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1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED AUGUST 31, 1997
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ___________________ TO ___________________
COMMISSION FILE NUMBER 1-7573
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PARKER DRILLING COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 73-0618660
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Parker Building, Eight East Third Street, Tulsa, Oklahoma 74103
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (918) 585-8221
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which registered:
Common Stock, par value $.16 2/3 per share New York Stock Exchange, Inc.
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(Title of class)
Securities registered pursuant to section 12(g) of the Act:
N/A
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of September 30, 1997, 76,686,892 common shares were outstanding, and
the aggregate market value of the common shares (based upon the closing price
of these shares on the New York Stock Exchange) held by nonaffiliates was
$1,071.7 million.
Documents Incorporated by Reference
Part III, Items 10 through 13 Portions of the Company's definitive Proxy
Statement in connection with its Annual
Meeting to be held December 17, 1997
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TABLE OF CONTENTS
PAGE
PART I
Item 1. Business 1
Item 2. Properties 15
Item 3. Legal Proceedings 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 4a. Executive Officers 22
PART II
Item 5. Market for Registrant's Common Stock and
Related Stockholder Matters 24
Item 6. Selected Financial Data 24
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 25
Item 8. Financial Statements and Supplementary Data 33
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 59
PART III
Item 10. Directors and Executive Officers of the Registrant 59
Item 11. Executive Compensation 59
Item 12. Security Ownership of Certain Beneficial Owners
and Management 60
Item 13. Certain Relationships and Related Transactions 60
PART IV
Item 14. Exhibits, Financial Statement Schedule and
Reports on Form 8-K 60
Signatures 65
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PART I
Item 1. BUSINESS
GENERAL DEVELOPMENT
Parker Drilling Company was incorporated in the state of Oklahoma in 1954
after having been established in 1934 by its founder Gifford C. Parker. The
founder was the father of Robert L. Parker, the chairman and a principal
stockholder, and the grandfather of Robert L. Parker Jr., president and chief
executive officer. In March 1976, the state of incorporation of the Company
was changed to Delaware through the merger of the Oklahoma corporation into its
wholly owned subsidiary Parker Drilling Company, a Delaware corporation.
Unless otherwise indicated, the term "Company" refers to Parker Drilling
Company together with its subsidiaries and "Parker Drilling" refers solely to
the parent, Parker Drilling Company.
The Company is a leading worldwide provider of contract drilling and
drilling related services, operating in the transition zones of the Gulf of
Mexico and Nigeria, in the offshore waters of the Gulf of Mexico and in
international and domestic land oil and gas producing regions. The Company's
growth strategy is focused on higher margin offshore and transition zone
drilling and workover markets. Consistent with this strategy, in November 1996
the Company acquired (i) Mallard Bay Drilling, Inc. ("Mallard"), the
second-largest barge drilling and workover company in the transition zones of
the Gulf of Mexico, and (ii) Quail Tools, Inc. ("Quail"), a leading provider of
specialized rental equipment for drilling and workover operations, primarily in
the Gulf of Mexico. In July 1997 the Company acquired the assets of Bolifor, a
leading provider of land contract drilling services in Bolivia. In addition,
in May 1997 the Company entered into agreements to acquire the capital stock of
Hercules Offshore Corporation and Hercules Rig Corp. (collectively,
"Hercules"), together a leading provider of contract drilling and workover
services in the shallow waters of the Gulf of Mexico. Such pending acquisition
of Hercules is referred to in this report as the "Hercules Acquisition."
With the closing of the pending acquisition of Hercules, the Company's rig
fleet will consist of 34 barge drilling and workover rigs, eight offshore
jackup rigs, six offshore platform rigs and 74 land rigs. The Company's barge
and jackup rig fleet is dedicated to transition zone waters, which are
generally defined as extending from the coast to depths of up to 25 feet. The
Company's offshore jackup and platform rig fleets currently operate in the Gulf
of Mexico market. The Company's land rig fleet generally consists of premium
and specialized deep drilling rigs, with 61 of its 74 land rigs capable of
drilling to depths of 15,000 feet or greater. In addition, 21 of the Company's
land rigs are helicopter-transportable, thus establishing the Company as the
dominant operator in the heli-rig market. The diversity of the Company's rig
fleet, both in terms of geographic location and asset class, enables the
Company to provide a broad range of services to oil and gas operators around
the world and to take advantage of market upturns, while reducing its exposure
to downturns in any particular sector or region.
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TRANSITION ZONE OPERATIONS
The Company is a leading provider of contract drilling services in the
transition zones of the Gulf of Mexico and Nigeria, where barge rigs are the
primary source of drilling and workover services. Barge rigs are mobile
drilling and workover vessels that are submersible and are built to work in
eight to 25 feet of water. These rigs are towed by tug boats to the drill site
with the derrick laid down. The lower hull is submerged by flooding until it
rests on the sea floor. The derrick is then raised and drilling or workover
operations are conducted with the barge in this position.
Domestic Barge Drilling
The Company's principal domestic market for its barge drilling rigs is the
transition zones of the Gulf of Mexico, primarily in Louisiana and, to a lesser
extent, Alabama and Texas, where conventional jackup rigs are unable to
operate. This area historically has been the world's largest market for
shallow water barge drilling. The Company is the second largest operator of
barge drilling rigs in this market, with 15 drilling barges. Barge rigs are
also employed inland in lakes, bays, rivers and marshes.
The barge market in the transition zones of the Gulf of Mexico has
undergone significant attrition and consolidation in recent years, with the
number of drilling rigs declining from over 120 in the early 1980s to
approximately 55 today, and the number of competitors decreasing over the same
period from more than 30 to only two significant contractors. Drilling and
workover activity has been increasing in the Gulf of Mexico transition zones,
spurred by (i) the increased use of 3-D seismic technology that has resulted in
the identification of previously undiscovered drilling prospects and (ii) the
settlement of a royalty dispute between the State of Louisiana and Texaco, the
region's largest leaseholder. It is estimated that Texaco holds approximately
45% of the shallow water leases in Louisiana. Pursuant to a settlement reached
in March 1994, Texaco agreed to invest approximately $150 million to drill in
Louisiana over a five-year period. Higher natural gas prices have also
significantly contributed to this increased drilling and workover activity.
The recent increase in drilling and workover activity in the Gulf of Mexico has
resulted in a significant increase in dayrates and utilization for the
Company's rigs. For the period from November 12, 1996 through August 31, 1997,
the Company's marketable deep drilling barge rigs averaged 98% utilization and
an average dayrate of $15,660. As of September 30, 1997, 88% of the Company's
marketable deep drilling barge rigs were in operation at an average dayrate of
$18,985.
The Company believes that international markets, in which jackup rigs have
historically been utilized for transition zone drilling, will utilize an
increasing number of barge rigs over the next several years, primarily rigs
currently or formerly employed in the Gulf of Mexico transition zone market and
newly constructed rigs. Once a barge rig has been modified for international
service, it may not be feasible to return to service in certain areas of the
Gulf of Mexico transition zone market because the modifications restrict the
ability of the rig to navigate inland waterways.
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Domestic Barge Workover and Shallow Drilling
The Company is the leading provider of domestic barge workover services in
the transition zone of the Gulf of Mexico. The Company's domestic barge
workover and shallow drilling business is based in the same geographical area
as its barge drilling business. The same factors that have affected the
structure of the barge drilling sector also have affected this sector,
including considerable consolidation of competitors and reduction of available
rigs since the early 1980s. In June 1997 the Company was awarded a one-year
extension of its exclusive alliance to provide barge rig completion and
workover services to Texaco in the transition zones of the Gulf of Mexico.
International Barge Drilling
The Company has focused its international barge drilling efforts in the
transition zones of West Africa, where it is one of the leading providers of
barge drilling services in Nigeria, with three of the eight rigs in the market.
International markets are particularly attractive due to the availability of
long-term contracts and the opportunity to earn dayrates higher than domestic
rates. The Company believes that international markets, in which jackup rigs
have historically been utilized for offshore drilling, will utilize an
increasing number of barge rigs over the next several years and that these will
come primarily from rigs currently or formerly employed in the Gulf of Mexico
transition zones. The most promising international barge drilling markets are
currently located in the transition zones of Venezuela, Indonesia, Tunisia,
Middle East, the Caspian Sea and West Africa.
The Company is one of the largest barge rig operators in the transition
zones of Nigeria. The Company has operated in Nigeria since 1991 and currently
operates three barge rigs under long-term contracts at an average dayrate of
$26,444. The Company has recently received a letter of intent, subject to the
execution of a definitive agreement, from one of its present customers in
Nigeria for a five-year drilling contract in the transition zones of Nigeria,
which will require the construction of a new drilling barge at an estimated
cost of $25 million. One of the Company's drilling rigs, which previously
operated offshore Nigeria, is currently undergoing modifications at a shipyard
in New Iberia, Louisiana.
Offshore Operations
Jackup Drilling
Pursuant to the Hercules Acquisition, the Company will acquire seven
shallow water jackup rigs. As of September 30, 1997, six of the rigs were in
active service at 100% effective utilization, with an average dayrate of
$26,433. The seventh rig is in a shipyard undergoing modification and is
expected to be in service in January 1998. The Hercules jackup rigs are
mobile, self-elevating drilling platforms equipped with legs that can be
lowered to the ocean floor until a foundation is established to support the
hull, which contains the drilling equipment, jacking system, crew quarters,
loading and unloading facilities, storage areas for bulk and liquid materials,
helicopter landing deck and other related equipment. Five of the rigs are
cantilever design, a feature that permits the drilling platform to be extended
out from the hull,
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allowing drilling and workover operations to be performed over existing
platforms or structures. Jackup rigs with the cantilever feature historically
have achieved higher dayrates and utilization levels. The other two rigs are
slot-type design configured for the drilling operations to take place through a
keyway in the hull. These two rigs have the added capability of operating in
eight feet of water. Four of the seven jackup rigs are mat-supported rigs and
three are independent leg rigs. The Hercules rigs are capable of drilling to
maximum depths of 25,000 feet and in water depths of up to 215 feet.
The Hercules Acquisition will further expand and complement the Company's
business in the Gulf of Mexico shallow water market and will augment the
Company's existing platform rig business.
Platform Drilling
The Hercules Acquisition will add three modular self-erecting rigs to the
Company's current fleet of three. These platform rigs consist of drilling
equipment and machinery arranged in modular packages that are transported to
and self- erected on fixed offshore platforms owned by oil companies. The
Company believes that the modular self-erecting design of the platform rigs
provides a competitive advantage due to lower mobilization costs and smaller
"footprint." The Company intends to expand its presence in the platform rig
market through the refurbishment of its cold-stacked rig and through the
acquisition or construction of additional rigs.
LAND OPERATIONS
General
The Company is a leading international provider of land contract drilling
services. The Company's land drilling operations specialize in the drilling of
deep and difficult wells and drilling in remote and harsh environments. Since
beginning operations in 1934, the Company has operated in 49 foreign countries
and throughout the United States, making it one of the most geographically
diverse land drilling contractors in the world.
International Operations
The Company's international land drilling operations are focused primarily
in South America and the Asia Pacific region, where it specializes in drilling
that requires equipment specially designed to be transported by helicopter or
all-terrain vehicles into remote access areas such as jungle, mountainside or
desert locations. Management believes that the Company's 21 heli-rigs, with
technologically advanced pumps and power generation systems that are capable of
drilling difficult wells in excess of 15,000 feet, have established the Company
as the dominant operator in the heli-rig market, with what the Company
estimates to be a 75% worldwide market share. The Company traditionally has
been a pioneer in frontier areas and is currently working for or has recently
worked for operators in China, Russia, Kazakhstan and Vietnam.
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In recent years, many major and independent oil companies have directed a
greater portion of their exploration budgets to foreign markets. This is
particularly true in South America and the Asia Pacific region, where the
demand for land rigs has increased significantly. The Company has benefitted
from this trend due to its long-standing presence in these markets and has been
able to deploy rigs under longer term contracts at higher dayrates and
operating margins than in its domestic operations. Management believes that
the demand for drilling services in international markets will continue to grow
as demand for oil and gas increases and countries dependent on oil and gas
revenues seek to increase their production. The Company intends to capitalize
on its global presence and substantial international experience to pursue
growth opportunities in both current and developing markets.
International markets differ from the domestic market in terms of
competition, nature of customers, equipment and experience requirements. The
majority of international drilling markets have the following characteristics:
(i) a small number of competitors; (ii) customers who are major, large
independent or foreign national oil companies; (iii) drilling programs in
remote locations requiring drilling equipment with a large inventory of spare
parts and other ancillary equipment; and (iv) drilling of difficult wells
requiring considerable experience.
South America. The Company has 33 rigs located in the South American
drilling markets of Colombia, Argentina, Paraguay, Peru and Bolivia. The
Company's rigs have been upgraded to meet the demands of deep, difficult
drilling in these areas. Most of these rigs are currently under contract to
major or national oil companies at attractive dayrates. The Company
anticipates it will continue to relocate rigs to the South American market to
meet increased demand for drilling.
Asia Pacific Region. The Company operates 13 of its fleet of 21
helicopter transportable rigs in the Asia Pacific region due to the remoteness
of the mountainside and jungle drilling performed in this region. The Company
entered the Indonesian geothermal market in 1995. In 1996, the Company became
the first land drilling contractor to enter the Vietnam market subsequent to
the liberalization of Vietnam's trading policy and the lifting of restrictions
on doing business with Vietnam. Also in 1996, the Company formed an alliance
with the national drilling company in China pursuant to which Parker is
providing project management assistance and rig supervisory personnel to
western oil companies in conjunction with the Company's Chinese partner. The
Company has the longest presence of any foreign drilling contractor in China,
beginning with its first contract in 1980.
Africa and the Former Soviet Union. Seven of the Company's rigs are
currently located in the markets of Africa and the former Soviet Union. After
becoming the first western drilling contractor to enter the Russian drilling
market in 1991, expansion of the Company's business in this country has been
hampered by bureaucratic inefficiencies, constantly changing tax and other laws
and political issues that have retarded the investment of capital by major and
large independent oil companies in Russia. As a result, the Company has
relocated three of its drilling rigs and is in the process of relocating its
remaining drilling rig from Russia to Kazakhstan. As anticipated, the recently
announced agreement
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regarding the pipeline to be built to accommodate incremental production from
the Tengiz field in Kazakhstan has already increased exploration efforts in
this region. In addition to operating the Company's own rigs, the Company
recently was awarded a five-year alliance contract by the operator of the
Tengiz field to operate and maintain its rigs, including the provision of
expatriate and local drilling crews and management of its warehouse, drilling
base and mobile equipment fleet.
Domestic Operations
In the United States, the Company operates land rigs in the Gulf Coast,
Rocky Mountain and Mid-Continent regions and the arctic region of Alaska.
Industry conditions in the United States land drilling market have recently
improved after having been depressed though most of the 1980s and early 1990s.
The improved market conditions have resulted in both increased rig utilization
and dayrates and shortages for certain types of rigs in certain markets. The
increased drilling activity has been reflected in a greater demand for rigs of
all depth capabilities, in particular deep drilling rigs such as those owned by
the Company. The recent market improvements have been a result of a
combination of a general consolidation trend in the industry, high and more
stable oil and natural gas prices and improvements in exploration technology,
in particular the greater use of 3-D seismic data and horizontal drilling.
