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UNITED STATES
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, 1999
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 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___
There were 137,288,984 shares of Common Stock, $.10 par value, of the registrant
outstanding as of August 4, 1999.
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<PAGE>
ENSCO INTERNATIONAL INCORPORATED
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1999
PAGE
- --------------------------------------------------------------------------------
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Review Report of Independent Accountants ............ 3
Consolidated Statement of Operations
Three Months Ended June 30, 1999 and 1998 ...... 4
Consolidated Statement of Operations
Six Months Ended June 30, 1999 and 1998 ........ 5
Consolidated Balance Sheet
June 30, 1999 and December 31, 1998 ........... 6
Consolidated Statement of Cash Flows
Six Months Ended June 30, 1999 and 1998 ........ 7
Notes to Consolidated Financial Statements .......... 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ....... 10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK ................................... 19
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 .................... 20
SIGNATURES ...................................................... 21
<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 and its subsidiaries as of June 30, 1999 and the
related consolidated statements of operations and of cash flows for the three
and six month periods ended June 30, 1999 and 1998. These financial statements
are 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 interim financial statements for them 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, 1998, 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 25, 1999 we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated balance sheet as of
December 31, 1998, is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
/s/ PricewaterhouseCoopers LLP
Dallas, Texas
July 30, 1999
3
<PAGE>
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
Three Months Ended
June 30,
--------------------
1999 1998
------ ------
OPERATING REVENUES ....................................... $ 79.4 $234.0
OPERATING EXPENSES
Operating costs ...................................... 62.3 83.6
Depreciation and amortization ........................ 24.9 20.2
General and administrative ........................... 2.9 4.1
------ ------
90.1 107.9
------ ------
OPERATING INCOME (LOSS) .................................. (10.7) 126.1
OTHER INCOME (EXPENSE)
Interest income ...................................... 3.5 3.8
Interest expense, net ................................ (4.8) (6.6)
Other, net ........................................... - .1
------ -----
(1.3) (2.7)
------ -----
INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST... (12.0) 123.4
PROVISION (BENEFIT) FOR INCOME TAXES
Current income tax expense (benefit) ................. (7.5) 31.2
Deferred income tax expense .......................... 5.8 11.1
------ -----
(1.7) 42.3
MINORITY INTEREST ....................................... (.5) .5
------ -----
NET INCOME (LOSS) ........................................ $ (9.8) $80.6
====== =====
EARNINGS (LOSS) PER SHARE
Basic ................................................ $ (.07) $ .57
Diluted .............................................. (.07) .57
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic ................................................ 136.4 141.4
Diluted .............................................. 136.4 142.6
CASH DIVIDENDS PER COMMON SHARE .......................... $ .025 $ .025
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
Six Months Ended
June 30,
-------------------
1999 1998
------ ------
OPERATING REVENUES ........................................ $207.1 $480.4
OPERATING EXPENSES
Operating costs ....................................... 129.8 167.3
Depreciation and amortization ......................... 48.5 40.0
General and administrative ............................ 5.8 7.7
------ ------
184.1 215.0
------ ------
OPERATING INCOME ........................................ 23.0 265.4
OTHER INCOME (EXPENSE)
Interest income ....................................... 7.6 6.5
Interest expense, net ................................. (10.2) (14.2)
Other, net ............................................ (.1) -
------ ------
(2.7) (7.7)
------ ------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST .......... 20.3 257.7
PROVISION (BENEFIT) FOR INCOME TAXES
Current income tax expense (benefit) .................. (7.2) 66.0
Deferred income tax expense ........................... 16.8 22.1
------ ------
9.6 88.1
MINORITY INTEREST ........................................ .5 1.8
------ ------
NET INCOME ................................................ $ 10.2 $167.8
====== ======
EARNINGS PER SHARE
Basic ................................................. $ .07 $ 1.19
Diluted ............................................... .07 1.18
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic ................................................. 136.4 141.4
Diluted ............................................... 137.2 142.8
CASH DIVIDENDS PER COMMON SHARE ........................... $ .05 $ .05
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In millions, except for par value)
June 30, December 31,
1999 1998
----------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents ......................... $ 252.7 $ 330.1
Accounts receivable, net .......................... 64.4 118.4
Prepaid expenses and other ........................ 22.7 27.8
-------- --------
Total current assets .......................... 339.8 476.3
-------- --------
PROPERTY AND EQUIPMENT, AT COST ...................... 1,973.9 1,799.2
Less accumulated depreciation ..................... 455.4 409.8
-------- --------
Property and equipment, net ................... 1,518.5 1,389.4
-------- --------
OTHER ASSETS, NET .................................... 125.0 127.1
-------- --------
$1,983.3 $1,992.8
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable .................................. $ 9.9 $ 9.1
Accrued liabilities ............................... 116.6 126.7
Current maturities of long-term debt .............. 4.1 23.6
-------- --------
Total current liabilities ..................... 130.6 159.4
-------- --------
LONG-TERM DEBT ....................................... 373.3 375.5
DEFERRED INCOME TAXES ................................ 196.8 180.0
OTHER LIABILITIES .................................... 15.4 17.1
MINORITY INTEREST .................................... 16.4 15.8
COMMITMENTS AND CONTINGENCIES ........................
