<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD OCTOBER 1, 1997 TO DECEMBER 31, 1997
COMMISSION FILE NUMBER: 1-9245
--------------------
NABORS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 93-0711613
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515 W. GREENS ROAD, SUITE 1200
HOUSTON, TEXAS 77067
(Address of principal executive offices) (Zip Code)
281-874-0035
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The number of shares of Common Stock, par value $.10 per share,
outstanding as of January 31, 1998 was 100,836,406.
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<PAGE> 2
NABORS INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Part I Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
December 31, 1997 and September 30, 1997 2
Condensed Consolidated Statements of
Income and Retained Earnings for the Three
Months Ended December 31, 1997 and 1996 3
Condensed Consolidated Statements of Cash
Flows for the Three Months Ended December
31, 1997 and 1996 4
Notes to Condensed Consolidated
Financial Statements 5
Report of Independent Accountants 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 13
</TABLE>
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
-------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,623 $ 3,919
Marketable securities 6,983 7,125
Accounts receivable, net 243,061 244,956
Inventory and supplies 21,305 21,372
Prepaid expenses and other current assets 26,359 28,456
----------- -----------
Total current assets 303,331 305,828
Property, plant and equipment, net 923,402 861,393
Marketable securities 29,529 42,279
Other long-term assets 25,044 24,732
----------- -----------
Total assets $ 1,281,306 $ 1,234,232
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 6,091 $ 3,939
Short-term borrowings 55,360 39,087
Trade accounts payable and accrued liabilities 166,614 179,934
Income taxes payable 12,695 11,996
----------- -----------
Total current liabilities 240,760 234,956
Long-term obligations 226,299 229,507
Other long-term liabilities 16,810 13,606
Deferred income taxes 30,097 28,320
----------- -----------
Total liabilities 513,966 506,389
----------- -----------
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;
issued and outstanding 101,325 and 101,240 10,133 10,124
Authorized Class B shares 8,000; none issued or outstanding -- --
Capital in excess of par value 400,120 391,859
Cumulative translation adjustment (4,130) (2,317)
Net unrealized gain on marketable securities 10,800 19,087
Retained earnings since May 1, 1988 353,581 312,254
Less treasury stock, at cost, 489 common shares (3,164) (3,164)
----------- -----------
Total stockholders' equity 767,340 727,843
----------- -----------
Total liabilities and stockholders' equity $ 1,281,306 $ 1,234,232
----------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE> 4
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended December 31,
1997 1996
--------- ---------
<S> <C> <C>
Revenues $ 302,806 $ 217,077
--------- ---------
Operating expenses:
Direct costs 199,714 162,638
General and administrative expenses 18,580 14,718
Depreciation and amortization 20,313 14,354
Merger expenses -- 1,755
--------- ---------
Operating expenses 238,607 193,465
--------- ---------
Operating income 64,199 23,612
--------- ---------
Other income (expense):
Interest expense (3,979) (4,176)
Interest income 93 1,579
Other income, net 2,303 14,548
--------- ---------
Other (expense) income (1,583) 11,951
--------- ---------
Income before income taxes 62,616 35,563
--------- ---------
Income taxes:
Current 7,103 1,289
Deferred 14,186 14,159
--------- ---------
Total income taxes 21,289 15,448
--------- ---------
Net income 41,327 20,115
Reclassification of pre-quasi-
reorganization tax benefit -- (729)
Adcor retained deficit at September 30, 1996 -- (2,762)
Retained earnings, beginning of period 312,254 200,208
--------- ---------
Retained earnings, end of period $ 353,581 $ 216,832
--------- ---------
Earnings per share:
Basic $ .41 $ .22
--------- ---------
Diluted $ .37 $ .20
--------- ---------
Weighted average number of shares outstanding:
Basic 100,814 92,230
--------- ---------
Diluted 116,427 108,523
--------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 5
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three months ended December 31,
1997 1996
-------- --------
<S> <C> <C>
Net cash provided by operating activities $ 69,638 $ 13,858
-------- --------
Cash flows from investing activities:
Sales of marketable securities, trading -- 3,653
(Increase) decrease in notes receivable, net (564) 52
Cash paid for acquisitions, net (25,666) (62,500)
Capital expenditures (58,372) (34,697)
Cash received from disposition of long-term assets and business 1,217 47,532
Investment in affiliates (200) (502)
-------- --------
Net cash used for investing activities (83,585) (46,462)
-------- --------
Cash flows from financing activities:
Increase in restricted cash (6) --
(Decrease) increase in long-term borrowings, net (1,056) 191
Increase (decrease) in short-term borrowings, net 16,273 (1,507)
Common stock transactions 440 23,688
-------- --------
Net cash provided by financing activities 15,651 22,372
-------- --------
Net increase (decrease) in cash and cash equivalents 1,704 (10,232)
Cash and cash equivalents, beginning of period 3,919 95,867
Adjustment for Adcor cash at September 30, 1996 -- 518
-------- --------
Cash and cash equivalents, end of period $ 5,623 $ 86,153
-------- --------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 6
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
Transition Period Financial Information
On December 4, 1997, the Board of Directors of Nabors
Industries, Inc. amended the bylaws of the corporation to change its fiscal year
end from September 30 to December 31, effective for the fiscal year beginning
January 1, 1998. The condensed consolidated financial statements for the three
months ended December 31, 1997 represent the transition period (the "Transition
Period") preceding the start of the new fiscal year period.
