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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, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 1-7573
 PARKER DRILLING COMPANY
 (Exact name of registrant as specified in its charter)
 Delaware
    
    73-0618660(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 1401 Enclave Parkway, Suite 600, Houston, Texas 77077  (Address of principal executive offices) (Zip code)
 (281) 406-2000  (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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TABLE OF CONTENTS
 PagePart I.Financial Information
    
    
    3Item 1. Financial Statements
    
    
    3Consolidated Condensed Balance Sheets (Unaudited) March 31, 2009 and December 31, 2008
    
    
    3Consolidated Condensed Statements of Operations (Unaudited) Three Months Ended March 31, 2009 and 2008
    
    
    4Consolidated Condensed Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2009 and 2008
    
    
    5Notes to the Unaudited Consolidated Condensed Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    30Item 4. Controls and Procedures
    
    
    30Part II.Other Information
    
    
    30Item 1. Legal Proceedings
    
    
    30Item 1A. Risk Factors
    
    
    30Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 3. Defaults Upon Senior Securities
    
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    
    31Item 5. Other Information
    
    
    31Item 6. Exhibits
    
    
    31Signatures
    
    
    32Officer CertificationsEX-10.1EX-10.2EX-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 31,2009
    
    
    2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    148,403
    
    
    $
    172,298Accounts and notes receivable, net
    
    
    182,333
    
    
    
    186,164Rig materials and supplies
    
    
    30,201
    
    
    
    30,241Deferred costs
    
    
    7,044
    
    
    
    7,804Deferred income taxes
    
    
    9,735
    
    
    
    9,735Other tax assets
    
    
    34,854
    
    
    
    40,924Other current assets
    
    
    26,692
    
    
    
    26,125Total current assets
    
    
    439,262
    
    
    
    473,291Property, plant and equipment less accumulated
depreciation and amortization of $737,600 at March 31,
2009 and $712,688 at December 31, 2008
    
    
    707,128
    
    
    
    675,548Deferred income taxes
    
    
    25,852
    
    
    
    22,956Other noncurrent assets
    
    
    33,060
    
    
    
    33,925Total assets
    
    $
    1,205,302
    
    
    $
    1,205,720LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    9,000
    
    
    $
    6,000Accounts payable and accrued liabilities
    
    
    135,276
    
    
    
    140,398Accrued income taxes
    
    
    10,359
    
    
    
    12,130Total current liabilities
    
    
    154,635
    
    
    
    158,528Long-term debt
    
    
    437,464
    
    
    
    435,394Other long-term liabilities
    
    
    19,342
    
    
    
    21,396Long-term deferred tax liability
    
    
    7,133
    
    
    
    8,230Contingencies (Note 10)
    
    
    
    
    
    
    Stockholders equity:Noncontrolling
interest
    
    
    
    
    
    
    Common stock
    
    
    19,351
    
    
    
    18,910Capital in excess of par value
    
    
    621,570
    
    
    
    619,561Accumulated deficit
    
    
    (54,193
    )
    
    
    (56,299
    )Total stockholders equity
    
    
    586,728
    
    
    
    582,172Total liabilities and stockholders equity
    
    $
    1,205,302
    
    
    $
    1,205,720
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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 Ended March 31,2009
    
    
    2008Revenues:International Drilling
    
    $
    77,381
    
    
    $
    68,740U.S. Drilling
    
    
    9,856
    
    
    
    45,888Project Management and Engineering Services
    
    
    32,054
    
    
    
    19,179Construction Contract
    
    
    16,745
    
    
    
    Rental Tools
    
    
    37,889
    
    
    
    39,471Total revenues
    
    
    173,925
    
    
    
    173,278Operating expenses:International Drilling
    
    
    49,777
    
    
    
    52,621U.S. Drilling
    
    
    13,136
    
    
    
    21,522Project Management and Engineering Services
    
    
    25,894
    
    
    
    15,661Construction Contract
    
    
    15,914
    
    
    
    Rental Tools
    
    
    16,454
    
    
    
    15,818Depreciation and amortization
    
    
    27,124
    
    
    
    26,166Total operating expenses
    
    
    148,299
    
    
    
    131,788Total operating gross margin
    
    
    25,626
    
    
    
    41,490General and administration expense
    
    
    (13,060
    )
    
    
    (6,668
    )Gain on disposition of assets, net
    
    
    78
    
    
    
    579Total operating income
    
    
    12,644
    
    
    
    35,401Other income and (expense):Interest expense
    
    
    (8,066
    )
    
    
    (6,837
    )Interest income
    
    
    286
    
    
    
    368Equity in loss of unconsolidated joint venture and related charges, net of tax
    
    
    
    
    
    
    (1,105
    )Other
    
    
    (12
    )
    
    
    60Total other income and (expense)
    
    
    (7,792
    )
    
    
    (7,514
    )Income before income taxes
    
    
    4,852
    
    
    
    27,887Income tax (benefit) expense:Current
    
    
    6,738
    
    
    
    (10,643
    )Deferred
    
    
    (3,992
    )
    
    
    15,328Total income tax (benefit) expense
    
    
    2,746
    
    
    
    4,685Net income
    
    
    2,106
    
    
    
    23,202Net income attributable to noncontrolling interest
    
    
    
    
    
    
    Net income attributable to Parker Drilling
    
    $
    2,106
    
    
    $
    23,202Basic earnings per share:Net income
    
    $
    0.02
    
    
    $
    0.21Diluted earnings per share:Net income
    
    $
    0.02
    
    
    $
    0.21Number of common shares used in computing earnings per shareBasic
    
    
    112,260,517
    
    
    
    110,546,311Diluted
    
    
    113,366,444
    
    
    
    111,481,301
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PARKER DRILLING COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 (Dollars in Thousands)
 (Unaudited)
 Three Months Ended March 31,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    2,106
    
    
    $
    23,202Adjustments to reconcile net income to
net cash provided by operating activities:Depreciation and amortization
    
    
    27,124
    
    
    
    26,166Gain on disposition of assets
    
    
    (78
    )
    
    
    (579
    )Equity loss in unconsolidated joint venture and related charges, net of tax
    
    
    
    
    
    
    1,105Deferred income tax expense
    
    
    (3,992
    )
    
    
    15,328Expenses not requiring cash
    
    
    3,907
    
    
    
    4,092Change in accounts receivable
    
    
    5,161
    
    
    
    (12,485
    )Change in other assets
    
    
    6,692
    
    
    
    (5,626
    )Change in liabilities
    
    
    (16,372
    )
    
    
    (35,282
    )Net cash provided by operating activities
    
    
    24,548
    
    
    
    15,921Cash flows from investing activities:Capital expenditures
    
    
    (51,384
    )
    
    
    (43,159
    )Proceeds from the sale of assets
    
    
    169
    
    
    
    1,227Proceeds from insurance settlements
    
    
    
    
    
    
    951Investment in unconsolidated joint venture
    
    
    
    
    
    
    (5,000
    )Net cash used in investing activities
    
    
    (51,215
    )
    
    
    (45,981
    )Cash flows from financing activities:Proceeds from draw on revolver credit facility
    
    
    4,000
    
    
    
    15,000Excess tax cost from stock based compensation
    
    
    (1,228
    )
    
    
    (331
    )Net cash provided by financing activities
    
    
    2,772
    
    
    
    14,669Net decrease in cash and cash equivalents
    
    
    (23,895
    )
    
    
    (15,391
    )Cash and cash equivalents at beginning of year
    
    
    172,298
    
    
    
