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Parker Drilling Company (NYSE:PKD)

Q1 2009 Earnings Call Transcript

May 6, 2009 11:00 am ET

Executives

Rich Bajenski – Director, IR

Bobby Parker – Chairman and CEO

Dave Mannon – President and COO

Kirk Brassfield – SVP and CFO

Analysts

Steve Ferazani – Sidoti & Company

Matt Beeby – Morgan Keegan & Co.

John Keller – Johnson Rice & Company

Operator

Good morning ladies and gentlemen, thank you for standing by. Welcome to the Parker Drilling first quarter 2009 conference call. During today’s presentation all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator instructions). This conference is being recorded May 6, 2009.

I would now like to turn the conference over to Richard Bajenski, please go ahead.

Rich Bajenski

Thank you Marissa and good morning everyone. Thank you for joining the Parker Drilling’s first quarter 2009 conference call. This is Rich Bajenski, Director of Investor Relations, and joining me today are Bobby Parker, Chairman and Chief Executive Officer; Dave Mannon, President and Chief Operating Officer; and Kirk Brassfield, Senior Vice President and Chief Financial Officer.

In the course of our comments today, we will make statements regarding management’s expectations for the company’s future performance that we believe will be informative and beneficial to our shareholders. These statements are considered forward-looking statements within the meaning of the Securities Act. Each forward-looking statement speaks only as of the date of this call and actual results may differ materially due to various factors we have referenced in our public filings and other factors addressed during this call including changes in market conditions affecting our industry. We will also refer to non-GAAP financial measures such as adjusted EBITDA and non-routine items. Please refer to the table in our current press release or on the company’s Web site for a definition of adjusted EBITDA and a reconciliation of this measure to the comparable GAAP measure, and for further information regarding non-routine items.

Before I turn the call over to Bobby Parker I will remind you that the company will be holding its 2009 Analysts Day on the morning of June 4 in New York City at the Parker Meridien Hotel. If you are an analyst or institutional investor and wish to attend, please send me an email and I will follow it up with you. With that Bobby you have the floor.

Bobby Parker

Thanks Rich and welcome to our conference call. Earlier today we reported Parker Drilling’s 2009 first quarter results. The net result was an income of $0.02 per share for the quarter. Excluding non-routine items, earnings per share for the quarter was $0.05 compared to $0.16 for the same period last year.

The marketplace presented us with many challenges this past quarter yet we have successfully addressed them finding business opportunity and even growth where others have not. I believe this is firm evidence of the soundness of our strategic balance and geographic diversification, the strength of our customer relationship based on years of reliable performance, our strategic initiative to upgrade the technology and capabilities of our rig fleet, and the quality and dedication of our employees whose hard work delivered these results.

Among the highlights of the first quarter are a year-to-year increase in first quarter revenues and EBITDA from International Drilling and Project Management and Services segment. These two segments accounted for 63% of total revenues in the first quarter a significant increase in segment EBITDA as a percent of revenue at International Drilling compared to the prior year’s first quarter. Segment EBITDA increased to 35.7% of revenues this quarter from 23.4% of revenues in last year’s first quarter. International rig utilization was 79% ahead of the prior year’s first quarter utilization of 73% and on-schedule progress in the construction of the BP-owned Liberty rig and our two Parker-owned arctic Alaska rigs.

It would be hard to overstate how far and how fast the US drilling market has fallen. Along with the global credit crisis, this has had an impact on some international drilling markets as well. Though we expect the remainder of the year to continue to be difficult, our operations are doing somewhat better today than they were when we reported our year-end 2008 results just ten weeks ago. At that time, our US barge drilling business had three rigs working and that soon went to two. Today the business has six rigs working and is generating positive cash flow. Ten weeks ago our International Drilling segment had six rigs coming off contract during the first six months of the year and with tender activity being quite meager, there was a concern that this could grow to be more. Since then no further terminations have occurred or are expected to occur and tender activity has picked up appreciably in all international regions offering reasonable prospects of being able to redeploy our rigs as they come off contract during the year. Ten weeks ago, we all had concern about the ability of our Rental Tools business to deal with the rapid and deep decline in US land drilling. As you can see, they did just fine for the quarter with revenues down less than 5% from the prior year.

