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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ☑ ANNUAL REPORT PURSUANT TO SECTION 13 orOR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, ~~2018~~2019

¨☐ TRANSITION REPORT PURSUANT TO SECTION 13 orOR 15 (d) OF THE SECURITIES EXCHANGE ACT ofOF 1934

For the transition period from to

Commission File Number 1-7573

PARKER DRILLING COMPANY

(Exact name of registrant as specified in its charter)



Delaware		73-0618660
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5 Greenway Plaza, Suite 100, Houston, Texas 77046

(Address of principal executive offices) (Zip Code)

(281) 406-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

~~None~~On January 29, 2020, the Company filed a Form 25 to delist its shares of common stock, par value $0.01 per share, from trading on the New York Stock Exchange as of February 10, 2020, and to deregister its shares of common stock under Section 12(b) of the Act. The deregistration under Section 12(b) will be effective upon 90 days after filing the Form 25.

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.~~16 2/3~~01 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þx

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No þx

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þx No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes þx No ¨

Indicate by check mark ifwhether ~~disclosure~~the ofregistrant ~~delinquent~~is ~~filers~~a ~~pursuant~~large toaccelerated ~~Item 405~~filer, ofan ~~Regulation S~~accelerated filer, a non-Kaccelerated isfiler, ~~not~~a ~~contained~~smaller ~~herein~~reporting company, ~~and~~or ~~will~~an ~~not~~emerging begrowth ~~contained,~~company. toSee the ~~best~~definitions of ~~registrant’s~~“large ~~knowledge~~accelerated filer,” in“accelerated ~~definitive~~filer,” ~~proxy~~“smaller orreporting ~~information~~company,” ~~statements~~and ~~incorporated~~“emerging bygrowth ~~reference~~company” in ~~Part~~Rule ~~III~~12b-2 of ~~this~~the ~~Form 10-K~~Exchange ~~or any amendment to this Form 10-K~~Act. þ

~~Indicate~~Large ~~by check mark whether the registrant is a large~~ accelerated filer, an☐ ~~accelerated~~Accelerated filer, a☑ ~~non~~Non-accelerated filer, a☐ ~~smaller~~Smaller reporting company, or☑ ~~emerging~~Emerging growth company. ~~See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):~~☐

Large accelerated filer ¨ Accelerated filer þ Non-accelerated filer ¨ Smaller reporting company þ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨☐ No þx

~~The~~Indicate ~~aggregate~~by ~~market~~check ~~value~~mark ofwhether ~~our~~the ~~common~~registrant ~~stock~~has ~~held~~filed byall ~~non-affiliates~~documents onand ~~June 30,~~reports ~~2018~~required ~~was~~to ~~$51.3~~be ~~million.~~filed Atby ~~March 6,~~Sections ~~2019~~12, ~~there~~13 ~~were~~or ~~9,382,493 shares~~15(d) of ~~our~~the ~~common~~Securities ~~stock~~Exchange ~~outstanding.~~Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ¨

The aggregate market value of our common stock held by non-affiliates on June 28, 2019, the last business day of the registrant’s most recently completed second quarter, was $115.8 million. As of February 28, 2020 there were 15,044,676 common shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

~~Table of contents~~None.

Table of Contents

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	1110
Item 1B.	Unresolved Staff Comments	2423
Item 2.	Properties	2524
Item 3.	Legal Proceedings	2725
Item 4.	Mine Safety Disclosures	2725
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2826
Item 6.	Selected Financial Data	2826
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3027
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	5242
Item 8.	Financial Statements and Supplementary Data	5343
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	~~108~~93
Item 9A.	Controls and Procedures	~~108~~93
Item 9B.	Other Information	~~109~~94
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	~~110~~95
Item 11.	Executive Compensation	~~110~~99
Item 12.	Security Ownership of Certain Beneficial Owners, Management and Related Stockholder Matters	~~110~~109
Item 13.	Certain Relationships and Related Transactions, and Director Independence	~~110~~112
Item 14.	Principal Accounting Fees and Services	~~110~~112
PART IV
Item 15.	Exhibits and Financial Statement Schedules	~~111~~114
Item 16.	Form 10-K Summary	~~116~~118
	Signatures	~~117~~119

Table of ~~contents~~Contents

PART I

Item 1. Business

General

Unless otherwise indicated, the terms “Company,” “Parker,” “we,” “us,” “its” and “our” refer to Parker Drilling Company together with its subsidiaries and “Parker Drilling” refers solely to the parent, Parker Drilling Company. Parker Drilling was incorporated in the state of Oklahoma in 1954 after having been established in 1934. In March 1976, the state of incorporation of the Company was changed to Delaware. Our principal executive offices are located at 5 Greenway Plaza, Suite 100, Houston, Texas 77046.

We are an international provider of contract drilling and drilling-related services as well as rental tools and services. We have operated in over 5060 countries since beginning operations in 1934, making us among the most geographically experienced drilling contractors and rental tools providers in the world. We currently have operations in 2019 countries. Parker has participated in numerous world records for deep and extended-reach drilling land rigs and is an industry leader in quality, health, safety, and environmental practices.

Our business is comprised of two business lines: (1) Drilling Services and (2) Rental Tools Services. We report our Drilling Services business as two reportable segments: (1) U.S. (Lower 48) Drilling and (2) International & Alaska Drilling. We report our Rental Tools Services business as two reportable segments: (1) U.S. Rental Tools and (2) International Rental Tools. For information regarding our reportable segments and operations by geographic areas for the years ended December 31, 2018, 2017 and 2016, see Note 16 - Reportable Segments in Item 8. Financial Statements and Supplementary Data and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Recent Developments

~~Reorganization~~Stockholder Approval of Stock Splits Transaction and ~~Chapter~~Delisting 11of ~~Proceedings~~our Common Stock from the New York Stock Exchange

On ~~December~~January 129, ~~2018~~2020, the Company held a special meeting of stockholders (the “~~Petition~~Special ~~Date~~Meeting”). At the Special Meeting, ~~Parker~~the ~~Drilling~~holders of a majority of the Company’s issued and ~~certain~~outstanding shares of ~~its~~common ~~U.S.~~stock ~~subsidiaries~~entitled ~~(collectively~~to vote approved amendments to the Company’s certificate of incorporation, as amended (the “~~Debtors~~Certificate of Incorporation”), ~~filed~~to effect a ~~prearranged~~reverse ~~plan~~stock split of ~~reorganization~~the Company’s common stock (the “~~Plan~~Reverse Stock Split”), ~~and~~followed ~~commenced~~immediately ~~voluntary~~by ~~Chapter~~a 11forward ~~proceedings~~stock split of the Company’s common stock (the “~~Chapter~~Forward 11Stock ~~Cases~~Split,” and together with the Reverse Stock Split, the “Stock Splits”), ~~under~~at ~~title~~a 11ratio (i) not less than 1-for-5 and not greater than 1-for-100, in the case of the ~~United~~Reverse ~~States~~Stock ~~Code~~Split, and (ii) not less than 5-for-1 and not greater than 100-for-1, in the ~~“Bankruptcy~~case ~~Code~~of the Forward Stock Split. If the Stock Splits are effectuated, then as a result of the Stock Splits, a stockholder owning immediately prior to the effective time of the Reverse Stock Split fewer than a minimum number of shares, which, depending on the stock split ratios chosen by the Board, would be between 5 and 100, would be paid $30.00, without interest, for each share of common stock held by such holder immediately prior to the effective time. Cashed out stockholders would no longer be stockholders of the Company. On January 29, 2019, in connection with the anticipated Stock Splits, the Company filed a Form 25 with the Securities and Exchange Commission (the “SEC”) into voluntarily delist its common stock from trading on the ~~United~~New ~~States~~York ~~Bankruptcy~~Stock ~~Court~~Exchange ~~for~~(“NYSE”) and to deregister its common stock under Section 12(b) of the ~~Southern~~Securities ~~District~~Exchange Act of ~~Texas~~1934, ~~Houston~~as ~~Division~~amended (the “~~Bankruptcy~~Exchange ~~Court~~Act”). ~~Since~~The delisting occurred ten calendar days after the ~~commencement~~filing of the ~~Chapter~~Form 1125 ~~Cases~~so that trading was suspended on February 10, 2020, prior to the ~~Debtors~~market ~~have~~opening. Following the delisting, the Company’s Board has continued to ~~operate~~evaluate ~~their~~updated ~~businesses~~ownership asdata ~~“debtors-in-possession”~~to ~~under~~ascertain the ~~jurisdiction~~aggregate costs within the ranges of stock split ratios that the ~~Bankruptcy~~Company’s ~~Court~~stockholders approved at the Special Meeting. Based upon this analysis, the Board will continue to consider the appropriate ratio to effectuate the Stock Splits. As previously disclosed, the Board, at its sole discretion, may elect to abandon the Stock Splits and inthe ~~accordance~~overall deregistration process for any reason, including if it determines that effectuating the Stock Splits would be too costly. Assuming the Board determines to proceed with the ~~applicable~~Stock ~~provisions~~Splits and the overall deregistration process, the Company will file with the State of Delaware certificates of amendment to the ~~Bankruptcy~~Company’s ~~Code~~Certificate of Incorporation to effectuate the Stock Splits. Following the effectiveness of the Stock Splits, the Company will file a Form 15 with the SEC certifying that it has less than 300 stockholders, which will terminate the registration of the Company’s common stock under Section 12(g) of the Exchange Act. As a result, the Company would cease to file annual, quarterly, current, and ~~orders~~other reports and documents with the SEC, and stockholders will cease to receive annual reports and proxy statements. Even if the Company effectuates the Stock Splits and terminates its registration under Section 12(g) of the ~~Bankruptcy~~Exchange ~~Court~~Act, the Company intends to continue to prepare audited annual and unaudited quarterly financial statements and to make such information available to its stockholders on a voluntary basis. However, the Company would not be required to do so by law and there is no assurance that even if the Company did make such information available that it would continue to do so in the future.

~~Also~~Change onin ~~December~~Chief ~~12,~~Executive ~~2018,~~Officer prior to the commencement of the Chapter 11 Cases, the Debtors entered into a restructuring support agreement (as amended, the “RSA”) with certain significant holders (together, collectively, the “Consenting Stakeholders”) of (i) 7.50% Senior Notes due 2020 (the “7.50% Note Holders”) issued pursuant to the 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”), (ii) 6.75% Senior Notes due 2022 (the “6.75% Note Holders”) issued pursuant to the 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, (iii) Parker Drilling’s existing common stock (the “Common Holders”) and (iv) Parker Drilling’s 7.25% Series A Mandatory Convertible Preferred Stock (the “Convertible Preferred Stock,” and such holders, the “Preferred Holders”) to support a restructuring (the “Restructuring”) on the terms set forth in the Plan.

On ~~December~~July 1311, ~~2018~~2019, Gary Rich, the ~~Bankruptcy~~Company’s ~~Court~~former ~~entered~~President anand ~~order~~Chief ~~approving~~Executive ~~joint~~Officer, ~~administration~~entered ofinto ~~the~~a ~~Chapter~~transition 11and ~~Cases~~separation ~~under~~agreement (the ~~caption~~“Separation InAgreement”) rewith the Company and Parker Drilling Management Services Ltd. In accordance with the Separation Agreement, on December 31, 2019, Mr. Rich retired from his positions of President and Chief Executive Officer of the Company and resigned from the Company’s Board of Directors (the “Board”). The Separation Agreement was amended on February 21, et2020. alPursuant to the amended Separation Agreement, two-thirds of Mr. Rich’s outstanding restricted stock options and outstanding restricted stock units were forfeited, while on February 21, 2020, the remaining one-third of the

Pursuant to the terms of the RSA and the Plan, the Consenting Stakeholders and other holders of claims against or interests in the Debtors receive treatment under the Plan summarized as follows:

• holders of claims arising from non-funded debt general unsecured obligations receive payment in full in cash as set forth in the Plan;

• the 7.50% Note Holders receive their pro rata share of: (a) approximately 34.3 percent of the common stock (the “New Common Stock”) of Parker Drilling, as reorganized pursuant to and under the Plan (“Reorganized Parker”), subject to dilution; (b) approximately $92.6 million of a new second lien term loan of Reorganized Parker (the “New Second Lien Term Loan”); (c) the right to purchase approximately 24.3 percent of the New Common Stock to be issued pursuant to the terms of the Rights Offering (as defined in the RSA); and (d) cash sufficient to satisfy certain expenses owed to the Trustee (the “Trustee Expenses”), to the extent not otherwise paid by the Debtors;

Table of ~~contents~~Contents

•restricted ~~the~~stock ~~6.75%~~options ~~Note~~fully ~~Holders receive their pro rata share of: (a) approximately 62.9 percent of the New Common Stock~~vested, ~~subject~~one‑half ~~to dilution; (b) approximately $117.4 million~~ of the ~~New~~remaining ~~Second~~restricted ~~Lien~~stock ~~Term~~units ~~Loan;~~vested ~~(c)~~and ~~the~~one‑half ~~right to purchase approximately 38.9 percent~~ of the ~~New~~remaining ~~Common~~restricted ~~Stock~~stock tounits bewere ~~issued pursuant to the terms of the Rights Offering; and (d) cash sufficient to satisfy the Trustee Expenses, to the extent not otherwise~~ paid byas ~~the Debtors;~~cash.

•As the ~~Preferred~~Company ~~Holders~~searches ~~receive~~for ~~their~~a ~~pro~~Chief ~~rata~~Executive ~~share~~Officer ~~of:~~to ~~(a)~~replace 1Mr.1 ~~percent~~Rich, the Board has established the Office of the ~~New~~Chief ~~Common~~Executive ~~Stock,~~Officer ~~subject~~Committee to ~~dilution;~~perform ~~(b)~~ the ~~right~~executive tofunctions ~~purchase~~and ~~approximately~~responsibilities 14formerly performed by Mr.7 ~~percent~~Rich. ofMr. Eugene Davis, the ~~New~~Company’s ~~Common~~Chairman ~~Stock~~of tothe beBoard, ~~issued~~was ~~pursuant~~appointed to serve as the ~~terms~~Chair of the ~~Rights~~Office ~~Offering;~~of ~~and~~the ~~(c)~~Chief ~~40.0~~Executive ~~percent~~Officer ofCommittee ~~the~~and, ~~warrants~~in tosuch ~~acquire~~capacity, anhas ~~aggregate~~been ofdesignated ~~13.5~~by ~~percent of~~ the ~~New~~Board ~~Common~~as ~~Stock (~~the ~~“New~~Company’s ~~Warrants”);~~principal ~~and~~executive officer.

•Emergence ~~the~~from ~~Common~~Voluntary ~~Holders~~Reorganization ~~receive~~under ~~their~~Chapter Pro Rata share of: (a) 1.65 percent of the New Common Stock, subject to dilution; (b) the right to purchase approximately 22.1 percent of the New Common Stock to be issued pursuant to the terms of the Rights Offering; and (c) 60.0 percent of the New Warrants.11

~~The~~Overview RSA contains certain covenants on the part of each of the Debtors and the Consenting Stakeholders, including certain limitations on the parties’ ability to pursue alternative transactions, commitments by the Consenting Stakeholders to vote in favor of the Plan and commitments of the Debtors and the Consenting Stakeholders to negotiate in good faith to finalize the documents and agreements governing the Plan. The RSA also provides for certain conditions to the obligations of the parties and for termination upon the occurrence of certain events, including, without limitation, the failure to achieve certain milestones and certain breaches by the parties under the RSA.

~~Since~~On ~~the~~December ~~Petition~~12, ~~Date~~2018, prior to the ~~Debtors~~commencement ~~have~~of ~~requested~~the ~~and~~voluntary ~~received~~petitions ~~certain~~under ~~approvals~~chapter ~~and~~11 ~~authorizations~~of ~~from~~title 11 of the United States Code (the “Bankruptcy ~~Court~~Code”) (the “Chapter 11 Cases”), Parker Drilling and certain of its U.S. ~~This~~subsidiaries ~~relief~~(collectively, ~~together~~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 ~~proposed~~“7.50% ~~treatment~~Note ~~under~~Holders”) issued pursuant to the ~~Plan~~indenture (the “7.50% Notes Indenture”) dated July 30, ~~provides~~2013 ~~that~~(the ~~vendors~~“7.50% Notes”), by and ~~other~~among ~~unsecured~~Parker ~~creditors~~Drilling, ~~will~~the besubsidiary ~~paid~~guarantors inparty ~~full~~thereto and inBank of New York Mellon Trust Company, N.A., as trustee (the ~~ordinary~~“Trustee”), ~~course~~(2) of6.75% ~~business~~Senior Notes, due 2022 (the “6.75% ~~All~~Note ~~existing~~Holders”) ~~customer~~issued pursuant to the indenture (the “6.75% Notes Indenture”) dated January 22, 2014 (the “6.75% Notes” and ~~vendor~~together ~~contracts~~with ~~are~~the ~~expected~~7.50% toNotes, ~~remain~~the in“Senior ~~place~~Notes”), by and beamong ~~serviced~~Parker inDrilling, the ~~ordinary~~subsidiary ~~course~~guarantors ofparty ~~business~~thereto and the Trustee, (3) the Predecessor’s common stock (the “Predecessor Common Stock”) and (4) the Predecessor’s 7.25% Series A Mandatory Convertible Preferred Stock (the “Predecessor Preferred Stock” and such holders to support a restructuring (the “Restructuring”).

On ~~March~~December 512, ~~2019,~~2018 (the ~~Bankruptcy~~“Petition ~~Court~~Date”), ~~held~~the Debtors filed a ~~hearing~~prearranged toplan ~~determine~~of ~~whether~~reorganization (the “Plan”) ~~should~~and becommenced ~~confirmed. On March 7, 2019,~~ the ~~Bankruptcy~~Chapter ~~Court~~11 ~~entered~~Cases anin ~~order confirming~~ the ~~Plan.~~United ~~Although~~States ~~the~~ Bankruptcy Court ~~has~~for ~~confirmed~~ the ~~Plan,~~Southern ~~the~~District ~~Debtors have not yet consummated all~~ of ~~the transactions that are contemplated by the Plan. Rather~~Texas, ~~the~~Houston ~~Debtors~~Division ~~intend to consummate these transactions in the near future, on or before the Plan’s effective date~~ (the “~~Effective~~Bankruptcy ~~Date~~Court”). AsThe ~~set forth in the~~ Plan, ~~there~~was ~~are~~confirmed ~~certain~~by ~~conditions precedent to~~ the ~~occurrence~~Bankruptcy ofCourt ~~the~~on ~~Effective~~March ~~Date~~7, ~~which~~2019, ~~must be satisfied or waived in accordance with the Plan in order for the Plan to become effective~~ and the Debtors toemerged ~~emerge~~ from the ~~Chapter~~bankruptcy 11proceedings ~~Cases.~~on ~~The Debtors anticipate that each of these conditions will be either satisfied or waived by the end of~~ March ~~2019~~26, ~~which~~2019 is (the ~~target~~“Plan ~~for the Debtors’ emergence from the Chapter 11 Cases. On the~~ Effective Date~~, the Debtors’ operations will, generally, no longer be governed by the Bankruptcy Court’s oversight~~”).

~~The~~Fresh ~~Company’s~~Start filing of the Chapter 11 Cases constituted an event of default of certain of its debt instruments described above, which accelerated the Company’s obligations under its Senior Notes. Under the Bankruptcy Code, holders of the Senior Notes are stayed from taking any action against the Company as a result of this event of default. All of the Company’s outstanding obligations under its Second Amended and Restated Credit Agreement dated as of January 26, 2015, among Parker Drilling, Bank of America, N.A., Wells Fargo Bank, National Association, Barclays Bank PLC and the other lenders and L/C issuers from time to time party thereto (as amended, the “2015 Secured Credit Agreement”) were paid prior to the filing of the Chapter 11 Cases and the 2015 Secured Credit Agreement was terminated substantially concurrent with the filing. Accounting

~~Debtor-~~Upon emergence from bankruptcy, we adopted fresh start accounting (“Fresh Start Accounting”) in~~-Possession~~ ~~Financing~~accordance with FASB ASC Topic No. 852, Reorganizations (“Topic 852”), which resulted in the Company becoming a new entity for financial reporting purposes. References to “Successor” relate to the financial position and results of operations of the reorganized Company as of and subsequent to March 31, 2019. References to “Predecessor” relate to the financial position of the Company prior to, and results of operations through and including, March 31, 2019. As a result of the adoption of Fresh Start Accounting and the effects of the implementation of the Plan, the Company’s consolidated financial statements of the Successor (as of and subsequent to March 31, 2019), are not comparable to its consolidated financial statements of the Predecessor.

InFor ~~connection~~more ~~with~~information ~~the~~relating ~~Chapter~~to 11Fresh ~~Cases,~~Start ~~Bank of America~~Accounting, ~~N.A.~~see ~~(“Bank~~Note of3 ~~America”) and Deutsche Bank AG New York Branch (“DB”) agreed to provide the Debtors with a superpriority and priming asset~~-~~based~~ ~~debtor-in-possession~~Fresh ~~credit~~Start ~~facility~~Accounting ~~(the “DIP Facility”) on the terms set forth~~ in ~~the~~Item ~~Debtor-In-Possession Financing Term Sheet attached to the RSA (the “DIP Term Sheet”)~~8. OnFinancial ~~December~~Statements ~~14, 2018, the Debtors, Bank of America~~ and DBSupplementary ~~entered into a Debtor-in-Possession Credit Agreement, which provides for, among other things, the DIP Facility~~Data. The DIP Facility is comprised of an asset-based revolving loan facility in an aggregate principal amount of $50.0 million, subject to availability under the borrowing base thereunder, $20.0 million of which is available for the issuance of standby letters of credit.

InBusiness connection with the Chapter 11 Cases, (i) Bank of America and DB agreed to provide, on a committed basis, the Company with an exit financing asset-based revolving loan facility on the terms set forth in the Senior Secured Asset-Based Revolving Facility Summary of Terms and Conditions attached to the RSA (the “First Lien Exit Term Sheet”) and (ii) certain Consenting Stakeholders and/or their affiliates have agreed to provide, on a committed basis, the Company with a new second lien term loan facility on the terms set forth in the New Second Lien Loan Term Sheet attached to the RSA (the “Second Lien Exit Term Sheet”). The First Lien Exit Term Sheet provides for, among other things, an asset-based revolving credit facility in an aggregate principal amount of $50.0 million, which amount may be increased to an aggregate principal amount of $100.0 million Overview

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.
For information regarding our reportable segments and operations by geographic areas, see Note 17 - Reportable Segments in Item 8. Financial Statements and Supplementary Data and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

Table of ~~contents~~Contents

inOur ~~the~~U.S. ~~event~~rental ~~additional~~tools ~~commitments~~segment ~~are~~maintains ~~received~~an ~~from~~inventory ~~other~~of ~~lenders~~rental ~~(the~~tools ~~“First~~for ~~Lien~~deepwater ~~Exit~~drilling, ~~Facility”).~~completion, Aworkover, ~~portion~~and ofproduction ~~the~~applications ~~First~~at ~~Lien~~facilities ~~Exit~~in ~~Facility~~Louisiana, inTexas, ~~the~~Wyoming, ~~amount~~North ofDakota, ~~$30~~and West Virginia.0 ~~million~~We ~~(the~~also ~~“L/C~~provide ~~Facility”)~~well ~~will~~construction beand ~~available~~well ~~for~~intervention ~~the~~services. ~~issuance~~Our oflargest ~~standby~~single ~~and~~market ~~commercial~~for ~~letters~~rental oftools ~~credit~~is U.S. ~~The~~land ~~Second~~drilling, ~~Lien~~a ~~Exit~~cyclical ~~Term~~market ~~Sheet~~driven ~~provides~~primarily ~~for,~~by ~~among~~oil ~~other~~and ~~things,~~natural agas ~~second~~prices ~~lien~~and ~~term~~our ~~loan~~customers’ ~~facility~~access into anproject ~~aggregate~~financing. ~~principal~~A ~~amount~~portion of ~~$210~~our U.0S. ~~million~~rental ~~(the~~tools ~~“Second~~business ~~Lien~~supplies ~~Exit~~tubular ~~Facility~~goods and other equipment to offshore Gulf of Mexico (“GOM”) customers.

~~The~~ International ~~foregoing~~Rental descriptions of the First Lien Exit Term Sheet and the Second Lien Exit Term Sheet do not purport to be complete and are qualified in their entirety by reference to the First Lien Exit Term Sheet or the Second Lien Exit Term Sheet, as applicable. The effectiveness of the First Lien Exit Facility and the Second Lien Exit Facility is subject to customary closing conditions. The foregoing descriptions of the First Lien Exit Facility and the Second Lien Exit Facility do not purport to be complete and are qualified in their entirety by reference to the final, executed documents memorializing the First Lien Exit Facility and the Second Lien Exit Facility, as applicable, in each case as approved by the Bankruptcy Court.Tools

~~Going~~Our ~~Concern~~International rental tools segment maintains an inventory of rental tools and ~~Financial~~provides ~~Reporting~~well construction, well intervention, and surface and tubular services to our customers in ~~Reorganization~~the Middle East, Latin America, Europe, and Asia-Pacific regions.

Our commencement of the Chapter 11 Cases and the weak industry conditions have negatively impacted our results of operations and cash flows and may continue to do so in the future. These factors raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles which contemplate the continuation of the Company as a going concern. See Note 2 - Chapter 11 Cases in the notes to the consolidated financial statements included under Item 8. Financial Statements and Supplementary Data and Item 1A. Risk Factors for additional information regarding our debt instruments and bankruptcy proceedings under Chapter 11.

Delisting of our Common Stock from the New York Stock Exchange (the “NYSE”)

Our common stock was previously listed on the NYSE under the symbol “PKD.” As a result of our failure to satisfy the continued listing requirements of the NYSE, on December 12, 2018, our common stock was delisted from the NYSE. Since December 13, 2018, our common stock has been quoted on the OTC Pink marketplace maintained by the OTC Markets Group, Inc. (“OTC Pink”) under the symbol “PKDSQ”.

Drilling Services Business

In our ~~Drilling~~drilling ~~Services~~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 ~~operators~~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 ana ~~oil or natural gas~~ 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~~lower 48) Drilling

Our U.S. (~~Lower~~lower 48) ~~Drilling~~drilling segment provides drilling services with our ~~Gulf of Mexico (“~~GOM”) barge drilling rig fleet and markets our U.S. (~~Lower~~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 onin both state and federal ~~water projects requiring more robust capabilities~~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~~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;

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•	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 ~~California~~Alaska, Kuwait, Canada, Indonesia, and on Sakhalin Island, Russia.

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 include tubular running services and downhole tool rentals, well intervention services, which include 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.

Our Business Strategy

We intend to successfully compete in select energy ~~services~~service businesses that benefit our customers’ exploration, appraisal, and development programs, and in which operational execution is the key measure of success. We plan to do this by:


•	Consistently delivering innovative, reliable, and efficient results that help our customers reduce their operational risks and manage their operating costs; and


•	Over the longer-term, investing to improve and grow our existing business lines and to expand the scope of products and services we offer, both organically and through acquisitions.

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Customers and Scope of Operations

Our customer base consists of major, independent, ~~and~~ national oil and natural gas E&P companies, and ~~integrated~~other oil field service providers. Each of our segments depends on a limited number of key customers and the loss of any one or more key customers could have a material adverse effect on a segment. In ~~2018~~2019, our largest customer, Exxon Neftegas Limited (“ENL”), accounted for approximately 2529.73 percent and 31.2 percent of our total consolidated revenues for the nine months ended December 31, 2019, and the three months ended March 31, 2019, respectively. For information regarding our reportable segments and operations by geographic areas ~~for the years ended December 31~~, ~~2018, 2017 and 2016,~~ see Note 1617 - Reportable Segments in Item 8. Financial Statements and Supplementary Data and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Competition

We operate in competitive businesses characterized by high capital requirements, rigorous technological challenges, evolving regulatory requirements, and challenges in securing and retaining qualified field personnel.

In drilling markets, most contracts are awarded on a competitive bidding basis and operators often consider reliability, efficiency, and safety in addition to price. We have been successful in differentiating ourselves from competitors through our drilling performance and safety record, and through providing services that help our customers manage their operating costs and mitigate their operational risks.

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drilling performance and safety record, and through providing services that help our customers manage their operating costs and mitigate their operational risks.

In international drilling markets, we compete with a number of international drilling contractors as well as local contractors. Although local drilling contractors often have lower labor and mobilization costs, we are generally able to distinguish ourselves from these companies based on our technical expertise, safety performance, quality of service, and experience. We believe our expertise in operating in challenging environments has been a significant factor in securing contracts.

In the GOM barge drilling market, we compete with a small number of contractors. We have the largest number and greatest diversity of rigs available in this market, allowing us to provide equipment and services that are well-matched to customers’ requirements. We believe the market for drilling contracts will continue to be competitive with continued focus on reliability, efficiency, and safety, in addition to price.

In rental tools markets, we compete with both large and small suppliers. We compete against other rental ~~tools~~tool companies based on breadth of inventory, availability of product, quality of product and service, as well as, price. In the U.S. market, our network of locations provides broad and efficient product availability for our customers. In international markets, some of our rental tools business is obtained in conjunction with our drilling and O&M projects.

Contracts

Most drilling contracts are awarded based on competitive bidding. The rates specified in drilling contracts vary depending upon the type of rig employed, equipment and services supplied, crew complement, geographic location, term of the contract, competitive conditions, and other variables. Our contracts generally provide for an operating dayrate during drilling operations, with lower rates for periods of equipment downtime, customer stoppage, well-to-well rig moves, adverse weather, or other conditions, and no payment when certain conditions continue beyond contractually established parameters. Contracts typically provide for a different dayrate or specified fixed payments during mobilization or demobilization. The terms of most of our contracts are based on either a specified period of time or a specified number of wells. The contract term in some instances may be extended by the customer exercising options for an additional time period or for the drilling of additional wells, or by exercising a right of first refusal. Most of our contracts allow termination by the customer prior to the end of the term without penalty under certain circumstances, such as the loss of or major damage to the drilling unit or other events that cause the suspension of drilling operations beyond a specified period of time. See “Certain of our contracts are subject to cancellation by our customers without penalty and with little or no notice” in Item 1A. Risk Factors. Certain contracts require the customer to pay an early termination fee if the customer terminates a contract before the end of the term without cause. Our project services contracts include engineering, procurement, and project management consulting, for which we are compensated through labor rates and cost-plus arrangements for non-labor items.

Rental ~~tools~~tool contracts are typically on a dayrate basis with rates based on type of equipment and competitive conditions. Depending on market and competitive conditions, rental rates may be applied from the time the equipment leaves our facility or only when the equipment is actually in use by the customer. Rental contracts generally require the customer to pay for lost-in-hole or damaged equipment. Some of the services provided in the rental tools segment are billed per well section with pricing determined by the length and diameter of the well section. In addition, some tools, such as whipstocks, are sold to the customer.

Seasonality

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Our rigs in the inland waters of the GOM are subject to severe weather during certain periods of the year, particularly during hurricane season from June through November, which could halt operations for prolonged periods or limit contract opportunities during that period. In addition, mobilization, demobilization, or well-to-well movements of rigs in arctic regions can be affected by seasonal changes in weather or weather so severe that conditions are deemed too unsafe to operate.

Backlog

Backlog is our estimate of the dollar amount of drilling contract revenues we expect to realize in the future as a result of executing awarded contracts. The Company’s backlog of firm orders was approximately $~~243~~701.43 million as of December 31, ~~2018~~2019 and $~~240~~243.94 million as of December 31, ~~2017~~2018 and is primarily attributable to the International & Alaska segment of our ~~Drilling~~drilling ~~Services~~services business. We estimate that, as of December 31, ~~2018~~2019, 5428.03 percent of our backlog will be recognized as revenues within one year.

The amount of actual revenues earned and the actual periods during which revenues are earned could be different from amounts disclosed in our backlog calculations due to a lack of predictability of various factors, including the scope of equipment and service provided, unscheduled repairs, maintenance requirements, weather delays, contract terminations or renegotiations, new contracts, and other factors. See “Our backlog of contracted revenues may not be fully realized and may reduce significantly in the future, which may have a material adverse effect on our financial position, results of operations or cash flows” in Item 1A. Risk Factors.

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in the future, which may have a material adverse effect on our financial position, results of operations or cash flows” in Item 1A. Risk Factors.

Insurance and Indemnification

Our contracts provide for varying levels of indemnification between ourselves and our customers. We maintain insurance with respect to personal injuries, damage to or loss of equipment, and various other business risks, including well control and subsurface risk. Our insurance policies typically have 12-month policy periods.

Our insurance program provides coverage, to the extent not otherwise paid by the customer under the indemnification provisions of the drilling or rental tool contract, for liability due to well control events and liability arising from third-party claims, including wrongful death and other personal injury claims by our personnel as well as claims brought on behalf of individuals who are not our employees. Generally, our insurance program provides liability coverage up to $350.0 million, with retentions of $1.0 million or less.

Well control events generally include an unintended flow from the well that cannot be contained by using equipment on site (e.g., a blowout preventer), by increasing the weight of drilling fluid or by diverting the fluids safely into production. Our insurance program provides coverage for third-party liability claims relating to sudden and accidental pollution from a well control event up to $350.0 million per occurrence. A separate limit of $50.0 million exists to cover the costs of re-drilling of the well and well control costs under a Contingent Operators Extra Expense policy. For our rig-based operations, remediation plans are in place to prevent the spread of pollutants and our insurance program provides coverage for removal, response, and remedial actions. We retain the risk for liability not indemnified by the customer below the retention and in excess of our insurance coverage.

Based upon a risk assessment and due to the high cost, high self-insured retention, and limited availability of coverage for windstorms in the GOM, we have elected not to purchase windstorm insurance for our barge rigs in the GOM. Although we have retained the risk for physical loss or damage for these rigs arising from a named windstorm, we have procured insurance coverage for removal of a wreck caused by a windstorm.

Our contracts provide for varying levels of indemnification from our customers and may require us to indemnify our customers in certain circumstances. Liability with respect to personnel and property is customarily assigned on a “knock-for-knock” basis, which means we and our customers customarily assume liability for our respective personnel and property regardless of fault. In addition, our customers typically indemnify us for damage to our equipment down-hole, and in some cases, our subsea equipment, generally based on replacement cost minus some level of depreciation. However, in certain contracts we may assume liability for damage to our customer’s property and other third-party property on the rig and in other contracts we are not indemnified by our customers for damage to their property and, accordingly, could be liable for any such damage under applicable law.

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Our customers typically assume responsibility for and indemnify us from any loss or liability resulting from pollution, including clean-up and removal and third-party damages, arising from operations under the contract and originating below the surface of the land or water, including losses or liability resulting from blowouts or cratering of the well. In some contracts, however, we may have liability for damages resulting from such pollution or contamination caused by our gross negligence or, in some cases, ordinary negligence.

We generally indemnify the customer for legal and financial consequences of spills of industrial waste, lubricants, solvents and other contaminants (other than drilling fluid) on the surface of the land or water originating from our rigs or equipment. We typically require our customers to retain liability for spills of drilling fluid which circulates down-hole to the drill bit, lubricates the bit and washes debris back to the surface. Drilling fluid often contains a mixture of synthetics, the exact composition of which is prescribed by the customer based on the particular geology of the well being drilled.

