##### 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, 2008ORo

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

(I.R.S. Employerincorporation or
    organization)

Identification
    No.)   1401 Enclave Parkway, Suite 600, Houston, Texas
    77077
 (Address of principal executive
    offices)          (Zip
    code)
  Registrants telephone number, including area code:
    (281) 406-2000
  Securities registered pursuant to Section 12(b) of
    the Act:
  Title of Each Class

Name of Each Exchange on Which Registered:Common Stock, par value
    $0.162/3
    per share

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
   o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  12b-2
 Large
    accelerated
    filer þ
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company 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


10Item 1B.


Unresolved Staff Comments


23Item 2.


Properties


23Item 3.


Legal Proceedings


25Item 4.


Submission of Matters to a Vote of Security
    Holders


25PART IIItem 5.


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


26Item 6.


Selected Financial Data


27Item 7.


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


28Item 7A.


Quantitative and Qualitative Disclosures about
    Market Risk


46Item 8.


Financial Statements and Supplementary Data


47Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


97Item 9A.


Controls and Procedures


97Item 9B.


Other Information


98PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


99Item 11.


Executive Compensation


99Item 12.


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


99Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


99Item 14.


Principal Accounting Fees and Services


99PART IVItem 15.


Exhibits and Financial Statement Schedules


100Signatures


105EX-10.BEX-10.IEX-10.TEX-21EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1EX-32.2




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PART I  ITEM 1.
    BUSINESS  General
  Form 10-K, Form 10-Q, Form 8-K, http://www.sec.gov.
        
    U.S. Drilling;  
    International Drilling, including land drilling and inland barge
    drilling;
    Project Management and Engineering Services;
    Rental Tools; and
    Construction Contract services.  Our Rig
    Fleet
    
    nine land rigs in the Commonwealth of Independent States
    (currently includes operations in Kazakhstan and Turkmenistan
    and referred to as the CIS);
    eight land rigs in the Asia Pacific region;
    nine land rigs in Latin America (Mexico and Colombia) region;
    one barge drilling rig in the inland waters of Mexico;
    two land rigs in the Africa/Middle East region (Algeria);
    the worlds largest arctic-class barge rig in the Caspian
    Sea;
    15 barge drilling and workover rigs in the transition zones of
    the U.S. Gulf of Mexico; and
    One land rig in the Companys construction yard in New
    Iberia.




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ITEM 1.
    BUSINESS
    (continued)   Our
    Project Management and Engineering Services Business
    Our
    Rental Tools Business
    Construction
    Contracts Business
    Our
    Market Areas
  U.S. Gulf of Mexico.
  International Markets. and/or
  Our
    Strategy
    Pursuing Strategic Growth
    Opportunities.
 2




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ITEM 1.
    BUSINESS
    (continued)  
 Our
    Strategy (continued)
      Sustaining the Preference for Our Barge and Land
    Rigs.
  Focusing on an Efficiency-Based Operating Philosophy for
    Operating Costs, Preventive Maintenance and Capital
    Expenditures.
  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)  
 Customers (continued)
      Contracts
      Insurance
    and Indemnification
   5




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##### Table of Contents



ITEM 1.
    BUSINESS
    (continued)  Employees
    December 31,2008


2007International operations


1,801



2,055U.S. operations


445



558Rental tools


280



255Corporate and other


240



219Total employees


2,766



3,087   Environmental
    Considerations
         6




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




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ITEM 1.
    BUSINESS
    (continued)  
 Environmental
    Considerations (continued)
      and/or Massachusetts v. EPA e.g.
    FINANCIAL
    INFORMATION ABOUT INDUSTRY SEGMENTS AND GEOGRAPHIC
    AREAS
   8




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ITEM 1.
    BUSINESS
    (continued)  EXECUTIVE
    OFFICERS
                 9




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ITEM 1.
    BUSINESS
    (continued)  
 EXECUTIVE
    OFFICERS (continued)
  Other
    Parker Drilling Company Officer
   ITEM 1A.  RISK
    FACTORS  Form 10-K,
  Risks
    Related to Our Business
  Due to
    the on-going volatility in oil and natural gas prices, the
    ongoing credit crisis, and the deteriorating global economic
    environment, certain customers have curtailed or delayed
    drilling programs. We are unable to anticipate whether or not
    our customers will further curtail or delay drilling programs.
    There is a risk that our vendors will not fulfill their
    commitments. The global economic conditions may result in an
    extended decrease in demand for our drilling rigs and rental
    tools business, which could have a material adverse effect on
    our drilling and rental tool business.
      Rig
    upgrade, refurbishment and construction projects are subject to
    risks, including delays and cost overruns, which could have an
    adverse impact on our results of operations and cash
    flows.
    
    shortages of equipment or skilled labor;
    unforeseen engineering problems;
    unanticipated change orders;
    work stoppages;
    adverse weather conditions; 10




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ITEM 1A.  RISK
    FACTORS (continued)
  
 Risks
    Related to Our Business (continued)
   
    delays relating to inaccessibility of credit markets;
    long lead times for manufactured rig components;
    unanticipated repairs to correct defects in construction not
    covered by warranty;
    loss of revenue associated with downtime to remedy
    malfunctioning equipment not covered by warranty;
    loss of revenue and payments of liquidated damages for downtime
    to perform repairs associated with defects, unanticipated
    equipment refurbishment and delays in commencement of operations;
    unanticipated cost increases; and
    inability to obtain the required permits or approvals.    Failure
    to retain skilled and experienced personnel could affect our
    operations.
    Our
    ability to service our debt obligations is primarily dependent
    upon our future financial performance.
    
    $455.1 million of long-term debt;
    $6.0 million of current portion of long-term debt;
    $8.6 million of operating lease commitments; and
    $12.8 million of standby letters of credit.        
    delay spending on maintenance projects and other capital
    projects, including the acquisition or construction of
    additional rigs, rental tools and other assets;
    sell equity securities;
    sell assets; or
    restructure or refinance our debt.   11




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ITEM 1A.  RISK
    FACTORS (continued)
  
 Risks
    Related to Our Business (continued)
      
    result in a reduction of our credit rating, which would make it
    more difficult for us to obtain additional financing on
    acceptable terms;
    require us to dedicate a substantial portion of our cash flows
    from operating activities to the repayment of our debt and the
    interest associated with our debt;
    limit our operating flexibility due to financial and other
    restrictive covenants, including restrictions on incurring
    additional debt and creating liens on our properties;
    place us at a competitive disadvantage compared with our
    competitors that have relatively less debt; and
    make us more vulnerable to downturns in our business.  Our
    current operations and future growth may require significant
    additional capital, and the amount of our indebtedness could
    impair our ability to fund our capital
    requirements.
    
    cash on hand;
    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.
   12




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##### Table of Contents



ITEM 1A.  RISK
    FACTORS (continued)
  
 Risks
    Related to Our Business (continued)
      
    the cost of producing and delivering oil and natural gas;
    advances in exploration, development and production technology;
    laws and government regulations, both in the United States and
    other countries;
    the imposition or lifting of economic sanctions against foreign
    countries;
    recent rig construction projects which may create overcapacity;
    local and worldwide military, political and economic events,
    including events in the oil producing countries in the Middle
    East, Southeast Asia and Latin America;
    the ability of the Organization of Petroleum Exporting Countries
    OPEC to set and maintain production levels and
    prices;
    the level of production by non-OPEC countries;
    weather conditions;
    expansion or contraction of worldwide economic activity, which
    affects levels of consumer demand;
    the rate of discovery of new oil and natural gas reserves;
    the development and use of alternative energy sources;
    the policies of various governments regarding exploration and
    development of their oil and natural gas reserves.  Most
    of our contracts are subject to cancellation by our customers
    without penalty with little or no notice.
      We
    rely on a small number of customers, and the loss of a
    significant customer could adversely affect us.
   13




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ITEM 1A.  RISK
    FACTORS (continued)
  
 Risks
    Related to Our Business (continued)
  Contract
    drilling and the rental tools business are highly
    competitive.
    Our
    international operations could be adversely affected by
    terrorism, war, civil disturbances, political instability and
    similar events.
    Our
    international operations are also subject to governmental
    regulation and other risks.
    
    inconsistency of foreign laws and governmental regulation;
    expropriation, confiscatory taxation and nationalization of our
    assets ;
    increases in governmental royalties;
    import-export quotas;
    hiring and retaining skilled and experienced workers, many of
    whom are represented by foreign labor unions;
    unfavorable changes in foreign monetary and tax policies and
    unfavorable and inconsistent interpretation and application of
    foreign tax laws;
    foreign currency fluctuations and restrictions on currency
    repatriation; and
    other forms of governmental regulation and economic conditions
    that are beyond our control.   14




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ITEM 1A.  RISK
    FACTORS (continued)
  
 Risks
    Related to Our Business (continued)
        and/or
  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.
   15




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##### Table of Contents



ITEM 1A.  RISK
    FACTORS (continued)
  
 Risks
    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.
  Form 10-K
  We are
    subject to the Foreign Corrupt Practices Act (FCPA)
    and other laws concerning our international operations, and
    currently are conducting an investigation into possible
    violations. The Securities and Exchange Commission and the
    Department of Justice are conducting parallel investigations
    into possible FCPA violations. If we are found to have violated
    the FCPA or other legal requirements, we may be subject to
    criminal and civil penalties and other remedial measures, which
    could materially harm our business, results of operations,
    financial condition and liquidity.
   16




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##### Table of Contents



ITEM 1A.  RISK
    FACTORS (continued)
  
 Risks
    Related to Our Business (continued)
    We are
    subject to laws and regulations concerning our international
    operations, including export restrictions, U.S. economic
    sanctions and other activities that we conduct abroad. We are
    conducting an internal review concerning our compliance with
    these legal requirements. If we are not in compliance with
    applicable legal requirements, we may be subject to civil or
    criminal penalties and other remedial measures, which could
    materially harm our business, results of operations, financial
    condition and liquidity.
    Risks
    Related to Our Common Stock
  Market
    price of our common stock currently changing
    significantly.
    
    the other risk factors described in this
    Form 10-K,
    including changes in oil and natural gas prices;
    a shortfall in rig utilization, operating revenue or net income
    from that expected by securities analysts and investors;
    changes in securities analysts estimates of the financial
    performance of us or our competitors or the financial
    performance of companies in the oilfield service industry
    generally;
    changes in actual or market expectations with respect to the
    amounts of exploration and development spending by oil and gas
    companies;
    general conditions in the economy and in the energy-related
    industries;
    general conditions in the securities markets;
    political instability, terrorism or war; and
    the outcome of pending and future legal proceedings, tax
    assessments and other claims. 17




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##### Table of Contents



ITEM 1A.  RISK
    FACTORS (continued)
  
 Risks
    Related to Our Common Stock (continued)
   A
    hostile takeover of our Company would be
    difficult.
    Risks
    Related to our Debt Securities
  Payment
    of principal and interest on our 9.625% Senior Notes will
    be effectively subordinated to our senior secured debt to the
    extent of the value of the assets securing that
    debt.
      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.
     18




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ITEM 1A.  RISK
    FACTORS (continued)
  
 Risks
    Related to our Debt Securities (continued)
  The
    subsidiary guarantees of our notes could be deemed fraudulent
    conveyances under certain circumstances, and a court may try to
    subordinate or void the subsidiary guarantees.
    
    issued the guarantee with the intent of hindering, delaying or
    defrauding current or future creditors; or
    received less than reasonably equivalent value or fair
    consideration for the incurrence of such guarantee, and;  
    was insolvent or rendered insolvent by reason of such
    incurrence; or
    was engaged in a business or transaction for which the
    guarantors remaining assets constituted unreasonably small
    capital; or
    intended to incur, or believed that it would incur, debts beyond
    its ability to pay such debts as they mature.    
    the sum of its debts, including contingent liabilities, was
    greater than the fair saleable value of all of its assets;
    the present fair saleable value of its assets was less than the
    amount that would be required to pay its probable liability,
    including contingent liabilities, on its existing debts, as they
    become absolute and mature; or
    it could not pay its debts as they become due.    We may
    not be able to repurchase our 9.625% Senior Notes upon a
    change of control.
     19




