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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For The Quarterly Period Ended March 31, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period fromto
 Commission File Number 1-7573
 PARKER DRILLING COMPANY
  Delaware
    
    73-0618660(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 5 Greenway Plaza, Suite 100, Houston, Texas 77046  (Address of principal executive offices) (Zip code)
 (281) 406-2000  (Registrants telephone number, including area code)
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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TABLE OF CONTENTS
  
 PagePart I.Financial Information
    
    
    3Item 1. Financial Statements
    
    
    3Consolidated Condensed Balance Sheets
March 31, 2011 (Unaudited) and December 31, 2010
    
    
    3Consolidated Condensed Statements of Operations (Unaudited)
Three Months Ended March 31, 2011 and 2010
    
    
    4Consolidated Condensed Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2011 and 2010
    
    
    5Notes to the Unaudited Consolidated Condensed Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    34Item 4. Controls and Procedures
    
    
    35Part II.Other Information
    
    
    35Item 1. Legal Proceedings
    
    
    35Item 1A. Risk Factors
    
    
    35Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 6. Exhibits
    
    
    36Signatures
    
    
    37EX-10.1EX-10.2EX-10.3EX-31.1EX-31.2EX-32.1EX-32.2
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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 PARKER DRILLING COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED CONDENSED BALANCE SHEETS
 (Dollars in Thousands)
 March 31
    
    
    December 31,2011
    
    
    2010(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    41,595
    
    
    $
    51,431Accounts and notes receivable, net of
allowance for bad debts of $6,775 and $7,020
at March 31, 2011 and December 31, 2010
    
    
    178,984
    
    
    
    168,876Rig materials and supplies
    
    
    24,213
    
    
    
    25,527Deferred costs
    
    
    1,822
    
    
    
    2,229Deferred income taxes
    
    
    10,137
    
    
    
    9,278Other tax assets
    
    
    46,349
    
    
    
    46,429Assets held for sale
    
    
    5,287
    
    
    
    5,287Other current assets
    
    
    23,686
    
    
    
    59,067Total current assets
    
    
    332,073
    
    
    
    368,124Property, plant and equipment less accumulated
depreciation and amortization of $898,734 at March
31, 2011 and $875,179 at December 31, 2010
    
    
    843,669
    
    
    
    816,147Deferred income taxes
    
    
    60,416
    
    
    
    61,016Other noncurrent assets
    
    
    28,586
    
    
    
    29,268Total assets
    
    $
    1,264,744
    
    
    $
    1,274,555LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    12,000
    
    
    $
    12,000Accounts payable and accrued liabilities
    
    
    142,393
    
    
    
    158,771Accrued income taxes
    
    
    5,683
    
    
    
    4,492Total current liabilities
    
    
    160,076
    
    
    
    175,263Long-term debt
    
    
    459,283
    
    
    
    460,862Other long-term liabilities
    
    
    31,542
    
    
    
    30,193Long-term deferred tax liability
    
    
    19,054
    
    
    
    20,171Contingencies (Note 7)
    
    
    
    
    
    
    Stockholders equity:Common stock
    
    
    19,440
    
    
    
    19,397Capital in excess of par value
    
    
    632,314
    
    
    
    630,409Accumulated deficit
    
    
    (56,666
    )
    
    
    (61,493
    )Total controlling interest stockholders equity
    
    
    595,088
    
    
    
    588,313Noncontrolling interest
    
    
    (299
    )
    
    
    (247
    )Total equity
    
    
    594,789
    
    
    
    588,066Total liabilities and stockholders equity
    
    $
    1,264,744
    
    
    $
    1,274,555
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PARKER DRILLING COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 (Dollars in Thousands Except Per Share and Weighted Average Shares Outstanding)
 (Unaudited)
 Three Months EndedMarch 31,2011
    
    
    2010Revenues:International Drilling
    
    $
    42,437
    
    
    $
    63,875U.S. Drilling
    
    
    15,920
    
    
    
    15,087Rental Tools
    
    
    52,319
    
    
    
    33,815Project Management and Engineering Services
    
    
    35,865
    
    
    
    24,441Construction Contracts
    
    
    9,638
    
    
    
    20,387Total revenues
    
    
    156,179
    
    
    
    157,605Operating expenses:International Drilling
    
    
    34,847
    
    
    
    47,173U.S. Drilling
    
    
    14,021
    
    
    
    12,974Rental Tools
    
    
    18,137
    
    
    
    12,626Project Management and Engineering Services
    
    
    29,908
    
    
    
    19,561Construction Contracts
    
    
    10,381
    
    
    
    21,197Depreciation and amortization
    
    
    27,599
    
    
    
    28,588Total operating expenses
    
    
    134,893
    
    
    
    142,119Total operating gross margin
    
    
    21,286
    
    
    
    15,486General and administration expense
    
    
    (6,888
    )
    
    
    (10,032
    )Gain on disposition of assets, net
    
    
    1,004
    
    
    
    672Total operating income
    
    
    15,402
    
    
    
    6,126Other income and (expense):Interest expense
    
    
    (5,861
    )
    
    
    (6,732
    )Interest income
    
    
    47
    
    
    
    74Loss on extinguishment of debt
    
    
    
    
    
    
    (3,220
    )Other
    
    
    11
    
    
    
    142Total other expense
    
    
    (5,803
    )
    
    
    (9,736
    )Income (loss) before income taxes
    
    
    9,599
    
    
    
    (3,610
    )Income tax expense (benefit):Current
    
    
    4,018
    
    
    
    3,648Deferred
    
    
    821
    
    
    
    (5,207
    )Total income tax expense (benefit)
    
    
    4,839
    
    
    
    (1,559
    )Net income (loss)
    
    $
    4,760
    
    
    $
    (2,051
    )Less: Net (loss) attributable to noncontrolling interest
    
    $
    (67
    )
    
    $
    Net income (loss) attributable to controlling interest
    
    $
    4,827
    
    
    $
    (2,051
    )Basic earnings (loss) per share:Net income (loss)
    
    $
    0.04
    
    
    $
    (0.02
    )Diluted earnings (loss) per share:Net income (loss)
    
    $
    0.04
    
    
    $
    (0.02
    )Number of common shares used in computing earnings per shareBasic
    
    
    115,119,277
    
    
    
    113,512,426Diluted
    
    
    116,322,199
    
    
    
    113,512,426
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PARKER DRILLING COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 (Dollars in Thousands)
 (Unaudited)
 Three months ended March 31,2011
    
    
    2010Cash flows from operating activities:Net income (loss)
    
    $
    4,760
    
    
    $
    (2,051
    )Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    27,599
    
    
    
    28,588Loss on extinguishment of debt
    
    
    
    
    
    
    3,220Gain on disposition of assets
    
    
    (1,004
    )
    
    
    (672
    )Deferred income tax expense
    
    
    821
    
    
    
    (5,207
    )Expenses not requiring cash
    
    
    4,453
    
    
    
    1,430Change in accounts receivable
    
    
    (9,747
    )
    
    
    19,400Change in other assets
    
    
    37,379
    
    
    
    (5,612
    )Change in liabilities
    
    
    (23,504
    )
    
    
    (37,639
    )Net cash provided by operating activities
    
    
    40,757
    
    
    
    1,457Cash flows from investing activities:Capital expenditures
    
    
    (50,664
    )
    
    
    (57,946
    )Proceeds from the sale of assets
    
    
    1,561
    
    
    
    773Proceeds from insurance settlements
    
    
    250
    
    
    
    Net cash used in investing activities
    
    
    (48,853
    )
    
    
    (57,173
    )Cash flows from financing activities:Proceeds from issuance of debt
    
    
    
    
    
    
    300,000Paydown on senior notes
    
    
    
    
    
    
    (96,310
    )Paydown on term note
    
    
    (3,000
    )
    
    
    (3,000
    )Paydown on
revolver credit facility
    
    
    
    
    
    
    (42,000
    )Payments of debt issuance costs
    
    
    
    
    
    
    (7,795
    )Payments of debt extinguishment costs
    
    
    
    
    
    
    (3,330
    )Proceeds from stock options exercised
    
    
    135
    
    
    
    26Excess tax (cost) benefit from stock based compensation
    
    
    1,125
    
    
    
    1,350Net cash provided by (used in) financing activities
    
    
    (1,740
    )
    
    
    148,941Net decrease in cash and cash equivalents
    
    
    (9,836
    )
    
    
    93,225Cash and cash equivalents, beginning of year
    
    
    51,431
    
    
    
    108,803Cash and cash equivalents, end of period
    
    $
    41,595
    
    
    $
    202,028Supplemental cash flow information:Interest paid
    
    $
    1,933
    
    
    $
    6,391Income taxes paid
    
    $
    402
    
    
    $
    8,050
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PARKER DRILLING COMPANY AND SUBSIDIARIES
 
 NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 1.
    