The above description of our insurance program and the indemnification provisions typically found in our contracts is only a summary as of the date hereof and is general in nature. Our insurance program and the terms of our drilling and rental tool contracts may change in the future. In addition, the indemnification provisions of our contracts may be subject to differing interpretations, and enforcement of those provisions may be limited by public policy and other considerations.

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If any of the aforementioned operating hazards results in substantial liability and our insurance and contractual indemnification provisions are unavailable or insufficient, our financial condition, operating results, or cash flows may be materially adversely affected.

Employees

The following table sets forth the composition of our employee base:

	December 31,
	2018	2017
	2019	2018
U.S. (Lower 48) Drilling	89	111
U.S. rental tools	270	232
International & Alaska Drilling	1,208	1,122
International rental tools	796	717
U.S. Rental Tools	232	214
U.S. (lower 48) drilling	193	89
International Rental Tools	717	648
International & Alaska drilling	1,230	1,208
Corporate	~~179~~181	~~171~~179
Total employees	2,~~425~~670	2,~~266~~425

Environmental Considerations

Our operations are subject to numerous U.S. federal, state, and local laws and regulations, as well as the laws and regulations of other jurisdictions in which we operate, pertaining to the environment or otherwise relating to environmental protection. Numerous governmental agencies, such as the U.S. Environmental Protection Agency (“EPA”) and state equivalents, issue regulations to implement and enforce laws pertaining to the environment, which often require costly compliance measures that carry substantial administrative, civil and criminal penalties or may result in injunctive relief for failure to comply. These laws and regulations may require the acquisition of a permit before drilling commences; restrict the types, quantities and concentrations of various substances that can be released into the environment in connection with drilling and production activities; limit or prohibit construction or drilling activities on certain lands lying within wilderness, wetlands, ecologically sensitive, and other protected areas; require remedial action to clean up pollution from former operations; and impose substantial liabilities for pollution resulting from our operations. Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent and costly compliance could adversely affect our operations and financial position, as well as those of similarly situated entities operating in the same markets. While our management believes that we comply with current applicable environmental laws and regulations, there is no assurance that compliance can be maintained in the future.

As an owner or operator of both onshore and offshore facilities, including mobile offshore drilling rigs in or near waters of the United States, we may be liable for the costs of clean up and damages arising out of a pollution incident to the extent set forth in federal statutes such as the Federal Water Pollution Control Act (commonly known as the Clean Water Act (“CWA”)), as amended by the Oil Pollution Act of 1990 (“OPA”); the Outer Continental Shelf Lands Act (“OCSLA”); the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”); the Resource Conservation and Recovery Act (“RCRA”); the Clean Air Act (“CAA”); the Endangered Species Act (“ESA”); the Occupational Safety and Health Act; the Emergency Planning and Community Right to Know Act (“EPCRA”); and the Hazardous Materials Transportation Act (“HMTA”) as well as comparable state laws. In addition, we may also be subject to civil claims arising out of any such incident.

The CWA and analogous state laws impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances, into waters of the United States. The discharge of pollutants into regulated waters, including jurisdictional wetlands, is prohibited, except in accordance with the terms of a permit issued by the EPA or an analogous state agency. In September 2015, a new EPA and U.S. Army Corps of Engineers (the “Corps”) rule defining the scope of federal jurisdiction over wetlands and other waters became effective (the “Clean Water Rule”). The Clean Water Rule was previously stayed nationwide to determine whether federal district or appellate courts had jurisdiction to hear cases challenging the rule. The EPA and the Corps issued a proposed rulemaking in June 2017 to repeal the Clean Water Rule, and announced their intent to issue a new rule defining the Clean Water Act’s jurisdiction. In January 2018, the U.S. Supreme Court issued a decision finding that jurisdiction resides with the federal district courts to hear challenges to the Clean Water Rule; following which, the previously-filed district court cases have been allowed to proceed. Following the Supreme Court’s decision, the EPA and the Corps issued a final rule in January 2018 staying implementation of the 2015 rule for two years while the agencies reconsider the rule. Multiple states and environmental groups have challenged the stay, and on August 16, 2018, a federal court in South Carolina issued an injunction against EPA’s stay of the rule. On December 11, 2018, EPA proposed a new rule defining the scope of federal jurisdiction over wetlands and other waters, a public hearing on which was originally scheduled for January 23, 2019. This hearing was indefinitely postponed during the shutdown of the federal government and has not yet been rescheduled. To the extent the rule expands the range of properties subject to the CWA’s jurisdiction, certain energy companies could face increased costs and 6

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~~Table~~The CWA and analogous state laws impose restrictions and strict controls with respect to the discharge of ~~contents~~pollutants, including spills and leaks of oil and other substances, into waters of the United States. The discharge of pollutants into regulated waters, including jurisdictional wetlands, is prohibited, except in accordance with the terms of a permit issued by the EPA or an analogous state agency. In addition, the CWA and analogous state laws require individual permits or coverage under general permits for discharges of storm water runoff from certain types of facilities. Federal and state regulatory agencies can impose administrative, civil and criminal penalties as well as other enforcement mechanisms for non-compliance with discharge permits or other requirements of the CWA and analogous state laws and regulations. The CWA and analogous state laws provide for administrative, civil and criminal penalties for unauthorized discharges and, impose rigorous requirements for spill prevention and response planning, as well as substantial potential liability for the costs of removal, remediation, and damages in connection with any unauthorized discharges.

delays with respect to obtaining permits for dredge and fill activities in wetland areas, which in turn could reduce demand for our services. In addition, the CWA and analogous state laws require individual permits or coverage under general permits for discharges of storm water runoff from certain types of facilities. Federal and state regulatory agencies can impose administrative, civil and criminal penalties as well as other enforcement mechanisms for non-compliance with discharge permits or other requirements of the CWA and analogous state laws and regulations. The CWA and analogous state laws provide for administrative, civil and criminal penalties for unauthorized discharges and, impose rigorous requirements for spill prevention and response planning, as well as substantial potential liability for the costs of removal, remediation, and damages in connection with any unauthorized discharges.

The OPA and related regulations impose a variety of regulations on “responsible parties” related to the prevention of spills of oil or other hazardous substances and liability for damages resulting from such spills. “Responsible parties” include the owner or operator of a vessel, pipeline or onshore facility, or the lessee or permittee of the area in which an offshore facility is located. The OPA assigns strict and joint and several liability for oil removal costs and a variety of public and private damages to each responsible party. The OPA also requires some facilities to demonstrate proof of financial responsibility and to prepare an oil spill response plan. Failure to comply with ongoing requirements or inadequate cooperation in a spill may subject a responsible party to civil or criminal enforcement actions.

The OCSLA authorizes regulations relating to safety and environmental protection applicable to lessees and permittees operating on the Outer Continental Shelf. Specific design and operational standards may apply to Outer Continental Shelf vessels, rigs, platforms, vehicles and structures. The Bureau of Safety and Environmental Enforcement (“BSEE”) regulates the design and operation of well control and other equipment at offshore production sites, implementation of safety and environmental management systems, and mandatory third-party compliance audits, among other requirements. Violations of environmentally related lease conditions or regulations issued pursuant to the OCSLA can result in substantial civil and criminal penalties as well as potential court injunctions curtailing operations and the cancellation of leases. Such enforcement liabilities, delay, or restriction of activities can result from either governmental or citizen prosecution.

High-profile and catastrophic events, such as the 2010 Macondo (Deepwater Horizon) well incident, have heightened governmental and environmental focus on the oil and gas industry. From time to time, legislative proposals have been introduced that would materially limit or prohibit offshore drilling in certain areas. Our operations, and those of our customers, are impacted by restrictions on drilling in certain areas of the U.S. Gulf of Mexico and elsewhere, including the adoption of additional safety requirements and policies regarding the approval of drilling permits and restrictions on development and production activities in the U.S. Gulf of Mexico.

On July 28, 2016, BSEE adopted a ~~new~~ well-control rule that will be implemented in phases over the next several years (the "2016 Well Control Rule"). This rule includes more stringent design requirements for well-control equipment used in offshore drilling operations. BSEE was directed to review the 2016 Well Control Rule pursuant to Executive Order (“EO”) 13783 (“Promoting Energy Independence and Economic Growth”) and Section 7 of EO 13795 (“Implementing an America-First Offshore Energy Strategy”), to determine if the rule should be revised to encourage energy exploration and production on the Outer Continental Shelf, while still providing for safe and environmentally responsible exploration and production activities. On May 112, ~~2018~~2019, BSEE ~~announced~~issued a ~~proposed~~revised rule ~~intending~~intended to reduce the regulatory burden of the 2016 Well Control Rule~~, the comment period for which ended on August 6, 2018~~. We are continuing to evaluate the cost and effect that ~~these~~the ~~new~~revised ~~rules~~rule will have on our operations.

CERCLA (also known as “Superfund”) and comparable state laws impose liability without regard to fault or the legality of the activity, on certain classes of persons who are considered to be responsible for the release of hazardous substances into the environment. While CERCLA exempts crude oil from the definition of hazardous substances for purposes of the statute, our operations may involve the use or handling of other materials that may be classified as hazardous substances. CERCLA assigns strict liability to a broad class of potentially responsible parties for all response and remediation costs, as well as natural resource damages. In addition, persons responsible for release of hazardous substances under CERCLA may be subject to joint and several liability for the cost of cleaning up the hazardous substances released into the environment and for damages to natural resources.

RCRA and comparable state laws regulate the management and disposal of solid and hazardous wastes. Current RCRA regulations specifically exclude from the definition of hazardous waste “drilling fluids, produced waters, and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal energy.” However, these wastes and other wastes may be otherwise regulated by EPA or state agencies. Moreover, ordinary industrial wastes, such as paint wastes, spent solvents, laboratory wastes, and used oils, may be regulated as hazardous waste. ~~For~~Although ~~example, in December 2016,~~ the ~~EPA~~costs ~~and~~of ~~environmental~~managing ~~groups~~solid ~~entered into a consent decree to address EPA’s alleged failure to timely assess its RCRA Subtitle D criteria regulations exempting certain exploration-~~ and ~~production-related oil and gas wastes from regulation as~~ hazardous wastes ~~under~~may ~~RCRA.~~be ~~The~~significant ~~consent~~and ~~decree~~new ~~requires~~regulations ~~the~~may ~~EPA~~be ~~to propose a rulemaking no later than March 15~~imposed, ~~2019~~we ~~for~~do ~~revision~~not ofexpect ~~certain Subtitle D criteria regulations pertaining~~ to ~~oil~~experience ~~and~~more ~~gas~~burdensome ~~wastes~~costs orthan tocompetitor ~~sign~~companies ainvolved ~~determination~~in ~~that~~similar ~~revision~~drilling ~~of the regulations is not necessary~~operations.

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If the EPA proposes rulemaking for revised oil and gas regulations, the Consent Decree requires that the EPA take final action following notice and comment rulemaking no later than July 15, 2021. Although the costs of managing solid and hazardous wastes may be significant and new regulations may be imposed, we do not expect to experience more burdensome costs than competitor companies involved in similar drilling operations.

The CAA and similar state laws and regulations restrict the emission of air pollutants and may also impose various monitoring and reporting requirements. In addition, those laws may require us to obtain permits for the construction, modification, or operation of certain projects or facilities and the utilization of specific equipment or technologies to control emissions. For example, the EPA has adopted regulations known as “RICE MACT” that require the use of “maximum achievable control technology” to reduce formaldehyde and other emissions from certain stationary reciprocating internal combustion engines, which can include portable engines used to power drilling rigs. In addition, in May 2016, the EPA finalized rules regarding criteria for aggregating multiple small surface sites into a single source for air-quality permitting purposes applicable to the oil and gas industry. This rule could cause small facilities, on an aggregate basis, to be deemed a major source, thereby triggering more stringent air permitting requirements. The EPA has also adopted new rules under the CAA that require the reduction of volatile organic compound emissions from certain fractured and refractured natural gas wells for which well completion operations are conducted and further require that most wells use reduced emission completions, also known as “green completions.” These regulations also establish specific new requirements regarding emissions from production-related wet seal and reciprocating compressors, and from pneumatic controllers and storage vessels. Further, the EPA lowered the National Ambient Air Quality Standard (“NAAQS”) for ozone from 75 to 70 parts per billion in October 2015. Pursuant to an order issued by the U.S. District Court for the Northern District of California in lawsuits brought by a coalition of states and environmental groups against the EPA for failing to complete initial area designations under the standard by the October 2017 statutory deadline, EPA completed all remaining initial area designations on July 17, 2018. State implementation of the revised NAAQS could result in stricter permitting requirements or delay, or limit our ability or our customers’ ability to obtain permits, and result in increased expenditures for pollution control equipment and decreased demand for our services.

Some scientific studies have suggested that emissions of certain gases including carbon dioxide and methane, commonly referred to as “greenhouse gases” (“GHGs”), may be contributing to the warming of the atmosphere resulting in climate change. There are a variety of legislative and regulatory developments, proposals, requirements, and initiatives that have been introduced in the U.S. and international regions in which we operate that are intended to address concerns that emissions of GHGs are contributing to climate change and these may increase costs of compliance for our drilling services or our customer’s operations. Among these developments, the Kyoto Protocol to the 1992 United Nations Framework Convention on Climate Change (“UNFCC”) established a set of emission targets for GHGs that became binding on all those countries that had ratified it. The Kyoto Protocol was followed by the Paris Agreement of the 2015 UNFCC. The Paris Agreement entered into force on November 4, 2016 and, as of late 2017, had been ratified by 174 of the 197 parties to the UNFCC. However, on August 4, 2017, the United States formally communicated to the United Nations its intent to withdraw from participation in the Paris Agreement, which entails a four-year process and will be complete by November 2020. In response to the announced withdrawal plan, a number of state and local governments in the United States have expressed intentions to take GHG-related actions.

Because our business depends on the level of activity in the oil and natural gas industry, existing or future laws, regulations, treaties or international agreements related to GHGs and climate change, including incentives to conserve energy or use alternative energy sources, could have a negative impact on our business if such laws, regulations, treaties or international agreements reduce the worldwide demand for oil and natural gas or otherwise result in reduced economic activity generally. In addition, such laws, regulations, treaties or international agreements could result in increased compliance costs or additional operating restrictions, which may have a negative impact on our business. In addition to potential impacts on our business directly or indirectly resulting from climate-change legislation or regulations, our business also could be negatively affected by climate-change related physical changes or changes in weather patterns. An increase in severe weather patterns could result in damages to or loss of our rigs, impact our ability to conduct our operations, and result in a disruption of our customers’ operations.

Hydraulic fracturing is a process sometimes used in the completion of oil and natural gas wells whereby water, other liquids, sand, and chemicals are injected under pressure into subsurface formations to stimulate natural gas and, oil production. Various governmental entities (within and outside the United States) are in the process of studying, restricting, regulating, or preparing to regulate hydraulic fracturing, directly and indirectly. Many state governments require the disclosure of chemicals used in the fracturing process and, due to concerns raised relating to potential impacts of hydraulic fracturing, including on groundwater quality and seismic activity, legislative and regulatory efforts at the federal level and in some state and local jurisdictions have been initiated to render permitting and compliance requirements more stringent for hydraulic fracturing or prohibit the activity altogether. We do not directly engage in hydraulic fracturing activities. However, these and other developments could cause operational delays or increased costs in exploration and production, which could adversely affect the demand for our products or services.

9The federal ESA was established to protect endangered and threatened species. Pursuant to the ESA, if a species is listed as threatened or endangered, restrictions may be imposed on activities adversely affecting that species’ habitat. Similar protections are offered to migratory birds under the Migratory Bird Treaty Act. We may conduct operations on natural gas and oil leases in areas where certain species that are listed as threatened or endangered are known to exist and where other species that potentially could be listed as threatened or endangered may exist. On February 11, 2016, the U.S. Fish and Wildlife Service (“FWS”) published a final policy which alters how it may designate critical habitat and suitable habitat areas that it believes are necessary for survival

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~~The~~Table federal ESA was established to protect endangered and threatened species. Pursuant to the ESA, if a species is listed as threatened or endangered, restrictions may be imposed on activities adversely affecting that species’ habitat. Similar protections are offered to migratory birds under the Migratory Bird Treaty Act. We may conduct operations on natural gas and oil leases in areas where certain species that are listed as threatened or endangered are known to exist and where other species that potentially could be listed as threatened or endangered may exist. On February 11, 2016, the U.S. Fish and Wildlife Service (“FWS”) published a final policy which alters how it may designate critical habitat and suitable habitat areas that it believes are necessary for survival of a threatened or endangered species. A critical habitat or suitable habitat designation could result in further material restrictions and may materially delay or prohibit land access for natural gas and oil development. The designation of previously unprotected species as threatened or endangered in areas where operations are conducted could cause us to incur increased costs arising from species protection measures or could result in limitations on our customer’s exploration and production activities that could have an adverse impact on their ability to develop and produce reserves. If our customers were to have a portion of their leases designated as critical or suitable habitat, it could have a material adverse impact on the demand for our products and services.Contents

of a threatened or endangered species. A critical habitat or suitable habitat designation could result in further material restrictions and may materially delay or prohibit land access for natural gas and oil development. The designation of previously unprotected species as threatened or endangered in areas where operations are conducted could cause us to incur increased costs arising from species protection measures or could result in limitations on our customer’s exploration and production activities that could have an adverse impact on their ability to develop and produce reserves. If our customers were to have a portion of their leases designated as critical or suitable habitat, it could have a material adverse impact on the demand for our products and services.

Our operations are also governed by laws and regulations related to workplace safety and worker health, primarily the Occupational Safety and Health Act and regulations promulgated thereunder. In addition, various other governmental and quasi-governmental agencies require us to obtain certain miscellaneous permits, licenses and certificates with respect to our operations. The kind of permits, licenses and certificates required by our operations depend upon a number of factors. We believe we have the necessary permits, licenses and certificates that are material to the conduct of our existing business.

Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are made available free of charge on our website at http://www.parkerdrilling.com as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the ~~Securities and Exchange Commission (“~~SEC”). Except to the extent explicitly stated herein, documents and information on our website are not incorporated by reference herein. Additionally, our reports, proxy and information statements and our other SEC filings are available on an Internet website maintained by the SEC at http://www.sec.gov.

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Item 1A. Risk Factors

Our businesses involve a high degree of risk. You should consider carefully the risks and uncertainties described below and the other information included in this Form 10-K, including Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8. Financial Statements and Supplementary Data. While these are the risks and uncertainties we believe are most important for you to consider, they are not the only risks or uncertainties facing us or which may adversely affect our business. If any of the following risks or uncertainties actually occurs, our business, financial condition, or results of operations could be adversely affected.

Risks Related to ~~Our~~our ~~Chapter~~Emergence 11from ~~Proceedings~~Bankruptcy

OnWe ~~December~~recently ~~12,~~emerged ~~2018~~from bankruptcy, ~~Parker~~which ~~Drilling and certain of its U.S. subsidiaries filed voluntary petitions commencing the Chapter 11 Cases under the Bankruptcy Code. The Chapter 11 Cases and the Restructuring~~ may ~~have~~adversely aaffect ~~material adverse impact on~~ our business, ~~financial condition, results of operations,~~ and ~~cash flows~~relationships. In addition, the Chapter 11 Cases and the Restructuring may have a material adverse impact on the trading price and ultimately are expected to result in the cancellation and discharge of our securities, including our common stock. The Plan governs distributions to and the recoveries of holders of our securities.

InIt ~~2018,~~is wepossible ~~engaged~~that ~~financial~~our ~~and~~having ~~legal~~filed ~~advisors~~for tobankruptcy ~~assist~~and usour ~~in,~~recent ~~among~~emergence ~~other~~from ~~things,~~bankruptcy ~~analyzing~~may ~~various~~adversely ~~strategic~~affect ~~alternatives to address~~ our ~~liquidity~~business and ~~capital~~relationships ~~structure~~with customers, ~~including~~vendors, ~~strategic~~contractors, ~~and~~employees ~~refinancing~~or ~~alternatives to restructure our indebtedness in private transactions~~suppliers. ~~These~~Due ~~restructuring efforts led~~ to ~~the~~uncertainties, ~~execution~~many ofrisks ~~the~~exist, ~~RSA~~including ~~and commencement of~~ the ~~Chapter 11 Cases in the Bankruptcy Court on December 12, 2018.~~ following:

~~The~~• ~~Chapter~~key ~~11 Cases could have a material adverse effect on our business~~suppliers, ~~financial~~vendors ~~condition,~~or ~~results~~other ofcontract ~~operations~~counterparties ~~and liquidity. So long as the Chapter 11 Cases continue, our senior management~~ may beterminate ~~required~~their torelationships ~~spend a significant amount of time and effort dealing~~ with ~~the~~us ~~reorganization~~or ~~instead~~require ofadditional ~~focusing~~financial onassurances ~~our~~or ~~business~~enhanced ~~operations.~~performance ~~Bankruptcy~~from Court protection also may make it more difficult to retain management and the key personnel necessary to the success and growth of our business. In addition, during the period of time we are involved in a bankruptcy proceeding, our customers and suppliers might lose confidence in our ability to reorganize our business successfully and may seek to establish alternative commercial relationships. us;

~~Other~~• ~~significant~~our ~~risks~~ability ~~include~~to orrenew ~~relate~~existing tocontracts ~~the~~and ~~following:~~compete for new business may be adversely affected

• our ability to ~~obtain~~attract, ~~the~~motivate ~~Bankruptcy Court’s approval with respect to motions~~ and/or ~~other~~retain ~~requests~~key ~~made~~executives tomay ~~the~~be ~~Bankruptcy~~adversely ~~Court in the Chapter 11 Cases, including maintaining strategic control as debtor-in-possession~~affected; and

• competitors may take business away from us, and our ability to ~~consummate~~attract ~~the~~and ~~Plan;~~retain customers may be negatively impacted.

•The ~~the~~occurrence ~~effects~~ of ~~the~~one ~~filing~~or more of ~~the~~these ~~Chapter~~events 11could ~~Cases~~have a material and adverse effect on our ~~business~~operations, financial condition and ~~the~~reputation. ~~interest~~We ofcannot ~~various~~assure ~~constituents,~~you ~~including~~that having been subject to bankruptcy protection will not adversely affect our ~~stockholders;~~operations in the future.

•Our ~~increased~~actual ~~advisory~~financial ~~costs~~results toafter ~~execute~~emergence from bankruptcy may not be comparable to our ~~reorganization;~~historical financial information as a result of the implementation of the Plan and the transactions contemplated thereby.

•In connection with the disclosure statement we filed with the Bankruptcy Court, and the hearing to consider confirmation of the Plan, we prepared projected financial information to demonstrate to the Bankruptcy Court the feasibility of the Plan and our ability to ~~maintain~~continue ~~relationships~~operations ~~with~~upon ~~suppliers~~our emergence from bankruptcy. Those projections were prepared solely for the purpose of bankruptcy proceedings and have not been, ~~customers~~and will not be, ~~employees~~updated on an ongoing basis and ~~other~~should ~~third~~not ~~parties~~be asrelied upon by investors. At the time they were prepared, the projections reflected numerous assumptions concerning our anticipated future performance with respect to prevailing and anticipated market and economic conditions that were and remain beyond our control and that may not materialize. Projections are inherently subject to substantial and numerous uncertainties and to a ~~result~~wide variety of significant business, economic and competitive risks and the ~~Chapter~~assumptions 11underlying ~~Cases;~~the projections and/or valuation estimates may prove to be wrong in material respects. Actual results may vary significantly from those contemplated by the projections. As a result, investors should not rely on these projections.

•Upon ~~Bankruptcy~~our ~~Court~~emergence ~~rulings~~from inbankruptcy, the ~~Chapter~~composition ~~11 Cases as well as the outcome~~ of ~~all~~our ~~other~~board ~~pending litigation and the outcome~~ of ~~the~~directors ~~Chapter~~changed ~~11 Cases in general;~~significantly.

•Pursuant to the ~~length~~Plan, the composition of ~~time~~the ~~that~~Board wechanged ~~will~~significantly. ~~operate~~Our ~~with~~Board ~~Chapter~~currently 11consists ~~protection~~of six directors, only one of whom served on the Board prior to our emergence from bankruptcy. The new directors have different backgrounds, experiences and perspectives from those individuals who previously served on our Board and, thus, may have different views on the ~~continued~~issues ~~availability~~that ofwill ~~operating~~determine ~~capital~~our ~~during~~future. There is no guarantee that our new Board will pursue, or pursue in the ~~pendency~~same manner, our current strategic plans. As a result, our future strategy and plans may differ materially from those of the ~~proceedings;~~past.

• third-party motions in the Chapter 11 Cases, which may interfere with our ability to consummate the Plan; and

• the potential adverse effects of the Chapter 11 Cases on our liquidity and results of operations.

Because of the risks and uncertainties associated with the Chapter 11 Cases, we cannot predict or quantify the ultimate impact that events occurring during the Chapter 11 Cases may have on our business, cash flows, liquidity, financial condition and results of operations, nor can we predict the ultimate impact that events occurring during the Chapter 11 Cases may have on our corporate or capital structure.

Delays in the Chapter 11 Cases may increase the risks of our being unable to reorganize our business and emerge from bankruptcy and increase our costs associated with the bankruptcy process.

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The RSA contemplates the consummation of the Plan through an orderly prearranged plan of reorganization, but there can be no assurance that we will be able to consummate the Plan. A prolonged Chapter 11 proceeding could adversely affect our relationships with customers, suppliers and employees, among other parties, which in turn could adversely affect our business, competitive position, financial condition, liquidity and results of operations and our ability to continue as a going concern. A weakening of our financial condition, liquidity and results of operations could adversely affect our ability to implement the Plan (or any other plan of reorganization). If we are unable to consummate the Plan, we may be forced to liquidate our assets.

In addition, the occurrence of the Effective Date is subject to certain conditions and requirements in addition to those described above that may not be satisfied.

We believe it is likely that our common stock will substantially decrease in value as a result of the Chapter 11 Cases.

We have a significant amount of indebtedness that is senior to our current common stock in our capital structure. Our existing common stock has substantially decreased in value during the Chapter 11 Cases. We do not foresee a market for our existing common stock after emergence from the Chapter 11 Cases. Accordingly, any trading in our common stock during the pendency of our Chapter 11 Cases is highly speculative and poses substantial risks to purchasers of our common stock.

The RSA is subject to significant conditions and milestones that may be difficult for us to satisfy.

There are certain material conditions we must satisfy under the RSA, including the timely satisfaction of milestones in the Chapter 11 Cases, which include the consummation of the Plan. Our ability to timely complete such milestones is subject to risks and uncertainties, many of which are beyond our control.

The Plan may not become effective.

While the Plan has been confirmed by the Bankruptcy Court, it may not become effective because it is subject to the satisfaction of certain conditions precedent (some of which are beyond our control). There can be no assurance that such conditions will be satisfied and, therefore, that the Plan will become effective and that the Debtors will emerge from the Chapter 11 Cases as contemplated by the Plan. If the Effective Date is delayed, the Debtors may not have sufficient cash available to operate their businesses. In that case, the Debtors may need new or additional post-petition financing, which may increase the cost of consummating the Plan. There is no assurance of the terms on which such financing may be available or if such financing will be available. If the transactions contemplated by the Plan are not completed, it may become necessary to amend the Plan. The terms of any such amendment are uncertain and could result in material additional expense and result in material delays to the Chapter 11 Cases.

Even if a Chapter 11 plan of reorganization is consummated, we may not be able to achieve our stated goals and there is substantial doubt regarding our ability to continue as a going concern.

Even if the Plan or any other Chapter 11 plan of reorganization is consummated, we may continue to face a number of risks, such as changes in economic conditions, changes in our industry, changes in demand for our services and increasing expenses. Some of these risks become more acute when a case under the Bankruptcy Code continues for a protracted period without indication of how or when the case may be completed. As a result of these risks and others, we cannot guarantee that any Chapter 11 plan of reorganization will achieve our stated goals.

Furthermore, even if our debts are reduced or discharged through a plan of reorganization, we may need to raise additional funds through public or private debt or equity financing or other various means to fund our business after the completion of the Chapter 11 Cases. Our access to additional financing may be limited, if it is available at all. Therefore, adequate funds may not be available when needed or may not be available on favorable terms, or at all.

As a result of the Chapter 11 Cases, even with the creditor support for the restructuring under the RSA, there is substantial doubt regarding our ability to continue as a going concern. As a result, we cannot give any assurance of our ability to continue as a going concern, even though the Plan has been confirmed.

Our shares of common stock are not listed for trading on a national securities exchange.

Our common stock currently trades on OTC Pink and is not listed for trading on a national securities exchange. We can provide no assurance that our common stock will continue to trade on OTC Pink, whether broker-dealers will continue to provide public quotes of our common stock on OTC Pink, whether the trading volume of our common stock will be sufficient to provide for an efficient trading market or whether quotes for our common stock will continue on OTC Pink in the future.

Investments in securities trading on OTC Pink are generally less liquid than investments in securities trading on a national securities exchange. In addition, the trading of our common stock on OTC Pink could have other negative implications, including

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the potential loss of confidence in us by suppliers, customers and employees and the loss of institutional investor interest in our common stock. This could further depress the trading price of our common stock and could also have a long-term adverse effect on our ability to raise capital. There can be no assurance that any public market for our common stock will exist in the future or that we will be able to relist our common stock on a national securities exchange.

In certain instances, a Chapter 11 case may be converted to a case under Chapter 7 of the Bankruptcy Code.

Upon a showing of cause, the Bankruptcy Court may convert our Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy Code. In such event, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the Bankruptcy Code. We believe that liquidation under Chapter 7 would result in significantly smaller distributions being made to our creditors than those provided for in the Plan because of (i) the likelihood that the assets would have to be sold or otherwise disposed of in a distressed fashion over a short period of time rather than in a controlled manner and as a going concern, (ii) additional administrative expenses involved in the appointment of a Chapter 7 trustee, and (iii) additional expenses and claims, some of which would be entitled to priority, that would be generated during the liquidation and from the rejection of leases and other executory contracts in connection with a cessation of operations.

As a result of the Chapter 11 Cases, our historical financial information may not be indicative of our future performance, which may be volatile.

During the Chapter 11 Cases, we expect our financial results to continue to be volatile as restructuring activities and expenses, contract terminations and rejections, and claims assessments significantly impact our consolidated financial statements. As a result, our historical financial performance is likely not indicative of our financial performance after the date of the filing of the Chapter 11 Cases. In addition, if we emerge from Chapter 11, the amounts reported in subsequent consolidated financial statements may materially change relative to our historical consolidated financial statements, including as a result of revisions to our operating plans pursuant to the Plan. We also may be required to adopt fresh start accounting, in which case our assets and liabilities will be recorded at fair value as of the fresh start reporting date, which may differ materially from the recorded values of assets and liabilities on our consolidated balance sheets. Our financial results after the application of fresh start accounting may be different from historical trends.

We may be subject to claims that will not be discharged in the Chapter 11 Cases, which could have a material adverse effect on our financial condition and results of operations.

The Bankruptcy Court provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to consummation of a plan of reorganization. With few exceptions, all claims that arose prior to December 12, 2018 or before consummation of the Plan (i) would be subject to compromise and/or treatment under the Plan and/or (ii) would be discharged in accordance with the Bankruptcy Code and the terms of the Plan. Any claims not ultimately discharged pursuant to the Plan could be asserted against the reorganized entities and may have an adverse effect on our financial condition and results of operations on a post-reorganization basis.

We may experience employee attrition as a result of the Chapter 11 Cases.

As a result of the Chapter 11 Cases, we may experience employee attrition, and our employees may face considerable distraction and uncertainty. A loss of key personnel or material erosion of employee morale could adversely affect our business and results of operations. Our ability to engage, motivate and retain key employees or take other measures intended to motivate and incentivize key employees to remain with us through the pendency of the Chapter 11 Cases is limited by restrictions on implementation of incentive programs under the Bankruptcy Code. The loss of services of members of our senior management team could impair our ability to execute our strategy and implement operational initiatives, which would be likely to have a material adverse effect on our financial condition, liquidity and results of operations.

Risks Related to Our Business

The volatility of prices for oil and natural gas has had, and may continue to have, a material adverse effect on our financial condition, results of operations, and cash flows.

Oil and natural gas prices and market expectations regarding potential changes in these prices are volatile and are likely to continue to be volatile in the future. Increases or decreases in oil and natural gas prices and expectations of future prices could have an impact on our customers’ long-term exploration and development activities, which in turn could materially affect our business and financial performance. Furthermore, higher oil and natural gas prices do not necessarily result immediately in increased drilling activity because our customers’ expectations of future oil and natural gas prices typically drive demand for our drilling services. The oil and natural gas industry has historically experienced periodic downturns, which have been characterized by ~~diminished demand for oilfield services and downward pressure on the prices we charge. A prolonged downturn in the oil and~~

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diminished demand for oilfield services and downward pressure on the prices we charge. A prolonged downturn in the oil and natural gas industry could result in a further reduction in demand for oilfield services and could continue to adversely affect our financial condition, results of operations, and cash flows. ~~The average price of oil during 2018 was well below the average prices in 2014.~~ Oil and natural gas prices and demand for our services also depend upon numerous factors which are beyond our control, including:


•	the level of supply and demand for oil and natural gas;


•	the cost of exploring for, producing, and delivering oil and natural gas;


•	expectations regarding future energy prices;


•	advances in exploration, development, and production technology;


•	the ability of the Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels and prices;


•	the level of production by non-OPEC countries;


•	the adoption or repeal of laws and government regulations, both in the United States and other countries;


•	the imposition or lifting of economic sanctions against certain regions, persons, and other entities;


•	the number of ongoing and recently completed rig construction projects which may create overcapacity;


•	local and worldwide military, political, and economic events, including events in the oil producing regions of Africa, the Middle East, Russia, Central Asia, Southeast Asia, and Latin America;


•	weather conditions and natural disasters;


•	the occurrence or threat of epidemic or pandemic diseases, such as the recent outbreak of coronavirus, or any government response to such occurrence or threat;


•	expansion or contraction of worldwide economic activity, which affects levels of consumer and industrial demand;


•	the rate of discovery of new oil and natural gas reserves;


•	domestic and foreign tax policies;


•	acts of terrorism in the United States or elsewhere;


•	increased demand for alternative energy sources and electric vehicles, including government initiatives to promote the use of renewable energy sources and the growing public sentiment around alternatives to oil and gas; and


•	the policies of various governments regarding exploration and development of their oil and natural gas reserves.

Demand for the majority of our services is substantially dependent on the levels of expenditures by the oil and natural gas industry. A substantial or an extended decline in oil and natural gas prices could result in lower expenditures by the oil and natural gas industry, which could have a material adverse effect on our financial condition, results of operations, and cash flows.

Demand for the majority of our services depends substantially on the level of expenditures for the exploration, development, and production of oil or natural gas reserves by the major, independent, and national oil and natural gas E&P companies and large integrated service companies that comprise our customer base. These expenditures are generally dependent on the industry’s view of future oil and natural gas prices and are sensitive to the industry’s view of future economic growth and the resulting impact on demand for oil and natural gas, including a heightened emphasis by E&P companies’ investors demanding cash flow returns which has limited the number of wells being drilled. Declines in oil and natural gas prices have and may continue to result in project modifications, delays or cancellations, general business disruptions, and delays in payment of, or nonpayment of, amounts that are owed to us, any of which could continue to have a material adverse effect on our financial condition, results of operations, and cash flows. Historically, when drilling activity and spending decline, utilization and dayrates also decline and drilling may be reduced or discontinued, resulting in an oversupply of drilling rigs. Sustained low oil prices have in turn caused a significant decline in the demand for drilling services over the last several years. ~~The rig utilization rate of our International & Alaska Drilling segment has risen to 37.0 percent for the year ended December 31, 2018 from 36.0 percent for the year ended December 31, 2017.~~ Furthermore, operators implemented significant reductions in capital spending in their budgets, including the cancellation or deferral of existing programs, and are expected to continue to operate under reduced budgets for the foreseeable future.

