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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For The Quarterly Period Ended March 31, 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(Do not check if a smaller reporting company)
Smaller reporting company o o þ




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TABLE OF CONTENTS
 PagePart I.
    
    Financial Information
    
    
    3Item 1. Financial Statements
    
    
    3Consolidated Condensed Balance Sheets 
March 31, 2010 (Unaudited) and December 31, 2009
    
    
    3Consolidated Condensed Statements of Operations (Unaudited) 
Three Months Ended March 31, 2010 and 2009
    
    
    4Consolidated Condensed Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2010 and 2009
    
    
    5Notes to the Unaudited Consolidated Condensed Financial Statements
    
    
    6-23Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    33Item 4. Controls and Procedures
    
    
    33Part II.
    
    Other Information
    
    
    33Item 1. Legal Proceedings
    
    
    33Item 1A. Risk Factors
    
    
    33Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    34Item 3. Defaults Upon Senior Securities
    
    
    34Item 4. Submission of Matters to a Vote of Security Holders
    
    
    34Item 5. Other Information
    
    
    34Item 6. Exhibits
    
    
    34SignaturesOfficer 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)
 March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    202,028
    
    
    $
    108,803Accounts and notes receivable, net
    
    
    169,937
    
    
    
    188,687Rig materials and supplies
    
    
    28,373
    
    
    
    31,633Deferred costs
    
    
    2,198
    
    
    
    4,531Deferred income taxes
    
    
    8,013
    
    
    
    9,650Other tax assets
    
    
    45,001
    
    
    
    37,818Other current assets
    
    
    65,341
    
    
    
    62,407Total current assets
    
    
    520,891
    
    
    
    443,529Property, plant and equipment less
accumulated depreciation and amortization of $836,929
at March 31, 2010 and $813,965 at December 31, 2009
    
    
    752,955
    
    
    
    716,798Deferred income taxes
    
    
    54,255
    
    
    
    55,749Other noncurrent assets
    
    
    34,541
    
    
    
    27,010Total assets
    
    $
    1,362,642
    
    
    $
    1,243,086LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    141,985
    
    
    $
    12,000Accounts payable and accrued liabilities
    
    
    145,381
    
    
    
    167,910Accrued income taxes
    
    
    4,078
    
    
    
    9,126Total current liabilities
    
    
    291,444
    
    
    
    189,036Long-term debt
    
    
    440,727
    
    
    
    411,831Other long-term liabilities
    
    
    28,089
    
    
    
    30,246Long-term deferred tax liability
    
    
    7,381
    
    
    
    16,074Contingencies (Note 10)
    
    
    
    
    
    
    Stockholders equity:Common stock
    
    
    19,453
    
    
    
    19,374Capital in excess of par value
    
    
    624,631
    
    
    
    623,557Accumulated deficit
    
    
    (49,083
    )
    
    
    (47,032
    )Total stockholders equity
    
    
    595,001
    
    
    
    595,899Total liabilities and stockholders equity
    
    $
    1,362,642
    
    
    $
    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 EndedMarch 31,2010
    
    
    2009Revenues:International Drilling
    
    $
    63,875
    
    
    $
    77,381U.S. Drilling
    
    
    15,087
    
    
    
    9,856Rental Tools
    
    
    33,815
    
    
    
    37,889Project Management and Engineering Services
    
    
    24,441
    
    
    
    32,054Construction Contracts
    
    
    20,387
    
    
    
    16,745Total revenues
    
    
    157,605
    
    
    
    173,925Operating expenses:International Drilling
    
    
    47,173
    
    
    
    49,777U.S. Drilling
    
    
    12,974
    
    
    
    13,136Rental Tools
    
    
    12,626
    
    
    
    16,454Project Management and Engineering Services
    
    
    19,561
    
    
    
    25,894Construction Contracts
    
    
    21,197
    
    
    
    15,914Depreciation and amortization
    
    
    28,588
    
    
    
    27,124Total operating expenses
    
    
    142,119
    
    
    
    148,299Total operating gross margin
    
    
    15,486
    
    
    
    25,626General and administration expense
    
    
    (10,032
    )
    
    
    (13,060
    )Gain on disposition of assets, net
    
    
    672
    
    
    
    78Total operating income
    
    
    6,126
    
    
    
    12,644Other income and (expense):Interest expense
    
    
    (6,732
    )
    
    
    (8,066
    )Interest income
    
    
    74
    
    
    
    286Loss on extinguishment of debt
    
    
    (3,220
    )
    
    
    Other
    
    
    142
    
    
    
    (12
    )Total other expense
    
    
    (9,736
    )
    
    
    (7,792
    )Income (loss) before income taxes
    
    
    (3,610
    )
    
    
    4,852Income tax
expense (benefit):Current
    
    
    3,648
    
    
    
    6,738Deferred
    
    
    (5,207
    )
    
    
    (3,992
    )Total income
tax expense (benefit)
    
    
    (1,559
    )
    
    
    2,746Net income (loss)
    
    $
    (2,051
    )
    
    $
    2,106Basic
earnings/(loss) per share:Net income (loss)
    
    $
    (0.02
    )
    
    $
    0.02Diluted
earnings/(loss) per share:Net income (loss)
    
    $
    (0.02
    )
    
    $
    0.02Number of common shares used in computing earnings per shareBasic
    
    
    113,512,426
    
    
    
    112,260,517Diluted
    
    
    115,029,996
    
    
    
    113,366,444
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PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 (Dollars in Thousands)
(Unaudited)
 Three Months Ended March 31,2010
    
    
    2009Cash flows from operating activities:Net income (loss)
    
    $
    (2,051
    )
    
    $
    2,106Adjustments to reconcile net income to
net cash provided by operating activities:Depreciation and amortization
    
    
    28,588
    
    
    
    27,124Loss on extinguishment of debt
    
    
    3,220
    
    
    
    Gain on disposition of assets
    
    
    (672
    )
    
