Parent, Guarantor, Non-Guarantor Unaudited Consolidating Condensed Financial Statements (Tables)

12 Months Ended

Dec. 31, 2012

Consolidating Condensed Statement of Operations

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

(Dollars in Thousands)

(Unaudited)

	Year ended December 31, 2012
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Total revenues	$	—		$	393,959		$	385,279		$	(101,256	)	$	677,982
Operating expenses		—			185,328			329,992			(101,256	)		414,064
Depreciation and amortization		—			65,354			47,663			—			113,017
Total operating gross margin		—			143,277			7,624			—			150,901
General and administration expense (1)		(182	)		(45,433	)		(437	)		—			(46,052	)
Gain on disposition of assets, net		—			775			1,199			—			1,974
Total operating income (loss)		(182	)		98,619			8,386			—			106,823
Other income and (expense):
Interest expense		(37,326	)		(151	)		(8,739	)		12,674			(33,542	)
Changes in fair value of derivative positions		55			—			—			—			55
Interest income		9,863			5,073			41,999			(56,782	)		153
Loss on extinguishment of debt		(2,130	)		—			—			—			(2,130	)
Other		—			(370	)		(12	)		—			(382	)
Equity in net earnings of subsidiaries		43,884			—			—			(43,884	)		—
Total other income (expense)		14,346			4,552			33,248			(87,992	)		(35,846	)
Income (benefit) before income taxes		14,164			103,171			41,634			(87,992	)		70,977
Income tax expense (benefit):
Current		(25,406	)		32,781			10,667			—			18,042
Deferred		2,257			15,429			(1,849	)		—			15,837
Income tax expense (benefit)		(23,149	)		48,210			8,818			—			33,879
Net income (loss)		37,313			54,961			32,816			(87,992	)		37,098
Less: Net (loss) attributable to noncontrolling interest		—			—			(215	)		—			(215	)
Net income (loss) attributable to controlling interest	$	37,313		$	54,961		$	33,031			$ (87,992	)	$	37,313

(1) General and administration expenses for field operations are included in operating expenses.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

(Dollars in Thousands)

(Unaudited)

	Year ended December 31, 2011
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Total revenues	$	—		$	376,229		$	426,491		$	(116,074	)	$	686,646
Operating expenses		—			175,465			358,753			(116,074	)		418,144
Depreciation and amortization		—			62,744			49,392			—			112,136
Total operating gross margin		—			138,020			18,346			—			156,366
General and administration expense (1)		(218	)		(30,859	)		(237	)		—			(31,314	)
Impairment and other charges		—			(170,000	)		—			—			(170,000	)
Provision for reduction in carrying value of certain assets		—			(1,350	)		—			—			(1,350	)
Gain on disposition of assets, net		—			2,706			953			—			3,659
Total operating income (loss)		(218	)		(61,483	)		19,062			—			(42,639	)
Other income and (expense):
Interest expense		(26,654	)		(17,889	)		(8,865	)		30,814			(22,594	)
Changes in fair value of derivative positions		(110	)		—			—			—			(110	)
Interest income		18,131			750			12,189			(30,814	)		256
Other		—			(345	)		20			—			(325	)
Equity in net earnings of subsidiaries		(23,484	)		—			—			23,484			—
Total other income and (expense)		(32,117	)		(17,484	)		3,344			23,484			(22,773	)
Income (benefit) before income taxes		(32,335	)		(78,967	)		22,406			23,484			(65,412	)
Income tax expense (benefit):
Current		(13,402	)		27,169			19,841			—			33,608
Deferred		31,518			(57,030	)		(22,863	)		—			(48,375	)
Total income tax expense (benefit)		18,116			(29,861	)		(3,022	)		—			(14,767	)
Net income (loss)		(50,451	)		(49,106	)		25,428			23,484			(50,645	)
Less: Net (loss) attributable to noncontrolling interest		—			—			(194	)		—			(194	)
Net income (loss) attributable to controlling interest	$	(50,451	)	$	(49,106	)	$	25,622		$	23,484		$	(50,451	)

(1) General and administration expenses for field operations are included in operating expenses.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

(Dollars in Thousands)

(Unaudited)

