<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995 COMMISSION FILE NO.: 1-9245
NABORS INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 93-0711613
(JURISDICTION OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
515 WEST GREENS ROAD, SUITE 1200
HOUSTON, TEXAS 77067
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(713) 874-0035
(REGISTRANT'S TELEPHONE NUMBER, INCLUDE AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:
NAME OF EACH
TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED
COMMON STOCK, $.10 PAR VALUE, PER SHARE AMERICAN STOCK EXCHANGE, INC.
INDICATE BY CHECK MARK WHETHER 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, AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
----- -----
INDICATE 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.
[ X ]
THE AGGREGATE MARKET VALUE ON NOVEMBER 30, 1995 OF VOTING STOCK HELD
BY NON-AFFILIATES OF THE REGISTRANT WAS APPROXIMATELY $669 MILLION.
THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF NOVEMBER 30,
1995 WAS 84,336,440.
DOCUMENTS INCORPORATED BY REFERENCE
(TO THE EXTENT INDICATED HEREIN)
SPECIFIED PORTIONS OF THE 1995 ANNUAL REPORT TO
STOCKHOLDERS (PARTS I AND II) SPECIFIED PORTIONS OF THE NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT (PART III)
1
<PAGE> 2
PART I
ITEM 1. BUSINESS
OVERVIEW
Nabors Industries, Inc. (collectively with its subsidiaries, "Nabors" or the
"Company") is the largest land drilling contractor in the world. The Company,
which was incorporated in Delaware in 1978, has principally been engaged in
oil, gas and geothermal land drilling operations in Alaska, the US Lower 48
states and Canada, and internationally in the Middle East, the Far East, the
CIS, North and West Africa and South and Central America. Nabors also provides
offshore drilling services in the UK North Sea, the Gulf of Mexico, Alaska's
Cook Inlet, and the Middle East, as well as drilling and workover barge rigs on
the US Gulf Coast. A Nabors subsidiary, Sundowner Offshore Services, Inc.
("Sundowner") provides offshore well servicing and workover services in the
Gulf of Mexico and several international markets. The Company also provides
oilfield management, engineering, transportation, construction, maintenance and
other support services in selected domestic and international markets. The
Company's Canrig subsidiary manufacturers top drives for a broad range of
drilling rig applications.
BUSINESS STRATEGY
Since the current management group began directing the Company in 1987, the
Company's primary business strategy has been to develop a group of profitable,
synergistic and growth oriented business units in geographically diversified
areas, where the Company can achieve profitability through critical mass and a
sustainable competitive advantage. This strategy has been implemented through
strategic acquisitions and internal growth in existing and new markets. The
primary business strategy has also been advanced by entering into strategic
alliances with customers and by providing integrated drilling and engineering
services responsive to customer needs.
EXPANSION BY ACQUISITIONS
Since 1988, through acquisition of other drilling companies, asset purchases
and internal expansion, the Company has grown from a business centered
principally in Canada and Alaska, to an international company operating in many
of the major oil, gas and geothermal markets in the world. In 1988, Nabors rig
fleet consisted of 44 land drilling rigs. In 1995, following the acquisition
of Delta Drilling, the active Nabors-owned rig fleet consists of 265 land
drilling rigs and 32 offshore rigs. The significant acquisitions by the
Company are described below.
In November 1988, the Company acquired the Westburne Group of Companies, an
international drilling contractor with land drilling operations in the Middle
East, as well as in North Africa, Southeast Asia, the Far East, Australia and
Canada. Westburne also operated platform drilling rigs in the UK North Sea.
The acquisition of Westburne and its 24 land drilling rigs and two North Sea
labor contracts, provided the Company with its initial entry into drilling
markets outside North America.
In March 1990, the Company acquired Loffland Brothers Company ("Loffland").
Loffland had been a leader in the domestic and international drilling industry
for over 80 years. This acquisition added 63 rigs, significantly expanded the
Company's presence in the North Sea, Middle East and Canada and added major new
markets, including the US Lower 48 states, Venezuela and the Gulf of Mexico.
In November 1990, the Company acquired Henley Drilling Company ("Henley"), a
subsidiary of Hunt Oil Company. Henley owned and operated 11 rigs in Texas,
Louisiana and the Republic of Yemen.
2
<PAGE> 3
In June 1993, the Company acquired substantially all of the assets of Grace
Drilling Company ("Grace") which was the largest land driller in the United
States. In this acquisition, the Company acquired 167 drilling rigs located in
virtually every significant domestic land drilling market. This acquisition
significantly expanded the capabilities of the Company in the US Lower 48
states and Alaska markets and has provided a supply of component parts to
reduce capital expenditure costs.
Also in 1993, the Company acquired the assets of Alaska United Drilling which
operated in Alaska. The addition of the Alaska United rigs plus the addition
of three former Grace rigs operating in the Cook Inlet area of South Central
Alaska further strengthened the Company's operations in the Alaskan market.
In April 1994, the Company acquired 16 drilling rigs from MND Drilling, a
subsidiary of Mitchell Energy.
In October 1994, the Company acquired Sundowner Offshore Services, Inc.
("Sundowner"), a leader in the offshore well servicing and workover markets.
The Sundowner fleet includes 15 platform rigs plus one rig under construction,
five jackup workover rigs and three workover and plug and abandonment barge
rigs. An additional platform rig is under construction and is scheduled for
deployment in the fiscal second quarter. The addition of Sundowner will allow
the Company to expand into what the Company believes will be significant
markets in the coming years.
Throughout 1994, the Company acquired eight additional mobile, medium depth
rigs from various other sources.
In January 1995, the Company acquired all of the stock of Delta Drilling
Company ("Delta"). In acquiring Delta, which operated primarily in Texas and
Louisiana, Nabors added 29 land drilling rigs to its fleet.
ALLIANCES, INTEGRATED DRILLING SERVICES AND ENGINEERING.
An increasing number of customers have been seeking to benefit from exploration
and development drilling programs by establishing continuing relationships or
alliances with a smaller number of preferred drilling contractors. These
alliances can result in long term work and increased profitability for drilling
contractors that are selected as partners in the alliance. The Company has
been selected by operators as alliance partners in Alaska, the US Lower 48
states, Canada, the UK North Sea and West Africa. The Company will continue to
pursue opportunities for alliances with customers in all of the markets in
which it operates.
The Company's ability to provide additional drilling-related services and
management of drill site activities for its customers is also a factor in the
Company's growth. As major oil and gas companies reduce the number of service
contractors at a drill site, they have been requesting that the contractors
provide additional drilling-related services and management that had previously
been provided by the customers themselves, or by other contractors.
Contractors that have been able to adapt to this expanded role have the
potential to achieve enhanced financial returns in consideration for providing
these additional services. The ability of the Company to provide these
services in Alaska, Canada, the US Lower 48 states, the Middle East, the CIS,
Venezuela and the UK has played a role in its growth. As with alliances, the
Company will continue to seek opportunities to capitalize on its ability to
provide a wide range of services to its customers in addition to drilling.
Another factor in the growth of the Company has been its ability to provide
innovative quality engineering and technical support for its drilling and
oilfield support operations. The Company provides engineering services to all
of its subsidiaries and to its worldwide customers from its Houston
3
<PAGE> 4
based engineering groups. Nabors also provides platform engineering and other
integrated services to its customers in the North Sea from its Aberdeen
engineering group.
MARKETS
ALASKA
Nabors is the leading drilling contractor in Alaska where it owns eight Arctic
land drilling and well service rigs on the North Slope and three land and one
platform drilling rig in the Cook Inlet area of South Central Alaska. All of
the North Slope rigs have been specifically designed to operate in severe
arctic conditions and employ wheel mounted systems designed by Nabors to permit
efficient moves from well to well and pad to pad and over ice or gravel roads.
Three rigs are also self-propelled to further facilitate moves. Well service
rigs have been designed with spacing capability that allows them to move
between reduced well spacing on drilling pads without disrupting production.
In addition, Nabors' arctic rigs incorporate environmental protection features
such as dry mud and fluid containment systems.
The partners of the largest North Slope oilfield, Prudhoe Bay, have
restructured their internal relationship in order to optimize their financial
and operational results. A major result of this structural change was the
development of stronger, long-term relationships with fewer service companies.
Early in 1992, Nabors Alaska was selected as the first service company to work
in alliance with these operators. This alliance has resulted in significant
cost reductions for the customers of the Company and has increased Nabors'
market share in this significant market. In fiscal 1994, the scope of the
alliance was expanded to include the Milne Point Unit.
The Company has a 50% interest in Peak Oilfield Services, a general partnership
("Peak"), with Cook Inlet Region, Inc., a leading Alaskan native corporation.
Peak provides heavy equipment to move drilling rigs, water, other fluids and
construction materials. Peak also provides road, pad, facilities, equipment,
drill site and pipeline construction and maintenance. During this past year,
Peak obtained a five year alliance contract to provide maintenance services for
the Prudhoe Bay Unit. Peak has also been chosen to coordinate and supply
drilling support transportation services. Peak has recently expanded its
business by the acquisition of Alaska Interstate Construction, an Alaska based
company with significant experience in Arctic road and site construction.
US LOWER 48 STATES AND CANADA
The Company currently markets approximately 190 land rigs, four platform rigs
and two barge rigs in the US Lower 48 states market. Over 80 of the rigs are
diesel electric SCR rigs, and 124 are capable of drilling to 15,000 feet or
deeper. The four platform rigs in the US Gulf of Mexico are all rated to
depths over 20,000 feet and have been extensively refurbished and upgraded with
top drives and other modern equipment. In addition to oil and gas drilling,
Nabors is also active in West Coast geothermal drilling.
The Company has a fleet of 20 rigs in Canada. Nine rigs in the fleet are
diesel electric SCR rigs, six are equipped with top drives and all of the rigs
in Nabors' Canadian fleet are capable of performing exploratory and development
drilling under arctic and sub-arctic conditions.
INTERNATIONAL DRILLING
SOUTH AND CENTRAL AMERICA Nabors has been operating in Venezuela since 1946.
The Company currently operates 16 land drilling rigs and provides crews for
four rigs under labor contracts. Three of these rigs were redeployed from
other areas of the world during fiscal year 1994 and seven rigs were
4
<PAGE> 5
redeployed during fiscal year 1995, in connection with long term contracts with
two US based operators and Corpoven and Maraven which are affiliates of PDVSA,
the government owned oil company. A new rig has recently been deployed to
Colombia and has commenced operations under a contract with Ecopetrol, the
national oil company of Colombia.
THE MIDDLE EAST In the Middle East, Nabors operates 18 land rigs, and one
jackup rig. Of the 18 land rigs, 12 are in Yemen (including three water well
rigs), three in Saudi Arabia, and three in other countries. The Company has
recently been awarded three additional contracts in Saudi Arabia and will be
redeploying rigs from Yemen and West Africa to fulfill these contracts. Since
1994, there has been a substantial downturn in drilling activities in Yemen and
as of the end of the fiscal year, only four drilling rigs (including one water
well rig) are in operation.
The Company has a sizable fleet of equipment in Yemen, including trucks,
cranes, bulldozers and other construction and transportation equipment. The
Company's logistics service operations in Yemen have had disappointing
operating results and as a result, the operations in that country have been
substantially reduced.
THE CIS In the CIS, the Company owns two rigs which have recently been
relocated from Russia to Kazakhstan. A third rig which was deployed during
fiscal year 1995 from the Middle East, has just completed a drilling and
workover contract with an independent operator and is scheduled to begin a one
year contract in the Republic of Georgia with another independent. In
addition, the Company is a participant in a joint venture which will operate a
rig in Kazakhstan.
FAR EAST In the Far East, the Company owns three deep rated, diesel electric
SCR land rigs in Japan.
AFRICA Nabors is currently operating one land rig on an integrated services
contract in West Africa. This contract will be concluded shortly.
NORTH SEA PLATFORM DRILLING
In the UK North Sea, Nabors has been providing offshore platform contract
drilling and engineering services since the 1970's. The Company currently has
contracts to provide labor for 11 platform drilling rigs. Nine of the
contracts are provided under either an alliance or integrated services contract
with the customer. In addition, the Company provides other services to its
customer including wire-line operations, engineering, construction and
maintenance services as well as general production maintenance.
OFFSHORE DRILLING WORKOVER AND WELL SERVICING
With the acquisition of Sundowner in October of 1994, the Company has expanded
into the offshore workover and well servicing business in the US Gulf of Mexico
as well as the CIS, Europe and West Africa. Sundowner operates a fleet of 24
rigs including 15 Sundowner and Super Sundowner platform rigs, five jackup
workover rigs and three inland barge rigs. Six of the "Super Sundowner" and
one of the Sundowner rigs are equipped with portable top drive units to enhance
drilling efficiency in sidetrack and horizontal drilling operations. A
subsidiary of Sundowner also provides plug and abandonment services on the Gulf
Coast. Sundowner has developed a new generation of innovative Minimum Area
Self Erecting (MASE) platform drilling rigs, certain elements of which are
patented, that results in reduced drilling and workover costs. One of these
MASE rigs is being deployed to Trinidad during the fiscal first quarter while a
second rig is presently under construction and is expected to be operational
during the third quarter of the fiscal year. The resources of the Company,
combined with the Sundowner technology, will facilitate expansion into new
markets throughout the world.
5
<PAGE> 6
Additional information regarding markets in which the Company operates can be
found on pages 9 - 18 of the Nabors Industries, Inc. 1995 Annual Report to
Stockholders ("1995 Annual Report") and is incorporated herein by reference.
ENGINEERING DEVELOPMENTS
In recent years, Nabors has been increasingly involved in engineering research
and development with respect to the commercialization of new drilling
technology. A subsidiary of the Company participated in a joint project with a
major oil company in connection with the design, construction and operation of
a slim hole drilling rig, utilizing an advanced drilling process known as a
Stratigraphic High Speed Advanced Drilling System. This small footprint, slim
hole rig, which the Company now owns, is designed to enable operators to
significantly cut the cost of exploration projects in remote and difficult
drilling regions. The Company has built a second slim hole rig. Both slim
hole rigs are now operational in Venezuela.
The Company's Canrig subsidiary manufactures and markets electric top drives.
The Canrig top drive has been designed with enhanced safety and drilling
efficiency features. This top drive design includes fixed and portable units
and is being utilized in a broad range of land and offshore applications. The
Company has also developed an automated slant rig, capable of drilling shallow
or slim hole wells.
Through its acquisition of Sundowner, the Company owns the rights to
proprietary designs and innovations which, when applied to the Company rigs,
can substantially reduce the costs of drilling and working on offshore wells.
These proprietary designs are being applied to a new generation of modular rigs
specifically for drilling.
Company engineers have obtained new patents during the past year and have
patent applications pending for new technology associated with drilling
activities. Engineering activities in the UK include planning, structural,
electrical and mechanical projects for existing and new platforms.
CUSTOMERS
The Company's customers include major oil and gas companies, foreign national
oil and gas companies and independent oil and gas companies. No single
customer provides as much as 10% of consolidated revenues.
INDUSTRY CONDITIONS, COMPETITION AND SEASONALITY
The Company's revenues and earnings are affected directly by the demand for
contract drilling and related oilfield services. Demand is a function of the
level of oil and gas exploration and development activity. The level of such
activity is impacted by many factors over which the Company has no control,
including among others, the market prices of oil and gas, the stability or
volatility of such prices, levels of production, activities of the Organization
of Petroleum Exporting Countries and other oil and gas producers, governmental
regulations, the level of worldwide economic activity, the development of
alternate energy sources, and the short and long-term effect of worldwide
energy conservation measures. Substantial uncertainty exists as to the future
level of oil and gas exploration and production drilling activity.
The contract drilling, workover and well servicing industry is a highly
fragmented, intensely competitive and cyclical business. Since 1982, the
contract drilling business has been severely impacted by the decline and
continued instability in the prices of oil and natural gas. Though these
depressed economic conditions have resulted in a consolidation of the number of
competitors and the reduction of the number of rigs available, the supply of
available rigs, particularly in the domestic markets, still
6
<PAGE> 7
exceeds the demand for those rigs. This excess capacity in the industry has
resulted in severe competition. Competition for services in a particular
market is based on price, location, type and condition of available equipment
and quality of service. In the offshore well servicing and workover business,
the technical capability of specialized equipment as well as technical and
engineering expertise is also important. A number of large and small
contractors provide competition for drilling contracts in all areas of the
Company's business. Although no single drilling competitor operates in all
such areas, certain competitors are present in more than one of those areas.
Seasonality is not a significant factor with respect to the operations of the
Company.
CONTRACTS
Each of the Company's drilling rigs is employed under an individual contract
which extends either over a stated period of time or the time required to drill
a well or a number of wells. Drilling contracts are generally obtained through
competitive bidding though some may be obtained by negotiation. Contracts are
generally subject to termination by the customer on short notice, but can be
firm for a number of wells or years.
Drilling contracts may provide for compensation on a daywork, footage, or
turnkey basis. Most of the Company's contracts are on a daywork basis. A
daywork contract provides for a basic rate per day when drilling (the
"Dayrate") and for Lower rates when the rig is moving, or when drilling
operations are interrupted or restricted by equipment breakdowns, actions of
the customer or adverse weather conditions or other conditions beyond the
control of the Company. In addition, the daywork contracts typically provide
for a lump sum fee for the mobilization and demobilization of the drilling
rig. The Dayrate depends on market and competitive conditions, the nature of
the operations to be performed, the duration of the work, the equipment and
services to be provided, the geographic area involved and other variables.
The Company is also a party to turnkey and footage contracts in certain areas
of the United States. In a turnkey contract, the Company undertakes to drill a
well to a specified depth for a fixed price. In a footage contract, the
Company undertakes to drill a well to a specified depth at a fixed price per
foot of hole. In both turnkey and footage contracts, the Company must bear the
cost of performing the drilling services until the well has been drilled, and
accordingly, such contracts require significant cash commitments by the
Company. In both the turnkey and footage contracts, the Company generally
agrees to furnish services such as testing, coring and casing the hole and
other services which are not normally provided by a drilling contractor working
under a daywork contract. In both situations, compensation is earned upon
completion of the well to the specified depth. If the well is not completed to
the specified depth, the Company may not receive the fixed turnkey or footage
price. In addition, footage and turnkey contracts generally involve a higher
degree of risk to the Company than daywork contracts because the Company
assumes greater risks and bears the cost of unanticipated downhole problems and
price escalation.
Onshore transportation and support services are provided through long-term
contracts or on a short-term demand basis. Long-term contracts may either be
negotiated or awarded by competitive bidding. Whether provided on a long-term
or short-term basis, equipment and labor are usually billed separately at
specified hourly rates. These hourly rates vary depending upon numerous
factors, including types of equipment and labor, and duration of the work.
7
<PAGE> 8
OPERATING RISKS AND INSURANCE
The Company's operations are subject to many hazards inherent in the drilling,
workover and well servicing industries including blowouts, cratering,
explosions and fires, each of which could result in personal injury or death,
damage to or destruction of equipment and facilities, suspension of operations,
environmental damage to surrounding areas and damage to the property of others.
The Company's offshore operations are also subject to the hazards of marine
operations including capsizing, grounding, collision, damage from heavy weather
or sea conditions and unsound bottom conditions. To the extent that such risks
are not transferred to customers by contract or indemnification agreements, the
Company seeks protection through insurance which the Company considers to be
adequate. However, there is no assurance that such insurance or
indemnification agreements will be adequate to protect the Company against
liability from all of the consequences of the hazards described above. The
occurrence of an event not fully insured or indemnified against, or the failure
of a customer to meet its indemnification obligations could result in
substantial losses to the Company. In addition, there can be no assurance that
insurance will be available, or, even if available, that it will be adequate or
that insurance premiums or other costs will not rise significantly in the
future.
INTERNATIONAL OPERATIONS
A significant portion of the Company's business is derived from international
markets, including major operations in the Middle East, the North Sea, and
South and Central America, as well as other operations in the CIS, the Far
East, and Africa. Such operations may be subject to various risks including
risk of war and civil disturbances and governmental activities that may limit
or disrupt markets, restrict the movement of funds or result in the deprivation
of contract rights or the taking of property without fair compensation. In
certain countries, such operations may be subject to the additional risk of
fluctuating currency values and exchange controls. (See also "Operating Risks
and Insurance".)
In the international markets in which the Company operates, it is subject to
various laws and regulations with respect to the operation and taxation of its
business and the import and export of its equipment from country to country,
the imposition, application and interpretation of which can prove to be
uncertain.
GOVERNMENTAL MATTERS
Governments at various levels in the United States and in various other
countries in which the Company operates have enacted legislation or adopted
regulations affecting the drilling and servicing of oil and gas wells,
controlling the discharge and disposal of wastes from drilling and other
operations and providing for the protection of the environment in general. In
recent years, laws and regulations protecting the environment have generally
become more stringent and have sought to impose greater liability on a larger
number of potentially responsible parties. While the Company believes it is
generally in compliance with applicable laws and regulations related to
environmental controls, the Company could nonetheless be subject to cleanup
costs or costs associated with environmental laws and regulations which could
be substantial and have a material adverse effect on the Company.
EMPLOYEES
At September 30, 1995, the Company employed approximately 6,885 persons. In
addition, Peak employed 525 persons.
8
<PAGE> 9
DISTRIBUTION OF EARNINGS AND ASSETS
The revenues, operating income (loss) and identifiable assets of each
geographic area for the three years ended September 30, 1995, can be found in
Note 14 of the Notes to Consolidated Financial Statements on page 47 of the
1995 Annual Report, which is incorporated herein by reference.
ITEM 2. PROPERTIES
A table of information regarding the Company's rig fleet can be found on page
20 ("Rig Fleet") of the 1995 Annual Report which is incorporated herein by
reference.
Many of the international drilling rigs in the Company's fleet are supported by
mobile camps which house the drilling crews and a significant inventory of
spare parts and supplies. In addition, the Company owns various trucks,
forklifts, cranes, earth moving and other construction and transportation
equipment which are used to support the drilling and logistics operations.
The Company and its subsidiaries lease or own executive and administrative
office space in Houston, Texas (headquarters); Denver, Colorado; Anchorage,
Alaska; Calgary and Nisku, Canada; Sana'a, Yemen; Dubai, U.A.E.; Port Gentil,
Gabon; Maracaibo and Anaco, Venezuela and Aberdeen, Scotland. The Company owns
or leases a number of facilities used in support of operations in each of its
geographic markets.
Additional information about Properties can be found in Notes 1, 4, 7, 9, and
11 of the Notes to Consolidated Financial Statements on pages 36-37, 39-41, and
45-46 of the 1995 Annual Report and is incorporated herein by reference.
The Company believes that its equipment and facilities are adequate to support
its current level of operations as well as an expansion of drilling operations
in those geographical areas where the Company may choose to expand.
ITEM 3. LEGAL PROCEEDINGS
Information with respect to legal proceedings can be found in Note 11 of the
Notes to Consolidated Financial Statements on page 45 of the 1995 Annual Report
and is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders of the Company
during the quarter ended September 30, 1995.
9
<PAGE> 10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET
The information called for by this item can be found on the inside back cover
("Price of Common Stock") of the 1995 Annual Report and is incorporated herein
by reference.
The Company has neither declared nor paid any cash dividends on its common
stock since 1982. Certain debt instruments restrict the Company's ability to
pay dividends. Under the terms of these instruments, Nabors may pay dividends
to the extent that cumulative dividends plus certain other payments since March
31, 1989 do not exceed 50% of Nabors' cumulative net income since March 31,
1989 plus the proceeds of any offering of equity securities of Nabors that are
not redeemable at the option of the holder of the securities. As of September
30, 1995 retained earnings available for dividends totaled approximately $140
million. The Company does not intend to pay any cash dividends on its common
stock in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
The information called for by this item can be found on page 26 ("Selected
Financial Data") of the 1995 Annual Report and is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information called for by this item can be found on pages 27 through 30
("Management's Discussion and Analysis of Financial Condition and Results of
Operations") of the 1995 Annual Report and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, together with the report thereon of
Coopers & Lybrand L.L.P. dated November 27, 1995 appear on pages 31 through 47
of the 1995 Annual Report and are incorporated herein by reference. With the
exception of the aforementioned information and the information expressly
incorporated into Items 1, 2, 3, 5, 6, 7, and 8 hereof, the 1995 Annual Report
is not deemed to be filed as part of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were none.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by this item is contained in the Nabors Industries,
Inc. definitive Proxy Statement to be distributed in connection with its Annual
Meeting (the "Proxy Statement") under the captions "Election of Directors" and
"Executive Officers" and is incorporated herein by reference.
10
<PAGE> 11
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission and the American Stock Exchange initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than
ten- percent shareholders are required by SEC regulation to furnish the Company
with all Section 16(a) forms which they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the two fiscal years ended September 30,1995, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this item is contained in the Proxy
Statement to be distributed in connection with its Annual Meeting under the
caption "Remuneration of Management" and is incorporated herein by reference;
except for information not deemed to be "soliciting material" or "filed" with
the SEC including the Report of the Compensation Committee on Executive
Compensation and the Five Year Stock Performance Graph which is not deemed to
be incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this item is contained in the Proxy
Statement to be distributed in connection with its Annual Meeting under the
caption "Share Ownership of Management and Principal Shareholders" and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this item is contained in the Proxy Statement to
be distributed in connection with its Annual Meeting, under the caption
"Business Relationships" and "Compensation Committee Interlocks and Insider
Participation" and is incorporated herein by reference.
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) Financial Statements of Nabors Industries, Inc. and
Subsidiaries which are listed in Part II, Item 8 and are
incorporated herein by reference from the Company's 1995
Annual Report to Stockholders from the respective page numbers
indicated:
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Report of Independent Accountants 31
Consolidated Balance Sheets 32
Consolidated Statements of Income 33
Consolidated Statements of Changes in Stockholders' Equity 34
Consolidated Statements of Cash Flows 35
Notes to Consolidated Financial Statements 36-47
</TABLE>
11
<PAGE> 12
(2) Financial Statement Schedules - the following items are
included in the report:
Report of Independent Accountants on Financial Statement
Schedules
SCHEDULES
Schedule VIII - Consolidated Valuation and Qualifying
Accounts
Supplemental schedules, other than those listed above, are
omitted because of the absence of the conditions under which
they are required or because the required information is
included in the financial statements or notes thereto.
(3) Exhibits
Exhibit Description
------- -----------
3 (1) Restated Certificate of Incorporation and By-Laws
of the Registrant dated May 12, 1988
3.1 (2) Certificate of Amendment of the Restated
Certificate of Incorporation of the Registrant
dated May 8, 1990
3.2 (3) Certificate of Amendment of the Restated
Certificate of Incorporation of the Registrant
dated April 12, 1991
3.3 (9) Certificate of Amendment of the Restated
Certificate of Incorporation of the Registrant
dated March 11, 1994
3.4 (2) Amendment to the Restated By-Laws of the
Corporation
10.1 (1) Stock Option and Compensation Agreement pursuant to
Confirmation Incentive Bonus Plan
10.2 (1) 1981 Participation Stock Option and Stock
Appreciation Rights Plan
10.3 (1) 1981 Incentive Stock Option Plan
10.4 (1) 1978 Participation Stock Option Agreement as
amended
10.5 (1) 1978 Incentive Stock Option Plan
10.6 (1) 1988 Stock Option Plan @ $1.10
10.7 (1) 1988 Stock Option Plan @ $.75
10.8 (1) 1988 Incentive Stock Option Plan
10.9 (5) Description of 1989 Management Stock Award Plan
10.10 (2) 1990 Incentive Stock Option Plan
10.11 (4) 1991 Stock Option Plan
12
<PAGE> 13
10.12 (4) 1992 Incentive Stock Option Plan
10.13 (9) 1993 Stock Option Plan for Non-Employee Directors
10.14 (9) 1993 Key Employee Stock Plan
10.15 1994 Executive Stock Option Agreement effective
December 28, 1994 between Nabors Industries, Inc.
and Eugene M. Isenberg
10.16 1994 Executive Stock Option Agreement effective
December 28, 1994 between Nabors Industries, Inc.
and Anthony G. Petrello
10.17 1994 Executive Stock Option Agreement effective
December 28, 1994 between Nabors Industries, Inc.
and Richard A. Stratton
10.18 (11) Employment Agreement effective October 1, 1994
between Nabors Industries, Inc. and Eugene M.
Isenberg
10.19 (11) Employment Agreement effective October 1, 1994
between Nabors Industries, Inc. and Anthony G.
Petrello
10.20 Amendment to Employment Contract dated as of
December 28, 1994 between Nabors Industries, Inc.
and Richard A. Stratton
10.21 (3) Consulting Agreement dated May 23, 1991 between
Nabors Industries, Inc. and Jack Wexler
10.22 (5) Note Purchase Agreement between Nabors
Industries, Inc. and John Hancock Mutual Life
Insurance Company dated October 1, 1992
10.23 (6) Asset Purchase Agreement dated April 23, 1993
between Grace Drilling Company, W.R. Grace &
Co.-Conn. and Nabors Loffland Drilling Company,
Nabors Properties, Inc. and Nabors Drilling
Technologies, Inc.
10.24 (6) Stock Distribution and Related Matters Agreement
dated as of April 23, 1993 between Nabors
Industries, Inc. and Grace Drilling Company
10.25 (7) Agreement and Plan of Reorganization dated as of
August 26, 1993 between Equity Strategies Fund,
Inc. and Nabors Industries, Inc.
10.26 (8) Agreement and Plan of Merger dated August 12,
1994 by and Among Nabors Industries, Inc., Nabors
Acquisition Corp. and Sndowner Offshore Services,
Inc.
10.27 Stock Purchase Agreement entered into as of
December 22, 1994 by and between Nabors Drilling
USA, Inc. and Gordon P. Getty.
13 1995 Annual Report to Stockholders
21 List of Subsidiaries of Nabors Industries, Inc.
13
<PAGE> 14
22 (10) Published Report Regarding Matters Submitted to
Vote of Securities Holders
23 Consent of Independent Accountants
___________________
(1) Incorporated by Reference to the Exhibits to Form 10-K, File No.
