UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One) FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended February 28, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-15784
NORTON DRILLING SERVICES, INC.
(Exact Name of Registrant as Specified in its charter)
Delaware 13-3273041
(State of Incorporation) (IRS Employer
Identification No.)
5211 Brownfield Highway
Suite 230 79407
Lubbock, Texas (Zip Code)
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (806) 785-8400
Former name, former address and former fiscal year, if changed since last
report: No Change
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 1, 1999
Common stock, par value $.01 per share 4,934,321 shares
1 of 14 Pages
<PAGE>
NORTON DRILLING SERVICES, INC. AND SUBSIDIARIES
Page No.
PART I - Financial Information:
Item 1. Financial Statements:
Unaudited Consolidated Balance Sheets................................3
Unaudited Consolidated Statements of Operations......................4
Unaudited Consolidated Statements of Stockholders' Equity............5
Unaudited Consolidated Statements of Cash Flows......................6
Notes to Consolidated Financial Statements...........................8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................10
Part II - Other Information ............................................13
Item 1. Legal Proceedings ..............................................13
Item 6. Exhibits and Reports on Form 8-K................................13
Signatures .............................................................14
2 of 14 Pages
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following financial statements include all adjustments which in
managements' opinion are necessary in order to make the financial statements not
misleading.
<TABLE>
NORTON DRILLING SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
February 28, November 30,
1999 1998
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 99,754 $ 172,321
Accounts receivable, trade, less allowance for
doubtful accounts of $178,477 at both periods 6,394,819 5,986,231
Costs and estimated earnings in excess of
billings on uncompleted contracts 138,956 534,557
Prepaid expenses and other current assets 219,335 352,677
----------- -----------
Total current assets 6,852,864 7,045,786
----------- -----------
Property and equipment, at cost, net of
accumulated depreciation 10,911,748 11,581,332
Goodwill, net of accumulated amortization 1,197,992 1,221,807
Note receivable, net of current maturities 25,000 25,000
Security deposits 128,991 128,991
----------- -----------
Total assets $19,116,595 $20,002,916
=========== ===========
Current liabilities:
Current maturities of notes payable $ 3,017,549 $ 3,156,410
Accounts payable 1,928,419 1,890,752
Accrued expenses and other current liabilities 1,350,918 1,817,321
Net liabilities of discontinued operations 79,676 83,615
----------- -----------
Total current liabilities 6,376,562 6,948,098
----------- -----------
Long-term liabilities
Notes payable, less current maturities 3,243,245 3,404,495
Deferred income taxes 1,014,859 1,014,859
----------- -----------
Total long-term liabilities 4,258,104 4,419,354
----------- -----------
Commitments and contingencies - - - -
Stockholders' equity:
Common stock-par value $.01;
authorized-100,000,000 shares;
issued-5,177,260 shares
outstanding-4,934,321 shares 258,863 258,863
Additional paid-in capital 10,535,754 10,535,754
Accumulated deficit ( 2,076,490) ( 1,922,955)
----------- -----------
8,718,127 8,871,662
Less treasury stock, at cost ( 236,198) ( 236,198)
----------- -----------
Total stockholders' equity 8,481,929 8,635,464
----------- -----------
Total liabilities and stockholders' equity $19,116,595 $20,002,916
=========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
3 of 14 Pages
<PAGE>
<TABLE>
NORTON DRILLING SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the three months ended
--------------------------
February 28, February 28,
1999 1998
------------ ------------
<S> <C> <C>
Operating revenues:
Contract drilling revenues $ 5,096,145 $ 9,507,887
Other 47,604 2,122
