and approximately 62.2 percent of our International & Alaska Drilling segment revenues. Excluding reimbursable revenues of $37.1 million, ENL constituted approximately 18.4 percent of our total consolidated revenues and approximately 49.8 percent of our International & Alaska Drilling segment revenues.
For the three months ended March 31, 2019, our largest customer, ENL, constituted approximately 31.2 percent of our total consolidated revenues and approximately 63.8 percent of our International & Alaska Drilling segment revenues. Excluding reimbursable revenues of $26.3 million, ENL constituted approximately 17.7 percent of our total consolidated revenues and approximately 46.6 percent of our International & Alaska Drilling segment revenues.
For the nine months ended September 30, 2018, our largest customer, ENL, constituted approximately 25.7 percent of our total consolidated revenues and approximately 57.5 percent of our International & Alaska Drilling segment revenues. Excluding reimbursable revenues of $34.6 million, ENL constituted approximately 17.9 percent of our total consolidated revenues and approximately 47.6 percent of our International & Alaska Drilling segment revenues.
(2)
Operating gross margin is calculated as revenues less direct operating expenses, including depreciation and amortization expense.

The following table shows the Company’s revenues by geographic region:
 
Successor
 
 
Predecessor
 
Three Months Ended September 30,
 
 
Three Months Ended September 30,
Dollars in Thousands
2019
 
 
2018
United States
$
70,887

 
 
$
57,016

Russia
45,769

 
 
30,315

EMEA & Asia
22,807

 
 
23,902

Latin America
10,480

 
 
2,596

Other CIS
3,721

 
 
2,743

Other
6,419

 
 
6,823

Total revenues
$
160,083

 
 
$
123,395


 
Successor
 
 
Predecessor
 
Six Months Ended September 30,
 
 
Three Months Ended March 31,
 
Nine Months Ended September 30,
Dollars in Thousands
2019
 
 
2019
 
2018
United States
$
143,047

 
 
$
66,253

 
$
153,665

Russia
88,047

 
 
49,387

 
90,378

EMEA & Asia
47,794

 
 
25,133

 
66,206

Latin America
17,275

 
 
5,482

 
10,214

Other CIS
7,313

 
 
3,621

 
9,799

Other
12,638

 
 
7,521

 
21,411

Total revenues
$
316,114

 
 
$
157,397

 
$
351,673