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##### Table of Contents



ITEM 1A.  RISK
    FACTORS (continued)
  
 Risks
    Related to our Debt Securities (continued)
    We may
    not have sufficient cash to repurchase the
    2.125% Convertible Senior Notes at the option of the holder
    upon a fundamental change or to pay the cash payable upon a
    conversion.
   20




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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 and expectations regarding when
    these rigs will commence operations;
    capital expenditures for acquisition of rigs, construction of
    new rigs or major upgrades to existing rigs;
    entering into joint venture agreements;
    our future liquidity;
    availability and sources of funds to reduce our debt and
    expectations of when debt will be reduced;
    the outcome of pending or future legal proceedings, tax
    assessments and other claims;
    the availability of insurance coverage for pending or future
    claims;
    the enforceability of contractual indemnification in relation to
    pending or future claims;
    future 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;
    inability of the Company to access the credit or security
    markets;
    the U.S. economy and the demand for natural gas;
    worldwide demand for oil; 21




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##### Table of Contents



ITEM 1A.  RISK
    FACTORS (continued)
  
 DISCLOSURE
    NOTE REGARDING FORWARD-LOOKING
    STATEMENTS (continued)
   
    fluctuations in the market prices of oil and natural gas;
    imposition of unanticipated trade restrictions;
    unanticipated operating hazards and uninsured risks;
    political instability, terrorism or war;
    governmental regulations, including changes in accounting rules
    or tax laws or ability to remit funds to the U.S., that
    adversely affect the cost of doing business;
    the outcome of our investigation and the parallel investigations
    by the Securities and Exchange Commission and the Department of
    Justice into possible violations of U.S. law, including the
    Foreign Corrupt Practices Act, and the outcome of the internal
    investigation regarding possible violations of U.S Economic
    Sanctions primarily related to our operations in Turkmenistan;
    adverse environmental events;
    adverse weather conditions;
    changes in the concentration of customer and supplier
    relationships;
    ability of our customers and suppliers to obtain financing for
    their operations;
    unexpected cost increases for new construction and upgrade and
    refurbishment projects;
    delays in obtaining components for capital projects and in
    ongoing operational maintenance and equipment certifications;
    shortages of skilled labor;
    unanticipated cancellation of contracts by operators;
    breakdown of equipment;
    other operational problems including delays in
    start-up of
    operations;
    changes in competition;
    the effect of litigation and contingencies; and
    other similar factors (some of which are discussed in documents
    referred to in this
    Form 10-K).  Form 10-K, Form 10-K
 22




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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


25000(1)


TotalAsia Pacific


1



7







8CIS






6



3



9Latin America






4



5



9Africa/Middle East






2



0



2Total


1



19



8



28    (1)
    
    One land rig currently in New
    Iberia yard.  Barge
    Rigs
    Year Built


Maximumor Last


DrillingInternational

Horsepower


Refurbished


Depth (Feet)Caspian Sea:Rig No. 257


3,000



1999



30,000Mexico:Rig No. 53


1,600



2004



20,000  23




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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


1,500



2006



20,000Rig No. 15


1,000



2007



15,000Rig No. 50


2,000



2006



25,000Rig No. 51


2,000



2008



25,000Rig No. 54


2,000



2006



25,000Rig No. 55


2,000



2001



25,000Rig No. 56


2,000



2005



25,000Rig No. 72


3,000



2005



30,000Rig No. 76


3,000



2004



30,000Rig No. 77


3,000



2006



30,000Intermediate drilling:Rig No. 8


1,000



2007



14,000Rig No. 20


1,000



2005



13,500Rig No. 21


1,200



2007



14,000Workover and shallow drilling:Rig No. 6(1)(2)


700



1995



Rig No. 16


1,000



1994



13,500    (1)
    
    Workover rig.  (2)
    
    Cold Stacked 24




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##### Table of Contents



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

2008


2007U.S. barge deep drilling:Rigs available for service(1)


10.0



10.0Utilization rate of rigs available for service(2)


85
%


95
%U.S. barge intermediate drilling:Rigs available for service(1)


3.0



3.3Utilization rate of rigs available for service(2)


74
%


70
%U.S. barge workover and shallow drilling:Rigs available for service(1)


2.0



3.0Utilization rate of rigs available for service(2)


41
%


30
%International barge drilling:Rigs available for service(1)


2.0



2.0Utilization rate of rigs available for service(2)


100
%


100
%U.S. Land Rig DataRigs available for service(1):






1.6Utilization rate of rigs available for service(2):






55
%International Land Rig DataRigs available for service(1):


28.0



25.8Utilization rate of rigs available for service(2):


79
%


73
%    (1)
    
    The number of
    100 percent-owned rigs available for service is determined
    by calculating the number of days each rig was in our fleet and
    was under contract or available for contract. For example, a rig
    under contract or available for contract for six months of a
    year is 0.5 rigs available for service for such year. Our method
    of computation of rigs available for service may not be
    comparable to other similarly titled measures of other companies.  (2)
    
    Rig utilization rates are based on
    a weighted average basis assuming 365 days availability for
    all rigs available for service. Rigs acquired or disposed of are
    treated as added to or removed from the rig fleet as of the date
    of acquisition or disposal. Rigs that are in operation or fully
    or partially staffed and on a revenue-producing standby status
    are considered to be utilized. Rigs under contract that generate
    revenues during moves between locations or during mobilization
    or demobilization are also considered to be utilized. Our method
    of computation of rig utilization may not be comparable to other
    similarly titled measures of other companies.  ITEM 3.
    LEGAL
    PROCEEDINGS  Form 10-K,
  ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   25




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PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    2008


2007Quarter

High


Low


High


LowFirst

$
7.82


$
5.53


$
9.76


$
7.50Second


10.17



6.69



12.10



9.40Third


10.18



7.77



11.65



7.01Fourth


7.81



2.46



9.07



6.70        26




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA  Form 10-K.
  Year Ended December 31,2008(1)


2007


2006(2)


2005(3)


2004(Dollars in Thousands, Except Per Share Amounts)Income Statement DataTotal drilling and rental revenues

$
829,842


$
654,573


$
586,435


$
531,662


$
376,525Total operating income


59,180



190,983



143,326



115,123



23,867Equity in loss of unconsolidated joint venture, net of tax


(1,105
)


(27,101
)










Other expense


(23,672
)


(22,081
)


(25,891
)


(44,895
)


(59,423
)Income tax (expense) benefit


(8,845
)


(37,723
)


(36,409
)


28,584



(15,009
)Income (loss) from continuing operations


25,558



104,078



81,026



98,812



(50,565
)Net income (loss)


25,558



104,078



81,026



98,883



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

$
0.23


$
0.95


$
0.76


$
1.03


$
(0.54
)Net income (loss)

$
0.23


$
0.95


$
0.76


$
1.03


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

$
0.23


$
0.94


$
0.75


$
1.02


$
(0.54
)Net income (loss)

$
0.23


$
0.94


$
0.75


$
1.02


$
(0.50
)Balance Sheet DataCash and cash equivalents

$
172,298


$
60,124


$
92,203


$
60,176


$
44,267Marketable securities










62,920



18,000



Property, plant and equipment, net


675,548



585,888



435,473



355,397



382,824Assets held for sale










4,828







23,665Total assets


1,213,631



1,076,987



901,301



801,620



726,590Total long-term debt and capital leases, including current debt


461,073



373,721



329,368



380,015



481,063Stockholders equity


570,404



534,724



459,099



259,829



148,917     (1)
    
    The 2008 results reflect a
    $100.3 million charge for impairment of goodwill.  (2)
    
    The 2006 results reflect the
    reversal of an $12.6 million valuation allowance at the end
    of 2006 and the utilization of $5.4 million of NOLs
    (Net Operating Loss), both related to Louisiana
    state net operating loss carryforwards. See Note 7 in the
    notes to the consolidated financial statements.  (3)
    
    The 2005 results reflect the
    reversal of a $71.5 million valuation allowance related to
    federal net operating loss carryforwards and other deferred tax
    assets. 27




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##### Table of Contents



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  OVERVIEW
    AND OUTLOOK
  Summary
  and/or
  Overview
           28




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##### Table of Contents



OVERVIEW
    AND OUTLOOK (continued)
   Overview (continued)
    Outlook
            Year
    Ended December 31, 2008 Compared with Year Ended
    December 31, 2007
     29




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##### Table of Contents



OVERVIEW
    AND OUTLOOK (continued)
   Overview (continued)
    RESULTS
    OF OPERATIONS (continued)
    Year Ended December 31,2008


2007(Dollars in Thousands)Revenues:U.S. drilling

$
173,633



21
%

$
225,263



34
%International drilling


325,096



39
%


213,566



33
%Project management and engineering services


110,147



13
%


77,713



12
%Construction contract


49,412



6
%


Rental tools


171,554



21
%


138,031



21
%Total revenues

$
829,842



100
%

$
654,573



100
%Operating gross margin:U.S. drilling gross margin excluding depreciation and
    amortization(1)

$
89,202



51
%

$
130,911



58
%International drilling gross margin excluding depreciation and
    amortization(1)


93,687



29
%


59,227



28
%Project management and engineering services gross margin
    excluding depreciation and amortization(1)


18,470



17
%


12,732



16
%Construction contract gross margin excluding depreciation and
    amortization(1)


2,597



5
%


Rental tools gross margin excluding depreciation and
    amortization(1)


104,506



61
%


83,654



61
%Depreciation and amortization


(116,956
)






(85,803
)Total operating gross margin(2)


191,506







200,721General and administrative expense


(34,708
)






(24,708
)Impairment of goodwill


(100,315
)Provision for reduction in carrying value of certain assets










(1,462
)Gain on disposition of assets, net


2,697







16,432Total operating income

$
59,180






$
190,983    (1)
    
    Gross margins, excluding
    depreciation and amortization, are computed as revenues less
    direct operating expenses, excluding depreciation and
    amortization expense; gross margin percentages are computed as
    gross margin, excluding depreciation and amortization, as a
    percent of 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 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:  30




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##### Table of Contents



RESULTS
    OF OPERATIONS (continued)
  ProjectManagementInternational


and


ConstructionU.S. Drilling


Drilling


Engineering


Contract


Rental ToolsYear Ended December 31, 2008

(Dollars in Thousands)Operating gross margin(2)

$
53,964


$
41,786


$
18,470


$
2,597


$
74,689Depreciation and amortization


35,238



51,901











29,817Operating gross margin excluding depreciation and amortization

$
89,202


$
93,687


$
18,470


$
2,597


$
104,506Year Ended December 31, 2007Operating gross margin(2)

$
97,679


$
31,046


$
12,732


$



$
59,264Depreciation and amortization


33,232



28,181











24,390Operating gross margin excluding depreciation and amortization

$
130,911


$
59,227


$
12,732


$



$
83,654   (2)
    
    Operating gross margin 
    revenues less direct 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)
    Project
    Management and Engineering Services Segment
    Construction
    Contract Segment
    Rental
    Tools Segment
      Other
    Financial Data
   32




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##### Table of Contents



RESULTS
    OF OPERATIONS (continued)
  
 Other
    Financial Data (continued)
        Year
    Ended December 31, 2007 Compared with Year Ended
    December 31, 2006
   33




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##### Table of Contents



RESULTS
    OF OPERATIONS (continued)
  