----------- -----------
Total operating revenues 5,143,749 9,510,009
----------- -----------
Operating costs and expenses:
Direct drilling costs 4,011,573 7,066,484
General and administrative 443,956 454,880
Depreciation, depletion and amortization 773,080 750,029
Other - - 2,843
----------- -----------
Total operating costs and expenses 5,228,609 8,274,236
----------- -----------
Operating income (loss) ( 84,860) 1,235,773
----------- -----------
Other income (expense):
Net gain (loss) on sale of assets ( 1,740) 211,856
Interest expense ( 144,560) ( 123,332)
Interest income 521 - -
Other income 24,404 - -
----------- -----------
Total other income (expense), net ( 121,375) 88,524
----------- -----------
Income (loss) before provision for income taxes ( 206,235) 1,324,297
Income tax expense (benefit) ( 52,700) 499,900
----------- -----------
Net income (loss) $( 153,535) $ 824,397
=========== ===========
Per share data:
Basic
Net income (loss) $(0.03) $0.17
====== =====
Diluted
Net income (loss) $(0.03) $0.16
====== =====
Weighted average number of common shares outstanding
Basic 4,934,321 4,927,563
========= =========
Diluted 4,934,321 5,035,296
========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
4 of 14 Pages
<PAGE>
<TABLE>
NORTON DRILLING SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<CAPTION>
Common Stock Treasury Stock
-------------------- --------------------
Shares Par Value Shares Cost
--------- --------- -------- ----------
<S> <C> <C> <C> <C>
Balance, November 30, 1997 5,168,360 $ 258,418 241,091 $(224,627)
Exercise of stock options 600 30 - - - -
Net income for the three months
ended February 28, 1998 - - - - - - - -
--------- --------- ------- ---------
Balance, February 28, 1998 5,168,960 $ 258,448 241,094 $(224,627)
========= ========= ======= =========
Balance, November 30, 1998 5,177,260 $ 258,863 242,939 $(236,198)
Net loss for the three months
ended February 28, 1999 - - - - - - - -
--------- --------- ------- ---------
Balance, February 28, 1999 5,177,260 $ 258,863 242,939 $(236,198)
========= ========= ======= =========
<CAPTION>
Additional Total
Paid-in Accumulated Stockholders'
Capital Deficit Equity
----------- ----------- -------------
<S> <C> <C> <C>
Balance, November 30, 1997 $10,518,132 $(2,750,294) $ 7,801,629
Exercise of stock options 1,188 - - 1,218
Net income for the three months
ended February 28, 1998 - - 824,397 824,397
----------- ----------- -----------
Balance, February 28, 1998 $10,519,320 $(1,925,897) $ 8,627,244
=========== =========== ===========
Balance, November 30, 1998 $10,535,754 $(1,922,955) $ 8,635,464
Net loss for the three months
ended February 28, 1999 - - ( 153,535) ( 153,535)
----------- ----------- -----------
Balance, February 28, 1999 $10,535,754 $(2,076,490) $ 8,481,929
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
5 of 14 Pages
<PAGE>
<TABLE>
NORTON DRILLING SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the three months ended
--------------------------
February 28, February 28,
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $( 153,535) $ 824,397
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation, depletion and amortization 773,080 750,029
(Gain) loss on sale of assets 1,740 ( 211,856)
Deferred income tax expense - - 309,779
Increase (decrease) in cash flows as a result
of changes in operating asset and liability
account balances:
Increase in accounts receivable-trade ( 408,588) ( 624,641)
Decrease in net costs and estimated
earnings in excess of billings on uncompleted
contracts 395,601 316,418
Decrease in prepaid expenses and other
current assets 133,342 111,071
Increase in accounts payable 37,667 76,989
Decrease in accrued expenses and other current
liabilities ( 466,403) ( 429,056)
----------- -----------
Net cash provided by continuing operations 312,904 1,123,130
Net cash used in discontinued operations ( 3,939) ( 8,696)
----------- -----------
Net cash provided by operating activities 308,965 1,114,434
----------- -----------
Cash flows from investing activities:
Collections on note receivable - - 5,276
Proceeds from sale of property and equipment 25,607 246,707
