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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): March 20, 1998
PRIDE INTERNATIONAL, INC.
(formerly Pride Petroleum Services, Inc.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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LOUISIANA 1-13289 76-0069030
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
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5847 SAN FELIPE, SUITE 3300
HOUSTON, TEXAS 77057
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713)789-1400
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
During 1997, Pride International, Inc. (the "Company") realigned its
operations to concentrate on more profitable offshore and international drilling
markets through the following strategic transactions:
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, for approximately $136
million in cash. The Company retained 14 of its larger land-based
rigs for redeployment to international markets, ten of which have
since been redeployed to South America. The divested operations
generated the Company's lowest operating margins.
o FORASOL ACQUISITION. In March 1997, the Company acquired the
operating subsidiaries of Forasol-Foramer N.V. (collectively,
"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 South 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 South America, West Africa, the Middle
East and Southeast Asia.
o PURCHASE OF JACKUP RIGS. In May 1997, the Company purchased 13
mat-supported jackup rigs for approximately $269 million. The
purchase of these rigs positioned 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.
The following financial statements are included as part of this Current
Report:
(a) Mat-Supported Jackup Rig Operations of Noble Drilling Corporation
Report of Independent Accountants ................................ 2
Historical Statement of Revenues and Direct/Allocated Operating
Expenses for the Year Ended December 31, 1996 and the
Three Months Ended March 31, 1997 ........................... 3
Notes to Historical Statement of Revenues and Direct/Allocated
Operating Expenses .......................................... 4
(b) Forasol-Foramer N.V.
Report of Independent Auditors (Ernst & Young Audit)............ 7
Report of Independent Accountants (Price Waterhouse)............ 8
Consolidated Balance Sheets as of December 31, 1996 and 1995.... 9
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994......................... 10
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994......................... 11
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1996, 1995 and 1994................... 12
Notes to the Consolidated Financial Statements................. 13
(c) Pro Forma Financial Information
Unaudited Pro Forma Statement of Operations ..................... 32
Unaudited Pro Forma Statement of Operations for the Year
Ended December 31, 1997 ................................. 33
Notes to Unaudited Pro Forma Statement of Operations ............ 34
(d) Exhibits.
23.1 -- Consent of Price Waterhouse LLP (Houston, Texas)
23.2 -- Consent of Ernst & Young Audit
23.3 -- Consent of Price Waterhouse (Paris, France)
1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Noble Drilling Corporation
We have audited the accompanying Historical Statement of Revenues and
Direct/Allocated Operating Expenses of the Mat-Supported Jackup Rigs of Noble
Drilling Corporation (the Company) for the year ended December 31, 1996. This
historical statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this historical statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the historical statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the historical statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the historical
statement. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying historical statement was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission (SEC) as described in Note 1 and is not intended to be a complete
presentation of the Noble Drilling Corporation's Mat-Supported Jackup Rigs'
revenues and expenses.
In our opinion, the historical statement referred to above presents fairly,
in all material respects, the revenues and direct/allocated operating expenses
of the Mat-Supported Jackup Rigs of Noble Drilling Corporation as described in
Note 1 for the year ended December 31, 1996 in conformity with generally
accepted accounting principles.
PRICE WATERHOUSE LLP
Houston, Texas
July 18, 1997
2
<PAGE>
MAT-SUPPORTED JACKUP RIG OPERATIONS OF
NOBLE DRILLING CORPORATION
HISTORICAL STATEMENT OF REVENUES AND DIRECT/
ALLOCATED OPERATING EXPENSES
(IN THOUSANDS)
THREE MONTHS
YEAR ENDED ENDED MARCH
DECEMBER 31, 31,
1996 1997
(UNAUDITED)
Revenues:
Contract drilling revenues...... $ 68,747 $ 23,970
------------ --------------
Direct/allocated operating expenses:
Contract drilling costs......... 37,268 11,096
Depreciation and amortization... 7,960 1,967
Impairment expense.............. 10,200 --
Selling, general and
administrative expenses........ 6,863 1,983
Other operating expense......... 1,782 7
Minority interest............... (441) 362
------------ --------------
63,632 15,415
------------ --------------
Revenues less direct/allocated
operating expenses................. $ 5,115 $ 8,555
============ ==============
The accompanying notes are an integral part of this statement.
3
<PAGE>
MAT-SUPPORTED JACKUP RIGS OF NOBLE DRILLING CORPORATION
NOTES TO HISTORICAL STATEMENT OF
REVENUES AND DIRECT/ALLOCATED OPERATING EXPENSES
NOTE 1 -- BASIS OF PRESENTATION:
Pursuant to an agreement dated February 19, 1997, Pride Petroleum Services,
Inc. ("Pride") acquired the Mat-Supported Jackup Rigs (the "Acquired Rigs")
of Noble Drilling Corporation (Noble or the Company) for $268.8 million in cash,
consisting of the following wholly-owned, mat-supported jackup rigs: JIM BAWCOM,
JACK CLARK, CECIL FORBES, DUKE HINDS, W.T. JOHNSON, FRANK LAMAISON, CLIFF
MATTHEWS, RED MCCARTY, MAC MCCOY, FRANK REIGER, LINN RICHARDSON (hull only) and
MARVIN WINTERS. In addition, the Acquired Rigs include Noble's share of the
NN-1, a mat-supported jackup rig owned by NN-1 Limited Partnership, of which
Noble is the General Partner and has an approximate 90% interest. Except for
NN-1's operations, which are conducted in Africa, the Acquired Rigs' operations
are conducted in the Gulf of Mexico.
The Pride acquisition has been accounted for as a purchase and the results
of operations for the Acquired Rigs are included in Pride's results of
operations effective May 7, 1997.
The accompanying statement reflects the historical revenues and
direct/allocated operating expenses attributable to the Acquired Rigs for the
year ended December 31, 1996 and for the three months ended March 31, 1997. The
revenues and direct/allocated operating expenses for the three months ended
March 31, 1997 are not necessarily indicative of results to be expected for the
remainder of the year. Complete financial statements, including a balance sheet
and statement of cash flows, are not presented, as the Acquired Rigs were not
operated as or accounted for within a separate entity for the periods presented
in the accompanying historical statement. For purposes of preparing this
historical statement under generally accepted accounting principles, allocations
from certain Noble income statement accounts were made. These allocations,
including the allocation from Noble of direct and indirect corporate
administrative costs attributable to the Acquired Rigs, are considered
reasonable by management and were based principally on proportionate variables
such as revenues.
Because the accompanying statement reflects extensive transactions and
relationships with Noble, the terms of these transactions and relationships
might have been different had they been between wholly unrelated parties.
During the year ended December 31, 1996, certain of the Acquired Rigs were
involved in drilling arrangements with Triton Engineering Services,
Inc.(Triton), a Noble affiliate. Drilling revenues and contract drilling costs
associated with these Triton arrangements were as follows:
Year ended
December 31,
Rig 1996
--- ----------------------
Revenues Costs
----------------------
(in millions)
Jack Clark ........ $ 6.6 $ 3.6
Jim Bawcom ........ $ 7.8 $ 4.3
Red McCarty ....... $ 1.6 $ 0.9
W.T. Johnson ...... $ 1.3 $ 0.7
----- -----
Total ............. $17.3 $ 9.5
===== =====
In addition, the NN-1 recognized $2.1 million in revenues and $1.0 million in
related drilling costs working for Triton during the first quarter of 1997.
NOTE 2 -- SUMMARY OF SIGNIFICANT POLICIES:
CONTRACT DRILLING REVENUES
Drilling revenues are recognized as services are performed based upon
contracted dayrates and the number of operating days during the period.
CONTRACT DRILLING COSTS
Contract drilling costs include labor, repairs and maintenance, fuel
consumed and supplies utilized to operate and maintain the Acquired Rigs.
Total repair and maintenance expenses for the year and quarter ended
December 31, 1996 and March 31, 1997 were approximately $7.9 million and $2.0
million, respectively.
4
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MAT-SUPPORTED JACKUP RIGS OF NOBLE DRILLING CORPORATION
NOTES TO HISTORICAL STATEMENT OF
REVENUES AND DIRECT/ALLOCATED OPERATING EXPENSES -- (CONTINUED)
DEPRECIATION AND AMORTIZATION
Depreciation and amortization of property and equipment related to the
Acquired Rigs is calculated using the straight-line method over estimated useful
lives ranging from three to twenty-five years from the date of construction or
major refurbishment.
IMPAIRMENT
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. This statement requires that
long-lived assets and certain identifiable intangibles held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Impairment
is recorded based on an estimate of future discounted net cash flows.
In the fourth quarter of 1996, Noble reviewed the status of the NN-1. As of
December 31, 1996, the NN-1 had not been under contract since March 1993. Given
the strength of the international markets in 1996 and the expected continued
strength in 1997, coupled with the Parent's unsuccessful marketing efforts with
respect to the NN-1, full recoverability of the NN-1's carrying value was
considered doubtful. The Company considered expected future cash flows over the
remaining life of the rig and determined that the NN-1 was impaired.
Accordingly, an impairment charge of approximately $10.2 million (excluding a
$289,000 reduction for minority interest) was recorded in the fourth quarter of
1996.
An impairment write-down was not required on any of the other Acquired
Rigs.
