-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, nNHxCZYaP1VE6gPKyefZjcQysYBzJqxLNTi8bCCtrSh4x8TAquLB3DLGSMtmolOh iwuRDPMir6pqHiS1WEyDgw== 0000950129-94-000641.txt : 19940815 0000950129-94-000641.hdr.sgml : 19940815 ACCESSION NUMBER: 0000950129-94-000641 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOBLE DRILLING CORP CENTRAL INDEX KEY: 0000777201 STANDARD INDUSTRIAL CLASSIFICATION: 1381 IRS NUMBER: 730374541 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13857 FILM NUMBER: 94543148 BUSINESS ADDRESS: STREET 1: 10370 RICHMOND AVE STE 400 CITY: HOUSTON STATE: TX ZIP: 77042 BUSINESS PHONE: 7139743131 MAIL ADDRESS: STREET 2: 10370 RICHMOND AVE STE 400 CITY: HOUSTON STATE: TX ZIP: 77042 10-Q 1 NOBLE DRILLING 10-Q DATED 06/30/94 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1994 OR ( ) 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: 0-13857 NOBLE DRILLING CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 73-0374541 (State of incorporation) (I.R.S. employer identification number) 10370 RICHMOND AVENUE, SUITE 400 HOUSTON, TEXAS 77042 (Address of principal executive offices) (Zip code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 974-3131 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 X Yes No --- --- Number of shares of Common Stock outstanding as of August 9, 1994: 48,606,871 Page 1 of 14 Pages Index to Exhibits on page 13 ================================================================================ 2 FORM 10-Q PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS NOBLE DRILLING CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (In thousands)
June 30, December 31, 1994 1993 -------- ----------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 26,283 $ 4,896 Restricted cash 1,819 1,793 Investment in marketable securities 31,536 37,387 Accounts receivable 50,393 40,293 Costs of uncompleted contracts in excess of billings 2,063 Other current assets 38,270 32,329 ----------- ----------- Total current assets 150,364 116,698 ----------- ----------- PROPERTY AND EQUIPMENT Drilling equipment and facilities 632,455 618,021 Other 17,314 13,836 ----------- ----------- 649,769 631,857 Accumulated depreciation (275,676) (261,630) ----------- ----------- 374,093 370,227 ----------- ----------- OTHER ASSETS 14,788 12,792 ----------- ----------- $ 539,245 $ 499,717 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term notes payable $ 5,562 $ Current installments of long-term debt 546 546 Accounts payable 9,508 9,110 Interest payable 2,815 3,548 Other current liabilities 50,953 29,085 ----------- ----------- Total current liabilities 69,384 42,289 LONG-TERM DEBT 126,871 127,144 OTHER LIABILITIES 1,174 1,175 MINORITY INTEREST 1,809 156 ----------- ----------- 199,238 170,764 ----------- ----------- SHAREHOLDERS' EQUITY Preferred stock 2,990 2,990 Common stock 4,870 4,780 Capital in excess of par value 339,530 333,617 Cumulative translation adjustment (2,308) (2,286) Retained deficit (3,325) (8,398) Treasury stock, at cost (1,750) (1,750) ----------- ----------- 340,007 328,953 ----------- ----------- $ 539,245 $ 499,717 =========== ===========
See notes to interim financial statements. -2- 3 FORM 10-Q NOBLE DRILLING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
Three Months Ended June 30, -------------------------- 1994 1993 ---- ---- OPERATING REVENUES Contract drilling services $ 53,982 $ 37,496 Turnkey drilling services 15,229 Engineering and consulting services 1,047 615 Other revenue 1,335 1,372 ---------- ----------- 71,593 39,483 ---------- ----------- OPERATING COSTS AND EXPENSES Contract drilling services 34,978 24,600 Turnkey drilling services 12,486 Engineering and consulting services 708 515 Other expense 1,044 675 Depreciation and amortization 7,500 4,278 Selling, general and administrative 9,388 4,529 Minority interest 276 (98) ---------- ----------- 66,380 34,499 ---------- ----------- OPERATING INCOME 5,213 4,984 OTHER INCOME (EXPENSE) Interest expense (3,114) (900) Interest income 659 312 Other, net 2,583 336 ---------- ----------- INCOME BEFORE INCOME TAXES 5,341 4,732 INCOME TAX PROVISION (1,372) (635) ---------- ----------- NET INCOME 3,969 4,097 PREFERRED STOCK DIVIDENDS (1,682) (1,682) ---------- ----------- NET INCOME APPLICABLE TO COMMON SHARES $ 2,287 $ 2,415 ---------- ----------- ---------- ----------- NET INCOME PER COMMON SHARE $ 0.05 $ 0.07 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 48,727 34,992