    General
 In the opinion of the management of Parker Drilling Company, the accompanying unaudited
consolidated condensed financial statements reflect all adjustments of a normally recurring
nature which are necessary for a fair presentation of (1) the financial position as of March 31,
2011 and December 31, 2010, (2) the results of operations for the three months ended March 31,
2011 and 2010, and (3) cash flows for the three months ended March 31, 2011 and 2010. Results
for the three months ended March 31, 2011 are not necessarily indicative of the results that
will be realized for the year ending December 31, 2011. The financial statements should be read
in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2010.
 Nature of Operations Parker Drilling Company (Parker Drilling), together with its subsidiaries
(the Company), is a leading worldwide provider of contract drilling and drilling-related
services with extensive experience and expertise in drilling geologically difficult wells and in
managing the logistical and technological challenges of operating in remote, harsh and
ecologically sensitive areas. At March 31, 2011, our marketable rig fleet consisted of 15 barge
drilling rigs and workover rigs, and 25 land rigs, located in the United States, Americas,
Commonwealth of Independent States/Africa-Middle East (CIS/AME) and Asia Pacific regions. In
addition, as of March 31, 2011 we have sales contracts pending for three rigs classified as
assets held for sale.
 Consolidation The consolidated financial statements include the accounts of Parker Drilling
and subsidiaries in which we exercise control or have a controlling financial interest,
including entities, if any, in which the Company is allocated a majority of the entitys losses
or returns, regardless of ownership percentage. A subsidiary of Parker Drilling has a 50
percent interest in one other company that is accounted for under the equity method as Parker
Drillings interest in the entity does not meet the consolidation criteria described above.
 Non-Controlling Interest For interests in entities that we do not control, we apply the
accounting standards related to noncontrolling interests. We report noncontrolling interest as
equity on the consolidated balance sheet and report net income (loss) attributable to
controlling interest and to noncontrolling interest separately on the statement of operations.
 Reclassifications Certain reclassifications have been made to prior period amounts to conform
with the current period presentation. These reclassifications did not have a material effect on
our consolidated statement of operations, consolidated balance sheet or statement of cash flows.
 Use of Estimates The preparation of financial statements in accordance with U.S. GAAP requires
us to make estimates and assumptions that affect our reported amounts of assets and liabilities,
our disclosure of contingent assets and liabilities at the date of the financial statements, and
our revenue and expenses during the periods reported. Estimates are used when accounting for
certain items such as legal accruals, mobilization and deferred mobilization, revenue and cost
accounting following the percentage of completion method, self-insured medical/dental plans,
etc. Estimates are based on historical experience, where applicable, and assumptions that we
believe are reasonable under the circumstances. Due to the inherent uncertainty involved with
estimates, actual results may differ.
 Concentrations of Credit Risk Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist primarily of trade receivables with a variety of national
and international oil and gas companies. We generally do not require collateral on our trade
receivables.
 At March 31, 2011 and December 31, 2010, we had deposits in domestic banks in excess of
federally insured limits of approximately $4.5 million and $25.9 million, respectively. In
addition, we had deposits in foreign banks, which were not insured at March 31, 2011 and
December 31, 2010 of $17.8 million and $31.1 million, respectively.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 1.
    
    General (continued)
 Our customer base consists of major, independent and national oil and gas companies and
integrated service providers. We depend on a limited number of significant customers. Our two
largest customers, ExxonMobil and BP, constituted 17.6 percent and 8.7 percent, respectively of
our year-to-date revenues as of March 31, 2011.
 In November 2010, BP informed us that it was suspending construction on the Liberty extended
reach drilling rig project to review the rigs engineering and design, including its safety
systems. We commenced construction of this rig for BP in April 2008 pursuant to an Engineering,
Procurement, Construction and Installation (EPCI) contract. In August 2009, BP also awarded us
an O&M contract for the first phase of drilling on the Liberty field.
 The Liberty rig construction contract expired on February 8, 2011. Prior to expiration of the
construction contract, BP identified several areas of concern for which it asked us to provide
explanations and documentation, and we have done so. Although we believe that the issues raised
by BP have been adequately addressed, there can be no assurance of when or how these issues will
be resolved with our client. At this point, construction on the rig is incomplete, and it
cannot be completed until BP determines to resume construction.
 The Liberty rig construction contract was a fixed fee and reimbursable contract accounted for on
a percentage of completion basis. Costs on the project were reimbursed without markup, except
for costs associated with changes in work scope, for which we were entitled to a markup. As of
March 31, 2011 and 2010 we had recognized $334.2 million and $255.2 million in project-to-date
revenues, respectively. As of March 31, 2011, we had recognized the entire $11.7 million fixed
fee margin on the contract. BP has not announced a schedule for resuming construction on the
rig or new target dates for drilling and production start-up.
 The Company and BP have continued activities to preserve and maintain the rig under the
pre-operations phase of our O&M contract in
accordance with its terms. The O&M contract is
scheduled to expire on May 31, 2011, and we have been notified
by BP that they do not anticipate
extending it at that time.
 Fair Value of Financial Instruments The estimated fair value of the Companys $300.0 million
principal amount of 9.125% Senior Notes due 2018, based on quoted market prices, was $324.0
million at March 31, 2011. The estimated fair value, based upon granted prices, of the
Companys $125.0 million principal amount of 2.125% Convertible Senior Notes due 2012 was $125.1
million on March 31, 2011. For cash, accounts receivable, and accounts payable, the Company
believes carrying value approximates estimated fair value.
 Property, Plant and Equipment We provide for depreciation of property, plant and equipment on
the straight line method over the estimated useful lives of the assets after provision for
salvage value. Depreciable lives for different categories of property, plant and equipment are
as follows:
 Land drilling equipment
    
    3 to 20 yearsBarge drilling equipment
    
    3 to 20 yearsDrill pipe, rental tools and other
    
    4 to 7 yearsBuildings and improvements
    
    15 to 30 years
 Management periodically evaluates the Companys assets to determine whether their net carrying
values are in excess of their net realizable values. Management considers a number of factors
such as estimated future cash
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 1.
    
    General (continued)
 flows, appraisals and current market value analysis in determining net realizable value. Assets
are written down to fair value if the fair value is below the net carrying value.
 Interest from external borrowings is capitalized on major projects until the assets are ready
for their intended use. Capitalized interest is added to the cost of the underlying asset and
is amortized over the useful lives of the assets in the same manner as the underlying assets.
Capitalized interest costs reduce net interest expense in the consolidated statement of
operations. During the three-months ended March 31, 2011 and March 31, 2010, we capitalized
interest costs related to the construction of rigs of $4.4 million and $2.5 million,
respectively.
 Assets held for saleWe classify an asset as held for sale when the facts and circumstances
meet the required criteria for such classification, including the following: (a) we have
committed to a plan to sell the asset, (b) the asset is available for immediate sale, (c) we
have initiated actions to complete the sale, including locating a buyer, (d) the sale is
expected to be completed within one year, (e) the asset is being actively marketed at a price
that is reasonable relative to its fair value, and (f) the plan to sell is unlikely to be
subject to significant changes or termination. At March 31, 2011, we had net assets held for
sale of $5.3 million, included in current assets. For further information, see Note 3.
 2.
    
    Earnings Per Share (EPS)
 Three Months Ended March 31, 2011Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPS:Net income
    
    $
    4,827,000
    
    
    
    115,119,277
    
    
    $
    0.04Effect of dilutive securities:Stock options and restricted stock
    
    
    
    
    
    
    1,202,922
    
    
    $
    Diluted EPS:Net income
    
    $
    4,827,000
    
    
    
    116,322,199
    
    
    $
    0.04
 Three Months Ended March 31, 2010Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPS:Net loss
    
    $
    (2,051,000
    )
    
    
    113,512,426
    
    
    $
    (0.02
    )Effect of dilutive securities:Stock options and restricted stock
    
    
    
    
    
    
    
    
    
    $
    Diluted EPS:Net loss
    
    $
    (2,051,000
    )
    
    
    113,512,426
    
    
    $
    (0.02
    )
 All options outstanding during the three months ended March 31, 2011, were included in the
computation of diluted EPS as the options exercise prices were less than the average market
price of the common shares. For the three months ended March 31, 2010, all outstanding options
and non-vested restricted shares or units have been excluded from the calculation of diluted EPS
as the company incurred a loss for the quarter, and therefore, inclusion of outstanding options
and non-vested restricted shares or units in the calculation of diluted EPS would be
anti-dilutive.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 3.
    
    Assets Held for Sale
 Assets held for sale of $5.3 million as of March 31, 2011 was comprised of the net book value of
three land rigs and related inventory for which sale is expected to be completed during 2011.
The three rigs were part of our Asia Pacific rig fleet and have historically been included in
the International Drilling segment. We expect the carrying amount of the assets, less costs to
sell, will be fully recoverable through sale of the assets.
 4.
    
    Accounting for Uncertainty in Income Taxes
 The company applies the accounting guidance related to accounting for uncertainty in income
taxes. This guidance prescribes a recognition threshold and a measurement attribute for the
financial statement recognition and measurement of tax positions taken or expected to be taken
in a tax return. For those benefits to be recognized, a tax position must be more likely than
not to be sustained upon examination by taxing authorities. During the first quarter of 2011, we recognized $0.7 million of expense related to an audit.
For the three months ended March 31, 2010, we did not recognize additional expense related to
uncertain tax positions. At March 31, 2011, we had a liability for unrecognized tax benefits of
$16.2 million ($5.8 million of which, if recognized, would favorably impact our effective tax
rate). In addition, the Company recognizes interest and penalties that could be applied to
uncertain tax positions in income tax expense. As of March 31, 2011 and December 31, 2010 we
had approximately $7.4 million and $7.0 million, respectively, of accrued interest and penalties
that could be applied to uncertain tax positions.
 5.
    
    Income Tax Benefit/Expense
 Income tax expense was $4.8 million for the first quarter of 2011, as compared to income tax
benefit of $1.6 million for the first quarter of 2010. The increase in income tax expense in
the first quarter of 2011, compared to the first quarter of 2010, was primarily the result of
differences in the mix of our domestic and international pre-tax earnings and losses, as well as
the mix of international tax jurisdictions in which we operate.
 6.
    
    Long Term Debt
 The following table illustrates the Companys debt portfolio:
 March 31,
    
    
    December 31,2011
    
    
    2010(Dollars in Thousands)9.125% Senior Notes, due April 2018
    
    $
    300,000
    
    
    $
    300,0002.125% Convertible Senior Notes, due July 2012
    
    
    117,283
    
    
    
    115,862Term Note
    
    
    29,000
    
    
    
    32,000Revolving Credit Facility
    
    
    25,000
    
    
    
    25,000Total debt
    
    
    471,283
    
    
    
    472,862Less current portion
    
    
    12,000
    
    
    
    12,000Total long-term debt
    
    $
    459,283
    
    
    $
    460,862
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 6.
    
