##### Table of Contents



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 June 30, 2010
 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
  Delaware(State or other jurisdiction of 
incorporation or organization)
    
    73-0618660(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
June 30, 2010 (Unaudited) and December 31, 2009
    
    
    3Consolidated Condensed Statements of Operations (Unaudited)
Three and Six Months Ended June 30, 2010 and 2009
    
    
    4Consolidated Condensed Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 2010 and 2009
    
    
    5Notes to the Unaudited Consolidated Condensed Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    27Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    39Item 4. Controls and Procedures
    
    
    39Part II.
    
    Other Information
    
    
    40Item 1. Legal Proceedings
    
    
    40Item 1A. Risk Factors
    
    
    40Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41Item 6. Exhibits
    
    
    41SignaturesOfficer CertificationsEX-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)
 June 30,
    
    
    December 31,2010
    
    
    2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    49,770
    
    
    $
    108,803Accounts and notes receivable, net
    
    
    165,120
    
    
    
    188,687Rig materials and supplies
    
    
    29,314
    
    
    
    31,633Deferred costs
    
    
    2,965
    
    
    
    4,531Deferred income taxes
    
    
    8,799
    
    
    
    9,650Other tax assets
    
    
    44,695
    
    
    
    37,818Other current assets
    
    
    66,711
    
    
    
    62,407Total current assets
    
    
    367,374
    
    
    
    443,529Property, plant and equipment less
accumulated depreciation and amortization of $854,800
at June 30, 2010 and $813,965 at December 31, 2009
    
    
    792,354
    
    
    
    716,798Deferred income taxes
    
    
    56,096
    
    
    
    55,749Other noncurrent assets
    
    
    30,600
    
    
    
    27,010Total assets
    
    $
    1,246,424
    
    
    $
    1,243,086LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    12,000
    
    
    $
    12,000Accounts payable and accrued liabilities
    
    
    156,857
    
    
    
    167,910Accrued income taxes
    
    
    4,045
    
    
    
    9,126Total current liabilities
    
    
    172,902
    
    
    
    189,036Long-term debt
    
    
    439,075
    
    
    
    411,831Other long-term liabilities
    
    
    30,880
    
    
    
    30,246Long-term deferred tax liability
    
    
    6,640
    
    
    
    16,074Contingencies (Note 6)
    
    
    
    
    
    
    Stockholders equity:Common stock
    
    
    19,487
    
    
    
    19,374Capital in excess of par value
    
    
    626,016
    
    
    
    623,557Accumulated deficit
    
    
    (48,576
    )
    
    
    (47,032
    )Total stockholders equity
    
    
    596,927
    
    
    
    595,899Total liabilities and stockholders equity
    
    $
    1,246,424
    
    
    $
    1,243,086
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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
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:International Drilling
    
    $
    52,932
    
    
    $
    79,279
    
    
    $
    116,807
    
    
    $
    156,660U.S. Drilling
    
    
    15,336
    
    
    
    12,889
    
    
    
    30,423
    
    
    
    22,745Rental Tools
    
    
    41,359
    
    
    
    28,160
    
    
    
    75,174
    
    
    
    66,049Project Management and Engineering Services
    
    
    26,363
    
    
    
    23,891
    
    
    
    50,804
    
    
    
    55,945Construction Contracts
    
    
    20,535
    
    
    
    77,572
    
    
    
    40,922
    
    
    
    94,317Total revenues
    
    
    156,525
    
    
    
    221,791
    
    
    
    314,130
    
    
    
    395,716Operating expenses:International Drilling
    
    
    39,423
    
    
    
    48,887
    
    
    
    86,596
    
    
    
    98,664U.S. Drilling
    
    
    13,540
    
    
    
    11,628
    
    
    
    26,514
    
    
    
    24,764Rental Tools
    
    
    14,268
    
    
    
    12,752
    
    
    
    26,894
    
    
    
    29,206Project Management and Engineering Services
    
    
    21,701
    
    
    
    18,283
    
    
    
    41,262
    
    
    
    44,177Construction Contracts
    
    
    20,043
    
    
    
    74,000
    
    
    
    41,240
    
    
    
    89,914Depreciation and amortization
    
    
    29,012
    
    
    
    28,951
    
    
    
    57,600
    
    
    
    56,075Total operating expenses
    
    
    137,987
    
    
    
    194,501
    
    
    
    280,106
    
    
    
    342,800Total operating gross margin
    
    
    18,538
    
    
    
    27,290
    
    
    
    34,024
    
    
    
    52,916General and administration expense
    
    
    (6,937
    )
    
    
    (11,126
    )
    
    
    (16,969
    )
    
    
    (24,186
    )Gain on disposition of assets, net
    
    
    1,712
    
    
    
    704
    
    
    
    2,384
    
    
    
    782Total operating income
    
    
    13,313
    
    
    
    16,868
    
    
    
    19,439
    
    
    
    29,512Other income and (expense):Interest expense
    
    
    (7,386
    )
    
    
    (7,504
    )
    
    
    (14,118
    )
    
    
    (15,570
    )Interest income
    
    
    78
    
    
    
    174
    
    
    
    152
    
    
    
    460Loss on extinguishment of debt
    
    
    (3,989
    )
    
    
    
    
    
    
    (7,209
    )
    
    
    Other
    
    
    115
    
    
    
    (68
    )
    
    
    257
    
    
    
    (80
    )Total other income and (expense)
    
    
    (11,182
    )
    
    
    (7,398
    )
    
    
    (20,918
    )
    
    
    (15,190
    )Income (loss) before income taxes
    
    
    2,131
    
    
    
    9,470
    
    
    
    (1,479
    )
    
    
    14,322Income tax expense (benefit):Current
    
    
    4,992
    
    
    
    6,161
    
    
    
    8,640
    
    
    
    12,899Deferred
    
    
    (3,368
    )
    
    
    (1,082
    )
    
    
    (8,575
    )
    
    
    (5,074
    )Total income tax expense (benefit)
    
    
    1,624
    
    
    
    5,079
    
    
    
    65
    
    
    
    7,825Net income (loss)
    
    $
    507
    
    
    $
    4,391
    
    
    $
    (1,544
    )
    
    $
    6,497Basic earnings (loss) per share:Net income (loss)
    
    $
    0.00
    
    
    $
    0.04
    
    
    $
    (0.01
    )
    
    $
    0.06Diluted earnings (loss) per share:Net income (loss)
    
    $
    0.00
    
    
    $
    0.04
    
    
    $
    (0.01
    )
    
    $
    0.06Number of common shares used in
computing earnings per shareBasic
    
    
    114,298,319
    
    
    
    113,180,858
    
    
    
    113,909,798
    
    
    
    112,723,230Diluted
    
    
    115,428,649
    
    
    
    114,757,123
    
    
    
    115,350,103
    
    
    
    114,107,675
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PARKER DRILLING COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 (Dollars in Thousands)
 (Unaudited)
 Six Months Ended June 30,2010
    
    
    2009Cash flows from operating activities:Net income (loss)
    
    $
    (1,544
    )
    
    $
    6,497Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    57,600
    
    
    
    56,075Loss on extinguishment of debt
    
    
    7,209
    
    
    
    Gain on disposition of assets
    
    
    (2,384
    )
    
    
    (782
    )Deferred income tax expense
    
    
    (8,575
    )
    
    
    (5,074
    )Expenses not requiring cash
    
    
    6,392
    
    
    
    5,947Change in accounts receivable
    
    
    24,908
    
    
    
    (809
    )Change in other assets
    
    
    (11,407
    )
    
    
    (2,247
    )Change in liabilities
    
    
    (18,006
    )
    
    
    (26,582
    )Net cash provided by operating activities
    
    
    54,193
    
    
    
    33,025Cash flows from investing activities:Capital expenditures
    
    
    (128,973
    )
    
    
    (93,978
    )Proceeds from the sale of assets
    
    
    2,798
    
    
    
    950Net cash used in investing activities
    
    
    (126,175
    )
    
    
    (93,028
    )Cash flows from financing activities:Proceeds from issuance of debt
    
    
    300,000
    
    
    
    Proceeds from draw on revolver credit facility
    
    
    
    
    
    
    4,000Paydown on senior notes
    
    
    (225,000
    )
    
    
    Paydown on revolver credit facility
    
    
    (48,000
    )
    
    
    (20,000
    )Payments of debt issuance costs
    
    
    (7,896
    )
    
    
    Payments of debt extinguishment costs
    
    
    (7,466
    )
    
    
    Proceeds from stock options exercised
    
    
    26
    
    
    
    101Excess tax (cost) benefit from stock based compensation
    
    
    1,285
    
    
    
    (1,813
    )Net cash provided by (used in) financing activities
    
    
    12,949
    
    
    
    (17,712
    )Net decrease in cash and cash equivalents
    
    
    (59,033
    )
    
