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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED JUNE 30, 1999
COMMISSION FILE NUMBER 0-6352
ATWOOD OCEANICS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1611874
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
15835 Park Ten Place Drive 77084
Houston, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
281-492-2929
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 15 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filings
requirements for the past 90 days. Yes X No___
The number of shares outstanding of the issuer's class of common stock, as
of July 31, 1999; 13,671,526 shares of Common Stock, $1 par value.
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<PAGE>
PART I. FINANCIAL INFORMATION
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
The condensed consolidated financial statements herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission for interim financial reporting. Accordingly, these financial
statements and related information have been prepared without audit and certain
information and disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted, although management believes that the disclosures are adequate to
make the information not misleading. The condensed consolidated financial
statements reflect all adjustments which are, in the opinion of management,
necessary to present fairly the financial position of the Company as of June 30,
1999 and September 30, 1998, and the results of its operations and cash flows
for the three months and nine months ended June 30, 1999 and 1998, respectively.
All adjustments were of a normal recurring nature. The interim financial results
may not be indicative of results that could be expected for a full year. It is
suggested these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's September 30, 1998 Annual Report to Shareholders.
<PAGE>
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, September 30,
---------- ---------------
1999 1998
---------- ---------------
(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 32,216 $ 11,621
Accounts receivable 20,164 27,730
Inventories of materials
and supplies, at lower
of average cost or market 7,588 8,076
Deferred tax assets 880 880
Prepaid expenses 1,184 3,280
-------- --------
Total Current Assets 62,032 51,587
-------- --------
SECURITIES HELD FOR INVESTMENT:
Held-to-maturity, at amortized cost 22,588 22,585
Available-for-sale, at fair value 317 323
-------- --------
22,905 22,908
-------- --------
PROPERTY AND EQUIPMENT, at cost:
Drilling vessels, equipment and
drill pipe 352,445 327,520
Other 7,297 6,128
-------- --------
359,742 333,648
Less-accumulated depreciation 141,309 128,016
-------- --------
Net Property and Equipment 218,433 205,632
-------- --------
DEFERRED COSTS AND OTHER ASSETS 1,321 1,610
-------- --------
$304,691 $281,737
======== ========
<PAGE>
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, September 30,
------------- --------------
1999 1998
------------- --------------
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ ---- $ 750
Accounts payable 5,601 14,250
Accrued liabilities 15,691 11,723
-------- --------
Total Current Liabilities 21,292 26,723
-------- --------
LONG-TERM DEBT, net of current liabilities 68,000 72,000
-------- --------
DEFERRED CREDITS:
Income taxes 6,720 4,820
Other 21,538 14,428
-------- --------
28,258 19,248
-------- --------
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 13,670,000
and 13,625,000 shares issued
and outstanding in
1999 and 1998, respectively 13,670 13,625
Paid-in capital 52,222 51,781
Net unrealized holding loss on
available-for-sale securities (160) (155)
Retained earnings 121,409 98,515
-------- -------
187,141 163,766
-------- -------
$304,691 $281,737
======== ========
<PAGE>
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
-------------------- -------------------
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
------- -------- --------- --------
(In thousands except (In thousands except
per share amounts) per share amounts)
REVENUES:
Contract drilling $ 38,503 $ 38,359 $113,632 $115,116
Contract management 224 935 1,397 1,830
-------- -------- -------- --------
38,727 39,294 115,029 116,946
-------- -------- -------- --------
COSTS AND EXPENSES:
Contract drilling 18,626 16,189 52,646 48,127
Contract management 141 899 1,256 1,638
Depreciation 6,008 4,572 17,792 13,454
General and administrative 1,710 1,826 5,816 5,657
-------- -------- ------- -------
26,485 23,486 77,510 68,876
-------- -------- ------- -------
OPERATING INCOME 12,242 15,808 37,519 48,070
-------- -------- ------- -------
OTHER INCOME (EXPENSE)
Interest expense (1,125) (931) (3,226) (3,072)
Interest income 667 626 1,801 1,760
-------- -------- ------- --------
(458) (305) (1,425) (1,312)
-------- -------- ------- -------
INCOME BEOFRE INCOME TAXES 11,784 15,503 36,094 46,758
PROVISION FOR INCOME TAXES 4,390 5,469 13,200 16,365
-------- -------- ------- -------
NET INCOME $ 7,394 $ 10,034 $22,894 $30,393
======== ======== ======= =======
EARNINGS PER SHARE
Basic $ .54 $ .74 $ 1.68 $ 2.24
Diluted .53 .72 1.66 2.20
WEIGHTED AVERAGE NUMBER OF
COMMON SHARE OUTSTANDING
Basic 13,669 13,623 13,641 13,581
Diluted 13,849 13,866 13,773 13,830
.
