<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996
--------------
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 1-8097
ENSCO INTERNATIONAL INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 76-0232579
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2700 Fountain Place
1445 Ross Avenue, Dallas Texas 75202 - 2792
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 922-1500
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 twelve 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 [ ]
There were 60,673,402 shares of Common Stock, $.10 par value, of the
registrant outstanding as of April 24, 1996.<PAGE>
ENSCO INTERNATIONAL INCORPORATED
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
PAGE
--------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet
March 31, 1996 and December 31, 1995 3
Consolidated Statement of Income
Three Months Ended March 31, 1996 and 1995 4
Consolidated Statement of Cash Flows
Three Months Ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6 - 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8 - 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURES 16<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31, December 31,
1996 1995
(Unaudited)
----------- -----------
(In thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents..................... $ 75,154 $ 77,064
Short-term investments........................ - 5,000
Accounts and notes receivable, net............ 65,071 60,796
Prepaid expenses and other.................... 21,587 22,893
Total current assets.................... 161,812 165,753
PROPERTY AND EQUIPMENT, AT COST................. 843,943 818,266
Less accumulated depreciation................. 201,450 185,334
Property and equipment, net............. 642,493 632,932
OTHER ASSETS.................................... 20,315 22,766
$824,620 $821,451
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.............................. $ 16,441 $ 8,936
Accrued liabilities........................... 28,630 45,820
Current maturities of long-term debt.......... 32,851 32,052
Total current liabilities............... 77,922 86,808
LONG-TERM DEBT.................................. 150,518 159,201
DEFERRED INCOME TAXES........................... 29,251 26,800
OTHER LIABILITIES............................... 20,092 17,393
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 125.0 million
shares authorized, 67.0 million and 66.9
million shares issued....................... 6,695 6,689
Additional paid-in capital.................... 616,300 615,644
Accumulated deficit........................... (8,908) (23,598)
Restricted stock (unearned compensation)...... (5,027) (5,263)
Cumulative translation adjustment............. (1,086) (1,086)
Treasury stock at cost, 6.3 million shares.... (61,137) (61,137)
Total stockholders' equity ............. 546,837 531,249
$824,620 $821,451
The accompanying notes are an integral part of these financial statements.<PAGE>
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended
March 31,
-----------------------
1996 1995
-------- ----------
(Restated)
(In thousands, except
per share data)
OPERATING REVENUES........................... $ 84,546 $ 61,130
OPERATING EXPENSES
Operating costs............................ 43,524 36,095
Depreciation and amortization.............. 16,374 13,546
General and administrative................. 2,215 2,143
62,113 51,784
OPERATING INCOME............................. 22,433 9,346
OTHER INCOME (EXPENSE)
Interest income............................ 1,236 2,149
Interest expense........................... (4,049) (4,391)
Other, net................................. 264 943
(2,549) (1,299)
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND MINORITY INTEREST......... 19,884 8,047
PROVISION FOR (BENEFIT FROM) INCOME TAXES
Current income taxes....................... 367 498
Deferred income taxes...................... 4,400 (459)
4,767 39
INCOME FROM CONTINUING OPERATIONS BEFORE
MINORITY INTEREST.......................... 15,117 8,008
MINORITY INTEREST............................ 427 602
INCOME FROM CONTINUING OPERATIONS............ 14,690 7,406
INCOME FROM DISCONTINUED OPERATION........... - 216
NET INCOME .................................. $ 14,690 $ 7,622
EARNINGS PER SHARE
Continuing operations...................... $ .24 $ .12
Discontinued operation..................... - .01
$ .24 $ .13
WEIGHTED AVERAGE SHARES OUTSTANDING.......... 60,651 60,648
The accompanying notes are an integral part of these financial statements.<PAGE>
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
