<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO _________________.
COMMISSION FILE NUMBER 1-7746
------------------
TRANSOCEAN OFFSHORE INC.
(Exact name of registrant as specified in its charter)
------------------
DELAWARE 72-0464968
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4 GREENWAY PLAZA
HOUSTON, TEXAS 77046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 871-7500
------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
As of July 31,1998, 100,549,127 shares of common stock, par value $.01 per
share, of Transocean Offshore Inc. were outstanding.
================================================================================
<PAGE>
TRANSOCEAN OFFSHORE INC.
INDEX TO FORM 10-Q
QUARTER ENDED JUNE 30, 1998
Page
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 1998 and 1997........... 2
Condensed Consolidated Balance Sheets
June 30, 1998 and December 31, 1997......................... 3
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1998 and 1997..................... 4
Notes to Condensed Consolidated Financial Statements.......... 5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 9
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings............................................. 19
ITEM 4. Submission of matters to a Vote of Security Holders........... 19
ITEM 6. Exhibits and Reports on Form 8-K.............................. 19
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The condensed consolidated financial statements of Transocean Offshore Inc. and
consolidated subsidiaries (the "Company") included herein have been prepared,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and notes normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. These financial statements should be read in conjunction with the
audited consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
TRANSOCEAN OFFSHORE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Operating Revenues $251,577 $208,093 $509,890 $427,709
- ---------------------------------------------------------------------------------------------------------
Costs and Expenses
Operating and maintenance 114,427 132,885 246,075 277,731
Depreciation and amortization 28,103 25,837 56,181 50,245
General and administrative 7,845 7,265 15,113 13,044
- ---------------------------------------------------------------------------------------------------------
150,375 165,987 317,369 341,020
- ---------------------------------------------------------------------------------------------------------
Operating Income 101,202 42,106 192,521 86,689
- ---------------------------------------------------------------------------------------------------------
Other Income (Expense), Net
Equity in earnings of joint ventures 2,557 2,420 4,890 4,885
Interest income 1,084 147 1,952 850
Interest expense, net of amounts capitalized (5,575) (6,029) (12,682) (10,831)
Gain on termination of cash flow sharing agreement (96) - 21,290 -
Other, net (362) 1,587 853 (613)
- ---------------------------------------------------------------------------------------------------------
(2,392) (1,875) 16,303 (5,709)
- ---------------------------------------------------------------------------------------------------------
Income Before Income Taxes 98,810 40,231 208,824 80,980
Income Taxes 29,149 12,315 61,603 25,355
- ---------------------------------------------------------------------------------------------------------
Net Income $ 69,661 $ 27,916 $147,221 $ 55,625
=========================================================================================================
Earnings Per Share
Basic $0.70 $ 0.28 $1.47 $ 0.55
=========================================================================================================
Diluted $0.69 $ 0.27 $1.46 $ 0.54
=========================================================================================================
Weighted Average Shares Outstanding
Basic 100,082 101,167 99,879 101,674
- ---------------------------------------------------------------------------------------------------------
Diluted 101,006 102,640 100,854 103,123
- ---------------------------------------------------------------------------------------------------------
Dividends Paid Per Share $0.03 $ 0.03 $0.06 $ 0.06
=========================================================================================================
</TABLE>
See accompanying notes.
2
<PAGE>
TRANSOCEAN OFFSHORE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
(In thousands, except share data)
ASSETS
<S> <C> <C>
Cash and Cash Equivalents $ 41,742 $ 54,225
Accounts Receivable 231,306 199,716
Deferred Income Taxes 7,511 4,418
Materials and Supplies 33,004 30,917
Prepayments 6,938 9,389
Other Current Assets 9,979 8,425
- ----------------------------------------------------------------------------------------------
Total Current Assets 330,480 307,090
- ----------------------------------------------------------------------------------------------
Property and Equipment 2,346,262 2,113,462
Less Accumulated Depreciation 491,673 445,488
- ----------------------------------------------------------------------------------------------
Property and Equipment, net 1,854,589 1,667,974
- ----------------------------------------------------------------------------------------------
Goodwill, net 684,206 693,154
Investments in and Advances to Joint Ventures 50,109 45,869
Other Assets 30,061 41,001
- ----------------------------------------------------------------------------------------------
Total Assets $2,949,445 $2,755,088
==============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable $ 47,715 $ 62,997
Accrued Income Taxes 51,201 47,002
Current Portion of Long-Term Debt 4,803 4,812
Other Current Liabilities 60,626 70,381
- ----------------------------------------------------------------------------------------------
Total Current Liabilities 164,345 185,192
- ----------------------------------------------------------------------------------------------
Long-Term Debt 771,021 728,282
Deferred Income Taxes 195,428 171,306
Other Long-Term Liabilities 40,443 49,130
- ----------------------------------------------------------------------------------------------
Total Long-Term Liabilities 1,006,892 948,718
- ----------------------------------------------------------------------------------------------
Preferred Stock, $0.10 par value; 50,000,000 shares authorized,
none issued and outstanding - -
Common Stock, $0.01 par value; 150,000,000 shares authorized,
104,333,127 shares issued and 100,549,127 shares outstanding
at June 30, 1998, and 103,700,638 shares issued and
99,916,638 shares outstanding at December 31, 1997 1,043 1,037
Less Common Stock in Treasury, at cost;
3,784,000 shares at June 30, 1998 and December 31, 1997 (144,297) (144,297)
Additional Paid-in Capital 1,524,928 1,509,110
Retained Earnings 396,534 255,328
- ----------------------------------------------------------------------------------------------
Total Stockholders' Equity 1,778,208 1,621,178
- ----------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $2,949,445 $2,755,088
==============================================================================================
</TABLE>
See accompanying notes.
3
<PAGE>
TRANSOCEAN OFFSHORE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------
1998 1997
---- ----
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 147,221 $ 55,625
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 56,181 50,245
Deferred income taxes 21,029 1,651
Equity in earnings of joint ventures (4,890) (4,885)
Gain on disposal of assets (3,735) (332)
Deferred income, net (4,901) 15,204
Deferred expenses, net 3,096 (9,504)
Other, net 6,964 (8,801)
Changes in operating assets and liabilities,
net of effects from divestiture
Accounts receivable (33,111) (12,173)
Accounts payable (13,548) 1,651
Income taxes receivable/payable, net 13,000 (8,086)
Other current assets (1,191) (13,789)
Other current liabilities (9,755) (11,097)
- --------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 176,360 55,709
- --------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (241,736) (192,158)
Proceeds from disposal of assets 6,440 572
Joint ventures and other investments 3,394 (527)
Divestiture of non-core drilling services activities and assets - 105,584
Cash balances of activities divested - (6,109)
Other - (878)
- --------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (231,902) (93,516)
- --------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) on revolving credit facility 45,200 (143,138)
Exercise of stock options 6,661 3,792
Dividends paid (6,015) (6,079)
Repayment of notes payable (2,308) -
Proceeds of public debt offering, net - 299,202
Proceeds from project financing facility - 137,870
Repayments on term loan facility - (193,250)
Financing costs - (5,208)
Treasury shares purchased - (49,910)
Sale of note receivable - 11,000
Other, net (479) 530
- --------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 43,059 54,809
Net Increase (Decrease) in Cash and Cash Equivalents (12,483) 17,002
- --------------------------------------------------------------------------------------------
Cash and Cash Equivalents at Beginning of Period 54,225 24,154
- --------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 41,742 $ 41,156
============================================================================================
</TABLE>
See accompanying notes.
