FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
For the fiscal year ended June 30, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the transition period from _______ to _________
Commission File Number 0-9953
BONRAY DRILLING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 73-1086424
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification Number)
4701 N. E. 23rd Street, Oklahoma City, OK 73121
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 405/424-4327
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class: Name of each exchange on which register:
None N/A
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Title of Class
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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by
non-affiliates of the registrant at August 31, 1995 was
$2,090,830.
The number of shares of common stock, $1.00 par value,
outstanding at August 31, 1995 was 423,540.
Part III incorporates information by reference from the Proxy
Statement for the Annual Meeting of Stockholders on November 14,
1995.
<PAGE>
PART I
ITEM 1. BUSINESS
Introduction
- - ------------
Bonray Drilling Corporation, a Delaware corporation formed in
March 1980, is successor to a contract drilling business which
has been in operation since 1957. The term "Company" includes
Bonray Drilling Corporation and its predecessor corporate and
divisional operations unless the context otherwise requires.
The Company is engaged in domestic onshore contract drilling
of oil and gas wells. It currently owns and has available for
operation fifteen drilling rigs in Oklahoma, having depth
capabilities ranging from 7,000 to 25,000 feet. The Company will
extend its geographical area of operation if appropriate
opportunities are presented.
Industry conditions and utilization rates
- - -----------------------------------------
The Company's contract drilling revenues depend upon the
utilization of, and contract rates for, its drilling rigs. These
factors are affected by a number of variables, including
competitive conditions in the drilling industry and the amount of
exploration and development activity conducted by oil and gas
producers.
The level of domestic drilling activity has historically
fluctuated widely and cannot be predicted because of the uncertainty of
numerous factors affecting the petroleum industry, including oil and gas
selling prices and the degree of government regulation of the industry.
The demand for rigs has greatly declined since the fourth quarter of
1982 due to the decline in the exploration for and development of oil and
gas reserves, which resulted from the decrease in the sales price of
oil and gas. Lower rig utilization rates have caused intense price
competition in the industry. During the month of July 1995, the Company
operated at approximately 49.7% of capacity.
The following table sets forth certain information with
respect to the drilling activities of the Company. The utilization rate
represents the number of days during which a rig was operating or being made
ready to operate in a given period, expressed as a percentage of the
number of days that the rig was owned by the Company and available for work
during that same period.
<TABLE>
<CAPTION>
Years ended June 30,
------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Utilization rate <F1> 43.4% 38.6% 41.9% 28.0% 37.3%
Rigs available for work at
end of period 15 14 14 14 14
Wells drilled 62 59 61 43 53
Footage drilled (thousands) 505 489 547 344 457
- - ---------------
<FN>
<F1> Rigs being dismantled, moved and assembled were treated as
utilized if the Company was paid by a customer or if the Company
allowed for such activity in determining the price under a related
drilling contract.
</TABLE>
Contracts
- - ---------
The terms and rates of the Company's drilling contracts vary
depending upon the location, duration and complexity of the
drilling, the equipment and services provided, and other factors. As of
August 31, 1995, seven rigs were under contract for the drilling of twelve
wells.
As of that date, five of the Company's rigs were operating on
a daywork basis, pursuant to which the Company is paid monthly a
specified amount per day based on the depth capability of the rig. The
Company is paid for all days during the term of the contracts except days
for which the rigs are not in operation because of repairs or maintenance.
Daywork contracts generally specify the type of equipment to be used, the
size of the hole and the depth of the well to be drilled, and provide for
payment by the customer of certain costs and expenses of transporting,
assembling and dismantling the rigs. While working under daywork contracts,
the Company bears no part of the costs due to in-hole losses such as
time delays for various reasons, including stuck drill strings and
blowouts.
The Company also enters into footage and turnkey contracts.
Footage and turnkey contracts, as opposed to daywork contracts,
shift the risk of loss in drilling from the customer to the drilling
contractor and, as a consequence, result in greater variation in
profitability. As of August 31, 1995, two rigs were operating under footage
contracts. Footage contracts usually provide for payment of an agreed price
per foot of hole drilled to a specified depth regardless of the time
required or the problems encountered. Turnkey contracts, of which none were
in process at August 31, 1995, provide for payment of an agreed
price upon the attainment of a specified objective. Turnkey contracts
require more services of the contractor and, consequently, result in
additional risks, costs and higher revenues which are not inherent in footage
or daywork contracts. Turnkey contracts include costs for casing,
cementing, drilling mud, and logging services. The Company determines the
manner of drilling and type of equipment to be used, subject to customer
specifications.
The Company prefers to work on a daywork basis, as it does
not believe the potentially higher profit margins of footage and
turnkey contracts justify the associated increased risks. However, in
periods of lesser demand, the Company is generally required to work on a
footage or turnkey basis, particularly with respect to shallow drilling.
The following table indicates the percentage of drilling
revenues attributable to the foregoing types of contracts for the periods
indicated:
<TABLE>
<CAPTION>
Years ended June 30,
--------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Type of Contract:
Daywork 88.5% 77.0% 42.8% 70.5% 43.3%
Footage 10.5% 12.0% 18.4% 26.7% 18.8%
Turnkey 1.0% 11.0% 38.8% 2.8% 37.9%
</TABLE>
Customers and competition
- - -------------------------
The Company's customers include major integrated oil
companies and independent oil and gas producers. The following table
summarizes the Company's sources of contract drilling revenue and wells
drilled for each of the three years in the period ended June 30, 1995:
<TABLE>
<CAPTION>
Years ended June 30,
(Dollars in thousands)
---------------------------------------------------------------------------
1995 1994 1993
Wells Wells Wells
Drld. Amount % Drld. Amount % Drld. Amount %
----- ------ -- ----- ------ -- ----- ------ --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Avalon Exploration 9 $2,561 30 13 $2,324 29 6 $1,933 20
Sanguine, Ltd. 4 879 10 1 162 2 5 1,506 16
Marathon Oil 6 2,082 25 10 1,766 22 8 1,731 18
DLB Energy - - - 4 871 11 9 1,480 15
All Others 43 2,964 35 31 2,789 36 33 2,981 31
-- ------ --- -- ------ --- -- ------ ---
Totals 62 $8,486 100 59 $7,912 100 61 $9,631 100
== ====== === == ====== === == ====== ===
</TABLE>
The Company competes with a large number of companies in the
marketing of its drilling services, some of which have substantially
greater resources available than the Company. The Company believes that
competition is based principally on the availability of suitable drilling
rigs and related equipment, expertise, price and reputation, and believes
that it is able to compete effectively with respect to each of such
factors. Competition is primarily regional and may vary from time to
time by region. Rigs can be moved, however, from one region to another
in response to perceived demand.
Conditions in the industry remain very competitive. Maintenance of
on-going customer relationships is extremely important. However,
vigorous competition will make it difficult to maintain such
relationships.
The Company maintains four trucks in order to move some of its rigs
to drill sites on an economic basis but contracts with common carriers
and contractors for rig assembly and disassembly. The cost of
transportation is usually included in the daywork rate, with some
reimbursements generally allowed. Footage and turnkey contracts
usually require the Company to absorb these costs.
Regulatory matters
- - ------------------
General - The production and sale of crude oil and natural gas are
currently subject to extensive regulation and significant taxation by
both federal and state authorities. Most states (including Oklahoma)
have regulations which pertain to spacing of wells, preventing waste of
oil and gas, limiting rates of production, proration of production,
prevention and clean-up of pollution and similar matters. These
regulations decrease producer profitability which in turn decreases the
demand for contract drilling.
Environmental regulation - The Company's operations are subject to
numerous federal, state and local laws and regulations controlling the
discharge of material into the environment or otherwise relating to the
protection of the environment. The Company believes that it complies
with those regulations and laws affecting its operations. Such
compliance has not had and is not currently expected to have, a
material effect upon the Company's capital expenditures, earnings or
competitive position.
Operating risks and insurance
- - -----------------------------
Contract drilling by its nature involves numerous operating hazards
and risks, including blowouts, craterings, fires and explosions, any of
which can cause serious damage to property and equipment and personal
injuries or loss of life. There is also a risk that oil spillage, gas
leakage or fires could result in serious environmental damage. The
Company carries insurance customary for the industry but may not be fully
insured against all risks either because they are not fully insurable or
because premium costs are prohibitive. The occurrence of an event
against which the Company is not fully insured could cause the Company to
incur substantial costs and loss of revenue.