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value, 20.0 million
shares authorized and none issued ............. - -
Common stock, $.10 par value, 250.0 million
shares authorized, 155.9 million and 155.6
million shares issued ......................... 15.6 15.6
Additional paid-in capital ........................ 848.7 846.1
Retained earnings ................................. 541.7 538.4
Restricted stock (unearned compensation) .......... (6.9) (7.7)
Cumulative translation adjustment ................. (1.1) (1.1)
Treasury stock, at cost, 18.6 million and
and 18.5 million shares ....................... (147.2) (146.3)
-------- --------
Total stockholders' equity .................. 1,250.8 1,245.0
-------- --------
$1,983.3 $1,992.8
======== ========
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
Six Months Ended
June 30,
--------------------
1999 1998
------ -------
OPERATING ACTIVITIES
Net income .......................................... $ 10.2 $167.8
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................... 48.5 40.0
Deferred income tax expense ..................... 16.8 22.1
Amortization of other assets .................... 5.5 5.0
Other ........................................... .6 (.6)
Changes in operating assets and liabilities:
Decrease in accounts receivable ............... 53.9 2.1
Decrease in prepaid expenses and other ........ .3 7.6
Increase in accounts payable .................. .7 3.1
Increase (decrease) in accrued liabilities .... (48.5) 25.4
------ ------
Net cash provided by operating activities .. 88.0 272.5
------ ------
INVESTING ACTIVITIES
Additions to property and equipment ................. (139.1) (152.1)
Other ............................................... .8 1.4
------ ------
Net cash used by investing activities ....... (138.3) (150.7)
------ ------
FINANCING ACTIVITIES
Reduction of long-term borrowings ................... (21.5) (17.7)
Cash dividends ...................................... (6.9) (7.1)
Repurchase of common stock .......................... - (7.7)
Other ............................................... 1.3 (.2)
------ ------
Net cash used by financing activities ....... (27.1) (32.7)
------ ------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..... (77.4) 89.1
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ....... 330.1 262.2
------ ------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............. $252.7 $351.3
====== ======
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Unaudited Financial Statements
The accompanying consolidated financial statements of ENSCO International
Incorporated (the "Company") have been prepared in accordance with generally
accepted accounting principles, pursuant to the rules and regulations of the
Securities and Exchange Commission included in the instructions to Form 10-Q and
Article 10 of Regulation S-X. The financial information included herein is
unaudited but, in the opinion of management, includes all adjustments
(consisting of normal recurring adjustments) which are necessary for a fair
presentation of the financial position, results of operations and cash flows for
the interim periods presented. The December 31, 1998 consolidated balance sheet
data was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
The financial data for the three and six month periods ended June 30,
1999 included herein have been subjected to a limited review by
PricewaterhouseCoopers 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,
1999 are not necessarily indicative of the results of operations that will be
realized for the year ending December 31, 1999. 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, 1998
included in the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K.
Note 2 - Earnings Per Share
For the three and six month periods ended June 30, 1999 and 1998, there
were no adjustments to net income (loss) for purposes of calculating basic and
diluted earnings (loss) per share. The following is a reconciliation of the
weighted average common shares used in the basic and diluted earnings (loss) per
share computations (in millions):
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1999 1998 1999 1998
----- ----- ----- -----
Weighted average common shares - basic .... 136.4 141.4 136.4 141.4
Potentially dilutive common shares:
Restricted stock grants ................ - .4 .2 .4
Stock options .......................... - .8 .6 1.0
----- ----- ----- -----
Weighted average common shares - diluted .. 136.4 142.6 137.2 142.8
===== ===== ===== =====
For the three months ended June 30, 1999, .2 milion shares of restricted
stock grants and 1.1 million shares of stock options were excluded from the
computation of diluted loss per share because their effect would have been
antidilutive.
Note 3 - Contract Expirations
In January 1999, the Company and Petroleos de Venezuela, S.A. ("PDVSA")
agreed upon the early expiration of the contracts on six of the Company's barge
rigs in Venezuela. The six contracts were originally scheduled to expire from
May to September of 1999. As a result of the early expiration of the contracts,
the Company received lump sum payments totaling $18.4 million, all of which was
recognized as revenue in the first quarter of 1999. The Company experienced
early termination of the contracts of certain other rigs during the first
quarter of 1999, and early termination proceeds of approximately $2.0 million
related to these rigs is also included in revenue for the first quarter of 1999.
8
<PAGE>
Note 4 - Segment Information
The Company's operations are categorized into two operating segments
which are differentiated based on the core services provided by the Company, (1)
contract drilling services and (2) marine transportation services. The Company's
contract drilling segment owns a fleet of 52 offshore drilling rigs, including
36 jackup rigs, nine barge rigs and seven platform rigs. The Company's marine
transportation segment owns a fleet of 36 oilfield support vessels. Operating
income (loss) for each segment includes an allocation of general and
administrative expenses of the Company's corporate office. Depreciation expense
of the Company's corporate office is not allocated to the operating segments.
