<PAGE> 1
UNITED STATES
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
and Exchange Act of 1934 For the Period Ended September 30, 1997
[ ] 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 001-13553
BAYARD DRILLING TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 73-1508021
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4005 NW EXPRESSWAY, SUITE 550E 73116-1679
OKLAHOMA CITY, OKLAHOMA (Zip Code)
(Address of principal offices)
(405) 840-9550
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former 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 NO X
--- ---
Outstanding shares of the registrant's common stock, par value $0.01 per share,
at December 9, 1997: 18,176,050
<PAGE> 2
BAYARD DRILLING TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
Part I. Financial Information
Item 1. Financial Statements
<S> <C>
Balance Sheets - September 30, 1997 (unaudited) and December 31, 1996............. 1
Statements of Operations (unaudited) - Three months and nine months ended
September 30, 1997 and 1996.............................................. 2
Statements of Equity (Deficit) for the years ended December 31, 1995 and
1996 and nine months ended September 30, 1997............................ 3
Statements of Cash Flows (unaudited) - Nine months ended September 30,
1997 and 1996............................................................ 4
Notes to Financial Statements (unaudited)......................................... 5 - 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ........................................................ 7 - 15
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds.....................................16 - 17
Item 4. Submission of Matters to a Vote of Securities Holders ........................17
Item 6. Exhibits and reports on Form 8-K..............................................18 - 21
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
BAYARD DRILLING TECHNOLOGIES, INC.
BALANCE SHEETS
(In thousands, except per share data)
(Information at September 30, 1997 is unaudited)
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31, SEPTEMBER 30,
CURRENT ASSETS: 1996 1997
-------- --------
<S> <C> <C>
Cash .................................................................. $ 4,963 $ 82
Restricted investments ................................................ -- 730
Accounts receivable ................................................... 1,084 13,610
Other current assets .................................................. 1 452
-------- --------
Total current assets ........................................ 6,048 14,874
Property, plant and equipment, net ......................................... 26,973 104,674
Goodwill, net of accumulated amortization of $215 .......................... -- 6,285
Other assets ............................................................... 1,652 2,231
-------- --------
Total assets ................................................ $ 34,673 $128,064
======== ========
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable ...................................................... $ 409 $ 13,716
Payable to affiliate .................................................. 412 --
Accrued liabilities ................................................... 253 3,817
Current portion of long-term debt ..................................... 947 14,589
-------- --------
Total current liabilities ................................... 2,021 32,122
-------- --------
Deferred income tax liabilities ............................................ 348 7,087
-------- --------
Long-term debt, less current maturities .................................... 6,053 23,583
-------- --------
Subordinated notes ......................................................... -- 16,776
-------- --------
Commitments and Contingencies
EQUITY (DEFICIT):
Stockholders' equity
Preferred stock, $0.01 par value, 20,000,000 shares authorized; none
issued or outstanding ........................................... -- --
Common stock, $0.01 par value, 100,000,000 shares authorized;
5,600,000 shares issued and outstanding at December 31, 1996;
7,588,000 at September 30, 1997 .................................... 56 76
Additional paid-in capital (net of deferred compensation of $292 at
September 30, 1997) ................................................ 26,229 47,791
Retained earnings (accumulated deficit) ............................... (34) 629
-------- --------
Total equity ................................................ 26,251 48,496
-------- --------
Total liabilities and equity ................................ $ 34,673 $128,064
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
BAYARD DRILLING TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ---------------------
1996 1997 1996 1997
-------- -------- -------- --------
REVENUES:
<S> <C> <C> <C> <C>
Drilling ............................... $ 2,486 $ 18,107 $ 6,728 $ 33,214
Other .................................. -- -- 59 --
-------- -------- -------- --------
Total revenues .................... 2,486 18,107 6,787 33,214
-------- -------- -------- --------
COST AND EXPENSES:
Drilling ............................... 1,976 13,349 5,244 24,246
General and administrative ............. 150 447 473 1,181
Depreciation and amortization .......... 312 2,273 727 4,918
-------- -------- -------- --------
Total costs and expenses .......... 2,438 16,069 6,444 30,345
-------- -------- -------- --------
Operating income .................. 48 2,038 343 2,869
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense ....................... -- (1,190) -- (2,172)
Interest income ........................ -- 17 -- 68
Gain on sale of assets ................. -- 243 -- 303
Other .................................. (19) (3) 17 5
-------- -------- -------- --------
Total other income (expense) ...... (19) (933) 17 (1,796)
-------- -------- -------- --------
Earnings before income taxes ................ 29 1,105 360 1,073
Income tax provision - deferred ............ -- 422 -- 410
-------- -------- -------- --------
Net earnings ................................ $ 29 $ 683 $ 360 $ 663
======== ======== ======== ========
Net earnings per share ...................... $ .00 $ .06 $ .05 $ .06
======== ======== ======== ========
Weighted average common shares
outstanding ............................ 6,568 11,317 6,568 11,317
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
BAYARD DRILLING TECHNOLOGIES, INC.
