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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1999 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
COMMISSION FILE NUMBER 333-57325
CHILES OFFSHORE LLC
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C> <C>
DELAWARE 76-0547408
(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
File No. 333-57325-01 File No. 333-57325-02 File No. 333-57325-03
CHILES OFFSHORE FINANCE CORP. CHILES COLUMBUS LLC CHILES MAGELLAN LLC
(Exact Name of Registrant as (Exact Name of Registrant as (Exact Name of Registrant as
Specified in its Charter) Specified in its Charter) Specified in its Charter)
DELAWARE DELAWARE DELAWARE
(State or other jurisdiction of (State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization) incorporation or organization)
76-0568691 76-0568690 76-0568689
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
11200 WESTHEIMER, SUITE 410, HOUSTON, TEXAS 77042-3227
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(713) 339-3777
(Registrants' Telephone Number, Including Area Code)
Indicate by check mark whether each of the registrants: (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[ ]
As of August 10, 1999, 1,000 shares of the common stock of Chiles Offshore
Finance Corp. were outstanding.
73293.0016
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY IN THE DEVELOPMENT STAGE)
CONSOLIDATED BALANCE SHEETS
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==============================================================================================================
June 30, 1999 December 31, 1998
------------- -----------------
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 862,612 $ 8,739,497
Cash restricted for interest payments.................. - 5,500,000
Accounts and other receivables......................... 1,895,166 263,000
Prepaid expenses....................................... 90,488 12,308
------------ ------------
Total current assets............................... 2,848,266 14,514,805
============ ============
PROPERTY AND EQUIPMENT:
Drilling Rig and Equipment............................. 92,017,684 356,086
Less accumulated depreciation.......................... (284,315) (62,188)
------------ ------------
Net property and equipment........................ 91,733,369 293,898
------------ ------------
Rig under construction................................. 83,503,157 111,430,739
------------ ------------
Total property and equipment........................... 175,236,526 111,724,637
------------ ------------
CASH RESTRICTED FOR CONSTRUCTION............................ - 47,974,015
------------ ------------
DEFERRED DEBT ISSUANCE COSTS AND OTHER...................... 4,124,548 4,219,267
------------ ------------
Total Assets...................................... $182,209,340 $178,432,724
============ ============
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable....................................... $ 6,102,584 $ 2,660,950
Accrued liabilities.................................... 2,704,819 2,176,920
------------ ------------
Total current liabilities......................... 8,807,403 4,837,870
LONG TERM DEBT.............................................. 110,000,000 110,000,000
------------ ------------
Total liabilities................................. $118,807,403 $114,837,870
============ ============
MEMBERS' EQUITY:
Capital contributions, net of offering costs........... 63,730,707 63,730,707
Cumulative (losses) income since inception............. (328,770) (135,853)
------------ ------------
Total members' equity.................................. 63,401,937 63,594,854
------------ ------------
Total Liabilities and Members' Equity.................. $182,209,340 $178,432,724
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
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2
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CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
For the Period For the For the For the For the
from Inception Three Months Three Months Six Months Six Months
(August 5, 1997) to Ended Ended Ended Ended
June 30, 1999 June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
-------------------- ---------------- -------------------- -------------------- ---------------
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REVENUE............................ $ 527,909 $ 527,909 - $ 527,909 -
OPERATING EXPENSES:
Rig Operating Expenses........... 402,621 402,621 - 402,621 -
General & administrative expenses 1,586,951 256,446 $ 277,801 444,118 $ 360,091
Depreciation..................... 284,315 204,727 18,478 222,127 21,043
---------------- ---------------- ---------------- ---------------- ----------------
Operating loss............... (1,745,978) (335,885) (296,279) (540,957) (381,134)
INTEREST INCOME.................... 4,179,244 178,100 587,709 723,430 950,795
INTEREST EXPENSE................... (2,762,036) (329,676) (843,661) (375,389) (843,661)
---------------- ---------------- ---------------- ---------------- ----------------
NET (LOSS)......................... $ (328,770) $ (487,461) $ (552,231) $ (192,916) $ (274,000)
================ ================ ================ ================ ================
The accompanying notes are an integral part of these consolidated financial
statements.
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3
<PAGE>
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CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
For the Period For the For the
from Inception Six Months Six Months
(August 5, 1997) to Ended Ended
June 30,1999 June 30, 1999 June 30, 1998
--------------------- --------------------- ---------------------
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................... $ (328,770) $ (192,916) $ (274,000)
Adjustments to reconcile net loss to net cash
provided by (required by) operating activities
-
Depreciation.............................. 284,315 222,127 21,043
Amortization of deferred expenses......... 90,943 12,704 69,645
Increase (decrease) in operating cash flows
resulting from-
Accounts and other receivable............. (1,895,166) (1,632,166) -
Accounts payable.......................... 6,034,982 3,441,634 (3,304,815)
Accrued liabilities....................... 2,704,819 527,899 2,086,901
Prepaid expenses and other................ (11,923) 3,835 7,867
--------------------- --------------------- ---------------------
Net cash provided by (used in) operating
activities.............................. 6,879,200 2,383,117 (1,393,359)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.......... (145,501,269) (63,734,017) (33,922,007)
--------------------- --------------------- ---------------------
Net cash required by investing activities (145,501,269) (63,734,017) (33,922,007)
CASH FLOWS FROM FINANCING ACTIVITIES:
Membership capital contributions, net........ 33,984,884 - -
Net proceeds from the sale of senior notes... 105,499,797 - 106,290,228
--------------------- --------------------- ---------------------
Net cash provided by financing activities 139,484,681 - 106,290,228
RESTRICTED CASH, beginning of period............. - 62,213,512 -
NET INCREASE (DECREASE) IN RESTRICTED CASH....... - (62,213,512) -
--------------------- --------------------- ---------------------
RESTRICTED CASH, end of period................... - - (95,908,713)
--------------------- --------------------- ---------------------
NET INCREASE (DECREASE) IN CASH.................. 862,612 862,612 (24,933,851)
CASH AND CASH EQUIVALENTS, beginning of period... - - 32,341,117
--------------------- --------------------- ---------------------
CASH AND CASH EQUIVALENTS, end of period......... $ 862,612 $ 862,612 $ 7,407,266
===================== ===================== =====================
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Noncash investing activities -
Purchase of property in exchange for
membership interest....................... $21,260,000 - -
Noncash financing activities -
Receipt of net assets in exchange for
membership interest....................... $ 8,486,000 - -
Cash paid for interest - net of capitalized $ 627,226 $ 190,908 -
interest..................................