-------------------
1996 1995
-------- ---------
(Restated)
(In thousands)
OPERATING ACTIVITIES
Net income........................................ $ 14,690 $ 7,622
Adjustments to reconcile net income to net cash
provided by operating activities:
Net cash provided by discontinued operation.. - 973
Depreciation and amortization................ 16,374 13,546
Deferred income tax provision (benefit)...... 4,400 (459)
Amortization of other assets................. 752 742
Other........................................ (262) 46
Changes in operating assets and liabilities:
Increase in accounts receivable............ (4,275) (5,286)
(Increase) decrease in prepaid expenses
and other................................ (642) 3,933
Increase in accounts payable............... 7,495 4,867
Decrease in accrued liabilities............ (1,491) (4,801)
Net cash provided by operating
activities........................... 37,041 21,183
INVESTING ACTIVITIES
Additions to property and equipment............... (38,878) (28,026)
Sale of short-term investments.................... 5,000 -
Other............................................. 2,128 (1,537)
Net cash used by investing activities......... (31,750) (29,563)
FINANCING ACTIVITIES
Reduction of long-term borrowings................. (7,846) (12,603)
Repurchase of common stock........................ - (7,042)
Other............................................. 645 4
Net cash used by financing activities........... (7,201) (19,641)
DECREASE IN CASH AND CASH EQUIVALENTS............... (1,910) (28,021)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...... 77,064 147,851
CASH AND CASH EQUIVALENTS, END OF PERIOD............ $ 75,154 $119,830
The accompanying notes are an integral part of these financial statements.<PAGE>
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - UNAUDITED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared by
ENSCO International Incorporated (the "Company"), without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission and
in accordance with generally accepted accounting principles and, in the
opinion of management, reflect all adjustments (which consist of normal
recurring adjustments) which are necessary for a fair statement of the
results of operations for the interim periods presented.
It is recommended that these statements be read in conjunction with the
Company's consolidated financial statements and notes thereto for the year
ended December 31, 1995 included in the Company's Annual Report to the
Securities and Exchange Commission on Form 10-K.
NOTE 2 - ACQUISITION
On March 21, 1996, the Company entered into a definitive agreement to
acquire DUAL DRILLING COMPANY ("Dual"). Dual operates a fleet of 20
offshore drilling rigs, including 10 jackup rigs and 10 self-contained
platform rigs. Twelve of Dual's rigs are located in the U.S., with three
jackup rigs and seven platform rigs currently located in the U.S. Gulf of
Mexico and two platform rigs off the coast of California. The remainder of
Dual's fleet operates in international waters, with rigs currently located
offshore India, Mexico, Qatar, Indonesia and China. Dual's common
stockholders will receive 0.625 shares of the Company's common stock for
each share of Dual common stock, which is expected to result in the
issuance of approximately 10.0 million shares of the Company's common
stock. The Company will account for the acquisition of Dual as a purchase
acquisition.
The Company has received early termination of the waiting period for the
transaction under applicable U.S. antitrust laws. Dual's financial
advisors have rendered a fairness opinion on the transaction for the
benefit of Dual's stockholders and Dual's Board of Directors has resolved
to recommend the transaction to its stockholders at a special meeting that
is expected to take place in June 1996. Dual's majority stockholder has
agreed to vote in favor of the acquisition of Dual by the Company. Closing
of the transaction is expected before June 30, 1996.
NOTE 3 - PROVISION FOR INCOME TAXES
The current income tax provision for the three months ended March 31, 1996
is primarily for the Company's operations in Venezuela. The deferred
income tax provision for the three months ended March 31, 1996 relates to
the Company's operations in the U.S., the United Kingdom and Venezuela. No
provision for regular U.S. federal income taxes has been recorded for the
three months ended March 31, 1996 due to the utilization of net operating
loss carryforwards to offset taxes currently payable.
