NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Organization and Nature of Operations
Unless otherwise indicated, the terms “Company,” “Parker,” “we,” “us” and “our” refer to Parker Drilling Company, incorporated in Delaware, together with its wholly-owned subsidiaries, and “Parker Drilling” refers solely to the parent, Parker Drilling Company. Parker is an international provider of contract drilling and drilling-related services, as well as, rental tools and services. We have operated in over 60 countries since beginning operations in 1934, making us among the most geographically experienced drilling contractors and rental tools providers in the world.
Basis of Presentation
The consolidated condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and are unaudited. In the opinion of the Company, these consolidated condensed financial statements include all adjustments which, unless otherwise disclosed, are of a normal recurring nature, necessary for their fair presentation for the periods presented. The results for interim periods are not necessarily indicative of results for the entire year. The consolidated condensed financial statements presented herein should be read in connection with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.
Consolidation
The consolidated condensed financial statements include the accounts of the Company and subsidiaries in which we exercise control or have a controlling financial interest, including entities, if any, in which the Company is allocated a majority of the entity’s losses or returns, regardless of ownership percentage. If a subsidiary of Parker Drilling has a 50.0 percent or greater interest in an entity but Parker Drilling’s interest in the subsidiary or the entity does not meet the consolidation criteria described above, then that interest is accounted for under the equity method.
Reclassifications
Certain reclassifications have been made to prior period amounts to conform to the current period presentation. These reclassifications did not materially affect our consolidated financial results.
Use of Estimates
The preparation of our consolidated condensed financial statements in accordance with U.S. GAAP requires management 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 consolidated condensed financial statements, and our revenues and expenses during the periods reported. Estimates are typically used when accounting for certain significant items such as legal or contractual liability accruals, self-insured medical/dental plans, impairment, income taxes and valuation allowance, operating lease right-of-use assets, operating lease liabilities and other items requiring the use of estimates. Estimates are based on a number of variables, which may include third party valuations, 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 from management estimates.
Cash, Cash equivalents and Restricted Cash
For purposes of the consolidated condensed balance sheets and the consolidated condensed statements of cash flows, the Company considers cash equivalents to be highly liquid debt instruments that have a remaining maturity of three months or less at the date of purchase.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Dollars in thousands
|
September 30,
2019
|
|
|
December 31,
2018
|
|
Cash and cash equivalents
|
$
|
101,106
|
|
|
|
$
|
48,602
|
|
|
Restricted cash
|
—
|
|
|
|
10,389
|
|
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
101,106
|
|
|
|
$
|
58,991
|
|
The restricted cash balance as of December 31, 2018 includes $9.8 million in a cash collateral account to support the letters of credit outstanding and $0.6 million held as compensating balances in the ordinary course of business for purchases and utilities.
Impairment
We evaluate the carrying amounts of long-lived assets for potential impairment when events occur or circumstances change that indicate the carrying values of such assets may not be recoverable. We evaluate recoverability by determining the undiscounted estimated future net cash flows for the respective asset groups identified. If the sum of the estimated undiscounted cash flows is less than the carrying value of the asset group, we measure the impairment as the amount by which the assets’ carrying value exceeds the fair value of such assets. Management considers a number of factors, such as estimated future cash flows from the assets, appraisals, and current market value analysis in determining fair value. Assets are written down to fair value if the final estimate of current fair value is below the net carrying value. The assumptions used in the impairment evaluation are inherently uncertain and require management judgment.
Intangible Assets
Our intangible assets are related to customer relationships, developed technology and trade name, which are classified as definite lived intangibles, that are generally amortized over a weighted average period of approximately three to six years. We assess the recoverability of the unamortized balance of our intangible assets when indicators of impairment are present based on expected future profitability and undiscounted expected cash flows and their contribution to our overall operations. Should the review indicate that the carrying value is not fully recoverable, the excess of the carrying value over the fair value of the intangible assets would be recognized as an impairment loss. See Note 4 - Intangible Assets for further discussion.
Income Taxes
Income taxes are accounted for under the asset and liability method and have been provided for based upon tax laws and rates in effect in the countries in which operations are conducted and income or losses are generated. There is little or no expected relationship between the provision for or benefit from income taxes and income or loss before income taxes as the countries in which we operate have taxation regimes that vary not only with respect to nominal rate, but also in terms of the availability of deductions, credits, and other benefits. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled and the effect of changes in tax rates is recognized in income in the period in which the change is enacted. Valuation allowances are established to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In order to determine the amount of deferred tax assets or liabilities, as well as the valuation allowances, we must make estimates and assumptions regarding future taxable income, where rigs will be deployed, and other matters. Changes in these estimates and assumptions, including changes in tax laws and other changes affecting our ability to recognize the underlying deferred tax assets, could require us to adjust the valuation allowances.
The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50.0 percent likely of being realized and changes in recognition or measurement are reflected in the period in which the change in judgment occurs. See Note 8 - Income Taxes for further details.
Leases
As lessee, our leases are primarily operating leases. See Note 5 - Operating Leases for further details.
As lessor, our leases are primarily operating leases which are included in revenue in our consolidated condensed statement of operations. See Note 11 - Revenue for further details.
Legal and Investigative Matters
We accrue estimates of the probable and estimable costs for the resolution of certain legal and investigative matters. We do not accrue any amounts for other matters for which the liability is not probable and reasonably estimable. Generally, the estimate of probable costs related to these matters is developed in consultation with our legal advisors. The estimates take into consideration factors such as the complexity of the issues, litigation risks and settlement costs. If the actual settlement costs, final judgments, or fines, after appeals, differ from our estimates, our future financial results may be adversely affected.
Revenue Recognition
See Note 11 - Revenue for further discussion of our revenue recognition policy.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade receivables with a variety of national and international oil and natural gas companies. We generally do not require collateral on our trade receivables. We depend on a limited number of significant customers. Our largest customer, Exxon Neftegas Limited (“ENL”), constituted approximately 27.7 percent of our consolidated revenues for the six months ended September 30, 2019. Excluding revenues from reimbursable costs (“reimbursable revenues”) of $37.1 million, ENL constituted approximately 18.4 percent of our total consolidated revenues for the six months ended September 30, 2019. For the three months ended March 31, 2019, ENL constituted approximately 31.2 percent of our total consolidated revenues. Excluding reimbursable revenues of $26.3 million, ENL constituted approximately 17.7 percent of our total consolidated revenues for the three months ended March 31, 2019.
The following table includes our deposits in domestic banks in excess of federally insured limits and uninsured deposits in foreign banks:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Dollars in thousands
|
September 30,
2019
|
|
|
December 31,
2018
|
|
Deposits in domestic banks in excess of federally insured limits
|
$
|
62,307
|
|
|
|
$
|
27,520
|
|
|
Uninsured deposits in foreign banks
|
$
|
39,495
|
|
|
|
$
|
32,907
|
|
Earnings (Loss) Per Share (EPS)
Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. The effects of dilutive securities such as Successor unvested restricted stock units, Successor unvested stock options, Successor warrants and Predecessor preferred stock are included in the diluted EPS calculation, when applicable. See Note 10 - Earnings (Loss) Per Common Share (“EPS”) for further details.
Bankruptcy
On December 12, 2018 (the “Petition Date”), Parker Drilling and certain of its U.S. subsidiaries (collectively, the “Debtors”) filed a prearranged plan of reorganization (the “Plan”) and commenced voluntary petitions under chapter 11 (the “Chapter 11 Cases”) of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”). The Plan was confirmed by the Bankruptcy Court on March 7, 2019, and the Debtors emerged from the bankruptcy proceedings on March 26, 2019. The consolidated financial statements included herein have been prepared as if we were a going concern and in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 852 - Reorganizations (“Topic 852”). See Note 2 - Chapter 11 Emergence and Note 3 - Fresh Start Accounting for further details.
Note 2 - Chapter 11 Emergence
On December 12, 2018, prior to the commencement of the Chapter 11 Cases, the Debtors entered into a restructuring support agreement (as amended on January 28, 2019, the “RSA”) with certain significant holders of (1) 7.50% Senior Notes, due 2020 (the “7.50% Note Holders”) issued pursuant to the indenture (the “7.50% Notes Indenture”) dated July 30, 2013 (the “7.50% Notes”), by and among Parker Drilling, the subsidiary guarantors party thereto and Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”), (2) 6.75% Senior Notes, due 2022 (the “6.75% Note Holders”) issued pursuant to the indenture (the “6.75% Notes Indenture”) dated January 22, 2014 (the “6.75% Notes” and together with the 7.50% Notes, the “Senior Notes”), by and among Parker Drilling, the subsidiary guarantors party thereto and the Trustee, (3) Parker Drilling’s existing common stock (the “Predecessor Common Stock”) and (4) Parker Drilling’s 7.25% Series A Mandatory Convertible Preferred Stock (the “Predecessor Preferred Stock” and such holders to support a restructuring (the “Restructuring”) on the terms set forth in the Plan.
On the Petition Date, the Debtors filed voluntary petitions for reorganization under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas pursuant to a prearranged plan of reorganization. The Plan was confirmed by the Bankruptcy Court on March 7, 2019, and the Debtors emerged from the bankruptcy proceedings on March 26, 2019.
References to “Successor” relate to the consolidated condensed statement of operations or consolidated condensed balance sheet of the reorganized Company as of and subsequent to March 31, 2019. References to “Predecessor” relate to the consolidated condensed balance sheet of the Company prior to, and consolidated condensed statement of operations through and including, March 31, 2019.
On March 26, 2019:
|
|
|
|
(1)
|
the Company amended and restated its certificate of incorporation and bylaws;
|
|
|
|
|
(2)
|
the Company appointed new members to the Successor’s board of directors to replace directors of the Predecessor;
|
|
|
|
|
•
|
2,827,323 shares of Successor Common Stock pro rata to 7.50% Note Holders;
|
|
|
|
|
•
|
5,178,860 shares of Successor Common Stock pro rata to 6.75% Note Holders;
|
|
|
|
|
•
|
90,558 shares of Successor Common Stock and 1,032,073 Successor warrants to purchase 1,032,073 shares of Successor Common Stock pro rata to holders of the Predecessor Preferred Stock;
|
|
|
|
|
•
|
135,838 shares of Successor Common Stock and 1,548,109 Successor warrants to purchase 1,548,109 shares of Successor Common Stock pro rata to holders of the Predecessor Common Stock;
|
|
|
|
|
•
|
504,577 shares of Successor Common Stock to commitment parties under that certain Backstop Commitment Agreement, dated December 12, 2018 and amended and restated on January 28, 2019, (as amended and restated, the “Backstop Commitment Agreement”) in respect of the commitment premium due thereunder;
|
|
|
|
|
•
|
1,403,910 shares of Successor Common Stock to the commitment parties under the Backstop Commitment Agreement in connection with their backstop obligation thereunder to purchase unsubscribed shares of Successor Common Stock; and
|
|
|
|
|
•
|
4,903,308 shares of Successor Common Stock to participants in the rights offering extended by Parker to the applicable classes under the Plan (including to the commitment parties party to the Backstop Commitment Agreement).
|
Reorganization Items
Any expenses, gains and losses that are realized or incurred subsequent to and as a direct result of the Chapter 11 Cases are recorded under reorganization items on our consolidated condensed statement of operations.