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
4
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
REVENUE
Drilling contracts are on a day rate basis, and revenue and expenses
are recognized as work progresses.
CAPITALIZED INTEREST
The Company capitalizes interest applicable to the construction of
offshore drilling rigs as a cost of such assets. Interest capitalized for the
six months ended June 30, 1999 and June 30, 1998 was $5.1 million and $1.1
million, respectively. Interest expense is shown net of interest capitalized in
the Consolidated Statement of Operations.
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal and recurring adjustments necessary to present a fair statement
of the results for the periods included herein) have been made and the
disclosures contained herein are adequate to make the information presented not
misleading. Operating results for the six-month and three-month periods and
ended June 30, 1999 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1999. Chiles Offshore LLC has three
wholly owned subsidiaries, Chiles Offshore Finance Corp. ("Finance"), Chiles
Columbus LLC ("Columbus") and Chiles Magellan LLC ("Magellan").
3. BUSINESS AND INDUSTRY CONDITIONS AND LIQUIDITY
Chiles Offshore LLC (the "Company") is engaged in the operation and
construction of two offshore drilling rigs (each a "Rig" and together, the
"Rigs") one of which is currently contracted to an oil and gas operator and one
of which is expected to be placed in service upon completion of construction.
The Company was formed under the laws of the State of Delaware on August 5,
1997. The Company has operated as a development stage company since its
inception by devoting substantially all of its efforts to designing, engineering
and contracting with shipyards and vendors for two offshore drilling rigs,
raising capital and securing contracts for the Rigs. Since inception, the
Company has had negative cash flow and has financed its operations with a
combination of the sale of equity interests in the Company and the issuance and
sale of the Notes. From July 1, 1999 through the scheduled delivery date of the
Chiles Magellan, the Company expects to incur approximately $16.2 million of
purchase commitments and $6.5 million of accounts payable to complete
construction and outfitting of the Rigs, including internal construction costs
and excluding net capitalized interest. The shipyard construction contracts are
fixed-price contracts, except for any approved change orders, and over 95% of
the aggregate cost of owner furnished equipment is fixed under firm delivery
contracts with various vendors. The Company started generating revenues in June
1999 in connection with the completion of the first of its two Rigs, the Chiles
Columbus; however, there can be no assurance that the Company will generate
sufficient operating revenues and cash flow to complete the transition from a
development stage company to successful operations. Additional risk factors
associated with the Company's operations include, but are not limited to, oil
and gas prices, capital expenditure plans of oil and gas operators, access to
capital, completion of construction of the Chiles Magellan and competition. As a
result of the aforementioned factors, and the related uncertainties, there can
be no assurance of the Company's future success.
5
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The Company has a loss from operations of $1.7 million for the period from
inception (August 5, 1997) to June 30, 1999. Management is currently pursuing a
business strategy which includes obtaining drilling contracts with oil and gas
operators, employment of rig personnel, selection and procurement of drilling
equipment, overseeing the construction of the Chiles Magellan and installation
of drilling equipment. There can be no assurance that this business strategy
will be successfully achieved. While pursuing this business strategy, the
Company will experience cash flow deficits until the Rig construction is
completed and both Rigs are placed in operation. As a result of the
aforementioned factors and related uncertainties, there is substantial doubt as
to the Company's ability to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern.
The Company's business and operations are materially dependent upon the
condition of the oil and natural gas industry and, specifically, the exploration
and production expenditures of oil and gas companies. Due to the Company's
initial focus on the Gulf of Mexico, the Company's business and operations are
and will continue to be particularly dependent upon the condition of the oil and
natural gas industry in the Gulf of Mexico and on the exploration and production
expenditures of oil and gas companies there. The offshore contract drilling
industry historically has been and is expected to continue to be highly
competitive and cyclical. During 1998, the decline in commodity prices in the
oil and gas industry resulted in significantly reduced dayrates and decreased
utilization, particularly in the Gulf of Mexico jackup market, and excess supply
of rigs. Sustained weak commodity prices, economic problems in countries outside
the United States, and a number of other factors beyond the Company's control
could further curtail spending by oil and gas companies. The Company cannot
predict whether or not current market conditions will improve or deteriorate
further, or to what extent. The current prevailing market conditions, if
continued, would have a material adverse effect on the Company's future results
of operations.
In connection with the initial drilling contract for the Chiles
Columbus, the Rig was modified to extend the legs from 477 feet to 511 feet in
length. In June 1999, the Company entered into a Letter of Intent ("LOI") for
the use of the Chiles Magellan in the Gulf of Mexico. The Company and the
customer are presently negotiating the terms of the drilling contract as
outlined in the LOI. Under the terms of the LOI, the Company has agreed to
extend the legs of the Chiles Magellan to 544 feet in length and modify its spud
cans. The LOI calls for the drilling of one well, estimated to be completed in
120 days, to begin, at the Company's option, between December 1, 1999 and April
30, 2000. Pursuant to the LOI, the customer will have the option to use the
Chiles Magellan, under certain circumstances, for additional wells in the same
area for a specified period of time after conclusion of the first well. The
Company estimates that the expense of the leg and spud can modifications to the
Rigs will be approximately $5.5 million, which amount is included in the $16.2
million of purchase commitments referred to above, exclusive of financing costs.
