<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 September 30, 1996
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 73-374541
(State of incorporation) (I.R.S. employer
identification number)
10370 RICHMOND AVENUE, SUITE 400 77042
HOUSTON, TEXAS (Zip code)
(Address of principal executive offices)
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 November 11, 1996:
122,323,443
================================================================================
<PAGE> 2
FORM 10-Q
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
--------------- ---------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 143,841 $ 41,307
Investment in marketable equity securities. . . . . . . . . . . . . . 1,749 6,131
Investment in marketable debt securities. . . . . . . . . . . . . . . 27,530 17,031
Accounts receivable (net of allowance of $1,369 and $1,280) . . . . . 108,222 60,251
Costs of uncompleted contracts in excess of billings . . . . . . . . - 6,646
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,632 19,795
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . 45,904 36,851
------------- ------------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . 366,878 188,012
------------- ------------
PROPERTY AND EQUIPMENT
Drilling equipment and facilities . . . . . . . . . . . . . . . . . . 1,246,842 871,539
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,379 23,891
------------- ------------
1,273,221 895,430
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . (349,189) (352,452)
------------- ------------
924,032 542,978
------------- ------------
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,181 10,402
------------- ------------
$ 1,303,091 $ 741,392
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt and current installments of long-term debt . . . . . . $ 6,088 $ 12,210
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,370 30,782
Accrued payroll and related costs . . . . . . . . . . . . . . . . . . . 22,025 13,674
Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,360 12,953
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,630 2,860
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . 64,473 13,910
------------- ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 160,946 86,389
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,532 129,923
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 859 1,338
MINORITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . 904 249
------------- ------------
413,241 217,899
------------- ------------
SHAREHOLDERS' EQUITY
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,025 4,025
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,185 9,455
Capital in excess of par value . . . . . . . . .. . . . . . . . . . . . 907,146 589,866
Unrealized losses on marketable securities . . . . . . . . . . . . . . (60) (115)
Minimum pension liability . . . . . . . . . . . . . . . . . . . . . . . (3,403) (3,403)
Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . (2,049) (2,081)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . (26,131) (73,802)
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . (1,863) (452)
------------- ------------
889,850 523,493
------------- ------------
COMMITMENTS AND CONTINGENCIES . . . . . . . . . . . . . . . . . . . . . . - -
------------- ------------
$ 1,303,091 $ 741,392
============= ============
</TABLE>
See accompanying notes to the 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 SEPTEMBER 30,
------------------------------------
1996 1995
-------------- ---------------
<S> <C> <C>
OPERATING REVENUES
Contract drilling services . . . . . . . . . . . . . . . . . . . . . . $ 110,928 $ 48,208
Labor contract drilling services . . . . . . . . . . . . . . . . . . . 8,542 7,255
Turnkey drilling services . . . . . . . . . . . . . . . . . . . . . . 35,056 24,092
Engineering and consulting services. . . . . . . . . . . . . . . . . . 1,042 3,918
Other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,504 1,179
------------ ------------
158,072 84,652
------------ ------------
OPERATING COSTS AND EXPENSES
Contract drilling services . . . . . . . . . . . . . . . . . . . . . . 64,659 33,336
Labor contract drilling services . . . . . . . . . . . . . . . . . . . 6,087 5,496
Turnkey drilling services . . . . . . . . . . . . . . . . . . . . . . 25,329 20,413
Engineering and consulting services . . . . . . . . . . . . . . . . . 591 2,228
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,849 309
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 14,621 9,083
Selling, general and administrative . . . . . . . . . . . . . . . . . 14,420 10,643
Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . (33) (96)
------------ ------------
127,523 81,412
------------ ------------
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,549 3,240
OTHER INCOME (EXPENSE)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . (6,562) (3,040)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,652 1,336
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 934 831
------------ ------------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . 27,573 2,367
INCOME TAX PROVISION . . . . . . . . . . . . . . . . . . . . . . . . . . (2,352) (52)
------------ ------------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,221 2,315
PREFERRED STOCK DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . (1,509) (1,509)
------------ ------------
NET INCOME APPLICABLE TO COMMON SHARES . . . . . . . . . . . . . . . . . $ 23,712 $ 806
============ ============
NET INCOME APPLICABLE TO COMMON SHARES
PER SHARE (See Note 3) . . . . . . . . . . . . . . . . . . . . . . . . $ 0.19 $ 0.01
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . . . . . . . 123,755 95,487
</TABLE>
See accompanying notes to the 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>
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------
1996 1995
-------------- ---------------
<S> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract drilling services. . . . . . . . . . . . . . . . . . . . . . $ 238,891 $ 145,743
Labor contract drilling services. . . . . . . . . . . . . . . . . . . 24,247 27,176
Turnkey drilling services . . . . . . . . . . . . . . . . . . . . . . 98,782 58,785
Engineering and consulting services . . . . . . . . . . . . . . . . . 4,084 8,371
Other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,511 3,658
------------ ------------
372,515 243,733
------------ ------------
OPERATING COSTS AND EXPENSES
Contract drilling services. . . . . . . . . . . . . . . . . . . . . . 142,634 98,512
Labor contract drilling services. . . . . . . . . . . . . . . . . . . 17,474 20,401
Turnkey drilling services . . . . . . . . . . . . . . . . . . . . . . 70,394 54,819
Engineering and consulting services . . . . . . . . . . . . . . . . . 2,625 6,547
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,910 2,715
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 32,904 26,924
Selling, general and administrative . . . . . . . . . . . . . . . . . 38,517 31,004
Impairments, net of gains on asset sales (See Notes 4 and 6). . . . . 73 -
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . (101) (139)
------------ ------------
308,430 240,783
------------ ------------
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,085 2,950
OTHER INCOME (EXPENSE)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . (12,906) (9,122)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . 4,030 4,422
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,447 1,796
------------ ------------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . 57,656 46
INCOME TAX PROVISION . . . . . . . . . . . . . . . . . . . . . . . . . . (5,456) (2,730)
------------ ------------
NET INCOME (LOSS). . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,200 (2,684)
PREFERRED STOCK DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . . . (4,529) (5,688)
------------ ------------
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES. . . . . . . . . . . . . . $ 47,671 $ (8,372)
============ ============
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES
PER SHARE (See Note 3) . . . . . . . . . . . . . . . . . . . . . . . $ 0.45 $ (0.12)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . . . . . . . 104,968 88,024
</TABLE>
See accompanying notes to the interim financial statements.