	Twelve months ended December 31, 2010
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Total revenues	$	—		$	366,947		$	401,617		$	(109,089	)	$	659,475
Operating expenses		—			237,584			342,783			(109,089	)		471,278
Depreciation and amortization		—			63,402			51,628			—			115,030
Total operating gross margin		—			65,961			7,206			—			73,167
General and administration expense (1)		(225	)		(30,193	)		(310	)		—			(30,728	)
Provision for reduction in carrying value of certain assets		—			(1,952	)		—			—			(1,952	)
Gain on disposition of assets, net		—			2,067			2,553			—			4,620
Total operating income (loss)		(225	)		35,883			9,449			—			45,107
Other income and (expense):
Interest expense		(30,771	)		(35,640	)		(16,185	)		55,791			(26,805	)
Interest income		42,000			757			23,291			(65,791	)		257
Loss on extinguishment of debt		(7,209	)		—			—			—			(7,209	)
Other		—			88			67			—			155
Equity in net earnings of subsidiaries		(22,962	)		—			—			22,962			—
Total other income and (expense)		(18,942	)		(34,795	)		7,173			12,962			(33,602	)
Income (benefit) before income taxes		(19,167	)		1,088			16,622			12,962			11,505
Income tax expense (benefit):
Current		139			(189	)		27,571			—			27,521
Deferred		(4,845	)		2,323			1,214			—			(1,308	)
Total income tax expense (benefit)		(4,706	)		2,134			28,785			—			26,213
Net income (loss)		(14,461	)		(1,046	)		(12,163	)		12,962			(14,708	)
Less: Net (loss) attributable to noncontrolling interest		—			—			(247	)		—			(247	)
Net income (loss) attributable to controlling interest	$	(14,461	)	$	(1,046	)	$	(11,916	)	$	12,962		$	(14,461	)

(1) General and administration expenses for field operations are included in operating expenses.

Consolidating Condensed Balance Sheet

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED BALANCE SHEET

(Dollars in Thousands)

(Unaudited)

	December 31, 2012
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	42,251		$	11,023		$	34,612		$	—		$	87,886
Accounts and notes receivable, net		289,957			98,747			292,644			(512,786	)		168,562
Rig materials and supplies		—			2,834			26,026			—			28,860
Deferred costs		—			—			1,089			—			1,089
Deferred income taxes		—			7,615			1,127			—			8,742
Other tax assets		46,249			(31,136	)		18,411			—			33,524
Assets held for sale		—			—			11,550			—			11,550
Other current assets		—			8,675			4,146			—			12,821
Total current assets		378,457			97,758			389,605			(512,786	)		353,034
Property, plant and equipment, net		60			548,794			237,304			—			786,158
Investment in subsidiaries and intercompany advances		780,878			(233,388	)		1,467,429			(2,014,919	)		—
Other noncurrent assets		43,569			59,541			13,431			—			116,541
Total assets	$	1,202,964		$	472,705		$	2,107,769		$	(2,527,705	)	$	1,255,733
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	10,000		$	—		$	—		$	—		$	10,000
Accounts payable and accrued liabilities		65,839			93,243			205,864			(227,200	)		137,746
Accrued income taxes		—			612			3,508			—			4,120
Total current liabilities		75,839			93,855			209,372			(227,200	)		151,866
Long-term debt		469,205			—			—			—			469,205
Other long-term liabilities		3,933			6,129			13,120			—			23,182
Long-term deferred tax liability		—			36,894			(16,047	)		—			20,847
Intercompany payables		62,583			43,657			216,320			(322,560	)		—
Contingencies		—			—			—			—			—
Stockholders’ equity:
Common stock		19,818			18,049			43,003			(61,052	)		19,818
Capital in excess of par value		646,217			733,112			1,455,246			(2,188,358	)		646,217
Retained earnings (accumulated deficit)		(74,631	)		(458,991	)		187,526			271,465			(74,631	)
Total controlling interest stockholders’ equity		591,404			292,170			1,685,775			(1,977,945	)		591,404
Noncontrolling interest		—			—			(771	)		—			(771	)
Total Equity		591,404			292,170			1,685,004			(1,977,945	)		590,633
Total liabilities and stockholders’ equity	$	1,202,964		$	472,705		$	2,107,769		$	(2,527,705	)	$	1,255,733

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED BALANCE SHEET

(Dollars in Thousands)

(Unaudited)

