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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ___________ TO _____________
COMMISSION FILE NUMBER: 0-13857
NOBLE DRILLING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 73-0374541
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(State of incorporation) (I.R.S. employer identification number)
10370 RICHMOND AVENUE, SUITE 400, HOUSTON, TEXAS 77042
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(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 974-3131
Securities registered pursuant to Section 12(b) of the Act:
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COMMON STOCK, PAR VALUE $.10 PER SHARE NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
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Title of each class Name of each exchange on which registered
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Securities registered pursuant to Section 12(g) of the Act:
NONE
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 [ ]
Indicated by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of Common Stock held by nonaffiliates as of
March 8, 2000: $5,082,657,041
Number of shares of Common Stock outstanding as of March 8, 2000:
132,602,991
DOCUMENTS INCORPORATED BY REFERENCE
Listed below are documents parts of which are incorporated herein by
reference and the part of this report into which the document is incorporated:
(1) Proxy statement for the 2000 annual meeting of stockholders - Part
III
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TABLE OF CONTENTS
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PART ITEM 1. BUSINESS........................................................................ 1
I General............................................................................. 1
Business Strategy................................................................... 1
Business Development During 1999.................................................... 2
Deepwater Conversions and Upgrades........................................... 2
Drilling Contracts.................................................................. 3
Offshore Drilling Operations........................................................ 4
International Contract Drilling.............................................. 4
Domestic Contract Drilling................................................... 4
Labor Contracts.............................................................. 4
Turnkey Drilling and Engineering Services........................................... 4
Competition and Risks............................................................... 5
Governmental Regulation and Environmental Matters................................... 6
Employees........................................................................... 6
Financial Information about Foreign and Domestic Operations......................... 7
ITEM 2. PROPERTIES...................................................................... 7
Drilling Fleet...................................................................... 7
Semisubmersibles............................................................. 7
Dynamically Positioned Drillships............................................ 7
Jackup Rigs.................................................................. 7
Submersibles................................................................. 8
Facilities.......................................................................... 10
ITEM 3. LEGAL PROCEEDINGS............................................................... 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................. 10
EXECUTIVE OFFICERS OF THE REGISTRANT........................................................ 10
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PART ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
II STOCKHOLDER MATTERS............................................................ 12
ITEM 6. SELECTED FINANCIAL DATA......................................................... 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................................. 14
Business Environment................................................................ 14
Results of Operations............................................................... 14
Liquidity and Capital Resources..................................................... 19
Year 2000........................................................................... 20
Accounting Pronouncement............................................................ 20
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK............................................................... 21
Interest Rate Risk.................................................................. 21
Foreign Currency Exchange Risk...................................................... 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................................... 22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE...................................................................... 50
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PART ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............................. 50
III ITEM 11 EXECUTIVE COMPENSATION.......................................................... 50
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT...................................................................... 50
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................. 50
========================================================================================================
PART ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
IV FORM 8-K................. ...................................................... 50
SIGNATURES.................................................................................. 51
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FORM 10-K
This report on Form 10-K 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-K, including,
without limitation, statements contained in "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations", regarding our
financial position, business strategy, plans and objectives of management for
future operations, industry conditions, and indebtedness covenant compliance,
are forward-looking statements. Although we believe that the expectations
reflected in such forward-looking statements are reasonable, we cannot assure
you that such expectations will prove to have been correct. Important factors
that could cause actual results to differ materially from our expectations
include, but are not limited to, volatility in crude oil and natural gas prices,
potential deterioration in the demand for our drilling services and resulting
declining dayrates, the cancellation by our customers of drilling contracts or
letter agreements or letters of intent for drilling contracts or their exercise
of early termination provisions generally found in our drilling contracts, risks
associated with our turnkey drilling operations, intense competition in the
drilling industry, political and economic conditions in international markets
where we operate, adverse weather (such as hurricanes) and seas, operational
risks (such as blowouts, fires and loss of production), limitations on our
insurance coverage, and requirements and potential liability imposed by
governmental regulation of the drilling industry (including environmental
regulation).
PART I
ITEM 1. BUSINESS
GENERAL
We are a leading provider of diversified services for the oil and gas
industry. We perform contract drilling services with our fleet of 48 offshore
drilling units located in key markets worldwide. Our fleet of floating deepwater
units consists of nine semisubmersibles and three dynamically positioned
drillships, seven of which are designed to operate in water depths greater than
5,000 feet. Our fleet of 33 jackup rigs includes 20 premium units that are
capable of operating in water depths of 300 feet and greater, four of which are
capable of operating in water depths of 360 feet and greater. In addition, our
fleet includes three submersible drilling units. Eleven of our drilling units
are capable of operating in harsh environments. Over 60 percent of the fleet is
currently deployed in international markets, principally including the North
Sea, Africa, Brazil, Venezuela, the Middle East, India and Mexico. We also
provide labor contract drilling services, engineering and production management
services, and turnkey drilling services.
Noble Drilling Corporation ("Noble Drilling") was organized as a
Delaware corporation in 1939. Noble Drilling and its predecessors have been
engaged in the contract drilling of oil and gas wells for others domestically
since 1921 and internationally during various periods since 1939. As used
herein, unless otherwise required by the context, the term "Noble Drilling"
refers to Noble Drilling Corporation and the term "Company", "we", "our" and
words of similar import refer to Noble Drilling and its consolidated
subsidiaries. The use herein of such terms as group, organization, we, us, our
and its, or references to specific entities, is not intended to be a precise
description of corporate relationships.
BUSINESS STRATEGY
In recent years we have focused on increasing the number of rigs in our
fleet capable of deepwater offshore drilling. Both the level of drilling
activity and the number of announced discoveries in water depths greater than
5,000 feet have increased substantially in recent years and the demand for rigs
capable of drilling in these water depths has increased correspondingly. We have
incorporated this focus into our broader, long-standing business strategy to
actively expand our international and offshore deepwater capabilities through
acquisitions, rig upgrades and modifications, and to redeploy assets in
important geological areas.
The offshore contract drilling industry has, in recent years,
experienced a series of asset sales and consolidations among drilling
contractors, and we expect this trend to continue as drilling contractors
position themselves strategically in the market. From time to time, we discuss
asset acquisitions or business combinations
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with others, and we intend to continue to consider business opportunities that
we believe promote our business strategy.
BUSINESS DEVELOPMENT DURING 1999
DEEPWATER CONVERSIONS AND UPGRADES
A principal component of our deepwater strategy is our Noble
EVA-4000(TM) semisubmersible conversion program. The Noble EVA-4000(TM) is our
proprietary design by which we have converted our three-column submersible
drilling rigs into ultra-deepwater semisubmersibles at a lower cost and on an
accelerated delivery schedule, we believe, versus a new construction project.
All five of our Noble EVA-4000(TM) semisubmersibles have been delivered under
long-term contracts. The Noble Paul Romano, Noble Paul Wolff, Noble Jim
Thompson, Noble Amos Runner and Noble Max Smith were activated in December 1998,
May 1999, June 1999, August 1999 and December 1999, respectively.
The Noble Paul Romano, which is capable of drilling in 6,000 feet of
water, is contracted to Shell Deepwater Development Inc. ("Shell Deepwater"), an
affiliate of Shell Oil Company, for use in the U.S. Gulf of Mexico under a five
year contract scheduled to expire in December 2003. The Noble Paul Wolff, a
dynamically positioned unit capable of drilling in 8,900 feet of water, is
contracted to Petroleo Brasiliero S.A. ("Petrobras") for use offshore Brazil
under a six year contract scheduled to expire in May 2005. The Noble Jim
Thompson, which is capable of drilling in 6,000 feet of water, is contracted to
Shell Deepwater for use in the U.S. Gulf of Mexico for an initial term of three
years scheduled to expire in July 2002, with options to extend by Shell
Deepwater. The Noble Amos Runner, which is capable of drilling in 6,600 feet of
water, is under contract to a rig-sharing consortium of operators for use in the
U.S. Gulf of Mexico under a five year contract scheduled to expire in August
2004. The Noble Max Smith, which is capable of drilling in 6,000 feet of water,
is under contract to Amerada Hess Corporation and Union Pacific Resources Group
for use in the U.S. Gulf of Mexico. Amerada Hess has contracted the unit for 30
months out of a five-year contract period and Union Pacific Resources has
contracted the unit for 15 months out of the balance of the five-year period.
Since initial delivery of the five Noble EVA-4000(TM) semisubmersibles
through February 29, 2000, the units have successfully drilled or completed 17
wells in water depths ranging from approximately 3,000 feet to 8,816 feet.
Additionally, our customers have announced two new discoveries as a result of
the exploratory wells drilled with these rigs.
In addition to our Noble EVA-4000(TM) conversions, we have acquired
three Friede & Goldman 9500 Enhanced Pacesetter hulls in recent years with the
intention of upgrading them to operate in water depths greater than 5,000 feet.
The first of these upgrades, the Noble Homer Ferrington, was delivered to
Mariner Energy, Inc. in March 2000 for use in the U.S. Gulf of Mexico. Our
contract with Mariner for the Noble Homer Ferrington, which is capable of
drilling in 6,000 feet of water, is at variable dayrates for 660 days over a
five-year contract period. In addition, we received from Mariner an assignment
of working interests (ranging between 5 and 10 percent depending on the lease)
in seven of Mariner's deepwater exploration prospects, in which Mariner will pay
our share of the drilling costs during the initial test well on each of the
prospects. The engineering design work for the other two units, the Ilion and
the Noble Dave Beard, is currently in process, and we expect to have preliminary
plans completed in 2000.
See "Item 3. Legal Proceedings" for a description of our lawsuit
against another operator relating to the use of the Noble Homer Ferrington.
See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources" for a
discussion of capital expenditures.
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DRILLING CONTRACTS
We typically employ each drilling unit under an individual contract.
Although the final terms of the contracts are the result of our negotiations
with our customers, many contracts are awarded based upon competitive bidding.
Our drilling contracts generally contain the following terms:
o a term extending over a specific period of time or the period
necessary to drill one or more wells (in general, we seek to have
a reasonable balance of short- and long-term contracts to
minimize the downside impact of a decline in the market, while
obtaining the upside of increasing market prices in a rising
market);
o terms permitting early termination of the contract by the
customer (1) without cause, generally exercisable upon advance
notice to us; (2) if the unit is lost or destroyed; or (3) if
operations are suspended for a specified period of time due to
breakdown of major equipment or if operations are suspended for a
specified period of time due to "force majeure" events beyond our
control and the control of the customer;
o options in favor of the customer to drill one or more additional
wells, generally upon advance notice to us;
o payment of compensation to us (generally in U.S. dollars) on a
"daywork" basis, so that we receive a fixed amount for each day
that the drilling unit is operating under contract (lower rates
or no compensation is payable during periods of equipment
breakdown and repair or adverse weather or in the event
operations are interrupted by other conditions, some of which may
be beyond our control); and
o payment by us of the operating expenses of the drilling unit,
including labor costs and the cost of incidental supplies.
During times of depressed market conditions, our customers may seek to
avoid or reduce their obligations under term drilling contracts or letter
agreements or letters of intent for drilling contracts. A customer may no longer
need a rig, due to a reduction in its exploration, development or production
program, or it may seek to obtain a comparable rig at a lower dayrate.
We anticipate that the primary terms of the current contracts on 20 of
35 of our rigs will expire at varying times in 2000, subject to options to
extend in the case of 16 contracts. We currently have five idle rigs that have
been contracted to commence operations in late March or early April 2000.
Many contracts allow us to recover our mobilization and demobilization
costs associated with moving a drilling unit from one location to another. When
market conditions require us to bear these costs, our operating margins are
accordingly reduced. Market conditions prevailing in 1999 and year to date in
2000 have permitted us to recover our mobilization and demobilization costs to
move a unit long distances between operating areas. We cannot predict our
ability to recover these costs in the future. For shorter moves such as "field
moves", our customers have generally agreed to bear the costs of moving the unit
by paying us a reduced dayrate or "move rate" while the unit is being moved.
Through our wholly-owned subsidiary, Triton Engineering Services
Company, and its subsidiaries (collectively, "Triton"), we also participate in
"turnkey" contracts. See "Item 1. Business - Turnkey Drilling and Engineering
Services." The risk of loss to us is generally higher with respect to our
turnkey drilling operations than it is for daywork contract drilling operations.
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OFFSHORE DRILLING OPERATIONS
Our offshore contract drilling operations, which accounted for
approximately 83 percent and 76 percent of operating revenues for the years
ended December 31, 1999 and 1998, respectively, are conducted worldwide. Our
offshore drilling fleet consists of 48 units. See "Item 2. Properties - Drilling
Fleet." Our principal regions of offshore contract drilling operations include
the North Sea, the Gulf of Mexico, Africa, Brazil, Venezuela, the Arabian Gulf
and India. In 1999, two separate customers accounted for approximately 13
percent and 11 percent of our total operating revenues. No other single customer
accounted for more than 10 percent of our total operating revenues.
INTERNATIONAL CONTRACT DRILLING
Our offshore contract drilling services revenues from international
sources accounted for approximately 74 percent and 80 percent of our total
offshore contract drilling services revenues for 1999 and 1998, respectively. In
1999, approximately 34 percent of our international offshore contract drilling
services revenues was derived from contracts with major oil and gas companies,
44 percent from contracts with government-owned companies and the balance from
contracts with independent operators.
DOMESTIC CONTRACT DRILLING
Offshore contract drilling services revenues generated in the U.S.
accounted for approximately 26 percent and 20 percent of our total offshore
contract drilling services revenues for 1999 and 1998, respectively. In 1999,
approximately 45 percent of our domestic offshore contract drilling revenues was
derived from contracts with independent operators and the remaining 55 percent
was derived from contracts with major oil and gas companies.
LABOR CONTRACTS
Our offshore operations also include services we perform under labor
contracts for drilling and workover activities covering six rigs operating in
the U.K. North Sea and two rigs under a labor contract (the "Hibernia Project")
off the east coast of Canada. These rigs are not owned or leased by us. Under
our labor contracts, we provide the personnel necessary to manage and perform
the drilling operations from drilling platforms owned by the operator. With the
exception of the Hibernia Project, which is operated under a five year
agreement, the contracts are generally renewable no more frequently than on an
annual basis. After drilling operations are completed, workover operations
usually become an important element of each platform's activity. Drilling
contractor crews will, therefore, typically remain on the platform until a field
is depleted by production.
TURNKEY DRILLING AND ENGINEERING SERVICES
Through Triton, we provide turnkey drilling, drilling project
management, drilling and completion planning and design, and contract
engineering and consulting manpower. Turnkey drilling, Triton's major service,
involves Triton's coordination of all equipment, materials, services and
management to drill a well to a specified depth, for a fixed price. Under
turnkey drilling contracts, Triton bears the financial risk of delays in the
completion of the well. In providing its services, Triton can use drilling rigs
owned either by us or by a third party, depending on availability and equipment
requirements. The drilling of a turnkey well is generally completed within 30 to
50 days. Triton completed 26 wells in 1999 compared to 14 wells in 1998.
Revenues from turnkey drilling services represented 11 percent and 14 percent of
our consolidated operating revenues for 1999 and 1998, respectively.
We also provide engineering services relating primarily to the design
of drilling equipment for offshore development and production services and to
the recertification of oilfield equipment. We work on a contract basis with
operators and prime construction contractors of drilling and production
platforms in the design of drilling equipment configurations aimed at optimizing
the operational efficiency of developmental drilling by maximizing platform
space utilization and load capability.
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COMPETITION AND RISKS
The contract drilling industry is a highly competitive and cyclical
business characterized by high capital and maintenance costs. We believe that
competition for drilling contracts will continue to be intense for the
foreseeable future. Certain competitors may have access to greater financial
resources than we do.
Competition in contract drilling involves numerous factors, including
price, rig availability and suitability, the experience of the workforce,
efficiency, condition of equipment, operating integrity, reputation, industry
standing and customer relations. Although price is a major consideration in most
markets, especially with respect to domestic drilling, the limited supply of
ultra-deepwater units has made rig availability and suitability a principal
consideration in recent periods. We believe that we compete favorably with
respect to all these factors. Competition is primarily on a regional basis and
may vary significantly by region at a particular time. Demand for offshore
drilling equipment also depends on the exploration and development programs of
oil and gas producers, which in turn are influenced by the financial condition
of such producers, by general economic conditions and prices of oil and gas,
and, from time to time, by political considerations and policies.
We follow a policy of keeping our equipment well maintained and
technologically competitive. However, our equipment could be made obsolete by
the development of new techniques and equipment. In addition, industry-wide
shortages of supplies, services, skilled personnel and equipment necessary to
conduct our business, such as blowout preventers and drill pipe, occur from time
to time. We cannot assure you that any such shortages experienced in the past
would not occur again or that any shortages, to the extent currently existing,
will not continue or worsen in the future.
Our results of operations depend on the levels of activity in offshore
oil and gas exploration, development and production in markets worldwide. Both
short-term and long-term trends in oil and gas affect that activity. During the
third quarter of 1999, demand for offshore drilling rigs in the U.S. Gulf of
Mexico began to strengthen, and as a result, rig utilization and dayrates began
rising in late 1999. We believe the increased demand for domestic rigs is
largely attributable to oil and gas prices that began rising in 1999 and have
remained at high levels as compared to average prices in recent years.
International demand for offshore drilling rigs, however, weakened during 1999,
and rig utilization and dayrates on certain contract renewals began declining in
those markets. Although most international drilling markets remain somewhat
depressed relative to prior year levels, in certain markets a number of our rigs
which had been idle are receiving contracts to return to work. International
dayrates we have recently obtained are lower, on an average basis, than the
rates we obtained in early 1999 and 1998.
Oil and gas prices and market expectations of potential changes in
these prices significantly affect the level of activity in oil and gas
exploration, development and production. These market prices are extremely
volatile. Demand for drilling services depends on a variety of economic and
political factors, including worldwide demand for oil and gas, the ability of
the Organization of Petroleum Exporting Countries ("OPEC") to set and maintain
production levels and pricing, the level of production of non-OPEC countries and
the policies of the various governments regarding exploration and development of
their oil and gas reserves.
We believe that a significant decrease from recent historical average
oil and gas prices could depress the level of exploration and production
activity and result in a corresponding decline in demand for our services.
Furthermore, the recent consolidations in the oil and gas industry have resulted
in a reduction in the amount of capital spent on exploration and production
activities. These reductions adversely affect the demand for our services. For
these reasons, we cannot predict the future level of demand for our drilling
services or future conditions in the offshore contract drilling industry.
Our operations are subject to the many hazards inherent in the drilling
business, including blowouts, cratering, fires, and collisions or groundings of
offshore equipment. In addition, our operations are subject to damage or loss
from adverse weather and seas. These hazards could cause personal injury and
loss of life, suspend drilling operations or seriously damage or destroy the
property and equipment involved and, in addition to causing environmental
damage, could cause substantial damage to producing formations and surrounding
areas. Although we maintain insurance against many of these hazards, our
insurance may be subject to substantial deductibles and provides for premium
adjustments based on claims. It also excludes certain matters from coverage,
such as loss of earnings on certain rigs. Also, while we generally obtain
indemnification from our customers for environmental
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damage with respect to offshore drilling, such indemnification is generally only
in excess of a specified amount, which typically ranges from $100,000 to
$250,000.
In the case of turnkey drilling operations, we maintain insurance
against pollution and environmental damage in amounts ranging from $10,000,000
to $100,000,000 depending on location, subject to self-insured retentions of
$10,000 to $1,000,000. Under turnkey drilling contracts, Triton generally
assumes the risk of pollution and environmental damage, but receives
indemnification from the customer for environmental and pollution liabilities in
excess of Triton's pollution insurance coverage. Further, Triton is not insured
against certain drilling risks that could result in delays or nonperformance of
a turnkey drilling contract, although it maintains insurance against delays
related to loss of well control. Triton typically obtains contractual
indemnification from the drilling contractors that provide the rigs for Triton's
turnkey drilling operations for pollution arising from certain acts of the
contractors.
Our international operations are also subject to certain political,
economic and other uncertainties including, among others, risks of war and civil
disturbances, expropriation, nationalization, renegotiation or modification of
existing contracts, taxation policies, foreign exchange restrictions,
international monetary fluctuations and other hazards arising out of foreign
governmental sovereignty over certain areas in which we conduct operations. We
have sought to obtain, where economical, insurance against certain political
risks. However, we cannot assure you that this insurance will always be
available to us or, if available, will cover all losses that we may incur in
respect of foreign operations.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
Many aspects of our operations are affected by domestic and foreign
political developments and are subject to numerous governmental regulations that
may relate directly or indirectly to the contract drilling industry. The
regulations applicable to our operations include provisions that regulate the
discharge of materials into the environment or require remediation of
contamination under certain circumstances. Generally, these environmental laws
and regulations impose "strict liability." This means that we could be liable
without regard to our negligence or fault. Such environmental laws and
regulations may expose us to liability for the conduct of, or conditions caused
by, others, or for any of our acts, even if they complied with all applicable
laws in effect at the time we acted.
The U.S. Oil Pollution Act of 1990 ("OPA `90") and regulations
thereunder impose certain additional operational requirements on our domestic
offshore rigs and govern liability for leaks, spills and blowouts involving
pollutants. Regulations under OPA `90 require owners and operators of rigs in
United States waters to maintain certain levels of financial responsibility. We
monitor these regulations and do not believe that they are likely to have a
material adverse effect on our financial condition or results of operations. We
have made and will continue to make expenditures to comply with environmental
requirements. To date we have not expended material amounts in order to comply
and we do not believe that our compliance with such requirements will have a
material adverse effect upon our results of operations or competitive position
or materially increase our capital expenditures. Although these requirements do
have a substantial impact upon the energy and energy services industries,
generally they do not appear to affect us any differently or to any greater or
lesser extent than other companies in the energy services industry.