    
    (78
    )Deferred income tax expense
    
    
    (5,207
    )
    
    
    (3,992
    )Expenses not requiring cash
    
    
    1,430
    
    
    
    3,907Change in accounts receivable
    
    
    19,400
    
    
    
    5,161Change in other assets
    
    
    (5,612
    )
    
    
    6,692Change in liabilities
    
    
    (37,639
    )
    
    
    (16,372
    )Net cash provided by (used in) operating activities
    
    
    1,457
    
    
    
    24,548Cash flows from investing activities:Capital expenditures
    
    
    (57,946
    )
    
    
    (51,384
    )Proceeds from the sale of assets
    
    
    773
    
    
    
    169Net cash used in investing activities
    
    
    (57,173
    )
    
    
    (51,215
    )Cash flows from financing activities:Proceeds from issuance of debt
    
    
    300,000
    
    
    
    Proceeds from draw on revolver credit facility
    
    
    
    
    
    
    4,000Paydown on senior notes
    
    
    (96,310
    )
    
    
    Paydown on revolver credit facility
    
    
    (45,000
    )
    
    
    Payments of debt issuance costs
    
    
    (7,795
    )
    
    
    Payments of debt extinguishment costs
    
    
    (3,330
    )
    
    
    Proceeds from stock options exercised
    
    
    26
    
    
    
    Excess tax cost (benefit) from stock based compensation
    
    
    1,350
    
    
    
    (1,228
    )Net cash provided by financing activities
    
    
    148,941
    
    
    
    2,772Net increase (decrease) in cash and cash equivalents
    
    
    93,225
    
    
    
    (23,895
    )Cash and cash equivalents at beginning of year
    
    
    108,803
    
    
    
    172,298Cash and cash equivalents at end of period
    
    $
    202,028
    
    
    $
    148,403Supplemental cash flow information:Interest paid
    
    $
    6,391
    
    
    $
    2,864Income taxes paid
    
    $
    8,050
    
    
    $
    8,357
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PARKER DRILLING COMPANY AND SUBSIDIARIES
 
 NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 1.
    
    General
 In the opinion of the management of Parker Drilling Company, the accompanying unaudited
consolidated condensed financial statements reflect all adjustments of a normally recurring
nature which are necessary for a fair presentation of (1) the financial position as of March 31,
2010 and December 31, 2009, (2) the results of operations for the three months ended March 31,
2010 and 2009 and (3) cash flows for the three months ended March 31, 2010 and 2009. Results
for the three months ended March 31, 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 March 31, 2010, our marketable
rig fleet consisted of 43 rigs, which operated in the North and South America, Middle East, CIS
and Asia Pacific regions.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, if any, 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 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 March 31, 2010 and December 31, 2009, we had deposits in domestic banks in excess of
federally insured limits of approximately $31.4 million and $68.1 million, respectively. In
addition, we had deposits in foreign banks at March 31, 2010 and December 31, 2009 of $55.6
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. During the first quarter of 2010, BP and ExxonMobil accounted for
approximately 16 percent and 15 percent of total revenues received from customers, respectively.Fair Value of Financial Instruments The estimated fair value of our $128.7 million principal
amount of 9.625% Senior Notes due 2013, based on quoted market prices, was $132.8 million at
March 31, 2010. The estimated fair value of our $125.0 million principal amount 2.125%
Convertible Senior Notes due 2012 was $117.3 million at March 31, 2010. The estimated fair
value of our $300 million principal amount of 9.125% Senior Notes due 2018 was $307.1 million at
March 31, 2010. For cash, accounts receivable, rig supplies and materials and accounts payable,
we believe carrying value approximates estimated fair value.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 1.
    
    General (continued)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
   Convertible Senior Notes, including call options and warrants Accounting For
Convertible Debt Instruments That May Be Settled In Cash Upon Conversion (Including Partial Cash
Settlement)
  Stock-Based Compensation
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 1.
    
    General (continued)For the three months ended March 31, 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
or tax cost of $1.3 million was recorded to Capital in excess of par value.
 2.
    
    Earnings Per Share (EPS)
 Three Months Ended March 31, 2010Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPS:Net loss
    
    $
    (2,051,000
    )
    
    
    113,512,426
    
    
    $
    (0.02
    )Effect of dilutive securities:Stock options and restricted stock
    
    
    
    
    
    
    1,517,570
    
    
    $
    Diluted EPS:Net loss
    
    $
    (2,051,000
    )
    
    
    115,029,996
    
    
    $
    (0.02
    )
 Three Months Ended March 31, 2009Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPS:Net income
    
    $
    2,106,000
    
    
    
    112,260,517
    
    
    $
    0.02Effect of dilutive securities:Stock options and restricted stock
    
    
    
    
    
    
    1,105,927
    
    
    $
    Diluted EPS:Net income
    
    $
    2,106,000
    
    
    
    113,366,444
    
    
    $
    0.02
  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 three
months ended March 2009, we recognized $0.7 million of expense related to certain intercompany
transactions between our U.S. subsidiaries and foreign affiliates. For the current quarter, we
did not recognize additional expense related to uncertain tax positions. As of March 31,
2010, we had a remaining liability for unrecognized tax benefits of $14.5 million primarily
related to foreign operations.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 4.
    
    Income Tax Benefit/Expense
 Income tax benefit was $1.6 million for the first quarter of 2010, as compared to income tax
expense of $2.7 million for the first quarter of 2009. The decrease in income tax expense in
the first quarter of 2010, compared to the first quarter of 2009, was primarily due to a
reduction in income subject to income taxes in 2010. We expect to incur a taxable loss in the
U.S. for the year, which will produce a tax benefit.
 5.
    
