<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-02281
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* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
* SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
***************************************************************************
SUBJECT TO COMPLETION DATED MAY 17, 1996
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 16, 1996)
$200,000,000
[WEATHERFORD ENTERRA, INC. LOGO]
WEATHERFORD ENTERRA, INC.
% NOTES DUE MAY , 2006
---------------------
Interest on the % Notes due May , 2006, (the "Notes") is
payable semi-annually on and of each year, beginning
, 1996. The Notes are not redeemable prior to maturity and
will not be subject to any sinking fund.
The Notes will be represented by one or more global securities registered
in the name of the nominee of The Depository Trust Company, as depository (the
"Depository"). Beneficial interests in the Notes will be shown on, and transfers
thereof will be effected only through, records maintained by the Depository and
its participants. Except as described herein, the Notes will not be issued in
definitive form. Settlement of the Notes will be made by the Underwriters in
immediately available funds. So long as the Notes are in the form of Book-Entry
Securities, all payments of principal and interest will be made by Weatherford
Enterra, Inc. (the "Company") in immediately available funds. The Notes are
expected to trade in the Depository's Same-Day Funds Settlement System until
maturity, and secondary market trading activity in the Notes therefore will be
required by the Depository to settle in immediately available funds. See
"Description of the Notes".
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===========================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note................................. % % %
-------------------------------------------------------------------------------------------
Total.................................... $ $ $
===========================================================================================
</TABLE>
(1) Plus accrued interest, if any, from May , 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933. See "Underwriting".
(3) Before deduction of expenses payable by the Company estimated at $250,000.
---------------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued by the Company, delivered to and accepted by the
Underwriters, subject to certain conditions. The Underwriters reserve the right
to withdraw, cancel or modify such offer, and to reject orders in whole or in
part. It is expected that delivery of the Notes will be made in New York, New
York on or about May , 1996.
---------------------
MERRILL LYNCH & CO.
BA SECURITIES, INC.
CHASE SECURITIES INC.
---------------------
The date of this Prospectus Supplement is May , 1996.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE COMPANY
Weatherford Enterra, Inc. (formerly Weatherford International Incorporated
("Weatherford")) was organized under the laws of the State of Delaware in 1970.
The "Company" or "Weatherford Enterra", as used herein, refers to Weatherford
Enterra, Inc. and its subsidiaries and affiliates, unless the context indicates
otherwise.
Weatherford Enterra is a diversified international energy service and
manufacturing company that provides a variety of services and equipment to the
exploration, production and transmission sectors of the oil and gas industry.
The Company's principal business segments include (i) the oilfield services
segment, which consists of renting specialized oilfield equipment, providing
fishing, well control assistance and other downhole services and related tools,
and providing tubular running services and related tools; (ii) the energy
products segment, which consists of manufacturing, selling and servicing a
variety of products, including cementation products, power equipment, fishing
and milling tools and heavy wall drill pipe, gas lift valves, production and
service packers and related equipment, electrical and instrumentation control
systems and pedestal-mounted marine cranes; (iii) the gas compression segment,
which consists of manufacturing, packaging, selling, renting and servicing
reciprocating natural gas compressors; and (iv) the pipeline services segment,
which consists of manufacturing, selling and renting specialized pipeline
equipment and services. Weatherford Enterra operates in virtually every oil and
gas exploration and production region in the world, with more than 330 locations
in 47 countries, including the United States.
Since 1991, the Company's management has implemented a business strategy
focused on offering a broader mix of services and products in domestic and
international markets, becoming a leading participant in each of its core
businesses and pursuing cost efficiencies in both its existing operations and
its newly-acquired businesses. Management has pursued this strategy through a
series of acquisitions, the most significant of which was the merger (the
"Enterra Merger") with Enterra Corporation ("Enterra") in October 1995, pursuant
to which all outstanding shares of Enterra common stock were exchanged for
approximately 23.7 million shares of the common stock, $.10 par value ("Common
Stock"), of the Company (after giving effect to a contemporaneous one-for-two
reverse stock split of the Common Stock). On December 15, 1995, the Company
acquired the assets of Energy Industries, Inc. and Zapata Energy Industries,
L.P. (collectively, "Energy Industries"), a gas compression business
complementary to the Company's existing gas compression business, for
approximately $130 million, subject to adjustment, and the assumption of certain
current liabilities.
The Enterra Merger and the acquisition of Energy Industries provided
complementary products and services, increased the Company's worldwide market
share in its existing rental tool and fishing and downhole services businesses,
provided gas compression and pipeline services as new "core" businesses, added
several additional energy products businesses and improved profitability and
cash flow through anticipated annualized consolidation savings in excess of $55
million.
Including the Enterra Merger and the acquisition of Energy Industries, the
Company has acquired 23 businesses since November 1991 for a total consideration
of approximately $950 million, of which approximately 75% has been financed
through the issuance of Common Stock. As a result of these acquisitions,
management believes it has positioned Weatherford Enterra as a market leader in
the oilfield services segment, the gas compression segment and the pipeline
services segment and in certain businesses included in the energy products
segment while significantly expanding and diversifying the Company's geographic
operations and product and service offerings. The acquisitions have allowed the
Company to expand its
S-2
<PAGE> 3
product and service lines, improve its worldwide market position and realize
significant consolidation cost savings.
The Company's principal executive offices are located at 1360 Post Oak
Boulevard, Suite 1000, Houston, Texas 77056, and its telephone number is (713)
439-9400.
RECENT DEVELOPMENT
On March 28, 1996, Weatherford Enterra executed a definitive agreement with
Nodeco AS and its wholly owned subsidiary, Aarbakke AS (collectively, "Nodeco"),
relating to the acquisition by Weatherford Enterra of all the assets of Nodeco.
Pursuant to the agreement, at closing Weatherford Enterra will assume all
liabilities of Nodeco (other than net debt in excess of 32 million Norwegian
kroner ("NOK") at December 31, 1995), pay to Nodeco the cash amount of NOK
117,649,250 (which, at the May 14, 1996 exchange rate disclosed in The Wall
Street Journal of 6.5807 NOK per United States dollar, is equivalent to
approximately $17,900,000) and issue Nodeco AS 750,000 shares of Common Stock.
The cash portion of the purchase price is subject to adjustment for changes in
the Common Stock price and the NOK/US$ exchange rate prior to closing.
Weatherford Enterra has registered such shares with the Securities and Exchange
Commission. The Company would fund the cash portion of such transaction with
borrowings under the Company's bank credit facilities.
Pursuant to the agreement, the closing of the transaction is subject to
certain conditions, including (i) the approval of the transaction by the
requisite vote of the shareholders of each of the sellers as may be required
under Norwegian law or such seller's governing documents, (ii) the delivery to
Weatherford Enterra of guarantees executed by certain shareholders of Nodeco AS
and (iii) the delivery to Weatherford Enterra by the sellers of certain bills of
sale, deeds, assignments and other documents regarding the assets to be sold in
the transaction. There can be no assurance that such transaction will be
consummated.
Nodeco is a privately owned, Norwegian concern that designs, manufactures,
sells and rents oil and gas well completion products primarily consisting of
liner hanger equipment and related services, as well as packers used in
completions with electric submersible pumps. Nodeco's primary markets for these
products are the Norwegian and United Kingdom sectors of the North Sea. Nodeco
also provides products and services for reservoir and wellbore monitoring and
manufactures precision mechanical components for customers that are primarily
affiliated with the oil industry.
S-3
<PAGE> 4
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical data for the Company for
the three months ended March 31, 1996 and 1995 and for each of the five years
ended December 31, 1995. This selected historical data should be read in
conjunction with the consolidated financial statements and notes thereto of the
Company, which are incorporated by reference in the accompanying Prospectus, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". See "Incorporation of Certain Documents by Reference" in the
accompanying Prospectus.
<TABLE>
<CAPTION>
AS OF OR FOR THE THREE
MONTHS ENDED MARCH 31, AS OF OR FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------
1996 1995 1995(1) 1994(2) 1993(3) 1992 1991(4)
---------- ---------- ---------- ---------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues.............. $ 218,481 $ 219,289 $ 858,907 $ 676,749 $500,491 $374,203 $397,480
Acquisition-related
costs and other
unusual charges.... -- -- 88,182 2,500 4,000 -- 20,044
Operating income...... 23,784 24,324 182 65,704 49,671 35,579 31,044
Depreciation and
amortization....... 25,404 22,529 95,957 71,037 50,449 35,738 35,720
Net income (loss)..... 13,477 14,439 (10,558) 41,977 35,175 26,760 14,234
Net income (loss) per
share.............. $ 0.26 $ 0.29 $ (0.21) $ 0.94 $ 0.88 $ 0.73 $ 0.37
PERCENTAGE OF REVENUES:
Selling, general and
administrative
expenses........... 15.2% 16.5% 16.1% 17.1% 18.3% 22.6% 22.5%
Gross profit.......... 27.6% 28.2% 27.2% 27.9% 29.5% 33.2% 35.6%
Operating income...... 10.9% 11.1% 0.0% 9.7% 9.9% 9.5% 7.8%
Net income (loss)..... 6.2% 6.6% (1.2)% 6.2% 7.0% 7.2% 3.6%
BALANCE SHEET DATA:
Working capital....... $ 288,850 $ 265,648 $ 267,380 $ 251,778 $211,834 $197,526 $197,879
Total assets.......... 1,244,235 1,141,888 1,258,860 1,153,970 635,602 474,490 470,702
Total debt............ 321,465 198,041 329,266 196,672 21,253 28,685 31,572
Stockholders'
equity............. $ 751,634 $ 747,854 $ 730,843 $ 734,634 $474,442 $349,458 $334,002
Total debt-to-total
capitalization..... 30.0% 20.9% 31.1% 21.1% 4.3% 7.6% 8.6%
OTHER DATA:
Capital expenditures,
excluding
acquisitions....... $ 28,782 $ 24,652 $ 110,625 $ 114,018 $ 63,757 $ 38,259 $ 50,636
Weighted average
shares
outstanding........ 51,334 50,645 50,989 44,845 38,607 34,786 34,394
</TABLE>
---------------
(1) Includes acquisition-related costs and other unusual charges of $88,182,000,
or $1.17 per common share.
(2) Includes acquisition-related costs of $2,500,000, or $0.06 per common share.
(3) Includes acquisition-related costs of $4,000,000, or $0.10 per common share.
(4) Includes acquisition-related costs and other unusual charges of $20,044,000,
or $0.58 per common share.
S-4
<PAGE> 5
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes (estimated to be
approximately $199 million) will be used by the Company for the repayment of
indebtedness outstanding under the Company's $200 million revolving credit
facility (the "Revolving Credit Facility"), and the balance of the net proceeds
will be used for the repayment of a portion of the indebtedness outstanding
under the Company's $200 million term loan (the "Term Loan" and, together with
the Revolving Credit Facility, the "Facilities"). In connection with the Enterra
Merger, the Company entered into the Facilities, which replaced the previous
primary bank credit facilities of Weatherford and Enterra. The Term Loan is
payable in equal quarterly installments on March 31, June 30, September 30 and
December 31 of each year through September 30, 2001. The Revolving Credit
Facility matures on September 30, 2000. Amounts outstanding under the Facilities
accrue interest at a variable rate ranging from 0.375% to 0.625% above a
specified Eurodollar rate, depending on the Company's total debt-to-total
capitalization ratio. The applicable interest rate on amounts outstanding under
the Term Loan and the Revolving Credit Facility at April 30, 1996 was 5.9375%. A
commitment fee ranging from 0.15% to 0.225% per annum, depending on the
Company's total debt-to-total capitalization ratio, is payable quarterly on the
unused portion of the Revolving Credit Facility. At April 30, 1996, the balances
outstanding under the Term Loan and the Revolving Credit Facility were
approximately $191 million and $113 million, respectively, and the Company had
$87 million available to borrow under the Revolving Credit Facility.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at March 31, 1996, and as adjusted to give effect to the sale of the
Notes offered hereby and the application of the net proceeds therefrom. See "Use
of Proceeds". This table should be read in conjunction with the Company's
consolidated financial statements and the related notes thereto, which are
incorporated by reference in the accompanying Prospectus.
<TABLE>
<CAPTION>
AT MARCH 31, 1996
---------------------------
OUTSTANDING AS ADJUSTED
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt and current portion of long-term debt............... $ 37,135 $ 21,317
Long-term debt:
Term Loan......................................................... 156,522 85,340
Revolving Credit Facility......................................... 113,000 --
Foreign bank debt, denominated in foreign currencies.............. 8,108 8,108
Industrial revenue bonds.......................................... 2,676 2,676
% Notes Due May , 2006..................................... -- 200,000
Other............................................................. 4,024 4,024
----------- -----------
Total debt..................................................... 321,465 321,465
----------- -----------
Stockholders' equity:
Preferred stock................................................... -- --
Common stock...................................................... 5,126 5,126
Paid-in capital................................................... 608,616 608,616
Retained earnings................................................. 143,720 143,720
Cumulative translation adjustment................................. (5,228) (5,228)
Treasury stock.................................................... (600) (600)
----------- -----------
Total stockholders' equity..................................... 751,634 751,634
----------- -----------
Total capitalization...................................... $ 1,073,099 $ 1,073,099
=========== ===========
</TABLE>
S-5
<PAGE> 6
BUSINESS
GENERAL
Weatherford Enterra is a diversified international energy service and
manufacturing company that provides a variety of services and equipment to the
exploration, production and transmission sectors of the oil and gas industry.
