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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 6, 1994
NOBLE DRILLING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-13857 73-0374541
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
10370 Richmond Avenue, Suite 400, Houston, Texas 77042
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(713) 974-3131
<PAGE> 2
Item 5. Other Events.
On September 15, 1994, Chiles Offshore Corporation ("Chiles"), a
Delaware corporation, merged (the "Merger") with and into Noble Offshore
Corporation ("NOC"), a Delaware corporation and a wholly owned
subsidiary of Noble Drilling Corporation ("Noble Drilling"), a Delaware
corporation, pursuant to the terms of the Agreement and Plan of Merger dated
June 13, 1994 among Noble Drilling, Chiles, and NOC. The Merger was
accounted for as a pooling of interests and as such, Noble Drilling's
historical financial statements and all other financial data have been restated
to give effect to the Merger as if the Merger had been in effect for all periods
presented. For the information of security holders of Noble Drilling, Noble
Drilling is filing herein the following Restated Selected Financial Data,
Restated Management's Discussion and Analysis of Financial Condition and
Results of Operations, and Restated Consolidated Financial Statements of Noble
Drilling and its subsidiaries. For additional information regarding the basis
of presentation of the financial information included herein, see Note 1 of
the Notes to Restated Consolidated Financial Statements below.
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RESTATED SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1993 (1) 1992 1991 1990 1989
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (2)
Operating revenues (3) $ 264,531 $ 184,166 $ 230,151 $ 181,831 $ 129,704
Operating costs (4) 178,684 135,252 179,490 151,445 104,774
Depreciation and amortization 28,886 27,248 30,052 18,420 15,532
Selling, general and administrative 28,284 30,716 32,684 20,734 21,310
Asset write-downs (5) 21,120 5,000
Other (6) (232) 89 6,212 (185) 814
----------- ----------- ----------- ----------- -----------
Operating income (loss) 28,909 (30,259) (23,287) (8,583) (12,726)
Interest expense (8,038) (13,274) (20,411) (6,665) (10,980)
Interest income 2,497 3,276 2,155 3,797 1,432
Loss from unconsolidated affiliate (142) (110)
Other, net 1,189 3,785 4,786 1,148 2,457
----------- ----------- ----------- ----------- -----------
Income (loss) from continuing
operations before income taxes and
extraordinary item 24,415 (36,582) (36,757) (10,303) (19,817)
Income tax provision (3,333) (3,396) (2,417) (1,211) (796)
----------- ----------- ----------- ----------- -----------
Income (loss) from continuing operations 21,082 (39,978) (39,174) (11,514) (20,613)
Discontinued operations (3,372) (1,815) 1 (449)
Extraordinary item (7) 1,770 4,978 21,887
----------- ----------- ----------- ----------- -----------
Net income (loss) 22,852 (43,350) (36,011) (11,513) 825
Preferred stock dividends (7,936) (6,728) (721)
----------- ----------- ----------- ----------- -----------
Net income (loss) applicable to common shares $ 14,916 $ (50,078) $ (36,732) $ (11,513) $ 825
=========== =========== =========== =========== ===========
Net income (loss) per common share (8)(9) $ 0.22 $ (1.05) $ (0.81) $ (0.31) $ 0.03
Weighted average common shares outstanding 66,923 47,762 45,554 36,854 23,939
BALANCE SHEET DATA (AT END OF PERIOD)
Working capital (deficit) (3)(10) $ 150,535 $ 42,993 $ (3,239) $ 54,187 $ 31,100
Property and equipment, net $ 482,029 $ 338,382 $ 384,182 $ 343,875 $ 164,421
Total assets $ 696,553 $ 456,529 $ 560,987 $ 474,431 $ 238,619
Long-term debt (10) $ 127,144 $ 87,280 $ 73,145 $ 127,008 $ 37,543
Total debt (10)(11)(12) $ 127,690 $ 114,477 $ 182,784 $ 146,143 $ 39,990
Shareholders' equity $ 516,770 $ 301,634 $ 324,367 $ 289,335 $ 156,873
OTHER DATA
Cash dividends per common share $ 0 $ 0 $ 0 $ 0 $ 0
Capital expenditures $ 173,501 $ 5,997 $ 129,986 $ 201,208 $ 8,541
</TABLE>
(1) Effective during the quarter ended March 31, 1993, the Company's
international subsidiaries began reporting their financial results on a
current rather than a month-lag basis. This change resulted in the
inclusion of the December 1992 operating results of such international
subsidiaries in the operating results of the Company for the first quarter
of 1993. Revenues and net income for this additional one-month period were
$7,687,000 and $140,000, respectively, and are not considered material to
the Company's overall results of operations.
(2) The statement of operations data for all periods contain certain
reclassifications to the data presented in the past to conform to the
classifications used in the 1993 consolidated financial statements.
(3) Includes the effect of the October 7, 1993 acquisition of nine offshore
rigs and associated assets (the "Western Acquisition") from the Western
Company of North America for $150,000,000 in cash. The Company financed the
Western Acquisition through public offerings of 12,041,000 shares of Noble
Common Stock at $8.375 per share and $125,000,000 principal amount of
Noble Drilling's 9 1/4% Senior Notes Due 2003.
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(4) Consists of operating costs and expenses other than depreciation,
selling, general and administrative, minority interest, restructuring
charges and write-down of assets charges.
(5) Consists of provisions which were made to reduce rig carrying
values to their estimated recoverable values in 1992 and 1991 of
$21.1 million and $5.0 million, respectively. See Note 1 of Notes
to the Supplemental Consolidated Financial Statements included elsewhere
herein.
(6) Consists of minority interest in 1993 and 1992, restructuring costs
of $6,134,000 and a minority interest of $78,000 in 1991, and a minority
interest in 1990.
(7) Consists of a gain on extinguishment of debt in 1993, a gain on an
insurance settlement in 1991 and a $1,784,000 gain on an insurance
settlement and $1,864,000 gain on a debt restructuring in 1989. Also,
includes a significant financing transaction undertaken by Chiles
in December 1989, which substantially reduced all of Chiles' existing
long-term debt at a discount, resulting in an extraordinary gain of
$18.2 million.
(8) Includes the effect of accretion on the stock subject to put option,
which is charged to retained earnings and not reflected in the amount of net
loss applicable to common shares for each applicable period. The amount of
the accretion was $92,000, $591,000 and $776,000 for the years ended
December 31, 1991, 1990 and 1989, respectively.
(9) Income (loss) applicable to common shares per share before
extraordinary item was $.20, $(.92) and $(.88) for the years ended
December 31, 1993, 1991 and 1989, respectively. Loss per common share
from discontinued operations was $(.07), $(.04) and $(.02) for the years
ended December 31, 1992, 1991 and 1989, respectively.
(10) Chiles reclassified $50.5 million of its outstanding indebtedness from
long-term to current liabilities in 1991. This reclassification was made
because as of December 31, 1991, Chiles anticipated not being able to
remain in compliance, and subsequently was not able to remain in
compliance, with all of the terms of its debt agreements. See Note 2 of
Notes to the Consolidated Financial Statements.
(11) Consists of short-term debt to banks, current installments of long-term
debt and long-term debt.
(12) As discussed further in Restated Management's Discussion and Analysis
of Financial Condition and Results of Operations and Note 5 of Notes to
Consolidated Financial Statements included elsewhere herein, Chiles
completed an offering of preferred stock during October 1993 which
resulted in net proceeds to Chiles of $96.5 million. Chiles used
approximately $45.2 million of such proceeds to repay all of its
outstanding indebtedness, including prepayments of principal of $44.3
million. The remaining net proceeds were invested in cash and cash
equivalents and marketable securities as of December 31, 1993.
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RESTATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Noble Drilling Corporation ("Noble Drilling") was organized as a
Delaware corporation in 1939. Noble Drilling and its predecessors have been
engaged in the contract drilling of oil and gas wells for others domestically
since 1921 and internationally during various periods since 1939. As used
herein, unless otherwise required by the context, the term "Noble Drilling"
refers to Noble Drilling Corporation and the term "Company" refers to Noble
Drilling and its consolidated subsidiaries (including Chiles, as described
below).
On September 15, 1994, the Company completed the merger of Chiles
Offshore Corporation ("Chiles") into Noble Offshore Corporation ("NOC"), a
wholly owned subsidiary of Noble Drilling. The merger was accounted for as a
pooling of interests. The consolidated financial statements and information
reflect the restatement of the Company's historical financial statements to
reflect the merger of Chiles as a pooling of interests as of the beginning of
the earliest year presented and will represent the Company's historical
financial statements in the future. All Chiles common stock amounts are
presented on an equivalent Noble Drilling common stock basis.
The following discussion is intended to assist in understanding the
Company's financial position as of December 31, 1993 and 1992 and its results
of operations for each of the three years in the period ended December 31,
1993. Reference is also made to the Consolidated Financial Statements and
the Notes thereto, included elsewhere herein, which should be read in
conjunction with this discussion.
OUTLOOK
The Company's operating strategy has been to pursue drilling
opportunities in the U. S. and in the various international markets. Worldwide
drilling conditions vary substantially from region to region, however, the
Company operates in most markets where there is a demand for offshore and land
drilling rigs. In response to depressed conditions within the U. S. market, in
1991, the Company mobilized appropriate drilling units to markets with
increasing activity levels. Conditions in the U.S. market remained depressed
through the summer of 1992, primarily due to continued depressed natural gas
prices and an oversupply of rigs. During late 1992, U. S. natural gas prices
improved, resulting in greater demand and higher dayrates for drilling rigs.
During 1993, U. S. markets continued to be strong while some international
markets weakened due to political unrest and weak worldwide oil prices. As a
result of declining international rig demand and improved market conditions in
the U.S. Gulf, many contractors mobilized rigs from international markets back
to the U.S. Gulf in late 1993 and early 1994. The increased supply of drilling
rigs in the U.S. Gulf has more than offset the increased level of rig demand
during 1994, causing dayrates to deteriorate. The Company believes that
absent an improvement in rig demand outside the U.S. Gulf, additional rigs
may be moved to the U.S. Gulf, which would increase pressure for lower
dayrates and could adversely affect the utilization levels of the Company's
rig fleet.
The international offshore markets are generally weaker than the Gulf
of Mexico. Specifically, on the West Coast of Africa, political unrest and
lower oil prices have reduced the demand for drilling equipment. Management
anticipates that the international market conditions should improve in 1995,
assuming improved political conditions in West Africa and a reduction in OPEC
production levels. However, there can be no assurances that operating areas on
the West Coast of Africa will stabilize politically or that oil prices will
strengthen.
1993 RIG ACQUISITIONS
The Company acquired nine offshore jackup drilling rigs and associated
drilling assets (the "Western Acquisition") from The Western Company of North
America ("Western") on October 7, 1993. The Western Acquisition increased the
number of independent leg jackup rigs owned by the Company from eight to
fifteen, strengthened the Company's operations in the Gulf of Mexico and
Nigeria, and diversified the Company's operations into Venezuela and Zaire.
On October 25, 1993, the Company purchased two submersible offshore
drilling rigs from Portal Rig Corporation ("Portal"). The two rigs are
currently stacked in the Gulf of Mexico. It is anticipated that these rigs
will require an aggregate of approximately $6,000,000 in capital expenditures
to reactivate. The Company plans to reactivate the rigs when market conditions
warrant.
The offshore contract drilling industry remains highly fragmented in
the markets in which the Company operates. From time to time, the Company has
had discussions with third parties regarding asset acquisitions or possible
business combinations. The Company intends to pursue possible acquisitions
and/or business combinations, if prudent.
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PURCHASE OF TRITON ENGINEERING SERVICES COMPANY
On January 19, 1994, the Company signed a letter of intent for the
acquisition of all of the outstanding common stock of Triton Engineering
Services Company ("Triton"), then a privately held corporation, which is
engaged, through its subsidiaries, in providing engineering, consulting and
"turnkey" drilling services. Triton also manufactures and rents oilfield
equipment to the oil and gas industry. The acquisition was subject to a
number of conditions, including the execution of a definitive agreement,
approval by Noble Drilling's board of directors and receipt of all necessary
governmental and third party approvals and consents. On April 22, 1994, the
acquisition of Triton was consummated.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $150.5 million and $43.0 million as
of December 31, 1993 and December 31, 1992, respectively. The increase in
working capital of $107.5 million was primarily due to the completion of a
preferred stock offering by Chiles, the Company's debt and stock offering (see
Note 3 of Notes to Supplemental Consolidated Financial Statements included
elsewhere herein) and cash provided by operations of $34.8 million. Chiles
completed a preferred stock offering in October of 1993, which resulted in net
proceeds of $96.5 million in cash. These proceeds were used by Chiles to
retire all outstanding indebtedness to secured lenders amounting to $49.5
million and prepay a zero coupon unsecured note of $4.6 million. The remaining
proceeds were placed into working capital for future capital expenditures and
operations.
The Company has and continues to have cash requirements for capital
expenditures, debt and principal payments, and preferred dividends, when and if
declared. In 1994, debt and principal payments are estimated to be
approximately $546,000. Cumulative dividends on Noble Drilling's $2.25
convertible exchangeable preferred stock and $1.50 convertible preferred stock
for 1994 are approximately $6.7 million and $6.1 million, respectively, for
aggregate dividends of approximately $12.8 million. Noble Drilling's $2.25
convertible exchangeable preferred stock is redeemable by the Company on and
after December 31, 1994. Assuming the full redemption of Noble Drilling's $2.25
convertible exchangeable preferred stock on December 31, 1994, and related
assumed full conversion on December 30, 1994, no dividends would be payable or
paid on such series of preferred stock for the fourth quarter of 1994. Based
on such assumptions, dividends on the $2.25 convertible exchangeable preferred
stock for 1994 would be approximately $5.0 million, and total preferred
dividends for 1994 would be approximately $11.1 million. The Company expects
to fund these 1994 obligations, ranging from approximately $11.6 to $13.3
million, out of cash and short-term investments as well as cash expected to be
provided by operations.
At December 31, 1993, the Company had planned capital expenditures for
1994 of approximately $83.4 million related to upgrades of several drilling
rigs and replacements of equipment and drill pipe. The Company expects to fund
these improvements to its assets out of cash provided by operations, to the
extent available, and/or existing cash balances. Due to the softening of the
markets in which the Company operates, as discussed previously, projected
capital expenditures for 1994 are expected to total $50 million.
Accounts receivable at December 31, 1993 increased from December 31,
1992 primarily due to increased revenues from improved market conditions in the
U.S. Gulf of Mexico and the addition of the offshore rigs from Western in
October 1993. Other current assets at December 31, 1993 increased from
December 31, 1992 principally due to inventories acquired with the Western
rigs. Other assets at December 31, 1993 increased from December 31, 1992
principally due to the debt issuance costs of $4.0 million incurred in
connection with the issuance of $125.0 million aggregate principal amount of
the Company's 9 1/4% Senior Notes Due 2003 (the "Senior Notes") in October
1993.
Current installments of long-term debt at December 31, 1993 decreased
from December 31, 1992 principally due to repayments related to the Company's
Nigerian operations (see "Credit Facilities and Long-Term Debt" below).
CREDIT FACILITIES AND LONG-TERM DEBT
The Company's international subsidiaries have various lines of credit
aggregating $7.6 million and letter of credit facilities aggregating $2.0
million, subject to the Company's maintenance of certain levels of collateral,
with $5.7 million available under these lines of credit and $1.3 million
available to support the issuance of letters of credit at December 31, 1993.
Noble Drilling has guaranteed up to $3.0 million of the amounts borrowed under
one of the international lines of credit, of which no amount was outstanding at
December 31, 1993. No lines of credit were available at December 31, 1993 in
the United States. The Company and its wholly owned subsidiary, Noble Drilling
(West Africa) Inc. ("NDWA"), were parties to a secured loan agreement (the
"Project Loan Agreement") with US WEST Financial Services, Inc. dated as of
October 31, 1990, as amended, pursuant to which NDWA borrowed $52.5 million for
the purpose of financing in part the equipping, refurbishment, and mobilization
to Nigeria of four offshore drilling rigs: the NN-1, which is majority owned
through NN-1 Limited Partnership, the Gene Rosser, the Lewis Dugger and the
Chuck Syring. On July 7, 1993 the final installment of $6.6 million plus
accrued interest was paid in accordance with the terms of the Project Loan
Agreement. Interest was charged under the Project Loan Agreement at a fixed
rate of 11.12%.
