##### 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 1934FOR THE FISCAL YEAR ENDED
    DECEMBER 31, 2006ORo

TRANSITION REPORT PURSUANT TO
    SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934FOR 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
    incorporation or organization)

(I.R.S. Employer
    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 ExchangePreferred Share Purchase Rights

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
   þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2. þ o o
  Rule 12b-2 o þ
    DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 



TABLE OF
    CONTENTS
  PAGEPART IItem 1.


Business


1Item 1A.


Risk Factors


8Item 1B.


Unresolved Staff Comments


19Item 2.


Properties


19Item 3.


Legal Proceedings


21Item 4.


Submission of Matters to a Vote of
    Security Holders


21Item 4A.


Executive Officers


22PART IIItem 5.


Market for Registrants
    Common Equity, Related Stockholder Matters and Issuer Purchases
    of Equity Securities


23Item 6.


Selected Financial Data


24Item 7.


Managements Discussion and
    Analysis of Financial Condition and Results of
    Operations


25Item 7A.


Quantitative and Qualitative
    Disclosures about Market Risk


42Item 8.


Financial Statements and
    Supplementary Data


43Item 9.


Changes in and Disagreements with
    Accountants on Accounting and Financial
    Disclosure


89Item 9A.


Controls and Procedures


89Item 9B.


Other Information


90PART IIIItem 10.


Directors, Executive Officers and
    Corporate Governance


91Item 11.


Executive Compensation


91Item 12.


Security Ownership of Certain
    Beneficial Owners and Management and Related Stockholder Matters


91Item 13.


Certain Relationships, Related
    Transactions and Director Independence


91Item 14.


Principal Accounting Fees and
    Services


91PART IVItem 15.


Exhibits and Financial Statement
    Schedule


92Signatures


96Second Amendment to Credit AgreementSubsidiariesConsent of Independent Registered Public Accounting FirmRule 13a-14(a)/15d-14(a) CertificationRule 13a-14(a)/15d-14(a) CertificationSection 1350 CertificationSection 1350 Certification




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##### Table of Contents



PART I  ITEM 1.
    BUSINESS  General
  Form 10-K, Form 10-Q, Form 8-K,
        
    U.S. barge and land 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
    (CIS);
    nine land rigs in the Asia Pacific region;
    three land rigs in the Latin America region;
    three land rigs in the U.S. domestic region;
    one barge drilling rig in the inland waters of Mexico;
    one land rig in the Middle East region;
    the worlds largest arctic-class barge rig in the Caspian
    Sea; and
    19 barge drilling and workover rigs in the transition zones of
    the U.S. Gulf of Mexico. Two workover rigs were
    subsequently sold in January 2007.




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ITEM 1.  BUSINESS (continued)
   Our
    Rental Tools Business
    Our
    Market Areas
  U.S Gulf of Mexico.
  International Markets. and/or
  Our
    Strategy
    Pursuing Strategic Growth
    Opportunities.
  Sustaining the High Utilization of Our Barge and Land
    Rigs.
 2




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ITEM 1.  BUSINESS (continued)
  
 Our
    Strategy (continued)
   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.
  Strong and Experienced Senior Management
    Team.
 3




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ITEM 1.  BUSINESS (continued)
  
 Our
    Competitive Strengths (continued)
    Project
    Management
      Competition
      Customers
     4




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ITEM 1.  BUSINESS (continued)
  Contracts
      Insurance
    and Indemnification
    Employees
    December 31,2006


2005International drilling (1)


1,574



2,113U.S. drilling


631



564Rental tools


217



175Corporate and other


206



188Total employees


2,628



3,040    (1)
    
    Declines relate primarily to sale
    of rigs in Nigeria and contract completions in Mexico,
    Kazakhstan and Turkmenistan.  Environmental
    Considerations
   5




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ITEM 1.  BUSINESS (continued)
  
 Environmental
    Considerations (continued)
           6




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ITEM 1.  BUSINESS (continued)
  
 Environmental
    Considerations (continued)
              7




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ITEM 1.  BUSINESS (continued)
  FINANCIAL
    INFORMATION ABOUT INDUSTRY SEGMENTS AND GEOGRAPHIC
    AREAS
   ITEM 1A.  RISK
    FACTORS  Form 10-K,
  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 material or skilled labor;
    unforeseen engineering problems;
    unanticipated change orders;
    work stoppages;
    adverse weather conditions;
    long lead times for manufactured rig components;
    unanticipated cost increases; and
    inability to obtain the required permits or approvals.    Risk
    Factors Related to Our Business
  Failure
    to retain skilled and experienced personnel could hurt our
    operations.
   8




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ITEM 1A.  RISK
    FACTORS (continued)
  
 Risk
    Factors Related to Our Business (continued)
   Our
    ability to service our debt obligations is primarily dependent
    upon our future financial performance.
    
    $329.4 million of long-term debt;
    $11.0 million of operating lease commitments; and
    $23.1 million of standby letters of credit.      
    delay spending on 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.    
    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;
    expose us to interest rate risk because certain of our
    borrowings, including our Senior Floating Rate Notes, are at
    variable rates of interest; and
    make us more vulnerable to downturns in our business.    Our
    current operations and future growth may require significant
    additional capital, and our indebtedness could impair our
    ability to fund our capital requirements.
   9




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ITEM 1A.  RISK
    FACTORS (continued)
  
 Risk
    Factors Related to Our Business (continued)
    
    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.
      
    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;
    new rig construction projects begun in the last eighteen months;
    local and worldwide military, political and economic events,
    including events in the oil producing countries in the Middle
    East, Southeast Asia, Latin America and Commonwealth of
    Independent States (CIS);
    the ability of the Organization of Petroleum Exporting Countries
    OPEC to set and maintain production levels;
    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 gas reserves; 10




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ITEM 1A.  RISK
    FACTORS (continued)
  
 Risk
    Factors Related to Our Business (continued)
   
    the availability of pipeline capacity; and
    the policies of various governments regarding exploration and
    development of their oil and 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.
    Contract
    drilling and the rental tools business are highly
    competitive.
     11




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ITEM 1A.  RISK
    FACTORS (continued)
  
 Risk
    Factors Related to Our Business (continued)
   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;
    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; and
    foreign currency fluctuations and restrictions on currency
    repatriation.        and/or
 12




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ITEM 1A.  RISK
    FACTORS (continued)
  
 Risk
    Factors Related to Our Business (continued)
    Compliance
    with foreign tax and other laws may adversely affect our
    operations.
    We are
    subject to hazards customary for drilling operations, which
    could adversely affect our financial performance if we are not
    adequately indemnified or insured.
   13




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ITEM 1A.  RISK
    FACTORS (continued)
  
 Risk
    Factors Related to Our Business (continued)
    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.
    Risks
    Related to Our Common Stock
  Market
    prices of our common stock could change
    significantly.
    
    the other risk factors described in this
    Form 10-K,
    including changes in oil and 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 oil and gas or
    oilfield service 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
    dispute with the Ministry of Finance of the Republic of
    Kazakhstan. See Note 12 in the notes to the consolidated
    financial statements.    A
    hostile takeover of our Company would be
    difficult.
   14




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ITEM 1A.  RISK
    FACTORS (continued)
  
 Risks
    Related to Our Common Stock (continued)
    Risks
    Related to our Debt Securities
  Payment
    of principal and interest on our notes will be effectively
    subordinated to our senior secured debt to the extent of the
    value of the assets securing that debt.
      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.
    
    received less than reasonably equivalent value or fair
    consideration for the incurrence of such guarantee; or 15




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ITEM 1A.  RISK
    FACTORS (continued)
   
    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.  We may
    not be able to repurchase our notes upon a change of
    control.
     16




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ITEM 1A.  RISK
    FACTORS (continued)
  DISCLOSURE
    NOTE REGARDING FORWARD-LOOKING STATEMENTS
  Form 10-K Form 10-K,
  
    stability of 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;
    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;
    the availability of insurance coverage for pending 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.  Form 10-K,
  
    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 gas;
    imposition of unanticipated trade restrictions; 17




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ITEM 1A.  RISK
    FACTORS (continued)
  
 DISCLOSURE
    NOTE REGARDING FORWARD-LOOKING STATEMENTS
    (continued)
   
    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).  Form 10-K, Form 10-K
 18




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ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES    Land
    Rigs
    Drilling Depth Rating in Feet10,000


10,000-


OverRegion

or Less


25,000


25,000


TotalAsia Pacific


1



8







9CIS (1)






5



3



8Latin America










3



3United States






2



1



3Africa/Middle East










1



1Total


1



15



8



24     (1)
    
    Two rigs are owned by AralParker.  Barge
    Rigs
    Year Built


Maximumor Last


DrillingInternational (1)

Horsepower


Refurbished


Depth (Feet)Caspian Sea:Rig No. 257


3,000



1999



30,000Mexico:Rig No. 53


1,600



2004



20,000     (1)
    
    Two barge rigs in Nigeria were sold
    in September 2006. 19




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##### Table of Contents



ITEM 2.  PROPERTIES
    (continued)
  
 Barge
    Rigs (continued)
     Year Built


Maximumor Last


DrillingU.S.