The Company operates in four industry segments -- oilfield services, energy
products, gas compression and pipeline services.
Oilfield Services. Weatherford Enterra rents a full line of specialized
equipment and tools and tubular goods for drilling, completion and workover of
oil and gas wells. Operators and drilling contractors often find it uneconomic
to maintain complete inventories of tools, drill pipe and other equipment and
therefore supplement such inventories by renting. Items rented include pressure
control equipment (such as blowout preventers, high-pressure valves,
accumulators, adapters and choke and kill manifolds); drill pipe, drill collars
and tubing; pipe handling equipment (such as elevators, spiders, slips, tongs
and kelly spinners); and fishing tools (such as milling tools, casing cutters,
jars, spears, overshots and whipstocks). Weatherford Enterra also provides
fishing, milling and cutting services, which consist of removing or otherwise
eliminating "fish" or "junk" in a well (such as cables, pipes, casing, well bore
tools or debris) that is causing an obstruction. An essential step in the
fishing operation is the proper selection and assembly of the fishing string.
Items that might be on a fishing string include jars, subs, overshots
(external), spears (internal), milling tools, casing cutters and other tools for
retrieving or eliminating the "fish". The Company also provides pipe recovery
electric wireline services and coring services. In addition, Weatherford Enterra
provides well control assistance services in critical well situations (such as a
well blow-out or a high pressure sour gas well). Management believes that, based
on total revenues, Weatherford Enterra is the leading worldwide supplier of
rental tools and provider of fishing and other downhole services.
Weatherford Enterra provides services and equipment used to "make up"
threaded tubular connections and to "run" tubulars that are used during the
drilling, completion and workover of oil and gas wells. Tubulars include casing,
tubing, special high alloy chrome pipe and fiberglass reinforced pipe. Casing is
pipe installed (or run) in a wellbore to protect the structural integrity of the
wellbore and to seal various zones in the well. Tubing is small diameter pipe
run in a producing well through which oil and gas is produced. These services
and related equipment ensure the mechanical integrity and leak-tight performance
of tubular connections. In running tubulars, Weatherford Enterra personnel
operate power tongs (similar in principle to hydraulic wrenches) and other
related handling equipment, to connect the pipe as it is placed in the well,
ensuring a good connection and minimizing thread damage. Management believes
that, based on total revenues, the Company is the leading worldwide provider of
tubular running services.
Energy Products. Weatherford Enterra's energy products business consists
of the manufacture, sale and servicing of a variety of products. The Company
provides cementation products and trained cementation engineers to perform
computerized well program studies, submit cementation proposals, finalize
cementation plans and advise and assist during the cementation process. The
Company does not provide cement pumping services. The Company's cementation
products, marketed under the Weatherford trade name, include cementing products
used to center casing strings in the wellbore (such as centralizers, wellbore
wipers and scratchers); float equipment used in the cementation of the casing
string to prevent cement from flowing back into the casing (such as guide shoes,
float shoes and float collars); and stage tools used to set cement in the
annular space between the wellbore and the casing string. The Company also sells
various proprietary rubber and elastomer products that have broad drilling and
tubular thread protection applications, in addition to applications in
cementation services. Management believes that, based on total revenues, the
Company is the leading worldwide manufacturer and supplier of cementation
products.
Weatherford Enterra designs, manufactures, sells and services power tongs
and related pipe handling equipment used to provide tubular handling services;
tubular connection testing equipment used to verify the integrity of
connections; milling tools, cutters, overshots, whipstocks and wireline
equipment used to provide fishing and other downhole services; heavy wall drill
pipe; McMurry-Macco(TM) gas lift and related equipment to increase the flow of
oil; and Arrow(TM) packers and related equipment to control the flow in oil and
gas wells and to provide remedial stimulation and testing services in oil and
gas wells. Weatherford Enterra, through Total
S-6
<PAGE> 7
Engineering Services Team, Inc. ("TEST"), provides electrical and
instrumentation construction services to the worldwide oil and gas production
industry and designs, builds, installs and services instrument control systems
for electrical power generation packages used on offshore production platforms
and associated offshore storage and handling facilities. The Company also
designs, manufacturers, sells and services American Aero(R) pedestal-mounted
hydraulic cranes used on offshore production platforms, marine vessels and
dockside locations.
Gas Compression. Weatherford Enterra manufactures, packages, sells, rents
and services gas compression units used for increasing natural gas pressure
exiting the wellhead and within gas gathering systems, injecting natural gas
into oil wells to enhance oil recovery, injecting natural gas into gas storage
wells and other general uses such as cogeneration, seismic marine surveys and
natural as fueling stations. The acquisition of Energy Industries in December
1995 greatly expanded the Company's gas compression business through the
addition of larger horsepower units and manufacturing and packaging
capabilities. The Company is a major manufacturer of gas compressors ranging
from 26 horsepower to 7200 horsepower. Weatherford Enterra currently offers an
entire line of reciprocating gas compressors and is able to serve the
international marketplace. Management believes that the Company is the second
largest gas compressor rental company based on number of units and the fourth
largest based on available horsepower.
Pipeline Services. Weatherford Enterra's pipeline services business
consists of CRC-Evans(TM) pipeline equipment, CRC-Evans automatic welding
services and Pipeline Induction Heat Ltd. ("PIH") services. The pipeline
equipment segment includes the manufacture of conventional line travel pipeline
construction equipment, the manufacture of specialized equipment for pipe
coating plants and pipe handling systems for offshore lay barges and the
manufacture of rehabilitation equipment for coating removal, surface preparation
and recoating pipelines. The automatic welding segment includes the provision of
proprietary automatic welding systems for use in pipeline construction. PIH
offers specialized field joint coating and heat treatment services for use in
pipeline construction. Management believes that, based on revenues, the Company
is the leading worldwide manufacturer and supplier of conventional pipeline
construction equipment.
INTERNATIONAL AND U.S. OPERATIONS AND EXPORT SALES
The Company has manufacturing operations, either through direct ownership
(including joint ventures) or through license arrangements, in the United
States, Germany, Canada, Italy, The Netherlands and Saudi Arabia. The Company
has product and equipment sales or service operations in more than 330 locations
in 47 countries (including the United States).
The Company's international operations traditionally have been more stable
and profitable than its U.S. operations. International revenues in 1995, 1994
and 1993 were $387,235,000 (45% of total revenues), $293,673,000 (43% of total
revenues) and $215,328,000 (43% of total revenues), respectively. Revenues for
the United States segment included export sales to international customers of
$65,465,000, $63,211,000 and $49,388,000 in 1995, 1994 and 1993, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should assist in an understanding of the Company's
financial position and results of operations for the three months ended March
31, 1996 and 1995 and for each of the three years in the period ended December
31, 1995. The Company's consolidated financial statements and the related notes,
which are incorporated by reference in the accompanying Prospectus, contain
detailed information that should be referred to in conjunction with this
discussion.
BUSINESS REVIEW
Weatherford Enterra is a diversified international energy service and
manufacturing company that provides a variety of services and equipment to the
exploration, production and transmission sectors of the oil and gas industry.
The Company's principal business segments are oilfield services, energy
products, gas
S-7
<PAGE> 8
compression and pipeline services. Weatherford Enterra operates in virtually
every oil and gas exploration and production region in the world, with more than
330 locations in 47 countries.
In 1991, the Company's management implemented a business strategy focused
on offering a broader mix of services and products in domestic and international
markets, becoming a leading participant in each of its core businesses and
pursuing cost efficiencies in its existing operations and its newly-acquired
businesses. Management has pursued this strategy through a series of
acquisitions. As a result of these acquisitions, management believes it has
positioned the Company as a market leader in its oilfield services, gas
compression and pipeline services segments and in certain businesses included in
its energy products segment. The acquisitions have allowed the Company to expand
its product and service lines, improve its worldwide market position and realize
significant consolidation cost savings.
On October 5, 1995, the Company completed the Enterra Merger, which
represents the Company's most significant business combination to date.
Management believes that the Enterra Merger strengthens the Company's position
as the worldwide leader in the rental and fishing tool services business. In
addition, the Enterra Merger adds gas compression, pipeline services and several
additional energy product and service businesses to the Company. In connection
with the Enterra Merger, the Company effected a one-for-two reverse stock split
and changed its name to "Weatherford Enterra, Inc." In this report, all per
share amounts and numbers of shares of Common Stock have been restated to
reflect the reverse stock split. Weatherford issued approximately 23,668,000
shares of Common Stock in exchange for all the outstanding shares of Enterra
common stock based on an exchange ratio of 0.845 of a share of Common Stock for
each share of Enterra common stock outstanding. The Enterra Merger was accounted
for as a pooling of interests. Accordingly, the consolidated financial
statements have been restated for all periods presented to include the accounts
and results of operations of Enterra with those of Weatherford, as if the two
companies had been combined since inception.
On December 15, 1995, the Company acquired substantially all of the assets
of Energy Industries, a natural gas compression business complementary to the
Company's gas compression business, for approximately $130,000,000 in cash,
subject to adjustment, and the assumption of certain liabilities totaling
approximately $12,485,000. The results of the Energy Industries operations are
included in the Company's consolidated financial statements and the related
notes, which are incorporated by reference in the accompanying Prospectus, since
the date of acquisition.
Management believes that the Company will achieve operating efficiencies
and annualized consolidation cost savings in excess of $55,000,000 after
combining the operations of Weatherford, Enterra and Energy Industries, and that
most of the cost saving measures will be in place by the summer of 1996.
On August 12, 1994, Enterra entered the gas compression business and
several energy products businesses through its acquisition of the outstanding
common stock of Total Energy Services Company ("Total Energy") in exchange for
shares of Enterra common stock valued, in the aggregate, at $213,570,000.
Enterra also acquired the minority interests in two Total Energy subsidiaries
for $23,000,000 in cash, paid transaction costs and employment-related
obligations totaling approximately $15,000,000 and assumed Total Energy's
long-term debt of $75,000,000. Other significant acquisitions within the past
three years, all made by Weatherford, include the September 1994 merger with H &
H Oil Tool Co., Inc. ("H & H") which was accounted for as a pooling of
interests, the April 1994 acquisition of the Rental Division of Odfjell Drilling
and Consulting Company ("Odfjell Rental") for $56,200,000 and the assumption of
certain contractual rights and obligations and the April 1993 acquisition of
substantially all of the assets of Homco International, Inc. and its
subsidiaries (collectively, "Homco") for $97,500,000 in cash and the assumption
of certain liabilities totaling approximately $39,200,000. The results of the
Odfjell Rental and Homco operations are included in the Company's consolidated
financial statements and the related notes, which are incorporated by reference
in the accompanying Prospectus, since the date of their respective acquisition.
S-8
<PAGE> 9
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
A summary of operating results by business segment is shown below:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
(IN THOUSANDS)
REVENUES:
Oilfield services............................................ $119,295 $113,663
Energy products.............................................. 51,015 58,672
Gas compression.............................................. 33,643 29,147
Pipeline services............................................ 14,888 17,807
-------- --------
Total................................................ $218,841 $219,289
======== ========
OPERATING INCOME (LOSS):
Oilfield services............................................ $ 20,256 $ 15,825
Energy products.............................................. 3,268 3,867
Gas compression.............................................. 2,625 3,497
Pipeline services............................................ 218 3,803
Corporate.................................................... (2,583) (2,668)
-------- --------
Total................................................ $ 23,784 $ 24,324
======== ========
</TABLE>
Oilfield services. Revenues increased 5% from $113,663,000 in the first
quarter of 1995 to $119,295,000 in the first quarter of 1996. International
revenues increased $10,487,000, or 19%, to $65,923,000, primarily as a result of
increased service activity in certain markets, including Latin America, the
North Sea, Canada and West Africa. During the first quarter of 1996, the average
international rig count (excluding Canada) was 5% higher than in the same period
of 1995. International operating income increased 21% to $12,152,000 in the
first quarter of 1996 as compared to the first quarter of 1995 primarily as a
result of increased revenues. United States revenues decreased $4,855,000, or
8%, to $53,372,000 in the first quarter of 1996 compared to the same period in
1995, primarily as a result of decreased service activity in certain regions.
United States operating income for the first quarter of 1996 increased 41%
compared to the first quarter of 1995, despite the decline in revenues,
reflecting cost savings achieved in consolidating the operations of Enterra and
Weatherford which were merged in October 1995.
