FORM 10-Q |
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
PARKER DRILLING COMPANY (Exact name of registrant as specified in its charter) |
Delaware | 73-0618660 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer ¨ | Accelerated filer þ | Non-accelerated filer ¨ | Smaller reporting company þ | |||
Emerging growth company ¨ |
Title of each class | Trading symbol | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | PKD | New York Stock Exchange |
Page | |
PARKER DRILLING COMPANY AND SUBSIDIARIES | |||
CONSOLIDATED CONDENSED BALANCE SHEETS | |||
(Dollars in Thousands, Except Per Share Data) |
Successor | Predecessor | |||||||
March 31, 2019 | December 31, 2018 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash | ||||||||
Accounts and notes receivable, net of allowance for bad debts of $0 at March 31, 2019 and $7,767 at December 31, 2018 | ||||||||
Rig materials and supplies | ||||||||
Other current assets | ||||||||
Total current assets | ||||||||
Property, plant and equipment, net of accumulated depreciation of $0 at March 31, 2019 and $951,798 at December 31, 2018 | ||||||||
Intangible assets, net (Note 4) | ||||||||
Deferred income taxes | ||||||||
Other non-current assets | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Debtor in possession financing (Note 2) | $ | $ | ||||||
Accounts payable and accrued liabilities | ||||||||
Accrued income taxes | ||||||||
Total current liabilities | ||||||||
Long-term debt (Note 6) | ||||||||
Other long-term liabilities | ||||||||
Long-term deferred tax liability | ||||||||
Commitments and contingencies (Note 9) | ||||||||
Total liabilities not subject to compromise | ||||||||
Liabilities subject to compromise (Note 2) | ||||||||
Total liabilities |
PARKER DRILLING COMPANY AND SUBSIDIARIES | |||
CONSOLIDATED CONDENSED BALANCE SHEETS | |||
(Dollars in Thousands, Except Per Share Data) |
Successor | Predecessor | |||||||
March 31, 2019 | December 31, 2018 | |||||||
(Unaudited) | ||||||||
Stockholders' equity: | ||||||||
Predecessor preferred stock, $1.00 par value, 1,942,000 shares authorized, 500,000 shares issued and outstanding | — | |||||||
Predecessor common stock, $0.16 2/3 par value, 18,666,667 shares authorized, 9,385,060 shares issued and outstanding (9,384,669 shares issued and outstanding in 2018) | — | |||||||
Predecessor capital in excess of par value | — | |||||||
Predecessor accumulated other comprehensive income (loss) | — | ( | ) | |||||
Successor common stock, $0.01 par value, 500,000,000 shares authorized, 15,044,374 shares issued and outstanding | — | |||||||
Successor capital in excess of par value | — | |||||||
Accumulated deficit | ( | ) | ||||||
Total stockholders’ equity | ||||||||
Total liabilities and stockholders’ equity | $ | $ |
PARKER DRILLING COMPANY AND SUBSIDIARIES | ||||||||||
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS | ||||||||||
(Dollars in Thousands, Except Per Share Data) | ||||||||||
(Unaudited) |
Predecessor | |||||||
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Revenues | $ | $ | |||||
Expenses: | |||||||
Operating expenses | |||||||
Depreciation and amortization | |||||||
Total operating gross margin (loss) | ( | ) | |||||
General and administrative expense | ( | ) | ( | ) | |||
Gain (loss) on disposition of assets, net | |||||||
Reorganization items | ( | ) | |||||
Total operating income (loss) | ( | ) | ( | ) | |||
Other income (expense): | |||||||
Interest expense | ( | ) | ( | ) | |||
Interest income | |||||||
Other | ( | ) | |||||
Total other income (expense) | ( | ) | ( | ) | |||
Income (loss) before income taxes | ( | ) | ( | ) | |||
Income tax expense (benefit) | |||||||
Net income (loss) | ( | ) | ( | ) | |||
Less: Predecessor preferred stock dividend | |||||||
Net income (loss) available to common stockholders | $ | ( | ) | $ | ( | ) | |
Basic earnings (loss) per common share: | $ | ( | ) | $ | ( | ) | |
Diluted earnings (loss) per common share: | $ | ( | ) | $ | ( | ) | |
Number of common shares used in computing earnings per share: | |||||||
Basic | |||||||
Diluted |
PARKER DRILLING COMPANY AND SUBSIDIARIES | |||||||||||||
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | |||||||||||||
(Dollars in Thousands) | |||||||||||||
(Unaudited) |
Predecessor | |||||||
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Net income (loss) | $ | ( | ) | $ | ( | ) | |
Other comprehensive income (loss), net of tax: | |||||||
Currency translation difference on related borrowings | |||||||
Currency translation difference on foreign currency net investments | ( | ) | ( | ) | |||
Total other comprehensive income (loss), net of tax: | ( | ) | ( | ) | |||
Comprehensive income (loss) | $ | ( | ) | $ | ( | ) |
PARKER DRILLING COMPANY AND SUBSIDIARIES | |||
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS | |||
(Dollars in Thousands) | |||
(Unaudited) |
Predecessor | |||||||
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | ( | ) | $ | ( | ) | |
Adjustments to reconcile net income (loss): | |||||||
Depreciation and amortization | |||||||
(Gain) loss on disposition of assets, net | ( | ) | ( | ) | |||
Reorganization items | |||||||
Deferred tax expense (benefit) | ( | ) | ( | ) | |||
Expenses not requiring cash | |||||||
Change in assets and liabilities: | |||||||
Accounts and notes receivable | ( | ) | ( | ) | |||
Other assets | ( | ) | |||||
Accounts payable and accrued liabilities | ( | ) | |||||
Accrued income taxes | ( | ) | |||||
Net cash provided by (used in) operating activities | ( | ) | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | ( | ) | ( | ) | |||
Proceeds from the sale of assets | |||||||
Net cash provided by (used in) investing activities | ( | ) | ( | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from rights offering | |||||||
Payment of amounts borrowed under debtor in possession financing | ( | ) | |||||
Payments of debt issuance costs | ( | ) | ( | ) | |||
Predecessor preferred stock dividend | ( | ) | |||||
Shares surrendered in lieu of tax | ( | ) | |||||
Net cash provided by (used in) financing activities | ( | ) | |||||
Net increase (decrease) in cash and cash equivalents and restricted cash | ( | ) | |||||
Cash and cash equivalents and restricted cash at beginning of period | |||||||
Cash and cash equivalents and restricted cash at end of period | $ | $ |
PARKER DRILLING COMPANY AND SUBSIDIARIES | ||||||||||||||||||
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY | ||||||||||||||||||
(Dollars and Shares in Thousands) | ||||||||||||||||||
(Unaudited) |
Shares | Preferred Stock | Common Stock | Treasury Stock | Capital in Excess of Par Value | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | |||||||||||||||||||||||
Balances, December 31, 2017 (Predecessor) | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
Activity in employees’ stock plans | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||||||
Amortization of stock-based awards | — | — | — | — | — | — | ||||||||||||||||||||||||
Predecessor preferred stock dividend | — | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||||
Comprehensive Income: | ||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||
Balances, March 31, 2018 (Predecessor) | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ |
PARKER DRILLING COMPANY AND SUBSIDIARIES | ||||||||||||||||||
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY | ||||||||||||||||||
(Dollars and Shares in Thousands) | ||||||||||||||||||
(Unaudited) |
Shares | Preferred Stock | Common Stock | Treasury Stock | Capital in Excess of Par Value | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | |||||||||||||||||||||||
Balances, December 31, 2018 (Predecessor) | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
Activity in employees’ stock plans | — | — | — | — | — | — | — | |||||||||||||||||||||||
Amortization of stock-based awards | — | — | — | — | — | — | ||||||||||||||||||||||||
Predecessor preferred stock dividend | — | — | — | — | — | — | — | |||||||||||||||||||||||
Comprehensive Income: | — | |||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||
Balances, March 31, 2019 (Predecessor) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
Cancellation of predecessor equity | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
Balances, March 31, 2019 (Predecessor) | ||||||||||||||||||||||||||||||
Issuances of common stock | — | — | — | — | ||||||||||||||||||||||||||
Issuances of warrants | — | — | — | — | — | |||||||||||||||||||||||||
Equity issuance costs | — | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||||
Balances, March 31, 2019 (Successor) | $ | $ | $ | $ | $ | $ | $ |
Successor | Predecessor | |||||||
Dollars in thousands | March 31, 2019 | December 31, 2018 | ||||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash | ||||||||
Cash, cash equivalents and restricted cash at end of period | $ | $ |
(1) | the Company amended and restated its certificate of incorporation and bylaws; |
(2) | the Company appointed new members to the Successor’s board of directors to replace directors of the Predecessor; |
(3) | the Company issued: |
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Predecessor | |||
Dollars in thousands | March 31, 2019 | ||
Gain on settlement of liabilities subject to compromise | $ | ( | ) |
Fresh start valuation adjustments | |||
Professional fees | |||
Backstop premium on the rights offering paid in stock | |||
Other | |||
Reorganization items | $ |
Successor | Predecessor | |||||||
Dollars in thousands | March 31, 2019 | December 31, 2018 | ||||||
Predecessor 6.75% senior notes, due July 2022 | $ | $ | ||||||
Predecessor 7.50% senior notes, due August 2020 | ||||||||
Accrued interest on predecessor senior notes | ||||||||
Liabilities subject to compromise | $ | $ |
Dollars in thousands | |||
Enterprise value | $ | ||
Cash and cash equivalents and other | |||
Fair value of term loan | ( | ) | |
Fair value of successor stockholders’ equity | $ |
Dollars in thousands | |||
Enterprise value | $ | ||
Cash and cash equivalents and other | |||
Current liabilities | |||
Non-current liabilities excluding long-term debt | |||
Reorganization value of successor assets | $ |
Predecessor | Reorganization Adjustments | Fresh Start Adjustments | Successor | ||||||||||||
ASSETS | |||||||||||||||
Current assets: | |||||||||||||||
Cash and cash equivalents | $ | $ | (1) | $ | $ | ||||||||||
Restricted cash | (2) | ||||||||||||||
Accounts and notes receivable, net | |||||||||||||||
Rig materials and supplies | ( | ) | (15) | ||||||||||||
Other current assets | ( | ) | (3) | ( | ) | (16) | |||||||||
Total current assets | ( | ) | |||||||||||||
Property, plant and equipment, net | ( | ) | (17) | ||||||||||||
Intangible assets, net | (18) | ||||||||||||||
Deferred income taxes | (19) | ||||||||||||||
Other non-current assets | (4) | ( | ) | (20) | |||||||||||
Total assets | $ | $ | $ | ( | ) | $ | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||
Current liabilities: | |||||||||||||||
Debtor in possession financing | $ | $ | ( | ) | (5) | $ | $ | ||||||||
Accounts payable and accrued liabilities | (6) | ( | ) | (21) | |||||||||||
Accrued income taxes | |||||||||||||||
Total current liabilities | ( | ) | ( | ) | |||||||||||
Long-term debt | (7) | ||||||||||||||
Other long-term liabilities | ( | ) | (22) | ||||||||||||
Long-term deferred tax liability | ( | ) | (19) | ||||||||||||
Commitments and contingencies | |||||||||||||||
Total liabilities not subject to compromise | ( | ) | |||||||||||||
Liabilities subject to compromise | ( | ) | (8) | ||||||||||||
Total liabilities | ( | ) | ( | ) | |||||||||||
Stockholders’ equity: | |||||||||||||||
Predecessor preferred stock | ( | ) | (9) | — | |||||||||||
Predecessor common stock | ( | ) | (10) | — | |||||||||||
Predecessor capital in excess of par value | ( | ) | (11) | ( | ) | (23) | — | ||||||||
Predecessor accumulated other comprehensive income (loss) | ( | ) | (23) | — | |||||||||||
Successor common stock | — | (12) | |||||||||||||
Successor capital in excess of par value | — | (13) | |||||||||||||
Accumulated deficit | ( | ) | (14) | (23) | |||||||||||
Total stockholders’ equity | ( | ) | |||||||||||||
Total liabilities and stockholders’ equity | $ | $ | $ | ( | ) | $ |
(1) | Changes in cash and cash equivalents included the following: |
Dollars in thousands | |||
Proceeds from the rights offering | $ | ||
Transfers from restricted cash for the return of cash collateral (for letters of credit) | |||
Proceeds from refund of backstop commitment fee | |||
Transfers from restricted cash for deposit releases | |||
Transfers to restricted cash for funding of professional fees | ( | ) | |
Payment of debtor in possession financing principal and interest | ( | ) | |
Payment of professional fees | ( | ) | |
Payment of debt issuance costs for the successor credit facility | ( | ) | |
Payment of fees on letters of credit | ( | ) | |
Payment of term loan agent fees | ( | ) | |
Payment of other reorganization expenses | ( | ) | |
Net change in cash and cash equivalents | $ |
(2) | Changes in restricted cash reflects the net transfer of cash between restricted cash and cash and cash equivalents. |
(3) | Changes in other current assets include the following: |
Dollars in thousands | |||
Refund of backstop commitment fee | $ | ( | ) |
Elimination of predecessor directors and officers insurance policies | ( | ) | |
Reclass of prepaid costs related to the successor credit facility | ( | ) | |
Payment of other costs related to the successor credit facility | |||
Net change in other current assets | $ | ( | ) |
(4) | Changes in other non-current assets include the following: |
Dollars in thousands | |||
Capitalization of debt issuance costs on the successor credit facility | $ | ||
Reclass of prepaid costs related to the successor credit facility | |||
Net change in other non-current assets | $ |
(5) | Reflects the payment of debtor in possession financing principal. |
(6) | Changes in accounts payable and accrued liabilities include the following: |
Dollars in thousands | |||
Accrual of professional fees | $ | ||
Payment of professional fees | ( | ) | |
Payment of debtor in possession financing interest | ( | ) | |
Payment of letters of credit fees | ( | ) | |
Net change in accounts payable and accrued liabilities | $ |
(7) | Changes in long-term debt include the issuance of the $ |
(8) | Liabilities subject to compromise to be settled in accordance with the Plan and the resulting gain was determined as follows: |
Dollars in thousands | |||
Liabilities subject to compromise | $ | ( | ) |
Issuance of term loan | |||
Issuance of successor common stock to the 7.50% note holders and 6.75% note holders | |||
Excess fair value ascribed to lenders participating in equity rights offering | |||
Gain on settlement of liabilities subject to compromise | $ | ( | ) |
(9) | Changes in Predecessor Preferred Stock reflects the cancellation of Predecessor Preferred Stock. |
(10) | Changes in Predecessor Common Stock reflects the cancellation of Predecessor Common Stock. |
(11) | Changes in Predecessor capital in excess of par include the following: |
Dollars in thousands | |||
Cancellation of predecessor preferred stock | $ | ||
Cancellation of predecessor common stock | |||
Issuance of successor warrants to predecessor common stock and predecessor preferred stock holders | ( | ) | |
Issuance of successor common stock to predecessor common stock and predecessor preferred stock holders | ( | ) | |
Excess fair value ascribed to parties participating in rights offering, excluding lenders | ( | ) | |
Net change in predecessor capital in excess of par value | $ | ( | ) |
(12) | Changes in Successor Common Stock include the following: |
Dollars in thousands | |||
Issuance of successor common stock to the 7.50% note holders and 6.75% note holders | $ | ||
Issuance of successor common stock pursuant to rights offering | |||
Issuance of successor common stock to predecessor common stock and predecessor preferred stock holders | |||