See notes to interim financial statements. -3- 4 FORM 10-Q NOBLE DRILLING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
Six Months Ended June 30, -------------------------- 1994 1993 ---------- ----------- OPERATING REVENUES Contract drilling services $ 111,847 $ 87,465 Turnkey drilling services 15,229 Engineering and consulting services 1,356 1,484 Other revenue 2,409 2,706 --------- -------- 130,841 91,655 --------- -------- OPERATING COSTS AND EXPENSES Contract drilling services 72,979 59,585 Turnkey drilling services 12,486 Engineering and consulting services 966 1,425 Other expense 1,645 1,353 Depreciation and amortization 14,661 8,867 Selling, general and administrative 15,712 10,471 Minority interest 239 (81) --------- -------- 118,688 81,620 --------- -------- OPERATING INCOME 12,153 10,035 OTHER INCOME (EXPENSE) Interest expense (6,114) (1,910) Interest income 1,246 749 Other, net 3,726 102 --------- -------- INCOME BEFORE INCOME TAXES 11,011 8,976 INCOME TAX PROVISION (2,575) (1,487) --------- -------- NET INCOME 8,436 7,489 PREFERRED STOCK DIVIDENDS (3,364) (3,364) --------- -------- NET INCOME APPLICABLE TO COMMON SHARES $ 5,072 $ 4,125 ========= ======== NET INCOME PER COMMON SHARE $ 0.10 $ 0.12 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 48,538 34,905
See notes to interim financial statements. -4- 5 FORM 10-Q NOBLE DRILLING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Six Months Ended June 30, ------------------------- 1994 1993 -------- -------- CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Net income $ 8,436 $ 7,489 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,661 8,867 (Gain) loss on sale of assets (572) (373) (Gain) loss on foreign exchange 200 254 Minority interest 239 (81) Deferred income tax provision 1,384 Accrued stock appreciation rights 57 Other (1,276) 103 Changes in operating assets and liabilities: Accounts receivable 14,844 (1,548) Deferred pension costs 114 (139) Other assets 4,029 (3,877) Debt issuance costs 177 Accounts payable (11,954) 2,338 Other liabilities (3,069) 1,245 -------- -------- 27,213 14,335 -------- -------- CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES Purchase of property and equipment (19,349) (2,443) Proceeds from acquisition of business, net of cash paid 13,600 Proceeds from sale of property and equipment 1,979 403 Investment in marketable securities 5,851 7,839 Payments to minority interest holders, net (3,978) Investment in unconsolidated affiliate (263) (28) -------- -------- (2,160) 5,771 -------- -------- CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES Payment of long-term debt (273) (13,820) Dividends paid on preferred stock (3,364) (3,364) Proceeds from issuance of common stock 827 1,203 Payment of short-term debt (4) (2,449) (Increase) decrease in restricted cash (26) (Increase) decrease in other assets and liabilities (111) 111 -------- -------- (2,951) (18,319) -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (715) (10) -------- -------- INCREASE IN CASH AND CASH EQUIVALENTS 21,387 1,777 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,896 3,142 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 26,283 $ 4,919 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest $ 5,794 $ 1,098 Income taxes $ 1,666 $ 166 Noncash investing and financing activities: Acquisition of business $ 9,169
See notes to interim financial statements. -5- 6 FORM 10-Q NOBLE DRILLING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited) NOTE 1 - FINANCIAL STATEMENT BASIS The consolidated balance sheet as of June 30, 1994 ("Noble Drilling" or, together with its consolidated subsidiaries, unless the context requires otherwise, the "Company"), the related consolidated statements of operations for the three- and six- month periods ended June 30, 1994 and 1993 and the consolidated statements of cash flows for the six-month periods ended June 30, 1994 and 1993 are unaudited. In the opinion of management, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of such financial statements have been included. These interim financial statements and notes are presented in condensed form as permitted by Form 10-Q and should be read in conjunction with the Company's annual financial statements and notes thereto contained in the 1993 Annual Report on Form 10-K. Effective during the quarter ended March 31, 1993, the Company's international subsidiaries began reporting their