The Company insures its rigs for amounts approximating their fair
market values (less $25,000 deductible per occurrence). The Company
purchases workers' compensation insurance under a loss rating plan. This
plan affords the Company the opportunity to pay less than standard
premium or the risk of paying more than standard premium depending on
losses incurred. The Company limits its exposure within the plan to
$250,000 ($100,000 beginning June 1995) per incident.
Employees
- - ---------
As of June 30, 1995, the Company had 24 salaried and approximately
115 hourly employees. The number of hourly employees varies, depending
upon the level of rig utilization.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding
the executive officers of the Company:
Name Age Positions
---- --- ---------
Raymond H. Hefner, Jr. 68 Chairman of the Board of Directors
Richard B. Hefner 35 President and Chief Executive Officer
Officers are elected annually by the Board of Directors.
Raymond H. Hefner, Jr., was elected Chairman of the Board of
Directors of the Company upon its inception in March 1980. He served as
Chief Executive Officer from that time until June 30, 1993. He founded
Bonray Energy Corporation ("BEC"), a company engaged in oil and gas
exploration and production and the predecessor of the Company's
operations, in 1957. He served as Chairman of the Board, Chief Executive
Officer and Treasurer of BEC from 1957 until November 1, 1991, when BEC
was sold to Ensign Oil & Gas, Inc., and became EOG (Oklahoma) Inc. Mr.
Hefner also serves as President of Bonray, Inc., a privately held oil and
gas investment company. He previously served as Chairman of the Board of
Liberty Bank and Trust Company of Oklahoma City, N.A., a national bank;
Vice Chairman of the Board of Liberty Bancorp, Inc., a bank holding
company; and currently serves as a director of Liberty Bancorp, Inc.,
Liberty Bank and Trust Company of Oklahoma City, N.A., Liberty Bank and
Trust Company of Tulsa, N.A., Oklahoma Health System, Liberty Mutual
Insurance Company, Liberty Mutual Life Insurance Company, Liberty
Financial Companies, Inc. and is a Southwest advisory director
for Liberty Mutual Insurance Company. Mr. Hefner joined the board of
directors for Gulf Canada Resources Limited January 25, 1995. He is the
father of Richard B. Hefner.
Richard B. Hefner was elected Chief Executive Officer effective June
30, 1993. He has served as President, Chief Operating Officer and
Director of the Company since October 1990. Mr. Hefner is a general
partner of Hefner Enterprises, a Texas general partnership, and serves as
Vice President of Bonray, Inc., a privately held oil and gas investment
company. He has served as Vice President and General Manager of Canadian
Valley Ranch, Inc., a pure-bred livestock production company, since 1982.
He is the son of Raymond H. Hefner, Jr.
ITEM 2. PROPERTIES
The Company owns approximately forty acres of land located in
Oklahoma City, Oklahoma, on which an office building and repair,
support and storage facilities for the Company's operations are located.
These facilities include a repair shop (8,000 square feet) and three
warehouses. The office building (3,600 square feet) was renovated in
fiscal year 1992 to be used by office personnel.
The Company presently owns and operates fifteen drilling rigs.
Although four of these drilling rigs have been "mothballed", thus
requiring major expenditures in order to become productive, the
remaining eleven rigs are in good operating condition. Although the rigs
with less depth capacity have had greater utilization in recent years,
those rigs with deeper capacity are available if deep gas drilling activity
increases. (See "Item 1. Business" for utilization rates, drilling
contracts and customers.) The following table sets forth certain
information relating to the Company's drilling rigs presently available
for operation:
<TABLE>
<CAPTION>
Depth
Rig Capability Customer at
Number (feet)<F1> Type August 31, 1995
- - ------ ----------- ----------- ---------------
<S> <C> <C> <C>
1 16,000 Oilwell 760 Marathon
2 20,000 Oilwell 860 mothballed
3 10,000 Ideco 525 mothballed
4 12,000 Unit U-40 Avalon
5 9,000 National 50-A <F2>
6 9,000 National 50-A mothballed
7 7,000 Cooper 550 Hollrah
8 10,000 Cooper LTO 750 Keener
10 12,000 National 55 <F2>
21 12,000 Ideco 750 Bolin
30 20,000 National 1320-M mothballed
31 25,000 National 1320-M <F2>
32 20,000 National 110-M Avalon
33 20,000 Mid Continent U914 Sanguine
34 25,000 Gardner Denver 1500 <F2>
<FN>
<F1> Depth capabilities are based upon the use of 4.5 inch or 5
inch drill pipe and normal casing designs. The capabilities may vary as a
result of the use of different drill pipe or unusual casing designs.
<F2> Not operating at August 31, 1995.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the Company is a
party or any of its property is subject.
There are no material administrative or judicial proceedings arising
under any federal, state, or local provisions regulating the discharge of
materials into the environment or otherwise relating to the protection of
the environment. No such proceedings are known to be contemplated by
governmental authorities. No material legal proceedings were terminated
during the fourth quarter ended June 30, 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of stockholders through the
solicitation of proxies or otherwise during the fourth quarter of the
year ended June 30, 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The common stock of the Company is traded over-the-counter under the
NASDAQ symbol BNRY. The following is the range of prices for the
Company's common stock for each of the quarters in the two year period
ended June 30, 1995:
<TABLE>
<CAPTION>
1995 Bids<F1> 1994 Bids<F1>
------------------ ----------------
Quarter High Low High Low
- - ------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
First $ 7.50 $ 7.00 $ 8.75 $ 8.25
Second $ 8.25 $ 7.75 $ 8.50 $ 8.00
Third $ 8.50 $ 8.50 $ 8.00 $ 7.25
Fourth $ 8.50 $ 8.50 $ 7.25 $ 7.25
<FN>
<F1> Bid quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.
</TABLE>
No dividends have been paid since the inception of the
Company. At present, the Company intends to maintain a policy of retaining
any earnings for its operations.
At August 31, 1995, Bonray Drilling Corporation had approximately 571
stockholders of record, not including individual stockholders whose
shares are held in street name by brokerage, nominee or depository firms.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Operating revenues $8,486 $ 7,912 $ 9,631 $ 5,145 $ 8,619
====== ======= ======= ======= =======
Net income (loss) $ 866 $ (575) $(1,551) $(1,179)<F2> $(5,283)<F1>
====== ======= ======= ======= =======
Net income (loss)
per share $ 2.05 $ (1.36) $ (3.66) $ (2.78)<F2> $(12.47)<F1>
====== ======= ======= ======= =======
Weighted average
shares outstanding 423,540 423,540 423,540 423,540 423,540
Total assets $10,647 $ 8,896 $ 9,419 $10,295 $11,391
======= ======= ======= ======= =======
Obligations due
after one year $ 693 $ 214 $ 388 $ - $ -
======= ======= ======= ======= =======
No cash dividends were declared or paid during the periods.
<FN>
<F1> Includes $5,106,000 ($12.05 per share) relating to a write-down of
the Company's drilling equipment during the year.
<F2> Includes cumulative effect on prior years of $100,000 ($.24 per share)
due to change in method of accounting for income taxes. See Note 2 of
Notes to Financial Statements.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
References to 1995, 1994 and 1993 refer to the Company's
fiscal years ended June 30, 1995, June 30, 1994 and June 30, 1993,
respectively.
Liquidity and capital resources
- - -------------------------------
The Company reported net working capital on June 30, 1995 of $508,000
and a ratio of current assets to current liabilities of 1.27 to 1. The
$157,000 increase in working capital was largely a result of a higher
utilization rate than reported for the previous year. The Company will
continue to maintain its drilling rig fleet in good operating condition
through the use of working capital generated from operations.
Due to the depressed status of the energy industry, some of the
Company's customers pay for services on a basis of sixty to ninety days.
Due to the delay in collecting receivables, it became necessary to obtain
a line of credit with a local bank. The credit agreement provides for a
maximum of $750,000 at an interest rate of 1/2% above the national prime
lending rate recognized by the bank and is collateralized by accounts
receivable. The agreement expires October 31, 1995, unless renewed. At
June 30, 1995, the Company had no borrowings under this agreement.
In connection with the purchase of drilling equipment, a note payable
was issued to the seller for $828,000, payable in monthly installments of
principal and interest in the amount of $50,000 until paid in full with
interest at a rate of 1% above the national prime lending rate (aggregate
rate of 10% at June 30, 1995), and is secured by the equipment purchased.
