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FILED PURSUANT TO RULE 424(B)(1); REGISTRATION STATEMENT NO. 333-5539
PROSPECTUS
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1,200,000 SHARES
CLIFFS DRILLING COMPANY
COMMON STOCK
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This Prospectus relates to 1,200,000 shares (the "Shares") of Common Stock,
$.01 par value per share (the "Common Stock"), of Cliffs Drilling Company, a
Delaware corporation (the "Company"), which may be offered for sale by certain
stockholders of the Company (the "Selling Stockholders") from time to time
(collectively the "Offering"). See "Selling Stockholders." The Company will not
receive any part of the proceeds from the sale of the Shares by the Selling
Stockholders.
Sales of Shares by the Selling Stockholders may be effected from time to
time in one or more transactions through underwriters, dealers or agents or
directly to purchasers. The sales may be effected on the over-the-counter market
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at fixed prices or at negotiated prices. The Selling
Stockholders may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended ("Securities Act"). See "Plan of
Distribution."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK.
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PROCEEDS TO
COMPANY OR OTHER
PRICE TO PUBLIC DISCOUNTS PERSONS
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Per Share....................................... (1) (2) (3)
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Total (4)....................................... (1) (2) (3)
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</TABLE>
(1) The Selling Stockholders may from time to time effect the sale of their
Shares at prices and at terms then prevailing or at prices related to the
then-current market price. The Common Stock of the Company is traded on the
over-the-counter market and quoted on The Nasdaq Stock Market ("Nasdaq")
under the symbol "CLDR." On June 25, 1996, the closing sale price of the
Company's Common Stock, as reported by Nasdaq, was $31 1/2 per share.
(2) The Selling Stockholders may pay regular brokers' commissions in cash at
the time(s) of the sale of their Shares.
(3) The Company will not receive any proceeds from the sales of the Shares to
which this Prospectus relates. The Selling Stockholders will receive
proceeds based on the sale price of the Shares at the time(s) of sale.
(4) Without deduction of expenses for the offering (all of which will be paid
by the Company), estimated to be approximately $45,000.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION ("COMMISSION") NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS JUNE 25, 1996
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549; and at the following regional offices of the Commission:
7 World Trade Center, Suite 1300, New York, New York 10048; and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549,
at prescribed rates. The Commission maintains a world wide web site on the
Internet at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The Company's Common Stock is traded on the
over-the-counter market and is listed on Nasdaq. The Company's reports, proxy
statements and other information concerning the Company can be inspected and
copied at the offices of The National Association of Securities Dealers, 1735 K
Street N.W., Washington, D.C. 20006.
This Prospectus constitutes part of a Registration Statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus omits certain of the information set forth in
the Registration Statement. Reference is hereby made to the Registration
Statement and to the exhibits relating thereto for further information with
respect to the Company and the securities offered hereby. Statements contained
herein concerning the provisions of contracts or other documents are not
necessarily complete, and each such statement is qualified in its entirety by
reference to the copy of the applicable contract or other document filed with
the Commission. Copies of the Registration Statement and the exhibits thereto
are on file at the offices of the Commission and may be obtained upon payment of
the fee prescribed by the Commission, or may be examined without charge at the
public reference facilities of the Commission described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
pursuant to the Exchange Act (File No. 0-16703) and are incorporated herein by
reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
(2) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996;
(3) The Company's Proxy Statement for the Annual Meeting of
Stockholders held on May 22, 1996;
(4) The Company's Current Report on Form 8-K filed June 6, 1996; and
(5) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 10 filed April 15, 1988, as
amended by Amendment No. 1 on Form 8 filed May 26, 1988 and Amendment No. 2
on Form 8 filed June 10, 1988.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering made by this Prospectus shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
thereof. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon the written or oral request of such person, a
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copy of any or all of the information that has been incorporated by reference in
this Prospectus (not including exhibits to the information that is incorporated
by reference herein unless such exhibits are specifically incorporated by
reference in such information). Requests for such copies should be directed to
the Company at 1200 Smith Street, Suite 300, Houston, Texas 77002, Attention:
James E. Mitchell Jr., Secretary (telephone number (713) 651-9426).
DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included in this
Prospectus, including without limitation, statements regarding the Company's
financial position, business strategy, budgets, plans and objectives of
management for future operations are forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from the Company's expectations ("Cautionary Statements") are
disclosed under "Risk Factors" and elsewhere in this Prospectus. All subsequent
written and oral forward-looking statements attributable to the Company, or
persons acting on its behalf, are expressly qualified in their entirety by the
Cautionary Statements.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and
consolidated financial statements (including the notes thereto) incorporated by
reference into this Prospectus. Unless the context otherwise requires, "Company"
refers to Cliffs Drilling Company and its consolidated subsidiaries.
THE COMPANY
Cliffs Drilling Company is an international contract drilling and
engineering company. The Company is primarily engaged in daywork drilling,
engineering services, and to a lesser extent, the development and operation of
mobile offshore production units ("MOPUs"). The Company has historically
deployed its assets in areas where it can achieve long-term growth and generate
stable cash flows and net income. This strategy has led to four consecutive
years of positive net income, while many other offshore drilling contractors
have experienced significant losses over the comparable period. The Company's
domestic operations are concentrated in the Texas/Louisiana Gulf Coast region
and its foreign operations are concentrated in Venezuela. The Company owns 12
jack-up drilling rigs, 6 land rigs, 6 MOPUs and a 50% interest in a joint
venture which owns one jack-up drilling rig.
The Company and its predecessors have been in the contract drilling
business since 1978. The Company entered the turnkey drilling business in 1982
in an effort to more fully utilize its existing fleet of rigs and complement its
daywork drilling operations. In response to the economic conditions which
adversely affected the domestic contract drilling business during the 1980s, the
Company undertook a strategic plan in 1989 to further diversify its scope of
operations and geographic concentration beyond the traditional domestic daywork
drilling market. The Company's management implemented a proactive approach to
identify, develop and exploit several market segments which provided higher
margins and more reliable operating income and cash flow. To achieve its
strategic objectives, the Company continued to emphasize its turnkey drilling
operations, expanded its well engineering and management services, became a
leader in the development and operation of MOPUs and deployed its drilling rigs
into selected international markets. With the implementation of this strategy,
the Company has positioned itself to benefit from increases in drilling and
production activities in several markets worldwide.
