<PAGE> 1
================================================================================
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, 1999
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, 1999: Common Stock, no par value - 21,266,726 shares
================================================================================
<PAGE> 2
PART I
ITEM 1. FINANCIAL STATEMENTS
POOL ENERGY SERVICES CO.
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues ...................................................... $ 73,080 $ 127,999
Earnings Attributable to Unconsolidated Affiliates ............ 1,403 1,179
---------- ----------
Total ................................................ 74,483 129,178
---------- ----------
Costs and Expenses:
Operating expenses ....................................... 54,182 86,769
Selling, general and administrative expenses ............. 12,519 14,869
Depreciation and amortization ............................ 11,452 10,489
---------- ----------
Total ................................................ 78,153 112,127
---------- ----------
Other Income (Expense) - Net .................................. 4,268 206
Interest Expense .............................................. 4,575 4,291
---------- ----------
Income (Loss) Before Income Taxes ............................. (3,977) 12,966
Income Tax Provision (Credit) ................................. (2,097) 5,361
---------- ----------
Net Income (Loss) ............................................. $ (1,880) $ 7,605
========== ==========
Earnings (Loss) Per Share of Common Stock ..................... $ (0.09) $ .36
========== ==========
Earnings (Loss) Per Share of Common Stock-assuming dilution.... $ (0.09) $ .36
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE> 3
POOL ENERGY SERVICES CO.
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
------------------------
1999 1998
--------- ---------
<S> <C> <C>
Revenues .................................................. $ 154,107 $ 245,711
Earnings Attributable to Unconsolidated Affiliates ........ 5,071 1,108
--------- ---------
Total ............................................ 159,178 246,819
--------- ---------
Costs and Expenses:
Operating expenses ................................... 110,307 170,132
Selling, general and administrative expenses ......... 26,654 28,044
Depreciation and amortization ........................ 22,778 17,999
--------- ---------
Total ............................................ 159,739 216,175
--------- ---------
Other Income (Expense) - Net .............................. 4,977 609
Interest Expense .......................................... 8,785 6,054
--------- ---------
Income (Loss) Before Income Taxes ......................... (4,369) 25,199
Income Tax Provision (Credit) ............................. (3,024) 10,141
--------- ---------
Net (Loss) Income ......................................... $ (1,345) $ 15,058
========= =========
Earnings (Loss) Per Share of Common Stock ................. $ (0.06) $ .74
========= =========
Earnings (Loss) Per Share of Common Stock-assuming dilution $ (0.06) $ .73
========= =========
</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
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Operating Activities:
Net Income (Loss) .................................................. $ (1,345) $ 15,058
Noncash items included above:
Depreciation and amortization .................................. 22,778 17,999
Amortization of deferred drydocking costs ...................... 1,606 786
Amortization of deferred rig mobilization ...................... (4,990) (1,777)
Amortization of deferred gain on sale and leaseback ............ (1,372) --
Settlement of employee benefit liability in company common
stock ...................................................... 1,247 --
Deferred income taxes (credit) ................................. (3,509) 3,956
Undistributed earnings of unconsolidated affiliates ............ (2,731) (65)
Other - net .................................................... 916 541
Payment for lease of manufacturing facility ........................ (3,269) (1,626)
Proceeds from rig mobilization ..................................... -- 6,921
Other - net ........................................................ (510) (395)
Provision for (payment of) prior years personal injury and
property damage claims - net ................................... 1,153 (1,574)
Net effect of changes in operating working capital ................. (5,240) (10,316)
---------- ----------
Net Cash Flows Provided by Operating Activities ........... 4,734 29,508
---------- ----------
Investing Activities:
Property additions ................................................. (41,370) (50,781)
Expenditures for acquisition, including acquisition costs, less
cash acquired .................................................. (2,881) (51,688)
Expenditures for drydocking costs .................................. (365) (817)
Proceeds from disposition of property, plant and equipment ......... 939 654
Other - net ........................................................ (206) (98)
---------- ----------
Net Cash Flows Used for Investing Activities .............. (43,883) (102,730)
---------- ----------
Financing Activities:
Proceeds from long-term debt ....................................... 35,000 180,000
Principal payments on long-term debt ............................... (15,625) (81,825)
Repayment of debt assumed in acquisition ........................... -- (15,672)
Payment of debt financing costs .................................... (105) (5,185)
Proceeds from exercise of stock options ............................ 220 379
---------- ----------
Net Cash Flows Provided by Financing Activities ........... 19,490 77,697
---------- ----------
Net Increase (Decrease) in Cash and Cash Equivalents .................... (19,659) 4,475
Cash and Cash Equivalents at January 1, ................................. 33,330 18,993
---------- ----------
Cash and Cash Equivalents at June 30, ................................... $ 13,671 $ 23,468
========== ==========
</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
1999 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ....................................................... $ 13,671 $ 33,330
Restricted cash ................................................................. 1,500 1,500
Accounts and notes receivable (net of allowance for doubtful accounts of
$739 and $742) ................................................................ 64,699 70,850
Inventories ..................................................................... 15,363 15,842