4
<PAGE>
TRANSOCEAN OFFSHORE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - GENERAL
BASIS OF CONSOLIDATION - The accompanying condensed consolidated financial
statements of Transocean Offshore Inc. and its consolidated subsidiaries (the
"Company") have been prepared without audit in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and
Exchange Commission. Accordingly, pursuant to such rules and regulations, these
financial statements do not include all disclosures required by generally
accepted accounting principles for complete financial statements. Operating
results for the three and six month periods ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998. In connection with the preparation of these financial
statements, management was required to make estimates and assumptions that
affect the reported amount of assets, liabilities, revenues, expenses and
disclosure of contingent liabilities. Actual results could differ from such
estimates. The accompanying condensed consolidated financial statements and
notes thereto should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
EARNINGS PER SHARE - In 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings
per Share. SFAS No. 128 replaced the calculation of primary and fully diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities. Diluted earnings per share is
similar to fully diluted earnings per share which was previously not required to
be reported if the effect of the dilution was less than three percent. Earnings
per share amounts for all periods have been presented, and where appropriate,
restated to conform to the SFAS No. 128 requirements.
STOCK SPLIT - In August 1997, the Board of Directors declared a two-for-one
stock split to be effected in the form of a 100 percent stock dividend. The
dividend was paid September 19, 1997 to stockholders of record on September 5,
1997. All references in the financial statements to number of shares and per
share amounts have been retroactively restated to reflect the increased number
of shares of common stock issued and outstanding as a result of the dividend.
SUPPLEMENTARY CASH FLOW INFORMATION - Cash payments for interest and income
taxes, net were $27.7 million and $28.7 million, respectively, for the six
months ended June 30, 1998 and $13.1 million and $31.8 million, respectively,
for the six months ended June 30, 1997.
GOODWILL - Goodwill is amortized on a straight-line basis over 40 years.
Accumulated amortization as of June 30, 1998 and December 31, 1997 totaled $33.8
million, and $24.8 million, respectively.
CAPITALIZED INTEREST - Interest costs for construction and upgrade of qualifying
assets are capitalized. The Company capitalized interest costs on construction
work in progress of $8.4 million and $15.0 million for the three and six months
ended June 30, 1998 and $4.8 million and $7.7 million in the corresponding
periods of 1997.
RECLASSIFICATIONS - Certain reclassifications have been made to prior period
amounts to conform with the current period's presentation.
5
<PAGE>
TRANSOCEAN OFFSHORE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
INTERIM FINANCIAL INFORMATION - The financial statements reflect all adjustments
which are, in the opinion of management, necessary for a fair statement of the
results for the interim periods. Such adjustments are considered to be of a
normal recurring nature unless otherwise identified.
NEW ACCOUNTING PRONOUNCEMENTS - In February 1998, the FASB issued SFAS No. 132,
Employers' Disclosures about Pensions and Other Postretirement Benefits. This
Statement revises employers' disclosures about pension and other postretirement
benefit plans in annual financial statements. SFAS No. 132 is effective for
fiscal years beginning after December 15, 1997. The Company adopted this
standard in the first quarter of 1998.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which is required to be adopted in years
beginning after June 15, 1999. The Company expects to adopt the new Statement
effective January 1, 2000. The Statement will require the Company to recognize
all derivatives on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through income. If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in the fair value of the
hedged assets, liabilities, or firm commitments through earnings or recognized
in other comprehensive income until the hedged item is recognized in earnings.
The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The Company has not yet determined what the
effect of SFAS No. 133 will be on the earnings and financial position of the
Company.
NOTE 2 - UPGRADE AND EXPANSION OF DRILLING FLEET
The Company made capital additions of $241.7 million during the first six months
of 1998, primarily relating to its previously announced fleet additions and
upgrades. During the first six months of 1998, the Company spent $63.6 million
on the conversion of the Transocean Marianas, $53.8 million on the construction
of the deepwater drillship Discoverer Enterprise, $55.2 million on the
construction of the deepwater drillship to be named "Discoverer Spirit", and
$31.9 million on the construction of the deepwater drillship to be named
"Discoverer Deep Seas".
NOTE 3 - DEBT
Debt is comprised of the following:
June 30, December 31,
1998 1997
---- ----
(In thousands)
Revolving Credit Facility $251,600 $206,400
Project Financing Agreement 196,210 196,210
8.00% Debentures, net of discount 199,229 199,216
7.45% Notes 100,000 100,000
6.90% Notes Payable 27,692 30,000
Other 1,093 1,268
- -----------------------------------------------------------------
Total Debt 775,824 733,094
Less Current Maturities 4,803 4,812
- -----------------------------------------------------------------
Total Long-Term Debt $771,021 $728,282
=================================================================
6
<PAGE>
TRANSOCEAN OFFSHORE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
CREDIT AGREEMENT - In connection with the 1996 combination with Transocean ASA,
the Company entered into a secured credit agreement, dated as of July 30, 1996
with a group of banks led by ABN AMRO Bank N.V. (the "Credit Agreement"). The
Credit Agreement, as subsequently amended, provides for borrowing by the Company
under a revolving credit facility in the amount of $540 million (the "Revolving
Credit Facility"). Loans under the Credit Agreement bear interest, at the
option of the Company, at a base rate or LIBOR plus a margin that varies
depending on the Company's funded debt to total capital ratio or its public
senior unsecured debt rating.
In May 1998, the Credit Agreement was amended to remove certain restrictions
that affected borrowing capability, allow for additional indebtedness subject to
financial covenants, and enable the Company to grant liens on new assets to
secure additional indebtedness.
NOTE 4 - TERMINATION OF CASH FLOW SHARING AGREEMENT
The Company and Global Marine Inc. ("Global Marine") were parties to an
agreement pursuant to which the Company participated in the cash flow from three
jackup drilling rigs owned and operated by Global Marine and Global Marine
participated in the cash flow from one of the Company's jackup drilling rigs,
the Transocean Nordic. During April 1997, Global Marine initiated arbitration
proceedings against the Company in the United Kingdom with respect to various
disputed matters under the agreement. In March 1998, the Company reached an
agreement with Global Marine that terminated the cash flow sharing agreement,
effective February 1, 1998, with certain continuing rights if any of the rigs
are sold within three years, and settled all disputed matters. Under the terms
of this agreement, the Company received $29.8 million in cash in settlement of
outstanding accounts receivable and to terminate the cash flow sharing
agreement, resulting in an after tax gain of $13.8 million, or $0.14 per share,
diluted.
NOTE 5 - EARNINGS PER SHARE
The reconciliation of the numerator and denominator used for the computation of
basic and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net Income for basic
and diluted earnings per share $ 69,661 $ 27,916 $147,221 $ 55,625
================================================================================================
Weighted-average shares
for basic earnings per share 100,082 101,167 99,879 101,674
Effect of dilutive securities
Employee stock options and unvested stock grants 924 1,473 975 1,449
- ------------------------------------------------------------------------------------------------
Adjusted weighted-average shares and assumed
conversions for diluted earnings per share 101,006 102,640 100,854 103,123
================================================================================================
Basic earnings per share $ 0.70 $ 0.28 $ 1.47 $ 0.55
================================================================================================
Diluted earnings per share $ 0.69 $ 0.27 $ 1.46 $ 0.54
================================================================================================
</TABLE>
7
<PAGE>
TRANSOCEAN OFFSHORE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 - BUSINESS DIVESTITURE
In May 1997, the Company divested certain non-core activities and associated
assets within its drilling services line of business originally acquired in the
1996 combination with Transocean ASA by selling the shares of a new corporate
entity, Procon Offshore ASA, to investors in Norway. The divestiture had no
material effect on the financial results of the Company. The net proceeds from
the sale were approximately $106 million, goodwill was reduced by approximately
$68.7 million and no gain or loss was recognized on the sale.
NOTE 7 - SUBSEQUENT EVENT
In August 1998, the Company sold certain non-core activities and assets within
its drilling services line of business to a subsidiary of Dailey International
Inc. for $10 million in cash, resulting in a pre-tax gain of approximately $8
million ($5 million after tax or $0.05 per share, diluted).
