Parker Drillng: Flying Under the Radar

Quick, name a company in the oilfield that:

1. is rich in history;
2. works as a drilling contractor and project manager for some of the industry's largest and most high-profile operators;
3. owns both land and offshore drilling assets, plus a profitable tool rental outfit;
4. operates in disparate regions across the globe, yet;
5. registered revenues in 2007 that were less than 10% of what Transocean (RIG) and Nabors Industries (NBR) recorded on a combined basis.

If you're stumped, don't beat yourself up. With 28 land rigs and 18 offshore barges scattered across the globe, Parker Drilling (PKD) has been flying under a lot of people's radars. In fact, despite announcing 2Q 2008 results recently that were up 34% from the year-ago period, market observers mustered little more than a collective yawn.

Although not the largest or most geographically focused driller in the industry, Parker nonetheless appears to be accomplishing some things for customers that a number of its peers have been unable or unwilling to do. With a range of drilling assets (some homegrown and quite advanced), experienced crews and personnel, expanding project management capabilities, and a one-two combination in the executive suite purportedly focused on customer relations and operations, respectively, the company has carved out an interesting, albeit unorthodox, niche for itself.

The most remarkable (and puzzling) part to us is Parker's ability (and willingness) to operate several different types of businesses in vastly different parts of the world without the kind of critical mass to which most companies tend to cling.

Nevertheless, on balance Parker's approach to its business seems to be getting the job done. In EnergyPoint's independent customer satisfaction surveys conducted since 2004, the company has held its own for the most part. Clearly, a willingness to follow loyal customers to all corners of the globe is one of its hallmarks.

While some respondents have commented that Parker can be "slightly unorganized with an ad hoc approach to assignments" and displays a tendency to "nickel and dime customers contractually", just as many praise the driller for its relatively competent hands and crews, approach to safety on hazardous jobs, and generally proactive style. Even so, we still wonder if customer satisfaction and performance would be enhanced if the company exercised a somewhat greater degree of focus.

Stock position: None.

Comments

[Tim Plaehn:]

I looked at this stock a year ago. It seems a reasonably profitable company whose stock goes no where. I see no reason why this is, but also no compelling reason to buy the stock.

2008 Aug 07 08:27 AM

[John Cordes:]

Actually that is precisely why I purchased this stock weeks ago. It is under the radar and is precisely the type of service company with consistent and loyal customer relationships which will bolster it's continuity and growth. Besides it's affordable for the sector with room to grow.

2008 Aug 07 10:12 AM

[Bart Gelino:]

My deceased mother purchased this stock at $6.00 per share and now it is worth about $1.50 per share. I believe in this company to rebound back to the $10-$12 per share range as they have done so many times in the past.
I am planning to purchase 900 hundred more shares, which will significantly reduce the average cost per share to around $1.95 per share and then let it ride for several more years.
You do what you want but I highly recommend that you do the same.

Mar 12 01:54 PM