    Long Term Debt (continued)
 9.125% Senior Notes, due April 2018
 On March 22, 2010, we issued $300.0 million aggregate principal amount of 9.125% Senior Notes
due 2018 (9.125% Notes) pursuant to an Indenture between the Company and The Bank of New York
Mellon Trust Company, N.A. (Trustee). The 9.125% Notes were issued at par with interest payable
on April 1 and October 1 of each year, beginning October 1, 2010. Net proceeds from the 9.125%
Notes offering were primarily used to redeem the $225.0 million aggregate principal amount of
our 9.625% Senior Notes due 2013 and to repay $42.0 million of borrowings under the revolving
credit facility.
 The 9.125% Notes are general unsecured obligations of the Company and rank equal in right of
payment with all of our existing and future senior unsecured indebtedness. The 9.125% Notes are
jointly and severally guaranteed by substantially all of our direct and indirect domestic
subsidiaries other than immaterial subsidiaries and subsidiaries generating revenue primarily
outside the United States.
 At any time prior to April 1, 2013, we may redeem up to 35 percent of the aggregate principal
amount of 9.125% Notes at a redemption price of 109.125 percent of the principal amount, plus
accrued and unpaid interest to the redemption date with the net cash proceeds of certain equity
offerings by us. On and after April 1, 2014, we may redeem all or a part of the 9.125% Notes
upon appropriate notice, at a redemption price of 104.563 percent of principal amount, and at
redemption prices decreasing each year thereafter to par. If we experience certain changes in
control, we must offer to repurchase the 9.125% Notes at 101.0 percent of the aggregate
principal amount, plus accrued and unpaid interest and additional interest, if any, to the date
of repurchase.
 The Indenture restricts our ability and the ability of certain subsidiaries to: (i) sell assets;
(ii) pay dividends or make other distributions on capital stock or redeem or repurchase capital
stock or subordinated indebtedness; (iii) make investments; (iv) incur or guarantee additional
indebtedness; (v) create or incur liens; (vi) enter into sale and leaseback transactions; (vii)
incur dividend or other payment restrictions affecting subsidiaries; (viii) merge or consolidate
with other entities; (ix) enter into transactions with affiliates; and (x) engage in certain
business activities. Additionally, the indenture contains certain restrictive covenants
designating certain events as Events of Default. These covenants are subject to a number of
important exceptions and qualifications.
 On June 21, 2010 pursuant to the Registration Rights Agreement among the Company, the guarantors
named therein, the initial purchasers of the 9.125% Notes and the Trustee, entered into as of
March 22, 2010 in connection with the closing of the 9.125% Notes offering, we filed an exchange
offer registration statement with respect to an offer to exchange the 9.125% Notes for
substantially identical notes that are registered under the Securities Act. The registration
statement was deemed effective by the United States Securities and Exchange Commission (SEC) on
September 1, 2010.
 9.625% Senior Notes, due October 2013
 As of December 31, 2009, we had outstanding $225.0 million in aggregate principal amount of
9.625% senior notes due 2013 (9.625% Notes). On March 8, 2010, we commenced a cash tender offer
and consent solicitation for all of our outstanding 9.625% Notes, which expired on April 2, 2010
(Tender Offer). On March 22, 2010, we voluntarily called for redemption all of our 9.625% Notes
that were not tendered pursuant to the Tender Offer, at the redemption price of 103.208 percent
of the principal amount of the 9.625% Notes, or $1,032.08 per $1,000 principal amount of the
9.625% Notes. On April 21, 2010, we redeemed in full the remaining $128.7 million principal
amount of 9.625% Notes. This redemption resulted in the Company recording debt extinguishment
costs of $7.2 million during 2010.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 6.
    
    Long Term Debt (continued)
 2.125% Convertible Senior Notes, due July 2012
 On July 5, 2007, we issued $125.0 million aggregate principal amount of 2.125% Convertible
Senior Notes (2.125% Notes) due July 2012.
 The significant terms of the 2.125% Notes are as follows:
 
    
    2.125% Notes Conversion Feature  The initial conversion price for holders to convert
their 2.125% 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. We may, under advice of our
Board of Directors, increase the conversion rate at our sole discretion for a period of at
least 20 days.
 
    
    2.125% Notes Settlement Feature  Upon tender of the 2.125% Notes for conversion, we
can either settle entirely in shares of common stock or a combination of cash and shares
of common stock, solely at our option. Our intent is to satisfy our conversion obligation
for our 2.125% Notes in cash, rather than in common stock, for at least the aggregate
principal amount of the 2.125% Notes. This reduces 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  Holders may only convert the 2.125% Notes when either
sales price or trading price conditions are met, on or after the 2.125% 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.
 
    
    Settlement Feature  Upon conversion, we will pay either cash or provide shares of our
common stock 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 March 31, 2011 and December 31, 2010, none of the conditions allowing holders of the
2.125% Notes to convert had been met.
 Concurrently with the issuance of the 2.125% Notes, we purchased a convertible note hedge (note
hedge) and sold warrants in private transactions with counterparties that were different than
the ultimate holders of the 2.125% Notes. The note hedge included purchasing free-standing call
options and selling free-standing warrants, both exercisable in our common shares. The note
hedge allows us to receive shares of our common stock from the counterparties to the transaction
equal to the amount of common stock related to the excess conversion value that we would issue
and/or pay to the holders of the 2.125% Notes upon conversion.
 The terms of the call options mirror the 2.125% Notes major terms whereby the call option
strike price is the same as the initial conversion price as are the number of shares callable,
$13.85 per share and 9,027,713 shares, respectively. This feature prevents dilution of our
outstanding shares. The warrants allow us to sell 9,027,713 common shares at a strike price of
$18.29 per share. The conversion price of the 2.125% Notes remains at $13.85 per share, and the
existence of the call options and warrants serve to guard against dilution at share prices less
than $18.29 per share, since we would be able to satisfy our obligations and deliver shares upon
conversion of the 2.125% Notes with shares that are obtained by exercising the call options.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 6.
    
    Long Term Debt (continued)
 We paid a premium of approximately $31.5 million for the call options, and received proceeds for
a premium of approximately $20.3 million for the sale of the warrants. This reduced the net
cost of the note hedge to $11.2 million. The expiration date of the note hedge is the earlier
of the last day on which the Notes remain outstanding or the maturity date of the 2.125% Notes.
 The 2.125% Notes are classified as a liability in our consolidated financial statements.
Because we have the choice of settling the call options and the warrants in cash or shares of
our common stock and these contracts meet all of the applicable criteria for equity
classification, the cost of the call options and proceeds from the sale of the warrants are
classified in stockholders equity in the Consolidated Balance Sheets. In addition, because
both of these contracts are classified in stockholders equity and are solely indexed to our own
common stock, they are not accounted for as derivatives.
 Debt issuance costs related to the 2.125% Notes totaled approximately $3.6 million and is being
amortized over the five year term of the 2.125% Notes using the effective interest method.
Proceeds from the transaction of $110.2 million were used to redeem our outstanding senior
floating rate notes, to pay the net cost of hedge and warrant transactions, and for general
corporate purposes.
 Credit Agreement:
 On May 15, 2008, we entered into a credit agreement (Credit Agreement) consisting of a senior
secured $80.0 million revolving credit facility (Revolver) and senior secured term loan facility
(Term Loan) of up to $50 million. The Credit Agreement provides that subject to certain
conditions, including the approval of the Administrative Agent and the lenders acceptance (or
additional lenders being joined as new lenders), the amount of the Term Loan or Revolver could
be increased by an additional $50.0 million, so long as after giving effect to such increase,
the Aggregate Commitments shall not be in excess of $180.0 million. On April 1, 2011, the
Company exercised the additional $50.0 million accordion feature and entered into an amendment
to the Credit Agreement that increased the aggregate commitment under the Credit Agreement to
$180 million, and borrowed an additional $50 million in a Term Loan. When the facility was
increased, all other terms of the Credit Agreement remained the same, including covenants and
Applicable Rates.
 Our obligations under the Credit Agreement are guaranteed by substantially all of our domestic
subsidiaries, each of which has executed guaranty agreements. The Credit Agreement contains
customary affirmative and negative covenants with which we were in compliance as of March 31,
2011 and December 31, 2010. The Credit Agreement terminates on May 14, 2013.
 Revolver:
 Our Revolver is available for general corporate purposes and to support letters of credit.
Interest on Revolver loans accrues at a Base Rate plus an Applicable Rate or LIBOR, plus an
Applicable Rate. The Applicable Rate varies from a rate per annum ranging from 2.75 percent to
3.25 percent for LIBOR rate loans and 1.75 percent to 2.25 percent for base rate loans,
determined by reference to the consolidated leverage ratio (as defined in the Credit Agreement).
Revolving loans are available subject to a borrowing base calculation based on a percentage of
eligible accounts receivable, certain specified barge drilling rigs and rental equipment of the
Company and its subsidiary guarantors. There were $25.0 million in revolving loans outstanding
at March 31, 2011 and December 31, 2010. Letters of credit outstanding as of March 31, 2011 and
December 31, 2010 totaled $11.3 million and $16.3 million, respectively.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 6.
    
    Long Term Debt (continued)
 Term Loan:
 The Term Loan originated at $50.0 million and requires quarterly principal payments of $3.0
million. Interest on the Term Loan accrues at either a Base Rate plus 2.25 percent or LIBOR
plus 3.25 percent. The outstanding balance on the Term Loan at March 31, 2011 and December 31,
2010 was $29.0 million and $32.0 million, respectively.
 Subsequent Event:
 On April 1, 2011, subsequent to the end of the first quarter, the company expanded its Term Loan
Facility by $50.0 million. Funding was provided by certain current Lenders and Barclays Bank
PLC, which joined as a lender under the Credit Agreement. We used the proceeds from the
additional Term Loan to repay the $25.0 million outstanding on the Revolver at March 31, 2011,
purchase additional rental tool inventory and for general corporate purposes. The additional
Term Loan will amortize at $3.0 million per quarter beginning June 30, 2011. Upon the
completion of the transaction, total borrowings under the Term Loan Facility are $79.0 million
and there are no borrowings under the Revolver. Total amortization on the Term Loans will be
$6.0 million per quarter.
 7.
    