Deferred income tax asset ....................................................... 8,630 8,579
Other current assets ............................................................ 12,008 9,896
----------- -----------
Total current assets ........................................................ 115,871 139,997
Property, Plant and Equipment - Net ................................................ 424,100 405,740
Vessel Construction Deposits ....................................................... 12,792 18,275
Investment in and Noncurrent Receivables from Unconsolidated Affiliates ............ 30,701 28,027
Goodwill, net ...................................................................... 59,684 60,124
Deferred Costs ..................................................................... 8,335 9,674
Noncurrent Receivables (net of allowance for doubtful accounts of $1,170 and
$1,027) and Other Assets ........................................................ 1,751 2,302
----------- -----------
Total ....................................................................... $ 653,234 $ 664,139
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt ............................................... $ 625 $ 625
Accounts payable ................................................................ 14,414 25,263
Other current liabilities ....................................................... 54,071 63,932
----------- -----------
Total current liabilities ................................................... 69,110 89,820
Long-Term Debt ..................................................................... 192,222 172,847
Deferred Income Taxes .............................................................. 58,608 61,320
Other Liabilities .................................................................. 40,122 48,704
Shareholders' Equity:
Common stock, no par value:
40,000,000 shares authorized; 21,266,726 and 21,043,898 shares issued
and outstanding ............................................................. 235,011 232,023
Retained earnings .................................................................. 58,692 60,037
Unearned compensation - restricted stock ........................................... (209) (290)
Cumulative foreign currency translation adjustments ................................ (322) (322)
----------- -----------
Total shareholders' equity .................................................. 293,172 291,448
----------- -----------
Total ....................................................................... $ 653,234 $ 664,139
=========== ===========
</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 1998
financial statements to conform with the 1999 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. MERGER AGREEMENT
On January 10, 1999, the Company entered into a definitive agreement and
plan of merger (the "Merger Agreement") among the Company, Nabors Industries,
Inc. ("Nabors") and Starry Acquisition Corp., a Texas corporation and a wholly
owned subsidiary of Nabors ("Merger Sub"). The Merger Agreement provides,
subject to certain conditions set forth therein, that Merger Sub will be merged
(the "Merger") with and into the Company, with the Company continuing as the
surviving corporation and a wholly owned subsidiary of Nabors. At the effective
time of the Merger, each share of common stock, without par value, of the
Company (the "Pool Common Stock") issued and outstanding (excluding any treasury
shares held by the Company and shares held by Nabors or any of its
subsidiaries), including the associated common stock purchase rights, if any,
outstanding at the effective time of the Merger, will be converted into the
right to receive 1.025 shares of common stock, par value $.10 per share, of
Nabors (the "Nabors Common Stock"). The closing of the Merger is subject to
certain conditions, including, among other things, the approval of the holders
of at least two-thirds of the Pool Common Stock, the registration with the
Securities and Exchange Commission of the shares of Nabors Common Stock to be
issued in connection with the Merger and the expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"). The applicable waiting period under the HSR
Act has expired and the registration statement with respect to the Nabors
shares became effective on August 9, 1999. Subject to meeting the other
conditions referred to above, the Merger is expected to close near the end of
the third quarter of 1999.
6
<PAGE> 7
POOL ENERGY SERVICES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
3. EARNINGS PER SHARE
The reconciliation of the numerator and denominator used for the
computation of basic and diluted earnings (loss) per share ("EPS") is as
follows:
<TABLE>
<CAPTION>
FOR THE QUARTER
ENDED JUNE 30
------------------------
1999 1998
--------- ---------
(IN THOUSANDS EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
Net income (loss) for basic and diluted earnings per share .......... $ (1,880) $ 7,605
======== ========
Weighted-average shares for basic earnings per share ................ 21,246 21,041
======== ========
Effect of dilutive securities:
Employee stock options ............................................ -- 283
-------- --------
Adjusted weighted-average shares and assumed conversions for
diluted earnings (loss) per share ................................. 21,246 21,324
======== ========
Basic earnings (loss) per share ..................................... (.09) .36
======== ========
Diluted earnings (loss) per share ................................... (.09) .36
======== ========
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30
--------------------------
1999 1998
---------- ----------
(IN THOUSANDS EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
Net income (loss) for basic and diluted earnings per share ...... $ (1,345) $ 15,058
========== ==========
Weighted-average shares for basic earnings per share ............ 21,200 20,267
========== ==========
Effect of dilutive securities:
Employee stock options ........................................ -- 284
---------- ----------
Adjusted weighted-average shares and assumed conversions for
diluted earnings (loss) per share ............................. 21,200 20,551
========== ==========
Basic earnings (loss) per share ................................. (.06) .74
========== ==========
Diluted earnings (loss) per share ............................... (.06) .73
========== ==========
</TABLE>
The 1999 EPS calculations exclude options to purchase approximately
1,422,000 shares of common stock that were outstanding during the second quarter
of 1999 because the inclusion of such options would have been antidilutive due
to the net loss during the period.