4
<PAGE> 5
FORM 10-Q
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------
1996 1995
------------- ---------------
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,200 $ (2,684)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . 32,904 26,924
(Gain) loss on sale of assets. . . . . . . . . . . . . . . . . . . . (8,334) 104
Loss on foreign exchange . . . . . . . . . . . . . . . . . . . . . . 104 153
Deferred income tax provision (benefit). . . . . . . . . . . . . . . - (1,288)
Asset impairments. . . . . . . . . . . . . . . . . . . . . . . . . . 7,600 -
Other . . . . . . . . . . . . . . . 342 (760)
Changes in current assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . (18,103) 4,572
Proceeds from sale of marketable equity securities . . . . . . . . 4,945 17,825
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (162) (7,404)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . (10,268) (3,260)
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . 34,128 2,721
------------ ------------
95,356 36,903
------------ ------------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Purchase of property and equipment . . . . . . . . . . . . . . . . . . (131,485) (62,226)
Acquisition of Neddrill, net of cash acquired . . . . . . . . . . . . . (284,199) -
Proceeds from sale of property and equipment . . . . . . . . . . . . . . 56,544 1,179
(Investment in) proceeds from sale of marketable debt securities . . . . (10,444) 3,168
------------ ------------
(369,584) (57,879)
------------ ------------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . 124,744 -
Payment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . (4,135) (260)
Dividends paid on preferred stock . . . . . . . . . . . . . . . . . . . (6,038) (8,879)
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . 270,479 361
Purchase of shares returned to treasury . . . . . . . . . . . . . . . . (2,052) -
Preferred stock conversion payment (See Note 2) . . . . . . . . . . . . - (1,524)
Payment of short-term debt . . . . . . . . . . . . . . . . . . . . . . . (6,122) (5,724)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (2,401)
------------ ------------
376,876 (18,427)
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH . . . . . . . . . . . . . . . . . (114) 227
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . 102,534 (39,176)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . . . . . . . 41,307 95,163
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . . . . $ 143,841 $ 55,987
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,242 $ 5,781
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,389 $ 4,357
Noncash investing and financing activities:
Neddrill acquisition . . . . . . . . . . . . . . . . . . . . . . . . $ 50,000 $ -
Triton acquisition . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 1,500
</TABLE>
See accompanying notes to the interim financial statements.
5
<PAGE> 6
FORM 10-Q
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in tables are in thousands, except per share amounts)
(Unaudited)
NOTE 1 - BASIS OF ACCOUNTING
The Consolidated Balance Sheet as of September 30, 1996 of Noble
Drilling Corporation ("Noble Drilling" or, together with its consolidated
subsidiaries, unless the context requires otherwise, the "Company"), the
related Consolidated Statements of Operations for the three-month and
nine-month periods ended September 30, 1996 and 1995 and the Consolidated
Statements of Cash Flows for the nine months ended September 30, 1996 and 1995,
are unaudited. In the opinion of management, all adjustments, consisting only
of 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. These interim
financial statements should be read in conjunction with the audited financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
Certain reclassifications have been made in the 1995 consolidated
financial statements to conform to the classifications used in the 1996
consolidated financial statements. These reclassifications have no impact on
net income or loss.
NOTE 2 - CONVERSION OF $2.25 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
In March 1995, an aggregate of 923,862 shares of Noble Drilling's
$2.25 Convertible Exchangeable Preferred Stock ("$2.25 Preferred Stock") were
converted into 5,006,830 shares of Noble Drilling common stock. The Company
paid an aggregate of approximately $1,524,000 in cash ("Preferred Conversion
Payment") in the first quarter of 1995 in connection with this conversion. In
the second quarter of 1995, the Company called for redemption all remaining
outstanding shares of the $2.25 Preferred Stock. Of the 2,065,238 shares then
outstanding, 2,062,537 were surrendered for conversion and 2,701 were redeemed
by the Company, resulting in the Company's issuance of 11,192,359 shares of
common stock (including 14,637 shares sold to a standby underwriter).
NOTE 3 - NET INCOME (LOSS) APPLICABLE TO COMMON SHARES PER SHARE
Net income (loss) applicable to common shares per share has been
computed on the basis of the weighted average number of common shares
outstanding and, where dilutive, common share equivalents outstanding during
the indicated periods. The calculation of net income (loss) applicable to
common shares per share assuming full dilution was antidilutive; therefore,
fully diluted amounts are not presented. The Preferred Conversion Payment of
approximately $1,524,000 in March 1995 was accounted for as a reduction of net
earnings applicable to common shares for purposes of calculating the net loss
per common share. This accounting treatment increased the net loss applicable
to common shares per share from $0.10 to $0.12 for the nine months ended
September 30, 1995.