At March 31, 1996, the Company had regular and alternative minimum tax net
operating loss carryforwards of approximately $228.2 million and $159.1
million, respectively, and investment tax credit and alternative minimum
tax credit carryforwards of approximately $360,000 and $1.5 million,
respectively.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
In February 1991, a wholly-owned subsidiary of the Company filed an action
against TransAmerican Natural Gas Corporation and related subsidiaries and
affiliates ("TransAmerican") seeking damages for breach of contract. In
August 1991, TransAmerican filed a state court action against the wholly-
owned subsidiary of the Company seeking damages for breach of contract and
tort claims. On April 5, 1996, the U.S. District Court for the Southern
District of Texas, Houston Division, entered a judgment against
TransAmerican. As a result of the judgment, on April 18, 1996 the wholly-
owned subsidiary of the Company entered into a settlement agreement with
TransAmerican. Under the terms of the settlement agreement, TransAmerican
agreed to pay the wholly-owned subsidiary of the Company, prior to June 17,
1996, approximately $7.2 million plus interest. Additionally, all claims
or causes of action which TransAmerican has or may have against the Company
or its wholly-owned subsidiary, including, without limitation, the state
court action currently pending, have been or will be dismissed. Interest
accrues at a rate of 15% per annum on the unpaid balance of the settlement
proceeds from April 16, 1996. The Company anticipates a gain on the
settlement with TransAmerican of approximately $6.3 million in the second
quarter of 1996.
In mid-January 1996, one of the Company's jackup rigs located in the U.S.
Gulf of Mexico experienced damage as it was preparing to jack up on a new
location. The jackup rig was mobilized to a shipyard where it is currently
undergoing repairs and is expected to be available for work in mid-1996.
The Company is fully insured for damage to, loss of, and/or salvage
operations related to the jackup rig and the Company expects that all such
costs incurred will be recoverable from its insurance coverage.<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BUSINESS ENVIRONMENT
ENSCO International Incorporated (the "Company") provides offshore contract
drilling and marine transportation services to the oil and gas industry
with operations in the U.S. Gulf of Mexico, the North Sea and Venezuela.
The Company's complement of offshore drilling rigs consists of 24 jackup
rigs, of which 18 are located in the U.S. Gulf of Mexico and six are
located in the North Sea, and 10 barge drilling rigs on Lake Maracaibo,
Venezuela. The Company's marine transportation fleet consists of 37
vessels, all of which are located in the U.S. Gulf of Mexico. Industry
activity levels for offshore drilling rigs and U.S. Gulf of Mexico marine
vessels increased in the first quarter of 1996 over the already improved
levels prevalent in the second half of 1995. The increased activity levels
in the first quarter of 1996 have resulted in demand increasing to absorb
most of the rigs that are being actively marketed in the major offshore oil
and gas markets throughout the world and for actively marketed U.S. Gulf of
Mexico marine vessels.
Industry activity levels for U.S. Gulf of Mexico jackup rigs and marine
vessels increased in the first quarter of 1996 in comparison to the latter
part of 1995 due, in part, to a sustained level of increased natural gas
prices in late-1995 and the first quarter of 1996. Unless there is a
significant deterioration in natural gas prices, management believes
current U.S. Gulf of Mexico industry activity levels are sustainable for
the remainder of 1996, and in particular, demand for cantilever jackup
rigs, which is the Company's main focus, is expected to remain strong due
to the increased level of development activity which requires cantilevered
drilling over existing production platforms.
In the North Sea, industry activity levels increased in the first quarter
of 1996 with full utilization of all actively marketed jackup rigs as
compared to near full utilization in 1995. Management anticipates, based
on current market conditions, that North Sea industry activity levels
should remain fairly stable for the remainder of 1996, although lower spot
prices for natural gas in the United Kingdom present some uncertainty.
The Company's barge drilling rigs in Venezuela generally operate under
long-term contracts for a national oil company. As a result, their
activity levels are not as dependent on oil and natural gas prices.