Segment information for the three and six month periods ended June 30, 1999 and
1998 is as follows (in millions):
INDUSTRY SEGMENT
Contract Marine
Drilling Transportation Corporate Total
-------- -------------- --------- -------
Three Months Ended June 30,
---------------------------
1999
----
Revenues ...................... $ 71.0 $ 8.4 $ -- $ 79.4
Operating loss ................ (9.1) (1.2) (.4) (10.7)
1998
----
Revenues ...................... $211.2 $ 22.8 $ -- $234.0
Operating income (loss) ....... 115.7 10.8 (.4) 126.1
Six Months Ended June 30,
-------------------------
1999
----
Revenues ...................... $188.5 $ 18.6 $ -- $207.1
Operating income (loss) ....... 24.9 (1.1) (.8) 23.0
1998
----
Revenues ...................... $432.0 $ 48.4 $ -- $480.4
Operating income (loss) ....... 241.4 24.7 (.7) 265.4
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Business Environment
ENSCO International Incorporated is one of the leading international
providers of offshore drilling services and marine transportation services to
the oil and gas industry. The Company's operations are conducted in the
geographic regions of North America, Europe, Asia Pacific and South America.
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 these and other events have on the current and expected future
pricing of oil and natural gas.
Concern over excess oil supplies and the resulting curtailment or
deferral of exploration and development spending by oil companies continues to
adversely impact industry conditions. Demand for drilling rigs and marine
vessels remains depressed, and day rates and utilization continued to decrease
during the first and second quarters of 1999. By several measures, current
industry conditions are the worst that have been experienced since the
mid-1980s.
During the first and second quarters of 1999 oil prices increased from
their low reached at the end of 1998, and recently prices for West Texas
Intermediate crude oil have exceeded $21.00 per barrel. The increase in oil
prices is due primarily to cutbacks in oil production by OPEC which were agreed
to in March 1999. Whether or not the recent increase in oil prices will be
sustained is not determinable at the present time. Although the recent increase
in oil prices improves the likelihood of oil companies increasing their
exploration and development spending, the timing of any exploration and
development spending increase and the impact on the Company's operations and
financial results are uncertain. The Company currently expects that day rates
and utilization will show little improvement domestically, and will continue to
deteriorate in the near term in international markets. As a result, the Company
anticipates that it will incur a net loss for the year ending December 31, 1999.
Results of Operations
The Company's results for the second quarter and six months ended June
30, 1999 reflect the continuation of the negative trend that began in the second
quarter of 1998. The Company has continued to experience decreases in day rates
and utilization, as well as more recently the early termination of drilling
contracts. During the first quarter of 1999, the Company received $20.4 million
as a result of the early termination of various drilling contracts, accelerating
the receipt of revenue which otherwise would have been realized over the course
of 1999.
The following analysis highlights the Company's consolidated operating
results for the three and six month periods ended June 30, 1999 and 1998 (in
millions):
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
Operating Results 1999 1998 1999 1998
- ----------------- ------ ------ ------ ------
Revenues ............................ $ 79.4 $234.0 $207.1 $480.4
Operating expenses, including G&A ... 65.2 87.7 135.6 175.0
Depreciation and amortization ....... 24.9 20.2 48.5 40.0
------ ------ ------ ------
Operating income (loss) .............. (10.7) 126.1 23.0 265.4
Other expense, net ................... 1.3 2.7 2.7 7.7
Provision (benefit) for income taxes . (1.7) 42.3 9.6 88.1
Minority interest .................... (.5) .5 .5 1.8
------ ------ ------ ------
Net income (loss) .................... $ (9.8) $ 80.6 $ 10.2 $167.8
====== ====== ====== ======
10
<PAGE>
The following is an analysis of the Company's revenues and operating
margin for the three and six month periods ended June 30, 1999 and 1998 (in
millions):
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
Revenues 1999 1998 1999 1998
-------- ------ ------ ------ ------
Contract drilling
Jackup rigs:
North America ................ $ 29.9 $ 99.8 $ 65.0 $209.7
Europe ....................... 14.1 59.8 47.4 117.6
Asia Pacific ................. 10.6 22.3 25.4 44.9
------ ------ ------ ------
Total jackup rigs ........... 54.6 181.9 137.8 372.2
Barge rigs - South America ..... 9.1 20.4 29.6 43.4
Platform rigs .................. 7.3 8.9 21.1 16.4
------ ------ ------ ------
Total contract drilling ..... 71.0 211.2 188.5 432.0
------ ------ ------ ------
Marine transportation
AHTS(1) ........................ 4.1 3.7 8.9 9.0
Supply ......................... 4.0 16.4 8.9 33.6
Mini-Supply .................... .3 2.7 .8 5.8
------ ------ ------ ------
Total marine transportation . 8.4 22.8 18.6 48.4
------ ------ ------ ------
Total .................... $ 79.4 $234.0 $207.1 $480.4
====== ====== ====== ======
Operating Margin(2)
-------------------
Contract drilling
Jackup rigs:
North America ................ $ 4.3 $ 67.3 $ 13.9 $144.6
Europe ....................... 6.0 44.1 26.7 87.0
Asia Pacific ................. 3.1 12.6 8.5 25.0
------ ------ ------ ------
Total jackup rigs ........... 13.4 124.0 49.1 256.6
Barge rigs - South America ..... .5 10.5 16.1 22.3
Platform rigs .................. 2.8 3.5 10.1 6.5
------ ------ ------ ------
Total contract drilling ..... 16.7 138.0 75.3 285.4
------ ------ ------ ------
Marine transportation
AHTS(1) ........................ 1.5 1.5 3.4 4.6
Supply ......................... (.9) 9.7 (1.0) 20.2
Mini-Supply .................... (.2) 1.2 (.4) 2.9
------ ------ ------ ------
Total marine transportation . .4 12.4 2.0 27.7
------ ------ ------ ------
Total .................... $ 17.1 $150.4 $ 77.3 $313.1
====== ====== ====== ======
(1) Anchor handling tug supply vessels.
