<PAGE> 1
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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)
<TABLE>
<S> <C>
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)
</TABLE>
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 August 11, 1997: 131,536,314
===============================================================================
<PAGE> 2
FORM 10-Q
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ............................................. $ 176,434 $ 149,632
Restricted cash ....................................................... -- 2,000
Investment in marketable equity securities ............................ -- 2,533
Investment in marketable debt securities .............................. 119,362 19,296
Accounts receivable (net of allowance of $583 and $1,494) ............. 118,714 101,619
Costs of uncompleted contracts in excess of billings .................. 24,784 18,505
Inventories ........................................................... 5,097 3,287
Deferred income taxes ................................................. 6,374 39,248
Prepaid expenses ...................................................... 32,046 19,572
Other current assets .................................................. 31,565 32,785
----------- -----------
Total current assets .................................................... 514,376 388,477
----------- -----------
PROPERTY AND EQUIPMENT
Drilling equipment and facilities ..................................... 1,169,815 1,176,145
Other ................................................................. 27,280 27,924
----------- -----------
1,197,095 1,204,069
Accumulated depreciation .............................................. (218,419) (247,035)
----------- -----------
978,676 957,034
----------- -----------
INVESTMENT IN AND NOTES RECEIVABLE FROM AFFILIATES ...................... 21,410 9,188
OTHER ASSETS ............................................................ 26,968 12,708
----------- -----------
$ 1,541,430 $ 1,367,407
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt and current installments of long-term debt ............ $ 10,530 $ 3,622
Accounts payable ...................................................... 113,776 66,906
Taxes payable ......................................................... 71,358 20,304
Other current liabilities ............................................. 52,941 60,668
----------- -----------
Total current liabilities ............................................... 248,605 151,500
LONG-TERM DEBT .......................................................... 132,130 239,506
DEFERRED INCOME TAXES ................................................... 50,383 50,331
OTHER LIABILITIES ....................................................... 1,733 821
----------- -----------
432,851 442,158
----------- -----------
SHAREHOLDERS' EQUITY
Common stock, $0.10 par value ......................................... 13,271 13,219
Capital in excess of par value ........................................ 920,266 916,004
Retained earnings (accumulated deficit) ............................... 177,458 (1,205)
Other ................................................................. (2,416) (2,769)
----------- -----------
1,108,579 925,249
----------- -----------
COMMITMENTS AND CONTINGENCIES ........................................... -- --
----------- -----------
$ 1,541,430 $ 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 JUNE 30,
---------------------------
1997 1996
--------- ---------
<S> <C> <C>
OPERATING REVENUES
Contract drilling services ................................. $ 114,820 $ 67,713
Labor contract drilling services ........................... 9,871 7,711
Turnkey drilling services .................................. 55,973 30,671
Engineering and consulting services ........................ 491 1,280
Other revenue .............................................. 3,837 2,311
--------- ---------
184,992 109,686
--------- ---------
OPERATING COSTS AND EXPENSES
Contract drilling services ................................. 41,854 37,408
Labor contract drilling services ........................... 7,012 5,462
Turnkey drilling services .................................. 54,706 23,890
Engineering and consulting services ........................ 671 937
Other expense .............................................. 974 1,161
Depreciation and amortization .............................. 19,306 9,353
Selling, general and administrative ........................ 15,166 12,072
Gains on sales of property and equipment, net of impairments (197,676) --
Minority interest .......................................... 102 (36)
--------- ---------
(57,885) 90,247
--------- ---------
OPERATING INCOME .............................................. 242,877 19,439
OTHER INCOME (EXPENSE)
Interest expense ........................................... (4,638) (3,168)
Interest income ............................................ 3,162 555
Other, net ................................................. 681 1,028
--------- ---------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY CHARGE ........... 242,082 17,854
INCOME TAX PROVISION .......................................... (80,382) (1,601)
--------- ---------
INCOME BEFORE EXTRAORDINARY CHARGE ............................ 161,700 16,253
EXTRAORDINARY CHARGE, NET OF TAX .............................. (4,981) --
--------- ---------
NET INCOME .................................................... 156,719 16,253
PREFERRED STOCK DIVIDENDS ..................................... -- (1,509)
--------- ---------
NET INCOME APPLICABLE TO COMMON SHARES ........................ $ 156,719 $ 14,744
========= =========
NET INCOME APPLICABLE TO COMMON SHARES PER SHARE:
Income before extraordinary charge .......................... $ 1.20 $ 0.15
Extraordinary charge ........................................ (0.04) --
--------- ---------
Net income applicable to common shares per share ............ $ 1.16 $ 0.15
========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING .................... 134,565 96,728
</TABLE>
See accompanying notes to the interim financial statements.