INDUSTRY CONDITIONS
Activity in the contract drilling industry and related oil service
businesses has shown signs of improvement over the last two years due to
increased worldwide demand for oil and natural gas. Over the past several years,
the supply of offshore drilling rigs has declined while the demand for such rigs
has increased, resulting in higher utilization rates. In addition, oil and gas
companies have experienced decreases in exploration and production costs from
technological advances such as increased use of 3-D seismic surveys, advances in
drill bits and completion technologies and use of new production techniques such
as MOPUs and subsea completions. In an effort to more quickly realize the
significant gas revenues attainable from shallow water drilling in the Gulf of
Mexico, oil and gas companies are producing reserves at faster rates. These
enhanced production methods increase the net present value of the reserves
produced and significantly shorten the reserve life in the Gulf of Mexico,
thereby necessitating additional drilling. In addition, the U.S. natural gas
market, which had experienced weak market conditions throughout the early 1990s,
has substantially improved in recent months. All of these factors have resulted
in increased demand for offshore rigs in the Gulf of Mexico and an increase in
both utilization and dayrates for jack-up drilling rigs. Management believes the
current market dynamics in the Gulf of Mexico will result in greater utilization
of the Company's rigs and services.
RECENT DEVELOPMENTS
As part of its business strategy, the Company has sought to identify
business opportunities that would expand its asset base, increase profitability
and enhance shareholder value. The Company's acquisition criteria, among others,
are to increase operating leverage and diversify geographically.
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On May 23, 1996, the Company completed the acquisition of 9 jack-up
drilling rigs and a 50% interest in a joint venture which owns an additional
jack-up drilling rig, and their related assets (collectively referred to as the
"Southwestern Rigs") operated by Southwestern Offshore Corporation, a Delaware
corporation ("Southwestern"). Pursuant to an Acquisition Agreement dated May 13,
1996 (the "Acquisition Agreement"), the Southwestern Rigs were acquired as
follows: (a) Cliffs Drilling Asset Acquisition Company, a newly formed Delaware
corporation and wholly-owned subsidiary of the Company ("Newco"), acquired 6
rigs from Viking Supply Ships A.S. ("Viking"), (b) Newco acquired one rig from
Ocean Master III Inc., a corporation organized under the laws of Liberia
("Ocean"), (c) Newco acquired one rig from Production Partner Inc., a
corporation organized under the laws of Liberia ("Partner"), (d) Newco acquired
a partial indirect interest in one rig owned by West Indies Drilling Joint
Venture (the "Joint Venture") through the purchase by Newco of the outstanding
capital stock of Viking Trinidad Limited, a corporation organized under the laws
of the Republic of Trinidad and Tobago ("Trinidad") and a partner in the Joint
Venture, and (e) Cliffs Drilling Merger Company, a newly formed Delaware
corporation and wholly-owned subsidiary of the Company ("Merger Sub"), acquired
one rig through the merger of Trivium Investments Limited, a corporation
organized under the laws of the British Virgin Islands ("Trivium"), with and
into Merger Sub. As used herein, the term "Sellers" shall mean Southwestern,
Viking, Ocean, Partner and Trivium.
The purchase price of the Southwestern Rigs was (a) $103.8 million in cash
(after reductions of $6.2 million for required refurbishments of certain
Southwestern Rigs not made prior to closing) plus (b) issuance of the Shares and
(c) assumption of certain contractual liabilities, including the Company's
guarantee of $4.25 million in indebtedness of the Joint Venture to Citibank N.A.
related to the refurbishment of the jack-up drilling rig owned by the Joint
Venture (together with accrued but unpaid interest thereon and costs of
collection). Pursuant to the Acquisition Agreement, the Company agreed to
register the Shares for the Selling Stockholders pursuant to Rule 415 of the
Securities Act, which is the subject of this Registration Statement.
In part to finance the acquisition of the Southwestern Rigs, the Company
sold $150 million of 10.25% Senior Notes due 2003 (the "Notes") in a private
placement. Of the $144.8 million net proceeds received by the Company in
connection with the sale of the Notes, $103.8 million was used to fund the cash
portion of the purchase price for the Southwestern Rigs and $6.2 million has
been reserved to complete refurbishments of 2 rigs not completed by Sellers
prior to closing. Newco, Merger Sub, Cliffs Drilling International, Inc., a
Delaware corporation and wholly-owned subsidiary of the Company, and Cliffs Oil
and Gas Company, a Delaware corporation and wholly-owned subsidiary of the
Company (collectively the "Subsidiary Guarantors") each guaranteed the Notes to
the extent it is legally able to do so (the "Subsidiary Guarantees"). See
"Description of Existing Indebtedness -- Description of the Notes."
The acquisition of the Southwestern Rigs significantly expanded the
Company's jack-up fleet and broadened its areas of operation, particularly in
the active Gulf of Mexico. Of the 10 Southwestern Rigs acquired, 7 rigs have
been refurbished by the Sellers in the past four years, and the Company expects
to complete refurbishments on one rig and commence refurbishment activities on
another rig during June, 1996. Upon completion of the current upgrades and
refurbishment, management believes capital expenditures over the next several
years will be minimal. Eight of these rigs are currently operating or are
expected to operate in the Gulf of Mexico and the other 2 rigs will operate in
Qatar and Trinidad, respectively.