Over the last several years, the Company generated additional net
operating losses for tax purposes due primarily to its use of accelerated
depreciation which exceeds accumulated book deprecation. The Company was
able to utilize a portion of these losses in its current year tax return.
The remaining net operating losses are available for use in future
periods due to carryover provisions. These carryover provisions will
begin to expire in the year 2001.
At the end of the year, the Company had no material commitments for
capital expenditures.
Results of operations
- - ---------------------
Revenues from drilling operations were $8,486,000 in 1995, an increase
of 7% from $7,912,000 in 1994 and a decrease of 12% from $9,631,000
reported in 1993. The increase from 1994 is represented by a higher
utilization of the Company's drilling fleet while the decrease from 1993
is due to the decrease in the number of turnkey contracts in relation to
total contracts. Unstable natural gas prices and fluctuating crude oil
prices have continued to depress the drilling industry. Competition for
contracts remains strong. However, the Company's attempts to raise rates
have been somewhat successful.
The Company's ability to operate on a large percentage of daywork
contracts as opposed to footage and turnkey contracts, along with a
reduction in depreciation in 1995, resulted in gross profit on drilling
contracts (drilling operations revenue less drilling operations' cost and
depreciation) of $491,000 compared to a gross profit of $51,000 reported
in 1994 and a gross loss of $823,000 reported in 1993. The decrease in
depreciation expense in 1995 and 1994 is due to the cost of certain rigs
more regularly operated becoming fully depreciated during the period. A
significant charge results from depreciating mothballed drilling rigs
pursuant to the Company's policy initiated in 1986. Additional
depreciation under this policy amounted to $36,000 in 1995, $131,000 in
1994 and $223,000 in 1993. Without the mothballed drilling rig
depreciation gross profit on drilling contracts would have been $527,000
in 1995 and $182,000 in 1994, while gross loss on drilling contracts
would have been $600,000 in 1993.
The income before provision for income taxes this year of $901,000 is
the result of a gain of approximately $1,000,000 from the sale of one of
the Company's rigs and related equipment.
Workers' compensation insurance costs and claims for self-insured
risks account for the Company's highest cash expense other than labor.
These costs were $979,000 in 1995, $876,000 in 1994 and $1,047,000 in
1993 or 25%, 23% and 27%, respectively, of payroll expenditures. Of the
amount expended in 1995, 1994, and 1993 for workers' compensation
insurance costs, 4%, 11% and 2%, respectively, were due to revisions in
estimates of claims from prior fiscal years. To place greater emphasis
on safety, the Company implemented a tenure and drug screening program in
1991 to help reduce these costs. The tenure program was changed to a
Safety Award Program in 1994. Because workers' compensation law and
insurance coverage allow claims to remain open after a policy year ends,
it is difficult to determine the Company's total liability for any given
year.
The following table indicates the percentage of the Company's
drilling revenues attributable to the various types of contracts for each
of the three years ended June 30, 1995:
<TABLE>
<CAPTION>
Years ended June 30,
----------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Type of Contract:
Daywork 88.5% 77.0% 42.8%
Footage 10.5% 12.0% 18.4%
Turnkey 1.0% 11.0% 38.8%
</TABLE>
Gross profit, excluding indirect costs associated with contract
drilling operations and depreciation of mothballed drilling rigs,
attributable to the various types of contracts for the same three
years are as follows:
<TABLE>
<CAPTION>
Years ended June 30,
--------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Type of Contract:
Daywork 91.0% 80.1% 67.2%
Footage 8.2% 12.6% 23.8%
Turnkey .8% 7.3% 9.0%
</TABLE>
Inflation
- - ---------
The effect of inflation on the Company's operations has been
insignificant because of the low rate of inflation in recent
years.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company, together with the
report thereon of Ernst & Young LLP, are set forth on pages 13
through 22 hereof. (See Item 14 for Index.)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The information required by Item 304 of Regulation S-K is not
applicable to the Company.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information relating to the identification, business
experience, and directorships of each director and nominee for
director of the Company required by Item 401 of Regulation S-K
and presented in the section entitled "Information Concerning
Nominees and Directors" of the Company's Proxy Statement for the
annual meeting of Stockholders on November 14, 1995, is hereby
incorporated by reference. (See Item 1 for information relating
to the identification and business experience of the Company's
executive officers). The information required by Item 405 of
Regulation S-K does not require disclosure by the Company.
ITEM 11. EXECUTIVE COMPENSATION
The information relating to the remuneration of directors and
officers required by Item 402 of Regulation S-K and presented in
the section entitled "Executive Compensation" of the Company's
Proxy Statement for the annual meeting of Stockholders on
November 14, 1995, is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information relating to security ownership required by Item 403 of
Regulation S-K and presented in the section entitled "Voting Securities
Outstanding, Security Ownership of Management and Principal Stockholders,"
of the Company's Proxy Statement for the annual meeting of Stockholders
on November 14, 1995, is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information relating to transactions with management and business
relationships required by Item 404 of Regulation S-K and presented in the
section entitled "Transactions With Management" of the Company's Proxy
Statement for the annual meeting of Stockholders on November 14, 1995, is
hereby incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following documents are filed as a part of this report:
1 and 2. Index to Financial Statements and Financial Statement Schedules.
---------------------------------------------------------------
Report of independent auditors
Covered by report of independent auditors:
Balance sheets at June 30, 1995 and 1994
Statements of operations and accumulated deficit
for each of the three years in the period
ended June 30, 1995
Statements of cash flows for each of the three
years in the period ended June 30, 1995
Notes to financial statements
All financial statement schedules are inapplicable or the required
information is included in the financial statements or the notes thereto.
3. Exhibits
--------
The following documents are exhibits to this Form 10-K. Each
document marked by an asterisk is hereby incorporated herein by
reference to same document previously filed with the Securities and
Exchange Commission.
Exhibit
Number Document
- - ------- --------
3(a) Registrant's Certificate of Incorporation and all amendments
(filed as Exhibit 19(a) to Form 10-Q for the six months ended
December 31, 1986).*
3(b) Registrant's Restated By-Laws (dated May 6, 1981, as amended
November 25, 1986)(filed as Exhibit 19(b) to Form 10-Q for the
six months ended December 31, 1986).*
10(a) 1981 Incentive Stock Option Plan for Bonray Drilling Corporation
and its Subsidiaries.
10(b) Commercial Promissory Note - Fixed or Variable Rate by and between
Bonray Drilling Corporation and BancFirst.
(b) Reports on Form 8-K
A report on Form 8-K was filed on April 13, 1995.