Energy products. Revenues of $51,015,000 in the first quarter of 1996
decreased $7,657,000, or 13%, compared to the first quarter of 1995. First
quarter 1995 results included an unusual $5,900,000 export sale of products and
$13,011,000 of revenues from businesses sold in September 1995 and February
1996. Operating income in the energy products segment decreased $599,000 from
the first quarter of 1995 primarily as a result of the two businesses that were
sold and the large export sale in 1995. Excluding the impact of these items,
revenues in the energy products segment increased 24% in the first quarter of
1996 compared to the same period in 1995, and operating income improved from
less than $1,000,000 to $3,100,000, primarily as a result of higher cementation
product sales and improved results from the Company's Arrow packer operations.
Gas compression. Revenues increased $4,496,000, or 15%, from $29,147,000
in the first quarter of 1995 to $33,643,000 in the first quarter of 1996,
primarily as a result of the December 1995 acquisition of the assets of Energy
Industries, partially offset by the impact of lower sales of packaged compressor
units. Operating income decreased $872,000, or 25%, to $2,625,000 in the first
quarter of 1996 compared to $3,497,000 in the first quarter of 1995, reflecting
the impact of the lower packaging sales and additional costs related to the
Energy Industries operations.
Pipeline services. Revenues declined $2,919,000, or 16%, to $14,888,000 in
the first quarter of 1996 compared to $17,807,000 in the first quarter of 1995,
and operating income decreased $3,585,000 from $3,803,000 in the first quarter
of 1995 to $218,000 in the first quarter of 1996. First quarter 1995 results
were
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<PAGE> 10
highlighted by extremely high equipment rental activity on a Canadian pipeline
project which was completed in 1995.
Selling, general and administrative expenses. Selling, general and
administrative expenses as a percentage of revenue decreased to 15.2% in the
first quarter of 1996 from 16.5% in the first quarter of 1995, primarily as a
result of cost efficiencies achieved in consolidating the operations of Enterra
into the Company.
Research and development. Research and development costs of $1,715,000 in
the first quarter of 1996 increased 67% compared to the first quarter of 1995.
The increases primarily reflected the expansion of the Company's operations and
development activities to support all four of its principal business segments.
Equity in earnings of unconsolidated affiliates. The Company owns an
interest of 50% or less in several joint ventures, primarily in the oilfield
services segment. The Company's equity in the earnings of these affiliates was
$501,000 in the first quarter of 1996 compared to $525,000 in the first quarter
of 1995. The Company received cash dividends from its 50% or less-owned
affiliates totaling $392,000 and $294,000 in the first quarter of 1996 and 1995,
respectively.
Foreign currency (gain) loss, net. As a result of the fluctuation of the
U.S. dollar against the major foreign currencies in which the Company conducts
business, the Company recorded net foreign currency gains of $19,000 in the
first quarter of 1996 compared to $333,000 in the first quarter of 1995.
Other expense, net. Other expense, net, increased to $2,026,000 in the
first quarter of 1996 compared to $1,238,000 in the first quarter of 1995. The
increase in the first quarter of 1996 was primarily attributable to the
amortization of goodwill related to the December 1995 acquisition of Energy
Industries, and lower net gains on sales of property, plant and equipment.
Interest. Net interest expense increased to $4,503,000 in the first
quarter of 1996 compared to $3,744,000 in the first quarter of 1995, primarily
as a result of higher average debt balances outstanding. The increased
indebtedness primarily related to the acquisition of Energy Industries in
December 1995.
Income taxes. Income tax expense as a percentage of income before income
taxes was 30% in the first quarter of 1996 and the first quarter of 1995. The
effective rate was lower than the U.S. statutory rate of 35% primarily as a
result of foreign income taxed at various rates and the availability of U.S. net
operating loss carryforwards.
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<PAGE> 11
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
A summary of operating results by business segment is shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES:
Oilfield services:
Rental and fishing/downhole services.................. $328,343 $300,214 $244,697
Tubular running services.............................. 130,387 109,503 105,715
Other oilfield services............................... 11,818 13,664 7,636
-------- -------- --------
Total oilfield services.......................... 470,548 423,381 358,048
-------- -------- --------
Energy products:
Cementation products.................................. 47,237 43,201 41,734
Other oilfield products............................... 118,394 66,283 30,653
Other products and services........................... 59,791 34,273 19,777
-------- -------- --------
Total energy products............................ 225,422 143,757 92,164
-------- -------- --------
Gas compression:
Manufacturing, packaging, parts and services.......... 57,565 32,790 --
Rental................................................ 36,821 13,355 --
-------- -------- --------
Total gas compression............................ 94,386 46,145 --
-------- -------- --------
Pipeline services:
Rentals and services.................................. 46,227 32,240 30,825
Sales................................................. 22,324 31,226 19,454
-------- -------- --------
Total pipeline services.......................... 68,551 63,466 50,279
-------- -------- --------
$858,907 $676,749 $500,491
======== ======== ========
ACQUISITION-RELATED COSTS AND OTHER UNUSUAL CHARGES:
Oilfield services........................................ $ 31,715 $ 2,500 $ 4,000
Energy products.......................................... 22,694 -- --
Gas compression.......................................... -- -- --
Pipeline services........................................ 4,762 -- --
Corporate................................................ 29,011 -- --
-------- -------- --------
$ 88,182 $ 2,500 $ 4,000
======== ======== ========
OPERATING INCOME (LOSS):
Oilfield services........................................ $ 41,214 $ 52,665 $ 44,743
Energy products.......................................... (14,210) 16,668 10,726
Gas compression.......................................... 7,788 4,047 --
Pipeline services........................................ 3,602 (2,237) 2,019
Corporate................................................ (38,212) (5,439) (7,817)
-------- -------- --------
$ 182 $ 65,704 $ 49,671
======== ======== ========
</TABLE>
Oilfield services. Revenues increased 11% in 1995 to $470,548,000 compared
to $423,381,000 in 1994. International revenues increased 23% to $245,698,000,
primarily as a result of increased activity in certain markets, including Latin
America, Africa, the North Sea and Canada. During 1995, the average
international drilling rig count (excluding Canada) was 3% higher than in 1994.
United States revenues increased 1% to $224,850,000, despite a 7% decline in the
average U.S. drilling rig count. Operating income for the oilfield services
segment decreased in 1995 compared to 1994 as a result of the
acquisition-related costs and other unusual charges in 1995 discussed below.
Excluding such charges, operating income would have improved
S-11
<PAGE> 12
32% to $72,929,000, primarily as a result of the increased international
activity and cost savings achieved in consolidating the operations of H & H and
Enterra into the Company.
Oilfield services revenues increased 18% in 1994 to $423,381,000 compared
to $358,048,000 in 1993. International revenues increased 23% in 1994 to
$200,169,000, primarily as a result of expansion into Latin America, increased
drilling activity in Canada and the addition of the Odfjell Rental operations
acquired in April 1994. During 1994, the average international drilling rig
count (excluding Canada) was 5% lower in 1994 than in 1993. United States
revenues increased 14% in 1994 to $223,212,000 compared to 1993, reflecting the
addition of the Homco operations in April 1993 and several smaller acquisitions.
Operating income increased 18% in 1994 to $52,665,000, primarily as a result of
the increased activity in Canada, expansion into Latin America and cost savings
achieved in consolidating the operations of Homco.
Energy products. Revenues increased 57% in 1995 to $225,422,000 compared
to $143,757,000 in 1994, primarily as a result of the addition of the Total
Energy businesses acquired in August 1994. Operating income, excluding the
acquisition-related costs and other unusual charges discussed below, decreased
49% to $8,484,000, primarily as a result of operating losses incurred in 1995 by
the Arrow packer business acquired from Total Energy.
Energy products revenues increased 56% in 1994 to $143,757,000 compared to
$92,164,000 in 1993, primarily as a result of the addition of the Total Energy
businesses in August 1994. Operating income improved 55% to $16,668,000 due to
the addition of the Total Energy businesses and improved operating results from
the cementation products business.
Gas compression. The gas compression segment was acquired as part of the
Total Energy acquisition, which was accounted for as a purchase, in August 1994.
Consequently, comparisons of the operating results for the periods presented are
not meaningful. Compression rental revenues have remained fairly stable since
the business was acquired. Sales of packaged compression units, particularly in
Canada, declined significantly during the second half of 1995, as many customers
deferred the acquisition of units due to the relatively low demand for natural
gas. Canadian operations accounted for 45% of gas compression revenues in 1995
compared to 55% for the period from August 12, 1994 through December 31, 1994.
Market conditions for compressor sales are expected to improve during 1996.
Pipeline services. Revenues increased 8% in 1995 to $68,551,000 compared
to $63,466,000 in 1994. Rental and service revenues of $46,227,000 increased 43%
compared to 1994 as a result of increased coating service revenues from a large
international pipeline construction project and increased automatic welding unit
rental and service revenue in Canada, Malaysia and North Africa. Equipment sales
revenue decreased $8,902,000, or 29%, primarily due to an unusually large
contract in 1994 to design and construct specialized equipment to be installed
on a large offshore pipe laying vessel (the "Contract"), which yielded revenues
of $10,000,000 but an operating loss of $4,200,000 in 1994. Exclusive of the
acquisition-related costs and other unusual charges discussed below, operating
income improved to $8,364,000 in 1995 compared to an operating loss of
$2,237,000 in 1994, primarily as a result of the higher rental and service
activity in 1995 and the $4,200,000 loss on the Contract in 1994.
Revenues for the pipeline services segment in 1994 increased 26% to
$63,466,000 compared to 1993, primarily as a result of revenues from the
Contract. Operating income decreased $4,256,000 to a loss of $2,237,000 in 1994,
primarily due to losses incurred on the Contract.
Gross profit. The consolidated gross profit percentage was 27.2% in 1995
compared to 27.9% in 1994 and 29.5% in 1993. The decline is primarily
attributable to weakness in the gas compression segment and several businesses
in the energy products segment.
Selling, general and administrative expenses. Selling, general and
administrative expenses as a percentage of revenues decreased to 16.1% in 1995
from 17.1% in 1994 and 8.3% in 1993, primarily as a result of cost efficiencies
achieved in consolidating the operations of acquired businesses into the
Company. Management expects the selling, general and administrative expense
percentage to decrease further in 1996, as the operations of Enterra and Energy
Industries are fully consolidated into the Company.
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<PAGE> 13
Research and development. Research and development costs of $4,954,000 in
1995 increased 5% compared to 1994. Research and development costs in 1994 of
$4,735,000 increased 30% compared to 1993. The increases primarily reflected the
expansion of the Company's operations and development activities to support all
four of its principal business segments.
Equity in earnings of unconsolidated affiliates. The Company owns an
interest of 50% or less in several joint ventures, primarily in the oilfield
services segment. The Company's equity in the earnings of these affiliates was
$1,477,000 in 1995 compared to $1,169,000 in 1994 and $2,716,000 in 1993. The
increase of 26% in 1995 compared to 1994 was primarily attributable to improved
drilling activity in Saudi Arabia, and the decrease of 57% in 1994 compared to
1993 was primarily the result of increased competition and reduced drilling
activity in Saudi Arabia. The Company received cash dividends from its 50% or
less-owned affiliates totaling $1,666,000, $2,203,000 and $3,622,000 in 1995,
1994 and 1993, respectively.
Foreign currency (gain) loss, net. As a result of the fluctuation of the
U.S. dollar against the major foreign currencies in which the Company conducts
business, the Company recorded net foreign currency gains of $74,000 in 1995
compared to a net gain of $2,205,000 in 1994 and a net loss of $713,000 in 1993.
A substantial portion of the gain in 1994 represented an unrealized currency
gain related to certain intercompany loans.
Other expense, net. Other expense, net, increased to $3,835,000 in 1995
compared to $3,073,000 in 1994 and $906,000 in 1993. The increase in 1995 and
1994 was primarily attributable to the amortization of goodwill related to the
1994 acquisitions of Total Energy and Odfjell Rental, partially offset in 1995
by increased gains on sales of property, plant and equipment.
Acquisition-related costs and other unusual charges. During the second
quarter of 1995, Enterra recorded unusual charges totaling $28,282,000
($26,000,000 of which was non-cash), representing writedowns to fair value of
certain businesses to be disposed of, asset writedowns related to certain excess
facilities, equipment and inventories, and estimated costs in connection with
the closure of certain pipeline businesses and the consolidation of certain
oilfield service administrative and operating facilities. During the fourth
quarter of 1995, the Company recorded expenses of $59,900,000 ($40,196,000 of
which was non-cash in 1995) related to the Enterra Merger and the financial
impact of management decisions related to the future operations of the combined
companies. These acquisition-related costs primarily consisted of transaction
costs, severance and termination agreements with former officers and employees,
facility closure costs primarily to consolidate the oilfield services operations
and administrative functions of Enterra and Weatherford, and the reduction in
recorded value of certain assets that had diminished future value in the
operations of the combined Company.
Weatherford recorded acquisition-related costs of $2,500,000 in the third
quarter of 1994 related to the H & H merger and $4,000,000 in the second quarter
of 1993 in connection with the Homco acquisition. The 1994 and 1993
acquisition-related costs primarily represented transaction costs of the H & H
merger and employee termination and facility closure costs to consolidate the
operations of H & H and Homco into Weatherford.