Net change in successor common stock | $ |
(13) | Change in Successor capital in excess of par value include the following: |
Dollars in thousands | |||
Issuance of successor common stock to the 7.50% note holders and 6.75% note holders | $ | ||
Issuance of successor common stock pursuant to rights offering | |||
Issuance of successor warrants to predecessor common stock and predecessor preferred stock holders | |||
Issuance of successor common stock to predecessor common stock and predecessor preferred stock holders | |||
Equity issuance costs | ( | ) | |
Net change in successor capital in excess of par value | $ |
(14) | Changes in accumulated deficit include the following: |
Dollars in thousands | |||
Gain on settlement of liabilities subject to compromise | $ | ||
Backstop premium on rights offering | ( | ) | |
Accrual of professional fees | ( | ) | |
Payment of professional fees | ( | ) | |
Elimination of predecessor directors and officers insurance policies | ( | ) | |
Payment of other reorganization items | ( | ) | |
Net change in accumulated deficit | $ |
(15) | Changes in rig materials and supplies reflect the fair value adjustment due to the adoption of fresh start accounting. |
(16) | Changes in other current assets reflect the elimination of capitalized mobilization costs due to the adoption of fresh start accounting. |
(17) | Changes in property, plant and equipment, net reflects the fair value adjustment due to the adoption of fresh start accounting. |
(18) | Changes in intangible assets, net reflects the fair value adjustment due to the adoption of fresh start accounting. |
Dollars in thousands | Successor Fair Value | Predecessor Historical Book Value | ||||||
Customer relationships | $ | $ | ||||||
Trade names | ||||||||
Developed technology | ||||||||
Intangible assets, net | $ | $ |
(19) | Changes in deferred income taxes reflects the adjustment due to the adoption of fresh start accounting. |
(20) | Changes in other non-current assets reflect the following: |
Dollars in thousands | |||
Fair value adjustment to rig material and supplies | $ | ( | ) |
Fair value adjustment to investment in non-consolidated subsidiaries | |||
Fair value adjustment to long-term notes receivable | ( | ) | |
Elimination of capitalized mobilization costs | ( | ) | |
Elimination of long-term other deferred charges | ( | ) | |
Net change in other non-current assets | $ | ( | ) |
(21) | Changes in accounts payable and accrued liabilities due to the adoption of fresh start accounting include the following: |
Dollars in thousands | |||
Elimination of deferred rent | $ | ( | ) |
Elimination of deferred revenue | ( | ) | |
Net change in accounts payable and accrued liabilities | $ | ( | ) |
(22) | Changes in other long-term liabilities reflects the elimination of deferred revenue due to the adoption of fresh start accounting. |
(23) |
Successor | |||||||||||||
Balance at March 31, 2019 | |||||||||||||
Dollars in thousands | Estimated Useful Life (Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||
Customer relationships | $ | $ | $ | ||||||||||
Trade names | |||||||||||||
Developed technology | |||||||||||||
Total amortized intangible assets | $ | $ | $ |
Dollars in thousands | Expected future intangible amortization expense | ||
2019 | $ | ||
2020 | $ | ||
2021 | $ | ||
2022 | $ | ||
Beyond 2022 | $ |
• | an election to adopt the modified retrospective transition method applied at the beginning of the period of adoption, which does not require a restatement of the prior period. Accordingly, no cumulative-effect adjustment to retained earnings was made. |
• | an election not to apply the recognition requirements in Topic 842 to short-term leases (initial lease term of 12 months or less) and recognize lease payments in the consolidated condensed statement of operations. Short-term leases have not been recorded on the balance sheet. |
• | a practical expedient to not reassess whether a contract is or contains a lease and carry forward its historical lease classification. |
• | a practical expedient to account for the lease and non-lease components separately. |
• | a practical expedient to account for the lease and non-lease components as a single lease component for certain assets, by class of underlying asset. |
Successor | |||
Dollars in thousands | March 31, 2019 | ||
Operating lease right-of-use assets (1) | $ | ||
Operating lease liabilities - current (2) | $ | ||
Operating lease liabilities - noncurrent (3) | |||
Total operating lease liabilities | $ | ||
Cash paid for amounts included in the measurement of operating lease liabilities | $ | ||
Operating lease right-of-use assets obtained in exchange for lease obligations | $ | ||
Weighted average remaining lease term (in years) | |||
Weighted average discount rate | % |
(1) | This amount is included in other non-current assets in our consolidated condensed balance sheet. |
(2) | This amount is included in accounts payable and accrued liabilities in our consolidated condensed balance sheet. |
(3) |
Successor | |||
Dollars in thousands | Operating Leases | ||
2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Beyond 2023 | |||
Total undiscounted lease liability | |||
Imputed interest | ( | ) | |
Total operating lease liabilities | $ |
Successor | |||
Dollars in thousands | Operating Leases | ||
2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Beyond 2023 | |||
Total lease payments | $ |
Predecessor | |||
Dollars in thousands | Three Months Ended March 31, 2019 | ||
Operating lease expense | $ | ||
Short-term lease expense | |||
Variable lease expense | |||
Total lease expense | $ |
Successor | Predecessor | |||||||
Dollars in thousands | March 31, 2019 | December 31, 2018 | ||||||
Successor credit facility | $ | $ | ||||||
Successor term loan, due March 2024 | ||||||||
Predecessor 6.75% senior notes, due July 2022 | ||||||||
Predecessor 7.50% senior notes, due August 2020 | ||||||||
Predecessor 2015 secured credit agreement | ||||||||
Total debt | $ | $ |
• | LIBOR plus an applicable margin that varies from |
• | a base rate plus an applicable margin that varies from |
• | Level 1 — Unadjusted quoted prices for identical assets or liabilities in active markets; |
• | Level 2 — Direct or indirect observable inputs, including quoted prices or other market data, for similar assets or liabilities in active markets or identical assets or liabilities in less active markets; and |
• | Level 3 — Unobservable inputs that require significant judgment for which there is little or no market data. |
Successor | Predecessor | |||||||||||||||
March 31, 2019 | December 31, 2018 | |||||||||||||||
Dollars in thousands | Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
Successor term loan, due March 2024 | $ | $ | $ | $ | ||||||||||||
Predecessor 6.75% senior notes, due July 2022 | ||||||||||||||||
Predecessor 7.50% senior notes, due August 2020 | ||||||||||||||||
Total | $ | $ | $ | $ |
Predecessor | |||||||
Three Months Ended March 31, | |||||||
Dollars in thousands, except share and per share amounts | 2019 | 2018 | |||||
Basic EPS | |||||||
Numerator | |||||||
Net income (loss) available to common stockholders (numerator) | $ | ( | ) | $ | ( | ) | |
Denominator | |||||||
Weighted average shares outstanding | |||||||
Number of shares used for basic EPS computation | |||||||
Basic earnings (loss) per common share | $ | ( | ) | $ | ( | ) | |
Predecessor | |||||||
Three Months Ended March 31, | |||||||
Dollars in thousands, except share and per share amounts | 2019 | 2018 | |||||
Diluted EPS | |||||||
Numerator | |||||||
Net income (loss) available to common stockholders (numerator) | $ | ( | ) | $ | ( | ) | |
Denominator | |||||||
Number of shares used for basic EPS computation | |||||||
Restricted stock units (1) | |||||||
Predecessor preferred stock | |||||||
Number of shares used for diluted EPS computation | |||||||
Diluted earnings (loss) per common share | $ | ( | ) | $ | ( | ) |
(1) |
Predecessor | |||||
Three Months Ended March 31, | |||||
2019 | 2018 | ||||
Predecessor common stock from conversion of predecessor preferred stock |
Predecessor | |||
Dollars in thousands | Three Months Ended March 31, 2019 | ||
Lease revenue | $ | ||
Service revenue | |||
Total revenues | $ |
• | an election to adopt the modified retrospective transition method applied at the beginning of the period of adoption which does not require a restatement of the prior period. Accordingly, no cumulative-effect adjustment to retained earnings was made. |
• | a practical expedient to not reassess whether a contract is or contains a lease and carry forward its historical lease classification. |
• | a practical expedient to account as a single performance obligation entirely depending on predominant component(s) i.e. lease or non-lease component. Revenue is recognized under Topic 842, if the lease component is predominant. Similarly, revenue is recognized under ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”) if the non-lease component is predominant. |
Successor | Predecessor | |||||||
Dollars in thousands | March 31, 2019 | December 31, 2018 | ||||||
Contract liabilities - current (Deferred revenue) (1) | $ | $ | ||||||
Contract liabilities - noncurrent (Deferred revenue) (1) | ||||||||
Total contract liabilities | $ | $ |
(1) |
Dollars in thousands | Contract Liabilities | ||
Balance at December 31, 2018 (Predecessor) | $ | ||
Decrease due to recognition of revenue | ( | ) | |
Increase to deferred revenue during current period | |||
Elimination of deferred revenue due to the adoption of fresh start accounting | ( | ) | |
Balance at March 31, 2019 (Predecessor) | |||
Balance at March 31, 2019 (Successor) | $ |
Successor | ||||||||||||||||
Balance at March 31, 2019 | ||||||||||||||||
Dollars in thousands | Remaining 2019 | 2020 | 2021 | Beyond 2021 | Total | |||||||||||
Deferred lease revenue | $ | $ | ||||||||||||||
Deferred service revenue | $ | $ |
• | customers typically are major, independent, or national oil and natural gas companies or integrated service providers; |
• | drilling programs in remote locations with little infrastructure, requiring a large inventory of spare parts and other ancillary equipment and self-supported service capabilities; |
• | complex wells and/or harsh environments (such as high pressures, deep depths, hazardous or geologically challenging conditions and sensitive environments) requiring specialized equipment and considerable experience to drill; and |
• | O&M contracts that generally cover periods of one year or more. |
Predecessor | |||||||
Three Months Ended March 31, | |||||||
Dollars in thousands | 2019 | 2018 | |||||
Revenues: (1) | |||||||
U.S. rental tools | $ | $ | |||||
International rental tools | |||||||
Total rental tools services | |||||||
U.S. (Lower 48) drilling | |||||||
International & Alaska drilling | |||||||
Total drilling services | |||||||
Total revenues | |||||||
Operating gross margin: (2) | |||||||
U.S. rental tools | $ | $ | |||||
International rental tools | ( | ) | ( | ) | |||
Total rental tools services | |||||||
U.S. (Lower 48) drilling | ( | ) | ( | ) | |||
International & Alaska drilling | ( | ) | ( | ) | |||
Total drilling services | ( | ) | ( | ) | |||
Total operating gross margin (loss) | ( | ) | |||||
General and administrative expense | ( | ) | ( | ) | |||
Gain (loss) on disposition of assets, net | |||||||
Reorganization items | ( | ) | |||||
Total operating income (loss) | ( | ) | ( | ) | |||
Interest expense | ( | ) | ( | ) | |||
Interest income | |||||||
Other | ( | ) | |||||
Income (loss) before income taxes | $ | ( | ) | $ | ( | ) |
(1) | For the three months ended March 31, 2019, our largest customer, ENL, constituted approximately |
(2) |
Predecessor | |||||||
Three Months Ended March 31, | |||||||
Dollars in Thousands | 2019 | 2018 | |||||
United States | $ | $ | |||||
Russia | |||||||
EMEA & Asia | |||||||
Latin America | |||||||
Other CIS | |||||||
Other | |||||||
Total revenues | $ | $ |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | % Change | |||||||||
Worldwide rig count (1) | |||||||||||
U.S. (land and offshore) | 1,046 | 965 | 8 | % | |||||||
International (2) | 1,030 | 970 | 6 | % | |||||||
Commodity Prices (3) | |||||||||||
Crude oil (Brent) per bbl | $ | 63.83 | $ | 67.23 | (5 | )% | |||||
Crude oil (West Texas Intermediate) per bbl | $ | 54.90 | $ | 62.89 | (13 | )% | |||||
Natural gas (Henry Hub) per mcf | $ | 2.87 | $ | 2.85 | 1 | % |
Predecessor | |||||||||||||
Three Months Ended March 31, | |||||||||||||
Dollars in Thousands | 2019 | 2018 | |||||||||||
Revenues: | |||||||||||||
U.S. rental tools | $ | 52,595 | 34 | % | $ | 34,748 | 32 | % | |||||
International rental tools | 21,109 | 13 | % | 17,477 | 16 | % | |||||||
Total rental tools services | 73,704 | 47 | % | 52,225 | 48 | % | |||||||
U.S. (Lower 48) drilling | 6,627 | 4 | % | 1,354 | 1 | % | |||||||
International & Alaska drilling | 77,066 | 49 | % | 56,096 | 51 | % | |||||||
Total drilling services | 83,693 | 53 | % | 57,450 | 52 | % | |||||||
Total revenues | $ | 157,397 | 100 | % | $ | 109,675 | 100 | % | |||||
Operating gross margin (loss) excluding depreciation and amortization: (1) | |||||||||||||
U.S. rental tools | $ | 29,004 | 55 | % | $ | 15,810 | 45 | % | |||||
International rental tools | 534 | 3 | % | 360 | 2 | % | |||||||
Total rental tools services | 29,538 | 40 | % | 16,170 | 31 | % | |||||||
U.S. (Lower 48) drilling | (700 | ) | (11 | )% | (2,699 | ) | (199 | )% | |||||
International & Alaska drilling | 7,688 | 10 | % | 4,670 | 8 | % | |||||||
Total drilling services | 6,988 | 8 | % | 1,971 | 3 | % | |||||||
Total operating gross margin (loss) excluding depreciation and amortization | 36,526 | 23 | % | 18,141 | 17 | % | |||||||
Depreciation and amortization | (25,102 | ) | (28,549 | ) | |||||||||
Total operating gross margin (loss) | 11,424 | (10,408 | ) | ||||||||||
General and administrative expense | (8,147 | ) | (6,201 | ) | |||||||||
Gain (loss) on disposition of assets, net | 384 | 343 | |||||||||||
Reorganization items | (92,977 | ) | — | ||||||||||
Total operating income (loss) | $ | (89,316 | ) | $ | (16,266 | ) |
(1) | Percentage amounts are calculated by dividing the operating gross margin (loss) excluding depreciation and amortization with revenue for the respective segment and business lines. |
Predecessor | |||||||||||||||||||
Dollars in Thousands | U.S. Rental Tools | International Rental Tools | U.S. (Lower 48) Drilling | International & Alaska Drilling | Total | ||||||||||||||
Three months ended March 31, 2019 | |||||||||||||||||||
Operating gross margin (loss) (1) | $ | 17,289 | $ | (3,581 | ) | $ | (1,508 | ) | $ | (776 | ) | $ | 11,424 | ||||||
Depreciation and amortization | 11,715 | 4,115 | 808 | 8,464 | 25,102 | ||||||||||||||
Operating gross margin (loss) excluding depreciation and amortization | $ | 29,004 | $ | 534 | $ | (700 | ) | $ | 7,688 | $ | 36,526 | ||||||||
Three months ended March 31, 2018 | |||||||||||||||||||
Operating gross margin (loss) (1) | $ | 4,231 | $ | (4,015 | ) | $ | (5,288 | ) | $ | (5,336 | ) | $ | (10,408 | ) | |||||
Depreciation and amortization | 11,579 | 4,375 | 2,589 | 10,006 | 28,549 | ||||||||||||||
Operating gross margin (loss) excluding depreciation and amortization | $ | 15,810 | $ | 360 | $ | (2,699 | ) | $ | 4,670 | $ | 18,141 |
(1) | Operating gross margin (loss) is calculated as revenues less direct operating expenses, including depreciation and amortization expense. |
Three Months Ended March 31, | |||||
2019 | 2018 | ||||
U.S. (Lower 48) Drilling | |||||
Rigs available for service (1) | 13 | 13 | |||
Utilization rate of rigs available for service (2) | 4 | % | 5 | % | |
International & Alaska drilling | |||||
Eastern hemisphere | |||||
Rigs available for service (1) | 10 | 11 | |||
Utilization rate of rigs available for service (2) | 50 | % | 41 | % | |
Latin America region | |||||
Rigs available for service (1) | 7 | 7 | |||
Utilization rate of rigs available for service (2) | 29 | % | 14 | % | |
Alaska | |||||