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
Bonray Drilling Corporation
We have audited the accompanying balance sheets of Bonray Drilling
Corporation as of June 30, 1995 and 1994, and the related statements of
operations and accumulated deficit and cash flows for each of the three
years in the period ended June 30, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Bonray
Drilling Corporation at June 30, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period
ended June 30, 1995, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Ernst & Young LLP
Oklahoma City, Oklahoma
August 11, 1995
<PAGE>
<TABLE>
<CAPTION>
BONRAY DRILLING CORPORATION
BALANCE SHEETS
June 30, 1995 and 1994
ASSETS 1995 1994
(Dollars in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 160 $ 9
Accounts receivable (Note 3) 2,139 1,705
Drilling contracts in progress 21 34
Prepaid expenses 94 103
------- -------
Total current assets 2,414 1,851
Properties and equipment:
Drilling equipment (Note 3) 20,766 20,941
Land 110 110
Buildings 356 346
Other equipment 1,093 1,069
------- -------
22,325 22,466
Less accumulated depreciation 14,092 15,421
------- -------
Net properties and equipment 8,233 7,045
------- -------
$10,647 $ 8,896
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 965 $ 897
Notes payable (Note 3):
Short term line of credit - 165
Other 551 -
Accrued liabilities:
Salaries and wages 163 162
Payroll and other taxes 61 67
Workers' compensation insurance
(Note 4) 66 135
Other 100 74
------- -------
Total current liabilities 1,906 1,500
Obligations due after one year:
Workers' compensation insurance (Note 4) 447 188
Notes payable (Note 3) 191 -
Other 55 26
Stockholders' equity (Note 5):
Common stock, $1.00 par value; 800,000
shares authorized, 432,740 shares
issued 433 433
Capital in excess of par value 12,497 12,497
Accumulated deficit (4,790) (5,656)
------- -------
8,140 7,274
Less 9,200 shares of treasury stock,
at cost 92 92
------- -------
Total stockholders' equity 8,048 7,182
------- -------
$10,647 $ 8,896
======= =======
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
<CAPTION>
BONRAY DRILLING CORPORATION
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
Years ended June 30, 1995, 1994 and 1993
(Dollars in thousands, except per share amounts)
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues:
Contract drilling operations
(Note 6) $ 8,486 $ 7,912 $ 9,631
Gain (loss) from sale of assets 1,029 (3) (25)
Interest and other income 172 137 66
------- ------- -------
9,687 8,046 9,672
Costs and expenses (Note 4):
Contract drilling operations 6,865 6,649 8,924
General and administrative 752 687 713
Interest and other expense 39 73 56
Depreciation 1,130 1,212 1,530
------- ------- -------
8,786 8,621 11,223
Income (loss) before provision for
income taxes 901 (575) (1,551)
Provision for income taxes (Note 2) 35 - -
------- ------- -------
Net income (loss) 866 (575) (1,551)
Accumulated deficit at beginning
of year (5,656) (5,081) (3,530)
------- ------- -------
Accumulated deficit at end of year $(4,790) $(5,656) $(5,081)
======= ======= =======
Net income (loss) per share $ 2.05 $ (1.36) $ (3.66)
======= ======= =======
Weighted average shares outstanding 423,540 423,540 423,540
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
<CAPTION>
BONRAY DRILLING CORPORATION
STATEMENTS OF CASH FLOWS
Years ended June 30, 1995, 1994 and 1993
(Dollars in thousands)
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $10,910 $10,492 $12,948
Cash paid to suppliers and
employees (10,178) (10,285) (12,239)
Interest received 36 - -
Interest paid (27) (31) (16)
Income taxes paid (30) - -
Other cash receipts 152 124 115
------- ------- -------
Net cash provided by
operating activities 863 300 808
Cash flows from investing activities:
Proceeds from sales of assets 1,659 4 25
Capital expenditures (2,120) (424) (759)
Insurance proceeds for reimbursements
of losses pertaining to properties
and equipment - - 153
------- ------- -------
Net cash used by investing
activities (461) (420) (581)
Cash flows from financing activities:
Payments on notes payable (86) - -
Net increase (decrease) in
borrowings on short-term line
of credit (165) 65 (200)
------- ------- -------
Net cash provided (used) by
financing activities (251) 65 (200)
------- ------- -------
Net increase (decrease) in cash
and cash equivalents 151 (55) 27
Cash and cash equivalents at
beginning of year 9 64 37
------- ------- -------
Cash and cash equivalents at
end of year $ 160 $ 9 $ 64
======= ======= =======
Reconciliation of net income (loss)
to net cash provided by
operating activities:
Net income (loss) $ 866 $ (575) $(1,551)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 1,130 1,212 1,530
(Gain) loss on sales of assets (1,029) 3 25
Change in assets and liabilities:
Decrease (increase) in
current assets:
Accounts receivable (434) (578) (233)
Drilling contracts in
progress 13 196 (28)
Prepaid expenses 9 (14) 135
Increase (decrease) in
current liabilities:
Accounts payable 68 107 313
Accrued liabilities (48) 54 174
Accrued workers' compensation
insurance and other due after
one year 288 (174) 388
Other - 69 55
------- ------- -------
Total adjustments (3) 875 2,359
------- ------- -------
Net cash provided by operating
activities $ 863 $ 300 $ 808
======= ======= =======
</TABLE>
Disclosure of noncash investing and
financing activities:
During the year ended June 30, 1995, the Company acquired property,
plant and equipment by issuing a note payable of $828,050.
The accompanying notes are an integral part of these financial
statements.
BONRAY DRILLING CORPORATION
NOTES TO FINANCIAL STATEMENTS
Years ended June 30, 1995, 1994 and 1993
1. Basis of financial statements and significant accounting policies
-----------------------------------------------------------------
Cash and cash equivalents - Cash and cash equivalents include cash
deposits in banks and short-term investments with original maturities of
three months or less from the date of purchase by the Company.
Contract drilling operations - Revenue earned from footage and turnkey
contracts is recognized by the completed contract method, while revenue
earned from daywork contracts is recognized by the percentage-of-completion
method. Provision is made for the entire amount of expected losses on
contracts, if any, in the period in which such losses are first determined.
Valuation of properties and equipment - Drilling equipment is stated
at amounts representing historical cost adjusted by prior year write-downs
totaling approximately $21,000,000 based on the expected future economic
value of such equipment. This value was determined by projecting the
estimated future cash flows generated by drilling equipment based on the
Company's historical utilization rates and profit margins as well as
consideration of the economic conditions of the industry. Additions to
drilling equipment, land, buildings and other equipment are reported at cost.
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." Under the new rules long-lived assets must be reviewed for impairment at
the lowest level for which there are identifiable cash flows for the
Company's asset base and any impairment would be measured based on the
fair value of the assets and would be reported in the year in which the
statement is initially adopted. The statement is required to be adopted
by the Company by fiscal year 1997. The Company is in the preliminary
stages of evaluating the financial statement impact of adoption of this
statement and, accordingly, such impact has not been determined.
Depreciation - Depreciation of drilling equipment is computed on an
operating day basis (net of estimated salvage value), except for drilling
rigs and related equipment which are "mothballed" or otherwise not
expected to be used for an extended period of time. Annual depreciation
of these inactive rigs and related equipment is equal to 20% of the
amount of depreciation which would be computed using the straight-line
method over the estimated useful life of such drilling equipment. To the
extent that the inactive rigs and related equipment are utilized during
the year, depreciation is provided on an annual basis at the greater of
the amount computed using the 20% rate or the operating day basis. The
specific inactive drilling equipment used in any year may vary so the net
book value of this equipment and the depreciation expense relating to it
will vary accordingly. The net book value of such drilling equipment is
$733,000 and $1,356,000 at June 30, 1995 and 1994, respectively. The
Company recorded $36,000 of depreciation in 1995, $131,000 in 1994 and
$223,000 in 1993 on these inactive rigs and related equipment, or $.08
per share, $.31 per share, and $.53 per share, respectively.
Depreciation of buildings and other equipment is computed by the
straight-line method over the estimated useful lives of the assets.
Income (loss) per share - Income (loss) per share is computed on the
basis of weighted average number of shares of common stock and dilutive
common stock equivalents outstanding.
Credit risk - The Company operates fifteen drilling rigs in the state
of Oklahoma and grants credit, which is generally unsecured, to its
customers (Note 6). At June 30, 1995 approximately 84% of the Company's
accounts receivable were from three customers. The Company has not
experienced any significant credit losses in 1995, 1994 or 1993 and is
not aware of any significant uncollectible accounts at June 30, 1995.
2. Income taxes
------------
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax
liabilities and assets as of June 30, 1995 and 1994 are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax liability - tax
depreciation over book
depreciation and write-downs $ 807 $ 1,198
======= =======
Deferred tax assets:
Net revenues and expenses
recognized for tax purposes
which are deferred for
financial purposes $ 7 $ 10
Net operating loss carryforwards 2,216 2,934
------- -------
Total deferred tax assets
before valuation allowance 2,223 2,944
Less: Valuation allowance
recognized 1,416 1,746
------- -------
Net deferred tax assets $ 807 $ 1,198
======= =======
</TABLE>
The deferred tax assets and liability are offset and, therefore, no
deferred tax asset or liability is reflected in the Company's balance
sheets at June 30, 1995 and 1994.
The difference between the amount of the credit for income taxes and
the amount which would result from the application of the statutory rate
to income (loss) before provision (credit) for income taxes is analyzed
as follows (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Provision (credit) for income taxes
at statutory rate $ 306 $ (201) $ (527)
Difference resulting from:
Increase (decrease) in valuation
allowance for net deferred
tax assets (330) 215 547
Alternative minimum tax 35 - -
Other 24 (14) (20)
------ ------ ------
Provision for income taxes $ 35 $ - $ -
====== ====== ======
</TABLE>
At June 30, 1995, the Company has net operating loss carryforwards for
federal tax purposes of approximately $5,100,000 which will expire
beginning in the year 2001 if not used. At June 30, 1995, the net
operating loss carryforwards for state tax purposes amounted to
approximately $12,600,000.