(2) Defined as revenues less operating expenses, exclusive of
depreciation and general and administrative expenses.
11
<PAGE>
The following is an analysis of certain operating information of the
Company for the three and six month periods ended June 30, 1999 and 1998:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1999 1998 1999 1998
------- -------- ------- ---------
Contract Drilling
-----------------
Utilization:
Jackup rigs:
North America ............. 88% 93% 88% 96%
Europe .................... 51% 100% 68% 100%
Asia Pacific .............. 37% 65% 47% 68%
------- -------- ------- ---------
Total jackup rigs ..... 71% 89% 76% 91%
Barge rigs - South America .. 36% 100% 28% 100%
Platform rigs ............... 53% 86% 63% 86%
------- -------- ------- ---------
Total .............. 63% 91% 67% 92%
======= ======== ======= =========
Average day rates:
Jackup rigs:
North America ............. $17,109 $ 53,543 $18,662 $ 54,891
Europe .................... 44,589 102,796 55,268 101,568
Asia Pacific .............. 44,983 52,981 42,457 50,630
------- -------- ------- --------
Total jackup rigs ..... 22,965 63,038 26,881 63,079
Barge rigs - South America .. 32,802 22,228 28,415 23,729
Platform rigs ............... 23,229 23,770 23,604 23,463
------- -------- ------- --------
Total .............. $23,652 $ 50,843 $26,509 $ 51,571
======= ======== ======= ========
Marine Transportation
---------------------
Utilization:
AHTS(1) ..................... 73% 52% 71% 63%
Supply ...................... 72% 89% 72% 89%
Mini-supply ................. 23% 86% 27% 91%
------- -------- ------- --------
Total .................... 61% 83% 62% 86%
======= ======== ======= ========
Average day rates:
AHTS(1) ..................... $12,476 $ 15,687 $13,763 $ 16,003
Supply ...................... 2,625 8,417 2,957 8,662
Mini-supply ................. 2,084 4,341 2,215 4,401
------- -------- ------- --------
Total .............. $ 4,209 $ 8,129 $ 4,610 $ 8,410
======= ======== ======= ========
(1) Anchor handling tug supply vessels.
Discussions relative to each of the Company's operating segments and
significant changes in operating results for the three and six month periods
ended June 30, 1999 compared with the results of the corresponding prior year
periods are set forth below. See "Business Environment" and "Outlook and
Forward-Looking Statements" for additional information about the Company's
expectations regarding future operations, day rates and utilization.
12
<PAGE>
Contract Drilling
The following is an analysis of the Company's offshore drilling rigs at
June 30, 1999 and 1998:
Number of Rigs
--------------
1999 1998
---- -----
Jackup rigs:
North America ........................... 22 22
Europe .................................. 7 7
Asia Pacific ............................ 7 7
-- --
Total jackup rigs ..................... 36 36
Barge rigs - South America(1) ............. 9 10
Platform rigs(2) .......................... 7 8
-- --
Total ................................. 52 54
== ==
(1) The Company sold four barge rigs in October 1998 and
completed construction of three new barge rigs that were
added to the Company's fleet during the first and second
quarters of 1999. The three newly constructed barge
rigs were delivered to Venezuela in March,
April, and June, respectively.
(2) In April 1999, the Company completed the operating contract
for a platform rig that was located off the coast of China.
The platform rig was not owned by the Company, but operated
under a management contract. The Company's seven remaining
platform rigs are all located in the Gulf of Mexico.
Second quarter 1999 revenues for the Company's contract drilling segment
compared to the second quarter of 1998 decreased by $140.2 million, or 66%, and
operating margin decreased by $121.3 million, or 88%. These decreases are
primarily due to lower average day rates, which decreased 54% from the prior
year quarter, and lower utilization, which decreased to 63% in the second
quarter of 1999 from 91% in the second quarter of 1998. Second quarter 1999
operating expenses for the contract drilling segment decreased by $18.9 million,
or 26%, from the prior year quarter due primarily to reduced utilization and the
impact of cost reduction initiatives implemented by the Company.
For the six months ended June 30, 1999, revenues for the Company's
contract drilling segment decreased $243.5 million, or 56% and operating margin
decreased $210.1 million, or 74%, from the prior year period. These decreases
are primarily due to lower average day rates, which decreased 49% from the prior
year period, and lower utilization, which decreased to 67% for the six months
ended June 30, 1999 from 92% in the six months ended June 30, 1998. Operating
expenses for the contract drilling segment in the six months ended June 30,
1999, decreased by $33.4 million, or 23%, from the prior year period due to
reduced utilization and the impact of cost reduction efforts, which include,
among other things, reductions in personnel and decreases in performance based
compensation and benefits.
North America Jackup Rigs
For the second quarter of 1999, revenues for the Company's North America
jackup rigs decreased by $69.9 million, or 70%, and the operating margin
decreased by $63.0 million, or 94%, from the prior year quarter. The decrease in
revenues and operating margin is primarily due to a 68% decrease in average day
rates, and a slight decrease in utilization to 88% in the current year quarter
from 93% in the prior year quarter. Operating expenses decreased by $6.9
million, or 21%, from the prior year quarter due primarily to cost saving
measures.