We have a significant amount of funded debt. Our debt levels and debt agreement restrictions may have significant consequences for our future prospects, including limiting our liquidity and flexibility in obtaining additional financing and in pursuing other business opportunities. 11

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~~Table~~We have a significant amount of ~~contents~~high interest debt. Our debt levels and debt agreement restrictions may have significant consequences for our future prospects, including limiting our liquidity and flexibility in obtaining additional financing or refinancing existing high interest debt and in pursuing other business opportunities.

As of December 31, ~~2018~~2019, we had:

• $~~585~~177.09 million principal amount of debt;

• $2641.93 million of undiscounted operating lease ~~commitments~~liabilities; and

• $109.03 million ~~borrowed~~in ~~under~~supporting ~~the~~letters ~~DIP~~of ~~Facility~~credit.

Our ability to meet our debt service obligations depends on our ability to generate positive cash flows from operations. We have in the past, and may in the future, incur negative cash flows from one or more segments of our operating activities. Our future cash flows from operating activities will be influenced by the demand for our drilling services, the utilization of our rigs, the dayrates that we receive for our rigs, demand for our rental tools, oil and natural gas prices, general economic conditions, and other factors affecting our operations, many of which are beyond our control.

If we are unable to service our debt obligations, we may have to take one or more of the following actions:


•	delay spending on capital projects, including maintenance projects and the acquisition or construction of additional rigs, rental tools, and other assets;


•	issue additional equity;


•	sell assets; or


•	restructure or refinance our debt.

As of December 12, 2018, the Company was in default under certain of its debt instruments. The Company’s filing of the Chapter 11 Cases described above accelerated the Company’s obligations under its Senior Notes. All of the Company’s outstanding obligations under its 2015 Secured Credit Agreement were paid prior to the filing of the Chapter 11 Cases and the 2015 Secured Credit Agreement was terminated substantially concurrently with such filing. Additionally, events of default under the indentures governing the Company’s Senior Notes have occurred and are continuing, including as a result of cross-defaults between such indentures.

Despite our current level of indebtedness, we may still be able to incur more debt. This could further exacerbate the risks associated with our indebtedness, including limiting our liquidity and our ability to pursue other business opportunities.

We may be able to incur additional indebtedness in the future, subject to certain limitations, including under the ~~DIP~~Credit Facility, ~~the First Lien Exit Facility~~ and the ~~Second~~Term ~~Lien~~Loan ~~Exit Facility~~Agreement. If new debt is added to our current debt levels, the related risks that we now face could increase. Our level of indebtedness could, for instance, prevent us from engaging in transactions that might otherwise be beneficial to us or from making desirable capital expenditures. This could put us at a competitive disadvantage relative to other less leveraged competitors that have more cash flow to devote to their operations. InAdditionally, ~~addition~~our Credit Facility provides, and any future credit facilities may provide, for variable interest rates, which may increase or decrease our interest expense. Furthermore, the incurrence of additional indebtedness could make it more difficult to satisfy our existing financial obligations.

~~Further,~~We ~~under Chapter 11, transactions outside the ordinary course of business~~ are subject to the prior approval of the Bankruptcy Court, which may limit our ability to respond in a timely manner to certain events or take advantage of certain opportunities or to adapt to changing market or industry conditions. The Debtors are subject to various covenants and events of default under the ~~DIP~~Credit Facility and the Term Loan Agreement. In general, certain of these covenants limit ~~the~~our ~~Debtors’~~ ability, subject to certain exceptions, to take certain actions, including:


•	selling assets outside the ordinary course of business;


•	consolidating, merging, amalgamating, liquidating, dividing, winding up, dissolving or otherwise disposing of all or substantially all of its assets;


•	granting liens; and


•	financing its investments.

If ~~the~~we ~~Debtors~~ fail to comply with these covenants or an event of default occurs under the ~~DIP~~Credit Facility or the Term Loan Agreement, our liquidity, financial condition or operations may be materially impacted.

Our current operations and future growth may require significant additional capital, and the amount and terms of our indebtedness could impair our ability to fund our capital requirements. ~~The DIP Facility may be insufficient to fund our cash requirements through emergence from bankruptcy.~~

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Our business requires substantial capital. We may require additional capital in the event of growth opportunities, unanticipated maintenance requirements, or significant departures from our current business plan.

Additional financing may not be available on a timely basis or on terms acceptable to us and within the limitations contained in the ~~DIP~~Credit Facility. Failure to obtain additional financing, should the need for it develop, could impair our ability to fund capital expenditure requirements and meet debt service requirements and could have an adverse effect on our business.

Further, for the duration of the Chapter 11 Cases, we will be subject to various risks, including but not limited to (i) the inability to maintain or obtain sufficient financing sources for operations or to fund the plan of reorganization and meet future obligations, and (ii) increased legal and other professional costs associated with the Chapter 11 Cases and our reorganization.12

IfTable ~~the transactions contemplated by the plan~~ of reorganization are not completed and the effective date of the plan of reorganization does not occur prior to the maturity of the DIP Facility, we may need to refinance the DIP Facility. We may not be able to obtain some or all of any such financing on acceptable terms or at all.Contents

We may be unable to repay or refinance our debt as it becomes due, whether at maturity or as a result of acceleration.

We may not be able to repay our debt as it comes due, or to refinance our debt on a timely basis or on terms acceptable to us and within the limitations contained in the DIP Facility and the indentures governing our outstanding Senior Notes. Failure to repay or to timely refinance any portion of our debt could result in a default under the terms of all our debt instruments and permit the acceleration of all indebtedness outstanding.

While we intend to take appropriate mitigating actions to refinance our indebtedness prior to maturity or otherwise extend the maturity dates, and to cure any potential defaults, there is no assurance that any particular actions with respect to refinancing existing indebtedness, extending the maturity of existing indebtedness or curing potential defaults in our existing and future debt agreements will be sufficient.

Our backlog of contracted revenues may not be fully realized and may reduce significantly in the future, which may have a material adverse effect on our financial position, results of operations, or cash flows.

Our expected revenues under existing contracts (“contracted revenues”) may not be fully realized due to a number of factors, including rig or equipment downtime or suspension of operations. Several factors could cause downtime or a suspension of operations, many of which are beyond our control, including:


•	breakdowns of our equipment or the equipment of others necessary for continuation of operations;


•	work stoppages, including labor strikes;


•	shortages of material and skilled labor;


•	severe weather or harsh operating conditions;

• the occurrence or threat of epidemic or pandemic diseases, such as the recent outbreak of coronavirus, or any government response to such occurrence or threat;


•	the early termination of contracts; and


•	force majeure events.

Liquidity issues could lead our customers to go into bankruptcy or could encourage our customers to seek to repudiate, cancel, or renegotiate our contracts for various reasons. Some of our contracts permit early termination of the contract by the customer for convenience (without cause), generally exercisable upon advance notice to us and in some cases without making an early termination payment to us. There can be no assurance that our customers will be able or willing to fulfill their contractual commitments to us.

Significant declines in oil prices, the perceived risk of low oil prices for an extended period, and the resulting downward pressure on utilization may cause some customers to consider early termination of select contracts despite having to pay early termination fees in some cases. In addition, customers may request to re-negotiate the terms of existing contracts. Furthermore, as our existing contracts roll off, we may be unable to secure replacement contracts for our rigs, equipment or services. We have been in discussions with some of our customers regarding these issues. Therefore, revenues recorded in future periods could differ materially from our current contracted revenues, which could have a material adverse effect on our financial position, results of operations or cash flows.

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Certain of our contracts are subject to cancellation by our customers without penalty and with little or no notice.

In periods of extended market weakness similar to the current environment, our customers may not be able to honor the terms of existing contracts, may terminate contracts even where there may be onerous termination fees, or may seek to renegotiate contract dayrates and terms in light of depressed market conditions. Certain of our contracts are subject to cancellation by our customers without penalty and with relatively little or no notice. Significant declines in oil prices, the perceived risk of low oil prices for an extended period, and the resulting downward pressure on utilization may cause some customers to consider early termination of select contracts despite having to pay early termination fees in some cases. When drilling market conditions are depressed, a customer may no longer need a rig or rental tools currently under contract or may be able to obtain comparable equipment at lower dayrates. Further, due to government actions, a customer may no longer be able to operate in, or it may not be economical to operate in, certain regions. As a result, customers may leverage their termination rights in an effort to renegotiate contract terms.

Our customers may also seek to terminate contracts for cause, such as the loss of or major damage to the drilling unit or other events that cause the suspension of drilling operations beyond a specified period of time. If we experience operational problems or if our equipment fails to function properly and cannot be repaired promptly, our customers will not be able to engage in drilling operations and may have the right to terminate the contracts. If equipment is not timely delivered to a customer or does not pass acceptance testing, a customer may in certain circumstances have the right to terminate the contract. The payment of a termination fee may not fully compensate us for the loss of the contract. Early termination of a contract may result in a rig or other equipment being idle for an extended period of time. The likelihood that a customer may seek to terminate a contract is increased during periods of market weakness. The cancellation or renegotiation of a number of our contracts could materially reduce our revenues and profitability.

Service contracts with national oil companies may expose us to greater risks than we normally assume in service contracts with non-governmental customers.

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We currently provide services and own rigs and other equipment that may be used in connection with projects involving national oil companies. In the future, we may expand our international operations and enter into additional, significant contracts or subcontracts relating to projects with national oil companies. The terms of these contracts may require us to resolve disputes in jurisdictions with less robust legal systems and may contain non-negotiable provisions and may expose us to greater commercial, political, environmental, operational, and other risks than we assume in other contracts. These contracts may also expose us to materially greater environmental liability and other claims for damages (including consequential damages) and personal injury related to our operations, or the risk that the contract may be terminated by our customer without cause on short-term notice, contractually or by governmental action, or under certain conditions that may not provide us with an early termination payment. We can provide no assurance that increased risk exposure will not have an adverse impact on our future operations or that we will not increase the number of rigs or amount of equipment and services contracted to national oil companies with commensurate additional contractual risks. Risks that accompany contracts relating to projects with national oil companies could ultimately have a material adverse impact on our business, financial condition, and results of operation.

We derive a significant amount of our revenues from a few major customers. The loss of a significant customer could adversely affect us.

A substantial percentage of our revenues are generated from a relatively small number of customers and the loss of a significant customer could adversely affect us. ~~In 2018, our largest customer,~~ ENL, accounted for approximately 2529.73 percent and 31.2 percent of our total consolidated revenues for the nine months ended December 31, 2019, and the three months ended March 31, 2019, respectively. Our consolidated results of operations could be adversely affected if any of our significant customers terminate their contracts with us, fail to renew our existing contracts, or do not award new contracts to us.

A slowdown in economic activity may result in lower demand for our drilling and drilling-related services and rental tools business, and could have a material adverse effect on our business.

A slowdown in economic activity in the United States or abroad could lead to uncertainty in corporate credit availability and capital market access and could reduce worldwide demand for energy and result in lower crude oil and natural gas prices. Concerns about global economic conditions have had a significant adverse impact on domestic and international financial markets and commodity prices, including oil and natural gas. Likewise, economic conditions in the United States or abroad could impact our vendors’ and suppliers’ ability to meet obligations to provide materials and services in general. Global or national health concerns, including the outbreak of pandemic or contagious disease, such as the recent coronavirus, may adversely affect the Company by (i) reducing demand for its services because of reduced global or national economic activity and (ii) affecting the health of its workforce, rendering employees unable to work or travel. All of these factors could have a material adverse effect on our business and financial results.

The contract drilling and the rental tools businesses are highly competitive and cyclical, with intense price competition.

The contract drilling and rental tools markets are highly competitive and many of our competitors in both the contract drilling and rental tools businesses may possess greater financial resources than we do. Some of our competitors ~~also~~ are incorporated in countries that may provide them with significant tax advantages that are not available to us as a U.S. company and which may impair our ability to compete with them for many projects.

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in countries that may provide them with significant tax advantages that are not available to us as a U.S. company and which may impair our ability to compete with them for many projects.

Contract drilling companies compete primarily on a regional basis, and competition may vary significantly from region to region at any particular time. Many drilling and workover rigs can be moved from one region to another in response to changes in levels of activity, provided market conditions warrant, which may result in an oversupply of rigs in an area. Many competitors construct rigs during periods of high energy prices and, consequently, the number of rigs available in some of the markets in which we operate can exceed the demand for rigs for extended periods of time, resulting in intense price competition. Most drilling contracts are awarded on the basis of competitive bids, which also results in price competition. Historically, the drilling service industry has been highly cyclical, with periods of high demand, limited equipment supply and high dayrates often followed by periods of low demand, excess equipment supply and low dayrates. Periods of low demand and excess equipment supply intensify the competition in the industry and often result in equipment being idle for long periods of time. During periods of decreased demand we typically experience significant reductions in dayrates and utilization. The Company, or its competition, may move rigs or other equipment from one geographic location to another location; the cost of which may be substantial. If we experience further reductions in dayrates or if we cannot keep our equipment utilized, our financial performance will be adversely impacted. Prolonged periods of low utilization and dayrates could result in the recognition of impairment charges on certain of our rigs if future cash flow estimates, based upon information available to management at the time, indicate that the carrying value of these rigs may not be recoverable.

Rig upgrade, refurbishment and construction projects are subject to risks and uncertainties, including delays and cost overruns, which could have an adverse impact on our results of operations and cash flows.

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We regularly make significant expenditures in connection with upgrading and refurbishing our rig fleet. These activities include planned upgrades to maintain quality standards, routine maintenance and repairs, changes made at the request of customers, and changes made to comply with environmental or other regulations. Rig upgrade, refurbishment, and construction projects are subject to the risks of delay or cost overruns inherent in any large construction project, including the following:


•	shortages of equipment or skilled labor;


•	unforeseen engineering problems;


•	unanticipated change orders;


•	work stoppages;


•	adverse weather conditions;


•	unexpectedly long delivery times for manufactured rig components;


•	unanticipated repairs to correct defects in construction not covered by warranty;


•	failure or delay of third-party equipment vendors or service providers;


•	unforeseen increases in the cost of equipment, labor or raw materials, particularly steel;


•	disputes with customers, shipyards or suppliers;


•	latent damages or deterioration to hull, equipment and machinery in excess of engineering estimates and assumptions;


•	financial or other difficulties with current customers at shipyards and suppliers;


•	loss of revenues associated with downtime to remedy malfunctioning equipment not covered by warranty;


•	unanticipated cost increases;


•	loss of revenues and payments of liquidated damages for downtime to perform repairs associated with defects, unanticipated equipment refurbishment and delays in commencement of operations; and


•	lack of ability to obtain the required permits or approvals, including import/export documentation.

Any one of the above risks could adversely affect our financial condition and results of operations. Delays in the delivery of rigs being constructed or undergoing upgrade, refurbishment, or repair may, in many cases, delay commencement of a drilling contract resulting in a loss of revenues to us, and may also cause our customer to renegotiate the drilling contract for the rig or terminate or shorten the term of the contract under applicable late delivery clauses, if any. If one of these contracts is terminated, we may not be able to secure a replacement contract on as favorable terms, if at all. Additionally, actual expenditures for required upgrades or to refurbish or construct rigs could exceed our planned capital expenditures, impairing our ability to service our debt obligations.

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we may not be able to secure a replacement contract on as favorable terms, if at all. Additionally, actual expenditures for required upgrades or to refurbish or construct rigs could exceed our planned capital expenditures, impairing our ability to service our debt obligations.

Our international operations are subject to governmental regulation and other risks.

We derive a significant portion of our revenues from our international operations. InFor ~~2018~~the nine months ended December 31, 2019, we derived approximately 56.87 percent of our revenues from operations in countries other than the United States. For the three months ended March 31, 2019, we derived approximately 57.9 percent of our revenues from operations in countries other than the United States. Our international operations are subject to the following risks, among others:


•	political, social, and economic instability, war, terrorism, and civil disturbances;


•	economic sanctions imposed by the U.S. government against other countries, groups, or individuals, or economic sanctions imposed by other governments against the U.S. or businesses incorporated in the U.S.;


•	limitations on insurance coverage, such as war risk coverage, in certain areas;


•	expropriation, confiscatory taxation, and nationalization of our assets;


•	foreign laws and governmental regulation, including inconsistencies and unexpected changes in laws or regulatory requirements, and changes in interpretations or enforcement of existing laws or regulations;

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•	increases in governmental royalties;


•	import-export quotas or trade barriers;


•	hiring and retaining skilled and experienced workers, some of whom are represented by foreign labor unions;


•	work stoppages;


•	damage to our equipment or violence directed at our employees, including kidnapping;


•	piracy of vessels transporting our people or equipment;


•	unfavorable changes in foreign monetary and tax policies;


•	solicitation by government officials for improper payments or other forms of corruption;


•	foreign currency fluctuations and restrictions on currency repatriation;


•	repudiation, nullification, modification, or renegotiation of contracts; and


•	other forms of governmental regulation and economic conditions that are beyond our control.

We currently have operations in 2019 countries. Our operations are subject to interruption, suspension, and possible expropriation due to terrorism, war, civil disturbances, political and capital instability, and similar events, and we have previously suffered loss of revenues and damage to equipment due to political violence. Civil and political disturbances in international locations may affect our operations. We may not be able to obtain insurance policies covering risks associated with these types of events, especially political violence coverage, and such policies may only be available with premiums that are not commercially reasonable.

Our international operations are subject to the laws and regulations of a number of countries with political, regulatory and judicial systems and regimes that may differ significantly from those in the U.S. Our ability to compete in international contract drilling and rental tool markets may be adversely affected by foreign governmental regulations and/or policies that favor the awarding of contracts to contractors in which nationals of those foreign countries have substantial ownership interests or by regulations requiring foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. Furthermore, our foreign subsidiaries may face governmentally imposed restrictions or fees from time to time on the transfer of funds to us.

In addition, tax and other laws and regulations in some foreign countries are not always interpreted consistently among local, regional, and national authorities, which can result in disputes between us and governing authorities. The ultimate outcome of these disputes is never certain, and it is possible that the outcomes could have an adverse effect on our financial performance.

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A portion of the workers we employ in our international operations are members of labor unions or otherwise subject to collective bargaining. We may not be able to hire and retain a sufficient number of skilled and experienced workers for wages and other benefits that we believe are commercially reasonable.

We may experience currency exchange losses where revenues are received or expenses are paid in nonconvertible currencies or where we do not take protective measures against exposure to a foreign currency. We may also incur losses as a result of an inability to collect revenues because of a shortage of convertible currency available to the country of operation, controls over currency exchange, or controls over the repatriation of income or capital. Given the international scope of our operations, we are exposed to risks of currency fluctuation and restrictions on currency repatriation. We attempt to limit the risks of currency fluctuation and restrictions on currency repatriation where possible by obtaining contracts payable in U.S. dollars or freely convertible foreign currency. In addition, some parties with which we do business could require that all or a portion of our revenues be paid in local currencies. Foreign currency fluctuations, therefore, could have a material adverse effect upon our results of operations and financial condition.

The shipment of goods, services and technology across international borders subjects us to extensive trade laws and regulations. Our import activities are governed by the unique customs laws and regulations in each of the countries where we operate. Moreover, many countries, including the U.S., control the export and re-export of certain goods, services, and technology and impose related export recordkeeping and reporting obligations. Governments may also impose economic sanctions against certain countries, persons, and other entities that may restrict or prohibit transactions involving such countries, persons, and entities. For example, over the past several years the U.S. Government has imposed additional sanctions against Russia’s oil and gas industry and certain Russian companies and individuals. Our ability to engage in certain future projects in Russia or involving certain Russian customers is dependent upon whether or not our involvement in such projects is restricted under U.S. or EU sanctions laws and the extent to which any of our prospective operations in Russia or with certain Russian customers may be subject to those laws. The laws and regulations concerning import activity, export recordkeeping and reporting, export control, and economic sanctions are complex and constantly changing. These laws and regulations can cause delays in shipments, unscheduled operational downtime and other operational disruptions. Moreover, any failure to comply with applicable legal and regulatory trading obligations could result in criminal and civil penalties and sanctions, such as fines, imprisonment, debarment from governmental contracts, seizure of shipments, and loss of import and export privileges. Reputational damage can also result from any failure to comply with such obligations.

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laws. The laws and regulations concerning import activity, export recordkeeping and reporting, export control, and economic sanctions are complex and constantly changing. These laws and regulations can cause delays in shipments, unscheduled operational downtime and other operational disruptions. Moreover, any failure to comply with applicable legal and regulatory trading obligations could result in criminal and civil penalties and sanctions, such as fines, imprisonment, debarment from governmental contracts, seizure of shipments, and loss of import and export privileges. Reputational damage can also result from any failure to comply with such obligations.

Our acquisitions, dispositions, and investments may not result in the realization of savings, the creation of efficiencies, the generation of cash or income, or the reduction of risk, which may have a material adverse effect on our liquidity, consolidated results of operations, and consolidated financial condition.

We continually seek opportunities to maximize efficiency and value through various transactions, including purchases or sales of assets, businesses, investments, or joint ventures. These transactions are intended to result in the realization of savings, the creation of efficiencies, the offering of new products or services, the generation of cash or income, or the reduction of risk. These transactions may also affect our consolidated results of operations.

These transactions also involve risks, and we cannot ensure that:


•	any acquisitions would result in an increase in income or earnings per share;


•	any acquisitions would be successfully integrated into our operations and internal controls;


•	the due diligence prior to an acquisition would uncover situations that could result in financial or legal exposure, or that we will appropriately quantify the exposure from known risks;


•	any disposition would not result in decreased earnings, revenues, or cash flow;


•	use of cash for acquisitions would not adversely affect our cash available for capital expenditures and other uses;


•	any dispositions, investments, acquisitions, or integrations would not divert management resources; or


•	any dispositions, investments, acquisitions, or integrations would not have a material adverse effect on our results of operations or financial condition.

Failure to comply with anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010, could result in fines, criminal penalties, negative commercial consequences and an adverse effect on our business.

The U.S. Foreign Corrupt Practices Act (FCPA), the U.K. Bribery Act 2010, and similar anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments or providing improper benefits for the purpose of obtaining or retaining business. Our policies mandate compliance with these anti-corruption laws. However, we operate in many parts of the world that experience corruption. If we are found to be liable for violations of these laws either due to our own acts or omissions or due to the acts or omissions of others (including our joint ventures partners, our agents or other third-party representatives), we could suffer from commercial, civil, and criminal penalties or other sanctions, which could have a material adverse effect on our business, financial condition, and results of operations.

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for the purpose of obtaining or retaining business. Our policies mandate compliance with these anti-corruption laws. However, we operate in many parts of the world that experience corruption. If we are found to be liable for violations of these laws either due to our own acts or omissions or due to the acts or omissions of others (including our joint ventures partners, our agents or other third-party representatives), we could suffer from commercial, civil, and criminal penalties or other sanctions, which could have a material adverse effect on our business, financial condition, and results of operations.

Failure to attract and retain skilled and experienced personnel could affect our operations.

We require skilled, trained, and experienced personnel to provide our customers with the highest quality technical services and support for our drilling operations. We compete with other oilfield services businesses and other employers to attract and retain qualified personnel with the technical skills and experience we require. Competition for skilled labor and other labor required for our operations intensifies as the number of rigs activated or added to worldwide fleets or under construction increases, creating upward pressure on wages. In periods of high utilization, we have found it more difficult to find and retain qualified individuals. A shortage in the available labor pool of skilled workers or other general inflationary pressures or changes in applicable laws and regulations could make it more difficult for us to attract and retain personnel and could require us to enhance our wage and benefits packages. Increases in our operating costs could adversely affect our business and financial results. Moreover, the shortages of qualified personnel or the inability to obtain and retain qualified personnel could negatively affect the quality, safety, and timeliness of our operations. For a description of how the Restructuring could affect our ability to attract and retain personnel, see Risks Related to Our Chapter 11 Proceedings - We may experience employee attrition as a result of the Chapter 11 Cases.

We are not fully insured against all risks associated with our business.

We ordinarily maintain insurance against certain losses and liabilities arising from our operations. However, we do not insure against all operational risks in the course of our business. Due to the high cost, high self-insured retention, and limited coverage insurance for windstorms in the GOM we have elected not to purchase windstorm insurance for our inland barges in the GOM. Although we have retained the risk for physical loss or damage for these rigs arising from a named windstorm, we have procured insurance coverage for removal of a wreck caused by a windstorm. The occurrence of an event that is not fully covered by insurance could have a material adverse impact on our business activities, financial position, and results of operations.

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GOM. Although we have retained the risk for physical loss or damage for these rigs arising from a named windstorm, we have procured insurance coverage for removal of a wreck caused by a windstorm. The occurrence of an event that is not fully covered by insurance could have a material adverse impact on our business activities, financial position, and results of operations.

We are subject to hazards customary for drilling operations, which could adversely affect our financial performance if we are not adequately indemnified or insured.

Substantially all of our operations are subject to hazards that are customary for oil and natural gas drilling operations, including blowouts, reservoir damage, loss of production, loss of well control, lost or stuck drill strings, equipment defects, cratering, oil and natural gas well fires and explosions, natural disasters, pollution, mechanical failure, and damage or loss during transportation. Some of our fleet is also subject to hazards inherent in marine operations, either while on-site or during mobilization, such as capsizing, sinking, grounding, collision, damage from severe weather, and marine life infestations. These hazards could result in damage to or destruction of drilling equipment, personal injury and property damage, suspension of operations, or environmental damage, which could lead to claims by third parties or customers, suspension of operations, and contract terminations. We have had accidents in the past due to some of these hazards. Typically, we are indemnified by our customers for injuries and property damage resulting from these types of events (except for injury to our employees and subcontractors and property damage to ours and our subcontractors’ equipment). However, we could be exposed to significant loss if adequate indemnity provisions or insurance are not in place, if indemnity provisions are unenforceable or otherwise invalid, or if our customers are unable or unwilling to satisfy any indemnity obligations. We may not be able to insure against these risks or to obtain indemnification to adequately protect us against liability from all of the consequences of the hazards and risks described above. The occurrence of an event not fully insured against or for which we are not indemnified, or the failure of a customer or insurer to meet its indemnification or insurance obligations, could result in substantial losses. In addition, insurance may not continue to be available to cover any or all of these risks. For example, pollution, reservoir damage and environmental risks generally are not fully insurable. Even if such insurance is available, insurance premiums or other costs may rise significantly in the future, making the cost of such insurance prohibitive. For a description of our indemnification obligations and insurance, see Item 1. Business — Insurance and Indemnification.

Certain areas in and near the GOM are subject to hurricanes and other extreme weather conditions. When operating in and near the GOM, our drilling rigs and rental tools may be located in areas that could cause them to be susceptible to damage or total loss by these storms. In addition, damage caused by high winds and turbulent seas to our rigs, our shore bases, and our corporate infrastructure could potentially cause us to curtail operations for significant periods of time until the effects of the damage can be repaired. In addition, our rigs in arctic regions can be affected by seasonal weather so severe that conditions are deemed too unsafe for operations.

Government regulations may reduce our business opportunities and increase our operating costs.

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Government regulations control and often limit access to potential markets and impose extensive requirements concerning employee privacy and safety, environmental protection, pollution control, and remediation of environmental contamination. Environmental regulations, including species protections, prohibit access to some locations and make others less economical, increase equipment and personnel costs, and often impose liability without regard to negligence or fault. In addition, governmental regulations, such as those related to climate change, emissions, and hydraulic fracturing, may discourage our customers’ activities, reducing demand for our products and services. We may be liable for damages resulting from pollution and, under United States regulations, must establish financial responsibility in order to drill offshore. See Item 1. Business — Environmental Considerations.

Regulation of greenhouse gases and climate change could have a negative impact on our business.

Some scientific studies have suggested that emissions of greenhouse gases may be contributing to warming of the earth’s atmosphere and other climatic changes. Such studies have resulted in increased local, state, regional, national, and international attention and actions relating to issues of climate change and the effect of GHG emissions, particularly emissions from fossil fuels. For example, the United States has been involved in international negotiations regarding greenhouse gas reductions under the UNFCCC. The U.S. was among 195 nations that participated in the creation of an international accord in December 2015, the Paris Agreement, with the objective of limiting greenhouse gas emissions. The Paris Agreement entered into force on November 4, 2016 and, as of ~~late~~January ~~2017~~2020, had been ratified by ~~174~~187 of the 197 parties to the UNFCC. However, on ~~August~~November 4, ~~2017~~2019, the United States formally communicated to the United Nations its intent to withdraw from participation in the Paris Agreement, which, ~~entails~~under athe ~~four-year~~terms ~~process~~of the Paris Agreement, cannot become effective until November 4, 2020. The EPA has also taken action under the CAA to regulate greenhouse gas emissions. In addition, a number of states have either proposed or implemented restrictions on greenhouse gas emissions. International accords such as the Paris Agreement may result in additional regulations to control greenhouse gas emissions. Other developments focused on restricting GHG emissions include but are not limited to the Kyoto Protocol; the European Union Emission Trading System; the United Kingdom’s Carbon Reduction Commitment; and, in the U.S., the Regional Greenhouse Gas Initiative, the Western Regional Climate Action Initiative, and various state programs. These regulations could also adversely affect market demand or pricing for our services, by affecting the price of, or reducing the demand for, fossil fuels or providing competitive advantages to competing fuels and energy sources.

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regulations could also adversely affect market demand or pricing for our services, by affecting the price of, or reducing the demand for, fossil fuels or providing competitive advantages to competing fuels and energy sources.

Because our business depends on the level of activity in the oil and natural gas industry, existing or future laws, regulations, treaties, or international agreements related to GHGs and climate change, including incentives to conserve energy or use alternative energy sources, could have a negative impact on our business if such laws, regulations, treaties, or international agreements reduce the worldwide demand for oil and natural gas or otherwise result in reduced economic activity generally. In addition, such laws, regulations, treaties, or international agreements could result in increased compliance costs or additional operating restrictions, which may have a negative impact on our business. In addition to potential impacts on our business directly or indirectly resulting from climate-change legislation or regulations, our business also could be negatively affected by climate-change related physical changes or changes in weather patterns. An increase in severe weather patterns could result in damages to or loss of our rigs, impact our ability to conduct our operations and/or result in a disruption of our customers’ operations.

The number and quantity of viable financing alternatives available to us may be significantly impacted by unfavorable lending and investment policies by financial institutions and insurance companies associated with concerns about environmental impacts of the oil and natural gas industry, on which our business depends, and negative views around our and our customer’s efforts with respect to environmental and social matters and related governance considerations could harm the perception of the Company by certain investors or result in the exclusion of our securities from consideration by those investors.

Global climate issues, including with respect to greenhouse gases (GHGs) such as carbon dioxide and methane and the relationship that GHGs have with climate change, continue to attract significant public and scientific attention. Certain banks, other financing sources and insurance companies have taken actions to limit available financing and insurance coverage for the oil and natural gas industry, on which our business depends. Increasingly, the actions of such financial institutions and insurance companies are informed by non-standardized “sustainability” scores, ratings and benchmarking studies provided by various organizations that assess corporate governance related to environmental and social matters. Further, there have been efforts in recent years by members of the general financial and investment communities, including investment advisors, sovereign wealth funds, public pension funds, universities and other institutional investors, to divest themselves and to promote the divestment of securities issued by companies involved in the fossil fuel extraction market, or that have low ratings or scores in studies and assessments of the type noted above. These entities also have been pressuring lenders to limit financing available to such companies. Because our business depends on the oil and gas industry, these efforts may have adverse consequences, including, but not limited to: restricting our and our customer’s ability to access capital and financial markets in the future; reducing the demand and price for our and our customer’s equity securities; and limiting our and our customer’s flexibility in business development activities such as mergers, acquisitions and divestures.

We are regularly involved in litigation, some of which may be material.

We are regularly involved in litigation, claims, and disputes incidental to our business, which at times may involve claims for significant monetary amounts, some of which would not be covered by insurance. We undertake all reasonable steps to defend ourselves in such lawsuits. Nevertheless, we cannot predict the ultimate outcome of such lawsuits and any resolution which is adverse to us could have a material adverse effect on our financial condition. See Note 911 - Commitments and Contingencies in Item 8. Financial Statements and Supplementary Data for a discussion of the material legal proceedings affecting us.

Increased regulation of hydraulic fracturing could result in reductions or delays in drilling and completing new oil and natural gas wells, which could adversely impact the demand for rental tools.

Our operations are subject to cyber-attacks or other cyber incidents that could have a material adverse effect on our business, consolidated results of operations, and consolidated financial condition.

22Our operations are becoming increasingly dependent on digital technologies and services. We use these technologies for internal purposes, including data storage (which may include personal identification information of our employees as well as our proprietary business information and that of our customers, suppliers, investors and other stakeholders), processing, and

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~~Our~~Table operations are becoming increasingly dependent on digital technologies and services. We use these technologies for internal purposes, including data storage (which may include personal identification information of our employees as well as our proprietary business information and that of our customers, suppliers, investors and other stakeholders), processing, and transmissions, as well as in our interactions with customers and suppliers. Digital technologies are subject to the risk of cyber-attacks, security breaches and other cyber incidents, which could include, among other things, computer viruses, malicious or destructive code, ransomware, social engineering attacks (including phishing and impersonation), hacking, denial-of-service attacks and other attacks and similar disruptions from the unauthorized use of or access to computer systems. If our systems for protecting against cybersecurity risks prove not to be sufficient, we could be adversely affected by, among other things: loss of or damage to intellectual property, proprietary or confidential information, or customer, supplier, or employee data; interruption of our business operations; and increased costs required to prevent, respond to, or mitigate cybersecurity attacks. These risks could harm our reputation and our relationships with customers, suppliers, employees, and other third parties, and may result in claims against us, including liability under laws that protect the privacy of personal information. In addition, these risks could have a material adverse effect on our business, results of operations and financial condition.Contents

~~The~~transmissions, ~~market~~as ~~price~~well as in our interactions with customers and suppliers. Digital technologies are subject to the risk of cyber-attacks, security breaches and other cyber incidents, which could include, among other things, computer viruses, malicious or destructive code, ransomware, social engineering attacks (including phishing and impersonation), hacking, denial-of-service attacks and other attacks and similar disruptions from the unauthorized use of or access to computer systems. If our ~~common~~systems ~~stock~~for ~~has~~protecting ~~fluctuated~~against ~~significantly~~cybersecurity risks prove not to be sufficient, we could be adversely affected by, among other things: loss of or damage to intellectual property, proprietary or confidential information, or customer, supplier, or employee data; interruption of our business operations; and increased costs required to prevent, respond to, or mitigate cybersecurity attacks. These risks could harm our reputation and our relationships with customers, suppliers, employees, and other third parties, and may result in claims against us, including liability under laws that protect the privacy of personal information. In addition, these risks could have a material adverse effect on our business, results of operations and financial condition.

~~The~~Risks ~~market~~Relating ~~price~~To ofOur ~~our~~Common ~~common stock may continue to fluctuate in response to various factors and events, many of which are beyond our control, including the following:~~Stock

We may become a non-reporting company if we proceed with the Stock Splits.

