10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended MARCH 31, 2009

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 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	(I.R.S. Employer Identification No.)
incorporation or organization)

1401 Enclave Parkway, Suite 600, Houston, Texas 77077
(Address of principal executive offices) (Zip code)

(281) 406-2000
(Registrant’s telephone number, including area code)

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 þ   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 o   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ  Accelerated filer o  Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o 

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

As of April 30, 2009, 116,062,287 common shares were outstanding.

TABLE OF CONTENTS

	Page
Part I. Financial Information		3
Item 1. Financial Statements		3
Consolidated Condensed Balance Sheets (Unaudited) March 31, 2009 and December 31, 2008		3
Consolidated Condensed Statements of Operations (Unaudited) Three Months Ended March 31, 2009 and 2008		4
Consolidated Condensed Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2009 and 2008		5
Notes to the Unaudited Consolidated Condensed Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 3. Quantitative and Qualitative Disclosures about Market Risk		30
Item 4. Controls and Procedures		30
Part II. Other Information		30
Item 1. Legal Proceedings		30
Item 1A. Risk Factors		30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		31
Item 3. Defaults Upon Senior Securities		31
Item 4. Submission of Matters to a Vote of Security Holders		31
Item 5. Other Information		31
Item 6. Exhibits		31
Signatures		32
Officer Certifications
EX-10.1
EX-10.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Dollars in Thousands)

	March 31,			December 31,
	2009			2008
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	148,403		$	172,298
Accounts and notes receivable, net		182,333			186,164
Rig materials and supplies		30,201			30,241
Deferred costs		7,044			7,804
Deferred income taxes		9,735			9,735
Other tax assets		34,854			40,924
Other current assets		26,692			26,125
Total current assets		439,262			473,291
Property, plant and equipment less accumulated depreciation and amortization of $737,600 at March 31, 2009 and $712,688 at December 31, 2008		707,128			675,548
Deferred income taxes		25,852			22,956
Other noncurrent assets		33,060			33,925
Total assets	$	1,205,302		$	1,205,720
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	9,000		$	6,000
Accounts payable and accrued liabilities		135,276			140,398
Accrued income taxes		10,359			12,130
Total current liabilities		154,635			158,528
Long-term debt		437,464			435,394
Other long-term liabilities		19,342			21,396
Long-term deferred tax liability		7,133			8,230
Contingencies (Note 10)		—			—
Stockholders’ equity:
Noncontrolling interest		—			—
Common stock		19,351			18,910
Capital in excess of par value		621,570			619,561
Accumulated deficit		(54,193	)		(56,299	)
Total stockholders’ equity		586,728			582,172
Total liabilities and stockholders’ equity	$	1,205,302		$	1,205,720

See accompanying notes to the unaudited consolidated condensed financial statements.

3

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Dollars in Thousands Except Per Share and Weighted Average Shares Outstanding)

(Unaudited)

	Three Months Ended March 31,
	2009			2008
Revenues:
International Drilling	$	77,381		$	68,740
U.S. Drilling		9,856			45,888
Project Management and Engineering Services		32,054			19,179
Construction Contract		16,745			—
Rental Tools		37,889			39,471
Total revenues		173,925			173,278
Operating expenses:
International Drilling		49,777			52,621
U.S. Drilling		13,136			21,522
Project Management and Engineering Services		25,894			15,661
Construction Contract		15,914			—
Rental Tools		16,454			15,818
Depreciation and amortization		27,124			26,166
Total operating expenses		148,299			131,788
Total operating gross margin		25,626			41,490
General and administration expense		(13,060	)		(6,668	)
Gain on disposition of assets, net		78			579
Total operating income		12,644			35,401
Other income and (expense):
Interest expense		(8,066	)		(6,837	)
Interest income		286			368
Equity in loss of unconsolidated joint venture and related charges, net of tax		—			(1,105	)
Other		(12	)		60
Total other income and (expense)		(7,792	)		(7,514	)
Income before income taxes		4,852			27,887
Income tax (benefit) expense:
Current		6,738			(10,643	)
Deferred		(3,992	)		15,328
Total income tax (benefit) expense		2,746			4,685
Net income		2,106			23,202
Net income attributable to noncontrolling interest		—			—
Net income attributable to Parker Drilling	$	2,106		$	23,202
Basic earnings per share:
Net income	$	0.02		$	0.21
Diluted earnings per share:
Net income	$	0.02		$	0.21
Number of common shares used in computing earnings per share
Basic		112,260,517			110,546,311
Diluted		113,366,444			111,481,301

See accompanying notes to the unaudited consolidated condensed financial statements.

4

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Three Months Ended March 31,
	2009			2008
Cash flows from operating activities:
Net income	$	2,106		$	23,202
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		27,124			26,166
Gain on disposition of assets		(78	)		(579	)
Equity loss in unconsolidated joint venture and related charges, net of tax		—			1,105
Deferred income tax expense		(3,992	)		15,328
Expenses not requiring cash		3,907			4,092
Change in accounts receivable		5,161			(12,485	)
Change in other assets		6,692			(5,626	)
Change in liabilities		(16,372	)		(35,282	)
Net cash provided by operating activities		24,548			15,921
Cash flows from investing activities:
Capital expenditures		(51,384	)		(43,159	)
Proceeds from the sale of assets		169			1,227
Proceeds from insurance settlements		—			951
Investment in unconsolidated joint venture		—			(5,000	)
Net cash used in investing activities		(51,215	)		(45,981	)
Cash flows from financing activities:
Proceeds from draw on revolver credit facility		4,000			15,000
Excess tax cost from stock based compensation		(1,228	)		(331	)
Net cash provided by financing activities		2,772			14,669
Net decrease in cash and cash equivalents		(23,895	)		(15,391	)
Cash and cash equivalents at beginning of year		172,298			60,124
Cash and cash equivalents at end of period	$	148,403		$	44,733
Supplemental cash flow information:
Interest paid	$	2,864		$	1,841
Income taxes paid	$	8,357		$	14,994

See accompanying notes to the unaudited consolidated condensed financial statements.

5

PARKER DRILLING COMPANY AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1.	General – In the opinion of the management of Parker Drilling Company, the accompanying unaudited consolidated condensed financial statements reflect all adjustments (of a normally recurring nature) which are necessary for a fair presentation of (1) the financial position as of March 31, 2009 and December 31, 2008, (2) the results of operations for the three months ended March 31, 2009 and 2008, and (3) cash flows for the three months ended March 31, 2009 and 2008. Results for the three months ended March 31, 2009 are not necessarily indicative of the results that will be realized for the year ending December 31, 2009. The financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2008.
	Stock-Based Compensation – Total stock-based compensation expense recognized under SFAS No. 123R for the three month period ended March 31, 2009 and for the three month period ended March 31, 2008 was $1.8 million and $2.0 million, respectively, all of which was related to restricted stock plan expense. Stock-based compensation expense is included in our consolidated condensed income statement in both “General and administration expense” and “operating expense.” There were no unvested stock options at March 31, 2009. The Company had 290,300 outstanding and exercisable stock options as of March 31, 2009, the aggregate intrinsic value of which was negligible, with a weighted average exercise price of $2.88. Unvested restricted stock awards at December 31, 2008 and March 31, 2009 were 1,458,716 shares and 3,098,256 shares, respectively. In March 2009 there were 2,094,639 restricted shares granted that were related to the Company’s long term incentive plan which were earned over the previous three years. Total unrecognized compensation cost related to unamortized restricted stock awards was $3.8 million as of December 31, 2008 and $4.5 million as of March 31, 2009. There were 2,214,639 restricted shares granted to certain officers and key employees during the three month period ended March 31, 2009. The remaining unrecognized compensation cost related to unamortized restricted stock awards will be amortized over a weighted-average vesting period of approximately one year.
	The excess tax deduction realized for tax purposes from restricted stock vesting totaled $1.2 million for the three months ended March 31, 2009, which has been reported as a financing cash outflow in the consolidated condensed statement of cash flows.
	Convertible Senior Notes, including call options and warrants – In May 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) Accounting Principles Board (“APB”) 14-1, “Accounting for Convertible Debt Instruments that May Be Settled in Cash upon Conversion (Including Partial Cash Settlement),” (“FSP APB 14-1”). The FSP requires that the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement), commonly referred to as Instrument C under EITF issue No. 90-19, “Convertible Bonds With Issuer Options to Settle for Cash upon Conversion,” be separated to account for the fair value of the debt and equity components as of the date of issuance to reflect the issuer’s non-convertible debt borrowing rate. The FSP is effective for financial periods beginning after December 15, 2008 and is applied retrospectively to all periods presented (retroactive restatement) pursuant to the guidance in SFAS 154, “Accounting Changes and Error Corrections.”

6

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

1.

General (continued)

The adoption of the FSP on January 1, 2009 impacted the treatment of the Company’s 2.125 percent convertible senior notes due 2012, by reclassifying a portion of the of the convertible note balances to additional paid in capital for the estimated fair value of the conversion feature at the date of issuance and creating a discount on the convertible notes that will be amortized through interest expense over the life of the convertible notes. The Company’s non-convertible debt borrowing rate at the date of issuance (July 2007) was 7.25 percent and, accordingly, adoption of the FSP resulted in a significant increase in interest expense, and reduced net income and basic earnings per share in the Company’s consolidated condensed financial statements. Upon adoption, the Company restated its “Accumulated deficit” balance by approximately $6.8 million to reflect the additional interest expense from issuance on July 5, 2007 through December 31, 2008 and reduced “Convertible senior notes” by $19.7 million, reflecting the issuance of the notes at a discount and including amortization of the discount from the transaction date through the adoption date. The Company’s “Paid in capital” balance increased by $26.5 million, reflecting the equity portion of the initial transaction. A deferred tax asset provision of $10.6 million was also established upon initial adoption of the FSP with a corresponding reduction in “Paid in capital.” This provision was then reduced by $2.7 million with the offset to “Accumulated deficit” to reflect the benefit associated with the additional interest recorded from July 2007 to December 31, 2008. See the tables below for changes to the relevant 2008 financials.

Balance Sheet

							Restated
	December 31, 2008			Adjustments			December 31, 2008
ASSETS
Deferred income taxes		30,867			(7,911	)		22,956
Total assets	$	1,213,631					$	1,205,720
LIABILITIES AND STOCKHOLDERS’ EQUITY
Long-term debt		455,073			(19,679	)		435,394
Capital in excess of par value		603,731			15,830			619,561
Accumulated deficit		(52,237	)		(4,062	)		(56,299	)
Total liabilities and stockholders’ equity	$	1,213,631					$	1,205,720

Statement of Operations

							Restated
	Three months ended						Three months ended
	March 31, 2008			Adjustments			March 31, 2008
Other income and (expense):
Interest expense		(5,690	)		(1,147	)		(6,837	)
Income tax (benefit) expense:
Deferred		15,789			(461	)		15,328
Net income	$	23,888					$	23,202

7

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

1.	General (continued)
	The maturity date of the notes (July 15, 2012) is the expected life of the liability due to the current market value of the Company’s stock which is significantly lower than the note conversion price of $13.85 per share. The 7.25 percent cost of non-convertible debt was calculated for use in our decision model at the time that the convertible notes were issued in July 2007. Using 7.25 percent, the fair value of the notes was calculated to be $98.5 million and the discount on the notes $26.5 million. Interest expense for the first quarter of 2009 was increased by $1.2 million to reflect the fair value increment calculated as the amortization of the debt discount, using the effective interest rate method. In addition, $0.7 million of interest expense was recognized during the current quarter for the contractual interest coupon on these convertible notes.
	Property, Plant, and Equipment - In the first quarter 2009, we implemented a change in accounting estimate to more accurately reflect the useful life of some of the long-lived assets in our U.S. Drilling and International Drilling segments. This resulted in an approximate $4 million reduction in depreciation expense in the first quarter 2009, or $.04 per share. We extended the useful lives of these long-lived assets based on our review of their service lives, technological improvements in the assets, and recent changes to our refurbishment and maintenance practices which helped to extend the lives.
	Non-Controlling Interest — In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidating Financial Statements” (“SFAS No. 160”). SFAS No. 160 provides enhanced guidance related to the disclosure of information regarding noncontrolling interests in a subsidiary and their effect on the company. This Statement, together with the IASB’s IAS 27, “Consolidated and Separate Financial Statements,” concludes a joint effort by the FASB and IASB to improve the accounting for and reporting of noncontrolling interests in consolidated financial statements and promotes international convergence of accounting standards. For the Company, SFAS No. 160 is effective January 1, 2009. The Company did not apply the disclosure provisions of SFAS No. 160 as the information regarding noncontrolling interests in a subsidiary is immaterial to the consolidated condensed financial statements.
	Construction Contract – Historically the Company has primarily constructed drilling rigs for its own use. In some instances, however, the Company enters into contracts to design, construct, deliver and commission a rig for a major customer. In 2008, we were awarded a cost reimbursable, fixed fee contract to construct, deliver and commission a rig for extended-reach drilling work in Alaska. Total cost of the construction phase is currently expected to be approximately $215 million. The Company recognizes revenues received and costs incurred related to its construction contract on a gross basis and income for the related fees on a percentage of completion basis using the cost-to-cost method. Construction costs in excess of funds received from the customer are accumulated and reported as part of other current assets. At March 31, 2009, a net liability (progress payments less construction costs) of $0.5 million is included in other current liabilities.
	Cash and Cash Equivalents – For purposes of the balance sheet and the statement of cash flows, the Company considers cash equivalents to be all highly liquid investment instruments that have a remaining maturity of three months or less at the date of purchase.

