<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSON
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
March 31, 1994
OR
/ / TRANSACTION 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. Yes /X/ No / /
Number of shares of Common Stock outstanding as of May 10, 1994:
48,390,710.
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<PAGE> 2
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 9,674 $ 4,896
Restricted cash 1,789 1,793
Investment in marketable securities 34,873 37,387
Accounts receivable 41,748 40,293
Other current assets 37,937 32,329
---------- ----------
Total current assets 126,021 116,698
---------- ----------
PROPERTY AND EQUIPMENT
Drilling equipment and facilities 621,689 618,021
Other 13,995 13,836
-------- ----------
635,684 631,857
Accumulated depreciation (268,311) (261,630)
---------- ----------
367,373 370,227
---------- ----------
OTHER ASSETS 13,483 12,792
---------- ----------
$ 506,877 $ 499,717
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current installments of long-term debt $ 546 $ 546
Accounts payable 7,569 9,110
Interest payable 5,612 3,548
Other current liabilities 33,305 29,085
---------- ----------
Total current liabilities 47,032 42,289
LONG-TERM DEBT 127,138 127,144
OTHER LIABILITIES 1,108 1,175
MINORITY INTEREST 119 156
---------- ----------
175,397 170,764
---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock 2,990 2,990
Common stock 4,784 4,780
Capital in excess of par value 333,710 333,617
Cumulative translation adjustment (2,641) (2,286)
Retained deficit (5,613) (8,398)
Treasury stock (1,750) (1,750)
---------- ----------
331,480 328,953
---------- ----------
$ 506,877 $ 499,717
---------- ----------
---------- ----------
</TABLE>
See notes to interim financial statements.
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<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 March 31,
-----------------------------
1994 1993
------- -------
<S> <C> <C>
OPERATING REVENUES
Contract drilling services $57,865 $49,969
Engineering services 309 869
Other revenue 1,074 1,334
------- -------
59,248 52,172
------- -------
OPERATING COSTS AND EXPENSES
Contract drilling operations 38,001 34,985
Engineering services 258 910
Other expense 601 678
Depreciation and amortization 7,161 4,589
Selling, general and administrative 6,324 5,942
Minority interest (37) 17
------- -------
52,308 47,121
------- -------
OPERATING INCOME 6,940 5,051
OTHER INCOME (EXPENSE)
Interest expense (3,000) (1,010)
Interest income 587 437
Other, net 1,143 (234)
------- -------
INCOME BEFORE INCOME TAXES 5,670 4,244
INCOME TAX PROVISION (1,203) (852)
------- -------
NET INCOME 4,467 3,392
PREFERRED STOCK DIVIDENDS (1,682) (1,682)
------- -------
NET INCOME APPLICABLE TO COMMON SHARES $ 2,785 $ 1,710
------- -------
------- -------
NET INCOME PER COMMON SHARE $ 0.06 $ 0.05
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 48,355 34,712
</TABLE>
See notes to interim financial statements.
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<PAGE> 4
FORM 10-Q
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------
1994 1993
-------- ---------
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net income $ 4,467 $ 3,392
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation and amortization 7,161 4,589
Gain on sale of assets (74) (8)
Loss on foreign exchange 24 96
Minority interest (37) 17
Deferred income tax provision 660
Accrued stock appreciation rights 22
Other 6 51
Changes in operating assets and liabilities:
Accounts receivable (1,577) (8,212)
Deferred pension cost 1 (35)
Other assets (5,414) 2,316
Debt issuance costs 77
Accounts payable 221 2,127
Other liabilities 5,173 1,001
------- --------
10,688 5,356
------- --------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Purchase of property and equipment (6,228) (1,282)
Proceeds from sale of property and equipment 135 131
Investment in marketable securities 2,514 4,719
Investment in unconsolidated affiliate (238) (28)
------- --------
(3,817) 3,540
------- --------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Payment of long-term debt (6) (6,926)
Dividends paid on preferred stock (1,682) (1,682)
Proceeds from issuance of common stock 244 324
Payment of short-term debt (2,449)
Increase in restricted cash 4
Decrease in other assets 75
------- --------
(1,440) (10,658)
------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (653) 24
------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,778 (1,738)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,896 3,142
------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,674 $ 1,404
------- --------
------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 15 $ 577
Income taxes $ 908 $ 96
</TABLE>
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<PAGE> 5
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)
NOTE 1 - FINANCIAL STATEMENT BASIS
The consolidated balance sheet as of March 31, 1994, the related
consolidated statements of operations for the three-month periods ended March
31, 1994 and 1993 and the consolidated statements of cash flows for the three-
month periods ended March 31, 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 - ACQUISITION
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. 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" had occurred on January 1, 1993, unaudited pro forma condensed
consolidated results of operations would be as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------
1994 1993
---------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Operating revenues . . . . . . . . . . . . . . . . . . . . . $59,248 $65,232
Net income (loss) applicable to common shares . . . . . . . . $ 2,785 $(1,067)
Net income (loss) per common share . . . . . . . . . . . . . $ .06 $ (.02)
</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.