Operating income. Operating income decreased substantially in 1995 to
$182,000 compared to $65,704,000 in 1994 and $49,671,000 in 1993, primarily as a
result of the acquisition-related costs and other unusual charges. Excluding
such charges, operating income would have been $88,364,000 in 1995 compared to
$68,204,000 in 1994 and $53,671,000 in 1993, reflecting the impact of the
Company's acquisitions and related cost savings.
Interest. Net interest expense increased to $15,136,000 in 1995 compared
to $6,888,000 in 1994 and $784,000 in 1993, primarily as a result of higher
average debt balances outstanding. The increased indebtedness primarily related
to the acquisitions of Energy Industries in December 1995, Total Energy in
August 1994, Odfjell Rental in April 1994 and Homco in April 1993.
Income taxes. The income tax provision (benefit) consists of taxes on
foreign earnings, foreign taxes withheld on certain remittances from
international subsidiaries, U.S. alternative minimum and state taxes and the
recognition of deferred tax credits relating to financial statement losses that
are not currently deductible
S-13
<PAGE> 14
for tax purposes. The income tax provision does not include U.S. regular federal
income tax due to the availability of U.S. net operating loss carryforwards.
Income tax provision (benefit) as a percentage of income (loss) before income
taxes and minority interests was 31%, 29% and 28% for 1995, 1994 and 1993,
respectively. The increase in the effective tax rates was primarily a result of
differences in the components and tax rates applicable to foreign taxable
income, and a result of nondeductible goodwill amortization related to the Total
Energy acquisition.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations used cash of $2,567,000 during the first three
months of 1996 compared to providing cash of $5,604,000 during the first three
months of 1995. Net income before depreciation and amortization of $38,881,000
in the first three months of 1996 increased $1,913,000 when compared to the same
period in 1995. Changes in working capital and other operating accounts used
cash of $35,516,000 during the first three months of 1996 compared to
$28,935,000 in the same period of 1995, primarily as a result of increases in
accounts receivable and inventories and decreases in accounts payable and
accrued liabilities. Working capital increased from $267,380,000 at December 31,
1995 to $288,850,000 at March 31, 1996.
At December 31, 1995, the Company had cash and cash equivalents of
$32,800,000. The Company's operations provided cash of $78,873,000 during 1995
compared to $67,569,000 during 1994 and $44,649,000 in 1993. Operating cash flow
before changes in working capital accounts increased 16% to $118,720,000 in 1995
over 1994 and 31% to $102,010,000 in 1994 compared to 1993, reflecting the
impact of the acquisitions and growth in the Company's operations. Changes in
working capital and other operating accounts used cash of $39,847,000 during
1995 compared to $34,441,000 in 1994 and $33,291,000 in 1993. Working capital of
$267,380,000 at December 31, 1995 increased $15,602,000 from December 31, 1994,
primarily due to the Energy Industries acquisition, and December 31, 1994
working capital of $251,778,000 increased $39,944,000 from December 31, 1993 as
a result of the acquisition of Total Energy.
In connection with the Company's plan to consolidate the operations of
Enterra into Weatherford, the Company committed to vacate certain excess
facilities. Accrued liabilities associated with such plan decreased from
$24,328,000 to $16,495,000 between December 31, 1995 and March 31, 1996, as a
result of cash payments in accordance with the consolidation plan.
Capital expenditures increased to $28,782,000 during the three months ended
March 31, 1996 compared to $24,652,000 for the same period in 1995. The increase
was primarily attributable to increased capital spending requirements as a
result of the Company's December 1995 acquisition of Energy Industries. Capital
expenditures, excluding business acquisitions, decreased 3% to $110,625,000 in
1995 compared to $114,018,000 in 1994, reflecting lower capital spending in the
oilfield services segment due to the consolidation of the Weatherford and
Enterra rental and service equipment inventories which was partially offset by
the capital requirements of the Total Energy operations acquired in August 1994.
Capital expenditures, excluding business acquisitions, increased 79% in 1994 to
$114,018,000, primarily to support the growth of the Company's operations
resulting from the acquisitions of Total Energy, Odfjell Rental, H & H, Homco
and other businesses. Management anticipates that the Company's capital spending
levels will continue to be primarily influenced by market opportunities and
growth in the Company's operations.
In addition to the Enterra and H & H mergers and the acquisitions of Energy
Industries, Total Energy, Odfjell Rental and Homco, the Company has made several
other acquisitions, principally in its oilfield services and energy products
segments. The total cash consideration paid in connection with these
acquisitions, net of cash acquired and notes issued, was $9,135,000, $12,046,000
and $21,964,000 in 1995, 1994 and 1993, respectively.
The Company's consolidated indebtedness decreased from $329,266,000 at
December 31, 1995 to $321,465,000 at March 31, 1996 primarily as a result of a
scheduled debt repayment. The Company's consolidated indebtedness increased to
$329,266,000 at December 31, 1995 from $196,672,000 at December 31, 1994,
primarily as a result of debt incurred in connection with the acquisition of
Energy Industries. The Company's total debt-to-total capitalization ratio was
30% at March 31, 1996 compared to 31% at December 31, 1995 and 21% at December
31, 1994.
S-14
<PAGE> 15
The Company's primary bank credit facilities consist of a $200,000,000 Term
Loan and a $200,000,000 Revolving Credit Facility. In connection with the
Enterra Merger, the Company entered into the Facilities, which replaced the
previous bank credit facilities of Weatherford and Enterra. The Term Loan is
repayable in equal quarterly installments through September 30, 2001. The
Revolving Credit Facility matures on September 30, 2000. Amounts outstanding
under the Facilities accrue interest at a variable rate, ranging from 0.375% to
0.625% above a specified Eurodollar rate, depending on the Company's total
debt-to-total capitalization ratio. The applicable interest rate on amounts
outstanding at March 31, 1996 was 5.8%. A commitment fee ranging from 0.15% to
0.225% per annum, depending on the Company's total debt-to-total capitalization
ratio, is payable quarterly on the unused portion of the Revolving Credit
Facility. The Company is required under the Facilities agreement to maintain
certain financial ratios, including a maximum debt-to-capitalization ratio of
45% through September 30, 1996 and 40% thereafter. At March 31, 1996, the
balances outstanding under the Term Loan and the Revolving Credit Facility were
$191,304,000 and $113,000,000, respectively, and the Company had $87,000,000
available to borrow under the Revolving Credit Facility. In addition, at March
31, 1996, the Company had $5,771,000 available for borrowing under working
capital facilities of certain of its international subsidiaries. The Company
also has various credit facilities available only for standby letters of credit
and bid and performance bonds, pursuant to which funds are available to the
Company to secure performance obligations and certain retrospective premium
adjustments under insurance policies. The Company had a total of $16,744,000 of
letters of credit and bid performance bonds outstanding at March 31, 1996.
The net proceeds to the Company from the sale of the Notes (estimated to be
approximately $199 million) will be used by the Company for the repayment of a
portion of the indebtedness outstanding under the Facilities. See "Use of
Proceeds".
The Company conducts a portion of its business in currencies other than the
U.S. dollar, including the Canadian dollar, the German mark, the U.K. pound
sterling, the Norwegian krone, certain Latin American currencies and the Italian
lira. Although most of the revenues of the Company's foreign operations are
denominated in the local currency, the effects of foreign currency fluctuations
are largely mitigated because local expenses of such foreign operations also
generally are denominated in the same currency. As a result of a weaker U.S.
dollar, the weighted average currency exchange rates used to translate the
statements of income of the Company's international subsidiaries were generally
lower during 1995 and 1994 compared to 1993, thereby increasing the amount of
U.S. dollars reflected on the Company's 1995 and 1994 consolidated statements of
income. Had the average exchange rates in 1995 and 1994 been the same as in
1993, revenues for 1995 would have been approximately $9,000,000 lower and
revenues for 1994 would have been virtually unchanged. The impact on net income
would not have been material.
The Company has entered into forward exchange contracts as a hedge against
certain existing economic exposures, and not for speculative or trading
purposes. These contracts reduce exposure to currency movements affecting
existing assets and liabilities denominated in foreign currencies, such exposure
resulting primarily from trade receivables and payables and intercompany loans.
The future value of these contracts and the related currency positions are
subject to offsetting market risk resulting from foreign currency exchange rate
volatility. Settlement of forward exchange contracts resulted in net cash
inflows totaling $381,000 during the first three months of 1996, net cash
outflows of $4,368,000 during the first three months of 1995 and net cash
outflows totaling $2,719,000 and $1,036,000 during 1995 and 1994, respectively.
The Company entered into no forward exchange contracts in 1993.
On March 28, 1996, the Company executed a definitive agreement with Nodeco
relating to the acquisition by the Company of all the assets of Nodeco. Pursuant
to the agreement, at closing the Company will assume all liabilities of Nodeco
(other than net debt in excess of NOK 32 million at December 31, 1995), pay to
Nodeco the cash amount of NOK 117,649,250 (which, at the May 14, 1996 exchange
rate disclosed in The Wall Street Journal of 6.5807 NOK per United States
dollar, is equivalent to approximately $17,900,000) and issue Nodeco AS 750,000
shares of Common Stock. The cash portion of the purchase price is subject to
adjustment for changes in the Common Stock price and the NOK/US$ exchange rate
prior to closing. The Company would fund the cash portion of such transaction
with borrowings under the Revolving Credit Facility. There can be no assurance
that such transaction will be consummated. See "Recent Development".
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<PAGE> 16
Management believes the combination of working capital, the unused portion
of existing credit facilities and cash flows from operations provide the Company
with sufficient capital resources and liquidity to manage its routine
operations. The Company continues to seek opportunities to enhance its
competitiveness through strategic acquisitions. In addition to the proposed
Nodeco acquisition mentioned above, the Company is currently considering several
other potential acquisitions, which are at various stages of negotiation or due
diligence. Management believes that any borrowings made in connection with any
such acquisitions will not have a materially adverse impact on the Company's
liquidity. Management believes that it is premature to provide specific
information with respect to any other such possible acquisitions because of the
status of, and possible adverse impact on, negotiations, and because, in any
event, there can be no assurance that any of such possible acquisitions will be
consummated.
Like most multinational oilfield service companies, the Company has
operations in certain international areas, including parts of the Middle East,
North and West Africa, Latin America, the Asia-Pacific Region and the
Commonwealth of Independent States (the "CIS"), that are inherently subject to
risks of civil disturbance and political activities that may disrupt oil and gas
exploration and production activities, restrict the movement of funds or limit
access to markets for periods of time. Historically, the economic impact of such
disruptions has been temporary and oil and gas exploration and production
activities have eventually resumed in relation to market forces. Certain areas,
including the CIS, Algeria, Nigeria and Angola have been subjected to political
disruption or social unrest in the past twelve months. Generally, business
interruptions resulting from civil or political disruptions negatively impact
near-term results of operations; however, management believes that it is
unlikely that any specific business disruption caused by existing or foreseen
civil or political instability will have a materially adverse impact on the
financial condition or liquidity of the Company.
The Company has not declared dividends on Common Stock since December 1982
and management does not anticipate paying dividends on Common Stock at any time
in the foreseeable future.
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying Prospectus as the "Securities")
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Securities set forth under the
caption "Description of the Securities" in the accompanying Prospectus, to which
description reference is hereby made. Except as otherwise defined herein,
capitalized terms defined in the accompanying Prospectus have the same meanings
when used herein.
GENERAL
The summary contained under this caption of certain provisions of the
Indenture dated as of May 17, 1996 (the "Indenture") between the Company and
Bank of Montreal Trust Company, as trustee (the "Trustee"), does not purport to
be complete and is subject to and qualified by reference to the Indenture and
the Notes.
The Notes will be limited to $200,000,000 aggregate principal amount and
will mature on May , 2006. Interest at the annual rate set forth on the cover
page of this Prospectus Supplement is to accrue from May , 1996 and is to be
payable semiannually on and , commencing
, 1996, to the Persons in whose names the Notes are registered at the
close of business on the preceding or , respectively.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. All payments on the Notes will be made in United States dollars.
The Notes will be general unsecured obligations of the Company and will
rank pari passu with the Company's existing and future unsecured and
unsubordinated indebtedness. The Notes may not be redeemed prior to maturity and
will not be subject to any sinking fund.
The discharge and defeasance provisions and the covenant provisions
described in the accompanying Prospectus under the caption "Description of the
Securities" will apply to the Notes.
S-16
<PAGE> 17
BOOK-ENTRY ONLY SYSTEM
The Notes will be issuable only as Registered Securities and will be
represented by one Book-Entry Security (the "Global Security") to be deposited
with, or on behalf of, The Depository Trust Company, New York, New York, as
depository (the "Depository"), and registered in the name of a nominee of the
Depository. The Depository will maintain the Notes in denominations of $1,000
and integral multiples thereof through its book-entry facilities. See
"Description of the Securities--Global Securities" in the accompanying
Prospectus for additional information concerning the Global Security. The
Depository has advised the Company that the Depository's established procedures
provide that (i) upon issuance of the Notes by the Company, the Depository will
credit the accounts of each of its participating firms (each, a "Participant")
designated by the Underwriters (as hereinafter defined) with the respective
principal amounts of the Notes purchased by the Underwriters and (ii) ownership
of interests in the Global Security will be shown on, and the transfer of such
ownership will be effected only through, records maintained by the Depository
and the Participants. None of the Company, the Trustee, any Paying Agent or the
Security Registrar will have any responsibility, obligation or liability for any
aspect of the records pertaining to beneficial ownership interests in the Global
Security (including, without limitation, maintaining, supervising or reviewing
any records relating to such beneficial ownership interests).
