<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MAY 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------------------- -------------------
COMMISSION FILE NUMBER 1-7573
----------------------
PARKER DRILLING COMPANY
(Exact name of registrant as specified in its charter)
Delaware 73-0618660
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Parker Building, Eight East Third Street, Tulsa, Oklahoma 74103
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (918) 585-8221
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
As of June 30, 1996, 56,235,774 common shares were outstanding.
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<TABLE>
PARKER DRILLING COMPANY
INDEX
<CAPTION>
<S> <C>
Part I. Financial Information Page No.
Consolidated Condensed Balance Sheets (Unaudited) -
May 31, 1996 and August 31, 1995 2
Consolidated Condensed Statements of Operations (Unaudited) -
Three and Nine Months Ended May 31, 1996 and
May 31, 1995 3
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Three and Nine Months Ended May 31, 1996 and 4
May 31, 1995
Notes to Unaudited Consolidated Condensed
Financial Statements 5
Report of Review by Independent Accountants 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 10
Part II. Other Information
Item 6, Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit 10(a) Credit Agreement, dated as of
April 9, 1996, between Parker Drilling Company
and Bank of Oklahoma, N.A.
Exhibit 15, Letter Re Unaudited Interim
Financial Information
Exhibit 27, Financial Data Schedule (EDGAR version only)
</TABLE>
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<TABLE>
PART 1. FINANCIAL INFORMATION
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
<CAPTION>
May 31, Aug. 31,
1996 1995
-------- --------
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,854 $ 20,752
Other short-term investments 4,068 1,372
Accounts and notes receivable 36,718 39,578
Rig materials and supplies 10,061 11,532
Other current assets 7,904 5,146
-------- --------
Total current assets 69,605 78,380
Property, plant and equipment less accumulated
depreciation, depletion and amortization of
$369,371 at May 31, 1996, and $432,360
at August 31, 1995 124,203 122,258
Other noncurrent assets 27,568 16,321
-------- --------
Total assets $221,376 $216,959
-------- --------
-------- --------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 289 $ 289
Accounts payable and accrued liabilities 13,931 16,940
Accrued income taxes 6,303 5,109
-------- --------
Total current liabilities 20,523 22,338
-------- --------
Long-term debt 1,463 1,748
-------- --------
Other long-term liabilities 6,559 5,953
-------- --------
Common stock, $.16 2/3 par value 9,371 9,287
Capital in excess of par value 207,258 205,310
Retained earnings (accumulated deficit) (21,843) (24,391)
Other (1,955) (3,286)
-------- --------
Total stockholders' equity 192,831 186,920
-------- --------
Total liabilities and stockholders' equity $221,376 $216,959
-------- --------
-------- --------
See accompanying notes to consolidated condensed financial statements.
- 2 -
</TABLE>
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<TABLE>
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31,
------------------- --------------------
1996 1995 1996 1995
------- ------- -------- -------
<S> <C> <C> <C> <C>
Revenue:
Drilling contracts $33,986 $42,193 $112,266 $111,973
Other 1,012 1,066 3,371 3,307
------- ------- -------- --------
Gross operating revenue 34,998 43,259 115,637 115,280
------- ------- -------- --------
Operating expense:
Drilling 23,000 31,023 76,987 82,890
Other 1,216 1,114 4,036 3,779
Depreciation, depletion and
amortization 5,216 5,456 15,928 16,382
General and administrative 5,977 4,650 16,605 14,805
------- ------- -------- --------
35,409 42,243 113,556 117,856
------- ------- -------- --------
Operating income (loss) (411) 1,016 2,081 (2,576)
------- ------- -------- --------
Other income and (expense):
Interest expense (34) (27) (87) (62)
Interest income 312 327 1,011 904
Other income (expense) - net 1,233 1,694 3,108 4,975
------- ------- -------- --------
1,511 1,994 4,032 5,817
------- ------- -------- --------
Income before income taxes 1,100 3,010 6,113 3,241
------- ------- -------- --------
Income tax expense 790 960 3,565 2,215
------- ------- -------- --------
Net income (loss) 310 2,050 2,548 1,026
------- ------- -------- --------
Earnings (loss) per share,
primary and fully diluted $ .01 $ .04 $ .05 $ .02
------- ------- -------- --------
------- ------- -------- --------
Number of common shares used
in computing earnings (loss)
per share:
Primary 56,251,437 55,206,365 56,014,726 55,010,970
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Fully diluted 56,290,118 55,389,837 56,219,680 55,183,989
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
See accompanying notes to consolidated condensed financial statements.
- 3 -
</TABLE>
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<TABLE>
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Dollars in Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
May 31,
--------------------
1996 1995
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,548 $ 1,026
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation, depletion and amortization 15,928 16,382
Expenses not requiring cash 1,519 389
Change in operating assets and liabilities (3,678) (1,755)
Other-net (2,587) (3,051)
------- -------
Net cash provided by operating activities 13,730 12,991
------- -------
Cash flows from investing activities:
Capital expenditures (26,359) (12,992)
Proceeds from the sale of equipment 5,377 6,198
Decrease (increase) in short-term
investments (2,696) (2,315)
Other-net (1,136) 121
------- -------
Net cash provided (used) by investing
activities (24,814) (8,988)
------- -------
Cash flows from financing activities:
Proceeds from exercise of stock warrants 1,552 -
Other (366) (226)
------- -------
Net cash provided (used) by financing
activities 1,186 (226)
------- -------
Net change in cash and cash equivalents (9,898) 3,777
Cash and cash equivalents at
beginning of period 20,752 10,660
------- -------
Cash and cash equivalents at
end of period $10,854 $14,437
------- -------
------- -------
Supplemental disclosure:
Interest paid $ 120 $ 2
Taxes paid $ 2,556 $ 2,248
Supplemental noncash financing activity:
In November 1994, the Company acquired a limited partner's ownership
interest in two consolidated partnerships in exchange for a promissory
note in the amount of $1,850,000.