 Other
    Financial Data (continued)
    Year Ended December 31,2007


2006(Dollars in Thousands)Revenues:U.S. drilling

$
225,263



34
%

$
191,225



33
%International drilling


213,566



33
%


184,280



31
%Project management and engineering services


77,713



12
%


88,936



15
%Rental tools


138,031



21
%


121,994



21
%Total revenues

$
654,573



100
%

$
586,435



100
%Operating gross margin:U.S. drilling gross margin excluding depreciation and
    amortization(1)

$
130,911



58
%

$
107,689



56
%International drilling gross margin excluding depreciation and
    amortization(1)


59,227



28
%


39,964



22
%Project management and engineering services gross margin
    excluding depreciation and amortization(1)


12,732



16
%


13,616



15
%Rental tools gross margin excluding depreciation and
    amortization(1)


83,654



61
%


75,540



62
%Depreciation and amortization


(85,803
)






(69,270
)Total operating gross margin(2)


200,721







167,539General and administrative expense


(24,708
)






(31,786
)Provision for reduction in carrying value of certain assets


(1,462
)






Gain on disposition of assets, net


16,432







7,573Total operating income

$
190,983






$
143,326     (1)
    
    Operating gross margins, excluding
    depreciation and amortization, are computed as revenues less
    operating expenses, excluding depreciation and amortization
    expense; operating gross margin percentages are computed as
    gross margin, excluding depreciation and amortization, as a
    percent of 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 operating gross
    margin. Management 34




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##### Table of Contents



RESULTS
    OF OPERATIONS (continued)
  
 Other
    Financial Data (continued)
  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:  ProjectManagementInternational


andU.S. Drilling


Drilling


Engineering


Rental Tools(Dollars in Thousands)Year Ended December 31, 2007Operating gross margin(2)

$
97,679


$
31,046


$
12,732


$
59,264Depreciation and amortization


33,232



28,181







24,390Operating gross margin excluding depreciation and amortization

$
130,911


$
59,227


$
12,732


$
83,654Year Ended December 31, 2006Operating gross margin(2)

$
83,296


$
13,923


$
13,616


$
56,704Depreciation and amortization


24,393



26,041







18,836Operating gross margin excluding depreciation and amortization

$
107,689


$
39,964


$
13,616


$
75,540   (2)
    
    Operating gross margin 
    revenues less direct operating expenses, including depreciation
    and amortization expense.  U.S.
    Drilling Segment
  Form 10-K).
    International
    Drilling Segment
        
    completion of the two-rig, TCO contract in 2006
    ($28.7 million);
    the release of our three rigs in Turkmenistan
    ($7.9 million) during the third quarter of 2006. 35




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##### Table of Contents



RESULTS
    OF OPERATIONS (continued)
  
 International
    Drilling Segment (continued)
   
    A decrease in reimbursable revenues relating to our barge rig
    operating in the Caspian Sea ($1.6 million)    
    an $18.5 million increase in the Karachaganak area of
    Kazakhstan, where Rig 107 operated all year in 2007 (the rig was
    released in late December 2005 from the TCO contract and
    commenced operations at the end of March 2006) and the
    addition of Rigs 249 and 258 (from the TCO contract), both of
    which began drilling in the third quarter of 2007; and
    increases related to the full-year operation of Rig 236, which
    began drilling in western Kazakhstan in late 2006
    ($12.5 million).      start-ups
  Project
    Management and Engineering Services Segment
   36




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##### Table of Contents



RESULTS
    OF OPERATIONS (continued)
  Rental
    Tools Segment
      Other
    Financial Data
        LIQUIDITY
    AND CAPITAL RESOURCES
  Liquidity
    2008


2007


2006In ThousandsOperating Activities

$
220,318


$
74,276


$
166,868Investing activities


(196,607
)


(152,889
)


(194,651
)Financing activities


88,463



46,534



59,810Net change in cash and cash equivalents


112,174



(32,079
)


32,027  37




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##### Table of Contents



Liquidity (continued)
  Operating
    Activities
      Investing
    Activities
        Financing
    Activities
     38




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##### Table of Contents



Financing
    Activities (continued)
    2008
    Credit Facility
      2.125 percent Convertible
    Senior Notes
      
    Notes Conversion Feature  The initial conversion
    price for note holders to convert their notes into shares is at
    a common stock share price equivalent of $13.85
    (77.2217 shares of common) stock per $1,000 note value.
    Conversion rate adjustments occur for any issuances of stock,
    warrants, rights or options (except for stock purchase plans or
    dividend re-investments) or any other transfer of benefit to
    substantially all stockholders, or as a result of a tender or
    exchange offer. The Company may, under advice of its Board of
    Directors, increase the conversion rate at its sole discretion
    for a period of at least 20 days. 39




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##### Table of Contents



Financing
    Activities (continued)
   
    Notes Settlement Feature  Upon tender of the notes
    for conversion, the Company can either settle entirely in shares
    or a combination of cash and shares, solely at the
    Companys option. The Companys policy is to satisfy
    our conversion obligation for our notes in cash, rather than in
    common stock, for at least the aggregate principal amount of the
    notes. This reduced the resulting potential earnings dilution to
    only include any possible conversion premium, which would be the
    difference between the average price of our shares and the
    conversion price per share of common stock.
    Contingent Conversion Feature  Note holders may only
    convert notes into shares when either sales price or trading
    price conditions are met, on or after the notes due date
    or upon certain accounting changes or certain corporate
    transactions (fundamental changes) involving stock
    distributions. Make-whole provisions are only included in the
    accounting and fundamental change conversions such that holders
    do not lose value as a result of the changes.
    Over-allotment Provision  The initial offering was
    for $115 million aggregate principal amount with an
    over-allotment provision to allow the underwriters an option to
    purchase an additional $10 million. The option was in fact,
    exercised for the entire $10 million on the same date on
    which the notes were issued, and therefore was never outstanding.
    Settlement Feature  Upon conversion, we will pay
    shares of our common stock and cash, if any, based on a daily
    conversion rate multiplied by a volume weighted average price of
    our common stock during a specified period following the
    conversion date. Conversions can be settled in cash or shares,
    solely at our discretion.
    As of December 31, 2008, none of the conditions allowing
    holders of the Senior Notes to convert had been met.  and/or
      No. 00-19, Accounting for Derivative Financial Instruments Indexed
    to, and Potentially Settled in, a Companys Own
    Stock
 40




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##### Table of Contents



Financing
    Activities (continued)
  Accounting
    for Derivative Instruments and Hedging Activities
      2007
    Credit Facility
      Other
    Liquidity
        
    $125.0 million aggregate principal amount of Convertible
    Senior Notes bearing interest at a rate of 2.125 percent,
    which are due July 15, 2012;
    $225.0 million aggregate principal amount of
    9.625 percent Senior Notes, which are due
    October 1, 2013 plus an associated $3.1 million in
    unamortized debt premium; and,
    $108.0 million drawn against our 2008 Credit Facility,
    including $58.0 million on our Revolving Credit Facility
    and $50.0 million on our Term Loan Facility,
    $6.0 million of which is classified as short term.   41




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##### Table of Contents



Financing
    Activities (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)

$
400,000


$
6,000


$
24,000


$
370,000


$
Long-term debt  interest(1)


132,387



29,921



58,110



44,356



Operating leases(2)


8,646



4,689



2,864



1,093



Purchase commitments(3)


34,319



34,319











Total contractual obligations

$
575,352


$
74,929


$
84,974


$
415,449


$
Commercial commitments:Long-term debt Revolving credit facility(4)

$
58,000


$



$



$
58,000


$
Standby letters of credit(4)


12,823



12,823











Total commercial commitments

$
70,823


$
12,823


$



$
58,000


$
     (1)
    
    Long-term debt includes the
    principal and interest cash obligations of the
    9.625 percent Senior Notes and the
    2.125 percent Convertible Notes. The remaining
    unamortized premium of $3.1 million is not included in the
    contractual cash obligations schedule.  (2)
    
    Operating leases consist of lease
    agreements in excess of one year for office space, equipment,
    vehicles and personal property.(3)
    
    We have purchase commitments
    outstanding as of December 31, 2008, related to rig upgrade
    projects and new rig construction.(4)
    
    We have an $80.0 million
    revolving credit facility. As of December 31, 2008,
    $58.0 million has been drawn down and $12.8 million of
    availability has been used to support letters of credit that
    have been issued, resulting in an estimated $9.2 million of
    availability. The revolving credit facility expires May 14,
    2013.      OTHER
    MATTERS
  Business
    Risks
  and/or
 42




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##### Table of Contents



OTHER
    MATTERS (continued)
  
 Business
    Risks (continued)
    Critical
    Accounting Policies
    and/or
  Impairment of Property, Plant and
    Equipment.
  Impairment of
    Goodwill
  Impairment of Goodwill.
   43




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##### Table of Contents



OTHER
    MATTERS (continued)
  
 Critical
    Accounting Policies (continued)
    Insurance Reserves.
      Accounting for Income Taxes.
 44




---



##### Table of Contents



OTHER
    MATTERS (continued)
  
 Critical
    Accounting Policies (continued)
        Revenue Recognition.
  Recent
    Accounting Pronouncements
   45




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##### Table of Contents



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Interest
    Rate Risk
    Long-Term
    Debt
   46




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##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA 47




---



##### Table of Contents



Note:  The information contained in this Item
    provides updates related to our addition of a new business
    segment effective January 1, 2008. Our new business segment
    is discussed further in Note 12: Business Segment. We
    revised the following Notes to the Consolidated Financial
    Statements:
  
    Note 1: Summary of Significant Accounting
    Policies  The business segment reference has been
    revised to reflect the new segment.
    Note 12: Business Segments  Item 8 has not been updated for other changes since the
    filing of our 2007
    Form 10-K.
 48




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  
  Internal Control  Integrated Framework
        Internal Control  Integrated Framework
 49




---



##### Table of Contents



KPMG
    LLP
    50




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Board
    of Directors and Stockholders of
           51




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##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENT OF OPERATIONS(Dollars in Thousands, Except Per Share Data)
  Year Ended December 31,2008


2007


2006Revenues:U.S. drilling

$
173,633


$
225,263


$
191,225International drilling


325,096



213,566



184,280Project management and engineering services


110,147



77,713



88,936Construction contract


49,412







Rental tools


171,554



138,031



121,994Total revenues


829,842



654,573



586,435Operating expenses:U.S. drilling


84,431



94,352



83,536International drilling


231,409



154,339



144,316Project management and engineering services


91,677



64,981



75,320Construction contract


46,815







Rental tools


67,048



54,377



46,454Depreciation and amortization


116,956



85,803



69,270Total operating expenses


638,336



453,852



418,896Total operating gross margin


191,506



200,721



167,539General and administration expense


(34,708
)


(24,708
)


(31,786
)Impairment of goodwill


(100,315
)






Provision for reduction in carrying value of certain assets






(1,462
)


Gain on disposition of assets, net


2,697



16,432



7,573Total operating income


59,180



190,983



143,326Other income and (expense):Interest expense


(24,533
)


(25,157
)


(31,598
)Change in fair value of derivative positions






(671
)


40Interest income


1,405



6,478



7,963Loss on extinguishment of debt






(2,396
)


(1,912
)Equity in loss of unconsolidated joint venture, net of taxes


(1,105
)


(27,101
)


Minority interest






(1,000
)


(229
)Other


(544
)


665



(155
)Total other income and (expense)


(24,777
)


(49,182
)


(25,891
)Income before income taxes


34,403



141,801



117,435Income tax expense (benefit):Current tax expense (benefit)


(1,539
)