The 1998 EPS calculations exclude options to purchase approximately 70,000
shares of common stock at exercise prices ranging from $24.00 per share to
$35.50 per share because the inclusion of such options would have been
antidilutive.
7
<PAGE> 8
POOL ENERGY SERVICES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
4. 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
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues:
Pool Arabia, Ltd. ................. $ 22,148 $ 25,962
Pool International Argentina S.A .. 5,029 5,411
Intairdril Oman L.L.C ............. 136 40
---------- ----------
Total ........................ $ 27,313 $ 31,413
========== ==========
Gross Profit (Loss) (a):
Pool Arabia, Ltd. ................. $ 7,170 $ 8,236
Pool International Argentina S.A .. 322 (2,018)
Intairdril Oman L.L.C ............. 42 28
---------- ----------
Total ........................ $ 7,534 $ 6,246
========== ==========
Net Income (Loss):
Pool Arabia, Ltd. ................. $ 523 $ 668
Pool International Argentina S.A .. (1,289) (2,361)
Intairdril Oman L.L.C ............. 15 3
---------- ----------
Total ........................ $ (751) $ (1,690)
========== ==========
</TABLE>
(a) Gross profit is computed as revenues less operating expenses (which
excludes depreciation and amortization and selling, general and
administrative expenses).
Earnings (loss) attributable to unconsolidated affiliates is summarized
below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
--------------------
1999 1998
------- -------
<S> <C> <C>
The Company's portion of net loss ............................... $ (383) $ (862)
Adjustments to reconcile differences between affiliates' bases
and Company's carrying value ............................... 3,114 927
------- -------
Equity in income ................................................ 2,731 65
Lease income (expense) - net .................................... 2,300 1,001
Other income (expense) - net .................................... 40 42
------- -------
Total ...................................................... $ 5,071 $ 1,108
======= =======
</TABLE>
8
<PAGE> 9
POOL ENERGY SERVICES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
5. OPERATING SEGMENTS
The Company operates in only one business segment - the oilfield services
industry. Within this segment, the Company conducts business in the following
distinct geographic markets or reportable operating segments: domestic onshore,
divided into two separate geographic divisions - the Central division
(principally Texas and Oklahoma) and the California division; Gulf of Mexico
offshore; Offshore support vessels; International and Alaska. The following
table presents certain financial information of the Company for the six months
ended June 30, 1999 and 1998 by operating segment.
<TABLE>
<CAPTION>
DOMESTIC ONSHORE GULF OFFSHORE
------------------------ OF MEXICO SUPPORT
CENTRAL CALIFORNIA OFFSHORE VESSELS(a) INTERNATIONAL ALASKA CORPORATE TOTAL
--------- ---------- --------- ---------- ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999
- --------------------
Revenues ........... $ 49,039 $ 41,419 $ 15,052 $ 10,491 $ 20,861 $ 17,245 $ -- $ 154,107
Net income (loss)... (3,681) 1,591 (1,104) (2,030) 9,330 4,953 (10,404) (1,345)
Total assets ....... 96,195 42,871 81,308 172,699 138,143 70,931 51,087 653,234
1998
- --------------------
Revenues ........... $ 95,217 $ 46,133 $ 43,019 $ 13,835 $ 28,546 $ 18,961 $ -- $ 245,711
Net income (loss)... 3,613 1,676 5,641 3,429 4,661 2,796 (6,758) 15,058
Total assets ....... 126,436 54,348 98,211 165,959 141,394 55,410 34,495 676,253
</TABLE>
- ----------
(a) On March 31, 1998, the Company acquired all of the outstanding capital
stock of Sea Mar, Inc. ("Sea Mar") a privately-owned Louisiana-based
offshore support vessel company with operations primarily in the Gulf of
Mexico.
6. ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities". This statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities. In June 1999, the FASB issued SFAS 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133" which will delay the effective date of SFAS 133 to fiscal
years beginning after June 15, 2000. The Company is still in process of
evaluating what effect, if any, SFAS 133 will have on the Company's financial
statements. The Company will adopt this statement no later than January 1, 2001.
