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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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Form 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED SEPTEMBER 30, 1998
COMMISSION FILE NUMBER 0-6352
ATWOOD OCEANICS, INC.
(Exact name of registrant as specified in its charter)
TEXAS
(State or other jurisdiction of 74-1611874
incorporation or organization) (I.R.S. Employer Identification No.)
15835 Park Ten Place Drive 77084
Houston, Texas (Zip Code)
(Address of principal executive offices)
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Registrant's telephone number, including area code:
281-492-2929
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $1 par value
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
NONE
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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 (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filings
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 { }
The aggregate market value of the voting stock held by non-affiliates of the
registrants as of November 30, 1998 is $ 199,000,000.
The number of shares outstanding of the issuer's class of Common Stock, as of
November 30, 1998: 13,624,926 shares of Common Stock, $1 par value.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report to Shareholders for the fiscal year ended September 30, 1998 -
Referenced in Parts I, II and IV of this report.
(2) Proxy Statement for Annual Meeting of Shareholders to be held
February 11, 1999 - Referenced in Part III of this report.
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<PAGE>
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) three "third-generation" semisubmersibles, one
"second-generation" semisubmersible, one jack-up, one "second-generation"
semisubmersible tender assist rig, one submersible, and one modular,
self-contained platform rig, and (ii) a 50 percent interest in a new
generation platform rig. The Company also provides labor, supervisory and
consulting services to two operator-owned platform rigs in Australia.
In fiscal 1998, the Company's revenues, operating cash flows and net
income were the highest in its history. For the last five fiscal years, the
Company has maintained 99 percent utilization of its drilling equipment,
resulting in five consecutive years of improved profitability. However, during
the second half of fiscal 1998, the price for oil declined which has resulted in
some curtailment of worldwide drilling activities, especially for jack-ups and
shallow water drilling rigs. Currently, the price for oil is approximately $12
per barrel, with worldwide fleet utilization for mobile offshore rigs at less
than 90 percent.
Historically, most of the Company's drilling operations have been conducted
outside United States waters. Approximately 69, 88 and 92 percent of the
Company's contract revenues were derived from foreign operations in fiscal years
1998, 1997 and 1996, respectively. The reduction in foreign operations in fiscal
1998 was due to a full year of operations of the ATWOOD HUNTER in United States
waters following its relocation from Southeast Asia during fiscal 1997. In
addition to operating in United States waters, the Company is currently involved
in active foreign operations in the territorial waters of Australia, Italy,
Malaysia, India, Egypt and the Philippines. The ATWOOD HUNTER, a
third-generation semisubmersible, and the submersible RICHMOND are the Company's
only drilling vessels located in United States waters. For information relating
to the contract revenues, operating income and identifiable assets attributable
to specific geographic areas of operations, see Note 12 of Notes to Consolidated
Financial Statements contained in the Company's Annual Report to Shareholders
for fiscal year 1998, incorporated by reference herein.
OFFSHORE DRILLING EQUIPMENT
The Company's diversified fleet of owned or operated
drilling rigs currently consists of four semisubmersibles, one jack-up, one
semisubmersible tender assist vessel, one submersible, and four modular,
self-contained platform rigs. 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 Company's rig fleet.
Each 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 unit 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 unit is raised out of the water by jacking up the legs.
On completion of the well, the unit is jacked down, 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 towed to
its 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 several wells are typically 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. 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, the amount and type
of equipment and services provided, the geographic areas involved, market
conditions and other variables. Generally, contracts for drilling, management
and support services specify a basic rate of compensation computed on a dayrate
basis. Such agreements generally provide for a reduced dayrate 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 dayrate because of the above conditions
or because the vessel is idle and not on contract will have an adverse effect on
operating profits. An over-supply of drilling rigs in any market area can
adversely affect the Company's ability to employ its drilling vessels. Except
for two rigs idle for upgrades, the Company had virtually 100 percent
utilization of its drilling fleet in 1998. However, due to current weakness in
the worldwide offshore drilling market, the Company was unable to identify a new
contract for the ATWOOD SOUTHERN CROSS when it completed its last contract at
the end of September 1998. Despite the current market softness and no current
contract for the ATWOOD SOUTHERN CROSS, the Company's contract backlog for its
third-generation semisubmersibles should provide a high level of revenues and
cash flows in fiscal 1999; however, there is no guarantee that the Company will
not experience additional equipment idle time in fiscal 1999.
For long moves of drilling equipment, the Company attempts to obtain
either a lump sum or a dayrate 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. In recent times, the Company has received full recovery of
relocation costs; however, there can be no assurance that this trend will
continue.
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.
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 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,
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 by the Oil
Pollution Act of 1990, 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 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 1998, the Company performed operations for 13
customers. Because of the relatively limited number of customers for which the
Company can operate at any given time, sales to each of 3 different customers
amounted to 10% or more of the Company's fiscal 1998 revenues. British-Borneo
Petroleum Inc., Esso Australia Limited/Esso Production Malaysia, Inc., and
Santos Ltd., accounted for 24%, 17% and 14%, respectively, of fiscal year 1998
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, most of
which are substantially larger than the Company and possess appreciably greater
financial and other resources. Although recent business combinations among
drilling companies have resulted in a decrease in the total number of
competitors, the drilling industry remains competitive, with no single drilling
contractor being dominant. Thus, 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 is 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, by prices of oil
and gas, and from time to time by political considerations and policies.
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,
regulations affecting production, regulations restricting the importation of
foreign petroleum, environmental regulations and regulations which may limit
operations in offshore areas by foreign companies and/or personnel. See Note 12
to Consolidated Financial Statements contained in the Company's Annual Report to
Shareholders for fiscal year 1998, incorporated herein by reference, for a
summary of contract revenues, operating income and identifiable assets by
geographic region.
Because of the Company's foreign operations, its overall effective tax
rate may in the future be higher than the maximum United States corporate
statutory rate due to the possibility of higher foreign tax rates in certain
jurisdictions or less than full creditability of foreign taxes paid.
EMPLOYEES
The Company currently employs approximately 700 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 significantly 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 table with the caption heading "Offshore
Drilling Operations" in the Company's Annual Report to Shareholders for fiscal
year 1998, which is incorporated by reference herein.
During fiscal 1997, the Company upgraded and relocated the ATWOOD HUNTER
at a cost of approximately $40 million and refurbished and upgraded the ATWOOD
SOUTHERN CROSS at a cost of approximately $35 million. During fiscal 1998, the
Company commenced an approximate $50 million upgrade of the ATWOOD FALCON and an
approximate $35 million upgrade of the VICSKBURG. Both upgrades were completed
during the first quarter of fiscal 1999. For more information concerning these
costs, see Note 4 in Consolidated Financial Statements contained in the
Company's Annual Report to Shareholders for fiscal year 1998, incorporated by
reference herein.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently involved in any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
During the fourth quarter of fiscal 1998, 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, 1998, there were over 750 beneficial owners of the
Company's common stock.
The Company did not pay cash dividends in fiscal years 1997 or 1998 and
the Company does not anticipate paying cash dividends in the foreseeable future
because of the capital intensive nature of its business. To enable the company
to maintain its high competitive profile in the industry, cash reserves will be
utilized, at the appropriate time, to upgrade existing equipment or to acquire
additional equipment. The Company's revolving credit facility prohibits the
Company from paying dividends on common stock.
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 1998, 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
1998, 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 1998, which is incorporated by reference
herein.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item may be found under the caption
"Disclosures About Market Risk" in the Company's Annual Report to Shareholders
for fiscal 1998, 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 1998, which is incorporated by reference
herein.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the Company's
independent public accountants on accounting and financial disclosure.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
This information is incorporated by reference from the Company's definitive
Proxy Statement for the Annual Meeting of Shareholders to be held February 11,
1999, 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 11,
1999, 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 11,
1999, 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
This information is incorporated by reference from the Company's definitive
Proxy Statement for the Annual Meeting of Shareholders to be held February 11,
1999, to be filed with the Commission not later than 120 days after the end of
the fiscal year covered by this Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS AND EXHIBITS
1. FINANCIAL STATEMENTS
The following financial statements, together with the report of Arthur
Andersen LLP dated November 23, 1998 appearing in the Company's Annual Report to
Shareholders, are incorporated by reference herein:
Report of Independent Public Accountants
Consolidated Balance Sheets dated September 30, 1998 and 1997
Consolidated Statements of Operations for each of the three years in
the period ended September 30, 1998
Consolidated Statements of Cash Flows for each of the three years in
the period ended September 30, 1998
Consolidated Statements of Changes in Shareholders' Equity for each of
the three years in the period ended September 30, 1998
Notes to Consolidated Financial Statements
2. EXHIBITS
See the "EXHIBIT INDEX" for a listing of all of the Exhibits filed as part
of this report.
The management contracts and compensatory plans or arrangements required
to be filed as exhibits to this report are as follows:
Atwood Oceanics, Inc. 1990 Stock Option Plan -
See Exhibit 10.1 hereof.
Atwood Oceanics, Inc. 1996 Incentive Equity Plan -
See Exhibit 10.3 hereof.
(b) REPORTS ON FORM 8-K
During the last quarter of fiscal 1998, the Company did not file with
the Securities and Exchange Commission any report on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
/s/ JOHN R. IRWIN
JOHN R. IRWIN, President
DATE: 3 December 1998
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.
/s/ JAMES M. HOLLAND /s/ JOHN R. IRWIN
JAMES M. HOLLAND JOHN R. IRWIN
Senior Vice President President and Director
(Principal Financial and (Principal Executive Officer)
Accounting Officer) Date: 3 December 1998
Date: 3 December 1998
/s/ ROBERT W. BURGESS /s/ GEORGE S. DOTSON
ROBERT W. BURGESS, GEORGE S. DOTSON,
Director Director
Date: 3 December 1998 Date: 3 December 1998
/s/ HANS HELMERICH /s/ WILLIAM J. MORRISSEY
HANS HELMERICH, WILLIAM J. MORRISSEY,
Director Director
Date: 3 December 1998 Date: 3 December 1998
/s/ W.H. HELMERICH, III
W.H. HELMERICH, III
Director
DATE: 3 December 1998
<PAGE>
EXHIBIT INDEX
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).