Reorganization items consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Three Months Ended September 30,
|
|
|
Three Months Ended September 30,
|
|
Dollars in thousands
|
2019
|
|
|
2018
|
|
Gain on settlement of liabilities subject to compromise
|
$
|
—
|
|
|
|
$
|
—
|
|
|
Fresh start valuation adjustments
|
—
|
|
|
|
—
|
|
|
Professional fees
|
211
|
|
|
|
—
|
|
|
Backstop premium on the rights offering paid in stock
|
—
|
|
|
|
—
|
|
|
Other
|
—
|
|
|
|
—
|
|
|
Reorganization items
|
$
|
211
|
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Six Months Ended September 30,
|
|
|
Three Months Ended March 31,
|
|
Nine Months Ended September 30,
|
|
Dollars in thousands
|
2019
|
|
|
2019
|
|
2018
|
|
Gain on settlement of liabilities subject to compromise
|
$
|
—
|
|
|
|
$
|
(191,129
|
)
|
|
$
|
—
|
|
|
Fresh start valuation adjustments
|
—
|
|
|
|
242,567
|
|
|
—
|
|
|
Professional fees
|
1,173
|
|
|
|
30,107
|
|
|
—
|
|
|
Backstop premium on the rights offering paid in stock
|
—
|
|
|
|
11,033
|
|
|
—
|
|
|
Other
|
—
|
|
|
|
399
|
|
|
—
|
|
|
Reorganization items
|
$
|
1,173
|
|
|
|
$
|
92,977
|
|
|
$
|
—
|
|
Supplemental cash flow information related to reorganization items paid is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Six Months Ended September 30,
|
|
|
Three Months Ended March 31,
|
|
Nine Months Ended September 30,
|
|
Dollars in thousands
|
2019
|
|
|
2019
|
|
2018
|
|
Reorganization items paid
|
$
|
22,081
|
|
|
|
$
|
8,617
|
|
|
$
|
—
|
|
Debtor in Possession Financing
Amounts outstanding against the debtor in possession financing facility were $10.0 million as of December 31, 2018. The debtor in possession financing facility was terminated as of March 26, 2019.
Liabilities Subject To Compromise
Pre-petition unsecured and under-secured obligations that could have been impacted by the Chapter 11 Cases have been classified as liabilities subject to compromise on our Predecessor consolidated condensed balance sheet. These liabilities were reported at the amounts allowed as claims by the Bankruptcy Court.
Liabilities subject to compromise consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Dollars in thousands
|
September 30,
2019
|
|
|
December 31,
2018
|
|
Predecessor 6.75% senior notes, due July 2022
|
$
|
—
|
|
|
|
$
|
360,000
|
|
|
Predecessor 7.50% senior notes, due August 2020
|
—
|
|
|
|
225,000
|
|
|
Accrued interest on predecessor senior notes
|
—
|
|
|
|
15,996
|
|
|
Liabilities subject to compromise
|
$
|
—
|
|
|
|
$
|
600,996
|
|
Contractual interest expense for the three months ended March 31, 2019, on our senior notes was $10.3 million; however, no interest expense was accrued on the senior notes, as they were impaired and extinguished upon emergence. See also Note 6 - Debt for further details.
Note 3 - Fresh Start Accounting
Upon emergence from bankruptcy, we adopted fresh start accounting (“Fresh Start Accounting”) in accordance with Topic 852, which resulted in the Company becoming a new entity for financial reporting purposes. In accordance with Topic 852, the Company is required to adopt Fresh Start Accounting upon its emergence from bankruptcy because (1) the holders of the then existing common shares of the Predecessor received less than 50 percent of the new common shares of the Successor outstanding upon emergence and (2) the reorganization value of the Company’s assets immediately prior to confirmation of the Plan was less than the total of all post-petition liabilities and allowed claims.
Upon adoption of Fresh Start Accounting, the reorganization value derived from the enterprise value as disclosed in the Plan was allocated to the Company’s assets and liabilities based on their fair values (except for deferred income taxes) in accordance with FASB ASC Topic No. 805 - Business Combinations. The amount of deferred income taxes recorded was determined in accordance with FASB ASC Topic No. 740 - Income Taxes.
We evaluated the events between March 26, 2019 and March 31, 2019 and concluded that the use of an accounting convenience date of March 31, 2019 (“Fresh Start Reporting Date”) would not have a material impact on our consolidated condensed statement of operations or consolidated condensed balance sheet. As such, the application of fresh start accounting was reflected in our condensed consolidated balance sheet as of March 31, 2019 and fresh start accounting adjustments related thereto were included in our consolidated condensed statement of operations for the three months ended March 31, 2019.
As a result of the adoption of Fresh Start Accounting and the effects of the implementation of the Plan, the consolidated condensed financial statements of the Successor, are not comparable to the consolidated condensed financial statements of the Predecessor.
The Company’s consolidated condensed financial statements and related footnotes are presented with a “black line” division, which emphasizes the lack of comparability between amounts presented as of and after March 31, 2019 and amounts presented for all prior periods. The Company’s financial results for future periods following the application of Fresh Start Accounting will be different from historical trends and the differences may be material.
Reorganization Value
Under Topic 852, the Successor determined a value to be assigned to the equity of the emerging entity as of the date of adoption of Fresh Start Accounting. The Plan confirmed by the Bankruptcy Court estimated a range of enterprise values between $365.0 million and $485.0 million, with a midpoint of $425.0 million. The Company deemed it appropriate to use the midpoint between the low end and high end of the range to determine the final enterprise value of $425.0 million.
The following table reconciles the enterprise value to the estimated fair value of our Successor Common Stock as of the Fresh Start Reporting Date:
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
|
Enterprise value
|
$
|
425,000
|
|
|
Cash and cash equivalents and other
|
127,800
|
|
|
Fair value of term loan
|
(210,000
|
)
|
|
Fair value of successor stockholders’ equity
|
$
|
342,800
|
|
The following table reconciles the enterprise value to the reorganization value of the Successor’s assets to be allocated to the Company’s individual assets as of the Fresh Start Reporting Date:
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
|
Enterprise value
|
$
|
425,000
|
|
|
Cash and cash equivalents and other
|
127,800
|
|
|
Current liabilities
|
140,596
|
|
|
Non-current liabilities excluding long-term debt
|
20,985
|
|
|
Reorganization value of successor assets
|
$
|
714,381
|
|
With the assistance of financial advisors, we determined the enterprise and corresponding equity value of the Successor by calculating the present value of future cash flows based on our financial projections. The enterprise value and corresponding equity value are dependent upon achieving the future financial results set forth in our valuations, as well as the realization of
certain other assumptions. All estimates, assumptions, valuations and financial projections, including the fair value adjustments, the enterprise value and equity value projections, are inherently subject to significant uncertainties and the resolution of contingencies beyond our control. Accordingly, we cannot assure you that the estimates, assumptions, valuations or financial projections will be realized, and actual results could vary materially.
Valuation Process
The fair values of the Company’s principal assets, including drilling equipment, rental tools, real property, and intangible assets were estimated with the assistance of third party valuation advisors. The income approach, market approach, and the cost approach were considered for estimating the value of each individual asset. Although the income approach was not applied to value the machinery and equipment and real property assets individually, the Company did consider the earnings of the reporting unit within which each of these assets reside. Economic obsolescence related to machinery and equipment and real property was also considered and was applied to stacked and underutilized assets based upon the status of the asset. Economic obsolescence was also considered in situations in which the earnings of the applicable reporting unit in which the assets are employed suggest economic obsolescence. When penalizing assets for economic obsolescence, an additional economic obsolescence penalty was levied, while considering scrap value to be the floor value for an asset. Because more than one approach was used to develop a valuation, the various approaches were reconciled to determine a final value conclusion. The reorganization value was allocated to the Company’s individual assets and liabilities based on their fair values as follows:
Rig Materials and Supplies
The fair value of the rig materials and supplies was determined using the direct and indirect cost approaches. The rig materials and supplies were analyzed on a line-by-line basis and each asset was adjusted for age, physical depreciation, and obsolescence.
Property, Plant and Equipment
Building, Land and Improvements
The fair value of the land assets was estimated using the sales comparison (market) approach, which involved gathering data on comparable sales and current listings of land in each subject market, then adjusting the unit price (per acre or per square foot) of each comparable for differences in market conditions, location, size, and other factors. A per unit value conclusion was then determined based on the adjusted prices of the comparable sales and listings. Fair value of buildings and improvements was estimated using the direct cost approach, in which the estimated replacement cost new of the improvements was adjusted for accrued physical depreciation and any functional or external obsolescence. As a supporting approach, the total fair value of all real property assets for each location was estimated using the sales comparison (or market approach). Held for sale assets were included at their respective pending or listed prices. The fair value of the leasehold improvements was determined using the cost approach, adjusted as needed for asset type, age, physical deterioration and obsolescence.
Rental Tools
The fair value of the rental tools was determined using a combination of the cost approach and sales comparison (market) approach depending upon the asset type. The fair value utilizing the cost approach was adjusted as needed for asset type, age, physical deterioration, and obsolescence. For assets where an active secondary market exists, we utilized the sales comparison (market) approach to estimate the fair value of the assets, which involved gathering market data and analyzing comparable sales of similar assets.
Drilling Equipment
The fair value of the drilling equipment was determined using a combination of the discounted cash flow method (income approach), the cost approach, and the sales comparison (market) approach. The income approach was utilized to estimate the fair value of drilling equipment that generated positive returns on projected cash flows over the remaining economic useful life of the drilling equipment and compared to the fair value utilizing the cost approach, adjusted as needed for asset type, age, physical deterioration and obsolescence. For assets where an active secondary market exists we utilized the sales comparison (market) approach to estimate the fair value of the assets, which involved gathering market data and analyzing comparable sales of similar assets.
Intangible Assets
We applied the income approach methodology to estimate the value of the customer relationships, trade name, and developed technology. We determined the value of the customer relationships based on the present value of the incremental after-tax cash flows attributable only to the intangible asset. The value of the trade name was estimated through the relief from royalty
method based on the present value of the cost savings realized by the owner of the asset as a result of not having to pay a stream of royalty payments to another party. The cost savings were based on hypothetical royalty payments of 0.2 percent of revenue reflecting a rate in which an arm’s length buyer would typically pay for the use of such intangible assets. Similar to the methodology used to value the trade name, we determined the value of the developed technology using a hypothetical royalty payment of 1.0 percent of revenue to reflect the attributable cost savings. The present value of the after-tax cash flows for all the Intangible Assets were estimated based on a discount rate of 20.0 percent.
Successor Warrants
The fair value of the Successor warrants was estimated by applying a Black-Scholes-Merton (“BSM”) model. The BSM model is a pricing model used to estimate the theoretical price or fair value for a European-style call or put option/warrant based on current stock price, strike price, time to maturity, risk-free rate, volatility, and dividend yield.