The modification of existing laws or regulations or the adoption of new
laws or regulations curtailing exploratory or developmental drilling for oil and
gas for economic, environmental or other reasons could materially and adversely
affect our operations by limiting drilling opportunities.
EMPLOYEES
At December 31, 1999, we had approximately 3,028 employees, of which
approximately 70 percent were engaged in international operations and
approximately 30 percent were engaged in domestic operations. We are not a party
to any collective bargaining agreements that are material. We consider our
employee relations to be satisfactory.
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FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
Information regarding our operating revenues, operating income and
loss, and identifiable assets attributable to each of our geographic areas of
operations for the last three fiscal years is presented in Note 15 of Notes to
Consolidated Financial Statements included in this Annual Report on Form 10-K.
ITEM 2. PROPERTIES
DRILLING FLEET
Our offshore drilling rig fleet consists of 48 units comprising nine
semisubmersibles (including five Noble EVA-4000(TM) semisubmersibles), three
drillships, 33 jackup rigs and three submersibles. The rig count includes one
drillship, one semisubmersible and one jackup unit in which we have partial
ownership interests through joint venture arrangements and one jackup rig
operated pursuant to a long-term bareboat charter agreement with the owner. Each
type of rig is described further below. There are several factors that determine
the type of rig most suitable for a particular job, the more significant of
which include the water depth and bottom conditions at the proposed drilling
location, whether the drilling is being done over a platform or other structure,
and the intended well depth.
SEMISUBMERSIBLES
Our semisubmersible fleet consists of nine units. Among the nine are
five units that have been converted to Noble EVA-4000(TM) semisubmersibles and
three Friede & Goldman 9500 Enhanced Pacesetter semisubmersibles, including one
in which we own a 50 percent interest (with the option to increase to 70
percent) through a joint venture arrangement. Semisubmersibles are floating
platforms which, by means of a water ballasting system, can be submerged to a
predetermined depth so that a substantial portion of the hull is below the water
surface during drilling operations. These units maintain their position over the
well through the use of either a fixed mooring system or a dynamic positioning
system and can drill in many areas where jackup rigs can also drill. However,
semisubmersibles normally require water depth of at least 200 feet in order to
conduct operations. Our semisubmersibles are designed to work in water depths of
up to 8,900 feet. Three of our units are designed to operate in harsh
environments. Semisubmersibles are typically more expensive to construct and
operate than jackup rigs.
DYNAMICALLY POSITIONED DRILLSHIPS
We have three dynamically positioned drillships in the fleet.
Drillships are ships that are equipped for drilling and are typically
self-propelled. Drillships are positioned over the well through use of either an
anchoring system or a computer controlled dynamic positioning system. Our two
wholly owned drillships, the Noble Leo Segerius and Noble Roger Eason, are
capable of drilling in water depths up to 5,000 feet and 6,000 feet,
respectively. The Noble Muravlenko, in which we own an 82 percent interest
through a joint venture arrangement, is capable of drilling in water depths up
to 4,000 feet.
JACKUP RIGS
We have 33 jackup rigs in the fleet, including one in which we own a 50
percent interest through a joint venture arrangement and one which we operate
pursuant to a long-term bareboat charter agreement with the owner. Jackup rigs
are mobile, self-elevating drilling platforms equipped with legs which can be
lowered to the ocean floor until a foundation is established to support the
drilling platform. The rig hull includes the drilling rig, jacking system, crew
quarters, loading and unloading facilities, storage areas for bulk and liquid
materials, helicopter landing deck and other related equipment. All of our
jackup rigs are independent leg (i.e., the legs can be raised or lowered
independently of each other) cantilevered rigs. A cantilevered jackup has a
feature that permits the drilling platform to be extended out from the hull,
allowing it to perform drilling or workover operations over pre-existing
platforms or structures. Moving a rig to the drill site involves jacking up its
legs until the hull is floating on the surface of the water. The hull is then
towed to the drill site by tugs and the legs are jacked down to the ocean floor.
The jacking operation continues until the hull is raised out of the water and
drilling operations are conducted with the hull in its raised position. Our
jackup rigs are capable of drilling to a maximum depth of 25,000 feet in water
7
<PAGE> 10
depths ranging between eight and 390 feet, depending on the jackup rig. Twenty
of our jackup rigs represent premium units that are capable of operating in
water depths of 300 feet and greater, four of which are capable of operating in
water depths of 360 feet and greater. Eight of our jackup rigs are capable of
operating in harsh environments.
SUBMERSIBLES
We have three submersibles in the fleet. Submersibles are mobile
drilling platforms which are towed to the drill site and submerged to drilling
position by flooding the lower hull until it rests on the sea floor, with the
upper deck above the water surface. Our submersibles are capable of drilling to
a maximum depth of 25,000 feet in water depths ranging between 12 and 85 feet,
depending on the submersible.
The following table sets forth certain information concerning our
drilling rig fleet at March 3, 2000. The table does not include eight rigs owned
by operators for which we had labor contracts as of March 3, 2000. We operate
and, unless otherwise indicated, own all of the rigs included in the table.
8
<PAGE> 11
DRILLING FLEET
<TABLE>
<CAPTION>
WATER DRILLING
DEPTH DEPTH
YEAR BUILT RATING CAPACITY
NAME MAKE OR REBUILT(1) (FEET) (FEET) LOCATION STATUS (2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SEMISUBMERSIBLES - 9
Noble Paul Wolff (T) Noble EVA-4000(TM)- DP 1999 R 8,900 30,000 Brazil Active
Noble Paul Romano (T) Noble EVA-4000(TM) 1998 R 6,000 30,000 U.S. Gulf of Mexico Active
Noble Amos Runner (T) Noble EVA-4000(TM) 1999 R 6,600 30,000 U.S. Gulf of Mexico Active
Noble Jim Thompson (T) Noble EVA-4000(TM) 1999 R 6,000 30,000 U.S. Gulf of Mexico Active
Noble Max Smith (T) Noble EVA-4000(TM) 1999 R 6,000 30,000 U.S. Gulf of Mexico Active
Noble Homer Ferrington (T) Friede & Goldman 9500 2000 R 6,000 30,000 U.S. Gulf of Mexico Active
Enhanced Pacesetter
Noble Ton van Langeveld (T) (3) Offshore Co. SCP III 1991 R 1,500 20,000 U.K. Contracted
Noble Dave Beard (3) (4) Friede & Goldman 9500 1986 8,000 25,000 China Shipyard
Enhanced Pacesetter
Ilion (4) (5) Friede & Goldman 9500 1987 8,000 25,000 U.S. Gulf of Mexico Shipyard
Enhanced Pacesetter
- ------------------------------------------------------------------------------------------------------------------------------------
DYNAMICALLY POSITIONED
DRILLSHIPS - 3
Noble Roger Eason (T) Nedlloyd 1997 R 6,000 25,000 Brazil Active
Noble Leo Segerius (T) Gusto Engineering Pelican Class 1996 R 5,000 20,000 Brazil Contracted/
Shipyard
Noble Muravlenko (T) (6) Gusto Engineering Pelican Class 1997 R 4,000 21,000 Brazil Active
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT LEG CANTILEVERED
JACKUPS - 33
Noble Bill Jennings (T) MLT 84 - E.R.C. 1997 R 390 25,000 U.S. Gulf of Mexico Active
Noble Eddie Paul (T) MLT 84 - E.R.C. 1995 R 390 25,000 U.S. Gulf of Mexico Active
Noble Leonard Jones (T) MLT 53 - E.R.C. 1998 R 390 25,000 U.S. Gulf of Mexico Active
Noble Al White (T) (3) CFEM T-2005C 1997 R 360 25,000 The Netherlands Active
Noble Byron Welliver (T) (3) CFEM T-2005C 1982 300 25,000 Denmark Active
Noble Kolskaya (T) (3) (7) Gusto Engineering 1997 R 330 25,000 Denmark Active
Noble Johnnie Hoffman (T) Baker Marine BMC 300 1993 R 300 25,000 U.S. Gulf of Mexico Active
Noble Julie Robertson (T)
(3) (4) (8) (9) Baker Marine Europe Class 1981 300 25,000 The Netherlands Shipyard
Noble Roy Butler (T) (10) F&G L-780 MOD II 1996 R 300 25,000 Nigeria Contracted
Noble Tommy Craighead (T) F&G L-780 MOD II 1990 R 300 25,000 Nigeria Available
Noble Kenneth Delaney (T) F&G L-780 MOD II 1998 R 300 25,000 Qatar Active
Noble Percy Johns (T) F&G L-780 MOD II 1995 R 300 25,000 Nigeria Active
Noble George McLeod (T) F&G L-780 MOD II 1995 R 300 25,000 Qatar Available
Noble Jimmy Puckett (T) F&G L-780 MOD II 1999 R 300 25,000 India Active
Noble Gus Androes (T) Levingston 111-C 1996 R 300 25,000 Qatar Active
Noble Lewis Dugger (T) Levingston 111-C 1997 R 300 20,000 Bay of Campeche Available
Noble Ed Holt (T) Levingston 111-C 1994 R 300 25,000 India Active
Noble Sam Noble (T) Levingston 111-C 1982 300 25,000 U.S. Gulf of Mexico Active
Noble Gene Rosser (T) Levingston 111-C 1996 R 300 20,000 Bay of Campeche Active
Noble John Sandifer (T) Levingston 111-C 1995 R 300 20,000 U.S. Gulf of Mexico Active
Noble Charles Copeland (T) MLT Class 82-SD-C 1995 R 250 20,000 Venezuela Active
Noble Earl Frederickson (T) MLT Class 82-SD-C 1979 250 20,000 U.S. Gulf of Mexico Active
Noble Tom Jobe (T) MLT Class 82-SD-C 1982 250 25,000 U.S. Gulf of Mexico Active
Noble Ed Noble (T) MLT Class 82-SD-C 1990 R 250 20,000 Nigeria Contracted
Noble Lloyd Noble (T) MLT Class 82-SD-C 1990 R 250 20,000 Nigeria Available
Noble Carl Norberg (T) MLT Class 82-C 1996 R 250 20,000 U.S. Gulf of Mexico Active
Noble Chuck Syring (T) MLT Class 82-C 1996 R 250 20,000 Qatar Active
Noble George Sauvageau (T) (3) (8) NAM Nedlloyd 1981 250 20,000 Denmark Contracted
Noble Ronald Hoope (T) (3) (8) Marine Structure CJ-46 1982 205 25,000 The Netherlands Active
Noble Lynda Bossler (T) (3) (8) Marine Structure CJ-46 1982 205 25,000 The Netherlands Active
Noble Piet van Ede (T) (3) (8) Marine Structure CJ-46 1982 205 25,000 The Netherlands Active
Noble Dick Favor Baker Marine BMC 150 1993 R 150 20,000 Venezuela Active
Noble Don Walker (T) Baker Marine BMC 150 1992 R 150 20,000 Nigeria Active
- ------------------------------------------------------------------------------------------------------------------------------------
SUBMERSIBLES - 3
Noble Joe Alford Pace Marine 85G 1997 R 85 25,000 U.S. Gulf of Mexico Active
Noble Lester Pettus Pace Marine 85G 1997 R 85 25,000 U.S. Gulf of Mexico Available
Noble Fri Rodli Transworld 1998 R 70 25,000 U.S. Gulf of Mexico Available
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(T) Denotes Top Drive
(1) Rigs designated with an "R" were modified, refurbished or otherwise
upgraded in the year indicated by capital expenditures in an amount deemed
material by management.
(2) Rigs listed as "active" were operating under contract; rigs listed as
"available" were available for bidding; rigs listed as "contracted" have
signed contracts or have letters of intent with operators but have not
begun operations; rigs listed as "shipyard" are in a shipyard for repair,
refurbishment or upgrade.
(3) Harsh environment capability.
(4) Water depth rating is subsequent to the rig's planned upgrade.
(5) We own a 50 percent interest in the unit through a joint venture
arrangement. At our election, we can convert a loan we have made to the
venture to an additional 20 percent ownership interest in the venture.
(6) We operate the unit and own an 82 percent interest in the unit through a
joint venture arrangement.
(7) We have operating control of the unit pursuant to a long-term bareboat
charter agreement with the owner.
(8) Water depth rating based on North Sea conditions year round.
(9) We own a 50 percent interest in the unit through a joint venture
arrangement. We will operate the unit following its upgrade.
(10) Although designed for a water depth rating of 300 feet of water, the rig is
currently equipped with legs adequate to drill in approximately 250 feet of
water. We own the additional legs required to extend the drilling depth
capability to 300 feet of water.
9
<PAGE> 12
FACILITIES
Our principal executive offices are located in Houston, Texas, and are
leased through June 2000. At the expiration of the lease, our principal
executive offices will be combined with our domestic contract drilling services
operations and Triton in a new facility, which is leased through June 2011. We
also lease administrative and marketing offices, and sites used primarily for
storage, maintenance and repairs for drilling rigs and equipment, in New Orleans
and Lafitte, Louisiana; Leduc and St. Johns, Canada; Lagos and Port Harcourt,
Nigeria; Aberdeen, Scotland; Maracaibo and Ciudad Ojeda, Venezuela; Doha, Qatar;
Rotterdam and Beverwijk, The Netherlands; Macae, Brazil; and Esjberg, Denmark.
We own certain tracts of land, including office and administrative buildings and
warehouse facilities in Lafayette and Bayou Black, Louisiana and Aberdeen,
Scotland.
ITEM 3. LEGAL PROCEEDINGS
On January 6, 2000, we filed suit against Samedan Oil Corporation and
Mariner Energy, Inc. in the 55th Judicial District Court of Harris County,
Texas, to enforce our rights under letter agreements for use of the Noble Homer
Ferrington. We recently settled our dispute with Mariner and have entered into a
drilling contract with Mariner for use of the rig. See "Item 1. Business -
Business Development During 1999 - Deepwater Conversions and Upgrades." Our suit
against Samedan is still pending. We believe that the letter agreement with
Samedan requires Samedan to sign a drilling contract for its portion of a
five-year contract period and a related rig-sharing agreement with Mariner.
Samedan has questioned the extent of its obligations under the letter agreement
and expressed concerns about the rig's design criteria. We believe Samedan has a
binding commitment for the use of the rig, and that the rig meets the originally
agreed upon design criteria. Our inability to contract the unit during the times
when the unit is not used by Mariner over the five-year contract period, whether
in the spot market or pursuant to a long-term contract, at the dayrate specified
in the letter agreement with Samedan would adversely affect our future revenues
and operating income during the relevant time periods.
There are no other material pending legal proceedings to which we are a
party or of which our property is the subject. We are involved in certain
routine litigation incidental to our business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of March 8, 2000
with respect to the executive officers of Noble Drilling:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------- ------- ---------------------------------------
<S> <C> <C>
James C. Day 56 Chairman and Chief Executive Officer and Director
Robert D. Campbell 49 President and Director
Julie J. Robertson 44 Vice President - Administration and Corporate Secretary
Mark L. Mey 36 Principal Financial Officer
Steven A. Manz 34 Principal Accounting Officer
</TABLE>
James C. Day has served as Chairman of Noble Drilling since October 22,
1992 and as Chief Executive Officer since January 1, 1984, and he served as
President from January 1, 1984 to January 1, 1999. From January 1983 until his
election as President and Chief Executive Officer, Mr. Day served as Vice
President of Noble Drilling. Prior to 1983, Mr. Day served as Vice President and
Assistant Secretary of Noble Affiliates, Inc. He has been a director of Noble
Drilling since 1984. Mr. Day is also a director of Global Industries, Ltd.
10
<PAGE> 13
Robert D. Campbell has served as President of Noble Drilling since
January 1, 1999 and as a director since February 4, 1999. Prior to January 1,
1999, Mr. Campbell practiced corporate/securities law as a senior shareholder
with the firm of Thompson & Knight, P.C. and served as general counsel to us for
more than five years.
Julie J. Robertson has served as Vice President-Administration of Noble
Drilling since April 1996 and as Corporate Secretary of Noble Drilling since
December 1993. In September 1994, Ms. Robertson became Vice
President-Administration of Noble Drilling Services Inc. From January 1989 to
September 1994, Ms. Robertson served consecutively as Manager of Benefits and
Director of Human Resources for Noble Drilling Services Inc. Prior to 1989, Ms.
Robertson served consecutively in the positions of Risk and Benefits Manager and
Marketing Services Coordinator for a predecessor subsidiary of Noble Drilling,
beginning in 1979.
Mark L. Mey has served as Director of Internal Audit and Special
Projects of Noble Drilling Services Inc. since January 1995. In December 1999,
Mr. Mey assumed the responsibilities of Principal Financial Officer of Noble
Drilling. Mr. Mey has served in various financial positions since joining the
Company in March 1994, and prior to that worked in public accounting and
financial consulting.
Steven A. Manz has served as Director of Accounting and Investor
Relations of Noble Drilling Services Inc. since December 1999. In that position,
Mr. Manz serves as our Principal Accounting Officer. Mr. Manz has served in
various financial positions since joining the Company in May 1995, and prior to
that worked in industry and public accounting.
11
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Noble Drilling's Common Stock, par value $0.10 per share ("Common
Stock"), is listed and traded on the New York Stock Exchange under the symbol
"NE". The following table sets forth for the periods indicated the high and low
sales prices of the Common Stock:
<TABLE>
<CAPTION>
HIGH LOW
-------------- ---------------
<S> <C> <C>
1999
First quarter............................. $ 19 7/8 $ 12
Second quarter............................ 21 15 1/2
Third quarter............................. 27 1/4 18 5/8
Fourth quarter............................ 32 7/8 18 11/16
1998
First quarter............................. $ 32 11/16 $ 21 9/16
Second quarter............................ 34 11/16 22 7/8
Third quarter............................. 25 11/16 10 3/4
Fourth quarter............................ 19 1/4 11
</TABLE>
We have not paid any cash dividends on the Common Stock since becoming
a publicly held corporation in October 1985, and do not anticipate paying
dividends on the Common Stock at any time in the foreseeable future.
At March 8, 2000, there were 2,083 record holders of Common Stock.
12
<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (1)
Operating revenues .......................... $ 705,903 $ 788,241 $ 713,195 $ 514,253 $ 327,968
Income before extraordinary charge and
preferred stock dividends (2) (3) ......... $ 95,302 $ 162,032 $ 263,882 $ 79,297 $ 1,594
Net income (loss) applicable to common
shares (2) (3) (4) ........................ $ 84,469 $ 162,032 $ 257,197 $ 72,597 $ (5,605)
Per common share: (2) (5)
Income before extraordinary charge:
Basic ................................... $ 0.72 $ 1.24 $ 2.00 $ 0.68 $ (0.08)
Diluted ................................. $ 0.72 $ 1.23 $ 1.98 $ 0.67 $ (0.08)
Net income: (4)
Basic ................................... $ 0.64 $ 1.24 $ 1.95 $ 0.67 $ (0.08)
Diluted ................................. $ 0.64 $ 1.23 $ 1.93 $ 0.66 $ (0.08)
BALANCE SHEET DATA (AT END OF PERIOD) (1)
Property and equipment, net ................. $2,049,769 $1,649,133 $1,182,927 $ 957,034 $ 542,978
Total assets ................................ $2,432,324 $2,178,632 $1,505,811 $1,367,173 $ 742,530
Long-term debt .............................. $ 730,893 $ 460,842 $ 138,139 $ 239,272 $ 129,923
Total debt (6) .............................. $ 790,353 $ 609,628 $ 147,837 $ 242,894 $ 142,133
Shareholders' equity ........................ $1,398,042 $1,310,473 $1,149,054 $ 925,249 $ 523,493
OTHER DATA (1)
Cash dividends per common share ............. $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Capital expenditures ........................ $ 421,679 $ 540,571 $ 391,065 $ 216,887 $ 91,202
</TABLE>
- ----------------
(1) The selected financial data include the 1996 acquisition of Royal Nedlloyd
N.V.'s offshore drilling division ("Neddrill"), which we accounted for
under the purchase method.
(2) The amounts include non-recurring gains on sales of property and equipment,
net of impairments and income taxes of $128,489,000 ($0.97 per basic share
and $0.96 per diluted share), $19,856,000 ($0.18 per basic and diluted
share) and $829,000 ($0.01 per basic and diluted share) in 1997, 1996 and
1995, respectively.
(3) The 1999 amount includes a net $4,861,000 non-recurring restructuring
charge related to early retirement packages offered to a number of domestic
employees and the relocation of our Lafayette, Louisiana offices to
Houston.
(4) The amounts include net extraordinary charges of $10,833,000 ($0.08 per
basic and diluted share), $6,685,000 ($0.05 per basic and diluted share)
and $660,000 ($0.01 per basic and diluted share) in 1999, 1997 and 1996,
respectively.
(5) The 1995 amount includes the $0.02 per share effect of a preferred
conversion payment in March 1995 related to the conversion into common
stock of 923,862 shares of Noble Drilling's $2.25 Convertible Exchangeable
Preferred Stock. We accounted for the payment of $1,524,000 as a reduction
of net earnings applicable to common shares when calculating the net loss
per share.
(6) Consists of long-term debt ($730,893,000 in 1999), short-term debt ($0 in
1999) and current installments of long-term debt ($59,460,000 in 1999). The
1999 amount includes $95,498,000 principal amount of fixed rate senior
secured notes issued by an indirect, wholly owned subsidiary of Noble
Drilling, which notes are non-recourse except to the issuer thereof.
13
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion is intended to assist you in understanding our
financial position as of December 31, 1999 and 1998, and our results of
operations for each of the three years in the period ended December 31, 1999.