Of the Company's 14 rigs located in the United States, 13 are SCR
electric, six are equipped with top drive units and all are capable of drilling
in excess of 15,000 feet. Traditionally, the Company has differentiated itself
from its domestic competitors by specializing in the drilling of deep and
difficult wells.
Specialty Services
Helicopter Transportable Rigs. The Company specializes in difficult wells
and drilling in remote areas and harsh environments, primarily in international
locations. A significant factor contributing to the Company's success in
obtaining drilling contracts in remote areas is the use of rigs that are
transportable by air, land and water. These rigs have been specially designed
and constructed by the Company for quick assembly and disassembly under the
proprietary designations "Heli-Hoist(R)" rig, Transportable By Anything(R)
("TBA(R)) rig and All-Terrain ("AT2000E(R)") rig. Management believes that the
Company's 21 helicopter rigs comprise approximately 75% of the operational
helicopter transportable rigs worldwide. The Heli-Hoist(R), TBA(R) and
AT2000E(R) rigs allow the Company to perform drilling operations in remote and
otherwise inaccessible locations such as jungle areas, mountainous areas and
offshore platforms.
Deep Drilling. During the U.S. drilling boom of the late 1970s and early
1980s the Company developed its specialty of deep and difficult drilling,
primarily in the Anadarko Basin of Western Oklahoma and the Overthrust Region
in the Rocky Mountains. The majority of the expansion of the Company's
domestic fleet was built around this deep gas drilling. The Company's largest
drilling rig is rated in excess of 35,000 feet.
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During the last several years, drilling activity has shifted from domestic
deep gas drilling to international deep oil and gas drilling. While
international deep drilling is generally in the range of 15,000 feet to 20,000
feet as opposed to the domestic deep drilling which often exceeds 20,000 feet,
the Company has benefitted in the international arena from the development of
this expertise, particularly in the deep drilling markets of the Cusiana and
Cupiagua fields of Colombia and in northern Argentina.
Arctic Drilling. The Company has been one of the pioneers in arctic
drilling conditions and continues to offer new technology to meet the demand
for increased drilling in an ecologically sensitive manner. The Company's most
recent development has been the introduction of a self-contained mobile
drilling unit capable of being moved in one unit by giant "crawlers" similar to
the system used to move rocket thrusters for the space program. The
environmentally sensitive rig also has a complete closed-loop mud system and
cuttings processing system that eliminate the need for mud pits.
Geothermal Drilling. The Company also has developed expertise in the area
of geothermal drilling. Geothermal operations involve drilling into a pocket
of geothermal energy, tapping the source of this energy in the form of steam,
hot water or hot rocks and converting this heat into usable forms of energy.
The market for geothermal drilling is expanding into several areas of the
world, including the Philippines, New Zealand and Indonesia, as various
countries elect to access this alternative form of energy.
RENTAL TOOLS
Quail, based in New Iberia, Louisiana, is a provider of premium
rental tools used for land and offshore oil and gas drilling and workover
activities. Approximately 70% of Quail's equipment is utilized in offshore and
coastal water operations. Since its inception in 1978, Quail's principal
customers have been major and independent oil and gas exploration and
production companies.
Quail rents specialized equipment utilized in difficult well drilling and
production and workover applications. Quail offers a full line of drill pipe,
drill collars, tubing, high-and low-pressure blowout preventers, choke
manifolds, casing scrapers and cement and junk mills. During fiscal 1997,
Quail entered into a contract with a major oil company to be its preferred
provider of rental tools to the land and offshore Texas markets. The Company
expects to open prior to year-end a new rental tool facility in Victoria,
Texas, in order to service the increasing demand for tools in that region.
Approximately 60% of Quail's revenues are realized from rentals for production
and workover activities.
The rental tool industry is currently experiencing increasing demand due
to the trend toward outsourcing by oil companies of noncore equipment and
services and the significant increase in drilling activity in the Gulf of
Mexico. In recent years, major and independent oil companies have
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liquidated certain ancillary drilling equipment in an effort to improve
drilling efficiencies and returns on drilling programs. In addition, drilling
activity has increased substantially in the Gulf of Mexico, causing an increase
in dayrates for drilling rigs and a further increase in the demand for rental
tools. The Company believes that Quail will benefit from such trends.
During the past three years, Quail has experienced significant growth in
revenues and earnings due in general to the growth trends in the oil and gas
industry and specifically to the increased production and drilling activity in
the Gulf of Mexico and the movement within the industry towards fewer or single
source vendors. Quail derives equipment rental revenue primarily from the
daily rental charges for its tools, pipe, and related equipment and to a lesser
extent by charging customers for ancillary parts and repairs, transportation of
the rental items to the customer's location, inspection of rental items as
specified by the customer, items it sub-rents from other rental tool companies,
the disposal of waste removed from the rental items after their use, and the
cost of rental items lost or damaged beyond repair. The operating costs
associated with Quail's rentals consist primarily of expenses associated with
depreciation, transportation, inspection, maintenance and repair, and related
direct overhead.
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PENDING ACQUISITIONS
The Hercules Acquisition
On May 9, 1997, the Company executed a definitive stock purchase agreement
(the "HOC Agreement") to acquire all of the outstanding capital stock of
Hercules Offshore Corporation, a Texas corporation ("HOC"), and a definitive
stock purchase agreement (the "HRC Agreement") to acquire all of the
outstanding capital stock of Hercules Rig Corp., a Texas corporation ("HRC")
and an affiliate of HOC (HOC and HRC being collectively referred to as
"Hercules"), for $145 million and $50 million, respectively. The purchase
prices for the acquisitions are subject to adjustment for certain debt assumed
by the Company, for capital expenditures incurred and for levels of working
capital at closing. Currently, Hercules owns three self-erecting platform rigs
and seven offshore jackup rigs.
Under the terms of the HOC Agreement, Trenergy (Malaysia) BHD
("Trenergy"), the sole shareholder of HOC, and the Company have agreed to
indemnify the other in certain circumstances. The closing of the HOC Agreement
is subject to certain conditions, including approval of the transaction by the
Malaysian Securities Commission and the Kuala Lumpur Stock Exchange and
obtaining of the requisite approval of the shareholders of Trenergy. Under
certain circumstances, if the Company fails to consummate the transaction, the
Company will be obligated to pay Trenergy $5 million. Trenergy also is
obligated to pay the Company $5 million if it fails to close the transaction
under certain circumstances. The HOC Agreement is terminable by either party
if the transaction fails to close by December 31, 1997.
The closings of the HOC Agreement and the HRC Agreement are further
conditioned on the closing of the other. The closing of the transaction is
expected to occur in the fourth quarter of calendar 1997. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
CUSTOMERS
The Company believes it has developed an international reputation for
providing efficient, quality drilling services. A key for advancing the
Company's business strategy is maintaining and developing relationships and
strategic alliances with its customers. An increasing number of the Company's
customers have been seeking to establish exploration or development drilling
programs based on partnering relationships or alliances with a limited number
of preferred drilling contractors. Such relationships or alliances can result
in longer term work and higher efficiencies that increase profitability for
drilling contractors at a lower overall well cost for oil companies. The
Company is currently a preferred contractor for operators in certain domestic
and international locations, which management believes is a result of the
Company's quality, service and experience.
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The Company's drilling customer base consists of major, independent and
foreign national oil and gas companies. The Company's largest customer
accounted for approximately 13% of total revenues for fiscal year 1997, and
its two largest customers accounted for 19% and 18% of total revenues for
fiscal year 1996 and 22% and 13% of total revenues for fiscal year 1995.
CONTRACTS
The Company generally obtains drilling contracts through competitive
bidding. Under most contracts the Company is paid a daily fee, or dayrate.
The dayrate received is based on several factors, including: type of
equipment, services and personnel furnished; investment required to perform the
contract; location of the well; term of the contract; and competitive market
forces. Meterage rate contracts are occasionally accepted in which the Company
is paid a rate per meter drilled upon reaching a specified depth.
The Company generally receives a lump sum fee to move its equipment to the
drilling site, which in most cases approximates the cost incurred by the
Company. Domestic contracts are generally for one well, while international
contracts are more likely to be for multi-well programs. The Company continues
to obtain contracts under which the Company provides drilling engineering and
integrated project management services. The Company provides drilling project
services ranging from well design and engineering expertise to site preparation
and road construction in an effort to help customers eliminate or reduce
management overhead which would otherwise be necessary to supervise such
services.
After a decade of low domestic land drilling activity, fiscal 1997 has
seen an improved market. Dayrates on domestic contracts have increased
significantly, thereby providing improved profit margins over prior years. The
Company has redeployed five of its domestic land rigs to the active Gulf Coast
market where dayrates and profit margins are more attractive. International
and offshore dayrates and profit margins continue to be more favorable than
those for domestic land operations. Because of the difficult remote drilling
sites encountered internationally, specialized equipment is often required,
sometimes resulting in additional modification or construction costs which are
generally offset by favorable dayrates for the Company. Substantially all the
international contracts provide for payment in U.S. dollars, with a minimum
local currency portion to cover local expenditures.
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COMPETITION
Demand in the offshore drilling markets serviced by the Company has
significantly improved from previous years. In the Gulf of Mexico barge
drilling and workover markets, the Company competes primarily with Falcon
Drilling Company, Inc. However, a few small contractors remain, principally
in the barge workover market.
Management believes that Quail is one of the four leading rental tool
companies in the offshore Gulf of Mexico. A number of Quail's competitors in
the Gulf of Mexico and in the Gulf Coast land markets are substantially larger
than, and have greater financial resources than, Quail.
Management believes that Hercules is the second largest shallow water
drilling company in the Gulf of Mexico. This market is characterized by
effectively full utilization and rising dayrates. While competitive, none of
the jack-up rig companies have experienced difficulty in obtaining contracts
for their rigs in recent months.
The land drilling market is generally more competitive than the offshore
market due to the larger number of rigs and companies. Drilling contracts are
generally awarded on a competitive bid basis and, while an operator may
consider factors such as quality of service and type and location of equipment
as well as the ability to provide ancillary services, price and availability of
equipment are significant factors in determining which contractor is awarded a
job. In international markets, experience in operating in certain environments
and customer alliances have also been factors in the selection of the Company
in certain cases, as well as the Company's patented drilling equipment for
remote drilling projects. The Company believes that the market for land
drilling contracts will continue to be competitive for the foreseeable future.
Certain of the Company's competitors have greater financial resources than the
Company, which may enable them to better withstand industry downturns, to
compete more effectively on the basis of price, to build new rigs or to acquire
existing rigs.
RESEARCH AND DEVELOPMENT
In response to the customers' need for reducing the overall drilling
costs, the Company is developing a versatile All Terrain Modular (ATM) Rig
System. The new series of modular compact components will provide an
expandable, upgradeable, concept to fit almost any drilling, transporting, and
environmental requirement. The ATM Rig System also will provide some of the
latest drilling equipment technology as well as maximum power capabilities for
fast, safe, and efficient drilling. Several proprietary designs will make the
modular rig system unique in capacity and transportability.
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Fifteen employees are involved in the Company's research and development
activities. The costs associated with the Company's research and development
efforts are not significant.
EMPLOYEES
At August 31, 1997, the Company employed 4,313 persons, up 116% from the
1,993 employed at August 31, 1996. The following table sets forth the
composition of the Company's employees:
August 31,
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1997 1996
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International Land Drilling Operations 2,286 1,458
Domestic Land Drilling Operations 413 331
Offshore Drilling Operations 1,355 --
Tool Rental Operations 68 --
Corporate and Other Domestic 191 204
RISKS AND ENVIRONMENTAL CONSIDERATIONS
The U.S. Gulf Coast market, and particularly the shallow water areas where
the Company's contract drilling service operations are concentrated, are
ecologically sensitive. As a result, environmental issues have led to higher
drilling costs, a more difficult and lengthy well permitting process and, in
general, have adversely affected decisions of the oil companies to drill in
these areas. U.S. laws and regulations applicable to the Company's operations
include those controlling the discharge of materials into the environment,
requiring removal and cleanup of materials that may harm the environment, or
otherwise relating to the protection of the environment. The Company, as an
operator of drilling rigs in navigable U.S. waters and certain offshore areas,
may be liable for damages and costs incurred in connection with oil spills for
which it is held responsible, subject to certain limitations. An oil spill in
a wetland or inland waterway could produce substantial damage to the
environment, including wildlife and ground water. Laws and regulations
protecting the environment have become more stringent in recent years, and may,
in certain circumstances, impose strict liability, rendering a person liable
for environmental damage without regard to negligence or fault on the part of
such person. Such laws and regulations may expose the Company to liability for
the conduct of or conditions caused by others, or for acts of the Company which
were in compliance with all applicable laws at the time such acts were
performed. The application of these requirements or the adoption of the new
requirements could have a material adverse effect on the Company.
- 12 -
15
The drilling of oil and gas wells is subject to various federal, state,
local and foreign laws, rules and regulations. The Company, as an owner or
operator of both onshore and offshore facilities operating in or near waters of
the United States, may be liable for the costs of removal and damages arising
out of a pollution incident to the extent set forth in the Federal Water
Pollution Control Act, as amended by the Oil Pollution Act of 1990 ("OPA") and
the Outer Continental Shelf Lands Act. In addition, the Company may also be
subject to applicable state law and other civil claims arising out of any such
incident. Certain of the Company's facilities are also subject to regulations
of the Environmental Protection Agency ("EPA") that require the preparation and
implementation of spill prevention, control and countermeasure plans relating
to possible discharge of oil into navigable waters. Other regulations of the
EPA may require certain precautions in storing, handling and transporting
hazardous wastes. State statutory provisions relating to oil and natural gas
generally include requirements as to well spacing, waste prevention, production
limitations, pollution prevention and cleanup, obtaining drilling and dredging
permits and similar matters. The Company believes that it is in substantial
compliance with such laws, rules and regulations.
The OPA and regulations promulgated pursuant thereto impose a variety of
regulations on "responsible parties" related to the prevention of oil spills
and liability for damages resulting from such spills. A "responsible party"
includes the owner or operator of a facility or vessel, or the lessee or
permittee of the area in which an offshore facility is located. The OPA
assigns liability to each responsible party of oil removal costs and a variety
of public and private damages. While liability limits apply in some
circumstances, a responsible party for an Outer Continental Shelf facility must
pay all spill removal costs incurred by a federal, state or local government.
The OPA establishes liability limits (subject to indexing) for offshore
drilling rigs. If functioning as an offshore facility, the offshore drilling
rigs are considered "tank vessels" for spills of oil on or above the water
surface, with liability limits of $1,200 per gross ton or $10 million. To the
extent damages and removal costs exceed this amount, the offshore drilling rigs
will be treated as an offshore facility and the offshore lessee will be
responsible up to higher liability limits for all removal costs plus $75
million. A party cannot take advantage of liability limits if the spill was
caused by gross negligence or willful misconduct or resulted from violation of
a federal safety, construction or operating regulation. If the party fails to
report a spill or to cooperate fully in the cleanup, liability limits likewise
do not apply. Few defenses exist to the liability imposed by the OPA. The OPA
also imposes ongoing requirements on a responsible party, including proof of
financial responsibility (to cover at least some costs in a potential spill)
and preparation of an oil spill contingency plan. Amendments to the OPA
adopted earlier in 1997 reduced the amount of financial responsibility
required for "offshore facilities" from $150 million to $35 million, but such
amendments did not reduce the amount of financial responsibility required for
"tank vessels." Since the Company's offshore drilling rigs are typically
classified as tank vessels, the recent amendments to the OPA are not expected
to have a significant effect on the Company's operations. A failure to comply
with ongoing requirements or inadequate cooperation in a spill may even subject
a responsible party to civil or criminal enforcement actions.