The depressed US land market continues to pose a challenge that we will seek to mitigate through the rest of the year. The Project Management and Engineering Service segment continues to grow in the first quarter for work we initiated earlier. There are several projects we are currently evaluating and bidding on that could add meaningfully to our portfolio. While we have no new commitments to announce this time, we expect to maintain our activity near or at current level and have prospects to add to this during the year. I don’t believe all of this is enough to say that we are in an upturn in our business, however I can say I feel more certain about our operations’ ability to deal with these extreme conditions than I did just ten weeks ago. Regardless of whether this is a turning point or not, we will continue doing what we do best providing innovative drilling solutions to our customers often unique and challenging needs and delivering solid financial results from our operation. Our strategy has proven to be a reliable guide through this time and should provide a foundation for a solid future. Our strategic balance and geographic diversification have cushioned the impact of current market forces. Our investment in safety, training and technology have proven to be key factors and why our rigs get called on first when there is work to be done and why Parker is topmost in people’s mind when they consider taking on exploration and production work in complex, remote, and difficult environments. In addition, we are in good financial condition with a sound balance sheet and sufficient cash and expected cash flow to meet our investment commitments and forecasted cash needs.

At this time, I will turn the call over to Dave Mannon to discuss our operations.

Dave Mannon

Thanks Bobby. I will start with the barge drilling business. Overall utilization in the first quarter was 25% compared to 77% in last year’s first quarter and 61% in the 2008 fourth quarter. Sequentially average dayrates were down 30%. Our deep drilling fleet of ten barges was 25% utilized during the quarter at average dayrates of 32,900. Only one of our three intermediate depth barges worked during the quarter and not for the entire quarter and one of our two shallow work over barges worked for most of the first quarter.

Our business has improved of late. We currently have six barges at work in the Gulf of Mexico and all deep drilling rigs are operating at an average dayrate of $30,500. A history of our barge utilization and dayrates is available on our Web site along with a fleet status report that is updated monthly. During the past four years, we invested over $125 million to refurbish and upgrade our barge fleet and establish Parker as the preferred provider with the most efficient and safest equipment in the barge market. What we expected to realize from this was above market dayrates most of the time, better than market utilization during down cycles, and a stronger recovery in the upturn. At this low point in the barge’s cycle, I think it is fair to say that our investment is being rewarded. Today in the entire Gulf of Mexico barge fleet there are ten drilling barges at work, six of them or 60% are Parker rigs. We have chosen to keep our rigs work ready when operators have drilling programs; we are most often their first choice. Given an uncertain outlook for this market, we have ratcheted down our operating cost to more closely manage lower levels of activity. We have reduced front office and operations support staff and though we have kept our underutilized rigs warm stacked, we have done it efficiently by clustering the rigs and instituting reduced work related schedules.

Turning to International Drilling, our 31-rig international fleet was 71% utilized during the first quarter compared to 73% in the 2008 first quarter and 87% utilization in the 2008 fourth quarter. We are currently 71% utilized with four rigs coming off contract in the near future. There is sufficient level of tender activity in the market for me to say that each rig has prospects for further work. It will be of various durations and for some it will be more immediate than for others. Nevertheless we are quite busy and expect to have our fleet actively deployed during most of the year. We had lower operating cost in several of our international regions this past quarter. Some of this reduction is the result of efforts to manage costs, some is due to the changing mix of rigs and operation are on the move, and some is a result of not having the repositioning costs we incurred in the first quarter of 2008.

In the Americas region, we operated at 90% utilization with nine of ten rigs working during the first quarter. One rig comes off contract before mid year, rig 268 and it has been marketed along with rig 266 which came up contract in April and rig 271 which has been idle. All the rigs currently working in this region are under term contracts extending to 2010 or later. The Americas market is fairly active right now driven by a Mexico’s desire to increase production. We expect our rigs in this region to be actively employed most of the year.

In the Asia Pacific region, we operated at 64% utilization with six of the eight rigs in the region working during the first quarter, three rigs became available during the quarter, rig 226, rig 231, and rig 252 are currently being marketed. There are several developing opportunities in this region and our rig fleet has the potential for improved utilization, however most of the current work is of short duration and our challenge continues to be keeping the rigs actively deployed. It is in this region that we are most likely to see some gaps in rig employment particularly through the middle part of this year.