Rigs available for service (1) | 2 | 2 | |||
Utilization rate of rigs available for service (2) | 50 | % | 50 | % | |
Total International & Alaska drilling | |||||
Rigs available for service (1) | 19 | 20 | |||
Utilization rate of rigs available for service (2) | 42 | % | 33 | % |
(1) | The number of rigs available for service is determined by calculating the number of days each rig was in our fleet and was under contract or available for contract. For example, a rig under contract or available for contract for six months of a year is 0.5 rigs available for service for such year. Our method of computation of rigs available for service may or may not be comparable to other similarly titled measures of other companies. |
(2) | Rig utilization rates are based on a weighted average basis assuming total days availability for all rigs available for service. Rigs acquired or disposed of are 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 or demobilization are also considered to be utilized. Our method of computation of rig utilization may or may not be comparable to other similarly titled measures of other companies. |
• | an increase of $13.9 million in reimbursable revenues, which increased revenues but had a minimal impact on operating margins; |
• | an increase of $5.1 million, excluding revenue from reimbursable costs (“reimbursable revenues”), resulting from increased utilization for certain Company-owned rigs in Kurdistan region of Iraq, Kazakhstan and Mexico; |
• | an increase of $1.4 million driven by O&M activities, excluding reimbursable revenues. |
Successor | |||
Dollars in thousands | March 31, 2019 | ||
Cash and cash equivalents on hand (1) | $ | 127,849 | |
Restricted cash | 21,436 | ||
Availability under Credit Facility | 25,167 | ||
Total liquidity | $ | 174,452 |
(1) | As of March 31, 2019, approximately $35.3 million of the $127.8 million of cash and equivalents was held by our foreign subsidiaries. |
Predecessor | |||||||
Three Months Ended March 31, | |||||||
Dollars in thousands | 2019 | 2018 | |||||
Operating activities | $ | 14,914 | $ | (12,204 | ) | ||
Investing activities | (9,130 | ) | (8,854 | ) | |||
Financing activities | 84,510 | (2,176 | ) | ||||
Net change in cash and cash equivalents | $ | 90,294 | $ | (23,234 | ) |
• | LIBOR plus an applicable margin that varies from 2.25 percent to 2.75 percent per annum or |
• | a base rate plus an applicable margin that varies from 1.25 percent to 1.75 percent per annum. |
• | key suppliers, vendors or other contract counterparties may terminate their relationships with us or require additional financial assurances or enhanced performance from us; |
• | our ability to renew existing contracts and compete for new business may be adversely affected; |
• | our ability to attract, motivate and/or retain key executives may be adversely affected; and |
• | competitors may take business away from us, and our ability to attract and retain customers may be negatively impacted. |
Exhibit Number | Description | |||
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— | Parker Drilling Company Form of Restricted Stock Unit Incentive Agreement (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on March 26, 2019). | |||
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101.INS | — | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||
101.SCH | — | XBRL Taxonomy Schema Document. | ||
101.CAL | — | XBRL Calculation Linkbase Document. | ||
101.LAB | — | XBRL Label Linkbase Document. | ||
101.PRE | — | XBRL Presentation Linkbase Document. | ||
101.DEF | — | XBRL Definition Linkbase Document. |
PARKER DRILLING COMPANY | ||||
Date: | May 9, 2019 | By: | /s/ Gary G. Rich | |
Gary G. Rich President and Chief Executive Officer | ||||
By: | /s/ Michael W. Sumruld | |||
Michael W. Sumruld Senior Vice President and Chief Financial Officer |
1. | I have reviewed this quarterly report on Form 10-Q for the quarterly period ended March 31, 2019, of Parker Drilling Company (the registrant); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a — 15(e) and 15d — 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Gary G. Rich |
Gary G. Rich President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q for the quarterly period ended March 31, 2019, of Parker Drilling Company (the registrant); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a — 15(e) and 15d — 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Michael W. Sumruld |
Michael W. Sumruld Senior Vice President and Chief Financial Officer |
1. | The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 (the Report) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Gary G. Rich |
Gary G. Rich President and Chief Executive Officer |
1. | The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 (the Report) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Michael W. Sumruld |
Michael W. Sumruld Senior Vice President and Chief Financial Officer |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
May 06, 2019 |
|
Document Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | PKD | |
Entity Registrant Name | PARKER DRILLING CO /DE/ | |
Entity Central Index Key | 0000076321 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity small business | true | |
Entity emerging growth company | false | |
Entity Common Stock, Shares Outstanding | 15,044,739 | |
Amendment Flag | false |
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Comprehensive income (loss): | ||
Net income (loss) | $ (90,248) | $ (28,796) |
Other comprehensive income (loss), net of tax: | ||
Currency translation difference on related borrowings | 141 | 276 |
Currency translation difference on foreign currency net investments | (518) | (576) |
Total other comprehensive income (loss), net of tax: | (377) | (300) |
Comprehensive income (loss) attributable to controlling interest | $ (90,625) | $ (29,096) |
Summary of Significant Accounting Policies |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Note 1 - Summary of Significant Accounting Policies Organization and Nature of Operations Unless otherwise indicated, the terms “Company,” “Parker,” “we,” “us” and “our” refer to Parker Drilling Company, incorporated in Delaware, together with its wholly-owned subsidiaries, and “Parker Drilling” refers solely to the parent, Parker Drilling Company. Parker Drilling Company is an international provider of contract drilling and drilling-related services as well as rental tools and services. We have operated in over 60 countries since beginning operations in 1934, making us among the most geographically experienced drilling contractors and rental tools providers in the world. Basis of Presentation The consolidated condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and are unaudited. In the opinion of the Company, these consolidated condensed financial statements include all adjustments which, unless otherwise disclosed, are of a normal recurring nature, necessary for their fair presentation for the periods presented. The results for interim periods are not necessarily indicative of results for the entire year. The consolidated condensed financial statements presented herein should be read in connection with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018. Consolidation The consolidated condensed financial statements include the accounts of the Company and subsidiaries in which we exercise control or have a controlling financial interest, including entities, if any, in which the Company is allocated a majority of the entity’s losses or returns, regardless of ownership percentage. If a subsidiary of Parker Drilling has a 50.0 percent or greater interest in an entity but Parker Drilling’s interest in the subsidiary or the entity does not meet the consolidation criteria described above, then that interest is accounted for under the equity method. Reclassifications Certain reclassifications have been made to prior period amounts to conform to the current period presentation. These reclassifications did not materially affect our consolidated financial results. Use of Estimates The preparation of our consolidated condensed financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect our reported amounts of assets and liabilities, our disclosure of contingent assets and liabilities at the date of the consolidated condensed financial statements, and our revenues and expenses during the periods reported. Estimates are typically used when accounting for certain significant items such as legal or contractual liability accruals, self-insured medical/dental plans, impairment, income taxes and valuation allowance, operating lease right-of-use assets, operating lease liabilities and other items requiring the use of estimates. Estimates are based on a number of variables, which may include third party valuations, historical experience, where applicable, and assumptions that we believe are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ from management estimates. Cash, Cash equivalents and Restricted Cash For purposes of the consolidated condensed balance sheets and the consolidated condensed statements of cash flows, the Company considers cash equivalents to be highly liquid debt instruments that have a remaining maturity of three months or less at the date of purchase.
The restricted cash balance as of March 31, 2019 includes $20.6 million for professional fees escrow account and $0.8 million for professional fees. The restricted cash balance as of December 31, 2018 includes $9.8 million into a cash collateral account to support the letters of credit outstanding and $0.6 million held as compensating balances in the ordinary course of business for purchases and utilities. Impairment We evaluate the carrying amounts of long-lived assets for potential impairment when events occur or circumstances change that indicate the carrying values of such assets may not be recoverable. We evaluate recoverability by determining the undiscounted estimated future net cash flows for the respective asset groups identified. If the sum of the estimated undiscounted cash flows is less than the carrying value of the asset group, we measure the impairment as the amount by which the assets’ carrying value exceeds the fair value of such assets. Management considers a number of factors such as estimated future cash flows from the assets, appraisals and current market value analysis in determining fair value. Assets are written down to fair value if the final estimate of current fair value is below the net carrying value. The assumptions used in the impairment evaluation are inherently uncertain and require management judgment. Intangible Assets Our intangible assets are related to customer relationships, developed technology and trade name, which are classified as definite lived intangibles, that are generally amortized over a weighted average period of approximately three to six years. We assess the recoverability of the unamortized balance of our intangible assets when indicators of impairment are present based on expected future profitability and undiscounted expected cash flows and their contribution to our overall operations. Should the review indicate that the carrying value is not fully recoverable, the excess of the carrying value over the fair value of the intangible assets would be recognized as an impairment loss. See Note 4 - Intangible Assets for further discussion. Income Taxes Income taxes are accounted for under the asset and liability method and have been provided for based upon tax laws and rates in effect in the countries in which operations are conducted and income or losses are generated. There is little or no expected relationship between the provision for or benefit from income taxes and income or loss before income taxes as the countries in which we operate have taxation regimes that vary not only with respect to nominal rate, but also in terms of the availability of deductions, credits, and other benefits. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled and the effect of changes in tax rates is recognized in income in the period in which the change is enacted. Valuation allowances are established to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In order to determine the amount of deferred tax assets or liabilities, as well as the valuation allowances, we must make estimates and assumptions regarding future taxable income, where rigs will be deployed, and other matters. Changes in these estimates and assumptions, including changes in tax laws and other changes affecting our ability to recognize the underlying deferred tax assets, could require us to adjust the valuation allowances. The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50.0 percent likely of being realized and changes in recognition or measurement are reflected in the period in which the change in judgment occurs. See Note 8 - Income Taxes for further details. Leases As lessee, our leases are primarily operating leases. See Note 5 - Operating Leases for further details. As lessor, our leases are primarily operating leases which are included in revenue in our consolidated condensed income statement. See Note 11 - Revenue for further details. Legal and Investigative Matters We accrue estimates of the probable and estimable costs for the resolution of certain legal and investigative matters. We do not accrue any amounts for other matters for which the liability is not probable and reasonably estimable. Generally, the estimate of probable costs related to these matters is developed in consultation with our legal advisors. The estimates take into consideration factors such as the complexity of the issues, litigation risks and settlement costs. If the actual settlement costs, final judgments, or fines, after appeals, differ from our estimates, our future financial results may be adversely affected. Revenue Recognition See Note 11 - Revenue for further discussion of our revenue recognition policy. Concentrations of Credit Risk Financial instruments that 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. We generally do not require collateral on our trade receivables. We depend on a limited number of significant customers. Our largest customer, Exxon Neftegas Limited (“ENL”), constituted approximately 31.2 percent of our consolidated revenues for the three months ended March 31, 2019. Excluding revenues from reimbursable costs (“reimbursable revenues”) of $26.3 million, ENL constituted approximately 17.7 percent of our total consolidated revenues for the three months ended March 31, 2019. As of March 31, 2019, and December 31, 2018, we had deposits in domestic banks in excess of federally insured limits of approximately $118.3 million and $27.5 million, respectively. In addition, we had uninsured deposits in foreign banks as of March 31, 2019, and December 31, 2018, of $35.3 million and $32.9 million, respectively. Earnings (Loss) Per Share (EPS) Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. The effects of dilutive securities, stock options, unvested restricted stock, assumed conversion of convertible stock and convertible debt are included in the diluted EPS calculation, when applicable. See Note 10 - Earnings (Loss) Per Common Share (“EPS”) for further details. Bankruptcy On December 12, 2018 (the “Petition Date”), Parker Drilling and certain of its U.S. subsidiaries (collectively, the “Debtors”) filed a prearranged plan of reorganization (the “Plan”) and commenced voluntary petitions under chapter 11 (the “Chapter 11 Cases”) of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”). The Plan was confirmed by the Bankruptcy Court on March 7, 2019, and the Debtors emerged from the bankruptcy proceedings on March 26, 2019. The consolidated financial statements included herein have been prepared as if we were a going concern and in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 852 - Reorganizations (“Topic 852”). See Note 2 - Chapter 11 Emergence and Note 3 - Fresh Start Accounting for further details.