OTHER OPERATING EXPENSES
Other operating expenses consist primarily of stacked costs, representing
labor, storage and other costs incurred to maintain rigs not under contract.
CAPITAL EXPENDITURES
The Company incurred capital expenditures on the Acquired Rigs totaling
approximately $5.0 million and $6.2 million during 1996 and the three months
ended March 31, 1997, respectively.
INCOME TAXES
Noble accounts for income taxes under SFAS No. 109, ACCOUNTING FOR INCOME
TAXES. The taxable income or loss attributable to the Acquired Rigs is included
in Noble's consolidated federal income tax return. No income tax provision has
been provided in the accompanying historical statement, as management considers
it impracticable to identify amounts attributable to the Acquired Rigs, which
were operated as individual assets during the periods presented herein.
EARNINGS PER SHARE
As described above, the Acquired Rigs were not operated as or accounted for
within a separate entity with its own capital structure but rather were
individual assets of Noble throughout the periods presented in the accompanying
historical statement. Therefore, earnings per share are not meaningful and,
accordingly, are not presented.
ESTIMATES, RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. While management believes its estimates are reasonable, actual
results could differ from those estimates.
5
<PAGE>
MAT-SUPPORTED JACKUP RIGS OF NOBLE DRILLING CORPORATION
NOTES TO HISTORICAL STATEMENT OF
REVENUES AND DIRECT/ALLOCATED OPERATING EXPENSES -- (CONTINUED)
Results of operations for the Acquired Rigs should be considered in light
of the potentially significant fluctuations in demand for services as rapid
changes in oil and gas producers' expectations, budgets and drilling plans
occur. These fluctuations can rapidly impact results of operations, as supply
and demand factors directly affect utilization and dayrates.
The Acquired Rigs' operations are subject to the many hazards inherent in
the drilling business, such as blowouts, cratering, fires and collisions, as
well as damage or loss from adverse weather and seas. The NN-1 is based in
Nigeria and is therefore subject to certain political, economic and other
uncertainties, including risk of war and civil disturbance, expropriation,
nationalization and other hazards arising from its area of operation.
Furthermore, industry-wide shortages of supplies, services, skilled personnel
and equipment necessary to conduct rig operations have occurred from time to
time in the past and may occur in future periods.
6
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Forasol-Foramer N.V.
We have audited the accompanying consolidated balance sheet of Forasol-Foramer
N.V. as of December 31, 1996, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Forasol-Foramer N.V. for the years ended
December 31, 1995 and 1994 were audited by other auditors whose report dated May
8, 1996 expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Forasol-Foramer N.V. at December 31, 1996, and the consolidated results of its
operations and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States.
Paris, March 24, 1997
Ernst & Young Audit
/s/ Francois Villard
Represented by
Francois Villard
7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Forasol-Foramer N.V.
We have audited the accompanying consolidated balance sheet of
Forasol-Foramer N.V. and subsidiaries (the "Company") as of December 31, 1995,
and the related consolidated statements of income, of cash flows and of changes
in stockholders' equity for each of the two years in the period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of
National Drilling and Services Corp. LLC ("NDSC"), an investment which is
reflected in the accompanying financial statements using the equity method of
accounting (see Note 4). The investment in NDSC represents 1.2% of consolidated
assets at December 31, 1995. The equity in its net income represents 6% and 20%
of the consolidated net income (loss) for the periods ended December 31, 1995
and 1994, respectively. Those statements were audited by other auditors whose
reports have been furnished to us and our opinion, insofar as it relates to the
amounts included for NDSC, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Forasol-Foramer N.V., as of
December 31, 1995, and the results of operations and their cash flows for each
of the two years in the period ended December 31, 1995, in conformity with
accounting principles generally accepted in the United States.
Paris, France
May 8, 1996
Price Waterhouse
8
<PAGE>
FORASOL-FORAMER N.V.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
(IN THOUSANDS)
DECEMBER 31,
----------------------
NOTES 1996 1995
----- ---------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............ $ 16,646 $ 17,335
Trade accounts receivable, net of
allowance for doubtful accounts of
$2,032 and $1,453 at December 31,
1996 and 1995, respectively........ 51,799 40,100
Prepaid expenses and other current
assets............................. 12,487 21,022
Deferred income taxes................ 10 1,221 2,467
---------- ----------
Total current
assets................. 82,153 80,924
---------- ----------
INVESTMENTS AND OTHER ASSETS:
Investments in and advances to equity
affiliates......................... 4 9,406 9,480
Other long-term investments and
receivables........................ 5 5,271 6,518
Deferred income taxes................ 10 7,346 5,761
---------- ----------
Total investments and
other assets...... 22,023 21,759
---------- ----------
PLANT AND EQUIPMENT, NET............. 6 237,148 230,372
---------- ----------
Total assets.......... $ 341,324 $ 333,055
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable............... $ 26,954 $ 32,397
Short-term borrowings................ 8 14,335 20,840
Current portion of long-term debt.... 9 11,773 18,202
Current portion of long-term lease
obligations........................ 7 4,850 8,138
Deferred income taxes................ 10 -- 647
Other current liabilities............ 11 33,069 26,919
---------- ----------
Total current
liabilities....... 90,981 107,143
---------- ----------
LONG-TERM DEBT AND OTHER LIABILITIES:
Long-term debt....................... 9 22,115 40,258
Long-term lease obligations.......... 7 30,663 44,538
Deferred income...................... 1,866 204
Provision for major repairs.......... 4,562 3,565
Deferred income taxes................ 10 3,014 4,852
Other long-term liabilities.......... 3,679 6,184
---------- ----------
Total long-term debt
and other
liabilities....... 65,899 99,601
---------- ----------
Commitments and Contingencies........ 17
MINORITY INTEREST.................... 2,368 3,306
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock, par value NLG .01,
50,000,000 shares authorized;
16,650,290 and 10,010,000 shares
outstanding at December 31, 1996
and 1995, respectively............. 94 55
Additional paid-in capital........... 140,688 70,685
Retained earning..................... 41,435 52,415
Foreign currency translation
adjustment......................... (141) (150)
---------- ----------
Total stockholders'
equity............ 182,076 123,005
---------- ----------
Total liabilities and
stockholders'
equity............ $ 341,324 $ 333,055
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
9
<PAGE>
FORASOL-FORAMER N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
NET OPERATING REVENUES............... $ 199,261 $ 171,335 $ 148,348
Equity in net income of affiliates... 210 165 (44)
------------ ------------ ------------
TOTAL REVENUES....................... 199,471 171,500 148,304
Cost of operations................... (161,897) (127,491) (104,398)
Depreciation and amortization........ (23,945) (20,264) (20,292)
Selling, general and administrative
expenses........................... (18,490) (17,660) (16,216)
------------ ------------ ------------
OPERATING INCOME (LOSS).............. (4,861) 6,085 7,398
Gain on disposals of equipment....... 2,348 57 673
Interest and other financial
income............................. 2,310 555 1,111
Interest and other financial
expense............................ (10,048) (9,338) (8,416)
Net foreign exchange gain (loss)..... (416) (166) 3,690
Other income (expense), net.......... (784) 491 (404)
------------ ------------ ------------
INCOME (LOSS) BEFORE MINORITY
INTEREST AND INCOME TAXES.......... (11,451) (2,316) 4,052
Minority interest.................... 825 (1,288) (536)
Income taxes......................... (354) (409) (2,580)
------------ ------------ ------------
NET INCOME (LOSS).................... $ (10,980) $ (4,013) $ 936
============ ============ ============
NET INCOME (LOSS) PER SHARE.......... $ (0.77) $ (0.40) $ 0.10
============ ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING........................ 14,201 10,010 9,466
============ ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
10
<PAGE>
FORASOL-FORAMER N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................. $ (10,980) $ (4,013) $ 936
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation.................... 23,945 20,264 20,292
Provision for major repairs..... 997 40 9
Gain on disposals of plant and
equipment..................... (2,348) (57) (673)
Undistributed earnings in
affiliates.................... 68 42 127
Deferred income taxes........... (2,825) (1,928) (862)
Minority interest in
undistributed earnings of
subsidiaries.................. (843) 1,437 550
Other, net...................... (1,185) 2,567 661
Increase (decrease) from changes
in:
Trade accounts receivable..... (13,099) (7,528) 7,660
Prepaid expenses and other
current assets............. 8,316 7,042 1,602
Trade accounts and notes
payable.................... (5,488) 5,925 (2,028)
Other current liabilities..... 6,104 (11,312) 2,942
Deferred income............... 1,662 (6,611) (2,700)
Other long-term liabilities... (2,504) (650) 1,191
---------- ---------- ----------
Net cash provided by
operating activities.... 1,820 5,218 29,707
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of plant and equipment... (37,139) (30,083) (20,703)
Proceeds from sales of plant and
equipment....................... 11,061 2,962 7,347
Net advances made to affiliates.... -- 301 (520)
Acquisitions of other long-term
investments and additions to
long-term receivables........... (425) (127) (1,135)
Disposals of other long-term
investments and collections of
long-term receivables........... 1,455 777 245
Consideration for HAPSA
acquisition, net of cash
acquired........................ -- (1,116) --
---------- ---------- ----------
Net cash used in investing
activities.............. (25,048) (27,286) (14,766)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings, net......... (6,507) 8,683 (5,839)
Repayment of long-term debt and
lease obligations............... (47,997) (18,505) (23,049)
Proceeds from long-term debt....... 6,450 25,864 6,635
Issuance of common stock........... 70,042 3,700 --
---------- ---------- ----------
Net cash provided (used) in
financing activities.... 21,988 19,742 (22,253)
---------- ---------- ----------
EFFECTS OF EXCHANGE RATE CHANGES ON
CASH............................... 551 171 148
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... (689) (2,155) (7,164)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD.......................... 17,335 19,490 26,654
