==============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-5587
READING & BATES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 73-0642271
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 Threadneedle, Suite 200, Houston, Texas 77079
(Address of principal executive offices)(Zip Code)
(281) 496-5000
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes _X_ No___
NUMBER OF SHARES OUTSTANDING OF REGISTRANT'S COMMON STOCK
AT APRIL 15, 1997 : 72,051,267
Exhibit Index
==============================================================================
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Company or Group of Companies for Which Report is Filed:
Reading & Bates Corporation and Subsidiaries
The financial statements for the three months ended March 31, 1997 and 1996,
include, in the opinion of the Company, all adjustments (which consist only
of normal recurring adjustments) necessary to present fairly the financial
position and results of operations for such periods. The financial data for
the three months ended March 31, 1997 included herein have been subjected to
a limited review by Arthur Andersen LLP, the registrant's independent public
accountants, whose report is included herein. Results of operations for the
three months ended March 31, 1997 are not necessarily indicative of results
of operations which will be realized for the year ending December 31, 1997.
The financial statements should be read in conjunction with the Company's
Form 10-K for the year ended December 31, 1996.
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands)
MARCH 31, DECEMBER 31,
1997 1996
---------- ----------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 24,557 $ 59,089
Short-term investments 30,725 -
Accounts receivable:
Trade, net 65,040 57,277
Other 11,777 6,452
Materials and supplies inventory 14,633 13,369
Other current assets 2,830 3,903
---------- ----------
Total current assets 149,562 140,090
---------- ----------
PROPERTY AND EQUIPMENT:
Drilling 917,502 896,609
Other 71,430 57,640
---------- ----------
Total property and equipment 988,932 954,249
Accumulated depreciation (306,037) (296,620)
---------- ----------
Net property and equipment 682,895 657,629
---------- ----------
DEFERRED CHARGES AND OTHER ASSETS 19,410 10,471
---------- ----------
TOTAL ASSETS $ 851,867 $ 808,190
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands)
MARCH 31, DECEMBER 31,
1997 1996
---------- ----------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Long-term obligations due within one year $ 13,000 $ 11,500
Accounts payable - trade 21,700 21,961
Accrued liabilities 24,513 21,671
---------- ----------
Total current liabilities 59,213 55,132
LONG-TERM OBLIGATIONS 216,644 207,578
OTHER NONCURRENT LIABILITIES 52,806 52,091
DEFERRED INCOME TAXES 1,202 635
---------- ----------
Total liabilities 329,865 315,436
---------- ----------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 49,418 46,147
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock, $.05 par value 3,602 3,594
Capital in excess of par value 392,032 389,907
Retained earnings from March 31, 1991 93,181 71,268
Other (16,231) (18,162)
---------- ----------
Total stockholders' equity 472,584 446,607
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 851,867 $ 808,190
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
THREE MONTHS ENDED
MARCH 31,
-------------------------
1997 1996
---------- ----------
OPERATING REVENUES $ 83,431 $ 61,190
---------- ----------
COSTS AND EXPENSES:
Operating expenses 36,514 30,831
Depreciation 9,852 7,568
General and administrative 5,848 4,590
---------- ----------
Total costs and expenses 52,214 42,989
---------- ----------
OPERATING INCOME 31,217 18,201
---------- ----------
OTHER INCOME (EXPENSE):
Interest expense, net of capitalized interest (3,529) (2,781)
Interest income 847 499
Other, net (292) (96)
---------- ----------
Total other income (expense) (2,974) (2,378)
---------- ----------
INCOME BEFORE INCOME TAX EXPENSE
AND MINORITY INTEREST 28,243 15,823
---------- ----------
INCOME TAX EXPENSE:
Current 1,492 1,093
Deferred 1,567 -
---------- ----------
Total income tax expense 3,059 1,093
---------- ----------
INCOME AFTER INCOME TAX EXPENSE
AND BEFORE MINORITY INTEREST 25,184 14,730
MINORITY INTEREST (3,271) (1,258)
---------- ----------
NET INCOME 21,913 13,472
DIVIDENDS ON PREFERRED STOCK - 1,213
---------- ----------
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS $ 21,913 $ 12,259
========== ==========
NET INCOME PER COMMON SHARE $ .30 $ .20
========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 72,008 61,966
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
THREE MONTHS ENDED
MARCH 31,
-------------------------
1997 1996
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 21,913 $ 13,472
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 9,852 7,568
Deferred income taxes 1,567 -
Loss (gain) on dispositions of
property and equipment 1,323 (688)
Recognition of deferred expenses 1,686 491
Deferred compensation 1,908 659
Minority interest in income of
consolidated subsidiaries 3,271 1,258
Changes in assets and liabilities:
Accounts receivable, net (14,138) (7,955)
Materials and supplies inventory (233) (872)
Deferred charges and other assets (1,824) 1,036
Accounts payable - trade (4,768) 2,695
Accrued liabilities 1,199 (784)
Accrued interest 1,283 1,028
