SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1994
Commission File Number 0-6352
ATWOOD OCEANICS, INC.
(Exact name of registrant as specified in its charter)
State of Texas 74-1611874
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
15835 Park Ten Place Drive
P.O. Box 218350
Houston, Texas 77218
(Address of principal executive offices)
Registrant's telephone number, including area code:
(713) 492-2929
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation in S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definite proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrants as of November 30, 1994 is $63,530,000.
The number of shares outstanding of the issuer's class of Common Stock, as of
November 30 , 1994: 6,582,613 shares of Common Stock, $1 par value.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report to Shareholders for the fiscal year ended September 30,
1994 - Referenced in Parts I, II and IV of this report.
(2) Proxy Statement for Annual Meeting of Shareholders to be held February 9,
1995 - Referenced in Part III of this report.
PART I
ITEM 1. BUSINESS
Atwood Oceanics, Inc. (which together with its subsidiaries is
identified as the "Company" or "Registrant", unless the context requires
otherwise), a corporation organized in 1968 under the laws of the State of
Texas, is engaged in contract drilling of exploratory and development oil and
gas wells in offshore areas and related support, management and consulting
services. The Company currently owns (i) one jack-up, one semisubmersible
tender-assist vessel, one submersible, one semisubmersible and one modular,
self-contained platform rig, and (ii) the stock of two corporations which are
the sole general partners owning 1% interests and limited partners owning 49%
interests in the profits and losses of two partnerships, which, collectively,
own three semisubmersible rigs. The Company also provides labor, supervisory
and consulting services to two operator-owned platform rigs in Australia
Activity in the contract drilling industry and related oil service
businesses has been depressed since 1982 due to a decline in the price of and
demand for oil and natural gas and an oversupply of drilling equipment. Such
industry conditions have resulted in intense competition, reduced rates for
drilling contracts and reduced utilization levels of drilling rigs. During
fiscal year 1994, there were no significant improvements in dayrate levels or
other underlying market conditions; however, due to the Company's increase in
fleet utilization from 88 percent in 1993 to 99 percent in 1994, the Company
enjoyed its first profitable year since 1989. However, due to continuing
uncertainties in the market and the fact that several rigs are currently
working under short-term contracts, there is no assurance in 1995 that the
Company can maintain its equipment utilization rate at its 1994 level.
Most of the Company's drilling operations have been conducted outside
United States waters. The Company is currently involved in active drilling
operations in Australia, Malaysia and Korea. At the present time, the
submersible "RICHMOND" is the Company's only drilling vessel located in United
States waters. At the end of fiscal year 1992, the RICHMOND had not found
profitable contract work for over one year, which, coupled with an uncertain
outlook for general improvement in the drilling market, caused the Company to
write down certain drilling vessels and other assets by $17 million. However,
since March 1993 the RICHMOND has had continuous profitable work in the United
States Gulf of Mexico.
For information relating to the revenues, profitability and identifiable
assets attributable to specific geographic area of operations, see Note 13 of
Notes to Consolidated Financial Statements contained in the Company's Annual
Report to shareholders for fiscal year 1994, incorporated by reference herein.
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The following table sets forth, for each of the last three fiscal years, the
approximate percentage of gross revenues (which include investment income)
derived from domestic and foreign operations:
Fiscal Year Ended
September 30,
1994 1993 1992
Domestic 12% 11% 6%
Foreign 88% 89% 94%
OFFSHORE DRILLING EQUIPMENT
As stated above, the Company's diversified fleet of owned or operated
drilling rigs currently consists of four semisubmersibles, one semisubmersible
tender assist vessel, one jack-up, one submersible, and one modular, self-
contained platform rig. Each type of drilling rig is designed for different
purposes and applications, for operations in different water depths, bottom
conditions, environments and geographical areas, and for different drilling
and operating requirements. The following descriptions of the various types
of drilling rigs owned or operated by the Company illustrate the diversified
range of application of the rig fleet.
The semisubmersible drilling unit has two hulls, the lower of which is
capable of being flooded. Drilling equipment is mounted on the main hull.
After the drilling unit is towed to location, the lower hull is flooded,
lowering the entire drilling unit to its operating draft, and the drilling
unit is anchored in place. On completion of operations, the lower hull is
deballasted, raising the entire drilling unit to its towing draft. This type
of drilling unit is designed to operate in greater water depths than a jack-up
and in more severe sea conditions than a drillship. Semisubmersible units are
generally more expensive to operate than jack-up rigs and, compared to a
drillship, are often limited in the amount of supplies that can be stored on
board.
The semisubmersible tender assist vessel operates like a semisubmersible
except that its drilling equipment is temporarily installed on permanently
constructed offshore support platforms. The semisubmersible vessel provides
crew accommodations, storage facilities and other support for the drilling
operations.
A jack-up drilling barge contains all of the drilling equipment on a
single hull designed to be towed to the well site. Once on location, legs are
lowered to the sea floor and the barge is raised out of the water by jacking
up on these legs. On completion of the well, the barge is jacked downed and
towed to the next location. A jack-up drilling unit can operate in more
severe sea and weather conditions than a drillship and is less expensive to
operate than a semisubmersible. However, because it must rest on the sea
floor, a jack-up cannot operate in as deep water as other units.
The submersible drilling unit owned by the Company has two hulls, the
lower being a mat which is capable of being flooded. Drilling equipment and
crew accommodations are located on the main hull. After the drilling unit is
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towed to location, the lower hull is flooded, lowering the entire unit to its
operating draft at which it rests on the sea floor. On completion of
operations, the lower hull is deballasted, raising the entire unit to its
towing draft. This type of drilling unit is designed to operate in shallow
water depths ranging from 9 to 70 feet and can operate in moderately severe
sea conditions. Although drilling units of this type are less expensive to
operate, like the jack-up rig, they cannot operate in as deep water as other
units.
A modular platform rig is similar to a land rig in its basic components.
Modular platform rigs are temporarily installed on permanently constructed
offshore support platforms in order to perform the drilling operations. After
the drilling phase is completed, the modular rig is broken down into
convenient packages and moved by work boats. A platform rig usually stays at
a location for several months, if not years, since there are usually several
wells drilled from a support platform.
DRILLING CONTRACTS
The contracts under which the Company operates its vessels are obtained
either through individual negotiations with the customer or by submitting
proposals in competition with other contractors and vary in their terms and
conditions. The initial term of contracts for the Company's owned and/or
operated vessels has ranged from the length of time necessary to drill one
well to several months and is generally subject to early termination in the
event of a total loss of the drilling vessel, excessive equipment breakdown or
failure to meet minimum performance criteria. In the current offshore
drilling market, long-term contracts for mobile exploration vessels, such as
the Company's semisubmersibles, are extremely rare. However, it is not
unusual for contracts to contain renewal provisions at the option of the
customer.
The rate of compensation specified in each contract depends on the
nature of the operation to be performed, the duration of the work, equipment
and services provided, the areas involved, market conditions and other
variables. Generally, contracts for drilling, management and support services
specify a basic rate of compensation computed on a day rate basis. Such
agreements generally provide for a reduced day rate payable when operations
are interrupted by equipment failure and subsequent repairs, field moves,
adverse weather conditions or other factors beyond the control of the Company.
Some contracts also provide for revision of the specified dayrates in the
event of material changes in certain items of cost. Any period during which a
vessel is not earning a full operating day rate because of the above
conditions or because the vessel is idle and not on contract will have an
adverse effect on operating profit. A continuing over supply of drilling rigs
in the market can adversely affect the Company's ability to employ its
drilling vessels and depresses dayrates which can be obtained.
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For long moves, the Company attempts to obtain either a lump sum or a
day rate as mobilization compensation for expenses incurred during the period
in transit. A surplus of certain types of units, either worldwide or in
particular operating areas, can result in the Company's acceptance of a
contract which provides only partial or no recovery of relocation costs.
Operation of the Company's drilling equipment is subject to the offshore
drilling requirements of petroleum exploration companies and agencies of
foreign governments. These requirements are, in turn, subject to fluctuations
in government policies, world demand and prices for petroleum products, proved
reserves in relation to such demand and the extent to which such demand can be
met from onshore sources. As the market continues to be burdened with an
oversupply of drilling units, some contracts continue to be offered on a per
well basis rather than a fixed time period.
The Company also contracts to provide various types of services to third
party owners of drilling rigs. These contracts are normally for a stated term
or until termination of operations or stages of operation at a particular
facility or location. The services may include, as in the case of contracts
entered into by the Company in connection with operations offshore Australia,
the supply of personnel and rig design, fabrication, installation and
operation. The contracts normally provide for reimbursement to the Company
for all out-of-pocket expenses, plus a service or management fee for all of
the services performed. In most instances, the amount charged for the
services may be adjusted if there are changes in conditions, scope or costs of
operations. The Company generally obtains the benefit of insurance or a
contractual indemnity from the owner for liabilities which could be incurred
in operations.
OPERATIONAL RISKS AND INSURANCE
The Company's operations are subject to the usual hazards associated
with the drilling of oil and gas wells, such as blowouts, explosions and
fires. In addition, the Company's vessels are subject to those perils
peculiar to marine operations, such as capsizing, grounding, collision and
damage from severe weather conditions. Any of these risks could result in
damage or destruction of drilling rigs and oil and gas wells, personal injury
and property damage, and suspension of operations or environmental damage
through oil spillage or extensive, uncontrolled fires. Although the Company
believes that it is adequately insured against normal and foreseeable risks in
its operations in accordance with industry standards, such insurance may not
be adequate to protect the Company against liability from all consequences of
well disasters, marine perils, extensive fire damage or damage to the
environment. To date, the Company has not experienced difficulty in obtaining
insurance coverage, although no assurance can be given as to the future
availability of such insurance or cost thereof. The occurrence of a
significant event against which the Company is not fully insured could have a
material adverse effect on the Company's financial position.
ENVIRONMENTAL PROTECTION
Under the Federal Water Pollution Control Act, as amended, operators of
vessels in navigable United States waters and certain offshore areas are
liable to the United States government for the costs of removing oil and
certain other pollutants for which they may be held responsible, subject to
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certain limitations, and must establish financial responsibility to cover such
liability. The Company has taken all steps necessary to comply with this law,
and has received a Certificate of Financial Responsibility (Water Pollution)
from the U.S. Coast Guard. The Company's operations in United States waters
are also subject to various other environmental regulations regarding
pollution and control thereof, and the Company has taken steps to ensure
compliance therewith.
CUSTOMERS
During fiscal year 1994, the Company performed operations for 17
customers. Because of the relatively limited number of customers for which
the Company can operate at any give time, sales to each of 2 different
customers amounted to 10% or more of the Company's fiscal 1994 revenues. Esso
Australia Limited/Esso Production Malaysia, Inc., and Western Mining
Corporation Limited accounted for 39% and 10% respectively, of fiscal year
1994 revenues. The Company's business operations are subject to the risks
associated with a business having a limited number of customers for its
products or services, and a decrease in the drilling programs of these
customers in the areas where they employ the Company may adversely affect the
Company's revenues.
COMPETITION
The Company competes with numerous other drilling contractors, some of
which are substantially larger than the Company and possess appreciably
greater financial and other resources. In addition, the Company must compete
with some large diversified natural resource companies that maintain offshore
drilling divisions. The drilling industry is highly competitive, and no one
drilling contractor is dominant. Even though improved somewhat from prior
years, the supply of drilling equipment continues to exceed demand. As a
consequence, there continues to be competition in securing available drilling
contracts.