The unaudited condensed consolidated financial statements of
Nabors Industries, Inc. (collectively with its subsidiaries, the "Company") are
prepared in conformity with generally accepted accounting principles, but do not
purport to be a complete presentation inasmuch as all note disclosures required
are not included. Reference is made to the Company's 1997 Annual Report on Form
10-K for additional note disclosures.
In the opinion of management, the condensed consolidated
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position of the
Company as of December 31, 1997 and the results of its operations and its cash
flows for the respective periods ended December 31, 1997 and 1996. The
Transition Period results for the three months ended December 31, 1997 are not
necessarily indicative of the financial position or operating results for an
entire twelve-month period.
Retroactive Restatement
The results of operations and cash flows presented in the
Company's condensed consolidated financial statements for the three months ended
December 31, 1996 have been retroactively restated to include the results of
operations and cash flows of Adcor-Nicklos Drilling Company, which was merged
with the Company in January 1997.
Earnings Per Share
At the beginning of the Transition Period, the Company adopted
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), Earnings Per
Share. Under the provisions of SFAS 128, primary earnings per share and fully
diluted earnings per share are replaced by basic earnings per share and diluted
earnings per share. In accordance with SFAS 128, all prior period earnings per
share amounts presented have been restated.
Basic earnings per share for all periods presented equal net
income divided by the weighted average number of common shares ("Shares")
outstanding during the period, and exclude Shares held in treasury. Diluted
earnings per share for the three months ended December 31, 1997 and 1996 reflect
the assumed conversion of the $172.5 million 5% Convertible Subordinated Notes
due 2006, issued on May 28, 1996 (the "5% Notes"). As a result, net income plus
$1.4 million of after tax interest expense incurred on the 5% Notes is divided
by the weighted average Shares outstanding, after giving effect to dilutive
stock options and warrants, as well as 9.5 million Shares assumed to be issued
on conversion of the 5% Notes.
5
<PAGE> 7
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 Acquisitions
During November 1997, the Company completed the acquisition of
certain domestic land drilling assets from Veco Drilling, Inc. ("Veco") and
Diamond L Drilling & Production ("Diamond L") for approximately $26.0 million in
cash. The Veco fleet consisted of six land drilling rigs located in California
and Nevada and two platform labor contracts to be performed offshore California.
The Diamond L fleet consisted of three land rigs located in east Texas. The
acquisitions were 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 operations and cash flows attributable to
the purchased drilling assets have been included in the condensed consolidated
financial statements of the Company commencing on the effective date of the
respective acquisition.
Note 3 Capital Stock
During the three months ended December 31, 1997, options to
acquire 65,900 Shares were exercised at prices ranging from $1.07 to $15.75 per
Share. In addition, 19,268 Shares were issued upon vesting under a stock award
plan.
Note 4 Income Taxes
The effective tax rate during the three months ended December
31, 1997 was 34%, as compared to an effective tax rate of 43% for the prior year
period. The provision for income taxes during the Transition Period reflects the
reversal of certain foreign tax reserves no longer deemed necessary by the
Company. The provision for income taxes during the prior year period reflects
higher UK taxes associated with the sale of the Company's UK operation in
November 1996.
