-----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, VSD0Ydvfj0RHe86MFipo0fQdpAAHctGmNJdfW/wwRd2Tj4habjO2BkkeJ0wVoHXk Sq9jEtpUcas6mybavN7QVA== 0000950129-97-003297.txt : 19970815 0000950129-97-003297.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950129-97-003297 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARINE DRILLING COMPANIES INC CENTRAL INDEX KEY: 0000860521 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 742558926 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18309 FILM NUMBER: 97660216 BUSINESS ADDRESS: STREET 1: ONE SUGAR CREEK CENTER BLVD CITY: SUGAR LAND STATE: TX ZIP: 77478-3435 BUSINESS PHONE: 7132433000 FORMER COMPANY: FORMER CONFORMED NAME: MARINE HOLDING CO DATE OF NAME CHANGE: 19910707 10-Q 1 MARINE DRILLING COMPANIES, INC. - 6/30/97 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ----------------------- FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM ____________ TO ___________ COMMISSION FILE NUMBER: 0-18309 ----------------------- MARINE DRILLING COMPANIES, INC. (Exact name of registrant as specified in its charter) TEXAS 74-2558926 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
ONE SUGAR CREEK CENTER BLVD., SUITE 600, SUGAR LAND, TEXAS 77478-3556 (Address of principal executive offices and zip code) (281) 243-3000 (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and formal fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . --- --- NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AT AUGUST 12, 1997 -- 51,529,011 ================================================================================ 2 MARINE DRILLING COMPANIES, INC. FORM 10-Q TABLE OF CONTENTS
Page ---- PART I - FINANCIAL INFORMATION Item 1. Index to Financial Statements Independent Auditors' Review Report..................................................... 1 Consolidated Balance Sheets - June 30, 1997 and December 31, 1996..................................................... 2 Consolidated Statements of Operations - Three and Six Months Ended June 30, 1997 and 1996....................................... 3 Consolidated Statements of Cash Flows - Six Months Ended June 30, 1997 and 1996................................................. 4 Notes to Consolidated Financial Statements.............................................. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................. 8 PART II - OTHER INFORMATION Item 1. Legal Proceedings............................................................................. 17 Item 4. Submission of Matters to a Vote of Security Holders........................................... 17 Item 5. Other Information............................................................................. 17 Item 6. Exhibits and Reports on Form 8-K.............................................................. 18 SIGNATURES................................................................................................... 19
(i) 3 INDEPENDENT AUDITORS' REVIEW REPORT The Board of Directors and Shareholders Marine Drilling Companies, Inc.: We have reviewed the accompanying consolidated balance sheet of Marine Drilling Companies, Inc. and subsidiaries as of June 30, 1997, and the related consolidated statements of operations and cash flows for the three-month and six-month periods ended June 30, 1997 and 1996. These consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Marine Drilling Companies, Inc. and subsidiaries as of December 31, 1996, and the related consolidated statements of operations, shareholders' equity and cash flows for the year then ended (not presented herein); and in our report dated January 24, 1997, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1996 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. KPMG PEAT MARWICK LLP Houston, Texas July 25, 1997 1 4 MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
JUNE 30, DECEMBER 31, 1997 1996 --------- --------- ASSETS Current Assets: Cash and cash equivalents $ 4,660 $ 69,761 Restricted cash 4,200 2,200 Short-term investments 9,988 9,990 Accounts receivable - trade and other, net 36,931 21,378 Inventory 623 897 Prepaid expenses and other 2,722 1,461 --------- --------- Total current assets 59,124 105,687 Property and Equipment 266,199 182,200 Less accumulated depreciation 40,727 33,463 --------- --------- Property and equipment, net 225,472 148,737 Goodwill 455 -- Other 1,369 523 --------- --------- $ 286,420 $ 254,947 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ -- $ 1,000 Accounts payable 6,100 3,249 Accrued expenses 6,791 4,284 Current tax liability 3,666 -- Employer's liability claims, current 1,000 483 --------- --------- Total current liabilities 17,557 9,016 Long-Term Debt -- 9,000 Employer's Liability Claims, non-current and other 1,642 1,469 Minority Interest in Subsidiary 1,717 -- Deferred Income Taxes 12,526 13,729 Shareholders' Equity: Common stock, par value $.01. Authorized 200,000,000 shares; issued and outstanding 51,418,860 and 51,262,519 shares, as of June 30, 1997 and December 31, 1996, respectively 514 513 Common stock restricted (1,309) (628) Additional paid-in capital 193,401 184,992 Retained earnings from January 1, 1993 60,372 36,856 --------- --------- Total shareholders' equity 252,978 221,733 --------- --------- Commitments and contingencies -- -- --------- --------- $ 286,420 $ 254,947 ========= =========
See notes to consolidated financial statements and accompanying accountants' review report. 2 5 MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------------ ------------------------------ 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Revenues $ 44,486 $ 27,360 $ 81,236 $ 48,599 Costs and Expenses: Contract drilling 18,557 15,679 35,033 29,211 Depreciation and amortization 4,047 2,873 7,628 5,570 General and administrative 2,007 2,203 3,788 3,613 ------------ ------------ ------------ ------------ 24,611 20,755 46,449 38,394 ------------ ------------ ------------ ------------ Operating income 19,875 6,605 34,787 10,205 ------------ ------------ ------------ ------------ Other Income (Expense): Interest expense (71) (203) (421) (384) Interest income 669 222 1,726 414 Other income (expense) 47 28 87 86 ------------ ------------ ------------ ------------ 645 47 1,392 116 ------------ ------------ ------------ ------------ Income before income taxes 20,520 6,652 36,179 10,321 Income tax expense 7,182 2,398 12,663 3,755 ------------ ------------ ------------ ------------ Net income $ 13,338 $ 4,254 $ 23,516 $ 6,566 ============ ============ ============ ============ Income per common share $ 0.26 $ 0.10 $ 0.46 $ 0.15 ============ ============ ============ ============ Weighted average common shares outstanding 51,408,251 44,338,438 51,369,324 44,071,363 ============ ============ ============ ============