In connection with the initial construction of the NN-1, the
predecessor of NN-1 Limited Partnership issued its U.S. Government Guaranteed
Ship Financing Sinking Fund Bonds, of which $2.6 million was outstanding at
December 31, 1993. The bonds are secured by the vessel, and the applicable
security agreement contains certain restrictions among others, on distributions
to partners, dispositions of assets and services to related parties. In
addition, there are minimum working capital, net worth and long-term debt to
net worth requirements applicable to NN-1 Limited Partnership. The Company's
sharing percentage in NN-1 Limited Partnership's distributions from operations
is generally 90%.
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The Company's outstanding principal of $38.6 million to Transworld
Drilling Company under its promissory note dated November 21, 1991 was prepaid
in full on October 14, 1993 with proceeds from the October 7, 1993 public
offering of Common Stock and the Senior Notes. An extraordinary gain of $1.8
million for extinguishment of debt was recognized from the prepayment of the
note, representing excess accrued interest.
The Senior Notes will mature on October 1, 2003. Interest on the Senior
Notes is payable semi-annually on April 1 and October 1 of each year,
commencing April 1, 1994. The Senior Notes are redeemable at the option of the
Company, in whole or in part, on or after October 1, 1998 at 103.47% of the
principal amount, declining ratably to par on or after October 1, 2001, plus
accrued interest. Mandatory sinking fund payments of 25% of the original
principal amount of the Senior Notes at par plus accrued interest will be
required on October 1, 2001 and October 1, 2002. The indenture governing the
Senior Notes contains certain restrictive covenants, including limitations on
additional indebtedness and the ability to secure such indebtedness,
restrictions on dividends and certain investments, and limitations on sale of
assets, sales and leasebacks, transactions with affiliates, and merger or
consolidations.
Minimum principal payments on the long-term debt as described above are
$546,000 in 1994, $546,000 in 1995, $546,000 in 1996, $546,000 in 1997,
$506,000 in 1998, and $125.0 million thereafter.
RESULTS OF OPERATIONS
The following table sets forth selected consolidated financial
information of the Company expressed as a pecentage of total operating revenues
for the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Operating revenues
Contract drilling services
International offshore 42.7% 64.8% 34.6%
Domestic offshore 44.6 22.2 32.1
International land 7.3 3.1 9.7
Domestic land 2.8 5.2 17.9
Engineering services .9 1.8 3.6
Other revenues 1.7 2.9 2.1
------ ------ ------
100.0 100.0 100.0
Operating costs (1) (67.6) (73.5) (78.0)
Depreciation and amortization (10.9) (14.8) (13.0)
Selling, general and administrative (10.7) (16.7) (14.2)
Other income (expense), net (2) .1 (11.5) (4.9)
------ ------ ------
Operating income (loss) 10.9 (16.5) (10.1)
Interest expense (3.0) (7.2) (8.9)
Interest income .9 1.8 .9
Other, net .4 2.0 2.1
Income tax provision (1.3) (1.8) (1.1)
Discontinued operations (1.8) (.8)
Extraordinary item .7 2.2
------ ------ ------
Net income (loss) 8.6 (23.5) (15.7)
Preferred stock dividends (3.0) (3.7) (.3)
------ ------ ------
Net income (loss) applicable to common shares 5.6% (27.2)% (16.0)%
====== ====== ======
</TABLE>
(1) Consists of operating costs and expenses other than depreciation and
amortization, selling, general and administrative expense, minority interest,
restructuring charges and write-down of assets charges.
(2) Consists of minority interest in 1993, a write-down of assets charge and
minority interest in 1992 and a write-down of assets charge, restructuring
charge and minority interest in 1991.
1993 COMPARED WITH 1992
Revenues. During 1993 the Company generated drilling revenues of
$264.5 million compared to drilling revenues of $184.2 million during 1992.
This 44% increase in drilling revenues in 1993 from 1992 was primarily
attributable to an increase in the number of active days worked and an increase
in average dayrates earned in the U.S. Gulf of Mexico. The Company's fleet
achieved a total of 16,894 active days worked during 1993 as compared to 14,553
active days during 1992. The Company's average dayrate was $15,656 in 1993 as
compared to $12,657 in 1992, primarily as a result of higher dayrates and
utilization in the U.S. Gulf of Mexico. The increase in revenue was also
attributable to the addition of nine jackup drilling rigs from Western in
October 1993. The results of operations included a decrease in domestic land
revenues of $2.1 million for 1993 from 1992, or 22%, and an increase in
international land revenues of $13.5 million for
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1993 from 1992, or 235%. Additionally, the Company had a decrease in its
international labor contracts on operator-owned rigs to 15 in 1993 from 17 in
1992, and experienced a decline of $1.0 million in its engineering services
revenues, primarily due to decreased oil and gas activity in the United
Kingdom, resulting from depressed oil prices.
Operating Costs. Operating costs ("Operating Costs") consist of
operating costs and expenses other than depreciation, selling, general and
administrative, minority interest, restructuring charges and write-down of
assets changes. Operating costs were $178.7 million, or 68% of revenues, during
1993 compared to $135.3 million, or 73% of revenues, in 1992. The Company's
operating costs increased $43.4 million as compared to its 1992 operating
costs. The increase is primarily attributable to the increase in active days
worked as discussed above.
Depreciation and Amortization Expense. Depreciation and amortization
expenses were $28.9 million in 1993 as compared to $27.2 million in 1992. The
increase of $1.7 million is primarily attributable to the capital expenditures
incurred near the end of 1992. These capital expenditures included upgraded
equipment on reactivated offshore drilling units, purchases of drill pipe put
into service in 1993 and addition of topdrives to some of the mobile offshore
drilling units.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $28.3 million during 1993 as compared to $30.7
million in 1992.
Interest (Income) Expense. Interest expense, net of interest income,
was $5.5 million in 1993 as compared to net interest expense of $10.0 million
in 1992. The decrease in net interest expense of $4.5 million was primarily
attributable to lower outstanding average borrowings, lower average interest
rates on outstanding borrowings, the elimination of long-term indebtedness by
Chiles and interest income earned on Chiles' net cash proceeds of a preferred
stock offering completed in October of 1993.
Provision for Income Taxes. Provisions for income taxes of $3.3
million and $3.4 million were recorded in 1993 and 1992, respectively,
primarily related to the Company's operations in Nigeria and Venezuela.
1992 COMPARED WITH 1991
Revenues. During 1992, the Company generated revenues of $184.2
million compared to revenues of $230.1 million in 1991. Revenues decreased
$45.9 million, or 20%, as compared to the 1991 revenues. The decrease in
revenues is primarily attributable to a decrease in active days worked. The
Company's fleet achieved 14,553 active days during 1992 as compared to 19,055
active days in 1991 due primarily to a decline in demand for drilling services
in the U.S. Gulf of Mexico. The decreased number of active days in 1992 was
offset to a small degree by higher average dayrates for the same period. The
average dayrate per active day in 1992 was $12,657 compared to $12,076 earned
in 1991. This increase in dayrates was in part due to the Company moving four
of its mobile offshore drilling units to Nigeria. Other contributing factors
to lower overall revenues included decreased domestic land revenues from 1991
of $13.3 million, or 58%, a decrease in international land revenues from 1991
of $15.7 million, or 73%, and a decrease in engineering services revenues of
$5.0 million.
Operating Costs. Operating Costs were $135.3 million (73% of revenues)
during 1992 compared to $179.5 million (78% of revenues) in 1991. The
Company's 1992 Operating Costs decreased $44.2 million as compared to its 1991
Operating Costs.
Depreciation and Amortization Expense. Depreciation and amortization
expenses were $27.2 million in 1992 compared to $30.0 million in 1991.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $30.7 million in 1992 as compared to $32.7 million
in 1991. The decline in selling, general and administrative expenses was
$2.0 million from 1991 to 1992.
Asset Write-downs. An asset write-down provision of $5.0 million was
recorded during the fourth quarter of 1991 by Chiles. An additional asset
write-down provision was recorded in 1992 by Chiles for $21.1 million during
the second quarter in connection with management's evaluation of the Company's
rig fleet net carrying values. The determining factors affecting these
evaluations were the continued depressed conditions in the U.S. Gulf of Mexico
and the effect that these conditions had on management's estimate of future
dayrate, utilization rates, and stacking periods. See Note 1 of Notes to
Consolidated Financial Statements for further discussion. In 1991, the Company
recorded a provision for write-down of assets of $1.8 million which is included
in other, net.
Interest (Income) Expense. Interest expense, net of interest income,
was $10.0 million in 1992 compared to net interest expense of $18.3 million in
1991. The decrease in net interest expense between 1992 and 1991 is primarily
attributable to reductions in secured indebtedness during 1992 and lower
interest rates on outstanding borrowings during 1992. See Note 5 of Notes to
the Consolidated Financial Statements included elsewhere herein for further
discussion.
Provision for Income Taxes. Provisions for income taxes of $3.4
million and $2.4 million were recorded in 1992 and 1991, respectively,
primarily related to the Company's operations in Nigeria and Venezuela. The
increase in income tax expense of $1.0 million is primarily attributable to a
wholly owned subsidiary of the Company mobilizing four of its mobile offshore
drilling units to Nigeria late in 1991.
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Noble Drilling Corporation:
We have audited the accompanying consolidated balance sheets of Noble Drilling
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1993
and 1992, and the related consolidated statements of operations, cash flows and
shareholders' equity for each of the three years in the period ended December
31, 1993. These financial statements reflect a restatement of the Company's
previously reported amounts for the merger with Chiles Offshore Corporation
("Chiles"), see Note 1. These financial statements and schedules referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Noble Drilling Corporation and
subsidiaries (including Chiles) as of December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1993, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules included in this Form 8-K
are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not a required part of the basic financial
statements. These schedules have been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas
September 15, 1994
9
<PAGE> 10
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amounts)
<TABLE>
<CAPTION>
December 31,
-------------------------------
1993 1992
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................ $ 69,177 $ 20,210
Restricted cash.................................. 1,793 857
Investment in marketable securities.............. 39,451 24,351
Accounts receivable.............................. 55,694 37,443
Other current assets............................. 35,617 25,657
------------- ------------
Total current assets....................... 201,732 108,518
------------- ------------
PROPERTY AND EQUIPMENT
Drilling equipment and facilities................ 765,807 600,100
Other............................................ 15,801 15,117
------------- ------------
781,608 615,217
Accumulated depreciation......................... (299,579) (276,835)
------------- ------------
482,029 338,382
------------- ------------
OTHER ASSETS........................................... 12,792 9,629
------------- ------------
$ 696,553 $ 456,529
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term notes payable......................... $ $ 2,449
Current installments of long-term debt........... 546 24,748
Accounts payable................................. 13,659 7,509
Interest payable................................. 3,548 3,168
Other current liabilities........................ 33,444 27,651
------------- ------------
Total current liabilities 51,197 65,525
LONG-TERM DEBT......................................... 127,144 87,280
OTHER LIABILITIES...................................... 1,286 1,702
MINORITY INTEREST...................................... 156 388
------------- ------------
179,783 154,895
------------- ------------
SHAREHOLDERS' EQUITY
$2.25 Preferred stock-par value $1; convertible;
cumulative; redeemable and exchangeable at
the option of the Company; aggregate
liquidation preference of $74,750;
15,000 shares authorized; 2,990 issued and
outstanding.................................... 2,990 2,990
$1.50 Preferred stock-par value $1; convertible;
cumulative; redeemable at option of the Company:
aggregate liquidation preference of $100,625;
15,000 shares authorized; 4,025 issued and
outstanding in 1993 and none in 1992........... 4,025
Common stock-par value $.10; 200,000 shares
authorized; 76,371 issued and 76,121
outstanding in 1993, 63,088 issued and 62,838
outstanding in 1992............................ 7,637 6,308
Capital in excess of par value................... 583,110 388,453
Cumulative translation adjustment................ (2,286) (2,495)
Retained deficit................................. (76,956) (91,872)
Treasury stock, at cost.......................... (1,750) (1,750)
------------- ------------
516,770 301,634
------------- ------------
$ 696,553 $ 456,529
============= ============
</TABLE>
See accompanying notes to the consolidated financial statements.
10
<PAGE> 11
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
OPERATING REVENUES
Contract drilling services.................................. $ 257,795 $ 175,610 $ 217,065
Engineering and consulting services......................... 2,292 3,263 8,286
Other revenue............................................... 4,444 5,293 4,800
--------- --------- ---------
264,531 184,166 230,151
--------- --------- ---------
OPERATING COSTS AND EXPENSES
Contract drilling services.................................. 173,865 128,364 169,322
Engineering and consulting services......................... 2,083 3,559 7,732
Other expense............................................... 2,736 3,329 2,436
Depreciation and amortization............................... 28,886 27,248 30,052
Selling, general and administrative......................... 28,284 30,716 32,684
Minority interest........................................... (232) 89 78
Restructuring charges/asset write-downs..................... 21,120 11,134
--------- --------- ---------
235,622 214,425 253,438
--------- --------- ---------
OPERATING INCOME (LOSS)........................................... 28,909 (30,259) (23,287)
OTHER INCOME (EXPENSE)
Interest expense............................................ (8,038) (13,274) (20,411)
Interest income............................................. 2,497 3,276 2,155
Other, net.................................................. 1,047 3,675 4,786
--------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM.......................................... 24,415 (36,582) (36,757)
INCOME TAX PROVISION............................................. (3,333) (3,396) (2,417)
--------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
EXTRAORDINARY ITEM.......................................... 21,082 (39,978) (39,174)
DISCONTINUED OPERATIONS.......................................... (3,372) (1,815)
--------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM.......................... 21,082 (43,350) (40,989)
EXTRAORDINARY ITEM............................................... 1,770 4,978
--------- --------- ---------
NET INCOME (LOSS)................................................ 22,852 (43,350) (36,011)
PREFERRED STOCK DIVIDENDS........................................ (7,936) (6,728) (721)
--------- --------- ---------
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES.................... $ 14,916 $ (50,078) $ (36,732)
========= ========= =========
INCOME (LOSS) APPLICABLE TO COMMON SHARES PER SHARE:
Continuing operations before extraordinary item.............. $ 0.20 $ (0.98) $ (0.88)
Discontinued operations...................................... (0.07) (0.04)
Extraordinary item........................................... 0.02 0.11
--------- --------- ---------
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES PER SHARE.......... $ 0.22 $ (1.05) $ (0.81)
========= ========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING....................... 66,923 47,762 45,554
</TABLE>
See accompanying notes to the consolidated financial statements.