On January 29, 2020, we filed a Form 25 with the SEC to voluntarily delist our common stock from the NYSE, and we anticipate filing a Form 15 with the SEC to suspend our reporting obligations under Section 12(g) of the Exchange Act in connection with the Stock Splits being considered by the Board. As a result of the Form 25 filing, our common stock will be deregistered under Section 12(b) of the Exchange Act 90 days following the filing of the Form 25. As a result, our common stock is no longer listed on a national securities exchange and trading in our stock will only occur in privately negotiated sales and potentially on an over-the-counter market, if one or more brokers continues to choose to make a market for our common stock on any such market and complies with applicable regulatory requirements; however, there can be no assurances regarding any such trading. If we file the Form 15, our common stock would be deregistered under Section 12(g) of the Exchange Act 90 days following the filing of the Form 15. Because of the limited liquidity for our common stock, the anticipated termination of our obligation to publicly disclose financial and other information, and the proposed deregistration of our common stock under the Exchange Act, our stockholders may potentially experience a significant decrease in the liquidity of their common stock.

If we file a Form 15 to deregister our common stock under Section 12(g) of the Exchange Act, we will cease to file annual, quarterly, current, and other reports and documents with the SEC, and stockholders will cease to receive annual reports and proxy statements. Even if we file the Form 15, we intend to continue to prepare audited annual financial statements and periodic unaudited financial statements, as required pursuant to the covenants contained in our debt documents and make such financial information available to our stockholders on a voluntary basis. However, we would not be required to do so by law and there is no assurance that even if we were to make such information available that we would continue to do so in the future. Nonetheless, our stockholders may have significantly less information about the Company and our business, operations, and financial performance than they have currently. We would continue to hold stockholder meetings as required under Delaware law, including annual meetings, or to take actions by written consent of our stockholders in lieu of meetings as permitted under and in conformity with applicable Delaware law.

If we were to complete the deregistration and delisting process, we would no longer be subject to the provisions of the Sarbanes-Oxley Act, the liability provisions of the Exchange Act or the oversight of a national securities exchange. Our executive officers, directors and 10% stockholders would no longer be required to file reports relating to their transactions in our common stock with the SEC. In addition, our executive officers, directors and 10% stockholders would no longer be subject to the recovery of profits provision of the Exchange Act, and persons acquiring 5% of our common stock would no longer be required to report their beneficial ownership under the Exchange Act. Additionally, we would not have the ability to access the public capital markets or to use public securities in attracting and retaining executives and other employees, and we would have a decreased ability to use common stock to acquire other companies.

Additionally, even if we were to complete the deregistration process, our public reporting obligations could be reinstated if on the first day of any fiscal year we have more than 300 stockholders of record, in which instance we would be required to resume reporting pursuant to Section 15(d) of the Exchange Act. However, the Company would reserve the right to take additional actions that may be permitted under Delaware law, including effectuating further reverse stock splits, as necessary to maintain the Company’s suspension of its SEC reporting obligations.

Because our common stock is not listed on a national securities exchange, it is less liquid and its price may be negatively impacted by factors that are unrelated to our operations.

Because our common stock is not listed on a national securities exchange, it is less liquid and its price may be negatively impacted by factors that are unrelated to our operations. There is no assurance that a sufficient market will develop in our common stock, in which case it could be difficult for shareholders to sell their shares of common stock. Even if one or more brokers chooses to make a market for our common stock on an over-the-counter market and complies with the applicable regulatory requirements,

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the market price of our common stock could fluctuate substantially in response to various factors and events, many of which are beyond our control, including the following:


•	the other risk factors described in this Form 10-K, including changes in oil and natural gas prices;


•	a shortfall in rig utilization, operating revenues, or net income from that expected by securities analysts and investors;


•	changes in securities analysts’ estimates of the financial performance of us or our competitors or the financial performance of companies in the oilfield service industry generally;


•	changes in actual or market expectations with respect to the amounts of exploration and development spending by oil and natural gas companies;


•	general conditions in the economy and in energy-related industries;


•	general conditions in the securities markets;

• political instability, terrorism, or war; ~~and~~

• the outcome of pending and future legal proceedings, investigations, tax assessments, and other claims.; and

~~For~~•trading avolume ~~description~~in ~~of how the Restructuring could affect the price of~~ our common stock~~, see “Risks Related to Our Chapter 11 Proceedings”~~.

There can be no assurance that any public market for our common stock will exist in the future or that we will choose or be able to relist our common stock on a national securities exchange.

Certain shareholders own large portions of our outstanding common stock, which may limit your ability to influence our actions.

Certain shareholders currently hold significant percentages of our common stock. To the extent a significant percentage of the ownership of our common stock is concentrated in a small number of holders, such holders will be able to influence the outcome of any shareholder vote, including the election of directors, the adoption or amendment of provisions in our articles of incorporation or bylaws and possible mergers, corporate control contests and other significant corporate transactions. Circumstances may arise in which these stockholders may have an interest in pursuing or preventing acquisitions, divestitures or other transactions, including the issuance of additional shares or debt, that, in their judgment, could enhance their investment in the Company. Such transactions might adversely affect us or other holders of our common stock.

The corporate opportunity provisions in our certificate of incorporation could enable affiliates (as defined in our certificate of incorporation) of ours to benefit from corporate opportunities that might otherwise be available to us.

Subject to the limitations of applicable law, our certificate of incorporation, among other things:


•	permits us to enter into transactions with entities in which one or more of our officers or directors are financially or otherwise interested;


•	permits any of our stockholders, officers or directors to conduct business that competes with us and to make investments in any kind of property in which we may make investments; and

•

provides that if any director or officer of one of our affiliates who is also one of our officers or directors becomes aware of a potential business opportunity, transaction or other matter (other than one expressly offered to that director or officer solely in his or her capacity as our director or officer), that director or officer will have no duty to communicate or offer that opportunity to us, and will be permitted to communicate or offer that opportunity to such affiliates and that director or officer will not be deemed to have (i) acted in bad faith or in a manner inconsistent with the best interests of the Company or our stockholders or to have acted in a manner inconsistent with or opposed to his or her fiduciary duties to us regarding the opportunity or (ii) be liable to us or our stockholders for breach of any fiduciary duty regarding the opportunity.

These provisions create the possibility that a corporate opportunity that would otherwise be available to us may be used for the benefit of one of our affiliates.

We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.

Our certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences, limitations and relative rights, including preferences over our

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common stock respecting dividends and distributions, as the Board may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock. For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock.

Our certificate of incorporation designates the Court of Chancery in the State of Delaware (or, if and only if the Court of Chancery lacks subject matter jurisdiction, the federal district court for the District of Delaware) as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

Our certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery in the State of Delaware (or, if and only if the Court of Chancery lacks subject matter jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for any: (i) derivative action or proceeding brought on our behalf; (ii) action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders; (iii) action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation, our bylaws or as to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery; or (iv) action asserting a claim against us that is governed by the internal affairs doctrine. In addition, our certificate of incorporation provides that if any action specified above (each is referred to herein as a covered proceeding), is filed in a court other than a court located within the State of Delaware (each is referred to herein as a foreign action), the claiming party will be deemed to have consented to (i) the personal jurisdiction of state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the exclusive forum provision described above and (ii) having service of process made upon such claiming party in any such enforcement action by service upon such claiming party’s counsel in the foreign action as agent for such claiming party. These provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our a certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the covered proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

We do not anticipate paying any dividends on our common stock in the foreseeable future.

We do not anticipate paying any dividends on our common stock in the foreseeable future, and the terms of our existing indebtedness restrict our ability to pay dividends on our common stock. Any declaration and payment of future dividends to holders of our common stock may be limited by the provisions of the Delaware General Corporation Law and our indebtedness. The future payment of dividends on our common stock will be at the sole discretion of ~~our~~the ~~board~~Board ~~of directors~~ and will depend on many factors, including our earnings, capital requirements, financial condition, and other considerations that ~~our~~the ~~board~~Board ~~of directors~~ deems relevant.

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FORWARD-LOOKING STATEMENTS

This Form 10-K contains certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). All statements in this Form 10-K other than statements of historical facts addressing activities, events or developments we expect, project, believe, or anticipate will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made by the Company based on management’s experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Although we believe our expectations stated in this Form 10-K are based on reasonable assumptions, such statements are subject to a number of risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from those implied or expressed by the forward-looking statements. These statements include, but are not limited to, statements about anticipated future financial or operational results, our financial position, and similar matters. These include risks relating to:

• our ability to obtain the Bankruptcy Court’s approval with respect to motions or other requests made to the Bankruptcy Court in the Chapter 11 Cases, including maintaining strategic control as debtor-in-possession;

• our ability to consummate the Plan;

• the effects of the filing of the Chapter 11 Cases on our business and the interest of various constituents, including our stockholders;

• increased advisory costs to execute our reorganization;

• any inability to maintain relationships with suppliers, customers, employees and other third parties as a result of the Chapter 11 Cases;

• Bankruptcy Court rulings in the Chapter 11 Cases as well as the outcome of all other pending litigation and the outcome of the Chapter 11 Cases in general;

• the length of time that we will operate with Chapter 11 protection and the continued availability of operating capital during the pendency of the proceedings;

• third-party motions in the Chapter 11 Cases, which may interfere with our ability to consummate the Plan;

• the potential adverse effects of the Chapter 11 Cases on our liquidity and results of operations;

• the impact of the NYSE delisting our common stock on the liquidity and market price of our common stock and on our ability to access the public capital markets;


•	changes in worldwide economic and business conditions;


•	fluctuations in oil and natural gas prices;


•	compliance with existing laws and changes in laws or government regulations;


•	the failure to realize the benefits of, and other risks relating to, acquisitions;


•	the risk of cost overruns;

• our ability to refinance or repay our ~~debt~~indebtedness; and


•	other important factors, many of which could adversely affect market conditions, demand for our services, and costs, and all or any one of which could cause actual results to differ materially from those projected.

For more information, see Item 1A. Risk Factors of this Form 10-K. Each forward-looking statement speaks only as of the date of this Form 10-K and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Item 1B. Unresolved Staff Comments

None.

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Item 2. Properties

We lease corporate headquarters office space in Houston, Texas and own our U.S. rental tools headquarters office in New Iberia, Louisiana. We lease regional headquarters space in Dubai, United Arab Emirates related to our ~~international~~International rental tools segment and ~~Eastern~~eastern ~~Hemisphere~~hemisphere drilling operations. Additionally, we own and/or lease office space and operating facilities in various other locations, domestically and internationally, including facilities where we hold inventories of rental and drilling tools and locations in close proximity to where we provide services to our customers. Additionally, we own and/or lease facilities necessary for administrative and operational support functions.

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Land and Barge Rigs

The table below shows the locations and drilling depth ratings of our rigs as of December 31, ~~2018~~2019:

Name	Type ~~(1)~~	Year ~~enteredinto~~entered into service/ upgraded	~~Drillingdepth~~Drilling depth rating (in feet)	Location
International & Alaska Drilling
International & Alaska drilling
Eastern Hemisphere
Rig 107	LLand rig	1983/2009	15,000	Kazakhstan
Rig 216	LLand rig	2001/2009	25,000	Kazakhstan
Rig 249	LLand rig	2000/2009	25,000	Kazakhstan
Rig 257	BBarge rig	1999/2010	30,000	Kazakhstan
Rig 258	LLand rig	2001/2009	25,000	Kazakhstan
Rig 247	LLand rig	1981/2008	20,000	Iraq, Kurdistan Region
Rig 269	LLand rig	2008	21,000	Iraq, Kurdistan Region
Rig 265	LLand rig	2007	20,000	Iraq, Kurdistan Region
Rig 264	LLand rig	2007	20,000	Tunisia
Rig 270	LLand rig	2011	21,000	Russia
Latin America
Rig 271	LLand rig	1982/2009	30,000	Colombia
Rig 266	LLand rig	2008	20,000	Guatemala
Rig 122	LLand rig	1980/2008	18,000	Mexico
Rig 165	LLand rig	1978/2007	30,000	Mexico
Rig 221	LLand rig	1982/2007	30,000	Mexico
Rig 256	LLand rig	1978/2007	25,000	Mexico
Rig 267	LLand rig	2008	20,000	Mexico
Alaska
Rig 272	LLand rig	2013	18,000	Alaska
Rig 273	LLand rig	2012	18,000	Alaska
U.S. (Lower 48) Drilling
U.S. (lower 48) drilling
Rig 8	BBarge rig	1978/2007	14,000	GOM
Rig 12	B	1979/2006	18,000	GOM
Rig 15	Barge rig	1978/2007	15,000	GOM
Rig 15	B	1978/2007	15,000	GOM
Rig 30	Barge rig	2014	18,000	GOM
Rig 20	B	1981/2007	13,000	GOM
Rig 50	Barge rig	1981/2006	20,000	GOM
Rig 21	B	1979/2012	14,000	GOM
Rig 51	Barge rig	1981/2008	20,000	GOM
Rig 30	B	2014	18,000	GOM
Rig 54	Barge rig	1980/2006	25,000	GOM
Rig 50	B	1981/2006	20,000	GOM
Rig 55	Barge rig	1981/2014	25,000	GOM
Rig 51	B	1981/2008	20,000	GOM
Rig 72	Barge rig	1982/2005	25,000	GOM
Rig 54	B	1980/2006	25,000	GOM
Rig 76	Barge rig	1977/2009	30,000	GOM
Rig 55	B	1981/2014	25,000	GOM
Rig 77	Barge rig	2006/2006	30,000	GOM
Rig 72	B	1982/2005	25,000	GOM
Rig 76	B	1977/2009	30,000	GOM
Rig 77	B	2006/2006	30,000	GOM

The table above excludes Rig 121 (1Colombia), ~~Type~~Rig is12 ~~defined~~(U.S.), ~~as:~~Rig ~~L —~~20 ~~land~~(U.S.) ~~rig;~~and ~~B —~~Rig ~~barge~~21 ~~rig~~(U.S.). Rig 121 was decommissioned in 2015 and sold after year-end. Rig 12 and Rig 21 were decommissioned and scrapped. Rig 20 was decommissioned for scrapping.

The table above excludes Rig 121 located in Colombia, which is currently not available for service. During 2018 we sold Rig 231 and Rig 253 which were located in Indonesia and Rig 268 which was located in Colombia.24

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Item 3. Legal Proceedings

For information on Legal Proceedings, see Note 911 - Commitments and Contingencies in Item 8. Financial Statements and Supplementary Data, which information is incorporated herein by reference.

For information on the Company’s Chapter 11 Cases, see Item 1. Business - Recent Developments - Reorganization and Chapter 11 Proceedings contained herein, which information is incorporated herein by reference.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

~~Parker~~Our ~~Drilling~~Predecessor ~~Company’s~~Common ~~common~~Stock ~~stock~~(as defined below) traded on the NYSE under the symbol “PKD” until December 12, 2018, at which time it was removed from trading on the NYSE, and began trading on the OTC Pink under the symbol “PKDSQ”. ~~Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions.~~

Our Successor Common Stock (as defined below) traded on the NYSE under the symbol “PKD” from April 3, 2019 through February 11, 2020, at which time we voluntarily delisted it from the NYSE and it began trading on the OTC Pink under the symbol “PKDC”.

The Company filed a Form 25 on January 29, 2020 with the SEC to delist its common stock from the NYSE and deregister the common stock under Section 12(b) of the Exchange Act.

Stockholders

As of ~~March~~February 625, ~~2019~~2020, there were ~~441~~461 stockholders of record.

Dividends

Our credit agreements limit the payment of dividends. In the past, we have not paid dividends on our ~~common~~Predecessor ~~stock~~Common ~~and~~Stock weor the Successor Common Stock. We have no present intention to pay dividends on ~~our~~the ~~common~~Successor ~~stock~~Common Stock in the foreseeable future.

Issuer Purchases of Equity Securities

The Company currently has no active share repurchase ~~programs~~program.

Item 6. Selected Financial Data

~~The~~Not following table presents selected historical consolidated financial data derived from the audited consolidated financial statements of Parker Drilling Company for each of the five years in the period ended December 31, 2018applicable. The following financial data should be read in conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8. Financial Statements and Supplementary Data.

	Year Ended December 31,
Dollars in Thousands, Except Per Share Amounts	2018			2017			2016			2015			2014
Income Statement Data
Revenues	$	480,821		$	442,520		$	427,004		$	712,183		$	968,684
Total operating income (loss)	$	(113,404	)	$	(65,805	)	$	(111,257	)	$	(17,338	)	$	120,220
Net income (loss)	$	(165,697	)	$	(118,701	)	$	(230,814	)	$	(94,284	)	$	24,461
Net income (loss) attributable to controlling interest	$	(165,697	)	$	(118,701	)	$	(230,814	)	$	(95,073	)	$	23,451
Net income (loss) available to common stockholders	$	(168,416	)	$	(121,752	)	$	(230,814	)	$	(95,073	)	$	23,451
Basic earnings (loss) per common share: (1)
Net income (loss)	$	(17.79	)	$	(13.07	)	$	(27.89	)	$	(11.54	)	$	3.03
Net income (loss) attributable to controlling interest	$	(17.79	)	$	(13.07	)	$	(27.89	)	$	(11.64	)	$	2.90
Net income (loss) available to common stockholders	$	(18.09	)	$	(13.40	)	$	(27.89	)	$	(11.64	)	$	2.90
Diluted earnings (loss) per common share: (1)
Net income (loss)	$	(17.79	)	$	(13.07	)	$	(27.89	)	$	(11.54	)	$	2.98
Net income (loss) attributable to controlling interest	$	(17.79	)	$	(13.07	)	$	(27.89	)	$	(11.64	)	$	2.86
Net income (loss) available to common stockholders	$	(18.09	)	$	(13.40	)	$	(27.89	)	$	(11.64	)	$	2.86
	Year Ended December 31,
Dollars in Thousands	2018 (3)			2017			2016			2015			2014
Balance Sheet Data
Total assets (2)	$	828,414		$	990,279		$	1,103,551		$	1,366,702		$	1,509,000
Long-term debt including current portion of long-term debt	$	—		$	577,971		$	576,326		$	574,798		$	603,341
Liabilities subject to compromise — principal debt only	$	585,000		$	—		$	—		$	—		$	—
Total equity	$	126,916		$	296,121		$	339,135		$	568,512		$	666,214

~~(1)~~Table ~~See~~of ~~Note 12 - Stockholders' Equity in Item 8. Financial Statements and Supplementary Data for details regarding the 1-for-15 reverse stock split.~~Contents

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(2) The Company adopted, effective January 1, 2016, newly issued accounting guidance ASU 2015-03, Interest - Imputation of Interest - Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the debt liability rather than as an asset.

(3) See Note 2 - Chapter 11 Cases in Item 8. Financial Statements and Supplementary Data for details regarding the reclass of long-term debt to liabilities subject to compromise and write-off of the related unamortized debt issuance costs in 2018.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis should be read in conjunction with Item 8. Financial Statements and Supplementary Data. We use rounded numbers in the Management Discussion and Analysis section which may result in slight differences with results reported under Item 8. Financial Statements and Supplementary Data.

For discussion related to the results of operations and change in financial condition of our Predecessor for the year ended December 31, 2018, compared to the year ended December 31, 2017, refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in Form 10-K for the year ended December 31, 2018, filed with the SEC on March 11, 2019.

Executive Summary

The oil and natural gas industry is highly cyclical. Activity levels are driven by traditional energy industry activity indicators, which include current and expected commodity prices, drilling rig counts, footage drilled, well counts, and our customers’ spending levels allocated to exploratory and development drilling.

Historical market indicators are listed below:

	2018		% Change		2017		% Change		2016
	2019		% Change		2018		% Change		2017
Worldwide Rig Count (1)
Worldwide rig count (1)
U.S. (land and offshore)	~~1,032~~944		18(9	)%	~~875~~1,032		7218	%	~~510~~875
International (2)	~~988~~1,098		411	%	~~948~~988		(14	)%	~~955~~948
Commodity Prices (3)
Commodity prices (3)
Crude Oil (Brent) per bbl	$	71.69	31	%	$	54.74	21	%	$	45.13
Crude oil (Brent) per bbl	$	64.16	(11	)%	$	71.69	31	%	$	54.74
Crude Oil (West Texas Intermediate) per bbl	$	64.90	28	%	$	50.85	17	%	$	43.47
Crude oil (West Texas Intermediate) per bbl	$	57.04	(12	)%	$	64.90	28	%	$	50.85
Natural Gas (Henry Hub) per mcf	$	3.07	2	%	$	3.02	18	%	$	2.55
Natural gas (Henry Hub) per mcf	$	2.53	(18	)%	$	3.07	2	%	$	3.02

(1) Estimate of drilling activity as measured by the average active rig count for the periods indicated - Source: Baker Hughes Rig Count.

(2) Excludes Canadian ~~Rig~~rig ~~Count~~count.

(3) Average daily commodity prices for the periods indicated based on NYMEX front-month composite energy prices.

~~Recent~~Chapter ~~Developments~~11 Emergence

On December 12, 2018 (the “Petition Date”), Parker 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 “Plan Effective Date”).

On December 12, 2018, (prior to the ~~“Petition~~commencement ~~Date”)~~of the Chapter 11 Cases, ~~Parker~~the ~~Drilling~~Debtors ~~and~~entered ~~certain~~into ofa ~~its~~restructuring ~~U.S.~~support ~~subsidiaries~~agreement (~~collectively~~as amended on January 28, 2019, the “~~Debtors~~RSA”) ~~filed~~with acertain ~~prearranged~~significant ~~plan~~holders of ~~reorganization~~ (~~the “Plan”~~1) ~~and~~7.50% ~~commenced~~Senior ~~voluntary~~Notes, ~~Chapter~~due 112020 ~~proceedings~~ (the “~~Chapter~~7.50% 11Note ~~Cases~~Holders”) ~~under~~issued ~~title~~pursuant 11to ofthe indenture (the ~~United~~“7.50% ~~States~~Notes ~~Code~~Indenture”) dated July 30, 2013 (the “~~Bankruptcy~~7.50% ~~Code~~Notes”), inby ~~the~~and ~~United~~among ~~States~~Parker ~~Bankruptcy~~Drilling, ~~Court~~the ~~for~~subsidiary ~~the~~guarantors ~~Southern~~party ~~District~~thereto and Bank of ~~Texas~~New York Mellon Trust Company, ~~Houston~~N.A., ~~Division~~as trustee (the “~~Bankruptcy Court~~Trustee”), (2) 6.75% ~~Since~~Senior Notes, due 2022 (the ~~commencement~~“6.75% ofNote Holders”) issued pursuant to the ~~Chapter~~indenture 11(the ~~Cases~~“6.75% Notes Indenture”) dated January 22, 2014 (the ~~Debtors~~“6.75% ~~have~~Notes” ~~continued~~and totogether ~~operate~~with ~~their~~the ~~businesses~~7.50% asNotes, the “~~debtors-in-possession~~Senior Notes”), ~~under~~by ~~the~~and ~~jurisdiction~~among ofParker Drilling, the ~~Bankruptcy~~subsidiary ~~Court~~guarantors party thereto and inthe ~~accordance~~Trustee, ~~with~~(3) Parker Drilling’s existing common stock (the ~~applicable~~“Predecessor ~~provisions~~Common ofStock”) and (4) Parker Drilling’s 7.25% Series A Mandatory Convertible Preferred Stock (the ~~Bankruptcy~~“Predecessor ~~Code~~Preferred Stock” and ~~orders~~such ofholders to support a restructuring (the ~~Bankruptcy~~“Restructuring”) ~~Court~~on the terms set forth in the Plan.

~~Also~~Plan ~~on December 12, 2018, prior to the commencement~~ of the Chapter 11 Cases, the Debtors entered into a restructuring support agreement (as amended, the “RSA”) with certain significant holders (together, collectively, the “Consenting Stakeholders”) of (i) 7.50% Senior Notes due 2020 (the “7.50% Note Holders”) issued pursuant to the 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”), (ii) 6.75% Senior Notes due 2022 (the “6.75% Note Holders”) issued pursuant to the 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, (iii) Parker Drilling’s existing common stock (the “Common Holders”) and (iv) Parker Drilling’s 7.25% Series A Mandatory Convertible Preferred Stock (the “Convertible Preferred Stock,” and such holders, the “Preferred Holders”) to support a restructuring (the “Restructuring”) on the terms set forth in the Plan.Reorganization

OnIn ~~December~~accordance ~~13,~~with ~~2018,~~ the ~~Bankruptcy~~Plan, ~~Court~~on ~~entered an order approving joint administration of~~ the ~~Chapter~~Plan 11Effective ~~Cases under the caption In re Parker Drilling Company, et al.~~Date:

~~Pursuant~~(1) to the ~~terms~~Company ofamended ~~the RSA~~ and ~~the~~restated ~~Plan,~~its ~~the~~certificate ~~Consenting~~of ~~Stakeholders~~incorporation and ~~other holders of claims against or interests in the Debtors receive treatment under the Plan summarized as follows:~~bylaws;

•(2) ~~holders~~the ofCompany ~~claims~~appointed ~~arising~~new ~~from~~members ~~non-funded~~to ~~debt~~the ~~general~~Successor’s ~~unsecured~~board ~~obligations~~of ~~receive~~directors ~~payment~~to inreplace ~~full~~directors inof ~~cash as set forth in~~ the ~~Plan~~Predecessor;

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~~• the 7.50% Note Holders receive their pro rata share of:~~ (~~a) approximately 34.~~3 ~~percent of the common stock (the “New Common Stock”~~) ~~of Parker Drilling, as reorganized pursuant to and under~~ the ~~Plan~~Company (“Reorganized Parker”), subject to dilution; (b) approximately $92.6 million of a new second lien term loan of Reorganized Parker (the “New Second Lien Term Loan”); (c) the right to purchase approximately 24.3 percent of the New Common Stock to be issued pursuant to the terms of the Rights Offering (as defined in the RSA); and (d) cash sufficient to satisfy certain expenses owed to the Trustee (the “Trustee Expenses”), to the extent not otherwise paid by the Debtors;:

• ~~the~~2,827,323 ~~6.75%~~shares ~~Note Holders receive their pro rata share~~ of: ~~(a)~~Successor ~~approximately 62.9 percent of the New~~ Common Stock, ~~subject~~pro torata ~~dilution; (b) approximately $117.4 million of the New Second Lien Term Loan; (c) the right~~ to ~~purchase approximately 38~~7.950% ~~percent~~Note ~~of the New Common Stock to be issued pursuant to the terms of the Rights Offering~~Holders; ~~and (d) cash sufficient to satisfy the Trustee Expenses, to the extent not otherwise paid by the Debtors;~~

• ~~the Preferred Holders receive their pro rata share of: (a) 1.1 percent of the New Common Stock~~5,178,860 ~~subject~~shares ~~to dilution; (b) the right to purchase approximately 14.7 percent~~ of ~~the~~Successor ~~New~~ Common Stock topro berata ~~issued pursuant~~ to ~~the terms of the Rights Offering; and (c) 40~~6.075% ~~percent~~Note ~~of the warrants to acquire an aggregate of 13.5 percent of the New Common Stock (the “New Warrants”)~~Holders; ~~and~~

• ~~the~~90,558 ~~Common~~shares ~~Holders receive their Pro Rata share~~ of: ~~(a)~~Successor ~~1.65 percent of the New~~ Common Stock, ~~subject~~and to1,032,073 ~~dilution;~~Successor ~~(b)~~warrants ~~the right~~ to purchase ~~approximately 22.~~1,032,073 ~~percent~~shares of ~~the~~Successor ~~New~~ Common Stock topro berata ~~issued pursuant~~ to ~~the~~holders ~~terms~~ of the ~~Rights~~Predecessor ~~Offering;~~Preferred ~~and (c) 60.0 percent of the New Warrants.~~Stock;

~~The~~• ~~RSA~~135,838 ~~contains~~shares ~~certain covenants on the part~~ of ~~each~~Successor ofCommon ~~the~~Stock ~~Debtors~~ and ~~the Consenting Stakeholders~~1,548,109 ~~including~~Successor ~~certain~~warrants ~~limitations on the parties’ ability~~ to ~~pursue~~purchase ~~alternative transactions~~1,548,109 ~~commitments~~shares ~~by the Consenting Stakeholders to vote in favor~~ of ~~the~~Successor ~~Plan~~Common ~~and~~Stock ~~commitments~~pro ofrata ~~the Debtors and the Consenting Stakeholders~~ to ~~negotiate~~holders ~~in good faith to finalize the documents and agreements governing the Plan. The RSA also provides for certain conditions to the obligations~~ of the ~~parties~~Predecessor ~~and~~Common ~~for termination upon the occurrence of certain events, including, without limitation, the failure to achieve certain milestones and certain breaches by the parties under the RSA.~~ Stock;

~~Since~~• ~~the Petition Date~~504,577 ~~the~~shares ~~Debtors~~of ~~have~~Successor ~~requested~~Common ~~and~~Stock ~~received~~to ~~certain~~commitment ~~approvals~~parties ~~and~~under ~~authorizations~~that ~~from~~certain ~~the~~Backstop ~~Bankruptcy~~Commitment ~~Court. This relief~~Agreement, ~~together~~dated ~~with~~December ~~the proposed treatment under the Plan~~12, ~~provides~~2018 ~~that~~and ~~vendors~~amended and ~~other~~restated ~~unsecured~~on ~~creditors~~January ~~will~~28, be2019, ~~paid~~(as inamended ~~full~~ and inrestated, the ~~ordinary~~“Backstop ~~course~~Commitment ofAgreement”) ~~business. All existing customer and vendor contracts are expected to remain~~ in ~~place~~respect ~~and~~of ~~be serviced in~~ the ~~ordinary~~commitment ~~course~~premium ofdue ~~business.~~thereunder;

On• ~~March 5~~1, ~~2019~~403,910 ~~the~~shares Bankruptcy Court held a hearing to determine whether the Plan should be confirmed. On March 7, 2019, the Bankruptcy Court entered an order confirming the Plan. Although the Bankruptcy Court has confirmed the Plan, the Debtors have not yet consummated all of ~~the~~Successor ~~transactions~~Common ~~that~~Stock ~~are contemplated by the Plan. Rather, the Debtors intend~~ to ~~consummate these transactions in~~ the ~~near~~commitment ~~future,~~parties onunder ~~or before~~ the ~~Plan’s~~Backstop ~~effective~~Commitment ~~date~~Agreement ~~(the “Effective Date”). As set forth~~ in ~~the~~connection ~~Plan, there are certain conditions precedent to the occurrence of the Effective Date, which must be satisfied or waived in accordance~~ with ~~the~~their ~~Plan~~backstop inobligation ~~order~~thereunder ~~for the Plan~~ to ~~become~~purchase ~~effective~~unsubscribed ~~and~~shares ~~the Debtors to emerge from the Chapter 11 Cases. The Debtors anticipate that each~~ of ~~these~~Successor ~~conditions~~Common ~~will~~Stock; be either satisfied or waived by the end of March 2019, which is the target for the Debtors' emergence from the Chapter 11 Cases. On the Effective Date, the Debtors’ operations will, generally, no longer be governed by the Bankruptcy Court's oversight.and

~~See~~• ~~Note~~4,903,308 2shares -of ~~Chapter~~Successor 11Common ~~Cases~~Stock to participants in ~~Item~~the 8.rights ~~Financial~~offering ~~Statements~~extended ~~and~~by ~~Supplementary~~Parker ~~Data~~to ~~and~~the ~~Item~~applicable ~~1A.~~classes ~~Risk~~under ~~Factors~~the ~~for~~Plan ~~additional~~(including ~~information~~to ~~regarding~~the ~~our~~commitment ~~Chapter~~parties 11party ~~proceedings.~~to the Backstop Commitment Agreement); and

~~Rights~~• all of the Company’s agreements, instruments and other documents evidencing or relating to, or otherwise connected with, any of the Predecessor’s equity interests outstanding prior to the Plan Effective Date were cancelled and all such equity interests have no further force or effect.

OnFresh ~~July 12,~~Start 2018, the Board of Directors of the Company declared a dividend of one right (“Right”) for each outstanding share of common stock to common stockholders of record at the close of business on July 27, 2018, which was amended by the Board of Directors on August 23, 2018 (the “Rights Plan”). On August 23, 2018, our Board of Directors approved an amendment and restatement of the Rights Plan, dated as of July 12, 2018, between the Company and Equiniti Trust Company, as rights agent (as amended and restated, the “Section 382 Rights Plan”). The purpose of the Section 382 Rights Plan is to protect value by preserving the Company’s ability to use its net operating losses and foreign tax credits (“Tax Benefits”). Accounting

~~Each~~Upon ~~Right~~emergence ~~entitles~~from ~~the~~bankruptcy, ~~registered~~we ~~holder~~adopted tofresh ~~purchase~~start ~~from~~accounting ~~the~~(“Fresh ~~Company~~Start aAccounting”) ~~unit~~in ~~consisting~~accordance ofwith ~~one~~FASB ~~one-thousandth~~ASC ofTopic aNo. ~~share~~852, (aReorganizations (“~~Fractional~~Topic ~~Share~~852”), ofwhich ~~Series~~resulted Ain ~~Junior~~the ~~Participating~~Company ~~Preferred~~becoming ~~Stock,~~a ~~par~~new ~~value~~entity $1for financial reporting purposes.00 ~~per~~See ~~share,~~Note at2 a- ~~purchase~~Chapter ~~price~~11 ofEmergence ~~$52.50~~and ~~per~~Note ~~Fractional~~3 ~~Share,~~- ~~subject~~Fresh toStart ~~adjustment.~~Accounting ~~Initially,~~for ~~the~~further ~~Rights~~details. ~~are~~We ~~attached~~evaluated tothe ~~all~~events ~~outstanding~~between ~~shares~~March of26, ~~common~~2019 ~~stock.~~and ~~The~~March ~~Rights~~31, ~~will~~2019 ~~separate~~and ~~from~~concluded that the ~~common~~use ~~stock~~of ~~and~~an aaccounting ~~“Distribution~~convenience ~~Date”~~date ~~will~~of ~~occur~~March 31, ~~with certain exceptions~~2019, ~~upon~~ (the ~~earlier~~“Fresh ofStart (iReporting Date”) 10would ~~days~~not ~~following~~have a ~~public~~material ~~announcement~~impact ~~that~~on aour ~~person~~results of operations or ~~group~~balance sheet. As such, the application of ~~affiliated~~fresh orstart ~~associated~~accounting ~~persons~~was ~~(an~~reflected ~~“Acquiring~~in ~~Person”)~~our ~~has~~condensed ~~acquired,~~consolidated orbalance ~~obtained~~sheet ~~the~~as ~~right~~of toMarch ~~acquire~~31, ~~beneficial~~2019, ~~ownership~~and offresh ~~4.9~~start ~~percent~~accounting oradjustments ~~more~~related ofthereto ~~the~~were ~~outstanding~~included ~~shares~~in our condensed consolidated statement of ~~common~~operations ~~stock,~~for orthe ~~(ii)~~three 10months ended March 31, 2019.

References to “Successor” relate to the financial position and results of operations of the reorganized Company as of and subsequent to March 31, 2019. References to “Predecessor” relate to the financial position of the Company prior to, and results of operations through and including, March 31, 2019. As a result of the adoption of Fresh Start Accounting and the effects of the implementation of the Plan, the Company’s consolidated financial statements of the Successor (as of and subsequent to March 31, 2019), are not comparable to its consolidated financial statements of the Predecessor.