In the CIS / AME region, our first quarter utilization was 86% with ten of twelve rigs working during the quarter, seven of the twelve rigs in the region are working under contracts extending into 2010 and 2011. Three rigs will come off contract before mid year, rig 230, rig 236 and rig 269. These are currently being marketed along with rig 247 which became available in January and all have prospects for additional work in 2009.

You can find regular updates of our international rig fleet status on the Parker Web site in the Investor Relations section and track changes in the fleet’s contract status on a monthly basis. We also have two Parker owned newbuild land rigs under construction for a five-year development drilling program for BP on the North Slope of Alaska beginning in late 2010. This program is on schedule for Sealift [ph] in the summer of 2010. We believe the Alaskan market has significant long-term growth potential that is well suited to our Arctic operating experience and extended-reach drilling expertise. This newbuilds will join the BP owned Liberty rig and solidify our presence in this region.

Rental Tool revenues and earnings performance in the quarter demonstrated the resilience of the Quail Tools business model. Year over year revenues declined 4% and segment gross margin was 56.6% of revenues despite the steep decline in US land and Gulf of Mexico’s shelf drilling activity, Quail Tools primary market. The business has maintained its activity in the shale plays around our Williston, North Dakota, and Texarkana and Texas location specifically the Bakken and the Haynesville shale areas where drilling has been less affected by current conditions both of these regions in which we recently placed new facilities allowing us to fully leverage these opportunities, in addition we have been supplying equipment to the Marcellus shale region where drilling has increased year to year.

In many areas operators have turned from drilling to work over activity and both types of work require Quail Tools. Also several of Quail Tools’ key customers like ExxonMobil, BP and Chevron continue to drill through this market including increases in their deep water and international activity. Quail Tools has established a strong position in the market through their customer service orientation and their increasing geographic diversification. We expect Quail Tools’ customer base and market diversification to continue to provide revenue and earnings support to the business during these weak market conditions. The project management contracts on Russian Sakhalin Island continue with Exxon Neftegas for the Yastreb land rig and the Orlan platform. The Yastreb is onsite and during much of the first quarter was being made ready to drill the Odoptu fields. The rigs spurred on April 29. On the Orlan platform the first phase of development drilling was completed in March and we are now in a scheduled warm stack condition.

Regarding other project assignments, we continue to work on the FEED study for ENL design the drilling package for the Arkutun-Dagi platform offshore Sakhalin Island. Also we recently increased the number of rigs under technical service contracts in Kuwait bringing to 24 the total number of rigs which we will be providing management support. We are actively bidding additional design and construction operation contracts and anticipate adding projects to our growing project management business in 2009.

The BP-owned Liberty rig is reflected in the construction contract segment. This purpose built rig is being constructed for BP’s development of the Liberty field offshore from the North Slope of Alaska. It is on schedule for deployment to Alaska in mid 2009 and the start of operations in early 2010.

That is it for the operations update; I will now turn the call over to Kirk Brassfield to discuss our financial results.

Kirk Brassfield

Thanks Dave. For the first quarter of 2009, Parker Drilling reported net income of $2.1 million or $0.02 per diluted share on revenues of $173.9 million. There was one non-routine item that affected this quarter’s results. Excluding the non-routine item, Parker’s 2009 first quarter diluted earnings per share was $0.05. The comparable result for last year’s first quarter was $0.16 per diluted share. Last year’s results have been restated by Financial Accounting Standards for position APB 14-1 titled Accounting for Convertible Debt Instruments that May Be Settled in Cash Upon Conversion which we adopted effective January 1. The decrease in earnings per share from the prior year’s first quarter was primarily the result of lower revenues and lower gross margin as a percent of revenue. Year-to-year earnings were further impacted by increases in depreciation expense, general and administrative expense, interest expense, and a higher effective tax rate. Before discussing operating results, let me deal first with the non-routine items.

In the first quarter, we incurred $5.3 million of expense related to the cost of the continuing parallel investigations by the DOJ and SEC into the utilization of a customs agent by some of our foreign operations and an internal investigation regarding US economic sanctions primarily relating to the company’s operations in Turkmenistan. The net impact to earnings was $0.03 per diluted share.

