##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 
 (MARK ONE)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007
 OR
 o
    
    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. Employerincorporation or organization)
    
    Identification No.)
 1401 Enclave Parkway, Suite 600, Houston, Texas 77077 
 (Address of principal executive offices) (Zip code)
 Registrants telephone number, including area code: (281) 406-2000
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange
on Which Registered:Common Stock, par value $0.162/3 per share
    
    New York Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act:
 þ o
 o þ
 þ o
 þ
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ
  DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 PAGEPART IItem 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    12Item 1B.
    
    Unresolved Staff Comments
    
    
    23Item 2.
    
    Properties
    
    
    24Item 3.
    
    Legal Proceedings
    
    
    26Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    26PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
    
    
    27Item 6.
    
    Selected Financial Data
    
    
    29Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    30Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    46Item 8.
    
    Financial Statements and Supplementary Data
    
    
    47Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    96Item 9A.
    
    Controls and Procedures
    
    
    97Item 9B.
    
    Other Information
    
    
    98PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    98Item 11.
    
    Executive Compensation
    
    
    98Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
    
    
    98Item 13.
    
    Certain
Relationships and Related Transactions
    
    
    99Item 14.
    
    Principal Accounting Fees and Services
    
    
    99PART IVItem 15.
    
    Exhibits and Financial Statement
Schedules
    
    
    99Signatures
    
    
    103Subsidiaries of the RegistrantReport of Independent Registered Public Accounting FirmConsent of PricewaterhouseCoopers LLPReport on ScheduleRobert L. Parker Jr., Chairman, President and CEO, Rule 13a-14(a)/15d-14(a) CertificationW. Kirk Brassfield, Senior Vice President and CFO, Rule 13a-14(a)/15d-14(a) CertificationRobert L. Parker Jr., Chairman, President and CEO, Section 1350 CertificationW. Kirk Brassfield, Senior Vice President and CFO, Section 1350 Certification
  2




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PART I
 
 ITEM 1. BUSINESS
 General
     
    
    U.S. barge drilling;
    
    international land drilling and offshore barge drilling; and
    
    drilling-related rental tools.
  Our Rig Fleet
  
    
    eight land rigs in the Commonwealth of Independent States (currently includes operations
in Russia, Kazakhstan and Turkmenistan and referred to as CIS);
    
    nine land rigs in the Asia Pacific region (one rig sold in early 2008);
    
    eight land rigs in the Americas region;
    
    one barge drilling rig in the inland waters of Mexico;
    
    seven land rigs in the Africa/Middle East region, including four in our 50 percent-owned
joint venture in Saudi Arabia;
    
    the worlds largest arctic-class barge rig in the Caspian Sea; and
    
    16 barge drilling and workover rigs in the transition zones of the U.S. Gulf of Mexico.
 3




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ITEM 1. BUSINESS (continued)
 Our Rental Tools Business
  Our Market Areas
 U.S. Gulf of Mexico.
 International Markets.
 Our Strategy
  Pursuing Strategic
Growth Opportunities.
 4




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ITEM 1. BUSINESS (continued)
 Our Strategy (continued)
   Sustaining the High
Utilization of Our Barge and Land Rigs.
 Focusing on an Efficiency-Based Operating Philosophy for Operating Costs, Preventive
Maintenance and Capital Expenditures.
 Continuing to Reduce Our Debt to Capitalization Ratio and Enhance Our Liquidity.
 Our Competitive Strengths
  Geographically Diverse Operations and Assets.
 Outstanding Safety, Preventive Maintenance, Inventory Control and Training Programs.
 5




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ITEM 1. BUSINESS (continued)
 Our Competitive Strengths (continued)
 Strong and Experienced Senior Management Team.
 Project Management
    Competition
     6




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ITEM 1. BUSINESS (continued)
 Customers
   Contracts
   Insurance and Indemnification
  7




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ITEM 1. BUSINESS (continued)
 Employees
  December 31,2007
    
    
    2006International drilling
    
    
    2,055
    
    
    
    1,574U.S. drilling
    
    
    558
    
    
    
    631Rental tools
    
    
    255
    
    
    
    217Corporate and other
    
    
    219
    
    
    
    206Total employees
    
    
    3,087
    
    
    
    2,628
 Environmental Considerations
    8




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ITEM 1. BUSINESS (continued)
 Environmental Considerations (continued)
      9




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ITEM 1. BUSINESS (continued)
 Environmental Considerations (continued)
   Massachusetts v. EPA e.g.
  10




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ITEM 1. BUSINESS (continued)
 Financial Information About Industry Segments And Geographic Areas
  EXECUTIVE OFFICERS
  (1)
    
    Robert L. Parker Jr., 59, chairman and chief executive officer, joined Parker Drilling
in 1973 as a contract representative and was named manager of U.S. operations later in
1973. He was elected a vice president in 1973, executive vice president in 1976 and was
named president and chief operating officer in October 1977. In December 1991, he was
named chief executive officer, and was elected chairman in April 2006. He has been a
director since 1973.(2)
    
    David C. Mannon, 50, president and chief operating officer, joined Parker Drilling in
December 2004 as senior vice president and chief operating officer. He was appointed
president in July 2007. From 1988 through 2003, Mr. Mannon held various positions,
including president and chief executive officer of Triton Engineering Services Company, a
subsidiary of Noble Drilling. From 1980 through 1988, Mr. Mannon served SEDCO-FOREX,
formerly SEDCO, as a drilling engineer.(3)
    
    W. Kirk Brassfield, 52, senior vice president and chief financial officer, joined
Parker Drilling in March 1998 as controller and principal accounting officer. From 1991
through March 1998, Mr. Brassfield served in various positions, including subsidiary
controller and director of financial planning of MAPCO Inc., a diversified energy company.
From 1979 through 1991, Mr. Brassfield served at the public accounting firm, KPMG.(4)
    
    Denis J. Graham, 58, vice president of engineering, joined Parker Drilling in 2000.
Mr. Graham was previously the senior vice president of technical services for Diamond
Offshore Inc., an international offshore drilling contractor. His experience with Diamond
Offshore ranged from 1978 through 1999 in the areas of offshore drilling rig design, new
construction, conversions, marine operations, maintenance and regulatory compliance.(5)
    
    Ronald C. Potter, 54, vice president and general counsel, re-joined Parker Drilling in
June 2003. From 2001 through May 2003, Mr. Potter was our outside legal counsel as a
shareholder of Conner & Winters, P.C. in Tulsa, Oklahoma. From 1980 to 2001, he served
Parker Drilling in various positions, most recently as chief legal counsel and corporate
secretary.(6)
    
    Lynn G. Cullom, 53, principal accounting officer and corporate controller, joined
Parker Drilling in August 2004 as director of corporate planning. From March 2001 through
August 2004, Ms. Cullom served in various accounting and reporting director positions at El
Paso Corporation. Ms. Cullom served in various positions for Coastal Corporation from
September 1979 through February 2001, including vice president of financial reporting and
planning for Coastal Mart, a subsidiary.(7)
    
    Michael D. Drennon, 52, vice president, operations, joined Parker Drilling in December
2005. From July 2000 through November 2005, Mr. Drennon served as program director for
development of company operated discoveries in Angola for BP p.l.c. Mr. Drennon served in
various engineering, operations and management assignments from 1977 through 2000 with
Amoco and BP p.l.c.
 11




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ITEM 1. BUSINESS (continued)
 Other
Parker Drilling Company Officer
 (8)
    
    David W. Tucker, 52, treasurer and director of investor relations, joined Parker Drilling in
1978 as a financial analyst and served in various financial and accounting positions before
being named chief financial officer of the Companys wholly-owned subsidiary, Hercules
Offshore Corporation, in February 1998. Mr. Tucker was named treasurer in 1999 and assumed
the responsibilities of director of investor relations in 2002.
 
 ITEM 1A. RISK FACTORS
  Risks Related to Our Business
 Rig upgrade, refurbishment and construction projects are subject to risks, including delays and
cost overruns, which could have an adverse impact on our results of operations and cash flows.
  
    
    shortages of equipment or skilled labor;
    
    unforeseen engineering problems;
    
    unanticipated change orders;
    
    work stoppages;
    
    adverse weather conditions;
    
    delays relating to inaccessibility of credit markets;
    
    long lead times for manufactured rig components;
    
    repairs to correct defects in construction not covered by warranty;
    
    loss of revenue associated with downtime to remedy malfunctioning equipment not covered
by warranty;
    
    loss of revenue and liquidated damages associated with downtime to perform repairs
associated with defects, unanticipated equipment refurbishment and
delays in commencement of operations;
    
    unanticipated cost increases; and
    
    inability to obtain the required permits or approvals.
  12




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ITEM 1A. RISK FACTORS (continued)
 Risks Related to Our Business (continued)
 Failure to retain skilled and experienced personnel could affect our operations.
  Our ability to service our debt obligations is primarily dependent upon our future financial
performance.
  
    
    $353.7 million of long-term debt;
    
    $20.0 million of current revolver debt;
    
    $8.5 million of operating lease commitments; and
    
    $12.9 million of standby letters of credit.
    
    
    delay spending on maintenance projects and other capital projects, including the
acquisition or construction of additional rigs, rental tools and other assets;
    
    sell equity securities;
    
    sell assets; or
    
    restructure or refinance our debt.
  13




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ITEM 1A. RISK FACTORS (continued)
 Risks Related to Our Business (continued)
  
    
    result in a reduction of our credit rating, which would make it more difficult for us to
obtain additional financing on acceptable terms;
    
    require us to dedicate a substantial portion of our cash flows from operating activities
to the repayment of our debt and the interest associated with our debt;
    
    limit our operating flexibility due to financial and other restrictive covenants,
including restrictions on incurring additional debt and creating liens on our properties;
    
    place us at a competitive disadvantage compared with our competitors that have
relatively less debt; and
    
    make us more vulnerable to downturns in our business.
 Our current operations and future growth may require significant additional capital, and the
amount of our indebtedness could impair our ability to fund our capital requirements.
  
    
    funds generated from our operations;
    
    public offerings or private placements of equity and debt securities;
    
    commercial bank loans;
    
    capital leases; and
    
    sales of assets.
  Volatile oil and natural gas prices impact demand for our drilling and related services.
  14




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ITEM 1A. RISK FACTORS (continued)
 Risks Related to Our Business (continued)
  
    
    the cost of producing and delivering oil and natural gas;
    
    advances in exploration, development and production technology;
    
    laws and government regulations, both in the United States and other countries;
    
    the imposition or lifting of economic sanctions against foreign countries;
    
    recent rig construction projects which may create overcapacity;
    
    local and worldwide military, political and economic events, including events in the oil
producing countries in the Middle East, Southeast Asia and Latin America
    
    the ability of the Organization of Petroleum Exporting Countries OPEC to set and
maintain production levels and prices;
    
    the level of production by non-OPEC countries;
    
    weather conditions;
    
    expansion or contraction of economic activity, which affects levels of consumer demand;
    
    the rate of discovery of new oil and natural gas reserves;
    
    the availability of pipeline capacity; and
    
    the policies of various governments regarding exploration and development of their oil
and natural gas reserves.
 Most of our contracts are subject to cancellation by our customers without penalty with little or
no notice.
   We rely on a small number of customers, and the loss of a significant customer could adversely
affect us.
  15




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ITEM 1A. RISK FACTORS (continued)
 Risks Related to Our Business (continued)
 Contract drilling and the rental tools business are highly competitive.
   Our international operations could be adversely affected by terrorism, war, civil disturbances,
political instability and similar events.
  Our international operations are also subject to governmental regulation and other risks.
  
    
    foreign laws and governmental regulation;
    
    expropriation, confiscatory taxation and nationalization of our assets located in areas
in which we operate;
    
    increases in governmental royalties;
    
    import-export quotas;
    
    hiring and retaining skilled and experienced workers, many of which are represented by
foreign labor unions;
    
    unfavorable changes in foreign monetary and tax policies and unfavorable and
inconsistent interpretation and application of foreign tax laws;
    
    foreign currency fluctuations and restrictions on currency repatriation; and
    
    other forms of governmental regulation and economic conditions that are beyond our
control.
 16




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ITEM 1A. RISK FACTORS (continued)
 Risks Related to Our Business (continued)
     Compliance with foreign tax and other laws may adversely affect our operations.
  17




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ITEM 1A. RISK FACTORS (continued)
 Risks Related to Our Business (continued)
 We are subject to hazards customary for drilling operations, which could adversely affect our
financial performance if we are not adequately indemnified or insured.
   Government regulations and environmental risks, which reduce our business opportunities and
increase our operating costs, might worsen in the future.
  We are regularly involved in litigation, some of which may be material.
  18




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ITEM 1A. RISK FACTORS (continued)
 Risks Related to Our Common Stock
 Market price of our common stock could change significantly.
  
    
    the other risk factors described in this Form 10-K, including changes in oil and natural
gas prices;
    
    a shortfall in rig utilization, operating revenue or net income from that expected by
securities analysts and investors;
    
    changes in securities analysts estimates of the financial performance of us or our
competitors or the financial performance of companies in the oilfield service industry
generally;
    
    changes in actual or market expectations with respect to the amounts of exploration and
development spending by oil and gas companies;
    
    general conditions in the economy and in the energy-related industries;
    
    general conditions in the securities markets;
    
    political instability, terrorism or war; and
    
    the outcome of pending and future legal proceedings, tax assessments and other claims,
including the outcome of our interest dispute with the Ministry of Finance of the Republic of
Kazakhstan (see Note 13 in the notes to the consolidated financial
statements in Item 8 of this Form 10-K).
 A hostile takeover of our Company would be difficult.
  Risks Related to our Debt Securities
 Payment of principal and interest on our 9.625% Senior Notes will be effectively subordinated to
our senior secured debt to the extent of the value of the assets securing that debt.
   19




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ITEM 1A. RISK FACTORS (continued)
 Risks Related to our Debt Securities (continued)
 We are a holding company and conduct substantially all of our operations through our subsidiaries,
which may affect our ability to make payments on our notes.
   The subsidiary guarantees of our notes could be deemed fraudulent conveyances under certain
circumstances, and a court may try to subordinate or void the subsidiary guarantees.
  
    
    issued the guarantee with the intent of hindering, delaying or defrauding current or
future creditors; or
    
    received less than reasonably equivalent value or fair consideration for the incurrence
of such guarantee; and
 
    
    was insolvent or rendered insolvent by reason of such incurrence; or
    
    was engaged in a business or transaction for which the guarantors remaining assets
constituted unreasonably small capital; or
    
    intended to incur, or believed that it would incur, debts beyond its ability to pay
such debts as they mature.
  
    
    the sum of its debts, including contingent liabilities, was greater than the fair
saleable value of all of its assets;
    
    the present fair saleable value of its assets was less than the amount that would be
required to pay its probable liability, including contingent liabilities, on its existing
debts, as they become absolute and mature; or
    
    it could not pay its debts as they become due.
  20




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ITEM 1A. RISK FACTORS (continued)
 Risks Related to our Debt Securities (continued)
 We may not be able to repurchase our 9.625% Senior Notes upon a change of control.
   We may not have sufficient cash to repurchase the 2.125% Convertible Senior Notes at the option of
the holder upon a fundamental change or to pay the cash payable upon a conversion.
  21




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ITEM 1A. RISK FACTORS (continued)
 DISCLOSURE NOTE REGARDING FORWARD-LOOKING STATEMENTS
  
    
    prices and demand for oil and natural gas;
    
    levels of oil and natural gas exploration and production activities;
    
    demand for contract drilling and drilling related services and demand for rental tools;
    
    our future operating results and profitability;
    
    our future rig utilization, dayrates and rental tools activity;
    
    entering into new, or extending existing, drilling contracts and our expectations
concerning when our rigs will commence operations under such contracts;
    
    growth through acquisitions of companies or assets;
    
    construction or upgrades of rigs;
    
    entering into joint venture agreements with local companies;
    
    our future capital expenditures and investments in the acquisition and refurbishment of
rigs and equipment, including the rigs being constructed by our Saudi Arabia joint venture;
    
    our future liquidity;
    
    availability and sources of funds to reduce our debt and expectations of when debt will
be reduced;
    
    the outcome of pending and future legal proceedings, tax assessments and other claims,
including the outcome of our interest dispute with the Ministry of Finance of the Republic of
Kazakhstan;
    
    the availability of insurance coverage for pending or future claims;
    
    the enforceability of contractual indemnification in relation to pending or future
claims;
    
    compliance with covenants under our senior credit facility and indentures for our senior
notes; and
    
    organic growth of our operations.
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ITEM 1A. RISK FACTORS (continued)
 DISCLOSURE NOTE REGARDING FORWARD-LOOKING STATEMENTS (continued)
  
    
    worldwide economic and business conditions that adversely affect market conditions
and/or the cost of doing business;
    
    the U.S. economy and the demand for natural gas;
    
    fluctuations in the market prices of oil and natural gas;
    
    imposition of unanticipated trade restrictions;
    
    unanticipated operating hazards and uninsured risks;
    
    political instability, terrorism or war;
    
    governmental regulations, including changes in tax laws or ability to remit funds to the
U.S., that adversely affect the cost of doing business;
    
    adverse environmental events;
    
    adverse weather conditions;
    
    changes in the concentration of customer and supplier relationships;
    
    unexpected cost increases for upgrade and refurbishment projects;
    
    delays in obtaining components for capital projects;
    
    shortages of skilled labor;
    
    unanticipated cancellation of contracts by operators without cause;
    
    breakdown of equipment and other operational problems;
    
    changes in competition; and
    
    other similar factors (some of which are discussed in documents referred to in this Form
10-K).
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  23




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ITEM 2. PROPERTIES
  Land Rigs
  Drilling Depth Rating in Feet10,000
    
    
    10,000
    
    
    OverRegion
    
    or Less
    
    
    25,000
    
    
    25,000
    
    
    TotalAsia Pacific
    
    
    1
    
    
    
    8
    (1)
    
    
    
    
    
    
    9CIS
    
    
    
    
    
    
    5
    
    
    
    3
    
    
    
    8Latin America
    
    
    
    
    
    
    3
    
    
    
    5
    
    
    
    8Africa/Middle East
    
    
    
    
    
    
    7
    (2)
    
    
    0
    
    
    
    7Total
    
    
    1
    
    
    
    23
    
    
    
    8
    
    
    
    32
 
 (1)
    
    Rig 206 was sold in early 2008.(2)
    
    Four are in a 50% owned joint venture in Saudi Arabia with two additional
rigs under construction. Barge Rigs
  Year Built
    
    
    Maximumor Last
    
    
    DrillingInternational
    
    Horsepower
    
    
    Refurbished
    
    
    Depth (Feet)Caspian Sea:Rig No. 257
    
    
    3,000
    
    
    
    1999
    
    
    
    30,000Mexico:Rig No. 53
    
    
    1,600
    
    
    
    2004
    
    
    
    20,000
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ITEM 2. PROPERTIES (continued)
 Barge Rigs (continued)
  Year Built
    
    
    Maximumor Last
    
    
    DrillingU.S.
    