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information should be read in connection with the information
contained in the Company's consolidated financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
OVERVIEW
Transocean Offshore Inc. is a leading international provider of deepwater and
harsh-environment contract drilling services for oil and gas wells. The Company
currently owns, has ownership interests in or operates 31 mobile offshore
drilling rigs (including two units not yet in service). Transocean's fleet
consists of seven fourth-generation semisubmersibles, fourteen second- and
third-generation semisubmersibles, four drillships and six jackup rigs. In
addition, the Company has under construction two new technologically advanced,
ultra-deepwater drillships. The Company contracts these drilling rigs, related
equipment and work crews primarily on a dayrate basis to drill offshore wells.
The Company also provides additional drilling services, including turnkey
drilling, coiled tubing drilling and well engineering and planning.
In September 1997, the Company effected a two-for-one split of its common stock
in the form of a 100 percent stock dividend. All references in this report to
number of shares and per share amounts have been retroactively restated to
reflect the increased number of shares of common stock issued and outstanding as
a result of the dividend.
9
<PAGE>
OPERATING RESULTS
Comparative data relating to the Company's operating revenues and operating
income by segment and geographic area follows. In the table and related
discussion below, the "Mobile Units" segment consists of the results of
operations for drilling rigs contracted to customers primarily on a dayrate
basis. The "Drilling Services" segment includes results of all other drilling
services provided by the Company, including turnkey operations.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES (a)
Mobile Units
U.S. Gulf of Mexico $ 62,371 $ 46,872 $131,863 $ 85,978
North Sea and Europe 112,628 83,121 223,107 167,713
Other Western Hemisphere 40,169 2,769 66,093 9,704
Other Eastern Hemisphere 16,026 20,234 31,266 38,021
- ---------------------------------------------------------------------------------
231,194 152,996 452,329 301,416
- ---------------------------------------------------------------------------------
Drilling Services 20,383 55,097 57,561 126,293
- ---------------------------------------------------------------------------------
Total Revenues $251,577 $208,093 $509,890 $427,709
=================================================================================
OPERATING INCOME (LOSS) (b)
Mobile Units
U.S. Gulf of Mexico $ 37,814 $ 25,400 $ 78,911 $ 49,009
North Sea and Europe 39,220 12,677 76,588 25,542
Other Western Hemisphere 21,875 756 37,961 3,484
Other Eastern Hemisphere 10,085 8,581 15,746 18,264
Other (3,847) (2,143) (5,574) (5,556)
- ---------------------------------------------------------------------------------
105,147 45,271 203,632 90,743
- ---------------------------------------------------------------------------------
Drilling Services 4,221 4,245 4,640 9,307
Corporate Expenses (8,166) (7,410) (15,751) (13,361)
- ---------------------------------------------------------------------------------
Operating Income $101,202 $ 42,106 $192,521 $ 86,689
=================================================================================
</TABLE>
(a) Intersegment eliminations are not material.
(b) Amounts shown are after applicable depreciation and amortization.
10
<PAGE>
QUARTER ENDED JUNE 30, 1998, COMPARED TO QUARTER ENDED JUNE 30, 1997
Net income for the quarter ended June 30, 1998 was $69.7 million or $0.69 per
share, diluted, compared to $27.9 million or $0.27 per share, diluted, for the
second quarter of 1997, an increase of $41.8 million or $0.42 per share,
diluted. The increase for 1998 resulted primarily from increases in dayrates
and rig utilization, and lower operating and maintenance costs.
Revenues were $251.6 million for the quarter ended June 30, 1998, compared to
$208.1 million for the prior year quarter, an increase of $43.5 million or 21
percent. Operating income was $101.2 million in 1998 compared to $42.1 million
in the second quarter of 1997, an increase of $59.1 million or 140 percent.
Revenues and operating income from Mobile Units increased significantly in the
second quarter of 1998, compared to the prior year quarter. Rig utilization
increased to 98 percent in the second quarter of 1998 from 90 percent in the
second quarter of 1997, reflecting reduced downtime for rig repairs and
upgrades. The average dayrate for the Company's semisubmersible drilling rigs
and drillships was approximately $116,900 in the second quarter of 1998,
compared to approximately $91,000 in the second quarter of 1997, an increase of
28 percent. The Company's jackup drilling rigs experienced a similar percentage
increase in average dayrates.
In the U.S. Gulf of Mexico, the increase in revenues and operating income
resulted primarily from higher average dayrates and the results of two
additional rigs that were in the shipyard undergoing upgrades in the prior year
quarter. These increases were offset by the relocation of a rig to Trinidad
during the current quarter. In the North Sea and Europe, increases resulted
from higher average dayrates and lower downtime for repairs and marine surveys
compared to the prior period. Operating results in Other Western Hemisphere
significantly increased in the current quarter due to higher average dayrates,
the relocation of two rigs from the U.S. Gulf of Mexico, including one that was
in the shipyard during 1997, the relocation of one rig that had operated in
Other Eastern Hemisphere in 1997, and the inclusion of results from one rig that
had operated in an unconsolidated joint venture in the prior year. Other
Eastern Hemisphere experienced a decrease in revenues from 1997 as a result of
the relocation of one rig to Other Western Hemisphere in the first quarter of
1998. This decrease was partially offset by increases in average dayrates and
rig utilization for the current period.
Revenues from Drilling Services decreased and operating income remained
unchanged in the second quarter of 1998, compared to the prior year quarter.
The decrease in revenue primarily reflects the May 1997 divestiture of certain
non-core activities and assets originally acquired in the 1996 combination with
Transocean ASA and the cessation of turnkey drilling services in the U.S. Gulf
of Mexico in the first quarter of 1998.
Corporate expenses increased $0.8 million, from $7.4 million in the second
quarter of 1997 to $8.2 million in the current quarter, reflecting the increased
activities of the Company. The previously announced fleet expansion projects
require expanded recruiting and training activities for drilling crews. The
Company also continues to upgrade and expand its communication and data
processing systems to more effectively manage its geographically diversified
operations.
Income tax expense increased by $16.8 million due primarily to higher pre-tax
earnings in the second quarter of 1998 over the same period in 1997. The
Company's effective tax rate was lower in the second quarter of 1998 compared to
the same period in 1997 due to an increase in the permanent reinvestment of
earnings of certain foreign subsidiaries.
11
<PAGE>
SIX MONTHS ENDED JUNE 30, 1998, COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Net income for the six months ended June 30, 1998 was $147.2 million or $1.46
per share, diluted, compared to $55.6 million or $0.54 per share, diluted, for
the first six months of 1997, an increase of $91.6 million or $0.92 per share,
diluted. The increase for 1998 resulted primarily from increases in average
dayrates and rig utilization and lower operating and maintenance costs,
partially offset by an increase in depreciation and amortization expense. The
Company also recognized a one-time $21.3 million pre-tax gain ($13.8 million
after tax or $0.14 per share, diluted) on the termination of a cash flow sharing
agreement with Global Marine Inc. ("Global Marine") in the current period.
Revenues were $509.9 million for the six months ended June 30, 1998, compared to
$427.7 million for the first six months of 1997, an increase of $82.2 million or
19 percent. Operating income was $192.5 million in 1998 compared to $86.7
million in 1997, an increase of $105.8 million or 122 percent.
Revenues and operating income from Mobile Units increased significantly for the
six months ended June 30, 1998, compared to the first six months of 1997. Rig
utilization increased to 98 percent in 1998 from 91 percent in the first six
months of 1997, reflecting reduced downtime for rig repairs and upgrades. The
average dayrate for the Company's semisubmersible drilling rigs and drillships
was approximately $114,700 in 1998, compared to approximately $89,400 in the
first six months of 1997, an increase of 28 percent. The Company's jackup
drilling rigs experienced a similar percentage increase in average dayrates.