You should read the accompanying Consolidated Financial Statements and their
Notes in conjunction with this discussion.
BUSINESS ENVIRONMENT
We are a leading provider of diversified services for the oil and gas
industry. We perform contract drilling services with our fleet of 48 offshore
drilling units located in key markets worldwide. Our fleet of floating deepwater
units consists of nine semisubmersibles and three dynamically positioned
drillships, seven of which are designed to operate in water depths greater than
5,000 feet. Our fleet of 33 jackup rigs includes 20 premium units that are
capable of operating in water depths of 300 feet and greater, four of which are
capable of operating in water depths of 360 feet and greater. In addition, our
fleet includes three submersible drilling units. Eleven of our drilling units
are capable of operating in harsh environments. Over 60 percent of the fleet is
currently deployed in international markets, principally including the North
Sea, Africa, Brazil, Venezuela, the Middle East, India and Mexico. We also
provide labor contract drilling services, engineering and production management
services, and turnkey drilling services.
Demand for drilling services depends on a variety of economic and
political factors, including worldwide demand for oil and gas, the ability of
the Organization of Petroleum Exporting Countries ("OPEC") to set and maintain
production levels and pricing, the level of production of non-OPEC countries and
the policies of the various governments regarding exploration and development of
their oil and gas reserves.
Since January 1999, oil prices have increased significantly as a result
of OPEC production cuts, decreased oil supply due to low levels of drilling and
the beginnings of Asian economic recovery which has contributed to rising global
oil demand projections. Natural gas prices in the U.S. have also increased in
anticipation of tighter supplies. Current drilling activity in many
international markets continues to remain weak, although the U.S. Gulf of Mexico
jackup market is showing positive signs of improvement in the form of improved
utilization, particularly for the higher-end equipment, and higher dayrates. The
strengthening demand for jackups in the U.S. Gulf of Mexico could be adversely
impacted by jackups mobilized back to the U.S. Gulf of Mexico from weak
international markets. Oil companies continue to work through the effects of
industry consolidation, which inhibited capital spending on exploration and
development in 1999. We expect further consolidation among our customer base
would dampen drilling activity levels near-term. We cannot predict the future
level of demand for our drilling services or future conditions in the offshore
contract drilling industry.
In recent years, we have focused on increasing the number of rigs in
our fleet capable of deepwater offshore drilling. We have incorporated this
focus into our broader, long-standing business strategy to actively expand our
international and offshore deepwater capabilities through acquisitions, rig
upgrades and modifications and to redeploy assets in important geological areas.
RESULTS OF OPERATIONS
1999 COMPARED TO 1998
GENERAL
Net income for 1999 was $84,469,000, or $0.64 per diluted share, on
operating revenues of $705,903,000, compared to net income of $162,032,000, or
$1.23 per diluted share, on operating revenues of $788,241,000 for 1998.
Excluding the effects of extraordinary and non-recurring items, net income for
1999 was $100,163,000, or $0.76 per diluted share, compared to net income for
1998 of $163,917,000, or $1.24 per diluted share. The results for 1999 included
an extraordinary charge of $10,833,000, net of taxes of $5,833,000, related to
the purchase and retirement of $125,000,000 principal amount of our 9 1/8%
Senior Notes due 2006 (the "9 1/8% Notes"). We financed the purchase and
retirement of the 9 1/8% Notes with a portion of the net proceeds from the
issuance on
14
<PAGE> 17
March 16, 1999 of $150,000,000 principal amount of our 6.95% Senior Notes due
2009 (the "2009 Notes") and $250,000,000 principal amount of our 7.50% Senior
Notes due 2019 (the "2019 Notes" and, together with the 2009 Notes, the
"Notes"). The results for 1999 also included a restructuring charge of
$4,861,000, net of taxes of $2,618,000, related to early retirement packages
accepted by a number of employees and the relocation of our Gulf Coast Marine
division office in Lafayette, Louisiana to our centralized Houston office, which
is scheduled to be completed by July 2000.
RIG UTILIZATION, OPERATING DAYS AND AVERAGE DAYRATE
The following table sets forth the average rig utilization rates,
operating days and average dayrate for our offshore rig fleet for 1999 and 1998:
<TABLE>
<CAPTION>
AVERAGE RIG
UTILIZATION RATES (1) OPERATING DAYS AVERAGE DAYRATE
------------------------ ----------------------- -----------------------
1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Offshore
International .... 74% 90% 7,709 9,148 $ 56,545 $ 52,348
Domestic ......... 70% 78% 3,318 2,720 $ 45,031 $ 44,795
</TABLE>
- ------------------
(1) Utilization rates reflect our policy of reporting on the basis of the
number of actively marketed rigs in our fleet. Rates reflect the results of
rigs only during the period in which they are owned or operated by us.
INTERNATIONAL OPERATIONS
The following table sets forth the operating revenues and gross margin
for our international operations for 1999 and 1998:
<TABLE>
<CAPTION>
REVENUES GROSS MARGIN
--------------------- ---------------------
1999 1998 1999 1998
--------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Contract drilling services ........... $ 435,909 $ 478,883 $ 197,782 $ 254,899
Labor contract drilling services ..... 35,639 63,789 4,616 10,806
Turnkey drilling services ............ -- 27,699 -- (4,278)
Engineering and consulting services .. 947 1,870 78 (225)
Other revenue ........................ 3,804 8,443 2,561 5,479
--------- --------- --------- ---------
Total ....................... $ 476,299 $ 580,684 $ 205,037 $ 266,681
========= ========= ========= =========
</TABLE>
OPERATING REVENUES. International contract drilling services revenues
decreased $42,974,000 during 1999 as compared to 1998. The decrease was
primarily attributable to lower average utilization rates and operating days in
Africa, Mexico and the Middle East. The lower utilization in these areas was
partially offset by the consolidation of the results of operations effective
January 1, 1999 of Arktik Drilling Limited, Inc. ("Arktik") and the Noble
Kolskaya. See Notes 2 and 5 to our accompanying Consolidated Financial
Statements. Additionally, the Noble Paul Wolff, a Noble EVA-4000(TM)
semisubmersible, began operating in Brazil for Petrobras in May 1999 at a
dayrate that is higher than our average international dayrate, and our
drillships operating in Brazil reported higher utilization rates in 1999 as
compared to 1998. Labor contract services revenues decreased $28,150,000 in 1999
as compared to 1998 due to fewer operating days on the North Sea labor contracts
as a result of the expiration of certain contracts that were not renewed,
coupled with reduced drilling and workover activities by our customers. We did
not generate any international turnkey drilling services revenues in 1999 as
compared to $27,699,000 generated in 1998. There were no international turnkey
wells completed in 1999 compared to one in 1998.
GROSS MARGIN. International contract drilling services gross margin
decreased $57,117,000 in 1999 as compared to 1998 primarily due to lower average
rig utilization rates and operating days combined with ongoing operating
expenses incurred on rigs that were stacked during 1999. Labor contract drilling
services gross margin
15
<PAGE> 18
decreased $6,190,000 in 1999 as compared to 1998 primarily due to fewer
operating days on the North Sea labor contracts coupled with reduced drilling
and workover activities by our customers.
DOMESTIC OPERATIONS
The following table sets forth the operating revenues and gross margin
for our domestic operations for 1999 and 1998:
<TABLE>
<CAPTION>
REVENUES GROSS MARGIN
----------------------- ------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Contract drilling services ........... $ 149,412 $ 121,843 $ 74,675 $ 78,153
Turnkey drilling services ............ 79,223 84,902 1,113 (11,120)
Engineering and consulting services .. -- -- (4) --
Other revenue ........................ 969 812 140 (1,954)
---------- ---------- ---------- ----------
Total ....................... $ 229,604 $ 207,557 $ 75,924 $ 65,079
========== ========== ========== ==========
</TABLE>
OPERATING REVENUES. Domestic contract drilling services revenues
increased $27,569,000 in 1999 compared to 1998 primarily due to revenues from
the Noble Paul Romano, Noble Jim Thompson, Noble Amos Runner and Noble Max
Smith, which began operating in December 1998, June 1999, August 1999 and
December 1999, respectively, at dayrates that are higher than our average
domestic dayrate. Revenues from these Noble EVA-4000(TM) semisubmersibles were
partially offset by lower average dayrates and average rig utilization rates on
our domestic jackup rigs. Domestic turnkey drilling services revenues were
$5,679,000 lower in 1999 than 1998 due to lower turnkey rates charged to our
customers and the completion of turnkey wells that were less complex and thus
produced lower average revenues than those wells completed in 1998. We completed
26 domestic turnkey wells in 1999 compared to 13 in 1998.
GROSS MARGIN. While the operations of the Noble Paul Romano, Noble Jim
Thompson, Noble Amos Runner and Noble Max Smith favorably impacted domestic
contract drilling services gross margin in 1999, gross margin decreased
$3,478,000 in 1999 as compared to 1998 due primarily to lower average dayrates
and average rig utilization rates and operating expenses incurred on rigs that
were stacked during 1999. The improved domestic turnkey drilling services gross
margin is attributable to the completion during 1999 of certain term contracts
our turnkey subsidiary had for third party drilling rigs which were at above
market dayrates and had low utilization levels. In addition, we accrued
$2,900,000 in 1998 for expected 1999 losses on these third party rig contracts.
OTHER ITEMS
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense increased $17,290,000 in 1999 as compared to 1998 due primarily to the
activation of five Noble EVA-4000(TM) semisubmersibles since the latter part of
1998.
SALES, GENERAL AND ADMINISTRATIVE EXPENSES. Sales, general and
administrative ("SG&A") expenses increased $5,466,000 in 1999 as compared to
1998 primarily due to higher stock-based compensation costs in 1999. For
information on stock-based compensation costs, see Note 10 to our accompanying
Consolidated Financial Statements.
RESTRUCTURING CHARGE. A restructuring charge of $7,479,000, $4,861,000
net of taxes, was recognized in 1999 related to early retirement packages
accepted by 37 employees and the relocation of our Gulf Coast Marine division
office in Lafayette, Louisiana to the centralized Houston office, which is
scheduled to be completed by July 2000. The restructuring charge was taken as
part of our ongoing efforts to streamline operations. At December 31, 1999, a
liability of approximately $3,800,000 was reflected in our accompanying
Consolidated Balance Sheets related to the early retirement packages. Future
cash outflows related to the liability established by the restructuring charge
and its impact on liquidity and working capital is not considered material.
These cash outflows will be
16
<PAGE> 19
funded from our normal operating cash flow. We estimate annual savings of
approximately $2,000,000 related to this restructuring.
INTEREST EXPENSE. Interest expense increased $27,969,000 in 1999 as
compared to 1998 due to higher average debt balances resulting from project
financings completed in the latter part of 1998 related to Noble EVA-4000(TM)
semisubmersible conversions and the March 1999 issuance of the Notes.
Additionally, in connection with the acquisition of a majority interest in
Arktik and a 100 percent interest in the bareboat charter of the Noble Kolskaya,
we incurred debt of $17,500,000 and recorded Arktik's outstanding indebtedness
of $31,900,000. See Notes 5 and 6 to our accompanying Consolidated Financial
Statements. Capitalized interest costs related to construction in progress on
qualifying upgrade projects were $22,393,000 and $17,200,000 in 1999 and 1998,
respectively.
INTEREST INCOME. Interest income increased $3,159,000 in 1999 compared
to 1998 due to higher average cash balances resulting from the completion of
project financings in the latter part of 1998 and the March 1999 issuance of the
Notes.
INCOME TAX PROVISION. Income tax expense decreased $38,703,000 in 1999
as compared to 1998 due primarily to lower pretax earnings.
EXTRAORDINARY CHARGE, NET OF TAX. Results for 1999 include an
extraordinary charge of $10,833,000, net of taxes of $5,833,000, related to the
purchase and retirement of our 9 1/8% Notes.
1998 COMPARED TO 1997
GENERAL
Net income for 1998 was $162,032,000, or $1.23 per diluted share, on
operating revenues of $788,241,000, compared to net income of $257,197,000, or
$1.93 per diluted share, on operating revenues of $713,195,000 for 1997.
Excluding the effects of non-recurring items, net income for 1998 increased 20
percent to $163,917,000, or $1.24 per diluted share, from net income of
$136,896,000, or $1.03 per diluted share, for 1997. The results for 1997
included a gain of $128,489,000, net of taxes of $69,187,000, related to the
sale of our mat-supported jackup rigs. The results for 1997 also included an
extraordinary charge of $6,685,000, net of taxes of $3,600,000, related to the
purchase of $110,885,000 principal amount of our outstanding 9 1/4% Senior Notes
Due 2003 (the "9 1/4% Notes").
RIG UTILIZATION, OPERATING DAYS AND AVERAGE DAYRATE
The following table sets forth the average rig utilization rates,
operating days and average dayrate for our offshore rig fleet for 1998 and 1997:
<TABLE>
<CAPTION>
AVERAGE RIG
UTILIZATION RATES (1) OPERATING DAYS AVERAGE DAYRATE
------------------------ ------------------------- --------------------
1998 1997 1998 1997 1998 1997
----------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Offshore
International..... 90% 95% 9,148 9,826 $ 52,348 $ 35,244
Domestic.......... 78% 98% 2,720 3,474 $ 44,795 $ 35,313
</TABLE>
- ------------------
(1) Utilization rates reflect our policy of reporting on the basis of the
number of actively marketed rigs in our fleet. Rates reflect the results of
rigs only during the period in which they are owned or operated by us.
17
<PAGE> 20
INTERNATIONAL OPERATIONS
The following table sets forth the operating revenues and gross margin
for our international operations for 1998 and 1997:
<TABLE>
<CAPTION>
REVENUES GROSS MARGIN
----------------------- ------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Contract drilling services ............ $ 478,883 $ 346,304 $ 254,899 $ 178,781
Labor contract drilling services ...... 63,789 49,076 10,806 10,015
Turnkey drilling services ............. 27,699 52,765 (4,278) (766)
Engineering and consulting services ... 1,870 2,548 (225) 698
Other revenue ......................... 8,443 8,289 5,479 6,008
---------- ---------- ---------- ----------
Total ........................ $ 580,684 $ 458,982 $ 266,681 $ 194,736
========== ========== ========== ==========
</TABLE>
OPERATING REVENUES. International contract drilling services revenues
increased $132,579,000 during 1998 as compared to 1997. The increase was
primarily attributable to higher average dayrates from certain contract renewals
in West Africa, the North Sea, India and Qatar. The increase was partially
offset by fewer operating days in Brazil in 1998 as compared to 1997 and the
mobilization of two rigs out of Venezuela in 1998. Labor contract drilling
services revenues increased $14,713,000 in 1998 as compared to 1997 due
primarily to revenues generated from the Hibernia Project in Canada, which began
operations in June 1997, and higher average dayrates on the North Sea platform
contracts. International turnkey drilling services revenues decreased
$25,066,000 in 1998 as compared to 1997 due to fewer well completions. Only one
international turnkey well was completed in 1998 as compared to eight well
completions in 1997.
GROSS MARGIN. International contract drilling services gross margin
increased $76,118,000 in 1998 as compared to 1997. The increase is attributable
to higher average dayrates on certain contract renewals in all our international
areas of operation. Labor contract drilling services gross margin increased
$791,000 in 1998 as compared to 1997 due to the contribution of the Hibernia
Project in Canada and higher average dayrates experienced on the North Sea
platform contracts. The negative results from international turnkey drilling
services in 1998 are principally attributable to unexpected drilling delays
experienced on a turnkey well completed offshore Mexico.
DOMESTIC OPERATIONS
The following table sets forth the operating revenues and gross margin
for our domestic operations for 1998 and 1997:
<TABLE>
<CAPTION>
REVENUES GROSS MARGIN
----------------------- ------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Contract drilling services ........... $ 121,843 $ 122,676 $ 78,153 $ 82,324
Turnkey drilling services ............ 84,902 128,098 (11,120) 5,943
Engineering and consulting services .. -- 58 -- --
Other revenue ........................ 812 3,381 (1,954) (743)
---------- ---------- ---------- ----------
Total ....................... $ 207,557 $ 254,213 $ 65,079 $ 87,524
========== ========== ========== ==========
</TABLE>
OPERATING REVENUES. Domestic contract drilling services revenues
decreased $833,000 in 1998 as compared to 1997 due primarily to lower
utilization and the Noble Paul Wolff, Noble Jim Thompson and Noble Amos Runner
being taken out of service in 1997 for conversion to Noble EVA-4000(TM)
semisubmersibles. Domestic contract drilling services revenues were
significantly higher in the first half of 1998 due to the reactivations of the
Noble Bill Jennings, Noble Leonard Jones, Noble Joe Alford, Noble Lester Pettus
and Noble Fri Rodli. The demand for offshore drilling units, however, declined
significantly over the last half of 1998 as oil prices remained at depressed
levels. The resulting oversupply of units caused dayrates in the U.S. Gulf of
Mexico to drop precipitously and our utilization levels decreased from 89
percent during the second quarter of 1998 to 61 percent during the
18
<PAGE> 21
fourth quarter of 1998. Domestic turnkey drilling services revenues were
$43,196,000 lower in 1998 as compared to 1997 due to fewer turnkey well
completions. Thirteen domestic turnkey wells were completed in 1998 as compared
to 26 in 1997.
GROSS MARGIN. Domestic contract drilling services gross margin
decreased $4,171,000 in 1998 as compared to 1997 due primarily to lower
utilization. The negative results from turnkey drilling services are primarily
attributable to above market dayrates and lower utilization for certain drilling
rigs which our turnkey subsidiary has under term contract from a third party. In
addition to the turnkey losses sustained in 1998, we accrued $2,900,000 in 1998
for expected 1999 losses on these third party rig contracts.
OTHER ITEMS
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense decreased $2,354,000 in 1998 as compared to 1997 due primarily to
certain submersibles being taken out of service for conversion to Noble
EVA-4000(TM) semisubmersibles.
GAINS ON SALES OF PROPERTY AND EQUIPMENT. In May 1997, we completed the
sale of our mat-supported jackup rigs, resulting in a pre-tax gain of
$197,676,000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased
$5,498,000 in 1998 as compared to 1997 due primarily to higher personnel costs
incurred to support our overall growth and to increased recruiting and training
activity.
INTEREST EXPENSE. Interest expense decreased $7,713,000 in 1998 as
compared to 1997 due primarily to the purchase of our outstanding 9 1/4% Notes
in 1997. We capitalized $17,200,000 of interest costs related to construction in
progress on qualifying upgrade projects during 1998 as compared to $4,218,000 in
1997.
INTEREST INCOME. Interest income decreased $2,685,000 in 1998 as
compared to 1997 due to lower average cash balances in 1998.
INCOME TAX PROVISION. Income tax expense decreased $46,844,000 in 1998
as compared to 1997. Taxes of $69,187,000 related to the gain on the sale of the
mat-supported rigs were included in 1997. Excluding non-recurring items, income
tax expense increased $23,358,000 in 1998 as compared to 1997 due primarily to
higher pre-tax earnings.
EXTRAORDINARY CHARGE, NET OF TAX. Results for 1997 include an
extraordinary charge of $6,685,000, net of taxes of $3,600,000, related to the
purchase of $110,885,000 principal amount of our outstanding 9 1/4% Notes.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
At December 31, 1999, we had cash and cash equivalents of $132,827,000
and approximately $196,223,000 of funds available under our bank credit
facility. We had working capital of $57,289,000 and $88,720,000 at December 31,
1999 and 1998, respectively. Total debt as a percentage of total debt plus
shareholders' equity was 36 percent at December 31, 1999 compared to 32 percent
at December 31, 1998. The increase results primarily from our issuance of the
Notes in 1999.
Capital expenditures totaled $421,679,000 and $540,571,000 for 1999 and
1998, respectively. Capital expenditures for 2000 are expected to aggregate
approximately $155,000,000. This amount includes approximately $31,200,000 to
complete the upgrade of the equipment and water depth capability of the Noble
Homer Ferrington, which was completed in March 2000. In addition, deferred
repair and maintenance expenditures for 2000 are expected to aggregate
approximately $38,000,000. For information on deferred repair and maintenance
expenditures, see Note 1 of our accompanying Consolidated Financial Statements.
19
<PAGE> 22
Certain projects currently under consideration could require, if they
materialize, capital expenditures or other cash requirements not included in the
2000 budget. In addition, we will continue to evaluate acquisitions of drilling
units from time to time. Factors that could cause actual capital expenditures to
materially exceed 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.
Required debt principal and interest payments for currently outstanding
debt are estimated to be approximately $113,299,000 in 2000. We expect to fund
these obligations out of cash and cash equivalents as well as cash expected to
be provided by operations. We anticipate that our 2000 cash flows generated from
operations will be sufficient to meet our required debt principal and interest
payments due in 2000 and a significant portion of the discretionary capital
expenditures we expect to make during 2000, assuming no material decrease in
demand for contract drilling and turnkey services.
CREDIT FACILITIES AND LONG-TERM DEBT
The term of our $200,000,000 bank credit agreement (the "Credit
Agreement") extends through August 14, 2002. As of December 31, 1999, we had no
borrowings under the credit agreement and $3,777,000 had been used to support
outstanding letters of credit. Additionally, at December 31, 1999, $19,110,000
of outstanding letters of credit had been supported through a combination of
unsecured letter of credit facilities and surety bonds. As of December 31, 1999,
we had the ability to borrow $196,223,000 under available bank facilities. As of
March 3, 2000, we had no borrowings under the Credit Agreement.