See accompanying notes to consolidated condensed financial statements.
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</TABLE>
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PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements reflect all adjustments (of a normally
recurring nature) which are necessary for a fair presentation of (1) the
financial position as of May 31, 1996 and August 31, 1995, (2) the results
of operations for the three and nine months ended May 31, 1996 and May 31,
1995, and (3) cash flows for the nine months ended May 31, 1996 and May
31, 1995. Results for the nine months ended May 31, 1996, are not
necessarily indicative of the results which will be realized for the year
ending August 31, 1996. The year-end consolidated condensed balance sheet
data was derived from audited financial statements, but does not include
all disclosures required by generally accepted accounting principles. The
financial statements should be read in conjunction with the Company's Form
10-K for the year ended August 31, 1995.
2. Earnings per common share are based on the weighted average number of
common shares and common share equivalents outstanding during the period.
Common shares granted under the 1969 Key Employee Stock Grant Plan, 1980
Incentive Career Stock Plan and the 1991 Stock Grant Plan are issued and
outstanding and are only considered in the computation of weighted average
shares outstanding when their effect on earnings per share is dilutive.
3. In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed of" was issued. The statement establishes accounting
standards for the impairment of long-lived assets, such as the Company's
drilling, transportation and other equipment and will be effective for the
Company beginning with the year ending August 31, 1997. The Company does
not believe the new standard will have a material effect on the Company's
financial position or results of operations.
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" was issued. The statement
requires the computation of compensation for grants of stock, stock
options and other equity instruments issued to employees based on fair
value. The compensation calculated is to be either recorded as an expense
in the financial statements or, alternatively, disclosed. The Company
anticipates it will elect the disclosure method of complying with the new
standard. Under the provisions of the new statement, it is anticipated
pro forma net income to be disclosed will be lower than net income
reported in the financial statements.
- 5 -
<PAGE>
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
Legal Proceedings
4. A judgment in the amount of $4,860,000 was entered against a
subsidiary of the Company by a judge of the First Civil Specialized
Court in Maynas, Peru on May 10, 1996. The judgment was based on a
claim by former union employees of the Company's subsidiary alleging
that such subsidiary impaired their employment opportunities with that
subsidiary and other employers. The Company disputes the basis for
the claim and the judgment and has appealed the decision. Because the
Company believes there was a lack of evidence and irregularities in
the proceedings, the Company also intends to seek to overturn the
decision through other appropriate proceedings. The original
complaint requested damages in the amount of $22,680,000, and the
plaintiffs' right to seek additional damages in excess of the judgment
by concurring in the appeal expires July 16, 1996. The plaintiffs
have not filed a claim for interest in the proceeding but could
initiate a separate proceeding for interest at a later date if the
judgment is affirmed. Any execution of a final judgment against the
subsidiary will have to be initiated in the United States or other
countries in which the subsidiary has assets or conducts business as
such subsidiary no longer holds assets or conducts business in Peru.
While the Company does not believe that the judgment will have a
material adverse effect on its financial condition, results of
operations or its operations in South America, there can be no
assurance at this time that a final judgment or judgments will not be
entered against the Company's subsidiary in excess of the original
judgment.
- 6 -
<PAGE>
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders
Parker Drilling Company
We have reviewed the consolidated condensed balance sheet of Parker
Drilling Company and subsidiaries as of May 31, 1996, and the related
consolidated condensed statements of operations for the three and nine month
periods ended May 31, 1996 and May 31, 1995 and consolidated condensed
statements of cash flows for the nine month periods ended May 31, 1996 and May
31, 1995. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of August 31, 1995, and the
related consolidated statements of operations, redeemable preferred stock and
stockholders' equity and cash flows for the year then ended (not presented
herein); and in our report, dated October 17, 1995, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of August 31, 1995, is fairly stated in all material respects
in relation to the consolidated balance sheet from which it has been derived.
By: /s/ Coopers & Lybrand L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
July 15, 1996
- 7 -
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Third Quarter of Fiscal 1996 Compared with Third Quarter of Fiscal 1995
The Company recorded net income of $.3 million in the third quarter of
fiscal 1996 compared to net income of $2.0 million in the third quarter of
fiscal 1995. This year's third quarter results were impacted by severance
payments for personnel reductions, temporary reductions in revenue while
certain rigs are being upgraded and completion of contracts on other rigs.
Total drilling revenue decreased $8.2 million in the third quarter of this
year from $42.2 million to $34.0 million due in part to lower revenue in the
Latin America region. Last year's third quarter revenue included $3.7 million
from southern Argentina operations which were subsequently terminated when the
Company decided to sell the six rigs and ancillary equipment located in this
market. In other Latin America operations, revenue decreased $4.2 million
primarily due to mobilization fees recorded last year and the temporary
reduction in revenue as three rigs were modified and upgraded in Colombia.
