PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 4, 1997)
4,300,000 SHARES
[LOGO] PRIDE PETROLEUM SERVICES, INC.
COMMON STOCK
All of the shares of common stock, no par value ("Common Stock"), of
Pride Petroleum Services, Inc. (the "Company") offered hereby are being issued
and sold by the Company (the "Common Stock Offering"). In connection with the
Common Stock Offering, the Company is offering $325 million principal amount of
Senior Notes due 2007 (the "Notes") for sale to the public pursuant to a
separate prospectus supplement (the "Notes Offering" and, together with the
Common Stock Offering, the "Offerings"). Neither the Common Stock Offering nor
the Notes Offering is contingent upon the consummation of the other. There can
be no assurance that the Notes Offering will be consummated and, if so, on what
terms.
The Common Stock is traded on the Nasdaq National Market under the symbol
"PRDE." On May 1, 1997, the last reported sale price of the Common Stock on
the Nasdaq National Market was $17 3/8 per share. See "Price Range of Common
Stock and Dividend Policy."
SEE "RISK FACTORS" BEGINNING ON PAGE S-9 OF THIS PROSPECTUS SUPPLEMENT
FOR A DISCUSSION OF CERTAIN FACTORS THAT PROSPECTIVE INVESTORS IN THE COMMON
STOCK SHOULD CONSIDER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------
Per Share ........... $ 17.00 $ .81 $ 16.19
Total(3) ............ $ 73,100,000 $ 3,483,000 $ 69,617,000
- --------------------------------------------------------------------------------
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS (AS DEFINED HEREIN)
AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. SEE "UNDERWRITING."
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED TO BE $217,000.
(3) THE COMPANY HAS GRANTED TO THE UNDERWRITERS A 30-DAY OPTION TO PURCHASE UP
TO 645,000 ADDITIONAL SHARES OF COMMON STOCK AT THE PRICE TO THE PUBLIC LESS
UNDERWRITING DISCOUNTS AND COMMISSIONS, SOLELY TO COVER OVER-ALLOTMENTS, IF
ANY. IF SUCH OPTION IS EXERCISED IN FULL, THE TOTAL PRICE TO THE PUBLIC,
UNDERWRITING DISCOUNTS AND COMMISSIONS, AND PROCEEDS TO THE COMPANY WILL BE
$84,065,000, $4,005,450, AND $80,059,550, RESPECTIVELY. SEE
"UNDERWRITING."
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by the Underwriters and
subject to various prior conditions, including their right to reject orders in
whole or in part. It is expected that delivery of the shares of Common Stock
will be made against payment therefor in New York, New York on or about May 7,
1997.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
JEFFERIES & COMPANY, INC.
ROBERT W. BAIRD & CO.
INCORPORATED
MORGAN KEEGAN & COMPANY, INC.
SIMMONS & COMPANY
INTERNATIONAL
SOUTHCOAST CAPITAL
CORPORATION
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS MAY 1, 1997.
<PAGE>
[GRAPHIC]
The NYMPHEA, a third-generation semisubmersible rig, is scheduled to begin a
four year contract with Petrobras in July 1997.
[GRAPHIC]
The ILE DU LEVANT, an independent-leg, cantilevered jackup rig, is operating on
Lake Maracaibo in Venezuela.
[GRAPHIC]
The ALLIGATOR, one of the Company's self-erecting tender-assisted rigs, was
acquired in the Forasol transaction.
[GRAPHIC]
The JIM BAWCOM, one of the Noble Rigs to be acquired, is a 250', mat-supported
jackup rig, which currently operates in the Gulf of Mexico.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING, AMONG OTHERS, OVER-ALLOTMENT, STABILIZING AND SHORTCOVERING
TRANSACTIONS IN THE COMMON STOCK, AND THE IMPOSITION OF A PENALTY BID, DURING
AND AFTER THE OFFERING. CERTAIN UNDERWRITERS ALSO MAY ENGAGE IN PASSIVE
MARKET-MAKING TRANSACTIONS IN THE COMMON STOCK ON THER NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 103 OF REGULATION M. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) INCLUDED IN
AND INCORPORATED BY REFERENCE INTO THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS. UNLESS OTHERWISE INDICATED, REFERENCES IN THIS
PROSPECTUS SUPPLEMENT TO THE "COMPANY" OR "PRIDE" ARE TO PRIDE PETROLEUM
SERVICES, INC. AND ITS SUBSIDIARIES AND THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE
EXERCISED. UNLESS OTHERWISE INDICATED, THE PRO FORMA INFORMATION CONTAINED
HEREIN GIVES EFFECT TO THE FOLLOWING TRANSACTIONS (COLLECTIVELY REFERRED TO
HEREIN AS THE "RECENT TRANSACTIONS"): (I) THE ACQUISITION OF QUITRAL-CO
S.A.I.C. ("QUITRAL-CO") IN APRIL 1996 AND THE RELATED FINANCING TRANSACTIONS,
(II) THE DIVESTITURE OF THE COMPANY'S DOMESTIC LAND-BASED WELL SERVICING
OPERATIONS IN FEBRUARY 1997, (III) THE ACQUISITION OF THE OPERATING SUBSIDIARIES
OF FORASOL-FORAMER N.V. (COLLECTIVELY, "FORASOL") IN MARCH 1997 AND THE
RELATED FINANCING TRANSACTIONS AND (IV) THE CONVERSION IN THE FIRST QUARTER OF
1997 OF $28.0 MILLION AGGREGATE PRINCIPAL AMOUNT OF THE COMPANY'S CONVERTIBLE
SUBORDINATED DEBENTURES INTO 2.3 MILLION SHARES OF COMMON STOCK. UNLESS
OTHERWISE INDICATED, THE PRO FORMA COMBINED INFORMATION CONTAINED HEREIN
ILLUSTRATES THE EFFECT ON THE COMPANY'S PRO FORMA DATA OF THE OFFERINGS AND THE
APPLICATION OF THE NET PROCEEDS THEREFROM, INCLUDING THE PURCHASE OF 12
MAT-SUPPORTED JACKUP RIGS AND THE HULL OF AN ADDITIONAL JACKUP RIG (THE "NOBLE
RIGS") FROM NOBLE DRILLING CORPORATION AND CERTAIN SUBSIDIARIES (COLLECTIVELY,
"NOBLE").
THE COMPANY
The Company is a leading domestic and international provider of contract
drilling and related services, operating both on land and offshore. In recent
years, the Company has focused its growth strategy on the higher margin offshore
and international drilling and workover markets. Consistent with this strategy,
the Company acquired several international and offshore businesses, including
Quitral-Co and Forasol, and divested its domestic land-based well servicing
operations, thereby transforming the Company into one of the largest and most
diversified drilling contractors in the world. The Company operates a global
fleet of 279 rigs, including two semisubmersible rigs, eight tender-assisted
rigs, three jackup rigs, five floating lake barge rigs, one posted swamp barge
rig, 22 offshore platform rigs, 76 land-based drilling rigs and 162 land-based
workover rigs. The significant diversity of the Company's rig fleet enables the
Company to provide a broad range of services and to take advantage of market
upturns while reducing its exposure to sharp downturns in any particular market
sector or geographic region. With the closing of the pending purchase of the
Noble Rigs, the Company will add 12 mat-supported jackup rigs and the hull of an
additional jackup rig to its offshore fleet. The Company's rig fleet operates in
some of the most prolific hydrocarbon producing regions in the world, as
depicted below:
Pride's Worldwide Operations
[Map of Pride's Worldwide Operations]
S-3
<PAGE>
The Company has grown rapidly in recent years, increasing revenue 203% from
$182.3 million in 1994 on a historical basis to $552.7 million in 1996 on a pro
forma basis. Over the same period, the Company increased EBITDA 403% from $17.3
million in 1994 on a historical basis to $86.8 million in 1996 on a pro forma
basis. On a pro forma combined basis, the Company would have had revenue of
$621.5 million and EBITDA of $115.2 million in 1996, representing increases of
241% and 567% from the respective historical levels in 1994.
International and offshore markets, where the Company now focuses its
operations, generally offer greater profit potential than domestic land-based
markets, primarily as a result of less competition, higher utilization rates and
stronger demand resulting from a general trend by major oil and gas operators to
shift expenditures to exploration and development activities abroad and in the
Gulf of Mexico.
Internationally, the Company has established leading market positions in
several operating regions. In Argentina, the Company operates a land-based fleet
of 36 drilling rigs and 109 workover rigs. In Venezuela, the Company operates
three jackup rigs, one tender-assisted rig, five lake barge rigs, 12 land-based
drilling rigs and 33 land-based workover rigs. In Colombia, the Company operates
13 land-based drilling rigs and six land-based workover rigs. In the western and
northern regions of Africa and in the Middle East, the Company operates two
semisubmersible rigs, six tender-assisted rigs, one swamp barge rig and seven
land-based drilling and workover rigs.
In the Gulf of Mexico, the Company operates a fleet of 22 self-erecting
platform rigs and is constructing one additional rig, making it the largest
contractor of such offshore platform rigs in this market with approximately 45%
of available capacity and a fleet approximately twice as large as that of its
next largest competitor. The purchase of the Noble Rigs will position the
Company as the second largest operator in the Gulf of Mexico of mat-supported
jackup rigs capable of operating in water depths of 200 feet or greater.
BUSINESS STRATEGY
The Company's strategy is focused on achieving revenue and earnings growth
through:
o Establishing and maintaining leading market positions to maximize
operating performance.
o Diversifying operations by asset class and geographic region.
o Developing and maintaining long-term relationships with major oil
and gas companies, including state-owned companies, by providing a
full range of drilling expertise and technology.
o Acquiring businesses and assets in international onshore and
offshore markets and domestic offshore markets where significant
consolidation savings and economies of scale can be achieved.
o Acquiring or constructing offshore and deepwater rigs, primarily
supported by long-term contracts.
Implementation of this strategy, including the Recent Transactions, has
repositioned the Company to take advantage of the benefits resulting from
operating a balanced fleet, which the pending purchase of the Noble Rigs is
expected to enhance. These benefits include more stable cash flows produced by
the Company's international and offshore rigs under term contracts, improved
cash flow and higher margins generally produced by offshore rigs, reduced
exposure to downturns in a single market and increased exposure to higher margin
international and offshore drilling and workover markets. To reflect more
accurately the nature and scope of the Company's current operations and business
strategy, the Board of Directors of the Company has approved a proposal to
change the name of the Company to Pride International, Inc., which is being
submitted to the Company's shareholders for their approval at the Company's
Annual Meeting of Shareholders to be held on May 22, 1997.
S-4
<PAGE>
RECENT DEVELOPMENTS
Consistent with its business strategy, the Company has realigned its
operations to concentrate on more profitable international and offshore drilling
markets, as evidenced by the following transactions:
o QUITRAL-CO ACQUISITION. In April 1996, the Company acquired
Quitral-Co (now Pride International S.A.) from Perez Companc S.A.
and others for an aggregate purchase price of $140 million.
Quitral-Co, the largest drilling and workover contractor in
Argentina, added 23 land-based drilling and 57 land-based workover
rigs in Argentina and seven land-based drilling and 23 land-based
workover rigs in Venezuela to the Company's existing fleets in
those countries.
o DIVESTITURE OF U.S. LAND-BASED OPERATIONS. In February 1997, the
Company completed the divestiture of its domestic land-based well
servicing operations, which included 407 workover rigs operating in
Texas, California, New Mexico and Louisiana, to Dawson Production
Services, Inc. for approximately $136 million in cash. The Company
retained 14 of its larger land-based rigs for redeployment to
international markets, four of which have since been redeployed.
The divested operations generated the Company's lowest operating
margins.
o FORASOL ACQUISITION. In March 1997, the Company acquired Forasol
for approximately $113 million in cash and 11 million shares of
Common Stock. The transaction provided entry into new international
markets while contributing additional capacity in the Company's
existing Latin American markets, as well as a deepwater asset base
and expertise. Forasol provides drilling, workover and engineering
services in more than 15 countries, including substantial
operations in Latin America and West Africa, and operates a
diversified fleet of offshore rigs, including two semisubmersible
rigs, three jackup rigs, seven tender-assisted rigs, three lake
barge rigs and one swamp barge rig, and an international fleet of
29 land-based rigs. The Company recently acquired an additional
tender-assisted rig for $6.5 million, which is currently located in
West Africa and being marketed for several projects.
o PURCHASE OF NOBLE RIGS. In February 1997, the Company entered into
a definitive agreement to purchase the Noble Rigs, consisting of 12
mat-supported jackup rigs and the hull of an additional jackup rig,
for $265 million in cash. The purchase, which is subject to
completion by the Company of satisfactory financing arrangements
and a purchase price adjustment if the transaction closes prior to
June 3, 1997, will position the Company as the second largest
operator in the Gulf of Mexico of mat-supported jackup rigs capable
of operating in water depths of 200 feet or greater. See "The
Noble Rigs."
o ADDITIONAL ACTIVITIES. In addition to the transactions described
above, since mid-1993 the Company acquired six businesses with an
aggregate of 62 land-based rigs serving international markets and a
fleet of 22 platform rigs serving the domestic offshore market. The
Company has further expanded international operations by deploying
35 rigs from its former U.S. land-based fleet, primarily to
Argentina and Venezuela, and by constructing new offshore rigs,
including two lake barge rigs operating in Venezuela and four
offshore platform rigs operating in the Gulf of Mexico.
FIRST QUARTER RESULTS OF OPERATIONS. The Company reported net earnings for
the first quarter of 1997 of $44.9 million, or $1.15 per share, on revenues of
$131.4 million. Net earnings include a gain on the divestiture of the Company's
U.S. land-based well servicing operations of $54.6 million, net of tax. The gain
was partially offset by (i) a charge of $13.3 million, net of tax, for costs
expected to be incurred in connection with the combination of the business units
of Forasol with the Company's existing operations, (ii) a charge of $4.6 million
relating to the conversion of $28.0 million aggregate principal amount of the
Company's convertible subordinated debentures and (iii) a charge of $288,000,
net of tax, as a result of the Company's decision to cease operations in Russia.
Excluding such nonrecurring items, net earnings were $8.6 million, or $.23 per
share, for the quarter. For the same period in 1996, the Company reported net
earnings of $2.8 million, or $.11 per share, on revenues of $66.2 million. The
increase in revenues and earnings was primarily attributable to the inclusion of
the businesses and assets acquired in the Recent Transactions, the most
significant of which to this year's first quarter operating results was that of
Quitral-Co.
S-5
<PAGE>
THE COMMON STOCK OFFERING
Common Stock offered................. 4,300,000 shares(1)
Common Stock to be outstanding after
this offering...................... 46,547,842 shares(1)(2)
Use of proceeds...................... The net proceeds from the Offerings will
be used to finance the purchase of the
Noble Rigs, to refurbish two of the
Noble Rigs, to repay outstanding
indebtedness and for general corporate
purposes. See "Use of Proceeds."
Nasdaq National Market Symbol........ PRDE
Notes Offering....................... In connection with the Common Stock
Offering, the Company is offering $325.0
million principal amount of Senior Notes
due 2007 for sale to the public. Neither
the Common Stock Offering nor the Notes
Offering is contingent upon the
consummation of the other.
- -----------------------------
(1) Excludes 645,000 shares subject to the Underwriters' over-allotment option.
(2) Based on the number of shares of Common Stock outstanding on May 1, 1997.
Does not include 4,285,714 shares issuable upon conversion of the Company's
convertible subordinated debentures and 2,982,200 shares reserved for
issuance upon exercise of outstanding stock options and warrants.
S-6
<PAGE>
SUMMARY FINANCIAL DATA
The following tables set forth summary historical, pro forma and pro forma
combined financial information for the Company as of the dates and for the
periods indicated. The summary unaudited pro forma financial information
illustrates the effect of the Recent Transactions. The summary unaudited pro
forma combined financial information illustrates the effect on the Company's pro
forma data of the Offerings and the application of the net proceeds therefrom,
including the purchase of the Noble Rigs. The unaudited pro forma combined
financial information does not purport to represent what the Company's financial
position or results of operations actually would have been had such transactions
in fact occurred at or prior to December 31, 1996 or the period then ended.
Furthermore, the unaudited pro forma combined financial information does not
reflect changes that may occur as the result of post-combination activities and
other matters. The following data should be read in conjunction with "-- Recent
Operating Information," "Unaudited Pro Forma and Pro Forma Combined Financial
Statements," "Selected Historical Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
consolidated financial statements of the Company (including the notes thereto)
incorporated by reference in the accompanying Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
PRO FORMA
PRO FORMA COMBINED
1994 1995 1996 1996 1996(3)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................... $ 182,336 $ 263,599 $ 407,174 $552,713 $ 621,460
Operating costs.................... 139,653 187,203 292,599 414,882 453,780
Depreciation and amortization...... 9,550 16,657 29,065 54,220 70,420
Selling, general and
administrative................... 25,105 32,418 45,368 54,048 55,548
--------- --------- --------- --------- ---------
Earnings from operations........... 8,028 27,321 40,142 29,563 41,712
Other income (expense)............. (305) 638 1,902 2,227 2,227
Interest income.................... 618 740 2,410 4,167 4,167
Interest expense................... (207) (6,276) (13,635) (24,802) (50,336)
Minority interest.................. -- -- -- 825 825
--------- --------- --------- --------- ---------
Earnings before income taxes....... 8,134 22,423 30,819 11,980 (1,405)
Income tax provision............... 1,920 7,064 8,091 4,356 (474)
--------- --------- --------- --------- ---------
Net earnings (loss)................ $ 6,214 $ 15,359 $ 22,728 $ 7,624 $ (931)
========= ========= ========= ========= =========
Net earnings (loss) per share
Primary.......................... $ .30 $ .60 $ .81 $ .18 $ (.02)
========= ========= ========= ========= =========
Fully diluted.................... $ .30 $ .60 $ .75 * *
========= ========= ========= ========= =========
OTHER DATA:
EBITDA(1).......................... $ 17,273 $ 44,616 $ 71,109 $ 86,835 $ 115,184
Capital expenditures............... 59,171 40,636 61,711 98,850
Ratio of EBITDA to interest
expense.......................... 83.4x 7.1x 5.2x 3.5x 2.3x
Ratio of earnings to fixed
charges(2)....................... 6.2x 4.0x 2.7x 1.3x --
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital.................... $ 26,640 $ 31,302 $ 62,722 $ 31,457 $ 107,457
Property and equipment, net........ 139,899 178,488 375,249 695,571 965,571
Total assets....................... 205,193 257,605 542,062 939,862 1,259,262
Long-term debt, net of current
portion.......................... 42,096 61,136 106,508 154,323 439,323
Long-term lease obligations, net of
current portion.................. -- -- -- 30,663 30,663
Convertible subordinated
debentures....................... -- -- 80,500 52,500 52,500
Shareholders' equity............... 111,385 131,239 201,797 438,049 507,449
</TABLE>
- -----------------------------
* Anti-dilutive.
(1) EBITDA (earnings before interest, taxes, depreciation and amortization) is
presented here to provide additional information about the Company's
operations. EBITDA should not be considered as an alternative to net income
as an indicator of the Company's operating performance or as an alternative
to cash flows as a better measure of liquidity.
(2) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings before income taxes plus
fixed charges less capitalized interest) by fixed charges (interest expense
plus capitalized interest and the portion of operating lease rental expense
that represents the interest factor). For the year ended December 31, 1996,
pro forma combined earnings were inadequate to cover fixed charges by
$3,972,000.
(3) The summary unaudited pro forma combined financial information assumes the
Notes bear interest at an annual rate of 9 3/8%, but does not give effect to
interest earned on proceeds from the Offerings prior to application thereof.
S-7
<PAGE>
RECENT OPERATING INFORMATION
The pro forma combined financial information presented in this Prospectus
Supplement reflects substantial dilution of earnings per share as a result of
including the 1996 operating results of Forasol and the Noble Rigs. The Company
believes, however, that such information is not indicative of the operating
performance expected to be achieved by the Company in 1997 and future years,
because such information does not reflect current day rates and utilization
levels, which are substantially above historical levels, or net cost savings and
synergies realized or expected to be realized in the Forasol acquisition and the
purchase of the Noble Rigs.
DAY RATES AND UTILIZATION. Within certain of the Company's offshore
operating areas, day rates and utilization levels have increased significantly
in 1997 relative to their average levels during 1996. For the year ended
December 31, 1996, the nine Noble Rigs that were operating generated revenues of
approximately $68.7 million, at an average operating rate of approximately
$22,000 per rig per day. As a result of increasing demand for offshore drilling
services and tightening supply of offshore drilling rigs in the Gulf of Mexico
and worldwide, current effective industry utilization for actively marketed
jackup rigs is approximately 100%. The Noble Rigs, other than those undergoing
or awaiting refurbishment, are currently experiencing 100% utilization at an
average contracted rate of approximately $28,000 per day. Based on such current
operating levels, on an annualized basis, the 10 Noble Rigs currently working
and an additional contracted rig to be placed in service during the second
quarter of 1997 are expected to generate an incremental $42.0 million of revenue
relative to 1996. There can be no assurance, however, that these rigs will in
fact continue to operate at such levels or generate such incremental revenue in
1997 or future years.
