Parker Drilling Co. said March 6 that its President and CEO David Mannon was leaving March 9 to pursue other interests. Mannon joined Parker in 2004 as senior vice president and chief operating officer, before becoming president in 2007 and CEO in 2009.
The Houston-based drilling contractor posted a net loss for the last two years — $50.5 million in 2011 and $14.5 million in 2010. Following the announcement of Mannon’s abrupt departure, Parker’s shares lost 34 cents, or 5.4 percent, falling to $6.02 on the New York Stock Exchange by mid-day.
So far this year, Parker’s stock has dropped a total of 11 percent.
A significant part of the company’s financial problems stem from huge cost over-runs and associated write-offs on its contract with BP for two newly designed Arctic drilling units that were supposed to replace two existing rigs owned by other drilling contractors in BP-operated units on Alaska’s North Slope. Those two older rigs are no longer drilling in BP fields and although pieces of the two new Parker rigs have been delivered to the North Slope, BP said the units were incomplete.
Hence, in mid-January BP issued a letter of default to Parker, essentially saying the rigs had not been delivered per the agreement.
Talks continue with BP
As of March 7, BP spokesman Steve Rinehart said “the two rigs have not been delivered and the default has not yet been resolved.”
However, he said discussions “on the matter” continue between the two companies.
In a Jan. 17 press release regarding BP’s letter of default, Parker said modification work on the two rigs would extend the commissioning activities and increase the total cost, resulting in a $171 million impairment charge in the fourth quarter.
In a conference call with analysts and the press on Jan. 17, Parker officials said the overall cost of the two rigs was now anticipated to be $385 million, with $340 million of that spent by the end of 2011, including capitalized interest. In 2012 the company expected to spend another $38 million on the rigs, plus capitalized interest, making the total impairment about $216 million.
The “Arctic Alaska Drilling Units,” Parker rigs 272 and 273, under a five-year contract to BP, would have been the first rigs in Alaska to bear the Parker logo since the late 1990s, when the company pulled out of the state.
A monster rig for BP’s Liberty development, designed and built by Parker, and delivered in 2009, is owned by BP. That rig is a still undergoing an extensive engineering and design review by BP that began shortly after its delivery to the North Slope.
In its March 6 announcement, the company said Robert Parker Jr., executive chairman and previous CEO from 1991 to 2009, will act as president and CEO while a search is conducted for Mannon’s replacement.
—Kay Cashman
