<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 June 30, 1997
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 70,994,806 shares of Common Stock, $.10 par value, of the
registrant outstanding as of July 28, 1997.<PAGE>
ENSCO INTERNATIONAL INCORPORATED
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
PAGE
--------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Review Report of Independent Accountants 3
Consolidated Statement of Income
Three Months Ended June 30, 1997 and 1996 4
Consolidated Statement of Income
Six Months Ended June 30, 1997 and 1996 5
Consolidated Balance Sheet
June 30, 1997 and December 31, 1996 6
Consolidated Statement of Cash Flows
Six Months Ended June 30, 1997 and 1996 7
Notes to Consolidated Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 21
SIGNATURES 22
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS
----------------------------------------
To the Board of Directors and Stockholders
of ENSCO International Incorporated
We have reviewed the accompanying consolidated balance sheet of ENSCO
International Incorporated as of June 30, 1997 and the related consolidated
statements of income and of cash flows for the three and six month periods
ended June 30, 1997 and 1996. This financial information is the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial information for it to be in
conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1996, and the
related consolidated statements of income and of cash flows for the year
then ended (not presented herein), and in our report dated January 28, 1997
we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet information as of December 31, 1996, is fairly
stated in all material respects in relation to the consolidated balance
sheet from which it has been derived.
/s/ Price Waterhouse LLP
- - ------------------------
Dallas, Texas
July 28, 1997
<PAGE>
<TABLE>
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
----------------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING REVENUES........................... $195,418 $ 97,249
EXPENSES
Operating expenses......................... 77,157 49,227
Depreciation and amortization.............. 25,780 17,880
General and administrative................. 3,804 2,950
-------- --------
106,741 70,057
-------- --------
OPERATING INCOME............................. 88,677 27,192
OTHER INCOME (EXPENSE)
Interest income............................ 1,287 1,098
Interest expense........................... (4,806) (4,387)
Other, net................................. 69 7,458
-------- --------
(3,450) 4,169
-------- --------
INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST................................... 85,227 31,361
PROVISION FOR INCOME TAXES
Current income taxes....................... 18,402 594
Deferred income taxes...................... 13,749 8,255
-------- --------
32,151 8,849
MINORITY INTEREST............................ 850 931
-------- --------
NET INCOME .................................. $ 52,226 $ 21,581
======== ========
EARNINGS PER SHARE........................... $ .74 $ .34
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING.......... 70,895 62,788
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.<PAGE>
<TABLE>
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING REVENUES........................... $357,018 $181,795
EXPENSES
Operating expenses......................... 147,268 92,751
Depreciation and amortization.............. 49,965 34,254
General and administrative................. 6,886 5,165
-------- --------
204,119 132,170
-------- --------
OPERATING INCOME............................. 152,899 49,625
OTHER INCOME (EXPENSE)
Interest income............................ 2,701 2,334
Interest expense........................... (10,663) (8,436)
Other, net................................. 160 7,722
-------- --------
(7,802) 1,620
-------- --------
INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST................................... 145,097 51,245
PROVISION FOR INCOME TAXES
Current income taxes....................... 27,593 961
Deferred income taxes...................... 27,223 12,655
-------- --------
54,816 13,616
MINORITY INTEREST............................ 1,778 1,358
-------- --------
NET INCOME .................................. $ 88,503 $ 36,271
======== ========
EARNINGS PER SHARE........................... $ 1.25 $ .59
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING.......... 70,882 61,719
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.<PAGE>
<TABLE>
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except for share amounts)
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents..................... $ 71,715 $ 80,698
Accounts and notes receivable, net............ 142,607 111,033
Prepaid expenses and other.................... 16,301 19,668
---------- ----------
Total current assets.................... 230,623 211,399
---------- ----------
PROPERTY AND EQUIPMENT, AT COST................. 1,361,834 1,248,873
Less accumulated depreciation................. 304,944 257,284
---------- ----------
Property and equipment, net............. 1,056,890 991,589
---------- ----------
OTHER ASSETS, NET 126,287 112,432
---------- ----------
$1,413,800 $1,315,420
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.............................. $ 10,556 $ 11,447
Accrued liabilities........................... 73,546 57,490
Current maturities of long-term debt.......... 35,356 34,943
---------- ----------
Total current liabilities............... 119,458 103,880
---------- ----------
LONG-TERM DEBT.................................. 215,553 258,635
DEFERRED INCOME TAXES........................... 101,758 72,963
OTHER LIABILITIES............................... 41,808 33,991
COMMITMENTS AND CONTINGENCIES...................
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 250.0 million
shares authorized, 77.3 million and 77.2
million shares issued....................... 7,733 7,718
Additional paid-in capital.................... 838,235 835,475
Retained earnings ............................ 160,305 71,802
Restricted stock (unearned compensation)...... (4,801) (4,929)
Cumulative translation adjustment............. (1,086) (1,086)
Treasury stock at cost, 6.4 million and
6.3 million shares.......................... (65,163) (63,029)
---------- ----------
Total stockholders' equity ............. 935,223 845,951
---------- ----------
$1,413,800 $1,315,420
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.<PAGE>
<TABLE>
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income........................................ $ 88,503 $ 36,271
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................ 49,965 34,254
Deferred income tax provision................ 27,223 12,655
Amortization of other assets................. 2,954 1,646
Other........................................ (306) (2,104)
Changes in operating assets and liabilities:
Increase in accounts receivable............ (31,579) (8,881)
(Increase) decrease in prepaid expenses and
other.................................... (679) 2,566
Increase in accounts payable............... 1,343 2,228
Increase in accrued liabilities............ 7,629 5,312
-------- --------
Net cash provided by operating
activities............................. 145,053 83,947
-------- --------
INVESTING ACTIVITIES
Additions to property and equipment............... (114,041) (69,289)
Sale of short-term investments.................... - 5,000
Net cash acquired in Dual acquisition............. - 8,529
Other............................................. 852 1,495
-------- --------
Net cash used by investing activities......... (113,189) (54,265)
-------- --------
FINANCING ACTIVITIES
Proceeds from long-term borrowings................ - 45,000
Reduction of long-term borrowings................. (42,282) (57,590)
Pre-acquisition purchase of Dual debt............. - (18,112)
Reduction in restricted cash...................... 1,631 -
Other............................................. (196) 699
-------- --------
Net cash used by financing activities......... (40,847) (30,003)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS............... (8,983) (321)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...... 80,698 77,064
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD............ $ 71,715 $ 76,743
======== ========
</TABLE>
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 presentation of the
financial position, results of operations and of cash flows for the interim
periods presented.
The financial data for the three and six month periods ended June 30, 1997
included herein have been subjected to a limited review by Price Waterhouse
LLP, the registrant's independent accountants. The accompanying review
report of independent accountants is not a report within the meaning of
Sections 7 and 11 of the Securities Act of 1933 and the independent
accountant's liability under Section 11 does not extend to it.
Results of operations for the three and six month periods ended June 30,
1997 are not necessarily indicative of the results of operations that will
be realized for the year ending December 31, 1997. It is recommended that
these financial statements be read in conjunction with the Company's
consolidated financial statements and notes thereto for the year ended
December 31, 1996 included in the Company's Annual Report to the Securities
and Exchange Commission on Form 10-K.