    60,124Cash and cash equivalents at end of period
    
    $
    148,403
    
    
    $
    44,733Supplemental cash flow information:Interest paid
    
    $
    2,864
    
    
    $
    1,841Income taxes paid
    
    $
    8,357
    
    
    $
    14,994
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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, 2009 and December 31, 2008, (2) the results of operations for the three months
ended March 31, 2009 and 2008, and (3) cash flows for the three months ended March 31, 2009
and 2008. Results for the three months ended March 31, 2009 are not necessarily indicative of
the results that will be realized for the year ending December 31, 2009. The financial
statements should be read in conjunction with our Annual Report on Form 10-K for the year
ended December 31, 2008.Stock-Based Compensation Total stock-based compensation expense recognized under SFAS No. 123R
for the three month period ended March 31, 2009 and for the three month period ended March 31,
2008 was $1.8 million and $2.0 million, respectively, all of which was related to restricted
stock plan expense. Stock-based compensation expense is included in our consolidated condensed
income statement in both General and administration expense and operating expense. There
were no unvested stock options at March 31, 2009. The Company had 290,300 outstanding and
exercisable stock options as of March 31, 2009, the aggregate intrinsic value of which was
negligible, with a weighted average exercise price of $2.88. Unvested restricted stock awards
at December 31, 2008 and March 31, 2009 were 1,458,716 shares and 3,098,256 shares,
respectively. In March 2009 there were 2,094,639 restricted shares
granted that were related to the Companys long term incentive
plan which were earned over the previous three years. Total unrecognized compensation cost related to unamortized restricted stock
awards was $3.8 million as of December 31, 2008 and $4.5 million as of March 31, 2009. There
were 2,214,639 restricted shares granted to certain officers and key employees during the three
month period ended March 31, 2009. The remaining unrecognized compensation cost related to
unamortized restricted stock awards will be amortized over a weighted-average vesting period of
approximately one year.The excess tax deduction realized for tax purposes from restricted stock vesting totaled $1.2
million for the three months ended March 31, 2009, which has been reported as a financing cash
outflow in the consolidated condensed statement of cash flows.Convertible Senior Notes, including call options and warrants In May 2008, the Financial
Accounting Standards Board (FASB) issued FASB Staff Position (FSP) Accounting Principles
Board (APB) 14-1, Accounting for Convertible Debt Instruments that May Be Settled in Cash
upon Conversion (Including Partial Cash Settlement), (FSP APB 14-1). The FSP requires that
the liability and equity components of convertible debt instruments that may be settled in cash
upon conversion (including partial cash settlement), commonly referred to as Instrument C under
EITF issue No. 90-19, Convertible Bonds With Issuer Options to Settle for Cash upon
Conversion, be separated to account for the fair value of the debt and equity components as of
the date of issuance to reflect the issuers non-convertible debt borrowing rate. The FSP is
effective for financial periods beginning after December 15, 2008 and is applied retrospectively
to all periods presented (retroactive restatement) pursuant to the guidance in SFAS 154,
Accounting Changes and Error Corrections.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 1.
    
    General (continued)The adoption of the FSP on January 1, 2009 impacted the treatment of the Companys 2.125 percent
convertible senior notes due 2012, by reclassifying a portion of the of the convertible note
balances to additional paid in capital for the estimated fair value of the conversion feature at
the date of issuance and creating a discount on the convertible notes that will be amortized
through interest expense over the life of the convertible notes. The Companys non-convertible
debt borrowing rate at the date of issuance (July 2007) was 7.25 percent and, accordingly,
adoption of the FSP resulted in a significant increase in interest expense, and reduced net
income and basic earnings per share in the Companys consolidated condensed
financial statements. Upon
adoption, the Company restated its Accumulated deficit balance by approximately $6.8 million
to reflect the additional interest expense from issuance on July 5, 2007 through December 31,
2008 and reduced Convertible senior notes by $19.7 million, reflecting the issuance of the
notes at a discount and including amortization of the discount from the transaction date through
the adoption date. The Companys Paid in capital balance increased by $26.5 million,
reflecting the equity portion of the initial transaction. A deferred tax asset provision of
$10.6 million was also established upon initial adoption of the FSP with a corresponding
reduction in Paid in capital. This provision was then reduced by $2.7 million with the offset
to Accumulated deficit to reflect the benefit associated with the additional interest recorded
from July 2007 to December 31, 2008. See the tables below for changes to the relevant 2008
financials.
 Balance Sheet
 RestatedDecember 31, 2008
    
    
    Adjustments
    
    
    December 31, 2008ASSETSDeferred income taxes
    
    
    30,867
    
    
    
    (7,911
    )
    
    
    22,956Total assets
    
    $
    1,213,631
    
    
    
    
    
    
    $
    1,205,720LIABILITIES AND STOCKHOLDERS EQUITYLong-term debt
    
    
    455,073
    
    
    
    (19,679
    )
    
    
    435,394Capital in
excess of par value
    
    
    603,731
    
    
    
    15,830
    
    
    
    619,561Accumulated deficit
    
    
    (52,237
    )
    
    
    (4,062
    )
    
    
    (56,299
    )Total liabilities and stockholders equity
    
    $
    1,213,631
    
    
    
    
    
    
    $
    1,205,720
 Statement of Operations
 RestatedThree months ended
    
    
    
    
    
    
    Three months endedMarch 31, 2008
    
    
    Adjustments
    
    
    March 31, 2008Other income and (expense):Interest expense
    
    
    (5,690
    )
    
    
    (1,147
    )
    
    
    (6,837
    )Income tax (benefit) expense:Deferred
    
    
    15,789
    
    
    
    (461
    )
    
    
    15,328Net income
    
    $
    23,888
    
    
    
    
    
    
    $
    23,202
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 1.
    
    General (continued)The maturity date of the notes (July 15, 2012) is the expected life of the liability due to the
current market value of the Companys stock which is significantly lower than the note
conversion price of $13.85 per share. The 7.25 percent cost of non-convertible debt was
calculated for use in our decision model at the time that the convertible notes were issued in
July 2007. Using 7.25 percent, the fair value of the notes was calculated to be $98.5 million
and the discount on the notes $26.5 million. Interest expense for the first quarter of 2009 was
increased by $1.2 million to reflect the fair value increment calculated as the amortization of
the debt discount, using the effective interest rate method. In addition, $0.7 million
of interest expense was recognized during the current quarter for the contractual interest coupon on these convertible notes.Property, Plant, and Equipment- In the first quarter 2009, we implemented a change in
accounting estimate to more accurately reflect the useful life of some of the long-lived assets
in our U.S. Drilling and International Drilling segments. This resulted in an approximate $4
million reduction in depreciation expense in the first quarter 2009, or $.04 per share. We
extended the useful lives of these long-lived assets based on our review of their service lives,
technological improvements in the assets, and recent changes to our refurbishment and
maintenance practices which helped to extend the lives.Non-Controlling Interest In December 2007, the FASB issued Statement of Financial Accounting
Standards No. 160, Noncontrolling Interests in Consolidating Financial Statements (SFAS No.
160). SFAS No. 160 provides enhanced guidance related to the disclosure of information
regarding noncontrolling interests in a subsidiary and their effect on the company. This
Statement, together with the IASBs IAS 27, Consolidated and Separate Financial Statements,
concludes a joint effort by the FASB and IASB to improve the accounting for and reporting of
noncontrolling interests in consolidated financial statements and promotes international
convergence of accounting standards. For the Company, SFAS No. 160 is effective January 1,
2009. The Company did not apply the disclosure provisions of SFAS No. 160 as the information
regarding noncontrolling interests in a subsidiary is immaterial to
the consolidated condensed financial
statements.Construction Contract Historically the Company has primarily constructed drilling rigs for its
own use. In some instances, however, the Company enters into contracts to design, construct,
deliver and commission a rig for a major customer. In 2008, we were awarded a cost
reimbursable, fixed fee contract to construct, deliver and commission a rig for extended-reach
drilling work in Alaska. Total cost of the construction phase is currently expected to be
approximately $215 million. The Company recognizes revenues received and costs incurred related
to its construction contract on a gross basis and income for the related fees on a percentage of
completion basis using the cost-to-cost method. Construction costs in excess of funds received
from the customer are accumulated and reported as part of other current assets. At March 31,
2009, a net liability (progress payments less construction costs) of $0.5 million is included in
other current liabilities.Cash and Cash Equivalents For purposes of the balance sheet and the statement of cash flows,
the Company considers cash equivalents to be all highly liquid investment instruments that have
a remaining maturity of three months or less at the date of purchase.
 2.
    
    Earnings Per Share (EPS)
 Three Months Ended March 31, 2009Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPS:Net income
    
    $
    2,106,000
    
    
    
    112,260,517
    
    
    $
    0.02Effect of dilutive securities:Stock options and restricted stock
    
    
    
    
    
    
    1,105,927
    
    
    $
    Diluted EPS:Net income
    
    $
    2,106,000
    
    
    
    113,366,444
    
    
    $
    0.02
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 2.
    
