<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 22, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
PARKER DRILLING COMPANY
(Exact name of Registrant as specified in its charter)
<TABLE>
<C> <C>
DELAWARE 73-0618660
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
JAMES J. DAVIS
SENIOR VICE PRESIDENT - FINANCE AND
8 EAST THIRD STREET CHIEF FINANCIAL OFFICER
TULSA, OKLAHOMA 74103 8 EAST THIRD STREET
(918) 585-8221 TULSA, OKLAHOMA 74103
(Address, including zip code, and telephone (918) 585-8221
number, (Name, address, including zip code, and
including area code, of Registrant's principal telephone number,
executive offices) including area code, of agent for service)
Copies to:
T. MARK KELLY
C. MICHAEL HARRINGTON
VINSON & ELKINS L.L.P.
2300 FIRST CITY TOWER CURTIS W. HUFF
1001 FANNIN STREET FULBRIGHT & JAWORSKI L.L.P.
HOUSTON, TEXAS 77002-6760 1301 MCKINNEY, SUITE 5100
(713) 758-2222 HOUSTON, TEXAS 77010-3095
(713) 758-2346 (FAX) (713) 651-5151
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.16 2/3 par value... 11,500,000 shares $16.10 $185,150,000 $56,107
====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Rules and Regulations of the Securities and
Exchange Commission under the Securities Act of 1933, as amended, on the
basis of the high and low prices of the Common Stock on the New York Stock
Exchange Composite Tape on October 17, 1997.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 21, 1997
PROSPECTUS
, 1997
10,000,000 SHARES
PARKER DRILLING COMPANY
[PARKER DRILLING LOGO] COMMON STOCK
All of the shares of common stock, $.16 2/3 par value ("Common Stock"), of
Parker Drilling Company (the "Company" or "Parker") offered hereby are being
issued and sold by the Company (the "Offering").
The Common Stock is traded on the New York Stock Exchange under the symbol
"PKD." On October 20, 1997, the closing sale price of the Common Stock on the
New York Stock Exchange Composite Tape was $16 9/16 per share. See "Price Range
of Common Stock and Dividend Policy."
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
- ---------------------------------------------------------------------------------------------------------------
Per Share........................ $ $ $
Total(4)......................... $ $ $
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the Underwriters an option exercisable within 30
days after the date of this Prospectus to purchase up to 1,500,000
additional shares of Common Stock on the same terms as set forth above, at
the Price to the Public, less the Underwriting Discounts and Commissions,
solely for the purpose of covering over-allotments, if any. If such option
were exercised in full, the total Price to the Public, total Underwriting
Discounts and Commissions and total Proceeds to the Company would be
$ , $ and $ , respectively. See "Underwriting."
The shares of Common Stock are offered by the several Underwriters when, as
and if delivered to and accepted by them, subject to certain conditions,
including their rights to withdraw, cancel or reject orders in whole or in part.
It is expected that delivery of share certificates will be made against payment
therefor in New York, New York on or about , 1997.
JOINT LEAD MANAGERS
DONALDSON, LUFKIN & JENRETTE JEFFERIES & COMPANY, INC.
SECURITIES CORPORATION
------------------
BEAR, STEARNS & CO. INC. PRUDENTIAL SECURITIES INCORPORATED
<PAGE> 3
[PHOTO]
Left:
An independent leg cantilever jackup
rig, one of the rigs to be acquired in
the Hercules Acquisition, operating in
the Gulf of Mexico.
[PHOTO]
Right:
One of the Company's deep drilling
barge rigs operating in the transition
zone of Louisiana.
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE COMMON
STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN
THE COMMON STOCK, AND THE IMPOSITION OF A PENALTY BID, DURING AND AFTER THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
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<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed with the Securities and Exchange Commission
(the "Commission") by the Company pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), are incorporated herein by reference and
made a part of this Prospectus:
(i) the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1997;
(ii) the Company's Current Reports on Form 8-K filed September 19,
October 17 and November 25, 1996; and
(iii) the Company's Current Reports on Form 8-K/A filed October 24,
1996 and January 6, 1997,
Each document filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of this offering (the "Offering") shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such document. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained in this Prospectus or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or suspended, to constitute a part of
this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF
THIS PROSPECTUS IS DELIVERED, ON THE ORAL OR WRITTEN REQUEST OF ANY SUCH PERSON,
A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED HEREIN BY
REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS). WRITTEN OR TELEPHONE
REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO PUBLIC RELATIONS DEPARTMENT,
PARKER DRILLING COMPANY, 8 EAST THIRD STREET, TULSA, OKLAHOMA 74103, TELEPHONE
(918) 585-8221.
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<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements (including the notes thereto)
included elsewhere in this Prospectus or incorporated by reference herein.
Unless otherwise indicated, the pro forma information presented herein gives
effect to (i) the acquisition of Mallard Bay Drilling, Inc. ("Mallard") in
November 1996, (ii) the acquisition of Quail Tools, Inc. ("Quail") in November
1996, (iii) the pending acquisitions of Hercules Offshore Corporation and
Hercules Rig Corp. (collectively, "Hercules"), (iv) the financings related to
these acquisitions, and (v) the Offering and the application of the estimated
net proceeds therefrom. Unless otherwise indicated, the information in this
Prospectus assumes the Underwriters' over-allotment option with respect to the
Offering will not be exercised. References to "Parker" or the "Company" in this
Prospectus include Parker Drilling Company and, unless the context otherwise
requires, its subsidiaries.
THE COMPANY
Parker is a leading worldwide provider of contract drilling and drilling
related services, operating in the transition zones of the Gulf of Mexico and
Nigeria, in the offshore waters of the Gulf of Mexico and in international and
domestic land oil and gas producing regions. The Company's growth strategy is
focused on higher margin offshore and transition zone drilling and workover
markets. Consistent with this strategy, in November 1996, the Company acquired
(i) Mallard, the second-largest barge drilling and workover company in the
transition zones of the Gulf of Mexico (the "Mallard Acquisition"), and (ii)
Quail, a leading provider of specialized rental equipment for drilling and
workover operations, primarily in the Gulf of Mexico (the "Quail Acquisition").
In July 1997 the Company acquired the assets of Bolifor, S.A. ("Bolifor"), a
leading provider of land contract drilling services in Bolivia (the "Bolifor
Acquisition"). In addition, in May 1997 the Company entered into agreements to
acquire the capital stock of Hercules, a leading provider of contract drilling
and workover services in the shallow waters of the Gulf of Mexico (the "Hercules
Acquisition").
With the closing of the pending acquisition of Hercules, Parker's rig fleet
will consist of 34 barge drilling and workover rigs, eight offshore jackup rigs,
six offshore platform rigs and 74 land rigs. The Company's barge rig fleet is
dedicated to transition zone waters, which are generally defined as extending
from the coast to depths of up to 25 feet. The Company's offshore jackup and
platform rig fleets currently operate in the Gulf of Mexico market. The
Company's land rig fleet generally consists of premium and specialized deep
drilling rigs, with 61 of its 74 land rigs capable of drilling to depths of
15,000 feet or greater. In addition, 21 of the Company's land rigs are
helicopter-transportable, thus establishing the Company as the dominant operator
in the heli-rig market throughout the world. The diversity of the Company's rig
fleet, both in terms of geographic location and asset class, enables the Company
to provide a broad range of services to oil and gas operators around the world
and to take advantage of market upturns, while reducing its exposure to
downturns in any particular sector or region.
The oilfield services industry has experienced a significant increase in
activity in the last two years as oil and gas companies have increased their
exploration and production budgets in response to increasing demand for oil and
gas, stronger oil and gas prices and reduced drilling costs due in large part to
improved technology. In the offshore drilling market, including transition
zones, rig dayrates and utilization levels are at a 15-year high with many
markets at or approaching full utilization. The land drilling industry, both in
the United States and internationally, has also shown a marked improvement in
dayrates and utilization driven by several factors, including stronger commodity
prices, rig attrition and consolidation of drilling contractors, especially in
the domestic market. Through its recent and pending acquisitions, the Company is
capitalizing on these improving conditions.
BUSINESS STRATEGY
The Company's objective is to continue to expand its position as a
worldwide provider of contract drilling and drilling related services in order
to achieve revenue and earnings growth. To accomplish this objective, the
4
<PAGE> 6
Company's business strategy is to (i) expand and diversify the Company's market
position in transition zones and in offshore drilling markets worldwide; (ii)
capitalize on the increased demand for contract drilling services in the
Company's core drilling markets by upgrading its existing rigs with newer
technology equipment and by pursuing the purchase of additional rigs in
international markets; and (iii) expand and diversify its operations by pursuing
additional acquisitions of complementary assets and businesses.
PENDING TRANSACTION
In May 1997, the Company entered into agreements to acquire Hercules for
$195 million. Hercules owns a fleet of seven jackup rigs and three self-erecting
platform rigs. A fourth platform rig, which was leased to a company in Brazil,
has been purchased by that company pursuant to a buy-out option contained in the
lease. Hercules is the second-largest jackup drilling and workover company in
the shallow offshore waters of the Gulf of Mexico. The Hercules Acquisition will
further expand and complement the Company's presence in the Gulf of Mexico
shallow water market and will provide opportunities to operate jackup rigs
internationally. Additionally, the Hercules fleet of three platform rigs will
augment the Company's existing offshore platform rig business. The Hercules
Acquisition is subject to various conditions, including approval by the
Malaysian Securities Commission and by the shareholders of Trenergy (Malaysia)
BHD ("Trenergy"), and closing by December 31, 1997. Although there can be no
assurance as to the closing of the transaction, management expects the Hercules
Acquisition to close by year-end 1997. The Hercules Acquisition will be
partially funded from the proceeds of the Offering. See "Hercules Acquisition,"
"Use of Proceeds" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
RECENT OPERATING INFORMATION
The pro forma combined financial information presented in this Prospectus
is based on historical revenues and operating data of the Company, Mallard,
Quail and Hercules. The Company believes that such historical data is not
indicative of the operating performance expected to be achieved by the Company
in fiscal 1998 and future years, as such information does not reflect current
dayrates and utilization levels which are, in general, substantially above
historical levels. The following supplemental pro forma information with respect
to the Company's transition zone and offshore drilling operations, including the
rigs to be acquired in the Hercules Acquisition, is based on current operating
data, and should be read in conjunction with the pro forma financial information
provided elsewhere herein. Further, the ability of the Company to maintain the
assumed utilization rates and dayrates is dependent upon future market
conditions and is subject to the risk factors described under "Risk Factors."
The Company believes that, based on information available to it, absent a
material decline in the demand and prices for oil and natural gas, the current
market conditions should continue into 1998.
Transition Zone Operations. Within the Company's transition zone operations
in the Gulf of Mexico, dayrates and utilization levels have increased
significantly throughout 1997. In addition, as a result of increasing demand for
drilling services, the Company has been able to introduce additional barge rigs
into service in its transition zone markets and additional platform rigs in the
Gulf of Mexico. On an annualized pro forma basis, assuming the Company's rigs
available for service as of September 30, 1997 operated at the average
utilization levels experienced in fiscal 1997 at average dayrates in effect as
of September 30, 1997, the barge drilling and workover rigs would have generated
an incremental $20.7 million of revenue.
Offshore Drilling Operations. As a result of increasing demand for offshore
drilling services and tightening supply of jackup and platform rigs equipped to
drill in such waters, dayrates and utilization levels have increased
significantly. On an annualized pro forma basis, assuming the jackup rigs and
platform rigs available for service as of September 30, 1997 operated at the
average utilization levels experienced in fiscal 1997 at average dayrates in
effect as of September 30, 1997, the rigs would have generated an incremental
$10.9 million of revenue.
5
<PAGE> 7
THE OFFERING
Common Stock Offered....... 10,000,000 shares
Common Stock Outstanding
After the Offering..... 86,679,669 shares(1)
Use of Proceeds............ To finance (i) a portion of the consideration
payable in the Hercules Acquisition estimated at
approximately $25 million, (ii) planned capital
expenditures aggregating approximately $85 million
to construct, modify or upgrade barge and land
drilling rigs, (iii) the purchase of drill pipe for
approximately $20 million and (iv) the purchase,
upgrade and relocation of a drilling barge at an
estimated cost of up to $22 million and, to the
extent of any remaining net proceeds or in the
event the Hercules Acquisition is not consummated,
other general corporate purposes. Pending the
application of the net proceeds of the Offering,
the Company intends to repay the outstanding
balance of its bank term loan of $90 million. See
"Use of Proceeds."
Common Stock Listing....... The Common Stock is listed on the New York Stock
Exchange (the "NYSE") under the symbol "PKD."
Risk Factors............... An investment in the Common Stock involves certain
risks that a potential investor should carefully
evaluate prior to making an investment. See "Risk
Factors."
- ---------------
(1) Based on the number of shares outstanding as of August 31, 1997. Excludes
4,184,000 shares of Common Stock issuable upon exercise of outstanding stock
options under the Company's stock option plans and 11,371,020 shares of
Common Stock reserved for issuance upon conversion of the Company's 5 1/2%
Convertible Subordinated Notes due 2004 (the "Convertible Notes").
6
<PAGE> 8
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents for the periods indicated certain historical
and pro forma financial data for the Company. The following information should
be read together with Management's Discussion and Analysis of Financial
Condition and Results of Operations, the historical financial statements of
Parker, Mallard, Quail and Hercules, including the notes thereto, and the
Unaudited Pro Forma Combined Financial Statements, including the notes thereto,
included elsewhere or incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------------------------------
PRO FORMA
1995 1996 1997 1997(1)
-------- -------- -------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues............................. $157,371 $156,652 $311,644 $403,993
Operating expenses:
Drilling, rental and other.............. 120,891 116,438 203,250 265,064
Depreciation, depletion and
amortization.......................... 23,745 23,061 46,256 60,885
General and administrative.............. 14,232 15,756 14,414 14,414
-------- -------- -------- --------
Total operating expenses........... 158,868 155,255 263,920 340,363
-------- -------- -------- --------
Operating income (loss).................... (1,497) 1,397 47,724 63,630
Interest income (expense), net............. 1,184 1,507 (27,484) (37,236)
Other income (expense)..................... 7,413 5,663 3,316 3,243
-------- -------- -------- --------
Income (loss) before income taxes.......... 7,100 8,567 23,556 29,637
Income tax expense......................... 3,184 4,514 7,241 7,371
-------- -------- -------- --------
Net income (loss).......................... $ 3,916 $ 4,053 $ 16,315 $ 22,266
======== ======== ======== ========
Earnings (loss) per share (fully
diluted)................................ $ .07 $ .07 $ .23 $ .27
======== ======== ======== ========
Weighted average shares outstanding (fully
diluted)................................ 55,332,541 57,466,183 72,049,124 82,866,457
========== ========== ========== ==========
OTHER FINANCIAL DATA:
EBITDA(2).................................. $ 22,248 $ 24,458 $ 93,980 $124,515
Capital expenditures:
Maintenance............................. 5,133 6,646 14,702 16,471
Other................................... 16,407 24,190 72,724 84,355
</TABLE>
<TABLE>
<CAPTION>
AUGUST 31, 1997
-----------------------
AS
ACTUAL ADJUSTED(3)
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and other short-term investments... $212,789 $ 83,567
Property, plant and equipment, net........................ 439,651 588,651
Total assets.............................................. 984,136 1,064,610
Total long-term debt, including current portion........... 567,126 477,126
Total stockholders' equity................................ 348,723 504,980
</TABLE>
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(1) Pro forma information gives effect to the Offering and the use of net
proceeds therefrom, the acquisitions of Mallard, Quail and Hercules and the
financings related to these acquisitions as if these transactions had
occurred on September 1, 1996. See "Unaudited Pro Forma Combined Financial
Statements."
(2) EBITDA represents operating income (loss) before depreciation, depletion and
amortization and provision for reduction in carrying value of certain
assets. EBITDA is frequently used by securities analysts and is presented
hereby to provide additional information about the Company's operations.
EBITDA is not a measurement presented in accordance with generally accepted
accounting principles. EBITDA should not be considered in isolation or as a
substitute for net income, cash flow provided by operating activities or
other income or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's profitability
or liquidity.
(3) Gives effect to the Offering at an assumed public offering price of $16.50
per share and the use of the estimated net proceeds therefrom of
approximately $157.2 million and the consummation of the Hercules
Acquisition as if these transactions had occurred on August 31, 1997. See
"Capitalization."
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<PAGE> 9
RIG ACTIVITY DATA
The following table presents for the periods indicated certain rig activity
data for the Company, including Mallard, which was acquired on November 12,
1996, and for the rigs to be acquired in the Hercules Acquisition:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1994 1995 1996 FISCAL 1997 CURRENT(1)
------- ------- ------- ------- ----------- ----------
(AVERAGE FOR PERIOD)
<S> <C> <C> <C> <C> <C> <C>
TRANSITION ZONE RIG DATA(2)
Domestic barge deep drilling:
Rigs available for service(3)....... 7.0 7.0 7.0 7.0 7.8 8.0
Utilization rate of rigs available
for service(4)................... 83% 73% 75% 86% 98% 88%
Dayrate............................. $ 9,606 $13,537 $12,880 $13,793 $15,660 $18,985
Cold stacked rigs(3)................ 1.0 1.0 1.0 2.0 3.0 3.0
Domestic barge intermediate drilling:
Rigs available for service(3)....... 5.0 5.0 5.0 5.0 4.1 4.0
Utilization rate of rigs available
for service(4)................... 77% 65% 74% 85% 95% 100%
Dayrate............................. $ 7,671 $10,432 $10,143 $10,381 $11,149 $13,825
Cold stacked rigs(3)................ 0.0 0.0 0.0 0.0 0.0 0.0
Domestic barge workover and shallow
drilling:
Rigs available for service(3)....... 10.0 9.0 7.3 8.7 8.7 10.0
Utilization rate of rigs available
for service(4)................... 66% 48% 66% 71% 83% 60%
Dayrate............................. $ 6,742 $ 8,181 $ 8,066 $ 7,595 $ 8,650 $10,254
Cold stacked rigs(3)................ 12.0 13.0 12.6 6.3 6.3 5.0
International barge drilling:
Rigs available for service(3)....... 1.0 1.0 1.0 1.7 3.5 3.0
Utilization rate of rigs available
for service(4)................... 57% 46% 89% 89% 92% 100%
Dayrate............................. $22,049 $23,531 $25,141 $25,302 $25,022 $26,444
Cold stacked rigs(3)................ 0.0 0.0 0.0 1.0 0.5 1.0
OFFSHORE RIG DATA(2)
Jackup rigs(5):
Rigs available for service(3)....... 2.7 3.5 5.0 5.0 5.8 6.0
Utilization rate of rigs available
for service(4)................... 97% 76% 89% 97% 100% 100%
Dayrate............................. $16,071 $15,429 $14,629 $19,390 $23,326 $26,433
Cold stacked rigs(3)................ 0.0 0.0 0.0 0.0 0.0 1.0
Platform rigs(6):
Rigs available for service(3)....... 5.0 4.5 4.0 3.2 3.0 3.0
Utilization rate of rigs available
for service(4)................... 82% 68% 50% 91% 96% 100%
Dayrate............................. $ 8,101 $ 9,379 $ 9,466 $12,226 $14,029 $16,333
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
LAND RIG DATA --------------------------------
1993 1994 1995 1996 1997 CURRENT(1)
---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Utilization rate of international land rigs(7)...... 40% 56% 54% 55% 63% 73%
Utilization rate of domestic land rigs(7)(8)........ 41% 45% 46% 56% 87% 100%
</TABLE>
- ---------------
(1) As of September 30, 1997.
(Footnotes Continue on Next Page)
8
<PAGE> 10
(2) Transition zone rig data for fiscal year 1997 is presented for the period
November 12, 1996, the acquisition date of Mallard, through August 31, 1997.
Offshore rig data for fiscal year 1997 is presented for the 12 months ended
September 30, 1997.
(3) The number of rigs is determined by calculating the number of days each rig
was in the fleet, e.g., a rig under contract or available for contract for
an entire year is 1.0 "rigs available for service" and a rig cold stacked
for one quarter is 0.25 "cold stacked rigs." "Rigs available for service"
includes rigs currently under contract or available for contract. "Cold
stacked rigs" includes all rigs that are stacked and would require
significant refurbishment before being placed into service. Rig No. 52,
which suffered a blowout in June 1997, is also included as a cold stacked
rig under current information for domestic barge deep drilling.
(4) Rig utilization rates are based on a weighted average basis assuming 365
days availability for all rigs available for service. Rigs acquired or
disposed of have been treated as added to or removed from the rig fleet as
of the date of acquisition or disposal. Rigs that are in operation or fully
or partially staffed and on a revenue-producing standby status are
considered to be utilized. Rigs under contract that generate revenues during
moves between locations or during mobilization/demobilization are also
considered to be utilized.
(5) Reflects information on the seven jackup rigs to be acquired by the Company
in the Hercules Acquisition, one of which is currently undergoing
refurbishment and is expected to be placed into service in January 1998, but
does not include one cold stacked jackup rig owned by the Company.
(6) Reflects the three platform rigs to be acquired by the Company in the
Hercules Acquisition. Does not include three of the Company's previously
cold stacked platform rigs, two of which have been refurbished and put in
service in January and April 1997 and at September 30, 1997 were operating
at dayrates of $20,480 and $18,400, respectively, and one additional cold
stacked platform rig. Also does not include two platform rigs located
offshore Peru that will be sold under an agreement effective May 1997.
(7) Parker calculates its land rig utilization rates on a weighted average basis
assuming 365 days availability for all of its rigs. Rigs retired, disposed
of or reclassified as assets held for sale have been treated as removed from
the rig fleet as of the last day of each fiscal period, except as described
in footnote (8) below. Rigs that are in operation or fully or partially
staffed and on a revenue-producing standby status are considered to be
utilized. Rigs under contract that generate revenues during moves between
locations or during mobilization/demobilization are also considered to be
utilized.
(8) Domestic utilization for the fiscal years ended August 31, 1993, 1994 and
1995 has been adjusted to reflect the removal of 16 domestic mechanical rigs
in August 1994 and the sale of an additional 22 such rigs in August 1996.
Including these 38 domestic rigs during such periods, historical domestic
utilization was as follows: 1993 -- 14%, 1994 -- 15%, and 1995 -- 21%.
9
<PAGE> 11
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange
Act. All statements, other than statements of historical facts, included in this
Prospectus that address activities, events or developments that the Company
expects, projects, believes or anticipates will or may occur in the future,
including such matters as the consummation of the Hercules Acquisition, future
operating results of the Company's and Hercules' rigs, future capital
expenditures and investments in the acquisition and refurbishment of rigs
(including the amount and nature thereof), repayment of debt, expansion and
growth of operations and other such matters, are forward-looking statements.