These rigs have re-commenced operations.
In the Asia Pacific region, revenue decreased $1.4 million due to the
completion of contracts in New Zealand, Pakistan and the Philippines. The
reduced revenue in these areas was offset somewhat by additional rig
utilization in Papua New Guinea, including one rig that was modified and
resumed working in the third quarter, and a contract in Vietnam that began in
the second quarter of this year. Revenue from U.S. operations increased $.9
million principally due to the relocation of several rigs in the Lower 48
states to the Gulf Coast region where day rates are higher.
Although total drilling revenue decreased $8.2 million, the drilling
margin decreased only $.2 million. The drilling margin as a percentage of
drilling revenue increased from 26% last year to 32% this year. Contributing
to the improvement in drilling margin percentage were the termination of low-
margin operations in southern Argentina, higher rig utilization in Papua New
Guinea where margins are better and improved margins on the three upgraded
rigs in Colombia.
General and administrative expense increased $1.3 million primarily due to
one-time expenses associated with personnel reductions. Other income
(expense) - net decreased $.5 million due to fewer gains on sales of assets
recorded in this year's third quarter.
The oversupply of rigs that has been prevalent in the U.S. market has
allowed oil companies to demand rigs equipped with more sophisticated
equipment such as diesel-electric power and/or top-drive systems.
Consequently, during the third quarter the Company decided to remove 22 of its
mechanical rigs from its U.S. rig fleet of 39 rigs and place them on the
market for sale. It is anticipated that this sale will be substantially
completed in the fourth quarter of fiscal year 1996.
- 8 -
<PAGE>
<PAGE>
RESULTS OF OPERATIONS (Continued)
- ---------------------------------
First Nine Months of Fiscal 1996 Compared with First Nine Months of Fiscal
1995
The Company recorded net income of $2.5 million for the first nine months
of fiscal 1996 as compared to $1.0 million for the same period last year.
Higher drilling margins were somewhat offset by one-time expenses associated
with personnel reductions and a reduction in other income.
Drilling revenue of $112.3 million for the first nine months of fiscal
1996 was $.3 million higher than last year. Increased revenue from the Asia
Pacific and U.S. operations offset the loss of revenue due to the termination
of operations in southern Argentina.
In the Asia Pacific region, revenue increased $6.4 million as reduced
revenue due to completed contracts in New Zealand, Philippines and Pakistan
was more than offset by increased rig utilization in Papua New Guinea.
Revenue increased $5.5 million in the U.S. due to Rig 245 operating in Alaska
for the entire nine months this year coupled with the relocation of several
rigs in the Lower 48 states to the Gulf Coast region where day rates are
higher.
Although revenue was nearly the same as last year, the profit margin
increased by $6.2 million. The lower-margin revenue generated by the
terminated southern Argentina operations was replaced by revenue from more
profitable operations, particularly Papua New Guinea. Additionally, the
Company benefited from improved margins on the three upgraded rigs which
resumed work in Colombia.
The increase in general and administrative expense was primarily
attributable to severance payments for personnel reductions. Of the $1.9
million decrease in other income, $1.5 million was due to the reversal in
fiscal 1995 of a prior year's foreign currency accrual.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Working capital of the Company was $49.1 million as of May 31, 1996, and
$56.0 million as of August 31, 1995. Cash and short-term investments
comprised $14.9 million and $22.1 million of working capital on these
respective dates. Sources of cash for the first nine months of fiscal 1996
included cash generated from operations of $13.7 million, proceeds of $5.4
million from the sale of property, plant and equipment and $1.6 million
received upon the exercise of stock warrants.
Capital expenditures for the first nine months of fiscal 1996 were $26.4
million, which were primarily related to upgrading and modifying rigs in
connection with international contracts. The Company is pursuing new drilling
projects in its existing markets, as well as in new markets such as Venezuela
and Algeria, that would require capital expenditures in excess of $75 million
over the next several years for upgrades to existing rigs and/or acquisitions
of new rigs. Of such amount, the Company is currently committed over the next
six to nine months to spending approximately $22 million for upgrades to two
rigs in Papua New Guinea, three rigs in Peru and four rigs in Indonesia and
for other ancillary capital expenditures. Any significant increase in capital
expenditures would be subject to restrictions contained in the Company bank
credit facility as specified below.
- 9 -
<PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (continued)
- -------------------------------
In order to have capital available to take advantage of these and other
contract opportunities and for other general corporate purposes including, but
not limited to, the acquisition of oil service related businesses, on July 11,
1996, the Company sold 9,050,000 shares of Common Stock raising $48.5 million
of net proceeds.
The Company has entered into a $15.0 million bank revolving credit and
letter of credit facility which expires on April 19, 1999 (the "Agreement").
At May 31, 1996, the Company had letters of credit totaling $10.4 million
outstanding under the Agreement. The Agreement contains restrictions on
annual capital expenditures and the issuance of certain senior and
subordinated indebtedness which can be incurred by the Company and certain
operating subsidiaries designated in the Agreement through which the Company
performs the majority of its drilling operations. The Agreement also limits
payment of dividends on Common Stock and requires the Company to maintain
certain financial ratios. The remaining subsidiaries of the Company are not a
party to the Agreement and are able to make capital expenditures with
independent financing from lenders that have no recourse to the Company and
the designated subsidiaries, subject only to an overall limitation of
indebtedness. The restrictions in the Agreement are not anticipated to
restrict growth or investment opportunities in the foreseeable future.