financial results on a current rather than a month-lag basis. This change resulted in the inclusion of the December 1992 operating results of such international subsidiaries in the operating results for the first quarter of 1993. Revenues and net income for this additional one-month period were $7,687,000 and $140,000, respectively, and are not considered material to the Company's overall results of operations. NOTE 2 - NET INCOME PER COMMON SHARE Net income per common share has been computed on the basis of the weighted average number of common shares and, where dilutive, common share equivalents outstanding during the indicated periods. Each share of preferred stock was assumed to be converted into 5.41946 shares of common stock for purposes of calculating fully diluted earnings per share. The calculation of income per share assuming full dilution was antidilutive; therefore, fully diluted earnings per share was not presented. NOTE 3 - ACQUISITIONS The Company acquired nine mobile offshore jackup drilling rigs and associated assets (the "Western Acquisition") from The Western Company of North America for $150,000,000 in cash on October 7, 1993. The Western Acquisition has been accounted for under the purchase method, and accordingly, the operating results have been included in the consolidated operating results since the date of acquisition. On April 22, 1994, the Company acquired all of the issued and outstanding shares of common stock (the "Shares") of Triton Engineering Services Company ("Triton Acquisition"), a Texas corporation ("Triton"), pursuant to the terms of the Stock Purchase Agreement dated April 22, 1994. Triton is engaged, through its subsidiaries, in providing engineering, consulting and turnkey drilling services and manufacturing and rental of oilfield equipment, for the oil and gas industry. In consideration for the Shares, the Company paid approximately $4,085,000 in cash, issued promissory notes of $4,000,000 which mature on October 21, 1994 and 751,864 shares of the Company's common stock valued at $5,169,000. In addition, the Company has a contingent obligation at the end of two years to pay additional consideration, including up to 254,551 shares of common stock, subject to -6- 7 FORM 10-Q NOBLE DRILLING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Dollar amounts in table are in thousands, except per share amounts) (Unaudited) reduction as a result of certain events, as well as an indeterminable number of additional shares in the event Triton achieves certain operating results in 1994. Assuming the Western Acquisition and the issuance of the common stock and debt securities discussed under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Credit Facilities and Long-Term Debt" and the Triton Acquisition had both occurred on January 1, 1993, unaudited pro forma condensed consolidated results of operations are shown below in the table.
Six Months Ended June 30, -------------------------- 1994 1993 ----------- ----------- (Unaudited) (Unaudited) Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 156,976 $ 179,697 Net income applicable to common shares . . . . . . . . . . . . . . . . . . . $ 5,166 $ 1,638 Net income per common share . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.10 $ 0.03
The pro forma results are not necessarily indicative of the actual results that would have occurred had the acquisitions been in effect for the entire periods presented. In addition, the pro forma results are not intended to be a projection of future results from combined operations. NOTE 4 - PENDING ACQUISITION On June 13, 1994, Noble Drilling signed a definitive merger agreement with Chiles Offshore Corporation ("Chiles") pursuant to which Chiles will merge with and into a wholly-owned subsidiary of Noble Drilling. The merger agreement provides that each share of Chiles common stock will be exchanged for 0.75 of a share of Noble common stock and each share of Chiles $1.50 preferred stock will be exchanged for one share of a newly created series of $1.50 convertible preferred stock of Noble Drilling. The merger is conditioned upon the approval of common stockholders of each company, required regulatory approvals and other conditions. -7- 8 FORM 10-Q ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following table sets forth selected financial information of the Company expressed as a percentage of total operating revenues for the periods indicated.