17,602



20,654Deferred tax expense


10,384



20,121



15,755Total income tax expense


8,845



37,723



36,409Income from continuing operations


25,558



104,078



81,026Discontinued operations










Net income

$
25,558


$
104,078


$
81,026Basic earnings per share:Income from continuing operations

$
0.23


$
0.95


$
0.76Discontinued operations

$



$



$
Net income

$
0.23


$
0.95


$
0.76Diluted earnings per share:Income from continuing operations

$
0.23


$
0.94


$
0.75Discontinued operations

$



$



$
Net income

$
0.23


$
0.94


$
0.75Number of common shares used in computing earnings per share:Basic


111,400,396



109,542,364



106,552,015Diluted


112,430,545



110,856,694



108,138,384    52




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##### Table of Contents



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

2008


2007Current assets:Cash and cash equivalents

$
172,298


$
60,124Accounts and notes receivable, net of allowance for bad debts of
    $3,169 in 2008 and $3,152 in 2007


186,164



166,706Rig materials and supplies


30,241



24,264Deferred costs


7,804



7,795Deferred income taxes


9,735



9,423Other tax assets


40,924



32,532Other current assets


26,125



22,339Total current assets


473,291



323,183Property, plant and equipment, at cost:Drilling equipment


960,472



837,287Rental tools


210,151



188,140Buildings, land and improvements


27,340



23,224Other


45,552



44,293Construction in progress


144,721



121,0231,388,236



1,213,967Less accumulated depreciation and amortization


712,688



628,079Property, plant and equipment, net


675,548



585,888Other assets:Goodwill






100,315Rig materials and supplies


7,219



1,925Debt issuance costs


7,285



7,324Deferred income taxes


30,867



40,121Investment in and advances to unconsolidated joint venture






(4,353
)Other assets


19,421



22,584Total other assets


64,792



167,916Total assets

$
1,213,631


$
1,076,987    53




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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

2008


2007Current liabilities:Current debt

$
6,000


$
20,000Accounts payable


77,814



36,062Accrued liabilities


62,584



51,290Accrued income taxes


12,130



16,828Total current liabilities


158,528



124,180Long-term debt


455,073



353,721Other long-term liabilities


21,396



56,318Long-term deferred tax liability


8,230



8,044Commitments and contingencies (Note 13)






Stockholders equity:Preferred stock, $1 par value, 1,942,000 shares
    authorized, no shares outstanding






Common stock,
    $0.162/3
    par value, authorized 280,000,000 shares, issued and
    outstanding 113,455,821 shares (111,915,773 shares in
    2007)


18,910



18,653Capital in excess of par value


603,731



593,866Accumulated deficit


(52,237
)


(77,795
)Total stockholders equity


570,404



534,724Total liabilities and stockholders equity

$
1,213,631


$
1,076,987    54




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##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIES
 CONSOLIDATED STATEMENT OF CASH FLOWS
 (Dollars in Thousands)
  Year Ended December 31,2008


2007


2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income

$
25,558


$
104,078


$
81,026Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Depreciation and amortization


116,956



85,803



69,270Impairment of goodwill


100,315







Amortization of debt issuance and premium


1,237



845



764Loss on extinguishment of debt






1,396



910Gain on disposition of assets


(2,697
)


(16,432
)


(7,573
)Provision for reduction in carrying value of certain assets






1,462



Deferred tax expense


10,384



20,121



15,755Equity loss in unconsolidated joint venture


1,105



27,101



Expenses not requiring cash


9,363



10,597



9,674Change in assets and liabilities:Accounts and notes receivable


(14,958
)


(60,209
)


(3,456
)Rig materials and supplies


(11,271
)


(4,945
)


(2,605
)Other current assets


(15,737
)


(12,720
)


34,420Accounts payable and accrued liabilities


(238
)


(19,728
)


(28,143
)Accrued income taxes


(2,404
)


(48,998
)


(3,101
)Other assets


2,705



(14,095
)


(73
)Net cash provided by operating activities


220,318



74,276



166,868CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures


(197,070
)


(242,098
)


(195,022
)Proceeds from the sale of assets


4,512



23,445



50,790Proceeds from insurance claims


951



7,844



4,501Investment in unconsolidated joint venture


(5,000
)


(5,000
)


(10,000
)Purchase of marketable securities






(101,075
)


(198,120
)Proceeds from sale of marketable securities






163,995



153,200Net cash used in investing activities


(196,607
)


(152,889
)


(194,651
)    55




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##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIES
    CONSOLIDATED STATEMENT OF CASH FLOWS
    (Continued)
    (Dollars in Thousands)
  Year Ended December 31,2008


2007


2006CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from issuance of debt

$
50,000


$
125,000


$
Principal payments under debt obligations


(35,000
)


(100,000
)


(50,000
)Proceeds from revolver draw


73,000



20,000



Purchase of call options






(31,475
)


Sale of common stock warrants






20,250



Proceeds from common stock offering










99,947Payment of debt issuance costs


(1,846
)


(4,618
)


Proceeds from stock options exercised


1,969



15,455



7,537Excess tax benefit from stock-based compensation


340



1,922



2,326Net cash provided by financing activities


88,463



46,534



59,810Net increase (decrease) in cash and cash equivalents


112,174



(32,079
)


32,027Cash and cash equivalents at beginning of year


60,124



92,203



60,176Cash and cash equivalents at end of year

$
172,298


$
60,124


$
92,203Supplemental disclosures of cash flow information:Cash paid during the year for:Interest

$
27,192


$
27,439


$
30,898Income taxes

$
45,615


$
74,801


$
21,566    56




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##### Table of Contents





PARKER
    DRILLING COMPANY AND SUBSIDIARIESCONSOLIDATED 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, 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
)Activity in employees stock plans


2,766



433



14,931











Purchase of call options on Convertible Notes










(31,475
)










Sale of warrants on Convertible Notes










20,250











OID premium deferred tax asset reclass










12,149











Adoption of FIN 48






















(54,499
)Excess tax benefit from stock based compensation










1,922











Amortization of restricted stock plan compensation










7,836











Net income (total comprehensive income of $104,078)






















104,078Balances, December 31, 2007


111,916


$
18,653


$
593,866


$



$



$
(77,795
)Activity in employees stock plans


1,540



257



2,895











Excess tax benefit from stock based compensation










340











Amortization of restricted stock plan compensation










6,630











Net income (total comprehensive income of $25,558)






















25,558Balances, December 31, 2008


113,456


$
18,910


$
603,731


$



$



$
(52,237
)    57




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##### Table of Contents





NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS  Note 1 
    Summary
    of Significant Accounting Policies  Consolidation
  Operations
  Drilling Contracts and Rental Revenues
  Construction Contract
  Reimbursable Costs
  Cash and Cash Equivalents
  Accounts Receivable and Allowance for Doubtful Accounts
    58




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 1 
    Summary
    of Significant Accounting Policies (continued)  December 31,2008


2007(Dollars in Thousands)Trade

$
189,266


$
169,811Employee(1)


67



47Allowance for doubtful accounts(2)


(3,169
)


(3,152
)Total receivables

$
186,164


$
166,706     (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, 2008, 2007 and 2006 are reported on
    Schedule II  Valuation and Qualifying Accounts.  Property, Plant and Equipment
  Goodwill
  Rig Materials and Supplies
  Deferred Costs
  Other Long-Term Liabilities
  Income Taxes
 59




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 1 
    Summary
    of Significant Accounting Policies (continued)  Earnings (Loss) Per Share (EPS)
  Concentrations of Credit Risk
      Fair Value of Financial Instruments
  Stock-Based Compensation
   60




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 1 
    Summary
    of Significant Accounting Policies (continued)    2006Expected price volatility

16.90%Risk-free interest rate range

4.23%Expected life of stock options

3 months     Accounting Estimates
  Note 2 
    Disposition
    of Assets  Disposition of Assets
  Note 3 
    Goodwill       61




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 3 
    Goodwill
    (continued)    Note 4 
    Long-Term
    Debt  December 31,2008


2007(Dollars in Thousands)Convertible Senior Notes payable in July 2012 with interest at
    2.125% payable semi-annually in January and July

$
125,000


$
125,000Senior Notes payable in October 2013 with interest at 9.625%
    payable semi-annually in April and October net of unamortized
    premium of $3,073 at December 31, 2008 and $3,721 at
    December 31, 2007 (effective interest rate of 9.24% at
    December 31, 2008 and December 31, 2007)


228,073



228,721Term Note with amortization beginning September 30, 2009 at
    equal installments of $3.0 million per quarter (effective
    interest rate of 5.96% at December 31, 2008)


50,000



Revolving Credit Facility with interest at prime, plus an
    applicable margin or LIBOR, plus an applicable margin (interest
    rate of 5.40% at December 31, 2008)


58,000



20,000Total debt


461,073



373,721Less current portion


6,000



20,000Total long-term debt

$
455,073


$
353,721   2009-2011,
  Activity in 2008 
   62




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 4 
    Long-Term
    Debt (continued)    Activity in 2007 
    
    Notes Conversion Feature  The initial
    conversion price for note holders to convert their notes into
    shares is at a common stock share price equivalent of $13.85
    (77.2217 shares of common) stock per $1,000 note value.
    Conversion rate adjustments occur for any issuances of stock,
    warrants, rights or options (except for stock purchase plans or
    dividend re-investments) or any other transfer of benefit to
    substantially all stockholders, or as a result of a tender or
    exchange offer. The Company may, under advice of its Board of
    Directors, increase the conversion rate at its sole discretion
    for a period of at least 20 days.
    Notes Settlement Feature  Upon tender
    of the notes for conversion, the Company can either settle
    entirely in shares or a combination of cash and shares, solely
    at the Companys option. The Companys policy is to
    satisfy our conversion obligation for our notes in cash, rather
    than in common stock, for at least the aggregate principal
    amount of the notes. This reduced the resulting potential
    earnings dilution to only include any possible conversion
    premium, which would be the difference between the average price
    of our shares and the conversion price per share of common stock.
    Contingent Conversion Feature  Note
    holders may only convert notes into shares when either sales
    price or trading price conditions are met, on or after the
    notes due date or upon certain accounting changes or
    certain corporate transactions (fundamental changes) involving
    stock distributions. Make-whole provisions are only included in
    the accounting and fundamental change conversions such that
    holders do not lose value as a result of the changes.
    Over-allotment Provision  The initial
    offering was for $115 million aggregate principal amount
    with an over-allotment provision to allow the underwriters an
    option to purchase an additional $10 million. The option
    was in fact, exercised for the entire $10 million on the
    same date on which the notes were issued, and therefore was
    never outstanding.
    Settlement Feature  Upon conversion, we
    will pay shares of our common stock and cash, if any, based on a
    daily conversion rate multiplied by a volume weighted average
    price of our common stock during a specified period following
    the conversion date. Conversions can be settled in cash or
    shares, solely at our discretion.
    As of December 31, 2008, none of the conditions allowing
    holders of the Senior Notes to convert had been met.  and/or
 63




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 4 
    Long-Term
    Debt (continued)      No. 00-19, Accounting for Derivative Financial Instruments Indexed
    to, and Potentially Settled in, a Companys Own
    Stock Accounting for Derivative Instruments and Hedging
    Activities
            Activity in 2006 
 64




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 4 
    Long-Term
    Debt (continued)    Form S-4
  Note 5 
    Guarantor/Non-Guarantor
    Consolidating Condensed Financial Statements  Rule 3-10(a)(1) Regulation S-X,
   65




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##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIES
    CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
    (Dollars in Thousands)
    (Unaudited)
  Twelve Months Ended December 31, 2008Parent


Guarantor


Non-Guarantor


Eliminations


ConsolidatedTotal revenues

$



$
638,883


$
312,015


$
(121,056
)

$
829,842Operating expenses


2



376,759



265,675



(121,056
)


521,380Depreciation and amortization






85,617



31,339







116,956Total operating gross margin


(2
)


176,507



15,001







191,506General and administration expense(1)


(204
)


(34,466
)


(38
)






(34,708
)Impairment of goodwill






(100,315
)










(100,315
)Gain on disposition of assets, net






1,860



837







2,697Total operating income (loss)


(206
)


