Parker Drilling Company (NYSE: PKD)

Parker Drilling Company (PKD) provides drilling services to the energy industry, including both land and offshore projects. The Company operates drilling rigs, provides project management and rental tools to the industry in nine countries. Engineering, logistics, health, safety, human resources, quality programs, preventive maintenance and alliance management is additionally offered to clients of the Company. The Company’s subsidiary Quail Tools provides drilling equipment on a rental agreement basis.

Founded in 1934, the Company is headquartered in Houston, Texas.

Source: Reuters.com, SEC Filings.

Financial Summary

Source: Reuters.com

Analyst Consensus

The mean of six analysts polled by Thomson Reuters rate shares of PKD a “Outperform.” The details of the analysts polled are as follows:

Analyst Recommendations and Revisions

Source: Reuters.com

Investment Highlights

The Company’s ability to grow its business is a primarily a function of oil and natural gas prices. Estimates from industry analysts suggest that the industry expands revenue and earnings when oil prices reach above approximately $55 to $60 per barrel. Since December of last year, oil has rallied smartly to above $75 per barrel, providing a price level to support exploration and development activity in the oil patch and demand for oil services companies.

Since capital formation and investor demand within the oil market is correlated strongly to fossil fuels prices, factors affecting prices are important considerations in an investment in oil services companies. These factors include the value of the U.S. dollar, oil supplies, oil demand and geopolitical risk.

The nature of most transactions made in the oil market is an important factor affecting investment into oil services enterprises. Since the majority of transactions for oil are conducted in the U.S. dollar, the anticipated continuation of the dollar’s decline will attract hedge funds and institutions into purchasing oil and natural gas as a currency hedge to further declines in the Greenback-as the U.S. dollar declines, oil price increases quoted in dollars.

As the dollar reach record lows on the USD Index, oil and natural gas prices reached record highs. A re-test of the U.S. dollar lows increases demand from institutional and hedge fund managers for oil and natural gas, as these markets are the deepest and most liquid in the commodities space. Higher oil prices encourage additional exploration and development of oil fields, thereby increasing demand for oil rigs and associated services.

Evidence of long-term oil supplies availability is questioned by renowned energy analyst Matt Simmons of Simmons & Company and William Powers of Powers Energy Investor, who hold more optimist price levels of oil and natural gas prices, both citing evidence of world peak oil production and expected increased demand as world GDP begins to regain its upward projection. Simmons and Powers envision a possibility of $100 per barrel of oil as soon as the first quarter of 2010.

Global industrial production remains a key driver of fossil fuels prices and alternative energy investment, with production in both OECD and ASEAN countries weighing heavily on total world production outputs. Most economists expect a rebound in durable goods production in Asia, especially China. China’s real GDP growth is expected to reach 8.3% in 2009, officially, while GDP growth in the OECD countries is anticipated to be flat or rise slightly.

Since the demand for energy correlates strongly with overall economic activity, oil and natural gas prices may continue higher as excess inventories are depleted and diminishing new supplies struggle to satisfy this demand sometime in 2010, according to the Energy Information Administration (EIA).

Political tensions in the Middle East have always been a factor in the price of fossil fuels, and have been the one of the primary causes of spikes in the price of oil for more than 40 years. Conflicts with Iran regarding its nuclear power ambitions are a growing concern among policymakers and energy industry participants. Oil analysts warn of oil price shocks if an attack on Iran is carried out. Since the Iranians are able to control much of the flow of oil tankers traveling through the Persian Gulf, aggression against Iran and its neighbors could include an oil supply shock and much higher prices. Destruction of Iranian oil fields would most likely spike oil prices to record levels for a protracted time.

Company News

On October 28, the Company announced that its board of directors has appointed David C. Mannon as its CEO. Mannon succeeds Robert Parker Jr., its CEO of 18 years.

On November 2, the Company announced that its CEO David C. Mannon will present at the Bank of America/Merrill Lynch Energy Conference in New York, scheduled at 4:40 p.m. EST on Tuesday, November 17.

Technical Analysis

Source: http://stockcharts.com/h-sc/ui?s=pkd

PKD trades below its 13-day moving average. This bearish sign is significant because the moving average are also negatively trending.

The MACD for PKD currently indicates a bearish signal. The MACD is below the signal line, a 9-day moving average of the MACD. The MACD is also below the critical level of 0, which implies the past price action had been negative. Overall, the chart is bearish in the short term. Support appears to be visible at $5.00.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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