7. CONSOLIDATING FINANCIAL STATEMENTS
On March 31, 1998, the Company issued 8 5/8% Senior Subordinated Notes Due
2008 (the "Notes") in the aggregate principal amount of $150 million which are
unconditionally guaranteed, jointly and severally, by all of the Company's
wholly-owned subsidiaries that are incorporated or organized in the United
States (the "Subsidiary Guarantors"). The other subsidiaries of the Company are
not guarantors of the Notes (the "Non-Guarantor Subsidiaries"). The following is
condensed consolidating financial information for Pool Energy Services Co., on a
stand-alone basis ("PESCO"), the Subsidiary Guarantors (on a combined basis) and
the Non-Guarantor Subsidiaries (on a combined basis). Separate financial
information for each Subsidiary Guarantor is not presented because the Company
has concluded that such financial information is not material to investors.
9
<PAGE> 10
POOL ENERGY SERVICES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
POOL ENERGY SERVICES CO.
UNAUDITED CONDENSED STATEMENT OF CONSOLIDATING OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1999
----------------------------------------------------------------------
SUBSIDIARY NON-GUARANTOR
PESCO GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues ................................. $ -- $ 64,480 $ 8,600 $ -- $ 73,080
Earnings Attributable to Unconsolidated
Affiliates ............................ -- 247 1,156 -- 1,403
-------- -------- -------- -------- --------
Total ........................... -- 64,727 9,756 -- 74,483
-------- -------- -------- -------- --------
Costs and Expenses:
Operating expenses .................... -- 50,627 3,555 -- 54,182
Selling, general and administrative
expenses ............................ 1,379 10,729 411 -- 12,519
Depreciation and amortization ......... -- 9,395 2,064 (7) 11,452
-------- -------- -------- -------- --------
Total ........................... 1,379 70,751 6,030 (7) 78,153
-------- -------- -------- -------- --------
Other Income (Expense) - Net ............. -- 4,315 (47) -- 4,268
Interest Expense ......................... 3,364 1,081 130 -- 4,575
-------- -------- -------- -------- --------
Income (Loss) Before Income Taxes and
Equity in Earnings of Consolidated
Subsidiaries .......................... (4,743) (2,790) 3,549 7 (3,977)
Income Tax Provision (Credit) ............ (1,660) (989) 550 2 (2,097)
Equity in Earnings of Consolidated
Subsidiaries .......................... 1,203 2,999 -- (4,202) --
-------- -------- -------- -------- --------
Net Income (Loss) ........................ $ (1,880) $ 1,198 $ 2,999 $ (4,197) $ (1,880)
======== ======== ======== ======== ========
</TABLE>
10
<PAGE> 11
POOL ENERGY SERVICES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
POOL ENERGY SERVICES CO.
UNAUDITED CONDENSED STATEMENT OF CONSOLIDATING OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
----------------------------------------------------------------------
SUBSIDIARY NON-GUARANTOR
PESCO GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues ................................. $ -- $ 133,743 $ 20,364 $ -- $ 154,107
Earnings Attributable to Unconsolidated
Affiliates ............................ -- 2,771 2,300 -- 5,071
--------- --------- --------- --------- ---------
Total ........................... -- 136,514 22,664 -- 159,178
--------- --------- --------- --------- ---------
Costs and Expenses:
Operating expenses .................... -- 102,076 8,231 -- 110,307
Selling, general and administrative
expenses ............................ 2,142 23,304 1,208 -- 26,654
Depreciation and amortization ......... -- 18,654 4,138 (14) 22,778
--------- --------- --------- --------- ---------
Total ........................... 2,142 144,034 13,577 (14) 159,739
--------- --------- --------- --------- ---------
Other Income (Expense) - Net ............. -- 4,851 126 -- 4,977
Interest Expense ......................... 6,719 1,708 358 -- 8,785
--------- --------- --------- --------- ---------
Income (Loss) Before Income Taxes and
Equity in Earnings of Consolidated
Subsidiaries ......................... (8,861) (4,377) 8,855 14 (4,369)
Income Tax Provision (Credit) ........... (3,101) (1,038) 1,110 5 (3,024)
Equity in Earnings of Consolidated
Subsidiaries ......................... 4,415 7,745 -- (12,160) --
--------- --------- --------- --------- ---------
Net Income (Loss) ....................... $ (1,345) $ 4,406 $ 7,745 $ (12,151) $ (1,345)
========= ========= ========= ========= =========
</TABLE>
11
<PAGE> 12
POOL ENERGY SERVICES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
POOL ENERGY SERVICES CO.