So long as the nominee of the Depository is the registered owner of the
Notes, such nominee will be considered the sole owner or holder of the Notes for
all purposes under the Indenture and any applicable laws. Except as otherwise
provided below, a Beneficial Owner (as hereinafter defined) of an interest in
the Notes will not be entitled to receive a physical certificate representing
such ownership interest and will not be considered an owner or holder of any
Notes under the Indenture. A "Beneficial Owner" is a Person who has the right to
sell, transfer or otherwise dispose of an interest in the Notes and the right to
receive the proceeds therefrom, as well as interest, principal and premium (if
any) payable in respect thereof. A Beneficial Owner's interest in the Notes will
be recorded, in integral multiples of $1,000, on the records of the Participant
that maintains such Beneficial Owner's account for such purpose. In turn, the
Participant's interest in such Notes will be recorded, in integral multiples of
$1,000, on the records of the Depository. Therefore, the Beneficial Owner must
rely on the foregoing arrangements to evidence its interest in the Notes.
Beneficial ownership of the Notes may be transferred only by compliance with the
procedures of a Beneficial Owner's Participant (e.g., brokerage firm) and the
Depository. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in the Notes
represented by the Global Security.
All rights of ownership must be exercised through the Depository and the
book-entry system, and notices that are to be given to registered owners by the
Company or the Trustee will be given only to the Depository. The Company
understands that, under existing practice, the Depository will forward the
notices to the Beneficial Owners. None of the Company, the Trustee, any Paying
Agent or the Security Registrar will have any responsibility, obligation or
liability for assuring that any notices are forwarded by the Depository to any
Participant or by any Participant to the Beneficial Owners.
Payments of principal of and interest on the Notes represented by the
Global Security will be made by the Trustee to the Depository. The Depository
has advised the Company that, upon the Depository's receipt of any payment of
principal or interest in respect of the Notes represented by the Global
Security, the Depository will credit immediately the accounts of the related
Participants with payment in amounts proportionate to their respective
beneficial interest in the Notes represented by the Global Security as shown on
the records of the Depository. Under the terms of the Indenture, the Company and
the Trustee will treat the persons in whose names the Notes are registered as
the owners of the Notes for the purpose of receiving payment of principal of and
interest on the Notes and for all other purposes whatsoever. Therefore, none of
the Company, the Trustee or any Paying Agent will have direct responsibility or
liability for the payment of principal of or interest on the Notes to owners of
beneficial interests in the Global Security. The Company expects the payments by
Participants to Beneficial Owners will be governed by standing customer
instructions and customary practices. Such payments will be the responsibility
of such Participants.
S-17
<PAGE> 18
The Depository has advised the Company and the Underwriters as follows: the
Depository is a limited-purpose trust company organized under the banking laws
of the State of New York, a "banking corporation" within the meaning of the
banking laws of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Depository was created to hold securities of Participants and to facilitate the
clearance and settlement of securities transactions among Participants in such
securities transactions through electronic book-entry changes in accounts of
Participants, thereby eliminating the need for physical movement of securities
certificates. Participants include securities brokers and dealers (including the
Underwriters), banks (including the Trustee), trust companies, clearing
corporations and certain other organizations, some of whom (alone or together
with their representatives) own the Depository. Access to the Depository's
book-entry system also is available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly. Persons who are not Participants
may beneficially own securities held by the Depository only through
Participants.
The Global Security is exchangeable for Notes registered in the name of,
and a transfer of the Global Security may be registered to, a Person other than
the Depository or its nominee only if (i) the Depository notifies the Company
that the Depository is unwilling or unable to continue as Depository or if at
any time the Depository ceases to be a clearing agency registered under the
Exchange Act, (ii) the Company executes and delivers to the Trustee a Company
Order that the Global Security shall be so exchangeable and the transfer thereof
so registrable or (iii) there shall have occurred and be continuing an Event of
Default with respect to the Global Security.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement of the Notes will be made by the Underwriters in immediately
available funds. So long as the Notes are in the form of Book-Entry Securities,
all payments of principal and interest will be made by the Company in
immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers
generally is settled in clearing-house or next-day funds. In contrast, the Notes
are expected to trade in the Depository's Same-Day Funds Settlement System until
maturity, and secondary market trading activity in the Notes therefore will be
required by the Depository to settle in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in immediately
available funds on trading activity in the Notes.
S-18
<PAGE> 19
UNDERWRITING
Subject to the terms and conditions set forth in the Terms Agreement among
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
(collectively, "Merrill Lynch"), acting on behalf of itself and the Underwriters
named below (the "Underwriters"), and the Company (which incorporates by
reference the terms of the Underwriting Agreement among the Company and Merrill
Lynch (the "Underwriting Agreement"), except to the extent inconsistent
therewith), the Underwriters named below have severally agreed to purchase from
the Company the following respective principal amounts of Notes. Under certain
circumstances, the commitments of non-defaulting Underwriters may be increased
as set forth in the Underwriting Agreement.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
----------- ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................... $
BA Securities, Inc. ...................................................
Chase Securities Inc...................................................
------------
Total..................................................... $200,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the Notes if any are
purchased.
The Underwriters have advised the Company that the Underwriters propose to
offer the Notes to the public initially at the public offering price set forth
on the cover page of this Prospectus Supplement and to certain dealers at such
price less a concession of not in excess of % of the principal amount per
Note; that the Underwriters may allow, and such dealers may reallow, a discount
of not in excess of % of such principal amount on sales to certain other
dealers; and that after the initial public offering, the public offering price
and concession and discount to dealers may be changed by the Underwriters.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended, or to contribute to payments that the Underwriters may be required to
make in respect of such liabilities.
The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Merrill Lynch & Co. performed investment banking services for the Company
in connection with the Enterra Merger in October 1995, for which Merrill Lynch &
Co. received usual and customary fees in the amount of $2 million plus
reimbursement of certain out-of-pocket expenses incurred in connection
therewith. Merrill Lynch & Co. also has performed investment banking services
for the Company from time to time, for which Merrill Lynch & Co. received
customary compensation. In addition, Merrill Lynch & Co. from time to time has
provided financial advisory services to the Company, but has received no
compensation therefor other than reimbursement of out-of-pocket expenses. On May
3, 1996, the Company and Merrill Lynch & Co. entered into a forward sale
contract relating to $100,000,000 of 10-year United States treasury notes. The
forward sale contract will settle on May 30, 1996.
In connection with the Facilities, the Company paid each of Bank of America
Illinois, an affiliate of BA Securities, Inc., and Texas Commerce Bank National
Association, an affiliate of Chase Securities Inc., an arrangement fee of
$75,000 and is required to pay Texas Commerce Bank National Association an
administrative agency fee of $50,000, payable annually in advance. Texas
Commerce Bank National Association also maintains the majority of the Company's
U.S. operating bank accounts and provides the Company with a $20 million letter
of credit facility, for which Texas Commerce Bank National Association receives
customary compensation. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources".
S-19
<PAGE> 20
From time to time in the ordinary course of its business, Texas Commerce
Bank National Association and Bank of America Illinois have engaged (and in the
future Texas Commerce Bank National Association and other affiliates of Chase
Securities Inc., and Bank of America Illinois and other affiliates of BA
Securities, Inc., may engage) in various general financing and banking
transactions with the Company and its affiliates. In addition, Texas Commerce
Bank National Association and Bank of America Illinois are lenders under the
Facilities, a portion of which is to be repaid with the proceeds of the sale of
the Notes, and each will receive 11.25% of any repayment by the Company. See
"Use of Proceeds".
Prior to the offering made hereby, there has been no public market for the
Notes. The Company does not intend to list the Notes on any securities exchange.
The Underwriters have advised the Company that the Underwriters currently intend
to make a market in the Notes; however, the Underwriters are not obligated to do
so, and any Underwriter may discontinue any such market making at any time
without notice.
S-20
<PAGE> 21
PROSPECTUS
$300,000,000
WEATHERFORD ENTERRA, INC.
DEBT SECURITIES
------------------------
Weatherford Enterra, Inc. (the "Company" or "Weatherford") may offer and
sell from time to time, in one or more series, its unsecured debt securities
consisting of notes, debentures or other evidences of indebtedness (the
"Securities") with an aggregate initial offering price not to exceed
$300,000,000 or, if applicable, the equivalent thereof in any other currency or
currency unit, on terms to be determined at the time of offering. The specific
designation, aggregate principal amount, maturity, rate (or method of
determining the same) and time of payment of interest, premium, if any, purchase
price, any terms in addition to or different from those described herein for
redemption or repurchase, the names of and the principal amounts to be purchased
by or through agents, dealers or underwriters, if any, the compensation of such
persons and other special terms in connection with the offering and sale of the
series of Securities in respect of which this Prospectus is being delivered are
set forth in the accompanying Prospectus Supplement (the "Prospectus
Supplement"). The Securities will be effectively subordinated to all obligations
of the subsidiaries of the Company. Consequently, the rights of the Company to
receive assets of any subsidiary (and thus the ability of holders of Securities
to benefit indirectly from such assets) are subject to the prior claims of
creditors of that subsidiary. As of March 31, 1996, $17.0 million of the
Company's total debt was indebtedness of subsidiaries, and such subsidiaries may
incur additional indebtedness in the future. The Securities will be general
unsecured obligations of the Company and will rank pari passu with the Company's
existing and future unsecured and unsubordinated indebtedness. As of March 31,
1996, the amount of the Company's total unsecured and unsubordinated
indebtedness with which the Securities would have been pari passu was $313.5
million.
------------------------
The Company may sell Securities to or through underwriters and also may
sell Securities directly to other purchasers or through agents. The accompanying
Prospectus Supplement sets forth the names of any underwriters or agents
involved in the sale of the Securities in respect of which this Prospectus is
being delivered, the principal amounts, if any, to be purchased by underwriters
and the compensation, if any, of such underwriters or agents.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
This Prospectus may not be used to consummate sales of the Securities
unless accompanied by a Prospectus Supplement.
The date of this Prospectus is May 16, 1996.
<PAGE> 22
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS, IF ANY, MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE
SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER
MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR
THE ACCOMPANYING PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFERING MADE
HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OTHER PERSON.
THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED BY
THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT IN ANY JURISDICTION
WHERE, OR TO ANY PERSON WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER OR THEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT
THE INFORMATION CONTAINED IN THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS
SUPPLEMENT IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected at the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the
regional offices of the Commission at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade
Center, New York, New York 10048. They also may be inspected at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005. Copies
of such material may be obtained from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits thereto, referred to as
the "Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered hereby. This
Prospectus constitutes the prospectus of the Company filed as part of the
Registration Statement and does not contain all the information contained in the
Registration Statement, certain portions of which are omitted as permitted by
the rules and regulations of the Commission. For further information with
respect to the Company and the securities offered hereby, reference is made to
the Registration Statement, including the exhibits thereto, which may be
inspected at the Commission's offices, without charge, or copies of which may be
obtained from the Commission upon payment of prescribed fees.
2
<PAGE> 23
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission are
incorporated by reference herein:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
(b) The Company's Current Report on Form 8-K dated December 29, 1995,
as amended by the Company's Current Report on Form 8-K/A dated February 27,
1996.
(c) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and before the termination of the offering made hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in this Prospectus or
in a document incorporated by reference in this Prospectus shall be deemed
modified or superseded for purposes of this Prospectus to the extent that a
statement contained in this Prospectus or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein or in
the accompanying Prospectus Supplement modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon the written or oral request of
any such person, a copy of any or all of the documents incorporated by reference
herein, other than the exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates. Written or oral requests for such copies should be directed to
Weatherford Enterra, Inc., 1360 Post Oak Boulevard, Suite 1000, Houston, Texas
77056, Attention: Investor Relations, telephone number (713) 439-9400.
THE COMPANY
The Company is a diversified international energy service and manufacturing
company that provides a variety of services and equipment to the exploration,
production and transmission sectors of the oil and gas industry. The Company's
principal business segments include (i) the oilfield services segment, which
consists of renting specialized oilfield equipment, providing fishing, well
control assistance and other downhole services and related tools, and providing
tubular running services and related tools; (ii) the energy products and
services segment, which consists of manufacturing, selling and servicing a
variety of products, including cementation products, power equipment, fishing
and milling tools and heavy wall drill pipe, gas lift valves, production and
service packers and related equipment, electrical and instrumentation control
systems and pedestal-mounted marine cranes; (iii) the gas compression segment,
which consists of manufacturing, packaging, selling, renting and servicing
reciprocating natural gas compressors; and (iv) the pipeline services segment,
which consists of manufacturing, selling and renting specialized pipeline
equipment and services. The Company operates in virtually every oil and gas
exploration and production region in the world, with more than 330 locations in
47 countries, including the United States.