Acquisition of property and equipment ( 107,128) ( 664,221)
----------- -----------
Net cash used in investing activities ( 81,421) ( 412,238)
----------- -----------
Cash flows from financing activities:
Proceeds from notes payable - - 4,114,754
Repayments of revolving line of credit, net ( 50,000) (1,465,000)
Repayments of notes payable ( 250,111) (3,368,777)
Exercise of stock options - - 1,218
----------- -----------
Net cash used in financing activities ( 300,111) ( 717,808)
----------- -----------
Net decrease in cash and cash equivalents ( 72,567) ( 15,609)
Cash and cash equivalents at beginning of period 172,321 277,097
----------- -----------
Cash and cash equivalents at end of period $ 99,754 $ 261,488
=========== ===========
</TABLE>
(Continued)
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
6 of 14 Pages
<PAGE>
<TABLE>
NORTON DRILLING SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
<CAPTION>
For the three months ended
---------------------------
February 28, February 28,
1999 1998
------------ ------------
<S> <C> <C>
Supplemental disclosures of cash flows information:
Cash paid during the period:
Interest $ 144,560 $ 162,332
========== ===========
Income taxes $ - - $ 479,457
========== ===========
</TABLE>
Supplemental Schedule of Non-cash Investing
and Financing Activities:
During the periods ending February 28, 1999 and February 28, 1998, we
acquired property and equipment in connection with borrowings in the amounts
of $-0- and $51,546, respectively.
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
7 of 14 Pages
<PAGE>
NORTON DRILLING SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
In our opinion, the accompanying consolidated balance sheet as of February
28, 1999 and the condensed consolidated statements of operations, stockholders'
equity, and cash flows for the three months ended February 28, 1999 and February
28, 1998 include all adjustments (consisting only of normal recurring
adjustments and accruals) considered necessary to present fairly the financial
position as of February 28, 1999, and the results of operations and cash flows
for the three months ended February 28, 1999 and February 28, 1998. The
accompanying consolidated balance sheet as of November 30, 1998 is presented
herein as unaudited, inasmuch as such balance sheet was prepared from the
balance sheet set forth in the audited consolidated financial statements and
does not reflect all disclosures and footnotes contained in those audited
consolidated financial statements.
The results of operations for the three months ended February 28, 1999 are
not necessarily indicative of the results of operations for the entire year.
2. INCOME PER COMMON SHARE
Basic earnings per share ("EPS") has been computed using the weighted average
number of common shares outstanding during the three month periods ending
February 28, 1999 and February 29, 1998.
Diluted EPS has been computed based on the weighted average number of common
shares outstanding during the three month periods ending February 28, 1999 and
February 28, 1998 and on the net additional number of shares which would be
issuable upon the exercise of stock options, assuming that we used the proceeds
received to purchase additional shares at market value.
A reconciliation of the denominator of the Basic EPS calculation to that used
to determine Diluted EPS is as follows:
<TABLE>
<CAPTION>
For the three months
ended February 28,
------------------------
1999 1998
--------- ---------
<S> <C> <C>
Weighted average shares outstanding:
Basic 4,934,321 4,927,563
Add:
Additional shares issuable upon exercise
of stock options - - 107,733
--------- ---------
Diluted 4,934,321 5,035,296
========= =========
</TABLE>
3. STOCK OPTIONS
On February 6, 1998, the compensation committee of our board of directors
awarded options to purchase 150,400 shares of our common stock at $7.50 per
share under our 1998 Stock Option Plan. The Board of Directors approved these
awards at its meeting on February 24, 1998. These options were awarded to
various employees of Norton. No compensation cost was recorded in connection
with this award.