Note 2 - Acquisition of DUAL DRILLING COMPANY
On June 12, 1996, the Company acquired DUAL DRILLING COMPANY ("Dual"),
pursuant to an Agreement and Plan of Merger among the Company, a wholly
owned subsidiary of the Company, and Dual. The acquisition was approved on
that date by Dual stockholders who received 0.625 shares of the Company's
common stock for each share of Dual common stock. The Company issued
approximately 10.1 million shares of its common stock to Dual stockholders
in connection with the acquisition, resulting in an acquisition price of
approximately $218.4 million.
The Company accounted for the acquisition of Dual under the purchase
accounting method. The excess of the purchase price over net assets
acquired approximated $115 million and is being amortized over 40 years.
The acquired Dual operations consisted of a fleet of 20 offshore drilling
rigs, including 10 jackup rigs and 10 platform rigs. Four of the jackup
rigs are presently located in the Gulf of Mexico and six are located in
various locations throughout Southeast Asia. Of the 10 platform rigs
operated by Dual, seven are currently located in the Gulf of Mexico and
one, which is not owned but managed, is located off the coast of China.
The remaining two platform rigs were retired in September 1996.
<PAGE>
The following unaudited pro forma information shows the consolidated
results of operations for the six months ended June 30, 1996 based upon
adjustments to the historical financial statements of the Company and the
historical financial statements of Dual to give effect to the acquisition
by the Company as if such acquisition had occurred January 1, 1996 (in
thousands, except per share data):
1996
--------
Operating revenues $235,337
Operating income $ 52,700
Net income $ 34,773
Earnings per share $ .48
The pro forma consolidated results of operations are not necessarily
indicative of the actual results that would have occurred had the
acquisition occurred on January 1, 1996 or of results that may occur in the
future.
Note 3 - Purchase of Additional Rig Interest
In May 1997, the Company acquired the remaining 51% interest in a jointly
owned premium jackup rig located in Southeast Asia. The Company previously
acquired a 49% interest in the rig as a result of the acquisition of Dual.
Note 4 - Long-Term Debt
On February 27, 1997, the Company amended and restated its $150.0 million
revolving credit facility with a group of international banks, increasing
availability under the amended and restated revolving credit facility (the
"Facility") to $200.0 million and reducing the interest rate margin and the
commitment fee. Availability under the Facility will be reduced by $14.0
million on a semi-annual basis beginning April 1998. The final maturity
date of the Facility remains October 2001 and the Facility continues to be
collateralized by the majority of the Company's jackup rigs. The covenants
under the Facility are similar to the covenants that existed under the
original revolving credit facility and the interest rate continues to be
tied to the London InterBank Offered Rate. As of June 30, 1997, $100.0
million was outstanding and $100.0 million was available for future
borrowing under the Facility. The weighted-average interest rate on the
Facility was 6.5% as of June 30, 1997.
Note 5 - Related Party Transaction
In January 1997, a director of the Company settled a $675,000 note payable
to the Company. The note payable related to the director's purchase of
168,750 shares of restricted common stock of the Company in 1988. The note
was settled through the delivery to the Company of restricted shares of the
Company's common stock valued at a formula price provided for in the
director's 1988 stock purchase agreement. As a result, the director
retained 132,998 net shares of common stock and $238,000 cash after
repayment of the note.
<PAGE>
Note 6 - Amendment of Shareholder Rights Plan
On March 3, 1997, the Board of Directors of ENSCO amended the Shareholder
Rights Plan of the Company to increase the purchase price from $50.00 to
$250.00 for each one one-hundredth of a share of preferred stock
purchasable upon the exercise of a Right, subject to adjustment.
Note 7 - Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share,"
(the "Statement") which establishes new standards for computing and
presenting earnings per share. The new Statement is intended to simplify
the standard for computing earnings per share and will require the
presentation of basic and diluted earnings per share on the face of the
income statement, including all prior periods presented. The Statement is
effective for financial statements issued for periods ending after December
15, 1997, and earlier adoption is not permitted. For the quarters ended
June 30, 1997 and 1996, the calculation of earnings per share in accordance
with the provisions of SFAS No. 128 would have resulted in basic earnings
per share of $.74 and $.35 and diluted earnings per share of $.73 and $.34,
for the respective periods. For the six months ended June 30, 1997 and
1996, the calculation of earnings per share in accordance with SFAS No. 128
would have resulted in basic earnings per share of $1.26 and $.59 and
diluted earnings per share of $1.24 and $.58, for the respective periods.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements based on current
expectations that involve a number of risks and uncertainties that could
cause actual results to differ materially from the results discussed in the
forward-looking statements. Generally, forward-looking statements include
words or phrases such as "management anticipates", "the Company believes",
"the Company anticipates" and words and phrases of similar impact. 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, but are not
limited to: (i) industry conditions and competition, (ii) the cyclical
nature of the industry, (iii) worldwide expenditures for oil and gas
drilling, (iv) operational risks and insurance, (v) risks associated with
operating in foreign jurisdictions, (vi) environmental liabilities which
may arise in the future which are not covered by insurance or indemnity,
(vii) the impact of current and future laws and governmental regulation, as
well as repeal or modification of the same, affecting the oil and gas
industry and the Company's operations in particular, and (viii) the risks
described from time to time in the Company's reports to the Securities and
Exchange Commission, including the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
Demand for the Company's services is significantly affected by worldwide
expenditures for oil and gas drilling. Expenditures for oil and gas
drilling activity fluctuate based upon many factors including world
economic conditions, the legislative environment in the U.S. and other
major countries, production levels and other activities of OPEC and other
oil and gas producers and the impact that those and other events have on
the current and expected future pricing of oil and natural gas.
BUSINESS ENVIRONMENT
ENSCO International Incorporated is one of the largest providers of
offshore drilling services and marine transportation services to the oil
and gas industry. The Company's operations are conducted in the geographic
cores of North America, Europe, Asia Pacific and South America. The
geographic region in which the Company has the largest operation is North
America where the Company operates primarily in the Gulf of Mexico. The
Company's European operations are concentrated in the North Sea and the
South American operations are conducted on Lake Maracaibo, Venezuela.
Offshore drilling and marine transportation services are largely affected
by the supply and demand for available equipment. Currently, nearly all
actively marketed offshore rigs in the world are under contract and the
demand for high quality rigs exceeds supply in most areas. Based on
current industry conditions and the projected capital spending levels of
major oil and gas companies, the Company believes the outlook remains
positive for additional increases in day rates and continued high demand
for the remainder of 1997.
<PAGE>
Offshore rig and marine vessel industry utilization for the three and six
months ended June 30, 1997 and 1996 are summarized below:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------
1997 1996 1997 1996
------ ------ ------ ------
INDUSTRY WIDE AVERAGES *
- - ------------------------
Offshore Rigs
U.S. Gulf of Mexico:
All Rigs:
Rigs Under Contract 167 156 167 153
Total Rigs Available 180 179 181 178
% Utilization 93% 87% 92% 86%
Jackup Rigs:
Rigs Under Contract 127 121 125 118
Total Rigs Available 133 137 134 137
% Utilization 95% 88% 93% 86%
Platform Rigs:
Rigs Under Contract 22 18 20 16
Total Rigs Available 27 26 26 25
% Utilization 81% 69% 77% 63%
Worldwide:
All Rigs:
Rigs Under Contract 600 572 592 562
Total Rigs Available 635 640 635 641
% Utilization 94% 89% 93% 88%
Jackup Rigs:
Rigs Under Contract 364 346 359 340
Total Rigs Available 378 384 378 384
% Utilization 96% 90% 95% 89%
Platform Rigs:
Rigs Under Contract 114 90 113 86
Total Rigs Available 124 122 123 118
% Utilization 92% 74% 92% 73%
Marine Vessels
U.S. Gulf of Mexico:
Vessels Under Contract 278 258 278 263
Total Vessels Available 297 278 293 280
% Utilization 94% 93% 95% 94%
* Industry utilization based on data published by OFFSHORE DATA
SERVICES, INC.