    Contingencies
 Asbestos-Related Claims
 We are from time to time a party to various lawsuits that are incidental to our operations in
which the claimants seek an unspecified amount of monetary damages for personal injury,
including injuries purportedly resulting from exposure to asbestos on drilling rigs and
associated facilities. At March 31, 2011, there were approximately 16 of these lawsuits in
which we are one of many defendants. These lawsuits have been filed in the United States in the
State of Mississippi.
 The subsidiaries named in these asbestos-related lawsuits intend to defend themselves vigorously
and, based on the information available to us at this time, we do not expect the outcome to have
a material adverse effect on our financial condition, results of operations or cash flows.
However, we are unable to predict the ultimate outcome of these lawsuits. No amounts were
accrued at March 31, 2011.
 Gulfco Site
 In 2003, we received an information request under the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA) designating Parker Drilling Offshore Corporation, a
subsidiary of Parker Drilling, as a potentially responsible party with respect to the Gulfco
Marine Maintenance, Inc. Superfund Site in Freeport, Texas (EPA No. TX 055144539). The
subsidiary responded to this request with documents. In January 2008 the subsidiary received an
administrative order to participate in an investigation of the site and a study of the
remediation needs and alternatives. The EPA alleges that the subsidiary is a successor to a
party who owned the Gulfco site during the time when chemical releases took place there. Two
other parties have been performing the investigation and study work since mid-2005 under an
earlier version of the same order. To date, the EPA and the other two parties have spent
approximately $3.5 million studying and conducting initial remediation of the site. It is
anticipated that at least an additional $1.3 million will be required to complete the
remediation. In December 2010, we entered into an agreement with the other two parties, pursuant
to which we agreed to pay 20 percent of past and future costs to study and remediate the site.
As of March 31, 2011, the Company had made certain participating payments and has accrued $0.3
million for our portion of the estimated future cost of remediation.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 7.
    
    Contingencies (continued)
 Customs Agent and Foreign Corrupt Practices Act (FCPA) Investigation
 As previously disclosed, we received requests from the United States Department of Justice (DOJ)
in July 2007 and the United States Securities and Exchange Commission (SEC) in January 2008
relating to our utilization of the services of a customs agent. The DOJ and the SEC are
conducting parallel investigations into possible violations of U.S. law by us, including the
FCPA. In particular, the DOJ and the SEC are investigating our use of customs agents in certain
countries in which we currently operate or formerly operated, including Kazakhstan and Nigeria.
We are fully cooperating with the DOJ and SEC investigations and are conducting an internal
investigation into potential customs and other issues in Kazakhstan and Nigeria. The internal
investigation has identified issues relating to potential non-compliance with applicable laws
and regulations, including the FCPA with respect to operations in Kazakhstan and Nigeria. At
this point, we are unable to predict the duration, scope or result of the DOJ or the SEC
investigation or whether either agency will commence any legal action.
 Further, in connection with our internal investigation, we also have learned that an individual
who may be considered a foreign official under the FCPA owns in trust a substantial stake in a
foreign subcontractor with whom we were doing business through a joint venture relationship in
Kazakhstan. The joint venture no longer does business with the foreign subcontractor.
 The DOJ and the SEC have a broad range of civil and criminal sanctions under the FCPA and other
laws and regulations, which they may seek to impose against corporations and individuals in
appropriate circumstances including, but not limited to, injunctive relief, disgorgement, fines,
penalties and modifications to business practices and compliance programs. These authorities
have entered into agreements with, and obtained a range of sanctions against, several public
corporations and individuals arising from allegations of improper payments and deficiencies in
books and records and internal controls, whereby civil and criminal penalties were imposed.
Recent civil and criminal settlements have included multi-million dollar fines, deferred
prosecution agreements, guilty pleas, and other sanctions, including the requirement that the
relevant corporation retain a monitor to oversee its compliance with the FCPA. In addition,
corporations may have to end or modify existing business relationships. Any of these remedial
measures, if applicable to us, could have a material adverse impact on our business, results of
operations, financial condition and liquidity.
 We have taken certain steps to enhance our anti-bribery compliance efforts, including retaining
a full-time Chief Compliance Officer who reports to the Chief Executive Officer and Audit
Committee; adopting revised FCPA policies, procedures, and controls; increasing training and
testing requirements; strengthening contractual provisions for our service providers that
interface with foreign government officials; improving due diligence and continuing oversight
procedures for the review and selection of such service providers; and implementing a compliance
awareness improvement initiative that includes issuance of periodic anti-bribery compliance
alerts.
 Demand Letter and Derivative Litigation
 In April 2010, we received a demand letter from a law firm representing Ernest Maresca. The
letter states that Mr. Maresca is one of our stockholders and that he believes that certain of
our current and former officers and directors violated their fiduciary duties related to the
issues described above under Customs Agent and Foreign Corrupt Practices Act (FCPA)
Investigation. The letter requests that our Board of Directors take action against the
individuals in question. In response to this letter, the Board has formed a special committee
to evaluate the issues raised by the letter and determine a course of action for the Company.
On August 25, 2010, Mr. Maresca filed a derivative action in the United States District Court
for the Southern District of Texas against our current directors, select officers, and the
Company as a nominal defendant. The lawsuit, like the demand letter, alleged that the
individual defendants breached their fiduciary duties to us related to the issues described
above under Customs Agent and Foreign Corrupt Practices Act (FCPA) Investigation. The lawsuit
sought damages in an unspecified amount, along with various other forms of relief and an award
of attorney fees, other costs, and expenses to the plaintiff. The lawsuit was voluntarily
dismissed by the plaintiff in December 2010.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 7.
    
    Contingencies (continued)
 On June 3, 2010, Mohamed Kassamali, a purported stockholder of the Company, filed a derivative
action in the state court of Harris County, Texas against our current directors and the Company
as a nominal defendant. The lawsuit alleges that the individual defendants breached their
fiduciary duties to the Company related to the issues described above under Customs Agent and
Foreign Corrupt Practices Act (FCPA) Investigation. On June 22, 2010, the Fuchs Family Trust,
a purported stockholder of the Company, filed a substantially similar lawsuit in the state court
of Harris County, Texas. On June 23, 2010, Kenneth Flacks, a purported stockholder of the
Company, also filed a substantially similar lawsuit in the state court of Harris County, Texas.
The lawsuits seek damages related to the alleged breaches of duty, unjust enrichment, abuse of
control, gross mismanagement and waste of corporate assets. The damages sought include both
compensatory and exemplary damages in an unspecified amount, along with various other forms of
relief and an award of attorney fees, other costs, and expenses to the plaintiffs. All
defendants have retained counsel, and on October 15, 2010, the three cases pending in the state
court of Harris County, Texas were consolidated under the Kassamali case number and restyled as
In re Parker Drilling Derivative Litigation. The case was briefly stayed. Plaintiffs have
filed a consolidated amended petition on April 7, 2011 and defendants will have 45 days to
answer or otherwise respond to the petition.
 On August 31, 2010, Douglas Freuler, a purported stockholder of the Company, filed a derivative
action in the United States District Court for the Southern District of Texas against our
current directors, select officers, and the Company as a nominal defendant. The lawsuit is
substantially similar to those filed in the state court of Harris County, Texas, and alleges
breach of fiduciary duties to the Company related to the issues described above under Customs
Agent and Foreign Corrupt Practices Act (FCPA) Investigation, as well as abuse of control,
gross mismanagement, waste of corporate assets, and unjust enrichment. The damages sought
include both compensatory and exemplary damages in an unspecified amount, along with various
other forms of relief and an award of attorney fees, other costs, and expenses to the
plaintiffs. The Company has filed a motion to dismiss the lawsuit, and briefings on the motion
are ongoing.
 Economic Sanctions Compliance
 We are subject to laws and regulations restricting our international operations, including
activities involving restricted countries, organizations, entities and persons that have been
identified as unlawful actors or that are subject to U.S. economic sanctions. Pursuant to an
internal review, we have identified certain shipments of equipment and supplies that were routed
through Iran as well as other activities, including drilling activities, which may have violated
applicable U.S. laws and regulations. We have reviewed these shipments, transactions and
drilling activities to determine whether the timing, nature and extent of such activities or
other conduct may have given rise to violations of these laws and regulations, and we
voluntarily disclosed the results of our review to the U.S. government. At this point, we are
unable to predict whether the government will initiate an investigation or any proceedings
against us or the ultimate outcome that may result from our voluntary disclosure. If U.S.
enforcement authorities determine that we were not in compliance with export restrictions, U.S.
economic sanctions or other laws and regulations that apply to our international operations, we
may be subject to civil or criminal penalties and other remedial measures, which could have an
adverse impact on our business, results of operations, financial condition and liquidity.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 7.
    