3
<PAGE> 4
FORM 10-Q
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1996
--------- ---------
<S> <C> <C>
OPERATING REVENUES
Contract drilling services ................................. $ 228,199 $ 127,963
Labor contract drilling services ........................... 19,223 15,705
Turnkey drilling services .................................. 99,001 63,726
Engineering and consulting services ........................ 1,354 3,042
Other revenue .............................................. 5,930 4,007
--------- ---------
353,707 214,443
--------- ---------
OPERATING COSTS AND EXPENSES
Contract drilling services ................................. 93,687 73,047
Labor contract drilling services ........................... 13,569 11,387
Turnkey drilling services .................................. 93,916 49,993
Engineering and consulting services ........................ 1,232 2,034
Other expense .............................................. 2,175 2,061
Depreciation and amortization .............................. 36,882 18,283
Selling, general and administrative ........................ 31,478 24,097
Gains on sales of property and equipment, net of impairments (197,676) 73
Minority interest .......................................... 505 (68)
--------- ---------
75,768 180,907
--------- ---------
OPERATING INCOME .............................................. 277,939 33,536
OTHER INCOME (EXPENSE)
Interest expense ........................................... (10,095) (6,344)
Interest income ............................................ 5,049 1,380
Other, net ................................................. 1,539 1,511
--------- ---------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY CHARGE ........... 274,432 30,083
INCOME TAX PROVISION .......................................... (89,084) (3,104)
--------- ---------
INCOME BEFORE EXTRAORDINARY CHARGE ............................ 185,348 26,979
EXTRAORDINARY CHARGE, NET OF TAX .............................. (6,685) --
--------- ---------
NET INCOME .................................................... 178,663 26,979
PREFERRED STOCK DIVIDENDS ..................................... -- (3,020)
--------- ---------
NET INCOME APPLICABLE TO COMMON SHARES ........................ $ 178,663 $ 23,959
========= =========
NET INCOME APPLICABLE TO COMMON SHARES PER SHARE:
Income before extraordinary charge .......................... $ 1.38 $ 0.25
Extraordinary charge ........................................ (0.05) --
--------- ---------
Net income applicable to common shares per share ............ $ 1.33 $ 0.25
========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING .................... 134,490 96,221
</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>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ....................................................... $ 178,663 $ 26,979
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ................................ 36,882 18,283
Gain on sale of assets ....................................... (197,676) (8,207)
Deferred income tax provision ................................ 32,926 --
Asset impairments ............................................ -- 7,600
Extraordinary charge, net of tax ............................. 6,685 --
Other ........................................................ 332 850
Changes in current assets and liabilities:
Accounts receivable ........................................ (17,377) (18,086)
Proceeds from sale of marketable equity securities ......... 2,353 4,945
Other assets ............................................... (18,936) (6,462)
Accounts payable ........................................... 42,427 9,994
Other liabilities .......................................... 51,596 8,358
--------- ---------
Net cash provided by operating activities .................. 117,875 44,254
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment ............................... (124,375) (76,155)
Proceeds from sale of property and equipment ..................... 268,818 30,903
Proceeds from (investment in) sale of marketable debt securities.. (100,031) 3,731
Investment in unconsolidated affiliate ........................... (12,222) --
--------- ---------
Net cash provided (used) by investing activities ........... 32,190 (41,521)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of long-term debt ........................................ (125,186) (4,157)
Dividends paid on preferred stock ................................ -- (3,020)
Issuance of common stock ......................................... 2,081 831
Purchase of shares returned to treasury .......................... -- (2,052)
Payment of short-term debt ....................................... -- (2,868)
--------- ---------
Net cash (used) by financing activities .................... (123,105) (11,266)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH ............................ (158) (211)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................... 26,802 (8,744)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ..................... 149,632 41,307
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ........................... $ 176,434 $ 32,563
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest ..................................................... $ 13,995 $ 6,165
Income taxes ................................................. $ 2,670 $ 41
</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 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 AND DISPOSITIONS
On July 1, 1996, the Company completed its agreement with Nedlloyd to
acquire the assets utilized in the offshore contract drilling and accommodation
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 SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1996
(Unaudited) (Unaudited)
-------- --------
<S> <C> <C>
Operating revenues ............................. $150,086 $296,820
Net income applicable to common shares ......... $ 20,763 $ 35,067
Net income applicable to common shares per share $ 0.18 $ 0.30
</TABLE>
On May 7, 1997, the Company completed the sale to Pride Petroleum
Services, Inc. of its 12 mat supported jackup rigs, including the hull of one
former mat supported jackup rig (Linn Richardson), which had all drilling
machinery and equipment removed. The sales price was $268,818,000 in cash. The
Company recognized a pre-tax gain of $197,676,000 in connection with the sale
which has been included in "Gains on sales of property and equipment, net of
impairments" in the accompanying Condensed Consolidated Statements of Operations
for the three months and six months ended June 30, 1997.
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)
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 June 30, 1997 was $410,000 and equity in
earnings was not material for the three months and six months ended June 30,
1997.
The Neddrill Muravlenko refurbishment has been completed, with the
exception of installing a blowout preventer, and it will begin operating as a
workover unit in the third quarter of 1997 for Petroleo Brasiliero S.A.
("Petrobras"). Upon installation of a blowout preventer, the Neddrill Muravlenko
will begin drilling operations with Petrobras under a five-year contract, with a
one-year option to Petrobras, in the latter part of the fourth quarter of 1997.
The refurbishment is expected to cost approximately $46,000,000. As of June 30,
1997, the Company had funded $21,000,000 to Arktik, which amount represents 50
percent of the refurbishment cost incurred. Arktik has negotiated a credit
agreement which provides for repayment of approximately 63 percent of the amount
funded by the Company once drilling operations begin. The remaining 37 percent
of the amount funded by the Company will be repaid by Arktik over the term of
the Petrobras contract. As of June 30, 1997, the Company had funded $10,000,000
to Arktik on behalf of one of the other Arktik joint venturers. Such amount is
included in "Other current assets" in the accompanying Condensed Consolidated
Balance Sheet at June 30, 1997.