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Chapter 11 Emergence |
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Reorganizations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chapter 11 Emergence | Note 2 - Chapter 11 Emergence On December 12, 2018, prior to the commencement of the Chapter 11 Cases, the Debtors entered into a restructuring support agreement (as amended on January 28, 2019, the “RSA”) with certain significant holders of (1) 7.50% Senior Notes, due 2020 (the “7.50% Note Holders”) issued pursuant to the indenture (the “7.50% Notes Indenture”) dated July 30, 2013 (the “7.50% Notes”), by and among Parker Drilling, the subsidiary guarantors party thereto and Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”), (2) 6.75% Senior Notes, due 2022 (the “6.75% Note Holders”) issued pursuant to the indenture (the “6.75% Notes Indenture”) dated January 22, 2014 (the “6.75% Notes” and together with the 7.50% Notes, the “Senior Notes”), by and among Parker Drilling, the subsidiary guarantors party thereto and the Trustee, (3) Parker Drilling’s existing common stock (the “Predecessor Common Stock”) and (4) Parker Drilling’s 7.25% Series A Mandatory Convertible Preferred Stock (the “Predecessor Preferred Stock” and such holders to support a restructuring (the “Restructuring”) on the terms set forth in the Plan. On the Petition Date, the Debtors filed voluntary petitions for reorganization under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas pursuant to a prearranged plan of reorganization. The Plan was confirmed by the Bankruptcy Court on March 7, 2019, and the Debtors emerged from the bankruptcy proceedings on March 26, 2019. References to “Successor” relate to the consolidated condensed income statement or consolidated condensed balance sheet of the reorganized Company as of and subsequent to March 31, 2019. References to “Predecessor” relate to the consolidated condensed balance sheet of the Company prior to, and consolidated condensed income statement through and including, March 31, 2019. On March 26, 2019:
Reorganization Items Any expenses, gains and losses that are realized or incurred subsequent to and as a direct result of the Chapter 11 Cases are recorded under reorganization items on our consolidated condensed statements of operations. Reorganization items were $93.0 million for the three months ended March 31, 2019, which consisted of:
Reorganization items paid during the three months ended March 31, 2019 and 2018 were $8.6 million and zero, respectively. Debtor in Possession Financing Amounts outstanding against the debtor in possession financing facility were zero and $10.0 million as of March 31, 2019 and December 31, 2018, respectively. The debtor in possession financing facility was terminated as of March 26, 2019. Liabilities Subject To Compromise Pre-petition unsecured and under-secured obligations that could have been impacted by the Chapter 11 Cases have been classified as liabilities subject to compromise on our Predecessor consolidated condensed balance sheet. These liabilities were reported at the amounts allowed as claims by the Bankruptcy Court. Liabilities subject to compromise consisted of:
Upon emergence from bankruptcy, we adopted fresh start accounting (“Fresh Start Accounting”) in accordance with Topic 852, which resulted in the Company becoming a new entity for financial reporting purposes. In accordance with Topic 852, the Company is required to adopt Fresh Start Accounting upon its emergence from bankruptcy because (1) the holders of the then existing common shares of the Predecessor received less than 50 percent of the new common shares of the Successor outstanding upon emergence and (2) the reorganization value of the Company’s assets immediately prior to confirmation of the Plan was less than the total of all post-petition liabilities and allowed claims. Upon adoption of Fresh Start Accounting, the reorganization value derived from the enterprise value as disclosed in the Plan was allocated to the Company’s assets and liabilities based on their fair values (except for deferred income taxes) in accordance with FASB ASC Topic No. 805 - Business Combinations. The amount of deferred income taxes recorded was determined in accordance with FASB ASC Topic No. 740 - Income Taxes. We evaluated the events between March 26, 2019 and March 31, 2019 and concluded that the use of an accounting convenience date of March 31, 2019 (“Fresh Start Reporting Date”) would not have a material impact on our consolidated condensed income statement or consolidated condensed balance sheet. As such, the application of fresh start accounting was reflected in our condensed consolidated balance sheet as of March 31, 2019 and fresh start accounting adjustments related thereto were included in our consolidated condensed income statement for the three months ended March 31, 2019. As a result of the adoption of Fresh Start Accounting and the effects of the implementation of the Plan, the Company’s consolidated condensed financial statements of the Successor, are not comparable to its consolidated condensed financial statements of the Predecessor. The Company’s consolidated condensed financial statements and related footnotes are presented with a “black line” division, which emphasizes the lack of comparability between amounts presented as of and after March 31, 2019 and amounts presented for all prior periods. The Company’s financial results for future periods following the application of Fresh Start Accounting will be different from historical trends and the differences may be material. Reorganization Value Under Topic 852, the Successor determined a value to be assigned to the equity of the emerging entity as of the date of adoption of Fresh Start Accounting. The Plan confirmed by the Bankruptcy Court estimated a range of enterprise values between $365.0 million and $485.0 million, with a midpoint of $425.0 million. The Company deemed it appropriate to use the midpoint between the low end and high end of the range to determine the final enterprise value of $425.0 million. The following table reconciles the enterprise value to the estimated fair value of our Successor Common Stock as of the Fresh Start Reporting Date:
The following table reconciles the enterprise value to the reorganization value of the Successor’s assets to be allocated to the Company’s individual assets as of the Fresh Start Reporting Date:
With the assistance of financial advisors, we determined the enterprise and corresponding equity value of the Successor by calculating the present value of future cash flows based on our financial projections. The enterprise value and corresponding equity value are dependent upon achieving the future financial results set forth in our valuations, as well as the realization of certain other assumptions. All estimates, assumptions, valuations and financial projections, including the fair value adjustments, the enterprise value and equity value projections, are inherently subject to significant uncertainties and the resolution of contingencies beyond our control. Accordingly, we cannot assure you that the estimates, assumptions, valuations or financial projections will be realized, and actual results could vary materially. Valuation Process The fair values of the Company’s principal assets, including drilling equipment, rental tools, real property, and intangible assets were estimated with the assistance of third party valuation advisors. The income approach, market approach, and the cost approach were considered for estimating the value of each individual asset. Although the income approach was not applied to value the machinery and equipment and real property assets individually, the Company did consider the earnings of the reporting unit within which each of these assets reside. Economic obsolescence related to machinery and equipment and real property was also considered and was applied to stacked and underutilized assets based upon the status of the asset. Economic obsolescence was also considered in situations in which the earnings of the applicable reporting unit in which the assets are employed suggest economic obsolescence. When penalizing assets for economic obsolescence, an additional economic obsolescence penalty was levied, while considering scrap value to be the floor value for an asset. Because more than one approach was used to develop a valuation, the various approaches were reconciled to determine a final value conclusion. The reorganization value was allocated to the Company’s individual assets and liabilities based on their fair values as follows: Rig Materials and Supplies The fair value of the rig materials and supplies was determined using the direct and indirect cost approaches. The rig materials and supplies were analyzed on a line-by-line basis and each asset was adjusted for age, physical depreciation, and obsolescence. Property, Plant and Equipment Building, Land and Improvements The fair value of the land assets was estimated using the sales comparison (market) approach, which involved gathering data on comparable sales and current listings of land in each subject market, then adjusting the unit price (per acre or per square foot) of each comparable for differences in market conditions, location, size, and other factors. A per unit value conclusion was then determined based on the adjusted prices of the comparable sales and listings. Fair value of buildings and improvements was estimated using the direct cost approach, in which the estimated replacement cost new of the improvements was adjusted for accrued physical depreciation and any functional or external obsolescence. As a supporting approach, the total fair value of all real property assets for each location was estimated using the sales comparison (or market approach). Held for sale assets were included at their respective pending or listed prices. The fair value of the leasehold improvements was determined using the cost approach, adjusted as needed for asset type, age, physical deterioration and obsolescence. Rental Tools The fair value of the rental tools was determined using a combination of the cost approach and sales comparison (market) approach depending upon the asset type. The fair value utilizing the cost approach was adjusted as needed for asset type, age, physical deterioration, and obsolescence. For assets where an active secondary market exists, we utilized the sales comparison (market) approach to estimate the fair value of the assets, which involved gathering market data and analyzing comparable sales of similar assets. Drilling Equipment The fair value of the drilling equipment was determined using a combination of the discounted cash flow method (income approach), the cost approach, and the sales comparison (market) approach. The income approach was utilized to estimate the fair value of drilling equipment that generated positive returns on projected cash flows over the remaining economic useful life of the drilling equipment and compared to the fair value utilizing the cost approach, adjusted as needed for asset type, age, physical deterioration and obsolescence. For assets where an active secondary market exists we utilized the sales comparison (market) approach to estimate the fair value of the assets, which involved gathering market data and analyzing comparable sales of similar assets. Intangible Assets We applied the income approach methodology to estimate the value of the customer relationships, trade name, and developed technology. We determined the value of the customer relationships based on the present value of the incremental after-tax cash flows attributable only to the intangible asset. The value of the trade name was estimated through the relief from royalty method based on the present value of the cost savings realized by the owner of the asset as a result of not having to pay a stream of royalty payments to another party. The cost savings were based on hypothetical royalty payments of 0.2 percent of revenue reflecting a rate in which an arm’s length buyer would typically pay for the use of such intangible assets. Similar to the methodology used to value the trade name, we determined the value of the developed technology using a hypothetical royalty payment of 1.0 percent of revenue to reflect the attributable cost savings. The present value of the after-tax cash flows for all the Intangible Assets were estimated based on a discount rate of 20.0 percent. Warrants The fair value of the Successor warrants was estimated by applying a Black-Scholes-Merton (“BSM”) model. The BSM model is a pricing model used to estimate the theoretical price or fair value for a European-style call or put option/warrant based on current stock price, strike price, time to maturity, risk-free rate, volatility, and dividend yield.Consolidated Balance SheetThe adjustments included in the following fresh start consolidated condensed balance sheet as of March 31, 2019 reflect the effects of the transactions contemplated by the Plan and executed by the Company on the Fresh Start Reporting Date (reflected in the column “Reorganization Adjustments”), and fair value and other required accounting adjustments resulting from the adoption of Fresh Start Accounting (reflected in the column “Fresh Start Adjustments”). The explanatory notes provide additional information with regard to the adjustments recorded, the methods used to determine the fair values and significant assumptions.
Fresh Start Accounting Adjustments
(23) Changes reflect the cumulative impact of fresh start accounting adjustments discussed above and the elimination of Predecessor accumulated other comprehensive loss and Predecessor accumulated deficit.
