<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 March 31, 1997
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 May 9, 1997: 132,453,295
=============================================================================
<PAGE> 2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents........................ $ 96,995 $ 149,632
Restricted cash.................................. -- 2,000
Investment in marketable equity securities....... 2,533 2,533
Investment in marketable debt securities......... 17,370 19,296
Accounts receivable (net of allowance of $583
and $1,494).................................. 121,774 101,619
Costs of uncompleted contracts in excess of
billings..................................... 13,599 18,505
Inventories...................................... 4,812 3,287
Assets held for sale (see Note 6)................ 62,396 --
Deferred income taxes............................ 39,248 39,248
Prepaid expenses................................. 24,029 19,572
Other current assets............................. 30,847 32,785
---------- ----------
Total current assets......................... 413,603 388,477
---------- ----------
PROPERTY AND EQUIPMENT
Drilling equipment and facilities................ 1,102,052 1,176,145
Other............................................ 26,265 27,924
---------- ----------
1,128,317 1,204,069
Accumulated depreciation......................... (200,706) (247,035)
---------- ----------
927,611 957,034
---------- ----------
INVESTMENT IN AND NOTES RECEIVABLE FROM AFFILIATES... 13,528 9,188
OTHER ASSETS......................................... 10,440 12,708
---------- ----------
$1,365,182 $1,367,407
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current installments of long-term debt........... $ 161 $ 3,622
Accounts payable................................. 71,896 66,906
Other current liabilities........................ 77,458 80,972
---------- ----------
Total current liabilities.................... 149,515 151,500
LONG-TERM DEBT....................................... 209,445 239,506
DEFERRED INCOME TAXES................................ 56,163 50,331
OTHER LIABILITIES.................................... 1,274 821
---------- ----------
416,397 442,158
---------- ----------
SHAREHOLDERS' EQUITY
Common stock, $0.10 par value.................... 13,248 13,219
Capital in excess of par value................... 918,113 916,004
Retained earnings (accumulated deficit).......... 20,739 (1,205)
Other............................................ (3,315) (2,769)
---------- ----------
948,785 925,249
---------- ----------
COMMITMENTS AND CONTINGENCIES........................ -- --
---------- ----------
$1,365,182 $1,367,407
========== ==========
</TABLE>
See accompanying notes to the interim financial statements.
2
<PAGE> 3
FORM 10-Q
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING REVENUES
Contract drilling services ............................................ $113,379 $ 60,250
Labor contract drilling services ...................................... 9,352 7,994
Turnkey drilling services ............................................. 43,028 33,055
Engineering and consulting services ................................... 863 1,762
Other revenue ......................................................... 2,093 1,696
-------- --------
168,715 104,757
-------- --------
OPERATING COSTS AND EXPENSES
Contract drilling services ............................................ 54,330 38,536
Labor contract drilling services ...................................... 6,557 5,925
Turnkey drilling services ............................................. 36,713 23,206
Engineering and consulting services ................................... 561 1,097
Other expense ......................................................... 1,201 900
Depreciation and amortization ......................................... 17,576 8,930
Selling, general and administrative ................................... 16,312 12,025
Gains on sales of property and equipment, net of impairments .......... - 73
Minority interest ..................................................... 403 (32)
-------- --------
133,653 90,660
-------- --------
OPERATING INCOME ......................................................... 35,062 14,097
OTHER INCOME (EXPENSE)
Interest expense ...................................................... (5,457) (3,176)
Interest income ....................................................... 1,887 825
Other, net ............................................................ 858 483
-------- --------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY CHARGE ...................... 32,350 12,229
INCOME TAX PROVISION ..................................................... (8,702) (1,503)
-------- --------
INCOME BEFORE EXTRAORDINARY CHARGE ....................................... 23,648 10,726
EXTRAORDINARY CHARGE, NET OF TAX ......................................... (1,704) -
-------- --------
NET INCOME ............................................................... 21,944 10,726
PREFERRED STOCK DIVIDENDS ............................................... - (1,511)
-------- --------
NET INCOME APPLICABLE TO COMMON SHARES ................................... $ 21,944 $ 9,215
======== ========
NET INCOME APPLICABLE TO COMMON SHARES PER SHARE:
Income before extraordinary charge ................................... $ 0.17 $ 0.10
Extraordinary charge ................................................. (0.01) -
-------- --------
Net income applicable to common shares per share ..................... $ 0.16 $ 0.10
======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ............................... 134,415 95,782
</TABLE>
See accompanying notes to the interim financial statements.