UNAUDITED CONDENSED STATEMENT OF CONSOLIDATING CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
-------------------------------------------------------------------
SUBSIDIARY NON-GUARANTOR
PESCO GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Cash Flows Provided by (Used for)
Operating Activities ................... $ (9,194) $ 5,045 $ 8,884 $ (1) $ 4,734
-------- -------- -------- -------- --------
Investing Activities:
Property additions ........................ -- (40,588) (782) -- (41,370)
Expenditures for acquisition, including
acquisition costs, less cash acquired... -- (2,881) -- -- (2,881)
Expenditures for drydocking costs ......... -- (365) -- -- (365)
Proceeds from disposition of property,.....
plant and equipment .................... -- 930 9 -- 939
Other - net ............................... -- (227) 21 -- (206)
-------- -------- -------- -------- --------
Net Cash Flows Used for Investing
Activities ............................. -- (43,131) (752) -- (43,883)
-------- -------- -------- -------- --------
Financing Activities:
Proceeds from long-term debt .............. -- 35,000 -- -- 35,000
Principal payments on long-term debt ...... -- (15,625) -- -- (15,625)
Payment of debt financing costs ........... -- (105) -- -- (105)
Proceeds from exercise of stock options ... 220 -- -- -- 220
Payments from (advances to) consolidated
subsidiaries, net ...................... 9,044 (1,976) (7,069) 1 --
-------- -------- -------- -------- --------
Net Cash Flows Provided by (Used for)
Financing Activities ................... 9,264 17,294 (7,069) 1 19,490
-------- -------- -------- -------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents ............................ 70 (20,792) 1,063 -- (19,659)
Cash and Cash Equivalents at January 1, ... 70 31,774 1,486 -- 33,330
-------- -------- -------- -------- --------
Cash and Cash Equivalents at June 30, ..... $ 140 $ 10,982 $ 2,549 $ -- $ 13,671
======== ======== ======== ======== ========
</TABLE>
12
<PAGE> 13
POOL ENERGY SERVICES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
POOL ENERGY SERVICES CO.
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, 1999
---------------------------------------------------------------------
SUBSIDIARY NON-GUARANTOR
PESCO GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ............................. $ 140 $ 10,982 $ 2,549 $ -- $ 13,671
Restricted cash ....................................... -- 1,500 -- -- 1,500
Accounts and notes receivable ......................... -- 58,673 6,026 -- 64,699
Inventories ........................................... -- 3,746 11,617 -- 15,363
Deferred income tax asset ............................. 201 7,007 1,311 111 8,630
Other current assets .................................. 12,049 (960) 919 -- 12,008
--------- --------- --------- --------- ---------
Total current assets ............................ 12,390 80,948 22,422 111 115,871
Property, Plant and Equipment - Net ...................... -- 350,930 73,484 (314) 424,100
Investment in Consolidated Subsidiaries .................. 87,481 52,104 -- (139,585) --
Investment in and Noncurrent Receivables
from Unconsolidated Affiliates ........................ -- 30,701 -- -- 30,701
Goodwill, net ............................................ -- 59,684 -- -- 59,684
Vessel Construction Deposits ............................. -- 12,792 -- -- 12,792
Deferred Costs ........................................... 3,754 4,581 -- -- 8,335
Noncurrent Receivables and Other Assets .................. -- 1,738 13 -- 1,751
--------- --------- --------- --------- ---------
Total ........................................... $ 103,625 $ 593,478 $ 95,919 $(139,788) $ 653,234
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt ..................... $ -- $ 625 $ -- $ -- $ 625
Accounts payable ...................................... -- 13,967 447 -- 14,414
Payable (receivable) to (from)
consolidated subsidiaries ........................... (230,029) 208,471 21,789 (231) --
Other current liabilities ............................. 4,895 40,271 8,909 (4) 54,071
--------- --------- --------- --------- ---------
Total current liabilities ....................... (225,134) 263,334 31,145 (235) 69,110
Long-Term Debt ........................................... 150,000 42,222 -- -- 192,222
Long-Term Payable (Receivable) to (from)
Consolidated Subsidiaries ............................. (111,595) 107,303 4,292 -- --
Deferred Income Taxes .................................... (3,140) 54,888 6,855 5 58,608
Other Liabilities ........................................ -- 38,600 1,522 -- 40,122
Shareholders' Equity:
Common stock .......................................... 235,011 1 500 (501) 235,011
Paid-in capital ....................................... -- 12,399 18,619 (31,018) --
Retained earnings ..................................... 58,692 75,053 32,986 (108,039) 58,692
Unearned compensation - restricted stock .............. (209) -- -- -- (209)
Cumulative foreign currency translation
adjustments ......................................... -- (322) -- -- (322)
--------- --------- --------- --------- ---------
Total shareholders' equity ...................... 293,494 87,131 52,105 (139,558) 293,172
--------- --------- --------- --------- ---------
Total ........................................... $ 103,625 $ 593,478 $ 95,919 $(139,788) $ 653,234
========= ========= ========= ========= =========
</TABLE>
13
<PAGE> 14
POOL ENERGY SERVICES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
POOL ENERGY SERVICES CO.
