SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
________________
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED JUNE 30, 1996
COMMISSION FILE NUMBER 0-6352
ATWOOD OCEANICS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1611874
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
15835 Park Ten Place Drive
Houston, Texas 77084
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
713-492-2929
_______________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 15 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to
such filings requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of June 30, 1996 6,688,863 shares of Common Stock $1 par value
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PART I. FINANCIAL INFORMATION
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
The condensed financial statements herein have been prepared by the
Company without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted,
although the Company believes that the disclosures are adequate to make the
information not misleading. The financial statements reflect all adjustments
which are, in the opinion of management, necessary to present fairly the
financial position as of June 30, 1996 and September 30, 1995, and the results
of operations for the three months and nine months ended June 30, 1996 and
1995, respectively, and the statements of cash flows for the nine months then
ended. All adjustments were of a normal recurring nature. It is suggested
these condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's September 30, 1995
Annual Report to Shareholders.
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PAGE 3
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, September 30,
1996 1995
(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 16,942 $ 11,984
Accounts receivable 16,819 13,425
Inventories of materials and supplies, at lower of 5,274 4,904
average cost or market 4,128 3,953
Prepaid expenses and other
Total Current Assets 43,163 34,266
SECURITIES HELD FOR INVESTMENT:
Held for maturity, at amortized cost 22,401 22,422
Available-for-sale, at fair value 3,967 3,516
26,368 25,938
PROPERTY AND EQUIPMENT:
Drilling vessels, equipment and drill pipe 177,239 174,989
Investment in joint venture 10,497 8,182
Other 4,783 4,569
192,519 187,740
Less-accumulated depreciation 103,237 96,313
Net Property and Equipment 89,282 91,427
DEFERRED COSTS AND OTHER ASSETS 1,305 1,222
$160,118 $152,853
See accompanying notes to financial statements.
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PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, September 30,
1996 1995
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term notes payable $ 3,750 $ 3,750
Short-term notes payable --- 1,500
Accounts payable 5,882 6,260
Accrued liabilities 11,947 8,995
Total Current Liabilities 21,579 20,505
LONG-TERM NOTES PAYABLE, net of current maturities 32,569 35,569
DEFERRED CREDITS:
Income taxes 1,798 1,334
Other 3,877 553
5,675 1,887
SHAREHOLDERS' EQUITY:
Preferred stock, no par value;
1,000,000 shares authorized, none outstanding --- ---
Common stock, $1 par value;
10,000,000 share authorized with 6,689,000
and 6,629,000 shares issued and outstanding
in 1996 and 1995, respectively 6,689 6,629
Paid-in capital 55,444 54,771
Net unrealized holding gains on available-for-sale 1,626 1,328
securities
Retained earnings 36,536 32,164
Total Shareholders' Equity 100,295 94,892
$ 160,118 $ 152,853
See accompanying notes to financial statements
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ATWOOD OCEANICS, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
1996 1995 1996 1995
(In thousands, except per share amounts)
REVENUES:
Contract drilling $ 18,891 $ 18,302 $ 55,712 $ 53,867
Contract management 236 246 639 1,301
19,127 18,548 56,351 55,168
COSTS AND EXPENSES:
Contract drilling 11,721 13,120 37,510 37,996
Contract management 158 162 453 439
Depreciation 2,312 2,523 7,380 8,561
General and administrative 1,337 1,199 3,691 3,446
15,528 17,004 49,034 50,442
OPERATING INCOME 3,599 1,544 7,317 4,726
OTHER INCOME (EXPENSE)
Interest expense (609) (740) (1,918) (2,207)
Interest income 648 738 1,828 2,180
Realized gain on sale of
securities --- 2,370 --- 2,370
39 2,368 (90) 2,343
INCOME BEFORE MINORITY INTEREST
AND INCOME TAXES 3,638 3,912 7,227 7,069
MINORITY INTEREST IN NET LOSS OF
PARTNERSHIPS --- --- --- 908
INCOME BEFORE INCOME TAXES 3,638 3,912 7,227 7,977
PROVISION FOR INCOME TAXES
Foreign 843 651 2,427 1,306
Federal 416 70 428 450
1,259 721 2,855 1,756
NET INCOME $ 2,379 $ 3,191 $ 4,372 $ 6,221
EARNINGS PER COMMON SHARE $ .36 $ .48 $ .66 $ .95
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,688 6,585 6,656 6,583
See accompanying notes to financial statements.