    Contingencies (continued)
 Kazakhstan Ministry of Finance Tax Audit
 On August 14, 2009, the Kazakhstan Branch (PKD Kazakhstan) of Parker Drillings subsidiary,
Parker Drilling Company International Limited (PDCIL), received an Act of Tax Audit from the
Ministry of Finance of Kazakhstan (MinFin) for the period January 1, 2005 through December 31,
2007. PKD Kazakhstan was assessed additional taxes in the amount of KZT 1.45 billion
(approximately USD $9.7 million) and associated interest in the amount of KZT 700 million
(approximately USD $4.7 million). The amounts assessed relate to corporate income taxes and
interest in connection with the disallowance of the head offices management and administrative
expenses, loan interest and state duties, as well as Value Added Taxes (VAT) and interest in
connection with VAT offset on debts classified as doubtful by MinFin and for property taxes and
interest in connection with Barge Rig 257 as a result of MinFin applying a lower rate of
depreciation.
 On September 25, 2009, PKD Kazakhstan appealed the Act of Tax Audit with MinFin on the basis
the Branch exercised its rights provided by the Convention between the Governments of the
Republic of Kazakhstan and the United States of America on the Avoidance of Double Taxation and
the Prevention of the Fiscal Evasion with respect to Taxes on Income and Capital as well as
improper application of Kazakhstan Tax Code provisions.
 On January 13, 2010, PKD Kazakhstan received a response from MinFin to the appeal filed
September 25, 2009. MinFin agreed with PKD Kazakhstan to remove the assessment related to
property taxes and interest in connection with Barge Rig 257 which reduced the overall
assessment by KZT 741 million (approximately USD $5 million). The residual assessment of KZT
959 million (approximately USD $6.5 million) of taxes and KZT 450 million (approximately USD $3
million) of associated interest remains outstanding.
 On March 1, 2010, PKD Kazakhstan filed a claim against the Tax Department, in the Special
Inter-district Economic Court of Atyrau Oblast, seeking to invalidate the revised Tax
Notification. On May 5, 2010, the court elected not to issue a ruling on the merits of the
case on the basis of an alleged lack of standing. PKD Kazakhstan adjusted and re-filed its
claim in June 2010.
 On August 17, 2010, the Special Inter-district Economic Court of Atyrau Oblast rendered a
decision rejecting PKD Kazakhstans re-filed claim. PKD Kazakhstan filed on September 17, 2010
an appeal to the Atyrau Oblast Court. That appeal was heard by a single judge on October 27,
2010, at the conclusion of which, the court announced its decision to let the lower court
decision stand without amendment or cancellation.
 On November 18, 2010, PKD Kazakhstan filed an appeal to a three-judge panel of the Atyrau
Oblast Court. On December 9, 2010 the court announced its decision to uphold the lower court
decision and allow the revised Tax Notification to stand.
 PKD Kazakhstan continues to believe that it properly exercised its rights provided by the
Convention and that MinFin improperly applied certain provisions of the Kazakhstan Tax Code.
PKD Kazakhstan intends to submit a further discretionary appeal to the Supreme Court of the
Republic of Kazakhstan. However, there can be no assurance that the Supreme Court will accept
and hear the appeal. PKD Kazakhstan may also pursue relief under the Convention.
 As a result of the decision on December 9, 2010, PKD Kazakhstan had an obligation to pay the
residual assessment. The amount due related to the tax assessment and applicable interest was
approximately $11.3 million, plus an administrative penalty of approximately $3.2 million
arising from the same alleged underpayment of taxes. PKD Kazakhstan paid these amounts in-full
prior to December 31, 2010 to avoid enforcement actions and additional interest while we pursue
further challenges.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 8.
    
    Recent Accounting Pronouncements
 Revenue Recognition  On January 1, 2011, we adopted an update issued by the Financial
Accounting Standards Board (FASB) to existing guidance on revenue recognition for arrangements
with multiple deliverables. This update allows companies to allocate consideration for
qualified separate deliverables using estimated selling price for both delivered and
undelivered items when vendor-specific objective evidence or third-party evidence is
unavailable. It also requires additional disclosures on the nature of multiple element
arrangements, the types of deliverables under the arrangements, the general timing of their
delivery, and significant factors and estimates used to determine estimated selling prices.
The update is effective for fiscal years beginning after June 15, 2010. The adoption of this
update did not have a material impact on our financial position, results of operations, cash
flows, and disclosures.
 9.
    
    Parent, Guarantor, Non-Guarantor Unaudited Consolidating Condensed Financial Statements
 Set forth on the following pages are the consolidating condensed financial statements of Parker
Drilling, its restricted subsidiaries that are guarantors of the 9.125% Notes, and 2.125% Notes
(collectively the Notes) and the restricted and unrestricted subsidiaries that are not
guarantors of the Notes. The Notes are guaranteed by substantially all of the restricted
subsidiaries of Parker Drilling. There are currently no restrictions on the ability of the
restricted subsidiaries to transfer funds to Parker Drilling in the form of cash dividends,
loans or advances. Parker Drilling is a holding company with no operations, other than through
its subsidiaries. Separate financial statements for each guarantor company are not provided as
the company complies with the exception to Rule 3-10(a)(1) of Regulation S-X, set forth in
sub-paragraph (f) of such rule. All guarantor subsidiaries are owned 100 percent by the parent
company, all guarantees are full and unconditional and all guarantees are joint and several.
 AralParker (a Kazakhstan joint stock company, owned 100% by Parker Drilling (Kazakhstan),
LLC), Casuarina Limited (a wholly-owned captive insurance company), KDN Drilling Limited,
Mallard Argentine Holdings, Ltd., Mallard Drilling of South America, Inc., Mallard Drilling of
Venezuela, Inc., Parker Drilling Investment Company, Parker Drilling (Nigeria) Limited, Parker
Drilling Company (Bolivia) S.A., Parker Drilling Company Kuwait Limited, Parker Drilling
Company Limited (Bahamas), Parker Drilling Company of New Zealand Limited, Parker Drilling
Company of Sakhalin, Parker Drilling de Mexico S. de R.L. de C.V., Parker Drilling
International of New Zealand Limited, Parker Drilling Tengiz, Ltd., PD Servicios Integrales, S.
de R.L. de C.V., PKD Sales Corporation, Parker SMNG Drilling Limited Liability Company (owned
50 percent by Parker Drilling Company International, LLC), Parker Drilling Kazakhstan, B.V.,
Parker Drilling AME Limited, Parker Drilling Asia Pacific, LLC, PD International Holdings C.V.,
PD Dutch Holdings C.V., PD Selective Holdings C.V., PD Offshore Holdings C.V., Parker Drilling
Netherlands B.V., Parker Drilling Dutch B.V., Parker Hungary Rig Holdings Limited Liability
Company, Parker Drilling Spain Rig Services, S L, Parker 3Source, LLC, Parker 5272 LLC, Parker
Central Europe Rig Holdings LLC, Parker Cyprus Leasing Limited, Parker Cypress Ventures
Limited, Parker Drilling International B.V., Parker Drilling Offshore B.V., Parker Drilling
Offshore International, Inc., Parker Drilling Overseas B.V., Parker Drilling Russia B.V.,
Parker Drillsource, LLC, PD Labor Services, Ltd, PD Labor Sourcing, Ltd., PD Personnel
Services, Ltd., SaiPar Drilling Company B.V. (owned 50 percent by Parker Drilling Dutch B.V.)
and Parker Enex, LLC, Parker Drilling Company Eastern Hemisphere, Ltd., Parker Drilling Company
of Bolivia, Inc., Canadian Rig Leasing, Inc., Parker Drilling Company International Limited,
Parker Drilling Company Limited LLC, Parker Drilling Company of Singapore, LLC, Parker USA
Drilling Company, Universal Rig Service LLC, Parker Offshore Resources, L.P., Choctaw
International Rig Corp., DGH, Inc., Parker Drilling Company of Argentina, Inc., Parker Drilling Company International, LLC, Parker Drilling (Kazakstan), LLC, Parker Drilling
Company of New Guinea, LLC, Indocorp of Oklahoma, Inc., Creek International Rig Corp., Parker
Drilling Company of Mexico, LLC, Selective Drilling Corporation, Parker Drilltech, LLC, Parker
Drillserv, LLC, Parker Drillex, LLC, Parker Rigsource, LLC, Parker Intex, LLC, Parker Drilling
Eurasia, Inc., Parker Drilling Pacific Rim, Inc., Parker Singapore Rig Holding Pte. Ltd.,
Parker Drilling Domestic Holding Company, LLC, Parker Drilling International Holding Company,
LLC, and Primorsky Drill Rig Services B.V. are all non-guarantor subsidiaries.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 9.
    
    Parent, Guarantor, Non-Guarantor Unaudited Consolidating Condensed Financial Statements
(continued)
 We are providing consolidating condensed financial information of the parent, Parker Drilling,
the guarantor subsidiaries, and the non-guarantor subsidiaries as of March 31, 2011 and
December 31, 2010 and for the three months ended March 31, 2011 and 2010. The consolidating
condensed financial statements present investments in both consolidated and unconsolidated
subsidiaries using the equity method of accounting.
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PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
 March 31, 2011Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    23,205
    
    
    $
    (2,216
    )
    
    $
    20,606
    
    
    $
    
    
    
    $
    41,595Accounts and notes receivable, net
    
    
    (5,789
    )
    
    
    96,796
    
    
    
    256,680
    
    
    
    (168,703
    )
    
    
    178,984Rig materials and supplies
    
    
    
    
    
    
    (2,752
    )
    
    
    26,965
    
    
    
    
    
    
    
    24,213Deferred costs
    
    
    
    
    
    
    
    
    
    
    1,822
    
    
    
    
    
    
    
    1,822Deferred income taxes
    
    
    9,840
    
    
    
    297
    
    
    
    
    
    
    
    
    
    
    
    10,137Other tax assets
    
    
    100,071
    
    
    
    (62,786
    )
    
    
    9,064
    
    
    
    
    
    
    
    46,349Assets held for sale
    
    
    
    
    
    
    
    
    
    
    5,287
    
    
    
    
    
    
    
    5,287Other current assets
    
    
    557
    
    
    
    15,844
    
    
    
    20,468
    
    
    
    (13,183
    )
    
    
    23,686Total current assets
    
    
    127,884
    
    
    
    45,183
    
    
    
    340,892
    
    
    
    (181,886
    )
    
    
    332,073Property, plant and equipment, net
    
    
    79
    
    
    
    574,136
    
    
    
    269,454
    
    
    
    
    
    
    
    843,669Investment in subsidiaries and intercompany advances
    
    
    1,006,184
    
    
    
    493,559
    
    
    
    1,327,005
    
    
    
    (2,826,748
    )
    
    
    Other noncurrent assets
    
    
    69,148
    
    
    
    15,477
    
    
    
    7,434
    
    
    
    (3,057
    )
    
    
    89,002Total assets
    
    $
    1,203,295
    
    
    $
    1,128,355
    
    
    $
    1,944,785
    
    
    $
    (3,011,691
    )
    
    $
    1,264,744LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    12,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    12,000Accounts payable and accrued liabilities
    
    
    62,560
    
    
    
    327,701
    
    
    
    184,474
    
    
    
    (432,342
    )
    
    
    142,393Accrued income taxes
    
    
    609
    
    
    
    195
    
    
    
    4,879
    
    
    
    
    
    
    
    5,683Total current liabilities
    
    
    75,169
    
    
    
    327,896
    
    
    
    189,353
    
    
    
    (432,342
    )
    
    
    160,076Long-term debt
    
    
    459,283
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    459,283Other long-term liabilities
    
    
    7,811
    
    
    
    7,864
    
    
    
    13,177
    
    
    
    2,690
    
    
    
    31,542Long-term deferred tax liability
    
    
    3,361
    
    
    