See notes to consolidated financial statements and accompanying accountants' review report. 3 6 MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, ---------------------- 1997 1996 -------- -------- Cash Flows From Operating Activities: Net income $ 23,516 $ 6,566 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,628 5,570 Deferred income taxes 943 1,757 Pre-quasi-reorganization net operating loss carryforwards 5,631 -- Tax effects of common stock issued pursuant to long-term incentive plan 795 1,854 Gain on disposition of equipment (53) (88) Loss on sale of short-term investments 2 -- Accrual of compensation expense, net 350 202 Issuance of common stock to Employee 401(k) Plan and the Non-Employee Directors' Plan 654 492 Amortization of interest income (453) -- Changes in operating assets and liabilities: Receivables (15,537) (879) Other current assets (987) (1,099) Payables, accrued expenses, current taxes and employer's liability claims 6,802 (166) Other (1,117) (86) -------- -------- Net cash provided by operating activities 28,174 14,123 -------- -------- Cash Flows From Investing Activities: Purchase of short-term investments (19,514) -- Maturity of short-term investments 19,967 -- Purchase of equipment (29,965) (9,550) Acquisition of company, net of cash acquired (52,134) -- Proceeds from disposition of equipment 72 228 -------- -------- Net cash used in investing activities (81,574) (9,322) -------- -------- Cash Flows From Financing Activities: Proceeds from exercise of stock options 299 1,493 Payment of debt (10,000) -- Increase in restricted cash (2,000) -- -------- -------- Net cash provided by (used in) financing activities (11,701) 1,493 -------- -------- Net increase (decrease) in cash and cash equivalents (65,101) 6,294 Cash and cash equivalents at beginning of period 69,761 12,260 -------- -------- Cash and cash equivalents at end of period $ 4,660 $ 18,554 ======== ========
See notes to consolidated financial statements and accompanying accountants' review report. 4 7 MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, -------------------- 1997 1996 -------- -------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 468 $434 Income taxes 3,698 145 Noncash investing and financing activities: Issuance of 62,000 and 60,833 shares in 1997 and 1996 respectively, of restricted common stock $ 1,081 $368 Forfeitures of 3,000 shares in 1997 of restricted common stock 50 -- Business acquisition, net of cash acquired: Working capital, other than cash $ 750 $ -- Plant and equipment (54,146) -- Purchase price in excess of the net assets acquired (455) -- Minority interest 1,717 -- -------- ---- Net cash used for acquisition $(52,134) $ -- ======== ====
See notes to consolidated financial statements and accompanying accountants' review report. 5 8 MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (UNAUDITED) (1) INTERIM FINANCIAL INFORMATION The consolidated interim financial statements of Marine Drilling Companies, Inc. (the "Company" or the "Registrant") presented herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and notes required by generally accepted accounting principles for complete financial statements have been condensed or omitted. In the opinion of management, these statements include all adjustments (all of which consist of normal recurring adjustments except as otherwise noted herein) necessary to present fairly the Company's financial position and results of operations for the interim periods presented. The financial data for the six months ended June 30, 1997 included herein has been subjected to a limited review by KPMG Peat Marwick LLP, the Registrants' independent public accountants, whose report is included herein. These statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. The results of operations for the six months ended June 30, 1997 are not necessarily indicative of the results of operations that may be expected for the year. (2) STATEMENT OF FINANCIAL ACCOUNTING STANDARDS Effective December 1997, the Company will be required to adopt Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128 introduces the concept of basic earnings per share, which represents net income divided by the weighted average common shares outstanding - without the dilutive effects of common stock equivalents (options, warrants, etc.) Diluted earnings per share, giving effect for common stock equivalents, will be reported when SFAS 128 is adopted in the fourth quarter of 1997. The impact of adopting SFAS 128 is anticipated to be immaterial. Effective December 1997, the Company will be required to adopt Statement of Financial Accounting Standards No. 129, "Disclosure of Information about Capital Structure" ("SFAS 129"). SFAS 129 required that all entities disclose in summary form within the financial statements the pertinent rights and privileges of the various securities outstanding. An entity is to disclose within the financial statements the number of shares issued upon conversion, exercise, or satisfaction of required conditions during at least the most recent annual fiscal period and any subsequent interim period presented. Other special provisions apply to preferred and redeemable stock. The Company's adoption of SFAS 129 in the fourth quarter of 1997 is not expected to have a material impact on reported results. In June 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which establishes standards for reporting and display of comprehensive income and its components. The components of comprehensive income refer to revenues, expenses, gains and losses that are excluded from net income under current accounting standards, including unrecognized foreign currency translation items, minimum pension liability adjustments and unrealized gains and losses on certain investments in debt and equity securities. SFAS 130 requires that all items that are recognized under accounting standards as components of comprehensive income be reported in a financial statement displayed in equal prominence with the other financial statements; the total of other comprehensive income for a period is required to be transferred to a component of equity that is separately displayed in a statement of financial position at the end of an accounting period. SFAS 130 is effective for both interim and annual periods beginning after December 15, 1997, at which time the Company will adopt the provisions. The Company does not expect SFAS 130 to have a material effect on reported results. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segment of an Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes standards for the way public enterprises are to report information about operating segments in annual financial statements and requires the reporting of selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. SFAS 131 is effective for periods beginning after December 15, 1997, at which time the Company will adopt the provisions. The Company does not expect SFAS 131 to have a material effect on its reported results. (3) INCOME TAXES Income taxes consist of the following:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------- ------------------- 1997 1996 1997 1996 ------- ------- ------- ------- Current: U.S. federal .................................. $ 3,666 $ (64) $ 4,705 $ 1 State ......................................... 44 -- 44 -- Foreign ....................................... 472 70 545 143 ------- ------- ------- ------- 4,182 6 5,294 144 ------- ------- ------- ------- Other: U.S. federal - deferred ....................... 368 1,190 943 1,757 Tax benefits not recognized in the statement of operations Pre-quasi-reorganization net operating loss carryforwards ................ 2,679 -- 5,631 -- Tax effects of common stock issued pursuant to long-term incentive plan .................... (47) 1,202 795 1,854 ------- ------- ------- ------- 3,000 2,392 7,369 3,611 ------- ------- ------- ------- Total tax provision ............................... $ 7,182 $ 2,398 $12,663 $ 3,755 ======= ======= ======= =======
For the six months ended June 30, 1997 and 1996, the effective tax rate for financial reporting purposes was 35% and 36% respectively, which approximates the U.S. federal statutory rate of 35%. The effective rate was higher than the statutory rate in 1996 due to the Company's treatment of foreign tax payments. 6 9 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at June 30, 1997 and December 31, 1996 are presented below.