For the six months ended June 30, 1999, revenues for the Company's North
America jackup rigs decreased by $144.7 million, or 69%, and the operating
margin decreased by $130.7 million, or 90%, from the prior year period. The
decrease in revenue and operating margin is primarily due to a 66% decrease in
average day rates and a decrease in utilization, to 88% in the current year
period as compared to 96% in the prior year period. Operating expenses decreased
by $14.0 million, or 22%, from the prior year period primarily from cost saving
measures and lower utilization.
Europe Jackup Rigs
Second quarter revenues for the Europe jackup rigs decreased $45.7
million, or 76%, and the operating margin decreased by $38.1 million, or 86%,
from the prior year quarter. The decrease in revenues and operating margin is
primarily due to a 57% decrease in average day rates and to a significant
13
<PAGE>
decrease in utilization, to 51% in the current year quarter from 100% in the
prior year quarter. Operating expenses decreased by $7.6 million, or 48%, from
the prior year quarter as a result of lower utilization and cost saving
measures.
For the six months ended June 30, 1999, revenues for the Europe jackup
rigs decreased by $70.2 million, or 60%, and the operating margin decreased by
$60.3 million, or 69%, from the prior year period. The decrease in revenues and
operating margin is due to a 46% decrease in average day rates and to a decrease
in utilization, to 68% in the current year period from 100% in the prior year
period. Operating expenses decreased by $9.9 million, or 32%, from the prior
year period primarily from reduced utilization and cost saving measures.
Asia Pacific Jackup Rigs
Second quarter revenues for the Asia Pacific jackup rigs decreased by
$11.7 million, or 53%, and the operating margin decreased by $9.5 million, or
75%, from the prior year quarter. The decrease in revenues and operating margin
is due to a 15% decrease in average day rates, and to a decrease in utilization
to 37% in the current year quarter from 65% in the prior year quarter. Operating
expenses decreased by $2.2 million, or 23%, from the prior year quarter due
primarily to reduced utilization and cost cutting measures.
For the six months ended June 30, 1999, revenues for the Asia Pacific
jackup rigs decreased by $19.5 million, or 43%, and the operating margin
decreased by $16.5 million, or 66%, from the prior year period. The decrease in
revenues and operating margin is due to a 16% decrease in average day rates and
to a decrease in utilization to 47% in the current year period from 68% in the
prior year period. Operating expenses decreased by $3.0 million, or 15%, from
the prior year period as a result of decreased utilization and cost saving
measures.
South America Barge Rigs
Second quarter revenues for the South America barge rigs decreased by
$11.3 million, or 55%, and operating margin decreased by $10.0 million, or 95%,
from the prior year quarter. The decrease in revenues and operating margin is
primarily due to reduced utilization. Four of the ten barge rigs that operated
during the prior year quarter were sold in October 1998, and five of the
remaining six barge rigs that operated during the prior year quarter were idle
during the second quarter of 1999. These decreases in revenue and operating
margin were partially offset by the operating results of three newly constructed
barge rigs that commenced operations in March, April and June of 1999. Operating
expenses decreased $1.3 million, or 13%, from the prior year quarter, as cost
reductions attributable to cost saving measures, the four barge rigs sold in
October 1998 and the five barge rigs idle during the second quarter of 1999 were
only partially offset by the costs associated with the three newly constructed
barge rigs.
For the six months ended June 30, 1999, revenues for the South America
barge rigs decreased by $13.8 million, or 32%, and operating margin decreased by
$6.2 million, or 28%, from the prior year period. The decrease in revenues and
operating margin is primarily due to reduced utilization. Four of the ten barge
rigs that operated during the prior year period were sold in October 1998, and
utilization of the remaining six barge rigs that operated during the prior year
period decreased from 100% to 13% in the current year period. The decreases in
revenue and operating margin were partially offset by the operating results of
three newly constructed barge rigs that commenced operations in March, April and
June of 1999, and by lump sum early contract termination payments totaling $18.4
million in January 1999. Operating expenses decreased $7.6 million, or 36%, from
the prior year quarter, as cost reductions attributable to cost saving measures,
the four barge rigs sold in October 1998 and the reduced utilization of the
remaining six barge rigs during the current year period were only partially
offset by the costs associated with the three newly constructed barge rigs.
Platform Rigs
Second quarter revenues for the platform rigs decreased by $1.6 million,
or 18%, and operating margin decreased by $700,000, or 20%, as compared to the
prior year quarter. The decrease in revenues and operating margin is primarily
due to a decrease in utilization to 53% in the current year quarter as compared
to 86% in the prior year quarter. Operating expenses decreased by $900,000, or
17%, from the prior year quarter primarily due to reduced utilization and cost
savings measures.
For the six months ended June 30, 1999, revenues for the platform rigs
increased by $4.7 million, or 29%, and operating margin increased by $3.6
million, or 55%, from the prior year period. The increase in revenues and
operating margin is primarily due to a lump sum contract cancellation payment
received in the first quarter of 1999, and to higher drilling day rates earned
by certain rigs in the current year period compared to lower standby day rates
earned in the prior year period. In 1998, certain rigs received standby day
14
<PAGE>
rates while undergoing enhancement modifications in the shipyard. Operating
expenses for platform rigs increased by $1.1 million, or 11%, due primarily to
the higher cost associated with drilling operations in the current year period
compared to the lower cost incurred by several rigs while in the shipyard during
the prior year period.