NOTE 4 - ACQUISITIONS AND SALES OF ASSETS
On July 1, 1996, the Company completed the agreement of sale and
purchase with Royal Nedlloyd N.V. ("Nedlloyd") and its wholly owned subsidiary,
Neddrill Holding B.V., to acquire the assets utilized in the offshore contract
drilling, accommodation and other oil and gas exploration and production
related service businesses of Nedlloyd's offshore drilling division
("Neddrill"), including the acquisition of $25,000,000 in net working capital,
and the personnel employed by Neddrill. The purchase price was $300,000,000 in
cash plus 5,000,000 shares of Noble Drilling common stock. The cash portion of
the purchase price was financed by the Company's issuance and sale of
21,850,000 shares of its common stock and $125,000,000 principal amount of
9-1/8% Senior Notes due 2006. The net proceeds from the public offerings of
securities in excess of the $300,000,000 cash portion of the purchase price has
been added to the Company's working capital and is available for general
corporate purposes.
Consistent with its business strategy, the Company sold two of its
posted barge units during the first quarter of 1996 and its remaining two
barges during the third quarter of 1996. The Gus Androes, located in the U.S.
Gulf of Mexico ("U.S. Gulf"), was sold for $6,000,000 on January 5, 1996. A
second posted barge unit, the Gene Rosser, located offshore Nigeria was sold
for $13,000,000; payments of $2,000,000, $8,000,000 and $2,000,000 were
received in the fourth quarter of 1995, the first quarter of 1996 and the
second quarter of 1996, respectively. The remaining proceeds of $1,000,000 will
be received in the first quarter of 1997. The Company recorded gains of
$4,815,000 and $2,712,000, respectively, related to the sales of these posted
barge units in the first quarter of 1996. The Company's remaining two posted
barges, which were located offshore Nigeria, were sold on August 22, 1996 (see
Note 6). These rigs were sold for $24,500,000 in cash and $7,500,000 in drill
pipe credit.
6
<PAGE> 7
FORM 10-Q
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
(Dollar amounts in tables are in thousands, except per share amounts)
(Unaudited)
On February 26, 1996, the Company purchased the Odin Explorer, renamed
the Gus Androes, a Levingston III-C independent leg cantilevered unit rated for
a water depth of 300 feet. The rig has been refurbished and is under contract
offshore Sharjah, U.A.E. with an international oil and gas company through
September, 1997, plus two one-year options.
The Company purchased the Dana, renamed the Noble Chuck Syring, a
Marathon LeTourneau 82-C independent leg cantilevered rig capable of drilling in
250 feet of water, on March 20, 1996. The rig is currently in the shipyard
undergoing enhancements. Upon completion, the rig will commence a three-year
contract for Qatar General Petroleum Corporation in Qatar.
On September 4, 1996 the Company purchased the Miss Kitty, a Friede &
Goldman L-780 Mod II independent leg cantilevered unit rated for a water depth
of 300 feet for $26,250,000 in cash. The rig is currently working offshore
India under a bareboat charter arrangement.
The Neddrill acquisition discussed above was accounted for using the
purchase method of accounting, and Neddrill's results of operations are included
in the Consolidated Statements of Operations from the date of the acquisition.
The respective assets and liabilities have been recorded at their estimated fair
value at the date of acquisition, and the allocation of the purchase price is
based on the best estimates of the Company using information currently
available. Certain adjustments relating to this acquisition are subject to
change based upon final appraisals and determination of the fair values of the
net assets acquired and liabilities assumed.
The following table provides selected consolidated financial
information for the Company on a pro forma basis assuming that the Neddrill
acquisition, the issuance of 21,850,000 shares of common stock and $125,000,000
principal amount of 9-1/8% Senior Notes due 2006 (the "9-1/8% Senior Notes") and
the application of the net proceeds therefrom had occurred on January 1, 1995.
The pro forma information set forth below is not necessarily indicative of what
the Company's results of operations would have been had the transactions been
consummated as of January 1, 1995, nor is such information necessarily
indicative of the Company's future results of operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------ ------------------ ------------------
<S> <C> <C> <C>
Operating revenues . . . . . . . . . . . . . . . . . . $ 112,686 $ 454,352 $ 329,385
Net income (loss) applicable to common shares . . . . $ 5,646 $ 58,779 $ (3,461)
Net income (loss) applicable to common shares
per share . . . . . . . . . . . . . . . . . . . . . $ 0.05 $ 0.47 $ (0.03)
</TABLE>
7
<PAGE> 8
FORM 10-Q
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
(Dollar amounts in tables are in thousands, except per share amounts)
(Unaudited)
NOTE 5 - MARKETABLE SECURITIES
As of September 30, 1996, the Company classified all of its debt
securities with original maturities of more than three months as available for
sale. These investments are classified as current assets on the accompanying
consolidated balance sheets. The following table highlights information
applicable to the Company's investments classified as available for sale as of
September 30, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------------
NET
AMORTIZED UNREALIZED
DEBT SECURITY/MATURITY COST FAIR VALUE LOSSES
- -------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Corporate Obligations:
Mature within 1 year . . . . . . . . . . . . $ 3,073 $ 3,073 $ -
U.S. Government Obligations:
Mature within 1 year . . . . . . . . . . . . 24,517 24,457 (60)
-------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . $ 27,590 $ 27,530 $ (60)
======== ========== ==========
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------
NET
AMORTIZED UNREALIZED
DEBT SECURITY/MATURITY COST FAIR VALUE LOSSES
- -------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Corporate obligations:
Mature within 1 year . . . . . . . . . . . . $ 1,520 $ 1,520 -
Mature after 1 year through 5 years . . . . 7,258 7,214 $ (44)
---------- ---------- ----------
8,778 8,734 (44)
---------- ---------- ----------
U.S. Government obligations:
Mature after 1 year through 5 years . . . . 8,368 8,297 (71)
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . $ 17,146 $ 17,031 $ (115)
========== ========== ==========
</TABLE>
An allowance for unrealized losses has been included as a reduction of
shareholders' equity. Total realized losses related to short-term investments
amounted to $102,000 and $15,000 for the nine-month periods ended September 30,
1996 and 1995, respectively. Total realized losses related to short-term
investments amounted to $50,000 and $0 for the three-month periods ended
September 30, 1996 and 1995, respectively.
