<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-18437
---------------------
POOL ENERGY SERVICES CO.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 76-0263755
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10375 RICHMOND AVENUE
HOUSTON, TEXAS 77042
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 954-3000
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and 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
filing requirements for the past 90 days. YES X NO
--- ---
The number of shares outstanding of each of the issuer's classes of common
stock, as of June 30, 1997: Common Stock, no par value - 19,172,794 shares
================================================================================
<PAGE> 2
PART I
ITEM 1. FINANCIAL STATEMENTS
POOL ENERGY SERVICES CO.
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30
---------------------------
1997 1996
----------- -----------
<S> <C> <C>
Revenues ................................................. $ 109,755 $ 82,988
Earnings Attributable to Unconsolidated Affiliates ....... 634 524
----------- -----------
Total ........................................... 110,389 83,512
----------- -----------
Costs and Expenses:
Operating expenses .................................. 81,799 64,521
Selling, general and administrative expenses ........ 13,432 10,982
Depreciation and amortization ....................... 5,874 4,260
----------- -----------
Total ........................................... 101,105 79,763
----------- -----------
Other Income (Expense) - Net ............................. 1,425 367
Interest Expense ......................................... 772 739
----------- -----------
Income Before Income Taxes and Minority Interest ......... 9,937 3,377
Income Tax Provision ..................................... 3,753 1,544
Minority Interest in Earnings of Consolidated Subsidiary . 232 --
----------- -----------
Net Income ............................................... $ 5,952 $ 1,833
=========== ===========
Earnings Per Share of Common Stock ....................... $ .31 $ .13
=========== ===========
Average Common Shares Outstanding ........................ 19,162,772 14,162,530
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE> 3
POOL ENERGY SERVICES CO.
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
---------------------------
1997 1996
----------- -----------
<S> <C> <C>
Revenues .................................................. $ 208,139 $ 164,670
Earnings Attributable to Unconsolidated Affiliates ........ 1,638 1,182
----------- -----------
Total ............................................ 209,777 165,852
----------- -----------
Costs and Expenses:
Operating expenses ................................... 156,515 128,102
Selling, general and administrative expenses ......... 26,193 22,280
Depreciation and amortization ........................ 11,577 8,513
----------- -----------
Total ............................................ 194,285 158,895
----------- -----------
Other Income (Expense) - Net .............................. 1,983 531
Interest Expense .......................................... 1,557 1,384
----------- -----------
Income Before Income Taxes and Minority Interest .......... 15,918 6,104
Income Tax Provision ...................................... 6,025 2,848
Minority Interest in Earnings of Consolidated Subsidiary .. 136 --
----------- -----------
Net Income ................................................ $ 9,757 $ 3,256
=========== ===========
Earnings Per Share of Common Stock ........................ $ .51 $ .23
=========== ===========
Average Common Shares Outstanding ......................... 19,151,509 14,118,223
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 4
POOL ENERGY SERVICES CO.
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
------------------------
1997 1996
--------- ---------
<S> <C> <C>
Operating Activities:
Net Income ........................................................... $ 9,757 $ 3,256
Noncash items included above:
Depreciation and amortization .................................... 11,577 8,513
Deferred income taxes ............................................ 5,181 453
Undistributed earnings of unconsolidated affiliates .............. (1,588) (1,125)
Other - net ...................................................... (976) (105)
Payment for lease of manufacturing facility .......................... (1,074) (1,074)
Cash dividends received from unconsolidated affiliates ............... -- 101
Other - net .......................................................... (551) (498)
Net effect of changes in operating working capital ................... (11,353) (6,209)
-------- --------
Net Cash Flows Provided by Operating Activities ............. 10,973 3,312
-------- --------
Investing Activities:
Property additions ................................................... (14,358) (13,046)
Expenditures for acquisitions, including acquisition
costs, less cash acquired .......................................... (431) (4,686)
Proceeds from disposition of property, plant and equipment ........... 2,446 845
Other - net .......................................................... 1,398 370
-------- --------
Net Cash Flows Used for Investing Activities ................ (10,945) (16,517)
-------- --------
Financing Activities:
Proceeds from exercise of stock options .............................. 612 1,562
Proceeds and repayments of short-term borrowings, net ................ -- 10,455
Retirement of debt assumed in acquisition ............................ (775) --
Payments for debt financing costs .................................... (14) (199)
Proceeds from long-term debt ......................................... -- 6,500
Principal payments on long-term debt ................................. (6,655) (4,234)
-------- --------
Net Cash Flows Provided by (Used for) Financing Activities .. (6,832) 14,084
-------- --------
Net Increase (Decrease) in Cash and Cash Equivalents ...................... (6,804) 879
Cash and Cash Equivalents at January 1, ................................... 21,837 5,492
-------- --------
Cash and Cash Equivalents at June 30, ..................................... $ 15,033 $ 6,371
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
POOL ENERGY SERVICES CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
--------- ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents .............................................. $ 15,033 $ 21,837
Restricted cash ........................................................ 10 183
Accounts and notes receivable (net of allowance for doubtful accounts of
$1,191 and $1,235) ................................................... 81,301 69,614
Inventories ............................................................ 15,733 14,726
Deferred income tax asset .............................................. 4,187 3,807
Other current assets ................................................... 11,329 4,213
--------- ---------
Total current assets ................................................. 127,593 114,380
Property, Plant and Equipment - Net ....................................... 198,054 189,125
Investment in and Noncurrent Receivables from Unconsolidated Affiliates ... 20,693 19,104
Goodwill, net ............................................................. 18,528 12,880
Noncurrent Deferred Income Tax Asset ...................................... -- 1,506
Noncurrent Receivables (net of allowance for doubtful accounts of $1,365
and $1,219) and Other Assets ........................................... 3,065 3,421
Noncurrent Restricted Cash ................................................ -- 801
--------- ---------
Total ................................................................ $ 367,933 $ 341,217
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt ...................................... $ 9,832 $ 10,627
Accounts payable ....................................................... 27,131 22,022
Other current liabilities .............................................. 35,972 34,095
--------- ---------
Total current liabilities ............................................ 72,935 66,744
Long-Term Debt ............................................................ 27,258 23,068
Deferred Income Taxes ..................................................... 8,504 4,199
Other Liabilities ......................................................... 47,132 46,036
Minority Interest ......................................................... 4,183 4,047
Shareholders' Equity :
Common stock, no par value:
40,000,000 shares authorized; 19,172,794 and 19,094,824 shares
issued and outstanding ............................................. 187,717 186,785
Retained earnings ...................................................... 21,308 11,551
Unearned compensation - restricted stock ............................... (782) (891)
Cumulative foreign currency translation adjustments .................... (322) (322)
--------- ---------
Total shareholders' equity ........................................... 207,921 197,123
--------- ---------
Total ................................................................ $ 367,933 $ 341,217
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 6
POOL ENERGY SERVICES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements included in this report
are unaudited but in the opinion of management include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial information for the periods indicated. All dollar
amounts in the tabulations in the notes to the financial statements are stated
in thousands unless otherwise indicated. Certain reclassifications have been
made in the 1996 financial statements to conform with the 1997 presentation.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted.