CASH AND CASH EQUIVALENTS, END OF
PERIOD............................. $ 16,646 $ 17,335 $ 19,490
========== ========== ==========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid...................... $ 10,726 $ 10,120 $ 7,274
========== ========== ==========
Income tax paid.................... $ 1,975 $ 1,097 $ 1,232
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
11
<PAGE>
FORASOL-FORAMER N.V.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER OF ADDITIONAL FOREIGN TOTAL
SHARES COMMON PAID-IN RETAINED CURRENCY STOCKHOLDERS'
ISSUED STOCK CAPITAL EARNINGS TRANSLATION EQUITY
---------- ------ ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
January 1, 1994...................... 9,461,681 $ 52 $ 65,614 $ 55,492 $ (627) $ 120,531
Exercise of stock options............ 548,319 3 5,071 5,074
Net income........................... 936 936
Translation adjustment............... 339 339
---------- ------ ---------- -------- ----------- -------------
December 31, 1994.................... 10,010,000 $ 55 $ 70,685 $ 56,428 $ (288) $ 126,880
Net loss............................. (4,013) (4,013)
Translation adjustment............... 138 138
---------- ------ ---------- -------- ----------- -------------
December 31, 1995.................... 10,010,000 $ 55 $ 70,685 $ 52,415 $ (150) $ 123,005
Issuance of common stock............. 6,640,290 39 70,003 70,042
Net loss............................. (10,980) (10,980)
Translation adjustment............... 9 9
---------- ------ ---------- -------- ----------- -------------
December 31, 1996.................... 16,650,290 $ 94 $ 140,688 $ 41,435 $ (141) $ 182,076
========== ====== ========== ======== =========== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
12
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. PRINCIPLES OF CONSOLIDATION
In the period until April 3, 1996, Forasol S.A. and its subsidiaries
("Forasol") and Forinter Ltd. and its subsidiaries ("Forinter") were
beneficially owned equally by Soletanche S.A., a French company
("Soletanche"), and Ackermans & van Haaren, N.V., a Belgian company
("Ackermans"). On September 21, 1995, the two shareholders established
Forasol-Foramer N.V. (the "Company"), a Dutch holding company. On April 3,
1996, the two shareholders exchanged their respective shares in Forasol and
Forinter for an equivalent interest in the Company. For purposes of financial
statement presentation, Forasol and Forinter have been retroactively
consolidated at December 31, 1995 and 1994 and for the period from January 1,
1996 until April 3, 1996 within the financial statements of the Company.
The Company's subsidiaries are primarily engaged in international oil and
gas contract drilling and workover operations for major and independent oil and
gas companies, as well as providing well engineering, integrated drilling
services, turnkey wells and project management to customers on a worldwide
basis.
The financial statements of the Company include the accounts of Forasol,
Forinter and all of their wholly owned and majority owned subsidiaries. The
financial statements have been presented in accordance with accounting
principles generally accepted in the United States of America ("U.S. GAAP").
Investments in which the Company's ownership interest ranges from 20% to 50% and
where the Company exercises significant influence over operating and financial
policies are accounted for using the equity method. Less than 20% owned
companies are accounted for at cost. Investments in non-corporate joint ventures
in which the Company owns an undivided interest are accounted for by the
proportionate line-by-line consolidation method. All significant intercompany
accounts and transactions have been eliminated. Certain reclassifications have
been made to prior year amounts to conform with the current year presentation.
2. ACQUISITIONS
On January 1, 1995, the Company acquired a 36.5% interest in Hispano
Americana de Petroleos ("HAPSA"), an Argentina contract drilling company, for
$1.02 million in cash. Subsequently, on May 1, 1995, the Company acquired an
additional 58.5% of HAPSA's shares in exchange for consideration of $1.3 million
in cash and notes payable and the contribution of the Company's 21% interest in
two Spanish equity investees, Sondeos Petroliferos SA and Bellegarde Investments
SA. This acquisition was recorded using the purchase method of accounting and,
accordingly, the purchase price has been allocated to the assets purchased and
the liabilities assumed based upon the fair values at the date of acquisition.
The excess of the purchase price over the fair values of the net assets acquired
resulted in $1.09 million of goodwill which was being amortized in 1995 on a
straight-line basis over five years. In 1996, the fair value of unamortized
goodwill was reevaluated and consequently the carrying value was written off to
the income statement.
The net purchase price was allocated as follows (in thousands):
Working capital, other than cash..... $ (6,958)
Plant and equipment.................. 9,219
Other assets......................... 746
Goodwill............................. 1,091
Other liabilities.................... (213)
---------
Purchase price, net of cash
received............................. $ 3,885
=========
13
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
2. ACQUISITIONS (CONTINUED)
On December 29, 1994, the Company acquired the remaining 50% interest in
Forafels, Inc., which owns and operates the swamp barge BINTANG KALIMANTAN. The
purchase price is contingent upon future utilization of Forafels' primary asset,
the swamp barge, during the five years subsequent to the purchase. The Company's
50% interest in Forafels, Inc. during the year ended December 31, 1994 was
recorded under the equity method (see Note 4).
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
TRANSLATION OF FINANCIAL STATEMENTS
The Company's financial results have been reported in U.S. dollars, as the
Company primarily conducts its multinational operations in U.S. dollars. When
translating local currency based financial statements to U.S. dollars where the
local currency is the functional currency, assets and liabilities are translated
at the year-end rate, while income and expenses are translated using the average
rate for the year. Translation differences are included as a component of
stockholders' equity.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of short-term investments, principally bank
deposits and money market investments, with original maturities of less than
three months when acquired.
FINANCIAL INSTRUMENTS
In the normal course of business, the Company employs a variety of
off-balance sheet financial instruments to manage its exposure to fluctuations
in interest and foreign currency exchange rates, including interest rate swap
agreements, interest rate cap agreements and currency forward exchange
contracts. The Company designates interest rate instruments as hedges of debt
and capital lease obligations, and accrues the differential to be paid or
received under the agreements as interest rates change over the lives of the
contracts. The Company's use of currency forward exchange contracts does not
meet the necessary criteria to apply hedge accounting and, accordingly, such
contracts have been marked to market at December 31, 1996, 1995 and 1994 with
any gains or losses recognized in income.
The Company continually monitors its positions with, and the credit quality
of, the financial institutions which are counterparties to its off-balance sheet
financial instruments and does not anticipate non-performance by the
counterparties.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. The Company provides for
the depreciation of drilling rigs on the modified units of production ("MUOP")
method over a period of 16 to 25 years, depending on the class of drilling rig.
Under the MUOP method, depreciation is computed based upon the utilization of
the drilling rigs. To provide for any deterioration that may occur while rigs
are idle for periods of less than one fiscal year, a minimum depreciation charge
is provided at a reduced rate of 25% of the fully utilized rate. If a drilling
rig is idle for the whole fiscal year, full depreciation is provided in order to
limit the maximum useful life of the asset regardless of utilization.
The Company provides for the depreciation of all other fixed assets on the
straight-line method of depreciation after providing for a salvage value.
Buildings are depreciated based on a 20-year useful life, and furniture,
fixtures and vehicles are depreciated over useful lives between five and ten
years.
14
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The estimated useful lives of property, plant and equipment are as follows:
Rigs and equipment................... 16 to 25 years
Buildings............................ 20 years
Furniture, fixtures and vehicles..... 5 to 10 years
The costs of routine maintenance are expensed as incurred. At periodic
intervals, the Company conducts significant overhauls of rigs and equipment to
perform necessary repairs and replacement. Associated costs are accrued prior to
overhaul in order to match costs against revenues earned during rig utilization.
The Company periodically reviews the carrying value of its rigs and
equipment using available information, such as market surveys and broker
quotations of similar rigs and equipment. The review of the carrying values of
principal equipment is performed on a rig by rig basis, and impairment losses
are recognized by a charge to income when the carrying value exceeds market.
Betterments expected to extend the useful lives of assets are capitalized. The
costs of assets sold, retired or otherwise disposed are removed from the
accounts at the time of disposition with gains or losses reflected in income.
In March 1995, Statement of Financial Accounting Standards 121 ("FAS
121"), ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF, was issued. This statement requires that long-lived
assets held and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. This statement was implemented by the Company in 1996.
Implementation did not have a material impact on the financial position or
results of operations of the Company.
REVENUE RECOGNITION
The Company recognizes revenue for drilling contracts based on the number
of days worked at the contractual day rate. Revenues from turnkey contracts are
recognized using the percentage of completion method. Management fees which
arise principally from services provided to affiliated entities are recognized
as earned. Revenues related to mobilization and demobilization of rigs are
recognized during the period of mobilization and demobilization. Advance
billings are deferred and amortized over the duration of the contract.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred. Certain government
research grants, which are repayable in the event that the related research
project proves to be successful, are recognized in income when the research
project has been determined to be unsuccessful and all other conditions for
their receipt have been met. Grants received for research projects whose outcome
has yet to be determined are included in other long-term liabilities.
