-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IIYBnuUO8HpuwstiMZ36/Kcw4DI8a7+gBQeOWHKPk4f7t3W1FHJplQvDo8JBrxiY DWgdK7JYhSdTqng0XO67pg== 0000950129-95-001462.txt : 19951119 0000950129-95-001462.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950129-95-001462 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOBLE DRILLING CORP CENTRAL INDEX KEY: 0000777201 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [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: 95592833 BUSINESS ADDRESS: STREET 1: 10370 RICHMOND AVE STE 400 CITY: HOUSTON STATE: TX ZIP: 77042 BUSINESS PHONE: 7139743131 MAIL ADDRESS: STREET 1: 10370 RICHMOND AVE STREET 2: STE 400 CITY: HOUSTON STATE: TX ZIP: 77042 10-Q 1 NOBLE DRILLING CORPORATION FORM 10-Q 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 September 30, 1995 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 73-374541 (State of incorporation) (I.R.S. employer identification number) 10370 Richmond Avenue, Suite 400 77042 Houston, Texas (Zip code) (Address of principal executive offices) 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. Yes [X] No. [ ] Number of shares of Common Stock outstanding as of November 7, 1995: 94,516,339 ================================================================================ 2 FORM 10-Q PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS NOBLE DRILLING CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, 1995 1994 ------------- ------------- ASSETS CURRENT ASSETS Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . $ 55,987 $ 95,163 Restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . 908 898 Investment in marketable debt securities . . . . . . . . . . . . . . . 23,327 39,673 Investment in marketable equity securities . . . . . . . . . . . . . . 6,711 9,489 Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . 58,962 61,563 Costs of uncompleted contracts in excess of billings . . . . . . . . . 2,445 841 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,636 14,008 Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . 26,204 18,584 ---------- ----------- Total current assets . . . . . . . . . . . . . . . . . . . . . . 190,180 240,219 ---------- ----------- PROPERTY AND EQUIPMENT Drilling equipment and facilities. . . . . . . . . . . . . . . . . . . 846,346 804,445 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,179 20,461 ---------- ----------- 868,525 824,906 Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . (343,266) (331,584) ---------- ----------- 525,259 493,322 ---------- ----------- OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,406 6,348 ---------- ----------- $ 722,845 $ 739,889 ========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current installments of long-term debt and short-term debt . . . . . . $ 520 $ 6,244 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,578 34,662 Accrued payroll and related costs. . . . . . . . . . . . . . . . . . . 13,032 14,888 Taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,565 12,972 Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,463 2,853 Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . 12,221 10,715 ---------- ----------- Total current liabilities. . . . . . . . . . . . . . . . . . . . 74,379 82,334 LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,286 126,546 OTHER LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,704 2,767 MINORITY INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322 631 ---------- ----------- 202,691 212,278 ---------- ----------- SHAREHOLDERS' EQUITY $2.25 Preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . - 2,989 $1.50 Preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . 4,025 4,025 Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,445 7,808 Capital in excess of par value . . . . . . . . . . . . . . . . . . . . 589,624 590,733 Unrealized losses on marketable securities . . . . . . . . . . . . . . (368) (1,847) Minimum pension liability. . . . . . . . . . . . . . . . . . . . . . . (3,825) (3,825) Cumulative translation adjustment. . . . . . . . . . . . . . . . . . . (1,726) (2,325) Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . (76,569) (68,197) Treasury stock, at cost. . . . . . . . . . . . . . . . . . . . . . . . (452) (1,750) ---------- ----------- 520,154 527,611 ---------- ----------- COMMITMENTS AND CONTINGENCIES. . . . . . . . . . . . . . . . . . . . . . . . - - ---------- ----------- $ 722,845 $ 739,889 ========== ===========
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 SEPTEMBER 30, -------------------------------- 1995 1994 ---------- ---------- OPERATING REVENUES Contract drilling services. . . . . . . . . . . . . . . . . . . . . . . $ 48,208 $ 59,029 Labor contract drilling services. . . . . . . . . . . . . . . . . . . . 7,255 9,223 Turnkey drilling services . . . . . . . . . . . . . . . . . . . . . . . 24,092 27,080 Engineering and consulting services . . . . . . . . . . . . . . . . . . 3,918 1,092 Other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,179 1,636 --------- ---------- 84,652 98,060 --------- ---------- OPERATING COSTS AND EXPENSES Contract drilling services. . . . . . . . . . . . . . . . . . . . . . . 33,336 38,434 Labor contract drilling services. . . . . . . . . . . . . . . . . . . . 5,496 7,129 Turnkey drilling services . . . . . . . . . . . . . . . . . . . . . . . 20,413 22,702 Engineering and consulting services . . . . . . . . . . . . . . . . . . 2,228 1,073 Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309 997 Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 9,083 10,152 Selling, general and administrative . . . . . . . . . . . . . . . . . . 