2. UNCONSOLIDATED AFFILIATES
The following table sets forth certain summarized financial information of
the Company's unconsolidated affiliates as derived from the unaudited condensed
financial statements of the affiliates.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
-----------------------
1997 1996
--------- --------
<S> <C> <C>
Revenues:
Pool Arabia, Ltd. ........................ $ 17,257 $ 13,610
Antah Drilling Sdn. Bhd. (b) ............. - 2,099
Pool Santana, Limited (c) ................ - 960
Intairdril Oman L.L.C. ................... 133 274
--------- --------
Total .............................. $ 17,390 $ 16,943
========= ========
Gross Profit (a):
Pool Arabia, Ltd. ........................ $ 6,358 $ 4,632
Antah Drilling Sdn. Bhd. (b) ............. - 1,195
Pool Santana, Limited (c) ................ - 333
Intairdril Oman L.L.C. ................... 114 112
--------- --------
Total .............................. $ 6,472 $ 6,272
========= ========
Net Income (Loss):
Pool Arabia, Ltd. ........................ $ 658 $ (660)
Antah Drilling Sdn. Bhd. (b) ............. - (98)
Pool Santana, Limited (c) ................ - 89
Intairdril Oman L.L.C. ................... (47) (14)
--------- --------
Total .............................. $ 611 $ (683)
========= ========
</TABLE>
(a) Gross profit is computed as revenues less operating expenses (which
excludes depreciation and amortization and selling, general and
administrative expenses).
(b) In October 1996, the Company acquired the 51% interest that it did not
already own in Antah Drilling Sdn. Bhd. ("Antah Drilling"). Antah
Drilling's results have been consolidated in the accompanying financial
statements since the date of such acquisition.
(c) In April 1996, the Company acquired the 51% interest that it did not
already own in Pool Santana, Limited, a Trinidad corporation, the assets
of which consisted primarily of a platform workover rig and related
equipment which were subsequently transferred to the Company's Gulf of
Mexico operation.
6
<PAGE> 7
POOL ENERGY SERVICES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
Earnings attributable to unconsolidated affiliates is summarized below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
------------------
1997 1996
------ -------
<S> <C> <C>
The Company's portion of net income (loss) ......................... $ 313 $ (348)
Adjustment to reconcile differences between affiliates' bases and
Company's carrying value ...................................... 1,275 1,473
------ -------
Equity in income ................................................... 1,588 1,125
Other income (expense) ............................................. 50 57
------ -------
Total ......................................................... $1,638 $ 1,182
====== =======
</TABLE>
3. ACQUISITION OF D A & S OIL WELL SERVICING, INCORPORATED
In June 1997, the Company acquired all of the outstanding capital stock of
D A & S Oil Well Servicing, Incorporated ("DA&S"), a privately owned
well-servicing company with a fleet of 37 land well-servicing rigs, for $10.5
million, consisting of long-term notes in the amount of $10.1 million and $0.4
million in cash.
The acquisition was accounted for under the purchase method, and
accordingly the results of DA&S have been included in the accompanying
condensed consolidated financial statements since the date of acquisition. The
purchase price was allocated on the basis of the estimated fair market value of
the assets acquired and the liabilities assumed as of the date of acquisition.
This allocation resulted in goodwill of approximately $6.1 million, which is
being amortized on a straight-line basis over 25 years.
Expenditures for the acquisition, including acquisition costs, less cash
acquired were as follows:
<TABLE>
<S> <C>
Fair value of assets acquired (including goodwill)....... $ 14,769
Long-term notes issued .................................. (10,050)
Liabilities assumed ..................................... (4,169)
---------
Cash paid, including acquisition related expenditures ... 550
Less cash acquired ...................................... 132
---------
Net cash used for the acquisition ....................... $ 418
=========
</TABLE>
4. LONG-TERM DEBT
In June 1997, as partial consideration for the acquisition of DA&S, the
Company issued 9% subordinated notes aggregating $10.1 million which are due in
2003. Required principal payments on the notes are as follows: $0.4 million in
1998, $2.0 million in 2000, $3.6 million in 2001 and $4.1 million thereafter.