Price competition is generally the most important factor in the drilling
industry, but the technical capability of specialized drilling equipment and
personnel at the time and place required by customers are also important.
Other competitive factors include work force experience, rig suitability,
efficiency, condition of equipment, reputation and customer relations. The
Company believes that it competes favorably with respect to these factors. If
demand for drilling rigs increases in the future, rig availability may also
become a competitive factor. Competition usually occurs on a regional basis
and, although drilling rigs are mobile and can be moved from one region to
another in response to increased demand, an oversupply of rigs in any region
may result. Demand for drilling equipment is also dependent on the
exploration and development programs of oil and gas companies, which are in
turn influenced by the financial condition of such companies, by general
economic conditions and prices of oil and gas, and from time to time by
political considerations and policies.
It is impracticable to estimate the number of competitors of the
Company, some of which may have substantially greater resources and longer
operating history than does the Company. In recent years many drilling
companies have sought protection from creditors under bankruptcy laws or have
undertaken business combinations with other companies as a result of the
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downturn in the contract drilling industry. Although these developments have
resulted in a decrease in the total number of competitors, management of the
Company believes that competition for drilling contracts will continue to be
intense for the foreseeable future.
FOREIGN OPERATIONS
The operations of the Company are conducted primarily in foreign waters
and are subject to certain political, economic and other uncertainties not
encountered by purely domestic drilling contractors, including risks of
expropriation, nationalization, foreign exchange restrictions, foreign
taxation, changing conditions and foreign and domestic monetary policies.
Generally, the Company purchases insurance to protect against some or all loss
due to events of political risk such as nationalization, expropriation, war,
confiscation and deprivation. Occasionally, customers will indemnify the
Company against such losses. Moreover, offshore drilling activity is affected
by government regulations and policies limiting the withdrawal of offshore oil
and gas, by regulations affecting production, by regulations restricting the
importation of foreign petroleum, by environmental regulations and by
regulations which may limit operations in offshore areas by foreign companies
and/or personnel. See Note 13 to Consolidated Financial Statements contained
in the Company's Annual Report to shareholders for fiscal year 1994,
incorporated herein by reference, for a summary of revenues, operating income
(loss) and identifiable assets by geographic region.
EMPLOYEES
The Company currently employs approximately 650 persons in its domestic
and worldwide operations. In connection with its foreign drilling operations,
the Company has often been required by the host country to hire substantial
portions of its work force in that country, and in some cases these employees
may be represented by foreign unions. To date the Company has experienced
little difficulty in complying with such requirements and the Company's
drilling operations have not been interrupted by strikes or work stoppages.
ITEM 2. PROPERTIES
Information regarding the location and general character of the
Company's principal assets may be found in the schedule with the caption
heading "Offshore Drilling Operations" in the Company's Annual Report to
Shareholders for fiscal year 1994, which is incorporated by reference herein.
In October 1993, the Company purchased for $1.5 million the SOUTHERN
CROSS, a semisubmersible built in 1976, and the Company sold its forty percent
interest in an incorporated Indian joint venture which owns a jack-up and a
drillbarge. For more information concerning these transactions, see Notes 4
and 11 to Consolidated Financial Statements contained in the Company's Annual
Report to Shareholders for fiscal year 1994, incorporated by reference herein.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently involved in any material legal proceedings.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
During the fourth quarter of fiscal 1994, no matters were submitted to a
vote of shareholders through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
As of September 30, 1994, there were over 400 beneficial owners of the
Company's common stock.
The Company did not pay cash dividends in fiscal years 1993 or 1994 and
the Company does not anticipate paying cash dividends in the foreseeable
future because of the capital intensive nature of its business. Cash reserves
will be utilized to offset any operating cash deficiencies which could occur,
as well as to acquire additional equipment, at the appropriate time, to enable
the company to maintain its high competitive profile in the industry.
Market information concerning the Company's common stock may be found
under the caption heading "Stock Price Information" in the Company's Annual
Report to Shareholders for fiscal 1994, which is incorporated by reference
herein.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item may be found under the caption "Five
Year Financial Review" in the Company's Annual Report to Shareholders for
fiscal 1994, which is incorporated by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information required by this item may be found in the Company's Annual
Report to Shareholders for fiscal 1994, which is incorporated by reference
herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item may be found in the Company's Annual
Report to Shareholders for fiscal 1994, which is incorporated by reference
herein.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements with the Company's accountants on
accounting and financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
This information is incorporated by reference from the Company's
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definitive Proxy Statement for the Annual Meeting of Shareholders to be held
February 9, 1995, to be filed with the Securities and Exchange Commission (the
Commission) not later than 120 days after the end of the fiscal year covered
by this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference from the Company's
definitive Proxy Statement for the Annual Meeting of Shareholders to be held
February 9, 1995, to be filed with the Commission not later than 120 days
after the end of the fiscal year covered by this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
This information is incorporated by reference from the Company's
definitive Proxy Statement for the Annual Meeting of Shareholders to be held
February 9, 1995, to be filed with the Commission not later than 120 days
after the end of the fiscal year covered by this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Upon being awarded a term contract in August 1994, the Company and
Helmerich & Payne, Inc. ("H&P") (current owner in conjunction with its wholly-
owned subsidiary, Helmerich & Payne International Drilling Co., of 24.31% of
the Company's common stock) entered into a joint venture agreement to
construct a new generation platform rig which is scheduled to commence
operating in offshore Australia in early 1996. H&P will manage the design,
construction, testing and mobilization of the new rig; while, the Company will
manage the initial installation and daily operation of the new rig. The
Company and H&P each have a fifty percent interest in the joint venture. At
September 30, 1994, the Company had invested $310,000 in this $26 million
project, with an estimated total investment by the Company to be approximately
$13 million. Three of the Company's directors, namely Walter H. Helmerich
III, Hans Helmerich and George S. Dotson are directors and executive officers
of H&P.
There are no other business relationships or transactions with
management involving the Company or any of its subsidiaries which require
disclosure under this Item 13.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements, Schedules and Exhibits
1. List of Financial Statements
The following financial statements, together with the report of Arthur
Andersen LLP dated November 29, 1994 appearing in the Company's Annual Report
to Shareholders, are incorporated by reference herein:
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Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Shareholders' Equity
Report of Independent Public Accountants
Notes to Consolidated Financial Statements
2. List of Financial Statement Schedules
The following additional data should be read in conjunction with the
Consolidated Financial Statements in the Company's Annual Report to
Shareholders:
Report of Independent Public Accountants on Additional Note and
Schedules
Additional Note to Financial Statements
Schedule I - Marketable Securities
Schedule V - Property and Equipment
Schedule VI - Accumulated Depreciation of Property and Equipment
3. Exhibits
Listed below are all of the Exhibits filed as part of this report.
3.1.1 Restated Articles of Incorporation dated January 1972
(Incorporated herein by reference to Exhibit 3.1.1 of the
Company's Form 10-K for the year ended September 30, 1993).
3.1.2 Articles of Amendment dated March 1975 (Incorporated herein
by reference to Exhibit 3.1.2 of the Company's Form 10-K for
the year ended September 30, 1993).
3.1.3 Articles of Amendment dated March 1992 (Incorporated herein
by reference to Exhibit 3.1.3 of the Company's Form 10-K for
the year ended September 30, 1993).
3.2 Bylaws, as amended (Incorporated herein by reference to
Exhibit 3.2 of the Company's Form 10-K for the year ended
September 30, 1993).
10.1 Atwood Oceanics, Inc. 1981 Incentive Stock Option Plan
(Incorporated herein by reference to Exhibit 10.1 of the
Company's Form 10-K for the year ended September 30, 1993).
10.2 Atwood Oceanics, Inc. 1990 Stock Option Plan (Incorporated
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herein by reference to Exhibit 10.2 of the Company's Form
10-K dated September 30, 1993).
10.3 Joint Venture Letter Agreement dated November 4, 1994
between the Company and Helmerich & Payne, Inc.
13.1 Annual Report to Shareholders
22.1 List of Subsidiaries
23.1 Accountants Consent
27.1 Financial Data Schedule
4. Executive Compensation Plans and Arrangements
Atwood Oceanics, Inc. 1981 Incentive Stock Option Plan - See
Exhibit 10.1 hereof.
Atwood Oceanics, Inc. 1990 Stock Option Plan - See Exhibit 10.2
hereof.
(b) Reports on Form 8-K
During the last quarter of fiscal 1994, the Company did not file
with the Securities and Exchange Commission any reports on Form 8-K.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ATWOOD OCEANICS, INC.
By /s/ JOHN R. IRWIN By /s/ JAMES M. HOLLAND
JOHN R. IRWIN, President JAMES M. HOLLAND,
(Principal Executive Officer) Senior Vice President
and (Principal
Financial Accounting
Officer)
Date: November 30, 1994 Date: November 30, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities on the dates
indicated.
By /s/ ROBERT W. BURGESS By /s/ GEORGE S. DOTSON
Robert W. Burgess, Director George S. Dotson, Director
Date: November 30, 1994 Date: November 30, 1994
By /s/ HANS HELMERICH By/s/ WILLIAM J. MORRISSEY
Date: November 30, 1994 Date: November 30, 1994
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
ADDITIONAL NOTE AND SCHEDULES
To Atwood Oceanics, Inc.:
We have audited in accordance with generally accepted auditing
standards, the financial statements included in Atwood Oceanics, Inc.'s annual
report to shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated November 29, 1994. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The
additional note and schedules listed in the index of financial statements are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. Such
note and schedules have been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, fairly state
in all material respects the financial data required to be set forth therein
in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas
November 29, 1994
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ATWOOD OCEANICS, INC. AND SUBSIDIARIES
ADDITIONAL NOTE TO FINANCIAL STATEMENTS
SUPPLEMENTARY PROFIT AND LOSS INFORMATION
The following amounts were included as a component of net
income (loss) for each of the three years in the period ended
September 30, 1994:
(In thousands)
1992 1993 1994
Maintenance and repairs $3,278 $3,891 $4,478
Dividend income 223 223 236
Interest income 2,869 2,247 2,382
DETAIL OF ACCRUED LIABILITIES
Components of accrued liabilities at September 30, 1993 and 1994, are as
follows:
(In thousands)
1993 1994
Payroll and related accounts $2,892 $3,191
Property and payroll taxes 489 997
Income taxes 1,453 839
Other 1,008 1,546
$5,842 $6,573
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SCHEDULE I
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
MARKETABLE SECURITIES
September 30, 1994
(In thousands)
Number of
Shares or
Principal
Description Amount Cost
Debt Securities:
U. S. Treasuries $ 22,600 $ 22,451
Common Stocks:
Energy 80 2,477
$ 24,928
Market Carrying
Description Value Amount
Debt Securities:
U. S. Treasuries $ 23,270 $ 22,451
Common Stocks:
Energy 5,458 2,477
$ 28,728 $ 24,928
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SCHEDULE V
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
PROPERTY AND EQUIPMENT
For the Three Years in the Period Ended September 30, 1994
(In thousands)
Balance
Beginning
of Year Additions
Year ended September 30:
1992 - Drilling vessels, equipment and
drill pipe $205,291 $ 2,226
Construction-in-progress --- 13,062
Other 3,688 254
208,979 15,542
1993 - Drilling vessels, equipment and
drill pipe 165,077 2,390
Construction-in-progress 14,028 2,845
Other 3,871 67
182,976 5,302
1994 - Drilling vessels, equipment and
drill pipe 182,851 6,133
Other 3,924 589
$186,775 $ 6,722
Write-
Down of
Drilling
Vessels Retirements,
and Other Transfers
Equipment or Sales
Year ended September 30:
1992 - Drilling vessels, equipment and
drill pipe $(15,677) $(26,763)(1)
Construction-in-progress --- 966
Other --- (71)
(15,677) (25,868)
1993 - Drilling vessels, equipment and
drill pipe --- 15,384
Construction-in-progress --- (16,873)
Other --- (14)
--- (1,503)
1994 - Drilling vessels, equipment and
drill pipe --- (1,459)
Other --- (34)
$ --- $ (1,493)
NOTE -
(1) Includes the retirement of approximately $30 million of assets net of
accumulated depreciation related to a drilling vessel (See Schedule VI).