3
<PAGE> 4
FORM 10-Q
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income....................................... $ 21,944 $ 10,726
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ............... 17,576 8,930
Gain on sales of property and equipment...... - (7,716)
Deferred income tax provision ............... 5,832 -
Impairment charge............................ - 7,600
Extraordinary charge, net of tax ............ 1,704 -
Other ....................................... 1,078 654
Changes in current assets and liabilities:
Accounts receivable ....................... (20,639) (13,294)
Other assets .............................. 5,202 (1,612)
Accounts payable .......................... 5,088 3,669
Other liabilities ......................... (1,559) 9,079
-------- --------
Net cash provided by operating activities.. 36,226 18,036
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment............... (50,658) (42,171)
Proceeds from sale of property and equipment..... - 14,521
Investment in and notes receivable from
affiliates .................................... (4,320) -
Proceeds from sale of marketable debt securities. 1,928 1,596
-------- --------
Net cash used by investing activities ..... (53,050) (26,054)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of long-term debt ....................... (36,601) (3,875)
Dividends paid on preferred stock ............... - (1,509)
Issuance of common stock ........................ 959 456
Purchase of shares returned to treasury ......... - (2,052)
Proceeds from short-term debt ................... - 400
-------- --------
Net cash used by financing activities ..... (35,642) (6,580)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH ........... (171) (371)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS ............. (52,637) (14,969)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .... 149,632 41,307
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD .......... $ 96,995 $ 26,338
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest ................................... $ 6,599 $ 177
Income taxes ............................... $ 929 $ -
</TABLE>
See accompanying notes to the interim financial statements.
4
<PAGE> 5
FORM 10-Q
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in tables are in thousands, except per share amounts)
(Unaudited)
NOTE 1 -- BASIS OF ACCOUNTING
The accompanying condensed consolidated financial statements of Noble
Drilling Corporation ("Noble Drilling" or, together with its consolidated
subsidiaries, unless the context requires otherwise, the "Company"), have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all disclosures required by
generally accepted accounting principles for complete financial statements. All
significant transactions among Noble Drilling and its consolidated subsidiaries
have been eliminated. The condensed consolidated financial statements have not
been audited. However, 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. Results of operations for interim
periods are not necessarily indicative of the results of operations that may be
expected for the entire year. 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,
1996.
On July 1, 1996, the Company completed the acquisition from Royal
Nedlloyd N.V. ("Nedlloyd") and its wholly owned subsidiary, Neddrill Holding
B.V., of Nedlloyd's offshore drilling division, Neddrill ("Neddrill"). The
Company's condensed consolidated financial statements include the results of
Neddrill from July 1, 1996.
Certain reclassifications have been made in prior year condensed
consolidated financial statements to conform to the classifications used in the
1997 condensed consolidated financial statements. These reclassifications have
no impact on net income or loss.
NOTE 2 -- ACQUISITIONS
On July 1, 1996, the Company completed its agreement with Nedlloyd to
acquire the assets utilized in the offshore contract drilling, accommodation
and other gas exploration and production related service businesses of
Neddrill.
The following table provides selected consolidated financial
information for the Company on a pro forma basis assuming that the Neddrill
acquisition had occurred on January 1, 1996. The pro forma information set
forth below is not necessarily indicative of what the Company's results of
operations would have been had the transaction been consummated as of January
1, 1996, nor is such information necessarily indicative of the Company's future
results of operations.
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996
------------------
(Unaudited)
<S> <C>
Operating revenues ......................................... $ 146,193
Net income applicable to common shares ..................... $ 14,304
Net income applicable to common shares per share ........... $ 0.12
</TABLE>
NOTE 3 -- INVESTMENT IN AND NOTES RECEIVABLE FROM AFFILIATES
The Company owns a 41 percent interest in Arktik Drilling Ltd., Inc.
