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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, 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, 1999
COMMISSION FILE NUMBER 1-13167
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
Fork 10-K { }. The aggregate market value of the voting stock held by
non-affiliates of the registrants as of November 30, 1999 is $ 359,000,000.
The number of shares outstanding of the issuer's class of Common Stock, as of
November 30, 1999: 13,674,851 shares of Common Stock, $1 par value.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report to Shareholders for the fiscal year ended September 30, 1999 -
Referenced in Parts I, II and IV of this report. (2) Proxy Statement for Annual
Meeting of Shareholders to be held February 10, 2000 - Referenced in Part III of
this report.
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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.
Despite a decline in utilization of the Company's equipment and some
dayrate reductions due to a downturn in the drilling market, fiscal 1999
represents the Company's second best financial performance in its over 30-year
history. Term contracts in place for some of the Company's rigs enabled the
Company to maintain a high level of revenues and cash flows in fiscal 1999. Even
though, the price for oil has recovered to over $20 per barrel, worldwide fleet
utilization for mobile offshore equipment still remains around 75 percent. There
are some encouraging indications that the offshore drilling market environment
could improve in 2000; however, there are no guarantees that the Company will
not incur some idle time on some of its drilling units in fiscal 2000.
Historically, most of the Company's drilling operations have been conducted
outside United States waters. Approximately 77, 69 and 88 percent of the
Company's contract revenues were derived from foreign operations in fiscal years
1999, 1998 and 1997, respectively. In addition to operating in United States
waters, the Company is currently involved in active foreign operations in the
territorial waters of Australia, Israel, 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 13 of Notes to Consolidated Financial Statements contained
in the Company's Annual Report to Shareholders for fiscal year 1999,
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 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. Due to
decline in drilling market activities, the Company's active rig utilization
decreased from virtually 100 percent in 1998 to 77 percent in 1999. Certain
periods of idle time were incurred on the ATWOOD SOUTHERN CROSS, RICHMOND,
RIG-19 and RIG-200 during fiscal 1999. The Company anticipates incurring
additional equipment idle time in fiscal 2000.
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 1999 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 1999 revenues. Shell Philippines Exploration
B.V/Sabah Shell Petroleum Company Limited, British-Borneo Petroleum Inc., and
Esso Australia Limited/Esso Production Malaysia, Inc., accounted for 24%, 21%
and 16%, respectively, of fiscal year 1999 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 13
to Consolidated Financial Statements contained in the Company's Annual Report to
Shareholders for fiscal year 1999, 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 1999, which is incorporated by reference herein.
Since 1997, the Company has successfully upgraded four drilling units; the
ATWOOD HUNTER, the ATWOOD SOUTHERN CROSS, the ATWOOD FALCON and the VICKSBURG at
approximate costs of $40 million, $35 million, $50 million and $35 million,
respectively. During 1999 the Company commenced an approximate $23 million
upgrade of the SEAHAWK for a four-year contract extension, of which
approximately $20 million will be reimbursed by the customer. 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 1999, 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 1999, 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, 1999, there were over 750 beneficial owners of the
Company's common stock.
The Company did not pay cash dividends in fiscal years 1998 or 1999 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 1999, 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
1999, 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 1999, 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 1999, 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 1999, 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.
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 10, 2000, 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 10, 2000, 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 10, 2000, 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 10, 2000, 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, 1999 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, 1999 and 1998
Consolidated Statements of Operations for each of the three years
in the period ended September 30, 1999
Consolidated Statements of Cash Flows for each of the three years in
the period ended September 30, 1999
Consolidated Statements of Changes in Shareholders' Equity for each
of the three years in the period ended September 30, 1999
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 10.1.1
hereof.
Form of Atwood Oceanics, Inc. Stock Option Agreement (1990 Stock Option
Plan) - See Exhibit 10.1.2 hereof
Amendment No. 1 to the Atwood Oceanics, Inc. 1990 Stock Option Plan -
See Exhibit 10.1.3 hereof
Form of Amendment No. 1 to the Atwood Oceanics, Inc. Stock Option
Agreement (1990 Stock Option Plan) - See Exhibit 10.1.4 hereof
Atwood Oceanics, Inc. 1996 Incentive Equity Plan - See Exhibit 10.3.1
hereof.
Form of Atwood Oceanics, Inc. Stock Option Agreement (1996 Incentive
Equity Plan) - See Exhibit 10.3.2 hereof
Amendment No. 1 to Atwood Oceanics, Inc. 1996 Incentive Equity Plan -
See Exhibit 10.3.3. hereof
Form of Amendment No. 1 to the Atwood Oceanics, Inc. Stock Option
Agreement (1996 Incentive Equity Plan) - See Exhibit 10.3.4 hereof
(b) REPORTS ON FORM 8-K
During the last quarter of fiscal 1999, 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: 2 December 1999
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: 2 December 1999
Date: 2 December 1999
/s/ ROBERT W. BURGESS /s/ GEORGE S. DOTSON
ROBERT W. BURGESS, GEORGE S. DOTSON,
Director Director
Date: 2 December 1999 Date: 2 December 1999
/s/ HANS HELMERICH /s/ WILLIAM J. MORRISSEY
HANS HELMERICH, WILLIAM J. MORRISSEY,
Director Director
Date: 2 December 1999 Date: 2 December 1999
/s/ W.H. HELMERICH, III
W.H. HELMERICH, III
Director
DATE: 2 December 1999
<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).
10.1.1 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).
*10.1.2 Form of Atwood Oceanics, Inc. Stock Option Agreement (1990 Stock
Option Plan)
*10.1.3 Amendment No.1 to the Atwood Oceanics, Inc. 1990 Stock Option
Plan
*10.1.4 Form of Amendment No. 1 to the Atwood Oceanics, Inc. Stock Option
Agreement (1990 Stock Option Plan)
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).
10.3.1 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).
*10.3.2 Form of Atwood Oceanics, Inc. Stock Option Agreement (1996
Incentive Equity Plan)
*10.3.3 Amendment No. 1 to the Atwood Oceanics, Inc. 1996 Incentive
Equity Plan
*10.3.4 Form of Amendment No. 1 to the Atwood Oceanics, Inc. Stock Option
Agreement (1996 Incentive Equity Plan)
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 10.1.2
ATWOOD OCEANICS, INC.
STOCK OPTION AGREEMENT
1990 STOCK OPTION PLAN
This is an Agreement dated the _____ day of ____________ between ATWOOD
OCEANICS, INC., (the "Company") and ____________________________ ("Option
Holder").
Recitals:
The Company has adopted its 1990 Stock Option Plan ("Plan") for the
granting to the Company's or its subsidiaries' key employees of options to
purchase shares of the Common Stock of the Company. Pursuant to said Plan, the
Stock Option Committee of the Company's Board of Directors has approved and
ratified the execution of this Stock Option Agreement between the Company and
the Option Holder.
Agreement:
1. Subject to the effectiveness of the Plan, as provided in Section 1.9
thereof, the Company grants to the Option Holder the right and option to
purchase, on the terms and conditions hereinafter set forth, all or part of an
aggregate of __________ shares of the Common Stock, $1.00 par value, of the
Company at the option price of $9.75 per share, exercisable from time to time,
subject to the provisions of this Agreement, during a period commencing at the
end of the second year following the date of this Agreement
Page 2
(the "Anniversary Date") and expiring at the close of business ten (10) years
from the date of this Agreement (the "Expiration Date" herein).
2. This option shall automatically terminate: (i) at the expiration of
one year from the date of death of the Option Holder; (ii) at the expiration of
three months after the termination of the Options Holder's employment with the
Company for any reason other than death. It is understood and agreed that
neither the grant of this option nor the execution of this Agreement shall
create any right of the Option Holder to remain in the employ of the Company,
and that the Company retains the right to terminate such employment at will, for
due cause or otherwise.
3. This option is non-exercisable during the first two (2) years during
which the Agreement is in effect. Thereafter, this option is exercisable at the
times and for the percentage of shares herein granted as follows:
(i) Between the Second and Third Anniversary Dates:
- 25%
(ii) Between the Third and Fourth Anniversary Dates:
- 25%
(iii) Between the Fourth and Fifth Anniversary Dates:
- 25%
(iv) On of After the Fifth Anniversary Date
- 25%
Provided, however, that this option is cumulative, so that any shares
not purchased within any one of the periods above specified may be purchased
thereafter in a Page 3 subsequent period, in whole or in part, until the
expiration or termination of this option on____________.
To the extent otherwise exercisable this option may be exercised during
the lifetime of the Option Holder only by him, or in the event of the death of
the Option Holder, by his legal representative within twelve (12) months after
the death.
4. Each exercise of this option shall be by means of a written notice
of exercise delivered to the Secretary of the Company at its office in Houston,
Texas, specifying the number of shares to be purchased and accompanied by
payment in cash or by certified or cashier's check payable to the order of the
Company of the full purchase price of the shares to be purchased. Payments for
shares of stock may also be made in common stock of the Company or a combination
of cash and common stock of the Company. In the event that common stock is
utilized for payment, the stock shall be valued at the "fair market value" as
defined in Section 1.6 of the Plan.
5. The option granted hereby and all rights hereunder, to the extent
such rights shall not have been exercised, shall terminate and become null and
void if the Option Holder ceases for any reason whatsoever to be an employee of
the Company or of a subsidiary corporation (as defined in Section 425 of the
Internal Revenue Code, as the same may be amended) excepting only that the
Option Holder may at any time within a period of three (3) months after the date
he so ceases to be an employee of any such corporation, and not thereafter,
exercise the option granted hereby to the extent such option was exercisable by
him on the date of such cessation of such employment. Provided however, that in
no event may the option granted hereby by exercised to any Page 4 extent after
the expiration date specified in Paragraph 1 above. The employment of the Option
Holder shall be deemed to continue during any leave of absence which has been
authorized by the Company, provided that no exercise of this option may take
place during any such authorized leave of absence excepting only during the
first three months thereof.
6. No shares issuable upon the exercise of this option shall be issued
and delivered unless and until all applicable requirements of law and of the
Securities and Exchange Commission pertaining to the issuance and sale of such
shares, and all applicable listing requirements of any national securities
exchange on which shares of the same class are then listed, shall have been
complied with.
7. Except as otherwise provided herein, this option and the rights and
privileges granted hereby shall not be transferred (other than by will or the
laws of descent and distribution), assigned, pledged or hypothecated in any way,
whether by operation of law or otherwise. Upon any attempt so to transfer,
assign, pledge, hypothecate or otherwise dispose of this option or any right or
privilege granted hereby contrary to the provisions hereof, this option and said
rights and privileges shall immediately become null and void.
8. If the outstanding shares of the Common Stock of the Company are
increased, decreased, changed into, or exchanged for a different number or kind
of shares or securities of the Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split, an
appropriate and proportionate adjustment (to be conclusively determined by the
Board of Directors of the Company) Page 5 shall be made in the number and kind
of securities allocated to this option, without change in the total price
applicable to the unexercised portion of this option but with a corresponding
adjustment in the price for each unit of any security covered by this option. No
such adjustment shall be made, however, with respect to additional stock
authorized or issued with receipt of consideration therefor, or pursuant to any
type of convertible debenture or capital note.