In the U.S. Gulf of Mexico, the increase in revenues and operating income for
the six months ended June 30, 1998 resulted primarily from higher average
dayrates and the results of two additional rigs that were in the shipyard
undergoing upgrades in the prior year period. These increases were offset by
the relocation of a rig to Trinidad during the current year. In the North Sea
and Europe, increases resulted from higher average dayrates and lower downtime
for repairs and marine surveys over the prior period. Operating results in
Other Western Hemisphere significantly increased in the current year due to
higher average dayrates, the relocation of two rigs from the U.S. Gulf of
Mexico, including one that was in the shipyard during 1997, the relocation of
one rig that had operated in Other Eastern Hemisphere in 1997, and the inclusion
of results from one rig that had operated in an unconsolidated joint venture in
the prior year. Other Eastern Hemisphere experienced a decrease in revenues
from 1997 as a result of the relocation of one rig to Other Western Hemisphere
in the first quarter of 1998. This decrease was partially offset by increases
in average dayrates and rig utilization for the current period.
Revenues and operating income from Drilling Services decreased for the six month
period ending June 30, 1998, compared to the first six months of 1997. This
decrease primarily reflects the May 1997 divestiture of certain non-core
activities and assets originally acquired in the 1996 combination with
Transocean ASA and the cessation of turnkey drilling services in the U.S. Gulf
of Mexico in the first quarter of 1998.
Corporate expenses increased $2.4 million, from $13.4 million in the first six
months of 1997 to $15.8 million in the current period, reflecting the increased
activities of the Company. The previously announced fleet expansion projects
require expanded recruiting and training activities for drilling crews. The
Company also continues to upgrade and expand its communication and data
processing systems to more effectively manage its geographically diversified
operations.
Other income increased to $16.3 million in the six month period ending June 30,
1998, compared to other expense of $5.7 million in the prior year. In 1998, the
Company recognized a $21.3 million pre-tax gain on the termination of a cash
flow sharing agreement with Global Marine.
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Income tax expense increased by $36.2 million due primarily to higher pre-tax
earnings in the six month period ending June 30, 1998, compared to the prior
period. The Company's effective tax rate was lower in the first six months in
1998 compared to the same period in 1997 due to an increase in the permanent
reinvestment of earnings of certain foreign subsidiaries.
MARKET OUTLOOK
High utilization for rigs in the deepwater and harsh-environment markets
continued through the first half of 1998. However, lower oil prices have
resulted in a weakening in the market for jackups and lesser capability floating
drilling rigs. As of the date of this quarterly report, lower oil prices have
had little or no impact on deepwater dayrates, and the Company anticipates that
demand will continue to be strong for its deepwater units that become available
through contract expiration in 1999. During the next several months, the Company
anticipates moving up to three deepwater units to West Africa, an area where
producers have reported deepwater exploratory success, while retaining two units
in Brazil and six units in the U.S. Gulf of Mexico.
Historically, the contract drilling market has been highly competitive and
cyclical. As a result, the Company cannot predict the extent to which current
market conditions will continue. Beginning in the latter part of 1997 and
continuing into 1998, oil prices declined substantially. The decline in oil
prices has not materially affected the dayrates and utilization of the Company's
rigs as of the date of this quarterly report; however, an extended period of
relatively low oil prices could reduce demand for the Company's contract
drilling services and adversely affect utilization and dayrates. Also during
1998, the government of the United Kingdom has discussed changes in the form of
taxation on oil and gas activities in the U.K. sector of the North Sea. At this
time, the Company cannot predict the impact on rig demand of any such tax
changes, if enacted.
A number of drilling contractors have commenced upgrading existing rigs or
constructing new rigs that will be capable of competing with the Company's
deepwater and harsh-environment rigs. Although most of these rigs are being
built pursuant to long-term contract commitments, there can be no assurance
that, upon the expiration of such contracts and the contracts for the Company's
rigs, the then-current market conditions will be favorable and that current high
utilization rates and dayrates will continue. Historically, drilling
contractors have tended to overbuild drilling units in response to increased
demand, and small changes in the supply and demand balance could lead to
increased volatility in dayrates.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES OF CASH
Cash flows provided by operations were $176.4 million for the six months ended
June 30, 1998, compared to $55.7 million for the six months ended June 30, 1997,
an increase of $120.7 million. The increase in cash provided by operations was
due primarily to higher net income in the first six months of 1998 compared to
the 1997 period, partially offset by a decrease due to changes in working
capital components in 1998 and deferred income received from a customer included
in 1997.
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<PAGE>
Cash flows used in investing activities increased $138.4 million from $93.5
million in the first six months of 1997 to $231.9 million in the current period.
The increase in cash used in investing activities resulted primarily from an
increase in capital expenditures relating to rig construction and upgrade
projects. In addition, in the first six months of 1997, the Company received
proceeds from the divestiture of certain non-core drilling services activities
and assets.
Cash flows provided by financing activities decreased $11.7 million from $54.8
million in the first six months of 1997 to $43.1 million in the current year
period. During 1998, the Company increased its net borrowings under its
revolving line of credit. In the first six months of 1997, the Company received
proceeds from the sale of a note receivable, the issuance of public debt, and
borrowings under its project financing facility. These proceeds were partially
offset by the repurchase of Company common stock and net repayments of amounts
outstanding under its Credit Agreement referred to below.
CAPITAL EXPENDITURES
The Company's investments in its existing fleet and previously announced fleet
additions continue to require significant capital expenditures. Capital
expenditures totaled $241.7 million during the first six months of 1998 and are
expected to be approximately $385 million during the remainder of the year
including amounts that will be spent on the construction of the deepwater
drillships to be named "Discoverer Spirit" and "Discoverer Deep Seas". During
the first six months of 1998, the Company spent $63.6 million on the conversion
of the Transocean Marianas and expects to spend approximately $40 million to
complete the project during the remainder of the year. The Company spent $53.8
million during the first six months of 1998 on the construction of the deepwater
drillship Discoverer Enterprise, and expects to spend approximately $105 million
and $5 million during the remainder of 1998 and in 1999, respectively, to
complete the project. Additionally, the Company spent $55.2 million during the
first six months of 1998 on the construction of the Discoverer Spirit and
expects to spend approximately $75 million during the remainder of 1998 and
approximately $190 million during 1999 and 2000 to complete the project. The
Company spent $31.9 million during the first six months of 1998 on the
construction of the Discoverer Deep Seas and expects to spend approximately $95
million during the remainder of 1998 and approximately $190 million during 1999
and 2000 to complete the project.
As with any major construction project that takes place over an extended period
of time, actual costs and the timing of such expenditures may vary from initial
estimates based on finalization of the design and actual terms of awarded
contracts. The Company intends to fund the cash requirements relating to these
capital commitments through available cash balances, borrowings under the Credit
Agreement referred to below and other commercial bank or capital market
financings, including potential public offerings under the Company's shelf
registration statement (discussed below) and, in the case of the Discoverer
Enterprise, financing under the Project Financing Agreement referred to below.
ACQUISITIONS
The Company regularly reviews possible acquisitions of businesses and drilling
units, and may from time to time in the future make significant capital
commitments for such purposes. Any such acquisition could involve the payment
by the Company of a substantial amount of cash and the issuance of a substantial
number of shares of common stock. The Company would expect to fund the cash
portion of any such acquisition through cash balances on hand, the incurrence of
additional debt, sales of assets or common stock, or a combination thereof.
14
<PAGE>
TERMINATION OF CASH FLOW SHARING AGREEMENT
The Company and Global Marine Inc. ("Global Marine") were parties to an
agreement pursuant to which the Company participated in the cash flow from three
jackup drilling rigs owned and operated by Global Marine and Global Marine
participated in the cash flow from one of the Company's jackup drilling rigs,
the Transocean Nordic. During April 1997, Global Marine initiated arbitration
proceedings against the Company in the United Kingdom with respect to various
disputed matters under the agreement. In March 1998, the Company reached an
agreement with Global Marine that terminated the cash flow sharing agreement,
effective February 1, 1998, with certain continuing rights if any of the rigs
are sold within three years, and settled all disputed matters. Under the terms
of this agreement, the Company received $29.8 million in cash in settlement of
outstanding accounts receivable and to terminate the cash flow sharing
agreement, resulting in an after tax gain of $13.8 million, or $0.14 per share,
diluted. The net proceeds were used to repay debt.