<PAGE>
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
June 30,
--------------- --------------
1999 1998
--------- ---------
(In thousands)
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 22,894 $ 30,393
---------- ---------
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 17,792 13,454
Amortization of deferred items 349 399
Deferred tax provision 1,900 3,003
Changes in assets and liabilities:
Decrease (Increase) in accounts receivable 5,426 (10,847)
Increase (decrease) in accounts payable
and accrued liabilities 5,432 (2,733)
Net mobilization fees 8,391 4,121
Other 2,106 597
--------- ---------
Total adjustments 41,396 7,994
--------- ---------
Net cash provided by operating activities 64,290 38,387
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (39,431) (56,972)
--------- ---------
Net cash used by investing activities (39,431) (56,972)
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from credit facilities 13,000 14,000
Principal payments on long-term debt (17,750) (750)
Proceeds from exercises of stock options 486 659
---------- ---------
Net cash (used) provided by
financing activities (4,264) 13,909
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 20,595 (4,676)
CASH AND CASH EQUIVALENTS, at beginning of period 11,621 19,264
--------- ---------
CASH AND CASH EQUIVALENTS, at end of period $ 32,216 $ 14,588
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the periiod for domestic
and foreign income tax $ 8,913 $ 14,936
========== =========
Cash paid during the period for interest,
net of amount capitalized $ 4,138 $ 2,714
========== =========
<PAGE>
PART I. ITEM 2
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
All non-historical information set forth herein is based upon expectations
and assumptions deemed reasonable by the Company. The Company can give no
assurance that such expectations and assumptions will prove to have been
correct, and actual results could differ materially from the information
presented herein. The Company's periodic reports filed with the Securities and
Exchange Commission should be consulted for a description of risk factors
associated with an investment in the Company.
MARKET OUTLOOK
The worldwide fleet utilization for mobile offshore drilling units is
currently below 75 percent. Despite recent improvements in oil prices,
international petroleum exploration and development companies continue to limit
their capital expenditures on drilling programs. The reduction in demand for
offshore drilling units has likewise resulted in a decline in dayrates.
Currently, the ATWOOD SOUTHERN CROSS, RICHMOND, RIG-19 and RIG-200 are
without drilling contracts. The Company is actively marketing these rigs;
however, current market conditions may result in these rigs incurring a
significant amount of idle time during the remainder of 1999. The ATWOOD EAGLE
continues to operate in the Mediterranean Sea with a commitment to the end of
September 1999. The Company is currently in discussion for additional work for
the ATWOOD EAGLE at a dayrate significantly below the $115,000 dayrate received
when the rig initially moved to the Mediterranean Sea in 1998. Despite the
anticipated lower rig utilization and some dayrate reductions, term contracts in
place for the ATWOOD HUNTER, ATWOOD FALCON, VICKSBURG and SEAHAWK should provide
the Company with a high level of revenues during the remainder of fiscal 1999
and into fiscal 2000.