These statements are based on certain assumptions and analyses made by
management of the Company in light of its experience and its perception of
historical trends, current conditions, expected future developments and other
factors it believes are appropriate in the circumstances. Such statements are
subject to a number of assumptions, risks and uncertainties, including the risk
factors discussed herein, general economic and business conditions, prices of
oil and gas, foreign exchange and currency fluctuations, the business
opportunities (or lack thereof) that may be presented to and pursued by the
Company, changes in laws or regulations and other factors, many of which are
beyond the control of the Company. Prospective investors are cautioned that any
such statements are not guarantees of future performance and that actual results
or developments may differ materially from those projected in the
forward-looking statements.
RISK FACTORS
Each investor should carefully examine this entire Prospectus and should
give particular attention to the risk factors set forth below.
SUBSTANTIAL LEVERAGE
As of August 31, 1997, as adjusted for the sale of the shares of Common
Stock offered hereby and the application of the net proceeds thereof, the
Company's total long-term debt and stockholders' equity would have been $477.1
million and $505.0 million, respectively. See "Capitalization." The Company's
level of indebtedness will have several important effects on its future
operations, including: (i) a substantial portion of the Company's cash flow from
operations must be dedicated to the payment of interest on its indebtedness and
will not be available for other purposes; and (ii) the Company's ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may be
impaired. The Company's ability to meet its debt service obligations and to
reduce its total indebtedness will be dependent upon the Company's future
performance, which will be subject to general economic conditions and to
financial, business and other factors affecting the operations of the Company,
many of which are beyond its control. There can be no assurance that the
Company's business will continue to generate cash flow at or above current
levels. If the Company is unable to generate sufficient cash flow from
operations in the future to service its debt, it may be required, among other
things, to refinance all or a portion of its existing debt or to obtain
additional financing. There can be no assurance that any such refinancing would
be possible or that any additional financing could be obtained.
FAILURE TO CLOSE THE HERCULES ACQUISITION
The closing of the Hercules Acquisition is subject to certain conditions,
including approval of the Malaysian Securities Commission and Kuala Lumpur Stock
Exchange and requisite approval of the shareholders of Trenergy. The Hercules
Acquisition is also subject to the closing occurring on or before December 31,
1997. It is anticipated that the closing of the Offering will occur prior to the
satisfaction of all conditions to consummate the Hercules Acquisition. No
assurance can be given that the Hercules Acquisition will be completed. If the
closing of the Hercules Acquisition does not occur, the Company intends to use
the approximately $25 million of the net proceeds of the Offering related to the
acquisition for general corporate purposes. In addition, the Company, under
certain circumstances, may be required to pay to Trenergy a fee of
10
<PAGE> 12
$5 million if the closing does not occur due to the fault or inability of the
Company to perform its obligations. See "Hercules Acquisition" and "Use of
Proceeds."
INDUSTRY CONDITIONS
The Company's revenues and earnings are affected directly by the worldwide
level of oil and gas exploration and development activity. The level of such
activity is affected by many factors over which the Company has no control,
including, among others, the market prices of oil and gas, the volatility of
such prices, the levels of production by, and other activities of, the
Organization of Petroleum Exporting Countries and other oil and gas producers,
governmental regulation and trade restrictions, the level of worldwide economic
activity, political stability in major oil producing areas, the development of
alternate energy sources and the long-term effect of worldwide energy
conservation measures. There can be no assurance that current levels of
exploration and development activities of oil and gas companies will be
maintained or that demand for the Company's services will reflect the level of
such activities.
RISKS OF INTERNATIONAL OPERATIONS
A significant portion of Parker's operations is conducted in international
markets, including South America, the Asia Pacific region and West Africa.
International activities accounted for approximately 53% of the Company's
operating revenues for the year ended August 31, 1997. In addition to the risks
inherent in the drilling business, the Company's international operations are
subject to certain political, economic and other uncertainties, including, among
others, risks of war and civil disturbances, expropriation, nationalization,
termination of existing contracts, taxation policies, foreign exchange
restrictions and fluctuations and other risks arising out of foreign
governmental sovereignty over certain areas in which the Company conducts
operations. Although the Company seeks to protect against some of these risks
through insurance, insurance is not available for all types of risks or for all
areas in which the Company operates. To the extent insurance is available for a
particular risk, there can be no assurance that such insurance will be
sufficient to cover all losses that could be incurred with respect to a
particular covered risk. Losses from these factors could be material in those
countries where the Company has a significant concentration of assets.
The Company's Nigerian operations are subject to certain risks relating to
political instability in Nigeria and the possibility of the promulgation of
legislation or regulations by the United States that, if adopted, could restrict
the ability of the Company and some of its customers to engage in trade with and
invest in Nigeria. Since beginning operations in 1991, Mallard has not been
materially affected by political instability in Nigeria, but other rig
contractors have in recent years experienced work stoppages and delays relating
to civil unrest in Nigeria. A contract for one of the Company's rigs in Nigeria,
however, was terminated in August 1997, and that rig has been mobilized to the
Gulf of Mexico where it is undergoing modifications for future international
service. If the United States were to adopt legislation or regulations
restricting operations in Nigeria or if civil unrest in Nigeria were to reoccur,
the Company could lose an important source of income and could be required to
redeploy its remaining rigs out of Nigeria. The costs of such redeployment might
not be reimbursable, and such costs, together with the lost revenues resulting
from a termination of its Nigerian operations, could have a material adverse
effect on the Company. Revenues and operating income attributable to the
Company's Nigerian operations for the year ended August 31, 1997 were $27.0
million and $7.4 million, respectively.
OPERATING HAZARDS AND UNINSURED RISKS
The Company's drilling operations are subject to various hazards inherent
in the drilling of oil and gas wells, including blowouts, reservoir damage, loss
of well control, cratering, and oil and gas well fires. Such events can result
in personal injury or death, severe damage to or destruction of equipment and
facilities, suspension of operations, and substantial damage to surrounding
areas and the property of others. The Company's offshore operations also are
subject to hazards inherent in marine operations, such as capsizings,
groundings, collisions, damage from weather, sea damage or unsound location.
Generally, the Company obtains indemnification from its customers by contract
for certain of these risks. To the extent not transferred to customers by
contract, the Company seeks protection against such risks through insurance.
However,
11
<PAGE> 13
potential liabilities associated with oilfield casualties or losses could arise
in risk categories where no insurance has been purchased, where claims exceed
the applicable insurance coverage, or where indemnification is not available or
satisfied. The occurrence of events that are not fully insured or the failure of
a customer to meet its indemnification obligations could have a material adverse
effect on the Company. In addition, there can be no assurance that insurance
will be available or, even if available, that insurance premiums or other costs
will not rise sharply in the future.
INTEGRATION OF ACQUISITIONS
The Mallard Acquisition and the Quail Acquisition have required the Company
to integrate and manage businesses that are related to, but substantially
different from, Parker's historical land drilling business. In addition, the
Hercules Acquisition will require assimilation of operations into the Company's
existing businesses. No assurance can be given that the Company will be
successful in managing and incorporating the acquired businesses into its
existing operations or that such activities will not require a disproportionate
amount of management's attention. The Company's failure to successfully
incorporate the acquired businesses into its existing operations, or the
occurrence of unexpected costs or liabilities in the acquired businesses, could
have a material adverse effect on the Company's business, financial condition
and results of operations.
RISKS OF ACQUISITION STRATEGY
The Company's growth strategy includes the acquisition of other oilfield
service businesses. There can be no assurance, however, that the Company will be
able to continue to identify attractive acquisition opportunities, obtain
financing for acquisitions on satisfactory terms or successfully acquire
identified targets. Future acquisitions may require the Company to incur
additional indebtedness or issue capital stock to finance such acquisitions.
Depending on the Company's operating performance, the provisions of the
Company's bank credit facility or the terms of its 9 3/4% Senior Notes due 2006
(the "9 3/4% Senior Notes") may limit the ability of the Company to incur
additional indebtedness, thereby restricting funds available to finance future
acquisitions. In addition, competition for acquisition opportunities in the
industry has escalated due to market conditions. There can be no assurance that
such competition for acquisitions will not continue to increase, thereby
increasing the cost to the Company of making further acquisitions or causing
such acquisitions to be prohibitively expensive for the Company.
COMPETITION
The drilling market is competitive. Drilling contracts are generally
awarded on a competitive bid basis and, while an operator may consider factors
such as quality of service and type and location of equipment as well as the
ability to provide ancillary services, price and availability are significant
factors in determining which contractor is awarded a job. The Company believes
that the market for drilling contracts will continue to be competitive for the
foreseeable future. Certain of the Company's competitors have greater financial
resources than the Company, which may enable them to better withstand industry
downturns, to compete more effectively on the basis of price, to acquire
existing rigs or to build new rigs. There can be no assurance that the Company
will be able to compete successfully against its competitors in the future or
that such competition will not have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business -- Competition."
RISK OF UPGRADE AND REFURBISHMENT PROJECTS
The Company's business strategy contemplates significant expenditures to
upgrade and refurbish certain of its rigs. These projects are subject to the
risks of delay or cost overruns inherent in large refurbishment projects,
including shortages of materials or skilled labor, unforeseen engineering
problems, work stoppages, weather interference, unanticipated cost increases,
nonavailability of necessary equipment and inability to obtain any of the
requisite permits or approvals. Any substantial delay in placing such rigs in
service could have an adverse effect on the operations of the Company.
12
<PAGE> 14
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
Many aspects of the Company's operations are affected by domestic and
foreign political developments and are subject to numerous domestic and foreign
governmental regulations that may relate directly or indirectly to the contract
drilling industry, including environmental and safety matters. Some of the
Company's activities take place in or near ecologically sensitive areas, such as
wetlands, beaches and inland waterways. Numerous federal and state environmental
laws regulate drilling activities and impose liability for causing pollution in
inland, coastal and offshore waters. In addition, the regulations applicable to
the Company's operations include certain regulations that control the discharge
of materials into the environment or require remediation of contamination under
certain circumstances. For example, the Company may be liable for damages and
costs incurred in connection with oil spills for which it is legally
responsible. Certain environmental laws and regulations impose "strict
liability," rendering a person liable without regard to negligence or fault on
the part of such person. Such environmental laws and regulations may expose the
Company to liability for the conduct of, or conditions caused by, others, or for
acts of the Company that were in compliance with all applicable laws at the time
such acts were performed.
The Company has made and will continue to make expenditures to comply with
environmental and safety requirements. Because the requirements imposed by such
laws and regulations are subject to change, the Company is unable to predict the
ultimate cost of compliance with such requirements. The modification of existing
foreign or domestic laws or regulations or the adoption of new laws or
regulations curtailing exploratory or development drilling for oil and gas for
economic, political, environmental or other reasons could have a material
adverse effect on the Company by limiting drilling opportunities. See
"Business -- Government Regulation and Environmental Matters."
DIVIDEND POLICY AND RESTRICTIONS
The Company does not intend to pay cash dividends on the Common Stock in
the foreseeable future and anticipates that future earnings will be retained to
finance future operations and expansion. The Company's term loan and its
revolving credit facility (collectively, the "Senior Credit Facility") prohibit
the Company from paying cash dividends, and the indenture for the 9 3/4% Senior
Notes restricts the payment of such dividends. See "Price Range of Common Stock
and Dividends" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
POSSIBLE ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Restated Certificate of Incorporation
and certain provisions of the Delaware General Corporation Law may make it
difficult to change control of the Company and replace incumbent management. For
example, the Company's Restated Certificate of Incorporation provides for a
staggered Board of Directors and permits the Board of Directors, without
stockholder approval, to issue additional shares of Common Stock or to establish
one or more series of Preferred Stock having such number of shares,
designations, relative voting rights, dividend rates, liquidation and other
rights as the Board of Directors may determine. See "Description of Capital
Stock -- Possible Anti-Takeover Provisions."
13
<PAGE> 15
HERCULES ACQUISITION
On May 9, 1997, the Company executed a definitive stock purchase agreement
(the "HOC Agreement") to acquire all of the outstanding capital stock of
Hercules Offshore Corporation, a Texas corporation ("HOC"), and a definitive
stock purchase agreement (the "HRC Agreement") to acquire all of the outstanding
capital stock of Hercules Rig Corp., a Texas corporation ("HRC") and an
affiliate of HOC (HOC and HRC being collectively referred to as "Hercules"), for
$145 million and $50 million, respectively. The purchase prices for the
acquisitions are subject to adjustment for certain debt assumed by the Company,
for capital expenditures incurred and for levels of working capital at closing.
Currently, Hercules owns three self-erecting platform rigs and seven offshore
jackup rigs.
Under the terms of the HOC Agreement, Trenergy, the sole shareholder of
HOC, and the Company have agreed to indemnify the other in certain
circumstances. The closing of the HOC Agreement is subject to certain
conditions, including approval of the transaction by the Malaysian Securities
Commission and the Kuala Lumpur Stock Exchange and obtaining of the requisite
approval of the shareholders of Trenergy. Under certain circumstances, if Parker
fails to consummate the transaction, the Company will be obligated to pay
Trenergy $5 million. Trenergy also is obligated to pay the Company $5 million if
it fails to close the transaction under certain circumstances. The HOC Agreement
is terminable by either party if the transaction fails to close by December 31,
1997.
The closings of the HOC Agreement and the HRC Agreement are further
conditioned on the closing of the other. Although there can be no assurance that
the Hercules Acquisition will close, the Company expects that the transaction
will close by December 31, 1997. The Hercules Acquisition will be partially
funded from the net proceeds of the Offering. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby are estimated to be approximately $157.2 million ($180.8 million if the
Underwriters' over-allotment option is exercised in full), assuming a public
offering price of $16.50 per share and after deducting the estimated
underwriting discounts and commissions and fees and expenses of the Offering.
The Company intends to use the estimated net proceeds of the Offering to: (i)
pay the remaining portion (estimated at approximately $25 million) of the
purchase price and expenses related to the Hercules Acquisition that was not
financed from the proceeds of the sale of the Convertible Notes in July 1997;
(ii) finance planned capital expenditures aggregating approximately $85 million
to construct, modify or upgrade barge and land drilling rigs; (iii) purchase for
approximately $20 million drill pipe for use in the Company's drilling and tool
rental operations; (iv) purchase and upgrade a drilling barge and transport it
to an international location, at an estimated cost of up to $22 million; and (v)
fund other general corporate purposes, to the extent of any remaining net
proceeds or if the Hercules Acquisition does not close. Pending such application
of the net proceeds of the Offering, the Company intends (i) to repay the
outstanding balance of the Company's bank term loan of $90 million and (ii) to
invest the net proceeds of the Offering in short-term interest-bearing
securities as permitted under the terms of the indenture for the 9 3/4% Senior
Notes. In addition, the Company will seek to increase the amount of its bank
revolving credit facility. The proceeds of such term loan were applied by the
Company to the acquisitions of Mallard and Quail in November 1996. As of October
20, 1997, the interest rate on the term loan was 7.875% per annum. For
additional information regarding the Company's bank term loan and its revolving
credit facility, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
14
<PAGE> 16
CAPITALIZATION
The following table sets forth as of August 31, 1997 the capitalization of
the Company on an actual basis and as adjusted to reflect the issuance of the
shares of Common Stock offered hereby and the application of the net proceeds
thereof as described under "Use of Proceeds". This information should be read in
conjunction with, and is qualified by reference to, the Consolidated Financial
Statements of the Company and Hercules, including the notes thereto, the
Unaudited Pro Forma Combined Financial Statements and related notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company" included elsewhere or incorporated by reference in
this Prospectus.
<TABLE>
<CAPTION>
AT AUGUST 31, 1997
------------------------
AS
ACTUAL ADJUSTED
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt:
Senior Credit Facility, including current portion of
long-term debt(1)...................................... $ 90,000 $ --
9 3/4% Senior Notes due 2006, less unamortized discount of
$2,166................................................. 297,834 297,834
5 1/2% Convertible Subordinated Notes due 2004............ 175,000 175,000
Other long-term debt...................................... 4,292 4,292
-------- --------
Total long-term debt.............................. 567,126 477,126
-------- --------
Stockholders' equity:
Preferred Stock, $1.00 par value, 1,942,000 shares
authorized, no shares outstanding...................... -- --
Common Stock, $.16 2/3 par value, 120,000,000 shares
authorized, 76,679,669 shares outstanding and
86,679,669 shares as adjusted(2)....................... 12,780 14,447
Capital in excess of par value............................ 340,243 495,751
Retained earnings (accumulated deficit)................... (4,023) (4,941)
Other..................................................... (277) (277)
-------- --------
Total stockholders' equity........................ 348,723 504,980
-------- --------
Total capitalization........................................ $915,849 $982,106
======== ========
</TABLE>
- ---------------
(1) The Company has maximum availability of $45 million under the revolving
credit portion of the Company's Senior Credit Facility, subject to borrowing
base limitations. A portion of the Senior Credit Facility is being used to
support letters of credit, approximately $13.8 million of which were
outstanding at August 31, 1997.
(2) Reflects the issuance of 10,000,000 shares of Common Stock by the Company at
an assumed public offering price of $16.50 per share, resulting in estimated
net proceeds of approximately $157,175,000, of which $1,667,000 (equal to
the par value of the shares issued) is reflected in Common Stock and the
remainder is reflected in capital in excess of par value. Does not include
11,371,020 shares of Common Stock reserved for issuance upon conversion of
the Convertible Notes and 4,184,000 shares of Common Stock issuable upon
exercise of outstanding stock options under the Company's stock option
plans.
15
<PAGE> 17
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock trades on the NYSE under the symbol "PKD". The following
table sets forth the high and low sales prices per share of the Common Stock as
reported on the NYSE Composite Tape for the fiscal periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal year ended August 31, 1996:
First Quarter........................................ $ 6 3/8 $4 7/8
Second Quarter....................................... 6 1/2 5
Third Quarter........................................ 8 1/8 5 3/8
Fourth Quarter....................................... 7 3/8 5 1/4
Fiscal year ended August 31, 1997:
First Quarter........................................ 10 1/4 6 1/8
Second Quarter....................................... 11 7 7/8
Third Quarter........................................ 10 7 1/2
Fourth Quarter....................................... 13 11/16 9 3/8
Fiscal year ending August 31, 1998:
First Quarter (through October 20)................... 17 15/16 13 1/8
</TABLE>
On October 20, 1997, the closing sale price of the Common Stock as reported
on the NYSE Composite Tape was $16 9/16 per share.
No dividends have been paid on Common Stock since February 1987.
Restrictions contained in the Senior Credit Facility prohibit the payment of
cash dividends, and the indenture for the 9 3/4% Senior Notes restricts the
payment of such dividends. The Company has no present intention to pay dividends
on its Common Stock in the foreseeable future and anticipates that future
earnings will be retained to finance future operations and expansion.
16
<PAGE> 18
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial information is derived
from the historical financial statements of Parker, Mallard, Quail and Hercules,
incorporated by reference herein, and certain assumptions deemed appropriate by
the Company. The Unaudited Pro Forma Combined Statement of Operations for the
year ended August 31, 1997 reflect: (i) the Mallard Acquisition, (ii) the Quail
Acquisition, (iii) the Hercules Acquisition, (iv) the issuance of $300 million
of 9 3/4% Senior Notes in November 1996, (v) the issuance of $25 million of
convertible preferred stock in November 1996 and the subsequent conversion of
such stock into 3,056,600 shares of Common Stock in December 1996, (vi) the
issuance of $175 million of Convertible Notes in July 1997 and (vii) the
Offering, in each case as if such transactions had occurred on September 1,
1996. Such twelve months unaudited pro forma combined information combines: (i)
the audited operating results for the Company for the fiscal year ended August
31, 1997, (ii) the unaudited operating results for Mallard and Quail for the
period from September 1, 1996 to November 12, 1996 (the date of acquisition by
Parker), and (iii) the combined unaudited operating results of Hercules for the
12 months ended September 30, 1997. The Hercules financial statements have been
derived from the separate financial statements of HOC and HRC incorporated
herein by reference and are presented on a combined basis with intercompany
transactions between the entities eliminated. The unaudited pro forma combined
financial information should be read in conjunction with the notes thereto and
the historical financial statements of Parker, Mallard, Quail and Hercules,
including the notes thereto, incorporated by reference herein. The unaudited pro
forma combined financial statements exclude any pro forma effect for the Bolifor
Acquisition as it is not considered material.
The pro forma adjustments giving effect to the various events described
above are based upon currently available information and upon certain
assumptions that management believes are reasonable. The historical operating
results of Mallard included in the Unaudited Pro Forma Combined Financial
Statements do not reflect any allocation of general corporate, accounting, tax,
legal and other administrative costs incurred by its former parent corporation.
The Company has not incurred any significant amount of additional general and
administrative expense in connection with the incorporation of Mallard's and
Quail's operations, and does not expect to incur any significant amount of such
expenses in connection with the incorporation of Hercules' operations. The
Mallard Acquisition and the Quail Acquisition have been, and the Hercules
Acquisition will be, accounted for by the Company under the purchase method of
accounting and the assets and liabilities of Mallard and Quail were, and the
assets and liabilities of Hercules will be, recorded at their estimated fair
market values at the date of acquisition.
The unaudited pro forma combined financial information does not purport to
be indicative of the results of operations that would actually have occurred if
the transactions described had occurred as presented in such statements or that
may be obtained in the future. In addition, future results may vary
significantly from the results reflected in such statements due to general
economic conditions, oil and gas commodity prices, the demand and prices for
contract drilling services and rental tools, increases in the number of rigs
available for service, the Company's ability to successfully integrate the
operations of Mallard, Quail and Hercules with its current business and several
other factors, many of which are beyond the Company's control. See "Risk
Factors -- Integration of Acquisitions."