10,643 15,407 Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . (96) (50) --------- ---------- 81,412 95,844 --------- ---------- OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,240 2,216 OTHER INCOME (EXPENSE) Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,040) (3,213) Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,336 1,469 Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 831 3,437 --------- ---------- INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 2,367 3,909 INCOME TAX PROVISION . . . . . . . . . . . . . . . . . . . . . . . . . . . . (52) (1,413) --------- ---------- NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,315 2,496 PREFERRED STOCK DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . . . . . (1,509) (3,191) --------- ---------- NET INCOME (LOSS) APPLICABLE TO COMMON SHARES. . . . . . . . . . . . . . . . $ 806 $ (695) ========= ========== NET INCOME (LOSS) APPLICABLE TO COMMON SHARES PER SHARE (See Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.01 $ (0.01) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . . . . . . . . . 95,487 77,894
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)
NINE MONTHS ENDED SEPTEMBER 30, ---------------------------------- 1995 1994 --------- --------- OPERATING REVENUES Contract drilling services. . . . . . . . . . . . . . . . . . . . . . . $ 145,743 $ 188,405 Labor contract drilling services. . . . . . . . . . . . . . . . . . . . 27,176 27,369 Turnkey drilling services . . . . . . . . . . . . . . . . . . . . . . . 58,785 42,309 Engineering and consulting services . . . . . . . . . . . . . . . . . . 8,371 2,448 Other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,658 4,045 --------- --------- 243,733 264,576 --------- --------- OPERATING COSTS AND EXPENSES Contract drilling services. . . . . . . . . . . . . . . . . . . . . . . 98,512 120,387 Labor contract drilling services. . . . . . . . . . . . . . . . . . . . 20,401 21,489 Turnkey drilling services . . . . . . . . . . . . . . . . . . . . . . . 54,819 35,188 Engineering and consulting services . . . . . . . . . . . . . . . . . . 6,547 2,039 Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,715 2,642 Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 26,924 29,460 Selling, general and administrative . . . . . . . . . . . . . . . . . . 31,004 35,295 Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . (139) 189 --------- --------- 240,783 246,689 --------- --------- OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,950 17,887 OTHER INCOME (EXPENSE) Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,122) (9,327) Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,422 4,002 Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,796 15,131 --------- --------- INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 46 27,693 INCOME TAX PROVISION . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,730) (4,678) --------- --------- NET (LOSS) INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,684) 23,015 PREFERRED STOCK DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . . . . . (5,688) (9,574) --------- --------- NET (LOSS) INCOME APPLICABLE TO COMMON SHARES. . . . . . . . . . . . . . . . $ (8,372) $ 13,441 ========= ========= NET (LOSS) INCOME APPLICABLE TO COMMON SHARES PER SHARE (See Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.12) $ 0.17 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . . . . . . . . . 88,024 77,275
See notes to interim financial statements. 4 5 FORM 10-Q NOBLE DRILLING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, --------------------------------- 1995 1994 ---------- ---------- CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,684) $ 23,015 Adjustments to reconcile net (loss) income to net cash . . . . . . . . . . provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 26,924 29,460 Loss (gain) on sale of assets . . . . . . . . . . . . . . . . . . . . . 104 (8,772) Loss on foreign exchange . . . . . . . . . . . . . . . . . . . . . . . 153 528 Deferred income tax (benefit) provision . . . . . . . . . . . . . . . . (1,288) 2,949 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (760) (6,180) Changes in current assets and liabilities: Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . 4,572 22,458 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,423) 12,675 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . (3,260) (9,822) Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 2,721 (12,255) --------- ---------- 19,059 54,056 --------- ---------- CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . (62,226) (36,360) Proceeds from acquisition, net of negative non-cash working capital of $3,532 acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 13,600 Proceeds from sale of property and equipment . . . . . . . . . . . . . . . . 1,179 12,748 Sale of (investment in) marketable securities. . . . . . . . . . . . . . . . 17,825 (3,505) Sale of (investment in) unconsolidated affiliate and equity securities . . . 3,187 (263) Payments to minority interest holders, net . . . . . . . . . . . . . . . . . -- (4,478) --------- ---------- (40,035) (18,258) --------- ---------- CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES Payment of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . (260) (279) Dividends paid on preferred stock. . . . . . . . . . . . . . . . . . . . . . (8,879) (9,574) Issuance of common stock, net of preferred conversion payment. . . . . . . . (1,163) 2,380 Payment of short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . (5,724) (1,566) Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,401) (136) --------- ---------- (18,427) (9,175) --------- ---------- EFFECT OF EXCHANGE RATE CHANGES ON CASH . . . . . . . . . . . . . . . . . . . . 227 (94) --------- ---------- DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . (39,176) 26,529 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD. . . . . . . . . . . . . . . . . 95,163 69,177 --------- ---------- CASH AND CASH EQUIVALENTS, END OF PERIOD. . . . . . . . . . . . . . . . . . . . $ 55,987 $ 95,706 ========= ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,781 $ 5,852 Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,357 $ 3,094 Noncash investing and financing activities: Triton acquisition with common stock. . . . . . . . . . . . . . . . . . . $ 1,500 $ 5,169 Triton acquisition with notes payable . . . . . . . . . . . . . . . . . . $ -- $ 4,000 Triton acquisition, minority interest assumed . . . . . . . . . . . . . . $ -- $ 5,392