    Horsepower
    
    
    Refurbished
    
    
    Depth (Feet)Deep drilling:Rig No. 12
    
    
    1,500
    
    
    
    2006
    
    
    
    20,000Rig No. 15
    
    
    1,000
    
    
    
    2007
    
    
    
    15,000Rig No. 50
    
    
    2,000
    
    
    
    2006
    
    
    
    25,000Rig No. 51
    
    
    2,000
    
    
    
    2003
    
    
    
    25,000Rig No. 54
    
    
    2,000
    
    
    
    2006
    
    
    
    25,000Rig No. 55
    
    
    2,000
    
    
    
    2001
    
    
    
    25,000Rig No. 56
    
    
    2,000
    
    
    
    2005
    
    
    
    25,000Rig No. 72
    
    
    3,000
    
    
    
    2005
    
    
    
    30,000Rig No. 76
    
    
    3,000
    
    
    
    2004
    
    
    
    30,000Rig No. 77
    
    
    3,000
    
    
    
    2006
    
    
    
    30,000Intermediate drilling:Rig No. 8
    
    
    1,000
    
    
    
    2007
    
    
    
    14,000Rig No. 20
    
    
    1,000
    
    
    
    2005
    
    
    
    13,500Rig No. 21
    
    
    1,200
    
    
    
    2007
    
    
    
    14,000Workover and shallow drilling:Rig No. 6 (1) (2)
    
    
    700
    
    
    
    1995
    
    
    
    Rig No. 16
    
    
    1,000
    
    
    
    1994
    
    
    
    13,500Rig No. 23 (2)
    
    
    1,000
    
    
    
    1993
    
    
    
    13,000
 
 (1)
    
    Workover rig.(2)
    
    Cold Stacked 25




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ITEM 2. PROPERTIES (continued)
 Barge Rigs (continued)
  Year Ended December 31,2007
    
    
    2006Transition Zone Rig DataU.S. barge deep drilling:Rigs available for service (1)
    
    
    10.0
    
    
    
    9.6Utilization rate of rigs available for service (2)
    
    
    95
    %
    
    
    81
    %U.S. barge intermediate drilling:Rigs available for service (1)
    
    
    3.3
    
    
    
    4.0Utilization rate of rigs available for service (2)
    
    
    70
    %
    
    
    72
    %U.S. barge workover and shallow drilling:Rigs available for service (1)
    
    
    3.0
    
    
    
    5.4Utilization rate of rigs available for service (2)
    
    
    30
    %
    
    
    53
    %International barge drilling:Rigs available for service (1)
    
    
    2.0
    
    
    
    3.2Utilization rate of rigs available for service (2)
    
    
    100
    %
    
    
    100
    %U.S. Land Rig DataRigs available for service (1):
    
    
    1.6
    
    
    
    0.8Utilization rate of rigs available for service (2):
    
    
    55
    %
    
    
    80
    %International Land Rig DataRigs available for service (1):
    
    
    25.8
    
    
    
    23.1Utilization rate of rigs available for service (2):
    
    
    73
    %
    
    
    63
    %
 
 (1)
    
    The number of 100 percent-owned rigs available for service is determined by calculating the number of days each
rig was in our fleet and was under contract or available for contract. For example, a rig
under contract or available for contract for six months of a year is 0.5 rigs available for
service for such year. Our method of computation of rigs available
for service may not be comparable to
other similarly titled measures of other companies.(2)
    
    Rig utilization rates are based on a weighted average basis assuming 365 days availability
for all rigs available for service. Rigs acquired or disposed of are treated as added to or
removed from the rig fleet as of the date of acquisition or disposal. Rigs that are in
operation or fully or partially staffed and on a revenue-producing standby status are
considered to be utilized. Rigs under contract that generate revenues during moves between
locations or during mobilization or demobilization are also considered to be utilized. Our
method of computation of rig utilization may not be comparable to other similarly
titled measures of other companies. 
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS  AND ISSUER PURCHASES OF EQUITY SECURITIES
  2007
    
    
    2006Quarter
    
    High
    
    
    Low
    
    
    High
    
    
    LowFirst
    
    $
    9.76
    
    
    $
    7.50
    
    
    $
    12.44
    
    
    $
    8.07Second
    
    
    12.10
    
    
    
    9.40
    
    
    
    9.84
    
    
    
    6.10Third
    
    
    11.65
    
    
    
    7.01
    
    
    
    7.65
    
    
    
    6.25Fourth
    
    
    9.07
    
    
    
    6.70
    
    
    
    10.05
    
    
    
    6.50
   27




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28




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ITEM 6. SELECTED FINANCIAL DATA
  Year Ended December 31,2007
    
    
    2006 (1)
    
    
    2005 (2)
    
    
    2004
    
    
    2003(3)(Dollars in Thousands, Except Per Share Amounts)Income Statement DataTotal drilling and rental revenues
    
    $
    654,573
    
    
    $
    586,435
    
    
    $
    531,662
    
    
    $
    376,525
    
    
    $
    338,653Total operating income
    
    
    190,983
    
    
    
    143,326
    
    
    
    115,123
    
    
    
    23,867
    
    
    
    22,927Equity in
loss of unconsolidated joint venture and related charges
    
    
    (27,101
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other expense
    
    
    (22,081
    )
    
    
    (25,891
    )
    
    
    (44,895
    )
    
    
    (59,423
    )
    
    
    (58,376
    )Income tax (expense) benefit
    
    
    (37,723
    )
    
    
    (36,409
    )
    
    
    28,584
    
    
    
    (15,009
    )
    
    
    (16,985
    )Income (loss) from continuing operations
    
    
    104,078
    
    
    
    81,026
    
    
    
    98,812
    
    
    
    (50,565
    )
    
    
    (52,434
    )Net income (loss)
    
    
    104,078
    
    
    
    81,026
    
    
    
    98,883
    
    
    
    (47,083
    )
    
    
    (109,699
    )Basic earnings (loss) per share:Income (loss) from continuing operations
    
    $
    0.95
    
    
    $
    0.76
    
    
    $
    1.03
    
    
    $
    (0.54
    )
    
    $
    (0.56
    )Net income (loss)
    
    $
    0.95
    
    
    $
    0.76
    
    
    $
    1.03
    
    
    $
    (0.50
    )
    
    $
    (1.17
    )Diluted earnings (loss) per share:Income (loss) from continuing operations
    
    $
    0.94
    
    
    $
    0.75
    
    
    $
    1.02
    
    
    $
    (0.54
    )
    
    $
    (0.56
    )Net income (loss)
    
    $
    0.94
    
    
    $
    0.75
    
    
    $
    1.02
    
    
    $
    (0.50
    )
    
    $
    (1.17
    )Balance Sheet DataCash and cash equivalents
    
    $
    60,124
    
    
    $
    92,203
    
    
    $
    60,176
    
    
    $
    44,267
    
    
    $
    67,765Marketable securities
    
    
    
    
    
    
    62,920
    
    
    
    18,000
    
    
    
    
    
    
    
    Property, plant and equipment, net
    
    
    585,888
    
    
    
    435,473
    
    
    
    355,397
    
    
    
    382,824
    
    
    
    387,664Assets held for sale
    
    
    
    
    
    
    4,828
    
    
    
    
    
    
    
    23,665
    
    
    
    150,370Total assets
    
    
    1,076,987
    
    
    
    901,301
    
    
    
    801,620
    
    
    
    726,590
    
    
    
    847,632Total long-term debt and capital leases, including current debt
    
    
    373,721
    
    
    
    329,368
    
    
    
    380,015
    
    
    
    481,063
    
    
    
    571,625Stockholders equity
    
    
    534,724
    
    
    
    459,099
    
    
    
    259,829
    
    
    
    148,917
    
    
    
    192,803
 
 (1)
    
    The 2006 results reflect the reversal of an
$12.6 million valuation allowance at the end of 2006 and the
current year utilization of $5.4 million of NOLs, both
related to Louisiana state net operating loss carryforwards. See
Note 7 in the notes to the consolidated financial statements.(2)
    
    The 2005 results reflect the reversal of a $71.5 million valuation allowance related to
federal net operating loss carryforwards and other deferred tax
assets.(3)
    
    In June 2003, we recognized a $53.8 million impairment charge in discontinued operations
related to our plan to sell the U.S. Gulf of Mexico offshore assets. See Note 2 in the notes
to the consolidated financial statements. 29




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 OVERVIEW AND OUTLOOK
 Summary
   Overview
    30




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##### Table of Contents



OVERVIEW AND OUTLOOK (continued)
   Outlook
    Recent Events
 Year Ended December 31, 2007 Compared with Year Ended December 31, 2006
  31




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
  Year Ended December 31,2007
    
    
    2006(Dollars in Thousands)Drilling and rental revenues:U.S. drilling
    
    $
    231,139
    
    
    
    35
    %
    
    $
    191,225
    
    
    
    33
    %International drilling
    
    
    285,403
    
    
    
    43
    %
    
    
    273,216
    
    
    
    46
    %Rental tools
    
    
    138,031
    
    
    
    21
    %
    
    
    121,994
    
    
    
    21
    %Total drilling and rental revenues
    
    $
    654,573
    
    
    
    100
    %
    
    $
    586,435
    
    
    
    100
    %Drilling and rental operating income:U.S. drilling gross margin excluding depreciation and amortization (1)
    
    $
    132,746
    
    
    
    57
    %
    
    $
    107,763
    
    
    
    56
    %International drilling gross margin excluding depreciation and amortization (1)
    
    
    70,124
    
    
    
    25
    %
    
    
    53,506
    
    
    
    20
    %Rental tools gross margin excluding depreciation and amortization (1)
    
    
    83,654
    
    
    
    61
    %
    
    
    75,540
    
    
    
    62
    %Depreciation and amortization
    
    
    (85,803
    )
    
    
    
    
    
    
    (69,270
    )Total drilling and rental operating income (2)
    
    
    200,721
    
    
    
    
    
    
    
    167,539General and administrative expense
    
    
    (24,708
    )
    
    
    
    
    
    
    (31,786
    )Provision for reduction in carrying
value of certain assets
    
    
    (1,462
    )
    
    
    
    
    
    
    Gain on disposition of assets, net
    
    
    16,432
    
    
    
    
    
    
    
    7,573Total operating income
    
    $
    190,983
    
    
    
    
    
    
    $
    143,326
 
 (1)
    
    Drilling and rental gross margins, excluding depreciation and amortization, are
computed as drilling and rental revenues less direct drilling and rental operating
expenses, excluding depreciation and amortization expense; drilling and rental gross margin
percentages are computed as drilling and rental gross margin, excluding depreciation and
amortization, as a percent of drilling and rental revenues. The gross margin amounts,
excluding depreciation and amortization, and gross margin percentages should not be used as
a substitute for those amounts reported under accounting principles generally accepted in
the United States (GAAP). However, we monitor our business segments based on several
criteria, including drilling and rental gross margin. Management believes that this
information is useful to our investors because it more accurately reflects cash generated
by segment. Such gross margin amounts are reconciled to our most comparable GAAP measure
as follows: InternationalU.S. Drilling
    
    
    Drilling
    
    
    Rental Tools(Dollars in Thousands)Year Ended December 31, 2007Drilling and rental operating income (2)
    
    $
    99,514
    
    
    $
    41,943
    
    
    $
    59,264Depreciation and amortization
    
    
    33,232
    
    
    
    28,181
    
    
    
    24,390Drilling and rental gross margin excluding depreciation and amortization
    
    $
    132,746
    
    
    $
    70,124
    
    
    $
    83,654Year Ended December 31, 2006Drilling and rental operating income (2)
    
    $
    83,370
    
    
    $
    27,465
    
    
    $
    56,704Depreciation and amortization
    
    
    24,393
    
    
    
    26,041
    
    
    
    18,836Drilling and rental gross margin excluding depreciation and amortization
    
    $
    107,763
    
    
    $
    53,506
    
    
    $
    75,540
 
 (2)
    
    Drilling and rental operating income  drilling and rental revenues less direct
drilling and rental operating expenses, including depreciation and amortization expense. 32




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RESULTS OF OPERATIONS (continued)
 U.S. Drilling Segment
   International Drilling Segment
    
    
    completion of the two-rig, TCO contract in 2006 ($30.9 million);
    
    the release of our three rigs in Turkmenistan ($7.9 million) during the third quarter of
2006; and
    
    a reduction in revenues related to our Sakhalin Island operations ($2.8 million
primarily related to lower reimbursable revenues and the completion of a water reinjection
well project in July 2006).
  
    
    an $18.5 million increase in the Karachaganak area of Kazakhstan, where Rig 107 operated
all year in 2007 (the rig was released in late December 2005 from the TCO contract and
commenced operations at the end of March 2006) and the addition of Rigs 249 and 258 (from
the TCO contract), both of which began drilling in the third quarter
of 2007; and
    
    increases related to the full-year operation of Rig 236, which began drilling in western
Kazakhstan in late 2006 ($12.5 million).
  33




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RESULTS OF OPERATIONS (continued)
 International Drilling Segment (continued)
    Rental Tools Segment
   Other Financial Data
  34




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RESULTS OF OPERATIONS (continued)
 Other Financial Data (continued)
   Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
  35




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RESULTS OF OPERATIONS (continued)
  Year Ended December 31,2006
    
    
    2005(Dollars in Thousands)Drilling and rental revenues:U.S. drilling
    
    $
    191,225
    
    
    
    32
    %
    
    $
    128,252
    
    
    
    24
    %International drilling
    
    
    273,216
    
    
    
    47
    %
    
    
    308,572
    
    
    
    58
    %Rental tools
    
    
    121,994
    
    
    
    21
    %
    
    
    94,838
    
    
    
    18
    %Total drilling and rental revenues
    
    $
    586,435
    
    
    
    100
    %
    
    $
    531,662
    
    
    
    100
    %Drilling and rental operating income:U.S. drilling gross margin excluding depreciation and amortization (1)
    
    $
    107,763
    
    
    
    56
    %
    
    $
    61,425
    
    
    
    48
    %International drilling gross margin excluding depreciation and amortization (1)
    
    
    53,506
    
    
    
    20
    %
    
    
    71,411
    
    
    
    23
    %Rental tools gross margin excluding depreciation and amortization (1)
    
    
    75,540
    
    
    
    62
    %
    
    
    56,627
    
    
    
    60
    %Depreciation and amortization
    
    
    (69,270
    )
    
    
    
    
    
    
    (67,204
    )Total drilling and rental operating income (2)
    
    
    167,539
    
    
    
    
    
    
    
    122,259General and administrative expense
    
    
    (31,786
    )
    
    
    
    
    
    
    (27,830
    )Provision for reduction in carrying
value of certain assets
    
    
    