43,586



15,800







59,180Other income and (expense):Interest expense


(29,257
)


(47,178
)


(308
)


52,210



(24,533
)Changes in fair value of derivative positions


















Interest income


42,575



7,577



3,463



(52,210
)


1,405Equity in loss of unconsolidated joint venture, net of taxes






(1,105
)










(1,105
)Other


(2
)


(776
)


234







(544
)Equity in net earnings of subsidiaries


(8,037
)










8,037



Total other income and (expense)


5,279



(41,482
)


3,389



8,037



(24,777
)Income before income taxes


5,073



2,104



19,189



8,037



34,403Income tax expense (benefit):Current


(25,850
)


12,432



11,879







(1,539
)Deferred


5,365



4,833



186







10,384Total income tax expense (benefit)


(20,485
)


17,265



12,065







8,845Net income (loss)

$
25,558


$
(15,161
)

$
7,124


$
8,037


$
25,558     (1)
    
    All field operations general and
    administration expenses are included in operating expenses.  66




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##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIES
    CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
    (Dollars in Thousands)
    (Unaudited)
  Year Ended December 31, 2007Parent


Guarantor


Non-Guarantor


Eliminations


ConsolidatedRevenues

$



$
573,164


$
136,319


$
(54,910
)

$
654,573Operating expenses


1



311,867



111,091



(54,910
)


368,049Depreciation and amortization






77,204



8,599







85,803Operating gross margin


(1
)


184,093



16,629







200,721General and administration expense(1)


(165
)


(24,485
)


(58
)






(24,708
)Provision for reduction in carrying value of certain assets






(1,462
)










(1,462
)Gain (loss) on disposition of assets, net






16,448



(16
)






16,432Total operating income (loss)


(166
)


174,594



16,555







190,983Other income and (expense):Interest expense


(29,918
)


(47,183
)


(551
)


52,495



(25,157
)Changes in fair value of derivative positions


(671
)














(671
)Interest income


47,435



11,878



(340
)


(52,495
)


6,478Loss on extinguishment of debt


(2,396
)














(2,396
)Equity in loss of unconsolidated joint venture, net of taxes










(27,101
)






(27,101
)Minority interest










(1,000
)






(1,000
)Other


9



618



44



(6
)


665Equity in net earnings of subsidiaries


101,432











(101,432
)


Total other income and (expense)


115,891



(34,687
)


(28,948
)


(101,438
)


(49,182
)Income (loss) before income taxes


115,725



139,907



(12,393
)


(101,438
)


141,801Income tax expense (benefit):Current


(4,237
)


16,217



5,622







17,602Deferred


15,884



2,626



1,611







20,121Income tax expense


11,647



18,843



7,233







37,723Net income (loss)

$
104,078


$
121,064


$
(19,626
)

$
(101,438
)

$
104,078     (1)
    
    All field operations general and
    administration expenses are included in operating expenses.  67




---



##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIES
    CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
    (Dollars in Thousands)
  Twelve Months Ended December 31, 2006Parent


Guarantor


Non-Guarantor


Eliminations


ConsolidatedRevenues

$
3


$
510,157


$
123,506


$
(47,231
)

$
586,435Operating expenses






274,862



121,995



(47,231
)


349,626Depreciation and amortization






65,221



4,049







69,270Operating gross margin


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.  68




---



##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIES
    CONSOLIDATING CONDENSED BALANCE SHEET
    (Dollars in Thousands)
    (Unaudited)
  December 31, 2008Parent


Guarantor


Non-Guarantor


Eliminations


ConsolidatedASSETSCurrent assets:Cash and cash equivalents

$
111,324


$
9,741


$
51,233


$



$
172,298Accounts and notes receivable, net


51,792



217,435



131,591



(214,654
)


186,164Rig materials and supplies






11,518



18,723







30,241Deferred costs






2,000



5,804







7,804Deferred income taxes


9,735















9,735Other tax assets


83,788



(41,008
)


(1,856
)






40,924Other current assets


549



13,755



11,875



(54
)


26,125Total current assets


257,188



213,441



217,370



(214,708
)


473,291Property, plant and equipment, net


79



465,659



209,686



124



675,548Goodwill


















Investment in subsidiaries and intercompany advances


867,684



1,066,216



(88,992
)


(1,844,908
)


Investment in and advances to unconsolidated joint venture






4,620



(4,620
)






Other noncurrent assets


35,518



21,215



8,059







64,792Total assets

$
1,160,469


$
1,771,151


$
341,503


$
(2,059,492
)

$
1,213,631LIABILITIES AND
     STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt

$
6,000


$



$



$



$
6,000Accounts payable and accrued liabilities


53,859



337,464



100,305



(351,230
)


140,398Accrued income taxes


540



4,861



6,729







12,130Total current liabilities


60,399



342,325



107,034



(351,230
)


158,528Long-term debt


455,073















455,073Other long-term liabilities


10



14,351



7,035







21,396Long-term deferred tax liability






1,237



6,993







8,230Intercompany payables


74,583



583,027



71,299



(728,909
)


Contingencies (Note 13)


















Stockholders equity:Common stock


18,910



39,899



21,153



(61,052
)


18,910Capital in excess of par value


603,731



1,045,727



141,112



(1,186,839
)


603,731Retained earnings (accumulated deficit)


(52,237
)


(255,415
)


(13,123
)


268,538



(52,237
)Total stockholders equity


570,404



830,211



149,142



(979,353
)


570,404Total liabilities and stockholders equity

$
1,160,469


$
1,771,151


$
341,503


$
(2,059,492
)

$
1,213,631   69




---



##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIES
    CONSOLIDATING CONDENSED BALANCE SHEET
    (Dollars in Thousands)
  December 31, 2007Parent


Guarantor


Non-Guarantor


Eliminations


ConsolidatedASSETSCurrent assets:Cash and cash equivalents

$
31,326


$
8,314


$
20,484


$



$
60,124Marketable securities


















Accounts and notes receivable, net


79,688



187,663



80,139



(180,784
)


166,706Rig materials and supplies






10,667



13,597







24,264Deferred costs






1,553



6,242







7,795Deferred income taxes


9,423















9,423Other tax assets


59,673



(23,395
)


(3,746
)






32,532Other current assets


174



10,578



11,587







22,339Total current assets


180,284



195,380



128,303



(180,784
)


323,183Property, plant and equipment, net


79



423,652



162,035



122



585,888Goodwill






100,315











100,315Investment in subsidiaries and intercompany advances


813,248



963,269



(58,320
)


(1,718,197
)


Investment in and advances to unconsolidated joint venture






267



(4,620
)






(4,353
)Other noncurrent assets


40,113



20,805



11,036







71,954Total assets

$
1,033,724


$
1,703,688


$
238,434


$
(1,898,859
)

$
1,076,987LIABILITIES AND
     STOCKHOLDERS EQUITYCurrent liabilities:Current debt

$
20,000


$



$



$



$
20,000Accounts payable and accrued liabilities


48,820



221,363



64,577



(247,408
)


87,352Accrued income taxes


1,765



10,790



4,273







16,828Total current liabilities


70,585



232,153



68,850



(247,408
)


124,180Long-term debt


353,721















353,721Other long-term liabilities


110



48,174



8,034







56,318Long-term deferred tax liability


1



1,237



6,806







8,044Intercompany payables


74,583



576,746



38,074



(689,403
)


Commitments and contingencies (Note 13)


















Stockholders equity:Common stock


18,653



39,900



21,152



(61,052
)


18,653Capital in excess of par value


593,866



1,045,732



115,765



(1,161,497
)


593,866Retained earnings (accumulated deficit)


(77,795
)


(240,254
)


(20,247
)


260,501



(77,795
)Total stockholders equity


534,724



845,378



116,670



(962,048
)


534,724Total liabilities and stockholders equity

$
1,033,724


$
1,703,688


$
238,434


$
(1,898,859
)

$
1,076,987   70




---



##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIES
    CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
    (Dollars in Thousands)
    (Unaudited)
  Twelve Months Ending December 31, 2008Parent


Guarantor


Non-Guarantor


Eliminations


ConsolidatedCash flows from operating activities:Net income (loss)

$
25,558


$
(15,161
)

$
7,124


$
8,037


$
25,558Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Depreciation and amortization






85,617



31,339







116,956Impairment of goodwill






100,315











100,315Amortization of debt issuance and premium


1,237















1,237Gain on disposition of assets






(1,860
)


(837
)






(2,697
)Deferred tax expense


5,365



4,833



186







10,384Equity in loss of unconsolidated joint venture






1,105











1,105Expenses not requiring cash


9,363















9,363Equity in net earnings of subsidiaries


8,037











(8,037
)


Change in accounts receivable


27,895



9,550



(52,403
)






(14,958
)Change in other assets


(36,459
)


16,044



(3,888
)






(24,303
)Change in liabilities


13,013



(51,295
)


35,640







(2,642
)Net cash provided by operating activities


54,009



149,148



17,161







220,318Cash flows from investing activities:Capital expenditures






(162,578
)


(34,492
)






(197,070
)Proceeds from the sale of assets






1,449



3,063







4,512Proceeds from insurance claims










951







951Investment in unconsolidated joint venture






(5,000
)










(5,000
)Net cash used in investing activities






(166,129
)


(30,478
)






(196,607
)Cash flows from financing activities:Proceeds from issuance of debt


50,000















50,000Principal payments under debt obligations


(35,000
)














(35,000
)Proceeds from revolver draw


73,000















73,000Payment of debt issuance costs


(1,846
)














(1,846
)Proceeds from stock options exercised


1,969















1,969Excess tax benefit from stock-based compensation


340















340Intercompany advances, net


(62,474
)


18,408



44,066







Net cash provided by financing activities


25,989



18,408



44,066







88,463Net increase in cash and cash equivalents


79,998



1,427



30,749







112,174Cash and cash equivalents at beginning of year


31,326



8,314



20,484







60,124Cash and cash equivalents at end of year

$
111,324


$
9,741


$
51,233


$



$
172,298   71




---



##### Table of Contents



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


Guarantor


Non-Guarantor


Eliminations


ConsolidatedCash flows from operating activities:Net income (loss)

$
104,078


$
121,064


$
(19,626
)

$
(101,438
)

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






77,204



8,599







85,803Amortization of debt issuance and premium


845















845Loss on extinguishment of debt


1,396















1,396Gain (loss) on disposition of assets






(16,448
)


16







(16,432
)Deferred income tax expense


15,884



2,626



1,611







20,121Equity in loss of unconsolidated joint venture










27,101







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






1,462











1,462Expenses not requiring cash


11,187



(590
)










10,597Equity in net earnings of subsidiaries


(101,432
)










101,432



Change in accounts receivable


(25,844
)


10,149



(44,514
)






(60,209
)Change in other assets


(21,409
)


36,881



(47,232
)






(31,760
)Change in liabilities


(24,119
)


(85,496
)


40,883



6



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


(39,414
)


146,852



(33,162
)






74,276Cash flows from investing activities:Capital expenditures






(235,189
)


(6,909
)






(242,098
)Proceeds from the sale of assets


54



22,865



526







23,445Proceeds from insurance claims






7,844











7,844Investment in unconsolidated joint venture










(5,000
)






(5,000
)Purchase of marketable securities


(101,075
)














(101,075
)Proceeds from sale of marketable securities


161,995



2,000











163,995Net cash (used in) investing activities


60,974



(202,480
)


(11,383
)






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


125,000















125,000Principal payments under debt obligations


(100,000
)














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


20,000















20,000Purchase of call options


(31,475
)














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


20,250















20,250Payment of debt issuance costs


(4,618
)














(4,618
)Proceeds from stock options exercised


15,455















15,455Excess tax benefit from stock-based compensation


1,922















1,922Intercompany advances, net


(96,797
)


49,575



47,222







Net cash provided by (used in) financing activities


(50,263
)