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SCHEDULE V (continued)
Balance at
End of Year
Year ended September 30:
1992 - Drilling vessels, equipment and
drill pipe $165,077
Construction-in-progress 14,028
Other 3,871
182,976
1993 - Drilling vessels, equipment and
drill pipe 182,851
Construction-in-progress ---
Other 3,924
186,775
1994 - Drilling vessels, equipment and
drill pipe 187,525
Other 4,479
192,004
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SCHEDULE VI
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
For the Three Years in the Period Ended September 30, 1994
(In thousands)
Balance Additions
Beginning Charged to
of Year Income
Year ended September 30:
1992 - Drilling vessels, equipment
and drill pipe $ 93,703 $15,089
Other 1,641 309
95,344 15,398
1993 - Drilling vessels, equipment
and drill pipe 83,049 12,730
Other 1,894 315
84,943 13,045
1994 - Drilling vessels, equipment
and drill pipe 94,488 13,317
Other 2,137 301
$ 96,625 $13,618
Balance
Retirements End
or Sales of Year
Year ended September 30:
1992 - Drilling vessels, equipment
and drill pipe $(25,743)(1) $ 83,049
Other (56) 1,894
(25,799) 84,943
1993 - Drilling vessels, equipment
and drill pipe (1,291) 94,488
Other (72) 2,137
(1,363) 96,625
1994 - Drilling vessels, equipment
and drill pipe (1,053) 106,752
Other (31) 2,407
$ (1,084) $109,159
(1) See Note (1) on Schedule V
<PAGE>
EXHIBIT 10.3
JOINT VENTURE LETTER AGREEMENT BETWEEN THE COMPANY
AND HELMERICH AND PAYNE, INC.
November 4, 1994
Atwood Oceanics, Inc.
15835 Park Ten Place Drive
P. O. Box 218350
Houston, TX 77218
Attention: John Irwin, President
Re: Platform Drilling Rig 200
Gentlemen:
This letter will confirm the agreement ("Agreement") of Helmerich &
Payne International Drilling Co. ("H&P") and Atwood Oceanics, Inc. ("Atwood")
(sometimes individually referred to herein as "Party" and collectively as the
"Parties") for the construction, sale and delivery of an offshore platform
drilling rig known as Rig 200 (referred to herein as the "Rig").
On or about August 9, 1994, Atwood Oceanics West Tuna Pty. Ltd. (an
Australian corporation owned equally by subsidiaries of H&P and Atwood)
entered into a platform drilling rig services contract ("Contract") with Esso
Australia Ltd. ("Esso") which, among other things, provides for the operation
of a drilling rig on Esso's West Tuna platform located in the Bass Strait,
offshore Australia. It is estimated that drilling operations will commence on
or about January 1, 1996. As a consequence, H&P and Atwood desire to cause
the Rig to be constructed in conformity with the Contract requirements and
specifications (attached hereto as Exhibit "A" and incorporated herein by this
reference) and to be sold and delivered to Atwood Oceanics West Tuna Pty. Ltd.
("Purchaser") at Barry Beach, Australia as more particularly described in this
Agreement.
1. Name of Project. The name of the project shall be the "Rig 200"
project ("Project"); provided, however, the business of the Project shall be
conducted under the name of H&P.
2. Term of Project. The term of the project is estimated to be
approximately twenty-four (24) months. The Project will terminate on the date
on which the construction, sale and delivery of the Rig to the Purchaser and
all activities necessary or incidental to the foregoing, including the payment
of all expenses, have been completed.
3. Principal Office. The principal place of business of the Project
shall be at H&P's offices, 1579 East 21st Street, Tulsa, Oklahoma, 74114.
4. Purpose of Project. The Project is formed for the purpose of the
construction, sale and delivery of the Rig to Purchaser for its performance of
the Contract.
5. Management. H&P, as manager of the Project ("Project Manager"),
shall be responsible for general supervision and management of the business
affairs and property of the Project. Except as otherwise provided in this
paragraph 5, the Project Manager shall have those powers necessary to cause
the construction, sale and delivery of the Rig to Purchaser including, but not
limited to, execution and administration of rig fabrication, insurance and
transportation contracts, and employment of personnel and professional
advisors. As to third parties, any document executed by the Project Manager
shall be deemed to be the action of the Project.
Notwithstanding the foregoing, the Project Manager shall have no power
or authority to do, perform or authorize any of the following on behalf of the
Project without the consent of all Parties: (i) sell, exchange or otherwise
dispose of assets not in the ordinary course of business: (ii) leave or sell
the Rig other than as specified in this Agreement; (iii) borrow money on
behalf of the Project; and (iv) grant any lien, mortgage, deed of trust or
other security arrangement on the property of the Project. Atwood shall have
no management rights with regard to the Project and without the prior written
consent of the Project Manager, shall not negotiate nor contract with third
parties for the provisions of goods or services to the Project.
6. Ownership Interests. Each Party shall own a 50% interest in the
Project including, without limitation, the Rig and the sales proceeds
therefrom. To the extent that H&P, as Project Manager, owns or is deemed to
own legal title to the Rig or any other assets of the Project, H&P agrees to
own, hold and manage such assets for the benefit and in the best interests of
the parties.
7. Payment of Project Costs. All costs and expenses of the Project
shall be shared equally by the Parties. The Project Manager shall have a
continuing election to (i) receive in advance Atwood's share of total Project
costs which the Project Manager estimates will be expended during a period not
to exceed 30 days from the date of a written request therefor; or (ii) pay
Project costs on behalf of both Parties and receive reimbursement for Atwood's
share of such costs. Atwood shall pay its share of all advances and shall
reimburse the Project Manager for its share of all costs of the Project within
five (5) days from the date of Atwood's receipt of the Project Manager's
invoice therefor. H&P shall reimburse Atwood (within five (5) days of H&P's
receipt of an invoice therefor) for H&P's share of any Project costs paid by
Atwood at the written request of H&P.
8. Liability and Indemnification. Each Party agrees to assume and
indemnify the other Party for its pro rata share of all loss, cost, claims and
liability arising out of the Project. Further, neither H&P nor Atwood shall
be liable to the Project or to the other for any act or omission taken or
suffered by it in connection with the conduct of the business of the Project
which it reasonably believed to be in or not opposed to the best interests of
the Project and the mutual best interest of the Parties, unless such act or
omission constitutes willful misconduct, fraud or gross negligence.
9. Project Funds. All of the Project's funds shall be maintained in a
bank account or bank accounts in such bank oor banks as shall be determined by
the Project Manager.
<PAGE>
10. Devotion of Time. During the existence of the Project, the Project
Manager shall devote such time and effort to the Project business and
operations as shall be necessary to timely fulfill the purpose of the Project
and to promote fully the interest of the Project and the mutual best interest
of the Parties. However, each Party (including the Project Manager) shall be
free to engage in other business activities and enterprises, including those
of the same nature as conducted by the Project.
11. Capital Contributions. The Parties shall equally contribute the
required capital for the Project which is presently estimated to be
$25,107,400 as set out in Exhibit "B." The Parties acknowledge that the
amount of such required capital is an estimate only and both Parties agree to
equally share and pay the actual costs of the Project. Other than the costs
of constructing, insuring and transporting the Rig, no additional capital
contributions to the Project shall be required or permitted without the
consent of the Parties.
12. Books and Accounts. The Project Manager shall maintain separate
books, records and accounts for the Project.
13. Sale of Rig. Once constructed, the Rig shall be loaded on an ocean
going vessel for transportation and delivery to Purchaser. The sale of the
Rig to Purchaser shall be consummated in international waters. Purchaser
shall tender to the Parties its originally executed promissory note (in form
acceptable to the Parties) as full payment for the Rig. Such note shall be in
the principal amount of the actual cost of the Project (which is presently
estimated to be $25,107,400) for a term of thirty (30) months with accrued
interest at the rate of 11 1/2%. The Purchaser shall pay each Party 50% of
the monthly principal and interest installment.
14. Status of Parties. The rights and obligations of the Parties with
respect to the Project are several and not joint or collective. This
Agreement is not intended to create, and shall not be construed to create, a
relationship of partnership or an association for profit between the Parties.
In the event that for federal income tax purposes, this Agreement and the
operations hereunder are regarded as a partnership, each Party hereby affected
elects to be excluded from the application of all of the provisions of
Subchapter "K", Chapter 1, Subtitle "A", of the United States Internal Revenue
Code of 1986, as amended, as permitted and authorized by Section 761 of the
Code and the regulations promulgated thereunder.
15. Limitation of Transfer of Interests. The Parties shall not sell,
assign, transfer or pledge their interests under this Agreement or in the
Project without the prior written consent of the other Party.
16. Dissolution and Liquidation. Upon dissolution of the Project, the
Project Manager shall act as liquidating trustee and immediately proceed to
terminate the business of the Project. Upon liquidation of the Project, all
creditors of the Project shall be paid and any remaining distributions, if
any, shall be shared equally by the Parties.
17. Default. If either Party breaches or fails to perform any of its
material obligations under this Agreement and shall have received written
notice thereof by the other Party and shall not have cured such breach or
<PAGE>
failure to perform within fifteen (15) days of receipt of such notice, it
shall be deemed to be in default. In such event, the non-defaulting Party
shall have such rights and remedies as may be available at law or in equity
including the right to seek specific performance or dissolution of the
Project.
18. Governing Law. This Agreement, and the obligations of the Parties
hereunder, shall be governed by and construed in accordance with the laws of
the State of Texas.
19. Successors and Assigns. This Agreement and all the terms,
provisions and conditions hereof shall be binding upon and shall enure to the
benefit of the Parties hereto and their respective successors and assigns.
20. Entire Agreement. This Agreement contains the entire agreement
among the Parties related to the subject matter hereof and all other
agreements relative hereto which are not contained herein are terminated.
21. Further Assurances. Each Party from time-to-time shall do and
perform such further acts and execute and deliver such further instruments as
may be required or reasonably requested by the other Party to establish,
maintain, or protect the respective rights and remedies of the Parties hereto
and to carry out and effect the intentions and purposes of this Agreement.
Please execute and date the counterpart of this Agreement in the space
provided and return it to the undersigned.