9. Subject to the provisions of Section 1.20 of the Plan, if
dissolution or liquidation of the Company or any merger, consolidation or
combination in which the Company is not the surviving corporation occurs, the
Participant shall have the right immediately prior to such dissolution,
liquidation, merger, consolidation or combination to exercise, in whole or in
part his remaining Options whether or not then exercisable. Also, in the event
that a Change of Control, as defined in the Plan, occurs with the Company, any
and all Options will become automatically fully vested and immediately
exercisable.
10. Nothing herein contained shall affect the right of the Option
Holder to participate in and receive benefits under and in accordance with the
then current provisions of any pension, insurance, profit sharing or other
employee welfare plan or program of the Company or of any subsidiary of the
Company.
11. Neither the Option Holder nor any other person legally entitled to
exercise this option shall be entitled to any of the rights or privileges of a
stockholder of the Company in respect of any shares issuable upon any exercise
of this option unless and
Page 6 until a certificate or certificates representing such shares shall
have been actually issued and delivered to him. 12. The option hereby granted is
subject to, and the Company and Option Holder agree to be bound by, all of the
terms and conditions of the Company's 1990 Stock Option Plan as the same shall
be amended from time to time in accordance with the terms thereof, but no such
amendment shall adversely affect the Option Holder's rights under this Option. A
copy of the Plan in its present form is available for inspection during business
hours by the Option Holder or others persons entitled to exercise this option at
the Company's principal office. 13. This option has been granted, executed and
delivered the day and year first above written at Houston, Texas, and the
interpretation, performance and enforcement on this Agreement shall be governed
by the laws of the State of Texas.
ATWOOD OCEANICS, INC.
By _________________________
----------------------------
Option Holder
Exhibit 10.1.3
AMENDMENT NO. 1
TO THE
ATWOOD OCEANICS, INC.
1990 STOCK OPTION PLAN
Pursuant to the terms and provisions of Section 1.8 of the Atwood Oceanics,
Inc. 1990 Stock Option Plan (the "Plan"), Atwood Oceanics, Inc., a Texas
corporation (the "Company"), hereby adopts the following Amendment No. 1 to the
Plan (the "Amendment No. 1"):
1.
The fourth sentence of Section 1.12 of the Plan is hereby amended in its
entirety by substituting the following therefor:
"In addition to the foregoing procedure which may be available for the
exercise of any Stock Option or ISO Option, the option holder may deliver to the
Company a notice of exercise including an irrevocable instruction to the Company
to deliver the stock certificate representing the shares subject to an Option to
a broker authorized to trade in the common stock of the Company."
2.
The eighth and ninth sentences of Section 1.12 of the Plan are hereby
amended in their entirety by substituting the
following therefor:
"Further, the broker may also facilitate a loan to the option holder upon
receipt of the exercise notice in advance receipt for issuance of the actual
stock certificate as an alternative means of financing and facilitating the
exercise of an Option. For all purposes of effecting the exercise of an Option,
the date on which the option holder gives the notice of exercise to the Company
will be the date he becomes bound contractually to take and pay for the shares
of Stock underlying the Option."
3.
Section 1.16 of the Plan is hereby amended in its entirety by substituting
the following therefor:
"1.16 Non-Transferability of Options. Except as otherwise provided in
Section 2.1(b) with respect to Stock Options, any Option granted shall not be
transferable otherwise than by will or the laws of descent and distribution, and
the Option may be exercised, during the lifetime of the Participant, only by
him. More particularly, (but without limiting the generality of the foregoing),
except as provided in Section 2.1(b) with respect to Stock Options and in the
preceding sentence, the Option may not be assigned, transferred, pledged, or
hypothecated in any way, shall not be assignable by operation of law and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to the provisions hereof shall be null and void and without effect. 4.
Section 1.17 of the Plan is hereby amended in its entirety by substituting
the following therefor:
"1.17 Additional Documents on Death of Participant or on Transfer. No
transfer of an Option by will or the laws of descent and distribution or
otherwise pursuant to Section 2.1(b) shall be effective to bind the Company
unless the Company shall have been furnished with written notice and such other
evidence as the Committee may deem necessary to establish the validity of the
transfer and the acceptance of the successor to the Option of the terms and
conditions of such Option."
5.
Section 1.19 of the Plan is hereby amended in its entirety by substituting
the following therefor:
"1.19 Shareholder Rights. No option holder shall have a right as a
shareholder with respect to any shares of Stock subject to an Option prior to
the purchase of such shares of Stock by exercise of the Option."
6.
The first sentence of Section 1.20 of the Plan is hereby amended in its
entirety by substituting the following therefor:
"If dissolution or liquidation of the Company or any merger, consolidation
or combination in which the Company is not the surviving corporation occurs, the
option holder shall have the right immediately prior to such dissolution,
liquidation, merger, consolidation or combination, as the case may be, in whole
or in part, his then remaining Options whether or not then exercisable."
7.
Section 1.21 of the Plan is hereby amended in its entirety by substituting
the following therefore:
"1.21 Payment of Withholding Taxes. Upon the exercise of any Stock Option
as provided herein, no such exercise shall be permitted, nor shall any stock be
issued, until the Company receives full payment for the Stock purchased, which
shall include any required federal withholding taxes. Further, upon the exercise
of any Stock Option, the number of shares of Stock (based on fair market value)
that would be necessary to satisfy the requirements for withholding any amounts
of taxes due upon exercise may be retained from the total shares of Stock to be
issued upon exercise.
8.
Section 2.1 of the Plan is hereby amended in its entirety by substituting
the following therefor:
"Section 2.1 Terms of Stock Options. Stock Options shall be granted by the
Committee on the following terms and conditions:
(a) General. Except as specifically provided in Section 2.3 hereof, with
regard to the death of a Participant, no Stock Option shall be exercisable
within six (6) months from nor more then ten (10) years after the date of the
grant. Subject to such limitation, the Committee shall have the discretion to
fix the period (the "Option Period") during which any Stock Option may be
exercised. Stock Options granted to a Participant shall be exercisable only
during the Participant's active employment with the Company, its parent or a
subsidiary, except that (i) any such Stock Option which is otherwise exercisable
as of the date of death of Participant may be exercised within twelve (12)
months after the death of such Participant, and (ii) any Stock Option granted to
a Participant which is otherwise exercisable as of the date of termination of
such Participant's employment with the Company, its parent or a subsidiary, may
be exercised at any time within three (3) months of such date of termination. If
a Participant should die during the applicable three-month period following the
date of such Participant's termination, the period of exercisability of any
Stock Options granted to such deceased Participant shall be governed in
accordance with clause (i) of the immediately preceding sentence.
(b) Limited Transferability of Stock Options. The Committee may, in its
discretion, authorize all or a portion of any Stock Options to be granted on
terms which permit transfer by the Participant to (i) the spouse, children or
grandchildren of the Participant, (ii) a trust or trusts for the exclusive
benefit of the spouse, children or grandchildren of the Participant, or (iii) a
partnership in which the spouse, children or grandchildren of the Participant
are the only partners; provided in each case that (x) the stock option agreement
pursuant to which such Stock Options are granted must be approved by the
Committee, and must expressly provide for transferability in a manner consistent
with this section, and (y) subsequent transfers of transferred options shall be
prohibited except those made in accordance with this section or by will or by
the laws of descent and distribution. Following transfer, any such Stock Options
shall continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer. The provisions with respect to termination of
employment set forth above in subsection (a) of this Section 2.1 and in Section
2.3 below shall continue to apply with respect to the original Participant, in
which event the Stock Options shall be exercisable by the transferee only to the
extent and for the periods specified herein. The original participant will
remain subject to withholding taxes upon exercise of any such Stock Option by
the transferee. The Company shall have no obligation whatsoever to provide
notice to any transferee of any matter, including without limitation, early
termination of a Stock Option on account of termination of employment or the
original Participant."
9.
Section 2.3 of the Plan is hereby amended in its entirety by substituting
the following therefor:
"2.3 Acceleration of Otherwise Unexercisable Stock Options on Termination
of Employment or Death. If a Participant should die or should terminate
employment with the Company, its parent or a subsidiary, the Committee, in its
sole discretion, may permit all or any part of the shares subject to a Stock
Option previously granted to such Participant to be exercised within three (3)
months of the date of termination of employment of the Participant, or twelve
(12) months of the date of death of the Participant, as applicable,
notwithstanding that all installments, if any, with respect to such Stock
Option, had not accrued on such date. Provided, such discretionary authority of
the Committee may not be exercised with respect to any Stock Option (or portion
thereof) if the applicable six-month waiting period for exercise had not
expired, except in the event of the death of the Participant, when such Stock
Option may, with the consent of the Committee, be exercised notwithstanding the
fact that the applicable six-month waiting period had not yet expired."
10.
Section 2.5 of the Plan is hereby amended in its entirety by substituting
the following therefor:
"2.5 Notice to Exercise Stock Options. Upon exercise of a Stock Option, an
option holder shall give written notice to the Secretary of the Company, or
other officer designated by the Committee, at the Company's main office in
Houston, Texas."
11.
Each amendment made by this Amendment No. 1 to the Plan has been effected
in conformity with the provisions of the Plan.
12.
This Amendment No. 1 was adopted by the Board of Directors of the Company
on September 2, 1999. Approval of this Amendment No. 1 by the shareholders of
the Company is not required pursuant to the terms and provisions of the Plan or
by applicable law.
Dated: September 2,1999.
ATWOOD OCEANICS, INC.
/s/ James M. Holland
James M. Holland
Senior Vice President
Exhibit 10.1.4
AMENDMENT NO. 1 TO THE
ATWOOD OCEANICS, INC.
STOCK OPTION AGREEMENT
(1990 Stock Option Plan)
THIS AMENDMENT NO. 1 TO ATWOOD OCEANICS, INC. STOCK OPTION AGREEMENT (the
"Amendment") is dated as of ______________________, 1999, by and between ATWOOD
OCEANICS, INC., a Texas corporation (the "Company"), and
________________________________________ ("Participant").
W I T N E S E T H:
WHEREAS, the Company has adopted the 1990 Stock Option Plan (the "Plan")
for the granting of options to purchase shares of the Common Stock of the
Company to key employees of the Company or its subsidiaries, subject to the
terms and conditions as more particularly set forth therein; and WHEREAS,
capitalized terms used but not defined herein shall have the meanings given to
them in the Plan; and WHEREAS, pursuant to Section 1.8 of the Plan, the Board of
Directors of the Company has amended the Plan to allow the Compensation
Committee of the Board of Directors the (the "Committee") to authorized the
transferability, under certain conditions, of the Stock Options granted under
the Plan, pursuant to that certain Amendment No. 1 to the Atwood Oceanics, Inc.