1-7773, filed with the Commission on January 11, 1988.
(2) Incorporated by Reference to the Exhibits to Form 10-K, File No.
1-9245, filed with the Commission on December 21, 1990.
(3) Incorporated by Reference to the Exhibits to Form 10-K, File No.
1-9245, filed with the Commission on December 30, 1991.
(4) Incorporated by Reference to the Exhibits to Form S-8, File No.
33-47821 filed with the Commission on April 28, 1992.
(5) Incorporated by Reference to the Exhibits to Form 10-K, File No.
1-9245, filed with the Commission on December 29, 1992.
(6) Incorporated by Reference to the Exhibits to Form 8-K, File No.
1-2964, filed with the Commission on June 10, 1993.
(7) Incorporated by Reference to the Exhibits to Form 10-K, File No.
1-9245, filed with the Commission on December 29, 1993.
(8) Incorporated by Reference to the Exhibits to Form S-4, File No.
33-84188, filed with the Commission on September 20, 1994.
(9) Incorporated by Reference to Form 10-K, File No. 1-9245, filed with
the Commission on December 29, 1994.
(10) Incorporated by Reference to Form 10-Q for Quarter ended March 31,
1995, File No. 1-9245, filed with the Commission on May 15, 1995.
(11) Incorporated by Reference to Form 10-Q for Quarter ended June 30,
1995, File No. 1-9245, filed with the Commission on August 14,
1995.
14
<PAGE> 15
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 on December 28, 1995.
NABORS INDUSTRIES, INC.
By: /s/ Anthony G. Petrello
----------------------
Anthony G. Petrello
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
15
<PAGE> 16
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Eugene M. Isenberg Chairman and December 27, 1995
- --------------------------- Chief Executive Officer
Eugene M. Isenberg
/s/Richard A. Stratton Vice Chairman December 27, 1995
- -----------------------------
Richard A. Stratton
/s/Anthony G. Petrello President and December 27, 1995
- ---------------------------- Chief Operating Officer
Anthony G. Petrello
/s/Martin J. Whitman Director December 27, 1995
- -----------------------------
Martin J. Whitman
/s/Myron M. Sheinfeld Director December 27, 1995
- -----------------------------
Myron M. Sheinfeld
/s/Jack Wexler Director December 27, 1995
- ---------------------------------
Jack Wexler
/s/Gary T. Hurford Director December 27, 1995
- --------------------------------
Gary T. Hurford
/s/Hans Schmidt Director December 27, 1995
- --------------------------------
Hans Schmidt
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Michael W. Dundy Vice President and December 27, 1995
- ----------------------------- General Counsel
Michael W. Dundy
/s/Daniel McLachlin Vice President December 27, 1995
- ------------------------------
Daniel McLachlin
/s/Bruce P. Koch Controller December 27, 1995
- --------------------------------
Bruce P. Koch
</TABLE>
17
<PAGE> 18
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
Our report on the consolidated financial statements of Nabors Industries,
Inc. and Subsidiaries has been incorporated by reference into this Form 10-K
from page 31 of the 1995 Annual Report to Stockholders of Nabors Industries,
Inc. In connection with our audits of such financial statements, we have also
audited the related financial statement schedule listed on page 12 of this Form
10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included herein.
COOPERS & LYBRAND L.L.P.
Houston, Texas
November 27, 1995
18
<PAGE> 19
SCHEDULE VIII
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
----------- ---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1995
-----------------------------
Valuation reserves for
accounts receivable $ 1,730 $ 467 $- $(802) $ 1,395
Deferred tax valuation
allowance $57,166 $(27,860) $- $ - $29,306
YEAR ENDED SEPTEMBER 30, 1994
-----------------------------
Valuation reserves for
accounts receivable $ 564 $ 1,401 $- $(235) $ 1,730
Deferred tax valuation
allowance $ - $ 57,166 $- $ - $57,166
YEAR ENDED SEPTEMBER 30, 1993
-----------------------------
Valuation reserves for
accounts receivable $ 366 $ 202 $- $ (4) $ 564
</TABLE>
19
<PAGE> 20
EXHIBITS
Exhibit Description
- ------- -----------
3 (1) Restated Certificate of Incorporation and By-Laws of the
Registrant dated May 12, 1988
3.1 (2) Certificate of Amendment of the Restated Certificate of
Incorporation of the Registrant dated May 8, 1990
3.2 (3) Certificate of Amendment of the Restated Certificate of
Incorporation of the Registrant dated April 12, 1991
3.3 (9) Certificate of Amendment of the Restated Certificate of
Incorporation of the Registrant dated March 11, 1994
3.4 (2) Amendment to the Restated By-Laws of the Corporation
10.1 (1) Stock Option and Compensation Agreement pursuant to
Confirmation Incentive Bonus Plan
10.2 (1) 1981 Participation Stock Option and Stock Appreciation Rights
Plan
10.3 (1) 1981 Incentive Stock Option Plan
10.4 (1) 1978 Participation Stock Option Agreement as amended
10.5 (1) 1978 Incentive Stock Option Plan
10.6 (1) 1988 Stock Option Plan @ $1.10
10.7 (1) 1988 Stock Option Plan @ $.75
10.8 (1) 1988 Incentive Stock Option Plan
10.9 (5) Description of 1989 Management Stock Award Plan
10.10 (2) 1990 Incentive Stock Option Plan
10.11 (4) 1991 Stock Option Plan
10.12 (4) 1992 Incentive Stock Option Plan
10.13 (9) 1993 Stock Option Plan for Non-Employee Directors
10.14 (9) 1993 Key Employee Stock Plan
10.15 1994 Executive Stock Option Agreement effective December 28,
1994 between Nabors Industries, Inc. and Eugene M. Isenberg
20
<PAGE> 21
10.16 1994 Executive Stock Option Agreement effective December 28,
1994 between Nabors Industries, Inc. and Anthony G. Petrello
10.17 1994 Executive Stock Option Agreement effective December 28,
1994 between Nabors Industries, Inc. and Richard A. Stratton
10.18 (11) Employment Agreement effective October 1, 1994 between Nabors
Industries, Inc. and Eugene M. Isenberg
10.19 (11) Employment Agreement effective October 1, 1994 between Nabors
Industries, Inc. and Anthony G. Petrello
10.20 Amendment to Employment Contract dated as of December 28, 1994
between Nabors Industries, Inc. and Richard A. Stratton
10.21 (3) Consulting Agreement dated May 23, 1991 between Nabors
Industries, Inc. and Jack Wexler
10.22 (5) Note Purchase Agreement between Nabors Industries, Inc. and
John Hancock Mutual Life Insurance Company dated October 1,
1992
10.23 (6) Asset Purchase Agreement dated April 23, 1993 between Grace
Drilling Company, W.R. Grace & Co.-Conn. and Nabors Loffland
Drilling Company, Nabors Properties, Inc. and Nabors Drilling
Technologies, Inc.
10.24 (6) Stock Distribution and Related Matters Agreement dated as of
April 23, 1993 between Nabors Industries, Inc. and Grace
Drilling Company
10.25 (7) Agreement and Plan of Reorganization dated as of August 26,
1993 between Equity Strategies Fund, Inc. and Nabors
Industries, Inc.
10.26 (8) Agreement and Plan of Merger dated August 12, 1994 by and
Among Nabors Industries, Inc., Nabors Acquisition Corp. and
Sundowner Offshore Services, Inc.
10.27 Stock Purchase Agreement entered into as of December 22, 1994
by and between Nabors Drilling USA, Inc. and Gordon P. Getty.
13 1995 Annual Report to Stockholders
21 List of Subsidiaries of Nabors Industries, Inc.
22 (10) Published Report Regarding Matters Submitted to Vote of
Securities Holders
23 Consent of Independent Accountants
27 Financial Data Schedule
21
<PAGE> 22
(1) Incorporated by Reference to the Exhibits to Form 10-K, File No.
1-7773, filed with the Commission on January 11, 1988.
(2) Incorporated by Reference to the Exhibits to Form 10-K, File No.
1-9245, filed with the Commission on December 21, 1990.
(3) Incorporated by Reference to the Exhibits to Form 10-K, File No.
1-9245, filed with the Commission on December 30, 1991.
(4) Incorporated by Reference to the Exhibits to Form S-8, File No.
33-47821 filed with the Commission on April 28, 1992.
(5) Incorporated by Reference to the Exhibits to Form 10-K, File No.
1-9245, filed with the Commission on December 29, 1992.
(6) Incorporated by Reference to the Exhibits to Form 8-K, File No.
1-2964, filed with the Commission on June 10, 1993.
(7) Incorporated by Reference to the Exhibits to Form 10-K, File No.
1-9245, filed with the Commission on December 29, 1993.
(8) Incorporated by Reference to the Exhibits to Form S-4, File No.
33-84188, filed with the Commission on September 20, 1994.
(9) Incorporated by Reference to Form 10-K, File No. 1-9245, filed with
the Commission on December 29, 1994.
(10) Incorporated by Reference to Form 10-Q for Quarter ended March 31,
1995, File No. 1-9245, filed with the Commission on May 15, 1995.
(11) Incorporated by Reference to Form 10-Q for Quarter ended June 30,
1995, File No. 1-9245, filed with the Commission on August 14,
1995.
22
<PAGE> 1
Exhibit 10.15
1994 EXECUTIVE
STOCK OPTION AGREEMENT
NABORS INDUSTRIES, INC.
This Agreement is effective the 28th day of December, 1994, between
NABORS INDUSTRIES, INC., a Delaware corporation (the "Company"), and EUGENE M.
ISENBERG ("Optionee"),
W I T N E S S E T H:
1. Grant of Option. The Company hereby grants to Optionee,
subject to the terms and conditions herein set forth (the "Plan"), the right
and option to purchase from the Company all or any part of an aggregate of
1,800,000 shares of Stock of the Company at the purchase price of $6.375 per
share, such option to be exercisable as hereinafter provided.
2. Terms and Conditions. The option evidenced hereby is subject
to the following terms and conditions:
(a) Expiration Date. The option shall expire on
December 27, 2004.
(b) Exercise of Option. Subject to the accelerated vesting as
otherwise provided for in this Agreement, the option shall be exercisable in
four equal installments in accordance with the following schedule: 450,000 on
October 1, 1995 (the "First Installment"), a further 450,000 on October 1, 1996
(the "Second Installment"), a further 450,000 on
<PAGE> 2
October 1, 1997 ( the "Third Installment"), and a further 450,000 on October 1,
1998 (the "Fourth Installment"). However, in the event that the Common Stock
of the Company trades at or above the Average Closing Price on or prior to the
scheduled vesting date indicated in the table below, the relevant installment
will be accelerated and become immediately vested:
<TABLE>
<CAPTION>
SCHEDULED ACCELERATED IF
INSTALLMENT VESTING DATE AVERAGE CLOSING PRICE EQUALS OR EXCEEDS
----------- ---------------- ---------------------------------------
<S> <C> <C>
First October 1, 1995 $7.3313
Second October 1, 1996 $8.4309
Third October 1, 1997 $9.6956
Fourth October 1, 1998 $11.1499
</TABLE>
In addition, in the event any installment is vested early as provided for in
the preceding sentence, new options (hereinafter the "Reload Options") equal in
number to the number of options of the installments vesting early shall be
granted to the Optionee upon the exercise of such vested options or any other
options held by the Optionee pursuant to any other grant prior, or subsequent,
to the effective date of this Agreement in a number equal to the number of such
options exercised. These Reload Options will have an exercise price equal to
the Closing Price on the date of the new grant and shall be immediately vested
and exercisable for a period from the date of grant through the expiration date
of the original option replaced. Any option not exercised on any applicable
vesting date may be exercised thereafter at any time, in whole or in part,
before the relevant expiration date of the option. Any exercise shall be
accompanied by a written notice to the Company specifying the number of shares
as to which the option is being exercised. If the Optionee so requests, shares
of Common Stock purchased upon exercise of an option may be issued in the name
of the Optionee or another person.
(c) Payment of Purchase Price Upon Exercise. At the time
of any exercise, Optionee shall deliver to the Company, together with the
notice provided in paragraph (b) above, the full amount of the purchase price
therefore payable either by bank cashier's check or
<PAGE> 3
certified check payable to the order of the Company or in Common Stock delivered
by the Optionee valued at the Closing Price of such Common Stock, or any
combination of cash or Common Stock in the sole discretion of the Optionee. The
term "Closing Price" shall be the last sale price regular way on the date of
exercise of the option or, in the case no sale takes place on such date, the
average of the high bid and low asked prices regular way, in either case on the
principal National Securities Exchange in which the Common Stock is listed or
admitted to trading or, if the shares of Common Stock are not listed or admitted
to trading on any such securities exchange, the last sales price in the
over-counter market as reported by NASDAQ or such other system then in use. If
the Common Stock is not traded such that the Closing Price can be determined in
accordance with the preceding sentence, the Closing Price shall mean the fair
market value of the Common Stock as of the last day of the measuring period as
determined by an independent investment banker approved by the Corporation and
the Employee. The Average Closing Price shall be the average of the Closing
Prices for a twenty (20) day consecutive period of trading days.
(d) Exercise Upon Termination of Employment. Any option
granted hereunder (including all Reload Options) may be exercised by the
Optionee, his heirs, devisees, legatees or assigns at any time before the
relevant expiration date, whether or not Optionee ceases to be an employee and
whether or not such employment is terminated by voluntary written resignation,
by action of the Company for cause, without cause, or by reason of death or
disability, with respect to all options as to which his right of exercise has
vested as provided for in paragraph (b) or as to which his right of exercise
shall vest in accordance with the next sentence of this paragraph on the date
of his termination of employment. In the event of a termination of employment
for any reason, except by the Company for cause or by voluntary resignation by
Optionee, all unvested options granted under this Agreement shall be
immediately exercisable as of the date of his
<PAGE> 4
termination of his employment without regard to the installment provision set
forth in paragraph (b) above. In this event, the target Average Closing Prices
defined in paragraph 2(b) shall be deemed to have been achieved on or before the
scheduled vesting date and Optionee shall also have the right to the Reload
Options as described therein. The term "for cause" shall have the same meaning
as in section 4(a)(v) of the Optionee's Employment Agreement dated January 6,
1987 ("Employment Agreement").
(e) Transferability. This option may be transferred by
the Employee with the consent of the Company which shall not be unreasonably
withheld at any time; provided however, Section 2(d) of this Agreement shall be
applied based on the Employee and his status and not that of any assignee.
(f) Adjustments. In the event of a reorganization,
recapitalization, stock split, stock dividend, Extraordinary Dividend,
combination of shares, consolidation, merger (other than a merger or
consolidation which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares), any sale or transfer by the
Company of all or substantially all of its assets or any tender offer or
exchange offer for or the acquisition, directly or indirectly, by any person or
group of all or a majority of the then outstanding voting securities of the
Company, rights offering, or any other change in the corporate structure or
rights with respect to any shares of the Company, adjustments shall be made to
the number or type of stock subject to this Agreement and, in order to prevent
dilution or enlargement of the rights of Optionee, to the number of Options, and
the type and option price of stock subject to outstanding Options or as provided
below with respect to Extraordinary Dividend. In the case of an Extraordinary
Dividend, the Optionee shall be entitled to have distributed to him upon the
exercise of any portion of the option an amount equal to the Extraordinary
Dividend he would have received had he exercised such portion of the option
immediately prior to the declaration of the Extraordinary Dividend. For
<PAGE> 5
this purpose, an Extraordinary Dividend shall mean any dividend or dividends
paid or declared in the twelve month period immediately prior to the day after
any such declaration in excess in the aggregate of 7% of the average Closing
Price of the Common Stock during such period.
(g) Withholding of Taxes. No stock may be granted or
option may be exercised unless the Grantee or the Optionee has paid, or has
made provision, satisfactory to the Committee for payment of, federal, state
and local income taxes, or any other taxes (other than stock transfer taxes)
which the Company may be obligated to collect as a result of the issue or
transfer of shares of Stock upon exercise of an option. The Optionee may elect
that shares of Common Stock can be applied towards the payment of withholding
taxes.
3. Treatment of Options as Non-Qualified Stock Options. The
Company and Optionee acknowledge that the stock options granted hereunder shall
be treated as non-qualified stock options for U.S. federal income tax purposes.
4. Registration, Listing and Qualification of Shares of Stock.
(a) Registration. The Company, within six months of the
date any option granted pursuant to this Agreement first becomes vested and
exercisable, shall register all the shares underlying the options on a
Registration Statement on Form S-8 ("S-8"). The Company shall also prepare and
file a Form S-3 prospectus with such S-8.
(b) Listing. The Company, within six months of the date
any option granted pursuant to this Agreement first becomes vested and
exercisable, shall list all the shares underlying the options on the American
Stock Exchange with an Additional Listing Application.
(c) Qualification. The Company may require Optionee to
furnish to the Company, prior to the issuance of any shares upon the exercise
of all or any part of this option,
<PAGE> 6
an agreement in which Optionee acknowledges the status of the shares and the
conditions and the restrictions, if any, upon their sale or distribution under
the applicable securities laws.
5. Notices. Any notice hereunder to the Company shall be
addressed to it at its office as follows: Attn: Corporate Secretary. Any
notice hereunder to Optionee shall be addressed to him at Two North Breakers
Row, Apt. 25-S, Palm Beach, Florida 33480. Either party may designate at any
time hereafter in writing some other address.
6. Binding Agreement. This Agreement constitutes the binding
agreement of the parties with respect to the grant of options to the Optionee
under the Plan. Notwithstanding any discretionary authority possessed by the
Committee under the Plan or the Company to
<PAGE> 7
impose other terms or conditions on the grant or exercise of options, no
additional terms or condition (other than those expressly stated in this
Agreement) may be imposed by the unilateral action of the Committee or the
Company. This Agreement may not be modified except by the mutual agreement of
the parties in writing.
7. No Termination or Amendment. No termination or amendment of
the Plan by the Company, without the consent of Optionee, shall adversely
affect the rights of Optionee with respect to any option granted under this
Agreement.
8. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
NABORS INDUSTRIES, INC.
By: /s/ Daniel McLachlin
--------------------
Daniel McLachlin
/s/ Eugene M. Isenberg
-----------------------
EUGENE M. ISENBERG
<PAGE> 1
Exhibit 10.16
1994 EXECUTIVE
STOCK OPTION AGREEMENT
NABORS INDUSTRIES, INC.
This Agreement is effective the 28th day of December, 1994, between
NABORS INDUSTRIES, INC., a Delaware corporation (the "Company"), and ANTHONY G.
PETRELLO ("Optionee"),
W I T N E S S E T H:
1. Grant of Option. The Company hereby grants to Optionee,
subject to the terms and conditions herein set forth (the "Plan"), the right
and option to purchase from the Company all or any part of an aggregate of
1,600,000 shares of Stock of the Company at the purchase price of $6.375 per
share, such option to be exercisable as hereinafter provided.
2. Terms and Conditions. The option evidenced hereby is subject
to the following terms and conditions:
(a) Expiration Date. The option shall expire on December
27, 2004.
(b) Exercise of Option. Subject to the accelerated vesting
as otherwise provided for in this Agreement, the option shall be exercisable in
four equal installments in accordance with the following schedule: 400,000 on
October 1, 1995 (the "First Installment"), a further 400,000 on October 1, 1996
(the "Second Installment"), a further 400,000 on October 1, 1997 ( the "Third
Installment"), and a further 400,000 on October 1, 1998 (the "Fourth
Installment"). However, in the event that the Common Stock of the Company
trades at or above
<PAGE> 2
the Average Closing Price on or prior to the scheduled vesting date indicated in
the table below, the relevant installment will be accelerated and become
immediately vested:
<TABLE>
<CAPTION>
SCHEDULED ACCELERATED IF
INSTALLMENT VESTING DATE AVERAGE CLOSING PRICE EQUALS OR EXCEEDS
----------- ------------ ---------------------------------------
<S> <C> <C>
First October 1, 1995 $7.3313
Second October 1, 1996 $8.4309
Third October 1, 1997 $9.6956
Fourth October 1, 1998 $11.1499
</TABLE>
In addition, in the event any installment is vested early as provided for in
the preceding sentence, new options (hereinafter the "Reload Options") equal in
number to the number of options of the installments vesting early shall be
granted to the Optionee upon the exercise of such vested options or any other
options held by the Optionee pursuant to any other grant prior, or subsequent,
to the effective date of this Agreement in a number equal to the number of such
options exercised. These Reload Options will have an exercise price equal to
the Closing Price on the date of the new grant and shall be immediately vested
and exercisable for a period from the date of grant through the expiration date
of the original option replaced. Any option not exercised on any applicable
vesting date may be exercised thereafter at any time, in whole or in part,
before the relevant expiration date of the option. Any exercise shall be
accompanied by a written notice to the Company specifying the number of shares
as to which the option is being exercised. If the Optionee so requests, shares
of Common Stock purchased upon exercise of an option may be issued in the name
of the Optionee or another person.
(c) Payment of Purchase Price Upon Exercise. At the time
of any exercise, Optionee shall deliver to the Company, together with the
notice provided in paragraph (b) above, the full amount of the purchase price
therefore payable either by bank cashier's check or certified check payable to
the order of the Company or in Common Stock delivered by the
<PAGE> 3
Optionee valued at the Closing Price of such Common Stock, or any combination of
cash or Common Stock in the sole discretion of the Optionee. The term "Closing
Price" shall be the last sale price regular way on the date of exercise of the
option or, in the case no sale takes place on such date, the average of the high
bid and low asked prices regular way, in either case on the principal National
Securities Exchange in which the Common Stock is listed or admitted to trading
or, if the shares of Common Stock are not listed or admitted to trading on any
such securities exchange, the last sales price in the over-counter market as
reported by NASDAQ or such other system then in use. If the Common Stock is not
traded such that the Closing Price can be determined in accordance with the
preceding sentence, the Closing Price shall mean the fair market value of the
Common Stock as of the last day of the measuring period as determined by an
independent investment banker approved by the Corporation and the Employee. The
Average Closing Price shall be the average of the Closing Prices for a twenty
(20) day consecutive period of trading days.
(d) Exercise Upon Termination of Employment. Any option
granted hereunder (including all Reload Options) may be exercised by the
Optionee, his heirs, devisees, legatees or assigns at any time before the
relevant expiration date, whether or not Optionee ceases to be an employee and
whether or not such employment is terminated by voluntary written resignation,
by action of the Company for cause, without cause, or by reason of death or
disability, with respect to all options as to which his right of exercise has
vested as provided for in paragraph (b) or as to which his right of exercise
shall vest in accordance with the next sentence of this paragraph on the date
of his termination of employment. In the event of a termination of employment
for any reason, except by the Company for cause or by voluntary resignation by
Optionee, all unvested options granted under this Agreement shall be
immediately exercisable as of the date of his termination of his employment
without regard to the installment provision set forth in paragraph
<PAGE> 4
(b) above. In this event, the target Average Closing Prices defined in paragraph
2(b) shall be deemed to have been achieved on or before the scheduled vesting
date and Optionee shall also have the right to the Reload Options as described
therein. The term "for cause" shall have the same meaning as in section
4(a)(vi) of the Optionee's Employment Agreement dated January 4, 1992
("Employment Agreement").
(e) Transferability. This option may be transferred by
the Employee with the consent of the Company which shall not be unreasonably
withheld at any time; provided however, Section 2(d) of this Agreement shall be
applied based on the Employee and his status and not that of any assignee.
(f) Adjustments. In the event of a reorganization,
recapitalization, stock split, stock dividend, Extraordinary Dividend,
combination of shares, consolidation, merger (other than a merger or
consolidation which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares), any sale or transfer by the
Company of all or substantially all of its assets or any tender offer or
exchange offer for or the acquisition, directly or indirectly, by any person or
group of all or a majority of the then outstanding voting securities of the
Company, rights offering, or any other change in the corporate structure or
rights with respect to any shares of the Company, adjustments shall be made to
the number or type of stock subject to this Agreement and, in order to prevent
dilution or enlargement of the rights of Optionee, to the number of Options,
and the type and option price of stock subject to outstanding Options or as
provided below with respect to Extraordinary Dividend. In the case of an
Extraordinary Dividend, the Optionee shall be entitled to have distributed to
him upon the exercise of any portion of the option an amount equal to the
Extraordinary Dividend he would have received had he exercised such portion of
the option immediately prior to the declaration of the Extraordinary Dividend.
For this purpose, an Extraordinary Dividend shall mean any dividend or
dividends paid or declared in
<PAGE> 5
the twelve month period immediately prior to the day after any such declaration
in excess in the aggregate of 7% of the average Closing Price of the Common
Stock during such period.
(g) Withholding of Taxes. No stock may be granted or
option may be exercised unless the Grantee or the Optionee has paid, or has
made provision, satisfactory to the Committee for payment of, federal, state
and local income taxes, or any other taxes (other than stock transfer taxes)
which the Company may be obligated to collect as a result of the issue or
transfer of shares of Stock upon exercise of an option. The Optionee may elect
that shares of Common Stock can be applied towards the payment of withholding
taxes.
3. Treatment of Options as Non-Qualified Stock Options. The
Company and Optionee acknowledge that the stock options granted hereunder shall
be treated as non-qualified stock options for U.S. federal income tax purposes.
4. Registration, Listing and Qualification of Shares of Stock.
(a) Registration. The Company, within six months of the
date any option granted pursuant to this Agreement first becomes vested and
exercisable, shall register all the shares underlying the options on a
Registration Statement on Form S-8 ("S-8"). The Company shall also prepare and
file a Form S-3 prospectus with such S-8.
(b) Listing. The Company, within six months of the date
any option granted pursuant to this Agreement first becomes vested and
exercisable, shall list all the shares underlying the options on the American
Stock Exchange with an Additional Listing Application.
(c) Qualification. The Company may require Optionee to
furnish to the Company, prior to the issuance of any shares upon the exercise
of all or any part of this option,
<PAGE> 6
an agreement in which Optionee acknowledges the status of the shares and the
conditions and the restrictions, if any, upon their sale or distribution under
the applicable securities laws.
5. Notices. Any notice hereunder to the Company shall be
addressed to it at its office as follows: Attn: Corporate Secretary. Any
notice hereunder to Optionee shall be addressed to him at The Houstonian, 111
North Post Oak Lane, Suite 445, Houston, Texas 77024. Either party may
designate at any time hereafter in writing some other address.
6. Binding Agreement. This Agreement constitutes the binding
agreement of the parties with respect to the grant of options to the Optionee
under the Plan. Notwithstanding any discretionary authority possessed by the
Committee under the Plan or the Company to impose other terms or conditions on
the grant or exercise of options, no additional terms or condition (other than
those expressly stated in this Agreement) may be imposed by the unilateral
action of the Committee or the Company. This Agreement may not be modified
except by the mutual agreement of the parties in writing.
7. No Termination or Amendment. No termination or amendment of
the Plan by the Company, without the consent of Optionee, shall adversely
affect the rights of Optionee with respect to any option granted under this
Agreement.
8. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware.
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
NABORS INDUSTRIES, INC.
By: /s/ Daniel McLachlin
--------------------
Daniel McLachlin
/s/ Anthony G. Petrello
------------------------
ANTHONY G. PETRELLO
<PAGE> 1
Exhibit 10.19
STOCK OPTION AGREEMENT
NABORS INDUSTRIES, INC.
This Agreement is effective the 28th day of December, 1994, between
NABORS INDUSTRIES, INC., a Delaware corporation (the "Company"), and RICHARD A.
STRATTON ("Optionee"),
W I T N E S S E T H:
1. Grant of Option. The Company hereby grants to Optionee,
subject to the terms and conditions herein set forth (the "Plan"), the right
and option to purchase from the Company all or any part of an aggregate of
200,000 shares of Stock of the Company at the purchase price of $6.375 per
share, such option to be exercisable as hereinafter provided.
2. Terms and Conditions. The option evidenced hereby is subject
to the following terms and conditions:
(a) Expiration Date. The option shall expire on December
27, 2004.
(b) Exercise of Option. Subject to the accelerated
vesting as otherwise provided for in this Agreement, the option shall be
exercisable in two equal installments in accordance with the following
schedule: 100,000 on December 28, 1995 (the "First Installment"), and a
further 100,000 on December 28, 1996 (the "Second Installment"). However, in
the event that the Common Stock of the Company trades at or above the Average
<PAGE> 2
Closing Price on or prior to the scheduled vesting date indicated in the table
below, the relevant installment will be accelerated and become immediately
vested:
<TABLE>
<CAPTION>
SCHEDULED ACCELERATED IF
INSTALLMENT VESTING DATE AVERAGE CLOSING PRICE EQUALS OR EXCEEDS
----------- ------------------ ---------------------------------------
<S> <C> <C>
First December 28, 1995 $7.3313
Second December 28, 1996 $8.4309
</TABLE>
In addition, in the event any installment is vested early as provided for in
the preceding sentence, new options (hereinafter the "Reload Options") equal in
number to the number of options of the installments vesting early shall be
granted to the Optionee upon the exercise of such vested options or any other
options held by the Optionee pursuant to any other grant prior, or subsequent,
to the effective date of this Agreement in a number equal to the number of such
options exercised. These Reload Options will have an exercise price equal to
the Closing Price on the date of the new grant and shall be immediately vested
and exercisable for a period from the date of grant through the expiration date
of the original option replaced. Any option not exercised on any applicable
vesting date may be exercised thereafter at any time, in whole or in part,
before the relevant expiration date of the option. Any exercise shall be
accompanied by a written notice to the Company specifying the number of shares
as to which the option is being exercised. If the Optionee so requests, shares
of Common Stock purchased upon exercise of an option may be issued in the name
of the Optionee or another person.