USE OF PROCEEDS
Unless otherwise provided in the Prospectus Supplement accompanying this
Prospectus, the net proceeds from the sale of the Securities offered by this
Prospectus and the Prospectus Supplement will be added to the Company's general
funds and used for repayment of debt or other general corporate purposes. Until
so utilized, it is expected that such net proceeds will be placed in interest
bearing time deposits or invested in short-term marketable securities. Any
allocation of the net proceeds of any offering of Securities to a specific
purpose will be determined at the time of such offering and will be described in
the related Prospectus Supplement.
3
<PAGE> 24
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for the periods shown.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED ----------------------------------------
MARCH 31, 1996 1995 1994 1993 1992 1991
------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
4.11 * 5.28 6.79 6.76 5.02
</TABLE>
---------------
* Earnings were inadequate to cover fixed charges by $14,985,000. The 1995 ratio
of earnings to fixed charges for the Company, excluding the effect of
acquisition-related costs and other unusual charges incurred in 1995, was
4.34.
For the purposes of computing the ratio of earnings to fixed charges,
"earnings" have been calculated by adding to net income (i) income tax provision
(benefit), (ii) undistributed earnings of affiliates and (iii) fixed charges.
"Fixed charges" consist of interest expense, whether capitalized or expensed,
and one-third of rental expense, which the Company considers representative of
the interest element of rentals.
DESCRIPTION OF THE SECURITIES
The Securities will be issued under an indenture (the "Indenture") between
the Company, as issuer, and Bank of Montreal Trust Company, as trustee (the
"Trustee"), a copy of which is filed as an exhibit to the Registration Statement
of which this Prospectus is a part. The terms of the Securities include those
stated in the Indenture and those made a part of the Indenture by reference to
the Trust Indenture Act of 1939 as in effect on the date of the Indenture (the
"Trust Indenture Act"). The statements and definitions of terms under this
caption relating to the Securities and the Indenture are subject to all such
terms and are summaries and do not purport to be complete. Such summaries make
use of certain terms defined in the Indenture and are qualified by express
reference to the Indenture. Wherever particular Sections of the Indenture or
terms not defined herein that are defined in the Indenture are referred to
herein or in a Prospectus Supplement, it is intended that such Sections or
defined terms shall be incorporated by reference herein or therein, as the case
may be.
The Securities may be issued from time to time in one or more series. The
following description of the Securities sets forth certain general terms and
provisions of the Securities of all series. The particular terms of each series
of Securities offered by any Prospectus Supplement will be described in the
Prospectus Supplement relating to such series.
GENERAL
The Indenture does not limit the amount of Securities, debentures, notes or
other evidences of indebtedness that may be issued by the Company or any of its
subsidiaries, nor does the Indenture restrict transactions between the Company
and its affiliates or dividends and other distributions by the Company to its
stockholders. In addition, other than as set forth under "--Limitation on Liens"
and "--Limitation on Sale/ Leaseback Transactions", there are no provisions of
the Indenture that afford holders of the Securities protection in the event of
either a change in control of the Company or a highly leveraged transaction
involving the Company.
Securities may be issued under the Indenture from time to time in separate
series up to an aggregate amount from time to time authorized by the Company for
such series. The Securities will be unsecured obligations of the Company and
will rank on a parity with all other unsecured and unsubordinated indebtedness
of the Company unless the Company is required to secure the Securities pursuant
to the Indenture provisions described below under "--Limitation on Liens".
The applicable Prospectus Supplement relating to any Securities will
describe the following terms of the Securities: (1) the title of the Securities;
(2) any limit on the aggregate principal amount of the Securities; (3) whether
the Securities are to be issuable as Registered Securities or Bearer Securities,
or both, whether any of the Securities are to be issuable initially in temporary
global form and whether any of the Securities are to be in permanent global
form; (4) the price or prices (expressed as a percentage of the aggregate
principal
4
<PAGE> 25
amount thereof) at which the Securities will be issued; (5) the date or dates on
which the Securities will mature; (6) the rate or rates per annum (or the method
by which such will be determined) at which the Securities will bear interest, if
any, and the date or dates from which any such interest will accrue and whether,
and under what circumstances, additional amounts with respect to the Securities
shall be payable; (7) the Interest Payment Dates on which any such interest on
the Securities will be payable, the Regular Record Date for any interest payable
on any Securities that are Registered Securities on any Interest Payment Date
and the extent to which, or the manner in which, any interest payable on a
temporary global Security on an Interest Payment Date will be paid; (8) any
mandatory or optional sinking fund or analogous provisions; (9) each office or
agency where, subject to the terms of the Indenture as described below under
"--Payment and Paying Agents", the principal of and any premium and interest on
the Securities will be payable and each office or agency where, subject to the
terms of the Indenture as described below under "--Form, Exchange, Registration
and Transfer", the Securities may be presented for registration of transfer or
exchange; (10) the right, if any, or obligation, if any, of the Company to
redeem the Securities and the period or periods, if any, within which and the
price or prices at which the Securities may, pursuant to any optional or
mandatory redemption provisions, be redeemed, in whole or in part, and the other
detailed terms and provisions of any such optional or mandatory redemption; (11)
the denominations in which any Securities which are Registered Securities will
be issuable, if other than in denominations of $1,000 and any integral multiple
thereof, and the denomination or denominations in which any Securities which are
Bearer Securities will be issuable, if other than in denominations of $5,000;
(12) the currency or currencies (including composite currencies) in which
payment of principal of and any premium and interest on the Securities is
payable; (13) any index used to determine the amount of payments of principal of
and any premium and interest on the Securities; (14) information with respect to
book-entry procedures, if any; and (15) any other terms of the Securities not
inconsistent with the provisions of the Indenture. (Section 301) Any such
Prospectus Supplement also will describe any special provisions for payment of
additional amounts with respect to the Securities.
Securities may be issued as Original Issue Discount Securities. An Original
Issue Discount Security is a Security that is issued at a price lower than the
amount payable upon the Stated Maturity thereof and that provides that upon
redemption or acceleration of the maturity thereof an amount less than the
amount payable upon the Stated Maturity thereof and determined in accordance
with the terms of such Security shall become due and payable. Special United
States federal income tax considerations applicable to Securities issued at an
original issue discount, including Original Issue Discount Securities, and
special United States tax considerations and other terms and restrictions
applicable to any Securities that are issued in bearer form, offered exclusively
to United States Aliens or denominated in other than United States dollars, will
be set forth in any Prospectus Supplement relating thereto.
The Securities will be general unsecured obligations of the Company and
will rank pari passu with the Company's existing and future unsecured and
unsubordinated indebtedness. Accordingly, the ability of the Company to meet its
obligations under the Indenture and the Securities will be dependent on the
earnings and cash flows of its subsidiaries and the ability of its subsidiaries
to pay dividends or to advance funds to the Company. As of March 31, 1996, the
amount of the Company's total unsecured and unsubordinated indebtedness with
which the Securities would have been pari passu was $313.5 million.
The Company is a holding company, conducting substantially all of its
business through subsidiaries, and the Indenture does not restrict the
incurrence of debt by such subsidiaries. The Securities will be effectively
subordinated to all obligations of such subsidiaries. Consequently, the rights
of the Company to receive assets of any subsidiary (and thus the ability of
holders of Securities to benefit indirectly from such assets) are subject to the
prior claims of creditors of that subsidiary. As of March 31, 1996, $17.0
million of the Company's total debt was indebtedness of subsidiaries, and such
subsidiaries may incur additional indebtedness in the future.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Securities of a series may be issuable in definitive form solely as
Registered Securities, solely as Bearer Securities or as both Registered
Securities and Bearer Securities. Unless otherwise indicated in an applicable
5
<PAGE> 26
Prospectus Supplement, Bearer Securities will have interest coupons attached.
The Indenture provides that Securities of a series may be issuable in temporary
or permanent global form. (Section 201)
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor. In addition, if Securities of any
series are issuable as both Registered Securities and Bearer Securities, at the
option of the Holder, subject to the terms of the Indenture, Bearer Securities
(with all unmatured coupons, except as provided below, and all matured coupons
in default) of such series will be exchangeable for Registered Securities of the
same series of any authorized denominations and of a like aggregate principal
amount and tenor. Bearer Securities surrendered in exchange for Registered
Securities between a Regular Record Date or a Special Record Date and the
relevant date for payment of interest shall be surrendered without the coupon
relating to such date for payment of interest, and interest accrued as of such
date will not be payable in respect of the Registered Security issued in
exchange for such Bearer Security, but will be payable only to the Holder of
such coupon, when due in accordance with the terms of the Indenture. Bearer
Securities will not be issued in exchange for Registered Securities. (Section
305)
Securities may be presented for exchange as provided above, and Registered
Securities may be presented for registration or transfer (with the form of
transfer endorsed thereon duly executed), at the office of the Security
Registrar or at the office of any transfer agent designated by the Company for
such purpose with respect to any series of Securities and referred to in an
applicable Prospectus Supplement, without service charge and upon payment of any
taxes and other governmental charges as described in the Indenture. Such
transfer or exchange will be effected upon the Security Registrar or any such
transfer agent, as the case may be, being satisfied with the documents of title
and identity of the person making the request. The Company shall serve initially
as Security Registrar. (Section 305) If a Prospectus Supplement refers to any
transfer agent (in addition to the Security Registrar) initially designated by
the Company with respect to any series of Securities, the Company may at any
time rescind the designation of any such transfer agent or approve a change in
the location through which any such transfer agent acts, except that, if
Securities of a series are issuable solely as Registered Securities, the Company
will be required to maintain a transfer agent in each Place of Payment for such
series and, if Securities of a series are issuable as Bearer Securities, the
Company will be required to maintain (in addition to the Security Registrar) a
transfer agent in a Place of Payment for such series located outside the United
States. The Company may at any time designate additional transfer agents with
respect to any series of Securities. (Section 1002)
In the event of any redemption in part, the Company shall not be required
to (i) issue, register the transfer of or exchange Securities of any series
during a period beginning at the opening of business 15 days prior to the
selection of Securities of that series for redemption and ending on the close of
business on (A) if Securities of the series are issuable only as Registered
Securities, the day of mailing of the relevant notice of redemption and (B) if
Securities of the series are issuable as Bearer Securities, the day of the first
publication of the relevant notice of redemption, or, if Securities of the
series also are issuable as Registered Securities and there is no publication,
the mailing of the relevant notice of redemption; (ii) register the transfer or
exchange of any Registered Security, or portion thereof, called for redemption,
except the unredeemed portion of any Registered Security being redeemed in part;
or (iii) exchange any Bearer Security called for redemption, except to exchange
such Bearer Security for a Registered Security of that series and like tenor
that is immediately surrendered for redemption. (Section 305)
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of, and any premium and interest on, Bearer Securities will be
payable, subject to any applicable laws and regulations, at the offices of such
Paying Agents outside the United States as the Company may designate from time
to time, in the manner indicated in such Prospectus Supplement. (Section 1002)
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
interest on Bearer Securities on any Interest Payment Date will be made only
against surrender to the Paying Agent of the coupon relating to such Interest
Payment Date. (Section 1001) No payment with respect to any Bearer Security will
be made at any office or agency of the Company in the United States or by check
mailed to any address in the United States or by transfer to an
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account maintained with a bank located in the United States. Notwithstanding the
foregoing, payments of principal of, and any premium and interest on, Bearer
Securities denominated and payable in U.S. dollars will be made at the offices
of the Company's Paying Agent in the City of New York, if (but only if) payment
of the full amount thereof in U.S. dollars at all offices or agencies outside
the United States is illegal or effectively precluded by exchange controls or
other similar restrictions. (Section 1002)
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of, and any premium and interest on, Registered Securities will be
made at the office of such Paying Agent or Paying Agents as the Company may
designate from time to time, except that at the option of the Company payment of
any interest may be made by check mailed on or before the due date to the
address of the Person entitled thereto as such address shall appear in the
Security Register. (Sections 307 and 1002) Unless otherwise indicated in an
applicable Prospectus Supplement, payment of any installment of interest on
Registered Securities will be made to the Person in whose name such Registered
Security is registered at the close of business on the Regular Record Date for
such interest. (Section 307)
Unless otherwise indicated in an applicable Prospectus Supplement, the
Trustee at its Corporate Trust Office will be designated as a Paying Agent for
the Company for payments with respect to Securities that are issuable solely as
Registered Securities, and the Company will maintain a Paying Agent outside the
United States for payments with respect to Securities (subject to the
limitations described above in the case of Bearer Securities) that are issuable
solely as Bearer Securities or as both Registered Securities and Bearer
Securities. Any Paying Agents outside the United States and any other Paying
Agents in the United States initially designated by the Company for the
Securities will be named in an applicable Prospectus Supplement. The Company may
at any time designate additional Paying Agents or rescind the designation of any
Paying Agent or approve a change in the office through which any Paying Agent
acts, except that, if Securities of a series are issuable solely as Registered
Securities, the Company will be required to maintain a Paying Agent in each
Place of Payment for such series and, if Securities of a series are issuable as
Bearer Securities, the Company will be required to maintain (i) a Paying Agent
in the City of New York, for principal payments with respect to any Registered
Securities of the series (and for payments with respect to Bearer Securities of
the series in the circumstances described above, but not otherwise), and (ii) a
Paying Agent in a Place of Payment located outside the United States where
Securities of such series and any coupons appertaining thereto may be presented
and surrendered for payment. (Section 1002)
All monies paid by the Company to a Paying Agent for the payment of
principal of or any premium or interest on any Security that remain unclaimed at
the end of two years after such principal, premium or interest shall have become
due and payable will (subject to applicable escheat laws) be repaid to the
Company, and the Holder of such Security or any coupon will thereafter look only
to the Company for payment thereof. (Section 1003)
GLOBAL SECURITIES
Securities of a series may be issued in whole or in part in the form of one
or more global Securities that will be deposited with, or on behalf of, a
depository identified in the Prospectus Supplement relating to such series.