Yours very truly,
HELMERICH & PAYNE INTERNATIONAL
DRILLING CO.
By /s/ James Bishop
(Vice) President
AGREED AND ACCEPTED
THIS 7TH DAY OF NOVEMBER 1994.
ATWOOD OCEANICS INC.
By /s/ Glen P. Kelley
(Vice) President
<PAGE>
EXHIBIT 13.1
THE COMPANY
Atwood Oceanics, Inc. is engaged in the business of international
offshore drilling of exploratory and developmental oil and gas wells and
related support, management and consulting services. Presently, the Company
operates a modern fleet of seven mobile offshore rigs and one
modular platform rig, as well as manages the operations of two operator-owned
platform rigs in Northwest Australia. The Company also owns a fifty percent
interest in an Australian company which has been awarded a term contract for
the design, construction and operation of a new generation platform rig which
should become operational in 1996. The Company supports its operations from
headquarters in Houston and affiliated offices in Australia, Malaysia,
Indonesia and Korea.
FINANCIAL HIGHLIGHTS
(In thousands) 1994 1993
FOR THE YEAR
REVENUES $68,794 $ 54,245
EARNINGS (before depreciation,
interest and taxes, 15,324 9,281
but after adjustment for 6,209 (1,791)
minority interest) 6,412 5,302
NET INCOME (LOSS) 99% 88%
CAPITAL EXPENDITURES
RIG UTILIZATION
AT YEAR END
CASH AND AVAILABLE FOR SALE SECURITIES 41,047 35,044
PROPERTY AND EQUIPMENT 82,845 90,150
TOTAL ASSETS 153,460 149,853
TOTAL SHAREHOLDERS' EQUITY 85,959 79,750
<PAGE>
PRESIDENT'S MESSAGE
TO OUR SHAREHOLDERS AND EMPLOYEES:
The Company accomplished a major goal in 1994 with its return to
profitability. Net income of $6.2 million marks the Company's best financial
performance since 1983. Earnings, including investment income, before
depreciation, interest and taxes, but after adjustment for minority interest,
increased 65 percent from $9.3 million in 1993 to $15.3 million in 1994; while
operating cash flow increased by $8.6 million from 1993. The key factor in
achieving these improved results was an increase in utilization of the
Company's fleet (excluding the SOUTHERN CROSS, which has not been placed in
service) from 88 percent in 1993 to 99 percent in 1994. These results were
also achieved without significant improvements in dayrate levels or other
underlying market conditions.
While utilization of the Company's fleet during 1994 demonstrated what
is achievable, improvement in its markets during 1995 remains possible but
uncertain at this stage. Based on current contract commitments, the SEAHAWK,
VICKSBURG and RIG 19 are expected to remain profitably employed during fiscal
year 1995. The GOODWYN 'A' self-contained platform rig should also remain
active throughout the forthcoming year and management fees will increase with
that unit commencing drilling operations during the first quarter of fiscal
year 1995. The EAGLE, FALCON, HUNTER and RICHMOND have contract commitments
which should keep those units employed into the second quarter of fiscal year
1995. Ongoing work for these four units is already being pursued, with high
utilization of the Company's fleet and continuing profitability remaining as
important goals for 1995.
Besides achieving profitability, the Company also accomplished another
goal in 1994 when an Australian entity, jointly owned by the Company and
Helmerich & Payne, Inc., was awarded a contract for a new, state-of-the-art
modular platform rig. A project team has already commenced design work. This
new growth opportunity should significantly enhance the Company's results
commencing in fiscal year 1996. We will continue to further capitalize on the
Company's management, services and technical strengths, and to seek profitable
new opportunities for self-contained platform rigs and conversion of the
SOUTHERN CROSS for use as a tender-assist or service support unit.
Opportunities for selective acquisition of existing rig assets will also be
monitored and pursued if there are suitable candidates.
During 1995, the Company will continue to focus on improving and
developing our safety, environmental, quality and performance efforts. We
will also continue to emphasize better understanding of our clients' future
service needs, ongoing improvement of our services, and further developing our
organization for future opportunities. We convey our sincere thanks to our
shareholders and employees whose support is so important as we strive to
enhance the Company's value through continuing profitability and future
growth.
<PAGE>
Page 3
<TABLE>
Atwood Oceanics, Inc. and Subsidiaries
FIVE YEAR FINANCIAL REVIEW
At or For the Years Ended September 30,
<CAPTION>
(In thousands, except per share
amounts and ratios) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Operating revenues $65,975 $51,775 $44,772 $54,476 $53,418
Drilling costs and general
and administrative expenses: (48,652) (41,797)(40,144)(51,141) (55,234)
OPERATING MARGIN, before
adjustment for minority interest 17,323 9,978 4,628 3,335 (1,816)
Depreciation (13,618) (13,045)(15,398)(15,123) (11,494)
Interest expense (2,892) (3,067) (3,523) (4,795) (3,884)
Minority interest in loss of
Partnerships 3,303 4,821 4,862 6,034 8,216
OPERATING INCOME (LOSS) 4,116 (1,313) (9,431)(10,549) (8,978)
Other income 2,819 2,470 3,092 3,857 6,690
Write-down of drilling vessels
and other assets --- --- (17,000) --- ---
Tax benefit (provision) (726) (2,948) 2,402 (350) 225
NET INCOME (LOSS) $ 6,209 $(1,791)$(20,937)$(7,042)$(2,063)
PER SHARE DATA:
Net income (loss) $ .94 $(.27) $(3.18) $(1.07) $(.42)
Weighted average shares
outstanding 6,582 6,582 6,582 6,594 4,960
FLEET DATA:
Number of rigs owned or
managed, at end of period 9 10 9 9 11
Utilization rate 99% 88% 75% 81% 80%
BALANCE SHEETS DATA:
Cash and available for
sale securities $41,047 $35,044 $33,877 $45,535 $46,725
Working capital 25,171 14,703 12,236 29,389 52,053
Net property and equipment 82,845 90,150 98,033 113,635 123,820
Total assets 153,460 149,853 165,942 188,283 204,029
Total long-term debt 53,294 58,409 63,016 64,032 62,403
Shareholders' equity 85,959 79,750 81,541 102,478 109,927
Ratio of current assets
to current liabilities 2.89 2.24 1.68 4.02 5.77
(The Company has not paid any cash dividends on its common stock.)
</TABLE>
<PAGE>
Page 4
<TABLE>
OFFSHORE DRILLING OPERATIONS
<CAPTION>
NAME OF RIG TYPE OF RIG PERCENTAGE YEAR MAXIMUM
OF 1994 BUILT WATER DEPTH
REVENUES
DRILLING RIGS WHOLLY OR PARTIALLY OWNED
<S> <C> <C> <C> <C>
FALCON (1) SEMISUBMERSIBLE 16% 1983 2,000 FT.
HUNTER (1) SEMISUBMERSIBLE 15% 1981 1,500 FT.
EAGLE (1) SEMISUBMERSIBLE 17% 1982 2,000 FT.
SEAHAWK SEMISUBMERSIBLE 16% 1974/1992 N/A
TENDER ASSIST
VICKSBURG JACK-UP 6% 1976 300 FT.
RIG-19 MODULAR 10% 1988 N/A
PLATFORM
RICHMOND SUBMERSIBLE 8% 1982 70 FT.
SOUTHERN CROSS SEMISUBMERSIBLE 0% 1976 1,500 FT.
MANAGEMENT/LABOR CONTRACTS
GOODWYN "A" MODULAR 3% N/A N/A
PLATFORM
NORTH RANKIN 'A' MODULAR 4% N/A N/A
PLATFORM
(1) RIGS OWNED BY TWO TEXAS LIMITED PARTNERSHIPS OF WHICH THE COMPANY IS
GENERAL PARTNER AND HAS A 50 PERCENT OWNERSHIP INTEREST. ONE HUNDRED PERCENT
(100%) OF THE RESPECTIVE PARTNERSHIPS' REVENUES ARE REFLECTED IN THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND ARE TAKEN INTO ACCOUNT IN STATING THE
PERCENTAGE OF 1994 REVENUES ATTRIBUTABLE TO EACH RIG.
<PAGE>
Page 5
<CAPTION>
NAME OF RIG LOCATION CUSTOMER CONTRACT STATUS AT
NOVEMBER 29, 1994
DRILLING RIGS WHOLLY OR PARTIALLY OWNED
<S> <C> <C> <C>
FALCON (1) KOREA KOREA Drilling the first of two
PETROLEUM firm wells (with one option
DEVELOPMENT well).
CORPORATION
HUNTER (1) MALAYSIA ESSO Drilling the 26th of 30 firm
PRODUCTION wells (with eight option
MALAYSIA, wells).
INC.
EAGLE (1) AUSTRALIA/ BHP PETROLEUM Drilling the second of
INDONESIA PTY. LTD. possible seven option wells.
"ZONE OF
COOPERATION"
SEAHAWK MALAYSIA ESSO Term contract (estimated
PRODUCTION completion 1998).
MALAYSIA,
INC.
VICKSBURG AUSTRALIA WESTERN Under contract until February
MINING 1996, subject to early
CORPORATION termination under certain
LIMITED limited circumstances (with
two one year options).
RIG-19 AUSTRALIA ESSO Term contract (estimated
AUSTRALIA completion 1996).
LIMITED
RICHMOND UNITED OFFSHORE Drilling the third of six
STATES ENERGY firm wells (with two option
DEVELOPMENT wells).
CORPORATION
SOUTHERN CROSS AUSTRALIA (NOT PLACED Idle while the Company
IN SERVICE) pursues future contract
opportunities.
MANAGEMENT/LABOR CONTRACTS
GOODWYN "A" AUSTRALIA WOODSIDE Term contract (estimated
OFFSHORE completion 1997)
PETROLEUM
PTY. LTD.
("WOODSIDE")
NORTH RANKIN 'A' AUSTRALIA WOODSIDE Term contract
</TABLE>
(1) RIGS OWNED BY TWO TEXAS LIMITED PARTNERSHIPS OF WHICH THE COMPANY IS
GENERAL PARTNER AND HAS A 50 PERCENT OWNERSHIP INTEREST. ONE HUNDRED PERCENT
(100%) OF THE RESPECTIVE PARTNERSHIPS' REVENUES ARE REFLECTED IN THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND ARE TAKEN INTO ACCOUNT IN STATING THE
PERCENTAGE OF 1994 REVENUES ATTRIBUTABLE TO EACH RIG.
<PAGE>
Page 6
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Fiscal Year 1994 Versus Fiscal Year 1993
As a result of 99 percent utilization of its equipment during fiscal
year 1994, the Company's operating results reflect significant improvement.
