-----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, DwF2E9DkXcpRSZYcI9IwsxuGjinN2nMit/Ks/DfgKRx5YIVDyYvbutOqNtJDIeOy ROdv8E5IaeD8GbQRCvyyWg== 0000008411-99-000018.txt : 19991220 0000008411-99-000018.hdr.sgml : 19991220 ACCESSION NUMBER: 0000008411-99-000018 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991217 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATWOOD OCEANICS INC CENTRAL INDEX KEY: 0000008411 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 741611874 STATE OF INCORPORATION: TX FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-13167 FILM NUMBER: 99776720 BUSINESS ADDRESS: STREET 1: 15835 PARK TEN PL DR STREET 2: SUITE 200 CITY: HOUSTON STATE: TX ZIP: 77084 BUSINESS PHONE: 2817497845 MAIL ADDRESS: STREET 1: 15835 PARK TEN PL DR STREET 2: SUITE 200 CITY: HOUSTON STATE: TX ZIP: 77084 10-K 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D. C. 20549 ---------------- Form 10-K ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR FISCAL YEAR ENDED SEPTEMBER 30, 1999 COMMISSION FILE NUMBER 1-13167 ATWOOD OCEANICS, INC. (Exact name of registrant as specified in its charter) TEXAS (State or other jurisdiction of 74-1611874 incorporation or organization) (I.R.S. Employer Identification No.) 15835 Park Ten Place Drive 77084 Houston, Texas (Zip Code) (Address of principal executive offices) ----------- Registrant's telephone number, including area code: 281-492-2929 Securities registered pursuant to Section 12(b) of the Act: Common Stock, $1 par value (Title of Class) Securities registered pursuant to Section 12(g) of the Act: NONE - --------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 15 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 filings requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation in S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definite proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Fork 10-K { }. The aggregate market value of the voting stock held by non-affiliates of the registrants as of November 30, 1999 is $ 359,000,000. The number of shares outstanding of the issuer's class of Common Stock, as of November 30, 1999: 13,674,851 shares of Common Stock, $1 par value. DOCUMENTS INCORPORATED BY REFERENCE (1) Annual Report to Shareholders for the fiscal year ended September 30, 1999 - Referenced in Parts I, II and IV of this report. (2) Proxy Statement for Annual Meeting of Shareholders to be held February 10, 2000 - Referenced in Part III of this report. ================================================================================ PART I ITEM 1. BUSINESS Atwood Oceanics, Inc. (which together with its subsidiaries is identified as the "Company" or "Registrant", unless the context requires otherwise), a corporation organized in 1968 under the laws of the State of Texas, is engaged in contract drilling of exploratory and development oil and gas wells in offshore areas and related support, management and consulting services. The Company currently owns (i) three "third-generation" semisubmersibles, one "second-generation" semisubmersible, one jack-up, one "second-generation" semisubmersible tender assist rig, one submersible, and one modular, self-contained platform rig, and (ii) a 50 percent interest in a new generation platform rig. The Company also provides labor, supervisory and consulting services to two operator owned platform rigs in Australia. Despite a decline in utilization of the Company's equipment and some dayrate reductions due to a downturn in the drilling market, fiscal 1999 represents the Company's second best financial performance in its over 30-year history. Term contracts in place for some of the Company's rigs enabled the Company to maintain a high level of revenues and cash flows in fiscal 1999. Even though, the price for oil has recovered to over $20 per barrel, worldwide fleet utilization for mobile offshore equipment still remains around 75 percent. There are some encouraging indications that the offshore drilling market environment could improve in 2000; however, there are no guarantees that the Company will not incur some idle time on some of its drilling units in fiscal 2000. Historically, most of the Company's drilling operations have been conducted outside United States waters. Approximately 77, 69 and 88 percent of the Company's contract revenues were derived from foreign operations in fiscal years 1999, 1998 and 1997, respectively. In addition to operating in United States waters, the Company is currently involved in active foreign operations in the territorial waters of Australia, Israel, Malaysia, India, Egypt and the Philippines. The ATWOOD HUNTER, a third-generation semisubmersible, and the submersible RICHMOND are the Company's only drilling vessels located in United States waters. For information relating to the contract revenues, operating income and identifiable assets attributable to specific geographic areas of operations, see Note 13 of Notes to Consolidated Financial Statements contained in the Company's Annual Report to Shareholders for fiscal year 1999, incorporated by reference herein. OFFSHORE DRILLING EQUIPMENT The Company's diversified fleet of owned or operated drilling rigs currently consists of four semisubmersibles, one jack-up, one semisubmersible tender assist vessel, one submersible, and four modular, self-contained platform rigs. Each type of drilling rig is designed for different purposes and applications, for operations in different water depths, bottom conditions, environments and geographical areas, and for different drilling and operating requirements. The following descriptions of the various types of drilling rigs owned or operated by the Company illustrate the diversified range of application of the Company's rig fleet. Each semisubmersible drilling unit has two hulls, the lower of which is capable of being flooded. Drilling equipment is mounted on the main hull. After the drilling unit is towed to location, the lower hull is flooded, lowering the entire drilling unit to its operating draft, and the drilling unit is anchored in place. On completion of operations, the lower hull is deballasted, raising the entire drilling unit to its towing draft. This type of drilling unit is designed to operate in greater water depths than a jack-up and in more severe sea conditions than a drillship. Semisubmersible units are generally more expensive to operate than jack-up rigs and are often limited in the amount of supplies that can be stored on board. The semisubmersible tender assist vessel operates like a semisubmersible except that its drilling equipment is temporarily installed on permanently constructed offshore support platforms. The semisubmersible vessel provides crew accommodations, storage facilities and other support for the drilling operations. A jack-up drilling unit contains all of the drilling equipment on a single hull designed to be towed to the well site. Once on location, legs are lowered to the sea floor and the unit is raised out of the water by jacking up the legs. On completion of the well, the unit is jacked down, and towed to the next location. A jack-up drilling unit can operate in more severe sea and weather conditions than a drillship and is less expensive to operate than a semisubmersible. However, because it must rest on the sea floor, a jack-up cannot operate in as deep water as other units. The submersible drilling unit owned by the Company has two hulls, the lower being a mat which is capable of being flooded. Drilling equipment and crew accommodations are located on the main hull. After the drilling unit is towed to its location, the lower hull is flooded, lowering the entire unit to its operating draft at which it rests on the sea floor. On completion of operations, the lower hull is deballasted, raising the entire unit to its towing draft. This type of drilling unit is designed to operate in shallow water depths ranging from 9 to 70 feet and can operate in moderately severe sea conditions. Although drilling units of this type are less expensive to operate, like the jack-up rig, they cannot operate in as deep water as other units. A modular platform rig is similar to a land rig in its basic components. Modular platform rigs are temporarily installed on permanently constructed offshore support platforms in order to perform the drilling operations. After the drilling phase is completed, the modular rig is broken down into convenient packages and moved by work boats. A platform rig usually stays at a location for several months, if not years, since several wells are typically drilled from a support platform. DRILLING CONTRACTS The contracts under which the Company operates its vessels are obtained either through individual negotiations with the customer or by submitting proposals in competition with other contractors and vary in their terms and conditions. The initial term of contracts for the Company's owned and/or operated vessels has ranged from the length of time necessary to drill one well to several months and is generally subject to early termination in the event of a total loss of the drilling vessel, excessive equipment breakdown or failure to meet minimum performance criteria. It is not unusual for contracts to contain renewal provisions at the option of the customer. The rate of compensation specified in each contract depends on the nature of the operation to be performed, the duration of the work, the amount and type of equipment and services provided, the geographic areas involved, market conditions and other variables. Generally, contracts for drilling, management and support services specify a basic rate of compensation computed on a dayrate basis. Such agreements generally provide for a reduced dayrate payable when operations are interrupted by equipment failure and subsequent repairs, field moves, adverse weather conditions or other factors beyond the control of the Company. Some contracts also provide for revision of the specified dayrates in the event of material changes in certain items of cost. Any period during which a vessel is not earning a full operating dayrate because of the above conditions or because the vessel is idle and not on contract will have an adverse effect on operating profits. An over-supply of drilling rigs in any market area can adversely affect the Company's ability to employ its drilling vessels. Due to decline in drilling market activities, the Company's active rig utilization decreased from virtually 100 percent in 1998 to 77 percent in 1999. Certain periods of idle time were incurred on the ATWOOD SOUTHERN CROSS, RICHMOND, RIG-19 and RIG-200 during fiscal 1999. The Company anticipates incurring additional equipment idle time in fiscal 2000. For long moves of drilling equipment, the Company attempts to obtain either a lump sum or a dayrate as mobilization compensation for expenses incurred during the period in transit. A surplus of certain types of units, either worldwide or in particular operating areas, can result in the Company's acceptance of a contract which provides only partial or no recovery of relocation costs. In recent times, the Company has received full recovery of relocation costs; however, there can be no assurance that this trend will continue. Operation of the Company's drilling equipment is subject to the offshore drilling requirements of petroleum exploration companies and agencies of foreign governments. These requirements are, in turn, subject to fluctuations in government policies, world demand and prices for petroleum products, proved reserves in relation to such demand and the extent to which such demand can be met from onshore sources. The Company also contracts to provide various types of services to third party owners of drilling rigs. These contracts are normally for a stated term or until termination of operations or stages of operation at a particular facility or location. The services may include, as in the case of contracts entered into by the Company in connection with operations offshore Australia, the supply of personnel and rig design, fabrication, installation and operation. The contracts normally provide for reimbursement to the Company for all out-of-pocket expenses, plus a service or management fee for all of the services performed. In most instances, the amount charged for the services may be adjusted if there are changes in conditions, scope or costs of operations. The Company generally obtains insurance or a contractual indemnity from the owner for liabilities which could be incurred in operations. OPERATIONAL RISKS AND INSURANCE The Company's operations are subject to the usual hazards associated with the drilling of oil and gas wells, such as blowouts, explosions and fires. In addition, the Company's vessels are subject to those perils peculiar to marine operations, such as capsizing, grounding, collision and damage from severe weather conditions. Any of these risks could result in damage or destruction of drilling rigs and oil and gas wells, personal injury and property damage, suspension of operations or environmental damage through oil spillage or extensive, uncontrolled fires. Although the Company believes that it is adequately insured against normal and foreseeable risks in its operations in accordance with industry standards, such insurance may not be adequate to protect the Company against liability from all consequences of well disasters, marine perils, extensive fire damage or damage to the environment. To date, the Company has not experienced difficulty in obtaining insurance coverage, although no assurance can be given as to the future availability of such insurance or cost thereof. The occurrence of a significant event against which the Company is not fully insured could have a material adverse effect on the Company's financial position. ENVIRONMENTAL PROTECTION Under the Federal Water Pollution Control Act, as amended by the Oil Pollution Act of 1990, operators of vessels in navigable United States waters and certain offshore areas are liable to the United States government for the costs of removing oil and certain other pollutants for which they may be held responsible, subject to certain limitations, and must establish financial responsibility to cover such liability. The Company has taken all steps necessary to comply with this law, and has received a Certificate of Financial Responsibility (Water Pollution) from the U.S. Coast Guard. The Company's operations in United States waters are also subject to various other environmental regulations regarding pollution and control thereof, and the Company has taken steps to ensure compliance therewith. CUSTOMERS During fiscal year 1999 the Company performed operations for 13 customers. Because of the relatively limited number of customers for which the Company can operate at any given time, sales to each of 3 different customers amounted to 10% or more of the Company's fiscal 1999 revenues. Shell Philippines Exploration B.V/Sabah Shell Petroleum Company Limited, British-Borneo Petroleum Inc., and Esso Australia Limited/Esso Production Malaysia, Inc., accounted for 24%, 21% and 16%, respectively, of fiscal year 1999 revenues. The Company's business operations are subject to the risks associated with a business having a limited number of customers for its products or services, and a decrease in the drilling programs of these customers in the areas where they employ the Company may adversely affect the Company's revenues. COMPETITION The Company competes with numerous other drilling contractors, most of which are substantially larger than the Company and possess appreciably greater financial and other resources. Although recent business combinations among drilling companies have resulted in a decrease in the total number of competitors, the drilling industry remains competitive, with no single drilling contractor being dominant. Thus, there continues to be competition in securing available drilling contracts. Price competition is generally the most important factor in the drilling industry, but the technical capability of specialized drilling equipment and personnel at the time and place required by customers is also important. Other competitive factors include work force experience, rig suitability, efficiency, condition of equipment, reputation and customer relations. The Company believes that it competes favorably with respect to these factors. If demand for drilling rigs increases in the future, rig availability may also become a competitive factor. Competition usually occurs on a regional basis and, although drilling rigs are mobile and can be moved from one region to another in response to increased demand, an oversupply of rigs in any region may result. Demand for drilling equipment is also dependent on the exploration and development programs of oil and gas companies, which are in turn influenced by the financial condition of such companies, by general economic conditions, by prices of oil and gas, and from time to time by political considerations and policies. FOREIGN OPERATIONS The operations of the Company are conducted primarily in foreign waters and are subject to certain political, economic and other uncertainties not encountered by purely domestic drilling contractors, including risks of expropriation, nationalization, foreign exchange restrictions, foreign taxation, changing conditions and foreign and domestic monetary policies. Generally, the Company purchases insurance to protect against some or all loss due to events of political risk such as nationalization, expropriation, war, confiscation and deprivation. Occasionally, customers will indemnify the Company against such losses. Moreover, offshore drilling activity is affected by government regulations and policies limiting the withdrawal of offshore oil and gas, regulations affecting production, regulations restricting the importation of foreign petroleum, environmental regulations and regulations which may limit operations in offshore areas by foreign companies and/or personnel. See Note 13 to Consolidated Financial Statements contained in the Company's Annual Report to Shareholders for fiscal year 1999, incorporated herein by reference, for a summary of contract revenues, operating income and identifiable assets by geographic region. Because of the Company's foreign operations, its overall effective tax rate may in the future be higher than the maximum United States corporate statutory rate due to the possibility of higher foreign tax rates in certain jurisdictions or less than full creditability of foreign taxes paid. EMPLOYEES The Company currently employs approximately 700 persons in its domestic and worldwide operations. In connection with its foreign drilling operations, the Company has often been required by the host country to hire substantial portions of its work force in that country and, in some cases, these employees may be represented by foreign unions. To date, the Company has experienced little difficulty in complying with such requirements, and the Company's drilling operations have not been significantly interrupted by strikes or work stoppages. ITEM 2. PROPERTIES Information regarding the location and general character of the Company's principal assets may be found in the table with the caption heading "Offshore Drilling Operations" in the Company's Annual Report to Shareholders for fiscal year 1999, which is incorporated by reference herein. Since 1997, the Company has successfully upgraded four drilling units; the ATWOOD HUNTER, the ATWOOD SOUTHERN CROSS, the ATWOOD FALCON and the VICKSBURG at approximate costs of $40 million, $35 million, $50 million and $35 million, respectively. During 1999 the Company commenced an approximate $23 million upgrade of the SEAHAWK for a four-year contract extension, of which approximately $20 million will be reimbursed by the customer. For more information concerning these costs, see Note 4 in Consolidated Financial Statements contained in the Company's Annual Report to Shareholders for fiscal year 1999, incorporated by reference herein. ITEM 3. LEGAL PROCEEDINGS The Company is not currently involved in any material legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS During the fourth quarter of fiscal 1999, no matters were submitted to a vote of shareholders through the solicitation of proxies or otherwise. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS As of September 30, 1999, there were over 750 beneficial owners of the Company's common stock. The Company did not pay cash dividends in fiscal years 1998 or 1999 and the Company does not anticipate paying cash dividends in the foreseeable future because of the capital intensive nature of its business. To enable the company to maintain its high competitive profile in the industry, cash reserves will be utilized, at the appropriate time, to upgrade existing equipment or to acquire additional equipment. The Company's revolving credit facility prohibits the Company from paying dividends on common stock. Market information concerning the Company's common stock may be found under the caption heading "Stock Price Information" in the Company's Annual Report to Shareholders for fiscal 1999, which is incorporated by reference herein. ITEM 6. SELECTED FINANCIAL DATA Information required by this item may be found under the caption "Five Year Financial Review" in the Company's Annual Report to Shareholders for fiscal 1999, which is incorporated by reference herein. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information required by this item may be found in the Company's Annual Report to Shareholders for fiscal 1999, which is incorporated by reference herein. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information required by this item may be found under the caption "Disclosures About Market Risk" in the Company's Annual Report to Shareholders for fiscal 1999, which is incorporated by reference herein. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Information required by this item may be found in the Company's Annual Report to Shareholders for fiscal 1999, which is incorporated by reference herein. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no changes in or disagreements with the Company's independent public accountants on accounting and financial disclosure. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY This information is incorporated by reference from the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held February 10, 2000, to be filed with the Securities and Exchange Commission (the Commission) not later than 120 days after the end of the fiscal year covered by this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION This information is incorporated by reference from the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held February 10, 2000, to be filed with the Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT This information is incorporated by reference from the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held February 10, 2000, to be filed with the Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS This information is incorporated by reference from the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held February 10, 2000, to be filed with the Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, AND REPORTS ON FORM 8-K (a) FINANCIAL STATEMENTS AND EXHIBITS 1. FINANCIAL STATEMENTS The following financial statements, together with the report of Arthur Andersen LLP dated November 23, 1999 appearing in the Company's Annual Report to Shareholders, are incorporated by reference herein: Report of Independent Public Accountants Consolidated Balance Sheets dated September 30, 1999 and 1998 Consolidated Statements of Operations for each of the three years in the period ended September 30, 1999 Consolidated Statements of Cash Flows for each of the three years in the period ended September 30, 1999 Consolidated Statements of Changes in Shareholders' Equity for each of the three years in the period ended September 30, 1999 Notes to Consolidated Financial Statements 2. EXHIBITS See the "EXHIBIT INDEX" for a listing of all of the Exhibits filed as part of this report. The management contracts and compensatory plans or arrangements required to be filed as exhibits to this report are as follows: Atwood Oceanics, Inc. 1990 Stock Option Plan - See Exhibit 10.1.1 hereof. Form of Atwood Oceanics, Inc. Stock Option Agreement (1990 Stock Option Plan) - See Exhibit 10.1.2 hereof Amendment No. 1 to the Atwood Oceanics, Inc. 1990 Stock Option Plan - See Exhibit 10.1.3 hereof Form of Amendment No. 1 to the Atwood Oceanics, Inc. Stock Option Agreement (1990 Stock Option Plan) - See Exhibit 10.1.4 hereof Atwood Oceanics, Inc. 1996 Incentive Equity Plan - See Exhibit 10.3.1 hereof. Form of Atwood Oceanics, Inc. Stock Option Agreement (1996 Incentive Equity Plan) - See Exhibit 10.3.2 hereof Amendment No. 1 to Atwood Oceanics, Inc. 1996 Incentive Equity Plan - See Exhibit 10.3.3. hereof Form of Amendment No. 1 to the Atwood Oceanics, Inc. Stock Option Agreement (1996 Incentive Equity Plan) - See Exhibit 10.3.4 hereof (b) REPORTS ON FORM 8-K During the last quarter of fiscal 1999, the Company did not file with the Securities and Exchange Commission any report on Form 8-K. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. ATWOOD OCEANICS, INC. /s/ JOHN R. IRWIN JOHN R. IRWIN, President DATE: 2 December 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated. /s/ JAMES M. HOLLAND /s/ JOHN R. IRWIN JAMES M. HOLLAND JOHN R. IRWIN Senior Vice President President and Director (Principal Financial and (Principal Executive Officer) Accounting Officer) Date: 2 December 1999 Date: 2 December 1999 /s/ ROBERT W. BURGESS /s/ GEORGE S. DOTSON ROBERT W. BURGESS, GEORGE S. DOTSON, Director Director Date: 2 December 1999 Date: 2 December 1999 /s/ HANS HELMERICH /s/ WILLIAM J. MORRISSEY HANS HELMERICH, WILLIAM J. MORRISSEY, Director Director Date: 2 December 1999 Date: 2 December 1999 /s/ W.H. HELMERICH, III W.H. HELMERICH, III Director DATE: 2 December 1999 EXHIBIT INDEX 3.1.1 Restated Articles of Incorporation dated January 1972 (Incorporated herein by reference to Exhibit 3.1.1 of the Company's Form 10-K for the year ended September 30, 1993). 3.1.2 Articles of Amendment dated March 1975 (Incorporated herein by reference to Exhibit 3.1.2 of the Company's Form 10-K for the year ended September 30, 1993). 3.1.3 Articles of Amendment dated March 1992 (Incorporated herein by reference to Exhibit 3.1.3 of the Company's Form 10-K for the year ended September 30, 1993). 3.1.4 Articles of Amendment dated November 6, 1997 (Incorporated by reference to Exhibit 3.1.4 of the Company's Form 10-K for the year ended September 30, 1997). 3.2 Bylaws, as amended (Incorporated herein by reference to Exhibit 3.2 of the Company's Form 10-K for the year ended September 30, 1993). 10.1.1 Atwood Oceanics, Inc. 1990 Stock Option Plan (Incorporated herein by reference to Exhibit 10.2 of the Company's Form 10-K for the year ended September 30, 1993). *10.1.2 Form of Atwood Oceanics, Inc. Stock Option Agreement (1990 Stock Option Plan) *10.1.3 Amendment No.1 to the Atwood Oceanics, Inc. 1990 Stock Option Plan *10.1.4 Form of Amendment No. 1 to the Atwood Oceanics, Inc. Stock Option Agreement (1990 Stock Option Plan) 10.2 Joint Venture Letter Agreement dated November 4, 1994 between the Company and Helmerich & Payne, Inc. (Incorporated herein by reference to Exhibit 10.3 of the Company's Form 10-K for the year ended September 30, 1994). 10.3.1 Atwood Oceanics, Inc. 1996 Incentive Equity Plan (Incorporated herein by reference to Exhibit 10.2 of the Company's Form 10-Q for the quarter ended June 30, 1997). *10.3.2 Form of Atwood Oceanics, Inc. Stock Option Agreement (1996 Incentive Equity Plan) *10.3.3 Amendment No. 1 to the Atwood Oceanics, Inc. 1996 Incentive Equity Plan *10.3.4 Form of Amendment No. 1 to the Atwood Oceanics, Inc. Stock Option Agreement (1996 Incentive Equity Plan) 10.4 Drilling Contract dated January 29, 1997 between the Company and Occidental Phillipines, Inc. (Incorporated herein by reference to the Company's Form 8-K dated July 10, 1997). 10.5 Credit Agreement dated July 17, 1997 between the Company and Bank One, Texas, N.A., Christiania Bank OG Kreditkasse Asa, New York Branch and Other Financial Institutions (Incorporated herein by reference to the Company's Form 8-K dated July 21, 1997.) 10.6 Drilling Contract dated June 20, 1996 between the Company and British-Borneo Petroleum, Inc. for use the ATWOOD HUNTER (Incorporated herein by reference to the Company's Form 8-K dated June 24, 1996). *13.1 Annual Report to Shareholders *21.1 List of Subsidiaries *23.1 Consent of Independent Public Accountants *27.1 Financial Data Schedule * Filed hereinwith EX-10.1.2 2 Exhibit 10.1.2 ATWOOD OCEANICS, INC. STOCK OPTION AGREEMENT 1990 STOCK OPTION PLAN This is an Agreement dated the _____ day of ____________ between ATWOOD OCEANICS, INC., (the "Company") and ____________________________ ("Option Holder"). Recitals: The Company has adopted its 1990 Stock Option Plan ("Plan") for the granting to the Company's or its subsidiaries' key employees of options to purchase shares of the Common Stock of the Company. Pursuant to said Plan, the Stock Option Committee of the Company's Board of Directors has approved and ratified the execution of this Stock Option Agreement between the Company and the Option Holder. Agreement: 1. Subject to the effectiveness of the Plan, as provided in Section 1.9 thereof, the Company grants to the Option Holder the right and option to purchase, on the terms and conditions hereinafter set forth, all or part of an aggregate of __________ shares of the Common Stock, $1.00 par value, of the Company at the option price of $9.75 per share, exercisable from time to time, subject to the provisions of this Agreement, during a period commencing at the end of the second year following the date of this Agreement Page 2 (the "Anniversary Date") and expiring at the close of business ten (10) years from the date of this Agreement (the "Expiration Date" herein). 2. This option shall automatically terminate: (i) at the expiration of one year from the date of death of the Option Holder; (ii) at the expiration of three months after the termination of the Options Holder's employment with the Company for any reason other than death. It is understood and agreed that neither the grant of this option nor the execution of this Agreement shall create any right of the Option Holder to remain in the employ of the Company, and that the Company retains the right to terminate such employment at will, for due cause or otherwise. 3. This option is non-exercisable during the first two (2) years during which the Agreement is in effect. Thereafter, this option is exercisable at the times and for the percentage of shares herein granted as follows: (i) Between the Second and Third Anniversary Dates: - 25% (ii) Between the Third and Fourth Anniversary Dates: - 25% (iii) Between the Fourth and Fifth Anniversary Dates: - 25% (iv) On of After the Fifth Anniversary Date - 25% Provided, however, that this option is cumulative, so that any shares not purchased within any one of the periods above specified may be purchased thereafter in a Page 3 subsequent period, in whole or in part, until the expiration or termination of this option on____________. To the extent otherwise exercisable this option may be exercised during the lifetime of the Option Holder only by him, or in the event of the death of the Option Holder, by his legal representative within twelve (12) months after the death. 4. Each exercise of this option shall be by means of a written notice of exercise delivered to the Secretary of the Company at its office in Houston, Texas, specifying the number of shares to be purchased and accompanied by payment in cash or by certified or cashier's check payable to the order of the Company of the full purchase price of the shares to be purchased. Payments for shares of stock may also be made in common stock of the Company or a combination of cash and common stock of the Company. In the event that common stock is utilized for payment, the stock shall be valued at the "fair market value" as defined in Section 1.6 of the Plan. 5. The option granted hereby and all rights hereunder, to the extent such rights shall not have been exercised, shall terminate and become null and void if the Option Holder ceases for any reason whatsoever to be an employee of the Company or of a subsidiary corporation (as defined in Section 425 of the Internal Revenue Code, as the same may be amended) excepting only that the Option Holder may at any time within a period of three (3) months after the date he so ceases to be an employee of any such corporation, and not thereafter, exercise the option granted hereby to the extent such option was exercisable by him on the date of such cessation of such employment. Provided however, that in no event may the option granted hereby by exercised to any Page 4 extent after the expiration date specified in Paragraph 1 above. The employment of the Option Holder shall be deemed to continue during any leave of absence which has been authorized by the Company, provided that no exercise of this option may take place during any such authorized leave of absence excepting only during the first three months thereof. 6. No shares issuable upon the exercise of this option shall be issued and delivered unless and until all applicable requirements of law and of the Securities and Exchange Commission pertaining to the issuance and sale of such shares, and all applicable listing requirements of any national securities exchange on which shares of the same class are then listed, shall have been complied with. 7. Except as otherwise provided herein, this option and the rights and privileges granted hereby shall not be transferred (other than by will or the laws of descent and distribution), assigned, pledged or hypothecated in any way, whether by operation of law or otherwise. Upon any attempt so to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right or privilege granted hereby contrary to the provisions hereof, this option and said rights and privileges shall immediately become null and void. 8. If the outstanding shares of the Common Stock of the Company are increased, decreased, changed into, or exchanged for a different number or kind of shares or securities of the Company through reorganization, recapitalization, reclassification, stock dividend, stock split or reverse stock split, an appropriate and proportionate adjustment (to be conclusively determined by the Board of Directors of the Company) Page 5 shall be made in the number and kind of securities allocated to this option, without change in the total price applicable to the unexercised portion of this option but with a corresponding adjustment in the price for each unit of any security covered by this option. No such adjustment shall be made, however, with respect to additional stock authorized or issued with receipt of consideration therefor, or pursuant to any type of convertible debenture or capital note. 9. Subject to the provisions of Section 1.20 of the Plan, if dissolution or liquidation of the Company or any merger, consolidation or combination in which the Company is not the surviving corporation occurs, the Participant shall have the right immediately prior to such dissolution, liquidation, merger, consolidation or combination to exercise, in whole or in part his remaining Options whether or not then exercisable. Also, in the event that a Change of Control, as defined in the Plan, occurs with the Company, any and all Options will become automatically fully vested and immediately exercisable. 10. Nothing herein contained shall affect the right of the Option Holder to participate in and receive benefits under and in accordance with the then current provisions of any pension, insurance, profit sharing or other employee welfare plan or program of the Company or of any subsidiary of the Company. 11. Neither the Option Holder nor any other person legally entitled to exercise this option shall be entitled to any of the rights or privileges of a stockholder of the Company in respect of any shares issuable upon any exercise of this option unless and Page 6 until a certificate or certificates representing such shares shall have been actually issued and delivered to him. 12. The option hereby granted is subject to, and the Company and Option Holder agree to be bound by, all of the terms and conditions of the Company's 1990 Stock Option Plan as the same shall be amended from time to time in accordance with the terms thereof, but no such amendment shall adversely affect the Option Holder's rights under this Option. A copy of the Plan in its present form is available for inspection during business hours by the Option Holder or others persons entitled to exercise this option at the Company's principal office. 