Deferred mobilization revenue 1,275 7,284
Income taxes 997 (489)
Other, net (948) (267)
---------- ----------
Net cash provided by operating activities 24,363 24,436
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Dispositions of property and equipment 539 122
Purchases of property and equipment (32,184) (28,714)
Purchase of short-term investments (30,725) -
Decrease (increase) in investments in and
advances to unconsolidated investees (7,698) 62
---------- ----------
Net cash used in investing activities (70,068) (28,530)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from revolving credit facility 15,000 7,000
Principal payments on long-term obligations (5,000) (5,000)
Exercise of stock options 1,173 964
Dividends paid on preferred stock - (1,213)
Distribution to minority shareholders
of consolidated subsidiaries - (3,662)
---------- ----------
Net cash provided by (used in)
financing activities 11,173 (1,911)
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (34,532) (6,005)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 59,089 36,171
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 24,557 $ 30,166
========== ==========
Supplemental Cash Flow Disclosures:
Interest paid $ 3,027 $ 2,259
Income taxes paid $ 966 $ 1,518
Noncash investing activities:
Purchase of property and equipment
in exchange for debt $ 4,507 $ -
The accompanying notes are an integral part of the consolidated financial
statements.
READING & BATES CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A) SIGNIFICANT ACCOUNTING POLICIES
SHORT-TERM INVESTMENTS - Short-term investments consist of interest-
bearing deposits with a commercial bank with a maturity greater than
three months but less than one year from the date of the investment.
PROPERTY AND EQUIPMENT - As of March 31, 1997, none of the Company's
oil and gas properties had entered the production stage and the
accumulated cost related to such properties was approximately $63.8
million which is included in Property and Equipment, Other. Depending
on prices, reserve developments and accounting policies adopted, the
Company could experience a future impairment charge.
CAPITALIZED INTEREST - The Company capitalizes interest applicable
to the acquisition, exploration and development of offshore oil and gas
properties as a cost of such assets. Interest capitalized for the three
months ended March 31, 1997 and 1996 was $.9 million and $.6 million,
respectively and is shown net of interest expense in the Consolidated
Statement of Operations.
RECLASSIFICATION - Certain prior period amounts in the consolidated
financial statements have been reclassified for comparative purposes.
Such reclassifications had no effect on the net income or the overall
financial condition of the Company.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Reading & Bates Corporation
We have reviewed the accompanying consolidated balance sheet of
Reading & Bates Corporation (a Delaware corporation) and Subsidiaries as of
March 31, 1997, and the related consolidated statements of operations and
cash flow for the three months ended March 31, 1997 and 1996. 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 upon our review, we are not aware of any material modifications
that should be made to the financial statements referred to above for them
to be in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Houston, Texas
April 14, 1997
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
MATERIAL CHANGES IN FINANCIAL CONDITION
The Company intends to continue to modernize and expand its fleet in
order to meet the requirements of competitive conditions in the offshore
drilling industry and the changing needs of its customers. In this regard,
the Company made significant capital expenditures, $36.7 million, in the
first three months of 1997 primarily related to capital upgrades to the
fleet to fulfill obligations under existing contracts or to improve the
marketability of certain of the Company's offshore units.
The Company has from time to time in the past engaged in, and currently
continues to engage in, preliminary discussions with other industry
participants with respect to business combinations that would potentially
strengthen its competitive position in the offshore drilling industry.
Also, the Company continues to consider the selective acquisition of
existing vessels, directly or through business combination transactions.
In July 1996, the Company entered into an agreement with Shell Offshore
Inc. to drill an appraisal well at the Company's expense in Shell's East
Boomvang prospect in the U.S. Gulf of Mexico, and if the results are
positive the Company will earn a working interest and proceed with the
development of the field. The estimated cost to drill the appraisal well is
approximately $11.8 million. In the first quarter of 1997, the first well
was drilled and was suspended as a potential producer. The Company is
currently evaluating the data gathered and intends to proceed with
additional drilling within the prospect.
In the first quarter of 1997, the Company entered into an agreement with
Marathon Oil Company to explore three oil and gas prospects in the U.S. Gulf
of Mexico. Two of the prospects are currently being drilled at an estimated
cost to the Company of approximately $12.3 million. The Company's third-
generation semisubmersible, "M. G. HULME, JR." has been contracted to drill
one of the prospects.