17
<PAGE> 19
PARKER DRILLING COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------------
SEPT. 1-NOV. 12,
1996
AS REPORTED ---------------- PRO
PARKER(1) MALLARD QUAIL HERCULES(2) ADJUSTMENTS FORMA
----------- ------- ------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Drilling........................ $ 283,598 $23,678 $ -- $64,251 $ (967)(1) $ 370,560
Rental.......................... 25,457 -- 5,387 -- -- 30,844
Other........................... 2,589 -- -- -- -- 2,589
---------- ------- ------ ------- -------- ----------
Total revenues.............. 311,644 23,678 5,387 64,251 (967) 403,993
---------- ------- ------ ------- -------- ----------
Operating expense:
Drilling........................ 189,979 14,382 -- 39,090 7,253(f) 250,615
(89)(1)
Rental.......................... 8,549 -- 439 -- 739(f) 9,727
Other........................... 4,722 -- -- -- -- 4,722
Depreciation, depletion and
amortization.................. 46,256 2,695 505 5,715 5,044(d) 60,885
858(e)
(188)(1)
General and administrative...... 14,414 1,933 739 5,320 (7,992)(f) 14,414
---------- ------- ------ ------- -------- ----------
Total operating expenses.... 263,920 19,010 1,683 50,125 5,625 340,363
---------- ------- ------ ------- -------- ----------
Operating income.................. 47,724 4,668 3,704 14,126 (6,592) 63,630
---------- ------- ------ ------- -------- ----------
Other income (expense):
Interest expense................ (32,851) (102) -- (3,068) (8,718)(g) (42,616)
(945)(j)
3,068(h)
Interest income................. 5,367 -- 962 -- (949)(i) 5,380
Other........................... 3,316 (78) 5 -- -- 3,243
---------- ------- ------ ------- -------- ----------
Total other income
(expense)................ (24,168) (180) 967 (3,068) (7,544) (33,993)
---------- ------- ------ ------- -------- ----------
Income before income taxes........ 23,556 4,488 4,671 11,058 (14,136) 29,637
---------- ------- ------ ------- -------- ----------
Income tax expense (benefit)...... 7,241 403 -- 4,808 (4,846)(k) 7,371
(235)(l)
---------- ------- ------ ------- -------- ----------
Net income........................ $ 16,315 $ 4,085 $4,671 $ 6,250 $ (9,055) $ 22,266
========== ======= ====== ======= ======== ==========
Earnings per share, primary and
fully diluted................... $ .23 $ 0.27
========== ==========
Weighted average shares
outstanding (fully diluted)..... 72,049,124 82,866,457
========== ==========
Other data:
EBITDA(3)....................... $ 93,980 $ 124,515
</TABLE>
- ---------------
(1) Includes the operations of Malland and Quail from November 12, 1996 through
August 31, 1997.
(2) Reflects combined results of operations of HOC and HRC for the 12 months
ended September 30, 1997. See Note (m) for the summary capsular combining
statement of operations of HOC and HRC for the 12 months ended September 30,
1997.
(3) EBITDA represents operating income (loss) before depreciation, depletion and
amortization and provision for reduction in carrying value of certain
assets. EBITDA is frequently used by securities analysts and is presented
hereby to provide additional information about the Company's operations.
EBITDA is not a measurement presented in accordance with generally accepted
accounting principles. EBITDA should not be considered in isolation or as a
substitute for net income, cash flow provided by operating activities or
other income or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's profitability
or liquidity.
18
<PAGE> 20
PARKER DRILLING COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
HISTORICAL
------------------------ PRO
PARKER HERCULES(1) ADJUSTMENTS FORMA
---------- ----------- ----------- ----------
AS OF AS OF
AUGUST 31, SEPT. 30,
1997 1997
---------- -----------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents..................... $209,951 $ 498 $ 157,175(a) $ 83,567
(195,500)(b)
1,443(b)
(90,000)(g)
Other short-term investments.................. 2,838 2,838
Accounts and notes receivable................. 103,808 14,120 117,928
Rig materials and supplies.................... 19,130 19,130
Other current assets.......................... 16,227 2,659 (503)(b) 18,383
-------- -------- --------- ----------
Total current assets................... 351,954 17,277 (127,385) 241,846
-------- -------- --------- ----------
Property, plant and equipment:
Drilling equipment............................ 723,878 94,077 46,309(b,l) 864,264
Rental equipment.............................. 28,264 28,264
Buildings, land and improvements.............. 12,519 12,519
Other......................................... 21,586 203 21,789
Construction in progress...................... 28,640 8,411 37,051
-------- -------- --------- ----------
814,887 102,691 46,309 963,887
Less accumulated depreciation, depletion and
amortization................................ 375,236 8,257 (8,257)(d,l) 375,236
-------- -------- --------- ----------
Net property, plant and equipment............. 439,651 94,434 54,566 588,651
-------- -------- --------- ----------
Goodwill, net of accumulated amortization....... 139,467 16,260 22,794(b,l) 178,521
-------- -------- --------- ----------
Other noncurrent assets......................... 53,064 3,446 (918)(g) 55,592
-------- -------- --------- ----------
Total assets........................... $984,136 $131,417 $ (50,943) $1,064,610
======== ======== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............. $ 16,084 $ 5,248 $ (5,248)(b) $ 2,084
(14,000)(g)
Accounts payable.............................. 26,178 8,368 34,546
Accrued liabilities........................... 29,539 5,045 34,584
Accrued income taxes.......................... 4,904 804 5,708
-------- -------- --------- ----------
Total current liabilities.............. 76,705 19,465 (19,248) 76,922
-------- -------- --------- ----------
Long-term debt.................................. 551,042 33,413 (33,413)(b) 475,042
(76,000)(g)
Deferred income taxes........................... -- 10,133 (10,133)(b)
Other long-term liabilities..................... 7,666 7,666
Preferred stock................................. -- 4,000 (4,000)(b)
Stockholders' equity:
Common stock.................................. 12,780 18,035 1,667(a) 14,447
(18,035)(b)
Capital in excess of par value................ 340,243 39,598 155,508(a) 495,751
(39,598)(b)
Retained earnings (accumulated deficit)....... (4,023) 6,773 (6,773)(b) (4,941)
(918)(g)
Other......................................... (277) (277)
-------- -------- --------- ----------
Total stockholders' equity............. 348,723 64,406 91,851 504,980
-------- -------- --------- ----------
Total liabilities and stockholders'
equity............................... $984,136 $131,417 $ (50,943) $1,064,610
======== ======== ========= ==========
</TABLE>
- ---------------
(1) Represents the combined balances of HOC and HRC as of September 30, 1997.
See note (c) for summary capsular combining balance sheet of HOC and HRC as
of September 30, 1997.
19
<PAGE> 21
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) To record the issuance of 10,000,000 shares of Common Stock at an assumed
public offering price of $16.50 per share, resulting in estimated net
proceeds of approximately $157.2 million.
(b) To reflect the Hercules Acquisition. The purchase price was allocated as
follows:
<TABLE>
<CAPTION>
PURCHASE PRICE HERCULES
-------------- --------
<S> <C>
Cash........................................................ $195,000
Fees and expenses........................................... 500
--------
Total............................................. $195,500
========
Purchase Price Allocation:
Increase in property and equipment........................ 54,566
Working capital adjustment per purchase agreement......... 1,443
Eliminate stockholders' equity............................ 64,406
Reverse assets/liabilities which are not a part of
acquisition:
Debt and capital lease obligations........................ 38,661
Redeemable preferred stock................................ 4,000
Intangible assets......................................... (16,260)
Deferred income taxes..................................... 9,630
Cost in excess of net assets acquired....................... 39,054
--------
$195,500
========
</TABLE>
(c) Following is the summary capsular combining balance sheets of HOC and HRC as
of September 30, 1997.
<TABLE>
<CAPTION>
HOC HRC ELIMINATIONS COMBINED
-------- -------- ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Current assets........................... $ 16,927 $ 350 $ -- $ 17,277
Noncurrent assets........................ 91,555 24,765 (2,180) 114,140
-------- ------- ------- --------
Total assets................... 108,482 25,115 (2,180) 131,417
======== ======= ======= ========
Current liabilities...................... $ 17,437 $ 2,028 -- $ 19,465
Noncurrent liabilities................... 31,198 14,528 (2,180) 43,546
Preferred stock.......................... 4,000 -- -- 4,000
Stockholders' equity..................... 55,847 8,559 -- 64,406
-------- ------- ------- --------
Total liabilities and
stockholders' equity......... $108,482 $25,115 $(2,180) $131,417
======== ======= ======= ========
</TABLE>
The eliminations represent approximately $2,180,000 of HRC's note payable
to HOC as of September 30, 1997.
(d) To adjust depreciation expense on assets acquired using allocated purchase
price and to eliminate accumulated depreciation on Hercules assets.
Depreciation was calculated over 17 1/2 years for barge drilling rigs, 15
years on jackup rigs and seven years for tool rental equipment, using 5%
salvage on all equipment.
(e) Amortization of excess cost over fair value of net assets acquired over 30
years.
(f) Reclassify the general and administrative expenses of Mallard and Hercules
to drilling expense and of Quail to rental expense.
(g) To record interest expenses related to $300 million of 9 3/4% Senior Notes
and $175 million of Convertible Notes at 5.5%, reduction of interest expense
related to the $90 million bank term loan and retirement of the $90 million
bank term loan at November 12, 1996 with proceeds from the Offering. In
addition, the Company would have recorded $.9 million extraordinary loss
from the early debt extinguishment.
20
<PAGE> 22
(h) Eliminate interest expense on Hercules debt not assumed.
(i) Eliminate interest and investment income on Quail cash and investments not
acquired.
(j) Amortization of original issue discount and debt issuance costs over the
ten-year term of the 9 3/4% Senior Notes and the seven-year term of the
Convertible Notes.
(k) Eliminate U.S. federal income taxes allocated to Mallard by its former
parent and eliminate U.S. federal income taxes recorded by Hercules due to
the existence of the Company's net operating loss tax carryforwards.
(l) Eliminate operating results and balance sheet accounts related to Rig No. 1
which was sold by Hercules subsequent to September 30, 1997.
(m) Following is the summary capsular combining statements of operations of HOC
and HRC, as applicable for the period indicated:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SEPTEMBER 30, 1997
-----------------------------------------------
HOC HRC ELIMINATIONS COMBINED
------------ ------ ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues...................................... $64,251 $1,923 $(1,923) $64,251
Total operating expenses...................... 50,621 1,427 (1,923) 50,125
Other (income) expense........................ 2,013 1,055 -- 3,068
Income (loss) before income taxes............. 11,617 (559) -- 11,058
Income tax expenses........................... 4,808 -- -- 4,808
------- ------ ------- -------
Net income (loss)............................. $ 6,809 $ (559) $ -- $ 6,250
======= ====== ======= =======
</TABLE>
Elimination entries represent the elimination of approximately $1,923,000
of HRC's billings to HOC for the twelve months ended September 30, 1997 for
HOC's bareboat charter of HRC's drilling and workover rigs.
21
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
The historical financial data presented in the table below as of and for
each of the years in the five-year period ended August 31, 1997 are derived from
the Consolidated Financial Statements of the Company audited by Coopers &
Lybrand L.L.P., independent accountants.
Except for the year ended August 31, 1997, the data presented below do not
reflect the effect of the acquisitions of Mallard and Quail (which were
completed November 12, 1996) and should be read in conjunction with the
Company's Consolidated Financial Statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere or incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------
1993 1994 1995 1996 1997
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Drilling........................................... $ 96,719 $ 147,480 $ 153,075 $ 145,160 $ 283,598
Rental............................................. -- -- -- -- 25,457
Other.............................................. 4,082 4,944 4,296 11,492 2,589
----------- ----------- ----------- ----------- -----------
Total revenues................................. 100,801 152,424 157,371 156,652 311,644
----------- ----------- ----------- ----------- -----------
Operating Expenses:
Drilling........................................... 71,533 117,430 115,963 104,614 189,979
Rental............................................. -- -- -- -- 8,549
Other.............................................. 5,951 6,563 4,928 11,824 4,722
Depreciation, depletion and amortization........... 23,376 23,246 23,745 23,061 46,256
General and administrative......................... 12,320 14,320 14,232 15,756 14,414
Provision for reduction in carrying value of
certain assets(1)................................ -- 19,718 -- -- --
----------- ----------- ----------- ----------- -----------
Total operating expenses....................... 113,181 181,277 158,868 155,255 263,920
----------- ----------- ----------- ----------- -----------
Operating income (loss).............................. (12,380) (28,853) (1,497) 1,397 47,724
----------- ----------- ----------- ----------- -----------
Other income (expense):
Interest income (expense) -- net................... 1,676 1,150 1,184 1,507 (27,484)
Minority interest.................................. 149 (135) (227) -- --
Other.............................................. (469) 919 7,640 5,663 3,316
----------- ----------- ----------- ----------- -----------
Total other income (expense)................... 1,356 1,934 8,597 7,170 (24,168)
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes.................... (11,024) (26,919) 7,100 8,567 23,556
Income tax expense (benefit)......................... (337) 1,887 3,184 4,514 7,241
----------- ----------- ----------- ----------- -----------
Net income (loss).............................. $ (10,687) $ (28,806) $ 3,916 $ 4,053 $ 16,315
=========== =========== =========== =========== ===========
Earnings (loss) per share (fully diluted)............ $ (.20) $ (.53) $ .07 $ .07 $ .23
=========== =========== =========== =========== ===========
Weighted average shares outstanding (fully
diluted)........................................... 53,082,078 54,247,664 55,332,541 57,466,183 72,049,124
=========== =========== =========== =========== ===========
OTHER FINANCIAL DATA:
EBITDA(2)............................................ $ 10,996 $ 14,111 $ 22,248 $ 24,458 $ 93,980
Capital expenditures:
Maintenance........................................ 3,552 5,444 5,133 6,646 14,702
Other.............................................. 15,165 29,320 16,407 24,190 72,724
BALANCE SHEET DATA (END OF PERIOD):
Cash, cash equivalents and other short-term
investments........................................ $ 43,989 $ 14,471 $ 22,124 $ 77,985 $ 212,789
Property, plant and equipment, net................... 139,325 127,178 122,258 124,177 439,651
Total assets......................................... 236,342 209,348 216,959 275,959 984,136
Total long-term debt, including current portion...... -- -- 2,037 3,378 567,126
Total stockholders' equity........................... 207,679 180,583 186,920 244,048 348,723
</TABLE>
- ---------------
(1) In fiscal 1994, Parker reorganized its domestic land drilling and
manufacturing operations and made the decision to dispose of certain
drilling equipment inventories and other properties. Accordingly, Parker
removed 16 rigs from its domestic fleet and recorded a $19.7 million
provision for reduction in carrying value of certain assets.
(2) EBITDA represents operating income (loss) before depreciation, depletion,
amortization and provision for reduction in carrying value of certain
assets. EBITDA is frequently used by securities analysts and is presented
here to provide additional information about the Company's operations.
EBITDA is not a measurement presented in accordance with generally accepted
accounting principles. EBITDA should not be considered in isolation or as a
substitute for net income, cash flow provided by operating activities or
other income or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's profitability
or liquidity.
22
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OUTLOOK AND OVERVIEW
The Company's operations and future results have been altered significantly
by the acquisitions of Mallard and Quail in November 1996. As a result of the
Mallard Acquisition, the Company has become one of the primary barge drilling
contractors in the Gulf of Mexico and Nigeria, each of which were markets in
which Parker previously did not operate. As a result of the Quail Acquisition,
the Company expanded its operations into the rental tool market in the Gulf of
Mexico and the Gulf Coast region. The pending acquisition of Hercules and the
recent acquisition of Bolifor are expected to further change the nature of the
Company's operations and its future results.
In addition to increasing the size and scope of the Company's operations,
the Hercules Acquisition will further increase the percentage of the Company's
revenue generated domestically. Parker generated approximately 47% of its
revenue from domestic sources in fiscal 1997 compared with 52% for the Company
on a pro forma basis for the Hercules Acquisition for the same period.
The financings related to the Mallard and Quail Acquisitions in November
1996, combined with the Company's issuance of the Convertible Notes in July
1997, have substantially increased the Company's debt levels. At August 31,
1997, the Company had $567.1 million in total indebtedness, compared to $3.4
million of total indebtedness at August 31, 1996. The substantial levels of debt
will result in a higher level of interest expense and an increased percentage of
the Company's cash flows being used for debt service and may limit the Company's
ability to obtain additional financing for future acquisitions and capital
expenditures. See " -- Liquidity and Capital Resources" and "Risk
Factors -- Substantial Leverage."
For the foregoing reasons, the acquisitions of Mallard, Quail and Hercules
will affect the comparability of the Company's historical results of operations
with results in future periods.
RESULTS OF OPERATIONS
Year Ended August 31, 1997 Compared to Year Ended August 31, 1996
The Company's fiscal 1997 results of operations were significantly impacted
by the acquisitions of Mallard for $336.8 million and Quail for $66.9 million in
November 1996. The acquisitions added two new business segments to the Company's
traditional land drilling business: offshore and transition zone drilling and
workover services utilizing barge and platform rigs and the rental of
specialized equipment used in drilling, production and workover applications.
The acquisitions were accounted for under the purchase method of
accounting. As a result, the assets and liabilities of Mallard and Quail were
recorded at their estimated fair values as of November 13, 1996, the date the
acquisitions were consummated. Goodwill, the purchase price in excess of the
fair value of Mallard's and Quail's assets, totaled $143.3 million and will be
amortized over a 30-year period.
The Company recorded net income of $16.3 million in fiscal 1997 as compared
to $4.1 million in fiscal 1996. Increased land rig utilization and improved
margins plus profit generated by the offshore and tool rental segments were
partially offset by increased interest and depreciation and amortization
expenses. The Company's results of operations included Mallard's and Quail's
operations for the period from the acquisition date, November 12, 1996, through
fiscal year end, August 31, 1997.
Total revenues of $311.6 million in fiscal 1997 increased $155.0 million,
nearly doubling total revenues in fiscal 1996. Offshore drilling and tool
rental, the two new business segments acquired in fiscal 1997, accounted for
$100.2 million and $25.5 million, respectively, of the increase. Offshore
drilling revenues were derived primarily from barge drilling activity in the
transition zones of the U.S. Gulf Coast and Nigeria. The Company furnishes
rental tools in both the Gulf of Mexico offshore and Gulf Coast land markets.
Total land drilling revenues increased $38.2 million due to increased
utilization and dayrates in several of the Company's primary land markets.
Drilling revenues in the United States increased $13.6 million due to
23
<PAGE> 25
increased dayrates and a 42% increase in operating days. All 14 of the Company's
United States land drilling rigs were operating at year end, with a majority of
the rigs located in the Gulf Coast and Rocky Mountain regions.
In Latin America, land drilling revenues increased $15.0 million due to
increased revenues in Peru, Colombia and Bolivia. Four rigs were active in Peru
for most of fiscal 1997 as compared to an average of one rig active in fiscal
1996. At year end, the Company had eight rigs under contract in Colombia, where
revenue increased from additional activity and increased dayrates. In July 1997,
the Company acquired substantially all of the assets of Bolifor, a leading
provider of land contract drilling services in Bolivia. Assets acquired include
11 land rigs located in Bolivia, Paraguay and Argentina. Eight of the rigs are
currently under contract. Since the acquisition occurred late in the fiscal
year, the impact on results of operations will not be fully realized until
fiscal 1998.
Land drilling revenues in the Asia Pacific region increased $9.4 million
due to increased drilling services provided in Indonesia and increased rig
utilization in Pakistan, where the Company had three rigs under contract at
fiscal year end. Drilling activity in the former Soviet Union and Middle East
countries remained nearly the same as in fiscal 1996. However, at fiscal year
end, the Company was mobilizing one land rig to Niger for a one-rig contract and
moving a land rig from Russia to Kazakhstan to begin a drilling program from a
gravel island in the Caspian Sea. Additionally, the Company is modifying one of
its barge rigs that previously operated in Nigeria for service in another
international location.
Land drilling revenues generated a profit margin (revenue less direct
operating expense) of $54.5 million in fiscal 1997, an increase of $14.0
million. Increased profit margins resulted from increased rig utilization and
higher dayrates as previously discussed. The offshore drilling and tool rental
segments acquired in fiscal 1997 generated profit margins of $39.1 million and
$16.9 million, respectively.
The increased 1997 profit margins of $75.0 million were somewhat offset by
$23.2 million higher depreciation and amortization expense and a $32.7 million
increase in interest expense. Higher depreciation and amortization expense was
attributable to a combined $19.0 million depreciation for Mallard and Quail and
$3.8 million of goodwill amortization in fiscal 1997. Increased interest expense
resulted from $400.0 million of debt incurred in November 1996 to finance the
Mallard and Quail acquisitions and the issuance of $175.0 million of Convertible
Notes in July 1997.
A $3.7 million increase in interest income was due to higher cash and cash
equivalent levels maintained during the year. Other income decreased $2.3
million due primarily to reduced gains on sales of assets in fiscal 1997.
Included in other income was a $1.6 million write down resulting from a blowout
which damaged barge Rig No. 52 and a $1.1 million gain from the sale of a
subsidiary, Parker Kinetic Designs, Inc.
General and administrative expense decreased $1.3 million principally due
to non-recurring severance costs in fiscal 1996 associated with a reduction in
corporate personnel. The increase in income tax expense was attributable to
improved international operations and the addition in fiscal 1997 of offshore
drilling in Nigeria and offset by a $1.3 million reversal in fiscal 1997 of an
income tax accrual in a country where the Company terminated operations.
Year Ended August 31, 1996 Compared to Year Ended August 31, 1995
The Company recorded net income of $4.1 million in fiscal 1996 as compared
to net income of $3.9 million in fiscal 1995. An improvement in drilling margins
in fiscal 1996 was offset by reduced other income and by increased general and
administrative expense due primarily to severance costs.
Drilling revenue decreased $7.9 million in fiscal 1996 due to the
termination in late fiscal 1995 of the Company's low-margin southern Argentina
operations, which had generated $13.0 million of revenue in fiscal 1995. The
Company's overall rig utilization rate increased from 52% in fiscal 1995 to 55%
in fiscal 1996. Excluded from the utilization percentages for both years are 22
domestic mechanical rigs sold in the fourth quarter of fiscal 1996.
24
<PAGE> 26
South America drilling revenue decreased from $76.1 million in fiscal 1995
to $58.5 million in fiscal 1996, primarily due to the loss of revenue generated
in the terminated southern Argentina operations in fiscal 1995. In Colombia,
three rigs were refurbished in fiscal 1996 and resumed work under new contracts.
The Company had seven rigs under contract in Colombia and two rigs under
contract both in northern Argentina and in Peru as of September 30, 1996.
Operations in the Asia Pacific areas generated revenue of $47.9 million in
fiscal 1996, an increase of $2.9 million from fiscal 1995. The primary area of
increased revenue was Papua New Guinea where the Company experienced a 91% rig
utilization rate on its five rigs in fiscal 1996. Revenue decreased in New
Zealand, the Philippines and Pakistan because five rigs completed contracts in
fiscal 1996.
Revenues from operations in Africa, Russia and Kazakhstan were
approximately $8.0 million in fiscal 1996 and fiscal 1995.
The Company's domestic operations generated $30.8 million of drilling
revenue in fiscal 1996 as compared to $23.7 million in fiscal 1995. The increase
in revenue was attributable to the Company's Alaska Rig No. 245 operating the
entire year in fiscal 1996 as compared to nine months in fiscal 1995 and a 10%
increase in utilization days for the rigs in the lower 48 states. The increase
in domestic drilling activity occurred primarily in the Tuscaloosa Trend in
Louisiana, where the Company deployed three rigs in fiscal 1996 and is currently
deploying another rig under a new contract.