8 of 14 Pages
<PAGE>
4. NOTES PAYABLE
Norton Drilling Company ("Norton") entered into two borrowing arrangements
with a bank on February 17, 1998. The first was a demand note payable in the
amount of $4,500,000. This note bears interest at 2.0% above the Wall Street
Journal prime rate and calls for monthly payments of $53,750 plus accrued
interest beginning March 1, 1998 through maturity on February 1, 2005. On April
1, 1999, the bank agreed to waive principal payments on this note for the months
of April, May and June 1999.
The second arrangement was a revolving line of credit with a borrowing
facility of $3,000,000. This line of credit requires monthly payments of
interest only at 1.0% above the Wall Street Journal prime rate with remaining
principal and interest due at maturity on April 1, 1999. On April 1, 1999, the
maturity date on this revolving line of credit was extended to July 1, 1999.
Both of the above notes are collateralized by accounts receivable and
general intangibles as well as sixteen drilling rigs and related equipment. In
addition a master loan agreement was entered into with this bank which contains
certain restrictive covenants.
9 of 14 Pages
<PAGE>
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
As of February 28, 1999, we had working capital of approximately $476,000 and
cash and cash equivalents of approximately $100,000 as compared to working
capital of approximately $98,000 and cash and cash equivalents of approximately
$172,000 at November 30, 1998. For the three months ending February 28, 1999,
operations provided approximately $309,000 in cash flows and our financing
activities used approximately $300,000. For the three months ended February 28,
1998, operations provided approximately $1,114,000 in cash flows and our
financing activities used approximately $718,000. The use of funds in the three
month period ending February 28, 1999 was mainly attributable to the repayments
of notes payable. The use of funds in the three month period ending February 28,
1998 was mainly attributable to the repayment of notes payable and the revolving
line of credit.
Significant expenditures of Norton Drilling Services, Inc. ("NDSI") primarily
consist of Norton Drilling Company's (the "Drilling Segment") continual
acquisition of replacement drilling equipment, such as drill collars, drill
pipe, engines and transportation equipment to adequately maintain the operating
status of the drilling fleet. Such expenditures for the three months ending
February 28, 1999 and February 28, 1998, approximate $107,000 and $664,000,
respectively. Capital expenditures decreased in the current three month period
as compared to the three month period in the prior year due to the decrease in
demand for drilling services. The Drilling Segment anticipates minimal capital
expenditures for fiscal 1999 to be funded from existing bank credit lines and
cash flows from operations. Due to numerous uncertainties regarding the
availability, price and delivery of certain drilling equipment, our anticipated
level of capital expenditures may fluctuate commensurate with the volatility of
the industry.
We believe that cash flows from operations and borrowings should be
sufficient to fund operations and adequately service our debt for the next
twelve months. The risks associated with the oil and gas industry, such as the
volatility of oil and gas prices, could adversely affect our operations.
Comparison of the three months ended February 28, 1999 and February
28, 1998
For the three months ended February 28, 1999 contract drilling revenues
were approximately $5,096,000 as compared to approximately $9,508,000 for the
three months ended February 28, 1998, a decrease of approximately $4,412,000 or
46.4%. Average rig utilization was 43.6% in the three months ended February 28,
1999 compared to 92.2% in the three months ended February 28, 1998. The decrease
in drilling revenues was due to a decrease in drilling rig utilization and a
decrease in rig rates.
Direct drilling costs for the three months ended February 28, 1999 were
approximately $4,012,000 or 78.7% of contract drilling revenues as compared to
$7,066,000 or 74.3% of contract drilling revenues for the three months ended
February 28, 1998. The decrease in costs was attributable to the decrease in the
number of rigs which Norton was operating. The increase in the percentage of
direct drilling costs to contract drilling revenues was due to the decrease in
the amount that Norton was able to charge for the use of its rigs.
General and administrative expenses were approximately $444,000 for the three
months ended February 28, 1999 as compared to approximately $455,000 for the
three months ended February 28, 1998.
10 of 14 Pages
<PAGE>
Interest expense was approximately $145,000 and $123,000 in the three months
ended February 28, 1999 and February 28, 1998, respectively. The increase in
interest expense was due to an increase in borrowings over the past year.