Also during 1996, Forasol's two semisubmersible drilling rigs, the NYMPHEA
and the SOUTH SEAS DRILLER, worked an aggregate of 449 days at an average day
rate of approximately $37,900. The SOUTH SEAS DRILLER recently began work on the
first of two term contracts that provide for a minimum of 285 days of work in
1997 and an additional 155 days of work in 1998, exclusive of extending options,
at an average day rate of approximately $61,200. In addition, the NYMPHEA is
scheduled to commence operations in June 1997 under a four-year contract at an
initial day rate of $79,370. Based on these new contracts, the SOUTH SEAS
DRILLER and the NYMPHEA, on an annualized basis, are expected to generate
approximately $34.0 million of incremental revenue relative to 1996. There can
be no assurance, however, that these rigs will in fact generate such incremental
revenue in 1997 or future years.
COST SAVINGS AND SYNERGIES. The Company expects to realize significant
cost savings and synergies as a result of the Forasol acquisition and the sale
of the Company's domestic land-based well servicing operations, net of certain
incremental costs associated with the purchase of the Noble Rigs. Similarly, the
Company has achieved certain additional cost savings and synergies since
completing the Quitral-Co acquisition in April 1996. The pro forma combined
financial information included in this Prospectus Supplement does not give full
effect to these cost savings and operational efficiencies, some of which have
already been achieved or which the Company estimates will be achieved by the end
of 1997, primarily resulting from the consolidation of certain facilities and
the reduction of personnel. On the other hand, the Company believes that rig
operating costs will increase to some extent during 1997 and in future years as
a result of strong demand for drilling services and limited supply of qualified
crews. The pro forma combined financial information included in this Prospectus
Supplement also does not give effect to such anticipated operating cost
increases. The Company believes that the net cost savings and synergies
associated with the acquisitions of Quitral-Co and Forasol and the sale of the
Company's domestic land-based well servicing operations will exceed any
operating costs associated with increased utilization, the limited supply of
qualified crews and the costs associated with operating two previously idle
Noble Rigs. Cost savings are subject to a number of factors, however, many of
which are beyond the control of the Company.
S-8
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus Supplement and the accompanying Prospectus include certain
statements that may be deemed to be "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). All statements, other than statements of
historical facts, included in this Prospectus Supplement or the accompanying
Prospectus that address activities, events or developments that the Company
expects, projects, believes or anticipates will or may occur in the future,
including such matters as future operating results of Forasol and the Noble
Rigs, cost savings and synergies expected to be achieved in the Recent
Transactions, future capital expenditures and investments in the acquisition and
refurbishment of rigs (including the amount and nature thereof), repayment of
debt, expansion and other development trends of the contract drilling industry,
business strategies, expansion and growth of operations and other such matters,
are forward-looking statements. These statements are based on certain
assumptions and analyses made by management of the Company in light of its
experience and its perception of historical trends, current conditions, expected
future developments and other factors it believes are appropriate in the
circumstances. Such statements are subject to a number of assumptions, risks and
uncertainties, including the risk factors discussed herein, general economic and
business conditions, prices of oil and gas, foreign exchange and currency
fluctuations, the business opportunities (or lack thereof) that may be presented
to and pursued by the Company, changes in laws or regulations and other factors,
many of which are beyond the control of the Company. Prospective investors are
cautioned that any such statements are not guarantees of future performance and
that actual results or developments may differ materially from those projected
in the forward-looking statements.
RISK FACTORS
THE FOLLOWING SHOULD BE CONSIDERED CAREFULLY WITH THE INFORMATION PROVIDED
ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND THE
DOCUMENTS INCORPORATED BY REFERENCE THEREIN IN REACHING A DECISION REGARDING AN
INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
SIGNIFICANT LEVERAGE AND RESTRICTIONS
As of December 31, 1996, on a pro forma combined basis, the Company would
have had approximately $690.5 million in total indebtedness, compared with total
actual indebtedness of $292.8 million. On March 6, 1997, the Company entered
into a $100 million secured bank credit facility (the "Credit Facility") for
working capital and for general corporate purposes. The level of the Company's
indebtedness will have several important effects on the Company's future
operations, including, among others, (i) a significant portion of the Company's
cash flow from operations will be dedicated to the payment of interest on its
indebtedness and will not be available for other purposes, (ii) covenants
contained in the Credit Facility and the Indenture Supplement relating to the
Notes require the Company to meet certain financial tests, which may affect the
Company's flexibility in planning for, and reacting to, changes in its business,
including possible acquisition opportunities, and (iii) the Company's ability to
obtain additional financing for working capital, capital expenditures,
acquisitions, general corporate and other purposes may be limited. 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, industry cycles and 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 sufficient cash flow from operations to
service its indebtedness. If the Company is unable to generate sufficient cash
flow from operations, it may be required to sell assets, to refinance all or a
portion of its indebtedness or to obtain additional financings. There can be no
assurance that any such refinancing would be possible or that any additional
financing could be obtained.
DEPENDENCE ON OIL AND GAS INDUSTRY; INDUSTRY CONDITIONS
The Company's current business and operations are substantially dependent
upon conditions in the oil and gas industry and, specifically, the exploration
and production expenditures of oil and gas companies.
S-9
<PAGE>
The demand for contract drilling and related services is directly influenced by
oil and gas prices, expectations about future prices, the cost of producing and
delivering oil and gas, government regulations, local and international
political and economic conditions, including the ability of the Organization of
Petroleum Exporting Countries ("OPEC") to set and maintain production levels
and prices, the level of production by non-OPEC countries and the policies of
the various governments regarding exploration and development of their oil and
gas reserves. There can be no assurance that current levels of exploration and
production expenditures of oil and gas companies will be maintained or that
demand for the Company's services will reflect the level of such activities.
INTERNATIONAL OPERATIONS
A significant portion of the Company's revenues are attributable to
international operations. On a pro forma combined basis, international
operations provided approximately 80% of the Company's revenues for the year
ended December 31, 1996. Risks associated with operating in international
markets include foreign exchange restrictions and currency fluctuations, foreign
taxation, political instability, foreign and domestic monetary and tax policies,
expropriation, nationalization, nullification, modification or renegotiation of
contracts, war and civil disturbances and other risks that may limit or disrupt
markets. Additionally, the ability of the Company to compete in international
contract drilling markets may be adversely affected by foreign governmental
regulations that favor or require the awarding of such contracts to local
contractors, or by regulations requiring foreign contractors to employ citizens
of, or purchase supplies from, a particular jurisdiction. Furthermore, the
Company's foreign subsidiaries may face governmentally imposed restrictions from
time to time on their ability to transfer funds to the Company. No predictions
can be made as to what foreign governmental regulations may be applicable to the
Company's operations in the future.
From time to time, certain foreign subsidiaries of the Company acquired in
the Forasol transaction operate in countries such as Libya and Iran that are
subject to sanctions and embargoes imposed by the U.S. Government. Although
these sanctions and embargoes do not prohibit such subsidiaries from completing
existing contracts or from entering into new contracts to provide drilling
services in such countries, they do prohibit the Company and its domestic
subsidiaries, as well as employees of the Company's foreign subsidiaries who are
U.S. citizens, from participating in or approving any aspect of the business
activities in such countries. The Company is unable to predict whether such
constraints on its ability to have U.S. persons provide managerial oversight and
supervision will adversely affect the financial or operating performance of such
business activities.
OPERATING RISKS AND INSURANCE
The Company's operations are subject to the many hazards inherent in the
oilfield services industry. Contract drilling and well servicing require the use
of heavy equipment and exposure to hazardous conditions, which may subject the
Company to liability claims by employees, customers and third parties. These
hazards can cause personal injury or loss of life, severe damage to or
destruction of property and equipment, pollution or environmental damage and
suspension of operations. The Company's offshore fleet is also subject to
hazards inherent in marine operations, either while on site or during
mobilization, such as capsizing, sinking and damage from severe weather
conditions. In certain instances, contractual indemnification of customers or
others is required of the Company. The Company maintains workers' compensation
insurance for its employees and other insurance coverage for normal business
risks, including general liability insurance. Although the Company believes its
insurance coverages to be adequate and in accordance with industry practice
against normal risks in its operations, there can be no assurance that any
insurance protection will be sufficient or effective under all circumstances or
against all hazards to which the Company may be subject. The occurrence of a
significant event against which the Company is not fully insured, or of a number
of lesser events against which the Company is insured, but subject to
substantial deductibles, could materially and adversely affect the Company's
operations and financial condition. Moreover, no assurance can be given that the
Company will be able to maintain adequate insurance in the future at rates or on
terms it considers reasonable or acceptable.
S-10
<PAGE>
RISKS OF ACQUISITION STRATEGY
A substantial portion of the Company's growth has resulted from the
acquisition of other oilfield services businesses and assets. There can be no
assurance, however, that the Company will be able to continue to identify
attractive acquisition opportunities, negotiate acceptable acquisition terms,
obtain financing for acquisitions on satisfactory terms or successfully acquire
identified targets. As indicated above under " -- Significant Leverage and
Restrictions," the ability of the Company to pursue acquisition opportunities
may be affected by the limitations on its financing flexibility imposed by the
Credit Facility and the Indenture governing the Notes. Moreover, there can be no
assurance that competition for acquisition opportunities in the industry will
not escalate, thereby increasing the cost to the Company of making further
acquisitions or causing the Company to refrain from making further acquisitions.
In addition, no assurance can be given that the Company will be successful in
integrating acquired businesses and assets, including Forasol and the Noble
Rigs, into its existing operations. Such integration may result in unforeseen
operational difficulties or require a disproportionate amount of management's
attention. The Company's failure to achieve consolidation savings, to
incorporate the acquired businesses and assets into its existing operations
successfully or to minimize any unforeseen operational difficulties could have a
material adverse effect on the Company.
In the pending purchase of the Noble Rigs, Noble may identify crews
sufficient to operate up to five of the Noble Rigs, which crews it will retain
as employees but will lease to the Company for up to one year. After such
period, the Company will be required to replace all such employees retained by
Noble. See "The Noble Rigs." There can be no assurance that at the end of such
lease period the Company will be able to employ and retain sufficient qualified
personnel at cost-effective levels to replace such employees.
COMPETITION
The contract drilling industry is a highly competitive and cyclical
business characterized by high capital and maintenance costs. In periods of low
rig utilization, drilling contracts are usually awarded on a competitive bid
basis and, while an operator may consider factors such as quality of service and
type and location of equipment as well as the ability to provide ancillary
services, price is generally the primary factor in determining which contractor
is awarded a job. Certain of the Company's competitors have greater financial
resources than the Company, which may enable them to better withstand periods of
low rig utilization, to compete more effectively on the basis of price, to build
new rigs or to acquire existing rigs. There can be no assurance that the Company
will be able to compete successfully against its competitors in the future.
RISKS OF NEW CONSTRUCTION, UPGRADE AND REFURBISHMENT PROJECTS
The Company intends to make significant expenditures to construct new rigs
and to upgrade and refurbish other rigs that are not currently under contract.
These projects are subject to the risks of delay or cost overruns inherent in
large construction and refurbishment projects, including shipyard availability,
shortages of materials or skilled labor, unforeseen engineering problems, work
stoppages, weather interference, unanticipated cost increases, nonavailability
of necessary equipment and inability to obtain any of the requisite permits or
approvals. Significant delays could also have a material adverse effect on the
Company's marketing plans for such rigs and could jeopardize the contracts under
which the Company plans to operate such rigs.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
Many aspects of the Company's operations are affected by domestic and
foreign political developments and are subject to numerous governmental
regulations that may relate directly or indirectly to the contract drilling and
well servicing industries. The Company's operations routinely involve the
handling of waste materials, some of which are classified as hazardous
substances. Consequently, the regulations applicable to the Company's operations
include those with respect to containment, disposal and controlling the
discharge of hazardous oilfield waste and other nonhazardous waste material into
the environment, requiring removal and cleanup under certain circumstances, or
otherwise relating to the protection of the
S-11
<PAGE>
environment. Laws and regulations protecting the environment have become more
stringent in recent years and may in certain circumstances impose strict
liability, rendering a party liable for environmental damage without regard to
negligence or fault on the part of such party. Such laws and regulations may
expose the Company to liability for the conduct of, or conditions caused by,
others or for acts of the Company which were in compliance with all applicable
laws at the time such acts were performed. The application of these requirements
or the adoption of new requirements could have a material adverse effect on the
Company. In addition, the modification of existing laws or regulations or the
adoption of new laws or regulations curtailing exploratory or development
drilling for oil and gas for economic, environmental or other reasons could have
a material adverse effect on the Company's operations by limiting future
contract drilling opportunities.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is listed on the Nasdaq National Market under the symbol
"PRDE." The following table sets forth the range of high and low sales prices
of the Common Stock on the Nasdaq National Market for the periods shown:
PRICE
--------------------
HIGH LOW
--------- ---------
1995
First Quarter................... $ 7 3/8 $ 4 3/4
Second Quarter.................. 8 3/4 6 1/2
Third Quarter................... 10 1/2 7 3/8
Fourth Quarter.................. 11 8
1996
First Quarter................... $ 14 3/8 $ 9 1/8
Second Quarter.................. 18 13 5/8
Third Quarter................... 16 1/4 11 5/8
Fourth Quarter.................. 23 1/4 13 1/8
1997
First Quarter................... $ 24 $ 16 3/4
Second Quarter (through May 1,
1997)......................... 20 17 1/4
On May 1, 1997, the last reported sale price of the Common Stock on the
Nasdaq National Market was $17 3/8 per share. As of April 15, 1997, there were
2,001 holders of record of Common Stock.
The Company has not paid any cash dividends on the Common Stock since
becoming a publicly held corporation in September 1988. The Company currently
has a policy of retaining all available earnings for the development and growth
of its business and does not anticipate paying dividends on the Common Stock at
any time in the foreseeable future. The ability of the Company to pay cash
dividends in the future is restricted by the Credit Facility and will be
restricted by the Indenture governing the Notes. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." The desirability of paying such dividends could be
materially affected by U.S. and foreign tax considerations.
S-12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Notes Offering and the Common
Stock Offering (assuming that the underwriters' over-allotment option is not
exercised) are estimated to be approximately $316.6 million and $69.4 million,
respectively, after deducting underwriting discounts and estimated offering
expenses payable by the Company. Neither the Notes Offering nor the Common Stock
Offering is contingent upon the consummation of the other. Of such net proceeds,
approximately $270.0 million will be used to finance the purchase of the Noble
Rigs, including the estimated acquisition costs, and at least $20.0 million is
expected to be used to upgrade and equip the two Noble Rigs awaiting
refurbishment. See "The Noble Rigs." Approximately $75.0 million will be used
to repay certain indebtedness, including all outstanding indebtedness under the
Credit Facility, which bears interest at a variable rate, currently 7.44%, based
on either the prime rate or LIBOR, and matures in March 2002. Of the $45.0
million borrowed under the Credit Facility as of March 31, 1997, $14.3 million
was used to repay amounts outstanding under the Company's previous credit
facility and $25.7 million was used to partially fund the acquisition of
Forasol. The Company intends to use excess proceeds from the Offerings and
available borrowing capacity for general corporate purposes, including
acquisitions and capital projects. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
S-13
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated cash and cash equivalents,
short-term debt and capitalization of the Company and its subsidiaries as of
December 31, 1996 (i) on a historical basis, (ii) on a pro forma basis to give
effect to the Recent Transactions and (iii) on a pro forma combined basis to
illustrate the effect on the Company's pro forma data of the Offerings and the
application of the net proceeds therefrom, including the purchase of the Noble
Rigs. See "Use of Proceeds."
AS OF DECEMBER 31, 1996
-----------------------------------------
PRO FORMA
HISTORICAL PRO FORMA COMBINED
(DOLLARS IN THOUSANDS)
CASH AND CASH EQUIVALENTS............ $ 10,310 $ 3,619 $ 44,619
=========== ========== ==========
SHORT-TERM DEBT AND CURRENT
MATURITIES OF LONG-TERM DEBT AND
CAPITAL LEASE OBLIGATIONS.......... $ 35,982 $ 63,040 $ 28,040
=========== ========== ==========
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS
Bank credit facilities.......... $ 11,566 $ 55,278 $ 15,278
Collateralized term loans....... 37,036 37,036 37,036
Note payable to sellers......... 11,000 11,000 11,000
Limited-recourse collateralized
term loans.................... 35,211 35,211 35,211
Notes payable................... 11,695 15,798 15,798
Capital lease obligations....... -- 30,663 30,663
Senior Notes due 2007........... -- -- 325,000
6 1/4% Convertible Subordinated
Debentures due 2006........... 80,500 52,500 52,500
----------- ---------- ----------
Total long-term debt and
capital lease
obligations............. 187,008 237,486 522,486
----------- ---------- ----------
SHAREHOLDERS' EQUITY
Preferred Stock, no par value,
5,000,000 shares authorized;
no shares issued or
outstanding................... -- -- --
Common Stock, no par value,
40,000,000 shares authorized;
100,000,000 shares authorized,
pro forma and pro forma
combined; 28,571,876 shares
issued and 28,517,656 shares
outstanding, historical;
41,956,779 shares issued and
41,902,559 shares outstanding,
pro forma; and 46,256,779
shares issued and 46,202,559
shares outstanding, pro forma
combined(1)................... 1 1 1
Paid-in capital................. 143,581 343,981 413,381
Treasury stock.................. (191) (191) (191)
Retained earnings............... 58,406 94,258 94,258
----------- ---------- ----------
Total shareholders'
equity.................. 201,797 438,049 507,449
----------- ---------- ----------
Total capitalization....... $ 388,805 $675,535 $1,029,935
=========== ========== ==========
- -----------------------------
(1) Does not include 6,571,428 shares historical and 4,285,714 shares pro forma
and pro forma combined issuable upon conversion of the Company's convertible
subordinated debentures, and 2,907,150 shares historical and 3,294,350
shares pro forma and pro forma combined reserved for issuance upon exercise
of outstanding stock options and warrants.
S-14
<PAGE>
UNAUDITED PRO FORMA AND PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma and pro forma combined financial
statements as of and for the year ended December 31, 1996 illustrate the effect
of the Recent Transactions and of the Offerings and the application of the net
proceeds therefrom, including the purchase of the Noble Rigs. The unaudited pro
forma and pro forma combined balance sheets have been prepared assuming that
such transactions were completed as of December 31, 1996. The unaudited pro
forma and pro forma combined statements of operations have been prepared
assuming that such transactions were completed as of January 1, 1996. Of the
Recent Transactions, the acquisition of Quitral-Co was completed in April 1996,
the sale of the Company's U.S. land-based well servicing operations was
completed on February 20, 1997, the acquisition of Forasol was completed on
March 10, 1997 and the conversion of $28.0 million principal amount of the
Company's convertible subordinated debentures occurred in several transactions
during the first quarter of 1997. The purchase of the Noble Rigs by the Company
is expected to close concurrently with the closing of the Notes Offering.
The historical results of operations for the Company have been derived from
the Company's consolidated financial statements, the historical results of
operations for Quitral-Co have been derived from Quitral-Co's consolidated
financial statements as adjusted for generally accepted accounting principles in
the United States ("U.S. GAAP") and have been translated into U.S. dollars in
accordance with U.S. GAAP, and the historical results of operations for Forasol
have been derived from Forasol's historical consolidated financial statements,
all of which are incorporated by reference in the accompanying Prospectus. The
historical results of operations attributable to the Noble Rigs have been
derived from Noble's historical financial statements.
The pro forma adjustments and the resulting unaudited pro forma and pro
forma combined financial statements are based upon available information and
certain assumptions and estimates described in the Notes to Unaudited Pro Forma
and Pro Forma Combined Financial Statements. A final determination of required
purchase accounting adjustments, including the allocation of the purchase price
to the assets acquired and liabilities assumed based on their respective fair
values, has not yet been made. Accordingly, the purchase accounting adjustments
reflected in the pro forma information are preliminary and have been made solely
for purposes of developing such information. The Company's management believes,
however, that the pro forma adjustments and the underlying assumptions and
estimates reasonably present the significant effects of the transactions
reflected thereby and that any subsequent changes in the underlying assumptions
and estimates (other than changes affected by the matters described under
"Summary -- Recent Operating Information") will not materially affect the pro
forma and pro forma combined financial statements presented herein. The pro
forma and pro forma combined financial statements do not purport to represent
what the Company's financial position or results of operations actually would
have been had the Recent Transactions, the Offerings and the purchase of the
Noble Rigs occurred on the dates indicated or to project the Company's financial
position or results of operations for any future date or period. Furthermore,
the unaudited pro forma and pro forma combined financial statements do not
reflect changes that may occur as the result of post-combination activities and
other matters.