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<PAGE> 6
FORM 10-Q
NOTE 4 - SUBSEQUENT EVENT
On April 22, 1994, the Company acquired all of the issued and
outstanding shares of common stock (the "Shares") of Triton Engineering
Services Company, 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 oil field equipment, for the oil and
gas industry.
In consideration for the Shares, the Company delivered 751,864 shares
of its common stock, cash of approximately $4,085,000 and promissory notes in
the aggregate amount of $4,000,000. The promissory notes of the Company mature
on October 21, 1994. 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 reduction as a result of certain events, as
well as a determinable number of additional shares in the event Triton achieves
certain operating results in 1994.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The following table sets forth selected financial information of Noble
Drilling Corporation ("Noble Drilling" or, together with its consolidated
subsidiaries unless the context requires otherwise, the "Company") expressed as
a percentage of total operating revenues for the periods indicated.
<TABLE>
<CAPTION>
Three Months
Ended March 31,
---------------------------
1994 1993
------- --------
<S> <C> <C>
Operating revenues
Contract drilling services
International offshore . . . . . . . . . . . . 38.9% 33.4%
Domestic offshore . . . . . . . . . . . . . . 29.4 27.9
International labor . . . . . . . . . . . . . 15.3 18.8
International land . . . . . . . . . . . . . . 10.3 11.9
Domestic land . . . . . . . . . . . . . . . . 3.8 3.7
Engineering services . . . . . . . . . . . . . . . 0.5 1.7
Other revenue . . . . . . . . . . . . . . . . . . 1.8 2.6
------ -----
100.0 100.0
Operating costs (1) . . . . . . . . . . . . . . . . . (65.6) (70.1)
Depreciation and amortization . . . . . . . . . . . . (12.1) (8.8)
Selling, general and administrative . . . . . . . . . (10.7) (11.4)
Minority interest . . . . . . . . . . . . . . . . . . 0.1 ---
------ -----
Operating income . . . . . . . . . . . . . . . . . . 11.7 9.7
Interest expense . . . . . . . . . . . . . . . . . . (5.1) (1.9)
Interest income . . . . . . . . . . . . . . . . . . . 1.0 0.8
Other, net . . . . . . . . . . . . . . . . . . . . . 1.9 (0.5)
Income tax provision . . . . . . . . . . . . . . . . (2.0) (1.6)
------ -----
Net income . . . . . . . . . . . . . . . . . . . . . 7.5% 6.5%
====== =====
</TABLE>
_________________________
(1) Consists of operating costs and expenses other than depreciation and
amortization, selling, general and administrative, and minority
interest.
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<PAGE> 7
FORM 10-Q
RESULTS OF OPERATIONS
The international operating results for the first quarter of 1994
reflect increased revenues and utilization compared to the same period in 1993.
International contract margins showed a 10 percent improvement and
international operating revenues increased by 11 percent. During the first
quarter of 1994, domestic revenues improved as a result of increased day rates,
while contract margins declined as a result of increased stacking charges.
Net income for the first quarter of 1994 increased to $4,467,000 from
$3,392,000 for the corresponding period in 1993 due to increased revenues from
international offshore operations, related margins, and an $807,000 insurance
recovery related to the Company's Nigeria operations in a prior period.
Revenues from contract drilling services increased 16 percent for the three
months ended March 31, 1994 to $57,865,000 from $49,969,000 for the same period
in 1993. The increase is primarily due to revenue generated from the rigs
acquired in October 1993 from The Western Company of North America ("Western")
and the increased day rates in the Gulf of Mexico. Revenues from international
contract drilling operations were $38,212,000 (or 66 percent of total contract
drilling services revenue) for the first quarter of 1994, compared to
$33,489,000 (or 67 percent of total contract drilling services revenue) for the
corresponding period in 1993.
Total operating revenues for the three months ended March 31, 1994
increased 14 percent compared with the corresponding 1993 period, primarily as
a result of increased revenues from contract drilling services. Operating
costs as a percentage of total operating revenues decreased to 66 percent for
the first quarter of 1994 compared to 70 percent for the corresponding period
in 1993.
The average domestic offshore rig utilization rate decreased to 63
percent for the first quarter of 1994 from 87 percent for the comparable period
in 1993. The average domestic land rig utilization was 47 percent and 41
percent for the first quarter of 1994 and 1993, respectively.
The average international offshore rig utilization rate decreased to
82 percent for the first quarter of 1994 from 98 percent for the comparable
period in 1993 as a result of the reduction in the Company's India and Nigeria
operations. The average international land rig utilization rate was 80 percent
and 37 percent for the first quarter of 1994 and 1993, respectively. The
increase in land rig utilization resulted from higher activity levels in
Canada. At March 31, 1994, the Company operated 15 rigs under management
contracts in the international operations, two fewer than at March 31, 1993.
Contract drilling operations expense as a percentage of contract
drilling services revenue decreased to 66 percent for the first quarter of 1994
compared to 70 percent in the same period of 1993. The improvement was due to
higher contract margins and revenue from the international operations.