2. Earnings Per Share (“EPS”)

	Three Months Ended March 31, 2009
	Income		Shares		Per-Share
	(Numerator)		(Denominator)		Amount
Basic EPS:
Net income	$	2,106,000		112,260,517	$	0.02
Effect of dilutive securities:
Stock options and restricted stock				1,105,927	$	—
Diluted EPS:
Net income	$	2,106,000		113,366,444	$	0.02

8

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

2. Earnings Per Share (“EPS”) (continued)

	Three Months Ended March 31, 2008
	Income		Shares		Per-Share
	(Numerator)		(Denominator)		Amount
Basic EPS:
Net income	$	23,202,000		110,546,311	$	0.21
Effect of dilutive securities:
Stock options and restricted stock				934,990	$	—
Diluted EPS:
Net income	$	23,202,000		111,481,301	$	0.21

All stock options outstanding during the three months ended March 31, 2008, were included in the computation of diluted EPS as the options’ exercise prices were less than the average market price of the common shares. Options to purchase 265,360 shares of common stock with exercise prices ranging from $2.24 to $4.20 per share were outstanding during the three months ended March 31, 2009, but were not included in the computation of diluted EPS because the options’ exercise prices were greater than the average market price of the common shares and would have been anti-dilutive.

3. Business Segments – The five primary services we provide are as follows: International Drilling, U.S. Drilling, Project Management and Engineering Services, Construction Contract and Rental Tools. In the first quarter of 2008, the Company created a new segment called Project Management and Engineering Services by combining our labor, operations and maintenance and engineering services contracts which had been previously reported in our U.S. Drilling or International Drilling segments. The new segment was created in anticipation of the significant expansion of these projects and services and senior management’s resultant separate performance assessment and resource allocation for this segment. The new segment operations, unlike our U.S. and International Drilling and Rental Tools operations, generally require little or no capital expenditures, and therefore have different performance assessment and resource needs. The Company anticipates further growth of this segment of our business and reviews and assesses its performance separately. In the second quarter of 2008, the Company created a new segment called Construction Contract to reflect the Company’s Engineering, Procurement, Construction and Installation contract (“EPCI”). The Construction Contract segment income (fees) is accounted for on a percentage of completion basis using the cost-to-cost method. Revenues received and costs incurred related to the contract are recorded on a gross basis.

9

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

3.	Business Segments (continued)
	Information regarding our operations by industry segment for the three months ended March 31, 2009 and 2008 is as follows:

	Three Months Ended March 31,
	2009			2008
	(Dollars in Thousands)
Revenues:
International Drilling	$	77,381		$	68,740
U.S. Drilling		9,856			45,888
Project Management and Engineering Services		32,054			19,179
Construction Contract		16,745			—
Rental Tools		37,889			39,471
Total revenues	$	173,925		$	173,278
Operating margin:
International Drilling	$	15,912		$	5,759
U.S. Drilling		(10,458	)		15,673
Project Management and Engineering Services		6,160			3,518
Construction Contract		831			—
Rental Tools		13,181			16,540
Total operating margin		25,626			41,490
General and administration expense		(13,060	)		(6,668	)
Gain on disposition of assets, net		78			579
Total operating income		12,644			35,401
Interest expense		(8,066	)		(6,837	)
Other		274			(677	)
Income before income taxes	$	4,852		$	27,887

4.

Disposition of Assets – Asset dispositions in the first three months of 2008 included the sale of Rig 206 in Indonesia, which we sold at our net book value and miscellaneous equipment that resulted in a recognized gain of $0.6 million. In the first three months of 2009 asset dispositions consisted primarily of the sale of miscellaneous equipment, resulting in an immaterial recognized gain.

5.

Accounting for Uncertainty in Income Taxes – FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. During March 2008, the Company resolved the pending tax case with the Kazakhstan Ministry of Finance by paying the reduced interest assessment related to tax payments made in 2007 (see Note 8 - Kazakhstan Tax Case), and we accordingly reduced the previously recorded accruals based on the final resolution of this matter. During March 2009, the Company recognized $0.7 million of expense related to certain intercompany transactions between our U.S. companies and foreign affiliates. As of March 31, 2009, the Company had a remaining liability for unrecognized tax benefits of $12.3 million primarily related to foreign operations.

10

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

6.	Income Tax Expense – Income tax expense was $2.7 million for the first quarter of 2009.
7.	Saudi Arabia Joint Venture – On April 9, 2008, a subsidiary of Parker executed an agreement (“Sale Agreement”) to sell its 50 percent share interest in Al-Rushaid Parker Drilling Co. Ltd. (“ARPD”) to an affiliate of the Al Rushaid subsidiary that owned the remaining 50 percent interest. The terms of the Sale Agreement provided for a $2.0 million payment to Parker’s subsidiary as consideration for the 50 percent share interest of the Parker subsidiary and partial repayment of investments and advances of the Parker subsidiary to ARPD, including a $5.0 million advance in January 2008. During the first quarter of 2008, the Parker subsidiary made the decision to terminate any future funding to ARPD, and accordingly, the Company did not record equity in losses of ARPD in the first quarter of 2008. We recognized a $1.1 million loss, net of income taxes, in the first quarter of 2008 primarily as a result of nonrecoverable costs, as per the terms of the Sale Agreement, incurred by the Parker affiliate to support ARPD operations during the current quarter. The Parker subsidiary received the $2.0 million on April 15, 2008 in full settlement of the Company’s investment in and advances to ARPD.
	The Sale Agreement obligates the resulting Saudi shareholders to indemnify the Parker subsidiary and its affiliates from claims arising out of or related to the operations of ARPD, including the drilling contracts between ARPD and Saudi Aramco, ARPD’s bank loans and vendors providing goods or services to ARPD. Each party has agreed to waive any claims that it may have against the other party arising out of the business of ARPD on or before the closing date, and subject to the formal transfer of the shares the Parker subsidiary has agreed to disclaim any remaining rights with respect to the unpaid portion of shareholder loans and payables owed by ARPD to the Parker subsidiary. The formal transfer of shares was approved by the Saudi Arabian authorities in July 2008.
	The agreement also provides that there are no restrictions on Parker or any of its affiliates with regard to competing with ARPD in the future, including in Saudi Arabia.
9.	Kazakhstan Tax Case - On October 12, 2005, the Kazakhstan Branch (“PKD Kazakhstan”) of Parker Drilling’s subsidiary, Parker Drilling Company International Limited (“PDCIL”), received an Act of Tax Audit from the Ministry of Finance of Kazakhstan (“MinFin”) assessing PKD Kazakhstan an amount of KZT (Kazakhstan Tenge) 14.9 billion (approximately $125.8 million). Approximately KZT7.5 billion or $63.3 million was assessed for import Value Added Tax (“VAT”), administrative fines and interest on equipment imported to perform the drilling contracts (the “VAT Assessment”) and approximately KZT7.4 billion or $62.5 million for corporate income tax, individual income tax and social tax, administrative fines and interest in connection with the reimbursements received by PDCIL from a client for the upgrade of Barge Rig 257 and other issues related to PKD Kazakhstan’s operations in the Republic of Kazakhstan (the “Income Tax Assessment”).
	On May 24, 2006, the Supreme Court of the Republic of Kazakhstan (“SCK”) issued a decision upholding the VAT Assessment. Consistent with its contractual obligations, on November 20, 2006, the client advanced the actual amount of the VAT Assessment and this amount has been remitted to MinFin. The administrative fines related to the VAT Assessment are being appealed by the client who is contractually responsible to reimburse PKD Kazakhstan for any administrative fines ultimately assessed. The client has also contractually agreed to reimburse PKD Kazakhstan for any incremental income taxes that PKD Kazakhstan incurs from the reimbursement of this VAT Assessment.
	After multiple appeals to the SCK and two meetings of the U.S. Competent Authorities under the Mutual Agreement Procedure of the U.S.- Kazakhstan Tax Treaty, the SCK ultimately upheld the Income Tax Assessment and on December 12, 2007, PKD Kazakhstan paid the principal tax portion of the Income Tax Assessment, net of estimated taxes previously paid. After a further appeal against the interest portion of the notice of assessment, on February 25, 2008, the Atyrau Economic Court issued a ruling that interest on the income tax assessed should accrue from the October 12, 2005 assessment date as opposed to the original assessment in 2001, which resulted in a revised interest assessment by the Atyrau Tax Committee of approximately US$13 million, which was paid by PKD Kazakhstan on March 14, 2008, in final resolution of this matter.

11

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

9. Long-Term Debt

	March 31,		December 31,
	2009		2008
	(Dollars in Thousands)
Convertible Senior Notes payable in July 2012 with coupon rate at 2.125% payable semi-annually in January and July, net of unamortized discount of $18,447 at March 31, 2009 and $19,679 at December 31, 2008	$	106,553	$	105,321
Senior Notes payable in October 2013 with coupon rate at 9.625% payable semi-annually in April and October net of unamortized premium of $2,911at March 31, 2009 and $3,073 at December 31, 2008		227,911		228,073
Term Note with amortization beginning September 30, 2009 at equal installments of $3.0 million per quarter		50,000		50,000
Revolving Credit Facility with interest at prime, plus an applicable margin or LIBOR, plus an applicable margin		62,000		58,000
Total debt		446,464		441,394
Less current portion		9,000		6,000
Total long-term debt	$	437,464	$	435,394

In May 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) Accounting Principles Board (“APB”) 14-1, “Accounting for Convertible Debt Instruments that May Be Settled in Cash upon Conversion (Including Partial Cash Settlement),” (“FSP APB 14-1”). The FSP requires that the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement), commonly referred to as Instrument C under EITF issue No. 90-19, “Convertible Bonds With Issuer Options to Settle for Cash upon Conversion,” be separated to account for the fair value of the debt and equity components as of the date of issuance to reflect the issuer’s non-convertible debt borrowing rate. The FSP is effective for financial periods beginning after December 15, 2008 and is applied retrospectively to all periods presented (retroactive restatement) pursuant to the guidance in SFAS 154, “Accounting Changes and Error Corrections” (see Note 1).

On May 15, 2008 we entered into a new Credit Agreement (“2008 Credit Facility”) with a five year senior secured $80.0 million revolving credit facility (“Revolving Credit Facility) and a senior secured term loan facility (“Term Loan Facility”) of up to $50.0 million. The obligations of the Company under the 2008 Credit Facility are guaranteed by substantially all of the Company’s domestic subsidiaries, except for domestic subsidiaries owned by foreign subsidiaries and certain immaterial subsidiaries, each of which has executed a guaranty. The 2008 Credit Facility contains customary affirmative and negative covenants such as minimum ratios for consolidated leverage, consolidated interest coverage and consolidated senior secured leverage.

12

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

9.	Long-Term Debt (continued)
	The 2008 Credit Facility is available for general corporate purposes and to fund reimbursement obligations under letters of credit the banks issue on our behalf pursuant to this facility. Revolving loans are available under the 2008 Credit Facility subject to a borrowing base calculation based on a percentage of eligible accounts receivable, certain specified barge drilling rigs and eligible rental equipment of the Company and its subsidiary guarantors. As of March 31, 2009, there were $17.7 million in letters of credit outstanding, $50.0 million outstanding on the Term Loan Facility and $62.0 million outstanding on the Revolving Credit Facility. As of March 31, 2009, the amount drawn represents nearly 100 percent of the capacity of the Revolving Credit Facility. The Term Loan will begin amortizing on September 30, 2009 at equal installments of $3.0 million per quarter. On January 30, 2009, Lehman Commercial Paper, Inc. assigned its obligations under the 2008 Credit Facility to Trustmark National Bank. Upon assignment, Trustmark National Bank fully funded Lehman Commercial Paper, Inc.’s commitments, including an additional $4.0 million that Lehman Commercial Paper, Inc. did not fund in October 2008, therefore, increasing our borrowings under the Revolving Credit Facility to $62.0 million. The Company expects to use the drawn amounts over the next twelve months to fund construction of two new rigs for work in Alaska. As of March 31, 2009 the Company is in compliance with all covenants.
10.	Contingencies
	Bangladesh Claim
	In September 2005, a subsidiary of the Company was served with a lawsuit filed in the 152nd District Court of Harris County State of Texas on behalf of numerous citizens of Bangladesh claiming $250 million in damages due to various types of property damage and personal injuries (none involving loss of life) arising as a result of two blowouts that occurred in Bangladesh in January and June 2005, although only the June 2005 blowout involved the Company. The court dismissed the case on the basis that Houston, Texas, is not the appropriate location for this suit to be filed. The plaintiffs appealed this dismissal. The Court of Appeals affirmed the dismissal which is now final because the plaintiffs failed to lodge an appeal with the Supreme Court within the required time period. No amounts were accrued at March 31, 2009.
	Asbestos-Related Claims
	In August 2004, the Company was notified that certain of its subsidiaries have been named, along with other defendants, in several complaints that have been filed in the Circuit Courts of the State of Mississippi by several hundred persons that allege that they were employed by some of the named defendants between approximately 1965 and 1986. The complaints name as defendants numerous other companies that are not affiliated with the Company, including companies that allegedly manufactured drilling-related products containing asbestos that are the subject of the complaints.
	The complaints allege that the Company’s subsidiaries and other drilling contractors used asbestos-containing products in offshore drilling operations, land-based drilling operations and in drilling structures, drilling rigs, vessels and other equipment and assert claims based on, among other things, negligence and strict liability and claims under the Jones Act and that the plaintiffs are entitled to monetary damages. Based on the report of the special master, these complaints have been severed and venue of the claims transferred to the county in which the plaintiff resides or the county in which the cause of action allegedly accrued. Subsequent to the filing of amended complaints, Parker Drilling has joined with other co-defendants in filing motions to compel discovery to determine what plaintiffs have an employment relationship with which defendant, including whether or not any plaintiffs have an employment relationship with subsidiaries of Parker Drilling. Out of 668 amended single-plaintiff complaints filed to date, sixteen (16) plaintiffs have identified Parker Drilling or one of its affiliates as a defendant. Discovery is proceeding in groups of 60 and none of the plaintiff complaints naming Parker are included in the first 60 (Group I). The initial discovery of Group I resulted in certain dismissals with prejudice, two dismissals without prejudice and two withdraws from Group I, leaving only 40 plaintiffs remaining in Group I. Selection of Discovery Group II was completed on April 21, 2008. Out of the 60 plaintiffs selected, Parker Drilling was named in one suit in which the plaintiff claims that during 1973 he earned $587.40 while working for a former subsidiary of a company Parker Drilling acquired in 1996.