At December 31, 1999, total long-term borrowings had increased to
$790,353,000, including current installments of $59,460,000, due to our issuance
in March 1999 of the Notes in the aggregate principal amount of $400,000,000. We
used approximately $218,000,000 of the net proceeds from the issuance of the
Notes to purchase and retire our 9 1/8% Notes and to repay $75,000,000
outstanding under our Credit Agreement. During 1998, two subsidiaries of Noble
Drilling issued an aggregate of $260,000,000 principal amount of various series
of fixed rate senior secured notes which are guaranteed by Noble Drilling. The
proceeds were used by the borrowers primarily to fund two Noble EVA-4000(TM)
semisubmersible conversion projects. In addition, $112,250,000 principal amount
of various series of fixed rate senior secured notes were issued by an indirect,
wholly owned special purpose subsidiary of Noble Drilling during 1998, which
notes are non-recourse except to the issuer thereof. See Note 6 to our
accompanying Consolidated Financial Statements.
We believe that our cash and cash equivalents, cash generated from
operations, borrowings under lines of credit, and access to other financing
sources will be adequate to meet our anticipated short-term and long-term
liquidity requirements, including scheduled debt repayments.
YEAR 2000
We have not had a material adverse impact to our results of operations
or financial position related to any year 2000 issues and we do not anticipate
any significant year 2000 compliance problems in the future. As of December 31,
1999, we had incurred costs of approximately $200,000 related to preparing for
technological issues that could arise in connection with the advent of the year
2000. A portion of these costs were not incremental, but rather reflected
redeployment of internal resources from other activities. We did not separately
track the internal costs incurred for our year 2000 project. Such internal costs
principally related to payroll costs of project personnel. All of the costs of
our year 2000 project were borne out of our operating cash flow and were
expensed as incurred. We do not anticipate further costs related to the project.
ACCOUNTING PRONOUNCEMENT
In June 1998, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging
Activities ("SFAS 133"). SFAS 133 requires that, upon adoption, all derivative
instruments (including certain derivative instruments embedded in other
contracts) be recognized in the balance sheet at fair value, and that changes in
such fair values be recognized in earnings unless
20
<PAGE> 23
specific hedging criteria are met. Changes in the values of derivatives that
meet these hedging criteria will ultimately offset related earnings effects of
the hedged items; effects of certain changes in fair value are recorded in Other
Comprehensive Income pending recognition in earnings. SFAS 133, as amended by
SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of SFAS No. 133, is effective for
fiscal years beginning after June 15, 2000. The impact of SFAS 133 on our
financial statements will depend on a variety of factors, including future
interpretive guidance from the FASB, the future level of actual foreign currency
transactions, the extent of our hedging activities, the types of hedging
instruments used and the effectiveness of such instruments. However, we believe
adoption will not have a material effect on our results of operations, cash
flows or financial position.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
We are subject to market risk exposure related to changes in interest
rates on our Credit Agreement and certain variable rate indebtedness. Interest
on these obligations is at an agreed upon percentage point spread from LIBOR. At
December 31, 1999, there were no outstanding borrowings under the Credit
Agreement and $14,000,000 of variable rate obligations was outstanding. Based
upon this balance, an immediate change of one percent in the interest rate would
not cause a material change in interest expense on an annual basis. For
information on financial instruments, see Note 9 of our accompanying
Consolidated Financial Statements.
FOREIGN CURRENCY EXCHANGE RATE RISK
We conduct business internationally; however, a substantial majority of
our foreign transactions are denominated in U.S. dollars. With minor exceptions,
we structure our drilling contracts in U.S. dollars to mitigate our exposure to
fluctuations in foreign currencies. Other than trade accounts receivable and
trade accounts payable, which mostly offset each other, we do not currently have
financial instruments that are sensitive to foreign currency rates. For
information on financial instruments, see Note 9 of our accompanying
Consolidated Financial Statements.
21
<PAGE> 24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements are filed in this Item 8:
Report of Independent Accountants
Consolidated Balance Sheets at December 31, 1999 and 1998
Consolidated Statements of Operations for each of the three years
in the period ended December 31, 1999
Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 1999
Consolidated Statements of Shareholders' Equity for each of the three
years in the period ended December 31, 1999
Consolidated Statements of Comprehensive Income for each of the three
years in the period ended December 31, 1999
Notes to Consolidated Financial Statements
22
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Noble Drilling Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows, of shareholders' equity
and of comprehensive income present fairly, in all material respects, the
financial position of Noble Drilling Corporation and its subsidiaries (the
"Company") at December 31, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
February 3, 2000
23
<PAGE> 26
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amount)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
ASSETS 1999 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ........................................... $ 132,827 $ 211,012
Restricted cash ..................................................... 4,010 5,871
Accounts receivable (net allowance of $414 and $610) ................ 117,273 148,168
Costs of uncompleted contracts in excess of billings ................ 5,886 907
Inventories ......................................................... 4,298 5,133
Prepaid expenses .................................................... 15,979 21,607
Other current assets ................................................ 10,352 45,511
----------- -----------
Total current assets .................................................. 290,625 438,209
----------- -----------
PROPERTY AND EQUIPMENT
Drilling equipment and facilities ................................... 2,417,179 1,940,919
Other ............................................................... 28,249 27,195
----------- -----------
2,445,428 1,968,114
Accumulated depreciation ............................................ (395,659) (318,981)
----------- -----------
2,049,769 1,649,133
----------- -----------
INVESTMENTS IN AND ADVANCES TO JOINT VENTURES ......................... 29,314 48,270
DEFERRED INCOME TAXES ................................................. -- 964
OTHER ASSETS .......................................................... 62,616 42,056
----------- -----------
$ 2,432,324 $ 2,178,632
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt and current installments of long-term debt .......... $ 59,460 $ 148,786
Accounts payable .................................................... 56,586 78,880
Accrued payroll and related costs ................................... 34,116 21,985
Taxes payable ....................................................... 47,452 51,495
Interest payable .................................................... 10,180 6,191
Other current liabilities ........................................... 25,542 42,152
----------- -----------
Total current liabilities ............................................. 233,336 349,489
LONG-TERM DEBT ........................................................ 730,893 460,842
DEFERRED INCOME TAXES ................................................. 70,660 56,937
OTHER LIABILITIES ..................................................... 2,340 891
MINORITY INTEREST ..................................................... (2,947) --
----------- -----------
1,034,282 868,159
----------- -----------
SHAREHOLDERS' EQUITY
Common stock-par value $0.10 per share; 200,000 shares authorized;
134,716 issued and 131,882 outstanding in 1999; 133,761 issued
and 131,101 outstanding in 1998 .................................. 13,472 13,376
Capital in excess of par value ...................................... 960,803 943,122
Retained earnings ................................................... 502,493 418,024
Treasury stock, at cost ............................................. (65,072) (61,771)
Restricted stock (unearned compensation) ............................ (6,778) --
Accumulated other comprehensive loss ................................ (6,876) (2,278)
----------- -----------
1,398,042 1,310,473
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 13) ............................... -- --
----------- -----------
$ 2,432,324 $ 2,178,632
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
24
<PAGE> 27
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
OPERATING REVENUES
Contract drilling services ................ $ 585,321 $ 600,726 $ 468,980
Labor contract drilling services .......... 35,639 63,789 49,076
Turnkey drilling services ................. 79,223 112,601 180,863
Engineering and consulting services ....... 947 1,870 2,606
Other revenue ............................. 4,773 9,255 11,670
--------- --------- ---------
705,903 788,241 713,195
--------- --------- ---------
OPERATING COSTS AND EXPENSES
Contract drilling services ................ 312,864 267,674 207,875
Labor contract drilling services .......... 31,023 52,983 39,061
Turnkey drilling services ................. 78,110 127,999 175,686
Engineering and consulting services ....... 873 2,095 1,908
Other expense ............................. 2,072 5,730 6,405
Depreciation and amortization ............. 88,981 71,691 74,045
Selling, general and administrative ....... 35,764 30,298 24,800
Minority interest ......................... (1,224) -- (256)
Restructuring charge ...................... 7,479 -- --
Gains on sales of property and equipment .. -- -- (197,676)
--------- --------- ---------
555,942 558,470 331,848
--------- --------- ---------
OPERATING INCOME ............................ 149,961 229,771 381,347
OTHER INCOME (EXPENSE)
Interest expense .......................... (33,150) (5,181) (12,894)
Interest income ........................... 9,830 6,671 9,356
Other, net ................................ (1,155) (342) 1,804
--------- --------- ---------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY CHARGE ...................... 125,486 230,919 379,613
INCOME TAX PROVISION ........................ (30,184) (68,887) (115,731)
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY CHARGE .......... 95,302 162,032 263,882
EXTRAORDINARY CHARGE, NET OF TAX ............ (10,833) -- (6,685)
--------- --------- ---------
NET INCOME .................................. 84,469 162,032 257,197
========= ========= =========
NET INCOME PER SHARE-BASIC:
Income before extraordinary charge ........ $ 0.72 $ 1.24 $ 2.00
Extraordinary charge ...................... (0.08) -- (0.05)
--------- --------- ---------
Net income ................................ $ 0.64 $ 1.24 $ 1.95
========= ========= =========
NET INCOME PER SHARE-DILUTED:
Income before extraordinary charge ........ $ 0.72 $ 1.23 $ 1.98
Extraordinary charge ...................... (0.08) -- (0.05)
--------- --------- ---------
Net income ................................ $ 0.64 $ 1.23 $ 1.93
========= ========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
25
<PAGE> 28
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................... $ 84,469 $ 162,032 $ 257,197
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization .............................. 88,981 71,691 74,045
Deferred income tax (benefit) provision .................... 21,108 (1,128) 48,821
Equity in loss (earnings) of joint ventures ................ 691 2,752 (78)
Compensation expense from stock-based plans ................ 2,309 835 7,036
Other ...................................................... (824) (737) 595
Restructuring charge, non-cash portion ..................... 4,802 -- --
Gains on sales of property and equipment ................... -- -- (197,676)
Extraordinary charge, net of tax ........................... 10,833 -- 6,685
Changes in current assets and liabilities:
Accounts receivable ...................................... 28,995 (15,637) (38,023)
Other assets ............................................. 28,285 (9,773) 36,468
Accounts payable ......................................... (29,514) 1,514 6,217
Other liabilities ........................................ 11,847 51,532 101
Proceeds from sale of marketable equity securities, net .. -- -- 2,353
--------- --------- ---------
Net cash provided from operations .................... 251,982 263,081 203,741
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment ......................... (421,679) (540,571) (391,065)
Proceeds from sale of property and equipment ............... 1,041 3,799 271,764
Proceeds from sale of marketable debt securities .......... -- 16,461 2,870
Investment in and advances to joint ventures ............... (490) (29,925) (11,831)
Investment in marketable equity securities ................. (4,931) -- --
--------- --------- ---------
Net cash used for investing activities ............... (426,059) (550,236) (128,262)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt ............................... 396,731 372,250 --
Net (payments) borrowings on revolving credit facility ..... (100,000) 100,000 --
Payment of long-term debt .................................. (206,950) (15,650) (128,787)
Proceeds from issuance of common stock, net ................ 4,250 1,834 5,774
Purchase of shares returned to treasury stock .............. -- (4,313) (52,181)
Decrease (increase) in restricted cash ..................... 1,861 (5,871) --
--------- --------- ---------
Net cash provided by (used for) financing activities . 95,892 448,250 (175,194)
--------- --------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ............... (78,185) 161,095 (99,715)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ................... 211,012 49,917 149,632
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR ......................... $ 132,827 $ 211,012 $ 49,917
========= ========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
26
<PAGE> 29
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Balance at beginning of year ................. 133,761 $ 13,376 133,335 $ 13,334 132,189 $ 13,219
Exercise stock options ....................... 845 85 350 35 951 95
Issuance of restricted shares ................ -- -- -- -- 59 6
Other ........................................ 110 11 76 7 136 14
----------- ----------- ----------- ----------- ----------- -----------
Balance at end of year ....................... 134,716 13,472 133,761 13,376 133,335 13,334
----------- ----------- ----------- ----------- ----------- -----------
CAPITAL IN EXCESS OF PAR VALUE
Balance at beginning of year ................. 943,122 934,383 916,004
Exercise stock options ....................... 15,712 2,713 5,679
Contribution of treasury stock to restricted
stock plan ................................. (2,364) -- (793)
Issuance of restricted shares ................ -- -- 826
Restricted shares returned to treasury ....... 381 824 423
Other ........................................ 3,952 5,202 12,244
----------- ----------- -----------
Balance at end of year ....................... 960,803 943,122 934,383
----------- ----------- -----------
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Balance at beginning of year ................. 418,024 255,992 (1,205)
Net income ................................... 84,469 162,032 257,197
----------- ----------- -----------
Balance at end of year ....................... 502,493 418,024 255,992
----------- ----------- -----------
TREASURY STOCK
Balance at beginning of year ................. (2,660) (61,771) (2,347) (53,544) (209) (1,852)
Contribution to restricted stock plan ........ 457 10,537 -- -- 88 793
Restricted stock plans shares returned ....... (16) (414) (112) (1,316) (44) (423)
Repurchase common stock ...................... -- -- (300) (4,313) (2,186) (52,181)
Exercise stock options ....................... (524) (12,560) (151) (5,302) -- --
Other ........................................ (91) (864) 250 2,704 4 119
----------- ----------- ----------- ----------- ----------- -----------
Balance at end of year ....................... (2,834) (65,072) (2,660) (61,771) (2,347) (53,544)
----------- ----------- ----------- ----------- ----------- -----------
RESTRICTED STOCK (UNEARNED COMPENSATION)
Balance at beginning of year ................. -- -- --
Issuance of restricted shares ................ (8,173) -- --
Compensation expense recognized .............. 1,395 -- --
----------- ----------- -----------
Balance at end of year ....................... (6,778) -- --
----------- ----------- -----------
ACCUMULATED OTHER COMPREHENSIVE LOSS
Balance at beginning of year ................. (2,278) (1,111) (917)
Other comprehensive loss ..................... (4,598) (1,167) (194)
----------- ----------- -----------
Balance at end of year ....................... (6,876) (2,278) (1,111)
----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY ..................... 131,882 $ 1,398,042 131,101 $ 1,310,473 130,988 $ 1,149,054
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
27
<PAGE> 30
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
----------------------------
<S> <C>
NET INCOME ................................................................ $ 84,469
---------------
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Foreign currency translation adjustments................................. (277)
Unrealized holding loss arising during period............................ (5,686)
Minimum pension liability adjustment (net of tax expense of $735)........ 1,365
---------------
Other comprehensive loss................................................. (4,598)
---------------
COMPREHENSIVE INCOME....................................................... $ 79,871
===============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
----------------------------
<S> <C>
NET INCOME ................................................................ $ 162,032
---------------
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Foreign currency translation adjustments................................. 319
---------------
Unrealized losses on securities:
Unrealized holding loss arising during period.......................... (10)
Less: reclassification adjustment for gains realized in net income..... (6)
---------------
Net unrealized losses.................................................. (16)
---------------
Minimum pension liability adjustment (net of tax benefit of $792)........ (1,470)
---------------
Other comprehensive loss................................................. (1,167)
---------------
COMPREHENSIVE INCOME....................................................... $ 160,865
===============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
----------------------------
<S> <C>
NET INCOME ............................................................... $ 257,197
---------------
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Foreign currency translation adjustments................................ (245)
Unrealized holding gains arising during period.......................... 51
---------------
Other comprehensive loss................................................ (194)
---------------
COMPREHENSIVE INCOME...................................................... $ 257,003
===============
</TABLE>
See accompanying notes to the consolidated financial statements.
28
<PAGE> 31
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Noble Drilling Corporation ("Noble Drilling" or, together with its
consolidated subsidiaries, unless the context requires otherwise, the "Company",
"we", "our" and words of similar import) is primarily engaged in domestic and
international contract oil and gas drilling and workover operations. Our
international operations are conducted in Canada, the North Sea, Mexico, Africa,
Brazil, Venezuela, the Middle East and India.
Noble Drilling (Paul Romano) Inc. ("NDPRI") was formed on April 3, 1998
for the purpose of owning the Noble Paul Romano and financing its conversion to
a Noble EVA-4000(TM) semisubmersible. NDPRI is an indirect, wholly owned
subsidiary of Noble Drilling and is operated in a fashion that is intended to
ensure that its assets and liabilities are distinct and separate from those of
Noble Drilling and its affiliates and that the creditors of NDPRI would be
entitled to satisfy their claims from the assets of NDPRI prior to any
distribution to Noble Drilling or its affiliates. (See Note 6.)
CONSOLIDATION
The consolidated financial statements include the accounts of Noble
Drilling and its wholly and majority owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The equity method of accounting is used for investments in affiliates where we
have a significant influence but not a controlling interest. (See Note 5.)
FOREIGN CURRENCY TRANSLATION
We follow a translation policy in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 52, Foreign Currency Translation
("SFAS 52"). In international locations where the U.S. Dollar has been
designated as the functional currency based on an evaluation of such factors as
the markets in which the subsidiary operates, inflation, generation of cash
flow, financing activities and intercompany arrangements, translation gains and
losses are included in net income. In international locations where the local
currency is the functional currency, assets and liabilities are translated at
the rates of exchange on the balance sheet date, while income and expense items
are translated at average rates of exchange. The resulting gains or losses
arising from the translation of accounts from the functional currency to the
U.S. Dollar are included in accumulated other comprehensive income. We did not
recognize any material gains or losses on foreign currency transactions or
translations during the years ended December 31, 1999, 1998 and 1997.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, demand deposits with
banks and all highly liquid investments with original maturities of three months
or less. Our cash, cash equivalents and short-term investments are subject to
potential credit risk. Our cash management and investment policies restrict
investments to lower risk, highly liquid securities and we perform periodic
evaluations of the relative credit standing of the financial institutions with
which we conduct business.
In accordance with SFAS No. 95, Statement of Cash Flows, cash flows
from our operations in the United Kingdom and Canada are calculated based on
their respective functional currencies. As a result, amounts related to assets
and liabilities reported on the Consolidated Statements of Cash Flows will not
necessarily agree with changes in the corresponding balances on the Consolidated
Balance Sheets. The effect of exchange rate changes on cash balances held in
foreign currencies was not material in 1999, 1998 or 1997.
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
29
<PAGE> 32
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DERIVATIVE INSTRUMENTS
We periodically enter into off-balance sheet derivative financial
instruments to manage our exposure to fluctuations in interest rates and foreign
currency exchange rates, including interest rate swaps and foreign currency
exchange contracts. We do not use derivative financial instruments for trading
purposes. We designate and assign the financial instruments as hedges of
specific assets, liabilities or anticipated transactions. Cash flows from hedge
transactions are classified in the Consolidated Statements of Cash Flows under
the same category as the cash flows from the underlying assets, liabilities or
anticipated transactions. (See Note 9.)
INVENTORIES
Inventories consist of spare parts, material and supplies held for
consumption and are stated principally at average cost.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, reduced by provisions to
recognize economic impairment in value when management determines that such
impairment has occurred. At December 31, 1999 and 1998, there was $213,041,000
and $511,418,000, respectively, of construction in progress related primarily to
semisubmersible upgrade and conversion projects. Such amounts are included in
"Drilling equipment and facilities" in the accompanying Consolidated Balance
Sheets. Major replacements and improvements are capitalized. Included in costs
of drilling equipment and facilities is an allocation of interest incurred
during the period that rigs are under construction or major refurbishment.
Interest capitalized for the years ended December 31, 1999, 1998 and 1997
totaled $22,393,000, $17,200,000 and $4,218,000, respectively. When assets are
sold, retired or otherwise disposed of, the cost and related accumulated
depreciation are eliminated from the accounts and the gain or loss is
recognized.
Scheduled maintenance of equipment and overhauls are performed on a
basis of number of hours operated in accordance with our preventative
maintenance program. Repair and maintenance costs are generally charged to
expense as incurred; however, overhauls related to large-scale maintenance
projects are deferred when incurred and amortized into contract drilling
services expense over a 36-month period. The deferred portion of these
large-scale maintenance projects is included in "Other assets" in the
Consolidated Balance Sheets. Such amounts totaled $27,657,000 and $21,474,000 at
December 31, 1999 and 1998, respectively. Total maintenance and repair expenses
for the years ended December 31, 1999, 1998 and 1997, were approximately
$64,410,000, $50,926,000 and $44,100,000, respectively. Drilling equipment and
facilities are depreciated using the straight-line method over estimated
remaining useful lives as of the in-service date or date of major refurbishment.
Estimated useful lives of our drilling equipment and facilities range from two
to twenty-five years. Other property and equipment is depreciated using the
straight-line method over useful lives ranging from two to twenty years.
LONG-LIVED ASSETS
We evaluate the realizability of our long-lived assets, including
property and equipment and goodwill, whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. There were
no impairment losses during the three years ended December 31, 1999, 1998 and
1997. An impairment loss exists when estimated undiscounted cash flows expected
to result from the use of the asset and its eventual disposition are less than
its carrying amount. Any impairment loss recognized represents the excess of the
asset's carrying value as compared to its estimated fair value.