Management believes that the current level of cash and short-term
investments, together with cash generated from operations and the net proceeds
from the sale of Common Stock subsequent to May 31, should be sufficient to
meet the Company's immediate capital needs as well as capital required in
connection with additional contracts which the Company is currently bidding.
Should further opportunities for growth requiring additional capital arise,
the Company believes it would be able to satisfy these needs through a
combination of cash generated from operations, borrowings under the bank
credit agreement and long-term debt financing.
- 10 -
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Page
Exhibit 10 (a) Credit Agreement, dated as of April 9, 1996,
between Parker Drilling Company and Bank of Oklahoma, N.A.
Exhibit 15 Letter re Unaudited Interim Financial Information
Exhibit 27 Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K - There were no reports on Form 8-K filed
during the nine months ended May 31, 1996.
- 11 -
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Parker Drilling Company
-----------------------
Registrant
Date: July 15, 1996
By: /s/James J. Davis
-----------------------------
James J. Davis
Vice President, Finance and
Chief Financial Officer
By: /s/Randy Ellis
-----------------------------
Randy Ellis
Controller and
Chief Accounting Officer
- 12 -
<PAGE>
<PAGE>
Exhibit 15
July 15, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 10549
Re: Parker Drilling Company
Registration on Form S-8 and Form S-3
We are aware that our report dated July 15, 1996, on our review of the interim
financial information of Parker Drilling Company for the period ended May 31,
1996, and included in this Form 10-Q is incorporated by reference in the
Company's registration statements on Form S-8 (File No. 2-87944, 33-24155, 33-
56698 and 33-57345) and Form S-3 (File No. 333-04779 and 333-07995). Pursuant
to Rule 436(c) under the Securities Act of 1933, this report should not be
considered a part of the registration statement prepared or certified by us
within the meaning of Section 7 and 11 of that Act.
By: /s/ Coopers & Lybrand L.L.P.
---------------------------------
COOPERS & LYBRAND L.L.P.
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET AS OF MAY 31, 1996 AND THE
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
MAY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> MAY-31-1996
<CASH> 10854
<SECURITIES> 4068
<RECEIVABLES> 37386
<ALLOWANCES> 668
<INVENTORY> 0
<CURRENT-ASSETS> 69605
<PP&E> 493574
<DEPRECIATION> 369371
<TOTAL-ASSETS> 221376
<CURRENT-LIABILITIES> 20523
<BONDS> 1463
0
0
<COMMON> 9371
<OTHER-SE> 183460
<TOTAL-LIABILITY-AND-EQUITY> 221376
<SALES> 0
<TOTAL-REVENUES> 115637
<CGS> 0
<TOTAL-COSTS> 81023
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87
<INCOME-PRETAX> 6113
<INCOME-TAX> 3565
<INCOME-CONTINUING> 2548
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2548
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
<PAGE>
<PAGE>
Exhibit 10(a)
April 9, 1996
Parker Drilling Company
and the Restricted Subsidiaries (defined below)
8 East Third Street
Tulsa, Oklahoma 74103
Re: $15,000,000 Revolving Line of Credit for Issuance
of Standby Letters of Credit, General Working
Capital and Capital Expenditures
Gentlemen:
Bank of Oklahoma, National Association ("Bank"), has agreed to provide,
subject to the terms and conditions of this letter agreement, a $15,000,000
Revolving Line of Credit ("Revolver") to Parker Drilling Company, a Delaware
corporation ("Parent"), and certain subsidiaries of Parent which are
signatories hereto (the "Restricted Subsidiaries" and separately and
collectively with the Parent, the "Borrower"), for the sole purposes of:
(i) issuance by the Bank, at the request of the Borrower, of standby letters
of credit, with the Borrower as account party ("LCs"); (ii) funding drafts on
LCs; and (iii) funding advance requests for general corporate working capital
and for short term capital expenditures (funding under (ii) and/or (iii),
separately "Advance" and collectively "Advances"). The Borrower's obligation
to repay Advances, together with interest, is evidenced by a promissory note
in the face amount of Fifteen Million and No/100 Dollars ($15,000,000) (the
"Note") executed by the Borrower, a copy of which is attached hereto as
Exhibit "A". The Borrower and Bank agree that the advance of funds and the
- -----------
issuance of LCs shall be in accordance with the following terms and
conditions:
1. Advances.
--------
1.1 Letters of Credit. Borrower hereby irrevocably authorizes
-----------------
and directs the Bank to make Advances with respect to proper
demands made under the LCs. Each Advance thereunder shall
be fully repaid with interest accrued at the rate described
in the Note no later than two (2) business days following
the day the Bank gives written notice to Borrower that such
Advance has been made.
1.2 Working Capital. The Bank agrees, on the terms and
---------------
conditions set forth in this letter agreement ("Agreement"),
to make Advances to the Borrower from time to time during
the period from the date of this Agreement up to April 30,
1999, in the aggregate principal amount not to exceed at any
given time outstanding Fifteen Million and No/100 Dollars
($15,000,000), less the aggregate outstanding (a)
commitments under any LCs issued in connection herewith and
(b) Advances. Within the limits of the foregoing, the
Borrower may borrow, repay and reborrow, from time to time.