13

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

10.	Contingencies (continued)
	Asbestos-Related Claims (continued)
	The subsidiaries named in these asbestos-related lawsuits intend to defend themselves vigorously and, based on the information available to the Company at this time, the Company does not expect the outcome to have a material adverse effect on its financial condition, results of operations or cash flows; however, the Company is unable to predict the ultimate outcome of these lawsuits. No amounts were accrued at March 31, 2009.
	Gulfco Site
	Several years ago the Company received an information request under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) designating Parker Drilling Offshore Corporation, a subsidiary of Parker Drilling as a potentially responsible party with respect to the Gulfco Marine Maintenance, Inc. Superfund Site in Freeport, Texas (EPA No. TX 055144539). The subsidiary responded to this request in 2003 with documents. In January 2008, the subsidiary received an administrative order to participate in an investigation of the site and a study of the remediation needs and alternatives. The EPA alleges that the subsidiary is successor to a party who owned the Gulfco site during the time when chemical releases took place there. Two other parties have been performing that work since mid-2005 under an earlier version of the same order. The subsidiary believes that it has a sufficient cause to decline participation under the order and has notified the EPA of that decision. Non-compliance with an EPA order absent sufficient cause for doing so can result in substantial penalties under CERCLA. The subsidiary is continuing to evaluate its relationship to the site and has conferred with the EPA and the other parties in an effort to resolve the matter. The Company has not yet estimated the amount or impact on our operations, financial position or cash flows of any costs related to the site. To date, the EPA and the other two parties have spent over $2.7 million studying and conducting initial remediation of the site. It is anticipated that an additional $1.3 million will be required to complete the remediation. Other costs (not yet quantified) such as interest and administrative overhead could be added to any action against the Company. Although we can provide no assurance as to the total amount necessary to finally resolve this matter, we currently anticipate that the total claim will not exceed $5 million and will be shared by all responsible parties. The Company does not believe it has any obligation with respect to the remediation of the property, and accordingly no accrual was made as of March 31, 2009.
	Customs Agent Investigation
	As previously disclosed, the Company received requests from the United States Department of Justice (“DOJ”) in July 2007 and the United States Securities and Exchange Commission (“SEC”) in January 2008 relating to the Company’s utilization of the services of a customs agent. In response to those requests, the Company is conducting an internal investigation. The DOJ and the SEC are conducting parallel investigations into possible violations of U.S. law by the Company, including the Foreign Corrupt Practices Act (the “FCPA”). In particular, the DOJ and the SEC are investigating the Company’s use of customs agents in certain countries in which the Company currently operates or formerly operated, including Kazakhstan and Nigeria. The Company is fully cooperating with the DOJ and SEC investigations. At this point, we are unable to predict the duration, scope or result of the DOJ or the SEC investigation or whether either agency will commence any legal action. If we are not in compliance with the FCPA and other laws governing the conduct of business with foreign government entities (including other United States laws and regulations as well as local laws), we may be subject to criminal and civil penalties and other remedial measures, which could have an adverse impact on our business, results of operations, financial condition and liquidity.

14

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

10.	Contingencies (continued)
	Economic Sanctions Compliance
	Our international operations are subject to laws and regulations restricting our international operations including activities involving restricted countries, organizations, entities and persons that have been identified as unlawful actors or that are subject to U.S. economic sanctions. Pursuant to an internal review, we have identified certain shipments of equipment and supplies that were routed through Iran as well as other activities that may have violated applicable U.S. laws and regulations. In addition, we have engaged in drilling wells in the Korpedje Field in Turkmenistan, from where natural gas may be exported by pipeline to Iran. We are currently reviewing these shipments, transactions and drilling activities to determine whether the timing, nature and extent of such activities or other conduct may have given rise to violations of these laws and regulations. Although we are unable to predict the scope or result of this internal review or its ultimate outcome, we have initiated voluntary disclosure of these potential compliance issues to the appropriate U.S. government agency. If we are not in compliance with export restrictions, U.S. economic sanctions or other laws and regulations that apply to our international operations, we may be subject to civil or criminal penalties and other remedial measures, which could have an adverse impact on our business, results of operations, financial condition and liquidity.
11.	Recent Accounting Pronouncements – In April 2009, the FASB issued FSP SFAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” This FSP which amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” to require publicly-traded companies, as defined in APB Opinion No. 28, “Interim Financial Reporting,” to provide disclosures on the fair value of financial instruments in interim financial statements. FSP SFAS 107-1 and APB 28-1 is effective for interim periods ending after June 15, 2009. We will adopt the new disclosure requirements in our June 30, 2009 financial statements.
12.	Parent, Guarantor, Non-Guarantor Unaudited Consolidating Condensed Financial Statements – Set forth on the following pages are the consolidating condensed financial statements of (i) Parker Drilling, (ii) its restricted subsidiaries that are guarantors of the Senior Notes, and Convertible Senior Notes (“the Notes”) and (iii) the restricted and unrestricted subsidiaries that are not guarantors of the Notes. The Notes are guaranteed by substantially all of the domestic restricted subsidiaries of Parker Drilling. There are currently no restrictions on the ability of the restricted subsidiaries to transfer funds to Parker Drilling in the form of cash dividends, loans or advances. Parker Drilling is a holding company with no operations, other than through its subsidiaries. Separate financial statements for each guarantor company are not provided as the company complies with the exception to Rule 3-10(a)(1) of Regulation S-X, set forth in sub-paragraph (f) of such rule. All guarantor subsidiaries are directly or indirectly owned 100% by the parent company, all guarantees are full and unconditional and all guarantees are joint and several.

15

NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

12.

Parent, Guarantor, Non-Guarantor Unaudited Consolidating Condensed Financial Statements (continued)

AralParker (a Kazakhstan joint stock company, owned 100 percent by Parker Drilling (Kazakstan), LLC, Casuarina Limited (a wholly-owned captive insurance company), KDN Drilling Limited, Mallard Argentine Holdings, Ltd., Mallard Drilling of South America, Inc., Mallard Drilling of Venezuela, Inc., Parker Drilling Investment Company, Parker Drilling (Nigeria) Limited, Parker Drilling Company (Bolivia) S.A., Parker Drilling Company Kuwait Limited, Parker Drilling Company Limited (Bahamas), Parker Drilling Company of New Zealand Limited, Parker Drilling Company of Sakhalin, Parker Drilling de Mexico S. de R.L. de C.V., Parker Drilling International of New Zealand Limited, Parker Drilling Tengiz, Ltd., PD Servicios Integrales, S. de R.L. de C.V., PKD Sales Corporation, Parker SMNG Drilling Limited Liability Company (owned 50 percent by Parker Drilling Company International, LLC), Parker Drilling Kazakhstan B.V., Parker Drilling AME Limited, Parker Drilling Asia Pacific, LLC, PD International Holdings C.V.,PD Dutch Holdings C.V., PD Selective Holdings C.V., PD Offshore Holdings C.V., Parker Drilling Netherlands B.V., Parker Drilling Dutch B.V., Parker Hungary Rig Holdings Limited Liability Company, Parker Drilling Spain Rig Services, S L, Parker 3Source, LLC, Parker 5272, LLC, Parker Central Europe Rig Holdings Limited Liability Company, Parker Cyprus Leasing Limited, Parker Cyprus Ventures Limited, Parker Drilling International B.V., Parker Drilling Offshore B.V., Parker Drilling Offshore International, Inc., Parker Drilling Overseas B.V., Parker Drilling Russia B.V., Parker Drillsource, LLC, PD Labor Services, Ltd., PD Labor Sourcing, Ltd., and Parker Enex, LLC are all non-guarantor subsidiaries. The Company is providing consolidating condensed financial information of the parent, Parker Drilling, the guarantor subsidiaries, and the non-guarantor subsidiaries as of March 31, 2009 and December 31, 2008 and for the quarters ended March 31, 2009 and 2008. The consolidating condensed financial statements present investments in both consolidated and unconsolidated subsidiaries using the equity method of accounting.

16

PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)

	March 31, 2009
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	85,826		$	7,466		$	55,111		$	—		$	148,403
Accounts and notes receivable, net		49,523			202,012			151,208			(220,410	)		182,333
Rig materials and supplies		—			10,989			19,212			—			30,201
Deferred costs		—			1,644			5,400			—			7,044
Deferred income taxes		9,735			—			—			—			9,735
Other tax assets		78,144			(41,820	)		(1,470	)		—			34,854
Other current assets		557			13,909			12,226			—			26,692
Total current assets		223,785			194,200			241,687			(220,410	)		439,262
Property, plant and equipment, net		79			497,575			209,351			123			707,128
Investment in subsidiaries and intercompany advances		910,363			938,810			(105	)		(1,849,068	)		—
Investment in and advances to unconsolidated joint venture		—			4,620			(4,620	)		—			—
Other noncurrent assets		34,141			17,531			7,240			—			58,912
Total assets	$	1,168,368		$	1,652,736		$	453,553		$	(2,069,355	)	$	1,205,302
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	9,000		$	—		$	—		$	—		$	9,000
Accounts payable and accrued liabilities		59,348			343,953			101,340			(369,365	)		135,276
Accrued income taxes		1,235			3,295			5,829			—			10,359
Total current liabilities		69,583			347,248			107,169			(369,365	)		154,635
Long-term debt		437,464			—			—			—			437,464
Other long-term liabilities		10			12,892			6,440			—			19,342
Long-term deferred tax liability		—			88			7,045			—			7,133
Intercompany payables		74,583			583,027			71,299			(728,909	)		—
Contingencies (Note 10)		—			—			—			—			—
Stockholders’ equity:
Common stock		19,351			39,899			21,153			(61,052	)		19,351
Capital in excess of par value		621,570			997,082			189,756			(1,186,838	)		621,570
Retained earnings (accumulated deficit)		(54,193	)		(327,500	)		50,691			276,809			(54,193	)
Total stockholders’ equity		586,728			709,481			261,600			(971,081	)		586,728
Total liabilities and stockholders’ equity	$	1,168,368		$	1,652,736		$	453,553		$	(2,069,355	)	$	1,205,302

17

PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)

	December 31, 2008
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	111,324		$	9,741		$	51,233		$	—		$	172,298
Accounts and notes receivable, net		51,792			217,435			131,591			(214,654	)		186,164
Rig materials and supplies		—			11,518			18,723			—			30,241
Deferred costs		—			2,000			5,804			—			7,804
Deferred income taxes		9,735			—			—			—			9,735
Other tax assets		83,788			(41,008	)		(1,856	)		—			40,924
Other current assets		549			13,755			11,875			(54	)		26,125
Total current assets		257,188			213,441			217,370			(214,708	)		473,291
Property, plant and equipment, net		79			465,659			209,686			124			675,548
Investment in subsidiaries and intercompany advances		867,684			1,066,216			(88,992	)		(1,844,908	)		—
Investment in and advances to unconsolidated joint venture		—			4,620			(4,620	)		—			—
Other noncurrent assets		27,607			21,215			8,059			—			56,881
Total assets	$	1,152,558		$	1,771,151		$	341,503		$	(2,059,492	)	$	1,205,720
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	6,000		$	—		$	—		$	—		$	6,000
Accounts payable and accrued liabilities		53,859			337,464			100,305			(351,230	)		140,398
Accrued income taxes		540			4,861			6,729			—			12,130
Total current liabilities		60,399			342,325			107,034			(351,230	)		158,528
Long-term debt		435,394			—			—			—			435,394
Other long-term liabilities		10			14,351			7,035			—			21,396
Long-term deferred tax liability		—			1,237			6,993			—			8,230
Intercompany payables		74,583			583,027			71,299			(728,909	)		—
Contingencies (Note 10)		—			—			—			—			—
Stockholders’ equity:
Common stock		18,910			39,899			21,153			(61,052	)		18,910
Capital in excess of par value		619,561			1,045,727			141,112			(1,186,839	)		619,561
Retained earnings (accumulated deficit)		(56,299	)		(255,415	)		(13,123	)		268,538			(56,299	)
Total stockholders’ equity		582,172			830,211			149,142			(979,353	)		582,172
Total liabilities and stockholders’ equity	$	1,152,558		$	1,771,151		$	341,503		$	(2,059,492	)	$	1,205,720

18

PARKER DRILLING COMPANY AND SUBSIDIARIES CONSOLIDATING
CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands)
(Unaudited)

	Three months ended March 31, 2009
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Total revenues	$	—		$	122,322		$	80,229		$	(28,626	)	$	173,925
Operating expenses		—			86,883			62,918			(28,626	)		121,175
Depreciation and amortization		—			20,054			7,070			—			27,124
Total operating gross margin		—			15,385			10,241			—			25,626
General and administration expense (1)		(41	)		(12,995	)		(24	)		—			(13,060	)
Gain on disposition of assets, net		—			13			65			—			78
Total operating income (loss)		(41	)		2,403			10,282			—			12,644
Other income and (expense):
Interest expense		(8,882	)		(11,775	)		(103	)		12,694			(8,066	)
Interest income		10,705			1,657			618			(12,694	)		286
Other		(3	)		(21	)		12			—			(12	)
Equity in net earnings of subsidiaries		(8,271	)		—			—			8,271			—
Total other income and (expense)		(6,451	)		(10,139	)		527			8,271			(7,792	)
Income (benefit) before income taxes		(6,492	)		(7,736	)		10,809			8,271			4,852
Income tax expense (benefit):
Current		(504	)		3,161			4,081			—			6,738
Deferred		(8,094	)		4,051			51			—			(3,992	)
Total income tax expense (benefit)		(8,598	)		7,212			4,132			—			2,746
Net income (loss)	$	2,106		$	(14,948	)	$	6,677		$	8,271		$	2,106

(1) All field operations general and administration expenses are included in operating expenses.