    
    (77,715
    )Cash and cash equivalents, beginning of year
    
    
    108,803
    
    
    
    172,298Cash and cash equivalents, end of period
    
    $
    49,770
    
    
    $
    94,583Supplemental cash flow information:Interest paid
    
    $
    13,673
    
    
    $
    15,038Income taxes paid
    
    $
    12,198
    
    
    $
    13,295
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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 June 30,
2010 and December 31, 2009, (2) the results of operations for the three and six months ended June 30, 2010 and 2009,
and (3) cash flows for the six months ended June 30, 2010 and 2009. Results for the six months
ended June 30, 2010 are not necessarily indicative of the results that will be realized for the
year ending December 31, 2010. The financial statements should be read in conjunction with our
Annual Report on Form 10-K for the year ended December 31, 2009.Nature of Operations Parker Drilling Company (Parker Drilling) and its majority-owned
subsidiaries (together with Parker Drilling, the Company) is a 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 June 30, 2010, our marketable
rig fleet was comprised of 43 rigs which operate in North and South America, North Africa,
Central Asia and Asia Pacific regions. Our rental tools business provides premium rental tools
for land, offshore oil and gas drilling and workover activities both in the U.S. and abroad. We
offer a full line of drill pipe, drill collars, tubing, high- and low-pressure blowout
preventers, choke manifolds, junk and cement mills and casing scrapers. Our rental tool
headquarters are in New Iberia, Louisiana with additional facilities located in Texas, North
Dakota, Pennsylvania and Wyoming.Consolidation and presentation The consolidated financial statements include the accounts of
the Company and subsidiaries in which we exercise significant control or have a controlling
financial interest, including entities, in which we are allocated a majority of the entitys
losses or returns, regardless of ownership percentage. Certain reclassifications have been made
to prior period amounts to conform with the current period presentation.Use of Estimates The preparation of financial statements in accordance with accounting
principles generally accepted in the United States (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 us 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 June 30, 2010 and December 31, 2009, we had deposits in domestic banks in excess of federally
insured limits of approximately $20.5 million and $68.1 million, respectively. In addition, we
had deposits in foreign accounts at June 30, 2010 and
December 31, 2009 of $33.4 million and $46.7
million, respectively, which are not federally insured.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, BP and ExxonMobil, constituted 16.0% and 15.3%, respectively of our
year-to-date revenues as of June 30, 2010. In regards to BP, $40.9 million or 13.1% of the
Companys revenues on a year-to-date basis were derived from the percentage of completion
accounting revenues associated with the BP Liberty rig construction that continues to decrease
as we near completion of the rig and ready the rig for customer acceptance testing.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 1.
    
    General (continued)
 Fair Value of Financial Instruments The estimated fair value of our $125.0 million principal
amount 2.125% Convertible Senior Notes due 2012 was $110.2 million at June 30, 2010. The
estimated fair value of our $300 million principal amount of 9.125% Senior Notes due 2018 was
$285.0 million at June 30, 2010. For cash, accounts receivable, rig supplies and materials and
accounts payable, we believe carrying value approximates estimated fair value due to the
short-term nature and utilization of these assets.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
    
    10 to 20 years
 When assets are retired or otherwise disposed of, the related cost and accumulated depreciation
are removed from the accounts and any gain or loss is included in results of operations.
Maintenance and repairs are charged to operating expense as incurred.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.
Interest cost capitalized during the three months ended June 30, 2010 and 2009 related to the
construction of rigs totaled $3.3 million and $1.3 million, respectively.Convertible Senior Notes, including call options and warrantsThe FASB accounting guidance
requires that the liability and equity components of convertible debt instruments that may be
settled in cash upon conversion (including partial cash settlement) 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. Accordingly, a portion of the note balance of our
2.125% Convertible Senior Notes due 2012 is classified as additional paid in capital for the
estimated fair value of the conversion feature at the date of issuance. In addition a discount
on the convertible notes is being amortized through interest expense over the life of the
convertible notes.Stock-Based Compensation Total stock-based compensation expense recognized for the three and
six month periods ended June 30, 2010 was $1.1 million and $2.1 million, respectively, and for
the three and six month periods ended June 30, 2009 was $1.0 million and $2.8 million,
respectively, all of which was related to non-vested stock. Stock-based compensation expense is
included in our consolidated condensed statements of operations in both General and
administration expense and Operating expenses. There were no non-vested stock options at
June 30, 2010. We had 123,500 outstanding and exercisable stock options as of June 30, 2010,
the aggregate intrinsic value of which was negligible, with a weighted average exercise price of
$3.58 per share. Non-vested restricted stock awards at June 30, 2010 and December 31, 2009 were
2,216,379 shares and 2,745,762 shares, respectively. Total unrecognized compensation cost
related to unamortized non-vested stock awards was $5.1 million as of June 30, 2010 and $2.9
million as of December 31, 2009. The remaining unrecognized compensation cost related to
non-vested stock awards will be amortized over a weighted-average vesting period of
approximately 18 months.For the six months ended June 30, 2010, the restricted stock vestings resulted in a tax benefit
that was more than the deferred tax asset previously recognized. As a result, an excess tax
benefit of $1.3 million was recorded to Capital in excess of par value.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 2.
    
    Earnings Per Share (EPS)
 Three Months Ended June 30, 2010Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPS:Net income
    
    $
    507,000
    
    
    
    114,298,319
    
    
    $
    0.00Effect of dilutive securities:Stock options and non-vested stock
    
    
    
    
    
    
    1,130,330
    
    
    $
    Diluted EPS:Net income
    
    $
    507,000
    
    
    
    115,428,649
    
    
    $
    0.00Six Months Ended June 30, 2010Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPS:Net loss
    
    $
    (1,544,000
    )
    
    
    113,909,798
    
    
    $
    (0.01
    )Effect of dilutive securities:Stock options and non-vested stock
    
    
    
    
    
    
    1,440,306
    
    
    $
    Diluted EPS:Net loss
    
    $
    (1,544,000
    )
    
    
    115,350,103
    
    
    $
    (0.01
    )Three Months Ended June 30, 2009Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPS:Net income
    
    $
    4,391,000
    
    
    
    113,180,858
    
    
    $
    0.04Effect of dilutive securities:Stock options and non-vested stock
    
    
    
    
    
    
    1,576,265
    
    
    $
    Diluted EPS:Net income
    
    $
    4,391,000
    
    
    
    114,757,123
    
    
    $
    0.04Six Months Ended June 30, 2009Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPS:Net income
    
    $
    6,497,000
    
    
    
    112,723,230
    
    
    $
    0.06Effect of dilutive securities:Stock options and non-vested stock
    
    
    
    
    
    
    1,384,445
    
    
    $
    Diluted EPS:Net income
    
    $
    6,497,000
    
    
    
    114,107,675
    
    
    $
    0.06
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 2.
    
    Earnings Per Share (EPS) (continued)
 All stock options outstanding during the three and six months ended June 30, 2010, 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 90,300 shares of common stock with
exercise prices ranging from $3.78 to $4.20 per share were outstanding during the six months
ended June 30, 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.
    
    Accounting for Uncertainty in Income Taxes
 Under guidance for accounting for uncertainty in income taxes, we prescribe 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. For the six
months ended June 2009, we recognized $0.7 million of expense related to certain intercompany
transactions between our U.S. subsidiaries and foreign affiliates.
For the second quarter of 2010, we
recognized additional expense of $0.6 million related to a permanent establishment issue of one
of our subsidiaries and additional benefit of $0.2 million related to the expiration of statute
of limitations in a foreign jurisdiction. As of June 30, 2010, we had a remaining liability for
unrecognized tax benefits of $14.9 million primarily related to foreign operations.
 4.
    
    Income Tax Benefit/Expense
 Income tax expense was $1.6 million for the second quarter of 2010, as compared to income tax
expense of $5.1 million for the second quarter of 2009. The decrease in income tax expense in
the second quarter of 2010, compared to the second quarter of 2009, was primarily due to a
reduction in income subject to income taxes in 2010.
 5.
    
    Long-Term Debt
 June 30,
    
    
    December 31,2010
    
    
    2009(Dollars in Thousands)9.125% Senior Notes, due April 2018
    
    $
    300,000
    
    
    $
    9.625% Senior Notes, due October 2013
    
    
    
    
    
    
    227,4272.125% Convertible Senior Notes, due July 2012
    
    
    113,075
    
    
    
    110,404Term Note
    
    
    38,000
    
    
    
    44,000Revolving Credit Facility
    
    
    
    
    
    
    42,000Total debt
    
    
    451,075
    
    
    
    423,831Less current portion
    
    
    12,000
    
    
    
    12,000Total long-term debt
    
    $
    439,075
    
    
    $
    411,831
 9.125% Senior Notes, due April 2018On March 22, 2010, we issued $300,000,000 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 used to redeem the $225.0 million aggregate principal amount of our 9.625%
Senior Notes due 2013, to repay $42.0 million of borrowings under the revolving credit facility
and for general corporate purposes.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 5.
    