Total revenues in 1994 increased 27 percent to $68.8 million from $54.2
million. This increase is primarily attributable to a $14 million increase in
drilling revenues, coupled with increases in management fees and dividend and
interest income. The higher utilization of the FALCON, HUNTER and RICHMOND,
coupled with a full year of operation of the SEAHAWK and the relocation of the
EAGLE from Malaysia to Australia, where the dayrate level is higher, accounts
for the increase in drilling revenues. An analysis of fleet utilization and
drilling revenues by rig for fiscal years 1994 and 1993 are as follows:
FLEET UTILIZATION 1994 1993
Idle Rig Utilization Idle Rig Utilizat
Days Percentage Days ion
Percenta
ge
Falcon --- 100% 105 71%
Hunter --- 100% 110 70%
Eagle 11 97% --- 100%
Seahawk --- 100% --- 100%
Vicksburg --- 100% --- 100%
Rig-19 --- 100% --- 100%
Richmond --- 100% 149 59%
Average for year 99% 88%
DRILLING REVENUES BY RIG In millions
Variance
1994 1993 Increase
Falcon $11.1 $10.5 $ .6
Hunter 10.2 6.9 3.3
Eagle 12.0 9.2 2.8
Seahawk 10.9 6.3 4.6
Vicksburg 4.4 4.4 ---
Rig-19 6.9 6.4 .5
Richmond 5.5 3.8 1.7
Other 2.6 2.1 .5
$63.6 $49.6 $14.0
Page 7
The FALCON started fiscal year 1994 working in Australia; however, in
the second quarter of the year, the rig was relocated to Malaysia, and during
the last quarter, it was relocated to Korea. Even though the FALCON was 100
percent utilized during 1994, its revenues did not reflect any significant
increase over 1993 because the rig was relocated to work in Malaysia and Korea
where dayrate levels are lower than in Australia due to lower operating
costs. The HUNTER worked the entire year in Malaysia and is anticipated to
remain under contract in Malaysia during fiscal year 1995. During the first
quarter of fiscal year 1994, the EAGLE was relocated from Malaysia to the
Australia/Indonesia "Zone of Cooperation". The impact of higher dayrate
levels for the EAGLE more than offset the slight reduction in rig utilization
in 1994 compared to 1993. The SEAHAWK has been a major contributor to the
Company's improvement in operating results since its commencement of
operations in February 1993. Relatively long-term, stable contracts for the
VICKSBURG and RIG-19 continue to provide consistency to these operations. The
RICHMOND has worked continuously on a profitable basis since March 1993.
In October 1993, the Company sold its forty percent interest in an
Indian joint venture company, realizing a gain of $201,000. Currently, the
Company has no involvement in India. The improvement in management fees is
attributable to an increased level of management services being provided to
two operator-owned platform rigs in Northwest Australia. The increase in
dividend and interest income is due to an increase in interest earned from a
higher level of short-term cash investments.
Increases in rig utilization, coupled with a full year of operations of
the SEAHAWK and the relocation of the EAGLE to the "Zone of Cooperation"
accounts for the 18 percent increase in drilling costs in 1994 compared to
1993. An analysis of drilling costs by rig is as follows:
In millions
Variance
Increase
1994 1993 (Decrease)
Falcon $7.7 $ 7.9 $ (.2)
Hunter 7.6 6.3 1.3
Eagle 10.5 6.1 4.4
Seahawk 6.1 4.1 2.0
Vicksburg 2.2 2.8 (.6)
Rig-19 4.6 4.3 .3
Richmond 3.6 2.7 .9
Other 2.0 3.5 (1.5)
$44.3 $37.7 $ 6.6
Because of increased labor costs, operating costs in Australia are
significantly higher than in Malaysia. Hence, the relocation of the FALCON
out of Australia and the EAGLE out of Malaysia affected the level of drilling
costs for these two rigs. The increase in drilling costs for the HUNTER is
due to its 100 percent utilization in 1994 compared to 70% in 1993. Likewise,
the increase in RICHMOND's drilling cost is due to increased utilization. The
SEAHAWK had a full year of operations in 1994 compared to approximately eight
months in 1993 which accounts for its increase in drilling costs. The
reduction in "other" drilling costs relates primarily to the Company's
termination of its involvement in India.
<PAGE>
10
An analysis of depreciation expense by rig is as follows:
In millions
1994 1993
Partnership rigs $ 9.9 $ 10.1
Seahawk 2.2 1.4
Rig-19 1.2 1.2
Other .3 .3
$13.6 $13.0
The approximate $200,000 increase in general and administrative expense is due
to increased travel and other corporate support activities. Interest expense
relates solely to non-recourse notes payable to a bank group and to the
limited partner by Atwood Deep Seas, Ltd. in which the Company owns a fifty
percent interest. The reduction
<PAGE>
11
in interest expense is due to principal reduction and a slight reduction in
average interest rates during 1994 compared to 1993. Due to the Partnerships'
rigs having virtually 100 percent utilization in 1994, the level of net
operating loss
incurred by these rigs in 1994 compared to 1993 declined, thereby, reducing
the amount of loss absorbed by the minority partner from $4.8 million in 1993
to $3.3 million in 1994.
The Company's effective income tax rate for 1994 and 1993 was 10 percent
and 255 percent, respectively. The high tax rate in 1993 was due to the
write-off of certain tax refund claims to foreign tax expense and to the
Company having limited depreciable tax basis in its interest in the
partnerships' assets. Effective October 1, 1993, the Company adopted the
provision of Statement of Financial Accounting Standards ("SFAS") No. 109
"Accounting for Income Taxes". This change in accounting for income taxes
resulted in no cumulative effect being recorded in the Company's statement of
operations.
Fiscal Year 1993 Versus Fiscal Year 1992
Total revenues increased 13 percent for fiscal year 1993 compared to
fiscal year 1992 primarily due to increases in drilling revenues. Higher
utilization of drilling equipment, primarily the RICHMOND, coupled with the
commencement of the SEAHAWK operations, account for the increase in drilling
revenues. An analysis by rig of the increase in drilling revenues is as
follows:
In millions
Variance
Increase
1993 1992 (Decrease
)
Falcon $10.5 $12.1 $ (1.6)
Hunter 6.9 8.6 (1.7)
Eagle 9.2 7.3 1.9
Seahawk 6.3 --- 6.3
Vicksburg 4.4 4.5 (.1)
Rig-19 6.4 6.8 (.4)
Richmond 3.8 --- 3.8
Other 2.1 2.8 (.7)
Total $ 49.6 $ 42.1 $ 7.5
The decrease in revenues for the FALCON and HUNTER is attributable to a
decline in utilization; while an increase in the EAGLE revenues is due to the
rig working 100 percent in 1993 compared to 68 percent in 1992. The SEAHAWK
commenced its initial drilling operations in February 1993. The decline in
revenues for RIG-19 is due to the rig being relocated to a new platform which
resulted in a reduced dayrate period. Prior to the RICHMOND going back to
<PAGE>
12
work in March 1993, it had been idle for approximately eighteen months.
Despite the commencement of the SEAHAWK operation and higher equipment
utilization, drilling costs for 1993 only increased $1.7 million or 5 percent.
An analysis of drilling costs by rig is as follows:
In millions
Variance
Increase
1993 1992 (Decrease)
Falcon $ 7.9 $ 9.2 $(1.3)
Hunter 6.3 6.3 ---
Eagle 6.1 5.6 .5
Seahawk 4.1 --- 4.1
Vicksburg 2.8 3.2 (.4)
Rig-19 4.3 4.9 (.6)
Richmond 2.7 1.0 1.7
Other 3.5 5.8 (2.3)
Total $37.7 $36.0 $ 1.7
The decrease in drilling costs for the FALCON is due to the rig having more
idle time in 1993 than in 1992. When a rig is idle, certain payroll and rig
maintenance costs can be reduced. The increase in the EAGLE's drilling costs
is due to the rig incurring no idle time during 1993. The decrease in
VICKSBURG and RIG-19 costs is due to certain reductions in payroll related
expenses. The increase in drilling costs for the RICHMOND is due to the rig
returning to work in 1993.
In 1992, due to adverse market conditions and an uncertain outlook for
improvement in the drilling market, the Company wrote down certain assets by
$17 million. Of this amount, approximately $10.5 million was attributable to
the RICHMOND. Prior to this write-down, the RICHMOND's depreciation was
approximately $3.6 million per year. The reduction in depreciation resulting
from the write-down of the carrying value of the RICHMOND, offset somewhat by
commencement of depreciation on the SEAHAWK, accounts for the reduction in
depreciation expense in 1993 compared to 1992.
LIQUIDITY AND CAPITAL RESOURCES
In October 1993, the Company applied the $1.3 million it received from
the sale of its equity in an Indian joint venture company toward the $1.5
million purchase of the SOUTHERN CROSS, a semisubmersible built in 1976
acquired by the Company for future contract opportunities. Before the unit
can be placed in service, an additional capital investment, estimated to range
from $6 to $30 million depending upon the extent of modification, will be
required.
Upon being awarded a term contract in August 1994, the Company and
Helmerich & Payne, Inc. (current owner of 24 percent of the Company's common
<PAGE>
13
stock) entered into a joint venture agreement to construct a new generation
platform rig which is scheduled to commence operating in offshore Australia in
early 1996. At September 30, 1994, the Company had invested approximately
$310,000 in this project, with estimated total investment by the Company to be
approximately $13 million. Except for this project and an estimated $4
million to be spent on existing rigs, the Company currently has no additional
significant capital expenditure commitments for fiscal year 1995; however, the
Company has submitted bids and is actively pursuing profitable expansion
opportunities.
At September 30, 1994, the Company continued to have $22.5 million
invested in United States treasury bonds with maturities in the years 2000 and
2001 and $2.5 million invested in equity securities. At November 29, 1994,
these investments had a aggregate market value of approximately $29 million.
The Company portfolio of accounts receivable is comprised of major
international corporate entities and government organizations with stable
payment experience. Thus, the Company continues to experience no difficulties
in receivable collections and anticipates no problems in collecting the $13.9
million of accounts receivable at September 30, 1994.
At September 30, 1994, one of the Partnerships had long-term notes of
$47.4 million payable to a bank group, with the remaining balance of long-term
debt of $6 million payable to the limited partner. The Company has not
guaranteed any portions of these long-term notes. Of the $47.4 million notes
payable to a bank group, Atwood Oceanics, Inc. owns approximately $8 million
which is reflected on the balance sheet as "long-term notes receivable" with a
cost basis at September 30, 1994 of approximately $6 million. The bank
group's primary collateral for its note is the preferred mortgages on the
EAGLE and HUNTER. The bank debt is being repaid in quarterly installments of
$750,000, with a balloon payment of $37.7 million payable in March 1998.
As of September 30, 1994, the Company, under the provision of SFAS No.
109, has net current deferred tax assets of $1.8 million (after applying a
valuation reserve of $7.7 million) and net noncurrent deferred tax liabilities
of $1.65 million. Working capital at September 30, 1994 was $25.2 million
which is $10.5 million higher than at September 30, 1993.
Currently, the Company continues to have all of its drilling equipment,
except the SOUTHERN CROSS which has not been placed in service, under
contract. The key factor in the Company's return to profitability in 1994 was
its ability to maintain a higher level of equipment utilization. Equipment
utilization will again be a key factor in maintaining profitability in 1995.
Based upon current contract commitments, the SEAHAWK, VICKSBURG and RIG-19 are
expected to remain profitably employed during fiscal year 1995 and beyond. On
the other hand, the EAGLE, FALCON, HUNTER and RICHMOND have contracts which
could expire after the first quarter of fiscal year 1995. The Company will
continue to focus on maintaining high utilization of its drilling equipment.
Improvements in underlying market conditions and dayrate levels during 1995
remain possible; however, market uncertainties still exist with no clear long-
term trends.