19

PARKER DRILLING COMPANY AND SUBSIDIARIES CONSOLIDATING
CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands)
(Unaudited)

	Three months ended March 31, 2008
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Total revenues	$	—		$	128,682		$	65,905		$	(21,309	)	$	173,278
Operating expenses		1			74,363			52,567			(21,309	)		105,622
Depreciation and amortization		—			20,513			5,653			—			26,166
Total operating gross margin		(1	)		33,806			7,685			—			41,490
General and administration expense (1)		(80	)		(6,584	)		(4	)		—			(6,668	)
Gain (loss) on disposition of assets, net		—			582			(3	)		—			579
Total operating income (loss)		(81	)		27,804			7,678			—			35,401
Other income and (expense):
Interest expense		(8,021	)		(11,786	)		(80	)		13,050			(6,837	)
Interest income		10,689			1,925			804			(13,050	)		368
Equity in loss of unconsolidated joint venture, and related charges net of taxes		—			(1,105	)		—			—			(1,105	)
Other		—			10			50			—			60
Equity in net earnings of subsidiaries		32,223			—			—			(32,223	)		—
Total other income and (expense)		34,891			(10,956	)		774			(32,223	)		(7,514	)
Income (loss) before income taxes		34,810			16,848			8,452			(32,223	)		27,887
Income tax expense (benefit):
Current		(2,568	)		(11,191	)		3,116			—			(10,643	)
Deferred		14,176			838			314			—			15,328
Income tax expense (benefit)		11,608			(10,353	)		3,430			—			4,685
Net income (loss)	$	23,202		$	27,201		$	5,022		$	(32,223	)	$	23,202

(1) All field operations general and administration expenses are included in operating expenses.

20

PARKER DRILLING COMPANY AND SUBSIDIARIES CONSOLIDATING
CONDENSED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)

	Three months ending March 31, 2009
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	2,106		$	(14,948	)	$	6,677		$	8,271		$	2,106
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		—			20,054			7,070			—			27,124
Gain on disposition of assets		—			(13	)		(65	)		—			(78	)
Deferred tax expense (benefit)		(8,094	)		4,051			51			—			(3,992	)
Expenses not requiring cash		3,907			—			—			—			3,907
Equity in net earnings of subsidiaries		8,271			—			—			(8,271	)		—
Change in accounts receivable		2,269			22,509			(19,617	)		—			5,161
Change in other assets		6,537			22			133			—			6,692
Change in liabilities		7,685			(20,319	)		(3,738	)		—			(16,372	)
Net cash provided by (used in) operating activities		22,681			11,356			(9,489	)		—			24,548
Cash flows from investing activities:
Capital expenditures		—			(47,650	)		(3,734	)		—			(51,384	)
Proceeds from the sale of assets		—			124			45			—			169
Net cash used in investing activities		—			(47,526	)		(3,689	)		—			(51,215	)
Cash flows from financing activities:
Proceeds from draw on revolver credit facility		4,000			—			—			—			4,000
Excess tax cost from stock-based compensation		(1,228	)		—			—			—			(1,228	)
Intercompany advances, net		(50,951	)		33,895			17,056			—			—
Net cash provided by (used in) financing activities		(48,179	)		33,895			17,056			—			2,772
Net increase (decrease) in cash and cash equivalents		(25,498	)		(2,275	)		3,878			—			(23,895	)
Cash and cash equivalents at beginning of year		111,324			9,741			51,233			—			172,298
Cash and cash equivalents at end of period	$	85,826		$	7,466		$	55,111		$	—		$	148,403

21

PARKER DRILLING COMPANY AND SUBSIDIARIES CONSOLIDATING
CONDENSED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)

	Three months ending March 31, 2008
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	23,202		$	27,201		$	5,022		$	(32,223	)	$	23,202
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		—			20,513			5,653			—			26,166
Gain/(loss) on disposition of assets		—			(582	)		3			—			(579	)
Deferred income tax expense		14,176			838			314			—			15,328
Equity in loss of unconsolidated joint venture					1,105			—			—			1,105
Expenses not requiring cash		4,092			—			—			—			4,092
Equity in net earnings of subsidiaries		(32,223	)		—			—			32,223			—
Change in accounts receivable		8,498			9,971			(30,954	)		—			(12,485	)
Change in other assets		(2,242	)		(2,751	)		(633	)		—			(5,626	)
Change in liabilities		4,638			(56,993	)		17,073			—			(35,282	)
Net cash provided by (used in) operating activities		20,141			(698	)		(3,522	)		—			15,921
Cash flows from investing activities:
Capital expenditures		—			(33,815	)		(9,344	)		—			(43,159	)
Proceeds from the sale of assets		—			1,227			—			—			1,227
Proceeds from insurance settlements		—			—			951						951
Investment in unconslidated joint venture		—			(5,000	)		—						(5,000	)
Net cash used in investing activities		—			(37,588	)		(8,393	)		—			(45,981	)
Cash flows from financing activities:
Proceeds from draw on revolver credit facility		15,000			—			—			—			15,000
Excess tax cost from stock based compensation		(331	)		—			—			—			(331	)
Intercompany advances, net		(44,566	)		37,809			6,757			—			—
Net cash provided by (used in) financing activities		(29,897	)		37,809			6,757			—			14,669
Net decrease in cash and cash equivalents		(9,756	)		(477	)		(5,158	)		—			(15,391	)
Cash and cash equivalents at beginning of year		31,326			8,314			20,484			—			60,124
Cash and cash equivalents at end of period	$	21,570		$	7,837		$	15,326		$	—		$	44,733

22

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DISCLOSURE NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This Form 10-Q contains statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements contained in this Form 10-Q, other than statements of historical facts, are “forward-looking statements” for purposes of these provisions, including any statements regarding:

• stability of prices and demand for oil and natural gas;

• levels of oil and natural gas exploration and production activities;

• demand for contract drilling and drilling related services and demand for rental tools;

• our future operating results and profitability;

• our future rig utilization, dayrates and rental tools activity;

• entering into new, or extending existing, drilling contracts and our expectations concerning when our rigs will commence operations under such contracts;

• growth through acquisitions of companies or assets;

• construction or upgrades of rigs and expectations regarding when these rigs will commence operations;

• capital expenditures for acquisition of rigs, construction of new rigs or major upgrades to existing rigs;

• entering into joint venture agreements;

• our future liquidity;

• availability and sources of funds to reduce our debt and expectations of when debt will be reduced;

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

• the availability of insurance coverage for pending or future claims;

• the enforceability of contractual indemnification in relation to pending or future claims;

• compliance with covenants under our senior credit facility and indentures for our senior notes; and

• organic growth of our operations.

     In some cases, you can identify these statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “outlook,” “may,” “should,” “will” and “would” or similar words. Forward-looking statements are based on certain assumptions and analyses made by our management in light of their experience and perception of historical trends, current conditions, expected future developments and other factors they believe are relevant. Although our management believes that their assumptions are reasonable based on information currently available, those assumptions are subject to significant risks and uncertainties, many of which are outside of our control. The following factors, as well as any other cautionary language included in this Form 10-Q, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our “forward-looking statements:”

• worldwide economic and business conditions that adversely affect market conditions and/or the cost of doing business;

• inability of the Company to access the credit markets;

• the U.S. economy and the demand for natural gas;

• worldwide demand for oil;

• fluctuations in the market prices of oil and natural gas;

• imposition of unanticipated trade restrictions;

• unanticipated operating hazards and uninsured risks;

• political instability, terrorism or war;

• governmental regulations, including changes in accounting rules or tax laws or ability to remit funds to the U.S., that adversely affect the cost of doing business;

• changes in the tax laws that would allow double taxation on foreign sourced income;

• the outcome of our investigation and the parallel investigations by the Securities and Exchange Commission and the Department of Justice into possible violations of U.S. law, including the Foreign Corrupt Practices Act;

• adverse environmental events;

• adverse weather conditions;

• global health concerns;

23

DISCLOSURE NOTE REGARDING FORWARD-LOOKING STATEMENTS (continued)

• changes in the concentration of customer and supplier relationships;

• ability of our customers and suppliers to obtain financing for their operations;

• unexpected cost increases for new construction and upgrade and refurbishment projects;

• delays in obtaining components for capital projects and in ongoing operational maintenance;

• shortages of skilled labor;

• unanticipated cancellation of contracts by operators;

• breakdown of equipment;

• other operational problems including delays in start-up of operations;

• changes in competition;

• the effect of litigation and contingencies; and

• other similar factors (some of which are discussed in documents referred to in this Form 10-Q, including the risk factors described in our 2008 Annual Report on Form 10-K and our other reports and filings with the Securities and Exchange Commission).

     Each “forward-looking statement” speaks only as of the date of this Form 10-Q, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Before you decide to invest in our securities, you should be aware that the occurrence of the events described in these risk factors and elsewhere in this Form 10-Q could have a material adverse effect on our business, results of operations, financial condition and cash flows.

OVERVIEW AND OUTLOOK

Summary

     We reported positive earnings for the first quarter of 2009 in spite of the continued impact of the global economic turmoil and constrained credit markets on energy prices and demand. The U.S. Gulf of Mexico (“GOM”) barge activity continues to be constrained although we have been successful in acquiring a significant share of the business that does exist. Our rental tools business posted strong results even though utilization declined during the first quarter of 2009 from the record highs achieved in 2008. With many long-term contracts secured for our international rig fleet, utilization remains strong, although we have experienced some pricing pressure in this sector.

Overview

     Revenues for the first quarter of 2009 were $173.9 million on par with revenues achieved in the first quarter of 2008 on the strength of increases in our International Drilling and Project Management and Engineering Services segments. Revenues for the U.S. Drilling segment were $9.9 million in the first quarter of 2009 down from $45.9 million in the first quarter of 2008 as both dayrates and utilization have dropped.

     Drilling and rental operating income was $25.6 million for the first quarter of 2009 as compared to $41.5 million for the first quarter of 2008 driven primarily by a $26.1 million decline in the GOM barge drilling margin offset partially by increases in the International Drilling and Project Management and Engineering Services segments.

     Increases in International Drilling operating income of $11.5 million in the first quarter of 2009 as compared to the comparable quarter of 2008 are primarily the result of a higher dayrate for our Caspian Sea barge ($8.2 million), three additional rigs fully operating in the Americas group ($6.3 million), and reduced operating expenses in African and Asia Pacific operations ($7.6 million), offset by loss of revenues related to the change out of equipment in Western Kazakhstan ($4.1 million).

Outlook

     Our outlook for 2009 remains uncertain, tempered by the indeterminable duration of weakened global markets (See Risk Factors). We do believe our strategy, performance and diversification will help us sustain our performance through the downturn and expect to gain the benefits of a leaner operating structure.

24

OUTLOOK AND OVERVIEW (continued)

Outlook

     We expect utilization in our GOM barge business to increase as the number of prospects in the recent weeks has increased and we have secured work for at least three additional rigs since the end of the first quarter. Our status as the preferred driller in this market has served us well as we continue to be successful in obtaining most of the work that is available, as we have six of the ten operating rigs in this depressed market. Most of the current work is of a short term nature, including workover wells. We expect to maintain our market share in our GOM barge business throughout the year in this depressed market as a result of the quality of our equipment and our performance record.

     Internationally, we expect strong utilization in all regions and better operating results in the CIS/AME region as our equipment issues have been resolved.

     Results for our Rental Tools business are also expected to decline in the short term as the result of lower utilization and increased discounts. The business is expected to maintain high activity in the Bakken and Haynesville shale areas, where drilling has been less affected by current conditions. In addition, we have been supplying equipment to the Marcellus shale region where drilling has increased year-to-year and we will have deepwater and international projects beginning later this year.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2009 Compared with Three Months Ended March 31, 2008

     We recorded net income of $2.1 million for the three months ended March 31, 2009, as compared to net income of $23.2 million for the three months ended March 31, 2008. Gross margin was $25.6 million for the three months ended March 31, 2009 as compared to $41.5 million for the three months ended March 31, 2008.

     In the first quarter of 2008, we began separate presentation of our project management and engineering services segment. As part of our long-term strategic growth plan, we have begun to separately monitor the results of this non-capital intensive group of operations. We also created a new segment in the second quarter of 2008 to separately reflect results of our extended-reach rig construction contract.