Note 5 Commitments and Contingencies
Capital Expenditures
As of December 31, 1997, the Company had capital expenditure
purchase commitments outstanding for drilling equipment of approximately $60.0
million.
Contingencies
The Company is a defendant or otherwise involved in a number
of lawsuits in the ordinary course of its business. In the opinion of
management, the Company's ultimate liability with respect to these pending
lawsuits is not expected to have a significant or material adverse effect on the
Company's consolidated financial position or results of operations.
Note 6 Subsequent Events
During January 1998, the Company completed the sale of all of
the stock of its wholly owned subsidiary, J.W. Gibson Well Service Company
("Gibson"), to a subsidiary of Key Energy Group, Inc. ("Key"). The assets of
Gibson consisted of 74 active well servicing and workover rigs, associated
auxiliary equipment, trucks, inventory, and several yards and related
facilities. In the sale, the Company received approximately $20.0 million plus
the value of Gibson's working capital in cash, 100,000 shares of Key common
stock and 265,000 warrants to acquire common stock of Key at an exercise price
of $18.00 per share.
6
<PAGE> 8
Report of Independent Accountants
To the Stockholders and Board of Directors
of Nabors Industries, Inc.
We have reviewed the accompanying condensed consolidated financial statements of
Nabors Industries, Inc. and Subsidiaries as of December 31, 1997 and for the
three months then ended. These financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed financial statements for them to be in conformity with
generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of September 30, 1997, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for the year then ended (not presented herein); and in our report
dated November 12, 1997, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of September 30, 1997,
is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
Coopers & Lybrand L.L.P.
Houston, Texas
January 16, 1998
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended December 31, 1997 Compared to Three Months Ended
December 31, 1996
This discussion covers the three months ended December 31,
1997 (the "Transition Period") as the Company changes its fiscal year end from
September 30 to December 31, effective for the fiscal year beginning January 1,
1998.
Company revenues for the Transition Period totaled $302.8
million, representing an $85.7 million, or 39% increase over the prior year
period. Operating income during the Transition Period totaled $64.2 million,
compared to $23.6 million during the prior year period, representing an increase
of 172%. Net income totaled $41.3 million ($.37 per diluted share) during the
Transition Period, compared to $20.1 million ($.20 per diluted share) during the
prior year period. The significant improvement in operating results during the
Transition Period was primarily the result of increased utilization and higher
dayrates in almost all of the Company's operating areas. The continued attrition
in the supply of quality rigs, coupled with an increase in demand, has exerted
upward pressure on rig pricing on a worldwide basis. The Company's results
during the Transition Period also benefited from the contribution of
acquisitions made during fiscal 1997. Net income during the prior year period
was positively affected by a gain recognized on the sale of the Company's UK
North Sea operation.
The Company is aware of the potential negative impact on its
business if the recent drops in pricing levels for crude oil and natural gas
deepen or continue for some extended time. However, in spite of a decline in
Nabors' rig count in the US Lower 48 unit during December 1997, the average
gross margin per rig per day has shown a modest increase. To date, the decline
in the number of rigs operating in our US Lower 48 fleet has primarily been
limited to the shallower rigs, while the market for deeper land rigs appears
reasonably stable. Rig activity in all of our other business units remains
steady with no noticeable impact from the current commodity price environment.
The following tables set forth certain financial information
with respect to the Company by geographical area :
<TABLE>
<CAPTION>
Three months ended December 31,
1997 1996(1) Increase (Decrease)
----------- ------------ ---------------------
(In thousands, except percentages)
Revenues:
<S> <C> <C> <C> <C>
North America $ 257,606 $ 173,698 $ 83,908 48%
International 45,200 43,379 1,821 4%
--------- --------- ---------
Total revenues 302,806 217,077 85,729 39%
--------- --------- ---------
Operating income:
North America 59,142 21,759 37,383 172%
International 9,178 6,801 2,377 35%
Corporate expenses (4,121) (3,193) (928) (29%)
Merger expenses(2) -- (1,755) 1,755 100%
--------- --------- ---------
Total operating income $ 64,199 $ 23,612 $ 40,587 172%
--------- --------- ---------
</TABLE>
8
<PAGE> 10
<TABLE>
<CAPTION>
Three months ended December 31,
1997 1996(1)
-------------------------- --------------------------
Rig Rig Rig Rig
Rig activity(3) : Years(4) Utilization Years(4) Utilization
----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
North America 244.1 67% 203.2 61%
International 29.2 56% 28.9 58%
------- --------
Total rig activity 273.3 66% 232.1 61%
------- --------
</TABLE>
(1) The results of operations for the three months ended December 31, 1996
have been retroactively restated to include the results of operations of
Adcor-Nicklos Drilling Company ("Adcor"), which was merged with the
Company during January 1997.