The Company has operating control of the Neddrill Kolskaya under a
long-term bareboat charter from the owner, and utilized the unit in offshore
accommodation mode under an agreement that expired in April 1997. The Neddrill
Kolskaya was converted from accommodation mode into drilling mode
during the second quarter of 1997. The total cost of the conversion was
approximately $17,000,000, of which the Company had funded $14,000,000 as of
June 30, 1997. Such amount is included in "Other assets" in the accompanying
Condensed Consolidated Balance Sheet at June 30, 1997. The Company is currently
involved in negotiations that may result in contribution of the Neddrill
Kolskaya to a joint venture with similar ownership and financing arrangements as
Arktik.
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. On May 14, 1997, the Company announced a tender offer to purchase
for cash all $84,445,000 principal amount then outstanding of its 9 1/4% Senior
Notes. Pursuant to the tender offer, the Company purchased $81,330,000
principal amount of 9 1/4% Senior Notes during the second quarter of 1997,
which resulted in an extraordinary charge of $4,981,000, net of taxes of
$2,682,000. 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 purchases, the Company
had $3,115,000 principal amount of 9 1/4% Senior Notes outstanding at June 30,
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 months and
six months ended June 30, 1997 and 1996, net income per common share would be
unchanged.
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 6 - SUBSEQUENT EVENTS
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 July 2, 1997, the Company purchased 1,100,000 shares from a
single stockholder in a private transaction for $23,100,000.
The Company entered into a credit agreement dated August 14, 1997 (the
"Credit Agreement") with a group of banks. The Credit Agreement provides for a
five year unsecured revolving credit facility in the amount of $200,000,000.
Loans under the Credit Agreement bear interest, at the option of the Company, at
either a base rate or LIBOR plus a margin (0.40 percent currently) that varies
depending on the Company's public senior secured debt rating or its funded debt
to capital ratio. The Credit Agreement requires compliance with various
covenants, including minimum consolidated net worth, interest coverage ratios,
leverage ratios and fleet coverage ratios.
8
<PAGE> 9
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, demand for the
Company's assets, commodity prices and industry conditions, fleet enhancements,
turnkey activities, capital expenditures, sufficiency of liquidity and capital
resources, 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, volatility of oil and gas prices, increasingly
heavy backlogs for equipment and services required to complete on schedule
major shipyard refurbishment and conversion projects which are either planned
or in progress, potential 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 (which could also result in competitors moving their rigs to other markets
where the Company has drilling rigs), risks associated with turnkey drilling
operations, intense competition in the drilling industry, political and economic
conditions in international markets (including Nigeria, Venezuela and India),
risks of natural disasters (hurricanes), operational risks (such as blowouts,
fires and loss of production, early termination provisions generally found in
the Company's drilling contracts, limitations on insurance coverage, and
requirements and potential liability imposed by governmental regulation of the
drilling industry (including environmental regulation).
OUTLOOK
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.
Since 1995, demand for the Company's drilling rigs has increased and
resulting dayrates have risen significantly. The improvement in the markets has
been in part due to favorable commodity prices in recent periods and also to
technological advances that have expanded the opportunities for offshore
exploration, particularly in deeper water depths. The increased activity levels
have resulted in demand sufficient to absorb virtually all rigs in working
condition which are being actively marketed. Demand for certain types of
deepwater equipment currently exceeds the existing capacity, and several of the
Company's competitors have announced plans to construct new rigs to service this
demand.
The Company has maintained a strategy in recent years to selectively
expand its international and deepwater drilling capabilities through fleet and
individual asset acquisitions, rig upgrades and enhancements, and redeployment
of assets in important geological areas. The Company expects to continue with
this strategy in the foreseeable future to the extent that expansions,
enhancements and redeployments are economically justified.
The Company believes that the worldwide demand for drilling rigs
should remain strong enough to support the current level of offshore drilling
activity for the remainder of 1997, particularly in international markets,
assuming that oil prices and the respective political environments remain
stable. However, commodity prices, especially domestic natural gas, have
softened considerably since the beginning of 1997, and oil and gas companies are
experiencing pressure on their exploration and development margins due to such
lower commodity prices and increased rig dayrates and exploration costs. If
commodity prices decline further, demand for drilling rigs may weaken,
especially in the U.S. Gulf, and dayrates may be adversely affected.
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 is continuing to enhance its fleet to meet customer demand
for diverse drilling capabilities, including those required for deepwater
operations. The Noble Bill Jennings and Noble Leonard Jones are being upgraded
from independent leg slot rigs capable of operating in 300 feet of water to
cantilever drilling units with
9
<PAGE> 10
FORM 10-Q
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-4000TM") design
semisubmersible rig capable of drilling in 6,000 feet of water, is not expected
to be available for work until at least mid 1998. The Company has contracted the
rig to Shell Deepwater Development Inc. ("Shell"), an affiliate of Shell Oil
Company, for four or five years, at Shell's option. The Noble Paul Wolff, an
EVA-4000(TM) design semisubmersible conversion which is designed to operate in
8,900 feet of water, is not expected to be available for work until at least
late 1998. The Company has contracted the rig to Petroleo Brasiliero S.A.