3.1.4 Articles of Amendment dated November 6, 1997 (Incorporated by reference
to Exhibit 3.1.4 of the Company's Form 10-K for the year ended
September 30, 1997).
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. 1990 Stock Option Plan (Incorporated herein by
reference to Exhibit 10.2 of the Company's Form 10-K for the year ended
September 30, 1993).
10.2 Joint Venture Letter Agreement dated November 4, 1994 between the Company
and Helmerich & Payne, Inc.(Incorporated herein by reference to
Exhibit 10.3 of the Company's Form 10-K for the year ended
September 30, 1994).
10.3 Atwood Oceanics, Inc. 1996 Incentive Equity Plan (Incorporated herein by
reference to Exhibit 10.2 of the Company's Form 10-Q for the quarter
ended June 30, 1997).
10.4 Drilling Contract dated January 29, 1997 between the Company and
Occidental Phillipines, Inc. (Incorporated herein by reference to the
Company's Form 8-K dated July 10, 1997).
10.5 Credit Agreement dated July 17, 1997 between the Company and Bank One,
Texas, N.A., Christiania Bank OG Kreditkasse Asa, New York Branch and
Other Financial Institutions (Incorporated herein by reference to the
Company's Form 8-K dated July 21, 1997.)
10.6 Drilling Contract dated June 20, 1996 between the Company and
British-Borneo Petroleum, Inc. for use the ATWOOD HUNTER (Incorporated
herein by reference to the Company's Form 8-K dated June 24, 1996).
*13.1 Annual Report to Shareholders
*21.1 List of Subsidiaries
*23.1 Consent of Independent Public Accountants
*27.1 Financial Data Schedule
* Filed hereinwith
EXHIBIT 13.1
1998 ANNUAL REPORT TO SHAREHOLDERS
THE COMPANY
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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 owns and 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 a new generation
platform rig operating in Australia. The Company supports its operations from
headquarters in Houston and affiliated offices in Australia, Malaysia,
Indonesia, Philippines, United Kingdom, Egypt, India and Italy.
<PAGE>
TO OUR SHAREHOLDERS AND EMPLOYEES
Operating results for fiscal 1998 represent the Company's best
financial performance in its thirty years of existence. Revenues, operating cash
flows (before changes in working capital and other assets and liabilities) and
net income increased 70%, 138% and 152%, respectively, over fiscal 1997 results.
Through the end of fiscal year 1998, the Company has maintained virtually 100
percent utilization of its active drilling equipment for five consecutive years.
Record earnings and revenues were achieved through contract renewals at
higher dayrates and through the commencement of contracts for our
semisubmersibles ATWOOD HUNTER and ATWOOD SOUTHERN CROSS following the major
enhancement and water depth upgrade of both units. With term contracts in place
for the ATWOOD HUNTER, ATWOOD FALCON, ATWOOD EAGLE and VICKSBURG, the Company
has a healthy contract backlog with approximately 90% and 60% of potential
revenue days for these units already committed for fiscal years 1999 and 2000,
respectively. Despite current near-term softness in the market, the Company's
present contract commitments should provide for a high level of revenues during
fiscal year 1999.
The major shipyard upgrades of the semisubmersible ATWOOD FALCON and
jack-up VICKSBURG were completed during the first quarter of fiscal 1999 within
cost and completion estimates. The Company has now successfully accomplished
four major upgrades in the past two years within cost and completion targets.
The ATWOOD FALCON, which was upgraded to 3,500 ft. water depth drilling
capability, commenced a three-year contract with options to extend in Southeast
Asia during November, 1998. The VICKSBURG, which was completely refurbished and
enhanced, including cantilever conversion, is being mobilized to India to
commence a one-year contract with options to extend during the first quarter of
fiscal 1999. In addition, upgrade of the GOODWYN `A' self-contained platform
rig, which the Company manages on a project basis on behalf of the owner, was
also completed and commenced drilling operations in October, 1998 under the
Company's management.
The ATWOOD EAGLE also recently received two additional contracts which
require the Company to increase the water-depth drilling capacity of the rig
from 2,500 feet to 2,800 feet. These additional contractual obligations do not
contemplate extensive downtime for the rig and should keep the rig employed into
fiscal year 2000. The tender-assist unit SEAHAWK is also a candidate for upgrade
and enhancement, following anticipated completion of its current contract
commitment in the second quarter of fiscal year 1999. Such upgrade will only be
undertaken upon receipt of a contract commitment.
The ATWOOD HUNTER is in the second year of a three-year contract in the
Gulf of Mexico. The submersible RICHMOND is committed until April, 1999 and has
been continuously employed since February, 1993. We believe the RICHMOND should
be a strong candidate for ongoing work prospects, though at reduced dayrates in
the short term. In an improving market environment, we expect the
semisubmersible ATWOOD SOUTHERN CROSS to be a significant contributor to the
Company's future success.
The Company's mix of long-term contracts on high margin units, coupled
with short-term contracts, provides the potential for excellent returns with
downside protection under current market conditions and upside potential for
enhanced earnings from market improvement. A strategy of international
operations, highly-skilled personnel, premium equipment, financial strength, and
a contract backlog and mix continues to serve us well. We remain optimistic
about the long-term market outlook despite current near-term softness. Striving
for safe operations remains at the core of our activities. We thank our
employees for their efforts and contributions, and our shareholders for their
support.
/s/ John Irwin
John Irwin
<PAGE>
FINANCIAL HIGHLIGHTS
- ----------------------------------------------- --------------- --------------
(In Thousands) 1998 1997
- ----------------------------------------------- --------------- --------------
FOR THE YEAR
REVENUES FROM CONTRACT
DRILLING AND MANAGEMENT $151,809 $ 89,082
NET INCOME 39,364 15,619
CAPITAL EXPENDITURES 79,607 62,778
AT YEAR END
CASH AND SECURITIES HELD FOR INVESTMENT $ 34,529 $42,234
NET PROPERTY AND EQUIPMENT 205,632 143,923
TOTAL ASSETS 281,737 215,330
TOTAL SHAREHOLDERS' EQUITY 163,766 122,689
<PAGE>
Atwood Oceanics, Inc. and Subsidiaries
FIVE YEAR FINANCIAL REVIEW
At or For the Years Ended September 30,
- ------------------------------- ------------------------------------------------
(In thousands, except per
share amounts, fleet data 1998 1997 1996 1995 1994
and ratios)
- ------------------------------- ------------------------------------------------
STATEMENTS OF OPERATIONS DATA:
Contract revenues $151,809 $89,082 $ 79,455 $ 72,231 $ 65,975
Drilling costs and general
and administrative
expenses (72,616) (54,890) (56,653) (55,311) (48,652)
-------- -------- ------- -------- -------
OPERATING MARGIN 79,193 34,192 22,802 16,920 17,323
Depreciation (17,596) (9,979) (9,742) (11,134) (13,618)
-------- ------- ------- -------- --------
OPERATING INCOME 61,597 24,213 13,060 5,786 3,705
Other income (expense) (1,278) 1,165 2,783 3,146 3,230
Tax provision (20,955) (9,759) (4,475) (1,872) (726)
-------- ------- ------- ------- -------
NET INCOME $ 39,364 $ 15,619 $ 11,368 $ 7,060 $ 6,209
=========== ========= ======== ======== =======
PER SHARE DATA:
Earnings per common
share: (1)
Basic $ 2.90 $ 1.16 $ .85 $ .54 $ .47
Diluted 2.84 1.14 .84 .53 .47
Average common
shares outstanding: (1)
Basic 13,592 13,474 13,328 13,182 13,164
Diluted 13,884 13,715 13,544 13,230 13,184
FLEET DATA:
Number of rigs owned
or managed, at end
of period 11 11 11 10 9
Utilization rate for
in-service rigs
(excludes contractual
downtime for rig upgrades
in 1998 and 1997) 100% 100% 100% 99% 99%
BALANCE SHEETS DATA:
Cash and securities
held for investment $ 34,529 $ 42,234 $ 40,492 $ 37,922 $ 41,047
Working capital 24,864 27,549 26,151 13,761 25,171
Net property and equipment 205,632 143,923 91,124 91,427 82,845
Total assets 281,737 215,330 159,309 152,853 153,460
Total long-term debt 72,000 59,500 34,473 39,319 53,294
Shareholders' equity 163,766 122,689 105,554 94,892 85,959
Ratio of current assets
to current liabilities 1.93 2.41 2.45 1.67 2.89
Note -
(1) Retroactively adjusted to reflect 100% stock dividend declared in
November, 1997.
(The Company has never paid any cash dividends on its common stock.)
<PAGE>
OFFSHORE DRILLING OPERATIONS
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
PERCENTAGE CONTRACT
OF 1998 MAXIMUM STATUS AT
NAME TYPE CONTRACT YEAR WATER NOVEMBER 30,
OF RIG OF RIG REVENUES BUILT DEPTH LOCATION CUSTOMER 1998
- ------ ------- -------- ----- ------- -------- -------- ----------------
DRILLING RIGS WHOLLY OR PARTIALLY OWNED
---------------------------------------
ATWOOD
FALCON Third- 11% 1983 3,500 Malaysia Sabah Shell Upon completion
generation (Enhanced Feet Petroleum of six-month
Semi- and water Company upgrade period,
submersible depth Limited the rig commenced
upgrade through drilling under a
in 1998) assignment firm three-year
from Shell contract in
Philippines November 1998.
Exploration Upon completion
B.V. of the current
well for Sabah
Shell it is
anticipated that
the rig will be
mobilized to the
Philippines to
drill for Shell
Philippines.
ATWOOD
HUNTER Third- 23% 1981 3,500 United British- Rig is under
generation (Enhanced Feet States Borneo long-term
Semi- and water Gulf of Petroleum contract which
submersible depth Mexico Inc. terminates in
upgrade September 2000.
in 1997)
ATWOOD
EAGLE Third- 21% 1982 2,500 Italy Enterprise Rig is contracted
generation Feet Oil to several
Semi- Italiana operators under a
submersible S.p.A. "rig sharing
agreement". Upon
completion of the
current well in
Italy, the rig
will return to
Egypt to drill for
Gulf of Suez
Petroleum Company
and BG Exploration
and Production
Limited. The rig
also has contracts
with Turkieye
Petrolleria A.O.
and Samedan,
Mediterranean Sea,
Inc. These
contracts provide
the rig with a
firm backlog of
work for
approximately one
year with options
for futher work.