("Arktik") and accounts for this investment using the equity method. Arktik is
a Bahamian joint venture company that owns and operates the drillship Neddrill
Muravlenko. The investment balance at March 31, 1997 was $410,000 and equity in
earnings was not material for the three months ended March 31, 1997.
5
<PAGE> 6
FORM 10-Q
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollar amounts in tables are in thousands, except per share amounts)
The Neddrill Muravlenko is currently undergoing refurbishment and is
expected to be available for workover operations in the latter part of the
second quarter of 1997. Upon installation of a blowout preventer, the rig will
begin drilling operations with Petroleo Brasiliero S.A. ("Petrobras") under a
five-year contract, with a one-year option to Petrobras, in the latter part of
the third quarter of 1997. The refurbishment is expected to cost approximately
$42,500,000. As of March 31, 1997, the Company has funded $13,118,000 to Arktik,
which represents 50 percent of the refurbishment cost incurred. Arktik has
negotiated a credit agreement which provides for repayment of approximately 65
percent of the amount funded by the Company once drilling operations begin. The
remaining 35 percent of the amount funded by the Company will be repaid by
Arktik over the term of the Petrobras contract. As of March 31, 1997, the
Company has funded $6,758,000 to Arktik on behalf of one of the other joint
venturers. Such amount is included in "Other current assets" in the accompanying
Condensed Consolidated Balance Sheet at March 31, 1997. Approximately $5,000,000
of the amount funded by the Company had been repaid by the other joint venturer
as of April 30, 1997.
NOTE 4 -- DEBT
During the first quarter of 1997, the Company purchased $29,555,000
principal amount of its 9 1/4% Senior Notes due 2003 (the "9 1/4% Senior
Notes"), which resulted in an extraordinary charge of $1,704,000, net of taxes
of $918,000. The extraordinary charge represents the difference between the
acquisition price and the net carrying value of the notes, including
unamortized debt issue costs. After giving effect to the purchase, the Company
had $84,445,000 principal amount of 9 1/4% Senior Notes outstanding at March
31, 1997. On March 31, 1997, the Company redeemed the remaining $1,026,000
principal amount of U.S. Government Financing Sinking Fund Bonds.
NOTE 5 -- EARNINGS PER SHARE
In February 1997 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("FAS
128"), which established new guidelines for computing and presenting earnings
per share and is effective for financial statements issued for periods ending
after December 15, 1997. If FAS 128 had been in effect for the three-month
periods ended March 31, 1997 and 1996, net income per common share would be
unchanged.
NOTE 6 -- SUBSEQUENT EVENTS
On May 14, 1997, the Company commenced a tender offer to purchase for
cash all the $84,445,000 principal amount then outstanding of its 9 1/4% Senior
Notes. Under the terms of the offer, the Company will purchase the outstanding
9 1/4% Senior Notes at a price determined by reference to a fixed spread of 15
basis points over the yield to maturity of United States Treasury 6% Notes due
September 30, 1998 at 3:00 p.m., New York City time, on June 10, 1997 (of which
an amount equal to 1% of the principal amount shall constitute a consent
payment that will be paid for 9 1/4% Senior Notes tendered at or prior to 5:00
p.m., New York City time, on May 29, 1997), plus accrued and unpaid interest up
to (but excluding) the date of payment of such purchase price. In connection
with the tender offer, the Company is also seeking consents from holders of
9 1/4% Senior Notes to certain proposed amendments to the Indenture governing
the 9 1/4% Senior Notes. The offer will expire at 5:00 p.m., New York City
time, on June 12, 1997, unless extended. Complete and detailed information
regarding the offer is contained in the Company's Offer to Purchase and Consent
Solicitation Statement dated May 14, 1997 which is being distributed to the
holders of the 9 1/4% Senior Notes.
On May 12, 1997, the Company announced that its Board of Directors has
authorized the repurchase of up to 10,000,000 shares of the Company's common
stock, or approximately eight percent of its outstanding common stock. The
common stock purchases, if any, will be made from time to time on the open
market or through privately negotiated transactions at prices determined by the
Company.