JUNE 30, DECEMBER 31, 1997 1996 -------- -------- (IN THOUSANDS) Deferred tax assets: Net operating loss carryforwards ..................... $ 18,435 $ 24,065 Investment tax, general business and alternative tax credit carryforwards ......................... 4,862 4,862 Employer's liability claims .......................... 871 683 Allowance for bad debts .............................. 53 53 -------- -------- Total gross deferred tax assets ...................... 24,221 29,663 Less valuation allowance ............................. (21,204) (28,980) -------- -------- Net deferred tax assets .............................. 3,017 683 -------- -------- Deferred tax liabilities: Plant and equipment, principally due to differences in depreciation .................................. 14,636 13,344 Deferred intercompany gains and losses ............... 907 1,068 -------- -------- Total gross deferred tax liabilities ................. 15,543 14,412 -------- -------- Net deferred tax liability ............................... $ 12,526 $ 13,729 ======== ========
(4) NET INCOME PER COMMON SHARE Net income per common share for the three and six months ended June 30, 1997 and 1996 excludes the effect of outstanding stock options inasmuch as the potential dilution from their exercise is less than three percent. (5) COMMITMENTS AND CONTINGENCIES The Company is a defendant in certain claims and litigation arising out of operations in the normal course of business. In the opinion of management, uninsured losses, if any, will not be material to the Company's financial position or results of operations. (6) SUBSEQUENT EVENTS The Company entered into a three-year contract for the MARINE 500, which is projected to commence on or before January 1, 1999. Drilling will take place in the Pacific Rim, Southeast Asia, offshore Australia and New Zealand. The rig will be upgraded to work in water depths up to 5,000 feet with 15,000 psi drilling equipment. The rig will be taken out of service mid-1998 for four to six months for the upgrade, which is expected to cost $70 to $80 million. In July 1997, the Company entered into a Charter Agreement with Shanghai Bureau of Marine Geological Survey to bareboat charter their semi-submersible Kan Tan III for a period of five years. The Kan Tan III is a 600-foot water depth rig based upon the Pacesetter design and was built in China in 1984. The Charter Agreement commences when a minimum one-year contract is awarded. The rig is scheduled to undergo a refurbishment program by the rig owners prior to commencement of the first contract. The Company is actively seeking a long-term contract for this rig. 7 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This Form 10-Q, particularly the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains certain 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, that are not historical facts concerning, among other things, market conditions, the demand for offshore drilling services, future acquisitions and fleet expansion, future financings, future rig contracts, future capital expenditures including rig upgrades and refurbishments, and future results of operations. Actual results may differ materially from those included in the forward-looking statements, and no assurance can be given that the Company's expectations will be realized or achieved. Important factors and risks that could cause actual results to differ materially from those referred to in the forward-looking statements include (i) one or more prolonged reductions in oil or gas prices; (ii) the inadequacy of insurance and indemnification to protect the Company against liability from all consequences of well disasters, fire damage or environmental damage; (iii) the inability of the Company to obtain insurance at reasonable rates; (iv) a decrease in the demand for offshore drilling rigs especially in the U.S. Gulf of Mexico or for slot jack-up rigs; (v) the risks attendant with operations in foreign countries including actions that may be taken by foreign countries and actions that may be taken by the United States against foreign countries; (vi) the failure of the Company to successfully compete with the Company's competitors that are larger and have a greater diversity of rigs and greater financial resources than the Company; (vii) a decrease in rig utilization resulting from reactivation of currently inactive non-marketed rigs or new construction of rigs; (viii) the risks of delay and cost overruns attendant to large construction projects such as the upgrade and refurbishment of certain of the Company's rigs, including shortages of material or skilled labor, engineering problems, latent defects or damage to current equipment, work stoppages, weather interference and inability to obtain requisite permits or approvals; (ix) the return of market and other conditions similar to those in which the Company incurred net losses before extraordinary items for each of the years ended December 31, 1991, 1992 and 1995; (x) the loss of key management personnel or the inability of the Company to attract and retain sufficient qualified personnel to operate its rigs; (xi) the risk that labor shortages could result in material wage increases; (xii) the adoption of additional laws or regulations that limit or reduce drilling opportunities or that increase the cost of drilling or increase the potential liability of the Company; (xiii) the occurrence of risks attendant to contract drilling operations including blowouts, cratering, fires and explosions, capsizing, grounding or collision involving rigs while in operation, mobilization or otherwise or damage to rigs from weather, sea conditions or unsound location; (xiv) adverse uninsured litigation results; and (xv) an adverse outcome with respect to the Company's treatment of its net operating losses generated prior to 1993. OVERVIEW Demand for offshore drilling services is primarily driven by the economics of oil and gas exploration, development and production, which in turn, are closely linked to current and projected oil and gas prices. Since the mid-1980's, oil and gas prices have been volatile and generally lower than prices experienced during the early 1980's, resulting in volatile and generally reduced demand for offshore drilling services. In addition, during the early 1980's, the industry built a substantial number of new offshore drilling rigs. Since 1993, the worldwide offshore drilling market has shown general improvement compared to the 1986-1992 period. This improvement can be generally attributed to improved offshore rig demand and a continuing reduction in offshore rig supply. Although this period can be characterized as showing general improvement, certain significant offshore markets have experienced short periods of reduced rig demand and/or excess rig supply. During those periods of low rig utilization, day rates were adversely impacted and drilling contractors competing in those markets suffered poorer financial results until rig demand improved or rigs left those markets for other markets. 