    Long Term Debt
 March 31,
    
    
    December 31,2010
    
    
    2009(Dollars in Thousands)9.125% Senior Notes, due April 2018
    
    $
    300,000
    
    
    $
    9.625% Senior Notes, due October 2013
    
    
    129,985
    
    
    
    227,4272.125% Convertible Senior Notes, due July 2012
    
    
    111,727
    
    
    
    110,404Term Note
    
    
    41,000
    
    
    
    44,000Revolving Credit Facility
    
    
    
    
    
    
    42,000Total debt
    
    
    582,712
    
    
    
    423,831Less current portion
    
    
    141,985
    
    
    
    12,000Total long-term debt
    
    $
    440,727
    
    
    $
    411,831
 9.125% Senior Notes, due April 2018
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 5.
    
    Long Term Debt (continued)9.125% Senior Notes, due April 2018 (continued)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.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 will file an exchange offer
registration statement within 90 days from March 22, 2010 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. Under some
circumstances, in lieu of a registered exchange offer, we can file a shelf registration
statement with respect to the 9.125% Notes and use our commercially reasonable best efforts to
keep the shelf registration statement effective until the earlier of the second anniversary of
the effective date of such shelf registration statement or the sale pursuant to the shelf
registration statement of all of the 9.125% Notes registered thereunder. We are required to pay
additional interest if we fail to comply with our obligations to register the 9.125% Notes
within the specified time periods.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 5.
    
    Long Term Debt (continued)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. As a result of the irrevocable call for redemption, we classified the
remaining 9.625% Notes as a current liability at March 31, 2010. On April 21, 2010, we redeemed
in full the $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
for2.125% 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.
    
    Settlement Feature  Upon conversion, we will pay shares of our cash
and 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.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 5.
    
    Long Term Debt (continued)2.125% Convertible Senior Notes, due July 2012 (continued)As of March 31, 2010, none of the conditions allowing holders of the 2.125% Notes to convert had
been met.Concurrently with the issuance of the 2.125% Notes, we purchased a convertible note hedge (note
hedge) and sold warrants in private transactions with counterparties that were different than
the ultimate holders of the 2.125% Notes. The note hedge included purchasing free-standing call
options and selling free-standing warrants, both exercisable in our common shares. The note
hedge allows us to receive shares of our common stock from the counterparties to the transaction
equal to the amount of common stock related to the excess conversion value that we would issue
and/or pay to the holders of the 2.125% Notes upon conversion.The terms of the call options mirror the 2.125% Notes major terms whereby the call option
strike price is the same as the initial conversion price as are the number of shares callable,
$13.85 per share and 9,027,713 shares, respectively. This feature prevents dilution of our
outstanding shares. The warrants allow us to sell 9,027,713 common shares at a strike price of
$18.29 per share. The conversion price of the 2.125% Notes remains at $13.85 per share, and the
existence of the call options and warrants serve to guard against dilution at share prices less
than $18.29 per share, since we would be able to satisfy our obligations and deliver shares upon
conversion of the 2.125% Notes with shares that are obtained by exercising the call options.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 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 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 $80.0 million senior secured revolving credit facility 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 under the credit facility 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 March 31, 2010 as net proceeds from the issuance
of our 9.125% Notes were used to repay the $42.0 million outstanding under the Revolver
on March 26, 2010. There were $62.0 million in revolving loans at March 31, 2009. We expect to
utilize borrowings on the Revolver to support spending on new rig construction during 2010 and
into 2011. Letters of credit outstanding as of March 31, 2010 and 2009 there were $16.6 million
and $17.7 million, respectively.Term Loan:The senior secured term loan facility originated at $50.0 million dollars and
requires quarter principal payments of $3.0 million. The outstanding balances on the Term Loan
at March 31, 2010 and 2009 were $41.0 million and $50.0 million, respectively.Our obligations under the Credit Agreement are guaranteed by substantially all of the 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.
Discovery is proceeding in groups of 60 and none of the plaintiff complaints naming Parker
Drilling are included in the first 60 (Group I). The initial discovery of Group I resulted in
certain dismissals with prejudice, two dismissals without prejudice and two withdraws from Group
I, leaving only 40 plaintiffs remaining in Group I. Selection of Discovery Group II was
completed on April 21, 2008. Out of the 60 plaintiffs selected, 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.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 March 31, 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 $3.0 million
studying and conducting initial remediation of the site. It is anticipated that at least an
additional $1.3 million will be required to complete the remediation. 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 are 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 have learned that an individual
who may be considered a foreign official under the FCPA owns in trust a substantial stake in a
foreign subcontractor with whom we do business through a joint venture relationship in
Kazakhstan. We are currently engaged in efforts to evaluate and implement alternatives to
restructure or end the relationship with the subcontractor. At this point, we are unable to
predict the outcome of our restructuring efforts or whether termination will result, either of
which could negatively impact some of our operations in Kazakhstan and potentially 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 LetterIn 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)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.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 intends to adjust and re-file its claim. 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 March 31, 2010.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENT (continued)
 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 will not have an impact on our consolidated 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.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.) and Parker Enex, LLC,
Parker Drilling Company Eastern Hemisphere, Ltd., Parker Drilling Company of Bolivia, Inc.,
Canadian Rig Leasing, Inc., Parker Drilling Company International Limited, Parker Drilling
Company Limited LLC, Parker Drilling Company of Singapore, LLC, Parker USA Drilling Company,
Universal Rig Service LLC, Parker Offshore Resources, L.P., Choctaw International Rig Corp.,
DGH, Inc., Parker Drilling Company of Argentina, Inc., Parker Drilling Company International,
LLC, Parker Drilling (Kazakstan), LLC, Parker Drilling Company of New Guinea, LLC, Indocorp of
Oklahoma, Inc., Creek International Rig Corp., Parker Drilling Company of Mexico, LLC, Selective
Drilling Corporation, Parker Drilltech, LLC, Parker Drillserv, LLC, Parker Drillex, LLC, Parker
Rigsource LLC, Parker Intex, LLC, Parker Drilling Eurasia, Inc., Parker Drilling Pacific Rim,
Inc. 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 March 31, 2010 and December 31, 2009 and for the three months ended March 31,
2010 and 2009. The consolidating condensed financial statements present investments in both
consolidated and unconsolidated subsidiaries using the equity method of accounting.
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PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
 March 31, 2010Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    157,479
    