<PAGE>
<PAGE>
Parker Drilling Company
April 9, 1996
Page 2
Notwithstanding anything to the contrary, the Bank's obligation to
issue any LCs hereunder or to make any Advances for working
capital purposes or other purposes hereunder, shall be subject to
the following conditions precedent: (i) All representations and
warranties contained in this Agreement shall be true and correct
on and as of the date each Advance request is made, and (ii) no
default shall have occurred and be continuing, or would result
from any Advance made hereunder.
2. LC Issuance and Bank Fees. The aggregate face amount of all LCs
-------------------------
issued and outstanding shall not exceed $15,000,000 at any time less unpaid
Advances under 1.2 above. The Bank agrees, subject to the foregoing limits
and the other terms and conditions of this Agreement, to issue LCs within
three (3) days after receipt by the Bank of a completed original of the Bank's
Standby Letter of Credit Application in the form of Exhibit "B" attached
-----------
hereto (or any similar form subsequently adopted by the Bank for such
purposes), properly executed by an authorized representative of the Borrower.
Upon the issuance of each LC, the Bank shall collect an issuance fee ("LC
Fee") equal to 1.0% per annum (30 day minimum calculation) of the face amount
of the LC (minimum $50.00 per quarter) plus expenses incurred by the Bank
(telecommunications, courier, etc.), by debiting the Borrower's general
account #206314321 with the Bank. Borrower also shall pay the Bank a
commitment fee ("Commitment Fee") equal to .375% per annum of the daily
average during each Quarter (as hereinafter defined) of the amount by which
$15,000,000 exceeds (a) the aggregate liability of the Banks under LCs
outstanding and (b) unpaid Advances under the Note on each day during the
quarter. Said Commitment Fee shall be payable on the 10th day following the
end of each Quarter, commencing with the Quarter ending May 31, 1996. As used
in this Agreement, the term "quarter" shall mean each of the periods of three
(3) consecutive months commencing on, respectively, March 1, June 1, September
1 and December 1. In the event the expiration date of any LC extends beyond
April 1, 1999, Borrower must (a) pledge to Lender a certificate of deposit or
similar cash collateral acceptable to Lender, or (b) authorize an Advance
hereunder to be held by Lender in an interest-bearing account at Lender's
office in which Borrower hereby grants to Bank a security interest and right
of set-off, in an amount at least equal to the face amount of the applicable
LC.
3. Collateral.
----------
3.1 Obligations Unsecured. The obligation of the Borrower to
---------------------
repay any and all Advances, and to pay interest thereon, LC
Fees, Commitment Fees and costs, expenses and other amounts
payable by the Borrower hereunder (collectively, the
"Obligations") shall be unsecured.
3.2 Negative Covenant. Borrower represents and warrants to Bank
-----------------
that none of its or their respective assets is (or will
become so long as any amounts remain unpaid under the Note
or any LC remains outstanding) encumbered (e.g., subject to
a lien or any adverse claim), except as to: (i) purchase
money security interests ("PMSI") as defined in the Oklahoma
Uniform Commercial Code; (ii) any existing liens not to
<PAGE>
<PAGE>
Parker Drilling Company
April 9, 1996
Page 3
exceed $100,000 in the aggregate; (iii) security for bonds
and other surety obligations incurred in connection with
normal business operations; (iv) liens granted to Bank; and
(v) non-consensual liens, provided they are removed within
sixty (60) days of attachment.
4. Covenants. The Borrower covenants and agrees with the Bank that,
---------
until the full and final payment of all Obligations and termination of the
Revolver, it will comply with the terms of this Section 4.
4.1 Borrower will maintain a ratio of current assets (excluding
intercompany accounts and notes receivable) to current
liabilities of no less than 1.75 to 1, as determined on a
GAAP basis, at all times.
4.2 Borrower will, at all times, maintain a ratio of total debt
to total net worth no greater than .5 to 1, as determined on
GAAP basis. Inter-company accounts payable and deferred
taxes are to be excluded from the calculation.
4.3 Borrower will, at all times, maintain a quick ratio (defined
by GAAP), not less than 1.5 to 1 (which excludes
intercompany accounts and notes receivable).
4.4 Borrower shall not create, incur, assume or suffer to exist
any Indebtedness owing by it (other than to the Company or
any other Restricted Subsidiary), except (a) Indebtedness
incurred pursuant to this Agreement; (b) additional
Indebtedness of the Borrower at any time outstanding not to
exceed $10,000,000; and (c) Indebtedness for the deferred
purchase price of property or in the nature of capitalized
leases in an aggregate principal amount at any time
outstanding not to exceed $10,000,000.
For the purposes of this Agreement, Indebtedness shall mean
(i) indebtedness for borrowed money, (ii) indebtedness for
the deferred purchase price of services or property, which
purchase price is due twelve months or more from the date of
incurrence of the obligation or evidenced by a note or
similar written instrument, (iii) obligations under leases
which have been or, in accordance with GAAP, should be
recorded as capitalized leases, (iv) obligations under
acceptance facilities, (v) the undrawn face amount of, and
unpaid reimbursement obligations in respect of all letters
of credit and Contingent Obligations, (vi) all obligations
evidenced by bonds, debentures, notes or other similar
instruments, (vii) all obligations upon which interest
charges are customarily paid, and (viii) all obligations
under conditional sale or other title retention agreements
relating to property purchased.