     The following is an analysis of our operating results for the comparable quarters:

	Three Months Ended March 31,
	2009						2008
				(Dollars in Thousands)
Revenues:
International Drilling	$	77,381			44	%	$	68,740		40	%
U.S. Drilling		9,856			6	%		45,888		26	%
Project Management and Engineering Services		32,054			18	%		19,179		11	%
Construction Contract		16,745			10	%		—		—
Rental Tools		37,889			22	%		39,471		23	%
Total revenues	$	173,925			100	%	$	173,278		100	%
Operating gross margin:
International Drilling gross margin excluding depreciation and amortization (1)	$	27,604			36	%	$	16,119		23	%
U.S. Drilling gross margin excluding depreciation and amortization (1)		(3,280	)		-33	%		24,366		53	%
Project Management and Engineering Services gross margin excluding depreciation and amortization (1)		6,160			19	%		3,518		18	%
Construction Contract excluding depreciation and amortization (1)		831			5	%		—		—
Rental Tools gross margin excluding depreciation and amortization (1)		21,435			57	%		23,653		60	%
Depreciation and amortization		(27,124	)					(26,166	)
Total operating gross margin (2)		25,626						41,490
General and administration expense		(13,060	)					(6,668	)
Gain on disposition of assets, net		78						579
Total operating income	$	12,644					$	35,401

25

RESULTS OF OPERATIONS (continued)

(1) Gross margins, excluding depreciation and amortization, are computed as revenues less direct operating expenses, excluding depreciation and amortization expense; gross margin percentages are computed as gross margin, excluding depreciation and amortization, as a percent of revenues. The gross margin amounts, excluding depreciation and amortization, and gross margin percentages should not be used as a substitute for those amounts reported under accounting principles generally accepted in the United States (“GAAP”). However, we monitor our business segments based on several criteria, including gross margin. Management believes that this information is useful to our investors because it more accurately reflects cash generated by segment. Such gross margin amounts are reconciled to our most comparable GAAP measure as follows:

						Project
						Management
						and
	International					Engineering		Construction
	Drilling		U.S. Drilling			Services		Contract		Rental Tools
	(Dollars in Thousands)
Three Months Ended March 31, 2009
Drilling and rental operating income (2)	$	15,912	$	(10,458	)	$	6,160	$	831	$	13,181
Depreciation and amortization		11,692		7,178			—		—		8,254
Drilling and rental gross margin excluding depreciation and amortization	$	27,604	$	(3,280	)	$	6,160	$	831	$	21,435
Three Months Ended March 31, 2008
Drilling and rental operating income (2)	$	5,759	$	15,673		$	3,518	$	—	$	16,540
Depreciation and amortization		10,360		8,693			—		—		7,113
Drilling and rental gross margin excluding depreciation and amortization	$	16,119	$	24,366		$	3,518	$	—	$	23,653

(2) Gross margin (operating) — revenues less direct operating expenses, including depreciation and amortization expense.

International Drilling Segment

     This segment’s revenues increased $8.6 million to $77.4 million during the current quarter when compared to the first quarter of 2008.

     Revenues in our Americas region increased by $5.4 million mainly due to an additional three rigs being fully operational during the current quarter as two were rigging up during the comparable quarter and one other became operational later in 2008. Revenues in our CIS region increased by $7.3 million primarily attributable to a higher dayrate for our barge rig operating in the Caspian Sea. In our Asia Pacific region, revenues decreased $3.6 million due to lower utilization.

     International operating gross margin, excluding depreciation and amortization, increased $11.5 million to $27.6 million during the current quarter of 2009 as compared to the first quarter of 2008. The improved margins are attributable to the above mentioned increase in revenues and lower operating expenses in our Africa-Middle East and Asia-Pacific regions being partially offset by decreased revenue due to the change out of equipment in Western Kazakhstan.

U.S. Drilling Segment

     Revenues for this segment decreased $36.0 million to $9.9 million for the quarter ended March 31, 2009 as compared to the quarter ended March 31, 2008. The decrease in revenues was primarily due to the market downturn which caused utilization for the U.S. barges to drop to 25 percent for the current quarter as compared 77 percent in the same period in 2008.

     As a result of the above mentioned factors, gross margin, excluding depreciation and amortization, decreased $27.6 million to a negative $3.3 million when compared to the first quarter of 2008.

26

RESULTS OF OPERATIONS (continued)

Project Management and Engineering Services Segment

     Revenues for this segment increased $12.0 million during the current quarter as compared to the first quarter of 2008. This increase was the result of higher revenues for our Kuwait and Sakhalin project management operations ($1.4 million and $8.8 million, respectively) and an increase of $2.6 million related to a Front End Engineering Design (“FEED”) study for our Arkutun Dagi project. Project management and engineering services do not incur depreciation and amortization, and as such, operating gross margin for this segment increased $2.4 million in the current period as compared to the prior period due to the revenue increase discussed above.

Construction Contract Segment

     Revenues from the construction of the extended-reach drilling rig for use in the Alaskan Beaufort Sea were $16.7 million for the first quarter of 2009. This project is a cost plus fixed fee contract. Operating gross margin for the EPCI project was $0.8 million based on the percentage of completion of the contract.

Rental Tools Segment

     Rental tools revenues decreased $1.6 million to $37.9 million during the current quarter as compared to the first quarter of 2008.

     Rental tools operating gross margins, excluding depreciation and amortization, decreased $2.2 million to $21.4 million for the current quarter as compared to the first quarter of 2008. The gross margin decrease relates directly to the decrease in revenues mentioned above.

Other Financial Data

     Gain on asset dispositions for the first quarter of 2009 and 2008 was insignificant as a result of minor asset sales during each period. Interest expense increased $1.3 million during the current quarter as compared to the first quarter of 2008 as additional borrowings during 2008 led to a higher level of outstanding debt. Interest income remained relatively unchanged on a comparative basis. General and administration expense increased $6.4 million as compared to the first quarter of 2008 due primarily to higher legal and professional fees associated with the ongoing DOJ and SEC investigations into the customs agent discussed in Note 10 in the notes to the unaudited consolidated condensed financial statements.

     Income tax expense was $2.7 million for the first quarter of 2009, as compared to income tax expense of $4.7 million for the first quarter of 2008. Income tax for the first quarter of 2008 includes a benefit of $13.4 million of FIN 48 interest and foreign currency exchange rate fluctuations related to our settlement of interest related to our Kazakhstan tax case (see Note 8 – Kazakhstan Tax Case) and a valuation allowance of $4.1 million related to a Papua New Guinea deferred tax asset.

     Depreciation expense benefited by $4.1 million due to a change in accounting estimate to extend the useful life of certain long-lived assets for depreciation purposes. We extended useful lives of these long-lived assets based on our review of their service lives, technological improvements in the assets, and recent changes to our refurbishment and maintenance practices which helped to extend the lives.

27

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

     As of March 31, 2009, we had cash and cash equivalents of $148.4 million, a decrease of $23.9 million from December 31, 2008. The primary sources of cash for the three-month period ended March 31, 2009 as reflected on the consolidated condensed statements of cash flows were $24.5 million provided by operating activities and proceeds of $4.0 million from draws on our credit facilities. The primary use of cash was $51.4 million for capital expenditures. Major capital expenditures for the period included $17.5 million on the construction of two new Alaska rigs and $17.2 million for tubulars and other tools for Rental Tools.

     As of March 31, 2008, we had cash and cash equivalents of $44.7 million, a decrease of $15.4 million from December 31, 2007. The primary sources of cash for the three-month period ended March 31, 2008 as reflected on the consolidated condensed statements of cash flows were $15.9 million provided by operating activities, proceeds of $15.0 million from a draw on our revolver and net proceeds of $2.2 million from the sale of assets and insurance proceeds. The primary uses of cash were $43.2 million for capital expenditures and a $5.0 million investment in our unconsolidated joint venture. Major capital expenditures for the period included $30.9 million on construction of new land rigs and upgrades to existing rigs and $12.3 million for tubulars and other rental tools for Quail Tools.

Financing Activity

     On July 5, 2007, we issued $125.0 million aggregate principal amount of 2.125 percent Convertible Senior Notes due July 15, 2012. Interest is payable semiannually on July 15th and January 15th. The initial conversion price is approximately $13.85 per share and is subject to adjustment for the occurrence of certain events stated within the indenture. Proceeds from the transaction were used to call our outstanding Senior Floating Rate notes, to pay the net cost of hedge and warrant transactions, and for general corporate purposes. Effectively, the hedge and warrant transactions increase the conversion price to approximately $18.29 per share.

     On September 20, 2007, we replaced our existing $40.0 million Credit Agreement with a new $60.0 million Amended and Restated Credit Agreement (“2007 Credit Facility”) which expires in September 2012. The 2007 Credit Facility was secured by rental tools equipment, accounts receivable and the stock of substantially all of our domestic subsidiaries, other than domestic subsidiaries owned by a foreign subsidiary, and contains customary affirmative and negative covenants such as minimum ratios for consolidated leverage, consolidated interest coverage and consolidated senior secured leverage.

     On May 15, 2008 we entered into a new Credit Agreement (“2008 Credit Facility”) with a five year senior secured $80.0 million revolving credit facility (“Revolving Credit Facility) and a senior secured term loan facility (“Term Loan Facility”) of up to $50.0 million. The obligations of the Company under the 2008 Credit Facility are guaranteed by substantially all of the Company’s domestic subsidiaries, except for domestic subsidiaries owned by foreign subsidiaries and certain immaterial subsidiaries, each of which has executed a guaranty. The 2008 Credit Facility contains customary affirmative and negative covenants such as minimum ratios for consolidated leverage, consolidated interest coverage and consolidated senior secured leverage.

     The 2008 Credit Facility is available for general corporate purposes and to fund reimbursement obligations under letters of credit the banks issue on our behalf pursuant to this facility. Revolving loans are available under the 2008 Credit Facility subject to a borrowing base calculation based on a percentage of eligible accounts receivable, certain specified barge drilling rigs and eligible rental equipment of the Company and its subsidiary guarantors. As of March 31, 2009, there were $17.7 million in letters of credit outstanding, $50.0 million outstanding on the Term Loan Facility and $62.0 million outstanding on the Revolving Credit Facility. As of March 31, 2009, the amount drawn represents nearly 100 percent of the capacity of the Revolving Credit Facility. The Term Loan will begin amortizing on September 30, 2009 at equal installments of $3.0 million per quarter. On January 30, 2009, Lehman Commercial Paper, Inc. assigned its obligations under the 2008 Credit Facility to Trustmark National Bank. Upon assignment, Trustmark National Bank fully funded Lehman Commercial Paper, Inc.’s commitments, including an additional $4.0 million that Lehman Commercial Paper, Inc. did not fund in October 2008, therefore, increasing our borrowings under the Revolving Credit Facility to $62.0 million. The Company expects to use the drawn amounts over the next twelve months to fund construction of two new rigs for work in Alaska. Although the credit crisis may affect certain customers’ ability to pay, the Company has not experienced significant delays in payments from customers as a result of the current credit crisis. The Company anticipates it has sufficient liquidity to meet its expected capital expenditures and manage any delays in collection of receivables, should they occur.

28

RESULTS OF OPERATIONS (continued)

Financing Activity (continued)

     We had total long-term debt, including current portion, of $446.5 million as of March 31, 2009, which consists of:

• $125.0 million aggregate principal amount of Convertible Senior Notes at a coupon rate of 2.125 percent, which are due July 15, 2012 net of $18.4 million in unamortized debt discount;

• $225.0 million aggregate principal amount of 9.625 percent Senior Notes, which are due October 1, 2013 plus an associated $2.9 million in unamortized debt premium; and,

• $112.0 million drawn against our 2008 Credit Facility, including $62.0 million on our Revolving Credit Facility and $50.0 million on our Term Loan Facility, $9.0 million of which is classified as short term.

     As of March 31, 2009, we had approximately $148.7 million of liquidity which was comprised of $148.4 million of cash and cash equivalents on hand and $0.3 million of availability under the Revolving Credit Facility. We do not have any unconsolidated special-purpose entities, off-balance sheet financing arrangements nor guarantees of third-party financial obligations. We have no energy or commodity contracts.

     In July 2008, we entered into a contract with BP for five-year drilling contracts that will require a subsidiary to construct and operate two new rigs for development drilling on the North Slope of Alaska. The cost of construction of the two new rigs will be funded partially by the above-mentioned draws on our 2008 Credit Facility.

     The following table summarizes our future contractual cash obligations as of March 31, 2009:

			Less than						More than
	Total		1 Year		Years 2-3		Years 4-5		5 Years
			(Dollars in Thousands)
Contractual cash obligations:
Long-term debt — principal (1)	$	400,000	$	9,000	$	21,000	$	370,000	$	—
Long-term debt — interest (1)		119,103		28,118		54,943		36,042		—
Operating leases (2)		8,350		4,665		2,676		1,009		—
Purchase commitments (3)		30,318		30,318		—		—		—
Total contractual obligations	$	557,771	$	72,101	$	78,619	$	407,051	$	—
Commercial commitments:
Long-term debt -
Revolving credit facility (4)	$	62,000	$	—	$	—	$	62,000	$	—
Standby letters of credit (4)		17,728		17,728		—		—		—
Total commercial commitments	$	79,728	$	17,728	$	—	$	62,000	$	—

(1)	Long-term debt includes the principal and interest cash obligations of the 9.625 percent Senior Notes and the 2.125 percent Convertible Senior Notes as well as $50.0 million of term loans drawn on our new Credit Facility. The remaining unamortized premium of $2.9 million on the 9.625 percent Senior Notes and unamortized discount of $18.4 million on the 2.125% Convertible Senior Notes are not included in the contractual cash obligations schedule.
(2)	Operating leases consist of lease agreements in excess of one year for office space, equipment, vehicles and personal property.
(3)	We have purchase commitments outstanding as of March 31, 2009, related to rig upgrade projects and new rig construction.
(4)	We have a $130 million credit agreement of which $80.0 million is a revolving credit facility. As of March 31, 2009, we had drawn down $62.0 million under the revolving credit facility and $17.7 million of availability has been used to support letters of credit that have been issued. The revolving credit facility expires May 14, 2013.