    Long-Term Debt (continued)
 The 9.125% Notes are general unsecured obligations of the Company. The 9.125% Notes 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% of the aggregate principal amount of
9.125% Notes at a redemption price of 109.125% 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 not less than
30 nor more than 60 days notice, at redemption prices (expressed as percentages of principal
amount) equal to 104.563% for the twelve-month period beginning on April 1, 2014, 102.281% for
the twelve-month period beginning on April 1, 2015 and 100% beginning on April 1, 2016, plus
accrued and unpaid interest.If we experience specified changes of control, the Company must offer to repurchase the 9.125%
Notes at 101% 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. These covenants are subject to a number of important exceptions and
qualifications.The Indenture provides that each of the following is an Event of Default: (i) default for 30
days in the payment when due of interest on, or additional interest with respect to, the 9.125%
Notes; (ii) default in payment when due of the principal of, or premium, if any, on the 9.125%
Notes; (iii) failure by the Company or any of its restricted subsidiaries to comply within
specified time periods with any of the other agreements in the Indenture; (iv) default under any
mortgage, indenture or instrument under which there may be issued or by which there may be
secured or evidenced any indebtedness for money borrowed by the Company or any of its restricted
subsidiaries (or the payment of which is guaranteed by the Company or any of its restricted
subsidiaries) whether such indebtedness or guarantee now exists, or is created after the date
9.125% Notes are first issued, if that default: (a) is caused by a failure to pay principal of,
or interest or premium, if any, on such indebtedness prior to the expiration of the grace period
provided in such indebtedness on the date of such default (Payment Default); or (b) results in
the acceleration of such indebtedness prior to its stated maturity, and, in each case, the
principal amount of any such indebtedness, together with the principal amount of any other such
indebtedness under which there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $25.0 million or more; (v) failure by the Company or any of its
subsidiaries to pay final judgments aggregating in excess of $25.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days; (vi) except as permitted by the
Indenture, any subsidiary guarantee shall be held in any judicial proceeding to be unenforceable
or invalid or shall cease for any reason (other than in accordance with the terms of that
guarantee and the indenture) to be in full force and effect or any guarantor, or any person
acting on behalf of any guarantor, shall deny or disaffirm its obligations under its subsidiary
guarantee; and (vii) certain events of bankruptcy or insolvency described in the indenture with
respect to the Company or any of its significant subsidiaries or any group of restricted
subsidiaries that, taken as a whole, would constitute a significant subsidiary. In the case of
an Event of Default arising from certain events of bankruptcy or insolvency with respect to the
Company, all outstanding 9.125% Notes will become due and payable immediately without further
action or notice. If any other Event of Default occurs and is continuing, the trustee or the
holders of at least 25% in principal amount of the then outstanding 9.125% Notes may declare all
the 9.125% Notes to be due and payable immediately.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 5.
    
    Long-Term Debt (continued)
 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. Additionally, we
have agreed to use our commercially reasonable best efforts to cause that registration statement
to become effective within 180 days from March 22, 2010.9.625% Senior Notes, due October 2013As 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). The total consideration paid for each validly tendered 9.625% Note was equal to
103.458% of the aggregate principal amount of the 9.625% Notes, or $1,034.58 per $1,000
principal amount of 9.625% Notes, plus accrued and unpaid interest to the date of payment. The
total consideration included a consent payment of $30 per $1,000 principal amount of 9.625%
Notes, payable only to holders who tendered their 9.625% Notes and validly delivered their
consents prior to 5:00 p.m., New York City time, on March 19, 2010 (Consent Date). Holders who
validly tendered their 9.625% Notes after the Consent Date received the total consideration less
the consent payment of $30, or $1,004.58 per $1,000 principal amount of the 9.625% Notes, plus
accrued and unpaid interest to the date of payment. Holders tendered $96.3 million in aggregate
principal amount of the 9.625% Notes as of the Consent Date. On March 22, 2010, we paid $104.0
million, representing payment of the total consideration including the Consent Payment and
accrued interest. On the same date, 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% 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.2.125% Convertible Senior Notes, due July 2012On July 5, 2007, we issued $125 million aggregate principal amount of 2.125% Convertible Senior
Notes (2.125% Notes) due 2012. The 2.125% Notes were issued at par and interest is payable
semi-annually on January 15th and July 15th. The significant terms of the 2.125% Notes are as
follows:
 
    
    2.125% Notes Conversion Feature  The initial conversion price for 2.125% Note holders
to convert their notes into shares is at a common stock share price equivalent of $13.85
(77.2217 shares of common stock) per $1,000 note value. Conversion rate adjustments occur
for any issuances of stock, warrants, rights or options (except for stock purchase plans or
dividend re-investments) or any other transfer of benefit to substantially all
stockholders, or as a result of a tender or exchange offer. 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 would reduce 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  2.125% Note holders may only convert 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.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 5.
    
    Long-Term Debt (continued)
 
    
    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 June 30, 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.We paid a premium of approximately $31.48 million for the call options, and received proceeds
for a premium of approximately $20.25 million for the sale of the warrants. This reduced the
net cost of the note hedge to $11.23 million. The expiration date of the note hedge is the
earlier of the last day on which the 2.125% Notes remain outstanding and 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% Convertible Notes totaled approximately $3.6 million
and are 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.
 2008 Credit Agreement:On May 15, 2008, the Company entered into a credit
agreement (Credit Agreement) consisting of a senior secured $80
million revolving credit facility (Revolver) and senior secured term loan facility (Term Loan)
of up to $50 million. The Credit Agreement terminates on May 14, 2013.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 5.
    
    Long-Term Debt (continued)
 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% to
3.25% for LIBOR rate loans and 1.75% to 2.25% 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 no revolving loans outstanding at June 30, 2010. There were
$42.0 million in revolving loans outstanding at December 31, 2009. Letters of credit outstanding as
of June 30, 2010 and December 31, 2009 totaled
$16.6 million and $12.7 million, respectively.Term Loan:The Term Loan  originated at $50.0 million and requires quarterly principal
payments of $3.0 million. The outstanding balances on the Term
Loan at June 30, 2010 and December 31, 2009
were $38.0 million and $44.0 million, respectively.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 such as minimum ratios for consolidated leverage,
consolidated interest coverage and consolidated senior secured leverage.On January 15, 2010, the Credit Agreement  was amended in anticipation of the
issuance of 9.125% Notes described above, in order to, among other things, release certain
subsidiaries from their obligations under the Credit Agreement, effective upon the repurchase or
redemption of all the outstanding 9.625% Notes. These released subsidiaries are the Companys
immaterial subsidiaries and subsidiaries generating revenue primarily outside the United States.
Upon the effectiveness of the amendment to the Credit Agreement, the guarantors under the
Credit Agreement were the same as the guarantors of the 9.125% Notes.
 6.
    
    Contingencies
 Asbestos-Related ClaimsIn August 2004, Parker Drilling 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 us, including companies that allegedly
manufactured drilling related products containing asbestos that are the subject of the
complaints.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 6.
    
    Contingencies (continued)
 Asbestos-Related Claims(continued)The complaints allege that our 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, we have 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 the Company. 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.
One of the sixteen plaintiffs cases was transferred to the federal multi-district litigation
and was administratively dismissed. Of the remaining 652 cases, discovery is proceeding in
groups of 60 and none of the fifteen plaintiff complaints naming Parker Drilling are included in
the first 60 (Group I). Selection of Discovery Group II was completed on April 21, 2008, and we
were 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. No trial date
has been set for this plaintiff.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 its 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 June 30, 2010.Gulfco SiteIn 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 U.S. Environmental Protection Agency (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. 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. To date, the EPA and the other two parties have spent
approximately $3.5 million studying and conducting remediation of the site. It is anticipated
that an additional $1.3 million may be required to complete the remediation. Other costs (not
yet quantified), such as interest and administrative overhead, could be added to any action
against us. We currently anticipate that the total claim will not exceed $5 million and will be
shared by all responsible parties. We have conducted an evaluation of the subsidiarys
relationship to the site and continue to be engaged in discussions with the relevant parties in
an effort to resolve the matter and to reduce potential risks and costs associated with possible
litigation in the future.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 6.
    
    Contingencies (continued)
 Customs Agent and Foreign Corrupt Practices Act (FCPA) InvestigationAs 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 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 do business through a joint venture relationship in
Kazakhstan. The joint ventures business with the foreign subcontractor will terminate at the conclusion of workover operations that commenced on a well in July 2010. We
expect workover operations on that well to conclude during the third quarter of 2010. At this
point, we do not expect the termination of the joint ventures business with the foreign
subcontractor to have a material adverse impact on our business, results of operations,
financial condition and liquidity.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, and implementing efforts for the adoption of revised FCPA policies, procedures, and
controls; increased training and testing requirements; contractual provisions for our service
providers that interface with foreign government officials; due diligence and continuing
oversight procedures for the review and selection of such service providers; and a compliance
awareness improvement initiative that includes issuance of periodic anti-bribery compliance
alerts.Demand Letter and Derivative LitigationIn 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.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 6.
    