11
<PAGE> 12
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1993 1992 1991
---------- --------- ---------
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net income (loss).......................................... $ 22,852 $ (43,350) $ (36,011)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization......................... 28,886 27,248 30,052
Asset write-downs..................................... 21,120 6,791
(Gain) loss on sale of assets......................... (785) (674) (4,428)
Extraordinary item.................................... (1,770) (4,978)
Gain on foreign exchange.............................. (79) (452) (569)
Minority interest..................................... (232) 89 78
Discontinued operations............................... 3,098 3,519
Deferred income tax provision......................... 201
Restructuring charges................................. 6,134
Accretion in unsecured debt........................... 254 296 258
Other................................................. 205 707 231
Changes in operating assets and liabilities:
Accounts receivable............................... (18,694) 12,158 (19,829)
Deferred pension costs............................ (177) (822) (677)
Other assets...................................... (7,378) 884 (3,511)
Debt issuance costs............................... (3,953) (291) (476)
Accounts payable.................................. 7,863 (9,281) 1,024
Accrued stock appreciation rights................. (126) 3 (1,085)
Other liabilities................................. 7,932 (3,911) 16,203
---------- --------- ---------
34,798 6,822 (7,073)
---------- --------- ---------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Purchase of property and equipment......................... (20,259) (7,891) (60,121)
Acquisition of Western rigs and related assets............. (150,000)
Proceeds from sale of property and equipment............... 1,712 11,394 48,120
Discontinued items......................................... 5,361
Investment in marketable securities........................ (15,100) (24,351) (2,006)
Reimbursable modifications in progress..................... 3,421 (2,221)
Investment in unconsolidated affiliate..................... (983) (2,455)
---------- --------- ---------
(184,630) (14,521) (16,228)
---------- --------- ---------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Proceeds from long-term debt............................... 125,000 21,600
Payment of long-term debt.................................. (109,592) (67,873) (53,022)
Dividends paid on preferred stock.......................... (7,936) (6,728) (721)
Proceeds from issuance of common stock..................... 97,451 29,752 1,156
Proceeds from issuance of preferred stock, net............. 96,500 70,785
Treasury stock............................................. (1,750)
Payment of short-term debt................................. (2,449) (712) (2,149)
(Increase) decrease in restricted cash..................... (936) (857)
(Increase) decrease in other assets and liabilities........ 116 749
Discontinued operations.................................... (58)
---------- --------- ---------
198,154 (46,418) 36,590
---------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH....................... 645 (1,003) 13
---------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............. 48,967 (55,120) 13,302
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD................ 20,210 75,330 62,028
---------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD...................... $ 69,177 $ 20,210 $ 75,330
========== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest.............................................. $ 7,033 $ 10,271 $ 17,936
Income taxes.......................................... $ 2,123 $ 1,250 $ 997
Noncash investing and financing activities:
Rig purchase with common stock........................ $ 5,725 $ $
</TABLE>
See accompanying notes to the consolidated financial statements.
12
<PAGE> 13
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except par value amounts)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Capital in Cumulative Retained
--------------- ---------------- Excess of Translation Earnings Treasury
Shares Amount Shares Amount Par Value Adjustment (Deficit) Stock
------ ------ ------ ------ ---------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1990 $ 45,232 $ 4,499 $288,237 $ 1,569 $ (4,970) $
Net loss.............................. (36,011)
Issuance of stock:
Sale of preferred stock.......... 2,990 2,990 67,795
Exercise of stock options........ 34 3 140
Contribution to benefit plans.... 148 15 769
Exercise of warrants............. 466 46 182
Treasury stock........................ 25 1,725 (1,750)
Stock appreciation rights cancelled... 1,101
Dividends on preferred stock.......... (721)
Translation adjustment................ (1,185)
Accretion of put option............... (92)
----- ------- ------ ------- -------- -------- -------- -------
DECEMBER 31, 1991 2,990 2,990 45,880 4,588 359,949 384 (41,794) (1,750)
Net loss.............................. (43,350)
Issuance of stock:
Sale of common stock............. 16,650 1,664 26,613
Exercise of stock options........ 322 32 767
Contribution to benefit plans.... 210 21 649
Exercise of warrants............. 34 3 3
Stock options granted at discount..... 472
Retirement of common stock............ (8)
Dividends on preferred stock.......... (6,728)
Translation adjustment................ (2,879)
----- ------- ------ ------- -------- -------- -------- -------
DECEMBER 31, 1992 2,990 2,990 63,088 6,308 388,453 (2,495) (91,872) (1,750)
Net income............................ 22,852
Issuance of stock:
Sale of common stock............. 12,041 1,204 93,705
Sale of preferred stock.......... 4,025 4,025 92,475
Purchase of Portal rigs.......... 626 63 5,662
Exercise of stock options........ 486 49 2,047
Contribution to benefit plans.... 130 13 560
Stock options granted at discount..... 208
Dividends on preferred stock.......... (7,936)
Translation adjustment................ 209
----- ------- ------ ------- -------- -------- -------- -------
DECEMBER 31, 1993 7,015 $ 7,015 76,371 $ 7,637 $583,110 $ (2,286) $(76,956) $(1,750)
===== ======= ====== ======= ======== ======== ======== =======
</TABLE>
See accompanying notes to the consolidated financial statements.
13
<PAGE> 14
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Noble Drilling Corporation ("Noble Drilling" or, together with its
consolidated subsidiaries, unless the context requires otherwise, the
"Company") is primarily engaged in domestic and international contract oil and
gas drilling and workover operations. On September 15, 1994, Chiles Offshore
Corporation ("Chiles") merged with Noble Offshore Corporation ("NOC"), a
subsidiary of Noble Drilling (the "Merger"). The Company's international
operations are conducted in the United Kingdom, Africa (excluding Nigeria),
the Far East, India, Canada, the Middle East and South America through its
subsidiary, Noble Drilling International Inc., and in Nigeria through its
subsidiaries, NOC and Noble Drilling (West Africa) Inc. (NDWA) and its
subsidiaries. The Company's operations in Mexico are conducted through its
subsidiaries, Noble Drilling International Inc. and Noble Drilling (Mexico)
Inc. (NDMI). Noble Drilling International Inc., NDWA and NDMI, together with
their subsidiaries, unless otherwise required by the context, are collectively
referred to herein as "Noble International."
On September 15, 1994, the Company completed the merger of Chiles into
NOC, a wholly owned subsidiary of Noble Drilling. The merger was accounted
for as a pooling of interests. The consolidated financial statements reflect
the restatement of the Company's historical financial statements to reflect
the merger of Chiles as a pooling of interests as of the beginning of the
earliest year presented and will represent the Company's historical financial
statements in the future. All Chiles common stock amounts are presented on an
equivalent Noble common stock basis.
CONSOLIDATION
The consolidated financial statements include the accounts of the
Company, its wholly owned subsidiaries, including Chiles, and the assets,
liabilities and operations of NN-1 Limited Partnership, of which the Company is
the general partner. The minority interest in NN-1 Limited Partnership is
included in the balance sheet and the statement of operations as minority
interest. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Effective during the quarter ended March 31, 1993, the Company's
international subsidiaries began reporting their financial results on a current
rather than a month-lag basis. This change resulted in the inclusion of the
December 1992 operating results of such international subsidiaries in the
operating results for the first quarter of 1993. Revenues and net income for
this additional one-month period were $7,687,000 and $140,000, respectively,
and are not considered material to the Company's overall results of operations.
Certain reclassifications have been made in the 1992 and 1991
consolidated financial statements to conform to the classifications used in the
1993 consolidated financial statements. These reclassifications have no impact
on net income or loss.
FOREIGN CURRENCY TRANSLATION
The Company follows a translation policy in accordance with Statement of
Financial Accounting Standards No. 52, Foreign Currency Translation. The U.S.
dollar has been designated as the functional currency where appropriate, based
on an evaluation of such factors as the markets in which the subsidiary
operates, generation of cash flow, financing activities and intercompany
arrangements. For other subsidiaries, such as in the case of the United
Kingdom and Canada, the local currency is the functional currency. Assets and
liabilities are translated at the rates of exchange on the balance sheet date.
Income and expense items are translated at average rates of exchange. The
resulting gains or losses arising from the translation of accounts from the
functional currency to the
14
<PAGE> 15
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
U.S. dollar are included as a separate component of shareholders' equity
designated as cumulative translation adjustment. Gains (losses) from foreign
currency exchange transactions are included in other income and consist of
$(611,000) in 1993, $452,000 in 1992 and $569,000 in 1991.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, demand deposits with
banks and all highly liquid investments with original maturities of three
months or less.
In accordance with Statement of Financial Accounting Standards No. 95,
Statement of Cash Flows, cash flows from the Company's operations in the United
Kingdom and Canada are calculated based on their functional currency. As a
result, amounts related to assets and liabilities reported on the
Consolidated Statements of Cash Flows will not necessarily agree to changes in
the corresponding balances on the Consolidated Balance Sheets. The effect of
exchange rates changes on cash balances held in foreign currencies is reported
on a separate line below Cash provided by (used in) financing activities.
Of the cash on hand at December 31, 1993 and 1992, approximately
$1,793,000 and $857,000, respectively, was restricted as a result of exchange
controls in certain foreign countries and cash collateral requirements for
performance bonds and letters of credit.
INVESTMENT IN MARKETABLE SECURITIES
Pursuant to the cash management policy implemented in 1992, the Company
invests in marketable debt securities. These are carried at cost plus accrued
interest and amortized premium, reduced by declines in market value which are
judged to be other than temporary. At December 31, 1993, this amount
approximated market value. On January 1, 1994, the Company adopted Statement
of Financial Standards No. 115, Accounting for Certain Instruments in Debt and
Equity Securities. The adoption of this statement did not have a material
effect on the recorded balances of marketable debt and equity securities as of
December 31, 1993.
INVESTMENT IN UNCONSOLIDATED AFFILIATES
The Company uses the equity method to account for affiliates in which it
does not have voting control.
INVENTORIES
Inventories of spare parts, material and supplies held for consumption
are stated principally at average cost.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, reduced by provisions to
recognize economic impairment in value when management determines that such
impairment has occurred. Drilling equipment and facilities are depreciated
using the straight-line method over estimated remaining useful lives ranging
from three to twenty-five years from the date of construction. In 1992, the
Company changed the method by which it depreciated five offshore drilling units
from the units-of-production method to the straight-line method. The
cumulative effect of this change was insignificant. All other property and
equipment is depreciated using the straight-line method over useful lives
ranging from three to twenty years.
Operations of certain offshore drilling rigs were adversely affected
by the significant decline in U.S. Gulf of Mexico offshore oil and gas
exploration activity which began in early 1991 and continued through July 1992.
As of late 1991 and early 1992, management of Chiles believed that one of the
rigs cold-stacked in the U.S. Gulf of Mexico would not recover its net carrying
value through future utilization over its estimated remaining useful life.
Accordingly, Chiles recorded a provision of $5.0 million to reduce the
carrying value of this rig to its estimated recoverable value as of December
31, 1991.
15
<PAGE> 16
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
During the second quarter of 1992, industry conditions continued to
deteriorate in the U.S. Gulf of Mexico, with dayrates reaching levels that had
not been seen since 1986. Accordingly, as of June 30, 1992, management of Chiles
determined, based on its continuing review of the net asset carrying values of
its rigs, that several additional rigs would not realize their net asset
carrying values over their estimated remaining useful lives. Accordingly,
Chiles recorded an additional provision of $21.1 million in the second quarter
of 1992 to reduce the carrying value of its rig fleet in the U.S. Gulf of
Mexico to their estimated recoverable values as of June 30, 1992.
Maintenance and repairs on drilling equipment are charged to expense as
incurred. Renewals and betterments are capitalized. Total maintenance and
repair expense for the years ended December 31, 1993, 1992 and 1991 were
approximately $25.9 million, $17.6 million, and $27.6 million, respectively.
When assets are sold, retired or otherwise disposed of, the cost and related
accumulated depreciation are eliminated from the accounts and the gain or loss
is recognized.
The Company capitalizes interest applicable to the construction of
drilling and other equipment. Interest of $1,054,000 was capitalized in 1991.
No interest was capitalized in 1993 or 1992.
OTHER ASSETS
In 1993, other assets include deferred debt issuance costs in connection
with the October 7, 1993 issuance of debt securities (see Note 5). These
charges totaled $4,015,000 and are being amortized over the life of the debt
securities. The accumulated amortization at December 31, 1993 is $92,000.
Also included in other assets are prepaid expenses related to the Company's
pension plans (see Note 12).
REVENUE RECOGNITION
Revenue from footage and turnkey drilling contracts is recognized on the
percentage-of-completion method based on progress to date compared with the
estimated number of days required to complete the contract. To the extent that
estimated contract costs are in excess of anticipated contract revenues, the
entire estimated loss is recognized in the current period. Revenue from
daywork contracts is recognized as the work progresses.
CONCENTRATION OF CREDIT RISK
The primary market for the Company's services is the offshore oil and gas
industry, and the Company's customers consist primarily of major oil companies
and independent oil and gas producers. The Company performs ongoing credit
evaluations of its customers and generally does not require material
collateral. The Company provides allowances for potential credit losses when
necessary.
INCOME (LOSS) PER COMMON SHARE
Income (loss) per share of common stock has been computed on the basis of
the weighted average number of common shares and, where dilutive, common share
equivalents, outstanding during the indicated periods, and includes the effect
of accretion on the stock subject to put option for the periods that the put
option was outstanding and preferred stock dividends (see Note 3). The
calculation of income (loss) per share assuming full dilution was
antidililutive; therefore, fully diluted earnings per share was not presented.
NOTE 2 - ACQUISITIONS
The Company acquired nine mobile offshore jackup drilling rigs and
associated assets (the "Western Acquisition") from The Western Company of North
America ("Western") for $150,000,000 in cash on October 7, 1993. The Western
Acquisition has been accounted for under the purchase method, and accordingly,
the operating results have been included in the consolidated operating results
since the date of acquisition. Assuming the Western Acquisition, the issuance
of debt securities discussed in Note 5 and the issuance of common stock
16
<PAGE> 17
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
discussed in Note 3 had occurred on January 1, 1992, unaudited pro forma
condensed consolidated results of operations would be as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1992
------------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Operating revenues . . . . . . . . . . . . . . . . . . $ 304,812 $ 239,780
Net income (loss) applicable to common shares . . . . . $ 7,697 $ (57,906)
Net income (loss) applicable to common shares per
share . . . . . . . . . . . . . . . . . . . . . . . . $ 0.10 $ (0.99)
</TABLE>
The pro forma results are not necessarily indicative of the actual
results that would have occurred had the acquisition been in effect for the
entire periods presented. In addition, the pro forma results are not intended
to be a projection of future results from combined operations.
On October 29, 1993, pursuant to a June 1993 agreement with Offshore
Logistics, Inc. and Grasso Corporation ("Grasso"), a subsidiary of the Company
acquired 1,026,674 shares of common stock of Grasso (approximately 27.5 percent
of the outstanding common stock), together with certain warrants and options to
purchase additional shares of common stock of Grasso, in consideration for a 50
percent interest in Seahawk Services Ltd., which was acquired by the Company in
July 1992.
Pursuant to an agreement dated August 20, 1993, the Company purchased two
submersible offshore drilling rigs from Portal Rig Corporation ("Portal") for
626,410 shares of common stock (see Note 3) on October 25, 1993. The Company
acquired the rigs subject to certain federal income tax "safe harbor leases"
and a related preferred ship mortgage relating to a tax benefit transaction
entered into in 1982 by a predecessor of Portal, and the Company will be
indemnified by Portal for any potential liabilities as a result of this earlier
tax benefit transaction.
Pursuant to the terms of an Asset Purchase Agreement dated as of November
30, 1990 between the Company and Transworld Drilling Company ("Transworld"), a
wholly owned subsidiary of Kerr-McGee Corporation, the Company purchased
substantially all the assets of Transworld on January 11, 1991. The purchase
price of $75,000,000 consisted of $5,000,000 in cash and $70,000,000 in a note,
which was subsequently amended. On October 14, 1993, this note was prepaid in
full (see Note 5). The purchased assets consisted of twelve mobile offshore
drilling units (five jackup and seven submersible rigs), all machinery,
equipment and spare parts inventory related to such rigs, the leasehold and fee
interests in real property owned by Transworld, certain intangible assets, and
drilling and other contracts related to the rigs. Noble Properties, Inc.
acquired title to the real property located in Lafayette, Louisiana, consisting
of approximately 1.6 acres and an office building, which the Company uses as
offices for its Gulf Coast Marine Division.
NOTE 3 - SHAREHOLDERS' EQUITY
On October 25, 1993, the Company issued 626,410 shares of common stock to
purchase two rigs from Portal as discussed in Note 2. The shares were issued
to Portal pursuant to a private placement, and the Company does not have an
obligation to register the resale of the shares under the Securities Act of
1933, as amended.
17
<PAGE> 18
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
Chiles completed a public offering of $1.50 Convertible Preferred Stock
on October 21, 1993 with the sale and issuance to the public of 4,025,000
shares by Chiles at $25.00 per share. Net proceeds to Chiles were
approximately $96.5 million, after underwriting discounts and issuance costs.