    21,958
    
    
    
    (6,265
    )
    
    
    
    
    
    
    19,054Intercompany payables
    
    
    62,583
    
    
    
    473,144
    
    
    
    103,667
    
    
    
    (639,394
    )
    
    
    Contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders equity:Common stock
    
    
    19,440
    
    
    
    18,050
    
    
    
    43,003
    
    
    
    (61,053
    )
    
    
    19,440Capital in excess of par value
    
    
    632,314
    
    
    
    733,120
    
    
    
    1,436,370
    
    
    
    (2,169,490
    )
    
    
    632,314Retained earnings (accumulated deficit)
    
    
    (56,666
    )
    
    
    (453,677
    )
    
    
    165,779
    
    
    
    287,898
    
    
    
    (56,666
    )Total controlling interest stockholders equity
    
    
    595,088
    
    
    
    297,493
    
    
    
    1,645,152
    
    
    
    (1,942,645
    )
    
    
    595,088Noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    (299
    )
    
    
    
    
    
    
    (299
    )Total Equity
    
    
    595,088
    
    
    
    297,493
    
    
    
    1,644,853
    
    
    
    (1,942,645
    )
    
    
    594,789Total liabilities and stockholders equity
    
    $
    1,203,295
    
    
    $
    1,128,355
    
    
    $
    1,944,785
    
    
    $
    (3,011,691
    )
    
    $
    1,264,744
 19




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
 December 31, 2010Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    13,835
    
    
    $
    2,317
    
    
    $
    35,279
    
    
    $
    
    
    
    $
    51,431Accounts and notes receivable, net
    
    
    1,179
    
    
    
    99,734
    
    
    
    215,650
    
    
    
    (147,687
    )
    
    
    168,876Rig materials and supplies
    
    
    
    
    
    
    (1,655
    )
    
    
    27,182
    
    
    
    
    
    
    
    25,527Deferred costs
    
    
    
    
    
    
    
    
    
    
    2,229
    
    
    
    
    
    
    
    2,229Deferred income taxes
    
    
    8,981
    
    
    
    297
    
    
    
    
    
    
    
    
    
    
    
    9,278Other tax assets
    
    
    97,896
    
    
    
    (62,678
    )
    
    
    11,211
    
    
    
    
    
    
    
    46,429Assets held for sale
    
    
    
    
    
    
    
    
    
    
    5,287
    
    
    
    
    
    
    
    5,287Other current assets
    
    
    557
    
    
    
    41,564
    
    
    
    30,129
    
    
    
    (13,183
    )
    
    
    59,067Total current assets
    
    
    122,448
    
    
    
    79,579
    
    
    
    326,967
    
    
    
    (160,870
    )
    
    
    368,124Property, plant and equipment, net
    
    
    79
    
    
    
    538,005
    
    
    
    278,063
    
    
    
    0
    
    
    
    816,147Investment in subsidiaries and intercompany advances
    
    
    996,018
    
    
    
    499,987
    
    
    
    1,310,792
    
    
    
    (2,806,797
    )
    
    
    0Other noncurrent assets
    
    
    72,202
    
    
    
    14,542
    
    
    
    6,653
    
    
    
    (3,113
    )
    
    
    90,284Total assets
    
    $
    1,190,747
    
    
    $
    1,132,113
    
    
    $
    1,922,475
    
    
    $
    (2,970,780
    )
    
    $
    1,274,555LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    12,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    12,000Accounts payable and accrued liabilities
    
    
    55,257
    
    
    
    338,626
    
    
    
    160,316
    
    
    
    (395,428
    )
    
    
    158,771Accrued income taxes
    
    
    609
    
    
    
    93
    
    
    
    3,790
    
    
    
    
    
    
    
    4,492Total current liabilities
    
    
    67,866
    
    
    
    338,719
    
    
    
    164,106
    
    
    
    (395,428
    )
    
    
    175,263Long-term debt
    
    
    460,862
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    460,862Other long-term liabilities
    
    
    7,762
    
    
    
    7,610
    
    
    
    12,131
    
    
    
    2,690
    
    
    
    30,193Long-term deferred tax liability
    
    
    3,361
    
    
    
    21,958
    
    
    
    (5,148
    )
    
    
    
    
    
    
    20,171Intercompany payables
    
    
    62,583
    
    
    
    473,144
    
    
    
    103,667
    
    
    
    (639,394
    )
    
    
    Contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders equity:Common stock
    
    
    19,397
    
    
    
    18,050
    
    
    
    43,003
    
    
    
    (61,053
    )
    
    
    19,397Capital in excess of par value
    
    
    630,409
    
    
    
    733,120
    
    
    
    1,436,338
    
    
    
    (2,169,458
    )
    
    
    630,409Retained earnings (accumulated deficit)
    
    
    (61,493
    )
    
    
    (460,488
    )
    
    
    168,625
    
    
    
    291,863
    
    
    
    (61,493
    )Total controlling interest stockholders equity
    
    
    588,313
    
    
    
    290,682
    
    
    
    1,647,966
    
    
    
    (1,938,648
    )
    
    
    588,313Noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    (247
    )
    
    
    
    
    
    
    (247
    )Total Equity
    
    
    588,313
    
    
    
    290,682
    
    
    
    1,647,719
    
    
    
    (1,938,648
    )
    
    
    588,066Total liabilities and stockholders equity
    
    $
    1,190,747
    
    
    $
    1,132,113
    
    
    $
    1,922,475
    
    
    $
    (2,970,780
    )
    
    $
    1,274,555
 20




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
 Three months ended March 31, 2011Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedTotal revenues
    
    $
    
    
    
    $
    87,405
    
    
    $
    108,091
    
    
    $
    (39,317
    )
    
    $
    156,179Operating expenses
    
    
    
    
    
    
    50,320
    
    
    
    96,291
    
    
    
    (39,317
    )
    
    
    107,294Depreciation and amortization
    
    
    
    
    
    
    15,210
    
    
    
    12,389
    
    
    
    
    
    
    
    27,599Total operating gross margin
    
    
    
    
    
    
    21,875
    
    
    
    (589
    )
    
    
    
    
    
    
    21,286General and administration expense (1)
    
    
    (45
    )
    
    
    (6,781
    )
    
    
    (62
    )
    
    
    
    
    
    
    (6,888
    )Gain on disposition of assets, net
    
    
    
    
    
    
    810
    
    
    
    194
    
    
    
    
    
    
    
    1,004Total operating income (loss)
    
    
    (45
    )
    
    
    15,904
    
    
    
    (457
    )
    
    
    
    
    
    
    15,402Other income and (expense):Interest expense
    
    
    (6,852
    )
    
    
    (8,910
    )
    
    
    (1,728
    )
    
    
    11,629
    
    
    
    (5,861
    )Interest income
    
    
    8,970
    
    
    
    190
    
    
    
    2,516
    
    
    
    (11,629
    )
    
    
    47Other
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    11Equity in net earnings of subsidiaries
    
    
    3,965
    
    
    
    
    
    
    
    
    
    
    
    (3,965
    )
    
    
    Total other income and (expense)
    
    
    6,083
    
    
    
    (8,720
    )
    
    
    799
    
    
    
    (3,965
    )
    
    
    (5,803
    )Income (benefit) before income taxes
    
    
    6,038
    
    
    
    7,184
    
    
    
    342
    
    
    
    (3,965
    )
    
    
    9,599Income tax expense (benefit):Current
    
    
    (65
    )
    
    
    222
    
    
    
    3,861
    
    
    
    
    
    
    
    4,018Deferred
    
    
    1,276
    
    
    
    151
    
    
    
    (606
    )
    
    
    
    
    
    
    821Total income tax expense (benefit)
    
    
    1,211
    
    
    
    373
    
    
    
    3,255
    
    
    
    
    
    
    
    4,839Net income (loss)
    
    
    4,827
    
    
    
    6,811
    
    
    
    (2,913
    )
    
    
    (3,965
    )
    
    
    4,760Net income attributable to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    (67
    )
    
    
    
    
    
    
    (67
    )Net income (loss) attributable to controlling interest
    
    $
    4,827
    
    
    $
    6,811
    
    
    $
    (2,846
    )
    
    $
    (3,965
    )
    
    $
    4,827
 
 (1)
    
    All field operations general and administration expenses are included in operating
expenses. 21




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
 Three months ended March 31, 2010Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedTotal revenues
    
    $
    
    
    
    $
    78,356
    
    
    $
    103,978
    
    
    $
    (24,729
    )
    
    $
    157,605Operating expenses
    
    
    
    
    
    
    54,123
    
    
    
    84,137
    
    
    
    (24,729
    )
    
    
    113,531Depreciation and amortization
    
    
    
    
    
    
    15,851
    
    
    
    12,737
    
    
    
    
    
    
    
    28,588Total operating gross margin
    
    
    
    
    
    
    8,382
    
    
    
    7,104
    
    
    
    
    
    
    
    15,486General and administration expense (1)
    
    
    (45
    )
    
    
    (9,888
    )
    
    
    (99
    )
    
    
    
    
    
    
    (10,032
    )Provision for reduction in carrying value ofcertain assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on disposition of assets, net
    
    
    
    
    
    
    569
    
    
    
    103
    
    
    
    
    
    
    
    672Total operating income (loss)
    
    
    (45
    )
    
    
    (937
    )
    
    
    7,108
    
    
    
    
    
    
    
    6,126Other income and (expense):Interest expense
    
    
    (7,789
    )
    
    
    (8,910
    )
    
    
    (4,609
    )
    
    
    14,576
    
    
    
    (6,732
    )Interest income
    
    
    10,492
    
    
    
    231
    
    
    
    3,927
    
    
    
    (14,576
    )
    
    
    74Loss on extinguishment of debt
    
    
    (3,220
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,220
    )Other
    
    
    
    
    
    
    (23
    )
    
    
    165
    
    
    
    
    
    
    
    142Equity in net earnings of subsidiaries
    
    
    (6,394
    )
    
    
    
    
    
    
    
    
    
    
    6,394
    
    
    
    Total other income and (expense)
    
    
    (6,911
    )
    
    
    (8,702
    )
    
