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Parker Drilling's Management Reviews Delayed Completion Of New Alaska Drilling Rigs And Increased Costs Result In Asset Impairment Charge (Transcript)

We also refer to non-GAAP financial numbers such as EBITDA and other items. These items are referred to in the same context as they have been employed in our past financial reports and filings. Please keep these qualifying conditions in mind as we proceed. Dave Mannon, will begin our review. David?

David C. Mannon

Thank you, Richard. Earlier today we announced that there will be further delays in completion of our advanced design Arctic Alaska Drilling Units or AADU. This delay is to allow the company to modify the rigs to meet their design and functional requirements.

The need for the modifications was determined as a result of comprehensive safety, technical and operational reviews during the recent commissioning activities of these prototype rigs. The modification work will extend the commissioning activities and increase the rigs total cost.

When bringing any prototype to market, unknown issues arise, especially when working with a multitude of interlink systems. Although we’ve identified solutions to resolve the issues identified during commissioning, I do not have a revised readiness schedule to share with you at this time. We are in discussions with our customer BP concerning, among other things, a revised schedule. In addition, commissioning and testing work is ongoing. We will update you on our progress in the future including during our quarterly earnings conference call in late February.

We now expect the total cost of the rigs to be approximately $385 million, including capitalized interest. At these expenditure levels, we have determined that the total cost of the two rigs will exceed their projected cash flows. In order to adjust the rigs’ values to their estimated fair value, we intend to record a non-cash charge in the 2011 fourth quarter of approximately $171 million pre-tax, or $111 million after-tax. This will reduce 2011 after-tax earnings per share by approximately $0.95.

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