~~Table~~Stockholder Approval of ~~contents~~Stock Splits Transaction and Delisting of our Common Stock from the New York Stock Exchange

~~business~~On ~~days~~January ~~following~~9, 2020, the ~~commencement~~Company ofheld a ~~tender~~special ~~offer~~meeting orof ~~exchange~~stockholders ~~offer~~(the ~~that~~“Special ~~would~~Meeting”). ~~result~~At inthe aSpecial ~~person’s~~Meeting, ~~becoming~~the anholders ~~Acquiring~~of ~~Person.~~a ~~Each~~majority ~~person or group~~ of ~~affiliated~~the orCompany’s ~~associated~~issued ~~persons~~and ~~that~~outstanding ~~was~~shares aof ~~beneficial~~common ~~owner~~stock ofentitled ~~4.9~~to ~~percent~~vote orapproved ~~more~~amendments ofto the ~~outstanding~~Company’s ~~shares~~certificate of ~~common~~incorporation, ~~stock~~as atamended (the ~~time~~“Certificate of ~~the~~Incorporation”), ~~adoption~~to ofeffect ~~the~~a ~~Section~~reverse ~~382~~stock ~~Rights~~split ~~Plan~~of ~~was~~the ~~grandfathered~~Company’s incommon atstock ~~its~~(the ~~then-current~~“Reverse ~~ownership~~Stock ~~level~~Split”), ~~but~~followed ~~the~~immediately ~~Rights~~by ~~will~~a ~~become~~forward ~~exercisable~~stock ifsplit atof ~~any time after~~ the ~~adoption~~Company’s ofcommon stock (the ~~Section~~“Forward ~~382~~Stock ~~Rights Plan~~Split,” ~~such~~and ~~person~~together orwith ~~group~~the ~~increases~~Reverse ~~its~~Stock ~~ownership~~Split, ofthe ~~common~~“Stock ~~stock~~Splits”), byat ~~one~~a ~~share~~ratio or(i) ~~more.~~not ~~Any~~less ~~person~~than or1-for-5 ~~group~~and ofnot ~~affiliated~~greater orthan ~~associated~~1-for-100, ~~persons~~in ~~who~~the ~~proposes~~case ~~to acquire 4.9 percent or more~~ of the ~~outstanding~~Reverse ~~shares~~Stock ofSplit, ~~common~~and ~~stock~~(ii) ~~may~~not ~~apply~~less tothan ~~our~~5-for-1 ~~Board~~and ofnot ~~Directors~~greater inthan ~~advance~~ 100-for-1, anin ~~exemption.~~the ~~The~~case ~~Rights~~of ~~are~~the ~~not~~Forward ~~exercisable~~Stock ~~until~~Split. If the ~~Distribution~~Stock ~~Date~~Splits ~~and~~are ~~will~~effectuated, ~~expire~~then atas ~~the~~a ~~earliest~~result of ~~(i)~~ the ~~close~~Stock ofSplits, ~~business~~a onstockholder ~~August~~owning ~~23,~~immediately ~~2021,~~prior ~~(ii)~~to the ~~redemption~~effective ortime ~~exchange~~ of the ~~Rights~~Reverse byStock ~~the~~Split ~~Company,~~fewer ~~(iii)~~than ~~the~~a ~~date~~minimum onnumber of shares, which, ~~our~~depending ~~Board~~on ofthe ~~Directors~~stock ~~determines~~split ~~that~~ratios ~~the~~chosen ~~Rights~~by ~~Plan~~the isBoard, nowould ~~longer~~be ~~necessary~~between ~~for~~5 ~~the~~and ~~preservation~~100, ofwould abe ~~material~~paid ~~Tax~~$30.00, ~~Benefit~~without interest, ~~(iv)~~for ~~the~~each ~~beginning~~share of acommon ~~taxable~~stock ~~year~~held ofby ~~the~~such ~~Company~~holder ~~for~~immediately ~~which~~prior ~~our~~to ~~Board~~the ofeffective ~~Directors~~time. ~~determines~~Cashed ~~that~~out nostockholders ~~Tax~~would ~~Benefits~~no ~~may~~longer be ~~carried~~stockholders ~~forward,~~of ~~(v)~~the ~~July~~Company. 12On January 29, 2019, ifin connection with the ~~affirmative~~anticipated ~~vote~~Stock ofSplits, the ~~majority~~Company offiled ~~the~~a ~~Company’s~~Form ~~stockholders~~25 ~~has~~with ~~not~~the ~~been~~Securities ~~obtained~~and ~~with~~Exchange ~~respect~~Commission (the “SEC”) to ~~ratification~~voluntarily ofdelist ~~the~~its ~~Rights~~common ~~Plan,~~stock ~~and~~from ~~(vi)~~trading on the ~~occurrence~~New ofYork aStock ~~“qualifying~~Exchange ~~offer~~(“NYSE”) ~~(as~~and ~~described~~to inderegister ~~the~~its ~~Section~~common ~~382~~stock ~~Rights~~under ~~Plan~~Section 12(b). Ifof the ~~rights~~Securities ~~become~~Exchange ~~exercisable,~~Act ~~each~~of ~~holder~~1934, ~~other~~as ~~than~~amended (the ~~Acquiring~~“Exchange ~~Person~~Act”). ~~(and~~The ~~certain~~delisting ~~related~~occurred ~~parties)~~ten ~~will~~calendar bedays ~~entitled~~after tothe ~~acquire~~filing ~~shares~~ of ~~common~~the ~~stock~~Form at25 aso ~~50.0~~that ~~percent~~trading ~~discount~~was orsuspended ~~the~~on ~~Company~~February ~~may~~10, ~~exchange~~2020, ~~each~~prior ~~right~~to ~~held~~the bymarket ~~such~~opening. ~~holders~~Following ~~for~~the ~~two~~delisting, ~~shares~~the ofCompany’s ~~common~~Board ~~stock.~~has continued to evaluate updated

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ownership data to ascertain the aggregate costs within the ranges of stock split ratios that the Company’s stockholders approved at the Special Meeting. Based upon this analysis, the Board will continue to consider the appropriate ratio to effectuate the Stock Splits. As previously disclosed, the Board, at its sole discretion, may elect to abandon the Stock Splits and the overall deregistration process for any reason, including if it determines that effectuating the Stock Splits would be too costly. Assuming the Board determines to proceed with the Stock Splits and the overall deregistration process, the Company will file with the State of Delaware certificates of amendment to the Company’s Certificate of Incorporation to effectuate the Stock Splits. Following the effectiveness of the Stock Splits, the Company will file a Form 15 with the SEC certifying that it has less than 300 stockholders, which will terminate the registration of the Company’s common stock under Section 12(g) of the Exchange Act. As a result, the Company would cease to file annual, quarterly, current, and other reports and documents with the SEC, and stockholders will cease to receive annual reports and proxy statements. Even if the Company effectuates the Stock Splits and terminates its registration under Section 12(g) of the Exchange Act, the Company intends to continue to prepare audited annual and unaudited quarterly financial statements and to make such information available to its stockholders on a voluntary basis. However, the Company would not be required to do so by law and there is no assurance that even if the Company did make such information available that it would continue to do so in the future.

Financial Results

Revenues ~~increased~~were $38472.34 million, orand ~~8.7 percent, to~~ $~~480~~157.84 million for the ~~year~~nine months ended December 31, ~~2018~~2019, asand ~~compared~~the ~~with~~three ~~revenues~~months ofended March 31, 2019, respectively, and $~~442~~480.58 million for the year ended December 31, ~~2017~~2018. Operating gross margin ~~increased~~was $3056.57 million toand ~~a loss of~~ $411.84 million for the ~~year~~nine months ended December 31, ~~2018~~2019, asand ~~compared~~the ~~with~~three months ended March 31, 2019, respectively, and a loss of $354.38 million for the year ended December 31, ~~2017~~2018.

Outlook

~~2018~~For ~~was~~2020, awe ~~year~~expect ofthe ~~constrained~~U.S. ~~improvement,~~land asrig ~~the~~count ~~oil~~to ~~and~~be ~~gas~~relatively ~~markets~~flat ~~wrestled~~to ~~with~~year ~~global~~end ~~supply~~levels ~~and~~after ~~demand~~a ~~balance~~26% ~~while~~decline ~~maintaining~~during ~~strict~~2019 ~~capital~~while ~~spend~~the ~~discipline~~U.S. ~~After~~offshore ~~years~~rig ofcount ~~underinvestment~~is ~~and~~expected ~~tepid~~to ~~activity~~increase inapproximately ~~international~~10%. ~~markets,~~The itnet ~~appears~~impact ~~that~~should ~~many~~translate ~~countries~~into ~~are~~a ~~sanctioning~~decrease ~~new~~in ~~projects,~~our ~~though~~year atover ayear ~~very gradual pace.~~ U.S. ~~markets~~rental ~~grew~~tools ~~throughout~~business ~~much~~results ofand ~~the~~a ~~first~~small ~~three~~increase ~~quarters,~~in ~~driven~~our ~~mostly~~barge byrig ~~unconventional~~utilization, ~~wells~~although ~~and~~overall ~~oil~~results ~~exports~~for our U.S. ~~Despite~~(lower a48) ~~sharp~~drilling ~~pullback~~segment inshould ~~commodity~~decrease ~~prices~~due into ~~the~~a ~~fourth~~shift ~~quarter,~~from werig ~~continue~~activation to ~~believe~~lower ~~global~~margin ~~market~~plug ~~conditions~~and ~~are~~abandonment ~~poised~~activity toon ~~improve~~our ~~over~~California ~~the medium and long term~~O&M.

InWe ~~our~~expect ~~U.S.~~the ~~(Lower~~international ~~48)~~rig ~~Drilling~~count ~~segment,~~to weincrease ~~anticipate~~approximately ~~utilization~~3% ~~for~~in ~~our~~2020 ~~barge~~with ~~drilling~~improvement ~~rigs~~mainly tocoming ~~improve~~from ~~slightly~~Mexico, ~~year-on-year~~the UAE, ~~while~~Iraq, ~~O&M~~and ~~activity~~Egypt. The areas in ~~this~~which the anticipated increase will occur should bode well for Parker. Our International rental tools segment revenue is ~~set~~anticipated to increase as we ~~move~~continue ~~into~~to win projects utilizing our well construction, well intervention, and surface and tubular goods in the ~~second~~Middle ~~quarter~~East, ofthe ~~2019.~~UK, ~~For~~and ~~our~~Latin America. Our International &and Alaska ~~Drilling~~drilling segment, weresults ~~anticipate~~are ~~higher~~expected ~~activity~~to inincrease ~~markets~~as ~~such~~we ashave ~~Alaska,~~won ~~Kazakhstan~~numerous contracts recently, ~~and~~including ~~Russia~~a ~~will~~5-year ~~provide~~extension ~~gradual~~of ~~segment~~our ~~improvement~~Sakhalin ~~compared~~Island tocontract ~~that~~and inthe ~~2018.~~addition ~~The~~of ~~segment~~two ~~will~~O&M ~~likely~~contracts ~~have~~in ~~higher~~Alaska. ~~gross~~In ~~margin~~total, ~~compared~~the tobacklog ~~2018~~for asour aO&M ~~result~~contracts ofhas ~~activity~~grown ~~improvement~~to $627 million.

InOur ~~our~~expectations ~~U.S.~~for ~~Rental~~2020 ~~Tools~~results ~~segment~~are directly linked to anticipated worldwide rig activity. Thus, wethere ~~anticipate~~are ~~strong~~inherent ~~utilization~~risks ofinvolved, ~~our~~including ~~rental~~changes ~~equipment~~to asthe current supply and demand ~~for~~outlook, ~~premium~~the ~~drill~~impact ~~pipe~~of ~~continues~~the coronavirus, ~~with~~and ~~operators~~investor ~~seeking~~pressure toon ~~capitalize~~E&P oncompanies ~~technology~~to ~~and~~exercise ~~improve~~capital ~~drilling~~discipline ~~efficiencies.~~and ~~For~~to ~~our~~generate ~~International~~free ~~Rental~~cash ~~Tools~~flow. ~~segment,~~Please wesee ~~expect~~Item ~~higher~~1A. ~~activity~~Risk ~~levels~~Factors ~~largely~~for ~~driven~~further byinformation regarding the ~~additional~~risks ~~well~~facing ~~construction~~the ~~work~~Company.

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Results of Operations

Our business is comprised of two business lines: (1) ~~Drilling~~rental ~~Services~~tools services and (2) ~~Rental~~drilling ~~Tools Services~~services. We report our ~~Drilling~~rental ~~Services~~tools services business as two reportable segments: (1) U.S. ~~(Lower~~rental ~~48)~~tools ~~Drilling~~ and (2) International &rental ~~Alaska Drilling~~tools. We report our ~~Rental~~drilling ~~Tools~~services ~~Services~~ business as two reportable segments: (1) U.S. ~~Rental~~(lower ~~Tools~~48) drilling and (2) International ~~Rental~~& ~~Tools~~Alaska drilling. We eliminate inter-segment revenues and expenses.

We analyze financial results for each of our reportable segments. The reportable segments presented are consistent with our reportable segments discussed in our consolidated financial statements. See Note 1617 - Reportable Segments in Item 8. Financial Statements and Supplementary Data for further discussion. We monitor our reporting segments based on several criteria, including operating gross margin and operating gross margin excluding depreciation and amortization. Operating gross margin excluding depreciation and amortization is computed as revenues less direct operating expenses, and excludes depreciation and amortization expense, where applicable. Operating gross margin percentages are computed as operating gross margin as a percent of revenues. The operating gross margin excluding depreciation and amortization amounts and percentages should not be used as a substitute for those amounts reported under accounting policies generally accepted in the United States (“U.S. GAAP”), but should be viewed in addition to the Company’s reported results prepared in accordance with U.S. GAAP. Management believes this information provides valuable insight into the information management considers important in managing the business.

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~~Year~~Nine Months Ended December 31, ~~2018~~2019, ~~Compared~~Three ~~with~~Months Ended March 31, 2019 and the Year Ended December 31, ~~2017~~2018

The following is an analysis of our operating results for the comparable periods by reportable segment:

	Year Ended December 31,
	Successor						Predecessor
Dollars in Thousands	2018					2017
	Nine Months Ended December 31,						Three Months Ended March 31,						Year Ended December 31,
Revenues:
Dollars in Thousands	2019						2019						2018
U.S. (Lower 48) Drilling	$	11,729		2	%	$	12,389			3	%
Revenues:
International & Alaska Drilling	213,411			45	%	247,254				56	%
U.S. rental tools	$	144,698		31	%		$	52,595			34	%	$	176,531		37	%
Total Drilling Services	225,140			47	%	259,643				59	%
International rental tools	71,292			15	%		21,109				13	%	79,150			16	%
U.S. Rental Tools	176,531			37	%	121,937				27	%
Total rental tools services	215,990			46	%		73,704				47	%	255,681			53	%
International Rental Tools	79,150			16	%	60,940				14	%
U.S. (lower 48) drilling	36,710			8	%		6,627				4	%	11,729			2	%
Total Rental Tools Services	255,681			53	%	182,877				41	%
International & Alaska drilling	219,695			46	%		77,066				49	%	213,411			45	%
Total revenues	$	480,821		100	%	$	442,520			100	%
Total drilling services	256,405			54	%		83,693				53	%	225,140			47	%
Operating gross margin (loss) excluding depreciation and amortization: (1)
Total revenues	$	472,395		100	%		$	157,397			100	%	$	480,821		100	%
U.S. (Lower 48) Drilling	$	(7,962	)	(68	)%	$	(7,135	)		(58	)%
Operating gross margin excluding depreciation and amortization: (1)
International & Alaska Drilling	14,136			7	%	40,702				16	%
U.S. rental tools	$	68,966		48	%		$	29,004			55	%	$	92,679		53	%
Total Drilling Services	6,174			3	%	33,567				13	%
International rental tools	10,632			15	%		534				3	%	3,864			5	%
U.S. Rental Tools	92,679			53	%	59,140				49	%
Total rental tools services	79,598			37	%		29,538				40	%	96,543			38	%
International Rental Tools	3,864			5	%	(5,674		)		(9	)%
U.S. (lower 48) drilling	6,613			18	%		(700		)		(11	)%	(7,962		)	(68	)%
Total Rental Tools Services	96,543			38	%	53,466				29	%
International & Alaska drilling	32,009			15	%		7,688				10	%	14,136			7	%
Total operating gross margin (loss) excluding depreciation and amortization	102,717			21	%	87,033				20	%
Total drilling services	38,622			15	%		6,988				8	%	6,174			3	%
Depreciation and amortization	(107,545		)			(122,373		)
Total operating gross margin excluding depreciation and amortization	118,220			25	%		36,526				23	%	102,717			21	%
Total operating gross margin (loss)	(4,828		)			(35,340		)
Depreciation and amortization	(61,499		)				(25,102		)				(107,545		)
General and administrative expense	(24,545		)			(25,676		)
Total operating gross margin	56,721						11,424						(4,828		)
Loss on impairment	(50,698		)			—
General and administrative expense	(17,967		)				(8,147		)				(24,545		)
Provision for reduction in carrying value of certain assets	—					(1,938		)
Loss on impairment	—						—						(50,698		)
Gain (loss) on disposition of assets, net	~~(1,724~~226		)			~~(2,851~~	384	)					(1,724		)
Pre-petition restructuring charges	~~(21,820~~—		)			—	—						(21,820		)
Reorganization items	(91,~~789~~173		)			—	(92,977		)				(9,789		)
Total operating income (loss)	$	~~(113~~37,~~404~~807	)			$	~~(65,805~~$	)(89,316	)				$	(113,404	)

(1) Percentage amounts are calculated by dividing the operating gross margin ~~(loss)~~ excluding depreciation and amortization ~~with~~by revenue for the respective segment and business lines.

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Operating gross margin (loss) amounts are reconciled to our most comparable U.S. GAAP measure as follows:

Dollars in Thousands	U.S. ~~(Lower~~Rental ~~48)Drilling~~Tools			International &Rental ~~Alaska Drilling~~Tools			U.S. ~~Rental~~(Lower ~~Tools~~48)Drilling			International ~~Rental~~& ~~Tools~~Alaska Drilling			Total
Year Ended December 31, 2018
Nine months ended December 31, 2019 (Successor)
Operating gross margin (loss) (1)	$	(15,720	)	$	(21,936	)	$	44,512		$	(11,684	)	$	(4,828	)
Operating gross margin (1) (Successor)	$	38,054		$	4,633		$	2,189		$	11,845		$	56,721
Depreciation and amortization	7,758			36,072			48,167			15,548			107,545
Depreciation and amortization (Successor)	30,912			5,999			4,424			20,164			61,499
Operating gross margin (loss) excluding depreciation and amortization	$	(7,962	)	$	14,136		$	92,679		$	3,864		$	102,717
Operating gross margin excluding depreciation and amortization (Successor)	$	68,966		$	10,632		$	6,613		$	32,009		$	118,220
Year Ended December 31, 2017
Dollars in Thousands	U.S. Rental Tools			International Rental Tools			U.S. (Lower 48)Drilling			International & Alaska Drilling			Total
Operating gross margin (loss) (1)	$	(20,656	)	$	(6,248	)	$	15,651		$	(24,087	)	$	(35,340	)
Three months ended March 31, 2019 (Predecessor)
Depreciation and amortization	13,521			46,950			43,489			18,413			122,373
Operating gross margin (1) (Predecessor)	$	17,289		$	(3,581	)	$	(1,508	)	$	(776	)	$	11,424
Operating gross margin (loss) excluding depreciation and amortization	$	(7,135	)	$	40,702		$	59,140		$	(5,674	)	$	87,033
Depreciation and amortization (Predecessor)	11,715			4,115			808			8,464			25,102
Operating gross margin excluding depreciation and amortization (Predecessor)	$	29,004		$	534		$	(700	)	$	7,688		$	36,526
Dollars in Thousands	U.S. Rental Tools			International Rental Tools			U.S. (Lower 48)Drilling			International & Alaska Drilling			Total
Year ended December 31, 2018 (Predecessor)
Operating gross margin (1) (Predecessor)	$	44,512		$	(11,684	)	$	(15,720	)	$	(21,936	)	$	(4,828	)
Depreciation and amortization (Predecessor)	48,167			15,548			7,758			36,072			107,545
Operating gross margin excluding depreciation and amortization (Predecessor)	$	92,679		$	3,864		$	(7,962	)	$	14,136		$	102,717

(1) Operating gross margin ~~(loss)~~ is calculated as revenues less direct operating expenses, including depreciation and amortization expense.

~~The following table presents our average utilization rates and rigs available for service for the years ended December~~ 31~~, 2018 and 2017, respectively:~~

	December 31,
	2018		2017
U.S. (Lower 48) Drilling
Rigs available for service (1)	13		13
Utilization rate of rigs available for service (2)	10	%	11	%
International & Alaska Drilling
Eastern Hemisphere
Rigs available for service (1) (3)	10		13
Utilization rate of rigs available for service (2)	46	%	38	%
Latin America Region
Rigs available for service (1)	7		7
Utilization rate of rigs available for service (2)	21	%	14	%
Alaska
Rigs available for service (1)	2		2
Utilization rate of rigs available for service (2)	50	%	97	%
Total International & Alaska Drilling
Rigs available for service (1)	19		22
Utilization rate of rigs available for service (2)	37	%	36	%

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The following table presents our average utilization rates and rigs available for service for the nine months ended December 31, 2019, the three months ended March 31, 2019 and year ended December 31, 2018, respectively:



	Successor		Predecessor
	Nine Months Ended December 31,		Three Months Ended March 31,		Year Ended December 31,
	2019		2019		2018
U.S. (lower 48) drilling
Rigs available for service ⁽¹⁾	10		13		13
Utilization rate of rigs available for service ⁽²⁾	17	%	4	%	10	%
International & Alaska drilling
Eastern Hemisphere
Rigs available for service ⁽¹⁾	10		10		10
Utilization rate of rigs available for service ⁽²⁾	44	%	50	%	46	%
Latin America Region
Rigs available for service ⁽¹⁾	7		7		7
Utilization rate of rigs available for service ⁽²⁾	51	%	29	%	21	%
Alaska
Rigs available for service ⁽¹⁾	2		2		2
Utilization rate of rigs available for service ⁽²⁾	50	%	50	%	50	%
Total International & Alaska drilling
Rigs available for service ⁽¹⁾	19		19		19
Utilization rate of rigs available for service ⁽²⁾	47	%	42	%	37	%

(1)

The number of rigs available for service is determined by calculating the number of days each rig was in our fleet and was under contract or available for contract. For example, a rig under contract or available for contract for six months of a year is 0.5 rigs available for service during such year. Our method of computation of rigs available for service may not be comparable to other similarly titled measures of other companies.

(2)

Rig utilization rates are based on a weighted average basis assuming total days availability for all rigs available for service. Rigs acquired or disposed of are treated as added to or removed from the rig fleet as of the date of acquisition or disposal. Rigs that are in operation or fully or partially staffed and on a revenue-producing standby status are considered to be utilized. Rigs under contract that generate revenues during moves between locations or during mobilization or demobilization are also considered to be utilized. Our method of computation of rig utilization may not be comparable to other similarly titled measures of other companies.

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(3) The Eastern Hemisphere rigs available for service decreased due to the sale of two Indonesia rigs in the first quarter 2018 and one Papua New Guinea rig in the fourth quarter of 2017.

Drilling Services Business

U.S. (Lower 48) Drilling

U.S. (Lower 48) Drilling segment revenues decreased $0.7 million, or 5.3 percent, to $11.7 million for the year ended December 31, 2018, as compared with revenues of $12.4 million for the year ended December 31, 2017. The decrease was primarily due to a decrease in utilization to 10.0 percent for the year ended December 31, 2018 from 11.0 percent for the year ended December 31, 2017.

U.S. (Lower 48) Drilling segment operating gross margin excluding depreciation and amortization decreased $0.8 million, or 11.6 percent, to a loss of $8.0 million for the year ended December 31, 2018, compared with a loss of $7.1 million for the year ended December 31, 2017. This decrease was primarily due to the decrease in revenues discussed above.

International & Alaska Drilling

International & Alaska Drilling segment revenues decreased $33.8 million, or 13.7 percent, to $213.4 million for the year ended December 31, 2018, compared with $247.3 million for the year ended December 31, 2017.

The change in revenues was primarily due to the following:

• a decrease of $23.6 million driven by a decline in average revenue per day primarily resulting from certain Company-owned rigs being in standby mode during 2018 compared with operating mode during 2017;

• a decrease of $10.9 million, excluding revenue from reimbursable costs (“reimbursable revenues”), resulting from decreased utilization for certain Company-owned rigs in Alaska and Kazakhstan, partially offset by increased utilization in the Kurdistan region of Iraq;

• a decrease of $3.3 million in reimbursable revenues, which decreased revenues but had a minimal impact on operating margins; and

• an increase of $2.9 million of O&M activities, excluding reimbursable revenues.

International & Alaska Drilling segment operating gross margin excluding depreciation and amortization decreased $26.6 million, or 65.3 percent, to $14.1 million for the year ended December 31, 2018, compared with $40.7 million for the year ended December 31, 2017. The decrease in operating gross margin excluding depreciation and amortization was primarily due to decrease in revenues discussed above.

Rental Tools Services Business

U.S. Rental Tools

U.S. ~~Rental~~rental ~~Tools~~tools segment revenues ~~increased~~were $54144.7 million and $52.6 million for the nine months ended December 31, or2019, ~~44.8~~and ~~percent~~the three months ended March 31, to2019, respectively, and were $176.5 million for the year ended December 31, 2018 ~~compared with $121~~.9 ~~million~~The results for the ~~year~~nine months ended December 31, ~~2017.~~2019, ~~The~~and ~~increase~~the ~~was~~three months ended March 31, 2019, were primarily driven by ancustomer ~~increase~~activity in U.S. land ~~rentals~~and ~~due~~offshore ~~to higher levels of customer activity~~rentals.

U.S. ~~Rental~~rental ~~Tools~~tools segment operating gross margin excluding depreciation and amortization ~~increased~~was $3369.50 million, orand ~~56.7 percent, to~~ $9229.70 million for the ~~year~~nine months ended December 31, ~~2018~~2019, ~~compared~~and ~~with~~the three months ended March 31, 2019, respectively, and was $5992.17 million for the year ended December 31, ~~2017~~2018. The ~~increase~~results ~~was~~for ~~primarily~~the ~~due~~nine tomonths ended December 31, 2019, and the ~~increase~~three inmonths ended March 31, 2019, were primarily driven by revenues discussed above.

International Rental Tools

International ~~Rental~~rental ~~Tools~~tools segment revenues ~~increased~~were $1871.23 million, orand 29$21.91 ~~percent~~million for the nine months ended December 31, to2019, and the three months ended March 31, 2019, respectively, and was $79.2 million for the year ended December 31, 2018 ~~compared with $60~~.9 ~~million~~The results for the ~~year~~nine months ended December 31, ~~2017.~~2019, ~~The~~and ~~increase~~the three months ended March 31, 2019, were primarily ~~attributable~~driven toby ~~increased~~well ~~onshore~~construction, ~~rental~~well ~~activity~~intervention inservices, ~~the~~and ~~Middle~~surface ~~East~~and tubular services.

International Rental Tools segment operating gross margin excluding depreciation and amortization increased $9.5 million, or 168.1 percent, to a gain of $3.9 million for the year ended December 31, 2018 compared with loss of $5.7 million for the year ended December 31, 2017. The increase was primarily due to the increase in revenues discussed above.32

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~~Table~~International ofrental ~~contents~~tools segment operating gross margin excluding depreciation and amortization was $10.6 million and $0.5 million for the nine months ended December 31, 2019, and the three months ended March 31, 2019, respectively, and was $3.9 million for the year ended December 31, 2018. The results for the nine months ended December 31, 2019, and the three months ended March 31, 2019, were primarily driven by revenues discussed above.

Other Financial Data

General and administrative expense

General and administrative expense decreased $1.1 million to $24.5 million for the year ended December 31, 2018, compared with $25.7 million for the year ended December 31, 2017 primarily due to reductions in professional fees.

Loss on impairment

Loss on impairment was $50.7 million for the year ended December 31, 2018. During third quarter 2018 we had a loss on impairment of $44.0 million which consisted of $34.2 million for Gulf of Mexico inland barge asset group and $9.8 million for International barge asset group. We performed our 2018 annual goodwill impairment review during the fourth quarter, as of October 1, and determined that the carrying value of the reporting unit exceeded its fair value and, therefore, the entire goodwill balance of $6.7 million for U.S. Rental Tools segment was impaired and written off. There was no loss on impairment for the year ended December 31, 2017.

Provision for reduction in carrying value of certain assets

There was no provision for reduction in carrying value of certain assets recorded during the year ended December 31, 2018. During the year ended December 31, 2017, we recorded $1.9 million of provision for reduction in carrying value of assets. This provision was related to certain assets in the International & Alaska Drilling segment that were deemed to be functionally obsolete.

Gain (loss) on disposition of assets, net

Net losses recorded on asset dispositions were $1.7 million and $2.9 million for the years ended December 31, 2018 and December 31, 2017, respectively. The net loss for 2018 was primarily related to equipment that was deemed obsolete in the International & Alaska Drilling segment and U.S. Rental Tools segment. The net loss for 2017 was primarily related to the sale of one rig located in Papua New Guinea. We periodically sell equipment deemed excess, obsolete, or not currently required for operations.

Pre-petition restructuring charges

Pre-petition charges were $21.8 million for the year ended December 31, 2018. The pre-petition restructuring charges primarily consisted of professional fees related to the Chapter 11 Cases. There were no pre-petition charges for the year ended December 31, 2017.

Reorganization items

Reorganization items were $9.8 million for the year ended December 31, 2018. The reorganization items primarily consisted of debt finance costs related to Senior Notes, professional fees, debt finance costs related to the 2015 Secured Credit Agreement and debtor-in-possession financing costs in the amount of $5.4 million, $2.3 million, $1.2 million and $1.0 million respectively, related to the Chapter 11 Cases. There were no reorganization items for the year ended December 31, 2017.

Interest expense and income

Interest expense decreased $1.7 million to $42.6 million for the year ended December 31, 2018 compared with $44.2 million for the year ended December 31, 2017. The decrease in interest expense is because the Company discontinued accruing interest upon the commencement of the Chapter 11 Cases.

Other

Other income and expense was $2.0 million of expense and $0.1 million of income for the years ended December 31, 2018 and December 31, 2017, respectively. Other income for both periods included the impact of foreign currency fluctuations.

Income tax expense (benefit)

Income tax expense was $7.8 million on a pre-tax loss of $157.9 million for the year ended December 31, 2018, compared with $9.0 million on pre-tax loss of $109.7 million for the year ended December 31, 2017. Our effective tax rate was negative 4.9 percent for the year ended December 31, 2018, compared with negative 8.2 percent for the year ended December 31, 2017. Income tax expense and our annual effective tax rate are primarily affected by the statutory tax rates applied in the jurisdictions where the income or losses are earned, and our ability to receive tax benefits for losses incurred. It is also affected by discrete items, such as return-to-accrual adjustments and changes in valuation allowances, and changes in reserves for uncertain tax positions, which may occur in any given year but are not consistent from year to year.

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Income tax expense for the year ended December 31, 2018 includes a net tax expense related to the change in valuation allowance of $28.4 million. We established the valuation allowance based on the weight of available evidence, both positive and negative, including results of recent and current operations and our estimates of future taxable income or loss by jurisdiction in which we operate. 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 business considerations. Changes in these estimates and assumptions, including changes in tax laws and other changes impacting our ability to recognize the underlying deferred tax assets, could require us to adjust the valuation allowances.

We are a U.S. based company that operates internationally through various branches and subsidiaries. Accordingly, our worldwide income tax provision includes the impact of income tax rates and foreign tax laws in the jurisdictions in which our operations are conducted and income is earned. We reported tax benefits for foreign statutory rates different from our U.S. statutory rate of $0.1 million and $2.0 million and tax expense of $7.3 million and $13.1 million for the impact of foreign tax laws in effect for the years ended December 31, 2018 and December 31, 2017, respectively. Differences between the U.S. and foreign tax rates and laws have a significant impact in Canada, Iraq, Kazakhstan, Mexico, Russia, United Arab Emirates and the United Kingdom.

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act included significant changes to U.S. corporate income tax laws, the most notable of which was a reduction in the U.S. corporate income tax rate from 35.0 percent to 21.0 percent, effective for tax years beginning January 1, 2018, and a one-time mandatory tax on previously deferred earnings of certain foreign subsidiaries associated with the transition from a worldwide to a modified territorial tax regime. As a result of the Company’s net deferred tax position, inclusive of valuation allowances, the provisions of the Tax Act did not materially impact the Company’s cash tax position or effective tax rate in 2018.

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Year Ended December 31, 2017 Compared with Year Ended December 31, 2016

Revenues increased $15.5 million, or 3.6 percent, to $442.5 million for the year ended December 31, 2017 as compared with revenues of $427.0 million for the year ended December 31, 2016. Operating gross margin increased $40.0 million to a loss of $35.3 million for the year ended December 31, 2017 as compared with a loss of $75.3 million for the year ended December 31, 2016.

The following is an analysis of our operating results for the comparable periods by reportable segment:

	Year Ended December 31,
Dollars in Thousands	2017					2016
Revenues:
U.S. (Lower 48) Drilling	$	12,389		3	%	$	5,429		1	%
International & Alaska Drilling	247,254			56	%	287,332			67	%
Total Drilling Services	259,643			59	%	292,761			68	%
U.S. Rental Tools	121,937			27	%	71,613			17	%
International Rental Tools	60,940			14	%	62,630			15	%
Total Rental Tools Services	182,877			41	%	134,243			32	%
Total revenues	$	442,520		100	%	$	427,004		100	%
Operating gross margin (loss) excluding depreciation and amortization: (1)
U.S. (Lower 48) Drilling	$	(7,135	)	(58	)%	$	(14,304	)	(263	)%
International & Alaska Drilling	40,702			16	%	64,508			22	%
Total Drilling Services	33,567			13	%	50,204			17	%
U.S. Rental Tools	59,140			49	%	21,397			30	%
International Rental Tools	(5,674		)	(9	)%	(7,118		)	(11	)%
Total Rental Tools Services	53,466			29	%	14,279			11	%
Total operating gross margin (loss) excluding depreciation and amortization	87,033			20	%	64,483			15	%
Depreciation and amortization	(122,373		)			(139,795		)
Total operating gross margin (loss)	(35,340		)			(75,312		)
General and administrative expense	(25,676		)			(34,332		)
Provision for reduction in carrying value of certain assets	(1,938		)			—
Gain (loss) on disposition of assets, net	(2,851		)			(1,613		)
Total operating income (loss)	$	(65,805	)			$	(111,257	)

(1) Percentage amounts are calculated by dividing the operating gross margin (loss) excluding depreciation and amortization with revenue for the respective segment and business lines.