    Contingencies (continued)
 Demand Letter and Derivative Litigation(continued)On June 3, 2010, Mohamed Kassamali, a purported shareholder 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 shareholder of the Company, filed a substantially similar lawsuit in the state court
of Harris County, Texas. On June 23, 2010, Kenneth Flacks, a purported shareholder 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 we anticipate the cases will be consolidated into a single action
before any substantive proceedings occur.Economic Sanctions ComplianceWe 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 have
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.Kazakhstan Ministry of Finance Tax AuditOn 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 01, 2005 through December 31,
2007. PKD Kazakhstan was assessed additional taxes in the amount of KZT 1.45 billion
(approximately $9.7 million) and associated interest in the amount of KZT 700 million
(approximately $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.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 6.
    
    Contingencies (continued)
 Kazakhstan Ministry of Finance Tax Audit(continued)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 $5 million). MinFin simultaneously caused the Tax
Department of the Atyrau Oblast (Tax Department) to issue a revised Tax Notification to PKD
Kazakhstan for the residual assessment of KZT 959 million (approximately $6.5 million) of taxes
and KZT 450 million (approximately $3 million) of associated interest, which residual assessment
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. Substantive arguments are continuing, and we anticipate a court decision in the
third quarter of 2010. PKD Kazakhstan also intends to pursue the claim through higher levels of
court appeals as necessary. Based on the information available to us at this time, we are
unable to predict the ultimate outcome of this case. However, we do not expect the ultimate
outcome to materially or adversely affect our financial condition, results of operations or cash
flows. No amounts were accrued at June 30, 2010.
 7.
    
    Recent Accounting Pronouncements
 In January 2010, the Financial Accounting Standard Board (FASB) issued Accounting Standards
Update Improving Disclosures about Fair Value Measurements.This update requires an entity to:
(i) disclose separately the amounts of significant transfers in and out of Level 1 and Level 2
fair value measurements and describe the reason for the transfers and (ii) present separate
information for Level 3 activity pertaining to gross purchases, sales, issuances, and
settlements. This amendment is effective for interim and annual reporting periods beginning
after December 15, 2009. Because the standard does not change how fair values are measured, the
standard did not have an impact on our consolidated condensed financial statements.
 8.
    
    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 subsidiaries that are guarantors of the 9.125% Notes and (iii) the
subsidiaries that are not guarantors of the 9.125% Notes. The 9.125% Notes are guaranteed by
substantially all of Companys direct and indirect domestic subsidiaries other than immaterial
subsidiaries and subsidiaries generating revenue primarily outside the United States. 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.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 8.
    
    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., PD Personnel Services, Ltd.,
SaiPar Drilling Company B.V. (owned 50% by Parker Drilling Dutch B.V.), 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. are all non-guarantor subsidiaries. We are providing
consolidating condensed financial information of the parent, Parker Drilling, the guarantor
subsidiaries, and the non-guarantor subsidiaries as of June 30, 2010 and December 31, 2009 and
for the three months and six months ended June 30, 2010 and 2009. The consolidating condensed
financial statements present investments in both consolidated and unconsolidated subsidiaries
using the equity method of accounting.
 18




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
 June 30, 2010Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    12,406
    
    
    $
    2,811
    
    
    $
    34,553
    
    
    $
    
    
    
    $
    49,770Accounts and notes receivable, net
    
    
    23,976
    
    
    
    96,395
    
    
    
    212,649
    
    
    
    (167,900
    )
    
    
    165,120Rig materials and supplies
    
    
    
    
    
    
    370
    
    
    
    28,944
    
    
    
    
    
    
    
    29,314Deferred costs
    
    
    
    
    
    
    
    
    
    
    2,965
    
    
    
    
    
    
    
    2,965Deferred income taxes
    
    
    8,799
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,799Other tax assets
    
    
    98,048
    
    
    
    (63,184
    )
    
    
    9,831
    
    
    
    
    
    
    
    44,695Other current assets
    
    
    557
    
    
    
    40,028
    
    
    
    36,860
    
    
    
    (10,734
    )
    
    
    66,711Total current assets
    
    
    143,786
    
    
    
    76,420
    
    
    
    325,802
    
    
    
    (178,634
    )
    
    
    367,374Property, plant and equipment, net
    
    
    79
    
    
    
    508,370
    
    
    
    283,782
    
    
    
    123
    
    
    
    792,354Investment in subsidiaries and intercompany advances
    
    
    960,753
    
    
    
    511,693
    
    
    
    488,117
    
    
    
    (1,960,563
    )
    
    
    Other noncurrent assets
    
    
    68,708
    
    
    
    (5,435
    )
    
    
    31,535
    
    
    
    (8,112
    )
    
    
    86,696Total assets
    
    $
    1,173,326
    
    
    $
    1,091,048
    
    
    $
    1,129,236
    
    
    $
    (2,147,186
    )
    
    $
    1,246,424LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    12,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    12,000Accounts payable and accrued liabilities
    
    
    54,620
    
    
    
    321,069
    
    
    
    164,618
    
    
    
    (383,450
    )
    
    
    156,857Accrued income taxes
    
    
    570
    
    
    
    15
    
    
    
    3,460
    
    
    
    
    
    
    
    4,045Total current liabilities
    
    
    67,190
    
    
    
    321,084
    
    
    
    168,078
    
    
    
    (383,450
    )
    
    
    172,902Long-term debt
    
    
    439,075
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    439,075Other long-term liabilities
    
    
    7,551
    
    
    
    4,867
    
    
    
    18,679
    
    
    
    (217
    )
    
    
    30,880Long-term deferred tax liability
    
    
    
    
    
    
    
    
    
    
    6,640
    
    
    
    
    
    
    
    6,640Intercompany payables
    
    
    62,583
    
    
    
    473,144
    
    
    
    154,750
    
    
    
    (690,477
    )
    
    
    Contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders equity:Common stock
    
    
    19,487
    
    
    
    18,049
    
    
    
    43,003
    
    
    
    (61,052
    )
    
    
    19,487Capital in excess of par value
    
    
    626,016
    
    
    
    722,849
    
    
    
    530,625
    
    
    
    (1,253,474
    )
    
    
    626,016Retained earnings (accumulated deficit)
    
    
    (48,576
    )
    
    
    (448,945
    )
    
    
    207,461
    
    
    
    241,484
    
    
    
    (48,576
    )Total stockholders equity
    
    
    596,925
    
    
    
    291,953
    
    
    
    781,089
    
    
    
    (1,073,040
    )
    
    
    596,927Total liabilities and stockholders equity
    
    $
    1,173,326
    
    
    $
    1,091,048
    
    
    $
    1,129,236
    
    
    $
    (2,147,186
    )
    
    $
    1,246,424
 19




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
(Dollars in Thousands)
 December 31, 2009Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    58,189
    
    
    $
    1,768
    
    
    $
    48,846
    
    
    $
    
    
    
    $
    108,803Accounts and notes receivable, net
    
    
    17,357
    
    
    
    101,316
    
    
    
    234,987
    
    
    
    (164,973
    )
    
    
    188,687Rig materials and supplies
    
    
    
    
    
    
    (1,150
    )
    
    
    32,783
    
    
    
    
    
    
    
    31,633Deferred costs
    
    
    
    
    
    
    
    
    
    
    4,531
    
    
    
    
    
    
    
    4,531Deferred income taxes
    
    
    9,650
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,650Other tax assets
    
    
    96,450
    
    
    
    (63,183
    )
    
    
    4,551
    
    
    
    
    
    
    
    37,818Other current assets
    
    
    557
    
    
    
    45,513
    
    
    
    27,084
    
    
    
    (10,747
    )
    
    
    62,407Total current assets
    
    
    182,203
    
    
    
    84,264
    
    
    
    352,782
    
    
    
    (175,720
    )
    
    
    443,529Property, plant and equipment, net
    
    
    79
    
    
    
    434,870
    
    
    
    281,725
    
    
    
    124
    
    
    
    716,798Investment in subsidiaries and intercompany advances
    
    
    903,616
    
    
    
    582,049
    
    
    
    466,799
    
    
    
    (1,952,464
    )
    
    
    Other noncurrent assets
    
    
    56,658
    
    
    
    5,094
    
    
    
    29,107
    
    
    
    (8,100
    )
    
    
    82,759Total assets
    
    $
    1,142,556
    
    
    $
    1,106,277
    
    
    $
    1,130,413
    
    
    $
    (2,136,160
    )
    