During the fourth quarter of fiscal 1996, the Company sold 22 mechanical
rigs from its domestic rig fleet, leaving 15 SCR electric rigs and two
mechanical rigs.
Although worldwide contract drilling revenue decreased $7.9 million in
fiscal 1996, as compared to fiscal 1995, the total drilling margin (drilling
revenue less drilling expense) increased $4.3 million over the same period. This
increase was attributable to increased utilization of rigs in Papua New Guinea,
improved contract margins in Colombia and the termination of the low-margin
southern Argentina operations.
Other revenue increased $7.2 million in fiscal 1996 due to the sale of a
rig by the Company's manufacturing subsidiary, Parker Technology, Inc.
("Partech(R)"). General and administrative expense increased $2.4 million in
fiscal 1996 principally due to nonrecurring severance costs associated with a
reduction in corporate personnel.
Other income (expense) decreased $2.0 million due to the reversal in fiscal
1995 of a prior year's foreign currency accrual of $1.5 million and reduced
gains on sales of assets in fiscal 1996. The increase in income tax expense was
attributable to increased international profits in fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments were $212.8 million at August 31, 1997, an
increase of $134.8 million from August 31, 1996. At August 31, 1997, the
Company's working capital was $275.2 million, which compares to working capital
of $102.9 million at August 31, 1996. Principal factors affecting working
capital in fiscal 1997 were $61.3 million of net proceeds from a Common Stock
offering in April 1997, $169.8 million of net proceeds from the issuance of
Convertible Notes in July 1997 and capital expenditures of $87.4 million
incurred during fiscal 1997.
Fiscal 1997 capital expenditures included: (i) the substantial upgrade of
barge Rig No. 74, which began work in Nigeria in the third quarter; (ii) the
refurbishment of platform Rig Nos. 41 and 42 and barge Rig No. 60, which began
work in the Gulf of Mexico during the second half of the fiscal year; (iii) the
upgrade of land Rig No. 7, which began working in Pakistan in the fourth
quarter; (iv) significant additions of drill pipe and tools for rental
operations; and (v) initial expenditures for expansion of tool rental operations
in the South Texas market.
In November 1996, the Company acquired Mallard for $311.8 million in cash
and $25.0 million in convertible preferred stock (that converted into 3,056,600
shares of Common Stock in the second quarter of fiscal 1997) and Quail for $66.9
million in cash. The Company financed the acquisitions of Mallard and Quail
25
<PAGE> 27
through the sale of $300 million principal amount of the 9 3/4% Senior Notes and
a term loan of $100 million under the Senior Credit Facility.
The 9 3/4% Senior Notes, which were sold at a $2.4 million discount, have
an interest rate of 9 3/4% (effective rate of 9.88%) and will mature in 2006.
The 9 3/4% Senior Notes are guaranteed by the Company's principal subsidiaries.
The Senior Credit Facility consists of the term loan and a $45 million revolving
credit facility. The term loan bears interest (7.89% at August 31, 1997) at the
option of the Company, at prime to prime plus 0.50% or at 1.75% to 2.25% above
the one-, two-, three- and six-month reserve-adjusted LIBOR rate, depending on
the Company's Debt-to-Capital Ratio (as defined), and matures on November 30,
2002. Installments of principal and interest are payable quarterly in an amount
that provides for the retirement of $10 million in fiscal 1997, $14 million in
fiscal 1998, $12 million in each of fiscal 1999 through 2002, with a final
payment of $28 million due at maturity. The term loan has no prepayment penalty,
is guaranteed by the Company's principal subsidiaries and is collateralized by
substantially all of the assets of the Company and the assets and stock of such
subsidiaries. The Company intends to repay the outstanding balance of its term
loan of $90 million. The Company also intends to increase the amount of its
revolving credit facility.
The revolving credit facility is available for working capital
requirements, general corporate purposes and to support letters of credit, of
which $13.8 million had been issued at August 31, 1997. Availability under the
revolving credit facility is subject to certain borrowing base limitations based
on 80% of eligible accounts receivable. All advances to the Company under the
revolving credit facility bear interest, at the option of the Company, at prime
to prime plus 0.50% or at 1.75% to 2.25% above the one-, two-, three-and
six-month reserve-adjusted LIBOR rate, depending on the percentage of the credit
facility utilized. The revolving credit facility is collateralized by a first
lien on the Company's accounts receivable. The revolving credit facility matures
on December 31, 1998. At August 31, 1997, no amounts were outstanding under the
revolving credit facility.
Each of the 9 3/4% Senior Notes and the Senior Credit Facility contains
customary affirmative and negative covenants, including restrictions on
incurrence of debt and sales of assets. The Senior Credit Facility prohibits
payment of dividends and the indenture for the 9 3/4% Senior Notes restricts the
payment of dividends.
On May 9, 1997, the Company signed definitive agreements to acquire the
capital stock of Hercules for $195 million. Hercules owns seven jackup rigs and
three self-erecting platform rigs in the Gulf of Mexico. The Hercules
acquisition is subject to various conditions, including Malaysian regulatory
approval, approval by the shareholders of Trenergy and closing by year-end 1997.
Although there can be no assurance as to the closing of the transaction, the
Company anticipates the transaction will close in the fourth quarter of calendar
1997. In anticipation of funding the Hercules acquisition, in July 1997 the
Company issued $175 million of Convertible Notes due August 1, 2004. The
Convertible Notes bear interest at 5.5% payable semi-annually in May and
November. The Convertible Notes are convertible at the option of the holder into
shares of Common Stock of Parker at any time prior to maturity. The Notes are
redeemable at the option of the Company at any time after July 2000 at certain
stipulated prices.
In July 1997 the Company acquired substantially all of the assets of
Bolifor for $25 million, of which $2.7 million will be paid in fiscal 1998. The
assets of Bolifor primarily consist of 11 land rigs located in Bolivia, Paraguay
and Argentina.
Management believes that the current level of cash and short-term
investments and cash generated from operations, combined with the net proceeds
of the Offering, should be sufficient to acquire Hercules and to finance the
Company's working capital needs, scheduled debt service and expected capital
expenditures during fiscal 1998. Should new opportunities requiring capital
arise, the Company may utilize the revolving portion of the Senior Credit
Facility or may consider seeking additional equity or long-term debt financing.
OTHER MATTERS
In fiscal year 1996, the Company purchased a software package which is year
2000 compliant. During fiscal 1997, the Company installed significant financial
applications and intends to install remaining applications in the near future.
26
<PAGE> 28
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share," was issued. This statement replaces the currently required
presentation of primary earnings per share (EPS) with a presentation of basic
EPS that excludes dilutive securities from the computation. It also requires a
presentation of diluted EPS that is computed similarly to the fully diluted EPS
calculation currently required. The statement will be effective for the
Company's fiscal quarter which will end February 28, 1998. Early application of
this statement is not permitted. The Company anticipates that the effect of this
pronouncement will be minimal.
27
<PAGE> 29
BUSINESS
GENERAL
Parker is a leading worldwide provider of contract drilling and drilling
related services, operating in the transition zones of the Gulf of Mexico and
Nigeria, in the offshore waters of the Gulf of Mexico and in international and
domestic land oil and gas producing regions. The Company's growth strategy is
focused on higher margin offshore and transition zone drilling and workover
markets. Consistent with this strategy, in November 1996, the Company acquired
(i) Mallard, the second-largest barge drilling and workover company in the
transition zones of the Gulf of Mexico, and (ii) Quail, a leading provider of
specialized rental equipment for drilling and workover operations, primarily in
the Gulf of Mexico. In July 1997 the Company acquired the assets of Bolifor, a
leading provider of land contract drilling services in Bolivia. In addition, in
May 1997 the Company entered into agreements to acquire the capital stock of
Hercules, a leading provider of contract drilling and workover services in the
shallow waters of the Gulf of Mexico.
With the closing of the pending acquisition of Hercules, Parker's rig fleet
will consist of 34 barge drilling and workover rigs, eight offshore jackup rigs,
six offshore platform rigs and 74 land rigs. The Company's barge and jackup rig
fleet is dedicated to transition zone waters, which are generally defined as
extending from the coast to depths of up to 25 feet. The Company's offshore
jackup and platform rig fleets currently operate in the Gulf of Mexico market.
Parker's land rig fleet generally consists of premium and specialized deep
drilling rigs, with 61 of its 74 land rigs capable of drilling to depths of
15,000 feet or greater. In addition, 21 of the Company's land rigs are
helicopter-transportable, thus establishing Parker as the dominant operator in
the heli-rig market throughout the world. The diversity of the Company's rig
fleet, both in terms of geographic location and asset class, enables the Company
to provide a broad range of services to oil and gas operators around the world
and to take advantage of market upturns, while reducing its exposure to
downturns in any particular sector or region.
The oilfield services industry has experienced a significant increase in
activity in the last two years as oil and gas companies have increased their
exploration and production budgets in response to increasing demand for oil and
gas, stronger oil and gas prices and reduced drilling costs due in large part to
improved technology. In the offshore drilling market, including transition
zones, rig dayrates and utilization levels are at a 15-year high with many
markets at or approaching full utilization. The land drilling industry, both in
the United States and internationally, has also shown a marked improvement in
dayrates and utilization driven by several factors, including stronger commodity
prices, rig attrition and consolidation of drilling contractors, especially in
the domestic market. Through its recent and pending acquisitions, the Company is
capitalizing on these improving conditions.
TRANSITION ZONE OPERATIONS
The Company is a leading provider of contract drilling services in the
transition zones of the Gulf of Mexico and Nigeria, where barge rigs are the
primary source of drilling and workover services. Barge rigs are mobile drilling
and workover vessels that are submersible and are built to work in eight to 25
feet of water. These rigs are towed by tug boats to the drill site with the
derrick laid down. The lower hull is submerged by flooding until it rests on the
sea floor. The derrick is then raised and drilling or workover operations are
conducted with the barge in this position.
Domestic Barge Drilling
The Company's principal domestic market for its barge drilling rigs is the
transition zones of the Gulf of Mexico, primarily in Louisiana and, to a lesser
extent, Alabama and Texas, where conventional jackup rigs are unable to operate.
This area historically has been the world's largest market for shallow water
barge drilling. Parker is the second largest operator of barge drilling rigs in
this market, with 15 drilling barges. Barge rigs are also employed inland in
lakes, bays, rivers and marshes.
The barge market in the transition zones of the Gulf of Mexico has
undergone significant attrition and consolidation in recent years, with the
number of drilling rigs declining from over 120 in the early 1980s to
approximately 55 today, and the number of competitors decreasing over the same
period from more than 30 to only two significant contractors. Drilling and
workover activity has been increasing in the Gulf of Mexico
28
<PAGE> 30
transition zones, spurred by (i) the increased use of 3-D seismic technology
that has resulted in the identification of previously undiscovered drilling
prospects and (ii) the settlement of a royalty dispute between the State of
Louisiana and Texaco, the region's largest leaseholder. It is estimated that
Texaco holds approximately 45% of the shallow water leases in Louisiana.
Pursuant to a settlement reached in March 1994, Texaco agreed to invest
approximately $150 million to drill in Louisiana over a five-year period. Higher
natural gas prices have also significantly contributed to this increased
drilling and workover activity. The recent increase in drilling and workover
activity in the Gulf of Mexico has resulted in a significant increase in
dayrates and utilization for the Company's rigs. For the period from November
12, 1996 through August 31, 1997, the Company's marketable deep drilling barge
rigs averaged 98% utilization and an average dayrate of $15,660. As of September
30, 1997, 88% of the Company's marketable deep drilling barge rigs were in
operation at an average dayrate of $18,985.
The Company believes that international markets, in which jackup rigs have
historically been utilized for transition zone drilling, will utilize an
increasing number of barge rigs over the next several years, primarily rigs
currently or formerly employed in the Gulf of Mexico transition zone market and
newly constructed rigs. Once a barge rig has been modified for international
service, it may not be feasible to return to service in certain areas of the
Gulf of Mexico transition zone market because the modifications restrict the
ability of the rig to navigate inland waterways.
The following table sets forth, as of September 30, 1997, the Company's
estimate of the number of barge drilling rigs in the domestic market. The table
does not include rigs that are suitable principally for workover or shallow
drilling.
<TABLE>
<CAPTION>
CONTRACTOR TOTAL ACTIVE
---------- ----- ------
<S> <C> <C>
Falcon Drilling Company, Inc. ("Falcon Drilling")........... 39 25
Parker...................................................... 15 12
Nabors Industries, Inc...................................... 1 1
-- --
Total............................................. 55 38
== ==
</TABLE>
29
<PAGE> 31
A schedule of the Company's deep and intermediate drilling barges located
in the Gulf of Mexico, as of September 30, 1997, is set forth below:
<TABLE>
<CAPTION>
MAXIMUM
YEAR BUILT DRILLING
OR LAST DEPTH
HORSEPOWER REFURBISHED (FEET) STATUS(1)
---------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Deep Drilling:
Rig No. 50........................ 2,000 1993 25,000 Active
Rig No. 51........................ 2,000 1993 25,000 Active
Rig No. 52(2)..................... 2,000 1993 25,000 Stacked
Rig No. 53........................ 1,600 1995 20,000 Active
Rig No. 54........................ 2,000 1995 30,000 Active
Rig No. 55........................ 2,000 1993 30,000 Active
Rig No. 56........................ 2,000 1992 30,000 Active
Rig No. 57........................ 1,500 1997 20,000 Active
Rig No. 58........................ 3,000 1982 30,000 Stacked
Rig No. 59........................ 3,000 1972 30,000 Stacked
Rig No. 60........................ 3,000 1997 30,000 Active
Intermediate Drilling:
Rig No. 8......................... 1,700 1995 15,000 Active
Rig No. 12........................ 1,200 1990 14,000 Active
Rig No. 17........................ 1,200 1993 13,000 Active
Rig No. 21........................ 1,200 1995 14,000 Active
</TABLE>
- ---------------
(1) "Active" denotes that the rig is currently under contract or available for
contract. "Stacked" denotes that the rig is currently cold stacked and would
need to be refurbished at a significant cost before being placed back into
service.
(2) On June 16, 1997, Rig No. 52 suffered extensive damage when a well on which
it was working suffered a blowout and fire.
Given the improvement in barge drilling demand and dayrates, the Company
may also contemplate refurbishing its cold stacked rigs.
Domestic Barge Workover and Shallow Drilling
The Company is the leading provider of domestic barge workover services in
the transition zones of the Gulf of Mexico. Parker's domestic barge workover and
shallow drilling business is based in the same geographical area as its barge
drilling business. The same factors that have affected the structure of the
barge drilling sector also have affected this sector, including considerable
consolidation of competitors and reduction of available rigs since the early
1980s. In June 1997, the Company was awarded a one-year extension of its
exclusive alliance to provide barge rig completion and workover services to
Texaco in the transition zones of the Gulf of Mexico.
The following table sets forth, as of September 30, 1997, the Company's
estimate of the number of barge units in the workover and shallow drilling
sector of the domestic market:
<TABLE>
<CAPTION>
CONTRACTOR TOTAL ACTIVE
---------- ----- ------
<S> <C> <C>
Parker...................................................... 15 10
Falcon Drilling............................................. 9 9
Other contractors........................................... 5 2
-- --
Total..................................................... 29 21
== ==
</TABLE>
30
<PAGE> 32
A schedule of the Company's workover rigs, as of September 30, 1997, which
includes some rigs with shallow drilling capabilities, is set forth below:
<TABLE>
<CAPTION>
MAXIMUM
YEAR BUILT DRILLING
OR LAST DEPTH
HORSEPOWER REFURBISHED (FEET) STATUS(1)
---------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Heavy Workover and Shallow Drilling:
Rig No. 5......................... 800 1991 -- Stacked
Rig No. 10........................ 800 1978 -- Stacked
Rig No. 15........................ 800 1991 -- Stacked
Rig No. 16........................ 800 1994 11,500 Active
Rig No. 18........................ 800 1993 11,500 Active
Rig No. 20........................ 800 1995 11,500 Active
Rig No. 23........................ 1,000 1993 13,000 Active
Rig No. 24........................ 1,000 1992 13,000 Active
Rig No. 25........................ 1,000 1993 13,000 Active
Rig No. 27........................ 800 1987 -- Stacked
Rig No. 28........................ 800 1987 -- Stacked
Workover and Other:
Rig No. 6......................... 700 1995 -- Active
Rig No. 7......................... 700 1995 -- Active
Rig No. 9......................... 650 1996 -- Active
Rig No. 26........................ 650 1996 -- Active
</TABLE>
- ---------------
(1) "Active" denotes that the rig is currently under contract or available for
contract. "Stacked" denotes that the rig is currently cold stacked and would
need to be refurbished at a significant cost before being placed back into
service.
International Barge Drilling
The Company has focused its international barge drilling efforts in the
transition zones of West Africa, where it is one of the leading providers of
barge drilling services in Nigeria, with three of the nine rigs in the market.
International markets are particularly attractive due to the availability of
long-term contracts and the opportunity to earn dayrates higher than domestic
rates. The Company believes that international markets, in which jackup rigs
have historically been utilized for offshore drilling, will utilize an
increasing number of barge rigs over the next several years and that these will
come primarily from rigs currently or formerly employed in the Gulf of Mexico
transition zones. The most promising international barge drilling markets are
currently located in the transition zones of Venezuela, Indonesia, Tunisia, the
Middle East, the Caspian Sea and West Africa.
The Company is one of the largest barge rig operators in the transition
zones of Nigeria. The Company has operated in Nigeria since 1991 and currently
operates three barge rigs under long-term contracts at an average dayrate of
$26,444. The Company has recently received a letter of intent, subject to the
execution of a definitive agreement, from one of its present customers in
Nigeria for a five-year drilling contract in the transition zones of Nigeria,
which will require the construction of a new drilling barge at an estimated cost
of $25 million. One of the Company's drilling rigs, which previously operated
offshore Nigeria, is currently undergoing modifications at a shipyard in
Louisiana.
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<PAGE> 33
A schedule of the Company's international drilling barges, as of September
30, 1997, is set forth below:
<TABLE>
<CAPTION>
MAXIMUM
YEAR BUILT DRILLING
OR LAST DEPTH
HORSEPOWER REFURBISHED (FEET) STATUS(1)
---------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Rig No. 71(2)........................ 3,000 1994 30,000 Shipyard
Rig No. 72........................... 3,000 1991 30,000 Active
Rig No. 73........................... 3,000 1991 30,000 Active
Rig No. 74........................... 3,000 1997 30,000 Active
</TABLE>
- ---------------
(1) "Active" denotes that the rig is currently under contract or available for
contract.
(2) Rig No. 71 is being refurbished for service in an international location.
OFFSHORE OPERATIONS
Jackup Drilling
Pursuant to the Hercules Acquisition, the Company will acquire seven
shallow water jackup rigs. As of September 30, 1997, six of the rigs were in
active service at 100% effective utilization, with an average dayrate of
$26,433. The seventh rig is in a shipyard undergoing modification and is
expected to be in service in January 1998. The Hercules jackup rigs are mobile,
self-elevating drilling platforms equipped with legs that can be lowered to the
ocean floor until a foundation is established to support the hull, which
contains the drilling equipment, jacking system, crew quarters, loading and
unloading facilities, storage areas for bulk and liquid materials, helicopter
landing deck and other related equipment. Five of the rigs are cantilever
design, a feature that permits the drilling platform to be extended out from the
hull, allowing drilling and workover operations to be performed over existing
platforms or structures. Jackup rigs with the cantilever feature historically
have achieved higher dayrates and utilization levels. The other two rigs are
slot-type design configured for the drilling operations to take place through a
keyway in the hull. These two rigs have the added capability of operating in
eight feet of water. Four of the seven jackup rigs are mat-supported rigs and
three are independent leg rigs. The Hercules rigs are capable of drilling to
maximum depths of 25,000 feet and in water depths of up to 215 feet.
The Hercules Acquisition will further expand and complement the Company's
business in the Gulf of Mexico shallow water market and will augment the
Company's existing platform rig business.
The following table sets forth certain information, as of September 30,
1997, with respect to the Parker and Hercules jackup rigs:
<TABLE>
<CAPTION>
MAXIMUM MAXIMUM
WATER DRILLING
DEPTH DEPTH
DESIGN(1) (FEET) (FEET) STATUS(2)
------------------------------ ------- -------- -----------
<S> <C> <C> <C> <C>
Parker:
Rig No. 43......... Sun Contractors (IC) 55 -- Stacked
Hercules:
Rig No. 11(3)...... Bethlehem JU-200 (MC) 200 -- Active
Rig No. 14......... Baker Marine Big Foot (IS) 85 20,000 Shipyard
Rig No. 15......... Baker Marine Big Foot III (IS) 100 20,000 Active
Rig No. 20......... Bethlehem JU-100 (MC) 110 25,000 Active
Rig No. 21......... Baker Marine BMC-125 (MC) 125 25,000 Active
Rig No. 22......... Le Tourneau Class 51 (MC) 173 18,000 Active
Rig No. 25......... Le Tourneau Class 150-44 (IC) 215 20,000 Active
</TABLE>
- ---------------
(1) IC -- independent leg, cantilevered; IS -- independent leg, slot;
MC -- mat-supported, cantilevered.
32
<PAGE> 34
(2) "Active" denotes that the rig is currently under contract or available for
contract. "Stacked" denotes that the rig is currently cold stacked and would
need to be refurnished at a significant cost before placed back into
service.
(3) Workover rig.
Platform Drilling
Following the Hercules Acquisition, the Company's fleet of platform rigs
will consist of six modular self-erecting rigs. These platform rigs consist of
drilling equipment and machinery arranged in modular packages that are
transported to and self-erected on fixed offshore platforms owned by oil
companies. The Company believes that the modular self-erecting design of the
platform rigs provides a competitive advantage due to lower mobilization costs
and smaller "footprint." The Company intends to expand its presence in the
platform rig market through the refurbishment of its cold-stacked rig and
through the acquisition or construction of additional rigs.
The following table sets forth certain information, as of September 30,
1997, with respect to the Parker and Hercules platform rigs:
<TABLE>
<CAPTION>
MAXIMUM
YEAR BUILT DRILLING
OR LAST DEPTH
HORSEPOWER REFURBISHED (FEET) STATUS(1)
---------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Parker:
Rig No. 41E............................ 1,000 1997 12,500 Active
Rig No. 42E............................ 1,000 1996 12,500 Active
Rig No. 47............................. 750 1993 11,000 Stacked
Hercules:
Rig No. 2.............................. 1,000 1982 12,000 Active
Rig No. 3.............................. 1,000 1997 12,000 Active
Rig No. 10............................. 650 1989 10,000 Active
</TABLE>
- ---------------
(1) "Active" denotes that the rig is currently under contract or available for
contract. "Stacked" denotes that the rig is currently cold stacked and would
need to be refurbished at a significant cost before being placed back into
service.