Turning now to ongoing operations, revenues excluding the Construction Contract segment declined 9% from the 2008 first quarter and adjusted EBITDA as a percent of revenues declined 10 percentage points compared to the same period last year. US barge drilling segment reported first quarter revenues of $9.9 million and EBITDA loss of $3.3 million. The decline in revenues and the EBITDA loss compared to prior year’s first quarter are due to the sharp drop in fleet utilization and reduced average dayrates. First quarter 2009 utilization was 25% while last year’s first quarter utilization was 77%. In addition, average dayrates declined by about a third to $28,000 per day this past quarter from $41,200 in the first quarter 2008. Our International Drilling segment achieved a significant increase in revenues, EBITDA, and EBITDA as a percentage of revenues. Revenues increased 13% to $77.4 million compared to last year’s first quarter while EBITDA increased 71%, and EBITDA as a percentage of revenues increased to 35.7%. Compared to last year’s first quarter overall, fleet utilization was at 71% compared to 73% with no significant change in the fleet’s average dayrate. International Drillings increased EBITDA and increased EBITDA as a percent of revenues was due to higher revenues during the quarter and continued management of operating cost.

Real Tools segment revenues declined 4% compared to the prior year’s first quarter and EBITDA declined 9%. EBITDA as a percentage of revenues was 56.6%. Lower overall demand has led to some increased discounting affecting both revenues and earnings. Project Management and Engineering Services segment revenues grew by 67% compared to the first quarter of 2008. The year to year increase represents the impact of higher revenues on Sakhalin Island program including revenues for the moving of the Yastreb rig to the north and preparations to drill the Odoptu field. Also there was a benefit from the additional engineering and O&M projects we have contracted since last year. EBITDA for the first quarter increased 75% as compared to the prior year’s first quarter primarily as a result of leveraging the higher revenues.

Construction contract revenues are recognized on a percentage to completion basis and (inaudible) since the progress made on the BP-owned Liberty rig construction contract, a cost plus contract. Depreciation expense was $27.1 million in the first quarter of 2009 compared to $26.2 million in the first quarter of 2008 and $32 million in the fourth quarter of 2009. In late 2008 we concluded the study comparing the scheduled depreciation of our rig fleet to our actual operating experience and found that certain assets associated with our rigs were often skilled in economic service long after they have reached salvage value. We have adjusted the (inaudible) life of these assets accordingly. This change has been made prospectively and only for reporting purposes to reflect more closely the economic performance for our operations. Tax depreciation remains unchanged. D&A expense increased to $13.1 million for the quarter, included here are the $5.3 million of professional fees related to the DOJ, SEC and Parker investigations, excluding these G&A expense was $7.8 million, an increase from the prior year’s first quarter primarily due to the departure of a senior executive and certain increases in professional fees.

Interest expense increased to $8.1 million in the first quarter higher than interest expense in the prior year and prior quarter primarily driven by the third and fourth quarter draws on our $130 million credit facility. The facility was put in place in May 2008 to supplement the construction of the two new build rigs committed to BP Alaska. Prior to year end 2008, with so much uncertainty in the market concerning lenders’ willingness or ability to follow through under financing commitments, we chose to effectively drawdown the full amount of the facility to assure the cash would be on hand when needed. Included in interest expense is $1.2 million of non-cash interest expense related to the adoption of APB 14-1 as previously talked about.

The effective tax rate for the quarter adjusted for non-routine items was 45.3% compared to a similarly adjusted rate of 38.4% in the first quarter 2008. The tax rate is unusually high due to the continued underutilization of our foreign tax credits and the low pretax income which exaggerates any tax impacts. Our cash balance at March 31 was $148.4 million compared to $172.3 million at the end of 2008. The decline in cash balance primarily relates funding the construction spending on our two newly build Alaska rigs. Capital expenditures were $51.4 million for the quarter included are capitalized interest of $1.1 million, Alaska rig construction of spending of $17.5 million, and rental tool inventory purchases of $17.2 million.

As you can see, we are in very sound financial shape. At the end of the quarter we had $446.5 million of debt outstanding and $148.4 million of cash and cash equivalents for net debt position of $298.1 million. Our debt-to-net capitalization ratio is a very manageable 33.7%. Of our debt outstanding, the $50 million term loan begins to amortize during the third quarter of 2009 at $3 million per quarter. The remaining components of the company’s debt do not mature until 2012 and 2013. Our debt covenants contain two important financial tasks, a leverage ratio of debt to EBITDA, and an interest coverage ratio. At March 31, 2009 our leverage ratio was 1.7 times against a covenant maximum of four times. Our interest coverage ratio was 9.5 times against the covenant minimum of 2.5 times. Lastly with our current $148.4 million of cash and cash equivalents and cash generated from operations we are positioned to meet the remaining capital needs we expect for 2009.