3. Notes Payable
-------------
During the year ended June 30, 1995, the Company acquired drilling and
other equipment by issuing a note payable of $828,000 to the seller of
the equipment. The note is payable in monthly installments of principal
and interest in the amount of $50,000 until paid in full with interest at
a rate of 1% above the national prime lending rate (aggregate rate of 10%
at June 30, 1995) and is secured by the equipment purchased. The balance
due under the agreement at June 30, 1995 was $742,000, of which $551,000
is expected to be due within one year with the remainder due in 1997.
The note also contains a prepayment option for the Company and allows the
Company to defer up to four of the monthly payments.
The Company has a revolving line of credit agreement (the "credit
agreement") with a bank. Credit availability is subject to a monthly
borrowing base determination calculated as 75% of the Company's accounts
receivable less than 90 days old, not to exceed $750,000. At June 30,
1994, $165,000 of borrowings were outstanding under the revolving line of
credit (none at June 30, 1995). The credit agreement, which expires
October 31, 1995 unless renewed, provides for monthly interest payments
which accrue at a rate of 1/2 of 1% over the lender's national prime rate
(aggregate rate of 9.5% at June 30, 1995, and 7.75% at June 30, 1994).
Outstanding advances and accrued interest are due in full upon expiration
of the credit agreement. The credit agreement is secured by the Company's
accounts receivable.
4. Contingency
-----------
The Company is covered by a workers' compensation insurance plan for
its employees under which the Company is responsible for claims up to
$250,000 ($100,000 beginning June 1995) per incident. The Company
changed from a retrospective rating plan to a paid loss plan effective
with the year ended June 30, 1995. Under the paid loss plan the Company
will reimburse the workers' compensation administrator for costs as those
costs are paid by the administrator, normally over a five year period.
Of these costs, $302,000 is included in workers' compensation insurance
due after one year in the accompanying 1995 balance sheet. Total
workers' compensation costs incurred by the Company were $979,000,
$876,000 and $1,047,000 for the years ended June 30, 1995, 1994 and 1993
respectively, and were based on actual and estimated claims incurred.
Workers' compensation expense for the years ended June 30, 1995, 1994
and 1993 includes $40,000, $99,000 and $24,000 ($.09, $.23 and $.06 per
share), respectively, for changes in the claims estimated to be incurred
by the Company's workers' compensation administrator for claims arising
in prior fiscal years. These changes in estimates are not expected to
have a significant effect on subsequent fiscal years.
At June 30, 1995, and 1994, the Company has a net liability for
accrued workers' compensation insurance totaling $513,000 and $323,000,
respectively. Under an agreement with the Company's workers' compensation
administrator, the Company will fund certain estimated workers'
compensation costs from the 1993 policy year as they are paid by
the administrator. The administrator has agreed to continue this
arrangement for the retrospective life of that particular policy year,
which is normally five years or until there is mutual agreement between
the Company and the administrator to do otherwise. Accordingly, the
estimated liability of $145,000 at June 30, 1995 related to these costs,
expected to be paid by the Company after June 30, 1996, is included in
workers' compensation insurance due after one year in the accompanying
1995 balance sheet. Under a similar agreement at June 30, 1994, the
Company included $188,000 related to these costs in workers' compensation
insurance due after one year.
5. Incentive stock option plan
---------------------------
In September 1981, the Company established the 1981 Incentive Stock
Option Plan under which the Company was authorized to award options on
up to 5,000 shares of common stock to certain officers and key employees
of the Company. The 1981 Incentive Stock Option Plan expired in
September 1991, and was not renewed, however outstanding options may
be exercised any time through June 1999.
The following table summarizes the activity in employees' stock
options during the year ended June 30, 1995:
<TABLE>
<S> <C>
Outstanding options at beginning of year 1,000
Granted -
Exercised -
Cancelled -
-------
Outstanding options at end of year 1,000
=======
At end of year:
Price of outstanding options $14.875
Options exercisable 1,000
</TABLE>
6. Major customers
---------------
Contract drilling operations revenues include revenues from certain
customers which individually account for 10% or more of these contract
drilling operations revenues as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Customer
A $ 879,000 $ - $1,506,000
B 2,561,000 2,324,000 1,933,000
C - 871,000 1,480,000
D 2,082,000 1,766,000 1,731,000
E - - 1,011,000
---------- ---------- ----------
$5,522,000 $4,961,000 $7,661,000
========== ========== ==========
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto
duly authorized, on September 22, 1995.
BONRAY DRILLING CORPORATION
RICHARD B. HEFNER
Richard B. Hefner
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities indicated on September
22, 1995.
RAYMOND H. HEFNER, JR. Chairman of the Board of Directors
Raymond H. Hefner, Jr.
RICHARD B. HEFNER President, Chief Executive Officer
Richard B. Hefner and Director
PHILIP C. DAY Treasurer and Chief Financial Officer
Philip C. Day
JOANNE BELCHER Controller and Chief Accounting Officer
Joanne Belcher
WILLIAM B. CLEARY Director
William B. Cleary
HOBART A. SMITH Director
Hobart A. Smith
JAMES R. TOLBERT, III Director
James R. Tolbert III
<PAGE>
INDEX TO EXHIBITS
PAGE NUMBER OR INCORPORATION
EXHIBIT NUMBER BY REFERENCE TO
3(a) Registrant's Certificate Form 10-Q for the six months
of Incorporation and all ended December 31, 1986,
amendments Exhibit 19(a)
3(b) Registrant's Restated Form 10-Q for the six months
By-laws (dated May 6, ended December 31, 1986,
1981, as amended Exhibit 19(a)
November 25, 1986)
10(a) 1981 Incentive Option
Plan for Bonray Drilling
Corporation on its
Subsidiaries
10(b) Commercial Promissory
Note - Fixed or Variable
Rate by and between
Bonray Drilling Corporation
and BancFirst
</TABLE>
EXHIBIT 10(a)
1981 INCENTIVE STOCK OPTION PLAN
FOR
BONRAY DRILLING CORPORATION AND ITS SUBSIDIARIES
ARTICLE I
Purpose
The purpose of the 1981 Incentive Stock Option Plan for
Bonray Drilling Corporation and Its Subsidiaries ("Plan") shall
be to attract, retain and motivate key management employees of
Bonray Drilling Corporation ("Company") and its subsidiaries by
providing additional compensation to such employees for future
services by way of granting incentive stock options ("Stock
Options") to such employees to enable them to purchase common
stock of the Company. The Stock Options to be granted under the
Plan are intended to qualify as "incentive stock options" as
defined in Section 422A of the Internal Revenue Code of 1954, as
amended (the "Code"). Under the Plan, subsidiaries are
corporations of which 80% or more of the outstanding voting stock
is owned by the Company, and which are herein referred to as
"Subsidiary" or "Subsidiaries."
ARTICLE II
Administration of the Plan
The Plan shall be administered by the Executive
Compensation Committee (the "Committee") appointed by the Board
of Directors (the "Board") of the Company and consisting of not
less than three members from the Board none of whom shall be
employees of the Company or a Subsidiary while serving on the
Committee. The members of the Committee shall serve at the
pleasure of the Board and shall be ineligible to participate
under the Plan. Any member may serve concurrently as a member of
any other administrative committee of any other plan of the
Company or any of its affiliates entitling participants therein
to acquire stock, stock options or deferred compensation rights
(including stock appreciation rights). No member of the Board may
serve on the Committee if such member has been eligible, during
the year preceding his appointment, to participate under the Plan
or any other plan of the Company entitling participants therein
to acquire stock, stock options or deferred compensation rights
(including stock appreciation rights). The Committee shall have
the power where consistent with the general purpose and intent of
the Plan (a) to establish policies and to adopt rules and
regulations for carrying out the purposes and provisions of the
Plan; (b) to interpret and construe the Plan and determine all
questions arising under the Plan and any agreement made pursuant
to the Plan, and any such interpretation, construction or
determination made by the Committee shall be final, binding and
conclusive; (c) to determine the number of shares of common stock
of the Company covered by each Stock Option; (d) to determine the
time or times when Stock Options will be granted and exercisable;
(e) to determine the conditions and restrictions under which
Stock Options may be granted and exercised; and (f) to prescribe
the form of the instruments relating to the grant, exercise and
other terms of Stock Options. A majority of the Committee shall
constitute a quorum, and an act of the majority of the members
present at any meeting at which a quorum is present shall be the
act of the Committee.