    Earnings Per Share (EPS) (continued)
 Three Months Ended March 31, 2008Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPS:Net income
    
    $
    23,202,000
    
    
    
    110,546,311
    
    
    $
    0.21Effect of dilutive securities:Stock options and restricted stock
    
    
    
    
    
    
    934,990
    
    
    $
    Diluted EPS:Net income
    
    $
    23,202,000
    
    
    
    111,481,301
    
    
    $
    0.21
 All stock options outstanding during the three months ended March 31, 2008, were included in the
computation of diluted EPS as the options exercise prices were less than the average market
price of the common shares. Options to purchase 265,360 shares of common stock with exercise
prices ranging from $2.24 to $4.20 per share were outstanding during the three months ended
March 31, 2009, but were not included in the computation of diluted EPS because the options
exercise prices were greater than the average market price of the common shares and would have
been anti-dilutive.
 3.
    
    Business Segments The five primary services we provide are as follows: International Drilling, U.S. Drilling,
 Project Management and Engineering Services, Construction Contract and
Rental Tools. In the first quarter of 2008, the Company created a new segment called Project
Management and Engineering Services by combining our labor, operations and maintenance and
engineering services contracts which had been previously reported in our U.S. Drilling or
International Drilling segments. The new segment was created in anticipation of the
significant expansion of these projects and services and senior managements resultant
separate performance assessment and resource allocation for this segment. The new segment
operations, unlike our U.S. and International Drilling and Rental Tools operations, generally
require little or no capital expenditures, and therefore have different performance assessment
and resource needs. The Company anticipates further growth of this segment of our business
and reviews and assesses its performance separately. In the second quarter of 2008, the
Company created a new segment called Construction Contract to reflect the Companys
Engineering, Procurement, Construction and Installation contract (EPCI). The Construction
Contract segment income (fees) is accounted for on a percentage of completion basis using the
cost-to-cost method. Revenues received and costs incurred related to the contract are
recorded on a gross basis.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 3.
    
    Business Segments (continued)Information regarding our operations by industry segment for the three months ended March 31,
2009 and 2008 is as follows:
 Three Months Ended March 31,2009
    
    
    2008(Dollars in Thousands)Revenues:International Drilling
    
    $
    77,381
    
    
    $
    68,740U.S. Drilling
    
    
    9,856
    
    
    
    45,888Project Management and Engineering Services
    
    
    32,054
    
    
    
    19,179Construction Contract
    
    
    16,745
    
    
    
    Rental Tools
    
    
    37,889
    
    
    
    39,471Total revenues
    
    $
    173,925
    
    
    $
    173,278Operating margin:International Drilling
    
    $
    15,912
    
    
    $
    5,759U.S. Drilling
    
    
    (10,458
    )
    
    
    15,673Project Management and Engineering Services
    
    
    6,160
    
    
    
    3,518Construction Contract
    
    
    831
    
    
    
    Rental Tools
    
    
    13,181
    
    
    
    16,540Total operating margin
    
    
    25,626
    
    
    
    41,490General and administration expense
    
    
    (13,060
    )
    
    
    (6,668
    )Gain on disposition of assets, net
    
    
    78
    
    
    
    579Total operating income
    
    
    12,644
    
    
    
    35,401Interest expense
    
    
    (8,066
    )
    
    
    (6,837
    )Other
    
    
    274
    
    
    
    (677
    )Income before income taxes
    
    $
    4,852
    
    
    $
    27,887
 4.
    
    Disposition of Assets Asset dispositions in the first three months of 2008 included the
sale of Rig 206 in Indonesia, which we sold at our net book value and miscellaneous equipment
that resulted in a recognized gain of $0.6 million. In the first three months of 2009 asset
dispositions consisted primarily of the sale of miscellaneous equipment, resulting in an
immaterial recognized gain.5.
    
    Accounting for Uncertainty in Income Taxes FIN 48 prescribes a recognition threshold and a
measurement attribute for the financial statement recognition and measurement of tax positions
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 March
2008, the Company resolved the pending tax case with the Kazakhstan Ministry of Finance by
paying the reduced interest assessment related to tax payments made in 2007 (see Note 8 -
Kazakhstan Tax Case), and we accordingly reduced the previously recorded accruals based on the
final resolution of this matter. During March 2009, the Company recognized $0.7 million of
expense related to certain intercompany transactions between our U.S. companies and foreign
affiliates. As of March 31, 2009, the Company had a remaining liability for unrecognized tax
benefits of $12.3 million primarily related to foreign operations.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 6.
    
    Income Tax Expense Income tax expense was $2.7 million for the first quarter of 2009.7.
    
    Saudi Arabia Joint Venture On April 9, 2008, a subsidiary of Parker executed an agreement
(Sale Agreement) to sell its 50 percent share interest in Al-Rushaid Parker Drilling Co.
Ltd. (ARPD) to an affiliate of the Al Rushaid subsidiary that owned the remaining 50 percent
interest. The terms of the Sale Agreement provided for a $2.0 million payment to Parkers
subsidiary as consideration for the 50 percent share interest of the Parker subsidiary and
partial repayment of investments and advances of the Parker subsidiary to ARPD, including a
$5.0 million advance in January 2008. During the first quarter of 2008, the Parker subsidiary
made the decision to terminate any future funding to ARPD, and accordingly, the Company did
not record equity in losses of ARPD in the first quarter of 2008. We recognized a $1.1
million loss, net of income taxes, in the first quarter of 2008 primarily as a result of
nonrecoverable costs, as per the terms of the Sale Agreement, incurred by the Parker affiliate
to support ARPD operations during the current quarter. The Parker subsidiary received the
$2.0 million on April 15, 2008 in full settlement of the Companys investment in and advances
to ARPD.The Sale Agreement obligates the resulting Saudi shareholders to indemnify the Parker subsidiary
and its affiliates from claims arising out of or related to the operations of ARPD, including
the drilling contracts between ARPD and Saudi Aramco, ARPDs bank loans and vendors providing
goods or services to ARPD. Each party has agreed to waive any claims that it may have against
the other party arising out of the business of ARPD on or before the closing date, and subject
to the formal transfer of the shares the Parker subsidiary has agreed to disclaim any remaining
rights with respect to the unpaid portion of shareholder loans and payables owed by ARPD to the
Parker subsidiary. The formal transfer of shares was approved by the Saudi Arabian authorities
in July 2008.The agreement also provides that there are no restrictions on Parker or any of its affiliates
with regard to competing with ARPD in the future, including in Saudi Arabia.9.
    
    Kazakhstan Tax Case- On October 12, 2005, 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) assessing PKD
Kazakhstan an amount of KZT (Kazakhstan Tenge) 14.9 billion (approximately $125.8 million).
Approximately KZT7.5 billion or $63.3 million was assessed for import Value Added Tax (VAT),
administrative fines and interest on equipment imported to perform the drilling contracts (the
VAT Assessment) and approximately KZT7.4 billion or $62.5 million for corporate income tax,
individual income tax and social tax, administrative fines and interest in connection with the
reimbursements received by PDCIL from a client for the upgrade of Barge Rig 257 and other
issues related to PKD Kazakhstans operations in the Republic of Kazakhstan (the Income Tax
Assessment).On May 24, 2006, the Supreme Court of the Republic of Kazakhstan (SCK) issued a decision
upholding the VAT Assessment. Consistent with its contractual obligations, on November 20,
2006, the client advanced the actual amount of the VAT Assessment and this amount has been
remitted to MinFin. The administrative fines related to the VAT Assessment are being appealed
by the client who is contractually responsible to reimburse PKD Kazakhstan for any
administrative fines ultimately assessed. The client has also contractually agreed to reimburse
PKD Kazakhstan for any incremental income taxes that PKD Kazakhstan incurs from the
reimbursement of this VAT Assessment.After multiple appeals to the SCK and two meetings of the U.S. Competent Authorities under the
Mutual Agreement Procedure of the U.S.- Kazakhstan Tax Treaty, the SCK ultimately upheld the
Income Tax Assessment and on December 12, 2007, PKD Kazakhstan paid the principal tax portion of
the Income Tax Assessment, net of estimated taxes previously paid. After a further appeal
against the interest portion of the notice of assessment, on February 25, 2008, the Atyrau
Economic Court issued a ruling that interest on the income tax assessed should accrue from the
October 12, 2005 assessment date as opposed to the original assessment in 2001, which resulted
in a revised interest assessment by the Atyrau Tax Committee of approximately US$13 million,
which was paid by PKD Kazakhstan on March 14, 2008, in final resolution of this matter.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 9.
    