    
    $
    1,306
    
    
    $
    43,243
    
    
    $
    
    
    
    $
    202,028Accounts and notes receivable, net
    
    
    22,382
    
    
    
    97,946
    
    
    
    220,243
    
    
    
    (170,634
    )
    
    
    169,937Rig materials and supplies
    
    
    
    
    
    
    (987
    )
    
    
    29,360
    
    
    
    
    
    
    
    28,373Deferred costs
    
    
    
    
    
    
    
    
    
    
    2,198
    
    
    
    
    
    
    
    2,198Deferred income taxes
    
    
    8,013
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,013Other tax assets
    
    
    97,755
    
    
    
    (63,092
    )
    
    
    10,339
    
    
    
    (1
    )
    
    
    45,001Other current assets
    
    
    557
    
    
    
    41,172
    
    
    
    34,346
    
    
    
    (10,734
    )
    
    
    65,341Total current assets
    
    
    286,186
    
    
    
    76,345
    
    
    
    339,729
    
    
    
    (181,369
    )
    
    
    520,891Property, plant and equipment, net
    
    
    79
    
    
    
    468,221
    
    
    
    284,532
    
    
    
    123
    
    
    
    752,955Investment in subsidiaries and
intercompany advances
    
    
    942,995
    
    
    
    537,883
    
    
    
    481,095
    
    
    
    (1,961,973
    )
    
    
    Other noncurrent assets
    
    
    68,757
    
    
    
    (4,375
    )
    
    
    32,513
    
    
    
    (8,099
    )
    
    
    88,796Total assets
    
    $
    1,298,017
    
    
    $
    1,078,074
    
    
    $
    1,137,869
    
    
    $
    (2,151,318
    )
    
    $
    1,362,642LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    141,985
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    141,985Accounts payable and accrued liabilities
    
    
    49,253
    
    
    
    309,952
    
    
    
    162,941
    
    
    
    (376,765
    )
    
    
    145,381Accrued income taxes
    
    
    957
    
    
    
    607
    
    
    
    2,514
    
    
    
    
    
    
    
    4,078Total current liabilities
    
    
    192,195
    
    
    
    310,559
    
    
    
    165,455
    
    
    
    (376,765
    )
    
    
    291,444Long-term debt
    
    
    440,727
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    440,727Other long-term liabilities
    
    
    
    
    
    
    
    
    
    
    7,381
    
    
    
    
    
    
    
    7,381Long-term deferred tax liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Intercompany payables
    
    
    7,512
    
    
    
    3,000
    
    
    
    17,796
    
    
    
    (219
    )
    
    
    28,089Contingencies
    
    
    62,583
    
    
    
    473,144
    
    
    
    165,999
    
    
    
    (701,726
    )
    
    
    Stockholders equity:Common stock
    
    
    19,453
    
    
    
    18,049
    
    
    
    43,003
    
    
    
    (61,052
    )
    
    
    19,453Capital in excess of par value
    
    
    624,629
    
    
    
    722,850
    
    
    
    530,625
    
    
    
    (1,253,473
    )
    
    
    624,631Retained earnings (accumulated deficit)
    
    
    (49,082
    )
    
    
    (449,528
    )
    
    
    207,610
    
    
    
    241,917
    
    
    
    (49,083
    )Total stockholders equity
    
    
    595,000
    
    
    
    291,371
    
    
    
    781,238
    
    
    
    (1,072,608
    )
    
    
    595,001Total liabilities and
stockholders equity
    
    $
    1,298,017
    
    
    $
    1,078,074
    
    
    $
    1,137,869
    
    
    $
    (2,151,318
    )
    
    $
    1,362,642
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PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
 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
    
    
    (1,098
    )
    
    
    9,404
    
    
    
    7,768
    
    
    
    
    
    
    
    16,074Long-term deferred tax liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Intercompany payables
    
    
    9,692
    
    
    
    2,797
    
    
    
    17,976
    
    
    
    (219
    )
    
    
    30,246Contingencies
    
    
    62,583
    
    
    
    473,144
    
    
    
    155,495
    
    
    
    (691,222
    )
    
    
    Stockholders equity:Common stock
    
    
    19,374
    
    
    
    18,049
    
    
    
    43,003
    
    
    
    (61,052
    )
    
    
    19,374Capital in excess of par value
    
    
    623,554
    
    
    
    722,851
    
    
    
    530,626
    
    
    
    (1,253,474
    )
    
    
    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
 19




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

(Dollars in Thousands)
(Unaudited)
 Three months ended March 31, 2010Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedTotal revenues
    
    $
    
    
    
    $
    78,356
    
    
    $
    103,978
    
    
    $
    (24,729
    )
    
    $
    157,605Operating expenses
    
    
    
    
    
    
    54,123
    
    
    
    84,137
    
    
    
    (24,729
    )
    
    
    113,531Depreciation and amortization
    
    
    
    
    
    
    15,851
    
    
    
    12,737
    
    
    
    
    
    
    
    28,588Total operating gross margin
    
    
    
    
    
    
    8,382
    
    
    
    7,104
    
    
    
    
    
    
    
    15,486General and administration expense (1)
    
    
    (45
    )
    
    
    (9,888
    )
    
    
    (99
    )
    
    
    
    
    
    
    (10,032
    )Provision for reduction in carrying value of
certain assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on disposition of assets, net
    
    
    
    
    
    
    569
    
    
    
    103
    
    
    
    
    
    
    
    672Total operating income (loss)
    
    
    (45
    )
    
    
    (937
    )
    
    
    7,108
    
    
    
    
    
    
    
    6,126Other income and (expense):Interest expense
    
    
    (7,789
    )
    
    
    (8,910
    )
    
    
    (4,609
    )
    
    
    14,576
    
    
    
