Parker Drilling Company (PKD)
Q1 2010 Earnings Call Transcript
May 5, 2010 11:00 am ET
Richard Bajenski – Director, IR
Bobby Parker – Executive Chairman
David Mannon – President and CEO
Kirk Brassfield – SVP and CFO
Steve Ferazani – Sidoti & Company
John Keller – Stephens
Previous Statements by PKD
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Ladies and gentlemen, thank you for standing by. Welcome to the Parker Drilling first 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, May 5, 2010.
I would now like to turn the conference over to Mr. Richard Bajenski. Please go ahead sir.
Thank you, Marissa. Good morning everyone, and thank you for joining the Parker Drilling first quarter 2010 conference call. This is Rich Bajenski, Director of Investor Relations. Joining me today are Bobby Parker, Executive Chairman, David 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. 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 also for further information regarding non-routine items.
Having said that; here is Bobby Parker to begin our review. Bobby?
Thanks Rich, and welcome to our conference call. Earlier today, we reported our 2010 first quarter results. David Mannon and Kirk Brassfield will review the operating and financial details of our results in a moment. Before that, I want to speak to the industry background, against which these have played out.
In recent quarters all fundamentals have been quite good. After a break in 2009, global needs have rekindled the demand for further development of energy resources, and the price of oil has risen to and maintained a level, that has once again triggered E&P programs.
In addition, capital markets have settled down, making financing more available to a broader range of market participants. As a result, we've seen a steady increase in oil directed drilling in markets that can and do react quickly to commodity price trends, such as the U.S. land market and shallow water Gulf of Mexico drilling, and we've seen a resumption of interest in oil drilling in many of the international markets that are relying on independent E&P companies access to outside financing.
The natural gas market is more difficult to analyze, being very much a regional commodity with the inherent complexities of the local supply and demand. For the U.S. drilling market there are a lot of questions about near term activity. I will leave it to others to parse all of the implications of oversupply, LNG imports, recovering industrial demand, lease holding drilling requirements, and liquids content of the Shale plays.
Whatever reasons, U.S. land drilling for natural gas continues, particularly when coupled with the economics of oil in those fields with a liquid content, and the type of drilling that occurs, directional and lateral wells with complex completions, have sustained and benefited many parts of the oil field service sectors including Parker.
All of these factors have reenergized the global drilling market. Drilling budgets are increasing worldwide, adding incrementally to the activities that had been maintained through much of the past downturn by the international oil companies, and the national oil companies, pursuing longer term development plans for energy reserves. The outlook for the industry is not without substantive issues.
High among my concerns is the propensity for national governments who want to add taxes or remove tax benefits that impact the economic returns to the risky and uncertain energy business. This applies to the U.S. with the desire to move toward less dependence on foreign supplies of energy, will not be satisfied by increasing the costs to find and develop national resources, as well as to foreign countries trying to develop their energy resources to finance internal growth.
But the state of the industry today is one of improving health. We have certainly seen evidence of that in the earnings report today coming from this sector. I would include a further sign of a more positive outlook, the increase in merger and acquisition activity. This indicates that key players have a strong, positive outlook for the industry, and this is certainly enough [ph] outlook that I share.
And I will turn it over to Dave Mannon. Dave?
Thanks, Bobby. Though not all of our businesses are yet reporting solid year-on-year revenues and earnings increases, they are all exhibiting stronger fundamentals. In international drilling tender activity in the early part of 2010 has exceeded that of last year, and this is occurring in all of our key regions.
Since the beginning of the year, we have extended contracts on five rigs, have a contract commitment for one rig, and are in advanced discussions or negotiations for new contracts or contract renewals for six other rigs. The U.S. barge drilling industry has recovered from the lows it experienced last year. Our rig utilization has risen, and day rates have improved.