    
    
    
    
    
    
    
    (4,884
    )Gain on disposition of assets, net
    
    
    7,573
    
    
    
    
    
    
    
    25,578Total operating income
    
    $
    143,326
    
    
    
    
    
    
    $
    115,123
 
 (1)
    
    Drilling and rental gross margins, excluding depreciation and amortization, are computed as
drilling and rental revenues less direct drilling and rental operating expenses, excluding
depreciation and amortization expense; drilling and rental gross margin percentages are
computed as drilling and rental gross margin excluding depreciation and amortization as a
percent of drilling and rental revenues. The gross margin amounts excluding depreciation and
amortization and gross margin percentages should not be used as a substitute for those amounts
reported under accounting principles generally accepted in the United States (GAAP).
However, we monitor our business segments based on several criteria, including drilling and
rental gross margin. Management believes that this information is useful to our investors
because it more accurately reflects cash generated by segment. Such gross margin amounts are
reconciled to our most comparable GAAP measure as follows: InternationalU.S. Drilling
    
    
    Drilling
    
    
    Rental Tools(Dollars in Thousands)Year Ended December 31, 2006Drilling and rental operating income (2)
    
    $
    83,370
    
    
    $
    27,465
    
    
    $
    56,704Depreciation and amortization
    
    
    24,393
    
    
    
    26,041
    
    
    
    18,836Drilling and rental gross margin excluding depreciation and amortization
    
    $
    107,763
    
    
    $
    53,506
    
    
    $
    75,540Year Ended December 31, 2005Drilling and rental operating income (2)
    
    $
    41,739
    
    
    $
    40,281
    
    
    $
    40,239Depreciation and amortization
    
    
    19,686
    
    
    
    31,130
    
    
    
    16,388Drilling and rental gross margin excluding depreciation and amortization
    
    $
    61,425
    
    
    $
    71,411
    
    
    $
    56,627
 
 (2)
    
    Drilling and rental operating income  drilling and rental revenues less direct drilling and
rental operating expenses, including depreciation and amortization expense. 36




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RESULTS OF OPERATIONS (continued)
 U.S. Drilling Segment
    International Drilling Segment
    37




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
 International Drilling Segment (continued)
    Rental Tools Segment
  Other Financial Data
    38




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
 Other Financial Data (continued)
   LIQUIDITY AND CAPITAL RESOURCES
 Operating Cash Flows
  39




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES (continued)
 Operating Cash Flows (continued)
   Financing Activity
   40




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LIQUIDITY AND CAPITAL RESOURCES (continued)
 Financing Activity (continued)
            41




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES (continued)
 Financing Activity (continued)
  
    
    $125.0 million aggregate principal amount of Convertible Senior Notes bearing interest
at a rate of 2.125 percent, which are due July 15, 2012; and
    
    $225.0 million aggregate principal amount of 9.625 percent Senior Notes, which are due
October 1, 2013 plus an associated $3.7 million in unamortized debt premium.
   Less than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 Year
    
    
    Years 2 - 3
    
    
    Years 4 - 5
    
    
    5 Years(Dollars in Thousands)Contractual cash obligations:Long-term debt  principal (1)
    
    $
    350,000
    
    
    $
    
    
    
    $
    
    
    
    $
    125,000
    
    
    $
    225,000Long-term debt  interest (1)
    
    
    136,588
    
    
    
    24,313
    
    
    
    48,625
    
    
    
    47,408
    
    
    
    16,242Operating leases (2)
    
    
    8,502
    
    
    
    4,450
    
    
    
    3,133
    
    
    
    919
    
    
    
    Purchase commitments (3)
    
    
    14,720
    
    
    
    14,720
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    509,810
    
    
    $
    43,483
    
    
    $
    51,758
    
    
    $
    173,327
    
    
    $
    241,242Commercial commitments:Long-term
debt  revolving credit facility (4)
    
    $
    20,000
    
    
    $
    20,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Standby letters of credit (4)
    
    
    12,941
    
    
    
    12,941
    
    
    
    
    
    
    
    
    
    
    
    Total commercial commitments
    
    $
    32,941
    
    
    $
    32,941
    
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Long-term debt includes the principal and interest cash obligations of the 9.625 percent
Senior Notes and the 2.125 percent Convertible Notes. The remaining unamortized premium of
$3.7 million is not included in the contractual cash obligations schedule.(2)
    
    Operating leases consist of lease agreements in excess of one year for office space,
equipment, vehicles and personal property.(3)
    
    We have purchase commitments outstanding as of December 31, 2007, related to rig upgrade
projects and new rig construction.(4)
    
    We have a $60.0 million revolving credit facility. As of December 31, 2007, $20.0 million
has been drawn down and $12.9 million of availability has been used to support letters of
credit that have been issued, resulting in an estimated $27.1 million of availability. The
revolving credit facility expires September 20, 2012.   42




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##### Table of Contents



OTHER MATTERS
 Business Risks
  Critical Accounting Policies
   Impairment of Property, Plant and Equipment.
 43




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##### Table of Contents



OTHER MATTERS (continued)
 Critical Accounting Policies (continued)
  Impairment of Goodwill.
  Insurance Reserves.
   44




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##### Table of Contents



OTHER MATTERS (continued)
 Critical Accounting Policies (continued)
 Accounting
for Income Taxes.
    Revenue Recognition.
 Accounting for Derivative Instruments.
  45




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OTHER MATTERS (continued)
 Critical Accounting Policies (continued)
  Recent Accounting Pronouncements
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
  Long-Term Debt
  46




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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
  
 Internal Control  Integrated Framework
    Internal
Control  Integrated Framework
 47




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
 (continued)
   
 Report
of Independent Registered Public Accounting Firm
 
  
 48




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PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
 Year Ended December 31,2007
    
    
    2006
    
    
    2005Drilling and rental revenues:U.S. drilling
    
    $
    231,139
    
    
    $
    191,225
    
    
    $
    128,252International drilling
    
    
    285,403
    
    
    
    273,216
    
    
    
    308,572Rental tools
    
    
    138,031
    
    
    
    121,994
    
    
    
    94,838Total drilling and rental revenues
    
    
    654,573
    
    
    
    586,435
    
    
    
    531,662Drilling and rental operating expenses:U.S. drilling
    
    
    98,393
    
    
    
    83,462
    
    
    
    66,827International drilling
    
    
    215,279
    
    
    
    219,710
    
    
    
    237,161Rental tools
    
    
    54,377
    
    
    
    46,454
    
    
    
    38,211Depreciation and amortization
    
    
    85,803
    
    
    
    69,270
    
    
    
    67,204Total drilling and rental operating expenses
    
    
    453,852
    
    
    
    418,896
    
    
    
    409,403Drilling and rental operating income
    
    
    200,721
    
    
    
    167,539
    
    
    
    122,259General and administration expense
    
    
    (24,708
    )
    
    
    (31,786
    )
    
    
    (27,830
    )Provision for reduction in carrying value of certain assets
    
    
    (1,462
    )
    
    
    
    
    
    
    (4,884
    )Gain on disposition of assets, net
    
    
    16,432
    
    
    
    7,573
    
    
    
    25,578Total operating income
    
    
    190,983
    
    
    
    143,326
    
    
    
    115,123Other income and (expense):Interest expense
    
    
    (25,157
    )
    
    
    (31,598
    )
    
    
    (42,113
    )Change in fair value of derivative positions
    
    
    (671
    )
    
    
    40
    
    
    
    2,076Interest income
    
    
    6,478
    
    
    
    7,963
    
    
    
    2,241Loss on extinguishment of debt
    
    
    (2,396
    )
    
    
    (1,912
    )
    
    
    (8,241
    )Equity in
loss of unconsolidated joint venture and related charges
    
    
    (27,101
    )
    
    
    
    
    
    
    Minority interest
    
    
    (1,000
    )
    
    
    (229
    )
    
    
    1,905Other
    
    
    665
    
    
    
    (155
    )
    
    
    (763
    )Total other income and (expense)
    
    
    (49,182
    )
    
    
    (25,891
    )
    
    
    (44,895
    )Income before income taxes
    
    
    141,801
    
    
    
    117,435
    
    
    
    70,228Income tax expense (benefit):Current tax expense
    
    
    17,602
    
    
    
    20,654
    
    
    
    16,328Deferred tax
expense (benefit)
    
    
    20,121
    
    
    
    15,755
    
    
    
    (44,912
    )Total income
tax expense (benefit)
    
    
    37,723
    
    
    
    36,409
    
    
    
    (28,584
    )Income from continuing operations
    
    
    104,078
    
    
    
    81,026
    
    
    
    98,812Discontinued operations
    
    
    
    
    
    
    
    
    
    
    71Net income
    
    $
    104,078
    
    
    $
    81,026
    
    
    $
    98,883Basic earnings per share:Income from continuing operations
    
    $
    0.95
    
    
    $
    0.76
    
    
    $
    1.03Discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    Net income
    
    $
    0.95
    
    
    $
    0.76
    
    
    $
    1.03Diluted earnings per share:Income from continuing operations
    
    $
    0.94
    
    
    $
    0.75
    
    
    $
    1.02Discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    Net income
    
    $
    0.94
    
    
    $
    0.75
    
    
    $
    1.02Number of common shares used in computing
earnings per share:Basic
    
    
    109,542,364
    
    
    
    106,552,015
    
    
    
    95,818,893Diluted
    
    
    110,856,694
    
    
    
    108,138,384
    
    
    
    97,208,345
  49




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PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
 December 31,ASSETS
    
    2007
    
    
    2006Current assets:Cash and cash equivalents
    
    $
    60,124
    
    
    $
    92,203Marketable securities
    
    
    
    
    
    
    62,920Accounts and notes receivable, net of
allowance for bad debts of $3,152 in 2007 and
$1,481 in 2006
    
    
    166,706
    
    
    
    112,359Rig materials and supplies
    
    
    24,264
    
    
    
    15,000Deferred costs
    
    
    7,795
    
    
    
    6,662Deferred income taxes
    
    
    9,423
    
    
    
    17,307Other tax assets
    
    
    32,532
    
    
    
    Other current assets
    
    
    22,339
    
    
    
    11,123Total current assets
    
    
    323,183
    
    
    
    317,574Property, plant and equipment, at cost:Drilling equipment
    
    
    837,287
    
    
    
    722,501Rental tools
    
    
    188,140
    
    
    
    141,594Buildings, land and improvements
    
    
    23,224
    
    
    
    17,365Other
    
    
    44,293
    
    
    
    34,794Construction in progress
    
    
    121,023
    
    
    
    89,8691,213,967
    
    
    
    1,006,123Less accumulated depreciation and amortization
    
    
    628,079
    
    
    
    570,650Property, plant and equipment, net
    
    
    585,888
    
    
    
    435,473Assets held for sale
    
    
    
    
    
    
    4,828Other assets:Goodwill
    
    
    100,315
    
    
    
    100,315Rig materials and supplies
    
    
    1,925
    
    
    
    5,654Debt issuance costs
    
    
    7,324
    
    
    
    5,552Deferred income taxes
    
    
    40,121
    
    
    
    13,405Investment
in and advances to unconsolidated joint venture
    
    
    (4,353
    )
    
    
    10,267Other assets
    
    
    22,584
    
    
    
    8,233Total other assets
    
    
    167,916
    
    
    
    143,426Total assets
    
    $
    1,076,987
    
    
    $
    901,301
  50




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Continued)
(Dollars in Thousands)
 December 31,LIABILITIES AND STOCKHOLDERS EQUITY
    
    2007
    
    
    2006Current liabilities:Current
portion of long-term debt
    
    $
    20,000
    
    
    $
    Accounts payable
    
    
    36,062
    
    
    
    35,223Accrued liabilities
    
    
    51,290
    
    
    
    60,003Accrued income taxes
    
    
    16,828
    
    
    
    6,677Total current liabilities
    
    
    124,180
    
    
    
    101,903Long-term debt
    
    
    353,721
    
    
    
    329,368Other long-term liabilities
    
    
    56,318
    
    
    
    10,931Long-term deferred tax liability
    
    
    8,044
    
    
    
    Commitments and contingencies (Note 13)
    
    
    
    
    
    
    Stockholders equity:Preferred stock, $1 par value, 1,942,000 shares
authorized, no shares outstanding
    
    
    
    
    
    
    Common stock, $0.16 2/3 par value, authorized
280,000,000 shares, issued and outstanding
111,915,773 shares (109,149,659 shares in 2006)
    
    
    18,653
    
    
    
    18,220Capital in excess of par value
    
    
    593,866
    
    
    
    568,253Accumulated deficit
    
    
    (77,795
    )
    
    
    (127,374
    )Total stockholders equity
    
    
    534,724
    
    
    
    459,099Total liabilities and stockholders equity
    
    $
    1,076,987
    
    
    $
    901,301
  51




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
 Year Ended December 31,2007
    
    
    2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    104,078
    
    
    $
    81,026
    
    
    $
    98,883Adjustments to reconcile net income (loss) to
net cash provided by operating activities:Depreciation and amortization
    
    
    85,803
    
    
    
    69,270
    
    
    
    67,204Amortization of debt issuance and premium
    
    
    845
    
    
    
    764
    
    
    
    958Loss on extinguishment of debt
    
    
    1,396
    
    
    
    910
    
    
    
    935Gain on disposition of assets
    
    
    (16,432
    )
    
    
    (7,573
    )
    
    
    (25,549
    )Provision for reduction in carrying value
of certain assets
    
    
    1,462
    
    
    
    
    
    
    
    4,884Deferred tax expense (benefit)
    
    
    20,121
    
    
    
    15,755
    
    
    
    (44,912
    )Equity loss in unconsolidated joint venture
    
    
    27,101
    
    
    
    
    
    
    
    Expenses not
requiring cash
    
    
    10,597
    
    
    
    9,674
    
    
    
    2,913Change in assets and liabilities:Accounts and notes receivable
    
    
    (60,209
    )
    
    
    (3,456
    )
    
    
    (568
    )Rig materials and supplies
    
    
    (4,945
    )
    
    
    (2,605
    )
    
    
    (3,179
    )Other current assets
    
    
    (12,720
    )
    
    
    34,420
    
    
    
    7,589Accounts payable and accrued liabilities
    
    
    (19,728
    )
    
    
    (28,143
    )
    
    
    18,218Accrued income taxes
    
    
    (48,998
    )
    
    
    (3,101
    )
    
    
    (5,100
    )Other assets
    
    
    (14,095
    )
    
    
    (73
    )
    
    
    331Net cash provided by operating activities
    
    
    74,276
    
    
    
    166,868
    
    
    
    122,607CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (242,098
    )
    
    
    (195,022
    )
    
    
    (69,492
    )Proceeds from the sale of assets
    
    
    23,445
    
    
    
    50,790
    
    
    
    61,046Proceeds from insurance claims
    
    
    7,844
    
    
    
    4,501
    
    
    
    13,850Investment
in unconsolidated joint venture
    
    
    (5,000
    )
    
    
    (10,000
    )
    
    
    Purchase of marketable securities
    
    
    (101,075
    )
    
    
    (198,120
    )
    
    
    (18,000
    )Proceeds from sale of marketable securities
    
    
    163,995
    
    
    
    153,200
    
    
    
    Net cash used in investing activities
    
    
    (152,889
    )
    
    
    (194,651
    )
    
    
    (12,596
    )
  52




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued)
(Dollars in Thousands)
 Year Ended December 31,2007
    
    
    2006
    
    
    2005CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from issuance of debt
    
    $
    125,000
    
    
    $
    
    
    
    $
    55,500Principal payments under debt obligations
    
    
    (100,000
    )
    
    
    (50,000
    )
    
    
    (155,632
    )Proceeds from draw on revolver credit facility
    
    
    20,000
    
    
    
    
    
    
    
    Purchase of call options
    
    
    (31,475
    )
    
    
    
    
    
    
    Sale of common stock warrants
    
    
    20,250
    
    
    
    
    
    
    
    Proceeds from common stock offering
    
    
    
    
    
    
    99,947
    
    
    
    Payment of debt issuance costs
    
    
    (4,618
    )
    
    
    
    
    
    
    (655
    )Proceeds from stock options exercised
    
    
    15,455
    
    
    
    7,537
    
    
    
    6,685Excess tax benefit from stock-based compensation
    
    
    1,922
    
    
    
    2,326
    
    
    
    Net cash provided by (used in) financing activities
    
    
    46,534
    
    
    
    59,810
    
    
    
    (94,102
    )Net increase (decrease) in cash and cash equivalents
    
    
    (32,079
    )
    
    
    32,027
    
    
    
    15,909Cash and cash equivalents at beginning of year
    
    
    92,203
    
    
    
    60,176
    
    
    