(c) Payment of Purchase Price Upon Exercise. At the time
of any exercise, Optionee shall deliver to the Company, together with the
notice provided in paragraph (b) above, the full amount of the purchase price
therefore payable either by bank cashier's check or certified check payable to
the order of the Company or in Common Stock delivered by the Optionee valued at
the Closing Price of such Common Stock, or any combination of cash or
<PAGE> 3
Common Stock in the sole discretion of the Optionee. The term "Closing Price"
shall be the last sale price regular way on the date of exercise of the option
or, in the case no sale takes place on such date, the average of the high bid
and low asked prices regular way, in either case on the principal National
Securities Exchange in which the Common Stock is listed or admitted to trading
or, if the shares of Common Stock are not listed or admitted to trading on any
such securities exchange, the last sales price in the over-counter market as
reported by NASDAQ or such other system then in use. If the Common Stock is not
traded such that the Closing Price can be determined in accordance with the
preceding sentence, the Closing Price shall mean the fair market value of the
Common Stock as of the last day of the measuring period as determined by an
independent investment banker approved by the Corporation and the Employee. The
Average Closing Price shall be the average of the Closing Prices for a twenty
(20) day consecutive period of trading days.
(d) Exercise Upon Termination of Employment. Any option
granted hereunder (including all Reload Options) may be exercised by the
Optionee, his heirs, devisees, legatees or assigns at any time before the
relevant expiration date, whether or not Optionee ceases to be an employee and
whether or not such employment is terminated by voluntary written resignation,
by action of the Company for cause, without cause, or by reason of death or
disability, with respect to all options as to which his right of exercise has
vested as provided for in paragraph (b) or as to which his right of exercise
shall vest in accordance with the next sentence of this paragraph on the date
of his termination of employment. In the event of a termination of employment
for any reason, except by the Company for cause or by voluntary resignation by
Optionee, all unvested options granted under this Agreement shall be
immediately exercisable as of the date of his termination of his employment
without regard to the installment provision set forth in paragraph (b) above.
In this event, the target Average Closing Prices defined in paragraph 2(b)
shall be
<PAGE> 4
deemed to have been achieved on or before the scheduled vesting date and
Optionee shall also have the right to the Reload Options as described therein.
The term "for cause" shall have the same meaning as in section 4(a)(v) of the
Optionee's Employment Agreement dated January 4, 1991 ("Employment Agreement").
(e) Transferability. This option may be transferred by
the Employee with the consent of the Company which shall not be unreasonably
withheld at any time; provided however, Section 2(d) of this Agreement shall be
applied based on the Employee and his status and not that of any assignee.
(f) Adjustments. In the event of a reorganization,
recapitalization, stock split, stock dividend, Extraordinary Dividend,
combination of shares, consolidation, merger (other than a merger or
consolidation which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares), any sale or transfer by the
Company of all or substantially all of its assets or any tender offer or
exchange offer for or the acquisition, directly or indirectly, by any person or
group of all or a majority of the then outstanding voting securities of the
Company, rights offering, or any other change in the corporate structure or
rights with respect to any shares of the Company, adjustments shall be made to
the number or type of stock subject to this Agreement and, in order to prevent
dilution or enlargement of the rights of Optionee, to the number of Options,
and the type and option price of stock subject to outstanding Options or as
provided below with respect to Extraordinary Dividend. In the case of an
Extraordinary Dividend, the Optionee shall be entitled to have distributed to
him upon the exercise of any portion of the option an amount equal to the
Extraordinary Dividend he would have received had he exercised such portion of
the option immediately prior to the declaration of the Extraordinary Dividend.
For this purpose, an Extraordinary Dividend shall mean any dividend or
dividends paid or declared in
<PAGE> 5
the twelve month period immediately prior to the day after any such declaration
in excess in the aggregate of 7% of the average Closing Price of the Common
Stock during such period.
(g) Withholding of Taxes. No stock may be granted or
option may be exercised unless the Grantee or the Optionee has paid, or has
made provision, satisfactory to the Committee for payment of, federal, state
and local income taxes, or any other taxes (other than stock transfer taxes)
which the Company may be obligated to collect as a result of the issue or
transfer of shares of Stock upon exercise of an option. The Optionee may elect
that shares of Common Stock can be applied towards the payment of withholding
taxes.
3. Treatment of Options as Non-Qualified Stock Options. The
Company and Optionee acknowledge that the stock options granted hereunder shall
be treated as non-qualified stock options for U.S. federal income tax purposes.
4. Registration, Listing and Qualification of Shares of Stock.
(a) Registration. The Company, within six months of the
date any option granted pursuant to this Agreement first becomes vested and
exercisable, shall register all the shares underlying the options on a
Registration Statement on Form S-8 ("S-8"). The Company shall also prepare and
file a Form S-3 prospectus with such S-8.
(b) Listing. The Company, within six months of the date
any option granted pursuant to this Agreement first becomes vested and
exercisable, shall list all the shares underlying the options on the American
Stock Exchange with an Additional Listing Application.
(c) Qualification. The Company may require Optionee to
furnish to the Company, prior to the issuance of any shares upon the exercise
of all or any part of this option,
<PAGE> 6
an agreement in which Optionee acknowledges the status of the shares and the
conditions and the restrictions, if any, upon their sale or distribution under
the applicable securities laws.
5. Notices. Any notice hereunder to the Company shall be
addressed to it at its office as follows: Attn: Corporate Secretary. Any
notice hereunder to Optionee shall be addressed to him at 26344 McDonald Road,
The Woodlands, Texas 77380. Either party may designate at any time hereafter
in writing some other address.
6. Binding Agreement. This Agreement constitutes the binding
agreement of the parties with respect to the grant of options to the Optionee
under the Plan. Notwithstanding any discretionary authority possessed by the
Committee under the Plan or the Company to impose other terms or conditions on
the grant or exercise of options, no additional terms or condition (other than
those expressly stated in this Agreement) may be imposed by the unilateral
action of the Committee or the Company. This Agreement may not be modified
except by the mutual agreement of the parties in writing.
7. No Termination or Amendment. No termination or amendment of
the Plan by the Company, without the consent of Optionee, shall adversely
affect the rights of Optionee with respect to any option granted under this
Agreement.
8. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware.
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
NABORS INDUSTRIES, INC.
/s/ Daniel McLachlin
------------------
Daniel McLachlin
/s/ Richard A. Stratton
---------------------
RICHARD A. STRATTON
<PAGE> 1
Exhibit 10.20
AMENDMENT TO EMPLOYMENT CONTRACT
This Amendment made as of this 28th day of December, 1994 by and
between Nabors Industries, Inc., a Delaware corporation (the "Corporation") and
Richard A. Stratton (the "employee").
WHEREAS, the Corporation and the Employee entered into an employment
agreement dated January 4,1991 (the "Agreement"); and
WHEREAS, the Corporation and the Employee wish to extend and amend the
Agreement.
NOW THEREFORE, the parties hereby agree as follows:
1. The base salary of the Employee of $225,000, as provided in
Section 3(a) of the Agreement, is increased to $275,000 effective October 1,
1994.
2. Section 4(a)(i) of the Agreement is amended to read in its
entirety "(I) December 31, 1998".
3. The reference to "December 31, 1995" appearing in Section 5(a)(i)
shall be replaced by "December 31, 1998".
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date and year first written.
Nabors Industries, Inc.
By: /s/ Anthony G. Petrello
-----------------------
Anthony G. Petrello
/s/ Richard A. Stratton
-----------------------
Richard A. Stratton
<PAGE> 1
Exhibit 10.27
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of the 22nd of December, 1994
(the "Agreement") is by and among Nabors Industries, Inc., a Delaware
corporation ("Nabors"), Delta Drilling Company, a Texas corporation wholly
owned by Gordon P. Getty ("Delta"), and Gordon P. Getty ("Getty"). Nabors,
Delta and Getty are referred to collectively herein as the "Parties," and each
individually as a "Party." Exhibit A sets forth the definitions of certain
terms used herein.
RECITALS:
WHEREAS, Getty beneficially and of record owns all of the outstanding
capital stock of Delta, which consists of 10,000 shares of common stock, par
value $.01 per share ("Delta Common Stock ");
WHEREAS, subject to and in accordance with the terms of this
Agreement, Nabors wishes to purchase from Getty, and Getty wishes to sell to
Nabors, all of the outstanding shares of Delta Common Stock for $20,000,000 in
cash, subject to adjustment as provided herein.
WHEREAS, the parties hereto desire to set forth certain
representations, warranties, and covenants made by each to the other as an
inducement to the consummation of the purchase and sale of the shares of Delta
Common Stock;
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. PURCHASE AND SALE OF DELTA SHARES.
(a) BASIC TRANSACTION. On and subject to the terms and conditions
of this Agreement, Nabors agrees to purchase from Getty, and Getty agrees to
sell to Nabors, all of the issued and outstanding shares of Delta Common Stock
for the consideration specified below in this Section 1.
(b) PURCHASE PRICE. Nabors agrees to pay to Getty $20,000,000
(the "Purchase Price") at the Closing by delivery of cash by wire transfer to
an account designated by Getty in writing to Nabors prior to the Closing Date.
(c) THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing ") shall take place at the offices of Vinson &
Elkins L.L.P., 2300 First City Tower, 1001 Fannin, Houston, Texas 77002-6760,
commencing at 9:00 a.m. local time on the second Business Day following the
satisfaction or waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated hereby (other than conditions with
respect to actions the respective Parties will take at the Closing itself) or
such other date as the Parties may mutually determine (the "Closing Date").
(d) DELIVERIES AT THE CLOSING. At the Closing, (i) Getty will
deliver to Nabors the various certificates, instruments, and documents referred
to in Section 6(a), (ii) Nabors will deliver to Getty
<PAGE> 2
the various certificates, instruments, and documents referred to in Section
6(b), (iii) Getty will deliver to Nabors stock certificates representing all of
the issued and outstanding shares of Delta Common Stock, endorsed in blank or
accompanied by duly executed stock powers, signature guaranteed, and (iv) Nabors
will deliver to Getty the consideration specified in Section 1(b).
(e) TAKING OF NECESSARY ACTION; FURTHER ACTION. The Parties
hereto shall take all such reasonable and lawful action as may be necessary or
appropriate in order to effectuate the transactions contemplated hereby as
promptly as possible. If, at any time after the Closing Date, any such further
action is necessary or desirable to carry out the purposes of this Agreement,
Getty shall, and shall direct his representatives to, take all such lawful and
necessary action.
(f) ADJUSTMENTS TO THE PURCHASE PRICE. Nabors and Getty agree
that the Net Liabilities (as defined below) of Delta as of the Closing Date
shall equal $1,265,000 and that in the event the Net Liabilities of Delta are
greater or lesser than $1,265,000, the Purchase Price shall be increased or
decreased, as the case may be, by an amount equal to the difference between the
actual Net Liabilities and $1,265,000, as set forth below.
(1) On or before a date that is 125 days following the
Closing (or the next Business Day if such day is not a Business Day),
Nabors will prepare and deliver to Getty a statement (the "Closing
Balance Sheet") showing the actual amount of Delta's assets and
liabilities as of the Closing Date, calculated in a manner consistent
with Delta's historical accounting policies and practices and
generally accepted accounting principles ("GAAP"). For purposes of
this Agreement, "Net Liabilities" shall mean the difference between
Delta's current assets and total liabilities, each calculated in a
manner consistent with Delta's historical accounting policies and
practices and GAAP; provided, however, that the following adjustments
shall be made in the calculation of Net Liabilities on the Closing
Balance Sheet: (i) Delta's liabilities shall be increased by an amount
equal to (x) the best estimate of the severance expenses for Delta
employees that arise as a result of the transactions contemplated
hereby pursuant to severance policies or employment agreements of
Delta in effect as of the Closing Date, as amended pursuant to Section
5(g)(4), including the cost to Delta of any continuation of health
insurance or other employee benefits pursuant to such policies or
agreements, minus (y) $1,000,000 (but in no event less than zero);
provided, that if such expenses are less than $1,000,000 then Getty
shall receive a credit in the amount by which such expenses are less
than $1,000,000 (the "Severance Credit") to be applied against Getty's
obligations to Nabors with respect to Former Employee Liabilities for
Terminated Employees pursuant to Section 5(g); (ii) Delta's current
assets shall be increased by the amount of capital expenditures from
October 1, 1994 through the Closing Date as permitted pursuant to the
terms of this Agreement (excluding amounts of capital expenditures for
which Delta is reimbursed by a third party); (iii) Delta's current
assets shall be decreased by the amount of proceeds from the sale or
other disposition of any property, plant or equipment from October 1,
1994 through the Closing Date; (iv) all insurance claims, accounts
receivables or other receivables included on the Closing Balance Sheet
that are not collected on or before the date that is 120 days
following the Closing Date (or the next Business Day if such day is
not a Business Day) will be fully reserved for on the Closing Balance
Sheet; (v) Delta's liabilities shall be increased by the cost to
Nabors of any insurance premiums incurred by Nabors at Getty's request
pursuant to Section 5(g)(4); and (vi) Delta's current assets shall be
increased for profits and decreased for losses resulting from
accounting for turnkey and footage drilling contracts not completed by
the Closing Date on a percentage-of-completion basis in accordance
with GAAP, based upon the actual cost of the well and Delta's results
pursuant to such contract or, if a well remains uncompleted as of the
date of delivery of the Closing Balance Sheet, the drilling budget and
<PAGE> 3
status of such contracts as of the date of delivery of the Closing
Balance Sheet and the percentage-of-completion adjustments shall
fully reflect any applicable insurance payments or claims of Delta
related to such turnkey or footage wells. With respect to the
adjustment referred to in (vi) above, Delta's current assets shall be
increased for positive contract margins and decreased for negative
contract margins by an amount equal to the product of (i) the positive
or negative contract margins on the contract multiplied by (ii) a
fraction the numerator of which shall be equal to the number of
revenue days under such contract occurring prior to and including the
Closing Date and the denominator of which shall be equal to the total
number of revenue days during the term of such contract. To the
extent any insurance claims, account receivables or other receivables
that are reserved on the Closing Balance Sheet pursuant to (iv) above
are collected, in whole or in part, or sold, transferred or otherwise
disposed of by or on behalf of Delta, Nabors or any of their
affiliates on or before the first anniversary of the Closing Date,
Nabors shall pay the full amount collected or received in respect
thereof to Getty in cash within five Business Days of the receipt
thereof by Nabors, Delta or such affiliate. Any such insurance
claims, account receivables or other receivables that remain
uncollected at the end of the first anniversary of the Closing Date
shall, upon the request of Getty, be assigned to Getty or his designee
for no further consideration.
(2) Within 30 days following delivery of the Closing
Balance Sheet, Getty shall notify Nabors whether it agrees with such
statement; provided, however, that if Getty shall fail to so notify
Nabors within such 30-day period, it shall be deemed to have agreed
with such statements. If Getty disagrees with such statements, Getty
and Nabors shall work in good faith to reach agreement on such
statements; but if they shall not agree within 10 days the matter will
be referred to one of the "Big Six" independent public accounting
firms as Getty and Nabors may mutually agree, the costs of which shall
be borne equally by Nabors and Getty. Such accountants shall examine
the records of Delta and determine the disputed Closing Balance Sheet
items within 30 days following the date such matter is referred to
them, and such determination shall be final and binding on Getty and
Nabors, and may be enforced by appropriate judicial or other
proceedings.
(3) If, as so determined, the Net Liabilities reflected
on the Closing Balance Sheet exceed $1,265,000, then Getty will within
ten days of such determination make a cash payment to Nabors in an
amount equal to the excess of the amount of the Net Liabilities over
$1,265,000, as an adjustment to the Purchase Price. If the Net
Liabilities as reflected on the Closing Balance Sheet are less than
$1,265,000, then Nabors shall within ten days of such determination
make a cash payment to Getty in an amount equal to the excess of
$1,265,000 over the Net Liabilities on such date, as an adjustment to
the Purchase Price.
2. REPRESENTATIONS AND WARRANTIES OF GETTY AND DELTA.
Getty and Delta, jointly and severally (with regard to Delta only
prior to the Closing Date), represent and warrant to Nabors that the statements
contained in this Section 2 are true, correct and complete as of the date of
this Agreement and will be true, correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Section 2, except for representations
that are made effective as of a specific date, which shall be true, correct and
complete as of such date), except as set forth in the Schedule applicable to
such representation and warranty contained in the disclosure schedule delivered
by Delta to Nabors on the date hereof attached hereto as Exhibit B (the
"Disclosure Schedule").
<PAGE> 4
(a) ORGANIZATION OF DELTA. Delta is a corporation duly
incorporated, validly existing, and in good standing under the laws of the
State of Texas.
(b) AUTHORIZATION OF TRANSACTION. Delta has all requisite power
and authority to execute and to deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
Getty has the capacity, right and power to execute and deliver this Agreement
and to perform his obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action and no other corporate action or proceeding
on the part of Delta is necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly executed
and delivered by each of Delta and Getty and constitutes the valid and legally
binding obligation of Getty and Delta, respectively, enforceable in accordance
with its terms. Except as required under the Hart-Scott-Rodino Act or as
otherwise provided herein, neither Getty nor Delta are obligated to give any
notice to, to make any filing with, or to obtain any authorization, consent, or
approval of any Governmental Authority in order to consummate the transactions
contemplated by this Agreement.
(c) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Delta has
all requisite corporate or other power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted, and
is duly qualified and in good standing to do business in each jurisdiction in
which the nature of the business conducted by it or the ownership or leasing of
its properties makes such qualification necessary, except where the failure to
be so qualified and in good standing, would not, individually or in the
aggregate have a Material Adverse Effect. Delta is in possession of all
franchises, authorizations, licenses, permits, approvals and orders necessary
to own, lease and operate its properties and to carry on its business as it is
now being conducted, except for such franchises, authorizations, licenses,
permits, approvals and orders the failure of which to obtain would not,
individually or in the aggregate, have a Material Adverse Effect (collectively,
the "Permits"), and there is no action, proceeding or investigation pending, or
to the knowledge of Delta, threatened, regarding the suspension or cancellation
of any of the Permits. Schedule 2(c) of the Disclosure Schedule lists the
directors and officers of Delta. Delta has delivered to Nabors correct and
complete copies of the charter and bylaws of Delta (as amended to date). The
minute books (containing the records of meetings of the stockholders, the board
of directors, and any committees of the board of directors), the stock
certificate books, and the stock record books of Delta are correct and
complete. Delta is not in default under or in violation of any provision of
its charter or bylaws.
(d) CAPITALIZATION. The entire authorized capital stock of Delta
consists of 100,000 shares of Delta Common Stock, of which 10,000 shares of
Delta Common Stock are issued and outstanding. All of the issued and
outstanding shares of Delta Common Stock have been duly authorized, are validly
issued, fully paid, and nonassessable. The issued and outstanding shares of
Delta Common Stock are held beneficially and of record by Getty, and are free
and clear of any Taxes and Security Interests (other than any restrictions
under the Securities Act and state securities laws), options, warrants, calls,
purchase rights, conversion rights, exchange rights, trusts, voting trusts or
other contracts or commitments relating to any capital stock or other security
of Delta (other than this Agreement). There are no outstanding or authorized
options, warrants, purchase rights, conversion rights, exchange rights, trusts,
voting trusts or other contracts or commitments that could require Delta to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to Delta. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of Delta.
<PAGE> 5
(e) SUBSIDIARIES. Delta has no subsidiaries.
(f) FINANCIAL STATEMENTS. Set forth in Schedule 2(f) are the
following financial statements of Delta (collectively, the "Financial
Statements"): (i) audited balance sheets and statements of income, changes in
stockholders' equity, and cash flow ("Audited Financial Statements") as of and
for the fiscal years ended December 31, 1992 and December 31, 1993, (the "Most
Recent Year End"); and (ii) unaudited balance sheets and statements of income,
changes in stockholders' equity, and cash flow (the "Unaudited Financial
Statements") as of and for the nine months ended September 30, 1994 (the "Most
Recent Quarter End"). The Financial Statements (including the notes thereto,
in the case of the Audited Financial Statements) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby (except as noted therein), are consistent with the books and
records of Delta, and present fairly the financial condition of Delta as of
such dates and the results of operations of Delta for such periods; provided,
however, that the Unaudited Financial Statements do not contain footnotes and
are subject to normal year-end adjustments consistent with prior practice that
will not, individually or in the aggregate, have a Material Adverse Effect.
(g) EVENTS SUBSEQUENT TO MOST RECENT QUARTER END. Except as set
forth on Schedule 2(g) of the Disclosure Schedule and since the date of the
Unaudited Financial Statements there has not been any change in the conduct of
the ongoing business operations of Delta that would, individually or in the
aggregate, have a Material Adverse Effect. Without limiting the generality of
the foregoing, since that date:
(1) Delta has not sold, leased, transferred, or assigned
any assets with a book value of $10,000 or more, or assets with an
aggregate book value of $50,000 or more, tangible or intangible,
outside the Ordinary Course of Business;
(2) Delta has not entered into any agreement, contract,
lease, or license outside the Ordinary Course of Business;
(3) Delta has not imposed or caused to be imposed any
Security Interest upon any of its assets, tangible or intangible,
outside the Ordinary Course of Business;
(4) Delta has not made any capital expenditures outside
the Ordinary Course of Business;
(5) Delta has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property, other than
ordinary wear and tear or damage, destruction or loss in any single
incident in an amount greater than $20,000 in amount, or damage,
destruction or loss in an aggregate amount greater than $50,000;
(6) Delta has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
(7) made any change in its accounting methods, principles
or practices;
(8) Delta has not committed to any of the foregoing; and
<PAGE> 6
(9) No new Employee Benefit Plan has been established and
no existing Delta Employee Benefit Plan has been modified or
terminated.
(h) LEGAL COMPLIANCE; NONCONTRAVENTION. Except as set forth in
Schedule 2(h) of the Disclosure Schedule, Delta has complied with and is not in
violation of or default under (i) any Law applicable to it or by which its
properties are bound by or subject to; or (ii) any Permits, except for such
events of noncompliance that would not, individually or in the aggregate, have
a Material Adverse Effect. No action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice alleging any failure
so to comply has been filed or commenced against Delta and to the Knowledge of
Delta no such action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been threatened. The execution and
delivery of this Agreement by Delta does not, and the performance of this
Agreement by Delta will not, (i) conflict with or violate its certificate of
incorporation or bylaws, (ii) conflict with or violate any Law in effect as of
the date of this Agreement and applicable to Delta or by which its properties
are bound or subject to, or (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or require payment under, or result in the
creation of a Security Interest on any properties or assets of Delta pursuant
to any note, bond, mortgage, indenture, contract, agreement, lease, license,
Permit, franchise or other instrument or obligation to which Delta is a party
or by which Delta or its properties are bound or subject to, except for
breaches, defaults, events, rights of termination, amendment, acceleration or
cancellation, payment obligations or Security Interests that would not,
individually or in the aggregate, have a Material Adverse Effect.
(i) TITLE TO PROPERTIES. Except as disclosed in the Financial
Statements or on Schedule 2(i) of the Disclosure Schedule, Delta has good and
indefeasible title to, or a valid leasehold interest in, the properties and
assets used by it, located on its premises, or shown on the Most Recent Balance
Sheet or acquired after the date thereof, free and clear of all Security
Interests, except for properties and assets disposed of in the Ordinary Course
of Business since the date of the Most Recent Balance Sheet and except for such
other liens or imperfections in title as do not affect Delta's enjoyment of
such assets in its business and that will not, individually or in the
aggregate, have a Material Adverse Effect.
(j) INTELLECTUAL PROPERTY. Schedule 2(j) of the Disclosure
Schedule lists all patents, trademarks, trade names, and copyrights and
registrations and applications for any such items, domestic or foreign, owned
or registered in the name of Delta. Delta owns or holds licenses under such
patents, trademarks, trade names, and copyrights necessary for the conduct of
its business as now being conducted. Delta is not currently in receipt of any
notice of infringement or notice of conflict with the asserted rights of others
in such patents, trademarks, trade names, and copyrights; nor is Delta
otherwise aware of any such infringement or conflict, or of any infringement
by, or conflict on the part of, others with respect to patents, trademarks,
trade names, or copyrights of Delta.
(k) TANGIBLE ASSETS. Schedule 2(k) of the Disclosure Schedule
lists and describes briefly (where appropriate by generic category) all
machinery, equipment, rigs and other tangible assets that Delta owns. Except
as set forth in Schedule 2(k) of the Disclosure Schedule, each such tangible
asset has been maintained in accordance with normal industry practice, is in
good operating condition and repair (subject to normal wear and tear) and is
suitable for the purposes for which it presently is used.
(l) CONTRACTS. Schedule 2(l) of the Disclosure Schedule lists the
following contracts and other agreements to which Delta is a party:
<PAGE> 7
(1) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing for
lease payments in excess of $3,000 per annum;
(2) any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities, equipment,
supplies, products, or other personal property, or for the furnishing
or receipt of services, including drilling contracts on active or
future jobs, the performance of which either will extend over a period
of more than six months (and is not terminable by Delta on notice of
60 days or less), or involves consideration in excess of $50,000;
(3) any agreement concerning a partnership or joint
venture;
(4) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of
$50,000 or under which it has imposed a Security Interest on any of
its assets, tangible or intangible;
(5) any material agreement concerning confidentiality or
noncompetition;
(6) any collective bargaining agreement or other contract
with any labor union;
(7) any separate agreement for the employment of any
individual on a full-time, part-time, consulting, or other basis
providing annual compensation in excess of $50,000 or any agreement or
document providing severance benefits;
(8) any agreement under which it has advanced or loaned
any amount to any of its directors, officers, and employees outside
the Ordinary Course of Business;
(9) any agreement under which the consequences of a
default or termination would have a Material Adverse Effect; or
(10) any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $50,000.
Delta has provided Nabors or Nabors' representatives access to correct and
complete copies of each written agreement listed in Schedule 2(l) of the
Disclosure Schedule and described in this Section 2(l). With respect to each
such agreement: (A) the agreement is legal, valid, binding, and in full force
and effect; (B) to the Knowledge of Delta, no party is in breach or default,
and no event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration under
the agreement, except in each case as set forth on Schedule 2(l) of the
Disclosure Schedule; (C) the Agreement will continue to be legal, valid,
binding, enforceable in accordance with its terms, and in full force and effect
following the consummation of the transaction contemplated herein; and (D)
except as set forth on Schedule 2(l) of the Disclosure Schedule, no party has
repudiated any provision of the agreement.
(m) INSURANCE. Schedule 2(m) of the Disclosure Schedule sets
forth the following information with respect to each insurance policy and self
insurance arrangements (including policies providing property, casualty,
liability, and workers' compensation coverage, and bond and surety
<PAGE> 8
arrangements) to which Delta is a party, a named insured, or otherwise the named
beneficiary of coverage at any time within the last three policy years:
(1) the name, address, and telephone number of the agent;
(2) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(3) the policy number and the period of coverage;
(4) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of deductibles and ceilings) of and limits on
coverage; and
(5) a description of any retroactive premium adjustments
or other loss-sharing arrangements.
With respect to each such insurance policy, and except as set forth on Schedule
2(m) of the Disclosure Schedule: (A) the policy is in full force and effect;
(B) to the Knowledge of Delta, neither Delta nor any other party to the policy
is in breach or default (including with respect to the payment of premiums or
the giving of notices), and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default, or permit termination,
modification, or acceleration under the policy; and (C) no party to the policy
has repudiated any provision thereof. Delta has been covered during the past
five years by insurance in scope and amount believed by management to be
adequate for the businesses in which it has engaged during the aforementioned
period. Schedule 2(m) of the Disclosure Schedule describes any self-insurance
arrangements affecting Delta.
(n) LITIGATION. Schedule 2(n) of the Disclosure Schedule sets
forth a brief description of each instance in which Delta or its properties (i)
is subject to any outstanding injunction, judgment, order, decree, ruling, or
charge, or (ii) is a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court of quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator and seeking a judgment or award against Delta in excess of $50,000
and each instance in which to the Knowledge of Delta any such actions described
in (i) and (ii) above is threatened against Delta or its properties.
(o) EMPLOYEE AND EMPLOYEE BENEFITS MATTERS.
(1) There are no pending or, to the Knowledge of Delta,
threatened disputes, labor controversies, strikes, lockouts, or work
stoppages with any current or former employees of Delta. Except for
Donald L. Frankel, the President of Delta, all employees of Delta are
employed on an at-will basis and may be terminated without cause by
Delta.
(2) Delta is not a party to any collective bargaining
agreement, nor are any collective bargaining agreements currently
being negotiated by or with respect to Delta.
(3) Delta has properly verified the identity and
authorization to work in the United States and has properly completed
and retained INS forms I-9 for all employees where required by the
Immigration Reform and Control Act of 1986 and related statutes.
<PAGE> 9
(4) Delta has delivered to Nabors a description of
Delta's severance pay program for salaried employees that was
announced to the salaried employees of Delta in conjunction with the
contemplated disposition of Delta and that will be in effect on the
day before the Closing Date. Delta does not maintain any other
severance pay program, but does have certain severance obligations to
Donald L. Frankel pursuant to an Employment Agreement dated January
10, 1990, a true, correct and complete copy of which has been provided
to Nabors.
(5) Except as set forth on Schedule 2(o) of the
Disclosure Schedule, with respect to all employees and former
employees of Delta, neither Delta nor any ERISA Affiliate presently
maintains, contributes to or has any Liability under any Employee
Benefit Plan. The plans, programs and arrangements set forth on
Schedule 2(o) of the Disclosure Schedule are herein referred to as the
"Delta Employee Benefit Plans."
(6) With respect to all employees and former employees of
Delta, neither Delta nor any ERISA Affiliate presently maintains,
contributes to or has any Liability under any funded or unfunded
medical, health or life insurance plan or arrangement for present or
future retirees or present or future terminated employees except as
required by the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), and except as set forth in the Delta
Drilling Company Special Health and Welfare Plan (and any predecessor
plan, arrangement or court order relating to such benefits).
(7) Delta does not maintain or contribute to a trust,
organization or association described in any of sections 501(c)(9),
501(c)(17) or 501(c)(20) of the Code.
