Parker Drilling's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Parker Drilling Co. (PKD)

Q2 2012 Results Earnings Call

August 2, 2012 11:00 AM ET

Executives

Richard Bajenski – Director, Investor Relations

Bobby Parker – Chairman, President and CEO

Kirk Brassfield – Senior Vice President and CFO

Analysts

Walt Chancellor – Stephens, Inc.

Presentation

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Parker Drilling Second Quarter 2012 Conference Call. During today’s presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be open for your questions. (Operator Instructions)

Today’s conference is being recorded, August 2, 2012. I would now like to turn the conference over to Richard Bajenski. Please go ahead, sir.

Richard Bajenski

Thank you, Alicia. Good morning to you and our audience. And thank you for joining the Parker Drilling 2012 second quarter conference call. This is Richard Bajenski, Director of Investor Relations. And joining me today are Bobby Parker, Chairman, CEO and President; and Kirk Brassfield, Senior Vice President and Chief Financial Officer.

In the course of our comments today, we may 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. And these forward-looking statements speaks only as of the date of this call, and actual results may differ materially due to the 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 today. Bobby?

Bobby Parker

Thanks, Rich. And I want to welcome everyone to our conference call. Earlier today we reported our 2012 second quarter results. We achieved year-to-year increases in revenues, adjusted EBITDA, net income and earnings per share.

In addition, our U.S. Barge Drilling and International Drilling segments contributed a greater portion of our earnings, demonstrating the balance and diversity of our sources of revenue and earnings growth. Kirk and I will review operational and financial performance in detail in a moment, before hand though an update on our CEO search and other topics.

Our CEO search is ongoing and has been led by the Board, assisted by an outside search firm. There is not much more that can be said about a project like this until it is complete and we have an executive onboard, until then, one of my objections is to maintain the momentum in our business operations.

There are two other areas that I’m focused on. First, is to get the AADU rig completed and working. We are making good progress on this. One rig is scheduled to begin acceptance testing today. Once accepted by BP, it will move to its first location and begin operations that could be before year end.

The second rig is scheduled to begin testing shortly after the first rig has gone through the process. Our people on the North Slope have never been busier, working to complete the rigs and they are training for rig operations.

They made great progress since earlier this year and I want to thank them for the perseverance, their dedicated work and their safety performance. Our safety record on the North Slope has been terrific. Year-to-date we have had no reportable injuries.

Our second area of focus is to reestablish momentum in our international rig fleet utilization. Our current rig utilization is not where we wanted to be and it will trend lower before it improves. We have been working vigilantly to remedy that.

As a result of our efforts and an increase in E&P spending, our tender activity has increased significantly and we have been actively submitting tenders in all of our key markets and developing opportunities in some promising new markets.

A particular focus of that work is our under utilized fleet of nine rings in Kazakhstan, only two of the nine Kazakhstan rigs are working today and we have been actively tendering them for work in country and through the CIS and other regions.

We’re also accessing other options for these rigs including potential sales. One of my personal priorities has been a commitment to maintain our focus on safety throughout the company.

Our people have done a good job of maintaining that focus, being watchful of their own safety as well as the safety of those they work with. As a result, our company-wide safety performance today is better than it was this time last year and significantly better than our target, everyone should be committed for this effort has to taken to achieve that.

Turning now to market trends as we see them, demand for the rental tools in the U.S. land drilling market has slowed as footage drilled and the overall rig count have leveled off. As a result, we are seeing more than adequate supplies of drill pipe and related products in most of our key markets as rental tools supplier bring to the market previously ordered equipment.

I would expect this oversupply condition will rebalance itself relatively quickly as it usually does through the normal wear and loss of pipe as they used. In the meantime, equipment utilization and pricing are trending lower.

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