VICKSBURG Jack-up 1% 1976 300 Mobilizing Enron Following
(Enhanc- Feet to India Oil & Gas completion of
ed and India Ltd. upgrade and
upgraded refurbishment in
in 1998) November 1998, the
rig is presently
being mobilized to
India to commence
a one-year
contract, with
options to extend.
SEAHAWK Second- 8% 1974/ 450 Malaysia Esso Rig is under term
generation 1992 Feet Production contract
semi- Malaysia (estimated
submersible Inc. completion second
Tender fiscal 1999
assist quarter).
Discussions
ongoing for multi-
year contract
extension.
ATWOOD Second- 14% 1976 2,000 Australia - Rig is available
SOUTHERN generation (Refur- Feet for contract since
CROSS semi- bished and it became idle at
submersible upgraded the end of
in 1997) September 1998.
RICHMOND Sub- 8% 1982 75 United Chevron Rig is under term
mersible Feet States U.S.A. contract (estimat-
Gulf of ed completion
Mexico March 1999).
Options available
for work until
October 1999.
RIG-19 Modular 4% 1988 N/A Australia Esso Rig is under term
platform Australia contract (estimat-
Limited ed completion
between January
and May 1999).
RIG-200 Modular 5% 1995 N/A Australia Esso Rig is under term
platform Australia contract (estimat-
Limited ed completion
between January
and May 1999).
MANAGEMENT/LABOR CONTRACTS
----------------------------
GOODWYN'A'Modular 5% N/A N/A Australia Woodside Rigs are under
and NORTH platforms Energy term contract for
RANKIN 'A' management of
drilling
operations into
the year 2000.
Current plans
project drilling
operations to
alternate between
the two rigs.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Annual Report to Shareholders and the related Form 10-K for the fiscal
year ended September 30, 1998 includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements other
than statements of historical facts included in this report and the related Form
10-K regarding the Company's financial position, business strategy, budgets and
plans and objectives of management for future operations are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. These forward-looking
statements involve risks and uncertainties that may cause the Company's actual
future activities and results of operations to be materially different from
those suggested or described in this Annual Report to Shareholders and related
Form 10-K. These risks include: the Company's dependence on the oil and gas
industry; the Company's ability to secure adequate financing; the risks involved
in the construction and upgrade to the Company's rigs; competition; operations
risks; risks involved in foreign operations; and governmental regulation and
environmental matters. These factors ("Cautionary Statements") are disclosed in
various places throughout this report and the related Form 10-K. All subsequent
written and oral forward-looking statements attributable to the Company, or
persons acting on its behalf, are expressly qualified in their entirety by the
Cautionary Statements.
OUTLOOK
In fiscal 1998, the Company's revenues, operating cash flows and net income
were the highest in its history. Except for rigs idle for upgrades, the Company
had 100 percent utilization of its drilling fleet in fiscal 1998. At the
beginning of fiscal 1998, the price for oil was around $20 per barrel, with
worldwide fleet utilization for mobile offshore rigs in excess of 95 percent.
During the second half of fiscal 1998, the price for oil declined which resulted
in some curtailment of worldwide drilling activities, especially for jack-ups
and shallow water drilling rigs. Currently, the price for oil is around $12 per
barrel, with worldwide fleet utilization for mobile offshore rigs at less than
90 percent.
Due to current weakness in the worldwide offshore drilling market, the
Company was unable to identify an ongoing contract for the ATWOOD SOUTHERN CROSS
when it completed its last contract at the end of September, 1998. Currently,
the ATWOOD SOUTHERN CROSS is the Company's only rig not generating revenues. In
an improved market environment, the Company is confident that the ATWOOD
SOUTHERN CROSS will be a significant contributor to future revenues. Despite the
current market softness and no current contract for the ATWOOD SOUTHERN CROSS,
the Company's contract backlog for its third-generation semisubmersibles should
provide a high level of revenues and cash flows in fiscal 1999. The Company
remains confident in the long-term future of the worldwide offshore drilling
market.
RESULTS OF OPERATIONS
Fiscal Year 1998 Versus Fiscal Year 1997
Despite the ATWOOD FALCON and VICKSBURG being idle for a significant
portion of fiscal 1998 while undergoing upgrades, contract revenues increased 70
percent to $151.8 million from $89.1 million. This increase was primarily
attributable to the ATWOOD HUNTER returning to work at a significant increase in
dayrate revenues following upgrade in fiscal 1997, the initial commencement of
drilling operations for the ATWOOD SOUTHERN CROSS following its upgrade and
refurbishment in fiscal 1997 and the increase in dayrate revenues for the ATWOOD
EAGLE. An analysis of contract revenues by rig for fiscal years 1998 and 1997 is
as follows:
CONTRACT REVENUES
------------------------------------
(In millions)
Fiscal Fiscal
1998 1997 Variance
------- ------ --------
ATWOOD HUNTER $ 35.2 $ 5.2 $ 30.0
ATWOOD SOUTHERN CROSS 20.4 0.0 20.4
ATWOOD EAGLE 32.2 19.3 12.9
ATWOOD FALCON 17.3 16.9 0.4
RICHMOND 11.3 8.8 2.5
RIG-200 7.9 5.9 2.0
SEAHAWK 11.4 11.3 0.1
VICKSBURG 1.9 5.1 (3.2)
RIG-19 6.7 7.1 (0.4)
GOODWYN `A' 4.3 7.3 (3.0)
NORTH RANKIN `A' 3.2 2.2 1.0
------- ------ -------
$ 151.8 $ 89.1 $ 62.7
======= ====== =======
In September, 1997, the ATWOOD HUNTER commenced drilling under a three-year
contract in the United States Gulf of Mexico. Due to the rig being upgraded, it
generated less than 100 days of revenue during fiscal 1997. The ATWOOD SOUTHERN
CROSS, which generated no revenues prior to fiscal 1998, commenced drilling in
Australia in November, 1997. The ATWOOD EAGLE was relocated from West Africa to
the Mediterranean Sea area in March, 1998 and commenced working under a
rig-sharing agreement, with enhanced dayrate revenues. The ATWOOD FALCON entered
a shipyard in May, 1998 for its water-depth upgrade, which was not completed
until November, 1998. Revenues from the rig should be significantly higher in
fiscal 1999. Due to a strong market during the first half of fiscal 1998,
revenues from the RICHMOND increased in fiscal 1998 compared to fiscal 1997.
However, due to current softness in the market, there has been a recent decline
in dayrate for the rig and, therefore, it is expected to generate less revenues
in fiscal 1999 than in fiscal 1998.
Stable contracts for the SEAHAWK, RIG-200 and RIG-19 provided consistency
to operations during fiscal 1998. Contractual work for RIG-200 and RIG-19 could
terminate during fiscal 1999 with an uncertainty for ongoing work. The VICKSBURG
entered a shipyard in December, 1997 for refurbishment and upgrade which was not
completed until November, 1998, and this accounted for its decrease in revenues.
Drilling activity for the GOODWYN `A' declined during the second half of fiscal
1998 due to its Australian owner upgrading the rig. The Company provided
additional labor to NORTH RANKIN `A' and is expected to continue to be involved
in the operation of both rigs at least into the year 2000.
Contract drilling and management costs during fiscal 1998 increased 34
percent from $48.8 million to $65.3 million. This increase was primarily due to
the ATWOOD HUNTER and ATWOOD SOUTHERN CROSS commencing drilling operations
following their upgrades during fiscal 1997. An analysis of contract drilling
and management costs by rig is as follows:
CONTRACT DRILLING AND MANAGEMENT COSTS
--------------------------------------------
(In millions)
Fiscal Fiscal
1998 1997 Variance
----- ------ --------
ATWOOD HUNTER $ 9.4 $ 1.7 $ 7.7
ATWOOD SOUTHERN CROSS 10.6 0.0 10.6
ATWOOD EAGLE 11.5 9.8 1.7
ATWOOD FALCON 4.9 6.3 (1.4)
RICHMOND 6.0 5.0 1.0
RIG-200 2.6 2.0 0.6
SEAHAWK 6.1 7.0 (0.9)
VICKSBURG 1.4 3.6 (2.2)
RIG-19 4.5 5.3 (0.8)
GOODWYN `A' 3.4 5.7 (2.3)
NORTH RANKIN `A' 2.9 1.1 1.8
OTHER 2.0 1.3 0.7
------ ------ ------
$ 65.3 $ 48.8 $ 16.5
====== ====== ======
The ATWOOD HUNTER worked the entire fiscal 1998 compared to only
approximately one quarter of fiscal 1997. The Company acquired the ATWOOD
SOUTHERN CROSS in October, 1993, but did not place the rig into service until
after the completion of its refurbishment and upgrade in November, 1997. The
increase in operating costs for the ATWOOD EAGLE was due primarily to an
increase in maintenance costs and higher operating costs associated with working
in the Mediterranean Sea area as compared to West Africa. The increase in
operating costs for the RICHMOND was due primarily to higher payroll related
costs. During the ATWOOD FALCON and VICKSBURG upgrade periods, no operating
costs are being incurred, resulting in lower operating costs in the current year
than in fiscal 1997. As a result of certain payroll related tax refunds received
in fiscal 1998, operating costs for RIG-19 declined. The increase in NORTH
RANKIN `A' costs and the decrease in GOODWYN `A' costs were due to an increase
in personnel services provided to the NORTH RANKIN `A', and a decrease in
services provided to GOODWYN `A' during its upgrade period.