    (6,732
    )Interest income
    
    
    10,492
    
    
    
    231
    
    
    
    3,927
    
    
    
    (14,576
    )
    
    
    74Loss on extinguishment of debt
    
    
    (3,220
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,220
    )Other
    
    
    
    
    
    
    (23
    )
    
    
    165
    
    
    
    
    
    
    
    142Equity in net earnings of subsidiaries
    
    
    (6,394
    )
    
    
    
    
    
    
    
    
    
    
    6,394
    
    
    
    Total other income and (expense)
    
    
    (6,911
    )
    
    
    (8,702
    )
    
    
    (517
    )
    
    
    6,394
    
    
    
    (9,736
    )Income (benefit) before income taxes
    
    
    (6,956
    )
    
    
    (9,639
    )
    
    
    6,591
    
    
    
    6,394
    
    
    
    (3,610
    )Income tax expense (benefit):Current
    
    
    245
    
    
    
    119
    
    
    
    3,284
    
    
    
    
    
    
    
    3,648Deferred
    
    
    (5,150
    )
    
    
    (10
    )
    
    
    (47
    )
    
    
    
    
    
    
    (5,207
    )Total income tax expense (benefit)
    
    
    (4,905
    )
    
    
    109
    
    
    
    3,237
    
    
    
    
    
    
    
    (1,559
    )Net income (loss)
    
    $
    (2,051
    )
    
    $
    (9,748
    )
    
    $
    3,354
    
    
    $
    6,394
    
    
    $
    (2,051
    )
 
 (1)
    
    All field operations general and administration expenses are included in operating
expenses. 20




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
 Three months ended March 31, 2009Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedTotal revenues
    
    $
    
    
    
    $
    71,873
    
    
    $
    130,678
    
    
    $
    (28,626
    )
    
    $
    173,925Operating expenses
    
    
    0
    
    
    
    51,346
    
    
    
    98,455
    
    
    
    (28,626
    )
    
    
    121,175Depreciation and amortization
    
    
    
    
    
    
    16,043
    
    
    
    11,080
    
    
    
    
    
    
    
    27,124Total operating gross margin
    
    
    (0
    )
    
    
    4,483
    
    
    
    21,143
    
    
    
    0
    
    
    
    25,626General and administration expense (1)
    
    
    (40
    )
    
    
    (12,991
    )
    
    
    (83
    )
    
    
    55
    
    
    
    (13,060
    )Provision for reduction in carrying value of
certain assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on disposition of assets, net
    
    
    
    
    
    
    1
    
    
    
    77
    
    
    
    
    
    
    
    78Total operating income (loss)
    
    
    (40
    )
    
    
    (8,507
    )
    
    
    21,136
    
    
    
    55
    
    
    
    12,644Other income and (expense):Interest expense
    
    
    (8,882
    )
    
    
    (9,064
    )
    
    
    (2,814
    )
    
    
    12,694
    
    
    
    (8,066
    )Interest income
    
    
    10,705
    
    
    
    190
    
    
    
    2,085
    
    
    
    (12,694
    )
    
    
    286Other
    
    
    (3
    )
    
    
    (21
    )
    
    
    12
    
    
    
    
    
    
    
    (12
    )Equity in net earnings of subsidiaries
    
    
    (13,225
    )
    
    
    
    
    
    
    
    
    
    
    13,225
    
    
    
    Total other income and (expense)
    
    
    (11,405
    )
    
    
    (8,895
    )
    
    
    (717
    )
    
    
    13,225
    
    
    
    (7,792
    )Income (benefit) before income taxes
    
    
    (11,445
    )
    
    
    (17,402
    )
    
    
    20,419
    
    
    
    13,280
    
    
    
    4,852Income tax expense (benefit):Current
    
    
    (1,633
    )
    
    
    2,546
    
    
    
    5,825
    
    
    
    
    
    
    
    6,738Deferred
    
    
    (11,918
    )
    
    
    7,648
    
    
    
    278
    
    
    
    
    
    
    
    (3,992
    )Total income tax expense (benefit)
    
    
    (13,551
    )
    
    
    10,194
    
    
    
    6,104
    
    
    
    
    
    
    
    2,746Net income (loss)
    
    $
    2,106
    
    
    $
    (27,596
    )
    
    $
    14,316
    
    
    $
    13,280
    
    
    $
    2,106
 
 (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

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)
(Unaudited)
 Three Months Ended March 31, 2010Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    (2,051
    )
    
    $
    (9,748
    )
    
    $
    3,354
    
    
    $
    6,394
    
    
    
    (2,051
    )Adjustments to reconcile net income (loss)
to net cash provided by operating activities:Depreciation and amortization
    
    
    
    
    
    
    15,851
    
    
    
    12,737
    
    
    
    
    
    
    
    28,588Loss on extinguishment of debt
    
    
    3,220
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,220Gain on disposition of assets
    
    
    
    
    
    
    (569
    )
    
    
    (103
    )
    
    
    
    
    
    
    (672
    )Deferred income tax expense (benefit)
    
    
    (5,150
    )
    
    
    (10
    )
    
    
    (47
    )
    
    
    
    
    
    
    (5,207
    )Expenses not requiring cash
    
    
    1,430
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,430Equity in net earnings of subsidiaries
    
    
    6,394
    
    
    
    
    
    
    
    
    
    
    
    (6,394
    )
    
    
    Change in accounts receivable
    
    
    (5,025
    )
    
    
    9,681
    
    
    
    14,744
    
    
    
    
    
    
    
    19,400Change in other assets
    
    
    (5,325
    )
    
    
    10,414
    
    
    
    (10,701
    )
    
    
    
    
    
    
    (5,612
    )Change in liabilities
    
    
    2,628
    
    
    
    (31,732
    )
    
    
    (8,535
    )
    
    
    
    
    
    
    (37,639
    )Net cash provided by (used in) operating activities
    
    
    (3,879
    )
    