On May 7, 1997, the Company completed the sale of its 12 mat supported
jackup rigs to Pride Petroleum Services, Inc. The sale also included the hull
of one former mat supported jackup rig (Linn Richardson) which has had all
drilling machinery and equipment removed. The sales price was $268,818,000 in
cash.
At March 31, 1997, the carrying value of the mat rigs was $62,396,000
and is classified as "Assets held for sale" in the accompanying Condensed
Consolidated Balance Sheet. The carrying value is stated at the lower of cost or
estimated net realizable value. Revenues, gross margin and operating income
generated from the 12 mat supported jackup rigs were $23,933,000, $12,686,000
and $10,526,000, respectively, for the three months ended March 31, 1997.
6
<PAGE> 7
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 Nigeria 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).
OUTLOOK
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. 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 increased demand and higher dayrates for offshore drilling rigs
that began in 1995 has continued into 1997. The improvement in the markets
was due in part to technological advances that expanded the opportunities for
offshore exploration and development. The increased activity levels have
resulted in demand sufficient enough to absorb virtually all of the rigs that
are in working condition and being actively marketed in the major offshore oil
and gas markets throughout the world.
The Company believes that the current level of offshore drilling
activity in the U.S. Gulf is sustainable for the remainder of 1997 unless there
is a significant and unexpected deterioration in natural gas and oil prices. The
international market is anticipated to remain strong in 1997, assuming oil
prices remain at current levels and the respective political environments remain
stable. Historically, the offshore contract drilling market has been highly
competitive and cyclical, and the Company cannot predict the future level of
demand for its drilling services nor the future conditions in the offshore
contract drilling industry.
The Company continues to enhance its fleet to meet customer demand for
diverse drilling capabilities, including those required for deepwater and harsh
environment operations. The Noble Bill Jennings and Noble Leonard Jones are
being converted to independent leg cantilever drilling units with proprietary,
extended reach cantilever design and water depth ratings of 390 feet. These rigs
are scheduled to be available for work in the fourth quarter of 1997. The Noble
Paul Romano, an Economic Value Advantage ("EVA-4000") design semisubmersible rig
capable of drilling in 6,000 feet of water, is scheduled to complete its
conversion in the spring of 1998 and will then go on contract for Shell
Deepwater Development, Inc., an affiliate of Shell Oil Company. The Noble Paul
Wolff, an EVA-4000 design semisubmersible conversion, which will be designed to
operate in 8,900 feet of water, is scheduled to be completed in June 1998 for a
six-year contract with Petroleo Brasiliero S.A. ("Petrobras"). The Noble Lewis
Dugger, an independent leg cantilever drilling unit capable of drilling in 300
feet of water, recently
7
<PAGE> 8
FORM 10-Q
completed refurbishment and began operations in the Bay of Campeche in May 1997
under a two-year contract with Petroleos Mexicanos ("Pemex"). The Neddrill
Trigon is scheduled to undergo refurbishment in July 1997 and to begin working
under an 18-month contract in the North Sea in the latter part of the third
quarter of 1997. The Neddrill Muravlenko is undergoing refurbishment and should
be available for workover operations in the latter part of the second quarter of
1997. Upon installation of a blowout preventer, the rig is expected to begin
drilling operations under a five-year contract with Petrobras in the latter part
of the third quarter of 1997. Noble's Joe Alford, Lester Pettus and Fri Rodli
are anticipated to be reactivated in 1997 with service availability dates
scheduled in the fourth quarter of 1997.