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PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
June 30
1996 1995
(In thousands)
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 4,372 $ 6,221
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 7,380 8,561
Deferred federal income tax provision 310 200
Amortization of deferred costs 474 316
Gain on sale of securities --- (2,370)
Minority interest in net loss of partnerships --- (908)
Changes in assets and liabilities:
Increase in accounts receivable (3,394) (706)
Increase in accounts payable and accrued 2,574 2,006
liabilities
Other (735) 1,195
Total adjustments 6,609 8,294
Net cash provided by operating activities 10,981 14,515
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sale of investments --- 3,343
Payment received on note receivable --- 202
Investment in joint venture (2,315) (4,400)
Acquisition of interest in partnerships --- (13,275)
Capital expenditures (2,941) (3,018)
Net cash used by investing activities (5,256) (17,148)
CASH FLOW FROM FINANCING ACTIVITIES:
Principal payments on long-term notes payable (3,000) (2,380)
Proceeds from exercises of stock options 733 54
Proceeds (payment) on short-term note payable (1,500) 3,000
Prepayment of mobilization revenues 3,000 ---
Net payments to limited partner --- (100)
Net cash provided (used) by financing activities (767) 574
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,958 (2,059)
CASH AND CASH EQUIVALENTS, at beginning of period 11,984 16,119
CASH AND CASH EQUIVALENTS, at end of period $16,942 $14,060
See accompanying notes to financial statements
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PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In January 1996, the Company commenced receiving a contribution to its
financial results from a dayrate payment on RIG-200 during the delay period
prior to its start-up of operations in Australia in late 1996 or early 1997.
In December 1995, the Company received a $3 million prepayment of mobilization
revenue relating to RIG-200 which was reflected in the Consolidated Balance
Sheet as "other deferred credits".
2. For the nine months ended June 30, 1996, in accordance with FASB 115,
shareholders' equity was increased $298,000 (net of $153,000 increase in
deferred income taxes) to reflect the net unrealized increases during the nine
months ended June 30, 1996 in holding gains on securities classified as
available-for-sale.
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PART I. ITEM 2
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The economics in the international offshore drilling market continues to
reflect improvement. Worldwide utilization of mobile offshore drilling units
is in excess of 90 percent. Since October 1993, the Company has only incurred
forty-one idle equipment days on all of its drilling units currently in
service, a 99.5 percent equipment utilization rate. Contract revenues
increased $1.2 million in the nine months ended June 30, 1996 compared to the
same period in 1995. A comparative analysis by quarter of contract revenues
is as follows:
QUARTERS ENDED
June 30, March 31, June 30,
1996 1996 1995
(In thousands)
RIG-200 $ 718 $ 729 $ ---
SEAHAWK 2,745 2,736 2,689
ATWOOD HUNTER 2,809 2,658 2,534
ATWOOD EAGLE 3,059 3,733 4,036
ATWOOD FALCON 2,542 2,515 2,804
VICKSBURG 1,262 1,235 1,224
RIG-19 2,072 2,057 1,905
RICHMOND 1,600 1,494 1,063
GOODWYN "A" 2,084 1,721 2,068
MANAGEMENT 236 208 225
$19,127 $19,086 $18,548
RIG-200 dayrate payments continue during the delay period while awaiting
mobilization to Australia. The rig should commence drilling operations in
Australia during the first calendar quarter of 1997. Since commencement of
dayrate payments in January 1996, RIG-200 has been a significant contributor
to the Company's improving quarterly results. The SEAHAWK has maintained a
consistent level of contribution to the Company's operating results since it
commenced operations in February 1993. The improvement in revenues generated
by the ATWOOD HUNTER ("HUNTER") is the result of some increases in dayrate
levels. The HUNTER has experienced 100 percent utilization since April 1993.