In addition, on May 10, 1996, the Company acquired the jack-up drilling rig
OCEAN MAGALLANES (the "Diamond Rig") from Diamond Offshore Southern Company
("Diamond") for $4.5 million. The Company has renamed this unit CLIFFS DRILLING
NO. 155. The Company intends to refurbish, upgrade and mobilize the Diamond Rig
to Venezuela at an additional cost estimated at $7.5 million. The Company has
allocated $12 million of the net proceeds from the sale of the Notes for the
acquisition and refurbishment of the Diamond Rig. The Company signed a letter of
intent with Maraven S.A. ("Maraven") for the Diamond Rig and expects to sign an
initial eight-month contract with Maraven for use of the Diamond Rig in Lake
Maracaibo, Venezuela.
The acquisitions of the Southwestern Rigs and the Diamond Rig are
collectively referred to herein as the "Rig Acquisitions." Newco has changed its
name to "Southwestern Offshore Corporation" and, upon receipt
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of required government approval, will acquire the jack-up drilling rig and
related assets from Merger Sub which were acquired from Trivium.
OPERATIONS
The Company's three major business segments are daywork drilling,
engineering services and MOPU operations.
Daywork Drilling. The Company began operations as a daywork contract
driller in the Gulf of Mexico and the Texas/Louisiana Gulf Coast region. Because
of depressed conditions in the domestic oil and gas industry during the 1980s
and early 1990s, the Company sold certain drilling rigs and deployed its
remaining rigs into selected international markets. These strategic decisions
were made to enable the Company to stabilize cash flows during an extended
market downturn. The Company currently has an established base of term contracts
in both drilling and production operations, a strong cash position and no debt.
Upon completion of all planned rig refurbishments, the Company will operate 6
land rigs in Venezuela, 9 jack-up rigs in the Gulf of Mexico and one jack-up rig
in each of Venezuela, Colombia, Qatar and Trinidad. Of the 13 jack-up drilling
rigs owned by the Company or in which the Company has an interest, 12 are
cantilevered, 5 have top drives and substantially all have been refurbished in
the last five years or are currently in the process of being refurbished as
described above.
Engineering Services. Turnkey drilling has been a key element in the
Company's long-term strategy since 1982. The Company believes that its downhole
engineering expertise, extensive operating experience, veteran personnel and
risk management capabilities have allowed the Company to reduce the risks
inherent in turnkey drilling operations. The Company also began providing well
engineering and management services during 1993 as an expansion of this business
segment. Under these arrangements, the Company is responsible for well design
and well site supervision.
MOPU Operations. Since 1989, the Company has pioneered the development and
operation of MOPUs, which allow the Company to participate in the more stable
oil and gas production market. MOPUs are offshore production systems, usually
converted jack-up rigs, from which the drilling equipment is removed and
production equipment is installed. MOPUs generally are contracted on a term
basis for several years and are characterized by relatively high operating
margins, with most of the costs assumed by the customer.
The Company is a Delaware corporation with principal executive offices
located at 1200 Smith Street, Suite 300, Houston, Texas 77002 and its telephone
number is (713) 651-9426.
THE OFFERING
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Shares of Common Stock to be sold by
the
Selling Stockholders............... 1,200,000
Shares to be sold by the Company..... None
Proceeds to the Company.............. None
Common Stock Outstanding............. 7,403,873 shares of Common Stock were outstanding at June
25, 1996. No additional shares of Common Stock will become
outstanding as a result of the sale of the shares offered
hereby.
Nasdaq symbol........................ CLDR
</TABLE>
RISK FACTORS
An investment in Common Stock involves certain risks that a potential
investor should carefully evaluate prior to making an investment in Common
Stock. See "Risk Factors" immediately following this summary.
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RISK FACTORS
In addition to the other information set forth elsewhere in this
Prospectus, the following factors should be carefully evaluated prior to making
an investment in the Company's Common Stock:
RELIANCE ON OIL AND GAS INDUSTRY
Demand for the Company's services depends primarily upon the level of
spending by oil and gas companies for exploration, development and production
activities. Activity in the contract drilling industry and related oil service
businesses was severely depressed from 1982 until 1992 due to volatility in oil
prices and depressed natural gas prices. As demonstrated during this period, any
prolonged reduction in oil and natural gas prices will depress the level of
exploration, development and production activity and result in a corresponding
decline in the demand for the Company's services and, therefore, have a material
adverse effect on the Company's revenues and profitability. It is not possible
to predict whether contract drilling rig utilization and dayrates will maintain
levels sufficient to ensure acceptable operating results in future periods. The
Company's future success will depend in part upon general economic conditions in
the oil and gas industry, which cannot be predicted with certainty.
COMPETITION
The contract drilling industry is a highly competitive and cyclical
business characterized by high capital and maintenance costs. The Company
competes with numerous other drilling contractors, some of which have
substantially greater financial and other resources than the Company.
Competition for drilling contracts will likely continue to be intense in the
foreseeable future. Competitive factors in the energy service industry include
price, technical and engineering expertise, work force experience, rig
suitability, safety record, efficiency, condition of equipment, reputation and
customer relations. If demand for drilling rigs increases in the future, rig
availability may also become a competitive factor.
SUBSTANTIAL INDEBTEDNESS AND RESTRICTIONS
As a result of the issuance of the Notes, the Company has substantial
indebtedness. The Company's level of indebtedness will have several important
effects on its future operations, including (i) a substantial portion of the
Company's cash flow from operations must be dedicated to the payment of interest
on its indebtedness and will not be available for other purposes, (ii) covenants
contained in the Company's Indenture relating to the Notes (the "Indenture") or
the Revolving Credit Facility (as defined) will require the Company to meet
certain financial tests, and other restrictions will limit its ability to borrow
additional funds or to dispose of assets and may affect the Company's
flexibility in planning for, and reacting to, changes in its business, including
possible acquisition activities, and (iii) the Company's ability to obtain
additional financing in the future for working capital, capital expenditures,
acquisitions, general corporate or other purposes may be impaired. The Company's
ability to meet its debt service obligations and to reduce its total
indebtedness will be dependent upon the Company's future performance, which will
be subject to general economic conditions and to financial, business and other
factors affecting the operations of the Company, many of which are beyond its
control. There can be no assurance that the Company's business will continue to
generate cash flow at or above current levels. If the Company is unable to
generate sufficient cash flow from operations in the future to service its debt,
it may be required to refinance all or a portion of its indebtedness, including
the Notes, or to obtain additional financing. There can be no assurance that any
such refinancing would be possible or that any additional financing could be
obtained.