Horsepower


Refurbished


Depth (Feet)Deep drilling:Rig No. 12(3)


1,500



2006



20,000Rig No. 15


1,000



1998



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



2002



30,000Rig No. 76


3,000



2004



30,000Rig No. 77


3,000



2006



30,000Intermediate drilling:Rig No. 8


1,000



1995



14,000Rig No. 17


1,000



1993



13,000Rig No. 20


1,000



2005



13,500Rig No. 21


1,200



2001



14,000Workover and shallow drilling:Rig No. 6 (1)


700



1995



Rig No. 9 (1)(2)


650



1996



Rig No. 16


1,000



1994



13,500Rig No. 23


1,000



1993



13,000Rig No. 26 (1)(2)


650



2005



    (1)
    
    Workover rig.(2)
    
    Rigs 9 and 26 were sold on
    January 2, 2007.(3)
    
    Rig 12 was upgraded from a
    workover barge to a deep drilling barge in 2006. 20




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ITEM 2.  PROPERTIES
    (continued)
    Year Ended December 31,Transition Zone Rig
    Data

2006


2005U.S. barge deep drilling:Rigs available for service (1)


9.6



8.8Utilization rate of rigs available
    for service (2)


81
%


92
%U.S. barge intermediate
    drilling:Rigs available for service (1)


4.0



4.0Utilization rate of rigs available
    for service (2)


72
%


74
%U.S. barge workover and
    shallow drilling:Rigs available for service (1)


5.4



6.0Utilization rate of rigs available
    for service (2)


53
%


56
%International barge drilling:Rigs available for service (1)


3.2



4.2Utilization rate of rigs available
    for service (2)


100
%


96
%U.S. Land Rig
    DataRigs available for
    service (1):


0.8



Utilization rate of rigs available
    for service (2):


80
%


International Land Rig
    DataRigs available for
    service (1):


23.1



29.9Utilization rate of rigs available
    for service (2):


63
%


75
%    (1)
    
    The number of 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. Rigs available for service exclude rigs
    classified as assets held for sale. Our method of computation of
    rigs available for service may or may not be comparable to other
    similarly titled measures of other companies.(2)
    
    Rig utilization rates are
    calculated 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 or may not be comparable to other similarly
    titled measures of other companies.  ITEM 3.
    LEGAL
    PROCEEDINGS  Form 10-K,
  ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   21




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ITEM 4A.
    EXECUTIVE
    OFFICERS    (1)
    Robert L. Parker Jr., 58, chairman, president 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, 49, senior vice president and chief operating
    officer, joined Parker Drilling in December 2004. 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, 51, 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, 57, 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, 53, 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, 52, 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, including vice president of
    financial reporting and planning for Coastal Mart, a subsidiary
    of Coastal Corporation from September 1979 through February 2001.(7)
    Michael D. Drennon, 51, vice president of 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.  Other
    Parker Drilling Company Officer
  (8)
    David W. Tucker, 51, 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. 22




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PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    2006


2005Quarter

High


Low


High


LowFirst

$
12.44


$
8.07


$
6.15


$
3.75Second


9.84



6.10



7.21



4.50Third


7.65



6.25



9.66



6.79Fourth


10.05



6.50



11.82



7.41            23




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA  Form 10-K.
  Year Ended December 31,2006 (1)


2005 (2)


2004


2003 (3)


2002 (4)(Dollars in Thousands, Except Per Share Amounts)Income Statement
    DataTotal drilling and rental revenues

$
586,435


$
531,662


$
376,525


$
338,653


$
385,714Total operating income


143,326



115,123



23,867



22,927



38,556Income (loss) from continuing
    operations


81,026



98,812



(50,565
)


(52,434
)


(21,193
)Net income (loss)


81,026



98,883



(47,083
)


(109,699
)


(114,054
)Basic earnings (loss) per share:Income (loss) from continuing
    operations

$
0.76


$
1.03


$
(0.54
)

$
(0.56
)

$
(0.23
)Net income (loss)

$
0.76


$
1.03


$
(0.50
)

$
(1.17
)

$
(1.23
)Diluted earnings (loss) per share:Income (loss) from continuing
    operations

$
0.75


$
1.02


$
(0.54
)

$
(0.56
)

$
(0.23
)Net income (loss)

$
0.75


$
1.02


$
(0.50
)

$
(1.17
)

$
(1.23
)Balance Sheet
    DataCash and cash equivalents

$
92,203


$
60,176


$
44,267


$
67,765


$
51,982Marketable securities


62,920



18,000











Property, plant and equipment, net


435,473



355,397



382,824



387,664



641,278Assets held for sale


4,828







23,665



150,370



896Total assets


901,301



801,620



726,590



847,632



953,325Total long-term debt and capital
    leases, including current portion


329,368



380,015



481,063



571,625



589,930Stockholders equity


459,099



259,829



148,917



192,803



300,626     (1)
    
    The 2006 results reflect the
    reversal of a $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 federal carryforwards and other
    deferred tax assets. See Note 7 in the notes to the
    consolidated financial statements.(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.(4)
    
    In 2002, we adopted the Statement
    of Financial Accounting Standards (SFAS)
    No. 142, Goodwill and Other Intangible Assets
    and recorded a goodwill impairment of $73.1 million as a
    cumulative effect of a change in accounting principle. 24




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##### Table of Contents



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  RESULTS
    OF OPERATIONS
  Overview
        Outlook 10-month
     25




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
  Outlook(continued)
                 Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
   26




---



##### Table of Contents



RESULTS OF OPERATIONS (continued)
      Year Ended December 31,2006


2005(Dollars in Thousands)Drilling and rental revenues:U.S. drilling

$
191,225



33%


$
128,252



24%International drilling


273,216



46%



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. 27




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
   U.S. Drilling
    Segment
        International
    Drilling Segment
         28




---



##### Table of Contents



RESULTS OF OPERATIONS (continued)
  
 International
    Drilling Segment (continued)
        Rental
    Tools Segment
    Other
    Financial Data
        variable-to-fixed mark-to-market
   29




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
  
 Other
    Financial Data (continued)
    Year
    Ended December 31, 2005 Compared to Year Ended
    December 31, 2004
      Year Ended December 31,2005


2004(Dollars in Thousands)Drilling and rental revenues:U.S. drilling

$
128,252



24
%

$
88,512



23
%International drilling


308,572



58
%


220,846



59
%Rental tools


94,838



18
%


67,167



18
%Total drilling and rental revenues

$
531,662



100
%

$
376,525



100
%Drilling and rental operating
    income:U.S. drilling gross margin
    excluding depreciation and amortization (1)

$
61,425



48
%

$
34,386



39
%International drilling gross
    margin excluding depreciation and amortization (1)


71,411



23
%


52,395



24
%Rental tools gross margin
    excluding depreciation and amortization (1)


56,627



60
%


39,130



58
%Depreciation and amortization


(67,204
)