("Petrobras") for six years. Other significant projects in progress include a
refurbishment of the Noble Al White (formerly the Neddrill Trigon) for an
18-month contract in the North Sea which is expected to commence in the third
quarter of 1997. The reactivation of three idle submersible rigs, the Joe
Alford, Lester Pettus and Fri Rodli, which are anticipated to be completed by
the end of 1997; and the installation and testing of blowout preventers and
related control systems on the Noble Roger Eason (formerly the Neddrill 2) and
the Neddrill Muravlenko. The Company also announced on July 24, 1997, that it
had received a letter of intent from a group of operators for a five-year
commitment to operate a semisubmersible in the U.S. Gulf. The Company intends to
convert one of its existing submersible rigs into a deepwater EVA-4000(TM)
semisubmersible to utilize under this arrangement. The conversion is not
expected to be completed until 1999.
The Company is actively marketing other submersible rigs for
conversion into deepwater EVA-4000(TM) design semisubmersible rigs. If the
Company is successful in negotiating contracts, the Company would have to make
significant capital expenditures to refurbish and upgrade the rigs.
The Company anticipates the number of turnkey well completions in 1997
to be higher than completions in 1996. For the first six months of 1997, there
were 21 turnkey well completions compared to 28 completions for the year ended
December 31, 1996. At the end of the second quarter, the Company was in the
process of drilling two wells which are expected to result in losses upon
completion. At June 30, 1997, the Company has fully accrued for the estimated
losses upon completion.
RESULTS OF OPERATIONS
SIGNIFICANT 1997 EVENTS
The consolidated results of operations for the three months and six
months ended June 30, 1997, reflect several significant transactions and
events. Management believes these events reflect the Company's efforts to
enhance its position within the offshore contract drilling services industry.
On May 7, 1997, the Company completed the sale of its 12 mat supported
jackup rigs to Pride Petroleum Services, Inc. for $268,818,000 in cash,
resulting in a pre-tax gain of $197,696,000, which is included in "Gains on
sales of property and equipment, net of impairments" in the accompanying
Condensed Consolidated Statements of Operations for the three months and six
months ended June 30, 1997. Revenues, gross margin and operating income
generated from the mat rigs were $9,846,000, $4,186,000 and $4,085,000,
respectively, for the three months ended June 30, 1997, and $33,780,000,
$14,893,000, and $14,613,000, respectively, for the six months ended June 30,
1997.
The Company purchased $81,330,000 and $110,885,000 principal amount of
its 9 1/4 % Senior Notes Due 2003 ("9 1/4% Senior Notes") during the three
months and six months ended June 30, 1997, respectively, resulting in
extraordinary charges of $4,981,000 and $6,685,000 for the same periods. The
extraordinary charges represent the difference between the acquisition price and
the net carrying value of the notes, including unamortized debt issuance costs.
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
Net income applicable to common shares for the second quarter of 1997
(the "Current Quarter") was $156,719,000, or $1.16 per share, on operating
revenues of $184,992,000, compared to net income applicable to
10
<PAGE> 11
FORM 10-Q
common shares of $14,744,000, or $0.15 per share, on operating revenues of
$109,686,000 for the second quarter of 1996 (the "Comparable Quarter").
Excluding the effects of non-recurring items, net income applicable to common
shares for the Current Quarter increased 126% to $33,211,000, or $0.25 per
share, compared to the Comparable Quarter. The increases in operating revenues
and net income were attributable to significantly higher domestic and
international average dayrates, the contribution of the former Neddrill fleet
which was acquired on July 1, 1996, and contributions from the Noble Gus
Androes, Noble Chuck Syring, Noble Kenneth Delaney and Noble Jimmy Puckett
jackup rigs, which were acquired during 1996 and placed into service in the
latter part of 1996. The Current Quarter's results were negatively impacted by
the Company's turnkey operations, due primarily to two wells which incurred
losses during the Current Quarter as a result of unexpected drilling
difficulty.
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 offshore rig fleet for
the three months ended June 30, 1997 and 1996:
<TABLE>
<CAPTION>
AVERAGE RIG
UTILIZATION RATES (1) OPERATING DAYS AVERAGE DAYRATES
-------------------- ------------------- ---------------------
THREE MONTHS ENDED THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30,
------------------- ------------------- ---------------------
1997 (2) 1996 1997 (2) 1996 1997 (2) 1996
-------- ---- -------- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C>
International. . . . 98% 94% 2,476 1,456 $ 35,647 $ 21,921
Domestic . . . . . . 100% 96% 780 1,370 $ 34,047 $ 22,478
</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 sold certain drilling
rigs. Utilization rates for the periods prior to sales of such rigs
have not been adjusted.
(2) Includes the results of Neddrill.