RETIREMENT PLANS
French employees participate in pension plans in accordance with French
laws and regulations. Employees of non-French subsidiaries participate in
government based pension plans as prescribed by local laws. Contributions to the
French government with respect to the maintenance of these plans are made
annually based on gross wages and are expensed as incurred. The Company has no
future commitments with respect to any of these plans.
15
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A lump sum payment is made to certain employees of the Company who retire
or are terminated by the Company without cause after such employees complete a
defined number of service years. Such payment is an amount not to exceed 12
months gross wages and is calculated based upon years of service, employment
status and gross wages during the year before retirement. The Company is fully
insured for this liability and has no future commitments with respect to these
payments.
INCOME TAXES
The Company provides for deferred taxes on temporary differences between
financial and tax reporting and employs the liability method under which
deferred taxes are calculated applying legislated tax rates in effect when the
temporary differences are expected to reverse.
CONCENTRATION OF CREDIT RISK
The market for the Company's services and products is the oil and gas
industry, and the Company's customers consist primarily of major integrated
international oil companies and independent oil and gas producers. The Company
performs ongoing credit evaluations of its customers and generally does not
require material collateral. The Company maintains reserves for potential
losses, and such losses have been within management's expectations.
At December 31, 1996 and 1995, the Company had cash deposits at a number of
major French banks and believes that the credit risk related to such
institutions is minimal.
EMPLOYEE STOCK OPTION PLANS
The Company applies Accounting Principles Board No. 25 (APB 25),
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock option plan. Additional disclosures required under
Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock Based Compensation" are included in Note 13.
NET INCOME (LOSS) PER SHARE
Net income (loss) per common share is based on the net income (loss)
divided by the weighted average number of shares outstanding during the period.
For 1995 and 1994 net income (loss) per share was computed retroactively
based on the number of shares issued by the Company to its two existing
shareholders in exchange for their respective interests in Forasol S.A. and
Forinter Ltd. on April 3, 1996. In addition, shares contingently issuable from
the exercise of stock options, using the treasury stock method, are included in
those periods in which they have a dilutive impact. For the three years ended
December 31, 1996, the effects of shares issuable upon exercise of stock options
were immaterial or antidilutive and were therefore excluded from the
calculation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
16
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
4. INVESTMENTS IN AND ADVANCES TO EQUITY AFFILIATES
DECEMBER 31,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS)
Investments.......................... $ 3,918 $ 3,992
Advances............................. 5,488 5,488
--------- ---------
Investments in and advances to equity
affiliates......................... $ 9,406 $ 9,480
========= =========
During the three years ended December 31, 1996, the Company's significant
equity investees consisted of National Drilling and Services Co. ("NDSC"), Al
Jazirah Forasol Drilling Corporation ("AJFDC"), Forafels, Inc. and Sondeos
Petroliferos SA.
NDSC is a 30% owned joint venture that operates mobile desert rigs in Oman.
NDSC changed its financial year end from March 31 to December 31 in 1994. The
Company has recorded $(2,000), $235,000 and $187,000 for its share of NDSC's
earnings (loss) for each of the three years ending December 31, 1996, 1995 and
1994, respectively, using the equity method.
AJFDC is a joint venture organized to own and operate two land rigs. The
Company owns 49% of AJFDC and is also contracted to manage the two rigs. The
Company provided AJFDC, on a pro rata basis with the other shareholders, a
non-interest bearing advance of $5.5 million to purchase the two drilling rigs.
The advance will be repaid from the future profits of the venture on a pro rata
basis.
A 50% interest in Forafels, Inc., a company which owns and operates the
swamp barge BINTANG KALIMANTAN, was acquired in 1983. On December 29, 1994, the
Company acquired the remaining 50% interest. This investment was accounted for
under the equity method for the year ending December 31, 1994 and, as a result,
$13,000 was recorded to recognize the Company's share of Forafels' earnings
during that year. As of January 1, 1995, Forafels became a consolidated
subsidiary (see Note 3).
Until the Company's disposition as part of the purchase consideration of
HAPSA (see note 2), the Company owned a 21% interest in Sondeos Petroliferos SA,
a Spanish holding Company ("Sonpetrol"). The Company recorded $177,000 for its
share of Sonpetrol's losses for the year ended December 31, 1994 under the
equity method. A $107,000 loss was recorded in 1995 up until the disposition
date.
The summarized financial information below represents an aggregation of the
Company's investments in equity affiliates:
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
Earnings data:
Revenue......................... $ 13,922 $ 13,477 $ 17,255
Operating income................ 109 588 9,415
Net income...................... 515 555 (292)
Company's equity in net
earnings................ 210 165 (44)
17
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
4. INVESTMENTS IN AND ADVANCES TO EQUITY AFFILIATES (CONTINUED)
DECEMBER 31,
---------------------
1996 1995
--------- ----------
(IN THOUSANDS)
Balance sheet data:
Current assets.................. $ 11,486 $ 11,821
Noncurrent assets............... 23,380 33,980
Current liabilities............. (4,834) (9,297)
Noncurrent liabilities.......... (17,304) (15,238)
--------- ----------
Net assets...................... $ 12,728 $ 21,266
========= ==========
Company's equity in net
assets.................. $ 3,918 $ 3,992
========= ==========
The Company's share of undistributed earnings of investments in equity
affiliates included in consolidated retained earnings was $2.5 million, $2.4
million and $4.2 million at December 31, 1996, 1995 and 1994, respectively.
Dividends from equity affiliates were $279,000, $207,000 and $83,000 in 1996,
1995 and 1994, respectively.
5. OTHER LONG-TERM INVESTMENTS AND RECEIVABLES
DECEMBER 31,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS)
Investments recorded at cost, net of
valuation allowance................ $ 3,344 $ 3,336
Receivables from affiliated entities
and related parties................ 2,862 4,391
Deposits............................. 865 1,875
Other................................ 922 911
--------- ---------
$ 7,993 $ 10,513
Less: Valuation allowance............ (2,722) (3,995)
--------- ---------
Total other long-term investments and
receivables........................ $ 5,271 $ 6,518
========= =========
Investments recorded at cost represent primarily investments in entities
involved in the oil and gas drilling sector. Included in these investments at
December 31, 1996 and 1995, is the $2.8 million cost of the Company's 12.5%
interest in a group of entities which operate a self-erecting tender barge under
capital lease, the AL BARAKA I. Quoted market values for these investments are
not readily available and, accordingly, the Company has evaluated the carrying
value of each investment based upon the financial position and future prospects
of each investee.
The Company believes that the recorded value of receivables from affiliated
entities and related parties, net of any valuation allowance, approximates fair
market value at December 31, 1996.
6. PLANT AND EQUIPMENT
DECEMBER 31,
--------------------------
1996 1995
------------ ------------
(IN THOUSANDS)
Rigs and equipment................... $ 426,220 $ 438,246
Buildings, furniture, fixtures and
vehicles........................... 3,984 3,226
------------ ------------
430,204 441,472
Less: accumulated depreciation....... (193,056) (211,100)
------------ ------------
Plant and equipment, net............. $ 237,148 $ 230,372
============ ============
18
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
6. PLANT AND EQUIPMENT (CONTINUED)
At December 31, 1996 and 1995, rigs and equipment with a carrying value of
$17.3 million and $50.8 million were held in non-operating status pending
redeployment. Rigs with a cost of $24 million are being depreciated over the
term of a five-year drilling contract which includes a bargain purchase option
in favor of the customer arising in May 1997. Depreciation charged in relation
to these rigs is $4.8 million in both 1996 and 1995. Assets with a book value of
$114 million and $165 million as of December 31, 1996 and 1995, respectively,
are pledged as security under the Company's debt agreements and leases.
The Company capitalizes interest applicable to the construction of
significant additions to plant and equipment. In 1996, total interest incurred
was $10,700,000 of which $652,000 was capitalized. No interest was capitalized
in 1995 or 1994.
7. LEASES
Included in property, plant and equipment in the accompanying consolidated
balance sheets are the following rigs and equipment under capital leases:
DECEMBER 31,
----------------------
1996 1995
---------- ----------
(IN THOUSANDS)
Rigs and equipment at cost........... $ 108,629 $ 150,830
Accumulated depreciation............. (53,123) (70,315)
---------- ----------
Assets under capital leases, net..... $ 55,506 $ 80,515
========== ==========
In October 1995, the Company exercised options to purchase five tender
barges and five land rigs which were under capital lease for a total amount of
$19.9 million. The terminated lease contracts had remaining unexpired terms
ranging up to four years and their payments were based upon interest rates
ranging from 6.0% to 9.0% after considering interest rate swap agreements.