Marine Transportation
The following is an analysis of the Company's marine transportation
vessels as of June 30, 1999 and 1998:
Number of Vessels
--------------------
1999 1998
---- ----
AHTS(1)(2)(3) ................. 5 5
Supply(3) ..................... 23 24
Mini-Supply ................... 8 8
-- --
Total(4) .............. 36 37
== ==
(1) Anchor handling tug supply vessels.
(2) In September 1998, one of the Company's large AHTS
vessels sank while supporting drilling operations for a
customer in the Gulf of Mexico. The vessel was fully
insured and the Company recognized a gain on the loss of
the vessel during the third quarter of 1998.
(3) During the fourth quarter of 1998, the Company added
towing capabilities to one of its larger supply vessels
and reclassified the vessel as an AHTS vessel effective
January 1, 1999.
(4) All of the Company's marine transportation vessels
are located in the Gulf of Mexico.
Second quarter revenues for the Company's marine transportation segment
decreased by $14.4 million, or 63%, and operating margin decreased by $12.0
million, or 97%, from the prior year quarter. The decrease in revenues and
operating margin is primarily due to a decrease in utilization, to 61% in the
current year quarter from 83% in the prior year quarter, and to a 48% decrease
in average day rates. The Company currently has seven of its vessels cold
stacked. Operating expenses decreased by $2.4 million, or 23%, from the prior
year quarter primarily due to reduced utilization and cost savings measures.
For the six months ended June 30, 1999, revenues for the Company's marine
transportation segment decreased by $29.8 million, or 62%, and operating margin
decreased by $25.7 million, or 93%, from the prior year period. The decrease in
revenues and operating margin is primarily due to a 45% decrease in average day
rates, and to a decrease in utilization, to 62% in the current year period from
86% in the prior year period. Operating expenses decreased by $4.1 million, or
20%, from the prior year period primarily due to reduced utilization and cost
savings measures.
Depreciation and Amortization
For the second quarter and six months ended June 30, 1999, depreciation
and amortization expense increased by $4.7 million, or 23%, and by $8.5 million,
or 21%, respectively, compared with the same periods in the prior year. These
increases are due primarily to enhancement projects that were completed during
1998 and consruction of three new barge rigs that commenced operations in 1999,
offset in part by the sale of four barge rigs in October 1998.
Other Income (Expense)
Other income (expense) for the second quarter and six months ended June
30, 1999 and 1998 was as follows (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
---------------- ----------------
1999 1998 1999 1998
------ ------ ------ ------
Interest income ......... $ 3.5 $ 3.8 $ 7.6 $ 6.5
Interest expense, net ... (4.8) (6.6) (10.2) (14.2)
Other, net .............. - .1 (.1) -
----- ----- ------ ------
$(1.3) $(2.7) $ (2.7) $ (7.7)
===== ===== ====== ======
15
<PAGE>
Interest expense decreased for the second quarter and six months ended
June 30, 1999 from the comparable prior year periods due to lower average debt
balances and an increase in capitalized interest resulting from the Company's
ongoing and recently completed construction projects. Capitalized interest for
the second quarter of 1999 was $2.7 million, a $1.1 million increase over the
prior year quarter. Capitalized interest for the six months ended June 30, 1999
was $5.4 million, a $3.1 million increase over the comparable prior year period.
Provision for Income Taxes
The Company's income tax provisions for the second quarter and six months
ended June 30, 1999, decreased from the comparable prior year periods by $44.0
million and $78.5 million, respectively, due to the reduced profitability of the
Company.
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, 1999 and 1998 were as follows (in millions):
1999 1998
------ ------
Cash flow from operations ............ $ 88.0 $272.5
====== ======
Capital expenditures
Sustaining ..................... $ 6.1 $ 23.1
Enhancements ................... 15.4 84.9
Construction ................... 117.6 44.1
------ ------
$139.1 $152.1
====== ======
Cash flow from operations decreased by $184.5 million for the six months
ended June 30, 1999 as compared to the prior year period. The decrease in cash
flow from operations is primarily a result of reduced operating margins and
reduced cash flow from working capital changes.
Management anticipates that capital expenditures for the full year 1999
will be approximately $275 million, including $220 million for new construction
projects, $35 million for enhancements and $20 million for ongoing operations.
The Company has two rigs under construction, the ENSCO 7500 and the ENSCO
101. The ENSCO 7500 is a semisubmersible rig, and is being constructed under a
contract for Burlington Resources. The total cost of the ENSCO 7500 is projected
to be approximately $200 million, plus an additional $25 million for spare
capital equipment. The expected construction completion date of the ENSCO 7500
is in the third quarter of 2000, which precedes the date under which the Company
would be subject to late delivery penalties by approximately nine months. The
ENSCO 101 is an international class, harsh environment, jackup rig, and is
scheduled for delivery during the first quarter of 2000. Currently, the Company
does not have a contract for the ENSCO 101.