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
30
<PAGE> 33
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OTHER ASSETS
The excess of cost over the fair value of net tangible assets acquired
in the acquisition of Triton Engineering Services Company ("Triton") is being
amortized over nine years. Amortization expense for goodwill was $213,000 for
each of the years ended December 31, 1999, 1998 and 1997. Accumulated
amortization of goodwill was $922,000 and $709,000 at December 31, 1999 and
1998, respectively. Prepaid insurance is amortized over the terms of the
insurance policies. Deferred debt issuance costs, which totaled $9,125,000 and
$9,073,000 at December 31, 1999 and December 31, 1998, respectively, are being
amortized over the life of the debt securities. Amortization related to debt
issuance costs was $1,378,000, $469,000 and $493,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
REVENUE RECOGNITION
Revenues generated from our dayrate-basis drilling contracts are
recognized as services are performed. Our turnkey drilling contracts are of a
short-term, fixed fee nature, and accordingly, revenues and expenses are
recognized using the completed contract method. We may receive lump-sum fees for
the mobilization of equipment and personnel. The net of mobilization fees
received and costs incurred to mobilize an offshore rig from one market to
another is recognized over the term of the related drilling contract. Costs
incurred to relocate drilling units to more promising geographic areas in which
a contract has not been secured are expensed as incurred. Lump-sum payments
received from customers relating to specific contracts are deferred and
amortized to income over the term of the drilling contract. Provisions for
future losses on turnkey contracts are recognized when it is probable that
expenses to be incurred on a specific contract will exceed the revenue from the
contract.
CONCENTRATION OF CREDIT RISK
The primary market for our services is the offshore oil and gas
industry, and our customers consist primarily of major oil companies,
independent oil and gas producers and government-owned oil companies. We perform
ongoing credit evaluations of our customers and generally do not require
material collateral. We maintain reserves for potential credit losses when
necessary. Our results of operations and financial condition should be
considered in light of the fluctuations in demand experienced by drilling
contractors as changes in oil and gas producers' expenditures and budgets occur.
These fluctuations can impact our results of operations and financial condition
as supply and demand factors directly affect utilization and dayrates, which are
the primary determinants of our cash flow from operations.
In 1999, one customer accounted for $89,991,000 of contract drilling
services revenues, or a total of 13 percent of consolidated operating revenues.
Another customer accounted for $74,894,000 of contract drilling services
revenues, or a total of 11 percent of consolidated operating revenues in 1999.
No other customer accounted for more than 10 percent of consolidated operating
revenue in 1999. In 1998, one customer accounted for $68,892,000 of contract
drilling services revenues and $27,694,000 of turnkey drilling services
revenues, or a total of 12 percent of consolidated operating revenues. No other
customer accounted for more than 10 percent of consolidated operating revenue in
1998. No customers accounted for more than 10 percent of consolidated operating
revenues in 1997.
NET INCOME PER SHARE
The Company has adopted SFAS No. 128, Earnings Per Share ("SFAS 128"),
which established new guidelines for computing and presenting earnings per
share. All prior period earnings per share data have been restated to conform to
the provisions of SFAS 128. Net income per share has been computed on the basis
of the weighted average number of common shares and, where dilutive, common
share equivalents, outstanding during the indicated periods.
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
31
<PAGE> 34
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table reconciles the basic and diluted earnings per share
computations for income before extraordinary charge for the years ended December
31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
INCOME BEFORE
EXTRAORDINARY BASIC BASIC DILUTED DILUTED
CHARGE SHARES EPS SHARES EPS
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 $ 95,302 131,493 $ 0.72 132,597 $ 0.72
1998 $ 162,032 131,203 $ 1.24 132,269 $ 1.23
1997 $ 263,882 131,791 $ 2.00 133,455 $ 1.98
</TABLE>
Included in diluted shares are common stock equivalents relating
primarily to outstanding stock options covering 1,104,000, 1,066,000 and
1,664,000 shares for the years ended December 31, 1999, 1998 and 1997,
respectively. The computation of diluted earnings per share for 1999 and 1998
did not include options to purchase 2,389,261 and 5,335,886 shares of common
stock, respectively, because the options' exercise prices were greater than the
average market price of the common stock.
SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash paid during the period for:
Interest (net of amounts capitalized)......................... $ 29,161 $ 5,078 $ 15,363
Income taxes (net of refunds)................................. $ 9,841 $ 42,228 $ 49,737
Noncash investing and financing activities:
Insurance financing agreement................................. $ 9,888 $ 5,168 $ 26,120
</TABLE>
CERTAIN SIGNIFICANT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
RESTRUCTURING CHARGE
As part of our ongoing efforts to streamline operations, a
restructuring charge of $7,479,000 was recognized in 1999. The restructuring
charge relates to early retirement packages accepted by 37 employees and the
relocation of our Gulf Coast Marine division office in Lafayette, Louisiana to
the centralized Houston office, which is scheduled to be completed by July 2000.
At December 31, 1999, a liability of approximately $3,800,000 was reflected in
our accompanying Consolidated Balance Sheets related to the early retirement
packages. Future cash outflows related to the liability established by the
restructuring charge and its impact on liquidity and working capital is not
considered material. These cash outflows will be funded from our normal
operating cash flows.
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
32
<PAGE> 35
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS 133"). SFAS 133 requires that, upon
adoption, all derivative instruments (including certain derivative instruments
embedded in other contracts) be recognized in the balance sheet at fair value,
and that changes in such fair values be recognized in earnings unless specific
hedging criteria are met. Changes in the values of derivatives that meet these
hedging criteria will ultimately offset related earnings effects of the hedged
items; effects of certain changes in fair value are recorded in Other
Comprehensive Income pending recognition in earnings. SFAS 133, as amended by
SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of SFAS No. 133, is effective for
fiscal years beginning after June 15, 2000. The impact of SFAS 133 on our
financial statements will depend on a variety of factors, including future
interpretive guidance from the FASB, the future level of actual foreign currency
transactions, the extent of our hedging activities, the types of hedging
instruments used and the effectiveness of such instruments. However, we believe
adoption will not have a material effect on our results of operations or
financial position. (See Note 9.)
NOTE 2 -- ACQUISITIONS, MERGERS AND DISPOSITIONS
In January 2000, our joint venture partners and we formed Noble
Rochford Drilling Ltd. ("Noble Rochford") which purchased the Noble Julie
Robertson (formerly Ocean Scotian), a Baker Marine Europe Class design jackup.
We acquired a 50 percent equity interest in Noble Rochford for an initial equity
investment in the joint venture of $10,000,000. Additionally, we agreed to make
additional equity investments of up to $2,000,000, if needed, to help fund
planned upgrades. At the time of closing, we also entered into a $24,000,000
credit agreement (the "Noble Rochford Credit Agreement") with Noble Rochford to
fund the acquisition and upgrade of the Noble Julie Robertson. As of March 3,
2000, we had funded $15,000,000 to Noble Rochford under the Noble Rochford
Credit Agreement. Additional proceeds necessary to fund the upgrade will be
loaned by us to the joint venture under the terms of the Noble Rochford Credit
Agreement or, if necessary, under a related Shareholder Loan Agreement. We will
manage the upgrade, marketing and operation of the Noble Julie Robertson, which
we believe will be available for service in mid-2000.
Effective January 1, 1999, we acquired a majority interest in Arktik
Drilling Limited, Inc. ("Arktik") and a 100 percent interest in the bareboat
charter of the Noble Kolskaya. Arktik's principal asset is the drillship, the
Noble Muravlenko. As a result of these acquisitions, the results of operations
of Arktik and the Noble Kolskaya are included in our Consolidated Statements of
Operations from January 1, 1999, and at that date, the respective assets and
liabilities acquired were recorded at their estimated fair values. Prior to
January 1, 1999, the investments were accounted for under the equity method.
(See Note 5.)
In July 1998, we purchased the Noble Dave Beard (formerly Shelf 6), a
Friede & Goldman 9500 Enhanced Pacesetter design semisubmersible, for
$24,100,000 in cash. As of December 31, 1999, we had spent an additional
$4,800,000 in preparation to upgrade the unit for work in deeper water depths if
we are able to secure a long-term drilling contract for the unit.
In June 1998, our joint venture partner and we formed a limited
liability company, which purchased the Ilion. (See Note 5.)
On May 7, 1997, we completed the sale of our 12 mat-supported jackup
rigs for $268,818,000 in cash. We 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" in the accompanying Consolidated Statement of Operations for the
year ended December 31, 1997. Revenues, gross margin and operating income
generated from the sold rigs were $35,155,000, $18,585,000 and $15,231,000,
respectively, for the period from January 1, 1997 through May 7, 1997.
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
33
<PAGE> 36
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 -- MARKETABLE SECURITIES
As of December 31, 1999, we owned marketable equity securities with a
fair market value of $4,931,000. We did not own any marketable equity securities
as of December 31, 1998. These investments are classified as available for sale
and are included in "Other assets" in the Consolidated Balance Sheets. Gross
unrealized holding losses on these investments were $5,686,000 at December 31,
1999 and are included in "Accumulated other comprehensive loss" in the
Consolidated Balance Sheets. At December 31, 1999 and 1998, we did not own any
marketable debt securities. Total realized gains (losses) related to short-term
investments were $0, $6,000 and ($6,000) for the years ended December 31, 1999,
1998 and 1997, respectively.
NOTE 4 -- COMPREHENSIVE INCOME
As of January 1, 1998, we adopted SFAS No. 130, Reporting Comprehensive
Income ("SFAS 130"). SFAS 130 established standards for reporting and displaying
comprehensive income and its components. Components of comprehensive income are
net income and all changes in equity during a period except those resulting from
transactions with owners. SFAS 130 requires enterprises to display comprehensive
income and its components in the enterprise's financial statements, to classify
items of comprehensive income by their nature in the financial statements and
display the accumulated balance of other comprehensive income in shareholders'
equity separately from retained earnings and additional paid-in capital.
Comparative financial statements provided for earlier periods have been
reclassified to reflect the application of SFAS 130.
The following table sets forth the components of accumulated other
comprehensive loss:
<TABLE>
<CAPTION>
ACCUMULATED
FOREIGN UNREALIZED MINIMUM OTHER
CURRENCY (LOSSES) GAINS PENSION COMPREHENSIVE
ITEMS ON SECURITIES LIABILITY LOSS
------------ -------------- ------------ -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1998 ....... $ (1,127) $ 16 $ -- $ (1,111)
1998-period change ............... 319 (16) (1,470) (1,167)
------------ ------------ ------------ ------------
Balance at December 31, 1998 ..... (808) -- (1,470) (2,278)
1999-period change ............... (277) (5,686) 1,365 (4,598)
------------ ------------ ------------ ------------
Balance at December 31, 1999 ..... $ (1,085) $ (5,686) $ (105) $ (6,876)
============ ============ ============ ============
</TABLE>
NOTE 5 -- INVESTMENTS IN AND ADVANCES TO JOINT VENTURES
Effective January 1, 1999, we acquired a majority interest in Arktik
and a 100 percent interest in the bareboat charter of the Noble Kolskaya, in
exchange for a variable rate note to Kvaerner Maritime A.S. ("Kvaerner") in the
aggregate principal amount of $17,500,000 (the "Kvaerner Debt"). (See Note 6.)
Arktik's principal asset is the drillship, the Noble Muravlenko. As a result of
these acquisitions, the results of operations of Arktik and the Noble Kolskaya
are included in our Consolidated Statements of Operations from January 1, 1999,
and at that date, the respective assets and liabilities acquired were recorded
at their estimated fair values. Prior to January 1, 1999, the investments were
accounted for under the equity method. The results of operations of Arktik and
the Noble Kolskaya prior to January 1, 1999 were not material to our
consolidated amounts; therefore, pro forma financial information is not
presented.
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
34
<PAGE> 37
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In June 1998, our joint venture partner and we formed Ilion LLC, a
limited liability company, which purchased the Ilion, a Friede & Goldman 9500
Enhanced Pacesetter design semisubmersible. We acquired an initial 50 percent
equity interest in Ilion LLC for an initial investment in the joint venture of
$12,825,000. In addition, we have funded $17,380,000 to Ilion LLC in the form of
a promissory note that is convertible at our election into an additional 20
percent equity interest. We account for this investment using the equity method.
We received no distributions or dividends from Ilion LLC during the years ended
December 31, 1999 and 1998.
Balances related to joint ventures for 1999 and 1998 are reflected in
the table below:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Equity in losses of joint ventures (1) ..... $ (690) $ (2,752)
Investment in joint ventures ............... $ 11,934 $ 10,761
Advances to joint ventures (2) ............. $ 17,380 $ 37,509
Receivable from other joint venturer (3) ... $ -- $ 5,163
</TABLE>
(1) Balance included in "Other, net" in the Consolidated Statements of
Operations. There was $78,000 in equity earnings in 1997.
(2) Balance included in "Investments in and advances to joint ventures" in the
Consolidated Balance Sheets.
(3) Balance included in "Other current assets" in the Consolidated Balance
Sheets.
In January 2000, our joint venture partners and we formed Noble
Rochford, which purchased the Noble Julie Robertson (formerly Ocean Scotian), a
Baker Marine Europe Class design jackup. (See Note 2.)
NOTE 6 -- DEBT
On March 16, 1999, we issued $150,000,000 principal amount of our 6.95%
Senior Notes due 2009 (the "2009 Notes") and $250,000,000 principal amount of
our 7.50% Senior Notes due 2019 (the "2019 Notes" and together with the 2009
Notes, the "Notes"). Interest on the Notes is payable on March 15 and September
15 of each year beginning September 15, 1999. The Notes are redeemable, as a
whole or from time to time in part, at our option on any date prior to maturity
at prices equal to 100 percent of the outstanding principal amount of the notes
redeemed plus accrued interest to the redemption date plus a make-whole premium,
if any is required to be paid. The Notes are senior unsecured obligations and
the indenture governing the Notes contains covenants that, among other things,
limit our ability to create certain liens, engage in certain sale and lease-back
transactions and merge, consolidate and sell assets, except under certain
conditions.
We used approximately $143,000,000 of the net proceeds from the
issuance of the Notes to purchase and retire $125,000,000 principal amount of
our 9 1/8% Senior Notes due 2006, which resulted in an extraordinary charge of
$10,833,000, net of taxes of $5,833,000. The extraordinary charge represents the
difference between the acquisition price and the net carrying value of the notes
purchased, including unamortized debt issuance costs.
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
35
<PAGE> 38
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with the acquisitions regarding Arktik and the Noble
Kolskaya (see Note 5), we incurred the Kvaerner Debt in the amount of
$17,500,000. Additionally, we recorded Arktik's outstanding bank indebtedness in
the amount of $24,000,000 (the "Arktik Debt") and Arktik's indebtedness to a
minority equity owner in Arktik in the amount of $7,900,000 (the "Shareholder
Debt"). The Arktik Debt and the Shareholder Debt are non-recourse except to
Arktik. The Arktik Debt is secured by a preferred mortgage on Arktik's
drillship, the Noble Muravlenko. The Shareholder Debt is also secured by a
mortgage on the Noble Muravlenko.
The Kvaerner Debt bears interest at a rate equal to the LIBOR rate plus
1.25 percent. Principal and interest is payable each October 1 and April 1 until
October 1, 2003. We may prepay all or any portion of the balance, plus accrued
interest, at any time after December 31, 1999. The interest rate as of December
31, 1999 was 6.75 percent per annum.
The Arktik Debt bears interest at 7.29 percent per annum. In December
1999, the Arktik Debt was converted from a variable rate obligation with a rate
equal to the LIBOR rate plus 1.0 percent to a fixed-rate obligation. Principal
and interest is payable on each June 1 and December 1.
The Shareholder Debt bears interest at 12.0 percent per annum. Interest
is payable on each April 1 and October 1. The principal balance of the debt is
to be repaid over a three year period, beginning in 2009.
In May 1999, we entered into a financing agreement with Cananwill, Inc.
related to the renewal of our Marine Package and Protection and Indemnity
insurance policies for periods of 36 months and 12 months, respectively. We
financed a total of $20,000,000 related to these insurance policies. The fixed
annual interest rate on the debt related to the Marine Package and Protection
and Indemnity insurance policies is 5.70 percent.
In July 1998, Noble Drilling (Paul Wolff) Ltd., an indirect, wholly
owned subsidiary of Noble Drilling and owner of the Noble Paul Wolff, issued
$145,000,000 principal amount of its fixed rate senior secured notes (the "Wolff
Notes") in three series. The Wolff Notes bear interest at rates of 6.43 percent
to 6.55 percent per annum. The Wolff Notes are guaranteed by Noble Drilling and
are secured by a first naval mortgage on the Noble Paul Wolff. The Wolff Notes
can be prepaid, in whole or in part, at a premium at any time after June 1,
2001.
In December 1998, Noble Drilling (Paul Romano) Inc., an indirect,
wholly owned subsidiary of Noble Drilling and owner of the Noble Paul Romano,
issued $112,250,000 principal amount of its fixed rate senior secured notes (the
"Romano Notes") in two series (the "Series A Notes" and the "Series B Notes").
The Series A Notes bear interest at 6.33 percent per annum and the Series B
Notes bear interest at 6.09 percent per annum. The Romano Notes are secured by a
first naval mortgage on the Noble Paul Romano and are non-recourse except to the
issuer thereof. The Romano Notes can be prepaid, in whole or in part, at a
premium at any time. Pursuant to the trust indenture and security agreement
under which the Romano Notes are issued, Noble Drilling (Paul Romano) Inc. is
restricted from incurring any indebtedness other than the Romano Notes and the
Noble Paul Romano may not be mortgaged to secure any debt other than the Romano
Notes. Pursuant to the trust indenture, we were required to deposit an amount
into two separate accounts, subject to control of a third-party trustee, to
prepay the first month's principal and interest payment and provide an
additional debt reserve balance equal to two months of debt service. Such amount
totaled $4,010,000 at December 31, 1999 and is included in "Restricted cash" in
the Consolidated Balance Sheet.
In December 1998, Noble Drilling (Jim Thompson) Inc., an indirect,
wholly owned subsidiary of Noble Drilling and owner of the Noble Jim Thompson,
issued $115,000,000 principal amount of its fixed rate senior secured notes (the
"Thompson Notes") in four series. The Thompson Notes bear interest at rates of
5.93 percent to 7.25 percent per annum. The Thompson Notes are guaranteed by
Noble Drilling and are secured by a first naval mortgage on the Noble Jim
Thompson. The Thompson Notes can be prepaid, in whole or in part, at a premium
at any time after January 1, 2001.
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
36
<PAGE> 39
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We issued $125,000,000 principal amount of 9 1/4% Senior Notes Due 2003
(the "9 1/4% Notes") in 1993. We purchased $29,555,000 principal amount of the 9
1/4% Notes in 1997, resulting in an extraordinary charge of $1,704,000, net of
taxes of $918,000. Thereafter, in 1997 we made a tender offer pursuant to which
we purchased an additional $81,330,000 principal amount of the 9 1/4% Notes.
This resulted in an extraordinary charge of $4,981,000, net of taxes of
$2,682,000. We redeemed the remaining $3,115,000 principal amount of the 9 1/4%
Notes in December 1998 and there was no extraordinary charge recognized as a
result of the redemption.
The following table summarizes our long-term debt:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
6.95% Senior Notes due 2009, net of unamortized discount of
$98 in 1999 ................................................. $ 149,902 $ --
7.50% Senior Notes due 2019 ................................... 250,000 --
9 1/8% Senior Notes due 2006, net of unamortized discount of
$175 in 1998 ................................................ -- 124,825
Project Financings:
Wolff Notes ................................................. 124,544 145,000
Romano Notes ................................................ 95,498 112,250
Thompson Notes .............................................. 113,735 115,000
Kvaerner Debt ................................................. 14,000 --
Arktik Debt ................................................... 20,000 --
Shareholder Debt .............................................. 7,900 --
Insurance Financing ........................................... 14,774 11,326
----------- -----------
790,353 508,401
Current Installments .......................................... (59,460) (47,559)
----------- -----------
$ 730,893 $ 460,842
=========== ===========
</TABLE>
Aggregate principal repayments of long-term debt for the next five
years and thereafter are as follows:
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 THEREAFTER
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
6.95% Senior Notes due 2009,
net of unamortized
discount of $98 ............. $ -- $ -- $ -- $ -- $ -- $ 149,902
7.50% Senior Notes due 2019 .... -- -- -- -- -- 250,000
Project Financings:
Wolff Notes ............... 21,808 23,251 24,799 26,458 28,228 --
Romano Notes .............. 17,844 19,007 20,245 38,402 -- --
Thompson Notes ............ 5,253 5,571 10,386 15,720 16,805 60,000
Kvaerner Debt .................. 3,500 3,500 3,500 3,500 -- --
Arktik Debt .................... 4,000 4,000 4,000 8,000 -- --
Shareholder Debt ............... -- -- -- -- -- 7,900
Insurance Financing ............ 7,055 6,133 1,586 -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total ..................... $ 59,460 $ 61,462 $ 64,516 $ 92,080 $ 45,033 $ 467,802
========== ========== ========== ========== ========== ==========
</TABLE>
The fair value of our long-term debt at December 31, 1999 was
$763,451,000, based on the quoted market prices for similar issues or on the
current rates offered to us for debt of similar remaining maturities.
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
37
<PAGE> 40
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 -- CREDIT FACILITIES
We have an unsecured revolving bank credit facility totaling
$200,000,000 (the "Credit Agreement"), including a letter of credit facility
totaling $40,000,000, through August 14, 2002. We are required to maintain
various affirmative and negative covenants relating to interest coverage, fleet
market value and net worth. The Credit Agreement contains restrictive covenants,
including restrictions on incurring additional indebtedness, and restrictions on
permitting additional liens, payment of dividends, transactions with affiliates,
and mergers or consolidations. As of December 31, 1999, we had no outstanding
borrowings under the Credit Agreement and $3,777,000 had been used to support
outstanding letters of credit. As of December 31, 1998, we had an outstanding
balance of $100,000,000 under the Credit Agreement. As of December 31, 1999,
$196,223,000 remained available under the Credit Agreement. Additionally, at
December 31, 1999, $19,110,000 of outstanding letters of credit had been
supported through a combination of unsecured letter of credit facilities and
surety bonds.