Consolidated Balance Sheet
The adjustments included in the following fresh start consolidated condensed balance sheet as of March 31, 2019 reflect the effects of the transactions contemplated by the Plan and executed by the Company on the Fresh Start Reporting Date (reflected in the column “Reorganization Adjustments”), and fair value and other required accounting adjustments resulting from the adoption of Fresh Start Accounting (reflected in the column “Fresh Start Adjustments”). The explanatory notes provide additional information with regard to the adjustments recorded, the methods used to determine the fair values and significant assumptions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
Predecessor
|
|
Reorganization Adjustments
|
|
Fresh Start Adjustments
|
|
Successor
|
|
ASSETS
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
51,777
|
|
|
$
|
76,072
|
|
(1)
|
$
|
—
|
|
|
$
|
127,849
|
|
|
Restricted cash
|
11,070
|
|
|
10,366
|
|
(2)
|
—
|
|
|
21,436
|
|
|
Accounts and notes receivable, net
|
168,444
|
|
|
—
|
|
|
—
|
|
|
168,444
|
|
|
Rig materials and supplies
|
39,024
|
|
|
—
|
|
|
(21,185
|
)
|
(15)
|
17,839
|
|
|
Other current assets
|
31,944
|
|
|
(8,764
|
)
|
(3)
|
(3,603
|
)
|
(16)
|
19,577
|
|
|
Total current assets
|
302,259
|
|
|
77,674
|
|
|
(24,788
|
)
|
|
355,145
|
|
|
Property, plant and equipment, net
|
533,938
|
|
|
—
|
|
|
(229,968
|
)
|
(17)
|
303,970
|
|
|
Intangible assets, net
|
4,245
|
|
|
—
|
|
|
13,755
|
|
(18)
|
18,000
|
|
|
Deferred income taxes
|
2,518
|
|
|
—
|
|
|
1,751
|
|
(19)
|
4,269
|
|
|
Other non-current assets
|
38,045
|
|
|
1,253
|
|
(4)
|
(6,301
|
)
|
(20)
|
32,997
|
|
|
Total assets
|
$
|
881,005
|
|
|
$
|
78,927
|
|
|
$
|
(245,551
|
)
|
|
$
|
714,381
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Debtor in possession financing
|
$
|
10,000
|
|
|
$
|
(10,000
|
)
|
(5)
|
$
|
—
|
|
|
$
|
—
|
|
|
Accounts payable and accrued liabilities
|
134,461
|
|
|
4,990
|
|
(6)
|
(3,868
|
)
|
(21)
|
135,583
|
|
|
Accrued income taxes
|
5,013
|
|
|
—
|
|
|
—
|
|
|
5,013
|
|
|
Total current liabilities
|
149,474
|
|
|
(5,010
|
)
|
|
(3,868
|
)
|
|
140,596
|
|
|
Long-term debt
|
—
|
|
|
210,000
|
|
(7)
|
—
|
|
|
210,000
|
|
|
Other long-term liabilities
|
20,901
|
|
|
—
|
|
|
(866
|
)
|
(22)
|
20,035
|
|
|
Long-term deferred tax liability
|
28,445
|
|
|
—
|
|
|
(27,495
|
)
|
(19)
|
950
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities not subject to compromise
|
198,820
|
|
|
204,990
|
|
|
(32,229
|
)
|
|
371,581
|
|
|
Liabilities subject to compromise
|
600,996
|
|
|
(600,996
|
)
|
(8)
|
—
|
|
|
—
|
|
|
Total liabilities
|
799,816
|
|
|
(396,006
|
)
|
|
(32,229
|
)
|
|
371,581
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Predecessor preferred stock
|
500
|
|
|
(500
|
)
|
(9)
|
—
|
|
|
—
|
|
|
Predecessor common stock
|
1,398
|
|
|
(1,398
|
)
|
(10)
|
—
|
|
|
—
|
|
|
Predecessor capital in excess of par value
|
767,793
|
|
|
(35,839
|
)
|
(11)
|
(731,954
|
)
|
(23)
|
—
|
|
|
Predecessor accumulated other comprehensive income (loss)
|
(7,256
|
)
|
|
—
|
|
|
7,256
|
|
(23)
|
—
|
|
|
Successor common stock
|
—
|
|
|
150
|
|
(12)
|
—
|
|
|
150
|
|
|
Successor capital in excess of par value
|
—
|
|
|
342,650
|
|
(13)
|
—
|
|
|
342,650
|
|
|
Accumulated deficit
|
(681,246
|
)
|
|
169,870
|
|
(14)
|
511,376
|
|
(23)
|
—
|
|
|
Total stockholders’ equity
|
81,189
|
|
|
474,933
|
|
|
(213,322
|
)
|
|
342,800
|
|
|
Total liabilities and stockholders’ equity
|
$
|
881,005
|
|
|
$
|
78,927
|
|
|
$
|
(245,551
|
)
|
|
$
|
714,381
|
|
Reorganization Adjustments
|
|
|
|
(1)
|
Changes in cash and cash equivalents included the following:
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
|
Proceeds from the rights offering
|
$
|
95,000
|
|
|
Transfers from restricted cash for the return of cash collateral (for letters of credit)
|
10,433
|
|
|
Proceeds from refund of backstop commitment fee
|
7,600
|
|
|
Transfers from restricted cash for deposit releases
|
250
|
|
|
Transfers to restricted cash for funding of professional fees
|
(21,049
|
)
|
|
Payment of debtor in possession financing principal and interest
|
(10,035
|
)
|
|
Payment of professional fees
|
(5,154
|
)
|
|
Payment of debt issuance costs for the successor credit facility
|
(490
|
)
|
|
Payment of fees on letters of credit
|
(58
|
)
|
|
Payment of term loan agent fees
|
(50
|
)
|
|
Payment of other reorganization expenses
|
(375
|
)
|
|
Net change in cash and cash equivalents
|
$
|
76,072
|
|
|
|
|
|
(2)
|
Changes in restricted cash reflects the net transfer of cash between restricted cash and cash and cash equivalents.
|
|
|
|
|
(3)
|
Changes in other current assets include the following:
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
|
Refund of backstop commitment fee
|
$
|
(7,600
|
)
|
|
Elimination of predecessor directors and officers insurance policies
|
(702
|
)
|
|
Reclass of prepaid costs related to the successor credit facility
|
(488
|
)
|
|
Payment of other costs related to the successor credit facility
|
26
|
|
|
Net change in other current assets
|
$
|
(8,764
|
)
|
|
|
|
|
(4)
|
Changes in other non-current assets include the following:
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
|
Capitalization of debt issuance costs on the successor credit facility
|
$
|
765
|
|
|
Reclass of prepaid costs related to the successor credit facility
|
488
|
|
|
Net change in other non-current assets
|
$
|
1,253
|
|
|
|
|
|
(5)
|
Reflects the payment of debtor in possession financing principal.
|
|
|
|
|
(6)
|
Changes in accounts payable and accrued liabilities include the following:
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
|
Accrual of professional fees
|
$
|
7,100
|
|
|
Payment of professional fees
|
(2,017
|
)
|
|
Payment of debtor in possession financing interest
|
(35
|
)
|
|
Payment of letters of credit fees
|
(58
|
)
|
|
Net change in accounts payable and accrued liabilities
|
$
|
4,990
|
|
|
|
|
|
(7)
|
Changes in long-term debt include the issuance of the $210.0 million Term Loan.
|
|
|
|
|
(8)
|
Liabilities subject to compromise to be settled in accordance with the Plan and the resulting gain was determined as follows:
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
|
Liabilities subject to compromise
|
$
|
(600,996
|
)
|
|
Issuance of term loan
|
210,000
|
|
|
Issuance of successor common stock to the 7.50% note holders and 6.75% note holders
|
175,058
|
|
|
Excess fair value ascribed to lenders participating in equity rights offering
|
24,809
|
|
|
Gain on settlement of liabilities subject to compromise
|
$
|
(191,129
|
)
|
|
|
|
|
(9)
|
Changes in Predecessor Preferred Stock reflects the cancellation of Predecessor Preferred Stock.
|
|
|
|
|
(10)
|
Changes in Predecessor Common Stock reflects the cancellation of Predecessor Common Stock.
|
|
|
|
|
(11)
|
Changes in Predecessor capital in excess of par include the following:
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
|
Cancellation of predecessor preferred stock
|
$
|
500
|
|
|
Cancellation of predecessor common stock
|
1,398
|
|
|
Issuance of successor warrants to predecessor common stock and predecessor preferred stock holders
|
(14,687
|
)
|
|
Issuance of successor common stock to predecessor common stock and predecessor preferred stock holders
|
(4,950
|
)
|
|
Excess fair value ascribed to parties participating in rights offering, excluding lenders
|
(18,100
|
)
|
|
Net change in predecessor capital in excess of par value
|
$
|
(35,839
|
)
|
|
|
|
|
(12)
|
Changes in Successor Common Stock include the following:
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
|
Issuance of successor common stock to the 7.50% note holders and 6.75% note holders
|
$
|
80
|
|
|
Issuance of successor common stock pursuant to rights offering
|
68
|
|
|
Issuance of successor common stock to predecessor common stock and predecessor preferred stock holders
|
2
|
|
|
Net change in successor common stock
|
$
|
150
|
|
|
|
|
|
(13)
|
Change in Successor capital in excess of par value include the following:
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
|
Issuance of successor common stock to the 7.50% note holders and 6.75% note holders
|
$
|
174,978
|
|
|
Issuance of successor common stock pursuant to rights offering
|
148,874
|
|
|
Issuance of successor warrants to predecessor common stock and predecessor preferred stock holders
|
14,687
|
|
|
Issuance of successor common stock to predecessor common stock and predecessor preferred stock holders
|
4,948
|
|
|
Equity issuance costs
|
(837
|
)
|
|
Net change in successor capital in excess of par value
|
$
|
342,650
|
|
|
|
|
|
(14)
|
Changes in accumulated deficit include the following:
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
|
Gain on settlement of liabilities subject to compromise
|
$
|
191,129
|
|
|
Backstop premium on rights offering
|
(11,032
|
)
|
|
Accrual of professional fees
|
(5,988
|
)
|
|
Payment of professional fees
|
(3,137
|
)
|
|
Elimination of predecessor directors and officers insurance policies
|
(702
|
)
|
|
Payment of other reorganization items
|
(400
|
)
|
|
Net change in accumulated deficit
|
$
|
169,870
|
|
Fresh Start Accounting Adjustments
|
|
|
|
(15)
|
Changes in rig materials and supplies reflect the fair value adjustment due to the adoption of fresh start accounting.
|
|
|
|
|
(16)
|
Changes in other current assets reflect the elimination of capitalized mobilization costs due to the adoption of fresh start accounting.
|
|
|
|
|
(17)
|
Changes in property, plant and equipment, net reflects the fair value adjustment due to the adoption of fresh start accounting.
|
|
|
|
|
(18)
|
Changes in intangible assets, net reflects the fair value adjustment due to the adoption of fresh start accounting.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
Successor Fair Value
|
|
|
Predecessor Historical Book Value
|
|
Customer relationships
|
$
|
16,300
|
|
|
|
$
|
—
|
|
|
Trade names
|
1,500
|
|
|
|
368
|
|
|
Developed technology
|
200
|
|
|
|
3,877
|
|
|
Intangible assets, net
|
$
|
18,000
|
|
|
|
$
|
4,245
|
|
|
|
|
|
(19)
|
Changes in deferred income taxes reflects the adjustment due to the adoption of fresh start accounting.
|
|
|
|
|
(20)
|
Changes in other non-current assets reflect the following:
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
|
Fair value adjustment to rig material and supplies
|
$
|
(6,845
|
)
|
|
Fair value adjustment to investment in non-consolidated subsidiaries
|
2,290
|
|
|
Fair value adjustment to long-term notes receivable
|
(272
|
)
|
|
Elimination of capitalized mobilization costs
|
(857
|
)
|
|
Elimination of long-term other deferred charges
|
(617
|
)
|
|
Net change in other non-current assets
|
$
|
(6,301
|
)
|
|
|
|
|
(21)
|
Changes in accounts payable and accrued liabilities due to the adoption of fresh start accounting include the following:
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
|
Elimination of deferred rent
|
$
|
(1,100
|
)
|
|
Elimination of deferred revenue
|
(2,768
|
)
|
|
Net change in accounts payable and accrued liabilities
|
$
|
(3,868
|
)
|
|
|
|
|
(22)
|
Changes in other long-term liabilities reflects the elimination of deferred revenue due to the adoption of fresh start accounting.
|
|
|
|
|
(23)
|
Changes reflect the cumulative impact of fresh start accounting adjustments discussed above and the elimination of Predecessor accumulated other comprehensive loss and Predecessor accumulated deficit.
|
Note 4 - Intangible Assets
Intangible Assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
Balance at September 30, 2019
|
|
Dollars in thousands
|
Estimated Useful Life (Years)
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Customer relationships
|
3
|
|
$
|
16,300
|
|
|
$
|
(2,716
|
)
|
|
$
|
13,584
|
|
|
Trade names
|
5
|
|
1,500
|
|
|
(150
|
)
|
|
1,350
|
|
|
Developed technology
|
6
|
|
200
|
|
|
(17
|
)
|
|
183
|
|
|
Total amortized intangible assets
|
|
|
$
|
18,000
|
|
|
$
|
(2,883
|
)
|
|
$
|
15,117
|
|
Amortization expense related to intangible assets is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Three Months Ended September 30,
|
|
|
Three Months Ended September 30,
|
|
Dollars in thousands
|
2019
|
|
|
2018
|
|
Intangibles amortization expense
|
$
|
1,442
|
|
|
|
$
|
577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Six Months Ended September 30,
|
|
|
Three Months Ended March 31,
|
|
Nine Months Ended September 30,
|
|
Dollars in thousands
|
2019
|
|
|
2019
|
|
2018
|
|
Intangibles amortization expense
|
$
|
2,883
|
|
|
|
$
|
577
|
|
|
$
|
1,730
|
|
Our remaining intangibles amortization expense for the next five years is presented below:
|
|
|
|
|
|
|
|
Dollars in thousands
|
Expected future intangible amortization expense
|
|
2019
|
$
|
1,442
|
|
|
2020
|
$
|
5,767
|
|
|
2021
|
$
|
5,767
|
|
|
2022
|
$
|
1,691
|
|
|
Beyond 2022
|
$
|
450
|
|
Note 5 - Operating Leases
We adopted the Accounting Standards Update (“ASU”) 2016-02, Leases (“Topic 842”) effective January 1, 2019. As lessee, our leasing activities primarily consist of operating leases for administrative offices, warehouses, oilfield services equipment, office equipment, computers and other items. Our leases have remaining lease terms of 1 year to 6 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year.