(8) Favorable determination letters have been received
from the Internal Revenue Service with respect to each Delta Employee
Benefit Plan that is intended to comply with the provisions of section
401(a) of the Code, evidencing compliance with the relevant provisions
of the Tax Equity and Fiscal Responsibility Act of 1982, the Tax
Reform Act of 1984 and the Retirement Equity Act of 1984 and each such
Delta Employee Benefit Plan complies in form and in operation with the
requirements of the Code and meets the requirements of a "qualified
plan" under section 401(a) of the Code. The 401(k) Plan has been or
will be amended by December 31, 1994 so as to bring it into compliance
with the Tax Reform Act of 1986 and other applicable laws and
governmental regulations for which amendment is required by such date,
and is and will be as of the transfer date described in Section 5(c)
qualified under section 401(a) of the Code and the trust established
thereunder will be exempt from tax pursuant to section 501(a) of the
Code.
(9) With respect to each Delta Employee Benefit Plan that
is subject to Title I of ERISA, neither Delta nor any ERISA Affiliate
has failed to comply with any of the applicable reporting, disclosure
or other requirements of ERISA and the Code. There has been no
"prohibited transaction" as described in section 4975 of the Code or
section 406 of ERISA for which Delta has any Liability.
(10) Delta does not have any unsatisfied Liability that is
not disclosed on Schedule 2(o) of the Disclosure Schedule for failure
to comply with ERISA or the Code for any action or failure to act in
connection with the administration or investment of, or with respect
to, the Delta Employee Benefit Plans including any actions taken or
omitted in connection with the Retirement Plan for Employees of
DeltaUS Corporation.
<PAGE> 10
(11) Any Delta Employee Benefit Plan that is or has been
subject to section 412 of the Code, section 302 of ERISA, or Title IV
of ERISA has been terminated. Except as set forth in Schedule 2(o) of
the Disclosure Schedule, Delta does not have any unsatisfied Liability
relating to any such terminated plan. With respect to the Delta
Employee Benefit Plans, all applicable contributions and premium
payments for all periods ending prior to the Closing Date (including
periods from the first day of the then current plan year to the
Closing Date) shall be made prior to the Closing Date in accordance
with past practice.
(12) Delta does not presently maintain, contribute to or
have any Liability (including current or potential withdrawal
liability) with respect to any "multiemployer plan" as such term is
defined in section 3(37) of ERISA.
(13) Except with regard to the Delta Employee Benefit
Plans listed on Schedule 2(o) of the Disclosure Schedule, Delta does
not have any Liability attributable to any Employee Benefit Plan. No
ERISA Affiliate sponsors, maintains, contributes to or has any
Liability under or, within six years of the date of this Agreement,
sponsored, maintained or contributed to or had any Liability under any
multiemployer plan as defined in section 3(37) of ERISA or any
Employee Benefit Plan subject to section 302 or Title IV of ERISA or
section 412 of the Code.
(14) There is no pending or threatened legal action,
proceeding or investigation against or involving any Delta Employee
Benefit Plan (other than routine claims for benefits) and, to the
Knowledge of Delta, there is no basis for any such condition, legal
action, proceeding or investigation. Any bonding required with
respect to the Delta Employee Benefit Plans in accordance with
applicable provisions of ERISA has been obtained and is in full force
and effect. No Delta Employee Benefit Plan is presently under audit
or examination (nor has notice been received of a potential audit) by
the Internal Revenue Service, the Department of Labor, or the PBGC,
nor are there any matters pending with respect to any Delta Employee
Benefit Plan with the Internal Revenue Service under its Voluntary
Compliance Resolution program, its Closing Agreement Program, or
similar programs.
(15) Except as set forth on Schedule 2(o) of the
Disclosure Schedule.
(a) Delta is not a party to any employment
agreement, whether written or oral, or agreement with change
in control or similar provisions;
(b) Delta does not have a currently outstanding
loan or loans to any current or former employees of Delta, nor
has Delta guaranteed such loans;
(c) No amount payable to an employee or former
employee of Delta in connection with the consummation of the
transactions contemplated by this Agreement will be an "excess
parachute payment" which is non-deductible under section 280G
of the Code.
(16) To the Knowledge of Delta, there has been no act or
acts which would result in a disallowance of a deduction to Delta or
the imposition of a tax upon Delta pursuant to section 4980B of the
Code, or with regard to plan years beginning before December 31, 1988,
section 162(i) of the Code as in effect immediately prior to the
enactment of the Technical and Miscellaneous Revenue Act of 1988, or
any regulations promulgated thereunder, whether final, temporary or
proposed, which disallowance or imposition would have a Material
Adverse Effect. No event has occurred with respect to which Delta
could be liable for a tax imposed by
<PAGE> 11
any of sections 4972, 4976, 4977, 4979, or 4980 of the Code, or for a
civil penalty under section 502(c) of ERISA, which tax or civil
penalty would have a Material Adverse Effect.
(17) With respect to each of the Delta Employee Benefit
Plans, Delta has delivered to Nabors true and complete copies of: (a)
the plan documents, including any related trust agreements, insurance
contracts or other funding arrangements, or a written summary of the
terms and conditions of the plan if there is no written plan document;
(b) the most recent determination letter received from the Internal
Revenue Service (where applicable); (c) the most recent IRS Form 5500;
(d) the most recent financial statement; and (e) the most recent
summary plan description. Except with respect to the Delta Drilling
Company Special Health and Welfare Plan and the benefits to be
provided pursuant to the severance pay program referred to in Section
2(o)(4), there has been no act or omission by Delta or any current or
prior affiliate of Delta that would impair the right or ability of
Delta to unilaterally amend or terminate any Delta Employee Benefit
Plans or to unilaterally terminate as of the Closing Date the accrual
of any benefits after such date with respect to employees or former
employees of Delta.
(p) TAX MATTERS. Except as set forth on Schedule 2(p) of the
Disclosure Schedule:
(1) Delta has filed all Tax Returns that are required to
be filed by it. All such Tax Returns were correct and complete in all
material respects. All Taxes stated to be due and owing by Delta on
such Tax Returns have been paid except to the extent payment thereof
is being contested by appropriate action and for which adequate
provision has been made on the Unaudited Financial Statements and
shall be made on the Closing Balance Sheet. Delta is not the
beneficiary of any extension of time within which to file any Tax
Return. To the Knowledge of Delta, no claim has been made by any
authority in a jurisdiction where Delta does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction. There are
no Security Interests on any of the assets of Delta that arose in
connection with any failure (or alleged failure) to pay any Tax.
(2) Delta has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, or stockholder.
(3) There is no dispute or claim concerning any Tax
Liability of Delta either (A) claimed or raised by any authority in
writing or (B) as to which Delta has Knowledge.
(4) Schedule 2(p) of the Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns filed with
respect to Delta for taxable periods ended on or after December 31,
1992.
(5) Delta has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
(6) Delta is not a party to any Tax allocation or sharing
agreement. Since February 1, 1990, Delta (A) has not been a member of
an Affiliated Group filing a consolidated federal income Tax Return,
and (B) has no Liability for the Taxes of any Person under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
<PAGE> 12
(7) Delta has qualified as an "S Corporation" as defined
in section 1361 et seq. of the Code (and any similar provisions of
state or local law) since February 1, 1990 and has no Subchapter C
earnings and profits.
(q) BROKERS' FEES. Getty is responsible for the payment of fees
to Simmons & Company International in connection with the transactions
contemplated hereby. Delta does not have any Liability to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Nabors could become liable or
obligated.
(r) REAL PROPERTY. Schedule 2(r) of the Disclosure Schedule lists
and describes briefly all real property owned by Delta. With respect to each
such parcel of owned real property:
(1) the identified owner has good and indefeasible title
to, and quiet enjoyment of, the parcel of real property, free and clear
of any Security Interest, easement, covenant, or other restriction,
except for installments of special assessments not yet delinquent,
recorded easements, covenants, and other restrictions, and utility
easements, building restrictions, zoning restrictions, and other
easements and restrictions existing generally with respect to
properties of a similar character that do not affect materially and
adversely the current use, occupancy, or value of the property subject
thereto;
(2) there are no pending or threatened condemnation
proceedings, lawsuits, or administrative actions relating to the
property or other matters affecting materially and adversely the
current use, occupancy, or value thereof;
(3) the legal description for the parcel contained in the
deed thereof describes such parcel fully and adequately except for
variations, the buildings and improvements are located within the
boundary lines of the described parcels of land, are not in material
violation of applicable setback requirements, zoning laws, and
ordinances (and none of the properties or buildings or improvements
thereon are subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications), and do not encroach on any
easement which may burden the land;
(4) all facilities have received all approvals of
governmental authorities (including material licenses and permits)
required in connection with the ownership or operation thereof, and
have been operated and maintained in accordance with applicable laws,
rules, and regulations in all material respects;
(5) there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to any
party or parties the right of use or occupancy of any portion of the
parcel or real property; and
(6) there are no outstanding options or rights of first
refusal to purchase the parcel of real property, or any portion
thereof or interest therein.
(s) LEASES. Schedule 2(s) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased by Delta. Delta has
made available to Nabors or its representatives correct and complete copies of
the leases and subleases listed in Schedule 2(s) of the Disclosure Schedule.
With respect to each material lease and sublease listed in Schedule 2(s) of the
Disclosure Schedule:
<PAGE> 13
(1) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect in all material respects;
(2) no party to the lease or sublease is in material
breach or default, and no event has occurred which, with notice or
lapse of time, would constitute a material breach or default or permit
termination, modification, or acceleration thereunder;
(3) no party to the lease or sublease has repudiated any
material provision thereof;
(4) there are no material disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(5) Delta has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold; and
(6) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including material
licenses and permits) required in connection with the operation
thereof.
(t) GUARANTIES. Delta is not a guarantor and is not otherwise
responsible for any liability or obligation (including indebtedness) of any
other Person.
(u) ENVIRONMENT, HEALTH, AND SAFETY. Except as disclosed on
Schedule 2(u) of the Disclosure Schedule and as otherwise would not have a
Material Adverse Affect:
(1) Delta (A) has complied with the Environmental, Health,
and Safety Laws in all respects and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has
been filed or commenced against it alleging any such failure to comply,
(B) has obtained and been in substantial compliance with all of the
terms and conditions (including notification, reporting and
registration requirements) of all permits, licenses, and other
authorizations that are required under the Environmental, Health, and
Safety Laws and no circumstance exists that is reasonably likely to
interfere with such compliance in the future or require material
expenditures, and (C) has complied in all respects with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables that are contained
in the Environmental, Health, and Safety Laws;
(2) Delta has no Liability, and has not handled or
disposed of any substance, arranged for the disposal of any substance,
exposed any employee or other individual to any substance or
condition, or owned or operated any property or facility in any manner
that could give rise to any Liability, for damage to or clean up of
any site, location, or body of water (surface or subsurface) for
remediation (including removal, response, clean up, investigative and
monitoring of contaminants or pollutants), for any illness of or
personal injury to any employee or other individual or for any reason
under any Environmental, Health, and Safety law; and
(3) All properties and equipment used in the business of
the Company have been free of asbestos, PCBs, methylene chloride,
trichloroethylene, 1,2-transdichloroethylene, dioxins, dibenzofurans,
and Extremely Hazardous Substances in concentrations or locations that
require remedial action under any Environmental, Health, and Safety
Laws.
<PAGE> 14
(v) ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
Schedule 2(v) of the Disclosure Schedule and other than (i) Liabilities fully
reflected and reserved against on the Most Recent Financial Statements, (ii)
Liabilities incurred in the Ordinary Course of Business since September 30,
1994, and (iii) Liabilities provided for in this Agreement that shall be fully
reflected on the Closing Balance Sheet, there are no Liabilities of Delta of
any kind whatsoever, and there is no existing condition, situation or set of
circumstances that could reasonably be expected to result in such Liabilities.
(w) RECEIVABLES. Schedule 2(w) of the Disclosure Statement sets
forth an accurate aging of the receivables of Delta. All of the receivables
reflected on the Financial Statements have arisen only from bonafide
transactions entered into in the Ordinary Course of Business.
3. REPRESENTATIONS AND WARRANTIES OF NABORS. Nabors represents
and warrants to Delta and Getty that the statements contained in this Section 3
are true, correct and complete as of the date of this Agreement and will be
true, correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3).
(a) ORGANIZATION. Nabors is a corporation duly incorporated,
validly existing, and in good standing under the laws of Delaware.
(b) AUTHORIZATION OF TRANSACTION. Nabors has all requisite power
and authority to execute and to deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action and no other corporate action or proceeding on the part of
Nabors is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Nabors and constitutes the valid and legally binding obligations
of Nabors, enforceable in accordance with its terms. Except as required by the
Hart-Scott-Rodino Act or as otherwise provided herein, Nabors need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any Governmental Authority in order to consummate the transactions
contemplated by this Agreement.
(c) POWER AND AUTHORITY. Nabors has all requisite corporate or
other power and authority to own, lease and operate its properties and to carry
on their respective businesses as each is now being conducted.
(d) BROKERS' FEES. Nabors shall not have any Liability to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Getty could become liable
or obligated.
(e) INVESTMENT. Nabors is acquiring the shares of Delta Common
Stock for investment purposes only and not with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities
Act.
(f) ABILITY TO PAY. Nabors has available sufficient funds to pay
the Purchase Price, together with all costs and expenses relevant thereto, and
otherwise to perform its obligations under this Agreement.
<PAGE> 15
4. PRE-CLOSING COVENANTS. The Parties agree as follows with
respect to the period between the execution of this Agreement and the Closing:
(a) GENERAL. Each of the Parties will use all reasonable efforts
to take all action and to do all things necessary, proper, or advisable in
order to consummate and to make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions
set forth in Section 6).
(b) NOTICES AND CONSENTS. Delta will give any notices to third
parties, and will use all reasonable efforts to obtain all third-party
consents, that are required for the consummation of the transactions
contemplated hereby or that Nabors may reasonably request in connection with
the matters referred to in Sections 2(l) and 2(s). To the extent, if any,
noted in the Disclosure Schedule as being required, Nabors will give any
notices to third parties, and will use all reasonable efforts to obtain any
third-party consents, that Delta or Getty may reasonably request. Each of the
Parties will (and Getty will cause Delta to) give any notices to, make any
filings with, and use all reasonable efforts to obtain any authorizations,
consents, and approvals of Governmental Authorities in connection with the
matters referred to in Sections 2(b) and 3(b). Without limiting the generality
of the foregoing, each of the Parties will file any Notification and Report
Forms and related material that it may be required to file with the Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice under the Hart-Scott-Rodino Act, will use all reasonable efforts to
obtain an early termination of the applicable waiting period, and will make any
further filings pursuant thereto that may be necessary, proper, or advisable in
connection therewith.
(c) OPERATION OF BUSINESS. Getty and Delta covenant and agree
that unless otherwise expressly contemplated by this Agreement or consented to
in writing by Nabors, (x) Delta will:
(1) operate its business only in the usual and ordinary
course consistent with past practices;
(2) preserve its business and properties, including its
present operations, physical facilities, working conditions and
relationships with lessors, licensors, suppliers, customers and
employees;
(3) maintain and keep its properties and assets in as
good repair and condition as at present, ordinary wear and tear
excepted; and
(4) keep in full force and effect insurance and bonds
comparable in amount and scope of coverage to that currently
maintained;
and (y) Delta will not:
(1) make any declaration, setting aside or payment of
dividends or distributions in respect of shares of Delta's Common
Stock or any redemption, purchase or other acquisition of any of
Delta's securities;
(2) increase or otherwise modify (except as contemplated
by this Agreement) the compensation of its employees including
salaries, bonus and other employee benefits, including severance
payments;
<PAGE> 16
(3) sell or otherwise dispose of any real or tangible
property the replacement value of which exceeds $25,000;
(4) make any capital expenditures, other than in the
Ordinary Course of Business, or make any capital expenditures for any
single item in excess of $15,000, without the prior consent of Nabors;
(5) except for borrowings under existing credit facilities
in the Ordinary Course of Business, incur any obligation for borrowed
money or purchase money indebtedness; and
(6) enter any new bids for turnkey or footage drilling
contracts without the prior consent of Nabors, which consent shall not
be unreasonably withheld, provided that Nabors agrees to notify Delta
of its decision with regard to turnkey or footage bids within two
Business Days after Delta notifies Nabors of its desire to bid on such
a contract.
(d) FULL ACCESS. Delta will permit representatives of Nabors to
have full access at reasonable times during normal business hours, in a manner
that will not interfere with the normal business operations of Delta, to all
premises, properties, personnel, books, records (including Tax records),
contracts, and documents of or pertaining to Delta.
(e) NOTICE OF DEVELOPMENTS. Each Party will give prompt written
notice to the other of any material adverse development causing a breach of any
of its representations and warranties under this Agreement.
(f) 401(k) PLAN. On or before the Closing Date, and effective as
of such date, Delta (i) will withdraw as a participating employer under the
401(k) Plan, and (ii) will cause each Delta Participant (including each
Terminated Employee who is a Delta Participant) to have a fully vested and
nonforfeitable interest in his or her account balance under the 401(k) Plan.
(g) NO SHOPPING. From and after the date of this Agreement until
the termination of this Agreement in accordance with its terms, neither Getty,
any representative or agent of Getty nor any officer, director, employee, agent
or representative of Delta shall, directly or indirectly, solicit or knowingly
encourage, including by way of furnishing information, the initiation of any
inquiries or proposals regarding, or engage in any discussions or enter into
any agreements regarding, any merger, tender offer, sale of shares of capital
stock or similar business combination transactions involving Delta, or any sale
of all or substantially all the assets of Delta.
(h) INSURANCE MATTERS. Delta shall use its reasonable efforts to
obtain an endorsement on its insurance policies naming Nabors and its
subsidiaries and affiliates as additional named insureds effective on the
Closing Date.
5. POST-CLOSING COVENANTS. The Parties agree as follows with
respect to the period following the Closing.
(a) GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as the other Party
reasonably may request; provided, however, that this Section 5(a) shall not be
deemed to require
<PAGE> 17
either party to expend funds or to incur obligations not otherwise expressly
required pursuant to the Agreement.
(b) NABORS' PLAN. As soon as practicable after the Closing Date,
Nabors shall establish or designate a defined contribution plan of its own or
of an affiliate ("Nabors' Plan") that is qualified under sections 401(a) and
501(a) of the Code to receive a transfer of assets and liabilities from the
401(k) Plan, as described in Section 5(c) below. As of the date of the
transfer of assets and liabilities from the 401(k) Plan to Nabors' Plan in
accordance with Section 5(c) below, Nabors' Plan shall satisfy the requirements
of a "qualified plan" under section 401(a) of the Code, and the trust
established under Nabors' Plan shall be exempt from tax pursuant to section
501(a) of the Code.
(c) TRANSFER TO NABORS' PLAN. As soon as practicable following
the later of (i) the Closing Date, (ii) the distribution of any amounts
necessary to cause the 401(k) Plan to satisfy the non-discrimination tests of
sections 401(k) and 401(m) of the Code for the 1994 plan year, and (iii) the
establishment or designation of Nabors' Plan, and in any event not later than
March 31, 1995, Getty shall cause to be transferred from the trust established
under the 401(k) Plan to the trust established under Nabors' Plan an amount in
cash equal to the aggregate account balances of the Delta Participants under
the 401(k) Plan determined as of the transfer date in accordance with the
methods of valuation set forth in the 401(k) Plan, together with such records
as are necessary to determine each participant's account balance; provided,
however, that to the extent any Delta Participant owes any amount to the 401(k)
Plan pursuant to the terms of a loan from such plan to such Delta Participant,
an in-kind transfer of such loan shall be made in lieu of the transfer of cash.
From and after the date of such transfer, Nabors shall cause Nabors' Plan to
assume the obligations of the 401(k) Plan with respect to the account balances
transferred with respect to Delta Participants, and the 401(k) Plan shall cease
to be responsible therefor. Nabors and Getty shall cooperate in making all
appropriate Internal Revenue Service filings, if any, in connection with the
transfer described above. The transfer of assets and liabilities from the
401(k) Plan to the Nabors' Plan is intended to constitute a spin-off for
purposes of section 414(l) of the Code and the regulations thereunder. For the
period between the Closing Date and the date of the transfer of assets and
liabilities from the 401(k) Plan to the Nabors' Plan, Nabors, Getty, and Delta
shall cooperate in making appropriate arrangements to continue to permit Delta
Participants who remain employed by Delta or Nabors or any affiliate of Nabors
to make payments on their outstanding loans from the 401(k) Plan, including,
without limitation, implementing payroll deductions from the paychecks of such
Delta Participants and remitting such amounts to the trustee of the 401(k) Plan
in accordance with the existing practice of Delta.
(d) PARTICIPATION IN NABORS' RSP. Effective as of the Closing
Date, Nabors and Delta shall extend coverage under the Nabors Industries, Inc.
Retirement Savings Plan (the "Nabors' RSP") to each employee of Delta who is
employed by Delta or Nabors (or a Nabors affiliate that is a participating
employer in the Nabors' RSP) immediately after the Closing Date, who was a
participant in the 401(k) Plan as of the day immediately preceding the Closing
Date, and who satisfies the eligibility requirements of the Nabors' RSP. For
purposes of participation in the Nabors' RSP following the Closing Date, each
employee of Delta shall be credited with service under the Nabors' RSP, for
eligibility and vesting purposes, with the service that they have with Delta or
its affiliates under sections 414 (b), (c), (m) and (o) of the Code as of the
day prior to the Closing Date.
(e) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity practice, plan,
occurrence, event, incident, action,
<PAGE> 18
failure to act, or transaction on or prior to the Closing Date involving Delta,
each of the other Parties will cooperate with it and its counsel in the contest
or defense, make available their personnel, and provide such testimony and
access to their books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 7).
(f) CHANGE IN TAX STATUS. Each Party acknowledges that the
consummation of the transactions contemplated hereby will result in the
termination, as of the Closing Date, of Delta's status as an S Corporation
under the Code. Furthermore, each Party acknowledges that in accordance with
section 1362(e) of the Code and the Treasury regulations thereunder (i) the
portion of Delta's taxable year beginning January 1, 1995 and ending on the day
prior to the Closing Date shall be treated as a short taxable year for which
Delta is an S Corporation (the "S short year"), (ii) the portion of Delta's
taxable year beginning on the day following the end of the S short year and
ending on September 30, 1995 shall be treated as a short taxable year for which
Delta is a C Corporation subject to federal income tax imposed by Subtitle A,
Chapter 1 of the Code (the "C short year"), and (iii) that items shall be
allocated between the S short year and the C short year on the basis of Delta's
normal tax accounting method. The Parties agree to provide Getty and those
persons designated by Getty as responsible for the preparation of the Form 1120
S and accompanying schedules required to be filed by Delta with the Internal
Revenue Service for the S short year access to the books and records of Delta
for purposes of preparing the Form 1120 S and accompanying schedules.
(g) EMPLOYEE MATTERS.
(1) As soon as practicable prior to the Closing Date, but
no later than five days prior to the Closing Date, Nabors will
identify and provide written notice to Getty of those salaried
employees of Delta that Delta will continue to employ following the
Closing Date. Those employees who are so identified are referred to
herein as "Continuing Employees." Continuing Employees will be
provided the opportunity to obtain coverage under Nabors' Employee
Benefit Plans, subject to the terms thereof.
(2) Delta shall terminate the employment of all salaried
employees of Delta other than the Continuing Employees effective
immediately prior to the Closing. Such employees are referred to
herein as "Terminated Employees."
(3) Except to the extent accrued on the Closing Balance
Sheet (determined without regard to the subtraction of $1,000,000 from
the amount of such costs), with respect to all employees or former
employees whose employment with Delta (or any person for whose
Liabilities Delta would be responsible through indemnification or
otherwise) ceased on or before the Closing Date (including each
Terminated Employee) and their dependents, Getty shall be responsible
for all related Liabilities (including severance costs and other
Liabilities in respect of Employee Benefit Plans such individuals
participated in or are entitled to participate in prior to the Closing
Date) whether such Liabilities arise on, prior to or after the Closing
Date (collectively, "Former Employee Liabilities"); provided, however,
that Former Employee Liabilities shall not include any Liabilities
assumed by the Nabors' Plan pursuant to Section 5(c). Notwithstanding
the preceding provisions of this paragraph, Getty's liability under
this paragraph with respect to Terminated Employees shall be reduced by
the amount, if any, of the Severance Credit. Subject to the forgoing,
Delta shall retain Liabilities after the Closing Date for the Delta
Drilling Company Special Health and Welfare Plan and for the provision
of the continued medical and dental coverage to the former employees of
Delta and
<PAGE> 19
their dependents pursuant to the severance pay program for salaried
employees described in Section 2(o)(4) or section 4980B of the Code and
Part 6 of Title I of ERISA. Notwithstanding anything in this Agreement
to the contrary, Getty's obligation to reimburse Nabors for Former
Employee Liabilities with respect to COBRA and the Delta Drilling
Company Special Health and Welfare Plan and any predecessor plan,
arrangement, or court order relating to such benefits shall survive
until the obligations of Delta with respect to such benefits shall have
ceased to exist.
(4) With respect to Former Employee Liabilities that
relate to the continuation of health insurance under any severance
policy or agreement or COBRA, Nabors agrees to use its best efforts
(with the cooperation of Delta) to obtain quotes for insurance
coverage in its name that would limit the retention or deductible
amount or the amount of self insurance for such Former Employee
Liabilities to $75,000 per individual per year and quotes for full
insurance coverage without any retention or deductible or self
insurance provision with respect to such Former Employee Liabilities.
Nabors shall notify Getty of the quotes it receives in respect of such
insurance coverage. Getty shall have the option prior to the Closing
to elect whether to request that Nabors place such insurance coverage,
and, if so requested, Nabors shall place the coverage that Getty
requests and use its best efforts to keep such coverage or comparable
coverage in place for so long as such Former Employee Liabilities
continue to exist. Any insurance premium paid by Nabors to provide
the supplemental coverage to the extent requested by pursuant to this
Section 5(g)(4) prior to the date of delivery of the Closing Balance
Sheet shall result in a Purchase Price Adjustment pursuant to the
provisions of Section 1(f). Any such insurance premium paid by Nabors
pursuant to this Section 5(g)(4) after delivery of the Closing Balance
Sheet shall be reimbursed by Getty within five Business Days of
Getty's receipt of evidence of the payment of such premiums by Nabors.
Nabors further agrees to use its best efforts to provide for the
continuation of life and disability insurance benefits pursuant to
severance policies or agreements for Terminated Employees on a fully
insured basis (not including self insurance) after the Closing Date.
(5) Prior to the Closing Date, Delta shall amend the
severance pay program for salaried employees described in Section
2(o)(4) so that it permits Delta or any successor to Delta to provide,
at its discretion, the one year or less of continued medical and
dental coverage described therein through wholly or partially self
funded plans, including the self funded medical and dental plan
maintained by Nabors, as well as insured plans.
6. CLOSING CONDITIONS.
(a) CONDITIONS TO OBLIGATION OF NABORS. The obligation of Nabors
to consummate the transactions contemplated hereby is subject to satisfaction
of the following conditions:
(1) the representations and warranties of Getty set forth
in Section 2 shall be true and correct in all material respects at and
as of the Closing Date;
(2) Delta and Getty shall have performed and complied
with all of their respective covenants and agreements hereunder in all
material respects through the Closing;
(3) Nabors and Delta shall have procured all of their
third party consents specified in Section 4(b);
<PAGE> 20
(4) no action, suit, or proceeding shall be pending
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (C) affect adversely
the right of Nabors to own Delta Common Stock and to control Delta, or
(D) affect adversely the right of Delta to own its assets and to
operate its business (and no such injunction, judgment, order, decree,
ruling, or charge shall be in effect);
(5) Getty shall have delivered to Nabors a certificate to
the effect that each of the conditions specified above in Section
6(a)(1)-(4) is satisfied in all respects;
(6) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated;
(7) Nabors shall have received the resignations,
effective as of the Closing, of each director and officer of Delta;
(8) there shall have not occurred any events or
developments, individually or in the aggregate, resulting in a
Material Adverse Effect with respect to Delta; and
(9) Nabors shall have received the opinion of Vinson &
Elkins L.L.P., dated as of the Closing Date, that this Agreement has
been duly authorized, executed and delivered by Getty and Delta and
assuming due authorization, execution and delivery of this Agreement
by Nabors, this Agreement constitutes a legal, valid and binding
agreement enforceable against Getty and Delta (with respect to
obligators of Delta prior to the Closing) in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors' rights
generally and to general principles of equity and other customary
exceptions.
At or prior to the Closing, Nabors may waive in writing any condition specified
in this Section 6(a), to the extent permitted by law.
(b) CONDITIONS TO OBLIGATION OF DELTA AND GETTY. The obligations
of Delta and Getty to consummate the transactions contemplated hereby are
subject to satisfaction of the following conditions:
(1) the representations and warranties of Nabors set
forth in Section 3 shall be true and correct in all material respects
at and as of the Closing Date;
(2) Nabors shall have performed and complied with all of
their respective covenants hereunder in all material respects through
the Closing;
(3) Nabors and Delta shall have procured all of their
third party consents specified in Section 4(b);
(4) no action, suit, or proceeding shall be pending before
any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement, or (B)
<PAGE> 21
cause any of the transactions contemplated by this Agreement to
be rescinded following consummation (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
(5) Nabors shall have delivered to Delta a certificate to
the effect that each of the conditions specified above in Section
6(b)(1)-(4) is satisfied in all respects;
(6) all applicable waiting periods (and any extensions
hereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated;
(7) Delta's letter of credit in the approximate amount of
$1,700,000 with The Northern Trust Company and the guarantee of Getty
with regard thereto shall have been terminated without recourse to
Getty; and
(8) Getty shall have received the opinion of Baker &
McKenzie, dated as of the Closing Date, that this Agreement has been
duly authorized, executed and delivered by Nabors and assuming due
authorization, execution and delivery of this Agreement by each of the
other Parties hereto, this Agreement constitutes a legal, valid and
binding agreement enforceable against Nabors in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors' rights
generally and to general principles of equity and other customary
exceptions.