8 11 DRILLING MARKETS AND UTILIZATION General Since 1995, most of the world's significant offshore drilling markets have experienced improved rig utilization and day rates. According to Offshore Data Services, as of August 5, 1997, worldwide jack-up utilization was 89% (338 rigs working out of a supply of 378 rigs) compared to 83% average utilization (320 rigs working out of a supply of 384 rigs) during the first six months of 1996. Worldwide semi-submersible rig utilization as of August 5, 1997 was 81% (117 rigs working out of a supply of 145 rigs) compared to 77% average utilization (110 rigs working out of a supply of 143 rigs) during the first six months of 1996. Prior to 1996, the Company derived substantially all of its revenues from offshore drilling in the U.S. Gulf of Mexico and the Bay of Campeche (offshore Mexico). Six of the Company's rigs, the MARINE 201, MARINE 300, MARINE 303, MARINE 304, MARINE 305 and MARINE 500, are configured to work in international markets outside the U.S. Gulf of Mexico. Three of these rigs, the MARINE 201, MARINE 305 and MARINE 500, are currently operating or have contracts to operate internationally. The Company's other rigs could, if applicable modifications were made and certifications obtained, operate in certain areas outside of the U.S. Gulf of Mexico. The Company's rigs are not, however, suitable for areas, such as the North Sea, that require enhanced environmental operating capabilities. Contract terms in the offshore drilling business range from well-to-well contracts that are very short in length, e.g. 30 days, to long term contracts of three or more years. Until recently, drilling contracts for jack-up rigs in the Company's primary operating area, the U.S. Gulf of Mexico, have been predominately short term contracts. On the other hand, longer term contracts have been more common (i) in most international drilling markets for jack-up rigs and (ii) in several worldwide markets for deep water rigs, i.e. semi-submersible rigs and drillships. Due to the highly cyclical nature of the offshore drilling business, the Company seeks longer-term contracts for the employment of a portion of its rig fleet (i) on a worldwide basis for deep water assets and (ii) internationally for jack-ups. Such contracts help mitigate the volatility of the Company's results. At the present time, the Company has long-term international contracts for three of its rigs, the MARINE 201, the MARINE 305 and the MARINE 500. The MARINE 201 is operating in India under a one-year contract that started in November 1995. That contract includes eight three-month extension options, four of which have been exercised by its customer, which will provide for the rig's employment through at least November 1997. Based upon conversations with the rig's customer, the Company currently expects this contract to be extended (pursuant to extension options) into 1998. The MARINE 305 has received a one-year contract with a major oil company commencing in the third quarter in Southeast Asia. This contract includes options that could, if exercised, extend its term for up to an additional year. The rig, which was acquired in August 1996, was recently upgraded and refurbished in the Middle East and will be on location during August 1997. Recently, the Company entered into a three-year contract for the MARINE 500, which is projected to commence on or before January 1, 1999. Drilling will take place in the Pacific Rim, Southeast Asia, offshore Australia and New Zealand. The rig will be upgraded for the contract to work in water depths up to 5,000 feet with 15,000 psi drilling equipment. The MARINE 500 is currently contracted in Southeast Asia under a contract that provides for the rig's employment through late 1997 (or through mid-1998 if all extension options are exercised). The Company is currently seeking to obtain a long-term contract for the MARINE 700, which was recently acquired with the acquisition of 96.2 percent of the outstanding shares of Marine Drilling ASA (formerly Deep Sea ASA of Norway). 9 12 U.S. Gulf of Mexico The jack-up drilling market in the U.S. Gulf of Mexico is highly competitive. A significant number of offshore drilling companies have rigs in this market and, as a result, no one contractor is able to materially affect pricing levels. Day rates can and have fluctuated significantly on relatively small changes in the rig supply and demand situation in this market. Since mid-1995, a combination of improved jack-up rig demand and rig mobilizations to other international markets has resulted in improved jack-up utilization and day rates. Improved utilization of jack-up rigs in the U.S. Gulf of Mexico during the third and fourth quarters of 1995 continued into and throughout 1996 and is still continuing during 1997. Utilization of jack-up rigs in this market as of August 5, 1997 was 92% (120 rigs working out of a supply of 130 rigs) as compared with an average of 85% (116 rigs working out of a supply of 136 rigs) for the first six months of 1996. With 12 of its 14 jack-up rigs located in the U.S. Gulf of Mexico, the Company is well positioned to benefit from the improved rig demand in this market. India In 1995, the Company entered into a one-year term contract for the MARINE 201 to operate off the east coast of India. That rig commenced operations under this contract in mid-November 1995. Under the contract, the customer has options to extend the contract for up to eight three-month periods, four of which have been exercised ensuring this rig's employment through November 1997. Annual demand for jack-ups in India has generally averaged between 20 to 26 rigs during the past few years. During this time, jack-up utilization has been stable in the range of 89% to 93%. The government of India recently approved investment in the oil and gas sector by non-Indian energy companies. As a result of these actions, jack-up rig demand has recently increased, and most industry analysts expect that demand could increase further in the near term. Southeast Asia In January 1997, the Company entered into a one-year contract with a major oil company for the MARINE 305 to begin work in Southeast Asia. The contract will begin in August 1997 and is expected to