27 th Annual Leveraged Finance Conference September 2019 PKD (NYSE) - - PowerPoint PPT Presentation

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Mike Sumruld Senior Vice President and Chief Financial Officer Deutsche Bank 27th Annual Leveraged Finance Conference September 2019

PKD (NYSE) Rig 273 Alaska

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Forward-Looking Statements Caution

The following presentation contains certain statements that may be deemed to be “forward-looking statements” within the meaning of the securities laws of the United States. All statements, other than statements of historical facts, addressing activities, events or developments that the Company expects, projects, believes or anticipates will or may occur in the future, the outlook for equipment and utilization and day rates, general industry conditions including bidding activity, future results of the Company’s operations, capital expenditures, income tax matters, expansion and growth opportunities, financing activities, debt repayment, returns on capital, cash flows and other such matters, are forward-looking statements. Although the Company believes its expectations stated in this presentation are based on reasonable assumptions, actual results may differ materially from those expressed or implied in the forward-looking statements. For a more detailed discussion of risk factors, please refer to the Company’s reports filed with the SEC, including reports on Forms 10-K and 10-Q. Each forward-looking statement speaks only as of the date of this presentation, and the Company undertakes no obligation to publically update or revise any forward-looking statement. Non-GAAP Measures: Included in this presentation are certain non‐GAAP financial measures as defined under SEC Regulation

• G. Investors are urged to consider closely the disclosure in Company’s Annual Report on Form 10‐K, Quarterly Reports on Form

10‐Q and Current Reports on Form 8‐K and any reconciliation to GAAP measures provided in this presentation.

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Parker Drilling

A service-driven company, we offer “operational execution” services and products to mitigate risk and control costs so our customers can deliver safe and profitable wells.

• Drives a motivated and

educated workforce

• Promotes enterprise

alignment

• Serves in the best interest
• f stakeholders
• Maximize return on

capital

• Enhance flexibility in a

cyclical industry

• Reliable partner, trusted

advisor

• Key role in customer

success

• Known for operational

execution

• Enhances operating

leverage and economies

• f scale
• Optimizes resource

allocation

• Enrich market intelligence
• Absorbs industry volatility
• Delivers share

appreciation

• Facilitates the return of

capital

Strong Brand Equity Team Oriented and Continual Improvement Culture Capital Efficient Business Model Scale in Key Geographies and Product Lines ROC Company

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Operational Execution Defined

Optimized Drilling Cycle

Increased Performance Increased Reliability Reduced Cost Reduced Risk

• Procedural Compliance
• Quality & HSE Focus
• Teamwork
• Accountability
• Empowerment

Operational Discipline

• Values
• Objectives
• Project Assessment
• Needs
• Requirements

Customer Alignment

• KPIs
• Assessment
• Review
• Improvement Plans
• Knowledge Transfer

Continual Improvement

• Right People
• Right Tools
• Right Certifications
• Competency Assurance

Planning & Resources

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Where We’re Heading

Total Rentals O&M Owned Rigs

36% 18% 46%

2012

Revenue $678 M Rebalanced revenue mix by investment bias toward capital efficient opportunities

51% 34% 15%

Revenue $566 M

Current 1

Grow scale in target geographies and product lines based upon capital efficient platform

1 LTM as of 2Q’19

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Scale in Key Geographies

Approximately 95% of our revenue comes from three key geographies

Middle East & Caspian Revenue: 18 % of Total 2018

Services:

Locations: Kazakhstan, Kuwait, Saudi Arabia, Iraq, UAE

Arctic Revenue: 36 % of Total 2018

Services: Drilling

Locations: Sakhalin Island, Alaska, Atlantic Canada

North America Revenue: 40 % of Total 2018

Services: Drilling and Rental

Locations: U.S (Lower 48), Mexico

Drilling and Rental

Other countries of operation

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United States 44% International 56% Offshore 34% Onshore 66%

621 465 293 260 225 276 348 247 134 183 256 290

• 200

400 600 800 1,000 1,200

2014 2015 2016 2017 2018 LTM

Revenue by Business

Drilling Rentals

$ millions 161 104 51 37 6 19 134 82 14 53 97 116

• 50

100 150 200 250 300 350 2014 2015 2016 2017 2018 LTM

Adjusted EBITDA excluding G&A2 by Business

Drilling Rentals

$ millions

1LTM as of 2Q’19 2Adjusted EBITDA excluding G&A is a non-GAAP measure. Please refer to the appendix for the definition and reconciliation.