The Company anticipates a significant increase in the total number of
turnkey well completions in 1997 as compared to 1996. For the year ended
December 31, 1996, there were 28 turnkey well completions. Profitability under
a turnkey contract is dependent upon keeping expenses within the estimates used
by the Company in determining the contract price.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
GENERAL
Net income applicable to common shares for the first quarter of 1997
(the "Current Quarter") was $21,944,000, or $0.16 per share, on operating
revenues of $168,715,000, compared to net income applicable to common shares of
$9,215,000, or $0.10 per share, on operating revenues of $104,757,000 for the
first quarter of 1996 (the "Comparable Quarter"). The increases in revenues and
net income were due principally to increased rig utilization in the U.S. Gulf,
significantly higher domestic and international average dayrates, the
contribution by Neddrill, which was acquired on July 1, 1996, and contributions
from the Noble Jimmy Puckett, Noble Kenneth Delaney and Noble Chuck Syring
independent leg jackup rigs, which were acquired on December 24, 1996, September
4, 1996 and March 20, 1996, respectively. Results for the Current Quarter
included an extraordinary charge of $1,704,000, net of tax of $918,000, or $0.01
per share, related to the Company's purchase of $29,555,000 principal amount of
its 9 1/4% Senior Notes due 2003 (the "9 1/4% Senior Notes"). Results for the
Comparable Quarter included gains on the sale of two posted barge rigs totaling
$7,527,000, which were offset by an impairment charge of $7,600,000.
RIG UTILIZATION, OPERATING DAYS AND AVERAGE DAYRATES
The following table sets forth the average rig utilization rates,
operating days and average dayrates for the Company's rig fleet for the three
months ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
AVERAGE RIG
UTILIZATION RATES(1) OPERATING DAYS AVERAGE DAYRATES
-------------------- -------------------- --------------------------
THREE MONTHS ENDED THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31, MARCH 31,
-------------------- -------------------- --------------------------
1997(2) 1996 1997(2) 1996 1997(2) 1996
--------- ------- ------- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
International ....... 92% 92% 2,341 1,343 $ 33,089 $ 22,563
Domestic ............ 99% 96% 1,223 1,165 $ 29,369 $ 19,957
</TABLE>
- -------------
(1) Information reflects the policy of the Company to report utilization rates
based on the number of actively marketed rigs owned in the fleet. During the
periods presented, the Company purchased and sold certain drilling rigs.
Utilization rates for the periods prior to sales and purchases of such rigs
have not been adjusted.
(2) Includes the results of Neddrill.
8
<PAGE> 9
FORM 10-Q
INTERNATIONAL OPERATIONS
The following table sets forth the operating revenues and gross margin
for the Company's international operations for the three months ended March 31,
1997 and 1996:
<TABLE>
<CAPTION>
REVENUES GROSS MARGIN
------------------- -------------------
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Contract drilling services
Offshore..................... $ 77,461 $ 30,302 $ 39,399 $ 12,157
Land......................... -- 3,278 -- 791
-------- -------- -------- --------
Total contract drilling services. 77,461 33,580 39,399 12,948
Labor contract drilling services. 9,352 7,994 2,795 2,069
Turnkey contract drilling
services..................... 14,346 -- 5,780 --
Engineering and consulting
services..................... 824 1,747 302 781
Other revenue.................... 1,537 1,071 1,312 763
-------- -------- -------- --------
Total.................... $103,520 $ 44,392 $ 49,588 $ 16,561
======== ======== ======== ========
</TABLE>
OPERATING REVENUES. Offshore contract drilling services revenues
increased $47,159,000 in the Current Quarter as compared to the Comparable
Quarter. The increase is primarily attributable to the acquisitions of Neddrill
and the Noble Jimmy Puckett, Noble Kenneth Delaney and Noble Chuck Syring jackup
rigs. These acquisitions contributed $38,520,000 in contract drilling services
revenues in the Current Quarter. The remaining increase is attributable to
higher average dayrates in the Current Quarter as compared to the Comparable
Quarter. In December 1996, the Company sold its land drilling assets. Land
contract drilling services contributed $3,278,000 in revenues in the Comparable
Quarter. Labor contract drilling services revenues increased $1,358,000 in the
Current Quarter as compared to the Comparable Quarter due to higher average
dayrates on the platform contracts. Turnkey contract drilling services revenues
increased $14,346,000 as there were three completions offshore Nigeria in the
Current Quarter as compared to no completions in the Comparable Quarter. There
were two turnkey wells in progress at March 31, 1997, one offshore Nigeria and
one in the Bay of Campeche.
