Parker Drilling's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Parker Drilling Company ( PKD)

Q4 2011 Earnings Conference Call

February 23, 2012 11:00 AM ET


Richard Bajenski – Director, IR

Robert Parker – Executive Chairman

David Mannon – President and CEO

Kirk Brassfield – SVP and CFO


John Keller – Stephens

Georg Venturatos – Johnson Rice



Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Parker Drilling Fourth Quarter 2011 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, Thursday, February 23, 2012.

I would now like to turn the conference over to Mr. Richard Bajenski. Please go ahead, sir.

Richard Bajenski

Thank you, Camille. Good morning and thank you all in our audience for joining the Parker Drilling 2011 fourth quarter conference call. This is Richard Bajenski, Director of Investor Relations, and 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 to 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.

Bobby Parker will begin our review. Bobby?

Robert Parker

Thanks, Richard, and welcome to our conference call. Earlier today, we reported our 2011 fourth quarter results. Dave Mannon and Kirk Brassfield will review our performance and outlook in a moment. Before they do, I have a few thoughts to share on current events that are shaping our business and may be of interest to investors.

Starting here in the US, I expect natural gas prices are a lot on people’s mind. New drilling techniques and a warm winter have led to high natural gas inventories and consequently a lot of pressure on gas prices. Meanwhile, escalating tensions in the Middle East have driven up the price of oil making it more attractive to drillers.

We’re all interested in the impact of a price below $3 per Mcf for natural gas and over $100 per barrel for oil we’ll have on the drilling in the US As I talked with customers and other industry participants, the general expectation is that rigs will continue to come down into our gas plays and many of them will go to work developing oil and wet gas resources.

While there is a wide range in opinions as to what this means for the rig count and many related businesses, the shift to oil to wet – some oil to wet gas or the wet gas particularly in the shale plates is expected to continue to be favorable for our rental tool business.

Advances in drilling techniques have led to longer well bores with equipment spending more time in the hole. Those trends continue to require an increasing amount of drill pipe and other tubulars and that means potentially more business for oil tools.

On the international front, we took notice when the International Energy Administration recently cut its forecast for global oil demand. Yet the IEA forecasts still project a year-over-year growth in global demand for oil, albeit, at a slower pace. Meeting rising demand is not getting any easier due to both geological and geopolitical reasons.

Already, we have seen major E&P companies stepping up, they are spending in 2012 including extensive exploration programs and deepwater, Arctic frontiers and other regions. So I expect Parker’s businesses worldwide should continue to benefit from these trends.

We are quite well-suited to serve the US land market for rental tools and in Gulf of Mexico large market as the US driven shifts to more oil and gas liquid targets. Internationally, we will continue to position our assets and markets where there our long-term drilling prospects and to apply technological services to work with the major international E&P companies as they open out new frontiers.

That concludes my remarks. I will now turn this over to Dave Manning to discuss our performance and outlook. Dave?

David Mannon

Thanks, Bobby. For the 2011 fourth quarter, we had solid growth in revenues producing 37% increase in operating gross margin and a 39% increase in adjusted EBITDA compared with 2000 fourth quarter.

Excluding the impact of the asset impairment and other non- routine items we had a significant improvement in net income and earnings per share. We also continue to surpass the industry in safety performance in 2011. Our total reportable incident rate was 40% better than the industry average reported by IADC.

Incident free operation continues to be our objective where we believe our safety performance contributes to our success. I also count among our accomplishments in 2011 the addition of several key individuals to our management team. Individuals with records of successful accomplishments now serving in key roles at Parker focused on operational excellence and growth.

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