Chiles utilized approximately $45.2 million of these proceeds to retire all of
the Chiles outstanding long-term indebtedness, including principal and
interest, during the fourth quarter of 1993. In the Merger, this series of
preferred stock was converted into and exchanged for an equivalent number of
shares of Noble Drilling preferred stock having substantially the same rights,
privileges, preferences and voting power as the Chiles preferred stock.
Holders of this preferred stock are entitled to receive, when, as and if
declared by the Board of Directors, out of the funds of Chiles legally
available therefore, annual cash dividends at the rate of $1.50 per share,
payable quarterly. Dividends on this preferred stock are cumulative from the
date of original issuance.
On October 7, 1993, the Company issued and sold 12,041,000 shares of
common stock in an underwritten public offering (the "Stock Offering"). The
shares of common stock were sold for $8.375 per share. This resulted in net
proceeds of $94,909,000, after deducting underwriting discounts, commissions
and other related costs. The net proceeds of the Stock Offering together with
the proceeds from an issuance of debt securities (see Note 5) were used to
purchase the nine jackup rigs and related assets discussed previously in Note
2, and prepay a promissory note discussed in Note 5, with the balance of the
proceeds, approximately $26 million, being available for general corporate use.
Chiles completed a public offering of its common stock on November
20, and December 16, 1992 with the sale and issuance of 16,650,000
shares by Chiles. This offering was made concurrently with the restructuring
of Chiles' secured debt facilities. Net proceeds to Chiles were approximately
$28.3 million from the sale of common stock, of which $17.3 million was used
to reduce debt. The remaining $11.0 million of net proceeds provided
additional working capital to be used for general corporate purposes.
On November 21 and December 2, 1991, the Company issued and sold
2,600,000 and 390,000 shares, respectively, of a new series of $2.25
Convertible Exchangeable Preferred Stock (liquidation preference $25.00 per
share), par value $1.00 per share, of the Company in an underwritten stock
offering. The shares of preferred stock were sold to the underwriters at the
price of $24.00 per share, reflecting an underwriting discount of $1.00 per
share. Holders of the preferred stock are entitled to receive cash dividends
at an annual rate of $2.25 per share, when and if declared by the Board of
Directors, and such dividends are cumulative. Each share of preferred stock
is convertible, at the option of the holder, into 5.41946 shares of common
stock (subject to adjustment in certain circumstances). The preferred stock
is not redeemable prior to December 31, 1994. The preferred stock will
otherwise be redeemable at the option of the Company, in whole or in part, at
$26.575 per share if redeemed prior to December 31, 1995, and at prices
decreasing ratably annually to $25.00 per share on and after December 31, 2001,
plus accrued and unpaid dividends to the redemption date. The preferred stock
is also exchangeable, in whole but not in part, at the option of the Company
on any dividend payment date beginning December 31, 1993 for the Company's 9%
Convertible Subordinated Debentures due 2016 (the "Debentures") at a rate of
$25.00 principal amount of Debentures for each share of preferred stock. The
Debentures contain conversion and optional redemption provisions similar to
those of the preferred stock, and are subject to a mandatory annual sinking
fund redemption of 5% of the amount of Debentures initially issued, commencing
on December 31, 2002 (or the first December 31 following their issuance, if
later).
In connection with an acquisition in 1988, the Company granted to the
sellers an option to sell back to the Company up to an aggregate of 2,000,000
shares of Noble Drilling's common stock and series B convertible preferred stock
at varying prices at varying dates. In August 1990, 1,750,000 shares of the
series B convertible preferred stock were exchanged with the Company for
1,750,000 shares of common stock. On November 10, 1991, the sellers exercised
their rights under the put option, and the Company purchased an aggregate of
250,000 shares of common stock at a price of $7.00 per share.
18
<PAGE> 19
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
NOTE 4 - RESTRUCTURING CHARGES AND DISCONTINUED OPERATIONS
The results for 1991 include restructuring charges of $6,134,000, of
which $5,634,000 relates to the Company's decision to close its Mid-Continent
and Rocky Mountain divisions. Of this $5,634,000, $1,366,000 related to
severance costs for personnel, $1,300,000 related to rig moves and stacking and
$2,968,000 related to writedowns of rigs. The remaining $500,000 related to
the consolidation of the Company's New Orleans and Lafayette offices. During
1992, all amounts accrued were expended.
The results for 1991 reflect the Company's decision to sell its oil and
gas properties. The completion of the sale occurred during 1992 with total
proceeds of approximately $5,705,000. The results of oil and gas operations
and losses incurred on the sale are reflected as Discontinued Oil and Gas
Operations in the consolidated statements of operations.
NOTE 5 - LONG-TERM DEBT
On October 15, 1993, Chiles prepaid its $4.6 million unsecured zero
coupon note due in 1997 at its discounted value as of September 30, 1993. No
gain or loss was recognized as a result of this transaction. As discussed
further in Note 3, Chiles completed an offering of its preferred stock on
October 21, 1993. Approximately $45.2 million of the net proceeds were used
to retire all of Chiles' remaining outstanding long-term indebtedness,
including principal and interest.
On October 14, 1993, the promissory note to Transworld was prepaid in
full with proceeds from the Public Offerings (as defined below). The terms of
the note provided that interest did not accrue from September 1, 1991 through
December 31, 1992, after which date interest on the unpaid principal amount
accrued at a fixed rate of 7.5 percent per annum. The Company had accrued
interest on the note at 4.9 percent for all periods, which was the imputed
rate based on the revised note terms. An extraordinary gain of $1,770,000 for
extinguishment of debt was recognized (see Note 11) from the prepayment of the
note, representing excess accrued interest.
On October 7, 1993, in connection with the Western Acquisition and the
Stock Offering, the Company issued $125,000,000 principal amount of 9 1/4%
Senior Notes Due 2003 ("Senior Notes") (the Stock Offering and the issuance of
Senior Notes are collectively referred to as the "Public Offerings"). The
Senior Notes will mature on October 1, 2003. Interest on the Senior Notes is
payable semi-annually on April 1 and October 1 of each year, commencing April
1, 1994. The Senior Notes are redeemable at the option of the Company, in
whole or in part, on or after October 1, 1998 at 103.47 percent of principal
amount, declining ratably to par on or after October 1, 2001, plus accrued
interest. Mandatory sinking fund payments of 25 percent of the original
principal amount of the Senior Notes at par plus accrued interest will be
required on October 1, 2001 and October 1, 2002. The indenture governing the
Senior Notes contains certain restrictive covenants, including limitations on
additional indebtedness and the ability to secure such indebtedness,
restriction on dividends and certain investments and limitations on sales of
assets, sales and leaseback, transactions with affiliates, and merger or
consolidation.
In connection with the initial construction of the NN-1, the predecessor
of NN-1 Limited Partnership issued U.S. Government Guaranteed Ship Financing
Sinking Fund Bonds, of which $2,586,000 principal amount was outstanding at
December 31, 1993. The bonds are secured by the vessel, and the applicable
security agreement contains certain restrictions, among others, on
distributions of partners, dispositions of assets and services to related
parties. In addition, there are minimum working capital, net worth and
long-term debt to net worth requirements applicable to NN-1 Limited
Partnership. The Company's sharing percentage in NN-1 Limited Partnership's
distribution from operations is generally 90 percent.
As more fully discussed below, Chiles restructured its loan agreements
with its two primary bank lenders in November 1992 in connection with the
offering of Chiles' common stock discussed in Note 3. Immediately prior to the
restructuring, Chiles owed one of its lenders $51.8 million under a then
existing credit facility which had been originated in 1989 (with various
amendments during 1990 and 1991) and which bore interest rates ranging from
between LIBOR + 1 1/2% to LIBOR +2 1/2%. Chiles' other primary bank lending
arrangement, which had been
19
<PAGE> 20
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
originated in 1990-1991, had an outstanding balance of $12.5 million
immediately prior to the restructuring and bore interest at rates ranging from
LIBOR + 1 3/4% to LIBOR + 1 7/8%.
In September 1992, Chiles reached preliminary agreements with its two
secured lenders regarding the reduction and rescheduling of its secured debt
obligations. Such agreements with both secured lenders were finalized and
closed concurrently with the successful completion of Chiles' stock offering in
November 1992. Approximately $17.3 million of the offering proceeds were used
to make payments to its two secured lenders to reduce its indebtedness from
$51.8 million and $12.5 million to $39.0 million and $8.0 million,
respectively.
Under the terms of the debt restructuring, Chiles was required to make
quarterly principal payments totaling $3.3 million in 1993 and 1994, $8.0
million in 1995 and 1996 and $24.5 million in 1997. The loans bore interest at
LIBOR for interest periods of one, three, or six months (with a maximum of
three one-month periods in any 12-month period), as selected by Chiles, plus 2
1/2% per annum. Interest was payable quarterly. All but one of the Chiles'
rigs was pledged as security to the secured lenders.
The Company and its wholly owned subsidiary, NDWA, were parties to a
secured loan agreement (the Project Loan Agreement) with US WEST Financial
Services, Inc. dated as of October 31, 1990, as amended, pursuant to which NDWA
borrowed $52,500,000 for the purpose of financing, in part, the equipping,
refurbishment and mobilization to Nigeria of four offshore drilling rigs: the
NN-1, which is majority owned through NN-1 Limited Partnership, the Gene
Rosser, the Lewis Dugger and the Chuck Syring. On July 2, 1993, the final
installment of $6,562,000 plus accrued interest was paid in accordance with the
terms of the Project Loan Agreement. Interest was charged under the Project
Loan Agreement at the fixed rate of 11.12 percent per annum.
Annual maturities of long-term debt are $546,000 in 1994 through 1997,
$506,000 in 1998 and $125,000,000 thereafter.
The following table summarizes the Company's long-term debt:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1993 1992
---------- ----------
<S> <C> <C>
9 1/4% Senior Notes Due 2003, interest payable each April 1 and
October 1, with mandatory sinking fund payments of 25
percent of original principal amount on October 1, 2001 and
October 1, 2002 $ 125,000 $
U.S. Government Guaranteed Ship Financing Sinking Fund Bonds
with interest at 8.65% to 8.95% maturing serially from 1991 to 1998 2,586 3,106
Financial institution loan with interest at 11.12% due in quarterly
installments 19,688
Transworld note with no interest through December 31, 1992, thereafter
at 7.5% 38,565
Note payable to a bank, variable interest rate (6.25% at December 31,
1992), secured by the first preferred ship mortgage on 11 of the
Company's rigs in 1992 39,000
Notes payable to a bank, variable interest rate (6.25% at December 1,
1992), secured by the first preferred ship mortgage on two of the
Company's rigs in 1992 8,000
Note payable to an investor, non-interest-bearing, unsecured, face
amount $4,560 discounted at 15%, principal and interest, due December
22, 1997 2,275
Line of credit with interest at LIBOR plus 1.25% 1,264
Other 104 130
---------- ----------
127,690 112,028
Less - Current Installments ( 546) (24,748)
---------- ----------
$ 127,144 $ 87,280
========== ==========
</TABLE>
20
<PAGE> 21
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
NOTE 6 - CREDIT FACILITIES
At December 31, 1993, the Company's international subsidiaries had
available credit facilities aggregating $9,583,000, as described below, of
which $1,983,000 related to letter of credit facilities and $7,600,000, subject
to certain limitations, related to lines and letters of credit. At that date,
$1,083,000 had been utilized to support outstanding letters of credit, of which
$400,000 is secured by the Company's lines of credit. Amounts available under
such facilities were $1,300,000 to support letters of credit and $5,682,000 in
lines of credit. No amounts were drawn under the lines of credit at December
31, 1993. No lines of credit were available at December 31, 1993 in the United
States.
At December 31, 1993, the Company had issued certain stand-by and
commercial letters of credit aggregating $937,000, which were collateralized by
cash of the Company.
NOTE 7 - STOCK OPTIONS
EMPLOYEE STOCK OPTION PLANS
1991 STOCK OPTION PLAN
The Company's 1991 Stock Option and Restricted Stock Plan (the "1991
Plan") was adopted by the Board of Directors in January 1991 and approved by
shareholders in April 1991. The Company's two other employee stock option
plans, adopted in 1985 and 1987, were amended in connection with the adoption
of the 1991 Plan to provide that no further grants would be made under those
plans after April 25, 1991; however, all options outstanding at that date
("Pre-1991 Options") remained in effect in accordance with their respective
terms.
Under the 1991 Plan, a maximum of 1,900,000 shares of the Company's
common stock may be subject to grants of options or awards of restricted stock
to participants, who are selected from regular salaried officers or other
employees of the Company. Options may be either incentive options or
nonqualified options, and may be with or without stock appreciation rights
("SARs"). The option price under the 1991 Plan may not be less than 100 percent
of the fair market value of the common stock at the time of grant, in the case
of an incentive option, and may not be less than 50 percent of the fair market
value of the common stock at the time of grant, in the case of a nonqualified
option. All Pre-1991 Options were granted at an option price of at least 100
percent of the fair market value of the common stock at the time of grant. The
exercise of either the tandem SAR or the option serves to cancel the other. At
December 31, 1993, 1,044,437 shares were available for grant under the 1991
Plan. See Note 16.
The following is a summary of option transactions under the plans:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1993 1992
------------ ----------
<S> <C> <C>
Outstanding, beginning of year . . . . . . . . . . . . . . . . 1,586,034 2,020,693
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290,000 403,250
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . (169,880) (495,042)
Exercised (at per share prices ranging from $2.50 to $7.69). . (393,537) (342,867)
------------ ----------
Outstanding, end of year (at per share prices
ranging from $1.72 to $7.69 in 1993) . . . . . . . . . . . . 1,312,617 1,586,034
============ ==========
Exercisable, end of year (at per share prices
ranging from $2.50 to $7.69 in 1993) . . . . . . . . . . . . 703,042 986,309
============ ==========
</TABLE>
Of the options for 290,000 shares granted under the 1991 Plan in February
1993, 145,000 become exercisable at February 10, 1994 at $4.69 per share and
145,000 February 10, 1995 at $4.69 per share.
21
<PAGE> 22
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
1990 STOCK OPTION PLAN
Effective June 10, 1993, the Board of Directors of Chiles approved an
amendment to Chiles' Amended and Restated 1990 Stock Option Plan, pursuant to
which a maximum aggregate of 697,750 shares of Common Stock had been reserved
for grant to officers, directors, and employees. The amendment approved
increased the number of maximum shares for grant from 697,750 to 1,500,000.
Options are granted at not less than market value on the date of grant. The
grant of options is made by the Compensation Committee of the Board of
Directors at its sole discretion.
Following is a summary of option transactions during 1992 and 1993 under
the amended Chiles' nonqualified stock option plan:
<TABLE>
<CAPTION>
NUMBER OF OPTION
SHARES PRICES
-------- -------------
<S> <C> <C>
Options outstanding at January 1, 1992 . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . 404,250 2.59
--------
Options outstanding at December 31, 1992 . . . . . . 404,250
Granted . . . . . . . . . . . . . . . . . . . . . 473,100 5.33 to 7.33
Canceled . . . . . . . . . . . . . . . . . . . . . (60,900) 2.59 to 7.33
Exercised . . . . . . . . . . . . . . . . . . . . (8,400) 2.59
--------
Options outstanding at December 31, 1993 . . . . . . 808,050 $2.59 to 7.33
========
Exercisable at December 31, 1993 . . . . . . . . . 78,825
Reserved for future options . . . . . . . . . . . 308,550
</TABLE>
See Note 16.
OTHER STOCK OPTIONS
In addition to the above, during 1987, options to purchase a total of
300,000 shares of Noble Drilling's common stock at $2.50 per share were granted
to certain non-employee directors of the Company pursuant to stock option
agreements which were approved by shareholders at the 1988 annual meeting.
These options were granted with stock appreciation rights. Of these, stock
appreciation rights on 40,000 shares were exercised during 1990, and options to
purchase 160,000 shares were outstanding and exercisable at December 31, 1993.
In 1993, the shareholders approved the 1992 Nonqualified Stock Option
Plan for Non-Employee Directors (the "1992 Option Plan"). Under the 1992 Option
Plan, non-employee directors received a one-time grant of an option to purchase
10,000 shares of common stock, and thereafter, after each annual meeting of
shareholders of the Company, receive an annual grant of an option to purchase
3,500 shares of common stock. The options are granted at fair market value on
the grant date and are exercisable from time to time over a period commencing
one year from the grant date and ending on the expiration of ten years from the
grant date, unless terminated sooner as described in the 1992 Option Plan.