    $
    1,243,086LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    12,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    12,000Accounts payable and accrued liabilities
    
    
    50,583
    
    
    
    319,187
    
    
    
    163,856
    
    
    
    (365,716
    )
    
    
    167,910Accrued income taxes
    
    
    1,069
    
    
    
    624
    
    
    
    7,433
    
    
    
    
    
    
    
    9,126Total current liabilities
    
    
    63,652
    
    
    
    319,811
    
    
    
    171,289
    
    
    
    (365,716
    )
    
    
    189,036Long-term debt
    
    
    411,831
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    411,831Other long-term liabilities
    
    
    9,689
    
    
    
    2,797
    
    
    
    17,976
    
    
    
    (216
    )
    
    
    30,246Long-term deferred tax liability
    
    
    (1,098
    )
    
    
    9,404
    
    
    
    7,768
    
    
    
    
    
    
    
    16,074Intercompany payables
    
    
    62,583
    
    
    
    473,144
    
    
    
    155,495
    
    
    
    (691,222
    )
    
    
    Contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders equity:Common stock
    
    
    19,374
    
    
    
    18,049
    
    
    
    43,003
    
    
    
    (61,052
    )
    
    
    19,374Capital in excess of par value
    
    
    623,557
    
    
    
    722,851
    
    
    
    530,626
    
    
    
    (1,253,477
    )
    
    
    623,557Retained earnings (accumulated deficit)
    
    
    (47,032
    )
    
    
    (439,779
    )
    
    
    204,256
    
    
    
    235,523
    
    
    
    (47,032
    )Total stockholders equity
    
    
    595,896
    
    
    
    301,121
    
    
    
    777,885
    
    
    
    (1,079,003
    )
    
    
    595,899Total liabilities and stockholders equity
    
    $
    1,142,556
    
    
    $
    1,106,277
    
    
    $
    1,130,413
    
    
    $
    (2,136,160
    )
    
    $
    1,243,086
 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 June 30, 2010Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedTotal revenues
    
    $
    
    
    
    $
    88,029
    
    
    $
    92,906
    
    
    $
    (24,410
    )
    
    $
    156,525Operating expenses
    
    
    
    
    
    
    57,504
    
    
    
    75,881
    
    
    
    (24,410
    )
    
    
    108,975Depreciation and
amortization
    
    
    
    
    
    
    15,912
    
    
    
    13,100
    
    
    
    
    
    
    
    29,012Total operating
gross margin
    
    
    
    
    
    
    14,613
    
    
    
    3,925
    
    
    
    
    
    
    
    18,538General and
administration
expense
(1)
    
    
    (86
    )
    
    
    (6,778
    )
    
    
    (73
    )
    
    
    
    
    
    
    (6,937
    )Provision for
reduction in
carrying value of
certain assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on disposition
of assets, net
    
    
    
    
    
    
    1,009
    
    
    
    703
    
    
    
    
    
    
    
    1,712Total operating
income (loss)
    
    
    (86
    )
    
    
    8,844
    
    
    
    4,555
    
    
    
    
    
    
    
    13,313Other income and
(expense):Interest expense
    
    
    (8,475
    )
    
    
    (8,909
    )
    
    
    (3,642
    )
    
    
    13,640
    
    
    
    (7,386
    )Interest income
    
    
    10,523
    
    
    
    167
    
    
    
    13,029
    
    
    
    (23,641
    )
    
    
    78Loss on
extinguishment
of debt
    
    
    (3,989
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,989
    )Other
    
    
    1
    
    
    
    91
    
    
    
    23
    
    
    
    
    
    
    
    115Equity in net
earnings of
subsidiaries
    
    
    432
    
    
    
    
    
    
    
    
    
    
    
    (432
    )
    
    
    Total other income
and (expense)
    
    
    (1,508
    )
    
    
    (8,651
    )
    
    
    9,410
    
    
    
    (10,433
    )
    
    
    (11,182
    )Income (benefit)
before income taxes
    
    
    (1,594
    )
    
    
    193
    
    
    
    13,965
    
    
    
    (10,433
    )
    
    
    2,131Income tax expense
(benefit):Current
    
    
    193
    
    
    
    (375
    )
    
    
    5,174
    
    
    
    
    
    
    
    4,992Deferred
    
    
    (2,294
    )
    
    
    (14
    )
    
    
    (1,060
    )
    
    
    
    
    
    
    (3,368
    )Total income tax
expense (benefit)
    
    
    (2,101
    )
    
    
    (389
    )
    
    
    4,114
    
    
    
    
    
    
    
    1,624Net income (loss)
    
    $
    507
    
    
    $
    582
    
    
    $
    9,851
    
    
    $
    (10,433
    )
    
    $
    507
 
 (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)
 Three months ended June 30, 2009Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedTotal revenues
    
    $
    
    
    
    $
    122,693
    
    
    $
    118,843
    
    
    $
    (19,745
    )
    
    $
    221,791Operating expenses
    
    
    
    
    
    
    102,096
    
    
    
    83,198
    
    
    
    (19,745
    )
    
    
    165,550Depreciation and
amortization
    
    
    
    
    
    
    16,393
    
    
    
    12,558
    
    
    
    
    
    
    
    28,951Total operating
gross margin
    
    
    
    
    
    
    4,204
    
    
    
    23,087
    
    
    
    
    
    
    
    27,290General and
administration
expense
(1)
    
    
    (42
    )
    
    
    (10,960
    )
    
    
    (69
    )
    
    
    (55
    )
    
    
    (11,126
    )Provision for
reduction in
carrying value of
certain assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on disposition
of assets, net
    
    
    
    
    
    
    241
    
    
    
    463
    
    
    
    
    
    
    
    704Total operating
income (loss)
    
    
    (42
    )
    
    
    (6,515
    )
    
    
    23,480
    
    
    
    (55
    )
    
    
    16,868Other income and
(expense):Interest expense
    
    
    (8,517
    )
    
    
    (8,910
    )
    
    
    (2,771
    )
    
    
    12,694
    
    
    
    (7,504
    )Interest income
    
    
    10,519
    
    
    
    188
    
    
    
    8,522
    
    
    
    (19,055
    )
    
    
    174Other
    
    
    
    
    
    
    (68
    )
    
    
    
    
    
    
    
    
    
    
    (68
    )Equity in net
earnings of
subsidiaries
    
    
    1,688
    
    
    
    
    
    
    
    
    
    
    
    (1,688
    )
    
    
    Total other income
and (expense)
    
    
    3,690
    
    
    
    (8,790
    )
    
    
    5,751
    
    
    
    (8,050
    )
    
    
    (7,398
    )Income (benefit)
before income taxes
    
    
    (3,648
    )
    
    
    (15,304
    )
    
    
    29,231
    
    
    
    (8,105
    )
    
    
    9,470Income tax expense
(benefit):Current
    
    
    (246
    )
    
    
    171
    
    
    
    5,744
    
    
    
    
    
    
    
    6,161Deferred
    
    
    (989
    )
    
    
    
    
    
    
    (93
    )
    
    
    
    
    
    
    (1,082
    )Total income tax
expense (benefit)
    
    
    (743
    )
    
    
    171
    
    
    
    5,651
    
    
    
    
    
    
    
    5,079Net income (loss)
    
    $
    4,391
    
    
    $
    (15,475
    )
    
    $
    23,580
    
    
    $
    (8,105
    )
    
    $
    4,391
 
 (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

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

(Dollars in Thousands)
(Unaudited)
 Six months ended June 30, 2010Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedTotal revenues
    
    $
    
    
    
    $
    166,385
    
    
    $
    196,884
    
    
    $
    (49,139
    )
    
    $
    314,130Operating expenses
    
    
    
    
    
    
    111,627
    
    
    
    160,018
    
    
    
    (49,139
    )
    
    
    222,506Depreciation and amortization
    
    
    
    
    
    
    31,763
    
    
    
    25,837
    
    
    
    
    
    
    
    57,600Total operating gross margin
    
    
    
    
    
    
    22,995
    
    
    
    11,029
    
    
    
    
    
    
    
    34,024General and administration expense (1)
    
    
    (131
    )
    
    
    (16,666
    )
    
    
    (172
    )
    
    
    
    
    
    
    (16,969
    )Gain on disposition of assets, net
    
    
    
    
    
    
    1,578
    
    
    
    806
    
    
    
    
    
    
    
    2,384Total operating income (loss)
    
    
    (131
    )
    
    
    7,907
    
    
    
    11,663
    
    
    
    
    
    
    
    19,439Other income and (expense):Interest expense
    
    
    (16,264
    )
    
    
    (17,819
    )
    
    
    (8,251
    )
    
    
    28,216
    
    
    
    (14,118
    )Interest income
    
    
    21,015
    
    
    
    398
    
    
    
