Parker Drilling CEO Discusses Q3 2010 Results – Earnings Call Transcript
Parker Drilling Company (
)
Q3 2010 Earnings Conference Call
November 3, 2010 11:00 AM ET
Executives
Richard Bajenski – Director, IR
Bobby Parker – Executive Chairman
Dave Mannon – President and CEO
Kirk Brassfield – SVP and CFO
Analysts
James West – Barclays Capital
David Smith – Johnson Rice
John Keller – Stephens Inc.
Steve Ferazani – Sidoti & Company
Presentation
Operator
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Parker Drilling Company Q3 2009 Earnings Call Transcript
Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Parker Drilling Third Quarter 2010 Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions). This conference is being recorded today, Wednesday, November 3rd, 2010.
I would now like to turn the conference over to Richard Bajenski, Director of Investor Relations. Please go ahead sir.
Richard Bajenski
Thank you (Brandie) and good morning to everyone. Thank you for joining the Parker Drilling third quarter 2010 conference call. This is Rich Bajenski, Director of Investor Relations and joining me today are Bobby Parker, Executive Chairman, Dave Mannon, President and Chief Executive Officer, and Kirk Brassfield, Senior Vice President and Chief Financial Officer.
In the course of our comments today, we will make statements regarding management’s expectations for the company’s future performance that we believe will be informative and beneficial for our shareholders. These statements are considered forward-looking statements within the meaning of the Securities Act. Each forward-looking statement speaks only as of the date of this call, and actual results may differ materially due to various factors we have referenced in our public filings, and other factors addressed during this call, including changes in market conditions affecting our industry.
We will also refer to non-GAAP financial measures, such as adjusted EBITDA and non-routine items. Please refer to the table in our current press release, or on the Company’s website for a definition of adjusted EBITDA and a reconciliation of this measure to the comparable GAAP measure, and for further information regarding non-routine items.
To start off, here is Bobby Parker to begin our review. Bobby?
Bobby Parker
Thanks, Rich, and welcome to our conference call. Earlier today, we reported our 2010 third quarter results. Dave Mannon and Kirk Brassfield will review the operating and financial details of our results in a moment.
Before they do, I have a few thoughts to share on the current business environment. The international E&P market seems (inaudible) growth. Others have reported some improvements in Brazil, the Middle East, and parts of Africa. I believe this is driven by several things; the shrinking gap between the growing demand for oil and gas and available supplies, the economics of drilling and producing oil at around $80 a barrel, and the condition of each local economy. Some of this new renewed growth is beginning to impact Parker, particularly in our drilling operations in Colombia and Southeast Asia. That growth is not taken hold around the globe.
Some markets, including those in which we are invested remain much less active than they were a year ago or even 18 months ago. As a result, I do not expect our international drilling operations to take off until international E&P’s drilling activity picks up more broadly.
Domestically, drilling for oil and gas and shale formations have been robust as measured by the rig count and feet drilled. In additional lateral drilling and production technology have begun to spread into conventional formations and has enlivened this traditional market. As a result, the demand for tubular products continues to grow impacting our rental tool business to such an extent that we are setting record for revenues and EBITDA in this business.
The moratorium on deep-water drilling in the Gulf of Mexico has been lifted. Yet I expect it will be many months before business returns to pre-Macondo levels. At least six floaters have left the Gulf recently.
However, we have been successful in keeping our equipment on some of the rigs that moved out of the gulf. We are intending on expanding the international side of our rental tool business, particularly in the off-shore market.
Having our rental tool remain on some of the relocated rigs will help us develop this market opportunity. In addition, new regulations and increased oversight have added to the cost of deep water and shelf drilling in the Gulf of Mexico. I believe this has the potential to driven more businesses to the shallow water barge drilling market, where historically regulatory compliance has been less costly and drilling permits have been more easily obtained.
The mood of the current Congress has been one of favoring more regulation with little input from the affected industries. I have been and will continue to be proactive along with industry trade associations to ensure that proposed regulations are well sought out and will not result in unintended consequences.
Now I’ll turn the call over to Dave Mannon to discuss the operating performance. Dave?
Dave Mannon
Thanks Bobby. The highlight of this past quarter was the record performance of our rental tools segment. That’s record revenues, record EBITDA, and record gross margin as a percent of revenue. I commend the management team in New Iberia and all of our Quail Tools employees around the country. This would not happen without your strong commitment to serving our customers and our shareholders.
Other highlights of the quarter include the sustained performance of our US barge drilling business. Activity has firmed up in both the utilization and average day rates and several new contracts in our international drilling segment. We extended the contracts on four rigs in Mexico into 2012 and benefited from new contracts for two rigs in the Asia-Pacific region; one in Indonesia, the other in Papua New Guinea.
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