ASSET DIVESTITURE
In August 1998, the Company sold certain non-core activities and assets within
its drilling services line of business to a subsidiary of Dailey International
Inc. for $10 million in cash, resulting in a pre-tax gain of approximately $8
million ($5 million after tax or $0.05 per share, diluted). The proceeds from
the sale will be used to repay debt.
AUTHORIZED STOCK REPURCHASE
In May 1997, the Company's Board of Directors authorized the repurchase of up to
$200 million worth of shares of its common stock from time to time on the open
market or in privately negotiated transactions. After purchases made during
1997, approximately $105 million remains available under this authority. The
Board of Directors regularly reviews the possibility of repurchasing common
stock in light of prevailing stock prices and the financial position of the
Company.
DEBT
CREDIT AGREEMENT - In connection with the 1996 combination with Transocean ASA,
the Company entered into a secured credit agreement dated as of July 30, 1996
with a group of banks led by ABN AMRO Bank, N.V. (the "Credit Agreement"). The
Credit Agreement, as subsequently amended, provides for borrowing by the Company
under a revolving credit facility in the amount of $540 million (the "Revolving
Credit Facility"). Loans under the Credit Agreement bear interest, at the
option of the Company, at a base rate or LIBOR plus a margin (0.25 percent at
June 30, 1998) that varies depending on the Company's funded debt to total
capital ratio or its public senior unsecured debt rating. The Credit Agreement
requires compliance with various restrictive covenants, including an interest
coverage ratio, which could limit the Company's ability to pay dividends in the
future. The Credit Agreement has a maturity date of July 2002. As of June 30,
1998, $251.6 million in borrowings were outstanding under the Credit Agreement.
In May 1998, the Credit Agreement was amended to remove certain restrictions
that affected borrowing capability, allow for additional indebtedness subject to
financial covenants, and enable the Company to grant liens on new assets to
secure additional indebtedness.
PROJECT FINANCING AGREEMENT - In connection with the on-going construction of
the Discoverer Enterprise and the completed upgrade of the Transocean Amirante,
the Company's wholly owned subsidiary, Transocean Enterprise Inc., obtained a
bank financing agreement effective December 27, 1996 from a group of banks led
by ABN AMRO Bank, N.V. (the "Project Financing Agreement"). Approximately $340
million
15
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is available for drawdowns during the construction period and is available in
two tranches. The first tranche of $66 million is to be repaid upon completion
of construction and acceptance of the two vessels (no later than December 31,
1998) by Amoco Exploration and Production Company ("Amoco"), which is
contracting the rigs for a period of five years following completion. It bears
an interest rate of LIBOR plus 0.35 percent. The Company expects to lend
Transocean Enterprise Inc. the necessary funds to repay the $66 million
utilizing funds borrowed under the Revolving Credit Facility. The second tranche
of $274.5 million (of which $130.2 million in borrowings were outstanding as of
June 30, 1998) bears an interest rate of LIBOR plus 0.85 percent during the
construction period and is convertible to term financing upon completion of
construction and acceptance of the two vessels by Amoco (no later than December
31, 1998). The term financing would mature over a period of five years. The term
financing would also be divided into two tranches, the relative amounts and
terms of which would depend on various factors. As of June 30, 1998, $196.2
million in borrowings were outstanding under the Project Financing Agreement.
LETTERS OF CREDIT
The Company had letters of credit outstanding at June 30, 1998 totaling $37.0
million, including $29.3 million relating to a legal dispute with Kvaerner
Installasjon a.s (see Part II. Item 1. Legal Proceedings). The remaining $7.7
million guarantees various insurance and contract bidding activities.
SHELF REGISTRATION
In July 1998, the Company filed with the Securities and Exchange Commission
(the "SEC") a $450 million shelf registration statement on Form S-3 for the
proposed offering from time to time of senior or subordinated debt securities,
preferred stock, common stock and warrants to purchase debt securities,
preferred stock, common stock or other securities. The registration statement
was declared effective by the SEC on July 20, 1998. The new registration
statement effectively amends and carries forward the unused portion of the
Company's prior registration statement on Form S-3 without registering any
additional amount of securities.
DERIVATIVE INSTRUMENTS
The Company enters into a variety of derivative financial instruments in
connection with the management of its exposure to fluctuations in foreign
exchange rates and interest rates. The Company does not enter into derivative
transactions for speculative purposes; however, for accounting purposes certain
transactions may not meet the criteria for hedge accounting.
Gains and losses on foreign exchange derivative instruments, which qualify as
accounting hedges, are deferred and recognized when the underlying foreign
exchange exposure is realized. Gains and losses on foreign exchange derivative
instruments, which do not qualify as hedges for accounting purposes, are
recognized currently based on the change in market value of the derivative
instruments. At June 30, 1998, the Company did not have any foreign exchange
derivative instruments not qualifying as hedges. The Company recognized a net
pre-tax loss of $1.9 million on such instruments for the six months ended June
30, 1997.
The Company uses interest rate swap agreements to effectively convert a portion
of its floating rate debt to a fixed rate basis, reducing the impact of interest
rate changes on future income. Interest rate swaps are designated as a hedge of
underlying future interest payments. The interest rate differential to be
received or paid on the swaps is recognized over the lives of the swaps as an
adjustment to interest expense. At June 30, 1998, the net unrealized loss on
open interest rate swaps was $4.9 million.
16
<PAGE>
SOURCES OF LIQUIDITY
The Company believes that its cash and cash equivalents, cash generated from
operations, borrowings available under its Credit Agreement, Project Financing
Agreement and access to other financing sources will be adequate to meet its
anticipated short-term and long-term liquidity requirements, including scheduled
debt repayments and capital expenditures for new rig construction, upgrade and
conversion projects.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1998, the Financial Accounting Standards Board ("FASB"), issued
Statement of Financial Accounting Standards ("SFAS") No. 132, Employers'
Disclosures about Pensions and Other Postretirement Benefits. This Statement
revises employers' disclosures about pension and other postretirement benefit
plans in annual financial statements. SFAS No. 132 is effective for fiscal
years beginning after December 15, 1997. The Company adopted this standard in
the first quarter of 1998.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which is required to be adopted in years
beginning after June 15, 1999. The Company expects to adopt the new Statement
effective January 1, 2000. The Statement will require the Company to recognize
all derivatives on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through income. If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in the fair value of the
hedged assets, liabilities, or firm commitments through earnings or recognized
in other comprehensive income until the hedged item is recognized in earnings.
The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The Company has not yet determined what the
effect of SFAS No. 133 will be on the earnings and financial position of the
Company.
YEAR 2000 ISSUE
The Company has instituted a plan to address the Year 2000 issue for its
computer systems, microprocessors, operational and control systems and other
significant computer-based devices and applications. It is possible that certain
of these systems will not be able to process dates beginning in the year 2000,
as many such systems are based on storing two digits to identify a particular
year rather than a full four digits and are not designed to take into account
the start of a new century. The Company's plan focuses on ensuring Year 2000
compliance in two distinct areas--(1) rig-based operational systems and control
devices and (2) all other business, financial and engineering systems, including
third-party systems that the Company may rely on. The plan is being implemented
under the direction of senior management by the Company's information systems
and technology personnel and operations personnel with appropriate expertise,
with the goal of ensuring compliance of critical systems by mid-year 1999.
With respect to rig-based systems, the Company has instituted an ongoing
compliance procedure that includes an initial survey followed by analysis,
vendor participation, corrective action, testing and continuous reappraisal.