Three Months Six Months Ended June 30, Ended June 30, ---------------------------- ---------------------------- 1994 1993 1994 1993 ------------ ------------ ------------ ------------ Operating revenues Contract drilling services International offshore . . . . . . . . . . . . 33.3% 25.2% 35.8% 29.9% Domestic offshore . . . . . . . . . . . . . . 21.8 39.2 25.2 32.8 International labor . . . . . . . . . . . . . 12.7 21.3 13.9 19.9 International land . . . . . . . . . . . . . . 4.4 6.2 7.1 9.5 Domestic land . . . . . . . . . . . . . . . . 3.3 3.0 3.5 3.4 Turnkey drilling services . . . . . . . . . . . . 21.3 11.6 Engineering and consulting services . . . . . . . 1.4 1.6 1.0 1.6 Other revenue . . . . . . . . . . . . . . . . . . 1.8 3.5 1.9 2.9 ----- ----- ----- ----- 100.0 100.0 100.0 100.0 Operating costs (1) . . . . . . . . . . . . .. . . (68.7) (65.3) (67.3) (68.0) Depreciation and amortization . . . . . . . . . . (10.5) (10.8) (11.2) (9.7) Selling, general and administrative . .. . . . . . (13.1) (11.5) (12.0) (11.4) Minority interest . . . . . . . . . . . . . . . . (0.4) 0.2 (0.2) 0.1 ----- ----- ----- ----- Operating income . . . . . . . . . . . . . . . . . 7.3 12.6 9.3 11.0 Interest expense . . . . . . . . . . . . . . . . (4.4) (2.3) (4.7) (2.1) Interest income . . . . . . . . . . . . . . . . . 0.9 0.8 1.0 0.8 Other, net . . . . . . . . . . . . . . . . . . . . 3.6 0.9 2.8 0.1 Income tax provision . . . . . . . . . . . . . . . (1.9) (1.6) (1.9) (1.6) ----- ----- ----- ----- Net income . . . . . . . . . . . . . . . . . . . . 5.5% 10.4% 6.5% 8.2% ----- ----- ----- ----- ----- ----- ----- -----
- - ------------------- (1) Consists of operating costs and expenses other than depreciation and amortization, selling, general and administrative, and minority interest. -8- 9 FORM 10-Q RESULTS OF OPERATIONS The consolidated operating results for the second quarter of 1994 ("Current Quarter") and first six months of 1994 ("Current Period") reflect higher activity levels compared to the same periods in 1993, particularly in the Company's international offshore operations. Revenues increased primarily a result of the addition to the Company's drilling rig fleet of the rigs purchased through the Western Acquisition and the turnkey drilling operations acquired in the Triton Acquisition during the Current Quarter. The land operations improved as a result of improved dayrates and utilization. Domestic offshore revenues increased primarily due to improved dayrates with respect to the comparable periods in 1993; however, utilization rates decreased from comparable periods in 1993 and contract margins declined due to increased stacking expenses and higher repair and supply costs. Operating revenues from contract drilling and turnkey services increased 84 percent for the Current Quarter to $69,211,000 from $37,496,000 for the same quarter in 1993. The 84 percent increase consists of 41 percent attributable to turnkey revenues and 43 percent attributable to increased international utilization and improved domestic dayrates. Although the Company's domestic offshore dayrates for the Current Quarter and Current Period were higher than those in 1993, dayrates in the Gulf of Mexico have declined since the beginning of 1994. Operating revenues from international contract drilling operations were $36,042,000 (or 52 percent of total contract drilling services revenue) for the Current Quarter, compared to $20,821,000 (or 56 percent of total contract drilling services revenue) for the comparable quarter in 1993. Net income for the Current Quarter decreased slightly to $3,969,000 from $4,097,000 for the corresponding quarter in 1993 due to decreased domestic utilization and contract margins, partially offset by increased margins from the international operations. Operating revenues for the Current Period increased 43% compared with the comparable period in 1993, primarily a result of revenues associated with the rigs purchased from Western and the Current Quarter revenues of $16,579,000 from Triton. Net income was $8,436,000 for the Current Period compared with net income of $7,489,000 for the same period in 1993. Operating costs as a percentage of operating revenues were 67% as compared to 68% in the 1993 period. This decrease was attributable to the increased contract contribution from the international land and offshore operations offset by reduced operating margins in the domestic offshore operations. The average domestic offshore rig