The Company categorizes its investment in marketable equity securities of
$1,749,000 at September 30, 1996 as trading securities and such investments are
classified as current assets and are recorded at fair value at such date. Total
net unrealized gains related to these equity investments for the nine-month
period ended September 30, 1996 were $565,000 compared to net unrealized gains
of $699,000 for the nine-month period ended September 30, 1995. Total net
unrealized gains related to these investments for the three-month period ended
September 30, 1996 were $311,000 compared to net unrealized gains of $486,000
for the three-month period ended September 30, 1995.
NOTE 6 - PROPERTY AND EQUIPMENT
In March 1995, SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, was issued. This statement
requires that long-lived assets and certain identifiable intangibles held and
used by an entity
8
<PAGE> 9
FORM 10-Q
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
(Dollar amounts in tables are in thousands, except per share amounts)
(Unaudited)
be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Company
adopted this standard effective January 1, 1996. In accordance with SFAS No.
121, the Company recorded an impairment loss of $7,600,000 in the first quarter
of 1996.
Consistent with the Company's strategic objective to focus on the
deepwater capabilities of its fleet, the Company formalized a plan to dispose
of its two remaining posted barges, the Lewis Dugger and the Chuck Syring,
during the first quarter of 1996. The two barges were written down at March 31,
1996 to their estimated net realizable values, which the Company determined to
be $31,968,000 based on then recent offers received for these assets from third
parties. The write-down of these two barges to their estimated net realizable
values resulted in a charge to earnings of $7,600,000 in the first quarter of
1996. This charge is classified in "Impairments, net of gains on asset sales"
in the Consolidated Statement of Operations for the nine-month period ended
September 30, 1996. These two rigs were employed under drilling contracts and
contributed gross margins of $1,035,000 and $4,498,000 during the three-month
and nine-month periods ended September 30, 1996, respectively. During the
third quarter of 1996, the Company completed the sale of these two barges for
$32,000,000, composed of $24,500,000 in cash and $7,500,000 in drill pipe
credit.
NOTE 7 - STOCK REPURCHASE
In January 1996, 250,000 shares of common stock were repurchased by the
Company and returned to treasury stock. Subsequent to the repurchase, 108,750
shares of treasury stock were awarded to certain employees as restricted stock
under the Company's 1991 Stock Option and Restricted Stock Plan and have been
placed in escrow subject to satisfaction of various performance criteria during
a three-year period.
9
<PAGE> 10
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
DISCLOSURES REGARDING FORWARD-LOOKING STATEMENTS
This report on Form 10-Q includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statements of historical facts included in this Form 10-Q,
including, without limitation, statements contained in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding the Company's financial position, business strategy, plans and
objectives of management of the Company for future operations, industry
conditions, and indebtedness covenant compliance, are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from the Company's expectations
include, but are not limited to, intense competition in the drilling industry,
volatility of oil and gas prices, political and economic conditions in
international markets (including Brazil, Nigeria, the North Sea and Venezuela),
potential for decrease in demand for drilling services in the U.S. Gulf of
Mexico ("U.S. Gulf") where the Company has a concentration of drilling rigs,
risks associated with turnkey drilling contracts, early termination provisions
generally found in the Company's offshore drilling contracts, operational risks
(such as blowouts, fires and loss of production), insurance coverage
limitations, and requirements and potential liability imposed by governmental
regulation of the drilling industry (including environmental regulation).
THE COMPANY
The Company's business strategy has been to expand its international
and offshore drilling capabilities through acquisitions and rig upgrades and
modifications, and by redeploying assets in important geological areas. In
recent years, the Company has included within its strategic objectives a focus
on increasing the number of rigs in its fleet capable of drilling in deeper
water depths. The Company's land drilling operations have become less
significant as the Company has emphasized its offshore and international
operations. As used herein, unless otherwise required by the context, "Noble
Drilling" refers to Noble Drilling Corporation and the "Company" refers to
Noble Drilling and its consolidated subsidiaries.
The Company's offshore fleet at November 1, 1996, consisted of 55
rigs, comprising 43 jackup drilling rigs, eight submersible rigs, three
drillships, and one semisubmersible rig. These rigs were diversified
geographically as follows: U.S. Gulf - 26 rigs; North Sea - seven rigs; Nigeria
- - six rigs; Venezuela - four rigs; Persian Gulf - three rigs; Brazil - two
rigs; India - two rigs; Mexican Gulf - two rigs; and one rig each in Argentina,
Zaire and Gibraltar (following refurbishment in Gibraltar, the rig will be
deployed offshore Brazil). The rig counts above include one drillship in which
the Company has a 41 percent interest through a joint venture arrangement, one
jackup rig owned by a limited partnership of which Noble Drilling is the
general partner and one jackup rig which the Company operates under a bareboat
charter agreement. The Company's offshore operations also include labor
contracts for drilling and workover activities covering 14 rigs operating in
the U.K. sector of the North Sea. These rigs are not owned or leased by the
Company. Through its wholly owned subsidiary, Triton Engineering Services
Company, the Company provides turnkey drilling services and other engineering
and consulting services to the oil and gas industry. The Company's land
drilling operations are conducted in Canada, Texas and Louisiana with an active
fleet of 19 land drilling rigs.