A few words about the outlook for the rest of the year, we remain cautious about the near future for drilling activity and how it may impact our performance. Specifically, we expect the US Gulf of Mexico barge business to remain depressed. Today there are ten barge drilling rigs working in the US coastal waters of which six are Parker rigs, a year ago they were about 34. We believe current enquiries could support some increase from first quarter levels and have sized our operating cost accordingly. We continue to operate this business to achieve a breakeven or better cash flow for 2009. We have about one third of our international fleet turning over before year end while we are optimistic about the continuity of work, dayrates may decline and our challenge will be to match this with lower cost and improved efficiency. The US land drilling market is yet to find the bottom, this will hamper our rental tool business somewhat though added deep water work in activity and some shale plays will provide a substantial offset and we expect a modest increase in project management results based on the work we currently have in hand. While we remain cautious about the outlook for our markets, we feel more confident in the ability of our business to respond that we will close on the opportunities we have developed and through active cost management deliver a solid performance for the upcoming quarters and for the year. We expect our second quarter revenues will be moderately below the first quarter level with a projected increase in the US barge drilling segment. We will continue to manage and control our costs consistent with business conditions as we demonstrated in the first quarter. This should result in the second quarter diluted earnings per share similar to the first quarter earnings in the range of $0.46 a share excluding non-routine items.

That concludes my part of the review, we believe the results we can produce in 2009 in this most uncertain of times will demonstrate the value of the strategy to leverage Parker’s technical capabilities and experience to build platforms for growth, to differentiate our traditional drilling business and to diversify in balance the company’s business mix. We remain focused on executing our plan and look forward to reporting our progress.

Bobby Parker

Well Marissa, that concludes our opening comments, we will be ready to take questions from our listeners.

Question-and-Answer Session

Operator

Thank you sir. (Operator instructions) Our first question comes from the line of Steve Ferazani with Sidoti & Company. Please go ahead.

Steve Ferazani – Sidoti & Company

Good morning. Just want to clarify first on the guidance at this point you are just trying to give Q2 or is that –

Kirk Brassfield

Yes Steve that is correct. We are just (inaudible) in the second quarter and that was $0.04 to $0.06.

Steve Ferazani – Sidoti & Company

Okay so I guess –

Kirk Brassfield

Normalized after non-routine items.

Steve Ferazani – Sidoti & Company

Right of course. I guess what I am hearing is perhaps inland barge you are starting to see stabilization but it could be offset on utilization internationally into the second-half, is that a fair characterization of your comments?

Dave Mannon

The US barge business, I don’t see that stabilizing right now. We are extremely happy that we have got fixed rates working. I think it is a testament to our strategy and warm stacking our rigs and also what we have done in the last three years to improve our performance and technology in that division. But moving forward, it is still a very spotty market and so therefore we are chasing more work than we were chasing in the first quarter, so we are I guess a little bit optimistic that maybe we have seen the bottom in this market but I think it is too early to tell. As far as international, we have not seen any indications that our current work program in our areas specifically in the CIS and in the Americas is slowing down. Yes we have some rigs that are going to be rolling over but we anticipate that we are going to finding work for those rigs. The one area that we do see weakness in is in Asia Pacific and for that matter we have seen a weakness there for some time.

Steve Ferazani – Sidoti & Company

I guess the challenge on the international side will be the exploration of contracts near the end of the year, do you start conversations this early on and can you give any kind of take on that?

Dave Mannon

We have started some conversations with people, certainly some of these rigs are in areas where they have considerable amount of development demand but we don’t have anything specific to say on those conversations.

Steve Ferazani – Sidoti & Company

Okay fair enough. Thanks David, thanks everyone.

Dave Mannon

Thank you.

Operator

Thank you. Our next question comes from the line of Matt Beeby with Morgan Keegan & Co. Please go ahead.

Matt Beeby – Morgan Keegan & Co., Inc

Good morning guys.

Bobby Parker

Good morning.

Kirk Brassfield

Hello Matt.

Matt Beeby – Morgan Keegan & Co., Inc

I was curious if we could go back into the US barge business, what kind of term are those six barges currently working at?