utilization rate decreased to 71 percent for the Current Period from 87 percent for the comparable period in 1993. The Company's utilization has been impacted by the movement of rigs into the Gulf of Mexico since late 1993. The average domestic land rig utilization rate was 48 percent and 32 percent for the Current Period and comparable period in 1993, respectively. The average international offshore rig utilization rate decreased to 82 percent for the Current Period from 84 percent for the comparable period in 1993, as a result of the Ed Holt being off contract due to repairs and reduced operating levels in Nigeria. At June 30, 1994, the Company had 15 labor contracts on operator-owned rigs in its international operations, compared to 16 contracts at June 30, 1993. The average international land rig utilization rate increased to 72 percent for the Current Period from 34 percent for the comparable period in 1993 as a result of the higher natural gas activity levels in Canada. The decrease in engineering services revenues for the Current Period was due to decreased oil and gas development activity in the United Kingdom resulting from depressed oil prices partially offset by the engineering and consulting services operating revenues generated by Triton of $764,000. Depreciation and amortization expense for the Current Quarter and Current Period increased from the comparable quarter and period in 1993 reflecting depreciation of the assets acquired in the Western and Triton Acquisitions. -9- 10 FORM 10-Q The increase in selling, general and administrative expenses as a percentage of operating revenues for the Current Quarter and Current Period as compared to the comparable quarter and period in 1993 was principally a result of the Western and Triton Acquisitions. Other, net for the Current Period increased by $3,624,000 from the comparable 1993 period. The increase was primarily due to a gain of $807,000 from an insurance recovery related to the Company's Nigeria operations and a gain of $1,593,000 from a recovery of a previously written-off note receivable associated with the dissolution of a portion of the Company's Far East operations. The Company received 2,925,000 shares of Century Drilling Limited (an Australian company) common stock valued at $1,288,000 and $275,000 in cash as proceeds from the recovery of the written-off note receivable. The increase in accounts receivable, costs of uncompleted contracts in excess of billings, other current assets, other current liabilities and minority interest was due to the Triton Acquisition. LIQUIDITY AND CAPITAL RESOURCES OVERVIEW At June 30, 1994, the Company had cash, cash equivalents, restricted cash and investments in marketable securities of $59.6 and $24.7 million of funds available under various lines of credit. In the Current Quarter and Current Period, cash provided by operations was $16.5 million and $27.2 million. The Company expects to continue to generate cash flow from operations for the remainder of 1994, assuming no material decrease in demand for contract drilling and turnkey services. The Company will continue to have cash requirements for debt principal and interest payments and preferred dividends, when and if declared. For the remainder of 1994 and the first six months of 1995, principal and interest payments are estimated to be approximately $17.9 million. Giving effect to an assumed full conversion of Noble Drilling's $2.25 Convertible Exchangeable Preferred Stock (the "Preferred Stock") on December 31, 1994, dividends on the Preferred Stock for the remainder of 1994 and the first six months of 1995 are estimated to be approximately $1.7 million. The Company expects to fund these obligations, totaling $19.6 million, out of cash and short-term investments as well as cash expected to be provided by operations. Capital expenditures for the remainder of 1994 and the first six months of 1995 are planned to aggregate approximately $50.0 million, of which the majority are discretionary and relate to upgrades of equipment which management considers desirable to improve the marketability of the fleet, but which can be deferred if necessary. These capital expenditures will be funded from operating cash flows to the extent available, existing cash balances and/or with available lines of credit. CREDIT FACILITIES AND LONG-TERM DEBT On June 16, 1994, the Company signed an agreement with First Interstate Bank of Texas, N.A. for a $25.0 million revolving credit