<PAGE>
RESULTS OF OPERATIONS
The following analysis highlights the Company's operating results for the
three and six months ended June 30, 1997 and 1996 (in thousands):
Three months ended Six months ended
June 30, June 30,
------------------ ------------------
Operating Results 1997 1996 1997 1996
- - ----------------- -------- -------- -------- --------
Revenues $195,418 $ 97,249 $357,018 $181,795
Operating margin <F1> 118,261 48,022 209,750 89,044
Operating income 88,677 27,192 152,899 49,625
Other income (expense) (3,450) 4,169 (7,802) 1,620
Provision for income taxes 32,151 8,849 54,816 13,616
Minority interest 850 931 1,778 1,358
Net income 52,226 21,581 88,503 36,271
Revenues
- - --------
Contract drilling
Jackup rigs:
North America $ 86,928 $ 41,279 $154,611 $ 77,332
Europe 39,394 19,824 71,644 40,746
Asia Pacific <F2> 18,281 1,933 31,144 1,933
-------- -------- -------- --------
Total jackup rigs 144,603 63,036 257,399 120,011
Barge rigs - South America 20,542 19,179 41,085 35,087
Platform rigs <F2> 7,405 1,459 14,816 1,459
-------- -------- -------- --------
Total contract drilling 172,550 83,674 313,300 156,557
-------- -------- -------- --------
Marine transportation
AHTS <F4> 5,390 3,852 10,085 7,630
Supply 14,760 7,811 28,329 14,406
Mini-supply 2,718 1,912 5,304 3,202
-------- -------- -------- --------
Total marine transportation 22,868 13,575 43,718 25,238
-------- -------- -------- --------
Total $195,418 $ 97,249 $357,018 $181,795
======== ======== ======== ========
Operating Margin <F1>
- - ---------------------
Contract drilling
Jackup rigs:
North America $ 56,743 $ 20,305 $ 98,413 $ 36,459
Europe 25,602 6,592 44,889 16,021
Asia Pacific <F2> 8,293 690 10,719 690
-------- -------- -------- --------
Total jackup rigs 90,638 27,587 154,021 53,170
Barge rigs - South America 12,021 13,119 25,110 23,113
Platform rigs <F2> 1,645 509 3,986 509
Land rig <F3> - (15) - (46)
-------- -------- -------- --------
Total contract drilling 104,304 41,200 183,117 76,746
-------- -------- -------- --------
Marine transportation
AHTS <F4> 2,770 1,827 5,582 4,004
Supply 9,680 3,988 18,133 6,889
Mini-supply 1,507 1,007 2,918 1,405
-------- -------- -------- --------
Total marine transportation 13,957 6,822 26,633 12,298
-------- -------- -------- --------
Total $118,261 $ 48,022 $209,750 $ 89,044
======== ======== ======== ========
<F1> Defined as revenues less operating expenses, exclusive of
depreciation and general and administrative expenses.
<F2> The 1996 amounts for Asia Pacific and the platform rigs are
comprised exclusively of operations acquired in the Dual acquisition
on June 12, 1996.
<F3> The Company sold its remaining land rig in July 1996.
<F4> Anchor handling tug supply vessels.
The following is an analysis of certain operating information of the
Company for the three and six months ended June 30, 1997 and 1996:
Three months ended Six months ended
June 30, June 30,
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
Contract Drilling
- - -----------------
Utilization:
Jackup rigs:
North America 98% 91% 95% 91%
Europe 100% 78% 100% 86%
Asia Pacific 78% 86% 70% 86%
-------- -------- -------- --------
Total jackup rigs 95% 88% 92% 89%
Barge rigs - South America 100% 85% 100% 82%
Platform rigs 62% 78% 62% 78%
-------- -------- -------- --------
Total 91% 87% 89% 87%
======== ======== ======== ========
Average day rates:
Jackup rigs:
North America $ 43,979 $ 25,825 $ 40,635 $ 24,631
Europe 71,917 45,522 66,384 44,375
Asia Pacific 37,333 24,772 35,396 24,772
-------- -------- -------- --------
Total jackup rigs 47,989 29,640 44,729 28,821
Barge rigs - South America 22,559 24,768 22,685 23,327
Platform rigs 17,563 15,074 17,739 15,074
-------- -------- -------- --------
Total $ 39,898 $ 27,879 $ 37,375 $ 27,106
======== ======== ======== ========
Marine Transportation
- - ---------------------
Utilization:
AHTS <F1> 82% 72% 81% 80%
Supply 94% 90% 94% 90%
Mini-supply 98% 95% 97% 80%
-------- -------- -------- --------
Total 93% 88% 93% 86%
======== ======== ======== ========
Average day rates:
AHTS <F1> $ 11,974 $ 9,767 $ 11,496 $ 8,713
Supply 7,535 4,142 7,249 3,840
Mini-supply 3,811 2,766 3,769 2,730
-------- -------- -------- --------
Total $ 7,324 $ 4,568 $ 7,060 $ 4,351
======== ======== ======== ========
<F1> - Anchor handling tug supply vessels.
The Company's consolidated revenues, operating margin and operating income
for the three and six months ended June 30, 1997 increased significantly
from the same periods in 1996. The increases were due to higher average
day rates and utilization for the Company's drilling rigs and marine
vessels over 1996 levels and the results from the drilling rigs acquired in
the Dual acquisition in mid-June 1996. <PAGE>
Contract Drilling
- - -----------------
The following is an analysis of the Company's offshore drilling rigs at
June 30, 1997 and 1996:
1997 1996
---- ----
Jackup rigs:
North America 22 23
Europe 6 6
Asia Pacific 7 5
---- ----
Total jackup rigs 35 34
Barge rigs - South America 10 10
Platform rigs* 8 10
---- ----
Total 53 54
---- ----
* Seven are located in the Gulf of Mexico and one,
which is not owned but operated under a management
contract, is located off the coast of China.
Revenues and operating margin for the Company's contract drilling segment
for the quarter ended June 30, 1997 were up $88.9 million, or 106%, and
$63.1 million, or 153%, respectively, from the comparable prior year
quarter. For the six months ended June 30, 1997, revenues were up $156.7
million, or 100%, and operating margin increased $106.4 million, or 139%,
respectively, compared to the same period in the prior year. The
significantly improved 1997 results were primarily due to increased day
rates and utilization for rigs owned by the Company in both the current and
prior year comparable periods and from the revenues and operating margin
generated from the rigs acquired in the mid-June 1996 acquisition of Dual.
For the quarter ended June 30, 1997, revenues and operating margin from the
Company's North America jackup rigs increased by $45.6 million, or 111%,
and $36.4 million, or 179%, respectively, over the prior year quarter. For
the six months ended June 30, 1997, revenues and operating margin increased
by $77.3 million, or 100%, and $62.0 million, or 170%, respectively, from
the comparable prior year period. These improvements are due primarily to
increased average day rates of 70% and 65% for the three and six months
ended June 30, 1997, respectively, over the comparable prior year periods.
In addition, the North America jackup rigs acquired in the Dual acquisition
increased revenues and operating margin by approximately $13.2 million and
$8.3 million, respectively, for the three and six months ended June 30,
1997.