Under the terms of the LOI for the Chiles Magellan, the customer has agreed to
contribute $1.5 million of the modifications costs, subject to the successful
completion of such modifications and certain other conditions. In addition, a
vendor has agreed to provide one-year payment terms, with interest, for $2.1
million of such modifications.
Because the Rigs are newbuilds, the Company does not expect to incur
material additional capital expenditures associated with the Rigs in the
foreseeable future, unless specific requests for modifications are made by
customers in connection with drilling contracts. Mobilization of the Company's
Rigs either from the shipyard or drilling location to another drilling location
or to another market is normally not budgeted because, under normal conditions,
such mobilizations are recovered from the customer; however, any unrecovered
mobilization costs, if they are incurred, could materially increase Rig
operating expense levels and reduce revenues while the Rig is in transit and not
working. Any unanticipated capital expenditures or mobilizations could adversely
affect cash flow from operations and operating income in the period in which
such expenses are incurred.
Due to the current depressed market conditions, no assurance can be
given that additional drilling contracts will be obtained for the Rigs, or
obtained on a timely basis, or if obtained, that dayrates payable under such
drilling contracts will be equal to or greater than the operating costs of the
Rigs and other fixed costs and current payment liabilities, including interest
payable with respect to the Notes and drawings under the Bank Facility.
For the three months ended June 30, 1999, the Company did not generate
revenues sufficient to cover total Rig operating and general and administrative
expenses. Management attributes the operating cash flow deficit to start-up
difficulties associated with the Chiles Columbus, which are commonly encountered
when a newly
6
<PAGE>
constructed drilling rig is first placed in service. At the date of this
Quarterly Report on Form 10-Q the Chiles Columbus is operating successfully and
generating the full dayrate called for in the drilling contract, and management
expects revenues from this Rig to exceed its operating expenses for the current
and any additional wells under the drilling contract. However, third quarter
operating cash flow from the operations of the Chiles Columbus alone may not be
sufficient to cover all of the Company's general and administrative expenses and
may not be sufficient to generate the cash necessary for the Company to meet its
full $5.5 million semi-annual interest payment obligation due on the Notes on
November 1, 1999.
The Company will require $16.2 million to satisfy purchase commitments
and $6.5 million to satisfy current payables expected to be incurred in
connection with completing the construction of the Rigs and placing the Chiles
Magellan in service. All proceeds of the Equity Financing and the issuance of
the Notes have been exhausted; therefore, the Company must rely on cash on hand
($0.8 million at June 30, 1999), operating cash flow and drawings under the Bank
Facility to cover expenses associated with completing and outfitting the Chiles
Magellan. As of the date of this Quarterly Report on Form 10-Q, the Company had
$15.0 million of credit available under the Bank Facility. The Company's ability
to draw on the Bank Facility is subject to satisfaction of customary conditions
precedent, including that there shall have occurred no material adverse change
in the Company or its business, assets, properties or prospects since the date
of execution of the Bank Facility.
The Company faces an additional significant liquidity requirement at
November 1, 1999, when a $5.5 million semi-annual interest payment is due on the
Notes. Currently, the only capital resources available to the Company to satisfy
this obligation are cash on hand of $0.8 million at June 30, 1999, operating
cash flow and availability under the Bank Facility. Based on the dayrates
currently anticipated for the Company's Rigs, the Company would expect the Bank
Facility to be fully drawn sometime in the fourth quarter of 1999 solely to meet
construction commitments for the Rigs and to cover operating cash flow deficits,
which may occur during the mobilization and start-up phases of placing the
Chiles Magellan in service. Because the Company believes that to satisfy all of
its obligations to the holders of the Notes, it is crucial to continue operation
of the Chiles Columbus and to complete construction of the Chiles Magellan,
availability under the Bank Facility and operating cash flow will largely be
absorbed for these purposes and therefore the Company may not have sufficient
cash on hand to meet its full November 1, 1999 interest payment obligation due
on the Notes.
To address the Company's liquidity situation, management has embarked
upon an aggressive program which, among other things, focuses on careful
management of all costs and expenses and potential ways to enhance liquidity. In
addition, under the terms of the LOI for the Chiles Magellan, the customer has
agreed to contribute $1.5 million of the modification costs for that Rig,
subject to the successful completion of such modifications and certain other
conditions. However, in the face of the current dayrate environment, cost
controls and such customer contribution alone may not fully ameliorate the
Company's liquidity problem and enable it to continue operations, complete
construction of the Chiles Magellan and satisfy its payment obligations on the
Notes. Therefore, management is exploring with its equity owners, including its
majority equity holder SEACOR Offshore Rigs Inc., the possibility of enhancing
liquidity either through additional equity contributions, or participation in or
assistance with a debt restructuring. These discussions are ongoing and there
are no commitments from any equity holder to contribute any additional equity,
or to participate in or assist with any debt restructuring.
If the Company is unable to fully meet the next scheduled interest
payment under the Notes in November 1999, it would be in default under the
indenture governing the Notes, which could lead to an acceleration of any and
all outstanding obligations thereunder, including the Bank Facility and any
other indebtedness, subject to any applicable cure periods. If such conditions
arise and the banks accelerated the outstanding indebtedness under the Bank
Facility and exercised their remedies under the mortgages securing that
indebtedness, the Rigs could be sold at foreclosure and all proceeds of such
sale would first be applied to satisfy the indebtedness to the banks and related
foreclosure expenses. The remaining proceeds would be available for application
to the indebtedness outstanding under the Notes. Because drilling rig valuations
fluctuate dramatically with current and expected dayrate environments, it is not
possible to predict whether these remaining proceeds would be sufficient to
retire, in full, all amounts outstanding under the Notes and the related
indenture.