The unaudited pro forma and pro forma combined financial statements and the
notes thereto should be read in conjunction with the historical financial
statements of the Company, including the notes thereto, the historical financial
statements of Forasol, including the notes thereto, and the historical financial
statements of Quitral-Co, including the notes thereto, all of which are
incorporated by reference in the accompanying Prospectus.
The pro forma and pro forma combined financial information presented in
this Prospectus Supplement reflects substantial dilution of earnings per share
as a result of including the 1996 operating results of Forasol and the Noble
Rigs. The Company believes, however, that such information is not indicative of
the operating performance expected to be achieved by the Company in 1997 and
future years. See "Summary -- Recent Operating Information."
S-15
<PAGE>
UNAUDITED PRO FORMA AND PRO FORMA COMBINED
BALANCE SHEET
AS OF DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO
PRIDE FORASOL PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS FORMA ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents........ $ 10,310 $ 16,646 $ 83,750(O) $ 3,619 $ 291,600(V) $ 44,619
25,150(H) 19,400(X)
(128,500)(I) (270,000)(Z)
(3,737)(R)
Short-term investments........... 460 -- 460 460
Trade receivables, net........... 99,531 51,799 151,330 151,330
Parts and supplies............... 27,642 -- (3,000)(O) 24,642 24,642
Deferred income taxes............ 1,778 1,221 2,999 2,999
Other current assets............. 16,686 12,487 29,173 29,173
---------- ---------- -------- ---------
Total current assets..... 156,407 82,153 212,223 253,223
---------- ---------- -------- ---------
PROPERTY AND EQUIPMENT, NET.......... 375,249 237,148 (42,850)(O) 695,571 270,000(Z) 965,571
126,024(I)
OTHER ASSETS
Investments in and advances to
affiliates..................... -- 9,406 9,406 9,406
Deferred income taxes............ -- 7,346 7,346 7,346
Goodwill and other intangibles,
net............................ 3,134 -- 3,134 3,134
Other............................ 7,272 5,271 550(H) 12,182 8,400(V) 20,582
(911)(R)
---------- ---------- -------- ---------
Total other assets....... 10,406 22,023 32,068 40,468
---------- ---------- -------- ---------
$542,062 $341,324 $939,862 $1,259,262
========== ========== ======== =========
CURRENT LIABILITIES
Accounts payable................. $ 32,488 $ 26,954 $ 59,442 $ 59,442
Accrued expenses................. 25,215 33,069 58,284 58,284
Current portion of long-term
debt........................... 35,982 26,108 $ (2,700)(H) 58,190 $ (25,000)(V) 23,190
(1,200)(O) (10,000)(X)
Current portion of long-term
lease obligations.............. -- 4,850 4,850 4,850
---------- ---------- -------- ---------
Total current
liabilities............ 93,685 90,981 180,766 145,766
---------- ---------- -------- ---------
OTHER LONG-TERM LIABILITIES.......... 12,134 10,107 22,241 22,241
LONG-TERM DEBT, NET OF CURRENT
PORTION............................ 106,508 22,115 28,400(H) 154,323 325,000(V) 439,323
(2,700)(O) (40,000)(X)
LONG-TERM LEASE OBLIGATIONS, NET OF
CURRENT PORTION.................... -- 30,663 30,663 30,663
CONVERTIBLE SUBORDINATED
DEBENTURES......................... 80,500 -- (28,000)(R) 52,500 52,500
DEFERRED INCOME TAXES................ 47,438 3,014 (12,000)(O) 58,952 58,952
20,500(I)
MINORITY INTEREST.................... -- 2,368 2,368 2,368
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock..................... 1 94 (94)(I) 1 1
Paid-in capital.................. 143,581 140,688 (140,688)(I) 343,981 69,400(X) 413,381
172,400(I)
28,000(R)
Treasury stock, at cost.......... (191) -- (191) (191)
Retained earnings................ 58,406 41,435 53,800(O) 94,258 94,258
(54,735)(I)
(4,648)(R)
Cumulative translation
adjustment..................... -- (141) 141(I) -- --
---------- ---------- -------- ---------
Total shareholders'
equity................. 201,797 182,076 438,049 507,449
---------- ---------- -------- ---------
$542,062 $341,324 $939,862 $1,259,262
========== ========== ======== =========
</TABLE>
The accompanying notes are an integral part of the pro forma and pro forma
combined financial statements.
S-16
<PAGE>
UNAUDITED PRO FORMA AND PRO FORMA COMBINED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NOBLE
PRIDE FORASOL PRO RIGS
HISTORICAL HISTORICAL ADJUSTMENTS FORMA HISTORICAL ADJUSTMENTS
<S> <C> <C> <C> <C> <C>
REVENUES............................. $407,174 $199,471 $ 63,210(A) $552,713 $ 68,747
---------- ---------- -------- ----------
(117,142)(P)
COSTS AND EXPENSES
Operating costs.................. 292,599 161,897 49,341(A) 414,882 38,898
(88,955)(P)
Depreciation and amortization.... 29,065 23,945 3,797(A) 54,220 18,160 $ (1,960)(AA)
80(B)
2,800(J)
(5,467)(P)
Selling, general and
administrative................. 45,368 18,490 3,831(A) 54,048 6,863 (5,363)(BB)
(13,641)(P)
---------- ---------- -------- ----------
Total costs and
expenses............... 367,032 204,332 523,150 63,921
---------- ---------- -------- ----------
EARNINGS (LOSS) FROM OPERATIONS...... 40,142 (4,861) 29,563 4,826
==========
OTHER INCOME (EXPENSE)
Other income (expense)........... 1,902 1,148 (519)(A) 2,227
(304)(P)
Interest income.................. 2,410 2,310 322(A) 4,167
(875)(C)
Interest expense................. (13,635) (10,048) (394)(A) (24,802) (25,534)(W)
(450)(D)
(1,920)(E)
(2,010)(K)
1,425(L)
380(P)
1,850(S)
---------- ---------- --------
Total other expense,
net.................... (9,323) (6,590) (18,408)
---------- ---------- --------
EARNINGS (LOSS) BEFORE MINORITY
INTEREST AND INCOME TAXES.......... 30,819 (11,451) 11,155
MINORITY INTEREST.................... -- (825) (825)
---------- ---------- --------
EARNINGS (LOSS) BEFORE INCOME
TAXES.............................. 30,819 (10,626) 11,980
INCOME TAX PROVISION................. 8,091 354 360(F) 4,356 (4,830)(CC)
(1,700)(M)
(3,415)(Q)
666(T)
---------- ---------- --------
NET EARNINGS (LOSS).................. $ 22,728 $(10,980) $ 7,624
========== ========== ========
NET EARNINGS (LOSS) PER SHARE
Primary.......................... $ .81 $ .18
========== ========
Fully diluted.................... $ .75
==========
WEIGHTED AVERAGE COMMON SHARES AND
EQUIVALENTS OUTSTANDING
Primary.......................... 28,198 11,099(N) 41,582 3,088(Y)
========== ========
2,285(U)
Fully diluted.................... 34,719 465(G) 46,283
========== ========
11,099(N)
</TABLE>
PRO
FORMA
COMBINED
REVENUES............................. $621,460
--------
COSTS AND EXPENSES
Operating costs.................. 453,780
Depreciation and amortization.... 70,420
Selling, general and
administrative................. 55,548
--------
Total costs and
expenses............... 579,748
--------
EARNINGS (LOSS) FROM OPERATIONS...... 41,712
OTHER INCOME (EXPENSE)
Other income (expense)........... 2,227
Interest income.................. 4,167
Interest expense................. (50,336)
--------
Total other expense,
net.................... (43,942)
--------
EARNINGS (LOSS) BEFORE MINORITY
INTEREST AND INCOME TAXES.......... (2,230)
MINORITY INTEREST.................... (825)
--------
EARNINGS (LOSS) BEFORE INCOME
TAXES.............................. (1,405)
INCOME TAX PROVISION................. (474)
--------
NET EARNINGS (LOSS).................. $ (931)
========
NET EARNINGS (LOSS) PER SHARE
Primary.......................... $ (.02)
========
Fully diluted....................
WEIGHTED AVERAGE COMMON SHARES AND
EQUIVALENTS OUTSTANDING
Primary.......................... 44,670
========
Fully diluted....................
The accompanying notes are an integral part of the pro forma and pro forma
combined financial statements.
S-17
<PAGE>
NOTES TO UNAUDITED PRO FORMA AND PRO FORMA
COMBINED FINANCIAL STATEMENTS
1. BACKGROUND
In April 1996, the Company acquired all of the outstanding capital stock of
Quitral-Co for aggregate consideration of $140.0 million, consisting of $110.0
million in cash and a note payable to the sellers for $30.0 million. The note
payable bears interest at a variable rate of LIBOR plus 2% per annum payable
quarterly. Payments of principal are being made in 30 monthly installments. Of
the cash portion of the purchase price, $70.0 million was funded from the
Company's working capital and $40.0 million from the net proceeds from two
long-term financing arrangements with three lending institutions. Borrowings
under these arrangements, which are collateralized by substantially all of the
Company's domestic offshore platform rig fleet and ancillary equipment, bear
interest at annual rates ranging from 7.95% to 8.50% and are repayable in
monthly installments of principal and interest over a period of five to six
years.
In January 1996, the Company completed the public sale of $80.5 million
principal amount of its convertible subordinated debentures, which resulted in
net proceeds to the Company of approximately $77.6 million. Such net proceeds
were used to fund various capital projects, including the acquisition of
Quitral-Co. During the first quarter of 1997, $28.0 million principal amount of
the convertible subordinated debentures was converted into 2.3 million shares of
Common Stock.
In February 1997, the Company sold substantially all of the assets used in
its U.S. land-based well servicing operations for $135.7 million in cash. After
federal and state income taxes of approximately $44.3 million, repayment of
approximately $3.9 million of indebtedness collateralized by certain of the
assets sold and prepayment of approximately $3.7 million of lease payments on
transferred assets subject to operating leases, the net proceeds to the Company
were approximately $83.8 million.
In March 1997, the Company completed the acquisition of Forasol for $113.2
million in cash and 11.1 million shares of Common Stock with a value of $172.4
million. Of the cash portion of the purchase price, $87.5 million was funded out
of working capital, including the net proceeds from the sale of the Company's
U.S. land-based well servicing operations, and $25.7 million was funded out of
net borrowings under the Credit Facility, which mature in March 2002 and bear
interest at a variable rate, currently 7.44%, based on either the prime rate or
LIBOR.
In February 1997, the Company agreed to purchase the Noble Rigs for $265.0
million in cash. The transaction is subject to certain conditions, including
completion by the Company of satisfactory financing arrangements. See "The
Noble Rigs." The Company expects to finance the purchase with a portion of the
proceeds from the Offerings.
2. BASIS OF PRESENTATION
The accompanying unaudited pro forma and pro forma combined balance sheets
have been prepared assuming that the Recent Transactions, the Offerings and the
purchase of the Noble Rigs were consummated as of December 31, 1996. The
accompanying unaudited pro forma and pro forma combined statements of operations
have been prepared assuming that such transactions were consummated as of
January 1, 1996.
Net earnings per share have been computed based on the weighted average
number of common shares and common share equivalents outstanding on a pro forma
and pro forma combined basis during the year ended December 31, 1996. Common
share equivalents include the number of shares issuable upon the exercise of
stock options and warrants, less the number of shares that could have been
repurchased with the exercise proceeds, using the treasury stock method. Fully
diluted net earnings per share have not been presented on a pro forma or pro
forma combined basis as the calculation is anti-dilutive.
S-18
<PAGE>
NOTES TO UNAUDITED PRO FORMA AND PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. MANAGEMENT ASSUMPTIONS
The unaudited pro forma and pro forma combined financial statements reflect
the following pro forma adjustments related to the acquisition of Quitral-Co and
Forasol and the related financing transactions, the sale of the Company's U.S.
land-based well servicing operations, the conversion of $28.0 million principal
amount of the Company's convertible subordinated debentures, the Offerings and
the purchase of the Noble Rigs:
QUITRAL-CO ACQUISITION
(A) Operating results for Quitral-Co for the period in 1996 prior to the
acquisition by the Company, based on actual results for the period from January
1, 1996 through March 31, 1996 and estimated results for the month of April
1996. Prior to the acquisition by the Company in April 1996, the books and
records of Quitral-Co were maintained in constant Argentine pesos in accordance
with Argentine GAAP, which differs in certain respects from U.S. GAAP. Financial
information in U.S. dollars prepared in accordance with U.S. GAAP has been
prepared through March 31, 1996. However, such information is not available for
the period from March 31, 1996 through April 30, 1996, the date the acquisition
by the Company was consummated. Accordingly, management has estimated such
results for purposes of preparing the accompanying pro forma financial
information and believes that actual results would not be materially different.
(B) Increase in depreciation and amortization expense resulting from the
preliminary allocation of the purchase cost to the assets acquired and
application of the Company's depreciation policies to such assets. Based on a
preliminary determination of the fair values of the assets and liabilities
acquired, approximately $161.4 million was allocated to property and equipment.
The pro forma adjustment to depreciation expense was based upon an estimated
salvage value of 10% and an estimated average remaining useful life of 12.5
years for the Quitral-Co assets.
(C) Reduction in historical interest income as a result of utilization of
$70.0 million in cash for the acquisition of Quitral-Co. Such cash amount
constituted a portion of the net proceeds from the issuance by the Company in
January 1996 of $80.5 million principal amount of the Company's convertible
subordinated debentures. Therefore, historical interest income on such cash
amount for the three months prior to the acquisition of Quitral-Co has been
reduced, based upon an approximate annual interest rate on investments during
the period of 5.0%.
(D) Increase in interest expense due to issuance and sale of $80.5 million
principal amount of the Company's convertible subordinated debentures. The pro
forma adjustment to interest expense relating to these financing transactions is
composed of the following:
YEAR ENDED
DECEMBER 31, 1996
(IN THOUSANDS)
Interest on convertible subordinated
debentures......................... $ 425
Amortization of deferred financing
costs.............................. 25
------
$ 450
======
(E) Increase in interest expense resulting from $40.0 million of net
borrowings pursuant to collateralized term loans entered into in connection with
the acquisition of Quitral-Co and the addition of a $30.0
S-19
<PAGE>
NOTES TO UNAUDITED PRO FORMA AND PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
million note payable to the sellers. The pro forma adjustment to interest
expense relating to these financing transactions is composed of the following:
YEAR ENDED
DECEMBER 31, 1996
(IN THOUSANDS)
Collateralized term loans............ $ 1,170
Note payable to sellers.............. 750
--------
$ 1,920
========
The pro forma adjustment to interest expense relating to these financing
transactions is based upon interest rates of 8.75% per annum for the
collateralized term loans and 7.50% per annum for the note payable to sellers,
which were the approximate actual rates in effect during 1996 for each of these
loans. For each .25% change in the actual interest rates incurred on the
collateralized term loans and the note payable to sellers, pro forma net
earnings for the year ended December 31, 1996 would change by approximately
$64,000 and $48,000, respectively.
(F) Income tax effects of the pro forma adjustments included herein, based
on a combined U.S. federal and state income tax rate of 36%, an Argentine income
tax rate of 33% and a Venezuelan tax rate of 34%. Such rates approximate the
statutory rates in effect for the period.
(G) Increase in weighted average common shares and equivalents outstanding
for fully diluted earnings per share calculation purposes, due to issuance by
the Company of $80.5 million principal amount of its convertible subordinated
debentures, which are convertible at a price of $12.25 per share.
FORASOL ACQUISITION
(H) Receipt of aggregate net proceeds of $25.7 million from the Credit
Facility, less $550,000 of debt issuance costs.
(I) Acquisition of Forasol for aggregate consideration of $285.6 million,
consisting of $113.2 million cash and 11.1 million shares of Common Stock valued
at $172.4 million, based on the approximate market value of the Common Stock
prior to the date of the letter agreement of $15.50 per share. In addition,
management estimates that the Company will ultimately incur legal, accounting
and other transaction-related costs, including Forasol closing costs, of
approximately $2.0 million. Management expects to incur approximately $13.3
million of costs in connection with the combination of the business units of
Forasol with the Company's existing operations and the cost to wind up Forasol's
affairs and liquidate, which amount is expected to be charged to expense in the
first quarter of 1997. Based on a preliminary determination of the fair values
of the assets and liabilities acquired, approximately $363.2 million of the
total purchase cost was allocated to property and equipment. Additional
adjustments to reflect the acquisition include elimination of the historical
capital accounts of Forasol and an increase in the deferred income tax liability
by approximately $20.5 million to provide for temporary differences resulting
from the allocation of the pro forma purchase cost at the statutory income tax
rates in the appropriate taxing jurisdictions.
(J) Increase in depreciation and amortization expense resulting from the
preliminary allocation of the purchase cost to the assets acquired and adoption
by Forasol of the Company's depreciation policies, based upon an estimated
salvage value of 10% and an estimated average remaining useful life of 12.5
years for the Forasol property and equipment.
(K) Increase in interest expense resulting from $25.7 million of net
borrowings under the Credit Facility. The pro forma adjustment to interest
expense is based on the variable rate of the Credit Facility, currently 7.44%.
For each .25% change in the current variable rate, pro forma net earnings for
the year ended December 31, 1996 would change by approximately $41,000.
S-20
<PAGE>
NOTES TO UNAUDITED PRO FORMA AND PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(L) Reduction in interest expense resulting from use of a portion of the
net proceeds from Forasol's public offering of common shares in May 1996 to
repay indebtedness and liquidate capital lease obligations of Forasol. The
principal amounts extinguished and the related interest savings are as follows:
AMOUNT INTEREST
EXTINGUISHED SAVINGS RATE RANGE
(IN THOUSANDS)
Credit Facility...................... $20,840 $ 585 7.5%
Current portion of long-term debt.... 8,650 240 7.1% - 7.7%
Current portion of long-term lease
obligations........................ 3,210 100 6.4% - 8.6%
Long-term debt....................... 8,860 250 7.1% - 7.7%
Long-term lease obligations.......... 8,040 250 6.4% - 8.6%
------------- ------
Total................. $49,600 $1,425
============= =========
Forasol operates in tax free jurisdictions (primarily Angola) and
approximately $1.3 million of the $1.4 million in pro forma annual savings
result from such tax jurisdictions.
(M) Income tax effects of the pro forma adjustments included herein, based
on a combined U.S. federal and state income tax rate of 36% and a French income
tax rate of 37%. Such rates approximate the statutory rates in effect for the
period.
(N) Estimated increase in weighted average common shares and equivalents
outstanding due to issuance of 11.1 million shares of Common Stock in connection
with the acquisition of Forasol.
SALE OF U.S. LAND-BASED WELL SERVICING OPERATIONS
(O) Receipt of net proceeds from sale of U.S. land-based well servicing
operations, net of $44.3 million of estimated federal and state income taxes,
repayment of approximately $3.9 million of indebtedness collateralized by
certain of the assets sold and prepayment of approximately $3.7 million of lease
payments on transferred assets subject to operating leases. Also, elimination of
the assets to be sold and reflection of an estimated gain of approximately $53.8
million on the sale.
(P) Elimination of the results of operations related to the assets of the
Company's U.S. land-based well servicing business to be sold.
(Q) Adjustment of income tax expense as follows:
YEAR ENDED
DECEMBER 31, 1996
(IN THOUSANDS)
Elimination of actual income tax
expense incurred by U.S. land-based
operations......................... $ (371)
Income tax effects of pro forma
adjustments based on a combined
U.S. federal and state income tax
rate of 36%, which rate
approximates the combined statutory
rate in effect for the period...... (3,044)
-----------------
$(3,415)
=================
S-21
<PAGE>
NOTES TO UNAUDITED PRO FORMA AND PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
CONVERSION OF CONVERTIBLE SUBORDINATED DEBENTURES
(R) To induce conversion of $28.0 million of convertible subordinated
debentures for 2,285,712 shares of Common Stock. Conversion costs, including
$3.7 million in cash and $.9 million of deferred financing costs, will be
recorded as a charge to income in the first quarter of 1997.
(S) Decrease in interest expense due to the conversion.
(T) Increase in federal and state income taxes as a result of the
conversion and based on a combined U.S. federal and state income tax rate of
36%.
(U) Increase of 2,285,712 primary shares of Common Stock outstanding as a
result of the conversion.
THE OFFERINGS
(V) Receipt of the assumed proceeds from the Notes Offering, net of
estimated issuance costs of $8.4 million, and application of a portion of the
proceeds to repay $25.0 million of indebtedness.