13. This option has been granted, executed and delivered the day and year first above written at Houston, Texas, and the interpretation, performance and enforcement on this Agreement shall be governed by the laws of the State of Texas. ATWOOD OCEANICS, INC. By _________________________ ---------------------------- Option Holder EX-10.1.3 3 Exhibit 10.1.3 AMENDMENT NO. 1 TO THE ATWOOD OCEANICS, INC. 1990 STOCK OPTION PLAN Pursuant to the terms and provisions of Section 1.8 of the Atwood Oceanics, Inc. 1990 Stock Option Plan (the "Plan"), Atwood Oceanics, Inc., a Texas corporation (the "Company"), hereby adopts the following Amendment No. 1 to the Plan (the "Amendment No. 1"): 1. The fourth sentence of Section 1.12 of the Plan is hereby amended in its entirety by substituting the following therefor: "In addition to the foregoing procedure which may be available for the exercise of any Stock Option or ISO Option, the option holder may deliver to the Company a notice of exercise including an irrevocable instruction to the Company to deliver the stock certificate representing the shares subject to an Option to a broker authorized to trade in the common stock of the Company." 2. The eighth and ninth sentences of Section 1.12 of the Plan are hereby amended in their entirety by substituting the following therefor: "Further, the broker may also facilitate a loan to the option holder upon receipt of the exercise notice in advance receipt for issuance of the actual stock certificate as an alternative means of financing and facilitating the exercise of an Option. For all purposes of effecting the exercise of an Option, the date on which the option holder gives the notice of exercise to the Company will be the date he becomes bound contractually to take and pay for the shares of Stock underlying the Option." 3. Section 1.16 of the Plan is hereby amended in its entirety by substituting the following therefor: "1.16 Non-Transferability of Options. Except as otherwise provided in Section 2.1(b) with respect to Stock Options, any Option granted shall not be transferable otherwise than by will or the laws of descent and distribution, and the Option may be exercised, during the lifetime of the Participant, only by him. More particularly, (but without limiting the generality of the foregoing), except as provided in Section 2.1(b) with respect to Stock Options and in the preceding sentence, the Option may not be assigned, transferred, pledged, or hypothecated in any way, shall not be assignable by operation of law and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to the provisions hereof shall be null and void and without effect. 4. Section 1.17 of the Plan is hereby amended in its entirety by substituting the following therefor: "1.17 Additional Documents on Death of Participant or on Transfer. No transfer of an Option by will or the laws of descent and distribution or otherwise pursuant to Section 2.1(b) shall be effective to bind the Company unless the Company shall have been furnished with written notice and such other evidence as the Committee may deem necessary to establish the validity of the transfer and the acceptance of the successor to the Option of the terms and conditions of such Option." 5. Section 1.19 of the Plan is hereby amended in its entirety by substituting the following therefor: "1.19 Shareholder Rights. No option holder shall have a right as a shareholder with respect to any shares of Stock subject to an Option prior to the purchase of such shares of Stock by exercise of the Option." 6. The first sentence of Section 1.20 of the Plan is hereby amended in its entirety by substituting the following therefor: "If dissolution or liquidation of the Company or any merger, consolidation or combination in which the Company is not the surviving corporation occurs, the option holder shall have the right immediately prior to such dissolution, liquidation, merger, consolidation or combination, as the case may be, in whole or in part, his then remaining Options whether or not then exercisable." 7. Section 1.21 of the Plan is hereby amended in its entirety by substituting the following therefore: "1.21 Payment of Withholding Taxes. Upon the exercise of any Stock Option as provided herein, no such exercise shall be permitted, nor shall any stock be issued, until the Company receives full payment for the Stock purchased, which shall include any required federal withholding taxes. Further, upon the exercise of any Stock Option, the number of shares of Stock (based on fair market value) that would be necessary to satisfy the requirements for withholding any amounts of taxes due upon exercise may be retained from the total shares of Stock to be issued upon exercise. 8. Section 2.1 of the Plan is hereby amended in its entirety by substituting the following therefor: "Section 2.1 Terms of Stock Options. Stock Options shall be granted by the Committee on the following terms and conditions: (a) General. Except as specifically provided in Section 2.3 hereof, with regard to the death of a Participant, no Stock Option shall be exercisable within six (6) months from nor more then ten (10) years after the date of the grant. Subject to such limitation, the Committee shall have the discretion to fix the period (the "Option Period") during which any Stock Option may be exercised. Stock Options granted to a Participant shall be exercisable only during the Participant's active employment with the Company, its parent or a subsidiary, except that (i) any such Stock Option which is otherwise exercisable as of the date of death of Participant may be exercised within twelve (12) months after the death of such Participant, and (ii) any Stock Option granted to a Participant which is otherwise exercisable as of the date of termination of such Participant's employment with the Company, its parent or a subsidiary, may be exercised at any time within three (3) months of such date of termination. If a Participant should die during the applicable three-month period following the date of such Participant's termination, the period of exercisability of any Stock Options granted to such deceased Participant shall be governed in accordance with clause (i) of the immediately preceding sentence. (b) Limited Transferability of Stock Options. The Committee may, in its discretion, authorize all or a portion of any Stock Options to be granted on terms which permit transfer by the Participant to (i) the spouse, children or grandchildren of the Participant, (ii) a trust or trusts for the exclusive benefit of the spouse, children or grandchildren of the Participant, or (iii) a partnership in which the spouse, children or grandchildren of the Participant are the only partners; provided in each case that (x) the stock option agreement pursuant to which such Stock Options are granted must be approved by the Committee, and must expressly provide for transferability in a manner consistent with this section, and (y) subsequent transfers of transferred options shall be prohibited except those made in accordance with this section or by will or by the laws of descent and distribution. Following transfer, any such Stock Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. The provisions with respect to termination of employment set forth above in subsection (a) of this Section 2.1 and in Section 2.3 below shall continue to apply with respect to the original Participant, in which event the Stock Options shall be exercisable by the transferee only to the extent and for the periods specified herein. The original participant will remain subject to withholding taxes upon exercise of any such Stock Option by the transferee. The Company shall have no obligation whatsoever to provide notice to any transferee of any matter, including without limitation, early termination of a Stock Option on account of termination of employment or the original Participant." 9. Section 2.3 of the Plan is hereby amended in its entirety by substituting the following therefor: "2.3 Acceleration of Otherwise Unexercisable Stock Options on Termination of Employment or Death. If a Participant should die or should terminate employment with the Company, its parent or a subsidiary, the Committee, in its sole discretion, may permit all or any part of the shares subject to a Stock Option previously granted to such Participant to be exercised within three (3) months of the date of termination of employment of the Participant, or twelve (12) months of the date of death of the Participant, as applicable, notwithstanding that all installments, if any, with respect to such Stock Option, had not accrued on such date. Provided, such discretionary authority of the Committee may not be exercised with respect to any Stock Option (or portion thereof) if the applicable six-month waiting period for exercise had not expired, except in the event of the death of the Participant, when such Stock Option may, with the consent of the Committee, be exercised notwithstanding the fact that the applicable six-month waiting period had not yet expired." 10. Section 2.5 of the Plan is hereby amended in its entirety by substituting the following therefor: "2.5 Notice to Exercise Stock Options. Upon exercise of a Stock Option, an option holder shall give written notice to the Secretary of the Company, or other officer designated by the Committee, at the Company's main office in Houston, Texas." 11. Each amendment made by this Amendment No. 1 to the Plan has been effected in conformity with the provisions of the Plan. 12. This Amendment No. 1 was adopted by the Board of Directors of the Company on September 2, 1999. Approval of this Amendment No. 1 by the shareholders of the Company is not required pursuant to the terms and provisions of the Plan or by applicable law. Dated: September 2,1999. ATWOOD OCEANICS, INC. /s/ James M. Holland James M. Holland Senior Vice President EX-10.1.4 4 Exhibit 10.1.4 AMENDMENT NO. 1 TO THE ATWOOD OCEANICS, INC. STOCK OPTION AGREEMENT (1990 Stock Option Plan) THIS AMENDMENT NO. 1 TO ATWOOD OCEANICS, INC. STOCK OPTION AGREEMENT (the "Amendment") is dated as of ______________________, 1999, by and between ATWOOD OCEANICS, INC., a Texas corporation (the "Company"), and ________________________________________ ("Participant"). W I T N E S E T H: WHEREAS, the Company has adopted the 1990 Stock Option Plan (the "Plan") for the granting of options to purchase shares of the Common Stock of the Company to key employees of the Company or its subsidiaries, subject to the terms and conditions as more particularly set forth therein; and WHEREAS, capitalized terms used but not defined herein shall have the meanings given to them in the Plan; and WHEREAS, pursuant to Section 1.8 of the Plan, the Board of Directors of the Company has amended the Plan to allow the Compensation Committee of the Board of Directors the (the "Committee") to authorized the transferability, under certain conditions, of the Stock Options granted under the Plan, pursuant to that certain Amendment No. 1 to the Atwood Oceanics, Inc. 1990 Stock Option Plan dated _________________________, 1999 (the "Plan Amendment"); and Page 2 WHEREAS, in furtherance of the Plan Amendment, the Committee has authorized the transferability of the Stock Options granted under the Plan to the Participant, under the conditions set forth in the Plan Amendment; and WHEREAS, in accordance with such authorization, the Company and the Participant desire to amend that certain Atwood Oceanics, Inc. Stock Option Agreement dated _____________________ between the Company and Participant (the "Agreement"), and the Committee has approved this Amendment, in order to reflect the authorized transferability of the Stock Options granted under the Plan to the Participant and the conditions therefor, as more particularly set forth herein. NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained and for other and valuable consideration, the receipt and sufficiency of which are hereby acknowledge, the parties hereto agree as follows: Section 1. The first sentence of Section 2 of the Agreement shall be deleted in its entirety. Section 2. The last paragraph of Section 3 of the Agreement shall be deleted in its entirety. Section 3. Section 5 of the Agreement is hereby amended in its entirety by substituting the following therefor: "5. This Option granted hereby and all rights hereunder, to the extent such rights shall not have been exercised, shall terminate and become null and void on, and this option shall be exercisable (only to the extent such option was exercisable upon the date of death of the Participant or the date of termination of the Participant's employment with the Company, as applicable) only until (i) the expiration of one year from the date of death of the Participant or the expiration of the stated term of such option, whichever occurs first; or (ii) the expiration of three months after the termination of the Participant's employment with the Company for any Page 3 reason other than death or the expiration of the sated term of such option, which ever occurs first; provided, however, that if the Participant dies within the three month period the three month period (or such shorter period ending upon expiration of the sated term of the option) following termination of the Participant's employment with the Company, termination of the option shall occur pursuant to clause (i) above. In no event may the option granted hereby be exercised to any extent after the Expiration Date specified in Section 1 above. The employment of the Participant shall be deemed to continue during any leave of absence which has been authorized by the Company, provided that no exercise of this option may take place during any such authorized leave of absence excepting only during the first three months thereof." Section 4. Section 7 of the Agreement is hereby amended in its entirety by substituting the following therefor: "7. The option and the right and privilege granted hereby may be transferred by the Participant to (i) the spouse, children or grandchildren of the Participant, (ii) a trust or trusts for the exclusive benefit of the spouse, children or grandchildren of the Participant or (iii) a partnership in which the spouse, children or grandchildren of the Participant are the only partners; provided in each case that subsequent transfers of transferred options shall be prohibited except those made in accordance with this section or by will or by the laws of descent and distribution. Following transfer, any such options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. The provisions with respect to termination of employment set forth in Section 5 of this Agreement shall continue to apply with respect to the Participant, in which event the options shall be exercisable Page 4 by the transferee only to the extent and for the periods specified herein. The Participant will remain subject to withholding taxes upon exercise of any such options by transferee. The Company shall have no obligation whatsoever to provide notice to any transferee of any matter, including without limitation, early termination of an option on account of termination of employment of the Participant. Except as set forth above, no option shall be transferable otherwise than by will or by the laws descent and distribution, and all options shall be exercisable, during the Participant's lifetime only by the Participant. Section 5. Section 9 shall be amended in its entirety by substituting the following therefor: "9. Subject to the provisions of Section 1.20 of the Plan, if dissolution or liquidation or combination in which the Company is not the surviving corporation occurs, the option holder shall have the right immediately prior to such dissolution, liquidation, merger consolidation or combination to exercise, in whole or in part, his remaining options whether or not then exercisable. Also, in the event that a Change of Control, as defined in the Plan, occurs with the Company, any and all options will become automatically fully vested and immediately exercisable." Section 6. Due to the fact that the options granted under the Plan are now transferable, all references in the Agreement to "Option Holder" shall be changed to refer to the "Participant." Section 7. Except as expressly amended hereby all of the covenants and agreements of the parties which are set forth in the Agreement are incorporated herein with the same force and effect as if set forth at length in this Amendment. Page 5 Section 8. This Amendment is executed and shall constitute an instrument supplemental to and in amendment of the Agreement, and shall be construed with and as part of the Agreement. Section 9. Except as modified and expressly amended by this Amendment and any other supplement or amendment, the Agreement is in all respects ratified and confirmed, and all of the terms, provisions and conditions thereof shall be and remain in full force and effect. Section 10. Any capitalized term used but not defined herein shall have the meaning attributable to such term in the Agreement. Section 11. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original for all purposes, and all of which together shall constitute one and the same instrument. EXECUTED as of the date first set forth above. ATWOOD OCEANICS, INC. By:___________________________________ James M. Holland Senior Vice President PARTICIPANT: ------------------------------------- Signature ------------------------------------- Print Name EX-10.3.2 5 6 Exhibit 10.3.2. ATWOOD OCEANICS, INC. STOCK OPTION AGREEMENT 1996 INCENTIVE EQUITY PLAN This is an Agreement dated the _____ day of ______________, between ATWOOD OCEANICS, INC., (the "Company") and _________________________________("Employee"). Recitals: The Company has adopted its 1996 Incentive Equity Plan ("Plan") for the granting to key employees of the Company or its subsidiaries of options to purchase shares of the Common Stock of the Company. Pursuant to said Plan, the Compensation Committee of the Company's Board of Directors has approved and ratified the execution of this Stock Option Agreement between the Company and the Employee. Agreement: 1. The Company grants to the Employee the right and option to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of __________ shares of the Common Stock, $1.00 par value, of the Company at the option price of $___________ per share, exercisable from time to time, subject to the provisions of this Agreement, during a period commencing at the end of the second year following the date of this Agreement (the "Anniversary Date") and expiring at the close of business ten (10) years (5 March 2008) from the date of this Agreement (the "Expiration Date" herein). 