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Fresh Start Accounting |
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Reorganizations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fresh Start Accounting | Note 2 - Chapter 11 Emergence On December 12, 2018, prior to the commencement of the Chapter 11 Cases, the Debtors entered into a restructuring support agreement (as amended on January 28, 2019, the “RSA”) with certain significant holders of (1) 7.50% Senior Notes, due 2020 (the “7.50% Note Holders”) issued pursuant to the indenture (the “7.50% Notes Indenture”) dated July 30, 2013 (the “7.50% Notes”), by and among Parker Drilling, the subsidiary guarantors party thereto and Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”), (2) 6.75% Senior Notes, due 2022 (the “6.75% Note Holders”) issued pursuant to the indenture (the “6.75% Notes Indenture”) dated January 22, 2014 (the “6.75% Notes” and together with the 7.50% Notes, the “Senior Notes”), by and among Parker Drilling, the subsidiary guarantors party thereto and the Trustee, (3) Parker Drilling’s existing common stock (the “Predecessor Common Stock”) and (4) Parker Drilling’s 7.25% Series A Mandatory Convertible Preferred Stock (the “Predecessor Preferred Stock” and such holders to support a restructuring (the “Restructuring”) on the terms set forth in the Plan. On the Petition Date, the Debtors filed voluntary petitions for reorganization under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas pursuant to a prearranged plan of reorganization. The Plan was confirmed by the Bankruptcy Court on March 7, 2019, and the Debtors emerged from the bankruptcy proceedings on March 26, 2019. References to “Successor” relate to the consolidated condensed income statement or consolidated condensed balance sheet of the reorganized Company as of and subsequent to March 31, 2019. References to “Predecessor” relate to the consolidated condensed balance sheet of the Company prior to, and consolidated condensed income statement through and including, March 31, 2019. On March 26, 2019:
Reorganization Items Any expenses, gains and losses that are realized or incurred subsequent to and as a direct result of the Chapter 11 Cases are recorded under reorganization items on our consolidated condensed statements of operations. Reorganization items were $93.0 million for the three months ended March 31, 2019, which consisted of:
Reorganization items paid during the three months ended March 31, 2019 and 2018 were $8.6 million and zero, respectively. Debtor in Possession Financing Amounts outstanding against the debtor in possession financing facility were zero and $10.0 million as of March 31, 2019 and December 31, 2018, respectively. The debtor in possession financing facility was terminated as of March 26, 2019. Liabilities Subject To Compromise Pre-petition unsecured and under-secured obligations that could have been impacted by the Chapter 11 Cases have been classified as liabilities subject to compromise on our Predecessor consolidated condensed balance sheet. These liabilities were reported at the amounts allowed as claims by the Bankruptcy Court. Liabilities subject to compromise consisted of:
Upon emergence from bankruptcy, we adopted fresh start accounting (“Fresh Start Accounting”) in accordance with Topic 852, which resulted in the Company becoming a new entity for financial reporting purposes. In accordance with Topic 852, the Company is required to adopt Fresh Start Accounting upon its emergence from bankruptcy because (1) the holders of the then existing common shares of the Predecessor received less than 50 percent of the new common shares of the Successor outstanding upon emergence and (2) the reorganization value of the Company’s assets immediately prior to confirmation of the Plan was less than the total of all post-petition liabilities and allowed claims. Upon adoption of Fresh Start Accounting, the reorganization value derived from the enterprise value as disclosed in the Plan was allocated to the Company’s assets and liabilities based on their fair values (except for deferred income taxes) in accordance with FASB ASC Topic No. 805 - Business Combinations. The amount of deferred income taxes recorded was determined in accordance with FASB ASC Topic No. 740 - Income Taxes. We evaluated the events between March 26, 2019 and March 31, 2019 and concluded that the use of an accounting convenience date of March 31, 2019 (“Fresh Start Reporting Date”) would not have a material impact on our consolidated condensed income statement or consolidated condensed balance sheet. As such, the application of fresh start accounting was reflected in our condensed consolidated balance sheet as of March 31, 2019 and fresh start accounting adjustments related thereto were included in our consolidated condensed income statement for the three months ended March 31, 2019. As a result of the adoption of Fresh Start Accounting and the effects of the implementation of the Plan, the Company’s consolidated condensed financial statements of the Successor, are not comparable to its consolidated condensed financial statements of the Predecessor. The Company’s consolidated condensed financial statements and related footnotes are presented with a “black line” division, which emphasizes the lack of comparability between amounts presented as of and after March 31, 2019 and amounts presented for all prior periods. The Company’s financial results for future periods following the application of Fresh Start Accounting will be different from historical trends and the differences may be material. Reorganization Value Under Topic 852, the Successor determined a value to be assigned to the equity of the emerging entity as of the date of adoption of Fresh Start Accounting. The Plan confirmed by the Bankruptcy Court estimated a range of enterprise values between $365.0 million and $485.0 million, with a midpoint of $425.0 million. The Company deemed it appropriate to use the midpoint between the low end and high end of the range to determine the final enterprise value of $425.0 million. The following table reconciles the enterprise value to the estimated fair value of our Successor Common Stock as of the Fresh Start Reporting Date:
The following table reconciles the enterprise value to the reorganization value of the Successor’s assets to be allocated to the Company’s individual assets as of the Fresh Start Reporting Date:
With the assistance of financial advisors, we determined the enterprise and corresponding equity value of the Successor by calculating the present value of future cash flows based on our financial projections. The enterprise value and corresponding equity value are dependent upon achieving the future financial results set forth in our valuations, as well as the realization of certain other assumptions. All estimates, assumptions, valuations and financial projections, including the fair value adjustments, the enterprise value and equity value projections, are inherently subject to significant uncertainties and the resolution of contingencies beyond our control. Accordingly, we cannot assure you that the estimates, assumptions, valuations or financial projections will be realized, and actual results could vary materially. Valuation Process The fair values of the Company’s principal assets, including drilling equipment, rental tools, real property, and intangible assets were estimated with the assistance of third party valuation advisors. The income approach, market approach, and the cost approach were considered for estimating the value of each individual asset. Although the income approach was not applied to value the machinery and equipment and real property assets individually, the Company did consider the earnings of the reporting unit within which each of these assets reside. Economic obsolescence related to machinery and equipment and real property was also considered and was applied to stacked and underutilized assets based upon the status of the asset. Economic obsolescence was also considered in situations in which the earnings of the applicable reporting unit in which the assets are employed suggest economic obsolescence. When penalizing assets for economic obsolescence, an additional economic obsolescence penalty was levied, while considering scrap value to be the floor value for an asset. Because more than one approach was used to develop a valuation, the various approaches were reconciled to determine a final value conclusion. The reorganization value was allocated to the Company’s individual assets and liabilities based on their fair values as follows: Rig Materials and Supplies The fair value of the rig materials and supplies was determined using the direct and indirect cost approaches. The rig materials and supplies were analyzed on a line-by-line basis and each asset was adjusted for age, physical depreciation, and obsolescence. Property, Plant and Equipment Building, Land and Improvements The fair value of the land assets was estimated using the sales comparison (market) approach, which involved gathering data on comparable sales and current listings of land in each subject market, then adjusting the unit price (per acre or per square foot) of each comparable for differences in market conditions, location, size, and other factors. A per unit value conclusion was then determined based on the adjusted prices of the comparable sales and listings. Fair value of buildings and improvements was estimated using the direct cost approach, in which the estimated replacement cost new of the improvements was adjusted for accrued physical depreciation and any functional or external obsolescence. As a supporting approach, the total fair value of all real property assets for each location was estimated using the sales comparison (or market approach). Held for sale assets were included at their respective pending or listed prices. The fair value of the leasehold improvements was determined using the cost approach, adjusted as needed for asset type, age, physical deterioration and obsolescence. Rental Tools The fair value of the rental tools was determined using a combination of the cost approach and sales comparison (market) approach depending upon the asset type. The fair value utilizing the cost approach was adjusted as needed for asset type, age, physical deterioration, and obsolescence. For assets where an active secondary market exists, we utilized the sales comparison (market) approach to estimate the fair value of the assets, which involved gathering market data and analyzing comparable sales of similar assets. Drilling Equipment The fair value of the drilling equipment was determined using a combination of the discounted cash flow method (income approach), the cost approach, and the sales comparison (market) approach. The income approach was utilized to estimate the fair value of drilling equipment that generated positive returns on projected cash flows over the remaining economic useful life of the drilling equipment and compared to the fair value utilizing the cost approach, adjusted as needed for asset type, age, physical deterioration and obsolescence. For assets where an active secondary market exists we utilized the sales comparison (market) approach to estimate the fair value of the assets, which involved gathering market data and analyzing comparable sales of similar assets. Intangible Assets We applied the income approach methodology to estimate the value of the customer relationships, trade name, and developed technology. We determined the value of the customer relationships based on the present value of the incremental after-tax cash flows attributable only to the intangible asset. The value of the trade name was estimated through the relief from royalty method based on the present value of the cost savings realized by the owner of the asset as a result of not having to pay a stream of royalty payments to another party. The cost savings were based on hypothetical royalty payments of 0.2 percent of revenue reflecting a rate in which an arm’s length buyer would typically pay for the use of such intangible assets. Similar to the methodology used to value the trade name, we determined the value of the developed technology using a hypothetical royalty payment of 1.0 percent of revenue to reflect the attributable cost savings. The present value of the after-tax cash flows for all the Intangible Assets were estimated based on a discount rate of 20.0 percent. Warrants The fair value of the Successor warrants was estimated by applying a Black-Scholes-Merton (“BSM”) model. The BSM model is a pricing model used to estimate the theoretical price or fair value for a European-style call or put option/warrant based on current stock price, strike price, time to maturity, risk-free rate, volatility, and dividend yield.Consolidated Balance SheetThe adjustments included in the following fresh start consolidated condensed balance sheet as of March 31, 2019 reflect the effects of the transactions contemplated by the Plan and executed by the Company on the Fresh Start Reporting Date (reflected in the column “Reorganization Adjustments”), and fair value and other required accounting adjustments resulting from the adoption of Fresh Start Accounting (reflected in the column “Fresh Start Adjustments”). The explanatory notes provide additional information with regard to the adjustments recorded, the methods used to determine the fair values and significant assumptions.
Fresh Start Accounting Adjustments
(23) Changes reflect the cumulative impact of fresh start accounting adjustments discussed above and the elimination of Predecessor accumulated other comprehensive loss and Predecessor accumulated deficit.
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Intangible Assets |
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Intangible Assets | Note 4 - Intangible Assets Intangible Assets consist of the following:
Amortization expense was $0.6 million and $0.6 million for the three months ended March 31, 2019 and 2018, respectively. Our remaining intangibles amortization expense for the next five years is presented below:
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Operating Leases | Note 5 - Operating Leases We adopted the Accounting Standards Update (“ASU”) 2016-02, Leases (“Topic 842”) effective January 1, 2019. As lessee, our leasing activities primarily consist of operating leases for administrative offices, warehouses, oilfield services equipment, office equipment, computers and other items. Our leases have remaining lease terms of 1 year to 6 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year. We elected the following package of practical expedients permitted under the transition guidance:
We determine whether a contract is or contains a lease at its inception. Topic 842 requires lessees to recognize operating lease right-of-use assets and operating lease liabilities on the balance sheet. An operating lease right-of-use asset represents our right to use an underlying asset for the lease term and operating lease liability represents our obligation to make lease payments arising from the lease. An operating lease right-of-use asset and operating lease liability are recognized at the commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The operating lease right-of-use assets also include any lease payments made and exclude lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise those options. The adoption of this standard resulted in the recording of operating lease right-of-use assets and operating lease liabilities of approximately $21.0 million as of January 1, 2019. Supplemental lease information related to our operating leases as of March 31, 2019 is shown below:
Maturities of operating lease liabilities as of March 31, 2019 were as follows:
Future minimum operating lease payments as of December 31, 2018 were as follows:
Lease expense for lease payments is recognized on a straight-line basis over the lease term. Expenses for operating leases for the three months ended March 31, 2019 are shown below:
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Debt | Note 6 - Debt The following table illustrates the Company’s debt portfolio as of March 31, 2019 and December 31, 2018:
Successor Credit Facility On March 26, 2019, pursuant to the terms of the Plan, we and certain of our subsidiaries, entered into a credit agreement with the lenders party thereto (the “Credit Facility Lenders”), Bank of America, N.A., as administrative agent and Bank of America, N.A. and Deutsche Bank Securities Inc. as joint lead arrangers and joint bookrunners, providing for a revolving credit facility (the “Credit Facility”) with initial aggregate commitments in the amount of $50.0 million, guaranteed by certain of our subsidiaries. Availability under the Credit Facility is subject to a monthly borrowing base calculation based on eligible domestic rental equipment and eligible domestic accounts receivable and requires us to maintain minimum liquidity of $25.0 million, defined as cash in our liquidity account not to exceed $10.0 million and availability under the borrowing base. The Credit Facility allows for an increase to the aggregate commitments by up to an additional $75.0 million, subject to certain conditions. The Credit Facility provides for a $30.0 million sublimit of the aggregate commitments that is available for the issuance of letters of credit. The Credit Facility matures on March 26, 2023. Debt issuance costs of $1.3 million are amortized over the term of the Credit Facility on a straight-line basis. As of March 31, 2019, the borrowing base under the Credit Facility was $86.2 million, allowing full access to the $50.0 million in aggregate commitments, which was further reduced by $15.0 million of restricted availability due to the minimum liquidity covenant and $9.8 million in supporting letters of credit outstanding, resulting in availability under the Credit Facility of $25.2 million. The Credit Facility bears interest either at a rate equal to:
We are required to pay a commitment fee of 0.5 percent per annum on the actual daily unused portion of the current aggregate commitments under the Credit Facility. We are also required to pay customary letter of credit and fronting fees. The Credit Facility also contains customary affirmative and negative covenants, including, among other things, as to compliance with laws (including environmental laws and anti-corruption laws), delivery of quarterly and annual consolidated financial statements and borrowing base certificates, conduct of business, maintenance of property, maintenance of insurance, restrictions on the incurrence of liens, indebtedness, asset dispositions, fundamental changes, restricted payments, and other customary covenants. Additionally, the Credit Facility contains customary events of default and remedies for credit facilities of this nature. If we do not comply with the financial and other covenants in the Credit Facility, the Credit Facility Lenders may, subject to customary cure rights, require immediate payment of all amounts outstanding under the Credit Facility, and any outstanding unfunded commitments may be terminated. Successor Term Loan, Due March 2024 On March 26, 2019, pursuant to the terms of the Plan, we and certain of our subsidiaries entered into a second lien term loan credit agreement (the “Term Loan Agreement”) with the lenders party thereto (the “Term Loan Lenders”) and UMB Bank, N.A., as administrative agent, providing for term loans (the “Term Loan”) in the amount of $210.0 million, guaranteed by certain of our subsidiaries. The Term Loan matures on March 26, 2024. The Term Loan bears interest at a rate of 13.0 percent per annum, payable quarterly on the first day of each January, April, July, and October, beginning July 1, 2019, with 11.0 percent paid in cash and 2.0 percent paid in kind and capitalized by adding such amount to the outstanding principal. We may voluntarily prepay all or a part of the Term Loan and, under certain conditions we are required to prepay all or a part of the Term Loan, in each case, at a premium (1) on or prior to 6 months after the closing date of 0%; (2) from 6 months and on or prior to two years after the closing date of 6.50%; (3) from two years and on or prior to three years after the closing date of 3.25%; and (4) from three years after the closing date and thereafter of 0%. The Term Loan is subject to mandatory prepayments and customary reinvestment rights. The mandatory prepayments include prepayment requirements with respect to a change of control, asset sales and debt issuances, in each case subject to certain exceptions or conditions. The Term Loan Agreement also contains customary affirmative and negative covenants, including as to compliance with laws (including environmental laws and anti-corruption laws), delivery of quarterly and annual financial statements, conduct of business, maintenance of property, maintenance of insurance, restrictions on the incurrence of liens, indebtedness, asset dispositions, fundamental changes, restricted payments and other customary covenants. Additionally, the Term Loan Agreement contains customary events of default and remedies for facilities of this nature. If we do not comply with the covenants in the Term Loan Agreement, the Term Loan Lenders may, subject to customary cure rights, require immediate payment of all amounts outstanding under the Term Loan Agreement. Predecessor 6.75% Senior Notes, Due July 2022 On January 22, 2014, we issued $360.0 million aggregate principal amount of the 6.75% Notes pursuant to the 6.75% Notes Indenture. The 6.75% Notes were general unsecured obligations of the Company and ranked equal in right of payment with all of our existing and future senior unsecured indebtedness. The 6.75% Notes were jointly and severally guaranteed by all of our subsidiaries that guaranteed indebtedness under the Second Amended and Restated Senior Secured Credit Agreement, as amended from time-to-time (“2015 Secured Credit Agreement”) and our 7.50% Notes. Interest on the 6.75% Notes was payable on January 15 and July 15 of each year, beginning July 15, 2014. Debt issuance costs related to the 6.75% Notes were approximately $7.6 million. After the commencement of the Chapter 11 Cases, the carrying amount of debt was adjusted to the claim amount and all unamortized debt issuance costs prior to the commencement of the Chapter 11 Cases were fully expensed. Predecessor 7.50% Senior Notes, Due August 2020 