SEVERANCE AGREEMENTS
During 1993, Chiles entered into severance agreements with its officers
and certain managerial employees, including Chiles' rig management personnel.
These agreements provide for severance payments equal to between six months and
two years of such person's annual salary in the event they are terminated after
a change in control of Chiles.
NOTE 8 - INCOME TAXES
The Company follows Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes. Under SFAS 109, the tax provision is determined
under the liability method. Under this method, deferred tax assets and
liabilities are recognized based on differences between the financial statement
and tax bases of assets and liabilities using presently enacted tax rates.
22
<PAGE> 23
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
SFAS 109 provides in part that a deferred tax asset shall be evaluated
for realization based on a more likely than not criteria using a valuation
allowance. The Company's valuation allowance at January 1, 1993 and December
31, 1993 was $37,998,000 and $25,562,000, respectively.
Amounts of deferred tax assets and liabilities are as follows at:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1993 1992
-------- ----------
<S> <C> <C>
Deferred tax asset, net of valuation
allowance of $25,562 in 1993 and $37,998 in 1992 . . . . $ 35,927 $ 25,649
Deferred tax liability . . . . . . . . . . . . . . . . . . (35,927) (25,649)
-------- ----------
Net, total . . . . . . . . . . . . . . . . . . . . . . . . $ $
======== ==========
</TABLE>
The components of and changes in the net deferred taxes were as follows:
<TABLE>
<CAPTION>
DEFERRED
JANUARY 1, EXPENSE DECEMBER 31,
1993 (BENEFIT) 1993
---------- --------- -------------
<S> <C> <C> <C>
Deferred tax assets:
Domestic
Net operating loss carryforwards . . . . . . . $ 54,445 $ 1,231 $ 55,676
Other . . . . . . . . . . . . . . . . . . . . 246 246
Tax basis of assets in excess of book basis. . . 3,484 (2,789) 695
Investment tax credit carryforward . . . . . . 1,457 1,457
International
Tax basis of assets in excess of book basis. . . 1,577 (326) 1,251
Other . . . . . . . . . . . . . . . . . . . . 1,022 1,022
Net operating loss carryforward . . . . . . . . 2,684 (1,542) 1,142
-------- -------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . 63,647 (2,158) 61,489
Valuation Allowance . . . . . . . . . . . . . . . (37,998) 12,436 (25,562)
-------- -------- ---------
Net Deferred Tax Assets . . . . . . . . . . . . . $ 25,649 $ 10,278 $ 35,927
======== ======== =========
Deferred tax liabilities:
Domestic
Excess of net book basis over
remaining tax basis . . . . . . . . . . . . . $(23,707) $(10,998) $ (34,705)
International
Excess of net book basis over tax basis . . . . (1,222) (1,222)
Deferred Canadian
exchange gains . . . . . . . . . . . . . . . (1,942) 1,942
-------- -------- ---------
Deferred tax liabilities . . . . . . . . . . . . $(25,649) $(10,278) $ (35,927)
======== ======== =========
</TABLE>
23
<PAGE> 24
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
Income (loss) from continuing operations before income taxes and extraordinary
items consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Domestic . . . . . . . . . . . . . . . . . . $ 16,948 $(53,513) $ (39,388)
International . . . . . . . . . . . . . . . . 7,467 16,931 2,631
-------- --------- ---------
Total . . . . . . . . . . $ 24,415 $ (36,582) $ (36,757)
======== ========= =========
</TABLE>
The income tax provision consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Current - Domestic . . . . . . . . . . . . . $ 205
Current - International . . . . . . . . . . . 3,128 $ 3,396 $ 2,216
Deferred - International . . . . . . . . . . 201
-------- ------- -------
Total . . . . . . . . . . . $ 3,333 $ 3,396 $ 2,417
======== ======= =======
</TABLE>
A reconciliation of Federal statutory and effective income tax rates is
shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Statutory rate . . . . . . . . . . . . . . . . 34.9% 34.0% 34.0%
Effect of:
U.S. operating losses generating no current
tax benefit . . . . . . . . . . . . . . . . (40.0) (36.5)
U.S. operating loss carryforward benefit . . (23.6)
Canadian operating loss carryforward benefit. . (2.2)
International tax rates which are different
than the U.S. rate . . . . . . . . . . . . . 3.7 (3.3) (3.5)
Alternative minimum tax . . . . . . . . . . . . .8
Other, net . . . . . . . . . . . . . . . . . (.6)
------- ------- --------
Effective rate . . . . . . . . . . . . . . . . 13.6% (9.3)% (6.6)%
======= ======= ========
</TABLE>
The Company had available at December 31, 1993, unused investment tax
credits, which may be used to offset future U.S. taxes payable, of
approximately $1,457,000 expiring in various years from 1998 to 2001.
Substantially all of this amount represents the Company's allocated share of
the consolidated investment tax credit carryforward of Noble Affiliates, Inc.
("NAI"). Taxable income or loss from the Company's operations through September
30, 1985 was included in the consolidated tax returns of NAI. The Company
became a separate U.S. taxpayer as of October 1, 1985. Amendments or other
adjustments to the current or prior consolidated tax returns of NAI may reduce
the carryforward available to the Company. In addition, the Company has net
operating loss carryforwards ("NOLs") for tax purposes of approximately $161.1
million at December 31, 1993 which expire in the years 2001 through 2007.
If a corporation undergoes an "ownership change" within the meaning of
section 382 of the Internal Revenue Code of 1986, as amended, section 382
limits the corporation's right to use its then existing NOLs (and certain other
tax attributes) during each future year to a percentage of the fair market
value of such corporation's stock immediately before the ownership change (the
"Section 382 Limitation"). In general, there is an "ownership change" under
section 382 if over a three-year period certain shareholders increase their
percentage ownership of a corporation by more than 50 percent. To the extent
the amount of the NOLs existing at the time of an ownership change that are
used in any subsequent year is less than the annual Section 382 Limitation, the
otherwise available Section 382 Limitation is correspondingly increased for
future years. An ownership change for purposes of Section 382
24
<PAGE> 25
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
took place on November 10, 1988. The annual Section 382 Limitation is
approximately $7,656,000. The cumulative Section 382 Limitation, which pertains
only to losses incurred prior to November 10, 1988, is approximately
$28,407,000 as of December 31, 1993. See Note 16.
Applicable U.S. income and foreign withholding taxes have not been
provided on undistributed earnings of the Company's international subsidiaries.
Any withholding taxes ultimately paid may be recoverable as foreign tax credits
in the United States. Management does not intend to repatriate such
undistributed earnings for the foreseeable future except for distributions upon
which incremental income taxes would not be material. Any withholding taxes
ultimately paid may be recoverable as foreign tax credits in the United
States.
NOTE 9 - RELATED PARTY TRANSACTIONS
The Company has performed contract drilling services for certain related
parties. Revenue earned both internationally and domestically from related
parties was $780,000 and $2,068,000 in the years ended December 31, 1993 and
1991, respectively. There was no revenue earned from related parties in 1992.
An officer of Chiles entered into a note payable with Chiles in the
original amount of $110,000. Effective October 1, 1992, the Board of Directors
of Chiles approved the forgiveness of 20 percent of this debt each January 1,
commencing January 1, 1993, subject to the officer's continued employment with
Chiles on such dates. Pursuant to this arrangement, Chiles forgave $22,000 of
this indebtedness on each January 1, 1993 and 1994.
NOTE 10 - ADDITIONAL BALANCE SHEET AND STATEMENT OF OPERATIONS
INFORMATION
A summary of accounts receivable is shown below:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1993 1992
----------- -----------
<S> <C> <C>
Trade $ 56,391 $ 37,493
Allowance for doubtful accounts (697) (50)
----------- -----------
$ 55,694 $ 37,443
=========== ===========
</TABLE>
Other current assets include the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1993 1992
----------- -----------
<S> <C> <C>
Inventories $ 9,999 $ 4,908
Prepaid expense 6,624 4,279
Accrued revenue 9,726 10,438
Other 9,268 6,032
----------- ----------
$ 35,617 $ 25,657
=========== ==========
</TABLE>
25
<PAGE> 26
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
Other current liabilities include the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1993 1992
----------- -----------
<S> <C> <C>
Accrued worker's compensation accrual $ 4,133 $ 3,660
Accrued payroll and benefits 7,231 6,232
Accrued income taxes 3,875 1,455
Accrued taxes, other 2,347 334
Accrued interest 2,974 3,168
Deferred revenue 475 2,155
Other 12,409 10,647
---------- ---------
$ 33,444 $ 27,651
========== =========
</TABLE>
Rent expense was $1,297,000, $1,848,000 and $1,951,000 for 1993, 1992 and
1991, respectively.
Stock appreciation rights benefits of $126,000, $0 and $1,085,000 in
1993, 1992 and 1991, respectively, are included in selling, general and
administrative expenses.
Other income (expense) - other, net includes the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1993 1992 1991
-------- --------- --------
<S> <C> <C> <C>
Nonoperating asset write-downs $ $ $ (1,791)
Gain on sale of property, plant and equipment 737 993 757
Settlement for abandoned equipment 3,423
Foreign currency exchange (611) 452 569
Sale of scrap equipment 70 244 960
Insurance refund 318
Gain on sale of investment 261
Realized gain on marketable securities 272 656
Other 579 1,069 550
-------- -------- --------
$ 1,047 $ 3,675 $ 4,786
======== ======== ========
</TABLE>
26
<PAGE> 27
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
Nonoperating asset write-downs of $786,000 on an office building in Tulsa
and $1,005,000 on a maintenance facility in Oklahoma City are included in 1991.
Insurance settlement for abandoned equipment consists of a gain of
$3,423,000 on a contractual settlement with an operator in the amount of
$5,400,000 in respect of a rig abandoned in Somalia in 1991.
NOTE 11 - EXTRAORDINARY ITEMS
The Company prepaid the promissory note to Transworld in the fourth
quarter of 1993 with proceeds from the Public Offerings (see Notes 3 and 5).
This prepayment resulted in an extraordinary gain from extinguishment of debt
of $1,770,000 ($0.02 per common share), representing excess accrued interest.
Due to conditions of civil unrest in Somalia in December 1990, Company
personnel were forced to abandoned certain logistics and drilling equipment.
In 1991, the Company accepted an offer for settlement from its insurance
underwriters in the amount of $5,600,000 for deprivation with respect only to
certain logistics equipment. Accordingly, net loss for 1991 includes an
extraordinary gain of $4,978,000 ($0.11 per common share) attributable to this
settlement.
NOTE 12 - EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company has a noncontributory defined benefit plan which covers
substantially all salaried employees and a noncontributory defined benefit
pension plan which covers certain field employees. The benefits from these
plans are based primarily on years of service and employees' compensation near
retirement. The Company's funding policy is consistent with funding
requirements of applicable laws and regulations. The assets of these plans
consist of cash, municipal bonds and corporate equity securities.
Noble U.K. maintains a pension plan which covers all of its salaried,
nonunion employees. Benefits are based on credited service and the average of
the highest three years of qualified salary within the past ten years of
participation. The assets of the plan consists of shares of the Newton Exempt
Fund, which consists of approximately 83 percent equity securities, 14 percent
fixed income investments and 3 percent cash at December 31, 1993.
Pension cost includes the following components:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------
1993 1992 1991
------------------------ ------------------------- -----------------------
International Domestic International Domestic International Domestic
------------- -------- ------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Service costs (benefits earned
during the year) $ 563 $ 535 $ 572 $ 537 $ 737 $ 301
Interest cost on projected
benefit obligations 549 1,534 563 1,456 479 1,233
Actual return on assets (597) (2,506) (631) (1,065) (498) (2,784)
Amortization of net gain at
January 1 12 563 (4) (1,075) 14 726
Settlement, curtailment and
termination gain (327)
-------- -------- -------- --------- -------- ---------
Net pension (credit) expense $ 527 $ 126 $ 500 $ (474) $ 732 $ (524)
======== ======== ======== ========== ======== =========
</TABLE>
27
<PAGE> 28
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
The funded status of the plans is as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------
1993 1992
-------------------------- -----------------------
International Domestic International Domestic
------------- -------- ------------- --------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations
Vested benefits $ (6,473) $ (19,996) $ (6,040) $ (17,004)
Nonvested benefits (552) (533)
--------- --------- --------- ---------
Accumulated benefits (6,473) (20,548) (6,040) (17,537)
Effect of projected future
compensation levels (1,054) (1,474) (123) (1,201)
--------- --------- --------- ---------
Projected benefits (7,527) (22,022) (6,163) (18,738)
Plan assets at fair value 8,078 21,390 5,876 19,946
--------- --------- --------- ---------
Plan assets in excess (shortfall) of
projected benefit obligations 551 (632) (287) 1,208
Unrecognized net gain (loss) (1,392) 7,011 (570) 5,319
Unrecognized prior service cost 139 146
Unrecognized transition obligation
(assets) 128 (2,422) 140 (2,877)
Additional liability (1,034) (497)
--------- --------- --------- ---------
Prepaid asset (accrued liability) $ (713) $ 3,062 $ (717) $ 3,299
========= ========= ========= =========
</TABLE>
The Company revised the discount rates and salary scale assumptions
during 1993. The effect of the changes of the assumptions did not impact the
net accrued liability for the international plan or the net prepaid asset for
the domestic plan.
The projected benefit obligations for the international and domestic
plans were determined using an assumed discount rate of 8% and 7.25%,
respectively in 1993, 9.25% and 8%, respectively in 1992 and 9.25% and 9.0%,
respectively, in 1991. Assumed long-term rate of return on international
plan assets was 8.75%, 10% and 10% in 1993, 1992 and 1991, respectively.
Assumed long-term rate of return on domestic plan assets was 9% in each of the
years presented. The projected benefit obligations for the international and
domestic plans assume a compensation increase of 5.75% and 6% per annum,
respectively.
OTHER BENEFIT PLANS
The Company presently sponsors medical and other plans for the benefit of
its employees. The cost of maintaining these plans aggregated $3,793,000,
$4,092,000 and $6,390,000 in 1993, 1992 and 1991, respectively.
POSTRETIREMENT BENEFITS
In December 1990, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions. This standard requires that the
cost of postretirement benefits, such as health care and life insurance, be
accrued during the employees' active service periods to the date the employee
attains full eligibility for these benefits. The Company's policy provides
that the cost of these benefits be reimbursed by the retired participants.
Accordingly, there was no accumulated postretirement obligation at the date the
new standard was adopted (retroactive to January 1, 1992) and no ongoing
obligation.
28
<PAGE> 29
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
NOTE 13 - COMMITMENTS, CONTINGENCIES AND OBLIGATIONS
At December 31, 1993, the Company had certain noncancelable long-term
leases, principally for office space and facilities, with various expiration
dates. Future minimum rentals under such leases aggregate $1,134,000 for 1994,
$869,000 for 1995, $685,000 for 1996, $687,000 for 1997, $646,000 for 1998 and
$2,823,000 thereafter.
In November 1991, Chiles sold the semi-submersible offshore drilling and
production rig INTREPID to Braspetro Oil Services Company (Brasoil), a
subsidiary of Petrobras, the Brazilian national oil company. The terms of this
sale required Brasoil to pay Chiles $28.5 million in cash and required Chiles
to enter into a fixed price modification and upgrade contract with Brasoil
(Petrobras Contract) to enhance the rig's capabilities as an offshore
production platform. Chiles delivered the modified rig to Brasoil on September
25, 1992. Except for management fees of $1.6 million and $300,000 earned in
1992 and 1991, respectively, during the performance of the Petrobras Contract
offset by $500,000 of commissions paid and charged against earnings during
1991, Chiles has recognized no significant gain or loss as a result of this
project. In accordance with the Petrobras Contract, Brasoil has audited the
costs of two change orders made at Brasoil's request during the rig
modification. Chiles billed and collected from Brasoil $2.4 million related to
these two change orders. The Company does not believe that the outcome of
these negotiations by Brasoil will have a significant impact on Chiles'
financial position or results of operations.