<PAGE>
14
Atwood Oceanics, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
September 30,
(In thousands) 1994 1993
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 16,119 $10,087
Accounts receivable 13,915 10,768
Current maturities of long-term
notes receivable 400 400
Inventories of materials and
supplies, 4,194 3,850
at lower of average cost or market 1,800 ---
Deferred tax assets 2,044 1,498
Prepaid expenses 38,472 26,603
Total Current Assets
AVAILABLE FOR SALE SECURITIES 24,928 24,957
LONG-TERM NOTES RECEIVABLE,
net of current maturities 5,985 6,389
PROPERTY AND EQUIPMENT, at cost:
Drilling vessels, equipment and
drill pipe 187,525 182,851
Other 4,479 3,924
192,004 186,775
Less - accumulated depreciation 109,159 96,625
Net Property and Equipment 82,845 90,150
DEFERRED COSTS AND OTHER ASSETS 1,230 1,754
$153,460 $149,853
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
15
Atwood Oceanics, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
September 30,
(In thousands, except share data) 1994 1993
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Current maturities of notes
payable by partnership $ 3,000 $ 3,000
Accounts payable 3,728 3,058
Accrued liabilities 6,573 5,842
Total Current Liabilities 13,301 11,900
LONG-TERM NOTES PAYABLE BY
PARTNERSHIP,
net of current maturities 50,294 55,409
DEFERRED CREDITS:
Income taxes 1,650 ---
Other 639 ---
2,289 ---
MINORITY INTEREST IN PARTNERSHIPS 1,617 2,794
SHAREHOLDERS' EQUITY:
Preferred stock, no par value;
1,000,000 shares authorized,
none outstanding --- ---
Common stock, $1 par value; 10,000,000
shares authorized with 6,582,000
issued and outstanding in 1994
and 1993 6,582 6,582
Paid-in capital 54,273 54,273
Retained earnings 25,104 18,895
Total Shareholders' Equity 85,959 79,750
$153,460 $149,853
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
16
<TABLE>
Atwood Oceanics, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
For Years Ended September 30,
<CAPTION>
(In thousands, except per share amounts) 1994 1993 1992
<S> <C> <C> <C>
REVENUES:
Drilling $63,640 $49,573 $42,142
Indian joint venture 201 510 485
Management fees 2,335 1,692 2,145
Dividends and interest 2,618 2,470 3,092
68,794 54,245 47,864
COSTS AND EXPENSES:
Drilling 44,328 37,694 36,035
Depreciation 13,618 13,045 15,398
General and administrative 4,324 4,103 4,109
Interest 2,892 3,067 3,523
Write-down of drilling vessels and
other assets --- --- 17,000
65,162 57,909 76,065
INCOME (LOSS) BEFORE MINORITY INTEREST
AND INCOME TAXES 3,632 (3,664) (28,201)
MINORITY INTEREST IN LOSS OF PARTNERSHIPS 3,303 4,821 4,862
INCOME (LOSS) BEFORE INCOME TAXES 6,935 1,157 (23,339)
PROVISION (BENEFIT) FOR INCOME TAXES 726 2,948 (2,402)
NET INCOME (LOSS) $ 6,209 $ (1,791) $(20,937)
INCOME (LOSS) PER COMMON SHARE $.94 $(.27) $(3.18)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,582 6,582 6,582
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
17
<TABLE>
Atwood Oceanics, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For Years Ended September 30,
<CAPTION>
(In thousands) 1994 1993 1992
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ 6,209 $ (1,791) $(20,937)
Adjustments to reconcile net
income (loss) to net cash provided
(used) by operating activities:
Depreciation 13,618 13,045 15,398
Amortization of deferred items 531 (104) (156)
Deferred federal income tax benefit (150) --- (3,593)
Write off of foreign tax refund claims --- 1,736 ---
Write-down of drilling vessel and
other assets --- --- 17,000
Gain on sale of equity in Indian
joint venture (201) --- ---
Minority interest in loss of Partnership (3,303) (4,821) (4,862)
Changes in assets and liabilities:
Decrease (increase) in accounts
receivable (3,147) 5,009 (3,876)
Increase (decrease) in accounts payable 670 (3,057) 2,387
Increase (decrease) in accrued liabilities 731 1,870 958
Other (358) (1,078) (3,595)
TOTAL ADJUSTMENTS 8,391 12,600 19,661
Net Cash Provided (Used) by
Operating Activities 14,600 10,809 (1,276)
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from maturity of United States
Treasury Bills --- --- 4,953
Capital Expenditures (6,412) (5,302) (15,542)
Proceeds from sale of equity in
Indian joint venture 1,300 --- ---
Investment in joint venture
venture (310) --- ---
Payments received on notes receivable 404 1,948 1,556
Net Cash Used by Investing Activities (5,018) (3,354) (9,033)
CASH FLOW FROM FINANCING ACTIVITIES:
Principal payments by Partnership on
long-term note (3,000) (3,000) (3,000)
Net advances by (payments to) limited
partner (550) 1,773 1,700
Proceeds (repayment) of short-term note
payable --- (5,000) 5,000
Net Cash Provided (Used) by Financing
Activities (3,550) (6,227) 3,700
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 6,032 1,228 (6,609)
CASH AND CASH EQUIVALENTS,
at beginning of period 10,087 8,859 15,468
CASH AND CASH EQUIVALENTS,
at end of period $16,119 $10,087 $ 8,859
__________________________
Supplemental disclosure of cash flow information:
Cash paid during the year for domestic and
foreign income taxes $ 1,657 $ 1,038 $ 1,087
Cash paid during the year for interest $ 2,380 $ 2,793 $ 3,281
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
18
Atwood Oceanics, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
Common Stock Paid-in Retained
(In thousands) Shares Amount Capital Earnings
September 30, 6,582 $6,582 $54,273 $41,623
1991
Net loss --- --- --- (20,937)
September 30, 6,582 6,582 54,273 20,686
1992
Net loss --- --- --- (1,791)
September 30, 6,582 6,582 54,273 18,895
1993
Net income --- --- --- 6,209
September 30, 6,582 $6,582 $54,273 $25,104
1994
- ----------------------
Preferred stock, no par value, of 1,000,000 shares was authorized in 1975 and
no shares have been issued.
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Atwood Oceanics, Inc.:
We have audited the accompanying consolidated balance sheets of Atwood
Oceanics, Inc. (a Texas corporation) and subsidiaries as of September 30, 1994
and 1993, and the related consolidated statements of operations, cash flows
and changes in shareholders' equity for each of three years in the period
ended September 30, 1994. 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 conducted our audits 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Atwood Oceanics,
Inc. and subsidiaries as of September 30, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the
period ended September 30, 1994, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
November 29, 1994
<PAGE>
Page 20
Atwood Oceanics, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation -
The consolidated financial statements include the accounts of Atwood
Oceanics, Inc. ("AOI") and all of its wholly owned domestic and foreign
subsidiaries and two Texas Limited Partnerships, Atwood Deep Seas, Ltd. ("Deep
Seas") and Atwood Falcon I, Ltd. ("Falcon"), of which AOI is both a limited
and the general partner (all of such entities being collectively referred to
herein as the "Company"). The other limited partner's interest in the net
assets and loss of the two partnerships is reflected in the Company's
financial statements as "minority interest in partnerships." All significant
intercompany accounts and transactions have been eliminated in consolidation.
(See Notes 2 and 5 regarding Deep Seas indebtedness.)
Foreign exchange -
Monetary assets and liabilities denominated in foreign currency are
translated to U.S. dollars at the rate of exchange in effect at the end of the
year and items of income and expense are translated at average monthly rates.
Gains and losses on foreign currency transactions and translations are
included in drilling costs in the consolidated statements of operations. The
Company incurred foreign exchange losses of $417,000, $140,000 and $456,000 in
1994, 1993 and 1992, respectively.
Depreciation, maintenance and retirement policies -
Depreciation is provided on the straight-line method over the following
estimated useful lives of the various classifications of assets:
Years
Drilling vessels and related equipment 8-12
Drill pipe 3
Furniture and Other 3-10
Maintenance, repairs and minor replacements are charged against income as
incurred; major replacements and betterments are capitalized and depreciated
over the remaining useful life of the asset as determined upon completion of
the work. The cost and related accumulated depreciation of assets sold,
retired or otherwise disposed are removed from the accounts at the time of
disposition, and any resulting gain or loss is reflected in the consolidated
statements of operations for the applicable period.
Deferred costs -
The Company defers and amortizes the costs of moving a drilling vessel
to a new area on a straight-line basis over the life of the applicable
drilling contract. There were no unamortized mobilization costs at September
30, 1994 or 1993.
The Company defers the cost of scheduled drydocking and the cost is
charged to expense over the period to the next scheduled drydocking (normally
two years).
Federal income taxes -
The Company accounts for income taxes in accordance with Statement of
<PAGE>
Page 21
Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes".
Under SFAS No. 109, deferred income taxes are recorded to reflect the tax
consequences on future years of differences between the tax basis of assets
and liabilities and their financial reporting amounts at each year-end.
Revenue recognition -
The Company accounts for drilling and management contracts using the
percentage of completion method of accounting, under which revenues are
recognized on a daily basis as earned.
Cash and cash equivalents -
Cash and cash equivalents consist of cash in banks and certificates of
deposit which mature within three months of the date of purchase.
Receivables -
Based upon the Company's historical collection of accounts receivable,
the Company has not established an allowance for doubtful accounts.
Investments -
The Company carries its investments in marketable securities at the
lower of aggregate cost or market value. When investments are sold, the
Company uses the weighted average cost method to compute gain or loss.
Loss per share -
Loss per common share was computed by dividing net loss by the weighted
average number of shares of common stock outstanding during each period. The
dilutive effect of stock options is immaterial.
NOTE 2 - LONG-TERM NOTES RECEIVABLE
An analysis of long-term notes receivable is as follows:
(In thousands)
1994 1993
Principal amount of $8.1 million of Deep
Seas' long-term
debt, bearing interest at approximately 5
percent per annum at
September 30, 1994 $ 6,385 $ 6,789
Less - current maturities 400 400
$ 5,985 $ 6,389
Quarterly payments of $127,500 are received on the Deep Seas note. The
Company acquired the note for $2.2 million less than its principal amount and
proportionately recognizes the discount as income ($112,000 and $114,000 in
1994 and 1993, respectively) as principal payments are received.
<PAGE>
Page 22
NOTE 3 - SECURITIES HELD FOR INVESTMENT
At September 30, 1994 and 1993, the Company's investment in securities
consisted of the following:
(In thousands)
Cost Market Value
1994 1993 1994 1993
Equity Securities $ 2,477 $ 2,477 $ 5,458 $ 5,615
United States Treasury Bonds 22,451 22,480 23,270 26,069
Total $24,928 $24,957 $28,728 $31,684
There were no sales of marketable securities in fiscal year 1994 or
1993.
At November 29, 1994, the market value of the equity securities was $5.8
million and the market value of the treasury bonds were $22.9 million
resulting in combined unrealized gains of $3.8 million at such date.
NOTE 4 - PROPERTY AND EQUIPMENT
In October 1993, the Company purchased for $1.5 million the SOUTHERN
CROSS, a semisubmersible built in 1976 which has been idle in Australia since
the end of 1992. For the rig to be placed in service, additional capital
investment (estimated to range from $6 to $30 million depending upon extent of
modification) will be required. At September 30, 1994, the Company had
incurred approximately $500,000 in additional costs related to evaluating and
preparing the rig for possible utilization alternatives. The vessel will
remain idle in Australia for an indefinite period of time as the Company
pursues future contract opportunities.