generate total revenues of approximately $28,000,000. In December 1996, the Company acquired the MARINE 500, a second-generation semi-submersible rig. The rig began operating in late February drilling offshore Indonesia on a short-term contract. In April 1997, the Company signed another short-term contract for the MARINE 500 to drill three wells with three option wells, which if exercised will extend the contract until mid-1998. The Company also recently entered into a three-year contract for that rig, which is projected to commence on or before January 1, 1999 and includes operations in Southeast Asia, the Pacific Rim, offshore Australia and New Zealand. Utilization in this market is currently strong, with contracted rig utilization of 91% and 100%, respectively, for jack-ups and semi-submersibles. The following table sets forth certain industry and Company historical data for the periods indicated. Industry data includes many rigs that are dissimilar to the Company's rigs in terms of performance capabilities, age, operational criteria and environmental capabilities. Certain of the Company's competitors operate rigs other than jack-up rigs that can compete with jack-up rigs under certain circumstances. 10 13
THREE MONTHS ENDED SIX MONTHS ENDED YEARS ENDED JUNE 30, JUNE 30, DECEMBER 31, ------------------------ ------------------------ ------------------------ 1997 1996 1997 1996 1996 1995 --------- --------- --------- --------- --------- --------- INDUSTRY(1): U.S. GULF OF MEXICO: Jack-ups Total rigs ................... 132.6 136.7 133.6 136.9 135.9 140.1 Working rigs ................. 119.8 118.5 119.6 116.0 118.5 104.6 Utilization .................. 90% 87% 90% 85% 87% 75% Semi-submersibles Total rigs ................... 33.7 29.4 33.6 29.1 30.4 24.2 Working rigs ................. 25.5 21.9 24.2 22.0 22.0 16.8 Utilization .................. 76% 74% 72% 76% 72% 69% ALL OTHER MARKETS: Jack-ups Total rigs ................... 245.5 246.8 244.4 246.7 246.0 246.7 Working rigs ................. 216.9 205.0 214.4 204.1 208.5 197.5 Utilization .................. 88% 83% 88% 83% 85% 80% Semi-submersibles Total rigs ................... 110.3 114.2 110.8 114.1 112.8 117.2 Working rigs ................. 90.9 91.8 92.8 88.1 90.4 82.6 Utilization .................. 82% 80% 84% 77% 80% 70% COMPANY(2): Jack-ups Total rigs ................... 14.0 13.0 14.0 13.0 13.4 13.0 Working rigs ................. 12.8 12.8 12.4 11.9 12.4 8.9 Utilization .................. 91% 98% 89% 92% 93% 69% Non-marketed rigs ............ 1.2 0.2 1.6 0.7 0.9 3.0 Utilization of marketed rigs.. 100% 100% 100% 97% 99% 89% Semi-submersibles Total rigs ................... 1.0 -- 1.0 -- -- -- Working rigs ................. 1.0 -- 0.7 -- -- -- Utilization .................. 100% -- 73% -- -- -- Non-marketed rigs ............ 0.0 -- 0.3 -- -- -- Utilization of marketed rigs.. 100% -- 100% -- -- -- Average Day Rates Jack-up rigs(3) .............. $ 34,027 $ 23,505 $ 32,952 $ 22,353 $ 24,343 $ 19,289 Semi-submersible rigs(3)(4)... $ 54,823 -- $ 55,832 -- All rigs(3) .................. $ 35,539 $ 23,505 $ 34,230 $ 22,353 $ 24,343 $ 19,289
(1) Average of weekly data published by Offshore Data Services. (2) The numbers included in the table represent the average number of rigs operated by the Company for the periods indicated. (3) "Average day rate" is determined by dividing the total gross revenue earned by the Company's rigs during a given period by the total number of days that the Company's rigs were under contract and working during that period. (4) The Company did not operate any semi-submersibles prior to 1997; therefore, prior period data is omitted. 11 14 DRILLING OPERATIONS AND CUSTOMERS The Company's existing drilling contracts provide for compensation on a "daywork" basis. Under daywork contracts, the Company receives a fixed amount per day for providing drilling services using the rigs it operates. Under most daywork contracts, the customer also pays the cost of moving the rig and related equipment to the job site and the costs of drilling the well (other than the costs of operating the rig, which are borne by the drilling contractor). Daywork contracts may provide for lower rates during periods when drilling operations are interrupted or restricted by equipment breakdowns, adverse weather or sea conditions or other conditions beyond the control of the Company. Historically, the Company has not marketed its rigs under fixed price or turnkey contracts. A daywork contract generally extends over a period of time covering either the drilling of a single well, a group of wells or a stated term. The customer may terminate the contract if the drilling rig is destroyed or lost, or if drilling operations are suspended for a specified period of time as a result of breakdown of major equipment or other specific events. The duration of drilling contracts has tended to be on a well-by-well basis, while contracts in the deep water and international jack-up markets typically have tended to be on a term basis. Until recently the Company's experience during recent years has been consistent with this general rule. As a result of the substantial improvement in the U.S. Gulf of Mexico drilling market, the Company has been able to obtain term contracts on some of its domestic rigs ranging from six months to two years. To the extent available, the Company will continue to focus upon obtaining additional term contracts, both foreign and domestic, in the future. The Company obtains most of its contracts through competitive bidding against other contractors in response to oil and gas companies' solicitations of bids. The Company's current drilling contracts, both foreign and domestic, generally provide for payment in U.S. dollars. The Company provides drilling services to a customer base that includes independent and major oil and gas companies. As is typical in the industry, the Company does business with a relatively small number of customers at any given time. The loss of any one of the Company's customers could, at least on a short-term basis, have a material adverse effect on the Company's profitability. Management believes, however, that at current levels of activity, the Company would have alternative customers for its services if it lost any single customer, and that the loss of any one customer would not have a material adverse effect on the Company on a long-term basis. FINANCIAL CONDITION -- GENERAL The following is a discussion of the Company's financial condition, results of operations, historical financial resources and working capital. This discussion and analysis should be read in conjunction with