In connection with the Petrobras Contract and other matters related to
the INTREPID, Chiles entered into an agreement to pay brokerage and advisory
fees of $3.0 million in addition to the $2.0 million in fees paid at the time
of the rig sale. To date, Chiles has paid $300,000 pursuant to this
agreement. Chiles believes that the other party to this agreement has failed
to provide the agreed to advisory services and that, because of such
non-performance, it owes no additional fees under the contract. During the
second quarter of 1993, Chiles received a demand for payment of all unpaid fees
from the broker, which Chiles denied. Management believes that this request
and any potential future claims for payment are without merit and is prepared
to defend vigorously any claim or other actions. Management further believes
that the Company will incur no material adverse effect on its financial
position or results of operations as a result of this matter.
In May 1992, four former employees brought an action against Chiles
alleging Chiles failed to compensate employees for time spent on certain self
study programs, pretour meetings and training activities. This suit is a
collective action pursuant to Section 16(b) of the Fair Labor Standards Act.
In February 1993, 257 potential plaintiffs filed a motion for consent to
participate in the action which motion was approved by the court. Chiles has
been notified by an additional ten potential plaintiffs who may seek to join
their action or pursue their related claims separately. Although this suit
remains in the discovery process, management intends to vigorously defend this
action and believes that the outcome of this action will not have any material
adverse effect on the financial position or results of operations of the
Company.
The Company is a defendant in certain other claims and litigation
arising out of operations in the normal course of business. In the opinion of
management, uninsured losses, if any, will not be material to the Company's
financial position or results of operations.
29
<PAGE> 30
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
NOTE 14 - INTERIM FINANCIAL DATA
Unaudited interim financial information for the years ended December 31,
1993 and 1992 is as follows:
<TABLE>
<CAPTION>
QUARTER ENDED,
---------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
1993
Operating revenues $ 65,323 $ 54,467 $ 63,431 $ 81,310
Operating income 2,258 5,457 6,462 14,732
Income (loss) applicable to
common shares:
Continuing operations(1) (2,015) 1,205 4,303 9,653
Extraordinary item 1,770
Net income (loss)(1) (2,015) 1,205 4,303 11,423
Income (loss) applicable to
common shares per share:
Continuing operations(1) $ (0.03) $ 0.02 $ 0.07 $ 0.13
Extraordinary item 0.02
Net income (loss)(1) (0.03) 0.02 0.07 0.15
1992
Operating revenues $ 48,167 $ 43,771 $ 43,540 $ 48,688
Operating income (loss) (3,750) (24,590) (2,148) 229
Income (loss) applicable to
common shares:
Continuing operations(1) (8,414) (28,084) (5,752) (4,517)
Discontinued operations (2,835) 211 (247) (440)
Net loss(1) (11,249) (27,783) (5,999) (4,957)
Loss applicable to common
shares per share:
Continuing operations(1) $ (0.18) $ (0.61) $ (0.13) $ (0.08)
Discontinued operations (0.06) (0.01)
Net loss(1) (0.24) (0.61) (0.13) (0.09)
</TABLE>
(1) After deducting preferred stock dividends.
NOTE 15 - GEOGRAPHICAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1993 1992 1991
---------- ---------- -----------
<S> <C> <C> <C>
Operating revenues
Domestic $ 125,505 $ 50,458 $ 115,031
International
United Kingdom 40,036 41,617 49,736
Canada 19,141 3,230 11,090
Far East 440 2,411 6,950
East Africa 1,848
India 4,093 4,655 3,063
Nigeria 58,630 80,217 40,020
Middle East 684 1,049 1,705
Mexico 10,503
Venezuela 3,736
Zaire 1,763
Other 529 708
---------- ---------- -----------
Total $ 264,531 $ 184,166 $ 230,151
========== ========== ===========
</TABLE>
30
<PAGE> 31
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1993 1992 1991
---------- ---------- -----------
<S> <C> <C> <C>
Operating income (loss)
Domestic $ 20,057 $ (49,842) $ (29,342)
International
United Kingdom 1,486 (234) 480
Canada 363 (1,463) (428)
Far East (223) (574) (1,110)
East Africa 842
India (116) 875 240
Nigeria 734 20,132 5,598
Middle East 328 466 (202)
Mexico 5,316
Venezuela 832
Zaire 400
Other (268) 381 635
-------- --------- ----------
Total $ 28,909 $ (30,259) $ (23,287)
======== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
1993 1992 1991
---------- ---------- -----------
<S> <C> <C> <C>
Identifiable assets
Domestic $ 393,525 $ 236,021 $ 262,330
International
United Kingdom 13,394 11,568 14,467
Canada 8,416 6,726 13,640
Far East 825 2,889 11,143
East Africa 205 486 11,025
India 16,422 17,595 19,052
Nigeria 140,542 179,798 224,413
Middle East 201 191 1,125
Mexico 36,999
Venezuela 64,025
Zaire 21,602
Other 397 1,255 3,792
--------- ---------- ----------
Total $ 696,553 $ 456,529 $ 560,987
========= ========== ==========
</TABLE>
Major customers are those that individually account for more than 10 percent of
the Company's total operating revenues. The following table shows percentage
of operating revenues for major customers during 1993, 1992 and 1991:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Customer A 17 % 28% 21%
Customer B 13 % 12%
</TABLE>
NOTE 16 - SUBSEQUENT EVENTS
On January 19, 1994, the Company signed a letter of intent for the
acquisition of all the outstanding common stock of Triton Engineering Services
Company ("Triton"). On April 22, 1994, the acquisition of Triton was
consummated and accounted for under the purchase method of accounting.
31
<PAGE> 32
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS, UNLESS OTHERWISE INDICATED)
During March 1994, Chiles received notice from the lessee of a bareboat
charter arrangement, which Chiles entered into in April 1993, that it was
exercising its option to purchase the Gulfwind for $10.0 million in cash.
Chiles completed the sale during the second quarter of 1994. Upon completion
of the sale, Chiles realized a gain of approximately $8.0 million for financial
reporting purposes.
On September 15, 1994, the Company completed the merger of Chiles with
and into its wholly owned subsidiary, NOC. The merger was approved by the
respective common stockholders of Noble Drilling and Chiles at separate
stockholder meetings held on September 15, 1994. In addition, the following
items were also approved at the Noble Drilling stockholder meeting (i) number
of authorized shares of Noble Drilling common stock was increased from
75,000,000 shares to 200,000,000 shares and (ii) the Noble Drilling 1991
Stock Option and Restricted Stock Plan was amended to increase the number of
shares of Noble Drilling common stock available for issuance from 1,900,000
shares to 5,200,000 shares. In connection with the Merger, all outstanding
Chiles common stock options granted under the 1990 Plan were cancelled and
exchanged for an aggregate of 480,000 shares of Noble Drilling common stock.
As discussed in Note 8, the Company has NOLs of approximately $161.1
million at December 31, 1993, a portion of which is subject to an annual
Section 382 limitation of $7,656,000 due to a 1988 ownership change. As a
result of the Merger, the Company believes that another ownership change with
respect to both Noble Drilling and Chiles may have occurred. The resulting
Section 382 limitation may limit the Company's ability to use the Noble
Drilling and Chiles NOLs in future years, although the effect, if any, of such
limitation will depend on the Company's profitability in future years. The
Company does not believe that any Section 382 limitation resulting from the
Merger or from any prior ownership changes will have a material adverse effect
on the Company's ability to utilize its net deferred tax assets.
32
<PAGE> 33
SCHEDULE V
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE
BEGINNING ADDITIONS, TRANSLATION AT END
CLASSIFICATION OF YEAR AT COST RETIREMENTS ADJUSTMENTS OTHER OF YEAR
-------------- ---------- ---------- ----------- ----------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED
DECEMBER 31, 1993 (1)
Drilling equipment and facilities $600,100 $172,417 $ (6,246) $ (464) $ $765,807
Other machinery and equipment 3,271 407 (68) (38) 3,572
Buildings, leasehold improvements
and furniture and fixtures 9,100 677 (235) (40) 9,502
Land and improvements 2,746 (19) 2,727
-------- -------- -------- ------- -------- --------
$615,217 $173,501 $ (6,549) $ (561) $ $781,608
======== ======== ======== ======= ======== ========
YEAR ENDED
DECEMBER 31, 1992
Drilling equipment and facilities $621,767 $ 5,297 $ (4,336) $(1,508) $(21,120)(2) $600,100
Other machinery and equipment 3,610 474 (972) (144) 2,968
Buildings, leasehold improvements
and furniture and fixtures 11,006 226 (1,566) (263) 9,403
Land and improvements 3,071 (213) (112) 2,746
-------- -------- -------- ------- -------- --------
$639,454 $ 5,997 $ (7,087) $(2,027) $(21,120) $615,217
======== ======== ======== ======= ======== ========
YEAR ENDED
DECEMBER 31, 1991
Drilling equipment and facilities $560,528 $125,264 $(58,747)(3) $ (278) $ (5,000)(4) $621,767
Other machinery and equipment 1,640 2,022 (3) (49) 3,610
Buildings, leasehold improvements
and furniture and fixtures 9,424 2,514 (843) (89) 11,006
Land and improvements 3,597 186 (691) (21) 3,071
-------- -------- -------- ------- -------- --------
$575,189 $129,986 $(60,284) $ (437) $ (5,000) $639,454
======== ======== ======== ======= ======== ========
</TABLE>
- - --------------------
(1) Certain reclassifications have been made in the 1992 consolidated financial
statements to conform to the classifications used in the 1993 consolidated
financial statements.
(2) Chiles recorded a provision of $21,120 to reduce the carrying value of
several of its rigs to their net realizable value as of June 30, 1992.
(3) During 1991, Chiles sold three jackup drilling rigs and its only
semi-submersible drilling rig.
(4) Chiles recorded a provision of $5,000 to reduce the carrying value of one
of its rigs to its estimated realizable value as of December 31, 1991.
33
<PAGE> 34
SCHEDULE VI
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT
AND EQUIPMENT
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE
BEGINNING ADDITIONS, TRANSLATION AT END
CLASSIFICATION OF YEAR AT COST RETIREMENTS ADJUSTMENTS OF YEAR
-------------- ---------- ---------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
YEAR ENDED
DECEMBER 31, 1993 (1)
Drilling equipment and facilities $272,254 $26,823 $(5,147) $(137) $293,793
Other machinery and equipment 1,453 590 (336) (4) 1,703
Buildings, leasehold improvements
and furniture and fixtures 2,890 1,031 (79) (14) 3,828
Land and improvements 238 17 255
-------- ------- ------- ----- --------
$276,835 $28,461 $(5,562) $(155) $299,579
======== ======= ======= ===== ========
YEAR ENDED
DECEMBER 31, 1992
Drilling equipment and facilities $250,666 $24,811 $(2,526) $(671) $272,280
Other machinery and equipment 1,105 619 (327) (58) 1,339
Buildings, leasehold improvements
and furniture and fixtures 3,177 778 (917) (60) 2,978
Land and improvements 324 20 (106) 238
-------- ------- ------- ----- --------
$255,272 $26,228 $(3,876) $(789) $276,835
======== ======= ======= ===== ========
YEAR ENDED
DECEMBER 31, 1991
Drilling equipment and facilities $227,374 $28,564 $(5,193) $(79) $250,666
Other machinery and equipment 550 569 (1) (13) 1,105
Buildings, leasehold improvements
and furniture and fixtures 3,100 93 (3) (13) 3,177
Land and improvements 290 34 324
-------- ------- ------- ----- --------
$231,314 $29,260 $(5,197) $(105) $255,272
======== ======= ======= ===== ========
</TABLE>
- - --------------------
(1) Certain reclassifications have been made in the 1992 consolidated financial
statements to conform to the classifications used in the 1993 consolidated
financial statements.
34
<PAGE> 35
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
c) Exhibit
-------
10.1 1991 Stock Option and Restricted Stock Plan (as amended and
restated through September 15, 1994).
35
<PAGE> 36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: December 8, 1994 NOBLE DRILLING CORPORATION
By:/s/ Byron L. Welliver
Byron L. Welliver, Senior Vice
President-Finance, Treasurer and Controller
36
<PAGE> 37
INDEX TO EXHIBITS
Exhibit
Number Exhibit
_________ _______
10.1 1991 Stock Option and Restricted Stock Plan (as
amended and restated through September 15, 1994).
<PAGE> 1
Exhibit 10.1
NOBLE DRILLING CORPORATION
1991 STOCK OPTION AND RESTRICTED STOCK PLAN
As Amended and Restated
Through September 15, 1994
SECTION 1. PURPOSE
The purpose of this Plan is to assist Noble Drilling Corporation, a
Delaware corporation, in attracting and retaining, as officers and key
employees of the Company and its Affiliates, persons of training, experience
and ability and to furnish additional incentive to such persons by encouraging
them to become owners of Shares of the Company's capital stock, by granting to
such persons Incentive Options, Nonqualified Options, Restricted Stock, or any
combination of the foregoing.
SECTION 2. DEFINITIONS
Unless the context otherwise requires, the following words as used herein
shall have the following meanings:
(a) "Affiliate" means any corporation (other than the Company) in
any unbroken chain of corporations (i) beginning with the Company if, at
the time of the granting of the Option or award of Restricted Stock, each
of the corporations other than the last corporation in the unbroken chain
owns stock possessing 50 percent or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain, or (ii) ending with the Company if, at the time of the granting of
the Option or award of Restricted Stock, each of the corporations, other
than the Company, owns stock possessing 50 percent or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
(b) "Agreement" means the written agreement (i) between the
Company and the Optionee evidencing the Option and any SARs that relate
to such Option granted by the Company and the understanding of the
parties with respect thereto or (ii) between the Company and a recipient
of Restricted Stock evidencing the restrictions, terms and conditions
applicable to such award of Restricted Stock and the understanding of the
parties with respect thereto.
(c) "Board" means the Board of Directors of the Company as the
same may be constituted from time to time.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Committee provided for in Section 3 of
the Plan as the same may be constituted from time to time.
(f) "Company" means Noble Drilling Corporation, a Delaware
corporation.
(g) "Corporate Transaction" shall have the meaning as defined in
Section 8 of the Plan.
(h) "Disinterested Person" means a person who satisfies the
definition thereof under Rule 16b-3 promulgated under the Exchange Act.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means the fair market value per Share as
determined by the Committee in good faith; provided, however, that if a
Share is listed or admitted to trading on a securities exchange
registered under the Exchange Act, the Fair Market Value per Share shall
be the average of the reported high and low sales price on the date in
question (or if there was no reported sale on such date, on the last
<PAGE> 2
preceding date on which any reported sale occurred) on the principal
securities exchange on which such Share is listed or admitted to trading,
or if a Share is not listed or admitted to trading on any such exchange
but is listed as a national market security on the National Association
of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or any
similar system then in use, the Fair Market Value per Share shall be the
average of the reported high and low sales price on the date in question
(or if there was no reported sale on such date, on the last preceding
date on which any reported sale occurred) on such system, or if a Share
is not listed or admitted to trading on any such exchange and is not
listed as a national market security on NASDAQ but is quoted on NASDAQ or
any similar system then in use, the Fair Market Value per Share shall be
the average of the closing high bid and low asked quotations on such
system for such Share on the date in question. For purposes of valuing
Shares to be made subject to Incentive Options, the Fair Market Value per
Share shall be determined without regard to any restriction other than
one which, by its terms, will never lapse.
(k) "Incentive Option" means an Option that is intended to satisfy
the requirements of Section 422(b) of the Code and Section 17 of the
Plan.
(l) "Nonqualified Option" means an Option that does not qualify as
a statutory stock option under Section 422 or 423 of the Code.
(m) "Option" means an option to purchase one or more Shares
granted under and pursuant to the Plan. Such Option may be either an
Incentive Option or a Nonqualified Option.
(n) "Optionee" means a person who has been granted an Option and
who has executed an Agreement with the Company.
(o) "Outside Director" means a director of the Company who is an
outside director within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.