    16,956
    
    
    
    (38,217
    )
    
    
    152Loss on extinguishment of debt
    
    
    (7,209
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,209
    )Other
    
    
    1
    
    
    
    68
    
    
    
    188
    
    
    
    
    
    
    
    257Equity in net earnings of subsidiaries
    
    
    (5,962
    )
    
    
    
    
    
    
    
    
    
    
    5,962
    
    
    
    Total other income and (expense)
    
    
    (8,419
    )
    
    
    (17,353
    )
    
    
    8,893
    
    
    
    (4,039
    )
    
    
    (20,918
    )Income (benefit) before income taxes
    
    
    (8,550
    )
    
    
    (9,446
    )
    
    
    20,556
    
    
    
    (4,039
    )
    
    
    (1,479
    )Income tax expense (benefit):Current
    
    
    438
    
    
    
    (256
    )
    
    
    8,458
    
    
    
    
    
    
    
    8,640Deferred
    
    
    (7,444
    )
    
    
    (24
    )
    
    
    (1,107
    )
    
    
    
    
    
    
    (8,575
    )Total income tax expense (benefit)
    
    
    (7,006
    )
    
    
    (280
    )
    
    
    7,351
    
    
    
    
    
    
    
    65Net income (loss)
    
    $
    (1,544
    )
    
    $
    (9,166
    )
    
    $
    13,205
    
    
    $
    (4,039
    )
    
    $
    (1,544
    )
 
 (1)
    
    All field operations general and administration expenses are included in operating
expenses. 23




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

(Dollars in Thousands)
 Six months ended June 30, 2009Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedTotal revenues
    
    $
    
    
    
    $
    194,566
    
    
    $
    249,521
    
    
    $
    (48,371
    )
    
    $
    395,716Operating expenses
    
    
    
    
    
    
    153,443
    
    
    
    181,653
    
    
    
    (48,371
    )
    
    
    286,725Depreciation and
amortization
    
    
    
    
    
    
    32,436
    
    
    
    23,639
    
    
    
    
    
    
    
    56,075Total operating
gross margin
    
    
    
    
    
    
    8,687
    
    
    
    44,229
    
    
    
    
    
    
    
    52,916General and
administration
expense
(1)
    
    
    (83
    )
    
    
    (23,951
    )
    
    
    (152
    )
    
    
    
    
    
    
    (24,186
    )Provision for
reduction in
carrying value of
certain assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on disposition
of assets, net
    
    
    
    
    
    
    242
    
    
    
    540
    
    
    
    
    
    
    
    782Total operating
income (loss)
    
    
    (83
    )
    
    
    (15,022
    )
    
    
    44,617
    
    
    
    
    
    
    
    29,512Other income and
(expense):Interest expense
    
    
    (17,399
    )
    
    
    (17,974
    )
    
    
    (5,584
    )
    
    
    25,387
    
    
    
    (15,570
    )Interest income
    
    
    21,224
    
    
    
    378
    
    
    
    10,606
    
    
    
    (31,748
    )
    
    
    460Other
    
    
    (3
    )
    
    
    (89
    )
    
    
    12
    
    
    
    
    
    
    
    (80
    )Equity in net
earnings of
subsidiaries
    
    
    (1,630
    )
    
    
    
    
    
    
    
    
    
    
    1,630
    
    
    
    Total other income
and (expense)
    
    
    2,192
    
    
    
    (17,685
    )
    
    
    5,034
    
    
    
    (4,731
    )
    
    
    (15,190
    )Income (benefit)
before income taxes
    
    
    2,109
    
    
    
    (32,707
    )
    
    
    49,651
    
    
    
    (4,731
    )
    
    
    14,322Income tax expense
(benefit):Current
    
    
    872
    
    
    
    458
    
    
    
    11,569
    
    
    
    
    
    
    
    12,899Deferred
    
    
    (5,260
    )
    
    
    
    
    
    
    186
    
    
    
    
    
    
    
    (5,074
    )Total income tax
expense (benefit)
    
    
    (4,388
    )
    
    
    458
    
    
    
    11,755
    
    
    
    
    
    
    
    7,825Net income (loss)
    
    $
    6,497
    
    
    $
    (33,165
    )
    
    $
    37,896
    
    
    $
    (4,731
    )
    
    $
    6,497
 
 (1)
    
    All field operations general and administration expenses are included in operating
expenses. 24




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)
(Unaudited)
 Six Months Ended June 30, 2010Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    (1,544
    )
    
    $
    (9,166
    )
    
    $
    13,205
    
    
    $
    (4,039
    )
    
    $
    (1,544
    )Adjustments to reconcile net income (loss)
to net cash provided by operating activities:Depreciation and amortization
    
    
    
    
    
    
    31,763
    
    
    
    25,837
    
    
    
    
    
    
    
    57,600Loss on extinguishment of debt
    
    
    7,209
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,209Gain on disposition of assets
    
    
    
    
    
    
    (1,578
    )
    
    
    (806
    )
    
    
    
    
    
    
    (2,384
    )Deferred income tax expense
    
    
    (7,444
    )
    
    
    (24
    )
    
    
    (1,107
    )
    
    
    
    
    
    
    (8,575
    )Expenses not requiring cash
    
    
    6,392
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,392Equity in net earnings of subsidiaries
    
    
    5,962
    
    
    
    
    
    
    
    
    
    
    
    (5,962
    )
    
    
    Change in accounts receivable
    
    
    (6,619
    )
    
    
    9,189
    
    
    
    22,338
    
    
    
    
    
    
    
    24,908Change in other assets
    
    
    (7,974
    )
    
    
    8,646
    
    
    
    (12,079
    )
    
    
    
    
    
    
    (11,407
    )Change in liabilities
    
    
    8,385
    
    
    
    (22,953
    )
    
    
    (3,438
    )
    
    
    
    
    
    
    (18,006
    )Net cash provided by (used in) operating
activities
    
    
    4,367
    
    
    
    15,877
    
    
    
    43,950
    
    
    
    (10,001
    )
    
    
    54,193Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (104,234
    )
    
    
    (24,739
    )
    
    
    
    
    
    
    (128,973
    )Proceeds from the sale of assets
    
    
    
    
    
    
    2,098
    
    
    
    700
    
    
    
    
    
    
    
    2,798Intercompany dividend payment
    
    
    
    
    
    
    
    
    
    
    (10,001
    )
    
    
    10,001
    
    
    
    Net cash provided by (used in) investing
activities
    
    
    
    
    
    
    (102,136
    )
    
    
    (34,040
    )
    
    
    10,001
    
    
    
    (126,175
    )Cash flows from financing activities:Proceeds from debt issuance
    
    
    300,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300,000Paydown on revolver credit facility
    
    
    (48,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48,000
    )Paydown on
senior notes
    
    
    (225,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (225,000
    )Payment of debt issuance costs
    
    
    (7,896
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,896
    )Payment of debt extinguishment costs
    
    
    (7,466
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,466
    )Proceeds from stock options exercised
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26Excess tax
benefit from stock-based compensation
    
    
    1,285
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,285Intercompany advances, net
    
    
    (63,099
    )
    
    
    87,302
    
    
    
    (24,203
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing
activities
    
    
    (50,150
    )
    
    
    87,302
    
    
    
    (24,203
    )
    
    
    
    
    
    
    12,949Net change in cash and cash equivalents
    
    
    (45,783
    )
    
    
    1,043
    
    
    
    (14,293
    )
    
    
    
    
    
    
    (59,033
    )Cash and cash equivalents at beginning of
period
    
    
    58,189
    
    
    
    1,768
    
    
    
    48,846
    
    
    
    
    
    
    
    108,803Cash and cash equivalents at end of period
    
    $
    12,406
    
    
    $
    2,811
    
    
    $
    34,553
    
    
    $
    
    
    
    $
    49,770
  25




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)
 Six Months Ended June 30, 2009Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    6,497
    
    
    $
    (33,165
    )
    
    $
    37,896
    
    
    $
    (4,731
    )
    
    $
    6,497Adjustments to reconcile net income (loss)
to net cash provided by operating activities:Depreciation and amortization
    
    
    
    
    
    
    32,436
    
    
    
    23,639
    
    
    
    
    
    
    
    56,075Gain on disposition of assets
    
    
    
    
    
    
    (242
    )
    
    
    (540
    )
    
    
    
    
    
    
    (782
    )Deferred income tax expense (benefit)
    
    
    (5,260
    )
    
    
    
    
    
    
    186
    
    
    
    
    
    
    
    (5,074
    )Expenses not requiring cash
    
    
    5,947
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,947Equity in net earnings of subsidiaries
    
    
    1,630
    
    
    
    
    
    
    
    
    
    
    
    (1,630
    )
    
    
    Change in accounts receivable
    
    
    32,633
    
    
    
    (21,229
    )
    
    
    (12,213
    )
    
