<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _________
COMMISSION FILE NUMBER: 0-13857
NOBLE DRILLING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 73-0374541
(State of incorporation) (I.R.S. employer identification number)
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
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days X Yes No
--- ---
Number of shares of Common Stock outstanding as of August 9, 1994:
48,606,871
Page 1 of 14 Pages
Index to Exhibits on page 13
================================================================================
<PAGE> 2
FORM 10-Q
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
-------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 26,283 $ 4,896
Restricted cash 1,819 1,793
Investment in marketable securities 31,536 37,387
Accounts receivable 50,393 40,293
Costs of uncompleted contracts in
excess of billings 2,063
Other current assets 38,270 32,329
----------- -----------
Total current assets 150,364 116,698
----------- -----------
PROPERTY AND EQUIPMENT
Drilling equipment and facilities 632,455 618,021
Other 17,314 13,836
----------- -----------
649,769 631,857
Accumulated depreciation (275,676) (261,630)
----------- -----------
374,093 370,227
----------- -----------
OTHER ASSETS 14,788 12,792
----------- -----------
$ 539,245 $ 499,717
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term notes payable $ 5,562 $
Current installments of long-term debt 546 546
Accounts payable 9,508 9,110
Interest payable 2,815 3,548
Other current liabilities 50,953 29,085
----------- -----------
Total current liabilities 69,384 42,289
LONG-TERM DEBT 126,871 127,144
OTHER LIABILITIES 1,174 1,175
MINORITY INTEREST 1,809 156
----------- -----------
199,238 170,764
----------- -----------
SHAREHOLDERS' EQUITY
Preferred stock 2,990 2,990
Common stock 4,870 4,780
Capital in excess of par value 339,530 333,617
Cumulative translation adjustment (2,308) (2,286)
Retained deficit (3,325) (8,398)
Treasury stock, at cost (1,750) (1,750)
----------- -----------
340,007 328,953
----------- -----------
$ 539,245 $ 499,717
=========== ===========
</TABLE>
See notes to interim financial statements.
-2-
<PAGE> 3
FORM 10-Q
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
--------------------------
1994 1993
---- ----
<S> <C> <C>
OPERATING REVENUES
Contract drilling services $ 53,982 $ 37,496
Turnkey drilling services 15,229
Engineering and consulting services 1,047 615
Other revenue 1,335 1,372
---------- -----------
71,593 39,483
---------- -----------
OPERATING COSTS AND EXPENSES
Contract drilling services 34,978 24,600
Turnkey drilling services 12,486
Engineering and consulting services 708 515
Other expense 1,044 675
Depreciation and amortization 7,500 4,278
Selling, general and administrative 9,388 4,529
Minority interest 276 (98)
---------- -----------
66,380 34,499
---------- -----------
OPERATING INCOME 5,213 4,984
OTHER INCOME (EXPENSE)
Interest expense (3,114) (900)
Interest income 659 312
Other, net 2,583 336
---------- -----------
INCOME BEFORE INCOME TAXES 5,341 4,732
INCOME TAX PROVISION (1,372) (635)
---------- -----------
NET INCOME 3,969 4,097
PREFERRED STOCK DIVIDENDS (1,682) (1,682)
---------- -----------
NET INCOME APPLICABLE TO COMMON SHARES $ 2,287 $ 2,415
---------- -----------
---------- -----------
NET INCOME PER COMMON SHARE $ 0.05 $ 0.07
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 48,727 34,992
</TABLE>
See notes to interim financial statements.
-3-
<PAGE> 4
FORM 10-Q
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------
1994 1993
---------- -----------
<S> <C> <C>
OPERATING REVENUES
Contract drilling services $ 111,847 $ 87,465
Turnkey drilling services 15,229
Engineering and consulting services 1,356 1,484
Other revenue 2,409 2,706
--------- --------
130,841 91,655
--------- --------
OPERATING COSTS AND EXPENSES
Contract drilling services 72,979 59,585
Turnkey drilling services 12,486
Engineering and consulting services 966 1,425
Other expense 1,645 1,353
Depreciation and amortization 14,661 8,867
Selling, general and administrative 15,712 10,471
Minority interest 239 (81)
--------- --------
118,688 81,620
--------- --------
OPERATING INCOME 12,153 10,035
OTHER INCOME (EXPENSE)
Interest expense (6,114) (1,910)
Interest income 1,246 749
Other, net 3,726 102
--------- --------
INCOME BEFORE INCOME TAXES 11,011 8,976
INCOME TAX PROVISION (2,575) (1,487)
--------- --------
NET INCOME 8,436 7,489
PREFERRED STOCK DIVIDENDS (3,364) (3,364)
--------- --------
NET INCOME APPLICABLE TO COMMON SHARES $ 5,072 $ 4,125
========= ========
NET INCOME PER COMMON SHARE $ 0.10 $ 0.12
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 48,538 34,905
</TABLE>
See notes to interim financial statements.