(W) Increased interest expense on the Notes, including amortization of
issuance costs, based on an assumed interest rate of 9 3/8%, less interest
expense on debt to be retired out of the net proceeds from the Offerings, as
follows:
AMOUNT
---------------
(IN THOUSANDS)
Interest on the Notes................ $30,469
Amortization of issuance costs....... 840
Interest on debt to be retired
Credit Facility................. (2,975)
Other short-term debt........... (2,800)
---------------
$25,534
===============
(X) Receipt of the assumed proceeds from the Common Stock Offering of
$69.4 million, net of estimated issuance costs of $3.7 million, and application
of a portion of the proceeds to repay $50.0 million of indebtedness.
(Y) Increased shares outstanding as a result of the Common Stock Offering.
For purposes of the pro forma combined statement of operations, shares are
assumed to be outstanding only to the extent that proceeds are applied to reduce
debt as follows:
YEAR ENDED
DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNT)
Debt repaid.......................... $50,000
Assumed offering price per share, net
of estimated issuance costs........ $ 16.19
Assumed shares issued................ 3,088
NOBLE RIG PURCHASE
(Z) Purchase of the Noble Rigs for $265.0 million plus estimated
acquisition costs of $5.0 million.
(AA) Adjustment to depreciation expense resulting from the preliminary
allocation of purchase cost to the rigs acquired and application of the
Company's depreciation policies for such rigs. The pro forma combined adjustment
to depreciation expense was based on an estimated average salvage value of 10%
and an estimated average remaining useful life of 15 years.
(BB) To reduce selling, general and administrative expenses for corporate
allocations from the seller of the Noble Rigs, which costs will not be incurred
by the Company.
(CC) Income tax benefit as a result of the pro forma combined adjustments.
S-22
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following selected consolidated financial information as of December
31, 1995 and 1996, and for each of the years in the three-year period ended
December 31, 1996, has been derived from the audited consolidated financial
statements of the Company incorporated by reference in the accompanying
Prospectus. This information should be read in conjunction with such
consolidated financial statements and the notes thereto. The selected
consolidated financial information as of December 31, 1994, 1993 and 1992, and
for each of the years in the two-year period ended December 31, 1993, has been
derived from audited consolidated financial statements of the Company that have
previously been included in the Company's reports under the Exchange Act that
are not incorporated by reference herein or in the accompanying Prospectus. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1992 1993 1994 1995 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................. $ 101,382 $ 127,099 $ 182,336 $ 263,599 $ 407,174
Operating costs...................... 83,829 100,305 139,653 187,203 292,599
Depreciation and amortization........ 5,649 6,407 9,550 16,657 29,065
Selling, general and
administrative..................... 14,076 17,572 25,105 32,418 45,368
--------- --------- --------- --------- ---------
Earnings (loss) from operations...... (2,172) 2,815 8,028 27,321 40,142
Other income (expense)............... 5 (135) (305) 638 1,902
Interest income...................... 811 649 618 740 2,410
Interest expense..................... (3) (10) (207) (6,276) (13,635)
--------- --------- --------- --------- ---------
Earnings (loss) before income
taxes.............................. (1,359) 3,319 8,134 22,423 30,819
Income tax provision (benefit)(1).... (517) (2,621) 1,920 7,064 8,091
--------- --------- --------- --------- ---------
Net earnings (loss)(1)............... $ (842) $ 5,940 $ 6,214 $ 15,359 $ 22,728
========= ========= ========= ========= =========
Net earnings (loss) per share (1)
Primary.......................... $ (.05) $ .36 $ .30 $ .60 $ .81
========= ========= ========= ========= =========
Fully diluted.................... $ (.05) $ .36 $ .30 $ .60 $ .75
========= ========= ========= ========= =========
Weighted average common shares and
equivalents outstanding
Primary.......................... 16,245 16,487 20,795 25,465 28,198
Fully diluted.................... 16,245 16,487 20,765 25,840 34,719
OTHER DATA:
EBITDA(2)............................ $ 3,482 $ 9,087 $ 17,273 $ 44,616 $ 71,109
Capital expenditures................. 4,094 12,123 59,171 40,636 61,711
Ratio of EBITDA(2) to interest
expense............................ 1,160.7x 908.7x 83.4x 7.1x 5.2x
Ratio of earnings to fixed
charges(3)......................... -- 5.8x 6.2x 4.0x 2.7x
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital...................... $ 29,989 $ 21,758 $ 26,640 $ 31,302 $ 62,722
Property and equipment, net.......... 45,084 62,823 139,899 178,488 375,249
Total assets......................... 94,842 109,981 205,193 257,605 542,062
Long-term debt, net of current
portion............................ 3,648 200 42,096 61,136 106,508
Convertible subordinated
debentures......................... -- -- -- -- 80,500
Shareholders' equity................. 61,774 69,126 111,385 131,239 201,797
</TABLE>
- -----------------------------
(1) Income tax provision (benefit) and net earnings for the year ended December
31, 1993 include $3,835,000 ($0.23 per share) cumulative effect of change in
accounting for income taxes.
(2) EBITDA (earnings before interest, taxes, depreciation and amortization) is
presented here to provide additional information about the Company's
operations. EBITDA should not be considered as an alternative to net income
as an indicator of the Company's operating performance or as an alternative
to cash flows as a better measure of liquidity.
(3) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings before income taxes plus
fixed charges less capitalized interest) by fixed charges (interest expense
plus capitalized interest and the portion of operating lease rental expense
that represents the interest factor). For the year ended December 31, 1992,
earnings were inadequate to cover fixed charges by $1,359,000.
S-23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements as of December 31, 1996 and
1995, and for the years ended December 31, 1996, 1995 and 1994, incorporated by
reference in the accompanying Prospectus. The following information contains
forward-looking statements. For a discussion of certain limitations inherent in
such statements, see "Forward-Looking Statements."
GENERAL
The Company's operations and future results have been and will be
significantly affected by a series of strategic transactions that have
transformed the Company from the second largest provider of land-based workover
and related well services in the United States into a diversified drilling
contractor operating both offshore and onshore in international markets and
offshore in the U.S. Gulf of Mexico. With the sale of its domestic land-based
well servicing operations in February 1997, the Company has ceased to provide
rig services onshore in the United States. Nevertheless, as a result of its
recent acquisition activity, the Company expects to continue to experience
revenue growth.
Domestic drilling and well servicing activity historically has had a
significant correlation with changes in oil and gas prices. International
drilling and well servicing activity is also affected by fluctuations in oil and
gas prices, but historically to a lesser extent than domestic activity.
International rig services contracts are typically for terms of one year or
more, while domestic contracts are typically for one well or multiple wells.
Accordingly, international rig services activities generally are not as
sensitive to short-term changes in oil and gas prices as domestic operations.
Since 1993, the Company has entered into a number of transactions that have
significantly expanded its international and domestic offshore operations,
including the following:
o In mid-1993, the Company commenced operations in Latin America with
the acquisition of businesses operating 23 land-based rigs in
Argentina and 13 land-based rigs in Venezuela.
o In June 1994, the Company acquired the largest fleet of platform
workover rigs, consisting of 22 units, in the Gulf of Mexico. Four
additional platform rigs have since been constructed and added to the
fleet, replacing four rigs that were retired. One additional rig is
currently under construction.
o In January 1995, the Company commenced operating two barge rigs on
Lake Maracaibo, Venezuela. The barge rigs were constructed during 1994
pursuant to ten-year operating contracts entered into with Lagoven,
S.A., a subsidiary of the Venezuelan national oil company.
o In October 1995, the Company acquired six land-based drilling rigs in
Colombia through the acquisition of Marlin Colombia Drilling Co. Inc.
o In April 1996, the Company acquired Quitral-Co from Perez Companc S.A.
and other shareholders. Quitral-Co operated 23 land-based drilling and
57 land-based workover rigs in Argentina and seven land-based drilling
and 23 land-based workover rigs in Venezuela. Quitral-Co was combined
with the Company's existing land-based operations in those countries.
The Company has further expanded international operations by deploying
35 rigs from its former U.S. land-based fleet primarily to Argentina
and Venezuela and by acquiring four rigs from an Argentine competitor.
o In October 1996, the Company acquired Ingeser de Colombia, S.A., which
operated seven land-based drilling rigs and six land-based workover
rigs in Colombia.
o In November 1996, the Company added three land-based drilling rigs and
support assets to its operations in Argentina through the acquisition
of the assets of another contractor.
o In February 1997, the Company completed the divestiture of its
domestic land-based well servicing operations, which included 407
workover rigs operating in Texas, California, New Mexico and
Louisiana, to Dawson Production Services, Inc. for approximately $136
million in cash.
S-24
<PAGE>
o In February 1997, the Company agreed to purchase 12 mat-supported
jackup rigs and the hull of an additional jackup rig from Noble. Nine
of the rigs are currently operating in the Gulf of Mexico, one rig is
operating offshore West Africa, one is undergoing refurbishment and
two (including the rig hull) are stacked awaiting refurbishment.
o In March 1997, the Company completed the Forasol acquisition, adding
two semisubmersible rigs, three jackup rigs, seven tender-assisted
rigs, three lake barge rigs, one swamp barge rig and 29 land-based
rigs operating in various locations in Latin America, Europe, the
Middle East, West Africa and Asia. The Company recently acquired an
additional tender-assisted rig, which is currently located in West
Africa and being marketed for several projects.
RESULTS OF OPERATIONS
The following table sets forth selected consolidated financial information
of the Company by operating segment for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1994 1995 1996
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Domestic land................... $ 95,860 52.6% $ 113,115 42.9% $ 117,142 28.8%
Domestic offshore............... 23,441 12.9 49,595 18.8 57,450 14.1
International................... 63,035 34.5 100,889 38.3 232,582 57.1
---------- --------- ---------- --------- ---------- ---------
Total revenues........ $ 182,336 100.0% $ 263,599 100.0% $ 407,174 100.0%
========== ========= ========== ========= ========== =========
Earnings from operations:
Domestic land................... $ 1,184 14.7% $ 7,906 28.9% $ 7,808 19.5%
Domestic offshore............... 3,304 41.2 6,785 24.9 6,983 17.4
International................... 3,540 44.1 12,630 46.2 25,351 63.1
---------- --------- ---------- --------- ---------- ---------
Total earnings from
operations......... $ 8,028 100.0% $ 27,321 100.0% $ 40,142 100.0%
========== ========= ========== ========= ========== =========
</TABLE>
1996 COMPARED WITH 1995
REVENUES. Revenues for the year ended December 31, 1996 increased $143.6
million, or 54%, as compared to the corresponding period in 1995. Of this
increase, $131.7 million was a result of expansion of the Company's
international operations, primarily due to the acquisition of Quitral-Co in
April 1996. Revenues from domestic land operations increased $4.0 million,
primarily as a result of the inclusion of operating results of X-Pert
Enterprises, Inc. ("X-Pert" ) (the operations of which were sold in February
1997) for twelve months in 1996 as compared to only ten months in 1995. Revenues
attributable to domestic offshore operations increased $7.9 million, due
primarily to an increased number of the Company's offshore platform rigs working
in 1996.
OPERATING COSTS. Operating costs for the year ended December 31, 1996
increased $105.4 million, or 56%, as compared to the corresponding period in
1995. Of this increase, $94.0 million was a result of expansion of the Company's
international operations and $3.8 million was attributable to domestic land-
based operations, primarily due to the inclusion of the operating results of
X-Pert for the full period, which offset a $2.4 million reduction of workers'
compensation expense recorded in the fourth quarter of 1996. Operating costs
related to domestic offshore operations increased $7.6 million, due to an
increased number of offshore platform rigs working, as discussed above, and a
related increase in mobilization costs.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the year
ended December 31, 1996 increased $12.4 million, or 74%, as compared to the
corresponding period of 1995, primarily as a result of the Quitral-Co
acquisition and additional expansion of the Company's international and domestic
offshore assets.
S-25
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the year ended December 31, 1996 increased $13.0 million, or 40%,
as compared to the corresponding period in 1995, primarily due to the inclusion
of such costs for Quitral-Co. During the year ended December 31, 1996, the
Company incurred certain nonrecurring expenses in connection with consolidation
of acquired operations with its existing operations in Argentina and Venezuela.
As a percentage of revenues, total selling, general and administrative costs
were 11% for 1996 as compared to 12% for 1995.
EARNINGS FROM OPERATIONS. Earnings from operations for the year ended
December 31, 1996 increased by $12.8 million, or 47%, as compared to the
corresponding period in 1995. Of this increase, $12.7 million was attributable
to international expansion, including the Quitral-Co acquisition. Domestic
offshore utilization also improved, resulting in a $198,000 increase in earnings
from operations. Earnings from domestic land operations were essentially
unchanged between 1996 and 1995.
OTHER INCOME (EXPENSE). Other income (expense) for the year ended December
31, 1996 included net gains from asset sales, foreign exchange transactions and
other sources. Other income (expense) for the corresponding 1995 period
consisted primarily of miscellaneous gains of $638,000 from asset sales,
insurance recoveries, foreign exchange transactions and other sources. Interest
income increased to $2.4 million for the year ended December 31, 1996 from
$740,000 for the corresponding period in 1995 due to an increase in cash
available for investment. Interest expense for the year ended December 31, 1996
increased by $7.4 million over the corresponding period in 1995, as a result of
interest accrued on the convertible subordinated debentures and borrowings
related to the Quitral-Co acquisition and other additions to property and
equipment. During the year ended December 31, 1996 and 1995, the Company
capitalized $1.9 million and $250,000, respectively, of interest expense in
connection with construction projects.
INCOME TAX PROVISION. The Company's consolidated effective income tax rate
for the year ended December 31, 1996 was approximately 26%, as compared to
approximately 32% for the corresponding period in 1995. The decrease was
attributable to the increase in foreign income, which is taxed at a lower
statutory rate, and the reduction in U.S. income, which is taxed at a higher
statutory rate. The decrease was also due to recognition in 1996 of $2.2 million
of foreign net operating loss carryforwards, including net operating loss
carryforwards of acquired businesses. The Company had previously provided a
valuation allowance for certain foreign net operating loss carryforwards, due to
uncertainties regarding the Company's ability to realize such tax benefits.
1995 COMPARED WITH 1994
REVENUES. Revenues for the year ended December 31, 1995 increased $81.3
million, or 45%, as compared to the year ended December 31, 1994. Of this
increase, $37.9 million was attributable to the Company's international
operations. The Company experienced increased activity levels in Argentina,
Venezuela and Russia, due primarily to the utilization of additional assets
deployed in those areas. The Company's offshore operations, which were acquired
in mid-1994, accounted for $26.2 million of the increase, as those operations
were included for a full year in 1995. Revenues from the Company's domestic
land-based operations increased $17.3 million, due primarily to the addition of
X-Pert in March 1995.
OPERATING COSTS. Operating costs for the year ended December 31, 1995
increased $47.6 million, or 34%, as compared to the year ended December 31,
1994. Of this increase, $22.0 million was attributable to the Company's
international operations, due to expansion of those operations, as discussed
above, $17.3 million was attributable to a full year of operations for the
Company's offshore operations, and $8.3 million was attributable to the
Company's domestic land-based operations. The Company's domestic land-based
operations experienced improved operating margins as a result of extensive
cost-cutting efforts, improved safety performance and reduced insurance costs
(attributable to both reduced rates and improved claims experience).
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the year
ended December 31, 1995 increased $7.1 million, or 74%, as compared to the year
ended December 31, 1994, primarily as a result of expansion of the Company's
domestic offshore and international asset base.
S-26
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the year ended December 31, 1995 increased $7.3 million, or 29%, as
compared to the year ended December 31, 1994, primarily as a result of the
inclusion of such costs related to acquired businesses. As a percentage of
revenues, total selling, general and administrative expenses declined to
approximately 12% in 1995 from approximately 14% in 1994.
EARNINGS FROM OPERATIONS. The Company generated earnings from operations
for the year ended December 31, 1995 of $27.3 million. Of this amount, $12.6
million was generated from international operations, $6.8 million was generated
from domestic offshore operations and $7.9 million was generated from domestic
land-based operations. During 1994, international operations generated earnings
from operations of $3.5 million, domestic offshore operations generated earnings
from operations of $3.3 million, and domestic land-based operations generated
earnings from operations of $1.2 million.
OTHER INCOME (EXPENSE). Other income (expense) for the year ended December
31, 1995 included miscellaneous gains of $638,000 from asset sales, other
insurance recoveries, foreign exchange transactions and other sources. Interest
income increased to $740,000 for the year ended December 31, 1995 from $618,000
in 1994 due to an increase in cash available for investment. Interest expense
for the year ended December 31, 1995 increased by $6.1 million from 1994, as a
result of borrowings related to the project financing two lake barge rigs,
acquisitions and other additions to property and equipment.
INCOME TAX PROVISION. The Company's consolidated effective income tax rate
for the year ended December 31, 1995 increased to approximately 32% from
approximately 24% for the year ended December 31, 1994, primarily as a result of
the recognition in 1994 of current tax benefits from the utilization of
approximately $3.0 million of foreign net operating loss carryforwards. The
Company recognized no such tax benefits from the utilization of foreign net
operating loss carryforwards in 1995.
FORASOL ACQUISITION
On March 10, 1997, the Company consummated the acquisition of Forasol for
aggregate consideration of $285.6 million, consisting of $113.2 million in cash
and 11.1 million shares of Common Stock valued at $172.4 million. Forasol
provides drilling and workover services in more than 15 countries, including
substantial operations in Latin America and West Africa, and operates a diverse
fleet of offshore rigs, including two semisubmersible rigs, three jackup rigs,
seven tender-assisted rigs, three lake barge rigs, one swamp barge rig and an
international fleet of 29 land-based rigs.
The following table presents summary historical information and other data
for Forasol. The summary historical financial information should be read in
conjunction with the historical financial statements of Forasol incorporated by
reference in the accompanying Prospectus.
YEAR ENDED DECEMBER 31,
----------------------
1995 1996
(IN THOUSANDS)
Net revenues......................... $ 171,500 $ 199,471
Cost of operations................... 127,491 161,897
---------- ----------
Gross margin.................... 44,009 37,574
Depreciation and amortization........ (20,264) (23,945)
Selling, general and
administrative..................... (17,660) (18,490)
Other income, net.................... 382 1,148
Interest expense, net................ (8,783) (7,738)
---------- ----------
Loss before minority interest
and income taxes.............. (2,316) (11,451)
Minority interest.................... (1,288) 825
Income taxes......................... (409) (354)
---------- ----------
Net loss........................ $ (4,013) $ (10,980)
========== ==========
S-27
<PAGE>
Revenues for the year ended December 31, 1996 increased $28.0 million, or
16%, as compared to the corresponding period in 1995. This increase was
primarily attributable to a $15.8 million increase in revenues from jackup rigs
and an $8.9 million increase in revenues from tender-assisted rigs. The increase
in revenues from jackup rigs was due to the commencement of integrated services
contracts in Venezuela, which began in April 1996. The increase in revenues from
tender-assisted rigs was attributable to increased utilization and the addition
of two management contracts in Venezuela. Revenues from land-based operations
were $67.5 million for 1996 compared to $67.4 million for 1995.
The cost of operations for the year ended December 31, 1996 increased $34.4
million, or 27%, as compared to the corresponding period in 1995. Operating
costs for the tender-assisted rigs, the semisubmersible rigs and the jackup rigs
increased by an aggregate of $17.4 million as a result of increased utilization.
Although revenues from land-based operations were essentially unchanged in 1996,
an increase in activity resulted in increased operating expenses of $8.4
million. This increase was primarily due to the Argentine land-based operations
and to a turnkey drilling contract completed in Algeria. Forasol also
experienced increased base costs in Venezuela due to the commencement of several
management contracts in that country.
During 1996, Forasol's two semisubmersible drilling rigs, the NYMPHEA and
the SOUTH SEAS DRILLER, worked an aggregate of 449 days at an average day rate
of approximately $37,900. The SOUTH SEAS DRILLER recently began work on the
first of two term contracts that provide for a minimum of 285 days of work in
1997 and an additional 155 days of work in 1998, exclusive of extending options,
at an average day rate of approximately $61,200. In addition, the NYMPHEA is
scheduled to commence operations in June 1997 under a four-year contract at an
initial day rate of $79,370. Based on these new contracts, the SOUTH SEAS
DRILLER and the NYMPHEA, on an annualized basis, are expected to generate
approximately $34 million of incremental revenue relative to 1996. The Company
also expects to realize significant cost savings and synergies as a result of
the Forasol acquisition.