RESULTS OF OPERATIONS
Contract revenues for the three months and nine months ended June 30,
1999 decreased 1.4% and 1.6%, respectively, compared to the same periods ended
June 30, 1998. A comparative analysis of contract revenues by drilling unit is
as follows:
CONTRACT REVENUES
-----------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- --------------------------
June 30, June 30, June 30, June 30,
1999 1998 Variance 1999 1998 Variance
-------- -------- -------- -------- ------- --------
(In millions)
ATWOOD FALCON 9.7 4.7 5.0 24.8 17.3 7.5
VICKSBURG 3.3 0.0 3.3 7.1 1.9 5.2
ATWOOD EAGLE 8.5 8.2 0.3 28.2 24.2 4.0
RIG-200 2.4 1.9 0.5 6.5 5.9 0.6
RIG-19 2.0 1.9 0.1 5.9 4.9 1.0
SEAHAWK 2.0 2.8 (0.8) 7.8 8.5 (0.7)
ATWOOD HUNTER 8.7 8.7 0.0 24.8 26.6 (1.8)
RICHMOND 0.0 3.1 (3.1) 3.7 8.2 (4.5)
SOUTHERN CROSS 0.0 6.4 (6.4) 0.0 13.5 (13.5)
GOODWYN 'A' 1.9 0.7 1.2 4.8 4.1 0.7
NORTH RANKIN 'A' 0.2 0.9 (0.7) 1.4 1.8 (0.4)
------ ----- ----- ------ ------ -----
$ 38.7 $39.3 $(0.6) $115.0 $116.9 $(1.9)
====== ===== ===== ====== ====== =====
<PAGE>
The increase in revenues for the ATWOOD FALCON resulted from higher
contract dayrates following completion of its water-depth upgrade in November
1998. During the third quarter of fiscal 1998, the VICKSBURG was in a shipyard
undergoing upgrade and refurbishment, with no revenues being earned compared to
working in India since December 1998. The ATWOOD EAGLE was relocated from West
Africa to the Mediterranean Sea at the end of March 1998 and commenced working
under a term rig sharing agreement which provided for enhancement in operating
dayrates. The drilling contract for RIG-200 terminated in early April 1999, with
$1.9 million of unamortized deferred net mobilization fees recognized into
income, accounting for the increase in revenues. RIG-19 revenues increased in
1999 due to the rig having reduced revenues in 1998 from its move to a new
offshore installation with no revenues being recognized during the relocation
period. The Company is currently moving RIG-19 to a stacking location in
Australia following completion of its drilling contract in July 1999. The
SEAHAWK is currently being upgraded for a four year contract extension, with a
reduced dayrate being received during the upgrade period. Due to market
conditions, the RICHMOND and ATWOOD SOUTHERN CROSS have been idle since March
1999 and September 1998, respectively.
Contract drilling and management costs for the three months and nine
months ended June 30, 1999 increased 10% and 8%, respectively, compared to the
same periods ended June 30, 1998. A comparative analysis of contract drilling
and management costs by drilling unit is as follows:
CONTRACT DRILLING AND MANAGEMENT COSTS
---------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ------------------------------
June 30, June 30, June 30, June 30,
1999 1998 Variance 1999 1998 Variance
-------- -------- -------- -------- -------- --------
(In millions)
VICKSBURG $ 1.8 $ 0.0 1.8 $ 3.3 $1.4 1.9
RIG-19 2.3 1.4 0.9 5.1 3.6 1.5
ATWOOD EAGLE 4.0 3.1 0.9 11.5 8.0 3.5
ATWOOD FALCON 2.0 1.2 0.8 5.1 4.9 0.2
SEAHAWK 1.9 1.5 0.4 5.3 4.5 0.8
ATWOOD HUNTER 2.1 2.5 (0.4) 7.4 6.8 0.6
RIG-200 0.2 0.6 (0.4) 1.5 2.0 (0.5)
RICHMOND 1.0 1.6 (0.6) 3.9 4.4 (0.5)
SOUTHERN CROSS 1.0 3.2 (2.2) 3.6 7.7 (4.1)
NORTH RANKIN 'A' 0.1 0.9 (0.8) 1.2 1.6 (0.4)
GOODWYN 'A' 1.4 0.7 0.7 3.7 3.3 0.4
OTHER 1.0 0.4 0.6 2.3 1.6 0.7
----- ----- ----- ----- ----- -----
$18.8 $17.1 $ 1.7 $53.9 $49.8 $4.1
===== ===== ===== ===== ===== =====
<PAGE>
The increase in costs for the VICKSBURG was due to the rig being in a
shipyard undergoing upgrade during most of fiscal 1998 with no operating costs
being incurred. The RIG-19 costs increase was due to the rig being relocated to
a new platform in 1998 with no operating costs being incurred during the
relocation period and due to certain costs being incurred in 1999 associated
with the termination of its drilling operations. Operating costs for the ATWOOD
EAGLE in the Mediterranean Sea are higher than its previous area of operation in
West Africa. Thus, higher area costs plus an increase in repair and maintenance
costs account for its overall increase in operating costs. The ATWOOD FALCON was
moved to a shipyard in May 1998 to commence its upgrade compared to working the
entire third quarter of fiscal 1999, accounting for its increase in operating
costs. The increase in operating costs for the year for the SEAHAWK and ATWOOD
HUNTER were primarily due to higher repair and maintenance costs. The decrease
in costs for RIG-200, RICHMOND and ATWOOD SOUTHERN CROSS were due to the rigs
incurring idle time following termination of contracts, with certain operating
cost savings being realized during idle periods.
The increase in depreciation expense is primarily due to increase in
depreciation on the ATWOOD FALCON and VICKSBURG following completion of their
upgrades. The Company does not recognize depreciation expense during the period
a rig is out of service for a significant upgrade.