See notes to interim financial statements. 5 6 NOBLE DRILLING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) NOTE 1 -- BASIS OF ACCOUNTING The Consolidated Balance Sheet as of September 30, 1995 of Noble Drilling Corporation ("Noble Drilling" or, together with its consolidated subsidiaries, unless the context requires otherwise, the "Company"), the related Consolidated Statements of Operations for the three-month and nine-month periods ended September 30, 1995 and 1994 and Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 1995 and 1994 are unaudited. In the opinion of management, all adjustments, consisting only of 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. On September 15, 1994, the Company completed the merger of Chiles Offshore Corporation ("Chiles") with a wholly owned subsidiary of Noble Drilling (the "Chiles Merger"). The consolidated financial statements reflect the restatement of the Company's historical financial statements to reflect the Chiles Merger as a pooling of interests as of the beginning of the earliest period presented. Certain reclassifications have been made to the 1994 consolidated financial statements to conform to the classifications used in the 1995 consolidated financial statements. NOTE 2 -- CONVERSION OF $2.25 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK In March 1995, an aggregate of 923,862 shares of Noble Drilling's $2.25 Convertible Exchangeable Preferred Stock ("$2.25 Preferred Stock") were converted into 5,006,830 shares of Noble Drilling common stock. The Company paid an aggregate of approximately $1.5 million in cash ("Preferred Conversion Payment") in the first quarter of 1995 in connection with this conversion. In the second quarter of 1995, the Company called for redemption all remaining outstanding shares of the $2.25 Preferred Stock. Of the 2,065,238 shares then outstanding, 2,062,537 were surrendered for conversion and 2,701 were redeemed by the Company, resulting in the Company's issuance of 11,192,359 shares of common stock (including 14,637 shares sold to a standby underwriter). NOTE 3 - CHANGE IN ACCOUNTING ESTIMATES Effective January 1, 1995, the Company revised its estimates of salvage values and remaining depreciable lives of certain rigs to better reflect their economic lives and to be consistent with other similar assets owned by the Company. The effect of this change in estimates was a decrease in the net loss applicable to common shares for the nine-month period ended September 30, 1995 of $3.3 million, or $0.04 per share. If the change in estimates had been made on January 1, 1994, net income applicable to common shares for the nine-month period ended September 30, 1994 would have been increased by approximately $2.5 million, or $0.03 per share. NOTE 4 - NET INCOME (LOSS) APPLICABLE TO COMMON SHARES PER SHARE Net income (loss) applicable to common shares per 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. The calculation of net income (loss) applicable to common shares per share assuming full dilution was antidilutive; therefore, fully diluted amounts are not presented. The Preferred Conversion Payment of approximately $1.5 million in March 1995 was accounted for as a reduction of net earnings applicable to common shares for purposes of calculating the net loss per common share. This accounting treatment increased the net loss applicable to common shares per share from $0.10 to $0.12 for the nine-month period ended September 30, 1995. NOTE 5 - MERGER AND ACQUISITION The Chiles Merger was consummated on September 15, 1994, through the exchange of 28,598,777 shares of Noble Drilling common stock for all the outstanding shares of common stock of Chiles. In addition, 4,025,000 shares of $1.50 Convertible Preferred Stock ("$1.50 Preferred Stock") were issued at the time of the Chiles Merger and exchanged for all of the outstanding shares of the Chiles $1.50 convertible preferred stock. Noble Drilling also issued 480,000 shares of its common stock in exchange for the cancellation of outstanding Chiles stock options. The Chiles Merger was accounted for as a pooling of interests and all financial information for the current and prior periods has been restated to reflect this merger. 6 7 NOBLE DRILLING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 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") pursuant to the terms of the Stock Purchase Agreement dated April 22, 1994 ("Triton Acquisition"). In consideration for the Shares, the Company paid $4,085,000 in cash, issued promissory notes in the aggregate amount of $4,000,000 and issued 751,864 shares of Noble Drilling common stock valued at $5,169,000. The promissory notes were paid on October 21, 1994. In addition, the Company has a contingent obligation on April 22, 1996 to pay additional consideration of up to 254,551 shares of Noble Drilling common stock. As of September 30, 1995, the Company has recorded a liability of $1.5 million related to this obligation. The Triton 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. The following table summarizes certain unaudited pro forma condensed consolidated results of operations information that gives effect to the Triton Acquisition as if this transaction had occurred on January 1, 1994.