An analysis of depreciation expense by rig is as follows:
DEPRECIATION EXPENSE
--------------------------------------
(In millions)
Fiscal Fiscal
1998 1997 Variance
------- ------ --------
ATWOOD HUNTER $ 5.0 $ 0.6 $ 4.4
ATWOOD SOUTHERN CROSS 3.0 0.0 3.0
ATWOOD EAGLE 2.2 2.1 0.1
ATWOOD FALCON 1.8 2.7 (0.9)
RICHMOND 0.5 0.4 0.1
RIG-200 2.1 1.5 0.6
SEAHAWK 2.5 2.2 0.3
VICKSBURG 0.0 0.0 0.0
RIG-19 0.2 0.2 0.0
OTHER 0.3 0.3 0.0
----- ------ -----
$17.6 $ 10.0 $ 7.6
===== ====== =====
The increase in depreciation expense was primarily due to the commencing of
depreciation in fiscal 1998 of upgrade costs of the ATWOOD HUNTER and ATWOOD
SOUTHERN CROSS. The Company does not recognize depreciation expense during the
period a rig is out of service for a significant upgrade. This accounts for the
decline in depreciation expense for the ATWOOD FALCON in fiscal 1998 and the
ATWOOD HUNTER in fiscal 1997. The increase in depreciation expense of RIG-200
was due to the rig having active drilling operations for all of fiscal 1998
compared to only three quarters of fiscal 1997.
General and administrative expense increased 20 percent in fiscal 1998
compared to fiscal 1997. This increase was attributed to an increase in payroll
related costs and in professional fees. The $2.4 million increase in interest
expense was primarily related to the increase in funds borrowed under the
Company's revolving credit agreement. With a significant increase in pre-tax
income and virtually no carryforward tax attributes, both the foreign and
domestic tax provision increased.
Fiscal Year 1997 Versus Fiscal Year 1996
Contract revenues in fiscal 1997 increased 12 percent to $89.1 million from
$79.5 million. This increase was primarily attributable to dayrate increases on
the ATWOOD FALCON, ATWOOD EAGLE and RICHMOND, to an increase in labor services
provided to NORTH RANKIN 'A' and to a complete year of revenues from RIG-200. An
analysis of contract revenues by rig for fiscal 1997 and 1996 is as follows:
CONTRACT REVENUES
------------------------------------
(In millions)
Fiscal Fiscal
1997 1996 Variance
------ ------- --------
ATWOOD FALCON $16.9 $ 11.5 $ 5.4
ATWOOD HUNTER 5.2 11.3 (6.1)
ATWOOD EAGLE 19.3 15.6 3.7
RIG-200 5.9 2.2 3.7
SEAHAWK 11.3 11.0 0.3
VICKSBURG 5.1 5.0 0.1
RIG-19 7.1 8.2 (1.1)
RICHMOND 8.8 6.2 2.6
GOODWYN 'A' 7.3 7.6 (0.3)
NORTH RANKIN 'A' 2.2 0.9 1.3
----- ----- ------
$89.1 $ 79.5 $ 9.6
===== ====== ======
Contracts which commenced during the last half of fiscal 1996 by the ATWOOD
FALCON and ATWOOD EAGLE, and which resulted in dayrate increases of
approximately 60 percent and 25 percent, respectively, extended through fiscal
1997, accounting for the increase in revenues for these rigs. The ATWOOD HUNTER
entered the shipyard in December, 1996 for its deep water upgrade which was not
completed until September, 1997, accounting for its decrease in revenues. A full
year of revenues coupled with the commencement of active drilling at higher
dayrates accounted for the increase in revenues for RIG-200. Stable contracts
for the SEAHAWK and VICKSBURG provided consistency to these operations. The
decline in revenues for RIG-19 was due to the rig being moved to a new platform
during fiscal 1997 with no revenues being recognized during the relocation
period. Market conditions for the RICHMOND also improved during fiscal 1997
resulting in increased revenues.
In contrast to a 12 percent increase in contract revenues, contract
drilling and management costs in fiscal 1997 decreased 5 percent to $48.8
million from $51.5 million. The decrease was primarily due to the absence of
drilling costs on the ATWOOD HUNTER during its upgrade period. An analysis of
contract drilling and management costs by rig is as follows:
CONTRACT DRILLING AND MANAGEMENT COSTS
--------------------------------------------
(In millions)
Fiscal Fiscal
1997 1996 Variance
----- ----- --------
ATWOOD FALCON $ 6.3 $ 6.9 $ (0.6)
ATWOOD HUNTER 1.7 7.2 (5.5)
ATWOOD EAGLE 9.8 9.1 0.7
RIG-200 2.0 0.3 1.7
SEAHAWK 7.0 6.5 0.5
VICKSBURG 3.6 3.1 0.5
RIG-19 5.3 6.4 (1.1)
RICHMOND 5.0 4.8 0.2
GOODWYN 'A' 5.7 5.9 (0.2)
NORTH RANKIN 'A' 1.1 0.6 0.5
OTHER 1.3 0.7 0.6
------ ------ ------
$ 48.8 $ 51.5 $ (2.7)
====== ====== =======
<PAGE>
The ATWOOD HUNTER was out of service for approximately eight months in fiscal
1997 due to the upgrade period. The increase in costs of RIG-200 was due to a
full year of operations. The decrease in costs for RIG-19 was due to its
relocation to a new platform which resulted in no drilling costs being
recognized during the relocation period. The increase in operating costs for the
ATWOOD EAGLE, SEAHAWK, VICKSBURG and NORTH RANKIN 'A' were due primarily to
higher payroll related costs.
An analysis of depreciation expense by rig is as follows:
DEPRECIATION EXPENSE
--------------------------------------
(In millions)
Fiscal Fiscal
1997 1996 Variance
------ ------ --------
ATWOOD FALCON $ 2.7 $ 2.6 $ 0.1
ATWOOD HUNTER 0.6 1.6 (1.0)
ATWOOD EAGLE 2.1 2.0 0.1
RIG-200 1.5 0.0 1.5
SEAHAWK 2.2 2.2 0.0
VICKSBURG 0.0 0.0 0.0
RIG-19 0.2 0.6 (0.4)
RICHMOND 0.4 0.4 0.0
OTHER 0.3 0.3 0.0
----- ----- -----
$10.0 $ 9.7 $ 0.3
===== ===== =====
With the ATWOOD HUNTER out of service for drilling operations during its
water depth enhancement, no depreciation was recognized during the rig's upgrade
period. Depreciation of RIG-200 commenced upon start-up of active drilling
operation in January, 1997.
General and administrative expense increased 19 percent in fiscal 1997
compared to fiscal 1996. This increase was attributable to an increase in
payroll related costs and to professional fees associated with a registration
statement filed with the Securities and Exchange Commission in February, 1997
with respect to a public offering of 1.5 million shares of the Company's common
stock, which was subsequently withdrawn due to the stock price range not
adequately reflecting the value of the Company. Investment income in fiscal
years 1997 and 1996 of $2.4 million and $2.5 million, respectively, offset
interest expense for both years. With an increase in pre-tax income and
virtually no carryforward tax attributes, both foreign and domestic tax
provisions significantly increased.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1998, operating cash flows (before changes in working capital
and other assets and liabilities) increased 138 percent from $25.8 million to
$61.4 million. During fiscal 1998, the Company utilized available cash,
internally generated funds and $14 million of funds borrowed under its revolving
credit facility to invest approximately $30 million in the water-depth upgrade
of the ATWOOD FALCON, to invest approximately $30 million in the refurbishment
and upgrade of the VICKSBURG, to invest approximately $13 million in completing
the refurbishment and upgrade of the ATWOOD SOUTHERN CROSS and to fund
approximately $7 million in other capital expenditures.
After enhancing the ATWOOD FALCON to drill in up to 3,500 feet of water at
an approximate cost of $50 million, of which $30 million was expended during
fiscal 1998, the rig commenced drilling under a three-year contract in November,
1998. After the Company committed approximately $35 million to upgrade and
refurbish the VICKSBURG (including cantilevering for extended reach drilling,
adding a top drive and enhancing certain drilling equipment), the rig is
preparing to mobilize to India to commence a one-year contract. Currently, the
Company has two other rigs, the SEAHAWK and ATWOOD EAGLE, which are candidates
for upgrades. A contract extension is currently being discussed for the SEAHAWK,
which is a requirement before any upgrade will be undertaken. The Company is
contractually obligated to increase the water-depth drilling capacity of the
ATWOOD EAGLE from 2,500 feet to 2,800 feet. This minimum upgrade will cost
approximately $4 million and will not require the use of a shipyard or result in
extensive downtime for the rig. Thus, except for funding the remaining costs
associated with the upgrades of the ATWOOD FALCON and VICKSBURG (approximately
$25 million), minimal upgrade of the ATWOOD EAGLE and general capital
maintenance of the Company's other rigs, the Company currently has no
significant capital commitments.
Since September 30, 1998, the Company has borrowed another $8 million under
its revolving credit facility, resulting in a current outstanding balance under
the facility of $80 million. Subject to an investment opportunity being
identified, the Company estimates that it will not significantly increase the
outstanding balance under this facility. The ATWOOD HUNTER, ATWOOD EAGLE, and
RICHMOND plus $20 million of the Company's United States Treasury bonds are
pledged as collateral under the $125 million revolving credit facility. This
revolving line of credit converts to a reducing facility commencing on March 31,
1999, with commitment reduction of $8.3 million per quarter until final maturity
on March 31, 2002. Depending upon additional capital investments, anticipated
future operating cash flows are expected to provide the Company with the option
of repaying funds borrowed under the revolving credit facility prior to its
required maturity.
For the last quarter of fiscal 1998, the Company earned approximately $35
million in contract revenues compared to approximately $24 million for the last
quarter of fiscal 1997. This significant increase in contract revenues accounts
for the $11.4 million increase in accounts receivable at September 30, 1998
compared to September 30, 1997. The Company's portfolio of accounts receivable
is comprised of major international corporate entities with stable payment
experience. Historically, the Company has experienced no difficulties in
receivable collections; however, at September 30, 1998, there is a contract
dispute over approximately $2 million billed in September 1998. The Company is
in the process of taking legal action to collect this $2 million.
The Company continues to pursue additional growth opportunities. The
current decline in drilling market activity may enhance the Company's ability to
identify investment alternatives. The Company would expect to finance additional
capital expenditures through a combination of operating cash flows, additional
borrowing under the revolving credit facility or additional debt financing;
however, the Company can give no assurance that additional debt financing would
be available on terms acceptable to the Company. The Company continues to
periodically review and adjust its planned capital expenditures and financing of
such expenditures in light of current market conditions.
YEAR 2000
Many computer software systems, as well as certain hardware and equipment
utilizing date-sensitive data, were structured to use a two-digit date field
meaning that they will not be able to properly recognize dates in the Year 2000.