29

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     There have been no material changes in market risk faced by us from those reported in our 2007 Annual Report on Form 10-K filed with the SEC. For more information on market risk, see Part II, Items 7 and 7A in our 2008 Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

     Evaluation of Disclosure Controls and Procedures – We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” in Rule 13a-15(e). In designing and evaluating the disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. We performed evaluations under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2009. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level at March 31, 2009.

     Changes in Internal Control Over Financial Reporting – There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2009 covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     For information regarding legal proceedings, see Note 10, “Contingencies,” in Item 1 of Part I of this quarterly report on Form 10-Q, which information is incorporated herein by reference into this item.

ITEM 1A. RISK FACTORS

     There have been no material changes in risk factors involving the Company or its subsidiaries from those previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

30

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

	Total Number of		Average Price
Date	Shares Purchased		Paid Per Share
March 6, 2009		21,304	$	1.40
March 9, 2009		23,959	$	1.39
March 20, 2009		23,005	$	1.82
March 24, 2009		392	$	2.00

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     At the Annual Meeting of Stockholders held on April 21, 2009, there were represented in person or by proxy, 100,338,311 shares out of 115,062,733 entitled to vote as of February 27, 2009, the record date, constituting a quorum.

The two matters voted upon at the Annual Meeting were:

1. Election of Directors: The Stockholders elected two Class I directors to the board of directors of Parker Drilling Company to serve for a three-year term, until 2012:

R. Rudolph Reinfrank
Votes cast in favor:	97,760,671
Votes withheld:	2,577,640
Robert W. Goldman
Votes cast in favor:	97,838,230
Votes withheld:	2,500,081

2. Election of independent registered public accountants: KPMG LLP was approved as the independent registered public accountants for 2009 with:

Votes cast in favor:	98,288,136
Votes against:	1,810,778
Abstain:	239,397

ITEM 5. OTHER INFORMATION

     None.

ITEM 6. EXHIBITS

     (a) Exhibits: The following exhibits are filed or furnished as a part of this report:

Exhibit
Number	Description
10.1	Separation Agreement and Release between Parker Drilling Company and Ronald C. Potter dated March 27, 2009
10.2	Consulting Agreement between Parker Drilling Company and Ronald C. Potter dated March 27, 2009
31.1	Section 302 Certification – Chairman and Chief Executive Officer
31.2	Section 302 Certification – Senior Vice President and Chief Financial Officer
32.1	Section 906 Certification – Chairman and Chief Executive Officer
32.2	Section 906 Certification – Senior Vice President and Chief Financial Officer

31

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PARKER DRILLING COMPANY
Date: May 8, 2009	By:	/s/ Robert L. Parker Jr.
		Robert L. Parker Jr.
		Chairman and Chief Executive Officer
	By:	/s/ W. Kirk Brassfield
		W. Kirk Brassfield
		Senior Vice President and Chief Financial Officer

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INDEX TO EXHIBITS

Exhibit
Number	Description
10.1	Separation Agreement and Release between Parker Drilling Company and Ronald C. Potter dated March 27, 2009.
10.2	Consulting Agreement between Parker Drilling Company and Ronald C. Potter dated March 27, 2009.
31.1	Section 302 Certification – Chairman and Chief Executive Officer
31.2	Section 302 Certification – Senior Vice President and Chief Financial Officer
32.1	Section 906 Certification – Chairman and Chief Executive Officer
32.2	Section 906 Certification – Senior Vice President and Chief Financial Officer

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EX-10.1

Exhibit 10.1

SEPARATION AGREEMENT AND RELEASE

     THIS SEPARATION AGREEMENT AND RELEASE (this “Agreement”) is made by and between Parker Drilling Company, a Delaware corporation (“Parker Drilling” or the “Company”) and Ronald C. Potter (“Executive”) and shall become effective on the eighth day following its execution by Executive and return to Parker Drilling, provided Executive has not revoked his consent to this Agreement pursuant to paragraph 18(c) (“Effective Date”). Parker Drilling and Executive are sometimes referred to collectively as the “Parties” or individually as a “Party”.

PURPOSE

     Parker Drilling and Executive have reached a mutual agreement that Executive’s employment with the Company will terminate on March 27, 2009 (the “Termination Date”) pursuant to the terms of this Agreement.

TERMS

     To achieve a final and amicable resolution of the employment relationship in all its aspects and in consideration of the mutual covenants and promises herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

     1. Termination of Employment Agreement. Except as otherwise provided herein or in the Consulting Agreement executed by the Parties as of March 28, 2009 (the “Consulting Agreement”), this Agreement replaces and terminates that certain Employment Agreement entered into as of July 1, 2003, as amended by the First Amendment to Employment Agreement dated October 26, 2005 and further amended by the Amendment to Employment Agreement effective as of December 31, 2008 (sometimes collectively referred to as the “Employment Agreement”) and will constitute the entire agreement between the Parties.

     2. Minimum Payments. On the fifth business day after the Effective Date, Parker Drilling shall pay to Executive in a lump sum the amount of $39,509.62, which represents Executive’s unpaid salary and vacation pay as provided for in Section 6(a)(1) and 6(a)(3) of the Employment Agreement. Executive acknowledges that no payment is required under Section 6(a)(2) of the Employment Agreement.

     3. Severance Payments. On the first regularly scheduled Parker Drilling payroll date that commences more than six months after the Termination Date or, if later, Executive’s “separation from service” as defined in Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations and other guidance thereunder (“Section 409A”), Parker Drilling shall pay to Executive in lump sum the amount of Seven Hundred Eight Thousand Seventy-Five United States Dollars ($708,075), representing the “Additional Payment” required by Section 6(b)(1) of the Employment Agreement.

     4. Vesting of Restricted Stock. Executive is the recipient of 161,362 shares of Parker Drilling common stock (“Grant Shares”), which shares are listed on Appendix A to this Agreement, granted under certain award agreements (the “Restricted Stock Award Agreements”) pursuant to the terms of the Parker Drilling Company 2005 Long-Term Incentive Plan effective as of March 18, 2005. The terms of the Restricted Stock Award Agreements provide that Executive’s rights to the Grant Shares shall terminate upon termination of Executive’s employment with the Company. Under the terms of the Parker Drilling Company 2005 Long-Term Incentive Plan (“2005 LTIP”) and the Restricted Stock Award Agreements issued pursuant to the 2005 Plan, Executive’s rights to such Grant Shares shall continue and such Grant Shares shall continue to vest under the terms of the respective Restricted Stock Award Agreement during the term of Executive’s Employment (as defined in the 2005 LTIP) as a consultant. In addition, at any time during the term of the Consulting Agreement, the Compensation Committee of the Board of Directors may, in its sole discretion, authorize the proper officers of the Company to amend the terms of any Restricted Stock Award Agreement to accelerate the vesting schedule related to some or all of the Grant Shares. In the event the Compensation Committee determines to approve the amendment of the terms of any Restricted Stock Award Agreement to accelerate the vesting schedule associated with any Grant Shares, the Company shall given written notice to the Executive of such amendment and such Grant Shares shall become fully vested and transferable to Executive free of any and all restrictions. Any Grant Share which remains subject to a vesting schedule at the end of the term of the Consulting Agreement shall be forfeited by Executive.

     5. Executive’s Stock Options. Executive has been awarded 25,000 stock options (“Stock Options”), which stock options are listed on Appendix A to this Agreement, pursuant to the Parker Drilling Company 1997 Stock Plan, as amended. The terms of the Stock Option

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Award Agreement entered into by the Company and Executive as of July 15, 2003 provide that Executive’s rights to the Option Shares are exercisable only during the time Executive remains an employee, director or consultant of the Company. Executive’s rights to such Option Shares shall continue during the term of the Consulting Agreement. In addition, at any time during the term of the Consulting Agreement, the Compensation Committee of the Board of Directors may, in its sole discretion, by written notice from the Company to Executive, extend the exercise period related to some or all of the Option Shares for any period from and after the expiration of the term of the Consulting Agreement up to and including July 15, 2010. In the event the Compensation Committee determines to extend the exercise period associated with any Option Shares, such Option Shares may be exercised at any time up to the later of: (i) the expiration of the term of the Consulting Agreement or (ii) the extended period approved by the Compensation Committee, if any, up to and including July 15, 2010.

     6. Group Health Coverage. Parker Drilling shall maintain Executive’s group health plan and group dental plan coverage for a period of eighteen (18) months following the Termination Date, at substantially the same level of coverages as existed on the Termination Date; provided, however, Executive and his covered dependents, if any, shall not be required to pay any portion of the premium cost to retain such coverages but in all other respects shall be treated the same as other participants under the terms of such plans. Following the expiration of the 18-month period, Executive shall be entitled to elect additional continuation coverage under such plans pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) and the Company’s procedures for COBRA administration, or otherwise. In the event that such additional COBRA coverage is elected, (i) the COBRA time period shall not be reduced by the post-termination continuation coverage provided pursuant to the foregoing provisions of this paragraph and (ii) Executive (and his covered dependents, if any) must pay the full COBRA premium rates as effective during such coverage period. In the event of any change to the group health plan or group dental plan following the Termination Date, Executive and his spouse and dependents, as applicable, shall be treated consistently with the then-current senior officers of Parker Drilling (or its successor) with respect to the terms and conditions of coverage and other substantive provisions of the plan; provided, however, no participant contributions shall be required from them unless the additional COBRA coverage period is in effect. Executive and his spouse hereby agree to acquire and maintain any and all coverage that either

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or both of them are entitled to at any time during their lives under the Medicare program or any similar program of the United States Government or any agency thereof (hereinafter referred to as “Medicare”). The coverage described in the immediately preceding sentence includes, without limitation, parts A and B of Medicare and any additional parts of Medicare. Executive and his spouse further agree to pay any required premiums for Medicare coverage from their personal funds. Notwithstanding the foregoing provisions, the coverage of Executive (and his dependents, if any) under such medical and/or dental plans maintained by Parker Drilling shall terminate in the event that Executive becomes employed by another for-profit employer which maintains a group health plan or plans for its employees providing group medical coverage and group dental coverage; provided, however, any additional COBRA coverage shall not be terminated unless and until permitted under COBRA.

     7. Withholdings; Right of Offset. Parker Drilling may withhold and deduct from any benefits and payments made or to be made pursuant to this Agreement (a) all Federal, state, local and other taxes as may be required pursuant to any law or governmental regulation or ruling, and (b) all other normal deductions made with respect to Parker Drilling’s employees generally, to the extent permissible under Section 409A.

     8. Indemnity Rights. This Agreement shall not impair in any way the rights of Executive or the obligations of Parker Drilling under the terms of that certain Indemnification Agreement between Parker Drilling and the Executive dated April 6, 2004, and by its execution of this Agreement Parker Drilling expressly re-affirms all the rights of Executive and obligations of Parker Drilling under the terms of said Indemnification Agreement. Further, Executive will be given reasonable access to all Parker Drilling records that are deemed necessary or helpful to Executive or his counsel on any matter to which the Indemnification Agreement applies subject to execution by Executive of a Confidentiality Agreement with terms and conditions reasonably acceptable to Parker Drilling related to such records.

     9. Miscellaneous Matters. Executive shall be allowed to retain the iPhone provided by Parker Drilling without cost to Executive, but Executive shall assume and pay all usage, repair or replacement charges associated with the cellular phone from and after the termination of the Consulting Agreement. Executive shall also be allowed to retain the laptop computer provided by Parker Drilling without cost to Executive; provided, however, Parker

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Drilling retains the right to remove any information related to Parker Drilling which exists on the laptop from and after the termination of the Consulting Agreement.

     Parker Drilling shall provide Executive with outplacement services for a period of six months at an aggregate cost not to exceed $5,000.00.

     10. Waiver of Reinstatement and Future Employment. Executive forever waives and relinquishes any right or claim to reinstatement to active employment with Parker Drilling, its affiliates, subsidiaries, divisions, and successors. Nothing contained herein shall prevent Executive from applying for future employment with Parker Drilling, nor shall this Agreement be deemed as precluding Executive from applying for future employment with third parties, including non-profit organizations.