facility and $5.0 million letter of credit facility. At June 30, 1994 the Company had lines of credit totaling $26.0 million and letter of credit facilities totaling $5.7 million subject to the Company's maintenance of certain levels of collateral. Based on levels of collateral at June 30, 1994, the Company had $24.7 million available under these lines of credit and $5.0 million available to support the issuance of letters of credit. In connection with the initial construction of the NN-l, the predecessor of NN-1 Limited Partnership issued U.S. Government Guaranteed Ship Financing Sinking Fund Bonds, of which $2.3 million was outstanding at June -10- 11 FORM 10-Q 30, 1994. The bonds are secured by the vessel, and the applicable security agreement contains certain restrictions, among others, on distributions to partners, dispositions of assets and services to related parties. In addition, there are minimum working capital, net worth and long-term debt to net worth requirements applicable to NN-1 Limited Partnership. The Company's sharing percentage in NN-1 Limited Partnership's distributions from operations is generally 90 percent. On October 7, 1993, in connection with the Western Acquisition, the Company issued 12,041,000 shares of common stock and $125,000,000 principal amount of 9 1/4% Senior Notes Due 2003 (the "Senior Notes"). The Senior Notes will mature on October 1, 2003. Interest on the Senior Notes is payable semi-annually on April 1 and October 1 of each year. The Senior Notes are redeemable at the option of the Company, in whole or in part, on or after October 1, 1998 at 103.47 percent of principal amount, declining ratably to par on or after October 1, 2001, plus accrued interest. Mandatory sinking fund payments of 25 percent of the original principal amount of the Senior Notes at par plus accrued interest will be required on October 1, 2001 and October 1, 2002. The indenture governing the Senior Notes contains certain restrictive covenants, including limitations on additional indebtedness and the ability to secure such indebtedness, restrictions on dividends and certain investments, and limitations on sale of assets, sales and leasebacks, transactions with affiliates, and mergers or consolidations. CASH FLOWS The net cash provided by operations in the Current Period was $27,213,000 compared with net cash provided by operations of $14,335,000 for the same period in 1993. The increase was primarily the result of the increased international activity in 1994. The net cash used in investing activities in the Current Period was $2,160,000 compared with net cash provided by investing activities of $5,771,000 in the same period in 1993. The decline in the Current Period compared to the 1993 period was due primarily to cash used in capital expenditures and Triton's payment to a minority interest holder of a Mexican joint venture, offset by net cash proceeds received as a result of the Triton Acquisition. The net cash used in financing activities was $2,951,000 in the Current Period compared with $18,319,000 for the first six months of 1993. The decrease in net cash used was primarily due to lower debt amortization requirements in the current period. The increase in cash and cash equivalents from January 1 to June 30, 1994 of $21,387,000 was primarily the result of cash provided by operations of $27,213,000 and net cash proceeds received of $13,600,000 from the Triton Acquisition offset by capital expenditures of $19,349,000 and payment on preferred stock dividends of $3,364,000. TRANSACTION WITH CHILES OFFSHORE CORPORATION On June 13, 1994, Noble Drilling signed a definitive merger agreement with Chiles, pursuant to which Chiles will merge with and into a wholly-owned subsidiary of Noble Drilling. The merger agreement provides that each share of Chiles common stock will be exchanged for 0.75 of a share of Noble common stock and each share of Chiles $1.50 preferred stock will be exchanged for one share of a newly created -11- 12 FORM 10-Q series of $1.50 convertible preferred stock of Noble Drilling. The merger is conditioned upon the approval of common stockholders of each company, required regulatory approvals and other conditions. On July 8, 1994, the Company filed a Registration Statement on Form S-4 with the Securities and Exchange Commission detailing the merger agreement. The respective meetings of the stockholders of Noble Drilling and Chiles are expected to occur on September 15, 1994 and the