The Company is using both internal and external resources to assess and where
necessary, to reprogram, replace or test software for Year 2000 Compliance. A
majority of the Company's internal information systems are in the process of
being reprogrammed or replaced with fully-compliant new or modified systems.
Most of the Company's operating systems on its various drilling rigs are
mechanical, with no Year 2000 compliance issues; however, there are some systems
that will require assessment and possible reprogramming or replacement. The
Company is striving to address and, where necessary, correct all Year 2000
issues by the end of June 1999. Currently, the total cost of assessments, new
software and implementations is estimated to be between $1 million and $2
million, most of which will relate to new software and will be capitalized. The
Company believes that with modifications to existing software and conversion to
new software, the Year 2000 issues will not pose significant operational
problems; however, the extent and magnitude of the Year 2000 problem as it will
affect the Company is difficult to predict. Accordingly, there can be no
assurance that the Company will adequately correct all Year 2000 problems, so as
not to create disruptions in the Company's business. The Company does not
currently have information concerning the Year 2000 compliance of its
significant customers or suppliers. In the event the Company's major suppliers
or customers do not successfully and timely achieve Year 2000 compliance, the
Company's operations will be adversely affected.
DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk, including adverse changes in
interest rates and foreign currency exchange rates as discussed below.
Interest Rate Risk
Total long-term debt at September 30, 1998, included $72 million of
floating rate debt. As a result, the Company's annual interest costs in fiscal
1999 will fluctuate based on interest rate changes. Because the interest rate on
the Company's long-term debt is a floating rate, the fair value of the Company's
long-term debt approximates carrying value as of September 30, 1998. The impact
on annual cash flow of a 10 percent change in the floating rate (approximately
70 basis points) would be approximately $0.5 million. The Company did not have
any open derivative contracts relating to its floating rate debt at September
30, 1998.
Foreign Currency Risk
Certain of the Company's subsidiaries have monetary assets and liabilities
that are denominated in a currency other than their functional currencies. A
decrease in the value of 10 percent in the foreign currencies relative to the
U.S. dollar from the year-end exchange rates would result in a foreign currency
transaction loss of approximately $1 million, based on September 30, 1998
amounts. The Company considers its current risk exposure to foreign currency
exchange rate movements, based on net cash flows, to be immaterial. The Company
did not have any open derivative contracts relating to foreign currencies at
September 30, 1998.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To 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, 1998
and 1997, and the related consolidated statements of operations, cash flows and
changes in shareholders' equity for each of the three years in the period ended
September 30, 1998. 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, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1998, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Houston, Texas
November 23, 1998
<PAGE>
Atwood Oceanics, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
September 30,
- ---------------------------------------------------------------------------
(In thousands) 1998 1997
- ---------------------------------------------------------- ----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 11,621 $19,264
Accounts receivable 27,730 16,353
Inventories of materials and supplies,
at lower of average cost or market 8,076 7,004
Deferred tax assets 880 1,820
Prepaid expenses 3,280 2,610
------ -------
Total Current Assets 51,587 47,051
------ -------
SECURITIES HELD FOR INVESTMENT:
Held-to-maturity, at amortized cost 22,585 22,581
Available-for-sale, at fair value 323 389
------ --------
22,908 22,970
------ --------
PROPERTY AND EQUIPMENT, at cost:
Drilling vessels, equipment and drill pipe 327,520 249,496
Other 6,128 5,363
------- --------
333,648 254,859
Less - accumulated depreciation 128,016 110,936
------- --------
Net Property and Equipment 205,632 143,923
------- --------
DEFERRED COSTS AND OTHER ASSETS 1,610 1,386
-------- --------
$281,737 $215,330
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Atwood Oceanics, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
September 30,
- ---------------------------------------------------------------------
(In thousands, except share data) 1998 1997
- ---------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities
of long-term debt $ 750 $ 750
Accounts payable 14,250 5,323
Accrued liabilities 11,723 13,429
------ ------
Total Current
Liabilities 26,723 19,502
------ ------
LONG-TERM DEBT,
net of current maturities 72,000 58,750
------ ------
DEFERRED CREDITS:
Income taxes 4,820 1,810
Mobilization fees and other 14,428 12,579
------ ------
19,248 14,389
------ ------
SHAREHOLDERS' EQUITY:
Preferred stock,
no par value;
1,000,000 shares
authorized, none
outstanding --- ---
Common stock, $1 par
value; 20,000,000
shares authorized
with 13,625,000
and 13,546,000
issued and
outstanding in
1998 and 1997,
respectively 13,625 13,546
Paid-in capital 51,781 50,104
Net unrealized holding
loss on
available-for-sale
securities (155) (112)
Retained earnings 98,515 59,151
-------- ------
Total Shareholders' Equity 163,766 122,689
-------- -------
$ 281,737 $215,330
========= ========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Atwood Oceanics, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended September 30,
- --------------------------------------------------------------------------------
(In thousands, except per share amounts) 1998 1997 1996
- --------------------------------------------------------------------------------
REVENUES:
Contract drilling $148,570 $86,833 $78,555
Contract management 3,239 2,249 900
-------- ------- -------
151,809 89,082 79,455
-------- ------- -------
COSTS AND EXPENSES:
Contract drilling 62,364 47,714 50,912
Contract management 2,921 1,076 628
Depreciation 17,596 9,979 9,742
General and administrative 7,331 6,100 5,113
------ ------ ------
90,212 64,869 66,395
------ ------ ------
OPERATING INCOME 61,597 24,213 13,060
------ ------ ------
OTHER INCOME (EXPENSE):
Interest expense (3,599) (1,212) (2,522)
Investment income 2,321 2,377 2,510
Realized gain on sale of securities -- -- 2,795
------- ------- -------
(1,278) 1,165 2,783
------- ------- -------
INCOME BEFORE INCOME TAXES 60,319 25,378 15,843
PROVISION FOR INCOME TAXES 20,955 9,759 4,475
------- ------- -------
NET INCOME $39,364 $15,619 $11,368
======= ======== =======
EARNINGS PER COMMON SHARE:
Basic $ 2.90 $ 1.16 $ .85
Diluted 2.84 1.14 .84
AVERAGE COMMON SHARES OUTSTANDING:
Basic 13,592 13,474 13,328
Diluted 13,884 13,715 13,544
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Atwood Oceanics, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For Years Ended September 30,
- --------------------------------------------------------------------------------
(In thousands) 1998 1997 1996
- --------------------------------------------------------------------------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $39,364 $15,619 $11,368
------- ------- -------
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 17,596 9,979 9,742
Amortization of deferred
items 427 539 604
Deferred federal income
tax provision (benefit) 3,970 (330) 1,400
Gain on sale of securities --- --- (2,795)
Changes in assets and
liabilities:
Decrease (increase) in
accounts receivable (11,377) 334 (3,412)
Increase (decrease) in
accounts payable 954 2,708 (3,645)
Increase (decrease) in
accrued liabilities (1,706) 5,958 (1,524)
Net mobilization fees 2,779 6,286 3,000
Other (1,924) (1,848) 2,216
------ --------- -----
10,719 23,626 5,586
------ -------- -----
Net Cash Provided by
Operating Activities 50,083 39,245 16,954
------ ------ ------
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sale of securities --- --- 3,738
Capital expenditures (79,607) (62,778) (9,526)
Non cash portion of capital
expenditures 7,973 --- ---
------- ---------- -----
Net Cash Used by Investing
Activities (71,634) (62,778) (5,788)
-------- -------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from exercises of
stock options 658 1,019 761
Proceeds from revolving
credit facility 14,000 58,000 ---
Principal payments on debt (750) (32,973) (6,346)
Deferred financing costs --- (814) ---
------- ------- ------
Net Cash Provided (Used)
by Financing Activities 13,908 25,232 (5,585)
------- ------- ------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (7,643) 1,699 5,581
CASH AND CASH EQUIVALENTS,
at beginning of period 19,264 17,565 11,984
-------- ------ ------
CASH AND CASH EQUIVALENTS,
at end of period $11,621 $19,264 $17,565
======= ======= =======
- --------------------------
Supplemental disclosure of cash
flow information:
Cash paid during the year
for domestic and foreign income taxes $18,549 $ 6,896 $ 2,660
======= ======= =======
Cash paid during the year
for interest, net of amounts capitalized $ 2,349 $ 1,295 $ 2,478
======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Atwood Oceanics, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
(In thousands) Common Stock Unrealized
---------------- Paid-in Holding Retained
Shares(1) Amount(1) Capital(1)Gain(Loss) Earnings
- --------------------------------------------------------------------------------
September 30, 1995 13,258 $13,258 $48,142 $1,328 $32,164
Unrealized holding gain at
September 30, 1995
realized
upon sale of securities
in 1996 --- --- --- (1,482) ---
Decrease in unrealized
holding loss --- --- --- 15 ---
Exercises of employee
stock options 124 124 637 --- ---
Net income --- --- --- --- 11,368
------ ------ ------ ----- ------
September 30, 1996 13,382 13,382 48,779 (139) 43,532
Decrease in unrealized
holding loss --- --- --- 27 ---
Exercises of employee
stock options 164 164 855 --- ---
Tax benefit from
exercises of
employee stock options --- --- 470 --- ---
Net income --- --- --- --- 15,619
------ ------ ------ ----- ------
September 30, 1997 13,546 13,546 50,104 (112) 59,151
Increase in unrealized
holding loss --- --- --- (43) ---
Exercises of employee
stock options 79 79 579 --- ---
Tax benefit from exercises of
employee stock options --- --- 1,098 --- ---
Net income --- --- --- --- 39,364
------ ------- -------- ------- -------
September 30, 1998 13,625 $13,625 $51,781 $ (155) $98,515
====== ======= ======== ======= =======
- ---------------------
NOTES -
(1) Adjusted for 100% stock dividend declared in November, 1997.
(2) 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>
Atwood Oceanics, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS
Atwood Oceanics, Inc. together with its wholly-owned subsidiaries
(collectively referred to herein as the "Company"), 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 owns and 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 a new generation platform rig. Currently, the Company is involved in
active operations in the territorial waters of Australia, Malaysia, Egypt,
Philippines, Italy, United States and India.
