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TheStreet Open House

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

Successful innovation in drilling technology has been one of the hallmarks of Parker Drilling, particularly for applications in Arctic environments such as Heli-Hoist, rig design, and rig on wheels, which later led to self propelled rigs. These innovations greatly contributed to the development of Alaska’s Prudhoe Bay Field.

When we undertook the AADU project in 2008, we set out to bring advanced drilling technologies to the north slope of Alaska believing that the new rig design would provide improved drilling efficiency, operational consistency and enhanced safety. Converting the AADU concept into a functional rig has posed significant engineering and construction challenges.

We made efforts along the way to address these as they occurred. As the design evolved, we strengthened the design team, adding experienced resources. As the build schedule accelerated, we added support in critical trades and added work shifts.

As the construction and integration complexities grew, we expanded our Management team with a new role focused on our engineering projects in general and the AADU in particular and staffed it with a proven leader in the field. Despite these responses, the AADUs have not met their scheduling cost targets. However, we continue to expect them to meet their design and performance objectives.

In operational and strategic terms, we are looking forward to having these rigs in operation and validating our concepts of improved efficiency and safety in a demanding work environment on the North Slope.

Earlier this month, we received a letter from BP stating their belief that the delay constitutes a default under contract. We disagree that default is in effect under the contract. We are in discussions with BP concerning the contractual and operational issues related to the rigs. These discussions are continuing and ongoing.

While this project has commanded a lot of attention, particularly in addressing the current circumstances, we continue to execute Parker's business plan and the rest of our operations continue to perform inline with our expectations. I look forward to providing you an update on that progress and our results during our earnings call in late February.

Read the rest of this transcript for free on seekingalpha.com

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