Company Overview

• 85-year history of delivering operational excellence to

the oil and gas industry

• Operated in 65 countries, currently active in 20
• Headquartered in Houston, Texas
• Dedicated global workforce totaling ~2700 employees

1 1

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Rental Tools & Well Services Overview

Well Intervention 2%

1 LTM as of 2Q’19

Middle East / Caspian 17%

Revenues by Geography 1

North Sea 5% Other 6% North America 72%

Revenues by Product Offering 1

Surface & Tubular 84%

• High return, quick payback investment opportunities
• Diversified product offerings across core geographies
• Surface & Tubulars – drill pipe, tubing, drill collars,

pressure control equipment, and more

• Well Construction – tubular running services and

downhole tool rentals

• Well Intervention – fishing and related services and

whipstocks

• A leading supplier in U.S. land and offshore Gulf of Mexico

markets

• A solid international platform with major presence in the

Middle East

• Opportunities to expand by leveraging existing infrastructure

and resources

Well Construction 14%

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U.S. Rentals – Leading U.S. Supplier

Parker U.S. Rentals Growth vs. US Rig Count 3 U.S. Rental Revenues by Market 1

26% 74%

U.S. Offshore U.S. Land

• Well developed infrastructure – presence in

every major U.S. basin

• Diverse mix of customers and outstanding

customer service

• Engineering and QHSE capabilities for

servicing offshore and high-profile projects

• Leading supplier of premium drill pipe

Unique Operating Strengths

1 LTM as of 2Q’19 2 The Parker U.S. Tubular Goods Utilization Index represents the proportion of tubular goods (drill pipe and related products) that were on rental compared to the total inventory of

tubular goods, and indexed to a base level of tubular goods inventory on rental. Tubular goods rentals do not account for all the U.S. Rental Tools segment’s revenues.

3 Source Baker Hughes-GE rig data

120% 140% 160% 180%

Q2 ‘16 vs Q2 ‘19

% Δ Avg US Rig Count % Δ Tubular Utilization Index % Δ US Rental Revenue

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Leader in New Drill Pipe Technology

Early adoption of new drill pipe technology, coupled with our focus on operational execution, helps our customers deliver increasingly complex wells more efficiently

Benefits

Performance

• High strength tool joints
• Higher torque rating
• Improved hydraulic
• Better fatigue resistance

Ease of Use

• Faster make up times
• Minimizes stabbing damages
• Improved tong gripping

Lower Maintenance Cost

• Reduced repair frequency
• Increased refacing amount
• Less recut loss

U.S. Land Well Lateral Lengths & Efficiencies

6,683 7,627 6,489 7,056 6,452 5,704 8,505 6,588 10,100 8,660 9,714 8,236 8,881 7,498 6,798 9,735 8,947 10,510

Anadarko 2014-2018 Appalachian 2014-2018 Delaware 2014-2018 DJ 2014-2018 Gulf Coast 2014-2018 Mid-Con 2014-2018 Midland 2014-2018 PRB 2014-2018 Williston 2014-2018 2018+ Avg. Lat Length (ft) 2014-2018 Avg. Lat Length (ft)

536 931 610 1,334 984 611 762 453 1,009 651 1,102 711 1,565 1,137 774 833 596 1,348

Anadarko 2014-2018 Appalachian 2014-2018 Delaware 2014-2018 DJ 2014-2018 Gulf Coast 2014-2018 Mid-Con 2014-2018 Midland 2014-2018 PRB 2014-2018 Williston 2014-2018 2018+ Avg. ft/d 2014-2018 Avg. ft/d

Source: DrillingInfo DI Rig Analytics

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International Rentals - Improving Performance

Forward Plan

• Focusing on scale in core markets with

sustainable activity

• Automated Casing Running Tool (CRT)

performance exceeding competitive technologies

• Leverage Well Construction success to

pull through additional product lines

6.1 6.3 7.6 8.5 8.6 10.4 10.0 9.9 10.6 10.6

1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19

Well Construction Revenues Growth

$ millions

Revenue Scale in Core Markets

2014A Current 1

Revenues by Product Offering 1

Surface & Tubular 45% Well Construction 50% Well Intervention 5%

1 LTM as of through 2Q’19

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1 LTM as of 2Q’19 2 Excluding reimbursable revenue 3 Rig count as of June 30, 2019

Drilling Services Overview

56% 44%

Revenues1,2 by Arena

Land Offshore

Revenues by Geography 1,2,3

Middle East / Caspian: 22% Owned Rigs: 8 O&M Rigs: 37 North America: 16% Owned Rigs: 16 O&M Rigs: 1 Arctic: 62% Owned Rigs: 3 O&M Rigs:6 Other: 0% Owned Rigs: 2 O&M Rigs: 2