These notes are subordinate to the Company's syndicated bank revolving line of
credit and $10 million term loan and are collateralized by security interests
in (i) the well-servicing rigs and related equipment of the acquired business
which had an aggregate net book value of $4.4 million at June 30, 1997 and (ii)
certain real property of the acquired business which had a carrying value of
$0.7 million at June 30, 1997.
7
<PAGE> 8
POOL ENERGY SERVICES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
5. LETTER OF INTENT
In June 1997, the Company entered into a letter of intent to acquire Trey
Services, Inc. ("Trey") and certain associated operating assets for
approximately $34.5 million in cash. Based in Midland, Texas, Trey owns R&H
Well Service, Inc. ("R&H") which has a fleet of approximately 67 land
well-servicing rigs, 104 fluid hauling and other trucks, 430 frac and flow test
tanks and five brine and other disposal wells in the Permian Basin of West
Texas. This acquisition is subject to negotiation of a definitive agreement and
lender and regulatory approvals, and there can be no assurance that the
transaction will be consummated. This acquisition will be financed by
internally generated funds and borrowings under the Company's line of credit.
6. NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
which establishes new standards for computing and presenting earnings per
share. This statement is effective for financial statements issued for periods
ending after December 15, 1997; earlier application is not permitted. However,
if this statement had been applied in the second quarter of 1997, there would
have been no material effect on the Company's computation of earnings per share
for the periods presented.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130") and Statement of Financial Accounting Standards No. 131, "Disclosures
About Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 130
and SFAS 131 are effective for periods beginning after December 15, 1997. SFAS
130 establishes standards for reporting and displaying comprehensive income and
its components. SFAS 131 establishes standards for the way that public business
enterprises report information about operating segments in interim and annual
financial statements. These two statements will have no effect on the Company's
1997 financial statements, but management is currently evaluating what, if any,
additional disclosures may be required when these two statements are adopted in
the first quarter of 1998.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
1997 ACQUISITION AND ADDITIONAL LETTER OF INTENT
D A & S Oil Well Servicing, Incorporated. In June 1997, the Company
acquired all of the outstanding capital stock of DA&S. Prior to the
acquisition, DA&S operated a fleet of 37 land well-servicing rigs from yards in
Hobbs and Eunice, New Mexico and Andrews, Texas. See Note 3 of Notes to
Condensed Consolidated Financial Statements for a discussion of this
acquisition.
Letter of Intent - Trey Services, Inc. In June 1997, the Company entered
into a letter of intent to acquire Trey and certain associated operating assets
for approximately $34.5 million in cash. Based in Midland, Texas, Trey owns R&H
which has a fleet of approximately 67 land well-servicing rigs, 104 fluid
hauling and other trucks, 430 frac and flow test tanks and five brine and other
disposal wells in the Permian Basin of West Texas. This acquisition is subject
to negotiation of a definitive agreement and lender and regulatory approvals,
and there can be no assurance that the transaction will be consummated. This
acquisition will be financed by internally generated funds and borrowings under
the Company's line of credit.
1996 ACQUISITIONS
Antah Drilling Acquisition. In October 1996, the Company acquired the 51%
interest that it did not already own in Antah Drilling and, in March 1997, such
entity's name was changed to Pool International (Malaysia) Sdn. Bhd. ("Pool
Malaysia"). Pool Malaysia's assets include Rig 489, a new state-of-the-art
2,000 horsepower offshore platform drilling rig, which commenced a three-year
contract in August 1996 for Esso Australia, Ltd. in Australia, and an offshore
platform workover rig currently operating under a term contract in Malaysia.
Argentina Acquisition. In August 1996, the Company acquired a 51%
controlling interest in Pool International Argentina S. A. ("PIASA"), a newly
formed Argentina corporation which provides well-servicing, workover and
drilling services in Argentina. PIASA owns nine land drilling rigs and 11 land
workover rigs, all of which are located in Argentina.
Acquisition of Operating Assets of Western Oil. In June 1996, the Company
purchased the operating assets, including approximately 23 land well-servicing
rigs, of Western Oil Well Service Co. ("Western Oil") in the Williston Basin.
RESULTS OF OPERATIONS - QUARTERS ENDED JUNE 30, 1997 AND 1996
The Company had net income of $6.0 million for the second quarter of 1997,
compared to $1.8 million for the second quarter of 1996. The average price of
crude oil was approximately 8% lower in the second quarter of 1997 than in the
second quarter of 1996, and average domestic natural gas prices decreased
approximately 6% comparing the same periods. Results from the Company's
domestic operations improved primarily due to (i) increased activity and rates
for the jackup and platform rigs in the Gulf of Mexico, (ii) increased rig
activity in the Austin Chalk and lower Gulf coast areas of Texas and increased
production services activity in Texas, (iii) inclusion of results from the land
well-servicing rigs acquired in June 1996 from Western Oil, and (iv) the
operation of Rig 18, a previously idle platform drilling rig which was
refurbished and placed in service in the Gulf of Mexico for Shell Offshore in
September 1996. The Company's domestic onshore operation reported rig hours 5%
higher for the second quarter of 1997 than in the corresponding quarter of
1996. The Company's offshore operation in the Gulf of Mexico experienced rig
utilization of 82% in the second quarter of 1997, compared to 67% during the
comparable period of 1996; average rig rates were 37% higher in the 1997
period. Net income from the Company's international operations increased
primarily due to the operation of Rig 489 in Australia, the inclusion of
results from the Argentina rigs owned by PIASA, the inclusion of results from
the offshore workover rig located in Malaysia and increased rig activity in
Oman.