LIQUIDITY AND CAPITAL RESOURCES
The Company had net working capital of $62.7 million and $31.3 million at
December 31, 1996 and 1995, respectively. The Company's current ratio was 1.7 at
both December 31, 1996 and December 31, 1995. During 1996, the Company issued to
the public $80.5 million principal amount of convertible subordinated debentures
and 3,450,000 shares of Common Stock. Proceeds from these transactions, which
aggregated approximately $123.2 million, together with borrowings under existing
credit facilities, sale-leaseback arrangements and the Company's internally
generated funds, were used primarily to pay the $110.0 million cash portion of
the purchase price for Quitral-Co, to finance the construction of two platform
rigs for the Company's offshore fleet in the Gulf of Mexico and for various
other capital projects, including rig upgrades and additions to the Company's
land-based fleet in Latin America. Two of the Company's barge rigs operating on
Lake Maracaibo, Venezuela were financed in 1994 on a long-term project basis
with limited recourse to the Company.
Since the end of 1996, the following transactions have had or are expected
to have a material impact on the Company's cash requirements:
o In February 1997, the Company sold substantially all of the assets used
in its domestic land-based well servicing operations for approximately
$135.7 million in cash. The Company's net proceeds from the sale, after
payment of taxes, repayment of indebtedness collateralized by certain
of the assets sold and prepayment of terminated operating leases, were
approximately $83.8 million.
o In March 1997, the Company completed the acquisition of Forasol for
$113.2 million in cash and 11.1 million shares of Common Stock. The
cash portion of the purchase price was funded out of working capital,
including the net proceeds from the sale of the Company's domestic
land-based well servicing operations and borrowings of $25.7 million
under the Credit Facility described below.
S-28
<PAGE>
o In February 1997, the Company agreed to purchase the Noble Rigs for
$265.0 million in cash. In addition, the Company expects to spend at
least $20 million to upgrade and equip the two Noble Rigs awaiting
refurbishment. The Company expects to finance the purchase of the Noble
Rigs from the proceeds from the Offerings.
In March 1997, the Company entered into the Credit Facility with a group of
banks which provides for availability of up to $100.0 million (including $25.0
million for letters of credit). Availability under the Credit Facility is
limited to a borrowing base based on the value of collateral. Unless the Company
secures its obligations by June 6, 1997 with additional offshore or domestic
assets with a value of at least $40.0 million ("Additional Collateral"), the
credit line will be reduced to $75.0 million. The Credit Facility is
collateralized by the accounts receivable, inventory and intangibles of the
Company and its domestic subsidiaries, two-thirds of the stock of the Company's
foreign subsidiaries, the stock of the Company's domestic subsidiaries and
certain other assets. The Company's domestic subsidiaries also provide
guarantees. The Credit Facility terminates on March 6, 2002 if the Additional
Collateral is timely provided; otherwise it terminates on March 6, 2000. The
credit line, unless extended, will be reduced by $12.5 million in each of 2000
and 2001.
The Credit Facility limits the ability of the Company and its subsidiaries
to incur additional indebtedness, create liens, enter into mergers and
consolidations, pay cash dividends on its capital stock, make acquisitions, sell
assets or change its business without prior consent of the lenders. Under the
Credit Facility, the Company must maintain certain financial ratios, including
(i) funded debt to pro forma EBITDA, (ii) funded debt to capitalization, (iii)
adjusted EBITDA to debt service and (iv) minimum tangible net worth. The Notes
Offering and the purchase of the Noble Rigs will result in the breach of certain
of these covenants as currently structured. To complete the Notes Offering and
finance the purchase, therefore, the Company will be required to obtain waivers
from the lenders, amend the Credit Facility and obtain releases of domestic
subsidiaries guarantees, or repay any amounts outstanding under the Credit
Facility.
In March 1997, the Company borrowed $40.0 million under the Credit
Facility, of which $14.3 million was used to repay amounts outstanding under the
Company's previous credit facility and $25.7 million was used to partially fund
the acquisition of Forasol. Borrowings under the Credit Facility bear interest
at a variable rate, currently 7.44%, based on either the prime rate or LIBOR.
The Notes Offering and the Common Stock Offering are being made under a
"shelf" registration statement under the Securities Act pursuant to which the
Company may issue up to $500.0 million of securities consisting of any
combination of debt securities and Common Stock. As part of their approval of
the Forasol acquisition, shareholders of the Company approved an increase in the
authorized number of shares of Common Stock from 40 million to 100 million.
Management believes that the cash generated from the Company's operations,
together with the net proceeds from the Offerings and borrowings under the
Credit Facility or a replacement thereof, will be adequate to fund its normal
ongoing capital expenditure, working capital and debt service requirements.
ACCOUNTING MATTERS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"). SFAS No. 128, which is effective for periods ending after December 15,
1997, including interim periods, simplifies the standards for computing earnings
per share and replaces the presentation of primary earnings per share with a
presentation of basic earnings per share. Initial adoption of this standard is
not expected to have a material impact on the Company's financial position or
results of operations. Early adoption is not permitted.
S-29
<PAGE>
BUSINESS
The Company is a leading domestic and international provider of contract
drilling and related services, operating both on land and offshore. In recent
years, the Company has focused its growth strategy on the higher margin offshore
and international drilling and workover markets. Consistent with this strategy,
the Company acquired several international and offshore businesses, including
Quitral-Co and Forasol, and divested its domestic land-based well servicing
operations, thereby transforming the Company into one of the largest and most
diversified drilling contractors in the world. The Company operates a global
fleet of 279 rigs, including two semisubmersible rigs, eight tender-assisted
rigs, three jackup rigs, five floating lake barge rigs, one posted swamp barge
rig, 22 offshore platform rigs, 76 land-based rigs and 162 land-based workover
rigs. The significant diversity of the Company's rig fleet enables the Company
to provide a broad range of services and to take advantage of market upturns
while reducing its exposure to sharp downturns in any particular market sector
or geographic region. With the closing of the pending purchase of the Noble
Rigs, the Company will add 12 mat-supported jackup rigs and the hull of an
additional jackup rig to its offshore fleet. See "The Noble Rigs."
Internationally, the Company has established leading market positions in
several operating regions. In Argentina, the Company operates a land-based fleet
of 36 drilling rigs and 109 workover rigs. In Venezuela, the Company operates
three jackup rigs, one tender-assisted rig, five lake barge rigs, 12 land-based
drilling rigs and 33 land-based workover rigs. In Colombia, the Company operates
13 land-based drilling rigs and six land-based workover rigs. In the western and
northern regions of Africa and in the Middle East, the Company operates two
semisubmersible rigs, six tender-assisted rigs, one swamp barge rig and seven
land-based drilling and workover rigs.
In the Gulf of Mexico, the Company operates a fleet of 22 self-erecting
platform rigs and is constructing one additional rig, making it the largest
contractor of such offshore platform rigs in this market with approximately 45%
of available capacity and a fleet approximately twice as large as that of its
next largest competitor. The purchase of the Noble Rigs will position the
Company as the second largest operator in the Gulf of Mexico of mat-supported
jackup rigs capable of operating in water depths of 200 feet or greater.
BUSINESS STRATEGY
The Company's strategy is focused on achieving revenue and earnings growth
through:
o Establishing and maintaining leading market positions to maximize
operating performance.
o Diversifying operations by asset class and geographic region.
o Developing and maintaining long-term relationships with major oil and
gas companies, including state-owned companies, by providing a full
range of drilling expertise and technology.
o Acquiring businesses and assets in international onshore and offshore
markets and domestic offshore markets where significant consolidation
savings and economies of scale can be achieved.
o Acquiring or constructing offshore and deepwater rigs, primarily
supported by long-term contracts.
Implementation of this strategy, including the Recent Transactions, has
repositioned the Company to take advantage of the benefits resulting from
operating a balanced fleet, which the pending purchase of the Noble Rigs is
expected to enhance. These benefits include more stable cash flows produced by
the Company's international and offshore rigs under term contracts, improved
cash flow and higher margins generally produced by offshore rigs, reduced
exposure to downturns in a single market and increased exposure to higher margin
international and offshore drilling and workover markets. To reflect more
accurately the nature and scope of the Company's current operations and business
strategy, the Board of Directors of the Company has approved a proposal to
change the name of the Company to Pride International, Inc., which is being
submitted to the Company's shareholders for their approval at the Company's
Annual Meeting of Shareholders to be held on May 22, 1997.
S-30
<PAGE>
OPERATIONS
LATIN AMERICA
The Company has significant Latin American operations. Through a series of
acquisitions and the deployment of underutilized domestic assets, the Company
now operates 145 land-based rigs in Argentina; three jackup rigs, one
tender-assisted rig, five lake barge rigs and 45 land-based rigs in Venezuela;
19 land-based rigs in Colombia and one land-based drilling rig in Ecuador. The
Company continues to review opportunities to expand in Latin America.
ARGENTINA. In Argentina, the Company currently operates 145 land-based
rigs. Of these rigs, 36 are drilling rigs and 109 are workover rigs. The
Argentine oil production market has experienced improved conditions in recent
years as a result of general economic reform, sales of certain state-owned oil
fields to private operators and the privatization of the state-owned oil
company, the predecessor of YPF Sociedad Anonima ("YPF"). These improved
conditions have resulted in additional demand for rig services. Argentine rig
operations are generally conducted in remote regions of the country and require
substantial fixed infrastructure and operating support costs. The Company
believes that its established infrastructure and scale of operations provide it
with a competitive advantage in this market.
VENEZUELA. The Company's land-based fleet in Venezuela currently consists
of 45 rigs, of which 12 are drilling rigs and 33 are workover rigs. In recent
years, the Venezuelan national oil company has entered into operating service
agreements with a number of international oil companies to rehabilitate and
develop approximately 80 "marginal" fields. Development of these fields is
providing additional demand for rig services in Venezuela. In July 1995, the
Venezuelan Congress enacted legislation that created a new mechanism for private
sector involvement in the oil and gas industry in that country through
production sharing contracts. As of December 1996, eight of Venezuela's largest
undeveloped properties had been awarded to multinational oil operators for
development through such contracts, and the Venezuelan government has recently
identified 20 additional properties for development by private-sector operators.
The Company operates three jackup rigs, five barge rigs and a
tender-assisted rig on Lake Maracaibo, Venezuela. Two of the jackup rigs that
the Company operates under contracts expiring in 1999 are owned by Maraven S.A.
The other jackup rig is owned by the Company and operates under a contract
expiring in 1998. In 1995, the Company placed two barge rigs into service on
Lake Maracaibo that are working under ten-year contracts for Lagoven, S.A.
Through a joint venture in which the Company owns a 62.5% interest, the Company
operates two additional barge rigs under contracts expiring at the end of May
1997, at which time the customer has a buyout option for nominal consideration.
The Company operates the remaining barge rig and the tender-assisted rig under
management contracts with Maraven S.A. that expire in December 1997.
COLOMBIA. The Company currently operates 13 land-based drilling rigs and
six land-based workover rigs in Colombia. The Colombian government has recently
enacted policies to encourage oil and gas exploration and production activities
and awarded additional properties for development to major international oil
operators under production sharing contracts. The Company believes it is well
positioned to capitalize on new opportunities in Colombia.
AFRICA AND THE MIDDLE EAST
OFFSHORE. The Company's semisubmersible rig NYMPHEA is currently drilling
offshore West Africa for Chevron Corp. ("Chevron"). Upon completion of the
Chevron contract, the NYMPHEA will be upgraded at an estimated cost of
approximately $10 million, after which the rig will be mobilized to Brazil in
May 1997 to work under a four-year contract with Petrobras to drill
high-pressure, high-temperature wells. The Company's semisubmersible rig SOUTH
SEAS DRILLER, which was recently upgraded, is currently operating in Nigeria.
The Company owns six tender-assisted rigs in Africa and the Middle East,
five of which are currently in West Africa, a highly consolidated market with
only three competitors operating seven tenders. The ALLIGATOR and BARRACUDA are
currently contracted through the end of 1997, with two six-months options.
S-31
<PAGE>
Through a joint venture, the Company owns a 12.5% interest in the self-erecting
tender AL BARAKA I. In addition to its ownership interest, the Company also
manages the rig for an operating fee. The CORMORANT is currently under contract
through October 1997, with a six-month option. The Company has recently acquired
the tender-assisted rig TENAGA, which is located in Cameroon and being marketed
for several projects. The ILE DE LA MARTINIQUE is currently stacked in the
United Arab Emirates. The Company operates one swamp barge rig, the BINTANG
KALIMANTAN, in Nigeria, which is currently contracted through April 1997, with a
12-month option.
LAND-BASED. The Company operates six land-based drilling rigs and one
land-based workover rig in Algeria, Libya and Oman, all of which were acquired
in the Forasol transaction.
GULF OF MEXICO
In June 1994, the Company commenced operations in the Gulf of Mexico
through the acquisition of the largest fleet of offshore self-erecting platform
workover rigs in that market. The Company has made substantial capital
improvements in this fleet and believes its fleet of 22 platform rigs is one of
the most technologically advanced fleets in the industry, which the Company
believes has led to higher day rates and increased utilization of these rigs.
OTHER
The Company owns a tender-assisted rig, the ILE DE SEINE, in Southeast
Asia, two land-based drilling rigs in Pakistan, and five land-based drilling
rigs and two land-based workover rigs in Europe. In addition, the Company has
two land-based workover rigs in Russia, both of which are currently stacked.
S-32
<PAGE>
RIG FLEET
OFFSHORE RIGS
The following table sets forth, as of April 1, 1997, certain information
concerning the offshore rig fleet operated by the Company:
OFFSHORE RIGS
<TABLE>
<CAPTION>
YEAR WATER DRILLING
BUILT OR DEPTH DEPTH
RIG NAME RIG TYPE/DESIGN REBUILT RATING RATING LOCATION STATUS
FEET) (FEET)
<S> <C> <C> <C> <C> <C>
SEMISUBMERSIBLE RIGS -- 2
Nymphea Third generation 1987 1,500 25,000 Cabinda Working
South Seas Driller Second generation 1977 1,000 20,000 Nigeria Working
TENDER-ASSISTED RIGS -- 8
Alligator Self-erecting barge 1992 330 20,000 Angola Working
Barracuda Self-erecting barge 1992 330 20,000 Angola Working
Cormorant Self-erecting ship-shaped 1996 300 16,400 Angola Working
Al Baraka I Self-erecting barge 1994 650 20,000 Cabinda Contracted
Ile de Seine Self-erecting barge 1990 450 16,000 Malaysia Contracted
Ile de la Martinique Ship-shaped 1995 400 16,000 UAE Stacked
GP-18 Tender barge 1985 150 20,000 Venezuela Working
Tenaga Tender barge 1978 600 20,000 Cameroon Available
JACKUP RIGS -- 15*
Ile du Levant Independent leg cantilever 1991 270 20,000 Venezuela Working
GP-19 Independent leg cantilever 1987 150 20,000 Venezuela Working
GP-20 Independent leg cantilever 1987 200 20,000 Venezuela Working
Marvin Winters* Mat-supported cantilever 1982 250 20,000 Gulf of Mexico Working
Jack Clark* Mat-supported slot 1996 250 20,000 Gulf of Mexico Working
Jim Bawcom* Mat-supported slot 1981 250 25,000 Gulf of Mexico Working
Cliff Matthews* Mat-supported slot 1976 250 20,000 Gulf of Mexico Working
W.T. Johnson* Mat-supported cantilever 1982 200 20,000 Gulf of Mexico Working
Duke Hinds* Mat-supported cantilever 1990 200 25,000 Gulf of Mexico Working
Frank Lamaison* Mat-supported cantilever 1982 200 20,000 Gulf of Mexico Working
Red McCarty* Mat-supported cantilever 1982 200 25,000 Gulf of Mexico Working
Mac McCoy* Mat-supported cantilever 1982 200 20,000 Gulf of Mexico Working
NN-1* Mat-supported slot 1990 45 20,000 Nigeria Working
Frank Reiger** Mat-supported slot 1975 250 20,000 Gulf of Mexico Shipyard
Cecil Forbes* Mat-supported slot 1997 300 20,000 Gulf of Mexico Stacked
BARGE RIGS -- 6
Pride I Floating cantilever 1995 150 20,000 Venezuela Working
Pride II Floating cantilever 1995 150 20,000 Venezuela Working
Rig 50 Floating cantilever 1992 150 20,000 Venezuela Working
Rig 51 Floating cantilever 1992 150 20,000 Venezuela Working
GP-10 Floating cantilever 1967 120 20,000 Venezuela Working
Bintang Kalimantan Posted swamp 1995 NA 15,000 Nigeria Working
PLATFORM RIGS -- 22***
Rig 11 Light mechanical 1993 NA 10,000 Gulf of Mexico Available
Rig 14 Light mechanical 1994 NA 10,000 Gulf of Mexico Working
Rig 15 Light mechanical 1994 NA 10,000 Gulf of Mexico Available
Rig 30 Intermediate mechanical 1986 NA 15,000 Gulf of Mexico Stacked
Rig 80 Intermediate mechanical 1987 NA 15,000 Gulf of Mexico Stacked
Rig 100 Intermediate mechanical 1990 NA 15,000 Gulf of Mexico Available
Rig 110 Intermediate mechanical 1990 NA 15,000 Gulf of Mexico Working
Rig 130 Intermediate mechanical 1991 NA 15,000 Gulf of Mexico Available
Rig 170 Intermediate mechanical 1991 NA 15,000 Gulf of Mexico Working
Rig 200 Intermediate mechanical 1993 NA 15,000 Gulf of Mexico Available
Rig 210 Intermediate mechanical 1996 NA 15,000 Gulf of Mexico Working
Rig 220 Intermediate mechanical 1995 NA 15,000 Gulf of Mexico Working
Rig 650E Intermediate electric 1994 NA 15,000 Gulf of Mexico Working
Rig 651E Intermediate electric 1995 NA 15,000 Gulf of Mexico Contracted
Rig 653E Intermediate electric 1995 NA 15,000 Gulf of Mexico Contracted
Rig 750E Heavy electric 1992 NA 16,500 Gulf of Mexico Working
Rig 751E Heavy electric 1995 NA 16,500 Gulf of Mexico Working
Rig 951 Heavy mechanical 1995 NA 18,000 Gulf of Mexico Working
Rig 952 Heavy mechanical 1995 NA 18,000 Gulf of Mexico Working
Rig 1002E Heavy electric 1996 NA 20,000 Gulf of Mexico Working
Rig 1003E Heavy electric 1996 NA 20,000 Gulf of Mexico Working
Rig 1501E Heavy electric 1996 NA 25,000 Gulf of Mexico Working
</TABLE>
(NOTES ON FOLLOWING PAGE)
S-33
<PAGE>
- ------------
* Pending closing of the purchase of the Noble Rigs. See "The Noble Rigs."
** Currently under contract and scheduled to be placed in service in the Gulf
of Mexico by May 1997.
*** On April 1, 1997, the Company's heavy electric platform workover Rig 1001E
operating in the Gulf of Mexico was destroyed by a blowout and resulting
fire. No personnel were injured. The Company has a substantially identical
rig under construction, which it expects to place in service in July 1997.
The Company currently intends to use insurance proceeds from the loss of Rig
1001E to construct an additional platform rig for its Gulf of Mexico fleet.
SEMISUBMERSIBLE RIGS. The Company's two semisubmersible rigs are floating
platforms that, by means of a water ballasting system, can be submerged to a
predetermined depth so that a substantial portion of the lower hulls, or
pontoons, are below the water surface during drilling operations. The rig is
"semi-submerged," remaining afloat in a position where the lower hull is about
60 to 80 feet below the water line and the upper deck protrudes well above the
surface. This type of rig maintains its position over the well through the use
of an anchoring system or computer-controlled thruster system.
TENDER-ASSISTED RIGS. Of the eight tender-assisted rigs operated by the
Company, four are equipped with top-drive drilling systems. Tender-assisted rigs
are generally non-self-propelled barges, which are moored alongside a platform
and contain crew quarters, mud pits, mud pumps and power generation systems. The
only equipment transferred to the platform for drilling or workover operations
is the derrick equipment set consisting of the substructure, drillfloor, derrick
and drawworks. As a result, tender-assisted rigs are less hazardous and allow
smaller, less costly platforms to be used for development projects. Self-
erecting tenders carry their own derrick equipment set and have a crane capable
of erecting the derrick on the platform, thereby eliminating the cost associated
with a separate derrick barge and related equipment.
JACKUP RIGS. The three jackup rigs currently operated by the Company are
mobile, self-elevating drilling platforms equipped with legs that can be lowered
to the ocean or lake floor until a foundation is established to support the
drilling platform. The rig legs may have a lower hull or mat attached to the
bottom to provide a more stable foundation in soft bottom areas. Independent leg
rigs are better suited for harsher or uneven seabed conditions. Jackup rigs are
generally subject to a maximum water depth of approximately 350 to 400 feet,
while some jackup rigs may drill in water depths as shallow as ten feet. The
water depth limit of a particular rig is determined by the length of the rig's
legs and the operating environment. Moving a rig from one drill site to another
involves lowering the hull down into the water until it is afloat and then
jacking up its legs with the hull floating on the surface of the water. The hull
is then towed to the new drilling site. A cantilever jackup has a feature that
allows the drilling platform to be extended out from the hull, allowing it to
perform drilling or workover operations over a pre-existing platform or
structure. Certain cantilever jackup rigs have "skid-off" capability, which
allows the derrick equipment to be skidded onto an adjacent platform, thereby
increasing the operational capacity of the rig. Slot type jackup rigs are
configured for drilling operations to take place through a slot in the hull.