(p) "Plan" means this Noble Drilling Corporation 1991 Stock Option
and Restricted Stock Plan, as amended.
(q) "Restricted Stock" means Shares issued or transferred pursuant
to Section 20 of the Plan.
(r) "SARs" means stock appreciation rights granted pursuant to
Section 7 of the Plan.
(s) "Securities Act" means the Securities Act of 1933, as amended.
(t) "Share" means a share of the Company's present common stock,
par value $.10 per share, and any share or shares of capital stock or
other securities of the Company hereafter issued or issuable in respect
of or in substitution or exchange for each such present share. Such
Shares may be unissued or reacquired Shares, as the Board, in its sole
and absolute discretion, shall from time to time determine.
SECTION 3. ADMINISTRATION
The Plan shall be administered by, and the decisions concerning the Plan
shall be made solely by, a Committee of two or more directors of the Company,
all of whom are (a) Disinterested Persons and (b) beginning immediately after
the first meeting of stockholders of the Corporation at which directors are to
be elected that occurs after December 31, 1994, Outside Directors. Each member
of the Committee shall be appointed by and shall serve at the pleasure of the
Board. The Board shall have the sole continuing authority to appoint members
of the Committee. In making grants or awards, the Committee shall take into
consideration the contribution the person has made or may make to the success
of the Company or its Affiliates and such other considerations as the Board may
from time to time specify.
The Committee shall elect one of its members as its chairman and shall
hold its meetings at such times and places as it may determine. A majority of
the members of the Committee shall constitute a quorum. All decisions
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and determinations of the Committee shall be made by the majority vote or
decision of the members present at any meeting at which a quorum is present;
provided, however, that any decision or determination reduced to writing and
signed by all members of the Committee shall be as fully effective as if it had
been made by a majority vote or decision at a meeting duly called and held.
The Committee may appoint a secretary (who need not be a member of the
Committee) who shall keep minutes of its meetings. The Committee may make any
rules and regulations for the conduct of its business that are not inconsistent
with the express provisions of the Plan, the bylaws or certificate of
incorporation of the Company or any resolutions of the Board.
All questions of interpretation or application of the Plan, or of a grant
of an Option and any SARs that relate to such Option or an award of Restricted
Stock, including questions of interpretation or application of an Agreement,
shall be subject to the determination of the Committee, which determination
shall be final and binding upon all parties.
Subject to the express provisions of the Plan, the Committee shall have
the authority, in its sole and absolute discretion, (a) to adopt, amend or
rescind administrative and interpretive rules and regulations relating to the
Plan; (b) to construe the Plan; (c) to make all other determinations necessary
or advisable for administering the Plan; (d) to determine the terms and
provisions of the respective Agreements (which need not be identical),
including provisions defining or otherwise relating to (i) the term and the
period or periods and extent of exercisability of the Options, (ii) the extent
to which the transferability of Shares issued upon exercise of Options or any
SARs that relate to such Options is restricted, (iii) the effect of termination
of employment upon the exercisability of the Options, and (iv) the effect of
approved leaves of absence (consistent with any applicable regulations of the
Internal Revenue Service) upon the exercisability of such Options; (e) subject
to Sections 9 and 11 of the Plan, to accelerate, for any reason, regardless of
whether the Agreement so provides, the time of exercisability of any Option and
any SARs that relate to such Option that have been granted or the time of the
lapsing of restrictions on Restricted Stock; (f) to construe the respective
Agreements; and (g) to exercise the powers conferred on the Committee under the
Plan. The Board may correct any defect or supply any omission or reconcile any
inconsistency in the Plan in the manner and to the extent it shall deem
expedient to carry it into effect, and it shall be the sole and final judge of
such expediency. The determinations of the Committee or Board, as the case may
be, on the matters referred to in this Section 3 shall be final and conclusive.
SECTION 4. SHARES SUBJECT TO THE PLAN
(a) The total number of Shares that may be purchased pursuant to
Options, issued or transferred pursuant to the exercise of SARs or
awarded as Restricted Stock shall not exceed 5,200,000 in the aggregate,
and the total number of shares that may be purchased pursuant to Options,
issued or transferred pursuant to the exercise of SARs or awarded as
Restricted Stock, by or to any one person during any continuous five-year
period shall not exceed 1,500,000 in the aggregate; provided that each
such maximum number of shares shall be increased or decreased as provided
in Section 13 of the Plan.
(b) At any time and from time to time after the Plan takes effect,
the Committee, pursuant to the provisions herein set forth, may grant
Options and any SARs that relate to such Options and award Restricted
Stock until the maximum number of Shares shall be exhausted or the Plan
shall be sooner terminated; provided, however, that no Incentive Option
and any SARs that relate to such Option shall be granted after January
31, 2001.
(c) Shares subject to an Option that expires or terminates prior
to exercise and Shares that had been previously awarded as Restricted
Stock that have since been forfeited shall be available for further grant
of Options or award as Restricted Stock. No Option shall be granted and
no Restricted Stock shall be awarded if the number of Shares for which
Options have been granted and which pursuant to this Section are not
again available for Option grant, plus the number of Shares that have
been awarded as Restricted Stock, would, if such Option were granted or
such Restricted Stock were awarded, exceed 1,900,000.
(d) Any Shares withheld pursuant to Section 19(c) of the Plan
shall not be available after such withholding for being optioned or
awarded pursuant to the provisions hereof.
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(e) Unless the Shares awarded as Restricted Stock are Shares that
have been reacquired by the Company as treasury shares, Restricted Stock
shall be awarded only for services actually rendered, as determined by
the Committee.
SECTION 5. ELIGIBILITY
The persons who shall be eligible to receive grants of Options and any
SARs that relate to such Options, and to receive awards of Restricted Stock,
shall be regular salaried officers or other employees of the Company or one or
more of its Affiliates.
SECTION 6. GRANT OF OPTIONS
(a) From time to time while the Plan is in effect, the Committee
may, in its sole and absolute discretion, select from among the persons
eligible to receive a grant of Options under the Plan (including persons
who have already received such grants of Options) such one or more of
them as in the opinion of the Committee should be granted Options. The
Committee shall thereupon, likewise in its sole and absolute discretion,
determine the number of Shares to be allotted for option to each person
so selected.
(b) Each person so selected shall be offered an Option to purchase
the number of Shares so allotted to him, upon such terms and conditions,
consistent with the provisions of the Plan, as the Committee may specify.
Each such person shall have a reasonable period of time, to be fixed by
the Committee, within which to accept or reject the proffered Option.
Failure to accept within the period so fixed may be treated as a
rejection.
(c) Each person who accepts an Option offered to him shall enter
into an Agreement with the Company, in such form as the Committee may
prescribe, setting forth the terms and conditions of the Option,
whereupon such person shall become a participant in the Plan. In the
event a person is granted both one or more Incentive Options and one or
more Nonqualified Options, such grants shall be evidenced by separate
Agreements, one for each Incentive Option grant and one for each
Nonqualified Option grant. The date on which the Committee completes all
action constituting an offer of an Option to a person, including the
specification of the number of Shares to be subject to the Option, shall
constitute the date on which the Option covered by such Agreement is
granted. In no event, however, shall an Optionee gain any rights in
addition to those specified by the Committee in its grant, regardless of
the time that may pass between the grant of the Option and the actual
signing of the Agreement by the Company and the Optionee.
(d) Each Agreement that includes SARs in addition to an Option
shall comply with the provisions of Section 7 of the Plan.
SECTION 7. GRANT OF SARS
The Committee may from time to time grant SARs in conjunction with all or
any portion of any Option either (i) at the time of the initial Option grant
(not including any subsequent modification that may be treated as a new grant
of an Incentive Option for purposes of Section 424(h) of the Code) or (ii) with
respect to Nonqualified Options, at any time after the initial Option grant
while the Nonqualified Option is still outstanding. SARs shall not be granted
other than in conjunction with an Option granted hereunder.
SARs granted hereunder shall comply with the following conditions and
also with the terms of the Agreement governing the Option in conjunction with
which they are granted:
(a) The SAR shall expire no later than the expiration of the
underlying Option.
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(b) Upon the exercise of an SAR, the Optionee shall be entitled to
receive payment equal to the excess of the aggregate Fair Market Value of
the Shares with respect to which the SAR is then being exercised
(determined as of the date of such exercise) over the aggregate purchase
price of such Shares as provided in the related Option. Payment may be
made in Shares, valued at their Fair Market Value on the date of
exercise, or in cash, or partly in Shares and partly in cash, as
determined by the Committee in its sole and absolute discretion.
(c) SARs shall be exercisable (i) only during such periods as may
be permissible without causing the Optionee to incur liability under
Section 16(b) of the Exchange Act, (ii) only at such time or times and
only to the extent that the Option to which they relate shall be
exercisable, (iii) only when the Fair Market Value of the Shares subject
to the related Option exceeds the purchase price of the Shares as
provided in the related Option, and (iv) only upon surrender of the
related Option or any portion thereof with respect to the Shares for
which the SARs are then being exercised.
(d) Upon exercise of an SAR, a corresponding number of Shares
subject to option under the related Option shall be canceled. Such
canceled Shares shall be charged against the Shares reserved for the
Plan, as provided in Section 4 of the Plan, as if the Option had been
exercised to such extent and shall not be available for future Option
grants or Restricted Stock awards hereunder.
SECTION 8. OPTION PRICE
The option price for each Share covered by an Incentive Option shall not
be less than the greater of (a) the par value of such Share or (b) the Fair
Market Value of such Share at the time such Option is granted. The option
price for each Share covered by a Nonqualified Option shall not be less than
the greater of (a) the par value of such Share or (b) 50 percent of the Fair
Market Value of such Share at the time the Option is granted. Notwithstanding
the two immediately preceding sentences, if the Company or an Affiliate agrees
to substitute a new Option under the Plan for an old Option, or to assume an
old Option, by reason of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization, or liquidation (any of such
events being referred to herein as a "Corporate Transaction"), the option price
of the Shares covered by each such new Option or assumed Option may be other
than the Fair Market Value of the Shares at the time the Option is granted as
determined by reference to a formula, established at the time of the Corporate
Transaction, which will give effect to such substitution or assumption;
provided, however, in no event shall:
(a) the excess of the aggregate Fair Market Value of the Shares
subject to the Option immediately after the substitution or assumption
over the aggregate option price of such Shares be more than the excess of
the aggregate Fair Market Value of all Shares subject to the Option
immediately prior to the substitution or assumption over the aggregate
option price of such Shares;
(b) in the case of an Incentive Option, the new Option or the
assumption of the old Option give the Optionee additional benefits that
he would not have under the old Option; or
(c) the ratio of the option price to the Fair Market Value of the
stock subject to the Option immediately after the substitution or
assumption be more favorable to the Optionee than the ratio of the option
price to the Fair Market Value of the stock subject to the old Option
immediately prior to such substitution or assumption, on a Share by Share
basis.
Notwithstanding the above, the provisions of this Section 8 with respect to the
option price in the event of a Corporate Transaction shall, in the case of an
Incentive Option, be subject to the requirements of Section 424(a) of the Code
and the Treasury regulations and revenue rulings promulgated thereunder. In
the case of an Incentive Option, in the event of a conflict between the terms
of this Section 8 and the above cited statute, regulations and rulings, or in
the event of an omission in this Section 8 of a provision required by said
laws, the latter shall control in all respects and are hereby incorporated
herein by reference as if set out at length.
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SECTION 9. OPTION PERIOD AND TERMS OF EXERCISE
(a) Each Option shall be exercisable during such period of time as
the Committee may specify, but in no event for longer than 10 years from
the date when the Option is granted; provided, however, that
(i) All rights to exercise an Option and any SARs that
relate to such Option shall, subject to the provisions of
subsection (c) of this Section 9, terminate three months after the
date the Optionee ceases to be employed by at least one of the
employers in the group of employers consisting of the Company and
its Affiliates, for any reason other than death or becoming
disabled (within the meaning of Section 22(e)(3) of the Code),
except that, in the event of the termination of employment of the
Optionee on account of fraud, dishonesty or other acts detrimental
to the interests of the Company or one or more of its Affiliates,
the Option and any SARs that relate to such Option shall thereafter
be null and void for all purposes. Employment shall not be deemed
to have ceased by reason of the transfer of employment, without
interruption of service, between or among the Company and any of
its Affiliates.
(ii) If the Optionee ceases to be employed by at least one of
the employers in the group of employers consisting of the Company
and its Affiliates, by reason of his death or becoming disabled
(within the meaning of Section 22(e)(3) of the Code), all rights to
exercise such Option and any SARs that relate to such Option shall,
subject to the provisions of subsection (c) of this Section 9,
terminate one year thereafter.
(b) If an Option is granted with a term shorter than 10 years, the
Committee may extend the term of the Option and any SARs that relate to
such Option, but for not more than 10 years from the date when the Option
was originally granted.
(c) In no event may an Option or any SARs that relate to such
Option be exercised after the expiration of the term thereof.
SECTION 10. OPTIONS AND SARS NOT TRANSFERABLE
No Option or any SARs that relate to such Option shall be transferable by
the Optionee otherwise than by will or the applicable laws of descent and
distribution or, on or after May 1, 1991, pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder.
SECTION 11. EXERCISE OF OPTIONS AND SARS
(a) During the lifetime of an Optionee, only such Optionee or his
guardian or legal representative may exercise an Option or any SARs that
relate to such Option granted to him. In the event of his death, any
then exercisable portion of his Option and any SARs that relate to such
Option may, within one year thereafter, or earlier date of termination of
the Option, be exercised in whole or in part by the duly authorized
representative of the deceased Optionee's estate.
(b) At any time, and from time to time, during the period when any
Option and any SARs that relate to such Option, or a portion thereof, are
exercisable, such Option or SARs, or portion thereof, may be exercised in
whole or in part; provided, however, that the Committee may require any
Option or SAR that is partially exercised to be so exercised with respect
to at least a stated minimum number of Shares.
(c) Each exercise of an Option, or a portion thereof, shall be
evidenced by a notice in writing to the Company accompanied by payment in
full of the option price of the Shares then being purchased. Payment in
full shall mean payment of the full amount due, either in cash, by
certified check or cashier's check, or,
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with the consent of the Committee, with Shares owned by the Optionee,
including an actual or deemed multiple series of exchanges of such
Shares.
Notwithstanding anything contained herein to the contrary, at the
request of an Optionee and to the extent permitted by applicable law, the
Committee may, in its sole and absolute discretion, selectively approve
arrangements with a brokerage firm or firms under which any such
brokerage firm shall, on behalf of the Optionee, make payment in full to
the Company of the option price of the Shares then being purchased, and
the Company, pursuant to an irrevocable notice in writing from the
Optionee, shall make prompt delivery of one or more certificates for the
appropriate number of Shares to such brokerage firm. Payment in full for
purposes of the immediately preceding sentence shall mean payment of the
full amount due, either in cash or by certified check or cashier's check.
(d) Each exercise of SARs, or a portion thereof, shall be
evidenced by a notice in writing to the Company.
(e) No Shares shall be issued upon exercise of an Option until
full payment therefor has been made, and an Optionee shall have none of
the rights of a stockholder until Shares are issued to him.
(f) Nothing herein or in any Agreement shall require the Company
to issue any Shares upon exercise of an Option or SAR if such issuance
would, in the opinion of counsel for the Company, constitute a violation
of the Securities Act or any similar or superseding statute or statutes,
or any other applicable statute or regulation, as then in effect. Upon
the exercise of an Option or SAR (as a result of which the Optionee
receives Shares), or portion thereof, the Optionee shall give to the
Company satisfactory evidence that he is acquiring such Shares for the
purposes of investment only and not with a view to their distribution;
provided, however, if or to the extent that the Shares delivered to the
Optionee shall be included in a registration statement filed by the
Company under the Securities Act, such investment representation shall be
abrogated.