Offshore rig and marine vessel industry utilization for the three months
ended March 31, 1996 and 1995 is summarized below:
INDUSTRY WIDE AVERAGES * 1996 1995
------------------------ ------ ------
Offshore Rigs
U.S. Gulf of Mexico:
All Rigs:
Rigs Under Contract 149 118
Total Rigs Available 178 179
% Utilization 84% 66% <PAGE>
Jackup Rigs:
Rigs Under Contract 115 96
Total Rigs Available 137 141
% Utilization 84% 68%
Worldwide:
All Rigs:
Rigs Under Contract 552 522
Total Rigs Available 641 653
% Utilization 86% 80%
Jackup Rigs:
Rigs Under Contract 334 311
Total Rigs Available 384 391
% Utilization 87% 80%
Marine Vessels
U.S. Gulf of Mexico:
Vessels Under Contract 268 233
Total Vessels Available 281 277
% Utilization 95% 84%
* Industry utilization based on data
published by Offshore Data Services, Inc.
RESULTS OF OPERATIONS
The following analysis highlights the Company's operating results for the
three months ended March 31, 1996 and 1995 (in thousands):
1996 1995
OPERATING RESULTS -------- --------
-----------------
Revenues $ 84,546 $ 61,130
Operating margin (1) 41,022 25,035
Operating income 22,433 9,346
Other expense (2,549) (1,299)
Provision for income taxes (4,767) (39)
Minority interest (427) (602)
Income from continuing operations 14,690 7,406
Income from discontinued operation - 216
Net income 14,690 7,622
REVENUES
--------
Contract drilling
United States jackup rigs $ 36,053 $ 27,722
North Sea jackup rigs 20,922 10,681
Total jackup rigs 56,975 38,403
Barge drilling rigs - Venezuela 15,908 15,497
Total contract drilling 72,883 53,900
Marine transportation
AHTS (2) 3,778 2,793
Supply 6,595 3,932<PAGE>
Mini-supply 1,290 505
Total marine transportation 11,663 7,230
Total $ 84,546 $ 61,130
OPERATING MARGIN (1)
--------------------
Contract drilling
United States jackup rigs $ 16,154 $ 10,281
North Sea jackup rigs 9,429 3,520
Total jackup rigs 25,583 13,801
Barge drilling rigs - Venezuela 9,994 9,734
Total offshore rigs 35,577 23,535
Land rig (3) (31) (114)
Total contract drilling 35,546 23,421
Marine transportation
AHTS (2) 2,177 1,085
Supply 2,901 545
Mini-supply 398 (16)
Total marine transportation 5,476 1,614
Total $ 41,022 $ 25,035
(1) Defined as revenues less operating expenses, exclusive of
depreciation and general and administrative expenses.
(2) Anchor handling tug supply vessels.
(3) The Company owns one land rig which is stacked in the
Middle East.
The following is an analysis of certain operating information of the
Company for the three months ended March 31, 1996 and 1995:
1996 1995
CONTRACT DRILLING -------- --------
-----------------
Rig utilization:
United States jackup rigs 90% 88%
North Sea jackup rigs 94% 60%
Total jackup rigs 91% 82%
Barge drilling rigs - Venezuela 80% 98%
Total 88% 87%
Average day rates:
United States jackup rigs $ 23,385 $ 19,989
North Sea jackup rigs 43,345 39,206
Total jackup rigs 27,959 23,200
Barge drilling rigs - Venezuela 21,798 17,490
Total $ 26,266 $ 21,187<PAGE>
MARINE TRANSPORTATION
---------------------
Fleet utilization:
AHTS * 88% 70%
Supply 89% 72%
Mini-supply 66% 41%
Total 84% 65%
Average day rates:
AHTS * $ 7,828 $ 7,001
Supply 3,535 2,875
Mini-supply 2,678 1,715
Total $ 4,120 $ 3,473
* Anchor handling tug supply vessels.<PAGE>
The Company's consolidated revenues, operating margin and operating income
(defined as revenues less operating expenses, depreciation and general and
administrative expenses) for the three months ended March 31, 1996
increased significantly from the same period in 1995. The increases were
due primarily to increased average day rates and utilization for the
Company's rigs and vessels in the first quarter of 1996 and the return to
work of various rigs and vessels that were in shipyards for major
modifications and enhancements in the prior year period. The improved
level of operating income in the first quarter of 1996 was offset, in part,
by increased depreciation expense associated with the addition of a North
Sea jackup rig in March 1995 and the return to work of various rigs and
vessels that experienced major modifications and enhancements in 1995.
