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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED DECEMBER 31, 1998
COMMISSION FILE NUMBER 0-6352
ATWOOD OCEANICS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1611874
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
15835 Park Ten Place Drive 77084
Houston, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
281-492-2929
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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 and (2) has been subject to such filings
requirements for the past 90 days. Yes X No___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of December 31, 1998 13,624,926 shares of Common Stock $1 par
value
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<PAGE>
PART I. FINANCIAL INFORMATION
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
The condensed consolidated financial statements herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission for interim financial reporting. Accordingly, these financial
statements and related information have been prepared without audit and certain
information and disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted, although management believes that the disclosures are adequate to
make the information not misleading. The condensed consolidated financial
statements reflect all adjustments which are, in the opinion of management,
necessary to present fairly the financial position of the Company as of December
31, 1998 and September 30, 1998, and the results of its operations and cash
flows for the three months ended December 31, 1998 and 1997, respectively. All
adjustments were of a normal recurring nature. The interim financial results may
not be indicative of results that could be expected for a full year. It is
suggested these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's September 30, 1998 Annual Report to Shareholders.
<PAGE>
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1998 1998
------------ -------------
(Unaudited)
(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 12,152 $ 11,621
Accounts receivable 30,636 27,730
Inventories of materials and supplies,
at lower of average cost or market 8,269 8,076
Deferred tax assets 880 880
Prepaid expenses 2,834 3,280
-------- --------
Total Current Assets 54,771 51,587
-------- --------
SECURITIES HELD FOR INVESTMENT:
Held-to-maturity, at amortized cost 22,586 22,585
Available-for-sale, at fair value 186 323
-------- --------
22,772 22,908
-------- --------
PROPERTY AND EQUIPMENT, at cost:
Drilling vessels, equipment and drill pipe 343,413 327,520
Other 6,513 6,128
-------- --------
349,926 333,648
Less-accumulated depreciation 129,388 128,016
-------- --------
Net Property and Equipment 220,538 205,632
-------- --------
DEFERRED COSTS AND OTHER ASSETS 1,702 1,610
-------- --------
$299,783 $281,737
======== ========
<PAGE>
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1998 1998
----------- -------------
(Unaudited)
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ ---- $ 750
Accounts payable 6,511 14,250
Accrued liabilities 15,265 11,723
-------- --------
Total Current Liabilities 21,776 26,723
-------- --------
LONG-TERM DEBT, net of current liabilities 85,000 72,000
-------- --------
DEFERRED CREDITS:
Income taxes 4,772 4,820
Other 17,782 14,428
-------- --------
22,554 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 13,625,000
shares issued and outstanding 13,625 13,625
Paid-in capital 51,781 51,781
Net unrealized holding loss on available-for-sale
securities (244) (155)
Retained earnings 105,291 98,515
-------- --------
170,453 163,766
-------- --------
$299,783 $281,737
======== ========
<PAGE>
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
December 31,
1998 1997
---------- ----------
In thousands except per
share amounts)
REVENUES:
Contract drilling $ 34,252 $ 35,768
Contract management 725 456
-------- --------
34,977 36,224
-------- --------
COSTS AND EXPENSES:
Contract drilling 15,911 16,069
Contract management 723 354
Depreciation 5,327 4,072
General and administrative 2,190 1,984
-------- --------
24,151 22,479
-------- --------
OPERATING INCOME 10,826 13,745
-------- --------
OTHER INCOME (EXPENSE):
Interest expense (824) (1,039)
Interest income 586 583
-------- -------
(238) (456)
-------- -------
INCOME BEFORE INCOME TAXES 10,588 13,289
PROVISION FOR INCOME TAXES 3,812 4,612
-------- -------
NET INCOME $ 6,776 $ 8,677
======== =======
EARNINGS PER SHARE
Basic $ .50 $ .64
Diluted $ .49 $ .63
AVERAGE COMMON SHARES OUTSTANDING
Basic 13,625 13,550
Diluted 13,755 13,855
<PAGE>
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
December 31,
1998 1997
(In thousands)
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 6,776 $ 8,677
-------- -------
Adjustments to reconcile net income
to net cash provided (used) by operating
activities:
Depreciation 5,327 4,072
Amortization of deferred items 124 208
Changes in assets and liabilities:
Increase in accounts receivable (2,906) (6,351)
Increase (decrease) in accounts
payable and accrued liabilities 3,776 (293)
Net mobilization fees 3,357 1,200
Other 223 1,360
-------- -------
9,901 196
-------- -------
Net cash provided by operating
activities 16,677 8,873
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CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (28,396) (25,501)
-------- -------
Net cash used by investing activities (28,396) (25,501)
-------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility 13,000 7,000
Proceeds from exercises of stock options --- 33
Principal payments on long-term debt (750) (750)
-------- -------
Net cash provided by financing
activities 12,250 6,283
-------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 531 (10,345)
CASH AND CASH EQUIVALENTS, at beginning of period 11,621 19,264
-------- -------
CASH AND CASH EQUIVALENTS, at end of period $ 12,152 $ 8,919
======== =======
- -------------
Supplemental disclosure of cash flow information:
Cash paid during the quarter for domestic
and foreign income tax $ 1,622 $ 1,022
======== =========
Cash paid during the quarter for interest,
net of amount capitalized $ 1,769 $ 1,034
======== =========
<PAGE>
PART I. ITEM 2
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
All non-historical information set forth herein is based upon expectations
and assumptions deemed reasonable by the Company. The Company can give no
assurance that such expectations and assumptions will prove to have been
correct, and actual results could differ materially from the information
presented herein. The Company's periodic reports filed with the Securities and
Exchange Commission should be consulted for a description of risk factors
associated with an investment in the Company.