9
<PAGE> 10
Revenues. Revenues were $109.8 million in the second quarter of 1997, a
32% increase over revenues of $83.0 million in the second quarter of 1996. This
increase was attributable to (i) the inclusion of revenues from the two
offshore rigs owned by Pool Malaysia, (ii) higher domestic land well-servicing
activity in the Austin Chalk and lower Gulf coast areas of Texas and higher
production services activity in Texas, (iii) higher activity and rates for the
jackup and platform rigs in the Gulf of Mexico, (iv) the inclusion of revenues
from the Argentina rigs owned by PIASA, (v) inclusion of revenues from the land
well-servicing rigs acquired in June 1996 from Western Oil, (vi) higher rig
activity in Oman and (vii) the operation of Rig 18 in the Gulf of Mexico.
Domestic onshore well-servicing and production services revenues increased $8.7
million or 16% in the second quarter of 1997 from the corresponding quarter of
1996. Domestic onshore well-servicing rig utilization was 55% in the second
quarter of 1997, compared to 53% in the second quarter of 1996. Domestic
onshore well-servicing rig hours increased from approximately 283,000 in the
second quarter of 1996 to 297,000 in the second quarter of 1997. Gulf of Mexico
offshore workover and drilling revenues increased $6.9 million or 54%,
international operations revenues increased $11.2 million or 119%, and Alaska
operations revenues did not change, from the second quarter of 1996.
Earnings Attributable to Unconsolidated Affiliates. Earnings attributable
to unconsolidated affiliates were $0.6 million in the second quarter of 1997
compared to $0.5 million in the second quarter of 1996. Earnings attributable
to Pool Arabia, Ltd., the Company's Saudi Arabia affiliate, increased $0.2
million from the second quarter of 1996 partly as a result of higher rig
utilization during the second quarter of 1997 and a higher day rate for a
drilling rig in 1997. Earnings from Antah Drilling (now Pool Malaysia) ceased
to be included in earnings attributable to unconsolidated affiliates
immediately following the Company's purchase of its partner's interest in
October 1996.
Costs and Expenses. The Company's costs and expenses were $101.1 million
in the second quarter of 1997, a 27% increase compared to costs and expenses of
$79.8 million in the corresponding quarter of 1996. The increase was due to (i)
the inclusion of costs and expenses related to the two offshore platform rigs
owned by Pool Malaysia and the 20 land rigs in Argentina owned by PIASA, all of
which were acquired after the second quarter of 1996, and the 23 land
well-servicing rigs acquired in June 1996 from Western Oil, (ii) increased
domestic onshore rig and production services activity, (iii) the operation of
Rig 18 and increased jackup and platform rig activity in the Gulf of Mexico and
(iv) increased rig activity in Oman.
Other Income - Net. Other income - net was $1.1 million higher in the
second quarter of 1997 than in the corresponding quarter of 1996 due primarily
to higher gains on dispositions of equipment.
Income Taxes. The Company recorded income tax expense of $3.8 million
(which included $3.2 million of deferred taxes) on income before income taxes
and minority interest of $9.9 million in the second quarter of 1997, compared
to income tax expense of $1.5 million on income before income taxes of $3.4
million in the second quarter of 1996. The increase in income tax expense in
the second quarter of 1997 compared to the second quarter of 1996 was primarily
due to stronger operating results in the second quarter of 1997, which included
results from the 1996 acquisitions. The Company's interim period tax expense is
determined by utilizing the aggregate of estimated annual effective tax rates
for each of the Company's domestic and foreign jurisdictions.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1997 AND 1996
The Company had net income of $9.8 million for the first six months of
1997, compared to $3.3 million for the first six months of 1996. Results from
the Company's domestic operations improved primarily due to (i) increased
activity and rates for the jackup rigs and increased rates for the platform
rigs in the Gulf of Mexico, (ii) increased rig activity in the Austin Chalk and
lower Gulf coast areas of Texas and increased production services activity in
Texas, (iii) inclusion of results from the land well-servicing rigs acquired in
June 1996 from Western Oil, and (iv) the operation of Rig 18, a previously idle
platform drilling rig, which was refurbished and placed in service in the Gulf
of Mexico for Shell Offshore in September 1996. The Company's domestic onshore
operation reported rig hours 5% higher for the first six months of 1997 than in
the corresponding period of 1996. The
10
<PAGE> 11
Company's offshore operation in the Gulf of Mexico experienced rig utilization
of 74% in the first six months of 1997, compared to 67% during the comparable
period of 1996; average rig rates were 34% higher in the 1997 period. Net
income from the Company's international operations increased primarily due to
the operation of Rig 489 in Australia, increased rig activity in Oman, higher
rig activity in Saudi Arabia and the inclusion of results for the offshore
workover rig located in Malaysia.
Revenues. Revenues were $208.1 million in the first six months of 1997, a
26% increase over revenues of $164.7 million in the first six months of 1996.
This increase was attributable to (i) the inclusion of revenues from the two
offshore rigs owned by Pool Malaysia, (ii) the inclusion of revenues from the
Argentina rigs owned by PIASA, (iii) higher domestic land well-servicing
activity in the Austin Chalk and lower Gulf coast areas of Texas and higher
production services activity in Texas, (iv) higher activity and rates for the
Company's jackup rigs in the Gulf of Mexico, (v) inclusion of revenues from the
land well-servicing rigs acquired in June 1996 from Western Oil, (vi) higher
rig activity in Oman and (vii) the operation of Rig 18 in the Gulf of Mexico.
These revenue increases were offset partly by lower revenues from operations in
Alaska, Ecuador and Pakistan where land rig activity declined. Domestic onshore
well-servicing and production services revenues increased $15.8 million or 15%
in the first six months of 1997 from the corresponding period of 1996. Domestic
onshore well-servicing rig utilization was 55% in the first six months of 1997,
compared to 53% in the first six months of 1996. Domestic onshore
well-servicing rig hours increased from approximately 562,000 in the first six
months of 1996 to 588,000 in the first six months of 1997. Gulf of Mexico
offshore workover and drilling revenues increased $10.6 million or 42%,
international operations revenues increased $20.0 million or 117%, and Alaska
operations revenues decreased $2.9 million or 19% from the first six months of
1996.