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Operating gross margin (loss) amounts are reconciled to our most comparable U.S. GAAP measure as follows:

Dollars in Thousands	U.S. (Lower 48)Drilling			International & Alaska Drilling			U.S. Rental Tools			International Rental Tools			Total
Year Ended December 31, 2017
Operating gross margin (loss) (1)	$	(20,656	)	$	(6,248	)	$	15,651		$	(24,087	)	$	(35,340	)
Depreciation and amortization	13,521			46,950			43,489			18,413			122,373
Operating gross margin (loss) excluding depreciation and amortization	$	(7,135	)	$	40,702		$	59,140		$	(5,674	)	$	87,033
Year Ended December 31, 2016
Operating gross margin (loss) (1)	$	(34,353	)	$	9,272		$	(22,372	)	$	(27,859	)	$	(75,312	)
Depreciation and amortization	20,049			55,236			43,769			20,741			139,795
Operating gross margin (loss) excluding depreciation and amortization	$	(14,304	)	$	64,508		$	21,397		$	(7,118	)	$	64,483

(1) Operating gross margin (loss) is calculated as revenues less direct operating expenses, including depreciation and amortization expense.

The following table presents our average utilization rates and rigs available for service for the years ended December 31, 2017 and 2016, respectively:

	December 31,
	2017		2016
U.S. (Lower 48) Drilling
Rigs available for service (1)	13		13
Utilization rate of rigs available for service (2)	11	%	5	%
International & Alaska Drilling
Eastern Hemisphere
Rigs available for service (1)	13		13
Utilization rate of rigs available for service (2)	38	%	40	%
Latin America Region
Rigs available for service (1)	7		7
Utilization rate of rigs available for service (2)	14	%	23	%
Alaska
Rigs available for service (1)	2		2
Utilization rate of rigs available for service (2)	97	%	100	%
Total International & Alaska Drilling
Rigs available for service (1)	22		22
Utilization rate of rigs available for service (2)	36	%	40	%

(1) The number of rigs available for service is determined by calculating the number of days each rig was in our fleet and was under contract or available for contract. For example, a rig under contract or available for contract for six months of a year is 0.5 rigs available for service during such year. Our method of computation of rigs available for service may not be comparable to other similarly titled measures of other companies.

(2) Rig utilization rates are based on a weighted average basis assuming total days availability for all rigs available for service. Rigs acquired or disposed of are treated as added to or removed from the rig fleet as of the date of acquisition or disposal. Rigs that are in operation or fully or partially staffed and on a revenue-producing standby status are considered to be utilized. Rigs under contract that generate revenues during moves between locations or during mobilization or demobilization are also considered to be utilized. Our method of computation of rig utilization may not be comparable to other similarly titled measures of other companies.

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Drilling Services Business

U.S. (Lower 48) Drilling

U.S. (~~Lower~~lower 48) ~~Drilling~~drilling segment revenues ~~increased~~were $736.07 million, orand ~~128.2 percent, to~~ $126.46 million for the ~~year~~nine months ended December 31, ~~2017~~2019, asand ~~compared~~the ~~with~~three ~~revenues~~months ofended March 31, 2019, respectively, and was $511.47 million for the year ended December 31, ~~2016~~2018. The ~~increase~~results ~~was primarily due to an increase in utilization to 11.0 percent~~ for the ~~year~~nine months ended December 31, ~~2017~~2019, ~~from~~and ~~5.0 percent for~~ the ~~year~~three months ended ~~December~~ March 31, ~~2016~~2019, aswere ~~well~~primarily asdriven aby ~~moderate~~our ~~increase~~inland inbarge ~~revenues~~rig ~~per~~fleet ~~day~~and ~~for~~O&M ~~certain barge rigs~~revenue.

U.S. (~~Lower~~lower 48) ~~Drilling~~drilling segment operating gross margin excluding depreciation and amortization ~~increased~~was ~~$7.2~~a ~~million,~~gain orof 50$6.16 ~~percent,~~million toand a loss of $70.17 million for the ~~year~~nine months ended December 31, ~~2017~~2019, ~~compared~~and ~~with~~the three months ended March 31, 2019, respectively, and a loss of $148.30 million for the year ended December 31, ~~2016~~2018. ~~This~~The ~~increase~~results ~~was~~for ~~primarily~~the ~~due~~nine tomonths ended December 31, 2019, and the ~~increase~~three inmonths ~~utilization~~ended ~~discussed~~March ~~above~~31, ~~and~~2019, ~~reduced~~were ~~costs~~primarily ~~resulting~~driven ~~from~~by ~~organizational~~revenues ~~efficiency~~discussed ~~initiatives~~above.

International & Alaska Drilling

International & Alaska ~~Drilling~~drilling segment revenues ~~decreased~~were $40219.07 million, orand ~~13.9 percent, to~~ $~~247~~77.31 million for the ~~year~~nine months ended December 31, ~~2017~~2019, ~~compared~~and ~~with~~the three months ended March 31, 2019, respectively, and was $~~287~~213.34 million for the year ended December 31, ~~2016~~2018. The results for the nine months ended December 31, 2019, and the three months ended March 31, 2019, were primarily driven by O&M revenue and revenue from Company-owned rigs.

~~The~~International ~~decrease~~& inAlaska ~~revenues~~drilling segment operating gross margin excluding depreciation and amortization was ~~primarily~~$32.0 ~~due~~million toand $7.7 million for the ~~following:~~nine months ended December 31, 2019, and the three months ended March 31, 2019, respectively, and was $14.1 million for the year ended December 31, 2018. The results for the nine months ended December 31, 2019, and the three months ended March 31, 2019, were primarily driven by revenues discussed above.

• a decrease of $21.9 million related to our project services activities;

• a decrease in reimbursable revenues of $11.7 million, which decreased revenues but had a minimal impact on operating margins;

• a decrease of $10.5 million resulting from a combined decrease in utilization and revenues per day for certain Company-owned rigs. The decline in revenues per day is a direct result of certain Company-owned rigs shifting to standby mode during 2017 compared with operating mode during 2016; and

• a decrease of $5.4 million from mobilization and demobilization activities.

The decrease in revenues was partially offset by an increase of $11.3 million primarily driven by O&M activities associated with the Hibernia platform located off the Atlantic Coast of Canada.

International & Alaska Drilling segment operating gross margin excluding depreciation and amortization decreased $23.8 million, or 36.9 percent, to $40.7 million for the year ended December 31, 2017, compared with $64.5 million for the year ended December 31, 2016. The decrease in operating gross margin excluding depreciation and amortization was primarily due to a decrease in project services activities and the impact of reduced utilization discussed above.

Rental Tools Services Business

U.S. Rental Tools

U.S. Rental Tools segment revenues increased $50.3 million, or 70.3 percent, to $121.9 million for the year ended December 31, 2017 compared with $71.6 million for the year ended December 31, 2016. The increase was primarily driven by an increase in U.S. land rentals due to improved customer activity, partially offset by a decline in offshore GOM rental revenues.

U.S. Rental Tools segment operating gross margin excluding depreciation and amortization increased $37.7 million, or 176.4 percent, to $59.1 million for the year ended December 31, 2017 compared with $21.4 million for the year ended December 31, 2016. The increase was primarily due to the increase in revenues discussed above.

International Rental Tools

International Rental Tools segment revenues decreased $1.7 million, or 2.7 percent, to $60.9 million for the year ended December 31, 2017 compared with $62.6 million for the year ended December 31, 2016. The decrease was primarily attributable to a decline in offshore rental revenues somewhat offset by international land rental revenues.

International Rental Tools segment operating gross margin excluding depreciation and amortization increased $1.4 million, or 20.3 percent, to a loss of $5.7 million for the year ended December 31, 2017 compared with loss of $7.1 million for the year ended December 31, 2016. The increase was due to lower operating costs resulting from organizational efficiency initiatives.

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Other Financial Data

General and ~~administrative~~Administrative ~~expense~~Expense

General and administrative expense ~~decreased~~was $818.60 million toand $258.71 million for the ~~year~~nine months ended December 31, ~~2017~~2019, ~~compared~~and ~~with~~the three months ended March 31, 2019, respectively, and was $3424.35 million for the year ended December 31, ~~2016~~2018. ~~primarily~~The ~~due~~results tofor ~~reductions~~the innine ~~incentive~~months ended December 31, 2019, and the three months ended March 31, 2019, were primarily driven by compensation expense and ~~professional~~legal fees.

~~Provision~~Loss ~~for~~on ~~reduction in carrying value of certain assets~~Impairment

~~During~~There was no loss on impairment for the ~~year~~nine months ended December 31, ~~2017~~2019 or, wethe ~~recorded~~three months ended March 31, 2019. Loss on impairment was $150.97 million offor ~~provisions~~the ~~for~~year ~~reduction~~ended inDecember 31, ~~carrying~~2018. ~~value~~During the third quarter of ~~assets,~~2018 ~~all~~we had a loss on impairment of $44.0 million which ~~was~~consisted ~~recorded~~of in$34.2 ~~the~~million ~~fourth~~for ~~quarter~~Gulf of ~~2017~~Mexico inland barge asset group and $9.8 ~~This~~million ~~provision~~for ~~was~~international ~~related~~barge toasset ~~certain~~group. ~~assets~~In inaddition, ~~the~~we ~~International~~performed &our ~~Alaska~~2018 ~~Drilling~~annual ~~segment~~goodwill ~~that~~impairment ~~were~~review ~~deemed~~during tothe befourth ~~functionally~~quarter, ~~obsolete.~~as ~~There~~of ~~was~~October no1, ~~provision~~2018, ~~for~~and ~~reduction~~determined inthat the carrying value of ~~certain~~the ~~assets~~reporting ~~recorded~~unit ~~during~~exceeded ~~the~~its ~~year~~fair ~~ended~~value ~~December 31~~and, ~~2016~~therefore, the entire goodwill balance of $6.7 million for U.S. rental tools segment was impaired and written off.

Gain (~~loss~~Loss) on ~~disposition~~Disposition of ~~assets~~Assets, ~~net~~Net

~~Net~~Gain ~~losses~~(loss) ~~recorded~~ on ~~asset~~disposition ~~dispositions~~of ~~were~~assets, net was a gain of $20.92 million and a gain of $10.64 million for the ~~years~~nine months ended December ~~31,~~ ~~2017 and December~~ 31, ~~2016~~2019, ~~respectively.~~and ~~The~~the ~~net~~three ~~loss~~months ~~for~~ended ~~2017~~March ~~was~~31, ~~primarily~~2019, ~~related~~respectively, toand ~~the~~a ~~sale~~loss of ~~one rig located in Papua New Guinea~~$1.7 ~~Activity~~million infor ~~both~~the ~~periods~~year ~~included~~ended ~~equipment~~December 31, ~~retirements~~2018. We periodically sell equipment deemed to be excess, obsolete, or not currently required for operations.

~~Interest~~Pre-petition ~~expense~~Restructuring ~~and~~Charges ~~income~~

~~Interest~~There ~~expense~~were ~~decreased~~no ~~$1.6~~pre-petition ~~million~~charges ~~to $44.2 million~~ for the ~~year~~nine months ended December 31, ~~2017~~2019 ~~compared~~or ~~with $45.8 million for~~ the ~~year~~three months ended ~~December~~ March 31, ~~2016~~2019. ~~The~~Pre-petition ~~decrease~~charges inwere ~~interest expense was primarily related to a write off of~~ $121.18 million offor ~~debt issuance costs during~~ the ~~second~~year ~~quarter~~ended ofDecember 31, ~~2016~~2018, inprimarily ~~conjunction~~consisting ~~with the execution~~ of anprofessional ~~amendment~~fees related to the ~~revolving~~Chapter ~~credit~~11 ~~facility~~Cases. ~~Interest income during each of the years ended December 31, 2017 and 2016 was nominal.~~

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Reorganization Items

Reorganization items were $1.2 million and $93.0 million for the nine months ended December 31, 2019, and the three months ended March 31, 2019, respectively. The reorganization items for the nine months ended December 31, 2019, primarily consisted of professional fees in the amount of $1.2 million, related to the Chapter 11 Cases. The reorganization items for the three months ended March 31, 2019, primarily consisted of gain on settlement of liabilities subject to compromise, loss from fresh start valuation adjustments, professional fees and backstop premium on rights offering in the amount of $191.1 million, $242.6 million, $30.1 million and $11.0 million, respectively, related to the Chapter 11 Cases. Reorganization items were $9.8 million for the year ended December 31, 2018, primarily consisting of debt finance costs related to Senior Notes, professional fees, debt finance costs related to the 2015 Secured Credit Agreement and debtor-in-possession financing costs in the amount of $5.4 million, $2.3 million, $1.2 million and $1.0 million respectively, related to the Chapter 11 Cases.

Interest Expense and Income

Interest expense was $20.9 million and $0.3 million for the nine months ended December 31, 2019, and the three months ended March 31, 2019, respectively, and was $42.6 million for the year ended December 31, 2018. The Company emerged from bankruptcy at the end of the first quarter of 2019, which resulted in a decrease in overall debt balance. Interest income was $0.9 million and nominal for the nine months ended December 31, 2019, and the three months ended March 31, 2019, respectively. Interest income was $0.1 million for the year ended December 31, 2018. We earn interest income on our cash balances.

Other

Other income and expense was ~~$0.1~~an ~~million~~expense of ~~income and~~ $0.42 million ofand ~~income~~nominal for the ~~years~~nine months ended December 31, ~~2017~~2019, and ~~December~~ the three months ended March 31, ~~2016~~2019, respectively., ~~Other~~and ~~income~~an expense of $2.0 million for ~~both~~the year ended December 31, 2018. Activity in all periods primarily included the impact of foreign currency fluctuations.

Income ~~tax~~Tax ~~expense (benefit)~~Expense

OnIncome ~~December~~tax ~~22,~~expense ~~2017,~~was ~~the United States enacted the Tax Act~~$11. ~~The~~1 ~~Tax~~million ~~Act~~and ~~includes significant changes to U~~$0.S.7 ~~corporate~~million ~~income~~for ~~tax laws,~~ the ~~most~~nine ~~notable~~months ofended ~~which~~December is31, a2019, ~~reduction~~and in the ~~U.S.~~three ~~corporate~~months ~~income~~ended ~~tax~~March ~~rate from 35.0 percent to 21.0 percent~~31, ~~effective for tax years beginning January 1~~2019, ~~2018~~respectively, and awas ~~one-time mandatory tax on previously deferred earnings of certain foreign subsidiaries associated with the transition from a worldwide to a modified territorial tax regime~~$7.8 ~~The~~million ~~impact of the Tax Act~~ for the year ended December 31, ~~2017~~2018. isWe ~~discussed~~recognized inincome ~~more~~tax ~~detail~~expense indue ~~Note~~to 8the -jurisdictional ~~Income~~mix ~~Taxes~~ of ~~the~~income ~~consolidated~~and ~~financial~~loss ~~statements.~~during ~~As a result of~~ the ~~Company’s net deferred tax position~~period, ~~inclusive~~along ofwith ~~valuation~~our ~~allowances,~~continued ~~the~~inability ~~provisions~~to ofrecognize the ~~Tax~~benefits ~~Act~~associated ~~are~~with ~~not~~certain ~~expected~~losses toas ~~materially~~a ~~impact~~result ~~the~~of ~~Company’s~~valuation ~~cash~~allowances, ~~tax~~changes ~~position~~in oruncertain ~~effective~~ tax ~~rate~~positions, inand ~~2018.~~the Weincome ~~are~~tax ~~continuing~~impacts ~~our analysis~~ of ~~the~~adjustments ~~effects~~made ~~the~~as ~~Tax~~part ~~Act~~of ~~will~~Fresh ~~have~~Start ~~on the Company in future periods~~Accounting.

Income tax expense was $9.0 million on a pre-tax loss of $109.7 million for the year ended December 31, 2017, compared with $74.2 million on pre-tax loss of $156.6 million for the year ended December 31, 2016. Our effective tax rate was negative 8.2 percent for the year ended December 31, 2017, compared with negative 47.3 percent for the year ended December 31, 2016. Income tax expense and our annual effective tax rate are primarily affected by the statutory tax rates applied in the jurisdictions where the income or losses are earned, and our ability to receive tax benefits for losses incurred. It is also affected by discrete items, such as return-to-accrual adjustments and changes in valuation allowances, and changes in reserves for uncertain tax positions, which may occur in any given year but are not consistent from year to year.34

~~Income~~Table ~~tax expense for the year ended December 31, 2017 includes a net tax benefit related to the change in valuation allowance~~ of $14.6 million. The change in valuation allowance includes a benefit of $45.3 million related to the reduction in the corporate income tax rate under the Tax Act. This benefit was reduced by the change related to current net operating losses and other deferred taxes of $30.7 million. We established the valuation allowance based on the weight of available evidence, both positive and negative, including results of recent and current operations and our estimates of future taxable income or loss by jurisdiction in which we operate. 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 business considerations. Changes in these estimates and assumptions, including changes in tax laws and other changes impacting our ability to recognize the underlying deferred tax assets, could require us to adjust the valuation allowances.Contents

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We are a U.S. based company that operates internationally through various branches and subsidiaries. Accordingly, our worldwide income tax provision includes the impact of income tax rates and foreign tax laws in the jurisdictions in which our operations are conducted and income is earned. We reported tax benefits for foreign statutory rates different from our U.S. statutory rate of $2.0 million and $3.6 million and tax expense of $13.1 million and $12.7 million for the impact of foreign tax laws in effect for the years ended December 31, 2017 and December 31, 2016, respectively. Differences between the U.S. and foreign tax rates and laws have a significant impact in Iraq, Kazakhstan, Mexico, Russia, United Arab Emirates and the United Kingdom.

Certain tax payments to foreign jurisdictions are available as credits to reduce tax expense in the U.S. and other foreign jurisdictions. We reported no tax benefits for foreign tax credits for the year ended December 31, 2017 and December 31, 2016. See Note 8 - Income Taxes in Item 8. Financial Statements and Supplementary Data for further discussion.

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Liquidity and Capital Resources

~~The~~We ~~Company’s~~periodically ~~commencement~~evaluate ofour ~~the~~liquidity ~~Chapter~~requirements, 11capital ~~Cases~~needs ~~constituted~~and aavailability ~~default~~of ~~under~~resources ~~certain~~in view of ~~its~~expansion ~~debt~~plans, ~~instruments~~operational ~~that~~and ~~accelerated~~other ~~the~~cash ~~Company’s~~needs. ~~obligations~~To ~~under~~meet ~~its~~our ~~Senior~~short-term ~~Notes.~~liquidity ~~Under~~requirements ~~the~~we ~~Bankruptcy~~primarily ~~Code,~~rely ~~holders~~on ofour ~~the~~cash ~~Senior~~on ~~Notes~~hand ~~are~~and ~~stayed~~cash from ~~taking~~operations. ~~any~~We ~~action~~also ~~against~~have access to cash through the ~~Company~~Credit asFacility. aWe ~~result~~expect ofthat ~~this~~these ~~event~~sources of ~~default~~liquidity will be sufficient to provide us the ability to fund our current operations and required capital expenditures. ~~However~~We may need to fund capital expenditures, ~~all~~acquisitions, debt principal payments, or pursuits of business opportunities that support our strategy, through additional borrowings or the ~~Company’s~~issuance ~~outstanding~~of ~~obligations~~additional ~~under~~Successor ~~its~~Common ~~2015~~Stock ~~Secured~~or ~~Credit~~other ~~Agreement~~forms ~~were~~of ~~paid~~equity. ~~prior~~Our credit agreements limit our ability to ~~the~~pay ~~filing~~dividends. ofIn the ~~Chapter~~past 11we ~~Cases~~have not paid dividends on our Predecessor Common Stock and ~~the~~we ~~2015~~have ~~Secured~~no ~~Credit~~present ~~Agreement~~intention ~~was~~to ~~terminated~~pay ~~substantially~~dividends ~~concurrently~~on ~~with~~our Successor Common Stock in the ~~filing~~foreseeable future.

The Chapter 11 Cases and weak industry conditions have deteriorated our operational results and cash flows and may continue to do so in the future. These factors raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements have been prepared in conformity with accounting principles accepted in the United States of America which contemplate the continuation of the Company as a going concern.

In order to decrease the Company’s level of indebtedness and maintain the Company’s liquidity at levels sufficient to meet its commitments, the Company has undertaken a number of actions, including minimizing capital expenditures and further reducing its recurring operating expenses. The Company believes that even after taking these actions, it did not have sufficient liquidity to satisfy its debt service obligations, meet other financial obligations, comply with its debt covenants, and execute its business plan. As a result, the Debtors filed petitions for reorganization under Chapter 11 of the Bankruptcy Code.

See Note 2 - Chapter 11 Cases in Item 8. Financial Statements and Supplementary Data and Item 1A. Risk Factors for additional information regarding our Chapter 11 proceedings.

Liquidity

Debtor-in-Possession Financing

In connection with the Chapter 11 Cases, Bank of America, N.A. (“Bank of America”) and Deutsche Bank AG New York Branch (“DB”) agreed to provide the Debtors with a superpriority and priming asset-based debtor-in-possession credit facility (the “DIP Facility”) on the terms set forth in the Debtor-In-Possession Financing Term Sheet attached to the RSA (the “DIP Term Sheet”). On December 14, 2018, the Debtors, Bank of America and DB entered into a Debtor-in-Possession Credit Agreement (the “DIP Credit Agreement”), which provides for, among other things, the DIP Facility. The DIP Facility is comprised of an asset-based revolving loan facility in an aggregate principal amount of $50.0 million, subject to availability under the borrowing base thereunder, $20.0 million of which DIP Facility is available for the issuance of standby letters of credit. The borrowing base is equal to:

(1) 85.0 percent of the aggregate net amount of eligible domestic accounts receivable, plus

(2) the lowest of:

(a) 90.0 percent of net book value of eligible rental equipment

(b) 60.0 percent of net equipment orderly liquidation value of eligible rental equipment; or

The borrowing base under the DIP Facility was calculated to be $50.0 million at the time of effectiveness of the DIP Facility, which was reduced by $10.0 million of outstanding loans under the DIP Facility as of December 31, 2018 and accrued interest on the debtor-in-possession financing, resulting in availability under the DIP Facility of $40.0 million.

In connection with the Chapter 11 Cases, (i) Bank of America and DB agreed to provide, on a committed basis, the Company with an exit financing asset-based revolving loan facility on the terms set forth in the Senior Secured Asset-Based Revolving Facility Summary of Terms and Conditions attached to the RSA (the “First Lien Exit Term Sheet”) and (ii) certain Consenting Stakeholders and/or their affiliates have agreed to provide, on a committed basis, the Company with a new second lien term loan facility on the terms set forth in the New Second Lien Loan Term Sheet attached to the RSA (the “Second Lien Exit Term Sheet”). The First Lien Exit Term Sheet provides for, among other things, an asset-based revolving credit facility in an aggregate principal amount of $50.0 million, which amount may be increased to an aggregate principal amount of $100.0 million in the event additional commitments are received from other lenders (the “First Lien Exit Facility”). A portion of the First Lien Exit Facility in the amount of $30.0 million (the “L/C Facility”) will be available for the issuance of standby and commercial letters of credit. Letters of credit outstanding under the DIP Facility may be rolled over and deemed outstanding under the L/C Facility. The Second Lien Exit Term Sheet provides for, among other things, a second lien term loan facility in an aggregate principal amount of $210.0 million (the “Second Lien Exit Facility”).

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The foregoing descriptions of the First Lien Exit Term Sheet and the Second Lien Exit Term Sheet do not purport to be complete and are qualified in their entirety by reference to the First Lien Exit Term Sheet or the Second Lien Exit Term Sheet, as applicable. The effectiveness of the First Lien Exit Facility and the Second Lien Exit Facility is subject to customary closing conditions. The foregoing descriptions of the First Lien Exit Facility and the Second Lien Exit Facility do not purport to be complete and are qualified in their entirety by reference to the final, executed documents memorializing the First Lien Exit Facility and the Second Lien Exit Facility, as applicable, in each case as approved by the Bankruptcy Court.

The following table provides a summary of our total liquidity:

Dollars in thousands	December 31, ~~2018~~2019
Cash and cash equivalents (1)	$	48104,~~602~~951
Restricted cash	10,389
Availability under Credit Facility (2)	30,941
Availability under debtor-in-possession financing	39,968
Total liquidity	$	135,892
Total liquidity	$	98,959

(1) As of December 31, ~~2018~~2019, approximately $3251.9 million of the $48105.60 million of cash and equivalents was held by our foreign subsidiaries.

~~The~~(2) ~~earnings~~As of ~~foreign subsidiaries as of~~ December 31, ~~2018~~2019, ~~were~~the ~~reinvested~~borrowing tobase ~~fund~~availability ~~our~~under ~~international operations. If in~~ the ~~future~~Credit weFacility ~~decide~~was to$40.2 ~~repatriate earnings~~million, ~~the~~which ~~Company~~was ~~may~~further bereduced ~~required~~by to$9.3 ~~pay~~million ~~taxes~~in onsupporting ~~those~~letters ~~amounts,~~of ~~which~~credit ~~could~~outstanding, ~~reduce~~resulting ~~the~~in ~~liquidity~~availability ofunder the ~~Company~~Credit atFacility ~~that~~of ~~time~~$30.9 million.

WeThe doearnings ~~not~~of ~~have~~foreign ~~any~~subsidiaries ~~unconsolidated~~as ~~special-purpose~~of ~~entities~~December 31, ~~off-balance~~2019 ~~sheet~~were ~~financing~~reinvested ~~arrangements~~to orfund ~~guarantees~~our ofinternational ~~third-party~~operations. If ~~financial~~in ~~obligations.~~the Asfuture ofwe ~~December 31,~~decide ~~2018~~to repatriate earnings, wethe ~~have~~Company nomay ~~energy,~~be ~~commodity~~required to pay taxes on those amounts, orwhich ~~foreign~~could ~~currency~~reduce ~~derivative~~the ~~contracts~~liquidity of the Company at that time.

We do not have any unconsolidated special-purpose entities, off-balance sheet financing arrangements or guarantees of third-party financial obligations. As of December 31, 2019, we have no energy, commodity, or foreign currency derivative contracts.

Cash Flow Activity

AsWe ~~of December 31, 2018, we~~ had cash, cash equivalents, and restricted cash of $59105.0 million, aand ~~decrease of~~ $8259.60 million ~~from~~at ~~cash~~December 31, ~~cash~~2019 ~~equivalents~~ and ~~restricted cash equivalents of $141.5 million as of~~ December 31, ~~2017~~2018, respectively. The following table provides a summary of our cash flow activity ~~for the last three years~~:

Dollars in thousands	2018			2017				2016
	Successor				Predecessor
Operating Activities	$	(17,050	)	$	6,733			$	22,441
	Nine Months Ended December 31,				Three Months Ended March 31,				Year Ended December 31,
Investing Activities	(69,214		)	(54,130		)		(26,513		)
Dollars in thousands	2019				2019				2018
Financing Activities	3,706			69,255				(10,531		)
Operating Activities	$	61,639			$	14,914			$	(17,050	)
Net change in cash, cash equivalents and restricted cash	$	(82,558	)	$	21,858			$	(14,603	)
Investing Activities	(70,315		)		(9,130		)		(69,214		)
Financing Activities	(35,658		)		84,510				3,706
Net change in cash, cash equivalents and restricted cash	$	(44,334	)		$	90,294			$	(82,558	)

Operating Activities

Cash flows ~~used~~from in operating activities were a source of cash of $1761.16 million and $14.9 million for the ~~year~~nine months ended December 31, ~~2018~~2019, ~~while~~and ~~cash~~the ~~flows~~three ~~provided~~months byended ~~operating~~March ~~activities~~31, ~~were~~2019, ~~$6.7 million~~respectively, and a use of cash of $2217.41 million for the ~~years~~year ended December 31, ~~2017 and 2016, respectively~~2018. Cash flows from operating activities in each period were largely impacted by our operating results and changes in working capital. Changes in working capital were a use of cash of $2320.67 million ~~for~~and ~~the year ended December 31, 2018,~~ a ~~use~~source of cash of $517.81 million for the ~~year~~nine months ended December 31, ~~2017~~2019, and the three months ended March 31, 2019, respectively, and a ~~source~~use of cash of $3823.86 million for the year ended December 31, ~~2016~~2018.

It is our long-term intention to utilize our operating cash flows to fund maintenance and growth of our rental tool assets and drilling rigs. Given the decline in demand in the current oil and natural gas services market over the past few years, our short-term focus is to preserve liquidity by managing our costs and capital expenditures. While the overall market for oilfield services remains challenging, we are beginning to see a market recovery that is expected to increase our earnings, working capital and capital spending as we pursue attractive investment opportunities.35

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It is our intention to utilize our operating cash flows to fund maintenance and growth of our rental tool assets and drilling rigs. Given the oil and natural gas services market over the past few years, our short-term focus is to preserve liquidity by managing our costs and capital expenditures. While the overall market for oilfield services remains challenging, we are beginning to see a market recovery that is expected to increase our earnings, working capital and capital spending as we pursue attractive investment opportunities.

Investing Activities

Cash flows ~~used~~from in investing activities were a use of cash of $6970.23 million and $9.1 million for the ~~year~~nine months ended December 31, ~~2018~~2019, ~~compared~~and ~~with~~the ~~$54.1~~three ~~million~~months ended March 31, 2019, respectively, and $2669.52 million for the ~~years~~year ended December 31, ~~2017 and 2016, respectively~~2018. Cash flows used in investing activities induring ~~2018~~the nine months ended December 31, ~~2017~~2019, and ~~2016~~the three months ended March 31, 2019, included capital expenditures of $7071.61 million, and $549.52 million, respectively, and $2970.06 million ~~respectively~~for the year ended December 31, 2018, which were primarily used for tubular and other products for our ~~Rental~~rental ~~Tools~~tools ~~Services~~services business and rig-related maintenance.

45Capital expenditures for 2020 are estimated to range from $85.0 million and $95.0 million and will primarily be directed to our rental tools services business inventory and maintenance capital for our drilling services business. Future capital spending will be evaluated based upon adequate return requirements and available liquidity.

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Capital expenditures for 2019 are estimated to be approximately $90.0 million and will primarily be directed to our Rental Tools Services business inventory and maintenance capital for our Drilling Services business. Future capital spending will be evaluated based upon adequate return requirements and available liquidity.

Financing Activities

Cash flows from financing activities were a ~~source~~use of $35.7 million for the nine months ended December 31, 2019, primarily related to the $35.2 million prepayment of the Term Loan (as defined below). Cash flows from financing activities were a source of cash of $84.5 million for the three months ended March 31, 2019, primarily related to proceeds from the rights offering of $95.0 million, partially offset by the payment of amounts borrowed under debtor in possession financing of $10.0 million. Cash flows from financing activities were a source of cash of $3.7 million for the year ended December 31, 2018 primarily related to amounts borrowed against the DIP Facility of $10.0 million and payments of $3.6 million, $1.4 million and $1.0 million for dividends on ~~our~~the ~~Convertible~~Predecessor's Preferred Stock, debt issuance cost related to the Fifth Amendment to the 2015 Secured Credit Agreement and debtors-in-possession financing costs respectively.

Cash flows from financing activities were a source of $69.3 million for the years ended December 31, 2017 primarily related to the issuances of common stock and Convertible Preferred Stock, which yielded combined proceeds of $72.3 million, net of underwriting discount and offering expenses. Additionally, during the year ended December 31, 2017, the Company paid dividends of $2.1 million on our Convertible Preferred Stock. Cash flows from financing activities were a use of $10.5 million for the years ended December 31, 2016 primarily due to payment of $6.0 million of the contingent consideration related to the April 2015 acquisition of a business, and $3.4 million in connection with the final payment of the purchase price for the remaining noncontrolling interest of ITS Arabia Limited.

Debt Summary

~~Our~~As of December 31, 2019, our principal amount of debt was related to the $~~585~~177.09 million asTerm ~~of December 31~~Loan, ~~2018,~~due ~~which consisted of:~~ 2024.

•Successor ~~$360.0~~Credit ~~million~~Facility ~~aggregate principal amount of 6.75% Notes; and~~

•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 (as amended and restated by the Amended and Restated Credit Agreement (as defined below), the “Credit Facility”) with initial aggregate commitments in the amount of $~~225~~50.0 million, guaranteed by certain of our subsidiaries. Availability under the Credit Facility is subject to a monthly borrowing base calculation and, prior to the Amended and Restated Credit Agreement, was based on eligible domestic rental equipment and eligible domestic accounts receivable. The Credit Facility provides for a $30.0 million sublimit of the aggregate ~~principal~~commitments ~~amount~~that is available for the issuance of 7letters of credit.~~50%~~ ~~Notes~~Prior to the Amended and Restated Credit Agreement, the Credit Facility required 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, allowed for an increase to the aggregate commitments by up to an additional $75.0 million, subject to certain conditions, matured on March 26, 2023, and bore interest either at a rate equal to:

6• LIBOR plus an applicable margin that varies from 2.~~75%~~25 ~~Senior~~percent ~~Notes,~~to ~~due~~2.75 ~~July~~percent ~~2022~~per annum or

On• ~~January~~a ~~22,~~base ~~2014,~~rate weplus ~~issued $360.0 million aggregate principal amount of 6.75% Notes pursuant to~~ an ~~Indenture~~applicable ~~between~~margin the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (the “6.75% Notes Indenture”). The 6.75% Notes are general unsecured obligations of the Company and rank equal in right of payment with all of our existing and future senior unsecured indebtedness. The 6.75% Notes are jointly and severally guaranteed by all of our subsidiaries that ~~guaranteed~~varies ~~indebtedness~~from ~~under the 2015 Secured Credit Agreement and our 7~~1.~~50%~~25 ~~Notes.~~percent ~~Interest on the 6.75% Notes is payable on January 15 and July 15 of each year, beginning July 15, 2014. Debt issuance costs related~~ to ~~the 6~~1.75% ~~Notes~~percent ~~were~~per ~~approximately $7~~annum.6 million. Unamortized debt issuance costs were $3.8 million prior to the commencement of the Chapter 11 Cases. 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.

WePrior ~~may~~to ~~redeem all or a part of~~ the ~~6.75%~~Amended ~~Notes~~and ~~upon~~Restated ~~appropriate~~Credit ~~notice~~Agreement, atwe ~~redemption~~were ~~prices~~required ~~decreasing each year after January 15, 2018~~ to ~~par~~pay ~~beginning~~a ~~January~~commitment ~~15,~~fee ~~2020. As~~ of ~~December 31, 2018, the redemption price is 103~~0.45 percent ~~and~~per weannum ~~have~~on ~~not~~the ~~made~~actual ~~any~~daily ~~redemptions~~unused toportion ~~date.~~of Ifthe wecurrent ~~experience~~aggregate ~~certain~~commitments ~~changes~~under ~~in control, we must offer to repurchase~~ the ~~6.75%~~Credit ~~Notes at 101~~Facility.0 ~~percent~~We ofare ~~the~~required ~~aggregate~~to ~~principal~~pay ~~amount,~~customary ~~plus~~letter ~~accrued~~of ~~and~~credit ~~unpaid interest~~ and ~~additional~~fronting ~~interest,~~fees ifunder ~~any, to~~ the ~~date~~Credit ~~of repurchase~~Facility.