the Company's Consolidated Financial Statements and notes thereto included in Item 1 of this report. FINANCIAL CONDITION -- LIQUIDITY AND CAPITAL RESOURCES Sources and Uses of Cash The Company had working capital at June 30, 1997 of $41,567,000 as compared to working capital of $96,671,000 at December 31, 1996. Net cash provided by operating activities was $28,174,000 for the six months ended June 30, 1997 compared to $14,123,000 for the six months ended June 30, 1996, an increase of $14,051,000 or 99.5%. Cash used in investing activities was $81,574,000 for the six months ended June 30, 1997 including capital expenditures of $29,965,000 and the acquisition of Marine Drilling ASA formerly known as Deep Sea ASA for $52,134,000, compared to cash used in investing activities of $9,322,000 for the six months ended June 30, 1996. Capital expenditures for the six months ended June 30, 1997 consisted of disbursements for (i) the upgrade and refurbishment of the MARINE 305, (ii) refurbishments to the MARINE 500 and (iii) purchase of drill pipe and other rig machinery. Net cash used in financing activities was $11,701,000 consisting of the debt prepayments and an increase in restricted cash offset by proceeds from the exercise of common stock options. 12 15 Credit Agreement In March 1997, the Company entered into a new credit agreement, the "New Credit Facility," with Bankers Trust Company ("BTCo"), Christiania Bank og Kreditkasse ("CBK"), and certain other banks providing financing up to $100,000,000 to be used for rig acquisitions and upgrades. This agreement includes a revolving credit facility available through December 31, 1999, which can be converted into a four-year term loan. Interest and facility fees are generally payable quarterly during the terms of both facilities. Principal during the term loan facility is payable quarterly in equal installments beginning March 31, 2000. Interest accrues at (i) LIBOR plus a margin of .75% to 1.25% or (ii) prime plus a margin of 0% to .50%, with margins determined pursuant to a debt to capital calculation. The agreement is secured by all of the Company's current rig fleet as well as certain other collateral assignments. The Company has no borrowings outstanding under this agreement at June 30, 1997. In connection with the consummation of the New Credit Facility, the Company repaid and terminated its prior $35,000,000 credit facility with a U.S. financial institution during February 1997. Other Activities In January 1997, the Company entered into a one-year contract to operate the MARINE 305 in Southeast Asia for a major oil company. This contract is currently expected to generate revenues of approximately $28,000,000. The rig underwent an upgrade that was completed in July 1997. The rig is currently under tow and will be on location to commence operations in mid August 1997. The Company entered into a three-well contract in April 1997 to operate the MARINE 500 in the Gulf of Thailand offshore Malaysia. This contract includes three option wells. If all options are exercised, the term of the contract will be approximately 360 days, until mid-1998. Repairs on the MARINE 15, a 250 foot mat supported slot jack-up rig, which was damaged as a result of a fire in late November 1996, were completed during April 1997 and the rig subsequently began operations under a one-year contract. In late May 1997, the Company completed the acquisition of 93.7% of the shares of Deep Sea ASA, a Norwegian company. In a mandatory offering in late June 1997, the Company acquired an additional 2.5% of the outstanding shares bringing the total ownership to 96.2%. Deep Sea ASA's primary asset is the Deepsea Stavanger, a Bingo 8000 design bare-deck hull, which upon completion can be configured as either a fourth or fifth-generation semi-submersible. Deep Sea ASA was subsequently renamed Marine Drilling ASA and the rig was renamed the MARINE 700. The Company is actively seeking a long-term contract for this rig. A three-year contract for the MARINE 500 was executed in July 1997. The contract is projected to commence on or before January 1, 1999 and is expected to produce total revenues of $164,000,00 to $188,000,000. Pursuant to the terms of this contract, the rig will have to be upgraded to operate in water depths up to 5,000 feet. In July 1997, the Company entered into a Charter Agreement with Shanghai Bureau of Marine Geological Survey to bareboat charter its semi-submersible Kan Tan III for a period of five years. The Kan Tan III is a 600-foot water depth rig based upon the Pacesetter design and was built in China in 1984. The Charter Agreement begins when the rig commences operations under a drilling contract having a term of a year or greater. The rig is scheduled to undergo a refurbishment program by the rig owners prior to commencement of the first contract. The Company is actively seeking a long-term contract for this rig. Projected Capital Expenditures The MARINE 700 will require additional expenditures to complete its construction and equip it for service. At this time, the Company is conducting a detailed engineering study to determine the cost of these activities. The Company's preliminary analysis indicates that 13 16 these additional expenditures will be in the range of $140,000,000 to $175,000,000. This estimate could change materially based upon further analysis and customer required features. The sources of funding for the future rig completion expenditures have not yet been determined. As previously discussed, the MARINE 500 will be upgraded for its new contract to work in water depths up to 5,000 feet. The rig is expected to be taken out of service in mid-1998 for four to six months to complete the upgrades, which are projected to cost between $70,000,000 and $80,000,000. The Company expects to spend approximately $54,000,000 during the second half of 1997 for other capital expenditures, consisting primarily of expenditures to complete the upgrade and refurbishment of the MARINE 305 and to begin the completion of the MARINE 700. The Company will continue to pursue acquisitions of additional drilling rigs and related equipment and/or businesses. Future acquisitions, if any, would likely be funded from the Company's working capital, the New Credit Facility or through the issuance of debt and/or equity securities. The Company cannot predict whether it will be successful in acquiring additional rigs, and obtaining financing therefor, on acceptable terms. In addition, it is currently anticipated that the Company will continue the upgrading of rigs to enhance their capability to obtain longer-term contracts. The timing and actual