Revenues and operating margin from the Company's Europe jackup rigs
increased by $19.6 million, or 99%, and $19.0 million, or 288%,
respectively, for the quarter ended June 30, 1997 over the comparable prior
year quarter. For the six months ended June 30, 1997, revenues and
operating margin increased by $30.9 million, or 76%, and $28.9 million, or
180%, respectively, compared to the same period in the prior year. These
improvements are due primarily to increased average day rates of 58% and
50% for the three and six months ended June 30, 1997, respectively, over
<PAGE>
the same periods in the prior year. Also, utilization increased to 100% in
the current year periods from 78% and 86% for the comparable three and six
month periods in the prior year, respectively. In the prior year, two of
the Company's Europe jackup rigs were undergoing modifications and
enhancements for a portion of the first six months of 1996.
The Company's Asia Pacific operations were acquired as part of the Dual
acquisition and the prior year results included only a partial month of
operations. Subsequent to the Dual acquisition, the Company purchased an
additional jackup rig located in Southeast Asia in November 1996 and
transferred another jackup rig from the Gulf of Mexico to Southeast Asia in
the first quarter of 1997. In May 1997, the Company completed the
acquisition of the remaining 51% interest in a jointly owned jackup rig
located in Southeast Asia. This rig is currently undergoing modifications
and enhancement and will remain in the shipyard for most of the third
quarter of 1997. During the second quarter of 1997, two of the Company's
Asia Pacific jackup rigs that had been in the shipyard since late 1996
undergoing modifications and enhancements returned to work.
Revenues from the Company's South America barge rigs increased by $1.4
million, or 7%, and operating margin decreased by $1.1 million, or 8%,
respectively, for the quarter ended June 30, 1997 compared to same period
in the prior year. For the six months ended June 30, 1997, revenues and
operating margin increased by $6.0 million, or 17%, and $2.0 million, or
9%, respectively, compared to the same period in the prior year. These
improvements are due primarily to increased utilization to 100% in the
current year from 85% and 82% for the three and six months ended June 30,
1996, respectively. The increase in utilization is attributable to two of
the Company's barge drilling rigs that were undergoing modification for
most of the first six months of the prior year that returned to work in May
and June of 1996. The increased utilization is offset by a decrease in
average day rates from the comparable 1996 periods due to the recovery of
prior cost increases included in the second quarter of 1996. These cost
recoveries were the primary factor in the decrease in operating margin for
the quarter ended June 30, 1997 compared to the prior year quarter.
Marine Transportation
- - ---------------------
The following is an analysis of the Company's marine transportation vessels
as of June 30, 1997 and 1996:
1997 1996
---- ----
AHTS * 6 6
Supply 23 23
Mini-Supply 8 8
---- ----
Total 37 37
==== ====
* Anchor handling tug supply vessels.
Revenues and operating margin for the Company's marine transportation
segment for the quarter ended June 30, 1997 were up $9.3 million, or 68%,
and $7.1 million, or 105%, respectively, from the comparable prior year
quarter. For the six months ended June 30, 1997, revenues and operating
<PAGE>
margins increased $18.5 million, or 73%, and $14.3 million, or 117%,
respectively, from the prior year period. The 1997 results improved
significantly over the prior year periods due to increased utilization and
increased average day rates of approximately 60% and 62% for the comparable
three and six month periods of 1996 and 1997, respectively.
Depreciation and Amortization
- - -----------------------------
Depreciation and amortization expense increased by $7.9 million, or 44%,
and $15.7 million, or 46%, for the three and six months ended June 30,
1997, respectively, as compared to the same prior year periods. These
increases were due primarily to depreciation and amortization from the
additional drilling rigs and goodwill associated with the Dual acquisition,
and depreciation associated with major modifications and enhancements to
the Company's fleet in 1996 and the first part of 1997.
Other Income (Expense)
- - ----------------------
Other income (expense) for the three and six months ended June 30, 1997 and
1996 was as follows (in thousands):
Three months ended Six months ended
June 30, June 30,
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
Interest income $ 1,287 $ 1,098 $ 2,701 $ 2,334
Interest expense (4,806) (4,387) (10,663) (8,436)
Other, net 69 7,458 160 7,722
------- ------- ------- -------
$(3,450) $ 4,169 $(7,802) $ 1,620
======= ======= ======= =======
The Company's interest income increased for the three and six month periods
ended June 30, 1997 over the comparable prior year periods due primarily to
higher average cash balances in the current year.
Interest expense increased for the three and six month periods ended June
30, 1997 over the comparable prior year periods due primarily to the
additional debt assumed in the Dual acquisition, offset, in part, by debt
repayments.
"Other, net" decreased for the three and six month periods ended June 30,
1997 as compared to the prior year periods due primarily to a $6.4 million
gain on a settlement with TransAmerican Natural Gas Corporation recorded in
the second quarter of 1996.
Provision for Income Taxes
- - --------------------------
The Company's provisions for income taxes increased significantly for the
three and six months ended June 30, 1997 as compared to the prior year
periods due primarily to the increased profitability of the Company and the
recognition of the remaining net operating losses for financial reporting
purposes in 1996.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow and Capital Expenditures
- - ----------------------------------
The Company's cash flow from operations and capital expenditures for the
six months ended June 30, 1997 and 1996 were as follows (in thousands):
1997 1996
-------- --------
Cash flow from operations $145,053 $ 83,947
======== ========
Capital expenditures
Sustaining $ 13,316 $ 6,264
Enhancements 79,049 49,754
Acquisitions 21,676 13,271
-------- --------
$114,041 $ 69,289
======== ========
Cash flow from operations increased by $61.1 million for the six months
ended June 30, 1997 as compared to the same period in the prior year. The
increase in cash flow from operations is primarily a result of increased
operating margins in the first six months of 1997 offset, in part, by a
decrease in cash flow from the net change in various working capital
accounts.
Management anticipates that capital expenditures in 1997, excluding
acquisitions, will be approximately $170.0 million to $190.0 million,
represented by approximately $30.0 million for existing operations and
$140.0 million to $160.0 million for modifications and enhancements of rigs
and vessels. The Company may spend additional funds to acquire rigs or
vessels in 1997, depending on market conditions and opportunities.
Financing and Capital Resources
- - -------------------------------
The Company's long-term debt, total capital and debt to capital ratios at
June 30, 1997 and December 31, 1996 are summarized below (in thousands,
except percentages):
June 30, December 31,
1997 1996
---------- ------------
Long-term debt $ 215,553 $ 258,635
Total capital 1,150,776 1,104,586
Long-term debt to total capital 19% 23%
The decrease in long-term debt is due to $42.3 million of debt repayments
in the first six months of 1997. The total capital of the Company
increased due primarily to the profitability of the Company for the first
six months of 1997.
On February 27, 1997, the Company amended and restated its $150.0 million
revolving credit facility with a group of international banks, increasing
availability under the amended and restated revolving credit facility (the
<PAGE>
"Facility") to $200.0 million and reducing the interest rate margin and the
commitment fee. Availability under the Facility will be reduced by $14.0
million on a semi-annual basis beginning April 1998. The final maturity
date of the Facility remains October 2001 and the Facility continues to be
collateralized by the majority of the Company's jackup rigs. The covenants
under the Facility are similar to the covenants that existed under the
original revolving credit facility and the interest rate continues to be
tied to the London InterBank Offered Rate. As of June 30, 1997, $100.0
million was outstanding and $100.0 million was available for future
borrowing under the Facility. The weighted-average interest rate on the
Facility was 6.5% as of June 30, 1997.