(69,241
)Total drilling and rental
    operating income (2)


122,259







56,670General and administrative expense


(27,830
)






(23,413
)Provision for reduction in
    carrying value of certain assets


(4,884
)






(13,120
)Gain on disposition of assets, net


25,578







3,730Total operating income

$
115,123






$
23,867     (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 30




---



##### Table of Contents



RESULTS OF OPERATIONS (continued)
  revenues.The gross margin amounts
    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. We believe 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 ToolsYear Ended December 31,
    2005

(Dollars in Thousands)Drilling 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


$
56,627Year Ended December 31,
    2004Drilling and rental operating
    income (2)

$
15,938


$
15,858


$
24,874Depreciation and amortization


18,448



36,537



14,256Drilling and rental gross margin
    excluding depreciation and amortization

$
34,386


$
52,395


$
39,130   (2)
    
    Drilling and rental operating
    income  drilling and rental revenues less direct
    drilling and rental operating expenses, including depreciation
    and amortization expense.  U.S. Drilling
    Segment
      International
    Drilling Segment
     31




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
  
 International
    Drilling Segment (continued)
             Rental
    Tools Segment
   32




---



##### Table of Contents



RESULTS OF OPERATIONS (continued)
   Other
    Financial Data
            variable-to-fixed mark-to-market
   33




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
  
 Other
    Financial Data (continued)
        Analysis
    of Discontinued Operations
  Year Ended December 31,2005


2004(Dollars in Thousands)U.S jackup and platform drilling
    operating income (loss)

$
100


$
7,720Depreciation and amortization






Drilling gross margin

$
100


$
7,720    34




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##### Table of Contents



LIQUIDITY
    AND CAPITAL RESOURCES
  Cash
    Flows
        Financing
    Activity
       35




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##### Table of Contents



LIQUIDITY
    AND CAPITAL RESOURCES (continued)
  
 Financing
    Activity (continued)
  sub-limit
              
    $100.0 million aggregate principal amount of Senior
    Floating Rate Notes bearing interest at a rate of LIBOR plus
    4.75%, which are due September 1, 2010; and
    $225.0 million aggregate principal amount of
    9.625% Senior Notes, which are due October 1, 2013
    plus the associated $4.4 million in unamortized debt
    premium.   36




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##### Table of Contents



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

$
325,000


$



$



$
100,000


$
225,000Long-term debt 
    interest (1)


178,440



30,370



60,973



49,199



37,898Operating leases (2)


11,008



4,958



4,650



1,227



173Purchase commitments (3)


62,484



62,484











Total contractual obligations

$
576,932


$
97,812


$
65,623


$
150,426


$
263,071Commercial commitments:Revolving credit facility (4)

$



$



$



$



$
Standby letters of credit(4)


23,061



23,061











Total commercial commitments

$
23,061


$
23,061


$



$



$
      (1)
    
    Long-term debt includes the
    principal and interest cash obligations of the
    9.625% Senior Notes but the remaining unamortized premium
    of $4.4 million is not included in the contractual cash
    obligations schedule. A portion of the interest on the Senior
    Floating Rate Notes has been fixed through
    variable-to-fixed
    interest rate swap agreements. The issuer (Bank of America,
    N.A.) of each swap has the option to extend each swap for an
    additional two years at the termination of the initial swap
    period. For the purpose of this table, the highest interest rate
    currently hedged is used in calculating the interest on future
    floating rate periods. See Note 4 and 6 in the notes to the
    consolidated financial statements.(2)
    
    Operating leases consist of lease
    agreements in excess of one year for office space, equipment,
    vehicles and personal property. See Note 12 in the notes to
    the consolidated financial statements.(3)
    
    We have purchase commitments
    outstanding as of December 31, 2006, related to rig upgrade
    projects and new rig construction.(4)
    
    We have a $40.0 million
    revolving credit facility. As of December 31, 2006 no
    amounts have been drawn down, but $23.1 million of
    availability has been used to support letters of credit that
    have been issued, resulting in an estimated $16.9 million
    availability. The revolving credit facility expires in December
    2007. See Note 4 in the notes to the consolidated financial
    statements.    OTHER
    MATTERS
  Business
    Risks
  and/or
  Critical
    Accounting Policies
   37




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##### Table of Contents



OTHER
    MATTERS (continued)
  
 Critical
    Accounting Policies (continued)
    and/or
  Impairment of Property, Plant and
    Equipment.
      Impairment of Goodwill.
    Insurance Reserves.
 38




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##### Table of Contents



OTHER
    MATTERS (continued)
  
 Critical
    Accounting Policies (continued)
        Accounting for Income Taxes.
      Revenue Recognition.
 39




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##### Table of Contents



OTHER
    MATTERS (continued)
  
 Critical
    Accounting Policies (continued)
    Accounting for Derivative
    Instruments.
  variable-to-fixed
  mark-to-market
  mark-to-market
  Recent
    Accounting Pronouncements
     40




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##### Table of Contents



OTHER
    MATTERS (continued)
  
 Recent
    Accounting Pronouncements (continued)
    41




---



##### Table of Contents



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Interest
    Rate Risk
  variable-to-fixed
    Notional




Fixed


FairEffective Date


Termination Date


Amount


Floating Rate

Rate


Value(Dollars in Thousands)September 1, 2005



September 2, 2008


$
50,000


Three-month LIBOR
    plus 475 basis points


8.83
%

$
740September 1, 2005



September 4, 2007


$
50,000


Three-month LIBOR
    plus 475 basis points


8.48
%


582$
1,322    Long-Term
    Debt
   42




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##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the Board
    of Directors and Stockholders of
     Consolidated
    financial statements and financial statement schedule
    Internal
    control over financial reporting
  Internal Control  Integrated Framework Internal Control 
    Integrated Framework
   43




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##### Table of Contents



ITEM 8.FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA (continued)
        /s/ PricewaterhouseCoopers LLP
     44




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##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIES
    CONSOLIDATED STATEMENT OF OPERATIONS
    (Dollars in Thousands, Except Per Share Data)
  Year Ended December 31,2006


2005


2004Drilling and rental revenues:U.S. drilling

$
191,225


$
128,252


$
88,512International drilling


273,216



308,572



220,846Rental tools


121,994



94,838



67,167Total drilling and rental revenues


586,435



531,662



376,525Drilling and rental operating
    expenses:U.S. drilling


83,462



66,827



54,126International drilling


219,710



237,161



168,451Rental tools


46,454



38,211



28,037Depreciation and amortization


69,270



67,204



69,241Total drilling and rental
    operating expenses


418,896



409,403



319,855Drilling and rental operating
    income


167,539



122,259



56,670General and administration expense


(31,786
)


(27,830
)


(23,413
)Provision for reduction in
    carrying value of certain assets






(4,884
)


(13,120
)Gain on disposition of assets, net


7,573



25,578



3,730Total operating income


143,326



115,123



23,867Other income and (expense):Interest expense


(31,598
)


(42,113
)


(50,368
)Change in fair value of derivative
    positions


40



2,076



(794
)Interest income


7,963



2,241



816Loss on extinguishment of debt


(1,912
)


(8,241
)


(8,753
)Minority interest


(229
)


1,905



(1,143
)Other


(155
)


(763
)


819Total other income and (expense)


(25,891
)


(44,895
)


(59,423
)Income (loss) before income taxes


117,435



70,228



(35,556
)Income tax expense (benefit):Current tax expense


20,654



16,328



15,009Deferred tax benefit


15,755



(44,912
)


Total income tax expense (benefit)


36,409



(28,584
)


15,009Income (loss) from continuing
    operations


81,026



98,812



(50,565
)Discontinued operations






71



3,482Net income (loss)

$
81,026


$
98,883


$
(47,083
)Basic earnings (loss) per share:Income (loss) from continuing
    operations

$
0.76


$
1.03


$
(0.54
)Discontinued operations

$



$



$
0.04Net income (loss)

$
0.76


$
1.03


$
(0.50
)Diluted earnings (loss) per share:Income (loss) from continuing
    operations