At or prior to the Closing, Delta and Getty may waive in writing any condition
specified in this Section 6(b), to the extent permitted by law.
7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in Sections 2 and 3
shall survive the Closing hereunder for the Survival Period.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF NABORS. Getty shall
defend, indemnify and hold Nabors harmless from and against any and all Adverse
Consequences resulting from or arising out of any of the following:
(i) the breach or nonperformance, either partial or total, of any
representation, warranty, covenant or agreement of Getty or Delta
(excluding covenants or agreements to be performed by Delta after the
Closing) in this Agreement, and
(ii) all Liabilities of Delta, including but not limited to Special
Matters, whether or not disclosed on the Disclosure Schedule, whether
or not Known by Delta and whether or not addressed by a representation
or warranty of Getty or Delta herein, that were created, incurred or
arose from facts, events, conditions or circumstances existing on or
before the Closing Date (or arise from a breach or nonperformance by
Getty of a covenant set forth in Section 5 or a Delta severance policy
or agreement in place as of the Closing Date) to the extent, and only
to the extent, such Liabilities are not fully reserved against on the
Closing Balance Sheet. In the case of Liabilities for Taxes, such
Liability shall be considered to be created or incurred on or before
the Closing Date if such Tax relates to (i) a Tax period of Delta
ending on or before the Closing Date, or (ii) a Tax period of Delta
ending after the Closing Date, if any, but only with respect to the
portion of such Tax period that has elapsed
<PAGE> 22
through the Closing Date or activities on or before the Closing Date;
provided, that such Liabilities shall not include any Liabilities for
Taxes resulting from any election by Nabors under section 338 of the
Code or any corresponding provisions of applicable state law; and in
the case of Liabilities arising from workers' compensation claims, such
Liability shall be considered to be created or incurred on or before
the Closing Date if such claim for Liabilities relates to illnesses and
injuries sustained on or prior to the Closing Date.
provided, however, that Getty shall have no obligation to indemnify, defend or
hold Nabors harmless with respect to any Adverse Consequences to the extent
such Adverse Consequence has been taken into account in calculating the
Purchase Price adjustment pursuant to Section 1(f), and, provided further, that
Getty shall have no obligation to indemnify, defend or hold Nabors harmless
with respect to any Adverse Consequence resulting from or arising out of a
breach or nonperformance of any representation, warranty, covenant or agreement
of Getty or Delta in this Agreement unless Getty receives notice of such
Adverse Consequence within the applicable Survival Period (or, if the
applicable Survival Period is the statute of limitations period, within 20 days
after the end of the applicable statute of limitations period), and Getty shall
have no obligation to indemnify, defend or hold Nabors harmless with respect to
any Adverse Consequences resulting from or arising out of a Liability of Delta
that was created, incurred or arose from facts, events, conditions or
circumstances existing on or before the Closing Date unless Getty receives
notice of such Adverse Consequence within two years of the Closing Date or with
respect to an Adverse Consequence resulting from or arising out of a Liability
of Delta involving any Special Matter unless Getty receives notice of such
Adverse Consequence within 20 days after the expiration of the applicable
statute of limitations. Notwithstanding anything in this Agreement to the
contrary, Getty shall not have any obligation to defend, indemnify and hold
Nabors harmless against any Adverse Consequences until Nabors has suffered
Adverse Consequences for which Nabors are entitled to indemnification hereunder
in excess of a $200,000 aggregate threshold (at which point Getty will be
obligated to indemnify Nabors from and against the full amount of such Adverse
Consequences including the initial $200,000 of Adverse Consequences). Further,
in no event shall Getty's aggregate liability for all Adverse Consequences
resulting from or arising out of breaches of the representations, warranties,
covenants or agreements set forth in Sections 2(d), 2(o), 2(p) and 2(u) and
Liabilities arising from a Special Matter exceed the aggregate value of the
Purchase Price as adjusted in accordance with Section 1(f), and in no event
shall Getty's aggregate liability for all Adverse Consequences resulting from
or arising out of all other representations, warranties, covenants or
agreements set forth in this Agreement and for any Liabilities of Delta that
were created or incurred on or before the Closing Date (other than a Liability
arising from a Special Matter) exceed $4,000,000. Notwithstanding anything
herein to the contrary, Getty's liability for any Adverse Consequences
resulting from or arising out of the representations, warranties, covenants and
agreements set forth in Section 2(o)(13) or Section 5(g)(3) shall be unlimited
in amount.
(c) INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF GETTY. Nabors
shall defend, indemnify and hold Getty harmless from and against any and all
Adverse Consequences resulting from or arising out of any of the following:
(i) the breach or non-performance, either partial or
total, of any representation, warranty, covenant, or agreement
of Nabors in this Agreement, and
(ii) all Liabilities of Delta that are created, incurred
or arose from facts, events, conditions or circumstances
existing after the Closing Date;
<PAGE> 23
provided, however, that Nabors shall have no obligation to indemnify, defend or
hold Getty harmless with respect to any Adverse Consequences resulting from or
arising out of a breach or non-performance of any representation, warranty,
covenant or agreement of Nabors in this Agreement unless Nabors receives notice
of such Adverse Consequence within the applicable Survival Period.
(d) MATTERS INVOLVING THIRD PARTIES.
(1) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") that may give rise to a claim for indemnification against any
other Party (the "Indemnifying Party") under this Section 7, then the
Indemnified Party shall promptly notify the Indemnifying Party thereof
in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(2) The Indemnifying Party will have the right to defend
the Indemnified Party against the Third Party Claim with counsel of
its choice reasonably satisfactory to the Indemnified Party so long as
(A) the Indemnifying Party notifies the Indemnified Party in writing
within 15 days after the Indemnified Party has given notice of the
Third Party Claim that the Indemnifying Party will indemnify the
Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party
Claim; (B) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations
hereunder; (C) the Third Party Claim involves only money damages and
does not seek an injunction or other equitable relief; (D) settlement
of, or an adverse judgment with respect to, the Third Party Claim is
not in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party; and (E) the
Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently.
(3) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7(d)(2),
(A) the Indemnified Party may retain separate co-counsel at its sole
cost and expense and participate in the defense of the Third Party
Claim, (B) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party
(which consent will not be withheld unreasonably); and (C) the
Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (which
consent will not be withheld unreasonably).
(4) In the event any of the conditions in Section 7(d)(2)
is or becomes unsatisfied, however, (A) the Indemnified Party may
defend against the Third Party Claim in any manner it reasonably may
deem appropriate; provided, however, that the Indemnified Party shall
not consent to the entry of any judgment or enter into any settlement
or agreement to settle a Third Party Claim without the prior written
consent of the Indemnifying Party which consent shall not be
unreasonably withheld; (B) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable attorneys' fees
and expenses); and (C) the Indemnifying Party will remain responsible
for any Adverse Consequences the Indemnified Party actually suffers
<PAGE> 24
resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent provided in this
Section 7.
(e) SOLE REMEDY FOR BREACHES OF THIS AGREEMENT. Following the
Closing, the foregoing indemnification provisions will be the sole remedy of
the Parties for breaches of the representations, warranties, covenants and
agreements contained herein, and each Party hereby waives any other statutory,
equitable, or common law remedy any Party would otherwise have for breach of
this Agreement.
8. TERMINATION.
(a) TERMINATION OF AGREEMENT. The Parties may terminate this
Agreement as provided below:
(1) Nabors, Delta and Getty may terminate this Agreement
by mutual written consent at any time prior to the Closing;
(2) Nabors may terminate this Agreement by giving written
notice to Delta and to Getty at any time prior to the Closing if: (A)
in the event Delta has breached any representation, warranty, or
covenant contained in this Agreement in any material respect, Nabors
has notified Delta and Getty of the breach, and the breach has
continued without cure for a period of 30 days after the notice of
breach; or (B) the Closing shall not have occurred on or before
February 15, 1995, by reason of the failure of any condition precedent
under Section 6(a) (unless the failure results primarily from a breach
of any representation, warranty, covenant or agreement of Nabors
contained in this Agreement), provided that such date may be extended
to March 15, 1995 by Getty by written notice to Nabors if the failure
to consummate the stock purchase by February 15, 1995 shall not have
been due to Getty or Delta's willful action or intentional failure to
act; and
(3) Delta and Getty may terminate this Agreement by
giving written notice to Nabors at any time prior to the Closing if:
(A) in the event Nabors has breached any representation, warranty, or
covenant contained in this Agreement in any material respect, Delta or
Getty has notified Nabors of the breach, and the breach has continued
without cure for a period of 30 days after the notice of breach; or
(B) the Closing shall not have occurred on or before February 15,
1995, by reason of the failure of any condition precedent under
Section 6(b) (unless the failure results primarily from a breach of
any representation, warranty, covenant or agreement of Delta or Getty
contained in this Agreement), provided that such date may be extended
to March 15, 1995 by Nabors by written notice to Getty if the failure
to consummate the stock purchase by February 15, 1995 shall not have
been due to Nabors' willful action or intentional failure to act.
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 8(a), all rights and obligations of the Parties hereunder
shall terminate without any Liability of either Party to the other Party,
except that nothing herein shall relieve any party from liability for any
breach of this Agreement and any termination shall not be deemed to be a waiver
of any applicable remedy for such breach.
<PAGE> 25
9. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written
approval of Nabors and Delta; provided, however, that either Party may make any
public disclosure it believes in good faith is required by applicable law or
any listing or trading agreement concerning its publicly traded securities (in
which case the disclosing Party will use all reasonable efforts to advise the
other Party prior to making the disclosure).
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations between the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
heirs, successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without the
prior written approval of the other Parties hereto.
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be sent by (i) personal delivery
(including courier service), (ii) telecopier during normal business hours to
the number indicated, or (iii) registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set
forth below (any communication shall be deemed given upon receipt):
IF TO GETTY:
Gordon P. Getty
c/o Vallejo Company
Suite 3315
50 California Street
San Francisco, California 94111
Attention: Henry P. Winetsky
Telecopier No.: (415) 986-3680
<PAGE> 26
WITH A COPY TO:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002
Attention: Keith R. Fullenweider
Telecopier: (713) 615-5855
IF TO NABORS:
Nabors Industries, Inc.
515 West Greens Road, Suite 1200
Houston, Texas 77067
Attention: Anthony G. Petrello, President
Telecopier No.: (713) 872-5205
WITH A COPY TO:
Baker & McKenzie
805 Third Avenue
New York, New York 10022
Attention: Howard M. Berkower
Telecopier: (212) 759-9133
Any Party may change its telecopier number or its address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(g) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Texas without giving
effect to any choice or conflict of Law provision or rule (whether of the State
of Texas or any other jurisdiction) that would cause the application of the
Laws of any jurisdiction other than the State of Texas. The Parties agree that
any legal action or proceeding in connection with this Agreement and the
transactions contemplated hereby shall be brought in the courts of the State of
Texas located in Harris County, Texas or of the United States of America for
the Southern District of Texas, and the parties hereto submit and agree to such
exclusive jurisdiction and further agree that any summons or other process may
be served by registered mail to the address set forth in Section 9(f) hereof.
(h) AMENDMENTS AND WAIVERS. No amendments of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
each Party hereto. No waiver by either Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(i) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
<PAGE> 27
(j) EXPENSES. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(k) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties, and no presumption or burden of proof
shall arise favoring or disfavoring either Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(l) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(m) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement shall be specifically enforceable and the parties hereto hereby waive
any defense to such a proceeding in equity that monetary damages are
sufficient.
<PAGE> 28
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
NABORS INDUSTRIES, INC.
By: /s/ Anthony G. Petrello
-----------------------
Name: Anthony G. Petrello
Title: President
DELTA DRILLING COMPANY
By: /s/ H. J. Bethancourt
---------------------
Name: H.J. Bethancourt
Title: Vice President - Finance
GORDON P. GETTY
*_________________________________
*By: /s/ John H. Slayton
-------------------
Name: John H. Slayton
Attorney-in-Fact for
Gordon P. Getty
<PAGE> 1
EXHIBIT 13
[PHOTO]
NABORS INDUSTRIES
1995
ANNUAL
REPORT
<PAGE> 2
FINANCIAL HIGHLIGHTS
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
OPERATING DATA 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $572,788 $484,268 $419,406 $312,407 $264,239 $153,920 $ 85,600 $ 63,060 $ 33,126
Depreciation and amortization 31,042 26,241 22,434 16,526 10,119 5,232 3,884 3,502 5,855
Operating income (loss) 58,555 9,299 38,257 34,705 30,324 14,383 5,346 403 (72,790)
Net income (loss) 51,104 1,350 38,558 33,740 29,724 16,401 7,165 23,522 (84,953)
Net income (loss) per share $ .58 $ .02 $ .50 $ .46 $ .42 $ .27 $ .14 $ .85 $ (5.90)
Weighted average number of
shares outstanding 88,018 85,620 77,806 74,037 70,395 61,143 51,644 27,671 14,403
------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
BALANCE SHEET DATA 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and short-term
marketable securities $ 15,334 $ 45,232 $ 70,458 $ 14,783 $ 15,139 $ 29,332 $ 6,484 $ 13,354 $ 6,509
Working capital 32,892 77,248 113,653 33,831 15,650 40,956 7,784 8,678 4,433
Property, plant and equipment, net 383,713 283,141 270,865 220,761 185,543 109,928 42,728 28,357 36,435
Total assets 583,521 490,273 493,927 339,930 285,615 226,846 75,519 61,123 54,086
Long-term obligations 51,478 61,879 73,109 49,294 37,489 37,729 7,760 4,254 65,864
Stockholders' equity (deficit) 368,750 317,424 307,583 201,058 157,302 117,335 47,215 36,101 (26,787)
Capital expenditures 109,321 62,907 53,669 57,525 78,958 29,286 10,011 7,414 3,248
------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
GEOGRAPHIC DISTRIBUTION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
North America $416,475 $323,149 $235,716 $147,506 $165,438 $101,335 $ 67,888 $ 63,060 $ 33,126
International 156,313 161,119 183,690 164,901 98,801 52,585 17,712 -- --
------------------------------------------------------------------------------------------
Total $572,788 $484,268 $419,406 $312,407 $264,239 $153,920 $ 85,600 $ 63,060 $ 33,126
------------------------------------------------------------------------------------------
Operating income (loss)
North America $ 47,989 $ 35,246 $ 26,092 $ 12,618 $ 15,119 $ 9,422 $ 9,116 $ 4,390 $(70,311)
International 20,293 (14,663) 23,091 35,111 27,527 13,640 609 -- --
Corporate (9,727) (11,284) (10,926) (13,024) (12,322) (8,679) (4,379) (3,987) (2,479)
------------------------------------------------------------------------------------------
Total $ 58,555 $ 9,299 $ 38,257 $ 34,705 $ 30,324 $ 14,383 $ 5,346 $ 403 $(72,790)
------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
Financial Highlights 1
Letter to Shareholders 4
Operations 6
Rig Fleet 20
Financial Review 25
Directors and Officers 48
Corporate Information Inside
Back Cover
[PHOTO 1]
<PAGE> 4
NABORS FIRMLY RE-ESTABLISHED FINANCIAL AND OPERATIONAL GROWTH
IN FISCAL 1995, SETTING A SOLID BASE FOR THE FUTURE.
[GRAPH 1]
2
<PAGE> 5
[Graph 2] [Graph 3]
*Operating income (loss) before provisions for asset write-downs.
3
<PAGE> 6
NABORS IS FINANCIALLY STRONG, EMPLOYING PROVEN PEOPLE, APPLYING
TECHNOLOGY AND SYSTEMS, UTILIZING A DIVERSE AND QUALITY
FLEET TO CREATE EXCEPTIONAL CAPABILITIES WHICH
INCREASE VALUE TO OUR CUSTOMERS AND
INCREASE VALUE TO OUR
SHAREHOLDERS.
TO OUR SHAREHOLDERS
Last year I enumerated the steps we took to re-establish vibrant growth
at Nabors. In fiscal year 1995 we made solid progress in this effort.
In each successive quarter during the year, Nabors recorded a new
historical high in operating income, culminating in a 50 percent improvement
over the prior year -- even before the 1994 write-down for asset impairment.
Similarly, net income per share improved in each successive quarter, setting an
all-time high in the last quarter and for the full year. Returns on our
shareholders' equity also were restored, averaging 16 percent in the fourth
quarter. These results were achieved in a market characterized by intense
competition, lower commodity prices, and -- correspondingly -- lower overall
land drilling. For the first time since I joined Nabors in 1987, all of our
core business units are performing very well -- and all have even brighter
prospects for the future.
The year's operational achievements are noteworthy, and are the
foundation of these financial achievements. Nabors reached record-high levels
in its market positions and the number of rigs contracted. This improved
operational base, along with increasing contributions from recent investments,
should produce continued growth in fiscal year 1996 and beyond. Encouraging
signals in certain industry drivers could compound our future growth rate
through the operational leverage we are developing in several of our business
units.
Traditionally, the primary drivers of the drilling market have been the
prices of oil and natural gas. Since the early 1980's, an oversupply of rigs
also has hindered the market. Neither our customers nor ourselves can reliably
predict or influence commodity prices. Therefore, to remain profitable, finance
growth, and reduce susceptibility to lower prices, our customer's and ourselves
have had to reduce costs, invest prudently, and manage risks better. In recent
years, however, additional positive market drivers, unrelated to commodity
prices have emerged: advancing technology, the evolution of alliances, and
4
<PAGE> 7
the narrowing gap between rig supply and demand. Nabors has already profited
from these new drivers and is well positioned to further capitalize on them.
- Advances in technology -- particularly 3-D seismic, downhole
telemetry, and directional drilling -- are reducing our customers' finding
costs and risks. They can spend their capital more efficiently, optimizing the
recovery of existing reserves as well as finding, estimating, and reaching new
reserves. As the use of these technologies has grown, the demand for diesel
electric SCR land rigs -- of which Nabors has more than twice the quantity of
anyone else -- has increased.
- The evolution of customer/contractor alliances is accelerating. Many
of our customers are outsourcing non-core functions and looking to realize the
benefits of concentration and greater continuity in their drilling programs. A
general trend in alliances is to delegate more control with a balanced
risk/reward allocation to only a few of the most capable contractors. Nabors'
strengths have helped us to be a part of several mutually beneficial alliances.
- Rig supply and demand is narrowing in the industry, particularly
among the higher quality and more technically advanced rigs. Certain types of
offshore rigs, for example, have experienced significant price increases. As
for land rigs, increasing operating and capital component replacement costs
will likely accelerate economic attrition among those contractors who are not
as well positioned as Nabors. The inventory of certain rig components, such as
drill pipe, is depleted forcing new cost economics and long lead times for
replacement of this critical rig component. Available quality inventory of
other capital components is diminishing rapidly as well. Nabors is not immune
to upward costs pressures, but has distinct advantages in its operations and
available asset inventory.
Nabors' many competitive advantages should enable us to capitalize on
and prosper from each of the above new drivers. The balance of this year's
report describes the attributes that are bringing us to this position: our
financial strength, capable people, good technology and systems, and broad
equipment base. The combination of these attributes has given Nabors the
capabilities to further enhance the value of our services to customers and
thereby increase our shareholders' value.
Thank you for your continued support of Nabors. We look forward to
reporting continuing progress through the year.
/s/ E.M. Isenberg
Eugene M. Isenberg
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
[PHOTO 2]
5
<PAGE> 8
FINANCIALLY STRONG
Nabors' financial strengths - solid earnings, substantial cash flow,
and a solid balance sheet, together with good access to capital - are essential
to its position in the industry. Our financial resources allow us to invest in
new or improved systems, technology, and capacity - as well as maintain,
upgrade, or replace our component equipment to meet the challenges of today's
market.
Our customers recognize the enhanced value they receive when they
select drilling contractors with higher standards of quality and efficiency.
This requires contractors who can afford comprehensive maintenance, training,
and quality assurance systems, as well as investments in new equipment and
technological improvements.
At Nabors, we have not only reestablished our growth in earnings and
cash flow, but also achieved a financial and market position that will enable
us to continue our growth.
Our earnings, operating income, and cash from operating activities all
increased by approximately 50 percent in 1995 - to record levels. Nabors'
balance sheet is strong, with total assets of $584 million, a healthy level of
cash and marketable securities, and a long-term debt-to-equity ratio of only
14 percent.
We have good access to capital - to fund significant expansions or
acquisitions. Nabors has received an "investment-grade" credit rating of NAIC-1
from the National Association of Insurance Commissioners and enjoys favorable
borrowing costs. New investments and acquisitions in the past year amounted to
capital expenditures of $135 million, which are underwriting our future growth.
This record level of good investment opportunities was funded internally,
without any increase in long-term debt.
[Graph 4] [Graph 5]
[Graph 6] [Graph 7]
[Graph 8] [Graph 9]
6
<PAGE> 9
[PHOTO 3]
<PAGE> 10
[PHOTO 4]
<PAGE> 11
EMPLOYING
PROVEN PEOPLE
Nabors has attracted and retained excellent people in every aspect of
its field, support, administrative, and managerial organizations. Our customers
place a very high value on the knowledge, experience, training, and dedication
of our rig crews, field supervisors, and engineers.
Developing and retaining experienced and capable rig crews is one of
the more important challenges facing our industry today. Although every
contractor claims to have good people, few equal Nabors today in the quantity,
depth, and breadth of our employees' experience in virtually all significant
oil, gas, and geothermal drilling areas of the world. Nabors employs more than
7,600 people, 95 percent of whom are employed in direct field operations, on
land and on offshore platforms, conducting drilling and workover operations:
from South America to the Alaskan and Canadian Arctics; from North America to
the North Sea; from the former Soviet Union to the deserts of the Middle East.
Nabors' operational-support and engineering staffs possess a similar
level of experience -- and excel in many areas. During the last five years,
they have designed, constructed or modified, and deployed more than 60 rigs in
a variety of styles and configurations. This effort requires not only a high
degree of engineering innovation -- as exemplified in our market-leading
Sundowner proprietary designs, slimhole drilling technology, and sophisticated
North Sea engineering -- but also expertise in procurement, logistics, and
administration. Our operations and drilling-engineering personnel have planned
and executed the drilling of more wells on a turnkey or footage basis than any
other land drilling contractor. Nabors' entrepreneurial, opportunistic, and
financially sophisticated culture has enabled us to recognize and capitalize on
business opportunities quickly and effectively.
ALASKA
NABORS ALASKA DRILLING
PEAK OILFIELD SERVICES
Driller of the discovery and confirmation wells for the Prudhoe Bay field,
Nabors has been the leading North Slope drilling contractor since the early
1960s. Nabors now participates in drilling and logistics as an alliance partner
with the North Slope operators. Nabors Alaska Drilling currently operates eight
drilling and workover rigs on the North Slope, three in the Kenai/Cook Inlet
area and one platform rig with a top drive in the Cook Inlet. Peak Oilfield
Services, a 50-50 partnership with Cook Inlet Region, Inc., an Alaskan native
corporation, is a leading provider of rig support, maintenance, logistical, and
construction services.
1995 HIGHLIGHTS
- - State of Alaska enacts incentives to encourage development of marginal oil
fields.
- - US Government lifts ban on Alaskan crude-oil exports.
NABORS ALASKA DRILLING
- - 409 full-time employees.
- - Increased rig activity to 6.7 years -- from 4.6 years in 1994 and 3.8 years
in 1993.
- - Lost time incident rate was 2.3.
- - Performed significant safety and operational enhancements on the fleet.
- - Constructed and commenced operation of a platform rig with a top drive in the
Cook Inlet.
PEAK OILFIELD SERVICES
- - 525 full-time employees; 12% are Alaskan natives.
- - Acquired civil construction assets of Alaska Interstate Construction.
- - Constructed 75 miles of ice roads.
- - Tank cleaning performed on Alaskan pipeline storage tanks.
- - Expanded business to Cook Inlet petrochemical industry.
9
<PAGE> 12
APPLYING TECHNOLOGY AND SYSTEMS
Nabors' technology and systems create significant value for our
customers. Sundowner continues to set the standard for cost efficiency in moving
and operating platform workover rigs. Sundowner's most recent innovation -- a
new generation of platform drilling rig -- promises to set a similar standard.
Nabors' CANRIG subsidiary developed the first electric top drive
specifically for land rigs, and more recently, has set new standards in
portability. Today, CANRIG is expanding our manufacturing capacity to meet
growing demand for these units, which reduce both the costs and risks of
drilling.
Numerous advances in continuous-coring slimhole drilling, were fostered
by Nabors' international engineering group. Today, our field and engineering
experience, along with our familiarity with most competing auxiliary drilling
services and downhole tools available in the market, makes us a logical
clearinghouse of "best" practices and technology, for our customers.
In the arctic, Nabors has led the industry in rig design, innovation
and arctic drilling performance for more than 30 years and remains the leader
today. Nabors' preventive-maintenance and ISO 9001 systems are improving
costs and compliance for our UK North Sea customers. Our recent refinements in
accounting and inventory management systems are identifying more ways to reduce
our operating costs and improve our use of limited and costly assets, such as
drill pipe.
Nabors streamlined administrative systems, and favorable insurance and
tax attributes also create value. Recently acquired companies have been
integrated quickly with significant cost economies as a result of our favorable
cost structure and comprehensive accounting and operations management
information systems.
US LOWER 48
Nabors Drilling USA, Inc. (NDUSA), today is the leading North American land
drilling company, with 90 years of operating experience. NDUSA boasts a
diversified and high-quality rig fleet, an outstanding drilling and safety
record, and an experienced operating team. The Company is strongly positioned,
with the equipment, personnel, and services required to meet its customers'
project requirements efficiently and cost-effectively. The Company currently
markets 190 land and six offshore rigs, including nearly 90 diesel electric SCR
rigs, in the US lower 48 states and the Gulf of Mexico.
1995 HIGHLIGHTS
- - 3,010 full-time employees.
- - Increased rig activity to 99.3 years -- from 73.8 years in 1994 and
35.8 years in 1993.
- - Achieved a lost time incident rate of 1.50 vs. US land industry
average of 4.03.
- - Successfully completed 23 turnkey wells.
- - Drilled 240 horizontal wells totaling nearly 3.2 million feet.
- - Acquired Delta Drilling Co. in January, with its 15 SCR rigs, seven
mechanical, and seven shallow-depth mobile rigs.
- - Acquired eight highly mobile rigs and numerous components to round
out the fleet.
- - Deployed three rigs to international operations and numerous
components to Sundowner.
- - Added three top drives to the fleet.
- - Remanufactured 65 engines.
- - Invested in over 220,000 feet of new drill pipe.
- - Increased market share to approximately 18% of US land business.
- - Entered into numerous new alliances.
10
<PAGE> 13
[PHOTO 5]
<PAGE> 14
[PHOTO 6]
<PAGE> 15
UTILIZING A DIVERSE AND QUALITY FLEET
Nabors today owns the world's largest and most comprehensive land
drilling fleet and holds a market-leading position in offshore platform
workover and drilling rigs. The fleet is modern, well maintained and diverse in
style, depth range, and geographic positioning. This diversity allows us to
meet our customers' requirements economically with the optimum rig for any
depth range in most of the world's significant oil- and gas- producing regions.
Nabors offers the industry's largest and most efficient fleet of arctic
drilling and offshore modular platform workover rigs. Nabors also is a
significant and growing offshore platform driller, with a new-generation rig
patterned on the proprietary Sundowner workover rig. Nabors has more diesel
electric SCR rigs (150 total), preferred by most customers for deeper,
more-difficult drilling, than its next biggest competitor's entire active rig
fleet. Our highly mobile, wheel-mounted fleet also is among the world's largest
and best. In Canada and Alaska, we have some of the best winterized rigs
equipped for drilling into high concentrations of sour gas.
We are investing heavily in new drill pipe, top drives, rig components,
and complete rigs to enhance the overall quality and technology of our fleet.
We also have a large inventory of component equipment, which helps us to hold
down costs when we construct new rigs or maintain or upgrade our active fleet.
We have positioned our rigs in sustainable markets, where they create a
competitive advantage for Nabors. In all of our core markets, we have
sufficient concentration to yield economies of scale. Sixty percent of Nabors
rigs offer a depth capacity of 15,000 feet or deeper, which characteristically
brings us higher margins and longer-term projects. Worldwide utilization of our
active fleet was only 56% in fiscal 1995, giving us significant upside
potential by employing idle rigs that require minimal capital expenditures.
CANADA
NABORS DRILLING LIMITED
CANRIG DRILLING TECHNOLOGY LTD.
Nabors Drilling Limited (Canada) has a 43-year reputation as a diversified rig
fleet and an exceptional operating team in the Canadian market. NDL currently
markets 20 land rigs in Canada, including nine SCR rigs. CANRIG is a subsidiary
of Nabors that specializes in drilling-technology systems. CANRIG designs,
manufactures, markets and services automated slanthole drilling rigs, portable
top drive drilling systems, and rig automation equipment.
1995 HIGHLIGHTS
NABORS DRILLING LIMITED
- - 426 full-time employees.
- - Increased rig activity to 11.1 years -- from 10.2 years in 1994 and 4.2 years
in 1993.
- - Lost time incident rate was 2.4.
- - Completed fifth year of an alliance with a major oil company customer.
- - Installed four new top drive units, bringing the total to seven, which is
more than any other Canadian contractor.
CANRIG DRILLING TECHNOLOGY LTD.
- - 60 full-time employees.
- - 100% sales growth in top drive systems.
- - Expanded CANRIG manufacturing capacity.
- - Introduced an advanced, portable installation system.
- - Commenced building 36th unit.
- - Product line now includes 250-, 350-, 500-, and 650-ton units and a special
slimhole unit.
13
<PAGE> 16
CREATING EXCEPTIONAL CAPABILITIES
Few, if any, contractors offer the level of capabilities that result
from Nabors' combination of financial position, experience and expertise,
breadth of technology and systems, and diversity and geographic concentration
of rigs.
Our geographic diversity enables us to enter into worldwide and
multi-regional alliances with our customers. In each of our significant
markets, we have concentrated rigs in the optimal depth range and style -- as
well as location for the customers in the area.