STATEMENTS OF EQUITY (DEFICIT)
(In thousands)
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY
--------------------------------------------------------------
PARTNERS ADDITIONAL
CAPITAL COMMON PAID-IN DEFERRED RETAINED
(DEFICIT) STOCK CAPITAL COST EARNINGS TOTAL
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 ..................... $ (276) $ -- $ -- $ -- $ -- $ --
Net earnings through date of corporate
capitalization ........................... 447 -- -- -- -- --
Net increase in equity arising from affiliate
transactions ............................. 5,285 -- -- -- -- --
Issuance of stock in corporate capitalization . (5,456) 20 5,436 -- -- 5,456
Sale of stock ................................. -- 20 9,980 -- -- 10,000
Issuance of stock options and warrants for
Drilling agreements and debt ............... -- -- 1,319 -- -- 1,319
Issuance of stock and options for property
and equipment .............................. -- 16 9,494 -- -- 9,510
Net loss from date of corporate capitalization
to December 31, 1996 ....................... -- -- -- -- (34) (34)
-------- -------- -------- -------- -------- --------
Balance at December 31, 1996 ..................... -- 56 26,229 -- (34) 26,251
Net earnings .................................. -- -- -- -- 663 663
Issuance of stock options to employees ........ -- -- 60 (59) -- 1
Sale of stock ................................. -- 13 11,217 -- -- 11,230
Issuance of stock options and warrants ........ -- -- 4,023 -- -- 4,023
Executive compensation agreements ............. -- -- 250 (233) -- 17
Issuance of stock for acquisitions ............ -- 7 6,304 -- -- 6,311
-------- -------- -------- -------- -------- --------
Balance at September 30, 1997 (unaudited) ........ $ -- $ 76 $ 48,083 $ (292) $ 629 $ 48,496
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
BAYARD DRILLING TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1996 1997
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings (loss) ................................................ $ 360 $ 663
Adjustments to reconcile net earnings (loss) to net cash
(used in) provided by operating activities -
Depreciation and amortization ................................... 727 4,918
(Gain) loss on sale of assets ................................... -- (303)
Compensation expense ............................................ -- 21
Deferred income taxes ........................................... -- 410
Change in assets and liabilities, net of effects of affiliate
transactions -
Decrease (increase) in accounts receivable ................ (525) (12,526)
Decrease (increase) in other assets ....................... (124) (1,030)
Increase (decrease) in accrued liabilities ................ (315) 3,564
Increase (decrease) in accounts payable ................... 466 12,895
-------- --------
Net cash (used in) provided by operating activities .... 589 8,612
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment .............................. (6,363) (50,454)
Acquisition of businesses .......................................... -- (26,056)
Proceeds from sale of assets ....................................... -- 781
Purchase of investments ............................................ -- (730)
-------- --------
Net cash used in investing activities .................. (6,363) (76,459)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments made to affiliates ........................................ (9,015) --
Advances received from affiliates .................................. 14,789 --
Proceeds from borrowings ........................................... -- 47,944
Proceeds from issuance of stock .................................... -- 11,230
Payments on long-term debt ......................................... -- (4,114)
Borrowings under line of credit .................................... -- 7,906
-------- --------
Net cash provided by financing activities ............... 5,774 62,966
-------- --------
Net change in cash .................................................... -- (4,881)
Cash at beginning of period ........................................... -- 4,963
-------- --------
Cash at end of period ................................................. $ -- $ 82
======== ========
Cash paid during the period for interest .............................. $ -- $ 2,275
Cash paid during the period for income taxes .......................... $ -- $ --
======== ========
</TABLE>
Supplemental non-cash activity:
During 1997 the Company acquired property and equipment through the issuance of
stock and options for $6,591 and through the issuance of trade payables of
$2,750.
4
<PAGE> 7
BAYARD DRILLING TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of management of Bayard Drilling Technologies, Inc. (the
"Company"), the unaudited interim financial statements for the nine months ended
September 30, 1997 and 1996 include all adjustments, consisting of normal
recurring accruals, necessary to present fairly the Company's financial position
as of September 30, 1997 and results of operations and cash flows for the nine
months ended September 30, 1997 and 1996. Results for the period ended September
30, 1997 are not necessarily indicative of the results to be expected for the
entire fiscal year. For further information, refer to the financial statements
and footnotes thereto included in the Company's Registration Statement on Form
S-1 (Registration No. 333-34451).
2. Earnings per common and equivalent shares is computed based on the weighted
average number of common and equivalent shares outstanding during the period.
Under guidelines issued by the Securities and Exchange Commission,
common shares, options and warrants issued prior to a public offering at prices
below the initial offering price are treated as outstanding for all periods
presented (using the Treasury stock method) in computing net earnings (loss) per
share.
3. In May 1997, the Company completed the acquisition of Trend Drilling Co.
("Trend") and acquired the assets of Ward Drilling Company, Inc. ("Ward") for an
aggregate purchase price of approximately $32.6 million. The operations of the
Trend and Ward acquisitions have been included in the statements of operations
and cash flows beginning May 1, 1997 for Trend and May 30, 1997 for Ward.
The following unaudited pro forma combined data gives effect to the
acquisitions of Trend (the "Trend Acquisition") and Ward (the "Ward
Acquisition") as if such transactions had been consummated as of January 1,
1997. The pro forma information is based on the historical financial statements
of the Company and the Trend Acquisition and the Ward Acquisition, giving effect
to such transactions under the purchase method of accounting. The unaudited pro
forma combined data are presented for illustrative purposes and are not
necessarily indicative of the actual results that would have occurred had the
acquisitions been consummated as of January 1, 1997, or of future results of the
combined operations. The data reflect adjustments for (i) amortization and
depreciation of the Trend Acquisition and the Ward Acquisition, (ii) incremental
interest expense resulting from the borrowings on the subordinated notes issued
by the Company to fund the cash requirements of the acquisitions, and (iii)
certain other pro forma adjustments.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1997
------------------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C>
Revenues ................................................... $44,561
Net income ................................................. 471
Net income per common share and common equivalent share .... $ .04
</TABLE>
5
<PAGE> 8
BAYARD DRILLING TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
4. On October 16, 1997, the Company acquired Bonray Drilling Corporation
("Bonray") for 3,015,000 shares of Common Stock, subject to certain working
capital adjustments. The acquisition (the "Bonray Acquisition") will be
accounted for as a purchase. In the Bonray Acquisition, the Company acquired 13
rigs, including seven rigs with depth capacities of 15,000 feet or greater and
two diesel electric SCR rigs. At the time of the Bonray Acquisition, twelve of
Bonray's rigs were operating and under contract and one was awaiting
refurbishment.
5. In November 1997, the Company completed an initial public offering (the
"Offering") of an aggregate of 11,040,000 shares of its common stock, par value
$0.01 per share ("Common Stock"). In the Offering, the Company issued and sold
4,229,050 shares of Common Stock and certain stockholders of the Company sold
6,810,950 shares of Common Stock. The Company received net proceeds of $90.7
million for the shares sold by it in the Offering.
The net proceeds received by the Company in the Offering have been, or
are intended to be, used to (i) repay in full the $6.0 million outstanding under
the revolving loan facility between Fleet Capital Corporation ("Fleet") and the
Company, (ii) redeem in full, through a cash payment of $18.2 million, certain
subordinated notes of the Company, (iii) repay 50% of the $28.5 million amount
outstanding under the $30.5 million term loan facility among The CIT
Group/Equipment Financing, Inc. ("CIT"), Fleet and the Company, which may not be
repaid until January 1998, (iv) make a cash payment to CIT of $817,125 in
connection with the exercise, on a net basis, of certain warrants for the
purchase of Common Stock held by CIT, (v) modify, upgrade and refurbish drilling
rigs and equipment currently owned by the Company at an estimated cost of
between $16 million and $18 million and (vi) fund working capital and for
general corporate purposes, including acquisitions of drilling rigs and related
equipment.
6. In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS No. 128"). SFAS No. 128, which is effective for periods ending after
December 15, 1997, including interim periods, simplifies the standards for
computing earnings per share and replaces the presentation of primary earnings
per share with a presentation of basic earnings per share. Initial adoption of
this standard is not expected to have a material impact on the Company's
financial position or results of operations. Early adoption is not permitted.
7. Effective July 1, 1997, the Company changed the estimated remaining lives
of its drilling rigs and other related drilling equipment to 180 months from
remaining lives of 144 months. These changes were made to more closely
approximate the remaining useful lives of such assets. The effect of these
changes was to increase net earnings for the third quarter ended September 30,
1997 by approximately $229,000, net of income taxes of $141,000, or $.02 per
share.