ARTICLE III
Participation in the Plan
Stock Options may be granted only to key management
employees. The Committee shall determine from time to time those
key management employees ("Participants") of the Company or a
Subsidiary who are to be granted Stock Options. No Stock Options
shall be granted to any person who is not eligible to receive
"incentive stock options" as provided in Section 422A of the
Code. No Stock Options shall be granted to any Participant if,
immediately before the grant of a Stock Option, such Participant
owns more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of a Subsidiary.
Provided, the preceding sentence shall not apply if, at the time
the Stock Option is granted, the Option Price is at least 110% of
the fair market value of the Stock subject to the Stock Option,
and such Stock Option by its terms is not exercisable after the
expiration of five (5) years from the date such Stock Option is
granted.
ARTICLE IV
Shares Subject to the Plan
Subject to adjustment under Article VII hereof, shares
of common stock of the Company covered by Stock Options shall not
exceed in the aggregate 50,000 shares of the common stock of the
Company (such 50,000 shares hereinafter referred to as "Stock").
Either authorized and unissued shares or treasury shares may be
delivered pursuant to the Plan. If any Stock Option for shares
of Stock granted to a Participant lapses, or is otherwise
terminated, the Committee may grant Stock Options for such shares
of Stock to other Participants.
ARTICLE V
Terms of Stock Options and Exercise
Each Stock Option granted hereunder shall be in writing
and shall contain such terms, restrictions and conditions as the
Committee may determine, which terms, restrictions and conditions
may or may not be the same in each case, subject to the
following:
The option price ("Option Price") for shares of Stock
shall be determined by the Committee, but in no event shall such
Option Price be less than the greater of (a) the fair market
value of the common stock of the Company on the date of grant or
(b) the par value of the Stock. "Fair market value" shall mean
the average of the bid and asked prices of the common stock of
the Company as reported by the National Association of Securities
Dealers Automated Quotations Systems or, if such common stock
should be listed on any securities exchange, the average of the
high and low, or closing sales prices as of the granting date,
exercise date or other relevant date.
The aggregate fair market value (determined as of the
time the Stock Option is granted) of the Stock for which any
Participant may be granted Stock Options in any calendar year
(under all incentive stock option plans qualified under Section
422A of the Code of the Company or a Subsidiary) shall not exceed
$100,000 plus the amount of any unused limit carryover applicable
to such year as provided in Section 422A(c)(4) of the Code.
No Stock Options may be granted under the Plan after
September 11, 1991. The maximum period for exercise of a Stock
Option shall be established by the Committee at the date of
grant, but shall not be more than ten (10) years from the date of
grant ("Option Period"). Stock Options may be exercisable in
installments (which may be cumulative or noncumulative or subject
to acceleration) during an Option Period as may be determined by
the Committee at the date of grant. Any shares not purchased on
any applicable installment date may, if so provided, be purchased
at any time prior to the expiration of the Option Period.
A Stock Option shall not be transferrable otherwise
than by will or the laws of descent and distribution, and the
Stock Option may be exercised, during the lifetime of the
Participant, only by him. More particularly (but without
limiting the generality of the foregoing), the Stock Option may
not be assigned, transferred (except as provided above) pledged
or hypothecated in any way, shall not be assignable by operation
of law and shall not be subject to execution, attachment, or
similar process. Any attempted assignment, transfer, pledge,
hypothecation, or other disposition of the Stock Option contrary
to the provisions hereof shall be null and void and without
effect.
At all times during the period commencing with the date
a Stock Option is granted to a Participant and ending on the
earlier of the expiration of the Option Period applicable to such
Stock Option or the date which is three (3) months prior to the
date the Stock Option is exercised by such Participant, such
Participant must be an employee of either (i) the Company, (ii) a
parent or a subsidiary of the Company, or (iii) a corporation or
a parent or a subsidiary corporation of such corporation issuing
or assuming a Stock Option in a transaction to which Section
425(a) of the Code applies. Provided, in the case of a
Participant who is "disabled" (within the meaning of Section
105(d)(4) of the Code) the aforesaid three (3) month period shall
mean a one (1) year period. Provided further, in the event a
Participant's employment is terminated by reason of his death,
his personal representative may exercise any unexercised Stock
Option granted to the Participant under the Plan at any time
after the Participant's death but in any event not after the
expiration of the Option Period applicable to such Stock Option.
So long as the Participant shall continue to be an
employee of the Company or one or more of its Subsidiaries, any
Stock Option granted to him shall not be affected by any change
of duties or position. Leaves of absence of a Participant, duly
authorized, shall not be deemed termination or interruptions of
employment. Nothing in the Plan or in any option agreement shall
confer upon any Participant any right to continue in the employ
of the Company or of any of its Subsidiaries, or interfere in any
way with the right of the Company or of any such Subsidiary to
terminate his employment at any time.
Any Stock Option granted hereunder to a Participant
shall not, by its terms, be exercisable while there is
outstanding (within the meaning of Section 422A(c)(7) of the
Code) any "incentive stock option" theretofore granted to such
Participant to purchase common stock of the Company or in a
corporation (which at the time of the granting of such Stock
Option hereunder) is a parent or subsidiary of the Company, or is
a predecessor corporation of any such corporations.
Participants may be granted more than one Stock Option.
The granting of a Stock Option shall not affect any outstanding
Stock Option previously granted to a Participant under the Plan.
To exercise his Stock Option, a Participant shall give
written notice to the Secretary of the Company, or other officer
designated by the Committee, at the Company's main office in
Oklahoma City, Oklahoma at least two (2) days prior to the
exercise of the Stock Option. No Stock shall be issued to any
Participant until the Company receives full payment for the Stock
purchased.
Payment for shares of Stock purchased under this Plan
shall be made in full, in cash, common stock of the Company or a
combination of cash and common stock of the Company, at the time
of the exercise of the Stock Option as a condition thereof, and
no loan or advance shall be made by the Company for the purpose
of financing, in whole or in part, the purchase of Stock. Any
cash proceeds of sale of Stock subject to the Stock Option are to
be added to the general funds of the Company to be used for its
general corporate purposes. In the event that common stock of
the Company is utilized as consideration for the purchase of
Stock upon the exercise of a Stock Option, such common stock
shall be valued at the "fair market value" as defined in this
Article V.
The Company shall have no liability to issue any Stock
hereunder unless such shares and issuance thereof comply with any
applicable federal or state securities laws or any other
applicable laws.
ARTICLE VI
Assumption of Outstanding Options
To the extent permitted by the then applicable
provisions of the Code, another employer succeeding to, or
assigned the business of, the Company as the result of or in
connection with a corporate merger or consolidation, purchase or
acquisition of property or stock, a separation, reorganization or
liquidation transaction may assume Stock Options existing under
the plan or issue new options in place of existing Stock Options
under the Plan.
ARTICLE VII
Adjustments
In the event of a merger, consolidation,
reorganization, recapitalization, stock dividend, stock split,
reverse stock split, or other change in the corporate structure
or capitalization affecting the Company common stock, a fair and
equitable adjustment shall be made by the Committee in the
number, kind, Option Price, etc., of shares of Stock subject to
outstanding Stock Options, including any adjustment in the Option
Price, shall be made in such a manner as not to constitute a
"modification" as defined in Section 425 of the Code.
ARTICLE VIII
Amendment and Termination of the Plan
The Plan shall terminate after September 11, 1991,
provided, the Plan shall continue with respect to Stock Options
which are in effect as of such date. Prior to any such
termination the Plan may be terminated, altered, changed,
modified or amended by the Board for any reason including, but
not limited to, the necessity of modifying requirements of the
Plan to conform with the law or to meet special circumstances not
anticipated or covered by the Plan. Provided, no action of the
Board may, without the approval of the shareholders of the
Company, increase the aggregate number of shares of Stock which
may be purchased under Stock Options granted under the Plan;
withdraw the administration of the Plan from the Committee;
permit a member of the Board to serve on the Committee, if he has
been eligible for the year preceding his appointment, to
participate under the Plan or any other plan of the Company
entitling Participants therein to acquire stock, stock options or
deferred compensation rights (including stock appreciation
rights); permit any person while a member of the Committee to be
eligible to receive or hold a Stock Option under the Plan;
decrease the minimum Option Price; or extend the maximum Option
Period or extend the term of the Plan. No amendment,
modification or termination of the Plan shall in any manner
adversely affect any Stock Option theretofore granted under the
Plan without the consent of the affected Participant.
ARTICLE IX
Effective Date
The Plan shall become effective only if approved by a
majority of the holders of the Company's common stock at the
stockholder meeting to be held within twelve (12) months from
September 11, 1981, and if so approved, shall be effective as of
said September 11, 1981.