SECTION 12. DELIVERY OF STOCK CERTIFICATES
As promptly as may be practicable after an Option or SAR (as a result of
the exercise of which the Optionee receives Shares), or a portion thereof, has
been exercised as hereinabove provided, the Company shall make delivery of one
or more certificates for the appropriate number of Shares. In the event that
an Optionee exercises both (i) an Incentive Option or SARs that relate to such
Option (as a result of which the Optionee receives Shares), or a portion
thereof, and (ii) a Nonqualified Option or SARs that relate to such Option (as
a result of which the Optionee receives Shares), or a portion thereof, separate
stock certificates shall be issued, one for the Shares subject to the Incentive
Option and one for the Shares subject to the Nonqualified Option.
SECTION 13. CHANGES IN COMPANY'S SHARES AND CERTAIN CORPORATE TRANSACTIONS
If at any time while the Plan is in effect there shall be any increase or
decrease in the number of issued and outstanding Shares of the Company effected
without receipt of consideration therefor by the Company, through the
declaration of a stock dividend or through any recapitalization or merger or
otherwise in which the Company is the surviving corporation, resulting in a
stock split-up, combination or exchange of Shares of the Company, then and in
each such event:
(a) An appropriate adjustment shall be made in the maximum number
of Shares then subject to being optioned or awarded as Restricted Stock
under the Plan, to the end that the same proportion of the Company's
issued and outstanding Shares shall continue to be subject to being so
optioned and awarded;
(b) Appropriate adjustment shall be made in the number of Shares
and the option price per Share thereof then subject to purchase pursuant
to each Option previously granted and then outstanding, to the end that
the same proportion of the Company's issued and outstanding Shares in
each such instance shall remain subject to purchase at the same aggregate
option price; and
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(c) In the case of Incentive Options, any such adjustments shall
in all respects satisfy the requirements of Section 424(a) of the Code
and the Treasury regulations and revenue rulings promulgated thereunder.
Except as is otherwise expressly provided herein, the issue by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with a direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number of or option price of Shares then
subject to outstanding Options granted under the Plan. Furthermore, the
presence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities
or preferred stock that would rank above the Shares subject to outstanding
Options granted under the Plan; (iv) the dissolution or liquidation of the
Company; (v) any sale, transfer or assignment of all or any part of the assets
or business of the Company; or (vi) any other corporate act or proceeding,
whether of a similar character or otherwise.
SECTION 14. EFFECTIVE DATE
The Plan shall be effective on January 31, 1991, the date of its adoption
by the Board, but shall be submitted to the stockholders of the Company for
approval and ratification at the next regular or special meeting thereof to be
held within 12 months after the Board shall have adopted the Plan. If at such
a meeting of the stockholders of the Company a quorum is present, the Plan
shall be presented for approval and ratification, and unless at such a meeting
the Plan is approved and ratified by the affirmative vote of a majority of the
outstanding shares of common stock, par value $.10 per share, of the Company
present in person or by proxy and entitled to vote, then and in such event, the
Plan and all then outstanding Options and any SARs that relate to such Options
shall become null and void and of no further force or effect. No award of
Restricted Stock shall be made prior to the approval and ratification of the
Plan by stockholders in accordance with this Section 14.
SECTION 15. AMENDMENT, SUSPENSION OR TERMINATION
The Board may at any time amend, suspend or terminate the Plan; provided,
however, that after the stockholders have approved and ratified the Plan in
accordance with Section 14 of the Plan, the Board may not, without approval of
the stockholders of the Company, amend the Plan so as to (a) increase the
maximum number of Shares subject thereto, as specified in Sections 4(a) and 13
of the Plan, or (b) reduce the option price for Shares covered by Options
granted hereunder below the price specified in Section 8 of the Plan; and
provided further, that the Board may not modify, impair or cancel any
outstanding Option or SAR that relates to such Option, or the restrictions,
terms or conditions applicable to Shares of Restricted Stock, without the
consent of the holder thereof.
SECTION 16. REQUIREMENTS OF LAW
Notwithstanding anything contained herein or in any Agreement to the
contrary, the Company shall not be required to sell or issue Shares under any
Option or SAR if the issuance thereof would constitute a violation by the
Optionee or the Company of any provision of any law or regulation of any
governmental authority or any national securities exchange; and as a condition
of any sale or issuance of Shares upon exercise of an Option or SAR, the
Company may require such agreements or undertakings, if any, as the Company may
deem necessary or advisable to assure compliance with any such law or
regulation.
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SECTION 17. INCENTIVE OPTIONS
The Committee may, in its sole and absolute discretion, designate any
Option granted under the Plan as an Incentive Option intended to qualify under
Section 422(b) of the Code. Any provision of the Plan to the contrary
notwithstanding, (a) no Incentive Option shall be granted to any person who, at
the time such Incentive Option is granted, owns stock possessing more than 10
percent of the total combined voting power of all classes of stock of the
Company or any Affiliate unless the option price under such Incentive Option is
at least 110 percent of the Fair Market Value of the Shares subject to the
Incentive Option at the date of its grant and such Incentive Option is not
exercisable after the expiration of five years from the date of its grant; and
(b) the aggregate Fair Market Value of the Shares subject to an Incentive
Option and the aggregate Fair Market Value of the shares of stock of the
Company or any Affiliate (or a predecessor corporation of the Company or an
Affiliate) subject to any other incentive stock option (within the meaning of
Section 422(b) of the Code) of the Company and its Affiliates (or a predecessor
corporation of any such corporation), that may become first exercisable in any
calendar year, shall not (with respect to any Optionee) exceed $100,000,
determined as of the date the Incentive Option is granted.
SECTION 18. MODIFICATION OF OPTIONS AND SARS
Subject to the terms and conditions of and within the limitations of the
Plan, the Committee may modify, extend or renew outstanding Options and any
SARs that relate to such Options granted under the Plan, or accept the
surrender of Options and any SARs that relate to such Options outstanding
hereunder (to the extent not theretofore exercised) and authorize the granting
of new Options and any SARs that relate to such new Options hereunder in
substitution therefor (to the extent not theretofore exercised).
Notwithstanding the foregoing provisions of this Section 18, no modification of
an Option and any SARs that relate to such Option granted hereunder shall,
without the consent of the Optionee, alter or impair any rights or obligations
under any Option and any SARs that relate to such Option theretofore granted
hereunder to such Optionee, except as may be necessary, with respect to
Incentive Options, to satisfy the requirements of Section 422(b) of the Code.
SECTION 19. AGREEMENT PROVISIONS
(a) Each Agreement shall contain such provisions (including,
without limitation, restrictions or the removal of restrictions upon the
exercise of the Option and any SARs that relate to such Option and the
transfer of shares thereby acquired) as the Committee shall deem
advisable. Each Agreement relating to an Option shall identify the
Option evidenced thereby as an Incentive Option or Nonqualified Option,
as the case may be. Incentive Options and Nonqualified Options may not
both be covered by a single Agreement. Each such Agreement relating to
Incentive Options shall contain such limitations and restrictions upon
the exercise of the Incentive Option as shall be necessary for the
Incentive Option to which such Agreement relates to constitute an
incentive stock option, as defined in Section 422(b) of the Code.
(b) Each Agreement shall recite that it is subject to the Plan and
that the Plan shall govern where there is any inconsistency between the
Plan and the Agreement.
(c) Each Agreement shall contain a covenant by the Optionee, in
such form as the Committee may require in its discretion, that he
consents to and will take whatever affirmative actions are required, in
the opinion of the Committee, to enable the Company or appropriate
Affiliate to satisfy its Federal income tax and FICA and any applicable
state and local withholding obligations. An Agreement may contain such
provisions as the Committee deems appropriate to enable the Company or
its Affiliates to satisfy such withholding obligations, including
provisions permitting the Company, upon the exercise of an Option or SAR
(as a result of which the Optionee receives Shares), to withhold Shares
otherwise issuable to the Optionee exercising the Option or SAR, or to
accept delivery of Shares owned by the Optionee, to satisfy the
applicable withholding obligations.
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(d) Each Agreement relating to an Incentive Option shall contain a
covenant by the Optionee immediately to notify the Company in writing of
any disqualifying disposition (within the meaning of Section 421(b) of
the Code) of Shares received upon the exercise of an Incentive Option.
SECTION 20. RESTRICTED STOCK
(a) Subject to the provisions of Section 14 of the Plan, the
Committee may from time to time, in its sole and absolute discretion,
award Shares of Restricted Stock to such persons as it shall select from
among those persons who are eligible under Section 5 of the Plan to
receive awards of Restricted Stock. Any award of Restricted Stock shall
be made from Shares subject hereto as provided in Section 4 of the Plan.
(b) A Share of Restricted Stock shall be subject to such
restrictions, terms and conditions, including forfeitures, if any, as may
be determined by the Committee, which may include, without limitation,
the rendition of services to the Company or its Affiliates for a
specified time or the achievement of specific goals, and to the further
restriction that no such Share may be sold, assigned, transferred,
discounted, exchanged, pledged or otherwise encumbered or disposed of
until the terms and conditions set by the Committee at the time of the
award of the Restricted Stock have been satisfied. Each recipient of an
award of Restricted Stock shall enter into an Agreement with the Company,
in such form as the Committee shall prescribe, setting forth the
restrictions, terms and conditions of such award, whereupon such
recipient shall become a participant in the Plan.
If a person is awarded Shares of Restricted Stock, whether or not
escrowed as provided below, the person shall be the record owner of such
Shares and shall have all the rights of a stockholder with respect to
such Shares (unless the escrow agreement, if any, specifically provides
otherwise), including the right to vote and the right to receive
dividends or other distributions made or paid with respect to such
Shares. Any certificate or certificates representing Shares of
Restricted Stock shall bear a legend similar to the following:
The shares represented by this certificate have been issued
pursuant to the terms of the Noble Drilling Corporation 1991 Stock
Option and Restricted Stock Plan and may not be sold, assigned,
transferred, discounted, exchanged, pledged or otherwise encumbered
or disposed of in any manner except as set forth in the terms of
the agreement embodying the award of such shares dated ,
19 .
In order to enforce the restrictions, terms and conditions that may
be applicable to a person's Shares of Restricted Stock, the Committee may
require the person, upon the receipt of a certificate or certificates
representing such Shares, or at any time thereafter, to deposit such
certificate or certificates, together with stock powers and other
instruments of transfer, appropriately endorsed in blank, with the
Company or an escrow agent designated by the Company under an escrow
agreement in such form as by the Committee shall prescribe.
After the satisfaction of the restrictions, terms and conditions
set by the Committee at the time of an award of Restricted Stock to a
person, a new certificate, without the legend set forth above, for the
number of Shares that are no longer subject to such restrictions, terms
and conditions shall be delivered to the person.
If a person to whom Restricted Stock has been awarded dies after
satisfaction of the restrictions, terms and conditions for the payment of
all or a portion of the award but prior to the actual payment of all or
such portion thereof, such payment shall be made to the person's
beneficiary or beneficiaries at the time and in the same manner that such
payment would have been made to the person.
The Committee shall have the authority (and the Agreement
evidencing an award of Restricted Stock may so provide) to cancel all or
any portion of any outstanding restrictions prior to the expiration of
such restrictions with respect to any or all of the Shares of Restricted
Stock awarded to a person hereunder on such terms and conditions as the
Committee may deem appropriate.
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(c) Without limiting the provisions of the first paragraph of
subsection (b) of this Section 20, if a person to whom Restricted Stock
has been awarded ceases to be employed by at least one of the employers
in the group of employers consisting of the Company and its Affiliates,
for any reason, prior to the satisfaction of any terms and conditions of
an award, any Restricted Stock remaining subject to restrictions shall
thereupon be forfeited by the person and transferred to, and reacquired
by, the Company or an Affiliate at no cost to the Company or the
Affiliate; provided, however, if the cessation is due to the person's
death or disability, the Committee may, in its sole and absolute
discretion, deem that the terms and conditions have been met for all or
part of such remaining portion. In the event of such forfeiture, the
person, or in the event of his death, his personal representative, shall
forthwith deliver to the Secretary of the Company the certificates for
the Shares of Restricted Stock remaining subject to such restrictions,
accompanied by such instruments of transfer, if any, as may reasonably be
required by the Secretary of the Company.
(d) In case of any consolidation or merger of another corporation
into the Company in which the Company is the surviving corporation and in
which there is a reclassification or change (including a change to the
right to receive cash or other property) of the Shares (other than a
change in par value, or from par value to no par value, or as a result of
a subdivision or combination, but including any change in such shares
into two or more classes or series of shares), the Committee may provide
that payment of Restricted Stock shall take the form of the kind and
amount of shares of stock and other securities (including those of any
new direct or indirect parent of the Company), property, cash or any
combination thereof receivable upon such consolidation or merger.
SECTION 21. GENERAL
(a) The proceeds received by the Company from the sale of Shares
pursuant to Options shall be used for general corporate purposes.
(b) Nothing contained in the Plan or in any Agreement shall confer
upon any Optionee or recipient of Restricted Stock the right to continue
in the employ of the Company or any Affiliate, or interfere in any way
with the rights of the Company or any Affiliate to terminate his
employment at any time, with or without cause.
(c) Neither the members of the Board nor any member of the
Committee shall be liable for any act, omission or determination taken or
made in good faith with respect to the Plan or any Option and any SARs
that relate to such Option granted hereunder or any Restricted Stock
awarded hereunder; and the members of the Board and the Committee shall
be entitled to indemnification and reimbursement by the Company in
respect of any claim, loss, damage or expenses (including counsel fees)
arising therefrom to the full extent permitted by law and under any
directors' and officers' liability or similar insurance coverage that may
be in effect from time to time.
(d) Any payment of cash or any issuance or transfer of Shares to
the Optionee, or to his legal representative, heir, legatee or
distributee, in accordance with the provisions hereof, shall, to the
extent thereof, be in full satisfaction of all claims of such persons
hereunder. The Committee may require any Optionee, legal representative,
heir, legatee or distributee, as a condition precedent to such payment,
to execute a release and receipt therefor in such form as it shall
determine.
(e) Neither the Committee, the Board nor the Company guarantees
the Shares from loss or depreciation.
(f) All expenses incident to the administration, termination or
protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Company or its Affiliates.
(g) Records of the Company and its Affiliates regarding a person's
period of employment, termination of employment and the reason therefor,
leaves of absence, re-employment and other matters shall be conclusive
for all purposes hereunder, unless determined by the Committee to be
incorrect.
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(h) Any action required of the Company shall be by resolution of
its Board or by a person authorized to act by resolution of the Board.
Any action required of the Committee shall be by resolution of the
Committee or by a person authorized to act by resolution of the
Committee.
(i) If any provision of the Plan or any Agreement is held to be
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining provisions of the Plan or such Agreement, as the
case may be, but such provision shall be fully severable and the Plan or
such Agreement, as the case may be, shall be construed and enforced as if
the illegal or invalid provision had never been included herein or
therein.
(j) Whenever any notice is required or permitted hereunder, such
notice must be in writing and personally delivered or sent by mail. Any
notice required or permitted to be delivered hereunder shall be deemed to
be delivered on the date on which it is personally delivered, or, whether
actually received or not, on the third business day after it is deposited
in the United States mail, certified or registered, postage prepaid,
addressed to the person who is to receive it at the address which such
person has theretofore specified by written notice delivered in
accordance herewith. The Company, an Optionee or a recipient of
Restricted Stock may change, at any time and from time to time, by
written notice to the other, the address that it or he had theretofore
specified for receiving notices. Until changed in accordance herewith,
the Company and each Optionee and recipient of Restricted Stock shall
specify as its and his address for receiving notices the address set
forth in the Agreement pertaining to the Shares to which such notice
relates.
(k) Any person entitled to notice hereunder may waive such notice.
(l) The Plan shall be binding upon the Optionee or recipient of
Restricted Stock, his heirs, legatees, distributees and legal
representatives, upon the Company, its successors and assigns, and upon
the Committee, and its successors.
(m) The titles and headings of Sections and paragraphs are
included for convenience of reference only and are not to be considered
in the construction of the provisions hereof.
(n) All questions arising with respect to the provisions of the
Plan shall be determined by application of the laws of the State of Texas
except to the extent Texas law is preempted by Federal law.
(o) Words used in the masculine shall apply to the feminine where
applicable, and wherever the context of the Plan dictates, the plural
shall be read as the singular and the singular as the plural.
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