- 13 -
16
In addition, the Outer Continental Shelf Lands Act authorized regulations
relating to safety and environmental protection applicable to lessees and
permittees operating on the Outer Continental Shelf. Specific design and
operational standards may apply to Outer Continental Shelf vessels, rigs,
platforms, vehicles and structures. Violations of environmental-related lease
conditions or regulations issues pursuant to the Outer Continental Shelf Lands
Act can result in substantial civil and criminal penalties as well as potential
court injunctions curtailing operations and the cancellation of leases. Such
enforcement liabilities can result from either governmental or citizen
prosecution.
All of the Company's operating domestic barge drilling rigs have zero
discharge capabilities as required by law. In addition, in recognition of
environmental concerns regarding dredging of inland waters and permitting
requirements, the Company conducts negligible dredging operations and
approximately two-thirds of the Company's offshore drilling contracts involve
directional drilling, which minimizes the need for dredging. However, the
existence of such laws and regulations has had and will continue to have a
restrictive effect on the Company and its customers.
The drilling industry is dependent on the demand for services from the oil
and gas exploration and development industry and, accordingly, is affected by
changes in laws relating to the energy business. The Company's business is
affected generally by political developments and by federal, state, local and
foreign laws and regulations that may relate directly to the oil and gas
industry. The adoption of laws and regulations, both domestic and foreign,
that curtail exploration and development drilling for oil and gas for economic,
environmental and other policy reasons may adversely affect the Company's
operations by limiting available drilling opportunities.
- 14 -
17
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company historically has operated in only one segment, land-based
contract drilling services. The acquisitions of Mallard and Quail significantly
diversified the Company's businesses, adding offshore drilling and tool rental
segments. Information about the Company's business segments and operations by
geographic areas for the three years ended August 31, 1997, is set forth in
Note 8 of Notes to Consolidated Financial Statements.
Item 2. PROPERTIES
The Company owns and occupies a ten-story building in downtown Tulsa,
Oklahoma, as its home office. Additionally, the Company owns and leases office
space and operating facilities in various locations, but only to the extent
necessary for administrative and operational functions.
Land Rigs. During fiscal 1997, the Company added 11 land rigs through the
Bolifor acquisition and four land rigs through the Mallard acquisition, sold
one domestic and one international rig, released a leased rig and retired a rig
damaged in a blowout. The following table shows, as of August 31, 1997, the
locations and drilling depth ratings of the Company's 74 land rigs:
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18
Drilling Depth Rating in Feet
---------------------------------------------------
10,000
or Over
less 15,000 20,000 25,000 25,000 TOTAL
------ ------ ------ ------ ------ -----
INTERNATIONAL:
South America 6 10 10 3 4 33
Asia Pacific 4 3 11 2 -- 20
Africa and the Former
Soviet Union 3 2 2 -- -- 7
---- ---- ---- ---- ---- ----
Total International 13 15 23 5 4 60
---- ---- ---- ---- ---- ----
DOMESTIC:
Gulf Coast -- -- 1 -- 4 5
Rocky Mountains -- -- 2 -- 2 4
Mid-Continent -- -- 4 -- -- 4
Alaska -- -- -- -- 1 1
---- ---- ---- ---- ---- ----
Total Domestic -- -- 7 -- 7 14
---- ---- ---- ---- ---- ----
TOTAL 13 15 30 5 11 74
==== ==== ==== ==== ==== ====
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19
Barge Rigs. The following schedule shows the Company's barge rigs as of August
31, 1997.
Maximum
Year Built Drilling
or Last Depth
Horsepower Refurbished (Feet) Status(1)
---------- ----------- -------- ---------
Deep Drilling:
Rig No. 50 ................ 2,000 1993 25,000 Active
Rig No. 51 ................ 2,000 1993 25,000 Active
Rig No. 52 (2)............. 2,000 1993 25,000 Stacked
Rig No. 53 ................ 1,600 1995 20,000 Active
Rig No. 54 ................ 2,000 1995 30,000 Active
Rig No. 55 ................ 2,000 1993 30,000 Active
Rig No. 56 ................ 2,000 1992 30,000 Active
Rig No. 57 ................ 1,500 1997 20,000 Active
Rig No. 58 ................ 3,000 1982 30,000 Stacked
Rig No. 59 ................ 3,000 1972 30,000 Stacked
Rig No. 60 ................ 3,000 1997 30,000 Active
Intermediate Drilling:
Rig No. 8 ................ 1,700 1995 15,000 Active
Rig No. 12 ................ 1,200 1990 14,000 Active
Rig No. 17 ................ 1,200 1993 13,000 Active
Rig No. 21 ................ 1,200 1995 14,000 Active
Heavy Workover and Shallow Drilling:
Rig No. 5 ................ 800 1991 - Stacked
Rig No. 10 ................ 800 1978 - Stacked
Rig No. 15 ................ 800 1991 - Stacked
Rig No. 16 ................ 800 1994 11,500 Active
Rig No. 18 ................ 800 1993 11,500 Active
Rig No. 20 ................ 800 1995 11,500 Active
Rig No. 23 ................ 1,000 1993 13,000 Active
Rig No. 24 ................ 1,000 1992 13,000 Active
Rig No. 25 ................ 1,000 1993 13,000 Active
Rig No. 27 ................ 800 1987 - Stacked
Rig No. 28 ................ 800 1987 - Stacked
Workover and Other:
Rig No. 6 ................ 700 1995 - Active
Rig No. 7 ................ 700 1995 - Active
Rig No. 9 ................ 650 1996 - Active
Rig No. 26 ................ 650 1996 - Active
- 17 -
20
Maximum
Year Built Drilling
or Last Depth
Horsepower Refurbished (Feet) Status(1)
---------- ----------- -------- ---------
Deep Drilling:
Rig No. 71 (3)............. 3,000 1994 30,000 Shipyard
Rig No. 72 ................ 3,000 1991 30,000 Active
Rig No. 73 ................ 3,000 1991 30,000 Active
Rig No. 74 ................ 3,000 1997 30,000 Active
- --------------------
(1) "Active" denotes that the rig is currently under contract or available for
contract. "Stacked" denotes that the rig is currently cold stacked and
would need to be refurbished at a significant cost before being placed
back into service.
(2) On June 16, 1997, Rig No. 52 suffered extensive damage when a well on
which it was working suffered a blowout and fire.
(3) Rig 71 is being refurbished for service in an international location.
Platform Rigs. The following table shows the Company's platform rigs as of
August 31, 1997.
Maximum
Year Built Drilling
or Last Depth
Horsepower Refurbished (Feet) Status(1)
---------- ----------- -------- ---------
Rig No. 41E .... 1,000 1997 12,500 Active
Rig No. 42E..... 1,000 1996 12,500 Active
Rig No. 47 ..... 750 1993 11,000 Stacked
- --------------------
(1) "Active" denotes that the rig is currently under contract or available for
contract. "Stacked" denotes that the rig is currently cold stacked and
would need to be refurbished at a significant cost before being placed
back into service.
- 18 -
21
Jackup rigs. The Company has one jackup rig as of August 31, 1997.
Maximum Maximum
Water Drilling
Depth Depth
Design(1) (Feet) (Feet) Status(2)
--------- -------- -------- ---------
Rig No. 43 ....... Sun Contractors (IC) 55 - Stacked
- -----------------
(1) IC--independent leg, cantilevered.
(2) "Active" denotes that the rig is currently under contract or available for
contract. "Stacked" denotes that the rig is currently cold stacked and
would need to be refurbished at a significant cost before placed back into
service.
- 19 -
22
The following table presents utilization rates for the Company's barge
rigs for fiscal year 1997 beginning at the November 12, 1996 acquisition date
of Mallard. The table also presents average dayrates as of September 30, 1997.
1997
----
Transition Zone Rig Data
Domestic barge deep drilling:
Rigs available for service (1) 7.8
Utilization rate of rigs available for service (2) 98%
Dayrate $18,985
Cold stacked rigs (1) 3.0
Domestic barge intermediate drilling:
Rigs available for service (1) 4.1
Utilization rate of rigs available for service (2) 95%
Dayrate $13,825
Cold stacked rigs (1) 0.0
Domestic barge workover and shallow drilling:
Rigs available for service (1) 8.7
Utilization rate of rigs available for service (2) 83%
Dayrate $10,256
Cold stacked rigs (1) 6.3
International barge drilling:
Rigs available for service (1) 3.5
Utilization rate of rigs available for service (2) 92%
Dayrate $26,444
Cold stacked rigs (1) 0.5
(1) The number of rigs is determined by calculating the number of days each
rig was in the fleet, e.g., a rig under contract or available for contract
for an entire year is 1.0 "rigs available for service" and a rig cold
stacked for one quarter is 0.25 "cold stacked rigs." "Rigs available for
service" includes rigs currently under contract or available for contract.
"Cold stacked rigs" includes all rigs that are stacked and would require
significant refurbishment before being placed into service. Rig No. 52,
which recently suffered a blowout is also included as a cold stacked rig
under current information for domestic barge deep drilling.
(2) Rig utilization rates are based on a weighted average basis assuming 365
days availability for all rigs available for service. Rigs acquired or
disposed of have been treated as added to or removed from the rig fleet as
of the date of acquisition or disposal. Rigs that are in operation or
fully or partially staffed and on a revenue-producing standby status are
considered to be utilized. Rigs under contract that generate revenues
during moves between locations or during mobilization/demobilization are
also considered to be utilized.
- 20 -
23
The following table sets forth the utilization rates for the Company's
land rigs during each of the previous three years. For comparison purposes the
domestic and overall utilization numbers for 1995 have been restated to remove
the 22 domestic rigs sold in fiscal 1996.
Average Utilization
for the Years Ended
August 31,
-------------------
1997 1996 1995
----- ---- ----
International Utilization 63% 55% 54%
Domestic Utilization 87% 56% 46%
Overall Utilization 68% 55% 52%
Item 3. LEGAL PROCEEDINGS
The Company is a party to certain legal proceedings that have resulted
from the ordinary conduct of its business. In the opinion of the Company's
management, none of these proceedings is expected to have a material adverse
effect on the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to Parker Drilling Company security
holders during the fourth quarter of fiscal year 1997.
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24
Item 4A. EXECUTIVE OFFICERS
Officers are elected each year by the board of directors following the
annual meeting for a term of one year and until the election and qualification
of their successors. The current executive officers of the Company and their
ages, positions with the Company and business experience are presented below:
(1) Robert L. Parker, 74, chairman, joined Parker Drilling Company in 1944 and
was elected a vice president of the Company in 1950. He was elected
president in 1954 and chief executive officer in October 1977. Since
December 1991, he has retained the position of chairman.
(2) Robert L. Parker Jr., 48, president and chief executive officer, joined
the Company in 1973 as a contract representative and was named manager of
U.S. operations later in 1973. He was elected a vice president in 1973,
executive vice president in 1976 and was named president and chief
operating officer in October 1977. In December 1991, he was elected chief
executive officer.
(3) James W. Linn, 51, executive vice president and chief operating officer,
joined Parker Drilling in 1973. He has general charge of the Company's
business affairs and its officers. Mr. Linn first served in Parker
Drilling's international division and in 1976 was named northern U.S.
district manager prior to being elected vice president of U.S. and Canada
operations in 1979. He was named a senior vice president in September 1981
and was elected to his current position in December 1991.
(4) James J. Davis, 51, senior vice president of finance and chief financial
officer, joined Parker in November 1991, in the stated positions. From
1986 through 1991, Mr. Davis was vice president and treasurer of MAPCO,
Inc., a diversified energy company with interests in natural gas liquids,
marketing and transportation, oil refining and retail motor fuel
marketing. He serves as a member of the board of directors of Dollar Rent
A Car Finance Company.
(5) Randy L. Ellis, 45, was elected corporate controller in June 1991. He
joined Parker in 1979 as general accounting supervisor and was named
manager of general accounting in May 1983.
- 22 -
25
OTHER PARKER DRILLING COMPANY OFFICERS
(6) I. E. Hendrix Jr., 53, vice president and treasurer, joined Parker
Drilling in 1976 as manager of the Company's treasury department and was
elected treasurer in 1978. Mr. Hendrix was elected vice president of
parker Drilling Company in April 1983. He serves as a member of the board
of directors of American Performance Mutual Fund.
(7) Kenneth R. Hoit, 60, vice president, planning and accounting, joined
Parker Drilling Company in 1973. He served as financial analyst and
manager of budgets and analysis prior to being elected a vice president in
April 1983. In June 1991, Mr. Hoit was given additional management
responsibilities over corporate accounting and information systems
departments.
(8) Leslie D. Rosencutter, 42, was elected vice president, administration, in
December 1989, and has responsibility for the public relations and human
resources departments. In March 1996, she was elected Corporate Secretary.
She previously had been named assistant vice president, administration in
1987. She joined Parker in 1974 as secretary to the controller and later
was secretary to the Robert L. Parker Trust. She has served as executive
secretary and administrative assistant to the chairman prior to being
elected an officer.
(9) T. Bruce Blackman, 46, was elected vice president, Asia Pacific region in
January 1996, and has responsibility for the international operations of
the Company in this area. He joined the Company in 1977 and has held
management positions in Africa and Singapore and international accounting
manager in Tulsa. In 1983, he became division manager for the Indonesian
operations. In 1989, he was promoted to contract manager, Asia Pacific
region.
(10) John R. Gass, 46, was elected vice president, frontier areas in January
1996, and has responsibility for the international operations of the
Company in Russia, North Africa, China and other areas. He joined the
Company in 1977 and has served in various management positions in the
Company's international divisions. In 1985, he became the division manager
of Africa and the Middle East. In 1987, he directed the Company's mining
operations in South Africa. In 1989, he was promoted to international
contract manager.
(11) Donald D. Goodson, 43, was elected vice president, Latin American region
in January 1996, and has responsibility for international operations in
this area. He joined the Company in 1976 and held various accounting and
finance positions prior to being named contract manager for U.S.
operations in 1981. In June 1989, Mr. Goodson was named Indonesian
division manager. In July 1993, he served as contract manager for the
Middle East, Africa and Colombia.
(12) Thomas L. Wingerter, 44, vice president, North America region, joined
Parker in 1979. In 1983 he was named contracts manager for the Rocky
Mountain division. He was promoted to Rocky Mountain division manger in
1984, a position he held until September 1991 when he was elected a vice
president.
- 23 -
26
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Parker Drilling Company common stock is listed for trading on the New York
Stock Exchange under the symbol PKD. At the close of business on August 31,
1997, there were 3,481 holders of record of Parker Drilling common stock.