    Long-Term Debt
 March 31,
    
    
    December 31,2009
    
    
    2008(Dollars in Thousands)Convertible Senior Notes payable in July
2012 with coupon rate at 2.125% payable
semi-annually in January and July, net of
unamortized discount of $18,447 at March 31,
2009 and $19,679 at December 31, 2008
    
    $
    106,553
    
    
    $
    105,321Senior Notes payable in October 2013 with
coupon rate at 9.625% payable semi-annually in
April and October net of unamortized premium
of $2,911at March 31, 2009 and $3,073 at
December 31, 2008
    
    
    227,911
    
    
    
    228,073Term Note with amortization beginning
September 30, 2009 at equal installments of
$3.0 million per quarter
    
    
    50,000
    
    
    
    50,000Revolving Credit Facility with interest
at prime, plus an applicable margin or
LIBOR, plus an applicable margin
    
    
    62,000
    
    
    
    58,000Total debt
    
    
    446,464
    
    
    
    441,394Less current portion
    
    
    9,000
    
    
    
    6,000Total long-term debt
    
    $
    437,464
    
    
    $
    435,394
 In May 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position
(FSP) Accounting Principles Board (APB) 14-1, Accounting for Convertible Debt Instruments
that May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), (FSP APB
14-1). The FSP requires that the liability and equity components of convertible debt
instruments that may be settled in cash upon conversion (including partial cash settlement),
commonly referred to as Instrument C under EITF issue No. 90-19, Convertible Bonds With Issuer
Options to Settle for Cash upon Conversion, be separated to account for the fair value of the
debt and equity components as of the date of issuance to reflect the issuers non-convertible
debt borrowing rate. The FSP is effective for financial periods beginning after December 15,
2008 and is applied retrospectively to all periods presented (retroactive restatement) pursuant
to the guidance in SFAS 154, Accounting Changes and Error Corrections (see Note 1).On May 15, 2008 we entered into a new Credit Agreement (2008 Credit Facility) with a five year
senior secured $80.0 million revolving credit facility (Revolving Credit Facility) and a senior
secured term loan facility (Term Loan Facility) of up to $50.0 million. The obligations of
the Company under the 2008 Credit Facility are guaranteed by substantially all of the Companys
domestic subsidiaries, except for domestic subsidiaries owned by foreign subsidiaries and
certain immaterial subsidiaries, each of which has executed a guaranty. The 2008 Credit
Facility contains customary affirmative and negative covenants such as minimum ratios for
consolidated leverage, consolidated interest coverage and consolidated senior secured leverage.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 9.
    
    Long-Term Debt (continued)The 2008 Credit Facility is available for general corporate purposes and to fund reimbursement
obligations under letters of credit the banks issue on our behalf pursuant to this facility.
Revolving loans are available under the 2008 Credit Facility subject to a borrowing base
calculation based on a percentage of eligible accounts receivable, certain specified barge
drilling rigs and eligible rental equipment of the Company and its subsidiary guarantors. As of
March 31, 2009, there were $17.7 million in letters of credit outstanding, $50.0 million
outstanding on the Term Loan Facility and $62.0 million outstanding on the Revolving Credit
Facility. As of March 31, 2009, the amount drawn represents nearly 100 percent of the capacity
of the Revolving Credit Facility. The Term Loan will begin amortizing on September 30, 2009 at
equal installments of $3.0 million per quarter. On January 30, 2009, Lehman Commercial Paper,
Inc. assigned its obligations under the 2008 Credit Facility to Trustmark National Bank. Upon
assignment, Trustmark National Bank fully funded Lehman Commercial Paper, Inc.s commitments,
including an additional $4.0 million that Lehman Commercial Paper, Inc. did not fund in October
2008, therefore, increasing our borrowings under the Revolving Credit Facility to $62.0 million.
The Company expects to use the drawn amounts over the next twelve months to fund construction of
two new rigs for work in Alaska. As of March 31, 2009 the Company is
in compliance with all covenants.10.
    
    ContingenciesBangladesh ClaimIn September 2005, a subsidiary of the Company was served with a lawsuit filed in the 152nd
District Court of Harris County State of Texas on behalf of numerous citizens of Bangladesh
claiming $250 million in damages due to various types of property damage and personal injuries
(none involving loss of life) arising as a result of two blowouts that occurred in Bangladesh in
January and June 2005, although only the June 2005 blowout involved the Company. The court
dismissed the case on the basis that Houston, Texas, is not the appropriate location for this
suit to be filed. The plaintiffs appealed this dismissal. The Court of Appeals affirmed the
dismissal which is now final because the plaintiffs failed to lodge an appeal with the Supreme
Court within the required time period. No amounts were accrued at March 31, 2009.Asbestos-Related ClaimsIn August 2004, the Company was notified that certain of its subsidiaries have been named, along
with other defendants, in several complaints that have been filed in the Circuit Courts of the
State of Mississippi by several hundred persons that allege that they were employed by some of
the named defendants between approximately 1965 and 1986. The complaints name as defendants
numerous other companies that are not affiliated with the Company, including companies that
allegedly manufactured drilling-related products containing asbestos that are the subject of the
complaints.The complaints allege that the Companys subsidiaries and other drilling contractors used
asbestos-containing products in offshore drilling operations, land-based drilling operations and
in drilling structures, drilling rigs, vessels and other equipment and assert claims based on,
among other things, negligence and strict liability and claims under the Jones Act and that the
plaintiffs are entitled to monetary damages. Based on the report of the special master, these
complaints have been severed and venue of the claims transferred to the county in which the
plaintiff resides or the county in which the cause of action allegedly accrued. Subsequent to
the filing of amended complaints, Parker Drilling has joined with other co-defendants in filing
motions to compel discovery to determine what plaintiffs have an employment relationship with
which defendant, including whether or not any plaintiffs have an employment relationship with
subsidiaries of Parker Drilling. Out of 668 amended single-plaintiff complaints filed to date,
sixteen (16) plaintiffs have identified Parker Drilling or one of its affiliates as a defendant.
Discovery is proceeding in groups of 60 and none of the plaintiff complaints naming Parker are
included in the first 60 (Group I). The initial discovery of Group I resulted in certain
dismissals with prejudice, two dismissals without prejudice and two withdraws from Group I,
leaving only 40 plaintiffs remaining in Group I. Selection of Discovery Group II was completed
on April 21, 2008. Out of the 60 plaintiffs selected, Parker Drilling was named in one suit in
which the plaintiff claims that during 1973 he earned $587.40 while working for a former
subsidiary of a company Parker Drilling acquired in 1996.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 10.
    
    Contingencies (continued)Asbestos-Related Claims(continued)The subsidiaries named in these asbestos-related lawsuits intend to defend themselves vigorously
and, based on the information available to the Company at this time, the Company does not expect
the outcome to have a material adverse effect on its financial condition, results of operations
or cash flows; however, the Company is unable to predict the ultimate outcome of these lawsuits.
No amounts were accrued at March 31, 2009.Gulfco SiteSeveral years ago the Company 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 in 2003 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
successor to a party who owned the Gulfco site during the time when chemical releases took place
there. Two other parties have been performing that work since mid-2005 under an earlier version
of the same order. The subsidiary believes that it has a sufficient cause to decline
participation under the order and has notified the EPA of that decision. Non-compliance with an
EPA order absent sufficient cause for doing so can result in substantial penalties under CERCLA.
The subsidiary is continuing to evaluate its relationship to the site and has conferred with
the EPA and the other parties in an effort to resolve the matter. The Company has not yet
estimated the amount or impact on our operations, financial position or cash flows of any costs
related to the site. To date, the EPA and the other two parties have spent over $2.7 million
studying and conducting initial remediation of the site. It is anticipated that an additional
$1.3 million will be required to complete the remediation. Other costs (not yet quantified)
such as interest and administrative overhead could be added to any action against the Company.
Although we can provide no assurance as to the total amount necessary to finally resolve this
matter, we currently anticipate that the total claim will not exceed $5 million and will be
shared by all responsible parties. The Company does not believe it has any obligation with
respect to the remediation of the property, and accordingly no accrual was made as of March 31,
2009.Customs Agent InvestigationAs previously disclosed, the Company 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 the Companys utilization of the services of a customs agent. In
response to those requests, the Company is conducting an internal investigation. The DOJ and
the SEC are conducting parallel investigations into possible violations of U.S. law by the
Company, including the Foreign Corrupt Practices Act (the FCPA). In particular, the DOJ and
the SEC are investigating the Companys use of customs agents in certain countries in which the
Company currently operates or formerly operated, including Kazakhstan and Nigeria. The Company
is fully cooperating with the DOJ and SEC investigations. 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. If we are not in compliance with the FCPA and other laws
governing the conduct of business with foreign government entities (including other United
States laws and regulations as well as local laws), we may be subject to criminal and civil
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 STATEMENTS (continued)
 10.
    