33
<PAGE> 35
LAND OPERATIONS
General
The Company is a leading international provider of land contract drilling
services. The Company's land drilling operations specialize in the drilling of
deep and difficult wells and drilling in remote and harsh environments. Since
beginning operations in 1934, the Company has operated in 49 foreign countries
and throughout the United States, making it one of the most geographically
diverse land drilling contractors in the world.
The following table sets forth, as of September 30, 1997, the locations of
the Company's land rigs and their drilling depth ratings:
<TABLE>
<CAPTION>
DRILLING DEPTH RATING IN FEET
---------------------------------------------------
10,000
OR LESS 15,000 20,000 25,000 30,000 TOTAL
------- ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
International:
South America.................................. 6 10 10 3 4 33
Asia Pacific................................... 4 3 11 2 - 20
Africa and the Former Soviet Union............. 3 2 2 - - 7
-- -- -- -- -- --
Total International.................... 13 15 23 5 4 60
Domestic:
Gulf Coast..................................... - - 1 - 4 5
Rocky Mountains................................ - - 2 - 2 4
Mid-Continent.................................. - - 4 - - 4
Alaska......................................... - - - - 1 1
-- -- -- -- -- --
Total Domestic......................... - - 7 - 7 14
-- -- -- -- -- --
Total.................................. 13 15 30 5 11 74
== == == == == ==
</TABLE>
International Operations
The Company's international land drilling operations are focused primarily
in South America and the Asia Pacific region, where it specializes in drilling
that requires equipment specially designed to be transported by helicopter or
all-terrain vehicles into remote access areas such as jungle, mountainside or
desert locations. Management believes that Parker's 21 heli-rigs, with
technologically advanced pumps and power generation systems that are capable of
drilling difficult wells in excess of 15,000 feet, have established Parker as
the dominant operator in the heli-rig market, with what the Company estimates to
be a 75% worldwide market share. Parker traditionally has been a pioneer in
frontier areas and is currently working for or has recently worked for operators
in China, Russia, Kazakhstan and Vietnam.
In recent years, many major and independent oil companies have directed a
greater portion of their exploration budgets to foreign markets. This is
particularly true in South America and the Asia Pacific region, where the demand
for land rigs has increased significantly. Parker has benefitted from this trend
due to its long-standing presence in these markets and has been able to deploy
rigs under longer term contracts at higher dayrates and operating margins than
in its domestic operations. Management believes that the demand for drilling
services in international markets will continue to grow as demand for oil and
gas increases and countries dependent on oil and gas revenues seek to increase
their production. The Company intends to capitalize on its global presence and
substantial international experience to pursue growth opportunities in both
current and developing markets.
International markets differ from the domestic market in terms of
competition, nature of customers, equipment and experience requirements. The
majority of international drilling markets have the following characteristics:
(i) a small number of competitors; (ii) customers who are major, large
independent or foreign national oil companies; (iii) drilling programs in remote
locations requiring drilling equipment with a large
34
<PAGE> 36
inventory of spare parts and other ancillary equipment; and (iv) drilling of
difficult wells requiring considerable experience.
South America. The Company has 33 rigs located in the South American
drilling markets of Colombia, Argentina, Paraguay, Peru and Bolivia. Parker's
rigs have been upgraded to meet the demands of deep, difficult drilling in these
areas. Most of these rigs are currently under contract to major or national oil
companies at attractive dayrates. The Company anticipates it will continue to
relocate rigs to the South American market to meet increased demand for
drilling.
Asia Pacific Region. The Company operates 13 of its fleet of 21 helicopter
transportable rigs in the Asia Pacific region due to the remoteness of the
mountainside and jungle drilling performed in this region. Parker entered the
Indonesian geothermal market in 1995. In 1996, Parker became the first land
drilling contractor to enter the Vietnam market subsequent to the liberalization
of Vietnam's trading policy and the lifting of restrictions on doing business
with Vietnam. Also in 1996, Parker formed an alliance with the national drilling
company in China, pursuant to which Parker is providing project management
assistance and rig supervisory personnel to western oil companies in conjunction
with Parker's Chinese partner. Parker has the longest presence of any foreign
drilling contractor in China, beginning with its first contract in 1980.
Africa and the Former Soviet Union. Seven of the Company's rigs are
currently located in the markets of Africa and the former Soviet Union. After
becoming the first western drilling contractor to enter the Russian drilling
market in 1991, expansion of Parker's business in this country has been hampered
by bureaucratic inefficiencies, constantly changing tax and other laws and
political issues that have retarded the investment of capital by major and large
independent oil companies in Russia. As a result, Parker has relocated three of
its drilling rigs and is in the process of relocating its remaining drilling rig
from Russia to Kazakhstan. As anticipated, the recently announced agreement
regarding the pipeline to be built to accommodate incremental production from
the Tengiz field in Kazakhstan has already increased exploration efforts in this
region. In addition to operating Parker's own rigs, Parker recently was awarded
a five-year alliance contract by the operator of the Tengiz field to operate and
maintain its rigs, including the provision of expatriate and local drilling
crews and management of its warehouse, drilling base and mobile equipment fleet.
Domestic Operations
In the United States, the Company operates land rigs in the Gulf Coast,
Rocky Mountain and Mid-Continent regions and the arctic region of Alaska.
Industry conditions in the United States land drilling market have recently
improved after having been depressed through most of the 1980s and early 1990s.
The improved market conditions have resulted in both increased rig utilization
and dayrates and shortages for certain types of rigs in certain markets. The
increased drilling activity has been reflected in a greater demand for rigs of
all depth capabilities, in particular deep drilling rigs such as those owned by
the Company. The recent market improvements have been a result of a combination
of a general consolidation trend in the industry, higher and more stable oil and
natural gas prices and improvements in exploration technology, in particular the
greater use of 3-D seismic data and horizontal drilling.
Of the Company's 14 rigs located in the United States, 13 are SCR electric,
six are equipped with top drive units and all are capable of drilling in excess
of 15,000 feet. Traditionally, Parker has differentiated itself from its
domestic competitors by specializing in the drilling of deep and difficult
wells.
Specialty Services
Helicopter Transportable Rigs. The Company specializes in difficult wells
and drilling in remote areas and harsh environments, primarily in international
locations. A significant factor contributing to Parker's success in obtaining
drilling contracts in remote areas is the use of rigs that are transportable by
air, land and water. These rigs have been specially designed and constructed by
Parker for quick assembly and disassembly under the proprietary designations
"Heli-Hoist(R)" rig, Transportable By Anything(R)("TBA(R)") rig and All-Terrain
("AT2000E(R)") rig. Management believes that Parker's 21 helicopter
transportable rigs comprise approximately 75% of the operational helicopter
transportable rigs worldwide. The Heli-Hoist(R), TBA(R) and
35
<PAGE> 37
AT2000E(R) rigs allow Parker to perform drilling operations in remote and
otherwise inaccessible locations such as jungle areas, mountainous areas and
offshore platforms.
Deep Drilling. During the U.S. drilling boom of the late 1970s and early
1980s, the Company developed its specialty of deep and difficult drilling,
primarily in the Anadarko Basin of Western Oklahoma and the Overthrust Region in
the Rocky Mountains. The majority of the expansion of Parker's domestic fleet
was built around this deep gas drilling. Parker's largest drilling rig is rated
in excess of 35,000 feet.
During the last several years, drilling activity has shifted from domestic
deep gas drilling to international deep oil and gas drilling. While
international deep drilling is generally in the range of 15,000 feet to 20,000
feet as opposed to the domestic deep drilling which often exceeds 20,000 feet,
Parker has benefitted in the international arena from the development of this
expertise, particularly in the deep drilling markets of the Cusiana and Cupiagua
fields of Colombia and in northern Argentina.
Arctic Drilling. The Company has been one of the pioneers in arctic
drilling conditions and continues to offer new technology to meet the demand for
increased drilling in an ecologically sensitive manner. Parker's most recent
development has been the introduction of a self-contained mobile drilling unit
capable of being moved in one unit by giant "crawlers" similar to the system
used to move rocket thrusters for the space program. The environmentally
sensitive rig also has a complete closed-loop mud system and cuttings processing
system that eliminate the need for mud pits.
Geothermal Drilling. The Company also has developed expertise in the area
of geothermal drilling. Geothermal operations involve drilling into a pocket of
geothermal energy, tapping the source of this energy in the form of steam, hot
water or hot rocks and converting this heat into usable forms of energy. The
market for geothermal drilling is expanding into several areas of the world,
including the Philippines, New Zealand and Indonesia, as various countries elect
to access this alternative form of energy.
RENTAL TOOLS
Quail, based in New Iberia, Louisiana, is a provider of premium rental
tools used for land and offshore oil and gas drilling and workover activities.
Approximately 70% of Quail's equipment is utilized in offshore and coastal water
operations. Since its inception in 1978, Quail's principal customers have been
major and independent oil and gas exploration and production companies.
Quail rents specialized equipment utilized in difficult well drilling and
production and workover applications. Quail offers a full line of drill pipe,
drill collars, tubing, high- and low-pressure blowout preventers, choke
manifolds, casing scrapers and cement and junk mills. During fiscal 1997, Quail
entered into a contract with a major oil company to be its preferred provider of
rental tools to the land and offshore Texas markets. The Company expects to open
prior to calendar year-end a new rental tool facility in Victoria, Texas, in
order to service the increasing demand for tools in that region. Approximately
60% of Quail's revenues are realized from rentals for production and workover
activities.
The rental tool industry is currently experiencing increasing demand due to
the trend toward outsourcing by oil companies of noncore equipment and services
and the significant increase in drilling activity in the Gulf of Mexico. In
recent years, major and independent oil companies have liquidated certain
ancillary drilling equipment in an effort to improve drilling efficiencies and
returns on drilling programs. In addition, drilling activity has increased
substantially in the Gulf of Mexico, causing an increase in dayrates for
drilling rigs and a further increase in the demand for rental tools. The Company
believes that Quail will benefit from such trends.
During the past three years, Quail has experienced significant growth in
revenue and earnings due in general to the growth trends in the oil and gas
industry and specifically to the increased production and drilling activity in
the Gulf of Mexico and the movement within the industry towards fewer or single
source vendors. Quail derives equipment rental revenue primarily from the daily
rental charges for its tools, pipe, and related equipment and to a lesser extent
by charging customers for ancillary parts and repairs, transportation of the
rental items to the customer's location, inspection of rental items as specified
by the customer, items its sub-rents from other rental tool companies, the
disposal of waste removed from the rental items after their use, and
36
<PAGE> 38
the cost of rental items lost or damaged beyond repair. The operating costs
associated with Quail's rentals consist primarily of expenses associated with
depreciation, transportation, inspection, maintenance and repair, and related
direct overhead.
COMPETITION
The contract drilling industry is a competitive and cyclical business
characterized by high capital and maintenance costs. See "Risk
Factors -- Competition."
Demand in the offshore drilling markets serviced by the Company has
significantly improved from previous years. In the Gulf of Mexico barge drilling
and workover markets, the Company competes primarily with Falcon Drilling.
However, a few small contractors remain, principally in the barge workover
market.
The land drilling market is generally more competitive than the offshore
market due to the larger number of rigs and companies. Drilling contracts are
generally awarded on a competitive bid basis and, while an operator may consider
factors such as quality of service and type and location of equipment as well as
the ability to provide ancillary services, price and availability of equipment
are significant factors in determining which contractor is awarded a job. In
international markets, experience in operating in certain environments and
customer alliances have also been factors in the selection of the Company in
certain cases, as well as the Company's patented drilling equipment for remote
drilling projects. The Company believes that the market for land drilling
contracts will continue to be competitive for the foreseeable future. Certain of
the Company's competitors have greater financial resources than the Company,
which may enable them to better withstand industry downturns, to compete more
effectively on the basis of price, to build new rigs or to acquire existing
rigs.
Management believes that Quail is one of the four leading rental tool
companies in the offshore Gulf of Mexico. A number of Quail's competitors in the
Gulf of Mexico and in the Gulf Coast land markets are substantially larger than,
and have greater financial resources than, Quail.
CUSTOMERS AND DRILLING CONTRACTS
The Company believes it has developed an international reputation for
providing efficient, quality drilling services. A key for advancing the
Company's business strategy is maintaining and developing relationships and
strategic alliances with its customers. An increasing number of the Company's
customers have been seeking to establish exploration or development drilling
programs based on partnering relationships or alliances with a limited number of
preferred drilling contractors. Such relationships or alliances can result in
longer term work and higher efficiencies that increase profitability for
drilling contractors at a lower overall well cost for oil companies. The Company
is currently a preferred contractor for operators in certain domestic and
international locations, which management believes is a result of the Company's
quality, service and experience.
The Company's drilling rigs are generally operated under individual dayrate
contracts. Drilling contracts generally cover either the drilling of a specified
well or wells for a stated term. Historically, most domestic contracts have been
on a well-to-well basis while contracts in the international markets frequently
are offered on a term basis. Because the Company focuses on drilling deep and
difficult wells in both domestic and international markets, contracts typically
last longer than 90 days. Certain of Parker's contracts in Colombia have
three-year terms with early termination penalties. Mallard's contracts in
Nigeria have two- to three-year stated terms but provide no contractual
penalties for early termination.
The Company's drilling customer base consists of major, independent and
foreign national oil and gas companies. The Company's two largest customers
accounted for approximately 19% and 18% of total revenues for fiscal year 1996
and its largest customer accounted for approximately 13% of total revenues for
fiscal year 1997.
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<PAGE> 39
LEGAL PROCEEDINGS
The Company is a party to certain legal proceedings that have resulted from
the ordinary conduct of its business. In the opinion of the Company's
management, none of these proceedings is expected to have a material adverse
effect on the Company.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
The U.S. Gulf Coast market, and particularly the shallow water areas where
the Company's contract drilling service operations are concentrated, are
ecologically sensitive. As a result, environmental issues have led to higher
drilling costs, a more difficult and lengthy well permitting process and, in
general, have adversely affected decisions of the oil companies to drill in
these areas. U.S. laws and regulations applicable to the Company's operations
include those controlling the discharge of materials into the environment,
requiring removal and cleanup of materials that may harm the environment, or
otherwise relating to the protection of the environment. The Company, as an
operator of drilling rigs in navigable U.S. waters and certain offshore areas,
may be liable for damages and costs incurred in connection with oil spills for
which it is held responsible, subject to certain limitations. An oil spill in a
wetland or inland waterway could produce substantial damage to the environment,
including wildlife and ground water. Laws and regulations protecting the
environment have become more stringent in recent years, and may, in certain
circumstances, impose strict liability, rendering a person liable for
environmental damage without regard to negligence or fault on the part of such
person. Such laws and regulations may expose the Company to liability for the
conduct of or conditions caused by others, or for acts of the Company which were
in compliance with all applicable laws at the time such acts were performed. The
application of these requirements or the adoption of the new requirements could
have a material adverse effect on the Company.
The drilling of oil and gas wells is subject to various federal, state,
local and foreign laws, rules and regulations. The Company, as an owner or
operator of both onshore and offshore facilities operating in or near waters of
the United States, may be liable for the costs of removal and damages arising
out of a pollution incident to the extent set forth in the Federal Water
Pollution Control Act, as amended by the Oil Pollution Act of 1990 ("OPA") and
the Outer Continental Shelf Lands Act. In addition, the Company may also be
subject to applicable state law and other civil claims arising out of any such
incident. Certain of the Company's facilities are also subject to regulations of
the Environmental Protection Agency ("EPA") that require the preparation and
implementation of spill prevention, control and countermeasure plans relating to
possible discharge of oil into navigable waters. Other regulations of the EPA
may require certain precautions in storing, handling and transporting hazardous
wastes. State statutory provisions relating to oil and natural gas generally
include requirements as to well spacing, waste prevention, production
limitations, pollution prevention and cleanup, obtaining drilling and dredging
permits and similar matters. The Company believes that it is in substantial
compliance with such laws, rules and regulations.
The OPA and regulations promulgated pursuant thereto impose a variety of
regulations on "responsible parties" related to the prevention of oil spills and
liability for damages resulting from such spills. A "responsible party" includes
the owner or operator of a facility or vessel, or the lessee or permittee of the
area in which an offshore facility is located. The OPA assigns liability to each
responsible party of oil removal costs and a variety of public and private
damages. While liability limits apply in some circumstances, a responsible party
for an Outer Continental Shelf facility must pay all spill removal costs
incurred by a federal, state or local government. The OPA establishes liability
limits (subject to indexing) for offshore drilling rigs. If functioning as an
offshore facility, the offshore drilling rigs are considered "tank vessels" for
spills of oil on or above the water surface, with liability limits of $1,200 per
gross ton or $10 million. To the extent damages and removal costs exceed this
amount, the offshore drilling rigs will be treated as an offshore facility and
the offshore lessee will be responsible up to higher liability limits for all
removal costs plus $75 million. A party cannot take advantage of liability
limits if the spill was caused by gross negligence or willful misconduct or
resulted from violation of a federal safety, construction or operating
regulation. If the party fails to report a spill or to cooperate fully in the
cleanup, liability limits likewise do not apply. Few defenses exist to the
liability imposed by the OPA. The OPA also imposes ongoing requirements on a
responsible party, including proof of financial responsibility (to cover at
least some costs in a potential spill) and preparation of an oil spill
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<PAGE> 40
contingency plan. Amendments to the OPA adopted earlier this year reduced the
amount of financial responsibility required for "offshore facilities" from $150
million to $35 million, but such amendments did not reduce the amount of
financial responsibility required for "tank vessels." Since the Company's
offshore drilling rigs are typically classified as tank vessels, the recent
amendments to the OPA are not expected to have a significant effect on the
Company's operations. A failure to comply with ongoing requirements or
inadequate cooperation in a spill may even subject a responsible party to civil
or criminal enforcement actions.
In addition, the Outer Continental Shelf Lands Act authorized regulations
relating to safety and environmental protection applicable to lessees and
permittees operating on the Outer Continental Shelf. Specific design and
operational standards may apply to Outer Continental Shelf vessels, rigs,
platforms, vehicles and structures. Violations of environmental-related lease
conditions or regulations issues pursuant to the Outer Continental Shelf Lands
Act can result in substantial civil and criminal penalties as well as potential
court injunctions curtailing operations and the cancellation of leases. Such
enforcement liabilities can result from either governmental or citizen
prosecution.
All of the Company's operating domestic barge drilling rigs have zero
discharge capabilities as required by law. In addition, in recognition of
environmental concerns regarding dredging of inland waters and permitting
requirements, the Company conducts negligible dredging operations and
approximately two-thirds of the Company's offshore drilling contracts involve
directional drilling, which minimizes the need for dredging. However, the
existence of such laws and regulations has had and will continue to have a
restrictive effect on the Company and its customers.
The drilling industry is dependent on the demand for services from the oil
and gas exploration and development industry and, accordingly, is affected by
changes in laws relating to the energy business. The Company's business is
affected generally by political developments and by federal, state, local and
foreign laws and regulations that may relate directly to the oil and gas
industry. The adoption of laws and regulations, both domestic and foreign, that
curtail exploration and development drilling for oil and gas for economic,
environmental and other policy reasons may adversely affect the Company's
operations by limiting available drilling opportunities.
39
<PAGE> 41
MANAGEMENT
The following table sets forth certain information regarding the directors
and executive officers of the Company as of September 30, 1997.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert L. Parker..................................... 74 Chairman of the Board of Directors
Robert L. Parker Jr.................................. 48 President and Chief Executive Officer
James W. Linn........................................ 51 Executive Vice President and Chief
Operating Officer
James J. Davis....................................... 50 Senior Vice President - Finance and Chief
Financial Officer
Randy L. Ellis....................................... 45 Controller
Bernard J. Duroc-Danner.............................. 44 Director
David L. Fist........................................ 66 Director
Earnest F. Gloyna.................................... 76 Director
R. Rudolph Reinfrank................................. 42 Director
</TABLE>
The following is a brief description of the background and principal
occupation of each director and executive officer:
Robert L. Parker, Chairman of the Board, has been a Director since 1954 and
served as President of the Company from 1954 until October 1977, when he was
elected Chairman and Chief Executive Officer. Since December 1991, he has
retained the position of Chairman. He serves on the board of directors of MAPCO
Inc., a diversified energy company; Clayton Williams Energy, Inc., a company
engaged in exploration and production of oil and natural gas; and BOK Financial
Corporation, a bank holding company organized under the laws of the State of
Oklahoma. Mr. Parker also serves on the board of directors of the American
Petroleum Institute and the National Petroleum Council. He is the father of
Robert L. Parker Jr.
Robert L. Parker Jr. has been a Director since 1973 and is President and
Chief Executive Officer. He joined the Company in 1973 and was elected President
and Chief Operating Officer in 1977 and Chief Executive Officer in December
1991. He was elected Vice President in 1973 and Executive Vice President in
1976. He currently serves on the board of directors of Alaska Air Group, Inc.,
the holding company for Alaska Airlines and Horizon Air Industries. He is the
son of Robert L. Parker.
James W. Linn has been a Director since 1986, is Executive Vice President
and Chief Operating Officer of the Company and has general charge of the
Company's business affairs and its officers. He joined the Company in 1973 in
the Company's international department. He then served in the Company's domestic
operations, being named northern U.S. district manager in 1976. Mr. Linn was
elected Vice President of U.S. and Canada operations in 1979, was promoted to
Senior Vice President in September 1981 and was elected to his present position
in December 1991.
James J. Davis serves as Senior Vice President-Finance and Chief Financial
Officer. He joined Parker in November 1991 as Vice President-Finance and Chief
Financial Officer and was promoted to his current position in December 1996.
From 1986 through 1991, Mr. Davis was vice president and treasurer of MAPCO
Inc., a diversified energy company with interests in natural gas liquids
marketing and transportation, oil refining and retail motor fuel marketing. He
serves as a member of the board of directors of Dollar Rent A Car Finance
Company.
Randy L. Ellis was elected Corporate Controller in June 1991. He joined
Parker in 1979 as general accounting supervisor and was named manager of general
accounting in May 1983.
Bernard J. Duroc-Danner has been a Director since November 1996. Mr.
Duroc-Danner has been President, Chief Executive Officer and a director of EVI,
Inc., the former parent company of Mallard, for more than the past five years.
EVI, Inc. is an international manufacturer and supplier of oilfield equipment.
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<PAGE> 42
Mr. Duroc-Danner is also a director of Dailey International Inc., a provider of
services and equipment to the oil and gas industry.
David L. Fist, a Director since 1986, is a member of the law firm of
Rosenstein, Fist & Ringold, Tulsa, Oklahoma, having been associated with the
firm since 1955. He serves as a director of Peoples State Bank and Alliance
Business Investment Company, a federally licensed small business investment
company.