NOTE 8 -- SHAREHOLDERS' EQUITY
STOCKHOLDER RIGHTS PLAN
In June 1995, we adopted a stockholder rights plan designed to assure
that our stockholders receive fair and equal treatment in the event of any
proposed takeover of the Company and to guard against partial tender offers and
other abusive takeover tactics to gain control of the Company without paying all
stockholders a fair price. The rights plan was not adopted in response to any
specific takeover proposal. Under the rights plan, one right ("Right") is
attached to each share of Noble Drilling common stock. Each Right will entitle
the holder to purchase one one-hundredth of a share of a new Series A Junior
Participating Preferred Stock, par value $1.00 per share, at an exercise price
of $120.00. The Rights are not currently exercisable and will become exercisable
only in the event a person or group acquires beneficial ownership of 15 percent
or more of Noble Drilling common stock. The Rights expire on July 10, 2005.
NOTE 9 -- FINANCIAL INSTRUMENTS
Because we operate internationally, we are exposed to foreign currency
risk. We denominate our contracts predominantly in U.S. Dollars to mitigate the
exposure to fluctuations in foreign currencies. We periodically use foreign
exchange derivative instruments or spot purchases to hedge our known liabilities
in foreign currencies to reduce the impact of foreign currency gains and losses
in our financial results. It is our policy not to enter into derivative
transactions for speculative purposes. Gains and losses on foreign exchange
derivative instruments, which qualify as accounting hedges, are deferred and
recognized when the underlying foreign exchange exposure is realized. To qualify
for hedge accounting, the contracts must meet defined correlation and
effectiveness criteria, be designated as hedges and result in cash flows and
financial statement effects that substantially offset those of the position
being hedged. Gains and losses on foreign exchange derivative instruments that
do not qualify as hedges for accounting purposes are recognized currently based
on the change in the market value of the derivative instrument. We did not
utilize foreign exchange derivative instruments in 1999. During 1998, we entered
into various foreign currency exchange contracts. These contracts expired
monthly throughout 1998 and required us to exchange U.S. Dollars for Dutch
Guilders and British Pounds Sterling totaling $33,800,000 and $24,700,000,
respectively. There were no material gains or losses recognized in the years
ended December 31, 1999 and 1998. At December 31, 1999 and 1998 there were no
open foreign exchange derivative hedges.
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
38
<PAGE> 41
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with 1998 project financings for the Noble Paul Wolff,
Noble Paul Romano and Noble Jim Thompson Noble EVA-4000(TM) semisubmersible
conversions, we entered into interest rate swap contracts to minimize exposure
to interest rate increases during the period prior to funding. Neither we nor
our counterparties, which were prominent bank institutions, were required to
collateralize the respective obligations under the interest rate swaps. A
summary of the interest rate swap contracts is as follows:
<TABLE>
<CAPTION>
NOTIONAL SETTLEMENT AMOUNT RECEIVED (PAID)
PROJECT FINANCING AMOUNT DATE AT SETTLEMENT DATE
- ------------------------- ----------- ------------------- ----------------------
<S> <C> <C> <C>
Noble Paul Wolff ....... $ 145,000 June 8, 1998 $ 311
Noble Jim Thompson ..... $ 137,750 November 3, 1998 $ (3,837)
Noble Paul Romano ...... $ 16,875 December 14, 1998 $ (741)
</TABLE>
The amounts received or paid at settlement of the interest rate swap
contracts have been deferred and are classified as "Other assets" in the
accompanying Consolidated Balance Sheets at December 31, 1999 and 1998. Such
amounts will be recognized over the term at the respective project financings as
an adjustment to the underlying yield of the financial instrument. (See Note 6.)
NOTE 10 -- STOCK-BASED COMPENSATION PLANS
We have several stock-based compensation plans, which are described
below. Effective January 1, 1996, we adopted the provisions of SFAS No. 123,
Accounting for Stock-Based Compensation ("SFAS 123"). As permitted by SFAS 123,
we have chosen to continue using the intrinsic value method of accounting for
stock-based compensation awards in accordance with APB Opinion 25. Compensation
expense of $9,097,000 was recognized during 1999, however, for stock options
exercised by employees in which we bought the shares exercised directly from the
employee. No compensation expense was recognized in 1998 and 1997 related to
stock option awards. We have modified our procedures regarding stock options and
do not anticipate future compensation expense related to stock option awards.
1991 STOCK OPTION AND RESTRICTED STOCK PLAN
Our 1991 Stock Option and Restricted Stock Plan, as amended (the "1991
Plan"), provides for the granting of options to purchase our common stock, with
or without stock appreciation rights ("SAR's"), and the awarding of shares of
restricted stock to selected employees. At December 31, 1999, 5,412,583 shares
were available for grant or award under the 1991 Plan. In general, all options
granted under the 1991 Plan have a term of 10 years, an exercise price equal to
the fair market value of the common stock on the date of grant and vest
one-third annually, commencing one year after the grant date.
1992 NONQUALIFIED STOCK OPTION PLAN
Our 1992 Nonqualified Stock Option Plan for Non-Employee Directors (the
"1992 Plan") provides for the granting of nonqualified stock options to
non-employee directors of Noble Drilling. We grant options at fair market value
on the grant date. The options are exercisable from time to time over a period
commencing one year from the grant date and ending on the expiration of ten
years from the grant date, unless terminated sooner as described in the 1992
Plan.
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
39
<PAGE> 42
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the status of our stock options under both the 1991 Plan
and 1992 Plan as of December 31, 1999, 1998 and 1997 and the changes during the
year ended on those dates is presented below (actual amounts):
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------- --------------------------- ---------------------------
NUMBER OF WEIGHTED NUMBER OF WEIGHTED NUMBER OF WEIGHTED
SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE
UNDERLYING EXERCISE UNDERLYING EXERCISE UNDERLYING EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of the year .... 7,590,473 $ 18.23 4,309,696 $ 13.72 3,607,403 $ 7.14
Granted ................................. 1,521,550 21.00 3,776,618 22.49 1,804,500 23.15
Exercised ............................... (868,290) 8.16 (348,880) 7.95 (858,213) 6.28
Forfeited ............................... (190,980) 23.79 (146,961) 22.10 (243,994) 11.97
------------ ------------ ------------ ------------ ------------ ------------
Outstanding at end of year .............. 8,052,753 $ 19.72 7,590,473 $ 18.23 4,309,696 $ 13.72
============ ============ ============ ============ ============ ============
Exercisable at end of year .............. 3,626,374 $ 16.95 2,430,715 $ 10.58 1,496,289 $ 6.52
============ ============ ============ ============ ============ ============
</TABLE>
The following table summarizes information about stock options
outstanding at December 31, 1999 (actual amounts):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------- ------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF EXERCISE NUMBER REMAINING AVERAGE NUMBER AVERAGE
PRICES OUTSTANDING LIFE (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ---------------------- --------------- ---------------- --------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 1.72 to $ 5.00 56,500 2.50 $ 3.77 56,500 $ 3.77
$ 5.19 to $14.00 1,488,020 5.50 8.28 1,413,020 8.05
$ 14.25 to $28.31 6,470,733 8.47 22.41 2,119,354 22.95
$ 32.50 37,500 8.30 32.50 37,500 32.50
- ---------------------- --------------- --------------- ------------ ----------- ------------
$ 1.72 to $32.50 8,052,753 7.88 $ 19.72 3,626,374 $ 16.95
=============== ============ ============ =========== ============
</TABLE>
Additional disclosures required by SFAS 123 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1999 1998 1997
------------- ----------- -----------
<S> <C> <C> <C>
Weighted average fair value per option granted........................... $ 9.24 $ 12.01 $ 10.58
Valuation assumptions:
Expected option term (years)........................................... 5 5 5
Expected volatility.................................................... 41.45% 38.06% 41.27%
Expected dividend yield................................................ 0% 0% 0%
Risk-free interest rate................................................ 4.65% 5.16% 6.20%
</TABLE>
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
40
<PAGE> 43
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table reflects pro forma net income and earnings per
share had we elected to adopt the fair value approach of SFAS 123:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Pro forma effects:
Net income ............... $ 73,502 $ 152,113 $ 253,077
Earnings per share
Basic .................. $ 0.56 $ 1.16 $ 1.92
Diluted ................ $ 0.55 $ 1.15 $ 1.90
</TABLE>
OTHER STOCK BASED COMPENSATION
In July 1996, a subsidiary of Noble Drilling granted SAR's covering
309,500 shares of Noble Drilling common stock. The SAR's, which are payable
solely in cash, have a five year term, an exercise price of fair market value on
the date of grant and vested fully in July 1997. In January 1998, we entered
into a Deed of Trust with Guiness Flight Trustees SARL to act as trustee of the
Company's Share Appreciation Rights Trust (the "Trust"). The Trust was
established to fund our obligation to pay the employees upon the exercise of
their SAR's. Pursuant to the Trust, 248,000 shares of our common stock,
representing the number of SAR's outstanding, were transferred to the Trust in
January 1998. We recognized no compensation expense for the years ended December
31, 1999 and 1998 and $3,500,000 for the year ended December 31, 1997 related to
SAR's.
In July 1996, we awarded selected employees 58,863 shares of restricted
(i.e., nonvested) common stock pursuant to the 1991 Plan. One-half of these
shares vested on each of the first and second anniversaries of the award date.
In January 1998, we awarded selected employees 22,000 shares of restricted stock
that vest 20 percent per year over a five year period commencing on the first
anniversary date of the award. In January 1999, we awarded one employee 15,000
shares of restricted stock that vest one-third per year over a three-year period
commencing on the first anniversary date of the award. In February 1999 and
October 1999, we awarded selected employees 190,000 shares and 230,000 shares,
respectively, of restricted stock that vest 20 percent per year over a five-year
period commencing on the first anniversary date of the award.
Additionally, we have awarded performance restricted shares pursuant to
the 1991 Plan. In general, the performance restricted shares have a three-year
performance period from the date of award. The actual number of shares awarded
and available for vesting may vary depending on the degree of achievement of
certain specified corporate performance criteria over the three-year performance
period. The number of shares awarded as so determined then vests (subject only
to future employment) at the rate of one-third thereof each year, on each
succeeding March 31. Nonvested shares will be forfeited.
A summary of the restricted share and performance restricted share
awards and the amounts recognized as compensation expense for the years ended
December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Restricted shares:
Shares awarded ........................ 435,000 22,000 --
Average share price at award date ..... $ 17.35 $ 28.25 --
Performance restricted shares:
Shares awarded ........................ -- -- 90,500
Share price at award date ............. -- -- $ 21.00
Compensation expense recognized ......... $ 2,309 $ 835 $ 3,536
</TABLE>
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
41
<PAGE> 44
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 -- INCOME TAXES
The components of and changes in the net deferred taxes were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
Domestic:
Net operating loss carryforwards ........................................... $ 51,890 $ --
International:
Net operating loss carryforwards ........................................... 10,697 3,130
Tax basis of assets in excess of book basis ................................ -- 964
----------- -----------
Deferred tax assets ............................................................ $ 62,587 $ 4,094
=========== ===========
Deferred tax liabilities:
Domestic:
Excess of net book basis over remaining tax basis .......................... $ (109,373) $ (45,596)
International:
Excess of net book basis over remaining tax basis .......................... (23,874) (14,471)
----------- -----------
Deferred tax liabilities ....................................................... $ (133,247) $ (60,067)
=========== ===========
</TABLE>
Income before income taxes and extraordinary items consisted of the
following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Domestic ....................................................................... $ 20,250 $ 106,552 $ 265,122
International .................................................................. 105,236 124,367 114,491
----------- ----------- -----------
Total .......................................................................... $ 125,486 $ 230,919 $ 379,613
=========== =========== ===========
</TABLE>
The income tax provision consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Current - domestic ............................................................. $ (4,894) $ 49,506 $ 50,153
Current - international ........................................................ 13,970 20,509 16,757
Deferred - domestic ............................................................ 18,448 (10,331) 50,780
Deferred - international ....................................................... 2,660 9,203 (1,959)
----------- ----------- -----------
Total .......................................................................... $ 30,184 $ 68,887 $ 115,731
=========== =========== ===========
</TABLE>
A reconciliation of Federal statutory and effective income tax rates is
shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Statutory rate ................................................................. 35.0% 35.0% 35.0%
Effect of:
International tax rates which are different than the U.S. rate ............... (12.3) (7.2) (6.2)
Other ........................................................................ 1.4 2.0 1.7
----------- ----------- -----------
Total .......................................................................... 24.1% 29.8% 30.5%
=========== =========== ===========
</TABLE>
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
42
<PAGE> 45
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We had available at December 31, 1996, unused investment tax credits of
$669,000, which were used to offset 1997 U.S. taxes payable. In addition, we had
net operating loss carryforwards ("NOL's") for tax purposes of approximately
$94,253,000 at December 31, 1996, which were fully utilized in 1997.
During 1999, we generated NOL's of $148,000,000 and $85,000,000 for
U.S. Regular and Alternative Minimum Tax (AMT) purposes, respectively. We can
carry these losses back two years and forward 20 years. We also have NOL's of
$25,000,000 and $5,600,000 in Mexico and Qatar, respectively, which begin to
expire in 2001. We believe that it is more likely than not that the deferred tax
assets attributable to the NOL's will be realized. Therefore, there is no
valuation allowance offsetting these assets.
If a corporation undergoes an "ownership change" within the meaning of
Section 382 of the Internal Revenue Code, the corporation's rights to use its
then existing NOL's (and certain other tax attributes) is limited during each
future year to a percentage of the fair market value of such corporation's stock
immediately prior to the ownership change (the "Section 382 limitation"). In
general, there is an "ownership change" under Section 382 if over a three-year
period certain shareholders increase their percentage ownership of a corporation
by more than 50 percent. To the extent the amount of the NOL's existing at the
time of the ownership change that are used in any subsequent year is less than
the annual Section 382 limitation, the otherwise available Section 382
limitation is correspondingly increased for future years. As of December 31,
1999, Noble Drilling does not believe it has undergone an "ownership change" for
purposes of these rules.
Applicable U.S. income and foreign withholding taxes have not been
provided on undistributed earnings of our international subsidiaries. Management
does not intend to repatriate such undistributed earnings for the foreseeable
future except for distributions upon which incremental income taxes would not be
material. At December 31, 1999, the estimated deferred tax liability associated
with the undistributed earnings of our international subsidiaries is
approximately $40,000,000.
NOTE 12 -- EMPLOYEE BENEFIT PLANS
We have a noncontributory defined benefit plan which covers
substantially all salaried employees and a noncontributory defined benefit
pension plan which covers certain field employees. The benefits from these plans
are based primarily on years of service and, for the salaried plan, employees'
compensation near retirement. Our funding policy is consistent with funding
requirements of applicable laws and regulations. The assets of these plans
consist of corporate equity securities, municipal and government bonds, and cash
equivalents. We make cash contributions to the domestic plans when required. As
of September 30, 1999, the domestic plan assets included $2,476,000 of Noble
Drilling common stock valued at fair value at that date.
Each of Noble Drilling (U.K.) Limited, Noble Enterprises Limited and
Noble Drilling (Nederland) B.V., indirect, wholly owned subsidiaries of Noble
Drilling, maintains pension plans which cover all of their salaried, nonunion
employees. Benefits are based on credited service and the average of the highest
three years of qualified salary within the past ten years of participation.
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
43
<PAGE> 46
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pension cost includes the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
1999 1998 1997
----------------------------- ----------------------------- -----------------------------
INTERNATIONAL DOMESTIC INTERNATIONAL DOMESTIC INTERNATIONAL DOMESTIC
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Service cost ................... $ 3,754 $ 2,452 $ 2,793 $ 1,965 $ 2,498 $ 1,520
Interest cost .................. 1,459 2,384 1,233 2,334 1,030 2,094
Return on plan assets .......... (1,373) (3,281) (1,587) (3,429) (1,264) (2,436)
Amortization of prior service
cost ......................... -- 162 -- 65 -- (10)
Amortization of transition
obligation (asset) ........... 327 (141) 151 (456) 93 (456)
Recognized net actuarial
loss ......................... 1 88 105 -- 6 183
------------- ------------- ------------- ------------- ------------- -------------
Net pension expense ............ $ 4,168 $ 1,664 $ 2,695 $ 479 $ 2,363 $ 895
============= ============= ============= ============= ============= =============
</TABLE>
The funded status of the plans is as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------------------
1999 1998
----------------------------- -----------------------------
INTERNATIONAL DOMESTIC INTERNATIONAL DOMESTIC
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Funded status ................................ $ (2,598) $ (17) $ (7,062) $ (222)
Unrecognized net (loss) gain ................. (1,248) (2,663) 4,798 2,821
Unrecognized prior service cost .............. -- 1,580 -- 1,914
Unrecognized transition obligation (asset) ... 1,983 -- 2,256 (142)
------------- ------------- ------------- -------------
Net amount recognized ........................ $ (1,863) $ (1,100) $ (8) $ 4,371
============= ============= ============= =============
</TABLE>
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
44
<PAGE> 47
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amounts recognized in the Consolidated Balance Sheets consist of:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------------------
1999 1998
----------------------------- -----------------------------
INTERNATIONAL DOMESTIC INTERNATIONAL DOMESTIC
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Prepaid benefit cost ........................................ $ -- $ -- $ 353 $ 4,353
Accrued benefit liability ................................... (2,038) (2,377) (3,039) (2,846)
Intangible asset ............................................ 175 1,115 1,279 2,001
Accumulated other comprehensive income ...................... -- 162 1,399 863
------------- ------------- ------------- -------------
Net amount recognized ....................................... $ (1,863) $ (1,100) $ (8) $ 4,371
============= ============= ============= =============
</TABLE>
A reconciliation of the changes in projected benefit obligations is as
follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------------------
1999 1998
----------------------------- -----------------------------
INTERNATIONAL DOMESTIC INTERNATIONAL DOMESTIC
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Benefit obligation at beginning of year ..................... $ 28,424 $ 37,514 $ 18,729 $ 31,010
Service cost ................................................ 3,754 2,452 2,793 1,965
Interest cost ............................................... 1,459 2,384 1,233 2,334
Actuarial (losses) gains .................................... (4,873) (146) 5,571 2,652
Benefits paid ............................................... (1,093) (8,184) (398) (1,625)
Contributions ............................................... 670 -- 496 --
Other ....................................................... -- -- -- 1,178
------------- ------------- ------------- -------------
Benefit obligation at end of year ........................... $ 28,341 $ 34,020 $ 28,424 $ 37,514
============= ============= ============= =============
</TABLE>
A reconciliation of the changes in fair value of plan assets is as
follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------------------
1999 1998
----------------------------- -----------------------------
INTERNATIONAL DOMESTIC INTERNATIONAL DOMESTIC
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Fair value of plan assets at beginning of year .............. $ 21,362 $ 37,292 $ 17,956 $ 38,382
Actual return on plan assets ................................ 2,692 4,895 (20) 109
Employer contribution ....................................... 2,254 -- 3,451 426
Plan participants' contribution ............................. 670 -- 496 --
Benefits and expenses paid .................................. (1,235) (8,184) (521) (1,625)
------------- ------------- ------------- -------------
Fair value of plan assets at end of year .................... $ 25,743 $ 34,003 $ 21,362 $ 37,292
============= ============= ============= =============
</TABLE>
The projected benefit obligations for the international and domestic
plans were determined using an assumed discount rate of 6.0 percent and 7.25
percent, respectively, in 1999, 5.25 percent and 6.50 percent, respectively, in
1998 and 6.75 percent and 7.25 percent, respectively, in 1997. Assumed long-term
rate of return on international plan assets was 6.75 percent, 6.0 percent and
7.5 percent for 1999, 1998 and 1997, respectively. Assumed long-term rate of
return on domestic plan assets was 9.0 percent in each of the years presented.
The projected benefit obligations for the international plan assume a
compensation increase of 3.75 percent, 3.0 percent and 4.5 percent for 1999,
1998 and 1997, respectively, and 6.0 percent per annum for the domestic plan in
each of the years ended December 31, 1999, 1998 and 1997.
As part of a restructuring, we implemented an early retirement
incentive program effective December 1, 1999. The charge related to this program
was calculated based on Statement of Financial Accounting Standards No. 88
("SFAS 88"). The total net charge under SFAS 88 was $4,004,000, which includes
settlement, curtailment and special termination benefit recognition. (See
Note 1.)
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
45
<PAGE> 48
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We presently sponsor a 401(k) savings plan, medical and other plans for
the benefit of our employees. The cost of maintaining these plans aggregated
$12,251,000, $12,200,000 and $12,556,000 in 1999, 1998 and 1997, respectively.
We do not provide post-retirement benefits (other than pensions) or any
post-employment benefits to our employees.
NOTE 13 -- COMMITMENTS, CONTINGENCIES AND OBLIGATIONS
We are a defendant in certain claims and litigation arising out of
operations in the normal course of business. In the opinion of management,
uninsured losses, if any, will not be material to our financial position,
results of operations or cash flows.