The Company's Revolving Credit Facility is secured by liens on
substantially all of the assets of the Company and the Subsidiary Guarantors.
Accordingly, the lender under the Revolving Credit Facility has claims with
respect to the assets constituting collateral for any indebtedness thereunder
that are prior to the claims of holders of the Notes. In the event of a default
on the Notes, or a bankruptcy, liquidation or reorganization of the Company,
such assets will be available to satisfy obligations with respect to the
indebtedness secured thereby before any payment therefrom could be made on the
Notes. However, holders of
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the Notes would be entitled to recovery from such assets before holders of the
Common Stock. See "Description of Existing Indebtedness."
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company must offer to
purchase all Notes then outstanding at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest to the date of
purchase. The occurrence of a Change of Control may result in lenders under the
Revolving Credit Facility having the right to require the Company to repay all
indebtedness outstanding thereunder. There can be no assurance that the Company
will have available funds sufficient to repay all indebtedness owing under the
Revolving Credit Facility or to fund the purchase of the Notes upon a Change of
Control. In the event a Change of Control occurs at a time when the Company does
not have available funds sufficient to pay for all of the Notes delivered by
Holders seeking to accept the Company's repurchase offer, an Event of Default
would occur under the Indenture.
OPERATING HISTORY AND WORKING CAPITAL NEEDS
The Company was not profitable from 1988 through 1991 as a result of
depressed economic conditions in the oil and gas and oilfield service
industries. To the extent that cash in excess of cash on hand and cash generated
from operations is needed in the near term for working capital and capital
expenditures, it is expected that the Company would draw on the Revolving Credit
Facility or seek other debt or equity financing in the private or public
markets. Additional liquidity might also be generated through the sale of
operating assets or through the reduction of capital expenditures, although any
such sale or reduction may have an adverse effect on the Company's results of
operations. The ability of the Company to sell debt or equity securities or
assets would depend on conditions then prevailing in the relevant market and, in
the case of any offering of debt or equity securities, the Company's results of
operations, financial condition and business prospects. There can be no
assurance that the Company could, if the need arose, effect any such sale of
debt or equity securities or assets on terms that were acceptable to the
Company. In addition, the Indenture will limit the ability of the Company to
incur additional indebtedness or to enter into mergers, asset sales or
consolidations. See "Description of Existing Indebtedness -- Description of the
Notes."
RISKS ASSOCIATED WITH TURNKEY DRILLING
Under a turnkey drilling contract, the Company contracts to drill a well to
a contract depth under specified conditions for a fixed price. In addition, the
Company provides technical expertise and engineering services, as well as most
of the equipment required for the well, and is compensated when the contract
terms have been satisfied. On a turnkey well, the Company from time to time
operates rigs subcontracted from other drilling contractors on a dayrate basis.
The Company also subcontracts substantially all of the related services and
manages the drilling process. The risks to the Company on a turnkey drilling
contract are substantially greater than on a well drilled on a daywork basis
because the Company assumes most of the risks associated with drilling
operations generally assumed by the operator in a daywork contract, including
risk of blowout, loss of hole, stuck drill stem, machinery breakdowns, abnormal
drilling conditions and risks associated with subcontractors' services, supplies
and personnel. The Company has obtained insurance coverage in the past to reduce
these risks inherent in turnkey drilling operations. Should such coverage not be
available in the future, it would have a material adverse effect on the
Company's turnkey drilling operations. See "-- Risks and Insurance."
RISKS AND INSURANCE
The Company's operations are subject to the many hazards inherent in the
drilling business, including, for example, blowouts, cratering, fires,
explosions and adverse weather and seas. These hazards could cause personal
injury, suspend drilling operations or seriously damage or destroy the equipment
involved and could cause substantial damage to producing formations and
surrounding areas. Damage to the environment could also result from the
Company's operations, particularly through oil spillage and extensive,
uncontrolled fires. As a protection against operating hazards, the Company
maintains broad insurance coverage, including all
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risks physical damage, employer's liability, comprehensive general liability or
commercial contract indemnity and workers' compensation insurance. The Company's
third party liability insurance coverage is approximately $100 million per
occurrence. The Company also maintains insurance coverage on an annual basis to
protect against certain hazards inherent in its turnkey contract drilling and
oil and gas operations. This insurance was most recently renewed on June 1,
1996, and is scheduled for renewal on October 1, 1997. The Company believes that
it is adequately insured for public liability and property damage to others with
respect to its operations. However, such insurance may not be sufficient to
protect the Company against liability for all consequences of well disasters,
extensive fire damage or damage to the environment. The Company also carries
insurance to cover physical damage to or loss of its drilling rigs and MOPUs and
a limited amount of insurance against loss of earnings resulting from damage to
one of its jack-up drilling rigs. In view of difficulties that may be
encountered in renewing such insurance at reasonable rates, no assurance can be
given that the Company will be able to maintain the type and amount of coverage
that it considers adequate. The occurrence of a significant event for which the
Company is not fully insured could have a material adverse effect on the
Company's financial position and results of operations.
RISKS INHERENT IN FOREIGN OPERATIONS
A significant percentage of the Company's revenues is derived from foreign
sources or from services performed abroad. For the fiscal year ended December
31, 1995, 63% of the Company's consolidated revenues were derived from foreign
operations, principally in Venezuela. Foreign operations and export sales are
subject in varying degrees to risks inherent in doing business abroad. Such
risks include the possibility of unfavorable changes in tax or other laws;
partial or total expropriation; currency exchange rate fluctuations and
restrictions on currency repatriation; the disruption of operations from labor
and political disturbances, insurrection or war; and the requirements of partial
local ownership of operations in certain countries. Foreign governments may from
time to time suspend or curtail drilling operations or leasing activities when
such operations are considered to be detrimental to the environment or to
jeopardize public safety.