-4-
<PAGE> 5
FORM 10-Q
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1994 1993
-------- --------
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net income $ 8,436 $ 7,489
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 14,661 8,867
(Gain) loss on sale of assets (572) (373)
(Gain) loss on foreign exchange 200 254
Minority interest 239 (81)
Deferred income tax provision 1,384
Accrued stock appreciation rights 57
Other (1,276) 103
Changes in operating assets and liabilities:
Accounts receivable 14,844 (1,548)
Deferred pension costs 114 (139)
Other assets 4,029 (3,877)
Debt issuance costs 177
Accounts payable (11,954) 2,338
Other liabilities (3,069) 1,245
-------- --------
27,213 14,335
-------- --------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Purchase of property and equipment (19,349) (2,443)
Proceeds from acquisition of business, net of cash paid 13,600
Proceeds from sale of property and equipment 1,979 403
Investment in marketable securities 5,851 7,839
Payments to minority interest holders, net (3,978)
Investment in unconsolidated affiliate (263) (28)
-------- --------
(2,160) 5,771
-------- --------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Payment of long-term debt (273) (13,820)
Dividends paid on preferred stock (3,364) (3,364)
Proceeds from issuance of common stock 827 1,203
Payment of short-term debt (4) (2,449)
(Increase) decrease in restricted cash (26)
(Increase) decrease in other assets and liabilities (111) 111
-------- --------
(2,951) (18,319)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (715) (10)
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 21,387 1,777
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,896 3,142
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 26,283 $ 4,919
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 5,794 $ 1,098
Income taxes $ 1,666 $ 166
Noncash investing and financing activities:
Acquisition of business $ 9,169
</TABLE>
See notes to interim financial statements.
-5-
<PAGE> 6
FORM 10-Q
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - FINANCIAL STATEMENT BASIS
The consolidated balance sheet as of June 30, 1994 ("Noble Drilling"
or, together with its consolidated subsidiaries, unless the context requires
otherwise, the "Company"), the related consolidated statements of operations
for the three- and six- month periods ended June 30, 1994 and 1993 and the
consolidated statements of cash flows for the six-month periods ended June 30,
1994 and 1993 are unaudited. In the opinion of management, all adjustments,
consisting of only normal recurring adjustments, necessary for a fair
presentation of such financial statements have been included. These interim
financial statements and notes are presented in condensed form as permitted by
Form 10-Q and should be read in conjunction with the Company's annual financial
statements and notes thereto contained in the 1993 Annual Report on Form 10-K.
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.
NOTE 2 - NET INCOME PER COMMON SHARE
Net income per common share 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. Each share of preferred
stock was assumed to be converted into 5.41946 shares of common stock for
purposes of calculating fully diluted earnings per share. The calculation of
income per share assuming full dilution was antidilutive; therefore, fully
diluted earnings per share was not presented.
NOTE 3 - ACQUISITIONS
The Company acquired nine mobile offshore jackup drilling rigs and
associated assets (the "Western Acquisition") from The Western Company of North
America 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.
On April 22, 1994, the Company acquired all of the issued and
outstanding shares of common stock (the "Shares") of Triton Engineering
Services Company ("Triton Acquisition"), a Texas corporation ("Triton"),
pursuant to the terms of the Stock Purchase Agreement dated April 22, 1994.