Nabors offers innovative and sophisticated engineering solutions for
virtually all geologic, climatic, and surface drilling conditions. Our
engineering talent, combined with the practical experience of our field staff,
has enabled us to create unique and often proprietary designs for specialized
workover and drilling equipment. Nabors' CANRIG Top Drive offers unique
portability features, and Sundowner's offshore platform workover and drilling
rigs have set a new standard in cost effectiveness. Nabors also has designed
and operated rigs for arctic, desert, slimhole, sour gas, and conventional land
applications.
Nabors' capabilities in downhole drilling come from our extensive
operating and engineering experience with all types of drilling tools and
systems. Today, we drill and in many cases manage, more straight, directional,
horizontal, and multi-lateral wells -- by a wide margin -- than any of our
competitors. This experience combined with our in-house drilling engineering
and field supervision, enables us to serve as an objective clearinghouse for
our customers as they select the "best" practices and drilling products for
their operation. Nabors can perform any role -- from up-front planning under
traditional daywork to footage, turnkey or total well project management. We
have built a reputation for commercial innovation and flexibility as we tailor
multiple services in multiple markets to meet our customer's unique
circumstances.
We support these capabilities with our investments in technology and
our integrated safety, quality, preventive-maintenance, and administrative
systems.
INTERNATIONAL
Nabors Drilling International Limited (NDIL) has been a worldwide leader in
international land drilling for more than half a century. The Company has
operated in Venezuela for more than 50 years and has also worked in several
Latin American markets. In the Middle East, NDIL drilled the major Yemen
discovery wells and offers a strong history of operations in the region. NDIL's
industry-leading fleet, operational infrastructure, and proven record prepare
it to serve customers worldwide. The Company is also a leader in international
geothermal drilling.
1995 HIGHLIGHTS
- - 1,561 full-time employees.
- - Increased rig activity to 24.4 years -- from 21.8 years in 1994.
- - Achieved a lost time incident rate of 0.8 vs. an industry average of 1.22.
- - Deployed seven rigs to Venezuela.
- - Deployed first rig to Colombia to drill in the Andean Overthrust.
- - Conducted first western drilling operation in the Republic of Georgia, CIS.
- - Received contract for rig operation in Kazakhstan, CIS.
14
<PAGE> 17
[PHOTO 7]
<PAGE> 18
[PHOTO 8]
<PAGE> 19
INCREASING VALUE TO OUR CUSTOMERS
At Nabors, we're committed to increasing our value to customers by
drilling their wells at the lowest possible cost and risk, while maximizing the
producing ability of the wellbore. We reduce drilling cost through improved rig
productivity and optimal incorporation of technology. This involves: minimizing
the potential for adverse cost variances and enhancing the safety of people,
equipment, the well, the reservoir, and the environment. To accomplish this,
we invest in sophisticated programs to improve people, systems, equipment, and
technology.
Nabors is committed to the continuous improvement of its comprehensive
safety, training, maintenance, and quality assurance programs. In the UK North
Sea, these systems are certified under the international quality standard: BS
EN ISO 9001. These systems and comprehensive preventive-maintenance programs
are widely used throughout our operations to the extent that risk and complexity
warrant. Our achievements in safety are superior to industry averages due to our
constant focus on this issue and our effective safety-management programs.
We also are investing heavily in new technology and equipment. In
fiscal year 1995, we doubled CANRIG's Top Drive manufacturing capacity,
broadened its product line and reduced field installation/removal cost with a
new portability system. Sundowner deployed three new rigs: two Super Sundowner
workover rigs and a new-generation platform drilling rig that incorporates
Sundowner's proprietary, cost-saving designs. Throughout our operations, we
invested more capital in new drill pipe, remanufacturing of component
equipment, and rig upgrades than at any time in our history.
In every customer alliance program in which we have been given
increased control over the execution of the work, our customers' drilling costs
have declined significantly. We attribute this success to increased use of
Nabors' strengths and competencies in front-end well planning, our efforts in
productivity improvement, and our adoption of "best" practices and technology.
UH NORTH SEA
Nabors Drilling & Energy Services UK, LTD. (NDES), has provided North Sea
platform drilling facilities design, construction, and commissioning -- as well
as rig operations -- for more than 20 years. Excellent safety, maintenance,
and quality programs ensure that our clients receive the highest level of
operating capabilities. NDES provides drilling, wireline, and
production-related services through integrated and alliance contracts at 10
North Sea production platforms.
1995 HIGHLIGHTS
- - 567 full-time employees.
- - Engineered and installed two portable top drives to be shared among a
customer's four rigs to ensure successful drilling of extended-reach wells.
- - Assisted in setting the largest conductors (48") in the North Sea, allowing
two wells per slot.
- - Integrated Thistle Wireline Services into Nabors operations.
- - Maintained registration under the international quality standard BS EN ISO
9001; 1994 was our third year.
- - Implemented PM3 purchasing and maintenance management system on all but two
operations.
- - Obtained a new contract on Hutton and Murchison platforms.
- - Entered into alliance contracts on Piper B, Saltire, and Claymore for three
years.
- - Obtained a wireline contract for Judy and Joanne platforms.
- - Remained under budget on the Britannia drilling-facility contract.
17
<PAGE> 20
INCREASING VALUE TO OUR SHAREHOLDERS
The same strengths that create value for our customers also increase
our shareholders' value.
Nabors' financial strength, market position, and low cost structure
enable us to capitalize on investment opportunities and reap maximum value from
acquisitions, new markets, new business lines, and new technology. Our
diversity -- geographically, onshore, and offshore -- minimizes the effect of
adverse developments in one or more markets while it maximizes the benefits of
strengthening industry fundamentals. We strive to achieve critical mass in
long-term markets to develop economies of scale, higher utilization, and more
customer alliances. The result is lower overhead and operating costs, greater
safety and quality through continuity in our operations, and better use of
available assets -- without the need for significant capital investments.
Highly refined safety and quality systems make for lower casualty and insurance
costs. Implementation of technology yields incremental revenues through more
content, lower cost and risk, and improved margins.
Our customers' spending on drilling programs has increased and appears
to be less vulnerable today to fluctuations in oil and gas commodity prices.
The new market drivers of advancing technology and improved efficiency through
alliances have become increasingly influential in driving market activity, and
are benefiting Nabors.
With a solid base of activity and recent investments, Nabors is poised
for robust near-term growth. Our 221 North American rigs and idle capacity in
the Middle East create significant leverage from improving rig prices and
utilization. Longer-term, the accelerating economic attrition of the industry's
workable rig fleet will likely compound our growth rate.
SUNDOWNER OFFSHORE SERVICES, INC.
Sundowner Offshore Services, Inc., operates a fleet of 23 rigs, including three
that operate internationally. Sundowner has developed a new generation of
modular platform workover and drilling rigs that offer a significant
improvement in mobility, which reduces customer mobilization costs. Sundowner
currently operates seven Sundowner and seven Super Sundowner platform rigs,
five jackup workover rigs, and three inland-barge workover rigs. Sundowner
deployed a newly designed and constructed MASE (Minimum Area Self Erecting)
platform drilling rig in December 1995.
1995 HIGHLIGHTS
- - 807 full-time employees.
- - Increased rig activity to 15.8 years -- from 15.3 in 1994 and 14.2 years in
1993.
- - Achieved an average platform workover rig utilization rate of 94%.
- - Achieved a lost time incident rate of 0.4 vs. the US offshore industry average
of 1.00.
- - Constructed and deployed Super Sundowner Rig XV in January.
- - Constructed and deployed Super Sundowner Rig XVI in September.
- - Constructed and deployed internationally, the first MASE platform drilling
rig, Sundowner rig 801.
- - Sundowner's fleet incorporates eight top drives.
18
<PAGE> 21
[PHOTO 9]
<PAGE> 22
RIG FLEET
LAND RIG FLEET
<TABLE>
<CAPTION>
10,000 10,000 15,000 Greater than
265 RIGS or less to 14,999 to 19,999 20,000 Total
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alaska
North Slope -- 2 1 5 8
Kenai/Cook Inlet -- 1 2 -- 3
International
Middle East 4 8 2 3 17
South and Central America -- 9 3 7 19
CIS -- 2 1 -- 3
Africa 1 -- 1 -- 2
Far East -- -- 2 1 3
US Lower 48 24 47 80 39 190
Canada 10 3 2 5 20
--------------------------------------------------------------
Total 39 72 94 60 265
--------------------------------------------------------------
</TABLE>
US LOWER 48 RIG FLEET
<TABLE>
<CAPTION>
Mechanical SCR Depth Range
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gulf Coast Division
Gulf of Mexico District
API Platform Rigs -- 4 25,000'
Inland Barge Rigs 1 1 18,000' - 25,000'
Gulf Coast District 7 9 14,000' - 30,000'
Southern Division
East Texas District 14 13 10,000' - 20,000'
South Texas District 8 24 9,000' - 35,000'
Southwestern Division
Arkoma District 16 6 8,000' - 25,000'
West Texas District 28 3 9,000' - 25,000'
Western Division
California District 2 12 8,000' - 35,000'
North Dakota District 16 2 12,000' - 16,000'
Northeast District 6 -- 6,000' - 9,000'
Wyoming District 16 8 7,000' - 25,000'
--------------------------------------------------------------
Total 114 82
--------------------------------------------------------------
</TABLE>
OFFSHORE RIG FLEET
<TABLE>
<CAPTION>
Sundowner Platform
---------------------
MASE Sundowner Platform
43 RIGS Drilling Workover Drilling Jackup Barge Total
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alaska -- -- 1 -- -- 1
International
Middle East -- -- -- 1 -- 1
South and Central America 1 -- -- -- -- 1
CIS -- 1 -- -- -- 1
Europe and Africa -- 2 -- -- -- 2
UK North Sea -- -- 11* -- -- 11
Gulf of Mexico -- 11 4 6** 5*** 26
--------------------------------------------------------------
Total 1 14 16 7 5 43
--------------------------------------------------------------
</TABLE>
* Operated, not owned.
** Includes two charters.
*** Includes three P & A barges.
SUNDOWNER RIG FLEET
<TABLE>
<CAPTION>
Gulf of Mexico International
- -------------------------------------------------------------------------------------------
<S> <C>
Platform Workover Rigs Platform Workover Rigs
Sundowner I Sundowner II
Sundowner III Mediterranean Rig I
Sundowner IV Sundowner VI
Sundowner V
Sundowner VII Platform Drilling Rig
Super Sundowner X Minimum Area Self Erecting (MASE)
Super Sundowner XI Sundowner 801
Super Sundowner XII
Super Sundowner XIV
Super Sundowner XV
Sundowner XVI
Jackup Workover Rigs
Dolphin 105
Dolphin 106
Dolphin 110
Dolphin 111
Workhorse IX
Inland Barge Workover Rigs
Sundowner 9
Sundowner 11
Sundowner 12
Platform Drilling Rig
Minimum Area Self Erecting (MASE)
Sundowner 802
- -------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 23
[PHOTO 10]
<PAGE> 24
[FIGURE 1]
[PHOTO 11] [PHOTO 12] [PHOTO 13]
ALASKA US LOWER 48 CANADA
22
<PAGE> 25
[FIGURE 2]
[PHOTO 14] [PHOTO 15] [PHOTO 16]
INTERNATIONAL UK NORTH SEA SUNDOWNER OFFSHORE
SERVICES, INC.
23
<PAGE> 26
[PHOTO 17]
<PAGE> 27
FINANCIAL REVIEW
Selected Financial Data 26
Management's Discussion and
Analysis of Financial Condition
and Results of Operations 27
Report of Independent Accountants 31
Consolidated Balance Sheets 32
Consolidated Statements of Income 33
Consolidated Statements of
Changes in Stockholders' Equity 34
Consolidated Statements of
Cash Flows 35
Notes to Consolidated
Financial Statements 36
25
<PAGE> 28
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
OPERATING DATA (1) 1995 1994 1993 1992 1991 1990 1989 1988
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $572,788 $484,268 $419,406 $312,407 $264,239 $153,920 $85,600 $63,060
Operating expenses:
Direct costs 434,097 369,677 313,458 215,939 187,873 111,405 64,285 50,682
General and administrative
expenses 49,094 49,365 45,257 45,237 35,923 22,900 12,085 8,473
Depreciation and
amortization 31,042 26,241 22,434 16,526 10,119 5,232 3,884 3,502
Provision for reduction in
carrying value of assets -- 29,686 (2) -- -- -- -- -- --
-----------------------------------------------------------------------------------------
Operating income (loss) 58,555 9,299 38,257 34,705 30,324 14,383 5,346 403
Interest income (expense),
net (5,917) (5,778) (7,733) (4,349) 551 1,153 48 (8,422)(3)
Other income (expense),
net 5,990 2,718 11,593 (4) 5,559 2,395 3,341 1,790 4,012
-----------------------------------------------------------------------------------------
Income (loss) before
income taxes (benefits) 58,628 6,239 42,117 35,915 33,270 18,877 7,184 (4,007)
Income taxes (benefits) 7,524 4,889 3,559 2,175 3,546 2,476 19 (780)
-----------------------------------------------------------------------------------------
Income (loss) before
extraordinary gain 51,104 1,350 38,558 33,740 29,724 16,401 7,165 (3,227)
Extraordinary gain -- -- -- -- -- -- -- 26,749 (5)
-------------------------------------------------------------------------------------------
Net income (loss) $ 51,104 $ 1,350 $ 38,558 $ 33,740 $ 29,724 $ 16,401 $ 7,165 $23,522
-------------------------------------------------------------------------------------------
Earning (loss) per share:
Income (loss) before
extraordinary gain $ .58 $ .02 $ .50 $ .46 $ .42 $ .27 $ .14 $ (.12)
Extraordinary gain -- -- -- -- -- -- -- .97 (5)
------------------------------------------------------------------------------------------
Net income (loss) $ .58 $ .02 $ .50 $ .46 $ .42 $ .27 $ .14 $ .85
------------------------------------------------------------------------------------------
Weighted average number
of shares outstanding 88,018 85,620 77,806 74,037 70,395 61,143 51,644 27,671
-------------------------------------------------------------------------------------------
<CAPTION>
OPERATING DATA (1) 1987
- ---------------------------------------
<S> <C>
Revenues $ 33,126
Operating expenses:
Direct costs 29,831
General and administrative
expenses 6,230
Depreciation and
amortization 5,855
Provision for reduction in
carrying value of assets 64,000
--------
Operating income (loss) (72,790)
Interest income (expense),
net (18,747)(3)
Other income (expense),
net (562)
--------
Income (loss) before
income taxes (benefits) (92,099)
Income taxes (benefits) (7,146)
--------
Income (loss) before
extraordinary gain (84,953)
Extraordinary gain --
--------
Net income (loss) $(84,953)
Earning (loss) per share:
Income (loss) before
extraordinary gain $ (5.90)
Extraordinary gain --
--------
Net income (loss) $ (5.90)
--------
Weighted average number
of shares outstanding 14,403
--------
</TABLE>
<TABLE>
<CAPTION>
As of September 30,
BALANCE SHEET DATA (1) 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and short-term
marketable securities $ 15,334 $ 45,232 $ 70,458 $ 14,783 $ 15,139 $ 29,332 $ 6,484 $13,354 $ 6,509
Working capital 32,892 77,248 113,653 33,831 15,650 40,956 7,784 8,678 4,433
Property, plant and
equipment, net 383,713 283,141 270,865 220,761 185,543 109,928 42,728 28,357 36,435
Long-term marketable
securities 9,645 20,266 -- -- -- -- -- -- --
Total assets 583,521 490,273 493,927 339,930 285,615 226,846 75,519 61,123 54,086
Long-term obligations 51,478 61,879 73,109 49,294 37,489 37,729 7,760 4,254 65,864
Stockholders' equity
(deficit) 368,750 317,424 307,583 201,058 157,302 117,335 47,215 36,101 (26,787)
Capital expenditures 109,321 62,907 53,669 57,525 78,958 29,286 10,011 7,414 3,248
------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) The results of operations and financial position, for all years presented,
have been retroactively restated to include the results of operations and
financial position of Sundowner Offshore Services, Inc. Other acquisitions
results of operations and financial position have been included beginning
on the respective dates of acquisition, and include Delta Drilling Company
(January 1995), Grace Drilling Company (June 1993), Henley Drilling Company
(November 1990), Loffland Brothers Company (March 1990) and the Westburne
Group of Companies (November 1988).
(2) Represents reduction in carrying value of the Company's Yemen logistical
assets and inventory as well as facility closure costs in certain
international areas, including Yemen, totaling $.35 per share.
(3) Includes interest expense and discount amortization totaling $7.8 million
and $18.8 million during 1988 and 1987, respectively, relating to secured
income notes.
(4) Includes a gain of approximately $9.0 million on the sale of a UK North
Sea platform rig.
(5) Represents gain recognized in connection with the Company's reorganization.
26
<PAGE> 29
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994
During fiscal year 1995, Nabors and Sundowner Offshore Services, Inc.
("Sundowner"), completed a tax-free merger. Under the merger agreement,
Sundowner stockholders received 2.8 shares of the Company's common stock for
each of their shares of Sundowner, or approximately 13.1 million common shares.
The exchange resulted in former Sundowner stockholders owning approximately 15%
of the common stock of Nabors outstanding after the merger.
The merger has been accounted for as a pooling of interests.
Accordingly, the accompanying consolidated financial statements have been
retroactively restated to include the results of operations, financial position
and cash flows of Sundowner for all periods prior to the consummation of the
merger.
Company revenues for fiscal year 1995 ("1995") totaled $572.8 million,
representing an $88.5 million, or 18% increase, compared to fiscal year 1994
("1994"). Operating income during 1995 totaled $58.6 million, compared to $9.3
million during 1994. Net income totaled $51.1 million ($.57 per share) during
1995, compared to $1.4 million ($.02 per share) during the prior year. The
operating income and net income amounts during 1994 include a $29.7 million
charge ($.35 per share), representing a provision for reduction in carrying
value of assets. The significant improvement in operating results during 1995
is primarily attributable to the Company's operations in the US Lower 48, the
Gulf of Mexico and Venezuela.
The following tables set forth information with respect to the Company
and its subsidiaries on a consolidated basis by geographical area:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Revenues:
North America $416,475 $323,149
International:
Middle East, CIS,
Africa and other 58,932 76,156
South and Central America 49,453 32,991
UK North Sea 47,928 51,972
------------------------
$572,788 $484,268
------------------------
</TABLE>
<TABLE>
<CAPTION>
1995 1994
Rig Rig Rig Rig
Years Utilization Years Utilization
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rig activity:(1)
North America 131.4 54% 100.8 46%
International:
Middle East, CIS,
Africa and other 12.5 44% 16.2 51%
South and Central America 13.4 89% 8.6 98%
UK North Sea NA NA .8 100%
-------------------------------------------------------
157.3 56% 126.4 49%
-------------------------------------------------------
</TABLE>
(1) Excludes labor contracts.
North American (including Canada) revenues totaled $416.5 million
during 1995, representing a 29% increase over 1994. The increase was primarily
attributable to more equivalent rig years in the US Lower 48 where revenues
increased by 38% due to the addition of the Delta Drilling Company ("Delta")
rigs acquired in January 1995 and the Mitchell Energy Development Corp. rigs
acquired in April 1994. The Company's increasing market share, resulting from
incremental activity under various customer alliance relationships, as well as
a broadening customer base, further contributed to this increase. Revenues for
the Gulf of Mexico operations increased by 16% during the current year due to
higher dayrates for the Company's platform drilling rigs, the addition of one
inland barge drilling rig and an increase in equivalent rig years for the
Company's platform workover rigs with the addition of the newly constructed
Super Sundowner XIV and XV rigs, which commenced operations during July 1994
and February 1995, respectively. This increase in activity in the US Lower 48
and the Gulf of Mexico occurred despite lower natural gas prices in the US
during 1995 and an overall decline in the Baker Hughes US land rig count.
Alaskan and Canadian revenues also increased during 1995 by 18% and 39%,
respectively, due to more equivalent rig years. Equivalent rig years for North
America during 1995 totaled 131.4 years, compared to 100.8 years during 1994.
International revenues totaled $156.3 million during 1995, representing
a 3% decrease compared to 1994. Equivalent international rig years totaled 25.9
years during 1995 compared to 25.6 years during 1994.
Middle Eastern, CIS and African revenues totaled $58.9 million during
1995, representing a 23% decrease from 1994. The decrease was primarily
attributable to decreased logistical and drilling activity in Yemen due to
reduced exploration and development activity. The Company operated 12.5 rig
years during 1995 in the Middle East, CIS and Africa, down from 16.2 years in
1994. Yemen had operating losses during 1994 due to reduced drilling and
logistical activity as well as the provision for reduction in carrying value of
assets.
27
<PAGE> 30
Revenues in the Company's South and Central American operations totaled
$49.5 million, a 50% increase over 1994. The increase was attributable to
increased activity in Venezuela. Venezuela represented approximately 89% and
85% of total South and Central American revenues and equivalent rig years,
respectively, during 1995. South and Central American rig years totaled 13.4
years during 1995, compared to 8.6 years in 1994.
UK North Sea revenues totaled $47.9 million during 1995, representing a
decrease of 8% compared to 1994. Total equivalent rig years, consisting of
labor contracts, totaled 8.4 and 7.0 years during 1995 and 1994, respectively.
The decrease in revenues resulted from reduced incentive contracts, partially
offset by an increase in equivalent rig years resulting from the award of three
new labor contracts: two during March 1995 and one during July 1995.
Direct costs as a percentage of revenues totaled 76% during 1995 and
1994. General and administrative expenses as a percentage of revenues decreased
during 1995 due to the effect of prior-year cost-reduction measures for the
Company's international operations, primarily in the Middle East, and as a
result of the increase in revenues for the US Lower 48 operations, since these
expenses were spread over a larger revenue base. Depreciation and amortization
as a percentage of revenues totaled 5% during 1995 and 1994. The Company
recorded a $29.7 million provision for reduction in carrying value of assets
during the third quarter of 1994.
Interest expense decreased during 1995, primarily due to the $6.0
million of scheduled principal payments made on the $30.0 million 10.25% Senior
Secured Notes. Interest income decreased during 1995 due to lower average cash
and investment balances as these amounts were used to fund capital expenditures
and the acquisition of Delta.
Other income during 1995 included $2.6 million of realized and
unrealized gains from equity security transactions and $.3 million of dividend
income. Insurance gains on damaged equipment totaled $4.7 million, including a
$4.1 million gain recorded for a rig damaged in Venezuela. Other income during
1994 included a $.9 million gain from the sale of an investment in equity
securities and $.6 million of dividend income. Foreign currency losses totaled
$3.2 million during 1995, compared to $1.5 million during 1994. The 1995 losses
primarily consisted of $2.5 million in the UK North Sea relating to foreign
currency losses that had previously been deferred and recognized as part of the
specific transactions being hedged. During 1994, the Venezuela bolivar devalued
by approximately 75%, as compared to the US dollar due to the deterioration in
that country's economic condition. During June 1994, the Venezuelan government
imposed exchange rate control policies and an official fixed exchange rate of
170 bolivars to the US dollar. As a result of the devaluation, the Company
recorded translation losses totaling $1.0 million during 1994. Subsequent to
the June 1994 establishment of the official fixed exchange rate, the Company
reduced its bolivar net monetary asset exposure. However, if the Venezuelan
government allows the bolivar to "float" relative to the US dollar or revises
the official fixed exchange rate, the Company could incur additional
translation losses. The Company also recorded amortization of deferred currency
losses in the UK North Sea during 1994.
The income tax provisions for 1995 and 1994 relate to foreign
operations, including Canada. Substantially all of the US taxable income is
offset by available net operating loss carryforwards. A valuation allowance is
provided to reduce the deferred tax assets, which includes net operating loss
carryforwards, to a level which, more likely than not, will be realized.
Primary factors considered by management to determine the size of the allowance
include the competitive and cyclical nature of the Company's primary markets
and the expiration timing of the net operating loss carryforwards (Note 8).
FISCAL YEAR 1994 COMPARED TO FISCAL YEAR 1993
<TABLE>
<CAPTION>
(In thousands) 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C>
Revenues:
North America $323,149 $235,716
International:
Middle East, CIS
Africa and other 76,156 103,082
South and Central America 32,991 28,788
UK North Sea 51,972 51,820
-----------------------
$484,268 $419,406
-----------------------
</TABLE>
<TABLE>
<CAPTION>
1994 1993
Rig Rig Rig Rig
Years Utilization Years Utilization
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rig activity:(1)
North America 100.8 46% 58.2 54%
International:
Middle East, CIS,
Africa and other 16.2 51% 21.2 71%
South and Central America 8.6 98% 6.9 91%
UK North Sea .8 100% 3.7 100%
------------------------------------------------
126.4 49% 90.0 60%
------------------------------------------------
</TABLE>
(1) Excludes labor contracts.
28
<PAGE> 31
The Company's revenues totaled $484.3 million during 1994, an increase
of $64.9 million, or 15%, compared to 1993. Operating income and net income
totaled $9.3 million and $1.4 million ($.02 per share) during 1994,
respectively, compared to $38.3 million and $38.6 million ($.49 per share) in
1993. The operating income and net income amounts during 1994 include a $29.7
million charge ($.35 per share) representing a provision for reduction in
carrying value of assets. The assets affected by the reduction in carrying
values were primarily the Company's Yemen logistical assets and inventory. The
provision also includes estimates of facility closure costs and other costs in
certain international areas, including Yemen. The determining factor resulting
in the provision for reduction in carrying value of assets was the general
reduction in activity in Yemen, further exacerbated by the civil war there.
The Company's North American (including Canada) revenues totaled $323.1
million during 1994, representing an $87.4 million, or 37%, increase over 1993.
The increase was attributable to more equivalent rig years in the US Lower 48
due to the acquisition of Grace Drilling Company ("Grace") assets during June
1993 and increased activity in both the US Lower 48 and Canada due to continued
higher gas prices. Also contributing to the increased activity in Canada was
the increased pipeline capacity for export to the US Lower 48. Alaskan revenues
during 1994 were essentially the same amount as in 1993 as an 18% increase in
drilling revenues, from more equivalent rig years, was offset by a decrease in
Peak Oilfield 1994 revenues due to lower overall logistical activity.
Equivalent rig years for North America during 1994 totaled 100.8 years,
compared to 58.2 years during 1993.
International revenues totaled $161.1 million during 1994, representing
a decrease of $22.6 million, or 12%, compared to 1993. Equivalent international
rig years totaled 25.6 years during 1994, compared to 31.8 years during 1993.
Middle Eastern, CIS and African revenues totaled $76.2 million during
1994, representing a 26% decrease from 1993. The decrease primarily was
attributable to decreased logistical and drilling activity in Yemen due to
political turmoil, diminished exploration prospects and scaled-back development
plans there, as well as an overall decrease in drilling activity in the Middle
East due to lower oil prices. The Company operated 16.2 rig years during 1994
in the Middle East, CIS and Africa, down from 21.2 years in 1993. Yemen
equivalent rig years declined by 3.6 years, totaling 5.5 years for the year.
Yemen had operating losses during 1994 due to reduced drilling and logistical
activity as well as the provision for reduction in carrying value of assets.
Yemen represented approximately 39% and 34% of total Middle Eastern, CIS and
African revenues and equivalent rig years, respectively, during 1994.
Revenues in the Company's South and Central American operations totaled
$33.0 million, a 15% increase over 1993. The increase was attributable to
increased activity in Venezuela. Venezuela represented approximately 83% and
77% of total South and Central American revenues and equivalent rig years,
respectively, during 1994. South and Central American rig years totaled 8.6
years during 1994, compared to 6.9 years in 1993.
In the UK North Sea, revenues remained flat during 1994, totaling $52.0
million. Equivalent rig years totaled 7.0 years during 1994, compared to 8.3
years during 1993. Essentially all of the 7.0 rig years during 1994 were labor
contracts, and 4.6 of the 8.3 years during 1993 were labor contracts. The
revenue decrease caused by the decrease in equivalent rig years was offset by
increased revenues under an integrated drilling-service contract.
Direct costs as a percentage of revenues totaled 76% during 1994,
compared to 75% during 1993. The decrease in operating margins during 1994 is
largely due to a greater percentage of the Company's total revenues during 1994
being generated by the Company's US Lower 48 operations. The contracts in the US
Lower 48 usually are at a lower gross margin percentage than International and
Alaskan contracts. This shift to higher US Lower 48 revenues was caused by the
acquisition of the Grace rigs, during June 1993, which operate in the US Lower
48, as well as decreased International revenues resulting from decreased
activity in the Yemen drilling and logistical businesses. General and
administrative and depreciation and amortization expenses as a percentage of
revenues during 1994 were comparable to 1993. The Company recorded a $29.7
million provision for reduction in carrying value of assets during the third
quarter of 1994.
Interest expense decreased during the current year primarily due to the
$6.0 million of scheduled principal payments made on the $30.0 million 10.25%
Senior Secured Notes. Interest income increased during the current year due to
the higher average cash and investment balances created by the cash received
during late 1993 from the sale of the UK North Sea platform rig, the exercise
of publicly traded warrants and the issuance of shares of common stock in a
secondary public offering. In addition, the Company has been earning higher
returns during 1994 due to the increase in short-term interest rates and the
investment in higher-yielding marketable securities with longer-term
maturities.
29
<PAGE> 32
Gain on sales of long-term assets decreased during 1994 primarily due to
the gain recorded during 1993 on the sale of the Company-owned platform rig in
the UK North Sea, which totaled approximately $9.0 million. Other income during
1994 included a $.9 million gain from the sale of an investment in equity
securities and $.6 million of dividend income. Also included as other expense
during 1994 were foreign currency translation losses totaling $1.5 million. The
foreign currency translation losses primarily were due to the significant
devaluation of the Venezuelan bolivar, where currency controls were placed into
effect during June 1994, as well as amortization of deferred currency losses in
the UK North Sea.