RELIANCE ON SIGNIFICANT CUSTOMERS
The Company's 3 largest customers for the year ended December 31, 1995,
Corpoven, S.A. ("Corpoven"), Maraven and Texaco Exploration & Production, Inc.,
accounted for approximately 66% of the Company's consolidated revenues. The
Company's 4 largest customers for the year ended December 31, 1994, Corpoven,
Maraven, Dresser-Rand Company and Cliffs Neddrill Central Turnkey International,
a joint venture in which the Company has a 1/3 ownership interest, accounted for
approximately 78% of the Company's consolidated revenues. The Company's 3
largest customers for the year ended December 31, 1993, Dresser-Rand Company,
Maraven and Marathon Oil Company, accounted for approximately 63% of the
Company's consolidated revenues. In addition, although during the last 3 years,
Southwestern decreased its dependence on individual customers, reliance on such
customers remains significant. In 1993, a single customer accounted for
approximately 77% of the total revenues of Southwestern and another customer
accounted for 15% of revenues. By 1994, the three largest customers of
Southwestern accounted for 24%, 16% and 10%, respectively, of its total
revenues. During 1995, the 2 largest customers of Southwestern each accounted
for 15% of its total revenues. The loss of any significant customer could, at
least on a short term basis, have a material adverse impact on the Company's
results of operations.
GOVERNMENT REGULATION
The drilling of oil and gas wells is subject to various federal, state,
local and foreign laws, rules and regulations. The Company, as an owner or
operator of domestic offshore facilities, may be liable for the costs of removal
and damages arising out of a pollution incident to the extent set forth in the
Federal Water Pollution Control Act, as amended by the U.S. Oil Pollution Act of
1990 ("OPA '90") and the Outer Continental Shelf Lands Act. In addition, the
Company may also be subject to other civil claims arising out of any such
incident. Certain of the Company's facilities are also subject to regulations of
the Environmental Protection Agency ("EPA") that require the preparation and
implementation of spill prevention control and countermeasure plans relating to
possible discharge of oil into navigable waters. The Company supplements its
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<PAGE> 10
activities in this regard by membership in the Clean Gulf Association, which
provides pollution control facilities to its members. Other regulations of the
EPA may require the Company to take certain precautions in storing, handling and
transporting certain hazardous wastes. State statutory provisions relating to
oil and natural gas generally include requirements as to well spacing, waste
prevention, production limitations, pollution prevention and clean-up, obtaining
drilling permits and similar matters. The Company believes that it is in
compliance in all material respects with such laws, rules and regulations and
that such compliance has not had any material adverse effect on its operations
or financial condition.
The drilling industry is dependent on the demand for services from the oil
and gas exploration industry and, accordingly, is affected by changing tax laws,
price controls and other laws relating to the energy business. The Company's
business is affected generally by political developments and by federal, state,
local and foreign laws, rules and regulations which may relate directly to the
oil and gas industry. The adoption of laws, rules and regulations, both domestic
and foreign, which curtail exploration and development drilling for oil and gas
for economic, environmental and other policy reasons may adversely affect the
Company's operations by limiting available drilling and production
opportunities.
MOPUs and MOPU operations are subject to certain federal, state, local and
foreign laws, rules and regulations relating to engineering, design, structural,
safety, operational and inspection standards or requirements, and changes in
such standards or requirements could adversely affect the Company's MOPU
operations.
NO DIVIDENDS PAID OR EXPECTED TO BE PAID
The Company anticipates that any earnings will be retained for the
development of the Company's business, and that no cash dividends will be
declared on the Common Stock in the foreseeable future. Moreover, under the
Revolving Credit Facility with Internationale Nederlanden (U.S.) Capital
Corporation ("ING") and the Notes, the Company is restricted from declaring,
making or paying any cash dividends on the Common Stock. See "Description of
Existing Indebtedness."
DIFFICULTY TO EFFECT A CHANGE IN CONTROL
The Company's Certificate of Incorporation and Bylaws and the provisions of
the Delaware General Corporation Law limit the liability of directors and make
it more difficult to change control of the Company and replace incumbent
management. Also, the terms of the Notes require the Company to offer to redeem
the Notes upon a change of control. See "Description of Certain Provisions of
the Company's Certificate of Incorporation and Bylaws" and "Description of
Existing Indebtedness."
USE OF PROCEEDS
The Company will not receive any part of the proceeds from the sale of the
Shares offered hereby. All proceeds from the sale of the Shares will be received
by the Selling Stockholders.
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<PAGE> 11
COMMON STOCK PRICE RANGE AND DIVIDENDS
The Common Stock of the Company is traded on the over-the-counter market
and quoted on Nasdaq under the symbol "CLDR." The following table sets forth the
range of high and low closing prices per share of Common Stock as reported by
Nasdaq for the periods indicated:
<TABLE>
<CAPTION>
SALES PRICE
---------------
HIGH LOW
---- ------
<S> <C> <C>
1995
1st Quarter....................................................... $14 1/8 $11 5/16
2nd Quarter....................................................... $15 $12 7/8
3rd Quarter....................................................... $15 1/4 $13 1/8
4th Quarter....................................................... $16 3/8 $13 3/8
1996
1st Quarter....................................................... $15 3/4 $13 3/4
2nd Quarter (through June 25, 1996)............................... $32 $15 1/4
</TABLE>
On June 25, 1996, the closing sale price of the Company's Common Stock, as
reported by Nasdaq, was $31 1/2 per share.
The Company has never paid cash dividends on its Common Stock and it is not
anticipated that cash dividends will be paid to holders of Common Stock in the
foreseeable future. Under the Revolving Credit Facility and the Notes, the
Company is restricted from declaring, making or paying any cash dividends on the
Common Stock. See "Description of Existing Indebtedness."