Simultaneously, the Company entered into a new seven year sale leaseback
contract for three of these tender barges with a financing company. The new sale
leaseback agreement results in a capital lease obligation of $40 million payable
in semi-annual installments. Interest is calculated at a stated rate of
six-month LIBOR plus 1.25% (6.85% at December 31, 1996) for $35 million of the
obligation and at a fixed rate of 7.67% for the remaining $5 million. In
conjunction with this lease, the Company entered into an interest rate swap
agreement which fixes the payment on this lease at 7.67% on $35 million of the
outstanding obligation over the entire term of the contract. The outstanding
amount of this capital lease obligation at December 31, 1996 was $35.5 million.
The Company also entered other contracts for the lease of land rigs and
various equipment which represented capital lease obligations of $12.6 million
at December 31, 1995. These lease obligations were liquidated by the Company
during 1996.
Under the terms of these lease contracts, the Company is required to comply
with applicable laws and regulations, maintain the rigs and equipment and obtain
a specified level of insurance coverage. The depreciation expense related to
assets under capital leases was $6.1 million, $5.5 million and $8.0 million in
1996, 1995 and 1994, respectively.
19
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
7. LEASES (CONTINUED)
Capital lease obligations are summarized below:
DECEMBER 31,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS)
Total capital lease obligations...... $ 35,513 $ 52,676
Less current installments............ (4,850) (8,138)
--------- ---------
Long-term obligations under capital
leases............................. $ 30,663 $ 44,538
========= =========
The Company also leases premises under operating leases which expire in the
year 2009. Rental expense for this operating leases amounted to $307,000,
$320,000 and $276,000 in 1996, 1995 and 1994, respectively.
Minimum lease payments under leases expiring subsequent to December 31,
1996 follow:
CAPITAL OPERATING
YEAR ENDED DECEMBER 31, LEASES LEASES
- ------------------------------------- ------- ---------
(IN THOUSANDS)
1997................................. $ 7,519 $ 675
1998................................. 7,520 587
1999................................. 7,519 409
2000................................. 7,520 238
2001................................. 7,519 219
2002 and thereafter.................. 7,520 1,096
------- ---------
Total................. $45,117 $ 3,224
=========
Less interest........................ (9,604)
-------
Minimum lease payments............... $35,513
=======
The new sale leaseback agreement contains certain limitations on the
incurrence of additional indebtedness, including the limitation that
indebtedness may not exceed tangible net worth. The Company will, however, be
permitted to assume, among other things, indebtedness of acquired businesses,
subject to compliance with the other financial covenants contained in the sale
leaseback agreement.
8. SHORT-TERM BORROWINGS
The Company has agreements with several banks for short-term lines of
credit in both U.S. dollars and French francs. These facilities are renewable
annually and bear interest at three-month LIBOR plus 1% (6.5% and 6% at December
31, 1996 and 1995, respectively) for U.S. dollar denominated facilities and
three-month PIBOR plus 1% (4.5% and 6% at December 31, 1996 and 1995,
respectively) for French franc denominated facilities.
20
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
8. SHORT-TERM BORROWINGS (CONTINUED)
The Company had the following balances outstanding under these short-term
credit facilities:
DECEMBER 31,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS)
Unsecured............................ $ 14,335 $ 10,171
Secured by trade receivables......... -- 10,669
--------- ---------
Total................. $ 14,335 $ 20,840
========= =========
As of December 31, 1996, the Company had $25 million of unused commitments
for unsecured credit lines and $6 million of unused commitments for secured
credit lines.
9. LONG-TERM DEBT
DECEMBER 31,
----------------------
1996 1995
---------- ----------
(IN THOUSANDS)
Bank debt(a)......................... $ 19,170 $ 41,867
Loan obligations to customers(b)..... 9,511 8,692
Other loan obligations(c)............ 5,207 7,901
---------- ----------
Total debt............ $ 33,888 $ 58,460
Less current portion................. (11,773) (18,202)
---------- ----------
Total long-term
debt............... $ 22,115 $ 40,258
========== ==========
(A) BANK DEBT
The Company has entered into borrowing arrangements with various banks for
loans denominated in U.S. dollars and French francs ("FF").
U.S. dollar denominated debt as of December 31, 1996 and 1995 amounted to
$19.2 million and $33.5 million, respectively. On August 1, 1995, the Company
refinanced loan obligations with new bank debt in the amount of $20 million
payable in semi-annual installments beginning February 1996 and continuing
through 2002. The loan bears interest at a stated rate of six month LIBOR plus a
margin ranging from 1.25% to 2.5% (6.85% at December 31, 1996). In conjunction
with this loan, the Company simultaneously entered into an interest rate swap
agreement which fixed the rate of interest on this loan at 7.55% over the term
of the debt agreement. The semisubmersible rig NYMPHEA is pledged as security
for this loan.
In September 1995, the Company entered into a new $10 million credit line.
This facility bore interest at six-month LIBOR plus 1.0% and was originally
repayable in monthly installments of $350,000 through January 1998. The
outstanding balance as of December 31, 1995 was $9.0 million. This loan was
repaid in full in May 1996.
In 1992, the Company entered into an agreement for a loan in the amount of
$14.3 million to finance the purchase and upgrading of two lake barges, RIG 50
and RIG 51. As of 1996 and 1995, $1.4 million and $4.3 million, respectively,
were outstanding under this loan. The loan is repayable in semi-annual
installments through April 1997 and bears interest at six-month LIBOR plus 1.7%
(7.3% and 7.2% at December 31, 1996 and 1995, respectively). Management has
entered into an interest rate swap contract for
21
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
9. LONG-TERM DEBT (CONTINUED)
the duration of the term of this loan which fixes the interest rate at 8.4%. The
loan is secured by Rigs 50 and 51.
French franc denominated debt translated into U.S. dollar amounts at year
end rates was $0 and $8.2 million (FF 40.3 million) as of December 31, 1996 and
1995, respectively. These borrowings were fully repaid during 1996.
In December 1996, Forasol-Foramer signed a credit facility for $30 million,
secured by its semisubmersible SOUTH SEAS DRILLER, which bears interest at a
rate of six-month LIBOR plus a margin ranging from 1% to 2%, depending on the
dayrate earned by the SOUTH SEAS DRILLER and the amount outstanding under the
facility as it relates to the asset market value of the rig. There is a
commitment fee of 0.25% on the undrawn balance of the facility. The credit
facility was unutilized at December 31, 1996.
(B) LOAN OBLIGATIONS TO CUSTOMERS
The Company has entered into borrowing arrangements denominated in both
U.S. dollars and French francs with certain significant customers. U.S. dollar
loan obligations to customers as of December 31, 1996 and 1995 amounted to $7.1
million and $5.3 million, respectively.
The $7.1 million loan obligation outstanding as of December 31, 1996
consists of two loans in the amounts of $4 million ($0 at December 31, 1995) and
$3.1 million ($4.1 million at December 31, 1995). The loan in the amount of $4
million represents an advance received from a customer in April 1996 to finance
the construction of a new derrick set for the Cormorant. The advance, which was
for an original amount of $6.5 million, bears interest at a fixed annual rate of
7% and is repayable in monthly installments ending in November 1997. The loan in
the amount of $3.1 million is payable in semi-annual installments through 1999,
is secured by the assets of the jack-up rig ILE DU LEVANT and bears interest at
LIBOR. Management has entered into an interest rate swap agreement for the
duration of the term of this loan which fixed the interest rate at 8.625%. An
additional loan outstanding at December 31, 1995, in the amount of $1.2 million,
was repaid during 1996.
French franc denominated loan obligations to customers translated into U.S.
dollar amounts at year end rates as of December 31, 1996 and 1995 were $2.4
million (FF 12.5 million) and $3.4 million (FF 16.5 million), respectively. The
repayment schedules for these loans are variable and are based upon the Company
achieving certain operating performance criteria. The loans bear interest at
variable rates ranging from a minimum of 0% to a maximum of 15% also depending
on certain operating performance criteria. The weighted average rate paid on
these loans for the year ended December 31, 1996 was 7.7%.
(C) OTHER LOAN OBLIGATIONS
In conjunction with the Company's 1995 purchase of a 95% interest in HAPSA,
the Company acquired or incurred $5.4 million of additional long-term debt
obligations. These obligations include a 10% unsecured, fixed rate loan in the
amount of $3.2 million repayable in semi-annual installments beginning January
1996 and continuing through 1999. The remaining $1.5 million indebtedness is
repayable in semi-annual installments through 1998 and accrues interest at a
fixed rate of 8%.
Other than the debt obligations described above, this category includes a
number of individually insignificant items.
22
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
9. LONG-TERM DEBT (CONTINUED)
Scheduled principal payments subsequent to December 31, 1996 are as
follows:
YEAR ENDED DECEMBER 31, (IN THOUSANDS)
- ------------------------------------- --------------
1997................................. $ 11,773
1998................................. 5,705
1999................................. 4,794
2000................................. 3,965
2001................................. 4,113
2002 and thereafter.................. 3,538
--------------
$ 33,888
==============
Based on rates currently available to the Company for debt with similar
terms and remaining maturities, the Company believes that the recorded value of
long-term debt approximates fair market value at December 31, 1996.
10. INCOME TAXES
The Company follows Statement of Financial ACCOUNTING STANDARDS NO. 109
("SFAS 109"), Accounting for Income Taxes. Under SFAS 109, the tax provision
is determined under the liability method. Under this method, deferred tax assets
and liabilities are recognized based on differences between the financial
statement and tax bases of assets and liabilities using presently enacted tax
rates. SFAS 109 provides, in part, that a deferred tax asset shall be evaluated
for realization based on a more likely than not criteria using a valuation
allowance.