Earnings Attributable to Unconsolidated Affiliates. Earnings attributable
to unconsolidated affiliates were $1.6 million in the first six months of 1997
compared to $1.2 million in the first six months of 1996. Earnings attributable
to Pool Arabia, Ltd., the Company's Saudi Arabia affiliate, increased $0.8
million from the first six months of 1996 partly as a result of higher rig
utilization during the first six months of 1997 and a higher day rate for a
drilling rig in 1997. Earnings from Antah Drilling (now Pool Malaysia) ceased
to be included in earnings attributable to unconsolidated affiliates
immediately following the Company's purchase of its partner's interest in
October 1996.
Costs and Expenses. The Company's costs and expenses were $194.3 million
in the first six months of 1997, a 22% increase compared to costs and expenses
of $158.9 million in the corresponding period of 1996. The increase was due to
(i) the inclusion of costs and expenses related to the two offshore platform
rigs owned by Pool Malaysia and the 20 land rigs in Argentina owned by PIASA,
all of which were acquired after the second quarter of 1996, and the 23 land
well-servicing rigs acquired in June 1996 from Western Oil, (ii) increased
domestic onshore rig and production services activity, (iii) the operation of
Rig 18 and increased jackup rig activity in the Gulf of Mexico and (iv)
increased rig activity in Oman. The increase was partly offset by decreased
costs and expenses in Alaska, Pakistan and Ecuador due to lower land rig
activity in the first six months of 1997.
Other Income - Net. Other income - net was $1.5 million higher in the
first six months of 1997 than in the corresponding period of 1996 primarily due
to higher gains on dispositions of equipment.
Interest Expense. Interest expense was $0.2 million higher in the first
six months of 1997 than in the corresponding period of 1996 primarily due to
interest expense on the term loans assumed in the Antah Drilling acquisition,
partially offset by a reduction in interest expense due to the scheduled
principal payments made on the Company's other debt and lower average
borrowings in 1997 under the Company's syndicated revolving line of credit.
Income Taxes. The Company recorded income tax expense of $6.0 million
(which included $5.2 million of deferred taxes) on income before income taxes
and minority interest of $15.9 million in the first six months of 1997,
compared to income tax expense of $2.8 million on income before income taxes of
$6.1 million in the first six months of 1996. The increase in income tax
expense in the first six months of 1997 compared to the first six
11
<PAGE> 12
months of 1996 was primarily due to stronger operating results in the first six
months of 1997, which included results from the 1996 acquisitions. The
Company's interim period tax expense is determined by utilizing the aggregate
of estimated annual effective tax rates for each of the Company's domestic and
foreign jurisdictions.
FINANCIAL CONDITION AND LIQUIDITY
Cash Flows. The Company had cash and cash equivalents of $15.0 million at
June 30, 1997 compared to $21.8 million at December 31, 1996. Working capital
was $54.7 million and $47.6 million at June 30, 1997 and December 31, 1996,
respectively. The Company used a net $10.9 million for investing activities in
the first six months of 1997, primarily for capital expenditures of $14.4
million. Cash used for investing activities for this period also included $0.4
million, net of cash acquired, for the purchase of DA&S, offset by $2.4 million
of proceeds from dispositions of equipment and the return of $1.0 million of
cash that had been placed in escrow as collateral in connection with a
leaseback arrangement. The Company used a net $16.5 million for investing
activities in the first six months of 1996, primarily for capital expenditures
of $13.0 million. Cash used for investing activities for this period also
included $4.0 million for the purchase of the operating assets of Western Oil
and $0.6 million, net of cash acquired, for the purchase of 51% of Pool
Santana, Limited, offset partly by $0.8 million of proceeds from dispositions
of equipment.
Credit Facilities and Long-Term Debt. The Company has available a
syndicated bank revolving line of credit to finance temporary working capital
requirements and to support the issuance of letters of credit. The maximum
availability is the lesser of (i) $40 million, or (ii) a calculated amount
based upon a percentage of domestic receivables meeting certain criteria. At
June 30, 1997, the maximum availability was $40 million, of which none had been
drawn in cash and $12.1 million was being utilized to support the issuance of
letters of credit, primarily related to insurance obligations.
During the first six months of 1997, the Company made scheduled principal
payments of $6.7 million on long-term debt, compared to $4.2 million in the
corresponding period of 1996.
DA&S Acquisition Debt. In June 1997, the Company acquired all of the
outstanding capital stock of DA&S for $10.5 million, consisting of $10.1
million of 9% subordinated long-term notes due in 2003 and $0.4 million in
cash. See Notes 3 and 4 of Notes to Condensed Consolidated Financial Statements
for further discussion.
As part of the acquisition of DA&S, the Company assumed $0.8 million of
DA&S debt, all of which was retired in June 1997.
Capital Expenditures. The Company anticipates that 1997 capital
expenditures, excluding the DA&S acquisition and the anticipated Trey
acquisition, will consist of (i) approximately $35 million for improvements and
upgrades to its existing rig fleet, (ii) $13.0 million for the construction of a
new offshore platform drilling rig for a two-year contract in the Gulf of
Mexico, (iii) $8.2 million for the purchase of a jack-up rig for operation in
the Gulf of Mexico, (iv) $5.2 million to upgrade Rig 122, a land drilling rig,
pursuant to a letter of intent for a five-year contract with BP Exploration Inc.
in Alaska, and (v) $1.8 million of a $15 million project to upgrade Rig 6, a
land drilling rig, pursuant to a letter of intent for a three-year contract with
Arco Alaska Inc. It is anticipated that these expenditures will be financed
through both internally generated funds and borrowings under the Company's line
of credit or under discrete term loans and/or leasing arrangements. Acquisitions
of additional assets and businesses are expected to continue to be an important
part of the Company's strategy for growth. The Company would, under certain
circumstances, need to obtain additional debt and/or equity financing to fund
such acquisitions.