NINE MONTHS ENDED SEPTEMBER 30, 1994 ------------------ Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 290,711 Net income applicable to common shares . . . . . . . . . . . . . . . . . $ 13,535 Net income applicable to common shares per share . . . . . . . . . . . . $ 0.17
NOTE 6 - MARKETABLE SECURITIES During 1994, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Under the provisions of SFAS No. 115, investments in debt and equity securities are required to be classified into one of three categories: held to maturity, available for sale or trading securities. At each reporting date, the appropriateness of such classification is required to be reassessed. As of September 30, 1995, the Company classified all of its debt securities, with original maturities of three months or more, as available for sale. These investments are classified as marketable securities within current assets on the accompanying consolidated balance sheets. The following table highlights information applicable to the Company's investments classified as available for sale as of September 30, 1995:
NET AMORTIZED UNREALIZED DEBT SECURITY/MATURITY COST FAIR VALUE (LOSSES) ---------------------- --------- ---------- ------------ Corporate Obligations: Mature within 1 year. . . . . . . . . . . . . $ 1,521 $ 1,520 $ (1) Mature after 1 year through 5 years . . . . . 2,136 2,120 (16) --------- ------------ ---------- 3,657 3,640 (17) --------- ------------ ---------- U.S. Government Obligations: Mature within 1 year . . . . . . . . . . . . 6,505 6,408 (97) Mature after 1 year through 3 years . . . . . 13,562 13,279 (283) --------- ------------ ---------- 20,067 19,687 (380) --------- ------------ ---------- Total . . . . . . . . . . . . . . . . . . . . . $ 23,724 $ 23,327 $ (397) ========= ============ ==========
An allowance for unrealized losses has been included as a reduction of shareholders' equity. Total realized losses related to short-term investments for the nine-month period ended September 30, 1995 amounted to $15,000. The Company categorizes its investments in marketable equity securities of $6.7 million as trading securities and such investments are classified as current assets and are recorded at fair value at September 30, 1995. Total net unrealized and realized gains related to these equity investments for the nine-month period ended September 30, 1995 were $699,000 and $275,000, respectively. Total net unrealized and realized gains related to these equity investments for the three-month period ended September 30, 1995 were $486,000 and $28,000, respectively. 7 8 FORM 10-Q NOTE 7 - SUPPLEMENTAL LOSS PER SHARE DISCLOSURE Assuming that all shares of $2.25 Preferred Stock had been converted on January 1, 1995 (see Notes 2 and 4 above), the supplemental primary net loss applicable to common shares per share for the nine months ended September 30, 1995 would have changed from $0.12 to $0.08. Supplemental fully diluted net loss applicable to common shares per share for the nine months ended September 30, 1995 is the same as supplemental primary net loss applicable to common shares per share since the effect of the conversion is anti-dilutive. NOTE 8 - STOCKHOLDER RIGHTS PLAN The Company adopted a stockholder rights plan on June 28, 1995 designed to assure that the Company's stockholders receive fair and equal treatment in the event of any proposed takeover of the Company and to guard against partial tender offers and other abusive takeover tactics to gain control of the Company without paying all stockholders a fair price. The rights plan was not adopted in response to any specific takeover proposal. Under the rights plan, the Company declared a dividend of one right ("Right") on each share of Noble Drilling common stock. Each Right will entitle the holder to purchase one one-hundredth of a share of a new Series A Junior Participating Preferred Stock, par value $1.00 per share, at an exercise price of $35.00. The Rights are not currently exercisable and will become exercisable only in the event a person or group acquires beneficial ownership of 15 percent or more of Noble Drilling's outstanding common stock or announces a tender offer or exchange offer to acquire such ownership level. The Rights are subject to redemption by the Company for $.01 per Right at any time prior to the tenth day after the first public announcement of the acquisition by any person or group of beneficial ownership of 15 percent or more of Noble Drilling common stock. The dividend distribution was made on July 10, 1995 to stockholders of record at the close of business on that date. The Rights will expire on July 10, 2005. NOTE 9 - SUBSEQUENT EVENT On November 3, 1995, the Company entered into a financing agreement for a period of 18 months related to the renewal of its Marine Package, Protection and Indemnity, and Excess Liability insurances. The insurance premium aggregated $17.4 million at a variable interest rate starting at 6.23%. The financing agreement calls for a cash down payment of $1.6 million and monthly payments of $974,175 beginning December 1, 1995. 8 9 FORM 10-Q ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL THE COMPANY The Company's offshore fleet at September 30, 1995 consisted of 44 rigs, comprising 32 jack-up drilling rigs, eight submersible rigs and four posted barges. As of September 30, 1995, the offshore fleet was diversified geographically as follows: U.S. Gulf - 27 rigs; Mexican Gulf - one rig; West Africa - 10 rigs; Venezuela - four rigs; Qatar - one rig; and India - one rig. Subsequently, the Company commenced preparation of one rig to be mobilized from the U. S. Gulf to Senegal, Africa. The Company's offshore operations also include labor contracts for drilling and workover activities covering 14 rigs operating in the U.K. sector of the North Sea and one rig operating in the Middle East. These rigs are not owned or leased by the Company. Through its wholly owned subsidiary, Triton Engineering Services Company ("Triton"), the Company provides turnkey drilling services and other engineering and consulting services to the oil and gas industry. The Company's land drilling operations are conducted principally in Canada, Texas