We elected the following package of practical expedients permitted under the transition guidance:
|
|
|
|
•
|
an election to adopt the modified retrospective transition method applied at the beginning of the period of adoption, which does not require a restatement of the prior period. Accordingly, no cumulative-effect adjustment to retained earnings was made.
|
|
|
|
|
•
|
an election not to apply the recognition requirements in Topic 842 to short-term leases (initial lease term of 12 months or less) and recognize lease payments in the consolidated condensed statement of operations. Short-term leases have not been recorded on the balance sheet.
|
|
|
|
|
•
|
a practical expedient to not reassess whether a contract is or contains a lease and carry forward its historical lease classification.
|
|
|
|
|
•
|
a practical expedient to account for the lease and non-lease components separately (except as discussed below).
|
|
|
|
|
•
|
a practical expedient to account for the lease and non-lease components as a single lease component for certain assets, by class of underlying asset.
|
We determine whether a contract is or contains a lease at its inception. Topic 842 requires lessees to recognize operating lease right-of-use assets and operating lease liabilities on the balance sheet. An operating lease right-of-use asset represents our right to use an underlying asset for the lease term and operating lease liability represents our obligation to make lease payments arising from the lease. An operating lease right-of-use asset and operating lease liability are recognized at the commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The operating lease right-of-use assets also include any lease payments made and exclude lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise those options. The adoption of this standard resulted in the recording of operating lease right-of-use assets and operating lease liabilities of approximately $21.0 million as of January 1, 2019.
Supplemental lease information related to our operating leases as of September 30, 2019 is shown below:
|
|
|
|
|
|
|
|
|
Successor
|
|
Dollars in thousands
|
September 30,
2019
|
|
Operating lease right-of-use assets (1)
|
$
|
17,173
|
|
|
|
|
|
Operating lease liabilities - current (2)
|
7,466
|
|
|
Operating lease liabilities - noncurrent (3)
|
8,647
|
|
|
Total operating lease liabilities
|
$
|
16,113
|
|
|
|
|
|
Weighted average remaining lease term (in years)
|
3
|
|
|
Weighted average discount rate
|
7.4
|
%
|
|
|
|
|
(1)
|
This amount is included in other non-current assets in our consolidated condensed balance sheet.
|
|
|
|
|
(2)
|
This amount is included in accounts payable and accrued liabilities in our consolidated condensed balance sheet.
|
|
|
|
|
(3)
|
This amount is included in other long-term liabilities in our consolidated condensed balance sheet.
|
Supplemental cash flow information related to leases are as follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Six Months Ended September 30,
|
|
|
Three Months Ended March 31,
|
|
Dollars in thousands
|
2019
|
|
|
2019
|
|
Cash paid for amounts included in the measurement of operating lease liabilities
|
$
|
4,519
|
|
|
|
$
|
2,498
|
|
|
Operating lease right-of-use assets obtained in exchange for lease obligations
|
$
|
976
|
|
|
|
$
|
60
|
|
Maturities of operating lease liabilities as of September 30, 2019 were as follows:
|
|
|
|
|
|
|
|
|
Successor
|
|
Dollars in thousands
|
Operating
Leases
|
|
2019
|
$
|
1,930
|
|
|
2020
|
7,314
|
|
|
2021
|
4,530
|
|
|
2022
|
2,052
|
|
|
2023
|
1,593
|
|
|
Beyond 2023
|
588
|
|
|
Total undiscounted lease liability
|
18,007
|
|
|
Imputed interest
|
(1,894
|
)
|
|
Total operating lease liabilities
|
$
|
16,113
|
|
Future minimum operating lease payments as of December 31, 2018 were as follows:
|
|
|
|
|
|
|
|
|
Successor
|
|
Dollars in thousands
|
Operating
Leases
|
|
2019
|
$
|
10,722
|
|
|
2020
|
7,887
|
|
|
2021
|
4,193
|
|
|
2022
|
1,968
|
|
|
2023
|
1,540
|
|
|
Beyond 2023
|
636
|
|
|
Total lease payments
|
$
|
26,946
|
|
Lease expense for lease payments is recognized on a straight-line basis over the lease term. Expenses for operating leases are shown below:
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Three Months Ended September 30,
|
|
Dollars in thousands
|
2019
|
|
Operating lease expense
|
$
|
2,071
|
|
|
Short-term lease expense
|
1,146
|
|
|
Variable lease expense
|
1,827
|
|
|
Total lease expense
|
$
|
5,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Six Months Ended September 30,
|
|
|
Three Months Ended March 31,
|
|
Dollars in thousands
|
2019
|
|
|
2019
|
|
Operating lease expense
|
$
|
4,756
|
|
|
|
$
|
2,709
|
|
|
Short-term lease expense
|
1,978
|
|
|
|
787
|
|
|
Variable lease expense
|
3,676
|
|
|
|
1,840
|
|
|
Total lease expense
|
$
|
10,410
|
|
|
|
$
|
5,336
|
|
Note 6 - Debt
The following table illustrates the Company’s debt portfolio as of September 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Dollars in thousands
|
September 30,
2019
|
|
|
December 31,
2018
|
|
Successor credit facility
|
$
|
—
|
|
|
|
$
|
—
|
|
|
Successor term loan, due March 2024
|
177,032
|
|
|
|
—
|
|
|
Predecessor 6.75% senior notes, due July 2022
|
—
|
|
|
|
360,000
|
|
|
Predecessor 7.50% senior notes, due August 2020
|
—
|
|
|
|
225,000
|
|
|
Predecessor 2015 secured credit agreement
|
—
|
|
|
|
—
|
|
|
Total debt
|
$
|
177,032
|
|
|
|
$
|
585,000
|
|
Successor Credit Facility
On March 26, 2019, pursuant to the terms of the Plan, we and certain of our subsidiaries, entered into a credit agreement with the lenders party thereto (the “Credit Facility Lenders”), Bank of America, N.A., as administrative agent and Bank of America, N.A. and Deutsche Bank Securities Inc. as joint lead arrangers and joint bookrunners, providing for a revolving credit facility (the “Credit Facility”) with initial aggregate commitments in the amount of $50.0 million, guaranteed by certain of our subsidiaries. Availability under the Credit Facility is subject to a monthly borrowing base calculation based on eligible domestic rental equipment and eligible domestic accounts receivable and requires us to maintain minimum liquidity of $25.0 million, defined as cash in our liquidity account not to exceed $10.0 million and availability under the borrowing base. The Credit Facility allows for an increase to the aggregate commitments by up to an additional $75.0 million, subject to certain conditions. The Credit Facility provides for a $30.0 million sublimit of the aggregate commitments that is available for the issuance of letters of credit. The Credit Facility matures on March 26, 2023. Debt issuance costs of $1.3 million ($1.1 million, net of amortization as of September 30, 2019) are being amortized over the term of the Credit Facility on a straight-line basis.
As of September 30, 2019, the borrowing base availability under the Credit Facility was $87.7 million, allowing full access to the $50.0 million in aggregate commitments, which was further reduced by $15.0 million of restricted availability due to the minimum liquidity covenant and $10.3 million in supporting letters of credit outstanding, resulting in availability under the Credit Facility of $24.7 million.
The Credit Facility bears interest either at a rate equal to:
|
|
|
|
•
|
LIBOR plus an applicable margin that varies from 2.25 percent to 2.75 percent per annum or
|
|
|
|
|
•
|
a base rate plus an applicable margin that varies from 1.25 percent to 1.75 percent per annum.
|
We are required to pay a commitment fee of 0.5 percent per annum on the actual daily unused portion of the current aggregate commitments under the Credit Facility. We are also required to pay customary letter of credit and fronting fees.
The Credit Facility also contains customary affirmative and negative covenants, including, among other things, as to compliance with laws (including environmental laws and anti-corruption laws), delivery of quarterly and annual consolidated financial statements and monthly borrowing base certificates, conduct of business, maintenance of property, maintenance of insurance, restrictions on the incurrence of liens, indebtedness, asset dispositions, fundamental changes, restricted payments, and other customary covenants. Additionally, the Credit Facility contains customary events of default and remedies for credit facilities of this nature. If we do not comply with the financial and other covenants in the Credit Facility, the Credit Facility Lenders may, subject to customary cure rights, require immediate payment of all amounts outstanding under the Credit Facility, and any outstanding unfunded commitments may be terminated. As of September 30, 2019, we were in compliance with all the financial covenants under the Credit Facility.
On October 8, 2019, we entered into an amended and restated credit agreement (the “Amended and Restated Credit Agreement”), which amended and restated the Credit Facility. The Amended and Restated Credit Agreement:
|
|
|
|
(1)
|
matures on October 8, 2024, subject to certain restrictions, including the refinancing of the Company’s Term Loan Agreement,
|
|
|
|
|
(2)
|
reduced our annual borrowing costs by reducing
|
|
|
|
|
•
|
the interest rate to LIBOR plus a range of 1.75 percent to 2.25 percent (based on availability) and
|
|
|
|
|
•
|
the unused commitment fee to a range of 0.25 percent to 0.375 percent (based on utilization),
|
|
|
|
|
(3)
|
replaced a $25 million liquidity covenant with a minimum fixed charge coverage ratio requirement of 1.0x when excess availability is less than the greater of
|
|
|
|
|
•
|
20.0 percent of the lesser of commitments and the borrowing base and
|
|
|
|
|
(4)
|
allowed an additional borrower to be included in the borrowing base upon completion of a field examination,
|
|
|
|
|
(5)
|
revised the calculation of the borrowing base by, among other things, excluding eligible domestic rental equipment and including 90 percent of investment grade eligible domestic accounts receivable, and
|
|
|
|
|
(6)
|
allowed the Company to grant a second priority lien on non-working capital assets in the event of a refinancing of the Term Loan Agreement (as defined below).
|
As described below, the Amended and Restated Credit Agreement also permitted us to make a voluntary prepayment of $35.0 million on our Term Loan (as defined below) without such prepayment being included in the calculation of our fixed coverage ratio.
If the Amended and Restated Credit Agreement were executed on or before September 30, 2019, the borrowing base availability would have been $41.7 million and, after deducting $10.3 million in letters of credit, would have resulted in net availability of $31.3 million, an increase of $6.7 million under the Credit Facility.
Successor Term Loan, Due March 2024
On March 26, 2019, pursuant to the terms of the Plan, we and certain of our subsidiaries entered into a second lien term loan credit agreement (the “Term Loan Agreement”) with the lenders party thereto (the “Term Loan Lenders”) and UMB Bank, N.A., as administrative agent, providing for term loans (the “Term Loan”) in the amount of $210.0 million, guaranteed by certain of our subsidiaries. The Term Loan matures on March 26, 2024.
The Term Loan bears interest at a rate of 13.0 percent per annum, payable quarterly on the first day of each January, April, July, and October, beginning July 1, 2019, with 11.0 percent paid in cash and 2.0 percent paid in kind and capitalized by adding such amount to the outstanding principal.
We may voluntarily prepay all or a part of the Term Loan and, under certain conditions we are required to prepay all or a part of the Term Loan, in each case, at a premium (1) on or prior to 6 months after the closing date of 0 percent; (2) from 6 months and on or prior to two years after the closing date of 6.50 percent; (3) from two years and on or prior to three years after the closing date of 3.25 percent; and (4) from three years after the closing date and thereafter of 0 percent.