<PAGE>
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Parker Drilling Company
April 9, 1996
Page 4
For the purposes of this section, Contingent Obligations
shall mean any guarantee of Indebtedness of any other person
or any assurance with respect to the financial condition of
any other person, whether direct, indirect or contingent
including, without limitation, any purchase or repurchase
agreement or keep-well or other arrangement of whatever
nature having the effect of assuring or holding harmless any
person against loss with respect to any Indebtedness of such
other person; provided, however, that Contingent Obligations
shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. Further, the
amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent
Obligation is made, or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof
(assuming the Borrower is required to perform thereunder) as
determined by the Borrower in good faith.
4.5 In addition to the investments described on Schedule "4.5"
--------------
hereto, Borrower shall not make any advance, loan, extension
of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures, or other securities of, or make
any other investment in, any of its subsidiaries not a
signatory hereto and/or and other third party in excess of
$25,000,000 during any given fiscal year.
4.6 Borrower shall not make, or enter into any commitment
arrangement to make, capital expenditures during any fiscal
year in excess of $30,000,000, plus proceeds from the sale
of assets.
4.7 Borrower (for purposes of this subsection 4.7 only, the term
"Borrower" shall include all of Borrower's subsidiaries,
restricted or unrestricted), shall not declare or pay any
dividends or grant authority or make any other distribution
in excess of forty percent (40%) of the previous fiscal year
net income or $3,000,000, whichever is less.
4.8 During each twelve (12) month period commencing on the date
of this Agreement, Borrower shall cause the balance under
the Note to equal zero for a period of thirty (30)
consecutive calendar days. If, however, Borrower fails to
comply with the foregoing, then Borrower shall immediately
commence monthly installments based upon amortization of the
outstanding balance representing the lowest cash funded
portion under the revolving line of credit for the preceding
twelve (12) months, with monthly principal payments
sufficient to amortize such amount for a term of not less
than thirty-six (36) months.
<PAGE>
<PAGE>
Parker Drilling Company
Page 5
4.9 Borrower shall maintain a minimum cash flow (net income plus
----
traditional non-cash charges) in excess of maintenance CAPEX
(in any event not less than $5,000,000), plus one-seventh
(1/7) the total amount of Borrower's funded debt and letters
of credit issued and outstanding under this Agreement. The
foregoing calculation shall be made at fiscal year-end.
4.10 Borrower shall not default on any term or condition of any
other credit facilities to which the Borrower is now or
hereafter a party. For the purpose of this Agreement, a
"default" under other credit facilities shall exclude events
which with the passing of time become defaults thereunder
until expiration of that time without cure or waiver.
4.11 Borrower shall preserve and maintain its corporate existence
and good standing in the jurisdiction of its incorporation
and qualify and remain qualified as a foreign corporation in
each jurisdiction in which such qualification is necessary
for the business of the Borrower.
4.12 Borrower shall reimburse the Bank for the Bank's cost and
expenses, including fees and expenses of the Bank's legal
counsel, incurred in the preparation and enforcement of this
Agreement, the Note and other documents executed in
connection herewith.
5. Reporting Requirements.
----------------------
5.1 Borrower shall, within 45 days following the end of each
Quarter, commencing with the Quarter ending May 31, 1996,
deliver to the Bank a copy of the Borrower's Form 10-Q most
recently filed with the Securities and Exchange Commission
along with a balance sheet, income statement and
reconciliation of cash for the previous Quarter prepared by
the Borrower on a consolidating basis, separating the
Borrower from the subsidiaries of Parent which are not
Restricted Subsidiaries, in form similar to the balance
sheet, income statement and reconciliation as of November
30, 1995, furnished to the Bank.
5.2 Borrower shall, in conjunction with delivery of the
financial statements described in Section 5.1 hereof,
deliver to the Bank a statement signed by the chief
financial officer or Treasurer of the Borrower stating
whether or not the Borrower is in compliance with all terms
and conditions of this Agreement, the Note and all security
agreements executed under the terms and conditions of this
Agreement, and is in compliance with the terms and
conditions of any other credit facilities entered into by
the Borrower with other financial institutions.
5.3 Within 90 days following the end of the Borrower's fiscal
year end, the Borrower shall supply the Bank with a balance
sheet, income statement and reconciliation of cash for the
previous fiscal year along with a statement of the firm of
independent public accountants which prepared the statements
provided pursuant to Sections 5.1 and 5.2, confirming the
calculations which are the basis for such statements.
<PAGE>
<PAGE>
Parker Drilling Company
April 9, 1996
Page 6
5.4 The Borrower shall give written notification of the
occurrence of an Event of Default to the Bank within one
business day following the determination of the existence of
such Event of Default.
6. Representations and Warranties. The Borrower represents and
------------------------------
warrants to the Bank that:
6.1 Incorporation, Good Standing, and Due Qualification. The
---------------------------------------------------
Borrower is a corporation duly incorporated, validly
existing, and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power
and authority to own its assets and to transact the business
in which it is now engaged or proposed to be engaged in; and
is duly qualified as a foreign corporation and in good
standing under the laws of each other jurisdiction in which
such qualification is necessary for the business of the
Borrower.