Prices on Parker Drilling's common stock for the fiscal years ending August 31,
1997 and 1996, were as follows:
Fiscal Year 1997 Fiscal Year 1996
---------------- ----------------
Quarter High Low High Low
------- ------ ------ ------ ------
First $10.250 $6.125 $6.375 $4.875
Second 11.000 7.875 6.500 5.000
Third 10.000 7.500 8.125 5.375
Fourth 13.688 9.375 7.375 5.250
No dividends have been paid on common stock since February 1987.
Restrictions contained in Parker Drilling's existing credit agreement prohibits
the payment of dividends. The Company has no present intention to pay dividends
on its common stock in the foreseeable future because of its business plan to
reinvest earnings in the Company's operations.
Item 6. SELECTED FINANCIAL DATA
Parker Drilling Company and Subsidiaries
(In Thousands Except Per Share Data)
Years Ended August 31, 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------
Revenues $311,644 $156,652 $157,371 $152,424 $100,801
Net income (loss) $ 16,315 $ 4,053 $ 3,916 $(28,806) $(10,687)
Earnings (loss) per
share, primary and
fully diluted $ .23 $ .07 $ .07 $ (.53) $ (.20)
Total assets $984,136 $275,959 $216,959 $209,348 $236,342
Long-term debt $551,042 $ 2,794 $ 1,748 $ - $ -
- 24 -
27
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OUTLOOK AND OVERVIEW
The Company's operations and future results have been altered
significantly by the acquisitions of Mallard and Quail in November 1996. As a
result of the Mallard Acquisition, the Company has become one of the primary
barge drilling contractors in the Gulf of Mexico and Nigeria, each of which
were markets in which Parker previously did not operate. As a result of the
Quail Acquisition, the Company expanded its operations into the rental tool
market in the Gulf of Mexico and the Gulf Coast region. The pending acquisition
of Hercules and the recent acquisition of Bolifor are expected to further
change the nature of the Company's operations and its future results.
In addition to increasing the size and scope of the Company's operations,
the Hercules Acquisition will further increase the percentage of the Company's
revenue generated domestically. Parker generated approximately 47% of its
revenue from domestic sources in fiscal 1997.
The financings related to the Mallard and Quail Acquisitions in November
1996, combined with the Company's issuance of the Convertible Notes in July
1997, have substantially increased the Company's debt levels. At August 31,
1997, the Company had $567.1 million in total indebtedness, compared to $3.4
million of total indebtedness at August 31, 1996. The substantial levels of
debt will result in a higher level of interest expense and an increased
percentage of the Company's cash flows being used for debt service and may
limit the Company's ability to obtain additional financing for future
acquisitions and capital expenditures. See "--Liquidity and Capital Resources."
For the foregoing reasons, the acquisitions of Mallard, Quail and the
pending Hercules Acquisition will affect the comparability of the Company's
historical results of operations.
- 25 -
28
RESULTS OF OPERATIONS
Year Ended August 31, 1997 Compared to Year Ended August 31, 1996
The Company's fiscal 1997 results of operations were significantly
impacted by the acquisitions of Mallard Bay Drilling, Inc. for $336.8 million
and Quail Tools, Inc. for $66.9 million in November 1996. The acquisitions
added two new business segments to the Company's traditional land drilling
business: offshore and transition zone drilling and workover services utilizing
barge and platform rigs and the rental of specialized equipment used in
drilling, production and workover applications.
The acquisitions were accounted for under the purchase method of
accounting. As a result, the assets and liabilities of Mallard and Quail were
recorded at their estimated fair values as of November 12, 1996, the date the
acquisitions were consummated. Goodwill, the purchase price in excess of the
fair value of Mallard's and Quail's assets, totaled $143.3 million and will be
amortized over a 30-year period.
The Company recorded net income of $16.3 million in fiscal 1997 as
compared to $4.1 million in fiscal 1996. Increased land rig utilization and
improved margins plus profit generated by the offshore and tool rental segments
were partially offset by increased interest and depreciation and amortization
expenses. The Company's results of operations included Mallard's and Quail's
operations for the period from the acquisition date, November 12, 1996, through
fiscal year end, August 31, 1997.
Total revenues of $311.6 million in fiscal 1997 increased $155.0 million,
nearly doubling total revenues in fiscal 1996. Offshore drilling and tool
rental, the two new business segments acquired in fiscal 1997, accounted for
$100.2 million and $25.5 million, respectively, of the increase. Offshore
drilling revenues were derived primarily from barge drilling activity in the
transition zones of the U.S. Gulf Coast and Nigeria. The Company furnishes
rental tools in both the Gulf of Mexico offshore and Gulf Coast land markets.
Total land drilling revenues increased $38.2 million due to increased
utilization and dayrates in several of the Company's primary land markets.
Drilling revenues in the United States increased $13.6 million due to increased
dayrates and a 42% increase in operating days. All 14 of the Company's United
States land drilling rigs were operating at year end, with a majority of the
rigs located in the Gulf Coast and Rocky Mountain regions.
In Latin America, land drilling revenues increased $15.0 million due to
increased revenues in Peru, Colombia and Bolivia. Four rigs were active in Peru
for most of fiscal 1997 as compared to an average of one rig active in fiscal
1996. At year end, the Company
- 26 -
29
RESULTS OF OPERATIONS 1997 AS COMPARED TO 1996 (continued)
had eight rigs under contract in Colombia, where revenue increased from
additional activity and increased dayrates. In July 1997, the Company acquired
substantially all of the assets of Bolifor, a leading provider of land contract
drilling services in Bolivia. Assets acquired include 11 land rigs located in
Bolivia, Paraguay and Argentina. Eight of the rigs are currently under
contract. Since the acquisition occurred late in the fiscal year, the impact
on results of operations will not be fully realized until fiscal 1998.
Land drilling revenues in the Asia Pacific region increased $9.4 million
due to increased drilling services provided in Indonesia and increased rig
utilization in Pakistan, where the Company had three rigs under contract at
fiscal year end. Drilling activity in the former Soviet Union and Middle East
countries remained nearly the same as in fiscal 1996. However, at fiscal year
end, the Company was mobilizing one land rig to Niger for a one-rig contract
and moving a land rig from Russia to Kazakhstan to begin a drilling program
from a gravel island in the Caspian Sea. Additionally, the Company is
modifying one of its barge rigs that previously operated in Nigeria, for
service in another international location.
Land drilling revenues generated a profit margin (revenue less direct
operating expense) of $54.5 million in fiscal 1997, an increase of $14.0
million. Increased profit margins resulted from increased rig utilization and
higher dayrates as previously discussed. The offshore drilling and tool rental
segments acquired in fiscal 1997 generated profit margins of $39.1 million and
$16.9 million, respectively.
The increased 1997 profit margins of $75.0 million were somewhat offset by
$23.2 million higher depreciation and amortization expense and a $32.7 million
increase in interest expense. Higher depreciation and amortization expense was
attributable to a combined $19.0 million depreciation for Mallard and Quail and
$3.8 million of goodwill amortization in fiscal 1997. Increased interest
expense resulted from $400.0 million of debt incurred in November 1996 to
finance the Mallard and Quail acquisitions and the issuance of $175.0 million
of Convertible Notes in July 1997.
A $3.7 million increase in interest income was due to higher cash and cash
equivalent levels maintained during the year. Other income decreased $2.3
million due primarily to reduced gains on sales of assets in fiscal 1997.
Included in other income was a $1.6 million write down resulting from a blowout
which damaged barge Rig No. 52 and a $1.1 million gain from the sale of a
subsidiary, Parker Kinetic Designs, Inc.
General and administrative expense decreased $1.3 million principally due
to non-recurring severance costs in fiscal 1996 associated with a reduction in
corporate personnel. The increase in income tax expense was attributable to
improved international operations and the addition in fiscal 1997 of offshore
drilling in Nigeria and offset by a $1.3 million reversal in fiscal 1997 of an
income tax accrual in a country where the Company terminated operations.
- 27 -
30
RESULTS OF OPERATIONS
Year Ended August 31, 1996 Compared to Year Ended August 31, 1995
The Company recorded net income of $4.1 million in fiscal 1996 as compared
to net income of $3.9 million in fiscal 1995. An improvement in drilling
margins in fiscal 1996 was offset by reduced other income and by increased
general and administrative expense due primarily to severance costs.
Drilling revenue decreased $7.9 million in fiscal 1996 due to the
termination in late fiscal 1995 of the Company's low-margin southern Argentina
operations, which had generated $13.0 million of revenue in fiscal 1995. The
Company's overall rig utilization rate increased from 52% in fiscal 1995 to 55%
in fiscal 1996. Excluded from the utilization percentages for both years are 22
domestic mechanical rigs sold in the fourth quarter of fiscal 1996.
South America drilling revenue decreased from $76.1 million in fiscal 1995
to $58.5 million in fiscal 1996, primarily due to the loss of revenue generated
in the terminated southern Argentina operations in fiscal 1995. In Colombia,
three rigs were refurbished in fiscal 1996 and resumed work under new
contracts. The Company had seven rigs under contract in Colombia and two rigs
under contract both in northern Argentina and in Peru as of September 30, 1996.
Operations in the Asia Pacific areas generated revenue of $47.9 million in
fiscal 1996, an increase of $2.9 million from fiscal 1995. The primary area of
increased revenue was Papua New Guinea where the Company experienced a 91% rig
utilization rate on its five rigs in fiscal 1996. Revenue decreased in New
Zealand, the Philippines and Pakistan because five rigs completed contracts in
fiscal 1996. Revenues from operations in Africa, Russia and Kazakhstan were
approximately $8.0 million in fiscal 1996 and fiscal 1995.
The Company's domestic operations generated $30.8 million of drilling
revenue in fiscal 1996 as compared to $23.7 million in fiscal 1995. The
increase in revenue was attributable to Alaska Rig 245 operating the entire
year in fiscal 1996 versus nine months in fiscal 1995 and a 10% increase in
utilization days for the rigs in the lower 48 states. The increase in domestic
drilling activity occurred primarily in the Tuscaloosa Trend in Louisiana,
where the Company deployed three rigs in fiscal 1996. Six rigs were under
contract in Louisiana as of September 30, 1996.
During the fourth quarter of fiscal 1996, the Company sold 22 mechanical
rigs from its domestic rig fleet, leaving 15 SCR electric rigs and two
mechanical rigs.
- 28 -
31
RESULTS OF OPERATIONS 1996 AS COMPARED TO 1995 (Continued)
Although worldwide contract drilling revenue decreased $7.9 million in
fiscal 1996, as compared to fiscal 1995, the total drilling margin (drilling
revenue less drilling expense) increased $4.3 million over the same period.
This increase was attributable to increased utilization of rigs in Papua New
Guinea, improved contract margins in Colombia and the termination of the
low-margin southern Argentina operations.
Other revenue increased $7.2 million in fiscal 1996 due to the sale of a
rig by the Company's manufacturing subsidiary, Parker Technology, Inc.
("Partech(R)"). General and administrative expense increased $2.4 million in
fiscal 1996 principally due to non-recurring severance costs associated with a
reduction in corporate personnel.
Other income (expense) decreased $2.0 million due to the reversal in
fiscal 1995 of a prior year's foreign currency accrual of $1.5 million and
reduced gains on sales of assets in fiscal 1996. The increase in income tax
expense was attributable to increased international profits in fiscal 1996.
- 29 -
32
Liquidity and Capital Resources
Cash and short-term investments were $212.8 million at August 31, 1997, an
increase of $134.8 million from August 31, 1996. At August 31, 1997, the
Company's working capital was $275.2 million, which compares to working capital
of $102.9 million at August 31, 1996. Principal factors affecting working
capital in fiscal 1997 were $61.3 million of net proceeds from a Common Stock
offering in April 1997, $169.8 million of net proceeds from the issuance of
Convertible Notes in July 1997 and capital expenditures of $87.4 million
incurred during fiscal 1997.
Fiscal 1997 capital expenditures included: (i) the substantial upgrade of
barge Rig No. 74, which began work in Nigeria in the third quarter; (ii) the
refurbishment of platform Rig Nos. 41 and 42 and barge Rig No. 60, which began
work in the Gulf of Mexico during the latter half of fiscal 1997; (iii) the
upgrade of land Rig No. 7, which began working in Pakistan in the fourth
quarter; (iv) significant additions of drill pipe and tools for rental
operations; and (v) initial expenditures for expansion of tool rental
operations in the South Texas market.
In November 1996, the Company acquired Mallard for $311.8 million in cash
and $25.0 million in convertible preferred stock (that converted into 3,056,600
shares of common stock in the second quarter of fiscal 1997) and Quail for
$66.9 million in cash. The Company financed the acquisitions of Mallard and
Quail through the sale of $300 million principal amount of the 9 3/4% Senior
Notes and a term loan of $100 million under the Senior Credit Facility.
The 9 3/4% Senior Notes, which were sold at a $2.4 million discount, have
an interest rate of 9 3/4% (effective rate of 9.88%) and will mature in 2006.
The 9 3/4% Senior Notes are guaranteed by the Company's principal subsidiaries.
The Senior Credit Facility consists of the term loan and a $45 million
revolving credit facility. The term loan bears interest (7.89% at August 31,
1997) at the option of the Company, at prime to prime plus 0.50% or at 1.75% to
2.25% above the one-, two-, three- and six-month reserve-adjusted LIBOR rate,
depending on the Company's Debt-to-Capital Ratio (as defined), and matures on
November 30, 2002. Installments of principal and interest are payable
quarterly in an amount that provides for the retirement of $10 million in
fiscal 1997, $14 million in fiscal 1998, $12 million in each of fiscal 1999
through 2002, with a final payment of $28 million due at maturity. The term
loan has no prepayment penalty, is guaranteed by the Company's principal
subsidiaries and is collateralized by substantially all of the assets of the
Company and the assets and stock of such subsidiaries.
The revolving credit facility is available for working capital
requirements, general corporate purposes and to support letters of credit, of
which $13.8 million had been issued at August 31, 1997. Availability under the
revolving credit facility is subject to certain borrowing base limitations
based on 80% of eligible accounts receivable. All advances to the Company
under the revolving credit facility bear interest, at the option of the
Company, at
- 30 -
33
Liquidity and Capital Resources (continued)
prime to prime plus 0.50% or at 1.75% to 2.25% above the one-, two-, three-and
six-month reserve-adjusted LIBOR rate, depending on the percentage of the
credit facility utilized. The revolving credit facility is collateralized by a
first lien on the Company's accounts receivable. The revolving credit facility
matures on December 31, 1998. At August 31, 1997, no amounts were outstanding
under the revolving credit facility.
Each of the 9 3/4% Senior Notes and the Senior Credit Facility contains
customary affirmative and negative covenants, including restrictions on
incurrence of debt and sales of assets. The Senior Credit Facility prohibits
payment of dividends and the indenture for the 9 3/4% Senior Notes restricts
the payment of dividends.
On May 9, 1997, the Company signed definitive agreements to acquire the
capital stock of Hercules for $195 million. Hercules owns seven jackup rigs
and three self-erecting platform rigs in the Gulf of Mexico. The Hercules
acquisition is subject to various conditions, including Malaysian regulatory
approval, approval by the shareholders of Trenergy and closing by year-end
1997. Although there can be no assurance as to the closing of the transaction,
the Company anticipates the transaction will close in the fourth quarter of
calendar 1997. In anticipation of funding the Hercules acquisition, in July
1997 the Company issued $175 million of Convertible Notes due August 1, 2004.