The Company purchased the Miss Kitty, a 300-foot Friede and Goldman,
Ltd. L-780 MOD II independent leg cantilevered rig, for $26,250,000 in cash on
September 4, 1996. The rig is currently working offshore India under a bareboat
charter agreement with a term through July 1997, with a one-year extension
option. The Company sold the Lewis Dugger and Chuck Syring, posted barge units,
on August 22, 1996 for $32,000,000, composed of $24,500,000 in cash and
$7,500,000 in drill pipe credit.
NEDDRILL ACQUISITION
On July 1, 1996, the Company completed the agreement of sale and
purchase with Royal Nedlloyd N.V. ("Nedlloyd") and its wholly owned subsidiary,
Neddrill Holding B.V., to acquire the assets utilized in the offshore contract
drilling, accommodation and other oil and gas exploration and production
related service businesses of Nedlloyd's offshore drilling division
("Neddrill"), including the acquisition of $25,000,000 in net working capital,
and the personnel employed by Neddrill. The purchase price was $300,000,000 in
cash plus 5,000,000 shares of Noble Drilling common stock.
10
<PAGE> 11
FORM 10-Q
In connection with the closing of the Neddrill acquisition, the
Company completed its offering of 21,850,000 shares of Noble Drilling common
stock (including 2,850,000 shares issued in connection with the exercise by the
underwriters of the over-allotment options) and its offering of $125,000,000
principal amount of 9-1/8% Senior Notes due 2006 of the Company.
The Neddrill acquisition is consistent with the Company's strategic
goal of expanding its international presence and enhancing its deepwater
drilling capabilities. The Neddrill acquisition adds deepwater and harsh
environment capabilities to the Company's fleet, diversifies the fleet to
include drillships and a semisubmersible rig and increases the Company's
geographic diversification by providing entry into the Brazilian offshore
market and expanding its presence in the North Sea.
Neddrill's operations are managed from its headquarters in Rotterdam,
The Netherlands. Its fleet includes three dynamically positioned drillships (of
which one is currently operating offshore West Africa, the second is operating
offshore Brazil and the third is undergoing refurbishment in Gibraltar before
being deployed to Brazil); one second generation semisubmersible rig operating
in the North Sea; and seven harsh environment jackup drilling rigs (six
operating in the North Sea and one offshore Argentina). The rig counts above
include one drillship in which Neddrill owns a 41 percent interest through a
joint venture arrangement and one jackup rig which Neddrill operates under a
bareboat charter agreement as a hotel accommodation unit. Neddrill's
semisubmersible and jackup rigs are all currently under contract, with
commitments extending through August 1996 to 2001, depending on the rig. All
three drillships are committed under five to six year contracts to work for
Petroleo Brasileiro S.A. (Petrobras) offshore Brazil. In addition to the one
drillship already on location, the other two are scheduled to arrive in late
1996 and early 1997, respectively.
Neddrill currently employs approximately 700 personnel in
offshore/field positions and 55 employees in administrative positions.
Depending on location, some employees are covered by a labor agreement or are
represented by labor unions. Neddrill maintains shorebase facilities in
Argentina, Brazil, Denmark, the United Kingdom and The Netherlands.
INDUSTRY CONDITIONS AND RISKS
The offshore contract drilling industry has experienced a series of
consolidations and acquisitions among drilling contractors. The Company expects
this trend to continue as drilling contractors position themselves
strategically in the market. The Company, from time to time, has discussions
with third parties regarding asset acquisitions or business combinations and
intends to continue to consider business opportunities that it believes promote
its business strategy.
The Company's operations are materially dependent upon the levels of
activity in offshore world oil and U.S. natural gas exploration, development
and production. Such activity levels are affected by both short-term and
long-term trends in oil and natural gas prices. In recent years, oil and
natural gas prices, the expenditures by oil and gas companies for exploration
and production, and the availability of drilling rigs, and therefore the level
of offshore drilling and exploration activity, have been extremely volatile.
For a number of years, depressed oil and natural gas prices and an oversupply
of rigs have adversely affected the offshore drilling market, particularly in
the Gulf of Mexico, where the prolonged weakness and uncertainty in the demand
for and price of natural gas resulted in a significant decline in exploration
and production activities. Demand for drilling services outside the United
States, excluding the North Sea, has been less volatile in recent years, but
remains dependent on a variety of political and economic factors beyond the
Company's control, including worldwide demand for oil and natural gas, the
ability of the Organization of Petroleum Exporting Countries ("OPEC") to set
and maintain production levels and pricing, the level of production of non-OPEC
countries and the policies of the various governments regarding exploration and
development of their oil and natural gas reserves.
If the price of natural gas decreases, the Company's dayrates and
utilization rates in the U.S. Gulf could be adversely affected. Similarly, if
the price of natural gas decreases in the North Sea market, where Neddrill's
jackup rigs principally compete, its rates there could be adversely affected.
The Company can predict neither the future level of demand for its drilling
services nor the future conditions in the offshore contract drilling industry.
The Company's revenues are balanced between international and domestic
sources. Revenues from international sources accounted for approximately 53
percent and 46 percent of the Company's operating revenues for the
three-month and nine-month periods ended September 30, 1996, respectively, and
43 percent and 48 percent for the three-month and nine-month periods ended
September 30, 1995, respectively. The percentage of the Company's total
operating revenues attributable to international sources has increased due to
the Neddrill acquisition.
11
<PAGE> 12
FORM 10-Q
Offshore Nigeria, the Company currently has five offshore drilling
units under contract and one offshore drilling rig waiting on location.