1990 Stock Option Plan dated _________________________, 1999 (the "Plan
Amendment"); and Page 2 WHEREAS, in furtherance of the Plan Amendment, the
Committee has authorized the transferability of the Stock Options granted under
the Plan to the Participant, under the conditions set forth in the Plan
Amendment; and WHEREAS, in accordance with such authorization, the Company and
the Participant desire to amend that certain Atwood Oceanics, Inc. Stock Option
Agreement dated _____________________ between the Company and Participant (the
"Agreement"), and the Committee has approved this Amendment, in order to reflect
the authorized transferability of the Stock Options granted under the Plan to
the Participant and the conditions therefor, as more particularly set forth
herein. NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained and for other and valuable consideration, the receipt and
sufficiency of which are hereby acknowledge, the parties hereto agree as
follows: Section 1. The first sentence of Section 2 of the Agreement shall be
deleted in its entirety. Section 2. The last paragraph of Section 3 of the
Agreement shall be deleted in its entirety. Section 3. Section 5 of the
Agreement is hereby amended in its entirety by substituting the following
therefor: "5. This Option granted hereby and all rights hereunder, to the extent
such rights shall not have been exercised, shall terminate and become null and
void on, and this option shall be exercisable (only to the extent such option
was exercisable upon the date of death of the Participant or the date of
termination of the Participant's employment with the Company, as applicable)
only until (i) the expiration of one year from the date of death of the
Participant or the expiration of the stated term of such option, whichever
occurs first; or (ii) the expiration of three months after the termination of
the Participant's employment with the Company for any
Page 3
reason other than death or the expiration of the sated term of such
option, which ever occurs first; provided, however, that if the
Participant dies within the three month period the three month period
(or such shorter period ending upon expiration of the sated term of the
option) following termination of the Participant's employment with the
Company, termination of the option shall occur pursuant to clause (i)
above. In no event may the option granted hereby be exercised to any
extent after the Expiration Date specified in Section 1 above. The
employment of the Participant shall be deemed to continue during any
leave of absence which has been authorized by the Company, provided
that no exercise of this option may take place during any such
authorized leave of absence excepting only during the first three
months thereof." Section 4. Section 7 of the Agreement is hereby
amended in its entirety by substituting the following
therefor:
"7. The option and the right and privilege granted
hereby may be transferred by the Participant to (i) the spouse,
children or grandchildren of the Participant, (ii) a trust or trusts
for the exclusive benefit of the spouse, children or grandchildren of
the Participant or (iii) a partnership in which the spouse, children or
grandchildren of the Participant are the only partners; provided in
each case that subsequent transfers of transferred options shall be
prohibited except those made in accordance with this section or by will
or by the laws of descent and distribution. Following transfer, any
such options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer. The
provisions with respect to termination of employment set forth in
Section 5 of this Agreement shall continue to apply with respect to the
Participant, in which event the options shall be exercisable
Page 4
by the transferee only to the extent and for the periods specified
herein. The Participant will remain subject to withholding taxes upon
exercise of any such options by transferee. The Company shall have no
obligation whatsoever to provide notice to any transferee of any
matter, including without limitation, early termination of an option on
account of termination of employment of the Participant.
Except as set forth above, no option shall be transferable
otherwise than by will or by the laws descent and distribution, and all
options shall be exercisable, during the Participant's lifetime only by
the Participant. Section 5. Section 9 shall be amended in its entirety
by substituting the following therefor:
"9. Subject to the provisions of Section 1.20 of the
Plan, if dissolution or liquidation or combination in which the Company
is not the surviving corporation occurs, the option holder shall have
the right immediately prior to such dissolution, liquidation, merger
consolidation or combination to exercise, in whole or in part, his
remaining options whether or not then exercisable. Also, in the event
that a Change of Control, as defined in the Plan, occurs with the
Company, any and all options will become automatically fully vested and
immediately exercisable." Section 6. Due to the fact that the options
granted under the Plan are now transferable, all references in the
Agreement to "Option Holder" shall be changed to refer to the "Participant."
Section 7. Except as expressly amended hereby all of the covenants and
agreements of the parties which are set forth in the Agreement are incorporated
herein with the same force and effect as if set forth at length in this
Amendment.
Page 5
Section 8. This Amendment is executed and shall constitute an
instrument supplemental to and in amendment of the Agreement, and shall be
construed with and as part of the Agreement.
Section 9. Except as modified and expressly amended by this Amendment
and any other supplement or amendment, the Agreement is in all respects ratified
and confirmed, and all of the terms, provisions and conditions thereof shall be
and remain in full force and effect.
Section 10. Any capitalized term used but not defined herein shall have
the meaning attributable to such term in the Agreement.
Section 11. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original for all purposes, and
all of which together shall constitute one and the same instrument.
EXECUTED as of the date first set forth above.
ATWOOD OCEANICS, INC.
By:___________________________________
James M. Holland
Senior Vice President
PARTICIPANT:
-------------------------------------
Signature
-------------------------------------
Print Name
6
Exhibit 10.3.2.
ATWOOD OCEANICS, INC.
STOCK OPTION AGREEMENT
1996 INCENTIVE EQUITY PLAN
This is an Agreement dated the _____ day of ______________, between
ATWOOD OCEANICS, INC., (the "Company") and
_________________________________("Employee").
Recitals:
The Company has adopted its 1996 Incentive Equity Plan ("Plan") for the
granting to key employees of the Company or its subsidiaries of options to
purchase shares of the Common Stock of the Company. Pursuant to said Plan, the
Compensation Committee of the Company's Board of Directors has approved and
ratified the execution of this Stock Option Agreement between the Company and
the Employee.
Agreement:
1. The Company grants to the Employee the right and option to purchase,
on the terms and conditions hereinafter set forth, all or any part of an
aggregate of __________ shares of the Common Stock, $1.00 par value, of the
Company at the option price of $___________ per share, exercisable from time to
time, subject to the provisions of this Agreement, during a period commencing at
the end of the second year following the date of this Agreement (the
"Anniversary Date") and expiring at the close of business ten (10) years (5
March 2008) from the date of this Agreement (the "Expiration Date" herein).
2. This option granted hereby and all rights hereunder, to the extent
such rights shall not have been exercised, shall terminate and become null and
void: (i) at the expiration of one year from the date of death of the Employee
or until the expiration of the stated term of such Stock Option, which ever
period is shorter; (ii) at the expiration of one year from termination of
employment of the Employee by reason of Disability or Retirement or until the
expiration of the stated term of such Stock Option, which ever period is
shorter; provided, however, that if the Employee dies within said period,
termination of the option shall be determined pursuant to clause (i) above;
(iii) at the expiration of three months after the termination of the Employee's
employment with the Company for any reason other than Death, Disability or
Retirement or until the expiration of the stated term of such Stock Option,
which ever period is shorter. It is understood and agreed that neither the grant
of this Option nor the execution of this Agreement shall create any right of the
Employee to remain in the employ of the Company, and that the Company retains
the right to terminate such employment at will, for due cause or otherwise.
3. This option is non-exercisable during the first two (2) years during
which the Agreement is in effect. Thereafter, this option is exercisable at the
times and for the percentage of shares herein granted as follows:
(i) On or After the Second Anniversary Date:
- 25%
(ii) On or After the Third Anniversary Date:
- 25%
(iii) On or After the Fourth Anniversary Date:
- 25%
(iv) On or After the Fifth Anniversary Date:
- 25%
Provided, however, that this option is cumulative, so that any
shares not purchased within any one of the periods above specified may be
purchased thereafter in a subsequent period, in whole or in part, until the
expiration or termination of this option on _______________________.
4. Each exercise of this option shall be by means of a written notice
of exercise delivered to the Secretary of the Company at its office in Houston,
Texas, specifying the number of shares to be purchased and accompanied by
payment by certified or bank check payable to the order of the Company of the
full purchase price of the shares to be purchased. Payment may also be made by
delivery to the Company of an executed irrevocable option exercise form together
with irrevocable instructions to a broker dealer to sell a sufficient portion of
the shares and deliver the sale proceeds to the Company in satisfaction of the
exercise price. Payments for shares of stock may also be made in common stock of
the Company or a combination of cash and common stock of the Company, as
specified in Section 6(d) of the Plan.
5. In no event may the option granted hereby be exercised to any extent
after the Expiration Date specified in Paragraph 1 above. The employment of the
Employee shall be deemed to continue during any leave of absence, which has been
authorized by the Company, provided that no exercise of this option may take
place during any such authorized leave of absence except during the first three
months thereof.
6. No shares issuable upon the exercise of this option shall be issued
and delivered unless and until all applicable requirements of law and of the
Securities and Exchange Commission pertaining to the issuance and sale of such
shares, and all applicable listing requirements of any national securities
exchange on which shares of the same class are then listed, shall have been
complied with.
7. The option and the right and privilege granted hereby may be
transferred by the Employee to, (i) the spouse, children or grandchildren of the
Employee, (ii) a trust or trusts for the exclusive benefit of the spouse,
children or grandchildren of the Employee, or (iii) a partnership in which
spouse, children or grandchildren of the Employee are the only partners;
provided in each case that there may be no consideration for any such transfer
and subsequent transfers of transferred options shall be prohibited except those
made in accordance with this section or by will or by the laws of descent and
distribution. Following transfer, any such Stock Options shall continue to be
subject to the same terms and conditions as were applicable immediately prior to
transfer. The provisions with respect to termination of employment set forth in
Section 2 of this Agreement shall continue to apply with respect to the original
Employee, in which event the Stock Option shall be exercisable by the transferee
only to the extent and for the periods specified herein. The original Employee
will remain subject to withholding taxes upon exercise of any such Stock Option
by the transferee. The Company shall have no obligation whatsoever to provide
notice to any transferee of any matter, including without limitation, early
termination of a Stock Option on account of termination of employment of the
original Employee.
Except as set forth above, no Stock Option shall be
transferable by the Employee otherwise than by will or by laws of descent and
distribution, and all Stock Options shall be exercisable, during the Employee's
lifetime only by the Employee. At the request of an Employee, Stock purchased
upon exercise of an Option may be issued or transferred into the name of the
Employee and another person jointly with rights of survivorship.
8. If the outstanding shares of the Common Stock of the Company are
increased, decreased, changed into, or exchanged for a different number or kind
of shares or securities of the Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split, an
appropriate and proportionate adjustment (to be conclusively determined by the
Board of Directors of the Company) shall be made in the number and kind of
securities allocated to this option, without change in the total price
applicable to the unexercised portion of this option but with a corresponding
adjustment in the price for each unit of any security covered by this option. No
such adjustment shall be made, however, with respect to additional stock
authorized or issued with receipt of consideration therefor, or pursuant to any
type of convertible debenture or capital note.
9. Subject to the provisions of Section 8 of the Plan, in the event of
a Change of Control, as defined in the Plan, all Options granted hereby will
become automatically fully vested and immediately exercisable.
10. Nothing herein contained shall affect the right of the Employee to
participate in and receive benefits under and in accordance with the then
current provisions of any pension, insurance, profit sharing or other employee
welfare plan or program of the Company or of any subsidiary of the Company.
11. Neither the Employee nor any other person legally entitled to
exercise this option shall be entitled to any of the rights or privileges of a
stockholder of the Company in respect of any shares issuable upon any exercise
of this option unless and until a certificate or certificates representing such
shares shall have been actually issued and delivered to him.
12. The option hereby granted is subject to, and the Company and
Employee agree to be bound by, all of the terms and conditions of the Company's
1996 Incentive Equity Plan as the same shall be amended from time to time in
accordance with the terms thereof, but no such amendment shall adversely affect
the Employee's rights under this Option. A copy of the Plan in its present form
is available for inspection during business hours by the Employee or other
persons entitled to exercise this option at the Company's principal office.
13. Upon an exercise of the options hereby granted, the Company may be
required to withhold federal or local tax with respect to the realization of
compensation. The Company is hereby authorized to satisfy any such withholding
requirement out of (i) any cash distributable upon exercise and (ii) any other
cash compensation then or thereafter payable to the Employee. To the extent that
the Company in its sole discretion determines that such sources are or may be
insufficient to fully satisfy such withholding requirement, Employee, as a
condition to the exercise of the options hereby granted, shall deliver to the
Company cash in an amount determined by the Company to be sufficient to satisfy
any such withholding requirement.