Triton is engaged, through its subsidiaries, in providing engineering,
consulting and turnkey drilling services and manufacturing and rental of
oilfield equipment, for the oil and gas industry. In consideration for the
Shares, the Company paid approximately $4,085,000 in cash, issued promissory
notes of $4,000,000 which mature on October 21, 1994 and 751,864 shares of the
Company's common stock valued at $5,169,000. In addition, the Company has a
contingent obligation at the end of two years to pay additional consideration,
including up to 254,551 shares of common stock, subject to
-6-
<PAGE> 7
FORM 10-Q
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in table are in thousands, except per share amounts)
(Unaudited)
reduction as a result of certain events, as well as an indeterminable number of
additional shares in the event Triton achieves certain operating results in
1994.
Assuming the Western Acquisition and the issuance of the common stock
and debt securities discussed under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources - Credit Facilities and Long-Term Debt" and the Triton
Acquisition had both occurred on January 1, 1993, unaudited pro forma condensed
consolidated results of operations are shown below in the table.
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------------------
1994 1993
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 156,976 $ 179,697
Net income applicable to common shares . . . . . . . . . . . . . . . . . . . $ 5,166 $ 1,638
Net income per common share . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.10 $ 0.03
</TABLE>
The pro forma results are not necessarily indicative of the actual
results that would have occurred had the acquisitions 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.
NOTE 4 - PENDING ACQUISITION
On June 13, 1994, Noble Drilling signed a definitive merger agreement
with Chiles Offshore Corporation ("Chiles") pursuant to which Chiles will
merge with and into a wholly-owned subsidiary of Noble Drilling. The merger
agreement provides that each share of Chiles common stock will be exchanged
for 0.75 of a share of Noble common stock and each share of Chiles $1.50
preferred stock will be exchanged for one share of a newly created series of
$1.50 convertible preferred stock of Noble Drilling. The merger is conditioned
upon the approval of common stockholders of each company, required regulatory
approvals and other conditions.
-7-
<PAGE> 8
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The following table sets forth selected financial information of the
Company expressed as a percentage of total operating revenues for the periods
indicated.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
---------------------------- ----------------------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating revenues
Contract drilling services
International offshore . . . . . . . . . . . . 33.3% 25.2% 35.8% 29.9%
Domestic offshore . . . . . . . . . . . . . . 21.8 39.2 25.2 32.8
International labor . . . . . . . . . . . . . 12.7 21.3 13.9 19.9
International land . . . . . . . . . . . . . . 4.4 6.2 7.1 9.5
Domestic land . . . . . . . . . . . . . . . . 3.3 3.0 3.5 3.4
Turnkey drilling services . . . . . . . . . . . . 21.3 11.6
Engineering and consulting services . . . . . . . 1.4 1.6 1.0 1.6
Other revenue . . . . . . . . . . . . . . . . . . 1.8 3.5 1.9 2.9
----- ----- ----- -----
100.0 100.0 100.0 100.0
Operating costs (1) . . . . . . . . . . . . .. . . (68.7) (65.3) (67.3) (68.0)
Depreciation and amortization . . . . . . . . . . (10.5) (10.8) (11.2) (9.7)
Selling, general and administrative . .. . . . . . (13.1) (11.5) (12.0) (11.4)
Minority interest . . . . . . . . . . . . . . . . (0.4) 0.2 (0.2) 0.1
----- ----- ----- -----
Operating income . . . . . . . . . . . . . . . . . 7.3 12.6 9.3 11.0
Interest expense . . . . . . . . . . . . . . . . (4.4) (2.3) (4.7) (2.1)
Interest income . . . . . . . . . . . . . . . . . 0.9 0.8 1.0 0.8
Other, net . . . . . . . . . . . . . . . . . . . . 3.6 0.9 2.8 0.1
Income tax provision . . . . . . . . . . . . . . . (1.9) (1.6) (1.9) (1.6)
----- ----- ----- -----
Net income . . . . . . . . . . . . . . . . . . . . 5.5% 10.4% 6.5% 8.2%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
- - -------------------
(1) Consists of operating costs and expenses other than depreciation and
amortization, selling, general and administrative, and minority interest.
-8-
<PAGE> 9
FORM 10-Q
RESULTS OF OPERATIONS
The consolidated operating results for the second quarter of 1994
("Current Quarter") and first six months of 1994 ("Current Period") reflect
higher activity levels compared to the same periods in 1993, particularly in
the Company's international offshore operations. Revenues increased primarily
a result of the addition to the Company's drilling rig fleet of the rigs
purchased through the Western Acquisition and the turnkey drilling operations
acquired in the Triton Acquisition during the Current Quarter. The land
operations improved as a result of improved dayrates and utilization. Domestic
offshore revenues increased primarily due to improved dayrates with respect to
the comparable periods in 1993; however, utilization rates decreased from
comparable periods in 1993 and contract margins declined due to increased
stacking expenses and higher repair and supply costs.