6
<PAGE> 9
BAYARD DRILLING TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Bayard Drilling Technologies, Inc. (the "Company") is a leading
provider of contract land drilling services to major and independent oil and gas
companies. The Company's operations have been and will be significantly affected
by the Company's acquisitions of Trend Drilling Co. ("Trend") in May 1997 (the
"Trend Acquisition"), Ward Drilling Company ("Ward") in May 1997 (the "Ward
Acquisition"), Bonray Drilling Corporation ("Bonray") in October 1997 (the
"Bonray Acquisition") and a number of individual drilling rigs (the "Individual
Rig Acquisitions") between December 1996 and the date of this Report
(collectively with the series of transactions consummated during the fourth
quarter of 1996 that resulted in the formation of the Company (the "Formation
Transactions"), the "Consolidation Transactions"). The Consolidation
Transactions have transformed the Company from a regional competitor with ten
rigs in late 1996 to its current position of operating the fifth largest land
drilling fleet in the United States, with a total of 54 rigs (including 13 rigs
acquired in the Bonray Acquisition, which was completed after September 30,
1997). The historical financial results presented herein include the effects of
the Formation Transactions (16 rigs), the Trend Acquisition (14 rigs), the Ward
Acquisition (six rigs), and the Individual Rig Acquisitions (six rigs), only for
the periods after such transactions. In addition, the historical financial
results include periods in which a number of rigs were being refurbished and did
not contribute to revenues. Accordingly, the Company does not believe that the
historical statements of operations presented herein are necessarily indicative
of the Company's future operating results, particularly in light of the
magnitude of its recent acquisitions and rig refurbishment projects and the
increased demand and contract rates for drilling rigs in its core Mid-Continent
and Gulf Coast operating regions.
The Company's operating margins are influenced by contract drilling
rates, operating costs and drilling rig utilization. The land drilling industry
is experiencing higher utilization, increasing day rates and improved financial
performance as a result of the long term decline in the supply of rigs and
increased demand for rigs attributable to improved oil and gas industry
fundamentals. In addition, the industry is experiencing a period of rapid
consolidation as larger, better-capitalized drilling companies have acquired
smaller operators. The convergence of land drilling rig supply and demand in its
core domestic markets, along with the acquisition and refurbishment of rigs, has
contributed to higher utilization, increasing day rates and improved financial
results for the Company in recent periods.
FINANCIAL CONDITION AND LIQUIDITY
Between December 1996 and September 30, 1997, the Company completed the
Formation Transactions, the Trend Acquisition, the Ward Acquisition and the
Individual Rig Acquisitions. The Formation Transactions involved the issuance of
an aggregate of 5,600,000 shares of common stock, par value $0.01 per share
("Common Stock"), of the Company to existing stockholders in consideration for
the contribution to the Company of 16 rigs and $10 million in cash. At the time
of the Formation Transactions, the Company entered into a $24 million term loan
facility with The CIT Group/Equipment Financing, Inc. ("CIT"), principally for
the refurbishment of certain of the Company's rigs. In May 1997,
contemporaneously with the Trend Acquisition and in anticipation of the Ward
Acquisition, the Company completed a financing transaction in which it (i)
issued to Chesapeake Energy Corporation ("Chesapeake") and Energy Spectrum
Partners LP ("Energy Spectrum") additional shares of Common Stock and two series
of warrants, together with subordinated notes due May 1, 2003 (the "Subordinated
7
<PAGE> 10
BAYARD DRILLING TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Notes") for $28.5 million in cash and (ii) increased the availability under its
debt facilities from $24 million to $40.5 million (collectively, the "May
Financing"). In addition, the Company obtained the right, exercisable solely at
the Company's option at any time on or prior to April 30, 1998, to require
Chesapeake to provide an additional $3 million in cash in exchange for the
issuance to Chesapeake of additional shares of Common Stock, Subordinated Notes
and warrants to purchase Common Stock. The Company later waived this right in
connection with the Chesapeake Transactions described below.
The Company's principal requirements for capital, in addition to the
funding of ongoing contract drilling operations, have been capital expenditures,
including the refurbishment of existing rigs and acquisitions. From December
1996 through September 30, 1997, the Company has spent $20.7 million on the
Trend Acquisition, $11.9 million on the Ward Acquisition, $5.5 million on the
Individual Rig Acquisitions and approximately $45.5 million on refurbishments
and other related equipment purchases, including drill pipe. As a result, the
Company's net property and equipment increased from $27 million at December 31,
1996 to $105 million at September 30, 1997. The Company's principal sources of
liquidity have been the issuance of Common Stock, warrants to purchase Common
Stock, the Subordinated Notes and borrowings under a $30.5 million term loan
facility (the "Term Loan") between the Company, CIT and Fleet Capital
Corporation ("Fleet") and a $10 million revolving loan facility (the "Revolving
Loan") between Fleet and the Company (collectively, the "Loan Agreements").
The most significant change in the Company's balance sheet from
December 31, 1996 to September 30, 1997 was a $77.7 million increase in net
property and equipment. During this same period, long-term debt, net of current
maturities, increased by $34.3 million and stockholders' equity increased by
$22.5 million. These changes are a direct result of the acquisition and
financing transactions described herein.
From December 31, 1996 to September 30, 1997, the Company's working
capital position declined by $21.3 million to a deficit of $17.2 million. This
decline was primarily the result of a $13.6 million increase in current
maturities of long-term debt and a $4.9 million decrease in cash, as the Company
continued to invest in rig acquisitions and the refurbishment of rigs.
Operating Activities
During the year ended December 31, 1996, the Company required $462,000
of cash to fund operating activities. This was the result of $1.5 million of
cash provided by operations, partially offset by changes in working capital
items that required $2 million of cash. Cash required for changes in working
capital items included (i) an increase in accounts receivable of $2.1 million,
(ii) an increase in other assets totaling $185,000 and (iii) a decrease of
$383,000 in accounts payable, which were partially offset by an increase of
$663,000 of other current liabilities.
During the nine months ended September 30, 1997, net cash provided from
operating activities totaled $8.6 million. The Company generated cash from
operations of $5.7 million and working capital changes provided $2.9 million.
8
<PAGE> 11
BAYARD DRILLING TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Investing Activities
During 1996, the Company invested $21.7 million in fixed assets, net of
asset sales. The major components of these expenditures were $10.4 million of
cash expenditures to acquire and refurbish five diesel electric SCR rigs and
$9.8 million of Common Stock issued to acquire rigs in the Formation
Transactions.
During the nine months ended September 30, 1997, the Company invested
$85.9 million in fixed assets, including the Trend Acquisition, the Ward
Acquisition and the Individual Rig Acquisitions. Rig refurbishments consisted of
$28.7 million, and $16.8 million was invested in drill pipe and other drilling
related equipment. The acquisitions of Trend and Ward were partially funded
through the issuance of Common Stock valued at $6.6 million.