14. This Option has been granted, executed and delivered the day and
year first above written at Houston, Texas, and the interpretation, performance
and enforcement on this Agreement shall be governed by the laws of the State of
Texas.
ATWOOD OCEANICS, INC.
By
Employee
C
Exhibit 10.3.3
AMENDMENT NO. 1
TO THE
ATWOOD OCEANICS, INC.
1996 INCENTIVE EQUITY PLAN
Pursuant to the terms and provisions of Section 9 of the Atwood Oceanics,
Inc. 1996 Incentive Equity Plan (the "Plan"), Atwood Oceanics, Inc., a Texas
corporation (the "Company"), hereby adopts the following Amendment No. 1 to the
Plan (the "Amendment No. 1").
1.
Subsections (e), (f), (g) and (h) of Section 6 of the Plan are hereby
amended in their entirety by substituting the following therefor:
"(e) Transferability of Options. The Committee may, in its
discretion, authorize all or a portion of any Non-Qualified Stock
Options to be granted on terms which permit transfer by the participant
to (i) the spouse, children or grandchildren of the participant, (ii) a
trust or trusts for the exclusive benefit of the spouse, children or
grandchildren of the participant, or (iii) a partnership in which the
spouse, children or grandchildren of the participant are the only
partners; provided in each case that (x) the stock option agreement
pursuant to which such Stock Options are granted must be approved by
the Committee, and must expressly provide for transferability in a
manner consistent with this section, and (y) subsequent transfers of
transferred options shall be prohibited except those made in accordance
with this section or by will or by the laws of descent and
distribution. Following transfer, any such Stock Options shall continue
to be subject to the same terms and conditions as were applicable
immediately prior to transfer. The provisions with respect to
termination of employment set forth in subsections (f), (g) and (h) of
this Section 6 shall continue to apply with respect to the participant,
in which event the Stock Options shall be exercisable by the transferee
only to the extent and for the periods specified herein. The
participant will remain subject to withholding taxes upon exercise of
any such Stock Option by the transferee. The Company shall have no
obligation whatsoever to provide notice to any transferee of any
matter, including without limitation, early termination of a Stock
Option on account of termination of employment of the participant.
"Except as set forth above and in the applicable stock option
agreement, no Stock Option shall be transferable otherwise than by will
or by laws of descent and distribution, and all Stock Options shall be
exercisable, during the participant's lifetime, only by the
participant. At the request of a participant, Stock purchased upon
exercise of a Stock Option may be issued or transferred into the name
of the participant and another person jointly with rights of
survivorship.
<PAGE>
-3-
"(f) Termination by Death. Subject to Section 6(i), if a
participant's employment by the Company or any Subsidiary or Affiliate
terminates by reason of death, any Stock Option theretofore granted to
such participant may thereafter be exercised, to the extent it was
exercisable at the time of death or on such accelerated basis as the
Committee may determine at or after grant, for a period of one year (or
such other period up to three years as the Committee may specify) from
the date of death or until the expiration of the stated term of such
Stock Option, whichever period is shorter.
"(g) Termination by Reason of Disability or Retirement.
Subject to Section 6(i), if a participant's employment by the Company
or any Subsidiary or Affiliate terminates by reason of Disability or
Retirement, any Stock Option theretofore granted to such participant
may thereafter be exercised, to the extent it was exercisable at the
time of such termination or on such accelerated basis as the Committee
may determine at or after grant, for a period of three years (or such
shorter period as the Committee may specify at grant) from the date of
such termination of employment or until the expiration of the stated
term of such Stock Option, whichever period is shorter; provided,
however, that, if the participant dies within such three-year period
(or such shorter period), any unexercised Stock Option theretofore
granted to such participant shall thereafter be exercisable, to the
extent to which it was exercisable at the time of death, for a period
of one year from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter. In
the event of termination of employment by reason of Disability or
Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section
422 of the Code, such Stock Option shall thereafter be treated as a
Non-Qualified Stock Option.
"(h) Other Termination of Employment. Unless otherwise
determined by the Committee at or after grant, if a participant's
employment by the Company or any Subsidiary or Affiliate terminates for
any reason other than death, Disability or Retirement, any Stock Option
theretofore granted to such participant may thereafter be exercised, to
the extent it was exercisable at the time of such termination, for a
period of three months from the date of such termination of employment
or until the expiration of the stated term of such Stock Option,
whichever period is shorter; provided, however, that, if the
termination was for Cause, any and all Stock Options theretofore
granted to such participant shall be immediately canceled."
2.
Each amendment made by this Amendment No. 1 to the Plan has been effected
in conformity with the provisions of
the Plan.
<PAGE>
3. This Amendment No. 1 was adopted by the Board of Directors of the
Company on September 2, 1999. Approval of this Amendment No. 1 by the
shareholders of the Company is not required pursuant to the terms and provisions
of the Plan or by applicable law.
Dated: September 2, 1999.
ATWOOD OCEANICS, INC.
/s/ James M. Holland
James M. Holland
Senior Vice President
Exhibit 10.3.4
AMENDMENT NO. 1 TO THE
ATWOOD OCEANICS, INC.
STOCK OPTION AGREEMENT
(1996 Incentive Equity Plan)
THIS AMENDMENT NO. 1 TO ATWOOD OCEANICS, INC. STOCK OPTION AGREEMENT (the
"Amendment") is dated as of ________________, 1999, by and between ATWOOD
OCEANICS, INC., a Texas corporation (the "Company"), and
________________________________________ ("Participant").
W I T N E S E T H :
WHEREAS, the Company has adopted the 1996 Incentive Equity Plan (the
"Plan") for the granting of options to purchase shares of the Common Stock of
the Company to key employees of the Company or its subsidiaries, subject to the
terms and conditions as more particularly set forth therein; and
WHEREAS, capitalized terms used but not defined herein shall have the
meanings given to them in the Plan; and
WHEREAS, in accordance with Section 9 of the Plan, the Board of
Directors of the Company has amended the Plan to allow the transferability,
under certain conditions, with or without consideration, of certain Stock
Options granted under the Plan, as determined by the Compensation Committee of
the Board of Directors (the "Committee"), pursuant to that certain Amendment No.
1 to the Atwood Oceanics, Inc. 1996 Incentive Equity Plan dated September 9,
1999 (the "Plan Amendment"); and
WHEREAS, in furtherance of the Plan Amendment, the Committee has
authorized the transferability, with or without consideration, of the Stock
Options granted under the Plan to the Participant, under the conditions set
forth in the Plan Amendment; and
WHEREAS, in accordance with such authorization, the Company and the
Participant desire to amend that certain Atwood Oceanics, Inc. Stock Option
Agreement dated _______________ between the Company and Participant (the
"Agreement"), and the Committee has approved this Amendment, in order to reflect
the authorized transferability of the Stock Options granted under the Plan to
the Participant and the conditions therefor, as more particularly set forth
herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. The first sentence of Section 7 of the Agreement is hereby
amended in its entirety by substituting the following therefor:
<PAGE>
- 2 -
CCAMPBELL\006349\200576_1
"7. The option and the right and privilege granted hereby may
be transferred by the option holder to (i) the spouse, children or
grandchildren of the Employee, (ii) a trust or trusts for the exclusive
benefit of the spouse, children or grandchildren of the Employee, or
(iii) a partnership in which the spouse, children or grandchildren of
the Employee are the only partners; provided in each case that
subsequent transfers of transferred options shall be prohibited except
those made in accordance with this section or by will or by the laws of
descent and distribution."
Section 7. Except as expressly amended hereby all of the covenants and
agreements of the parties which are set forth in the Agreement are incorporated
herein with the same force and effect as if set forth at length in this
Amendment.
Section 8. This Amendment is executed and shall constitute an
instrument supplemental to and in amendment of the Agreement, and shall be
construed with and as part of the Agreement.
Section 9. Except as modified and expressly amended by this Amendment
and any other supplement or amendment, the Agreement is in all respects ratified
and confirmed, and all of the terms, provisions and conditions thereof shall be
and remain in full force and effect.
Section 10. Any capitalized term used but not defined herein shall have
the meaning attributable to such term in the Agreement.
Section 11. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original for all purposes, and
all of which together shall constitute one and the same instrument.
EXECUTED as of the date first set forth above.
ATWOOD OCEANICS, INC.
By:
James M. Holland
Senior Vice President
PARTICIPANT:
-----------------------------------------
Printed Name:_____________________________
EXHIBIT 13.1
1999 ANNUAL REPORT TO SHAREHOLDERS
THE COMPANY
Atwood Oceanics, Inc. is engaged in the business of international offshore
drilling of exploratory and developmental oil and gas wells and related support,
management and consulting services. Presently, the Company 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 platform rig
located in Australia. The Company supports its operations from headquarters in
Houston and affiliated offices in Australia, Malaysia, Indonesia, Philippines,
United Kingdom, Egypt, India and Israel.
TO OUR SHAREHOLDERS AND EMPLOYEES:
Operating results for fiscal 1999 represent the Company's second best
financial performance in its thirty-year history, despite 1999 not being a good
year, in general, for the offshore drilling market. The Company remained
financially strong and continued to enhance shareholders' equity during fiscal
year 1999 with revenues of $150.0 million, operating cash flows (before changes
in working capital and other assets and liabilities) of $55.7 million and net
income of $27.7 million.
Even though market conditions resulted in the Company having certain
periods of idle time during fiscal 1999 on the ATWOOD SOUTHERN CROSS, RICHMOND,
RIG-19 and RIG-200, term contracts in place for the ATWOOD HUNTER, ATWOOD
FALCON, VICKSBURG and SEAHAWK, as well as contributions from the ATWOOD EAGLE,
assisted in maintaining the Company's strong financial performance. With the
cyclical nature of the drilling business, the recent downturn reinforces our
belief that the strategy of maintaining a mix of long-term contracts at good
margins, coupled with short-term contracts, provides downside protection during
market declines with upside potential for enhanced earnings in an improving
market environment. With this strategy, the Company has been well-positioned to
capitalize on future market improvements and will continue to explore all
possible growth opportunities and current fleet enhancements.
Upgrade of the semisubmersible tender-assist unit SEAHAWK for a four-year
contract extension is progressing satisfactorily. A new derrick equipment set
for the SEAHAWK is being loaded on the tender-assist unit for mobilization to
the unit's first drill location. It is anticipated that commencement of dayrate
operations under the contract extension should occur during our second fiscal
2000 quarter. Dayrates in the contract extension have upside potential based on
higher average oil prices.
The ATWOOD FALCON and ATWOOD HUNTER have term commitments that should keep
both units employed into fiscal years 2001 and 2002, respectively. The jack-up
VICKSBURG has a conditional letter of intent which could also keep that unit
employed through fiscal year 2000. The SEAHAWK should remain employed into
fiscal year 2004. The submersible RICHMOND has been back at work since
September 1999 utilizing its unique operating characteristics, and is
benefiting from increasing dayrates and an improving outlook for shallow-water
units in the Gulf of Mexico. The ATWOOD EAGLE achieved virtually 100%
utilization during fiscal year 1999, though at significantly reduced dayrates in
the fourth quarter following market deterioration, and should remain employed
until late in the first quarter of fiscal year 2000. The ATWOOD EAGLE is then
scheduled to undergo an upgrade in its variable deck load and water depth
capability utilizing a wire insert system, which could take up to ninety days to
complete. The ATWOOD SOUTHERN CROSS is being bid for opportunities commencing
next year and has the potential for providing the Company with additional upside
in an improving market environment.