Operating revenues from contract drilling and turnkey services
increased 84 percent for the Current Quarter to $69,211,000 from $37,496,000
for the same quarter in 1993. The 84 percent increase consists of 41 percent
attributable to turnkey revenues and 43 percent attributable to increased
international utilization and improved domestic dayrates. Although the
Company's domestic offshore dayrates for the Current Quarter and Current
Period were higher than those in 1993, dayrates in the Gulf of Mexico have
declined since the beginning of 1994. Operating revenues from international
contract drilling operations were $36,042,000 (or 52 percent of total contract
drilling services revenue) for the Current Quarter, compared to $20,821,000
(or 56 percent of total contract drilling services revenue) for the comparable
quarter in 1993. Net income for the Current Quarter decreased slightly to
$3,969,000 from $4,097,000 for the corresponding quarter in 1993 due to
decreased domestic utilization and contract margins, partially offset by
increased margins from the international operations.
Operating revenues for the Current Period increased 43% compared with
the comparable period in 1993, primarily a result of revenues associated with
the rigs purchased from Western and the Current Quarter revenues of $16,579,000
from Triton. Net income was $8,436,000 for the Current Period compared with
net income of $7,489,000 for the same period in 1993. Operating costs as a
percentage of operating revenues were 67% as compared to 68% in the 1993
period. This decrease was attributable to the increased contract contribution
from the international land and offshore operations offset by reduced operating
margins in the domestic offshore operations.
The average domestic offshore rig utilization rate decreased to 71
percent for the Current Period from 87 percent for the comparable period in
1993. The Company's utilization has been impacted by the movement of rigs into
the Gulf of Mexico since late 1993. The average domestic land rig utilization
rate was 48 percent and 32 percent for the Current Period and comparable period
in 1993, respectively.
The average international offshore rig utilization rate decreased to
82 percent for the Current Period from 84 percent for the comparable period in
1993, as a result of the Ed Holt being off contract due to repairs and reduced
operating levels in Nigeria. At June 30, 1994, the Company had 15 labor
contracts on operator-owned rigs in its international operations, compared to
16 contracts at June 30, 1993. The average international land rig
utilization rate increased to 72 percent for the Current Period from 34 percent
for the comparable period in 1993 as a result of the higher natural gas
activity levels in Canada.
The decrease in engineering services revenues for the Current Period
was due to decreased oil and gas development activity in the United Kingdom
resulting from depressed oil prices partially offset by the engineering and
consulting services operating revenues generated by Triton of $764,000.
Depreciation and amortization expense for the Current Quarter and
Current Period increased from the comparable quarter and period in 1993
reflecting depreciation of the assets acquired in the Western and Triton
Acquisitions.
-9-
<PAGE> 10
FORM 10-Q
The increase in selling, general and administrative expenses as a
percentage of operating revenues for the Current Quarter and Current Period as
compared to the comparable quarter and period in 1993 was principally a result
of the Western and Triton Acquisitions.
Other, net for the Current Period increased by $3,624,000 from the
comparable 1993 period. The increase was primarily due to a gain of $807,000
from an insurance recovery related to the Company's Nigeria operations and a
gain of $1,593,000 from a recovery of a previously written-off note receivable
associated with the dissolution of a portion of the Company's Far East
operations. The Company received 2,925,000 shares of Century Drilling Limited
(an Australian company) common stock valued at $1,288,000 and $275,000 in cash
as proceeds from the recovery of the written-off note receivable.