The Company conducted a survey of computer systems, computer-controlled
equipment and electronic devices, including equipment with embedded
microprocessors, onboard each rig to identify those systems and devices to be
reviewed for Year 2000 compliance. The Company has requested letters of
compliance from its third-party vendors and suppliers and in addition is
conducting its own tests to verify compliance. Critical systems and devices
identified by the survey that are likely to be affected by the Year 2000 issue
are in the process of being modified or replaced. A number of these systems and
devices had already been identified for renewal or replacement in connection
with the Company's ongoing maintenance programs. In some cases, systems or
equipment may be covered by warranties, while other vendors are providing
software upgrades at minimal costs. Therefore, the Company
17
<PAGE>
believes the cost to replace or modify its operational systems in order to
attain Year 2000 compliance will not have a material effect on its financial
results. The Company's drilling units are composed of many stand-alone systems,
and the Company believes that the diversity of manufacture of both the rigs and
equipment minimizes the risk of a fleet-wide system failure that would affect
the functionality or safety of the fleet. As such, the Company does not believe
that the Year 2000 issue will have a significant effect on the operations of the
Company's drilling units. The Company expects to complete implementation of its
compliance plan for rig-based systems by mid-year 1999.
With respect to business, financial and engineering systems, the Company
surveyed all of its internal systems worldwide and identified those software and
hardware systems determined not to be Year 2000 compliant. Letters of
compliance are being obtained from all vendors of standard systems, and the
Company plans to conduct tests of all systems to provide an enhanced degree of
confidence for Year 2000 compliance. Replacement or modification of known non-
compliant systems has commenced, and the Company expects to complete this
process during the second half of 1999. In addition to its internal systems, the
Company also relies, directly and indirectly, on the systems of third parties,
such as its banks and investment managers, for the accurate exchange of data and
for financial processing capabilities. The Company is contacting these third
parties to determine what actions may be needed to mitigate its risks relating
to the failure of such third parties to be Year 2000 compliant in a timely
fashion. The effect, if any, on the Company's results of operations arising
from the failure of these third parties to be Year 2000 compliant is not
reasonably estimable at this time. The total cost to implement the plan as it
relates to business, financial and engineering systems is not known at this
time. The Company is in the process of developing the estimated cost projections
and a contingency plan for these systems, which may involve in part manual
operation of certain systems for a period of time in the event of Year 2000
related disruptions.
Although the Company's failure to fully implement its Year 2000 compliance plan
or the occurrence of an unexpected Year 2000 problem could result in the
disruption of normal business activities or operations and have a material
adverse effect on the Company's results of operations, liquidity or financial
condition, based upon the work performed to date and the anticipated completion
of the plan by the second half of 1999, the Company does not believe that such
matters will have a material adverse effect. With respect to third parties,
however, there can be no assurance that their systems will be rendered Year 2000
compliant on a timely basis or that any resulting Year 2000 issues would not
have an adverse effect on the results of operations of the Company.
FORWARD-LOOKING INFORMATION
The statements included in this quarterly report regarding future financial
performance and results of operations and other statements that are not
historical facts are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Statements to the effect that the Company or management "anticipates,"
"believes," "estimates," "expects," "predicts," or "projects" a particular
result or course of events, or that such result or course of events "may"
"should" occur, and similar expressions, are also intended to identify forward-
looking statements. Forward-looking statements in this quarterly report include,
but are not limited to, statements involving expected capital expenditures, the
Company's plans and expectations with regard to Year 2000 issues and the
Company's expectations with regard to market outlook. Such statements are
subject to numerous risks, uncertainties and assumptions, including but not
limited to uncertainties relating to industry and market conditions, prices of
crude oil and natural gas, exploration success by producers in deepwater and
harsh-environment regions, foreign exchange and currency fluctuations, changes
in existing tax laws, political instability in foreign jurisdictions, scheduled
completion of construction projects, the labor market for skilled personnel in
the offshore drilling industry, the outcome of annual labor negotiations with
unions representing certain Norwegian offshore workers, the success of the
Company in implementing its Year 2000 compliance plan, the failure of financial
and other
18
<PAGE>
service providers to be Year 2000 complaint on a timely basis, and other factors
discussed in this quarterly report and in the Company's other filings with the
Securities Exchange Commission. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those indicated.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has certain claims pending involving a dispute of work performance
and amounts owed to a shipyard and contested tax assessments. These matters
have been previously discussed and reported in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997 and Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998. There have been no significant
developments in these previously reported matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Stockholders on May 14, 1998, there were three matters
submitted to a vote of stockholders. The first matter was the election of Class
II Directors as set forth in the Company's Proxy Statement relating to the
meeting. With respect to such election, proxies were solicited pursuant to
Regulation 14 under the Securities Exchange Act of 1934 and there was no
solicitation in opposition to such nominees. Of the Company's 99,977,040
shares of record as of March 25, 1998, 87,391,355 were voted at the meeting in
person or by proxy. The following number of votes were cast as to the Class II
Director nominees: Martin B. McNamara, 86,604,144 votes for and 787,211 votes
withheld; J. Michael Talbert, 86,606,383 votes for and 784,972 votes withheld;
and Fridtjof Lorentzen, 86,595,609 votes for and 795,746 votes withheld.
The second matter submitted was the approval of the amendment and restatement of
the Company's Long-Term Incentive Plan as described in the Proxy Statement
relating to the meeting. The amendment and restatement was approved by the
stockholders with 84,929,563 shares voting for approval, 2,315,859 voting
against and 145,933 abstaining from voting.
The third matter submitted was the approval of the Transocean Offshore Inc.
Employee Stock Purchase Plan as described in the Proxy Statement relating to the
meeting. The Plan was approved by the stockholders with 87,142,967 shares
voting for approval, 155,239 voting against and 93,149 abstaining from voting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed in connection with this Report:
NUMBER DESCRIPTION
- ------ -----------
4.9 Third Amendment dated May 22, 1998 to Secured Credit Agreement dated
as of July 30, 1996 among Sonat Offshore Drilling Inc., the Lenders
party thereto, ABN AMRO Bank N.V., as Agent, and the Co-Agents listed
therein (filed as Exhibit 10-(1) to the Company's Form 10-Q for the
quarter ending June 30, 1996).
27.1 Financial Data Schedule.
- ------------
19
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(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ending June 30,
1998.
20
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on August 10, 1998.
TRANSOCEAN OFFSHORE INC.
By: /s/ Robert L. Long
----------------------------
Robert L. Long
Senior Vice President
(Principal Financial Officer)
By: /s/ Barbara S. Koucouthakis
----------------------------
Barbara S. Koucouthakis
Vice President and Controller
(Principal Accounting Officer)
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<PAGE>
EXHIBIT 4.9
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") dated as of May
22, 1998, is by and among Transocean Offshore Inc., a Delaware corporation (the
"BORROWER"), the lenders from time to time parties hereto (each a "LENDER" and
collectively, the "LENDERS"), ABN AMRO Bank N.V. ("ABN AMRO"), a Netherlands
chartered bank acting through its Houston agency, as agent for the Lenders (in
such capacity, the "AGENT"), SunTrust Bank, Atlanta, and Credit Lyonnais New
York Branch, as documentation agents for the Lenders (in such capacity, each a
"DOCUMENTATION AGENT" and together, the "DOCUMENTATION AGENTS"), and Bank of
Montreal, The Fuji Bank, Limited, Houston Agency, Royal Bank of Canada, Wells
Fargo Bank (Texas), National Association, and Bank of Tokyo- Mitsubishi, Ltd.,
Houston Agency, as co-agents for the Lenders (in such capacity, each a "CO-
AGENT" and collectively, the "CO-AGENTS").