The ~~6.75%~~Credit ~~Notes~~Facility ~~Indenture~~also ~~limits~~contains ~~our~~customary ~~ability~~affirmative and ~~the~~negative ~~ability~~covenants, ofincluding, ~~certain~~among ~~subsidiaries~~other things, as to: ~~(i)~~compliance ~~sell~~with ~~assets,~~laws (~~ii)~~including ~~pay~~environmental ~~dividends~~laws orand ~~make~~anti-corruption ~~other~~laws), ~~distributions~~delivery onof ~~capital~~quarterly ~~stock~~and orannual ~~redeem~~consolidated orfinancial ~~repurchase~~statements ~~capital~~and ~~stock~~monthly orborrowing ~~subordinated~~base ~~indebtedness~~certificates, ~~(iii)~~conduct ~~make~~of ~~investments~~business, ~~(iv)~~maintenance ~~incur~~of orproperty, ~~guarantee~~maintenance ~~additional~~of ~~indebtedness~~insurance, ~~(v)~~restrictions ~~create~~on orthe ~~incur~~incurrence of liens, ~~(vi) enter into sale and leaseback transactions~~indebtedness, ~~(vii)~~asset ~~incur dividend or other payment restrictions affecting subsidiaries~~dispositions, ~~(viii)~~fundamental ~~merge or consolidate with other entities~~changes, ~~(ix)~~restricted ~~enter into transactions with affiliates~~payments, and ~~(x)~~other ~~engage~~customary ~~in certain business activities~~covenants. Additionally, the ~~6.75%~~Credit ~~Notes~~Facility ~~Indenture~~ contains ~~certain~~customary ~~restrictive covenants designating certain~~ events ~~as events~~ of default. ~~These~~and ~~covenants~~remedies ~~are~~for ~~subject~~credit ~~to a number of important exceptions and qualifications.~~

~~7.50% Senior Notes, due August 2020~~36

OnTable ~~July 30, 2013, we issued $225.0 million aggregate principal amount~~ of the 7.50% Notes pursuant to an Indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (the “7.50% Notes Indenture”). The 7.50% Notes are general unsecured obligations of the Company and rank equal in right of payment with all of our existing and future senior unsecured indebtedness. The 7.50% Notes are 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 is 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. Unamortized debt issuance costs were $1.6 million prior to the commencement of the Chapter 11 Cases. After the Contents

46facilities 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 December 31, 2019, we were in compliance with all the financial covenants under the Credit Facility.

~~Table~~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. As a result of ~~contents~~the Amended and Restated Credit Agreement:

~~commencement~~(1) of the ~~Chapter~~Credit 11Facility ~~Cases,~~matures ~~the~~on ~~carrying~~October ~~amount~~8, of2024, ~~debt~~subject ~~was adjusted~~ to ~~the~~certain ~~claim~~restrictions, ~~amount~~including ~~and all unamortized debt issuance costs prior to~~ the ~~commencement~~refinancing of the ~~Chapter~~Company’s 11Term ~~Cases~~Loan ~~were~~Agreement ~~fully~~(as ~~expensed.~~defined below),

~~Beginning~~(2) ~~August~~our 1,annual ~~2018,~~borrowing wecosts ~~may~~under ~~redeem all or a part of~~ the ~~7.50%~~Credit ~~Notes~~Facility ~~upon~~are ~~appropriate~~lowered ~~notice~~by at par. We have not made any redemptions to date. If we experience certain changes in control, we must offer to repurchase the 7.50% Notes at 101.0 percent of the aggregate principal amount, plus accrued and unpaid interest and additional interest, if any, to the date of repurchase. reducing

~~The~~• ~~7.50% Notes Indenture limits our ability and~~ the ~~ability~~interest ofrate ~~certain subsidiaries~~ to: (ia) ~~sell~~ ~~assets,~~LIBOR ~~(ii) pay~~plus ~~dividends~~a orrange ~~make~~of ~~other~~1.75 ~~distributions~~percent onto ~~capital~~2.25 ~~stock~~percent ~~or redeem or repurchase capital stock or subordinated indebtedness,~~ (~~iii) make~~based ~~investments,~~on ~~(iv~~availability) ~~incur~~ or ~~guarantee additional indebtedness,~~ (vb) ~~create~~ ora ~~incur~~base ~~liens,~~rate ~~(vi) enter~~plus ~~into~~a ~~sale~~range ~~and~~of ~~leaseback~~0.75 ~~transactions,~~percent ~~(vii) incur~~to ~~dividend~~1.25 orpercent ~~other payment restrictions affecting subsidiaries,~~ (~~viii) merge~~based oron ~~consolidate with other entities, (ix~~availability) ~~enter into transactions with affiliates~~, and (x) engage in certain business activities. Additionally, the 7.50% Notes Indenture contains certain restrictive covenants designating certain events as events of default. These covenants are subject to a number of important exceptions and qualifications.

~~The~~• ~~commencement of~~ the ~~Chapter~~unused 11commitment ~~Cases~~fee ~~constituted~~to ana ~~event~~range of ~~default that accelerated the Company’s obligations under the indenture governing the 6~~0.~~75%~~25 ~~Notes~~percent ~~and~~to ~~the 7~~0.~~50%~~375 ~~Notes.~~percent ~~However,~~(based ~~any~~on ~~efforts to enforce such payment obligations are automatically stayed under the provisions of the Bankruptcy Code.~~utilization),

~~2015~~(3) ~~Secured~~a ~~Credit~~$25 ~~Agreement~~million liquidity covenant was replaced with a minimum fixed charge coverage ratio requirement of 1.0x when excess availability is less than the greater of

On• ~~January 26, 2015 we entered into the 2015 Secured Credit Agreement~~20.0 ~~The~~percent ~~2015 Secured Credit Agreement was originally comprised~~ of ~~a $200 million revolving credit facility (~~the ~~“Revolver”).~~lesser ~~The~~of ~~2015~~commitments ~~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 prior to February 14, 2018, which reduced~~ the ~~size~~borrowing ofbase ~~the Revolver from $200.0 million to $100.0 million.~~and

On• February 14, 2018, we executed the Fifth Amendment to the 2015 Secured Credit Agreement (the “Fifth Amendment”) which modified the credit facility to an asset-based lending structure and reduced the size of the Revolver from $~~100 million to $80 million~~10. ~~The~~0 ~~Fifth Amendment eliminated the financial maintenance covenants previously in effect and replaced them with a liquidity covenant of $30~~ million and a monthly borrowing base calculation based on eligible rental equipment and eligible domestic accounts receivable. The liquidity covenant required the Company to maintain a minimum of $30 million of liquidity (defined as availability under the borrowing base and cash on hand), of which $15 million was restricted, resulting in a maximum availability at any one time of the lesser of (a) an amount equal to our borrowing base minus $15 million, or (b) $65 million. Our ability to borrow under the 2015 Secured Credit Agreement was determined by reference to our borrowing base. The Fifth Amendment also allowed for refinancing our existing Senior Notes with either secured or unsecured debt, added the ability for the Company to designate certain of its subsidiaries as “Designated Borrowers” and removed our ability to make certain restricted payments.

~~On July 12, 2018, we executed the Sixth Amendment to the 2015 Secured Credit Agreement~~ (~~the “Sixth Amendment”~~4) ~~which~~an ~~permitted~~additional ~~the~~borrower ~~Company~~was allowed to ~~make~~be ~~Restricted~~included ~~Payments (as defined~~ in the ~~2015~~borrowing ~~Secured~~base ~~Credit~~upon ~~Agreement)~~completion ~~in the form~~ of ~~certain~~a ~~Equity~~field ~~Interests (as defined in the 2015 Secured Credit Agreement).~~examination,

On(5) ~~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~~calculation ~~Secured~~of ~~Credit Agreement for~~ the ~~purpose~~borrowing ofbase ~~depositing~~was ~~cash~~revised toby, ~~secure~~among ~~certain~~other ~~Letters of Credit. On October 30~~things, ~~2018,~~excluding weeligible ~~deposited~~domestic ~~$10.0~~rental ~~million~~equipment ~~into~~and aincluding ~~cash~~90 ~~collateral~~percent ~~account to support the letters~~ of ~~credit~~investment ~~outstanding,~~grade ~~which~~eligible isdomestic ~~included~~accounts ~~in the restricted cash balance on the consolidated balance sheet.~~ receivable,

~~Our~~(6) ~~obligations under~~ the ~~2015~~Company ~~Secured~~was ~~Credit~~allowed ~~Agreement~~to ~~were~~grant ~~guaranteed~~a bysecond 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~~lien on ~~our~~non-working ~~accounts~~capital ~~receivable,~~assets ~~specified rigs including barge rigs~~ in the ~~GOM~~event ~~and land rigs in Alaska, certain U.S.-based rental equipment~~ of ~~the~~a ~~Company~~refinancing ~~and its subsidiary guarantors and the equity interests~~ of ~~certain of~~ the ~~Company’s~~Term ~~subsidiaries.~~Loan ~~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).~~

~~Our~~(7) ~~Revolver~~the ~~was~~amount ~~available~~allowed for ~~general~~an ~~corporate~~increase ~~purposes and~~ to ~~support~~the ~~letters~~aggregate ofcommitments ~~credit.~~was ~~Interest~~reduced onfrom ~~Revolver~~$75.0 ~~loans~~million ~~accrued~~to at$50.0 ~~either:~~million, and

•(8) ~~Base~~we ~~Rate~~were ~~plus~~permitted anto ~~Applicable~~make ~~Rate~~a orvoluntary prepayment of $35.0 million on our Term Loan on September 20, 2019 without such prepayment being included in the calculation of our fixed charge coverage ratio.

47As of December 31, 2019, the borrowing base availability under the Credit Facility was $40.2 million, which was further reduced by $9.3 million in supporting letters of credit outstanding, resulting in availability under the Credit Facility of $30.9 million. As of December 31, 2019, debt issuance costs of $1.5 million ($1.3 million, net of amortization) are being amortized over the term of the Credit Facility on a straight-line basis.

~~Table~~Successor ofTerm ~~contents~~Loan, Due March 2024

•On ~~LIBOR~~March 26, ~~plus~~2019, anpursuant ~~Applicable~~to ~~Rate~~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.

~~All~~The ofTerm ~~the~~Loan ~~Company’s~~bears ~~obligations~~interest ~~under~~at ~~the~~a ~~2015~~rate ~~Secured~~of ~~Credit~~13.0 ~~Agreement~~percent ~~were~~per ~~paid~~annum, ~~prior~~payable toquarterly on the ~~commencement~~first day of ~~the~~each ~~Chapter~~January, 11April, ~~Cases~~July, and ~~the~~October, ~~2015~~beginning ~~Secured~~July ~~Credit Agreement~~1, ~~including the Revolver thereunder~~2019, ~~was terminated concurrently~~ with ~~the~~11.0 ~~commencement~~percent ofpaid ~~the~~in ~~Chapter~~cash 11and ~~Cases~~2.0 ~~Unamortized~~percent ~~debt~~paid ~~issuance~~in ~~costs~~kind ofand ~~$1.2~~capitalized ~~million~~by ~~were~~adding ~~fully~~such ~~expensed~~amount ~~upon~~to ~~termination of~~ the ~~2015~~outstanding ~~Secured Credit Agreement~~principal.

~~Summary~~We may voluntarily prepay all or a part of ~~Contractual~~the ~~Cash~~Term ~~Obligations~~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.

~~The~~On ~~following~~September ~~table~~20, ~~summarizes~~2019, ~~our~~we ~~future~~made ~~contractual~~a ~~cash~~voluntary ~~obligations~~prepayment ason 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 December 31, ~~2018:~~2019, the Term Loan balance was $177.9 million.

Dollars in thousands	Total		2019		2020		2021		2022		2023		Beyond 2023
Contractual cash obligations:
Debt — principal	$	585,000	$	585,000	$	—	$	—	$	—	$	—	$	—
Operating leases (1)	26,946		10,722		7,887		4,193		1,968		1,540		636
Purchase commitments (2)	36,687		36,687		—		—		—		—		—
Debtor in possession financing	10,000		10,000		—		—		—		—		—
Total contractual obligations	$	658,633	$	642,409	$	7,887	$	4,193	$	1,968	$	1,540	$	636
Commercial commitments:
Standby letters of credit	$	9,188	$	8,482	$	543	$	163	$	—	$	—	$	—
Total commercial commitments	$	9,188	$	8,482	$	543	$	163	$	—	$	—	$	—

~~(1)~~Table ~~Operating leases consist~~ of ~~lease agreements in excess of one year for office space, equipment, vehicles and personal property.~~Contents

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 (2including environmental laws and anti-corruption laws), Wedelivery ~~had~~of ~~purchase~~quarterly ~~commitments~~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 asunder the Term Loan Agreement. As of December 31, ~~2018~~2019, ~~related~~we towere ~~rental~~in ~~tools~~compliance ~~and~~with ~~rig~~all ~~related~~the ~~expenditures~~financial covenants under the Term Loan Agreement.

48Predecessor 6.75% Senior Notes, Due July 2022

~~Table~~On January 22, 2014, we issued $360.0 million aggregate principal amount of ~~contents~~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.

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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.

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Other Matters

Business Risks

See Item 1A. Risk Factors, for a discussion of risks related to our business.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to fair value of assets, bad debt, materials and supplies obsolescence, property and equipment, ~~goodwill,~~ income taxes, workers’ compensation and health insurance and contingent liabilities for which settlement is deemed to be probable. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. While we believe that such estimates are reasonable, actual results could differ from these estimates.

We believe the following are our most critical accounting policies as they can be complex and require significant judgments, assumptions and/or estimates in the preparation of our consolidated financial statements. Other significant accounting policies are summarized in Note 1 - Summary of Significant Accounting Policies of the consolidated financial statements.

Fair Value Measurements

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. Our valuation technique requires inputs that we categorize using a three-level hierarchy, from highest to lowest level of observable inputs, as follows: (1) unadjusted quoted prices for identical assets or liabilities in active markets (Level 1), (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 (Level 2) and (3) unobservable inputs that require significant judgment for which there is little or no market data (Level 3). 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 measurement even though we may have also utilized significant inputs that are more readily observable.

Impairment of Property, Plant, and Equipment

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. For example, evaluations are performed when we experience sustained significant declines in utilization and dayrates, and we do not contemplate recovery in the near future. In addition, we evaluate our assets when we reclassify property and equipment to assets held for sale or as discontinued operations as prescribed by accounting guidance related to accounting for the impairment or disposal of long-lived assets. We determine recoverability by evaluating the undiscounted estimated future net cash flows. When impairment is indicated, we measure the impairment as the amount by which the assets carrying value exceeds its fair value. Management considers a number of factors such as estimated future cash flows, appraisals and current market value analysis in determining fair value. Assets are written down to fair value if the concluded current fair value is below the net carrying value.

Asset impairment evaluations are, by nature, highly subjective. They involve expectations about future cash flows generated by our assets and reflect management’s assumptions and judgments regarding future industry conditions and their effect on future utilization levels, dayrates and costs. The use of different estimates and assumptions could result in materially different carrying values of our assets.

Goodwill

We account for all business combinations using the acquisition method of accounting. Under this method, assets and liabilities, including any remaining noncontrolling interests, are recognized at fair value at the date of acquisition. The excess of the purchase price over the fair value of assets acquired, net of liabilities assumed, plus the value of any noncontrolling interests, is recognized as goodwill. We perform our annual goodwill impairment review during the fourth quarter, as of October 1, and more frequently if negative conditions or other triggering events arise. The quantitative impairment test we perform for goodwill utilizes certain assumptions, including forecasted revenues and costs assumptions.

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Intangible Assets

Our intangible assets are related to customer relationships, trade names and developed technology, ~~which were acquired through acquisition~~ and are ~~generally~~ amortized over a ~~weighted average~~ period of approximately three, tofive and six years, respectively. 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.

Accrual for Self-Insurance

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Our contracts provide for varying levels of indemnification between ourselves and our customers, including with respect to well control and subsurface risks. We seek to obtain indemnification from our customers by contract for certain of these risks. We also maintain insurance for personal injuries, damage to or loss of equipment and other insurance coverage for various business risks. To the extent that we are unable to transfer such risks to customers by contract or indemnification agreements, we seek protection through insurance. However, these insurance or indemnification agreements may not adequately protect us against liability from all of the consequences of the hazards described above. Moreover, our insurance coverage generally provides that we assume a portion of the risk in the form of an insurance coverage deductible.

Based on the risks discussed above, we estimate our liability in excess of insurance coverage and accrue for these amounts in our consolidated financial statements. Accruals related to insurance are based on the facts and circumstances specific to the insurance claims and our past experience with similar claims. The actual outcome of insured claims could differ significantly from the amounts estimated. We accrue actuarially determined amounts in our consolidated balance sheet to cover self-insurance retentions for workers’ compensation, employers’ liability, general liability, automobile liability and health benefits claims. These accruals use historical data based upon actual claim settlements and reported claims to project future losses. These estimates and accruals have historically been reasonable in light of the actual amount ofpaid ~~claims~~on ~~paid~~claims.

As the determination of our liability for insurance claims could be material and is subject to significant management judgment and in certain instances is based on actuarially estimated and calculated amounts, management believes that accounting estimates related to insurance accruals are critical.

Accounting for Income Taxes

We are a U.S. company and we operate through our various foreign legal entities and their branches and subsidiaries in numerous countries throughout the world. Consequently, our tax provision is based upon the tax laws and rates in effect in the countries in which our operations are conducted and income is earned. The income tax rates imposed and methods of computing taxable income in these jurisdictions vary. Therefore, as a part of the process of preparing the consolidated financial statements, we are required to estimate the income taxes in each of the jurisdictions in which we operate. This process involves estimating the actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as depreciation, amortization and certain accrued liabilities for tax and accounting purposes. Our effective tax rate for financial statement purposes will continue to fluctuate from year to year as our operations are conducted in different taxing jurisdictions. Current income tax expense represents either liabilities expected to be reflected on our income tax returns for the current year, nonresident withholding taxes or changes in prior year tax estimates which may result from tax audit adjustments. Our deferred tax expense or benefit represents the change in the balance of deferred tax assets or liabilities reported on the consolidated balance sheet. 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 amounts and sources of future taxable income, where rigs will be deployed and other matters. Changes in these estimates and assumptions, as well as changes in tax laws, could require us to adjust the deferred tax assets and liabilities or valuation allowances, including as discussed below.

Our ability to realize the benefit of our deferred tax assets requires that we achieve certain future earnings levels prior to expiration. Evaluations of the realizability of deferred tax assets are, by nature, highly subjective. They involve expectations about future operations and reflect management’s assumptions and judgments regarding future industry conditions and their effect on future utilization levels, dayrates and costs. The use of different estimates and assumptions could result in materially different determinations of our ability to realize deferred tax assets. In the event that our earnings performance projections do not indicate that we will be able to benefit from our deferred tax assets, valuation allowances are established following the “more likely than not” criteria. We periodically evaluate our ability to utilize our deferred tax assets and, in accordance with accounting guidance related to accounting for income taxes, will record any resulting adjustments that may be required to deferred income tax expense in the period for which an existing estimate changes.

50We do not currently provide for deferred taxes on unremitted earnings of our foreign subsidiaries as such earnings were reinvested to fund our international operations. If the unremitted earnings were to be distributed, we could be subject to taxes and

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~~future~~Table ~~operations and reflect management’s assumptions and judgments regarding future industry conditions and their effect on future utilization levels, dayrates and costs. The use~~ of different estimates and assumptions could result in materially different determinations of our ability to realize deferred tax assets. In the event that our earnings performance projections do not indicate that we will be able to benefit from our deferred tax assets, valuation allowances are established following the “more likely than not” criteria. We periodically evaluate our ability to utilize our deferred tax assets and, in accordance with accounting guidance related to accounting for income taxes, will record any resulting adjustments that may be required to deferred income tax expense in the period for which an existing estimate changes.Contents

~~We do not currently provide for deferred taxes on unremitted earnings of our~~ foreign ~~subsidiaries as such earnings were reinvested to fund our international operations. If the unremitted earnings were to be distributed, we could be subject to taxes and foreign~~ withholding taxes though it is not practicable to determine the resulting liability, if any, that would result on the distribution of such earnings. We annually review our position and may elect to change our future tax position.

We apply the accounting standards related to uncertainty in income taxes. This accounting guidance requires that management make estimates and assumptions affecting amounts recorded as liabilities and related disclosures due to the uncertainty as to final resolution of certain tax matters. Because the recognition of liabilities under this interpretation may require periodic adjustments and may not necessarily imply any change in management’s assessment of the ultimate outcome of these items, the amount recorded may not accurately reflect actual outcomes.

Revenue Recognition

Contract drilling revenues and expenses, comprised of daywork drilling contracts, call-outs against master service agreements and engineering and related project service contracts, are recognized as services are performed and collection is reasonably assured. For certain contracts, we receive payments contractually designated for the mobilization of rigs and other drilling equipment. Mobilization payments received, and direct costs incurred for the mobilization, are deferred and recognized over the term of the related drilling contract; however, costs incurred to relocate rigs and other drilling equipment to areas in which a contract has not been secured are expensed as incurred. Reimbursements received for out-of-pocket expenses are recorded as both revenues and direct costs. For contracts that are terminated prior to the specified term, early termination payments received by us are recognized as revenues when all contractual requirements are met. Revenues from rental activities are recognized ratably over the rental term which is generally less than six months. Our project related services contracts include engineering, consulting, and project management scopes of work and revenue is typically recognized on a time and materials basis.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is estimated for losses that may occur resulting from disputed amounts and the inability of our customers to pay amounts owed. We estimate the allowance based on historical write-off experience and information about specific customers. We review individually, for collectability, all balances over 90 days past due as well as balances due from any customer with respect to which we have information leading us to believe that a risk exists for potential collection.

Legal and Investigative Matters

As of December 31, ~~2018~~2019, we have accrued an estimate of the probable and estimable costs for the resolution of certain legal and investigation matters. We have not accrued 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.

Recent Accounting Pronouncements

For a discussion of the new accounting pronouncements that have had or are expected to have an effect on our consolidated financial statements, see Note 1719 - ~~Selected~~Recent ~~Quarterly~~Accounting ~~Financial~~Pronouncements ~~Data (Unaudited)~~ in Item 8. Financial Statements and Supplementary Data.

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk

~~Foreign~~Not ~~Currency Exchange Rate Risk~~applicable.

Our international operations expose us to foreign currency exchange rate risk. There are a variety of techniques to minimize the exposure to foreign currency exchange rate risk, including customer contract payment terms and the possible use of foreign currency exchange rate risk derivative instruments. Our primary foreign currency exchange rate risk management strategy involves structuring customer contracts to provide for payment in both U.S. dollars and local currency. The payment portion denominated in local currency is based on anticipated local currency requirements over the contract term. Due to various factors, including customer acceptance, local banking laws, other statutory requirements, local currency convertibility and the impact of inflation on local costs, actual foreign currency exchange rate risk needs may vary from those anticipated in the customer contracts, resulting in partial exposure to foreign exchange risk. Fluctuations in foreign currencies typically have not had a material impact on our overall results. In situations where payments of local currency do not equal local currency requirements, foreign currency exchange rate risk derivative instruments, specifically spot purchases, may be used to mitigate foreign exchange rate currency risk. We do not enter into derivative transactions for speculative purposes. As of December 31, 2018, we had no open foreign currency exchange rate risk derivative contracts.42

~~Interest~~Table ~~Rate~~of ~~Risk~~Contents

We are exposed to changes in interest rates through our fixed rate debt. Typically, the fair market value of fixed rate debt will increase as prevailing interest rates decrease and will decrease as prevailing interest rates increase. The fair value of our debt is estimated based on quoted market prices where applicable, or based on the present value of expected cash flows relating to the debt discounted at rates currently available to us for long-term borrowings with similar terms and maturities. The estimated fair value of our $360.0 million principal amount of 6.75% Notes, based on quoted market prices, was $180.0 million as of December 31, 2018. The estimated fair value of our $225.0 million principal amount of 7.50% Notes, based on quoted market prices, was $117.0 million as of December 31, 2018. A hypothetical 100 basis point increase in interest rates relative to market interest rates as of December 31, 2018 would decrease the fair market value of our 6.75% Notes by approximately $12.4 million and decrease the fair market value of our 7.50% Notes by approximately $7.6 million.

Impact of Fluctuating Commodity Prices

We are exposed to the impact of fluctuations in commodity prices that affect spending by E&P companies on drilling programs. Prolonged price reductions in commodity prices have led to significant reductions in drilling activity for both oil and natural gas. This has resulted in cancellations of some existing contracts for our rigs and rental tools, as well as fewer opportunities to maintain utilization for our equipment when contracted work was completed. As a result, drilling rig and rental tools utilization declined along with associated dayrates and rental rates.

In response to the prolonged reduction in market prices for oil and natural gas, many E&P companies curtailed U.S. drilling activity, cut worldwide spending, terminated certain drilling contracts, requested pricing concessions and took other measures aimed at reducing the capital and operating expenses within their supply chain. This adversely impacted our rental tools activity and pricing, as well as utilization and pricing of our drilling rigs.

We have experienced lower pricing and utilization of tools, services and rigs in the U.S. and certain international markets. Although the severity and duration of the current industry downturn is contingent upon many factors beyond our control, we have taken several steps in an effort to generate free cash flow during this period, including lowering our cost base through headcount reductions and lower idle rig costs, and reducing our capital expenditures. Drilling activity is highly dependent on oil and natural gas prices. Many E&P companies are expected to increase their worldwide spending plans for 2019.

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Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

~~The~~To the Stockholders and Board of Directors Parker Drilling Company:

Parker Drilling Company:

Opinion on Internal Control Over Financial Reporting

We have audited Parker Drilling Company and subsidiaries (~~Debtor in Possession) (~~the “Company”) internal control over financial reporting as of December 31, ~~2018~~2019 (Successor), based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2018~~2019 (Successor), based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, ~~2018~~2019 (Successor) and ~~2017~~2018 (Predecessor), the related consolidated statements of operations, comprehensive income ~~(loss)~~, stockholders’ equity, and cash flows for ~~each~~the ofnine ~~the~~months ~~years~~ended inDecember 31, 2019 (Successor), for the three~~-year~~ ~~period~~months ended March 31, 2019 (Predecessor), and for the year ended December 31, 2018 (Predecessor), and the related notes and the financial statement ~~Schedules~~Schedule II - Valuation and Qualifying Accounts (collectively, the consolidated financial statements), and our report dated March 114, ~~2019~~2020, expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting ~~in Item 9A~~. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Houston, Texas

March 114, ~~2019~~2020

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Report of Independent Registered Public Accounting Firm

~~The~~To the Stockholders and Board of Directors Parker Drilling Company:

Parker Drilling Company:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Parker Drilling Company and subsidiaries (~~Debtor In Possession) (~~the “Company”) as of December 31, ~~2018~~2019 (Successor) and ~~2017~~2018 (Predecessor), the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for ~~each~~the ofnine ~~the~~months ~~years~~ended inDecember 31, 2019 (Successor), for the three~~-year~~ ~~period~~months ended March 31, 2019 (Predecessor), and for the year ended December 31, 2018 (Predecessor), and the related notes and the financial statement Schedule II - Valuation and Qualifying Accounts (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2018~~2019 (Successor) and ~~2017~~2018 (Predecessor), and the results of its operations and its cash flows for ~~each~~the ofnine ~~the~~months ~~years~~ended inDecember 31, 2019 (Successor), for the three~~-year~~ ~~period~~months ended March 31, 2019 (Predecessor), and for the year ended December 31, 2018 (Predecessor), in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, ~~2018~~2019 (Successor), based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March ~~11,~~ ~~2019~~4, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

~~Going~~Basis ~~Concern~~of Presentation

~~The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.~~ As discussed in Note 2 to the consolidated financial statements, the Company ~~has~~emerged ~~suffered~~from ~~recurring~~bankruptcy ~~losses~~on ~~from~~March ~~operations~~26, ~~and~~2019 iswith ~~facing~~a ~~risk~~reporting ~~and~~date ~~uncertainties~~of ~~surrounding~~March ~~its~~31, ~~Chapter~~2019 11as ~~proceedings~~discussed ~~that~~in ~~raise~~Note ~~substantial~~1. ~~doubt~~Accordingly, ~~about~~the ~~its~~accompanying ~~ability~~consolidated tofinancial ~~continue~~statements ashave abeen ~~going~~prepared ~~concern.~~in ~~Management’s~~conformity ~~plans~~with inAccounting ~~regard~~Standards toCodification ~~these~~Topic ~~matters~~852, ~~are~~Reorganizations, ~~also~~for ~~described~~the inSuccessor ~~Note~~as 2.a ~~The~~new ~~consolidated~~entity ~~financial~~with ~~statements~~assets, doliabilities ~~not~~and ~~include~~a ~~any~~capital ~~adjustments~~structure ~~that~~having ~~might~~carrying ~~result~~amounts ~~from~~not ~~the~~comparable ~~outcome~~with ofprior ~~this~~periods ~~uncertainty~~as discussed in Note 3.

Change in Accounting Principle

As discussed in Note 6 to the consolidated financial statements, the Company changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842).

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company’s auditor since 2007.

Houston, Texas

March 114, ~~2019~~2020

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PARKER DRILLING COMPANY AND SUBSIDIARIES ~~(DEBTOR IN POSSESSION)~~

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Per Share Data)

	December 31,
	Successor				Predecessor
	2018			2017
	December 31, 2019				December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	48104,~~602~~951		$	~~141,549~~$	48,602
Restricted cash	~~10,389~~—			—	10,389
Accounts and Notes Receivable, net of allowance for bad debts of $7,767 at December 31, 2018 and $7,564 at December 31, 2017	136,437			122,511
Accounts receivable, net	166,456				136,437
Rig materials and supplies	3623,~~245~~267			~~31,415~~	36,245
Deferred costs	45,~~353~~223			~~3,145~~	4,353
Other tax assets	2,949			~~4,889~~	2,949
Other current assets	2717,~~929~~688			~~14,327~~	27,929
Total current assets	~~266~~320,~~904~~534			~~317,836~~	266,904
Property, plant and equipment, net of accumulated depreciation of $951,798 at December 31, 2018 and $1,343,105 at December 31, 2017 (Note 3)	534,371			625,771
Property, plant, and equipment, net (Note 4)	299,768				534,371
Goodwill (Note 4)	—			6,708
Intangible assets, net (Note 5)	13,675				4,821
Intangible assets, net (Note 4)	4,821			7,128
Rig materials and supplies	4,766				12,971
Rig materials and supplies	12,971			18,788
Deferred income taxes	4,416				2,143
Deferred income taxes	2,143			1,284
Other non-current assets	39,689				7,204
Other non-current assets	7,204			12,764
Total assets	$	682,848			$	828,414
Total assets	$	828,414		$	990,279
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current Liabilities:
Debtor in possession financing (Note 2)	$	—			$	10,000
Debtor in possession financing (Note 2)	$	10,000		$	—
Accounts payable	55,104				39,678
Accounts payable	39,678			41,523
Accrued liabilities	57,954				35,385
Accrued liabilities	35,385			57,723
Accrued income taxes	5,058				3,385
Accrued income taxes	3,385			4,430
Total current liabilities	118,116				88,448
Total current liabilities	88,448			103,676
Long-term debt (Note 8)	177,937				—
Long-term debt, net of unamortized debt issuance costs of $7,029 at December 31, 2017	—			577,971
Other long-term liabilities	25,892				11,544
Other long-term liabilities	11,544			12,433
Long-term deferred tax liability	7,002				510
Long-term deferred tax liability	510			78
Commitments and contingencies (Note 11)
Commitments and contingencies (Note 9)				—
Total liabilities not subject to compromise	328,947				100,502
Total liabilities not subject to compromise	100,502			694,158
Liabilities subject to compromise (Note 2)	—				600,996
Liabilities subject to compromise (Note 2)	600,996			—
Total liabilities	328,947				701,498
Stockholders’ equity:
Preferred stock, $1.00 par value, 1,942,000 shares authorized, 7.25% Series A Mandatory Convertible, 500,000 shares issued and outstanding	500			500
Common Stock, $0.16 2/3 par value, authorized 18,666,667 shares, issued and outstanding, 9,384,669 shares (9,262,382 shares in 2017) (1)	1,398			1,378
Capital in excess of par value (1)	766,347			766,508
Accumulated deficit	(634,450		)	(468,753		)
Accumulated other comprehensive income (loss)	(6,879		)	(3,512		)
Total stockholders’ equity	126,916			296,121
Total liabilities and stockholders’ equity	$	828,414		$	990,279

~~(1) See Note 12 - Stockholders' Equity for details regarding the 1-for-15 reverse stock split.~~45

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	Successor			Predecessor
	December 31, 2019			December 31, 2018
Stockholders’ equity:
Predecessor preferred stock, $1.00 par value, 1,942,000 shares authorized, 500,000 shares issued and outstanding	—			500
Predecessor common stock, $0.16 ²/₃ par value, 18,666,667 shares authorized, 9,385,060 shares issued and outstanding (9,384,669 shares issued and outstanding in 2018)	—			1,398
Predecessor capital in excess of par value	—			766,347
Predecessor accumulated other comprehensive income (loss)	—			(6,879		)
Successor common stock, $0.01 par value, 500,000,000 shares authorized, 15,044,739 shares issued and outstanding	150			—
Successor capital in excess of par value	347,340			—
Successor accumulated other comprehensive income (loss)	(98		)	—
Retained earnings (accumulated deficit)	6,509			(634,450		)
Total stockholders’ equity	353,901			126,916
Total liabilities and stockholders’ equity	$	682,848		$	828,414

See accompanying notes to the consolidated financial statements.

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PARKER DRILLING COMPANY AND SUBSIDIARIES ~~(DEBTOR IN POSSESSION)~~

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Data)

	Year Ended December 31,
	Successor				Predecessor
	2018			2017				2016
	Nine Months Ended December 31,				Three Months Ended March 31,				Year Ended December 31,
Revenues	$	480,821		$	442,520			$	427,004
	2019				2019				2018
Expenses:
Revenues	$	472,395			$	157,397			$	480,821
Operating expenses	378,104			355,487				362,521
Expenses:
Depreciation and amortization	107,545			122,373				139,795
Operating expenses	354,175				120,871				378,104
	485,649			477,860				502,316
Depreciation and amortization	61,499				25,102				107,545
Total operating gross margin (loss)	(4,828		)	(35,340		)		(75,312		)
	415,674				145,973				485,649
General and administrative expense	(24,545		)	(25,676		)		(34,332		)
Total operating gross margin	56,721				11,424				(4,828		)
Loss on impairment	(50,698		)	—				—
General and administrative expense	(17,967		)		(8,147		)		(24,545		)
Provision for reduction in carrying value of certain assets	—			(1,938		)		—
Loss on impairment	—				—				(50,698		)
Gain (loss) on disposition of assets, net	~~(1,724~~226		)	~~(2,851~~	384	)		~~(1,613~~	(1,724	)	)
Pre-petition restructuring charges	~~(21,820~~—		)	—	—			—	(21,820		)
Reorganization items	(91,~~789~~173		)	—	(92,977		)	—	(9,789		)
Total operating income (loss)	~~(113~~37,~~404~~807		)	~~(65,805~~	(89,316	)	)	~~(111,257~~	(113,404	)	)
Other income (expense):
Interest expense	(4220,~~565~~902		)	~~(44,226~~	(274	)	)	~~(45,812~~	(42,565	)	)
Interest income	91887			~~244~~	8			58	91
Other	(~~2,023~~188		)	~~126~~	(10		)	~~367~~	(2,023		)
Total other income (expense)	(4420,~~497~~203		)	~~(43,856~~	(276	)	)	~~(45,387~~	(44,497	)	)
Income (loss) before income taxes	~~(157~~17,~~901~~604		)	~~(109,661~~	(89,592	)	)	~~(156,644~~	(157,901	)	)
Income tax expense (benefit):
Income tax expense
Current tax expense	85,~~225~~190			~~9,264~~	2,341			~~5,108~~	8,225
Deferred tax expense (benefit)	~~(429~~5,905		)	~~(224~~	(1,685	)	)	~~69,062~~	(429		)
Total income tax expense (benefit)	7,796			9,040				74,170
Total income tax expense	11,095				656				7,796
Net income (loss)	~~(165~~6,~~697~~509		)	~~(118,701~~	(90,248	)	)	~~(230,814~~	(165,697	)	)
Less: Convertible preferred stock dividend	2,719			3,051				—
Less: Predecessor preferred stock dividend	—				—				2,719
Net income (loss) available to common stockholders	$	~~(168~~6,~~416~~509	)	$	~~(121,752~~$	)(90,248	)	$	~~(230,814~~$	)(168,416	)
Basic earnings (loss) per common share: (1)	$	(18.09	)	$	(13.40	)		$	(27.89	)
Basic earnings (loss) per common share:	$	0.43			$	(9.63	)		$	(18.09	)
Diluted earnings (loss) per common share: (1)	$	(18.09	)	$	(13.40	)		$	(27.89	)
Diluted earnings (loss) per common share:	$	0.43			$	(9.63	)		$	(18.09	)
Number of common shares used in computing earnings per share:
Basic (1)	9,311,722			9,084,456				8,275,334
Basic	15,044,919				9,368,322				9,311,722
Diluted (1)	9,311,722			9,084,456				8,275,334
Diluted	15,060,365				9,368,322				9,311,722

(1) See Note 12 - Stockholders' Equity for details regarding the 1-for-15 reverse stock split.