    
    (517
    )
    
    
    6,394
    
    
    
    (9,736
    )Income (benefit) before income taxes
    
    
    (6,956
    )
    
    
    (9,639
    )
    
    
    6,591
    
    
    
    6,394
    
    
    
    (3,610
    )Income tax expense (benefit):Current
    
    
    245
    
    
    
    119
    
    
    
    3,284
    
    
    
    
    
    
    
    3,648Deferred
    
    
    (5,150
    )
    
    
    (10
    )
    
    
    (47
    )
    
    
    
    
    
    
    (5,207
    )Total income tax expense (benefit)
    
    
    (4,905
    )
    
    
    109
    
    
    
    3,237
    
    
    
    
    
    
    
    (1,559
    )Net income (loss)
    
    $
    (2,051
    )
    
    $
    (9,748
    )
    
    $
    3,354
    
    
    $
    6,394
    
    
    $
    (2,051
    )
 
 (1)
    
    All field operations general and administration expenses are included in operating
expenses. 22




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
 Three months ended March 31, 2011Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    4,827
    
    
    $
    6,811
    
    
    $
    (2,913
    )
    
    $
    (3,965
    )
    
    $
    4,760Adjustments to reconcile net income (loss)
to net cash provided by operating activities:Depreciation and amortization
    
    
    
    
    
    
    15,210
    
    
    
    12,389
    
    
    
    
    
    
    
    27,599Gain on disposition of assets
    
    
    
    
    
    
    (810
    )
    
    
    (194
    )
    
    
    
    
    
    
    (1,004
    )Deferred income tax expense
    
    
    1,276
    
    
    
    151
    
    
    
    (606
    )
    
    
    
    
    
    
    821Expenses not requiring cash
    
    
    4,507
    
    
    
    
    
    
    
    (54
    )
    
    
    
    
    
    
    4,453Equity in net earnings of subsidiaries
    
    
    (3,965
    )
    
    
    
    
    
    
    
    
    
    
    3,965
    
    
    
    Change in accounts receivable
    
    
    6,968
    
    
    
    24,315
    
    
    
    (41,030
    )
    
    
    
    
    
    
    (9,747
    )Change in other assets
    
    
    326
    
    
    
    39,374
    
    
    
    (2,321
    )
    
    
    
    
    
    
    37,379Change in liabilities
    
    
    3,372
    
    
    
    (66,599
    )
    
    
    39,723
    
    
    
    
    
    
    
    (23,504
    )Net cash provided by operating activities
    
    
    17,311
    
    
    
    18,452
    
    
    
    4,994
    
    
    
    
    
    
    
    40,757Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (47,233
    )
    
    
    (3,431
    )
    
    
    
    
    
    
    (50,664
    )Proceeds from the sale of assets
    
    
    
    
    
    
    1,360
    
    
    
    201
    
    
    
    
    
    
    
    1,561Proceeds from insurance settlements
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    250Net cash used in investing activities
    
    
    
    
    
    
    (45,623
    )
    
    
    (3,230
    )
    
    
    
    
    
    
    (48,853
    )Cash flows from financing activities:Paydown on term note
    
    
    (3,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,000
    )Proceeds from stock options exercised
    
    
    135
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    135Excess tax benefit from stock-based compensation
    
    
    1,125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,125Intercompany advances, net
    
    
    (6,201
    )
    
    
    22,638
    
    
    
    (16,437
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    (7,941
    )
    
    
    22,638
    
    
    
    (16,437
    )
    
    
    
    
    
    
    (1,740
    )Net change in cash and cash equivalents
    
    
    9,370
    
    
    
    (4,533
    )
    
    
    (14,673
    )
    
    
    
    
    
    
    (9,836
    )Cash and
cash equivalents at beginning of year
    
    
    13,835
    
    
    
    2,317
    
    
    
    35,279
    
    
    
    
    
    
    
    51,431Cash and cash equivalents at end of period
    
    $
    23,205
    
    
    $
    (2,216
    )
    
    $
    20,606
    
    
    $
    
    
    
    $
    41,595
  23




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
 Three Months Ended March 31, 2010Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    (2,051
    )
    
    $
    (9,748
    )
    
    $
    3,354
    
    
    $
    6,394
    
    
    
    (2,051
    )Adjustments to reconcile net income (loss)
to net cash provided by operating activities:Depreciation and amortization
    
    
    
    
    
    
    15,851
    
    
    
    12,737
    
    
    
    
    
    
    
    28,588Loss on extinguishment of debt
    
    
    3,220
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,220Gain on disposition of assets
    
    
    
    
    
    
    (569
    )
    
    
    (103
    )
    
    
    
    
    
    
    (672
    )Deferred income tax expense (benefit)
    
    
    (5,150
    )
    
    
    (10
    )
    
    
    (47
    )
    
    
    
    
    
    
    (5,207
    )Expenses not requiring cash
    
    
    1,430
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,430Equity in net earnings of subsidiaries
    
    
    6,394
    
    
    
    
    
    
    
    
    
    
    
    (6,394
    )
    
    
    Change in accounts receivable
    
    
    (5,025
    )
    
    
    9,681
    
    
    
    14,744
    
    
    
    
    
    
    
    19,400Change in other assets
    
    
    (5,325
    )
    
    
    10,414
    
    
    
    (10,701
    )
    
    
    
    
    
    
    (5,612
    )Change in liabilities
    
    
    2,628
    
    
    
    (31,732
    )
    
    
    (8,535
    )
    
    
    
    
    
    
    (37,639
    )Net cash provided by (used in) operating activities
    
    
    (3,879
    )
    
    
    (6,113
    )
    
    
    11,449
    
    
    
    
    
    
    
    1,457Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (46,615
    )
    
    
    (11,331
    )
    
    
    
    
    
    
    (57,946
    )Proceeds from the sale of assets
    
    
    
    
    
    
    562
    
    
    
    211
    
    
    
    
    
    
    
    773Net cash used in investing activities
    
    
    
    
    
    
    (46,053
    )
    
    
    (11,120
    )
    
    
    
    
    
    
    (57,173
    )Cash flows from financing activities:Proceeds from draw on revolver credit facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from debt issuance
    
    
    300,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300,000Paydown on
senior notes
    
    
    (96,310
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (96,310
    )Paydown on
term note
    
    
    (3,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,000
    )Paydown on revolver credit facility
    
    
    (42,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42,000
    )Payment of debt issuance costs
    
    
    (7,795
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,795
    )Payment of debt extinguishment costs
    
    
    (3,330
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,330
    )Proceeds from stock options exercised
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26Excess tax
benefit from stock-based compensation
    
    
    1,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,350Intercompany advances, net
    
    
    (45,772
    )
    
    
    51,704
    
    
    
    (5,932
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    103,169
    
    
    
    51,704
    
    
    
    (5,932
    )
    
    
    
    
    
    
    148,941Net change in cash and cash equivalents
    
    
    99,290
    
    
    
    (462
    )
    
    
    (5,603
    )
    
    
    
    
    
    
    93,225Cash and
cash equivalents at beginning of year
    
    
    58,189
    
    
    
    1,768
    
    
    
    48,846
    
    
    
    
    
    
    
    108,803Cash and cash equivalents at end of period
    
    $
    157,479
    
    
    $
    1,306
    
    
    $
    43,243
    
    
    $
    
    
    
    $
    202,028
  24




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 DISCLOSURE NOTE REGARDING FORWARD-LOOKING STATEMENTS
  
    
    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;
    
    scheduled delivery of drilling rigs for operation in Alaska under the terms of our
agreement with BP Exploration (Alaska) Inc.;
    
    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, investigations, 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;
    
    compliance with covenants under our senior secured credit facility and indentures for
our senior notes; and
    
    organic growth of our operations.
  
    
    worldwide economic and business conditions that adversely affect market conditions
and/or the cost of doing business;
    
    our inability to access the credit markets;
    
    the U.S. economy and the demand for natural gas;
    
    worldwide demand for oil;
    
    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 that may
impact our ability to remit funds to the U.S., that adversely affect the cost of doing
business;
 25




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##### Table of Contents



DISCLOSURE NOTE REGARDING FORWARD-LOOKING STATEMENTS (continued)
 
    
    changes in the tax laws that would allow double taxation on foreign sourced income;
    
    the outcome of our investigation and the parallel investigations by the SEC and the
Department of Justice into possible violations of U.S. law, including the Foreign Corrupt
Practices Act;
    
    contemplated U.S. legislation on carbon emissions;
    
    potential new employer taxes on U.S. health care plans;
    
    adverse environmental events;
    
    adverse weather conditions;
    
    global health concerns;
    
    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 or
incorporated by reference into this Form 10-Q and our other reports and filings with the
SEC.
  OVERVIEW AND OUTLOOK
 Overview
   
    
    Our Rental Tools segment achieved record levels of quarterly revenues and segment
gross margin (segment gross margins exclude depreciation and amortization expense).
    
    Our U.S. barge drilling business recorded increases in rig fleet utilization and
average dayrate compared with the prior years first quarter.
    
    We began the Yastreb rig relocation project, a redeployment of the rig to its original
drilling area on Sakhalin Island.
    