$
0.75


$
1.02


$
(0.54
)Discontinued operations

$



$



$
0.04Net income (loss)

$
0.75


$
1.02


$
(0.50
)Number of common shares used in
    computing earnings per share:Basic


106,552,015



95,818,893



94,113,257Diluted


108,138,384



97,208,345



94,113,257    45




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##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIES
    CONSOLIDATED BALANCE SHEET
    (Dollars in Thousands)
  December 31,ASSETS

2006


2005Current assets:Cash and cash equivalents

$
92,203


$
60,176Marketable securities


62,920



18,000Accounts and notes receivable, net
    of allowance for bad debts of $1,481 in 2006 and $1,639 in 2005


112,359



104,681Rig materials and supplies, net


15,000



18,179Deferred costs


6,662



4,223Deferred income taxes


17,307



12,018Other current assets


11,123



64,058Total current assets


317,574



281,335Property, plant and equipment, at
    cost:Drilling equipment


722,501



750,368Rental tools


141,594



119,028Buildings, land and improvements


17,365



17,448Other


34,794



31,528Construction in progress


89,869



23,1931,006,123



941,565Less accumulated depreciation and
    amortization


570,650



586,168Property, plant and equipment, net


435,473



355,397Assets held for sale


4,828



Other assets:Goodwill


100,315



107,606Rig materials and supplies


5,654



2,819Debt issuance costs


5,552



8,088Deferred income taxes


13,405



34,449Other assets


18,500



11,926Total other assets


143,426



164,888Total assets

$
901,301


$
801,620    46




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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

2006


2005Current liabilities:Current portion of long-term debt

$



$
Accounts payable


35,223



31,909Accrued liabilities


60,003



109,068Accrued income taxes


6,677



9,778Total current liabilities


101,903



150,755Long-term debt


329,368



380,015Other long-term liabilities


10,931



11,021Commitments and contingencies
    (Note 12)Stockholders equity:Preferred stock, $1 par
    value, 1,942,000 shares authorized, no shares outstanding






Common stock,
    $0.162/3
    par value, authorized 140,000,000 shares, issued and
    outstanding 109,149,659 shares (97,836,254 shares in
    2005)


18,220



16,306Capital in excess of par value


568,253



456,135Unamortized restricted stock plan
    compensation






(4,212
)Accumulated deficit


(127,374
)


(208,400
)Total stockholders equity


459,099



259,829Total liabilities and
    stockholders equity

$
901,301


$
801,620    47




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##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIES
    CONSOLIDATED STATEMENT OF CASH FLOWS
    (Dollars in Thousands)
  Year Ended December 31,2006


2005


2004CASH FLOWS FROM OPERATING
    ACTIVITIES:Net income (loss)

$
81,026


$
98,883


$
(47,083
)Adjustments to reconcile net
    income (loss) to net cash provided by operating activities:Depreciation and amortization


69,270



67,204



69,241Amortization of debt issuance and
    premium


764



958



1,924Loss on extinguishment of debt


910



935



2,657Gain on disposition of assets


(7,573
)


(25,549
)


(3,620
)Gain on disposition of marketable
    securities










(762
)Provision for reduction in
    carrying value of certain assets






4,884



17,248Deferred tax expense (benefit)


15,755



(44,912
)


Other


9,674



2,913



6,132Change in assets and liabilities:Accounts and notes receivable


(3,456
)


(568
)


(10,565
)Rig materials and supplies


(2,605
)


(3,179
)


361Other current assets


34,420



7,589



(30,735
)Accounts payable and accrued
    liabilities


(28,143
)


18,218



12,749Accrued income taxes


(3,101
)


(5,100
)


895Other assets


(73
)


331



10,360Net cash provided by operating
    activities


166,868



122,607



28,802CASH FLOWS FROM INVESTING
    ACTIVITIES:Capital expenditures


(195,022
)


(69,492
)


(47,318
)Proceeds from the sale of assets


50,790



61,046



51,053Proceeds from insurance claims


4,501



13,850



41,566Investment in joint venture


(10,000
)






Purchase of marketable securities


(198,120
)


(18,000
)


Proceeds from sale of marketable
    securities


153,200







1,377Net cash provided by (used in)
    investing activities


(194,651
)


(12,596
)


46,678    48




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##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIES
    CONSOLIDATED STATEMENT OF CASH FLOWS
    (Continued)
    (Dollars in Thousands)
  Year Ended December 31,2006


2005


2004CASH FLOWS FROM FINANCING
    ACTIVITIES:Proceeds from issuance of debt

$



$
55,500


$
200,000Principal payments under debt
    obligations


(50,000
)


(155,632
)


(290,206
)Proceeds from common stock offering


99,947







Payment of debt issuance costs






(655
)


(10,243
)Proceeds from stock options
    exercised


7,537



6,685



1,471Excess tax benefit from
    stock-based compensation


2,326







Net cash provided by (used in)
    financing activities


59,810



(94,102
)


(98,978
)Net increase (decrease) in cash
    and cash equivalents


32,027



15,909



(23,498
)Cash and cash equivalents at
    beginning of year


60,176



44,267



67,765Cash and cash equivalents at end
    of year

$
92,203


$
60,176


$
44,267Supplemental disclosures of cash
    flow information:Cash paid during the year for:Interest, net of amounts
    capitalized

$
30,898


$
41,308


$
49,181Income taxes

$
21,566


$
13,415


$
15,062Discontinued operations:Depreciation

$



$



$
Loss on disposition of assets

$



$
29


$
110Provision for reduction in
    carrying value of certain assets

$



$



$
4,128    49




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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, 2003


94,176


$
15,696


$
438,311


$
(1,885
)

$
881


$
(260,200
)Activity in employees stock
    plans


823



137



2,774











Amortization of restricted stock
    plan compensation














1,167







Other comprehensive
    loss  net unrealized loss on investments (net of
    taxes of $0)


















(881
)


Net loss (total comprehensive loss
    of $47,964)






















(47,083
)Balances, 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 FAS 123R










(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
)    50




---



##### 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 out-of-pocket out-of-pocket
  Cash and Cash Equivalents
  Marketable Securities
  Accounts Receivable and Allowance for Doubtful
    Accounts
 51




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 1 
    Summary of Significant Accounting Policies (continued)
     December 31,2006


2005(Dollars in Thousands)Trade

$
113,819


$
105,982Employee (1)


21



338Allowance for doubtful accounts (2)


(1,481
)


(1,639
)Total receivables

$
112,359


$
104,681     (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, 2006, 2005 and 2004 are reported on
    Schedule II  Valuation and Qualifying Accounts.  Property, Plant and Equipment
  Goodwill
  Rig Materials and Supplies
  Deferred Costs
  Other Long-Term Liabilities
 52




---



##### 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 mark-to-market
  Fair Value of Financial Instruments
    Stock-Based Compensation
 53




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 1 
    Summary of Significant Accounting Policies (continued)
    Year Ended December 31,2005


2004(Dollars in Thousands)Net income (loss) as reported

$
98,883


$
(47,083
)Stock-based compensation expense
    included in net income (loss) as reported


1,704



1,097Stock-based compensation expense
    determined under fair value method


(1,855
)


(1,738
)Net income (loss) pro forma

$
98,732


$
(47,724
)Basic earnings (loss) per share:Net income (loss) as reported

$
1.03


$
(0.50
)Net income (loss) pro forma

$
1.03


$
(0.51
)Diluted earnings (loss) per share:Net income (loss) as reported

$
1.02


$
(0.50
)Net income (loss) pro forma

$
1.02


$
(0.51
)     2006 (1)

2005

2004Expected price volatility

16.90%

51.1%

60.0%Risk-free interest rate range

4.23%

3.38%

1.95%-3.89%Expected life of stock options

3 months

3-7 years

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.   54




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 1 
    Summary of Significant Accounting Policies (continued)
    Accounting Estimates
  Note 2 
    Disposition of Assets
  Discontinued Operations
       55




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 2 
    Disposition of Assets (continued)
      Year Ended December 31,2006


