(Parker, 3.Mar.2020) — Parker Drilling Company announced results for the fourth quarter ended December 31, 2019, which included a net loss of $2.1 million, or a $0.14 loss per share on revenues of $156.3 million. Fourth quarter Adjusted EBITDA was $25.9 million (Note 1).
Michael W. Sumruld, the Company’s Senior Vice President and CFO, said, “We are very pleased with our results in 2019 despite the ongoing challenges in the U.S. markets. Our substantial improvement across all business segments was due to the intense focus our employees have on providing innovative, reliable, and efficient solutions to our customers so they can minimize their operational risks and overall well costs. In particular, our O&M backlog grew over 250% to $627 million at the end of 2019 from $176 million at the end of 2018. We believe our focus on capital efficiency positions us to generate long-term positive cash flow going forward.
“Our fourth-quarter results were in-line with our expectations, reflecting weaker industry conditions in the U.S. and improving conditions in several of our key international markets. In the U.S., our rental tools results were generally in line with the decline in the U.S. rig count and our (lower 48) drilling results were impacted by seasonally lower utilization in the inland waterways of the Gulf of Mexico. In the International rental tools and International and Alaska drilling segments, we posted sequential revenue improvement in the fourth quarter as rental tools experienced higher utilization of our surface and tubulars product line in Guyana, the U.A.E., and India, while drilling benefited from the new Alaska O&M contract, higher utilization in Mexico, and our recently awarded barge rig contract in Kazakhstan,” concluded Sumruld.
Fourth Quarter Review
Parker Drilling’s revenues for the 2019 fourth quarter, compared with the 2019 third quarter, decreased 2.4 percent to $156.3 million from $160.1 million. Operating gross margin, excluding depreciation and amortization expense (“gross margin”), decreased 24.3 percent to $32.2 million from $42.6 million and gross margin as a percentage of revenues was 20.6 percent, compared with 26.6 percent for the 2019 third quarter.
Rental Tools Services
For the Company’s rental tools services business, which is comprised of the U.S. rental tools and International rental tools segments, fourth quarter revenues decreased 7.8 percent to $67.6 million from $73.3 million for the third quarter. Gross margin decreased 22.3 percent to $21.4 million from $27.6 million, and gross margin as a percentage of revenues was 31.7 percent, as compared with 37.6 percent for the 2019 third quarter.
U.S. Rental Tools
U.S. rental tools segment revenues decreased 13.7 percent to $42.5 million in the 2019 fourth quarter from $49.3 million for the 2019 third quarter. Gross margin decreased 26.1 percent to $17.6 million in the 2019 fourth quarter, compared with gross margin of $23.7 million in the 2019 third quarter. The decrease in revenue and gross margin resulted primarily from reduced activity that mirrored the decline in U.S. land rig count and the completion of several deep-water projects midway through the fourth quarter, partially offset by higher revenue from operations in the Permian Basin and Eagle Ford Shale Play.
International Rental Tools
International rental tools segment revenues increased 4.2 percent to $25.1 million in the 2019 fourth quarter from $24.1 million for the 2019 third quarter. Gross margin of $3.9 million in the 2019 fourth quarter was flat with the 2019 third quarter. The increase in revenues was primarily the result of additional activity in certain of our international markets, including Guyana, UAE and India.
For the Company’s drilling services business, which is comprised of the U.S. (lower 48) drilling and the International & Alaska drilling segments, fourth quarter revenues increased 2.2 percent to $88.7 million from $86.8 million for the third quarter. Gross margin decreased 28.1 percent to $10.8 million from $15.0 million, and gross margin as a percentage of revenues was 12.2 percent, compared with 17.3 percent for the 2019 third quarter.
U.S. (Lower 48) Drilling
U.S. (lower 48) drilling segment revenues decreased 32.7 percent to $9.7 million in the 2019 fourth quarter from $14.5 million for the 2019 third quarter. Gross margin was $0.1 million in the 2019 fourth quarter, compared with $3.9 million in the third quarter. Revenues and gross margin were lower as a result of seasonal declines in an already depressed inland waterway market, where the Company’s barge utilization rates declined to 14% in the fourth quarter from 21% in the third quarter. Also, revenue from the O&M project in California was lower as the project transitioned from the re-activation phase to ongoing plug & abandonment operations.
International & Alaska Drilling
International & Alaska drilling segment revenues increased 9.3 percent to $79.0 million in the 2019 fourth quarter from $72.3 million for the 2019 third quarter. Gross margin decreased 3.6 percent to $10.7 million in the 2019 fourth quarter, compared with $11.1 million in the 2019 third quarter. The increase in revenue was primarily due to higher reimbursable revenues from our Sakhalin O&M work, a full quarter of work for the Alaska O&M contract, higher utilization in Mexico, and our barge rig in Kazakhstan returning to service on a standby rate. This was partially offset by our owned rig in Sakhalin going on a standby rate midway through the fourth quarter as well as lower activity in the Kurdistan region of Iraq after two rigs completed work at the end of July. For the fourth quarter, rig utilization was 50% compared to 45% in the third quarter. This mix of activity resulted in a slight gross margin contraction.
General and administrative expense was $6.4 million for the 2019 fourth quarter. Total liquidity at the end of the quarter was $135.9 million, consisting of $105.0 million in cash and cash equivalents and $30.9 million available under the Company’s credit facility.
Capital expenditures in the fourth quarter were $24.4 million and totaled $80.3 million for the full year when combining activity in both predecessor and successor periods, with the majority of capital expenditures directed to the Company’s rental tools services business.
(Note 1) Adjusted EBITDA is a non-GAAP financial measure. See the reconciliation and table of net income/(loss) to EBITDA and Adjusted EBITDA later in this release for more information on non-GAAP financial measures.