The Company's liquidity position at June 30, 1997 and December 31, 1996 is
summarized in the table below (in thousands, except ratios):
June 30, December 31,
1997 1996
---------- ------------
Cash and cash equivalent $ 71,715 $ 80,698
Working capital 111,165 107,519
Current ratio 1.9 2.0
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.
OTHER MATTERS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share,"
(the "Statement") which establishes new standards for computing and
presenting earnings per share. The new Statement is intended to simplify
the standard for computing earnings per share and will require the
presentation of basic and diluted earnings per share on the face of the
income statement, including all prior periods presented. The Statement is
effective for financial statements issued for periods ending after December
15, 1997, and earlier adoption is not permitted. For the quarters ended
June 31, 1997 and 1996, the calculation of earnings per share in accordance
with the provisions of SFAS No. 128 would have resulted in basic earnings
per share of $.74 and $.35 and diluted earnings per share of $.73 and $.34,
for the respective periods. For the six months ended June 30, 1997 and
1996, the calculation of earnings per share in accordance with SFAS No. 128
would have resulted in basic earnings per share of $1.26 and $.59 and
diluted earnings per share of $1.24 and $.58, for the respective periods.
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 13 1997, the Company held an annual meeting of stockholders to
consider the following proposals: "Proposal 1" - To elect two Class I
Directors; "Proposal 2" - To approve the amendment of Article 4 of the
Company's Restated Certificate of Incorporation to increase the authorized
common stock from 125 million shares to 250 million shares; and "Proposal
3" - To approve the appointment of Price Waterhouse LLP as the Company's
independent accountants for 1997. A description of the foregoing matters
is contained in the Company's proxy statement, dated March 27, 1997,
relating to the 1997 annual meeting of stockholders.
There were 70,866,746 shares of the Company's common stock entitled to vote
at the annual meeting based on the March 26, 1997 record date. The Company
solicited proxies pursuant to Regulation 14 of the Securities Exchange Act
of 1934, and there was no solicitation in opposition to management's
nominees for directors as listed in the proxy statement. Each director
received a minimum of 63,000,000 votes, which was in excess of 88% of the
outstanding common shares entitled to vote.
With respect to Proposal 1 listed above, the voting was as follows:
Votes for Votes Withheld
--------- --------------
Gerald W. Haddock 63,331,567 995,197
Carl F. Thorne 64,126,449 200,315
With respect to Proposals 2 and 3 listed above, the voting was as follows:
Votes for Votes Against Abstentions
--------- ------------- -----------
Proposal 2 60,140,700 3,995,136 190,928
Proposal 3 64,174,130 40,347 112,287
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Filed with this Report
EXHIBIT NO.
-----------
3.1 Amended and Restated Certificate of
Incorporation.
15.1 Letter regarding unaudited interim financial
information.
27.1 Financial Data Schedule. (Exhibit 27.1 is being
submitted as an exhibit only in the electronic
format of this Quarterly Report on Form 10-Q
submitted to the Securities and Exchange
Commission.)
(b) Reports on Form 8-K
None
<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: July 28, 1997 /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
EXHIBIT NO. 27.1
<LEGEND>
This schedule contains summary financial information extracted from the
June 30, 1997 financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> $ 71,715
<SECURITIES> 0
<RECEIVABLES> 145,328
<ALLOWANCES> 2,721
<INVENTORY> 2,902
<CURRENT-ASSETS> 230,623
<PP&E> 1,361,834
<DEPRECIATION> 304,944
<TOTAL-ASSETS> 1,413,800
<CURRENT-LIABILITIES> 119,458
<BONDS> 215,553
<COMMON> 7,733
0
0
<OTHER-SE> 927,940
<TOTAL-LIABILITY-AND-EQUITY> 1,413,800
<SALES> 0
<TOTAL-REVENUES> 357,018
<CGS> 0
<TOTAL-COSTS> 147,268
<OTHER-EXPENSES> 56,851
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,663
<INCOME-PRETAX> 145,097
<INCOME-TAX> 54,816
<INCOME-CONTINUING> 88,503
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 88,503
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 0<PAGE>
</TABLE>
<PAGE>
EXHIBIT NO. 3.1
State of Delaware
OFFICE OF THE SECRETARY OF STATE
________________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED
CERTIFICATE OF "ENSCO INTERNATIONAL INCORPORATED", FILED IN THIS OFFICE ON
THE TENTH DAY OF JUNE, A.D. 1997, AT 10:30 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
[ S E A L ]
/S/ EDWARD J. FREEL, SECRETARY OF STATE
---------------------------------------
Edward J. Freel, Secretary of State
2134970 8100 AUTHENTICATION: 8503884
971189079 DATE: 06-10-97
<PAGE>
ENSCO INTERNATIONAL INCORPORATED
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
ENSCO International Incorporated (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that:
(i) The Corporation was incorporated under the name of Energy
Service Company, Inc. on August 14, 1987 and its original certificate
of incorporation (the "Original Certificate of Incorporation) was
filed on such date with the Secretary of State of the State of
Delaware.
(ii) The Original Certificate of Incorporation was amended
by certificates of amendment filed with the Secretary of State of the
State of Delaware on June 21, 1990, June 25, 1991, August 10, 1993,
and May 27, 1994.
(iii) The Original Certificate of Incorporation was restated
by the Restated Certificate of Incorporation filed with the Secretary
of State of the State of Delaware on June 10, 1994 and such Restated
Certificate of Incorporation was amended by certificates of amendment
filed with the Secretary of State of the State of Delaware on May 23,
1995 and December 28, 1995. Pursuant to the Certificate of Amendment
to the Restated Certificate of Incorporation filed May 23, 1995, the
name of the Corporation was changed to ENSCO International
Incorporated.
(iv) The stockholders of the Corporation authorized the
amendment of Article Four of the Restated Certificate of Incorporation
at the 1997 Annual Meeting of Stockholders held on May 13, 1997.
(v) This Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") has been duly adopted in accordance
with the applicable provisions of Section 245 of the General
Corporation Law of the State of Delaware ("GCL"), and, except with
respect to the amendment of Article Four approved by the stockholders
of the Corporation on May 13, 1997 and the omissions permitted under
Section 245(c) of the GCL, only restates and integrates, and does not
further amend, the Corporation's certificate of incorporation as
heretofore restated and amended, there being no discrepancy between
those provisions and the provisions of this Certificate of
Incorporation. Accordingly, the Corporation's Certificate of
Incorporation is hereby amended and restated in its entirety to read
as follows:
"ARTICLE ONE
The name of the corporation is ENSCO International Incorporated.
<PAGE>
ARTICLE TWO
The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street in the City of Wilmington,
County of New Castle, Delaware 19801. The registered agent in charge
thereof is The Corporation Trust Company, Corporation Trust Center, 1208
Orange Street, Wilmington, Delaware.
ARTICLE THREE
The nature of the business or purpose to be conducted or promoted
by the corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE FOUR
The aggregate number of shares of stock which the corporation
shall have the authority to issue is 270,000,000 shares, of which 5,000,000
shall be First Preferred Stock, par value $l.00 per share ("First Preferred
Stock"), 15,000,000 shares shall be Serial Preferred Stock, par value $l.00
per share ("Serial Preferred Stock"), and 250,000,000 shares shall be
Common Stock, par value $.10 per share ("Common Shares").
The following is a statement of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof, in respect of the shares of First Preferred Stock, Serial
Preferred Stock, and Common Stock or any series of any class of stock of
the corporation, and of the authority expressly granted hereby for the
Board of Directors of the corporation to fix by resolution or resolutions
any of such designations and powers, preferences and rights, and
qualifications, limitations and restrictions thereof that may be desired
but which shall not be fixed by this Certificate of Incorporation.