	December 31, 2011
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	55,670		$	4,212		$	37,987		$	—		$	97,869
Accounts and notes receivable, net		289,512			94,748			285,326			(485,663	)		183,923
Rig materials and supplies		—			762			29,185			—			29,947
Deferred costs		—			—			3,249			—			3,249
Deferred income taxes		—			5,311			853			486			6,650
Other tax assets		47,834			(25,218	)		2,742			—			25,358
Assets held for sale		—			—			5,315			—			5,315
Other current assets		788			6,381			8,133			—			15,302
Total current assets		393,804			86,196			372,790			(485,177	)		367,613
Property, plant and equipment, net		79			474,942			244,787			1			719,809
Investment in subsidiaries and intercompany advances		720,214			(212,883	)		1,347,719			(1,855,050	)		—
Other noncurrent assets		44,962			66,660			16,839			363			128,824
Total assets	$	1,159,059		$	414,915		$	1,982,135		$	(2,339,863	)	$	1,216,246
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	145,723		$	—		$	—		$	—		$	145,723
Accounts payable and accrued liabilities		60,120			94,056			181,010			(199,936	)		135,250
Accrued income taxes		(205	)		921			4,121			—			4,837
Total current liabilities		205,638			94,977			185,131			(199,936	)		285,810
Long-term debt		337,000			—			—			—			337,000
Other long-term liabilities		8,081			9,474			15,897			—			33,452
Long-term deferred tax liability		1,151			25,232			(11,296	)		847			15,934
Intercompany payables		62,583			43,657			111,619			(217,859	)		—
Contingencies		—			—			—			—			—
Stockholders’ equity:
Common stock		19,508			18,049			43,003			(61,052	)		19,508
Capital in excess of par value		637,042			733,120			1,444,091			(2,177,211	)		637,042
Retained earnings (accumulated deficit)		(111,944	)		(509,594	)		194,246			315,348			(111,944	)
Total controlling interest stockholders’ equity		544,606			241,575			1,681,340			(1,922,915	)		544,606
Noncontrolling interest		—			—			(556	)		—			(556	)
Total Equity		544,606			241,575			1,680,784			(1,922,915	)		544,050
Total liabilities and stockholders’ equity	$	1,159,059		$	414,915		$	1,982,135		$	(2,339,863	)	$	1,216,246

Consolidated Condensed Statements of Cash Flows

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Year Ended December 31, 2012
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	37,313		$	54,961		$	32,816		$	(87,992	)	$	37,098
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		—			65,354			47,663			—			113,017
Loss on extinguishment of debt		2,130			—			—			—			2,130
Gain on disposition of assets		—			(775	)		(1,199	)		—			(1,974	)
Deferred income tax expense		2,257			15,429			(1,849	)		—			15,837
Expenses not requiring cash		16,558			33,644			(27,602	)		—			22,600
Equity in net earnings of subsidiaries		(43,884	)		—			—			43,884			—
Change in accounts receivable		(445	)		(1,788	)		17,474			—			15,241
Change in other assets		1,649			2,060			(9,200	)		—			(5,491	)
Change in accrued income taxes		(4,055	)		220			(2,267	)		—			(6,102	)
Change in liabilities		3,914			(4,158	)		(2,413	)		—			(2,657	)
Net cash provided by (used in) operating activities		15,437			164,947			53,423			(44,108	)		189,699
Cash flows from investing activities:
Capital expenditures		—			(176,333	)		(15,210	)		—			(191,543	)
Proceeds from the sale of assets		—			2,062			1,875			—			3,937
Proceeds from insurance settlements		—			—			—			—			—
Intercompany dividend payment		(8,387	)		(4,357	)		(31,364	)		44,108			—
Net cash (used in) investing activities		(8,387	)		(178,628	)		(44,699	)		44,108			(187,606	)
Cash flows from financing activities:
Proceeds from debt issuance		130,000			—			—			—			130,000
Proceeds from draw on revolver credit facility		7,000			—			—			—			7,000
Paydown on senior notes		(125,000	)		—			—			—			(125,000	)
Paydown on term note		(18,000	)		—			—			—			(18,000	)
Paydown on revolver credit facility		—			—			—			—			—
Payment of debt issuance costs		(4,859	)		—			—			—			(4,859	)
Payment of debt extinguishment costs		(555	)		—			—			—			(555	)
Proceeds from stock options exercised		—			—			—			—			—
Excess tax benefit from stock-based compensation		(662	)		—			—			—			(662	)
Intercompany advances, net		(8,393	)		20,492			(12,099	)		—			—
Net cash provided by (used in) financing activities		(20,469	)		20,492			(12,099	)		—			(12,076	)
Net change in cash and cash equivalents		(13,419	)		6,811			(3,375	)		—			(9,983	)
Cash and cash equivalents at beginning of year		55,670			4,212			37,987			—			97,869
Cash and cash equivalents at end of year	$	42,251		$	11,023		$	34,612		$	—		$	87,886