     11. Global Release of Claims. Executive, on behalf of himself, his heirs, executors, successors and assigns, irrevocably and unconditionally releases, waives, and forever discharges Parker Drilling and each of Parker Drilling’s subsidiaries whether wholly owned or not and whether direct or indirect and each of Parker Drilling and its subsidiaries predecessors, successors, parents, joint ventures, holding companies, subsidiaries, divisions, affiliates, assigns, partnerships, agents, directors, officers, employees, consultants, committees, employee benefit committees, fiduciaries, representatives, attorneys, and all persons and entities acting by, through, under or in concert or in any such capacity with any of them (the “Parker Releasees”) from any and all claims, demands, actions, causes of action, costs, fees, attorneys’ fees, and all liability whatsoever, whether known or unknown, fixed or contingent, which Executive has, had, or may have against any of the Parker Releasees including, without limitation, the agreements he executed with Parker Drilling and his acts or omissions that resulted in Executive’s separation from employment with Parker Drilling, from the beginning of time and up to and including the date of execution of this Agreement. This Agreement includes, without limitation, claims at law or equity or sounding in contract (express or implied) or tort, claims arising under any federal, state, or local laws of any jurisdiction that prohibit age, sex, race, national origin, color, disability, religion, veteran, military status, sexual orientation, or any other form of discrimination, harassment, or retaliation (including, without limitation, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Americans with Disabilities Act, Title VII of the 1964 Civil Rights Act, the Civil Rights Act of 1991, 42 U.S.C. § 1981, the Rehabilitation Act, the Family and Medical Leave Act, the Sarbanes-Oxley Act, the Employee

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Polygraph Protection Act, the Financial Institutions Reform, Recovery and Enforcement Act (or any other employment-related banking statute or regulation), the Uniformed Services Employment and Reemployment Rights Act of 1994, the Texas Commission on Human Rights Act, any federal, state, local or municipal whistleblower protection or anti-retaliation statute or ordinance, or any other federal, state, local, or municipal laws of any jurisdiction), claims arising under the Employee Retirement Income Security Act, or any other statutory or common law claims related to Executive’s employment or separation from employment with Parker Drilling, the agreements he executed with Parker Drilling, and his acts or omissions that resulted in Executive’s separation from employment with Parker Drilling. Notwithstanding the foregoing, the provisions of this paragraph 11 shall not apply to the Indemnification Agreement. Under this Agreement, Executive is excluded from the definition of Parker Releasees.

     12. Non-Disparagement. Executive agrees, for a period of two (2) years after the Effective Date, not to, directly or indirectly, disclose, communicate, or publish any intentionally disparaging, negative, harmful, or disapproving information, written communications, oral communications, electronic or magnetic communications, writings, oral or written statements, comments, opinions, facts, or remarks, of any kind or nature whatsoever (collectively, “Disparaging Information”), concerning or related to any of the Parker Releasees. Executive understands and acknowledges that this non-disparagement clause prevents him from disclosing, communicating, or publishing, directly or indirectly, any Disparaging Information concerning or related to the Parker Releasees. Further, Executive acknowledges that in executing this Agreement, he has knowingly, voluntarily, and intelligently waived any free speech, free association, free press or First Amendment to the United States Constitution (including, without limitation, any counterpart or similar provision or right under the Texas Constitution or any other state constitution which may be deemed to apply) rights to disclose, communicate, or publish Disparaging Information concerning or related to the Parker Releasees. Executive also understands and agrees that he has had a reasonable period of time to consider this non-disparagement clause, to review the non-disparagement clause with his attorney, and to consent to this clause and its terms knowingly and voluntarily. Executive further acknowledges that this non-disparagement clause is a material term of this Agreement. If Executive breaches this paragraph 12, Parker Drilling will not be limited to a damages remedy, but may seek all other equitable and legal relief including, without limitation, a temporary restraining order, temporary

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injunctive relief, a permanent injunction, and its attorneys’ fees and costs, against him and any other persons, individuals, corporations, businesses, groups, partnerships or other entities acting by, through, under, or in concert with him. Nothing in this Agreement shall, however, be deemed to prevent Executive from testifying fully and truthfully in response to a subpoena from any court or from responding to investigative inquiry from any governmental agency or during interviews of audit committee counsel related to or in anticipation of government investigations.

     13. Cooperation. After his separation from employment from Parker Drilling, Executive agrees to cooperate with Parker Drilling in connection with the defense or prosecution of any claims, causes of action, investigations, hearings, proceedings, arbitrations or other tribunals now in existence or which may be brought in the future against or on behalf of Parker Drilling that relate to events or occurrences that transpired while he was employed with Parker Drilling. Executive’s cooperation in connection with this paragraph 13 shall include, without limitation, making himself reasonably available to meet with counsel to prepare for discovery or trial, to act as a witness on behalf of Parker Drilling at convenient times, and to provide true and accurate testimony regarding any such matters. If Executive is subpoenaed or contacted to cooperate in any manner by a non-governmental party concerning any matter related to Parker Drilling, he shall immediately notify Parker Drilling, through the notice procedures identified in this Agreement before responding or cooperating. The Executive shall be entitled to reimbursement of all expenses incurred in conjunction with his cooperation pursuant to this paragraph 13, including reasonable attorneys fees, consistent with the terms of the Indemnification Agreement between Parker Drilling and the Executive dated April 6, 2004. Any amount that Executive is entitled to be reimbursed under this Section will be reimbursed to Executive as promptly as practicable and in any event not later than the last day of the calendar year after the calendar year in which the expenses to be reimbursed are incurred, and the amount of the expenses eligible for reimbursement during any calendar year will not affect the amount of expenses eligible for reimbursement in any other calendar year.

     14. Confidentiality of Company Information. The Executive shall continue to abide by Parker Drilling’s confidentiality policies, including those imposed on him by virtue of his consulting relationship with Parker Drilling. The Executive will not at any time disclose to anyone, including, without limitation, any person, firm, corporation, or other entity, or publish, or use for any purpose, any Confidential Information, except as Parker Drilling directs and

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authorizes. The Executive shall take all reasonable measures to protect the secrecy of and avoid disclosure and unauthorized use of the “Confidential Information” and agrees to immediately notify Parker Drilling in the event of any unauthorized use or disclosure of the Confidential Information. Confidential Information includes, without limitation, all of Parker Drilling’s technical and business information, which is of a confidential, trade secret or proprietary character; lists of customers; identity of customers; identity of prospective customers; contract terms; bidding information and strategies; pricing methods or information; photographs; internal policies, procedures, communications and reports; computer software; computer software methods and documentation; graphic designs; hardware; Parker Drilling’s methods of operation; the procedures, forms and techniques used in servicing accounts; and other information or documents that Parker Drilling requires to be maintained in confidence for Parker Drilling’s continued business success or any other information defined as “secret and Confidential Information” in the Employment Agreement. Confidential Information does not include any information that is readily available to the public or, upon reasonable investigation, is readily ascertainable in the public domain.

     15. Agreement to Return Company Property/Documents. Executive understands and agrees that his last day of active work at any Parker Drilling office or on any Parker Drilling owned or leased property will be at the end of the term of the Consulting Agreement. The Executive will not take with him, copy, alter, destroy, or delete any files, documents, electronically stored information, or other materials whether or not embodying or recording any Confidential Information, including copies, without obtaining in advance the written consent of an authorized Parker Drilling representative. The Executive will promptly return to Parker Drilling all Confidential Information, documents, files, electronically stored information, records and tapes (written or electronically stored) regarding Parker Drilling that are in his possession or control, and he will not use or disclose such materials in any way or in any format, including written information in any form, information stored by electronic means, and any and all copies of these materials. Upon or before the execution of this Agreement, Executive will return to Parker Drilling all Parker Drilling property except the property described in paragraph 9 above, including, without limitation, company automobiles, keys, equipment, computer(s) and computer equipment, devices, cellular phones, other telephonic equipment, Parker Drilling credit cards,

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data, lists, information, correspondence, notes, memos, reports, or other writings prepared by Parker Drilling or himself on behalf of Parker Drilling.

     16. Knowing and Voluntary Agreement. The Executive understands it is his choice whether or not to enter into this Agreement and that his decision to do so is voluntary and is made knowingly. The Executive acknowledges that he has been advised by Parker Drilling to seek legal counsel to review this Agreement.

     17. Resignation as Officer and Employee. The Executive hereby resigns all positions as an officer and employee of Parker Drilling, including but not limited to, Vice President, General Counsel and Corporate Secretary, effective as of the Effective Date. Likewise, Executive hereby resigns all positions as an employee, director, representative or agent of all Parker Drilling subsidiaries, whether direct or indirect, and Parker Drilling affiliates effective as of the Effective Date.

     18. Executive and Company Acknowledgment. Executive acknowledges that among other rights which he is waiving by entering into this Agreement is the right to bring an action pursuant to the Age Discrimination in Employment Act (“ADEA”) and similar state statutes. The following admonitions and rights have been negotiated by the parties in order to insure full compliance with the requirements of the ADEA for a valid waiver of claim:

     a) Executive and the Company have been advised to discuss the terms of this Agreement with an attorney before signing.

     b) Executive has been extended a period of 21 days within which to consider this Agreement.

     c) For a period of seven (7) days following Executive’s execution of the Agreement, Executive may revoke the Agreement by notifying Parker Drilling, in writing, of his desire to do so. After the seven (7) day period has elapsed, this Agreement shall become effective and enforceable.

     19. Dispute Resolution. If any dispute arises out of or is related to this Agreement, the Company and Executive hereby agree to resolve such dispute pursuant to the provisions of paragraph 14 of the Consulting Agreement.

     20. No Admission of Liability. This Agreement and compliance with this Agreement shall not be construed as an admission by Parker Drilling or Executive of any

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liability whatsoever, or as an admission by Parker Drilling of any violation of the rights of Executive or any other person, or any violation of any order, law, statute, duty or contract.

     21. Governing Law. This Agreement will be interpreted and enforced in accordance with the laws of the State of Texas.

     22. Entirety and Integration. Upon the execution hereof by all the parties, this Agreement shall constitute a single, integrated contract expressing the entire agreement of the parties relative to the subject matter hereof and supersedes all prior negotiations, understandings and/or agreements, if any, of the parties. No covenants, agreements, representations, or warranties of any kind whatsoever have been made by any party hereto, except as specifically set forth in this Agreement.

     23. Authorization. Each person signing this Agreement as a party or on behalf of a party represents that he or she is duly authorized to sign this Agreement on such party’s behalf, and is executing this Agreement voluntarily, knowingly, and without any duress or coercion.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

PARKER DRILLING COMPANY		EXECUTIVE
By:
	Its:	RONALD C. POTTER
	Date:	Date:

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Appendix A

Unvested Restricted Stock Grants

	Date of Agreement	Number of Grant Shares		Vesting Date
1.	April 6, 2006		9667	April 6, 2009
2.	March 20, 2008		9471	March 19, 2010
3.	[March 9, 2009		70962	March 9, 2010]
4.	[March 9, 2009		70962	March 9, 2011]
	Total		161,062

Outstanding Stock Options

Date of Agreement	Number of Remaining Options	Strike Price	Expiration Date
July 15, 2003	25,000	$2.61	July 15, 2010

EX-10.2

Exhibit 10.2

CONSULTING AGREEMENT

     This Consulting Agreement (the “Agreement”) is made by and between Parker Drilling Company, a company organized and existing under the laws of the State of Delaware (hereinafter “COMPANY”), and Ronald C. Potter, an individual residing in Houston, Texas (hereinafter “CONSULTANT”) effective as of March 28, 2009.

     WHEREAS, the CONSULTANT and COMPANY have entered into a Separation Agreement and Release effective as of March 27, 2009, in connection with CONSULTANT’s separation from the COMPANY as the Vice President, General Counsel and Corporate Secretary (the “Separation Agreement”);

     WHEREAS, pursuant to the terms of the Separation Agreement, the parties have agreed to enter into this Agreement for the provision of consulting services by CONSULTANT to COMPANY;

     WHEREAS, the COMPANY desires to retain CONSULTANT’s services during the interim period and to facilitate the transition to a new general counsel; and

     WHEREAS, the CONSULTANT is willing to provide consulting services to the COMPANY in accordance with the terms of this Agreement.

     NOW, THEREFORE, in consideration of the mutual promises herein contained, COMPANY and CONSULTANT agree as follows:

1. Scope of Service

The COMPANY and CONSULTANT recognize that CONSULTANT previously acted in the capacity of the COMPANY’s Vice President, General Counsel and Corporate Secretary and that the Scope of Service CONSULTANT will render under this Agreement shall be substantially different and more limited than the services previously provided by the CONSULTANT in his capacity as Vice President, General Counsel and Corporate Secretary of the Company.

(a)	CONSULTANT has been retained by the COMPANY to provide certain services to the COMPANY solely with regard to transitioning pending matters, including, but not limited to litigation, operations, finance, corporate/administration, compliance, corporate records, governance, corporate structure, benefits, and related issues to the COMPANY.
(b)	CONSULTANT is not retained to engage outside counsel, to enter into contracts or commitments for the COMPANY, and agrees not to do so.
(c)	CONSULTANT shall be free to engage in consulting services for others, provided, however, such other activities shall not interfere with his rendering services to the COMPANY.

(d) CONSULTANT shall provide such other consulting services as the COMPANY and CONSULTANT may agree, without additional compensation. The services described in subparagraphs 1(a)-(d) may be referred to hereinafter collectively as the “Consultant Services”.