In August 1994, Atwood Oceanics West Tuna Pty. Ltd., an Australian
company owned 50 percent by the Company and 50 percent by Helmerich & Payne,
Inc. (H&P) (current owner of 24 percent of the Company's common stock), was
awarded a term contract for the design, construction and operation of a new
generation platform rig. The rig is scheduled to commence operating in
offshore Australia in early 1996. The Company and H&P have entered into a
joint venture agreement to construct the rig whereby H&P will manage the
design, construction, testing and mobilization of the new rig; while, the
Company will manage the initial installation and daily operations of the new
rig. At September 30, 1994, the Company had invested $310,000 in this
project, with an estimated total investment by the Company to be approximately
$13 million.
<PAGE>
Page 23
NOTE 5 - LONG-TERM NOTES PAYABLE
A summary of long-term notes payable is as follows:
(In thousands)
1994 1993
Note payable to bank group by Deep Seas, bearing
interest at approximately 5 percent per annum at
September 30, 1994, of which the Company owns
$8.1 million at September 30, 1994 $ 47,375 $ 50,375
Notes payable to limited partner by Deep Seas:
Non-interest bearing with maturity in 2011,
net of $3.2 million and $3.3 million discount
in 1994 and 1993, respectively 800 750
Bearing interest at prime rate (7 3/4 percent
at September 30, 1994), with maturity in 2011 5,119 7,284
53,294 58,409
Less - current maturities 3,000 3,000
$ 50,294 $ 55,409
The note payable to bank group requires principal payments of $750,000
per quarter, with a balloon payment of $37.7 million payable in March 1998.
The Company has not guaranteed any portion of this long-term note. The bank
group's collateral for this long-term note consists principally of preferred
mortgages on the HUNTER and EAGLE. The loan documents with the bank group
prohibit the cash payment of management fees, partnership profits and certain
other cash disbursements by Deep Seas prior to the time the note is paid in
full.
The interest bearing note payable to limited partner relates to cash
advances made by the limited partner since 1990 to help fund cash shortfalls
of Deep Seas plus accrued interest on such advances. To reflect the
additional support to Deep Seas operations provided by the limited partner, $3
million and $5 million of these advances were reclassified to "minority
interest in partnerships" during 1994 and 1993, respectively.
The maturities of long-term debt for each of the years ending September
30, 1995 through 1999 are as follows: $3,000,000, $3,000,000, $3,000,000,
$38,375,000 with $5,919,000 due after 1999.
<PAGE>
Page 24
NOTE 6 - INCOME TAXES
The provision (benefit) for domestic and foreign taxes on income
consists of the following:
(In thousands)
1994 1993 1992
Current domestic provision $ 400 $ 460 $ 131
Deferred domestic benefit (150) --- (3,593)
Foreign provision 476 2,488 1,060
$ 726 $ 2,948 $ (2,402)
Effective October 1, 1993, the Company adopted the provision of SFAS No.
109, "Accounting for Income Taxes". As of October 1, 1993, there was no
cumulative effect of the accounting change for income taxes reflected in the
Company's statement of operations. For fiscal year 1994, the provision of
SFAS No. 109 resulted in a $150,000 deferred benefit. As of September 30,
1994, the Company had deferred tax assets totalling $16.6 million, deferred
tax liabilities totalling $8.7 million and a valuation allowance in the amount
of $7.7 million. The valuation allowance is based on the likelihood that the
deferred tax assets in the amount of $7.7 million will not be realized based
on current outlook for the partnership rigs. The components of the deferred
income tax assets (liabilities) as of September 30, 1994 are summmarized as
follows:
(In thousands)
September 30,
1994
Deferred tax assets -
Net operating loss carryforwards $ 9,090
Investment tax credit carryforwards 4,290
Foreign tax credits carryforwards 1,810
Book revenues 1,370
16,560
Deferred tax liabilities -
Difference in book and tax basis of equipment 200
Income recognized for tax in excess of book 8,400
Deferred charges 140
8,740
Net deferred tax assets before valuation allowance 7,820
Valuation allowances (7,670)
Net deferred tax asset $ 150
Net current deferred tax assets $ 1,800
Net noncurrent deferred tax liabilities (1,650)
Net deferred tax asset $ 150
<PAGE>
Page 25
The differences between the statutory and the effective income tax rate
are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Statutory income tax rate 34% 34% (34)%
Increase (decrease) in tax rate resulting
from -
Reversal of timing differences at prior
years rate --- --- (9)
Foreign tax rate differentials (18) --- ---
Book depreciation on partnerships'
assets with no tax basis 19 113 6
Foreign taxes not creditable against
domestic income taxes --- 96 4
Investment tax credits (14) 23 ---
Financial losses in excess of benefits
recognizable for tax purposes --- --- 23
Financial income not subject to
domestic income taxes (2) (16) ---
Other, net (9) 5 ---
Effective incoem tax rate 10% 255% (10)%
</TABLE>
At September 30, 1994, the Company had approximately $1.7 million in
investment tax credits and approximately $1.8 million in foreign tax credits
(which commence expiration in 1996) available to reduce future tax
obligations. The Company also has available approximately $25 million in net
operating loss carryforwards and approximately $3 million in investment tax
credits applicable to its partnership interests. These tax attributes can
only be used to reduce future tax payments resulting from partnership earnings
and are subject to various limitations.
As the result of the Company's unsuccessful efforts to collect $3.4
million of previously paid foreign taxes considered refundable, these taxes
were written-off in the fourth quarter of 1993. Legal action is currently
being pursued; however, it will take several years to ultimately resolve this
issue. This additional foreign income tax expense, after adjustment for
minority interest, added $1.7 million ($.25 per share) to the Company's fiscal
year 1993 net loss.
For several years, the Company has pursued legal action to collect
certain tax refund claims in India. As a result of favorable court decisions
in India, and upon the Company providing a letter of guarantee, the Company
received a tax refund of $639,000 (net of taxes on interest and other related
expense), which is reflected in the balance sheet as other deferred credits,
pending ultimate resolution of the issue by the Indian High Court.
NOTE 7 - CAPITAL STOCK
Stock Option Plans -
The Company has a stock option plan ("Stock Plan") under which non-
qualified and incentive stock options may be granted to officers and key
employees through December 5, 2000. The maximum number of shares of common
stock that may be granted under the Stock Plan is 330,000. The Company also
has options outstanding to purchase 32,000 shares (at prices ranging from
$12.25 to $14.75 per share) under an incentive stock option plan ("Incentive
Plan") which expired for future grant purposes on November 17, 1991. Under
<PAGE>
Page 26
the Stock Plan, the Compensation Committee of the Board of Directors
determines the option exercise period, which cannot be less than six months or
more than ten years from the date of grant, and the option prices, which
cannot be less than the fair market value on the date of the grant. The
rights to exercise options under the Stock Plan currently vest over a period
of sixty-three months after the date of grant.
At September 30, 1994, options under the Stock Plan to purchase 222,500
shares, at prices ranging from $9.75 to $13.38 per share, were outstanding,
leaving 107,500 shares available for grant. The rights to exercise these
options vest at 25 percent per year commencing two years after date of grant.
At September 30, 1994, options to purchase 53,000 shares under the Stock Plan
and 5,300 shares under the Incentive Plan were currently exercisable.
Total option activity for the years ended September 30, 1994, 1993 and
1992 was as follows:
1994 1993 1992
Stock options outstanding,
at beginning of year 258,800 242,300 213,300
Stock options granted
(the Stock Plan) 44,000 54,000 42,000
Stock options cancelled (48,300) (37,500) (13,000)
Stock options outstanding,
end of year 254,500 258,800 242,300
Weighted average exercise
price of options outstanding $ 12.19 $ 12.44 $ 14.00
NOTE 8 - RETIREMENT PLAN
The Company has a contributory retirement plan (the "Plan") under which
qualified participants may make contributions of up to 5% of their
compensation, as defined (the basic contribution). The Company makes a
contribution to the Plan equal to twice the basic contribution. Company
contributions vest 100 percent to each participant beginning with the fourth
year of participation. If a participant terminates his employment before
becoming fully vested, the unvested portion is credited to the Company's
account and can be used only to offset Company contribution requirements. In
1994 and 1992, the Company made cash contributions of $702,000 and $732,000,
respectively, and did not utilize any forfeitures to reduce its contribution
requirements. In 1993, the Company used $195,000 of forfeiture to reduce its
contribution requirements which resulted in actual cash contributions of
$477,000. As of September 30, 1994, there remained approximately $162,000
of contribution forfeitures which can be utilized to offset future Company
contributions.
NOTE 9 - COMMITMENTS
The terms of some drilling contracts require that the Company provide
standby letters of guarantee. To support these requirements and the Indian
tax guarantee, the Company has an unsecured short-term line of credit,
<PAGE>
Page 27
totalling $3.0 million, with a bank. At September 30, 1994, the Company had
approximately $1 million in outstanding commitments related to the unsecured
short-term line of credit.
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The Financial Accounting Standards Board has issued Statement No. 107,
"Disclosures about Fair Value of Financial Instruments", which will require
the Company to disclose the fair value of financial instruments, both assets
and liabilities recognized and not recognized in its consolidated balance
sheets. Because the amount of its total assets at September 30, 1994 is below
the applicable threshold, the Company is not required to adopt the new
standard until fiscal year 1996.
NOTE 11 - SALE OF EQUITY INTEREST IN INDIAN JOINT VENTURE
In October 1993, the Company sold its forty percent interest in Great
Atwood Limited ("GAL") for $1.3 million which resulted in the Company
recognizing an after tax gain of $201,000. In December 1993, the Company
terminated its involvement in the operations of GAL's two offshore drilling
rigs through cancellation of technical collaboration and expatriate labor
agreements. The Indian joint venture's results of operations attributable to
the Company for each of the three years in the period ended September 30, 1994
are as follows:
<TABLE>
(In thousands)
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Gain on sale of equity interest $ 201 $ --- $ ---
Dividends --- 24 ---
Amortization of deferred gain --- 371 277
Interest income --- 115 208
$ 201 $ 510 $ 485
</TABLE>
NOTE 12 - WRITE-DOWN OF CERTAIN ASSETS
In September 1992, due to adverse market conditions and at that time, an
uncertain outlook for improvement in the drilling market, the Company wrote
down certain of its drilling vessels and other assets by $17 million. The $17
million write-down in 1992 added $13.6 million, after tax ($2.06 per share) to
the Company's fiscal year 1992 net loss.
NOTE 13 - OPERATIONS BY GEOGRAPHIC AREAS
The Company is engaged in offshore contract drilling. The contract
drilling operations consist of contracting Company owned or managed offshore
drilling equipment primarily to major oil and gas exploration companies.
Operating income (loss) is total revenues less operating expenses. In
computing operating income (loss) for each geographic area, none of the
following items were considered: investment income, general corporate
expenses, interest expense, minority interest in loss of partnerships and
domestic and foreign income taxes. Identifiable assets are those assets that
are used by the Company in operations in each geographic area. Corporate
assets are principally cash and cash equivalents and investments in marketable
securities. In 1994 and 1993, revenues from 2 customers accounted for 49
percent and 51 percent respectively, of drilling revenues; while in 1992
<PAGE>
Page 28
revenues from four customers accounted for 90 percent of drilling revenues.