    44,267Cash and cash equivalents at end of year
    
    $
    60,124
    
    
    $
    92,203
    
    
    $
    60,176Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    27,439
    
    
    $
    30,898
    
    
    $
    41,308Income taxes
    
    $
    74,801
    
    
    $
    21,566
    
    
    $
    13,415Discontinued operations:Depreciation
    
    $
    
    
    
    $
    
    
    
    $
    Loss on disposition of assets
    
    $
    
    
    
    $
    
    
    
    $
    29Provision for reduction in carrying value
of certain assets
    
    $
    
    
    
    $
    
    
    
    $
    
  53




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(Dollars and Shares in Thousands)
 Unamortized
    
    
    AccumulatedCapital in
    
    
    Restricted
    
    
    OtherCommon
    
    
    Excess of
    
    
    Stock Plan
    
    
    Comprehensive
    
    
    AccumulatedShares
    
    
    Stock
    
    
    Par Value
    
    
    Compensation
    
    
    Income (Loss)
    
    
    DeficitBalances, December 31, 2004
    
    
    94,999
    
    
    $
    15,833
    
    
    $
    441,085
    
    
    $
    (718
    )
    
    $
    
    
    
    $
    (307,283
    )Activity in employees stock plans
    
    
    2,837
    
    
    
    473
    
    
    
    13,495
    
    
    
    (6,217
    )
    
    
    
    
    
    
    Income tax benefit from stock
options exercised
    
    
    
    
    
    
    
    
    
    
    1,555
    
    
    
    
    
    
    
    
    
    
    
    Amortization of restricted stock
plan compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,723
    
    
    
    
    
    
    
    Net income (total comprehensive
income of $98,883)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98,883Balances, December 31, 2005
    
    
    97,836
    
    
    
    16,306
    
    
    
    456,135
    
    
    
    (4,212
    )
    
    
    
    
    
    
    (208,400
    )Adoption of FAS123R
    
    
    
    
    
    
    
    
    
    
    (4,212
    )
    
    
    4,212
    
    
    
    
    
    
    
    Activity in employees stock plans
    
    
    2,414
    
    
    
    431
    
    
    
    9,031
    
    
    
    
    
    
    
    
    
    
    
    Common stock offering
    
    
    8,900
    
    
    
    1,483
    
    
    
    98,464
    
    
    
    
    
    
    
    
    
    
    
    Excess tax benefit from stock
based compensation
    
    
    
    
    
    
    
    
    
    
    2,326
    
    
    
    
    
    
    
    
    
    
    
    Amortization of restricted stock
plan compensation
    
    
    
    
    
    
    
    
    
    
    6,509
    
    
    
    
    
    
    
    
    
    
    
    Net income (total comprehensive
income of $81,026)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,026Balances, December 31, 2006
    
    
    109,150
    
    
    
    18,220
    
    
    
    568,253
    
    
    
    
    
    
    
    
    
    
    
    (127,374
    )Activity in employees stock plans
    
    
    2,766
    
    
    
    433
    
    
    
    14,931
    
    
    
    
    
    
    
    
    
    
    
    Sale of
warrants on Senior Convertible Notes
    
    
    
    
    
    
    
    
    
    
    20,250
    
    
    
    
    
    
    
    
    
    
    
    Purchase of
call options on Senior Convertible Notes
    
    
    
    
    
    
    
    
    
    
    (31,475
    )
    
    
    
    
    
    
    
    
    
    
    OID premium
deferred tax asset on call options of Senior Convertible Notes
    
    
    
    
    
    
    
    
    
    
    12,149
    
    
    
    
    
    
    
    
    
    
    
    Adoption of FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54,499
    )Excess tax benefit from stock
based compensation
    
    
    
    
    
    
    
    
    
    
    1,922
    
    
    
    
    
    
    
    
    
    
    
    Amortization of restricted stock
plan compensation
    
    
    
    
    
    
    
    
    
    
    7,836
    
    
    
    
    
    
    
    
    
    
    
    Net income (total comprehensive
income of $104,078)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104,078Balances, December 31, 2007
    
    
    111,916
    
    
    $
    18,653
    
    
    $
    593,866
    
    
    $
    
    
    
    $
    
    
    
    $
    (77,795
    )
  54




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Summary of Significant Accounting Policies
 Consolidation
 Operations
 Drilling Contracts and Rental Revenues
 Reimbursable Costs
 Cash and Cash Equivalents
 Marketable Securities
 Accounts Receivable and Allowance for Doubtful Accounts
 55




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 1  Summary of Significant Accounting Policies (continued)
  December 31,2007
    
    
    2006(Dollars in Thousands)Trade
    
    $
    169,811
    
    
    $
    113,819Employee (1)
    
    
    47
    
    
    
    21Allowance for doubtful accounts (2)
    
    
    (3,152
    )
    
    
    (1,481
    )Total receivables
    
    $
    166,706
    
    
    $
    112,359
 
 (1)
    
    Employee receivables related to cash advances for business expenses and travel.(2)
    
    Additional information on the allowance for doubtful accounts for the years ended
December 31, 2007, 2006 and 2005 are reported on Schedule II  Valuation and Qualifying
Accounts. Property, Plant and Equipment
 Goodwill
 Rig Materials and Supplies
 Deferred Costs
 Other Long-Term Liabilities
 56




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 1  Summary of Significant Accounting Policies (continued)
 Income Taxes
 Earnings (Loss) Per Share (EPS)
 Concentrations of Credit Risk
   Derivative Financial Instruments
 Fair Value of Financial Instruments
 57




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 1  Summary of Significant Accounting Policies (continued)
 Stock-Based Compensation
 Year EndedDecember 31, 2005(Dollars in Thousands)Net income (loss) as reported
    
    $
    98,883Stock-based compensation expense included in
net income (loss) as reported
    
    
    1,704Stock-based compensation expense determined under fair
value method
    
    
    (1,855
    )Net income (loss) pro forma
    
    $
    98,732Basic earnings (loss) per share:Net income (loss) as reported
    
    $
    1.03Net income (loss) pro forma
    
    $
    1.03Diluted earnings (loss) per share:Net income (loss) as reported
    
    $
    1.02Net income (loss) pro forma
    
    $
    1.02
 58




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 1  Summary of Significant Accounting Policies (continued)
  2006 (1)
    
    
    2005Expected price volatility
    
    
    16.90%
    
    
    
    51.1%Risk-free interest rate range
    
    
    4.23%
    
    
    
    3.38%Expected life of stock options
    
    3 months
    
    3-7 years
 
 (1)
    
    The stock option grant during the first quarter of 2006 was a discounted option that was made
to provide the recipient with the same value as a grant which he had been advised that he
would receive in 1999 but was not awarded at that time due to an oversight. The option was
vested at the grant date and had an April 14, 2006 expiration date. Accordingly, the
volatility and expected term assumptions in 2006 are not comparable with those calculated for
2005.  Accounting Estimates
 Note 2  Disposition of Assets
 Discontinued
Operations
 59




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 2  Disposition of Assets (continued)
  Year Ended December 31,2007
    
    
    2006
    
    
    2005(Dollars in Thousands)U.S. jackup and platform drilling revenues
    
    $
    
    
    
    $
    
    
    
    $
    193U.S. jackup and platform drilling gross margin
    
    $
    
    
    
    $
    
    
    
    $
    100Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    Loss on disposition of assets, net of gains and impairment
    
    
    
    
    
    
    
    
    
    
    (29
    )Income from discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    71
 Disposition of Assets
 Involuntary Conversion of Assets
 60




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 2  Disposition of Assets (continued)
 Provision for Reduction in Carrying Value of an Asset
 Assets Held for Sale
 Note 3  Goodwill
  Note 4  Long-Term Debt
 December 31,2007
    
    
    2006(Dollars in Thousands)Senior Floating Rate Notes payable in September 2010
with interest at three-month LIBOR + 4.75% payable quarterly in
March, June, September and December (effective interest rate of
10.12% at December
31, 2006.)
    
    $
    
    
    
    $
    100,000Convertible Senior Notes payable in July 2012 with
interest
at 2.125% payable semi-annually in January and July.
    
    
    125,000
    
    
    
    Senior Notes payable in October 2013 with interest
at 9.625% payable semi-annually in April and October
net of unamortized premium of $3,721 at December 31, 2007
and $4,368 at December 31, 2006 (effective interest
rate of 9.24%
at December 31, 2007 and 9.27% at December 31,
2006)
    
    
    228,721
    
    
    
    229,368Revolving Credit Facility with interest
at prime plus an applicable margin or LIBOR plus an applicable margin
(interest rate
of 8.75% at December 31, 2007)
    
    
    20,000
    
    
    
    Total debt
    
    
    373,721
    
    
    
    329,368Less current portion
    
    
    20,000
    
    
    
    Total long-term debt
    
    $
    353,721
    
    
    $
    329,368
 61




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 4  Long-Term Debt (continued)
  Activity in 2007 
      Activity in 2006 
 Activity in 2005
   62




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 4  Long-Term Debt (continued)
    Note 5  Guarantor/Non-Guarantor Consolidating Condensed Financial Statements
   63




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands)
 Year ended December 31, 2007Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedDrilling and rental revenues
    
    $
    
    
    
    $
    573,164
    
    
    $
    136,319
    
    
    $
    (54,910
    )
    
    $
    654,573Drilling and rental operating expenses
    
    
    1
    
    
    
    311,867
    
    
    
    111,091
    
    
    
    (54,910
    )
    
    
    368,049Depreciation and amortization
    
    
    
    
    
    
    77,204
    
    
    
    8,599
    
    
    
    
    
    
    
    85,803Drilling and
rental operating income (loss)
    
    
    (1
    )
    
    
    184,093
    
    
    
    16,629
    
    
    
    
    
    
    
    200,721General and administration expense (1)
    
    
    (165
    )
    
    
    (24,485
    )
    
    
    (58
    )
    
    
    
    
    
    
    (24,708
    )Provision for reduction in carrying
value of certain assets
    
    
    
    
    
    
    (1,462
    )
    
    
    
    
    
    
    
    
    
    
    (1,462
    )Gain (loss) on disposition of assets, net
    
    
    
    
    
    
    16,448
    
    
    
    (16
    )
    
    
    
    
    
    
    16,432Total operating income (loss)
    
    
    (166
    )
    
    
    174,594
    
    
    
    16,555
    
    
    
    
    
    
    
    190,983Other income and (expense):Interest expense
    
    
    (29,918
    )
    
    
    (47,183
    )
    
    
    (551
    )
    
    
    52,495
    
    
    
    (25,157
    )Changes in fair value of derivative positions
    
    
    (671
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (671
    )Interest income
    
    
    47,435
    
    
    
    11,878
    
    
    
    (340
    )
    
    
    (52,495
    )
    
    
    6,478Loss on extinguishment of debt
    
    
    (2,396
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,396
    )Equity in loss of unconsolidated joint
venture and related charges
    
    
    
    
    
    
    
    
    
    
    (27,101
    )
    
    
    
    
    
    
    (27,101
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    (1,000
    )
    
    
    
    
    
    
    (1,000
    )Other
    
    
    9
    
    
    
    618
    
    
    
    44
    
    
    
    (6
    )
    
    
    665Equity in net earnings of subsidiaries
    
    
    101,432
    
    
    
    
    
    
    
    
    
    
    
    (101,432
    )
    
    
    Total other income and (expense)
    
    
    115,891
    
    
    
    (34,687
    )
    
    
    (28,948
    )
    
    
    (101,438
    )
    
    
    (49,182
    )Income (loss) before income taxes
    
    
    115,725
    
    
    
    139,907
    
    
    
    (12,393
    )
    
    
    (101,438
    )
    
    
    141,801Income tax
expense (benefit):Current
    
    
    (4,237
    )
    
    
    16,217
    
    
    
    5,622
    
    
    
    
    
    
    
    17,602Deferred
    
    
    15,884
    
    
    
    2,626
    
    
    
    1,611
    
    
    
    
    
    
    
    20,121Income tax expense
    
    
    11,647
    
    
    
    18,843
    
    
    
    7,233
    
    
    
    
    
    
    
    37,723Net income (loss)
    
    $
    104,078
    
    
    $
    121,064
    
    
    $
    (19,626
    )
    
    $
    (101,438
    )
    
    $
    104,078
 
 (1)
    
    All field operations general and administration expenses are included in operating expenses. 64




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands)
 Year Ended December 31, 2006Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedDrilling and rental revenues
    
    $
    3
    
    
    $
    510,157
    
    
    $
    123,506
    
    
    $
    (47,231
    )
    
    $
    586,435Drilling and rental operating expenses
    
    
    
    
    
    
    274,862
    
    
    
    121,995
    
    
    
    (47,231
    )
    
    
    349,626Depreciation and amortization
    
    
    
    
    
    
    65,221
    
    
    
    4,049
    
    
    
    
    
    
    
    69,270Drilling and rental operating income
    
    
    3
    
    
    
    170,074
    
    
    
    (2,538
    )
    
    
    
    
    
    
    167,539General and administration expense (1)
    
    
    (166
    )
    
    
    (31,606
    )
    
    
    (14
    )
    
    
    
    
    
    
    (31,786
    )Gain (loss) on disposition of assets, net
    
    
    (6
    )
    
    
    7,416
    
    
    
    163
    
    
    
    
    
    
    
    7,573Total operating income (loss)
    
    
    (169
    )
    
    
    145,884
    
    
    
    (2,389
    )
    
    
    
    
    
    
    143,326Other income and (expense):Interest expense
    
    
    (36,313
    )
    
    
    (47,178
    )
    
    
    (1,674
    )
    
    
    53,567
    
    
    
    (31,598
    )Changes in fair value of derivative positions
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40Interest income
    
    
    50,102
    
    
    
    8,458
    
    
    
    2,970
    
    
    
    (53,567
    )
    
    
    7,963Loss on extinguishment of debt
    
    
    (1,912
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,912
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    (229
    )
    
    
    
    
    
    
    (229
    )Other
    
    
    21
    
    
    
    (216
    )
    
    
    40
    
    
    
    
    
    
    
    (155
    )Equity in net earnings of subsidiaries
    
    
    80,335
    
    
    
    
    
    
    
    
    
    
    
    (80,335
    )
    
    
    Total other income and (expense)
    
    
    92,273
    
    
    
    (38,936
    )
    
    
    1,107
    
    
    
    (80,335
    )
    
    
    (25,891
    )Income (loss) before income taxes
    
    
    92,104
    
    
    
    106,948
    
    
    
    (1,282
    )
    
    
    (80,335
    )
    
    
    117,435Income tax expense (benefit):Current
    
    
    (4,873
    )
    
    
    21,243
    
    
    
    4,284
    
    
    
    
    
    
    
    20,654Deferred
    
    
    15,951
    
    
    
    (4,144
    )
    
    
    3,948
    
    
    
    
    
    
    
    15,755Income tax expense
    
    
    11,078
    
    
    
    17,099
    
    
    
    8,232
    
    
    
    
    
    
    
    36,409Net income (loss)
    
    $
    81,026
    
    
    $
    89,849
    
    
    $
    (9,514
    )
    
    $
    (80,335
    )
    
    $
    81,026
 
 (1)
    
    All field operations general and administration expenses are included in operating expenses. 65




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands)
 Year Ended December 31, 2005Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedDrilling and rental revenues
    
    $
    
    
    
    $
    403,024
    
    
    $
    156,802
    
    
    $
    (28,164
    )
    
    $
    531,662Drilling and rental operating expenses
    
    
    1
    
    
    
    218,189
    
    
    
    152,173
    
    
    
    (28,164
    )
    
    
    342,199Depreciation and amortization
    
    
    
    
    
    
    63,226
    
    
    
    3,978
    
    
    
    
    
    
    
    67,204Drilling and rental operating income (loss)
    
    
    (1
    )
    
    
    121,609
    
    
    
    651
    
    
    
    
    
    
    
    122,259General and administrative expense(1)
    
    
    (179
    )
    
    
    (27,632
    )
    
    
    (19
    )
    
    
    
    
    
    
    (27,830
    )Provision for reduction in carrying
value of certain assets
    
    
    (2,300
    )
    
    
    (2,584
    )
    
    
    
    
    
    
    
    
    
    
    (4,884
    )Gain on disposition of assets, net
    
    
    38
    
    
    
    24,590
    
    
    
    950
    
    
    
    
    
    
    
    25,578Total operating income (loss)
    
    
    (2,442
    )
    
    
    115,983
    
    
    
    1,582
    
    
    
    
    
    
    
    115,123Other income and (expense):Interest expense
    
    
    (46,856
    )
    
    
    (48,880
    )
    
    
    (2,664
    )
    
    
    56,287
    
    
    
    (42,113
    )Changes in fair value of derivative positions
    
    
    2,076
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,076Interest income
    
    
    46,565
    
    
    
    8,641
    
    
    
    3,322
    
    
    
    (56,287
    )
    
    
    2,241Loss on extinguishment of debt
    
    
    (8,241
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,241
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    1,905
    