2005


2004(Dollars in Thousands)U.S. jackup and platform
    drilling revenues

$



$
193


$
34,350U.S. jackup and platform
    drilling gross margin

$



$
100


$
7,720Depreciation and amortization










Loss on disposition of assets, net
    of gains and impairment






(29
)


(4,238
)Income from discontinued operations

$



$
71


$
3,482   Disposition of Assets
    Involuntary Conversion of Assets
    Provision for Reduction in Carrying Value of an
    Asset
 56




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 2 
    Disposition of Assets (continued)
      
    $3.2 million related to two U.S. Gulf of Mexico
    workover barges that were determined not to be marketable;
    $0.7 million to adjust two rigs in the Asia Pacific region
    to net realizable value;
    $2.4 million to adjust all assets in Bolivia to net
    realizable value in anticipation of their sale;
    $5.1 million reduction to adjust Latin America assets to
    fair value after reclassification of the assets from
    discontinued operations to continuing operations; and
    $1.7 million reserve against an asset comprised of
    insurance premiums paid on behalf of Robert L. Parker. See
    Note 13 in the notes to the consolidated financial
    statements.  Assets Held for Sale
  Note 3 
    Goodwill
    Note 4 
    Long-Term Debt
  December 31,2006


2005(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 and
    9.16% at December 31, 2005)

$
100,000


$
150,000Senior Notes payable in October
    2013 with interest at 9.625% payable semi-annually in April and
    October net of unamortized premium of $4,368 at
    December 31, 2006 and $5,015 at December 31, 2005
    (effective interest rate of 9.27% at December 31, 2006 and
    9.20% at December 31, 2005)


229,368



230,015Total debt


329,368



380,015Less current portion






Total long-term debt

$
329,368


$
380,015  57




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 4 
    Long-Term Debt (continued)
  2006-2009,
  Activity in 2006
  Activity in 2005
          Form S-4
  Note 5 
    Guarantor/Non-Guarantor Consolidating Condensed Financial
    Statements
  Rule 3-10(a)(1) Regulation S-X, sub-paragraph (f) of
 58




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 5 
    Guarantor/Non-Guarantor Consolidating Condensed Financial
    Statements (continued)
       59




---



##### 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. 60




---



##### 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. 61




---



##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIES
    CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
    (Dollars in Thousands)
  Year Ended December 31, 2004Parent


Guarantor


Non-Guarantor


Eliminations


ConsolidatedDrilling and rental revenues

$



$
280,120


$
104,695


$
(8,290
)

$
376,525Drilling and rental operating
    expenses


2



160,583



98,319



(8,290
)


250,614Depreciation and amortization






64,253



4,988







69,241Drilling and rental operating
    income (loss)


(2
)


55,284



1,388







56,670General and administrative expense
    (1)


53



(23,437
)


(29
)






(23,413
)Provision for reduction in carrying
    value of certain assets


(1,782
)


(7,847
)


(3,491
)






(13,120
)Gain on disposition of assets, net






3,305



425







3,730Total operating income (loss)


(1,731
)


27,305



(1,707
)






23,867Other income and (expense):Interest expense


(54,689
)


(48,590
)


(3,748
)


56,659



(50,368
)Changes in fair value of derivative
    positions


(794
)














(794
)Interest income


48,323



6,705



2,447



(56,659
)


816Loss on extinguishment of debt


(8,753
)














(8,753
)Minority interest










(1,143
)






(1,143
)Other


775



32



12







819Equity in net losses of subsidiaries


(29,149
)










29,149



Total other income and (expense)


(44,287
)


(41,853
)


(2,432
)


29,149



(59,423
)Income (loss) before income taxes


(46,018
)


(14,548
)


(4,139
)


29,149



(35,556
)Income tax expense


1,065



12,685



1,259







15,009Income (loss) from continuing
    operations


(47,083
)


(27,233
)


(5,398
)


29,149



(50,565
)Discontinued operations






3,482











3,482Net income (loss)

$
(47,083
)

$
(23,751
)

$
(5,398
)

$
29,149


$
(47,083
)     (1)
    
    All field operations general and
    administrative expenses are included in operating expenses. 62




---



##### 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
)


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


459,097



763,397



56,774



(820,169
)


459,099Total liabilities and
    stockholders equity

$
905,125


$
1,508,808


$
139,021


$
(1,651,653
)

$
901,301  63




---



##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIES
    CONSOLIDATING CONDENSED BALANCE SHEET
    (Dollars in Thousands)
  December 31, 2005Parent


Guarantor


Non-Guarantor


Eliminations


ConsolidatedASSETSCurrent assets:Cash and cash equivalents

$
31,978


$
11,145


$
17,053


$



$
60,176Marketable securities


16,000



2,000











18,000Accounts and notes receivable, net


41,965



112,888



41,637



(91,809
)


104,681Rig materials and supplies






10,830



7,349







18,179Deferred costs






2,791



1,432







4,223Other current assets


12,024



63,312



740







76,076Total current assets


101,967



202,966



68,211



(91,809
)


281,335Property, plant and equipment, net


134



324,637



30,504



122



355,397Goodwill






107,606











107,606Investment in subsidiaries and
    intercompany advances


606,711



740,140



35,403



(1,382,254
)


Other noncurrent assets


46,080



10,997



244



(39
)


57,282Total assets

$
754,892


$
1,386,346


$
134,362


$
(1,473,980
)

$
801,620LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued
    liabilities

$
38,802


$
163,414


$
50,446


$
(111,685
)

$
140,977Accrued income taxes


609



9,885



(716
)






9,778Total current liabilities


39,411



173,299



49,730



(111,685
)


150,755Long-term debt


380,015















380,015Other long-term liabilities


1,054



8,242



1,725







11,021Intercompany payables


74,583



567,434



17,195



(659,212
)


Stockholders equity:Common stock


16,306



39,899



21,251



(61,150
)


16,306Capital in excess of par value


456,135



977,559



33,950



(1,011,509
)


456,135Unamortized restricted stock plan
    compensation


(4,212
)














(4,212
)Retained earnings (accumulated
    deficit)


(208,400
)


(380,087
)


10,511



369,576



(208,400
)Total stockholders equity


259,829



637,371



65,712



(703,083
)


259,829Total liabilities and
    stockholders equity

$
754,892


$
1,386,346


$
134,362


$
(1,473,980
)

$
801,620  64




---



##### 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 on disposition of assets


6



(7,416
)


(163
)






(7,573
)Deferred tax expense (benefit)


15,951



(4,144
)


3,948







15,755Other


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 joint venture


(10,000
)














(10,000
)Proceeds from the sale of assets


(6
)


48,481



2,315







50,790Proceeds from insurance settlements






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  65




---



##### 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
)Other


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   66




---



##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIES
    CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
    (Dollars in Thousands)
  Year Ended December 31, 2004Parent


Guarantor


Non-Guarantor


Eliminations


ConsolidatedCash flows from operating
    activities:Net income (loss)

$
(47,083
)

$
(23,751
)

$
(5,398
)

$
29,149


$
(47,083
)Adjustments to reconcile net income
    (loss) to net cash provided by (used in) operating activities:Depreciation and amortization






64,253



4,988







69,241Amortization of debt issuance and
    premium


1,924















1,924Loss on extinguishment of debt


2,657















2,657Gain on disposition of assets






(3,195
)


(425
)






(3,620
)Gain on disposition of marketable
    securities


(762
)














(762
)Provision for reduction in carrying
    value of certain assets


1,782



11,975



3,491







17,248Other


1,122



4,994



16







6,132Equity in net losses of subsidiaries


29,149











(29,149
)


Change in operating assets and
    liabilities


(24,883
)


(7,941
)


15,889







(16,935
)Net cash provided by (used in)
    operating activities


(36,094
)


46,335



18,561







28,802Cash flows from investing
    activities:Capital expenditures


(1
)


(45,319
)


(1,998
)






(47,318
)Proceeds from the sale of assets






50,324



729







51,053Proceeds from insurance claims






41,566











41,566Proceeds from sale of marketable
    securities


1,377















1,377Net cash provided by (used in)
    investing activities


1,376



46,571



(1,269
)