UNAUDITED CONDENSED STATEMENT OF CONSOLIDATING OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1998
-------------------------------------------------------------------
SUBSIDIARY NON-GUARANTOR
PESCO GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues ................................. $ -- $114,207 $ 13,792 $ -- $127,999
Earnings Attributable to Unconsolidated
Affiliates ............................ -- 235 944 -- 1,179
-------- -------- -------- -------- --------
Total ........................... -- 114,442 14,736 -- 129,178
-------- -------- -------- -------- --------
Costs and Expenses:
Operating expenses .................... -- 79,134 7,635 -- 86,769
Selling, general and administrative
expenses ............................ 227 13,021 1,621 -- 14,869
Depreciation and amortization ......... -- 8,868 1,628 (7) 10,489
-------- -------- -------- -------- --------
Total ........................... 227 101,023 10,884 (7) 112,127
-------- -------- -------- -------- --------
Other Income (Expense) - Net ............. -- 110 96 -- 206
Interest Expense ......................... 3,347 478 466 -- 4,291
-------- -------- -------- -------- --------
Income (Loss) Before Income Taxes ........ (3,574) 13,051 3,482 7 12,966
Income Tax Provision (Credit) ............ (873) 4,908 1,324 2 5,361
Equity in Earnings of Consolidated
Subsidiaries .......................... 10,306 2,158 -- (12,464) --
-------- -------- -------- -------- --------
Net Income ............................... $ 7,605 $ 10,301 $ 2,158 $(12,459) $ 7,605
======== ======== ======== ======== ========
</TABLE>
14
<PAGE> 15
POOL ENERGY SERVICES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
POOL ENERGY SERVICES CO.
UNAUDITED CONDENSED STATEMENT OF CONSOLIDATING OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1998
-------------------------------------------------------------------
SUBSIDIARY NON-GUARANTOR
PESCO GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues ................................. $ -- $ 217,844 $ 27,867 $ -- $ 245,711
Earnings Attributable to Unconsolidated
Affiliates ............................ -- 129 979 -- 1,108
--------- --------- --------- --------- ---------
Total ........................... -- 217,973 28,846 -- 246,819
--------- --------- --------- --------- ---------
Costs and Expenses:
Operating expenses .................... -- 154,553 15,579 -- 170,132
Selling, general and administrative
expenses ............................ 374 25,064 2,606 -- 28,044
Depreciation and amortization ......... -- 15,061 2,952 (14) 17,999
--------- --------- --------- --------- ---------
Total ........................... 374 194,678 21,137 (14) 216,175
--------- --------- --------- --------- ---------
Other Income (Expense) - Net ............. -- 426 183 -- 609
Interest Expense ......................... 3,347 1,833 874 -- 6,054
--------- --------- --------- --------- ---------
Income (Loss) Before Income Taxes ........ (3,721) 21,888 7,018 14 25,199
Income Tax Provision (Credit) ............ (925) 8,649 2,412 5 10,141
Equity in Earnings of Consolidated
Subsidiaries .......................... 17,854 4,606 -- (22,460) --
--------- --------- --------- --------- ---------
Net Income ............................... $ 15,058 $ 17,845 $ 4,606 $ (22,451) $ 15,058
========= ========= ========= ========= =========
</TABLE>
15
<PAGE> 16
POOL ENERGY SERVICES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
POOL ENERGY SERVICES CO.
UNAUDITED CONDENSED STATEMENT OF CONSOLIDATING CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1998
----------------------------------------------------------------------
SUBSIDIARY NON-GUARANTOR
PESCO GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Cash Flows Provided by (Used for)
Operating Activities ................... $ (5,059) $ 21,654 $ 12,917 $ (4) $ 29,508
--------- --------- --------- --------- ---------
Investing Activities:
Property additions ........................ -- (37,242) (13,986) 447 (50,781)
Expenditures for acquisition, including
acquisition costs, less cash acquired .. -- (51,688) -- -- (51,688)
Expenditures for drydocking costs ......... -- (817) -- -- (817)
Proceeds from disposition of property,
plant and equipment .................... -- 942 159 (447) 654
Other - net ............................... 1 (106) 3 4 (98)
--------- --------- --------- --------- ---------
Net Cash Flows Provided by (Used for)
Investing Activities ................... 1 (88,911) (13,824) 4 (102,730)
--------- --------- --------- --------- ---------
Financing Activities:
Proceeds from long-term debt .............. 150,000 30,000 -- -- 180,000
Principal payments on long-term debt ...... -- (81,825) -- -- (81,825)
Repayment of debt assumed in acquisition .. -- (15,672) -- -- (15,672)
Payment of debt financing costs ........... (4,610) (575) -- -- (5,185)
Proceeds from exercise of stock options ... 379 -- -- -- 379
Payments from (advances to) consolidated
subsidiaries, net ...................... (140,858) 139,770 1,088 -- --
--------- --------- --------- --------- ---------
Net Cash Flows Provided by Financing
Activities ............................. 4,911 71,698 1,088 -- 77,697
--------- --------- --------- --------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents ............................ (147) 4,441 181 -- 4,475
Cash and Cash Equivalents at January 1, ... 210 16,395 2,388 -- 18,993
--------- --------- --------- --------- ---------
Cash and Cash Equivalents at June 30, ..... $ 63 $ 20,836 $ 2,569 $ -- $ 23,468
========= ========= ========= ========= =========
</TABLE>
16
<PAGE> 17
POOL ENERGY SERVICES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
POOL ENERGY SERVICES CO.
CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------------------------------------------
SUBSIDIARY NON-GUARANTOR
PESCO GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents .................. $ 70 $ 31,774 $ 1,486 $ -- $ 33,330
Restricted cash ............................ -- 1,500 -- -- 1,500
Accounts and notes receivable .............. -- 59,239 11,611 -- 70,850
Inventories ................................ -- 4,552 11,290 -- 15,842
Deferred income tax asset .................. 131 7,004 1,311 133 8,579
Other current assets ....................... 511 8,424 961 -- 9,896
--------- --------- --------- --------- ---------
Total current assets ................. 712 112,493 26,659 133 139,997
Property, Plant and Equipment - Net ........... -- 328,760 77,308 (328) 405,740
Vessel Construction Deposits .................. -- 18,275 -- -- 18,275
Investment in Consolidated Subsidiaries ....... 83,066 44,360 -- (127,426) --
Investment in and Noncurrent Receivables
from Unconsolidated Affiliates ............. -- 28,027 -- -- 28,027
Goodwill, net ................................. -- 60,124 -- -- 60,124
Deferred Costs ................................ 3,990 5,684 -- -- 9,674
Noncurrent Receivables and Other Assets ....... -- 2,284 18 -- 2,302
--------- --------- --------- --------- ---------
Total ................................ $ 87,768 $ 600,007 $ 103,985 $(127,621) $ 664,139
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt .......... $ -- $ 625 $ -- $ -- $ 625
Accounts payable ........................... -- 22,782 2,481 -- 25,263
Payable (receivable) to (from)
consolidated subsidiaries ................ (236,391) 210,662 25,961 (232) --
Other current liabilities .................. (4,384) 51,758 16,544 14 63,932
--------- --------- --------- --------- ---------
Total current liabilities ............ (240,775) 285,827 44,986 (218) 89,820
Long-Term Debt ................................ 150,000 22,847 -- -- 172,847
Long-Term Payable (Receivable) to (from)
Consolidated Subsidiaries .................. (111,595) 104,406 7,189 -- --
Deferred Income Taxes ......................... (1,632) 57,129 5,819 4 61,320
Other Liabilities ............................. -- 47,073 1,631 -- 48,704
Shareholders' Equity:
Common stock ............................... 232,023 1 500 (501) 232,023
Paid-in capital ............................ -- 12,399 18,619 (31,018) --
Retained earnings .......................... 60,037 70,647 25,241 (95,888) 60,037
Unearned compensation - restricted stock ... (290) -- -- -- (290)
Cumulative foreign currency translation
adjustments .............................. -- (322) -- -- (322)
--------- --------- --------- --------- ---------
Total shareholders' equity ........... 291,770 82,725 44,360 (127,407) 291,448
--------- --------- --------- --------- ---------
Total ................................ $ 87,768 $ 600,007 $ 103,985 $(127,621) $ 664,139
========= ========= ========= ========= =========
</TABLE>
17
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
MERGER AGREEMENT
The Merger Agreement entered into on January 10, 1999 among the Company,
Nabors and Merger Sub provides, subject to certain conditions set forth therein,
that Merger Sub will be merged with and into the Company, with the Company
continuing as the surviving corporation and a wholly owned subsidiary of Nabors.
At the effective time of the Merger, each share of Pool Common Stock issued and
outstanding (excluding any treasury shares held by the Company and shares held
by Nabors or any of it subsidiaries), including the associated common stock
purchase rights, if any, outstanding at the effective time of the Merger, will
be converted into the right to receive 1.025 shares of Nabors Common Stock. The
closing of the Merger is subject to certain conditions, including, among other
things, approval by the holders of at least two-thirds of Pool Common Stock, the
registration with the Securities and Exchange Commission of the shares of Nabors
Common Stock to be issued in connection with the Merger and the expiration or
termination of the applicable waiting period under the HSR Act. The applicable
waiting period under the HSR Act has expired and the registration statement with
respect to the Nabors shares became effective on August 9, 1999. Subject to
meeting the other conditions referred to above, the Merger is expected to close
near the end of the third quarter of 1999.