See accompanying notes to unaudited consolidated condensed financial statements.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Year Ended December 31, 2011
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(50,451	)	$	(49,106	)	$	25,428		$	23,484		$	(50,645	)
Adjustments to reconcile net income (loss)to net cash provided by operating activities:
Depreciation and amortization		—			62,744			49,392			—			112,136
Loss on extinguishment of debt		—			—			—			—			—
Gain on disposition of assets		—			(2,706	)		(953	)		—			(3,659	)
Deferred income tax expense		31,518			(57,030	)		(22,863	)		—			(48,375	)
Impairment and other charges		—			170,000			—			—			170,000
Provision for reduction in carrying value of certain assets		—			1,350			—			—			1,350
Expenses not requiring cash		16,411			376			(3,954	)		—			12,833
Equity in net earnings of subsidiaries		23,484			—			—			(23,484	)		—
Change in accounts receivable		(288,333	)		347,344			(65,852	)		—			(6,841	)
Change in other assets		62,173			(16,724	)		16,404			—			61,853
Change in liabilities		(10,454	)		(53,404	)		41,091			—			(22,767	)
Net cash provided by (used in) operating activities		(215,652	)		402,844			38,693			—			225,885
Cash flows from investing activities:
Capital expenditures		—			(174,999	)		(15,400	)		—			(190,399	)
Proceeds from the sale of assets		—			4,335			1,200			—			5,535
Proceeds from insurance settlements		—			250			—			—			250
Intercompany dividend payment		—			—			—			—			—
Net cash provided by (used in) investing activities		—			(170,414	)		(14,200	)		—			(184,614	)
Cash flows from financing activities:
Proceeds from debt issuance		50,000			—			—			—			50,000
Proceeds from draw on revolver credit facility		—			—			—			—			—
Paydown on senior notes		—			—			—			—			—
Paydown on term note		(21,000	)		—			—			—			(21,000	)
Paydown on revolver credit facility		(25,000	)		—			—			—			(25,000	)
Payment of debt issuance costs		(504	)		—			—			—			(504	)
Payment of debt extinguishment costs		—			—			—			—			—
Proceeds from stock options exercised		183			—			—			—			183
Excess tax benefit from stock-based compensation		1,488			—			—			—			1,488
Intercompany advances, net		252,320			(230,535	)		(21,785	)		—			—
Net cash provided by (used in) financing activities		257,487			(230,535	)		(21,785	)		—			5,167
Net change in cash and cash equivalents		41,835			1,895			2,708			—			46,438
Cash and cash equivalents at beginning of year		13,835			2,317			35,279			—			51,431
Cash and cash equivalents at end of year	$	55,670		$	4,212		$	37,987		$	—		$	97,869

See accompanying notes to unaudited consolidated condensed financial statements.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Year Ended December 31, 2010
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(14,461	)	$	(1,046	)	$	(12,163	)	$	12,962		$	(14,708	)
Adjustments to reconcile net income (loss)to net cash provided by operating activities:
Depreciation and amortization		—			63,402			51,628			—			115,030
Loss on extinguishment of debt		7,209			—			—			—			7,209
Gain on disposition of assets		—			(2,067	)		(2,553	)		—			(4,620	)
Deferred income tax expense		(4,845	)		2,323			1,214			—			(1,308	)
Provision for reduction in carrying value of certain assets		—			1,952			—			—			1,952
Expenses not requiring cash		14,829			—			—			—			14,829
Equity in net earnings of subsidiaries		22,962			—			—			(22,962	)		—
Change in accounts receivable		16,178			(14,763	)		19,337			—			20,752
Change in other assets		(2,505	)		(13,454	)		15,365			—			(594	)
Change in liabilities		(144	)		7,793			(22,641	)		—			(14,992	)
Net cash provided by (used in) operating activities		39,223			44,140			50,187			(10,000	)		123,550
Cash flows from investing activities:
Capital expenditures		—			(169,784	)		(49,400	)		—			(219,184	)
Proceeds from the sale of assets		—			4,646			1,829			—			6,475
Intercompany dividend payment		—			—			(10,000	)		10,000			—
Net cash provided by (used in) investing activities		—			(165,138	)		(57,571	)		10,000			(212,709	)
Cash flows from financing activities:
Proceeds from debt issuance		300,000			—			—			—			300,000
Proceeds from draw on revolver credit facility		25,000			—			—			—			25,000
Paydown on senior notes		(225,000	)		—			—			—			(225,000	)
Paydown on term note		(12,000	)		—			—			—			(12,000	)
Paydown on revolver credit facility		(42,000	)		—			—			—			(42,000	)
Payment of debt issuance costs		(7,976	)		—			—			—			(7,976	)
Payment of debt extinguishment costs		(7,466	)		—			—			—			(7,466	)
Proceeds from stock options exercised		26			—			—			—			26
Excess tax benefit from stock-based compensation		1,203			—			—			—			1,203
Intercompany advances, net		(115,364	)		121,547			(6,183	)		—			—
Net cash provided by (used in) financing activities		(83,577	)		121,547			(6,183	)		—			31,787
Net change in cash and cash equivalents		(44,354	)		549			(13,567	)		—			(57,372	)
Cash and cash equivalents at beginning of year		58,189			1,768			48,846			—			108,803
Cash and cash equivalents at end of year	$	13,835		$	2,317		$	35,279		$	—		$	51,431