Demand for drilling equipment is dependent on the exploration and
development programs of oil and gas companies, which is in turn influenced by
the financial conditions of such companies, by general economic conditions, by
prices of oil and gas, and from time to time, by political considerations and
policies. The Company's business operations are subject to the risks associated
with a business having a limited number of customers for which it can operate at
any given time. A decrease in the drilling programs of customers in the areas
where the Company is employed may adversely affect the Company's revenues. The
contracts under which the Company operates its drilling rigs are obtained either
through individual negotiations with the customer or by submitting proposals in
competition with the other drilling contractors and vary in their terms and
conditions. The Company competes with several other drilling contractors, most
of which are substantially larger than the Company and possess appreciably
greater financial and other resources. 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.
NOTE 2 - 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. The Company's undivided 50 percent interest in RIG-200 is
accounted for using the proportionate consolidation method (See Note 4). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Foreign exchange -
The U.S. dollar is the functional currency for all areas of operations of
the Company. Accordingly, monetary assets and liabilities denominated in foreign
currency are remeasured to U.S. dollars at the rate of exchange in effect at the
end of the year, items of income and expense are remeasured at average monthly
rates, and property and equipment and other nonmonetary amounts are remeasured
at historical rates. Gains and losses on foreign currency transactions and
remeasurements are included in drilling costs in the consolidated statements of
operations. The Company incurred foreign exchange losses of $ 1 million and $.7
million in 1998 and 1997, respectively, with a foreign exchange gain of $.2
million in 1996.
<PAGE>
Property and equipment -
Property and equipment is recorded at cost. Interest costs related to
property under construction are capitalized as a component of construction
costs. Interest capitalized during fiscal 1998 and 1997 totaled $1.4 million and
$1.3 million, respectively.
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 5-15
Drill pipe 3
Furniture and Other 3-10
Maintenance, repairs and minor replacements are charged against income as
incurred; major replacements and upgrades 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 the net costs of moving a drilling rig to a new area and
amortizes such costs on a straight-line basis over the life of the applicable
drilling contract. During fiscal years 1998 and 1997, the Company received
sufficient mobilization revenues on all rig moves to more than cover all
mobilization costs. Thus, there were no unamortized mobilization costs at
September 30, 1998 or 1997.
The Company defers the costs of scheduled drydocking and charges such costs
to expense over the period to the next scheduled drydocking (normally 30
months).
Federal income taxes -
The Company accounts for income taxes in accordance with Statement of
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 given the
provisions of enacted tax laws. Deferred tax assets are reduced by a valuation
allowance when, based upon management's estimates, it is more likely than not
that a portion of the deferred tax assets will not be realized in a future
period.
Revenue recognition -
The Company accounts for drilling and management contract revenues using
the percentage of completion method of accounting, under which revenues are
recognized on a daily basis as earned. Mobilization revenues are first used to
cover the costs of mobilization with the excess revenues deferred and amortized
on a straight-line basis over the life of the applicable drilling contract. At
September 30, 1998 and 1997, deferred revenues totaling $12.1 million and $9.3
million, respectively, were included in Deferred Credits on the accompanying
consolidated balance sheets.
Cash and cash equivalents -
Cash and cash equivalents consist of cash in banks and highly liquid debt
instruments which mature within three months of the date of purchase.
<PAGE>
Receivables -
Based upon the Company's historical collection of accounts receivable, the
Company has not established an allowance for doubtful accounts.
Investments -
Investments in held-to-maturity securities are stated at the amortized cost
at the balance sheet date. The Company has the ability and intent to hold such
securities to maturity. At September 30, 1998 and 1997, investments in
available-for-sale securities are carried at fair value with the unrealized
holding loss, net of deferred tax, included in shareholders' equity.
Earnings per common share -
In fiscal 1998, the Company adopted SFAS No. 128, "Earnings per Share".
Under SFAS No. 128, primary earnings per share ("EPS") is replaced by "Basic"
EPS, which excludes dilution and is computed by dividing income available to
common shareholders by the weighted-average number of common shares outstanding
for the period. "Diluted" EPS reflects the issuance of additional shares in
connection with the assumed conversion of stock options. As required, all
prior-period EPS information has been restated.
The computation of basic and diluted earnings per share under SFAS 128 for
each of the past three years is as follows: (in thousands, except per share
amounts)
Per Share
Net Income Shares Amount
Fiscal 1998:
Basic earnings per share $ 39,364 13,592 $ 2.90
Effect of dilutive securities -
Stock options --- 292 (.06)
=========================================================================
Diluted earnings per share $ 39,364 13,884 $ 2.84
=========================================================================
Fiscal 1997:
Basic earnings per share $ 15,619 13,474 $ 1.16
Effect of dilutive securities -
Stock options --- 241 (.02)
=========================================================================
Diluted earnings per share $ 15,619 13,715 $ 1.14
=========================================================================
Fiscal 1996:
Basic earnings per share $ 11,368 13,328 $ .85
Effect of dilutive securities -
Stock options --- 216 (.01)
=========================================================================
Diluted earnings per share $ 11,368 13,544 $ .84
=========================================================================
Stock-Based Compensation -
The Company accounts for employee stock-based compensation using the
intrinsic value method prescribed by Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees". Accordingly, the adoption of
SFAS No. 123, "Accounting for Stock-Based Compensation" in fiscal 1996 had no
effect on the Company's results of operations.
<PAGE>
Use of Estimates -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 3 - SECURITIES HELD FOR INVESTMENT
All of the Company's investments in equity securities are classified as
"available-for-sale" and accordingly, are reflected in the September 30, 1998
and 1997 Consolidated Balance Sheets at fair value, with the aggregate
unrealized gain or loss, net of related deferred tax liability or asset,
included in shareholders' equity. All of the Company's investment in United
States Treasury Bonds (which mature in 2000 and 2001) are classified as
"held-to-maturity" and, accordingly, are reflected in the September 30, 1998 and
1997 Consolidated Balance Sheets at amortized cost.
There were no sales of securities during fiscal 1998 or 1997. During fiscal
1996, 32,000 shares of Mobil Corporation common stock were sold for $3.7 million
and resulting in realized gains, using average cost, of $2.8 million. An
analysis of the Company's investment in marketable securities is as follows (in
thousands):
Unrealized
Amortized Cost Gain (Loss) Fair Value
--------------- ------------- ---------------
September 30, 1998 -
Equity Securities $ 561 $ (238) $ 323
United States
Treasury Bonds 22,585 1,782 24,367
-------- -------- -------
$ 23,146 $ 1,544 $24,690
======== ======== =======
September 30, 1997 -
Equity Securities $ 561 $ (172) $ 389
United States
Treasury Bonds 22,581 1,429 24,010
------ ------- ------
$ 23,142 $ 1,257 $ 24,399
======== ======== =======
NOTE 4 - PROPERTY AND EQUIPMENT
VICKSBURG -
In December, 1997, the VICSKSBURG was mobilized from Australia to a
Singapore shipyard to undergo an approximate $35 million refurbishment and
upgrade project, of which $30 million was expended during fiscal 1998. Following
completion of this project in November, 1998, the rig is being mobilized to
India to commence a one-year plus option contract.
ATWOOD FALCON -
In June, 1998, the ATWOOD FALCON was relocated from Philippines to a
Singapore shipyard to undergo an approximately $50 million water-depth upgrade,
of which $30 million was expended during fiscal 1998. Following completion of
the project in November, 1998, the rig has commenced drilling under the
three-year phase two portion of its 1996 contract. Pursuant to the contract, the
Company will receive $11.2 million in mobilization fees, of which $6.3 million
was received at September 30, 1998 and recorded to Deferred Credits. These fees,
net after mobilization costs, will be amortized into revenues over the
three-year contract period.
ATWOOD SOUTHERN CROSS -
During fiscal year 1997, the ATWOOD SOUTHERN CROSS was mobilized from
Australia to a Singapore shipyard, refurbished and upgraded to achieve 2,000
feet water-depth drilling capability at an aggregate cost of approximately $35
million. During November, 1997, the rig was mobilized from Singapore to
Australia to commence working under a contract which it completed in September,
1998. While waiting for a new contract opportunity, the rig is currently idle in
Australia.
ATWOOD HUNTER -
In fiscal 1997, the ATWOOD HUNTER was upgraded to achieve up to 3,500 feet
water-depth drilling capability and relocated from Southeast Asia to the United
States Gulf of Mexico at an aggregate cost of approximately $40 million. The rig
has two more years remaining on its three-year contract with British-Borneo
Petroleum Inc. The contract provided for the payment of a $10 million
mobilization fee of which $6.4 million (net after mobilization costs) was
recorded to Deferred Credits and is being amortized into revenues over the
three-year contract period, with an unamortized balance of $4.2 million at
September 30, 1998.
RIG 200 -
RIG-200 (a modular platform rig built in 1995) is owned 50 percent by the
Company and 50 percent by Helmerich & Payne, Inc. (current owner of 22 percent
of the Company's outstanding common stock). Since the Company has a 50 percent
undivided ownership interest in RIG-200 and is actively involved in its
operations, the Company accounts for its investment in the rig on a
proportionate consolidation method. Accordingly, the Company's $12 million
investment in RIG-200 is reflected in "Drilling Vessels, Equipment and Drill
Pipe" in the Consolidated Balance Sheet, with 50 percent of the rig's operating
results for fiscal years 1998, 1997 and 1996 reflected in the Company's
Consolidated Statement of Operations. At September 30, 1998, Accounts Payable
included approximately $950,000 payable to Helmerich & Payne, Inc. relating to
RIG-200 operations, which the Company paid in October, 1998.
NOTE 5 - DEBT
LONG-TERM DEBT -
A summary of long-term debt is as follows (in thousands):
September 30,
-----------------------
1998 1997
----------- --------
Revolving credit agreement, bearing interest
(market adjustable) at approximately 7 percent
per annum at September 30, 1998 $ 72,000 $ 58,000
Term note, bearing interest at 6 percent per annum 750 1,500
-------- -------
72,750 59,500
Less - current maturities 750 750
-------- -------
$ 72,000 $ 58,750
======== ========
In July, 1997, the Company entered into a $125 million revolving credit
facility with a bank group. The revolving line of credit converts to a reducing
facility commencing on March 31, 1999, with commitment reduction of $8.3 million
per quarter until final maturity on March 31, 2002. The bank group's collateral
for this revolving credit facility consists principally of preferred mortgages
on the ATWOOD HUNTER, ATWOOD EAGLE and the RICHMOND plus the assigment of $20
million in market value of United States Treasury Bonds. The credit facility
prohibits the Company from incurring any additional indebtedness in excess of $5
million, disposing of any material assets, paying dividends or repurchasing any
of the Company's outstanding common stock. The proceeds borrowed under this
revolving credit facility have been used to repay the notes payable to a prior
bank group and to fund capital expenditures.