On July 30, 2013, we issued $225.0 million aggregate principal amount of the 7.50% Notes pursuant to the 7.50% Notes Indenture. The 7.50% Notes were general unsecured obligations of the Company and ranked equal in right of payment with all of our existing and future senior unsecured indebtedness. The 7.50% Notes were jointly and severally guaranteed by all of our subsidiaries that guaranteed indebtedness under the 2015 Secured Credit Agreement and the 6.75% Notes. Interest on the 7.50% Notes was payable on February 1 and August 1 of each year, beginning February 1, 2014. Debt issuance costs related to the 7.50% Notes were approximately $5.6 million. After the commencement of the Chapter 11 Cases, the carrying amount of debt was adjusted to the claim amount and all unamortized debt issuance costs prior to the commencement of the Chapter 11 Cases were fully expensed. The commencement of the Chapter 11 Cases constituted an event of default that accelerated the Company’s obligations under the indenture governing the 6.75% Notes and the 7.50% Notes. However, any efforts to enforce such payment obligations were automatically stayed under the provisions of the Bankruptcy Code. The principal balance on the 6.75% Notes and 7.50% Notes of $360.0 million and $225.0 million, respectively, had been reclassed from long-term debt to liabilities subject to compromise as of December 31, 2018. See also Note 2 - Chapter 11 Emergence for further details. As previously disclosed in our Current Report on Form 8-K filed with the SEC on March 26, 2019, our obligations with respect to the Senior Notes as well as our subsidiaries’ obligations under their respective guarantees under the 6.75% Notes Indenture and the 7.50% Notes Indenture (and the Senior Notes) were cancelled and extinguished as provided in the Plan. From and after March 26, 2019, neither the Company nor its subsidiaries have any continuing obligations under the 6.75% Notes Indenture and 7.50% Notes Indenture or with respect to the Senior Notes or the guarantees related thereto except to the extent specifically provided in the Plan. Predecessor 2015 Secured Credit Agreement On January 26, 2015, we entered into the 2015 Secured Credit Agreement. The 2015 Secured Credit Agreement was originally comprised of a $200.0 million revolving credit facility (the “Revolver”). The 2015 Secured Credit Agreement formerly included financial maintenance covenants, including a leverage ratio, consolidated interest coverage ratio, senior secured leverage ratio, and asset coverage ratio, many of which were suspended beginning in September 2015. We executed various amendments which, among other things: (1) modified the credit facility to an asset-based lending structure, (2) reduced the size of the Revolver to $80.0 million, (3) eliminated the financial maintenance covenants previously in effect and replaced them with a minimum liquidity covenant of $30.0 million and a monthly borrowing base calculation, (4) allowed for the refinancing of our existing Senior Notes with either secured or unsecured debt, (5) added the ability for the Company to designate certain of its subsidiaries as “Designated Borrowers”, and (6) permitted the Company to make restricted payments in the form of certain equity interests. On October 25, 2018, we entered into a Consent Agreement and a Cash Collateral Agreement, whereby we could open bank accounts not subject to the 2015 Secured Credit Agreement for the purpose of depositing cash to secure certain letters of credit. On October 30, 2018, we deposited $10.0 million into a cash collateral account to support the letters of credit outstanding, which is included in the restricted cash balance on the consolidated balance sheet as of December 31, 2018. Our obligations under the 2015 Secured Credit Agreement were guaranteed by substantially all of our direct and indirect domestic subsidiaries, other than immaterial subsidiaries and subsidiaries generating revenues primarily outside the United States, each of which has executed guaranty agreements, and were secured by first priority liens on our accounts receivable, specified rigs including barge rigs in the GOM and land rigs in Alaska, certain U.S.-based rental equipment of the Company and its subsidiary guarantors and the equity interests of certain of the Company’s subsidiaries. In addition to the liquidity covenant and borrowing base requirements, the 2015 Secured Credit Agreement contains customary affirmative and negative covenants, such as limitations on indebtedness and liens, and restrictions on entry into certain affiliate transactions and payments (including certain payments of dividends). All of the Company’s obligations under the 2015 Secured Credit Agreement were paid prior to the commencement of the Chapter 11 Cases, and the 2015 Secured Credit Agreement, including the Revolver thereunder, was terminated concurrently with the commencement of the Chapter 11 Cases. See also Note 2 - Chapter 11 Emergence for further details. Unamortized debt issuance costs were fully expensed upon termination of the 2015 Secured Credit Agreement. Interest paid during the three months ended March 31, 2019 and 2018 were $0.2 million and $20.6 million, respectively.
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Fair Value of Measurements | Note 7 - Fair Value of Measurements Certain of our assets and liabilities are required to be measured at fair value on a recurring basis. For purposes of recording fair value adjustments for certain financial and non-financial assets and liabilities, and determining fair value disclosures, we estimate fair value at a price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market for the asset or liability. The fair value measurement and disclosure requirements of FASB ASC Topic No. 820, Fair Value Measurement and Disclosures requires inputs that we categorize using a three-level hierarchy, from highest to lowest level of observable inputs, as follows:
When multiple input levels are required for a valuation, we categorize the entire fair value measurement according to the lowest level of input that is significant to the entire measurement even though we may also have utilized significant inputs that are more readily observable. The amounts reported in our consolidated condensed balance sheets for cash and cash equivalents, accounts receivable, and accounts payable approximate fair value. Fair value of our Term Loan is determined using Level 3 inputs. The Level 3 fair value was determined using a market approach. Fair value of our 6.75% Notes and 7.50% Notes is determined using Level 2 inputs. Fair values and related carrying values of our debt instruments were as follows:
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Income Taxes |
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Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 8 - Income Taxes Income tax expense was $0.7 million and $1.6 million for the three months ended March 31, 2019 and 2018, respectively. The Company’s effective tax rate for the three months ended March 31, 2019 was negative 0.7 percent, which varied from the U.S. statutory rate of 21.0% primarily due to the jurisdictional mix of income and loss during the quarter, our continued inability to recognize the benefits associated with certain losses as a result of valuation allowances, and the income tax impacts of adjustments made as part of Fresh Start Accounting. See Note 3 - Fresh Start Accounting for further details. The Company’s effective tax rate for the three months ended March 31, 2018 was negative 5.9 percent, which varied from the U.S. statutory rate of 21.0% primarily due to the jurisdictional mix of income and loss during the quarter and our continued inability to recognize the benefits associated with certain losses as a result of valuation allowances. Income taxes paid (net of any refunds) during the three months ended March 31, 2019 and 2018 were $1.4 million and $2.0 million, respectively. We apply the accounting guidance related to accounting for uncertainty in income taxes. This guidance prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. As of March 31, 2019, we had a liability for unrecognized tax benefits of $4.9 million, primarily related to foreign operations, (all of which, if recognized, would favorably impact our effective tax rate.). As of December 31, 2018, we had a liability for unrecognized tax benefits of $5.7 million, all of which would favorably impact our effective tax rate upon recognition. In addition, we recognize interest and penalties that could be applied to uncertain tax positions in periodic income tax expense. As of March 31, 2019 and December 31, 2018, we had approximately $2.2 million and $2.1 million, respectively, of accrued interest and penalties related to uncertain tax positions. As described in Note 2 - Chapter 11 Emergence, in accordance with the Plan, our 7.50% Notes and 6.75% Notes were canceled and exchanged for Successor Common Stock, the Term Loan, and right to participate in the rights offering. The Internal Revenue Service Code (“IRC”) of 1986, as amended, provides that a debtor in a Chapter 11 bankruptcy case may exclude cancellation of debt income (“CODI”) from taxable income but must reduce certain of its tax attributes by the amount of any CODI realized as a result of the consummation of a plan of reorganization. The amount of CODI realized by a taxpayer is determined based on the fair market value of the consideration received by the creditors in settlement of outstanding indebtedness. Upon emergence from Chapter 11 bankruptcy proceedings, the CODI may reduce some or all of the amount of prior U.S. tax attributes, which can include net operating losses, capital losses, and tax basis in assets. The actual reduction in tax attributes does not occur until January 1, 2020. The amount of the remaining U.S. deferred tax assets, against which a full valuation exists, will be limited under IRC Section 382 due to the change in control resulting from the Plan. The Company has evaluated the impact of the reorganization, including the change in control, resulting from its emergence from bankruptcy. The Company believes that the Successor Company will be able to fully absorb the CODI realized by the Predecessor in connection with the reorganization with its net operating losses, capital losses, and tax basis in assets. It is more likely than not that the Successor will not realize future income tax benefits related to its remaining U.S. net deferred tax asset based on the IRC Section 382 limitation, historical results, and expected market conditions known on the date of measurement, and the Company has therefore maintained a full valuation allowance against the remaining U.S. net deferred tax asset. This is periodically reassessed and could change in the future.
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Commitments and Contingencies |
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Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 9 - Commitments and Contingencies We are a party to various lawsuits and claims arising out of the ordinary course of business. We estimate the range of our liability related to pending litigation when we believe the amount or range of loss can be estimated. We record our best estimate of a loss when the loss is considered probable. When a liability is probable and there is a range of estimated loss with no best estimate in the range, we record the minimum estimated liability related to the lawsuits or claims. As additional information becomes available, we assess the potential liability related to our pending litigation and claims and revise our estimates. Due to uncertainties related to the resolution of lawsuits and claims, the ultimate outcome may differ significantly from our estimates. In the opinion of management and based on liability accruals provided, our ultimate exposure with respect to these pending lawsuits and claims is not expected to have a material adverse effect on our consolidated condensed balance sheets or statements of cash flows, although they could have a material adverse effect on our consolidated condensed statements of operations for a particular reporting period. |
Earnings (Loss) Per Common Share (EPS) |
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Earnings (Loss) Per Common Share (EPS) | Note 10 - Earnings (Loss) Per Common Share (“EPS”) Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. The effects of dilutive securities, stock options, unvested restricted stock, convertible debt and equity are included in the diluted EPS calculation, when applicable. The following table represents the computation of earnings per share for the three months ended March 31, 2019 and 2018, respectively:
The following shares were excluded from the computation of diluted EPS as such shares would be anti-dilutive:
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Revenue |
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Revenue | Note 11 - Revenue The following table shows the Company’s revenues by type:
Our business is comprised of two business lines: (1) Rental Tools Services and (2) Drilling Services. See Note 12 - Reportable Segments for further details on these business lines and revenue disaggregation amounts. Lease Revenue We adopted Topic 842 effective January 1, 2019. For a lessor, lease revenue recognition begins at the commencement of the lease date, which is defined as the date on which a lessor makes an underlying asset available for use by the lessee. Any pre-commencement payments (e.g. mobilization) are deferred. Subsequently, any lease payments (i.e. related to any fixed consideration received) are recorded as receivables when due and payable by the lessee. All of our lease revenue is from variable lease payments. Variable lease payments are recognized as income in profit or loss as the variability is resolved (i.e. as performance or use of the asset occurs). We elected the following package of practical expedients permitted under the transition guidance:
Service Revenue We adopted Topic 606 effective January 1, 2018, using the modified retrospective implementation method. Accordingly, we have applied the five-step method outlined in Topic 606 for determining when and how revenue is recognized to all contracts that were not completed as of the date of adoption. Revenues for reporting periods beginning as of January 1, 2018 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported under the previous revenue recognition guidance. For contracts that were modified before the effective date, we have considered the modification guidance within the new standard and determined that the revenue recognized and contract balances recorded prior to adoption for such contracts were not impacted. While Topic 606 requires additional disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, its adoption has not had a material impact on the measurement or recognition of our revenues. As part of the adoption, no adjustments were needed to the consolidated balance sheets, statements of operations and statements of cash flows. Our rental tools and drilling services provided under each contract is a single performance obligation satisfied over time and comprised of a series of distinct time increments, or service periods. Total revenue is determined for each individual contract by estimating both fixed and variable consideration expected to be earned over the contract term. Fixed consideration generally relates to activities that are not distinct within the context of our contracts and is recognized on a straight-line basis over the contract term. Variable consideration generally relates to distinct service periods during the contract term and are recognized in the period when the services are performed. Our contract terms generally range from 2 to 60 months. The amount estimated for variable consideration may be constrained (reduced) and is only recognized as revenue to the extent that it is probable that a significant reversal of previously recognized revenue will not occur during the contract term. When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s control that could result in a significant reversal of revenue as well as the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required. Accounts receivable are recognized when the right to consideration becomes unconditional based upon contractual billing schedules. Payment terms on invoiced amounts are typically 30 days. Rental Tools Services Business Dayrate Revenues Our rental tools services contracts generally provide for payment on a dayrate basis depending on the rate for the tool defined in the contract. Such dayrate consideration is allocated to the distinct hourly increment it relates to within the contract term, and therefore, recognized in line with the contractual rate billed for the services provided for any given hour. Drilling Services Business Dayrate Revenues Our drilling services contracts generally provide for payment on a dayrate basis, with higher rates for periods when the drilling unit is operating and lower rates or zero rates for periods when drilling operations are interrupted or restricted. The dayrate invoices billed to the customer are typically determined based on the varying rates applicable to the specific activities performed on an hourly basis. Such dayrate consideration is allocated to the distinct hourly increment to which it relates within the contract term, and therefore, recognized in line with the contractual rate billed for the services provided for any given hour. Mobilization Revenues We may receive fees (on either a fixed lump-sum or variable dayrate basis) for the mobilization of our rigs. These activities are not considered to be distinct within the context of the contract and therefore, the associated revenues are allocated to the overall performance obligation and typically recognized ratably over the initial term of the related drilling contract. We record a contract liability for mobilization fees received, which is typically amortized ratably to revenue as services are rendered over the initial term of the related drilling contract. The amortized amount is adjusted accordingly if the term of the initial contract is extended. Capital Modification Revenues We may, from time to time, receive fees from our customers for capital improvements to our rigs to meet contractual requirements (on either a fixed lump-sum or variable dayrate basis). Such revenues are allocated to the overall performance obligation and typically recognized ratably over the initial term of the related drilling contract as these activities are not considered to be distinct within the context of our contracts. We record a contract liability for such fees and typically recognize them ratably as revenue over the initial term of the related drilling contract. Demobilization Revenues We may receive fees (on either a fixed lump-sum or variable dayrate basis) for the demobilization of our rigs. Due to the inherent uncertainty regarding the realization, we have elected to not recognize demobilization revenues until the uncertainty is resolved. Therefore, demobilization revenues are recognized once the related performance obligations have been completed. Reimbursable Revenues We generally receive reimbursements from our customers for the purchase of supplies, equipment, personnel services and other services provided at their request in accordance with a drilling contract or other agreement. Such reimbursable revenues are variable and subject to uncertainty, as the amounts received and timing thereof is highly dependent on factors outside of our control. Accordingly, reimbursable revenues are not included in the total transaction price until the uncertainty is resolved, which typically occurs when the related costs are incurred on behalf of a customer. We are generally considered a principal in such transactions and record the associated revenues at the gross amount billed to the customer in our consolidated condensed statements of operations. Such amounts are recognized once the services have been performed. Such amounts totaled $28.5 million and $14.3 million for the three months ended March 31, 2019 and 2018, respectively. Contract Costs The following is a description of the different costs that we may incur for our contracts: Mobilization Costs These costs include certain direct and incremental costs incurred for mobilization of contracted rigs. These costs relate directly to a contract, enhance resources of the Company that will be used in satisfying its performance obligations in the future and are expected to be recovered. These costs are capitalized when incurred as a current or noncurrent asset (depending on the length of the initial contract term), and are typically amortized over the initial term of the related drilling contract. Current and non-current capitalized mobilization costs are included in other current assets and other non-current assets, respectively, on our consolidated balance sheet. The balance for capitalized mobilization costs was $0.4 million and $5.3 million as of March 31, 2019 and December 31, 2018, respectively. There was no impairment loss in relation to capitalized costs. Amortization of capitalized mobilization costs was $3.1 million and $1.0 million for the three months ended March 31, 2019 and 2018, respectively. Demobilization Costs These costs are incurred for the demobilization of rigs at contract completion and are recognized as incurred during the demobilization process. Capital Modification Costs These costs are incurred for rig modifications or upgrades required for a contract, which are considered to be capital improvements, are capitalized as property, plant and equipment and depreciated over the estimated useful life of the improvement. Contract Liabilities The following table provides information about contract liabilities from contracts with customers:
Contract liabilities relate to mobilization revenues and capital modification revenues, where, we have unconditional right to cash or cash has been received but performance obligations have not been fulfilled. These liabilities are reduced and revenue is recognized as performance obligations are fulfilled. Significant changes to contract liabilities balances during the three months ended March 31, 2019 are shown below:
Transaction Price Allocated to the Remaining Performance Obligations The following table includes revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period.