    
    (6,113
    )
    
    
    11,449
    
    
    
    
    
    
    
    1,457Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (46,615
    )
    
    
    (11,331
    )
    
    
    
    
    
    
    (57,946
    )Proceeds from the sale of assets
    
    
    
    
    
    
    562
    
    
    
    211
    
    
    
    
    
    
    
    773Net cash provided by (used in) investing activities
    
    
    
    
    
    
    (46,053
    )
    
    
    (11,120
    )
    
    
    
    
    
    
    (57,173
    )Cash flows from financing activities:Proceeds from draw on revolver credit facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from debt issuance
    
    
    300,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300,000Paydown on revolver credit facility
    
    
    (45,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45,000
    )Paydown on term note
    
    
    (96,310
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (96,310
    )Payment of debt issuance costs
    
    
    (7,795
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,795
    )Payment of debt extinguishment costs
    
    
    (3,330
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,330
    )Proceeds from stock options exercised
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26Excess tax cost from stock-based compensation
    
    
    1,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,350Intercompany advances, net
    
    
    (45,772
    )
    
    
    51,704
    
    
    
    (5,932
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    103,169
    
    
    
    51,704
    
    
    
    (5,932
    )
    
    
    
    
    
    
    148,941Net change in cash and cash equivalents
    
    
    99,290
    
    
    
    (462
    )
    
    
    (5,603
    )
    
    
    
    
    
    
    93,225Cash and cash equivalents at beginning of period
    
    
    58,189
    
    
    
    1,768
    
    
    
    48,846
    
    
    
    
    
    
    
    108,803Cash and cash equivalents at end of period
    
    $
    157,479
    
    
    $
    1,306
    
    
    $
    43,243
    
    
    $
    
    
    
    $
    202,028
 22




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
 Three Months Ended March 31, 2009Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    2,106
    
    
    $
    (27,541
    )
    
    $
    14,316
    
    
    $
    13,225
    
    
    
    2,106Adjustments to reconcile net income (loss)
to net cash provided by operating activities:Depreciation and amortization
    
    
    
    
    
    
    16,043
    
    
    
    11,080
    
    
    
    
    
    
    
    27,124Gain on disposition of assets
    
    
    
    
    
    
    (1
    )
    
    
    (77
    )
    
    
    
    
    
    
    (78
    )Deferred income tax expense (benefit)
    
    
    (11,918
    )
    
    
    7,648
    
    
    
    278
    
    
    
    
    
    
    
    (3,992
    )Expenses not requiring cash
    
    
    3,907
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,907Equity in net earnings of subsidiaries
    
    
    13,225
    
    
    
    
    
    
    
    
    
    
    
    (13,225
    )
    
    
    Change in accounts receivable
    
    
    2,269
    
    
    
    33,741
    
    
    
    (30,849
    )
    
    
    
    
    
    
    5,161Change in other assets
    
    
    18,150
    
    
    
    (17,555
    )
    
    
    6,097
    
    
    
    
    
    
    
    6,692Change in liabilities
    
    
    (99
    )
    
    
    (10,454
    )
    
    
    (5,819
    )
    
    
    
    
    
    
    (16,372
    )Net cash provided by (used in) operating activities
    
    
    27,640
    
    
    
    1,881
    
    
    
    (4,974
    )
    
    
    0
    
    
    
    24,548Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (43,907
    )
    
    
    (7,477
    )
    
    
    
    
    
    
    (51,384
    )Proceeds from the sale of assets
    
    
    0
    
    
    
    29
    
    
    
    140
    
    
    
    
    
    
    
    169Net cash provided by (used in) investing activities
    
    
    0
    
    
    
    (43,878
    )
    
    
    (7,337
    )
    
    
    
    
    
    
    (51,215
    )Cash flows from financing activities:Proceeds from draw on revolver credit facility
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000Excess tax cost from stock-based compensation
    
    
    (1,228
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,228
    )Intercompany advances, net
    
    
    (55,910
    )
    
    
    41,081
    
    
    
    14,829
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    (53,138
    )
    
    
    41,081
    
    
    
    14,829
    
    
    
    
    
    
    
    2,772Net change in cash and cash equivalents
    
    
    (25,498
    )
    
    
    (915
    )
    
    
    2,518
    
    
    
    0
    
    
    
    (23,895
    )Cash and cash equivalents at beginning of period
    
    
    111,324
    
    
    
    6,858
    
    
    
    54,116
    
    
    
    
    
    
    
    172,298Cash and cash equivalents at end of period
    
    $
    85,826
    
    
    $
    5,943
    
    
    $
    56,634
    
    
    $
    0
    
    
    $
    148,403
 23




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 DISCLOSURE NOTE REGARDING FORWARD-LOOKING STATEMENTS
  
    
    stability of prices and demand for oil and natural gas;
    
    levels of oil and natural gas exploration and production activities;
    
    demand for contract drilling and drilling related services and demand for rental tools;
    
    our future operating results and profitability;
    
    our future rig utilization, dayrates and rental tools activity;
    
    entering into new, or extending existing, drilling contracts and our expectations
concerning when our rigs will commence operations under such contracts;
    
    growth through acquisitions of companies or assets;
    
    construction or upgrades of rigs and expectations regarding when these rigs will
commence operations;
    
    capital expenditures for acquisition of rigs, construction of new rigs or major
upgrades to existing rigs;
    
    scheduled delivery of drilling rigs for operation in Alaska under the terms of our
agreement with BP Exploration (Alaska) Inc.;
    
    entering into joint venture agreements;
    
    our future liquidity;
    
    availability and sources of funds to reduce our debt and expectations of when debt will
be reduced;
    
    the outcome of pending or future legal proceedings, investigations, tax assessments and
other claims;
    
    the availability of insurance coverage for pending or future claims;
    
    the enforceability of contractual indemnification in relation to pending or future
claims;
    
    compliance with covenants under our senior secured credit facility and indentures for
our senior notes; and
    
    organic growth of our operations.
  