CONTRACT DRILLING
Revenues and operating margins for the Company's contract drilling segment
for the three months ended March 31, 1996 were up 35% and 52%,
respectively, compared to the prior year period. The significantly
improved 1996 results were primarily due to increased current year activity
levels in the U.S. Gulf of Mexico and the North Sea which were contributing
factors to higher average day rates for the Company's jackup rigs as
compared to the prior year period. Average day rates for the Company's
jackup rigs in the U.S. Gulf of Mexico and the North Sea increased by 17%
and 11%, respectively, from the prior year period. The 1996 results also
benefitted from the return to work in 1995 of three of the Company's jackup
rigs, two in the North Sea and one in the U.S. Gulf of Mexico, that were
undergoing major modifications and enhancements in the prior year period.
These increases were partially offset by two barge drilling rigs in
Venezuela coming off contract in the second quarter of 1995. Modifications
on the two barge drilling rigs in Venezuela are substantially complete and
the Company is currently in final negotiations with Lagoven, S.A.
("Lagoven"), a subsidiary of the Venezuela national oil company, for the
rigs to begin operating in the second quarter of 1996.
The Venezuelan currency experienced significant devaluation in the first
half of 1994 and the Venezuelan government established policies to control
the exchange rate of the Venezuelan currency and severely restricted the
conversion of Venezuelan currency to U.S. dollars. The Venezuelan
government further devalued the Venezuela currency against the U.S. dollar
in late 1995. In April 1996, the Venezuela government removed all
conversion and exchange controls and the Venezuelan currency began trading
freely. To date, the Company has not experienced problems associated with
receiving U.S. dollar payments with respect to the U.S. dollar portion of
its contracts with Lagoven. Changes in these conditions, other policy
enactments, or political developments in Venezuela could have an adverse
effect upon the Company. However, the Company believes such adverse
effects are unlikely due to the volume of U.S. dollars paid to the parent
company of Lagoven for its oil exports.
On March 21, 1996, the Company entered into a definitive agreement to
acquire DUAL DRILLING COMPANY ("Dual"). Dual operates a fleet of 20
offshore drilling rigs, including 10 jackup rigs and 10 self-contained
platform rigs. Twelve of Dual's rigs are located in the U.S., with three
jackup rigs and seven platform rigs currently located in the U.S. Gulf of
Mexico and two platform rigs off the coast of California. The remainder of
Dual's fleet operates in international waters, with rigs currently located
offshore India, Mexico, Qatar, Indonesia and China. Closing of the
transaction is expected before June 30, 1996.
<PAGE>
MARINE TRANSPORTATION
Revenues and operating margins for the Company's marine transportation
segment for the three months ended March 31, 1996 were up 61% and 239%,
respectively, in comparison to the prior year period. The 1996 results
improved significantly from the prior year period due to increased current
year activity levels in the U.S. Gulf of Mexico which was a contributing
factor to higher average day rates for the Company's marine transportation
vessels as compared to the prior year period. Average day rates for the
Company's marine transportation vessels increased by 19% from the prior
year period. The 1996 results also benefitted from the return to work in
1995 of four mini-supply vessels that were undergoing modifications in the
prior year period and the purchase of six supply vessels in late-1995, four
of which were previously operated under operating lease agreements.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased by 21% for the three months
ended March 31, 1996 as compared to the prior year period due primarily to
depreciation on a North Sea jackup rig acquired in March 1995 and
depreciation on six supply vessels purchased in late 1995. Depreciation
expense also increased in the first quarter of 1996 due to depreciation on
major modifications and enhancements of rigs and vessels in 1995.