6.2 Corporate Power and Authority. The execution, delivery, and
-----------------------------
performance by the Borrower of this Agreement, the Note and
any security agreements which may be executed in connection
herewith have been duly authorized by all necessary
corporate action and do not and will not (a) require any
consent or approval of its stockholders; (b) contravene its
charter or bylaws; (c) violate any provisions of any law,
rule, regulation (including, without limitation, Regulations
U and X of the Board of Governor's of the Federal Reserve
System), order, writ, judgment, injunction, decree,
determination, or award presently in effect applicable to
it, (d) result in a breach of or constitute a default under
any indenture or loan or credit agreement or any other
agreement, lease, or instrument to which it is a party or by
which it or its properties may be bound or affected; (f)
result in, or require, the creation or imposition of any
lien, upon or with respect to any of the properties now
owned or hereafter acquired by it, or (g) cause it to be in
default under any law, rule, regulation, order, writ,
judgment, injunction, decree, determination, or award
applicable to it or any indenture, agreement, lease or
instrument to which it is a party.
6.3 Legally Enforceable Agreement. This Agreement and the Note
-----------------------------
are, and each of the security agreements when delivered
under this Agreement will be, legal, valid, and binding
obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms, except
to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency, and other similar laws
affecting creditors' rights generally.
<PAGE>
<PAGE>
Parker Drilling Company
April 9, 1996
Page 7
6.4 Financial Data. Subject to any limitation stated therein,
--------------
all balance sheets, earnings statements and other financial
data which have been furnished to the Bank to induce it to
provide the Revolver, fairly represented the financial
condition of the Borrower as of the date for which the same
were furnished, and all other information, reports and other
papers and data were so furnished, accurate and correct in
all material respects. Since November 30, 1995, there has
been no material adverse change in the condition, business
or prospects, financial or otherwise, of the Borrower.
6.5 Litigation. There is not now pending against the Borrower
----------
and, to the knowledge of the Borrower, there is not now
pending against its directors and officers nor threatened
any litigation or any other proceeding against or affecting
any of them, the outcome of which might materially and
adversely affect the Borrower's financial condition or
business.
7. Events of Default. Regardless of the terms of any note or other
-----------------
instrument evidencing indebtedness from the Borrower to the Bank and without
prejudice to the rights of the Bank to demand payment at any time hereunder
and under the Note, the occurrence of any of the following events ("Events of
Default") shall terminate any obligation on the part of the Bank hereunder
and, at the option of the Bank, shall make all Obligations immediately due and
payable, without notice of default, presentment or demand for payment, protest
or notice of nonpayment or dishonor, or other notices or demands of any kind
or character, except as hereinafter specified:
7.1 Nonpayment. Nonpayment when due of any installment of
----------
interest or principal in accordance with the terms hereof,
the Note or any other instrument evidencing the Borrower's
indebtedness to the Bank or nonpayment when due of any other
sums payable by the Borrower to the Bank. Failure to make
any payments under the Note shall not constitute a default
hereunder unless such failure extends beyond ten (10) days
from the due date.
7.2 Act of Insolvency. Any Borrower shall (a) apply for or
-----------------
consent to the appointment of a receiver, trustee or
liquidator of itself, or of all or a substantial part of its
assets, (b) be unable, or admit in writing its inability to
pay its debts as they fall due, (c) make a general
assignment for the benefit of its creditors, (d) be
adjudicated a bankrupt or insolvent, or (e) file a voluntary
petition in bankruptcy or a petition or an answer seeking
reorganization or an arrangement with creditors or to take
advantage of any insolvency law or file an answer admitting
the material allegations of a petition filed against it in
any bankruptcy, reorganization or insolvency proceeding, or
any corporate action shall be taken by it for the purpose of
effecting any of the foregoing.
<PAGE>
<PAGE>
Parker Drilling Company
April 9, 1996
Page 8
7.3 Involuntary Bankruptcy. An order, judgment or decree shall
----------------------
be entered, without the application, approval or consent of
any Borrower, by any court of competent jurisdiction
approving a petition seeking reorganization of any Borrower
or appointing a receiver, trustee or liquidator of the
Borrower or of all or a substantial part of any of its
assets and such order, judgment or decree shall continue
unstayed and in effect fore any period of more than sixty
(60) consecutive days.
7.4 General Default. The breach of, or default under, any
---------------
covenant, agreement, term, condition, provision,
representation or warranty contained in this Agreement or
any instrument executed in connection herewith not
specifically referred to in this Section 7. If the breach
or default is nonmonetary in nature, and excluding
representations and warranties in this Agreement and related
documents, Borrower shall be entitled to a thirty (30) day
written notice and cure period.
8. Governing Law. This Agreement, the Note and any security
-------------
agreements executed pursuant to the terms hereof shall be governed by, and
construed in accordance with, the laws of the State of Oklahoma.
9. Severability of Provisions. Any provisions of this Agreement, the
--------------------------
Note and any security agreements executed pursuant to the terms hereof which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions thereof or
affecting the validity or enforceability of such provision in any other
jurisdiction, unless the remaining terms would substantially alter the intent
of the original agreement, in which case such agreement would be voidable by
either party.