    
    worldwide economic and business conditions that adversely affect market conditions
and/or the cost of doing business;
    
    our inability to access the credit markets;
    
    the U.S. economy and the demand for natural gas;
    
    worldwide demand for oil;
    
    fluctuations in the market prices of oil and natural gas;
    
    imposition of unanticipated trade restrictions;
    
    unanticipated operating hazards and uninsured risks;
    
    political instability, terrorism or war;
 24




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##### Table of Contents



DISCLOSURE NOTE REGARDING FORWARD-LOOKING STATEMENTS (continued)
 
    
    governmental regulations, including changes in accounting rules or tax laws or ability
to remit funds to the U.S., that adversely affect the cost of doing business;
    
    changes in the tax laws that would allow double taxation on foreign sourced income;
    
    the outcome of our investigation and the parallel investigations by the SEC and the
Department of Justice into possible violations of U.S. law, including the Foreign Corrupt
Practices Act;
    
    contemplated U.S. legislation on carbon emissions;
    
    potential new employer taxes on U.S. health care plans;
    
    adverse environmental events;
    
    adverse weather conditions;
    
    global health concerns;
    
    changes in the concentration of customer and supplier relationships;
    
    ability of our customers and suppliers to obtain financing for their operations;
    
    unexpected cost increases for new construction and upgrade and refurbishment projects;
    
    delays in obtaining components for capital projects and in ongoing operational
maintenance and equipment certifications;
    
    shortages of skilled labor;
    
    unanticipated cancellation of contracts by operators;
    
    breakdown of equipment;
    
    other operational problems including delays in start-up of operations;
    
    changes in competition;
    
    the effect of litigation and contingencies; and
    
    other similar factors (some of which are discussed in documents referred to 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
 Summary
   25




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OVERVIEW AND OUTLOOK (continued)
 Summary (continued)
  Overview: Recent Trends
       Outlook
    26




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OVERVIEW AND OUTLOOK (continued)
 Outlook (continued)
    27




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RESULTS OF OPERATIONS
 Three Months Ended March 31, 2010 Compared with Three Months Ended March 31, 2009
  Three Months Ended March 31,2010
    
    
    2009(Dollars in Thousands)Revenues:International Drilling
    
    $
    63,875
    
    
    
    41
    %
    
    $
    77,381
    
    
    
    44
    %U.S. Drilling
    
    
    15,087
    
    
    
    10
    %
    
    
    9,856
    
    
    
    6
    %Rental Tools
    
    
    33,815
    
    
    
    21
    %
    
    
    37,889
    
    
    
    22
    %Project Management and Engineering Services
    
    
    24,441
    
    
    
    15
    %
    
    
    32,054
    
    
    
    18
    %Construction Contract
    
    
    20,387
    
    
    
    13
    %
    
    
    16,745
    
    
    
    10
    %Total revenues
    
    $
    157,605
    
    
    
    100
    %
    
    $
    173,925
    
    
    
    100
    %Operating gross margin (1):International Drilling gross margin excluding depreciation and
amortizatio
    
    $
    16,702
    
    
    
    26
    %
    
    $
    27,604
    
    
    
    36
    %U.S. Drilling gross margin excluding depreciation and amortization
    
    
    2,113
    
    
    
    14
    %
    
    
    (3,280
    )
    
    
    -33
    %Rental Tools gross margin excluding depreciation and amortization
    
    
    21,189
    
    
    
    63
    %
    
    
    21,435
    
    
    
    57
    %Project Management and Engineering Services gross margin
excluding depreciation and amortization
    
    
    4,880
    
    
    
    20
    %
    
    
    6,160
    
    
    
    19
    %Construction Contract excluding depreciation and amortization
    
    
    (810
    )
    
    
    -4
    %
    
    
    831
    
    
    
    5
    %Depreciation and amortization
    
    
    (28,588
    )
    
    
    
    
    
    
    (27,124
    )Total operating gross margin
    
    
    15,486
    
    
    
    
    
    
    
    25,626General and administration expense
    
    
    (10,032
    )
    
    
    
    
    
    
    (13,060
    )Provision for reduction in carrying value of certain assets
    
    
    
    
    
    
    
    
    
    
    Gain on disposition of assets, net
    
    
    672
    
    
    
    
    
    
    
    78Total operating income
    
    $
    6,126
    
    
    
    
    
    
    $
    12,644
 
 (1)
    
    Gross margins, excluding depreciation and amortization, are computed as
revenues less direct operating expenses, excluding depreciation and amortization expense;
gross margin percentages are computed as gross margin, excluding depreciation and
amortization, as a percent of revenues. The gross margin amounts, excluding depreciation and
amortization, and gross margin percentages should not be used as a substitute for those
amounts reported under accounting principles generally accepted in the United States (GAAP).
However, we monitor our business segments based on several criteria, including gross margin.
Management believes that this information is useful to our investors because it more
accurately reflects cash generated by segment. Such gross margin amounts are reconciled to
our most comparable GAAP measure as follows: ProjectManagementandInternational
    
    
    
    
    
    
    
    
    
    
    Engineering
    
    
    ConstructionThree Months Ended:
    
    Drilling
    
    
    U.S. Drilling
    
    
    Rental Tools
    
    
    Services
    
    
    Contract(Dollars in Thousands)March 31, 2010Operating gross margin
    
    $
    3,314
    
    
    $
    (4,161
    )
    
    $
    12,263
    
    
    $
    4,880
    
    
    $
    (810
    )Depreciation and amortization
    
    
    13,388
    
    
    
    6,274
    
    
    
    8,926
    
    
    
    
    
    
    
    Drilling and rental gross
margin excluding
depreciation and
amortization
    
    $
    16,702
    
    
    $
    2,113
    
    
    $
    21,189
    
    
    $
    4,880
    
    
    $
    (810
    )March 31, 2009Operating gross margin
    
    $
    15,912
    
    
    $
    (10,458
    )
    