49,575



47,222







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


(28,703
)


(6,053
)


2,677







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


60,029



14,367



17,807







92,203Cash and cash equivalents at end of year

$
31,326


$
8,314


$
20,484


$



$
60,124   72




---



##### Table of Contents



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


Guarantor


Non-Guarantor


Eliminations


ConsolidatedCash flows from operating activities:Net income (loss)

$
81,026


$
89,849


$
(9,514
)

$
(80,335
)

$
81,026Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:Depreciation and amortization






65,221



4,049







69,270Amortization of debt issuance and premium


764















764Loss on extinguishment of debt


910















910Gain (loss) on disposition of assets


6



(7,416
)


(163
)






(7,573
)Deferred tax expense (benefit)


15,951



(4,144
)


3,948







15,755Expenses not requiring cash


8,474



1,200











9,674Equity in net earnings of subsidiaries


(80,335
)










80,335



Change in operating assets and liabilities


(2,952
)


6,797



(6,803
)






(2,958
)Net cash provided by (used in) operating activities


23,844



151,507



(8,483
)






166,868Cash flows from investing activities:Capital expenditures






(191,308
)


(3,714
)






(195,022
)Investment in unconsolidated joint venture


(10,000
)














(10,000
)Proceeds from the sale of assets


(6
)


48,481



2,315







50,790Proceeds from insurance claims






4,501











4,501Purchase of marketable securities


(196,120
)


(2,000
)










(198,120
)Sale of marketable securities


151,200



2,000











153,200Net cash used in investing activities


(54,926
)


(138,326
)


(1,399
)






(194,651
)Cash flows from financing activities:Principal payments under debt obligations


(50,000
)














(50,000
)Proceeds from common stock offering


99,947















99,947Proceeds from stock options exercised


7,537















7,537Excess tax benefit from stock options exercised


2,326















2,326Intercompany advances, net


(677
)


(9,959
)


10,636







Net cash provided by (used in) financing activities


59,133



(9,959
)


10,636







59,810Net increase in cash and cash equivalents


28,051



3,222



754







32,027Cash and cash equivalents at beginning of year


31,978



11,145



17,053







60,176Cash and cash equivalents at end of year

$
60,029


$
14,367


$
17,807


$



$
92,203   73




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Note 6 
    Derivative
    Financial Instruments  18-month
    Note 7 
    Income
    Taxes    Year Ended December 31,2008


2007


2006(Dollars in Thousands)United States

$
(25,480
)

$
127,483


$
99,024Foreign


59,883



14,318



18,411$
34,403


$
141,801


$
117,435     Year Ended December 31,2008


2007


2006(Dollars in Thousands)Current:United States:Federal

$
(3,751
)

$
13,860


$
13,046State


407



791



Foreign


1,805



2,951



7,608Deferred:United States:Federal


10,571



16,559



30,436State


(538
)


4,290



(12,617
)Foreign


351



(728
)


(2,064
)$
8,845


$
37,723


$
36,409  74




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
    Year Ended December 31,2008


2007


2006% of Pre-Tax





% of Pre-Tax





% of Pre-TaxAmount


Income


Amount


Income


Amount


IncomeComputed Expected Tax Expense

$
12,041



35
%

$
49,630



35
%

$
41,104



35
%Foreign Taxes


22,391



65
%


12,669



9
%


5,820



5
%State Taxes, net of federal benefit


66







5,080



4
%






Foreign Tax Credits


(20,404
)


(59
)%


(16,020
)


(11
)%






Kazakhstan Tax Credits










(22,547
)


(16
)%






Kazakhstan FIN 48 Items


(13,002
)


(38
)%


(12,427
)


(9
)%






Change in Valuation Allowance


(1,835
)


(5
)%


5,764



4
%






Foreign Corporation Income


2,997



9
%


8,916



6
%


1,524



2
%Adoption of FIN 48










7,807



5
%






State NOL


















(12,617
)


(11
)%Tax Benefit of Foreign Divestment


(3,456
)


(10
)%














Other Permanent Differences, Net


(1,260
)


(4
)%


(161
)






1,404



1
%Other


(1,329
)


(4
)%


(988
)






(826
)


(1
)%Goodwill


12,636



37
%














Actual Tax Expense

$
8,845



26
%

$
37,723



27
%

$
36,409



31
%  75




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
    December 31,2008


2007(Dollars in Thousands)Deferred tax assetsCurrent deferred tax assets:Reserves established against realization of certain assets

$
5,362


$
6,563Accruals not currently deductible for tax purposes


4,373



2,860Gross current deferred tax assets


9,735



9,423Current deferred tax valuation allowance






Net current deferred tax assets


9,735



9,423Non-current deferred tax assets:State net operating loss carryforwards


4,273



9,217Other state deferred tax asset


5,015



Foreign tax credits






6,300Other long term liabilities


2,149



2,149Deferred compensation


809



370Note hedge interest


9,304



11,239Percentage of completion construction projects


491



Goodwill


5,810



FIN 48


5,162



13,381Property, plant and equipment


2,941



Other


(531
)


Gross long-term deferred tax assets


35,423



42,656Valuation Allowance


(4,556
)


(6,391
)Net non-current deferred tax assets


30,867



36,265Net deferred tax assets


40,602



45,688Deferred tax liabilities:Non-current deferred tax liabilities:Property, plant and equipment


(4,507
)


8,571Goodwill






(14,336
)Deferred tax impact of 481 (a) adjustment related to FTCs


(4,645
)


Foreign tax local


(342
)


Federal benefit of foreign tax


(1,032
)


Other


2,296



1,577Net non-current deferred tax liabilities


(8,230
)


(4,188
)Net deferred tax asset

$
32,372


$
41,500    76




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
              In MillionsBalance at January 1, 2008


(13.1
)Decreases related to prior year tax positions


4.6Increases related to current year tax positions


(3.3
)Lapse of statute


0.1Balance at December 31, 2008


(11.7
)  77




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
    United States  Federal

1985-presentBolivia

2001-presentKazakhstan

2003-presentMexico

2003-presentPapua New Guinea

2002-presentRussia

2006-presentNew Zealand

2003-presentColombia

2006-present       Note 8 
    Saudi
    Arabia Joint Venture       78




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 8 
    Saudi
    Arabia Joint Venture (continued)    Al
    Rushaid-Parker Drilling, LLC
    Condensed Statement of Operations
    (Dollars in Thousands)
    (Unaudited)
  Year EndedDecember 31,2007Drilling revenues

$
12,287Drilling operating expenses


28,406Other expenses


31,042Total expenses


59,448Net loss

$
(47,161
)   Al
    Rushaid-Parker Drilling, LLC
    Condensed Balance Sheet
    (Dollars in Thousands)
    (Unaudited)
  December 31,2007ASSETSTotal current assets

$
32,544Net property, plant and equipment


185,383Total assets

$
217,927LIABILITIES AND STOCKHOLDERS EQUITYTotal current debt

$
8,785Total other current liabilities


74,766Long-term debt  third party


151,467Long-term debt  related party


29,536Total stockholders equity


(46,627
)Total liabilities and stockholders equity

$
217,927   Note 9 
    Common
    Stock and Stockholders Equity  Common Stock Offering
 79




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 9 
    Common
    Stock and Stockholders Equity (continued)  Stock Plans
           80




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 9 
    Common
    Stock and Stockholders Equity (continued)  Form S-8
            1994 Non-EmployeeDirector Stock Incentive PlanWeightedAverageExercise


IntrinsicShares


Price


ValueOutstanding at December 31, 2007


14,000


$
9.573Granted






Exercised


(4,000
)


3.280


$
23,191Cancelled


(10,000
)


12.090Outstanding at December 31, 2008






   81




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 9 
    Common
    Stock and Stockholders Equity (continued)  1997 Stock PlanIncentive Options


Non-Qualified OptionsWeighted





WeightedAverage





AverageExercise





Exercise


IntrinsicShares


Price


Shares


Price


ValueOutstanding at December 31, 2007


46,240


$
10.813



921,560


$
3.770Granted














Exercised










(507,500
)


3.855


$
2,231,580Cancelled


(46,240
)


10.813



(123,760
)


5.516Outstanding at December 31, 2008





$




290,300


$
2.877     Outstanding OptionsWeightedAverage


WeightedRemaining


Average


AggregateNumber of


Contractual


Exercise


IntrinsicPlan

Exercise Prices

Shares


Life


Price


Value1997 Stock PlanNon-qualified

$1.960-$4.200


290,300



1.40 years


$
2.877


$
6,677   Exercisable OptionsWeightedAverage

AggregateNumber of

Exercise

IntrinsicPlan

Exercise Prices

Shares

Price

Value1997 Stock PlanNon-qualified

$1.960-$4.200


290,300


$
2.877


$
6,677     Stock Reserved for Issuance
  December 31,2008


2007Stock plans


2,091,037



1,426,589Stock bonus plan


355,359



304,402Total shares reserved for issuance


2,446,396



1,730,991   Stockholder Rights Plan
 82




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 9 
    Common
    Stock and Stockholders Equity (continued)        Note 10
    
    Reconciliation of Income and Number of Shares Used to Calculate
    Basic and Diluted Earnings Per Share (EPS)  For The Year Ended December 31, 2008Income


Shares


Per-Share(Numerator)


(Denominator)


AmountBasic EPS:Income from continuing operations

$
25,558,000



111,400,396


$
0.23Discontinued operations










Net income

$
25,558,000






$
0.23Effect of dilutive securities:Stock options and restricted stock






1,030,149


$
Diluted EPS:Income from continuing operations

$
25,558,000



112,430,545


$
0.23Discontinued operations










Net income

$
25,558,000






$
0.23   83




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 10
    
    Reconciliation of Income and Number of Shares Used to Calculate
    Basic and Diluted Earnings Per Share
    (EPS) (continued)  For The Year Ended December 31, 2007Income


Shares


Per-Share(Numerator)


(Denominator)


AmountBasic EPS:Income from continuing operations

$
104,078,000



109,542,364


$
0.95Discontinued operations










Net income

$
104,078,000






$
0.95Effect of dilutive securities:Stock options and restricted stock






1,314,330


$
(0.01
)Diluted EPS:Income from continuing operations

$
104,078,000



110,856,694


$
0.94Discontinued operations










Net income

$
104,078,000






$
0.94   For The Year Ended December 31, 2006Income (Loss)


Shares


Per-Share(Numerator)


(Denominator)


AmountBasic EPS:Loss from continuing operations

$
81,026,000



106,552,015


$
0.76Discontinued operations










Net loss

$
81,026,000






$
0.76Effect of dilutive securities:Stock options and restricted stock






1,586,368


$
(0.01
)Diluted EPS:Loss from continuing operations

$
81,026,000



108,138,383


$
0.75Discontinued operations










Net loss

$
81,026,000






$
0.75       Note 11 
    Employee
    Benefit Plan   84




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 11 
    Employee
    Benefit Plan (continued)    Note 12 
    Business
    Segments    85




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 12 
    Business
    Segments (continued)  Year Ended December 31,Operations by Industry
    Segment

2008


2007


2006(Dollars in Thousands)Revenues:U.S. drilling(1)

$
173,633


$
225,263


$
191,225International drilling(1)


325,096



213,566



184,280Project management and engineering services(1)


110,147



77,713



88,936Construction contract(1)


49,412







Rental tools(1)


171,554



138,031



121,994Total revenues


829,842



654,573



586,435Operating income:U.S. drilling(2)


53,964



97,679



83,296International drilling(2)


41,786



31,046



13,923Project management and engineering services(2)


18,470



12,732



13,616Construction contract(2)


2,597







Rental tools(2)


74,689



59,264



56,704Total operating income


191,506



200,721



167,539General and administrative expense


(34,708
)


(24,708
)


(31,786
)Impairment of goodwill


(100,315
)






Provision for reduction in carrying value of certain assets






(1,462
)