amounts expended by the Company in connection with its plans to upgrade and refurbish selected rigs, as well as the type of rig modification comprising each program is subject to the discretion of the Company and will depend on the Company's view of market conditions, the Company's cash flow, whether other acquisitions are made and other factors. With regard to fleet expansion, the Company believes that segments of the offshore drilling market are continuing to undergo consolidation and such consolidation may present acquisition opportunities. The Company will continue to explore additional acquisition opportunities, including opportunities in the deep water drilling sector, but there can be no assurance as to the timing of any such acquisitions or that any acquisitions will be made. The Company believes that its available funds, together with cash generated from operations and amounts that may be borrowed under the New Credit Facility and other potential funding sources will be sufficient to fund its required capital expenditures, working capital and debt service requirements for the foreseeable future. Future cash flows, however, are subject to a number of uncertainties, especially the condition of the oil and gas industry. Accordingly, there can be no assurance that these resources will be sufficient to fund the Company's cash requirements. In particular, the potential sources of funding (i) to complete and equip the MARINE 700 for operations and (ii) to upgrade the MARINE 500 may not be available at the time or in sufficient amounts to allow the Company to successfully complete these projects. RESULTS OF OPERATIONS -- SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996 Revenues Revenues for the six months ended June 30, 1997 increased $32,637,000 (67%) from $48,599,000 to $81,236,000 compared to the same period in 1996. The increase in revenues was the result of three factors: (i) a 53% increase in average day rates from $22,353 in 1996 to $34,230 in 1997, which includes the addition of a semi-submersible rig at a higher day rate (ii) an increase in the number of marketed rigs from 12 in 1996 to 13 in 1997 and (iii) an increase in utilization of marketed rigs from 97% in 1996 to 100% in 1997. The increases in utilization and average day rates resulted from increased drilling activity in the U.S. Gulf of Mexico and from the activation of the MARINE 500 offshore Indonesia in late February 1997. 14 17 Costs and Expenses Contract drilling expense for the six months ended June 30, 1997 increased $5,822,000 (20%) from $29,211,000 to $35,033,000 compared to the same period in 1996. The increase was mainly due to higher labor costs of $4,422,000 (30%) and was partially offset by decreases in both employer liability claims and insurance costs. Labor costs were higher primarily as a result of the increase in the number of working rigs and wage increases. Depreciation and amortization expense for the six months ended June 30, 1997 increased $2,058,000 (37%) from $5,570,000 to $7,628,000 compared to the same period in 1996. The increase was due to depreciation associated with expenditures for the following items - (i) the acquisition of the MARINE 500, (ii) upgrades to the MARINE 15 and the MARINE 300, (iii) acquisitions of drill string and other drilling equipment; and amortization expense related (i) to deferred financing costs related to the New Credit Facility and (ii) the accelerated recognition of the deferred financing costs associated with the prepayment of the CIT Credit Facility. General and administrative expense increased $175,000 (5%) from $3,613,000 for the six months ended June 30, 1996 to $3,788,000 for the same period in 1997. Interest Expense Interest expense for the six months ended June 30, 1997 was $421,000 and consisted of the following: (i) nonutilization fee of $200,000 based on a 2% rate on an outstanding balance of $10,000,000 related to the early termination of the CIT Credit Facility, (ii) interest of $115,000 based on an average rate of 8.1% with an average balance of $10,000,000, (iii) credit facility fees of $7,000 based on a .25% rate with an average unused balance of $21,500,000, (iv) agency fee of $50,000, (v) commitment fees of $95,000 based on a .30% rate with an average unused balance of $100,000,000 and (vi) offset by capitalized interest of approximately $46,000. Interest expense for the six months ended June 30, 1996 was $384,000. Interest Income Interest income increased $1,312,000 from $414,000 for the six months ended June 30, 1996 to $1,726,000 for the same period in 1997. The increase was related primarily to increased cash balances and, to a lesser extent, higher interest rates. Income Taxes Income tax expense of $12,663,000 for the six months ended June 30, 1997 consisted of (i) current U.S. federal taxes of $4,705,000, (ii) current state taxes of $44,000, (iii) current foreign taxes of $545,000, (iv) deferred U.S. federal income taxes of $943,000, (v) the realization of pre-quasi-reorganization net operating loss carryforwards of $5,631,000 and (vi) the tax effects of common stock issued pursuant to the Marine Drilling 1992 Long-Term Incentive Plan $795,000. RESULTS OF OPERATIONS -- THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996 Revenues Revenues for the second quarter of 1997 increased $17,126,000 (63%) from $27,360,000 to $44,486,000 compared to the same period in 1996. The increase in revenues was the result of two factors: (i) a 51% increase in average day rates from $23,505 in 1996 to $35,539 in 1997 and (ii) an increase in the number of marketed rigs from 13 in 1996 to 14 in 1997. The increase in average day rates resulted from increased drilling activity in the U.S. Gulf of Mexico and from the higher day rates working offshore Indonesia. 