The successful completion during 1997 and 1998 of four major rig upgrades
ATWOOD FALCON, ATWOOD HUNTER, VICKSBURG and ATWOOD SOUTHERN CROSS have already
proven beneficial to the Company's financial results. We believe these upgrades
will also be beneficial in terms of future opportunities and financial upside in
a strengthening market.
We remain committed to a strategy of international operations,
highly-skilled personnel, premium equipment and financial strength. The recent
improvement in oil and gas prices is encouraging and, if sustained, should
ultimately lead to an increase in operators' drilling budgets. Accordingly, we
are optimistic about the longer-term outlook and gradually improving
fundamentals. Our goal of achieving safe operations receives our day-to-day
attention. As always, we want to thank our employees for their efforts and
contributions, and our shareholders for their continuing support.
John R. Irwin
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(In thousands) 1999 1998
- -------------------------------------------------------------------------------
FOR THE YEAR
REVENUES FROM CONTRACT DRILLING AND MANAGEMENT $150,009 $151,809
NET INCOME 27,720 39,364
CAPITAL EXPENDITURES 38,760 79,607
- -------------------------------------------------------------------------------
AT YEAR END
CASH AND SECURITIES HELD FOR INVESTMENT $ 43,041 $ 34,529
NET PROPERTY AND EQUIPMENT 218,914 205,632
TOTAL ASSETS 293,604 281,737
TOTAL SHAREHOLDERS' EQUITY 192,229 163,766
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 and ratios) 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS DATA:
Contract revenues $150,009 $151,809 $89,082 $79,455 $72,231
Drilling costs and general
and administrative expenses (77,874) (72,616)(54,890)(56,653) (55,311)
-------- ------- ------ ------ -------
OPERATING MARGIN 72,135 79,193 34,192 22,802 16,920
Depreciation (23,904) (17,596) (9,979) (9,742) (11,134)
-------- ------- ------ ------ -------
OPERATING INCOME 48,231 61,597 24,213 13,060 5,786
Other income (expense) (1,724) (1,278) 1,165 2,783 3,146
Tax provision (18,787) (20,955) (9,759) (4,475) (1,872)
------- ------ ------ ------ ------
NET INCOME $ 27,720 $39,364 $15,619 $11,368 $ 7,060
======= ======= ======= ======= =======
PER SHARE DATA:
Earnings per common share: (1)
Basic $ 2.03 $ 2.90 $ 1.16 $ .85 $ .54
Diluted 2.01 2.84 1.14 .84 .53
Average common shares outstanding: (1)
Basic 13,649 13,592 13,474 13,328 13,182
Diluted 13,791 13,884 13,715 13,544 13,230
FLEET DATA:
Number of rigs owned or managed,
at end of period 11 11 11 11 10
Utilization rate for in-service rigs
(excludes contractual downtime for
rig upgrades in 1999, 1998 and
1997) 77% 100% 100% 100% 99%
BALANCE SHEETS DATA:
Cash and securities held for
investment $ 43,041 $34,529 $42,234 $40,492 $37,922
Working capital 31,519 24,864 27,549 26,151 13,761
Net property and equipment 218,914 205,632 143,923 91,124 91,427
Total assets 293,604 281,737 215,330 159,309 152,853
Total long-term debt 54,000 72,000 59,500 34,473 39,319
Shareholders' equity 192,229 163,766 122,689 105,554 94,892
Ratio of current assets to
current liabilities 2.66 1.93 2.41 2.45 1.67
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.)
<TABLE>
OFFSHORE DRILLING OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------
PERCENTAGE
OF 1999 MAXIMUM
CONTRACT YEAR WATER CONTRACT STATUS AT
NAME OF RIG TYPE OF RIG REVENUES BUILT DEPTH LOCATION CUSTOMER NOVEMBER 30, 1999
DRILLING RIGS WHOLLY OR PARTIALLY OWNED
<S> <C> <C> <C> <C> <C>
ATWOOD FALCON Third-generation 23% 1983 3,500 FT. Malaysia Sabah Shell Rig is under long-term contract which
semisubmersible (Enhanced Petroleum terminates in November 2001.
and water Company Upon completion of current well in
depth Limited through Malaysia, the rig will be relocated
upgrade in assignment from to Philippines to commence drilling
1998) Shell Philippines program for Shell Philippines.
Exploration B.V.
ATWOOD HUNTER Third-generation 21% 1981 3,500 FT. United British-Borneo Rig is under long-term contract which
semisubmersible (Enhanced States Petroleum terminates in November 2000.
and water Gulf of Inc.
depth Mexico
upgrade in
1997)
ATWOOD EAGLE Third-generation 25% 1982 2,500 FT. Israel Isramco Upon completion of current well, the
semisubmersible rig will enter a shipyard for
a water-depth upgrade which could
take up to 90 days to complete.
Upon completion of the upgrade, the
rig will return to Israel to
drill a short-term program for
Samedan, Mediterranean Sea, Inc.
Discussion ongoing for additional
contract work.
VICKSBURG Jack-up 7% 1976 300 FT. India Enron Oil & Gas Rig is under term contract which
(Enhanced India Ltd. expires December 2000.
and upgraded
in 1998)
SEAHAWK Second-generation 6% 1974/1992 450 FT. Malaysia Esso Rig is currently undergoing an
semisubmersible (Enhanced Production upgrade for four-year contract
Tender assist and upgraded Malaysia Inc. extension. Upgrade should be
in 1999) completed in early 2000,
with contract to extend to 2004.
RICHMOND Submersible 3% 1982 75 FT. United Triton USA, Inc. Rig has current commitments through
States and first half of fiscal year 2000.
Gulf of Cockrell Oil
Mexico Corporation
ATWOOD Second-generation 0% 1976 2,000 FT. Australia Rig is available for contract since
SOUTHERN CROSS semisubmersible (Refurbished it became idle at the end of
and upgraded September 1998.
in 1997)
RIG-19 Modular platform 5% 1988 N/A Australia Rig is available for contract since
it became idle in September 1999.
RIG-200 Modular platform 4% 1995 N/A Australia Rig is available for contract since
it became idle in June 1999.
MANAGEMENT/LABOR CONTRACTS
GOODWYN 'A' and Modular platforms 6% N/A N/A Australia Woodside Rigs are under term contract for
NORTH RANKIN 'A' Energy management of drilling operations
into the year 2001.
Current plans project drilling
operations to alternate between the
two rigs.
</TABLE>
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, 1999 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
At the beginning of fiscal 1999, the price for oil was around $12 per
barrel, with worldwide fleet utilization for mobile offshore rigs on a decline.
Even though the oil price has recovered to over $20 per barrel, worldwide fleet
utilization for mobile offshore rigs has remained around 75 percent for most of
1999. Due to this weakness in the worldwide offshore drilling market, the
Company has been unable to identify an ongoing contract for the ATWOOD SOUTHERN
CROSS since it completed its last contract at the end of September 1998, and has
incurred certain periods of idle time during fiscal year 1999 on the RICHMOND,
RIG-19 and RIG-200.
Despite a down trend in the offshore drilling market and certain idle rig
time, term contracts in place for the ATWOOD HUNTER, ATWOOD FALCON, VICKSBURG
and SEAHAWK, as well as a good year for the ATWOOD EAGLE, resulted in the
Company generating in 1999 the second highest level of revenue, operating cash
flows and net income in its history. There are some encouraging indications that
the offshore drilling market environment could improve in 2000. Historically,
worldwide fleet utilization of mobile offshore rigs needs to approach 90 percent
before significant improvement in dayrate levels will occur. Even without market
improvement, the Company's contract backlog should provide a high level of
revenues and cash flows in fiscal 2000. The Company remains confident in the
long-term future of the worldwide offshore drilling market.
RESULTS OF OPERATIONS
Fiscal Year 1999 Versus Fiscal Year 1998
Despite the Company's active rig utilization decreasing from 100% in 1998
to 77% in 1999, contract revenues only declined approximately 1 percent. An
analysis of contract revenues by rig for fiscal year 1999 and 1998 is as
follows:
- ------------------------------------------------------------------------------
CONTRACT REVENUES
- ------------------------------------------------------------------------------
(In millions)
Fiscal Fiscal
1999 1998 Variance
- --------------------------------------------------------------------------------
ATWOOD FALCON $ 34.7 $ 17.3 $ 17.4
VICKSBURG 10.6 1.9 8.7
ATWOOD EAGLE 37.9 32.2 5.7
GOODWYN 'A'/NORTH RANKIN 'A' 8.6 7.5 1.1
RIG-19 6.8 6.7 0.1
RIG-200 6.8 7.9 (1.1)
SEAHAWK 9.5 11.4 (1.9)
ATWOOD HUNTER 31.0 35.2 (4.2)
RICHMOND 4.1 11.3 (7.2)
ATWOOD SOUTHERN CROSS 0.0 20.4 (20.4)
- --------------------------------------------------------------------------------
$ 150.0 $ 151.8 $ (1.8)
- --------------------------------------------------------------------------------
The ATWOOD FALCON was in a shipyard from May 1998 to November 1998
undergoing a water-depth upgrade. The VICKSBURG entered a shipyard in December
1997 for refurbishment and upgrade which was not completed until November 1998.
The ATWOOD FALCON and VICKSBURG have worked continuously since the completion of
their upgrades. The ATWOOD EAGLE was relocated from West Africa to the
Mediterranean Sea area in March 1998. The increase in revenues for the ATWOOD
EAGLE is due to enhanced dayrate for a portion of the year from term contract
commitments. The increase in revenues from the GOODWYN 'A' and NORTH RANKIN 'A'
rigs is due to the Company providing additional labor and assistance to the
rigs' Australian owner in upgrading the rigs during fiscal 1999. The Company
expects to be involved in the operation of both rigs at least into the year
2001; however, the Company expects revenues from these rigs to decline in 2000.
RIG-200 and RIG-19 are currently idle following completion of their contracts in
June and September 1999, respectively. In preparation for a four-year contract
extension, the SEAHAWK entered a shipyard in April 1999 for upgrade, with a
reduced dayrate paid during the upgrade period which accounts for the decline in
revenues. The decline in revenues for the ATWOOD HUNTER is due to a temporary
reduction in dayrate, with an extension in the contract term, during a period
when the rig could not drill due to extremely strong underwater currents. Market
conditions resulted in a reduced dayrate and some idle time for the RICHMOND;
with the ATWOOD SOUTHERN CROSS idle for the entire year.
Contract drilling and management costs during fiscal 1999 increased 8
percent from $65.3 million to $70.4 million. An analysis of contract drilling
and management costs by rig is as follows:
- -----------------------------------------------------------------------------
CONTRACT DRILLING AND MANAGEMENT COSTS
(In millions)
- -----------------------------------------------------------------------------
Fiscal Fiscal
1999 1998 Variance
- -----------------------------------------------------------------------------
VICKSBURG $ 4.5 $ 1.4 $ 3.1
ATWOOD EAGLE 14.3 11.5 2.8
ATWOOD FALCON 6.8 4.9 1.9
RIG-19 6.0 4.5 1.5
SEAHAWK 7.1 6.1 1.0
ATWOOD HUNTER 9.8 9.4 0.4
GOODWYN 'A'/NORTH RANKIN 'A' 6.6 6.3 0.3
RIG-200 1.5 2.6 (1.1)
RICHMOND 4.8 6.0 (1.2)
ATWOOD SOUTHERN CROSS 6.8 10.6 (3.8)
OTHER 2.2 2.0 0.2
- ----------------------------------------------------------------------------
$ 70.4 $ 65.3 $ 5.1
- ----------------------------------------------------------------------------
The increase in the drilling costs for the VICKSBURG and ATWOOD FALCON are
due to the rigs working continuously since completing their upgrades during the
first quarter of fiscal 1999. 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 the entire year in the Mediterranean Sea area. The
increase in operating expense for RIG-19 was due to costs being lower in 1998
due to the receipt of certain payroll related tax refunds. Reductions in
operating costs for the RICHMOND, RIG-200 and ATWOOD SOUTHERN CROSS were due to
cost savings associated with idle rig time.