The Convertible Notes bear interest at 5.5% payable semi-annually in May and
November. The Convertible Notes are convertible at the option of the holder
into shares of Common Stock of Parker Drilling at any time prior to maturity.
The Notes are redeemable at the option of the Company at any time after July
2000 at certain stipulated prices.
In July 1997 the Company acquired substantially all of the assets of
Bolifor for $25 million, of which $2.7 million will be paid in fiscal 1998.
The assets of Bolifor primarily consist of 11 land rigs located in Bolivia,
Paraguay and Argentina.
Management believes that the current level of cash and short-term
investments and cash generated from operations should be sufficient to acquire
Hercules and to finance the Company's working capital needs, scheduled debt
service and a portion of the expected capital expenditures during fiscal 1998.
In anticipation of new opportunities requiring capital, management is
considering various available options for raising additional capital including
seeking additional equity and utilizing the revolving portion of the Senior
Credit facility.
- 31 -
34
Other Matters
Internationally, the Company specializes in drilling in remote locations
and under difficult geological or operating conditions. The Company's
international services are primarily utilized by international and national oil
companies in the exploration and development of reserves of oil. Domestically,
the Company specializes in drilling deep wells in search of natural gas.
Business activity is dependent on the exploration and development activities of
the major, independent and national oil and gas companies that make up the
Company's customer base. Generally, temporary fluctuations in oil and gas
prices do not materially affect these companies' exploration and development
activities, and consequently do not materially affect the operations of the
Company. However, sustained increases or decreases in oil and natural gas
prices could have an impact on customers' long-term exploration and development
activities which in turn could materially affect the Company's operations.
Generally, a sustained change in the price of oil would have a greater impact
on the Company's international operations while a sustained change in the price
of natural gas would have a greater effect on domestic operations. Although
recent price increases for natural gas have spurred domestic drilling activity,
weak prices have resulted in depressed markets for domestic drilling services
over the past decade.
Historically, due to the importance of oil revenue to most of the
countries in which the Company operates, the Company's operations generally
have not been negatively impacted by adverse economic and political conditions.
However, there can be no assurances that such conditions could not have a
material adverse effect in the future.
In fiscal year 1996 the Company purchased a software package which is year
2000 compliant. During fiscal year 1997 the Company installed significant
financial applications and intends to install remaining applications in the
near future.
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share," was issued. This statement replaces the currently
required presentation of primary earnings per share (EPS) with a presentation
of basic EPS that excludes dilutive securities from the computation. It also
requires a presentation of diluted EPS that is computed similarly to the fully
diluted EPS calculation currently required. The statement will be effective
for the Company's fiscal quarter which will end February 28, 1998. Early
application of this statement is not permitted. The Company anticipates that
the effect of this pronouncement will be minimal.
- 32 -
35
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Parker Drilling Company
We have audited the consolidated financial statements and financial
statement schedule of Parker Drilling Company and subsidiaries as listed in
Item 14(a)(1) and (2) of the Form 10-K. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Parker
Drilling Company and subsidiaries as of August 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended August 31, 1997, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
/s/ COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
October 14, 1997
- 33 -
36
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands Except Earnings Per Share
and Weighted Average Shares Outstanding)
For the Years Ended August 31, 1997 1996 1995
- -------------------------------------------------------------------------------------
Revenues:
Land drilling $ 183,381 $ 145,160 $ 153,075
Offshore drilling 100,217 -- --
Tool rental 25,457 -- --
Other 2,589 11,492 4,296
------------ ------------ ------------
Total revenues 311,644 156,652 157,371
------------ ------------ ------------
Operating expenses:
Land drilling 128,843 104,614 115,963
Offshore drilling 61,136 -- --
Tool rental 8,549 -- --
Other 4,722 11,824 4,928
Depreciation and amortization 46,256 23,061 23,745
General and administrative 14,414 15,756 14,232
------------ ------------ ------------
Total operating expenses 263,920 155,255 158,868
------------ ------------ ------------
Operating income 47,724 1,397 (1,497)
------------ ------------ ------------
Other income and (expense):
Interest expense (32,851) (135) (88)
Interest income 5,367 1,642 1,272
Other 3,316 5,663 7,413
------------ ------------ ------------
Total other income and (expense) (24,168) 7,170 8,597
------------ ------------ ------------
Income before income taxes 23,556 8,567 7,100
------------ ------------ ------------
Income tax expense 7,241 4,514 3,184
------------ ------------ ------------
Net income $ 16,315 $ 4,053 $ 3,916
============ ============ ============
Earnings per share,
primary and fully diluted $ .23 $ .07 $ .07
============ ============ ============
Weighted average shares
outstanding (fully diluted) 72,049,124 57,466,183 55,332,541
============ ============ ============
The accompanying notes are an integral part
of the consolidated financial statements.
- 34 -
37
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
August 31, 1997 1996
- ---------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $209,951 $ 61,738
Other short-term investments 2,838 16,247
Accounts and notes receivable, net of
allowance for bad debts of $3,153 in 1997
and $739 in 1996 103,808 33,675
Rig materials and supplies 19,130 10,735
Other current assets 16,227 3,653
-------- --------
Total current assets 351,954 126,048
-------- --------
Property, plant and equipment, at cost:
Drilling equipment 723,878 423,023
Rental equipment 28,264 --
Buildings, land and improvements 12,519 14,871
Other 21,586 19,153
Construction in progress 28,640 18,844
-------- --------
814,887 475,891
Less accumulated depreciation, depletion
and amortization 375,236 351,714
-------- --------
Net property, plant and equipment 439,651 124,177
-------- --------
Deferred charges and other assets:
Goodwill, net of accumulated
amortization of $3,822 139,467 --
Rig materials and supplies 5,486 7,984
Assets held for disposition 9,191 8,065
Debt issuance costs 14,956 --
Other 23,431 9,685
-------- --------
Total deferred charges and other assets 192,531 25,734
-------- --------
Total assets $984,136 $275,959
======== ========
The accompanying notes are an integral part
of the consolidated financial statements.
- 35 -
38
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
August 31, 1997 1996
- -----------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 16,084 $ 584
Accounts payable 26,178 9,415
Accrued liabilities 29,539 6,911
Accrued income taxes 4,904 6,217
--------- ---------
Total current liabilities 76,705 23,127
--------- ---------
Long-term debt (Note 4) 551,042 2,794
--------- ---------
Other long-term liabilities 7,666 5,990
--------- ---------
Commitments and contingencies (Note 10)
Stockholders' equity:
Preferred stock, $1 par value, 1,942,000
shares authorized, no shares outstanding -- --
Common stock, $.16 2/3 par value,
authorized 120,000,000 shares, issued
and outstanding 76,679,669 shares
(65,327,088 shares in 1996) 12,780 10,888
Capital in excess of par value 340,243 254,955
Retained earnings (accumulated deficit) (4,023) (20,338)
Other (277) (1,457)
--------- ---------
Total stockholders' equity 348,723 244,048
--------- ---------
Total liabilities and stockholders' equity $ 984,136 $ 275,959
========= =========
The accompanying notes are an integral part
of the consolidated financial statements.
- 36 -
39
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
For the Years Ended August 31, 1997 1996 1995
- ------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,315 $ 4,053 $ 3,916
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 46,256 23,061 23,745
Loss (gain) on disposition of
property, plant and equipment (1,292) (5,416) (6,395)
Deferred tax expense (benefit) -- -- (294)
Other 4,201 307 (55)
Change in assets and liabilities:
Accounts and notes receivable (46,488) 8,057 (4,105)
Rig materials and supplies (3,468) (532) (627)
Other current assets (2,661) 1,493 (1,364)
Accounts payable and accrued
liabilities 2,236 (1,504) 3,319
Accrued income taxes (1,732) 1,108 56
Other assets (4,895) (656) (260)
--------- --------- ---------
Net cash provided by operating
activities 8,472 29,971 17,936
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of property,
plant and equipment 14,235 8,288 11,711
Capital expenditures (87,426) (30,836) (21,540)
Acquisition of Mallard (311,837) -- --
Acquisition of Quail (66,888) -- --
Acquisition of Bolifor (22,311) -- --
Investments in affiliates (5,458) (1,720) (501)
Decrease (increase) in other short-term
and long-term investments 13,409 (14,875) 2,439
Other -- -- 121
--------- --------- ---------
Net cash provided by (used in)
investing activities (466,276) (39,143) (7,770)
--------- --------- ---------
The accompanying notes are an integral part
of the consolidated financial statements.
- 37 -
40
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(continued)
(Dollars in Thousands)
For the Years Ended August 31, 1997 1996 1995
- ------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt $ 557,040 $ -- $ 187
Proceeds from common stock offering 61,341 49,032 --
Principal payments under debt
obligations (12,284) (367) --
Repurchase of common stock (432) (382) (277)
Proceeds from exercise of stock warrant -- 1,552 --
Other 352 323 16
--------- --------- ---------
Net cash provided (used) by financing
activities 606,017 50,158 (74)
--------- --------- ---------
Net increase in cash and
cash equivalents 148,213 40,986 10,092
Cash and cash equivalents at beginning
of year 61,738 20,752 10,660
--------- --------- ---------
Cash and cash equivalents at
end of year $ 209,951 $ 61,738 $ 20,752
========= ========= =========
Supplemental disclosures of cash
flow information:
Cash paid during the year for:
Interest $ 21,116 $ 145 $ 2
Income taxes $ 8,973 $ 3,406 $ 3,422
Supplemental noncash financing activity:
In November 1994, the Company acquired a limited partner's ownership
interest in two consolidated partnerships in exchange for a
promissory note in the amount of $1,850,000.
In May 1995, the Company received rig materials and supplies valued at
$556,000 in lieu of payment on a note due the Company.
In fiscal 1996 the Company acquired computer and office equipment
under capital lease arrangements totaling $1,708,000.
The accompanying notes are an integral part
of the consolidated financial statements.
- 38 -
41
PARKER DRILLING COMPANY AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
(Dollars in Thousands)
Other-
Capital Retained Unearned
in excess earnings restricted
Preferred Common of par (accumulated stock plan
stock stock value deficit) compensation
--------- --------- --------- --------- ---------
Balances, August 31, 1994 $ -- $ 9,185 $ 202,403 $ (28,307) $ (2,698)
Activity in employees' stock
plans 111 3,175 (588)
Acquisition of stock from
certain employees (9) (268)
Net income 3,916
--------- --------- --------- --------- ---------
Balances, August 31, 1995 -- 9,287 205,310 (24,391) (3,286)
Activity in employees' stock
plans 36 1,008 1,829
Acquisition of stock from
certain employees (10) (372)
Issuance of 400,000 common
shares upon exercise of
warrants at $3.88 per share 67 1,485
Issuance of 9,050,000 common
shares in public offering 1,508 47,524
Net income 4,053
--------- --------- --------- --------- ---------
Balances, August 31, 1996 -- 10,888 254,955 (20,338) $ (1,457)
Acquisition of Mallard Bay
Drilling, Inc. 25,000
Conversion of preferred stock
into common stock (25,000) 509 24,491
Activity in employees' stock
plans 32 1,239 1,180
Acquisition of stock from
certain employees (7) (425)
Issuance of 8,146,600 common
shares in public offering 1,358 59,983
Net income 16,315
--------- --------- --------- --------- ---------
Balances, August 31, 1997 $ -- $ 12,780 $ 340,243 $ (4,023) $ (277)
========= ========= ========= ========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
- 39 -
42
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Consolidation - The consolidated financial statements include the accounts
of Parker Drilling Company ("Parker Drilling") and all of its majority-owned
subsidiaries (collectively, the "Company").
Operations - The Company provides land and offshore contract drilling
services and rental tools on a worldwide basis to major, independent and
foreign national oil companies. Parker's rig fleet consists of 34 barge
drilling and workover rigs, one offshore jackup rig, three offshore platform
rigs and 74 land rigs. The Company specializes in the drilling of deep and
difficult wells, and drilling in remote and harsh environments, drilling in
transition zones and offshore waters and in providing specialized rental tools.
The Company also provides a range of services that are ancillary to its
principal drilling services, including engineering, logistics, construction and
environmental remediation, as well as various types of project management.
Drilling Contracts - The Company recognizes revenue and expenses on
dayrate contracts as the drilling progresses (percentage-of-completion method)
because the Company does not bear the risk of completion of the well. For
meterage contracts, the Company recognizes the revenue and expenses upon
completion of the well (completed-contract method).
Cash and Cash Equivalents - For purposes of the balance sheet and the
statement of cash flows, the Company considers cash equivalents to be all
highly liquid debt instruments that had a remaining maturity of three months or
less at the date of purchase.
Other Short-term Investments - Other short-term investments include
primarily certificates of deposit, U.S. government securities and commercial
paper having remaining maturities of greater than three months at the date of
purchase and are stated at the lower of cost or market.
Property, Plant and Equipment - The Company provides for depreciation of
property, plant and equipment primarily on the straight-line method over the
estimated useful lives of the assets after provision for salvage value. When
properties are retired or otherwise disposed of, the related cost and
accumulated depreciation are removed from the accounts and any gain or loss is
included in operations. Management periodically evaluates the Company's assets
to determine if they are not in excess of their net realizable value.
Management considers a number of factors such as estimated future cash flows,
appraisals and current market value analysis in determining net realizable
value. Assets are written down to reflect any decrease in net realizable value
below their net carrying value (see Note 9).
- 40 -
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 1 - Summary of Significant Accounting Policies (continued)
Goodwill - Goodwill is being amortized on a straight-line basis over 30
years commencing on the dates of the respective acquisitions. The Company
assesses whether the excess of cost over net assets acquired is impaired based
on the ability of the operation to which it relates to generate cash flows in
amounts adequate to cover the future amortization of such assets. If an
impairment is determined, the amount of such impairment is calculated based on
the estimated fair value of the related asset.
Rig Materials and Supplies - Since the Company's foreign drilling
generally occurs in remote locations, making timely outside delivery of spare
parts unlikely, a complement of parts and supplies is maintained for each rig
either at the drilling site or in warehouses close to the operations. During
periods of high rig utilization, these parts are generally consumed and
replenished within a one-year period. During a period of lower rig utilization
in a particular location, the parts, like the related idle rigs, are generally
not transferred to other foreign locations until new contracts are obtained
because of the significant transportation costs which would result from such
transfers. The Company classifies those parts which are not expected to be
utilized in the following year as long-term assets.
Income Taxes - The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 109: Accounting for Income Taxes. Under this method,
deferred tax liabilities and assets are determined based on the difference
between the financial statement and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse.
Earnings (Loss) Per Share - Earnings (loss) per share is computed by
dividing net income (loss), as adjusted for dividends on preferred stock, by
the weighted average number of common shares outstanding during the period
including the effect of dilutive options when applicable. Common shares issued
under the 1969 Key Employees Stock Grant Plan, 1980 Incentive Career Stock Plan
and the 1991 Stock Grant Plan are issued and outstanding and are only
considered in the computation of weighted average shares outstanding when their
effect on earnings per share is dilutive.