    Our International Drilling segment reported higher average dayrates in all regions,
despite lower average fleet utilization.
 26




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##### Table of Contents



OVERVIEW AND OUTLOOK (continued)
 Overview (continued)
      Outlook
     RESULTS OF OPERATIONS
 Three Months Ended March 31, 2011 Compared with Three Months Ended March 31, 2010
  27




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
  Three Months Ended March 31,2011
    
    
    2010Revenues:
    
    
    
    
    
    (Dollars in Thousands)International Drilling
    
    $
    42,437
    
    
    
    27
    %
    
    $
    63,875
    
    
    
    41
    %U.S. Drilling
    
    
    15,920
    
    
    
    10
    %
    
    
    15,087
    
    
    
    10
    %Rental Tools
    
    
    52,319
    
    
    
    34
    %
    
    
    33,815
    
    
    
    21
    %Project Management and Engineering Services
    
    
    35,865
    
    
    
    23
    %
    
    
    24,441
    
    
    
    15
    %Construction Contract
    
    
    9,638
    
    
    
    6
    %
    
    
    20,387
    
    
    
    13
    %Total revenues
    
    $
    156,179
    
    
    
    100
    %
    
    $
    157,605
    
    
    
    100
    %Operating gross margin:International Drilling gross margin excluding depreciation and amortization
    
    $
    7,590
    
    
    
    18
    %
    
    $
    16,702
    
    
    
    26
    %U.S. Drilling gross margin excluding depreciation and amortization
    
    
    1,899
    
    
    
    12
    %
    
    
    2,113
    
    
    
    14
    %Rental Tools gross margin excluding depreciation and amortization
    
    
    34,182
    
    
    
    65
    %
    
    
    21,189
    
    
    
    63
    %Project Management and Engineering Services gross margin
    
    
    5,957
    
    
    
    17
    %
    
    
    4,880
    
    
    
    20
    %Construction Contract gross margin
    
    
    (743
    )
    
    
    -8
    %
    
    
    (810
    )
    
    
    -4
    %Depreciation and amortization
    
    
    (27,599
    )
    
    
    
    
    
    
    (28,588
    )Total operating gross margin
    
    
    21,286
    
    
    
    
    
    
    
    15,486General and administration expense
    
    
    (6,888
    )
    
    
    
    
    
    
    (10,032
    )Provision for reduction in carrying value of certain assets
    
    
    
    
    
    
    
    
    
    
    Gain on disposition of assets, net
    
    
    1,004
    
    
    
    
    
    
    
    672Total operating income
    
    $
    15,402
    
    
    
    
    
    
    $
    6,126
  ProjectManagementInternational
    
    
    
    
    
    
    
    
    
    
    and Engineering
    
    
    ConstructionThree Months Ended
    
    Drilling
    
    
    U.S. Drilling
    
    
    Rental Tools
    
    
    Services (2)
    
    
    Contract (2)(Dollars in Thousands)March 31, 2011Operating gross margin (1)
    
    $
    (5,239
    )
    
    $
    (2,642
    )
    
    $
    23,953
    
    
    $
    5,957
    
    
    $
    (743
    )Depreciation and amortization
    
    
    12,829
    
    
    
    4,541
    
    
    
    10,229
    
    
    
    
    
    
    
    Drilling and rental gross margin,
excluding depreciation and amortization
    
    $
    7,590
    
    
    $
    1,899
    
    
    $
    34,182
    
    
    $
    5,957
    
    
    $
    (743
    )March 31, 2010Operating gross margin (1)
    
    $
    3,314
    
    
    $
    (4,161
    )
    
    $
    12,263
    
    
    $
    4,880
    
    
    $
    (810
    )Depreciation and amortization
    
    
    13,388
    
    
    
    6,274
    
    
    
    8,926
    
    
    
    
    
    
    
    Drilling and rental gross margin,
excluding depreciation and amortization
    
    $
    16,702
    
    
    $
    2,113
    
    
    $
    21,189
    
    
    $
    4,880
    
    
    $
    (810
    )
 
 (1)
    
    Operating gross margin is calculated as revenues less direct operating expenses, including
depreciation and amortization expense.(2)
    
    The project management and engineering services segment and the construction contract segment
do not incur depreciation and amortization. 28




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
 International Drilling Segment
    29




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
 U.S. Drilling Segment
   Rental Tools Segment
   Project Management and Engineering Services Segment
   Construction Contracts Segment
   30




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
 Construction Contracts Segment (continued)
   Other Financial Data
     LIQUIDITY AND CAPITAL RESOURCES
 Cash Flows
   31




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES (continued)
 Financing Activity
      32




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES (continued)
 Financing Activity, (continued)
  
    
    $300.0 million aggregate principal amount of 9.125% Notes, which are due April 1,
2018;
    
    $54.0 million drawn against our Credit Agreement, including $29.0 million on our
Term Loan Facility, $12.0 million of which is classified as short term, and $25.0 million
under our Revolver, and
    
    $125.0 million aggregate principal amount of 2.125% Notes, which are due July 15, 2012
less $7.7 million in unamortized debt discount
  33




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES (continued)
 Contractual Obligations
  Less than
    
    
    Years
    
    
    Years
    
    
    More thanTotal
    
    
    1 Year
    
    
    1 - 3
    
    
    4 - 5
    
    
    5 Years(Dollars in Thousands)Contractual cash obligations:Long-term debt  principal (1)
    
    $
    479,000
    
    
    $
    12,000
    
    
    $
    167,000
    
    
    $
    
    
    
    $
    300,000Long-term debt  interest (1)
    
    
    199,183
    
    
    
    32,215
    
    
    
    57,468
    
    
    
    54,750
    
    
    
    54,750Operating leases (2)
    
    
    30,527
    
    
    
    7,371
    
    
    
    7,642
    
    
    
    5,871
    
    
    
    9,643Purchase commitments (3)
    
    
    16,423
    
    
    
    16,423
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    725,133
    
    
    $
    68,009
    
    
    $
    232,110
    
    
    $
    60,621
    
    
    $
    364,393Commercial commitments:Long-term debt  standby letters of credit (4)
    
    
    11,300
    
    
    
    11,300
    
    
    
    
    
    
    
    
    
    
    
    Total commercial commitments
    
    $
    11,300
    
    
    $
    11,300
    
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Long-term debt includes the principal and interest cash obligations of the 9.125% Notes,
the 2.125% Notes, the Revolver, and the Term Loan. The remaining unamortized discount of
$7.7 million on the 2.125% Notes is not included in the contractual cash obligations
schedule. Subsequent to the end of the quarter, the Term Loan was expanded by $50.0 million
to $79.0 million and $25.0 million of Revolver borrowings were repaid. These numbers are not
reflected in the table above.(2)
    
    Operating leases consist of lease agreements in excess of one year for office space,
equipment, vehicles and personal property.(3)
    
    Purchase commitments outstanding as of March 31, 2011, are primarily related to rig upgrade
projects and new rig construction.(4)
    
    We have an $80.0 million revolving credit facility. As of March 31, 2011, we had drawn down
$25.0 million under the revolver and $11.3 million of availability has been used to support
letters of credit that have been issued, resulting in $43.7 million of availability. The
revolving credit facility expires May 14, 2013. Off-Balance Sheet Arrangements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  34




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control Over Financial Reporting 
 
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Issuer Purchases of Equity SecuritiesTotal Number
    
    
    Average Price PaidPeriod
    
    
    
    
    
    of Shares Purchased
    
    
    Per ShareJanuary 1-31, 2011
    
    
    
    
    
    
    
    
    
    $
    February 1-28, 2011
    
    
    
    
    
    
    4,500
    
    
    $
    5.35March 1-31, 2011
    
    
    
    
    
    
    348,127
    
    
    $
    5.29Total
    
    
    
    
    
    
    352,627
    
    
    $
    5.29
 35




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##### Table of Contents



ITEM 6. EXHIBITS
  ExhibitNumber
    
    DESCRIPTION10.1
    
     First Amendment to Credit Agreement, dated as of June 30, 2008, but effective as of May 15,
2008, among Parker Drilling Company, as Borrower, lender from time to time party to the Credit
Agreement, Bank of America, N.A., as Administrative Agent and an L/C Issuer, Lehman Commercial
Paper Inc., as Syndication Agent, and ABN AMRO Bank N.V., as Documentation Agent.10.2
    
     Consent and Second Amendment to Credit Agreement dated as of January 15, 2010, among Parker
Drilling Company, as Borrower, each lender from time to time party to the Credit Agreement, Bank of
America, N.A., as Administrative Agent and an L/C Issuer, and ABN AMRO Bank N.V., as Documentation
Agent.10.3
    
     Third Amendment to Credit Agreement and Joinder dated as of April, 1, 2011, among Parker
Drilling Company, as Borrower, each lender from time to time party to the Credit Agreement, and
Bank of America, N.A., as Administrative Agent.31.1
    
     David C. Mannon, President and Chief Executive Officer, Rule 13a-14(a)/15d-14(a) Certification31.2
    
     W. Kirk Brassfield, Senior Vice President and Chief Financial Officer, Rule 13a-14(a)/15d-14(a)
Certification32.1
    
     David C. Mannon, President and Chief Executive Officer, Section 1350 Certification32.2
    
     W. Kirk Brassfield, Senior Vice President and Chief Financial Officer, Section 1350 Certification
 36




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##### Table of Contents



SIGNATURES
  PARKER DRILLING COMPANYDate:  May 5, 2011
    By:
    /s/ David C. MannonDavid C. MannonPresident and Chief Executive OfficerBy:
    /s/ W. Kirk BrassfieldW. Kirk BrassfieldSenior Vice President and Chief Financial Officer 37




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Description10.1
    
     First Amendment to Credit Agreement, dated as of June 30, 2008, but effective as of May 15,
2008, among Parker Drilling Company, as Borrower, lender from time to time party to the Credit
Agreement, Bank of America, N.A., as Administrative Agent and an L/C Issuer, Lehman Commercial
Paper Inc., as Syndication Agent, and ABN AMRO Bank N.V., as Documentation Agent.10.2
    
     Consent and Second Amendment to Credit Agreement dated as of January 15, 2010, among Parker
Drilling Company, as Borrower, each lender from time to time party to the Credit Agreement, Bank of
America, N.A., as Administrative Agent and an L/C Issuer, and ABN AMRO Bank N.V., as Documentation
Agent.10.3
    
     Third Amendment to Credit Agreement and Joinder dated as of April, 1, 2011, among Parker
Drilling Company, as Borrower, each lender from time to time party to the Credit Agreement, and
Bank of America, N.A., as Administrative Agent.31.1
    
     David C. Mannon, President and Chief Executive Officer, Rule 13a-14(a)/15d-14(a) Certification31.2
    
     W. Kirk Brassfield, Senior Vice President and Chief Financial Officer, Rule
13a-14(a)/15d-14(a) Certification32.1
    
     David C. Mannon, President and Chief Executive Officer, Section 1350 Certification32.2
    
     W. Kirk Brassfield, Senior
Vice President and Chief Financial Officer, Section 1350
Certification