• Expand capital efficient O&M through

technical service and operational resources

• Onshore, offshore, remote and harsh-

environment expertise

• Highly capable fleet to meet complex

drilling requirements

• Developing scale in large and growing

international markets

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Expanding O&M Business

$32 $43 $42 $162 2019 2020 2021 2022+

O&M Revenue

O&M Contracted Backlog 1

Total backlog of $279 million as of June 30th 2019

$ millions

Recent Notable O&M Project Awards

• Holly Platform – ExxonMobil Offshore California
• West White Rose Project – Husky Energy Offshore

Atlantic Canada

• NEW Contract award: Arctic O&M project –

Recognized E&P client on the North Slope of Alaska

1 O&M revenue backlog is an estimate of O&M drilling revenues from drilling contracts. It does not include owned–asset drilling revenues,

rental revenues and all other revenues we may earn, including those for added services, reimbursables, mobilization or demobilization; nor does it anticipate revenue reductions that may be due to conditions that would lead to reduced dayrates or early terminations.

2 Rig count as of June 30, 2019

31 41 3 5 10 20 30 40 50 2012 Current

Rig Count

O&M by Arena 2

Land Offshore 13

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International vs. US Volatility 1

International & Alaska Drilling Services

• International markets have historically

provided better value and less volatility compared to the U.S.

• Recovery in many international markets

is beginning to take shape in earnest

• Opportunities to restart idle assets with

minimal capital expenditure requirements (i.e. Alaska and Kazakhstan) Highlights

9 28 7 14 13 '08 '09 - '11 '14 '16 - 17 '17 - 18 15% 117% 7% 129% 16%

United States

Average change in rig count: 57% Average bull market length: 14 months

International

Average change in rig count: 20% Average bull market length: 33 months

Bear Market

… while the US market is prone to more volatility during downturns

Average change in rig count: (31%) Average bear market length: 12 months

United States

Average change in rig count: (21%) Average bear market length: 17 months Change in rig count

International

Bull Market

International rig counts have seen longer periods of expansion in bull markets… 4 59 30 '08 '9 - 14 '16 - 19 5% 40% 15% 9 24 20 4 4 '08 - '09 '11 - '13 '14 - '16 '17 '19 (55%) (13%) (79%) (4%) (5%) 7 27 '08 - '09 '14 - '16 (10%) (31%)

1Source: Deutsche Bank, FactSet, Baker Hughes-GE rig data. Note: Market data as of May 20, 2019.

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U.S Drilling Services

2 2 4 2 1 3 1 1 1

Light Bay Deep Bay Deep Posted High-Spec Posted

Competitor B Competitor A Parker

Barge Rig Diversity 4

• Leverage resources and experience to

expand O&M business (i.e. California & GOM offshore)

• Dominant market share in GOM inland

waters with only fleet capable of drilling all projects

• Parker-owned rigs breakeven gross

margin3 projected at approx. 30% utilization Unique Operating Strengths

1 LTM as of 2Q’19 2 Excluding reimbursables 3 Excluding depreciation and amortization 4 Rigs classes are defined as follows:

• Light Bay: Drawworks rating < 1500hp with bay barge design
• Deep Bay: Drawworks rating > 1500hp with 2 mud pumps and bay barge design
• Deep Posted : Drawworks rating > 1500hp with 2 mud pumps and posted barge design
• High-Spec Posted: Drawworks rating > 3000hp with 3 mud pump 7500psi system and posted barge design

90% 10% 41% 59%

Parker Owned Rigs O&M + Project Services

Drilling Revenues 2 by Service Type

Parker Owned Rigs O&M + Project Services

2014 Current1

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Continuing to progress in 2019…

US Drilling

• Intl. / AK

Drilling

Executed O&M drilling contract with Husky Energy for their new platform project offshore Atlantic Canada Opening new U.S. Rental Tools facility in Odessa, TX Completed rig reactivation phase on offshore California O&M project Extended tubular running services contract for an additional 3 years with key client in Abu Dhabi

Intl. Rentals US Rentals

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Q2 2019 Financial Snapshot

1 Adjusted EBITDA is a non-GAAP financial measure. Please refer to the appendix for the definition and reconciliation. 2 Represents unrestricted ending cash balance 3 Our $50M credit facility is reduced by $15M of restricted liquidity and $10M in letters of credit, which equates to an availability of $25M

7 ½ %

$ millions

139 25

Cash 2 ABL 3

Liquidity Position Q2 CAPEX Spend

89% 11%

Rentals Drilling

($ millions)

06/30/2019 Ending Cash Balance 2 ABL Borrowing Long Term Debt 139 211 Revenue Net Income (loss)

• Adj. EBITDA 1
• Adj. EBITDA / Rev (%)

156 38 24% 5

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1 LTM as of 2Q’19 2 Adjusted EBITDA and Net Debt are non-GAAP financial measures. Please refer to the appendix for definitions and reconciliations. 3 Peer data set is mean calculation of companies NBR, SPN, HP, PD, PTEN, BAS, KEG, and PES 4 Company’s revolver remains undrawn 5 Reflects current balance; future PIK amounts would result in $232 million payable at maturity

$211 $50 2019 2020 2021 2022 2023 2024

Debt Maturity Schedule

$ millions

Debt / Adj. EBITDA 2 Net Debt / Adj. EBITDA 2 Debt / Total Cap.