Global Securities may be issued in either registered or bearer form and in
either temporary or permanent form. Unless and until it is exchanged in whole or
in part for the individual Securities represented thereby, a global Security may
not be transferred except as a whole by the depository for such global Security
to a nominee of such depository or by a nominee of such depository to such
depository or another nominee of such depository or by the depository or any
nominee to a successor depository or any nominee of such successor. (Section
203)
The specific terms of the depository arrangement with respect to a series
of Securities and certain limitations and restrictions relating to a series of
Bearer Securities in the form of one or more global Securities will be described
in the Prospectus Supplement relating to such series.
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CERTAIN DEFINITIONS
"Attributable Indebtedness" means, with respect to any Sale/Leaseback
Transaction as of any particular time, the present value (discounted at the rate
of interest implicit in the terms of the lease) of the obligations of the lessee
under such lease for net rental payments during the remaining term of the lease
(including any period for which such lease has been extended). "Net rental
payments" under any lease for any period means the sum of the rental and other
payments required to be paid in such period by the lessee thereunder, not
including, however, any amounts required to be paid by such lessee (whether or
not designated as rental or additional rental) on account of maintenance and
repairs, insurance, taxes, assessments or similar charges required to be paid by
such lessee thereunder contingent upon the amount of sales or deliveries,
maintenance and repairs, insurance, taxes, assessments or similar charges.
(Section 101)
"Consolidated Net Worth" means the amount of total stockholders' equity
shown in the most recent consolidated statement of financial position of the
Company. (Section 101)
"Current Assets" of any Person includes all assets of such Person that
would in accordance with generally accepted accounting principles be classified
as current assets. (Section 101)
"Current Liabilities" of any Person includes all liabilities of such Person
that would in accordance with generally accepted accounting principles be
classified as current liabilities. (Section 101)
"Non-Recourse Indebtedness" means indebtedness of the Company or any
Subsidiary of the Company in respect of which the recourse of the holder of such
indebtedness, whether direct or indirect and whether contingent or otherwise, is
effectively limited to specified assets, and with respect to which neither the
Company nor any Subsidiary of the Company provides any credit support. (Section
101)
"Sale/Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary, for a period of more
than three years, of any real or personal property, which property has been or
is to be sold or transferred by the Company or such Subsidiary to such Person in
contemplation of such leasing. (Section 101)
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which is owned, directly
or indirectly, by such Person or by one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries, or (ii) any partnership or similar
business organization more than 50% of the ownership interests having ordinary
voting power of which shall at the time be so owned. For the purposes of this
definition, "securities having ordinary voting power" means securities or other
equity interests that ordinarily have voting power for the election of
directors, or persons having management power with respect to the Person,
whether at all times or only so long as no senior class of securities has such
voting power by reason of any contingency. (Section 101)
LIMITATION ON LIENS
The Indenture provides that the Company will not, and will not permit any
Subsidiary of the Company to, issue, assume or guarantee any indebtedness for
money borrowed ("Debt") if such Debt is secured by a mortgage, pledge, security
interest or lien (a "mortgage" or "mortgages") upon any real or personal
property of the Company or any Subsidiary of the Company or upon any shares of
stock or other equity interest or indebtedness of any Subsidiary of the Company
(whether such property, shares of stock or other equity interest or indebtedness
is now owned or hereafter acquired), without in any such case effectively
providing that the Securities shall be secured equally and ratably with (or
prior to) such Debt; provided, however, that the foregoing restrictions shall
not apply to: (a) mortgages existing on the date the Securities are originally
issued or mortgages provided for under the terms of agreements existing on such
date; (b) mortgages on Current Assets securing Current Liabilities; (c)
mortgages on any property acquired, constructed, altered or improved by the
Company or any Subsidiary of the Company after the date of the Indenture that
are created or assumed contemporaneously with or within one year after such
acquisition (or in the case of property constructed, altered or improved, after
the completion and commencement of commercial operation of such property,
whichever is later) to secure or provide for the payment of the purchase price
or cost thereof, provided that in the case of any such construction, alteration
or improvement the mortgages shall not apply to
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any property theretofore owned by the Company or any Subsidiary of the Company
other than (i) the property so altered or improved and (ii) any theretofore
unimproved real property on which the property so constructed or altered, or the
improvement, is located; (d) existing mortgages on property acquired (including
mortgages on any property acquired from a Person that is consolidated with or
merged with or into the Company or a Subsidiary of the Company) or mortgages
outstanding at the time any Person becomes a Subsidiary of the Company that are
not incurred in connection with such entity becoming a Subsidiary of the
Company; (e) mortgages in favor of the Company or any Subsidiary of the Company;
(f) mortgages on any property (i) in favor of domestic or foreign governmental
bodies to secure partial, progress, advance or other payments pursuant to any
contract or statute, (ii) securing indebtedness incurred to finance all or any
part of the purchase price or cost of constructing, installing or improving the
property subject to such mortgages, including mortgages to secure Debt of the
pollution control or industrial revenue bond type, or (iii) securing
indebtedness issued or guaranteed by the United States, any State, any foreign
country or any department, agency, instrumentality or political subdivision of
any such jurisdiction; and (g) any extension, renewal or replacement (or
successive extensions, renewals or replacements), in whole or in part, of any
mortgage referred to in the foregoing clauses (a), (b), (c), (d), (e) or (f);
provided, however, that the principal amount of Debt secured thereby shall not
exceed the principal amount of Debt so secured at the time of such extension,
renewal or replacement, together with the reasonable costs related to such
extension, renewal or replacement, and that such extension, renewal or
replacement shall be limited to all or a part of the property that secured the
mortgage so extended, renewed or replaced (plus improvements on such property).
(Section 1006)
Notwithstanding the foregoing, the Company and any Subsidiary of the
Company may, without securing the Securities, issue, assume or guarantee secured
Debt (that would otherwise be subject to the foregoing restrictions) in an
aggregate amount that, together with all other such secured Debt and the
aggregate amount of Attributable Indebtedness of the Company and its
Subsidiaries deemed to be outstanding in respect of all Sale/Leaseback
Transactions entered into pursuant to the provisions described below under
"--Limitation on Sale/Leaseback Transactions" (excluding any such Sale/Leaseback
Transactions the proceeds of which have been applied in accordance with clauses
(2) or (3) under the "--Limitation on Sale/Leaseback Transactions" covenant
described below), does not exceed 10% of the Consolidated Net Worth, as shown on
a consolidated balance sheet as of a date not more than 90 days prior to the
proposed transaction prepared by the Company in accordance with generally
accepted accounting principles. (Section 1006)
LIMITATION ON SALE/LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, enter into any Sale/Leaseback Transaction with any
Person (other than the Company or a Subsidiary of the Company) unless:
(1) at the time of entering into such Sale/Leaseback Transaction, the
Company or such Subsidiary would be entitled to incur Debt, in a principal
amount equal to the Attributable Indebtedness with respect to such
Sale/Leaseback Transaction, secured by a mortgage on the property subject to
such Sale/Leaseback Transaction, pursuant to the provisions of the covenant
described under "--Limitation on Liens" without equally and ratably securing the
Securities pursuant to such provisions;
(2) after the date on which Securities are first issued and within a period
commencing six months prior to the consummation of such Sale/Leaseback
Transaction and ending six months after the consummation thereof, the Company or
such Subsidiary shall have expended for property used or to be used in the
ordinary course of business of the Company or such Subsidiary (including amounts
expended for additions, expansions, alterations, repairs and improvements
thereto) an amount equal to all or a portion of the net proceeds of such
Sale/Leaseback Transaction, and the Company shall have elected to designate such
amount as a credit against such Sale/Leaseback Transaction (with any such amount
not being so designated to be applied as set forth in clause (3) below); or
(3) during the 12-month period after the effective date of such
Sale/Leaseback Transaction, the Company shall have applied to the voluntary
defeasance or retirement of Securities or any pari passu
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indebtedness of the Company an amount equal to the net proceeds of the sale or
transfer of the property leased in such Sale/Leaseback Transaction, which amount
shall not be less than the fair value of such property at the time of entering
into such Sale/Leaseback Transaction (adjusted to reflect the remaining term of
the lease and any amount expended by the Company as set forth in clause (2)
above), less an amount equal to the principal amount of such Securities and pari
passu indebtedness voluntarily defeased or retired by the Company within such
12-month period and not designated as a credit against any other Sale/Leaseback
Transaction entered into by the Company or any Subsidiary of the Company during
such period. (Section 1009)
EVENTS OF DEFAULT
Unless otherwise indicated in an applicable Prospectus Supplement, any of
the following events will constitute an Event of Default under the Indenture
with respect to Securities of any series: (a) failure to pay any interest on any
Security of that series when due, continued for 30 days; (b) failure to pay
principal of or any premium on any Security of that series when due; (c) failure
to deposit any sinking fund payment, when due, in respect of any Security of
that series; (d) failure to perform or breach of any other covenant of the
Company in the Indenture (other than a covenant included in the Indenture solely
for the benefit of series of Securities other than that series), continued for
90 days after written notice as provided in the Indenture; (e) the acceleration
of the maturity of any indebtedness for borrowed money of the Company or any
Subsidiary of the Company (other than the Securities or Non-Recourse
Indebtedness) having an aggregate principal amount outstanding in excess of
$25,000,000, if such acceleration is not rescinded or annulled, or such
indebtedness shall not have been discharged, within 15 days after written notice
thereof to the Company; (f) certain events in bankruptcy, insolvency or
reorganization involving the Company; and (g) any other Event of Default
provided with respect to Securities of that series. (Section 501)
If an Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, either the Trustee or the Holders of at
least 25% in aggregate principal amount of the Outstanding Securities of that
series, by notice as provided in the Indenture, may declare the principal amount
(or, if the Securities of that series are Original Issue Discount Securities,
such portion of the principal amount as may be specified in the terms of that
series) of all the Securities of that series to be due and payable immediately.
At any time after a declaration of acceleration with respect to Securities of
any series has been made, but before a judgment or decree for payment of money
has been obtained by the Trustee, the Holders of a majority in aggregate
principal amount of the Outstanding Securities of that series, under certain
circumstances, may rescind and annul such acceleration. (Section 502)
The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. (Sections 601, 603) Subject to such
provisions for the indemnification of the Trustee, the Holders of a majority in
aggregate principal amount of the Outstanding Securities of any series shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred on the Trustee, with respect to the Securities of that series;
provided, however, that the Trustee shall not be obligated to take any action
unduly prejudicial to Holders not joining in such direction or involving the
Trustee in personal liability. (Section 512)
The Company will be required to furnish to the Trustee annually a statement
as to the Company's compliance with conditions and covenants under the
Indenture. (Section 1007)
DEFEASANCE
If so specified with respect to any particular series of Securities, the
Company may discharge its indebtedness and its obligations or certain of its
obligations under the Indenture with respect to such series by depositing funds
or obligations issued or guaranteed by the United States of America with the
Trustee.
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Defeasance and Discharge
The Indenture provides that, if so specified with respect to the Securities
of any series, the Company will be discharged from any and all obligations in
respect of the Securities of such series (except for certain obligations,
including those relating to temporary Securities and exchange of Securities,
registration of transfer or exchange of Securities of such series, replacement
of stolen, destroyed, lost or mutilated Securities of such series, maintenance
of paying agencies to hold moneys for payment in trust and payments of
additional amounts, if any, required in consequence of United States withholding
taxes imposed on payments to non-United States persons) upon the deposit with
the Trustee, in trust, of an amount of money, and/or U.S. Government Obligations
that, through the scheduled payment of interest and principal in respect thereof
in accordance with their terms, will provide money in an amount, sufficient to
pay and discharge the principal of, and any premium and each installment of
interest on, the Securities of such series on the Stated Maturity of such
payments in accordance with the terms of the Indenture and the Securities of
such series. (Sections 1302 and 1304) Such a trust may only be established if,
among other things, the Company has delivered to the Trustee an Opinion of
Counsel to the effect that (i) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (ii) since the date of
the Indenture there has been a change in applicable federal income tax law, in
either case to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Holders of Securities of such series will not recognize
income, gain or loss for federal income tax purposes as a result of such
deposit, defeasance and discharge, and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge had not occurred. (Section
1304) In the event of any such defeasance and discharge of Securities of such
series, Holders of Securities of such series would be entitled to look only to
such trust fund for payment of principal of and any premium and any interest on
their Securities until Maturity.