During March/April 1996, the ATWOOD EAGLE ("EAGLE") was relocated from
Australia to West Africa. As a result of this mobilization period, both
revenues and drilling costs declined during the third quarter of 1996.
However, with operating margin increasing from $10,000 per day in Australia to
around $25,000 per day in West Africa the EAGLE was a contributor to the
earnings improvement reflected in the third quarter's operating results. The
PAGE 9
ATWOOD FALCON ("FALCON") continues to work on a consistent basis in the "Joint
Development Area" between Thailand and Malaysia. Stable contracts for the
VICKSBURG and RIG-19 continue to provide consistency to these operations.
Increasing dayrates in the Gulf of Mexico account for the improvement in
revenues generated by the RICHMOND. In June 1996 the Company received certain
operating bonus awards related to GOODWYN 'A' which account for its revenues
in the third quarter exceeding revenues for the quarter ended March 31, 1996.
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Current status of the Company's drilling contracts is as follows:
NAME OF RIG LOCATION CONTRACT STATUS
RIG-200 United States Currently preparing for transport of rig
to Australia. Estimate drilling to
commence early 1997. Firm two year term
with anticipated drilling program of
five years.
SEAHAWK Malaysia Term contract (estimated completion
March 1997).
ATWOOD HUNTER Malaysia Rig has five remaining option wells on
its current contract, which, if drilled,
could result in the dayrate revenue
remaining approximately at current
level. If all option wells are
drilled, contract could extend to the
end of 1996. Following completion of
its contract work in Southeast Asia,
the rig will be upgraded and relocated
to the United States Gulf of Mexico to
commence in mid-1997 a two year drilling
program for British-Borneo Petroleum Inc.
ATWOOD EAGLE Equatorial Guinea In May 1996 commenced drilling under a
one year firm plus two six-month options
contract.
ATWOOD FALCON Thailand/Malaysia Current program has been extended at a
"Joint higher dayrate level with estimated
Development Area" completion of May 1997.
VICKSBURG Australia Under contract until January 1997 (with
a one year option).
RIG-19 Australia Should complete work on current
platform in September 1996. Planning
in progress to move the rig to a new
platform with drilling work
of 12 to 18 months.
RICHMOND United States Firm commitment through well-in
progress at the end of September 1996 in
the Gulf of Mexico (anticipate
continuous work with
current client through remainder of
1996.)
GOODWYN 'A' Australia Term contract (estimated completion late
1996/early 1997).
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An analysis of contract drilling costs by rig by quarter is as follows:
QUARTERS ENDED
June 30, March 31, June 30,
1996 1996 1995
(In thousands)
RIG-200 $ 92 $ 97 $ ---
SEAHAWK 1,613 1,654 1,597
ATWOOD HUNTER 1,718 1,821 1,773
ATWOOD EAGLE 1,408 2,519 3,362
ATWOOD FALCON 1,632 1,663 1,597
VICKSBURG 731 705 736
RIG-19 1,647 1,613 1,469
RICHMOND 1,240 1,235 971
GOODWYN "A" 1,572 1,379 1,396
OTHER 68 215 219
$11,721 $12,901 $13,120
The decline in drilling costs for the EAGLE is due to its relocation
from Australia to West Africa. Costs incurred by the EAGLE during the
mobilization period were offset by the $3.8 million of mobilization revenues;
thereby, significantly reducing the level of costs reflected for the rig
during the third quarter of 1996. RIG-19 operating cost in 1996 have
increased over 1995 levels due to higher labor costs. The increases in
RICHMOND's operating costs are due to higher maintenance expenditures.