RECENT DEVELOPMENTS
The Company has received a commitment letter from a bank to syndicate a
three-year $130 million senior unsecured credit facility which the Company
plans to use to: (i) replace its current $40 million syndicated
12
<PAGE> 13
revolving line of credit, (ii) retire certain long-term debt of approximately
$17 million, (iii) support the issuance of letters of credit and (iv) fund
capital expenditures and acquisitions. Terms and conditions of the credit
facility are currently being negotiated.
OTHER MATTERS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
which establishes new standards for computing and presenting earnings per
share. This statement is effective for financial statements issued for periods
ending after December 15, 1997; earlier application is not permitted. However,
if this statement had been applied in the second quarter of 1997, there would
have been no material effect on the Company's computation of earnings per share
for the periods presented.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130") and Statement of Financial Accounting Standards No. 131, "Disclosures
About Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 130
and SFAS 131 are effective for periods beginning after December 15, 1997. SFAS
130 establishes standards for reporting and displaying comprehensive income and
its components. SFAS 131 establishes standards for the way that public business
enterprises report information about operating segments in interim and annual
financial statements. These two statements will have no effect on the Company's
1997 financial statements, but management is currently evaluating what, if any,
additional disclosures may be required when these two statements are adopted in
the first quarter of 1998.
13
<PAGE> 14
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO. DOCUMENT
10.1(*) - Fourth Amendment and Waiver to Pool Company Restated Revolving
Credit Agreement and Pool Company Restated Term Loan Agreement
27(*) - Financial Data Schedule
- ------------
(*) Filed herewith
(b) Reports on Form 8-K - There were no reports on Form 8-K filed during
the quarter ended June 30, 1997.
14
<PAGE> 15
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.
POOL ENERGY SERVICES CO.
(Registrant)
AUGUST 7, 1997 /s/ E. J. SPILLARD
- ----------------------------------- -----------------------------------
(Date) E. J. Spillard
Senior Vice President, Finance
(principal financial officer)
AUGUST 7, 1997 /s/ B. G. GORDON
- ----------------------------------- -----------------------------------
(Date) B. G. Gordon
Controller
(principal accounting officer)
15
<PAGE> 16
POOL ENERGY SERVICES CO.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
- ----------- --------
<S> <C>
10.1(*) - Fourth Amendment and Waiver to Pool Company Restated Revolving
Credit Agreement and Pool Company Restated Term Loan Agreement
27(*) - Financial Data Schedule
</TABLE>
- -------------
(*) Filed herewith
<PAGE> 1
EXHIBIT 10.1
As of June 19, 1997
Pool Company
10375 Richmond Avenue
Houston, Texas 77042
Attention: R. A. Johannsen, Treasurer
Re: Fourth Amendment and Waiver to (a) Pool Company Restated
Revolving Credit Agreement, and (b) Pool Company Restated Term
Loan Agreement
Gentlemen:
Reference is made to:
(a) the Restated Credit Agreement dated as of November 30, 1995,
as modified by the First Amendment and Waiver dated as of April 3, 1996, the
Second Amendment dated as of July 31, 1996, and the Third Amendment dated as of
December 20, 1996 (the "REVOLVING CREDIT AGREEMENT"), among Pool Company, the
financial institutions named therein as lenders ("LENDERS"), and NationsBank of
Texas, N.A., as agent for such Lenders ("AGENT"), and
(b) the Restated Term Loan Agreement dated as of November 30,
1995, as modified by the First Amendment and Waiver dated as of April 3, 1996,
the Second Amendment dated as of July 31, 1996, and the Third Amendment dated
as of December 20, 1996 (the "TERM LOAN AGREEMENT"), among Pool Company,
Lenders, and Agent.
Unless otherwise indicated, all capitalized terms herein are used as defined in
the Revolving Credit Agreement and the Term Loan Agreement.
Pool Company has advised Agent and Lenders that it wishes to purchase
the stock of DA&S Oil Well Servicing, Incorporated, a New Mexico corporation
("DA&S"), for $10,500,000 (comprised of $450,000 in cash and $10,050,000 in
Pool Company Subordinated Notes). Therefore, for good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, Pool
Company, Agent and Lenders agree as follows:
1. The fourth paragraph in the recitals to the Revolving Credit
Agreement is hereby amended by deleting the reference to "$35,000,000" and
inserting in lieu thereof a reference to "$40,000,000."
2. Debt. SECTION 7.11 of the Revolving Credit Agreement and
SECTION 7.11 of the Term Loan Agreement are hereby amended:
(a) by deleting the phrase "through January 31, 1997" in
clause (q) of such section, and
(b) by deleting the word "and" before clause (t),
changing the clause designated as "(v)" to clause "(u)", deleting the
word "and" before such clause and adding the following at the end of
each such section:
<PAGE> 2
Pool Company
As of June 19, 1997
Page 2
(v) the DA&S Subordinated Notes, a guaranty by PESCO of
such Notes, and a guaranty by DA&S of such Notes.
3. Capital Expenditures. SECTION 7.13 of the Revolving Credit
Agreement and SECTION 7.13 of the Term Loan Agreement are hereby amended by
deleting the word "and" before clause (f) and adding the following at the end
of each such section:
, and (g) an expenditure of $10,500,000 to purchase 100% of the stock
of DA&S.