Concentrations of Credit Risk - Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of trade
receivables with a variety of national and international oil and natural gas
companies. The Company generally does not require collateral on its trade
receivables. Such credit risk is considered by management to be limited due to
the large number of customers comprising the Company's customer base. The
Company places substantially all its interest-bearing investments with major
financial institutions and, by policy, limits the amount of credit exposure to
any one financial institution. At August 31, 1997, the Company had deposits in
domestic banks in excess of federally insured limits of approximately $4.9
million. In addition, the Company had deposits in foreign banks of $11.1
million which are not federally insured.
Fair Market Value of Financial Instruments - The carrying amount of the
Company's cash and short-term investments and short-term and long-term debt had
fair values that approximated their carrying amounts.
- 41 -
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 1 - Summary of Significant Accounting Policies (continued)
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
New Accounting Pronouncements - In February 1997, Statement of Financial
Accounting Standards No. 128, "Earnings per Share," was issued. This statement
replaces the currently required presentation of primary earnings per share
(EPS) with a presentation of basic EPS that excludes dilutive securities from
the computation. It also requires a presentation of diluted EPS that is
computed similarly to the fully diluted EPS calculation currently required.
The statement will be effective for the Company's fiscal quarter which will end
February 28, 1998. Early application of this statement is not permitted. The
Company anticipates that the effect of this pronouncement will be minimal.
Note 2 - Reclassification of General and Administrative Expense
The Company has elected early application of Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information." The statement requires the presentation of certain
financial information based on the way management organizes the segments within
the Company for making operating decisions and assessing performance. In
connection with the implementation of this accounting standard, certain
expenses previously included in general and administrative expense have been
reclassified as drilling expense due to their direct association with the
segment information presented in Note 8. Amounts reclassified are as follows:
1997 - $5,200,000; 1996 - $3,672,000; and 1995 - $2,831,000.
- 42 -
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 3 - Acquisitions
On November 12, 1996, the Company acquired Mallard Bay Drilling, Inc.
("Mallard") and Quail Tools, Inc. ("Quail"). Both were accounted for by the
purchase method of accounting.
The Company acquired all of the outstanding stock of Mallard from Energy
Ventures, Inc. ("EVI") for $336.8 million, including acquisition costs, for
cash of $311.8 million and $25.0 million of preferred stock which was converted
into 3,056,600 shares of common stock during the second quarter of fiscal 1997.
Mallard owns and operates 34 drilling and workover barges in the shallow waters
of the Gulf of Mexico and Nigeria and four land drilling rigs in Argentina.
The Company acquired all of the outstanding stock of Quail for $66.9
million, including acquisition costs. Quail is a provider of premium rental
tools used in well drilling, production and workover operations to companies
working in the Gulf of Mexico and Gulf Coast land regions. The excess of
purchase price over the fair values of the net assets acquired was $99.7
million for Mallard and $43.6 million for Quail and has been recorded as
goodwill, which is being amortized on a straight-line basis over 30 years.
The following unaudited pro forma information presents a summary of the
annual consolidated results of operations of the Company and the acquired
entities as if the acquisition had occurred September 1, 1995.
For the Years ended August 31, 1997 1996
-------------------------------------------------------------
(Thousands Except Per Share Amounts)
Revenues $340,710 $263,007
Net income (loss) $ 17,234 $(24,822)
Earnings (loss) per common share $ .25 $ (.41)
In July 1997, the Company acquired substantially all of the assets of
Bolifor, a leading provider of contract drilling services in Bolivia, for $25.0
million, of which $2.7 million will be paid in fiscal 1998. The assets of
Bolifor primarily consist of 11 land rigs located in Bolivia, Paraguay and
Argentina. The results of the acquisition were not material to the results of
operations and, accordingly, not included in the table above.
- 43 -
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 3 - Acquisitions (continued)
On May 9, 1997, the Company executed a definitive stock purchase agreement
(the "HOC Agreement") to acquire all of the outstanding capital stock of
Hercules Offshore Corporation, a Texas corporation ("HOC"), and a definitive
stock purchase agreement (the "HRC Agreement") to acquire all of the
outstanding capital stock of Hercules Rig Corp., a Texas corporation ("HRC")
and an affiliate of HOC (HOC and HRC being collectively referred to as
"Hercules"), for $145 million and $50 million, respectively. The purchase
prices for the acquisitions are subject to adjustment for certain debt assumed
by the Company, for capital expenditures incurred and for levels of working
capital at closing. Currently, Hercules owns three self-erecting platform rigs
and seven offshore jackup rigs.
The closing of the HOC Agreement is subject to certain conditions,
including approval of the transaction by the Malaysian Securities Commission
and the Kuala Lumpur Stock Exchange and obtaining of the requisite approval of
the shareholders of Trenergy. The HOC Agreement is terminable by either party
if the transaction fails to close by December 31, 1997. The closings of the
HOC Agreement and the HRC Agreement are further conditioned on the closing of
the other. Although there can be no assurance as to the closing of the
transaction, the Company anticipates the transaction will close in the fourth
quarter of calendar 1997.
- 44 -
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 4 - Long-term Debt
August 31, 1997 1996
- ----------------------------------------------------------------------------------
(Dollars in Thousands)
Senior Notes payable in November 2006 with
interest of 9.75% payable semi-annually in
May and November, net of discount of $2,166 $297,834 $ --
(effective interest rate of 9.88%)
Senior Credit Facility payable in quarterly
payments until November 2002 with interest
at prime plus 0.50% or LIBOR plus 1.75% to
2.25% 90,000 --
Convertible Notes with interest at 5.5% payable 175,000
in July 2004 --
Other 4,292 3,378
-------- --------
Total debt 567,126 3,378
Less current portion 16,084 584
-------- --------
Total long-term debt $551,042 $ 2,794
======== ========
The aggregate maturities of long-term debt for the five years ending
August 31, 2002, are as follows (000's): 1998 - $ 16,084; 1999 - $ 12,650;
2000 - $ 12,660; 2001 - $ 12,587 and 2002 - $12,288.
The Senior Notes, which were sold at a $2.4 million discount, have an
interest rate of 9 3/4% and will mature in 2006. The Senior Notes are
guaranteed by substantially all subsidiaries of Parker Drilling, all of which
are wholly owned. The guarantees are joint and several, full, complete and
unconditional. There are currently no restrictions on the ability of the
subsidiaries to transfer funds to Parker Drilling in the form of cash
dividends, loans or advances. Parker Drilling is a holding company with no
operations, other than through its subsidiaries. The non-guarantors are
inconsequential, individually and in the aggregate, to the consolidated
financial statements and separate financial statements of the guarantors are
not presented because management has determined that they would not be material
to investors.
The Senior Credit Facility consists of the term loan and a $45 million
revolving credit facility. The term loan bears interest (7.89% at August 31,
1997) at the option of the Company, at prime to prime plus 0.50% or at 1.75% to
2.25% above the one-, two-, three- and six-month reserve-adjusted LIBOR rate,
depending on the Company's Debt-to-Capital Ratio (as defined), and matures on
November 30, 2002. Installments of principal and interest are payable
quarterly in an amount that provides for the retirement of $10 million in
fiscal 1997, $14 million in fiscal 1998, $12 million in each of fiscal 1999
through 2002, with a final payment of $28 million due at maturity. The term
loan has no prepayment penalty, is guaranteed by the Company's principal
subsidiaries and is collateralized by substantially all of the assets of the
Company and the assets and stock of such subsidiaries.
- 45 -
48
The revolving credit facility is available for working capital
requirements, general corporate purposes and to support letters of credit, of
which $13.8 million had been issued at August 31, 1997. Availability under the
revolving credit facility is subject to certain borrowing base limitations
based on 80% of eligible accounts receivable. All advances to the Company
under the revolving credit facility bear interest, at the option of the
Company, at prime to prime plus 0.50% or at l.75% to 2.25% above the one-,
two-, three- and six-month reserve-adjusted LIBOR rate, depending on the
percentage of the credit facility utilized. The revolving credit facility is
collateralized by a first lien on the Company's accounts receivable. The
revolving credit facility matures on December 31, 1998. At August 31, 1997, no
amounts were outstanding under the revolving credit facility.
Each of the 9 3/4% Senior Notes and the Senior Credit Facility contains
customary affirmative and negative covenants, including restrictions on
incurrence of debt and sales of assets. The Senior Credit Facility prohibits
payment of dividends and the indenture for the 9 3/4% Senior Notes restricts
the payment of dividends.
In anticipation of funding the Hercules acquisition, in July 1997 the
Company issued $175 million of Convertible Subordinated Notes due 2004. The
Notes bear interest at 5.5% payable semi-annually in May and November. The
Notes are convertible at the option of the holder into shares of common stock
of Parker Drilling at any time prior to maturity. The Notes will be redeemable
at the option of the Company at any time after July 2000 at certain stipulated
prices.
- 46 -
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 5 - Income Taxes
Income (loss) before income taxes (in thousands) is summarized as follows:
Years Ended August 31,
-------------------------------------
1997 1996 1995
--------- --------- ---------
United States $ 4,231 $ (4,623) $ 1,180
Foreign 19,325 13,190 5,920
-------- -------- --------
$ 23,556 $ 8,567 $ 7,100
======== ======== ========
Income tax expense (benefit) (in thousands) is summarized as follows:
Years Ended August 31,
-------------------------------------
1997 1996 1995
--------- --------- ---------
Current:
United States:
Federal $ 70 $ - $ -
State 215 - -
Foreign 6,956 4,514 3,478
Deferred:
United States: -
Federal - - -
State - - -
Foreign - - (294)
------ ------- ------
$7,241 $ 4,514 $3,184
====== ======= ======
- 47 -
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 5 - Income Taxes (continued)
Total income tax expense (benefit) (in thousands) differs from the amount
computed by multiplying income (loss) before income taxes by the U.S. federal
income tax statutory rate. The reasons for this difference are as follows:
Years Ended August 31,
------------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
% of % of % of
pretax pretax pretax
Amount income Amount income Amount income
--------------- --------------- ---------------
Computed expected tax
expense $ 8,245 35% $ 2,913 34% $ 2,414 34%
Foreign tax at rates
different than U.S. 192 1% 29 - 1,171 16%
Utilization of loss
carryforwards (1,814) (8%) - - (401) (5%)
Limitation on
recognition of tax - - 1,572 19% - -
Other 618 3% - - - -
------- ---- ------- ---- ------- ----
Actual tax expense $ 7,241 31% $ 4,514 53% $ 3,184 45%
======= ==== ======= ==== ======= ====
The components of the Company's tax assets and (liabilities) as of August
31, 1997 and 1996, are shown below (in thousands):
Domestic: 1997 1996
-------- --------
Deferred tax assets:
Net operating loss and tax credit carryforwards $ 55,586 $ 63,454
Reserves established against realization
of certain assets 1,229 815
Accruals not deducted for tax purposes 3,297 4,088
Depreciation of property, plant and equipment 1,597 3,265
-------- --------
61,709 71,622
Deferred tax liabilities:
Depreciation of property, plant and equipment (17,623) (9,778)
-------- --------
Net deferred tax asset 44,086 61,844
Valuation allowance (44,086) (61,844)
-------- --------
$ - $ -
======== ========
- 48 -
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 5 - Income Taxes (continued)
At August 31, 1997, the Company had $139,711,000 net operating loss
carryforwards for tax purposes which expire over a fourteen year period as
follows: 2000, $22,814,000; 2001, $48,560,000; 2002, $28,541,000; thereafter,
$39,796,000. The Company has recorded a full valuation allowance with respect
to its net deferred tax asset. However, the amount of the deferred tax asset
considered realizable could be different in the near term if estimates of
future taxable income change or the Company consummates the Hercules
acquisition (see Note 3).
Note 6 - Common Stock and Stock Options
The Company's 1969 Key Employees Stock Grant Plan (formerly the 1969 Key
Employees Stock Option Plan) was amended in December 1990 to provide for the
issuance of 223,000 shares of common stock for no cash consideration to key
non-officer employees. Each employee receiving a grant of shares may dispose
of 15 percent of his/her grant on each annual anniversary date from the date of
grant for the first four years. On the fifth year anniversary, the employee
may dispose of the remaining 40 percent of his/her grant. No shares were
granted or canceled in fiscal 1997 and 1996. At August 31, 1997, 1,375 shares
were reserved for issuance and available for granting.
The Company's 1980 Incentive Career Stock Plan ("1980 Plan") provides for
the issuance of 2,100,000 shares of common stock for no cash consideration to
key employees. Each employee receiving a grant of shares may dispose of 15
percent of his/her grant on each annual anniversary date from the date of grant
for the first four years. On the fifth year anniversary, the employee may
dispose of the remaining 40 percent of his/her grant. No shares were granted
in fiscal 1997 and 1996. In fiscal 1997 and fiscal 1996 1,000 shares and 2,750
shares were canceled, respectively, leaving 10,000 shares reserved for issuance
and available for granting at August 31, 1997.
The Company's 1991 Stock Grant Plan ("1991 Plan") provides for the
issuance to officers and key employees of up to 3,160,000 shares of common
stock for no cash consideration. Shares granted under the 1991 Plan are fully
vested no earlier than 24 months from the effective date of the grant and not
later than 36 months. The specific vesting schedule for each grant is
determined at the time of grant. In fiscal 1996, 18,000 shares were granted
and no shares canceled. In fiscal 1997, no shares were granted or canceled,
leaving 1,562,195 shares reserved for issuance and available for granting at
August 31, 1997.
The fair market value of the common stock at date of grant for the Plans
is recorded as deferred compensation and amortized to expense over the period
during which the restrictions lapse. Deferred compensation is shown as a
deduction from stockholders' equity.
During fiscal 1997, 1996 and 1995, the Company purchased 42,875, 59,347
and 51,279 shares, respectively, from certain of its employees who had received
stock grants under the 1991 and 1980 Plans. Total shares purchased from
employees and treated as treasury stock are 343,260, 402,607 and 445,482 for
the three years ended August 31, 1997. The Company acquired the shares at then
current market prices (weighted average price was $10.08 per share in fiscal
1997, $6.44 per share in fiscal 1996 and $5.40 per share in fiscal 1995). The
proceeds were used to pay the employees' tax withholding obligations arising
from the vesting of shares under the Plans.
- 49 -
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 6 - Common Stock and Stock Options (continued)
The 1994 Non-Employee Director Stock Option Plan ("Director Plan")
provides for the issuance of options to purchase up to 200,000 shares of the
Company's common stock. The option price per share is equal to the fair market
value of a Parker Drilling share on the date of grant. The term of each option
is ten years, and an option first becomes exercisable six months after the date
of grant. Under the Director Plan, on the first trade day of each calendar
year, each person who is then a non-employee director of the Company will be
automatically granted an option to purchase 5,000 shares of common stock.
The 1994 Executive Stock Option Plan provides for the granting of a
maximum of 2,400,000 shares to key employees and consultants of the Company and
its subsidiaries through the granting of stock options, stock appreciation
rights and restricted and deferred stock awards. The option price per share
may not be less than 50% of the fair market value of a share on the date the
option is granted, and the maximum term of a non-qualified option may not
exceed fifteen years and the maximum term of an incentive option is ten years.
The 1997 Stock Plan is a "broad-based" stock plan that provides for the
granting of a maximum of 4,000,000 shares to all employees and consultants of
the Company who in the opinion of the board of directors are in a position to
contribute to the growth, management and success of the Company through the
granting of stock options and restricted stock awards. The option price per
share may not be less than 100% of the fair market value on the date the option
is granted for incentive options and not less than par value of a share of
common stock for non-qualified options. The maximum term of an incentive
option is ten years and the maximum term of a non-qualified option is fifteen
years.