Earnest F. Gloyna has been a Director since 1978 and is presently a chaired
professor in Environmental Engineering at the University of Texas at Austin. He
served as dean, College of Engineering, from April 1970 to August 1987. He is
also a consultant in environmental engineering through Earnest F. Gloyna
Enterprises, and is president of Gloyna Properties, Inc. Dr. Gloyna serves as a
member of the board of trustees of Southwest Research Institute, a nonprofit
research institute that does contract research work for government and industry.
R. Rudolph Reinfrank has been a Director since 1993. Since January 1, 1997,
he has been Managing General Partner of Coldstream Capital LLC, Los Angeles,
California. From May 1993 to December 1996, Mr. Reinfrank was a managing
director of the Davis Companies, the holding company for the Marvin Davis
family. From January 1, 1988 through June 30, 1993, Mr. Reinfrank was executive
vice president of Shamrock Holdings, Inc., the holding company for the Roy E.
Disney family. From January 1990 through December 1992, Mr. Reinfrank also
served as managing director of Trefoil Investors, Inc. and Shamrock Capital
Advisors, Inc., the general partner and management services company
respectively, for Trefoil Capital Investors, L.P.
41
<PAGE> 43
DESCRIPTION OF CAPITAL STOCK
The Company has 121,942,000 authorized shares of stock, consisting of (a)
120,000,000 shares of Common Stock, having a par value of $.16 2/3 per share,
and (b) 1,942,000 shares of Preferred Stock, having a par value of $1.00 per
share. The summary description of the capital stock of the Company contained
herein is necessarily general and reference should be made in each case to the
Company's Restated Certificate of Incorporation (the "Company's Charter"), and
By-Laws, which are exhibits to the Registration Statement of which this
Prospectus is a part.
COMMON STOCK
As of August 31, 1997, there were 76,679,669 shares of Common Stock
outstanding. All of such outstanding shares of Common Stock are, and the shares
of Common Stock offered hereby will be upon issuance, fully paid and
nonassessable. Each share of Common Stock has an equal and ratable right to
receive dividends when, as and if declared by the Board of Directors of the
Company out of assets legally available therefor and subject to the dividend
obligations of the Company to the holders of any Preferred Stock then
outstanding. The Company is subject to certain restrictions on the payment of
dividends on, and the repurchase or redemption of, the Common Stock under the
provisions of the Senior Credit Facility and the indenture for the 9 3/4% Senior
Notes. See "Price Range of Common Stock and Dividends."
In the event of a liquidation, dissolution or winding up of the Company,
the holders of Common Stock are entitled to share equally and ratably in the
assets available for distribution after payment of all liabilities, and subject
to any prior rights of any holders of Preferred Stock that at the time may be
outstanding.
The holders of Common Stock have no preemptive, subscription, conversion or
redemption rights, and are not subject to further calls or assessments by the
Company. There are no sinking fund provisions applicable to the Common Stock.
Each share of Common Stock is entitled to one vote in the election of directors
and on all other matters submitted to a vote of stockholders. Holders of Common
Stock have no right to cumulate their votes in the election of directors.
PREFERRED STOCK
Under the Company's Charter, the Board of Directors is authorized, without
further stockholder action, to provide for the issuance of up to 1,942,000
shares of Preferred Stock in one or more series, with such voting powers, or
without voting powers, and with such designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, as shall be set forth in resolutions providing for the
issuance thereof adopted by the Board of Directors. As of the date of this
Prospectus, no shares of Preferred Stock are outstanding or designated as to
series. Preferred Stock may be issued from time to time in one or more series,
and the Board of Directors, without further approval of the stockholders, is
authorized to fix the designations, voting powers, dividend rates, conversion
rights, redemption rights, liquidation price and other rights, and the
qualifications, limitations or restrictions thereof. It is not possible to state
the actual effect of the authorization and issuance of a new series of Preferred
Stock upon the rights of holders of the Common Stock unless and until the Board
of Directors determines the attributes of such new series of Preferred Stock and
the specific rights of its holders. Such effects might include, however, (i)
restrictions on dividends on Common Stock if dividends on such new series of
Preferred Stock have not been paid; (ii) dilution of the voting power of Common
Stock to the extent that such new series of Preferred Stock has voting rights,
or to the extent that any such new series of Preferred Stock is convertible into
Common Stock; (iii) dilution of the equity interest of Common Stock; and (iv)
limitation on the right of holders of Common Stock to share in the Company's
assets upon liquidation until satisfaction of any liquidation preference
attributable to such new series of Preferred Stock. While the ability of the
Company to issue Preferred Stock provides flexibility in connection with
possible acquisitions and other corporate purposes, its issuance could be used
to impede an attempt by a third party to acquire a majority of the outstanding
voting stock of the Company.
POSSIBLE ANTI-TAKEOVER PROVISIONS
The Company's Charter contains certain provisions that might be
characterized as anti-takeover provisions. Such provisions may render more
difficult certain possible takeover proposals to acquire control of the Company
and make removal of management of the Company more difficult.
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<PAGE> 44
The Company's By-Laws provide for the Board of Directors to be divided into
three classes of directors serving staggered three-year terms, with each class
as nearly equal in number as possible. Any stockholder wishing to submit a
nomination to the Board of Directors must follow certain procedures outlined in
the Company's By-Laws. In addition, the By-Laws require written application by
the holders of 75% of the Company's outstanding voting stock to call a special
stockholders' meeting.
Certain outstanding contracts binding on the Company with respect to
certain employees may render more difficult the removal of management or
attempts to acquire control of the Company.
As described above, the Company's Charter authorizes a class of
undesignated Preferred Stock consisting of 1,942,000 shares; Preferred Stock may
be issued from time to time in one or more series; and the Board of Directors,
without further approval of the stockholders, is authorized to fix the
designations, preferences, rights, qualifications, limitations and restrictions
applicable to each series of Preferred Stock. One possible result of authorizing
the Board of Directors to determine such designations, preferences, rights,
qualifications, limitations and restrictions is to eliminate delays associated
with a stockholder vote on specific issuance. The issuance of Preferred Stock,
while providing flexibility in connection with possible acquisitions and other
corporate purposes, could among other things, adversely affect the voting power
of the holders of Common Stock and, under certain circumstances, make it more
difficult for a third party to gain control of the Company.
The Company is incorporated under the laws of State of Delaware. Section
203 of the Delaware General Corporation Law prevents an "interested stockholder"
(defined as a stockholder owning 15 percent or more of a corporation's voting
stock) from engaging in a business combination with such corporation for a
period of three years from the time such stockholder became an interested
stockholder unless (a) the corporation's board of directors had earlier approved
either the business combination or the transaction by which the stockholder
became an interested stockholder, or (b) upon attaining that status, the
interested stockholder had acquired at least 85 percent of the corporations's
voting stock (not counting shares owned by persons who are directors and also
officers), or (c) the business combination is later approved by the board of
directors and authorized by a vote of two-thirds of the stockholders (not
including the shares held by the interested stockholder). Since the Company has
not amended its Restated Certificate of Incorporation or By-Laws to exclude the
application of Section 203, such section does apply to the Company and thus may
inhibit an interested stockholder's ability to engage in a business combination
with the Company.
Certain affiliates of Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), one of the underwriters for this Offering, at October 17, 1997 held for
the benefit of various accounts and funds an aggregate of approximately
14,753,500 shares of Common Stock, or approximately 19.2% of the total
outstanding shares of Common Stock. Although a substantial portion of the shares
held by such affiliates are held for the accounts of persons unaffiliated with
DLJ and such affiliates of DLJ do not have a pecuniary interest in such shares
other than through the managerial relationship with respect to such shares, the
holding of such shares by such affiliates of DLJ could result in DLJ being
considered to be an interested stockholder or associate of an interested
stockholder for purposes of Section 203, which would prevent DLJ and its
affiliates from engaging in a business combination with the Company. The Company
and DLJ believe that a purchase of shares pursuant to an underwriting agreement
by an underwriter with the view to distribution, and not for its account or for
the account of any of its affiliates, is not the type of transaction intended to
be covered by Section 203. Nevertheless, DLJ and the Company have agreed that
DLJ will manage the underwriting but will not purchase any shares from the
Company pursuant to the Underwriting Agreement. In connection therewith, DLJ has
agreed with each of the three co-managers in the Offering to assume the economic
responsibility with regard to their pro-rata portion of the additional amount of
the shares that they agree to underwrite which would customarily be underwritten
by DLJ and, in exchange for DLJ assuming such economic responsibility, each of
the three co-managers will pay DLJ a fee equal to the amount of the underwriting
commission applicable to each such share.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Norwest Bank
Minnesota, N.A.
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<PAGE> 45
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement (the
"Underwriting Agreement"), the Underwriters named below (the "Underwriters")
have severally agreed to purchase from the Company the respective number of
shares of Common Stock set forth opposite their names below, at the public
offering price set forth on the cover page of this Prospectus, less the
underwriting discounts and commissions:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation......... *
Jefferies & Company, Inc....................................
Bear, Stearns & Co. Inc.....................................
Prudential Securities Incorporated..........................
----------
Total............................................. 10,000,000
==========
</TABLE>
- ---------------
* Certain affiliates of DLJ at October 17, 1997 held for the benefit of various
accounts and funds an aggregate of approximately 14,753,500 shares of Common
Stock, or approximately 19.2% of the total outstanding shares of Common Stock.
As described under "Description of Capital Stock -- Possible Anti-Takeover
Provisions," because of this holding and the provisions of Section 203 of the
Delaware General Corporation Law relating to transactions between a Delaware
corporation and stockholders owning 15% or more of the corporation's voting
stock, DLJ will not purchase any shares from the Company pursuant to the
Underwriting Agreement, but it has agreed with each of the three co-managers
in the Offering to assume the economic responsibility with regard to their
pro-rata portion of the number of shares set forth opposite DLJ's name and, in
exchange for DLJ assuming such economic responsibility, each of the three co-
managers will pay DLJ a fee equal to the amount of the underwriting commission
applicable to each such share. See "Description of Capital Stock -- Possible
Anti-Takeover Provisions."
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock are
subject to approval of certain legal matters by counsel and to certain other
conditions. If any of the shares of Common Stock are purchased by the
Underwriters pursuant to the Underwriting Agreement, all such shares of Common
Stock (other than those covered by the over-allotment option described below)
must be purchased.
The Underwriters initially propose to offer the Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain dealers (who may include
the Underwriters) at such price, less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may re-allow to certain
other dealers, a concession not in excess of $ per share. After the initial
offering of the Common Stock, the public offering price and other selling terms
may be changed by the Underwriters. The Underwriters do not intend to confirm
sales to any accounts over which they exercise discretionary authority.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.
The Company has granted to the Underwriters an option to purchase up to an
aggregate of 1,500,000 additional shares of Common Stock, at the initial public
offering price less underwriting discounts and commissions, solely to cover
over-allotments. Such option may be exercised at any time until 30 days after
the date of this Prospectus. To the extent that the Underwriters exercise such
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase a number of option shares proportionate to such
Underwriter's initial commitment as indicated in the preceding table.
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<PAGE> 46
Other than in the United States, no action has been taken by the Company or
the Underwriters that would permit a public offering of the Common Stock in any
jurisdiction where action for that purpose is required. The Common Stock offered
hereby may not be offered or sold, directly or indirectly, nor may this
Prospectus or any other offering material or advertisements in connection with
the offer and sale of the Common Stock be distributed or published in any
jurisdiction, except under circumstances that will result in compliance with the
applicable rules and regulations of such jurisdiction. Persons into whose
possession this Prospectus comes are advised to inform themselves about and to
observe any restrictions relating to the Offering of the Common Stock and the
distribution of this Prospectus. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any of the shares of Common Stock
offered hereby in any jurisdiction in which such an offer or a solicitation is
unlawful.
In connection with the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot the Offering,
creating a syndicate short position. The Underwriters may bid for and purchase
Common Stock in the open market to cover such syndicate short position or to
stabilize the price of the Common Stock. These activities may stabilize or
maintain the market price of the Common Stock above independent market levels.
The Underwriters are not required to engage in these activities, and may end
either of these activities at any time.
The Company, and its directors and executive officers, have each agreed
that, subject to certain exceptions, during the period beginning on the date of
this Prospectus and continuing to and including the 90th day after such date,
they will not, directly offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock, any securities convertible into or exercisable or
exchangeable for shares of Common Stock or any rights to acquire shares of
Common Stock without the written consent of DLJ and Jefferies & Company, Inc.
("Jefferies").
In July 1997, the four firms acting as Underwriters of the Common Stock
offered hereby also acted as underwriters of the Company's offering of
Convertible Notes and received usual and customary fees. Jefferies has provided
investment banking and financial advisory services to the Company in the past,
including acting as lead managing underwriter in the Company's July 1996 and
April 1997 offerings of Common Stock and placement agent in the Company's
offering of 9 3/4% Senior Notes in November 1996 and rendering a fairness
opinion to the Company's Board of Directors in connection with the Mallard
Acquisition. In each case, Jefferies received usual and customary fees.
Jefferies is providing financial advisory services to Hercules in connection
with the Hercules Acquisition, for which Jefferies will receive usual and
customary fees. Prudential Securities Incorporated acted as co-manager in the
Company's July 1996 and April 1997 offerings of Common Stock and received usual
and customary fees.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Vinson & Elkins L.L.P., Houston, Texas, and for the Underwriters by
Fulbright & Jaworski L.L.P., Houston, Texas.
EXPERTS
The consolidated balance sheets as of August 31, 1997 and 1996, and the
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended August 31, 1997, incorporated by
reference in this Prospectus, have been incorporated by reference in reliance on
the report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in auditing and accounting.
The combined balance sheets of Mallard Bay Drilling Division of EVI, Inc.
as of December 31, 1995 and 1994 and the combined statement of income, equity
investments and cash flows for each of the three years in the period ended
December 31, 1995, incorporated by reference in this Prospectus, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
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<PAGE> 47
The balance sheets of Quail Tools, Inc. as of December 31, 1995 and 1994
and the related statements of earnings and retained earnings and cash flows for
each of the years in the three-year period ended December 31, 1995, have been
incorporated by reference in this Prospectus in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated by
reference, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP refers to the adoption in 1994 of
the method of accounting for certain investments in debt and equity securities
prescribed by Statement of Financial Accounting Standards No. 115.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports, proxy and information
statements and other information with the Commission. Such reports, proxy and
information statements and other information can be inspected and copied at the
public reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: Seven World Trade Center, Suite 1300, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials can be obtained by mail from the
Public Reference Section of the Commission, at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. In addition,
reports, proxy statements and other information concerning the Company can be
inspected at the New York Stock Exchange, 20 Broad Street, New York, New York
10005, on which exchange the Common Stock is listed.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the Securities Act.
This Prospectus omits certain of the information contained in the Registration
Statement, and reference is hereby made to the Registration Statement for
further information with respect to the Company and the securities offered
hereby. Any statements contained herein concerning the provisions of any
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission are not necessarily complete, and in each instance reference
is made to the copy of such document so filed. Each such statement is qualified
in its entirety by such reference.
46
<PAGE> 48
[PHOTO]
Left:
The Company's rental tool operations
supply drill pipe, drill collars and
other specialized equipment utilized
in drilling and production
applications, primarily in the Gulf of
Mexico.
[PHOTO]
Right:
The Company operates 21
helicopter-transportable land rigs in
remote regions around the world.
<PAGE> 49
=========================================================
NO DEALER, SALESMAN OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE NOTES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Incorporation of Certain Documents by
Reference............................. 3
Prospectus Summary...................... 4
Disclosure Regarding Forward-Looking
Statements............................ 10
Risk Factors............................ 10
Hercules Acquisition.................... 14
Use of Proceeds......................... 14
Capitalization.......................... 15
Price Range of Common Stock and
Dividends............................. 16
Unaudited Pro Forma Combined Financial
Statements............................ 17
Selected Consolidated Financial Data.... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 23
Business................................ 28
Management.............................. 40
Description of Capital Stock............ 42
Underwriting............................ 44
Legal Matters........................... 45
Experts................................. 45
Available Information................... 46
</TABLE>
=========================================================
=========================================================
10,000,000 SHARES
[PARKER DRILLING LOGO]
PARKER DRILLING
COMPANY
COMMON STOCK
---------------------
PROSPECTUS
---------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
JEFFERIES & COMPANY, INC.
BEAR, STEARNS & CO. INC.
PRUDENTIAL SECURITIES INCORPORATED
, 1997
=========================================================
<PAGE> 50
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses payable by the Company in
connection with the issuance and distribution of the shares of Common Stock
registered hereby, other than underwriting discounts and commissions. All the
amounts shown are estimates, except the registration and NASD filing fees.
<TABLE>
<S> <C>
Registration fee............................................ $ 56,107
NASD filing fee............................................. 19,015
Fees and expenses of accountants............................ 50,000
Fees and expenses of legal counsel of the Company........... 75,000
Printing and engraving expenses............................. 125,000
Transfer agent and registrar fees and expenses.............. 5,000
Miscellaneous............................................... 69,878
--------
Total............................................. $400,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's By-Laws provide that each person who was or is made a party
to, or is involved in, any action, suit or proceeding by reason of the fact that
he or she was a director or officer of the Company (or was serving at the
request of the Company as a director, officer, employee or agent for another
entity) will be indemnified and held harmless by the Company, to the full extent
authorized by the Delaware General Corporation Law.
Under Section 145 of the Delaware General Corporation Law, a corporation
may indemnify a director, officer, employee or agent of the corporation against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. In the case of an action brought by or in the right of a corporation,
the corporation may indemnify a director, officer, employee or agent of the
corporation against expenses (including attorneys' fees) actually and reasonably
incurred by him or her if he or she acted in good faith and in a manner he or
she reasonably believed to be in the best interests of the corporation, except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the corporation
unless a court finds that, in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as the
court shall deem proper.
The Company's Restated Certificate of Incorporation provides that to the
fullest extent permitted by Delaware General Corporation Law as the same exists
or may hereafter be amended, a director of the Company shall not be liable to
the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director. The Delaware General Corporation Law permits Delaware
corporations to include in their certificates of incorporation a provision
eliminating or limiting director liability for monetary damages arising from
breaches of their fiduciary duty. The only limitations imposed under the statute
are that the provision may not eliminate or limit a director's liability for (i)
breaches of the director's duty of loyalty to the corporation or its
stockholders, (ii) acts or omissions not in good faith or involving intentional
misconduct or known violations of law, (iii) the payment of unlawful dividends
or unlawful stock purchases or redemptions, or (iv) transactions in which the
director received an improper personal benefit.
The Company is insured against liabilities which it may incur by reason of
its indemnification of officers and directors in accordance with its By-Laws. In
addition, directors and officers are insured, at the Company's
II-1
<PAGE> 51
expense, against certain liabilities which might arise out of their employment
and are not subject to indemnification under the By-Laws.
The foregoing summaries are necessarily subject to the complete text of the
statute, Restated Certificate of Incorporation, By-Laws and agreements referred
to above and are qualified in their entirety by reference thereto.
ITEM 16. EXHIBITS.
The following documents are filed as exhibits to this Registration
Statement, including those exhibits incorporated herein by reference to a prior
filing of the Company under the Securities Act or the Exchange Act as indicated
in parentheses:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBITS
----------- --------
<C> <S>
*1.1 -- Form of Underwriting Agreement
2.1 -- Stock Purchase Agreement dated May 9, 1997 by and among
the Company, Parker Drilling Offshore Company and
Trenergy (Malaysia) BHD (incorporated by reference to
Exhibit 10(n) to the Company's Quarterly Report on Form
10-Q for the three months ended May 31, 1997)
2.2 -- Stock Purchase Agreement dated May 9, 1997 by and among
the Company, Parker Drilling Offshore Company and Rashid
& Lee Nominees SDN BHD (incorporated by reference to
Exhibit 10(o) to the Company's Quarterly Report on Form
10-Q for the three months ended May 31, 1997)
4.1 -- Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 4.1 to Amendment
No. 1 to the Company's S-3 Registration Statement No.
333-22987)
4.2 -- Certificate of Retirement of the Company (incorporated by
reference to Exhibit 4.2 to Amendment No. 1 to the
Company's S-3 Registration Statement No. 333-22987)
4.3 -- By-Laws of the Company (incorporated by reference to
Exhibit 3(b) to Annual Report on Form 10-K for the year
ended August 31, 1992, as amended by Form 8 dated
February 18, 1993)
4.4 -- Indenture dated as of November 12, 1996 among the
Company, as issuer, certain Subsidiary Guarantors (as
defined therein) and Texas Commerce Bank National
Association, as trustee (incorporated by reference to
Exhibit 4.3 to the Company's S-4 Registration Statement
No. 333-19317)
4.5 -- Term Loan Agreement dated as of November 8, 1996 between
the Company and ING (U.S.) Capital Corporation
(incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q/A for the three
months ended November 30, 1996)
*5.1 -- Opinion of Vinson & Elkins L.L.P.
*23.1 -- Consent of Coopers & Lybrand L.L.P.
*23.2 -- Consent of Arthur Andersen LLP
*23.3 -- Consent of KPMG Peat Marwick LLP
23.4 -- Consent of Vinson & Elkins L.L.P. (included in Exhibit
5.1)
*24.1 -- Powers of Attorney
</TABLE>
- ------------
* Filed herewith
II-2
<PAGE> 52
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefits plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to any charter provision, by-law, contract, arrangement,
statute, or otherwise, the registrant has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such labilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted against the registrant by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
<PAGE> 53
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Tulsa, State of Oklahoma, on the 21st day of October,
1997.
PARKER DRILLING COMPANY
By /s/ ROBERT L. PARKER JR.
-----------------------------------
Robert L. Parker Jr.
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 21, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
(i) Principal executive officer:
/s/ ROBERT L. PARKER JR. President, Chief Executive Officer and
- ----------------------------------------------------- Director
Robert L. Parker Jr.