(2) Merger expenses relating to the Adcor merger.
(3) Excludes labor contracts and Gibson workover and well servicing rigs,
which were sold in January 1998.
(4) Rig years represents a measure of the number of equivalent rigs operating
during a given period. For example, one rig operating 182 days during a
365-day period represents 0.5 rig years.
North America. North America revenues totaled $257.6 million
during the Transition Period, representing a 48% increase over the prior year
period. The increase was primarily attributable to a significant increase in
revenues for the Company's US Lower 48 operations during the Transition Period
resulting primarily from the December 1996 purchase of the Noble Drilling
Corporation land rigs and the acquisition of the Chesley Pruet Drilling Company
land rigs during April 1997. Additionally, dayrates and rig utilization in the
US Lower 48 improved as a result of increased rig demand, primarily for our deep
drilling, silicon-controlled rectifier (SCR) rigs. Revenues for the Gulf of
Mexico operation also increased during the Transition Period as a result of
increased equivalent rig years and higher dayrates for the Company's platform
drilling rigs and jackup workover rigs, as well as higher dayrates for the
Company's platform workover rigs associated with increased demand. Platform
drilling rig equivalent rig years increased in part as a result of the
commissioning of rig 270, a land rig adapted for platform drilling applications,
which began working in the Gulf of Mexico during August 1997. Canada operation
revenues increased during the Transition Period as a result of the contribution
of nine land rigs purchased from Noble Drilling Corporation during December
1996, as well as an improvement in dayrates and utilization resulting from
increased demand. Alaska operation drilling revenues increased during the
Transition Period as a result of increased equivalent rig years and higher
dayrates. Revenues for Peak Oilfield Services, the Company's Alaskan
construction and logistics joint venture also improved during the Transition
Period as a result of increased activity. Equivalent North America rig years
increased to 244.1 years during the Transition Period as compared to 203.2 years
during the prior year period.
International. International revenues totaled $45.2 million
during the Transition Period, representing a 4% increase over the prior year
period. Middle Eastern revenues increased significantly during the Transition
Period as a result of new contracts for three rigs in Saudi Arabia which
commenced operations during the second quarter of fiscal 1997. Additionally, a
jackup rig that began working in the Persian Gulf during March 1997, worked for
two months during the Transition Period prior to completion of the contract.
South and Central American revenues decreased during the Transition Period as a
result of decreased rig activity in Venezuela and the completion of a one rig
contract in Colombia. UK North Sea revenues decreased during the Transition
Period, as the Company completed the sale of its UK North Sea operation during
November 1996. Equivalent international rig years, excluding labor contracts,
were 29.2 during the Transition Period as compared to 28.9 years in the prior
year period.
9
<PAGE> 11
The following table sets forth selected consolidated financial
information of the Company expressed as a percentage of total operating
revenues:
<TABLE>
<CAPTION>
Three months ended December 31,
1997 1996
----- -----
<S> <C> <C>
Revenues 100.0% 100.0%
----- -----
Operating expenses:
Direct costs 66.0% 74.9%
General and administrative expenses 6.1% 6.8%
Depreciation and amortization 6.7% 6.6%
Merger expenses -- 0.8%
----- -----
Operating expenses 78.8% 89.1%
----- -----
Operating income 21.2% 10.9%
Other (expense) income (0.5%) 5.5%
----- -----
Income before income taxes 20.7% 16.4%
Income taxes 7.0% 7.1%
----- -----
Net income 13.7% 9.3%
----- -----
</TABLE>
Direct costs as a percentage of revenues decreased to 66%
during the Transition Period, as compared to 75% during the prior year period.
The resulting increase in the gross margin percentage during the Transition
Period is largely the result of improved margins in essentially all of the
Company's operations on the strength of improved dayrates. General and
administrative expenses as a percentage of revenues decreased during the
Transition Period due primarily to the increase in revenues for the US Lower 48
operations, since these expenses were spread over a larger revenue base.