    
    
    
    
    
    (809
    )Change in other assets
    
    
    13,364
    
    
    
    (7,052
    )
    
    
    (8,559
    )
    
    
    
    
    
    
    (2,247
    )Change in liabilities
    
    
    (8,820
    )
    
    
    32,668
    
    
    
    (50,430
    )
    
    
    
    
    
    
    (26,582
    )Net cash provided by (used in) operating
activities
    
    
    45,991
    
    
    
    3,416
    
    
    
    (10,021
    )
    
    
    (6,361
    )
    
    
    33,025Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (78,453
    )
    
    
    (15,525
    )
    
    
    
    
    
    
    (93,978
    )Proceeds from the sale of assets
    
    
    
    
    
    
    26
    
    
    
    924
    
    
    
    
    
    
    
    950Intercompany dividend payments
    
    
    
    
    
    
    
    
    
    
    (6,361
    )
    
    
    6,361
    
    
    
    Net cash provided by (used in) investing
activities
    
    
    
    
    
    
    (78,427
    )
    
    
    (20,962
    )
    
    
    6,361
    
    
    
    (93,028
    )Cash flows from financing activities:Proceeds from draw on revolver credit facility
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000Paydown on revolver credit facility
    
    
    (20,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,000
    )Paydown on term note
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from stock options exercised
    
    
    101
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101Excess tax cost from stock-based compensation
    
    
    (1,813
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,813
    )Intercompany advances, net
    
    
    (112,609
    )
    
    
    71,416
    
    
    
    41,193
    
    
    
    
    
    
    
    Net cash provided by (used in) financing
activities
    
    
    (130,321
    )
    
    
    71,416
    
    
    
    41,193
    
    
    
    
    
    
    
    (17,712
    )Net change in cash and cash equivalents
    
    
    (84,330
    )
    
    
    (3,595
    )
    
    
    10,210
    
    
    
    (0
    )
    
    
    (77,715
    )Cash and cash equivalents at beginning of
period
    
    
    111,324
    
    
    
    6,858
    
    
    
    54,116
    
    
    
    
    
    
    
    172,298Cash and cash equivalents at end of period
    
    $
    26,994
    
    
    $
    3,263
    
    
    $
    64,326
    
    
    $
    (0
    )
    
    $
    94,583
  26




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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 oil and 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 additional regulation of
onshore or  offshore drilling, changes
in accounting rules or tax laws that may impact our ability to remit funds to the U.S.
government, that adversely
affect the cost of doing business;
 27




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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 (including those set forth in
Part II, Item 1A Risk Factors, and
in documents referred to, in this Form 10-Q, including the risk factors described in our
2009 Annual Report on Form 10-K and our other reports and filings with the Securities and
Exchange Commission).
  OVERVIEW AND OUTLOOK
 Overview
   28




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##### Table of Contents



OVERVIEW AND OUTLOOK (continued)
 Overview (continued)
       29




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##### Table of Contents



OVERVIEW AND OUTLOOK (continued)
 Outlook
       RESULTS OF OPERATIONS
 Three Months Ended June 30, 2010 Compared with Three Months Ended June 30, 2009
  30




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##### Table of Contents



RESULTS OF OPERATIONS
  Three Months Ended June 30,2010
    
    
    2009(Dollars in Thousands)Revenues:International Drilling
    
    $
    52,932
    
    
    
    34
    %
    
    $
    79,279
    
    
    
    36
    %U.S. Drilling
    
    
    15,336
    
    
    
    10
    %
    
    
    12,889
    
    
    
    6
    %Rental Tools
    
    
    41,359
    
    
    
    26
    %
    
    
    28,160
    
    
    
    13
    %Project Management and Engineering Services
    
    
    26,363
    
    
    
    17
    %
    
    
    23,891
    
    
    
    10
    %Construction Contract
    
    
    20,535
    
    
    
    13
    %
    
    
    77,572
    
    
    
    35
    %Total revenues
    
    $
    156,525
    
    
    
    100
    %
    
    $
    221,791
    
    
    
    100
    %Operating gross margins, excluding depreciation and amortization (1):International Drilling
    
    $
    13,509
    
    
    
    26
    %
    
    $
    30,392
    
    
    
    38
    %U.S. Drilling
    
    
    1,796
    
    
    
    12
    %
    
    
    1,261
    
    
    
    10
    %Rental Tools
    
    
    27,091
    
    
    
    66
    %
    
    
    15,408
    
    
    
    55
    %Project Management and Engineering Services
    
    
    4,662
    
    
    
    18
    %
    
    
    5,608
    
    
    
    23
    %Construction Contract
    
    
    492
    
    
    
    2
    %
    
    
    3,572
    
    
    
    5
    %Depreciation and amortization
    
    
    (29,012
    )
    
    
    
    
    
    
    (28,951
    )Total operating gross margin (2)
    
    
    18,538
    
    
    
    
    
    
    
    27,290General and administration expense
    
    
    (6,937
    )
    
    
    
    
    
    
    (11,126
    )Gain on disposition of assets, net
    
    
    1,712
    
    
    
    
    
    
    
    704Total operating income
    
    $
    13,313
    
    
    
    
    
    
    $
    16,868
 
 (1)
    
    Gross margins, excluding depreciation and amortization
are computed as revenues less direct operating
expenses, depreciation and amortization expense, where applicable; segment operating gross margin
percentages are computed as gross margin as a percent of revenues. The gross
margin amounts and gross margin percentages should not be used as a substitute for those amounts
reported under accounting principles generally accepted in the United States (U.S. 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 U.S. GAAP
measure as follows: ProjectManagementandInternational
    
    
    
    
    
    
    
    
    
    
    Engineering
    
    
    ConstructionThree Months Ended:
    
    Drilling
    
    
    U.S. Drilling
    
    
    Rental Tools
    
    
    Services
    
    
    Contract(Dollars in Thousands)June 30, 2010Operating gross margin (2)
    
    $
    (305
    )
    
    $
    (4,171
    )
    
    $
    17,860
    
    
    $
    4,662
    
    
    $
    492Depreciation and amortization
    
    
    13,814
    
    
    
    5,967
    
    
    
    9,231
    
    
    
    
    
    
    
    Drilling and rental gross margin excluding depreciation and amortization
    
    $
    13,509
    
    
    $
    1,796
    
    
    $
    27,091
    
    
    $
    4,662
    
    
    $
    492June 30, 2009Operating gross margin (2)
    
    $
    17,163
    
    
    $
    (5,781
    )
    
    $
    6,728
    
    
    $
    5,608
    
    
    $
    3,572Depreciation and amortization
    
    
    13,229
    
    
    
    7,042
    
    
    
    8,680
    
    
    
    
    
    
    
    Drilling and rental gross margin excluding depreciation and amortization
    
    $
    30,392
    
    
    $
    1,261
    
    
    $
    15,408
    
    
    $
    5,608
    
    
    $
    3,572
 
 (2)
    
    Operating gross margin is calculated as revenues less direct operating
expenses, including depreciation and amortization expense. 31




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##### Table of Contents



RESULTS OF OPERATIONS
 International Drilling Segment
    U.S. Drilling Segment
   Rental Tools Segment
   Project Management and Engineering Services Segment
  32




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##### Table of Contents



RESULTS OF OPERATIONS
 Construction Contracts Segment
  Other Financial Data
     Six Months Ended June 30, 2010 Compared with Six Months Ended June 30, 2009
  33




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##### Table of Contents



RESULTS OF OPERATIONS
  Six Months Ended June 30,2010
    
    
    2009(Dollars in Thousands)Revenues:International Drilling
    
    $
    116,807
    
    
    
    37
    %
    
    $
    156,660
    
    
    
    40
    %U.S. Drilling
    
    
    30,423
    
    
    
    10
    %
    
    
    22,745
    
    
    
    6
    %Rental Tools
    
    
    75,174
    
    
    
    24
    %
    
    
    66,049
    
    
    
    16
    %Project Management and Engineering Services
    
    
    50,804
    
    
    
    16
    %
    
    
    55,945
    
    
    
    14
    %Construction Contract
    
    
    40,922
    
    
    
    13
    %
    
    
    94,317
    
    
    
    24
    %Total revenues
    
    $
    314,130
    
    
    
    100
    %
    
    $
    395,716
    
    
    
    100
    %Operating gross margins, excluding depreciation and amortization (1):International Drilling
    
    $
    30,211
    
    
    
    26
    %
    
    $
    57,996
    
    
    
    37
    %U.S. Drilling
    
    
    3,909
    
    
    
    13
    %
    
    
    (2,019
    )
    
    
    -9
    %Rental Tools
    
    
    48,280
    
    
    
    64
    %
    
    
    36,843
    
    
    
    56
    %Project Management and Engineering Services
    
    
    9,542
    
    
    
    19
    %
    
    
    11,768
    
    
    