(ii) Principal financial officer:
/s/ JAMES J. DAVIS Senior Vice President -- Finance and Chief
- ----------------------------------------------------- Financial Officer
James J. Davis
(iii) Principal accounting officer:
/s/ RANDY L. ELLIS Corporate Controller
- -----------------------------------------------------
Randy L. Ellis
(iv) Directors:
- -----------------------------------------------------
Robert L. Parker
- -----------------------------------------------------
James W. Linn
- -----------------------------------------------------
Bernard Duroc-Danner
- -----------------------------------------------------
David L. Fist
- -----------------------------------------------------
Earnest F. Gloyna
- -----------------------------------------------------
R. Rudolph Reinfrank
*By: /s/ JAMES J. DAVIS
------------------------------------------------
(James J. Davis,
Attorney-in-Fact)
</TABLE>
II-4
<PAGE> 54
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
*1.1 -- Form of Underwriting Agreement
2.1 -- Stock Purchase Agreement dated May 9, 1997 by and among
the Company, Parker Drilling Offshore Company and
Trenergy (Malaysia) BHD (incorporated by reference to
Exhibit 10(n) to the Company's Quarterly Report on Form
10-Q for the three months ended May 31, 1997)
2.2 -- Stock Purchase Agreement dated May 9, 1997 by and among
the Company, Parker Drilling Offshore Company and Rashid
& Lee Nominees SDN BHD (incorporated by reference to
Exhibit 10(o) to the Company's Quarterly Report on Form
10-Q for the three months ended May 31, 1997)
4.1 -- Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 4.1 to Amendment
No. 1 to the Company's S-3 Registration Statement No.
333-22987)
4.2 -- Certificate of Retirement of the Company (incorporated by
reference to Exhibit 4.2 to Amendment No. 1 to the
Company's S-3 Registration Statement No. 333-22987)
4.3 -- By-Laws of the Company (incorporated by reference to
Exhibit 3(b) to Annual Report on Form 10-K for the year
ended August 31, 1992, as amended by Form 8 dated
February 18, 1993)
4.4 -- Indenture dated as of November 12, 1996 among the
Company, as issuer, certain Subsidiary Guarantors (as
defined therein) and Texas Commerce Bank National
Association, as trustee (incorporated by reference to
Exhibit 4.3 to the Company's S-4 Registration Statement
No. 333-19317)
4.5 -- Term Loan Agreement dated as of November 8, 1996 between
the Company and ING (U.S.) Capital Corporation
(incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q/A for the three
months ended November 30, 1996)
*5.1 -- Opinion of Vinson & Elkins L.L.P.
*23.1 -- Consent of Coopers & Lybrand L.L.P.
*23.2 -- Consent of Arthur Andersen LLP
*23.3 -- Consent of KPMG Peat Marwick LLP
23.4 -- Consent of Vinson & Elkins L.L.P. (included in Exhibit
5.1)
*24.1 -- Powers of Attorney
</TABLE>
- ------------
* Filed herewith
<PAGE> 1
EXHIBIT 1.1
10,000,000 Shares
PARKER DRILLING COMPANY
Common Stock
UNDERWRITING AGREEMENT
November ___, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
JEFFERIES & COMPANY, INC.
BEAR, STEARNS & CO. INC.
PRUDENTIAL SECURITIES INCORPORATED
As representatives of the
several Underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Parker Drilling Company, a Delaware corporation (the "COMPANY"),
proposes to issue and sell 10,000,000 shares (the "FIRM SHARES") of its common
stock, par value $.16 2/3 per share (the "COMMON STOCK") to the several
underwriters named in Schedule I hereto (the "UNDERWRITERS"). The Company also
proposes to issue and sell to the several Underwriters not more than an
additional 1,500,000 shares of its Common Stock (the "ADDITIONAL SHARES") if
requested by the Underwriters as provided in Section 2 hereof. The Firm Shares
and the Additional Shares are hereinafter referred to collectively as the
"SHARES".
SECTION 1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"COMMISSION") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "ACT"), a registration statement on Form S-3, including a
prospectus, relating to the Shares. The registration statement, as amended at
the time it became effective, including the information (if any) deemed to be
part of the registration statement at the time of effectiveness pursuant to
Rule 430A under the Act, is hereinafter referred to as the "REGISTRATION
STATEMENT"; and the prospectus in the form first used to confirm sales of
Shares is hereinafter referred to as the "PROSPECTUS". If the Company has filed
or is required pursuant to the terms hereof to file a registration statement
pursuant to Rule 462(b) under the Act registering additional shares of Common
Stock (a "RULE 462(b) REGISTRATION STATEMENT"), then, unless otherwise
specified, any reference herein to the term "Registration Statement" shall be
deemed to include such Rule 462(b) Registration Statement (including, in the
case of all references to the Registration Statement or the Prospectus,
documents incorporated therein by reference). The terms "SUPPLEMENT" and
"AMENDMENT" or "AMEND" as used in this Agreement with respect to the
Registration Statement or the Prospectus shall include all documents
subsequently filed
-1-
<PAGE> 2
by the Company with the Commission pursuant to the Securities Exchange Act of
1934, as amended, and the Rules and Regulations of the Commission thereunder
(collectively, the "EXCHANGE ACT") that are deemed to be incorporated by
reference in the Prospectus.
SECTION 2. Agreements to Sell and Purchase and Lock-Up Agreements. On
the basis of the representations and warranties contained in this Agreement,
and subject to its terms and conditions, the Company agrees to issue and sell,
and each Underwriter agrees, severally and not jointly, to purchase from the
Company at a price per Share of $______ (the "PURCHASE PRICE") the number of
Firm Shares set forth opposite the name of such Underwriter in Schedule I
hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the Additional Shares and the Underwriters shall have the right to
purchase, severally and not jointly, up to 1,500,000 Additional Shares from the
Company at the Purchase Price. Additional Shares may be purchased solely for
the purpose of covering over-allotments made in connection with the offering of
the Firm Shares. The Underwriters may exercise their right to purchase
Additional Shares in whole or in part from time to time by giving written
notice thereof to the Company within 30 days after the date of this Agreement.
You shall give any such notice on behalf of the Underwriters and such notice
shall specify the aggregate number of Additional Shares to be purchased
pursuant to such exercise and the date for payment and delivery thereof, which
date shall be a business day (i) no earlier than two business days after such
notice has been given (and, in any event, no earlier than the Closing Date (as
hereinafter defined)) and (ii) no later than ten business days after such
notice has been given. If any Additional Shares are to be purchased, each
Underwriter, severally and not jointly, agrees to purchase from the Company the
number of Additional Shares (subject to such adjustments to eliminate
fractional shares as you may determine) which bears the same proportion to the
total number of Additional Shares to be purchased from the Company as the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I bears to the total number of Firm Shares.
The Company hereby agrees not to (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
(ii) enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise), except to the Underwriters pursuant to this Agreement, for
a period of 90 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation and Jefferies &
Company, Inc. Notwithstanding the foregoing, during such period (i) the Company
may grant stock options pursuant to the Company's existing stock option plans
and (ii) the Company may issue shares of Common Stock upon the exercise of an
option or warrant or the conversion of a security outstanding on the date
hereof. The Company also agrees not to file any registration statement with
respect to any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock for a period of 90 days after the
date of the Prospectus without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation and Jefferies & Company, Inc. The Company
shall, prior to or concurrently with the execution of this Agreement, deliver
an agreement executed by each of the directors and officers of the Company to
the effect that such person will not, during the period commencing on the date
such person signs such agreement and ending 90 days after the date of the
Prospectus, without the prior written consent of Donaldson, Lufkin & Jenrette
Corporation and Jefferies & Company, Inc., (i) engage in any of the
transactions described in the first sentence of this paragraph or (ii) make any
demand for, or exercise any right with respect to, the registration of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock.
SECTION 3. Terms of Public Offering. The Company is advised by you
that the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the execution and delivery of this
Agreement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
-2-
<PAGE> 3
SECTION 4. Delivery and Payment. The Shares to be purchased by the
Underwriters hereunder shall be represented by one or more definitive global
securities in book-entry form which will be deposited by or on behalf of the
Company with The Depository Trust Company ("DTC") or its designated custodian.
The Company will deliver the Shares to Donaldson, Lufkin & Jenrette Securities
Corporation, for the account of each Underwriter, against payment by or on
behalf of such Underwriter to the Company of the Purchase Price therefor in
same day funds, by causing DTC to credit the Shares to the account of
Donaldson, Lufkin & Jenrette Securities Corporation at DTC. The time and date
of such delivery and payment shall be, with respect to the Firm Securities,
9:00 a.m., Eastern Time, on November __, 1997, or such other time and date as
the Underwriters and the Company may agree upon in writing and, with respect to
the Additional Shares, 9:00 a.m., Eastern Time, on the date specified by the
Underwriters in the written notice given by them of their election to purchase
such Additional Securities, or such other time and date as the Underwriters and
the Company may agree in writing. Such time and date for delivery of the Firm
Shares is herein called the "First Closing Date", such time and date for
delivery of the Additional Shares, if not the First Closing Date, is herein
called the "Second Closing Date", and each such time and date for delivery is
herein called a "Closing Date".
SECTION 5. Agreements of the Company. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm
such advice in writing, (i) of any request by the Commission for amendments to
the Registration Statement or amendments or supplements to the Prospectus or
for additional information, (ii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of the
suspension of qualification of the Shares for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purposes, (iii) when
any amendment to the Registration Statement becomes effective, (iv) if the
Company is required to file a Rule 462(b) Registration Statement after the
effectiveness of this Agreement, when the Rule 462(b) Registration Statement
has become effective and (v) of the happening of any event during the period
referred to in Section 5(d) below which makes any statement of a material fact
made in the Registration Statement or the Prospectus untrue or which requires
any additions to or changes in the Registration Statement or the Prospectus in
order to make the statements therein not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(b) To furnish you five signed copies of the Registration
Statement as first filed with the Commission and of each Amendment to it,
including all exhibits and documents incorporated therein by reference, and to
furnish to you and each Underwriter designated by you such number of conformed
copies of the Registration Statement as so filed and of each Amendment to it,
without exhibits but including documents incorporated therein by reference, as
you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which
shall be satisfactory to you, and to file the Prospectus in such form with the
Commission within the applicable period specified in Rule 424(b) under the Act;
during the period specified in Section 5(d) below, not to file any further
Amendment to the Registration Statement and not to make any Amendment or
Supplement to the Prospectus of which you shall not previously have been
advised or to which you shall reasonably object after being so advised; and,
during such period, to prepare and file with the Commission, promptly upon your
reasonable request, any Amendment to the Registration Statement or amendment or
Supplement to the Prospectus which may be necessary or advisable in connection
with the distribution of the Shares by you, and to use its best efforts to
cause any such Amendment to the Registration Statement to become promptly
effective.
(d) Prior to 10:00 A.M., New York City time, on the first business
day after the date of this Agreement and from time to time thereafter for such
period as in the opinion of counsel for the Underwriters a prospectus is
required by law to be delivered in connection with sales by an Underwriter
-3-
<PAGE> 4
or a dealer, to furnish in New York City to each Underwriter and any dealer as
many copies of the Prospectus (and of any amendment or supplement to the
Prospectus) and any documents incorporated therein by reference as such
Underwriter or dealer may reasonably request.
(e) If during the period specified in Section 5(d), any event
shall occur or condition shall exist as a result of which, in the reasonable
opinion of counsel for the Underwriters, it becomes necessary to amend or
supplement the Prospectus in order to make the statements therein, in the light
of the circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if, in the reasonable opinion of counsel for the Underwriters,
it is necessary to amend or supplement the Prospectus to comply with applicable
law, forthwith to prepare and file with the Commission an appropriate amendment
or supplement to the Prospectus so that the statements in the Prospectus, as so
amended or supplemented, will not in the light of the circumstances when it is
so delivered, be misleading, or so that the Prospectus will comply with
applicable law, and to furnish to each Underwriter and to any dealer as many
copies thereof as such Underwriter or dealer may reasonably request.
(f) Prior to any public offering of the Shares, to cooperate with
you and counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters and
by dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such registration or qualification in effect so
long as required for distribution of the Shares and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that the Company shall
not be required in connection therewith to qualify as a foreign corporation in
any jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation other
than as to matters and transactions relating to the Prospectus, the
Registration Statement, any preliminary prospectus or the offering or sale of
the Shares, in any jurisdiction in which it is not now so subject.
(g) To mail and make generally available to its stockholders as
soon as practicable an earnings statement covering the twelve-month period
ending November 30, 1998 that shall satisfy the provisions of Section 11(a) of
the Act, and to advise you in writing when such statement has been so made
available.
(h) During the period of three years after the date of this
Agreement, to furnish to you as soon as available copies of all reports or
other communications furnished to the record holders of Common Stock or
furnished to or filed with the Commission or any national securities exchange
on which any class of securities of the Company is listed and such other
publicly available information concerning the Company and its subsidiaries as
you may reasonably request.
(i) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel
and the Company's accountants in connection with the registration and delivery
of the Shares under the Act and all other fees and expenses in connection with
the preparation, printing, filing and distribution of the Registration
Statement (including financial statements and exhibits), any preliminary
prospectus, the Prospectus and all amendments and supplements to any of the
foregoing, including the mailing and delivering of copies thereof to the
Underwriters and dealers in the quantities specified herein, (ii) all costs and
expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii) all
costs of printing or producing this Agreement and any other agreements or
documents in connection with the offering, purchase, sale or delivery of the
Shares, (iv) all expenses in connection with the registration or qualification
of the Shares for offer and sale under the securities or Blue Sky laws of the
several states and all costs of printing or producing any Preliminary and
Supplemental Blue Sky Memoranda in connection therewith (including the filing
fees and fees and disbursements of counsel for the Underwriters in connection
with such registration or qualification and memoranda relating thereto), (v)
the filing fees and disbursements of counsel for the Underwriters in connection
with the review and clearance of the offering of the Shares by the National
Association of Securities Dealers, Inc., (vi) all fees and expenses in
connection with the preparation and
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filing of the registration statement on Form 8-A relating to the Common Stock
and all costs and expenses incident to the listing of the Shares on the New
York Stock Exchange (the "NYSE") (vii) the cost of printing certificates
representing the Shares, (viii) the costs and charges of any transfer agent,
registrar or depositary (including DTC), and (ix) all other costs and expenses
incident to the performance of the obligations of the Company hereunder for
which provision is not otherwise made in this Section.
(j) To use its best efforts to list, subject to notice of
issuance, the Shares on the NYSE and to maintain the listing of the Shares on
the NYSE for so long as the Shares are outstanding.
(k) To use its best efforts to do and perform all things required
or necessary to be done and performed under this Agreement by the Company prior
to the Closing Date and to satisfy all conditions precedent to the delivery of
the Shares.
(l) If the Registration Statement at the time of the effectiveness
of this Agreement does not cover all of the Shares, to file a Rule 462(b)
Registration Statement with the Commission registering the Shares not so
covered in compliance with Rule 462(b) by 10:00 P.M., New York City time, on
the date of this Agreement and to pay to the Commission the filing fee for such
Rule 462(b) Registration Statement at the time of the filing thereof or to give
irrevocable instructions for the payment of such fee pursuant to Rule 111(b)
under the Act.
SECTION 6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than
any Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement); any Rule 462(b) Registration Statement filed
after the effectiveness of this Agreement will be filed and become effective no
later than 10:00 P.M., New York City time, on the date of this Agreement; and
no stop order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or threatened by
the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to
the Exchange Act and incorporated by reference in the Prospectus complied or
will comply when so filed in all material respects with the Exchange Act, (ii)
the Registration Statement (other than any Rule 462(b) Registration Statement
to be filed by the Company after the effectiveness of this Agreement), when it
became effective, did not contain and, as amended, if applicable, will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (iii) the Registration Statement (other than any Rule 462(b)
Registration Statement to be filed by the Company after the effectiveness of
this Agreement) and the Prospectus comply and, as amended or supplemented, if
applicable, will comply in all material respects with the Act, (iv) if the
Company is required to file a Rule 462(b) Registration Statement after the
effectiveness of this Agreement, such Rule 462(b) Registration Statement and
any amendments thereto, when they become effective (A) will not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
and (B) will comply in all material respects with the Act and (v) the
Prospectus does not contain and, as amended or supplemented, if applicable,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph do not apply to
statements or omissions in the Registration Statement or the Prospectus based
upon information relating to any Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use therein.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations
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and warranties set forth in this paragraph do not apply to statements or
omissions in any preliminary prospectus based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use therein.
(d) Each of the Company and its significant subsidiaries (as
defined in the Act and listed in Schedule II hereto) has been duly
incorporated, organized or formed, as the case may be, is validly existing as a
corporation, limited liability company or limited liability partnership, as the
case may be, in good standing under the laws of its jurisdiction of
incorporation, organization or formation, as the case may be, and has the
corporate power and authority to carry on its business as described in the
Prospectus and to own, lease and operate its properties, and each is duly
qualified and is in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
business, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole ("MATERIAL ADVERSE EFFECT").
(e) There are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or liens granted or
issued by the Company or any of its subsidiaries relating to or entitling any
person to purchase or otherwise to acquire any shares of the capital stock of
the Company or any of its subsidiaries, except as otherwise disclosed in the
Registration Statement.
(f) The Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor as provided by this
Agreement, will be validly issued, fully paid and non-assessable, and the
issuance of such Shares will not be subject to any preemptive or similar
rights.
(g) All of the outstanding shares of capital stock of and all of
the interests in each of the Company's subsidiaries have been duly authorized
and validly issued and are fully paid and non-assessable, and are owned by the
Company, directly or indirectly through one or more subsidiaries, free and
clear of any security interest, claim, lien, encumbrance or adverse interest of
any nature (each, a "LIEN").
(h) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.
(i) The Company has entered into a stock purchase agreement
pursuant to which the Company will acquire, directly or indirectly, all of the
outstanding capital stock of Hercules Offshore Corporation and a stock purchase
agreement pursuant to which it will acquire, directly or indirectly, all of the
outstanding capital stock of Hercules Rig Corp. (collectively, the "ACQUISITION
AGREEMENTS"). Each of the Acquisition Agreements is in full force and effect,
has been duly and validly authorized, executed and delivered by the parties
thereto and is valid and binding on the parties thereto in accordance with its
terms and, none of the parties thereto is in default in any respect thereunder.
A complete and correct copy of each Acquisition Agreement, including all
exhibits, schedules and amendments thereto, has been delivered to you.
(j) Neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws or in default in the performance
of any obligation, agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or their respective property is bound, the violation or
default of which would have a Material Adverse Effect.
(k) The execution and delivery of this Agreement and the issuance
and delivery of the Shares by the Company, and the consummation of the
transactions contemplated hereby will not require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as have been obtained under the Act
and such as may be required under the securities or Blue Sky laws of the
various states or the notice of issuance requirements of the NYSE), (A)(i)
conflict with or constitute a breach of any of the terms or provisions of, or a
default under, the charter or by-laws or other organizational documents of the
Company or any of its subsidiaries or (ii) any
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<PAGE> 7
indenture, loan agreement, mortgage, lease or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries or their respective property is bound, (B) violate
or conflict with any applicable law or any rule, regulation, judgment, order or
decree of any court or any governmental body or agency having jurisdiction over
the Company, any of its subsidiaries or their respective property or (C) result
in the suspension, termination or revocation of any Authorization (as defined
below) of the Company or any of its subsidiaries or any other impairment of the
rights of the holder of any such Authorization ( in the case of (A)(ii), (B) or
(C), where such conflict, breach, default violation, imposition, suspension,
termination or revocation would have a Material Adverse Effect).
(l) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is or could be a
party or to which any of their respective property is or could be subject that
are required to be described in the Registration Statement or the Prospectus
and are not so described; nor are there any contracts or other documents that
are required to be described in the Registration Statement or the Prospectus or
to be filed as exhibits to the Registration Statement that are not so described
or filed as required.
(m) Neither the Company nor any of its subsidiaries has violated
any foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS") or any
provisions of the Employee Retirement Income Security Act of 1974, as amended,
or the rules and regulations promulgated thereunder, except for such violations
which, singly or in the aggregate, would not have a Material Adverse Effect.
(n) Each of the Company and its subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other approvals
(each, an "AUTHORIZATION") of, and has made all filings with and notices to,
all governmental or regulatory authorities and self-regulatory organizations
and all courts and other tribunals, including, without limitation, under any
applicable Environmental Laws, as are necessary to own, lease, license and
operate its respective properties and to conduct its business, except where the
failure to have any such Authorization or to make any such filing or notice
would not, singly or in the aggregate, have a Material Adverse Effect. Each
such Authorization is valid and in full force and effect and each of the
Company and its subsidiaries is in compliance with all the terms and conditions
thereof and with the rules and regulations of the authorities and governing
bodies having jurisdiction with respect thereto; and no event has occurred
(including, without limitation, the receipt of any notice from any authority or
governing body) which allows or, after notice or lapse of time or both, would
allow, revocation, suspension or termination of any such Authorization or
results or, after notice or lapse of time or both, would result in any other
impairment of the rights of the holder of any such Authorization; except where
such failure to be valid and in full force and effect or to be in compliance,
the occurrence of any such event or the presence of any such restriction would
not, singly or in the aggregate, have a Material Adverse Effect.
(o) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any Authorization, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a Material Adverse Effect.
(p) This Agreement has been duly authorized, executed and
delivered by the Company.
(q) Coopers & Lybrand L.L.P., Arthur Andersen LLP and KPMG Peat
Marwick LLP are independent public accountants with respect to the Company and
its subsidiaries as required by the Act.
(r) The consolidated financial statements, together with related
schedules and notes forming part of or incorporated by reference in the
Registration Statement and the Prospectus (and any Amendment or Supplement
thereto), present fairly the consolidated financial position, results of
operations and cash flows of the Company and its subsidiaries on the basis
stated therein at the
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<PAGE> 8
respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved, except as disclosed therein; the supporting schedules, if
any, included in the Registration Statement present fairly in accordance with
generally accepted accounting principles the information required to be stated
therein; and the other financial and statistical information and data set forth
in the Registration Statement and the Prospectus (and any amendment or
supplement thereto) are, in all material respects, accurately presented and
prepared on a basis consistent with such financial statements and the books and
records of the Company. The selected financial information included in the
Registration Statement and the Prospectus presents fairly the information shown
therein and has been compiled on a basis consistent with that of the audited
financial statements of the Company included therein. The pro forma financial
information in the Registration Statement and the Prospectus complies in all
material respects with the applicable accounting requirements of Article 11 of
Regulation S-X promulgated by the Commission and presents fairly in all
material respects the information shown therein; the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein. No other financial statements or schedules of the Company and its
subsidiaries are required by the Exchange Act or the Act to be included or
incorporated by reference in the Registration Statement or Prospectus.
(s) The Company is not and, after giving effect to the offering
and sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be, an "investment company" as such term is defined
in the Investment Company Act of 1940, as amended.
(t) There are no contracts, agreements or understandings between
the Company and any person granting such person the right to require the
Company to file a registration statement under the Act with respect to any
securities of the Company or to require the Company to include such securities
with the Shares registered pursuant to the Registration Statement.
(u) Since the respective dates as of which information is given in
the Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement),
(i) there has not occurred any material adverse change or any development
involving a prospective material adverse change in the condition, financial or
otherwise, or the earnings, business, management or operations of the Company
and its subsidiaries, taken as a whole, (ii) there has not been any material
adverse change or any development involving a prospective material adverse
change in the capital stock or in the long-term debt of the Company or any of
its subsidiaries and (iii) neither the Company nor any of its subsidiaries has
incurred any material liability or obligation, direct or contingent for
borrowed money.