    
    
    
    
    
    
    1,905Other
    
    
    (655
    )
    
    
    (147
    )
    
    
    39
    
    
    
    
    
    
    
    (763
    )Equity in net earnings of subsidiaries
    
    
    109,271
    
    
    
    
    
    
    
    
    
    
    
    (109,271
    )
    
    
    Total other income and (expense)
    
    
    102,160
    
    
    
    (40,386
    )
    
    
    2,602
    
    
    
    (109,271
    )
    
    
    (44,895
    )Income (loss) before income taxes
    
    
    99,718
    
    
    
    75,597
    
    
    
    4,184
    
    
    
    (109,271
    )
    
    
    70,228Income tax expense (benefit):Current tax expense
    
    
    2,672
    
    
    
    11,358
    
    
    
    2,298
    
    
    
    
    
    
    
    16,328Deferred tax benefit
    
    
    (1,837
    )
    
    
    (44,678
    )
    
    
    1,603
    
    
    
    
    
    
    
    (44,912
    )Income tax expense (benefit)
    
    
    835
    
    
    
    (33,320
    )
    
    
    3,901
    
    
    
    
    
    
    
    (28,584
    )Income (loss) from continuing operations
    
    
    98,883
    
    
    
    108,917
    
    
    
    283
    
    
    
    (109,271
    )
    
    
    98,812Discontinued operations
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    71Net income (loss)
    
    $
    98,883
    
    
    $
    108,988
    
    
    $
    283
    
    
    $
    (109,271
    )
    
    $
    98,883
 
 (1)
    
    All field operations general and administrative expenses are included in operating expenses. 66




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
(Dollars in Thousands)
 December 31, 2007Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    31,326
    
    
    $
    8,314
    
    
    $
    20,484
    
    
    $
    
    
    
    $
    60,124Accounts and notes receivable, net
    
    
    79,688
    
    
    
    187,663
    
    
    
    80,139
    
    
    
    (180,784
    )
    
    
    166,706Rig materials and supplies
    
    
    
    
    
    
    10,667
    
    
    
    13,597
    
    
    
    
    
    
    
    24,264Deferred costs
    
    
    
    
    
    
    1,553
    
    
    
    6,242
    
    
    
    
    
    
    
    7,795Deferred income taxes
    
    
    9,423
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,423Other tax
assets
    
    
    59,673
    
    
    
    (23,395
    )
    
    
    (3,746
    )
    
    
    
    
    
    
    32,532Other current assets
    
    
    174
    
    
    
    10,578
    
    
    
    11,587
    
    
    
    
    
    
    
    22,339Total current assets
    
    
    180,284
    
    
    
    195,380
    
    
    
    128,303
    
    
    
    (180,784
    )
    
    
    323,183Property, plant and equipment, net
    
    
    79
    
    
    
    423,652
    
    
    
    162,035
    
    
    
    122
    
    
    
    585,888Goodwill
    
    
    
    
    
    
    100,315
    
    
    
    
    
    
    
    
    
    
    
    100,315Investment in subsidiaries and intercompany advances
    
    
    813,248
    
    
    
    963,269
    
    
    
    (58,320
    )
    
    
    (1,718,197
    )
    
    
    Investment in and advances to unconsolidated joint
venture
    
    
    
    
    
    
    267
    
    
    
    (4,620
    )
    
    
    
    
    
    
    (4,353
    )Other noncurrent assets
    
    
    40,113
    
    
    
    20,805
    
    
    
    11,036
    
    
    
    
    
    
    
    71,954Total assets
    
    $
    1,033,724
    
    
    $
    1,703,688
    
    
    $
    238,434
    
    
    $
    (1,898,859
    )
    
    $
    1,076,987LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current debt
    
    $
    20,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    20,000Accounts payable and accrued liabilities
    
    
    48,820
    
    
    
    221,363
    
    
    
    64,577
    
    
    
    (247,408
    )
    
    
    87,352Accrued income taxes
    
    
    1,765
    
    
    
    10,790
    
    
    
    4,273
    
    
    
    
    
    
    
    16,828Total current liabilities
    
    
    70,585
    
    
    
    232,153
    
    
    
    68,850
    
    
    
    (247,408
    )
    
    
    124,180Long-term debt
    
    
    353,721
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    353,721Other long-term liabilities
    
    
    110
    
    
    
    48,174
    
    
    
    8,034
    
    
    
    
    
    
    
    56,318Long-term deferred tax liability
    
    
    1
    
    
    
    1,237
    
    
    
    6,806
    
    
    
    
    
    
    
    8,044Intercompany payables
    
    
    74,583
    
    
    
    576,746
    
    
    
    38,074
    
    
    
    (689,403
    )
    
    
    Commitments and contingencies (Note 13)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders equity:Common stock
    
    
    18,653
    
    
    
    39,900
    
    
    
    21,152
    
    
    
    (61,052
    )
    
    
    18,653Capital in excess of par value
    
    
    593,866
    
    
    
    1,045,732
    
    
    
    115,765
    
    
    
    (1,161,497
    )
    
    
    593,866Retained earnings (accumulated deficit)
    
    
    (77,795
    )
    
    
    (240,254
    )
    
    
    (20,247
    )
    
    
    260,501
    
    
    
    (77,795
    )Total stockholders equity
    
    
    534,724
    
    
    
    845,378
    
    
    
    116,670
    
    
    
    (962,048
    )
    
    
    534,724Total liabilities and stockholders equity
    
    $
    1,033,724
    
    
    $
    1,703,688
    
    
    $
    238,434
    
    
    $
    (1,898,859
    )
    
    $
    1,076,987
 67




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
(Dollars in Thousands)
 December 31, 2006Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    60,029
    
    
    $
    14,367
    
    
    $
    17,807
    
    
    $
    
    
    
    $
    92,203Marketable securities
    
    
    60,920
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    62,920Accounts and notes receivable, net
    
    
    53,844
    
    
    
    143,905
    
    
    
    33,625
    
    
    
    (119,015
    )
    
    
    112,359Rig materials and supplies
    
    
    
    
    
    
    7,173
    
    
    
    7,827
    
    
    
    
    
    
    
    15,000Deferred costs
    
    
    
    
    
    
    6,321
    
    
    
    341
    
    
    
    
    
    
    
    6,662Other current assets
    
    
    18,105
    
    
    
    8,969
    
    
    
    1,319
    
    
    
    37
    
    
    
    28,430Total current assets
    
    
    192,898
    
    
    
    182,735
    
    
    
    60,919
    
    
    
    (118,978
    )
    
    
    317,574Property, plant and equipment, net
    
    
    134
    
    
    
    354,356
    
    
    
    80,861
    
    
    
    122
    
    
    
    435,473Assets held for sale
    
    
    
    
    
    
    4,828
    
    
    
    
    
    
    
    
    
    
    
    4,828Goodwill
    
    
    
    
    
    
    100,315
    
    
    
    
    
    
    
    
    
    
    
    100,315Investment in subsidiaries and intercompany advances
    
    
    694,050
    
    
    
    846,800
    
    
    
    (8,053
    )
    
    
    (1,532,797
    )
    
    
    Other noncurrent assets
    
    
    18,043
    
    
    
    19,774
    
    
    
    5,294
    
    
    
    
    
    
    
    43,111Total assets
    
    $
    905,125
    
    
    $
    1,508,808
    
    
    $
    139,021
    
    
    $
    (1,651,653
    )
    
    $
    901,301LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    44,667
    
    
    $
    175,092
    
    
    $
    44,611
    
    
    $
    (169,144
    )
    
    $
    95,226Accrued income taxes
    
    
    (10,514
    )
    
    
    17,039
    
    
    
    152
    
    
    
    
    
    
    
    6,677Total current liabilities
    
    
    34,153
    
    
    
    192,131
    
    
    
    44,763
    
    
    
    (169,144
    )
    
    
    101,903Long-term debt
    
    
    329,368
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    329,368Other long-term liabilities
    
    
    1,596
    
    
    
    9,030
    
    
    
    265
    
    
    
    40
    
    
    
    10,931Intercompany payables
    
    
    80,909
    
    
    
    544,250
    
    
    
    37,219
    
    
    
    (662,378
    )
    
    
    Commitments
and contingences (Note 13)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders equity:Common stock
    
    
    18,220
    
    
    
    39,899
    
    
    
    21,251
    
    
    
    (61,150
    )
    
    
    18,220Capital in excess of par value
    
    
    568,253
    
    
    
    1,013,736
    
    
    
    34,526
    
    
    
    (1,048,262
    )
    
    
    568,253Retained earnings (accumulated deficit)
    
    
    (127,374
    )
    
    
    (290,238
    )
    
    
    997
    
    
    
    289,241
    
    
    
    (127,374
    )Total stockholders equity
    
    
    459,099
    
    
    
    763,397
    
    
    
    56,774
    
    
    
    (820,171
    )
    
    
    459,099Total liabilities and stockholders equity
    
    $
    905,125
    
    
    $
    1,508,808
    
    
    $
    139,021
    
    
    $
    (1,651,653
    )
    
    $
    901,301
 68




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
 Year ended December 31, 2007Parent


Guarantor


Non-Guarantor


Eliminations


ConsolidatedCash flows from operating activities:Net income (loss)

$
104,078


$
121,064


$
(19,626
)

$
(101,438
)

$
104,078Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:Depreciation and amortization






77,204



8,599







85,803Amortization of debt issuance and premium


845















845Loss on extinguishment of debt


1,396















1,396Gain (loss) on disposition of assets






(16,448
)


16







(16,432
)Deferred income tax expense


15,884



2,626



1,611







20,121Equity in loss of unconsolidated joint venture










27,101







27,101Provision for reduction in carrying value of certain assets






1,462











1,462Expenses not requiring cash


11,187



(590
)










10,597Equity in net earnings of subsidiaries


(101,432
)










101,432



Change in accounts receivable


(25,844
)


10,149



(44,514
)






(60,209
)Change in other assets


(21,409
)


36,881



(47,232
)






(31,760
)Change in liabilities


(24,119
)


(85,496
)


40,883



6



(68,726
)Net cash provided by (used in) operating activities


(39,414
)


146,852



(33,162
)






74,276Cash flows from investing activities:Capital expenditures






(235,189
)


(6,909
)






(242,098
)Proceeds from the sale of assets


54



22,865



526







23,445Proceeds from insurance claims






7,844











7,844Investment in unconsolidated joint venture










(5,000
)






(5,000
)Purchase of marketable securities


(101,075
)














(101,075
)Proceeds from sale of marketable securities


161,995



2,000











163,995Net cash (used in) investing activities


60,974



(202,480
)


(11,383
)






(152,889
)Cash flows from financing activities:Proceeds from issuance of debt


125,000















125,000Principal payments under debt obligations


(100,000
)














(100,000
)Proceeds from draw on revolver credit facility


20,000















20,000Purchase of call options


(31,475
)














(31,475
)Proceeds from sale of common stock warrants


20,250















20,250Payment of debt issuance costs


(4,618
)














(4,618
)Proceeds from stock options exercised


15,455















15,455Excess tax benefit from stock-based compensation


1,922















1,922Intercompany advances, net


(96,797
)


49,575



47,222







Net cash provided by (used in) financing activities


(50,263
)


49,575



47,222







46,534Net increase (decrease) in cash and cash equivalents


(28,703
)


(6,053
)


2,677







(32,079
)Cash and cash equivalents at beginning of year


60,029




14,367



17,807







92,203Cash and cash equivalents at end of year

$
31,326


$
8,314


$
20,484


$



$
60,124 69




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
 Year Ended December 31, 2006Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    81,026
    
    
    $
    89,849
    
    
    $
    (9,514
    )
    
    $
    (80,335
    )
    
    $
    81,026Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    
    
    
    
    65,221
    
    
    
    4,049
    
    
    
    
    
    
    
    69,270Amortization of debt issuance and premium
    
    
    764
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    764Loss on extinguishment of debt
    
    
    910
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    910Gain (loss) on disposition of assets
    
    
    6
    
    
    
    (7,416
    )
    
    
    (163
    )
    
    
    
    
    
    
    (7,573
    )Deferred tax expense (benefit)
    
    
    15,951
    
    
    
    (4,144
    )
    
    
    3,948
    
    
    
    
    
    
    
    15,755Expenses not
requiring cash
    
    
    8,474
    
    
    
    1,200
    
    
    
    
    
    
    
    
    
    
    
    9,674Equity in net earnings of subsidiaries
    
    
    (80,335
    )
    
    
    
    
    
    
    
    
    
    
    80,335
    
    
    
    Change in operating assets and liabilities
    
    
    (2,952
    )
    
    
    6,797
    
    
    
    (6,803
    )
    
    
    
    
    
    
    (2,958
    )Net cash provided by operating activities
    
    
    23,844
    
    
    
    151,507
    
    
    
    (8,483
    )
    
    
    
    
    
    
    166,868Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (191,308
    )
    
    
    (3,714
    )
    
    
    
    
    
    
    (195,022
    )Investment
in unconsolidated joint venture
    
    
    (10,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,000
    )Proceeds from the sale of assets
    
    
    (6
    )
    
    
    48,481
    
    
    
    2,315
    
    
    
    
    
    
    
    50,790Proceeds
from insurance claims
    
    
    
    
    
    
    4,501
    
    
    
    
    
    
    
    
    
    
    
    4,501Purchase of marketable securities
    
    
    (196,120
    )
    
    
    (2,000
    )
    
    
    
    
    
    
    
    
    
    
    (198,120
    )Sale of marketable securities
    
    
    151,200
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    153,200Net cash used in investing activities
    
    
    (54,926
    )
    
    
    (138,326
    )
    
    
    (1,399
    )
    
    
    
    
    
    
    (194,651
    )Cash flows from financing activities:Principal payments under debt obligations
    
    
    (50,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,000
    )Proceeds from common stock offering
    
    
    99,947
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99,947Proceeds from stock options exercised
    
    
    7,537
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,537Excess tax benefit from stock options
exercised
    
    
    2,326
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,326Intercompany advances, net
    
    
    (677
    )
    
    
    (9,959
    )
    
    
    10,636
    
    
    
    
    
    
    
    Net cash provided by (used in) financing
activities
    
    
    59,133
    
    
    
    (9,959
    )
    
    
    10,636
    
    
    
    
    
    
    
    59,810Net increase in cash and cash equivalents
    
    
    28,051
    
    
    
    3,222
    
    
    
    754
    
    
    
    
    
    
    
    32,027Cash and cash equivalents at beginning of year
    
    
    31,978
    
    
    
    11,145
    
    
    
    17,053
    
    
    
    
    
    
    
    60,176Cash and cash equivalents at end of year
    
    $
    60,029
    
    
    $
    14,367
    
    
    $
    17,807
    
    
    $
    
    
    
    $
    92,203
 70




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
 Year Ended December 31, 2005Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    98,883
    
    
    $
    108,988
    
    
    $
    283
    
    
    $
    (109,271
    )
    
    $
    98,883Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:Depreciation and amortization
    
    
    
    
    
    
    63,226
    
    
    
    3,978
    
    
    
    
    
    
    
    67,204Amortization of debt issuance and premium
    
    
    958
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    958Loss on extinguishment of debt
    
    
    935
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    935Gain on disposition of assets
    
    
    (38
    )
    
    
    (24,561
    )
    
    
    (950
    )
    
    
    
    
    
    
    (25,549
    )Provision for reduction in carrying
value of certain assets
    
    
    2,300
    
    
    
    2,584
    
    
    
    
    
    
    
    
    
    
    
    4,884Deferred tax expense (benefit)
    
    
    (1,837
    )
    
    
    (44,678
    )
    
    
    1,603
    
    
    
    
    
    
    
    (44,912
    )Expenses not
requiring cash
    
    
    1,713
    
    
    
    1,200
    
    
    
    
    
    
    
    
    
    
    
    2,913Equity in net earnings of subsidiaries
    
    
    (109,271
    )
    
    
    
    
    
    
    
    
    
    
    109,271
    
    
    
    Change in operating assets and liabilities
    
    
    139,247
    
    
    
    (131,278
    )
    
    
    9,322
    
    
    
    
    
    
    
    17,291Net cash provided by (used in) operating
activities
    
    
    132,890
    
    
    
    (24,519
    )
    
    
    14,236
    
    
    
    
    
    
    
    122,607Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (63,806
    )
    
    
    (5,686
    )
    
    
    
    
    
    
    (69,492
    )Proceeds from the sale of assets
    
    
    38
    
    
    
    57,184
    
    
    
    3,824
    
    
    
    
    
    
    
    61,046Proceeds from insurance claims
    
    
    
    
    
    
    13,850
    
    
    
    
    
    
    
    
    
    
    
    13,850Purchase of marketable securities
    
    
    (16,000
    )
    
    
    (2,000
    )
    
    
    
    
    
    
    
    
    
    
    (18,000
    )Net cash provided by (used in) investing
activities
    
    
    (15,962
    )
    