The Company operates internationally and tax rates are subject to
applicable tax legislation in the countries in which it operates. The tax rates
in many of these countries are based on deemed profit as a percentage of
revenue. The domestic and foreign components of pre-tax (loss) income after
equity in net income of affiliates follow:
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1994 1993
---------- ---------- ----------
(IN THOUSANDS)
Domestic............................. $ (21,436) $ (21,925) $ (24,456)
Foreign.............................. 9,985 19,609 28,508
---------- ---------- ----------
Total................. $ (11,451) $ (2,316) $ 4,052
========== ========== ==========
23
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
10. INCOME TAXES (CONTINUED)
A reconciliation of the differences between income taxes computed at the
French statutory rate of 37% for 1996 and 1995 and 33% for 1994 and the
Company's reported provision for income taxes follows:
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
Statutory income tax rate............ (37)% (37)% 33%
Non-utilizable tax losses in
Forinter........................... -- 22% 14%
Taxation rebates..................... -- (9)% (4)%
Tax loss benefits.................... (29)% -- --
Foreign taxes in overseas
jurisdictions...................... 69% 45% 21%
--
--- ---
Effective income tax rate............ 3% 21% 64%
=== === ==
The effective tax rate is different from the French statutory rate
primarily due to revenues being earned in foreign tax jurisdictions with
different tax bases and rates and to taxable losses in the group company
Forinter Ltd., an entity based in a tax free jurisdiction, being unavailable for
offset against taxable income. Additionally, in 1996 the Company recognized a
deferred income tax benefit of approximately $3.4 million from the reduction in
a valuation allowance for the tax benefits of net operating loss carryforwards.
The allowance had been recorded in prior years due to uncertainties then
existing regarding the Company's ability to utilize such tax benefits.
As of December 31, 1996 and 1995, the components of deferred tax assets and
liabilities were as follows:
DECEMBER 31,
----------------------
1996 1995
---------- ----------
(IN THOUSANDS)
Deferred Tax Assets:
Tax loss carryforwards.......... $ 24,203 $ 23,203
Other........................... -- 702
---------- ----------
Total deferred tax
assets............. 24,203 23,905
Valuation allowance............. (13,544) (15,677)
---------- ----------
Net deferred tax
asset.............. $ 10,659 $ 8,228
========== ==========
Deferred Tax Liabilities:
Depreciation.................... $ 5,106 $ 4,852
Capital leases.................. -- 647
---------- ----------
Total deferred tax
liabilities................... $ 5,106 $ 5,499
========== ==========
Net deferred tax asset.......... $ 5,553 $ 2,729
========== ==========
Due to the projected inability to fully utilize tax loss carryforwards
related to the Company's operations against the Company's forecasted future
taxable earnings in various jurisdictions, the Company has recorded a valuation
allowance against such tax loss carryforwards of $13.5 million and $15.7 million
at December 31, 1996 and 1995, respectively.
24
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
10. INCOME TAXES (CONTINUED)
As of December 31, 1996, unused net tax loss carryforwards were $71.7
million. Of these net tax loss carryforwards, $42.2 million are not subject to
an expiration date. The remaining tax loss carryforwards expire between 1997 and
2009.
The provision for income taxes consists of:
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
Current income tax expense:
Domestic........................ $ 107 $ 69 $ 18
Foreign......................... 3,072 1,839 1,715
--------- --------- ---------
3,179 1,908 1,733
--------- --------- ---------
Deferred income tax expense:
Domestic........................ $ (3,451) $ (1,031) $ 370
Foreign......................... 626 (468) 477
--------- --------- ---------
(2,825) (1,499) 847
--------- --------- ---------
Total................. $ 354 $ 409 $ 2,580
========= ========= =========
11. OTHER CURRENT LIABILITIES
Other current liabilities are summarized below:
DECEMBER 31,
--------------------
1996 1995
--------- ---------
Amounts due to personnel................ $ 5,590 $ 3,596
Accrued payroll taxes................... 5,308 3,772
Value Added Tax......................... 4,952 1,464
Accrued income taxes.................... 2,056 4,177
Other accrued liabilities............... 15,163 13,910
--------- ---------
$ 33,069 $ 26,919
========= =========
12. STOCKHOLDERS' EQUITY
At December 31, 1996, the Company's retained earnings includes legal and
other reserves of $24.8 million, which are not distributable to shareholders.
13. STOCK OPTIONS
During 1996, options under the 1996 Long Term Incentive Plan were granted
to the primary officers, managers and employees of the Company to purchase a
total of 312,000 Common Shares at an exercise price of $12 per share and 150,000
Common Shares at an exercise price of $14 per share. Grants were originally to
have become exercisable five years from the date of issuance and to expire at
the end of ten years. All 462,000 options granted, with a weighted exercise
price of $12.65, were outstanding and unexercisable at December 31, 1996.
On March 10, 1997, following the closing of the sale of the Company's
operating subsidiaries to Pride Petroleum Services, Inc. ("Pride") (See Note
19 -- Subsequent Events) all such options were cancelled
25
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
13. STOCK OPTIONS (CONTINUED)
after having been exchanged for the equivalent number of shares of Pride Common
Stock, in the case of 110,000 of the options, or for options to acquire shares
of Pride Common Stock at a rate of 1.1 Pride options for each option in the
Company, with accelerated exercise dates in the case of the remaining 352,000
options.
14. INTEREST RATE RISK MANAGEMENT TRANSACTIONS
The Company uses interest rate swaps and other instruments to manage its
exposure to changes in interest rates and to lower its overall borrowing costs.
The following interest rate contracts were outstanding at December 31,
1996:
o Interest rate swaps that convert specific bank debt and capital lease
obligations from variable rate borrowings to fixed rate borrowings and
are scheduled to mature between July 1997 and October 2002. Under
these contracts, the Company receives interest at six-month LIBOR
(5.6% at December 31, 1996) and paid interest at a weighted average
fixed rate of 6.8% in 1996.
o An interest rate cap that limits the maximum rate of interest on
six-month LIBOR based rates to 6%. At December 31, 1996, this contract
had a notional amount of $2.5 million and a maturity date of October
15, 1997.
The interest rate differential resulting from these contracts increased
interest and other financial expenses by $1.6 million, $737,000 and $1.9 million
for 1996, 1995 and 1994, respectively. The fair market value of these contracts
is estimated to be the same as the cost or gain to the Company to terminate its
interest rate hedging instruments. At December 31, 1996 and 1995, taking into
account the prevailing interest rate environment and creditworthiness of counter
parties, this amount is a loss of $1.6 million and $2.6 million, respectively.
Management believes that no significant concentration of credit risk exists
with respect to the Company's financial instruments. At December 31, 1996 and
1995, neither the Company nor the counterparties were required to collateralize
their respective obligations under these hedging instruments.
The following table summarizes by notional amounts the activity for each
major category of interest rate contract:
INTEREST CAP
RATE SWAPS CONTRACT
---------- --------
(IN THOUSANDS)
Balance at December 31, 1994......... $ 41,799 $ 7,010
Additions/Adjustments........... 55,000 --
Maturities...................... (14,017) (2,930)
---------- --------
Balance at December 31, 1995......... 82,782 4,080
Additions/Adjustments........... -- --
Maturities...................... (19,298) (1,550)
---------- --------
Balance at December 31, 1996......... $ 63,484 $ 2,530
========== ========
After giving effect to the interest rate hedging instruments outstanding, a
1% increase in interest rates would have resulted in a $205,000, $195,000 and
$186,000 increase in financial expenses for 1996, 1995 and 1994, respectively.
26
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
15. FOREIGN CURRENCY FORWARD CONTRACTS
The Company's risk management program attempts to minimize, to the extent
practical, the effects of fluctuations in the foreign exchange markets. The
Company's revenues are primarily U.S. dollar denominated, while the majority of
the Company's administrative expenditures are denominated in French francs. In
addition, the Company has long-term debt denominated in French francs. The table
below summarizes by major currency the contractual amounts of the Company's
forward exchange contracts in U.S. dollars. Foreign currency amounts are
translated at rates current at the reporting date. The "buy" amounts represent
the U.S. dollar equivalent of commitments to purchase foreign currencies, and
the "sell" amounts represent the U.S. dollar equivalent of commitments to sell
foreign currencies.
DECEMBER 31,
------------------------------------------
1996 1995
-------------------- --------------------
BUY SELL BUY SELL
--------- --------- --------- ---------
(IN THOUSANDS)
French franc....................... $ 12,000 -- $ 9,700 $ --
Deutsche mark...................... 4,000 -- -- 915
U.S. dollar........................ -- -- -- 8,500
--------- --------- --------- ---------
$ 16,000 $ -- $ 9,700 $ 9,415
========= ========= ========= =========
In addition to the above, at December 31, 1996, the Company had forward
exchange contracts involving the sale of one foreign currency and the purchase
of another foreign currency with a contractual amount equivalent to
approximately $5 million.
The estimated (cost) to terminate exchange contracts outstanding at
December 31, 1996, 1995 and 1994 was $(241,000), $240,000 and $0, respectively.