On September 20, 2019, we made a voluntary prepayment on the Term Loan of $35.0 million in principal, plus $1.0 million in interest associated with the principal payment. Since the prepayment occurred within the first six months from the closing date, no premium was applicable on the prepayment. As of September 30, 2019, the Term Loan balance was $177.0 million.
The Term Loan is subject to mandatory prepayments and customary reinvestment rights. The mandatory prepayments include prepayment requirements with respect to a change of control, asset sales and debt issuances, in each case subject to certain exceptions or conditions. The Term Loan Agreement also contains customary affirmative and negative covenants, including as to compliance with laws (including environmental laws and anti-corruption laws), delivery of quarterly and annual financial statements, conduct of business, maintenance of property, maintenance of insurance, restrictions on the incurrence of liens, indebtedness, asset dispositions, fundamental changes, restricted payments and other customary covenants. Additionally, the Term Loan Agreement contains customary events of default and remedies for facilities of this nature. If we do not comply with the covenants in the Term Loan Agreement, the Term Loan Lenders may, subject to customary cure rights, require immediate payment of all amounts outstanding under the Term Loan Agreement. As of September 30, 2019, we were in compliance with all the financial covenants under the Term Loan Agreement.
Predecessor 6.75% Senior Notes, Due July 2022
On January 22, 2014, we issued $360.0 million aggregate principal amount of the 6.75% Notes pursuant to the 6.75% Notes Indenture. The 6.75% Notes were general unsecured obligations of the Company and ranked equal in right of payment with all of our existing and future senior unsecured indebtedness. The 6.75% Notes were jointly and severally guaranteed by all of our
subsidiaries that guaranteed indebtedness under the Second Amended and Restated Senior Secured Credit Agreement, as amended from time-to-time (“2015 Secured Credit Agreement”) and our 7.50% Notes. Interest on the 6.75% Notes was payable on January 15 and July 15 of each year, beginning July 15, 2014. Debt issuance costs related to the 6.75% Notes were approximately $7.6 million. After the commencement of the Chapter 11 Cases, the carrying amount of debt was adjusted to the claim amount and all unamortized debt issuance costs prior to the commencement of the Chapter 11 Cases were fully expensed.
Predecessor 7.50% Senior Notes, Due August 2020
On July 30, 2013, we issued $225.0 million aggregate principal amount of the 7.50% Notes pursuant to the 7.50% Notes Indenture. The 7.50% Notes were general unsecured obligations of the Company and ranked equal in right of payment with all of our existing and future senior unsecured indebtedness. The 7.50% Notes were jointly and severally guaranteed by all of our subsidiaries that guaranteed indebtedness under the 2015 Secured Credit Agreement and the 6.75% Notes. Interest on the 7.50% Notes was payable on February 1 and August 1 of each year, beginning February 1, 2014. Debt issuance costs related to the 7.50% Notes were approximately $5.6 million. After the commencement of the Chapter 11 Cases, the carrying amount of debt was adjusted to the claim amount and all unamortized debt issuance costs prior to the commencement of the Chapter 11 Cases were fully expensed.
The commencement of the Chapter 11 Cases constituted an event of default that accelerated the Company’s obligations under the indentures governing the 6.75% Notes and the 7.50% Notes. However, any efforts to enforce such payment obligations were automatically stayed under the provisions of the Bankruptcy Code. The principal balance on the 6.75% Notes and 7.50% Notes of $360.0 million and $225.0 million, respectively, had been reclassed from long-term debt to liabilities subject to compromise as of December 31, 2018. See also Note 2 - Chapter 11 Emergence for further details.
As previously disclosed in our Current Report on Form 8-K filed with the SEC on March 26, 2019, our obligations with respect to the Senior Notes as well as our subsidiaries’ obligations under their respective guarantees under the 6.75% Notes Indenture and the 7.50% Notes Indenture (and the Senior Notes) were cancelled and extinguished as provided in the Plan. From and after March 26, 2019, neither the Company nor its subsidiaries have any continuing obligations under the 6.75% Notes Indenture and 7.50% Notes Indenture or with respect to the Senior Notes or the guarantees related thereto except to the extent specifically provided in the Plan.
Predecessor 2015 Secured Credit Agreement
On January 26, 2015, we entered into the 2015 Secured Credit Agreement. The 2015 Secured Credit Agreement was originally comprised of a $200.0 million revolving credit facility (the “Revolver”). The 2015 Secured Credit Agreement formerly included financial maintenance covenants, including a leverage ratio, consolidated interest coverage ratio, senior secured leverage ratio, and asset coverage ratio, many of which were suspended beginning in September 2015.
We executed various amendments which, among other things: (1) modified the credit facility to an asset-based lending structure, (2) reduced the size of the Revolver to $80.0 million, (3) eliminated the financial maintenance covenants previously in effect and replaced them with a minimum liquidity covenant of $30.0 million and a monthly borrowing base calculation, (4) allowed for the refinancing of our existing Senior Notes with either secured or unsecured debt, (5) added the ability for the Company to designate certain of its subsidiaries as “Designated Borrowers”, and (6) permitted the Company to make restricted payments in the form of certain equity interests.
On October 25, 2018, we entered into a Consent Agreement and a Cash Collateral Agreement, whereby we could open bank accounts not subject to the 2015 Secured Credit Agreement for the purpose of depositing cash to secure certain letters of credit. On October 30, 2018, we deposited $10.0 million into a cash collateral account to support the letters of credit outstanding, which is included in the restricted cash balance on the consolidated balance sheet as of December 31, 2018.
Our obligations under the 2015 Secured Credit Agreement were guaranteed by substantially all of our direct and indirect domestic subsidiaries, other than immaterial subsidiaries and subsidiaries generating revenues primarily outside the United States, each of which has executed guaranty agreements, and were secured by first priority liens on our accounts receivable, specified rigs including barge rigs in the Gulf of Mexico (“GOM”) and land rigs in Alaska, certain U.S.-based rental equipment of the Company and its subsidiary guarantors and the equity interests of certain of the Company’s subsidiaries. In addition to the liquidity covenant and borrowing base requirements, the 2015 Secured Credit Agreement contains customary affirmative and negative covenants, such as limitations on indebtedness and liens, and restrictions on entry into certain affiliate transactions and payments (including certain payments of dividends).
All of the Company’s obligations under the 2015 Secured Credit Agreement were paid prior to the commencement of the Chapter 11 Cases, and the 2015 Secured Credit Agreement, including the Revolver thereunder, was terminated concurrently with
the commencement of the Chapter 11 Cases. See also Note 2 - Chapter 11 Emergence for further details. Unamortized debt issuance costs were fully expensed upon termination of the 2015 Secured Credit Agreement.
Supplemental cash flow information related to interest paid is as follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Six Months Ended September 30,
|
|
|
Three Months Ended March 31,
|
|
Nine Months Ended September 30,
|
|
Dollars in thousands
|
2019
|
|
|
2019
|
|
2018
|
|
Interest paid
|
$
|
7,248
|
|
|
|
$
|
184
|
|
|
$
|
41,175
|
|
Note 7 - Fair Value of Measurements
Certain of our assets and liabilities are required to be measured at fair value on a recurring basis. For purposes of recording fair value adjustments for certain financial and non-financial assets and liabilities, and determining fair value disclosures, we estimate fair value at a price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market for the asset or liability.
The fair value measurement and disclosure requirements of FASB ASC Topic No. 820, Fair Value Measurement and Disclosures requires inputs that we categorize using a three-level hierarchy, from highest to lowest level of observable inputs, as follows:
|
|
|
|
•
|
Level 1 — Unadjusted quoted prices for identical assets or liabilities in active markets;
|
|
|
|
|
•
|
Level 2 — Direct or indirect observable inputs, including quoted prices or other market data, for similar assets or liabilities in active markets or identical assets or liabilities in less active markets; and
|
|
|
|
|
•
|
Level 3 — Unobservable inputs that require significant judgment for which there is little or no market data.
|
When multiple input levels are required for a valuation, we categorize the entire fair value measurement according to the lowest level of input that is significant to the entire measurement even though we may also have utilized significant inputs that are more readily observable. The amounts reported in our consolidated condensed balance sheets for cash and cash equivalents, accounts receivable, and accounts payable approximate fair value.
Fair value of our Term Loan is determined using Level 2 inputs. The Level 2 fair value was determined using a market approach by comparing secured debt of other companies in our industry that have a similar credit rating and debt amount. Fair value of our 6.75% Notes and 7.50% Notes was determined using Level 2 inputs.
Fair values and related carrying values of our debt instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
Dollars in thousands
|
Carrying Amount
|
|
Fair Value
|
|
|
Carrying Amount
|
|
Fair Value
|
|
Successor term loan, due March 2024
|
$
|
177,032
|
|
|
$
|
205,601
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Predecessor 6.75% senior notes, due July 2022
|
—
|
|
|
—
|
|
|
|
360,000
|
|
|
180,000
|
|
|
Predecessor 7.50% senior notes, due August 2020
|
—
|
|
|
—
|
|
|
|
225,000
|
|
|
117,000
|
|
|
Total
|
$
|
177,032
|
|
|
$
|
205,601
|
|
|
|
$
|
585,000
|
|
|
$
|
297,000
|
|
Market conditions could cause an instrument to be reclassified from Level 1 to Level 2, or Level 2 to Level 3. There were no transfers between levels of the fair value hierarchy or any changes in the valuation techniques used during the nine months ended September 30, 2019.
Note 8 - Income Taxes
Income tax expense and the effective tax rate is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Three Months Ended September 30,
|
|
|
Three Months Ended September 30,
|
|
Dollars in thousands
|
2019
|
|
|
2018
|
|
Income tax (benefit) expense
|
$
|
4,979
|
|
|
|
$
|
2,371
|
|
|
Effective tax rate
|
55.5
|
%
|
|
|
(3.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Six Months Ended September 30,
|
|
|
Three Months Ended March 31,
|
|
Nine Months Ended September 30,
|
|
Dollars in thousands
|
2019
|
|
|
2019
|
|
2018
|
|
Income tax (benefit) expense
|
$
|
8,771
|
|
|
|
$
|
656
|
|
|
$
|
5,561
|
|
|
Effective tax rate
|
50.4
|
%
|
|
|
(0.7
|
)%
|
|
(4.8
|
)%
|
The Company’s effective tax rate was 50.4 percent for the six months ended September 30, 2019, which varied from the U.S. statutory rate of 21.0 percent primarily due to the jurisdictional mix of income and loss during the quarter, our continued inability to recognize the benefits associated with certain losses as a result of valuation allowances, and changes in uncertain tax positions. The Company’s effective tax rate was negative 0.7 percent for the three months ended March 31, 2019, respectively, which varied from the U.S. statutory rate of 21.0 percent primarily due to the jurisdictional mix of income and loss during the quarter, our continued inability to recognize the benefits associated with certain losses as a result of valuation allowances, and the income tax impacts of adjustments made as part of Fresh Start Accounting. See Note 3 - Fresh Start Accounting for further details. The Company’s effective tax rate was negative 4.8 percent for the nine months ended September 30, 2018, which varied from the U.S. statutory rate of 21.0 percent primarily due to the jurisdictional mix of income and loss and our continued inability to recognize the benefits associated with certain losses as a result of valuation allowances.