7
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4. NOTES PAYABLE
Long-term debt at June 30, 1999 consisted solely of 10% Senior Notes
(the "Notes") due 2008 in the aggregate principal amount of $110.0 million. The
Notes were co-issued by the Company jointly with Finance (the "Issuers"). The
Notes are guaranteed by Columbus and Magellan, jointly and severally, on an
unsecured basis. The Issuers received net proceeds from the Notes of
approximately $105.5 million after deducting estimated offering-related
expenses. The Notes are redeemable in May 2003, at a premium to par, except that
until May 2001, up to 35% of the Notes may be redeemable with the proceeds of a
public equity offering, also at a premium to par, both at the option of the
Issuers.
5. BANK FACILITY
The Company has entered into an agreement with two banks to provide a
senior secured revolving credit facility of $25.0 million (the "Bank Facility").
The Bank Facility bears interest at the rate of LIBOR plus 1.25% and matures on
December 31, 2004, at which time any outstanding principal amount and any unpaid
interest will be due. The Bank Facility is guaranteed by Columbus and Magellan.
The $25.0 million Bank Facility became available to the Company with the
delivery of the Chiles Columbus. At June 30, 1999, there were no borrowings
under the Bank Facility.
6. COMMITMENTS AND CONTINGENCIES
The Company has entered into agreements with a shipyard and various
equipment vendors for delivery of the mobile offshore drilling rig, the Chiles
Magellan, at a cost of approximately $91.7 million, exclusive of interest during
construction and costs associated with arranging financing. In June, 1999, the
Company entered into the LOI with a customer for the use of the Chiles Magellan.
Under the terms of the LOI, the Company has agreed to make certain enhancements
to the Rig, and the customer has agreed to fund $1.5 million of the cost of the
enhancements, subject to successful completion of the enhancements and certain
other conditions. In addition, a vendor has agreed to provide one-year payment
terms, with interest, for $2.1 million of the enhancements. At June 30, 1999,
the Company had outstanding purchase commitments of approximately $14.2 million
with respect to the remaining balance of the cost of the Chiles Magellan. These
amounts will become payable in future periods in accordance with terms of the
construction contract and vendor agreements. Given the above described
enhancements to the Chiles Magellan, the Rig is now scheduled for delivery in
the fourth quarter of 1999.
7. COMPREHENSIVE INCOME
In June 1997, Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), was issued. SFAS 130 established
standards for reporting and display of comprehensive income and its component in
a full set of general purpose financial statements. Comprehensive income is the
total of net income and all other non-owner changes in equity. The Company has
no non-owner changes in equity during the six months ended June 30, 1999 and
therefore, no reporting and display of comprehensive income was required.
8. OPERATING SEGMENTS
In June 1997, Statement of Financial Accounting Standards No. 131,
Disclosure about Segments of an Enterprise and Related Information ("SFAS 131")
was issued. SFAS 131 requires that companies report financial and descriptive
information about their reportable operating segments. The Company adopted SFAS
131 in 1998; however, the Company is still in the development stage and has only
one Rig operating and no material operating information to report for the six
months ended June 30, 1999.
9. SUBSEQUENT EVENT
As of August 9, 1999 the Company had drawn down a total of $10.0
million under the Bank Facility.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The following discussion should be read in conjunction with the
Consolidated Financial Statements of Chiles Offshore LLC (the "Company")
(including the Notes thereto) included elsewhere in this Quarterly Report on
Form 10-Q.
The Company is a development stage company formed in August 1997 for
the purpose of constructing, owning and operating a fleet of state-of-the-art
premium offshore jackup drilling rigs. At formation of the Company, COI, LLC
(a Delaware limited liability company formed by members of management of the
Company and certain other investors) contributed $0.36 million in cash to the
capital of the Company and assets with an agreed-upon value of $8.5 million
and a historical cost of $2.3 million. The difference of $6.2 million between
such agreed-upon value and historical cost has been recorded on the balance
sheet of the Company as "Property and Equipment". At formation of the Company
and in the final phase of the Company's equity financing, which was completed
in December 1997 (the "Equity Financing"), SEACOR Offshore Rigs Inc.
contributed an aggregate of $35.0 million in cash. Other accredited investors
contributed $20.0 million in cash in the Equity Financing.
In April 1998, the Company completed the private placement of $110.0
million of 10% Senior Notes due 2008 (the "Notes") issued by the Company and
Chiles Offshore Finance Corp., a wholly-owned subsidiary of the Company. The
Company received net proceeds of $105.5 million from the issuance and sale of
the Notes. Also in April 1998, the Company entered into a $25.0 million senior
secured credit agreement with two banks (the "Bank Facility"). In September
1998, the Company completed a registered exchange offer for the Notes issued
in the private placement (the "Exchange Offer"). In the Exchange Offer, all of
the Notes issued in the private placement were exchanged for substantially
identical Notes that were registered under the Securities Act of 1933, as
amended.
The Company completed construction of the Chiles Columbus in June 1999,
and construction of the Chiles Magellan (each a "Rig" and together, the "Rigs")
is ongoing at a shipyard in Brownsville, Texas (the "Shipyard"). The Chiles
Magellan is scheduled for delivery in the fourth quarter of 1999. The Company is
currently engaged in rig-related design, engineering, procurement and
construction activities for the Chiles Magellan and has commenced commercial
operations of the Chiles Columbus. As of June 30, 1999, the Company had
approximately $0.8 million of cash on hand. There were no outstanding borrowings
under the $25.0 million Bank Facility as of June 30, 1999; however, subsequent
to June 30, 1999, the Company had drawn $10.0 million of the Bank Facility as of
August 9, 1999. The Company's management estimates that, as of June 30, 1999,
construction of the Chiles Magellan was approximately 82% complete.
DEVELOPMENT STAGE COMPANY
The Company has operated as a development stage company since inception
by devoting substantially all of its efforts to designing, engineering and
contracting with shipyards and vendors for the Rigs, raising capital, employing
personnel and securing contracts for the Rigs. The Company began generating
operating revenues in June 1999, in connection with the delivery of the first of
its two Rigs, the Chiles Columbus; however, there can be no assurance that the
Company will generate sufficient operating revenues and cash flow to
successfully complete the transition from a development stage company to
successful operations. Additional risk factors associated with the Company's
operations include, but are not limited to, oil and gas prices, capital
expenditure plans of oil and gas operators, access to capital, completion of
construction of the Chiles Magellan and competition. As a result of the
aforementioned factors and the related uncertainties, there can be no assurance
of the Company's future success.