A summary of the contract status of the Company's wholly or partially
owned drilling units as of August 12, 1999 is as follows:
NAME OF RIG LOCATION CONTRACT STATUS
- ------------------------ ---------------- ------------------------
ATWOOD FALCON Philippines Rig is under long-term
contract which terminates
in November 2001.
ATWOOD HUNTER United States Gulf Rig is under long-term
of Mexico contract which terminates
in September 2000.
ATWOOD EAGLE Mediterranean Sea Rig is contracted into
September 1999, with
options for additional
work.
VICKSBURG India Rig is under term
contract which terminates
in December 1999, with
options for further work.
SEAHAWK Malaysia The rig is undergoing
upgrades which may not
be completed until the
end of calendar 1999.
Following the upgrades,
the rig will commence
drilling under a four-
year contract extension
period, with a further
option to extend.
RIG-19 Australia Rig is being moved to a
stacking location
following the completion
of its contract in July
1999.
RIG-200 Australia Rig is available for
contract since it became
idle in March 1999.
RICHMOND United States Gulf Rig is available for
of Mexico contract since it became
idle in March 1999.
ATWOOD SOUTHERN CROSS Australia Rig is available for
contract since it became
idle in September 1998.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended June 30, 1999, operating cash flow (before
changes in working capital and other assets and liabilities) was $42.9 million
compared to $47.2 million for the same period in fiscal 1998. During the first
nine months of fiscal 1999, the Company utilized internally generated funds to
invest approximately $28.1 million in completing the upgrades of the ATWOOD
FALCON and the VICKSBURG, to invest $5.8 million in commencing the upgrade of
the SEAHAWK and to invest approximately $5.5 in other capital expenditures, in
addition to reducing long-term debt by $4.8 million. Currently, the only
significant capital commitment for the remainder of 1999 is an approximate $23
million upgrade of the SEAHAWK. The SEAHAWK contract extension provides for
approximately $20 million of the upgrade costs to be reimbursed by the operator
and for the Company to be paid a reduced dayrate during the upgrade period.
Fifty percent of the upgrade costs reimbursement (approximately $10 million
reflected in other deferred credits at June 30, 1999) was paid by the operator
in April 1999, with the balance due at the end of the upgrade process.
At June 30, 1999, the Company had $68 million outstanding under the
revolving credit facility. Until an investment opportunity is identified, the
Company will continue to utilize its excess cash flow to reduce its long-term
debt, with a further reduction of $6 million made subsequent to June 30, 1999.
The Company will continue to review and adjust its planned capital expenditures
and financing of such expenditures in light of current market conditions.
YEAR 2000
The Company continues to place priority on Year 2000 Compliance ("Y2K")
and is committed to being Y2K compliant without significant disruptions in
safety systems, operations or its ability to perform quality service. In 1998,
the Company engaged a Y2K consulting company to visit the Company's various
drilling units to inventory all equipment systems and assess Y2K compliance. The
Company believes that the Year 2000 issue will not pose significant operational
problems to the Company's equipment; however, no assurance can be given that the
Company will not encounter some Y2K issues. In the event the Company's major
suppliers or customers do not successfully and timely achieve Year 2000
compliance, the Company's operations could be adversely affected.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATWOOD OCEANICS, INC.
(Registrant)
Date: August 12, 1999 s/JAMES M. HOLLAND
-----------------------
James M. Holland
Senior Vice President
and Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000008411
<NAME> Atwood Oceanics, Inc.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Sep-30-1999
<PERIOD-START> Oct-01-1998
<PERIOD-END> Jun-30-1999
<EXCHANGE-RATE> 1
<CASH> 32,216
<SECURITIES> 22,905
<RECEIVABLES> 20,164
<ALLOWANCES> 0
<INVENTORY> 7,588
<CURRENT-ASSETS> 62,082
<PP&E> 359,742
<DEPRECIATION> 141,309
<TOTAL-ASSETS> 304,691
<CURRENT-LIABILITIES> 21,292
<BONDS> 68,000
0
0
<COMMON> 13,670
<OTHER-SE> 52,062
<TOTAL-LIABILITY-AND-EQUITY> 304,691
<SALES> 115,029
<TOTAL-REVENUES> 115,020
<CGS> 58,462
<TOTAL-COSTS> 77,510
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,226
<INCOME-PRETAX> 36,094
<INCOME-TAX> 13,200
<INCOME-CONTINUING> 22,894
<DISCONTINUED> 0
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<NET-INCOME> 22,894
<EPS-BASIC> 1.68
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</TABLE>