10. Notices. All notices, requests and demands hereunder shall be
-------
given to or made upon the Bank and the Borrower by (i) telefax, or (ii) United
States mail, postage prepaid and addressed as follows:
Borrower:
Parker Drilling Company, et al.
Eight East Third Street
Tulsa OK 74103
Attn: Ed Hendrix
Telefax No.: (918) 631-1265
Bank:
Bank of Oklahoma, National Association
P. O. Box 2300
Tulsa OK 74103
Attn: Energy Dept. - 8 South
Telefax No.: (918) 588-6880
<PAGE>
<PAGE>
Parker Drilling Company
April 9, 1996
Page 9
11. Counterparts. This Agreement may be executed in as many
------------
counterparts as may be deemed necessary or convenient, and each counterpart
shall be deemed an original. Bank may rely on telefax signatures as
originals.
If the terms and conditions described in this Agreement, the Note and the
Standby Letter of Credit Application are acceptable to the Borrower, please
have the duly authorized officer of the Borrower execute as indicated below.
Sincerely,
BANK OF OKLAHOMA, NATIONAL
ASSOCIATION
By /s/ Tim Sheehan
---------------------------------------
Tim Sheehan, Vice President
Read and accepted.
PARKER DRILLING COMPANY
PARKER DRILLING COMPANY LIMITED
(BAHAMAS)
PARKER DRILLING COMPANY OF
MEXICO, LTD.
By /s/ I. E. Hendrix, Jr.
---------------------------------------
I. E. Hendrix, Jr., Vice President
ANACHORETA, INC.
DGH, INC.
OIME, INC.
PARCO, INC.
PADRIL, INC.
PARKER DRILLING COMPANY OF
OKLAHOMA, INC.
PARKER DRILLING COMPANY NORTH
AMERICA, INC.
TOTAL COVERAGE SERVICES
UNIVERSAL RIG SERVICE CORPORATION
By /s/ Thomas L. Wingerter
--------------------------------------
Thomas L. Wingerter, President
PARKER AVIATION INC.
By /s/ Thomas L. Wingerter
---------------------------------------
Thomas L. Wingerter, Vice President
<PAGE>
<PAGE>
Parker Drilling Company
April 9, 1996
Page 10
PARKER DRILLING COMPANY OF
BOLIVIA, INC.
PARKER DRILLING COMPANY OF
SOUTH AMERICA, INC.
PARKER DRILLING COMPANY
INTERNATIONAL LIMITED
PARKER DRILLING COMPANY KUWAIT,
LTD.
By /s/ I. E. Hendrix, Jr.
---------------------------------------
I. E. Hendrix, Jr., Vice President
PARKER DRILLING COMPANY OF
INDONESIA, INC.
PARKER DRILLING COMPANY OF
SINGAPORE, LTD.
PARKER DRILLING COMPANY EASTERN
HEMISPHERE, LTD.
PARKER DRILLING COMPANY OF
NEW GUINEA, INC.
INDOCORP OF OKLAHOMA, INC.
By /s/ T. Bruce Blackman
---------------------------------------
T. Bruce Blackman, President
PARKER DRILLING COMPANY OF
NEW ZEALAND LTD.
By /s/ T. Bruce Blackman
---------------------------------------
T. Bruce Blackman, Director
PARKER VALVE COMPANY
PARKER AIR LOGISTICS
VANCE SYSTEMS ENGINEERING, INC.
By /s/ William W. Pritchard
---------------------------------------
William W. Pritchard, Vice President
PARKER TECHNOLOGY, INC.
By /s/ Joe N. Brown
---------------------------------------
Joe N. Brown, President
<PAGE>
<PAGE>
Parker Drilling Company
April 9, 1996
Page 11
STATE OF TEXAS )
) ss.
COUNTY OF ECTOR )
--------------
This instrument was acknowledged before me on this 11th day of
-----
April , 1996, by Joe N. Brown, as President of Parker Technology, Inc.
----------
My Commission Expires: 05-13-97
/s/ Connie W. Smithee
------------------------------------
Notary Public
- ---------------------------
[S E A L]
PARKER KINETIC DESIGNS, INC.
By /s/ James M. Weldon
---------------------------------------
James M. Weldon, Vice President
STATE OF TEXAS )
) ss.
COUNTY OF TRAVIS )
--------------
This instrument was acknowledged before me on this 10th day of
-----
April , 1996, by James M. Weldon, as Vice President of Parker Kinetic
- ----------
Designs, Inc.
My Commission Expires:
/s/ Vonda Lawson-Rosa
------------------------------------
Notary Public
June 23, 1999
- ---------------------------
[S E A L]
CANADIAN RIG LEASING, INC.
By /s/ Sharon L. Poynter
---------------------------------------
Sharon L. Poynter, Vice President
<PAGE>
<PAGE>
Parker Drilling Company
April 9, 1996
Page 12
PROVIDENCE OF ALBERTA )
----------------
) ss.
COUNTY OF )
--------------
This instrument was acknowledged before me on this 11th day of
-----
April , 1996, by Sharon L. Poynter, as Vice President of Canadian Rig
- ----------
Leasing, Inc.
My Commission Does Not Expire
/s/ D. Mitchell Williams
------------------------------------
Notary Public
- ---------------------------
[S E A L]