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Reportable Segments | Note 12 - Reportable Segments Our business is comprised of two business lines: (1) Rental Tools Services and (2) Drilling Services. We report our Rental Tools Services business as two reportable segments: (1) U.S. Rental Tools and (2) International Rental Tools. We report our Drilling Services business as two reportable segments: (1) U.S. (Lower 48) Drilling and (2) International & Alaska Drilling. Within the four reportable segments, we have one business unit under U.S. Rental Tools, one business unit under International Rental Tools, one business unit under U.S. (Lower 48) Drilling, and we aggregate our Arctic, Eastern Hemisphere, and Latin America business units under International & Alaska Drilling, for a total of six business units. The Company has aggregated each of its business units in one of the four reporting segments based on the guidelines of the FASB ASC Topic No. 280, Segment Reporting. We eliminate inter-segment revenues and expenses. We disclose revenues under the four reportable segments based on the similarity of the use and markets for the groups of products and services within each segment. Rental Tools Services Business In our Rental Tools Services business, we provide premium rental equipment and services to exploration & production companies, drilling contractors, and service companies on land and offshore in the U.S. and select international markets. Tools we provide include standard and heavy-weight drill pipe, all of which are available with standard or high-torque connections, tubing, drill collars, pressure control equipment, including blowout preventers, and more. We also provide well construction services, which includes tubular running services and downhole tool rentals, well intervention services, which includes whipstocks, fishing, and related services, as well as inspection and machine shop support. Rental tools are used during drilling and/or workover programs and are requested by the customer as needed, requiring us to keep a broad inventory of rental tools in stock. Rental tools are usually rented on a daily or monthly basis. U.S. Rental Tools Our U.S. Rental Tools segment maintains an inventory of rental tools for deepwater, drilling, completion, workover, and production applications at facilities in Louisiana, Texas, Wyoming, North Dakota and West Virginia. We also provide well construction and well intervention services. Our largest single market for rental tools is U.S. land drilling, a cyclical market driven primarily by oil and natural gas prices and our customers’ access to project financing. A portion of our U.S. rental tools business supplies tubular goods and other equipment to offshore GOM customers. International Rental Tools Our International Rental Tools segment maintains an inventory of rental tools and provides well construction, well intervention, and surface and tubular services to our customers in the Middle East, Latin America, Europe, and Asia-Pacific regions. Drilling Services Business In our Drilling Services business, we drill oil, natural gas, and geothermal wells for customers globally. We provide this service with both Company-owned rigs and customer-owned rigs. We refer to the provision of drilling services with customer-owned rigs as our operations and management (“O&M”) service in which our customers own their own drilling rigs, but choose Parker Drilling to operate and manage the rigs for them. The nature and scope of activities involved in drilling an oil or natural gas well is similar whether it is drilled with a Company-owned rig (as part of a traditional drilling contract) or a customer-owned rig (as part of an O&M contract). In addition, we provide project-related services, such as engineering, procurement, project management, commissioning of customer-owned drilling rig projects, operations execution, and quality and safety management. We have extensive experience and expertise in drilling geologically challenging wells and in managing the logistical and technological challenges of operating in remote, harsh, and ecologically sensitive areas. U.S. (Lower 48) Drilling Our U.S. (Lower 48) Drilling segment provides drilling services with our Gulf of Mexico (“GOM”) barge drilling rig fleet and markets our U.S. (Lower 48) based O&M services. We also provide O&M services for a customer-owned rig offshore California. Our GOM barge rigs drill for oil and natural gas in shallow waters in and along the inland waterways and coasts of Louisiana, Alabama, and Texas. The majority of these wells are drilled in shallow water depths ranging from 6 to 12 feet. Our rigs are suitable for a variety of drilling programs, from inland coastal waters requiring shallow draft barges, to open water drilling on both state and federal waters. Contract terms typically consist of well-to-well or multi-well programs, most commonly ranging from 20 to 180 days. International & Alaska Drilling Our International & Alaska Drilling segment provides drilling services, using both Company-owned rigs and O&M contracts, and project-related services. The drilling markets in which this segment operates have one or more of the following characteristics:
We have rigs under contract in Alaska, Kazakhstan, the Kurdistan region of Iraq, Guatemala, Mexico, and on Sakhalin Island, Russia. In addition, we have O&M and ongoing project-related services for customer-owned rigs in Kuwait, Canada, Indonesia, and on Sakhalin Island, Russia. The following table represents the results of operations by reportable segment:
For the three months ended March 31, 2018, our largest customer, ENL, constituted approximately 28.6 percent of our total consolidated revenues and approximately 55.9 percent of our International & Alaska Drilling segment revenues. Excluding reimbursable revenues of $12.1 million, ENL constituted approximately 20.1 percent of our total consolidated revenues and approximately 45.9 percent of our International & Alaska Drilling segment revenues.
The following table shows the Company’s revenues by geographic region:
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Recent Accounting Pronouncements |
3 Months Ended |
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Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Recent Accounting Pronouncements | Note 13 - Recent Accounting Pronouncements Standards recently adopted In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This ASU requires (a) an entity to separate the lease components from the non-lease components in a contract where the lease component will be accounted for under ASU 2016-02 and the non-lease component will be accounted for under ASU 2014-09, (b) recognition of lease assets and lease liabilities by lessees and derecognition of the leased asset and recognition of a net investment in the lease by the lessor and (c) additional disclosure requirements for both lessees and lessors. We adopted the ASU 2016-02, Leases (Topic 842) effective January 1, 2019, using the modified retrospective transition method applied at the beginning of the period of adoption. See Note 5 - Operating Leases for further details.
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Summary of Significant Accounting Policies (Policies) |
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | The consolidated condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and are unaudited. In the opinion of the Company, these consolidated condensed financial statements include all adjustments which, unless otherwise disclosed, are of a normal recurring nature, necessary for their fair presentation for the periods presented. The results for interim periods are not necessarily indicative of results for the entire year. The consolidated condensed financial statements presented herein should be read in connection with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidation | The consolidated condensed financial statements include the accounts of the Company and subsidiaries in which we exercise control or have a controlling financial interest, including entities, if any, in which the Company is allocated a majority of the entity’s losses or returns, regardless of ownership percentage. If a subsidiary of Parker Drilling has a 50.0 percent or greater interest in an entity but Parker Drilling’s interest in the subsidiary or the entity does not meet the consolidation criteria described above, then that interest is accounted for under the equity method. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassifications | Certain reclassifications have been made to prior period amounts to conform to the current period presentation. These reclassifications did not materially affect our consolidated financial results. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Use of Estimates | The preparation of our consolidated condensed financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect our reported amounts of assets and liabilities, our disclosure of contingent assets and liabilities at the date of the consolidated condensed financial statements, and our revenues and expenses during the periods reported. Estimates are typically used when accounting for certain significant items such as legal or contractual liability accruals, self-insured medical/dental plans, impairment, income taxes and valuation allowance, operating lease right-of-use assets, operating lease liabilities and other items requiring the use of estimates. Estimates are based on a number of variables, which may include third party valuations, historical experience, where applicable, and assumptions that we believe are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ from management estimates. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents and Restricted Cash | For purposes of the consolidated condensed balance sheets and the consolidated condensed statements of cash flows, the Company considers cash equivalents to be highly liquid debt instruments that have a remaining maturity of three months or less at the date of purchase.
The restricted cash balance as of March 31, 2019 includes $20.6 million for professional fees escrow account and $0.8 million for professional fees. The restricted cash balance as of December 31, 2018 includes $9.8 million into a cash collateral account to support the letters of credit outstanding and $0.6 million held as compensating balances in the ordinary course of business for purchases and utilities.