Slot type rigs are usually used for exploratory drilling because their
configuration makes them difficult to position over existing platforms or
structures. Each of the Company's three jackup rigs is an independent leg rig
equipped with cantilevers, and one has skid-off capability.
BARGE RIGS. The Company operates five barge rigs in Lake Maracaibo,
Venezuela and one swamp barge in Nigeria. Rigs operating in Venezuela are
generally barges that have been designed to work in a floating mode with a
cantilever feature and a mooring system that enables the rig to operate in
waters up to 150 feet deep. In recent years, demand for barge rigs for drilling
and workover services in certain international markets, especially Venezuela,
has increased. The swamp barge rig in Nigeria is held in position by means of
legs or "posts" submerged to the ocean floor.
PLATFORM RIGS. The Company's 22 platform rigs in the Gulf of Mexico
consist of well servicing equipment and machinery arranged in modular packages
that are transported to and assembled and installed on fixed offshore platforms
owned by the customer. Fixed offshore platforms are steel tower-like structures
that stand on the ocean floor, with the top portion, or platform, above the
water level, providing the foundation upon which the platform rig is placed. One
of the Company's platform rigs is capable of
S-34
<PAGE>
operating at well depths of up to 25,000 feet. The Company is using its platform
rigs to provide an increasing amount of drilling and horizontal reentry services
using portable top drives, enhanced pumps and solids control equipment for
drilling fluids as well as for workover services.
LAND-BASED RIGS
The following table sets forth, as of April 1, 1997, certain information
concerning the land-based rig fleet operated by the Company:
LAND-BASED RIGS
COUNTRY TOTAL DRILLING WORKOVER
----- -------- --------
LATIN AMERICA -- 210
Argentina....................... 145 36 109
Venezuela....................... 45 12 33
Colombia........................ 19 13 6
Ecuador......................... 1 1 --
AFRICA/MIDDLE EAST -- 7
Algeria......................... 3 3 --
Libya........................... 2 1 1
Oman............................ 2 2 --
OTHER -- 11.......................... 11 7 4
HELD FOR REDEPLOYMENT -- 10
United States................... 10 1 9
--
----- ---
Total Land Rigs............ 238 76 162
===== == ===
A land-based drilling rig consists of engines, drawworks, a mast,
substructure, pumps to circulate the drilling fluid, blowout preventers, drill
string and related equipment. The engines power a rotary table that turns the
drill string, causing the drill bit to bore through the subsurface rock layers.
Rock cuttings are carried to the surface by the circulating drilling fluid. The
intended well depth and the drilling site conditions are the principal factors
that determine the size and type of rig most suitable for a particular drilling
job.
A land-based well servicing rig consists of a mobile carrier, engine,
drawworks and derrick. The primary function of a well servicing rig is to act as
a hoist so that pipe, rods and down-hole equipment can be run into and out of a
well. All of the Company's well servicing rigs can be readily moved between well
sites and between geographic areas of operations.
SERVICES PROVIDED
DRILLING SERVICES
The Company provides contract drilling services to oil and gas exploration
and production companies through the use of mobile offshore and land-based
drilling rigs. Generally, land-based rigs and offshore platform rigs operate
with crews of six to 17 persons while semisubmersible rigs, tender-assisted
rigs, jackup rigs and barge rigs operate with crews of 15 to 25 persons. The
Company provides the rig and drilling crew and is responsible for the payment of
operating and maintenance expenses. Mobilization expenses are generally paid by
the customer.
MAINTENANCE AND WORKOVER SERVICES
Maintenance services are required on producing oil and gas wells to ensure
efficient, continuous operation. These services consist of mechanical repairs
necessary to maintain production from the well, such as repairing parted sucker
rods, replacing defective downhole pumps in an oil well or replacing defective
tubing in a gas well. The Company provides the rigs, equipment and crews for
these maintenance services, which are performed on both oil and gas wells but
which are more often required on oil wells.
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<PAGE>
Many of the Company's rigs also have pumps and tanks that can be used for
circulating fluids into and out of the well. Typically, maintenance jobs are
performed on a series of wells in geographic proximity to each other, take less
than 48 hours per well to complete and require little, if any,
revenue-generating equipment other than a rig.
Maintenance services are generally required throughout the life of a well.
The need for these services does not depend on the level of drilling activity
and is generally independent of short-term fluctuations in oil and gas prices.
Accordingly, the demand for maintenance services is generally more stable than
for other well servicing activities. The general level of maintenance, however,
is affected by changes in the total number of producing oil and gas wells in a
region.
In addition to periodic maintenance, producing oil and gas wells
occasionally require major repairs or modifications, called "workovers."
Workover services include the opening of new producing zones in an existing
well, recompletion of a well in which production has declined, drilling out
plugs and packers and the conversion of a producing well to an injection well
during enhanced recovery operations. These extensive workover operations are
normally performed by a well servicing rig with additional specialized accessory
equipment, which may include rotary drilling equipment, mud pumps, mud tanks and
blowout preventers, depending upon the particular type of workover operation.
Most of the Company's rigs are designed and equipped to handle the more complex
workover operations. A workover may last from a few days to several weeks.
ENGINEERING SERVICES
The Company believes that the engineering and design expertise acquired in
the Forasol transaction will become important factors in the growth and success
of its business. In Paris, the Company employs a technical staff dedicated to
designing specialized drilling equipment to fill specific customer requirements.
The engineering staff has designed and managed the fabrication of seven of the
rigs in the offshore rig fleet. The Company also has an engineering staff that
provides turnkey and project management services, reservoir drainage analysis
and well engineering, which enhances the Company's contract drilling services.
COMPETITION
Competition in the international markets in which the Company operates
ranges from large multinational competitors offering a wide range of well
servicing and drilling services to smaller, locally owned businesses. The
Company believes that it is competitive in terms of pricing, performance,
equipment, safety, availability of equipment to meet customer needs and
availability of experienced, skilled personnel in those international areas in
which it operates. Currently, the Company has strong market positions in the
Gulf of Mexico, northern and western Africa, Argentina, Venezuela and Colombia,
and believes it is well positioned in the Middle East.
The Company believes that in the Gulf of Mexico there are approximately
12,000 producing oil and gas wells and that such wells generally require
workovers about once every five years to maintain optimal production levels. The
market for offshore platform workover rig services is highly competitive, with
the Company's two most significant competitors having an aggregate of
approximately 19 rigs compared to 22 rigs for the Company.
In periods of low rig utilization, drilling contracts are generally awarded
on a competitive bid basis and, while an operator may consider quality of
service and equipment, intense price competition is the primary factor in
determining which contractor, among those with suitable rigs, is awarded a job.
Certain of the Company's competitors have greater financial resources than the
Company, which may enable them to better withstand periods of low utilization,
to compete more effectively on the basis of price, to build new rigs or to
acquire existing rigs.
CUSTOMERS
In international markets, the Company works for government-owned oil
companies, large multinational oil companies and locally owned independent
operators. During 1996, approximately 40% of the
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<PAGE>
revenues from the operations conducted in Argentina by the Company was derived
from YPF, the successor to the operations of the former state-owned oil company.
Services provided to YPF accounted for approximately 16% of the Company's
consolidated revenues for 1996. The remainder of the Company's Argentine
customers are large multinational oil companies and locally owned independent
operators. In Venezuela, the Company provides services for three subsidiaries of
Petroleos de Venezuela, S.A., the state-owned oil company, as well as
multinational oil companies. Forasol derived 16%, 30% and 36% of its
consolidated revenues during 1996, 1995 and 1994, respectively, from Elf
Aquitaine Group. During the year ended December 31, 1996, an additional 15%,
14%, 14% and 10% of Forasol's consolidated revenues were derived from Maraven
S.A., Chevron, Shell Oil Company and Total, S.A., respectively. The Company's
U.S. customers are predominantly major integrated and large independent
operators. One customer, Shell Oil Company, accounted for approximately 22% of
revenues from domestic offshore operations during 1996.
CONTRACTS
The Company's drilling contracts are awarded through competitive bidding or
on a negotiated basis. The contract terms and rates vary depending on
competitive conditions, the geographical area, the geological formation to be
drilled, the equipment and services to be supplied, the on-site drilling
conditions and the anticipated duration of the work to be performed.
Oil and gas well drilling contracts are carried out on either a dayrate,
footage or turnkey basis. Under dayrate contracts, the Company charges the
customer a fixed charge per day regardless of the number of days needed to drill
the well. In addition, dayrate contracts usually provide for a reduced day rate
(or lump sum amount) for mobilizing the rig to the well location and for
assembling and dismantling the rig. Under dayrate contracts, the Company
ordinarily bears no part of the costs arising from down-hole risks (such as time
delays for various reasons, including a stuck or broken drill string or
blowouts). Most of the Company's contracts are on a dayrate basis. Other
contracts provide for payment on a footage basis, whereby the Company is paid a
fixed amount for each foot drilled regardless of the time required or the
problems encountered in drilling the well. The Company may also enter into
turnkey contracts, whereby it agrees to drill a well to a specific depth for a
fixed price and to bear some of the well equipment costs. Compared to dayrate
contracts, footage and turnkey contracts involve a higher degree of risk to the
Company and, accordingly, normally provide greater profit potential. Two of the
Company's jackup rigs in Venezuela are currently operating under turnkey
contracts.
In international markets, contracts generally provide for longer terms than
contracts in domestic offshore markets. When contracting abroad, the Company is
faced with the risks of currency fluctuation and, in certain cases, exchange
controls. Typically, the Company limits these risks by obtaining contracts
providing for payment in freely convertible foreign currency or U.S. dollars. To
the extent possible, the Company seeks to limit its exposure to potentially
devaluating currencies by matching its acceptance thereof to its expense
requirements in such local currencies. There can be no assurance that the
Company will be able to continue to take such actions in the future, thereby
exposing the Company to foreign currency fluctuations which could have a
material adverse effect upon its results of operations and financial condition.
Currently, foreign exchange in Argentina, Venezuela and Colombia is carried out
on a free-market basis. There can be no assurances, however, that the local
monetary authorities in these countries will not implement exchange controls in
the future.
The Company's contracts with Lagoven, S.A. for the operation of two barge
rigs on Lake Maracaibo, Venezuela provide for a term that runs through 2004.
Rates under the contracts are subject to contractual escalation and are
denominated in part in U.S. dollars and in part in local currency. The portion
of the rate denominated in U.S. dollars may be paid in local currency based on
prevailing exchange rates provided that exchange into U.S. dollars can be
readily effected.
S-37
<PAGE>
SEASONALITY
In general, the Company's business activities are not significantly
affected by seasonal fluctuations. The Company's rigs are located in
geographical areas which are not subject to severe weather that would halt
operations for prolonged periods.
LEGAL PROCEEDINGS
The Company is routinely involved in litigation incidental to its business,
which often involves claims for significant monetary amounts, some of which
would not be covered by insurance. In the opinion of management, none of the
existing litigation will have a material adverse effect on the Company's
financial position or results of operations.
EMPLOYEES
The Company currently employs approximately 2,000 salaried employees and
approximately 6,400 hourly paid employees. Approximately 800 of the employees
are located in the United States and 7,600 are located abroad. Hourly rig crew
members constitute the vast majority of employees. None of the Company's U.S.
employees are represented by a collective bargaining unit. Many of the Company's
international employees are subject to industry-wide labor contracts within
their respective countries. Management believes that the Company's employee
relations are good.
THE NOBLE RIGS
In February 1997, the Company entered into a definitive agreement to
purchase 12 mat-supported jackup rigs and the hull of an additional jackup rig
from Noble for $265.0 million in cash. Nine of the rigs are currently operating
in the Gulf of Mexico, one rig is operating offshore West Africa, one is
undergoing refurbishment and two (including the rig hull) are stacked awaiting
refurbishment. The Company expects to spend at least $20.0 million to upgrade
and equip the two rigs awaiting refurbishment. For the year ended December 31,
1996, the nine rigs that were operating generated revenues of approximately
$68.7 million, at an average operating rate of approximately $22,000 per rig per
day. Recent high demand for these types of rigs, which typically work under
well-to-well contracts, has resulted in a significant upward trend in day rates,
with the current average contracted rate being approximately $28,000 per day.
The Noble Rigs are mobile, self-elevating drilling platforms equipped with
legs that can be lowered to the ocean floor until a foundation is established to
support the hull, which contains the drilling equipment, jacking system, crew
quarters, loading and unloading facilities, storage areas for bulk and liquid
materials, helicopter landing deck and other related equipment. All of the Noble
Rigs are mat-supported rigs, of which six are cantilever design, a feature that
permits the drilling platform to be extended out from the hull, allowing
drilling or workover capabilities over pre-existing platforms or structures. The
other six rigs are slot-type design configured for the drilling operations to
take place through a keyway in the hull. Jackup rigs with the cantilever feature
historically have achieved higher day rates and utilization levels. The Noble
Rigs are capable of drilling to maximum depths of 20,000 to 25,000 feet in water
depths of up to 250 feet for the cantilever units and 300 feet for the slot
units.
Purchase of the Noble Rigs by the Company is subject to certain conditions,
including completion by the Company of satisfactory financing arrangements. The
closing of the transaction is expected to occur concurrently with the closing of
the Notes Offering. If the closing occurs prior to June 3, 1997, the purchase
price will be adjusted to compensate Noble for the estimated operating cash
flows the Noble Rigs would have otherwise generated for Noble's benefit until
that date. The Company has placed in escrow a deposit of $20.0 million, which
Noble has the right to retain if the Company fails to secure adequate financing
or is otherwise unable to close by June 30, 1997.
S-38
<PAGE>
MANAGEMENT
The following table and descriptions set forth information regarding the
directors and executive officers of the Company. Directors are elected at the
Company's annual meeting of shareholders and serve for five-year terms or until
their successors are elected and qualified or until their earlier resignation or
removal in accordance with the Company's bylaws. Officers are elected annually
by the Board of Directors and serve until their successors are chosen or until
their resignation or removal.
<TABLE>
<CAPTION>
NAME AGE* POSITION
<S> <C> <C>
Ray H. Tolson(1)........................ 62 Chairman of the Board and Chief Executive Officer
Paul A. Bragg........................... 41 President and Chief Operating Officer
James W. Allen.......................... 53 Senior Vice President -- Operations
Gerard Godde............................ 54 Senior Vice President -- Forasol Operations
Earl W. McNiel.......................... 38 Vice President and Chief Financial Officer
Robert W. Randall....................... 54 Vice President -- General Counsel and Secretary
John O'Leary............................ 41 Vice President -- International Marketing
Christian J. Boon Falleur............... 50 Director
James B. Clement(1)(2)(3)............... 51 Director
Remi Dorval............................. 46 Director and Vice Chairman
Jorge E. Estrada M...................... 49 Director
Ralph D. McBride(1)(2)(3)............... 50 Director
Thomas H. Roberts, Jr.(2)............... 72 Director
James T. Sneed(1)(3).................... 65 Director
</TABLE>
- -----------------------------
* As of April 1, 1997
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
Ray H. Tolson was elected Chairman of the Board in December 1993. He has
served as a director since August 1988 and Chief Executive Officer of the
Company and its predecessor since 1975. Mr. Tolson was President of the Company
from February 1975 to February 1997.
Paul A. Bragg has been President of the Company since February 1997. He
joined the Company in July 1993 as its Vice President and Chief Financial
Officer. From 1988 until he joined the Company, Mr. Bragg was an independent
business consultant and managed private investments. He previously served as
Vice President and Chief Financial Officer of Energy Service Company, Inc., an
oilfield services company, from 1983 through 1987.
James W. Allen joined the Company in January 1993 as its Vice
President -- International Operations (Latin America). In February 1996, he was
named Senior Vice President -- Operations. He became Senior Vice President of
Pride International Ltd. in May 1994. From 1988 through 1992, Mr. Allen was an
independent business consultant and managed private investments. From 1984 to
1988, he was Vice President Latin America for Energy Service Company, Inc. Mr.
Allen has 28 years of oilfield experience with several different companies.
Gerard Godde was named Senior Vice President of the Company in March 1997
in connection with the Forasol transaction. Mr. Godde has served as Senior Vice
President and Chief Operating Officer of Forasol since April 1996 and Managing
Director of Forasol since 1987. Mr. Godde joined Forasol in 1968 and has been
involved with the management of its various offshore and land operations in
Africa, the Middle East and North America.
Earl W. McNiel has been Vice President and Chief Financial Officer of the
Company since February 1997. He joined the Company in September 1994 as its
Chief Accounting Officer. From 1990 to 1994, Mr.
S-39
<PAGE>
McNiel served as Chief Financial Officer of several publicly owned waste
management companies. From 1987 to 1990, he was employed by Energy Service
Company, Inc. as Manager, Finance.
Robert W. Randall has been Vice President and General Counsel of the
Company since May 1991. He was elected Secretary of the Company in 1993. Prior
to 1991, he was Senior Vice President, General Counsel and Secretary for Tejas
Gas Corporation, a natural gas transmission company.
John O'Leary was named Vice President -- International Marketing in March
1997 in connection with the Forasol transaction. Mr. O'Leary has been Manager,
Marketing and Business Development of Forasol since June 1993, with primary
responsibility for worldwide business development. Mr. O'Leary joined Forasol
S.A. in August 1985.
Christian J. Boon Falleur became a director of the Company in March 1997 in
connection with the Forasol transaction. Prior to becoming a director, Mr. Boon
Falleur was a Supervisory Director and Executive Vice President of Forasol. He
has been affiliated since 1972 with Ackermans & van Haaren Group, a publicly
traded company listed on the Brussels Stock Exchange, and is currently in charge
of its energy services and construction sections.
James B. Clement has been a director of the Company since November 1993.
Since 1977, he has been an executive officer of Offshore Logistics, Inc. and has
served as its President, Chief Executive Officer and a director since 1988.
Remi Dorval became a director and vice chairman of the Company in March
1997 in connection with the Forasol transaction. Prior to becoming a director,
Mr. Dorval was a Supervisory Director and Chief Executive Officer of Forasol.
Since 1990, he has been a supervisory director of Soletanche Group, a privately
held French company, and is in charge of its interests in the oil and gas
sector.
Jorge E. Estrada M. has been a director of the Company since October 1993.
For more than five years, Mr. Estrada has been President and Chief Executive
Officer of JEMPSA Media and Entertainment, a company specializing in the Spanish
and Latin American entertainment industry. Previously Mr. Estrada served as
President -- Worldwide Drilling Division of Geosource and Vice President of
Geosource Exploration Division -- Latin America.
Ralph D. McBride became a director of the Company in September 1995. Mr.
McBride has been a partner with the law firm of Bracewell & Patterson, Houston,
Texas, since 1980.
Thomas H. Roberts, Jr. has been a director of the Company since 1988. He
held a variety of management positions with DEKALB Energy Company until his
retirement in 1996. Mr. Roberts is currently a director of IMC Global Inc., a
public company engaged in the production and distribution of crop nutrients and
related products.
James T. Sneed has been a director of the Company since October 1992. In
1991 he retired after 37 years of employment with Mobil Oil Corporation where he
was Production Manager USA.
S-40
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
relating to the Common Stock, the Company has agreed to sell to the several
Underwriters named below (the "Underwriters"), and the several Underwriters
have agreed to purchase, the number of shares of Common Stock set forth opposite
their respective names:
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
Donaldson, Lufkin & Jenrette
Securities Corporation............. 2,020,000
Jefferies & Company, Inc............. 1,212,000
Robert W. Baird & Co.
Incorporated....................... 202,000
Morgan Keegan & Company, Inc......... 202,000
Simmons & Company International...... 202,000
Southcoast Capital Corporation....... 202,000
Hanifen, Imhoff Inc.................. 65,000
Johnson Rice & Company L.L.C......... 65,000
Principal Financial Securities,
Inc................................ 65,000
Rauscher Pierce Refsnes, Inc......... 65,000
----------------
Total........................... 4,300,000
================
The Underwriters have advised the Company that they propose initially to
offer the Common Stock to the public at the public offering price set forth on
the cover page of this Prospectus Supplement, and to certain dealers at such
price less a concession not in excess of $.45 per share. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $.10 to
certain other dealers. After the initial offering, the public offering price and
concessions may be changed.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus Supplement to purchase up to an aggregate of
645,000 additional shares of Common Stock to cover over-allotments, if any. If
the Underwriters exercise their over-allotment option, the Underwriters will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares as the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to 4,300,000.