The Company had a loss from operations of approximately $0.5 million for
the six months ended June 30, 1999 and approximately $1.7 million for the period
from inception (August 5, 1997) to June 30, 1999. The Company's management is
currently pursuing a business strategy that includes obtaining drilling
contracts with oil and gas operators, employment of rig personnel, completing
the construction of the Chiles Magellan, including the purchase of drilling
equipment, overseeing the construction of the Chiles Magellan, installation of
the drilling equipment
9
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and operating the Chiles Columbus. There can be no assurance that this business
strategy will be achieved. While pursuing this business strategy, the Company
will experience cash flow deficits until construction of the Chiles Magellan is
completed and the Chiles Magellan is placed in service and the Rigs are
operating at revenue rates greater than operating and financing costs. As a
result of these conditions, a substantial doubt exists as to the Company's
ability to continue as a going concern. The Company's financial statements
included elsewhere herein do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
RESULTS OF OPERATIONS
General
The Company placed the Chiles Columbus in service in June 1999. Prior
to such time, and since inception, the Company engaged in no operations other
than managing the construction of the Rigs and related matters. Following the
delivery and commissioning of the Chiles Columbus, the Company generated
operating revenues of approximately $0.5 million in June 1999. The Chiles
Columbus departed the Shipyard and commenced initial drilling operations in June
1999, and was under contract as of June 30, 1999.
The following table provides revenue and operating loss information for
the periods indicated:
Three months ended Six months ended
June 30 June 30
---------------------- ----------------------
(in thousands)
1999 1998 1999 1998
---------------------- ----------------------
Revenue $ 528 - $ 528 -
Operating profit (loss) $(336) $(296) $(541) $(381)
From inception to June 30, 1999, the Company had a net loss of
approximately $0.3 million as a result of rig operating expenses, general and
administrative expenses, interest expense and depreciation in excess of
operating revenue and interest income.
The Company's initial operating revenue of approximately $0.5 million
and operating expense of $0.4 million was generated in the month of June 1999 as
a result of the placement in service of the Chiles Columbus. The Company did not
generate operating revenue or operating expense in any prior period.
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Operating revenue is primarily a function of dayrates, utilization and
mobilization. The Company's first Rig was delivered into service during June
1999 and the Company's revenue for the three month period ending June 30, 1999
was $0.5 million greater than three month period ending June 30, 1998 as a
result of the operation of this Rig.
Rig operating expenses are primarily related to the operations of the
rig and include crew expense, rig maintenance, insurance and other rig operating
expenses. Rig operating expenses for the three months ended June 30, 1999 were
$0.4 million greater than the three month period ended June 30, 1998 due to the
delivery of the Company's first Rig in June 1999.
10
<PAGE>
Depreciation of approximately $0.2 million during the three months
ended June 30, 1999 increased approximately $0.2 million from the same period in
1998 primarily due to the placement in service of the Company's first Rig in
June, 1999.
The operating loss of approximately $0.3 million during the three
months ended June 30, 1999 did not change materially from the same period in
1998.
Interest expense decreased approximately $0.5 million in the three
months ended June 30, 1999 as interest capitalized during this period increased,
compared the same period in 1998, due to additions to Rigs under construction.
Interest income decreased approximately $0.4 million in the three-month
period ended June 30, 1999 compared to the same period in 1998 as payments were
made for Rigs under construction which reduced the Company's cash balances.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
The Company's first Rig was delivered into service during June, 1999.
The Company's revenue for the six month period ending June 30, 1999 was $0.5
million greater than six month period ending June 30, 1998 as a result of the
operations of this Rig.
Rig operating expenses for the six months ended June 30, 1999 were $0.4
million greater than the six month period ended June 30, 1998 due to the
delivery of the Company's first Rig in June, 1999.
Depreciation of approximately $0.2 million during the first six months
of 1999 increased approximately $0.2 million from the same period in 1998
primarily due to the placement in service of the Chiles Columbus.
The operating loss of approximately $0.5 million during the first six
months of 1999 increased approximately $0.2 million from the same period in 1998
primarily due to the placement in service of the Chiles Columbus, which operated
at a dayrate level that was insufficient to cover operating and financing
expenses and depreciation.
Interest expense decreased approximately $0.5 million in the six-month
period ended June 30, 1999 due to increased interest capitalized in 1999 as
compared to the same period in 1998.
Interest income decreased approximately $0.2 million in the six-month
period ended June 30, 1999 compared to the same period in 1998 as payments made
for Rigs under construction reduced the Company's cash balances.
OUTLOOK
The Company's business and operations are materially dependent upon the
condition of the oil and natural gas industry and, specifically, the exploration
and production expenditures of oil and gas companies. Due to the Company's
initial focus on the Gulf of Mexico, the Company's business and operations are
and will continue to be particularly dependent upon the condition of the oil and
natural gas industry in the Gulf of Mexico and on the exploration and production
expenditures of oil and gas companies there. The offshore contract drilling
industry historically has been and is expected to continue to be highly
competitive and cyclical. During 1998, the decline in commodity prices in the
oil and gas industry resulted in significantly reduced dayrates and decreased
utilization, particularly in the Gulf of Mexico jackup market, and excess supply
of rigs. Sustained weak commodity prices, economic problems in countries outside
the United States, and a number of other factors beyond the Company's control
could further curtail spending by oil and gas companies. In June 1999, the
Chiles Columbus was placed in service under a contract in the Gulf of Mexico.
The contract calls for the drilling of one well, which is expected to be
completed in August 1999. At June 30, 1999, the Chiles Columbus was drilling
pursuant to the contract and, upon completion of the first well, the customer
has the option to use the Chiles Columbus to drill one or two additional wells.