The slight decline in selling, general and administration expenses as
a percentage of operating revenues for the first quarter of 1994 is principally
a result of the increased revenues discussed previously and decreased selling,
general and administrative expenses for the Company's Nigeria and United
Kingdom operations.
The decrease in engineering services revenues is due to decreased oil
and gas development activity in the United Kingdom resulting from depressed oil
prices.
Interest expense for the three-month period ended March 31, 1994
increased by $1,990,000 from the comparable 1993 period, due to increased
long-term debt incurred in connection with the acquisition of the nine offshore
drilling rigs and associated assets from Western.
Other, net for the three-month period ended March 31, 1994 increased
by $1,377,000 from the comparable 1993 period primarily due to the $807,000
insurance recovery previously discussed.
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<PAGE> 8
FORM 10-Q
LIQUIDITY AND CAPITAL RESOURCES
Overview
At March 31, 1994, the Company had cash, cash equivalents, restricted
cash and investments in marketable securities of $46,336,000 and approximately
$7.6 million of funds available under various lines of credit. In the first
quarter of 1994, cash provided by operations was $10,688,000. The Company
expects to continue to generate cash flow from operations for the remainder of
1994, assuming demand for contract drilling services remains strong. 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 three months of 1995, debt principal and interest payments
are estimated to be approximately $12.3 million and dividends on Noble
Drilling's $2.25 Convertible Exchangeable Preferred Stock (the "Preferred
Stock") are estimated to be approximately $3.4 million. The Company expects to
fund these obligations, totaling $15.7 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 three
months of 1995 are planned to aggregate approximately $30.0 million (not
including $8.0 million cash discussed in Note 4 to the Consolidated Interim
Financial Statements), 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, and/or with possible project financing arrangements, although the
Company is not currently seeking any additional project loans at this time.
Credit Facilities and Long-Term Debt
At March 31, 1994, the Company's international subsidiaries had
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 $6.3 million available under these lines of
credit and $1.3 million available to support the issuance of letters of credit
at March 31, 1994. 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 March 31, 1994. No lines of credit are currently
available in the United States.
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 $2.6 million was outstanding at March
31, 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 purchase of rigs from
Western, 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, 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,
restrictions on dividends and certain investments, and limitations on sale of
assets, sales and leasebacks, transactions with affiliates, and mergers or
consolidations.
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FORM 10-Q
Cash Flows
The net cash provided by operations in the first three months of 1994
was $10,688,000 compared with net cash provided by operations of $5,356,000 for
the same period in 1993. The increase is primarily the result of the increased
activity in 1994 in the international operations.
The net cash used in investing activities in the first three months of
1994 was $3,817,000 compared with net cash provided by investing activities of
$3,540,000 in the same period in 1993. The decline in the first three months
of 1994 compared to the first three months of 1993 is primarily due to cash
used in capital expenditures.
The net cash used in financing activities was $1,440,000 in the first
three months of 1994 compared with $10,658,000 for the first three months of
1993. The decrease in net cash used is primarily due to lower amounts paid on
long-term debt in the 1994 period.
The increase in cash and cash equivalents from January 1 to March 31,
1994 of $4,778,000 is primarily the result of cash provided by operations of
$10,688,000 partially offset by the $6,228,000 in capital expenditures and
payments of dividends on the Preferred Stock of $1,682,000.
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<PAGE> 10
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The annual meeting of shareholders of Noble Drilling was held at
10:00 a.m., local time, on Thursday, April 28, 1994 in Houston,
Texas.
b) Proxies were solicited by the Board of Directors of Noble Drilling
pursuant to Regulation 14A under the Securities Exchange Act of
1934. There was no solicitation in opposition to the Board of
Directors' nominees as listed in the proxy statement and all of
such nominees were duly elected.
c) Out of a total of 47,609,941 shares of common stock of Noble
Drilling outstanding and entitled to vote, 44,779,179 shares were
present in person or by proxy, representing approximately 94
percent. The only matter voted on by the shareholders, as fully
described in the proxy statement for the annual meeting, was the
nomination of Tommy C. Craighead, James C. Day and Bill M.
Thompson to serve three-year terms on the Board of Directors of
Noble Drilling. The results of voting were as follows:
<TABLE>
<CAPTION>
Number of Shares
Number of Shares Voting WITHHOLDING AUTHORITY
FOR Election as Director to Vote for Election as Director
------------------------ --------------------------------
<S> <C> <C>
Tommy C. Craighead 43,823,901 955,278
James C. Day 43,825,411 953,768
Bill M. Thompson 43,824,933 954,246
</TABLE>
d) Inapplicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) No exhibits are filed as part of this Form 10-Q.
b) The following report on Form 8-K was filed by the Company on
May 6, 1994:
Form 8-K dated May 6, 1994 (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."
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<PAGE> 11
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: May 11, 1994 /s/ JAMES C. DAY
---------------------------------------
JAMES C. DAY, Chairman, President
and Chief Executive Officer
DATE: May 11, 1994 /s/ BYRON L. WELLIVER
--------------------------------------
BYRON L. WELLIVER, Senior
Vice President-Finance and Treasurer
(Principal Financial Officer)
-11-