15 18 Costs and Expenses Contract drilling expense for the second quarter of 1997 increased $2,878,000 (18%) from $15,679,000 to $18,557,000 compared to the same period in 1996. The increase was mainly due to higher labor costs of $2,146,000 (28%) and was partially offset by decreases in both employer liability claims and insurance costs. Labor costs were higher primarily as a result of the increased number of working rigs and wage increases. Depreciation and amortization expense for the second quarter of 1997 increased $1,174,000 (41%) from $2,873,000 to $4,047,000 compared to the same period in 1996. The increase resulted primarily from depreciation associated with the acquisition of the MARINE 500, upgrades for the MARINE 15, and purchases of rig machinery and other capital expenditures. General and administrative expense decreased $196,000 (9%) from $2,203,000 for the second quarter to $2,007,000 for the same period in 1997. The decrease was primarily the result of the incurrence in 1996 of $500,000 of general and administrative expenses related to potential rig acquisitions offset by increased labor costs, professional services and international travel in 1997. Interest Expense Interest expense for the second quarter of 1997 was $71,000 compared to $203,000 for the second quarter of 1996. Interest Income Interest income increased $447,000 from $222,000 for the second quarter of 1996 to $669,000 for the same period in 1997. The increase was related primarily to increased cash balances and, to a lesser extent, higher interest rates. Income Taxes Income tax expense of $7,182,000 for the second quarter of 1997 consisted of (i) current U.S. federal taxes of $3,666,000, (ii) current state taxes of $44,000, (iii) foreign taxes of $472,000, (iv) deferred U.S. federal income taxes of $368,000, (v) the realization of pre-quasi-reorganization net operating loss carryforwards of $2,679,000 and (vi) the tax effects of common stock issued pursuant to the Marine Drilling 1992 Long-Term Incentive Plan $(47,000). 16 19 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company has various claims filed against its subsidiaries in the ordinary course of business, particularly claims alleging personal injuries. It is the belief of management that the Company has established adequate reserves for any liabilities that may reasonably be expected to result from these claims. In the opinion of management, no pending claims, actions or proceedings against the Company would have a material adverse effect on its financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Stockholders of the Company was held on May 9, 1997. At the meeting, seven directors were elected by a vote of holders of Common Stock, as outlined in the company's Proxy Statement related to the meeting. With respect to the election of directors, (i) proxies were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, (ii) there was no solicitation in opposition to the management's nominees as listed in the Proxy Statement, and (iii) all of such nominees were elected. The following numbers of votes were cast as to the director nominees:
==================================================================================================================== BROKER IN FAVOR WITHHELD NON-VOTES ABSTAINING --------------------- ------------------ --------------- --------------- NOMINEE VOTES CAST VOTES % VOTES % VOTES % VOTES % - ----------------- -------------- --------------------- ------------ ----- -------- ------ --------- ----- Mr. Barbanell 46,145,179 43,357,707 84% 2,787,472 5% - -% - -% Mr. Brown 46,145,179 43,358,007 84% 2,787,172 5% - -% - -% Mr. Bull 46,145,179 43,358,007 84% 2,787,172 5% - -% - -% Mr. Flores 46,145,179 43,358,007 84% 2,787,172 5% - -% - -% Mr. Gregory 46,145,179 43,358,007 84% 2,787,172 5% - -% - -% Mr. Linneman 46,145,179 43,358,007 84% 2,787,172 5% - -% - -% Mr. Rask 46,145,179 43,358,007 84% 2,787,172 5% - -% - -% ====================================================================================================================
The second item voted upon at the meeting was to approve and ratify the Marine Drilling 1992 Long-Term Incentive Plan, as amended and restated, with votes cast as follows:
==================================================================================================================== BROKER IN FAVOR WITHHELD NON-VOTES ABSTAINING ----------------------- ------------------------- ----------------- --------------------- VOTES CAST VOTES % VOTES % VOTES % VOTES % --------------- -------------- -------- -------------- --------- --------- ------ ----------- -------- 46,145,179 30,536,581 66.2% 15,402,581 33.4% - -% 206,017 0.4% ====================================================================================================================
ITEM 5. OTHER INFORMATION William H. Flores, Executive Vice President and Chief Financial Officer of the Company, will be resigning as an officer and director effective August 17, 1997 to accept employment with another company. 17 20 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Description Exhibits No. 15 Letter regarding unaudited interim financial information 27 Financial Data Schedule (Exhibit 27 is being submitted as an exhibit only in the electronic format of this Quarterly Report on Form 10-Q being submitted to the U.S. Securities and Exchange Commission.) (b) Reports on Form 8-K: One report was filed on Form 8-K during the second quarter of 1997. (1) Report of the Company dated June 4, 1997 regarding the acquisition of 93.7% of the shares of Deep Sea ASA, a Norwegian company. 18 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MARINE DRILLING COMPANIES, INC. (Registrant) Date: August 14, 1997 By /s/ William H. Flores ---------------------------------------- William H. Flores Executive Vice President Chief Financial Officer and Director (Principal Financial Officer) Date: August 14, 1997 By /s/ Joan R. Smith ---------------------------------------- Joan R. Smith Vice President, Controller and Secretary (Principal Accounting Officer) 19 22 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 15 Letter regarding unaudited interim financial information 27 Financial Data Schedule (Exhibit 27 is being submitted as an exhibit only in the electronic format of this Quarterly Report on Form 10-Q being submitted to the U.S. Securities and Exchange Commission.)
EX-15 2 LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFO 1 EXHIBIT 15 LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFORMATION The Board of Directors and Shareholders Marine Drilling Companies, Inc.: Re: Registration Statement No. 33-56920 on Form S-8 dated January 11, 1993 No. 33-61901 on Form S-8 dated August 17, 1995 No. 333-6997 on Form S-3 dated June 27, 1996, as amended No. 333-6995 on Form S-4 dated June 27, 1996, as amended With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated July 25, 1997, related to our review of interim financial information. Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not considered part of a registration statement prepared or certified by an accountant within the meanings of Sections 7 and 11 of the Act. KPMG PEAT MARWICK LLP Houston, Texas July 25, 1997 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1997 JUN-30-1997 8,860 9,988 36,931 0 623 59,124 266,199 40,727 286,420 17,557 0 0 0 514 252,464 286,420 81,236 81,236 35,033 35,033 7,628 0 421 36,179 12,663 23,516 0 0 0 23,516 0.46 0
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