In the three months ended February 28, 1999, loss before income taxes was
approximately $206,000 as compared to income of approximately $1,324,000 in the
three months ended February 28, 1998. The decrease in net income was due mainly
to decreased drilling revenues.
Volatility of Oil and Natural Gas Prices
Our revenue, profitability and future rate of growth are substantially
dependent upon prevailing prices for oil and gas. In recent years, oil and gas
prices and markets have been extremely volatile. Prices are affected by market
supply and demand factors as well as actions of state and local agencies, the
United States and foreign governments and international cartels. All of these
factors are beyond our control. Any significant or extended decline in oil
and/or gas prices could have a material adverse effect on our financial
condition and results of operations.
The price of oil rose to a six-year high of $25.75 per barrel in January
1997, and fell to a ten-year low of $11.00 per barrel in March 1998. These low
oil prices have adversely impacted our operations. Should oil prices remain at
these levels or continue to decline or natural gas prices decline, our
operations could be further adversely affected.
As the result of lower crude oil prices, we have experienced a reduction in
drilling activity. This reduction adversely impacted our revenues and net income
for the three months ended February 28, 1999 and is expected to similarly impact
our results of operations until crude oil prices increase to a level
substantially above the current prices and remain at such a level for an
extended period of time.
Market Conditions for Contract Drilling Services
Except for periods of time in 1991 and 1997, the market for onshore contract
drilling services has generally been depressed since mid-1982, when crude oil
and natural gas prices began to weaken. A particularly sharp decline in demand
for contract drilling services occurred in 1986 because of the world-wide
collapse in oil prices (to approximately $10.00 per Bbl in April 1986). Since
1986, and except during the occasional upturns, there have been substantially
more drilling rigs available than necessary to meet demand in most operating and
geographic segments of the domestic drilling industry. As a result, drilling
contractors have had difficulty sustaining profit margins. Reactivation of
onshore drilling rigs or new construction of drilling rigs could also adversely
affect rig utilization rates and pricing even in an environment of higher oil
and natural gas prices and increased drilling activity. We cannot predict either
the future level of demand for contract drilling services or future conditions
in the contract drilling industry.
Recent Accounting Standards
The FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits" in February 1998. SFAS No. 132 revises employers'
disclosures about pension and other postretirement benefit plans. It does not
change the measurement recognition of those plans. This statement is effective
for fiscal years beginning after December 15, 1997 and will be adopted by us in
our fiscal year ending November 30, 1999. The adoption of this new standard is
not expected to have a material impact to us.
11 of 14 Pages
<PAGE>
The FASB issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" in June 1998. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement is effective for all fiscal quarters of fiscal years beginning after
June 15, 1999 and will be effective for us at the beginning of our fiscal
quarter ending February 29, 2000. The provisions of this new standard are not
expected to have a material impact to us.
Impact of Inflation
While subject to inflation, our business was not adversely impacted by
inflation during the three month periods ended February 28, 1999 and 1998 in any
material respect. We do not believe that inflation will have a material impact
on our business in the near future.
Year 2000
During 1997 we began evaluating computer systems to identify the those which
could be affected by the Year 2000 issue. The "Year 2000 issue" is whether our
computer systems will properly recognize date sensitive information when the
year changes to 2000 or "00". Programs that were not designed to properly
recognize such dates could generate erroneous data or cause a system to fail. We
reviewed our computer systems and identified those systems that were not year
2000 compliant.
Those systems that were not year 2000 compliant were replaced in November
1998. The cost to replace the non-compliant systems were not material to our
financial position and results of operations.