Revenues from drilling activities in Nigeria accounted for approximately nine
percent and 12 percent, respectively, of the Company's operating revenues for
the three-month and nine-month periods ended September 30, 1996, and 15 percent
and 12 percent, respectively, for the three-month and nine-month periods ended
September 30, 1995. In those periods, Nigeria experienced labor strikes, high
inflation and political turmoil, none of which has materially affected the
Company's operations; however, no assurance can be given that the political and
economic climate in Nigeria will not worsen or that it will not materially
affect the Company's operations in the future.
The Company currently has three rigs under contract with Lagoven, a
subsidiary of the government-owned oil company of Venezuela. Two of these rigs
are under long-term contracts terminating in the year 2000 and the third is
operating on a one year contract. A fourth rig is under a long-term contract
with Shell Venezuela S.A. through September 1997. In recent periods, the
Venezuelan economy has experienced high inflation and a shortage of foreign
currency. In 1994, the Venezuelan government imposed a program of currency
exchange controls and taxes on certain financial transactions that temporarily
limited the ability of the government-owned oil companies and their affiliates
to make payment in U.S. dollars or other hard currencies to oilfield service
contractors. During this period the Company's operations were not materially
affected, and the Company received timely payment for its services in U.S.
dollars. During April 1996, the Venezuelan government announced increases in
gas prices, interest rates and the value-added tax rate. In addition, the
government eased exchange controls and granted pay raises to public sector
employees. These events did not have a material impact on the Company's
operations in Venezuela during the nine-month period ended September 30, 1996
and it is unknown what impact, if any, these events will have on the Company's
operations in Venezuela in the future. Revenues from drilling activities in
Venezuela accounted for approximately six percent and seven percent,
respectively, of the Company's operating revenues for the three-month and
nine-month periods ended September 30, 1996 and nine percent and 10 percent,
respectively, for the three-month and nine-month periods ended September 30,
1995.
12
<PAGE> 13
FORM 10-Q
SELECTED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial
information of the Company expressed as a percentage of total operating
revenues for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Operating revenues
Contract drilling services
International offshore........................ 44.1% 27.8% 35.4% 28.0%
Domestic offshore............................. 21.9 24.0 23.8 23.7
International land............................ 1.6 1.3 2.0 4.6
Domestic land................................. 2.5 3.8 2.9 3.6
Labor contract drilling services............... 5.4 8.6 6.5 11.2
Turnkey drilling services...................... 22.2 28.5 26.5 24.1
Engineering and consulting services............ 0.7 4.6 1.1 3.4
Other revenue.................................. 1.6 1.4 1.8 1.4
----- ----- ----- -----
100.0 100.0 100.0 100.0
Operating costs and expenses
Contract drilling services..................... (40.9) (39.4) (38.3) (40.4)
Labor contract drilling services............... (3.9) (6.5) (4.7) (8.4)
Turnkey drilling services...................... (16.0) (24.1) (18.9) (22.5)
Engineering and consulting services............ (0.4) (2.6) (0.7) (2.7)
Other expense.................................. (1.2) (0.4) (1.0) (1.1)
Depreciation and amortization.................. (9.2) (10.7) (8.8) (11.0)
Selling, general and administrative............ (9.1) (12.5) (10.3) (12.6)
----- ----- ----- -----
Operating income................................ 19.3 3.8 17.3 1.3
Interest expense................................ (4.2) (3.6) (3.5) (3.7)
Interest income................................. 1.7 1.6 1.1 1.8
Other income, net............................... 0.6 1.0 0.7 0.7
----- ----- ----- -----
Income before income taxes...................... 17.4 2.8 15.6 0.1
Income tax provision............................ (1.5) (0.1) (1.5) (1.1)
----- ----- ----- -----
Net income (loss)............................... 15.9 2.7 14.1 (1.0)
Preferred stock dividends....................... (1.0) (1.8) (1.2) (2.3)
----- ----- ----- -----
Net income (loss) applicable to common shares... 14.9% 0.9% 12.9% (3.3)%
===== ===== ===== =====
</TABLE>
13
<PAGE> 14
FORM 10-Q
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
OPERATIONAL REVIEW. During the three months ended September 30, 1996
(the "Current Quarter"), the Company generated operating revenues of
$158,072,000 compared to $84,652,000 during the three months ended September
30, 1995 (the "Comparable Quarter"). The increase in operating revenues was
primarily due to increased offshore contract and turnkey drilling activity,
improved dayrates and the contribution by Neddrill, which was acquired by the
Company on July 1, 1996. Domestic offshore contract drilling benefited in the
Current Quarter from a 56 percent improvement in average dayrates compared to
the Comparable Quarter.
Turnkey drilling services revenue increased $10,964,000 in the
Current Quarter as compared to the Comparable Quarter due to an increase in the
number of well completions combined with contracts of longer duration and at
increased prices caused by growing demand for equipment and services in the
U.S. Gulf. Ten turnkey wells were completed in the Current Quarter compared to
eight wells in the Comparable Quarter.
The utilization rate for the Company's domestic offshore rig fleet
increased to 99 percent in the Current Quarter from 84 percent in the
Comparable Quarter. The Company's international offshore rig utilization rate
increased to 95 percent in the Current Quarter from 71 percent in the
Comparable Quarter. These increases were principally due to increased drilling
activity levels and the addition of Neddrill's fleet on July 1, 1996, which was
operating at a higher utilization than the Company's fleet. At September 30,
1996, the Company had labor contracts on 14 operator-owned rigs in its
international operations compared to 15 rigs at the end of the Comparable
Quarter.