As of the date of this report, the Chiles Columbus is continuing to drill
pursuant to the contract and
11
<PAGE>
has not yet completed the first well, and accordingly the customer continues to
have the right to exercise such option. In connection with the contract, the
Chiles Columbus was modified to extend the legs from 477 feet to 511 feet in
length.
In June 1999, the Company entered into a Letter of Intent ("LOI") for
the use of the Chiles Magellan in the Gulf of Mexico. The Company and the
customer are presently negotiating the terms of the drilling contract as
outlined in the LOI. Under the terms of the LOI, the Company has agreed to
extend the legs of the Chiles Magellan to 544 feet in length and modify its spud
cans. The LOI calls for the drilling of one well, estimated to be completed in
120 days, to begin, at the Company's option, between December 1, 1999 and April
30, 2000. Pursuant to the LOI, the customer will have the option to use the
Chiles Magellan, under certain circumstances, for additional wells in the same
area for a specified period of time after conclusion of the first well. The
Company estimates that the expense of the leg and spud can modifications to the
Rigs will be approximately $5.5 million, exclusive of financing costs. Under the
terms of the LOI for the Chiles Magellan, the customer has agreed to contribute
$1.5 million of the modifications costs, subject to the successful completion of
such modifications and certain other conditions. In addition, a vendor has
agreed to provide one-year payment terms, with interest, for $2.1 million of
such modifications.
While the Company anticipates that it will continue to obtain drilling
contracts for the Rigs, no assurance can be given that additional drilling
contracts will be obtained, or obtained on a timely basis, nor can the Company
predict that the dayrates payable under any drilling contract will be equal to
or greater than the operating costs of the Rigs and other fixed costs, and
current payment liabilities, including interest payable with respect to the
Notes and drawings under the Bank Facility. The Company expects to use
borrowings under the Bank Facility, subject to the terms and conditions of the
Bank Facility, to meet operating cost requirements and other current payment
liabilities until market conditions improve. Based on currently prevailing
market conditions, the Company may not be able to fully satisfy the next
scheduled interest payment obligation under the Notes without the Company being
able to raise sufficient additional liquidity to sustain its operations, and
there can be no assurance that the Company will be able to do so, or to do so on
a timely basis. The Company cannot predict whether or not current market
conditions will improve or deteriorate further, or to what extent. The current
prevailing market conditions, if continued, would have a material adverse effect
on the Company's future results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has had negative cash flow and has
financed its operations with a combination of the sale of equity interests in
the Company and the issuance and sale of the Notes. From July 1, 1999 through
the scheduled delivery date of the Chiles Magellan, the Company expects to incur
approximately $16.2 million of purchase commitments and fund $6.5 million of
current accounts payable to complete construction and outfitting of the Rigs,
including internal construction costs and excluding net capitalized interest.
The Shipyard construction contracts are fixed-price contracts, except for any
approved change orders, and over 95% of the aggregate cost of owner furnished
equipment is fixed under firm delivery contracts with various vendors. As of
June 30, 1999, the Company had approximately $0.8 million cash on hand. As of
June 30, 1999, the Company had $110.0 million of long term debt related to the
Notes. Additionally, as a result of the delivery of the Chiles Columbus,
borrowings under the $25.0 million Bank Facility became available, subject to
the terms and conditions of the Bank Facility, which together with any cash flow
from operations of the Chiles Columbus, deferral of certain vendor payments and
customer contributions, will be available to apply toward construction,
outfitting and overhead costs and placement in service of the Chiles Magellan.
Because the Rigs are newbuilds, the Company does not expect to incur
material additional capital expenditures associated with the Rigs in the
foreseeable future, unless specific requests for modifications are made by
customers in connection with drilling contracts. Mobilization of the Company's
Rigs either from the shipyard or drilling location to another drilling location
or to another market is normally not budgeted because, under normal conditions,
such mobilizations are recovered from the customer; however, any unrecovered
mobilization costs, if they are incurred, could materially increase Rig
operating expense levels and reduce revenues while the Rig is in transit and not
working. Any unanticipated capital expenditures or mobilizations could adversely
affect cash flow from operations and operating income in the period such
expenses are incurred. Due to the current depressed market conditions, no
assurance can be given that additional drilling contracts will be obtained for
the Rigs, or obtained on a timely basis, or if obtained, that dayrates payable
under such drilling contracts will be equal to or greater than the
12
<PAGE>
operating costs of the Rigs and other fixed costs and current payment
liabilities, including interest payable with respect to the Notes and borrowings
under the Bank Facility.
For the three months ended June 30, 1999, the Company did not generate
revenues sufficient to cover total rig operating and general and administrative
expenses. Management attributes the operating cash flow deficit to start-up
difficulties associated with the Chiles Columbus, which are commonly encountered
when a newly constructed drilling rig is first placed in service. As of the date
of this report the Chiles Columbus is operating successfully and generating the
full dayrate called for in the drilling contract, and management expects
revenues from this Rig to exceed its operating expenses for the current and any
additional wells under the drilling contract. However, third quarter operating
cash flow from the operations of the Chiles Columbus alone may not be sufficient
to cover all of the Company's general and administrative expenses and may not be
sufficient to generate the cash necessary for the Company to meet its full $5.5
million semi-annual interest payment obligation due on the Notes on November 1,
1999.
The Company will require $16.2 million to satisfy purchase commitments
and $6.5 million to satisfy current payables expected to be incurred in
connection with completing the construction of the Rigs and placing the Chiles
Magellan in service. All proceeds of the Equity Financing and the issuance of
the Notes have been exhausted; therefore, the Company must rely on cash on hand
($0.8 million at June 30, 1999), operating cash flow and drawings under the Bank
Facility to cover expenses associated with completing and outfitting the Chiles
Magellan. As of the date of this report, the Company had $15.0 million of credit
available under the Bank Facility. The Company's ability to draw on the Bank
Facility is subject to satisfaction of customary conditions precedent, including
that there shall have occurred no material adverse change in the Company or its
business, assets, properties or prospects since the date of execution of the
Bank Facility.