4. Acquisitions, Mergers, and Dissolutions. Notwithstanding the
provisions of SECTION 7.15 of the Revolving Credit Agreement and SECTION 7.15
of the Term Loan Agreement, Pool Company may (a) acquire 100% of the stock of
DA&S pursuant to the DA&S Purchase Agreement, and (b) merge DA&S into Pool
Company.
5. Loans, Advances, and Investments. Notwithstanding the
provisions of SECTION 7.16 of the Revolving Credit Agreement and SECTION 7.16
of the Term Loan Agreement, (a) Pool Company may acquire 100% of the stock of
DA&S pursuant to the DA&S Purchase Agreement, (b) Pool Company may assume
(through its merger with DA&S) the existing advances of DA&S relating to two
life insurance policies on Dean Snyder issued by (i) American General Life
Insurance Company in the amount of approximately $27,576.55, and (ii)
Philadelphia Life Insurance Company in the amount of approximately $43,110.53,
and (c) Pool Company may contribute the assets of DA&S that it receives by
virtue of its merger with DA&S to PCNV, Inc.
6. Subsidiaries. Notwithstanding the provisions of SECTION 4 and
SECTION 7.29 of the Revolving Credit Agreement, and SECTION 4 and SECTION 7.28
of the Term Loan Agreement, Pool Company may, for a period not to exceed 30
days after the closing under the DA&S Purchase Agreement, maintain the
existence of DA&S without the execution and delivery of a Guaranty, Security
Agreement, Financing Statements and Stock Powers for DA&S, subject to the
covenant set forth in paragraph 10(b) below.
7. Default on Other Debt or Security. Notwithstanding the
provisions of SECTION 8.6 of the Revolving Credit Agreement and SECTION 8.6(A)
of the Term Loan Agreement, Lenders and Agent agree that if the DA&S
Subordinated Note in the amount of $1,000,000 payable to Alexander Family Trust
is accelerated pursuant to the second paragraph of Section 4.1 thereof, then
there shall be no Default under the Revolving Credit Agreement and the Term
Loan Agreement, provided that Borrower pays such accelerated debt within 7
Business Days.
8. Permitted Liens. The definition of "Permitted Liens" in
SECTION 10.3 of the Revolving Credit Agreement and SECTION 10.3 of the Term
Loan Agreement is hereby amended by deleting the word "and" before clause (t)
and adding the following at the end of each such section:
, (u) Liens on assets of DA&S securing the DA&S Subordinated Notes,
and (v) Liens in the form of a pledge of cash collateral to support a
letter of credit issued for the account of DA&S in the amount of
$550,000.
<PAGE> 3
Pool Company
As of June 19, 1997
Page 3
9. New Definitions. SECTION 10.3 of the Revolving Credit
Agreement and SECTION 10.3 of the Term Loan Agreement are hereby amended by
adding the following definitions:
DA&S means DA&S Oil Well Servicing, Incorporated, a New Mexico
corporation.
DA&S PURCHASE AGREEMENT means the Stock Purchase Agreement
dated as of June 19, 1997, among the DA&S Sellers, DA&S, Borrower, and
PESCO.
DA&S SELLERS means the holders of all of the issued and
outstanding stock of DA&S at the time of the closing under the DA&S
Purchase Agreement.
DA&S SUBORDINATED NOTES means the promissory notes issued by
Pool Company in the aggregate amount of $10,050,000, payable to the
DA&S Sellers and subordinated to the Obligations as set forth in the
Subordination Agreement dated as of June 24, 1997 among the DA&S
Sellers, Borrower, Agent and Lenders.
10. Liquidating Companies. SECTION 10.3 of the Revolving Credit
Agreement and SECTION 10.3 of the Term Loan Agreement are hereby amended by
revising the definition of "LIQUIDATING COMPANIES" to add the companies
reflected in bold and italics below, so that such definition reads as follows:
"LIQUIDATING COMPANIES" means Pool Horizontal Drilling
Services Co., Westex Production Service, Inc., The International Air
Drilling Company, DA&S, POOL AMERICAS, INC., POOL-AUSTRALIA, INC.,
PESCO SUBSIDIARY, POOL HOUSTON #1, INC. AND POOL PRODUCTION SERVICES,
INC."
11. Conditions. This instrument shall not be effective until it
has been duly executed and delivered by all parties named below, and Agent has
received from Pool Company any documentation that Agent may reasonably request
related hereto, including, without limitation, a true and complete copy of the
DA&S Purchase Agreement (which Borrower hereby designates as a "Material
Agreement" for purposes of the Revolving Credit Agreement and the Term Loan
Agreement).
12. Covenants.
(a) Within 30 days after the closing under the DA&S
Purchase Agreement, Pool Company shall either (i) merge DA&S into Pool
Company, or (ii) deliver to Agent the Guaranty, Security Agreement,
Financing Statements and Stock Powers required by SECTIONS 4.2 and
7.29(A) of the Revolving Credit Agreement and SECTIONS 4.2 and 7.28(A)
of the Term Loan Agreement; and
(b) If DA&S is not merged into Pool Company, then within
five Business Days after any change in the corporate name of DA&S or
any other Obligor, Pool Company shall notify Agent of such change and
execute and deliver any Financing Statement amendments or other
documentation reasonably requested by Agent in connection with such
change.
<PAGE> 4
Pool Company
As of June 19, 1997
Page 4
Any failure or refusal of Pool Company to punctually and properly perform,
observe, and comply with each of the foregoing covenants shall constitute a
"Default" under SECTION 8 of the Revolving Credit Agreement and SECTION 8 of
the Term Loan Agreement.
13. Representations and Warranties. Pool Company represents and
warrants that it possesses all requisite power and authority to execute,
deliver and comply with the terms of this instrument, which has been duly
authorized and approved by all necessary corporate action and for which no
consent of any person is required, and agrees to furnish Agent with evidence of
such authorization and approval upon request.