An analysis of depreciation expense by rig is as follows:
- -----------------------------------------------------------------------------
DEPRECIATION EXPENSE
- -----------------------------------------------------------------------------
(In millions)
Fiscal Fiscal
1999 1998 Variance
- ------------------------------------------------------------------------------
ATWOOD FALCON $ 5.8 $ 1.8 $ 4.0
VICKSBURG 2.0 0.0 2.0
ATWOOD SOUTHERN CROSS 3.8 3.0 0.8
RICHMOND 0.8 0.5 0.3
ATWOOD HUNTER 5.1 5.0 0.1
ATWOOD EAGLE 2.4 2.2 0.2
RIG-200 2.1 2.1 0.0
RIG-19 0.0 0.2 (0.2)
SEAHAWK 1.3 2.5 (1.2)
OTHER 0.6 0.3 0.3
- ------------------------------------------------------------------------------
$23.9 $ 17.6 $ 6.3
- ------------------------------------------------------------------------------
The increase in depreciation expense was primarily due to the commencing of
depreciation in fiscal 1999 of upgrade costs of the ATWOOD FALCON and VICKSBURG.
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 SEAHAWK in fiscal 1999.
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
RICHMOND 11.3 8.8 2.5
RIG-200 7.9 5.9 2.0
ATWOOD FALCON 17.3 16.9 0.4
SEAHAWK 11.4 11.3 0.1
RIG-19 6.7 7.1 (0.4)
GOODWYN 'A'/NORTH RANKIN 'A' 7.5 9.5 (2.0)
VICKSBURG 1.9 5.1 (3.2)
- ------------------------------------------------------------------------------
$ 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 commenced working in the
Mediterranean Sea area in March 1998, with enhanced dayrate revenues. Due to a
strong market during the first half of fiscal 1998, revenue from the RICHMOND
increased in fiscal 1998 compared to fiscal 1997. The decline in revenues for
the VICKSBURG was due to the rig undergoing upgrade during most of fiscal year
1998.
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 SOUTHERN CROSS $ 10.6 $ 0.0 $ 10.6
ATWOOD HUNTER 9.4 1.7 7.7
ATWOOD EAGLE 11.5 9.8 1.7
RICHMOND 6.0 5.0 1.0
RIG-200 2.6 2.0 0.6
GOODWYN 'A'/NORTH RANKIN 'A' 6.3 6.8 (0.5)
RIG-19 4.5 5.3 (0.8)
SEAHAWK 6.1 7.0 (0.9)
ATWOOD FALCON 4.9 6.3 (1.4)
VICKSBURG 1.4 3.6 (2.2)
OTHER 2.0 1.3 0.7
- -----------------------------------------------------------------------------
$ 65.3 $ 48.8 $ 16.5
- -----------------------------------------------------------------------------
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 ATWOOD HUNTER worked the entire fiscal 1998
compared to only approximately one quarter of fiscal 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. As a
result of certain payroll related tax refunds received in fiscal 1998, operating
costs for RIG-19 declined. 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.
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
RIG-200 2.1 1.5 0.6
ATWOOD EAGLE 2.2 2.1 0.1
RICHMOND 0.5 0.4 0.1
SEAHAWK 2.5 2.2 0.3
ATWOOD FALCON 1.8 2.7 (0.9)
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.
LIQUIDITY AND CAPITAL RESOURCES
Even though, net income in fiscal 1999 declined 30 percent from fiscal
1998, operating cash flows (before changes in working capital and other assets
and liabilities) for fiscal 1999 only declined 9 percent from $61.4 million to
$55.7 million. During fiscal 1999, the Company utilized available cash and
internally generated funds to invest approximately $16 million in completing the
water-depth upgrade of the ATWOOD FALCON, to invest approximately $5 million in
completing the refurbishment and upgrade of the VICKSBURG, to invest
approximately $11 million in the upgrade of the SEAHAWK, to fund approximately
$7 million in other capital expenditures and to reduce outstanding debt by
approximately $19 million.
Since 1997, the Company has successfully upgraded four drilling units; the
ATWOOD HUNTER, the ATWOOD SOUTHERN CROSS, the ATWOOD FALCON and the VICKSBURG at
a cost of approximately $160 million. Currently, the Company is completing the
$23 million upgrade of the SEAHAWK required for its four year contract
extension, of which approximately $20 million will be reimbursed by the
customer. The Company is currently preparing to increase the water-depth
drilling capacity of the ATWOOD EAGLE from 2,500 feet to approximately 3,200
feet at a cost of between $8 and $10 million and to enhance the operating
performance of the RICHMOND at an estimated cost of $2.5 to $3.0 million. Except
for funding remaining costs associated with the upgrade of the SEAHAWK
(approximately $12 million, excluding reimbursement from the customer),
water-depth upgrade of the ATWOOD EAGLE, the RICHMOND enhancement and general
capital maintenance of the Company's other rigs, the Company currently has no
significant capital commitments.
The Company's revolving line of credit converted to a reducing facility at
March 31, 1999, with commitment reductions of $8.3 million per quarter until
final maturity on March 31, 2002. At September 30, 1999, the reduced line of
credit commitment was approximately $100 million with an actual outstanding
amount of $54 million, with another $3 million being repaid subsequently to
September 30, 1999. Depending upon additional capital investments, anticipated
future operating cash flows are expected to continue to provide the Company with
the option of repaying funds borrowed under the credit facility prior to its
required maturity.
Working capital increased from $24.9 million at September 30, 1998 to $31.5
million at September 30, 1999, a 27 percent increase. The Company's portfolio of
accounts receivable is comprised of major international corporate entities with
stable payment experience. Historically, the Company has experienced no
significant difficulties in receivable collection; however, at September 30,
1999, the Company was continuing to pursue legal action in Australia to collect
approximately $2 million billed in 1998.
The Company continues to pursue growth opportunities. With the Company
currently two years ahead of its required debt repayment schedule, the Company
would expect to finance additional capital expenditures through a combination of
operating cash flows or additional debt financing; however, there are no
assurances 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
The Company has used both internal and external resources in assessing the
Year 2000 readiness of its operations. An outside consultant visited the
Company's various drilling units to review and assess their Year 2000
compliance. The majority of the operating systems on its various drilling rigs
are mechanical with no Year 2000 compliance issues; however, there were some
systems that required assessment and where necessary, reprogramming or
replacement. The Company's internal information systems have been assessed and
where necessary, reprogrammed or replaced with fully compliant, new or modified
systems. The Company has incurred approximately $350,000 in Year 2000 assessment
costs which has been expensed over the last two years. In addition to the
assessment costs, the Company has incurred approximately $1.2 million in
purchasing new software and implementation of an inventory, purchasing and
maintenance system for Year 2000 compliance, the cost of which has been
capitalized. After assessing its operations and making required modifications or
replacements, the Company believes that 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. Due to the
Company's international operations, foreign governments, suppliers and customers
who do not successfully and timely achieve Year 2000 compliance could adversely
affect the Company's operations. Accordingly, there can be no assurance that the
Company will not have some disruption in its business due to Year 2000 issues.
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, 1999, included $54 million of
floating rate debt. As a result, the Company's annual interest costs in fiscal
2000 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 Companys
long-term debt approximates carrying value as of September 30, 1999. The impact
on annual cash flow of a 10 percent change in the floating rate (approximately
70 basis points) would be approximately $0.4 million. The Company did not have
any open derivative contracts relating to its floating rate debt at September
30, 1999.
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, 1999
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, 1999.
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, 1999
and 1998, 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, 1999. 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, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1999, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
November 23, 1999
Atwood Oceanics, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
September 30,
- --------------------------------------------------------------------------------
(In thousands) 1999 1998
- -----------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $20,105 $ 11,621
Accounts receivable, net 18,289 27,730
Inventories of materials and supplies,
at lower of average cost or market 8,010 8,076
Deferred tax assets 720 880
Prepaid expenses 3,408 3,280
------- --------
Total Current Assets 50,532 51,587
------- --------
SECURITIES HELD FOR INVESTMENT:
Held-to-maturity, at amortized cost 22,589 22,585
Available-for-sale, at fair value 347 323
------- --------
22,936 22,908
------- --------
PROPERTY AND EQUIPMENT, at cost:
Drilling vessels, equipment and drill pipe 358,372 327,520
Other 7,317 6,128
------- -------
365,689 333,648
Less-accumulated depreciation 146,775 128,016
------- -------
Net Property and Equipment 218,914 205,632
------- -------
DEFERRED COSTS AND OTHER ASSETS 1,222 1,610
-------- --------
$293,604 $281,737
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
Atwood Oceanics, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
September 30,
- --------------------------------------------------------------------------
(In thousands, except share data) 1999 1998
- --------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ --- $ 750
Accounts payable 7,640 14,250
Accrued liabilities 11,373 11,723
-------- -------
Total Current Liabilities 19,013 26,723
-------- -------
LONG-TERM DEBT, net of current maturities 54,000 72,000
-------- -------
DEFERRED CREDITS:
Income taxes 8,168 4,820
Mobilization fees and other 20,194 14,428
-------- -------
28,362 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 13,675,000 and
13,625,000 issued and outstanding in 1999
and 1998, respectively 13,675 13,625
Paid-in capital 52,458 51,781
Accumulated other comprehensive income (loss) (139) (155)
Retained earnings 126,235 98,515
-------- -------
Total Shareholders' Equity 192,229 163,766
-------- -------
$293,604 $281,737
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
Atwood Oceanics, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended September 30,
- -------------------------------------------------------------------------------
(In thousands, except per share amounts) 1999 1998 1997
- -------------------------------------------------------------------------------
REVENUES:
Contract drilling $148,051 $148,570 $86,833
Contract management 1,958 3,239 2,249
-------- -------- --------
150,009 151,809 89,082
-------- -------- --------
COSTS AND EXPENSES:
Contract drilling 68,868 62,364 47,714
Contract management 1,487 2,921 1,076
Depreciation 23,904 17,596 9,979
General and administrative 7,519 7,331 6,100
-------- ------- -------
101,778 90,212 64,869
-------- ------- -------
OPERATING INCOME 48,231 61,597 24,213
OTHER INCOME (EXPENSE):
Interest expense (4,172) (3,599) (1,212)
Investment income 2,448 2,321 2,377
-------- ------- -------
(1,724) (1,278) 1,165
-------- ------- -------
INCOME BEFORE INCOME TAXES 46,507 60,319 25,378
PROVISION FOR INCOME TAXES 18,787 20,955 9,759
-------- ------- -------
NET INCOME $27,720 $39,364 $15,619
======== ======= =======
EARNINGS PER COMMON SHARE:
Basic $ 2.03 $ 2.90 $ 1.16
Diluted 2.01 2.84 1.14
AVERAGE COMMON SHARES OUTSTANDING:
Basic 13,649 13,592 13,474
Diluted 13,791 13,884 13,715
The accompanying notes are an integral part of these consolidated financial
statements.