- 50 -
53
Information regarding the Company's stock option plans is summarized
below:
1994 Option Plan
-----------------------
1994 Non- 1997
Director Incentive qualified Option
Plan Options Options Plan
---------- ---------- ---------- --------------
Shares under option:
Outstanding at Sept. 1, 1995 15,000 733,000 140,000 --
Granted 15,000 -- -- --
Exercised -- (57,000) (29,652) --
Canceled -- -- -- --
---------- ---------- ---------- --------------
Outstanding at Aug. 31, 1996 30,000 676,000 110,348 --
Granted 140,000 1,520,000 -- 1,800,000
Exercised -- (62,000) (30,348) --
Canceled -- -- -- --
---------- ---------- ---------- --------------
Outstanding at Aug. 31, 1997 170,000 2,134,000 80,000 1,800,000
---------- ---------- ---------- --------------
Range of option prices per share
at August 31, 1997:
Low $ 4.56 $ 4.50 $ 2.25 $ 8.875
High $ 8.875 $ 8.875 $ 2.25 $ 8.875
Average option price per share
at August 31, 1997 $ 8.30 $ 7.62 $ 2.25 $ 8.875
Options exercisable
at August 31, 1997 74,000 1,115,600 80,000 160,000
Price of options exercised
during fiscal 1997 -- $ 4.50 $ 2.25 --
- 51 -
54
The Company has elected the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for the
Company's stock option plans. Pro forma net income and earnings per share are
reflected below as if compensation cost had been determined based on the fair
value of the options at their applicable grant date, according to the
provisions of SFAS No. 123.
1997 1996
---- ----
Net Income (In thousands)
As reported $16,315 $4,053
Pro forma $14,054 $4,027
Earnings per share,
primary and fully diluted
As reported $.23 $.07
Pro forma $.20 $.07
The fair value of each option grant is estimated using the Black-Scholes
option-pricing model with the following assumptions.
Expected dividend yield 0.0%
Expected stock volatility 39.1%
Risk-free interest rate 5.4 - 6.6%
Expected life of options 5 - 7 years
The fair value of options granted during fiscal years 1997 and 1996 under the
Director Plan was $605,000 and $39,000 respectively. Options granted in
fiscal 1997 had fair values of $6,321,000 and $8,100,200 under the 1994
Executive Stock Option Plan and the 1997 Stock Plan, respectively.
- 52 -
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 6 - Common Stock and Stock Options (continued)
The following is a summary of common stock reserved for issuance at fiscal
year end:
1997 1996
---------- ---------
Stock plans 5,757,570 4,078,918
Stock Bonus Plan 280,991 81,579
Convertible Notes 11,371,020 -
---------- ---------
Total shares reserved for issuance 17,409,581 4,160,497
========== =========
Note 7 - Employee Benefit Plans
The Parker Drilling Company Stock Bonus Plan ("Plan") was adopted
effective September 1980 for employees of Parker Drilling and its subsidiaries
who are U.S. citizens and who have completed one year of service with the
Company. It was amended in 1983 to qualify as a 401(k) plan under the Internal
Revenue Code which permits a specified percentage of an employee's salary to be
voluntarily contributed on a before-tax basis and to provide for a Company
matching feature. Participants may contribute from one percent to 15 percent
of eligible earnings and direct contributions to one or more of seven
investment funds. The Company presently makes dollar-for-dollar matching
contributions up to three percent of a participant's compensation. The
Company's matching contribution is made in Parker Drilling common stock. The
Plan was amended and restated on April 1, 1996 for the purpose of adding loans
and daily record keeping. The Plan was further amended effective September 1,
1996 to provide for immediate vesting of participants in the full amount of the
Company's past and future contributions. Each Plan year, additional Company
contributions can be made, at the discretion of the Board of Directors, in
amounts not exceeding the permissible deductions under the Internal Revenue
Code. The Company issued 100,777 shares to the Plan in 1997, 104,700 shares in
1996 and 113,399 shares in 1995.
Note 8 - Business Segments
The Company has elected early application of Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information." The Company has organized its segments according to
services provided. This is the basis management uses for making operating
decisions and assessing performance. The primary services the Company provides
are as follows: land drilling, offshore drilling and tool rentals.
- 53 -
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 8 - Business Segments (continued)
Information regarding the Company's operations by industry segment and
geographic area is as follows:
1997 1996 1995
--------- --------- ---------
(Dollars in Thousands)
Operations by Industry Segment
Revenues:
Land drilling $ 183,381 $ 145,160 $ 153,075
Offshore drilling 100,217 -- --
Tool rental 25,457 -- --
Other 2,589 11,492 4,296
--------- --------- ---------
Net revenues 311,644 156,652 157,371
========= ========= =========
Operating income (loss):
Land drilling 17,325 2,069 (407)
Offshore drilling 20,514 -- --
Tool rental 12,229 -- --
Other (2,344) (672) (1,090)
--------- --------- ---------
Total operating income (loss) 47,724 1,397 (1,497)
Interest expense (32,851) (135) (88)
Other income (expense) - net 8,683 7,305 8,685
--------- --------- ---------
Income before income taxes 23,556 8,567 7,100
========= ========= =========
Identifiable assets:
Land drilling 245,216 175,258 173,277
Offshore drilling 300,852 -- --
Tool rental 36,600 -- --
Other 17,664 5,093 4,569
--------- --------- ---------
Total identifiable assets 600,332 180,351 177,846
Corporate assets 383,804 95,608 39,113
--------- --------- ---------
Total assets 984,136 275,959 216,959
========= ========= =========
Capital expenditures:
Land drilling 37,907 29,946 20,986
Offshore drilling 35,577 -- --
Tool rental 11,538 -- --
Other 2,404 890 554
--------- --------- ---------
Total capital expenditures 87,426 30,836 21,540
========= ========= =========
Depreciation, depletion and amortization:
Land drilling 22,217 20,208 20,489
Offshore drilling 17,672 -- --
Tool rental 4,311 -- --
Other 2,056 2,853 3,256
--------- --------- ---------
Total depreciation, depletion
and amortization 46,256 23,061 23,745
========= ========= =========
- 54 -
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 8 - Business Segments (continued)
1997 1996 1995
--------- --------- ---------
(Dollars in Thousands)
Operations by Geographic Area
Revenues:
United States $ 145,294 $ 41,743 $ 28,487
South America 73,545 59,041 76,115
Asia Pacific 57,688 47,857 44,911
Africa and the Former
Soviet Union 35,117 8,011 7,858
--------- --------- ---------
Total revenues $ 311,644 $ 156,652 $ 157,371
========= ========= =========
Operating income (loss):
United States $ 22,622 $ (8,988) $ (7,609)
South America 1,838 4,802 (921)
Asia Pacific 15,728 7,943 8,701
Africa and the Former
Soviet Union 7,536 (2,360) (1,668)
--------- --------- ---------
Total operating income (loss) $ 47,724 $ 1,397 $ (1,497)
========= ========= =========
Identifiable assets:
United States $ 680,020 $ 135,923 $ 71,233
South America 119,617 82,292 83,345
Asia Pacific 82,930 46,683 49,223
Africa and the Former
Soviet Union 101,569 11,061 13,158
--------- --------- ---------
Total identifiable assets $ 984,136 $ 275,959 $ 216,959
========= ========= =========
One customer accounted for approximately 13 percent of total revenues in
1997. Two customers accounted for approximately 19 percent and 18 percent,
respectively, of total revenue in 1996. Two customers accounted for
approximately 22 percent and 13 percent, respectively, of total revenue in
1995. Operating income (loss) is total revenue less operating expenses
including depreciation, depletion and amortization and an allocation of general
corporate expenses.
- 55 -
58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 9 - Assets Held for Disposition
In fiscal 1996 the Company reclassified to assets held for disposition six
rigs and related equipment located in southern Argentina with a net book value
of $6,179,000. Although the Company believes it will recover the carrying
value of the assets, it is reasonably possible that a lesser amount will be
recovered.
Note 10 - Commitments and Contingencies
At August 31, 1997, the Company had a $45 million revolving credit
facility available for general corporate purposes and to support letters of
credit, of which $13,839,000 had been issued.
Certain officers of the Company entered into Severance Compensation and
Consulting Agreements with the Company in 1988 and 1992. In October 1996, the
officers executed revised Severance Compensation and Consulting Agreements (the
"Agreements"). The Agreements provide for an initial six year term and the
payment of certain benefits upon a change of control (as defined in the
Agreements). A change of control includes certain mergers or reorganizations,
changes in the board of directors, sale or liquidation of the Company or
acquisition of more than 20% of the outstanding common stock of the Company by
a third party. After a change of control occurs, if an officer is terminated
within four years without good cause or resigns within two years for good
reason (as each are defined in the Agreements) the officer shall receive a
payment of three times his annual cash compensation, plus additional
compensation for a one year consulting agreement at the officer's annual cash
compensation, plus extended life, health and other miscellaneous benefits for
four years.
The drilling of oil and gas wells is subject to various federal, state,
local and foreign laws, rules and regulations. The Company, as an owner or
operator of both onshore and offshore facilities operating in or near waters of
the United States, may be liable for the costs of removal and damages arising
out of a pollution incident to the extent set forth in the Federal Water
Pollution Control Act, as amended by the Oil Pollution Act of 1990 ("OPA") and
the Outer Continental Shelf Lands Act. In addition, the Company may also be
subject to applicable state law and other civil claims arising out of any such
incident. Certain of the Company's facilities are also subject to regulations
of the Environmental Protection Agency ("EPA") that require the preparation and
implementation of spill prevention, control and countermeasure plans relating
to possible discharge of oil into navigable waters. Other regulations of the
EPA may require certain precautions in storing, handling and transporting
hazardous wastes. State statutory provisions relating to oil and natural gas
generally include requirements as to well spacing, waste prevention, production
limitations, pollution prevention and cleanup, obtaining drilling and dredging
permits and similar matters. The Company believes that it is in substantial
compliance with such laws, rules and regulations.
The Company is a party to various lawsuits and claims arising out of the
ordinary course of business. Management, after review and consultation with
legal counsel, considers that any liability resulting from these matters would
not materially affect the results of operations or the financial position of
the Company.
Note 11 - Related Party Transactions
At August 31, 1997, the Company owned an insurance policy on the life of
Mr. R. L. Parker, chairman and a principal stockholder. The Company is the
beneficiary of this policy which was issued pursuant to a Stock Purchase
Agreement ("Agreement") approved by vote of the stockholders at the 1975 Annual
Meeting on December 10, 1975. This Agreement was entered into between the
Company and the Robert L. Parker Trust and provides that upon the death of
Robert L. Parker, the
- 56 -
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 11 - Related Party Transactions (continued)
Company would be required, at the option of the Trust, to purchase from the
Trust at a discounted price the amount of Parker Drilling common stock which
could be purchased with the proceeds of the policy of $7,000,000. On August 3,
1994, the Company and the Trust modified this Agreement so that the Company
will have the option but not the obligation to purchase the stock at a
discounted price with the proceeds or to retain the entire proceeds upon the
death of Robert L. Parker. If action under the agreement had been required at
August 31, 1997, and the Company elected to purchase Parker Drilling common
stock from the Trust, Parker Drilling's outstanding common stock would have
been reduced by approximately one percent.
As a part of the agreement to terminate the option held by the Trust and
to grant the Company a limited option to purchase stock at a discounted price,
the Company has also agreed to pay a premium of $655,019 annually for a split
dollar last-to-die life insurance policy on Robert L. Parker and Mrs. Robert
L. Parker. Upon the deaths of Mr. Parker and Mrs. Parker, the Company will be
reimbursed by the Robert L. Parker Sr. and Catherine M. Parker Family Trust
from the proceeds of the policy for the full amount of premiums paid plus
interest at the one-year treasury bill rate on the premiums paid after fiscal
year 1999. Robert L. Parker and the Company agreed in October 1996 that the
Company would cash surrender a $500,000 Executive Life policy on his life and,
in exchange, the interest on the above-described policy would not begin
accruing until March 2003. Additionally, Robert L. Parker Jr., Chief Executive
Officer of the Company and son of Robert L. Parker, will receive as a
beneficiary of the Trust one-third of the net proceeds of this policy. The
face value of the policy is $13,200,000.
Note 12 - Supplementary Information
At August 31, 1997, accrued liabilities included $10,189,000 of accrued
interest expense, $1,691,000 of workers' compensation liabilities and
$5,566,000 of accrued payroll and payroll taxes. At August 31, 1996, accrued
liabilities included $1,321,000 of workers' compensation liabilities and
$2,392,000 of accrued payroll and payroll taxes. Other long-term liabilities
included $5,596,000 and $1,434,000 of workers' compensation liabilities as of
August 31, 1997 and 1996, respectively.
- 57 -
60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 13 - Selected Quarterly Financial Data (Unaudited)
Quarter
-------------------------------------------------
First Second Third Fourth Total
------- ------- ------- ------- --------
(Dollars in Thousands Except Per Share Amounts)
FISCAL 1997
Revenue $45,198 $79,042 $91,953 $95,451 $311,644
Gross profit (1) $ 6,594 $13,037 $21,699 $20,808 $ 62,138
Operating income $ 3,196 $ 9,634 $18,338 $16,556 $ 47,724
Net income $ 1,479 $ 1,336 $ 5,897 $ 7,603 $ 16,315
Primary and fully
diluted earnings
per share $ .02 $ .02 $ .08 $ .10 $ .23 (2)
Quarter
-------------------------------------------------
First Second Third Fourth Total
------- ------- ------- ------- --------
(Dollars in Thousands Except Per Share Amounts)
FISCAL 1996
Revenue $42,710 $37,929 $34,998 $41,015 $156,652
Gross profit (1) $ 6,393 $ 4,317 $ 4,004 $ 2,439 $ 17,153
Operating income (loss) $ 2,272 $ 220 $ (411) $ (684) $ 1,397
Net income $ 1,887 $ 351 $ 310 $ 1,505 $ 4,053
Primary and fully
diluted earnings
per share $ .03 $ .01 $ .01 $ .02 $ .07
(1) Gross profit is calculated by excluding General and administrative
expense from Operating income (loss), as reported in the Consolidated
Statement of Operations.
(2) As a result of shares issued during the year, earnings per share for
the year's four quarters, which are based on average shares
outstanding during each quarter, do not equal the annual earnings per
share, which is based on the average shares outstanding during the
year.
- 58 -
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
This item is not applicable to the Company in that disclosure is required
under Regulation S-X by the Securities and Exchange Commission only if the
Company had changed independent auditors and, if it had, only under certain
circumstances.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is hereby incorporated by reference
from the information appearing under the captions "Proposal One - Election of
Directors" and "Executive Officers" in the Company's definitive proxy statement
for the Annual Meeting of Stockholders to be held December 17, 1997, to be
filed with the Securities and Exchange Commission ("Commission") within 120
days of the end of the Company's fiscal year on August 31, 1997.