A. COMMON SHARES
Common Stock. The Board of Directors of the corporation is
hereby expressly vested with authority to issue 250,000,000 shares of
common stock, par value $.10 per share, from time to time. Common Shares,
upon issuance, shall be fully paid and nonassessable. Such dividends
(payable in cash, stock or otherwise) as may be determined by the Board of
Directors may be declared and paid on the common stock from time to time
out of any funds legally available therefor. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the affairs of the
corporation, the remaining assets and funds of the corporation available
for distribution to holders of common shares shall be distributed to
holders of the common shares according to their respective shares.
B. FIRST PREFERRED STOCK. The Board of Directors of the
corporation is hereby expressly vested with authority to issue 5,000,000
shares of First Preferred Stock, par value $1.00 per share, in series, and
by filing a certificate of designation pursuant to the applicable law of
the State of Delaware, to establish from time to time the number of shares
to be included in each such series, and to fix the designations, powers,
preferences, and rights of such series, and the qualifications, limitations
or restrictions thereof. The authority of the Board of Directors with
respect to each series shall include, but not be limited to, determination
of the following:
(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates,
and the relative rights of priority, if any, of payment of dividends
on shares of that series;
(c) Whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of such
voting rights;
(d) Whether that series shall have conversion privileges, and,
if so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events as the
Board of Directors shall determine;
(e) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be
redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates;
(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and if so, the terms
and amount of such sinking fund;
(g) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
corporation, and the relative rights of priority, if any, of payment
of shares of that series;
(h) Any other relative rights, preferences and limitations of
that series.
Dividends on outstanding shares of First Preferred Stock shall be
paid or declared and set apart for payment before any dividends shall
be paid or declared and set apart for payment on the shares of Common
Stock or any subordinate and inferior series of Serial Preferred Stock
with respect to the same dividend period.
If upon any voluntary or involuntary liquidation, dissolution or
winding up of the corporation, the assets available for distribution
to holders of shares of First Preferred Stock of all series shall be
insufficient to pay such holders the full preferential amount to which
they are entitled, then such assets shall be distributed ratably among
the shares of all series of First Preferred Stock in accordance with
the respective preferential amounts (including unpaid cumulative
dividends, if any) payable with respect thereto.
Shares of First Preferred Stock which have been redeemed or
converted, or which have been issued and reacquired in any manner and
retired, shall have the status of authorized and unissued First
Preferred Stock and may be reissued by the Board of Directors as
shares of the same or any other series, unless otherwise provided with
respect to any series in the resolution or resolutions of the Board of
Directors creating such series.
The corporation's $1.50 Cumulative Convertible Exchangeable
Preferred Stock (the "$1.50 Preferred Stock") and the corporation's
Series A 8% Non-Cumulative Convertible Preferred Stock (the "Series A
Preferred Stock"), each of which is a series of First Preferred Stock,
and the number of shares, designations, powers, preferences and rights
of each such series were not changed in any respect by the amendments
to this Article Four approved by the stockholders of the corporation
on June 5, 1990 (the "1990 Certificate Amendment"). The terms and
provisions of Section C of Article Four of the Certificate of
Incorporation of the corporation filed with the Secretary of State of
the State of Delaware (the "Secretary") on August 14, 1987, and the
terms and provisions of the corporation's Certificate of Designation
filed with the Secretary on April 29, 1988, are each hereby
incorporated herein by this reference for all purposes as if set forth
herein in full and, any other provision herein notwithstanding, were
not amended or repealed in any respect by the 1990 Certificate
Amendment except for the designation of the class. Certificates
evidencing shares of Series A Preferred Stock and $1.50 Preferred
Stock outstanding at the time the 1990 Certificate Amendment became
effective continued to evidence such shares notwithstanding the
redesignation of the class of such shares.
C. SERIAL PREFERRED STOCK. The Board of Directors of the
corporation is hereby expressly vested with authority to issue 15,000,000
shares of Serial Preferred Stock, par value $l.00 per share, in series, and
by filing a certificate of designation pursuant to the applicable law of
the State of Delaware, to establish from time to time the number of shares
to be included in each such series, and to fix the designations, powers,
preferences, and rights of each such series, and the qualifications,
limitations or restrictions thereof. The authority of the Board of
Directors with respect to each series shall include, but not be limited to,
determination of the following:
(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates,
and the relative rights of priority, if any, of payment of dividends
on shares of that series; provided, the payment of any dividends on
any series of Serial Preferred Stock shall be junior and subordinate
to the payment, or the setting apart of a sum sufficient for the
payment, of all accrued and current dividends on all outstanding
shares of the $l.50 Preferred Stock, the Series A Preferred Stock and
any other series of First Preferred Stock which by its terms is senior
to the shares of Serial Preferred Stock;
(c) Whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of such
voting rights; provided, that any series may be allowed to vote
together with the shares of Common Stock (and with the shares of any
other series of Serial Preferred Stock or First Preferred Stock which<PAGE>
has the right to vote as a single class with the Common Stock) as a
single class on any matter, but shall not have the right to vote as a
separate class on any matter except as provided by applicable law;
(d) Whether that series shall have conversion privileges, and,
if so, the terms and conditions of such conversion, including
provision for all adjustment of the conversion rate in such events as
the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be
redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates;
(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking fund;
(g) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
corporation, and the relative rights of priority, if any, of payment
of shares of that series; provided, that rights of any series of
Serial Preferred Stock to receive any distribution upon any such event
shall be junior and subordinate to the payment, or the setting apart
of a sum sufficient for the payment, of the liquidation preference of
all outstanding shares of the $1.50 Preferred Stock, the Series A
Preferred Stock and any other series of First Preferred Stock which by
its terms is senior to the shares of Serial Preferred Stock;
(h) Any other relative rights, preferences and limitations of
that series.
Dividends on outstanding shares of Serial Preferred Stock shall
be paid or declared and set apart for payment before any dividends shall be
paid or declared and set apart for payment on the shares of Common Stock
with respect to the same dividend period.
Shares of Serial Preferred Stock which have been redeemed or
converted, or which have been issued and reacquired in any manner and
retired, shall have the status of authorized and unissued Serial Preferred
Stock and may be reissued by the Board of Directors as shares of the same
or any other series, unless otherwise provided with respect to any series
in the resolution or resolutions of the Board of Directors creating such
series. Further, the number of authorized shares of Serial Preferred Stock
may be increased or decreased (but not below the number of shares then
outstanding) by the affirmative vote of the holders of a majority of the
stock of the corporation entitled to vote.
Notwithstanding the above, the Board of Directors may grant
powers, preferences and rights to any series of Serial Preferred Stock
which are on a parity with, or senior to, the powers, preferences and
rights of any series of First Preferred Stock, or the class of First
Preferred Stock, provided, that such series or class of First Preferred
Stock shall have approved such powers, preferences and rights by the vote
specified in the terms and provisions of such series of First Preferred
Stock, or, if no such vote is specified, by the vote of such series or
class required by applicable law, if any.
D. GENERAL. The Board of Directors may in its discretion issue
from time to time authorized but unissued shares for such consideration as
it may determine, and holders of Common Stock, First Preferred Stock and
Serial Preferred Stock shall have no preemptive rights, as such holders, to
purchase any shares or securities of any class, including treasury shares,
which may at any time be issued or sold or offered for sale by the
corporation.