Supplemental cash flow information related to income taxes paid (net of refunds) are as follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Six Months Ended September 30,
|
|
|
Three Months Ended March 31,
|
|
Nine Months Ended September 30,
|
|
Dollars in thousands
|
2019
|
|
|
2019
|
|
2018
|
|
Income taxes paid (net of refunds)
|
$
|
5,440
|
|
|
|
$
|
1,421
|
|
|
$
|
5,871
|
|
We apply the accounting guidance related to accounting for uncertainty in income taxes. This guidance prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be 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. Our liability for unrecognized tax benefits is primarily related to foreign operations, (all of which, if recognized, would favorably impact our effective tax rate). Unrecognized tax benefits and accrued interest and penalties related to uncertain tax positions was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Dollars in thousands
|
September 30,
2019
|
|
|
December 31,
2018
|
|
Liability for unrecognized tax benefits
|
$
|
3,403
|
|
|
|
$
|
5,728
|
|
|
Accrued interest and penalties related to uncertain tax positions
|
$
|
1,323
|
|
|
|
$
|
2,107
|
|
As described in Note 2 - Chapter 11 Emergence, in accordance with the Plan, our 7.50% Notes and 6.75% Notes were canceled and exchanged for Successor Common Stock, the Term Loan, and right to participate in the rights offering. The Internal Revenue Service Code (“IRC”) of 1986, as amended, provides that a debtor in a Chapter 11 bankruptcy case may exclude cancellation of debt income (“CODI”) from taxable income but must reduce certain of its tax attributes by the amount of any CODI realized as a result of the consummation of a plan of reorganization. The amount of CODI realized by a taxpayer is determined
based on the fair market value of the consideration received by the creditors in settlement of outstanding indebtedness. Upon emergence from Chapter 11 bankruptcy proceedings, the CODI may reduce some or all of the amount of prior U.S. tax attributes, which can include net operating losses, capital losses, and tax basis in assets. The actual reduction in tax attributes does not occur until January 1, 2020. The amount of the remaining U.S. deferred tax assets, against which a full valuation exists, will be limited under IRC Section 382 due to the change in control resulting from the Plan.
The Company has evaluated the impact of the reorganization, including the change in control, resulting from its emergence from bankruptcy. The Company believes that the Successor Company will be able to fully absorb the CODI realized by the Predecessor in connection with the reorganization with its net operating losses, capital losses, and tax basis in assets. It is more likely than not that the Successor will not realize future income tax benefits related to its remaining U.S. net deferred tax asset based on the IRC Section 382 limitation, historical results, and expected market conditions known on the date of measurement, and the Company has therefore maintained a full valuation allowance against the remaining U.S. net deferred tax asset. This is periodically reassessed and could change in the future.
Note 9 - Commitments and Contingencies
We are a party to various lawsuits and claims arising out of the ordinary course of business. We estimate the range of our liability related to pending litigation when we believe the amount or range of loss can be estimated. We record our best estimate of a loss when the loss is considered probable. When a liability is probable and there is a range of estimated loss with no best estimate in the range, we record the minimum estimated liability related to the lawsuits or claims. As additional information becomes available, we assess the potential liability related to our pending litigation and claims and revise our estimates. Due to uncertainties related to the resolution of lawsuits and claims, the ultimate outcome may differ significantly from our estimates. In the opinion of management and based on liability accruals provided, our ultimate exposure with respect to these pending lawsuits and claims is not expected to have a material adverse effect on our consolidated condensed balance sheets or statements of cash flows, although they could have a material adverse effect on our consolidated condensed statements of operations for a particular reporting period.
Note 10 - Earnings (Loss) Per Common Share (“EPS”)
Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. The effects of dilutive securities such as Successor unvested restricted stock units, Successor unvested stock options, Successor warrants and Predecessor preferred stock are included in the diluted EPS calculation, when applicable. The number of outstanding dilutive securities can change with turnover of employees holding these securities.
The Successor unvested restricted stock units represent shares of Successor Common Stock that were issued upon emergence from bankruptcy under the 2019 Long Term Incentive Plan to certain employees. The Successor unvested stock options were issued upon emergence from bankruptcy under the 2019 Long Term Incentive Plan to certain employees and are convertible into one share each of Successor Common Stock at an exercise price of $23. The Successor warrants were issued upon emergence from bankruptcy and are initially convertible into one share each of Successor Common Stock at an initial exercise price of $48.85. See Note 2 - Chapter 11 Emergence for more details. The 500,000 units of Predecessor preferred stock were convertible into 47.6190 shares of Predecessor common stock for each Predecessor preferred stock for a total of 1,587,300 shares of Predecessor common stock.
The following table represents the computation of earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Three Months Ended September 30,
|
|
|
Three Months Ended September 30,
|
|
Dollars in thousands, except share and per share amounts
|
2019
|
|
|
2018
|
|
Basic EPS
|
|
|
|
|
|
Numerator
|
|
|
|
|
|
Net income (loss) available to common stockholders (numerator)
|
$
|
3,989
|
|
|
|
$
|
(71,857
|
)
|
|
Denominator
|
|
|
|
|
|
Weighted average shares outstanding
|
15,044,739
|
|
|
|
9,334,390
|
|
|
Number of shares used for basic EPS computation
|
15,044,739
|
|
|
|
9,334,390
|
|
|
Basic earnings (loss) per common share
|
$
|
0.27
|
|
|
|
$
|
(7.70
|
)
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Three Months Ended September 30,
|
|
|
Three Months Ended September 30,
|
|
Dollars in thousands, except share and per share amounts
|
2019
|
|
|
2018
|
|
Diluted EPS
|
|
|
|
|
|
Numerator
|
|
|
|
|
|
Net income (loss) available to common stockholders (numerator)
|
$
|
3,989
|
|
|
|
$
|
(71,857
|
)
|
|
Denominator
|
|
|
|
|
|
Number of shares used for basic EPS computation
|
15,044,739
|
|
|
|
9,334,390
|
|
|
Successor unvested restricted stock units
|
—
|
|
|
|
—
|
|
|
Successor unvested stock options
|
—
|
|
|
|
—
|
|
|
Successor warrants
|
—
|
|
|
|
—
|
|
|
Predecessor preferred stock
|
—
|
|
|
|
—
|
|
|
Number of shares used for diluted EPS computation
|
15,044,739
|
|
|
|
9,334,390
|
|
|
Diluted earnings (loss) per common share
|
$
|
0.27
|
|
|
|
$
|
(7.70
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Six Months Ended September 30,
|
|
|
Three Months Ended March 31,
|
|
Nine Months Ended September 30,
|
|
Dollars in thousands, except share and per share amounts
|
2019
|
|
|
2019
|
|
2018
|
|
Basic EPS
|
|
|
|
|
|
|
|
Numerator
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders (numerator)
|
$
|
8,630
|
|
|
|
$
|
(90,248
|
)
|
|
$
|
(125,343
|
)
|
|
Denominator
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
15,044,739
|
|
|
|
9,368,322
|
|
|
9,292,858
|
|
|
Number of shares used for basic EPS computation
|
15,044,739
|
|
|
|
9,368,322
|
|
|
9,292,858
|
|
|
Basic earnings (loss) per common share
|
$
|
0.57
|
|
|
|
$
|
(9.63
|
)
|
|
$
|
(13.49
|
)
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Six Months Ended September 30,
|
|
|
Three Months Ended March 31,
|
|
Nine Months Ended September 30,
|
|
Dollars in thousands, except share and per share amounts
|
2019
|
|
|
2019
|
|
2018
|
|
Diluted EPS
|
|
|
|
|
|
|
|
Numerator
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders (numerator)
|
$
|
8,630
|
|
|
|
$
|
(90,248
|
)
|
|
$
|
(125,343
|
)
|
|
Denominator
|
|
|
|
|
|
|
|
Number of shares used for basic EPS computation
|
15,044,739
|
|
|
|
9,368,322
|
|
|
9,292,858
|
|
|
Successor unvested restricted stock units
|
—
|
|
|
|
—
|
|
|
—
|
|
|
Successor unvested stock options
|
—
|
|
|
|
—
|
|
|
—
|
|
|
Successor warrants
|
—
|
|
|
|
—
|
|
|
—
|
|
|
Predecessor preferred stock
|
—
|
|
|
|
—
|
|
|
—
|
|
|
Number of shares used for diluted EPS computation
|
15,044,739
|
|
|
|
9,368,322
|
|
|
9,292,858
|
|
|
Diluted earnings (loss) per common share
|
$
|
0.57
|
|
|
|
$
|
(9.63
|
)
|
|
$
|
(13.49
|
)
|
The following shares were excluded from the computation of diluted EPS as such shares would be anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Three Months Ended September 30,
|
|
|
Three Months Ended September 30,
|
|
|
2019
|
|
|
2018
|
|
Successor unvested restricted stock units
|
198,765
|
|
|
|
—
|
|
|
Successor unvested stock options
|
298,150
|
|
|
|
—
|
|
|
Successor warrants
|
2,580,182
|
|
|
|
—
|
|
|
Predecessor preferred stock
|
—
|
|
|
|
1,587,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Six Months Ended September 30,
|
|
|
Three Months Ended March 31,
|
|
Nine Months Ended September 30,
|
|
|
2019
|
|
|
2019
|
|
2018
|
|
Successor unvested restricted stock units
|
198,765
|
|
|
|
—
|
|
|
—
|
|
|
Successor unvested stock options
|
298,150
|
|
|
|
—
|
|
|
—
|
|
|
Successor warrants
|
2,580,182
|
|
|
|
—
|
|
|
—
|
|
|
Predecessor preferred stock
|
—
|
|
|
|
1,587,300
|
|
|
1,587,300
|
|
Note 11 - Revenue
The following table shows the Company’s revenues by type:
|
|
|
|
|
|
|
|
|
Successor
|
|
Dollars in thousands
|
Three Months Ended September 30,
|
|
|
2019
|
|
Lease revenue
|
$
|
40,691
|
|
|
Service revenue
|
119,392
|
|
|
Total revenues
|
$
|
160,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Dollars in thousands
|
Six Months Ended September 30,
|
|
|
Three Months Ended March 31,
|
|
|
2019
|
|
|
2019
|
|
Lease revenue
|
$
|
83,122
|
|
|
|
$
|
42,041
|
|
|
Service revenue
|
232,992
|
|
|
|
115,356
|
|
|
Total revenues
|
$
|
316,114
|
|
|
|
$
|
157,397
|
|
Our business is comprised of two business lines: (1) rental tools services and (2) drilling services. See Note 12 - Reportable Segments for further details on these business lines and revenue disaggregation amounts.
Lease Revenue
We adopted Topic 842 effective January 1, 2019. For a lessor, lease revenue recognition begins at the commencement of the lease date, which is defined as the date on which a lessor makes an underlying asset available for use by the lessee. Any pre-commencement payments (e.g. mobilization) are deferred. Subsequently, any lease payments (i.e. related to any fixed consideration received) are recorded as receivables when due and payable by the lessee. All of our lease revenue is from variable lease payments. Variable lease payments are recognized as income in profit or loss as the variability is resolved (i.e. as performance or use of the asset occurs).
We elected the following package of practical expedients permitted under the transition guidance:
|
|
|
|
•
|
an election to adopt the modified retrospective transition method applied at the beginning of the period of adoption which does not require a restatement of the prior period. Accordingly, no cumulative-effect adjustment to retained earnings was made.
|
|
|
|
|
•
|
a practical expedient to not reassess whether a contract is or contains a lease and carry forward its historical lease classification.
|
|
|
|
|
•
|
a practical expedient to account as a single performance obligation entirely depending on predominant component(s) i.e. lease or non-lease component. Revenue is recognized under Topic 842, if the lease component is predominant. Similarly, revenue is recognized under ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”) if the non-lease component is predominant.
|
Our lease revenue comes from rental tools services business and drilling services business as described below.
Rental Tools Services Business
Dayrate Revenues
Our rental tools services contracts generally provide for payment on a dayrate basis depending on the rate for the tool defined in the contract.
Such dayrate consideration is allocated to the distinct daily increment it relates to within the contract term, and therefore, recognized in line with the contractual rate billed for the services provided for any given day.
Drilling Services Business
Dayrate Revenues
Our drilling services contracts generally provide for payment on a dayrate basis, with higher rates for periods when the drilling unit is operating and lower rates or zero rates for periods when drilling operations are interrupted or restricted. The dayrate invoices billed to the customer are typically determined based on the varying rates applicable to the specific activities performed on an hourly basis.
Such dayrate consideration is allocated to the distinct hourly increment to which it relates within the contract term, and therefore, recognized in line with the contractual rate billed for the services provided for any given hour.