• Adj. EBITDA 2 / Interest

1.9x 0.6x

($ millions)

Parker

Key Leverage Metrics 1

Peers 3 4.0x 38% 4.8x 4.3x 60% 7.8x

ABL 4

Term Loan 5

Q2 2019 Financial Snapshot

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+1 281-406-2000 www.parkerdrilling.com

Appendix

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Reconciliation of Adjusted EBITDA to Net Income (loss)

1 We believe Adjusted EBITDA is an important measure of operating performance because it allows management, investors and others to evaluate and compare our core operating results

from period to period by removing the impact of our capital structure (interest expense from our outstanding debt), asset base (depreciation and amortization), remeasurement of foreign currency transactions, tax consequences, impairment and other special items. Special items include items impacting operating expenses that management believes detract from an understanding of normal operating performance. Management uses Adjusted EBITDA as a supplemental measure to review current period operating performance and period to period

• comparisons. Our Adjusted EBITDA may not be comparable to a similarly titled measure of another company because other entities may not calculate EBITDA in the same manner. EBITDA

and Adjusted EBITDA are not measures of financial performance under U.S. Generally Accepted Accounting Principles (GAAP), and should not be considered in isolation or as an alternative to operating income or loss, net income or loss, cash flows provided by or used in operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.

$ in millions

LTM FY 2018 FY 2017 FY 2016 FY 2015 FY 2014 Net income (loss) (200) (166) (119) (231) (95) 23 Interest expense 28 43 44 46 45 44 Income tax expense (benefit) 10 7 10 74 23 24 Depreciation and amortization 97 108 122 140 156 145 EBITDA (65) (8) 57 29 129 236 Adjustments: Loss on impairment 51 51

• Provision for reduction in carrying value of certain assets
• 2
• 12
• (Gain) loss on disposition of assets, net

1 2 2 1 (2) (1) Pre-petition restructuring charges 19 22

• Reorganization items

103 9

• Interest income

(0) (0) (0) (0) (0) (0) Other 2 2 (0) (0) 10 28 Special items

• 3

1 1

• Non-routine items
• (3)

Adjusted EBITDA 1

111 78 64 31 150 260 G&A 24 25 26 34 36 35

Adjusted EBITDA excluding G&A

135 103 90 65 186 295

Parker Drilling Company and Subsidiaries

• Adj. EBITDA and Adj. EBITDA excluding G&A

(Unaudited)

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Reconciliation of Net Debt to Total Debt

1 Net debt is computed by subtracting the sum of cash & cash equivalents from total debt. This non-GAAP measure has limitations and therefore should not be used in isolation or as a

substitute for the amounts reported in accordance with GAAP. However, management evaluates the performance of the consolidated Company based on several criteria, including net debt, because it believes that this financial measure accurately measures the Company’s liquidity. In addition, securities analysts and investors use this measure as one of the metrics on which they analyze the company’s performance. Other companies in this industry may compute this measure differently.

$ in millions

June 30, 2019 Long Term Debt $211 Current Debt Total Debt $211 Cash & Cash Equivalents 139 Net Debt 1 $72

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Parker Drilling Services

• O&M requires skills that

enable the drilling contractor to run unique equipment under special circumstances Operations & Management Daywork Drilling Services

Drilling Services

Unique Capability Cost Efficiency Risk Management

• Development requires

processes & procedures which maximize efficiency & minimizes clients cost per BOE

• Exploration requires the

drilling contractor to provide contingency equipment & skilled multifaceted personnel

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Parker Rental & Services

• Impact and Stabilization
• Hole Openers , Reamers
• ROP enhancers, Motors

Well Construction Well Intervention Surface & Tubular Rental & Services

• Cased & Open Hole
• P&A
• Through Tubing

Tubular Running Services Re-entry Services Machines Shops BHA Tools Rental Fishing & Remedial PCE & Tubular Rental

• Conventional TRS
• CRT – 2M-TEK
• Hydro-Mechanical

Whipstocks

• Fabrication & Repair
• Inspection
• BOPs
• Drill Pipe, HWDP
• Drill Collar