Item 11. EXECUTIVE COMPENSATION
The information required by this item is hereby incorporated by reference
from the information appearing under the captions "Meetings, Committees and
Compensation of the Board", "Executive Compensation", "Severance Compensation
and Consulting Agreements", "Compensation Committee Report on Executive
Compensation" and "Performance Graph" in the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held December 17, 1997,
to be filed with the Commission within 120 days of the end of the Company's
fiscal year on August 31, 1997.
- 59 -
62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Item 11. EXECUTIVE COMPENSATION (continued)
Notwithstanding the foregoing, in accordance with the instructions to Item 402
of Regulation S-K, the information contained in the Company's proxy statement
under the sub-headings "Compensation Committee Report on Executive
Compensation" and "Performance Graph" shall not be deemed to be filed as part
of or incorporated by reference into this Form 10-K.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is hereby incorporated by reference
from the information appearing under the captions "Voting" and "Common Stock
Ownership of Directors and Executive Officers" in the Company's definitive
proxy statement for the Annual Meeting of Stockholders to be held December 17,
1997, to be filed with the Commission within 120 days of the end of the
Company's fiscal year on August 31, 1997.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is hereby incorporated by reference
to such information appearing under the caption "Certain Relationships and
Related Transactions" in the Company's definitive proxy statement for the
Annual Meeting of Stockholders to be held December 17, 1997, to be filed with
the Commission within 120 days of the end of the Company's fiscal year on
August 31, 1997.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements of Parker Drilling Company and subsidiaries
which are included in Part II, Item 8:
Page
----
Report of Independent Accountants __
Consolidated Statement of Operations for each
of the three years in the period ended August 31, 1997 __
Consolidated Balance Sheet as of August 31, 1997 and 1996 __
Consolidated Statement of Cash Flows for each of the
three years in the period ended August 31, 1997 __
Consolidated Statement of Stockholders' Equity for
each of the three years in the period ended August 31, 1997 __
Notes to Consolidated Financial Statements __
- 60 -
63
PART IV
(continued)
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(continued)
(2) Financial Statement Schedule:
Page
Schedule II - Valuation and qualifying accounts __
(3) Exhibits:
Exhibit Number Description
-------------- -----------
2(a) - Stock Purchase Agreement dated May 9, 1997 by and among the
Company, Parker Drilling Offshore Company and Trenergy
(Malaysia) BHD. (incorporated herein by reference to
Exhibit 10(n) to the Company's Quarterly Report on Form 10-Q
for the three months ended May 31, 1997).
2(b) - Stock Purchase Agreement dated May 9, 1997 by and among the
Company, Parker Drilling Offshore Company and Rashid & Lee
Nominees SDN BHD. (incorporated herein by reference to
Exhibit 10(o) to the Company's Quarterly Report on Form 10-Q
for the three months ended May 31, 1997).
2(c) - Definitive agreement between Parker Drilling Company and
Energy Ventures, Inc., for the purchase of Mallard Bay
Drilling, Inc., (incorporated herein by reference to Form
8-K filed September 19, 1996).
2(d) - Definitive agreement to acquire Quail Tools, Inc.,
(incorporated herein by reference to Form 8-K filed
October 17, 1996).
3(a) - Restated Certificate of Incorporation of the Company
(incorporated herein by reference to Exhibit 4.1 to
Amendment No. 1 to the Company's S-3 Registration
Statement No. 333-22987).
3(b) - Certificate of Retirement of the Company (incorporated
herein by reference to Exhibit 4.2 to Amendment No. 1 to the
Company's S-3 Registration Statement No. 333-22987).
3(c) - By-Laws of the Company (incorporated herein by reference to
Exhibit 3(b) to Annual Report on Form 10-K for the year
ended August 31, 1992, as amended by Form 8 dated February
18, 1993).
4(a) - Term Loan Agreement dated as of November 8, 1996 between
the Company and ING (U.S.) Capital Corporation (incorporated
herein by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q/A for the three months ended
November 30, 1996.
4(b) - Indenture dated as of November 12, 1996 among the Company,
as issuer, certain Subsidiary Guarantors (as defined
therein) and Texas Commerce Bank National Association, as
Trustee (incorporated herein by reference to Exhibit 4.3 to
the Company's S-4 Registration Statement No. 333-19317).
- 61 -
64
PART IV (continued)
(3) Exhibits: (continued)
Exhibit Number Description
-------------- -----------
4(c)- Indenture dated as of July 25, 1997, between the Company
and Texas Commerce Bank National Association, as Trustee,
respecting 5 1/2% Convertible Subordinated Notes due 2004
(incorporated herein by reference to Exhibit 4.7 to the
Company's S-3 Registration Statement No. 333-30711).
10(a)- Parker Drilling Company and Subsidiaries 1991 Stock
Grant Plan; incorporated herein by reference to Exhibit
10(c) to Annual Report on Form 10-K for the year ended
August 31, 1992, as amended by Form 8 dated February
18, 1993.*
10(b)- 1980 Incentive Career Stock Plan; incorporated herein
by reference to Exhibit 10(c) to Annual Report on Form
10-K for the year ended August 31, 1989, as amended by
Form 8 dated December 27, 1989.*
10(c)- 1969 Key Employees Stock Grant Plan; incorporated
herein by reference to Exhibit 10(e) to Annual Report
on Form 10-K for the year ended August 31, 1992, as
amended by Form 8 dated February 18, 1993.*
- 62 -
65
PART IV (continued)
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(continued)
(3) Exhibits: (continued)
Exhibit Number Description
-------------- -----------
10(d) - Amended and Restated Parker Drilling Company Stock Bonus Plan,
effective as of April 1, 1996 (incorporated herein by reference to
Exhibit 10(e) to Annual Report on Form 10-K for the year ended
August 31, 1996).
10(e) - 1975 Stock Purchase Agreement; incorporated herein
by reference to Exhibit 10(g) to Annual Report on Form 10-K for the
year ended August 31, 1986, as amended by Form 8 dated December 29,
1986.
10(f) - Form of Severance Compensation and Consulting Agreement entered into
between Parker Drilling Company and certain officers of Parker
Drilling Company, dated on or about October 15, 1996 (incorporated
herein by reference to Exhibit 10(g) to Annual Report on Form 10-K for
the year ended August 31, 1996).*
10(g) - 1994 Parker Drilling Company Deferred Compensation Plan; incorporated
herein by reference to Exhibit 10(h) to Annual Report on Form 10-K for
the year ended August 31, 1995.*
10(h) - 1994 Non-Employee Director Stock Option Plan; incorporated herein by
reference to Exhibit 10(i) to Annual Report on Form 10-K for the year
ended August 31, 1995.*
10(i) - 1994 Executive Stock Option Plan; incorporated herein by reference to
Exhibit 10(j) to Annual Report on Form 10-K for the year ended
August 31, 1995.*
10(j) - First Amendment effective as of September 1, 1996, to the Amended and
Restated Parker Drilling Company Stock Bonus Plan, effective as of
April 1, 1996 (incorporated herein by reference to Exhibit 10(k) to
Annual Report on Form 10-K for the year ended August 31, 1996).
21 - Subsidiaries of the Registrant.
23 - Consent of Independent Accountants.
27 - Financial Data Schedule.
99 - Additional Exhibit - Annual Report on Form 11-K To be
with respect to Parker Drilling Company Stock filed by
Bonus Plan. amendment
*Management Contract, Compensatory Plan or Agreement
(b) Reports on Form 8-K:
The Company filed a Form 8-K on July 3, 1997 to disclose that it had
executed a definitive stock purchase agreement to acquire all of the
outstanding capital stock of Hercules Offshore Corporation and Hercules Rig
Corp. for $145 million and $50 million, respectively.
- 63 -
66
PARKER DRILLING COMPANY AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
Column A Column B Column C Column D Column E
- -------------------------------- --------- --------- --------- ---------
Balance Charged
at to cost Balance
beginning and at end of
Classifications of period expenses Deductions period
- -------------------------------- --------- --------- ---------- ----------
Year ended August 31, 1997:
Allowance for doubtful accounts
and notes $ 739 $ 737 $ (1,677) $ 3,153
Reduction in carrying value of
rig materials and supplies $ 1,797 $ 1,384 $ 335 $ 2,846
Deferred tax valuation allowance $61,844 $ - $ 17,758 $44,086
Year ended August 31, 1996:
Allowance for doubtful accounts
and notes $ 796 $ 70 $ 127 $ 739
Reduction in carrying value of
rig materials and supplies $ 2,080 $ 240 $ 523 $ 1,797
Deferred tax valuation allowance $67,494 $ - $ 5,650 $61,844
Year ended August 31, 1995:
Allowance for doubtful accounts
and notes $ 1,050 $ - $ 254 $ 796
Reduction in carrying value of
rig materials and supplies $ 2,230 $ 870 $ 1,020 $ 2,080
Deferred tax valuation allowance $68,805 $(1,311) $ - $67,494
- 64 -
67
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PARKER DRILLING COMPANY
By /s/ ROBERT L. PARKER JR. Date: October 16, 1997
-------------------------------------
Robert L. Parker Jr.
President and Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Chairman of the Board and
By /s/ ROBERT L. PARKER Director Date: October 16, 1997
---------------------------------
Robert L. Parker
President and Chief Executive
Officer and Director
By /s/ ROBERT L. PARKER JR. (Principal Executive Officer) Date: October 16, 1997
---------------------------------
Robert L. Parker Jr.
Senior Vice President - Finance and
Chief Financial Officer
By /s/ JAMES J. DAVIS (Principal Financial Officer) Date: October 16, 1997
---------------------------------
James J. Davis
Corporate Controller
By /s/ RANDY L. ELLIS (Principal Accounting Officer) Date: October 16, 1997
---------------------------------
Randy L. Ellis
Executive Vice President and
Chief Operating Officer and
By /s/ JAMES W. LINN Director Date: October 16, 1997
---------------------------------
James W. Linn
By /s/ EARNEST F. GLOYNA Director Date: October 16, 1997
---------------------------------
Earnest F. Gloyna
By /s/ DAVID L. FIST Director Date: October 16, 1997
---------------------------------
David L. Fist
By /s/ R. RUDOLPH REINFRANK Director Date: October 16, 1997
---------------------------------
R. Rudolph Reinfrank
By /s/ BERNARD DUROC-DANNER Director Date: October 16, 1997
---------------------------------
Bernard Duroc-Danner
68
INDEX TO EXHIBITS
Exhibit Number Description
-------------- -----------
2(a) - Stock Purchase Agreement dated May 9, 1997 by and among the
Company, Parker Drilling Offshore Company and Trenergy
(Malaysia) BHD. (incorporated herein by reference to
Exhibit 10(n) to the Company's Quarterly Report on Form 10-Q
for the three months ended May 31, 1997).
2(b) - Stock Purchase Agreement dated May 9, 1997 by and among the
Company, Parker Drilling Offshore Company and Rashid & Lee
Nominees SDN BHD. (incorporated herein by reference to
Exhibit 10(o) to the Company's Quarterly Report on Form 10-Q
for the three months ended May 31, 1997).
2(c) - Definitive agreement between Parker Drilling Company and
Energy Ventures, Inc., for the purchase of Mallard Bay
Drilling, Inc., (incorporated herein by reference to Form
8-K filed September 19, 1996).
2(d) - Definitive agreement to acquire Quail Tools, Inc.,
(incorporated herein by reference to Form 8-K filed
October 17, 1996).
3(a) - Restated Certificate of Incorporation of the Company
(incorporated herein by reference to Exhibit 4.1 to
Amendment No. 1 to the Company's S-3 Registration
Statement No. 333-22987).
3(b) - Certificate of Retirement of the Company (incorporated
herein by reference to Exhibit 4.2 to Amendment No. 1 to the
Company's S-3 Registration Statement No. 333-22987).
3(c) - By-Laws of the Company (incorporated herein by reference to
Exhibit 3(b) to Annual Report on Form 10-K for the year
ended August 31, 1992, as amended by Form 8 dated February
18, 1993).
4(a) - Term Loan Agreement dated as of November 8, 1996 between
the Company and ING (U.S.) Capital Corporation (incorporated
herein by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q/A for the three months ended
November 30, 1996.
4(b) - Indenture dated as of November 12, 1996 among the Company,
as issuer, certain Subsidiary Guarantors (as defined
therein) and Texas Commerce Bank National Association, as
Trustee (incorporated herein by reference to Exhibit 4.3 to
the Company's S-4 Registration Statement No. 333-19317).
69
Exhibit Number Description
-------------- -----------
4(c)- Indenture dated as of July 25, 1997, between the Company
and Texas Commerce Bank National Association, as Trustee,
respecting 5 1/2% Convertible Subordinated Notes due 2004
(incorporated herein by reference to Exhibit 4.7 to the
Company's S-3 Registration Statement No. 333-30711).
10(a)- Parker Drilling Company and Subsidiaries 1991 Stock
Grant Plan; incorporated herein by reference to Exhibit
10(c) to Annual Report on Form 10-K for the year ended
August 31, 1992, as amended by Form 8 dated February
18, 1993.*
10(b)- 1980 Incentive Career Stock Plan; incorporated herein
by reference to Exhibit 10(c) to Annual Report on Form
10-K for the year ended August 31, 1989, as amended by
Form 8 dated December 27, 1989.*
10(c)- 1969 Key Employees Stock Grant Plan; incorporated
herein by reference to Exhibit 10(e) to Annual Report
on Form 10-K for the year ended August 31, 1992, as
amended by Form 8 dated February 18, 1993.*
70
Exhibit Number Description
-------------- -----------
10(d) - Amended and Restated Parker Drilling Company Stock Bonus Plan,
effective as of April 1, 1996 (incorporated herein by reference to
Exhibit 10(e) to Annual Report on Form 10-K for the year ended
August 31, 1996).
10(e) - 1975 Stock Purchase Agreement; incorporated herein
by reference to Exhibit 10(g) to Annual Report on Form 10-K for the
year ended August 31, 1986, as amended by Form 8 dated December 29,
1986.
10(f) - Form of Severance Compensation and Consulting Agreement entered into
between Parker Drilling Company and certain officers of Parker
Drilling Company, dated on or about October 15, 1996 (incorporated
herein by reference to Exhibit 10(g) to Annual Report on Form 10-K for
the year ended August 31, 1996).*
10(g) - 1994 Parker Drilling Company Deferred Compensation Plan; incorporated
herein by reference to Exhibit 10(h) to Annual Report on Form 10-K for
the year ended August 31, 1995.*
10(h) - 1994 Non-Employee Director Stock Option Plan; incorporated herein by
reference to Exhibit 10(i) to Annual Report on Form 10-K for the year
ended August 31, 1995.*
10(i) - 1994 Executive Stock Option Plan; incorporated herein by reference to
Exhibit 10(j) to Annual Report on Form 10-K for the year ended
August 31, 1995.*
10(j) - First Amendment effective as of September 1, 1996, to the Amended and
Restated Parker Drilling Company Stock Bonus Plan, effective as of
April 1, 1996 (incorporated herein by reference to Exhibit 10(k) to
Annual Report on Form 10-K for the year ended August 31, 1996).
21 - Subsidiaries of the Registrant.
23 - Consent of Independent Accountants.
27 - Financial Data Schedule.
99 - Additional Exhibit - Annual Report on Form 11-K To be
with respect to Parker Drilling Company Stock filed by
Bonus Plan. amendment
*Management Contract, Compensatory Plan or Agreement