Mobilization Revenues
We may receive fees (on either a fixed lump-sum or variable dayrate basis) for the mobilization of our rigs.
These activities are not considered to be distinct within the context of the contract and therefore, the associated revenues are allocated to the overall performance obligation and typically recognized ratably over the initial term of the related drilling contract. We record a contract liability for mobilization fees received, which is typically amortized ratably to revenue as services are rendered over the initial term of the related drilling contract. The amortized amount is adjusted accordingly if the term of the initial contract is extended.
Service Revenue
We adopted Topic 606 effective January 1, 2018, using the modified retrospective implementation method. Accordingly, we have applied the five-step method outlined in Topic 606 for determining when and how revenue is recognized to all contracts that were not completed as of the date of adoption. Revenues for reporting periods beginning as of January 1, 2018 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported under the previous revenue recognition guidance. For contracts that were modified before the effective date, we have considered the modification guidance within the new standard and determined that the revenue recognized and contract balances recorded prior to adoption for such contracts were not impacted. While Topic 606 requires additional disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, its adoption has not had a material impact on the measurement or recognition of our revenues. As part of the adoption, no adjustments were needed to the consolidated balance sheets, statements of operations and statements of cash flows.
Our rental tools and drilling services provided under each contract is a single performance obligation satisfied over time and comprised of a series of distinct time increments, or service periods. Total revenue is determined for each individual contract by estimating both fixed and variable consideration expected to be earned over the contract term. Fixed consideration generally relates to activities that are not distinct within the context of our contracts and is recognized on a straight-line basis over the contract term. Variable consideration generally relates to distinct service periods during the contract term and are recognized in the period when the services are performed. Our contract terms generally range from 2 to 60 months.
The amount estimated for variable consideration may be constrained (reduced) and is only recognized as revenue to the extent that it is probable that a significant reversal of previously recognized revenue will not occur during the contract term. When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s control that could result in a significant reversal of revenue as well as the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required. Accounts receivable are recognized when the right to consideration becomes unconditional based upon contractual billing schedules. Payment terms on invoiced amounts are typically 30 days.
Rental Tools Services Business
Dayrate Revenues
Our rental tools services contracts generally provide for payment on a dayrate basis depending on the rate for the tool defined in the contract.
Such dayrate consideration is allocated to the distinct daily increment it relates to within the contract term, and therefore, recognized in line with the contractual rate billed for the services provided for any given day.
Drilling Services Business
Dayrate Revenues
Our drilling services contracts generally provide for payment on a dayrate basis, with higher rates for periods when the drilling unit is operating and lower rates or zero rates for periods when drilling operations are interrupted or restricted. The dayrate invoices billed to the customer are typically determined based on the varying rates applicable to the specific activities performed on an hourly basis.
Such dayrate consideration is allocated to the distinct hourly increment to which it relates within the contract term, and therefore, recognized in line with the contractual rate billed for the services provided for any given hour.
Mobilization Revenues
We may receive fees (on either a fixed lump-sum or variable dayrate basis) for the mobilization of our rigs.
These activities are not considered to be distinct within the context of the contract and therefore, the associated revenues are allocated to the overall performance obligation and typically recognized ratably over the initial term of the related drilling contract. We record a contract liability for mobilization fees received, which is typically amortized ratably to revenue as services are rendered over the initial term of the related drilling contract. The amortized amount is adjusted accordingly if the term of the initial contract is extended.
Capital Modification Revenues
We may, from time to time, receive fees from our customers for capital improvements to our rigs to meet contractual requirements (on either a fixed lump-sum or variable dayrate basis).
Such revenues are allocated to the overall performance obligation and typically recognized ratably over the initial term of the related drilling contract as these activities are not considered to be distinct within the context of our contracts. A contract liability is recorded for such fees when received.
Demobilization Revenues
We may receive fees (on either a fixed lump-sum or variable dayrate basis) for the demobilization of our rigs.
Due to the inherent uncertainty regarding the realization, we have elected to not recognize demobilization revenues until the uncertainty is resolved. Therefore, demobilization revenues are recognized once the related performance obligations have been completed.
Reimbursable Revenues
We generally receive reimbursements from our customers for the purchase of supplies, equipment, personnel services and other services provided at their request in accordance with a drilling contract or other agreement.
Such reimbursable revenues are variable and subject to uncertainty, as the amounts received and timing thereof is highly dependent on factors outside of our control. Accordingly, reimbursable revenues are not included in the total transaction price until the uncertainty is resolved, which typically occurs when the related costs are incurred on behalf of a customer. We are generally considered a principal in such transactions and record the associated revenues at the gross amount billed to the customer in our consolidated condensed statements of operations. Such amounts are recognized once the services have been performed.
Reimbursable revenues during the period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Three Months Ended September 30,
|
|
|
Three Months Ended September 30,
|
|
Dollars in thousands
|
2019
|
|
|
2018
|
|
Reimbursable revenue
|
$
|
23,152
|
|
|
|
$
|
13,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Six Months Ended September 30,
|
|
|
Three Months Ended March 31,
|
|
Nine Months Ended September 30,
|
|
Dollars in thousands
|
2019
|
|
|
2019
|
|
2018
|
|
Reimbursable revenue
|
$
|
41,617
|
|
|
|
$
|
28,541
|
|
|
$
|
40,440
|
|
Contract Costs
The following is a description of the different costs that we may incur for our contracts:
Mobilization Costs
These costs include certain direct and incremental costs incurred for mobilization of contracted rigs. These costs relate directly to a contract, enhance resources of the Company that will be used in satisfying its performance obligations in the future and are expected to be recovered. These costs are capitalized when incurred as a current or noncurrent asset (depending on the length of the initial contract term), and are typically amortized over the initial term of the related drilling contract. Current and non-current capitalized mobilization costs are included in other current assets and other non-current assets, respectively, on our consolidated balance sheet.
Capitalized mobilization costs were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Dollars in thousands
|
September 30,
2019
|
|
|
December 31,
2018
|
|
Capitalized mobilization costs
|
$
|
6,151
|
|
|
|
$
|
5,343
|
|
There was no impairment loss in relation to capitalized costs. Amortization of these capitalized mobilization costs were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Three Months Ended September 30,
|
|
|
Three Months Ended September 30,
|
|
Dollars in thousands
|
2019
|
|
|
2018
|
|
Amortization of capitalized mobilization costs
|
$
|
352
|
|
|
|
$
|
1,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Six Months Ended September 30,
|
|
|
Three Months Ended March 31,
|
|
Nine Months Ended September 30,
|
|
Dollars in thousands
|
2019
|
|
|
2019
|
|
2018
|
|
Amortization of capitalized mobilization costs
|
$
|
480
|
|
|
|
$
|
3,066
|
|
|
$
|
3,901
|
|
Demobilization Costs
These costs are incurred for the demobilization of rigs at contract completion and are recognized as incurred during the demobilization process.
Capital Modification Costs
These costs are incurred for rig modifications or upgrades required for a contract, which are considered to be capital improvements, are capitalized as property, plant and equipment and depreciated over the estimated useful life of the improvement.
Contract Liabilities
The following table provides information about contract liabilities from contracts with customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Dollars in thousands
|
September 30,
2019
|
|
|
December 31,
2018
|
|
Contract liabilities - current (Deferred revenue) (1)
|
$
|
1,942
|
|
|
|
$
|
4,081
|
|
|
Contract liabilities - noncurrent (Deferred revenue) (1)
|
895
|
|
|
|
2,441
|
|
|
Total contract liabilities
|
$
|
2,837
|
|
|
|
$
|
6,522
|
|
|
|
|
|
(1)
|
Contract liabilities - current and contract liabilities - noncurrent are included in accounts payable and accrued liabilities and other long-term liabilities respectively, in our consolidated condensed balance sheet as of September 30, 2019 and December 31, 2018.
|
Contract liabilities relate to mobilization revenues and capital modification revenues, where, we have unconditional right to cash or cash has been received but performance obligations have not been fulfilled. These liabilities are reduced and revenue is recognized as performance obligations are fulfilled.
Significant changes to contract liabilities balances during the nine months ended September 30, 2019 are shown below:
|
|
|
|
|
|
|
|
Dollars in thousands
|
Contract Liabilities
|
|
Balance at December 31, 2018 (Predecessor)
|
$
|
6,522
|
|
|
Decrease due to recognition of revenue
|
(1,451
|
)
|
|
Increase to deferred revenue during current period
|
1,635
|
|
|
Elimination of deferred revenue due to the adoption of fresh start accounting
|
(3,634
|
)
|
|
Balance at March 31, 2019 (Predecessor)
|
3,072
|
|
|
|
|
|
|
|
|
Decrease due to recognition of revenue
|
(1,250
|
)
|
|
Increase to deferred revenue during current period
|
1,015
|
|
|
Balance at September 30, 2019 (Successor)
|
$
|
2,837
|
|
Transaction Price Allocated to the Remaining Performance Obligations
The following table includes revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Balance at September 30, 2019
|
|
Dollars in thousands
|
Remaining 2019
|
|
2020
|
|
2021
|
|
Beyond 2021
|
|
Total
|
|
Deferred lease revenue
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
Deferred service revenue
|
$
|
464
|
|
|
1,842
|
|
|
531
|
|
|
—
|
|
|
$
|
2,837
|
|
The revenues included above consist of mobilization and capital modification revenues for both wholly and partially unsatisfied performance obligations, which have been estimated for purposes of allocating across the entire corresponding performance obligations. The amounts are derived from the specific terms within contracts that contain such provisions, and the expected timing for recognition of such revenue is based on the estimated start date and duration of each respective contract based on information known at September 30, 2019. The actual timing of recognition of such amounts may vary due to factors outside of our control. We have applied the disclosure practical expedient in FASB ASC Topic No. 606-10-50-14A(b) and have not included estimated variable consideration related to wholly unsatisfied performance obligations or to distinct future time increments within our contracts.
Note 12 - Reportable Segments
Our business is comprised of two business lines: (1) rental tools services and (2) drilling services. We report our rental tools services business as two reportable segments: (1) U.S. rental tools and (2) International rental tools. We report our drilling services business as two reportable segments: (1) U.S. (lower 48) drilling and (2) International & Alaska drilling.
Within the four reportable segments, we have one business unit under U.S. rental tools, one business unit under international rental tools, one business unit under U.S. (lower 48) drilling, and we aggregate our Arctic, Eastern Hemisphere, and Latin America business units under International & Alaska drilling, for a total of six business units. The Company has aggregated each of its business units in one of the four reporting segments based on the guidelines of the FASB ASC Topic No. 280, Segment Reporting. We eliminate inter-segment revenues and expenses. We disclose revenues under the four reportable segments based on the similarity of the use and markets for the groups of products and services within each segment.
Rental Tools Services Business
In our rental tools services business, we provide premium rental equipment and services to exploration & production companies, drilling contractors, and service companies on land and offshore in the U.S. and select international markets. Tools we provide include standard and heavy-weight drill pipe, all of which are available with standard or high-torque connections, tubing, drill collars, pressure control equipment, including blowout preventers, and more. We also provide well construction services, which includes tubular running services and downhole tool rentals, well intervention services, which includes whipstocks, fishing, and related services, as well as inspection and machine shop support. Rental tools are used during drilling and/or workover programs and are requested by the customer as needed, requiring us to keep a broad inventory of rental tools in stock. Rental tools are usually rented on a daily or monthly basis.
U.S. Rental Tools
Our U.S. rental tools segment maintains an inventory of rental tools for deepwater, drilling, completion, workover, and production applications at facilities in Louisiana, Texas, Wyoming, North Dakota and West Virginia. We also provide well construction and well intervention services. Our largest single market for rental tools is U.S. land drilling, a cyclical market driven primarily by oil and natural gas prices and our customers’ access to project financing. A portion of our U.S. rental tools business supplies tubular goods and other equipment to offshore GOM customers.
International Rental Tools
Our international rental tools segment maintains an inventory of rental tools and provides well construction, well intervention, and surface and tubular services to our customers in the Middle East, Latin America, Europe, and Asia-Pacific regions.