All of the Company's customers are in the oil and gas offshore exploration and
production industry. This could affect the Company's overall exposure to
market risk in as much as these customers could be affected by similar
economic or other conditions. The Company's portfolio of accounts receivable
is comprised of major international corporate entities and government
organizations with stable payment experience, and, as a result, its credit
risks are minimal. Historically, the Company's uncollectible accounts
receivable have been immaterial, and typically, the Company does not require
collateral for its receivables.
A summary of revenues, operating income (loss) and identifiable assets
by geographic areas is as follows:
(In thousands)
1994 1993
1992
REVENUES:
United States $ 5,483 $ 3,842 $ 9
Australia 31,192 23,497 23,236
Southeast Asia 28,935 22,004 18,412
India/Middle East 566 2,432 3,115
Other income 2,618 2,470 3,092
$ 68,794 $ 54,245 $ 47,864
OPERATING INCOME (LOSS)
United States $ 1,160 $ 602 $ (5,029)
Australia 6,013 1,671 2,972
Southeast Asia 902 (1,968) (4,885)
India/Middle East 155 731 1,186
Africa --- --- (905)
General corporate expense (4,324) (4,103) (4,109)
Write-down of drilling vessels and --- --- (17,000)
other assets (274) (597) (431)
Other income/expense, net $ 3,632 $ (3,664) $ (28,201)
IDENTIFIABLE ASSETS:
United States $ 19,132 $ 10,890 $ 2,200
Australia 39,182 43,386 54,365
Southeast Asia 63,024 62,470 73,639
India/Middle East 7 1,345 2,001
Africa 2 16 14
General corporate 32,113 31,746 33,723
$ 153,460 $ 149,853 $165,942
<PAGE>
Page 29
NOTE 14 - QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly results for fiscal year 1994, 1993 and 1992 are as
follows:
<TABLE>
QUARTERS ENDED
<CAPTION>
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
1994
Revenues $ 16,674 $ 17,117 $ 17,441 $17,562
Income before income taxes 1,883 1,553 1,661 1,838
Net Income 1,600 1,305 1,626 1,678
Earnings per common share .24 .20 .25 .25
1993
Revenues $ 11,374 $ 12,796 $14,067 $16,008
Income (loss) before
income taxes (312) (531) 855 1,145
Net income (loss) (502) (1,147) 377 (519) (a)
Earnings (loss) per common share (.08) (.17) .06 (.08)
1992
Revenues $ 11,820 $ 11,368 $ 12,204 $ 12,472
Loss before income taxes (1,491) (1,779) (1,034) (19,035) (b)
Net loss (1,545) (1,820) (1,329) (16,243)
Loss per common share (.23) (.28) (.20) (2.47)
(a) The Company expensed certain foreign income tax refund claims related to
operations in prior years which had a $1.7 million negative effect on
1993 fourth quarter results.
(b) The Company wrote down the recoverable value of drilling vessels and
other assets by $17 million in the fourth quarter of fiscal year 1992.
</TABLE>
<PAGE>
Page 30
DIRECTORS
ROBERT W. BURGESS (3)
Senior Vice President
CIGNA Investment Division
CIGNA Companies
Bloomfield, Connecticut
GEORGE S. DOTSON (1, 2, 3)
Vice President
Helmerich & Payne, Inc.
President
Helmerich & Payne, International
Drilling Co.
Tulsa, Oklahoma
W. H. HELMERICH, III
Chairman
Helmerich & Payne, Inc.
Tulsa, Oklahoma
HANS HELMERICH (1, 3)
President, Chief Executive Officer
Helmerich & Payne, Inc.
Tulsa, Oklahoma
JOHN R. IRWIN (1)
President, Chief Executive Officer
Atwood Oceanics, Inc.
Houston, Texas
WILLIAM J. MORRISSEY (2)
Bank Executive, Retired
Elkhorn, Wisconsin
(1) Executive Committee
(2) Audit Committee
(3) Compensation Committee
ANNUAL MEETING
The annual meeting of stockholders will be held on February 9, 1995
at the Company's principal office: 15835 Park Ten Place Drive,
Houston, Texas. A formal notice of the meeting together with a
proxy statement and form of proxy will be mailed to stockholders
about January 16, 1995.
<PAGE>
Page 31
OFFICERS
JOHN R. IRWIN
President, Chief Executive Officer
JAMES M. HOLLAND
Senior Vice President and Secretary
GLEN P. KELLEY
Vice President - Contracts and Administration
LARRY P. TILL
Vice President - Operations
TRANSFER AGENT AND REGISTRAR
Liberty Bank & Trust of Oklahoma City, N.A.
P. O. Box 25848
100 N. Broadway, 7th Floor (73102)
Oklahoma City, OK 73125
FORM 10-K
A copy of Form 10-K as filed with the Securities and Exchange
Commission, is available free on request by writing to:
Secretary, Atwood Oceanics, Inc.
P. O. Box 218350
Houston, Texas 77218
STOCK PRICE INFORMATION -
Atwood Oceanics, Inc. stock is traded Over-the-Counter with the
NASDAQ/NMS Symbol "ATWD". No cash dividends on common stock were paid in
fiscal year 1993 or 1994, and none are anticipated in the foreseeable future.
As of September 30, 1994, there were over 400 beneficial owners of the common
stock of Atwood Oceanics, Inc. As of November 29, 1994, the closing sale
price of the common stock of Atwood Oceanics, Inc., as reported by NASDAQ, was
$12.75 per share. The following table sets forth the range of high and low
closing sale prices per share of common stock as reported by NASDAQ for the
periods indicated.
1993 1994
QUARTERS ENDED LOW HIGH LOW HIGH
December 31 8 1/2 11 1/4 10 3/4 12
March 31 8 3/4 11 1/2 11 13 5/8
June 30 10 1/2 11 1/2 12 1/2 14
September 30 10 1/4 11 1/ 12 1/2 14 7/8
<PAGE>
APPENDIX Page 27
The following graphic and immage informmation in the form of "Bar Charts" are
located in the Annual Report immediately following "Highlights".
BAR CHART - REVENUES ($ MILLIONS)
1990 1991 1992 1993 1994
$60.1 $58.3 $47.9 $54.2 $68.8
BAR CHART - EARNINGS, BEFORE DEPRECIATION, INTEREST AND TAXES ($ MILLIONS)
1990 1991 1992 1993 1994
$3.0 $4.3 $4.3 $9.3 $15.3
BAR CHART - OPERATING CASH FLOW ($ MILLIONS)
1990 1991 1992 1993 1994
$(4.2) $1.2 $2.9 $8.1 $16.8
BAR CHART - NET INCOME (LOSS) ($ MILLIONS)
1990 1991 1992 1993 1994
$(2.1) $(7.0) $(20.9) $(1.8) $6.2
BAR CHART - CAPITAL EXPENDITURES ($ MILLIONS)
1990 1991 1992 1993 1994
$19.7 $5.2 $15.5 $5.3 $6.4
BAR CHART - CASH AND AVAILABLE FOR SALE SECURITIES ($ MILLIONS)
1990 1991 1992 1993 1994
$46.7 $45.5 $33.9 $35.0 41.0
<PAGE>
EXHIBIT 22.1
SUBSIDIARY COMPANIES AND STATE OR
JURISDICTION OF INCORPORATION
Atwood Oceanics Drilling Company Texas 100%
Swiftdrill, Inc. Texas 100%
Eagle Oceanics, Inc. Texas 100%
Hunter Co. Texas 100%
Falcon Co. Texas 100%
Atwood Deep Seas, Ltd. Texas Limited 50%
Partnership
Atwood Falcon I, Ltd. Texas Limited 50%
Partnership
Atwood Oceanics Australia Pty. Ltd. Australia 100%
Atwood Oceanics Services Pty. Ltd. Australia 100%
Atwood Oceanics Platforms Pty. Ltd. Australia 100%
Deep Seas Drilling Pty. Ltd. Australia 100%
Atwood Oceanics Drilling Pty. Ltd. Australia 100%
Clearways Sdn. Bhd. Malaysia 30%
Atwood Oceanics (M) Sdn. Bhd. Malaysia 100%
Clearways Offshore Development
Drilling Sdn. Bhd. Malaysia 30%
Atwood Oceanics International, S.A. Panama 100%
Atwood Oceanics Pacific Limited Cayman Islands, 100%
B.W.I.
Aurora Offshore Services GmbH West Germany 100%
All Oceans Drilling B.V. Netherlands 100%
Atwood Oceanics Singapore Pte. Ltd. Singapore 100%
Swiftdrill Nigeria Limited Nigeria 60%
P. T. Pentawood Offshore Drilling Indonesia 80%
Isobuild Sdn. Bhd. Malaysia 90%
Vista Mayang Sdn. Bhd. Malaysia 90%
Atwood Oceanics West Tuna Pty. Ltd. Australia 50%
Atwood Oceanics (NZ) Ltd. New Zealand 100%
<PAGE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in previously filed Registration Statement No. 33-
39993 of Atwood Oceanics, Inc. on Form S-3 and previously filed Registration
Statement Nos. 33-36921 and 33-52065 of Atwood Oceanics, Inc. on Form S-8 of
(i) our report dated November 29, 1994 on the consolidated financial
statements of Atwood Oceanics, Inc. and subsidiaries and (ii) our report dated
November 29, 1994 on the additional note and schedules included or
incorporated by reference in the annual report on Form 10-K of Atwood
Oceanics, Inc. for the year ended September 30, 1994.
ARTHUR ANDERSEN LLP
Houston, Texas
December 21, 1994
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS DESCRIBED IN ITEM 14 OF THE COMPANY'S ANNUAL REPORT ON FORM 10K FOR THE
YEAR ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> SEP-30-1994 SEP-30-1993
<PERIOD-START> OCT-01-1993 OCT-01-1992
<PERIOD-END> SEP-30-1994 SEP-30-1993
<CASH> 16,119 10,087
<SECURITIES> 24,928 24,957
<RECEIVABLES> 20,300 17,557
<ALLOWANCES> 0 0
<INVENTORY> 4,194 3,850
<CURRENT-ASSETS> 38,472 26,603
<PP&E> 192,004 186,775
<DEPRECIATION> 109,159 96,625
<TOTAL-ASSETS> 153,460 149,853
<CURRENT-LIABILITIES> 13,301 11,900
<BONDS> 50,294 55,409
<COMMON> 6,582 6,582
0 0
0 0
<OTHER-SE> 54,273 54,273
<TOTAL-LIABILITY-AND-EQUITY> 153,460 149,853
<SALES> 66,176 51,775
<TOTAL-REVENUES> 68,794 54,245
<CGS> 48,652 41,797
<TOTAL-COSTS> 48,652 41,797
<OTHER-EXPENSES> 13,618 13,045
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,892 3,067
<INCOME-PRETAX> 6,935 1,157
<INCOME-TAX> 726 2,948
<INCOME-CONTINUING> 6,209 (1,791)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,209 (1,791)
<EPS-PRIMARY> .94 (.27)
<EPS-DILUTED> .94 (.27)
</TABLE>