MARKET OUTLOOK
Low oil prices continue to curtail worldwide drilling activities,
especially for jack-ups and shallow water drilling rigs. In response to low oil
prices, international petroleum exploration and development companies are
reducing their capital expenditures on drilling programs. It appears that 1999
will be a challenging year for the drilling industry, with current worldwide
fleet utilization for mobile offshore rigs at 80 percent.
Currently, the ATWOOD SOUTHERN CROSS is the Company's only rig without
a drilling contract. The Company anticipates lower utilization during 1999;
however, term contracts in place for the ATWOOD HUNTER, ATWOOD FALCON, ATWOOD
EAGLE, VICKSBURG, and SEAHAWK should, despite near-term market softness, provide
the Company with a high level of revenues during fiscal year 1999 and to some
extent, into fiscal year 2000. Despite current market softness, the Company
remains optimistic about the longer-term market outlook.
RESULTS OF OPERATIONS
Contract revenues for the three months ended December 31, 1998
decreased 3%, compared to the three months ended December 31, 1997 A comparative
analysis of contract revenues is as follows:
CONTRACT REVENUES
--------------------------------------------------
First Quarter First Quarter
Fiscal 1999 Fiscal 1998 Variance
----------------- -------------- ------------
ATWOOD EAGLE $ 9.1 $ 7.4 $ 1.7
ATWOOD FALCON 5.4 4.5 0.9
SEAHAWK 2.9 2.8 0.1
RIG-200 2.1 2.0 0.1
RIG-19 1.9 1.9 0.0
RICHMOND 2.4 2.7 (0.3)
ATWOOD HUNTER 8.7 9.3 (0.6)
ATWOOD SOUTHERN CROSS 0.0 1.4 (1.4)
VICKSBURG 0.4 1.9 (1.5)
GOODWYN `A'/NORTH RANKIN `A' 2.1 2.3 (0.2)
$35.0 $36.2 $(1.2)
The increase in revenue for the ATWOOD EAGLE is due to an increase in
contract dayrates when the rig relocated from West Africa to the Mediterranean
Sea in March/April 1998. During the first quarter of fiscal 1998, the ATWOOD
HUNTER received some enhancement in revenues from performing some limited
special drilling services. Such additional services were not performed during
the first quarter of fiscal 1999 accounting for the decrease in revenues. Due to
current curtailed worldwide drilling activities due to the low oil prices, the
Company has been unable to obtain a contract for the ATWOOD SOUTHERN CROSS since
it completed its last contract in September 1998. The decline in revenues for
the RICHMOND is also due to lower dayrates dictated by the current market
environment. The ATWOOD FALCON commenced drilling in November 1998 at an
enhanced dayrate level following its upgrade; while the VICKSBURG did not
complete its upgrade until the end of the first quarter of fiscal 1999
accounting for the decrease in revenue.
Contract drilling and management costs increased only one percent in
the first quarter of fiscal 1999 compared to the first quarter of fiscal 1998.