The income tax provisions for 1994 and 1993 relate to foreign
operations, including Canada. Substantially all of the US taxable income is
offset by available net operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $10.5 million during 1995,
compared to a decrease of $40.5 million during 1994.
Net cash provided by operating activities totaled $73.8 million during
1995, compared to $50.2 million during 1994. During 1995 and 1994, net income as
adjusted for non cash items, such as depreciation, was partially offset by the
negative impact on cash from changes in the Company's working capital accounts.
Also during 1994, net income was adjusted for the provision for reduction in
carrying value of assets, a non cash item.
Net cash used for investing activities totaled $87.4 million during
1995, compared to $95.8 million during 1994. Capital expenditures and cash paid
for the acquisition of Delta represented the primary uses of cash during 1995.
This was partially offset by maturities and sales of marketable securities.
During 1994, capital expenditures and the purchase of marketable securities
represented the primary uses of cash.
Financing activities provided cash totaling $3.1 million during 1995,
compared to $5.1 million during the previous year. Cash provided during 1995
resulted from short-term borrowings, partially offset by scheduled principal
payments on long-term obligations. In the prior year, cash provided by common
stock transactions was partially offset by cash used for scheduled principal
payments on long-term obligations.
The Company's cash and cash equivalents and short-term investments in
marketable securities totaled $15.3 million as of September 30, 1995. In
addition, the Company had long-term investments in marketable securities of
$9.6 million. The Company currently has credit facility arrangements with a
number of banks totaling $53.4 million. These credit facilities are limited at
any given time to receivables of certain of the Company's subsidiaries. As of
September 30, 1995, remaining availability, after borrowings on the facilities
and outstanding letters of credit, totaled approximately $15.1 million.
As of September 30, 1995, the Company had capital expenditure
commitments totaling approximately $15.5 million.
The Company currently has authorization from the Board of Directors to
repurchase $40.0 million of its common stock in the open market or by privately
negotiated transactions.
The current cash and cash equivalents, short-term investments,
credit-facility position, and projected cash flow generated from current
operations is expected to adequately finance the Company's non-discretionary
capital and debt service requirements for the next twelve months.
OTHER MATTERS
The Company's financial condition and results of operations depend on
the level of spending by oil and gas companies for exploration, development and
production activities. Therefore, a sustained increase or decrease in the price
of oil or natural gas, which could have a material impact on exploration,
development and production activities, could materially affect the Company's
financial condition and results of operations. Generally, a sustained change in
the price of oil would have a greater impact on the Company's Alaskan and
International operations, while a sustained change in the price of natural gas
would have a greater impact on the US Lower 48, Gulf of Mexico and Canadian
operations.
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 ("SFAS 121"), Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of. SFAS 121, is effective for fiscal years beginning after December
15, 1995. The Company will adopt SFAS 121 at the beginning of fiscal year 1997.
It is anticipated that the impact of adopting this statement will not have a
material effect on the financial statements.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), Accounting for
Stock-Based Compensation. SFAS 123 is effective for fiscal years beginning after
December 15, 1995. The Company will adopt the disclosure provisions of SFAS 123
at the beginning of fiscal year 1997. It is anticipated that the impact of
adopting this statement will not have a material effect on the financial
statements.
30
<PAGE> 33
REPORT OF INDEPENDENT ACCOUNTANTS
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS
OF NABORS INDUSTRIES, INC.
We have audited the accompanying consolidated balance sheets of Nabors
Industries, Inc. and Subsidiaries as of September 30, 1995 and 1994, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for each of the three years in the period ended September 30, 1995.
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 in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Nabors
Industries, Inc. and Subsidiaries as of September 30, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1995, in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Houston, Texas
November 27, 1995
31
<PAGE> 34
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amount)
<TABLE>
<CAPTION>
SEPTEMBER 30,
ASSETS 1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,038 $ 22,563
Marketable securities 3,296 22,669
Accounts receivable, net 132,482 102,069
Inventory and supplies 14,079 15,029
Prepaid expenses and other current assets 21,550 15,745
------------------------
Total current assets 183,445 178,075
Property, plant and equipment, net 383,713 283,141
Marketable securities 9,645 20,266
Other long-term assets 6,718 8,791
------------------------
Total assets $583,521 $490,273
------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------------------------------------
Current liabilities;
Current portion of long-term obligations $ 11,158 $ 16,536
Short-term borrowings 30,684 6,502
Trade accounts payable 53,891 34,190
Accrued liabilities 48,944 40,220
Income taxes payable 5,876 3,379
------------------------
Total current liabilities 150,553 100,827
Long-term obligations 51,478 61,879
Other long-term liabilities 8,784 9,393
Deferred income taxes 3,956 750
------------------------
Total liabilities 214,771 172,849
------------------------
Commitments and contingencies
Stockholders' equity
Preferred stock, par value $.10 per share:
Authorized 10,000 shares; none issued
or outstanding -- --
Capital stock, par value $.10 per share:
Authorized common shares 200,000 in
1995 and 1994; issued and outstanding
85,017 in 1995 and 84,388 in 1994 8,502 8,438
Authorized Class B shares 8,000; none
issued or outstanding -- --
Capital in excess of par value 229,267 218,319
Cumulative translation adjustment (2,670) (2,748)
Net unrealized gain on marketable securities 354 1,345
Retained earnings since May 1, 1988 138,091 95,165
Less treasury stock, at cost, 755 and 506
common shares in 1995 and 1994 (4,794) (3,095)
------------------------
Total stockholders' equity 368,750 317,424
------------------------
Total liabilities and stockholders'
equity $583,521 $490,273
------------------------
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
32
<PAGE> 35
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $572,788 $484,268 $419,406
----------------------------------------
Operating expenses:
Direct costs 434,097 369,677 313,458
General and administrative expenses 49,094 49,365 45,257
Depreciation and amortization 31,042 26,241 22,434
Provision for reduction in carrying
value of assets -- 29,686 --
----------------------------------------
Operating expenses 514,233 474,969 381,149
----------------------------------------
Operating income 58,555 9,299 38,257
----------------------------------------
Other income (expense):
Interest expense (7,611) (8,237) (8,924)
Interest income 1,694 2,459 1,191
Gain on sales of long-term assets 1,404 2,010 9,774
Other income, net 4,586 708 1,819
----------------------------------------
Other income (expense) 73 (3,060) 3,860
----------------------------------------
Income before income taxes 58,628 6,239 42,117
Income taxes 7,524 4,889 3,559
----------------------------------------
Net income $ 51,104 $ 1,350 $ 38,558
----------------------------------------
Earnings per share:
Primary $ .58 $ .02 $ .50
----------------------------------------
Fully diluted $ .57 $ .02 $ .49
----------------------------------------
Weighted average number of shares
outstanding:
Primary 88,018 85,620 77,806
----------------------------------------
Fully diluted 90,237 85,743 78,288
----------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
33
<PAGE> 36
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Net
Capital Unrealized
Common Stock In Excess Cumulative Gain on Total
----------------- of Par Translation Marketable Retained Treasury Stockholders'
Shares Par Value Value Adjustment Securities Earnings Stock Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, September 30, 1992
as previously reported 58,592 $5,859 $121,441 $(2,116) $ -- $ 59,614 $ -- $184,798
Adjustments for Sundowner pooling of
interests 8,971 897 12,057 (234) 3,774 16,494
----------------------------------------------------------------------------------------
Balances, September 30, 1992,
as restated 67,563 6,756 133,498 (2,350) -- 63,388 -- 201,292
Net income 38,558 38,558
Translation adjustment (1,310) (1,310)
Reclassification of pre-quasi-
reorganization tax benefit 7,735 (7,735) --
Issuance of common shares in
connection with public offering, net 4,060 406 18,250 18,656
Issuance of common shares for stock
options and warrants exercised 9,736 974 32,969 (4,508) 29,435
Issuance of common shares for stock
awards 141 14 787 801
Issuance of common shares and treasury
stock in connection with acquisition
of assets 75 8 1,296 1,225 2,529
Issuance of common shares in connection
with public offering, net 770 77 7,436 7,513
Issuance of common shares to pay down
note payable and accrued interest 1,031 103 10,014 10,117
----------------------------------------------------------------------------------------
Balances, September 30, 1993 83,376 8,338 211,985 (3,660) -- 94,211 (3,283) 307,591
Adjustment to conform Sundowner
to Nabors fiscal year-end (396) (396)
Net income 1,350 1,350
Translation adjustment 912 912
Net unrealized gain on marketable
securities 1,345 1,345
Issuance of common shares and treasury
stock for stock options exercised
and employee benefit plans 168 16 1,021 188 1,225
Issuance of common shares for stock awards 110 11 627 638
Issuance of common shares in connection
with acquisition of mutual fund assets 729 73 4,686 4,759
----------------------------------------------------------------------------------------
Balances, September 30, 1994 84,383 8,438 218,319 (2,748) 1,345 95,165 (3,095) 317,424
Net income 51,104 51,104
Translation adjustment 78 78
Reclassification of pre-quasi-
reorganization tax benefit 8,178 (8,178) --
Net unrealized gain on marketable
securities (991) (991)
Issuance of common shares for
stock options exercised 505 51 2,012 2,063
Issuance of common shares for stock
awards 129 13 758 771
Repurchase of common shares (1,699) (1,699)
----------------------------------------------------------------------------------------
Balances, September 30, 1995 85,017 $8,502 $229,267 $(2,670) $ 354 $138,091 $(4,794) $368,750
----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
34
<PAGE> 37
CONSOLIDATED STATEMENTS OF CASH FLOWS
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 51,104 $ 1,350 $ 38,558
Adjustments to net income:
Depreciation and amortization 31,042 26,241 22,434
Provision for reduction in carrying value of assets -- 29,686 --
Deferred taxes 2,611 750 (650)
Gain on sales of long-term assets (1,404) (2,010) (9,774)
Gain on insurance claims (4,649) (484) --
Gain on sales of marketable securities available-for-sale (2,406) (908) --
Foreign currency transaction and translation losses 3,160 1,502 547
Non cash compensation element of stock awards and options 476 1,051 1,227
Other (207) (137) 210
Increase (decrease), net of effects from acquisitions, from
changes in:
Accounts receivable (13,715) 160 (44,065)
Inventory and supplies 962 (811) 602
Prepaid expenses and other current assets (2,723) 1,274 (3,731)
Other long-term assets (792) 1,721 692
Accounts payable and accrued liabilities 12,895 (8,486) 24,605
Income taxes payable 2,497 (295) 734
Other long-term liabilities (5,085) (395) (274)
----------------------------------------
Net cash provided by operating activities 73,766 50,209 31,115
----------------------------------------
Cash flows from investing activities:
Purchases of marketable securities, held-to-maturity (5,121) (39,762) --
Maturities of marketable securities, held-to-maturity 21,254 10,000 --
Sales of marketable securities, held-to-maturity 12,416 -- --
Purchases of marketable securities, available-for-sale (2,273) (12,617) --
Sales of marketable securities, available-for-sale 5,189 2,597 --
Payment received on investment in sales-type leases
and notes receivable -- 1,541 5,350
Cash paid for acquisitions, net (19,572) -- (22,000)
Capital expenditures (109,321) (62,907) (43,417)
Proceeds from sales of assets and insurance claims 10,039 5,315 19,660
----------------------------------------
Net cash used for investing activities (87,389) (95,833) (40,407)
----------------------------------------
Cash flows from financing activities:
Increase in restricted cash (795) (44) (168)
Long-term borrowings 4,538 6,537 56,938
Reduction of long-term obligations (20,317) (26,762) (34,863)
Increase (decrease) in short-term borrowings 19,522 453 (11,459)
Common stock and treasury stock transactions 150 24,951 54,519
----------------------------------------
Net cash provided by financing activities 3,098 5,135 64,967
----------------------------------------
Net (decrease) increase in cash and cash equivalents (10,525) (40,489) 55,675
Cash and cash equivalents, beginning of year 22,563 63,052 14,783
Adjustment to conform Sundowner to Nabors fiscal year-end -- -- (7,406)
----------------------------------------
Cash and cash equivalents, end of year $ 12,038 $ 22,563 $ 63,052
----------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
35
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Nabors Industries, Inc. (the
"Company"), include the accounts of the Company and all subsidiaries.
Intercompany accounts and transactions are eliminated in consolidation.
The Company's investments in several joint ventures are accounted for
under the proportionate consolidation method. The Company's proportionate share
of the joint ventures' net assets and net income was as follows:
<TABLE>
<CAPTION>
September 30,
(In thousands) 1995 1994 1993
----------------------------
<S> <C> <C> <C>
Net assets $22,755 $17,580 $9,491
Net income 4,868 4,386 6,699
----------------------------
</TABLE>
The term "Nabors" as used herein, refers to Nabors Industries, Inc. and
its subsidiaries prior to the merger with Sundowner (Note 2). Nabors fiscal
year-end has historically ended on September 30, while Sundowner Offshore
Services, Inc. ("Sundowner") has a calendar year-end. Effective October 1, 1994,
Sundowner's year-end was changed to conform to Nabors' September 30 fiscal
year-end. Accordingly, the accompanying consolidated financial statements for
the fiscal years ended September 30, 1995 and 1994, combine the information for
Nabors and Sundowner as of September 30, 1995, and for each of the two years
then ended. The accompanying consolidated financial statements for earlier
fiscal years combine information for Nabors' September 30 year-end with
Sundowner's subsequent calendar year-end. Due to the different year-end of the
merged companies, the results of Sundowner for the three months ended December
31, 1993, have been included in the consolidated statements of income for both
the periods ended September 30, 1994 and 1993. Accordingly, Sundowner's net
income of $.4 million for the three months ended December 31, 1993, has been
reported as an adjustment to the September 30, 1994, consolidated retained
earnings.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include time deposits and various other
short-term investments with an original maturity of three months or less at the
time of purchase.
MARKETABLE SECURITIES
In the first quarter of 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The new standard expands the use of
fair value accounting for certain investments in debt and equity securities,
but retains the use of the amortized cost method for investments in debt
securities that the Company has the intent and ability to hold to maturity.
The Company's marketable securities consist of debt securities,
including United States Government securities, commercial paper with maturities
of greater than three months at the date of purchase, and equity securities.
Marketable debt securities that are classified as held-to-maturity are stated
at amortized cost, which approximates market, and marketable securities that
are classified as available-for-sale or trading are stated at fair value.
Unrealized holding gains and losses for available-for-sale securities are
excluded from earnings and reported as a net amount in a separate component of
stockholders' equity until realized. Unrealized gains and losses on securities
classified as trading are reported in earnings currently.
In computing realized gains and losses on the sale of equity securities,
the cost of the equity securities sold is determined using the specific cost of
the security when originally purchased.
INVENTORY AND SUPPLIES
Inventory and supplies are composed of replacement parts and supplies
held for use in the operations of the Company and top drives that are
manufactured by a Company subsidiary for resale. Inventory and supplies are
valued at the lower of weighted average cost or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. The Company provides
for depreciation of drilling rigs on the unit-of-production method over a
3,800-day period after provision for salvage value. To provide for any
deterioration that may occur while the rigs are not operating for an extended
period of time, a minimum depreciation charge is provided at reduced rate of
20% of an assumed depreciation life of 15 years. Depreciation on buildings,
oilfield hauling and mobile equipment, and other machinery and equipment is
computed using the straight-line method over the estimated useful lives of the
assets after provision for salvage value (buildings -- 10 to 30 years; oilfield
hauling and mobile equipment and other machinery and equipment -- 3 to 10
years). Maintenance and repairs are charged to income currently; renewals and
betterments are capitalized. Amortization of capitalized leases is included in
depreciation and amortization expense. Interest applicable to the construction
of drilling and
36
<PAGE> 39
other equipment is capitalized. Interest expense of $.7 million, $.4 million
and $.2 million was capitalized during 1995, 1994 and 1993, respectively.
Provisions for permanent asset impairment are charged to income when it is
considered probable that the carrying values of equipment may not be recovered
over their remaining service lives, based on estimates of future net cash flows
on an undiscounted basis. Upon retirement or other disposal of fixed assets,
the cost and related accumulated depreciation are removed from the respective
accounts, and any gains or losses are included in results of operations.
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121 ("SFAS 121"), Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of. SFAS 121, which is effective for fiscal years beginning after
December 15, 1995, requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. The Company will adopt SFAS 121 at the beginning
of fiscal year 1997. It is anticipated that the impact of adopting this
statement will not have a material effect on the financial statements.
INCOME TAXES
In February 1992, the FASB issued Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), SFAS 109, which
supersedes Statement of Financial Accounting Standards No. 96. "Accounting for
Income Taxes" ("SFAS 96"), is an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the Company's financial
statements or tax returns. In estimating future tax consequences, SFAS 109
generally considers all expected future events other than enactments of changes
in the tax law or rates. The Company adopted SFAS 109 at the beginning of 1994,
the required effective date of the statement. Adoption of this statement did
not have a material effect on the financial statements.
United States income taxes have not been provided on unremitted
earnings of subsidiaries located outside the United States, as such earnings
are considered permanently reinvested.
REVENUE RECOGNITION
Revenues and costs on daywork contracts are recognized daily
(percentage-of-completion method); revenues and costs applicable to footage and
turnkey contracts are recognized on completion of the well (completed contract
method).
FOREIGN CURRENCY TRANSLATION
For certain foreign subsidiaries, such as those in the United Kingdom
and Canada, the local currency is the functional currency. Assets and
liabilities are translated at year-end exchange rates, and income and expenses
are translated at the average exchange rates prevailing during the year.
Translation gains or losses are accumulated in a separate section of
stockholders' equity, and transaction gains and losses are included in net
income. For subsidiaries operating in highly inflationary countries, such as
Venezuela, and for certain other subsidiaries, the US dollar is the functional
currency, and translation gains and losses are included in determining net
income.
Foreign currency transaction and translation losses included in net
income for 1995, 1994 and 1993 totaled $3.2 million, $1.5 million and $.5
million, respectively. The 1995 losses include $2.5 million in the UK North Sea
relating to foreign currency losses that were deferred and recognized as part
of the specific transactions hedged. During 1994, the Venezuelan bolivar
devalued by approximately 75%, as compared to the US dollar, due to the
deterioration in that country's economic condition. During June 1994, the
Venezuelan government imposed exchange rate control policies and an official
fixed rate of 170 bolivars to the US dollar. As a result of the devaluation,
the Company recorded translation losses totaling $1.0 million during 1994.
Subsequent to the June 1994 establishment of the official fixed exchange rate,
the Company reduced its bolivar net monetary asset exposure. However, if the
Venezuelan government allows the bolivar to "float" relative to the US dollar,
or revises the official fixed exchange rate, the Company could incur additional
translation losses. The Company also recorded amortization of deferred currency
losses in the UK North Sea during 1994.
EARNINGS PER SHARE
The Company's earnings per share are based upon the weighed average
number of common shares ("Shares") outstanding during the year, excluding
Shares held in treasury. Shares reserved for issuance against stock options
outstanding under the Company's stock option plans and stock warrants issued
are considered common stock equivalents if dilutive.
CASH FLOW INFORMATION
Cash paid for income taxes and interest during 1995, 1994 and 1993 was
as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes $5,045 $2,765 $3,817
Interest, net of
capitalized interest 7,064 7,818 8,114
---------------------------------------
</TABLE>
37
<PAGE> 40
A summary of the Company's non cash activities during 1995, 1994 and
1993 is as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Acquisition of businesses:
Fair value of assets acquired
less negative goodwill $ 29,634 $ -- $ 32,000
Consideration paid:
Cash (20,000) -- (22,000)
----------------------------------
Liabilities assumed or created 9,634 -- 10,000
----------------------------------
Common stock issued to a
mutual fund in exchange for
the Company's shares -- 83,135 --
----------------------------------
Common shares and treasury
shares issued to acquire assets -- -- 2,000
----------------------------------
Common stock issued to pay
down note payable and
accrued interest -- -- 10,117
----------------------------------
</TABLE>
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of temporary cash investments
that the Company has with a variety of financial institutions with strong credit
ratings. The Company believes that, due to the foregoing, the credit risk in
such instruments is minimal. In addition, as disclosed in the distribution of
earnings and assets information that appears in Note 14, the Company's trade
receivables are with a variety of international and national oil companies.
Management considers this credit risk to be limited due to these companies'
financial resources.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of the Company's cash and cash equivalents and
short-term marketable securities approximate fair value because of the
short-term maturity of those investments. The fair value of the Company's
long-term marketable securities is determined based on quoted market prices.
The fair value of the Company's debt approximates its carrying value.
2 ACQUISITIONS
During October 1994, the Company consummated its merger with Sundowner,
a company that provides contract well servicing and workover services in the
Gulf of Mexico and various international offshore markets utilizing
self-contained, modular platform rigs and jackup workover rigs. Under the
merger agreement, Sundowner stockholders received 2.8 shares of the Company's
common stock for each of their shares of Sundowner. As a result, the Company
issued 13,081,600 common shares to Sundowner stockholders.
The merger has been accounted for as a pooling of interests.
Accordingly, the accompanying consolidated financial statements have been
retroactively restated to include the results of operations, financial position
and cash flows of Sundowner for all periods prior to consummation of the merger
(Note 1). In addition to combining the companies' historical operations, the
accompanying consolidated financial statements include adjustments to
Sundowner's deferred income tax expense. The companies expect to file
consolidated tax returns subsequent to the combination date; accordingly, the
deferred tax accounts have been adjusted retroactively to reflect the combined
companies' use of the Company's operating loss carryforwards for US federal
income tax purposes. Such adjustments resulted in a reduction in US federal
deferred income tax expense in the combined companies statement of operations.
In accordance with SFAS 109, no retroactive adjustment has been made to the
combined companies' current US federal income tax expense because consolidated
tax returns cannot be filed for periods preceding the combination date. Earnings
per common share for each period are based on the combined weighted average
number of common shares outstanding after adjusting Sundowner's historical
amounts for the conversion into 2.8 shares of the Company's common stock.
Operating results of the separate companies for the periods prior to
the merger are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994 1995
(In thousands) REVENUES NET INCOME REVENUES NET INCOME
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nabors $422,551 $ 650 $352,037 $34,263
Sundowner 61,717 148 67,369 3,430
Deferred income
tax adjustment 552 865
------------------------------------------------------
$484,268 $1,350 $419,406 $38,558
------------------------------------------------------
</TABLE>
38
<PAGE> 41
During January 1995, the Company acquired Delta Drilling Company
("Delta"), a company engaged in the business of contract land drilling in the
United States. The purchase price of Delta was approximately $20.0 million in
cash plus liabilities assumed. The acquisition was accounted for under the
purchase method of accounting; accordingly, the total purchase price was
allocated to net assets based on estimated fair values. The results of Delta's
operations have been included in the consolidated financial statements
commencing on the effective date of the acquisition.
During June 1993, the Company acquired the land rigs and certain
other assets of Grace Drilling Company ("Grace"). Grace owned 167 US-based land
rigs, of which approximately 110 were being actively marketed. The purchase
price for Grace totaled $32.0 million, plus acquisition costs, and consisted of
$22.0 million in cash and $10.0 million in a note that was repaid during August
1993 through the issuance of common stock. In addition, the purchase price
included a three-year warrant to purchase 1,100,000 shares of the Company's
common stock at a per share price equal to $16.18. The acquisition was
accounted for under the purchase method of accounting. The results of Grace's
operations have been included in the consolidated financial statements
commencing on the effective date of the acquisition.
3 MARKETABLE SECURITIES
Marketable securities classified as current assets are as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
- -------------------------------------------------------------------
<S> <C> <C>
Debt securities, classified as held-to-maturity,
at amortized cost, which approximates
fair value:
US Government securities $2,002 $10,758
Commercial paper -- 11,911
Equity securities, classified as trading,
at fair value 1,294 --
----------------
$3,296 $22,669
----------------
</TABLE>
Marketable securities classified as long-term assets are follows:
<TABLE>
<CAPTION>
September 30,
(In thousands) 1995 1994
- -------------------------------------------------------------------
<S> <C> <C>
US Government securities, classified as
held-to-maturity, at amortized cost,
which approximates fair value -- $ 7,994
Equity securities, classified as available-
for-sale, at fair value 9,645 12,272
----------------
$9,645 $20,266
----------------
</TABLE>
The fair value of equity securities that were classified as
available-for-sale exceeded the cost by approximately $.4 million and $1.3
million as of September 30, 1995 and 1994, respectively. The contractual
maturities of debt securities held-to-maturity are less than one year as of
September 30, 1995. During 1995, the Company sold debt securities with an
amortized cost of $12.6 million and recorded a loss of $.2 million. The debt
securities previously had been classified as held-to-maturity and were sold to
fund the acquisition of Delta.
During 1995, the Company recorded a gain totaling $2.4 million and
received $6.3 million of proceeds in a combination of shares, warrants and cash
in settlement of the tender offer for the Company's investment in certain
equity securities and from other sales of equity securities classified as
available-for-sale. During 1995, the Company recorded unrealized holding gains
totaling $.2 million on equity securities classified as trading.
During 1994, the Company received $2.6 million of proceeds and
realized a gain of $.9 million resulting from the sale of certain investments
in equity securities that had been classified as available-for-sale.
4 PROPERTY, PLANT AND EQUIPMENT
The major components of property, land and equipment are as follows:
<TABLE>
<CAPTION>
September 30,
(In thousands) 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Land $ 3,788 $ 2,868
Buildings 13,684 12,467
Contract drilling rigs and related equipment 516,487 394,190
Oilfield hauling and mobile equipment 42,208 40,662
Other machinery and equipment 19,896 19,410
----------------------
596,063 469,597
Less: accumulated depreciation
and amortization(1) (212,350) (186,456)
----------------------
$ 383,713 $ 283,141
----------------------
</TABLE>
(1) Includes, as of September 30, 1995 and 1994, reserves of $56.3 million
and $56.6 million, respectively, resulting from the permanent
impairment of certain asset values.
39
<PAGE> 42
Repair and maintenance expense included in direct costs in the
statements of income amounted to $63.2 million, $49.2 million and $40.6 million
for the years ended September 30, 1995, 1994 and 1993, respectively.
The oilfield hauling and mobile equipment category of property, plant
and equipment includes equipment under capital lease totaling $1.6 million and
$2.1 million as of September 30, 1995 and 1994, respectively. Accumulated
amortization associated with the equipment totaled $.7 million and $.8 million
as of September 30, 1995 and 1994, respectively.
5 PROVISION FOR REDUCTION IN CARRYING VALUE OF ASSETS
During the third quarter of 1994, the Company recorded a provision for
reduction in carrying value of assets totaling $29.7 million. The assets
primarily affected were the Company's Yemen logistical assets and inventory.
The provision also included estimates of facility closure costs and other costs
in certain international areas, including Yemen. The determining factor
resulting in the provision for reduction in carrying value of assets was the
general reduction of activity in Yemen, further exacerbated by the civil war
there.
6 SHORT-TERM BORROWINGS AND LETTERS OF CREDIT
The Company has available lines of credit with a number of banks that
permit borrowing at interest rates generally not to exceed, at the option of
the Company, each bank's prime rate or LIBOR plus 1.00%. The weighted average
interest rate on short-term borrowings outstanding as of September 30, 1995 and
1994 equaled 6.88% and 6.78%, respectively.
Availability and borrowings under these lines of credit are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
(In thousands) 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
Lines of credit available $53,391 $33,500
Short-term borrowings outstanding 28,440 5,600
Letters of credit outstanding 9,853 6,800
--------------------------
</TABLE>
7 LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
(In thousands) 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
9.18% Senior Secured Notes payable in
semiannual installments of $4,000
commencing January 2002 $ 40,000 $ 40,000
10.25% Senior Secured Notes payable in
semiannual installments of $3,000
commencing July 1992, net 8,782 14,628
$8,284 Loan payable in quarterly
installments of $295 commencing
July 1990 2,071 3,254
$5,100 Loan payable in quarterly
installments of $182 commencing
July 1991 2,003 2,732
$4,851 Loan payable in quarterly
installments of $173 commencing
July 1993 3,118 3,984
$2,200 Loan payable in full August 1998 2,200 --
Medium-term notes payable, maturing from
1995 to 2001, from 6.5% to 8.5%(1) 4,068 12,905
Capital leases(1) 394 912
----------------------------
62,636 78,415
Less: current portion (11,158) (16,536)
----------------------------
$ 51,478 $ 61,879
----------------------------
</TABLE>
(1) Certain of these obligations are collateralized by specific assets financed
with the related proceeds. The aggregate net book value of such assets
approximated $12.5 million and $26.0 million as of September 30, 1995
and 1994, respectively.
The Company issued 9.18% Senior Secured Notes due July 31, 2006, in the
principal amount of $40.0 million (the "9.18% Senior Secured Notes") to the John
Hancock Mutual Life Insurance Company ("John Hancock"), pursuant to an Amended
and Restated Note Purchase Agreement dated October 1, 1992.
The Company substantially financed the 1990 acquisition of Loffland
Brothers Company through certain of its subsidiaries incurring $30.0 million of
10.25% Senior Secured Notes due January 31, 1997 (the "10.25% Senior Secured
Notes") to John Hancock. The Company also issued warrants to the same financial
institution to purchase 1,500,000 shares of the Company's common stock of $5.50
per share, exercisable until January 31, 1997 (the "Warrants"). A value of $1.1
million was assigned to the Warrants.
40
<PAGE> 43
The 9.18% Senior Secured Notes and the 10.25% Senior Secured Notes
(collectively "Senior Secured Notes") impose certain restrictions on the
Company, including restrictions on the payments of dividends and certain
business combinations. The Company may pay dividends to the extent the Company's
cumulative dividends plus certain other payments since March 31, 1989, do not
exceed 50% of the Company's cumulative net income since March 31, 1989, plus the
proceeds of any offering of equity securities of the Company that are not
redeemable at the option of the holder of the securities. As of September 30,
1995, retained earnings available for dividend totaled approximately $140.0
million. Also, proceeds from the sale of certain assets must be used to prepay
the Senior Secured Notes to the extent that an amount equal to such proceeds are
not invested by the Company during a two-year period. The Senior Secured Notes
also require that certain financial tests be met on a consolidated Company
basis, the most restrictive of which requires working capital to be in excess of
$5.0 million. The Senior Secured Notes are collateralized by the pledge of all
the shares and assets of the Company's subsidiaries operating in the UK North
Sea and of all the shares of one of the Company's subsidiaries operating in the
Gulf of Mexico and are guaranteed by the Company and one of its subsidiaries.