46,678Cash flows from financing
    activities:Proceeds from issuance of debt


200,000















200,000Principal payments under debt
    obligations


(290,206
)














(290,206
)Payment of debt issuance costs


(10,243
)














(10,243
)Proceeds from stock options
    exercised


1,471















1,471Intercompany advances, net


97,318



(88,578
)


(8,740
)






Net cash provided by (used in)
    financing activities


(1,660
)


(88,578
)


(8,740
)






(98,978
)Net increase (decrease) in cash and
    cash equivalents


(36,378
)


4,328



8,552







(23,498
)Cash and cash equivalents at
    beginning of year


53,055



3,610



11,100







67,765Cash and cash equivalents at end of
    year

$
16,677


$
7,938


$
19,652


$



$
44,267  67




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
   Note 6 
    Derivative Financial Instruments
  variable-to-fixed 18-month
    Notional




Fixed


FairEffective Date


Termination Date


Amount


Floating Rate

Rate


Value(Dollars in Thousands)September 1, 2005



September 2, 2008


$
50,000


Three-month LIBOR
    plus 475 basis points


8.83
%

$
740September 1, 2005



September 4, 2007


$
50,000


Three-month LIBOR
    plus 475 basis points


8.48
%


582$
1,322    Note 7 
    Income Taxes
    Year Ended December 31,2006


2005


2004(Dollars in Thousands)United States

$
99,024


$
23,021


$
(14,847
)Foreign


18,411



47,207



(20,709
)$
117,435


$
70,228


$
(35,556
)  68




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 7 
    Income Taxes (continued)
    Year Ended December 31,2006


2005


2004(Dollars in Thousands)Current:United States:Federal

$
13,046


$
1,837


$
124State






18



Foreign


7,608



14,473



14,885Deferred:United States:Federal


30,436



(46,537
)


State


(12,617
)






Foreign


(2,064
)


1,625



$
36,409


$
(28,584
)

$
15,009     Year Ended December 31,2006


2005


2004% of





% of





% ofPre-Tax





Pre-Tax





Pre-TaxAmount


Income


Amount


Income


Amount


Income(Dollars in Thousands)Computed expected tax expense

$
41,104



35
%

$
24,580



35
%

$
(12,445
)


(35
)%Foreign taxes, net of federal
    benefit


5,820



5
%


7,496



11
%


12,672



36
%Change in valuation allowance









$
(71,497
)


(102
)%


12,231



34
%Foreign corporation income


1,524



2
%


9,055



13
%


1,116



3
%Benefit of State NOL


(12,617
)


(11
)%














Permanent differences


1,404



1
%


1,740



2
%


1,311



4
%Other


(826
)


(1
)%


42







124



Actual tax expense

$
36,409



31
%

$
(28,584
)


(41
)%

$
15,009



42
%  69




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 7 
    Income Taxes (continued)
    December 31,2006


2005(Dollars in Thousands)Deferred tax assets:Current deferred tax assets:Reserves established against
    realization of certain assets

$
4,375


$
5,951Accruals not currently deductible
    for tax purposes


12,932



6,067Current deferred tax assets


17,307



12,018Long-term deferred tax assets:Net operating loss carryforwards






34,783Alternative minimum tax
    carryforwards






2,363Property, plant and equipment


10,940



10,199State net operating loss
    carryforwards


12,617



Other long-term liabilities


2,149



2,149Deferred stock compensation


3,693



741Gross long-term deferred tax assets


29,399



50,235Long-term deferred tax valuation
    allowance






Long-term deferred tax assets


29,399



50,235Deferred tax assets


46,706



62,253Deferred tax liabilities:Long-term deferred tax liabilities:Goodwill


(14,561
)


(12,234
)Other


(1,433
)


(3,552
)Long-term deferred tax liabilities


(15,994
)


(15,786
)Net deferred tax assets

$
30,712


$
46,467      70




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 7 
    Income Taxes (continued)
        Note 8 
    Common Stock and Stockholders Equity
  Common Stock Offering
  Stock Plans
       71




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 8 
    Common Stock and Stockholders Equity (continued)
      Form S-8
   72




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 8 
    Common Stock and Stockholders Equity (continued)
     1991 StockGrant PlanRestrictedSharesOutstanding at December 31,
    2005


100,000Granted


Exercised


Cancelled


Outstanding at December 31,
    2006


100,000   1994 Non-Employee DirectorStock Incentive PlanWeightedAverageExercise


IntrinsicShares


Price


ValueOutstanding at December 31,
    2005


124,000


$
9.137Granted






Exercised


(30,000
)


8.880


$
3,975Cancelled


(10,000
)


10.700Outstanding at December 31,
    2006


84,000


$
9.047   1994 Executive Stock Option PlanIncentive Options


Non-Qualified OptionsWeighted








WeightedAverage








AverageExercise


Intrinsic





Exercise


IntrinsicShares


Price


Value


Shares


Price


ValueOutstanding at December 31,
    2005


141,539


$
8.875







790,995


$
8.875Granted


















Exercised


(33,801
)


8.875


$
84,333



(161,199
)


8.875


$
404,730Cancelled


(6,335
)


8.875







(11,199
)


8.875Outstanding at December 31,
    2006


101,403


$
8.875







618,597


$
8.875  73




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 8 
    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,
    2005


1,205,368


$
8.947







2,631,448


$
5.049



Granted






















Exercised


(277,622
)


4.144


$
1,647,359



(927,928
)


4.018






$
6,009,490Cancelled


(196,564
)


9.781







(24,902
)


4.958



Outstanding at December 31,
    2006


731,182


$
10.547







1,678,618


$
5.623



   2005 Long-Term Incentive PlanNon-Qualified OptionsWeightedAverageExercise


Intrinsic


RestrictedShares


Price


Value


SharesOutstanding at December 31,
    2005


200,000


$
8.875







1,005,000Granted


10,000



3.188







753,500Exercised


(135,000
)


3.523


$
254,950



(270,184
)Cancelled


(50,000
)


8.875







(30,165
)Outstanding at December 31,
    2006


25,000


$
8.875







1,458,151  74




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 8 
    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

$3.281


4,000



2.0 years


$
3.280


$
19,560Non-qualified

$8.875  $12.094


80,000



0.4 years


$
9.335


$
1994 Executive Stock Option PlanIncentive option

$8.875


101,403



0.4 years


$
8.875


$
Non-qualified

$8.875


618,597



0.4 years


$
8.875


$
1997 Stock Plan Incentive option

$3.188  $5.938









$



$
Incentive option

$8.875  $12.188


731,182



0.6 years


$
10.547


$
Non-qualified

$1.960  $6.070


1,087,800



0.4 years


$
3.847


$
4,702,222Non-qualified

$8.875  $10.813


590,818



0.3 years


$
8.892


$
2005 Long-Term Incentive PlanNon-qualified

$8.875


25,000



0.4 years


$
8.875


$
   Exercisable OptionsWeightedAverage


AggregateNumber of


Exercise


IntrinsicPlan

Exercise Prices

Shares


Price


Value1994 Non-Employee Director
    Incentive PlanNon-qualified

$3.281


4,000


$
3.280


$
19,560Non-qualified

$8.875  $12.094


80,000


$
9.335


$
1994 Executive Stock Option PlanIncentive option

$8.875


101,403


$
8.875


$
Non-qualified

$8.875


618,597


$
8.875


$
1997 Stock PlanIncentive option

$3.188  $5.938





$



$
Incentive option

$8.875  $12.188


731,182


$
10.547


$
Non-qualified

$1.960  $6.070


1,079,466


$
3.847


$
4,666,219Non-qualified

$8.875  $10.813


590,818


$
8.892


$
2005 Long-Term Incentive PlanNon-qualified

$8.875


25,000


$
8.875


$
    75




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 8 
    Common Stock and Stockholders Equity (continued)
   Stock Reserved for Issuance
  December 31,2006