Such costs were recorded as a gain (loss) on foreign exchange contracts in the
Consolidated Statements of Operations at December 31, 1996, 1995 and 1994,
respectively. Under terms of the contracts, neither the Company nor the
counterparties were required to collateralize their respective obligations.
The average fair market value of these contracts calculated on a quarterly
basis was:
YEAR ENDED DECEMBER 31,
------------------------------
1996 1995 1994
--------- --------- -----
(IN THOUSANDS)
Average during the period (calculated
on a quarterly basis)
Assets.......................... $ 30 $ 130 $ 864
Liabilities..................... 209 22 129
The net gain (loss) arising from these contracts was $(104,000), $144,000
and $2.6 million for each of the three years ending December 31, 1996, 1995 and
1994, respectively.
16. GEOGRAPHICAL INFORMATION
The Company operates only in the contract oil and gas drilling industry
segment.
The following tables present net operating revenues, operating income and
identifiable assets by geographic area.
27
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
16. GEOGRAPHICAL INFORMATION (CONTINUED)
Operating income represents net operating revenues less operating costs and
expenses of the geographic area concerned. Identifiable assets are those used in
the operations of each geographic area. Corporate assets consist primarily of
cash and cash equivalents and deferred tax assets.
<TABLE>
<CAPTION>
MIDDLE REST OF
1996 EAST AFRICA FAR EAST FRANCE EUROPE AMERICAS TOTAL
- ------------------------------------- --------- --------- --------- --------- --------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............................. $ 3,822 $ 85,006 $ 3,398 $ 3,839 $ 26,508 $76,898 $ 199,471
========= ========= ========= ========= ========= ======== =========
Operating income (loss).............. $ 146 $ 20,492 $ (2,034) $ (22,389) $ 1,668 $(2,744 ) $ (4,861)
========= ========= ========= ========= ========= ======== =========
Identifiable assets.................. $ 20,128 $ 140,410 $ 14,596 $ 11,681 $ 43,789 $85,507 $ 316,111
========= ========= ========= ========= ========= ========
Corporate assets..................... 25,213
---------
Total assets......................... $ 341,324
=========
MIDDLE REST OF
1995 EAST AFRICA FAR EAST FRANCE EUROPE AMERICAS TOTAL
- ------------------------------------- --------- --------- --------- --------- --------- -------- ---------
(IN THOUSANDS)
Revenues............................. $ 12,464 $ 90,060 $ 7,070 $ 3,595 $ 17,971 $40,340 $ 171,500
========= ========= ========= ========= ========= ======== =========
Operating income (loss).............. $ 8,868 $ 16,928 $ 314 $ (21,734) $ 150 $ 1,559 $ 6,085
========= ========= ========= ========= ========= ======== =========
Identifiable assets.................. $ 20,258 $ 140,255 $ 29,077 $ 24,307 $ 40,915 $52,680 $ 307,492
========= ========= ========= ========= ========= ========
Corporate assets..................... 25,563
---------
Total assets......................... $ 333,055
=========
MIDDLE REST OF
1994 EAST AFRICA FAR EAST FRANCE EUROPE AMERICAS TOTAL
- ------------------------------------- --------- --------- --------- --------- --------- -------- ---------
(IN THOUSANDS)
Revenues............................. $ 15,002 $ 87,738 $ 26,141 $ 71 $ 4,238 $15,114 $ 148,304
========= ========= ========= ========= ========= ======== =========
Operating income (loss).............. $ 4,706 $ 16,233 $ 10,431 $ (25,521) $ (266) $ 1,815 $ 7,398
========= ========= ========= ========= ========= ======== =========
Identifiable assets.................. $ 21,160 $ 171,711 $ 26,605 $ 36,009 $ 13,809 $22,487 $ 291,781
========= ========= ========= ========= ========= ========
Corporate assets..................... 25,842
---------
Total assets......................... $ 317,623
=========
</TABLE>
The Company derived 16%, 30% and 36% of its consolidated revenues during
1996, 1995 and 1994, respectively, from Elf Aquitaine Group. In the year ended
December 31, 1996, an additional 15%, 14%, 14% and 10% of consolidated revenues
were derived from Maraven, Chevron, Shell and Total, respectively.
17. COMMITMENTS, CONTINGENCIES AND UNCERTAINTIES
The Company's business and operations are substantially dependent upon the
conditions of the oil and natural gas industry and, specifically, the
exploration and production expenditures of oil and natural gas companies, which
are largely dependent upon prevailing prices for oil and natural gas. The
Company's rigs are based in countries outside the U.S. While demand for drilling
rigs outside the U.S. has been less volatile, demand remains dependent on
various factors outside the Company's control. The Company cannot predict the
timing or extent of any improvement in the industry or the future level of
demand for the Company's drilling services.
28
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
17. COMMITMENTS, CONTINGENCIES AND UNCERTAINTIES (CONTINUED)
INSURANCE COVERAGE
The Company maintains broad insurance coverage, including general and
marine public liability. No insurance is generally carried against loss of
revenues. The Company believes that it is adequately insured in accordance with
industry standards against normal risks of its operations. Notwithstanding such
coverage, the occurrence of a casualty or loss against which the Company is not
fully insured could have a material adverse effect on the Company's financial
position and results of operations.
ENVIRONMENTAL REGULATION
The Company is subject to numerous domestic and foreign governmental
regulations that relate directly or indirectly to its operations. The Company
does not believe that environmental regulations have to date had a material
adverse effect on its results of operations and does not anticipate that any
material expenditures will be required to enable it to comply with existing laws
and regulations.
LEGAL PROCEEDINGS
The Company is a defendant in a number of legal proceedings and has various
unresolved asserted and unasserted claims arising in the ordinary course of
business. The outcome of these lawsuits and claims is not known at this time.
The Company believes that the resulting uninsured liability, if any, will not
have a material adverse effect on its consolidated results of operations or
financial position.
18. RELATED PARTY TRANSACTIONS
For the years ended December 31, 1996, 1995 and 1994, an aggregate of
$471,000, $484,000, and $450,000 respectively, in management fees was paid to
Soletanche S.A. and Ackermans and van Haaren N.V.
Under the terms of joint venture and other agreements, the Company provides
contract labor and other management services to certain of its affiliates. The
table on the following page summarizes revenues regarding affiliates for the
years ended December 31, 1996, 1995 and 1994 and receivables from affiliates as
of December 31, 1996, 1995 and 1994:
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
Revenues:
National Drilling and Services
Co. LLC....................... $ 295 $ 171 $ 409
Al Jazirah Forasol Drilling
Corporation................... 860 980 1,588
Foradel, Inc.................... 168 882 10,157
--------- --------- ---------
Total...................... $ 1,323 $ 2,033 $ 12,154
========= ========= =========
DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
Accounts receivable:
National Drilling and Services
Co. LLC....................... $ 93 $ 21 $ 47
Al Jazirah Forasol Drilling
Corporation................... -- 183 146
Foradel, Inc.................... -- 79 1,769
--------- --------- ---------
Total...................... $ 93 $ 283 $ 1,962
========= ========= =========
29
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
19. SUBSEQUENT EVENTS (UNAUDITED)
At an Extraordinary General Meeting of the Company held in Rotterdam on
March 10, 1997, the Shareholders of the Company approved the transactions
provided for in the Purchase Agreement dated December 16, 1996 between the
Company, certain shareholders of the Company and Pride Petroleum Services, Inc.,
a Louisiana corporation ("Pride"), having its corporate headquarters at 1500
City West Boulevard, Suite 400, Houston, Texas 77042, United States of America,
including the sale and transfer by the Company of all of the shares in the
issued capital of Forasub B.V., having its registered office in Rotterdam, to
Pride.
Forasub B.V., a Dutch closed limited liability company, was a wholly owned
subsidiary of the Company organized on December 30, 1996 into which the Company
transferred substantially all of its assets, including its record and beneficial
ownership in the outstanding capital stock of Forasol S.A., Forinter Limited and
International Drilling Management B.V. and their respective subsidiaries, on
December 31, 1996.
The Shareholders of the Company also approved a proposal to dissolve the
Company as of March 11, 1997, subject to the condition precedent that the
transactions contemplated by the Purchase Agreement should have been effected
prior to that date, to approve the liquidation of the assets and liabilities of
the Company and to appoint its Board of Managing Directors as liquidator, all
this in accordance with Article 29 paragraph 2 of the Articles of Association of
the Comapny, without any payment of a specific remuneration to the liquidators
and the persons assisting the liquidators.
Finally, the Shareholders of the Company approved a proposal, subject to
the condition precedent that the transactions contemplated by the purchase
Agreement should have been completed, to pay a liquidating
30
<PAGE>
FORASOL-FORAMER N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
19. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
distribution to the Shareholders of the Company, for each share in the issued
capital of the Company consisting of:
(a) an amount of $6.80 in cash (less any applicable Dutch withholding
taxes), to be paid out on or about March 14, 1997;
(b) 0.66 share of common stock of Pride, to be transferred on or
about March 14, 1997.
The transaction with Pride was completed on March 10, 1997 subsequent to
the Extraordinary General Meeting, the liquidation of the Company commenced on
March 11, 1997 and the liquidation dividend was paid on March 14, 1997.