2. This option granted hereby and all rights hereunder, to the extent such rights shall not have been exercised, shall terminate and become null and void: (i) at the expiration of one year from the date of death of the Employee or until the expiration of the stated term of such Stock Option, which ever period is shorter; (ii) at the expiration of one year from termination of employment of the Employee by reason of Disability or Retirement or until the expiration of the stated term of such Stock Option, which ever period is shorter; provided, however, that if the Employee dies within said period, termination of the option shall be determined pursuant to clause (i) above; (iii) at the expiration of three months after the termination of the Employee's employment with the Company for any reason other than Death, Disability or Retirement or until the expiration of the stated term of such Stock Option, which ever period is shorter. It is understood and agreed that neither the grant of this Option nor the execution of this Agreement shall create any right of the Employee to remain in the employ of the Company, and that the Company retains the right to terminate such employment at will, for due cause or otherwise. 3. This option is non-exercisable during the first two (2) years during which the Agreement is in effect. Thereafter, this option is exercisable at the times and for the percentage of shares herein granted as follows: (i) On or After the Second Anniversary Date: - 25% (ii) On or After the Third Anniversary Date: - 25% (iii) On or After the Fourth Anniversary Date: - 25% (iv) On or After the Fifth Anniversary Date: - 25% Provided, however, that this option is cumulative, so that any shares not purchased within any one of the periods above specified may be purchased thereafter in a subsequent period, in whole or in part, until the expiration or termination of this option on _______________________. 4. Each exercise of this option shall be by means of a written notice of exercise delivered to the Secretary of the Company at its office in Houston, Texas, specifying the number of shares to be purchased and accompanied by payment by certified or bank check payable to the order of the Company of the full purchase price of the shares to be purchased. Payment may also be made by delivery to the Company of an executed irrevocable option exercise form together with irrevocable instructions to a broker dealer to sell a sufficient portion of the shares and deliver the sale proceeds to the Company in satisfaction of the exercise price. Payments for shares of stock may also be made in common stock of the Company or a combination of cash and common stock of the Company, as specified in Section 6(d) of the Plan. 5. In no event may the option granted hereby be exercised to any extent after the Expiration Date specified in Paragraph 1 above. The employment of the Employee shall be deemed to continue during any leave of absence, which has been authorized by the Company, provided that no exercise of this option may take place during any such authorized leave of absence except during the first three months thereof. 6. No shares issuable upon the exercise of this option shall be issued and delivered unless and until all applicable requirements of law and of the Securities and Exchange Commission pertaining to the issuance and sale of such shares, and all applicable listing requirements of any national securities exchange on which shares of the same class are then listed, shall have been complied with. 7. The option and the right and privilege granted hereby may be transferred by the Employee to, (i) the spouse, children or grandchildren of the Employee, (ii) a trust or trusts for the exclusive benefit of the spouse, children or grandchildren of the Employee, or (iii) a partnership in which spouse, children or grandchildren of the Employee are the only partners; provided in each case that there may be no consideration for any such transfer and subsequent transfers of transferred options shall be prohibited except those made in accordance with this section or by will or by the laws of descent and distribution. Following transfer, any such Stock Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. The provisions with respect to termination of employment set forth in Section 2 of this Agreement shall continue to apply with respect to the original Employee, in which event the Stock Option shall be exercisable by the transferee only to the extent and for the periods specified herein. The original Employee will remain subject to withholding taxes upon exercise of any such Stock Option by the transferee. The Company shall have no obligation whatsoever to provide notice to any transferee of any matter, including without limitation, early termination of a Stock Option on account of termination of employment of the original Employee. Except as set forth above, no Stock Option shall be transferable by the Employee otherwise than by will or by laws of descent and distribution, and all Stock Options shall be exercisable, during the Employee's lifetime only by the Employee. At the request of an Employee, Stock purchased upon exercise of an Option may be issued or transferred into the name of the Employee and another person jointly with rights of survivorship. 8. If the outstanding shares of the Common Stock of the Company are increased, decreased, changed into, or exchanged for a different number or kind of shares or securities of the Company through reorganization, recapitalization, reclassification, stock dividend, stock split or reverse stock split, an appropriate and proportionate adjustment (to be conclusively determined by the Board of Directors of the Company) shall be made in the number and kind of securities allocated to this option, without change in the total price applicable to the unexercised portion of this option but with a corresponding adjustment in the price for each unit of any security covered by this option. No such adjustment shall be made, however, with respect to additional stock authorized or issued with receipt of consideration therefor, or pursuant to any type of convertible debenture or capital note. 9. Subject to the provisions of Section 8 of the Plan, in the event of a Change of Control, as defined in the Plan, all Options granted hereby will become automatically fully vested and immediately exercisable. 10. Nothing herein contained shall affect the right of the Employee to participate in and receive benefits under and in accordance with the then current provisions of any pension, insurance, profit sharing or other employee welfare plan or program of the Company or of any subsidiary of the Company. 11. Neither the Employee nor any other person legally entitled to exercise this option shall be entitled to any of the rights or privileges of a stockholder of the Company in respect of any shares issuable upon any exercise of this option unless and until a certificate or certificates representing such shares shall have been actually issued and delivered to him. 12. The option hereby granted is subject to, and the Company and Employee agree to be bound by, all of the terms and conditions of the Company's 1996 Incentive Equity Plan as the same shall be amended from time to time in accordance with the terms thereof, but no such amendment shall adversely affect the Employee's rights under this Option. A copy of the Plan in its present form is available for inspection during business hours by the Employee or other persons entitled to exercise this option at the Company's principal office. 13. Upon an exercise of the options hereby granted, the Company may be required to withhold federal or local tax with respect to the realization of compensation. The Company is hereby authorized to satisfy any such withholding requirement out of (i) any cash distributable upon exercise and (ii) any other cash compensation then or thereafter payable to the Employee. To the extent that the Company in its sole discretion determines that such sources are or may be insufficient to fully satisfy such withholding requirement, Employee, as a condition to the exercise of the options hereby granted, shall deliver to the Company cash in an amount determined by the Company to be sufficient to satisfy any such withholding requirement. 14. This Option has been granted, executed and delivered the day and year first above written at Houston, Texas, and the interpretation, performance and enforcement on this Agreement shall be governed by the laws of the State of Texas. ATWOOD OCEANICS, INC. By Employee EX-10.3.3 6 C Exhibit 10.3.3 AMENDMENT NO. 1 TO THE ATWOOD OCEANICS, INC. 1996 INCENTIVE EQUITY PLAN Pursuant to the terms and provisions of Section 9 of the Atwood Oceanics, Inc. 1996 Incentive Equity Plan (the "Plan"), Atwood Oceanics, Inc., a Texas corporation (the "Company"), hereby adopts the following Amendment No. 1 to the Plan (the "Amendment No. 1"). 1. Subsections (e), (f), (g) and (h) of Section 6 of the Plan are hereby amended in their entirety by substituting the following therefor: "(e) Transferability of Options. The Committee may, in its discretion, authorize all or a portion of any Non-Qualified Stock Options to be granted on terms which permit transfer by the participant to (i) the spouse, children or grandchildren of the participant, (ii) a trust or trusts for the exclusive benefit of the spouse, children or grandchildren of the participant, or (iii) a partnership in which the spouse, children or grandchildren of the participant are the only partners; provided in each case that (x) the stock option agreement pursuant to which such Stock Options are granted must be approved by the Committee, and must expressly provide for transferability in a manner consistent with this section, and (y) subsequent transfers of transferred options shall be prohibited except those made in accordance with this section or by will or by the laws of descent and distribution. Following transfer, any such Stock Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. The provisions with respect to termination of employment set forth in subsections (f), (g) and (h) of this Section 6 shall continue to apply with respect to the participant, in which event the Stock Options shall be exercisable by the transferee only to the extent and for the periods specified herein. The participant will remain subject to withholding taxes upon exercise of any such Stock Option by the transferee. The Company shall have no obligation whatsoever to provide notice to any transferee of any matter, including without limitation, early termination of a Stock Option on account of termination of employment of the participant. "Except as set forth above and in the applicable stock option agreement, no Stock Option shall be transferable otherwise than by will or by laws of descent and distribution, and all Stock Options shall be exercisable, during the participant's lifetime, only by the participant. At the request of a participant, Stock purchased upon exercise of a Stock Option may be issued or transferred into the name of the participant and another person jointly with rights of survivorship. -3- "(f) Termination by Death. Subject to Section 6(i), if a participant's employment by the Company or any Subsidiary or Affiliate terminates by reason of death, any Stock Option theretofore granted to such participant may thereafter be exercised, to the extent it was exercisable at the time of death or on such accelerated basis as the Committee may determine at or after grant, for a period of one year (or such other period up to three years as the Committee may specify) from the date of death or until the expiration of the stated term of such Stock Option, whichever period is shorter. "(g) Termination by Reason of Disability or Retirement. Subject to Section 6(i), if a participant's employment by the Company or any Subsidiary or Affiliate terminates by reason of Disability or Retirement, any Stock Option theretofore granted to such participant may thereafter be exercised, to the extent it was exercisable at the time of such termination or on such accelerated basis as the Committee may determine at or after grant, for a period of three years (or such shorter period as the Committee may specify at grant) from the date of such termination of employment or until the expiration of the stated term of such Stock Option, whichever period is shorter; provided, however, that, if the participant dies within such three-year period (or such shorter period), any unexercised Stock Option theretofore granted to such participant shall thereafter be exercisable, to the extent to which it was exercisable at the time of death, for a period of one year from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. In the event of termination of employment by reason of Disability or Retirement, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option shall thereafter be treated as a Non-Qualified Stock Option. "(h) Other Termination of Employment. Unless otherwise determined by the Committee at or after grant, if a participant's employment by the Company or any Subsidiary or Affiliate terminates for any reason other than death, Disability or Retirement, any Stock Option theretofore granted to such participant may thereafter be exercised, to the extent it was exercisable at the time of such termination, for a period of three months from the date of such termination of employment or until the expiration of the stated term of such Stock Option, whichever period is shorter; provided, however, that, if the termination was for Cause, any and all Stock Options theretofore granted to such participant shall be immediately canceled." 2. Each amendment made by this Amendment No. 1 to the Plan has been effected in conformity with the provisions of the Plan. 3. This Amendment No. 1 was adopted by the Board of Directors of the Company on September 2, 1999. Approval of this Amendment No. 1 by the shareholders of the Company is not required pursuant to the terms and provisions of the Plan or by applicable law. Dated: September 2, 1999. ATWOOD OCEANICS, INC. /s/ James M. Holland James M. Holland Senior Vice President EX-10.3.4 7 Exhibit 10.3.4 AMENDMENT NO. 1 TO THE ATWOOD OCEANICS, INC. STOCK OPTION AGREEMENT (1996 Incentive Equity Plan) THIS AMENDMENT NO. 1 TO ATWOOD OCEANICS, INC. STOCK OPTION AGREEMENT (the "Amendment") is dated as of ________________, 1999, by and between ATWOOD OCEANICS, INC., a Texas corporation (the "Company"), and ________________________________________ ("Participant"). W I T N E S E T H : WHEREAS, the Company has adopted the 1996 Incentive Equity Plan (the "Plan") for the granting of options to purchase shares of the Common Stock of the Company to key employees of the Company or its subsidiaries, subject to the terms and conditions as more particularly set forth therein; and WHEREAS, capitalized terms used but not defined herein shall have the meanings given to them in the Plan; and WHEREAS, in accordance with Section 9 of the Plan, the Board of Directors of the Company has amended the Plan to allow the transferability, under certain conditions, with or without consideration, of certain Stock Options granted under the Plan, as determined by the Compensation Committee of the Board of Directors (the "Committee"), pursuant to that certain Amendment No. 1 to the Atwood Oceanics, Inc. 1996 Incentive Equity Plan dated September 9, 1999 (the "Plan Amendment"); and WHEREAS, in furtherance of the Plan Amendment, the Committee has authorized the transferability, with or without consideration, of the Stock Options granted under the Plan to the Participant, under the conditions set forth in the Plan Amendment; and WHEREAS, in accordance with such authorization, the Company and the Participant desire to amend that certain Atwood Oceanics, Inc. Stock Option Agreement dated _______________ between the Company and Participant (the "Agreement"), and the Committee has approved this Amendment, in order to reflect the authorized transferability of the Stock Options granted under the Plan to the Participant and the conditions therefor, as more particularly set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. The first sentence of Section 7 of the Agreement is hereby amended in its entirety by substituting the following therefor: - 2 - CCAMPBELL\006349\200576_1 "7. The option and the right and privilege granted hereby may be transferred by the option holder to (i) the spouse, children or grandchildren of the Employee, (ii) a trust or trusts for the exclusive benefit of the spouse, children or grandchildren of the Employee, or (iii) a partnership in which the spouse, children or grandchildren of the Employee are the only partners; provided in each case that subsequent transfers of transferred options shall be prohibited except those made in accordance with this section or by will or by the laws of descent and distribution." Section 7. Except as expressly amended hereby all of the covenants and agreements of the parties which are set forth in the Agreement are incorporated herein with the same force and effect as if set forth at length in this Amendment. Section 8. This Amendment is executed and shall constitute an instrument supplemental to and in amendment of the Agreement, and shall be construed with and as part of the Agreement. Section 9. Except as modified and expressly amended by this Amendment and any other supplement or amendment, the Agreement is in all respects ratified and confirmed, and all of the terms, provisions and conditions thereof shall be and remain in full force and effect. Section 10. Any capitalized term used but not defined herein shall have the meaning attributable to such term in the Agreement. Section 11. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original for all purposes, and all of which together shall constitute one and the same instrument. EXECUTED as of the date first set forth above. ATWOOD OCEANICS, INC. By: James M. Holland Senior Vice President PARTICIPANT: ----------------------------------------- Printed Name:_____________________________ EX-13.1 8 ANNUAL REPORT EXHIBIT 13.1 1999 ANNUAL REPORT TO SHAREHOLDERS THE COMPANY Atwood Oceanics, Inc. is engaged in the business of international offshore drilling of exploratory and developmental oil and gas wells and related support, management and consulting services. Presently, the Company owns and operates a modern fleet of seven mobile offshore rigs and one modular platform rig, as well as manages the operations of two operator-owned platform rigs in Northwest Australia. The Company also owns a fifty percent interest in a platform rig located in Australia. The Company supports its operations from headquarters in Houston and affiliated offices in Australia, Malaysia, Indonesia, Philippines, United Kingdom, Egypt, India and Israel. TO OUR SHAREHOLDERS AND EMPLOYEES: Operating results for fiscal 1999 represent the Company's second best financial performance in its thirty-year history, despite 1999 not being a good year, in general, for the offshore drilling market. The Company remained financially strong and continued to enhance shareholders' equity during fiscal year 1999 with revenues of $150.0 million, operating cash flows (before changes in working capital and other assets and liabilities) of $55.7 million and net income of $27.7 million. Even though market conditions resulted in the Company having certain periods of idle time during fiscal 1999 on the ATWOOD SOUTHERN CROSS, RICHMOND, RIG-19 and RIG-200, term contracts in place for the ATWOOD HUNTER, ATWOOD FALCON, VICKSBURG and SEAHAWK, as well as contributions from the ATWOOD EAGLE, assisted in maintaining the Company's strong financial performance. With the cyclical nature of the drilling business, the recent downturn reinforces our belief that the strategy of maintaining a mix of long-term contracts at good margins, coupled with short-term contracts, provides downside protection during market declines with upside potential for enhanced earnings in an improving market environment. With this strategy, the Company has been well-positioned to capitalize on future market improvements and will continue to explore all possible growth opportunities and current fleet enhancements. Upgrade of the semisubmersible tender-assist unit SEAHAWK for a four-year contract extension is progressing satisfactorily. A new derrick equipment set for the SEAHAWK is being loaded on the tender-assist unit for mobilization to the unit's first drill location. It is anticipated that commencement of dayrate operations under the contract extension should occur during our second fiscal 2000 quarter. Dayrates in the contract extension have upside potential based on higher average oil prices. The ATWOOD FALCON and ATWOOD HUNTER have term commitments that should keep both units employed into fiscal years 2001 and 2002, respectively. The jack-up VICKSBURG has a conditional letter of intent which could also keep that unit employed through fiscal year 2000. The SEAHAWK should remain employed into fiscal year 2004. The submersible RICHMOND has been back at work since September 1999 utilizing its unique operating characteristics, and is benefiting from increasing dayrates and an improving outlook for shallow-water units in the Gulf of Mexico. The ATWOOD EAGLE achieved virtually 100% utilization during fiscal year 1999, though at significantly reduced dayrates in the fourth quarter following market deterioration, and should remain employed until late in the first quarter of fiscal year 2000. The ATWOOD EAGLE is then scheduled to undergo an upgrade in its variable deck load and water depth capability utilizing a wire insert system, which could take up to ninety days to complete. The ATWOOD SOUTHERN CROSS is being bid for opportunities commencing next year and has the potential for providing the Company with additional upside in an improving market environment. The successful completion during 1997 and 1998 of four major rig upgrades ATWOOD FALCON, ATWOOD HUNTER, VICKSBURG and ATWOOD SOUTHERN CROSS have already proven beneficial to the Company's financial results. We believe these upgrades will also be beneficial in terms of future opportunities and financial upside in a strengthening market. We remain committed to a strategy of international operations, highly-skilled personnel, premium equipment and financial strength. The recent improvement in oil and gas prices is encouraging and, if sustained, should ultimately lead to an increase in operators' drilling budgets. Accordingly, we are optimistic about the longer-term outlook and gradually improving fundamentals. Our goal of achieving safe operations receives our day-to-day attention. As always, we want to thank our employees for their efforts and contributions, and our shareholders for their continuing support. John R. Irwin FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- (In thousands) 1999 1998 - ------------------------------------------------------------------------------- FOR THE YEAR REVENUES FROM CONTRACT DRILLING AND MANAGEMENT $150,009 $151,809 NET INCOME 27,720 39,364 CAPITAL EXPENDITURES 38,760 79,607 - ------------------------------------------------------------------------------- AT YEAR END CASH AND SECURITIES HELD FOR INVESTMENT $ 43,041 $ 34,529 NET PROPERTY AND EQUIPMENT 218,914 205,632 TOTAL ASSETS 293,604 281,737 TOTAL SHAREHOLDERS' EQUITY 192,229 163,766 Atwood Oceanics, Inc. and Subsidiaries FIVE YEAR FINANCIAL REVIEW At or For the Years Ended September 30, - ------------------------------------------------------------------------------- (In thousands, except per share amounts, fleet data and ratios) 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS DATA: Contract revenues $150,009 $151,809 $89,082 $79,455 $72,231 Drilling costs and general and administrative expenses (77,874) (72,616)(54,890)(56,653) (55,311) -------- ------- ------ ------ ------- OPERATING MARGIN 72,135 79,193 34,192 22,802 16,920 Depreciation (23,904) (17,596) (9,979) (9,742) (11,134) -------- ------- ------ ------ ------- OPERATING INCOME 48,231 61,597 24,213 13,060 5,786 Other income (expense) (1,724) (1,278) 1,165 2,783 3,146 Tax provision (18,787) (20,955) (9,759) (4,475) (1,872) ------- ------ ------ ------ ------ NET INCOME $ 27,720 $39,364 $15,619 $11,368 $ 7,060 ======= ======= ======= ======= ======= PER SHARE DATA: Earnings per common share: (1) Basic $ 2.03 $ 2.90 $ 1.16 $ .85 $ .54 Diluted 2.01 2.84 1.14 .84 .53 Average common shares outstanding: (1) Basic 13,649 13,592 13,474 13,328 13,182 Diluted 13,791 13,884 13,715 13,544 13,230 FLEET DATA: Number of rigs owned or managed, at end of period 11 11 11 11 10 Utilization rate for in-service rigs (excludes contractual downtime for rig upgrades in 1999, 1998 and 1997) 77% 100% 100% 100% 99% BALANCE SHEETS DATA: Cash and securities held for investment $ 43,041 $34,529 $42,234 $40,492 $37,922 Working capital 31,519 24,864 27,549 26,151 13,761 Net property and equipment 218,914 205,632 143,923 91,124 91,427 Total assets 293,604 281,737 215,330 159,309 152,853 Total long-term debt 54,000 72,000 59,500 34,473 39,319 Shareholders' equity 192,229 163,766 122,689 105,554 94,892 Ratio of current assets to current liabilities 2.66 1.93 2.41 2.45 1.67 Note - (1) Retroactively adjusted to reflect 100% stock dividend declared in November 1997. (The Company has never paid any cash dividends on its common stock.) OFFSHORE DRILLING OPERATIONS - ------------------------------------------------------------------------------------------------------------------------ PERCENTAGE OF 1999 MAXIMUM CONTRACT YEAR WATER CONTRACT STATUS AT NAME OF RIG TYPE OF RIG REVENUES BUILT DEPTH LOCATION CUSTOMER NOVEMBER 30, 1999 DRILLING RIGS WHOLLY OR PARTIALLY OWNED ATWOOD FALCON Third-generation 23% 1983 3,500 FT. Malaysia Sabah Shell Rig is under long-term contract which semisubmersible (Enhanced Petroleum terminates in November 2001. and water Company Upon completion of current well in depth Limited through Malaysia, the rig will be relocated upgrade in assignment from to Philippines to commence drilling 1998) Shell Philippines program for Shell Philippines. Exploration B.V. ATWOOD HUNTER Third-generation 21% 1981 3,500 FT. United British-Borneo Rig is under long-term contract which semisubmersible (Enhanced States Petroleum terminates in November 2000. and water Gulf of Inc. depth Mexico upgrade in 1997) ATWOOD EAGLE Third-generation 25% 1982 2,500 FT. Israel Isramco Upon completion of current well, the semisubmersible rig will enter a shipyard for a water-depth upgrade which could take up to 90 days to complete. Upon completion of the upgrade, the rig will return to Israel to drill a short-term program for Samedan, Mediterranean Sea, Inc. Discussion ongoing for additional contract work. VICKSBURG Jack-up 7% 1976 300 FT. India Enron Oil & Gas Rig is under term contract which (Enhanced India Ltd. expires December 2000. and upgraded in 1998) SEAHAWK Second-generation 6% 1974/1992 450 FT. Malaysia Esso Rig is currently undergoing an semisubmersible (Enhanced Production upgrade for four-year contract Tender assist and upgraded Malaysia Inc. extension. Upgrade should be in 1999) completed in early 2000, with contract to extend to 2004. RICHMOND Submersible 3% 1982 75 FT. United Triton USA, Inc. Rig has current commitments through States and first half of fiscal year 2000. Gulf of Cockrell Oil Mexico Corporation ATWOOD Second-generation 0% 1976 2,000 FT. Australia Rig is available for contract since SOUTHERN CROSS semisubmersible (Refurbished it became idle at the end of and upgraded September 1998. in 1997) RIG-19 Modular platform 5% 1988 N/A Australia Rig is available for contract since it became idle in September 1999. RIG-200 Modular platform 4% 1995 N/A Australia Rig is available for contract since it became idle in June 1999. MANAGEMENT/LABOR CONTRACTS GOODWYN 'A' and Modular platforms 6% N/A N/A Australia Woodside Rigs are under term contract for NORTH RANKIN 'A' Energy management of drilling operations into the year 2001. Current plans project drilling operations to alternate between the two rigs.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Annual Report to Shareholders and the related Form 10-K for the fiscal year ended September 30, 1999 includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this report and the related Form 10-K regarding the Company's financial position, business strategy, budgets and plans and objectives of management for future operations are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. These forward-looking statements involve risks and uncertainties that may cause the Company's actual future activities and results of operations to be materially different from those suggested or described in this Annual Report to Shareholders and related Form 10-K. These risks include: the Company's dependence on the oil and gas industry; the Company's ability to secure adequate financing; the risks involved in the construction and upgrade to the Company's rigs; competition; operations risks; risks involved in foreign operations; and governmental regulation and environmental matters. These factors ("Cautionary Statements") are disclosed in various places throughout this report and the related Form 10-K. All subsequent written and oral forward- looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by the Cautionary Statements. OUTLOOK At the beginning of fiscal 1999, the price for oil was around $12 per barrel, with worldwide fleet utilization for mobile offshore rigs on a decline. Even though the oil price has recovered to over $20 per barrel, worldwide fleet utilization for mobile offshore rigs has remained around 75 percent for most of 1999. Due to this weakness in the worldwide offshore drilling market, the Company has been unable to identify an ongoing contract for the ATWOOD SOUTHERN CROSS since it completed its last contract at the end of September 1998, and has incurred certain periods of idle time during fiscal year 1999 on the RICHMOND, RIG-19 and RIG-200. Despite a down trend in the offshore drilling market and certain idle rig time, term contracts in place for the ATWOOD HUNTER, ATWOOD FALCON, VICKSBURG and SEAHAWK, as well as a good year for the ATWOOD EAGLE, resulted in the Company generating in 1999 the second highest level of revenue, operating cash flows and net income in its history. There are some encouraging indications that the offshore drilling market environment could improve in 2000. Historically, worldwide fleet utilization of mobile offshore rigs needs to approach 90 percent before significant improvement in dayrate levels will occur. Even without market improvement, the Company's contract backlog should provide a high level of revenues and cash flows in fiscal 2000. The Company remains confident in the long-term future of the worldwide offshore drilling market. RESULTS OF OPERATIONS Fiscal Year 1999 Versus Fiscal Year 1998 Despite the Company's active rig utilization decreasing from 100% in 1998 to 77% in 1999, contract revenues only declined approximately 1 percent. An analysis of contract revenues by rig for fiscal year 1999 and 1998 is as follows: - ------------------------------------------------------------------------------ CONTRACT REVENUES - ------------------------------------------------------------------------------ (In millions) Fiscal Fiscal 1999 1998 Variance - -------------------------------------------------------------------------------- ATWOOD FALCON $ 34.7 $ 17.3 $ 17.4 VICKSBURG 10.6 1.9 8.7 ATWOOD EAGLE 37.9 32.2 5.7 GOODWYN 'A'/NORTH RANKIN 'A' 8.6 7.5 1.1 RIG-19 6.8 6.7 0.1 RIG-200 6.8 7.9 (1.1) SEAHAWK 9.5 11.4 (1.9) ATWOOD HUNTER 31.0 35.2 (4.2) RICHMOND 4.1 11.3 (7.2) ATWOOD SOUTHERN CROSS 0.0 20.4 (20.4) - -------------------------------------------------------------------------------- $ 150.0 $ 151.8 $ (1.8) - -------------------------------------------------------------------------------- The ATWOOD FALCON was in a shipyard from May 1998 to November 1998 undergoing a water-depth upgrade. The VICKSBURG entered a shipyard in December 1997 for refurbishment and upgrade which was not completed until November 1998. The ATWOOD FALCON and VICKSBURG have worked continuously since the completion of their upgrades. The ATWOOD EAGLE was relocated from West Africa to the Mediterranean Sea area in March 1998. The increase in revenues for the ATWOOD EAGLE is due to enhanced dayrate for a portion of the year from term contract commitments. The increase in revenues from the GOODWYN 'A' and NORTH RANKIN 'A' rigs is due to the Company providing additional labor and assistance to the rigs' Australian owner in upgrading the rigs during fiscal 1999. The Company expects to be involved in the operation of both rigs at least into the year 2001; however, the Company expects revenues from these rigs to decline in 2000. RIG-200 and RIG-19 are currently idle following completion of their contracts in June and September 1999, respectively. In preparation for a four-year contract extension, the SEAHAWK entered a shipyard in April 1999 for upgrade, with a reduced dayrate paid during the upgrade period which accounts for the decline in revenues. The decline in revenues for the ATWOOD HUNTER is due to a temporary reduction in dayrate, with an extension in the contract term, during a period when the rig could not drill due to extremely strong underwater currents. Market conditions resulted in a reduced dayrate and some idle time for the RICHMOND; with the ATWOOD SOUTHERN CROSS idle for the entire year. Contract drilling and management costs during fiscal 1999 increased 8 percent from $65.3 million to $70.4 million. An analysis of contract drilling and management costs by rig is as follows: - ----------------------------------------------------------------------------- CONTRACT DRILLING AND MANAGEMENT COSTS (In millions) - ----------------------------------------------------------------------------- Fiscal Fiscal 1999 1998 Variance - ----------------------------------------------------------------------------- VICKSBURG $ 4.5 $ 1.4 $ 3.1 ATWOOD EAGLE 14.3 11.5 2.8 ATWOOD FALCON 6.8 4.9 1.9 RIG-19 6.0 4.5 1.5 SEAHAWK 7.1 6.1 1.0 ATWOOD HUNTER 9.8 9.4 0.4 GOODWYN 'A'/NORTH RANKIN 'A' 6.6 6.3 0.3 RIG-200 1.5 2.6 (1.1) RICHMOND 4.8 6.0 (1.2) ATWOOD SOUTHERN CROSS 6.8 10.6 (3.8) OTHER 2.2 2.0 0.2 - ---------------------------------------------------------------------------- $ 70.4 $ 65.3 $ 5.1 - ---------------------------------------------------------------------------- The increase in the drilling costs for the VICKSBURG and ATWOOD FALCON are due to the rigs working continuously since completing their upgrades during the first quarter of fiscal 1999. The increase in operating costs for the ATWOOD EAGLE was due primarily to an increase in maintenance costs and higher operating costs associated with working the entire year in the Mediterranean Sea area. The increase in operating expense for RIG-19 was due to costs being lower in 1998 due to the receipt of certain payroll related tax refunds. Reductions in operating costs for the RICHMOND, RIG-200 and ATWOOD SOUTHERN CROSS were due to cost savings associated with idle rig time. An analysis of depreciation expense by rig is as follows: - ----------------------------------------------------------------------------- DEPRECIATION EXPENSE - ----------------------------------------------------------------------------- (In millions) Fiscal Fiscal 1999 1998 Variance - ------------------------------------------------------------------------------ ATWOOD FALCON $ 5.8 $ 1.8 $ 4.0 VICKSBURG 2.0 0.0 2.0 ATWOOD SOUTHERN CROSS 3.8 3.0 0.8 RICHMOND 0.8 0.5 0.3 ATWOOD HUNTER 5.1 5.0 0.1 ATWOOD EAGLE 2.4 2.2 0.2 RIG-200 2.1 2.1 0.0 RIG-19 0.0 0.2 (0.2) SEAHAWK 1.3 2.5 (1.2) OTHER 0.6 0.3 0.3 - ------------------------------------------------------------------------------ $23.9 $ 17.6 $ 6.3 - ------------------------------------------------------------------------------ The increase in depreciation expense was primarily due to the commencing of depreciation in fiscal 1999 of upgrade costs of the ATWOOD FALCON and VICKSBURG. The Company does not recognize depreciation expense during the period a rig is out of service for a significant upgrade. This accounts for the decline in depreciation expense for the SEAHAWK in fiscal 1999. Fiscal Year 1998 Versus Fiscal Year 1997 Despite the ATWOOD FALCON and VICKSBURG being idle for a significant portion of fiscal 1998 while undergoing upgrades, contract revenues increased 70 percent to $151.8 million from $89.1 million. This increase was primarily attributable to the ATWOOD HUNTER returning to work at a significant increase in dayrate revenues following upgrade in fiscal 1997, the initial commencement of drilling operations for the ATWOOD SOUTHERN CROSS following its upgrade and refurbishment in fiscal 1997 and the increase in dayrate revenues for the ATWOOD EAGLE. An analysis of contract revenues by rig for fiscal years 1998 and 1997 is as follows: - --------------------------------------------------------------------------- CONTRACT REVENUES (In millions) - --------------------------------------------------------------------------- Fiscal Fiscal 1998 1997 