INTERNATIONAL OPERATIONS
The following table sets forth the operating revenues and gross margin
for the Company's international operations for the three months ended June 30,
1997 and 1996:
<TABLE>
<CAPTION>
OPERATING REVENUES GROSS MARGIN
-------------------------- ---------------------------
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ---------------------------
1997 1996 1997 1996
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Contract drilling services
Offshore .......................... $ 88,263 $ 31,917 $ 52,712 $ 13,194
Land .............................. -- 1,538 -- 294
-------- -------- -------- --------
Total contract drilling services ..... 88,263 33,455 52,712 13,488
Labor contract drilling services ..... 9,871 7,711 2,859 2,249
Turnkey drilling services ............. 15,202 -- (107) --
Engineering and consulting services .. 491 542 185 138
Other revenue ........................ 2,869 1,027 2,105 823
-------- -------- -------- --------
Total ....................... $116,696 $ 42,735 $ 57,754 $ 16,698
======== ======== ======== ========
</TABLE>
OPERATING REVENUES. Offshore contract drilling services revenues
increased $56,346,000 for the Current Quarter as compared to the Comparable
Quarter. The increase is primarily attributable to the acquisitions of the
Neddrill fleet and the Noble Jimmy Puckett, Noble Kenneth Delaney, Noble Gus
Androes and Noble Chuck Syring jackup rigs. These acquisitions contributed
$49,418,000 in contract drilling services revenues in the Current
11
<PAGE> 12
FORM 10-Q
Quarter. The remaining increase is attributable to higher average dayrates in
the Current Quarter as compared to the Comparable Quarter. All of the Company's
land assets were sold in December 1996. Labor contract drilling services
revenues increased $2,160,000 in the Current Quarter as compared to the
Comparable Quarter due to higher average dayrates on the platform contracts.
Turnkey drilling services revenues increased $15,202,000 as a result
of two completions in West Africa and one in the North Sea in the Current
Quarter, as compared to no international wells completed in the Comparable
Quarter. There were two international turnkey wells in progress at June 30,
1997, one offshore Mexico in the Bay of Campeche and one in the North Sea.
GROSS MARGIN. International offshore contract drilling services gross
margin increased $39,518,000 in the Current Quarter as compared to the
Comparable Quarter. The increase is primarily attributable to the contributions
from the Neddrill fleet, Noble Jimmy Puckett, Noble Kenneth Delaney, Noble Gus
Androes and Noble Chuck Syring. These assets contributed $28,435,000 in gross
margin in the Current Quarter. The remaining increase is due to higher average
dayrates in the Current Quarter as compared to the Comparable Quarter. The
increase in gross margin for labor contract drilling services in the Current
Quarter as compared to the Comparable Quarter is attributable to higher average
dayrates on the platform contracts. The negative results from international
turnkey drilling services are attributable to unexpected drilling difficulties
on a well in progress offshore Mexico, which is expected to result in a loss
upon completion. At June 30, 1997, the Company has fully accrued for the
estimated loss upon completion. The loss in Mexico was offset by positive
margins on turnkey wells completed in West Africa and in the North Sea.
DOMESTIC OPERATIONS
The following table sets forth the operating revenues and gross margin
for the Company's domestic operations for the three months ended June 30, 1997
and 1996:
<TABLE>
<CAPTION>
OPERATING REVENUES GROSS MARGIN
--------------------------- ---------------------------
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
1997 1996 1997 1996
------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C>
Contract drilling services
Offshore . . . . . . . . . . . . . . $26,557 $30,795 $20,254 $15,915
Land . . . . . . . . . . . . . . . . - 3,463 - 902
------- ------- ------- -------
Total contract drilling services . . . 26,557 34,258 20,254 16,817
Turnkey drilling services . . . . . . . 40,771 30,671 1,374 6,781
Engineering and consulting services . . - 738 (365) 205
Other revenue . . . . . . . . . . . . . 968 1,284 758 327
------- ------- ------- -------
Total . . . . . . . . . . . . $68,296 $66,951 $22,021 $24,130
======= ======= ======= =======
</TABLE>
OPERATING REVENUES. Domestic offshore contract drilling services
revenues decreased $4,238,000 in the Current Quarter as compared to the
Comparable Quarter. The decrease is primarily attributable to the sale of the
Company's mat supported jackup fleet, which reduced the number of rig operating
days in the Current Quarter as compared to the Comparable Quarter. The decrease
in rig operating days was partially offset by the significant increase in the
average domestic contract drilling dayrate. All of the Company's land drilling
assets were sold in December 1996. There were nine turnkey wells completed in
the Current Quarter as compared to eight in the Comparable Quarter, and the
average revenue per completed well was higher in the Current Quarter.
GROSS MARGIN. Domestic offshore contract drilling services gross
margin increased $4,339,000 in the Current Quarter as compared to the Comparable
Quarter. The increase is primarily attributable to higher average domestic
dayrates, which was partially offset by the sale of the Company's mat supported
jackup fleet during the Current Quarter. The decrease in turnkey drilling
services gross margin was attributable to unexpected drilling difficulties on a
well which is expected to result in a loss upon completion. At June 30, 1997,
the Company has fully accrued for the estimated loss upon completion.