The maturities of long-term debt are as follows (in thousands):
FISCAL YEAR AMOUNT
1999 $ 750
2000 5,100(1)
2001 33,200
2002 33,700
--------
$ 72,750
========
(1) Subsequent to September 30, 1998, an additional $8 million was borrowed
under the credit facility. The additional $8 million will be due in 2000.
LINE OF CREDIT -
The Company has a $3 million unsecured line of credit with a bank to support
issuance, when required, of standby letters of guarantee and the Indian tax
guarantee (see Note 6). At September 30, 1998, standby letters of guarantee in
the aggregate amount of approximately $3 million were outstanding under this
facility.
NOTE 6 - INCOME TAXES
Domestic and foreign income (loss) before income taxes for the three years
in the period ended September 30, 1998 are as follows (in thousands):
Fiscal Fiscal Fiscal
1998 1997 1996
-------- -------- ---------
Domestic income $ 39,553 $ 14,623 $ 17,508
Foreign income (loss) 20,766 10,755 (1,665)
------- -------- ---------
$60,319 $ 25,378 $ 15,843
======= ======== =========
The provision (benefit) for domestic and foreign taxes on income consists of
the following (in thousands):
Fiscal Fiscal Fiscal
1998 1997 1996
-------- ------- -------
Current domestic provision $ 11,487 $ 5,736 $ 452
Deferred domestic provision (benefit) 3,970 (330) 1,400
Current foreign provision 5,498 4,353 2,623
-------- ------- -------
$ 20,955 $ 9,759 $ 4,475
======== ======= =======
The components of the deferred income tax assets (liabilities) as of
September 30, 1998 and 1997 are summarized as follows (in thousands):
September 30,
-------------------
1998 1997
------- -------
Deferred tax assets -
Net operating loss carryforwards $ 2,860 $ 2,970
Book reserves 1,200 1,260
Deferred mobilization revenues 2,100 3,210
----- -----
6,160 7,440
----- -----
Deferred tax liabilities -
Difference in book and tax basis
of equipment 7,360 4,940
Deferred charges 450 160
Unrealized holding loss
available-for-sale securities (80) (60)
------ ------
7,730 5,040
------ -----
Net deferred tax assets (liabilities)
before valuation allowance (1,570) 2,400
Valuation allowance (2,370) (2,390)
------- -------
$(3,940) $ 10
========= =======
Net current deferred tax assets $ 880 $ 1,820
Net noncurrent deferred tax liabilities (4,820) (1,810)
------- --------
$(3,940) $ 10
======== ========
U.S. deferred taxes have not been provided on foreign earnings totaling
approximately $20.6 million which are permanently invested abroad. Foreign tax
credits totaling approximately $8.8 million are available to reduce the U.S.
taxes on such amounts.
The differences between the statutory and the effective income tax rate are
as follows:
Fiscal Fiscal Fiscal
1998 1997 1996
------ ------ ------
Statutory income tax rate 35% 35% 34%
Increase (decrease) in tax rate resulting from -
Foreign tax rate differentials,
net of foreign tax credit utilization (1) 10 12
Change in valuation allowance --- (2) (15)
Investment tax credit utilization --- (5) ---
Other, net 1 --- (3)
---- ---- ----
Effective income tax rate 35% 38% 28%
==== ==== ====
The Company has United States net operating loss carryforwards totaling $8.2
million which expire in fiscal years 2001 through 2003. Due to various
utilization limitations, management estimates that a significant portion of this
tax attribute will not be available to reduce future tax obligations;
accordingly, a $2.4 million valuation allowance is recorded as of September 30,
1998.
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 letters of guarantee, the Company received tax
refunds in 1997 and 1994 of $ 1.1 million and $.6 million, respectively, (net of
taxes on interest and other related expense), which are reflected in the
September 30, 1998 and 1997 Consolidated Balance Sheets as other Deferred
Credits, pending ultimate resolution of the issue by the Indian High Court.
<PAGE>
NOTE 7 - CAPITAL STOCK
COMMON STOCK DIVIDEND -
On November 19, 1997, the Company effected a 100 percent common stock
dividend resulting in the issuance of approximately 6,775,000 shares of common
stock and the transfer of approximately $ 6,775,000 from paid-in capital to
common stock which represented the par value of additional shares issued. All
share and per share information has been retroactively restated in the
Consolidated Financial Statements to reflect the stock dividend.
STOCK OPTION PLANS -
The Company has an incentive equity plan ("1996 Plan") whereby 670,000
shares of common stock may be granted to officers and key employees through
February 12, 2007. At September 30, 1998, options to purchase 307,000 shares
were outstanding under this Plan. The Company also has options outstanding to
purchase 259,200 shares under a stock plan ("1990 Plan"). Under both plans, the
exercise price of each option equals the market price of the Company's common
stock on the date of grant, all outstanding options have a maximum term of 10
years, and options vest over a period from the second to the fifth year from the
date of grant.
A summary of the status of the Company's Plans as of September 30, 1998,
1997 and 1996, and changes during the years ended on those dates is presented
below:
Fiscal Fiscal Fiscal
1998 1997 1996
------------------ ------------------ -----------------
Weighted- Weighted- Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Options Price Options Price Options Price
Outstanding at
beginning of Year 444,700 $ 15.42 506,800 $ 9.46 480,200 $ 6.15
Granted 208,000 33.07 112,500 28.00 151,000 17.25
Exercised (78,500) 8.39 (164,000) 6.22 (124,400) 6.12
Forfeited (8,000) 23.73 (10,600) 6.46 --- ---
Expired --- ---- --- --- --- ---
- -------------------------------------------------------------------------------
Outstanding at
end of year 566,200 $ 22.76 444,700 15.42 506,800 $ 9.46
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Exercisable at
end of year 88,950 $ 8.49 69,450 $ 5.67 164,676 $ 6.02
- -------------------------------------------------------------------------------
Available for grant
at end of Year 366,000 567,000 ---
Weighted-average
fair value of
options granted
during the year $ 14.21 $ 23.36 $ 6.68
The following table summarizes information about stock options outstanding
at September 30, 1998:
Options Outstanding Options Exercisable
-------------------------------------- ---------------------
Weighted-
Average
Remaining Weighted- Weighted-
Range of Contractural Average Average Exercise
Exercise Prices Shares Life Exercise Price Shares Price
- ----------------- ------- ------------ -------------- ---------- --------
$ 4.87 to 5.38 38,000 4.1 years $ 5.18 38,000 $ 5.18
6.50 to 6.69 82,650 5.6 years 6.61 31,150 6.62
16.63 to 18.97 235,050 8.6 years 17.42 19,800 17.83
28.00 107,500 8.5 years 28.00 --- ---
48.75 to 52.06 103,000 9.2 years 48.94 --- ---
------- ----- ------ ------
4.87 to 52.06 566,200 7.9 years $ 22.76 88,950 $ 8.49
======= ======= ====== =======
<PAGE>
As permitted by SFAS No. 123, the Company applies APB Opinion No. 25 and
related Interpretations in accounting for its stock option plans. Accordingly,
no compensation cost has been recognized from the granting of options pursuant
to its stock option plans. Had compensation costs been determined based on the
fair value at the grant dates for awards made in fiscal years 1998, 1997 and
1996 consistent with the method of SFAS No. 123, the Company's net income and
earnings per share would have been reduced to the pro forma amounts indicated
below (in thousands, except for per share amounts):
Fiscal Fiscal Fiscal
1998 1997 1996
--------- ---------- ----------
Net Income As reported $ 39,364 $ 15,619 $ 11,368
Pro forma 38,830 15,404 11,291
Earnings per share As reported -
Basic 2.90 1.16 .85
Diluted 2.84 1.14 .84
Pro forma
Basic 2.86 1.14 .85
Diluted 2.80 1.12 .83
The fair value of grants made in fiscal 1998, 1997 and 1996 was estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions used: fiscal 1998 - risk free interest rate of 5.4
percent, expected volatility of 42 percent, expected lives of 5 years and no
dividend yield; - fiscal 1997 - risk-free interest rate of 6.7 percent, expected
volatility of 33.6 percent, expected lives of 5 years and no dividend yield;
fiscal 1996 - risk-free interest rate of 5.8 percent, expected volatility of
33.7 percent, expected lives of 5 years and no dividend yield.
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 contributions to the Plan
equal to twice the basic contributions. Company contributions vest 100 percent
to each participant beginning with the fourth year of participation. If a
participant terminates 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 fiscal 1998, the Company made cash
contributions of approximately $1.3 million to the Plan and utilized no
fortfeitures to reduce its contribution requirements. In fiscal 1997 and 1996,
the Company used forfeitures of $84,000 and $58,000, respectively, to reduce its
cash requirements, which resulted in actual contributions of approximately $.9
million and $.7 million, respectively. As of September 30, 1998, there are
approximately $100,000 of contribution forfeitures which can be utilized to
reduce future Company cash contribution requirements.
NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities included in the accompanying
Consolidated Balance Sheets approximated fair value due to the short maturity of
these instruments. Since the bank debt has a market adjustable interest rate,
the carrying value approximated fair value as of fiscal year end 1998 and 1997.
Although the $.7 million term note has a fixed 6 percent interest rate at
September 30, 1998, it also approximated fair value. The Company's only
financial instruments at September 30, 1998 and 1997 with a fair value different
from carrying value are marketable securities; the difference of which is shown
in Note 3.
NOTE 10 - CONCENTRATION OF MARKET AND CREDIT RISK
All of the Company's customers are in the oil and gas offshore exploration
and production industry. This industry concentration has the potential to impact
the Company's overall exposure to market and credit risks, either positively or
negatively, in that the Company's customers could be affected by similar changes
in economic, industry or other conditions. However, the Company believes that
the credit risk posed by this industry concentration is offset by the
creditworthiness of the Company's customer base. The Company's portfolio of
accounts receivable is comprised of major international corporate entities and
government organizations with stable payment experience. Historically, the
Company's uncollectible accounts receivable have been immaterial, and typically,
the Company does not require collateral for its receivables.