Gross margin from contract drilling operations was $46,269,000, or 42
percent of contract drilling revenues, in the Current Quarter as compared to
$14,872,000, or 31 percent of contract drilling revenues, in the Comparable
Quarter. The increase in gross margin was principally due to higher average
dayrates from the domestic contract drilling operations, combined with the
contribution of Neddrill. Labor contract gross margin was $2,455,000, or 29
percent of labor contract revenues, in the Current Quarter compared to
$1,759,000, or 24 percent of labor contract revenues, in the Comparable
Quarter. Turnkey drilling operations gross margin was $9,727,000, or 28 percent
of turnkey drilling revenues, in the Current Quarter compared to a gross margin
of $3,679,000, or 15 percent of turnkey drilling revenues, in the Comparable
Quarter. The increase in turnkey drilling operations gross margin was due to an
improved success rate on turnkey wells.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
OPERATIONAL REVIEW. During the nine months ended September 30, 1996
(the "Current Period"), the Company generated operating revenues of
$372,515,000 compared to $243,733,000 during the nine months ended September
30, 1995 (the "Comparable Period"). The increase in operating revenues was
primarily due to increased offshore contract and turnkey drilling activity,
improved dayrates and the contribution by Neddrill, which was acquired by the
Company on July 1, 1996. Domestic offshore contract drilling benefited in the
Current Period from a 39 percent improvement in average dayrates compared to
the Comparable Period.
Turnkey drilling services revenue increased $39,997,000 in the Current
Period as compared to the Comparable Period due to the completion of wells
under contracts of longer duration and at increased prices caused by stronger
demand for equipment and services in the U.S. Gulf and increased activity.
Twenty-six turnkey wells were completed in the Current Period compared to 24
completed wells in the Comparable Period.
The utilization rate for the Company's domestic offshore rig fleet
increased to 97 percent in the Current Period from 80 percent in the Comparable
Period. The Company's international offshore rig utilization rate increased to
94 percent in the Current Period from 74 percent in the Comparable Period.
14
<PAGE> 15
FORM 10-Q
Gross margin from contract drilling operations was $96,257,000, or 40
percent of contract drilling revenues, in the Current Period as compared to
$47,231,000, or 32 percent of contract drilling revenues, in the Comparable
Period. The increase in gross margin was principally due to higher average
dayrates from contract drilling operations and the contribution of Neddrill.
Labor contract gross margin was $6,773,000, or 28 percent of labor contract
revenues, in the Current Period compared to $6,775,000, or 25 percent of labor
contract revenues, in the Comparable Period. Turnkey drilling operations gross
margin was $28,388,000, or 29 percent of turnkey drilling revenues, in the
Current Period compared to gross margin of $3,966,000, or seven percent of
turnkey drilling revenues, in the Comparable Period. The increase in turnkey
drilling operations gross margin was due to an improved success rate on turnkey
wells and increased activity.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
The Company had working capital of $205,932,000 and $101,623,000 as of
September 30, 1996 and December 31, 1995, respectively. The increase in working
capital was primarily due to an increase in cash, cash equivalents and
marketable debt securities and the effect of Neddrill's working capital
components obtained through the acquisition. The increase in cash, cash
equivalents and marketable debt securities was due primarily to excess
proceeds from the recent equity and debt offerings related to the Neddrill
acquisition. Long-term debt as a percentage of long-term debt plus
shareholders' equity was 22 percent at September 30, 1996 compared to 20
percent at December 31, 1995.
At September 30, 1996, the Company had cash, cash equivalents, and
investments in marketable debt securities of $171,371,000 and had $16,000,000
of funds available under various lines of credit. The Company expects to
generate positive cash flow from operations for the remainder of 1996, assuming
no material decrease in demand for contract drilling and turnkey drilling
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 1996, debt principal and interest payments for currently
outstanding debt (including the 9-1/8% Senior Notes due 2006 issued on July 1,
1996) are estimated to be approximately $14,724,000. Cumulative dividends on
the $1.50 Convertible Preferred Stock for the remainder of 1996 are
approximately $1,509,000. The Company expects to fund these obligations,
totaling $16,233,000, out of cash and short-term investments as well as cash
expected to be provided by operations.
Capital expenditures (including Neddrill expenditures) for the
remainder of 1996 are expected to aggregate approximately $31,400,000, of
which the majority are discretionary and relate to upgrades of equipment.
Management considers such upgrades desirable to improve the marketability of
the fleet, but the upgrades could be deferred if necessary. These capital
expenditures will be funded from operating cash flows, existing cash balances,
and/or available lines of credit. Capital expenditures totaled $131,485,000 for
the nine-month period ended September 30, 1996 compared to $62,226,000 for the
nine-month period ended September 30, 1995. Included in the 1996 amount is
$70,200,000 related to rig purchases.
CREDIT FACILITIES AND LONG-TERM DEBT
In conjunction with the closing of the Neddrill acquisition on July 1,
1996, the Company issued $125,000,000 aggregate principal amount of 9-1/8%
Senior Notes due 2006 (the "9-1/8% Senior Notes"). The 9-1/8% Senior Notes will
mature on July 1, 2006. Interest on the 9-1/8% Senior Notes is payable
semiannually on January 1 and July 1 of each year. The 9-1/8% Senior Notes are
redeemable at the option of the Company, in whole or in part, at any time on or
after July 1, 2001 initially at 104.563 percent of principal amount, declining
ratably to par on or after July 1, 2004, plus accrued interest. The indenture
governing the 9-1/8% 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 sales of assets, sales and leasebacks, transactions with
affiliates, and mergers or consolidations.
At September 30, 1996, the Company had lines of credit totaling
$25,000,000, of which $15,000,000 was available for letters of credit, and
letter of credit facilities totaling $5,000,000, subject to the Company's
maintenance of certain levels of collateral. At September 30, 1996, the Company
had $16,000,000 available under these lines of credit, including $6,000,000
available to support the issuance of letters of credit.