    Contingencies (continued)Economic Sanctions ComplianceOur international operations 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 that may have violated
applicable U.S. laws and regulations. In addition, we have engaged in drilling wells in the
Korpedje Field in Turkmenistan, from where natural gas may be exported by pipeline to Iran. We
are currently reviewing 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. Although we are unable to predict the scope or result
of this internal review or its ultimate outcome, we have initiated voluntary disclosure of these
potential compliance issues to the appropriate U.S. government agency. If we are 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.11.
    
    Recent Accounting Pronouncements In April 2009, the FASB issued FSP SFAS 107-1 and APB
28-1, Interim Disclosures about Fair Value of Financial Instruments. This FSP which amends
SFAS No. 107, Disclosures about Fair Value of Financial Instruments, to require
publicly-traded companies, as defined in APB Opinion No. 28, Interim Financial Reporting, to
provide disclosures on the fair value of financial instruments in interim financial
statements. FSP SFAS 107-1 and APB 28-1 is effective for interim periods ending after June
15, 2009. We will adopt the new disclosure requirements in our June 30, 2009 financial
statements.12.
    
    Parent, Guarantor, Non-Guarantor Unaudited Consolidating Condensed Financial Statements Set
forth on the following pages are the consolidating condensed financial statements of (i)
Parker Drilling, (ii) its restricted subsidiaries that are guarantors of the Senior Notes, and
Convertible Senior Notes (the Notes) and (iii) the restricted and unrestricted subsidiaries
that are not guarantors of the Notes. The Notes are guaranteed by substantially all of the
domestic 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 directly or
indirectly owned 100% by the parent company, all guarantees are full and unconditional and all
guarantees are joint and several.
 15




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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 12.
    
    Parent, Guarantor, Non-Guarantor Unaudited Consolidating Condensed Financial Statements (continued)AralParker (a Kazakhstan joint stock company, owned 100 percent by Parker Drilling (Kazakstan),
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 Limited Liability Company, Parker Cyprus Leasing Limited, Parker Cyprus 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., and Parker Enex, LLC are all
non-guarantor subsidiaries. The Company is providing consolidating condensed financial
information of the parent, Parker Drilling, the guarantor subsidiaries, and the non-guarantor
subsidiaries as of March 31, 2009 and December 31, 2008 and for the quarters ended March 31,
2009 and 2008. The consolidating condensed financial statements present investments in both
consolidated and unconsolidated subsidiaries using the equity method of accounting.
 16




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PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
 March 31, 2009Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    85,826
    
    
    $
    7,466
    
    
    $
    55,111
    
    
    $
    
    
    
    $
    148,403Accounts and notes receivable, net
    
    
    49,523
    
    
    
    202,012
    
    
    
    151,208
    
    
    
    (220,410
    )
    
    
    182,333Rig materials and supplies
    
    
    
    
    
    
    10,989
    
    
    
    19,212
    
    
    
    
    
    
    
    30,201Deferred costs
    
    
    
    
    
    
    1,644
    
    
    
    5,400
    
    
    
    
    
    
    
    7,044Deferred income taxes
    
    
    9,735
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,735Other tax assets
    
    
    78,144
    
    
    
    (41,820
    )
    
    
    (1,470
    )
    
    
    
    
    
    
    34,854Other current assets
    
    
    557
    
    
    
    13,909
    
    
    
    12,226
    
    
    
    
    
    
    
    26,692Total current assets
    
    
    223,785
    
    
    
    194,200
    
    
    
    241,687
    
    
    
    (220,410
    )
    
    
    439,262Property, plant and equipment, net
    
    
    79
    
    
    
    497,575
    
    
    
    209,351
    
    
    
    123
    
    
    
    707,128Investment in subsidiaries and intercompany advances
    
    
    910,363
    
    
    
    938,810
    
    
    
    (105
    )
    
    
    (1,849,068
    )
    
    
    Investment in and advances to unconsolidated joint venture
    
    
    
    
    
    
    4,620
    
    
    
    (4,620
    )
    
    
    
    
    
    
    Other noncurrent assets
    
    
    34,141
    
    
    
    17,531
    
    
    
    7,240
    
    
    
    
    
    
    
    58,912Total assets
    
    $
    1,168,368
    
    
    $
    1,652,736
    
    
    $
    453,553
    
    
    $
    (2,069,355
    )
    
    $
    1,205,302LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    9,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    9,000Accounts payable and accrued liabilities
    
    
    59,348
    
    
    
    343,953
    
    
    
    101,340
    
    
    
    (369,365
    )
    
    
    135,276Accrued income taxes
    
    
    1,235
    
    
    
    3,295
    
    
    
    5,829
    
    
    
    
    
    
    
    10,359Total current liabilities
    
    
    69,583
    
    
    
    347,248
    
    
    
    107,169
    
    
    
    (369,365
    )
    
    
    154,635Long-term debt
    
    
    437,464
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    437,464Other long-term liabilities
    
    
    10
    
    
    
    12,892
    
    
    
    6,440
    
    
    
    
    
    
    
    19,342Long-term deferred tax liability
    
    
    
    
    
    
    88
    
    
    
    7,045
    
    
    
    
    
    
    
    7,133Intercompany payables
    
    
    74,583
    
    
    
    583,027
    
    
    
    71,299
    
    
    
    (728,909
    )
    
    
    Contingencies (Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders equity:Common stock
    
    
    19,351
    
    
    
    39,899
    
    
    
    21,153
    
    
    
    (61,052
    )
    
    
    19,351Capital in excess of par value
    
    
    621,570
    
    
    
    997,082
    
    
    
    189,756
    
    
    
    (1,186,838
    )
    
    
    621,570Retained earnings (accumulated deficit)
    
    
    (54,193
    )
    
    
    (327,500
    )
    
    
    50,691
    
    
    
    276,809
    
    
    
    (54,193
    )Total stockholders equity
    
    
    586,728
    
    
    
    709,481
    
    
    
    261,600
    
    
    
    (971,081
    )
    
    
    586,728Total liabilities and stockholders equity
    
    $
    1,168,368
    
    
    $
    1,652,736
    
    
    $
    453,553
    
    
    $
    (2,069,355
    )
    
    $
    1,205,302
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PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
 December 31, 2008Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    111,324
    
    
    $
    9,741
    
    
    $
    51,233
    
    
    $
    
    
    
    $
    172,298Accounts and notes receivable, net
    
    
    51,792
    
    
    
    217,435
    
    
    
    131,591
    
    
    
    (214,654
    )
    
    
    186,164Rig materials and supplies
    
    
    
    
    
    
    11,518
    
    
    
    18,723
    
    
    
    
    
    
    
    30,241Deferred costs
    
    
    
    
    
    
    2,000
    
    
    
    5,804
    
    
    
    
    
    
    
    7,804Deferred income taxes
    
    
    9,735
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,735Other tax assets
    
    
    83,788
    
    
    
    (41,008
    )
    
    
    (1,856
    )
    
    
    
    
    
    
    40,924Other current assets
    
    
    549
    
    
    
    13,755
    
    
    
    11,875
    
    
    
    (54
    )
    
    
    26,125Total current assets
    
    
    257,188
    
    
    
    213,441
    
    
    
    217,370
    
    
    
    (214,708
    )
    
    
    473,291Property, plant and equipment, net
    
    
    79
    
    
    
    465,659
    
    
    
    209,686
    
    
    
    124
    
    
    
    675,548Investment in subsidiaries and intercompany advances
    
    
    867,684
    
    
    
    1,066,216
    
    
    
    (88,992
    )
    
    
    (1,844,908
    )
    
    
    Investment in and advances to unconsolidated joint venture
    
    
    
    
    
    
    4,620
    
    
    
    (4,620
    )
    
    
    
    
    
    
    Other noncurrent assets
    
    
    27,607
    
    
    
    21,215
    
    
    
    8,059
    
    
    
    
    
    
    
    56,881Total assets
    
    $
    1,152,558
    
    
    $
    1,771,151
    
    
    $
    341,503
    
    
    $
    (2,059,492
    )
    