Atwood Oceanics, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For Years Ended September 30,
- -------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- -------------------------------------------------------------------------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $27,720 $39,364 $15,619
------- ------- -------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 23,904 17,596 9,979
Amortization of deferred items 566 427 539
Deferred federal income tax provision (benefit) 3,500 3,970 (330)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 9,441 (11,377) 334
Increase in accounts payable 402 954 2,708
Increase (decrease) in accrued liabilities (350) (1,706) 5,958
Net mobilization fees 7,074 2,779 6,286
Other (1,364) (1,924) (1,848)
------ ------ ------
43,173 10,719 23,626
------ ------ ------
Net Cash Provided by Operating Activities 70,893 50,083 39,245
------ ------ ------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (38,760) (79,607) (62,778)
Non cash portion of capital expenditures (7,012) 7,973 ---
Other 1,574 --- ---
------ ------ ------
Net Cash Used by Investing Activities (44,198) (71,634) (62,778)
------ ------ ------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from exercises of stock options 539 658 1,019
Proceeds from revolving credit facility 13,000 14,000 58,000
Principal payments on debt (31,750) (750) (32,973)
Deferred financing costs --- --- (814)
------- ------ -------
Net Cash Provided (Used) by
Financing Activities (18,211) 13,908 25,232
------- ------ ------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 8,484 (7,643) 1,699
CASH AND CASH EQUIVALENTS, at beginning of period 11,621 19,264 17,565
------- ------ ------
CASH AND CASH EQUIVALENTS, at end of period $20,105 $11,621 $19,264
======= ======= =======
__________________________
Supplemental disclosure of cash flow information:
Cash paid during the year for domestic
and foreign income taxes $13,383 $18,549 $ 6,896
======= ======= =======
Cash paid during the year for interest,
net of amounts capitalized $ 4,614 $ 2,349 $ 1,295
======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
<TABLE>
Atwood Oceanics, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated
Other
(In thousands) Comprehensive Common Stock Paid-In Comprehensive Retained
Income Shares (1) Amount (1) Capital (1) Income (Loss) Earnings
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
September 30, 1996 13,382 $13,382 $48,779 $ (139) $43,532
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income $15,619 --- --- --- --- 15,619
Unrealized holding gain on
available-for-sale securities, net of
tax of $11 27 --- --- --- 27 ---
------
Comprehensive income $15,646
======
Exercises of employee stock options 164 164 855 --- ---
Tax benefit from exercises of
employee stock options --- --- 470 --- ---
----- ------- ------- -------- ------
September 30, 1997 13,546 13,546 50,104 (112) 59,151
Net Income $39,364 --- --- --- --- 39,364
Unrealized holding loss on
available-for-sale securities, net of
tax of $23 (43) --- --- --- (43) ---
------
Comprehensive income $39,321
======
Exercises of employee stock options 79 79 579 --- ---
Tax benefit from exercises of
employee stock options --- --- 1,098 --- ---
----- ----- ----- ------ -----
September 30, 1998 13,625 13,625 51,781 (155) 98,515
Net Income $27,720 --- --- --- --- 27,720
Unrealized holding gain on
available-for-sale securities, net of
tax of $8 16 --- --- --- 16 ---
------
Comprehensive income $27,736
======
Exercises of employee stock options 50 50 489 --- ---
Tax benefit from exercises of
employee stock options --- --- 188 --- ---
------ ------- -------- ------ --------
September 30, 1999 13,675 $13,675 $ 52,458 $ (139) $126,235
====== ======= ======== ====== ========
</TABLE>
- ---------------------
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.
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, Israel, 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 recorded a foreign exchange gain of $.4 million in 1999
and foreign exchange losses of $ 1 million and $.7 million in 1998 and 1997,
respectively.
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 1999 and 1998 totaled $.5 million and
$1.4 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 1999 and 1998, 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, 1999 or 1998.
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, 1999 and 1998, deferred revenues totaling $19.4 million and $12.3
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.
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, 1999 and 1998, investments in
available-for-sale securities are carried at fair value with the unrealized
holding loss or gain, net of deferred tax, included in comprehensive income.
Earnings per common share -
Basic and diluted earnings per share have been computed in accordance with
SFAS No. 128, Earnings per Share. Basic EPS, 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.
The computation of basic and diluted earnings per share under SFAS No. 128
for each of the past three years is as follows (in thousands, except per share
amounts):
Per Share
Net Income Shares Amount
---------- ------ ---------
Fiscal 1999:
Basic earnings per share $ 27,720 13,649 $ 2.03
Effect of dilutive securities-
Stock options --- 142 (0.02)
-------- ------ ------
Diluted earnings per share $ 27,720 13,791 $ 2.01
======== ====== ======
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
======== ====== ======
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.
Comprehensive income -
In the first quarter of 1999, the Company adopted SFAS No. 130, Reporting
Comprehensive Income, which requires companies to report the components of
comprehensive income in a financial statement with the same prominence as other
financial statements. The Company has chosen to disclose comprehensive income,
which is comprised of net income and unrealized holding gains (losses) on
available for sale equity securities, in the accompanying Consolidated
Statements of Changes in Shareholders' Equity. This information is shown for all
periods presented.
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, 1999
and 1998 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, 1999 and
1998 Consolidated Balance Sheets at amortized cost.
There were no sales of securities during fiscal 1999 or 1998. An analysis
of the Company's investment in marketable securities is as follows (in
thousands):
- --------------------------------------------------------------------------------
Amortized Unrealized
Cost Gain (Loss) Fair Value
- --------------------------------------------------------------------------------
September 30, 1999 -
Equity Securities $ 561 $ (214) $ 347
United States
Treasury Bonds 22,589 687 23,276
------- ------- -------
$23,150 $ 473 $23,623
======= ======= =======
September 30, 1998 -
Equity Securities $ 561 $ (238) $ 323
United States
Treasury Bonds 22,585 1,782 24,367
------- ------- -------
$23,146 $ 1,544 $24,690
======= ======= =======
NOTE 4 - PROPERTY AND EQUIPMENT
SEAHAWK -
In 1999, the Company commenced an approximately $23 million upgrade of the
SEAHAWK, in compliance with a four-year contract extension. Pursuant to the
contract, the Company will receive approximately $20 million in upgrade
reimbursement payments from the customer, of which $10 million was received at
September 30, 1999 and recorded to Deferred Credits. These upgrade reimbursement
payments, net after certain costs, will be amortized into revenues over the
four-year contract extension period.
ATWOOD FALCON -
In November 1998, the ATWOOD FALCON commenced drilling under its three-year
contract with Shell Philippines Exploration B.V., following completion of its
approximately $45 million water-depth upgrade. The contract provided for the
payments of $11.2 million in mobilization fees of which $10.4 million (net after
mobilization costs) was recorded to Deferred Credits and is being amortized into
revenue over the three-year contract period, with an unamortized balance of $7.0
million at September 30, 1999.
VICKSBURG -
In December 1998, the VICKSBURG commenced drilling in India under a
one-year plus option contract with Enron Oil & Gas India Ltd., following
completion of its approximately $35 million refurbishment and upgrade. The
VICKSBURG contract has been extended for another year in India.
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 one more year 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 $2.0 million at
September 30, 1999.
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.
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 Sheets, with 50 percent of the rig's operating
results for fiscal years 1999, 1998 and 1997 reflected in the Company's
Consolidated Statements of Operations. RIG-200 completed its initial contract in
June 1999 and is currently idle in Australia while waiting for a new contract
opportunity.
NOTE 5 - DEBT
LONG-TERM DEBT -
A summary of long-term debt is as follows (in thousands):
September 30,
--------------------------
1999 1998
--------- --------
Revolving credit agreement, bearing interest
(market adjustable) at approximately 7 percent
per annum at September 30, 1999 $54,000 $ 72,000
Term note, bearing interest at 6 percent per annum --- 750
------- --------
54,000 72,750
Less - current maturities --- 750
------- --------
$54,000 $ 72,000
======= ========
In July 1997, the Company entered into a $125 million revolving credit
facility with a bank group. The revolving line of credit converted to a reducing
facility on March 31, 1999, with commitment reduction of $8.3 million per
quarter until final maturity on March 31, 2002. The maximum amount permitted to
be outstanding at September 30, 1999 was $100 million. The credit facility
permits the Company to prepay principal at anytime without incurring penalty.
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 assignment 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 maturities of long-term debt are as follows (in thousands):
FISCAL YEAR AMOUNT
2000 $ ---
2001 20,300
2002 33,700
-------
$54,000
=======
___________
LINE OF CREDIT -
The Company has a $5 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, 1999, standby letters of guarantee
in the aggregate amount of approximately $2.4 million were outstanding under
this facility.
NOTE 6 - INCOME TAXES
Domestic and foreign income before income taxes for the three years in the
period ended September 30, 1999 are as follows (in thousands):
- -------------------------------------------------------------------------------
Fiscal Fiscal Fiscal
1999 1998 1997
------- -------- --------
Domestic income $29,648 $ 39,553 $ 14,623
Foreign income 16,859 20,766 10,755
------- -------- --------
$46,507 $ 60,319 $ 25,378
======= ======== ========
The provision (benefit) for domestic and foreign taxes on income consists
of the following (in thousands):
Fiscal Fiscal Fiscal
1999 1998 1997
------- ------- -------
Current domestic provision $ 8,000 $11,487 $ 5,736
Deferred domestic provision (benefit) 3,500 3,970 (330)
Current foreign provision 7,287 5,498 4,353
------- ------- -------
$18,787 $20,955 $ 9,759
======= ======= =======
The components of the deferred income tax assets (liabilities) as of
September 30, 1999 and 1998 are summarized as follows (in thousands):
September 30,
-----------------------
1999 1998
------- -------
Deferred tax assets -
Net operating loss carryforwards $2,760 $ 2,860
Book reserves 700 1,200
Deferred mobilization revenues 700 2,100
------ -------
4,160 6,160
------ -------
Deferred tax liabilities -
Difference in book and tax basis of
equipment 9,190 7,360
Deferred charges 123 450
Unrealized holding loss on
available-for-sale securities (75) (80)
------ ------
9,238 7,730
------ ------
Net deferred tax assets (liabilities) before
valuation allowance (5,078) (1,570)
Valuation allowance (2,370) (2,370)
------ ------
$(7,448) $(3,940)
======= =======
Net current deferred tax assets $ 720 $ 880
Net noncurrent deferred tax liabilities (8,168) (4,820)
-------- -------
$ (7,448) $(3,940)
======== =======
U.S. deferred taxes have not been provided on foreign earnings totaling
approximately $ 24.5 million which are permanently invested abroad. Foreign tax
credits totaling approximately $ 12.4 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
1999 1998 1997
------ ------ ------
Statutory income tax rate 35% 35% 35%
Increase (decrease) in tax rate resulting from -
Foreign tax rate differentials,
net of foreign tax credit utilization 5 (1) 10
Change in valuation allowance --- --- (2)
Investment tax credit utilization --- --- (5)
Other, net --- 1 ---
----- ---- ----
Effective income tax rate 40% 35% 38%
===== ==== ====
The Company has United States net operating loss carryforwards totaling
$7.9 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,
1999.
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 expenses), which were recorded to other
Deferred Credits, pending ultimate resolution of the issue by Indian High Court.