Financing and Capital Resources
The Company's long-term debt, total capital and debt to capital ratios at
June 30, 1999 and December 31, 1998 are summarized below (in millions, except
percentages):
June 30, December 31,
1999 1998
-------- --------
Long-term debt ........................... $ 373.3 $ 375.5
Total capital ............................ 1,624.1 1,620.5
Long-term debt to total capital .......... 23.0% 23.2%
The decrease in long-term debt is due primarily to debt repayments in the
first six months of 1999. The total capital of the Company increased due
primarily to the profitability of the Company for the six month period ended
June 30, 1999, offset in part by reductions in long-term debt and the payment of
dividends.
During the first quarter of 1999, the Company repaid $19.6 million of
term loans outstanding at December 31, 1998. These loans were secured by four
Venezuela barge rigs and were required to be repaid as a result of the early
termination of the drilling contracts of the four rigs.
16
<PAGE>
In June 1999, the Company received a commitment from the United States
Maritime Administration ("MARAD") for the guarantee of approximately $195
million of long-term debt for the construction of the ENSCO 7500, the Company's
new semisubmersible rig. The MARAD guarantee covers interim construction
financing, as well as 15 year bonds to be issued upon completion of
construction, which is projected to occur in the third quarter of 2000. The
Company expects to complete the financing and begin drawing funds in the fourth
quarter of 1999.
In order to ensure the Company has adequate liquidity and resources for
growth, the Company continues to maintain its $185 million unsecured revolving
line of credit (the "Credit Agreement") with a syndicate of banks. As of June
30, 1999, the Company had the full $185 million available for borrowings under
the Credit Agreement. The Credit Agreement matures in May 2003.
The Company's liquidity position at June 30, 1999 and December 31, 1998
is summarized in the table below (in millions, except ratios):
June 30, December 31,
1999 1998
------ ------
Cash and cash equivalents ............ $252.7 $330.1
Working capital ...................... 209.2 316.9
Current ratio ........................ 2.6 3.0
Management believes cash flow from operations, the ENSCO 7500 financing
guaranteed by MARAD, the Company's existing Credit Agreement and the Company's
working capital should be sufficient to fund the Company's short and long-term
liquidity needs.
MARKET RISK
The Company occasionally uses derivative financial instruments to hedge
against its exposure to changes in foreign currencies. The Company does not use
derivative financial instruments for trading purposes. The Company predominantly
structures its drilling rig contracts in U.S. dollars to mitigate its exposure
to fluctuations in foreign currencies. The Company will, however, from time to
time, hedge its known liabilities or projected payments in foreign currencies to
reduce the impact of foreign currency gains and losses in its financial results.
At June 30, 1999, the Company had foreign currency exchange contracts
outstanding to exchange U.S. dollars for Dutch guilders, British pounds sterling
and Singapore dollars totaling $39.6 million. At June 30, 1999, there were no
material unrealized gains or losses on open foreign currency exchange derivative
hedges. Management believes that the Company's hedging activities do not expose
the Company to any material interest rate risk, foreign currency exchange rate
risk, commodity price risk or any other market rate or price risk.
YEAR 2000 UPDATE
The Company has completed its assessment of its critical information
technology (IT) systems and non-IT systems and has corrected substantially all
deficiencies identified. The Company believes that it is on schedule to complete
all required system implementations and equipment modifications necessary to
make the Company's critical systems Year 2000 compliant by September 1999.
The Company's critical IT systems are comprised primarily of a general
ledger accounting software package and related application modules, a fixed
asset system, payroll system and procurement and purchasing system. The
assessment of the Company's IT systems found that some of the IT systems were
not Year 2000 compliant. Changes to make these systems Year 2000 compliant were
made in conjunction with the Company's planned upgrade cycle, which was
completed in June 1999.
Non-IT systems are comprised primarily of computer controlled equipment
and electronic devices, including equipment with embedded microprocessors, which
are used to operate equipment on the Company's drilling rigs and marine vessels.
With respect to drilling rig and marine vessel based systems, the Company's
assessment indicated that while there were certain systems that were not Year
2000 compliant, there would be no disruption in the operations of its drilling
rigs and marine vessels as a result of the Year 2000 problem. The Company
conducted testing of its drilling rig based equipment with manufacture
representatives during the fourth quarter of 1998 which verified the Company's
assessment. Changes to make certain drilling rig and marine vessel based systems
Year 2000 compliant are being made in conjunction with the Company's ongoing
equipment upgrades, and should be completed by September 1999.
17
<PAGE>
The Company's non-IT systems also include telephone systems and other
office based electronic equipment. With respect to office based non-IT systems,
the Company's assessment indicated that it would be necessary to replace or
modify some existing equipment. The Company completed the necessary replacements
and modifications to its office based non-IT systems in June 1999.
The total cost to make all systems and equipment Year 2000 compliant is
currently estimated at $700,000, including software and systems replaced in the
Company's normal upgrade cycle. Approximately $500,000 has been spent in
modifying and upgrading systems and equipment to date. These estimates do not
include internal labor costs for employees who spend part of their time working
on the Company's Year 2000 project.
The Company has initiated or received communication from most significant
suppliers, customers and financial service providers on the Year 2000 issue.
This communication has been used to determine the extent to which the Company is
vulnerable to these third parties' failure to remedy their own Year 2000 issues.
Although there is currently no indication that these business partners will not
achieve their Year 2000 compliance plans, there can be no guarantee that the
systems of other companies on which the Company relies will be timely converted.