    
    5,228
    
    
    
    (1,862
    )
    
    
    
    
    
    
    (12,596
    )Cash flows from financing activities:Proceeds from issuance of debt
    
    
    55,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,500Principal payments under debt obligations
    
    
    (155,632
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (155,632
    )Payment of debt issuance costs
    
    
    (655
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (655
    )Proceeds from stock options exercised
    
    
    6,685
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,685Intercompany advances, net
    
    
    (7,525
    )
    
    
    22,498
    
    
    
    (14,973
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing
activities
    
    
    (101,627
    )
    
    
    22,498
    
    
    
    (14,973
    )
    
    
    
    
    
    
    (94,102
    )Net increase (decrease) in cash and cash
equivalents
    
    
    15,301
    
    
    
    3,207
    
    
    
    (2,599
    )
    
    
    
    
    
    
    15,909Cash and cash equivalents at beginning of year
    
    
    16,677
    
    
    
    7,938
    
    
    
    19,652
    
    
    
    
    
    
    
    44,267Cash and cash equivalents at end of year
    
    $
    31,978
    
    
    $
    11,145
    
    
    $
    17,053
    
    
    $
    
    
    
    $
    60,176
 71




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 6  Derivative Financial Instruments
   Note 7  Income Taxes
  Year Ended December 31,2007
    
    
    2006
    
    
    2005(Dollars in Thousands)United States
    
    $
    127,484
    
    
    $
    99,024
    
    
    $
    23,021Foreign
    
    
    14,317
    
    
    
    18,411
    
    
    
    47,207$
    141,801
    
    
    $
    117,435
    
    
    $
    70,228
 72




---



##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 7  Income Taxes (continued)
  Year Ended December 31,2007
    
    
    2006
    
    
    2005(Dollars in Thousands)Current:United States:Federal
    
    $
    13,860
    
    
    $
    13,046
    
    
    $
    1,837State
    
    
    791
    
    
    
    
    
    
    
    18Foreign
    
    
    2,951
    
    
    
    7,608
    
    
    
    14,473Deferred:United States:Federal
    
    
    16,559
    
    
    
    30,436
    
    
    
    (46,537
    )State
    
    
    4,290
    
    
    
    (12,617
    )
    
    
    Foreign
    
    
    (728
    )
    
    
    (2,064
    )
    
    
    1,625$
    37,723
    
    
    $
    36,409
    
    
    $
    (28,584
    )
  Year Ended December 31,2007
    
    
    2006
    
    
    2005% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofPre-Tax
    
    
    
    
    
    
    Pre-Tax
    
    
    
    
    
    
    Pre-TaxAmount
    
    
    Income
    
    
    Amount
    
    
    Income
    
    
    Amount
    
    
    Income(Dollars in Thousands)Computed expected tax expense
    
    $
    49,630
    
    
    
    35
    %
    
    $
    41,104
    
    
    
    35
    %
    
    $
    24,580
    
    
    
    35
    %Foreign
taxes, (net of federal benefit-pre-07)
    
    
    12,669
    
    
    
    9
    %
    
    
    5,820
    
    
    
    5
    %
    
    
    7,496
    
    
    
    11
    %State taxes, net of federal benefit
    
    
    5,080
    
    
    
    4
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign tax credits
    
    
    (16,020
    )
    
    
    (11
    )%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Kazakhstan
tax credits
    
    
    (22,547
    )
    
    
    (16
    )%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
Kazakhstan FIN 48 items
    
    
    (12,427
    )
    
    
    (9
    )%Change in valuation allowance
    
    
    5,764
    
    
    
    4
    %
    
    
    
    
    
    
    
    
    
    
    (71,497
    )
    
    
    (102
    )%Foreign corporation income
    
    
    8,916
    
    
    
    6
    %
    
    
    1,524
    
    
    
    2
    %
    
    
    9,055
    
    
    
    13
    %FIN 48
    
    
    7,807
    
    
    
    5
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefit of State NOL
    
    
    
    
    
    
    
    
    
    
    (12,617
    )
    
    
    (11
    )%
    
    
    
    
    
    
    Permanent differences
    
    
    (161
    )
    
    
    
    
    
    
    1,404
    
    
    
    1
    %
    
    
    1,740
    
    
    
    2
    %Other
    
    
    (988
    )
    
    
    
    
    
    
    (826
    )
    
    
    (1
    )%
    
    
    42
    
    
    
    Actual tax expense
    
    $
    37,723
    
    
    
    27
    %
    
    $
    36,409
    
    
    
    31
    %
    
    $
    (28,584
    )
    
    
    (41
    )%
 73




---



##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 7  Income Taxes (continued)
  December 31,2007
    
    
    2006(Dollars in Thousands)Deferred tax assetsCurrent deferred tax assets:Reserves established against realization of certain assets
    
    $
    6,563
    
    
    $
    4,375Accruals not currently deductible for tax purposes
    
    
    2,860
    
    
    
    12,932Gross current deferred tax assets
    
    
    9,423
    
    
    
    17,307Valuation allowance
    
    
    0
    
    
    
    0Net current deferred tax assets
    
    
    9,423
    
    
    
    17,307Non-current deferred tax assets:State net operating loss carryforwards
    
    
    9,217
    
    
    
    12,617Foreign tax credits
    
    
    6,300
    
    
    
    0Other long term liabilities
    
    
    2,149
    
    
    
    2,149Deferred
stock based compensation
    
    
    370
    
    
    
    3,693
    

Unamortized
OID benefit
    
    
    11,239
    
    
    
    0Indirect FIN 48
U.S. tax benefit
    
    
    13,381
    
    
    
    0
    

Gross long-term deferred tax assets
    
    
    42,656
    
    
    
    18,459Valuation allowance
    
    
    (6,391
    )
    
    
    0
    

Net non-current deferred tax assets
    
    
    36,265
    
    
    
    18,459Net deferred tax assets
    
    
    45,688
    
    
    
    35,766
    

Deferred tax liabilities:Non-current deferred tax liabilities:
    
    
    
    
    
    
    
    

Property, plant and equipment
    
    
    8,571
    
    
    
    10,940Goodwill
    
    
    (14,336
    )
    
    
    (14,561
    )















Other
    
    
    1,577
    
    
    
    (1,433
    )Net non-current deferred tax liabilities
    
    
    (4,188
    )
    
    
    (5,054
    )

Net deferred tax asset
    
    $
    41,500
    
    
    $
    30,712
  74




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 7  Income Taxes (continued)
      In MillionsBalance at January 1,2007
    
    $
    (49.3
    )Additions based on tax positions taken during a prior period
    
    
    Reductions based on tax positions taken during a prior period
    
    
    3.8Additions based on tax positions taken during the current period
    
    
    (4.6
    )Reductions based on tax positions taken during the current period
    
    
    Reductions related to settlement of tax matters
    
    
    36.3Reductions related to a lapse of applicable statute of limitations
    
    
    0.7Balance at December 31, 2007
    
    $
    (13.1
    )
  United States  Federal
    
    1985-presentBolivia
    
    2000-presentKazakhstan
    
    2002-presentMexico
    
    2002-presentPapua New Guinea
    
    2001-presentRussia
    
    2005-presentNew Zealand
    
    2002-presentColombia
    
    2005-present
   Note 8  Saudi Arabia Joint Venture
  75




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 8  Saudi Arabia Joint Venture (continued)
   Al Rushaid-Parker Drilling, LLC
Condensed Statement of Operations
(Dollars in Thousands)
(Unaudited)
 Year EndedDecember 31, 2007Drilling revenues
    
    $
    12,287Drilling operating expenses
    
    
    28,406Other expenses
    
    
    31,042Total expenses
    
    
    59,448Net loss
    
    $
    (47,161)
 76




---



##### Table of Contents



Al Rushaid-Parker Drilling, LLC
Condensed Balance Sheet
(Dollars in Thousands)
(Unaudited)
 December 31,2007ASSETSTotal current assets
    
    $
    32,544Net property, plant and equipment
    
    
    185,383Total assets
    
    $
    217,927LIABILITIES AND STOCKHOLDERS EQUITYTotal current debt
    
    $
    8,785Total other current liabilities
    
    
    74,766Long-term debt  third party
    
    
    151,467Long-term debt  related party
    
    
    29,536Total stockholders equity
    
    
    (46,627
    )Total liabilities and stockholders equity
    
    $
    217,927
 Note 9  Common Stock and Stockholders Equity
 Common
Stock Offering
 Stock Plans
   77




---



##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 9  Common Stock and Stockholders Equity (continued)
      78




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 9  Common Stock and Stockholders Equity (continued)
  1991 StockGrant PlanRestrictedSharesOutstanding at December 31, 2006
    
    
    100,000Granted
    
    
    Exercised
    
    
    (100,000
    )Cancelled
    
    
    Outstanding at December 31, 2007
    
    
    
 1994 Non-EmployeeDirector Stock Incentive PlanWeightedAverageExercise
    
    
    IntrinsicShares
    
    
    Price
    
    
    ValueOutstanding at December 31, 2006
    
    
    84,000
    
    
    $
    9.047Granted
    
    
    
    
    
    
    Exercised
    
    
    (30,000
    )
    
    
    8.875
    
    
    $
    33,150Cancelled
    
    
    (40,000
    )
    
    
    8.984Outstanding at December 31, 2007
    
    
    14,000
    
    
    
    9.573
 1994 Executive Stock Option PlanIncentive Options
    
    
    Non-Qualified OptionsWeighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    AverageExercise
    
    
    Intrinsic
    
    
    
    
    
    
    Exercise
    
    
    IntrinsicShares
    
    
    Price
    
    
    Value
    
    
    Shares
    
    
    Price
    
    
    ValueOutstanding at December 31, 2006
    
    
    101,403
    
    
    $
    8.875
    
    
    
    
    
    
    
    618,597
    
    
    $
    8.875Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (101,403
    )
    
    
    8.875
    
    
    $
    147,203
    
    
    
    (618,597
    )
    
    
    8.875
    
    
    $
    890,677Cancelled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at December 31, 2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    
 79




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 9  Common Stock and Stockholders Equity (continued)
 1997 Stock PlanIncentive Options
    
    
    Non-Qualified OptionsWeighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    AverageExercise
    
    
    Intrinsic
    
    
    
    
    
    
    Exercise
    
    
    Restricted
    
    
    IntrinsicShares
    
    
    Price
    
    
    Value
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    ValueOutstanding at December 31, 2006
    
    
    731,182
    
    
    $
    10.547
    
    
    
    
    
    
    
    1,678,618
    
    
    $
    5.623
    
    
    
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (342,942
    )
    
    
    8.875
    
    
    $
    521,567
    
    
    
    (749,558
    )
    
    
    7.897
    
    
    
    
    
    
    $
    1,917,413Cancelled
    
    
    (342,000
    )
    
    
    12.188
    
    
    
    
    
    
    
    (7,500
    )
    
    
    6.070
    
    
    
    Outstanding at December 31, 2007
    
    
    46,240
    
    
    $
    10.813
    
    
    
    
    
    
    
    921,560
    
    
    $
    3.770
    
    
    
    
 2005 Long-Term Incentive PlanNon-Qualified OptionsWeightedAverageExercise
    
    
    Intrinsic
    
    
    RestrictedShares
    
    
    Price
    
    
    Value
    
    
    SharesOutstanding at December 31, 2006
    
    
    25,000
    
    
    $
    8.875
    
    
    
    
    
    
    
    1,458,151Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    922,845Exercised
    
    
    (25,000
    )
    
    
    8.875
    
    
    $
    33,025
    
    
    
    (819,343
    )Cancelled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59,061
    )Outstanding at December 31, 2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    1,502,592
 80




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 9  Common Stock and Stockholders Equity (continued)
  Outstanding OptionsWeightedAverage
    
    
    WeightedRemaining
    
    
    Average
    
    
    AggregateNumber of
    
    
    Contractual
    
    
    Exercise
    
    
    IntrinsicPlan
    
    Exercise Prices
    
    
    Shares
    
    
    Life
    
    
    Price
    
    
    Value1994 Non-Employee Director Incentive PlanNon-qualified
    
    $
    3.280
    
    
    
    
    
    4,000
    
    
    1.01 years
    
    $
    3.280
    
    
    $
    17,080Non-qualified
    
    $
    12.090
    
    
    
    
    
    10,000
    
    
    0.01 years
    
    $
    12.090
    
    
    $
    1994 Executive Stock Option PlanIncentive option
    
    $
    8.875
    
    
    

    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    Non-qualified
    
    $
    8.875
    
    
    
    

    
    
    
    
    
    
    
    
    $
    
    
    
    $
    1997 Stock PlanIncentive option
    
    $
    10.813
    
    
    
    

    
    46,240
    
    
    0.23 years
    
    $
    10.813
    
    
    $
    Non-qualified
    
    $
    1.990
    - $
    5.350
    
    
    
    917,800
    
    
    1.31 years
    
    $
    3.741
    
    
    $
    3,496,818Non-qualified
    
    $
    10.810
    
    
    
    

    
    3,760
    
    
    0.23 years
    
    $
    10.810
    
    
    $
    2005 Long-Term Incentive PlanNon-qualified
    
    $
    8.875
    
    
    
    
    

    
    
    
    
    
    
    
    $
    
    
    
    $
    
 Exercisable OptionsWeightedAverage
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    IntrinsicPlan
    
    Exercise Prices
    
    
    Shares
    
    
    Price
    
    
    Value1994 Non-Employee Director Incentive PlanNon-qualified
    
    $
    3.280
    
    
    
    
    4,000
    
    
    $
    3.280
    
    
    $
    17,080Non-qualified
    
    $
    8.875
    - $12.090
    
    
    
    10,000
    
    
    $
    12.090
    
    
    $
    1994 Executive Stock Option PlanIncentive option
    
    $
    8.875
    
    
    
    
    
    
    
    $
    
    
    
    $
    Non-qualified
    
    $
    8.875
    
    
    
    
    
    
    
    $
    
    
    
    $
    1997 Stock PlanIncentive option
    
    $
    10.813
    
    
    
    
    46,240
    
    
    $
    10.813
    
    
    $
    Non-qualified
    
    $
    1.990
    - $  5.350
    
    
    
    917,800
    
    
    $
    3.741
    
    
    $
    3,496,818Non-qualified
    
    $
    10.810
    
    
    
    
    3,760
    
    
    $
    10.810
    
    
    $
    2005 Long-Term Incentive PlanNon-qualified
    
    $
    8.875
    
    
    
    
    
    
    
    $
    
    
    
    $
    
  81




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 9  Common Stock and Stockholders Equity (continued)
 Stock Reserved for Issuance
 December 31,2007
    
    
    2006Stock plans
    
    
    2,118,089
    
    
    
    5,372,934Stock bonus plan
    
    
    304,402
    
    
    
    87,983Total shares reserved for issuance
    
    
    2,422,491
    
    
    
    5,460,917
 Stockholder Rights Plan
   82




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 10  Reconciliation of Income and Number of Shares Used to Calculate Basic and Diluted
Earnings Per Share (EPS)
 For the Year Ended December 31, 2007Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPS:Income from continuing operations
    
    $
    104,078,000
    
    
    
    109,542,364
    
    
    $
    0.95Discontinued operations
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    104,078,000
    
    
    
    
    
    
    $
    0.95Effect of dilutive securities:Stock options and restricted stock
    
    
    
    
    
    
    1,314,330
    
    
    $
    (0.01
    )Diluted EPS:Income from continuing operations
    
    $
    104,078,000
    
    
    
    110,856,694
    
    
    $
    0.94Discontinued operations
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    104,078,000
    
    
    
    
    
    
    $
    0.94
 For the Year Ended December 31, 2006Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPS:Income from continuing operations
    
    $
    81,026,000
    
    
    
    106,552,015
    
    
    $
    0.76Discontinued operations
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    81,026,000
    
    
    
    
    
    
    $
    0.76Effect of dilutive securities:Stock options and restricted stock
    
    
    
    
    
    
    1,586,368
    
    
    $
    (0.01
    )Diluted EPS:Income from continuing operations
    
    $
    81,026,000
    
    
    
    108,138,383
    
    
    $
    0.75Discontinued operations
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    81,026,000
    
    
    
    
    
    
    $
    0.75
 83




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 10  Reconciliation of Income and Number of Shares Used to Calculate Basic and Diluted
Earnings Per Share (EPS) (continued)
 For the Year Ended December 31, 2005Income (Loss)
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPS:Income from continuing operations
    
    $
    98,812,000
    
    
    
    95,818,893
    
    
    $
    1.03Discontinued operations
    
    
    71,000
    
    
    
    
    
    
    
    Net income
    
    $
    98,883,000
    
    
    
    
    
    
    $
    1.03Effect of dilutive securities:Stock options and restricted stock
    
    
    
    
    