The Company faces an additional significant liquidity requirement at
November 1, 1999, when a $5.5 million semi-annual interest payment is due on the
Notes. Currently, the only capital resources available to the Company to satisfy
this obligation are cash on hand of $0.8 million at June 30, 1999, operating
cash flow and availability under the Bank Facility. Based on the dayrates
currently anticipated for the Company's Rigs, the Company would expect the Bank
Facility to be fully drawn sometime in the fourth quarter of 1999 solely to meet
construction commitments for the Rigs and to cover operating cash flow deficits,
which may occur during the mobilization and start-up phases of placing the
Chiles Magellan in service. Because the Company believes that to satisfy all of
its obligations to the holders of the Notes, it is crucial to continue operation
of the Chiles Columbus and to complete construction of the Chiles Magellan,
availability under the Bank Facility and operating cash flow will largely be
absorbed for these purposes and therefore the Company may not have sufficient
cash on hand to meet its full November 1, 1999 interest payment obligation due
on the Notes.
To address the Company's liquidity situation, management has embarked
upon an aggressive program which, among other things, focuses on careful
management of all costs and expenses and potential ways to enhance liquidity. In
addition, under the terms of the LOI for the Chiles Magellan, the customer has
agreed to contribute $1.5 million of the modification costs for that Rig,
subject to the successful completion of such modifications and certain other
conditions. However, in the face of the current dayrate environment, cost
controls and such customer contribution alone may not fully ameliorate the
Company's liquidity problem and enable it to continue operations, complete
construction of the Chiles Magellan and satisfy its payment obligations on the
Notes. Therefore, management is exploring with its equity owners, including its
majority equity holder SEACOR Offshore Rigs Inc., the possibility of enhancing
liquidity either through additional equity contributions, or participation in or
assistance with a debt restructuring. These discussions are ongoing and there
are no commitments from any equity holder to contribute any additional equity,
or to participate in or assist with any debt restructuring.
If the Company is unable to fully satisfy the next scheduled interest
payment obligation under the Notes, in November, 1999, it would, subject to a
30-day grace period, be in default under the indenture governing the Notes,
which could lead to an acceleration (upon notice to the Issuers to such effect
by the trustee under such indenture or the holders of at least 25% in aggregate
principal amount of the Notes) of any and all outstanding obligations
thereunder. This in turn could lead to an acceleration of the indebtedness of
the Company under the Bank Facility, subject to any applicable cure periods. If
such conditions arise and the banks accelerated the outstanding indebtedness
under the Bank Facility and exercised their remedies under the mortgages
securing that indebtedness, the Rigs could be sold at foreclosure and all
proceeds of such sale would first be applied to satisfy the indebtedness
13
<PAGE>
to the banks and related foreclosure expenses. The remaining proceeds would be
available for application to the indebtedness outstanding under the Notes.
Because drilling rig valuations fluctuate dramatically with current and expected
dayrate environments, it is not possible to predict whether these remaining
proceeds would be sufficient to retire, in full, all amounts outstanding under
the Notes and the related indenture.
YEAR 2000 ISSUES
The Company has initiated and is in the process of carrying out an
assessment of Year 2000 ("Y2K") compliance issues. Although the Company has been
in existence only since August 1997, and since its inception the Company has
acquired only new systems, equipment, components and related software, a full
assessment of the Company's Y2K compliance is now underway. The Y2K assessment
being undertaken by the Company is designed to review all of the Company's
systems and equipment with respect to Y2K compliance. This assessment includes a
review of both information technology ("IT") systems (e.g., computer hardware
and software) and non-information Technology ("non-IT") systems (e.g., embedded
technology such as microcontrollers). As part of the assessment, the Company is
seeking to obtain certification of Y2K compliance from its vendors and
suppliers. The Company's administrative IT systems are stand-alone, standard
products that have not been custom developed or modified. The Company will seek
to obtain certifications from the vendors of such systems as to their Y2K
compliance. The Company will also acquire certain specialized IT systems and
expects to obtain certification of their Y2K compliance prior to acquisition and
installation of such specialized IT systems. Those vendors that are unable to
provide Y2K compliance certification, if any, will be requested to provide
replacement components or systems that are Y2K compliant under warranty
provisions of the Company's purchase agreements. This phase of the Company's Y2K
assessment is expected to be completed, with respect to the Company's currently
existing vendor relationships, during the third quarter of 1999. The Company
also has a program underway requesting Y2K compliance certifications from its
suppliers. This program is expected to be completed during the third quarter of
1999.
The Company will initiate a program to identify any other third parties
with whom a material relationship exists. The Company will seek to obtain
certification of Y2K compliance from any such third parties. If any such third
parties are unable to provide such certification, the Company will seek to
minimize any negative effect of such non-compliance on the Company until the
third party becomes Y2K compliant or until an alternative relationship is
established.
As of June 30, 1999, the Company has incurred nominal administrative
cost in conducting its Y2K compliance program. Results of this program as of
such date have not identified any system, equipment, component or software owned
or used by the Company that is not Y2K compliant. Although the total cost to
complete the Company's Y2K program cannot be determined at this time, it is not
expected to be material because all of the Company's IT and non-IT equipment has
been purchased within approximately the last two years, and the procurement
arrangements of the Company for such equipment require vendors to provide only
Y2K compliant items. Such procurement arrangements also require that any such
equipment that is not Y2K compliant be replaceable under the applicable warranty
provisions.
The Company is in the process of developing contingency plans that are
intended to address worst-case business interruptions, such as future
interruptions of drilling services aboard the Rigs after they begin operations
or interruptions in the delivery of equipment and materials to be utilized in
the Company's future drilling operations. The Company anticipates that its
contingency planning phase will be completed by the end of the third quarter of
1999. The Company's failure to fully implement its Y2K program or the occurrence
of an unexpected Y2K problem could result in the disruption of normal business
activities or operations and have a material adverse effect on the Company's
results of operations, liquidity or financial condition. However, based upon the
work performed to date and the anticipated completion of the Company's Y2K
program by the end of the third quarter of 1999, the Company does not believe
that such matters will have a material adverse effect on its results of
operations. With respect to third parties, there can be no assurance that their
systems will be rendered Y2K complaint on a timely basis or that any resulting
Y2K issues would not have a material adverse effect on the results of operations
of the Company.