    $
    13,181
    
    
    $
    6,160
    
    
    $
    831Depreciation and amortization
    
    
    11,692
    
    
    
    7,178
    
    
    
    8,254
    
    
    
    
    
    
    
    Drilling and rental gross
margin excluding
depreciation and
amortization
    
    $
    27,604
    
    
    $
    (3,280
    )
    
    $
    21,435
    
    
    $
    6,160
    
    
    $
    831
 28




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RESULTS OF OPERATIONS
 International Drilling Segment
    U.S. Drilling Segment
   Rental Tools Segment
   Project Management and Engineering Services Segment
  Construction Contracts Segment
  29




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RESULTS OF OPERATIONS (continued)
 Other Financial Data
     LIQUIDITY AND CAPITAL RESOURCES
 Cash Flows
   Financing Activity
  30




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LIQUIDITY AND CAPITAL RESOURCES (continued)
 Financing Activity (continued)
      31




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LIQUIDITY AND CAPITAL RESOURCES (continued)
 Financing Activity (continued)
  
    
    $300.0 million aggregate principal amount of 9.125%  Notes, which are due April
1, 2018;
    
    $128.7 million aggregate principal amount of 9.625%  Notes, which are due
October 1, 2013 plus an associated $1.3 million in unamortized debt premium, the full
amount being classified as short term pursuant to a call for redemption issued March 22,
2010;
    
    $41.0 million drawn against our 2008 Credit Facility, including $41.0 million on our
Term Loan Facility, $12.0 million of which is classified as short term, and none on our
Revolving Credit Facility.
    
    $125.0 million aggregate principal amount of Convertible Senior Notes at a coupon rate
of 2.125% , which are due July 15, 2012 net of $13.3 million in unamortized debt discount;
and,
    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)
    
    $
    594,690
    
    
    $
    140,690
    
    
    $
    149,000
    
    
    $
    5,000
    
    
    $
    300,000Long-term debt  interest (1)
    
    
    228,415
    
    
    
    32,019
    
    
    
    59,499
    
    
    
    54,772
    
    
    
    82,125Operating leases (2)
    
    
    34,661
    
    
    
    7,178
    
    
    
    8,478
    
    
    
    6,381
    
    
    
    12,624Purchase commitments (3)
    
    
    55,163
    
    
    
    55,163
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    912,929
    
    
    $
    235,050
    
    
    $
    216,977
    
    
    $
    66,153
    
    
    $
    394,749Commercial commitments:Long-term debt 
Standby letters of credit (4)
    
    
    16,616
    
    
    
    16,616
    
    
    
    
    
    
    
    
    
    
    
    Total commercial commitments
    
    $
    16,616
    
    
    $
    16,616
    
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (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 $1.3 million and unamortized discount of
$13.3 million are not included in the contractual cash obligations schedule.(2)
    
    Operating leases consist of lease agreements in excess of one year for
office space, equipment, vehicles and personal property.(3)
    
    We have purchase commitments outstanding as of March 31, 2010, related to
rig upgrade projects and new rig construction.(4)
    
    We have an $80.0 million revolving credit facility. As of March 31, 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 an estimated $63.4 million of
availability. The revolving credit facility expires May 14, 2013. 32




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control Over Financial Reporting 
 
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  Our operations could be adversely impacted by the recent drilling rig accident and resulting oil
spill in the Gulf of Mexico.
    33




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##### Table of Contents



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 ProgramJanuary 1-31, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    N/AFebruary 1-28, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    N/AMarch 1-31, 2010
    
    
    262,086
    
    
    $
    5.17
    
    
    
    
    
    
    
    N/ATotal
    
    
    262,086
    
    
    $
    5.17
    
    
    
    
    
    
    
    N/A
 
 (1)
    
    Represents shares subject to restricted share awards withheld to satisfy
tax obligations arising upon the vesting of restricted shares. 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  ExhibitNumber
    
    
    
    DESCRIPTION4.1
    
    
    
    Indenture, dated March 22, 2010, among Parker Drilling Company, the
guarantors named therein and The Bank of New York Mellon Trust Company, N.A.,
as trustee (incorporated by reference to Exhibit 4.1 to the Companys Current
Report on Form 8-K dated March 22, 2010)4.2
    
    
    
    Form of 91/8
% Senior Note due 2018 (included in Exhibit 4.1)4.3
    
    
    
    Registration Rights Agreement, dated March 22, 2010, by and among Parker
Drilling Company, the guarantors named therein, Bank of America Securities
LLC, RBS Securities Inc., Barclays Capital Inc., Credit Suisse Securities
(USA), Inc., Deutsche Bank Securities Inc., HSBC Securities (USA) Inc.,
Natixis Bleichroeder LLC and Wells Fargo Securities, LLC (incorporated by
reference to Exhibit 10.1 to the Companys Current Report on Form 8-K dated
March 22, 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
 34




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##### Table of Contents



SIGNATURES
  PARKER DRILLING COMPANYDate:  May 7, 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
    
    Description4.1
    
    Indenture, dated March 22, 2010, among Parker Drilling Company, the
guarantors named therein and The Bank of New York Mellon Trust Company, N.A.,
as trustee (incorporated by reference to Exhibit 4.1 to the Companys Current
Report on Form 8-K dated March 22, 2010)4.2
    
    Form of 91/8
% Senior Note due 2018 (included in Exhibit 4.1)4.3
    
    Registration Rights Agreement, dated March 22, 2010, by and among Parker
Drilling Company, the guarantors named therein, Bank of America Securities
LLC, RBS Securities Inc., Barclays Capital Inc., Credit Suisse Securities
(USA), Inc., Deutsche Bank Securities Inc., HSBC Securities (USA) Inc.,
Natixis Bleichroeder LLC and Wells Fargo Securities, LLC (incorporated by
reference to Exhibit 10.1 to the Companys Current Report on Form 8-K dated
March 22, 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