Parker Drilling Co. :PKD-US: Earnings Analysis: Q2, 2017 By the Numbers : September 11, 2017

Parker Drilling Co. reports financial results for the quarter ended June 30, 2017.

We analyze the earnings along side the following peers of Parker Drilling Co. – Patterson-UTI Energy, Inc., Atwood Oceanics, Inc., Helmerich & Payne, Inc., Pioneer Energy Services Corp. and Diamond Offshore Drilling, Inc. (PTEN-US, ATW-US, HP-US, PES-US and DO-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 109.61 million, Net Earnings of USD -29.89 million.
  • Gross margins widened from -19.21% to -10.05% compared to the same period last year, operating (EBITDA) margins now 12.28% from 7.69%.
  • Year-on-year change in operating cash flow of -36.92% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 109.61 98.27 94.03 97.19 105.29
Revenue Growth (%YOY) 4.1 -24.7 -36.79 -43.96 -43.38
Earnings (mil) -29.89 -39.81 -48.93 -46.23 -39.82
Earnings Growth (%YOY) 24.95 58.46 -37.26 4.92 -183.85
Net Margin (%) -27.27 -40.51 -52.04 -47.57 -37.82
EPS -0.23 -0.31 -0.39 -0.37 -0.32
Return on Equity (%) -8.68 -11.17 -13.5 -11.32 -8.81
Return on Assets (%) -10.62 -14.26 -17.37 -15.65 -12.91

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Market Share Versus Profits

Revenues History
Earnings History

PKD-US‘s change in revenue this period compared to the same period last year of 4.10% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that PKD-US is holding onto its market share. Also, for comparison purposes, revenues changed by 11.54% and earnings by 24.92% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from -19.21% to -10.05% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 7.69% to 12.28% compared to the same period last year. For comparison, gross margins were -20.09% and EBITDA margins were 5.51% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

PKD-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 186.01 days from 186.07 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

PKD-US‘s change in operating cash flow of -36.92% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from -26.80% to -15.98% and (2) one-time items. The company’s pretax margins are now -25.68% compared to -38.69% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Parker Drilling Co.

Company Profile

Parker Drilling Co. provides contract drilling solutions to the energy industry. It operates through the following segments: International and Alaska Drilling, U.S. Drilling and Rental Tools. The U.S. Drilling segment offers drilling services with to Gulf of Mexico barge drilling rig fleet and through U.S. based O&M services. The International and Alaska Drilling segment gives drilling services, with company owned rigs as well as through O&M contracts, and project related services. The Rental Tools segment provides premium rental equipment and services to exploration and production companies, drilling contractors and service companies on land and offshore in the United States and select international markets. The company was founded by Gifford C. Parker in 1934 and is headquartered in Houston, TX.

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