merger is expected to become effective as soon as practicable thereafter. NIGERIAN SITUATION The Company has significant operations in Nigeria. Since the cancellation of presidential elections in June 1993, Nigeria has undergone a period of political unrest. The reluctance of Nigeria to proceed with a transition to civilian rule has resulted in a series of strikes, protests and disruptions to the Nigerian economy. In July 1994, both of Nigeria's oil worker unions called for a strike to protest the government's continued refusal to hand over the power to the winner of the 1993 presidential election. During the first week of August, other national labor unions joined in the oil worker's strike and tensions have increased, causing widespread civil unrest and severely curtailing most commercial and economic activity in Nigeria. Specifically, the strike has resulted in the suspension of virtually all drilling activity in Nigeria. There can be no assurance as to the length or outcome of the unrest in Nigeria. Currently, the Company has two rigs under contract and three rigs stacked in Nigeria. Although drilling activity has been suspended on one rig, the Company continues to earn dayrates for both rigs under the drilling contracts. The contracts for both rigs contain clauses that allow the operator to suspend operations in the event of force majeure and to terminate the contract if the force majeure continues; however, neither operator has elected to suspend operations pursuant to these clauses. The Company maintains war and political risk and business interruption insurance, subject in the case of certain coverages, to cancellation on seven days notice. The current political instability may delay or jeopardize the Company's ability to renew existing drilling contracts or to secure new contracts for the rigs. No assurance can be given that the civil and political climate in Nigeria will improve. Drilling activities in Nigeria accounted for 19 percent and 13 percent, respectively, of the Company's revenues during 1993 and the first six months of 1994. -12- 13 FORM 10-Q INDEX TO EXHIBITS PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) The following exhibits are filed as part of this Form 10-Q: 10.1 -- Credit Agreement dated as of June 16, 1994 among Noble Drilling Corporation, First Interstate Bank of Texas, N.A., in its individual capacity and as agent and Credit Lyonnais Cayman Island Branch (filed as Exhibit 10.1 to the Company's Registration Statement on Form S-4 (No. 33-54495) and incorporated herein by reference). 10.2 -- Revolving Credit Note dated June 16, 1994 of Noble Drilling Corporation in the amount of $12,500,000 in favor of Credit Lyonnais Cayman Island Branch (filed as Exhibit 10.2 to the Company's Registration Statement on Form S-4 (No. 33-54495) and incorporated herein by reference). 10.3 -- Revolving Credit Note dated June 16, 1994 of Noble Drilling Corporation in the amount of $12,500,000 in favor of First Interstate Bank of Texas, N.A. (filed as Exhibit 10.3 to the Company's Registration Statement on Form S-4 (No. 33-54495) and incorporated herein by reference). 10.4 -- Guaranty Agreement dated as of June 16, 1994 by and among Noble Drilling (U.S.) Inc., Noble Drilling (West Africa) Inc. and Noble Drilling (Mexico) Inc. (filed as Exhibit 10.4 to the Company's Registration Statement on Form S-4 (No. 33-54495) and incorporated herein by reference). b) The following report on Form 8-K/A Amendment No. 1 was filed by the Company on June 30, 1994: Form 8-K/A Amendment No.1 dated June 30, (Date of Event: April 22, 1994), which reported the acquisition of all the issued and outstanding capital stock of Triton Engineering Services Company under "Item 2. Acquisition or Disposition of Assets." c) The following report on Form 8-K was filed by the Company on June 13, 1994: Form 8-K dated June 13, 1994, which reported the signing of a definitive merger agreement with Chiles Offshore Corporation under "Item 2. Transaction with Chiles Offshore Corporation." -13- 14 FORM 10-Q 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. NOBLE DRILLING CORPORATION DATE: August 11, 1994 /s/ JAMES C. DAY ------------------------------------- JAMES C. DAY, Chairman, President and Chief Executive Officer DATE: August 11, 1994 /s/ BYRON L. WELLIVER ------------------------------------- BYRON L. WELLIVER, Senior Vice President-Finance and Treasurer (Principal Financial Officer) -14- -----END PRIVACY-ENHANCED MESSAGE-----