At December 31, 1999, we had certain noncancellable, long-term
operating leases, principally for office space and facilities, with various
expiration dates. Future minimum rentals under these leases aggregate $1,379,000
for 2000, $1,525,000 for 2001, $1,452,000 for 2002, $1,425,000 for 2003 and
$12,182,000 thereafter. Rental expense for all operating leases was $2,671,000,
$2,729,000 and $5,583,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
NOTE 14 -- UNAUDITED INTERIM FINANCIAL DATA
Unaudited interim financial information for the years ended December
31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------
1999 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operating revenues ...................... $ 180,120 $ 175,471 $ 176,825 $ 173,487
Operating income (1) .................... $ 38,931 $ 41,987 $ 41,200 $ 27,843
Income before extraordinary charge ...... $ 26,339 $ 27,285 $ 25,170 $ 16,508
Extraordinary charge, net of tax (2) .... $ (10,833) -- -- --
Net income .............................. $ 15,506 $ 27,285 $ 25,170 $ 16,508
Net income per share: (2)
Basic ................................. $ 0.12 $ 0.21 $ 0.19 $ 0.12
Diluted ............................... $ 0.12 $ 0.21 $ 0.19 $ 0.12
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------
1998 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operating revenues ...................... $ 189,036 $ 216,228 $ 195,049 $ 187,928
Operating income ........................ $ 66,315 $ 70,305 $ 48,401 $ 44,750
Net income .............................. $ 46,229 $ 50,404 $ 32,616 $ 32,783
Net income per share:
Basic ................................. $ 0.35 $ 0.38 $ 0.25 $ 0.25
Diluted ............................... $ 0.35 $ 0.38 $ 0.25 $ 0.25
</TABLE>
(1) Included in the quarter ended December 31, 1999 is a non-recurring
restructuring charge of $7,479,000, or $4,861,000 net of tax, related to
early retirement packages accepted by a number of employees and the
relocation of our Gulf Coast Marine division office in Lafayette, Louisiana
to our centralized Houston office.
(2) Included in the quarter ended March 31, 1999 is an extraordinary charge of
$10,833,000 ($0.08 per basic and diluted share), related to the purchase
and retirement of $125,000,000 principal amount of the 9 1/8% Notes.
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
46
<PAGE> 49
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 -- SEGMENT AND RELATED INFORMATION
We adopted SFAS No. 131, Disclosures About Segments of an Enterprise
and Related Information, in 1998 which changes the way we report information
about our operating segments.
We provide diversified services for the oil and gas industry. Our
reportable segments consist of the primary services we provide. These services
include offshore contract drilling, turnkey drilling and labor contract
services. Although each of these services is generally influenced by the same
economic factors, they each represent a distinct service to the oil and gas
industry. Offshore contract drilling services is then separated into
international and domestic contract drilling segments since there are certain
economic and political risks associated with each of these geographic markets
and our management makes decisions based on these markets accordingly.
Our international contract drilling segment conducts contract drilling
services in the North Sea, Africa, Brazil, Venezuela, the Middle East, India and
Mexico, whereas domestic contract drilling is conducted in the U.S. Gulf of
Mexico. Our turnkey drilling operations consist of the coordination of all
equipment, materials, services and management to drill a well to a specified
depth for a fixed price. We conduct our turnkey drilling operations primarily in
the U.S. Gulf of Mexico. Under our labor contracts, we provide the personnel
necessary to manage and perform drilling operations from drilling platforms
owned by the operator. We conduct our labor contract drilling services in the
U.K. North Sea and off the east coast of Canada.
The accounting policies of the reportable segments are the same as
those described in the summary of significant accounting policies (see Note 1).
All intersegment sales pricing is based on current market conditions. We
evaluate the performance of our operating segments based on operating revenues
and earnings. Summarized financial information of our reportable segments for
the years ended December 31, 1999, 1998 and 1997 is shown in the following table
in thousands. The "Other" column includes results of insignificant operations
and corporate related items.
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
47
<PAGE> 50
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INTERNATIONAL DOMESTIC
CONTRACT CONTRACT LABOR TURNKEY
DRILLING DRILLING CONTRACT DRILLING
SERVICES SERVICES SERVICES SERVICES OTHER TOTAL
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1999:
Revenues from external customers .. $ 436,579 $ 151,286 $ 39,720 $ 79,223 $ (905) $ 705,903
Intersegment revenues ............. -- 1,522 -- -- -- 1,522
Depreciation and amortization ..... 57,700 28,054 1,723 54 1,450 88,981
Interest expense .................. 17,991 15,297 102 -- (240) 33,150
Equity in loss of
unconsolidated subsidiaries ... -- (690) -- -- -- (690)
Segment profit (loss) ............. 90,424 13,449 4,190 (772) (12,016) 95,275
Total assets ...................... 1,118,058 1,123,336 27,368 8,639 154,923 2,432,324
Capital expenditures .............. 63,487 356,459 245 -- 1,488 421,679
1998:
Revenues from external customers .. $ 483,086 $ 122,027 $ 70,242 $ 113,171 $ (285) $ 788,241
Intersegment revenues ............. -- 1,683 -- 391 -- 2,074
Depreciation and amortization ..... 53,905 13,144 1,843 171 2,628 71,691
Interest expense .................. 11,205 2,805 61 -- (8,890) 5,181
Equity in loss of
unconsolidated subsidiaries ... (2,752) -- -- -- -- (2,752)
Segment profit (loss) ............. 144,460 33,184 8,767 (11,676) (12,595) 162,140
Total assets ...................... 1,152,515 923,461 35,453 7,848 59,355 2,178,632
Capital expenditures .............. 87,171 444,349 28 -- 9,023 540,571
1997:
Revenues from external customers .. $ 349,256 $ 123,497 $ 55,902 $ 184,540 $ -- $ 713,195
Intersegment revenues ............. 10,826 13,253 -- -- -- 24,079
Depreciation and amortization ..... 57,835 9,763 1,194 927 4,326 74,045
Interest expense .................. 10,273 3,333 358 32 (1,102) 12,894
Equity in earnings of
unconsolidated subsidiaries ... 78 -- -- -- -- 78
Gain on sale of mat rigs .......... 2,177 109,177 -- -- 86,322 197,676
Segment profit (1) ................ 88,949 109,849 7,463 1,108 56,788 264,157
Total assets ...................... 947,086 420,598 33,531 39,170 65,426 1,505,811
Capital expenditures .............. 97,064 286,031 4,435 443 3,092 391,065
</TABLE>
(1) Segment profit for 1997 includes the effect of a gain on the sale of
mat-supported rigs. The gain, net of taxes, is included in International
Contract Drilling Services profit, Domestic Contract Drilling Services
profit and Other profit for $2,177,000, $70,965,000 and $55,347,000,
respectively.
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
48
<PAGE> 51
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table is a reconciliation of reportable segment profit or
loss to consolidated totals:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
PROFIT OR LOSS
Total profit for reportable segments................................. $ 95,275 $ 162,140 $ 264,157
Elimination of intersegment losses (profits)......................... 27 (108) (275)
Extraordinary charge, net of tax..................................... (10,833) -- (6,685)
----------- ----------- -----------
Total consolidated net income........................................ $ 84,469 $ 162,032 $ 257,197
=========== =========== ===========
</TABLE>
The following tables present revenues and identifiable assets by
country based on the location of the service provided:
<TABLE>
<CAPTION>
REVENUES IDENTIFIABLE ASSETS
---------------------------------- ----------------------------------
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------- ----------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
United States ...... $ 229,604 $ 206,838 $ 254,213 $1,155,771 $ 953,935 $ 519,079
Brazil ............. 89,991 29,261 33,312 418,865 325,176 146,613
Canada ............. 15,976 15,381 8,153 9,092 10,476 12,489
Denmark ............ 57,122 33,196 23,513 88,488 70,823 81,543
India .............. 21,916 22,150 14,413 102,024 96,716 85,037
Mexico ............. 27,467 96,967 44,373 47,560 100,041 78,849
Nigeria ............ 40,592 99,526 82,067 107,342 133,600 103,217
Norway ............. 29,723 31,389 -- 56,534 52,973 --
Qatar .............. 44,559 61,870 34,951 109,904 117,295 80,780
The Netherlands .... 81,445 45,608 57,179 100,778 158,966 198,298
United Kingdom ..... 43,637 108,964 71,120 62,201 75,998 70,613
Venezuela .......... 23,871 34,778 77,427 51,365 50,865 93,337
Zaire .............. -- 2,313 12,474 18 112 22,542
Other (1) .......... -- -- -- 122,382 31,656 13,414
---------- ---------- ---------- ---------- ---------- ----------
Total .. $ 705,903 $ 788,241 $ 713,195 $2,432,324 $2,178,632 $1,505,811
========== ========== ========== ========== ========== ==========
</TABLE>
(1) Other assets includes $86,678,000 of cash and cash equivalents at December
31, 1999.
(Unless otherwise indicated, dollar amounts in tables are in thousands,
except per share amounts)
49
<PAGE> 52
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections entitled "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" appearing in our proxy statement for
the annual meeting of stockholders to be held on April 27, 2000 (the "2000 Proxy
Statement"), set forth certain information with respect to the directors of
Noble Drilling and with respect to reporting under Section 16(a) of the
Securities Exchange Act of 1934, and are incorporated herein by reference.
Certain information with respect to the executive officers of Noble
Drilling is set forth under the caption "Executive Officers of the Registrant"
in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation" appearing in the 2000
Proxy Statement sets forth certain information with respect to the compensation
of our management, and, except for the report of the compensation committee of
the board of directors of Noble Drilling on executive compensation and the
information therein under "Performance Graph," is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The sections entitled "Security Ownership of Certain Beneficial Owners"
and "Security Ownership of Management" appearing in the 2000 Proxy Statement set
forth certain information with respect to the ownership of voting securities and
equity securities of Noble Drilling, and are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) A list of the financial statements filed as a part of this report
is set forth in Item 8 on page 22 and is incorporated herein by
reference.
(2) Financial Statement Schedules:
All schedules are omitted because they are either not applicable
or required information is shown in the financial statements or
notes thereto.
(3) Exhibits:
The information required by this Item 14(a)(3) is set forth in the
Index to Exhibits accompanying this Annual Report on Form 10-K and
is incorporated herein by reference.
(4) Financial Statements required by Form 11-K for the fiscal year
ended December 31, 1999, with respect to the Noble Drilling
Corporation 401(k) Savings Plan (formerly Noble Drilling
Corporation Thrift Plan) (to be filed by amendment).
(b) No reports on Form 8-K were filed by the Company during the quarter ended
December 31, 1999.
50
<PAGE> 53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 20, 2000
By: /s/ JAMES C. DAY
--------------------------------------------------
James C. Day, Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following individuals on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
- ---------------------------------------- ------------------------------------- --------------
<S> <C> <C>
/s/ JAMES C. DAY Chairman and Chief Executive Officer
- ---------------------------------------- and Director
James C. Day (Principal Executive Officer) March 20, 2000
/s/ ROBERT D. CAMPBELL President and Director March 20, 2000
- ----------------------------------------
Robert D. Campbell
/s/ MARK L. MEY Principal Financial Officer March 20, 2000
- ----------------------------------------
Mark L. Mey
/s/ STEVEN A. MANZ Principal Accounting Officer March 20, 2000
- ----------------------------------------
Steven A. Manz
/s/ MICHAEL A. CAWLEY Director March 20, 2000
- ----------------------------------------
Michael A. Cawley
/s/ LAWRENCE J. CHAZEN Director March 20, 2000
- ----------------------------------------
Lawrence J. Chazen
/s/ TOMMY C. CRAIGHEAD Director March 20, 2000
- ----------------------------------------
Tommy C. Craighead
/s/ WILLIAM J. DORE Director March 20, 2000
- ----------------------------------------
William J. Dore
/s/ JAMES L. FISHEL Director March 20, 2000
- ----------------------------------------
James L. Fishel
/s/ MARC E. LELAND Director March 20, 2000
- ----------------------------------------
Marc E. Leland
/s/ JACK E. LITTLE Director March 20, 2000
- ----------------------------------------
Jack E. Little
/s/ WILLIAM A. SEARS Director March 20, 2000
- ----------------------------------------
William A. Sears
</TABLE>
51
<PAGE> 54
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT
- ---------------- -----------------------------------------------------------
<S> <C>
2.1 Agreement of Sale and Purchase dated as of April 25, 1996
between the Registrant and Royal Nedlloyd N.V. and Neddrill
Holding B.V. (filed as Exhibit 2.1 to the Registrant's
Registration Statement on Form S-3 (No. 333-2927) and
incorporated herein by reference).
2.2 Asset Purchase Agreement dated November 15, 1996 by and
between the Registrant, Noble Properties, Inc. and Noble
Drilling (Canada) Ltd. and Nabors Industries, Inc. (filed as
Exhibit 2.1 to the Registrant's Form 8-K dated December 27,
1996 (date of event: December 13, 1996) and incorporated
herein by reference).
2.3 Agreement dated December 13, 1996 by and among the
Registrant, Noble Properties, Inc., Noble (Canada) Ltd.,
Noble Drilling (U.S.) Inc., and Noble Drilling Land Limited
and Nabors, Inc., Nabors Drilling USA, Inc. and Nabors
Drilling Limited (filed as Exhibit 2.2 to the Registrant's
Form 8-K dated December 27, 1996 (date of event: December
13, 1996) and incorporated herein by reference).
2.4 Asset Purchase Agreement dated as of February 19, 1997
between the Registrant, Noble Drilling (U.S.) Inc., Noble
Offshore Corporation, Noble Drilling (Mexico) Inc. and NN-1
Limited and Pride Petroleum Services, Inc. (filed as Exhibit
2.10 in the Registrant's Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by
reference).
2.5 Agreement dated April 10, 1997 by and between Noble Drilling
Corporation, Noble Drilling U.S.) Inc., Noble Offshore
Corporation, Noble Drilling (Mexico) Inc. and NN-1 Limited
Partnership, and Pride Petroleum Services, Inc. (filed as
Exhibit 2.2 to the Registrant's Form 8-K dated May 21, 1997
(date of event: May 7, 1997) and incorporated herein by
reference).
2.6 First Amendment to Asset Purchase Agreement dated as of May
7, 1997 by and between Noble Drilling Corporation, Noble
Drilling (U.S.) Inc., Noble Offshore Corporation, Noble
Drilling (Mexico) Inc., NN-1 Limited Partnership and Mexico
Drilling Partners Inc., and Pride Petroleum Services, Inc.,
Pride Offshore, Inc. and Forasol S.A. (filed as Exhibit 2.3
to the Registrant's Form 8-K dated May 21, 1997 (date of
event: May 7, 1997) and incorporated herein by reference).
3.1 Restated Certificate of Incorporation of the Registrant
dated August 29, 1985 (filed as Exhibit 3.7 to the
Registrant's Registration Statement on Form 10 (No. 0-13857)
and incorporated herein by reference).
3.2 Certificate of Amendment of Restated Certificate of
Incorporation of the Registrant dated May 5, 1987 (filed as
Exhibit 4.2 to the Registrant's Registration Statement on
Form S-3 (No. 33-67130) and incorporated herein by
reference).
3.3 Certificate of Amendment of Certificate of Incorporation of
the Registrant dated July 31, 1991 (filed as Exhibit 3.16 to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1991 and incorporated herein by
reference).
3.4 Certificate of Amendment of Certificate of Incorporation of
the Registrant dated September 15, 1994 (filed as Exhibit
3.1 to the Registrant's Quarterly Report on Form 10-Q for
the three-month period ended March 31, 1995 and incorporated
herein by reference).
3.5 Certificate of Designations of Series A Junior Participating
Preferred Stock, par value $1.00 per share, of the
Registrant dated as of June 29, 1995 (filed as Exhibit 3.2
to the Registrant's Quarterly Report on Form 10-Q for the
three-month period ended June 30, 1995 and incorporated
herein by reference).
</TABLE>
<PAGE> 55
<TABLE>
<S> <C>
3.6 Certificate of Amendment of Certificate of Designations of
Series A Junior Participating Preferred Stock of Registrant
dated September 5, 1997 (filed as Exhibit 3.6 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997 and incorporated herein by reference).
3.7 Composite copy of the Bylaws of the Registrant as currently
in effect (filed as Exhibit 3.7 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference).
4.1 Indenture dated as of March 1, 1999, between Noble Drilling
Corporation and Chase Bank of Texas, National Association,
as trustee (filed as Exhibit 4.1 to the Registrant's Form
8-K dated March 22, 1999 (date of event: March 1, 1999) and
incorporated herein by reference).
4.2 Supplemental Indenture dated as of March 16, 1999, between
Noble Drilling Corporation and Chase Bank of Texas, National
Association, as trustee (filed as Exhibit 4.2 to the
Registrant's Form 8-K dated March 22, 1999 (date of event:
March 1, 1999) and incorporated herein by reference).
4.3 Credit Agreement, dated as of August 14, 1997, among Noble
Drilling Corporation, the lending institutions listed from
time to time on Annex I thereto, Credit Lyonnais New York
Branch, as Documentation Agent and Christiania Bank Og
Kreditkasse ASA, New York Branch, as Arranger and
Administrative Agent (filed as Exhibit 4.4 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997 and incorporated herein by reference).
4.4 Rights Agreement dated as of June 28, 1995 between the
Registrant and Liberty Bank and Trust Company of Oklahoma
City, N.A. (filed as Exhibit 4 to the Registrant's Form 8-K
dated June 29, 1995 (date of event: June 28, 1995) and
incorporated herein by reference).
4.5 Amendment No. 1 to Rights Agreement, dated September 3,
1997, between Noble Drilling Corporation and Liberty Bank
and Trust Company of Oklahoma City, N.A. (filed as Exhibit
4.2 to the Registrant's Form 8-A/A (Amendment No. 1) dated
September 3, 1997 and incorporated herein by reference).
4.6 Summary of Rights to Purchase Preferred Shares, as amended
as of September 3, 1997 to conform with Amendment No. 1 to
Rights Agreement, dated September 3, 1997 (filed as Exhibit
4.3 to the Registrant's Form 8-K dated September 3, 1997
(date of event: September 3, 1997) and incorporated herein
by reference).
4.7 Note Purchase Agreement dated as of September 24, 1998, by
and among Noble Drilling (Paul Romano) Inc. and each of the
note purchasers thereunder. Each note purchaser has entered
into a separate Note Purchase Agreement, which agreements
are substantially identical in all material respects, except
for the principal amount of notes to be purchased. A
schedule identifying each of the note purchasers that
entered into a Note Purchase Agreement with Noble Drilling
(Paul Romano) Inc. and the principal amount of notes to be
purchased by each such note purchaser is included as
Schedule A to the Note Purchase Agreement (filed as Exhibit
4.1 to the Registrant's Quarterly Report on Form 10-Q for
the three-month period ended September 30, 1998 and
incorporated herein by reference).
4.8 Trust Indenture and Security Agreement dated as of November
24, 1998, between Noble Drilling (Paul Romano) Inc. and
Chase Bank of Texas, National Association, as Trustee (filed
as Exhibit 4.18 to the Registrant's Registration Statement
on Form S-3 (No. 333-72059) and incorporated herein by
reference).
</TABLE>
<PAGE> 56
<TABLE>
<S> <C>
4.9 First Naval Mortgage covering the Noble Paul Romano dated as
of November 24, 1998, made by Noble Drilling (Paul Romano)
Inc. in favor of Chase Bank of Texas, National Association,
as Indenture Trustee (filed as Exhibit 4.19 to the
Registrant's Registration Statement on Form S-3 (No.
333-72059) and incorporated herein by reference).
4.10 Note Purchase Agreement dated as of July 1, 1998, by and
among Noble Drilling (Paul Wolff) Ltd., Chase Bank of Texas,
National Association, as Trustee, and each of the note
purchasers thereunder. Each note purchaser has entered into
a separate Note Purchase Agreement, which agreements are
substantially identical in all material respects, except for
the principal amount of notes purchased. A schedule
identifying each of the note purchasers that entered into a
Note Purchase Agreement with Noble Drilling (Paul Wolff)
Ltd. and the principal amount of notes purchased by each
such note purchaser is included in Annex I to the Note
Purchase Agreement (filed as Exhibit 4.4 to the Registrant's
Quarterly Report on Form 10-Q for the three-month period
ended September 30, 1998 and incorporated herein by
reference).
4.11 Indenture of First Naval Mortgage, dated as of July 1, 1998,
made by Noble Drilling (Paul Wolff) Ltd. in favor of Chase
Bank of Texas, National Association, as Trustee (filed as
Exhibit 4.5 to the Registrant's Quarterly Report on Form
10-Q for the three-month period ended September 30, 1998 and
incorporated herein by reference).
4.12 Parent Guaranty, dated as of July 1, 1998, by Noble Drilling
Corporation in favor of Chase Bank of Texas, National
Association, as Trustee (filed as Exhibit 4.6 to the
Registrant's Quarterly Report on Form 10-Q for the
three-month period ended September 30, 1998 and incorporated
herein by reference).
4.13 Second Amendment, dated September 10, 1998, to Credit
Agreement, dated as of August 14, 1997, among Noble Drilling
Corporation, the lending institutions listed from time to
time on Annex I thereto, Credit Lyonnais, New York Branch,
as Documentation Agent, and Christiana Bank Og Kreditkasse
ASA, New York Branch, as Administrative Agent (filed as
Exhibit 4.7 to the Registrant's Quarterly Report on Form
10-Q for the three-month period ended September 30, 1998 and
incorporated herein by reference).
4.14 Note Purchase Agreement dated as of December 21, 1998, by
and among Noble Drilling (Jim Thompson) Inc., Chase Bank of
Texas, National Association, as Trustee, and each of the
note purchasers hereunder. Each note purchaser has entered
into a separate Note Purchase Agreement, which agreements
are substantially identical in all material respects, except
for the principal amount of notes purchased. A schedule
identifying each of the note purchasers that entered into a
Note Purchase Agreement with Noble Drilling (Jim Thompson)
Inc. and the principal amount of notes purchased by each
such note purchaser is included as Annex I to the Note
Purchase Agreement (filed as Exhibit 4.24 to the
Registrant's Registration Statement on Form S-3 (No.
333-72059) and incorporated herein by reference).
4.15 Indenture of First Naval Mortgage, dated as of December 21,
1998, made by Noble Drilling (Jim Thompson) Inc. in favor of
Chase Bank of Texas, National Association, as Trustee (filed
as Exhibit 4.25 to the Registrant's Registration Statement
on Form S-3 (No. 333-72059) and incorporated herein by
reference).