Gain on disposition of assets, net


2,697



16,432



7,573Total operating income


59,180



190,983



143,326Interest expense


(24,533
)


(25,157
)


(31,598
)Changes in fair value of derivative positions






(671
)


40Loss on extinguishment of debt


1,405



(2,396
)


(1,912
)Equity in loss of unconsolidated joint venture, net of taxes






(27,101
)


Minority interest


(1,105
)


(1,000
)


(229
)Other


(544
)


7,143



7,808Income from continuing operations before income taxes

$
34,403


$
141,801


$
117,435Identifiable assets:U.S. drilling

$
157,508


$
235,030International drilling


540,574



441,282Rental tools


125,170



177,033Total identifiable assets


823,252



853,345Corporate assets


390,379



223,642Total assets

$
1,213,631


$
1,076,987     (1)
    
    In 2008, ExxonMobil accounted for
    approximately 13 percent of the Companys total
    revenues, approximately $62.2 million of the Companys
    project management and engineering services segment revenues and
    approximately $22.3 million of the Companys rental
    tools segment revenues. In 2007, ExxonMobil accounted for
    approximately 11 percent of the Companys total
    revenues, approximately $63.0 million of the Companys
    project management and engineering services segment revenues and
    approximately $11.4 million of the Companys rental
    tools segment revenues. In 2006, ExxonMobil accounted for
    approximately 14 percent of the Companys total
    revenues. ExxonMobil accounted for approximately
    $65.8 million of the Companys project management and
    engineering services segment revenues and approximately
    $19.0 million of the Companys rental tools segment
    revenues.(2)
    
    Operating income 
    revenues less direct operating expenses, including depreciation
    and amortization expense.  86




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 12 
    Business
    Segments (continued)  Year Ended December 31,Operations by Industry
    Segment

2008


2007


2006(Dollars in Thousands)Capital expenditures:U.S. drilling

$
82,396


$
32,563


$
72,373International drilling


75,680



144,984



75,448Rental tools


36,806



62,011



40,773Corporate


2,188



2,540



6,428Total capital expenditures

$
197,070


$
242,098


$
195,022Depreciation and amortization:U.S. drilling

$
34,469


$
32,102


$
23,867International drilling


50,461



26,785



25,290Rental tools


29,057



23,715



18,501Corporate


2,969



3,201



1,612Total depreciation and amortization

$
116,956


$
85,803


$
69,270   87




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 12 
    Business
    Segments (continued)  Year Ended December 31,Operations by Geographic
    Area

2008


2007


2006(Dollars in Thousands)Revenues:United States

$
399,962


$
369,170


$
309,757Latin America


122,521



75,683



31,466Asia Pacific


56,998



67,037



79,665Africa and Middle East


40,036



14,580



24,219CIS


210,325



128,103



141,328Total revenues


829,842



654,573



586,435Operating income:United States(1)


132,991



158,778



136,690Latin America(1)


27,072



26,825



(5,679
)Asia Pacific(1)


7,668



10,670



19,884Africa and Middle East(1)


(13,293
)


(14,466
)


(2,594
)CIS(1)


37,068



18,914



19,238Total operating income


191,506



200,721



167,539General and administrative expense


(34,708
)


(24,708
)


(31,786
)Impairment of goodwill


(100,315
)






Provision for reduction in carrying value of certain assets






(1,462
)


Gain on disposition of assets, net


2,697



16,432



7,573Total operating income


59,180



190,983



143,326Interest expense


(24,533
)


(25,157
)


(31,598
)Changes in fair value of derivative positions






(671
)


40Loss on extinguishment of debt






(2,396
)


(1,912
)Equity in loss of unconsolidated joint venture, net of taxes


(1,105
)


(27,101
)


Minority interest






(1,000
)


(229
)Other


861



7,143



7,808Income from continuing operations before income taxes

$
34,403


$
141,801


$
117,435Long-lived assets:(2)United States

$
396,992


$
447,235Latin America


63,560



54,415Asia Pacific


27,663



29,200Africa and Middle East


40,724



59,067CIS


146,609



96,286Total long-lived assets

$
675,548


$
686,203     (1)
    
    Operating income 
    revenues less direct 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. 88




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
   Note 13 
    Commitments
    and Contingencies      2009

$
4,6892010


1,7392011


1,1252012


8312013


262Total

$
8,646              89




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##### Table of Contents



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




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NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 13 
    Commitments
    and Contingencies (continued)        Gulfco
    Site
   91




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 13 
    Commitments
    and Contingencies (continued)  Customs
    Agent Investigation
    Economic
    Sanctions Compliance
    Note 14 
    Related
    Party Transactions  Consulting
    Agreement
    (i)
    A consulting contract and severance agreement,  (ii)
    Payment of unpaid vacation pay that has accrued through
    April 30, 2006,(iii)
    A lump sum payment of $397,500 on November 2, 2006,(iv)
    Monthly payments of $37,500 and $28,750 commencing on
    May 1, 2006, for two years related to the severance
    agreement and the consulting agreement, respectively, and(v)
    Medical coverage under the Companys medical plan for
    Mr. Parker Sr. and his spouse through April 30, 2008. 92




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 14 
    Related
    Party Transactions (continued)          (i)
    A monthly payment of $15,000 for May 2008 and monthly payments
    of $16,000 commencing on June 1, 2008, through and
    including April 30, 2009, and(ii)
    coverage under the Companys medical and dental plans for
    Mr. Parker Sr. and his spouse through May 31, 2008.    (i)
    If Mr. Parker Sr. should die during the term of the
    Amendment, the payments shall continue to be made to his spouse,
    if she survives him, and if she does not survive him, to
    Mr. Parkers beneficiaries.  (ii)
    Mr. Parker Sr. shall be available to represent the Company
    on the US-Kazakhstan Business Council and assist with marketing
    efforts utilizing relationships developed during Mr. Parker
    Sr.s tenure with the Company;  (iii)
    Mr. Parker Sr. will be required to maintain the
    confidentiality of any information he obtains while an employee
    or consultant during the term of the Consulting Agreement, to
    disclose and assign to the Company any ideas he conceives and
    any inventions he develops related to the business of the
    Company or his consulting with the Company; and      Lease
    Agreements
   93




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 14 
    Related
    Party Transactions (continued)    Other
    Related Party Agreements
    Note 15 
    Supplementary
    Information      QuarterYear 2008

First


Second


Third


Fourth


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

$
173,278


$
216,730


$
227,454


$
212,380


$
829,842Operating gross margin

$
41,490


$
50,035


$
52,319


$
47,662


$
191,506Operating income

$
35,401


$
42,190


$
43,847


$
(62,258
)

$
59,180Income (loss) from continuing operations

$
23,888


$
22,596


$
18,551


$
(39,477
)

$
25,558Net income (loss)

$
23,888


$
22,596


$
18,551


$
(39,477
)

$
25,558Basic earnings per share:(1)Net income

$
0.22


$
0.20


$
0.17


$
(0.35
)

$
0.23Diluted earnings per share:(1)Net income

$
0.21


$
0.20


$
0.16


$
(0.35
)

$
0.23     (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.  94




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 15 
    Supplementary
    Information (continued)  QuarterYear 2007

First


Second


Third(2)


Fourth(2)


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

$
151,273


$
150,277


$
172,197


$
180,826


$
654,573Operating gross margin

$
49,507


$
42,881


$
57,394


$
50,939


$
200,721Operating income

$
60,023


$
36,904


$
50,600


$
43,456


$
190,983Income from continuing operations

$
29,994


$
16,860


$
22,653


$
34,571


$
104,078Net income

$
29,994


$
16,860


$
22,653


$
34,571


$
104,078Basic earnings per share:(1)Net income

$
0.28


$
0.15


$
0.21


$
0.31


$
0.95Diluted earnings per share:(1)Net income

$
0.27


$
0.15


$
0.20


$
0.31


$
0.94     (1)
    
    As a result of shares issued during
    the year, earnings per share for the years four quarters,
    which are based on weighted average shares outstanding during
    each quarter, may not equal the annual earnings per share, which
    is based on the weighted average shares outstanding during the
    year.(2)
    
    Total operating income and net
    income includes a gain of $15.1 million related to the sale
    of two barge rigs in the first quarter. Also included is a
    provision for reduction in carrying value of certain assets of
    $1.1 million recorded in the third quarter, and an equity
    loss in an unconsolidated joint venture of $1.1 million and
    $26.0 million in the third and fourth quarters,
    respectively. See Note 8 for further information on our
    joint venture. Net income in the first quarter included income
    tax expense of $7.0 million related to the sale of the two
    barge rigs and $1.9 million related to interest on tax
    uncertainties recorded. Net income in the second quarter
    included income tax expense of $4.0 million interest on tax
    uncertainties recorded. Net income in the fourth quarter
    included an income tax benefit of $25.6 million related to
    the settlement of tax matters related to FIN 48. See
    Note 7 for further detail.  Note 17 
    Recent
    Accounting Pronouncements       95




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##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
 Note 17 
    Recent
    Accounting Pronouncements (continued)    14-1, 14-1
   96




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##### Table of Contents



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    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.       97




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##### Table of Contents



Form 10-K,
  Changes in Internal Control over Financial Reporting
  ITEM 9B.
    OTHER
    INFORMATION   98




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##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS 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   99




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##### Table of Contents



PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES       PAGEReports of Independent Registered Public
    Accounting Firms

49Consolidated Statement of Operations for the
    years ended December 31, 2008, 2007 and 2006

52Consolidated Balance Sheet as of
    December 31, 2008 and 2007

53Consolidated Statement of Cash Flows for the
    years ended December 31, 2008, 2007 and 2006

55Consolidated Statement of Stockholders
    Equity for the years ended December 31, 2008, 2007 and
    2006

57Notes to the Consolidated Financial Statements

58       Report of KPMG LLP  Independent
    Registered Public Accounting Firm

49Schedule II  Valuation and
    qualifying accounts

104      EXHIBITNUMBER



DESCRIPTION3(a)



Restated Certificate of Incorporation of the Company, as amended
    on May 16, 2007 (incorporated by reference to
    Exhibit 3.1 to the Companys Report on
    Form 10-Q
    for the period ended September 20, 2007).3(b)



By-Laws of the Company, as amended on January 31, 2003
    (incorporated by reference to the Companys
    Form 10-K/A
    dated September 25, 2003).4(a)



Rights Agreement dated as of July 14, 1998, between the
    Company and Norwest Bank Minnesota, N.A., as rights agent
    (incorporated by reference to
    Form 8-A
    filed July 15, 1998).4(b)



Amendment No. 1 to the Rights Agreement dated
    September 22, 1998, between the Company and Norwest Bank
    Minnesota, N.A., as rights agent (incorporated by reference to
    Exhibit 3(a) of
    Form 10-K
    dated March 17, 2003).4(c)



Indenture dated as of October 10, 2003 between the Company,
    as issuer, certain Subsidiary Guarantors (as defined therein)
    and JPMorgan Chase Bank, as Trustee, respecting the
    9.625% Senior Notes due 2013 (incorporated by reference to
    the Companys
    S-4
    Registration Statement
    No. 333-110374
    dated November 10, 2003).4(d)



Credit Agreement among Parker Drilling Company, as Borrower, the
    Several Lenders Parties thereto, Lehman Brothers, Inc., as Sole
    Advisor, Sole Lead Arranger and Sole Bookrunner, Bank of
    America, N.A., as Syndication Agent and Lehman Commercial Paper,
    Inc. as Administrative Agent dated December 20, 2004
    (incorporated by reference to Exhibit 99.1 to
    Form 8-K
    dated December 27, 2004).4(e)