The increase in accounts receivable, costs of uncompleted contracts in
excess of billings, other current assets, other current liabilities and
minority interest was due to the Triton Acquisition.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
At June 30, 1994, the Company had cash, cash equivalents, restricted
cash and investments in marketable securities of $59.6 and $24.7 million of
funds available under various lines of credit. In the Current Quarter and
Current Period, cash provided by operations was $16.5 million and $27.2
million. The Company expects to continue to generate cash flow from operations
for the remainder of 1994, assuming no material decrease in demand for contract
drilling and turnkey services. The Company will continue to have cash
requirements for debt principal and interest payments and preferred dividends,
when and if declared. For the remainder of 1994 and the first six months of
1995, principal and interest payments are estimated to be approximately $17.9
million. Giving effect to an assumed full conversion of Noble Drilling's $2.25
Convertible Exchangeable Preferred Stock (the "Preferred Stock") on December
31, 1994, dividends on the Preferred Stock for the remainder of 1994 and the
first six months of 1995 are estimated to be approximately $1.7 million. The
Company expects to fund these obligations, totaling $19.6 million, out of cash
and short-term investments as well as cash expected to be provided by
operations.
Capital expenditures for the remainder of 1994 and the first six
months of 1995 are planned to aggregate approximately $50.0 million, of which
the majority are discretionary and relate to upgrades of equipment which
management considers desirable to improve the marketability of the fleet, but
which can be deferred if necessary. These capital expenditures will be funded
from operating cash flows to the extent available, existing cash balances
and/or with available lines of credit.
CREDIT FACILITIES AND LONG-TERM DEBT
On June 16, 1994, the Company signed an agreement with First
Interstate Bank of Texas, N.A. for a $25.0 million revolving credit facility
and $5.0 million letter of credit facility. At June 30, 1994 the Company had
lines of credit totaling $26.0 million and letter of credit facilities totaling
$5.7 million subject to the Company's maintenance of certain levels of
collateral. Based on levels of collateral at June 30, 1994, the Company had
$24.7 million available under these lines of credit and $5.0 million available
to support the issuance of letters of credit.
In connection with the initial construction of the NN-l, the
predecessor of NN-1 Limited Partnership issued U.S. Government Guaranteed Ship
Financing Sinking Fund Bonds, of which $2.3 million was outstanding at June
-10-
<PAGE> 11
FORM 10-Q
30, 1994. 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 percent.
On October 7, 1993, in connection with the Western Acquisition, the
Company issued 12,041,000 shares of common stock and $125,000,000 principal
amount of 9 1/4% Senior Notes Due 2003 (the "Senior Notes"). 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. 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, restrictions on dividends and certain investments,
and limitations on sale of assets, sales and leasebacks, transactions with
affiliates, and mergers or consolidations.
CASH FLOWS
The net cash provided by operations in the Current Period was
$27,213,000 compared with net cash provided by operations of $14,335,000 for
the same period in 1993. The increase was primarily the result of the
increased international activity in 1994.
The net cash used in investing activities in the Current Period was
$2,160,000 compared with net cash provided by investing activities of
$5,771,000 in the same period in 1993. The decline in the Current Period
compared to the 1993 period was due primarily to cash used in capital
expenditures and Triton's payment to a minority interest holder of a Mexican
joint venture, offset by net cash proceeds received as a result of the Triton
Acquisition.
The net cash used in financing activities was $2,951,000 in the
Current Period compared with $18,319,000 for the first six months of 1993. The
decrease in net cash used was primarily due to lower debt amortization
requirements in the current period.
The increase in cash and cash equivalents from January 1 to June 30,
1994 of $21,387,000 was primarily the result of cash provided by operations of
$27,213,000 and net cash proceeds received of $13,600,000 from the Triton
Acquisition offset by capital expenditures of $19,349,000 and payment on
preferred stock dividends of $3,364,000.
TRANSACTION WITH CHILES OFFSHORE CORPORATION
On June 13, 1994, Noble Drilling signed a definitive merger agreement
with Chiles, pursuant to which Chiles will merge with and into a wholly-owned
subsidiary of Noble Drilling. The merger agreement provides that each share of
Chiles common stock will be exchanged for 0.75 of a share of Noble common stock
and each share of Chiles $1.50 preferred stock will be exchanged for one share
of a newly created
-11-
<PAGE> 12
FORM 10-Q
series of $1.50 convertible preferred stock of Noble Drilling. The merger is
conditioned upon the approval of common stockholders of each company, required
regulatory approvals and other conditions.
On July 8, 1994, the Company filed a Registration Statement on Form
S-4 with the Securities and Exchange Commission detailing the merger agreement.