The aggregate book value of such net assets approximated $29.7 and $35.8 million
as of September 30, 1995 and 1994, respectively.
During 1993, 1991 and 1990, subsidiaries of the Company entered into
three separate loan agreements with a financial institution, under which it
borrowed $4.9 million, $5.1 million and $8.3 million, respectively, to finance
the construction of three new rigs placed in service during March 1993, March
1991 and February 1990. Effective August 15, 1995, each of the three loans bears
interest at 90-day LIBOR plus .75% (6.70% at September 30, 1995). Before this
date, the three loans bore interest at 90-day LIBOR plus 1.125% (6.06% at
September 30, 1994). The loans are collateralized by the rigs financed with the
proceeds of such loans, with the exception of the $4.9 million loan, which is
collateralized by five land drilling rigs located in the US Lower 48 and the
proceeds of the contracts under which the rigs operate. The aggregate net book
value of such assets approximated $20.2 million and $21.0 million as of
September 30, 1995 and 1994, respectively. The loans are guaranteed by the
Company and require the Company, on a consolidated basis, to maintain various
financial ratios, the most restrictive of which requires working capital to be
in excess of $1.0 million.
During 1995, a subsidiary of the Company entered into a revolving loan
agreement with a financial institution whereby it can borrow up to $20.0 million
for the construction of certain drilling equipment that is exported from Canada
by one of the Company's subsidiaries. The loan proceeds are drawn quarterly
based on the amount of qualifying drilling equipment exported from Canada during
the immediately preceding three-month period and are due for repayment three
years after the date the individual advances are made. The Company received its
first advance during August 1995 totaling $2.2 million. The loans bear interest
at 90-day LIBOR plus .75% (6.70% at September 30, 1995). The loans are
collateralized by several drilling rigs located in the US with an aggregate net
book value of approximately $27.4 million as of September 30, 1995. The loans
are guaranteed by the Company, and require the Company, on a consolidated basis,
to maintain various financial ratios, the most restrictive of which requires
working capital to be in excess of $5.0 million.
As of September 30, 1995, the maturities of long-term obligations,
exclusive of capital lease obligations, for the five years after 1995 are as
follows:
<TABLE>
<CAPTION>
(In thousands)
- -------------------------------------------------------------------------------
<S> <C>
1996 $ 10,767
1997 6,291
1998 4,185
1999 789
2000 402
Thereafter 39,808
--------
$ 62,242
========
</TABLE>
The following is a schedule of future minimum lease payments under
capital leases, together with the present value of the net minimum lease
payments, as of September 30, 1995:
<TABLE>
<CAPTION>
(In thousands)
- -------------------------------------------------------------------------------
<S> <C>
1996 $ 415
1997 3
-----
Total minimum lease payments 418
Less: amount representing interest (24)
-----
Present value of net minimum lease payments 394
Less: amount payable in one year (391)
-----
$ 3
=====
</TABLE>
41
<PAGE> 44
8 INCOME TAXES
The Company's income tax, reconciled to the United States federal
income tax using the federal statutory rate, and an analysis of the income tax
provision is as follows:
<TABLE>
<CAPTION>
Year ended September 30,
(In thousands) 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total pretax income (1) $ 58,628 $ 6,239 $ 42,117
------------------------------------------
Expected federal income tax using the
statutory rate (35%, 35% and 34.75%) 20,520 2,184 14,636
Recognition of net loss carryforwards (20,599) -- (9,709)
Alternative Minimum Tax 574 76 --
State income taxes 672 115 --
Foreign taxes and other 6,357 2,514 (1,368)
------------------------------------------
Total income tax $ 7,524 $ 4,889 $ 3,559
------------------------------------------
Analysis of the income tax provision:
Current:
US federal $ 574 $ 76 $ --
State and local 72 115 --
Foreign 4,267 3,948 4,209
------------------------------------------
4,913 4,139 4,209
Deferred:
State and local 600 -- --
Foreign 2,011 750 (650)
------------------------------------------
Total income tax $ 7,524 $ 4,889 $ 3,559
------------------------------------------
</TABLE>
(1) Includes foreign income before taxes of $7.5 million, $6.7 million and $9.4
million, respectively, in the years ended September 30, 1995, 1994 and 1993.
The components of the Company's net deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
September 30,
(In thousands) 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 65,688 $ 72,935
Accrued liabilities not deducted
for tax purposes 10,960 10,562
General tax credits 5,455 5,631
---------------------------
Deferred tax asset 82,103 89,128
Valuation allowance (29,306) (57,166)
---------------------------
Net deferred tax asset 52,797 31,962
Deferred tax liabilities:
Excess tax over book depreciation (56,753) (32,712)
---------------------------
Net deferred tax liability (3,956) (750)
---------------------------
</TABLE>
In conjunction with the acquisition of Delta (Note 2), deferred tax
liabilities of $.6 million were recorded during 1995.
For US federal income tax purposes, the Company has net operating loss
carryforwards of approximately $184.6 million that, if not utilized, will expire
from 1999 to 2009. The net operating loss carryforwards for Alternative Minimum
Tax purposes are approximately $145.2 million. There are Alternative Minimum Tax
credit carryforwards of $1.4 million available to offset future regular tax
liabilities. In addition, the Company has approximately $4.1 million of
investment-tax-credit carryforwards expiring at various dates from 1997 to 2001.
Under federal tax law, the amount and availability of loss
carryforwards (and certain other tax attributes) are subject to a variety of
interpretations and restrictive tests applicable to the Company and its
subsidiaries. The utilization of such carryforwards could be limited or
effectively lost upon certain changes in ownership. Accordingly, although the
Company believes substantial loss carryforwards are available to it, no
assurance can be given concerning such loss carryforwards or whether or not
such loss carryforwards will be available in the future.
A valuation allowance is provided to reduce the deferred tax assets to
a level which, more likely than not, will be realized. Primary factors
considered by management to determine the size of the allowance include the
competitive and cyclical nature of the Company's primary markets and the
expiration timing of the net operating loss carryforwards.
42
<PAGE> 45
The Company's accumulated deficit of $56.9 million as of May 1, 1988,
was eliminated by a transfer to paid-in capital through an accounting
reorganization of its stockholders' equity accounts (quasi-reorganization). The
quasi-reorganization did not involve any revaluation of assets or liabilities
because their fair values were, respectively, not less than or greater than
their book values.
The Company adopted its quasi-reorganization in the context of its
reliance, at that time, on SFAS 96, which provided for recognition in the
statement of income the tax benefits of operating loss and tax-credit
carryforward items that arose prior to a quasi-reorganization such as that
implemented by the Company.
Subsequent to the issuance of SFAS 96 in September 1989, the Securities
and Exchange Commission issued Staff Accounting Bulletin No. 86 (SAB 86). This
bulletin sets forth the SEC staff's view that the tax benefits of operating
loss and tax-credit carryforward items that arose prior to a
quasi-reorganization must be reported as a direct credit to paid-in capital
following a quasi-reorganization involving only an elimination of a deficit in
retained earnings.
Since the Company implemented its quasi-reorganization based on SFAS 96
and prior to the issuance of SAB 86, it will continue to report carryforward tax
benefits directly in the statement of income and then will reclassify the amount
of such benefit from retained earnings to paid-in capital. The SEC has informed
the Company that, under the circumstances, it will not object to the Company's
accounting for these tax benefits. If the provisions of SAB 86 had been applied,
net income for the years ended September 30, 1995 and 1993 would have been
reduced by $8.2 million ($.09 per share) and $7.7 million ($.10 per share),
respectively. Net income for the year ended September 30, 1994, would not have
been reduced.
SFAS 109, which supersedes SFAS 96 and was adopted by the Company at
the beginning of 1994, includes a "grandfathering" provision that permits the
Company to continue its present method of accounting for the utilization of its
operating loss and tax-credit carryforward items that arose before the
Company's 1988 quasi-reorganization.
9 CAPITAL STOCK AND STOCK OPTIONS
CAPITAL STOCK
During December 1994, the Company purchased 250,000 shares of its
common stock in the open market at a cost of $1.7 million, or $6.80 per share.
During October 1994, the Company completed its merger with Sundowner
whereby the Company acquired all of the outstanding shares of Sundowner in
exchange for 13,081,600 newly issued registered shares of the Company's common
stock (Note 2).
During April 1994, the Company completed a transaction whereby it
acquired all of the assets of Equity Strategies Fund, Inc., an open-ended
mutual fund ("ESI"), in exchange for 13,276,349 newly issued registered shares
of the Company's common stock. The ESI assets acquired comprised 12,548,733
shares of the Company's common shares and $4.8 million in cash. The price at
which the Company's shares were exchanged was $6.625 per share, which was based
upon an average closing price of the Company's stock. The shares of common
stock issued to ESI then were distributed pro rata to the shareholders of ESI.
The net effect of the transaction was that the Company's common shares
outstanding increased by 727,616 shares and the Company received $4.8 million
in cash.
During 1993, a total of 4,632,000 common shares were issued for an
equal number of publicly traded warrants at an exercise price of $5.50 per
share. The warrants had been exercisable through August 28, 1993.
During 1993, Sundowner completed a public offering of 1,450,000 shares
of common stock (or the equivalent of 4,060,000 Company common shares at the
2.8 share conversion ratio, see Note 2) priced at $14.00 per share, resulting
in net proceeds to Sundowner of approximately $18.7 million.
The Company issued 1,030,770 common shares during August 1993 to repay
a $10.0 million note issued as part of the acquisition of Grace (Note 2).
During August 1993, the Company completed the public sale of 769,230
common shares at a price of $9.875 per share.
During June 1993, the Company issued 200,000 treasury shares to
purchase three drilling rigs.
During December 1992, two senior officers exercised options to purchase
a total of 3,776,000 common shares for an aggregate purchase price of $4.5
million. The Company received 735,968 common shares from the two officers as
consideration for the purchase of these common shares.
The Company is authorized to issue up to 10,000,000 shares of preferred
stock with a par value of $.10 per share in one or more series and to fix the
powers, designations, preferences and rights to each series.
As of September 30, 1995 and 1994 there were warrants outstanding to
purchase: 1,500,000 common shares at $5.50 per share, exercisable until
January 31, 1997; 1,100,000 common shares at $16.18 per share, exercisable
until June 1996; and 650,000 common shares at $7.92 per share, exercisable
until April 1996.
43
<PAGE> 46
STOCK OPTION PLANS
As of September 30, 1995, the Company has several stock option plans
under which options to purchase common shares may be granted to key officers,
directors and managerial employees of the Company and its subsidiaries. Options
granted under the plans generally are at prices ranging between 85% and 110% of
the fair market value of the stock on the date of the grant. Options granted
under the plans generally are exercisable in varying cumulative periodic
installments after one year and cannot be exercised more than ten years from
the date of grant. Options to purchase 1,326,714 and 2,102,764 common shares
remained available for grant as of September 30, 1995 and 1994, respectively.
A summary of stock option transactions during the three years ended
September 30, 1995, is as follows:
<TABLE>
<CAPTION>
Number Price Range
(Share amounts in thousands) of Shares Per Share
- ----------------------------------------------------------------------------
<S> <C> <C>
Options outstanding
September 30, 1992 11,889 $ .75 to $16.25
Granted 1,132 4.77 to 9.625
Exercised (5,135) .75 to 5.875
Forfeited (299) 4.04 to 6.50
------------------------------
Options outstanding
September 30, 1993 7,587 $ .75 to $16.25
Granted 1,437 5.00 to 7.50
Exercised (168) 1.07 to 6.875
Forfeited (137) 4.04 to 6.875
------------------------------
Options outstanding
September 30, 1994 8,719 $ .75 to $16.25
Granted 4,453 6.25 to 8.25
Exercised (505) 1.07 to 6.875
Forfeited (47) 4.77 to 6.875
------------------------------
Options outstanding
September 30, 1995 12,620 $ .75 to $16.25
------------------------------
</TABLE>
Of the options outstanding, 9,567,270, 5,278,870 and 3,454,270 were
exercisable as of September 30, 1995, 1994 and 1993, respectively.
The Company has several stock grant plans under which grants of common
shares may be awarded to key officers, directors and managerial employees of
the Company and its subsidiaries. Shares granted under the plans generally vest
in varying cumulative periodic installments. As of September 30, 1995, 497,500
shares remained available for grant.
A summary of stock grant transactions during the three years ended
September 30, 1995, is as follows:
<TABLE>
<CAPTION>
Number
(Share amounts in thousands) of Shares
- ----------------------------------------------------------------------------
<S> <C>
Grants Outstanding
September 30, 1992 406
Granted 40
Vested (141)
Forfeited (63)
--------
Grants Outstanding
September 30, 1993 242
Granted --
Vested (110)
Forfeited --
--------
Grants Outstanding
September 30, 1994 132
Granted 77
Vested (129)
Forfeited --
--------
Grants Outstanding
September 30, 1995 80
--------
</TABLE>
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), Accounting for Stock-Based Compensation. SFAS
123, which is effective for fiscal years beginning after December 15, 1995,
establishes financial accounting and reporting standards for stock-based
employee compensation plans and for transactions in which an entity issues its
equity instruments to acquire goods and services from nonemployees. SFAS 123
requires, among other things, that compensation cost be calculated for fixed
stock options at the grant date by determining fair value using an
option-pricing model. The Company has the option of recognizing the compensation
cost over the vesting period as an expense in the income statement or making pro
forma disclosures in the notes to the financial statements as to the effects on
net income as if the compensation cost has been recognized in the income
statement. The Company will adopt the pro forma disclosure provisions of SFAS
123 at the beginning of fiscal year 1997.
44
<PAGE> 47
10 EMPLOYEE BENEFIT PLANS
Certain of the Company's employees are covered by defined contribution
plans. The Company's contributions to the plans are based on employee
contributions and totaled $2.9 million, $2.6 million and $1.9 million for the
years ended September 30, 1995, 1994 and 1993, respectively.
Before its acquisition by the Company, Loffland Brothers Company had
accrued, over a number of years, deferred incentive compensation for certain of
its key employees. This deferred incentive compensation plan was discontinued
prior to the acquisition by the Company. At September 30, 1995 and 1994, the
Company's balance sheet reflected a liability of $1.4 million and $2.1 million,
respectively, relating to the deferred compensation plan.
In November 1992, the FASB issued Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS
112"). The adoption of SFAS 112 by the Company during 1995 did not have a
material effect upon the financial statements because the Company does not
provide such benefits to its employees.
11 COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company and its subsidiaries occupy various facilities and lease
certain equipment under leases that range in length from 1 to 31 years.
Payments required under the operating leases in years subsequent to
September 30, 1995, are as follows:
<TABLE>
<CAPTION>
(In thousands)
----------------------------------
<S> <C>
1996 $ 2,156
1997 2,151
1998 2,102
1999 1,803
2000 1,347
Thereafter 1,123
-------
$10,682
-------
</TABLE>
Minimum payments have not been reduced by sublease rentals, which are
minimal and are due in the future under noncancelable subleases. The above
amounts do not include property taxes, insurance, or normal maintenance that the
lessees are required to pay. Rental expense relating to operating leases
amounted to $11.4 million, $11.8 million and $9.1 million for the years ended
September 30, 1995, 1994 and 1993, respectively.
EMPLOYMENT CONTRACTS
The Company has entered into employment contracts with certain of its
employees. The Company's minimum salary and bonus obligations under these
contracts are as follows:
<TABLE>
<CAPTION>
(In thousands)
--------------------------------
<S> <C>
1996 $2,548
1997 2,261
1998 1,511
1999 1,368
2000 --
------
$7,688
------
</TABLE>
Pursuant to one of the employment contracts, an employee is entitled to
receive an annual bonus equal to 7% of the net cash flow of the Company (as
defined in the employment contract) that exceeds 15% of the average
stockholders' equity in such year. The employee received cash bonuses of $1.3
million, $.68 million and $.68 million for the years ended September 30, 1995,
1994 and 1993, respectively. The employee also received stock-based
compensation for 1993 and will receive stock-based compensation for 1995.
Pursuant to one of the employment contracts, an employee is entitled to
receive an annual bonus equal to the greater of $.7 million, or 2% of the net
cash flow of the Company (as defined in the employment contract) that exceeds
15% of the average stockholders' equity in such year. For 1995, 1994 and 1993,
the employee received cash bonuses of $.3 million, $.42 million and $.42
million, respectively. The employee also received stock-based compensation for
1993 and will receive stock-based compensation for 1995. For 1995, 1994 and
1993, both employees received lower cash bonuses than those to which they were
entitled under the bonus formula. For both employees the package of bonus
compensation for each of the three fiscal years was not greater than the cash
bonus that each employee was entitled to received under the bonus formula.
CAPITAL EXPENDITURES
As of September 30, 1995 and 1994, the Company had capital expenditure
commitments totaling approximately $15.5 million and $4.5 million, respectively.
CONTINGENCIES
A petition was filed on March 4, 1994, in the 61st Judicial Court, of
Harris County, Texas, against Nealwell Drilling Limited ("Nealwell") and
Sundowner, asserting that Nealwell breached a contract, and Sundowner tortiously
interfered with alleged contract rights of Primrose Drilling Ventures, Ltd.,
when Sundowner purchased a jackup workover rig from Nealwell for $2.0 million in
cash. Primrose has alleged approximately $34.5 million in actual damages, as
well as exemplary damages not less than its actual damages. Company management
believes that the litigation instituted by Primrose is without merit and intends
to vigorously defend all claims of Primrose. The case is in the discovery
stages.
45
<PAGE> 48
The Company is a defendant or otherwise involved in a number of
lawsuits. In the opinion of management, the Company's ultimate liability, with
respect to these lawsuits is not expected to have a significant or material
adverse effect on the Company's consolidated financial position or results of
operations.
The Company insures its drilling rigs and equipment subject to various
deductibles, but not exceeding $.2 million per occurrence. The Company retains
the first $1.0 million per occurrence and $7.4 million in the aggregate of its
workers' compensation exposures in the US Lower 48 and Alaska. These operations
also are subject to a $.25 million per occurrence deductible for auto liability.
All international workers' compensation and automobile liability is subject to a
retrospectively rated insurance policy. In the US Lower 48 and Alaska, the
Company self-insures the first $1.0 million per occurrence and $2.0 million in
the aggregate of general liability claims. International general liability
exposures are subject to a $25,000 per occurrence deductible.
12 SUPPLEMENTAL BALANCE SHEET AND STATEMENT OF INCOME INFORMATION
Other income during 1995 includes insurance gains on damaged equipment
totaling $4.6 million. During 1993, a customer of the Company exercised its
buyout option for a Company-owned platform rig in the UK North Sea. The Company
received approximately $16.0 million in cash proceeds and recognized a pretax
gain of approximately $9.0 million from the sale. During 1993, the Company
received income tax refunds totaling $5.9 million from the Norwegian
government. Substantially all of the tax refund was recorded as other income
during 1993. The Company recorded other expense during 1993 totaling
approximately $3.5 million from the establishment of a reserve relating to
investment in sales-type leases that resulted from the restructuring of the
long-term lease arrangement.
Accounts receivable is net of an allowance for doubtful accounts of
$1.4 million and $1.7 million as of September 30, 1995 and 1994, respectively.
Accrued liabilities includes accrued compensation totaling $19.6
million and $15.8 million as of September 30, 1995 and 1994, respectively.
13 UNAUDITED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Year ended September 30, 1995
(In thousands, First Second Third Fourth
except per share amounts) Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $126,002 $143,335 $152,673 $150,778
Gross profit (excluding
depreciation and general
and administrative expenses) 32,257 34,510 36,790 35,134
Net income 11,073 12,284 13,045 14,702
Earnings per share .13 .14 .15 .16
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year ended September 30, 1994
(In thousands, First Second Third Fourth
except per share amounts) Quarter Quarter Quarter Quarter
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $133,932 $118,577 $111,387 $120,372
Gross profit (excluding
depreciation and general
and administrative expenses) 29,899 28,787 27,277 28,628
Net income (loss) 9,065 8,235 (22,906) 6,956
Earnings (loss) per share .11 .10 (.27)(1) .08
---------------------------------------------------------
</TABLE>
(1) Includes provision for reduction in carrying value of assets totaling
$29.7 million or $.35 per share.
46
<PAGE> 49
14 DISTRIBUTION OF EARNINGS AND ASSETS
The following table sets forth financial information with respect to
the Company and its subsidiaries, on a consolidated basis, by geographical area.
<TABLE>
<CAPTION>
Geographic Areas Year ended September 30,
(In thousands) 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues(1)(2)
North America $416,475 $323,149 $235,716
International:
Middle East, CIS, Africa
and other 58,932 76,156 103,082
South and Central America 49,453 32,991 28,788
UK North Sea 47,928 51,972 51,820
----------------------------------------
$572,788 $484,268 $419,406
----------------------------------------
Operating income (loss)
North America $ 47,989 $ 35,246 $ 26,092
International:
Middle East, CIS, Africa
and other 8,346 (26,091) 8,277
South and Central America 8,031 5,781 6,729
UK North Sea 3,916 5,647 8,085
Corporate (9,727) (11,284) (10,926)
----------------------------------------
$ 58,555 $ 9,299 $ 38,257
----------------------------------------
Assets
North America $365,568 $307,862 $295,371
International:
Middle East, CIS, Africa
and other 117,887 108,170 136,782
South and Central America 84,845 52,843 27,128
UK North Sea 15,221 21,398 34,646
----------------------------------------
$583,521 $490,273 $493,927
----------------------------------------
</TABLE>
(1) No material revenues were derived from transactions between geographic
areas of operation.
(2) No customers provided 10% or more of consolidated revenues in the years
presented. In the opinion of management, the loss of a single customer
would not have a material adverse effect on the Company's business.
47
<PAGE> 50
DIRECTORS AND OFFICERS
DIRECTORS
EUGENE M. ISENBERG
Chairman and Chief Executive Officer,
Nabors Industries, Inc.
ANTHONY G. PETRELLO
President and Chief Operating Officer,
Nabors Industries, Inc.
RICHARD A. STRATTON
Vice Chairman, Nabors Industries, Inc.
GARY T. HURFORD
President, Hunt Oil Company
HANS W. SCHMIDT
Formerly President, Deutag Drilling
MYRON M. SHEINFELD
Attorney, Sheinfeld, Maley & Kay
JACK WEXLER
International Business Consultant
Formerly Senior Vice President,
Exxon International, and
President and CEO, Esso Sekiyo KK
MARTIN J. WHITMAN
Managing Director,
Whitman Hefferman Rhein & Co., Inc.
Chairman, Danielson Holding Corporation
OFFICERS
EUGENE M. ISENBERG
Chairman and Chief Executive Officer
ANTHONY G. PETRELLO
President and Chief Operating Officer
RICHARD A. STRATTON
Vice Chairman
MICHAEL W. DUNDY
Vice President and General Counsel
DANIEL McLACHLIN
Vice President and Corporate Secretary
BRUCE P. KOCH
Corporate Controller
48
<PAGE> 51
CORPORATE ADDRESS
Nabors Industries, Inc.
515 West Greens Road
Suite 1200
Houston, Texas 77067
Telephone: (713) 874-0035
Fax: (713) 872-5205
FORM 10-K
Copies may be obtained at no charge by writing to the Secretary at the
corporate office of the Company.
TRANSFER AGENT
First Chicago Trust of New York
30 West Broadway
New York, New York 10007
INVESTOR CONTACT
Dennis A. Smith
Director of Corporate Development
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Houston, Texas
PRICE OF COMMON STOCK
As of September 30, 1995, there were 84,261,372 shares of Common Stock
outstanding held by 1,793 holders of record.
The Common stock is listed on the American Stock Exchange under the
symbol "NBR." Options on Nabors stock are available on the CBOE. The following
table sets forth the reported high and low sales prices of the Common Stock on
the Composite Tape for the quarters indicated.
Stock Price
Fiscal Year High Low
----------------------------
1994
First Quarter 10 6 1/8
Second Quarter 7 7/8 6 1/4
Third Quarter 7 1/2 6 1/8
Fourth Quarter 7 3/8 5 3/4
----------------------------
1995
First Quarter 7 7/8 6 1/8
Second Quarter 7 1/2 6
Third Quarter 9 11/16 7 3/8
Fourth Quarter 10 7 15/16
----------------------------
OPERATING SUBSIDIARIES
NABORS ALASKA DRILLING, INC.
Anchorage, Alaska
James Denney, President
NABORS DRILLING INTERNATIONAL LIMITED
Houston, Texas
Siegfried Meissner, President
NABORS DRILLING & ENERGY SERVICES UK, LTD.
Aberdeen, Scotland
Larry P. Heidt, President
NABORS DRILLING USA, INC.
Houston, Texas
Richard Stratton, President
Steven A. Richards, Senior Vice President
NABORS DRILLING LIMITED
Nisku, Alberta
Duane A. Mather, President
PEAK OILFIELD SERVICES COMPANY
Anchorage, Alaska
Michael R. O'Connor, President
LOFFLAND BROTHERS DE VENEZUELA, C.A.
Caracas, Venezuela
Warren L. Twa, President
SUNDOWNER OFFSHORE SERVICES, INC.
Houston, Texas
Jerry C. Shanklin, President and Chairman
<PAGE> 52
[LOGO] NABORS INDUSTRIES, INC.
515 WEST GREENS ROAD
SUITE 1200
HOUSTON, TEXAS 77067
713-874-0035
[PHOTO 18]
<PAGE> 1
Exhibit 21
NABORS INDUSTRIES, INC.
List of Subsidiaries and Certain Other Affiliates
<TABLE>
<CAPTION>
Subsidiary or Affiliate Jurisdiction of Incorporation
- ----------------------- -----------------------------
<S> <C>
Activo Rental, Inc. Delaware
Andean Rental, Inc. Delaware
ARRH, Inc. Delaware
Beaufort Marine J.V. (50%) Alaska
Canrig Drilling Technology Ltd. Alberta
Canrig Drilling Technology Ltd. Delaware
Crest Service Company Delaware
Delta Drilling Company Texas
Hemisphere Oil Services, Inc. Delaware
Intrafield Oil Services Limited Barbados
Kodiak Oilfield Haulers, Inc. Alaska
Loffland Brothers Company of Canada Delaware
Loffland Brothers de Venezuela, C.A. Venezuela
Loffland Brothers North Sea, Inc. Nevada
Maple Leaf Financial Services, Inc. Delaware
Nabors Acquisition Corp. III Delaware
Nabors Alaska Drilling, Inc. Alaska
Nabors Alaska Services Corp. Delaware
Nabors Corporate Services, Inc. Delaware
Nabors Drilling & Energy Services UK Limited United Kingdom
Nabors Drilling International Limited Delaware
Nabors Drilling International Limited Bermuda
Nabors Drilling Limited Canada
Nabors Drilling USA, Inc. Delaware
Nabors Equipment, Inc. Delaware
Nabors Eurasia, Inc. Delaware
Nabors Europe Limited United Kingdom
Nabors Gull Corp. Delaware
Nabors Incorporated Ecuador Ecuador
Nabors International, Inc. Delaware
Nabors Kazakhstan Company Kazakhstan
Nabors Oilfield Equipment, Inc. Delaware
Nabors Russia, Inc. Delaware
Nabors Shipping Company Delaware
Nabors Yemen, Ltd. Delaware
Nabors Yemen Transportation Services, Ltd. Delaware
Nadrico Saudi Limited (45%) Saudi Arabia
Peak Oilfield Services Company (50%) Alaska
</TABLE>
<PAGE> 2
Page 2 of 2
<TABLE>
<CAPTION>
Subsidiary or Affiliate Jurisdiction of Incorporation
- ----------------------- -----------------------------
<S> <C>
Peak-Ploss Industries (49 1/2%) Texas
Red Deer Financial Services LLC Delaware
SOL Insurance Limited Bermuda
Solefin, Inc. Nevada
Sovereign Oilfield, Inc. Delaware
Sovereign Supply Company Delaware
Sundowner Caspian Sea (50%) Bermuda
Sundowner Offshore Australia (50%) Australia
Sundowner Offshore Services, Inc. Nevada
Sundowner Trinidad, Inc. Delaware
Sunset P&A Services Nevada
Thistle Well Services Limited United Kingdom
West Range Leasing, Inc. Delaware
</TABLE>
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statements of Nabors Industries, Inc. on Form S-8 (File Numbers 2-76080,
33-36229, 33-39316, 33-45097, 33-47821, 33-54884, 33-56000,33-87322 and
33-87324) of our reports dated November 27, 1995, on our audits of the
consolidated financial statements and financial statement schedules of Nabors
Industries, Inc. and Subsidiaries as of September 30, 1995 and 1994, and for
each of the three years in the period ended September 30, 1995, which reports
are included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Houston, Texas
December 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 12,038
<SECURITIES> 3,296
<RECEIVABLES> 132,482
<ALLOWANCES> 0
<INVENTORY> 14,079
<CURRENT-ASSETS> 183,445
<PP&E> 596,063
<DEPRECIATION> 212,350
<TOTAL-ASSETS> 583,521
<CURRENT-LIABILITIES> 150,553
<BONDS> 0
<COMMON> 8,502
0
0
<OTHER-SE> 360,248
<TOTAL-LIABILITY-AND-EQUITY> 583,521
<SALES> 572,788
<TOTAL-REVENUES> 572,788
<CGS> 434,097
<TOTAL-COSTS> 434,097
<OTHER-EXPENSES> 80,136
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,611
<INCOME-PRETAX> 58,628
<INCOME-TAX> 7,524
<INCOME-CONTINUING> 51,104
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,104
<EPS-PRIMARY> .58
<EPS-DILUTED> .57
</TABLE>