12
<PAGE> 13
FORM 10-Q
OTHER OPERATING ITEMS
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense increased $9,951,000 in the Current Quarter as compared to the
Comparable Quarter. Of this amount, $6,376,000 represents depreciation
attributable to the Neddrill fleet, and approximately $2,784,000 relates
to the Noble Jimmy Puckett, Noble Kenneth Delaney, Noble Gus Androes and Noble
Chuck Syring, which were acquired in 1996 and placed into service in the latter
part of the year. The remaining increase is attributable to rig refurbishments
subsequent to the Comparable Quarter.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses increased $3,096,000 in the Current Quarter as
compared to the Comparable Quarter. The increase is 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. The
Company sold its mat supported jackup fleet in the Current Quarter, resulting
in a pre-tax gain of $197,676,000. See "Results of Operations - Significant
1997 Events."
INTEREST EXPENSE. Interest expense increased in the Current Quarter
as compared to the Comparable Quarter due to the issuance on July 1, 1996 of
$125,000,000 principal amount of 9 1/8% Senior Notes due 2006 (the "9 1/8%
Senior Notes"), the proceeds of which were used to finance the acquisition of
the former Neddrill fleet. The higher interest expense associated with the
issuance of the 9 1/8% Senior Notes was partially offset in the Current Quarter
by repurchases of $81,330,000 principal amount of the Company's 9 1/4% Senior
Notes in the Current Quarter. See "Results of Operations - Significant 1997
Events."
INTEREST INCOME. Interest income increased $2,607,000 in the Current
Quarter as compared to the Comparable Quarter due to higher average cash
balances resulting primarily from proceeds received in May 1997 from the sale
of the Company's mat supported jackup fleet. The higher average cash balances
were also partially attributable to increased operating cash flow in the
Current Quarter as compared to the Comparable Quarter.
INCOME TAX PROVISION. The effective income tax rate in the Current
Quarter increased to approximately 33 percent from approximately nine percent
in the Comparable Quarter. Income taxes of $69,187,000 were recorded in the
Current Quarter in connection with the gain on the sale of the mat rigs. The
Comparable Quarter was favorably impacted by the recognition of deferred tax
benefits related to net operating loss carryforwards.
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Net income applicable to common shares for the six months ended June
30, 1997 (the "Current Period"), was $178,663,000, or $1.33 per share, on
operating revenues of $353,707,000, compared to net income applicable to common
shares of $23,959,000, or $0.25 per share, on operating revenues of
$214,443,000 for the six months ended June 30, 1996 (the "Comparable Period").
See "Results of Operations - Significant 1997 Events" for information on
non-recurring transactions and their impact on the results of the Current
Period. Excluding the effects of non-recurring items, net income applicable to
common shares increased 137% to $56,859,000, or $0.42 per share for the
Current Period, compared to the Comparable Period.
The increases in operating revenues and net income are attributable to
significantly higher domestic and international average dayrates, the
contribution of the Neddrill fleet which was acquired on July 1, 1996,
and the contributions from the Noble Gus Androes, Noble Chuck Syring, Noble
Kenneth Delaney and Noble Jimmy Puckett, which were acquired during 1996 and
placed into service in the latter part of 1996.
13
<PAGE> 14
FORM 10-Q
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 offshore rig fleet for
the six months ended June 30, 1997 and 1996:
<TABLE>
<CAPTION>
AVERAGE RIG
UTILIZATION RATES (1) OPERATING DAYS AVERAGE DAYRATES
--------------------- ------------------ --------------------
SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30,
-------------------- ------------------ --------------------
1997 (2) 1996 1997 (2) 1996 1997 (2) 1996
-------- ---- -------- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C>
International .......... 95% 93% 4,817 2,724 $34,404 $22,841
Domestic ................ 99% 96% 2,003 2,534 $31,191 $21,328
</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 sold certain drilling
rigs. Utilization rates for the periods prior to sales of such rigs
have not been adjusted.
(2) Includes the results of Neddrill.
INTERNATIONAL OPERATIONS
The following table sets forth the operating revenues and gross margin
for the Company's international operations for the six months ended June 30,
1997 and 1996:
<TABLE>
<CAPTION>
OPERATING REVENUES GROSS MARGIN
-------------------------- --------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1997 1996 1997 1996
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Contract drilling services
Offshore .......................... $165,724 $ 62,219 $ 93,611 $ 25,351
Land .............................. -- 4,816 -- 1,085
-------- -------- -------- --------
Total contract drilling services ..... 165,724 67,035 93,611 26,436
Labor contract drilling services ..... 19,223 15,705 5,654 4,318
Turnkey drilling services ............ 29,550 -- 4,561 --
Engineering and consulting services .. 656 1,265 99 385
Other revenue ........................ 4,175 2,357 3,186 1,601
-------- -------- -------- --------
Total ....................... $219,328 $ 86,362 $107,111 $ 32,740
======== ======== ======== ========
</TABLE>
OPERATING REVENUES. Offshore contract drilling services revenues
increased $103,505,000 during the Current Period as compared to the Comparable
Period. The increase is primarily attributable to the acquisitions of the
Neddrill fleet and the Noble Jimmy Puckett, Noble Kenneth Delaney, Noble Gus
Androes and the Noble Chuck Syring jackup rigs. These acquisitions contributed
$87,938,000 in contract drilling services revenues in the Current Period. The
remaining increase is attributable to higher average dayrates in the Current
Period as compared to the Comparable Period. All of the Company's land assets
were sold in December 1996. Labor contract drilling services revenues increased
$3,518,000 in the Current Period as compared to the Comparable Period due to
higher average dayrates on the platform contracts. Turnkey drilling
services revenues increased $29,550,000 resulting from five completions in West
Africa and one in the North Sea in the Comparable Period, as compared to no
international wells completed in the Comparable Period. There were two
international turnkey wells in progress at June 30, 1997, one offshore Mexico
in the Bay of Campeche and one in the North Sea.