At each election of directors, every stockholder entitled to vote
at any meeting shall have the right to vote, in person or by proxy, the
number of shares owned by him for as many persons as there are directors to
be elected. Cumulative voting of shares of stock of the corporation,
whether Common Stock, First Preferred Stock or Serial Preferred Stock, is
hereby prohibited.
The corporation shall be entitled to treat the person in whose
name any share or other security is registered as the owner thereof, for
all purposes, and shall not be bound to recognize any equitable or other
claim to or interest in such share or other security on the part of any
other person, whether or not the corporation shall have notice thereof.
ARTICLE FIVE
The name and address of the incorporator of the corporation has
been omitted in accordance with Section 245 of the General Corporation Law
of the State of Delaware.
ARTICLE SIX
A. The business and affairs of the corporation shall be managed
by or under the direction of a Board of Directors. The number of directors
of the corporation shall be not less than three nor more than fifteen. The
number of directors shall be fixed within the foregoing limits from time to
time by resolution duly adopted by the Board of Directors. The directors
of the corporation need not be stockholders therein.
B. The directors of the corporation, other than the directors
elected pursuant to the special voting rights of any class or series of
preferred stock or indebtedness then outstanding, shall be classified, with
respect to the time for which they severally hold office, into three (3)
classes, as nearly equal in number as possible, as shall be provided in the
Bylaws of the corporation; one class whose initial term expires at the
annual meeting of stockholders to be held in 1992; another class whose
initial term expires at the annual meeting of stockholders to be held in
1993; and another class whose initial term expires at the annual meeting of
stockholders to be held in 1994; with each class to hold office until its
successors are duly elected and qualified. At each annual meeting of
stockholders beginning with the annual meeting for 1992, the number of
directors equal to the number of the class whose term expires at such
meeting shall be elected to hold office until the third succeeding annual
meeting of stockholders.
C. In the event of any change in the authorized number of
directors, the newly created or eliminated directorships resulting from
such increase or decrease shall be apportioned by the Board of Directors
among the classes of directors so as to maintain such classes as nearly
equal as possible.
D. Notwithstanding any of the foregoing provisions of this
Article Six and subject to the rights, if any, of the holders of any then
outstanding class or series of preferred stock or indebtedness of the
corporation with special rights to elect directors, each director shall
serve until his successor is elected and qualified or until his death,
retirement, resignation or removal for cause. Should a vacancy on the
Board of Directors occur or be created, whether arising through death,
retirement, resignation or removal of a director for cause, or through an
increase in the number of directors of any class, such vacancy shall be
filled by the majority vote of the remaining directors of all classes,
whether or not a quorum, or by a sole remaining director. A director so
elected to fill a vacancy shall serve for the remainder of the then present
term of office of the class to which he was elected.
E. Notwithstanding any other provisions of this Certificate of
Incorporation or the Bylaws of the corporation, or any provision of law
which might otherwise permit a lesser vote or no vote, the provisions set
forth in this Article Six may not be amended or repealed in any respect,
unless such action is approved by the affirmative vote of the holders of at
least two-thirds of the voting power of all of the then outstanding shares
of the corporation entitled to vote generally in the election of directors,
voting together as a single class.
ARTICLE SEVEN
The corporation is to have perpetual existence.
ARTICLE EIGHT
The Board of Directors may exercise all such powers and do all
such lawful acts and things as are not by statute, the Bylaws, or this
Certificate of Incorporation directed or required to be exercised and done
by the stockholders.
ARTICLE NINE
The initial Bylaws of the corporation shall be adopted by the
Board of Directors. The power to alter, amend or repeal the corporation's
Bylaws, and to adopt new Bylaws, is hereby vested in the Board of
Directors, subject, however, to repeal or change by the affirmative vote of
the holders of at least two-thirds of the outstanding shares entitled to
vote thereon. Notwithstanding any other provisions of this Certificate of
Incorporation, or any provision of law which might otherwise permit a
lesser vote or no vote, the affirmative vote of the holders of at least
two-thirds of the voting power of all of the then outstanding shares of the
voting stock, voting together as a single class, shall be required to
alter, amend, or repeal this Article Nine.
ARTICLE TEN
The corporation reserves the right to amend, alter or repeal any
provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by law, and all rights conferred upon officers,
directors, and stockholders herein are granted subject to this reservation.
ARTICLE ELEVEN
Special meetings of the stockholders of the corporation for any
purpose or purposes may be called at any time by the Board of Directors,
the Chairman of the Board of Directors or the President. Special meetings
of the stockholders may not be called by any other person or persons.
ARTICLE TWELVE
Meetings of stockholders may be held within or without the State
of Delaware as the Bylaws may provide. Elections of directors need not be
by written ballot.
ARTICLE THIRTEEN
Subject to the rights, if any, of the holders of any then
outstanding class or series of preferred stock or indebtedness of the
corporation with special rights to elect directors, any or all of the
directors of the corporation may be removed from office at any time, but
only with cause and only by the affirmative vote of the holders of a
majority of the outstanding shares of the corporation then entitled to vote
generally in the election of directors, voting together as a single class.
Notwithstanding any other provisions of this Certificate of Incorporation
or the Bylaws of the corporation, or any provision of law which might
otherwise permit a lesser vote or no vote, the provisions set forth in this
Article Thirteen may not be amended or repealed in any respect, unless such
action is approved by the affirmative vote of the holders of at least
two-thirds of the voting power of all of the then outstanding shares of the
corporation entitled to vote generally in the election of directors, voting
together as a single class.
ARTICLE FOURTEEN
The officers of the corporation shall be chosen in such a manner,
shall hold their offices for such terms and shall carry out such duties as
are determined solely by the Board of Directors, subject to the right of
the Board of Directors to remove any officer or officers at any time with
or without cause.
ARTICLE FIFTEEN
A. The corporation shall indemnify to the full extent
authorized or permitted by law (as now or hereafter in effect) any person
made, or threatened to be made, a defendant or witness to any action, suit
or proceeding (whether civil or otherwise) by reason of the fact that he,
his testator or intestate, is or was a director or officer of the
corporation or by reason of the fact that such director or officer, at the
request of the corporation, is or was serving any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise, in any capacity. Nothing contained herein shall affect any
rights to indemnification to which employees other than directors and
officers may be entitled by law. No amendment or repeal of this Section A
of Article Fifteen shall apply to or have any effect on any right to
indemnification provided hereunder with respect to any acts or omissions
occurring prior to such amendment or repeal.
B. No director of the corporation shall be personally liable to
the corporation or its stockholders for monetary damages for any breach of
fiduciary duty by such director as a director. Notwithstanding the
foregoing sentence, a director shall be liable to the extent provided by
applicable law (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the Delaware General Corporation Law,
or (iv) for any transaction from which such director derived an improper
personal benefit. No amendment to or repeal of this Section B of Article
Fifteen shall apply to or have any effect on the liability or alleged
liability of any director of the corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or
repeal.
C. In furtherance and not in limitation of the powers conferred
by statute:
(i) the corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify
him against such liability under the provisions of law; and
(ii) the corporation may create a trust fund, grant a
security interest and/or use other means (including, without
limitation, letters of credit, surety bonds and/or other similar
arrangements), as well as enter into contracts providing
indemnification the full extent authorized or permitted by law and
including as part thereof provisions with respect to any or all of the
foregoing to ensure the payment of such amounts as may become
necessary to effect indemnification as provided therein, or elsewhere.