During and after the Common Stock Offering, the Underwriters may purchase
and sell the Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the Common Stock Offering. The
Underwriters may also impose a penalty bid, whereby selling concessions allowed
to syndicate members or other broker-dealers for the shares of Common Stock sold
in the Common Stock Offering for their account may be reclaimed by the syndicate
if such shares are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Common Stock, which may be higher than the price that might
otherwise prevail in the open market, and, if commenced, may be discontinued at
any time.
The Company has agreed to indemnify the Underwriters against or make
contributions relating to certain liabilities, including liabilities under the
Securities Act.
The Underwriting Agreement will provide that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock are
subject to the approval of certain legal matters by counsel to the Underwriters
and to certain other conditions. The Underwriters are committed to take and pay
for all of the shares of Common Stock if any are taken.
In connection with the Common Stock Offering, certain Underwriters and
selling group members (if any) or their respective affiliates who are qualified
market makers on the Nasdaq National Market may engage in passive market making
transactions in the Common Stock on the Nasdaq National Market in accordance
with Rule 103 of Regulation M under the Exchange Act during the one business day
period
S-41
<PAGE>
before commencement of offers or sales of the Common Stock. Passive market
making transactions must comply with applicable volume and price limits and be
identified as such. In general, a passive market maker may display its bid at a
price not in excess of the highest independent bid for such security; if all
independent bids are lowered below the passive market maker's bid, however, such
bid must then be lowered when certain purchase limits are exceeded.
In connection with the Forasol acquisition, Jefferies & Company, Inc. acted
as financial advisor to Forasol, and Simmons & Company International acted as
financial advisor to the Company, and both received customary fees in connection
therewith.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock offered hereby
will be passed upon for the Company by Baker & Botts, L.L.P., Houston, Texas,
and for the Underwriters by Vinson & Elkins L.L.P., Houston, Texas. McGlinchey
Stafford, a professional limited liability company, New Orleans, Louisiana, will
pass on all matters of Louisiana law in this connection.
S-42
<PAGE>
PROSPECTUS
[LOGO] $500,000,000
PRIDE PETROLEUM SERVICES, INC.
DEBT SECURITIES
COMMON STOCK
------------------
Pride Petroleum Services, Inc. (the "Company") may offer from time to
time its unsecured debt securities consisting of notes, debentures or other
evidences of indebtedness (the "Debt Securities"). The Company may also offer
and sell from time to time shares of its common stock, no par value (the
"Common Stock"). The aggregate initial offering price of the Debt Securities
and the Common Stock to be offered by the Company hereby (the "Securities")
will not exceed $500,000,000 or, if applicable, the equivalent thereof in any
other currency or currency unit. The Securities may be offered as separate
series in amounts, at prices and on terms to be determined in light of market
conditions at the time of sale and set forth in a Prospectus Supplement.
The terms of each series of Debt Securities, including, where applicable,
the specific designation, aggregate principal amount, authorized denominations,
maturity, rate or rates (or method of determining the same) and time or times of
payment of any interest, any terms for optional or mandatory redemption, which
may include redemption at the option of holders upon the occurrence of certain
events, or payment of additional amounts or any sinking fund provisions, any
provisions with respect to conversion (in the case of Debt Securities that may
be convertible into Common Stock), the initial public offering price, the net
proceeds to the Company and any other specific terms in connection with the
offering and sale of such series will be set forth in a Prospectus Supplement.
As used herein, the Debt Securities shall include securities denominated in
United States dollars or, at the option of the Company if so specified in an
applicable Prospectus Supplement, in any other currency or currency unit, or in
amounts determined by reference to an index. In addition, all or a portion of
the Debt Securities of a series may be issuable in temporary or permanent global
form.
The Securities may be sold directly by the Company to investors, through
agents designated from time to time or to or through underwriters or dealers.
See "Plan of Distribution." If any agents of the Company or any underwriters
are involved in the sale of any Securities in respect of which this Prospectus
is being delivered, the names of such agents or underwriters and any applicable
commissions or discounts will be set forth in a Prospectus Supplement. The net
proceeds to the Company from such sale also will be set forth in a Prospectus
Supplement.
The Common Stock is traded on the Nasdaq National Market under the symbol
"PRDE." Any Common Stock offered will be traded, subject to notice of
issuance, on the Nasdaq National Market.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
The date of this Prospectus is April 4, 1997.
<PAGE>
NO DEALERS, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFERING COVERED
BY THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL, OR A SOLICITATION OF ANY
OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE, OR
TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS
PAGE
----
Available Information................ 3
Incorporation of Certain Documents by
Reference.......................... 3
The Company.......................... 4
Use of Proceeds...................... 4
Ratio of Earnings to Fixed Charges... 4
Description of Debt Securities....... 4
Description of Capital Stock......... 10
Plan of Distribution................. 13
Legal Matters........................ 14
Independent Public Accountants....... 14
------------------
IN CONNECTION WITH AN OFFERING THROUGH UNDERWRITERS, CERTAIN PERSONS
PARTICIPATING IN SUCH OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE,
MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED, INCLUDING,
AMONG OTHERS, OVERALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN THE
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, DURING AND AFTER SUCH OFFERING.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
2
<PAGE>
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
Securities and Exchange Commission (the "Commission"), which can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549; and
at the regional offices of the Commission at 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and at 7 World Trade Center, New York, New
York 10048. Copies of such material can 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 an Internet
web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission
(http://www.sec.gov). The Common Stock is traded on the Nasdaq National Market.
This Prospectus, which constitutes part of a registration statement on Form
S-3 (the "Registration Statement") filed by the Company with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"), omits
certain of the information contained in the Registration Statement. Reference is
hereby made to the Registration Statement and the exhibits thereto, which may be
obtained at the public reference facilities maintained by the Commission as
provided in the preceding paragraph, for further information with respect to the
Company and the Securities offered hereby. Statements contained herein
concerning the provisions of such documents are necessarily summaries of such
documents, and each such statement is qualified in its entirety by reference to
the copy of the applicable document filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act (File No. 0-16961), are incorporated in
this Prospectus by reference and shall be deemed to be a part hereof:
(a) Annual Report on Form 10-K for the year ended December 31, 1996;
(b) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed on February 6, 1989, as such
Registration Statement may be amended from time to time for the purpose of
updating, changing or modifying such description;
(c) Current Report on Form 8-K filed March 7, 1997; and
(d) Current Report on Form 8-K filed March 25, 1997.
All documents filed by the Company with the Commission pursuant to sections
13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering made hereby (by the
filing of a post-effective amendment to the Registration Statement which
indicates that all securities offered hereby have been sold, or which
deregisters all securities then remaining unsold) shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such document. 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 is delivered,
upon the written or oral request of such person, a copy of any or all documents
that have been incorporated herein by reference (not including exhibits to the
documents that have been incorporated herein by reference unless such exhibits
are specifically incorporated by reference in the documents this Prospectus
incorporates). Requests should be directed to
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Robert W. Randall, Secretary, Pride Petroleum Services, Inc., 1500 City West
Blvd., Suite 400, Houston, Texas 77042 (telephone number: (713) 789-1400).
THE COMPANY
The Company is a leading domestic and international provider of contract
drilling and related services, operating both on land and offshore. In recent
years, the Company has focused its growth strategy on the higher margin offshore
and international drilling and workover markets. Consistent with this strategy,
the Company acquired Quitral-Co S.A.I.C., the largest drilling and workover
contractor in Argentina, in April 1996, divested its domestic land-based well
servicing operations in February 1997, and acquired the operating subsidiaries
of Forasol-Foramer N.V., which provide offshore and onshore drilling, workover
and engineering services primarily in Latin America, Africa and the Middle East,
in March 1997. These transactions transformed the Company into one of the
largest and most diversified drilling contractors in the world. The significant
diversity of the Company's rig fleet enables the Company to provide a broad
range of services and to take advantage of market upturns while reducing its
exposure to sharp downturns in any particular market sector or geographic
region. Pride Petroleum Services, Inc. is a Louisiana corporation with its
principal executive offices located at 1500 City West Blvd., Suite 400, Houston,
Texas 77042. Its telephone number at that address is (713) 789-1400.
USE OF PROCEEDS
Except as otherwise described in any Prospectus Supplement or any Pricing
Supplement, the net proceeds from the sale of Securities will be used for
general corporate purposes, which may include refinancings of indebtedness,
working capital, capital expenditures, acquisitions and repurchases and
redemptions of Securities.
RATIO OF EARNINGS TO FIXED CHARGES
YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994 1993 1992
Ratio of Earnings to Fixed Charges...... 2.7x 4.0x 6.2x 5.8x --
The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings before income taxes plus fixed
charges less capitalized interest) by fixed charges (interest expense plus
capitalized interest and the portion of operating lease rental expense that
represents the interest factor). For the year ended December 31, 1992, earnings
were inadequate to cover fixed charges by $1,359,000.
DESCRIPTION OF DEBT SECURITIES
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities to which any Prospectus Supplement
may relate ("Offered Debt Securities"). The particular terms of the Offered
Debt Securities and the extent to which such general provisions may apply will
be described in a Prospectus Supplement relating to such Offered Debt
Securities.
The Debt Securities will be general unsecured obligations of the Company
and will be issued under an Indenture (the "Indenture"), between the Company
and The Chase Manhattan Bank, as trustee (the "Trustee"). The statements under
this caption relating to the Debt Securities and the Indenture are summaries
only and do not purport to be complete. Such summaries make use of terms defined
in the Indenture. Wherever such terms are used herein or particular provisions
of the Indenture are referred to, such terms or provisions, as the case may be,
are incorporated by reference as part of the statements made herein, and such
statements are qualified in their entirety by such reference. Certain defined
terms in the Indenture are capitalized herein. The italicized parenthetical
references below refer to the section numbers in the Indenture, unless otherwise
indicated.
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GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities that can be issued thereunder and provides that Debt Securities may
be issued from time to time thereunder in one or more series, each in an
aggregate principal amount authorized by the Company prior to issuance. The
Indenture does not limit the amount of other unsecured indebtedness or
securities that may be issued by the Company.
Unless otherwise indicated in a Prospectus Supplement, the Debt Securities
will not benefit from any covenant or other provision that would afford Holders
of such Debt Securities special protection in the event of a highly leveraged
transaction involving the Company.
Reference is made to the Prospectus Supplement for the following terms of
the Offered Debt Securities, which will be issued in registered form: (i) the
title and aggregate principal amount of the Offered Debt Securities; (ii) the
date or dates on which the Offered Debt Securities will mature; (iii) the rate
or rates (which may be fixed or variable) per annum, if any, at which the
Offered Debt Securities will bear interest or the method of determining such
rate or rates; (iv) the date or dates from which such interest, if any, will
accrue and the date or dates at which such interest, if any, will be payable;
(v) the terms for redemption or early payment, if any, including any mandatory
or optional sinking fund or analogous provision; (vi) the terms for conversion
or exchange, if any, of the Offered Debt Securities; (vii) whether such Offered
Debt Securities will be issued in the form of one or more global securities and
whether such global securities are to be issuable in temporary global form or
permanent global form; (viii) if other than U.S. dollars, the currency,
currencies or currency unit or units in which such Offered Debt Securities will
be denominated and in which the principal of, and premium and interest, if any,
on, such Offered Debt Securities will be payable; (ix) whether, and the terms
and conditions on which, the Company or a Holder may elect that, or the other
circumstances under which, payment of principal of, or premium or interest, if
any, on, such Offered Debt Securities is to be made in a currency or currencies
or currency unit or units other than that in which such Offered Debt Securities
are denominated; and (x) any other specific terms of the Offered Debt
Securities. Reference is also made to the Prospectus Supplement for information
with respect to any additional covenants that may be included in the terms of
the Offered Debt Securities. (SECTION 301)
No service charge will be made for any registration of transfer or exchange
of the Debt Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
(SECTION 305)
To the extent the Company conducts its operations through Subsidiaries, the
Holders of Debt Securities will have a junior position to any creditors of the
Company's Subsidiaries.
Offered Debt Securities may be sold at a discount (which may be
substantial) below their stated principal amount bearing no interest or interest
at a rate that at the time of issuance is below market rates. Any material
United States federal income tax consequences and other special considerations
applicable thereto will be described in the Prospectus Supplement relating to
any such Offered Debt Securities.
If any of the Offered Debt Securities are sold for any foreign currency or
currency unit or if the principal of, or premium or interest, if any, on, any of
the Offered Debt Securities is payable in any foreign currency or currency unit,
the restrictions, elections, tax consequences, specific terms and other
information with respect to such Offered Debt Securities and such foreign
currency or currency unit will be set forth in the Prospectus Supplement
relating thereto.
EVENTS OF DEFAULT
Unless otherwise provided with respect to any series of Debt Securities,
the following are Events of Default under the Indenture with respect to the Debt
Securities of such series issued under such Indenture: (a) failure to pay
principal of (or premium, if any, on) any Debt Security of such series when due;
(b) failure to pay any interest on any Debt Security of such series when due,
continued for 30 days; (c) failure to deposit any mandatory sinking fund
payment, when due, in respect of the Debt Securities of such series, continued
for 30 days; (d) failure to perform any other covenant of the Company in the
Indenture (other
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than a covenant included in the Indenture for the benefit of a series of Debt
Securities other than such series), continued for 90 days after written notice
as provided in the Indenture; (e) certain events of bankruptcy, insolvency or
reorganization; and (f) any other Event of Default as may be specified with
respect to Debt Securities of such series. (SECTION 501) If an Event of Default
with respect to any outstanding series of Debt Securities occurs and is
continuing, either the Trustee or the Holders of at least 25% in principal
amount of the outstanding Debt Securities of such series (in the case of an
Event of Default described in clause (a), (b), (c) or (f) above) or at least 25%
in principal amount of all outstanding Debt Securities under the Indenture (in
the case of other Events of Default) may declare the principal amount of all the
Debt Securities of the applicable series (or of all outstanding Debt Securities
under the Indenture, as the case may be) to be due and payable immediately. At
any time after a declaration of acceleration has been made, but before a
judgment has been obtained, the Holders of a majority in principal amount of the
outstanding Debt Securities of such series (or of all outstanding Debt
Securities under the applicable Indenture, as the case may be) may, under
certain circumstances, rescind and annul such acceleration. (SECTION 502)
Depending on the terms of other indebtedness of the Company outstanding from
time to time, an Event of Default under the Indenture may give rise to cross
defaults on such other indebtedness of the Company.
The Indenture provides that, within 90 days after the occurrence of a
default in respect of any series of Debt Securities, the Trustee will give to
the Holders of the Debt Securities of such series notice of all uncured and
unwaived defaults known to it; PROVIDED, HOWEVER, that, except in the case of a
default in the payment of the principal of (or premium, if any) or any interest
on, or any sinking fund installment with respect to, any Debt Securities of such
series, the Trustee will be protected in withholding such notice if it in good
faith determines that the withholding of such notice is in the interest of the
Holders of the Debt Securities of such series; and PROVIDED, FURTHER, that such
notice shall not be given until at least 30 days after the occurrence of a
default in the performance or breach of any covenant or warranty of the Company
under such Indenture other than for the payment of the principal of (or premium,
if any) or any interest on, or any sinking fund installment with respect to, any
Debt Securities of such series. For the purpose of this provision, "default"
with respect to Debt Securities of any series means any event that is, or after
notice or lapse of time, or both, would become, an Event of Default with respect
to the Debt Securities of such Series. (SECTION 602)
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series (or, in certain cases, all outstanding Debt Securities
under the Indenture) have the right, subject to certain limitations, to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee with
respect to the Debt Securities of such series (or of all outstanding Debt
Securities under the Indenture). (SECTION 512) The Indenture provides that in
case an Event of Default shall occur and be continuing, the Trustee shall
exercise such of its rights and powers under the applicable Indenture and use
the same degree of care and skill in its exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(SECTION 601) Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any of the Holders of the Debt Securities unless they shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities that might be incurred by it in compliance with such
request. (SECTION 603)
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series (or, in certain cases, all outstanding Debt Securities
under the Indenture) may on behalf of the Holders of all Debt Securities of such
series (or of all outstanding Debt Securities under the Indenture) waive any
past default under the Indenture, except a default in the payment of the
principal of (or premium, if any) or interest on any Debt Security or in respect
of a provision that under the applicable Indenture cannot be modified or amended
without the consent of the Holder of each outstanding Debt Security affected.
(SECTION 513) The Holders of a majority in principal amount of the outstanding
Debt Securities affected thereby may on behalf of the Holders of all such Debt
Securities waive compliance by the Company with certain restrictive provisions
of the Indenture. (SECTION 1006)
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The Company is required to furnish to the Trustee annually a statement as
to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (SECTION 1005)
MODIFICATION
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in principal
amount of the outstanding Debt Securities under the Indenture affected thereby;
PROVIDED, HOWEVER, that no such modification or amendment may, without the
consent of the Holder of each outstanding Debt Security affected thereby, (a)
change the stated maturity date of the principal of, or any installment of
principal of or interest on, any Debt Security, (b) reduce the principal amount
of, or the premium (if any) or interest on, any Debt Security, (c) change the
place or currency, currencies, or currency unit or units of payment of principal
of, or premium (if any) or interest on, any Debt Security, (d) impair the right
to institute suit for the enforcement of any payment on or with respect to any
Debt Security or (e) reduce the percentage in principal amount of outstanding
Debt Securities the consent of the Holders of which is required for modification
or amendment of the Indenture or for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults. (SECTION 902)
The Indenture provides that the Company and the Trustee may, without the
consent of any Holders of Debt Securities, enter into supplemental indentures
for the purposes, among other things, of adding to the Company's covenants,
adding additional Events of Default, establishing the form or terms of Debt
Securities or curing ambiguities or inconsistencies in the Indenture, provided
that such action to cure ambiguities or inconsistencies shall not adversely
affect the interests of the Holders of the Debt Securities in any material
respect.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of any Holders of outstanding Debt
Securities, may consolidate with or merge into, or convey, transfer or lease its
assets substantially as an entirety to, any Person, provided that (i) the Person
formed by such consolidation or into which the Company is merged or that
acquires or leases the assets of the Company substantially as an entirety is a
Person that assumes by supplemental indenture the Company's obligations on the
Debt Securities and under the Indenture, (ii) after giving effect to the
transaction, no Event of Default and no event that, after notice or lapse of
time or both, would become an Event of Default shall have occurred and be
continuing, and (iii) certain other conditions are met. Upon compliance with
these provisions by a successor Person, the Company will (except in the case of
a lease) be relieved of its obligations under the Indenture and the Debt
Securities. (ARTICLE EIGHT)
DISCHARGE AND DEFEASANCE
The Company may terminate its obligations under the Indenture, other than
its obligation to pay the principal of (and premium, if any) and interest on the
Debt Securities of any series and certain other obligations, provided that it
(i) irrevocably deposits or causes to be irrevocably deposited with the Trustee
as trust funds money or U.S. Government Obligations maturing as to principal and
interest sufficient to pay the principal of, any interest on, and any mandatory
sinking funds in respect of, all outstanding Debt Securities of such series on
the stated maturity of such payments or on any redemption date and (ii) complies
with any additional conditions specified to be applicable with respect to the
covenant defeasance of Debt Securities of such series. (SECTION 401)
The terms of any series of Debt Securities may also provide for legal
defeasance pursuant to the Indenture. In such case, if the Company (i)
irrevocably deposits or causes to be irrevocably deposited money or U.S.
Government Obligations as described above, (ii) makes a request to the Trustee
to be discharged from its obligations on the Debt Securities of such series and
(iii) complies with any additional conditions specified to be applicable with
respect to legal defeasance of Debt Securities of such series, then the Company
shall be deemed to have paid and discharged the entire indebtedness on all the
outstanding Debt Securities of such series, the obligations of the Company under
the Indenture and the Debt Securities
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of such series to pay the principal of (and premium, if any) and interest on the
Debt Securities of such series shall cease, terminate and be completely
discharged, and the Holders thereof shall thereafter be entitled only to payment
out of the money or U.S. Government Obligations deposited with the Trustee as
aforesaid, unless the Company's obligations are revived and reinstated because
the Trustee is unable to apply such trust fund by reason of any legal
proceeding, order or judgment. (SECTIONS 403 AND 404).
"U.S. Government Obligations" is defined in the Indenture as direct
noncallable obligations of, or noncallable obligations the payment of principal
of and interest on which is guaranteed by, the United States of America, or to
the payment of which obligations or guarantees the full faith and credit of the
United States of America is pledged, or beneficial interests in a trust the
corpus of which consists exclusively of money or such obligations or a
combination thereof. (SECTION 101)
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Debt Securities are issuable in definitive form as Registered Debt
Securities. (SECTION 301) Reference is made to the Prospectus Supplement for the
terms relating to the form, exchange, registration and transfer of Debt
Securities issuable in temporary or permanent global forms.
Registered Debt Securities of any series will be exchangeable for other
Registered Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations.