Interest income decreased during the Transition Period due to
lower average cash and cash equivalent balances as compared to the prior year
period. During the prior year period, the remaining proceeds from the $172.5
million 5% Convertible Subordinated Notes issued on May 28, 1996 were invested
in commercial paper and other interest-bearing cash equivalents.
Other income decreased during the Transition Period, as the
prior year period amount includes a gain recognized on the sale of the Company's
UK North Sea operation.
The effective tax rate during the Transition Period was 34%,
as compared to an effective tax rate of 43% for the prior year period. The
provision for income taxes during the Transition Period reflects the reversal of
certain foreign tax reserves no longer deemed necessary by the Company. The
provision for income taxes during the prior year period reflects higher UK taxes
associated with the sale of the Company's UK operation during November 1996. The
Company's effective tax rate for financial statement purposes during fiscal year
1998 is expected to be in the 35% to 38% range.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial condition remains strong. The Company
generates significant cash from operations and has substantial borrowing
capacity under various credit facility arrangements. Additionally, the Company
has access to public debt and equity capital markets. The Company's senior debt
rating as provided by Moody's Investor Service remains at "A3".
The Company had working capital of $62.6 million as of
December 31, 1997, representing an $8.3 million decrease as compared to
September 30, 1997. The decrease in working capital relates primarily to the use
of cash to acquire certain domestic land drilling assets during November 1997,
and to make certain other capital expenditures, which exceeded cash provided by
operations during the period. The Company's ratio of funded debt to funded debt
plus shareholders' equity, commonly referred to as the debt to capital ratio,
remains unchanged since September 30, 1997 at 0.27:1.
10
<PAGE> 12
Net cash provided by operating activities totaled $69.6
million during the Transition Period, compared to $13.9 million during the prior
year comparable period. During the Transition Period and prior year period, net
income was increased for non-cash items such as depreciation and deferred taxes,
partially offset by the negative impact on cash from changes in the Company's
working capital accounts.
Net cash used for investing activities totaled $83.6 million
during the Transition Period compared to $46.5 million during the prior year
period. Cash paid for capital expenditures and acquisitions represented the
primary uses of cash during the Transition Period and the prior year period.
During the prior year period, cash was provided by the sale of the UK operation
and other fixed assets.
Financing activities provided cash totaling $15.7 million
during the Transition Period compared to $22.4 million during the prior year
period. During the Transition Period, cash was provided by short-term
borrowings. During the prior year period, cash was provided by common stock
transactions.
The Company's cash and cash equivalents and short-term
investments in marketable securities totaled $12.6 million as of December 31,
1997. In addition, the Company had long-term investments in marketable
securities of $29.5 million. The Company currently has credit facility
arrangements with various banks totaling $255.0 million. As of December 31,
1997, remaining availability, after borrowings on the facilities and outstanding
letters of credit, totaled approximately $185.6 million.
During January 1998, the Company completed the sale of all of
the stock of its wholly owned subsidiary, J.W. Gibson Well Service Company
("Gibson"), to a subsidiary of Key Energy Group, Inc. ("Key"). The assets of
Gibson consisted of 74 active well servicing and workover rigs, associated
auxiliary equipment, trucks, inventory, and several yards and related
facilities. In the sale, the Company received approximately $20.0 million plus
the value of working capital in cash, 100,000 shares of Key common stock and
265,000 warrants to acquire common stock of Key at an exercise price of $18.00
per share.
As of December 31, 1997, the Company had capital expenditure
purchase commitments outstanding for drilling equipment of approximately $60.0
million.
The current cash and cash equivalents, short-term investments,
credit facility position, projected cash flow generated from current operations,
and cash provided by the sale of Gibson are expected to adequately finance the
Company's sustaining capital and debt service requirements for the next twelve
months.