See accompanying notes to the consolidated financial statements.

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PARKER DRILLING COMPANY AND SUBSIDIARIES ~~(DEBTOR IN POSSESSION)~~

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in Thousands)

	Year Ended December 31,
	Successor				Predecessor
	2018			2017				2016
	Nine Months Ended December 31,				Three Months Ended March 31,				Year Ended December 31,
Net income (loss)	$	(165,697	)	$	(118,701	)		$	(230,814	)
	2019				2019				2018
Other comprehensive income (loss), net of tax:
Net income (loss)	$	6,509			$	(90,248	)		$	(165,697	)
Currency translation difference on related borrowings	(646		)	643				(691		)
Other comprehensive income (loss), net of tax:
Currency translation difference on foreign currency net investments	(2,721		)	2,689				(4,265		)
Currency translation difference on related borrowings	(148		)		141				(646		)
Total other comprehensive income (loss), net of tax:	(3,367		)	3,332				(4,956		)
Currency translation difference on foreign currency net investments	50				(518		)		(2,721		)
Comprehensive income (loss)	$	(169,064	)	$	(115,369	)		$	(235,770	)
Total other comprehensive income (loss), net of tax:	(98		)		(377		)		(3,367		)
Comprehensive income (loss)	$	6,411			$	(90,625	)		$	(169,064	)

See accompanying notes to the consolidated financial statements.

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PARKER DRILLING COMPANY AND SUBSIDIARIES ~~(DEBTOR IN POSSESSION)~~

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

	Year Ended December 31,
	Successor				Predecessor
	2018			2017				2016
	Nine Months Ended December 31,				Three Months Ended March 31,				Year Ended December 31,
Cash flows from operating activities:
	2019				2019				2018
Net income (loss)	$	(165,697	)	$	(118,701	)		$	(230,814	)
Cash flows from operating activities:
Adjustments to reconcile net income (loss):
Net income (loss)	$	6,509			$	(90,248	)		$	(165,697	)
Depreciation and amortization	107,545			122,373				139,795
Adjustments to reconcile net income (loss):
Accretion on contingent consideration	—			—				419
Depreciation and amortization	61,499				25,102				107,545
(Gain) loss on debt modification	—			—				1,088
(Gain) loss on disposition of assets, net	(226		)		(384		)		1,724
Gain (loss) on disposition of assets, net	1,724			2,851				1,613
Deferred tax expense (benefit)	5,905				(1,685		)		(429		)
Deferred tax expense (benefit)	(429		)	(224		)		69,062
Loss on impairment	—				—				50,698
Loss on impairment	50,698			—				—
Reorganization items	—				62,470				7,538
Reorganization items	7,538			—				—
Expenses not requiring cash	8,681				2,575				5,151
Provision for reduction in carrying value of certain assets	—			1,938				—
Change in assets and liabilities:
Expenses not requiring cash	5,151			4,251				2,518
Accounts receivable	1,611				(32,842		)		(15,235		)
Change in assets and liabilities:
Rig materials and supplies	(6,335		)		—				249
Accounts and notes receivable	(15,235		)	(9,628		)		60,391
Other current assets	(4,027		)		(6,542		)		(10,860		)
Rig materials and supplies	249			4,710				(1,752		)
Other non-current assets	(4,805		)		—				13,019
Other current assets	(10,860		)	(1,319		)		2,140
Accounts payable and accrued liabilities	(4,646		)		55,780				(9,489		)
Other non-current assets	13,019			8,658				3,897
Accrued income taxes	(2,527		)		688				(1,264		)
Accounts payable and accrued liabilities	(9,489		)	(8,714		)		(19,494		)
Net cash provided by (used in) operating activities	61,639				14,914				(17,050		)
Accrued income taxes	(1,264		)	538				(6,422		)
Cash flows from investing activities:
Net cash provided by (used in) operating activities	(17,050		)	6,733				22,441
Capital expenditures	(71,107		)		(9,231		)		(70,567		)
Cash flows from investing activities:
Proceeds from the sale of assets	792				101				1,353
Capital expenditures	(70,567		)	(54,533		)		(28,954		)
Net cash provided by (used in) investing activities	(70,315		)		(9,130		)		(69,214		)
Proceeds from the sale of assets	1,353			403				2,441
Cash flows from financing activities:
Net cash provided by (used in) investing activities	(69,214		)	(54,130		)		(26,513		)
Payment of term loan	(35,158		)		—				—
Cash flows from financing activities:
Payments of debt issuance costs	(500		)		(490		)		(1,443		)
Proceeds from borrowing under DIP facility	10,000			—				—
Proceeds from rights offering	—				95,000				—
Payment of DIP facility costs	(975		)	—				—
Payment of amounts borrowed under debtor in possession facility	—				(10,000		)		—
Convertible preferred stock dividend	(3,625		)	(2,145		)		—
Predecessor preferred stock dividend	—				—				(3,625		)
Payments of debt issuance costs	(1,443		)	—				—
Shares surrendered in lieu of tax	—				—				(251		)
Shares surrendered in lieu of tax	(251		)	(936		)		(1,156		)
Proceeds from borrowing under debtor in possession facility	—				—				10,000
Proceeds from the issuance of common stock	—			25,200				—
Payment of debtor in possession facility costs	—				—				(975		)
Proceeds from the issuance of convertible preferred stock	—			50,000				—
Net cash provided by (used in) financing activities	(35,658		)		84,510				3,706
Payment of equity issuance costs	—			(2,864		)		—
Net increase (decrease) in cash and cash equivalents and restricted cash	(44,334		)		90,294				(82,558		)
Payment of contingent consideration	—			—				(6,000		)
Cash, cash equivalents and restricted cash at beginning of period	149,285				58,991				141,549
Payment for noncontrolling interest	—			—				(3,375		)
Cash, cash equivalents and restricted cash at end of period	$	104,951			$	149,285			$	58,991
Net cash provided by (used in) financing activities	3,706			69,255				(10,531		)
Net increase (decrease) in cash, cash equivalents and restricted cash	(82,558		)	21,858				(14,603		)
Cash, cash equivalents and restricted cash at beginning of period	141,549			119,691				134,294
Cash, cash equivalents and restricted cash at end of period	$	58,991		$	141,549			$	119,691
Supplemental cash flow information:
Interest paid	41,175			41,175				41,175
Income taxes paid	8,625			8,422				14,341
Restructuring costs paid	6,638			—				—

See accompanying notes to the consolidated financial statements.

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PARKER DRILLING COMPANY AND SUBSIDIARIES ~~(DEBTOR IN POSSESSION)~~

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars and Shares in Thousands)

	Shares (1)		Convertible Preferred Stock			CommonStock			Treasury Stock			Capital inExcess ofPar Value			AccumulatedDeficit			Accumulated Other Comprehensive Income (Loss)			TotalStockholders’Equity
	Shares		Preferred Stock			Common Stock			Treasury Stock			Capital inExcess ofPar Value			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			TotalStockholders’Equity
Balances, December 31, 2015	8,214		$	—		$	1,373		$	(170	)	$	688,435		$	(119,238	)	$	(1,888	)	$	568,512
Balances, December 31, 2017 (Predecessor)	9,762		$	500		$	1,548		$	(170	)	$	766,508		$	(468,753	)	$	(3,512	)	$	296,121
Activity in employees’ stock plans	127		—			21			—			(1,177		)	—			—			(1,156		)
Amortization of stock-based awards	—		—						—			7,549			—			—			7,549
Comprehensive Income:
Net income	—		—						—			—			(230,814		)	—			(230,814		)
Other comprehensive income (loss)	—		—						—			—			—			(4,956		)	(4,956		)
Balances, December 31, 2016	8,341		—			1,394			(170		)	694,807			(350,052		)	(6,844		)	339,135
Activity in employees’ stock plans	121		—			20			—			(956		)	—			—			(936		)
Amortization of stock-based awards	—		—			—			—			4,006			—			—			4,006
Issuance of common stock	800		—			134			—			23,925			—			—			24,059
Issuance of mandatory convertible preferred stock	500		500			—			—			47,777			—			—			48,277
Convertible preferred stock dividend	—		—			—			—			(3,051		)	—			—			(3,051		)
Comprehensive Income:
Net income	—		—			—			—			—			(118,701		)	—			(118,701		)
Other comprehensive income (loss)	—		—			—			—			—			—			3,332			3,332
Balances, December 31, 2017	9,762		500			1,548			(170		)	766,508			(468,753		)	(3,512		)	296,121
Activity in employees’ stock plans	123		—			20			—			(275		)	—			—			(255		)
Amortization of stock-based awards	—		—			—			—			2,833			—			—			2,833
Convertible preferred stock dividend	—		—			—			—			(2,719		)	—			—			(2,719		)
Predecessor preferred stock dividend	—		—			—			—			(2,719		)	—			—			(2,719		)
Comprehensive Income:
Net income (loss)	—		—			—			—			—			(165,697		)	—			(165,697		)
Net income	—		—			—			—			—			(165,697		)	—			(165,697		)
Other comprehensive income (loss)	—		—			—			—			—			—			(3,367		)	(3,367		)
Balances, December 31, 2018	9,885		$	500		$	1,568		$	(170	)	$	766,347		$	(634,450	)	$	(6,879	)	$	126,916
Balances, December 31, 2018 (Predecessor)	9,885		500			1,568			(170		)	766,347			(634,450		)	(6,879		)	126,916
Amortization of stock-based awards	—		—			—			—			1,446			—			—			1,446
Comprehensive Income:
Net income (loss)	—		—			—			—			—			(90,248		)	—			(90,248		)
Other comprehensive income (loss)	—		—			—			—			—			—			(377		)	(377		)
Balances, March 31, 2019 (Predecessor)	9,885		500			1,568			(170		)	767,793			(724,698		)	(7,256		)	37,737
Cancellation of predecessor equity	(9,885	)	(500		)	(1,568		)	170			(767,793		)	724,698			7,256			(37,737		)
Balances, March 31, 2019 (Predecessor)	—		—			—			—			—			—			—			—
Issuances of successor common stock	15,044		—			150			—			328,800			—			—			328,950
Issuances of successor warrants	—		—			—			—			14,687			—			—			14,687
Equity issuance costs	—		—			—			—			(837		)	—			—			(837		)
Balances, March 31, 2019 (Successor)	15,044		—			150			—			342,650			—			—			342,800
Amortization of stock-based awards	—		—			—			—			4,690			—			—			4,690
Comprehensive Income:
Net income (loss)	—		—			—			—			—			6,509			—			6,509
Other comprehensive income (loss)	—		—			—			—			—			—			(98		)	(98		)
Balances, December 31, 2019 (Successor)	15,044		$	—		$	150		$	—		$	347,340		$	6,509		$	(98	)	$	353,901

(1) See Note 12 - Stockholders' Equity for details regarding the 1-for-15 reverse stock split.

See accompanying notes to the consolidated financial statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Summary of Significant Accounting Policies

Organization and Nature of Operations

Unless otherwise indicated, the terms “Company,” “Parker,” “we,” “us,” “its” and “our” refer to Parker Drilling Company, incorporated in Delaware, ~~and~~together with its wholly-owned subsidiaries, (and “Parker Drilling” orrefers ~~the~~solely ~~“Company”~~to orthe ~~“we”~~parent, orParker ~~“us”~~Drilling orCompany. ~~“our”)~~Parker is an international provider of contract drilling and drilling-related services, as well as, rental tools and services. We have operated in over 5060 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 financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and are audited. In the opinion of ~~Parker~~the ~~Drilling~~Company, these consolidated financial statements include all adjustments which, unless otherwise disclosed, are of a normal recurring nature, necessary for their fair presentation for the periods presented.

Consolidation

The consolidated 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 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.

Noncontrolling Interest

We apply accounting standards related to noncontrolling interests for ownership interests in our subsidiaries held by parties other than Parker Drilling. We report noncontrolling interest as equity on the consolidated balance sheets and report net income (loss) attributable to controlling interest and to noncontrolling interest separately on the consolidated statements of operations.

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 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 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.

~~Revenue~~Cash, ~~Recognition~~Cash Equivalents and Restricted Cash

See Note 14 - Revenue from Contracts with Customers for further discussion of our revenue recognition policy.

Goodwill

We account for business combinations using the acquisition method of accounting. Under this method, assets and liabilities, including any remaining noncontrolling interests, are recognized at fair value at the date of acquisition. The excess of the purchase price over the fair value of assets acquired, net of liabilities assumed, plus the value of any noncontrolling interests, is recognized as goodwill. We perform our annual goodwill impairment review during the fourth quarter, as of October 1, and more frequently if negative conditions or other triggering events arise that indicate that the fair value of the reporting unit has decreased below its carrying value. In order to estimate the fair value of the reporting unit, the Company used a weighting of the discounted cash flow, guideline public company and guideline transaction method. The Company engages third-party appraisal firms to assist in f

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air value determination of the reporting unit. The quantitative impairment test we perform for goodwill utilizes certain assumptions, including forecasted revenues and costs assumptions. See Note 4 - Goodwill and Intangible Assets for further discussion.

Intangible Assets

Our intangible assets are related to developed technology and trade names, which were acquired through acquisition and 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 - Goodwill and Intangible Assets for further discussion.

Cash, Cash equivalents and Restricted Cash

For purposes of the consolidated balance sheets and the consolidated 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.

	December 31,
	Successor			Predecessor
Dollars in thousands	2018		2017
	December 31,			December 31,
Cash and cash equivalents	$	48,602	$	141,549
Dollars in thousands	2019			2018
Restricted cash	10,389		—
Cash and cash equivalents	$	104,951		$	48,602
Cash, cash equivalents and restricted cash at end of period	$	58,991	$	141,549
Restricted cash	—			10,389
Cash, cash equivalents and restricted cash at end of period	$	104,951		$	58,991

The restricted cash balance ~~includes~~as of December 31, 2018 included $9.8 million in ~~into~~ 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.

~~Accounts Receivable and Allowance for Bad Debt~~51

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Accounts Receivable and Allowance for Bad Debts

Trade accounts receivable are recorded at the invoice amount and typically do not bear interest. The allowance for bad debt is estimated for losses that may occur resulting from disputed amounts and the inability of our customers to pay amounts owed. We estimate the allowance based on historical write-off experience and information about specific customers. We review individually, for collectability, all balances over 90 days past due as well as balances due from any customer with respect to which we have information leading us to believe that a risk exists for potential collection.

Account balances are charged off against the allowance when we believe it is probable the receivable will not be recovered. We do not have any off-balance-sheet credit exposure related to customers.

The components of our accounts receivable, net of allowance for bad debt balance are as follows:

	December 31,
	Successor				Predecessor
Dollars in thousands	2018			2017
	December 31,				December 31,
Trade	$	144,204		$	130,075
Dollars in thousands	2019				2018
Allowance for bad debt (1)	(7,767		)	(7,564		)
Accounts Receivable	$	166,799			$	144,204
Total accounts and notes receivable, net of allowance for bad debt	$	136,437		$	122,511
Allowance for bad debts (1)	(343		)		(7,767		)
Accounts receivable, net of allowance for bad debts	$	166,456			$	136,437

(1) Additional information on the allowance for bad debt ~~for~~as ~~the~~of ~~years ended~~ December 31, ~~2018,~~2019 ~~2017~~ and ~~2016~~2018, is reported on Schedule II — Valuation and Qualifying Accounts in Item 15. Exhibits and Financial Statement Schedules.

61Rig Materials and Supplies

~~Table~~Because international drilling generally occurs in remote locations, making timely delivery of ~~contents~~spare parts uncertain, a complement of parts and supplies is maintained either at the drilling site or in warehouses close to the operation. During periods of high rig utilization, these parts are generally consumed and replenished within a one-year period. During a period of lower rig utilization in a particular location, the parts, like the related idle rigs, are generally not transferred to other international locations until new contracts are obtained because of the significant transportation costs that would result from such transfers. We classify those parts which are not expected to be utilized in the following year as long-term assets. Additionally, our International rental tools business holds machine shop consumables and steel stock for manufacture in our machine shops and inspection and repair shops, which are classified as current assets. Rig materials and supplies are valued at the lower of cost or market value.

Property, Plant, and Equipment

Property, plant, and equipment is carried at cost. Maintenance and most repair costs are expensed as incurred. The cost of upgrades and replacements is capitalized. The Company capitalizes software developed or obtained for internal use. Accordingly, the cost of third-party software, as well as the cost of third-party and internal personnel that are directly involved in application development activities, are capitalized during the application development phase of new software systems projects. Costs during the preliminary project stage and post-implementation stage of new software systems projects, including data conversion and training costs, are expensed as incurred. We account for depreciation of property, plant, and equipment on the straight-line method over the estimated useful lives of the assets after provision for salvage value. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the term of the lease. Depreciation, for tax purposes, utilizes several methods of accelerated depreciation. ~~Depreciable~~See ~~lives~~Note ~~for~~4 ~~different~~- ~~categories~~Property, ~~of property~~Plant, ~~plant~~ and ~~equipment are as follows:~~Equipment.

Computer, office equipment and other	3 to 10 years
Land drilling equipment	3 to 20 years
Barge drilling equipment	3 to 20 years
Drill pipe, rental tools and other	4 to 15 years
Buildings and improvements	5 to 30 years

Depreciable lives for different categories of property, plant, and equipment are as follows:

Leasehold improvements are depreciated over the shorter of their estimated useful lives or the term of the lease.



Computer, office equipment, and other	3 to 10 years
Land drilling equipment	3 to 20 years
Barge drilling equipment	3 to 20 years
Drill pipe, rental tools, and other	4 to 15 years
Buildings and improvements	5 to 30 years

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.

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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, trade names and developed technology, 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 5 - Intangible Assets.

Capitalized Interest

Interest from external borrowings is capitalized on major projects until the assets are ready for their intended use. Capitalized interest is added to the cost of the underlying asset and is amortized over the useful lives of the assets in the same manner as the underlying assets. Capitalized interest costs reduce net interest expense in the consolidated statements of operations. ~~Capitalized interest costs were $0.1 million during 2018. During 2017 and 2016 capitalized interest costs were nominal and $0.2 million, respectively.~~



	Successor		Predecessor
	December 31,		December 31,
Dollars in thousands	2019		2018
Capitalized interest	$	—	$	125

Assets Held for Sale

We classify an asset as held for sale when the facts and circumstances meet the criteria for such classification, including the following: (a) we have committed to a plan to sell the asset, (b) the asset is available for immediate sale, (c) we have initiated actions to complete the sale, including locating a buyer, (d) the sale is expected to be completed within one year, (e) the asset is being actively marketed at a price that is reasonable relative to its fair value, and (f) the plan to sell is unlikely to be subject to significant changes or termination.

Rig Materials and Supplies

Because our international drilling generally occurs in remote locations, making timely outside delivery of spare parts uncertain, a complement of parts and supplies is maintained either at the drilling site or in warehouses close to the operation. During periods of high rig utilization, these parts are generally consumed and replenished within a one-year period. During a period of lower rig utilization in a particular location, the parts, like the related idle rigs, are generally not transferred to other international locations until new contracts are obtained because of the significant transportation costs that would result from such transfers. We classify those parts which are not expected to be utilized in the following year as long-term assets. Additionally, our international rental tools business holds machine shop consumables and steel stock for manufacture in our machine shops and inspection and repair shops, which are classified as current assets. Rig materials and supplies are valued at the lower of cost or market value.

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Deferred Costs

We defer costs related to rig mobilization and amortize such costs over the primary term of the related contract. The costs to be amortized within twelve months are classified as current.

Debt Issuance Costs

We typically defer costs associated with issuance of indebtedness, and amortize those costs over the term of the related debt using the effective interest method.

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 10 - Income Taxes for further details.

~~Earnings (Loss) Per Share (EPS)~~Leases

~~Basic~~As 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 securitieslessee, ~~stock~~our ~~options,~~leases ~~unvested restricted stock, assumed conversion of convertible stock and convertible debt~~ are ~~included~~primarily inoperating ~~the~~leases. ~~diluted~~See ~~EPS~~Note ~~calculation,~~6 ~~when~~- ~~applicable~~Operating Leases.

~~Concentrations~~As lessor, our leases are primarily operating leases which are included in revenue in our consolidated statement of ~~Credit~~operations. ~~Risk~~See Note 15 - Revenue.

AsTable of December 31, 2018 and 2017, we had deposits in domestic banks in excess of federally insured limits of approximately $27.5 million and $97.6 million, respectively. In addition, we had uninsured deposits in foreign banks as of December 31, 2018 and 2017 of $32.9 million and $45.6 million, respectively.Contents

Fair Value Measurements

~~For~~See ~~purposes~~Note of9 ~~recording fair value adjustments for certain financial and non~~-~~financial~~ ~~assets~~Fair ~~and~~Value 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 liabilityMeasurements. Our valuation technique requires inputs that we categorize using a three-level hierarchy, from highest to lowest level of observable inputs, as follows: (1) unadjusted quoted prices for identical assets or liabilities in active markets (Level 1), (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 (Level 2) and (3) unobservable inputs that require significant judgment for which there is little or no market data (Level 3). 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 measurement even though we may have also utilized significant inputs that are more readily observable.

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Foreign Currency

InFor ~~our international rental tool business, for~~ certain subsidiaries and branches outside the U.S., the local currency is the functional currency. The financial statements of these subsidiaries and branches are translated into U.S. dollars as follows: (i) assets and liabilities at month-end exchange rates; (ii) income, expenses and cash flows at monthly average exchange rates or exchange rates in effect on the date of the transaction; and (iii) stockholders’ equity at historical exchange rates. For those subsidiaries where the local currency is the functional currency, the resulting translation adjustment is recorded as a component of accumulated other elements of comprehensive income (loss) in the accompanying consolidated balance sheets.

Stock-Based Compensation

Under our long-term incentive plan, we are authorized to issue the following: stock options; stock appreciation rights; restricted stock awards; restricted stock units; performance-based awards; and other types of awards in cash or stock to key employees, consultants, and directors. We typically grant restricted stock units, time-based phantom stock units, performance cash units, and performance-based phantom stock units.

Stock-based compensation expense is recognized, net of an estimated forfeiture rate, which is based on historical experience and adjusted, if necessary, in subsequent periods based on actual forfeitures. We recognize stock-based compensation expense in the same financial statement line item as cash compensation paid to the respective employees. Tax deduction benefits for awards in excess of recognized compensation costs are reported as an operating cash flow.

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.

~~Reverse~~Revenue ~~Stock Split~~Recognition

OnSee ~~July~~Note ~~27,~~15 ~~2018, the Company’s 1~~-~~for-15~~ ~~reverse stock split of its common stock became effective~~Revenue. Unless otherwise indicated, all common share and per common share data have been retroactively restated for all periods presented. The reverse stock split did not affect the par value of the common stock. Shareholders who otherwise would have been entitled to receive a fractional share of common stock as a result of the reverse stock split received cash in lieu of such fractional share. The Company’s 7.25% Series A Mandatory Convertible Preferred Stock (“Convertible Preferred Stock”) was not subject to the reverse stock split, as proportionate adjustments were made to the minimum and maximum conversion rates of the Convertible Preferred Stock.

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 29.3 percent of our consolidated revenues for the nine months ended December 31, 2019. Excluding revenues from reimbursable costs (“reimbursable revenues”) of $63.2 million, ENL constituted approximately 18.6 percent of our total consolidated revenues for the nine months ended December 31, 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	December 31, 2019		December 31, 2018
Deposits in domestic banks in excess of federally insured limits	$	53,303	$	27,520
Uninsured deposits in foreign banks	$	51,884	$	32,907

Stock-Based Compensation

Under our long-term incentive plan, we are authorized to issue the following: stock options; stock appreciation rights; restricted stock; restricted stock units; performance-based awards; and other types of awards in cash or stock to key employees, consultants, and directors. We typically grant restricted stock units, time-based phantom stock units, performance cash units, and performance-based phantom stock units.

Earnings (Loss) Per Share (EPS)

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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 14 - Earnings (Loss) Per Share (EPS).

Bankruptcy

On December 12, 2018 (the “Petition Date”), ~~the~~Parker ~~Company~~Drilling and certain of its U.S. subsidiaries (collectively, the “Debtors”) filed a prearranged plan of reorganization (the “Plan”) and commenced voluntary ~~Chapter~~petitions 11under ~~proceedings~~chapter 11 (the “Chapter 11 Cases”) ~~under~~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 “Plan Effective Date”). 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 ~~Cases~~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;


(3)	the Company issued:


•	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

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•	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); and


•	all of the Company’s agreements, instruments and other documents evidencing or relating to, or otherwise connected with, any of the Predecessor’s equity interests outstanding prior to the Plan Effective Date were cancelled and all such equity interests have no further force or effect.

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 statement of operations.

Reorganization items consisted of:



	Successor		Predecessor
	Nine Months Ended December 31,		Three Months Ended March 31,			Year Ended December 31,
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			2,251
Backstop premium on the rights offering paid in stock	—		11,033			—
Predecessor 6.75% senior notes, due July 2022 - unamortized debt issuance costs	—		—			3,775
Predecessor 7.50% senior notes, due August 2020 - unamortized debt issuance costs	—		—			1,580
Predecessor 2015 secured credit agreement - unamortized debt issuance costs	—		—			1,208
Debtor in possession facility costs	—		—			975
Other	—		399			—
Reorganization items	$	1,173	$	92,977		$	9,789

Supplemental cash flow information related to reorganization items paid is as follows:



	Successor		Predecessor
	Nine Months Ended December 31,		Three Months Ended March 31,		Year Ended December 31,
Dollars in thousands	2019		2019		2018
Reorganization items paid	$	22,168	$	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 balance sheet. These liabilities were reported at the amounts allowed as claims by the Bankruptcy Court.

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Liabilities subject to compromise consisted of:



	Successor		Predecessor
Dollars in thousands	December 31, 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 8 - 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 statement of operations or consolidated balance sheet. As such, the application of fresh start accounting was reflected in our consolidated condensed 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 financial statements of the Successor, are not comparable to the consolidated financial statements of the Predecessor.

The Company’s consolidated 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

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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 of new 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.

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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 names, 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 names 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 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.

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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
Deferred costs	3,718			—				(3,603		)	(16)	115
Other tax assets	2,725			—				—				2,725
Other current assets	25,501			(8,764		)	(3)	—				16,737
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
Rig materials and supplies	10,703							(6,845		)	(20)	3,858
Other non-current assets	27,342			1,253			(4)	544			(20)	29,139
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	68,633			—				—				68,633
Accrued liabilities	65,828			4,990			(6)	(3,868		)	(21)	66,950
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
Retained earnings (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

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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 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 accrued liabilities	$	4,990


(7)	Changes in long-term debt include the issuance of the $210.0 million Term Loan.

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(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

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(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 deferred costs 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 rig materials and supplies and other non-current assets reflect the following:



Dollars in thousands
Fair value adjustment to rig material and supplies	$	(6,845	)
Net change in rig materials and supplies	$	(6,845	)



Dollars in thousands
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	$	544


(21)	Changes in 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 accrued liabilities	$	(3,868	)

Table of Contents


(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 - Property, Plant, and Equipment

The components of our property, plant, and equipment balance are as follows:



	Successor			Predecessor
Dollars in Thousands	December 31, 2019			December 31, 2018
Property, plant, and equipment, at cost:
Drilling equipment	$	139,722		$	720,037
Rental tools	164,592			581,107
Building, land and improvements	25,636			58,193
Other	15,902			115,977
Construction in progress	10,078			10,855
Total property, plant, and equipment, at cost	355,930			1,486,169
Accumulated depreciation	(56,162		)	(951,798		)
Property, plant, and equipment, net	$	299,768		$	534,371

Depreciation expense related to property, plant, and equipment is presented below:



	Successor		Predecessor
	Nine Months Ended December 31,		Three Months Ended March 31,		Year Ended December 31,
Dollars in thousands	2019		2019		2018
Depreciation expense	$	57,174	$	24,525	$	105,239

Loss on impairment

There was no loss on impairment for the nine months ended December 31, 2019, or the three months ended March 31, 2019. Loss on impairment was $50.7 million for the year ended December 31, 2018. During the third quarter of 2018, we noted that historically, our barge rig utilization has trended closely with oil prices in periods of both decline and recovery. Management determined the divergence between oil prices and utilization for our Gulf of Mexico inland barge and international barge asset groups necessitated performance of a recoverability analysis for these two asset groups. Average quarterly oil prices have increased sequentially beginning in the third quarter of 2017, reaching an average quarterly 3-year high in the third quarter of 2018, while our utilization remained flat for the nine months ending September 30, 2018, as compared to the year ended December 31, 2018.

Based upon our recoverability analysis, where the carrying values exceeded both estimated future undiscounted cash flows and a subsequent aggregate fair value determination based upon a cost approach method, we determined the Gulf of Mexico inland barge and international barge asset groups were impaired. The significant unobservable inputs to the cost approach method included replacement costs and remaining economic life. See also Note 9 - Fair Value Measurements.

We estimated the fair values to be $19.7 million and $3.4 million for the Gulf of Mexico inland barge asset group and the international barge asset group, respectively for the year ended December 31, 2018. We recognized a pretax impairment loss of approximately $44.0 million in total, or $34.2 million and $9.8 million for the Gulf of Mexico inland barge asset group and the international barge asset group, respectively, for the year ended December 31, 2018. The Gulf of Mexico inland barge asset group is reported as part of the U.S. (lower 48) drilling segment and the international barge asset group is reported as part of the International & Alaska drilling segment.

Gain (loss) on disposition of assets, net

During the normal course of operations, we periodically sell equipment deemed excess, obsolete, or not currently required for operations. Net gains recorded on asset disposition were $0.2 million and $0.4 million for the nine months ended December 31, 2019, and the three months ended March 31, 2019, respectively, and a net loss of $1.7 million for the year ended December 31,

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~~Note~~2018. 2The -net ~~Chapter~~gains 11for ~~Cases~~2019 were primarily related to disposal of equipment deemed to be excess, obsolete, or not currently required for operations. The net loss for 2018 was primarily related to equipment that was deemed obsolete in the International & Alaska drilling segment and U.S. rental tools segment.

OnNote ~~the~~5 Petition Date, the Debtors filed the Plan and commenced the Chapter 11 Cases under title 11 of the Bankruptcy Code in the Bankruptcy Court. Since the commencement of the Chapter 11 Cases, the Debtors have continued to operate their businesses as “debtors-~~in-possession”~~ ~~under~~Intangible ~~the~~Assets ~~jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.~~

InIntangible ~~addition~~assets toconsist Parker Drilling, the U.S. subsidiaries included as debtors in the Chapter 11 Cases are 2M-TEK, Inc., Anachoreta, Inc., Pardril, Inc., Parker Aviation Inc., Parker Drilling Arctic Operating, LLC, Parker Drilling Company North America, Inc., Parker Drilling Company of Niger, Parker Drilling Company of Oklahoma, Incorporated, Parker Drilling Company of South America, Inc., Parker Drilling Management Services, Ltd., Parker Drilling Offshore Company, LLC, Parker Drilling Offshore USA, L.L.C., Parker North America Operations, LLC, Parker Technology, Inc., Parker Technology, L.L.C., Parker Tools, LLC, Parker-VSE, LLC, Quail Tools, L.P., and Quail USA, LLC. Since the commencement of the Chapter 11 Cases, the Debtors have continued to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.following:

Restructuring Support Agreement



		Successor
		Balance at December 31, 2019
Dollars in thousands	Estimated Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	3	$	16,300	$	(4,075	)	$	12,225
Trade names	5	1,500		(225		)	1,275
Developed technology	6	200		(25		)	175
Total intangible assets		$	18,000	$	(4,325	)	$	13,675

OnAmortization ~~December~~expense ~~12,~~related ~~2018, prior~~ to ~~the~~intangible ~~commencement~~assets ofis ~~the~~presented Chapter 11 Cases, the Debtors entered into a restructuring support agreement (as amended, the “RSA”) with certain significant holders (together, collectively, the “Consenting Stakeholders”) of (i) 7.50% Senior Notes due 2020 (the “7.50% Note Holders”) issued pursuant to the 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”), (ii) 6.75% Senior Notes due 2022 (the “6.75% Note Holders”) issued pursuant to the 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, (iii) Parker Drilling’s existing common stock (the “Common Holders”) and (iv) Parker Drilling’s 7.25% Series A Mandatory Convertible Preferred Stock (the “Convertible Preferred Stock,” and such holders, the “Preferred Holders”) to support a restructuring (the “Restructuring”) on the terms set forth in the Plan.below:

On December 13, 2018, the Bankruptcy Court entered an order approving joint administration of the Chapter 11 Cases under the caption In re Parker Drilling Company, et al.



	Successor		Predecessor
	Nine Months Ended December 31,		Three Months Ended March 31,		Year Ended December 31,
Dollars in thousands	2019		2019		2018
Amortization expense	$	4,325	$	577	$	2,306

~~Pursuant~~Our toremaining ~~the~~intangibles ~~terms~~amortization ofexpense ~~the~~for ~~RSA and~~ the ~~Plan,~~next ~~the~~five ~~Consenting~~years ~~Stakeholders~~is ~~and~~presented ~~other holders of claims against or interests in the Debtors receive treatment under the Plan summarized as follows~~below:

• holders of claims arising from non-funded debt general unsecured obligations receive payment in full in cash as set forth in the Plan;



Dollars in thousands	Expected future intangible amortization expense
2020	$	5,766
2021	$	5,766
2022	$	1,693
2023	$	333
Beyond 2023	$	117

~~• the 7.50%~~ Note Holders receive their pro rata share of: (a) approximately 34.3 percent of the common stock (the “New Common Stock”) of Parker Drilling, as reorganized pursuant to and under the Plan (“Reorganized Parker”), subject to dilution; (b) approximately $92.6 ~~million~~- ofOperating aLeases ~~new second lien term loan of Reorganized Parker (the “New Second Lien Term Loan”); (c) the right to purchase approximately 24.~~

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