The Company continues to consider participation in field development
projects. Investments in oil and gas properties as of March 31, 1997 are
not material to total assets. However, depending on prices, reserve
developments and accounting policies adopted, the Company could experience a
future impairment charge.
Liquidity of the Company should be considered in light of the
fluctuations in demand experienced by drilling contractors as changes in oil
and gas producers' expectations and budgets occur. These fluctuations can
impact the Company's liquidity as supply and demand factors directly affect
utilization and dayrates, which are the primary determinants of cash flow
from the Company's operations. As of March 31, 1997, approximately $35.8
million of total consolidated cash, cash equivalents and short-term
investments of $55.3 million are restricted from the Company's use outside
of Arcade Drilling AS, a majority owned subsidiary of the Company. In
addition, as of March 31, 1997, there was $119 million available under the
Company's existing credit facility. The Company's management currently
expects that its cash flow from operations, in combination with cash on
hand, funds available under its existing credit facility, and other sources,
including new debt, new equity, asset disposals and/or by proper scheduling
of its planned capital or other expenditures, will be sufficient to satisfy
the Company's short-term and long-term working capital needs, planned
investments, capital expenditures, debt, lease and other payment
obligations.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 COMPARED
TO THREE MONTHS ENDED MARCH 31, 1996
The Company's net income for the three months ended March 31, 1997 was
$21.9 million ($.30 per share) compared with net income of $13.5 million
($.20 per share after preferred stock dividends of $1.2 million) for the
same period of 1996. Income from operations for the three months ended
March 31, 1997 was $31.2 million compared to income from operations of $18.2
million in 1996. The Company's fleet utilization for the three months ended
March 31, 1997 and 1996 was 94% and 95%, respectively.
Operating revenues are primarily a function of dayrates and utilization.
The $22.2 million increase in operating revenues for the three months ended
March 31, 1997 over the same period in 1996 is primarily due to increased
dayrates fleetwide, with the fourth and third generation semisubmersibles
accounting for the largest part of the increase. Also, the addition of the
"SEILLEAN", a floating production storage and shuttle vessel, to the fleet
and the June 1996 activation of the "J. W. McLEAN", a second-generation
semisubmersible, contributed to the increased operating revenues in the
first quarter of 1997.
Operating expenses do not necessarily fluctuate in proportion to changes
in operating revenues. The continuation of personnel on board and equipment
maintenance is generally still necessary when the Company's offshore units
are stacked. It is only during prolonged stacked periods that the Company
is significantly able to reduce labor costs and equipment maintenance
expense. Additionally, labor costs fluctuate due to the geographic
diversification of the Company's offshore units and the mix of labor between
expatriates and nationals as stipulated in the operating contracts. In
general, labor costs increase primarily due to higher salary levels and
inflation. Equipment maintenance expenses fluctuate depending upon the type
of activity the offshore unit is performing and the age and condition of the
equipment. Scheduled maintenance of equipment and overhauls are performed
on the basis of number of hours operated in accordance with the Company's
preventive maintenance program. Operating expenses for an offshore unit are
typically deferred or capitalized as appropriate during periods of
mobilization, contract preparation, major upgrades or conversions unless
corresponding mobilization revenue is recognized, in which case such
operating expenses are expensed as incurred.
The $5.7 million increase in operating expenses for the three months
ended March 31, 1997 as compared to the same period in 1996 is primarily due
to the addition of the "SEILLEAN" to the fleet, the "J. W. McLEAN" being
placed in service in June 1996, and the "RON TAPPMEYER" due to operations in
Australia, a significantly higher cost area, in 1997 versus Bangladesh in
1996. Additionally, the "JACK BATES" incurred increased expenses related
to casualty loss accruals in 1997 and casualty gain recognition in 1996.
These increases were partially offset by a decrease in operating expense due
to the capitalization of expenses on the "M. G. HULME, JR." while the
drilling unit was drilling an appraisal well on the East Breaks 688 block of
the "East Boomvang" prospect for Reading and Bates Development Co., a wholly
owned subsidiary of the Company.
Depreciation expense increased for the three months ended March 31, 1997
as compared to the same period in 1996 primarily due to the addition of the
"SEILLEAN" to the fleet, the June 1996 activation of the "J. W. McLEAN" and
a significant increase in gross property and equipment on the "JIM
CUNNINGHAM" related to major upgrades.
General & administrative expense increased for the three months ended
March 31, 1997 as compared to the same period in 1996 primarily due to
increases in payroll and related expenses associated with increased staffing
and employee incentive plans.