Defeasance of Certain Obligations
The Indenture provides that, if so specified with respect to the Securities
of any series, the Company may omit to comply with certain restrictive
covenants, including the covenants described under "--Limitation on Liens" and
"--Limitation on Sale/Leaseback Transactions" above, and any such omission shall
not be an Event of Default with respect to the Securities of such series, upon
the deposit with the Trustee, in trust, of an amount of money, and/or U.S.
Government Obligations that, through the scheduled payment of interest and
principal in respect thereof in accordance with their terms, will provide money
in an amount, sufficient to pay and discharge the principal of, and any premium
and each installment of interest on, the Securities of such series on the Stated
Maturity of such payments in accordance with the terms of the Indenture and the
Securities of such series. The obligations of the Company under the Indenture
and the Securities of such series other than with respect to such covenants
shall remain in full force and effect. (Sections 1303 and 1304) Such a trust may
be established only if, among other things, the Company has delivered to the
Trustee an Opinion of Counsel to the effect that the Holders of the Securities
of such series will not recognize gain or loss for federal income tax purposes
as a result of such deposit and defeasance of certain obligations and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such deposit and defeasance had not
occurred. (Section 1304)
Although the amount of money and U.S. Government Obligations on deposit
with the Trustee would be intended to be sufficient to pay amounts due on the
Securities of such series at the time of their Stated Maturity, in the event the
Company exercises its option to omit compliance with the covenants defeased with
respect to the Securities of any series as described above and the Securities of
such series are declared due and payable because of the occurrence of any Event
of Default, such amount may not be sufficient to pay amounts due on the
Securities of such series at the time of the acceleration resulting from such
Event of Default. The Company shall in any event remain liable for such payments
as provided in the Indenture.
Federal Income Tax Consequences
Under current United States federal income tax law, defeasance and
discharge likely would be treated as a taxable exchange of Securities to be
defeased for an interest in the defeasance trust. As a consequence, a
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holder would recognize gain or loss equal to the difference between the holder's
cost or other tax basis for such Securities and the value of the holder's
interest in the defeasance trust, and thereafter would be required to include in
income a share of the income, gain or loss of the defeasance trust. Under
current United States federal income tax law, covenant defeasance would
ordinarily not be treated as a taxable exchange of such Securities.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of each series affected by such
modification or amendment; provided, however, that no such modification or
amendment may, without consent of the Holder of each Outstanding Security
affected thereby, (a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security; (b) change the
Redemption Date with respect to any Security; (c) reduce the principal amount
of, or premium or interest rate on, any Security; (d) change any obligation of
the Company to pay additional amounts; (e) reduce the amount of principal of an
Original Issue Discount Security payable upon acceleration of the Maturity
thereof; (f) change the coin or currency in which any Security or any premium or
interest thereon is payable; (g) change the redemption right of any Holder; (h)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Security; (i) reduce the percentage in principal amount of
Outstanding Securities of any series, the consent of whose Holders is required
for modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults; (j)
reduce the requirements contained in the Indenture for quorum or voting; (k)
change any obligation of the Company to maintain an office or agency in the
places and for the purposes required by the Indenture; or (l) modify any of the
above provisions. (Section 902)
The Holders of a majority in aggregate principal amount of the Outstanding
Securities of each series may, on behalf of the Holders of all Securities of
that series, waive, insofar as that series is concerned, compliance by the
Company with certain restrictive provisions of the Indenture. (Section 1008) The
Holders of a majority in aggregate principal amount of the Outstanding
Securities of each series may, on behalf of all Holders of Securities of that
series, waive any past default under the Indenture with respect to any
Securities of that series, except a default (a) in the payment of principal of,
or any premium or interest on, any Security of such series or (b) in respect of
a covenant or provision of the Indenture that cannot be modified or amended
without the consent of the Holder of each Outstanding Security of such series
affected. (Section 513)
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any request,
demand, authorization, direction, notice, consent or waiver thereunder or are
present at a meeting of the Holders of Securities for quorum purposes, (i) the
principal amount of an Original Issue Discount Security that shall be deemed to
be Outstanding shall be the amount of the principal that would be due and
payable as of the date of such determination upon acceleration of the Maturity
thereof, and (ii) the principal amount of a Security denominated in a foreign
currency or currencies shall be the U.S. dollar equivalent, determined on the
date of original issuance of such Security, of the principal amount of such
Security or, in the case of an Original Issue Discount Security, the U.S. dollar
equivalent, determined on the date of original issuance of such Security, of the
amount determined as provided in clause (i) above. (Section 101)
The Indenture contains provisions for convening meetings of the Holders of
Securities of a series if Securities of that series are issuable as Bearer
Securities. (Section 1401) A meeting may be called at any time by the Trustee,
and also, upon request by the Company or the Holders of at least 10% in
aggregate principal amount of the Outstanding Bearer Securities of that series,
in any such case upon notice given in accordance with the provisions described
under "--Notices" below. (Section 1402) Except for any consent that must be
given by the Holder of each Outstanding Bearer Security affected thereby, as
described above, any resolution presented at a meeting (or adjourned meeting
duly reconvened at which a quorum is present) may be adopted by the affirmative
vote of the Holders of a majority in principal amount of the Outstanding Bearer
Securities of that series; provided, however, that, except for any consent or
waiver that must be given by the Holder of each Outstanding Bearer Security
affected thereby, as described above, any resolution with respect to any
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request, demand, authorization, direction, notice, consent, waiver or other
action that may be made, given or taken by the Holders of a specified
percentage, which is less than a majority in aggregate principal amount of the
Outstanding Bearer Securities of a series, may be adopted at a meeting (or
adjourned meeting duly reconvened at which a quorum is present) by the
affirmative vote of such specified percentage in aggregate principal amount of
the Outstanding Bearer Securities of that series. Any resolution passed or
decision taken at any meeting of Holders of Bearer Securities of any series duly
held in accordance with the Indenture will be binding on all Holders of Bearer
Securities of that series and related coupons. The quorum at any meeting, and at
any reconvened meeting, will be Persons holding or representing a majority in
aggregate principal amount of the Outstanding Bearer Securities of a series.
(Section 1404)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the Holders of any of the Outstanding
Securities under the Indenture, may consolidate with or merge into, or convey,
transfer or lease its properties and assets substantially as an entirety to, any
other Person that is a corporation, partnership or trust organized and validly
existing under the laws of any domestic jurisdiction, provided that any
successor Person assumes the Company's obligations on the Securities and under
the Indenture, that after giving effect to the transaction no Event of Default
(and no event that, after notice or lapse of time or both, would become an Event
of Default) shall have occurred and be continuing, and that certain other
conditions are met. (Section 801)
NOTICES
Except as otherwise provided in the Indenture, notices to Holders of Bearer
Securities will be given by publication at least twice in a daily newspaper in
The City of New York and in such other city or cities as may be specified in
such Securities. Notices to Holders of Registered Securities will be given by
mail to the addresses of such Holders as they appear in the Security Register.
(Section 106)
TITLE
Title to any Bearer Securities (including Bearer Securities in permanent
global form) and any coupons appertaining thereto will pass by delivery. The
Company, the Trustee and any agent of the Company or the Trustee may treat the
bearer of any Bearer Security and the bearer of any coupon and the registered
owner of any Registered Security as the owner thereof (whether or not such
Security or coupon shall be overdue and notwithstanding any notice to the
contrary) for the purpose of making payments and for all other purposes.
(Section 308)
REPLACEMENT OF SECURITIES
Any mutilated Security or a Security with a mutilated coupon appertaining
thereto will be replaced by the Company at the expense of the Holder upon
surrender of such Security to the Trustee. Securities or coupons that become
destroyed, stolen or lost will be replaced by the Company at the expense of the
Holder upon delivery to the Company and the Trustee of the Security and coupons
or evidence of destruction, loss or theft thereof satisfactory to the Company
and the Trustee; in the case of any coupon that becomes destroyed, stolen or
lost, such coupon will be replaced by issuance of a new Security in exchange for
the Security to which such coupon appertains. In the case of a destroyed, lost
or stolen Security or coupon, an indemnity satisfactory to the Trustee and the
Company may be required at the expense of the Holder of such Security or coupon
before a replacement Security will be issued. (Section 306)
GOVERNING LAW
The Indenture, the Securities and any coupons will be governed by, and
construed in accordance with, the laws of the State of New York. (Section 113)
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REGARDING THE TRUSTEE
The Company and certain affiliates from time to time borrow money from, and
maintain deposit accounts and conduct certain banking transactions with, Bank of
Montreal, an affiliate of the Trustee, in the ordinary course of their business.
Bank of Montreal is a lender under the Company's bank credit facility.
The Indenture and the provisions of the Trust Indenture Act incorporated by
reference therein contain certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. (Section 613) The Trustee
will be permitted to engage in certain other transactions; however, if it
acquires any conflicting interest, it must eliminate such conflict or resign.
(Section 608)
PLAN OF DISTRIBUTION
GENERAL
The Company may sell Securities to or through underwriters or dealers, and
also may sell Securities directly to one or more other purchasers or through
agents. The Prospectus Supplement accompanying this Prospectus sets forth the
names of any underwriters or agents involved in the sale of the Securities and
any applicable commissions or discounts.
Underwriters, dealers or agents may offer and sell the Securities at a
fixed price or prices, which may be changed, or from time to time at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. In connection with the sale of the
Securities, underwriters or agents may be deemed to have received compensation
from the Company in the form of underwriting discounts or commissions and also
may receive commissions from purchasers of the Securities for whom they may act
as agent. Underwriters or agents may sell the Securities to or through dealers,
and such dealers may receive compensation in the form of discounts, concessions
or commissions from the underwriters or commissions from the purchasers for whom
they may act as agent.
The Securities, when first issued, will have no established trading market.
Any underwriters or agents to or through whom Securities are sold by the Company
for public offering and sale may make a market in such Securities, but such
underwriters or agents will not be obligated to do so and may discontinue any
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for any Securities.
Any underwriters, dealers or agents participating in the distribution of
the Securities may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of the
Securities may be deemed to be underwriting discounts and commissions under the
Securities Act. Underwriters, dealers or agents may be entitled, under
agreements entered into with the Company, to indemnification by the Company
against or contribution toward certain civil liabilities, including liabilities
under the Securities Act.
DELAYED DELIVERY ARRANGEMENTS
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other persons acting as the Company's agents to solicit offers
by certain institutions to purchase Securities from the Company pursuant to
contracts providing for payment and delivery on a future date. Institutions with
which such contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all cases such contracts will be subject to the
approval of the Company. The obligations of any purchaser under any such
contract will be subject to the condition that the purchase of the Securities
shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject. The underwriters and such
agents will not have any responsibility in respect of the validity or
performance of such contracts.
14
<PAGE> 35
LEGAL MATTERS
The legality of the Securities are being passed upon by Fulbright &
Jaworski L.L.P., 1301 McKinney, Suite 5100, Houston, Texas 77010. Certain legal
matters in connection with the Securities may be passed upon for any
underwriters, dealers or agents by Vinson & Elkins L.L.P., 1001 Fannin, Suite
2300, Houston, Texas 77002. From time to time, Vinson & Elkins L.L.P. serves the
Company as outside special counsel in certain unrelated matters.
EXPERTS
The consolidated financial statements of the Company at December 31, 1995
and 1994, and for each of the three years in the period ended December 31, 1995,
incorporated by reference in this Prospectus and the accompanying Prospectus
Supplement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference in this Prospectus in reliance upon the authority of
said firm as experts in accounting and auditing in giving said report.
15
<PAGE> 36
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE OFFERING MADE
HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED BY THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN ANY JURISDICTION WHERE,
OR TO ANY PERSON WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER OR THEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT
THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
The Company........................... S-2
Recent Development.................... S-3
Selected Consolidated Financial
Data................................ S-4
Use of Proceeds....................... S-5
Capitalization........................ S-5
Business.............................. S-6
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... S-7
Description of the Notes.............. S-16
Underwriting.......................... S-19
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 3
The Company........................... 3
Use of Proceeds....................... 3
Ratio of Earnings to Fixed Charges.... 4
Description of the Securities......... 4
Plan of Distribution.................. 14
Legal Matters......................... 15
Experts............................... 15
</TABLE>
===============================================================================
===============================================================================
$200,000,000
[WEATHERFORD ENTERRA, INC. LOGO]
WEATHERFORD ENTERRA, INC.
% NOTES DUE MAY , 2006
---------------------
PROSPECTUS SUPPLEMENT
---------------------
MERRILL LYNCH & CO.
BA SECURITIES, INC.
CHASE SECURITIES INC.
MAY , 1996
===============================================================================