Drilling revenues for fiscal 1998 include $35.2 million, $25.9 million and
$20.4 million in revenues received from British-Borneo Petroleum Inc., ESSO
Australian Limited/ESSO Production Malaysia, Inc. and Santos Ltd., respectively.
Drilling revenues for fiscal 1997 include $24.3 million, $19.3 million and $16.9
million in revenues received from ESSO Australia Limited/ESSO Production
Malaysia, Inc., Mobil Equatorial Guinea Inc. and Carigali-Triton Operating
Company Sdn. Bhd., respectively. Drilling revenues for fiscal 1996 include $25.6
million, $11.5 million and $8.4 million in revenues received from Esso Australia
Limited/Esso Production Malaysia, Inc., Carigali-Triton Operating Company Sdn.
Bhd. and Mobil Equatorial Guinea Inc., respectively.
<PAGE>
NOTE 11 - NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued four new accounting
standards; SFAS No. 130 "Reporting Comprehensive Income"; SFAS No. 131,
"Disclosures about Segments for Enterprise and Related Information"; SFAS No.
132, "Employer's Disclosure about Pension and Other Post Retirement Benefits"
and SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities". SFAS 130, 131 and 132 are effective for fiscal years beginning
after December 15, 1997. SFAS 130 requires the reporting and display of
comprehensive income. While the Company does have certain comprehensive income
items, this standard will not affect the Company's reported consolidated net
income or cash flows. SFAS 131 establishes standards for reporting financial and
description information about a company's operating segments. Management is
currently analyzing the impact of SFAS 131, but does not expect the standard to
materially change its current segment disclosure. SFAS 132 is a disclosure
oriented standard and will not affect the Company's reported consolidated income
or cash flows. SFAS 133 is effective for fiscal years beginning after June 14,
1999. This Statement establishes accounting and reporting standards requiring
that every derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as either an asset
or liability measured at its fair value. In the opinion of management, the
adoption of Statement 133 will not have a material impact on the Company's
financial statements.
NOTE 12 - 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
is contract revenues less operating costs, general and administrative expenses
and depreciation. In computing operating margin for each geographic area, none
of the following items were considered: other income (expense) and domestic and
foreign income taxes. Identifiable assets are those assets that are used by the
Company in operations in each geographic area. General corporate assets are
principally investments in marketable securities.
A summary of revenues, operating margin and identifiable assets by geographic
areas is as follows (in thousands):
Fiscal Fiscal Fiscal
1998 1997 1996
---------- --------- --------
CONTRACT REVENUES:
United States $ 46,454 $10,585 $ 6,208
Australia 44,445 27,599 31,043
Southeast Asia 28,661 31,583 33,774
Mediterranean Sea 18,699 --- ---
Africa 13,550 19,315 8,430
-------- -------- --------
$151,809 $ 89,082 $ 79,455
======== ======== ========
OPERATING INCOME:
United States $24,102 $ 5,642 $ 42
Australia 13,822 8,236 8,018
Southeast Asia 9,911 8,235 6,316
Mediterranean Sea 12,274 --- ---
Africa 8,819 8,200 3,831
India/Middle East --- --- (34)
General and administrative expenses (7,331) (6,100) (5,113)
---------- -------- --------
$ 61,597 $ 24,213 $ 13,060
========== ======== ========
IDENTIFIABLE ASSETS:
United States $ 76,557 $ 81,800 $ 31,071
Australia 59,388 49,713 19,365
Southeast Asia 97,736 40,387 64,163
Mediterranean Sea 24,908 --- ---
Africa 2 20,457 21,780
India/Middle East 238 3 3
General corporate 22,908 22,970 22,927
-------- -------- --------
$281,737 $215,330 $159,309
======== ======== ========
<PAGE>
NOTE 13 - QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly results for fiscal years 1998 and 1997 are as follows
(in thousands, except per share amounts):
QUARTERS ENDED
-----------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
----------- -------- -------- -------------
1998
Revenues $ 36,224 $ 41,428 $ 39,294 $ 34,863
Income before income taxes 13,289 17,966 15,503 13,561
Net income 8,677 11,682 10,034 8,971
Earnings per common share (1) -
Basic .64 .86 .74 .66
Diluted .63 .84 .72 .65
1997
Revenues $ 22,093 $ 20,805 $22,069 $ 24,115
Income before income taxes 5,734 5,117 5,660 8,867
Net income 3,919 3,114 3,662 4,924
Earnings per common share (1) -
Basic .29 .23 .27 .37
Diluted .29 .23 .27 .36
- ------------
(1) Net income per common share has been restated in accordance with SFAS No.
128, as discussed in Note 2. The sum of the individual quarterly net income per
common share amounts may not agree with year-to-date net income per common share
as each quarterly computation is based on the weighted average number of common
shares outstanding during that period.
<PAGE>
DIRECTORS OFFICERS
ROBERT W. BURGESS (3) JOHN R. IRWIN
Senior Vice President President, Chief Executive Officer
CIGNA Investment Division
CIGNA Companies JAMES M. HOLLAND
Bloomfield, Connecticut Senior Vice President and Secretary
GEORGE S. DOTSON (1, 2, 3) GLEN P. KELLEY
Vice President Vice President - Contracts and
Helmerich & Payne, Inc. Administration
President LARRY P. TILL
Helmerich & Payne International Vice President - Operations
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
<PAGE>
ANNUAL MEETING
The annual meeting of stockholders will be held on February 11, 1999 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 15, 1999.
TRANSFER AGENT AND REGISTRAR
Bank One Corporation, N.A.
P. O. Box 25848
100 N. Broadway, 7th Floor (73102)
Oklahoma City, OK 73125
FORM 10-K
A copy of the Company's 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 -
On August 6, 1997, the common stock of Atwood Oceanics, Inc. ceased trading
on the Nasdaq Stock Market (NASDAQ) under the symbol "ATWD" and commenced
trading on the New York Stock Exchange ("NYSE") under the symbol "ATW". No cash
dividends on common stock were paid in fiscal year 1997 or 1998, and none are
anticipated in the foreseeable future. As of September 30, 1998, there were over
750 beneficial owners of the common stock of Atwood Oceanics, Inc. As of
November 30, 1998, the closing sale price of the common stock of Atwood
Oceanics, Inc., as reported by NYSE, was $18.75 per share. The following table
sets forth the range of high and low sales prices per share of common stock as
reported by NASDAQ and the NYSE for the periods indicated, after retroactive
restatement for the November 1997 100% common stock dividend.
Fiscal Fiscal
1997 1998
---------------- -----------------
QUARTERS ENDED LOW HIGH LOW HIGH
- -------------- ------- ------- ------- ------
December 31 $22 3/8 $32 3/4 $40 1/16 $61 5/8
March 31 26 3/4 35 1/2 38 3/4 55 1/4
June 30 28 7/8 35 1/8 37 3/8 61 3/8
September 30 33 3/4 57 1/16 15 1/16 40 3/4
<PAGE>
APPENDIX
The following graphic and image information in the form of "Bar Charts" are
located in the Annual Report immediately following "Highlights".
BAR CHART - CONTRACT REVENUES ($ MILLIONS)
1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
$66.0 $72.2 $79.5 $89.1 $151.8
BAR CHART - EARNINGS, BEFORE DEPRECIATION, INTEREST, TAXES AND INVESTMENT
INCOME ($ MILLIONS)
1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
$17.3 $16.9 $22.8 $34.2 $79.2
BAR CHART - OPERATING CASH FLOW ($ MILLIONS)
1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
$16.8 $14.9 $20.3 $25.8 $61.4
BAR CHART - NET INCOME (LOSS) ($ MILLIONS)
1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
$6.2 $7.1 $11.4 $15.6 $39.4
BAR CHART - CAPITAL EXPENDITURES ($ MILLIONS)
1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
$6.4 $25.7 $9.5 $62.8 $79.6
BAR CHART - CASH AND SECURITIES HELD FOR INVESTMENT ($ MILLIONS)
1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
$41.0 $38.0 $40.5 $42.2 $34.5
EXHIBIT 21.1
SUBSIDIARY COMPANIES AND STATE OR
JURISDICATION OF INCORPORATION
All Oceans Drilling B.V. Netherlands 100%
Alpha Offshore Drilling Services Cayman Islands, B.W.I. 100%
Atwood Drilling Inc. Delaware 100%
Atwood Offshore Inc. Delaware 100%
Atwood Hunter Co. Delaware 100%
Atwood Oceanics Australia Pty. Ltd. Australia 100%
Atwood Oceanics Drilling Company Texas 100%
Atwood Oceanics Drilling Pty. Ltd. Australia 100%
Atwood Oceanics International, S.A. Panama 100%
Atwood Oceanics (M) Sdn. Bhd. Malaysia 100%
Atwood Oceanics (NZ) Limited New Zealand 100%
Atwood Oceanics Pacific Limited Cayman Islands B.W.I. 100%
Atwood Oceanics Platforms Pty. Ltd. Australia 100%
Atwood Oceanics Service Pty. Ltd. Australia 100%
Atwood Oceanics West Tuna Pty. Ltd. Australia 50%
Aurora Offshore Service GmbH Germany 100%
Clearways Drilling (M) Sdn. Bhd. Malaysia 30%
Clearways Offshore Development
Drilling Sdn. Bhd. Malaysia 30%
Deep Seas Drilling Pty. Ltd. Australia 100%
Drillquest (M) Sdn. Bhd. Malaysia 90%
Eagle Oceanics, Inc. Delaware 100%
Oceandril (M) Sdhn. Bhd. Malaysia 90%
PT Pentawood Offshore Drilling Indonesia 80%
Swiftdrill, Inc. Texas 100%
Swiftdrill Nigeria Limited Nigeria 60%
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated November 23, 1998, incorporated by reference in this
Form 10-K, into the Company's previously filed Registration Statement No.
33-52065 on Form S-8.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Houston, Texas
December 18, 1998
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<FISCAL-YEAR-END> Sep-30-1998
<PERIOD-START> Oct-01-1997
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<COMMON> 13,625
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