GROSS MARGIN. International offshore contract drilling services gross
margin increased $68,260,000 in the Current Period as compared to the
Comparable Period. The increase is primarily attributable to the contributions
14
<PAGE> 15
FORM 10-Q
from the Neddrill fleet, the Noble Jimmy Puckett, Noble Kenneth Delaney, Noble
Gus Androes and Noble Chuck Syring. These assets contributed $46,739,000 in
gross margin in the Current Period. The remaining increase is due to higher
average dayrates in the Current Period as compared to the Comparable Period.
The increases in gross margin for labor contract drilling services and turnkey
drilling services in the Current Period, as compared to the Comparable
Period, were attributable to higher average dayrates on the platform contracts
and increased turnkey well completions, respectively.
DOMESTIC OPERATIONS
The following table sets forth the operating revenues and gross margin
for the Company's domestic operations for the six months ended June 30, 1997
and 1996:
<TABLE>
<CAPTION>
OPERATING REVENUES GROSS MARGIN
-------------------------- --------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1997 1996 1997 1996
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Contract drilling services
Offshore ......................... $ 62,475 $ 54,045 $ 40,901 $ 27,042
Land ............................. -- 6,883 -- 1,438
-------- -------- -------- --------
Total contract drilling services .... 62,475 60,928 40,901 28,480
Turnkey drilling services ........... 69,451 63,726 524 13,733
Engineering and consulting services . 698 1,777 23 623
Other revenue ....................... 1,755 1,650 569 345
-------- -------- -------- --------
Total ...................... $134,379 $128,081 $ 42,017 $ 43,181
======== ======== ======== ========
</TABLE>
OPERATING REVENUES. Domestic offshore contract drilling services
revenues increased $8,430,000 in the Current Period as compared to the
Comparable Period. Although the sale of the Company's mat supported jackup
fleet reduced the number of rig operating days in the Current Period as
compared to the Comparable Period, the decrease in rig operating days was
offset by a significant increase in the average domestic contract drilling
dayrate. All of the Company's land drilling assets were sold in December 1996.
The increase in turnkey drilling services revenues is primarily attributable to
a higher number of turnkey wells completed in the Current Period as compared to
the Comparable Period.
GROSS MARGIN. Domestic offshore contract drilling services gross
margin increased $13,859,000 in the Current Period as compared to the
Comparable Period. The increase is primarily attributable to higher average
domestic dayrates, which was partially offset by the sale of the Company's mat
supported jackup fleet during the Current Period. The decrease in turnkey
drilling services gross margin was attributable to several wells which incurred
losses during the Current Period as a result of unexpected drilling difficulty.
OTHER OPERATING ITEMS
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense increased $18,599,000 in the Current Period as compared to the
Comparable Period. Of this amount, $11,710,000 represents depreciation
attributable to the Neddrill fleet, and approximately $5,608,000 relates
to the Noble Jimmy Puckett, Noble Kenneth Delaney, Noble Gus Androes and Noble
Chuck Syring, which were acquired in 1996 and placed into service in the latter
part of the year. The remaining increase is attributable to rig refurbishments
subsequent to the Comparable Period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased
$7,381,000 in the Current Period as compared to the Comparable Period. The
increase is attributable to the Neddrill acquisition combined with other
general increases resulting from higher activity levels.
15
<PAGE> 16
FORM 10-Q
GAINS ON SALES OF PROPERTY AND EQUIPMENT, NET OF IMPAIRMENTS. The
Company sold its mat supported jackup fleet in the Current Period, resulting in
a pre-tax gain of $197,676,000. See "Results of Operations - Significant 1997
Events." In the Comparable Period, 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 in the Current Period as
compared to the Comparable Period due to the issuance on July 1, 1996 of
$125,000,000 principal amount of 9 1/8% Senior Notes, the proceeds of which
were used to finance the acquisition of the Neddrill fleet. The higher
interest expense associated with the issuance of the 9 1/8% Senior Notes was
partially offset by repurchases of $110,885,000 principal amount of the
Company's 9 1/4% Senior Notes in the Current Period.
INTEREST INCOME. Interest income increased $3,669,000 in the Current
Period as compared to the Comparable Period due to higher average cash balances
resulting primarily from proceeds received in May 1997 from the sale of the
Company's mat supported jackup fleet. The higher average cash balances were
also partially attributable to increased operating cash flow in the Current
Period as compared to the Comparable Period.
INCOME TAX PROVISION. The effective income tax rate in the Current
Period increased to approximately 32 percent from approximately 10 percent in
the Comparable Period. Income taxes of $69,187,000 were recorded in the Current
Period in connection with the gain on the sale of the mat rigs. The Comparable
Period 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 $265,771,000 and $236,977,000 as of
June 30, 1997 and December 31, 1996, respectively. Long-term debt as a
percentage of long-term debt plus shareholders' equity was 11 percent at June
30, 1997 compared to 21 percent at December 31, 1996.