GROSS MARGIN. Offshore contract drilling services gross margin
increased $27,242,000 in the Current Quarter as compared to the Comparable
Quarter. The increase is primarily attributable to the contributions from
Neddrill and the Noble Jimmy Puckett, Noble Kenneth Delaney and Noble Chuck
Syring jackup rigs. These acquisitions contributed $18,304,000 in gross margin
in the Current Quarter. The remaining increase is primarily attributable to
higher average dayrates in the Current Quarter as compared to the Comparable
Quarter. The increases in gross margin for labor contract drilling services and
turnkey contract drilling services in the Current Quarter as compared to the
Comparable Quarter were attributable to higher average dayrates on the platform
contracts and increased turnkey well completions, respectively.
9
<PAGE> 10
DOMESTIC OPERATIONS
The following table sets forth the operating revenues and gross margin
for the Company's domestic operations for the three months ended March 31, 1997
and 1996:
<TABLE>
<CAPTION>
REVENUES GROSS MARGIN
------------------- -------------------
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Contract drilling services
Offshore..................... $ 35,918 $ 23,250 $ 19,650 $ 8,230
Land......................... -- 3,420 -- 536
-------- -------- -------- --------
Total contract drilling
services..................... 35,918 26,670 19,650 8,766
Turnkey contract drilling
services..................... 28,682 33,055 535 9,849
Engineering and consulting
services..................... 39 15 -- (116)
Other revenue.................... 556 625 (420) 33
-------- -------- -------- --------
Total................... $ 65,195 $ 60,365 $ 19,765 $ 18,532
======== ======== ======== ========
</TABLE>
10
<PAGE> 11
FORM 10-Q
OPERATING REVENUES. Offshore contract drilling services revenues
increased $12,668,000 in the Current Quarter as compared to the Comparable
Quarter due to significantly higher rig utilization rates and higher average
dayrates. In December 1996, the Company sold its land drilling assets. Land
contract drilling services contributed $3,420,000 in revenues in the Comparable
Quarter. Turnkey contract drilling services revenues decreased $4,373,000 in the
Current Quarter as compared to the Comparable Quarter due to a decrease in the
number of completions from nine in the Comparable Quarter to six in the Current
Quarter. The decrease in the number of completions was partially offset by
increased contract rates as demand for equipment and services remained strong in
the U.S. Gulf. There were four turnkey wells in progress at March 31, 1997.
GROSS MARGIN. Offshore contract drilling services gross margin
increased $11,420,000 in the Current Quarter as compared to the Comparable
Quarter due to significantly higher rig utilization rates and higher average
dayrates. Turnkey contract drilling services gross margin decreased $9,314,000
due primarily to two wells which incurred losses during the Current Quarter as a
result of unexpected drilling difficulty.
OTHER OPERATING ITEMS
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense increased $8,646,000 in the Current Quarter as compared to the
Comparable Quarter. Of this amount, $5,334,000 is attributable to the
acquisition of Neddrill. The remaining increase is attributable to rig
acquisitions and refurbishments subsequent to March 31,1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses increased $4,287,000 in the Current Quarter as
compared to the Comparable Quarter. The increase is primarily attributable to
the Neddrill acquisition combined with other general increases resulting from
higher activity levels.
GAINS ON SALES OF PROPERTY AND EQUIPMENT, NET OF IMPAIRMENTS. In the
Comparable Quarter, the Company sold two posted barge rigs, resulting in pre-tax
gains of $7,527,000, which were offset by the recognition of impairment charges
totaling $7,600,000.
INTEREST EXPENSE. Interest expense increased $2,281,000 in the Current
Quarter as compared to the Comparable Quarter due to the July 1, 1996 issuance
of $125,000,000 principal amount of 9 1/8% Senior Notes due 2006 (the "9 1/8%
Senior Notes"). The proceeds from the issuance of the 9 1/8% Senior Notes were
used to finance the Neddrill acquisition. The Company purchased $11,000,000
principal amount of its 9 1/4% Senior Notes in December 1996 and $29,555,000
principal amount of 9 1/4% Senior Notes during the Current Quarter, which
partially offset the increased interest expense resulting from the issuance of
the 9 1/8% Senior Notes.
INTEREST INCOME. Interest income increased $1,062,000 in the Current
Quarter as compared to the Comparable Quarter due to higher average cash
balances resulting primarily from increased operating activity.