For the nine months ended June 30, 1996 compared to the same period in
fiscal year 1995, depreciation decreased $1.2 million. This decrease is
primarily attributable to an increase in the depreciable lives of the HUNTER,
EAGLE and FALCON of five additional years upon the Company's acquisition of
the limited partner's interest in these rigs effective December 31, 1994. An
analysis of depreciation expense by rig is as follows:
NINE MONTHS ENDED
June 30, June 30,
1996 1995
(In thousands)
ATWOOD HUNTER $ 1,226 $ 1,395
ATWOOD EAGLE 1,450 1,697
ATWOOD FALCON 1,976 2,437
SEAHAWK 1,671 1,725
RIG-19 544 892
OTHER 513 415
$ 7,380 $ 8,561
As a result of the Company's buyout of its limited partner's interest
effective as of December 31, 1994, the limited partner had no interest in the
operating results of the HUNTER, EAGLE and FALCON for the nine months ended
June 30, 1996; therefore, no minority interest is reflected in the 1996
financial statements. The increase in provision for income taxes for the
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PAGE 12
three months and nine months ended June 30, 1996 is due primarily to increases
in foreign taxes in Malaysia and Australia. As a result of profitable
operations in recent times in both of these countries, most tax carryforward
attributes have been utilized, thereby, increasing exposure to foreign taxes.
Due to lower tax attribute carryforwards, the Company anticipates that tax
expense in 1996 will be higher than 1995. Operating results in 1995 compared
to 1996 were enhanced by the positive impact of minority interest, a lower tax
provision and a $2.4 million gain on sale of securities. However, with
continuation of 100 percent utilization of its active equipment and increasing
dayrates on several rigs, the Company anticipates that the operating results
for the fourth quarter of 1996 will continue to reflect improvement.
LIQUIDITY AND CAPITAL RESOURCES
In June 1996, the Company entered into a contract with British-Borneo
Petroleum, Inc. for the HUNTER to conduct drilling operations in 1997 under a
firm two years plus option program in the Gulf of Mexico. The Company will
incur expenditures of approximately $40 million to upgrade the rig for
operations in water depths of up to 3,500 feet, and to relocate the rig from
Southeast Asia to the Gulf of Mexico. In addition to the HUNTER, the Company
has also committed to purchase $5 million of long delivery equipment for the
ATWOOD SOUTHERN CROSS ("CROSS"). The CROSS (a second-generation
semisubmersible) remains idle in Australia as the Company continues to market
the rig. Besides the $5 million of current commitments, an additional $15 to
$18 million of equipment will have to be purchased to enable the rig to be
placed in service with the capacity to drill in water depths up to 2,000 feet.
The VICKSBURG, a jackup, is also a candidate for upgrade investment. This rig
is currently committed under a drilling contract until 1997.
The construction of RIG-200 was completed on time and within cost
estimates. The rig is currently stacked in the United States awaiting
delivery to Australia. Due to certain delays unrelated to the Company's
activities, the rig is now not scheduled to commence drilling operations until
early 1997. On January 1, 1996, the Company commenced receiving a "holding
period" dayrate on RIG-200. In December 1995, the Company received a $3
million prepayment of mobilization revenues related to RIG-200, which will not
be recognized into income until the rig is delivered to Australia.
The Company continues to experience no difficulties in collecting its
accounts receivable, with no requirement for an allowance for doubtful
accounts. Currently the Company has no outstanding borrowings under a $10
million short-term line of credit it has with a bank. In accordance with
Financial Accounting Standard Board Statement No. 115, available for sale
securities are reflected in the Consolidated Balance Sheet at fair value, with
the aggregate unrealized gain, net of related deferred tax liability, included
in shareholders' equity.
At June 30, 1996, the Company had approximately $43 million in cash and
securities. A significant portion of the current capital commitment should be
funded from excess cash; however, some short-term borrowings may be required
to fund a portion of the upgrade expenditures. Based upon continued high
equipment utilization and increasing operation margins from its third-
generation semisubmersibles, especially the EAGLE, the Company's fourth
quarter results should continue to reflect improvements in operating cash
flow. Quarterly cash flows generated by the EAGLE and HUNTER above certain
defined levels could result in additional principal payments to the Bank
Group.