    $
    1,205,720LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    6,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,000Accounts payable and accrued liabilities
    
    
    53,859
    
    
    
    337,464
    
    
    
    100,305
    
    
    
    (351,230
    )
    
    
    140,398Accrued income taxes
    
    
    540
    
    
    
    4,861
    
    
    
    6,729
    
    
    
    
    
    
    
    12,130Total current liabilities
    
    
    60,399
    
    
    
    342,325
    
    
    
    107,034
    
    
    
    (351,230
    )
    
    
    158,528Long-term debt
    
    
    435,394
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    435,394Other long-term liabilities
    
    
    10
    
    
    
    14,351
    
    
    
    7,035
    
    
    
    
    
    
    
    21,396Long-term deferred tax liability
    
    
    
    
    
    
    1,237
    
    
    
    6,993
    
    
    
    
    
    
    
    8,230Intercompany payables
    
    
    74,583
    
    
    
    583,027
    
    
    
    71,299
    
    
    
    (728,909
    )
    
    
    Contingencies (Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders equity:Common stock
    
    
    18,910
    
    
    
    39,899
    
    
    
    21,153
    
    
    
    (61,052
    )
    
    
    18,910Capital in excess of par value
    
    
    619,561
    
    
    
    1,045,727
    
    
    
    141,112
    
    
    
    (1,186,839
    )
    
    
    619,561Retained earnings (accumulated deficit)
    
    
    (56,299
    )
    
    
    (255,415
    )
    
    
    (13,123
    )
    
    
    268,538
    
    
    
    (56,299
    )Total stockholders equity
    
    
    582,172
    
    
    
    830,211
    
    
    
    149,142
    
    
    
    (979,353
    )
    
    
    582,172Total liabilities and stockholders equity
    
    $
    1,152,558
    
    
    $
    1,771,151
    
    
    $
    341,503
    
    
    $
    (2,059,492
    )
    
    $
    1,205,720
 18




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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, 2009Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedTotal revenues
    
    $
    
    
    
    $
    122,322
    
    
    $
    80,229
    
    
    $
    (28,626
    )
    
    $
    173,925Operating expenses
    
    
    
    
    
    
    86,883
    
    
    
    62,918
    
    
    
    (28,626
    )
    
    
    121,175Depreciation and amortization
    
    
    
    
    
    
    20,054
    
    
    
    7,070
    
    
    
    
    
    
    
    27,124Total operating gross margin
    
    
    
    
    
    
    15,385
    
    
    
    10,241
    
    
    
    
    
    
    
    25,626General and administration expense (1)
    
    
    (41
    )
    
    
    (12,995
    )
    
    
    (24
    )
    
    
    
    
    
    
    (13,060
    )Gain on disposition of assets, net
    
    
    
    
    
    
    13
    
    
    
    65
    
    
    
    
    
    
    
    78Total operating income (loss)
    
    
    (41
    )
    
    
    2,403
    
    
    
    10,282
    
    
    
    
    
    
    
    12,644Other income
and (expense):Interest expense
    
    
    (8,882
    )
    
    
    (11,775
    )
    
    
    (103
    )
    
    
    12,694
    
    
    
    (8,066
    )Interest income
    
    
    10,705
    
    
    
    1,657
    
    
    
    618
    
    
    
    (12,694
    )
    
    
    286Other
    
    
    (3
    )
    
    
    (21
    )
    
    
    12
    
    
    
    
    
    
    
    (12
    )Equity in net earnings of subsidiaries
    
    
    (8,271
    )
    
    
    
    
    
    
    
    
    
    
    8,271
    
    
    
    Total other income and (expense)
    
    
    (6,451
    )
    
    
    (10,139
    )
    
    
    527
    
    
    
    8,271
    
    
    
    (7,792
    )Income (benefit) before income taxes
    
    
    (6,492
    )
    
    
    (7,736
    )
    
    
    10,809
    
    
    
    8,271
    
    
    
    4,852Income tax expense (benefit):Current
    
    
    (504
    )
    
    
    3,161
    
    
    
    4,081
    
    
    
    
    
    
    
    6,738Deferred
    
    
    (8,094
    )
    
    
    4,051
    
    
    
    51
    
    
    
    
    
    
    
    (3,992
    )Total income tax expense (benefit)
    
    
    (8,598
    )
    
    
    7,212
    
    
    
    4,132
    
    
    
    
    
    
    
    2,746Net income (loss)
    
    $
    2,106
    
    
    $
    (14,948
    )
    
    $
    6,677
    
    
    $
    8,271
    
    
    $
    2,106
 
 (1)
    
    All field operations general and administration expenses are included in operating expenses. 19




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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, 2008Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedTotal revenues
    
    $
    
    
    
    $
    128,682
    
    
    $
    65,905
    
    
    $
    (21,309
    )
    
    $
    173,278Operating expenses
    
    
    1
    
    
    
    74,363
    
    
    
    52,567
    
    
    
    (21,309
    )
    
    
    105,622Depreciation and amortization
    
    
    
    
    
    
    20,513
    
    
    
    5,653
    
    
    
    
    
    
    
    26,166Total
operating gross margin
    
    
    (1
    )
    
    
    33,806
    
    
    
    7,685
    
    
    
    
    
    
    
    41,490General and administration expense (1)
    
    
    (80
    )
    
    
    (6,584
    )
    
    
    (4
    )
    
    
    
    
    
    
    (6,668
    )Gain (loss) on disposition of assets, net
    
    
    
    
    
    
    582
    
    
    
    (3
    )
    
    
    
    
    
    
    579Total operating income (loss)
    
    
    (81
    )
    
    
    27,804
    
    
    
    7,678
    
    
    
    
    
    
    
    35,401Other income and (expense):Interest expense
    
    
    (8,021
    )
    
    
    (11,786
    )
    
    
    (80
    )
    
    
    13,050
    
    
    
    (6,837
    )Interest income
    
    
    10,689
    
    
    
    1,925
    
    
    
    804
    
    
    
    (13,050
    )
    
    
    368Equity in loss of unconsolidated joint
venture, and related charges net of taxes
    
    
    
    
    
    
    (1,105
    )
    
    
    
    
    
    
    
    
    
    
    (1,105
    )Other
    
    
    
    
    
    
    10
    
    
    
    50
    
    
    
    
    
    
    
    60Equity in net earnings of subsidiaries
    
    
    32,223
    
    
    
    
    
    
    
    
    
    
    
    (32,223
    )
    
    
    Total other income and (expense)
    
    
    34,891
    
    
    
    (10,956
    )
    
    
    774
    
    
    
    (32,223
    )
    
    
    (7,514
    )Income (loss) before income taxes
    
    
    34,810
    
    
    
    16,848
    
    
    
    8,452
    
    
    
    (32,223
    )
    
    
    27,887Income tax
expense (benefit):Current
    
    
    (2,568
    )
    
    
    (11,191
    )
    
    
    3,116
    
    
    
    
    
    
    
    (10,643
    )Deferred
    
    
    14,176
    
    
    
    838
    
    
    
    314
    
    
    
    
    
    
    
    15,328Income tax
expense (benefit)
    
    
    11,608
    
    
    
    (10,353
    )
    
    
    3,430
    
    
    
    
    
    
    
    4,685Net income (loss)
    
    $
    23,202
    
    
    $
    27,201
    
    
    $
    5,022
    
    
    $
    (32,223
    )
    
    $
    23,202
 
 (1)
    
    All field operations general and administration expenses are included in operating
expenses. 20




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PARKER DRILLING COMPANY AND SUBSIDIARIES CONSOLIDATING
CONDENSED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
 Three months ending March 31, 2009Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    2,106
    
    
    $
    (14,948
    )
    
    $
    6,677
    
    
    $
    8,271
    
    
    $
    2,106Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Depreciation and amortization
    
    
    
    
    
    
    20,054
    
    
    
    7,070
    
    
    
    
    
    
    
    27,124Gain on disposition of assets
    
    
    
    
    
    
    (13
    )
    
    
    (65
    )
    
    
    
    
    
    
    (78
    )Deferred tax
expense (benefit)
    
    
    (8,094
    )
    
    
    4,051
    
    
    
    51
    
    
    
    
    
    
    
    (3,992
    )Expenses not requiring cash
    
    
    3,907
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,907Equity in net earnings of subsidiaries
    
    
    8,271
    
    
    
    
    
    
    