    
    1,389,452
    
    
    $
    (0.01
    )Diluted EPS:Income from continuing operations
    
    $
    98,812,000
    
    
    
    97,208,345
    
    
    $
    1.02Discontinued operations
    
    
    71,000
    
    
    
    
    
    
    
    Net income
    
    $
    98,883,000
    
    
    
    
    
    
    $
    1.02
  Note 11  Employee Benefit Plan
  84




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 12  Business Segments
  Year Ended December 31,Operations by Industry Segment
    
    2007
    
    
    2006
    
    
    2005(Dollars in Thousands)Drilling and rental revenues:U.S. drilling (1)
    
    $
    231,139
    
    
    $
    191,225
    
    
    $
    128,252International drilling (1)
    
    
    285,403
    
    
    
    273,216
    
    
    
    308,572Rental tools (1)
    
    
    138,031
    
    
    
    121,994
    
    
    
    94,838Total drilling and rental revenues
    
    
    654,573
    
    
    
    586,435
    
    
    
    531,662Drilling and rental operating income (loss):U.S. drilling (2)
    
    
    99,514
    
    
    
    83,370
    
    
    
    41,739International drilling (2)
    
    
    41,943
    
    
    
    27,465
    
    
    
    40,281Rental tools (2)
    
    
    59,264
    
    
    
    56,704
    
    
    
    40,239Total drilling and rental operating income
    
    
    200,721
    
    
    
    167,539
    
    
    
    122,259General and administrative expense
    
    
    (24,708
    )
    
    
    (31,786
    )
    
    
    (27,830
    )Provision for reduction in carrying value of certain assets
    
    
    (1,462
    )
    
    
    
    
    
    
    (4,884
    )Gain on disposition of assets, net
    
    
    16,432
    
    
    
    7,573
    
    
    
    25,578Total operating income
    
    
    190,983
    
    
    
    143,326
    
    
    
    115,123Interest expense
    
    
    (25,157
    )
    
    
    (31,598
    )
    
    
    (42,113
    )Changes in fair value of derivative positions
    
    
    (671
    )
    
    
    40
    
    
    
    2,076Loss on extinguishment of debt
    
    
    (2,396
    )
    
    
    (1,912
    )
    
    
    (8,241
    )Equity in
loss of unconsolidated joint venture and related charges
    
    
    (27,101
    )
    
    
    
    
    
    
    Minority interest
    
    
    (1,000
    )
    
    
    (229
    )
    
    
    1,905Other
    
    
    7,143
    
    
    
    7,808
    
    
    
    1,478Income  from continuing operations before income taxes
    
    $
    141,801
    
    
    $
    117,435
    
    
    $
    70,228Identifiable assets:U.S. drilling
    
    $
    235,030
    
    
    $
    255,275International drilling
    
    
    441,282
    
    
    
    318,767Rental tools
    
    
    177,033
    
    
    
    166,270Total identifiable assets
    
    
    853,345
    
    
    
    740,312Corporate assets
    
    
    223,642
    
    
    
    160,989Total assets
    
    $
    1,076,987
    
    
    $
    901,301
 
 (1)
    
    In 2007, ExxonMobil accounted for approximately 11 percent of the Companys total revenues,
approximately $63.0 million of the Companys international drilling segment revenues and
approximately $11.4 million of the Companys rental tools segment revenues. In 2006,
ExxonMobil accounted for approximately 14 percent of the Companys
total revenues. ExxonMobil accounted for approximately $65.8 million of the
Companys international drilling segment revenues and approximately $19.0 million of the
Companys rental tools segment revenues. In
2005, ExxonMobil and Chevron accounted for approximately 14 percent and 11 percent of the
Companys total revenues, respectively. ExxonMobil accounted for approximately $54.8 million
of the Companys international drilling segment revenues and approximately $18.2 million of
the Companys rental tools segment revenues. Chevron accounted for approximately $50.6
million of the Companys international drilling segment revenues and approximately $9.2
million of the Companys rental tools segment revenues.(2)
    
    Drilling and rental operating income  drilling and rental revenues less direct drilling and
rental operating expenses, including depreciation and amortization expense. 85




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 12  Business Segments (continued)
 Year Ended December 31,Operations by Industry Segment
    
    2007
    
    
    2006
    
    
    2005(Dollars in Thousands)Capital expenditures:U.S. drilling
    
    $
    32,563
    
    
    $
    72,373
    
    
    $
    16,724International drilling
    
    
    144,984
    
    
    
    75,448
    
    
    
    23,524Rental tools
    
    
    62,011
    
    
    
    40,773
    
    
    
    27,962Corporate
    
    
    2,540
    
    
    
    6,428
    
    
    
    1,282Total capital expenditures
    
    $
    242,098
    
    
    $
    195,022
    
    
    $
    69,492Depreciation and amortization:U.S. drilling
    
    $
    32,102
    
    
    $
    23,867
    
    
    $
    19,354International drilling
    
    
    26,785
    
    
    
    25,290
    
    
    
    30,330Rental tools
    
    
    23,715
    
    
    
    18,501
    
    
    
    16,142Corporate
    
    
    3,201
    
    
    
    1,612
    
    
    
    1,378Total depreciation and amortization
    
    $
    85,803
    
    
    $
    69,270
    
    
    $
    67,204
 86




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 12  Business Segments (continued)
 Year Ended December 31,Operations by Geographic Area
    
    2007
    
    
    2006
    
    
    2005(Dollars in Thousands)Drilling and rental revenues:United States
    
    $
    369,170
    
    
    $
    309,757
    
    
    $
    218,056Latin America
    
    
    75,683
    
    
    
    31,466
    
    
    
    67,954Asia Pacific
    
    
    67,037
    
    
    
    79,665
    
    
    
    58,623Africa and Middle East
    
    
    14,580
    
    
    
    24,219
    
    
    
    33,377CIS
    
    
    128,103
    
    
    
    141,328
    
    
    
    153,652Total drilling and rental revenues
    
    
    654,573
    
    
    
    586,435
    
    
    
    531,662Drilling and rental operating income (loss):United States (1)
    
    
    158,778
    
    
    
    136,690
    
    
    
    77,560Latin America (1)
    
    
    26,825
    
    
    
    (5,679
    )
    
    
    4,018Asia Pacific (1)
    
    
    10,670
    
    
    
    19,884
    
    
    
    14,353Africa and Middle East (1)
    
    
    (14,466
    )
    
    
    (2,594
    )
    
    
    (834
    )CIS (1)
    
    
    18,914
    
    
    
    19,238
    
    
    
    27,162Total drilling and rental operating income
    
    
    200,721
    
    
    
    167,539
    
    
    
    122,259General and administrative expense
    
    
    (24,708
    )
    
    
    (31,786
    )
    
    
    (27,830
    )Provision for reduction in carrying value of certain assets
    
    
    (1,462
    )
    
    
    
    
    
    
    (4,884
    )Gain on disposition of assets, net
    
    
    16,432
    
    
    
    7,573
    
    
    
    25,578Total operating income
    
    
    190,983
    
    
    
    143,326
    
    
    
    115,123Interest expense
    
    
    (25,157
    )
    
    
    (31,598
    )
    
    
    (42,113
    )Changes in fair value of derivative positions
    
    
    (671
    )
    
    
    40
    
    
    
    2,076Loss on extinguishment of debt
    
    
    (2,396
    )
    
    
    (1,912
    )
    
    
    (8,241
    )Equity in
loss of unconsolidated joint venture and related charges
    
    
    (27,101
    )
    
    
    
    
    
    
    Minority interest
    
    
    (1,000
    )
    
    
    (229
    )
    
    
    1,905Other
    
    
    7,143
    
    
    
    7,808
    
    
    
    1,478Income (loss) from continuing operations before income taxes
    
    $
    141,801
    
    
    $
    117,435
    
    
    $
    70,228Long-lived assets: (2)United States
    
    $
    447,235
    
    
    $
    401,349Latin America
    
    
    54,415
    
    
    
    17,217Asia Pacific
    
    
    29,200
    
    
    
    24,420Africa and Middle East
    
    
    59,067
    
    
    
    2,412CIS
    
    
    96,286
    
    
    
    90,389Total long-lived assets
    
    $
    686,203
    
    
    $
    535,787
 
 (1)
    
    Drilling and rental operating income  drilling and rental revenues less direct drilling and
rental operating expenses, including depreciation and amortization expense.(2)
    
    Is primarily comprised of property, plant and equipment, net and goodwill and excludes assets
held for sale. Note 13  Commitments and Contingencies
  87




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 13  Commitments and Contingencies (continued)
  2008
    
    $
    4,4502009
    
    
    2,2602010
    
    
    8732011
    
    
    7672012
    
    
    152Total
    
    $
    8,502
       88




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 13  Commitments and Contingencies (continued)
 Kazakhstan Tax Claims
     Recent
Events
  89




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 13  Commitments and Contingencies (continued)
 Bangladesh Claim
  Asbestos-Related Claims
    90




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 13  Commitments and Contingencies (continued)
 Gulfco Site
  Freight Forwarding and Customs Agent Request
  Saudi Arabia Joint Venture
  91




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 14  Related Party Transactions
 Consulting Agreement
  (i)
    
    A consulting contract and severance agreement,(ii)
    
    Payment of unpaid vacation pay that has accrued through April 30, 2006,(iii)
    
    A lump sum payment of $397,500 on November 2, 2006,(iv)
    
    Monthly payments of $37,500 and $28,750 commencing on May 1, 2006, for two years
related to the severance agreement and the consulting agreement, respectively, and(v)
    
    Medical coverage under the Companys medical plan for Mr. Parker Sr. and his spouse
through April 30, 2008.
    Lease Agreements
  92




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 14  Related Party Transactions (continued)
 Lease Agreements (continued)
  Other Related Party Agreements
  Note 15  Supplementary Information
   93




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 16  Selected Quarterly Financial Data
 QuarterYear 2007
    

First
(2)
    
    
    Second
(2)
    
    
    Third (2)
    
    
    Fourth (2)
    
    
    Total (2)(Dollars in Thousands Except Per Share Amounts)(Unaudited)Revenues
    
    $
    151,273
    
    
    $
    150,277
    
    
    $
    172,197
    
    
    $
    180,826
    
    
    $
    654,573Drilling and rental operating income
    
    $
    49,507
    
    
    $
    42,881
    
    
    $
    57,394
    
    
    $
    50,939
    
    
    $
    200,721Operating income
    
    $
    60,023
    
    
    $
    36,904
    
    
    $
    50,600
    
    
    $
    43,456
    
    
    $
    190,983Income from continuing operations
    
    $
    29,994
    
    
    $
    16,860
    
    
    $
    22,653
    
    
    $
    34,571
    
    
    $
    104,078Discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Net income
    
    $
    29,994
    
    
    $
    16,860
    
    
    $
    22,653
    
    
    $
    34,571
    
    
    $
    104,078Basic earnings per share: (1)Income from continuing operations
    
    $
    0.28
    
    
    $
    0.15
    
    
    $
    0.21
    
    
    $
    0.31
    
    
    $
    0.95Discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Net income
    
    $
    0.28
    
    
    $
    0.15
    
    
    $
    0.21
    
    
    $
    0.31
    
    
    $
    0.95Diluted earnings per share: (1)Income from continuing operations
    
    $
    0.27
    
    
    $
    0.15
    
    
    $
    0.20
    
    
    $
    0.31
    
    
    $
    0.94Discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Net income
    
    $
    0.27
    
    
    $
    0.15
    
    
    $
    0.20
    
    
    $
    0.31
    
    
    $
    0.94
 
 (1)
    
    As a result of shares issued during the year, earnings per share for the years four
quarters, which are based on weighted average shares outstanding during each quarter, may not
equal the annual earnings per share, which is based on the weighted average shares outstanding
during the year.(2)
    
    Total operating income and net income includes a gain of
$15.1 million related to the sale of two barge rigs in the first
quarter. Also included is a provision for reduction in carrying value
of certain assets of $1.1 million recorded in the third quarter,
and an equity loss in an unconsolidated joint venture of
$1.1 million  and $26.0 million in the third and fourth
quarters, respectively. See Note 8 for further information on
our joint venture. Net income in the first quarter included income
tax expense of $7.0 million related to the sale of the two barge
rigs and $1.9 million related to interest on tax uncertainties
recorded.
Net income in the second quarter included income tax expense of
$4.0 million interest on tax uncertainties recorded. Net income in the fourth
quarter included an income tax benefit of $25.6 million related
to the settlement of tax matters related to FIN 48. See
Note 7 for further detail. 94




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 16  Selected Quarterly Financial Data (continued)
 QuarterYear 2006
    
    First
    
    
    Second
    
    
    Third (2)
    
    
    Fourth (2)
    
    
    Total (2)(Dollars in Thousands Except Per Share Amounts)(Unaudited)Revenues
    
    $
    147,334
    
    
    $
    145,988
    
    
    $
    146,783
    
    
    $
    146,330
    
    
    $
    586,435Drilling and rental operating income
    
    $
    41,065
    
    
    $
    39,636
    
    
    $
    44,217
    
    
    $
    42,621
    
    
    $
    167,539Operating income
    
    $
    33,819
    
    
    $
    34,186
    
    
    $
    40,553
    
    
    $
    34,768
    
    
    $
    143,326Income from continuing operations
    
    $
    11,458
    
    
    $
    13,761
    
    
    $
    18,639
    
    
    $
    37,168
    
    
    $
    81,026Discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Net income
    
    $
    11,458
    
    
    $
    13,761
    
    
    $
    18,639
    
    
    $
    37,168
    
    
    $
    81,026Basic earnings per share: (1)Income from continuing operations
    
    $
    0.11
    
    
    $
    0.13
    
    
    $
    0.17
    
    
    $
    0.35
    
    
    $
    0.76Discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Net income
    
    $
    0.11
    
    
    $
    0.13
    
    
    $
    0.17
    
    
    $
    0.35
    
    
    $
    0.76Diluted earnings per share: (1)Income from continuing operations
    
    $
    0.11
    
    
    $
    0.13
    
    
    $
    0.17
    
    
    $
    0.34
    
    
    $
    0.75Discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Net income
    
    $
    0.11
    
    
    $
    0.13
    
    
    $
    0.17
    
    
    $
    0.34
    
    
    $
    0.75
 
 (1)
    
    As a result of shares issued during the year, earnings per share for the years four
quarters, which are based on weighted average shares outstanding during each quarter, may not
equal the annual earnings per share, which is based on the weighted average shares outstanding
during the year.(2)
    
    Total operating income and net income includes a $1.9 million gain in the third quarter of
2006 related to the receipt of insurance proceeds for a damaged rig discussed in Note 2. Also
included is a gain on the disposition of assets for barge rigs in Nigeria, Barge Rig 57, Barge
Rig 255, and certain other equipment of $2.1 million and $4.3 million in the second and third
quarters of 2006, respectively. Net income in the fourth quarter includes the reversal of the
remaining $12.6 million valuation allowance related to net operating loss state carryforwards.
See Note 7 in the notes to the consolidated financial statement. 95




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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Note 17  Recent Accounting Pronouncements
    
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  96




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##### Table of Contents



ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
 Managements Report on Internal Control over Financial Reporting
 
    
    pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company;
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting principles generally
accepted in the United States, and that receipts and expenditures of the Company are being
made only in accordance with authorization of management and directors of the Company; and
    
    provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Companys assets that could have a material effect
on the financial statements.
     Changes in Internal Control over Financial Reporting
 97




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##### Table of Contents



ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
      
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS
  98




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##### Table of Contents



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  
 PART IV
 
 ITEM
15. EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
   PAGEReport
of KPMG LLP  Independent Registered Public Accounting Firm
    
    
    47Report
of PricewaterhouseCoopers LLP  Independent Registered Public Accounting Firm.
    