First Amendment to the Credit Agreement dated December 20,
    2004 among Parker Drilling Company, as Borrower, the Several
    Lenders Parties thereto, Lehman Brothers, Inc., as Sole Advisor,
    Sole Lead Arranger and Sole Bookrunner, Bank of America, N.A.,
    as Syndication Agent and Lehman Commercial Paper, Inc., as
    Administrative Agent dated March 1, 2006 (incorporated by
    reference to Exhibit 4(j) to Form 10-K, dated March 10,
    2006). 100




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##### Table of Contents



ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES (continued)  EXHIBITNUMBER



DESCRIPTION4(f)



Second Amendment to the Credit Agreement dated December 20,
    2004 among Parker Drilling, as Borrower, the Several Lenders
    Parties thereto, Lehman Brothers, Inc., as Sole Advisor, Sole
    Lead Arranger and Sole Bookrunner, Bank of America, N.A., as
    Syndication Agent dated February 9, 2007 (incorporated by
    reference to Exhibit 10(c) to annual report on
    Form 10-K
    for the year ended December 31, 2006).4(g)



Indenture dated as of September 2, 2004, between the
    Company and JP-Morgan Chase Bank, as trustee, respecting the
    $150.0 million Senior Floating Rate Notes due 2010
    (incorporated by reference to Exhibit 10.1 to the
    Companys
    Form 8-K,
    dated September 7, 2004).4(h)



Indenture, dated as of July 5, 2007, among Parker Drilling
    Company, the guarantors from time to time party thereto, and The
    Bank of New York Trust Company, N.A., with respect to the
    2.125% Convertible Senior Notes due 2013 (incorporated by
    reference to Exhibit 4.1 to the Companys Current
    Report on
    Form 8-K
    filed on July 5, 2007)4(i)



Form of 2.125% Convertible Senior Note due 2013 (included
    in Exhibit 4(h))4(j)



Amended and Restated Credit Agreement, dated as of
    September 20, 2007, among Parker Drilling Company, as
    Borrower, the several lenders from time to time thereto, Lehman
    Brothers Inc., as Sole Advisor, Sole Lead Arranger and Sole
    Bookrunner, Bank of America N.A., as Syndication Agent, and
    Lehman Commercial Paper Inc., as Administrative Agent
    (incorporated by reference to Exhibit 10.1 to report on
    Form 8-K
    dated September 25, 2007).4(k)



Credit Agreement, dated as of May 15, 2008, among Parker
    Drilling Company, as Borrower, , Bank of America, N.A., as
    Administrative Agent and L/C Issuer, the several banks and other
    financial institutions or entities from time to time parties
    thereto, ABN AMRO BANK N.V., as Documentation Agent, and Banc of
    America Securities LLC and Lehman Brothers Inc., as Joint Lead
    Arrangers and Book Managers (incorporated by reference to
    Exhibit 10.1 to the report on
    Form 8-K
    dated May 21, 2008.10(a)



Amended and Restated Parker Drilling Company Stock Bonus Plan,
    effective as of January 1, 1999 (incorporated herein by
    reference to Exhibit 10(a) to the Companys Quarterly
    Report on
    Form 10-Q
    for the three months ended March 31, 1999).*10(b)



Parker Drilling Company Incentive Compensation Plan, dated
    December 17, 2008, and effective January 1, 2008.*10(c)



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(d)



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(e)



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(f)



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(g)



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



2005 Long Term Incentive Plan (2005 LTIP)
    (incorporated by reference to the Companys 2005 Proxy
    Statement dated March 22, 2005).*10(i)



First Amendment to the 2005 LTIP (incorporated by reference to
    the Companys 2008 Proxy Statement dated March 21,
    2008).*10(j)



Second Amendment to the 2005 LTIP, dated December 13, 2008.*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).* 101




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##### Table of Contents



ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES (continued)  EXHIBITNUMBER



DESCRIPTION10(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, 2005).*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, 2005).*10(o)



Form of Restricted Stock Award Agreement under the 2005 LTIP
    (incorporated by reference to Exhibit 10.2 to
    Form 8-K
    dated May 1, 2005).*10(p)



Form of Performance Based Restricted Stock Award Agreement under
    the 2005 LTIP (incorporated by reference to Exhibit 10.3 to
    Form 8-K
    dated May 1, 2005).*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).*10(t)



Amendment to Consulting Agreement between Parker Drilling
    Company and Robert L. Parker Sr., dated April 12, 2008.*10(u)



Termination of Split Dollar Life Insurance Agreement between
    Parker Drilling Company, Robert L. Parker Sr., and Robert L.
    Parker Sr. and Catherine Mae Parker Family Trust under Indenture
    dated the 23rd day of July 1993, dated April 12, 2006
    (incorporated by reference to Exhibit 10.2 to the
    Form 8-K
    dated April 12, 2006).*10(v)



Confirmation of Convertible Bond Hedge Transaction, dated as of
    June 28, 2007, by and between Parker Drilling Company and
    Bank of America, N.A (incorporated by reference to
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K
    filed on July 5, 2007).10(w)



Confirmation of Convertible Bond Hedge Transaction, dated as of
    June 28, 2007, by and between Parker Drilling Company and
    Deutsche Bank AG, London Branch (incorporated by reference to
    Exhibit 10.2 to the Companys Current Report on
    Form 8-K
    filed on July 5, 2007).10(x)



Confirmation of Convertible Bond Hedge Transaction, dated as of
    June 28, 2007, by and between Parker Drilling Company and
    Lehman Brothers OTC Derivatives Inc. (incorporated by reference
    to Exhibit 10.3 to the Companys Current Report on
    Form 8-K
    filed on July 5, 2007).10(y)



Confirmation of Issuer Warrant Transaction dated as of
    June 28, 2007, by and between Parker Drilling Company and
    Bank of America, N.A. (incorporated by reference to
    Exhibit 10.4 to the Companys Current Report on
    Form 8-K
    filed on July 5, 2007).10(z)



Confirmation of Issuer Warrant Transaction, dated as of
    June 28, 2007, by and between Parker Drilling Company and
    Deutsche Bank AG, London Branch (incorporated by reference to
    Exhibit 10.5 to the Companys Current Report on
    Form 8-K
    filed on July 5, 2007).10(aa)



Confirmation of Issuer Warrant Transaction dated as of
    June 28, 2007, by and between Parker Drilling Company and
    Lehman Brothers OTC Derivatives Inc. (incorporated by reference
    to Exhibit 10.6 to the Companys Current Report on
    Form 8-K
    filed on July 5, 2007).10(bb)



Amendment to Confirmation of Issuer Warrant Transaction dated as
    of June 29, 2007, by and between Parker Drilling Company
    and Bank of America, N.A. (incorporated by reference to
    Exhibit 10.7 to the Companys Current Report on
    Form 8-K
    filed on July 5, 2007).10(cc)



Amendment to Confirmation of Issuer Warrant Transaction, dated
    as of June 29, 2007, by and between Parker Drilling Company
    and Deutsche Bank AG, London Branch (incorporated by reference
    to Exhibit 10.8 to the Companys Current Report on
    Form 8-K
    filed on July 5, 2007). 102




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##### Table of Contents



ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES (continued)  EXHIBITNUMBER



DESCRIPTION10(dd)



Amendment to Confirmation of Issuer Warrant Transaction, dated
    as of June 29, 2007, by and between Parker Drilling Company
    and Lehman Brothers OTC Derivatives Inc. (incorporated by
    reference to Exhibit 10.9 to the Companys Current
    Report on
    Form 8-K
    filed on July 5, 2007).21



Subsidiaries of the Registrant.23.1



Consent of KPMG LLP  Independent Registered Public
    Accounting Firm23.2



Consent of PricewaterhouseCoopers LLP  Independent
    Registered Public Accounting Firm31.1



Robert L. Parker Jr., Chairman and Chief Executive Officer,
    Rule 13a-14(a)/15d-14(a)
    Certification.31.2



W. Kirk Brassfield, Senior Vice President and Chief Financial
    Officer,
    Rule 13a-14(a)/15d-14(a)
    Certification.32.1



Robert L. Parker Jr., Chairman and Chief Executive Officer,
    Section 1350 Certification.32.2



W. Kirk Brassfield, Senior Vice President and Chief Financial
    Officer, Section 1350 Certification.     *
    
    - Management Contract, Compensatory Plan or Agreement. 103




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##### Table of Contents



PARKER
    DRILLING COMPANY AND SUBSIDIARIESSCHEDULE II  VALUATION AND
    QUALIFYING ACCOUNTS(Dollars in Thousands)
  Balance


Chargedat


to cost


Charged





Balancebeginning


and


to other





at end ofClassifications

of year


expenses


accounts


Deductions


yearYear ended December 31, 2008Allowance for doubtful accounts and notes

$
3,152


$
76


$



$
59


$
3,169Reduction in carrying value of rig materials and supplies

$
2,607


$
(903
)

$



$
1,704


$
Deferred tax valuation allowance

$
6,391


$



$



$
1,835


$
4,556Year ended December 31, 2007Allowance for doubtful accounts and notes

$
1,481


$
1,975


$



$
304


$
3,152Reduction in carrying value of rig materials and supplies

$
4,337


$
(590
)

$



$
1,140


$
2,607Deferred tax valuation allowance

$



$



$
6,391


$



$
6,391Year ended December 31, 2006:Allowance for doubtful accounts and notes

$
1,639


$



$



$
158


$
1,481Reduction in carrying value of rig materials and supplies

$
3,451


$
1,200


$



$
314


$
4,337Deferred tax valuation allowance

$



$



$
18,026
(1)

$
18,026
(2)

$
     (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. 104




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##### Table of Contents



SIGNATURES    PARKER DRILLING COMPANY
  By:
    /s/  Robert
    L. Parker Jr         Signature

Title

DateBy:

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

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

February 27, 2009By:

/s/  
    James W. WhalenJames
    W. Whalen

Vice Chairman of the Board and Director

February 27, 2009By:

David C. MannonDavid
    C. Mannon

President and Chief Operating Officer

February 27, 2009By:

/s/   W.
    Kirk BrassfieldW.
    Kirk Brassfield

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

February 27, 2009By:

/s/  Lynn
    G. CullomLynn
    G. Cullom

Controller (Principal Accounting Officer)

February 27, 2009By:

/s/  George
    J. DonnellyGeorge
    J. Donnelly

Director

February 27, 2009By:

/s/  John
    W. Gibson, Jr.John
    W. Gibson, Jr.

Director

February 27, 2009By:

/s/  Robert
    W. GoldmanRobert
    W. Goldman

Director

February 27, 2009By:

/s/  Gary
    R. KingGary
    R. King

Director

February 27, 2009By:

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

Director

February 27, 2009By:

/s/  Roger
    B. PlankRoger
    B. Plank

Director

February 27, 2009By:

/s/  R.
    Rudolph ReinfrankR.
    Rudolph Reinfrank

Director

February 27, 2009  105




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##### Table of Contents



INDEX TO
    EXHIBITS
  EXHIBITNUMBER



DESCRIPTION10(b)




Parker Drilling Company Incentive Compensation Plan dated
    December 17, 2008, and effective January 1, 200810(j)




Second Amendment to the 2005 LTIP, dated December 13, 2008.10(t)




Amendment to Consulting Agreement between Parker Drilling
    Company and Robert L. Parker Sr. dated April 12, 200821




Subsidiaries of the Registrant23
.1



Consent of KPMG LLP  Independent Registered Public
    Accounting Firm23
.2



Consent of PricewaterhouseCoopers LLP  Independent
    Registered Public Accounting Firm31
.1



Robert L. Parker Jr., Chairman and Chief Executive Officer,
    Rule 13a-14(a)/15d-14(a)
    Certification.31
.2



W. Kirk Brassfield, Senior Vice President and Chief Financial
    Officer,
    Rule 13a-14(a)/15d-14(a)
    Certification.32
.1



Robert L. Parker Jr., Chairman and Chief Executive Officer,
    Section 1350 Certification.32
.2



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