    
    
    
    
    (8,271
    )
    
    
    Change in accounts receivable
    
    
    2,269
    
    
    
    22,509
    
    
    
    (19,617
    )
    
    
    
    
    
    
    5,161Change in other assets
    
    
    6,537
    
    
    
    22
    
    
    
    133
    
    
    
    
    
    
    
    6,692Change in liabilities
    
    
    7,685
    
    
    
    (20,319
    )
    
    
    (3,738
    )
    
    
    
    
    
    
    (16,372
    )Net cash provided by (used in) operating activities
    
    
    22,681
    
    
    
    11,356
    
    
    
    (9,489
    )
    
    
    
    
    
    
    24,548Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (47,650
    )
    
    
    (3,734
    )
    
    
    
    
    
    
    (51,384
    )Proceeds from the sale of assets
    
    
    
    
    
    
    124
    
    
    
    45
    
    
    
    
    
    
    
    169Net cash used in investing activities
    
    
    
    
    
    
    (47,526
    )
    
    
    (3,689
    )
    
    
    
    
    
    
    (51,215
    )Cash flows from financing activities:Proceeds
from draw on revolver credit facility
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000Excess tax
cost from stock-based compensation
    
    
    (1,228
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,228
    )Intercompany advances, net
    
    
    (50,951
    )
    
    
    33,895
    
    
    
    17,056
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    (48,179
    )
    
    
    33,895
    
    
    
    17,056
    
    
    
    
    
    
    
    2,772Net increase (decrease) in cash and cash equivalents
    
    
    (25,498
    )
    
    
    (2,275
    )
    
    
    3,878
    
    
    
    
    
    
    
    (23,895
    )Cash and
cash equivalents at beginning of year
    
    
    111,324
    
    
    
    9,741
    
    
    
    51,233
    
    
    
    
    
    
    
    172,298Cash and cash equivalents at end of period
    
    $
    85,826
    
    
    $
    7,466
    
    
    $
    55,111
    
    
    $
    
    
    
    $
    148,403
 21




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES CONSOLIDATING
CONDENSED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
 Three months ending March 31, 2008Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    23,202
    
    
    $
    27,201
    
    
    $
    5,022
    
    
    $
    (32,223
    )
    
    $
    23,202Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:Depreciation and amortization
    
    
    
    
    
    
    20,513
    
    
    
    5,653
    
    
    
    
    
    
    
    26,166Gain/(loss) on disposition of assets
    
    
    
    
    
    
    (582
    )
    
    
    3
    
    
    
    
    
    
    
    (579
    )Deferred income tax expense
    
    
    14,176
    
    
    
    838
    
    
    
    314
    
    
    
    
    
    
    
    15,328Equity in loss of unconsolidated joint venture
    
    
    
    
    
    
    1,105
    
    
    
    
    
    
    
    
    
    
    
    1,105Expenses not requiring cash
    
    
    4,092
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,092Equity in net earnings of subsidiaries
    
    
    (32,223
    )
    
    
    
    
    
    
    
    
    
    
    32,223
    
    
    
    Change in accounts receivable
    
    
    8,498
    
    
    
    9,971
    
    
    
    (30,954
    )
    
    
    
    
    
    
    (12,485
    )Change in other assets
    
    
    (2,242
    )
    
    
    (2,751
    )
    
    
    (633
    )
    
    
    
    
    
    
    (5,626
    )Change in liabilities
    
    
    4,638
    
    
    
    (56,993
    )
    
    
    17,073
    
    
    
    
    
    
    
    (35,282
    )Net cash provided by (used in) operating activities
    
    
    20,141
    
    
    
    (698
    )
    
    
    (3,522
    )
    
    
    
    
    
    
    15,921Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (33,815
    )
    
    
    (9,344
    )
    
    
    
    
    
    
    (43,159
    )Proceeds from the sale of assets
    
    
    
    
    
    
    1,227
    
    
    
    
    
    
    
    
    
    
    
    1,227Proceeds
from insurance settlements
    
    
    
    
    
    
    
    
    
    
    951
    
    
    
    
    
    
    
    951Investment in unconslidated joint venture
    
    
    
    
    
    
    (5,000
    )
    
    
    
    
    
    
    
    
    
    
    (5,000
    )Net cash used in investing activities
    
    
    
    
    
    
    (37,588
    )
    
    
    (8,393
    )
    
    
    
    
    
    
    (45,981
    )Cash flows from financing activities:Proceeds from draw on revolver credit facility
    
    
    15,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000Excess tax
cost from stock based compensation
    
    
    (331
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (331
    )Intercompany advances, net
    
    
    (44,566
    )
    
    
    37,809
    
    
    
    6,757
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    (29,897
    )
    
    
    37,809
    
    
    
    6,757
    
    
    
    
    
    
    
    14,669Net decrease in cash and cash equivalents
    
    
    (9,756
    )
    
    
    (477
    )
    
    
    (5,158
    )
    
    
    
    
    
    
    (15,391
    )Cash and
cash equivalents at beginning of year
    
    
    31,326
    
    
    
    8,314
    
    
    
    20,484
    
    
    
    
    
    
    
    60,124Cash and cash equivalents at end of period
    
    $
    21,570
    
    
    $
    7,837
    
    
    $
    15,326
    
    
    $
    
    
    
    $
    44,733
 22




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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;
    
    entering into joint venture agreements;
    
    our future liquidity;
    
    availability and sources of funds to reduce our debt and expectations of when debt will
be reduced;
    
    the outcome of pending or future legal proceedings, tax assessments and other claims;
    
    the availability of insurance coverage for pending or future claims;
    
    the enforceability of contractual indemnification in relation to pending or future
claims;
    
    compliance with covenants under our senior 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;
    
    inability of the Company 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 or ability
to remit funds to the U.S., that adversely affect the cost of doing business;
    
    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 Securities and
Exchange Commission and the Department of Justice into possible violations of U.S. law,
including the Foreign Corrupt Practices Act;
    
    adverse environmental events;
    
    adverse weather conditions;
    
    global health concerns;
 23




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##### Table of Contents



DISCLOSURE NOTE REGARDING FORWARD-LOOKING STATEMENTS (continued)
 
    
    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;
    
    shortages of skilled labor;
    
    unanticipated cancellation of contracts by operators;
    
    breakdown of equipment;
    
    other operational problems including delays in start-up of operations;
    
    changes in competition;
    
    the effect of litigation and contingencies; and
    
    other similar factors (some of which are discussed in documents referred to in this
Form 10-Q, including the risk factors described in our 2008 Annual Report on Form 10-K and
our other reports and filings with the Securities and Exchange Commission).
  OVERVIEW AND OUTLOOK
 Summary
  Overview
    Outlook
  24




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##### Table of Contents



OUTLOOK AND OVERVIEW (continued)
 Outlook
    RESULTS OF OPERATIONS
 Three Months Ended March 31, 2009 Compared with Three Months Ended March 31, 2008
    Three Months Ended March 31,2009
    
    
    2008(Dollars in Thousands)Revenues:International Drilling
    
    $
    77,381
    
    
    
    44
    %
    
    $
    68,740
    
    
    
    40
    %U.S. Drilling
    
    
    9,856
    
    
    
    6
    %
    
    
    45,888
    
    
    
    26
    %Project Management and Engineering Services
    
    
    32,054
    
    
    
    18
    %
    
    
    19,179
    
    
    
    11
    %Construction Contract
    
    
    16,745
    
    
    
    10
    %
    
    
    
    
    
    
    Rental Tools
    
    
    37,889
    
    
    
    22
    %
    
    
    39,471
    
    
    
    23
    %Total revenues
    
    $
    173,925
    
    
    
    100
    %
    
    $
    173,278
    
    
    
    100
    %Operating gross margin:International Drilling gross margin excluding depreciation and amortization (1)
    
    $
    27,604
    
    
    
    36
    %
    
    $
    16,119
    
    
    
    23
    %U.S. Drilling gross margin excluding depreciation and amortization (1)
    
    
    (3,280
    )
    
    
    -33
    %
    
    
    24,366
    
    
    
    53
    %Project Management and Engineering Services gross margin
excluding depreciation and amortization (1)
    
    
    6,160
    
    
    
    19
    %
    
    
    3,518
    
    
    
    18
    %Construction Contract excluding depreciation and amortization (1)
    
    
    831
    
    
    
    5
    %
    
    
    
    
    