ARTICLE SIXTEEN
(a) Purpose and Effectiveness. The purpose of this Article
Sixteen is to limit ownership and control of shares of any class of capital
stock of the corporation by Aliens in order to permit the corporation to
hold, obtain or reinstate a license or franchise from a governmental agency
necessary to conduct its business as a U.S. Maritime Company. The
effectiveness of this Article Sixteen shall terminate one year after the
corporation and each Subsidiary and Controlled Person cease to be a U.S.
Maritime Company unless, at or prior to that time, either the corporation
or a Subsidiary or Controlled Person has reinstated itself as a U.S.
Maritime Company or has contracted to reinstate itself as a U.S. Maritime
Company. The Board of Directors is hereby authorized to adopt all such
Bylaws and resolutions, and to effect any and all other measures reasonably
necessary or desirable and consistent with applicable law and the
provisions of this Certificate of Incorporation, to fulfill the purpose and
implement the provisions of this Article Sixteen.
(b) Restriction on Transfers.
(i) Any transfer, or attempted or purported transfer, of any
shares of Common Stock issued by the corporation or any interest therein or
right thereof, which would result in the ownership or control by one or
more Aliens of an aggregate percentage of the shares of Common Stock of the
corporation or of any interest therein or right thereof in excess of the
Permitted Percentage shall, to the full extent permitted by law, and for
long as such excess shall exist, be void and shall be ineffective as
against the corporation and the corporation shall not recognize, to the
extent of such excess, the purported transferee as a shareholder of the
corporation for any purpose whatsoever except for the purpose of making a
further transfer to a person not an Alien; provided, however, that such
shares, to the extent of such excess, may nevertheless be deemed to be
Alien owned shares for the purposes of the other provisions of this Article
Sixteen.
(ii) The Board of Directors is hereby authorized to adopt a Bylaw
or Bylaws and to take such other action as it may deem necessary or
desirable to implement the restriction set forth in subsection (1) above,
including without limitation, (A) requiring, as a condition to transfer,
representations and other proof as to the identity of existing or
prospective stockholders and persons on whose behalf shares of stock of the
corporation or any interest therein or right thereof are or are to be held
and as to whether or not such persons are Aliens, and (B) establishing and
maintaining a dual stock certificate system under which different forms of
stock certificates, representing outstanding shares of Common Stock of the
corporation, are issued to the holders of record of the shares represented
thereby to indicate whether or not such shares or any interest therein or
right thereof is owned or controlled by an Alien.
(c) Suspension of Voting and Dividend and Distribution Rights
With Respect to Alien Owned Stock. With respect to shares of the
outstanding capital stock of the corporation or any class thereof
determined to be in excess of the Permitted Percentage in accordance with
this section (c) of this Article Sixteen, the corporation may, to the full
extent permitted by law, so long as such excess exists, withhold the
payment of dividends and other distributions of assets in respect of such
excess Alien owned shares and suspend the voting rights of such excess
Alien owned shares. If Alien ownership of the outstanding capital stock of
the corporation or any class thereof shall be in excess of the Permitted
Percentage, the shares deemed included in such excess for purposes of this
section (c) of this Article Sixteen shall be those Alien owned shares that
the Board of Directors determines became so owned most recently.
(d) Definitions.
(i) "Alien" shall mean (1) any person (including an individual,
a partnership, a corporation or an association) who is not a United States
citizen within the meaning of Section 2 of the Shipping Act, 1916, as
amended or as it may hereafter be amended; (2) any foreign government or
representative thereof; (3) any corporation, the president, chief executive
officer or chairman of the board of directors of which is an Alien, or of
which more than a minority of the number of its directors necessary to
constitute a quorum are Aliens; (4) any corporation organized under the
laws of any foreign government; (5) any corporation of which 25% or greater
interest is owned beneficially or of record, or may be voted by, an Alien
or Aliens, or which by any other means whatsoever is controlled by or in
which control is permitted to be exercised by an Alien or Aliens (the Board
of Directors being authorized to determine reasonably the meaning of
"control" for this purpose); (6) any partnership or association which is
controlled by an Alien or Aliens; or (7) any person (including an
individual, partnership, corporation or association) who acts as
representative of or fiduciary for any person described in clauses (1)
through (6) above.
(ii) "Controlled Person" shall mean any corporation or
partnership of which the corporation or any Subsidiary owns or controls an
interest in excess of 25% .
(iii) "Permitted Percentage" shall mean 2% less than the lawful
maximum percentage of the outstanding shares of capital stock of the
corporation, or any class thereof (as evidenced by a resolution of the
Board of Directors), which, if shares in excess of such percentage were
held by Aliens, would prevent the corporation (or any Subsidiary or
Controlled Person) from being a U.S. Maritime Company.
(iv) "Subsidiary" shall mean any corporation more than 50%
of the outstanding stock of which is owned by the corporation or any
Subsidiary of the corporation.
(v) "U.S. Maritime Company" shall mean any corporation or other
entity which, directly or indirectly (1) owns or operates vessels in the
United States foreign trade; (2) owns any vessel on which there is a
preferred mortgage issued in connection with Title XI of the Merchant
Marine Act, 1936, as amended; (3) operates vessels under agreement with the
United States government (or any agency thereof); (4) conducts any
activity, takes any action or receives any benefit which would be adversely
affected under any provision of the U.S. Maritime, shipping or vessel
documentation laws by virtue of Alien ownership of its stock; or (5)
maintains a Capital Construction Fund under the provisions of Section 607
of the Merchant Marine Act, 1936, as amended.
ARTICLE SEVENTEEN
Subject to the rights, if any, of the holders of any then
outstanding class or series of preferred stock or indebtedness of the
corporation with special rights to elect directors, any action required or
permitted to be taken by the stockholders of the corporation must be
effected at a duly called annual or special meeting of the stockholders or
by unanimous written consent of stockholders, and stockholders may not
otherwise act by written consent. Notwithstanding any other provisions of
this Certificate of Incorporation or the Bylaws of the corporation, or any
provision of law which might otherwise permit a lesser vote or no vote, the
provisions set forth in this Article Seventeen may not be amended or
repealed in any respect, unless such action is approved by the affirmative
vote of the holders of at least two-thirds of the voting power of all of
the then outstanding shares of the corporation entitled to vote generally
in the election of directors, voting together as a single class."<PAGE>
IN WITNESS WHEREOF, ENSCO International Incorporated has caused
this certificate to be signed by William S. Chadwick, Jr., its Vice
President and attested to by Albert G. McGrath, Jr., its Assistant
Secretary, as of May 15, 1997.
ENSCO INTERNATIONAL INCORPORATED
By: /s/ WILLIAM S. CHADWICK, JR.
----------------------------------------
William S. Chadwick, Jr., Vice President
Attested: /s/ ALBERT G. MCGRATH, JR.
--------------------------
Albert G. McGrath, Jr.
Assistant Secretary<PAGE>
<PAGE>
EXHIBIT NO. 15.1
July 28, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Ladies and Gentlemen:
We are aware that ENSCO International Incorporated has included our
report dated July 28, 1997 (issued pursuant to the provisions of
Statement of Auditing Standards No. 71) in the Company's Registration
Statements on Form S-3 (Nos. 33-42965, 33-46500, 33-49590, 33-43756,
33-64642 and 333-3575), and any existing amendments thereto, and Form
S-8 (Nos. 33-14714, 33-32447, 33-35862, 33-40282 and 33-41294). We
are also aware of our responsibilities under the Securities Act of
1933.
Yours very truly,
/s/ PRICE WATERHOUSE LLP
- - ------------------------
Price Waterhouse LLP
Dallas, Texas<PAGE>
