• Wednesday, 16 May, 2012

Parker Drilling to eat $171m cost overruns

Shelling out: Parker Drilling says it will have to write off $171 million in additional costs for newbuild Arctic units

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Bill Lehane , Bill Lehane , Bill Lehane , Bill Lehane

 17 January 2012 15:02 GMT

Houston-based Parker Drilling has admitted it will have to write off $171 million in cost overruns on its two newly designed Arctic Alaska Drilling Units (AADUs).

Completion of the two units has been delayed to allow the company to modify the rigs based on safety, technical and operational reviews conducted on the prototypes.

The company said the delay and modifications had raised the two rigs' cost at completion to $385 million, including capitalized interest of approximately $49 million, a total which exceeds their book value based on projected cash flows.

“In order to adjust the rigs' values to their estimated fair value, the company expects to record a pre-tax, non-cash charge in the fourth quarter of approximately $171 million”, Parker Drilling said in a statement on Tuesday, adding this would cut around $0.95 off after-tax earnings per share for the period.

The contractor says the AADUs “incorporate some of the most advanced features available in the global land rig market”, and that it remains committed to completing the project.

“We expect the AADUs to establish a new standard of performance for Arctic drilling programs," said Parker Drilling chief executive David Mannon.

New York-listed Parker Drilling provides contract drilling solutions, rental tools and project management services to the energy industry, with an international fleet of 25 land rigs and two offshore barge rigs, and a US fleet of 13 barge rigs in the US Gulf of Mexico.

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