WITNESSETH
WHEREAS, the Borrower, the Lenders, the Agent, the Documentation Agents and
the Co-Agents have entered into that certain Credit Agreement dated as of July
30, 1996, as amended by that certain First Amendment to Credit Agreement dated
as of April 18, 1997, and that certain Second Amendment to Credit Agreement
dated as of December 19, 1997 (the "CREDIT AGREEMENT"), pursuant to which the
Lenders have made and agreed to make Loans to the Borrower and issued and agreed
to issue Letters of Credit for the account of the Borrower; and
WHEREAS, the Borrower, the Lenders, the Agent, the Documentation Agents and
the Co-Agents desire to further amend the Credit Agreement as hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Borrower, the Lenders, the Agent, the Documentation Agents
and the Co-Agents hereby agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
(a) Section 1.1 (Definitions) of the Credit Agreement is amended as
follows:
(i) The following definitions of "Consolidated Net Assets" and
"Subsidiary Debt Basket Amount" are hereby added in the
correct alphabetical order:
"`Consolidated Net Assets' means, as of any date of
determination, an amount equal to the aggregate book value
of the assets of the Borrower, its Subsidiaries and, to the
extent of the equity interest of the Borrower and its
Subsidiaries therein, SPVs at such time minus
<PAGE>
the current liabilities of the Borrower and its
Subsidiaries, all determined on a consolidated basis in
accordance with GAAP."
"`Subsidiary Debt Basket Amount' has the meaning ascribed to
such term in Section 6.15(j)."
(ii) The definition of "Public Debt Issue" is hereby deleted in
its entirety.
(b) Section 6.14 (Liens) of the Credit Agreement is amended as
follows:
(i) 6.14(g), (h) and (w) of the Credit Agreement are hereby
deleted in their entirety and the following inserted in their
place, in each case in the correct alphabetical order:
"(g) Liens on assets and interests acquired after the
Effective Date ("After-Acquired Assets") securing (i) any
obligation incurred for the purpose of financing all or any
part of the purchase price of any such After-Acquired Assets
or for the purpose of financing all or any part of the cost
of the completion of construction and commencement of
commercial operation, alteration, repair or improvement of
any such After-Acquired Assets, or (ii) any Non-recourse
Debt;
(h) Liens on property existing at the time such property is
acquired by the Borrower or any Subsidiary of the Borrower
and not created in contemplation of such acquisition (or on
repairs, renewals, replacements, additions, accessions and
betterments thereto) and Liens on the assets of any Person
at the time such Person becomes a Subsidiary of the Borrower
and not created in contemplation of such Person becoming a
Subsidiary of the Borrower (or on repairs, renewals,
replacements, additions, accessions and betterments
thereto);
(w) Liens on the Transocean Amirante and the Discoverer
Enterprise to secure Indebtedness incurred pursuant to the
Secured Credit Agreement dated as of January 17, 1997, among
Transocean Enterprise Inc., various lenders and ABN AMRO, as
agent for such lenders, as amended from time to time, or any
Lease Securitization Facility (as defined in such Secured
Credit Agreement), as amended from time to time;"
(ii) New subsections (x) and (y) are hereby added in the correct
alphabetical order:
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<PAGE>
"(x) Liens on the stock or assets of SPVs; and
(y) Liens (not otherwise permitted by this Section 6.14) on
property securing Indebtedness (or other obligations) not
exceeding $50,000,000 in the aggregate at any time
outstanding."
(c) Section 6.15 (Indebtedness) of the Credit Agreement is hereby
deleted in its entirety and the following inserted in its place:
"Section 6.15 Indebtedness. The Borrower and its Subsidiaries
shall not incur, assume or suffer to exist any Indebtedness
except:
(a) Indebtedness under the Credit Documents;
(b) existing Indebtedness outstanding on the Effective Date and
listed on Schedule 5.21, and any subsequent extensions, renewals
or refinancings thereof so long as such Indebtedness is not
increased in amount, the scheduled maturity date thereof (if
prior to the Maturity Date) is not accelerated, the interest rate
per annum applicable thereto is not increased, any scheduled
amortization of principal thereunder prior to the Maturity Date
is not shortened and the payments thereunder are not increased;
(c) unsecured intercompany loans and advances to the Borrower or
its Subsidiaries, and unsecured intercompany loans and advances
from any of such Subsidiaries or SPVs to the Borrower or any
other Subsidiaries of the Borrower;
(d) Indebtedness under any Interest Rate Protection Agreements
and under foreign exchange futures agreements, arrangements or
options designed to protect against fluctuations in currency
exchange rates;
(e) Indebtedness of the Borrower that may be incurred, assumed or
suffered to exist without violating any section of this
Agreement, including, without limitation, Sections 6.23 and 6.24
hereof;
(f) Indebtedness of any Subsidiary of the Borrower (i) under
overdraft lines of credit or for working capital purposes in
foreign countries with financial institutions on terms no more
favorable to the lenders thereunder than under this Agreement,
and (ii) arising from the honoring by a bank or other Person of a
check, draft or similar instrument inadvertently drawing against
insufficient funds, all such Indebtedness not to exceed
$35,000,000 in the aggregate at any time outstanding, provided
that amounts under overdraft lines of credit or outstanding as a
result of drawings against
-3-
<PAGE>
insufficient funds shall be outstanding for one (1) Business Day
before being included in such aggregate amount;
(g) Indebtedness of a Person existing at the time such Person
becomes a Subsidiary of the Borrower or is merged with or into
the Borrower or any Subsidiary of the Borrower and not incurred
in contemplation of such transaction;
(h) Indebtedness of any Subsidiary of the Borrower (i) under
Performance Guaranties and Performance Letters of Credit, and
(ii) with respect to letters of credit issued in the ordinary
course of business of such Subsidiary;
(i) Indebtedness of the nature described in the last sentence of
the definition of the term "Indebtedness";
(j) Indebtedness of any Subsidiary of the Borrower in an
aggregate principal amount not to exceed an amount equal to ten
percent (10%) of Consolidated Net Assets (the "Subsidiary Debt
Basket Amount") in the aggregate at any time outstanding; and
(k) other Indebtedness of any Subsidiary of the Borrower so long
as such Subsidiary has in force a Subsidiary Guaranty in
substantially the form of Exhibit 4.1C, provided that such
Subsidiary Guaranty shall contain a provision that such
Subsidiary Guaranty and all obligations thereunder of the
guarantor party thereto shall be terminated upon delivery to the
Agent by the Borrower of a certificate stating that (i) the
aggregate principal amount of Indebtedness of all Subsidiaries
permitted to be outstanding pursuant to Section 6.15(j) and (k)
of the Credit Agreement is equal to or less than the Subsidiary
Debt Basket Amount, and (ii) no Default or Event of Default has
occurred and is continuing."
(d) Section 6.19(h) of the Credit Agreement is hereby deleted in its
entirety and the following inserted in its place:
"(h) sale and leaseback transactions that may be incurred,
assumed or suffered to exist without violating any section of
this Agreement, including, without limitation, Sections 6.23 and
6.24 hereof;"
2. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. To induce the
Lenders, the Agent, the Collateral Agent, the Documentation Agents and the Co-
Agents to enter into this Amendment, the Borrower hereby reaffirms, as of the
date hereof, that its representations and warranties contained in the Credit
Agreement are true and correct in all material respects (except to the extent
such representations and warranties (x) are not so true and correct in all
material respects
-4-
<PAGE>
as a result of the transactions expressly permitted under the Credit Agreement
or under the other Credit Documents or (y) relate solely to an earlier date) and
additionally represents and warrants as follows:
(i) The execution and delivery by the Borrower of this Amendment
and the performance by the Borrower of its obligations under this
Amendment and the Credit Agreement, as amended hereby, are within
the Borrower's corporate powers, have been duly authorized by all
necessary corporate action of the Borrower and do not and will
not contravene in any material respect any provision of
applicable law or contravene or conflict with any provision of
the certificate of incorporation, bylaws or any material
agreements binding upon the Borrower, and the execution and
delivery by the Borrower of this Amendment have received all
necessary governmental approvals or other consents (if any shall
be required);
(ii) This Amendment and the Credit Agreement, as amended hereby,
are legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their terms,
subject as to enforcement only to bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and equitable
principles;
(iii) There are no actions, suits, proceedings or counterclaims
(including, without limitation, derivative or injunctive actions)
pending or, to the knowledge of the Borrower, threatened against
the Borrower or any of its Subsidiaries which purports to affect
the legality, validity or enforceability of this Amendment, the
Credit Agreement, as amended hereby, or any other Credit
Document;
(iv) No Default or Event of Default has occurred and is
continuing; and
(v) There have been no amendments to the certificate of
incorporation or bylaws of the Borrower since April 18, 1997.