Registered Debt Securities may be presented for registration of transfer
(with the form of transfer endorsed thereon duly executed), at the office of the
Security Registrar or at the office of any transfer agent designated by the
Company for such purpose with respect to any series of Debt Securities and
referred to in an applicable Prospectus Supplement, without service charge and
upon payment of any taxes and other governmental charges as described in the
Indenture. Such transfer or exchange will be effected upon the Security
Registrar or such transfer agent, as the case may be, being satisfied with the
documents of title and identity of the Person making the request. The Company
has appointed the Trustee as Security Registrar. (SECTION 305) If a Prospectus
Supplement refers to any transfer agents (in addition to the Security Registrar)
initially designated by the Company with respect to any series of Debt
Securities, the Company may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts, except that, if Debt Securities of a series are issuable
solely as Registered Debt Securities, the Company will be required to maintain a
transfer agent in each Place of Payment for such series. The Company may at any
time designate additional transfer agents with respect to any series of Debt
Securities. (SECTION 1002)
In the event of any redemption in part, the Company shall not be required
to (i) issue, register the transfer of or exchange Registered Debt Securities of
any series during a period beginning at the opening of business 15 days prior to
the selection of Debt Securities of that series for redemption and ending on the
close of business on the day of mailing of the relevant notice of redemption or
(ii) register the transfer of or exchange any Registered Debt Security, or
portion thereof, called for redemption, except the unredeemed portion of any
Registered Debt Security being redeemed in part. (SECTION 305)
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and any premium and interest on Registered Debt Securities will
be made in the designated currency or currency unit at the office of such Paying
Agent or Paying Agents as the Company may designate from time to time, except
that, at the option of the Company, payment of any interest may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register. Unless otherwise indicated in an applicable
Prospectus Supplement, payment of any installment of interest on Registered Debt
Securities will be made to the Person in whose name such Registered Debt
Security is registered at the close of business on the Regular Record Date for
such interest. (SECTION 307)
Unless otherwise indicated in an applicable Prospectus Supplement, the
Corporate Trust Office of the Trustee in New York, New York will be designated
as a Paying Agent for the Company for payments with respect to Debt Securities
issuable solely as Registered Debt Securities. The Company may at any time
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designate additional Paying Agents or rescind the designation of any Paying
Agent or approve a change in the office through which any Paying Agent acts,
except that the Company will be required to maintain a Paying Agent in each
Place of Payment for such series. (SECTION 1002)
All moneys paid by the Company to a Paying Agent for the payment of
principal of and any premium or interest on any Debt Security that remain
unclaimed at the end of three years after such principal, premium or interest
shall have become due and payable will (subject to applicable escheat laws) be
repaid to the Company, and the Holder of such Debt Security or any coupon will
thereafter look only to the Company for payment thereof. (SECTION 1003)
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued, in whole or in part, in the
form of one or more global Debt Securities that would be deposited with a
depositary or its nominee identified in the applicable Prospectus Supplement.
Global Debt Securities may be issued in either temporary or permanent form. The
specific terms of any depositary arrangement with respect to any portion of a
series of Debt Securities and the rights of, and limitations on, owners of
beneficial interests in any such global Debt Security representing all or a
portion of a series of Debt Securities will be described in the applicable
Prospectus Supplement. (SECTION 204)
MEETINGS
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series. (SECTION 1301) A meeting may be called at any time
by the Trustee, and also, upon request, by the Company or the Holders of at
least 10% in principal amount of the Outstanding Debt Securities of such series,
in any such case upon notice given as described under "Notices" below.
(SECTION 1302) Except for any consent that must be given by the Holder of each
Outstanding Debt Security affected thereby, as described under "Modification"
above, any resolution presented at a meeting or adjourned meeting at which a
quorum is present may be adopted by the affirmative vote of the Holders of a
majority in principal amount of the Outstanding Debt Securities of that series;
PROVIDED, HOWEVER, that, except for any consent that must be given by the Holder
of each Outstanding Debt Security affected thereby, as described under
"Modification" above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the Holders of a specified percentage, which is less
than a majority in principal amount of the Outstanding Debt Securities of a
series, may be adopted at a meeting or adjourned meeting duly reconvened at
which a quorum is present by the affirmative vote of the Holders of such
specified percentage in principal amount of the Outstanding Debt Securities of
that series. Subject to the proviso set forth above, any resolution passed or
decision taken at any meeting of Holders of Debt Securities of any series duly
held in accordance with the Indenture will be binding on all Holders of Debt
Securities of that series and any related coupons. The quorum at any meeting
called to adopt a resolution, and at any reconvened meeting, will be Persons
holding or representing a majority in principal amount of the Outstanding Debt
Securities of a series. (SECTION 1304)
GOVERNING LAW
The Indenture and the Debt Securities will be governed by and construed in
accordance with the laws of the State of New York. (SECTION 113)
NOTICES
Notices to Holders of Registered Debt Securities will be given by mail to
the addresses of such Holders as they appear in the Security Register. (SECTION
107)
THE TRUSTEE
The Indenture contains certain limitations on the right of the Trustee, as
a creditor of the Company, to obtain payment of claims in certain cases and to
realize on certain property received with respect to any such claims, as
security or otherwise. (SECTION 613) The Trustee is permitted to engage in other
transactions,
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except that, if it acquires any conflicting interest (as defined), it must
eliminate such conflict or resign. (SECTION 608)
The Trustee has made loans to the Company and its subsidiaries and
affiliates from time to time in the ordinary course of business and at
prevailing interest rates under agreements with commercial bank groups. In
addition, the Trustee may from time to time serve as a depositary of funds of,
and perform other services for, the Company.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 100,000,000 shares of Common Stock and
5,000,000 shares of preferred stock, no par value ("Preferred Stock"). To
date, no series of Preferred Stock has been designated or issued. The following
summary description of the capital stock of the Company is qualified in its
entirety by reference to the Articles, a copy of which has been incorporated by
reference as an exhibit to the Registration Statement.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share, and, in
general, a majority of votes cast with respect to a matter is sufficient to
authorize action. Dividends may be paid to the holders of Common Stock when, as
and if declared by the Board of Directors out of funds legally available for
such purpose. Holders of Common Stock have no conversion, redemption, cumulative
voting or preemptive rights. In the event of any liquidation, dissolution or
winding up of the Company, after payment or provision for payment of the debts
and other liabilities of the Company and payment or provision for payment of all
amounts to which holders of any other series or class of the Company's stock
hereafter issued that ranks senior as to liquidation rights to the Common Stock
are entitled, the holders of Common Stock will be entitled to share ratably in
any remaining assets of the Company. All outstanding shares of Common Stock are,
and any shares of Common Stock to be sold by the Company hereby will be, duly
and validly issued, fully paid and nonassessable.
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
PREFERRED STOCK
When and if issued, shares of each series of Preferred Stock will have such
rights and preferences as are fixed by the Board of Directors in the resolution
or resolutions authorizing the issuance of that particular series. In
designating any series of Preferred Stock, the Board of Directors has the
authority, without further action of the holders of Common Stock, to fix the
number of shares constituting that series and to fix the preferences,
limitations and relative rights of the series, including the dividend rights,
dividend rate, terms and prices of redemption, liquidation preferences, sinking
fund rights, conversion rights and voting rights. It is expected that the
holders of any series of Preferred Stock, when and if issued, will have priority
with respect to dividends and any distributions upon liquidation of the Company,
and may have other preferences over the holders of the Common Stock, including
the preferential right to elect directors in the event dividends on the
Preferred Stock are not paid for a specified period. Although the Company has no
present intent to issue shares of Preferred Stock, the issuance of Preferred
Stock could be used to discourage an unsolicited acquisition proposal or
otherwise have an antitakeover effect.
CERTAIN PROVISIONS OF THE ARTICLES, BYLAWS AND LOUISIANA LAW
The Articles, the Company's Bylaws (the "Bylaws") and Louisiana law
contain certain other provisions that may impede an unsolicited takeover attempt
or otherwise have an antitakeover effect.
DIRECTOR TERMS AND RELATED PROVISIONS
The Articles provide that the members of the Board of Directors of the
Company will be elected for terms of five years and until their successors are
elected and qualified. The Articles further provide that the number of directors
will be as designated in the Bylaws, although no amendment to the Bylaws to
decrease
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the number of directors shall shorten the term of any incumbent director. The
Bylaws provide for eight directors and, in addition, that the Bylaws may be
amended by shareholders only upon the affirmative vote of at least 80% of the
voting power. Moreover, the Articles provide that any vacancy on the Board of
Directors may be filled by a vote of at least two-thirds of the directors then
in office, and a director elected to fill a vacancy shall serve until the next
shareholders' meeting held for the election of directors generally. The
shareholders, however, have the right at a special meeting, if called for such
purpose prior to such action by the Board of Directors, to fill a vacancy. The
Articles also provide that directors may be removed only for cause and only by
the affirmative vote of not less than 80% of the voting power, provided that the
removal may only be effected at a meeting of shareholders called for that
purpose.
SHAREHOLDER MEETINGS
The Articles and the Bylaws provide that special meetings of shareholders
may be called by any shareholder or group of shareholders holding in the
aggregate at least 80% of the total voting power, or by the Chairman of the
Board, the President or the Board of Directors of the Company. A quorum for a
meeting of shareholders is a majority of the outstanding shares of Common Stock
entitled to vote. Unless the question brought before the meeting is one for
which, by express provision of law or the Articles, a different vote is
required, a majority of the votes cast decides the question. Unless otherwise
required by law or the Bylaws, meetings of shareholders may be held at any place
within or without Louisiana, as designated by the Board of Directors.
SHAREHOLDER NOMINATIONS OF DIRECTORS
The Articles provide that only persons who are nominated by, or at the
direction of, the Board of Directors of the Company or by a shareholder who has
given timely notice to the Secretary of the Company prior to the meeting at
which directors are to be elected will be eligible for election as directors. To
be timely, notice must be received by the Company at its principal executive
offices not less than 45 days nor more than 90 days prior to the meeting (or, if
less than 55 days' notice or prior public disclosure of the meeting date is
given or made to shareholders, not later than the tenth day following the day on
which such notice was mailed or such prior public disclosure was made). Notice
to the Company from a shareholder who proposes to nominate a person at a meeting
for election as a director must contain certain specified information about that
person.
SUPERMAJORITY VOTE FOR CERTAIN BUSINESS COMBINATIONS
The Articles provide that no Business Combination (as hereinafter defined)
shall be effected unless it is approved at the shareholders' meeting called for
that purpose by the affirmative vote of 80% of the total voting power of the
holders of voting securities or other obligations with voting power (excluding
such securities and obligations owned by an Acquiring Entity (as hereinafter
defined) and its affiliates). In addition to the voting requirements, no
Business Combination may be effected without first satisfying substantive
conditions with regard to: (i) the consideration to be received by shareholders;
(ii) certain restrictions prohibiting the Acquiring Entity from purchasing
voting securities or obligations with voting power subsequent to becoming an
Acquiring Entity but prior to any Business Combination; (iii) the dividends paid
on the outstanding stock of the Company; (iv) certain restrictions prohibiting
the Acquiring Entity from receiving the benefit of any financial assistance of
the Company or making any major change in the Company's business or equity
capital structure without unanimous approval of the directors and (v) the
distribution of a proxy statement containing any recommendations by the
directors and the opinion of a reputable investment banking firm as to the
fairness of the terms of the Business Combination.
These requirements will not apply to a Business Combination that (i) is
approved by a majority of directors unaffiliated with the Acquiring Entity who
were directors prior to an Acquiring Entity's becoming such (or certain
successors) (the "Continuing Directors"), if there are at least three
Continuing Directors or (ii) involves solely either (A) a transfer of assets of
the Company to a subsidiary wholly owned by the Company or (B) a merger or
consolidation with or into a successor corporation, as long as the percentages
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of shareholder ownership remain the same and the successor corporation's
articles of incorporation contain the same provisions as the Articles.
A "Business Combination" is defined in the Articles as: (i) any merger or
consolidation of the Company with or into any entity unrelated to the Company
which is the beneficial owner of securities representing 30% or more of the
voting power of the Company's securities or other obligations of the Company
granting voting rights (an "Acquiring Entity") or any affiliate thereof; (ii)
any sale or other disposition of all or substantially all of the assets of the
Company to an Acquiring Entity or any affiliate thereof; (iii) any sale or other
disposition to the Company or any subsidiary thereof of any assets in exchange
for which an Acquiring Entity or any affiliate thereof becomes the beneficial
owner of either (A) voting securities of the Company or any subsidiary thereof
or (B) other obligations of the Company granting voting rights; (iv) any
transaction designed to decrease the number of holders of the Company's voting
securities remaining after an Acquiring Entity has become an Acquiring Entity or
(v) the adoption of any plan or proposal for the liquidation or dissolution of
the Company in which anything other than cash will be received by an Acquiring
Entity or any affiliates thereof.
LOUISIANA LAW
Louisiana law requires that certain transactions, such as mergers,
consolidations or share exchanges, with a shareholder beneficially owning 10% or
more of the voting power of the corporation (an "Interested Shareholder") or
its affiliates be recommended by the board of directors and approved by the
affirmative vote of (i) 80% of the votes entitled to be cast by outstanding
shares of the corporation's voting stock and (ii) two-thirds of the votes
entitled to be cast by holders of voting stock other than the Interested
Shareholder and its affiliates. These voting requirements do not apply to such
transactions if the transaction (i) does not alter the contract rights of the
stock or change or convert, in whole or in part, the outstanding shares of the
corporation or (ii) satisfies certain requirements with regard to the
consideration to be received by shareholders and certain procedural
requirements.
OTHER PROVISIONS
The Articles and Louisiana law provide that the Board of Directors of the
Company, when evaluating a tender offer or an offer to make a tender or exchange
offer or to effect a Business Combination, may, in exercising its judgment in
determining what is in the best interests of the Company and its shareholders,
consider the following factors and any other factors that it deems relevant: (i)
not only the consideration being offered in the proposed transaction, in
relation to the then current market price for the outstanding capital stock of
the Company, but also (A) the market price for the capital stock of the Company
over a period of years, (B) the estimated price that might be achieved in a
negotiated sale of the Company as a whole or in part or through orderly
liquidation, (C) the premiums over market price for the securities of other
corporations in similar transactions, (D) current political, economic and other
factors bearing on securities prices and (E) the Company's financial condition
and future prospects; (ii) the social and economic effects of such transaction
on the Company, its subsidiaries or their employees, customers, creditors and
the communities in which the Company and its subsidiaries do business; (iii) the
business and financial condition and earnings prospects of the acquiring party
or parties, including, but not limited to, debt service and other existing or
likely financial obligations of the acquiring party or parties, and the possible
effect of such conditions upon the Company and its subsidiaries and the
communities in which the Company and its subsidiaries do business; and (iv) the
competence, experience and integrity of the acquiring party or parties and its
or their management.
AMENDMENT OF CERTAIN PROVISIONS OF THE ARTICLES AND BYLAWS
The Articles provide, with certain exceptions, that the holders of a
majority of the total voting power present at a shareholders' meeting are
required to amend certain provisions of the Articles. The exceptions relate
generally to the authority of the Board of Directors to issue Preferred Stock,
the antitakeover provisions and limitations on director liability, in which
instances an amendment requires approval of holders of 80% of the total voting
power. The Bylaws provide that they may be amended or repealed only
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<PAGE>
by (i) a majority of the entire Board of Directors at any time when there is no
Acquiring Entity, (ii) both a majority of the entire Board of Directors and a
majority of the Continuing Directors at any time when there is an Acquiring
Entity or (iii) the affirmative vote of the holders of at least 80% of the total
voting power.
PLAN OF DISTRIBUTION
The Company may sell the Securities in and/or outside the United States:
(i) through underwriters or dealers, (ii) directly to a limited number of
purchasers or to a single purchaser or (iii) through agents. The Prospectus
Supplement with respect to the Securities offered thereby (the "Offered
Securities") will set forth the terms of the offering of the Offered
Securities, including the name or names of any underwriters or agents, the
purchase price of the Offered Securities and the proceeds to the Company from
such sale, any delayed delivery arrangements, any underwriting discounts and
other items constituting underwriters' compensation, any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers.
Any initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or underwriters with
respect to a particular underwritten offering of Securities to be named in the
Prospectus Supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth on
the cover of such Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement relating thereto, the obligations of the underwriters to
purchase the Offered Securities will be subject to conditions precedent, and the
underwriters will be obligated to purchase all the Offered Securities if any are
purchased.
During and after an offering through underwriters, such underwriters may
purchase and sell the Securities in the open market. These transactions may
include overallotment and stabilizing transactions and purchases to cover
syndicate short positions created in connection with the offering. The
underwriters may also impose a penalty bid, whereby selling concessions allowed
to syndicate members or other broker-dealers for the Offered Securities sold for
their account may be reclaimed by the syndicate if such Offered Securities are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Offered Securities, which may be higher than the price that might otherwise
prevail in the open market, and, if commenced, may be discontinued at any time.
If dealers are used in the sale of Offered Securities in respect of which
this Prospectus is delivered, the Company will sell such Offered Securities to
dealers as principals. The dealers may then resell such Offered Securities to
the public at varying prices to be determined by such dealers at the time of
resale. The names of the dealers and the terms of the transaction will be set
forth in the Prospectus Supplement relating thereto.
The Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of the Offered Securities in respect to which this Prospectus is delivered
will be named, and any commissions payable by the Company to such agent will be
set forth, in the Prospectus Supplement relating thereto. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
The Securities may be sold directly by the Company to institutional
investors or others who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any sale thereof. The terms of any such sales
will be described in the Prospectus Supplement relating thereto.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers from certain types of
institutions to purchase Offered Securities from the Company
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<PAGE>
at the public offering price set forth in the Prospectus Supplement pursuant to
delayed delivery contracts providing for payment and delivery on a specified
date in the future. Such contracts will be subject only to those conditions set
forth in the Prospectus Supplement, and the Prospectus Supplement will set forth
the commission payable for solicitation of such contracts.
Agents, dealers and underwriters may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments that such agents, dealers or underwriters may be
required to make in respect thereof. Agents, dealers and underwriters may be
customers of, engage in transactions with, or perform services for the Company
in the ordinary course of business.
The Securities may or may not be listed on a national securities exchange.
No assurances can be given that there will be a market for the Securities.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock offered hereby
will be passed upon for the Company by McGlinchey Stafford, a professional
limited liability company, New Orleans, Louisiana. Certain legal matters in
connection with the Debt Securities offered hereby will be passed upon for the
Company by Baker & Botts, L.L.P., Houston, Texas. McGlinchey Stafford, a
professional limited liability company, will pass on all matters of Louisiana
law in this connection.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated balance sheet of the Company as of December 31, 1996 and
1995, and the related consolidated statements of operations, changes in
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1996, and the related schedules, incorporated by reference in
this Prospectus, have been incorporated by reference herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in auditing and accounting.
14
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[GRAPHIC]
One of Pride's newly constructed, 1000-horsepower, diesel-electric, platform
rigs operating in the Gulf of Mexico.
[GRAPHIC]
Pride's international land-based fleet includes 76 drilling rigs and 162
workover rigs.
[GRAPHIC]
A diesel-electric drilling rig with 15,000' depth capacity operating in
Argentina.
[GRAPHIC]
Pride operates five floating cantilever barge rigs on Lake Maracaibo in
Venezuela.
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS 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 TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, OR THE
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREAFTER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
PAGE
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary........ S-3
Forward-Looking Statements........... S-9
Risk Factors......................... S-9
Price Range of Common Stock and
Dividend Policy.................... S-12
Use of Proceeds...................... S-13
Capitalization....................... S-14
Unaudited Pro Forma and Pro Forma
Combined Financial Statements...... S-15
Selected Historical Financial Data... S-23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... S-24
Business............................. S-30
The Noble Rigs....................... S-38
Management........................... S-39
Underwriting......................... S-41
Legal Matters........................ S-42
PROSPECTUS
Available Information................ 3
Incorporation of Certain Documents by
Reference.......................... 3
The Company.......................... 4
Use of Proceeds...................... 4
Ratio of Earnings to Fixed Charges... 4
Description of Debt Securities....... 4
Description of Capital Stock......... 10
Plan of Distribution................. 13
Legal Matters........................ 14
Independent Public Accountants....... 14
4,300,000 SHARES
[LOGO]
PRIDE PETROLEUM
SERVICES, INC.
COMMON STOCK
___________________________________________
PROSPECTUS SUPPLEMENT
___________________________________________
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
JEFFERIES & COMPANY, INC.
ROBERT W. BAIRD & CO.
INCORPORATED
MORGAN KEEGAN & COMPANY, INC.
SIMMONS & COMPANY
INTERNATIONAL
SOUTHCOAST CAPITAL
CORPORATION
May 1, 1997
================================================================================