(v) The Company has not taken, directly or indirectly, any action
designed to cause or result in or that has constituted or that might reasonably
be expected to constitute, the stabilization or manipulation of the price of
the Common Stock to facilitate the sale or resale of shares of Common Stock.
SECTION 7. Indemnification. (a) The Company agrees to indemnify and
hold harmless each Underwriter, its directors, its officers and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and judgments (including, without limitation, any legal or
other expenses incurred in connection with investigating or defending any
matter, including any action, that could give rise to any such losses, claims,
damages, liabilities or judgments) caused by any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement (or
any amendment thereto), the Prospectus (or any amendment or supplement thereto)
or any preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished in writing to the Company by
such Underwriter through you expressly for use therein.
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<PAGE> 9
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
to the same extent as the foregoing indemnity from the Company to such
Underwriter but only with reference to information relating to such Underwriter
furnished in writing to the Company by such Underwriter through you expressly
for use in the Registration Statement (or any amendment thereto), the
Prospectus (or any amendment or supplement thereto) or any preliminary
prospectus.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 7(a) or 7(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 7(a) and 7(b), the Underwriter shall not be required to assume
the defense of such action pursuant to this Section 7(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
such Underwriter). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the
indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified
parties and all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by Donaldson, Lufkin &
Jenrette Securities Corporation and Jefferies & Company, Inc., in the case of
parties indemnified pursuant to Section 7(a), and by the Company, in the case
of parties indemnified pursuant to Section 7(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any action effected with its written consent. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of a judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could
have been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent the indemnification provided for in this Section
7 is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the
offering of the Shares or (ii) if the allocation provided by clause 7(d)(i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 7(d)(i) above
but also the relative fault of the Company on the one hand and the Underwriters
on the other hand in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative benefits received by the
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<PAGE> 10
Company on the one hand and the Underwriters on the other hand shall be deemed
to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company, and the total underwriting
discounts and commissions received by the Underwriters, bear to the total price
to the public of the Shares, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of the Company on the one hand
and the Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
indemnified party in connection with investigating or defending any matter,
including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 7, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Shares underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages which such Underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 7(d) are several in proportion to the
respective number of Shares purchased by each of the Underwriters hereunder and
not joint.
(e) The remedies provided for in this Section 7 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
SECTION 8. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares under this
Agreement are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company
contained in this Agreement shall be true and correct on each Closing Date with
the same force and effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have been filed and become effective by 10:00
P.M., New York City time, on the date of this Agreement; and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been commenced or shall
be pending before or contemplated by the Commission.
(c) You shall have received on the Closing Date a certificate
dated the Closing Date, signed by Robert L. Parker, Jr. and James J. Davis, in
their capacities as the President and Chief Executive Officer and Senior Vice
President-Finance and Chief Financial Officer of the Company, respectively,
confirming the matters set forth in Sections 8(a), 8(b) and 8(d) and that the
Company has complied with all of the agreements and satisfied all of the
conditions herein contained and required to be complied with or satisfied by
the Company on or prior to the Closing Date.
(d) Since the respective dates as of which information is given in
the Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement),
(i) there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or
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<PAGE> 11
operations of the Company and its subsidiaries, taken as a whole, (ii) there
shall not have been any change or any development involving a prospective
change in the capital stock or in the long-term debt of the Company or any of
its subsidiaries and (iii) neither the Company nor any of its subsidiaries
shall have incurred any liability or obligation, direct or contingent, the
effect of which, in any such case described in clause 8(d)(i), 8(d)(ii) or
8(d)(iii), in your judgment, is material and adverse and, in your judgment,
makes it impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing Date,
of Vinson & Elkins L.L.P. counsel for the Company, to the effect that:
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and
authority to carry on its business as described in the Prospectus and
to own, lease and operate its properties;
(ii) the Shares have been duly authorized and, when issued
and delivered to the Underwriters against payment therefor as provided
by this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject to
any statutory preemptive or, to the knowledge of such counsel, similar
rights;
(iii) this Agreement has been duly authorized, executed and
delivered by the Company;
(iv) the Registration Statement has become effective under
the Act, no stop order suspending its effectiveness has been issued
and no proceedings for that purpose are, to such counsel's knowledge,
pending before or threatened by the Commission;
(v) the statements under the caption "Description of
Capital Stock" in the Prospectus, insofar as such statements
constitute a summary of legal matters, documents or proceedings
referred to therein, are accurate in all material respects;
(vi) the execution and delivery of this Agreement and the
issuance and delivery of the Shares by the Company and the
consummation of the transactions contemplated hereby and thereby will
not require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except
such as have been obtained under the Act and such as may be required
under the securities or Blue Sky laws of the various states or the
notice of issuance requirements of the NYSE) and will not conflict
with or constitute a breach under the terms or provisions of, or a
default under, (A) the charter or by-laws of the Company or (B) any
indenture, loan agreement, mortgage, lease or other agreement or
instrument that is (i) filed as an exhibit to the Registration
Statement, (ii) filed as an exhibit to a report that is filed pursuant
to the Exchange Act and incorporated by reference in the Prospectus or
(iii) identified to such counsel by the Company as material to the
Company and its subsidiaries, taken as a whole, or (C) to the
knowledge of such counsel, violate or conflict with any applicable law
or any rule, regulation, judgment, order or decree of any court or any
governmental body or agency having jurisdiction over the Company or
any of its subsidiaries (except in the case of clause (C) such
conflict or violation that would not have a Material Adverse Effect
and except for federal or state securities or blue sky laws as to
which such counsel does not express an opinion in this subparagraph
(vii));
(vii) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be, an "investment
company" as such term is defined in the Investment Company Act of
1940, as amended; and
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<PAGE> 12
(viii) The Registration Statement and the Prospectus (except
the financial statements, supporting schedules and other information
of a financial or statistical nature included therein, as to which
such counsel does not express any opinion) comply as to form in all
material respects with the requirements of the Act. In passing upon
the form of the Registration Statement and the Prospectus, such
counsel has necessarily assumed the correctness and completeness of
the statements made therein. Such counsel is not passing upon and does
not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement or
the Prospectus (except to the extent set forth in subparagraph
8.(e)(v) hereof), and such counsel has not independently verified the
accuracy, completeness or fairness of such statements (except as
aforesaid). Without limiting the foregoing, such counsel assumes no
responsibility for and has not independently verified the accuracy,
completeness or fairness of the financial statements and schedules and
other financial and statistical data included in the Registration
Statement and has not examined the accounting, financial or
statistical records from which such financial statements, schedules
and data are derived. Such counsel notes that, although certain
portions of the Registration Statement have been included therein on
the authority of experts within the meaning of the Act, such counsel
is not an expert with respect to any portion of the Registration
Statement. However, such counsel has participated in conferences with
officers and other representatives of the Company, representatives of
the independent accountants of the Company, and with the Underwriters'
representatives and counsel, at which the contents of the Registration
Statement and Prospectus and related matters were discussed. Such
counsel has also reviewed certain corporate documents furnished to
them by the Company. Based on such participation and review (relying
as to materiality to a certain extent upon the officers and the other
representatives of the Company), and subject to the limitations
described above, no information has come to such counsel's attention
that causes them to believe that the Registration Statement, at the
time it became effective or as of the Closing Date, contained or
contains an untrue statement of a material fact or omitted or omits to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus, as
of its date or as of the Closing Date, included or includes an untrue
statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
The opinion of Vinson & Elkins L.L.P. described in Section 8(f) above
shall be rendered to you at the request of the Company and shall so state
therein.
(f) You shall have received on the Closing Date an opinion or
opinions (satisfactory to you and counsel for the Underwriters), dated the
Closing Date, of Ronald J. Potter, Esq., counsel for the Company, to the effect
that:
(i) each of the Company's significant subsidiaries has
been duly incorporated, organized or formed, as the case may be, is
validly existing as a corporation, limited liability company or
limited liability partnership, as the case may be, in good standing
under the laws of its jurisdiction of incorporation, organization or
formation, as the case may be, and has the corporate power and
authority to carry on its business as described in the Prospectus and
to own, lease and operate its properties;
(ii) each of the Company and each significant subsidiary
is duly qualified and is in good standing as a foreign corporation,
foreign limited liability company or foreign limited liability
partnership, as the case may be, authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the
failure to be so qualified would not have a Material Adverse Effect;
(iii) all the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid, non-assessable and not subject to any preemptive or similar
rights;
-12-
<PAGE> 13
(iv) all of the outstanding shares of capital stock of
each of the Company's corporate subsidiaries and all of the interests
in its limited liability company and limited liability partnership
subsidiaries have been duly authorized and validly issued and are
fully paid and non-assessable, and are owned by the Company, directly
or indirectly through one or more subsidiaries, free and clear of any
Lien;
(v) after due inquiry, such counsel does not know of any
legal or governmental proceedings pending or threatened to which the
Company or any of its subsidiaries is or could be a party or to which
any of their respective property is or could be subject that are
required to be described in the Registration Statement or the
Prospectus and are not so described, or of any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not so described or filed as
required;
(vi) to such counsel's knowledge after due inquiry, there
are no contracts, agreements or understandings between the Company and
any person granting such person the right to require the Company to
include such securities with the Securities registered pursuant to the
Registration Statement; and
(vii) Such counsel is not passing upon and does not assume
any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus,
and such counsel has not independently verified the accuracy,
completeness or fairness of such statements (except as aforesaid).
Without limiting the foregoing, such counsel assumes no responsibility
for and has not independently verified the accuracy, completeness or
fairness of the financial statements and schedules and other financial
and statistical data included in the Registration Statement and has
not examined the accounting, financial or statistical records from
which such financial statements, schedules and data are derived. Such
counsel notes that, although certain portions of the Registration
Statement have been included therein on the authority of experts
within the meaning of the Act, such counsel is not an expert with
respect to any portion of the Registration Statement. However, such
counsel has participated in conferences with officers and other
representatives of the Company, representatives of the independent
accountants of the Company, and with the Underwriters' representatives
and counsel, at which the contents of the Registration Statement and
Prospectus and related matters were discussed. Such counsel has also
reviewed certain corporate documents. Based on such participation and
review (relying as to materiality to a certain extent upon the
officers and the other representatives of the Company), and subject to
the limitations described above, no information has come to such
counsel's attention that causes them to believe that the Registration
Statement, at the time it became effective or as of the Closing Date,
contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
that the Prospectus, as of its date or as of the Closing Date,
included or includes an untrue statement of a material fact or omitted
or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(g) You shall have received on the Closing Date an opinion, date
the Closing Date, of counsel for the Company in such jurisdictions in which the
Company's significant subsidiaries have been incorporated, other than Oklahoma
and Delaware as to the matters referred to in Sections 8(f)(i), 8(f)(ii) and
8(f)(iv).
(h) You shall have received on the Closing Date an opinion, dated
the Closing Date, of Fulbright & Jaworski L.L.P., counsel for the Underwriters,
as to the matters referred to in Sections 8(e)(ii), 8(e)(iii), 8(e)(v) (only
with respect to the statements under the captions "Description of Capital
Stock" and "Underwriting") and 8(e)(viii).
-13-
<PAGE> 14
(i) You shall have received, on each of the date hereof and the
Closing Date, a letter dated the date hereof or the Closing Date, as the case
may be, in form and substance satisfactory to you, from Coopers & Lybrand
L.L.P., KPMG Peat Marwick LLP, Arthur Andersen LLP and Price Waterhouse LLP,
independent public accountants, containing the information and statements of
the type ordinarily included in accountants' "comfort letters" to Underwriters
with respect to the financial statements and certain financial information
contained in the Registration Statement and the Prospectus.
(j) The Company shall have delivered to you the lock-up agreements
specified in Section 2 hereof which lock-up agreements shall be in full force
and effect on the Closing Date.
(k) The Shares shall have been duly listed, subject to notice of
issuance, on the NYSE.
(l) The Company shall not have failed on or prior to the Closing
Date to perform or comply with any of the agreements herein contained and
required to be performed or complied with by the Company on or prior to the
Closing Date.
SECTION 9. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the
Closing Date by you by written notice to the Company if any of the following
has occurred: (i) any outbreak or escalation of hostilities or other national
or international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market
the Shares on the terms and in the manner contemplated in the Prospectus, (ii)
the suspension or material limitation of trading in securities or other
instruments on the New York Stock Exchange, the American Stock Exchange, the
Chicago Board of Options Exchange, the Chicago Mercantile Exchange, the Chicago
Board of Trade or the Nasdaq National Market or limitation on prices for
securities or other instruments on any such exchange or the Nasdaq National
Market, (iii) the suspension of trading of any securities of the Company on any
exchange or in the over-the-counter market, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in your opinion
materially and adversely affects, or will materially and adversely affect, the
business, prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole, (v) the declaration of a
banking moratorium by either federal or New York State authorities or (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs which in your opinion has a material
adverse effect on the financial markets in the United States.
If on the First Closing Date or on the Second Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase the Firm Shares or Additional Shares, as the case may be, which it has
or they have agreed to purchase hereunder on such date and the aggregate number
of Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not
more than one-tenth of the total number of Firm Shares or Additional Shares, as
the case may be, to be purchased on such date by all Underwriters, each
non-defaulting Underwriter shall be obligated severally, in the proportion
which the number of Firm Shares set forth opposite its name in Schedule I bears
to the total number of Firm Shares which all the non-defaulting Underwriters
have agreed to purchase, or in such other proportion as you may specify, to
purchase the Firm Shares or Additional Shares, as the case may be, which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
on such date; provided that in no event shall the number of Firm Shares or
Additional Shares, as the case may be, which any Underwriter has agreed to
purchase pursuant to Section 2 hereof be increased pursuant to this Section 9
by an amount in excess of one-ninth of such number of Firm Shares or Additional
Shares, as the case may be, without the written consent of such Underwriter. If
on the First Closing Date any Underwriter or Underwriters shall fail or refuse
to purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of
Firm Shares to be purchased by all Underwriters and arrangements satisfactory
to you and the Company for purchase of such Firm Shares are not made within 48
hours after such default, this Agreement will terminate without liability on
the
-14-
<PAGE> 15
part of any non-defaulting Underwriter and the Company. In any such case which
does not result in termination of this Agreement, either you or the Company
shall have the right to postpone the First Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or
arrangements may be effected. If, on any Second Closing Date, any Underwriter
or Underwriters shall fail or refuse to purchase Additional Shares and the
aggregate number of Additional Shares with respect to which such default occurs
is more than one-tenth of the aggregate number of Additional Shares to be
purchased on such date, the non-defaulting Underwriters shall have the option
to (i) terminate their obligation hereunder to purchase such Additional Shares
or (ii) purchase not less than the number of Additional Shares that such
non-defaulting Underwriters would have been obligated to purchase on such date
in the absence of such default. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
any such Underwriter under this Agreement.
SECTION 10. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company, to Parker
Drilling Company, 8 East Third Street, Tulsa, Oklahoma 74103, Attention:
President and (ii) if to any Underwriter or to you, to you c/o Donaldson,
Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York, New York
10172, Attention: Syndicate Department and Jefferies & Company, Inc., 909
Fannin Street, Suite 3100, Houston, Texas 77010, Attention: Managing Director,
or in any case to such other address as the person to be notified may have
requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Shares,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter, the officers or directors of any
Underwriter, any person controlling any Underwriter, the Company, the officers
or directors of the Company or any person controlling the Company, (ii)
acceptance of the Shares and payment for them hereunder and (iii) termination
of this Agreement.
If for any reason the Shares are not delivered by or on behalf of the
Company as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 9), the Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by them. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has
agreed to pay pursuant to Section 5(i) hereof. The Company also agrees to
reimburse the several Underwriters, their directors and officers and any
persons controlling any of the Underwriters for any and all fees and expenses
(including, without limitation, the fees disbursements of counsel) incurred by
them in connection with enforcing their rights hereunder (including, without
limitation, pursuant to Section 7 hereof).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the
Underwriters, the Underwriters' directors and officers, any controlling persons
referred to herein, the Company's directors and the Company's officers who sign
the Registration Statement and their respective successors and assigns, all as
and to the extent provided in this Agreement, and no other person shall acquire
or have any right under or by virtue of this Agreement. The term "successors
and assigns" shall not include a purchaser of any of the Shares from any of the
several Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
-15-
<PAGE> 16
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
PARKER DRILLING COMPANY
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
JEFFERIES & COMPANY, INC.
BEAR, STEARNS & CO. INC.
PRUDENTIAL SECURITIES INCORPORATED
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
----------------------------
and
By JEFFERIES & COMPANY, INC.
By:
----------------------------
-16-
<PAGE> 17
SCHEDULE I
<TABLE>
<CAPTION>
Number of Firm Shares
Underwriters to be Purchased
------------ ---------------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation . . . . . . . . . .
Jefferies & Co. Inc. . . . . . . . . . . . . . . . . . . . . . . . . .
Bear, Stearns & Co. Inc. . . . . . . . . . . . . . . . . . . . . . . .
Prudential Securities Incorporated . . . . . . . . . . . . . . . . . .
----------
Total 10,000,000
==========
</TABLE>
-1-
<PAGE> 18
SCHEDULE II
<TABLE>
<CAPTION>
Jurisdiction of
Significant Subsidiaries Incorporation
------------------------ -------------
<S> <C>
Parker Drilling Company of Oklahoma, Inc. Oklahoma
Parker Drilling Company of South America, Inc. Oklahoma
Parker Technology, Inc. Nevada
Vance Systems Engineering, Inc. Texas
Parker Drilling Company International Limited Nevada
Parker Drilling Company of Alaska Limited Alaska
Parker Drilling Company of New Guinea, Inc. Oklahoma
Parker Drilling Company North America, Inc. Nevada
</TABLE>
-2-
<PAGE> 1
EXHIBIT 5.1
VINSON & ELKINS L.L.P.
2300 FIRST CITY TOWER
1001 FANNIN STREET
HOUSTON, TEXAS 77002-6760
October 21, 1997
Parker Drilling Company
8 East Third Street
Tulsa, Oklahoma 74103
Ladies and Gentlemen:
We have acted as counsel for Parker Drilling Company, a Delaware
corporation (the "Company"), with respect to certain legal matters in connection
with the registration by the Company under the Securities Act of 1933, as
amended (the "Securities Act"), of the offer and sale by the Company of up to
11,500,000 shares of its Common Stock, $.16 2/3 par value (the "Shares"). In
connection therewith, we, as your counsel, have examined such certificates,
instruments and documents and reviewed such questions of law as we have
considered necessary or appropriate for the purposes of this opinion.
Based on the foregoing, we are of the opinion that the Shares proposed to
be sold by the Company pursuant to an underwriting agreement between the Company
and the underwriters named therein (the "Underwriting Agreement"), have been
duly authorized for issuance and, when (a) the Form S-3 Registration Statement
relating to the Shares (the "Registration Statement") shall have become
effective under the Securities Act, and (b) the Company shall have received the
purchase price for the Shares in accordance with the terms set forth in the
Underwriting Agreement, the Shares will be validly issued, fully paid and
nonassessable shares of Common Stock of the Company.
The foregoing opinion is limited to the laws of the United States of
America and to the General Corporation Law of the State of Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Prospectus forming a
part of the Registration Statement under the caption "Legal Matters." In giving
this consent, we do not admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act and the rules and
regulations thereunder.
Very truly yours,
VINSON & ELKINS L.L.P.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
on Form S-3 (File No. 333- ) of our report dated October 14, 1997, on our
audits of the financial statements and financial statement schedule of Parker
Drilling Company. We also consent to the reference to our firm under the caption
"Experts."
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
October 21, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Form S-3 (File No. 333- ) of our report dated October
7, 1996 on the combined financial statements of the Mallard Bay Drilling
division of EVI, Inc. as of December 31, 1995 and 1994, and for each of the
three years in the period ended December 31, 1995, and to all references to our
Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
October 21, 1997
<PAGE> 1
EXHIBIT 23.3
The Board of Directors
Parker Drilling Company:
We consent to the incorporation by reference in the Registration Statement
on Form S-3 of Parker Drilling Company of our report dated September 27, 1996,
with respect to the balance sheets of Quail Tools, Inc. as of December 31, 1995
and 1994, and the related statements of earnings and retained earnings, and cash
flows for each of the years in the three-year period ended December 31, 1995,
which report appears in the Form 8-K/A of Parker Drilling Company dated January
6, 1997. Our report refers to the adoption in 1994 of the method of accounting
for certain investments in debt and equity securities prescribed by Statement of
Financial Accounting Standards No. 115.
We also consent to the reference to our firm under the heading "Experts" in
the prospectus.
KPMG PEAT MARWICK LLP
New Orleans, Louisiana
October 21, 1997
<PAGE> 1
EXHIBIT 24.1
LIMITED POWER OF ATTORNEY
PARKER DRILLING COMPANY
KNOW ALL MEN BY THESE PRESENTS that, the undersigned director or officer of
Parker Drilling Company, a Delaware corporation, does hereby make, constitute
and appoint ROBERT L. PARKER JR. and JAMES J. DAVIS, and each of them acting
individually, his true and lawful attorney with power to act without the other
and with full power of substitution, to execute, deliver and file with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"), for and on his behalf, and in his name and in his capacity or
capacities as aforesaid, (i) a Registration Statement on Form S-3 with respect
to a primary offering of Common Stock of Parker Drilling Company, (ii) a second
Registration Statement on Form S-3 with respect to additional shares of such
Common Stock pursuant to Rule 462 under the Act and (iii) any and all amendments
thereto or other documents in support thereof or supplemental thereto, hereby
granting to said attorneys and each of them full power and authority to do and
perform each and every act and thing whatsoever as said attorney or attorneys
may deem necessary or advisable to carry out fully the intent of the foregoing
as the undersigned might or could do personally or in the capacity or capacities
as aforesaid, hereby ratifying and confirming all acts and things which said
attorney or attorneys may do or cause to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 21st day
of October, 1997.
/s/ ROBERT L. PARKER
--------------------------------------
Robert L. Parker
/s/ ROBERT L. PARKER JR.
--------------------------------------
Robert L. Parker Jr.
/s/ JAMES W. LINN
--------------------------------------
James W. Linn
/s/ BERNARD DUROC-DANNER
--------------------------------------
Bernard Duroc-Danner
/s/ DAVID L. FIST
--------------------------------------
David L. Fist
/s/ EARNEST F. GLOYNA
--------------------------------------
Earnest F. Gloyna
/s/ R. RUDOLPH REINFRANK
--------------------------------------
R. Rudolph Reinfrank
/s/ JAMES J. DAVIS
--------------------------------------
James J. Davis