2.	Nature of Relationship Between Parties
	The CONSULTANT shall render the Consultant Services in this Agreement as an independent contractor. Except as otherwise agreed to by the COMPANY, CONSULTANT will have no authority or power to bind the COMPANY in relation to third parties or to represent to third parties that CONSULTANT has authority or power to bind the COMPANY. It is not the intention of the parties to this Agreement to create, by virtue of this Agreement, any employment relationship, trust, partnership or joint venture between CONSULTANT and the COMPANY or any of its affiliates or, except as specifically provided in this Agreement, to make them legal representatives or agents of each other or to create any fiduciary relationship or additional contractual relationship among them.
3.	Compensation

(a)	In consideration for CONSULTANT performing the Consultant Services for the term of this Agreement, COMPANY agrees to pay CONSULTANT a monthly consulting fee of US$24,458, payable monthly, in arrears on the 27th day of each month, prorated on a weekly basis for any partial month.
(b)	In addition to the above compensation, COMPANY will reimburse CONSULTANT for all reasonable out of pocket expenses incurred by CONSULTANT consistent with COMPANY’s policies on reimbursement of business expenses. CONSULTANT will submit an itemized statement of expenses to COMPANY on a monthly basis for costs incurred incidental to the performance of his duties as a CONSULTANT.
(c)	CONSULTANT will also be provided with office access, computer, cell phone, blackberry and other reasonable support services, including home internet access, during the period of this Agreement consistent with the office support and services he was receiving as an employee. The consideration described in subparagraphs 3(a)-(c) may be referred to hereinafter collectively as the “Consultant Compensation”.
(d)	The Consultant Compensation shall be CONSULTANT’s sole compensation for performing the Consultant Services.

4. Term

This Agreement shall commence on March 28, 2009, and shall continue in effect through May 27, 2009; provided, however, such term may be extended thereafter by mutual agreement of the parties.

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5.	Consultant’s Standard of Care
	Subject to the other provisions of this Agreement, CONSULTANT shall provide the Consultant Services with the same degree of care, skill and prudence that would be customarily exercised for what he reasonably believes to be in the best interest of the COMPANY.
6.	Independent Contractor

(a)	Except as otherwise provided herein or in the Separation Agreement, the status of CONSULTANT shall be that of an independent contractor and CONSULTANT shall not be eligible for participation in benefit plans offered by COMPANY to its employees.
(b)	COMPANY acknowledges and agrees that CONSULTANT may engage directly or indirectly in other activities during the term of this Agreement, including the provision of legal services to other companies and persons. However, this provision shall not relieve CONSULTANT of his obligations under paragraph 7 of this Agreement.
(c)	CONSULTANT shall be solely responsible for satisfaction of all tax obligations with regard to compensation earned pursuant to this Agreement, and agrees to hold COMPANY harmless from any liability for unpaid taxes or penalties in conjunction with earnings hereunder.

7.

Confidentiality

The CONSULTANT acknowledges and agrees that all Confidential Information about the COMPANY that was previously provided in the course of employment with the COMPANY and Confidential Information that will be provided to him in the course of the Term of this Agreement are and will continue to be the exclusive property of the COMPANY. The CONSULTANT agrees to keep all Confidential Information in strict confidence, not disclosing any Confidential Information to any third person except (i) as consented to in writing by the CEO of the COMPANY or (ii) as required by law or judicial or regulatory process; provided, however, that CONSULTANT shall not be obligated to keep in confidence any information which has become generally available to the public without any breach by CONSULTANT of this paragraph 7. If requested by the COMPANY, CONSULTANT will obtain from any third party to whom he discloses any Confidential Information the written agreement (in form and substance satisfactory to the COMPANY in its sole discretion) of such third party to keep such information confidential. The CONSULTANT agrees to continue to abide by COMPANY policies regarding confidentiality.

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8.

Protective Covenants

The COMPANY agrees to provide CONSULTANT with Confidential Information, which CONSULTANT has not had access to or knowledge of before the execution of this Agreement. The CONSULTANT agrees that to protect the COMPANY’s Confidential Information, it is necessary to enter into the following restrictive covenants, which are ancillary to the enforceable promises between the COMPANY and CONSULTANT in paragraph 8 of this Agreement:

(i)	Non-Solicitation. The CONSULTANT agrees that during (A) the Term of the Agreement and (B) for a one-year period following the Term of the Agreement (the “Post Consulting Period” and, together with the Term, the “Restricted Period”) will not, directly or indirectly, either individually or as a principal, partner, agent, consultant, contractor, employee, or as a director or officer of any corporation or association, or in any other manner or capacity whatsoever, except on behalf of the COMPANY, solicit business, or attempt to solicit business, in products or services competitive with products or services sold by the COMPANY, from any customer or client, or prospective customer or client, with whom CONSULTANT had contact or solicited during the (24) months that immediately proceeded the execution of this Agreement or during the Term of the Agreement. Notwithstanding the foregoing, nothing in this Agreement or in the Separation Agreement shall limit CONSULTANT’s right to provide legal services to any person or entity that is a present or potential competitor of the COMPANY.
(ii)	Non-Recruitment. The CONSULTANT also agrees that during the Restricted Period, he will not, directly or indirectly, hire, solicit, induce, recruit, engage, go into business with, encourage to leave their employment or contractor relationship with the COMPANY, or otherwise cease their employment or contractor relationship with the COMPANY, or otherwise contract for services with, any employee or contractor of the COMPANY.
(iii)	Nature of the Restrictions. The CONSULTANT agrees that the time, geographical area, and scope of restrained activities for the restrictions in this paragraph 8 are reasonable, especially in light of the COMPANY’s desire to protect its Confidential Information. If a court concludes that any time period, geographical area, or scope of restrained activities specified in paragraph 8 of this Agreement is unenforceable, the court is vested with the authority to reduce the time period, geographical area, and/or scope of restrained activities, so that the restrictions may be enforced to the fullest extent permitted by law. Additionally, if CONSULTANT violates any of the restrictions contained in this paragraph 8, the Restricted Period shall be suspended and will not run in favor of the CONSULTANT from the time of the commencement of any such violation until the time when the CONSULTANT cures the violation to the COMPANY’s satisfaction.

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9.	Agreement to Return Company Property/Documents
	Following the termination of CONSULTANT’s consulting arrangement for any reason, CONSULTANT agrees that: (i) he will not take with him, copy, alter, destroy, or delete any files, documents or other materials whether or not embodying or recording any Confidential Information, including copies, without obtaining in advance the written consent of an authorized COMPANY representative; and (ii) he will promptly return to the COMPANY all Confidential Information, documents, files, records and tapes (written or electronically stored) that have been in his possession or control regarding the COMPANY, and he will not use or disclose such materials in any way or in any format, including written information in any form, information stored by electronic means, and any and all copies of these materials. He further agrees to return to the COMPANY immediately all COMPANY property, including, without limitation, keys, equipment, computer(s) and computer equipment, devices, COMPANY cellular phones, other COMPANY telephonic equipment, COMPANY credit cards, data, lists, information, correspondence, notes, memos, reports, or other writings prepared by the COMPANY or himself on behalf of the COMPANY other than the iPhone and laptop referred to in paragraph 9 of the Separation Agreement.
10.	Termination
	This Agreement may be terminated by the COMPANY at any time for Cause. “Cause” means (i) a material breach or violation of this Agreement by CONSULTANT, unless cured to the COMPANY’s satisfaction within ten (10) business days following written notice given to CONSULTANT by the COMPANY; (ii) the failure or refusal of CONSULTANT to perform timely and fully the Consultant Services or to comply fully with his obligations under this Agreement, unless such default is cured to the COMPANY’s satisfaction within ten (10) business days following written notice given to CONSULTANT by the COMPANY; (iii) conviction of or a plea of no lo contendere or similar plea by CONSULTANT of a crime involving theft, dishonesty or moral turpitude, or the entry of a court order or administrative decree or order against the CONSULTANT, agreed or otherwise, involving allegations of criminal or civil fraud; or (iv) CONSULTANT’s breach of the non-solicitation covenant in paragraph 8 of this Agreement. “Good Reason” means a material breach or violation of this Agreement by the COMPANY, unless cured to CONSULTANT’s satisfaction within ten (10) business days following written notice given to the COMPANY by CONSULTANT. If this Agreement is terminated for Cause, the COMPANY’s obligation to pay Consultant Consideration not earned, as of the date of the event giving rise to the Cause termination, shall end immediately. Moreover, CONSULTANT agrees to forfeit the right to any unpaid Consultant Consideration owed by the COMPANY at the time of his termination for Cause. If this Agreement is terminated by the COMPANY without Cause, or if CONSULTANT terminates this Agreement for Good Reason, then the COMPANY shall promptly pay CONSULTANT the balance of the Consultant Consideration for the then current Term.
11.	Survival
	The provisions set forth in paragraphs 7, 8 and 9 shall survive termination or expiration of

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	this Agreement for any reason. In addition, all provisions of this Agreement which expressly continue to operate after the termination of this Agreement shall survive termination or expiration of this Agreement in accordance with the terms of such provisions.
12.	No Assignment or Subcontracting
	CONSULTANT shall not assign or subcontract in whole or in part any of the services to be furnished under this Agreement, nor shall CONSULTANT assign any payment due or to become due hereunder from COMPANY without the prior written consent of the COMPANY.
13.	Governing Law
	This Agreement shall be governed and interpreted in accordance with the laws of the State of Texas, not including any choice-of-law rule of the State of Texas, which may direct or refer any such interpretation to the laws of any other state or county.
14.	Dispute Resolution
	If any dispute arises out of or is related to this Agreement or CONSULTANT’s employment or separation from employment with the COMPANY for any reason, and the parties to this Agreement cannot resolve the dispute, the dispute shall be submitted to final and binding arbitration. The arbitration shall be conducted in accordance with the American Arbitration Association’s (“AAA”) National Rules for the Resolution of Employment Disputes (“Rules”). If the parties cannot agree to an arbitrator, an arbitrator will be selected through the AAA’s standard procedures and Rules. The COMPANY and CONSULTANT shall share the costs of arbitration, unless the arbitrator rules otherwise, with the parties agreeing that if CONSULTANT challenges this arbitration provision based on the allocation of costs between the parties, then the arbitrator shall decide the proper allocation of costs. The COMPANY and CONSULTANT agree that the arbitration shall be held in Houston, Texas. Arbitration of the parties’ disputes is mandatory, and in lieu of all civil causes of action or lawsuits either party may have against the other arising out of the Agreement or CONSULTANT’s employment or separation from employment with the COMPANY, with the exception that the COMPANY alone may seek a temporary restraining order and temporary injunctive relief in a court to enforce the terms of this Agreement. CONSULTANT acknowledges that by agreeing to this provision, he knowingly and voluntarily waives any right he may have to a jury trial based on any claims he has, had, or may have against the COMPANY, including any right to a jury trial under any local, municipal, state or federal law including, without limitation, claims under Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act of 1990, the Age Discrimination In Employment Act of 1967, the Older Workers Benefit Protection Act, the Texas Commission on Human Rights Act, claims of harassment, discrimination or wrongful termination, and any other statutory or common law claims.

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15.

Injunctive Relief

The CONSULTANT acknowledges and agrees that the covenants, obligations and agreements of the CONSULTANT contained in this Agreement concern special, unique and extraordinary matters and that a violation of any of the terms of these covenants, obligations or agreements will cause the COMPANY irreparable injury for which adequate remedies at law are not available. Therefore, the CONSULTANT agrees that the COMPANY alone will be entitled to an injunction, restraining order, or all other equitable relief (without the requirement to post bond) as a court of competent jurisdiction may deem necessary or appropriate to restrain the CONSULTANT from committing any violation of the covenants, obligations or agreements referred to in this Agreement before submitting this matter to binding arbitration. These injunctive remedies are cumulative and in addition to any other rights and remedies the COMPANY may have against the CONSULTANT. The COMPANY and the CONSULTANT irrevocably submit to the exclusive jurisdiction of the state courts and federal courts in the city of the COMPANY’s headquarters (Houston, Texas) regarding the injunctive remedies set forth in this paragraph and the interpretation and enforcement of this paragraph 15 solely insofar as the interpretation and enforcement relate to an application for injunctive relief in accordance with this Agreement. Further, the parties irrevocably agree that (a) the sole and exclusive appropriate venue for any suit or proceeding relating to injunctive relief shall be in the courts listed in this paragraph 15; (b) all claims with respect to any application for injunctive relief shall be heard and determined exclusively in these courts; (c) these courts will have exclusive jurisdiction over the parties to this Agreement and over the subject matter of any dispute relating to an application for injunctive relief; and (d) each party waives all objections and defenses based on service of process, forum, venue, or personal or subject matter jurisdiction, as these defenses may relate to an application for injunctive relief in a suit or proceeding under the provisions of this paragraph 15.

        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

PARKER DRILLING COMPANY
By:
	Name:
	Title:

RONALD C. POTTER
 

Name:  

Date: 

7

EX-31.1

EXHIBIT 31.1

PARKER DRILLING COMPANY
RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, Robert L. Parker Jr., certify that:

1.	I have reviewed this quarterly report on Form 10-Q for the quarterly period ended March 31, 2009, of Parker Drilling Company (the “registrant”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2009

/s/ Robert L. Parker Jr.

Robert L. Parker Jr.

Chairman and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

PARKER DRILLING COMPANY
RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, W. Kirk Brassfield, certify that:

1.	I have reviewed this quarterly report on Form 10-Q for the quarterly period ended March 31, 2009, of Parker Drilling Company (the “registrant”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2009

/s/ W. Kirk Brassfield

W. Kirk Brassfield

Senior Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

Pursuant to 18 U.S.C. Section 1350, the undersigned officer of Parker Drilling Company (the “Company”) hereby certifies, to such officer’s knowledge, that:

1.	The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (the “Report”) fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: May 8, 2009

/s/ Robert L. Parker Jr.

Robert L. Parker Jr.

Chairman and Chief Executive Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure statement.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

Pursuant to 18 U.S.C. Section 1350, the undersigned officer of Parker Drilling Company (the “Company”) hereby certifies, to such officer’s knowledge, that:

1.	The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (the “Report”) fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: May 8, 2009

/s/ W. Kirk Brassfield

W. Kirk Brassfield

Senior Vice President and Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure statement.