SELLING STOCKHOLDERS
The shares of Common Stock offered hereunder were acquired by the Selling
Stockholders as a result of the acquisition by the Company of the Southwestern
Rigs. The following table sets forth the number and percentage of shares of
Common Stock owned by each Selling Stockholder at June 25, 1996. Except as set
forth below, the Shares shown below constitute all of the shares of Common Stock
known to the Company to be beneficially owned by the Selling Stockholders.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING
-------------------------- SHARES TO --------------------------
NAME SHARES PERCENTAGE(1) BE SOLD SHARES PERCENTAGE(1)
- ------------------------------------- --------- ------------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Viking Supply Ships A.S.............. 1,153,528 15.59% 1,153,528 -- *
P.O. Box 9
N-4601 Kristiansand
Norway
Production Partner Inc............... 46,472 * 46,472 -- *
Five Post Oak Park,
Suite 1720
Houston, Texas 77027
</TABLE>
- ---------------
* Less than one percent (1%).
(1) Based on 7,403,873 shares of Common Stock outstanding at June 25, 1996.
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<PAGE> 12
DESCRIPTION OF COMMON STOCK
The Company's Certificate of Incorporation authorizes the issuance of
15,000,000 shares of Common Stock, of which 7,838,161 shares are issued,
7,403,873 shares are outstanding, and 449,500 shares are reserved for issuance
pursuant to the Company's 1988 Incentive Equity Plan as of June 25, 1996. In
addition, the Company is authorized to issue 3,000,000 shares of Preferred
Stock, no par value (the "Preferred Stock"), of which no shares are issued and
outstanding. All outstanding shares of Common Stock are fully paid and non-
assessable.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share on all
matters upon which shareholders have the right to vote and, except as otherwise
required by law or provided in any resolution adopted by the Board with respect
to any series of preferred stock, the holders of such shares exclusively possess
all voting power. The Certificate of Incorporation does not provide for
cumulative voting for the election of directors. No holder of Common Stock has
any preemptive right to subscribe for any securities of the Company of any kind
or class. Subject to any preferential rights of any outstanding series of
preferred stock, the holders of Common Stock are entitled to receive such
dividends as the Board may from time to time declare out of funds legally
available therefor and, upon liquidation of the Company, are entitled to receive
pro rata all assets of the Company available for distribution to such holders.
However, under the Company's credit agreement with ING and under the terms of
the Notes, the Company is restricted from declaring, making or paying any
dividends on the Common Stock. See "Description of Certain Provisions of the
Company's Certificate of Incorporation and Bylaws" and "Description of Existing
Indebtedness."
The transfer agent and registrar for the Common Stock is Society National
Bank, c/o KeyCorp Shareholder Services, Inc., 700 Louisiana, Suite 2620,
Houston, Texas 77002-2729. The Common Stock is traded on Nasdaq under the symbol
"CLDR."
REGISTRATION RIGHTS AGREEMENT
In connection with issuance of the Shares in consideration for the
acquisition of the Southwestern Rigs, the Company, Viking and Partner entered
into a Registration Rights Agreement for the Shares. Under the terms of this
agreement, the Company agreed to provide Viking, Partner and certain qualified
transferees of either Viking or Partner certain limited registration rights
which are the subject of this Prospectus and the Registration Statement.
DESCRIPTION OF CERTAIN PROVISIONS OF THE COMPANY'S
CERTIFICATE OF INCORPORATION AND BYLAWS
The Certificate of Incorporation and the Bylaws of the Company contain
several provisions that may make the acquisition of control of the Company by
means of a tender offer, open market purchases, proxy fight or otherwise more
difficult. These provisions are expected to discourage certain types of
transactions that may involve an actual or threatened change of control of the
Company and to encourage persons seeking to acquire control of the Company to
consult first with the Company's Board to negotiate the terms of any proposed
business combination or offer. Takeovers or changes in the Board that might be
proposed and effected without prior consultation and negotiation with the Board
or the Company's management would not necessarily be detrimental to the Company
and its shareholders. However, the Company nonetheless believes that the
benefits of increased protection of the Company's potential ability to negotiate
with the proponent of an unfriendly or unsolicited proposal to take over or
restructure the Company outweigh the disadvantages of discouraging such
proposal, because, among other things, negotiation of such proposals could
result in an improvement of their terms.
The Company's Certificate of Incorporation and Bylaws (i) provide that the
size of the Board will be fixed by resolution of the directors of the Company,
(ii) classify the Board into three classes, as nearly equal in number as
possible, each class to serve for three years, with one class elected each year,
(iii) provide that
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<PAGE> 13
directors may be removed only for cause and only with the approval of the
holders of at least 80 percent of the combined voting power of the outstanding
shares of the Company capital stock entitled to vote generally in the election
of directors (the "Voting Stock"), (iv) provide that any vacancy on the Board
may be filled only by the remaining directors then in office, though less than a
quorum, (v) provide that no shareholder action may be taken by written consent,
(vi) provide that special meetings of the shareholders of the Company may be
called only pursuant to a resolution adopted by a majority of the total number
of directors that the Board would have if there were no vacancies or by the
Chairman of the Board, (vii) require advance notice of business to be brought
before, or nominations to be made at, a meeting of shareholders by a
shareholder, (viii) authorize the Board to issue one or more series of preferred
stock and to determine with respect to any such series the terms and rights
thereof, and (ix) provide that certain provisions of the Certificate of
Incorporation and of the Bylaws may not be amended or repealed or provisions
inconsistent therewith adopted, without the approval of the holders of at least
80 percent of the Voting Stock. In addition, Section 203 of the Delaware General
Corporation Law, requires (with certain exceptions) a vote of 66 percent of the
holders of the Voting Stock, excluding shares of Voting Stock held by an
"Interested Stockholder," as defined under Section 203, to approve certain
business combinations.
The foregoing is a summary of certain provisions in the Company's
Certificate of Incorporation and Bylaws, and is qualified in its entirety by
reference to the Certificate of Incorporation and Bylaws.