INCOME TAX PROVISION. The effective income tax rate in the Current
Quarter increased to approximately 27% from approximately 12% in the Comparable
Quarter. The Comparable Quarter was favorably impacted by the recognition of
deferred tax benefits related to net operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
The Company had working capital of $264,088,000 and $236,977,000 as of
March 31, 1997, and December 31, 1996, respectively. Long-term debt as a
percentage of long-term debt plus shareholders' equity was 18 percent at March
31, 1997 compared to 21 percent at December 31, 1996.
At March 31, 1997, the Company had cash, cash equivalents, and
investments in marketable debt securities of $114,365,000 and had $17,788,000
of funds available under various lines of credit. The Company expects to
generate positive cash flow from operations for the remainder of 1997, assuming
no material decrease in demand
11
<PAGE> 12
FORM 10-Q
for contract drilling and turnkey services. The Company will continue to have
cash requirements for debt principal and interest payments. For the remainder
of 1997, required debt principal and interest payments for currently
outstanding debt are estimated to be approximately $14,623,000. The Company
expects to fund these obligations out of cash and short-term investments as
well as cash expected to be provided by operations.
Capital expenditures totaled $50,658,000 and $42,171,000 for the Current
Quarter and Comparable Quarter, respectively. Capital expenditures for the
remainder of 1997 are expected to aggregate approximately $335,000,000, of which
the majority are discretionary and relate to upgrades of equipment. This amount
includes approximately $147,000,000 for the conversions of the Noble Paul Romano
and the Noble Paul Wolff to EVA-4000 semisubmersible units. The conversion of
these two rigs will not be completed until 1998. The total cost of the Noble
Paul Romano and Noble Paul Wolff EVA-4000 conversions is expected to be
approximately $240,000.000. These capital expenditures will be funded from
operating cash flows, existing cash balances, available lines of credit and/or
net proceeds from the sale of the 12 mat supported jackup rigs. The Company is
currently reviewing proposals from several financial institutions to provide
project financing for the EVA-4000 semisubmersible rig conversions. Certain
projects currently being considered by the Company could require, if they
materialize, capital expenditures or other cash requirements not included in the
above estimate. In addition, the Company will continue to evaluate acquisitions
of drilling units from time to time. Factors that could cause actual capital
expenditures to exceed materially the planned capital expenditures include
delays and cost overruns in shipyards, shortages of equipment, latent damage or
deterioration to hull, equipment and machinery in excess of engineering
estimates and assumptions, and changes in design criteria or specifications
during repair or construction.
On May 7, 1997, the Company completed the sale of its 12 mat supported
jackup rigs to Pride Petroleum Services, Inc. The sale also included the hull
of one former mat supported jackup rig (Linn Richardson) which has had all
drilling machinery and equipment removed. The sales price was $268,818,000 in
cash.
On May 12, 1997, the Company announced that its Board of Directors has
authorized the repurchase of up to 10,000,000 shares of the Company's common
stock, or approximately eight percent of its outstanding common stock. The
common stock purchases, if any, will be made from time to time on the open
market or through privately negotiated transactions at prices determined by
the Company.
CREDIT FACILITIES AND LONG-TERM DEBT
At March 31, 1997, the Company had lines of credit totaling
$25,000,000, of which $15,000,000 was available to support letters of credit,
and letter of credit facilities totaling $10,000,000, subject to the Company's
maintenance of certain levels of collateral. At March 31, 1997, $17,212,000 had
been used to support outstanding letters of credit. At March 31, 1997,
borrowings of $17,788,000 were available under the lines of credit, including
$7,788,000 to support letters of credit.