During fiscal year 1999, all but approximately $400,000 of the amounts received
were favorably resolved and accordingly recognized (net of expenses) in income.
NOTE 7 - CAPITAL STOCK
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, 1999, options to purchase 298,000 shares
were outstanding under this Plan. The Company also has options outstanding to
purchase 206,900 shares under a stock option 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, 1999,
1998 and 1997, and changes during the years ended on those dates is presented
below:
<TABLE>
Fiscal Fiscal Fiscal
1999 1998 1997
-------------------------- -------------------------- ----------------------------
Weighted- Weighted- Weighted-
Number of Average Number of Average Number of Average
Options Exercise Price Options Exercise Price Options Exercise Price
--------- -------------- -------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of Year 566,200 $ 22.76 444,700 $ 15.42 506,800 $ 9.46
Granted --- --- 208,000 33.07 112,500 28.00
Exercised (49,925) 10.75 (78,500) 8.39 (164,000) 6.22
Forfeited (11,375) 26.00 (8,000) 23.73 (10,600) 6.46
Expired --- --- --- --- --- ---
------- ------ --------
Outstanding at
end of year 504,900 $ 23.88 566,200 $ 22.76 444,700 $ 15.42
Exercisable at
end of year 137,150 $ 13.14 88,950 $ 8.49 69,450 $ 5.67
Available for grant
at end of Year 374,375 366,000 567,000
Weighted-average fair
value of options
granted during the year --- $ 14.21 $ 23.36
The following table summarizes information about stock options outstanding
at September 30, 1999:
Options Outstanding Options Exercisable
------------------------------------------ ------------------------
Weighted-
Average Weighted- Weighted-
Range of Remaining Average Average
Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
---------------- ------- ---------------- -------------- ------ --------------
$ 4.87 to 5.38 33,000 3.0 years $ 5.17 33,000 $ 5.17
6.50 to 6.69 54,400 4.8 years 6.62 38,900 6.64
16.63 to 18.97 220,500 7.6 years 17.47 44,000 17.69
28.00 94,000 7.5 years 28.00 21,250 28.00
48.75 to 52.06 103,000 8.2 years 48.94 --- ---
------- ------- ------- -------
4.87 to 52.06 504,900 7.1 years $ 23.88 137,150 $ 13.14
======= ======= ======= =======
</TABLE>
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 and 1997
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
1999 1998 1997
-------- -------- --------
Net Income
As reported $27,720 $39,364 $15,619
Pro forma 27,186 38,830 15,404
Earnings per share
As reported -
Basic 2.03 2.90 1.16
Diluted 2.01 2.84 1.14
Pro forma
Basic 1.99 2.86 1.14
Diluted 1.97 2.80 1.12
The fair value of grants made in fiscal 1998 and 1997 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.
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.
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 1999 and 1997, the Company used
forfeitures of $190,000 and $84,000 respectively, to reduce its cash
requirements, which resulted in actual contributions of approximately $1.3
million, and $.9 million, respectively. In 1998, the Company made actual
contributions of approximately $1.3 million, with no forfeitures used to reduce
its cash requirements. As of September 30, 1999, there are approximately $2,000
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 1999 and 1998.
The Company's only financial instruments at September 30, 1999 and 1998 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 1999 include $34.7 million, $31.0 million and
$23.1 million in revenues received from Shell Philippines Exploration B.V./Sabah
Shell Petroleum Company Limited, British-Borneo Petroleum Inc. and ESSO
Australia Limited/ESSO Production Malaysia, Inc., respectively. 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.
NOTE 11 - NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued a new accounting
standard; SFAS No. 137 "Accounting for Derivative Instruments and Hedging
Activities - Defferal of the Effective Date of FASB Statement No. 133". This
Statement is effective upon issuance and is an amendment to SFAS No. 133.
SFAS No. 133 has been amended to become effective for all fiscal quarters
of all fiscal years beginning after June 15, 2000. It 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 SFAS No. 133 will not have a material
impact on the Company's financial statements.
NOTE 12 - OPERATING LEASES
The Company leases its office space under an operating lease agreement.
This lease has essentially the same terms and conditions as the original lease,
and will expire in fiscal 2005.
Future minimum lease payments for operating leases are as follows (in
thousands):
Fiscal year ending September 30,
2000........................$348
2001........................ 408
2002........................ 408
2003........................ 408
2004 and thereafter......... 578
Total rent expense under operating leases was approximately $285,000,
$268,000 and $228,000 for fiscal years ended September 30, 1999, 1998 and 1997,
respectively.
NOTE 13 - OPERATIONS BY GEOGRAPHIC AREAS
The Company is engaged in offshore contract drilling. The contract drilling
operations consist of contracting Company owned or managed offshore drilling
equipment primarily to major oil and gas exploration companies. Operating income
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
1999 1998 1997
---------- --------- ----------
CONTRACT REVENUES:
United States $ 35,122 $ 46,454 $ 10,585
Australia 22,237 44,445 27,599
Southeast Asia 44,215 28,661 31,583
Mediterranean Sea 37,063 18,699 ---
India 11,372 --- ---
Africa --- 13,550 19,315
---------- --------- ---------
$ 150,009 $151,809 $ 89,082
========== ========= =========
OPERATING INCOME(LOSS):
United States $ 13,005 $ 24,102 $ 5,642
Australia (6,475) 13,822 8,236
Southeast Asia 14,378 9,911 8,235
Mediterranean Sea 26,164 12,274 ---
Africa --- 8,819 8,200
India 8,678 --- ---
General and administrative expenses (7,519) (7,331) (6,100)
---------- --------- ---------
$ 48,231 $ 61,597 $ 24,213
========== ========= =========
IDENTIFIABLE ASSETS:
United States $ 76,227 $ 76,557 $ 81,800
Australia 46,688 59,388 49,713
Southeast Asia 85,650 97,736 40,387
Mediterranean Sea 21,921 24,908 ---
Africa 2 2 20,457
India 40,180 238 3
General corporate 22,936 22,908 22,970
--------- --------- ---------
$ 293,604 $281,737 $ 215,330
========= ========= =========
NOTE 14 - QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly results for fiscal years 1999 and 1998 are as follows
(in thousands, except per share amounts):
QUARTERS ENDED
------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
----------- --------- -------- ------------
1999
Revenues $ 34,977 $ 41,325 $ 38,727 $ 34,980
Income before income taxes 10,588 13,722 11,784 10,413
Net income 6,776 8,724 7,394 4,826
Earnings per common share (1) -
Basic .50 .64 .54 .35
Diluted .49 .63 .53 .35
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
____________
(1) 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.
DIRECTORS OFFICERS
ROBERT W. BURGESS (2,3) JOHN R. IRWIN
Financial Executive, Retired President, Chief Executive Officer
Orleans, Massachusetts
JAMES M. HOLLAND
GEORGE S. DOTSON (1,3) Senior Vice President and Secretary
Vice President
Helmerich & Payne, Inc. GLEN P. KELLEY
President Vice President - Contracts and
Helmerich & Payne International Administration
Drilling Co.
Tulsa, Oklahoma
W. H. HELMERICH, III
Chairman
Helmerich & Payne, Inc.
Tulsa, Oklahoma
HANS HELMERICH (1, 3)
President, Chief Executive Officer
Helmerich & Payne, Inc.
Tulsa, Oklahoma
JOHN R. IRWIN (1)
President, Chief Executive Officer
Atwood Oceanics, Inc.
Houston, Texas
WILLIAM J. MORRISSEY (2)
Bank Executive, Retired
Elkhorn, Wisconsin
(1) Executive Committee
(2) Audit Committee
(3) Compensation Committee
ANNUAL MEETING
The annual meeting of stockholders will be held on February 10, 2000 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, 2000.
TRANSFER AGENT AND REGISTRAR
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
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 -
The common stock of Atwood Oceanics, Inc. is traded on the New York Stock
Exchange ("NYSE") under the symbol "ATW". No cash dividends on common stock were
paid in fiscal year 1998 or 1999, and none are anticipated in the foreseeable
future. As of September 30, 1999, there were over 750 beneficial owners of the
common stock of Atwood Oceanics, Inc. As of November 30, 1999, the closing sale
price of the common stock of Atwood Oceanics, Inc., as reported by NYSE, was $
33 5/8 per share. The following table sets forth the range of high and low sales
prices per share of common stock as reported by the NYSE for the periods
indicated.
Fiscal Fiscal
1998 1999
------ ------
QUARTERS ENDED LOW HIGH LOW HIGH
- -------------- ----- ------- ------- ------
December 31 $ 40 1/16 $ 61 5/8 $ 15 7/8 $ 32 1/2
March 31 38 3/4 55 1/4 16 1/8 31 3/4
June 30 37 3/8 61 3/8 25 7/8 37 3/4
September 30 15 1/16 40 3/4 28 1/2 35 9/16
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)
1995 1996 1997 1998 1999
$72.2 $79.5 $89.1 $151.8 $150.0
BAR CHART - EARNINGS, BEFORE DEPRECIATION, INTEREST, TAXES AND
INVESTMENT INCOME ($ MILLIONS)
1995 1996 1997 1998 1999
$16.9 $22.8 $34.2 $79.2 $72.1
BAR CHART - OPERATING CASH FLOW ($ MILLIONS)
1995 1996 1997 1998 1999
$14.9 $20.3 $25.8 $61.4 $55.7
BAR CHART - NET INCOME ($ MILLIONS)
1995 1996 1997 1998 1999
$7.1 $11.4 $15.6 $39.4 $27.7
BAR CHART - CAPITAL EXPENDITURES ($ MILLIONS)
1995 1996 1997 1998 1999
$25.7 $9.5 $62.8 $79.6 $38.8
BAR CHART - CASH AND SECURITIES HELD FOR INVESTMENT ($ MILLIONS)
1995 1996 1997 1998 1999
$38.0 $40.5 $42.2 $34.5 $43.0
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 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 Offshore Development
Drilling Sdn. Bhd. Malaysia 30%
Drillquest (M) Sdn. Bhd. Malaysia 90%
Eagle Oceanics, Inc. Delaware 100%
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, 1999, incorporated by reference in this Form 10-K,
into the Company's previously filed Registration Statements No.
33-52065 and 333-74255 both on Form S-8.
ARTHUR ANDERSEN LLP
Houston, Texas
December 15, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000008411
<NAME> Atwood Oceanics, Inc.
<MULTIPLIER> 1000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Sep-30-1999
<PERIOD-START> Oct-01-1998
<PERIOD-END> Sep-30-1999
<EXCHANGE-RATE> 1
<CASH> 20,105
<SECURITIES> 22,936
<RECEIVABLES> 18,289
<ALLOWANCES> 0
<INVENTORY> 8,010
<CURRENT-ASSETS> 50,532
<PP&E> 365,689
<DEPRECIATION> 146,775
<TOTAL-ASSETS> 293,604
<CURRENT-LIABILITIES> 19,013
<BONDS> 54,000
0
0
<COMMON> 13,675
<OTHER-SE> 52,319
<TOTAL-LIABILITY-AND-EQUITY> 293,604
<SALES> 150,009
<TOTAL-REVENUES> 150,009
<CGS> 77,874
<TOTAL-COSTS> 101,778
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,172
<INCOME-PRETAX> 46,507
<INCOME-TAX> 18,787
<INCOME-CONTINUING> 27,720
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,720
<EPS-BASIC> 2.03
<EPS-DILUTED> 2.01
</TABLE>