Financing Activities
During 1996, the Company raised $15.9 million from financing
activities. The Company borrowed $7 million during the year under the Term Loan
described below. The Company also issued 3,600,000 shares of Common Stock for
assets and cash and made debt payments totaling $900,000 during the year.
During the nine months ended September 30, 1997, the Company obtained
$63 million from financing activities, including net borrowings under the Loan
Agreements totaling $31.3 million, $11.2 million from the issuance of Common
Stock and $20.5 million from the issuance of the Subordinated Notes and the
associated warrants. The proceeds from these transactions were used to fund the
Company's working capital requirements and capital expenditures as discussed
above.
Following is a summary of certain material terms of the Formation
Transactions, the Loan Agreements and the May Financing.
Formation Transactions. The Company was formed in December 1996 through
a series of affiliated entity transactions in which the Company became successor
to Anadarko Drilling Company, the contract drilling subsidiary of privately held
AnSon Partners Limited Partnership. In connection with the Formation
Transactions (i) R. T. Oliver Drilling, Inc. and Mike Mullen Energy Equipment
Resource, Inc. and certain of their affiliated companies (collectively, "the
Oliver Companies") exchanged six drilling rigs for 1,600,000 shares of Common
Stock, (iii) Energy Spectrum contributed $10 million in consideration for
2,000,000 shares of Common Stock and (iv) Chesapeake entered into drilling
contracts with two-year terms for six of the Company's rigs in consideration for
the grant by the Company of an option to purchase 2,000,000 shares of Common
Stock.
Loan Agreements. On December 10, 1996, the Company also entered into
the Term Loan. Subsequent to that date and in connection with the May Financing,
the Company increased the Term Loan from $24 million to $30.5 million. The Term
Loan provides the Company up to approximately $30.5 million of borrowing
capacity for the purchase of additional land drilling rigs, the refurbishment of
such rigs and equipment and for working capital purposes. The Company also
entered into the Revolving Loan with Fleet in May 1997. The Revolving Loan
provides for revolving credit loans of up to $10
9
<PAGE> 12
BAYARD DRILLING TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
million, and is being used for general corporate purposes. Amounts outstanding
under the Revolving Loan ($7.9 million at September 30, 1997) bear interest
based on Fleet's prime rate plus 1.5% (10% at September 30, 1997) and mature in
April 2000. Amounts outstanding under the Term Loan ($28.5 million at September
30, 1997) bear interest, at the election of the Company, at floating rates equal
to Chase Manhattan Bank's prime rate plus 2.0% or LIBOR plus 4.25% (10% at
September 30, 1997) and mature in March 2002. To date, loans under the Revolving
Loan and the Term Loan have been used for capital expenditures and working
capital requirements. The Loan Agreements are secured by substantially all of
the assets of the Company, including all drilling rigs, equipment and drilling
contracts, and contain customary restrictive covenants (including covenants
restricting the ability of the Company to pay dividends and encumber assets) and
affirmative covenants to maintain specified financial ratios.
May Financing. In order to fund the Trend Acquisition and the Ward
Acquisition, on May 1, 1997, the Company completed the May Financing in which
the Company issued shares of Common Stock, the Subordinated Notes and warrants
to purchase Common Stock to Chesapeake and Energy Spectrum in exchange for an
aggregate of $28.5 million in cash, as described below. In addition, the Company
modified the Term Loan and entered into the Revolving Loan as described above.
In the May Financing, the Company issued 1,000,000 shares of Common
Stock to Chesapeake in consideration for $7 million in cash and 140,000 shares
of Common Stock to Energy Spectrum in consideration for $980,000 in cash.
Additionally, the Company issued Subordinated Notes due May 1, 2003 in the
original principal amounts of $18 million and $2.52 million (the "Subordinated
Notes") to Chesapeake and Energy Spectrum, respectively. The Subordinated Notes
bear interest at the Company's option at either (i) 11% per annum, payable in
cash, or (ii) 12.875% per annum, payable in the form of additional Subordinated
Notes, which interest is payable quarterly in arrears. The Subordinated Notes
are general unsecured subordinated obligations of the Company, pari passu with
all existing and future subordinated indebtedness of the Company and senior in
right of payment to all future junior subordinated indebtedness of the Company.
Upon consummation of the initial public offering of Common Stock, the Company
redeemed in full the $18 million principal amount of Subordinated Notes issued
to Chesapeake in consideration for the payment by the Company to Chesapeake of
$18.2 million in cash. See Note 5 in "Notes to Financial Statements" and "Recent
Events and Future Activities."
In connection with the issuance of the Subordinated Notes, the Company
issued two series of detachable warrants (the "Warrants") for the purchase of
shares of Common Stock, designated as "Series A Warrants" and "Series B
Warrants." The Warrants are exercisable on or prior to May 1, 2003 at a price of
$0.01 per share in the case of the Series A Warrants and $7.50 per share in the
case of the Series B Warrants. In the May Financing, Chesapeake was issued
Series A Warrants and Series B Warrants representing the right to purchase
700,000 shares and 800,000 shares of Common Stock, respectively, and Energy
Spectrum was issued Series A Warrants and Series B Warrants representing the
right to purchase 98,000 shares and 112,000 shares of Common Stock,
respectively. On July 31, 1997, Energy Spectrum exercised in full its Series A
Warrants, but continues to hold all of the Series B Warrants issued to it. In
August 1997, Chesapeake agreed to the relinquishment and cancellation in full of
its Series A Warrants and Series B Warrants in connection with a series of
transactions which, when completed in October 1997, resulted in the cancellation
of the option received by Chesapeake in the Formation Transactions, the
10
<PAGE> 13
BAYARD DRILLING TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
payment to the Company of $9 million in cash by Chesapeake, the redemption of
the $18 million principal amount of Subordinated Notes held by Chesapeake and
the issuance of 3,194,000 shares of Common Stock to Chesapeake (the "Chesapeake
Transactions").
Additional Chesapeake Financing. Additionally, in connection with the
May Financing, the Company obtained the right to require Chesapeake, on or
before April 30, 1998, to provide the Company with an additional $3 million in
capital through the purchase of (i) 120,000 shares of Common Stock for a
purchase price of $7.00 per share, (ii) additional Subordinated Notes in the
aggregate principal amount of $2.16 million, (iii) additional Series A Warrants
exercisable for 84,000 shares of Common Stock and (iv) additional Series B
Warrants exercisable for 96,000 shares of Common Stock. In August 1997, the
Company agreed to waive this right in connection with the Chesapeake
Transactions.
The foregoing summaries of the material provisions of the Company's
principal financing agreements do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all of the provisions of the
related agreements, copies or forms of which are included as exhibits hereto.