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Impairment | We evaluate the carrying amounts of long-lived assets for potential impairment when events occur or circumstances change that indicate the carrying values of such assets may not be recoverable. We evaluate recoverability by determining the undiscounted estimated future net cash flows for the respective asset groups identified. If the sum of the estimated undiscounted cash flows is less than the carrying value of the asset group, we measure the impairment as the amount by which the assets’ carrying value exceeds the fair value of such assets. Management considers a number of factors such as estimated future cash flows from the assets, appraisals and current market value analysis in determining fair value. Assets are written down to fair value if the final estimate of current fair value is below the net carrying value. The assumptions used in the impairment evaluation are inherently uncertain and require management judgment. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets | Our intangible assets are related to customer relationships, developed technology and trade name, which are classified as definite lived intangibles, that are generally amortized over a weighted average period of approximately three to six years. We assess the recoverability of the unamortized balance of our intangible assets when indicators of impairment are present based on expected future profitability and undiscounted expected cash flows and their contribution to our overall operations. Should the review indicate that the carrying value is not fully recoverable, the excess of the carrying value over the fair value of the intangible assets would be recognized as an impairment loss. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income taxes are accounted for under the asset and liability method and have been provided for based upon tax laws and rates in effect in the countries in which operations are conducted and income or losses are generated. There is little or no expected relationship between the provision for or benefit from income taxes and income or loss before income taxes as the countries in which we operate have taxation regimes that vary not only with respect to nominal rate, but also in terms of the availability of deductions, credits, and other benefits. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled and the effect of changes in tax rates is recognized in income in the period in which the change is enacted. Valuation allowances are established to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In order to determine the amount of deferred tax assets or liabilities, as well as the valuation allowances, we must make estimates and assumptions regarding future taxable income, where rigs will be deployed, and other matters. Changes in these estimates and assumptions, including changes in tax laws and other changes affecting our ability to recognize the underlying deferred tax assets, could require us to adjust the valuation allowances.The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50.0 percent likely of being realized and changes in recognition or measurement are reflected in the period in which the change in judgment occurs. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases, Lessee | As lessee, our leases are primarily operating leases. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases, Lessor | As lessor, our leases are primarily operating leases which are included in revenue in our consolidated condensed income statement. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Legal and Investigative Matters | We accrue estimates of the probable and estimable costs for the resolution of certain legal and investigative matters. We do not accrue any amounts for other matters for which the liability is not probable and reasonably estimable. Generally, the estimate of probable costs related to these matters is developed in consultation with our legal advisors. The estimates take into consideration factors such as the complexity of the issues, litigation risks and settlement costs. If the actual settlement costs, final judgments, or fines, after appeals, differ from our estimates, our future financial results may be adversely affected. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Concentrations of Credit Risk | Financial instruments that 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. We generally do not require collateral on our trade receivables. We depend on a limited number of significant customers. Our largest customer, Exxon Neftegas Limited (“ENL”), constituted approximately 31.2 percent of our consolidated revenues for the three months ended March 31, 2019. Excluding revenues from reimbursable costs (“reimbursable revenues”) of $26.3 million, ENL constituted approximately 17.7 percent of our total consolidated revenues for the three months ended March 31, 2019.As of March 31, 2019, and December 31, 2018, we had deposits in domestic banks in excess of federally insured limits of approximately $118.3 million and $27.5 million, respectively. In addition, we had uninsured deposits in foreign banks as of March 31, 2019, and December 31, 2018, of $35.3 million and $32.9 million, respectively. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings (Loss) Per Share (EPS) | Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. The effects of dilutive securities, stock options, unvested restricted stock, assumed conversion of convertible stock and convertible debt are included in the diluted EPS calculation, when applicable. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recent Accounting Pronouncements | Standards recently adoptedIn February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This ASU requires (a) an entity to separate the lease components from the non-lease components in a contract where the lease component will be accounted for under ASU 2016-02 and the non-lease component will be accounted for under ASU 2014-09, (b) recognition of lease assets and lease liabilities by lessees and derecognition of the leased asset and recognition of a net investment in the lease by the lessor and (c) additional disclosure requirements for both lessees and lessors. We adopted the ASU 2016-02, Leases (Topic 842) effective January 1, 2019, using the modified retrospective transition method applied at the beginning of the period of adoption. See Note 5 - Operating Leases for further details. |
Summary of Significant Accounting Policies Summary of Significant Accounting Policies (Tables) |
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash and Cash Equivalents |
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Schedule of Restricted Cash and Cash Equivalents |
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Chapter 11 Emergence (Tables) |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reorganizations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Expenses Incurred Subsequent to and as a Direct Result of Chapter 11 Cases | Reorganization items were $93.0 million for the three months ended March 31, 2019, which consisted of:
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Schedule of Liabilities Subject to Compromise | Liabilities subject to compromise consisted of:
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Fresh Start Accounting (Tables) |
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Reorganizations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Enterprise Value to Estimated Fair Value of Successor Common Stock | The following table reconciles the enterprise value to the estimated fair value of our Successor Common Stock as of the Fresh Start Reporting Date:
The following table reconciles the enterprise value to the reorganization value of the Successor’s assets to be allocated to the Company’s individual assets as of the Fresh Start Reporting Date:
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Schedule of Fresh-Start Adjustments | The explanatory notes provide additional information with regard to the adjustments recorded, the methods used to determine the fair values and significant assumptions.
Fresh Start Accounting Adjustments
(23) Changes reflect the cumulative impact of fresh start accounting adjustments discussed above and the elimination of Predecessor accumulated other comprehensive loss and Predecessor accumulated deficit.
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Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Intangible Assets | Intangible Assets consist of the following:
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Schedule of Intangible Assets, Future Amortization Expense | Our remaining intangibles amortization expense for the next five years is presented below:
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Operating Leases (Tables) |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Supplemental Balance Sheet Information | Supplemental lease information related to our operating leases as of March 31, 2019 is shown below:
(3) This amount is included in other long-term liabilities in our consolidated condensed balance sheet.
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Schedule of Maturities of Operating Lease Liabilities | Maturities of operating lease liabilities as of March 31, 2019 were as follows:
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Expenses for Operating Leases | Expenses for operating leases for the three months ended March 31, 2019 are shown below:
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Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Company's Current Debt Portfolio | The following table illustrates the Company’s debt portfolio as of March 31, 2019 and December 31, 2018:
|
Fair Value of Measurements (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Values and Related Carrying Values of Debt Instruments | Fair values and related carrying values of our debt instruments were as follows:
|
Earnings (Loss) Per Common Share (EPS) (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Computation of Earnings per Share | The following table represents the computation of earnings per share for the three months ended March 31, 2019 and 2018, respectively:
(1) For the three months ended March 31, 2019 and 2018, respectively, all common shares potentially issuable in connection with outstanding restricted stock unit awards have been excluded from the calculation of diluted EPS as the Company incurred losses during the periods, therefore, inclusion of such potential common shares would be anti-dilutive.
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Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following shares were excluded from the computation of diluted EPS as such shares would be anti-dilutive:
|
Revenue (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Revenue by type | The following table shows the Company’s revenues by type:
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Contract with Customer, Asset and Liability | Significant changes to contract liabilities balances during the three months ended March 31, 2019 are shown below:
(1) Contract liabilities - current and contract liabilities - noncurrent are included in accounts payable and accrued liabilities and other long-term liabilities respectively, in our consolidated condensed balance sheet as of March 31, 2019 and December 31, 2018.
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Revenue Expected to be Recognized in the Future Related to Performance Obligations | The following table includes revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period.
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Reportable Segments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Results of Operations by Reportable Segment | The following table represents the results of operations by reportable segment:
For the three months ended March 31, 2018, our largest customer, ENL, constituted approximately 28.6 percent of our total consolidated revenues and approximately 55.9 percent of our International & Alaska Drilling segment revenues. Excluding reimbursable revenues of $12.1 million, ENL constituted approximately 20.1 percent of our total consolidated revenues and approximately 45.9 percent of our International & Alaska Drilling segment revenues. (2) Operating gross margin is calculated as revenues less direct operating expenses, including depreciation and amortization expense.
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Schedule of Revenue by Geographic Region | The following table shows the Company’s revenues by geographic region:
|
Fresh Start Accounting - Reorganization Value (Details) - USD ($) |
Mar. 31, 2019 |
Mar. 26, 2019 |
---|---|---|
Fresh-Start Adjustment [Line Items] | ||
Enterprise value | $ 425,000,000 | |
Cash and cash equivalents and other | 127,800,000 | |
Fair value of term loan | (210,000,000) | |
Fair value of successor stockholders’ equity | 342,800,000 | |
Current liabilities | 140,596,000 | |
Non-current liabilities excluding long-term debt | 20,985,000 | |
Reorganization value of successor assets | 714,381,000 | |
Savings calculation, percentage, royalty intangible assets | 0.002% | |
Savings calculation, percentage, technology intangible assets | 1.00% | |
Savings calculation, percentage, after-tax intangible assets | 20.00% | |
Minimum | ||
Fresh-Start Adjustment [Line Items] | ||
Enterprise value | 365,000,000.0 | |
Maximum | ||
Fresh-Start Adjustment [Line Items] | ||
Enterprise value | $ 485,000,000.0 |
Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 18,000 | |
Accumulated Amortization | 0 | |
Net Carrying Amount | 18,000 | |
Amortization of Intangible Assets | $ 600 | $ 600 |
Customer relationships | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Estimated Useful Life (Years) | 3 years | |
Gross Carrying Amount | $ 16,300 | |
Accumulated Amortization | 0 | |
Net Carrying Amount | $ 16,300 | |
Trade names | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Estimated Useful Life (Years) | 5 years | |
Gross Carrying Amount | $ 1,500 | |
Accumulated Amortization | 0 | |
Net Carrying Amount | $ 1,500 | |
Developed technology | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Estimated Useful Life (Years) | 6 years | |
Gross Carrying Amount | $ 200 | |
Accumulated Amortization | 0 | |
Net Carrying Amount | $ 200 |
Intangible Assets - Expected Future Intangibles Amortization Expense (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2019 | $ 4,325 |
2020 | 5,767 |
2021 | 5,767 |
2022 | 1,691 |
Beyond 2022 | $ 450 |
Operating Leases (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Jan. 01, 2019 |
|
Lessee, Lease, Description [Line Items] | ||
Extension renewal term | 5 years | |
Lease termination period | 1 year | |
Operating lease right-of-use assets (Note 5) | $ 19,662 | $ 21,000 |
Operating lease liabilities - current | 8,131 | |
Operating lease liabilities - noncurrent | 10,971 | $ 21,000 |
Total operating lease liabilities | 19,102 | |
Cash paid for amounts included in the measurement of operating lease liabilities | 2,498 | |
Operating lease right-of-use assets obtained in exchange for lease obligations | $ 60 | |
Weighted average remaining lease term (in years) | 3 years | |
Weighted average discount rate | 7.00% | |
Minimum | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease term | 1 year | |
Maximum | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease term | 6 years |
Operating Leases - Maturities and Costs (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Leases [Abstract] | |
2019 | $ 6,231 |
2020 | 6,879 |
2021 | 4,170 |
2022 | 1,957 |
2023 | 1,534 |
Beyond 2023 | 558 |
Total undiscounted lease liability | 21,329 |
Imputed interest | (2,227) |
Total operating lease liabilities | 19,102 |
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |
2019 | 10,722 |
2020 | 7,887 |
2021 | 4,193 |
2022 | 1,968 |
2023 | 1,540 |
Beyond 2023 | 636 |
Total lease payments | 26,946 |
Lease, Cost [Abstract] | |
Operating lease expense | 2,709 |
Short-term lease expense | 787 |
Variable lease expense | 1,840 |
Total lease expense | $ 5,336 |
Debt - Summary of Company's Current Debt Portfolio (Detail) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Debt Instrument [Line Items] | ||
Total debt | $ 210,000 | $ 585,000 |
Successor credit facility | ||
Debt Instrument [Line Items] | ||
Total principal | 0 | 0 |
Successor term loan, due March 2024 | ||
Debt Instrument [Line Items] | ||
Total principal | 210,000 | 0 |
Predecessor 6.75% senior notes, due July 2022 | ||
Debt Instrument [Line Items] | ||
Total principal | 0 | 360,000 |
Predecessor 7.50% senior notes, due August 2020 | ||
Debt Instrument [Line Items] | ||
Total principal | 0 | 225,000 |
2015 Secured Credit Agreement | ||
Debt Instrument [Line Items] | ||
Total principal | $ 0 | $ 0 |
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
Jan. 22, 2014 |
Jul. 30, 2013 |
|
Income Tax Disclosure [Abstract] | |||||
Income tax expense (benefit) | $ 656 | $ 1,604 | |||
Effective tax rate | (0.70%) | (5.90%) | |||
Income taxes paid, net | $ 1,400 | $ 2,000 | |||
Liability for unrecognized tax | 4,900 | $ 5,700 | |||
Accrued interest and penalties applied to uncertain tax positions | $ 2,200 | $ 2,100 | |||
Predecessor 7.50% senior notes, due August 2020 | |||||
Debt Instrument [Line Items] | |||||
Debt instrument fixed interest rate | 7.50% | ||||
Predecessor 6.75% senior notes, due July 2022 | |||||
Debt Instrument [Line Items] | |||||
Debt instrument fixed interest rate | 6.75% |
Earnings (Loss) Per Common Share (EPS) - Summary of Earnings Per Share (EPS) (Detail) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Earnings Per Share [Abstract] | ||
Net income (loss) available to common stockholders | $ (90,248) | $ (29,702) |
Basic earnings (loss) per share (in shares) | 9,368,322 | 9,251,066 |
Basic earnings (loss) per common share (in dollars per share) | $ (9.63) | $ (3.21) |
Effect of dilutive securities: | ||
Restricted stock units (in shares) | 0 | 0 |
Predecessor preferred stock (in shares) | 0 | 0 |
Number of shares used in diluted EPS computation (in shares) | 9,368,322 | 9,251,066 |
Diluted earnings (loss) per common share (in dollars per share) | $ (9.63) | $ (3.21) |
Predecessor common stock from conversion of predecessor preferred stock (in shares) | 1,587,300 | 1,587,300 |
Revenue - Narrative (Details) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019
USD ($)
business_line
|
Mar. 31, 2018
USD ($)
|
Dec. 31, 2018
USD ($)
|
|
Revenue from Contract with Customer [Abstract] | |||
Number of business lines | business_line | 2 | ||
Disaggregation of Revenue [Line Items] | |||
Revenues | $ 157,397 | $ 109,675 | |
Typical payment term (days) | 30 days | ||
Capitalized mobilization costs | $ 400 | $ 5,300 | |
Capitalized contract cost, amortization | 3,100 | 1,000 | |
Lease revenue | |||
Disaggregation of Revenue [Line Items] | |||
Revenues | 42,041 | ||
Service revenue | |||
Disaggregation of Revenue [Line Items] | |||
Revenues | 115,356 | ||
Reimbursable revenue | |||
Disaggregation of Revenue [Line Items] | |||
Revenues | $ 28,500 | $ 14,300 | |
Minimum | |||
Disaggregation of Revenue [Line Items] | |||
Revenue, remaining performance obligation, expected timing of satisfaction, period | 2 | ||
Maximum | |||
Disaggregation of Revenue [Line Items] | |||
Revenue, remaining performance obligation, expected timing of satisfaction, period | 60 |
Reportable Segments - Additional Information (Detail) |
3 Months Ended |
---|---|
Mar. 31, 2019
segment
business_line
ft
| |
Segment Information [Line Items] | |
Number of business lines | business_line | 2 |
Number of reportable segments | 4 |
U.S. (Lower 48) drilling | |
Segment Information [Line Items] | |
Number of business lines | business_line | 2 |
Number of reportable segments | 2 |
U.S. (Lower 48) drilling | Minimum | |
Segment Information [Line Items] | |
Underwater drilling depth | ft | 6 |
Drilling contract terms | 20 days |
U.S. (Lower 48) drilling | Maximum | |
Segment Information [Line Items] | |
Underwater drilling depth | ft | 12 |
Drilling contract terms | 180 days |
International & Alaska drilling | |
Segment Information [Line Items] | |
Number of reportable segments | 2 |
Drilling contract terms | 1 year |
Reportable Segments - Revenue by Geographic Region (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | $ 157,397 | $ 109,675 |
United States | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | 66,253 | 43,995 |
Russia | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | 49,387 | 31,292 |
EMEA & Asia | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | 25,133 | 20,044 |
Latin America | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | 5,482 | 3,513 |
Other CIS | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | 3,621 | 3,550 |
Other | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | $ 7,521 | $ 7,281 |
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