14
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain written and oral statements made or incorporated by reference
from time to time by the Company or its representatives are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include, without limitation, any statement
that may project, indicate or imply future results, performance or achievements,
and may contain the words "expect," "intend," "plan," "anticipate," "estimate,"
"believe," "will be," "will continue," "will likely result," and similar
expressions. Such statements inherently are subject to a variety of risks and
uncertainties that could cause actual results to differ materially from those
projected. Such risks and uncertainties include, among others, general economic
and business conditions, operating difficulties arising from shortages of
equipment or qualified personnel or as a result of other causes, casualty
losses, industry fleet capacity, changes in foreign and domestic oil and gas
exploration and production activity, competition, changes in foreign political,
social and economic conditions, regulatory initiatives and compliance with
governmental regulations, the ability to attract and retain qualified personnel,
customer preferences, the ability of the Company to raise additional equity or
other forms of liquidity, Year 2000 issues and various other matters, many of
which are beyond the Company's control. The list of risks included here is not
exhaustive. Other sections of this report and the Company's other filings with
the Securities and Exchange Commission include additional factors that could
adversely affect the Company's business and financial performance. Given these
risks and uncertainties, investors should not place undue reliance on
forward-looking statements. The forward-looking statements in this report speak
only as of the date of this report. The Company expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any
forward-looking statement to reflect any change in the Company's expectations
with regard thereto or any change in events, conditions or circumstances on
which any forward-looking statement is based.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to changes in interest rates with respect to the
Bank Facility if and when it is drawn upon. The market value of the Notes, which
were originally issued on April 29, 1998, is sensitive to changes in interest
rates. The Notes, which are due May 1, 2008, have a stated interest rate of 10%
and an effective interest rate of 10.4%. At December 31, 1998, the fair value of
the Notes, based on quoted market prices, was approximately $90.2 million, as
compared to a carrying amount of $110.0 million. The Company is also exposed to
changes in the prices of oil and natural gas. The offshore contract drilling
industry is dependent upon the exploration and production programs of oil and
gas companies, which in turn are influenced by the price of oil and natural gas.
Since December 31, 1998, there has been no significant change in the value of
the Company's Notes.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
15
<PAGE>
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See the Exhibit Index for a list of the exhibits to this report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by any of the Registrants during the
quarterly period covered by this report.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, each of the Registrants has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
CHILES OFFSHORE LLC
CHILES OFFSHORE FINANCE CORP.
CHILES COLUMBUS LLC
CHILES MAGELLAN LLC
By: /s/ Dick H. Fagerstal
-------------------------------------------
Dick H. Fagerstal
Senior Vice President, Chief Financial
Officer and Secretary
By: /s/ William A. Thorogood
--------------------------------------------
William A. Thorogood
Vice President - Controller
Dated: August 11, 1999
17
<PAGE>
EXHIBIT INDEX
3.1 Limited Liability Company Certificate of Chiles Offshore LLC (incorporated
by reference to Exhibit 3.1 to the Registrants' Registration Statement on
Form S-4 (Registration No. 333-57325))
3.2 Amended and Restated Operating Agreement, dated as of December 16, 1997,
among the members of Chiles Offshore LLC (incorporated by reference to
Exhibit 3.2 to the Registrants' Registration Statement on Form S-4
(Registration No. 333-57325))
3.3 Amendment No. 1, dated effective as of April 28, 1998, to Amended and
Restated Operating Agreement of Chiles Offshore LLC, among the members of
Chiles Offshore LLC (incorporated by reference to Exhibit 3.3 to the
Registrants' Registration Statement on Form S-4 (Registration No.
333-57325))
3.4 Certificate of Incorporation of Chiles Offshore Finance Corp. (incorporated
by reference to Exhibit 3.4 to the Registrants' Registration Statement on
Form S-4 (Registration No. 333-57325))
3.5 Bylaws of Chiles Offshore Finance Corp. (incorporated by reference to
Exhibit 3.5 to the Registrants' Registration Statement on Form S-4
(Registration No. 333-57325))
3.6 Certificate of Formation of Chiles Columbus LLC (incorporated by reference
to Exhibit 3.6 to the Registrants' Registration Statement on Form S-4
(Registration No. 333-57325))
3.7 Limited Liability Company Agreement of Chiles Columbus LLC (incorporated by
reference to Exhibit 3.7 to the Registrants' Registration Statement on Form
S-4 (Registration No. 333-57325))
3.8 Certificate of Formation of Chiles Magellan LLC (incorporated by reference
to Exhibit 3.8 to the Registrants' Registration Statement on Form S-4
(Registration No. 333-57325))
3.9 Limited Liability Company Agreement of Chiles Magellan LLC (incorporated by
reference to Exhibit 3.9 to the Registrants' Registration Statement on Form
S-4 (Registration No. 333-57325))
27.1 Financial Data Schedule (filed herewith)
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CHILES OFFSHORE LLC CONTAINED IN THE ACCOMPANYING
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 862
<SECURITIES> 0
<RECEIVABLES> 1,895
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,848
<PP&E> 175,236
<DEPRECIATION> 284
<TOTAL-ASSETS> 182,209
<CURRENT-LIABILITIES> 8,807
<BONDS> 110,000
0
0
<COMMON> 0
<OTHER-SE> 63,401
<TOTAL-LIABILITY-AND-EQUITY> 182,209
<SALES> 0
<TOTAL-REVENUES> 527
<CGS> 0
<TOTAL-COSTS> 402
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 375
<INCOME-PRETAX> 193
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 193
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