Variance - --------------------------------------------------------------------------- ATWOOD HUNTER $ 35.2 $ 5.2 $ 30.0 ATWOOD SOUTHERN CROSS 20.4 0.0 20.4 ATWOOD EAGLE 32.2 19.3 12.9 RICHMOND 11.3 8.8 2.5 RIG-200 7.9 5.9 2.0 ATWOOD FALCON 17.3 16.9 0.4 SEAHAWK 11.4 11.3 0.1 RIG-19 6.7 7.1 (0.4) GOODWYN 'A'/NORTH RANKIN 'A' 7.5 9.5 (2.0) VICKSBURG 1.9 5.1 (3.2) - ------------------------------------------------------------------------------ $ 151.8 $ 89.1 $ 62.7 - ------------------------------------------------------------------------------ In September 1997, the ATWOOD HUNTER commenced drilling under a three-year contract in the United States Gulf of Mexico. Due to the rig being upgraded, it generated less than 100 days of revenue during fiscal 1997. The ATWOOD SOUTHERN CROSS, which generated no revenues prior to fiscal 1998, commenced drilling in Australia in November 1997. The ATWOOD EAGLE commenced working in the Mediterranean Sea area in March 1998, with enhanced dayrate revenues. Due to a strong market during the first half of fiscal 1998, revenue from the RICHMOND increased in fiscal 1998 compared to fiscal 1997. The decline in revenues for the VICKSBURG was due to the rig undergoing upgrade during most of fiscal year 1998. Contract drilling and management costs during fiscal 1998 increased 34 percent from $48.8 million to $65.3 million. This increase was primarily due to the ATWOOD HUNTER and ATWOOD SOUTHERN CROSS commencing drilling operations following their upgrades during fiscal 1997. An analysis of contract drilling and management costs by rig is as follows: - ------------------------------------------------------------------------------ CONTRACT DRILLING AND MANAGEMENT COSTS (In millions) - ------------------------------------------------------------------------------ Fiscal Fiscal 1998 1997 Variance - ------------------------------------------------------------------------------ ATWOOD SOUTHERN CROSS $ 10.6 $ 0.0 $ 10.6 ATWOOD HUNTER 9.4 1.7 7.7 ATWOOD EAGLE 11.5 9.8 1.7 RICHMOND 6.0 5.0 1.0 RIG-200 2.6 2.0 0.6 GOODWYN 'A'/NORTH RANKIN 'A' 6.3 6.8 (0.5) RIG-19 4.5 5.3 (0.8) SEAHAWK 6.1 7.0 (0.9) ATWOOD FALCON 4.9 6.3 (1.4) VICKSBURG 1.4 3.6 (2.2) OTHER 2.0 1.3 0.7 - ----------------------------------------------------------------------------- $ 65.3 $ 48.8 $ 16.5 - ----------------------------------------------------------------------------- The Company acquired the ATWOOD SOUTHERN CROSS in October 1993, but did not place the rig into service until after the completion of its refurbishment and upgrade in November 1997. The ATWOOD HUNTER worked the entire fiscal 1998 compared to only approximately one quarter of fiscal 1997. The increase in operating costs for the ATWOOD EAGLE was due primarily to an increase in maintenance costs and higher operating costs associated with working in the Mediterranean Sea area as compared to West Africa. The increase in operating costs for the RICHMOND was due primarily to higher payroll related costs. As a result of certain payroll related tax refunds received in fiscal 1998, operating costs for RIG-19 declined. During the ATWOOD FALCON and VICKSBURG upgrade periods, no operating costs are being incurred, resulting in lower operating costs in the current year than in fiscal 1997. An analysis of depreciation expense by rig is as follows: - ----------------------------------------------------------------------- DEPRECIATION EXPENSE (In millions) - ----------------------------------------------------------------------- Fiscal Fiscal 1998 1997 Variance - ----------------------------------------------------------------------- ATWOOD HUNTER $ 5.0 $ 0.6 $ 4.4 ATWOOD SOUTHERN CROSS 3.0 0.0 3.0 RIG-200 2.1 1.5 0.6 ATWOOD EAGLE 2.2 2.1 0.1 RICHMOND 0.5 0.4 0.1 SEAHAWK 2.5 2.2 0.3 ATWOOD FALCON 1.8 2.7 (0.9) VICKSBURG 0.0 0.0 0.0 RIG-19 0.2 0.2 0.0 OTHER 0.3 0.3 0.0 - ------------------------------------------------------------------------ $17.6 $ 10.0 $ 7.6 - ------------------------------------------------------------------------ The increase in depreciation expense was primarily due to the commencing of depreciation in fiscal 1998 of upgrade costs of the ATWOOD HUNTER and ATWOOD SOUTHERN CROSS. The Company does not recognize depreciation expense during the period a rig is out of service for a significant upgrade. This accounts for the decline in depreciation expense for the ATWOOD FALCON in fiscal 1998 and the ATWOOD HUNTER in fiscal 1997. The increase in depreciation expense of RIG-200 was due to the rig having active drilling operations for all of fiscal 1998 compared to only three quarters of fiscal 1997. General and administrative expense increased 20 percent in fiscal 1998 compared to fiscal 1997. This increase was attributed to an increase in payroll related costs and in professional fees. The $2.4 million increase in interest expense was primarily related to the increase in funds borrowed under the Company's revolving credit agreement. With a significant increase in pre-tax income and virtually no carryforward tax attributes, both the foreign and domestic tax provision increased. LIQUIDITY AND CAPITAL RESOURCES Even though, net income in fiscal 1999 declined 30 percent from fiscal 1998, operating cash flows (before changes in working capital and other assets and liabilities) for fiscal 1999 only declined 9 percent from $61.4 million to $55.7 million. During fiscal 1999, the Company utilized available cash and internally generated funds to invest approximately $16 million in completing the water-depth upgrade of the ATWOOD FALCON, to invest approximately $5 million in completing the refurbishment and upgrade of the VICKSBURG, to invest approximately $11 million in the upgrade of the SEAHAWK, to fund approximately $7 million in other capital expenditures and to reduce outstanding debt by approximately $19 million. Since 1997, the Company has successfully upgraded four drilling units; the ATWOOD HUNTER, the ATWOOD SOUTHERN CROSS, the ATWOOD FALCON and the VICKSBURG at a cost of approximately $160 million. Currently, the Company is completing the $23 million upgrade of the SEAHAWK required for its four year contract extension, of which approximately $20 million will be reimbursed by the customer. The Company is currently preparing to increase the water-depth drilling capacity of the ATWOOD EAGLE from 2,500 feet to approximately 3,200 feet at a cost of between $8 and $10 million and to enhance the operating performance of the RICHMOND at an estimated cost of $2.5 to $3.0 million. Except for funding remaining costs associated with the upgrade of the SEAHAWK (approximately $12 million, excluding reimbursement from the customer), water-depth upgrade of the ATWOOD EAGLE, the RICHMOND enhancement and general capital maintenance of the Company's other rigs, the Company currently has no significant capital commitments. The Company's revolving line of credit converted to a reducing facility at March 31, 1999, with commitment reductions of $8.3 million per quarter until final maturity on March 31, 2002. At September 30, 1999, the reduced line of credit commitment was approximately $100 million with an actual outstanding amount of $54 million, with another $3 million being repaid subsequently to September 30, 1999. Depending upon additional capital investments, anticipated future operating cash flows are expected to continue to provide the Company with the option of repaying funds borrowed under the credit facility prior to its required maturity. Working capital increased from $24.9 million at September 30, 1998 to $31.5 million at September 30, 1999, a 27 percent increase. The Company's portfolio of accounts receivable is comprised of major international corporate entities with stable payment experience. Historically, the Company has experienced no significant difficulties in receivable collection; however, at September 30, 1999, the Company was continuing to pursue legal action in Australia to collect approximately $2 million billed in 1998. The Company continues to pursue growth opportunities. With the Company currently two years ahead of its required debt repayment schedule, the Company would expect to finance additional capital expenditures through a combination of operating cash flows or additional debt financing; however, there are no assurances that additional debt financing would be available on terms acceptable to the Company. The Company continues to periodically review and adjust its planned capital expenditures and financing of such expenditures in light of current market conditions. YEAR 2000 The Company has used both internal and external resources in assessing the Year 2000 readiness of its operations. An outside consultant visited the Company's various drilling units to review and assess their Year 2000 compliance. The majority of the operating systems on its various drilling rigs are mechanical with no Year 2000 compliance issues; however, there were some systems that required assessment and where necessary, reprogramming or replacement. The Company's internal information systems have been assessed and where necessary, reprogrammed or replaced with fully compliant, new or modified systems. The Company has incurred approximately $350,000 in Year 2000 assessment costs which has been expensed over the last two years. In addition to the assessment costs, the Company has incurred approximately $1.2 million in purchasing new software and implementation of an inventory, purchasing and maintenance system for Year 2000 compliance, the cost of which has been capitalized. After assessing its operations and making required modifications or replacements, the Company believes that the Year 2000 issues will not pose significant operational problems; however, the extent and magnitude of the Year 2000 problem as it will affect the Company is difficult to predict. Due to the Company's international operations, foreign governments, suppliers and customers who do not successfully and timely achieve Year 2000 compliance could adversely affect the Company's operations. Accordingly, there can be no assurance that the Company will not have some disruption in its business due to Year 2000 issues. DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk, including adverse changes in interest rates and foreign currency exchange rates as discussed below. Interest Rate Risk Total long-term debt at September 30, 1999, included $54 million of floating rate debt. As a result, the Company's annual interest costs in fiscal 2000 will fluctuate based on interest rate changes. Because the interest rate on the Company's long-term debt is a floating rate, the fair value of the Companys long-term debt approximates carrying value as of September 30, 1999. The impact on annual cash flow of a 10 percent change in the floating rate (approximately 70 basis points) would be approximately $0.4 million. The Company did not have any open derivative contracts relating to its floating rate debt at September 30, 1999. Foreign Currency Risk Certain of the Company's subsidiaries have monetary assets and liabilities that are denominated in a currency other than their functional currencies. A decrease in the value of 10 percent in the foreign currencies relative to the U.S. dollar from the year-end exchange rates would result in a foreign currency transaction loss of approximately $1 million, based on September 30, 1999 amounts. The Company considers its current risk exposure to foreign currency exchange rate movements, based on net cash flows, to be immaterial. The Company did not have any open derivative contracts relating to foreign currencies at September 30, 1999. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Board of Directors of Atwood Oceanics, Inc.: We have audited the accompanying consolidated balance sheets of Atwood Oceanics, Inc. (a Texas corporation) and subsidiaries as of September 30, 1999 and 1998, and the related consolidated statements of operations, cash flows and changes in shareholders' equity for each of the three years in the period ended September 30, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Atwood Oceanics, Inc. and subsidiaries as of September 30, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1999, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas November 23, 1999 Atwood Oceanics, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS September 30, - -------------------------------------------------------------------------------- (In thousands) 1999 1998 - ----------------------------------------------------------------------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $20,105 $ 11,621 Accounts receivable, net 18,289 27,730 Inventories of materials and supplies, at lower of average cost or market 8,010 8,076 Deferred tax assets 720 880 Prepaid expenses 3,408 3,280 ------- -------- Total Current Assets 50,532 51,587 ------- -------- SECURITIES HELD FOR INVESTMENT: Held-to-maturity, at amortized cost 22,589 22,585 Available-for-sale, at fair value 347 323 ------- -------- 22,936 22,908 ------- -------- PROPERTY AND EQUIPMENT, at cost: Drilling vessels, equipment and drill pipe 358,372 327,520 Other 7,317 6,128 ------- ------- 365,689 333,648 Less-accumulated depreciation 146,775 128,016 ------- ------- Net Property and Equipment 218,914 205,632 ------- ------- DEFERRED COSTS AND OTHER ASSETS 1,222 1,610 -------- -------- $293,604 $281,737 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. Atwood Oceanics, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS September 30, - -------------------------------------------------------------------------- (In thousands, except share data) 1999 1998 - -------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ --- $ 750 Accounts payable 7,640 14,250 Accrued liabilities 11,373 11,723 -------- ------- Total Current Liabilities 19,013 26,723 -------- ------- LONG-TERM DEBT, net of current maturities 54,000 72,000 -------- ------- DEFERRED CREDITS: Income taxes 8,168 4,820 Mobilization fees and other 20,194 14,428 -------- ------- 28,362 19,248 SHAREHOLDERS' EQUITY: Preferred stock, no par value; 1,000,000 shares authorized, none outstanding --- --- Common stock, $1 par value; 20,000,000 shares authorized with 13,675,000 and 13,625,000 issued and outstanding in 1999 and 1998, respectively 13,675 13,625 Paid-in capital 52,458 51,781 Accumulated other comprehensive income (loss) (139) (155) Retained earnings 126,235 98,515 -------- ------- Total Shareholders' Equity 192,229 163,766 -------- ------- $293,604 $281,737 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. Atwood Oceanics, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended September 30, - ------------------------------------------------------------------------------- (In thousands, except per share amounts) 1999 1998 1997 - ------------------------------------------------------------------------------- REVENUES: Contract drilling $148,051 $148,570 $86,833 Contract management 1,958 3,239 2,249 -------- -------- -------- 150,009 151,809 89,082 -------- -------- -------- COSTS AND EXPENSES: Contract drilling 68,868 62,364 47,714 Contract management 1,487 2,921 1,076 Depreciation 23,904 17,596 9,979 General and administrative 7,519 7,331 6,100 -------- ------- ------- 101,778 90,212 64,869 -------- ------- ------- OPERATING INCOME 48,231 61,597 24,213 OTHER INCOME (EXPENSE): Interest expense (4,172) (3,599) (1,212) Investment income 2,448 2,321 2,377 -------- ------- ------- (1,724) (1,278) 1,165 -------- ------- ------- INCOME BEFORE INCOME TAXES 46,507 60,319 25,378 PROVISION FOR INCOME TAXES 18,787 20,955 9,759 -------- ------- ------- NET INCOME $27,720 $39,364 $15,619 ======== ======= ======= EARNINGS PER COMMON SHARE: Basic $ 2.03 $ 2.90 $ 1.16 Diluted 2.01 2.84 1.14 AVERAGE COMMON SHARES OUTSTANDING: Basic 13,649 13,592 13,474 Diluted 13,791 13,884 13,715 The accompanying notes are an integral part of these consolidated financial statements. Atwood Oceanics, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS For Years Ended September 30, - ------------------------------------------------------------------------------- (In thousands) 1999 1998 1997 - ------------------------------------------------------------------------------- CASH FLOW FROM OPERATING ACTIVITIES: Net income $27,720 $39,364 $15,619 ------- ------- ------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 23,904 17,596 9,979 Amortization of deferred items 566 427 539 Deferred federal income tax provision (benefit) 3,500 3,970 (330) Changes in assets and liabilities: Decrease (increase) in accounts receivable 9,441 (11,377) 334 Increase in accounts payable 402 954 2,708 Increase (decrease) in accrued liabilities (350) (1,706) 5,958 Net mobilization fees 7,074 2,779 6,286 Other (1,364) (1,924) (1,848) ------ ------ ------ 43,173 10,719 23,626 ------ ------ ------ Net Cash Provided by Operating Activities 70,893 50,083 39,245 ------ ------ ------ CASH FLOW FROM INVESTING ACTIVITIES: Capital expenditures (38,760) (79,607) (62,778) Non cash portion of capital expenditures (7,012) 7,973 --- Other 1,574 --- --- ------ ------ ------ Net Cash Used by Investing Activities (44,198) (71,634) (62,778) ------ ------ ------ CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from exercises of stock options 539 658 1,019 Proceeds from revolving credit facility 13,000 14,000 58,000 Principal payments on debt (31,750) (750) (32,973) Deferred financing costs --- --- (814) ------- ------ ------- Net Cash Provided (Used) by Financing Activities (18,211) 13,908 25,232 ------- ------ ------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,484 (7,643) 1,699 CASH AND CASH EQUIVALENTS, at beginning of period 11,621 19,264 17,565 ------- ------ ------ CASH AND CASH EQUIVALENTS, at end of period $20,105 $11,621 $19,264 ======= ======= ======= __________________________ Supplemental disclosure of cash flow information: Cash paid during the year for domestic and foreign income taxes $13,383 $18,549 $ 6,896 ======= ======= ======= Cash paid during the year for interest, net of amounts capitalized $ 4,614 $ 2,349 $ 1,295 ======= ======= ======= The accompanying notes are an integral part of these consolidated financial statements. Atwood Oceanics, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - ---------------------------------------------------------------------------------------------------------------------------------- Accumulated Other (In thousands) Comprehensive Common Stock Paid-In Comprehensive Retained Income Shares (1) Amount (1) Capital (1) Income (Loss) Earnings - ----------------------------------------------------------------------------------------------------------------------------------- September 30, 1996 13,382 $13,382 $48,779 $ (139) $43,532 - ----------------------------------------------------------------------------------------------------------------------------------- Net Income $15,619 --- --- --- --- 15,619 Unrealized holding gain on available-for-sale securities, net of tax of $11 27 --- --- --- 27 --- ------ Comprehensive income $15,646 ====== Exercises of employee stock options 164 164 855 --- --- Tax benefit from exercises of employee stock options --- --- 470 --- --- ----- ------- ------- -------- ------ September 30, 1997 13,546 13,546 50,104 (112) 59,151 Net Income $39,364 --- --- --- --- 39,364 Unrealized holding loss on available-for-sale securities, net of tax of $23 (43) --- --- --- (43) --- ------ Comprehensive income $39,321 ====== Exercises of employee stock options 79 79 579 --- --- Tax benefit from exercises of employee stock options --- --- 1,098 --- --- ----- ----- ----- ------ ----- September 30, 1998 13,625 13,625 51,781 (155) 98,515 Net Income $27,720 --- --- --- --- 27,720 Unrealized holding gain on available-for-sale securities, net of tax of $8 16 --- --- --- 16 --- ------ Comprehensive income $27,736 ====== Exercises of employee stock options 50 50 489 --- --- Tax benefit from exercises of employee stock options --- --- 188 --- --- ------ ------- -------- ------ -------- September 30, 1999 13,675 $13,675 $ 52,458 $ (139) $126,235 ====== ======= ======== ====== ========