    21
    %Construction Contract
    
    
    (318
    )
    
    
    -1
    %
    
    
    4,403
    
    
    
    5
    %Depreciation and amortization
    
    
    (57,600
    )
    
    
    
    
    
    
    (56,075
    )Total operating gross margin (2)
    
    
    34,024
    
    
    
    
    
    
    
    52,916General and administration expense
    
    
    (16,969
    )
    
    
    
    
    
    
    (24,186
    )Gain on disposition of assets, net
    
    
    2,384
    
    
    
    
    
    
    
    782Total operating income
    
    $
    19,439
    
    
    
    
    
    
    $
    29,512
 
 (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 U.S. GAAP measure as follows: ProjectManagementandInternational
    
    
    
    
    
    
    
    
    
    
    Engineering
    
    
    ConstructionSix Months Ended:
    
    Drilling
    
    
    U.S. Drilling
    
    
    Rental Tools
    
    
    Services
    
    
    Contract(Dollars in Thousands)June 30, 2010Operating gross margin (2)
    
    $
    3,009
    
    
    $
    (8,332
    )
    
    $
    30,123
    
    
    $
    9,542
    
    
    $
    (318
    )Depreciation and amortization
    
    
    27,202
    
    
    
    12,241
    
    
    
    18,157
    
    
    
    
    
    
    
    Drilling and rental gross margin excluding depreciation and amortization
    
    $
    30,211
    
    
    $
    3,909
    
    
    $
    48,280
    
    
    $
    9,542
    
    
    $
    (318
    )June 30, 2009Operating gross margin (2)
    
    $
    33,075
    
    
    $
    (16,239
    )
    
    $
    19,909
    
    
    $
    11,768
    
    
    $
    4,403Depreciation and amortization
    
    
    24,921
    
    
    
    14,220
    
    
    
    16,934
    
    
    
    
    
    
    
    Drilling and rental gross margin excluding depreciation and amortization
    
    $
    57,996
    
    
    $
    (2,019
    )
    
    $
    36,843
    
    
    $
    11,768
    
    
    $
    4,403
 
 (2)
    
    Operating gross margin is calculated as revenues less direct operating
expenses, including depreciation and amortization expense 34




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##### Table of Contents



RESULTS OF OPERATIONS
 International Drilling Segment
    U.S. Drilling Segment
   Rental Tools Segment
   Project Management and Engineering Services Segment
  35




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##### Table of Contents



RESULTS OF OPERATIONS
 Construction Contracts Segment
  Other Financial Data
     LIQUIDITY AND CAPITAL RESOURCES
 Cash Flows
   36




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES (continued)
 Financing Activity
      37




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES (continued)
 Financing Activity
   
    
    $300.0 million aggregate principal amount of 9.125% Notes, which are due April 1, 2018;
 
    
    $38.0 million drawn against our 2008 Credit Facility, including $38.0 million on our
Term Loan Facility, $12.0 million of which is classified as short term, and none on our
Revolving Credit Facility, and
 
    
    $125.0 million aggregate principal amount of Convertible Senior Notes at a coupon rate
of 2.125% , which are due July 15, 2012 less $11.9 million
in unamortized debt discount.
   38




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES (continued)
 Contractual
Obligations
  Less than
    
    
    Years
    
    
    Years
    
    
    More thanTotal
    
    
    1 Year
    
    
    2-3
    
    
    4-5
    
    
    5 Years(Dollars in Thousands)Contractual cash obligations:Long-term debt  principal (1)
    
    $
    463,000
    
    
    $
    12,000
    
    
    $
    151,000
    
    
    $
    
    
    
    $
    300,000Long-term debt  interest (1)
    
    
    219,854
    
    
    
    31,224
    
    
    
    58,599
    
    
    
    54,750
    
    
    
    75,281Operating leases (2)
    
    
    33,648
    
    
    
    7,140
    
    
    
    8,483
    
    
    
    6,196
    
    
    
    11,829Purchase commitments (3)
    
    
    44,457
    
    
    
    44,457
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    760,959
    
    
    $
    94,821
    
    
    $
    218,082
    
    
    $
    60,946
    
    
    $
    387,110Commercial commitments:Long-term debt  standbyletters of credit (4)
    
    
    16,580
    
    
    
    16,580
    
    
    
    
    
    
    
    
    
    
    
    Total commercial commitments
    
    $
    16,580
    
    
    $
    16,580
    
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Long-term debt includes the principal and interest cash obligations of the 9.125%
Notes, the 9.625% Notes, the 2.125% Convertible Senior Notes and the Term Loan. The remaining
unamortized premium of $11.9 million on the Convertible Notes is not included in the contractual
cash obligations schedule.(2)
    
    Operating leases consist of lease agreements in excess of one year for office
space, equipment, vehicles and personal property(3)
    
    Purchase commitments outstanding
as of June 30, 2010, are primarily related to rig upgrade projects and new rig construction.(4)
    
    We have an $80.0 million revolving credit facility. As of June 30, 2010, there were
no drawings against the revolver and $16.6 million of availability has been used to support letters
of credit that have been issued, resulting in  $63.4 million of availability. The
revolving credit facility expires May 14, 2013. Off-Balance Sheet Arrangements
  
 ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
 39




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##### Table of Contents



ITEM 4.
    
    CONTROLS AND PROCEDURES(continued)
 Changes in Internal Control Over Financial Reporting 
 
 PART II. OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
  
 ITEM 1A.
    
    RISK FACTORS
  Our operations could be adversely impacted by the recent drilling rig accident in the U.S. Gulf of
Mexico, and its consequences.
    40




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##### Table of Contents



ITEM 1A.
    
    RISK FACTORS (continued)
  
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Issuer Purchases of Equity SecuritiesTotal Number ofShares Purchased as
    
    
    Maximum Number ofTotal Number
    
    
    
    
    
    
    Part of Publicly
    
    
    Shares That May yetof Shares
    
    
    Average Price
    
    
    Announced Plan or
    
    
    Be Purchased UnderPeriod
    
    Purchased (1)
    
    
    Paid Per Share
    
    
    Program
    
    
    the Plan or ProgramApril 1-30, 2010
    
    
    28,913
    
    
    $
    5.27
    
    
    
    
    
    
    
    N/AMay 1-31, 2010
    
    
    3,821
    
    
    $
    4.76
    
    
    
    
    
    
    
    N/AJune 1-30, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    N/ATotal
    
    
    32,734
    
    
    $
    5.02
    
    
    
    
    
    
    
    N/A
 
 (1)
    
    Represents shares subject to restricted share awards withheld to satisfy tax obligations arising upon the vesting of
restricted shares. 
 ITEM 6.
    
    EXHIBITS
  ExhibitNumber
    
    DESCRIPTION3.1
    
    Restated Certificate of
Incorporation of the Company, as amended on May 16, 2007
(incorporated by reference to Exhibit 3.1 to the Companys
Quarterly Report on Form 10-Q filed on November 9, 2007)3.2
    
    Bylaws of the Company, as amended
on January 31, 2003 (incorporated by reference to Exhibit 3(d) to the
Companys Annual Report on Form 10-K filed on March 20, 2003)4
    
    Parker Drilling Company 2010
Long-Term Incentive Plan (incorporated here in by reference to Annex A
to the Companys 2010 Proxy Statement dated March 16, 2010)31.1
    
     section 302 Certification  President and Chief Executive Officer31.2
    
     section 302 Certification  Senior Vice President and Chief Financial Officer32.1
    
     section 906 Certification  President and Chief Executive Officer32.2
    
     section 906 Certification  Senior Vice President and Chief Financial Officer
 41




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##### Table of Contents



SIGNATURES
  PARKER DRILLING COMPANYDate:  August 6, 2010
    By:
    /s/ David C. MannonDavid C. MannonPresident and Chief Executive OfficerBy:
    /s/ W. Kirk BrassfieldW. Kirk BrassfieldSenior Vice President and Chief Financial Officer




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Description3.1
    
    Restated Certificate of
Incorporation of the Company, as amended on May 16, 2007
(incorporated by reference to Exhibit 3.1 to the Companys
Quarterly Report on Form 10-Q filed on November 9, 2007)3.2
    
    Bylaws of the Company, as amended
on January 31, 2003 (incorporated by reference to Exhibit 3(d) to the
Companys Annual Report on Form 10-K filed on March 20, 2003)4
    
    Parker Drilling Company 2010
Long-Term Incentive Plan (incorporated here in by reference to Annex A
to the Companys 2010 Proxy Statement dated March 16, 2010)31.1
    
    Section 302 Certification  President and Chief Executive Officer31.2
    
    Section 302 Certification  Senior Vice President and Chief Financial Officer32.1
    
    Section 906 Certification  President and Chief Executive Officer32.2
    
    Section 906 Certification  Senior Vice President and Chief Financial Officer