Recent Events and Future Activities
In October 1997, the Company consummated the Chesapeake Transactions,
resulting in the cancellation of the option received by Chesapeake in the
Formation Transactions, the payment to the Company of $9 million in cash by
Chesapeake, the redemption of the $18 million principal amount of Subordinated
Notes held by Chesapeake for an aggregate cash payment by the Company of $18.2
million and the issuance of 3,194,000 shares of Common Stock to Chesapeake.
Also in October 1997, the Company consummated the Bonray Acquisition,
pursuant to which Bonray became a wholly owned subsidiary of the Company. In the
Bonray Acquisition, the Company issued to DLB Oil & Gas, Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation 2,955,000 and 60,000 shares of Common
Stock, respectively. See Note 4 to "Notes to Financial Statements."
In November 1997, the Company and certain of its stockholders
consummated an initial public offering (the "Offering") of an aggregate of
11,040,000 shares of Common Stock. In the Offering, the Company issued and sold
4,229,050 shares of Common Stock and certain stockholders of the Company sold
6,810,950 shares of Common Stock. The Company received net proceeds of $90.7
million for the shares sold by it in the Offering.
On November 24, 1997, the Board of Directors of the Company approved
the acquisition and refurbishment of nine additional drilling rigs as part of an
$87 million capital expenditure budget. This budget includes $14.4 million for
refurbishment of four rigs in inventory, $42.6 million for the acquisition and
refurbishment of six rigs from R. T. Oliver Drilling, Inc., $11.2 million for
the acquisition of components and refurbishment to complete three additional
rigs, $10 million for maintenance capital expenditures, including drill pipe,
and $8.8 million for spare equipment. The schedule for rig refurbishment is
expected to extend through the first quarter of 1999; however, the Company may
accelerate or decelerate this schedule at any time and from time to time based
on market conditions and other factors.
11
<PAGE> 14
BAYARD DRILLING TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company believes that the balance of the proceeds from the
Offering, cash flow from operations and, to the extent required, borrowings
under the Loan Agreements will be sufficient to fund the Company's 1997 rig
refurbishment program and to meet its other anticipated capital requirements for
1997. As of December 8, 1997, the Company had $28.5 million of borrowings
outstanding under the Term Loan, no borrowings outstanding under the Revolving
Loan and $2.5 million of borrowings outstanding under the Subordinated Notes,
with $10 million of unused borrowing capacity under the Revolving Loan and cash
or cash equivalents of approximately $54.0 million.
See Note 5 in "Notes to Financial Statements".
On November 25, 1997, the Company entered into an agreement to acquire
six rigs from R. T. Oliver Drilling, Inc. for $14 million. The Company expects
to consummate this acquisition on or about January 9, 1998; however, because it
is subject to the satisfaction of certain conditions, no assurance can be given
that such transaction will be finally consummated.
The Company continues to actively review possible acquisition
opportunities. Except for the acquisition from R. T. Oliver Drilling, Inc.
described above, the Company has no agreements to acquire additional businesses
or equipment; however, suitable opportunities may arise in the future. The
timing or success of any acquisition effort and the size of the associated
potential capital commitments cannot be predicted at this time. In addition,
there can be no assurance that adequate funding will be available on terms
satisfactory to the Company.
Forward Looking Information
This Report contains forward-looking statements and information that
are based on the beliefs of the Company's management as well as assumptions made
by and information currently available to management. All statements other than
statements of historical fact included in this Report constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, including but not limited to statements identified by the words
"anticipate," believe," "intend," "estimate" and "expect" and similar
expressions. Such statements reflect the Company's current views with respect to
future events, based on what it believes are reasonable assumptions; however,
such statements are subject to certain risks, uncertainties and assumptions,
including but not limited to the risk factors set forth in the Company's
Registration Statement on Form S-1 (Registration No. 333-34451), copies of which
may be obtained from the Securities and Exchange Commission or from the Internet
site maintained by the Commission at http://www.sec.gov. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those in the forward-looking
statements. The Company disclaims any intention or obligation to update or
review any forward-looking statements or information, whether as a result of new
information, future events or otherwise.
12
<PAGE> 15
BAYARD DRILLING TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
Comparison of Three Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1996 1997
<S> <C> <C>
Rig days worked (1) .................... 502 3,006
Average revenues per day (2) ........... $ 4,952 $ 6,024
Drilling revenues ...................... $ 2,486,000 $18,107,000
Drilling costs (3) ..................... 1,976,000 13,349,000
----------- -----------
Operating Margin ....................... $ 510,000 $ 4,758,000
=========== ===========
</TABLE>
================================================================================
(1) Rig days worked represents the number of rigs being marketed by the
Company multiplied by the number of days during which such rigs are
being operated, mobilized, assembled or dismantled while under
contract. Rig days are a common measurement of both utilization rates
and fleet size.
(2) Represents total contract drilling revenues (including mobilization
revenues and reimbursement for fuel and other costs) divided by the
total number of rig days worked by the Company's drilling rig fleet
marketed during the period.
(3) Drilling costs exclude depreciation and amortization and general and
administrative expenses.
Drilling revenues increased approximately $15.6 million, or 628% to
$18.1 million for the three months ended September 30, 1997, from $2.5 million
for the three months ended September 30, 1996. Drilling revenues increased due
to a 2,504 day, or 499%, increase in rig days worked, and a $1,072, or 22%,
increase in the average revenue per day. The increase in days worked was a
result of an increase in the average number of rigs owned and available for
service. As of September 30, 1997, the Company had 36 rigs available for
service. The increase in rigs available for service was principally the result
of the Consolidation Transactions. Rig days worked consisted of 1,096 days
worked in the Gulf Coast region and 1,910 days worked in the Mid-Continent
region. Increases in revenues per day were a result of the overall increase in
demand for land drilling rigs as reflected in the utilization rate increase from
87% to 94%.
Drilling costs increased by approximately $11.3 million, or 576%, to
$13.3 million for the three months ended September 30, 1997, as compared to $2.0
million for the three months ended September 30, 1996. The increase in drilling
operating expenses was a direct result of the increase in the number of rigs
owned and available for service and the corresponding 2,504 day increase in the
days worked.
13
<PAGE> 16
BAYARD DRILLING TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Depreciation and amortization expense increased by $2.0 million, or
629%, to $2.3 million for the three months ended September 30, 1997, as compared
to $312,000 for the three months ended September 30, 1996. The increase was
primarily due to additional depreciation associated with the Consolidation
Transactions.
General and administrative expense increased by $297,000, or 198%, to
$447,000 for the three months ended September 30, 1997, from $150,000 for the
same period of 1996 due primarily to increased payroll costs associated with new
management and increased corporate staff and increased legal fees due to the
Company's acquisition activities.
Interest expense was $1.2 million for the three months ended September
30, 1997. The Company had no outstanding debt for the three months ended
September 30, 1996.