Interest expense increased for the three months ended March 31, 1997 as
compared to the same period in 1996 primarily due to an increased average
principal balance outstanding, partially offset by increased capitalized
interest related to oil and gas development costs.
Income tax expense increased for the three months ended March 31, 1997
as compared to the same period in 1996 primarily due to the increase in the
Company's pretax income.
Minority interest relates primarily to the results of Arcade Drilling
and the percentage attributable to stockholders other than the Company.
Arcade Drilling reported net income of $13.0 million and $4.9 million for
the three months ended March 31, 1997 and 1996, respectively.
FORWARD LOOKING STATEMENTS AND ASSUMPTIONS
This Quarterly Report on Form 10-Q may contain or incorporate by
reference certain forward-looking statements, including by way of
illustration and not of limitation, statements relating to liquidity,
revenues, expenses, margins and contract rates and terms. The Company
strongly encourages readers to note that some or all of the assumptions,
upon which such forward-looking statements are based, are beyond the
Company's ability to control or estimate precisely, and may in some cases be
subject to rapid and material changes. Such assumptions include the
contract status of the Company's offshore units, general market conditions
prevailing in the offshore drilling industry (including daily rates and
utilization) and various other trends affecting the offshore drilling
industry, including world oil prices, the exploration and development
programs of the Company's customers, the actions of the Company's
competitors and economic conditions generally.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
LITIGATION - In November 1988, a lawsuit was filed in the U.S. District
Court for the Southern District of West Virginia against Reading & Bates
Coal Co., a wholly owned subsidiary of the Company, by SCW Associates, Inc.
claiming breach of an alleged agreement to purchase the stock of Belva Coal
Company, a wholly owned subsidiary of Reading & Bates Coal Co. with coal
properties in West Virginia. When those coal properties were sold in July
1989 as part of the disposition of the Company's coal operations, the
purchasing joint venture indemnified Reading & Bates Coal Co. and the
Company against any liability Reading & Bates Coal Co. might incur as the
result of this litigation. A judgment for the plaintiff of $32,000 entered
in February 1991 was satisfied and Reading & Bates Coal Co. was indemnified
by the purchasing joint venture. On October 31, 1990, SCW Associates, Inc.,
the plaintiff in the above-referenced action, filed a separate ancillary
action in the Circuit Court, Kanawha County, West Virginia against the
Company and a wholly owned subsidiary of Reading & Bates Coal Co., Caymen
Coal, Inc. (former owner of the Company's West Virginia coal properties), as
well as the joint venture, Mr. William B. Sturgill personally (former
President of Reading & Bates Coal Co.), three other companies in which the
Company believes Mr. Sturgill holds an equity interest, two employees of the
joint venture, First National Bank of Chicago and First Capital Corporation.
The lawsuit seeks to recover compensatory damages of $50 million and
punitive damages of $50 million for alleged tortious interference with the
contractual rights of the plaintiff and to impose a constructive trust on
the proceeds of the use and/or sale of the assets of Caymen Coal, Inc. as
they existed on October 15, 1988. Subsequently, the court entered an order
dismissing the Company's indirect subsidiary. The Company intends to defend
its interests vigorously and believes the damages alleged by the plaintiff
in this action are highly exaggerated. In any event, the Company believes
that it has valid defenses and that it will prevail in this litigation.
The Company is involved in various other legal actions arising in the
normal course of business. After taking into consideration the evaluation
of such actions by counsel for the Company, management is of the opinion
that outcome of all known and potential claims and litigation will not have
a material adverse effect on the Company's business or consolidated
financial position or results of operations.
Item 6(a). Exhibits
Exhibit 11 - Computation of Net Income Per Common Share, Primary and
Fully Diluted.
Exhibit 15 - Letter regarding unaudited interim financial information.
Exhibit 27 - Financial Data Schedule. (Exhibit 27 is being submitted as
an exhibit only in the electronic format of this Quarterly
Report on Form 10-Q being submitted to the Securities and
Exchange Commission.)
Item 6(b). Reports on Form 8-K
There were seven Current Reports on Form 8-K filed during the three
months ended March 31, 1997. A Current Report on Form 8-K was: filed
January 7, 1997 disclosing that the Company has entered into an agreement
with Santa Fe Energy Resources to explore five oil and gas prospects in
the U.S. Gulf of Mexico; filed January 21, 1997 disclosing that the
Company and Cal Dive International have agreed to jointly pursue the
development of deepwater technology; filed January 28, 1997 disclosing
the Company's fourth quarter and yearend 1996 earnings; filed February
19, 1997 disclosing the Company's award from AGIP Petroleum of a four
well contract for the "GEORGE H. GALLOWAY"; filed February 26, 1997
disclosing that the "JACK BATES" sustained damage while under tow; filed
March 17, 1997 disclosing that Gary J. Junco has been appointed Chief
Operating Officer of Reading & Bates Development Co. and filed March 26,
1997 disclosing the completion of the first well in the East Breaks 688
"East Boomvang" prospect in the U.S. Gulf of Mexico.