In addition to the HUNTER, the FALCON and EAGLE could also be upgraded
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PAGE 13
to higher water depth drilling capabilities. Although no current commitments
exist for upgrading these two rigs, the Company will continue to explore
future upgrade opportunities, as well as, continue actively marketing the
CROSS. Thus, the Company could incur additional equipment upgrade commitments
which could require some form of externally generated funding.
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PAGE 14
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
PART II - ITEM 1
TO OUR SHAREHOLDERS AND EMPLOYEES:
The Company's net income for the quarter ended June 30, 1996 reflects an
approximate $1 million increase over the results for the second quarter of
fiscal 1996 and an approximate $1.6 million increase over the results for the
third quarter of fiscal year 1995 after adjustment for a $2.4 million gain
realized in 1995 on sale of securities. This improvement in the third-quarter
financial performance results primarily from increased operating margins
realized from the Company's third-generation semisubmersibles, particularly
the ATWOOD EAGLE ("EAGLE"). Earnings excluding investment income, but before
depreciation, interest and taxes, were $5.9 million for the third quarter of
fiscal 1996 compared to $4.1 million for the third quarter of fiscal 1995.
The Company is optimistic this improving trend in financial performance will
continue in its fourth fiscal quarter with increasing dayrates and continuing
high fleet utilization. Excluding the ATWOOD SOUTHERN CROSS ("SOUTHERN
CROSS"), which has not been placed in service, only forty-one idle equipment
days have been incurred by the Company from October 1993 through June 30,
1996, a 99.5 percent equipment utilization rate.
The EAGLE commenced operation in Equatorial Guinea in early May, 1996
under a one-year firm contract at significantly improved dayrates and daily
margins. The ATWOOD FALCON ("FALCON") also received a firm extension of its
current contract at significantly increased dayrates and daily margins. The
FALCON contract extension is for five additional firm wells commencing in
July, 1996 following the fifth well of the current contract. A term contract
has been executed with British-Borneo Petroleum, Inc. for upgrade of the
ATWOOD HUNTER to conduct drilling operations in the Gulf of Mexico under a
firm two-year plus options contract, estimated to commence in mid-1997. The
SOUTHERN CROSS is actively being offered for term opportunities in up to 2,000
ft. of water.
RIG 19 is now expected to complete its current platform in September,
1996. We are still optimistic that RIG 19 will then move to another platform
of 12 to 18 months duration. Formal notice has been received for mobilization
of RIG 200 to Australia with arrival expected by November, 1996. RIG 200
drilling operations should commence in early calendar year 1997. The RICHMOND
received a further dayrate increase in July and a firm contract extension
which should keep it employed into October, 1996. The SEAHAWK and VICKSBURG
should remain employed under their existing contracts into fiscal year 1997.
The Company's positive trend in safety performance was again evident
during our third fiscal quarter. The final phase in development and
implementation of the Company's improved fleet-wide safety and management
systems has now begun. In May, 1996, the Company completed a full year,
fleet-wide, without a lost-time accident. The Company's employees throughout
our operations are to be commended for this achievement and for their
commitment to safe operations. We would also like to recognize our employees
for their efforts and contributions to the Company's progress during our third
quarter.
/s/ John R. Irwin
JOHN R. IRWIN
President
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PAGE 15
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Reports on Form 8-K.
On July 9, 1996, the Company filed a Form 8-K related to the June 24,
1996 announcement that it executed a term contract with British-Borneo
Petroleum, Inc. for the ATWOOD HUNTER to conduct drilling operations under a
firm two years plus option program. This contract will require the Company to
incur expenditures of approximately $40 million to upgrade the rig for
operating in water depths up to 3,500 feet, and to relocate the rig from
Southeast Asia to the Gulf of Mexico.
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PAGE 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATWOOD OCEANICS, INC.
(Registrant)
Date: 8/7/96
/s/ James M. Holland
James M. Holland
Senior Vice President
and Chief Accounting
Officer
<PAGE>
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