4.16 Parent Guaranty, dated as of December 21, 1998, by Noble
Drilling Corporation in favor of Chase Bank of Texas,
National Association, as Trustee (filed as Exhibit 4.26 to
the Registrant's Registration Statement on Form S-3 (No.
333-72059) and incorporated herein by reference).
4.17 Third Amendment, dated February 25, 1999, to Credit
Agreement, dated as of August 14, 1997, among Noble Drilling
Corporation, the lending institutions listed from time to
time on Annex I thereto, Credit Lyonnais, New York Branch,
as Documentation Agent, and Christiana Bank Og Kreditkasse
ASA, New York Branch, as Administrative Agent (filed as
Exhibit 4.18 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1998 and incorporated herein
by reference).
</TABLE>
<PAGE> 57
<TABLE>
<S> <C>
4.18 Fourth Consent, dated January 14, 2000, to Credit Agreement,
dated as of August 14, 1997, among Noble Drilling
Corporation, the lending institutions listed from time to
time on Annex I thereto, and Christiana Bank Og Kreditkasse
ASA, New York Branch, as Administrative Agent.
10.1 Assets Purchase Agreement dated as of August 20, 1993 (the
"Portal Assets Purchase Agreement"), between the Registrant
and Portal Rig Corporation (filed as Exhibit 2.3 to the
Registrant's Registration Statement on Form S-3 (No.
33-67130) and incorporated herein by reference).
10.2 Agreement dated as of October 25, 1993, among the
Registrant, Noble (Gulf of Mexico) Inc. and Portal Rig
Corporation, amending the Portal Assets Purchase Agreement
(filed as Exhibit 2.5 to the Registrant's Quarterly Report
on Form 10-Q for the three-month period ended September 30,
1993 and incorporated herein by reference).
10.3 Amended and Restated Letter of Credit Agreement, dated as of
October 25, 1993, among Portal Rig Corporation, Noble (Gulf
of Mexico) Inc., NationsBank of Texas, N.A., as agent and as
one of the "Banks" thereunder, and Marine Midland Bank,
N.A., Bank of America National Trust and Savings
Association, and Norwest Bank Minnesota, National
Association (collectively, the "Banks") (filed as Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for
the three-month period ended September 30, 1993 and
incorporated herein by reference).
10.4 Assignment, Assumption and Amended and Restated Preferred
Ship Mortgage, dated October 25, 1993, by Noble (Gulf of
Mexico) Inc. to the Banks (filed as Exhibit 10.2 to the
Registrant's Quarterly Report on Form 10-Q for the
three-month period ended September 30, 1993 and incorporated
herein by reference).
10.5 Security Agreement and Assignment, dated October 25, 1993,
by Noble (Gulf of Mexico) Inc. to the Banks (filed as
Exhibit 10.3 to the Registrant's Quarterly Report on Form
10-Q for the three-month period ended September 30, 1993 and
incorporated herein by reference).
10.6 Noble Support Agreement, dated October 25, 1993, among the
Registrant and the Banks (filed as Exhibit 10.4 to the
Registrant's Quarterly Report on Form 10-Q for the
three-month period ended September 30, 1993 and incorporated
herein by reference).
10.7* Noble Drilling Corporation 1991 Stock Option and Restricted
Stock Plan, as amended effective as of February 4, 1999
(filed as Exhibit 4.1 to the Registrant's Registration
Statement on Form S-8 (No. 333-80511) and incorporated
herein by reference).
10.8* Noble Drilling Corporation 1992 Nonqualified Stock Option
Plan for Non-Employee Directors (filed as Exhibit 4.1 to the
Registrant's Registration Statement on Form S-8 (No.
33-62394) and incorporated herein by reference).
10.9* Amendment No. 1 to the Noble Drilling Corporation 1992
Nonqualified Stock Option Plan for Non-Employee Directors
dated as of July 28, 1994 (filed as Exhibit 10.44 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference).
10.10* Noble Drilling Corporation Equity Compensation Plan for
Non-Employee Directors (filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the
three-month period ended September 30, 1996 and incorporated
herein by reference).
10.11* Noble Drilling Corporation Short-Term Incentive Plan
(revised April 1999) (filed as Exhibit 10 to the
Registrant's Quarterly Report on Form 10-Q for the
three-month period ended March 31, 1999 and incorporated
herein by reference).
10.12* Noble Drilling Corporation Amended and Restated Thrift
Restoration Plan (filed as Exhibit 10.46 to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1994 and incorporated herein by reference).
</TABLE>
<PAGE> 58
<TABLE>
<S> <C>
10.13* Amendment No. 1 to the Noble Drilling Corporation Amended
and Restated Thrift Restoration Plan dated January 29, 1998
(filed as Exhibit 10.18 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1997 and
incorporated herein by reference).
10.14* Noble Drilling Corporation Retirement Restoration Plan dated
April 27, 1995 (filed as Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-Q for the three-month period
ended March 31, 1995 and incorporated herein by reference).
10.15* Amendment No. 1 to the Noble Drilling Corporation Retirement
Restoration Plan dated January 29, 1998 (filed as Exhibit
10.18 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1997 and incorporated herein by
reference).
10.16* Form of Indemnity Agreement entered into between the
Registrant and each of the Registrant's directors and bylaw
officers (filed as Exhibit 10.46 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.17 Guarantee dated August 26, 1994 between the Registrant and
Hibernia Management and Development Company Ltd. (filed as
Exhibit 10.45 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994 and incorporated herein
by reference).
10.18* Employment Agreement, dated as of October 22, 1998, by and
between Noble Drilling Corporation and James C. Day (filed
as Exhibit 10.1 to the Registrant's Quarterly Report on Form
10-Q for the three-month period ended September 30, 1998 and
incorporated herein by reference).
10.19* Employment Agreement dated as of October 22, 1998, by and
between the Company and Julie J. Robertson (filed as Exhibit
10.3 to the Registrant's Quarterly Report on Form 10-Q for
the three-month period ended September 30, 1998 and
incorporated herein by reference).
10.20* Employment Agreement dated as of January 1, 1999 by and
between Noble Drilling Corporation and Robert D. Campbell
(filed as Exhibit 10.22 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference).
10.21* Amendment to the Noble Drilling Corporation 1991 Stock
Option and Restricted Stock Plan, dated October 28, 1999.
12.1 Statement re Computation of Ratio of Earnings to Fixed
Charges.
21.1 Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
27.1 Financial Data Schedule.
</TABLE>
- ----------------------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit hereto.
<PAGE> 1
EXHIBIT 4.18
FOURTH CONSENT
FOURTH CONSENT (this "Consent"), dated as of January 14, 2000, among
NOBLE DRILLING CORPORATION, a Delaware corporation (the "Borrower"), the lenders
from time to time party to the Credit Agreement referred to below (the "Banks")
and CHRISTIANIA BANK OG KREDITKASSE ASA, NEW YORK BRANCH, as Administrative
Agent (the "Agent"). All capitalized terms used herein and not otherwise defined
shall have the respective meanings provided such terms in the Credit Agreement
referred to below.
W I T N E S S E T H :
WHEREAS, the Borrower, the Banks and the Agent are parties to a Credit
Agreement, dated as of August 14, 1997, among the Borrower, various lending
institutions, Credit Lyonnais New York Branch, as Documentation Agent and the
Agent (the "Credit Agreement"); and
WHEREAS, the parties hereto wish to amend the Credit Agreement as
herein provided;
NOW, THEREFORE, it is agreed:
1. Notwithstanding anything to the contrary contained in Section
8.07(b) of the Credit Agreement, the Banks hereby consent to the transfer of
ownership of the Fleet Rigs "Noble Ed Holt" (Vessel No. 2389-95), "Noble Dick
Favor" (Vessel No. 21683-94) and "Noble Charles Copeland" (Vessel No. 21356-94A)
from the Borrower to a foreign Wholly-Owned Subsidiary of the Borrower to be
designated by the Borrower, and the Fleet Rig "Noble Fri Rodli" (Vessel No.
CG000082) from the Guarantor owning such Fleet Rig on the date hereof to a
foreign Wholly-Owned Subsidiary of the Borrower.
2. In order to induce the Banks to enter into this Consent, the
Borrower hereby represents and warrants that (i) the representations, warranties
and agreements contained in Section 6 of the Credit Agreement are true and
correct in all material respects on and as of the Fourth Consent Effective Date
(except with respect to any representations and warranties limited by their
terms to a specific date, which shall be true and correct in all material
respects as of such date) and (ii) there exists no Default or Event of Default
on the Fourth Consent Effective Date; in each case both before and after giving
effect to this Consent.
3. This Consent is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
4. This Consent may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which
counterparts when executed and
<PAGE> 2
delivered shall be an original, but all of which shall together constitute one
and the same instrument. A complete set of counterparts shall be lodged with the
Borrower and the Agent.
5. THIS CONSENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF
NEW YORK.
6. This Consent shall become effective on the date (the "Fourth Consent
Effective Date") when (i) the Borrower and the Required Banks shall have signed
a counterpart hereof (whether the same or different counterparts) and shall have
delivered (including by way of facsimile transmission) the same to the Agent at
its Notice Office and (ii) the Borrower shall have paid, to each Bank that has
executed and delivered a counterpart hereof on or before 5:00 p.m. (New York
time) on January 14, 2000, a consent fee (the "Consent Fee") equal to 0.075% of
such Bank's Commitment as in effect on the Fourth Consent Effective Date
immediately prior to giving effect to this Amendment.
7. From and after the Fourth Consent Effective Date, all references in
the Credit Agreement and each of the Credit Documents to the Credit Agreement
shall be deemed to be references to the Credit Agreement as amended hereby.
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Consent to be duly executed and delivered as of the date first above
written.
NOBLE DRILLING CORPORATION
By /s/ Robert D. Campbell
---------------------------------------------
Title: President
CHRISTIANIA BANK OG
KREDITKASSE ASA, NEW YORK
BRANCH, Individually, and as
Administrative Agent
By /s/ Hans Chr. Kjelsrud
---------------------------------------------
Title: Senior Vice President
By /s/ Peter M. Dodge
---------------------------------------------
Title: Senior Vice President
<PAGE> 3
CREDIT LYONNAIS NEW YORK
BRANCH, Individually and as
Documentation Agent
By /s/ Philippe Soustra
---------------------------------------------
Title: Senior Vice President
BANK OF TOKYO-MITSUBISHI, LTD.,
HOUSTON AGENCY
By /s/ Michael Meiss
---------------------------------------------
Title: VP & Manager
THE FUJI BANK LIMITED
By /s/ Nate Ellis
---------------------------------------------
Title: Senior Vice President & Manager
KBC BANK N.V.
By /s/ Robert Snauffer
---------------------------------------------
Title: First Vice President
By /s/ Patrick J. Owens
---------------------------------------------
Title: Vice President
MEESPIERSON CAPITAL
CORPORATION
By /s/ John T. Connors
---------------------------------------------
Title: President and Chief Operating Officer
By /s/ John C. Preneta
---------------------------------------------
Title: Executive Vice President
<PAGE> 4
ROYAL BANK OF CANADA
By /s/ Linda M. Stephens
---------------------------------------------
Title: Managing Director
WELLS FARGO BANK (TEXAS)
NATIONAL ASSOCIATION
By /s/ Bret C. West
---------------------------------------------
Title: Vice President
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By /s/ Felicia La Forgia
---------------------------------------------
Title: Vice President
By /s/ Thomas Lee
---------------------------------------------
Title: Associate
THE BANK OF NOVA SCOTIA
By /s/ F.C.B. Ashby
---------------------------------------------
Title: Senior Manager Loan Operations
SKANDINAVISKA ENSKILDA BANKEN
AB (Publ.)
By /s/ Bjarte Boe
---------------------------------------------
Title: Managing Director
<PAGE> 5
THE SANWA BANK, LIMITED
By /s/ Lawrence Murphy
---------------------------------------------
Title: Senior Vice President
DG BANK AG, New York Branch
By /s/ Mark K. Connelly
---------------------------------------------
Title: Vice President
By /s/ Lynne McCarthy
---------------------------------------------
Title: Vice President
BANK ONE, NA
By /s/ Karen Patterson
---------------------------------------------
Title: First Vice President
<PAGE> 1
EXHIBIT 10.21
AMENDMENT TO NOBLE DRILLING CORPORATION
1991 STOCK OPTION AND RESTRICTED STOCK PLAN
DATED OCTOBER 28, 1999
RESOLVED, that the Noble Drilling Corporation 1991 Stock Option and
Restricted Stock Plan, as amended and restated (the "Plan"), is hereby further
amended by amending the definition of "Retirement" set forth in paragraph (s) of
Section 2 of the Plan to read in its entirety as follows:
"(s) "Retirement" means a termination of employment with the
Company or an Affiliate either (i) on a voluntary basis by a person if,
immediately prior to such termination of employment, the sum of the age
of such person and the number of such person's years of continuous
service with the Company or one or more Affiliates is equal to or
greater than 60, or (ii) otherwise with the written consent of the
Committee in its sole discretion."
RESOLVED FURTHER, that the Chairman of the Board and Chief Executive
Officer, the President and any vice president, of the Corporation, and each of
them, are hereby authorized and directed to execute any and all such instruments
and documents as may be appropriate to put the Plan, as amended hereby, into
full force and effect with respect to the Corporation.
RESOLVED FURTHER, that the proper officers of the Corporation are
hereby authorized and directed to take or cause to be taken all such further
action and to execute and deliver all such further instruments and documents, in
the name and on behalf of the Corporation, as such officers in their sole and
absolute discretion shall deem necessary, advisable or appropriate in order to
carry out the intent, and accomplish the purposes, of the foregoing resolutions.
<PAGE> 1
EXHIBIT 12.1
NOBLE DRILLING CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ----------------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings:
Income before income taxes and
extraordinary charge....................(1) $125,486 $230,919 $379,613 $101,959 $ 4,866
Add:
Interest on indebtedness and
amortization of debt expense
and discount.......................... 33,150 5,181 12,894 18,758 12,156
Interest component of rent expense...... 1,282 1,314 2,128 1,668 731
Equity in losses of joint ventures...... 690 4,216 528 -- --
Minority interest....................... 1,224 -- 256 428 214
-------- -------- -------- -------- --------
Earnings as adjusted.............. $161,832 $241,630 $395,419 $122,813 $ 17,967
======== ======== ======== ======== ========
Fixed Charges:
Interest on indebtedness and
amortization of debt expense
and discount.......................... $ 33,150 $ 5,181 $ 12,894 $ 18,758 $ 12,156
Capitalized interest.................... 22,393 17,200 4,218 -- --
Interest component of rent expense...... 1,282 1,314 2,128 1,668 731
-------- -------- -------- -------- --------
Fixed charges .................... $ 56,825 $ 23,695 $ 19,240 $ 20,426 $ 12,887
======== ======== ======== ======== ========
Ratio of earnings to fixed charges......(2) 2.8 10.2 20.6 6.0 1.4
======== ======== ======== ======== ========
</TABLE>
(1) Included in the 1997 amount is a non-recurring gain of $197,676,000 related
to the sale of the Company's mat-supported jackup rigs.
(2) Excluding a non-recurring gain of $197,676,000 related to the sale of the
Company's mat-supported jackup rigs, the ratio of earnings to fixed charges
for 1997 was 10.3.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
The following table sets forth the subsidiaries of Noble Drilling
Corporation as of March 15, 2000 excluding certain subsidiaries that, if
considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary (as defined in Rule 1-02 (W) of Regulation S-X as of
December 31, 1999):
<TABLE>
<CAPTION>
SUBSIDIARY NAME INCORPORATED OR ORGANIZED IN:
- --------------- -----------------------------
<S> <C>
Noble Drilling Asset Holding Corporation (1) Delaware
Noble Drilling International Inc. (1) Delaware
Noble Drilling Services Inc. (1) Delaware
Noble Drilling (U.S.) Inc. (1) Delaware
Noble Engineering & Development Limited (1) Cayman Islands
Noble Properties, Inc. (1) Oklahoma
Triton Engineering Services Company (1) Delaware
Noble Drilling International (Cayman) Ltd. (2) Cayman Islands
Noble Drilling (Canada) Ltd. (2) Alberta
Mexico Drilling Partners Inc. (3) Nevada
Noble Drilling (Jim Thompson) Inc. (3) Delaware
Noble Drilling (Paul Romano) Inc. (3) Delaware
Noble (Gulf of Mexico) Inc. (3) Delaware
Noble Drilling Exploration Company (3) Delaware
Triton Engineering Services Company, S.A. (4) Venezuela
Triton International, Inc. (4) Delaware
Triton USA, Inc. (4) Delaware
International Directional Services Ltd. (5) Bermuda
Noble do Brasil S/C Ltda. (5) Brazil
Nedstaff Ltd. (5) Hong Kong
Noble Asset Company Limited (5) Cayman Islands
Noble Asset (U.K.) Limited (5) Cayman Islands
Noble Contracting GmbH (5) Switzerland
Noble Drilling (Nigeria) Ltd. (5) Nigeria
Noble Drilling (Paul Wolff) Ltd. (5) Cayman Islands
Noble Drilling (TVL) Ltd. (5) Cayman Islands
Noble Drilling (U.K.) Ltd. (5) U.K.
Noble Drilling (West Africa) Ltd. (5) Cayman Islands
Noble Enterprises Limited (5) Cayman Islands
Noble International Finance Company (5) Cayman Islands
Noble International Limited (5) Cayman Islands
Noble Mexico Limited (5) Cayman Islands
Noble-Neddrill International Limited (5) Cayman Islands
Noble Drilling (N.S.) Limited (5) U.K.
Noble Drilling (Denmark) ApS (5) Denmark
372733 Alberta Inc. (6) Alberta
Bawden Drilling Inc. (6) Delaware
Bawden Drilling International Ltd. (6) Bermuda
Noble International Services Ltd. (6) Bermuda
Triton Drilling (Nigeria) Ltd. (7) Nigeria
Triton International (Europe) Ltd. (7) U.K.
Triton International de Mexico, S.A. de C.V. (7) Mexico
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
TSIA International (Antilles) N.V. (8) Antilles
Arktik Drilling Limited, Inc. (9) Bahamas
Nedstaff Europe Limited (10) U.K.
Noble Drilling (Land Support) Limited (10) U.K.
Noble Drilling International Ltd. (11) Bermuda
Noble Drilling International Services Pte. Ltd. (11) Singapore
Noble Drilling (Malaysia) Sdn. Bhd. (11) Malaysia
Noble Drilling Arabia Limited (12) Saudi Arabia
Nobile Drilling de Venezuela C.A. (12) Venezuela
Noble Offshore de Venezuela C.A. (12) Venezuela
Resolute Insurance Group Ltd. (13) Bermuda
Ilion, LLC (14) Delaware
Noble Drilling (Nederland) B.V. (15) The Netherlands
Noble Kvaerner Drilling Limited (16) Bahamas
Noble Rochford Drilling Ltd. (17) Cayman Islands
(1) 100% owned by Noble Drilling Corporation
(2) 100% owned by Noble Drilling International Inc.
(3) 100% owned by Noble Drilling (U.S.) Inc.
(4) 100% owned by Triton Engineering Services Company
(5) 100% owned by Noble Drilling International (Cayman) Ltd.
(6) 100% owned by Noble Drilling (Canada) Ltd.
(7) 100% owned by Triton International, Inc.
(8) 100% owned by Noble Asset Company Limited
(9) Joint venture (owned 82% by Noble Asset Company Limited)
(10) 100% owned by Noble Drilling (U.K.) Ltd.
(11) 100% owned by Noble Enterprises Limited (70% in the case of Noble Drilling (Malaysia) Sdn. Bhd.)
(12) 100% owned by Noble International Limited
(13) 100% owned by Bawden Drilling International Ltd.
(14) Joint Venture (owned 50% by Noble Drilling (U.S.) Inc.)
(15) 100% owned by Noble Drilling (Denmark) ApS
(16) 100% owned by Noble Drilling (Nederland) B.V.
(17) Joint Venture (owned 50% by Noble Asset Company Limited)
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-3289), Form S-8 (No. 33-15269), Form S-8 (No.
33-18966), Form S-8 (No. 33-46724), Form S-8 (No. 33-50270), Form S-8 (No.
33-50272), Form S-8 (No. 33-62394), Form S-8 (No. 33-57675), Form S-8 (No.
333-17407), Form S-8 (No. 333-25857) and Form S-8 (No. 333-80511) of Noble
Drilling Corporation of our report dated February 3, 2000 relating to the
consolidated financial statements, which appears in this Form 10-K.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
March 20, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 132,827
<SECURITIES> 0
<RECEIVABLES> 117,273
<ALLOWANCES> 414
<INVENTORY> 4,298
<CURRENT-ASSETS> 290,625
<PP&E> 2,445,428
<DEPRECIATION> 395,659
<TOTAL-ASSETS> 2,432,324
<CURRENT-LIABILITIES> 233,336
<BONDS> 730,893
0
0
<COMMON> 13,472
<OTHER-SE> 1,384,570
<TOTAL-LIABILITY-AND-EQUITY> 2,432,324
<SALES> 0
<TOTAL-REVENUES> 705,903
<CGS> 0
<TOTAL-COSTS> 424,942
<OTHER-EXPENSES> 131,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,150
<INCOME-PRETAX> 125,486
<INCOME-TAX> 30,184
<INCOME-CONTINUING> 95,302
<DISCONTINUED> 0
<EXTRAORDINARY> (10,833)
<CHANGES> 0
<NET-INCOME> 84,469
<EPS-BASIC> 0.64
<EPS-DILUTED> 0.64
</TABLE>