Other income increased for the three months ended September 30, 1997 as
compared to the three months ended September 30, 1996, primarily due to gains on
the sale of assets.
Comparison of Nine Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1997
<S> <C> <C>
Rig days worked (1) .................... 1,438 5,786
Average revenues per day (2) ........... $ 4,678 $ 5,740
Drilling revenues ...................... $ 6,728,000 $33,214,000
Drilling costs (3) ..................... 5,244,000 24,246,000
----------- -----------
Operating Margin ....................... $ 1,484,000 $ 8,968,000
=========== ===========
</TABLE>
================================================================================
(1) Rig days worked represents the number of rigs being marketed by the
Company multiplied by the number of days during which such rigs are
being operated, mobilized, assembled or dismantled while under
contract. Rig days are a common measurement of both utilization rates
and fleet size.
(2) Represents total contract drilling revenues (including mobilization
revenues and reimbursement for fuel and other costs) divided by the
total number of rig days worked by the Company's drilling rig fleet
marketed during the period.
(3) Drilling costs exclude depreciation and amortization and general and
administrative expenses.
Drilling revenues increased approximately $26.5 million, or 394%, to
$33.2 million for the nine months ended September 30, 1997, from $6.7 million
for the nine months ended September 30, 1996. Drilling revenues increased due to
a 4,348 day, or 302%, increase in rig days worked, and a $1,062, or 23%,
increase in the average revenue per day. The increase in days worked was a
result of an increase in
14
<PAGE> 17
BAYARD DRILLING TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
the average number of rigs owned and available for service. As of September 30,
1997, the Company had 36 rigs available for service. The increase in rigs
available for service was principally the result of the Consolidation
Transactions. Rig days worked consisted of 2,533 days worked in the Gulf Coast
region and 3,253 days worked in the Mid-Continent region. Increases in revenues
per day were a result of the overall increase in demand for land drilling rigs
as reflected in the utilization rate increase from 87% to 94%.
Drilling costs increased by approximately $19.0 million, or 362%, to
$24.2 million for the nine months ended September 30, 1997, as compared to $5.2
million for the nine months ended September 30, 1996. The increase in drilling
operating expenses was a direct result of the increase in the number of rigs
owned and available for service and the corresponding 4,348 day increase in rig
days worked.
Depreciation and amortization expense increased by $4.2 million, or
576%, to $4.9 million for the nine months ended September 30, 1997, as compared
to $727,000 for the nine months ended September 30, 1996. The increase was
primarily due to additional depreciation associated with the Consolidation
Transactions.
General and administrative expense increased by $708,000, or 149%, to
$1.2 million for the nine months ended September 30, 1997, from $473,000 for the
same period of 1996, due primarily to increased payroll costs associated with
new management and increased corporate staff and increased legal fees due to the
Company's acquisition activities.
Interest expense was $2.2 million for the nine months ended September
30, 1997. The Company had no outstanding debt for the nine months ended
September 30, 1996.
Other income increased for the nine months ended September 30, 1997 as
compared to the nine months ended June 30, 1996, primarily due to gains on the
sale of assets.
For the nine months ended September 30, 1997, the income tax provision
was $410,000. For the first nine months of 1996 the Company was not a taxable
entity.
INFLATION AND CHANGING PRICES
Contract drilling revenues do not necessarily track the changes in
general inflation as they tend to respond to the level of activity on the part
of the oil and gas industry in combination with the supply of equipment and the
number of competing companies. Capital and operating costs are influenced to a
larger extent by specific price changes in the oil and gas industry and to a
lesser extent by changes in general inflation.
15
<PAGE> 18
PART II. OTHER INFORMATION
BAYARD DRILLING TECHNOLOGIES, INC.
ITEM 2. Changes in Securities and Use of Proceeds
(a) During the period from July 1, 1997 through September 30, 1997, the only
outstanding class of securities of the Company was the Common Stock. During such
period, the Company adopted a Restated Certificate of Incorporation in the form
of Exhibit 3.1 to this Report. The Restated Certificate of Incorporation
reflects amendments to the previous certificate of incorporation that, among
other things, (i) establish "fair price" provisions for certain transactions,
(ii) prohibit stockholders from acting by written consent, (iii) prohibit
stockholders from calling special meetings of stockholders, (iv) require certain
procedures to be followed and time periods to be met for any stockholder to
propose matters to be considered at annual meetings of stockholders, including
nominating directors for election at those meetings, (v) limit the ability of
stockholders to interfere with the power of the Company's Board of Directors in
other specified ways and (vi) require supermajority votes to amend any of the
preceding provisions.
(b) On July 31, 1997, upon the exercise by Energy Spectrum of its warrants to
purchase 98,000 shares of Common Stock at an exercise price of $.01 per share
and the payment by Energy Spectrum of an aggregate of $490 in consideration of
such exercise price, the Company issued to Energy Spectrum 98,000 shares of
Common Stock. The issuance of the shares of Common Stock was exempt from the
registration requirements of the Securities Act of 1933, as amended, under
Section 4(2) thereof as a transaction not involving a public offering.
(c) On November 3, 1997, the Securities and Exchange Commission declared
effective two Registration Statements on Form S-1 (Commission File Nos.
333-34451 and 333-39393) pursuant to which the Company registered the sale of an
aggregate of 11,040,000 shares of Common Stock. The Offering commenced on
November 4, 1997 and was concluded promptly thereafter by the sale of all
11,040,000 of the registered shares. The managing underwriters in the Offering
were Donaldson, Lufkin & Jenrette Securities Corporation, Lehman Brothers Inc.,
Prudential Securities Incorporated, Rauscher Pierce Refsnes, Inc. and Raymond
James & Associates, Inc. Of the 11,040,000 shares of Common Stock registered in
the Offering, 4,229,050 shares were sold by the Company for an aggregate
offering price of $97,268,150 and an aggregate of 6,810,950 shares were sold by
certain stockholders for an aggregate offering price of $156,651,850.
The following is a statement of expenses incurred by the Company in connection
with the issuance and distribution of the securities described above.
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
Underwriting discounts and commissions $6,565,600
Finders' fees 0
Securities Act registration fee 70,534
NASD filing fee 17,600
Blue sky qualification fees and expenses 5,000*
Printing and engraving fees and expenses 300,000*
Legal fees and expenses 300,000*
Accounting fees and expenses 300,000*
Transfer agent and registrar fees and expenses 5,000*
American Stock Exchange listing fee 50,000
Miscellaneous 151,866*
----------
TOTAL $7,765,600
==========
</TABLE>
- ---------
*Estimate
16
<PAGE> 19
PART II. OTHER INFORMATION
BAYARD DRILLING TECHNOLOGIES, INC. (CONTINUED)
After deducting such expenses, the net proceeds to the Company from the Offering
were $89.5 million.