The respective meetings of the stockholders of Noble Drilling and Chiles are
expected to occur on September 15, 1994 and the merger is expected to become
effective as soon as practicable thereafter.
NIGERIAN SITUATION
The Company has significant operations in Nigeria. Since the
cancellation of presidential elections in June 1993, Nigeria has undergone a
period of political unrest. The reluctance of Nigeria to proceed with a
transition to civilian rule has resulted in a series of strikes, protests and
disruptions to the Nigerian economy. In July 1994, both of Nigeria's oil
worker unions called for a strike to protest the government's continued refusal
to hand over the power to the winner of the 1993 presidential election. During
the first week of August, other national labor unions joined in the oil
worker's strike and tensions have increased, causing widespread civil unrest
and severely curtailing most commercial and economic activity in Nigeria.
Specifically, the strike has resulted in the suspension of virtually all
drilling activity in Nigeria. There can be no assurance as to the length or
outcome of the unrest in Nigeria.
Currently, the Company has two rigs under contract and three rigs
stacked in Nigeria. Although drilling activity has been suspended on one rig,
the Company continues to earn dayrates for both rigs under the drilling
contracts. The contracts for both rigs contain clauses that allow the operator
to suspend operations in the event of force majeure and to terminate the
contract if the force majeure continues; however, neither operator has elected
to suspend operations pursuant to these clauses. The Company maintains war and
political risk and business interruption insurance, subject in the case of
certain coverages, to cancellation on seven days notice. The current political
instability may delay or jeopardize the Company's ability to renew existing
drilling contracts or to secure new contracts for the rigs. No assurance can
be given that the civil and political climate in Nigeria will improve.
Drilling activities in Nigeria accounted for 19 percent and 13 percent,
respectively, of the Company's revenues during 1993 and the first six months of
1994.
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<PAGE> 13
FORM 10-Q
INDEX TO EXHIBITS
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) The following exhibits are filed as part of this Form 10-Q:
10.1 -- Credit Agreement dated as of June 16, 1994 among
Noble Drilling Corporation, First Interstate Bank of Texas,
N.A., in its individual capacity and as agent and Credit
Lyonnais Cayman Island Branch (filed as Exhibit 10.1 to the
Company's Registration Statement on Form S-4 (No. 33-54495) and
incorporated herein by reference).
10.2 -- Revolving Credit Note dated June 16, 1994 of Noble Drilling
Corporation in the amount of $12,500,000 in favor of Credit
Lyonnais Cayman Island Branch (filed as Exhibit 10.2 to the
Company's Registration Statement on Form S-4 (No. 33-54495) and
incorporated herein by reference).
10.3 -- Revolving Credit Note dated June 16, 1994 of
Noble Drilling Corporation in the amount of $12,500,000 in
favor of First Interstate Bank of Texas, N.A. (filed as
Exhibit 10.3 to the Company's Registration Statement on Form
S-4 (No. 33-54495) and incorporated herein by reference).
10.4 -- Guaranty Agreement dated as of June 16, 1994 by and among
Noble Drilling (U.S.) Inc., Noble Drilling (West Africa) Inc.
and Noble Drilling (Mexico) Inc. (filed as Exhibit 10.4 to
the Company's Registration Statement on Form S-4 (No.
33-54495) and incorporated herein by reference).
b) The following report on Form 8-K/A Amendment No. 1 was filed
by the Company on June 30, 1994:
Form 8-K/A Amendment No.1 dated June 30, (Date of Event:
April 22, 1994), which reported the acquisition of all the
issued and outstanding capital stock of Triton Engineering
Services Company under "Item 2. Acquisition or Disposition
of Assets."
c) The following report on Form 8-K was filed by the Company on
June 13, 1994:
Form 8-K dated June 13, 1994, which reported the signing of a
definitive merger agreement with Chiles Offshore Corporation
under "Item 2. Transaction with Chiles Offshore Corporation."
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<PAGE> 14
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NOBLE DRILLING CORPORATION
DATE: August 11, 1994 /s/ JAMES C. DAY
-------------------------------------
JAMES C. DAY,
Chairman,
President and
Chief Executive Officer
DATE: August 11, 1994 /s/ BYRON L. WELLIVER
-------------------------------------
BYRON L. WELLIVER,
Senior Vice President-Finance and
Treasurer (Principal
Financial Officer)
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