DESCRIPTION OF EXISTING INDEBTEDNESS
REVOLVING CREDIT FACILITY
The Company has established a credit facility (the "Revolving Credit
Facility") with ING to fund its working capital requirements and other
obligations and to support the issuance of letters of credit. The Company may
borrow from time to time up to $20 million under the Revolving Credit Facility,
subject to certain borrowing base limitations. All advances to the Company under
the Revolving Credit Facility bear interest at 3/4% per annum plus the greater
of the prevailing Federal Funds Rate plus 1/2% or a referenced average prime
rate; or at the adjusted LlBOR rate plus 2 1/2% per annum. The foregoing rates
are subject to an increase of 1/2% in the event certain financial thresholds
are exceeded. The Company is also obligated to pay ING (i) a commitment fee
equal to 1/2% per annum on the average daily unadvanced portion of the
commitments and (ii) a letter of credit fee of 2% per annum on the average daily
undrawn and unexpired amount of each issued and outstanding letter of credit
during the period that such letter of credit remains outstanding. The Revolving
Credit Facility expires on January 1, 1998.
The Revolving Credit Facility is secured by the Company's rig fleet,
inventory, equipment, accounts receivable and certain oil and gas properties.
The Revolving Credit Facility requires the Company to comply with various
covenants including, but not limited to, the maintenance of various financial
ratios, and restricts the Company from declaring, making or paying any dividends
on its Common Stock.
At June 25, 1996, the Company had no outstanding borrowings under the
Revolving Credit Facility. ING has issued a commitment letter to increase the
Revolving Credit Facility to $35 million and to extend its maturity to May 31,
1998.
DESCRIPTION OF THE NOTES
On May 23, 1996, the Company issued $150 million principal amount of 10.25%
Senior Notes due 2003. Until their stated maturity on May 15, 2003, the Notes
bear interest at a rate of 10.25% per annum from the date of issuance thereof
payable semi-annually in cash in arrears on May 15 and November 15 of each year,
commencing November, 1996.
The Notes are redeemable at the option of the Company, in whole or in part,
at any time on or after May 15, 2000, at the redemption prices set forth in the
Indenture, together with accrued and unpaid interest to the date of redemption.
In the event the Company consummates a Public Equity Offering on or prior to May
15, 1999, the Company may at its option use all or a portion of the proceeds
from such offering to redeem
13
<PAGE> 14
up to $37.5 million principal amount of the Notes at a redemption price equal to
110% of the aggregate principal amount thereof, together with accrued and unpaid
interest to the date of redemption, provided that at least $112.5 million in
aggregate principal amount of Notes remain outstanding immediately after such
redemption.
Upon the occurrence of a Change of Control (as defined in the Indenture),
the Company will be required to offer to purchase all the outstanding Notes at a
purchase price equal to 101% of the aggregate principal amount thereof, together
with accrued and unpaid interest to the date of purchase.
Under the terms of the Indenture, the Company may not, and may not permit
any Restricted Subsidiary (as defined in the Indenture) to, make any Restricted
Payments, including dividends and other payments with respect to the Common
Stock, unless (1) no default shall have occurred and be continuing or would
result from such Restricted Payment, (2) for the 12-month period ending on the
last day of the Company's most recently completed fiscal quarter, the Company's
Consolidated EBITDA Coverage Ratio was greater than 2.25 to 1.0, and (3) after
giving effect to such Restricted Payment, the aggregate amount of all Restricted
Payments declared or made after May 15, 1996 does not exceed the sum of (A) 50%
of the cumulative consolidated net income of the Company since April 1, 1996 (or
if such consolidated net income is a deficit, 100% of such deficit), (B) the
aggregate net cash proceeds from sales of certain capital stock, options,
warrants or capital stock purchase rights of the Company since May 15, 1996, (C)
the aggregate net cash proceeds from the exercise of any options, warrants or
capital stock purchase rights, (D) the aggregate net cash proceeds from the
issuance or sale of indebtedness or certain redeemable capital stock which has
been converted into Common Stock, (E) to the extent not otherwise included in
consolidated net income, certain net reductions in investments in Unrestricted
Subsidiaries, and (F) $10 million. Notwithstanding the foregoing, the Company
may make certain payments and investments under the terms of the Indenture.
The Indenture relating to the Notes also contains certain covenants,
including covenants which limit: (i) indebtedness; (ii) issuances and sales of
capital stock of Restricted Subsidiaries; (iii) sale/leaseback transactions;
(iv) transactions with affiliates; (v) liens; (vi) asset sales; (vii) dividends
and other payments affecting Restricted Subsidiaries; (viii) conduct of
business; and (ix) mergers, consolidations and sales of assets.
The Notes are unconditionally guaranteed on a senior unsecured basis by the
Subsidiary Guarantors (and each of the Company's additional principal
subsidiaries), and such Subsidiary Guarantees rank pari passu in right of
payment with all senior indebtedness of the Subsidiary Guarantors and senior to
all Subordinated Indebtedness of the Subsidiary Guarantors. The Subsidiary
Guarantees may be released under certain circumstances.
The Notes are senior unsecured obligations of the Company, ranking pari
passu in right of payment with all senior indebtedness of the Company and senior
to all Subordinated Indebtedness of the Company. At June 6, 1996, the Company
and the Subsidiary Guarantors had no outstanding Indebtedness. The Notes and the
Subsidiary Guarantees, however, will be effectively subordinated to secured
indebtedness of the Company and the Subsidiary Guarantors, respectively, with
respect to the assets securing such indebtedness, including any indebtedness
under the Revolving Credit Facility, which is secured by liens on substantially
all of the assets of the Company and the Subsidiary Guarantors. Subject to
certain limitations, the Company and its Subsidiaries may incur additional
indebtedness in the future.
The Notes have not been registered under the Securities Act and unless so
registered may not be offered or sold except pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the Securities
Act. However, pursuant to a registration rights agreement (the "Notes
Registration Rights Agreement") by and among the Company, the Subsidiary
Guarantors and Jefferies & Company, Inc. and ING Baring (U.S.) Securities, Inc.