The Company entered into a financing agreement in November 1995 with
Transamerica Insurance Finance for a period of 18 months related to the renewal
of its Marine Package, Protection and Indemnity, and Excess Liability insurance
policies. The amount financed totaled $16,561,000 at a fixed interest rate of
6.23 percent per annum, repayable in 18 equal payments.
15
<PAGE> 16
FORM 10-Q
The Company has outstanding $125,000,000 aggregate principal amount of
9-1/4% Senior Notes Due 2003 (the "9-1/4% Senior Notes") which will mature on
October 1, 2003. Interest on the 9-1/4% Senior Notes is payable semiannually on
April 1 and October 1 of each year. The 9-1/4% Senior Notes are redeemable at
the option of the Company, in whole or in part, at any time on or after October
1, 1998 initially 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 9-1/4% Senior
Notes at par plus accrued interest will be required on October 1, 2001 and
October 1, 2002. The indenture governing the 9-1/4% 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 sales of assets, sales and leasebacks,
transactions with affiliates, and mergers or consolidations.
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 $766,000 was outstanding at September
30, 1996. Interest and principal are payable semiannually on September 15 and
December 15 of each year with interest at 8.95 percent, and the bonds mature in
1998. 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 the provision of 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.
16
<PAGE> 17
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The information required by this Item 6(a) is set forth
in the Index to Exhibits accompanying this quarterly
report and is incorporated herein by reference.
(b) One report on Form 8-K was filed by the Company during
the quarter ended September 30, 1996. A report on
form 8-K dated July 16, 1996, which reported the closing
of the Neddrill acquisition, was filed on the date
thereof.
17
<PAGE> 18
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: November 13, 1996 By: /S/ JAMES C. DAY
--------------------------------------------
JAMES C. DAY, Chairman, President and
Chief Executive Officer
DATE: November 13, 1996 By: /S/ BYRON L. WELLIVER
--------------------------------------------
BYRON L. WELLIVER,
Senior Vice President-Finance,
Treasurer and Controller
(Principal Financial and Accounting Officer)
18
<PAGE> 19
FORM 10-Q
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<S> <C>
10.1 -- Noble Drilling Corporation Equity Compensation
Plan for Non-Employee Directors.
27 -- Financial Data Schedule.
</TABLE>
19
<PAGE> 1
EXHIBIT 10.1
NOBLE DRILLING CORPORATION
EQUITY COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
ADOPTED BY THE BOARD OF DIRECTORS: OCTOBER 24, 1996
SECTION 1. ESTABLISHMENT AND PURPOSE. Noble Drilling
Corporation, a Delaware corporation (the "Company"), hereby establishes this
Noble Drilling Corporation Equity Compensation Plan for Non-Employee Directors
(the "Plan"). The purposes of the equity compensation features of the Plan are
to enable non-employee directors of the Company to acquire shares of the
Company's common stock, and thereby to align their interests more closely with
the interests of the other stockholders of the Company, and to encourage the
highest level of director performance by providing the non-employee directors
with a more direct interest in the Company's attainment of its financial goals.
SECTION 2. CERTAIN DEFINITIONS. For purposes of the Plan, the
following terms shall have the indicated meanings:
(a) "Annual Retainer" shall have the meaning specified in Section
5(a) hereof.
(b) "Board of Directors" means the Board of Directors of the
Company.
(c) "Common Stock" means the Common Stock, par value $.10 per
share, of the Company, or any stock or other securities of the Company
hereafter issued or issuable in substitution or exchange for the Common Stock.
(d) "Compensation Committee" means the Compensation Committee of
the Board of Directors.
(e) The "Current Market Price" of the Common Stock on any date
shall be deemed to be the greater of (i) the average of the daily closing
prices of the Common Stock for the 15 consecutive trading days immediately
preceding the day in question and (ii) the then per share par value of the
Common Stock. The closing price for each such trading day shall be the closing
sales price of the Common Stock as reported for the principal national stock
exchange or stock market on which the Common Stock is then listed, or, if not
reported for such exchange or market, on the composite tape, or, in case no
such sale takes place on such trading day, the average of the reported closing
bid and asked quotations for the Common Stock on such exchange or market, or,
if the Common Stock is not listed on any national stock exchange or stock
market, or no such quotations are available, the average of the high bid and
low asked quotations for the Common Stock in the over-the-counter market as
reported by the National Association of Securities Dealers' Automated
Quotations System or a similar organization. Such closing prices shall be
appropriately adjusted to take into account any stock dividend, split or
combination with respect to the Common Stock that occurs within such 15-day
period.
(f) "Outside Director" means an individual duly elected or chosen
as a director of the Company who is not also a salaried officer or employee of
the Company or any of its
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 143,841
<SECURITIES> 29,279
<RECEIVABLES> 109,591
<ALLOWANCES> 1,369
<INVENTORY> 39,632
<CURRENT-ASSETS> 366,878
<PP&E> 1,273,221
<DEPRECIATION> 349,189
<TOTAL-ASSETS> 1,303,091
<CURRENT-LIABILITIES> 160,946
<BONDS> 250,532
0
4,025
<COMMON> 12,185
<OTHER-SE> 873,640
<TOTAL-LIABILITY-AND-EQUITY> 1,303,091
<SALES> 0
<TOTAL-REVENUES> 372,515
<CGS> 0
<TOTAL-COSTS> 237,037
<OTHER-EXPENSES> 71,393
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,906
<INCOME-PRETAX> 57,656
<INCOME-TAX> 5,456
<INCOME-CONTINUING> 47,671
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,671
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.45
</TABLE>