At June 30, 1997, the Company had cash, cash equivalents and
marketable debt securities of $295,796,000 and had $2,603,000 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 for contract drilling and turnkey drilling
services. The Company will continue to have cash requirements for debt
principal and interest payments; for the remainder of 1997, cash requirements
for currently outstanding debt principal and interest payments are estimated to
be approximately $12,000,000. The Company expects to fund these payments out
of cash and short-term investments as well as cash provided by operations.
Capital expenditures totaled $124,375,000 and $76,155,000 for the
Current Period and Comparable Period, respectively. Capital expenditures for the
remainder of 1997 are expected to total approximately $300,000,000, of which the
majority relates to upgrades of existing equipment. This amount includes
approximately $167,000,000 for the conversions of submersible rigs, including
the Noble Paul Romano, the Noble Paul Wolff and a third submersible which has
yet to be determined, into EVA-4000(TM) semisubmersible units. The Noble Paul
Romano and Noble Paul Wolff rigs are not expected to be available for
work until at least mid 1998 and late 1998, respectively. The third
EVA-4000(TM) semisubmersible unit is not expected to be completed until 1999.
The total cost of these conversion projects is expected to be approximately
$400,000,000. These expenditures will be funded from operating cash flows,
existing cash balances, available lines of credit and possibly from other
sources of project financing. The Company is currently reviewing several
proposals from financial institutions to provide project financing for the
EVA-4000(TM) semisubmersible conversions. Certain conversion projects currently
under consideration could require, if they materialize, capital expenditures or
other cash requirements not included in the above estimate. Factors that could
cause actual capital expenditures to exceed materially the planned capital
expenditures include delays and cost overruns in shipyards, shortages and delays
in the delivery of key rig equipment necessary for conversion projects, latent
damage or deterioration to hulls, requirements for equipment and machinery in
excess of engineering estimates and assumptions, and changes in design criteria
or specifications during repair or construction.
On May 12, 1997, the Company announced that its Board of Directors
authorized the repurchase of up to 10,000,000 shares of the Company's common
stock, or approximately eight percent of its outstanding common
16
<PAGE> 17
FORM 10-Q
stock. On July 2, 1997, the Company repurchased 1,100,000 shares from a
single stockholder in a private transaction for $23,100,000. Additional
purchases, if any, will likely be made from time to time on the open market or
in private transactions at prices determined by the Company.
CREDIT FACILITIES AND LONG-TERM DEBT
At June 30, 1997, the Company had lines of credit totaling $5,000,000
to support letters of credit, subject to the Company's maintenance of certain
levels of collateral. At June 30, 1997, $2,397,000 had been used to support
outstanding letters of credit. Additionally, at June 30, 1997, $15,020,000 of
outstanding letters of credit had been supported through a combination of
unsecured letter of credit facilities and surety 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. The Company purchased $81,330,000 pursuant to the tender offer during
the Current Quarter. During the Current Period, the Company acquired
$110,885,000 principal amount of its 9 1/4% Senior Notes. After giving effect
to the purchases, the Company had $3,115,000 principal amount of 9 1/4% Senior
Notes outstanding at June 30, 1997.
The Company entered into a credit agreement dated August 14, 1997 ("the
Credit Agreement") with a group of banks. The Credit Agreement provides for a
five year unsecured revolving credit facility in the amount of $200,000,000.
Loans under the Credit Agreement bear interest, at the option of the Company, at
a base rate or LIBOR plus a margin (0.40 percent currently) that varies
depending on the Company's public senior secured debt rating or its funded debt
to capital ratio. The Credit Agreement requires compliance with various
covenants, including minimum consolidated net worth, interest coverage ratios,
leverage ratios and fleet coverage ratios.
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.
17
<PAGE> 18
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 June 30, 1997. A report on
Form 8-K dated May 22, 1997, which reported the sale
of the mat supported jackup rigs to Pride Petroleum
Services, Inc., was filed on the date thereof.
18
<PAGE> 19
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NOBLE DRILLING CORPORATION
DATE: August 14, 1997 /S/ JAMES C. DAY
------------------------------------------
JAMES C. DAY, Chairman, President and
Chief Executive Officer
DATE: August 14, 1997 /S/ BYRON L. WELLIVER
------------------------------------------
BYRON L. WELLIVER,
Senior Vice President-Finance,
Treasurer and Controller
(Principal Financial and Accounting Officer)
19
<PAGE> 20
FORM 10-Q
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ -------
<S> <C>
27 Financial Data Schedule
</TABLE>
20
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 176,434
<SECURITIES> 119,362
<RECEIVABLES> 119,297
<ALLOWANCES> 583
<INVENTORY> 5,097
<CURRENT-ASSETS> 514,376
<PP&E> 1,197,095
<DEPRECIATION> 218,419
<TOTAL-ASSETS> 1,541,430
<CURRENT-LIABILITIES> 248,605
<BONDS> 132,130
0
0
<COMMON> 13,271
<OTHER-SE> 1,095,308
<TOTAL-LIABILITY-AND-EQUITY> 1,541,430
<SALES> 0
<TOTAL-REVENUES> 353,707
<CGS> 0
<TOTAL-COSTS> 204,579
<OTHER-EXPENSES> (128,811)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,095
<INCOME-PRETAX> 274,432
<INCOME-TAX> 89,084
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (6,685)
<CHANGES> 0
<NET-INCOME> 178,663
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.33
</TABLE>