- --------------------- NOTES (1) Adjusted for 100% stock dividend declared in November 1997. (2) Preferred stock, no par value, of 1,000,000 shares was authorized in 1975 and no shares have been issued. The accompanying notes are an integral part of these consolidated financial statements. Atwood Oceanics, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - NATURE OF OPERATIONS Atwood Oceanics, Inc. together with its wholly owned subsidiaries (collectively referred to herein as the "Company"), is engaged in the business of international offshore drilling of exploratory and developmental oil and gas wells and related support, management and consulting services. Presently, the Company owns and operates a modern fleet of seven mobile offshore rigs and one modular platform rig, as well as manages the operations of two operator-owned platform rigs in Northwest Australia. The Company also owns a fifty percent interest in a new generation platform rig. Currently, the Company is involved in active operations in the territorial waters of Australia, Malaysia, Egypt, Philippines, Israel, United States and India. Demand for drilling equipment is dependent on the exploration and development programs of oil and gas companies, which is in turn influenced by the financial conditions of such companies, by general economic conditions, by prices of oil and gas, and from time to time, by political considerations and policies. The Company's business operations are subject to the risks associated with a business having a limited number of customers for which it can operate at any given time. A decrease in the drilling programs of customers in the areas where the Company is employed may adversely affect the Company's revenues. The contracts under which the Company operates its drilling rigs are obtained either through individual negotiations with the customer or by submitting proposals in competition with the other drilling contractors and vary in their terms and conditions. The Company competes with several other drilling contractors, most of which are substantially larger than the Company and possess appreciably greater financial and other resources. Price competition is generally the most important factor in the drilling industry, but the technical capability of specialized drilling equipment and personnel at the time and place required by customers are also important. Other competitive factors include work force experience, rig suitability, efficiency, condition of equipment, reputation and customer relations. The Company believes that it competes favorably with respect to these factors. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation - The consolidated financial statements include the accounts of Atwood Oceanics, Inc. ("AOI") and all of its wholly owned domestic and foreign subsidiaries. The Company's undivided 50 percent interest in RIG-200 is accounted for using the proportionate consolidation method (See Note 4). All significant intercompany accounts and transactions have been eliminated in consolidation. Foreign exchange - The U.S. dollar is the functional currency for all areas of operations of the Company. Accordingly, monetary assets and liabilities denominated in foreign currency are remeasured to U.S. dollars at the rate of exchange in effect at the end of the year, items of income and expense are remeasured at average monthly rates, and property and equipment and other nonmonetary amounts are remeasured at historical rates. Gains and losses on foreign currency transactions and remeasurements are included in drilling costs in the consolidated statements of operations. The Company recorded a foreign exchange gain of $.4 million in 1999 and foreign exchange losses of $ 1 million and $.7 million in 1998 and 1997, respectively. Property and equipment - Property and equipment is recorded at cost. Interest costs related to property under construction are capitalized as a component of construction costs. Interest capitalized during fiscal 1999 and 1998 totaled $.5 million and $1.4 million, respectively. Depreciation is provided on the straight-line method over the following estimated useful lives of the various classifications of assets: Years ----- Drilling vessels and related equipment 5-15 Drill pipe 3 Furniture and Other 3-10 Maintenance, repairs and minor replacements are charged against income as incurred; major replacements and upgrades are capitalized and depreciated over the remaining useful life of the asset as determined upon completion of the work. The cost and related accumulated depreciation of assets sold, retired or otherwise disposed are removed from the accounts at the time of disposition, and any resulting gain or loss is reflected in the consolidated statements of operations for the applicable period. Deferred costs - The Company defers the net costs of moving a drilling rig to a new area and amortizes such costs on a straight-line basis over the life of the applicable drilling contract. During fiscal years 1999 and 1998, the Company received sufficient mobilization revenues on all rig moves to more than cover all mobilization costs. Thus, there were no unamortized mobilization costs at September 30, 1999 or 1998. The Company defers the costs of scheduled drydocking and charges such costs to expense over the period to the next scheduled drydocking (normally 30 months). Federal income taxes - The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes". Under SFAS No. 109, deferred income taxes are recorded to reflect the tax consequences on future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end given the provisions of enacted tax laws. Deferred tax assets are reduced by a valuation allowance when, based upon management's estimates, it is more likely than not that a portion of the deferred tax assets will not be realized in a future period. Revenue recognition - The Company accounts for drilling and management contract revenues using the percentage of completion method of accounting, under which revenues are recognized on a daily basis as earned. Mobilization revenues are first used to cover the costs of mobilization with the excess revenues deferred and amortized on a straight-line basis over the life of the applicable drilling contract. At September 30, 1999 and 1998, deferred revenues totaling $19.4 million and $12.3 million, respectively, were included in Deferred Credits on the accompanying consolidated balance sheets. Cash and cash equivalents - Cash and cash equivalents consist of cash in banks and highly liquid debt instruments which mature within three months of the date of purchase. Investments - Investments in held-to-maturity securities are stated at the amortized cost at the balance sheet date. The Company has the ability and intent to hold such securities to maturity. At September 30, 1999 and 1998, investments in available-for-sale securities are carried at fair value with the unrealized holding loss or gain, net of deferred tax, included in comprehensive income. Earnings per common share - Basic and diluted earnings per share have been computed in accordance with SFAS No. 128, Earnings per Share. Basic EPS, excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the issuance of additional shares in connection with the assumed conversion of stock options. The computation of basic and diluted earnings per share under SFAS No. 128 for each of the past three years is as follows (in thousands, except per share amounts): Per Share Net Income Shares Amount ---------- ------ --------- Fiscal 1999: Basic earnings per share $ 27,720 13,649 $ 2.03 Effect of dilutive securities- Stock options --- 142 (0.02) -------- ------ ------ Diluted earnings per share $ 27,720 13,791 $ 2.01 ======== ====== ====== Fiscal 1998: Basic earnings per share $ 39,364 13,592 $ 2.90 Effect of dilutive securities- Stock options --- 292 (.06) -------- ------- ------- Diluted earnings per share $ 39,364 13,884 $ 2.84 ======== ======= ======= Fiscal 1997: Basic earnings per share $ 15,619 13,474 $ 1.16 Effect of dilutive securities- Stock options --- 241 (.02) -------- ------ ------ Diluted earnings per share $ 15,619 13,715 $ 1.14 ======== ====== ====== Stock-Based compensation - The Company accounts for employee stock-based compensation using the intrinsic value method prescribed by Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees". Accordingly, the adoption of SFAS No. 123, "Accounting for Stock-Based Compensation" in fiscal 1996 had no effect on the Company's results of operations. Comprehensive income - In the first quarter of 1999, the Company adopted SFAS No. 130, Reporting Comprehensive Income, which requires companies to report the components of comprehensive income in a financial statement with the same prominence as other financial statements. The Company has chosen to disclose comprehensive income, which is comprised of net income and unrealized holding gains (losses) on available for sale equity securities, in the accompanying Consolidated Statements of Changes in Shareholders' Equity. This information is shown for all periods presented. Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 3 - SECURITIES HELD FOR INVESTMENT All of the Company's investments in equity securities are classified as "available-for-sale" and accordingly, are reflected in the September 30, 1999 and 1998 Consolidated Balance Sheets at fair value, with the aggregate unrealized gain or loss, net of related deferred tax liability or asset, included in shareholders' equity. All of the Company's investment in United States Treasury Bonds (which mature in 2000 and 2001) are classified as "held-to-maturity" and accordingly, are reflected in the September 30, 1999 and 1998 Consolidated Balance Sheets at amortized cost. There were no sales of securities during fiscal 1999 or 1998. An analysis of the Company's investment in marketable securities is as follows (in thousands): - -------------------------------------------------------------------------------- Amortized Unrealized Cost Gain (Loss) Fair Value - -------------------------------------------------------------------------------- September 30, 1999 - Equity Securities $ 561 $ (214) $ 347 United States Treasury Bonds 22,589 687 23,276 ------- ------- ------- $23,150 $ 473 $23,623 ======= ======= ======= September 30, 1998 - Equity Securities $ 561 $ (238) $ 323 United States Treasury Bonds 22,585 1,782 24,367 ------- ------- ------- $23,146 $ 1,544 $24,690 ======= ======= ======= NOTE 4 - PROPERTY AND EQUIPMENT SEAHAWK - In 1999, the Company commenced an approximately $23 million upgrade of the SEAHAWK, in compliance with a four-year contract extension. Pursuant to the contract, the Company will receive approximately $20 million in upgrade reimbursement payments from the customer, of which $10 million was received at September 30, 1999 and recorded to Deferred Credits. These upgrade reimbursement payments, net after certain costs, will be amortized into revenues over the four-year contract extension period. ATWOOD FALCON - In November 1998, the ATWOOD FALCON commenced drilling under its three-year contract with Shell Philippines Exploration B.V., following completion of its approximately $45 million water-depth upgrade. The contract provided for the payments of $11.2 million in mobilization fees of which $10.4 million (net after mobilization costs) was recorded to Deferred Credits and is being amortized into revenue over the three-year contract period, with an unamortized balance of $7.0 million at September 30, 1999. VICKSBURG - In December 1998, the VICKSBURG commenced drilling in India under a one-year plus option contract with Enron Oil & Gas India Ltd., following completion of its approximately $35 million refurbishment and upgrade. The VICKSBURG contract has been extended for another year in India. ATWOOD HUNTER - In fiscal 1997, the ATWOOD HUNTER was upgraded to achieve up to 3,500 feet water-depth drilling capability and relocated from Southeast Asia to the United States Gulf of Mexico at an aggregate cost of approximately $40 million. The rig has one more year remaining on its three-year contract with British-Borneo Petroleum Inc. The contract provided for the payment of a $10 million mobilization fee of which $6.4 million (net after mobilization costs) was recorded to Deferred Credits and is being amortized into revenues over the three-year contract period, with an unamortized balance of $2.0 million at September 30, 1999. ATWOOD SOUTHERN CROSS - During fiscal year 1997, the ATWOOD SOUTHERN CROSS was mobilized from Australia to a Singapore shipyard, refurbished and upgraded to achieve 2,000 feet water-depth drilling capability at an aggregate cost of approximately $35 million. During November 1997, the rig was mobilized from Singapore to Australia to commence working under a contract which it completed in September 1998. While waiting for a new contract opportunity, the rig is currently idle in Australia. RIG 200 - RIG-200 (a modular platform rig built in 1995) is owned 50 percent by the Company and 50 percent by Helmerich & Payne, Inc. (current owner of 22 percent of the Company's outstanding common stock). Since the Company has a 50 percent undivided ownership interest in RIG-200 and is actively involved in its operations, the Company accounts for its investment in the rig on a proportionate consolidation method. Accordingly, the Company's $12 million investment in RIG-200 is reflected in "Drilling Vessels, Equipment and Drill Pipe" in the Consolidated Balance Sheets, with 50 percent of the rig's operating results for fiscal years 1999, 1998 and 1997 reflected in the Company's Consolidated Statements of Operations. RIG-200 completed its initial contract in June 1999 and is currently idle in Australia while waiting for a new contract opportunity. NOTE 5 - DEBT LONG-TERM DEBT - A summary of long-term debt is as follows (in thousands): September 30, -------------------------- 1999 1998 --------- -------- Revolving credit agreement, bearing interest (market adjustable) at approximately 7 percent per annum at September 30, 1999 $54,000 $ 72,000 Term note, bearing interest at 6 percent per annum --- 750 ------- -------- 54,000 72,750 Less - current maturities --- 750 ------- -------- $54,000 $ 72,000 ======= ======== In July 1997, the Company entered into a $125 million revolving credit facility with a bank group. The revolving line of credit converted to a reducing facility on March 31, 1999, with commitment reduction of $8.3 million per quarter until final maturity on March 31, 2002. The maximum amount permitted to be outstanding at September 30, 1999 was $100 million. The credit facility permits the Company to prepay principal at anytime without incurring penalty. The bank group's collateral for this revolving credit facility consists principally of preferred mortgages on the ATWOOD HUNTER, ATWOOD EAGLE and the RICHMOND plus the assignment of $20 million in market value of United States Treasury Bonds. The credit facility prohibits the Company from incurring any additional indebtedness in excess of $5 million, disposing of any material assets, paying dividends or repurchasing any of the Company's outstanding common stock. The maturities of long-term debt are as follows (in thousands): FISCAL YEAR AMOUNT 2000 $ --- 2001 20,300 2002 33,700 ------- $54,000 ======= ___________ LINE OF CREDIT - The Company has a $5 million unsecured line of credit with a bank to support issuance, when required, of standby letters of guarantee and the Indian tax guarantee (see Note 6). At September 30, 1999, standby letters of guarantee in the aggregate amount of approximately $2.4 million were outstanding under this facility. NOTE 6 - INCOME TAXES Domestic and foreign income before income taxes for the three years in the period ended September 30, 1999 are as follows (in thousands): - ------------------------------------------------------------------------------- Fiscal Fiscal Fiscal 1999 1998 1997 ------- -------- -------- Domestic income $29,648 $ 39,553 $ 14,623 Foreign income 16,859 20,766 10,755 ------- -------- -------- $46,507 $ 60,319 $ 25,378 ======= ======== ======== The provision (benefit) for domestic and foreign taxes on income consists of the following (in thousands): Fiscal Fiscal Fiscal 1999 1998 1997 ------- ------- ------- Current domestic provision $ 8,000 $11,487 $ 5,736 Deferred domestic provision (benefit) 3,500 3,970 (330) Current foreign provision 7,287 5,498 4,353 ------- ------- ------- $18,787 $20,955 $ 9,759 ======= ======= ======= The components of the deferred income tax assets (liabilities) as of September 30, 1999 and 1998 are summarized as follows (in thousands): September 30, ----------------------- 1999 1998 ------- ------- Deferred tax assets - Net operating loss carryforwards $2,760 $ 2,860 Book reserves 700 1,200 Deferred mobilization revenues 700 2,100 ------ ------- 4,160 6,160 ------ ------- Deferred tax liabilities - Difference in book and tax basis of equipment 9,190 7,360 Deferred charges 123 450 Unrealized holding loss on available-for-sale securities (75) (80) ------ ------ 9,238 7,730 ------ ------ Net deferred tax assets (liabilities) before valuation allowance (5,078) (1,570) Valuation allowance (2,370) (2,370) ------ ------ $(7,448) $(3,940) ======= ======= Net current deferred tax assets $ 720 $ 880 Net noncurrent deferred tax liabilities (8,168) (4,820) -------- ------- $ (7,448) $(3,940) ======== ======= U.S. deferred taxes have not been provided on foreign earnings totaling approximately $ 24.5 million which are permanently invested abroad. Foreign tax credits totaling approximately $ 12.4 million are available to reduce the U.S. taxes on such amounts. The differences between the statutory and the effective income tax rate are as follows: Fiscal Fiscal Fiscal 1999 1998 1997 ------ ------ ------ Statutory income tax rate 35% 35% 35% Increase (decrease) in tax rate resulting from - Foreign tax rate differentials, net of foreign tax credit utilization 5 (1) 10 Change in valuation allowance --- --- (2) Investment tax credit utilization --- --- (5) Other, net --- 1 --- ----- ---- ---- Effective income tax rate 40% 35% 38% ===== ==== ==== The Company has United States net operating loss carryforwards totaling $7.9 million which expire in fiscal years 2001 through 2003. Due to various utilization limitations, management estimates that a significant portion of this tax attribute will not be available to reduce future tax obligations; accordingly, a $2.4 million valuation allowance is recorded as of September 30, 1999. For several years, the Company has pursued legal action to collect certain tax refund claims in India. As a result of favorable court decisions in India, and upon the Company providing letters of guarantee, the Company received tax refunds in 1997 and 1994 of $1.1 million and $.6 million, respectively, (net of taxes on interest and other related expenses), which were recorded to other Deferred Credits, pending ultimate resolution of the issue by Indian High Court. During fiscal year 1999, all but approximately $400,000 of the amounts received were favorably resolved and accordingly recognized (net of expenses) in income. NOTE 7 - CAPITAL STOCK STOCK OPTION PLANS - The Company has an incentive equity plan ("1996 Plan") whereby 670,000 shares of common stock may be granted to officers and key employees through February 12, 2007. At September 30, 1999, options to purchase 298,000 shares were outstanding under this Plan. The Company also has options outstanding to purchase 206,900 shares under a stock option plan ("1990 Plan"). Under both plans, the exercise price of each option equals the market price of the Company's common stock on the date of grant, all outstanding options have a maximum term of 10 years, and options vest over a period from the second to the fifth year from the date of grant. A summary of the status of the Company's Plans as of September 30, 1999, 1998 and 1997, and changes during the years ended on those dates is presented below: Fiscal Fiscal Fiscal 1999 1998 1997 -------------------------- -------------------------- ---------------------------- Weighted- Weighted- Weighted- Number of Average Number of Average Number of Average Options Exercise Price Options Exercise Price Options Exercise Price --------- -------------- -------- -------------- ---------- -------------- Outstanding at beginning of Year 566,200 $ 22.76 444,700 $ 15.42 506,800 $ 9.46 Granted --- --- 208,000 33.07 112,500 28.00 Exercised (49,925) 10.75 (78,500) 8.39 (164,000) 6.22 Forfeited (11,375) 26.00 (8,000) 23.73 (10,600) 6.46 Expired --- --- --- --- --- --- ------- ------ -------- Outstanding at end of year 504,900 $ 23.88 566,200 $ 22.76 444,700 $ 15.42 Exercisable at end of year 137,150 $ 13.14 88,950 $ 8.49 69,450 $ 5.67 Available for grant at end of Year 374,375 366,000 567,000 Weighted-average fair value of options granted during the year --- $ 14.21 $ 23.36 The following table summarizes information about stock options outstanding at September 30, 1999: Options Outstanding Options Exercisable ------------------------------------------ ------------------------ Weighted- Average Weighted- Weighted- Range of Remaining Average Average Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price ---------------- ------- ---------------- -------------- ------ -------------- $ 4.87 to 5.38 33,000 3.0 years $ 5.17 33,000 $ 5.17 6.50 to 6.69 54,400 4.8 years 6.62 38,900 6.64 16.63 to 18.97 220,500 7.6 years 17.47 44,000 17.69 28.00 94,000 7.5 years 28.00 21,250 28.00 48.75 to 52.06 103,000 8.2 years 48.94 --- --- ------- ------- ------- ------- 4.87 to 52.06 504,900 7.1 years $ 23.88 137,150 $ 13.14 ======= ======= ======= =======
As permitted by SFAS No. 123, the Company applies APB Opinion No. 25 and related Interpretations in accounting for its stock option plans. Accordingly, no compensation cost has been recognized from the granting of options pursuant to its stock option plans. Had compensation costs been determined based on the fair value at the grant dates for awards made in fiscal years 1998 and 1997 consistent with the method of SFAS No. 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below (in thousands, except for per share amounts): Fiscal Fiscal Fiscal 1999 1998 1997 -------- -------- -------- Net Income As reported $27,720 $39,364 $15,619 Pro forma 27,186 38,830 15,404 Earnings per share As reported - Basic 2.03 2.90 1.16 Diluted 2.01 2.84 1.14 Pro forma Basic 1.99 2.86 1.14 Diluted 1.97 2.80 1.12 The fair value of grants made in fiscal 1998 and 1997 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used: fiscal 1998 - risk free interest rate of 5.4 percent, expected volatility of 42 percent, expected lives of 5 years and no dividend yield; fiscal 1997 - risk-free interest rate of 6.7 percent, expected volatility of 33.6 percent, expected lives of 5 years and no dividend yield. COMMON STOCK DIVIDEND - On November 19, 1997, the Company effected a 100 percent common stock dividend resulting in the issuance of approximately 6,775,000 shares of common stock and the transfer of approximately $ 6,775,000 from paid-in capital to common stock which represented the par value of additional shares issued. All share and per share information has been retroactively restated in the Consolidated Financial Statements to reflect the stock dividend. NOTE 8 - RETIREMENT PLAN The Company has a contributory retirement plan (the "Plan") under which qualified participants may make contributions of up to 5% of their compensation, as defined (the basic contribution). The Company makes contributions to the Plan equal to twice the basic contributions. Company contributions vest 100 percent to each participant beginning with the fourth year of participation. If a participant terminates employment before becoming fully vested, the unvested portion is credited to the Company's account and can be used only to offset Company contribution requirements. In fiscal 1999 and 1997, the Company used forfeitures of $190,000 and $84,000 respectively, to reduce its cash requirements, which resulted in actual contributions of approximately $1.3 million, and $.9 million, respectively. In 1998, the Company made actual contributions of approximately $1.3 million, with no forfeitures used to reduce its cash requirements. As of September 30, 1999, there are approximately $2,000 of contribution forfeitures which can be utilized to reduce future Company cash contribution requirements. NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities included in the accompanying Consolidated Balance Sheets approximated fair value due to the short maturity of these instruments. Since the bank debt has a market adjustable interest rate, the carrying value approximated fair value as of fiscal year end 1999 and 1998. The Company's only financial instruments at September 30, 1999 and 1998 with a fair value different from carrying value are marketable securities; the difference of which is shown in Note 3. NOTE 10 - CONCENTRATION OF MARKET AND CREDIT RISK All of the Company's customers are in the oil and gas offshore exploration and production industry. This industry concentration has the potential to impact the Company's overall exposure to market and credit risks, either positively or negatively, in that the Company's customers could be affected by similar changes in economic, industry or other conditions. However, the Company believes that the credit risk posed by this industry concentration is offset by the creditworthiness of the Company's customer base. The Company's portfolio of accounts receivable is comprised of major international corporate entities and government organizations with stable payment experience. Historically, the Company's uncollectible accounts receivable have been immaterial, and typically, the Company does not require collateral for its receivables. Drilling revenues for fiscal 1999 include $34.7 million, $31.0 million and $23.1 million in revenues received from Shell Philippines Exploration B.V./Sabah Shell Petroleum Company Limited, British-Borneo Petroleum Inc. and ESSO Australia Limited/ESSO Production Malaysia, Inc., respectively. Drilling revenues for fiscal 1998 include $35.2 million, $25.9 million and $20.4 million in revenues received from British-Borneo Petroleum Inc., ESSO Australian Limited/ESSO Production Malaysia, Inc. and Santos Ltd., respectively. Drilling revenues for fiscal 1997 include $24.3 million, $19.3 million and $16.9 million in revenues received from ESSO Australia Limited/ESSO Production Malaysia, Inc., Mobil Equatorial Guinea Inc. and Carigali-Triton Operating Company Sdn. Bhd., respectively. NOTE 11 - NEW ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board has issued a new accounting standard; SFAS No. 137 "Accounting for Derivative Instruments and Hedging Activities - Defferal of the Effective Date of FASB Statement No. 133". This Statement is effective upon issuance and is an amendment to SFAS No. 133. SFAS No. 133 has been amended to become effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. It establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. In the opinion of management, the adoption of SFAS No. 133 will not have a material impact on the Company's financial statements. NOTE 12 - OPERATING LEASES The Company leases its office space under an operating lease agreement. This lease has essentially the same terms and conditions as the original lease, and will expire in fiscal 2005. Future minimum lease payments for operating leases are as follows (in thousands): Fiscal year ending September 30, 2000........................$348 2001........................ 408 2002........................ 408 2003........................ 408 2004 and thereafter......... 578 Total rent expense under operating leases was approximately $285,000, $268,000 and $228,000 for fiscal years ended September 30, 1999, 1998 and 1997, respectively. NOTE 13 - OPERATIONS BY GEOGRAPHIC AREAS The Company is engaged in offshore contract drilling. The contract drilling operations consist of contracting Company owned or managed offshore drilling equipment primarily to major oil and gas exploration companies. Operating income is contract revenues less operating costs, general and administrative expenses and depreciation. In computing operating margin for each geographic area, none of the following items were considered: other income (expense) and domestic and foreign income taxes. Identifiable assets are those assets that are used by the Company in operations in each geographic area. General corporate assets are principally investments in marketable securities. A summary of revenues, operating margin and identifiable assets by geographic areas is as follows (in thousands): Fiscal Fiscal Fiscal 1999 1998 1997 ---------- --------- ---------- CONTRACT REVENUES: United States $ 35,122 $ 46,454 $ 10,585 Australia 22,237 44,445 27,599 Southeast Asia 44,215 28,661 31,583 Mediterranean Sea 37,063 18,699 --- India 11,372 --- --- Africa --- 13,550 19,315 ---------- --------- --------- $ 150,009 $151,809 $ 89,082 ========== ========= ========= OPERATING INCOME(LOSS): United States $ 13,005 $ 24,102 $ 5,642 Australia (6,475) 13,822 8,236 Southeast Asia 14,378 9,911 8,235 Mediterranean Sea 26,164 12,274 --- Africa --- 8,819 8,200 India 8,678 --- --- General and administrative expenses (7,519) (7,331) (6,100) ---------- --------- --------- $ 48,231 $ 61,597 $ 24,213 ========== ========= ========= IDENTIFIABLE ASSETS: United States $ 76,227 $ 76,557 $ 81,800 Australia 46,688 59,388 49,713 Southeast Asia 85,650 97,736 40,387 Mediterranean Sea 21,921 24,908 --- Africa 2 2 20,457 India 40,180 238 3 General corporate 22,936 22,908 22,970 --------- --------- --------- $ 293,604 $281,737 $ 215,330 ========= ========= ========= NOTE 14 - QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly results for fiscal years 1999 and 1998 are as follows (in thousands, except per share amounts): QUARTERS ENDED ------------------------------------------------ DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, ----------- --------- -------- ------------ 1999 Revenues $ 34,977 $ 41,325 $ 38,727 $ 34,980 Income before income taxes 10,588 13,722 11,784 10,413 Net income 6,776 8,724 7,394 4,826 Earnings per common share (1) - Basic .50 .64 .54 .35 Diluted .49 .63 .53 .35 1998 Revenues $ 36,224 $ 41,428 $ 39,294 $ 34,863 Income before income taxes 13,289 17,966 15,503 13,561 Net income 8,677 11,682 10,034 8,971 Earnings per common share (1) - Basic .64 .86 .74 .66 Diluted .63 .84 .72 .65 ____________ (1) The sum of the individual quarterly net income per common share amounts may not agree with year-to-date net income per common share as each quarterly computation is based on the weighted average number of common shares outstanding during that period. DIRECTORS OFFICERS ROBERT W. BURGESS (2,3) JOHN R. IRWIN Financial Executive, Retired President, Chief Executive Officer Orleans, Massachusetts JAMES M. HOLLAND GEORGE S. DOTSON (1,3) Senior Vice President and Secretary Vice President Helmerich & Payne, Inc. GLEN P. KELLEY President Vice President - Contracts and Helmerich & Payne International Administration Drilling Co. Tulsa, Oklahoma W. H. HELMERICH, III Chairman Helmerich & Payne, Inc. Tulsa, Oklahoma HANS HELMERICH (1, 3) President, Chief Executive Officer Helmerich & Payne, Inc. Tulsa, Oklahoma JOHN R. IRWIN (1) President, Chief Executive Officer Atwood Oceanics, Inc. Houston, Texas WILLIAM J. MORRISSEY (2) Bank Executive, Retired Elkhorn, Wisconsin (1) Executive Committee (2) Audit Committee (3) Compensation Committee ANNUAL MEETING The annual meeting of stockholders will be held on February 10, 2000 at the Company's principal office: 15835 Park Ten Place Drive, Houston, Texas. A formal notice of the meeting together with a proxy statement and form of proxy will be mailed to stockholders about January 15, 2000. TRANSFER AGENT AND REGISTRAR Continental Stock Transfer & Trust Company 2 Broadway New York, New York 10004 FORM 10-K A copy of the Company's Form 10-K as filed with the Securities and Exchange Commission is available free on request by writing to: Secretary, Atwood Oceanics, Inc. P. O. Box 218350 Houston, Texas 77218 STOCK PRICE INFORMATION - The common stock of Atwood Oceanics, Inc. is traded on the New York Stock Exchange ("NYSE") under the symbol "ATW". No cash dividends on common stock were paid in fiscal year 1998 or 1999, and none are anticipated in the foreseeable future. As of September 30, 1999, there were over 750 beneficial owners of the common stock of Atwood Oceanics, Inc. As of November 30, 1999, the closing sale price of the common stock of Atwood Oceanics, Inc., as reported by NYSE, was $ 33 5/8 per share. The following table sets forth the range of high and low sales prices per share of common stock as reported by the NYSE for the periods indicated. Fiscal Fiscal 1998 1999 ------ ------ QUARTERS ENDED LOW HIGH LOW HIGH - -------------- ----- ------- ------- ------ December 31 $ 40 1/16 $ 61 5/8 $ 15 7/8 $ 32 1/2 March 31 38 3/4 55 1/4 16 1/8 31 3/4 June 30 37 3/8 61 3/8 25 7/8 37 3/4 September 30 15 1/16 40 3/4 28 1/2 35 9/16 APPENDIX The following graphic and image information in the form of "Bar Charts" are located in the Annual Report immediately following "Highlights". BAR CHART - CONTRACT REVENUES ($ MILLIONS) 1995 1996 1997 1998 1999 $72.2 $79.5 $89.1 $151.8 $150.0 BAR CHART - EARNINGS, BEFORE DEPRECIATION, INTEREST, TAXES AND INVESTMENT INCOME ($ MILLIONS) 1995 1996 1997 1998 1999 $16.9 $22.8 $34.2 $79.2 $72.1 BAR CHART - OPERATING CASH FLOW ($ MILLIONS) 1995 1996 1997 1998 1999 $14.9 $20.3 $25.8 $61.4 $55.7 BAR CHART - NET INCOME ($ MILLIONS) 1995 1996 1997 1998 1999 $7.1 $11.4 $15.6 $39.4 $27.7 BAR CHART - CAPITAL EXPENDITURES ($ MILLIONS) 1995 1996 1997 1998 1999 $25.7 $9.5 $62.8 $79.6 $38.8 BAR CHART - CASH AND SECURITIES HELD FOR INVESTMENT ($ MILLIONS) 1995 1996 1997 1998 1999 $38.0 $40.5 $42.2 $34.5 $43.0 EX-21.1 9 EXHIBIT 21.1 SUBSIDIARY COMPANIES AND STATE OR JURISDICATION OF INCORPORATION All Oceans Drilling B.V. Netherlands 100% Alpha Offshore Drilling Services Cayman Islands, B.W.I. 100% Atwood Drilling Inc. Delaware 100% Atwood Offshore Inc. Delaware 100% Atwood Hunter Co. Delaware 100% Atwood Oceanics Australia Pty. Ltd. Australia 100% Atwood Oceanics Drilling Company Texas 100% Atwood Oceanics International, S.A. Panama 100% Atwood Oceanics (M) Sdn. Bhd. Malaysia 100% Atwood Oceanics (NZ) Limited New Zealand 100% Atwood Oceanics Pacific Limited Cayman Islands B.W.I. 100% Atwood Oceanics Platforms Pty. Ltd. Australia 100% Atwood Oceanics Service Pty. Ltd. Australia 100% Atwood Oceanics West Tuna Pty. Ltd. Australia 50% Aurora Offshore Service GmbH Germany 100% Clearways Offshore Development Drilling Sdn. Bhd. Malaysia 30% Drillquest (M) Sdn. Bhd. Malaysia 90% Eagle Oceanics, Inc. Delaware 100% PT Pentawood Offshore Drilling Indonesia 80% Swiftdrill, Inc. Texas 100% Swiftdrill Nigeria Limited Nigeria 60% EX-23.1 10 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated November 23, 1999, incorporated by reference in this Form 10-K, into the Company's previously filed Registration Statements No. 33-52065 and 333-74255 both on Form S-8. ARTHUR ANDERSEN LLP Houston, Texas December 15, 1999 EX-27.1 11 FDS --
5 (Replace this text with the legend) 0000008411 Atwood Oceanics, Inc. 1000 USD Year Sep-30-1999 Oct-01-1998 Sep-30-1999 1 20,105 22,936 18,289 0 8,010 50,532 365,689 146,775 293,604 19,013 54,000 0 0 13,675 52,319 293,604 150,009 150,009 77,874 101,778 0 0 4,172 46,507 18,787 27,720 0 0 0 27,720 2.03 2.01
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