14. Fees and Expenses. Pool Company agrees to pay the reasonable
fees and expenses of counsel to Agent for services rendered in connection with
the preparation, negotiation and execution of this instrument.
15. Loan Paper; Effect. This instrument is a Loan Paper and,
therefore, is subject to the applicable provisions of SECTION 12 of the
Revolving Credit Agreement and SECTION 12 of the Term Loan Agreement, all of
which are incorporated herein by reference the same as if set forth herein
verbatim. Except as amended in this instrument, the Loan Papers are and shall
be unchanged and shall remain in full force and effect. In the event of any
inconsistency between the terms of the Revolving Credit Agreement and the Term
Loan Agreement as hereby modified (the "AMENDED AGREEMENTS") and any other Loan
Papers, the terms of the Amended Agreements shall control and such other
document shall be deemed to be amended hereby to conform to the terms of the
Amended Agreements. Pool Company hereby releases Agent and Lenders from any
liability for actions or failures to act in connection with the Loan Papers
prior to the date hereof.
16. No Waiver of Defaults. This instrument does not constitute a
waiver of Lenders' right to insist upon future compliance with each term,
covenant, condition and provision of the Loan Papers, and the Loan Papers shall
continue to be binding upon, and inure to the benefit of, Pool Company,
Guarantors, Lenders, Agent, and their respective successors and assigns.
17. Multiple Counterparts. This instrument may be executed in more
than one counterpart, each of which shall be deemed an original, but all of
which when taken together shall constitute one instrument.
18. Final Agreement. THE LOAN PAPERS, AS AMENDED HEREBY, REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
<PAGE> 5
Pool Company
As of June 19, 1997
Page 5
If the foregoing terms and conditions are acceptable, please indicate
your acceptance by signing in the space provided below, whereupon this letter
shall become an agreement binding upon and inuring to the benefit of Agent,
Lenders and Pool Company and their respective successors and assigns.
Very truly yours,
NATIONSBANK OF TEXAS, N.A., NATIONAL BANK OF CANADA,
as Agent and a Lender as a Lender
By: /s/ JOHN H. ROBERTS By: /s/ DOUGLAS G. CLARK
------------------------------- ---------------------------------
John H. Roberts Douglas G. Clark
Vice President Vice President
NATIONAL BANK OF ALASKA, By: /s/ WILLIAM W. HANDLEY
as a Lender ---------------------------------
William W. Handley
Vice President
By: /s/ RICHARD M. MONROE
-------------------------------
Richard M. Monroe
Vice President
THE HONGKONG AND SHANGHAI
BANK ONE, TEXAS, N.A., BANKING CORPORATION LTD.,
as a Lender as a Lender
By: /s/ KELLY L. ELMORE III By: /s/ JEFFREY M. YUN
------------------------------- -------------------------------
Name: Kelly L. Elmore III Name: Jeffrey M. Yun
----------------------------- -----------------------------
Title: Vice President Title: Assistant Vice President
---------------------------- ----------------------------
<PAGE> 6
Pool Company
As of June 19, 1997
Page 6
Accepted and agreed to as of the day and year first set forth in the
foregoing letter.
POOL COMPANY
By: /s/ J. T. JONGEBLOED
--------------------------
J. T. Jongebloed
President
By: /s/ R. A. JOHANNSEN
--------------------------
R. A. Johannsen
Treasurer
<PAGE> 7
Pool Company
As of June 19, 1997
Page 7
GUARANTORS' CONSENT AND AGREEMENT
As an inducement to Agent and Lenders to execute, and in consideration
of Agent's and Lenders' execution of the foregoing, the undersigned hereby
consent thereto and agree that the same shall in no way release, diminish,
impair, reduce or otherwise adversely affect the respective obligations and
liabilities of each of the undersigned under the Guaranty described in the
Revolving Credit Agreement executed by the undersigned, or any agreements,
documents or instruments executed by any of the undersigned to create liens,
security interests or charges to secure any of the indebtedness under the Loan
Papers (as described in the Revolving Credit Agreement or the Term Loan
Agreement), all of which obligations and liabilities are, and shall continue to
be, in full force and effect. This consent and agreement shall be binding upon
the undersigned, and the respective successors and assigns of each, and shall
inure to the benefit of Agent and Lenders, and respective successors and
assigns of each.
ASSOCIATED PETROLEUM SERVICES, INC. POOL COMPANY HOUSTON LTD.
BIG 10 FISHING TOOL COMPANY, INC. POOL COMPANY TEXAS LTD.
PCNV, INC.
POOL ALASKA, INC.
POOL AMERICAS, INC. By: POOL COMPANY, General Partner
POOL-AUSTRALIA, INC. of each of the above Obligors
POOL CALIFORNIA ENERGY SERVICES,
INC. By: /s/ J. T. JONGEBLOED
POOL COMPANY -----------------------------
POOL ENERGY HOLDING, INC. J. T. Jongebloed
POOL ENERGY SERVICES CO. President
POOL INTERNATIONAL, INC.
POOL PRODUCTION SERVICES, INC.
PTX, INC. By: /s/ R. A. JOHANNSEN
THE INTERNATIONAL AIR DRILLING -----------------------------
COMPANY R. A. Johannsen
WESTEX PRODUCTION SERVICE, INC. Treasurer
By: /s/ J. T. JONGEBLOED
----------------------------------------
J. T. Jongebloed
President of each of the above Obligors
By: /s/ R. A. JOHANNSEN
----------------------------------------
R. A. Johannsen
Treasurer of each of the above Obligors
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
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<RECEIVABLES> 76,764
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