    
    49Consolidated Statement of Operations for the years ended
December 31, 2007, 2006 and 2005
    
    
    49Consolidated Balance Sheet as of December 31, 2007 and 2006
    
    
    50Consolidated Statement of Cash Flows for the years ended
December 31, 2007, 2006 and 2005
    
    
    52Consolidated Statement of Stockholders Equity for the years ended
December 31, 2007, 2006 and 2005
    
    
    54Notes to the Consolidated Financial Statements
    
    
    55
  Schedule II  Valuation and qualifying accounts
    
    
    103
  EXHIBITNUMBER
    
    
    
    DESCRIPTION3(a)
    
    
    
    Restated Certificate of
Incorporation of the Company, as amended on
May 16, 2007
(incorporated by reference to Exhibit 3.1 to the Companys Report on Form 10-Q for the
period ended September 20, 2007).3(b)
    
    
    
    By-Laws of the Company, as amended on January 31, 2003 (incorporated by reference to
the Companys Form 10-K/A dated September 25, 2003).4(a)
    
    
    
    Rights Agreement dated as of July 14, 1998, between the Company and Norwest Bank
Minnesota, N.A., as rights agent (incorporated by reference to Form 8-A filed July 15,
1998).4(b)
    
    
    
    Amendment No. 1 to the Rights Agreement dated September 22, 1998, between the Company
and Norwest Bank Minnesota, N.A., as rights agent (incorporated by reference to
Exhibit 3(a) of Form 10-K dated March 17, 2003).4(c)
    
    
    
    Indenture dated as of October 10, 2003 between the Company, as issuer, certain
Subsidiary Guarantors (as defined therein) and JPMorgan Chase Bank, as Trustee,
respecting the 9.625% Senior Notes due 2013 (incorporated by reference to the
Companys S-4 Registration Statement No. 333-110374 dated November 10, 2003).
Supplemental Indentures4(d)
    
    
    
    Credit Agreement among Parker Drilling Company, as Borrower, the Several Lenders
Parties thereto, Lehman Brothers, Inc., as Sole Advisor, Sole Lead Arranger and Sole
Bookrunner, Bank of America, N.A., as Syndication Agent and Lehman Commercial Paper,
Inc. as Administrative Agent dated December
 99




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##### Table of Contents



EXHIBITNUMBER
    
    
    
    DESCRIPTION20, 2004 (incorporated by reference to Exhibit 99.1 to Form 8-K dated December 27, 2004).4(e)
    
    
    
    First Amendment to the Credit Agreement dated December 20, 2004 among Parker Drilling
Company, as Borrower, the Several Lenders Parties thereto, Lehman Brothers, Inc., as
Sole Advisor, Sole Lead Arranger and Sole Bookrunner, Bank of America, N.A., as
Syndication Agent and Lehman Commercial Paper, Inc., as Administrative Agent dated
March 1, 2006.4(f)
    
    
    
    Second Amendment to the Credit Agreement dated December 20, 2004 among Parker
Drilling, as Borrower, the Several Lenders Parties thereto, Lehman Brothers, Inc., as
Sole Advisor, Sole Lead Arranger and Sole Bookrunner, Bank of America, N.A., as
Syndication Agent dated February 9, 2007 (incorporated by reference to Exhibit 10(c)
to annual report on Form 10-K for the year ended December 31, 2006).4(g)
    
    
    
    Indenture dated as of September 2, 2004, between the Company and JP-Morgan Chase Bank,
as trustee, respecting the $150.0 million Senior Floating Rate Notes due 2010
(incorporated by reference to Exhibit 10.1 to the Companys Form 8-K, dated September
7, 2004).4(h)
    
    
    
    Indenture, dated as of July 5, 2007, among Parker Drilling Company, the guarantors
from time to time party thereto, and The Bank of New York Trust Company, N.A., with
respect to the 2.125% Convertible Senior Notes due 2013 (incorporated by reference to
Exhibit 4.1 to the Companys Current Report on Form 8-K filed on July 5, 2007)4(i)
    
    
    
    Form of 2.125% Convertible Senior Note due 2013 (included in
Exhibit 4(h))4(j)
    
    
    
    Amended and Restated Credit
Agreement, dated as of September 20, 2007, among Parker Drilling
Company, as Borrower, the several lenders from time to time thereto,
Lehman Brothers Inc., as Sole Advisor, Sole Lead Arranger and Sole
Bookrunner, Bank of America N.A., as Syndication Agent, and Lehman
Commercial Paper Inc., as Administrative Agent (incorporated by
reference to Exhibit 10.1 to report on Form 8-K dated
September 25, 2007).10(a)
    
    
    
    Amended and Restated Parker Drilling Company Stock Bonus Plan, effective as of January
1, 1999 (incorporated herein by reference to Exhibit 10(a) to the Companys Quarterly
Report on Form 10-Q for the three months ended March 31, 1999).*10(b)
    
    
    
    1994 Parker Drilling Company Limited Deferred Compensation Plan (incorporated herein
by reference to Exhibit 10(h) to Annual Report on Form 10-K for the year ended August
31, 1995).*10(c)
    
    
    
    1994 Non-Employee Director Stock Option Plan (incorporated herein by reference to
Exhibit 10(i) to Annual Report on Form 10-K for the year ended August 31, 1995).*10(d)
    
    
    
    1994 Executive Stock Option Plan (incorporated herein by reference to Exhibit 10(j) to
Annual Report on Form 10-K for the year ended August 31, 1995).*10(e)
    
    
    
    Parker Drilling Company and Subsidiaries 1991 Stock Grant Plan (incorporated by
reference to Exhibit 10(c) to Form 10-K dated November 2, 1992).*10(f)
    
    
    
    Third Amended and Restated Parker Drilling 1997 Stock Plan effective July 24, 2002
(incorporated herein by reference to Exhibit 10(e) to Annual Report on Form 10-K dated
March 20, 2003).*10(g)
    
    
    
    2005 Long Term Incentive Plan
(2005 LTIP) (incorporated by reference to the
Companys 2005 Proxy Statement dated March 22, 2005).*10(h)
    
    
    
    Form of Indemnification Agreement entered into between Parker Drilling Company and
each director and executive officer of Parker Drilling Company, dated on or about
October 15, 2002 (incorporated by reference to Exhibit 10(g) to Form 10-K dated March
12, 2004).*10(i)
    
    
    
    Form of Employment Agreement entered into between Parker Drilling Company and certain
executive and other officers of Parker Drilling Company, (incorporated by reference to
Exhibit 10(h) to Form 10-K dated March 17, 2003).*10(j)
    
    
    
    Form of Stock Option Award Agreement to the Third Amended and Restated Parker Drilling
1997 Stock Plan (incorporated by reference to Exhibit 10(m) to Form 10-K dated March
14, 2005).*10(k)
    
    
    
    Form of Stock Grant Award Agreement to the Third Amended and Restated Parker Drilling
1997 Stock Plan (incorporated by reference to Exhibit 10(n) to Form 10-K dated March
14, 2005).*10(l)
    
    
    
    Form of Restricted Stock Award
Agreement under the 2005 LTIP (incorporated by
reference to Exhibit 10.2 to Form 8-K dated May 1,
2005).*10(m)
    
    
    
    Form of Performance Based
Restricted Stock Award Agreement under the 2005 LTIP
(incorporated by reference to Exhibit 10.3 to Form 8-K
dated May 1, 2005).*
 100




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##### Table of Contents



EXHIBITNUMBER
    
    
    
    DESCRIPTION10(n)
    
    
    
    Form of Lease Agreement between Parker Drilling Management Services, Inc. entered into
by the Robert L. Parker Sr. Family Limited Partnership and Robert L. Parker Jr. dated
January 1, 2004 (incorporated by reference to Exhibit 10(a) to the Form 10-Q dated
August 6, 2004).*10(o)
    
    
    
    Form of Personnel Services Contract between Parker Drilling Management Services, Inc.
and the Robert L. Parker Sr. Family Limited Partnership and Robert L. Parker Jr. dated
January 1, 2004 (incorporated by reference to Exhibit 10(b) to the Form 10-Q dated
August 6, 2004).*10(p)
    
    
    
    Consulting Agreement between Parker
Drilling Company and Robert L. Parker Sr. dated April 12, 2006
(incorporated by reference to Exhibit 10.1 to the Form 8-K dated
April 12, 2006).*10(q)
    
    
    
    Termination of Split Dollar Life
Insurance Agreement between Parker Drilling Company, Robert L. Parker
Sr., and Robert L. Parker Sr. and Catherine Mae Parker Family Trust
under Indenture dated the 23rd day of July 1993, dated April 12,
2006 (incorporated by reference to Exhibit 10.2 to the Form 8-K
dated April 12, 2006).*10(r)
    
    
    
    Confirmation of Convertible Bond Hedge Transaction, dated as of June 28, 2007, by and
between Parker Drilling Company and Bank of America, N.A (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K filed on July 5, 2007)10(s)
    
    
    
    Confirmation of Convertible Bond Hedge Transaction, dated as of June 28, 2007, by and
between Parker Drilling Company and Deutsche Bank AG, London Branch (incorporated by
reference to Exhibit 10.2 to the Companys Current Report on Form 8-K filed on July 5,
2007).10(t)
    
    
    
    Confirmation of Convertible Bond Hedge Transaction, dated as of June 28, 2007, by and
between Parker Drilling Company and Lehman Brothers OTC Derivatives Inc. (incorporated
by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K filed on July
5, 2007)10(u)
    
    
    
    Confirmation of Issuer Warrant Transaction dated as of June 28, 2007, by and between
Parker Drilling Company and Bank of America, N.A. (incorporated by reference to
Exhibit 10.4 to the Companys Current Report on Form 8-K filed on July 5, 2007)10(v)
    
    
    
    Confirmation of Issuer Warrant Transaction, dated as of June 28, 2007, by and between
Parker Drilling Company and Deutsche Bank AG, London Branch (incorporated by reference
to Exhibit 10.5 to the Companys Current Report on Form 8-K filed on July 5, 2007).10(w)
    
    
    
    Confirmation of Issuer Warrant Transaction dated as of June 28, 2007, by and between
Parker Drilling Company and Lehman Brothers OTC Derivatives Inc. (incorporated by
reference to Exhibit 10.6 to the Companys Current Report on Form 8-K filed on July 5,
2007).10(x)
    
    
    
    Amendment to Confirmation of Issuer Warrant Transaction dated as of June 29, 2007, by
and between Parker Drilling Company and Bank of America, N.A. (incorporated by
reference to Exhibit 10.7 to the Companys Current Report on Form 8-K filed on July 5,
2007).10(y)
    
    
    
    Amendment to Confirmation of Issuer Warrant Transaction, dated as of June 29, 2007, by
and between Parker Drilling Company and Deutsche Bank AG, London Branch (incorporated
by reference to Exhibit 10.8 to the Companys Current Report on Form 8-K filed on July
5, 2007).10(z)
    
    
    
    Amendment to Confirmation of Issuer Warrant Transaction, dated as of June 29, 2007, by
and between Parker Drilling Company and Lehman Brothers OTC Derivatives Inc.
(incorporated by reference to Exhibit 10.9 to the Companys Current Report on Form 8-K
filed on July 5, 2007)21
    
    
    
    Subsidiaries of the Registrant.23.1
    
    
    
    Consent of KPMG LLP 
Independent Registered Public Accounting Firm23.2
    
    
    
    Consent of PriceWaterhouseCoopers
LLP  Independent Registered Public Accounting Firm24.1
    
    
    
    Report on schedule of KPMG LLP  Independent Registered Public Accounting Firm31.1
    
    
    
    Robert L. Parker Jr., Chairman and Chief Executive Officer, Rule 13a-14(a)/15d-14(a)
Certification.31.2
    
    
    
    W. Kirk Brassfield, Senior Vice President and Chief Financial Officer, Rule
13a-14(a)/15d-14(a) Certification.32.1
    
    
    
    Robert L. Parker Jr., Chairman and Chief Executive Officer, Section 1350 Certification.32.2
    
    
    
    W. Kirk Brassfield, Senior Vice President and Chief Financial Officer, Section 1350
Certification.
 
 *
    
    - Management Contract, Compensatory Plan or Agreement 101




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
 Balance
    
    
    Chargedat
    
    
    to cost
    
    
    Charged
    
    
    
    
    
    
    Balancebeginning
    
    
    and
    
    
    to other
    
    
    
    
    
    
    at end ofClassifications
    
    of year
    
    
    expenses
    
    
    accounts
    
    
    Deductions
    
    
    yearYear ended December 31, 2007Allowance for doubtful accounts
and notes
    
    $
    1,481
    
    
    $
    1,975
    
    
    $
    
    
    
    $
    304
    
    
    $
    3,152Reduction in carrying value of rig
materials and supplies
    
    $
    4,337
    
    
    $
    (590)
    
    
    $
    
    
    
    $
    1,140
    
    
    $
    2,607Deferred tax valuation allowance
    
    $
    
    
    
    $
    6,391
    
    
    $
    
    
    
    $
    
    
    
    $
    6,391Year ended December 31, 2006:Allowance for doubtful accounts
and notes
    
    $
    1,639
    
    
    $
    
    
    
    $
    
    
    
    $
    158
    
    
    $
    1,481Reduction in carrying value of rig
materials and supplies
    
    $
    3,451
    
    
    $
    1,200
    
    
    $
    
    
    
    $
    314
    
    
    $
    4,337Deferred tax valuation allowance
    
    $
    
    
    
    $
    
    
    
    $
    18,026
    (1)
    
    $
    18,026
    (2)
    
    $
    Year ended December 31, 2005:Allowance for doubtful accounts
and notes
    
    $
    3,591
    
    
    $
    613
    
    
    $
    
    
    
    $
    2,565
    
    
    $
    1,639Reduction in carrying value of rig
materials and supplies
    
    $
    6,468
    
    
    $
    1,200
    
    
    $
    
    
    
    $
    4,217
    
    
    $
    3,451Deferred tax valuation allowance
    
    $
    56,003
    
    
    $
    
    
    
    $
    15,494
    (3)
    
    $
    71,497
    (4)
    
    $
    
 
 (1)
    
    During 2006 and prior to the reversal of the state valuation allowance, the Company completed
a process of reconciling its Louisiana state income tax balance sheet for the purpose of
properly adjusting its deferred tax assets and liabilities. As a result of this process, the
Company recognized an additional net deferred tax asset of approximately $18.0 million.
Additionally, the Company increased its valuation allowance by $18.0 million resulting in no
impact to the net deferred tax asset.(2)
    
    This deduction relates to the reversal of the valuation allowance related to Louisiana state
net operating loss carryforwards and other deferred tax assets resulting from the Companys
return to profitability in Louisiana and expected future earnings performance.(3)
    
    During 2005 and prior to the reversal of the valuation allowance, the Company completed a
process of reconciling its United States federal income tax balance sheet for the purpose of
properly adjusting its deferred tax assets and liabilities. As a result of this process, the
Company recognized an additional net deferred tax asset of approximately $15.5 million.
Additionally, the Company increased its valuation allowance by $15.5 million resulting in no
impact to the net deferred tax asset.(4)
    
    This deduction relates to the reversal of the valuation allowance related to net operating
loss carryforwards and other deferred tax assets resulting from the Companys return to
profitability and expected future earnings performance. 102




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##### Table of Contents



SIGNATURES
  PARKER DRILLING COMPANYBy:
    /s/ Robert L. Parker Jr.Date: February 29 , 2008
    
    Robert L. Parker Jr.Chairman, Chief Executive Officer and Director  Signature
    
    Title
    
    DateBy:
    
    /s/ Robert L. Parker Jr.

Robert L. Parker Jr.
    
    Chairman, Chief Executive
Officer and Director
(Principal Executive Officer)
    
    February 29, 2008By:
    
    /s/ James W. Whalen

James W. Whalen
    
    Vice Chairman of the Board and
Director
    
    February 29, 2008By:
    
    /s/ David C. Mannon

David C. Mannon
    
    President and
Chief Operating Officer
    
    February 29, 2008By:
    
    /s/ W. Kirk Brassfield

W. Kirk Brassfield
    
    Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
    
    February 29, 2008By:
    
    /s/ Lynn G. Cullom

Lynn G. Cullom
    
    Controller
(Principal Accounting Officer)
    
    February 29, 2008By:
    
    /s/ George J. Donnelly

George J. Donnelly
    
    Director
    
    February 29, 2008By:
    
    /s/ John W. Gibson, Jr.

John W. Gibson, Jr.
    
    Director
    
    February 29, 2008By:
    
    /s/ Robert W. Goldman

Robert W. Goldman
    
    Director
    
    February 29, 2008By:
    
    /s/ Robert E. McKee III

Robert E. McKee III
    
    Director
    
    February 29, 2008By:
    
    /s/ Roger B. Plank

Roger B. Plank
    
    Director
    
    February 29, 2008By:
    
    /s/ R. Rudolph Reinfrank

R. Rudolph Reinfrank
    
    Director
    
    February 29, 2008
 103




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##### Table of Contents



INDEX TO EXHIBITS
 EXHIBITNUMBER
    
    DESCRIPTION21
    
    Subsidiaries of the Registrant.23.1
    
    Consent of KPMG LLP    Independent Registered Public Accounting Firm23.2
    
    Consent of PricewaterhouseCoopers
LLP  Independent Registered Public Accounting Firm24.1
    
    Report on schedule of KPMG
LLP  Independent Registered Public Accounting Firm31.1
    
    Robert L. Parker Jr., Chairman and Chief Executive Officer, Rule 13a-14(a)/15d-14(a)
Certification.31.2
    
    W. Kirk Brassfield, Senior Vice President and Chief Financial Officer, Rule 13a-14(a)/15d-14(a)
Certification.31.1
    
    Robert L. Parker Jr., Chairman and Chief Executive Officer, Section 1350 Certification.31.2
    
    W. Kirk Brassfield, Senior Vice President and Chief Financial Officer, Section 1350 Certification.
 104