2005Stock plans


5,372,934



7,938,484Stock bonus plan


87,983



307,187Total shares reserved for issuance


5,460,917



8,245,671   Stockholder Rights Plan
     76




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
   Note 9 
    Reconciliation
    of Income and Number of Shares Used to Calculate Basic and
    Diluted Earnings Per Share (EPS)  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



108,138,384


$
0.75Discontinued operations










Net income

$
81,026,000






$
0.75   For the Year Ended December 31, 2005Income


Shares


Per-Share(Numerator)


(Denominator)


AmountBasic EPS:Income from continuing operations

$
98,812,000



95,818,893


$
1.03Discontinued operations


71,000







0.00Net 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







0.00Net income

$
98,883,000






$
1.02   For the Year Ended December 31, 2004Income (Loss)


Shares


Per-Share(Numerator)


(Denominator)


AmountBasic EPS:Loss from continuing operations

$
(50,565,000
)


94,113,257


$
(0.54
)Discontinued operations


3,482,000







0.04Net loss

$
(47,083,000
)





$
(0.50
)Effect of dilutive securities:Stock options and restricted stock










Convertible debt










Diluted EPS:Loss from continuing operations

$
(50,565,000
)


94,113,257


$
(0.54
)Discontinued operations


3,482,000







0.04Net loss

$
(47,083,000
)





$
(0.50
)  77




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 9 
    Reconciliation
    of Income and Number of Shares Used to Calculate Basic and
    Diluted Earnings Per Share (EPS) (continued)    Note 10 
    Employee Benefit Plan
   78




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
   Note 11 
    Business Segments
    Year Ended December 31,Operations by Industry
    Segment

2006


2005


2004(Dollars in Thousands)Drilling and rental revenues:U.S. drilling (1)

$
191,225


$
128,252


$
88,512International drilling (1)


273,216



308,572



220,846Rental tools (1)


121,994



94,838



67,167Total drilling and rental revenues


586,435



531,662



376,525Drilling and rental operating
    income (loss):U.S. drilling (2)


83,370



41,739



15,938International drilling (2)


27,465



40,281



15,858Rental tools (2)


56,704



40,239



24,874Total drilling and rental
    operating income


167,539



122,259



56,670Net construction contract
    operating income










General and administrative expense


(31,786
)


(27,830
)


(23,413
)Provision for reduction in
    carrying value of certain assets






(4,884
)


(13,120
)Gain on disposition of assets, net


7,573



25,578



3,730Total operating income


143,326



115,123



23,867Interest expense


(31,598
)


(42,113
)


(50,368
)Changes in fair value of
    derivative positions


40



2,076



(794
)Loss on extinguishment of debt


(1,912
)


(8,241
)


(8,753
)Minority interest


(229
)


1,905



(1,143
)Other


7,808



1,478



1,635Income (loss) from continuing
    operations before income taxes

$
117,435


$
70,228


$
(35,556
)Identifiable assets: (3)U.S. drilling

$
255,275


$
120,647International drilling


318,767



378,427Rental tools


166,270



98,531Total identifiable assets


740,312



597,605Corporate assets


160,989



204,015Total assets

$
901,301


$
801,620     (1)
    
    In 2006, ExxonMobil and Chevron
    accounted for approximately 14 percent and 8 percent
    of the Companys total revenues, respectively. 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. Chevron accounted for approximately
    $28.5 million of the Companys international drilling
    segment revenues, $9.8 million of the U.S. drilling
    segment and approximately $10.3 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.(3)
    
    Includes assets related to
    discontinued operations. 79




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 11 
    Business Segments (continued)
  Year Ended December 31,Operations by Industry
    Segment

2006


2005


2004(Dollars in Thousands)Capital expenditures:U.S. drilling

$
72,373


$
16,724


$
13,549International drilling


75,448



23,524



20,128Rental tools


40,773



27,962



13,031Corporate


6,428



1,282



610Total capital expenditures

$
195,022


$
69,492


$
47,318Depreciation and amortization:U.S. drilling

$
23,867


$
19,354


$
18,090International drilling


25,290



30,330



35,642Rental tools


18,501



16,142



13,984Corporate


1,612



1,378



1,525Total depreciation and amortization

$
69,270


$
67,204


$
69,241  80




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 11 
    Business Segments (continued)
  Year Ended December 31,Operations by Geographic
    Area

2006


2005


2004(Dollars in Thousands)Drilling and rental revenues:United States

$
309,757


$
218,056


$
154,995Latin America


31,466



67,954



39,614Asia Pacific


79,665



58,623



42,468Africa and Middle East


24,219



33,377



31,352CIS


141,328



153,652



108,096Total drilling and rental revenues


586,435



531,662



376,525Drilling and rental operating
    income (loss):United States (1)


136,690



77,560



40,130Latin America (1)


(5,679
)


4,018



(1,215
)Asia Pacific (1)


19,884



14,353



9,379Africa and Middle East (1)


(2,594
)


(834
)


(8,181
)CIS (1)


19,238



27,162



16,557Total drilling and rental
    operating income


167,539



122,259



56,670Net construction contract
    operating income (United States)










General and administrative expense


(31,786
)


(27,830
)


(23,413
)Provision for reduction in
    carrying value of certain assets






(4,884
)


(13,120
)Gain on disposition of assets, net


7,573



25,578



3,730Total operating income


143,326



115,123



23,867Interest expense


(31,598
)


(42,113
)


(50,368
)Changes in fair value of
    derivative positions


40



2,076



(794
)Loss on extinguishment of debt


(1,912
)


(8,241
)


(8,753
)Minority interest


(229
)


1,905



(1,143
)Other


7,808



1,478



1,635Income (loss) from continuing
    operations before income taxes

$
117,435


$
70,228


$
(35,556
)Long-lived assets: (2)United States

$
401,349


$
257,302Latin America


17,217



36,853Asia Pacific


24,420



18,732Africa and Middle East


2,412



51,615CIS


90,389



98,501Total long-lived assets

$
535,787


$
463,003     (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 12 
    Commitments and Contingencies
   81




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 12 
    Commitments and Contingencies (continued)
      2007

$
4,9582008


2,8442009


1,8062010


6622011


565Thereafter


173Total

$
11,008              82




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 12 
    Commitments and Contingencies (continued)
   Kazakhstan
    Tax Claims
          Bangladesh
    Claim
  forum non conveniens,
 83




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 12 
    Commitments and Contingencies (continued)
   Asbestos-Related
    Claims
        Other
    Litigation
    Note 13 
    Related Party Transactions
  Agreements
    with Robert L. Parker and Robert L. Parker, Jr.    Consulting
    Agreement
         84




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 13 
    Related Party Transactions (continued)
  
 Consulting
    Agreement (continued)
   (iv)
    Monthly payments of $37,500 and $28,750 commencing on
    December 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.        Termination
    of Split Dollar Life Insurance Agreement
      85




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 13 
    Related Party Transactions (continued)
  Lease
    Agreements
    Other
    Related Party Agreements
    Note 14 
    Supplementary Information
     86




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
   Note 15 
    Selected Quarterly Financial Data
  QuarterYear 2006

First


Second


Third


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 settlement of insurance 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.  QuarterYear 2005

First


Second


Third (2)


Fourth (2)


Total (2)(Dollars in Thousands Except Per Share Amounts)(Unaudited)Revenues

$
120,243


$
133,954


$
127,905


$
149,560


$
531,662Drilling and rental operating
    income

$
24,991


$
29,322


$
32,665


$
35,281


$
122,259Operating income

$
18,567


$
38,820


$
29,865


$
27,871


$
115,123Income from continuing operations

$
3,838


$
20,194


$
18,073


$
56,707


$
98,812Discontinued operations

$
91


$
(14
)

$
(6
)