    
    Rental Tools gross margin excluding depreciation and amortization (1)
    
    
    21,435
    
    
    
    57
    %
    
    
    23,653
    
    
    
    60
    %Depreciation and amortization
    
    
    (27,124
    )
    
    
    
    
    
    
    (26,166
    )Total operating gross margin (2)
    
    
    25,626
    
    
    
    
    
    
    
    41,490General and administration expense
    
    
    (13,060
    )
    
    
    
    
    
    
    (6,668
    )Gain on disposition of assets, net
    
    
    78
    
    
    
    
    
    
    
    579Total operating income
    
    $
    12,644
    
    
    
    
    
    
    $
    35,401
 25




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
 (1)
    
    Gross margins, excluding depreciation and amortization, are computed as revenues less direct
operating expenses, excluding depreciation and amortization expense; gross margin percentages
are computed as gross margin, excluding depreciation and amortization, as a percent of
revenues. The gross margin amounts, excluding depreciation and amortization, and gross margin
percentages should not be used as a substitute for those amounts reported under accounting
principles generally accepted in the United States (GAAP). However, we monitor our business
segments based on several criteria, including gross margin. Management believes that this
information is useful to our investors because it more accurately reflects cash generated by
segment. Such gross margin amounts are reconciled to our most comparable GAAP measure as
follows:
 ProjectManagementandInternational
    

    
    
    
    
    Engineering
    
    
    ConstructionDrilling
    

    U.S. Drilling
    
    
    Services
    
    
    Contract
    
    
    Rental Tools(Dollars in Thousands)Three Months Ended March 31, 2009Drilling and rental operating income (2)
    
    $
    15,912
    

    $
    (10,458
    )
    
    $
    6,160
    
    
    $
    831
    
    
    $
    13,181Depreciation and amortization
    
    
    11,692
    

    
    7,178
    
    
    
    
    
    
    
    
    
    
    
    8,254Drilling and rental gross margin excluding depreciation and amortization
    
    $
    27,604
    

    $
    (3,280
    )
    
    $
    6,160
    
    
    $
    831
    
    
    $
    21,435Three Months Ended March 31, 2008Drilling and rental operating income (2)
    
    $
    5,759
    

    $
    15,673
    
    
    $
    3,518
    
    
    $
    
    
    
    $
    16,540Depreciation and amortization
    
    
    10,360
    

    
    8,693
    
    
    
    
    
    
    
    
    
    
    
    7,113Drilling and rental gross margin excluding depreciation and amortization
    
    $
    16,119
    

    $
    24,366
    
    
    $
    3,518
    
    
    $
    
    
    
    $
    23,653
 
 (2)
    
    Gross margin (operating)  revenues less direct operating expenses, including depreciation
and amortization expense. International Drilling Segment
    U.S. Drilling Segment
   26




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
 Project Management and Engineering Services Segment
  Construction Contract Segment
  Rental Tools Segment
   Other Financial Data
    27




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 Cash Flows
   Financing Activity
     28




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
 Financing Activity (continued)
  
    
    $125.0 million aggregate principal amount of Convertible Senior Notes at a coupon rate  of 2.125 percent, which are due July 15, 2012 net of $18.4 million in unamortized
debt discount;
    
    $225.0 million aggregate principal amount of 9.625 percent Senior Notes, which are due
October 1, 2013 plus an associated $2.9 million in unamortized debt premium; and,
    
    $112.0 million drawn against our 2008 Credit Facility, including $62.0 million on our
Revolving Credit Facility and $50.0 million on our Term Loan Facility, $9.0 million of
which is classified as short term.
    Less than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 Year
    
    
    Years 2-3
    
    
    Years 4-5
    
    
    5 Years(Dollars in Thousands)Contractual cash obligations:Long-term debt  principal (1)
    
    $
    400,000
    
    
    $
    9,000
    
    
    $
    21,000
    
    
    $
    370,000
    
    
    $
    Long-term debt  interest (1)
    
    
    119,103
    
    
    
    28,118
    
    
    
    54,943
    
    
    
    36,042
    
    
    
    Operating leases (2)
    
    
    8,350
    
    
    
    4,665
    
    
    
    2,676
    
    
    
    1,009
    
    
    
    Purchase commitments (3)
    
    
    30,318
    
    
    
    30,318
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    557,771
    
    
    $
    72,101
    
    
    $
    78,619
    
    
    $
    407,051
    
    
    $
    Commercial commitments:Long-term debt -Revolving credit facility (4)
    
    $
    62,000
    
    
    $
    
    
    
    $
    
    
    
    $
    62,000
    
    
    $
    Standby letters of credit (4)
    
    
    17,728
    
    
    
    17,728
    
    
    
    
    
    
    
    
    
    
    
    Total commercial commitments
    
    $
    79,728
    
    
    $
    17,728
    
    
    $
    
    
    
    $
    62,000
    
    
    $
    
 
 (1)
    
    Long-term debt includes the principal and interest cash obligations of the 9.625
percent Senior Notes and the 2.125 percent Convertible Senior Notes as well as $50.0
million of term loans drawn on our new Credit Facility. The remaining unamortized premium
of $2.9 million on the 9.625 percent Senior Notes and unamortized discount of $18.4 million
on the 2.125% Convertible Senior Notes are not included in the contractual cash obligations
schedule.(2)
    
    Operating leases consist of lease agreements in excess of one year for office space,
equipment, vehicles and personal property.(3)
    
    We have purchase commitments outstanding as of March 31, 2009, related to rig upgrade
projects and new rig construction.(4)
    
    We have a $130 million credit agreement of which $80.0 million is a revolving credit
facility. As of March 31, 2009, we had drawn down $62.0 million under the revolving credit
facility and $17.7 million of availability has been used to support letters of credit that
have been issued. The revolving credit facility expires May 14, 2013. 29




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 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
  30




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##### Table of Contents



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Issuer Purchases of Equity Securities
 Total Number of
    
    Average PriceDate
    
    Shares Purchased
    
    Paid Per ShareMarch 6, 2009
    
    
    21,304
    
    
    $
    1.40March 9, 2009
    
    
    23,959
    
    
    $
    1.39March 20, 2009
    
    
    23,005
    
    
    $
    1.82March 24, 2009
    
    
    392
    
    
    $
    2.00
 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   1.
    
    Election of Directors: The Stockholders elected two Class I directors to the board of
directors of Parker Drilling Company to serve for a three-year term, until 2012:
 R. Rudolph ReinfrankVotes cast in favor:
    
    
    97,760,671Votes withheld:
    
    
    2,577,640Robert W. GoldmanVotes cast in favor:
    
    
    97,838,230Votes withheld:
    
    
    2,500,081
 2.
    
    Election of independent registered public accountants: KPMG LLP was approved as the
independent registered public accountants for 2009 with:
 Votes cast in favor:
    
    
    98,288,136Votes against:
    
    
    1,810,778Abstain:
    
    
    239,397
 
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  ExhibitNumber
    
    Description10.1
    
    Separation Agreement and Release between Parker Drilling Company and Ronald C. Potter dated March 27, 200910.2
    
    Consulting Agreement between Parker Drilling Company and Ronald C. Potter dated March 27, 200931.1
    
    Section 302 Certification  Chairman and Chief Executive Officer31.2
    
    Section 302 Certification  Senior Vice President and Chief
Financial Officer32.1
    
    Section 906 Certification  Chairman and Chief Executive Officer32.2
    
    Section 906 Certification  Senior Vice President and Chief
Financial Officer
 31




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##### Table of Contents



SIGNATURES
  PARKER DRILLING COMPANYDate:  May 8, 2009
    By:
    /s/ Robert L. Parker Jr.Robert L. Parker Jr.Chairman and Chief Executive OfficerBy:
    /s/ W. Kirk BrassfieldW. Kirk BrassfieldSenior Vice President and Chief Financial Officer 32




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Description10.1
    
    Separation Agreement and Release
between Parker Drilling Company and Ronald C. Potter dated March 27, 2009.10.2
    
    Consulting Agreement between Parker
Drilling Company and Ronald C. Potter dated March 27, 2009.31.1
    
    Section 302 Certification  Chairman and Chief Executive Officer31.2
    
    Section 302 Certification  Senior Vice President and Chief
Financial Officer32.1
    
    Section 906 Certification  Chairman and Chief Executive Officer32.2
    
    Section 906 Certification  Senior Vice President and Chief
Financial Officer
 33