During the Current Quarter, the Company acquired $29,555,000 principal
amount of its 9 1/4% Senior Notes, resulting in $84,445,000 principal amount of
9 1/4% Senior Notes outstanding at March 31, 1997. On March 31, 1997, the
Company redeemed the remaining $1,026,000 principal amount of U.S. Government
Financing Sinking Fund Bonds. On May 14, 1997, the Company commenced a tender
offer to purchase for cash all the $84,445,000 principal amount then
outstanding of its 9 1/4% Senior Notes. Under the terms of the offer, the
Company will purchase the outstanding 9 1/4% Senior Notes at a price determined
by reference to a fixed spread of 15 basis points over the yield to maturity of
United States Treasury 6% Notes due September 30, 1998 at 3:00 p.m., New York
City time, on June 10, 1997 (of which an amount equal to 1% of the principal
amount shall constitute a consent payment that will be paid for 9 1/4% Senior
Notes tendered at or prior to 5:00 p.m., New York City time, on May 29, 1997),
plus accrued and unpaid interest up to (but excluding) the date of payment of
such purchase price. In connection with the tender offer, the Company is also
seeking consents from holders of 9 1/4% Senior Notes to certain proposed
amendments to the Indenture governing the 9 1/4% Senior Notes. The offer will
expire at 5:00 p.m., New York City time, on June 12, 1997, unless extended.
Complete and detailed information regarding the offer is contained in the
Company's Offer to Purchase and Consent Solicitation Statement dated May 14,
1997 which is being distributed to the holders of the 9 1/4% Senior Notes.
The Company believes that its cash and cash equivalents, cash generated
from operations, borrowings under its lines of credit and access to other
financing sources will be adequate to meet its anticipated short-term and
long-term liquidity requirements, including scheduled debt repayments.
12
<PAGE> 13
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of stockholders of Noble Drilling was held in Houston,
Texas, at 10:00 a.m., local time, on April 24, 1997.
(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 132,313,617 shares of Noble Drilling common stock
outstanding and entitled to vote, 112,944,994 shares were present in
person or by proxy, representing approximately 85 percent of outstanding
shares. The first matter voted on by the stockholders, as fully described
in the proxy statement for the annual meeting, was the re-election of
James C. Day and Marc E. Leland to serve three-year terms on the Board of
Directors of Noble Drilling. The results of voting were as follows:
<TABLE>
<CAPTION>
Nominee Number of Shares Number of Shares
for Re-election Voting FOR Re-election WITHHOLDING AUTHORITY
as Director as Director to Vote for Re-election as Director
- ------------------- ---------------------- -----------------------------------
<S> <C> <C>
James C. Day 112,256,961 688,033
Marc E. Leland 112,257,528 687,466
</TABLE>
The only other matter voted on by the stockholders, as fully described in the
proxy statement for the annual meeting, was the proposal to approve and ratify
the Company's 1991 Stock Option and Restricted Stock Plan as amended and
restated. The results of voting on this proposal were as follows:
For: 82,121,274 Against: 30,621,150 Abstain 202,570
(d) Inapplicable.
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) No reports on Form 8-K were filed by the Company during the quarter ended
March 31, 1997.
13
<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: May 14, 1997 /s/ JAMES C. DAY
---------------------------------
JAMES C. DAY, Chairman, President
and Chief Executive Officer
DATE: May 14, 1997 /s/ BYRON L. WELLIVER
---------------------------------
BYRON L. WELLIVER,
Senior Vice President-Finance,
Treasurer and Controller
(Principal Financial and
Accounting Officer)
14
<PAGE> 15
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------- -------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 96,995
<SECURITIES> 19,903
<RECEIVABLES> 122,357
<ALLOWANCES> 583
<INVENTORY> 4,812
<CURRENT-ASSETS> 413,603
<PP&E> 1,128,317
<DEPRECIATION> 200,706
<TOTAL-ASSETS> 1,365,182
<CURRENT-LIABILITIES> 149,515
<BONDS> 209,445
0
0
<COMMON> 13,248
<OTHER-SE> 935,537
<TOTAL-LIABILITY-AND-EQUITY> 1,365,182
<SALES> 0
<TOTAL-REVENUES> 168,715
<CGS> 0
<TOTAL-COSTS> 99,362
<OTHER-EXPENSES> 34,291
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,457
<INCOME-PRETAX> 32,350
<INCOME-TAX> 8,702
<INCOME-CONTINUING> 23,648
<DISCONTINUED> 0
<EXTRAORDINARY> (1,704)
<CHANGES> 0
<NET-INCOME> 21,944
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