Through November 30, 1997, the net proceeds received by the Company in the
Offering have been used for the following purposes:
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
Purchase and installation of machinery and equipment $ 8,094,262
Construction of plant, building and facilities 0
Purchase of real estate 0
Acquisitions of other businesses 0
Repayment of indebtedness 24,200,000
Working capital 0
Payment to CIT in connection with warrant exercise 817,125
Temporary investments (1) 56,391,163
</TABLE>
(1) Such funds are currently being invested in short-term instruments until
they are required for the purposes described in the prospectus related to
the Offering.
Such uses conform in all material respects to the uses described in the
prospectus relating to the Offering.
None of the aforementioned expenses or uses of proceeds constituted direct or
indirect payments to directors or officers of the Company or their associates,
to persons owning 10% or more of any class of equity securities of the Company
or to any affiliates of the Company.
ITEM 4. Submission of Matters to a Vote of Securities Holders
By written consent dated August 19, 1997, holders of an aggregate of
2,669,000 shares of Common Stock, representing 70.3% of the 3,794,000 shares of
Common Stock then outstanding, adopted and approved the Restated Certificate of
Incorporation in the form of Exhibit 3.1 to this Report.
17
<PAGE> 20
PART II. OTHER INFORMATION
BAYARD DRILLING TECHNOLOGIES, INC. (CONTINUED)
ITEM 6. Exhibits and reports on Form 8-K
Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
3.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 (Registration No.
333-34451)).
3.2 Amended and Restated Bylaws of the Company, as adopted
August 19, 1997 (incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement on Form S-1
(Registration No. 333-34451)).
9.1 Second Amended and Restated Stockholders and Voting
Agreement, dated as of October 16, 1997, by and among the
Company and the several stockholders that are signatories
thereto (incorporated by reference to Exhibit 9.1 to the
Company's Registration Statement on Form S-1 (Registration
No. 333-34451)).
10.1 1997 Stock Option and Stock Award Plan of the Company
(incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-1 (Registration No.
333-34451)).
10.2 Forms of Non-Qualified Stock Option Agreements under the
1997 Stock Option and Stock Award Plan (incorporated by
reference to Exhibit 10.2 to the Company's Registration
Statement on Form S-1 (Registration No. 333-34451)).
10.3 Amended and Restated Registration Rights Agreement, dated as
of April 30, 1997, by and among the Company and the
stockholders of the Company that are signatories thereto
(incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-1 (Registration No.
333-34451)).
10.4 First Amendment to Amended and Restated Registration Rights
Agreement, dated as of May 30, 1997, by and among the
Company and the stockholders of the Company that are
signatories thereto (incorporated by reference to Exhibit
10.4 to the Company's Registration Statement on Form S-1
(Registration No. 333-34451)).
10.5 Master Agreement, dated as of November 26, 1996, by and
among the Company and the stockholders of the Company that
are signatories thereto (incorporated by reference to
Exhibit 10.5 to the Company's Registration Statement on Form
S-1 (Registration No. 333-34451)).
10.6 Master Drilling Agreement, dated as of December 10, 1996, by
and among the Company, Chesapeake Energy Corporation and
Chesapeake Operating, Inc. (incorporated by reference to
Exhibit 10.6 to the Company's Registration Statement on Form
S-1 (Registration No. 333-34451)).
</TABLE>
18
<PAGE> 21
PART II. OTHER INFORMATION
BAYARD DRILLING TECHNOLOGIES, INC. (CONTINUED)
<TABLE>
<S> <C>
10.7 Form of Chesapeake Drilling Agreement, by and between
Chesapeake Operating, Inc., as Operator, and the Company, as
Contractor (incorporated by reference to Exhibit 10.7 to the
Company's Registration Statement on Form S-1 (Registration
No. 333-34451)).
10.8 Option Agreement, dated as of December 10, 1996, by and
between the Company and Chesapeake Energy Corporation
(incorporated by reference to Exhibit 10.8 to the Company's
Registration Statement on Form S-1 (Registration No.
333-34451)).
10.9 Chesapeake Energy Corporation Option to Purchase Common
Stock of the Company, dated December 10, 1996 (incorporated
by reference to Exhibit 10.9 to the Company's Registration
Statement on Form S-1 (Registration No. 333-34451)).
10.10 Securities Purchase Agreement, dated as of April 30, 1997,
by and among the Company, Energy Spectrum Partners LP and
Chesapeake Energy Corporation (the "April Securities
Purchase Agreement") (incorporated by reference to Exhibit
10.10 to the Company's Registration Statement on Form S-1
(Registration No. 333-34451)).
10.11 Form of Subordinated Note of the Company issued pursuant to
the April Securities Purchase Agreement (incorporated by
reference to Exhibit 10.11 to the Company's Registration
Statement on Form S-1 (Registration No. 333-34451)).
10.12 Form of Series A Warrant to Purchase Common Stock of the
Company issued pursuant to the April Securities Purchase
Agreement (incorporated by reference to Exhibit 10.12 to the
Company's Registration Statement on Form S-1 (Registration
No. 333-34451)).
10.13 Form of Series B Warrant to Purchase Common Stock of the
Company issued pursuant to the April Securities Purchase
Agreement (incorporated by reference to Exhibit 10.13 to the
Company's Registration Statement on Form S-1 (Registration
No. 333-34451)).
10.14 Ward Drilling Company, Inc. Warrant to Purchase Common Stock
of the Company, dated May 30, 1997 (incorporated by
reference to Exhibit 10.14 to the Company's Registration
Statement on Form S-1 (Registration No. 333-34451)).
10.15 Preferential Right to Transport Agreement, dated as of May
30, 1997, by and between the Company and Geronimo Trucking
Company (incorporated by reference to Exhibit 10.15 to the
Company's Registration Statement on Form S-1 (Registration
No. 333-34451)).
10.15.1 RR&T, Inc. Warrant to Purchase Common Stock of the Company,
dated May 1, 1997 (incorporated by reference to Exhibit
10.16 to the Company's Registration Statement on Form S-1
(Registration No. 333-34451)).
</TABLE>
19
<PAGE> 22
PART II. OTHER INFORMATION
BAYARD DRILLING TECHNOLOGIES, INC. (CONTINUED)
<TABLE>
<S> <C>
10.16 Mike Mullen Warrant to Purchase Common Stock of the Company,
dated May 1, 1997 (incorporated by reference to Exhibit
10.17 to the Company's Registration Statement on Form S-1
(Registration No. 333-34451)).
10.17 The CIT Group/Equipment Financing, Inc. Warrant to Purchase
Common Stock of the Company, dated December 10, 1996
(incorporated by reference to Exhibit 10.18 to the Company's
Registration Statement on Form S-1 (Registration No.
333-34451)).