STOCK OPTION AGREEMENT
FOR
1981 INCENTIVE STOCK OPTION PLAN
FOR
BONRAY DRILLING CORPORATION AND ITS SUBSIDIARIES
THIS STOCK OPTION AGREEMENT (the "Option Agreement"),
made as of this ______ day of _____________, 1982, at Oklahoma
City, Oklahoma, by and between ________________ (hereinafter
referred to as the "Participant"), and Bonray Drilling
Corporation and Its Subsidiaries (hereinafter referred to as the
"Company"):
W I T N E S S E T H:
WHEREAS, the Participant is a key management employee
of the Company or one of its subsidiaries, and it is important to
the Company that the Participant be encouraged to remain in the
employ of the Company or one of its subsidiaries; and
WHEREAS, in recognition of such facts, the Company
desires, by affording the Participant an opportunity to purchase
shares of the common stock of the Company, as hereinafter
provided, pursuant to the "1981 Incentive Stock Option Plan for
Bonray Drilling Corporation and Its Subsidiaries" (the "Plan").
NOW, THEREFORE, in consideration of the mutual
covenants hereinafter set forth and for good and valuable
consideration, the Participant and the Company hereby agree as
follows:
1. GRANT OF STOCK OPTION. The Company hereby grants
to the Participant an option (the "Stock Option") to purchase all
or any part of an aggregate of ____________________ (__,000)
shares of its common stock (the "Stock") of the Company as set
forth below, under and subject to the terms and conditions of
this Option Agreement and the Plan which is incorporated herein
by reference and made a part hereof for all purposes. The
purchase price per share shall be ____________________ ($_______
per share (but in no event shall such price be less than the
"fair market value" as defined in Article V of the Plan as of the
date hereof). A copy of the Plan has been furnished to the
Participant, and the Participant hereby acknowledges the receipt
thereof.
2. TIMES OF EXERCISE OF STOCK OPTION. After, and only
after, the conditions of paragraph 10 hereof have been satisfied,
a Participant shall be eligible to exercise that portion of his
Stock Option pursuant to the schedule set forth hereafter. If
the Participant's employment with the Company (or its parent or
of any one or more of its subsidiaries) remains full-time and
continuous at all times to any of the "Exercise Dates" specified
hereafter, then the Participant shall be entitled, subject to the
applicable provisions of the Plan and this Option Agreement
having been satisfied, to exercise on or after the applicable
Exercise Date, on a cumulative basis, that number of shares of
Stock determined by multiplying the aggregate number of shares
set forth in the foregoing paragraph 1 by the designated
percentage set forth hereafter.
Percent of Stock
Exercise Dates Option Exercisable
After __________, 1982 20%
After _________, 1982 and
before __________ , 1983 40%
After __________, 1983 and
before ___________, 1984 60%
After ____________, 1984 and
before ____________, 1985 50%
After ___________, 1985 and
before ____________, 1986 100%
3. TERM OF STOCK OPTION. The term of the Stock Option
("Option Period") shall be for a period of 10 years from the date
hereof, subject to earlier termination as provided in paragraph 6
below and pursuant to the terms of the Plan. Except as provided
in paragraph 6 hereof, the Stock Option may not be exercised at
any time unless the Participant shall have been in the full-time
continuous employ of the Company, the parent or of one or more of
its subsidiaries, from the date hereof to the date of the
exercise of the Stock Option. The holder of the Stock Option
shall not have any of the rights of a stockholder with respect to
the shares of Stock covered by the Stock Option except and only
to the extent that one or more certificates for such shares of
Stock shall be delivered to him upon the due exercise of the
Stock Option. No Stock Option may be exercised by the
Participant (or such Participant's personal representative in the
event of his death) after the expiration of the Option Period
applicable to such Stock Option.
4. NON-TRANSFERABILITY. A Stock Option shall not be
transferable otherwise than by will or the laws of descent and
distribution, and the Stock Option may be exercised, during the
lifetime of the Participant, only by the Participant. More
particularly (but without limiting the generality of the
foregoing), the Stock Option may not be assigned, transferred
(except as provided above) pledged or hypothecated in any way,
shall not be assignable by operation of law and shall not be
subject to execution, attachment, or similar process. Any
attempted assignment, transfer, pledge, hypothecation, or other
disposition of the Stock Option contrary to the provisions hereof
shall be null and void and without effect.
5. EMPLOYMENT. So long as the Participant shall
continue to be a full-time and continuous employee of the Company
or its parent or one or more of its subsidiaries, any Stock
Option granted to him shall not be affected by any change of
duties or position. Leaves of absence of a Participant, duly
authorized by the Company, shall not be deemed termination or
interruptions of employment. Nothing in the Plan or in this
Option Agreement shall confer upon the Participant any right to
continue in the employ of the Company or its parent or of any of
its subsidiaries, or interfere in any way with the right of the
Company or its parent or of any of its subsidiaries to terminate
such Participant's employment at any time.
6. EXPIRATION OF OPTION PERIOD UPON TERMINATION OF
EMPLOYMENT.
(a) At all times during the period commencing
with the date a Stock Option is granted to the Participant and
ending on the earlier of the expiration of the Option Period
applicable to the Stock Option or the date which is three months
prior to the date the Stock Option is exercised by the
Participant, the Participant must be an employee of either (i)
the Company, (ii) a parent or a subsidiary corporation of the
Company, or (iii) a corporation or a parent or a subsidiary
corporation of such corporation issuing or assuming a Stock
Option in a transaction to which Section 425(a) of the Code
applies. Provided, if the Participant is "disabled" (within the
meaning of Section 105(d)(4) of the Code) the aforesaid three
month period shall mean a one year period. Provided further, in
the event the Participant's employment is terminated by reason of
his death, his personal representative may exercise any
unexercised Stock Option granted to the Participant under the
Plan at any time within one year after the Participant's death,
but in any event not after the expiration of the Option Period
applicable to such Stock Option.
(b) Notwithstanding anything herein to the
contrary, in the event the employment of the Participant is
terminated for any of the reasons as set forth in subparagraph
6(a) hereof, unless otherwise determined by the Committee, the
Participant (or the Participant's personal representative in the
case of death) shall be permitted to exercise any Stock Option or
part thereof to the extent, and only to the extent, that such
Stock Option becomes exercisable (as provided in paragraph 2,
hereof) as of the date the Participant's employment is
terminated.
7. SUCCESSIVE OPTIONS. Any Stock Option granted
hereunder shall not be exercisable while there is outstanding
(within the meaning of Section 422A(c)(7) of the Code) any
"incentive stock option" theretofore granted to the Participant
to purchase common stock of the Company or in a corporation
(which at the time of the granting of such Stock Option
hereunder) is a parent or subsidiary corporation of the Company,
or in a predecessor corporation of any such corporations.
8. METHOD OF EXERCISING OPTION.
(a) The manner of exercising the Stock Option
herein granted shall be by written notice to the Company at least
two days before the date the Stock Option, or part thereof, is to
be exercised, and in any event prior to the expiration of the
Option Period. Such notice shall state the election to exercise
the Stock Option and the number of shares of Stock with respect
to that portion of the Stock Option being exercised, and shall be
signed by the person or persons so exercising the Stock Option.
The notice shall be accompanied by payment of the full purchase
price of such shares, in which event the Company shall deliver a
certificate or certificates representing such shares to the
person or persons entitled thereto as soon as practicable after
the notice shall be received.
(b) Payment for shares of Stock purchased under
this Option Agreement shall be made in full, in cash, common
stock of the Company or a combination of cash and common stock of
the Company, at the time of the exercise of the Stock Option as a
condition thereof, and no loan or advance shall be made by the
Company for the purpose of financing, in whole or in part, the
purchase of Stock. Any cash proceeds of sale of Stock subject to
the Stock Option are to be added to the general funds of the
Company to be used for its general corporate purposes. In the
event that common stock of the Company is utilized as
consideration for the purchase of Stock upon the exercise of a
Stock Option, such common stock shall be valued at the "fair
market value" as defined in Article V of the Plan.
(c) In the event the Option is exercised,
pursuant to the foregoing provisions of this paragraph 8, by any
person or persons other than the Participant in the event of the
death of the Participant, such notice shall also be accompanied
by appropriate proof of the right of such person or persons to
exercise the Stock Option. The notice so required shall be given
by personal delivery to the Secretary of the Company or by
registered or certified mail, addressed to the Company at 4201 N.