and Louisiana with an active fleet of 20 land drilling rigs. On November 3, 1995, the Company completed the purchase of two 300-foot independent leg jack-up rigs, the Azteca and the Maya, for a total of approximately $10.1 million in cash. As used herein, unless otherwise required by the context, "Noble Drilling" refers to Noble Drilling Corporation and the "Company" refers to Noble Drilling and its consolidated subsidiaries. INDUSTRY CONDITIONS AND RISKS The Company's operating strategy has been to pursue drilling opportunities in the U.S. and in certain international markets. Worldwide drilling conditions vary substantially from region to region; however, the Company operates in most markets where there is a demand for offshore drilling rigs. During late 1992, U.S. natural gas prices improved, resulting in greater demand and higher dayrates for drilling rigs. Increasing U.S. natural gas prices resulted in significant improvements in the U.S. Gulf of Mexico ("U.S. Gulf") rig demand and dayrates during the second half of 1993. Declining world oil prices during this period reduced rig demand outside the U.S. Gulf. As a result of declining international rig demand and improved market conditions in the U.S. Gulf, certain contractors mobilized rigs from international markets to the U.S. Gulf in late 1993 and early 1994. The increased supply of drilling rigs in the U.S. Gulf more than offset the increased level of U.S. Gulf rig demand during 1994 and the first half of 1995, causing dayrates to deteriorate. Some improvement in dayrates has occurred during the third quarter of 1995. U.S. natural gas prices have declined from a several year high in February 1994 to a low which had not existed since mid-1992, and have remained relatively flat since September 1994. Oil prices have improved slightly during the same period. The average dayrate charged by the Company in the first nine months of 1995 in the U.S. Gulf was 14 percent lower than the average dayrate charged by the Company in the first nine months of 1994. If the price of natural gas remains at current levels indefinitely, the Company's dayrates and utilization rates in the U.S. Gulf could be adversely affected. The Company also believes that, absent further improvement in rig demand outside the U.S. Gulf, the supply of rigs in the U.S. Gulf could continue to cause pressure on dayrates and utilization levels of the Company's rig fleet through 1995 and into 1996. The Company cannot predict either the future level of demand for its drilling services or future conditions in the offshore contract drilling industry. A major portion of the Company's revenues has been attributable to international operations. Revenues from international sources accounted for approximately 48 percent of the Company's operating revenues for both the nine-month period ended September 30, 1995 and the year ended December 31, 1994. Currently, the Company has seven offshore drilling units under contract and two offshore drilling rigs available for bidding in Nigeria. The Company maintains war and political risk insurance (covering physical damage or loss up to the insured value of each rig), subject, in the case of certain coverages, to immediate termination upon the occurrence of certain events or upon termination by the underwriter on seven days' notice. Revenues from drilling activities in Nigeria accounted for approximately 12 percent and 13 percent, respectively, of the Company's operating revenues for the nine-month period ended September 30, 1995 and the year ended December 31, 1994. No assurance can be given that the political and economic climate in Nigeria will remain stable or that it will not worsen. 9 10 FORM 10-Q The Company began to operate in Venezuela in late 1993. The Company's operations commenced with four rigs under long-term contracts with Lagoven, a subsidiary of the government-owned oil company of Venezuela. The contracts with Lagoven relative to these four rigs expired in the first quarter of 1995. The Company has subsequently contracted two of the four rigs with Lagoven under new long-term contracts terminating in the year 2000. A third rig completed refurbishment in the third quarter of 1995 and has commenced work under a long-term contract with Shell de Venezuela S.A. This contract extends through June 1997. The Company's fourth rig in Venezuela is currently operating on a well-to-well basis for Lagoven. The Company is actively pursuing long-term commitments for this rig in Venezuela and elsewhere. In recent periods, the Venezuelan economy has experienced high inflation and a shortage of foreign currency. During a banking crisis in July 1994, the Venezuelan government imposed a program of currency exchange controls and taxes on certain financial transactions that temporarily limited the ability of the government-owned oil companies and their affiliates to make payment in U.S. dollars or other hard currencies to oilfield service contractors. The Company's operations have not been materially affected, and the Company continues to receive timely payment for its services in U.S. dollars. Although timely U.S. dollar payments are currently being made to the Company, future exchange control actions of the Venezuelan government could adversely affect the Company's operations in Venezuela. Revenues from drilling activities in Venezuela accounted for approximately 10 and nine percent, respectively, of the Company's operating revenues for the nine-month period ended September 30, 1995 and the year ended December 31, 1994. At the beginning of 1995, the Company had two rigs under long-term contracts offshore Mexico. During the second quarter of 1995, both contracts expired. The Company currently has one drilling unit working under a term contract in the Bay of Campeche, Mexico. Mobilization of the second rig to offshore Qatar was completed during the third quarter of 1995, and this rig has been awarded a three-year term contract commencing during the fourth quarter of 1995. SELECTED FINANCIAL INFORMATION The following table sets forth selected consolidated financial information of the Company expressed as a percentage of total operating revenues for the periods indicated.