10.18 Loan and Security Agreement, dated as of May 1, 1997, by and
among Fleet Capital Corporation, the Company and Trend
Drilling Co. (incorporated by reference to Exhibit 10.19 to
the Company's Registration Statement on Form S-1
(Registration No. 333-34451)).
10.19 Amended and Restated Loan Agreement, dated as of May 1,
1997, by and among the CIT Group/Equipment Financing, Inc.
and Fleet Capital Corporation, as Lenders, and the Company
and Trend Drilling Co., as Borrowers (incorporated by
reference to Exhibit 10.20 to the Company's Registration
Statement on Form S-1 (Registration No. 333-34451)).
10.20 Employment Agreement, dated as of December 10, 1996, by and
between the Company and James E. Brown (incorporated by
reference to Exhibit 10.21 to the Company's Registration
Statement on Form S-1 (Registration No. 333-34451)).
10.21 Restricted Stock Award Agreement, dated as of December 10,
1996, by and between the Company and James E. Brown
(incorporated by reference to Exhibit 10.22 to the Company's
Registration Statement on Form S-1 (Registration No.
333-34451)).
10.22 Employment Agreement, dated as of January 1, 1997, by and
between the Company and Ed Jacob (incorporated by reference
to Exhibit 10.23 to the Company's Registration Statement on
Form S-1 (Registration No. 333-34451)).
10.23 Employment Agreement, dated as of July 16, 1997, by and
between the Company and David E. Grose (incorporated by
reference to Exhibit 10.24 to the Company's Registration
Statement on Form S-1 (Registration No. 333-34451)).
10.24 Letter Agreement, dated as of August 20, 1997, by and
between the Company and Chesapeake Energy Corporation
(incorporated by reference to Exhibit 10.25 to the Company's
Registration Statement on Form S-1 (Registration No.
333-34451)).
10.25 Form of Indemnification Agreement to be entered into by the
Company and each of the directors and certain officers of
the Company in connection with the Offering (incorporated by
reference to Exhibit 10.26 to the Company's Registration
Statement on Form S-1 (Registration No. 333-34451)).
</TABLE>
20
<PAGE> 23
PART II. OTHER INFORMATION
BAYARD DRILLING TECHNOLOGIES, INC. (CONTINUED)
<TABLE>
<S> <C>
10.26 Agreement and Plan of Merger, dated as of October 9, 1997,
by and among DLB Oil & Gas, Inc., the Company, Bonray
Acquisition Corp. and Bonray Drilling Corporation
(incorporated by reference to Exhibit 10.27 to the Company's
Registration Statement on Form S-1 (Registration No.
333-34451)).
10.27 1997 Non-Employee Directors' Stock Option Plan of the
Company (incorporated by reference to Exhibit 10.28 to the
Company's Registration Statement on Form S-1 (Registration
No. 333-34451)).
10.28 Form of Nonqualified Option Agreement under the 1997
Non-Employee Directors' Option Plan of the Company
(incorporated by reference to Exhibit 10.29 to the Company's
Registration Statement on Form S-1 (Registration No.
333-34451)).
10.29 Registration Rights Agreement, dated as of October 16, 1997,
by and among the Company, DLB Oil & Gas, Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation (incorporated by
reference to Exhibit 10.30 to the Company's Registration
Statement on Form S-1 (Registration No. 333-34451)).
10.30 The Letter Agreement, dated as of October 3, 1997, by and
between the Company and The CIT Group/Equipment Financing,
Inc. (incorporated by reference to Exhibit 10.31 to the
Company's Registration Statement on Form S-1 (Registration
No. 333-34451)).
10.31 Second Amended and Restated Registration Rights Agreement,
dated as of October 30, 1997, by and among the Company and
the stockholders of the Company that are signatories thereto
(incorporated by reference to Exhibit 10.32 to the Company's
Registration Statement on Form S-1 (Registration No.
333-34451)).
11.1 Statement regarding computation of per share earnings.*
27.1 Financial Data Schedule. *
</TABLE>
(b) No reports on Form 8-K were filed during the three months ended September
30, 1997.
- -------------
* Filed herewith
21
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
BAYARD DRILLING TECHNOLOGIES, INC.
DATE December 9, 1997 /s/ James E. Brown
------------------------- --------------------------------------
James E. Brown, Chairman, President and
Chief Executive Officer
DATE December 9, 1997 /s/ David E. Grose
------------------------- --------------------------------------
David E. Grose, Vice President and
Chief Financial Officer
22
<PAGE> 25
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
11.1 Statement regarding computation of per share earnings.*
27.1 Financial Data Schedule.*
* Filed Herewith
<PAGE> 1
EXHIBIT 11.1
BAYARD DRILLING TECHNOLOGIES, INC.
COMPUTATION OF EARNINGS (LOSS) PER SHARE
Nine Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------
March 31, June 30, September 30,
------------ ------------ -------------
1997
- ----
<S> <C> <C> <C>
Weighted average common and common equivalent shares:
Common stock outstanding from beginning of period 5,850,000 5,850,000 10,432,000
Common stock issued -- 4,582,000 166,667
Common stock equivalents 718,043 718,043 718,043
------------ ------------ ------------
6,568,043 11,150,043 11,316,710
============ ============ ============
Net income (loss) $ (83,526) $ 64,225 $ 682,713
============ ============ ============
Net income (loss) per common and common
equivalent shares $ (0.01) $ 0.01 $ 0.06
============ ============ ============
Weighted average shares 11,316,710
============
Net income $ 663,412
============
Net income per common and common
equivalent shares $ 0.06
============
1996
- ----
Weighted average common and common equivalent shares:
Common stock outstanding from beginning of period 5,850,000 5,850,000 5,850,000
Common stock issued -- -- --
Common stock equivalents 718,043 718,043 718,043
------------ ------------ ------------
6,568,043 6,568,043 6,568,043
============ ============ ============
Net income (loss) $ 79,000 $ 252,000 $ 29,000
============ ============ ============
Net income (loss) per common and common
equivalent shares $ 0.01 $ 0.04 $ 0.00
============ ============ ============
Weighted average shares 6,568,043
============
Net income $ 360,000
============
Net income per common and common
equivalent shares $ 0.05
============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 812
<SECURITIES> 0
<RECEIVABLES> 13,610
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,874
<PP&E> 124,509
<DEPRECIATION> 19,835
<TOTAL-ASSETS> 128,064
<CURRENT-LIABILITIES> 32,122
<BONDS> 40,359
0
0
<COMMON> 76
<OTHER-SE> 48,420
<TOTAL-LIABILITY-AND-EQUITY> 128,064
<SALES> 33,214
<TOTAL-REVENUES> 33,214
<CGS> 30,345
<TOTAL-COSTS> 30,345
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,172
<INCOME-PRETAX> 1,073
<INCOME-TAX> 410
<INCOME-CONTINUING> 663
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 663
<EPS-PRIMARY> .06
<EPS-DILUTED> 0
</TABLE>
