Houston-based Parker Drilling Co., which provides drilling services and rental tools to U.S. and global markets, on Wednesday filed for Chapter 11 bankruptcy protection, a process that it expects to complete before the end of March.
The voluntary reorganization plan by the company and its subsidiaries, which began providing rental tool services in 1978, should result in no interruptions to business activities, and creditors are expected to be paid in full, the operator said on Wednesday.
To implement the terms of a restructuring support agreement to strengthen its financial position, Parker and some of its U.S. subsidiaries voluntarily filed for protection in the U.S. Bankruptcy Court for the Southern District of Texas.
"Our operational results have continued to improve this year, and we anticipate new opportunities for profitable growth across our drilling and rental tools businesses,” CEO Gary Rich said. “The steps we are announcing...will ensure that we have the appropriate capital structure to take advantage of these opportunities to strategically grow our assets, our global footprint and our suite of products and services.”
During 3Q2018, Parker reported a net loss of almost $72 million (minus $7.70/share), including a $44 million impairment. Revenue increased about 4% sequentially to $123.4 million.
When the third quarter results were issued in November, Rich said there were “early signs of recovery in several end markets, with our U.S. and international rental tools services segments performing very well again…” However, the drilling services business unit remained challenged, he said, and the company was exploring ways to right the ship.
Parker management, which is set to remain in place, is expecting cash flow and existing liquidity will be sufficient to support global operations through the restructuring. It also has augmented liquidity with access to $50 million in debtor-in-possession, or DIP, financing. The DIP lenders also committed to fund an exit facility of $50 million, which could be increased once the restructuring is completed, now anticipated in 1Q2019.
The proposed plan, subject to court approval, reduces about two-thirds of funded debt and injects $95 million of committed equity capital through a backstopped rights offering. It also contemplates issuing a $210 million second-lien term loan due in 2024 to satisfy the remaining existing notes.
“We are confident that by resolving our legacy balance sheet issues, we will enable Parker to continue executing a strategy to build greater scale in core markets and expand strategic offerings, such as our U.S. well services, while strengthening our drilling and rental tools businesses,” Rich said. “We expect these efforts to drive additional efficiencies while providing greater flexibility and more options for customers over the long term.”
Customers, he said, should see no changes to products and services. The company also intends to continue to pay employee wages and benefits as usual, and to pay trade creditors in full and in the ordinary course of business.
“Employees, customers and vendors should see minimal interruption through this process,” Parker noted.