Tulsa, Perimeter Center, Suite 200, P. O. Box 12279, Oklahoma
City, Oklahoma 73157 and it shall be deemed to have been given
when it is so personally delivered or when it is deposited in the
United States mail in an envelope addressed to the Company, as
aforesaid, properly stamped for delivery as a registered or
certified letter.
9. ADJUSTMENTS. In the event of a merger,
consolidation, reorganization, recapitalization, stock dividend,
stock split, reverse stock split, or other change in the
corporate structure or capitalization affecting the Company's
common stock, a fair and equitable adjustment shall be made in
the number, kind, option price, etc., of shares of Stock subject
to Stock Option granted hereunder; provided, however, that each
such adjustment and the number and kind of shares of Stock
subject to outstanding Stock Options, including any adjustment in
the option price, shall be made in such a manner as not to
constitute a "modification" as defined in Section 425 of the
Internal Revenue Code of 1954, as amended.
10. SECURITIES LAW RESTRICTIONS. Stock Options shall
be exercised and Stock issued only upon compliance with the
Securities Act of 1933, as amended (the "Act"), and any other
applicable securities law, or pursuant to an exemption therefrom.
11. GENERAL. The Company shall at all times during
the term of this Option Agreement reserve and keep available such
number of shares of its common stock as will be sufficient to
satisfy the requirements of this Option Agreement.
IN WITNESS WHEREOF, the Company has caused this Option
Agreement to be duly executed by its officers thereunto duly
authorized, and the Participant has hereunto set his hand and
seal, all on the day and year first above written.
BONRAY DRILLING CORPORATION
By_______________________________
ATTEST: President
______________________ "COMPANY"
Secretary
WITNESSED BY: _________________________________
, an individual
_____________________
"PARTICIPANT"
EXHIBIT 10(b)
COMMERCIAL PROMISSORY NOTE - FIXED OR VARIABLE RATE
CUSTOMER(S) NAME AND ADDRESS:
Bonray Drilling Corporation
4701 N.E. 23rd Street
Oklahoma City, OK 73121-6818
_________________________________________________________________
PRINCIPAL AMOUNT: $750,000.00
_________________________________________________________________
NOTE NUMBER: 0407045500 R
_________________________________________________________________
CUSTOMER NO.: 1913
_________________________________________________________________
DATE: 10-31-94
_________________________________________________________________
MATURITY DATE: 10-31-95
_________________________________________________________________
INTEREST RATE TERMS:
( ) Fixed Interest Rate of ___________% Per Annum
_________________________________________________________________
Variable Interest Rate payable at a fluctuating rate Per Annum of
.50% above ( ) Lender's Base.
(X) Other Index: WSJ Money Center Prime
(X) Rate to be Adjusted Date of Change
Initial Rate per Annum 8.25%
_________________________________________________________________
INTEREST PAYABLE:
( ) At Maturity Date
(X) Other (See Comments)
_________________________________________________________________
PRINCIPAL PAYABLE:
( ) At Maturity Date
(X) Other (See Comments)
INSTALLMENT AMOUNT: See Below
_________________________________________________________________
FIRST INSTALLMENT DUE: December 4, 1994
_________________________________________________________________
LOAN PURPOSE: Renewal Revolving Line of Credit/Working Capital
_________________________________________________________________
COMMENTS/SPECIAL TERMS:
Interest only payable monthly beginning December 4, 1994, and
continuing on the 4th day of each month thereafter until maturity
on October 31, 1995, at which time all unpaid principal plus
accrued interest shall be due and payable.
_________________________________________________________________
SECURITY ( ) THIS NOTE IS UNSECURED (X) THIS NOTE IS SECURED
BY: Accounts Receivable
_________________________________________________________________
For value received, the undersigned Customer (whether one or
more) promises to pay to the order of the named Lender the
principal amount of this Note together with interest as set forth
by the above terms. The unpaid balance of the principal amount
and interest shall become payable on the maturity date, and any
amount not paid when due shall accrue interest at the rate of 5%
above the per annum interest rate then in effect until paid but
in no event less than 15% per annum.
In the event a variable rate of interest is set forth above,
changes in the rate charged on this Note are effective without
notice to Customer on the same day as the effective change in the
lending index specified above, unless a rate adjustment date is
specified above, in which case changes in the rate charged on
this Note are effective without notice to Customer on each rate
adjustment date according to the lending index in effect on such
date: provided, however, that in no event shall the interest
charged hereunder exceed the maximum allowed by law. Interest on
this Note will be computed at a per diem charge based on a 360-day year.
Customer agrees that the sum of all advances granted under this Note
may exceed the principal amount shown above, but the unpaid outstanding
balance shall never exceed the principal Note amount. Any and all
advances and payments shall be recorded on Lender's records and such
records shall be prima facie evidence of said advances, payments and
unpaid principal balance. Any subsequent advances shall be on Lender's
option and no continuing line of credit is implied. All payments made by
Customer hereunder or for account of Customer shall be applied to
any indebtedness now or hereafter owing by Customer to the holder
in such order as the holder may elect.
This Note and all other obligations of Customer to Lender and all
renewals and extensions thereof are secured by the collateral
described herein. Holder may from time to time call for security
or additional security of such kind and value as will be
satisfactory to holder, and, on failure of Customer to comply
with such request, or, if in the sole discretion of the holder
the security or any additions thereto or substitutes therefor or
any part thereof shall have depreciated in value to the extent
that this Note is not regarded by the holder as adequately
secured, then, at the election of the holder, this Note and all
other indebtedness now or hereafter owing by Customer to the
holder shall become immediately due and payable.
Any indebtedness due from the holder hereof to any party hereto,
including without limitation, any deposits or credit balance or
any other indebtedness due from holder is pledged and assigned,
as collateral, to secure the payment hereof and any other
indebtedness to holder of any other party hereto and may at any
time while the whole or any part of such indebtedness remains
unpaid whether before or after maturity hereof be appropriated,
held or applied toward the payment of this Note or any other
indebtedness to holder of any party hereto.
At the option of the holder hereof, the unpaid balance of this
Note, and all other obligations of Customer to the holder,
direct, or indirect, absolute or contingent, now existing or
hereafter arising, shall be immediately due and payable without
demand or demand if: (a) any payment required by this Note or
any other note or obligation of Customer due to holder or others
is not made when due; (b) any default occurring in the
performance of any covenant obligation, warranty, or provision
contained in this Note, any loan agreement or other obligation to
holder or others, or any instrument securing payment of the same;
(c) any warranty, representation, financial information or
statement made or furnished to holder by or on behalf of Customer
proves to have been false in any material respect when made or
furnished; or (d) any Customer, endorser, or guarantor dies,
dissolves, becomes insolvent, has an order for bankruptcy relief
entered against it, permits a receiver to be appointed for its
property, incurs a business failure or upon the occurrence of any
other adverse change in the financial condition of any Customer
hereto, or any endorser or guarantor; or (e) the holder in its
sole discretion believes that the prospect of any payment
required by this Note is impaired.
All parties which may become liable for all or any part of this
Note severally waive demand, presentment, notice of dishonor,
protest, notice of protest, notice of nonpayment, and consent to:
(a) any and all extensions of time for any term or terms
regarding any payment due under this Note, including partial
payments or renewals before or after maturity; (b) changes in
interest rates; and (c) any substitutions or release of
collateral and the addition, substitution or release of any party
liable for payment of this Note.
Customer and all other signers agree to pay reasonable costs of
collection, including attorney's fees of 15% of all sums due upon
default.
No waiver of any payment or other right under this Note or any
related agreement shall operate as a waiver of any other payment.
All of the holder's rights hereunder are cumulative and not
alternative. This Note shall inure to the benefit of the
successors and assigns of the holder and shall be binding upon
the heirs, executors, administrators, successors and assigns of
Customer. The holder at any time at its option may assign its
rights under this Note in whole or part, and any assignee shall
have all the rights of the original holder as to the rights or
parts thereof so assigned.
This Note is to be construed according to the laws of the State
of Oklahoma.
_________________________________________________________________
LENDER'S NAME AND ADDRESS:
BancFirst
101 N. Broadway
P.O. Box 26788
Oklahoma City, OK 73126-0788
_________________________________________________________________
Bonray Drilling Corporation
By: /s/
Customer
Richard B. Hefner, President
_________________________________________________________________
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0
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