OTHER MATTERS
This Transition Report on Form 10-Q includes certain
statements that may be deemed to be "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, included in this Transition Report on Form
10-Q that address activities, events or developments that the Company "expects",
"projects", "believes" or "anticipates" will or may occur in the future,
including such matters as future capital expenditures and investments in the
acquisition and refurbishment of rigs (including the amount and nature thereof),
repayment of debt, expansion and other development trends of the contract
drilling industry, business strategies, expansion and growth of operations and
other such matters are forward-looking statements. These statements are based on
certain assumptions and analyses made by management of the Company in light of
its experience and its perception of historical trends, current conditions,
expected future developments and other factors it believes are appropriate in
the circumstances. Such statements are subject to a number of risks and
uncertainties, including those discussed herein, general economic and business
conditions, prices of crude oil and natural gas, foreign exchange and currency
fluctuations, the business opportunities (or lack thereof) that may be presented
to and pursued by the Company, changes in laws or regulations and other factors,
many of which are beyond the control of the Company. Any such statements are not
guarantees of future performance and actual results or developments may differ
materially form those projected in the forward-looking statements.
11
<PAGE> 13
The Company's businesses depend, to a large degree, 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, results of operations and cash flows.
12
<PAGE> 14
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Statement Re Computation of Per Share Earnings
15.1 Awareness Letter of Independent Accountants
27 Financial Data Schedule
(b) Reports on Form 8-K
Report on Form 8-K filed with the Commission on December 18, 1997
with regard to the change in the Registrant's fiscal year end from
September 30 to December 31.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
NABORS INDUSTRIES, INC.
/s/ Anthony G. Petrello
-------------------------------------
Anthony G. Petrello
President and Chief Operating Officer
/s/ Bruce P. Koch
-------------------------------------
Bruce P. Koch
Vice President of Finance (principal
financial and accounting officer)
Dated: February 16, 1998
13
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
11 Statement Re Computation of Per Share Earnings
15.1 Awareness Letter of Independent Accountants
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended December 31,
1997 1996
-------- --------
<S> <C> <C>
Basic:
Weighted average number of shares outstanding 100,814 92,230
-------- --------
Net income $ 41,327 $ 20,115
-------- --------
Per share amount $ .41 $ .22
-------- --------
Diluted:
Weighted average number of shares outstanding 100,814 92,230
Net effect of dilutive stock options and warrants-based
on the treasury stock method using average market price 6,096 6,776
Assumed conversion of 5% convertible notes 9,517 9,517
-------- --------
Total 116,427 108,523
-------- --------
Net income $ 41,327 $ 20,115
Add 5% convertible note interest, net
of tax effect 1,348 1,402
-------- --------
Total $ 42,675 $ 21,517
-------- --------
Per share amount $ .37 $ .20
-------- --------
</TABLE>
<PAGE> 1
EXHIBIT 15.1
Coopers & Lybrand L.L.P. Awareness Letter
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Nabors Industries, Inc. and Subsidiaries
Registration Statements on Form S-8 and Form S-3
We are aware that our report dated January 16, 1998 on our review of the interim
condensed consolidated financial information of Nabors Industries, Inc. and
Subsidiaries for the three months ended December 31, 1997 and included in this
Form 10-Q is incorporated by reference in the Company's registration statements
on Form S-8 (Registration Numbers 333-11313, 33-87322, 33-87324, 33-47521,
33-45097, 33-36229, 33-56000 and 33-54858) and on Form S-3 (Registration Numbers
333-02477, 333-20501 and 333-25233). Pursuant to Rule 436 (c) under the
Securities Act of 1933, this report should not be considered a part of the
registration statement prepared or certified by us within the meanings of
Section 7 and 11 of the Act.
COOPERS & LYBRAND L.L.P.
Houston, Texas
February 16, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,623
<SECURITIES> 6,983
<RECEIVABLES> 243,061
<ALLOWANCES> 0
<INVENTORY> 21,305
<CURRENT-ASSETS> 303,331
<PP&E> 1,255,181
<DEPRECIATION> 331,779
<TOTAL-ASSETS> 1,281,306
<CURRENT-LIABILITIES> 240,760
<BONDS> 226,299
0
0
<COMMON> 10,133
<OTHER-SE> 757,207
<TOTAL-LIABILITY-AND-EQUITY> 1,281,306
<SALES> 302,806
<TOTAL-REVENUES> 302,806
<CGS> 199,714
<TOTAL-COSTS> 199,714
<OTHER-EXPENSES> 38,893
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,979
<INCOME-PRETAX> 62,616
<INCOME-TAX> 21,289
<INCOME-CONTINUING> 41,327
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,327
<EPS-PRIMARY> .41
<EPS-DILUTED> .37
</TABLE>