3. REAFFIRMATION OF CREDIT AGREEMENT. This Amendment shall be deemed to
be an amendment to the Credit Agreement, and the Credit Agreement, as amended
hereby, is hereby ratified, approved and confirmed in each and every respect.
All references to the Credit Agreement in the Credit Agreement and the other
Credit Documents (excluding this Amendment) shall hereafter be deemed to refer
to the Credit Agreement, as amended hereby.
4. DEFINED TERMS. Terms used but not defined herein when defined in the
Credit Agreement shall have the same meanings herein unless the context
otherwise requires.
-5-
<PAGE>
5. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
(A) THIS AMENDMENT AND THE OTHER CREDIT DOCUMENTS, AND THE RIGHTS AND
DUTIES OF THE PARTIES HERETO AND THERETO, SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
(B) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES
HERETO AGREE THAT ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AMENDMENT OR ANY OTHER CREDIT DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
THE AGENT, THE DOCUMENTATION AGENTS, THE CO-AGENTS, THE COLLATERAL AGENT, THE
LENDERS OR THE BORROWER MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE
OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN OR THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS, BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE
WITHIN OR WITHOUT THE STATE OF NEW YORK. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, ANY
OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY
SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT
THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF
ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OF NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH
RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AMENDMENT AND THE OTHER CREDIT DOCUMENTS.
(C) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY
HERETO WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
-6-
<PAGE>
AMENDMENT, THE CREDIT AGREEMENT, ANY OTHER CREDIT DOCUMENT OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AMENDMENT, THE CREDIT
AGREEMENT, ANY OTHER CREDIT DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR THEREWITH AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
6. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and by the different parties on different counterpart signature
pages, each of which when executed shall be deemed an original, but all such
counterparts taken together shall constitute one and the same agreement.
7. SEVERABILITY. Any provision of this Amendment that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
8. HEADINGS. Section headings used in this Amendment are for reference
only and shall not affect the construction of this Amendment.
9. NOTICE OF ENTIRE AGREEMENT. This Amendment, together with the other
Credit Documents, constitute the entire understanding among the Borrower, the
Lenders, the Agent, the Documentation Agents and the Co-Agents and supersede all
earlier or contemporaneous agreements, whether written or oral, concerning the
subject matter of the Credit Documents. THIS WRITTEN AMENDMENT, TOGETHER WITH
THE OTHER CREDIT DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Third
Amendment to Credit Agreement as of the date first written above.
BORROWER:
TRANSOCEAN OFFSHORE INC.,
a Delaware corporation
By: /s/ ROBERT L. LONG
------------------------------------
Name: Robert L. Long
Title: Senior Vice President and CFO
LENDERS:
ABN AMRO BANK N.V., Houston Agency, as Agent and
Collateral Agent and as a Lender
By: /s/ CHERYL I. LIPSHUTZ
------------------------------------
Cheryl I. Lipshutz
Senior Vice President and Director
By: /s/ STEPHANIE BALETTE
------------------------------------
Stephanie Balette
Assistant Vice President
-8-
<PAGE>
SUNTRUST BANK, ATLANTA, as Documentation Agent and
as a Lender
By: /s/ JOHN A. FIELDS, JR.
------------------------------------
Name: John A. Fields, Jr.
Title: Vice President
By: /s/ STEVEN J. NEWBY
------------------------------------
Name: Steven J. Newby
Title: Corporate Banking Officer
CREDIT LYONNAIS NEW YORK BRANCH, as
Documentation Agent and as a Lender
By: /s/ PASCAL POUPELLE
------------------------------------
Name: Pascal Poupelle
Title: Executive Vice President
BANK OF MONTREAL, as Co-Agent and as a Lender
By: /s/ J. B. WHITMORE
------------------------------------
Name: J. B. Whitmore
Title: Director
THE FUJI BANK, LIMITED, HOUSTON AGENCY,
as Co-Agent and as a Lender
By: /s/ NATE ELLIS
------------------------------------
Name: Nate Ellis
Title: Vice President and Manager
-9-
<PAGE>
ROYAL BANK OF CANADA, as Co-Agent and as a Lender
By: /s/ GIL J. BERNARD
------------------------------------
Name: Gil J. Bernard
Title: Senior Manager
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION, as
Co-Agent and as a Lender
By: /s/ FRANK W. SCHAGEMAN
------------------------------------
Name: Frank W. Schageman
Title: Vice President
BANK OF TOKYO - MITSUBISHI, LTD., HOUSTON AGENCY,
as Co-Agent and as a Lender
By: /s/ MICHAEL MEISS
------------------------------------
Name: Michael Meiss
Title: Vice President
SKANDINAVISKA ENSKILDA BANKEN AB (publ.)
By: /s/ BJARTE BOE
------------------------------------
Name: Bjarte Boe
Title: Managing Director
By: /s/ PER FROLICH
------------------------------------
Name: Per Frolich
Title: Head of Administration
-10-
<PAGE>
WESTDEUTSCHE LANDESBANK GIROZENTRALE
By: /s/ RICHARD R. NEWMAN
------------------------------------
Name: Richard R. Newman
Title: Director
By: /s/ THOMAS LEE
------------------------------------
Name: Thomas Lee
Title: Associate
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
By: /s/ K. LOUGHLIN
------------------------------------
Name: K. Loughlin
Title: Vice President
THE BANK OF NEW YORK
By: /s/ TAN K. STEWART
------------------------------------
Name: Tan K. Stewart
Title: Senior Vice President
THE BANK OF NOVA SCOTIA, ATLANTA AGENCY
By: /s/ F.C. H. ASHBY
------------------------------------
Name: F.C. H. Ashby
Title: Senior Manager
Loan Operations
-11-
<PAGE>
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK,
CAYMAN ISLAND BRANCH
By: /s/ MARK K. CONNELLY
------------------------------------
Name: Mark K. Connelly
Title: Vice President
By: /s/ PAMELA D. INGRAM
------------------------------------
Name: Pamela D. Ingram
Title: Assistant Vice President
FIRST NATIONAL BANK OF COMMERCE
By: /s/ J. CHARLES FREEL, JR.
------------------------------------
Name: J. Charles Freel, Jr.
Title: Senior VIce President
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ BET HUNTER
------------------------------------
Name: Bet Hunter
Title: Director
THE SANWA BANK, LIMITED
By: /s/ MATTHEW G. PATRICK
------------------------------------
Name: Matthew G. Patrick
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ WILLIAM R. MCKOWN, III
------------------------------------
Name: William R. McKown, III
Title: Vice President and Manager
-12-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 41,742 41,156
<SECURITIES> 0 0
<RECEIVABLES> 231,306 144,576
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 330,480 256,154
<PP&E> 2,346,262 1,914,990
<DEPRECIATION> 491,673 417,365
<TOTAL-ASSETS> 2,949,445 2,521,489
<CURRENT-LIABILITIES> 164,345 167,123
<BONDS> 771,021 516,559
0 0
0 0
<COMMON> 1,043 517
<OTHER-SE> 1,777,165 1,630,961
<TOTAL-LIABILITY-AND-EQUITY> 2,949,445 2,521,489
<SALES> 0 0
<TOTAL-REVENUES> 509,890 427,709
<CGS> 0 0
<TOTAL-COSTS> 317,369 341,020
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 12,682 10,831
<INCOME-PRETAX> 208,824 80,980
<INCOME-TAX> 61,603 25,355
<INCOME-CONTINUING> 147,221 55,625
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 147,221 55,625
<EPS-PRIMARY> 1.47 0.55
<EPS-DILUTED> 1.46 0.54
<FN>
<F1> Reflects adoption of SFAS No. 128, Earnings Per Share, and a two-for-one
stock split paid in September 1997.
</FN>
</TABLE>