Drilling Services Business
In our drilling services business, we drill oil, natural gas, and geothermal wells for customers globally. We provide this service with both Company-owned rigs and customer-owned rigs. We refer to the provision of drilling services with customer-owned rigs as our operations and management (“O&M”) service in which our customers own their own drilling rigs, but choose Parker Drilling to operate and manage the rigs for them. The nature and scope of activities involved in drilling a well is similar whether it is drilled with a Company-owned rig (as part of a traditional drilling contract) or a customer-owned rig (as part of an O&M contract). In addition, we provide project-related services, such as engineering, procurement, project management, commissioning of customer-owned drilling rig projects, operations execution, and quality and safety management. We have extensive experience and expertise in drilling geologically challenging wells and in managing the logistical and technological challenges of operating in remote, harsh, and ecologically sensitive areas.
U.S. (Lower 48) Drilling
Our U.S. (lower 48) drilling segment provides drilling services with our GOM barge drilling rig fleet and markets our U.S. (lower 48) based O&M services. We also provide O&M services for a customer-owned rig offshore California. Our GOM barge rigs drill for oil and natural gas in shallow waters in and along the inland waterways and coasts of Louisiana, Alabama, and Texas. The majority of these wells are drilled in shallow water depths ranging from 6 to 12 feet. Our rigs are suitable for a variety of drilling programs, from inland coastal waters requiring shallow draft barges, to open water drilling on both state and federal waters. Contract terms typically consist of well-to-well or multi-well programs, most commonly ranging from 20 to 180 days.
International & Alaska Drilling
Our International & Alaska drilling segment provides drilling services, using both Company-owned rigs and O&M contracts, and project-related services. The drilling markets in which this segment operates have one or more of the following characteristics:
|
|
|
|
•
|
customers typically are major, independent, or national oil and natural gas companies or integrated service providers;
|
|
|
|
|
•
|
drilling programs in remote locations with little infrastructure, requiring a large inventory of spare parts and other ancillary equipment and self-supported service capabilities;
|
|
|
|
|
•
|
complex wells and/or harsh environments (such as high pressures, deep depths, hazardous or geologically challenging conditions and sensitive environments) requiring specialized equipment and considerable experience to drill; and
|
|
|
|
|
•
|
O&M contracts that generally cover periods of one year or more.
|
We have rigs under contract in Alaska, Kazakhstan, the Kurdistan region of Iraq, Guatemala, Mexico, and on Sakhalin Island, Russia. In addition, we have O&M and ongoing project-related services for customer-owned rigs in Alaska, California, Kuwait, Canada, Indonesia, and on Sakhalin Island, Russia.
The following table represents the results of operations by reportable segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Three Months Ended September 30,
|
|
|
Three Months Ended September 30,
|
|
Dollars in thousands
|
2019
|
|
|
2018
|
|
Revenues: (1)
|
|
|
|
|
|
U.S. rental tools
|
$
|
49,256
|
|
|
|
$
|
50,944
|
|
|
International rental tools
|
24,067
|
|
|
|
20,151
|
|
|
Total rental tools services
|
73,323
|
|
|
|
71,095
|
|
|
U.S. (lower 48) drilling
|
14,487
|
|
|
|
4,530
|
|
|
International & Alaska drilling
|
72,273
|
|
|
|
47,770
|
|
|
Total drilling services
|
86,760
|
|
|
|
52,300
|
|
|
Total revenues
|
160,083
|
|
|
|
123,395
|
|
|
Operating gross margin: (2)
|
|
|
|
|
|
U.S. rental tools
|
13,446
|
|
|
|
16,588
|
|
|
International rental tools
|
1,925
|
|
|
|
(2,713
|
)
|
|
Total rental tools services
|
15,371
|
|
|
|
13,875
|
|
|
U.S. (lower 48) drilling
|
2,505
|
|
|
|
(3,402
|
)
|
|
International & Alaska drilling
|
4,392
|
|
|
|
(8,541
|
)
|
|
Total drilling services
|
6,897
|
|
|
|
(11,943
|
)
|
|
Total operating gross margin
|
22,268
|
|
|
|
1,932
|
|
|
General and administrative expense
|
(5,983
|
)
|
|
|
(14,495
|
)
|
|
Loss on impairment
|
—
|
|
|
|
(43,990
|
)
|
|
Gain (loss) on disposition of assets, net
|
(92
|
)
|
|
|
9
|
|
|
Reorganization items
|
(211
|
)
|
|
|
—
|
|
|
Total operating income (loss)
|
15,982
|
|
|
|
(56,544
|
)
|
|
Interest expense
|
(7,118
|
)
|
|
|
(11,350
|
)
|
|
Interest income
|
362
|
|
|
|
23
|
|
|
Other
|
(258
|
)
|
|
|
(709
|
)
|
|
Income (loss) before income taxes
|
$
|
8,968
|
|
|
|
$
|
(68,580
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Six Months Ended September 30,
|
|
|
Three Months Ended March 31,
|
|
Nine Months Ended September 30,
|
|
Dollars in thousands
|
2019
|
|
|
2019
|
|
2018
|
|
Revenues: (1)
|
|
|
|
|
|
|
|
U.S. rental tools
|
$
|
102,192
|
|
|
|
$
|
52,595
|
|
|
$
|
127,775
|
|
|
International rental tools
|
46,222
|
|
|
|
21,109
|
|
|
57,563
|
|
|
Total rental tools services
|
148,414
|
|
|
|
73,704
|
|
|
185,338
|
|
|
U.S. (lower 48) drilling
|
26,966
|
|
|
|
6,627
|
|
|
9,167
|
|
|
International & Alaska drilling
|
140,734
|
|
|
|
77,066
|
|
|
157,168
|
|
|
Total drilling services
|
167,700
|
|
|
|
83,693
|
|
|
166,335
|
|
|
Total revenues
|
316,114
|
|
|
|
157,397
|
|
|
351,673
|
|
|
Operating gross margin: (2)
|
|
|
|
|
|
|
|
U.S. rental tools
|
31,317
|
|
|
|
17,289
|
|
|
30,903
|
|
|
International rental tools
|
2,626
|
|
|
|
(3,581
|
)
|
|
(9,402
|
)
|
|
Total rental tools services
|
33,943
|
|
|
|
13,708
|
|
|
21,501
|
|
|
U.S. (lower 48) drilling
|
3,485
|
|
|
|
(1,508
|
)
|
|
(12,443
|
)
|
|
International & Alaska drilling
|
7,831
|
|
|
|
(776
|
)
|
|
(17,701
|
)
|
|
Total drilling services
|
11,316
|
|
|
|
(2,284
|
)
|
|
(30,144
|
)
|
|
Total operating gross margin
|
45,259
|
|
|
|
11,424
|
|
|
(8,643
|
)
|
|
General and administrative expense
|
(11,593
|
)
|
|
|
(8,147
|
)
|
|
(28,984
|
)
|
|
Loss on impairment
|
—
|
|
|
|
—
|
|
|
(43,990
|
)
|
|
Gain (loss) on disposition of assets, net
|
(145
|
)
|
|
|
384
|
|
|
(126
|
)
|
|
Reorganization items
|
(1,173
|
)
|
|
|
(92,977
|
)
|
|
—
|
|
|
Total operating income (loss)
|
32,348
|
|
|
|
(89,316
|
)
|
|
(81,743
|
)
|
|
Interest expense
|
(14,781
|
)
|
|
|
(274
|
)
|
|
(33,787
|
)
|
|
Interest income
|
736
|
|
|
|
8
|
|
|
76
|
|
|
Other
|
(902
|
)
|
|
|
(10
|
)
|
|
(1,609
|
)
|
|
Income (loss) before income taxes
|
$
|
17,401
|
|
|
|
$
|
(89,592
|
)
|
|
$
|
(117,063
|
)
|
|
|
|
|
(1)
|
For the six months ended September 30, 2019, our largest customer, ENL, constituted approximately 27.7 percent of our total consolidated revenues and approximately 62.2 percent of our International & Alaska Drilling segment revenues. Excluding reimbursable revenues of $37.1 million, ENL constituted approximately 18.4 percent of our total consolidated revenues and approximately 49.8 percent of our International & Alaska Drilling segment revenues.
|
For the three months ended March 31, 2019, our largest customer, ENL, constituted approximately 31.2 percent of our total consolidated revenues and approximately 63.8 percent of our International & Alaska Drilling segment revenues. Excluding reimbursable revenues of $26.3 million, ENL constituted approximately 17.7 percent of our total consolidated revenues and approximately 46.6 percent of our International & Alaska Drilling segment revenues.
For the nine months ended September 30, 2018, our largest customer, ENL, constituted approximately 25.7 percent of our total consolidated revenues and approximately 57.5 percent of our International & Alaska Drilling segment revenues. Excluding reimbursable revenues of $34.6 million, ENL constituted approximately 17.9 percent of our total consolidated revenues and approximately 47.6 percent of our International & Alaska Drilling segment revenues.
|
|
|
|
(2)
|
Operating gross margin is calculated as revenues less direct operating expenses, including depreciation and amortization expense.
|
The following table shows the Company’s revenues by geographic region:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Three Months Ended September 30,
|
|
|
Three Months Ended September 30,
|
|
Dollars in Thousands
|
2019
|
|
|
2018
|
|
United States
|
$
|
70,887
|
|
|
|
$
|
57,016
|
|
|
Russia
|
45,769
|
|
|
|
30,315
|
|
|
EMEA & Asia
|
22,807
|
|
|
|
23,902
|
|
|
Latin America
|
10,480
|
|
|
|
2,596
|
|
|
Other CIS
|
3,721
|
|
|
|
2,743
|
|
|
Other
|
6,419
|
|
|
|
6,823
|
|
|
Total revenues
|
$
|
160,083
|
|
|
|
$
|
123,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
Six Months Ended September 30,
|
|
|
Three Months Ended March 31,
|
|
Nine Months Ended September 30,
|
|
Dollars in Thousands
|
2019
|
|
|
2019
|
|
2018
|
|
United States
|
$
|
143,047
|
|
|
|
$
|
66,253
|
|
|
$
|
153,665
|
|
|
Russia
|
88,047
|
|
|
|
49,387
|
|
|
90,378
|
|
|
EMEA & Asia
|
47,794
|
|
|
|
25,133
|
|
|
66,206
|
|
|
Latin America
|
17,275
|
|
|
|
5,482
|
|
|
10,214
|
|
|
Other CIS
|
7,313
|
|
|
|
3,621
|
|
|
9,799
|
|
|
Other
|
12,638
|
|
|
|
7,521
|
|
|
21,411
|
|
|
Total revenues
|
$
|
316,114
|
|
|
|
$
|
157,397
|
|
|
$
|
351,673
|
|
Note 13 - Recent Accounting Pronouncements
Standards recently adopted
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This ASU requires (a) an entity to separate the lease components from the non-lease components in a contract where the lease component will be accounted for under ASU 2016-02 and the non-lease component will be accounted for under ASU 2014-09, (b) recognition of lease assets and lease liabilities by lessees and derecognition of the leased asset and recognition of a net investment in the lease by the lessor and (c) additional disclosure requirements for both lessees and lessors. We adopted the ASU 2016-02, Leases (Topic 842) effective January 1, 2019, using the modified retrospective transition method applied at the beginning of the period of adoption. See Note 5 - Operating Leases for further details.
Standards not yet adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326). This requires changes to the recognition of credit losses on financial instruments not accounted for at fair value through net income, including loans, debt securities, trade receivables, net investments in leases and available-for-sale debt securities. This ASU broadens the information that an entity must consider in developing its estimate of expected credit losses, requiring an entity to estimate credit losses over the life of an exposure based on historical information, current information and reasonable and supportable forecasts. The guidance is effective for interim and annual periods beginning after December 15, 2019. In October 2019, FASB tentatively decided to defer the effective dates for eligible SEC filers that are eligible to be smaller reporting companies to interim and annual periods beginning after December 15, 2022. We are currently evaluating the effect the guidance will have on our consolidated financial statements.