OTHER INCOME (EXPENSE)
Other income (expense) for the three months ended March 31, 1996 and 1995
was as follows (in thousands):
1996 1995
-------- --------
Interest income $ 1,236 $ 2,149
Interest expense (4,049) (4,391)
Other, net 264 943
$ (2,549) $ (1,299)
The Company's interest income and interest expense decreased for the three
months ended March 31, 1996 as compared to the prior year period due
primarily to lower average cash balances in the current period and general
principal reductions in long-term debt balances since the prior year
period, respectively. Other, net income decreased for the three months
ended March 31, 1996 as compared to the prior year period due primarily to
gains on the sale of foreign currency denominated securities in the prior
year period.
PROVISION FOR INCOME TAXES
The Company's provision for income taxes increased for the three months
ended March 31, 1996 as compared to the prior year period due to increased
deferred income tax provisions in the current period. The Company's U.S.
deferred income tax provision increased by $3.6 million from the prior year
period due primarily to the timing of the recognition of the expected
utilization or non-utilization of U.S. net operating loss carryforwards.
The deferred income tax provisions in the U.S., Venezuela and the United
Kingdom also increased for the three months ended March 31, 1996 as
compared to the prior year period due, in part, to increased differences in
the book and tax basis of property and equipment. <PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
CASH FLOW AND CAPITAL EXPENDITURES
The Company's cash flow from operations and capital expenditures for the
three months ended March 31, 1996 and 1995 are as follows (in thousands):
1996 1995
-------- --------
Cash flow from operations $ 37,041 $ 21,183
Capital expenditures
Sustaining $ 2,551 $ 2,695
Enhancements 23,056 11,810
New Construction - 766
Acquisitions 13,271 12,755
$ 38,878 $ 28,026
Cash flow from operations increased by $15.9 million for the three months
ended March 31, 1996 as compared to the prior year period. The increase in
cash flow from operations is primarily a result of increased operating
margins in the first three months of 1996 as compared to the prior year
period and an increase in cash flow from the net change in various working
capital accounts.
Management anticipates that capital expenditures in 1996, excluding any
amounts associated with Dual, will be approximately $113.0 million,
including $20.0 million for existing operations, $80.0 million for
modifications and enhancements of rigs and vessels and $13.0 million
related to a deferred purchase payment on a North Sea jackup rig acquired
in March 1995. The Company may spend additional funds to acquire rigs or
vessels in 1996, depending on market conditions and opportunities.
FINANCING AND CAPITAL RESOURCES
The Company's long-term debt, total capital and debt to capital ratios at
March 31, 1996 and December 31, 1995 are summarized below (in thousands,
except percentages):
MARCH 31, DECEMBER 31,
1996 1995
------------ -----------
Long-term debt $150,518 $159,201
Total capital 697,355 690,450
Long-term debt to total capital 22% 23%
The decrease in long-term debt relates to scheduled repayments. The total
capital of the Company increased primarily due to the profitability of the
Company for the three months ended March 31, 1996 offset, in part, by the
reduction in long-term debt.
On March 21, 1996, the Company entered into a definitive agreement to
acquire Dual. Dual's common stockholders will receive 0.625 shares of the
Company's common stock for each share of Dual common stock, which is
expected to result in the issuance of approximately 10.0 million shares of
the Company's common stock. The Company has received early termination of
the waiting period for the transaction under applicable U.S. antitrust<PAGE>
laws. Dual's financial advisors have rendered a fairness opinion on the
transaction for the benefit of Dual's stockholders and Dual's Board of
Directors has resolved to recommend the transaction to its stockholders at
a special meeting that is expected to take place in June 1996. Dual's
majority stockholder has agreed to vote in favor of the acquisition of Dual
by the Company. Closing of the transaction is expected before June 30,
1996.
The Company had a $64.0 million undrawn revolving line of credit at March
31, 1996. The revolver is reduced semi-annually by $6.0 million with the
remaining line expiring in October 2001.