$



$
71Net income

$
3,929


$
20,180


$
18,067


$
56,707


$
98,883Basic earnings per share: (1)Income from continuing operations

$
0.04


$
0.21


$
0.19


$
0.59


$
1.03Discontinued operations

$



$



$



$



$
Net income

$
0.04


$
0.21


$
0.19


$
0.59


$
1.03Diluted earnings per
    share: (1)Income from continuing operations

$
0.04


$
0.21


$
0.18


$
0.58


$
1.02Discontinued operations

$



$



$



$



$
Net income

$
0.04


$
0.21


$
0.18


$
0.58


$
1.02  87




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 15 
    Selected Quarterly Financial Data (continued)
    (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 $4.9 million provision for reduction in
    carrying value of certain assets in 2005; $2.3 million and
    $2.6 million in the third and fourth quarters,
    respectively. Also included is a gain on the disposition of
    assets for the seven land rigs in Latin America and rig 255 in
    Bangladesh of $15.0 million, $6.0 million and
    $3.3 million in the second, third and fourth quarters of
    2005, respectively. Net income in the fourth quarter includes
    the reversal of a $71.5 million valuation allowance related
    to net operating loss carryforwards and other deferred assets.
    See Note 7 in the notes to the consolidated financial
    statements.  Note 16 
    Recent Accounting Pronouncements
       88




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##### Table of Contents



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE  Regulation S-X
  ITEM 9A.
    CONTROLS
    AND PROCEDURES  Evaluation of Disclosure Controls and
    Procedures Rules 13a-15(e) 15d-15(e)
  Managements Report on Internal Control over
    Financial Reporting Rules 13a-15(f) 15d-15(f).
  
    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.    Internal Control 
    Integrated Framework
   89




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##### Table of Contents



ITEM 9A.
    CONTROLS
    AND PROCEDURES (continued)     Changes in Internal Control over Financial
    Reporting
  ITEM 9B.
    OTHER
    INFORMATION   90




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##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE AND CORPORATE GOVERNANCE    Form 10-K.
      http://www.parkerdrilling.com. Form 8-K
  ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES   91




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##### Table of Contents



PART IV ITEM 15.  EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES      PAGEReport of Independent Registered
    Public Accounting Firm

43Consolidated Statement of
    Operations for the years ended December 31, 2006, 2005 and
    2004

45Consolidated Balance Sheet as of
    December 31, 2006 and 2005

46Consolidated Statement of Cash
    Flows for the years ended December 31, 2006, 2005 and 2004

48Consolidated Statement of
    Stockholders Equity for the years ended December 31,
    2006, 2005 and 2004

50Notes to the Consolidated
    Financial Statements

51     Schedule II 
    Valuation and qualifying accounts

94   EXHIBITNUMBER



DESCRIPTION3(a)



Corrected Restated Certificate of
    Incorporation of the Company, as amended on September 21,
    1998 (incorporated by reference to Exhibit 3(c) to the
    Companys Annual Report on
    Form 10-K
    for the fiscal year ended August 31, 1998).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).4(d)



First Supplemental Indenture dated
    as of November 8, 2006, between Parker Drilling Company and
    the Subsidiary Guarantors and the Bank of New York Trust
    Company, N.A., as Trustee, respecting the 9.625% Senior Notes
    due 2013 (incorporated herein by reference to Exhibit 4.3
    to the Companys
    Form 10-Q
    for the quarter ended November 30, 2006).4(e)



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(f)



First Supplemental Indenture dated
    as of November 8, 2006, between Parker Drilling Company and the
    Subsidiary Guarantors and the Bank of New York Trust Company,
    N.A., as Trustee, respecting the Floating Rate Notes due 2010
    (incorporated herein by reference to Exhibit 4.4 to the
    Companys
    Form 10-Q
    for the quarter ended November 30, 2006).10(a)



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 20, 2004 (incorporated
    by reference to Exhibit 99.1 to
    Form 8-K
    dated December 27, 2004). 92




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##### Table of Contents



EXHIBITNUMBER



DESCRIPTIONITEM 15.  EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES (continued)10(b)



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, (incorporated herein by reference to
    Exhibit 4(i) to Annual Report on
    Form 10-K
    for the year ended December 31, 2005).10(c)



Second 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
    February 9, 2007.10(d)



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(e)



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(f)



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(g)



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(h)



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(i)



Third Amended and Restated Parker
    Drilling 1997 Stock Plan effective July 24, 2002
    (incorporated herein by reference to Exhibit 10(c) to
    Annual Report on
    Form 10-K
    dated March 20, 2003).*10(j)



2006 Long Term Incentive Plan
    (2006 LTIP) (incorporated by reference to the
    Companys 2006 Proxy Statement dated March 22, 2006).*10(k)



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(l)



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(m)



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, 2006).*10(n)



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, 2006).*10(o)



Form of Restricted Stock Award
    Agreement under the 2006 LTIP (incorporated by reference to
    Exhibit 10.2 to
    Form 8-K
    dated April 27, 2006).*10(p)



Form of Performance Based
    Restricted Stock Award Agreement under the 2006 LTIP
    (incorporated by reference to Exhibit 10.3 to
    Form 8-K
    dated April 27, 2006).*10(q)



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(r)



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(s)



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).* 93




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##### Table of Contents



EXHIBITNUMBER



DESCRIPTIONITEM 15.  EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES (continued)10(t)



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).*21



Subsidiaries of the Registrant.23



Consent of Independent Registered
    Public Accounting Firm.31.1



Robert L. Parker Jr., Chairman,
    President 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,
    President 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  Form 8-K:
 94




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##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIES
    SCHEDULE II  VALUATION AND QUALIFYING
    ACCOUNTS
    (Dollars in Thousands)
  Column A

Column B


Column C


Column D


Column EBalance at


Charged to


Charged to





Balance atbeginning


cost and


other





end ofClassifications

of year


expenses


accounts


Deductions


yearYear 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)

$
Year ended December 31, 2004:Allowance for doubtful accounts
    and notes

$
4,732


$
620


$



$
1,761


$
3,591Reduction in carrying value of rig
    materials and supplies

$
4,681


$
2,400


$



$
613


$
6,468Deferred tax valuation allowance

$
18,867


$
37,136


$



$



$
56,003     (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. 95




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##### Table of Contents



SIGNATURES    PARKER DRILLING COMPANY
  
         Signature

Title

DateBy:

/s/  Robert
    L. Parker Jr.Robert
    L. Parker Jr.

Chairman, President and Chief
    Executive Officer and Director (Principal Executive Officer)

February 27, 2007By:

/s/  James
    W. WhalenJames
    W. Whalen

Vice Chairman of the Board and
    Director

February 27, 2007By:

/s/  David
    C. MannonDavid
    C. Mannon

Senior Vice President and 
    Chief Operating Officer

February 27, 2007By:

/s/  W.
    Kirk BrassfieldW.
    Kirk Brassfield

Senior Vice President and 
    Chief Financial Officer 
    (Principal Financial Officer)

February 27, 2007By:

/s/  Lynn
    G. CullomLynn
    G. Cullom

Controller 
    (Principal Accounting Officer)

February 27, 2007By:

/s/  George
    J. DonnellyGeorge
    J. Donnelly

Director

February 27, 2007By:

/s/  John
    W. GibsonJohn
    W. Gibson

Director

February 27, 2007By:

/s/  Robert
    W. GoldmanRobert
    W. Goldman

Director

February 27, 2007By:

/s/  Robert
    E. McKee IIIRobert
    E. McKee III

Director

February 27, 2007 96




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##### Table of Contents



Signature

Title

DateBy:

/s/  Roger
    B. PlankRoger
    B. Plank

Director

February 27, 2007By:

/s/  R.
    Rudolph ReinfrankR.
    Rudolph Reinfrank

Director

February 27, 2007  97




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##### Table of Contents



INDEX TO
    EXHIBITS
  EXHIBITNUMBER



DESCRIPTION10
(c)



Second 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 10(c) Commercial Paper, Inc., as Administrative Agent
    dated February 9, 2007.21




Subsidiaries of the Registrant.23




Consent of Independent Registered
    Public Accounting Firm.31
.1



Robert L. Parker Jr., Chairman,
    President 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,
    President and Chief Executive Officer, Section 1350
    Certification.31
.2



W. Kirk Brassfield, Senior Vice
    President and Chief Financial Officer, Section 1350
    Certification.