SIGNATURE
---------
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.
READING & BATES CORPORATION
---------------------------
Date: April 23, 1997 By /s/T. W. Nagle
-------------------------
T. W. Nagle
Executive Vice President,
Finance and Administration
(Principal Financial and Accounting Officer)
EXHIBIT INDEX
Exhibit
Number Description
- ------ -------------------------------------------------------------
11 Computation of Net Income Per Common Share, Primary and Fully Diluted.
15 Letter re: unaudited interim financial information.
27 Financial Data Schedule. (Exhibit 27 is being submitted as an exhibit
only in the electronic format of this Quarterly Report on Form 10-Q
being submitted to the Securities and Exchange Commission.)
Exhibit 11
----------
READING & BATES CORPORATION
AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE, PRIMARY AND FULLY DILUTED
(in thousands except share and per share amounts)
THREE MONTHS ENDED
MARCH 31,
-------------------------
1997 1996
---------- ----------
PRIMARY NET INCOME PER SHARE:
Weighted average number of common shares
outstanding 72,007,880 61,966,020
========== ==========
Net income $ 21,913 $ 13,472
Adjustments:
Less dividends paid on $1.625 Convertible
Preferred Stock - (1,213)
---------- ----------
Adjusted net income applicable to common
shares outstanding $ 21,913 $ 12,259
========== ==========
Net income per common share $ .30 $ .20
========== ==========
FULLY DILUTED NET INCOME PER SHARE:*
Weighted average number of common shares
outstanding 72,007,880 61,966,020
Assume exercise of outstanding stock options
(based on the treasury stock method) 1,015,849 1,166,294
Assume conversion of (at the beginning of
the period):
$1.625 Convertible Preferred Stock - 8,647,485
8% Senior Subordinated Convertible Debentures 863,576 823,631
---------- ----------
Adjusted common shares outstanding
- fully diluted 73,887,305 72,603,430
========== ==========
Adjusted net income applicable to common
shares outstanding $ 21,913 $ 12,259
Adjustments:
Interest on 8% Senior Subordinated
Convertible Debentures 941 868
Dividends paid on $1.625 Convertible
Preferred Stock - 1,213
---------- ----------
Adjusted net income applicable to common
shares outstanding - assuming full dilution $ 22,854 $ 14,340
========== ==========
Net income per common share - assuming
full dilution $ .31 $ .20
========== ==========
* This calculation considers all convertible securities and is submitted in
accordance with Regulation S-K item 601(b)(11) although it is contrary to
paragraph 40 of APB Opinion No. 15.
Exhibit 15
----------
Reading & Bates Corporation
We are aware that Reading & Bates Corporation has incorporated by
reference in its Registration Statements No. 33-44237, No. 33-50828 , No.
33-50565, 33-56029 and 33-62727 its Form 10-Q for the quarter ended March
31, 1997, which includes our report dated April 14, 1997 covering the
unaudited interim financial information contained therein. Pursuant to
Regulation C of the Securities Act of 1933, that report is not considered a
part of the registration statement prepared or certified by our firm or a
report prepared or certified by our firm within the meaning of Sections 7
and 11 of the Act.
Arthur Andersen LLP
Houston, Texas
April 22, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Reading & Bates Corporation for the three months ended
March 31, 1997 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 55,282
<SECURITIES> 0
<RECEIVABLES> 78,708
<ALLOWANCES> 1,891
<INVENTORY> 14,633
<CURRENT-ASSETS> 149,562
<PP&E> 988,932
<DEPRECIATION> 306,037
<TOTAL-ASSETS> 851,867
<CURRENT-LIABILITIES> 59,213
<BONDS> 0
0
0
<COMMON> 3,602
<OTHER-SE> 468,982
<TOTAL-LIABILITY-AND-EQUITY> 851,867
<SALES> 0
<TOTAL-REVENUES> 83,431
<CGS> 0
<TOTAL-COSTS> 52,214
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,529
<INCOME-PRETAX> 28,243
<INCOME-TAX> 3,059
<INCOME-CONTINUING> 21,913
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,913
<EPS-PRIMARY> .30
<EPS-DILUTED> 0
</TABLE>