Dave Mannon

A few years ago we did talk about term contracts with rigs today that is not a conversation we have with our customer. So the majority of the rigs that we have working are relatively short-term projects anywhere from 20 to 40 days. We do have two rigs that are on longer term contracts, one is drilling about a 90 to 100-day well and the other one is drilling about 120-day well.

Matt Beeby – Morgan Keegan & Co., Inc

Okay.

Dave Mannon

We do have some forward guidance I guess just from a near term basis and that a couple of rigs that are working on short-term projects have follow-up work that the customers talked about.

Matt Beeby – Morgan Keegan & Co., Inc

So are we past the point you guys have not yet had to cold stack or really talk about that yet, have we past that point you feel comfortable that you will not have to do any kind of cold stacking?

Dave Mannon

Well I think it really depends on the economic situation in that localized area, our strategy even in the doldrums in the first quarter was not to cold stack rigs. We think that our rigs are going to be the first to go back to work and we want to be ready to do that. What we have done is dramatically reduced our cost, so we have as have talked about earlier, we have lashed our rigs together and have a support crew, a small support crew that can go from rig to rig to rig instead of having individualized crews on each rig. So we have, I guess you could say, we have prepared for the worst case scenario but are opportunistic about demand returning and so therefore we had experienced crews and we had ready rigs to go back to work. I cannot say that about the rest of our peer group.

Matt Beeby – Morgan Keegan & Co., Inc

Okay and how about the term negotiations that you are getting and in discussion for on the international land drilling side?

Dave Mannon

Currently we don’t have anything to discuss there. We are talking to a number of customers in the CIS as well as in the Latin America area about work, typically international work is at least a year’s worth of work to go on these projects but we don’t have any guidance on that.

Matt Beeby – Morgan Keegan & Co., Inc

Okay. One last one, you guys said some CapEx in 1Q on the Rental Tool business, would you say that your opportunities there in the domestic shale plays and deepwater would be better than your opportunities in the international land drilling segment?

Dave Mannon

We had commitments from the existing customers in the Rental Tool division that we wanted to fulfill. We had contracts for that capital that we spent and so we thought that that was the right thing to do. Capital to be spent internationally would be rig build and we don’t see that – we are not going to go out and build a rig on stack right now. So we felt that the capital that we deployed in the Quail Tools division was the right thing to do.

Matt Beeby – Morgan Keegan & Co., Inc

Okay, thanks guys.

Operator

Thank you. (Operator instructions) Our next question comes from the line of John Keller with Johnson Rice & Company. Please go ahead.

John Keller – Johnson Rice & Company

Hi guys.

Bobby Parker

Good morning.

John Keller – Johnson Rice & Company

I was curious if you could maybe walk me through what the outlook is in the project management side of the business, I mean it sounds like you are getting some nice incremental awards there with the expansion in Kuwait and how does that business play out through the end of ’09 and into 2010? Is that a growth business for you all?

Dave Mannon

I think it is. We have a number of projects that we are currently bidding on in vast areas of the world. There are projects over in the Sakhalin Island, there are projects in the Caspian, there are projects offshore Canada, there is a project that we are looking at also in the Gulf of Mexico. So I think that amongst all the projects that we are looking at something will come of that. Now let me just remind you, the project management business is different than the international contract business whereby the project management business is a long lead type business meaning that we start on a design of an initial customer owned rig and we build that rig and then we operate it. So typically these are five, ten, fifteen-year projects. So the majors tend not to look at the present economic conditions in sanctioning these projects. These projects are portfolio type projects and so therefore that is why I think even in the current marketplace there are opportunities in the project management.

John Keller – Johnson Rice & Company

Okay.

Dave Mannon

So we are hopeful that we are going to be able to come out with some guidance on this in later part of this year.

Operator

Thank you. We have no following questions. I would now like to turn it back over to management for any closing remarks. Please go ahead.

Rich Bajenski

Thank you Marissa and thank you all for being with us today. I know it is a busy season for you all and we appreciate your time. This will end our call, if you have any further follow-ups I will certainly be available. Again, thank you for your interest in Parker Drilling. Have a good day.

Operator

Thank you ladies and gentlemen, this concludes our conference call for today. Thank you for using AT&T conferencing. You may now disconnect.

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