The Company's liquidity position at March 31, 1996 and December 31, 1995 is
summarized in the table below (in thousands, except ratios):
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
Cash and short-term investments $ 75,154 $ 82,064
Working capital 83,890 78,945
Current ratio 2.1 1.9
Based on current energy industry conditions, management believes cash flow
from operations, the Company's existing credit facility and the Company's
working capital should be sufficient to fund the Company's short and long-
term liquidity needs.
PRIVATE LITIGATION SECURITIES REFORM ACT OF 1995
- ------------------------------------------------
This report contains forward-looking statements based on current
expectations that involve a number of risks and uncertainties. The
forward-looking statements are made pursuant to safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. The factors that
could cause actual results to differ materially include the following:
industry conditions and competition, cyclical nature of the industry,
worldwide expenditures for oil and gas drilling, operational risks and
insurance, risks associated with operating in foreign jurisdictions, and
the risks described from time to time in the Company's reports to the
Securities and Exchange Commission, which include the Company's Annual
Report on Form 10-K for the year ended December 31, 1995. <PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In February 1991, a wholly-owned subsidiary of the Company filed an action
against TransAmerican Natural Gas Corporation and related subsidiaries and
affiliates ("TransAmerican") seeking damages for breach of contract. In
August 1991, TransAmerican filed a state court action against the wholly-
owned subsidiary of the Company seeking damages for breach of contract and
tort claims. On April 5, 1996, the U.S. District Court for the Southern
District of Texas, Houston Division, entered a judgment against
TransAmerican. As a result of the judgment, on April 18, 1996 the wholly-
owned subsidiary of the Company entered into a settlement agreement with
TransAmerican. Under the terms of the settlement agreement, TransAmerican
agreed to pay the wholly-owned subsidiary of the Company, prior to June 17,
1996, approximately $7.2 million plus interest. Additionally, all claims
or causes of action which TransAmerican has or may have against the Company
or its wholly-owned subsidiary, including, without limitation, the state
court action currently pending, have been or will be dismissed. Interest
accrues at a rate of 15% per annum on the unpaid balance of the settlement
proceeds from April 16, 1996. The Company anticipates a gain on the
settlement with TransAmerican of approximately $6.3 million in the second
quarter of 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits and Exhibit Index
Exhibit No.
-----------
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed Current Reports on Form 8-K dated:
(i) January 25, 1996, with respect to the Letter
of Intent for the acquisition of DUAL
DRILLING COMPANY by the Company, and
(ii) March 21, 1996, with respect to the Agreement
and Plan of Merger between the Company, DDC
Acquisition Company and DUAL DRILLING COMPANY
and the Voting Agreement between the Company
and Dual Invest AS.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENSCO INTERNATIONAL INCORPORATED
Date: April 25, 1996 /s/ C. Christopher Gaut
------------------ ----------------------------------
C. Christopher Gaut
Chief Financial Officer
/s/ H. E. Malone
----------------------------------
H. E. Malone, Corporate Controller
and Chief Accounting Officer<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<PAGE>
<LEGEND>
This schedule contains summary financial information extracted from the
March 31, 1996 financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> $ 75,154
<SECURITIES> 0
<RECEIVABLES> 65,746
<ALLOWANCES> 675
<INVENTORY> 2,322
<CURRENT-ASSETS> 161,812
<PP&E> 843,943
<DEPRECIATION> 201,450
<TOTAL-ASSETS> 824,620
<CURRENT-LIABILITIES> 77,922
<BONDS> 150,518
<COMMON> 6,695
0
0
<OTHER-SE> 540,142
<TOTAL-LIABILITY-AND-EQUITY> 824,620
<SALES> 0
<TOTAL-REVENUES> 84,546
<CGS> 0
<TOTAL-COSTS> 43,524
<OTHER-EXPENSES> 18,589
<LOSS-PROVISION> 211
<INTEREST-EXPENSE> 4,049
<INCOME-PRETAX> 19,884
<INCOME-TAX> 4,767
<INCOME-CONTINUING> 14,690
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,690
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24<PAGE>
</TABLE>