Additionally, there can be no guarantee that the Company will not experience
Year 2000 problems. If the Company or its business partners experience Year 2000
compliance problems, material adverse business consequences could result. The
Company believes that the most likely negative effects, if any, could include
delays in payments to the Company from customers or payments by the Company to
suppliers and disruptions in shipments of equipment and materials required to
operate the Company's drilling rigs and marine vessels.
The Company has begun contingency planning for its Year 2000 issues and
is expected to have such plans completed during the third quarter of 1999. The
Company's contingency planning will primarily focus on precautionary measures
related to safety response requirements for operating assets, the shipment of
equipment to foreign countries and rig crew changes on or around January 1,
2000.
OUTLOOK AND FORWARD-LOOKING STATEMENTS
The Company currently expects that day rates and utilization for drilling
rigs and marine transportation vessels will remain at depressed levels during
the remainder of 1999 as a result of current industry conditions and sharply
curtailed spending for exploration and development programs by oil companies. As
a result, the Company's financial results will be adversely affected. Due to the
short-term nature of many of the Company's contracts and the unpredictable
nature of oil and natural gas prices, which affect the demand for drilling
activity, the extent of such adverse change cannot be accurately predicted.
While recent oil price improvement has been encouraging, even if these prices
persist, significantly higher day rates will probably not be realized for
several quarters. Based on these factors, the Company anticipates it will incur
a net loss for 1999. However, management remains positive on the long-term
outlook for the industry and for ENSCO.
The decline experienced in the offshore drilling markets has resulted in
the Company stacking certain rigs and vessels. The Company will stack its rigs
and vessels if it does not believe there will be a market for the equipment in
the near-term or if sufficient cash flow cannot be generated to cover cash
operating costs. Currently, the Company has no plans to stack any of its North
America jackup rigs. In Europe, four of the Company's rigs are currently idle,
including two rigs that were stacked during the first quarter. The Company
continues to market the remaining two rigs. In the Asia Pacific region, the
Company has four rigs currently not under contract. The Company has stacked
three of these rigs and plans to market the remaining rig. In South America, the
Company has received delivery of three new barge rigs constructed against a
long-term contract with Chevron. The Company's six other barge rigs in Venezuela
were idled in January 1999 as a result of early contract terminations by PDVSA.
The Company has stacked four of the barge rigs and plans to market the remaining
two barge rigs, one of which completed a 70 day short-term contract in June. In
the marine transportation segment, there are currently two supply vessels and
five mini-supply vessels stacked. Additional vessels will be considered for
stacking as their drydocking requirements mature during 1999.
This report contains forward-looking statements based on current
expectations that involve a number of risks and uncertainties that could cause
18
<PAGE>
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, and include but
are not limited to statements regarding future operations and business
environment. 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, 1998.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires companies to record
derivatives on the balance sheet as assets and liabilities, measured at fair
value. Gains and losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. This statement is not expected to
have a material impact on the Company's consolidated financial statements. This
statement, as amended by Statement of Financial Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133," is effective for fiscal years
beginning after June 15, 2000, with earlier adoption encouraged. ENSCO will
adopt this accounting standard as required by January 1, 2001.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information required under Item 3. has been incorporated into
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Market Risk.
19
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On May 18, 1999, the Company held an annual meeting of stockholders to
consider the following proposals: "Proposal 1" - To elect three Class II
Directors; "Proposal 2" - To approve the appointment of PricewaterhouseCoopers
LLP as the Company's independent accountants for 1999. A description of the
foregoing matters is contained in the Company's proxy statement dated March 26,
1999 relating to the 1999 annual meeting of stockholders.
There were 137,049,752 shares of the Company's common stock entitled to
vote at the annual meeting based on the March 25, 1999 record date, of which
121,564,612 shares, or approximately 89%, were present in person or by proxy.
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.
With respect to Proposal 1 listed above, the voting was as follows:
Votes for Votes Withheld
--------- --------------
Craig I. Fields 120,546,620 1,017,992
Morton H. Meyerson 120,545,610 1,019,002
Richard A. Wilson 120,549,035 1,015,577
With respect to Proposal 2 listed above, the voting was as follows:
Votes for Votes Against Abstentions
--------- ------------- -----------
Proposal 2 121,200,215 202,655 161,742
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Filed with this Report
Exhibit No.
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
20
<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: August 4, 1999 /s/ C. Christopher Gaut
----------------------------------
C. Christopher Gaut
Chief Financial Officer
/s/ H. E. Malone
----------------------------------
H. E. Malone, Corporate Controller
and Chief Accounting Officer
21
August 4, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Commissioners:
We are aware that our report dated July 30, 1999 on our review of interim
financial information of ENSCO International Incorporated (the "Company") as of
and for the period ended June 30, 1999 and included in the Company's quarterly
report on Form 10-Q for the quarter then ended is incorporated by reference in
its Registration Statements on Form S-3 (Nos. 33-42965, 33-46500, 33-49590,
33-43756, 33-64642, 333-03575 and 333-37897), and any existing amendments
thereto, and Form S-8 (Nos. 33-58625, 33-14714, 33-32447, 33-35862, 33-40282 and
33-41294).
Yours very truly,
/s/ PricewaterhouseCoopers LLP
Dallas, Texas
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
June 30, 1999 financial statements and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000314808
<NAME> ENSCO INTERNATIONAL INCORPORATED
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