An analysis of contract drilling and management costs by rig is as follows:
<PAGE>
CONTRACT DRILLING AND MANAGEMENT COSTS
---------------------------------------------------
First Quarter First Quarter
Fiscal 1999 Fiscal 1998 Variance
---------------- ------------------ ------------
ATWOOD EAGLE $ 3.5 $ 2.1 $ 1.4
ATWOOD HUNTER 2.6 2.2 0.4
ATWOOD SOUTHERN CROSS 1.5 1.1 0.4
RICHMOND 1.6 1.5 0.1
RIG-200 0.6 0.7 (0.1)
RIG-19 1.4 1.5 (0.1)
SEAHAWK 1.6 1.7 (0.1)
ATWOOD FALCON 1.2 1.8 (0.6)
VICKSBURG 0.3 1.4 (1.1)
GOODWYN `A'/NORTH RANKIN `A' 1.7 1.7 0.0
OTHER 0.6 0.7 (0.1)
$16.6 $16.4 $ 0.2
The increase in costs for the ATWOOD EAGLE is due to operating costs in
the Mediterranean Sea being higher than its previous area of operation in West
Africa. The ATWOOD HUNTER encountered higher maintenance expenses during the
first quarter of fiscal 1999 accounting for its increase in costs. Even though
the ATWOOD SOUTHERN CROSS earned no revenues during the first quarter of fiscal
1999, the Company maintained its full operating crew while pursuing a new
contract opportunity. Since the ATWOOD SOUTHERN CROSS was completing its upgrade
during the first part of the first quarter of fiscal 1998, it did not have a
complete quarter of personnel costs compared to the first quarter of fiscal 1999
which accounts for its increase in operating costs. The increase in operating
costs for the ATWOOD EAGLE, ATWOOD HUNTER and ATWOOD SOUTHERN CROSS were
virtually offset by declines in operating costs for the ATWOOD FALCON and
VICKSBURG due to these rigs being in the shipyard completing their upgrades for
a portion of the first quarter of fiscal 1999.
The increase in depreciation expense is primarily due to a complete
quarter of depreciation of the ATWOOD SOUTHERN CROSS in fiscal 1999 compared to
a partial quarter of depreciation in fiscal 1998 and the recommencement of
depreciation on the ATWOOD FALCON following completion of its upgrade. The
Company does not recognize depreciation expense during the period a rig is out
of service for a significant upgrade.
A summary of the contract status of each of the Company's wholly or
partially owned drilling rigs as of February 12, 1999 is as follows:
NAME OF RIG LOCATION CONTRACT STATUS
- ------------------ -------------------- ------------------------------------
ATWOOD FALCON Philippines Rig is under long-term contract
which terminates in November 2001.
ATWOOD HUNTER United States Gulf Rig is under long-term contract
of Mexico which terminates in September 2000.
ATWOOD EAGLE Mediterranean Sea Rig is contracted to several
operators under a "rig sharing
agreement". These contracts should
provide the rig with a backlog of
work for the remainder of fiscal
1999, with options for further work.
VICKSBURG India Rig is under term contract which
terminates in December 1999, with
options for further work.
SEAHAWK Malaysia The rig is expected to complete
its current drilling program in
March/April 1999 and then undergo
upgrades during the remainder of
calendar 1999. Following the
upgrades, the rig will commence
drilling under a four-year
contract extension period, with a
further option to extend.
RICHMOND United States Gulf Rig is under contract which expires
of Mexico in March 1999, with options for
further work.
RIG-19 and RIG-200 Australia Rigs are under term contracts with
estimated completions between March
and May 1999.
ATWOOD SOUTHERN CROSS Australia Rig is available for contract since
it became idle at the end of
September 1998.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of fiscal 1999, operating cash flow (before
changes in working capital and other assets and liabilities) was $12.2 million
compared to $13.0 million for the first quarter of fiscal 1998. During the first
quarter of fiscal 1999, the Company utilized the internally generated funds plus
an additional $13 million borrowed under the $125 million revolving credit
facility to invest approximately $26.6 million in completing the upgrades of the
ATWOOD FALCON and the VICKSBURG, and to fund approximately $1.8 in other capital
expenditures. Currently, the only significant capital commitment for the
remainder of fiscal 1999 is an approximate $19 million upgrade of the SEAHAWK.
The SEAHAWK contract extension provides that the upgrade costs will be
reimbursed by the operator and that the Company will be paid a reduced dayrate
during the upgrade period.
Subsequent to December 31, 1998, the Company repaid $1 million under
the revolving credit facility resulting in a current outstanding debt of $84
million. Depending upon additional capital investments, anticipated future cash
flows are expected to provide the Company with the option of repaying funds
borrowed under the revolving credit facility prior to the required maturity. The
Company will continue to review and adjust its planned capital expenditures and
financing of such expenditures in light of current market conditions.
<PAGE>
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATWOOD OCEANICS, INC.
(Registrant)
Date: February 15, 1999 s/JAMES M. HOLLAND
------------------
James M. Holland
Senior Vice President
and Chief Accounting
Officer
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<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Sep-30-1999
<PERIOD-START> Oct-01-1998
<PERIOD-END> Dec-3-1998
<EXCHANGE-RATE> 1
<CASH> 12,152
<SECURITIES> 22,772
<RECEIVABLES> 30,636
<ALLOWANCES> 0
<INVENTORY> 8,269
<CURRENT-ASSETS> 54,771
<PP&E> 349,926
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<BONDS> 85,000
0
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<COMMON> 13,625
<OTHER-SE> 51,537
<TOTAL-LIABILITY-AND-EQUITY> 299,783
<SALES> 34,977
<TOTAL-REVENUES> 34,977
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<INTEREST-EXPENSE> 824
<INCOME-PRETAX> 10,588
<INCOME-TAX> 3,812
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