Our ability to conduct our business efficiently and productively requires
that our customers and vendors be year 2000 compliant. We have not assessed the
readiness and effectiveness of our customers and vendors in regards to their
compliance with year 2000 problems. However, we plan to make inquiries,
solicitations and surveys of these customers and vendors in the current year on
an on-going basis to determine our level of vulnerability from our customers and
vendors. We do not anticipate an interruption of our operations relative to Year
2000 concerns of our customers and vendors. Therefore, we do not deem it
necessary to formally adopt a contingency plan.
The failure to correct a material year 2000 problem could result in
interruptions or failures of our normal business activities or operations. Such
failures could materially and adversely affect our results of operations,
liquidity and financial condition. Due to the uncertaintity inherent in the year
2000 problem, resulting in part from the uncertainty of the year 2000 readiness
of our customers and vendors, we are unable to determine at this time whether
the consequences of year 2000 failures will have a material impact on our
results of operations, liquidity or financial condition. We believe that with
the completion of upgrading our computer systems and the review of the status of
our customers and vendors year 2000 readiness, the possibility of significant
interruptions of normal operations should be reduced.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in Item 2 of this report contains forward-looking
statements which are made pursuant to the "safe harbor" provisions of The
Private Securities Litigation Reform Act of 1995. These statements include,
without limitation, statements relating to:
12 of 14 Pages
<PAGE>
liquidity; financing of operations; continued volatility of oil and natural gas
prices; estimates of, and budgets for, capital expenditures for modifications
and upgrades to certain of the Company's drilling rigs and for maintenance of
its contract drilling fleet during fiscal year 1998; sources and sufficiency of
funds required for immediate capital needs; and such other matters. The words
"believes," "plans," "intends," "expected" or "budgeted" and similar expressions
identify forward-looking statements. The forward-looking statements are based on
certain assumptions and analyses made by 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.
The Company does not undertake to update, revise or correct any of the
forward-looking information. Factors that could cause actual results to differ
materially from the Company's expectations expressed in the forward-looking
statements include, but are not limited to, the following: intense competition
in the contract drilling industry; volatility of oil and natural gas prices;
market conditions for contract drilling services; continuation of severe
drill-pipe shortage; operational risks (such as blow outs, fires and loss of
production); labor shortage, primarily qualified drilling rig personnel;
insurance coverage limitations and requirements; potential liability imposed by
government regulation of the contract drilling industry (including environmental
regulation); and the substantial capital expenditures required to fund its
operations.
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Name
27 Financial Data Schedule for the period ending
February 28, 1999
(b) Reports on Form 8-K
None
13 of 14 Pages
<PAGE>
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.
NORTON DRILLING SERVICES, INC.
Dated: April 19, 1999 By:/S/ Sherman H. Norton, Jr.
Sherman H. Norton, Jr.
Chairman of the Board
Dated: April 19, 1999 By:/s/ David W. Ridley
David Ridley, Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE> 14 of 14 Pages
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extraced from form
10-Q for the quarterly period ended February 28, 1999 (Balance Sheet and
Statement of Income) and is qualified in its entirety by reference to such form
10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Nov-30-1999
<PERIOD-START> Dec-01-1998
<PERIOD-END> Feb-28-1999
<CASH> 99,754
<SECURITIES> 4,607
<RECEIVABLES> 6,573,296
<ALLOWANCES> 178,477
<INVENTORY> 0
<CURRENT-ASSETS> 6,852,864
<PP&E> 20,922,094
<DEPRECIATION> 10,010,346
<TOTAL-ASSETS> 19,116,595
<CURRENT-LIABILITIES> 6,376,562
<BONDS> 0
0
0
<COMMON> 258,863
<OTHER-SE> 8,223,066
<TOTAL-LIABILITY-AND-EQUITY> 19,116,595
<SALES> 0
<TOTAL-REVENUES> 5,143,749
<CGS> 0
<TOTAL-COSTS> 4,011,573
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 144,560
<INCOME-PRETAX> (206,235)
<INCOME-TAX> (52,700)
<INCOME-CONTINUING> (153,535)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (153,535)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