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, -------------------------------- ------------------------------- 1995 1994 1995 1994 ---------- ----------- ----------- ----------- Operating revenues Contract drilling services International offshore . . . . . . . . . . . . 27.8% 24.6% 28.0% 30.2% Domestic offshore . . . . . . . . . . . . . . 24.0 28.5 23.7 33.2 International land . . . . . . . . . . . . . . 1.3 4.9 4.5 5.3 Domestic land . . . . . . . . . . . . . . . . 3.9 2.2 3.6 2.5 Labor contract drilling services. . . . . . . . . 8.6 9.4 11.2 10.4 Turnkey drilling services . . . . . . . . . . . . 28.5 27.6 24.1 16.0 Engineering and consulting services . . . . . . . 4.6 1.1 3.4 0.9 Other revenue . . . . . . . . . . . . . . . . . . 1.3 1.7 1.5 1.5 ------ ------ ------ ------ 100.0 100.0 100.0 100.0 Operating costs (1) . . . . . . . . . . . . . . . . (73.0) (71.7) (75.1) (68.7) Depreciation and amortization . . . . . . . . . . . (10.7) (10.4) (11.1) (11.1) Selling, general and administrative . . . . . . . . (12.6) (15.7) (12.7) (13.3) Minority interest . . . . . . . . . . . . . . . . . 0.1 0.1 0.1 (0.1) ------ ------ ------ ------ Operating income . . . . . . . . . . . . . . . . . 3.8 2.3 1.2 6.8 Interest expense . . . . . . . . . . . . . . . . . (3.6) (3.3) (3.7) (3.5) Interest income . . . . . . . . . . . . . . . . . . 1.6 1.5 1.8 1.5 Other, net . . . . . . . . . . . . . . . . . . . . 1.0 3.5 0.7 5.7 ------ ------ ------ ------ Income before income tax . . . . . . . . . . . . . 2.8 4.0 0.0 10.5 Income tax provision. . . . . . . . . . . . . . . . (0.1) (1.4) (1.1) (1.8) ------ ------ ------ ------ Net income (loss) . . . . . . . . . . . . . . . . . 2.7 2.6 (1.1) 8.7 Preferred Stock dividends . . . . . . . . . . . . . (1.8) (3.3) (2.3) (3.6) ------ ------ ------ ------ Net income (loss) applicable to common shares . . . 0.9% (0.7%) (3.4%) 5.1% ====== ====== ====== ======
(1) Consists of operating costs and expenses other than depreciation and amortization, selling, general and administrative, and minority interest. 10 11 FORM 10-Q RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 OPERATIONAL REVIEW. During the three-month period ended September 30, 1995 (the "Current Quarter"), the Company generated operating revenues of $84.7 million compared to $98.1 million during the three-month period ended September 30, 1994 (the "Comparable Quarter"). The decrease in operating revenues was primarily due to a softer market in the U.S. Gulf, lower international utilization, and the effect of strategic relocation of assets into international markets. The utilization rate for the Company's domestic offshore rig fleet was 84 percent in the Current Quarter compared to 87 percent in the Comparable Quarter. The Company's international offshore rig utilization rate decreased to 71 percent during the Current Quarter from 79 percent in the Comparable Quarter due to the relocation of assets noted above. At September 30, 1995, the Company had 15 rigs under labor contracts on operator-owned rigs in its international operations compared to 16 rigs at the end of the Comparable Quarter. The Company's domestic land rig utilization rate was 78 percent in the Current Quarter as compared to 46 percent in the Comparable Quarter. The utilization rate for the Company's international land rig fleet decreased to 21 percent in the Current Quarter compared to 87 percent in the Comparable Quarter. The decrease in international land utilization was due primarily to fluctuation in natural gas prices and seasonal activity. Gross margins from contract drilling operations were $14.9 million, or 31 percent of contract drilling revenues, in the Current Quarter as compared to $20.6 million, or 35 percent of drilling revenues, in the Comparable Quarter. The decrease in gross margins was principally due to fewer operating days and lower average dayrates from the domestic contract drilling operations. Labor contract gross margins were $1.8 million, or 24 percent of labor contract revenues, in the Current Quarter compared to $2.1 million, or 23 percent of labor contract revenues, in the Comparable Quarter. Turnkey drilling operations gross margins decreased to $3.7 million, or 15 percent of turnkey drilling revenues, in the Current Quarter compared to gross margins of $4.4 million, or 16 percent of turnkey drilling revenues, in the Comparable Quarter. DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization expenses were $9.1 million in the Current Quarter as compared to $10.2 million in the Comparable Quarter, a decrease of 11 percent. In the first quarter of 1995, estimated salvage values and remaining depreciable lives of certain rigs were adjusted to better reflect their remaining economic lives and to be consistent with other similar assets held by the Company. The effect of this change in accounting estimates was an increase to the Current Quarter net income applicable to common shares of approximately $1.1 million, or $0.01 per share. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative ("SG&A") expenses were $10.6 million in the Current Quarter compared to $15.4 million in the Comparable Quarter. The 31 percent decrease in SG&A expenses was principally attributable to reductions in overhead achieved as a result of restructuring and consolidation efforts which commenced in the fourth quarter of 1994. Reported SG&A costs include field office expenses of $6.8 million in the Current Quarter compared to $7.9 in the Comparable Quarter. INTEREST INCOME (EXPENSE). Interest expense, net of interest income, was $1.7 million in the Current Quarter, unchanged from the Comparable Quarter. OTHER, NET. Other, net was $831,000 in the Current Quarter as compared to $3.4 million in the Comparable Quarter. The decrease in other, net was due primarily to $3.1 million of net gains on the Company's marketable securities in the Comparable Quarter. TAX. Income tax provision for the Current Quarter was $52,000 compared to $1.4 million in the Comparable Quarter. The Current Quarter income tax provision includes a tax benefit of $800,000 resulting from the application of carry-back losses from the Current Quarter to pre-1995 taxable income. 11 12 FORM 10-Q RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 OPERATIONAL REVIEW. During the nine-month period ended September 30, 1995 (the "Current Period"), the Company generated operating revenues of $243.7 million compared to $264.6 million during the nine-month period ended September 30, 1994 (the "Comparable Period"). The eight percent decline in operating revenues was primarily due to a decrease in offshore contract drilling services revenues, partially offset by revenues of Triton, which was acquired in April 1994. The utilization rate for the Company's domestic offshore rig fleet was 80 percent in the Current Period, unchanged from the Comparable Period. The Company's international offshore rig utilization rate decreased to 74 percent during the Current Period from 83 percent in the Comparable Period. At September 30, 1995, the Company had 15 rigs under labor contracts on operator-owned rigs in its international operations compared to 16 rigs at the end of the Comparable Period. The Company's domestic land rig utilization rate was 69 percent in the Current Period as compared to 47 percent in the Comparable Period. The utilization rate for the Company's international land rig fleet decreased to 55 percent in the Current Period from 76 percent in the Comparable Period. Gross margins from contract drilling operations were $47.2 million, or 32 percent of contract drilling revenues, in the Current Period as compared to $68.0 million, or 36 percent of drilling revenues, in the Comparable Period. The decrease in gross margins was principally due to fewer operating days and lower average dayrates from the contract drilling operations in the Current Period. Labor contract gross margins were $6.8 million, or 25 percent of labor contract revenues, in the Current Period compared to $5.9 million, or 21 percent of labor contract revenues, in the Comparable Period. Turnkey drilling operations gross margins were $4.0 million, or seven percent of turnkey drilling revenues, in the Current Period compared to a gross margin of $7.1 million, or 17 percent of turnkey drilling revenues, in the Comparable Period. This decrease was primarily due to losses resulting from operational issues. DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization expenses were $26.9 million in the Current Period as compared to $29.5 million in the Comparable Period. The decrease of $2.6 million was due to a change in accounting estimates. In the first quarter of 1995, estimated salvage values and remaining depreciable lives of certain rigs were adjusted to better reflect their remaining economic lives and to be consistent with other similar assets held by the Company. The effect of this change in accounting estimates was a decrease in the Current Period net loss applicable to common shares of approximately $3.3 million, or $0.04 per share. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative ("SG&A") expenses were $31.0 million in the Current Period compared to $35.3 million in the Comparable Period. The decrease was principally due to reductions in overhead achieved as a result of restructuring and consolidation efforts which commenced in the fourth quarter of 1994. Reported SG&A costs include field office expenses of $19.6 million in the Current Period compared to $17.3 million in the Comparable Period. INTEREST INCOME (EXPENSE). Interest expense, net of interest income, was $4.7 million in the Current Period compared to $5.3 million in the Comparable Period. This net decrease of $600,000 was principally due to higher average interest rates earned on the Company's investments in the Current Period. OTHER, NET. Other, net was $1.8 million in the Current Period as compared to $15.1 million in the Comparable Period. The decrease in other, net was primarily due to an $8.0 million gain on the sale of a drilling unit, a net gain of $3.1 million related to the Company's marketable securities and a gain of $1.6 million from the recovery of a previously written-off note receivable in the Comparable Period. TAX. Income tax provision for the Current Period was $2.7 million compared to $4.7 million for the Comparable Period. The Current Period income tax provision includes a tax benefit of $800,000 resulting from application of carry-back losses from the Current Period to pre-1995 taxable income. 12 13 FORM 10-Q LIQUIDITY AND CAPITAL RESOURCES OVERVIEW The Company had working capital of $115.8 million and $157.9 million as of September 30, 1995 and December 31, 1994, respectively. The decrease in working capital was primarily due to increased capital expenditures during the Current Quarter. The ratio of current assets to current liabilities at September 30, 1995 was 2.56:1 as compared to 2.92:1 at December 31, 1994. The ratio of long-term debt to total debt plus shareholders' equity was 0.20:1 at September 30, 1995, compared to 0.19:1 at December 31, 1994. At September 30, 1995, the Company had cash, cash equivalents, restricted cash and investments in marketable debt securities of $80.2 million and had $26.0 million of funds available under various lines of credit. The Company expects to generate positive cash flow from operations for the remainder of 1995 and the first nine months of 1996, 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 1995 and the first nine months of 1996, debt principal and interest payments are estimated to be approximately $14.1 million. Cumulative dividends on the $1.50 Preferred Stock for the remainder of 1995 and the first nine months of 1996 are approximately $6.0 million. The Company expects to fund these obligations, totaling $20.1 million, out of cash and short-term investments as well as cash expected to be provided by operations. Capital expenditures for the remainder of 1995 and the first nine months of 1996 are planned to aggregate approximately $85.0 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 could be deferred if necessary. These capital expenditures will be funded from operating cash flows to the extent available, existing cash balances and/or available lines of credit. CREDIT FACILITIES AND LONG-TERM DEBT At September 30, 1995, the Company had lines of credit totaling $31.0 million and letter of credit facilities totaling $5.0 million, subject to the Company's maintenance of certain levels of collateral. Based on levels of collateral at September 30, 1995, the Company had $26.0 million available under these lines of credit and $2.7 million available to support the issuance of letters of credit. In connection with the initial construction of the NN-1, the predecessor of NN-1 Limited Partnership issued U.S. Government Guaranteed Ship Financing Sinking Fund Bonds, of which $1.8 million was outstanding at September 30, 1995. Interest and principal is payable semi-annually on June 15 and December 15 of each year with interest at 8.95 percent, and the bonds mature in 1998. 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 the provision of 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. In 1993, the Company issued $125,000,000 aggregate 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 sales of assets, sales and leasebacks, transactions with affiliates, and mergers or consolidations. 13 14 FORM 10-Q PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. The information required by this Item 6(a) is set forth in the Index to Exhibits accompanying this quarterly report and is incorporated herein by reference. (b) No reports on Form 8-K were filed by the Company during the quarter ended September 30, 1995. 14 15 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: November 10, 1995 /S/ JAMES C. DAY ------------------------------------------- JAMES C. DAY, Chairman, President and Chief Executive Officer DATE: November 10, 1995 /S/ BYRON L. WELLIVER ------------------------------------------ BYRON L. WELLIVER, Senior Vice President-Finance, Treasurer and Controller (Principal Financial and Accounting Officer) 15 16 FORM 10-Q INDEX TO EXHIBITS EXHIBIT NUMBER EXHIBIT -------- -------------------------------------------------------- 27 Financial Data Schedule. EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1995 SEP-30-1995 56,895 30,038 58,962 0 15,636 190,180 868,525 (343,266) 722,845 74,379 126,286 9,445 0 4,025 506,684 722,845 243,733 243,733 182,994 182,994 57,789 0 (9,122) 46 (2,730) (8,372) 0 0 0 (8,372) (0.12) .00
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