(together the "Initial Purchasers"), the Company has agreed (i) to file a
registration statement with the Commission (the "Exchange Offer Registration
Statement") with respect to an offer to exchange the Notes (the "Exchange
Offer") for senior debt securities of the Company with terms substantially
identical to the Notes (the "Exchange Notes") (except that the Exchange Notes
generally will not contain terms with respect to transfer restrictions) within
60 days after the date of original issuance of the Notes and (ii) to use its
best efforts to cause such registration statement to become effective under the
14
<PAGE> 15
Securities Act within 120 days after such issue date. In the event that
applicable law or interpretations of the staff of the Commission do not permit
the Company to file the Exchange Offer Registration Statement or to effect the
Exchange Offer, or if certain holders of the Notes notify the Company that they
are not permitted to participate in, or would not receive freely tradeable Notes
pursuant to, the Exchange Offer, the Company will use its best efforts to cause
to become effective a registration statement (the "Shelf Registration
Statement") with respect to the resale of the Notes and to keep the Shelf
Registration Statement effective until three years after the date of original
issuance of the Notes. The interest rate on the Notes is subject to increase
under certain circumstances if the Company is not in compliance with its
obligations under the Notes Registration Rights Agreement.
The above description of the Notes is qualified in its entirety by
reference to the Indenture. Capitalized terms used above shall have the meaning
attributed to such terms in the Indenture unless otherwise specifically noted.
PLAN OF DISTRIBUTION
The Selling Stockholders may sell the Shares in any of the following ways:
(i) through underwriters or dealers; (ii) through agents; or (iii) directly to
one or more purchasers. The distribution of the Shares may be effected from time
to time in one or more transactions (which may involve block transactions) on
the over-the-counter market, and may be effected at market prices prevailing at
the time of sale, at prices related to such prevailing market prices, at fixed
prices or at negotiated prices. The Selling Stockholders or any underwriter for
the Shares may effect such transactions by selling Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Stockholders
or such underwriter and/or commissions from purchasers of Shares for whom they
may act as agent (which discounts, concessions or commissions will not exceed
those customary in the types of transactions involved). Any underwriter of the
Shares also may receive commissions from purchasers of Shares for whom it may
act as agent. The Selling Stockholders, the Company and any underwriters,
broker-dealers or agents that participate in the distribution of Shares might be
deemed to be underwriters, and any profit on such sale of Shares by them and any
discounts, commissions or concessions received by any such underwriters,
broker-dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act.
Upon the Company being notified by any of the Selling Stockholders that any
material arrangement has been entered into with a broker-dealer for the sale of
shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplemental
prospectus will be filed, if required, pursuant to Rule 424 of the Securities
Act, disclosing where applicable: (a) the name of each such Selling Stockholder
and of the participating broker-dealer(s), (b) the number of shares involved,
(c) the price at which such shares were sold, (d) the commissions paid or
discounts or concessions allowed to such broker-dealer(s), where applicable, (e)
that such broker-dealer(s) did not conduct any investigation to verify the
information set forth or incorporated by reference in this Prospectus, and (f)
other facts material to the transaction.
The Company has agreed to indemnify in certain circumstances the Selling
Stockholders and certain persons related to the Selling Stockholders against
certain liabilities, including liabilities under the Securities Act. The Selling
Stockholders have agreed to indemnify in certain circumstances the Company and
certain persons related to the Company against certain liabilities, including
liabilities under the Securities Act. All of the expenses incident to the
registration of the Shares of Common Stock shall be paid by the Company;
provided, however, that the Selling Stockholders shall bear any underwriting
discounts and commissions attributable to the sale of the Shares.
Prior to May 23, 2001, the Selling Stockholders are restricted from
selling, transferring or otherwise disposing of the Shares to certain persons or
entities engaged (or who were engaged during the two-year period prior to such
sale or disposition) in the oilfield service or contract oil and gas drilling
business, which beneficially own, or after giving effect to such sale or
disposition, would beneficially own, 5% or more of the outstanding Voting
Securities of the Company. The foregoing restriction is not applicable to sales
or other
15
<PAGE> 16
dispositions (i) effected in the open market by a broker or market maker, (ii)
after the occurrence of a change of control of the Company, (iii) pursuant to a
tender offer or an exchange offer, (iv) in connection with a merger,
consolidation or sale of substantially all the assets of the Company, or (v) in
connection with a bona fide lending arrangement secured by the Shares. The
Selling Stockholders are subject to certain other restrictions on the voting,
sale, transfer or other disposition of the Shares as set forth in, and the
foregoing description of such restrictions is qualified in its entirety by
reference to, the Acquisition Agreement.
EXPERTS
The validity of the issuance of the Company's Common Stock offered hereby
will be passed upon for the Company by Griggs & Harrison, P.C., Houston, Texas.
The Consolidated Financial Statements and schedule of the Company included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1995, incorporated by reference in this Prospectus, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such Consolidated Financial
Statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing. The
Consolidated Financial Statements of Southwestern Offshore Corporation and
Subsidiaries at December 31, 1995 and 1994 and for the years ended December 31,
1995 and 1994 and for the period from inception (July 19, 1993) through December
31, 1993 included in the Company's Current Report on Form 8-K filed June 6,
1996, incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as stated in their report with
respect thereto, and are included herein in reliance upon the authority of such
firm as experts in accounting and auditing in giving such report.
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<PAGE> 17
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED
HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT
RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 2
Disclosure Regarding Forward-Looking
Information.......................... 3
Prospectus Summary..................... 4
Risk Factors........................... 7
Use of Proceeds........................ 10
Common Stock Price Range and
Dividends............................ 11
Selling Stockholders................... 11
Description of Common Stock............ 12
Description of Certain Provisions of
the Company's Certificate of
Incorporation and Bylaws............. 12
Description of Existing Indebtedness... 13
Plan of Distribution................... 15
Experts................................ 16
</TABLE>
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1,200,000 SHARES
CLIFFS DRILLING COMPANY
COMMON STOCK
---------------------
PROSPECTUS
---------------------
JUNE 25, 1996
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