The Company arranged for all trading in its shares on the Nasdaq Stock
Exchange to cease as at the close of business on March 10, 1997 and for its
listing to be cancelled as from that date.
On February 25, 1997 the Company signed an agreement to purchase a tender
barge, the "Tenaga", for $6.6 million. The Tenaga is currently being used as a
support vessel and the Company anticipates that it will require an investment of
between $15 million and $22 million, depending upon specific customer
requirements and the intended area of operations, to return it to its original
use as a tender-assisted drilling barge.
31
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
The following unaudited pro forma statement of operations for the year
ended December 31, 1997 illustrates the effect of: (i) the divestiture of the
Company's domestic land-based well servicing operations on February 20, 1997,
(ii) the acquisition of Forasol on March 10, 1997 and the related financing
transactions, (iii) the purchase of 13 mat-supported jackup rigs on May 7, 1997
and the related financing transactions, and (iv) the conversion of $28.0 million
principal amount of the Company's convertible subordinated debentures
(collectively, the "1997 Transactions"). The unaudited pro forma statement of
operations has been prepared assuming that such transactions were completed on
January 1, 1997.
The historical results of operations for the Company have been derived from
the Company's consolidated financial statements. The pro forma adjustments and
the resulting unaudited pro forma statement of operations are based upon
available information and certain assumptions and estimates described in the
Notes to Unaudited Pro Forma Statement of Operations. The pro forma statement of
operations does not purport to represent what the Company's results of
operations actually would have been had the 1997 Transactions occurred on
January 1, 1997 or to project the Company's financial position or results of
operations for any future date or period.
The unaudited pro forma statement of operations and the notes thereto
should be read in conjunction with the historical financial statements of the
Company, including the notes thereto.
32
<PAGE>
UNAUDITED PRO FORMA
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRIDE PRO
HISTORICAL ADJUSTMENTS FORMA
<S> <C> <C> <C>
REVENUES .............................$ 699,788 ($16,485)(A) $ 755,952
40,689 (C)
31,960 (D)
OPERATING COSTS ...................... 458,861 (12,776)(A) 496,223
30,974 (C)
19,164 (D)
--------- ---------
Gross Margin ......................... 240,927 259,729
DEPRECIATION AND AMORTIZATION ........ 58,661 (777)(A) 68,001
4,111 (C)
3,354 (D)
2,652 (E)
SELLING, GENERAL AND ADMINISTRATIVE .. 73,881 (2,274)(A) 77,621
2,823 (C)
3,191 (D)
--------- --------
EARNINGS FROM OPERATIONS ............. 108,385 114,107
--------- --------
OTHER INCOME (EXPENSE)
Other income (expense)................ 77,844 1,265 (A) 1,439
(83,553)(B)
(617)(C)
6,500 (H)
Interest income ...................... 3,773 85 (C) 3,858
Interest expense ..................... (34,368) 90 (A) (41,571)
(1,060)(C)
(6,233)(G)
--------- ----------
Total other income (expenses), net ... 47,249 (36,274)
--------- ----------
EARNINGS BEFORE INCOME TAXES ......... 155,634 77,833
INCOME TAX PROVISION ................. 51,639 121 (C) 23,792
(27,968)(I)
--------- ---------
NET EARNINGS .........................$ 103,995 $ 54,041
========= =========
NET EARNINGS PER SHARE
Basic ...........................$ 2.42 $ 1.14
Diluted .........................$ 2.16 $ 1.05
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic ........................... 43,036 2,312 (F) 47,386
2,038 (G)
Diluted ......................... 49,143 2,312 (F) 53,493
2,038 (G)
</TABLE>
The accompanying notes are an integral part of the pro forma
statement of operations.
33
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
1. BACKGROUND
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 $42.2 million, repayment of $3.9
million of indebtedness collateralized by certain of the assets sold and
prepayment of $4.0 million of lease payments on transferred assets subject to
operating leases, the net proceeds to the Company were $85.6 million. The
Company recognized a pretax gain on the sale of $83.6 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 Company's senior credit facility.
In May 1997, the Company completed the acquisition of 13 mat-supported
jackup rigs for cash consideration of $269.0 million. Also in May 1997, the
Company completed the public sale of $325.0 million aggregate principal amount
of its senior notes and 4.4 million shares of Common Stock, which resulted in
aggregate net proceeds to the Company of approximately $387.5 million.
Approximately $75.0 million of such net proceeds were used to repay certain
indebtedness, and approximately $269.0 million were used to purchase the 13
mat-supported jackup rigs.
In the first quarter of 1997, $28.0 million aggregate principal amount of
the Company's convertible subordinated debentures were converted into 2.3
million shares of Common Stock.
2. BASIS OF PRESENTATION
The accompanying unaudited pro forma statement of operations has been
prepared assuming that the transactions described in Note 1 were consummated on
January 1, 1997.
Pro forma basic net earnings per share have been computed based on the
weighted average number of common shares outstanding during the applicable
period. Pro forma diluted net earnings per share have been computed based on the
weighted average number of common shares and common share equivalents
outstanding during the period, as if the Company's convertible subordinated
debentures were converted into Common Stock as of the date of conversion, after
giving retroactive effect to the elimination of interest expense, net of income
tax effect, applicable to the convertible subordinated debentures.
3. MANAGEMENT ASSUMPTIONS
The unaudited pro forma statement of operations reflects the following pro
forma adjustments related to the 1997 Transactions:
34
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS -- (CONTINUED)
(A) Elimination of the results of operations related to the Company's U.S.
land-based well servicing business for the period from January 1, 1997 to
February 20, 1997.
(B) Elimination of $83.5 million gain recognized in connection with the
sale of the Company's U.S. land-based well servicing operations.
(C) Inclusion of the results of operations of Forasol for the period from
January 1, 1997 to March 10, 1997.
(D) Inclusion of the revenues and direct/allocated operating expenses of
the 13 mat-supported jackup rigs for the period from January 1, 1997 to May 7,
1997.
(E) Increase in depreciation and amortization expense resulting from the
preliminary allocation of the purchase price to assets acquired as described in
Notes (C) and (D), and adoption of the Company's depreciation policies.
(F) Increase in basic and diluted weighted average shares outstanding as a
result of shares issued in connection with the Forasol acquisition.
(G) Adjustment to interest expense to reflect (i) the issuance of a portion
of the $325.0 million principal amount of 9 3/8% senior notes used to fund the
acquisition of the mat-supported jackup rigs, (ii) the issuance of approximately
4.4 million shares of Common Stock used in part to repay $75.0 million of debt
and (iii) the conversion of $28.0 million principal amount of convertible
subordinated debentures as follows:
(in thousands)
Issuance of senior notes.............. $ 8,406
Repayment of debt..................... (1,563)
Conversion of debentures.............. (610)
-------
$ 6,233
=======
The aggregate effect on basic and diluted weighted average shares outstanding
for the year as a result of the issuance of approximately 4.4 million shares of
Common Stock and conversion of the debentures was 2,038,000 shares.
35
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS -- (CONTINUED)
(H) Adjustment to other income (expense) for the loss on the conversion of
the debentures.
(I) Income tax effect of the pro forma adjustments included herein, based
on applicable statutory rates.
36
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED HEREUNTO DULY AUTHORIZED.
PRIDE INTERNATIONAL, INC.
By: /s/ EARL McNIEL
EARL McNIEL
VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
Date: March 20, 1998
37
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Registration Nos.
33-62425 and 333-21385) and in the Registration Statements on Form S-8
(Registration Nos. 33-26854, 33-44823, 333-06823, 333-06825, 333-27661,
333-35089 and 333-35093)of our report dated July 18, 1997 relating to the
Historical Statement of Revenues and Direct/Allocated Operating Expenses of the
Mat-Supported Jackup Rigs of Noble Drilling Corporation for the year ended
December 31, 1996, which appears on page 2 of this Current Report on Form 8-K of
Pride International, Inc.
PRICE WATERHOUSE LLP
Houston, Texas
March 20, 1998
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference of our report dated March
24, 1997 on the consolidated balance sheet of Forasol-Foramer N.V. as of
December 31, 1996, and the related consolidated statements of operations,
shareholders' equity, and cash flows for the year then ended, included in this
Current Report on Form 8-K and incorporated by reference in the Registration
Statements on Form S-8 (Registration Nos. 33-26854, 33-44823, 333-06823,
333-06825, 333-27661, 333-35089 and 333-35093) and the Registration Statements
on Form S-3 (Registration Nos. 33-62425 and 333-21385) by Pride International,
Inc.
ERNST & YOUNG AUDIT
/s/ Francois Villard
Represented by
Francois Villard
Paris, France
March 19, 1998
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference of our report dated May 8,
1996 on the consolidated balance sheet of Forasol-Foramer N.V. and subsidiaries
as of December 31, 1995, and the related consolidated statements of income, of
cash flows and of changes in stockholders' equity for each of the two years in
the period ended December 31, 1995, included in this Current Report on Form 8-K
and incorporated by reference in the Registration Statements on Form S-8
(Registration Nos. 33-26854, 33-44823, 333-06823, 333-06825, 333-27661,
333-35089 and 333-35093) and the Registration Statements on Form S-3
(Registration Nos. 33-62425 and 333-21385) by Pride International, Inc.
Paris, France
March 20, 1998
Price Waterhouse