SEA MAR ACQUISITION
The Company's acquisition on March 31, 1998 of all of the outstanding
capital stock of Sea Mar, a privately owned Louisiana-based offshore support
vessel company with operations primarily in the Gulf of Mexico, involved
purchase consideration at closing of approximately $76.0 million in cash and
1,538,462 shares of the Company's common stock. During the first quarter of
1999, the Company paid additional cash consideration of approximately $2.9
million as a result of Sea Mar's financial performance for the fiscal year ended
December 31, 1998. The Company is also obligated to pay additional cash
consideration contingent upon Sea Mar's financial performance for the fiscal
year ending December 31, 1999, up to a maximum of $10 million.
As a result of the acquisition of Sea Mar, the Company now operates a
diversified fleet of offshore support vessels in the Gulf of Mexico. In
addition, Sea Mar has a contract with a marine shipbuilder for the construction
of ten offshore support vessels at an estimated aggregate cost of $78.5 million,
net of deposits. Three new vessels were delivered during the first half of 1999.
The remaining seven vessels are scheduled to be delivered between the third
quarter of 1999 and late 2000. The Company anticipates that the expenditures for
these vessels will be financed by internally generated funds and other financing
arrangements as needed.
RESULTS OF OPERATIONS - QUARTERS ENDED JUNE 30, 1999 AND 1998
The Company incurred a net loss of $1.9 million in the second quarter of
1999 compared to net income of $7.6 million generated in the second quarter of
1998. The average price of crude oil was approximately 21% higher in the second
quarter of 1999 than in the second quarter of 1998 and the average domestic
natural gas price was essentially flat comparing the same periods. Results from
each of the Company's operating segments for the second quarter 1999 were
unfavorable to reported results for the same period in 1998 except for the
California division of the domestic onshore operation where an organizational
restructuring resulted in reduced costs. Overall, the Company's earnings for the
period were down due to the lingering effect from low oil prices in 1998 and
early 1999 which, although steadily rising during the second quarter of 1999,
negatively impacted the Company's equipment utilization and rates.
Revenues. Revenues were $73.1 million in the second quarter of 1999, a 43%
decrease from revenues of $128.0 million in the second quarter of 1998. Each of
the Company's operating segments contributed to the $54.9 million decline.
18
<PAGE> 19
Domestic onshore well-servicing and production services revenues declined
$20.5 million or 30% in the second quarter of 1999 from the corresponding
quarter of 1998. Domestic onshore rig utilization dropped from 50% in 1998 to
39% in 1999 and rig hours declined approximately 74,000, from 297,700 in the
second quarter of 1998 to 223,700 in the second quarter of 1999. Rig rates also
decreased by about 1%, comparing the same periods. The Company's truck and frac
tank activity levels declined by approximately 31% and 54%, respectively. In the
Gulf of Mexico, revenue of $8.4 million for the second quarter of 1999 was 66%
lower than that in the comparable period of 1998 with rig utilization of 39% in
1999 compared to 74% in 1998. Average rates for the Company's offshore rigs in
1999 were 42% below the rates in the 1998 period. The Company's offshore support
vessel operation, Sea Mar, had revenues of $4.9 million during the second
quarter of 1999 compared to revenues of $13.8 million during the second quarter
of 1998. Vessel utilization was approximately 43% and 89% for the respective
periods, and average day rates for the vessels were approximately 34% lower in
the 1999 period.
Internationally, revenues were down from $14.3 million for the quarter
ended June 1998 to $8.8 million for the same period in 1999. Rig utilization in
the second quarter of 1999 was 34% compared to 50% in the second quarter of
1998. Reduced utilization in most of the Company's international operating
locations resulted in lower revenues except for offshore Australia where higher
day rates and mobilization revenue were earned by a platform workover rig, Rig
453, that was converted for drilling operations during the second quarter of
1998. In Alaska, quarterly revenues of $4.4 million represented a 46% decline
from revenues of the comparable period in 1998. The decline resulted from lower
rig utilization, 33% in 1999 compared to 56% in 1998, as well as from reduced
revenues from labor contracts.
Earnings Attributable to Unconsolidated Affiliates. Earnings attributable
to unconsolidated affiliates were $1.4 million in the second quarter of 1999
compared to earnings of $1.2 million in the second quarter of 1998. The $0.2
million improvement in 1999 resulted partially from a $0.1 million increase by
Pool Arabia and partially from a $0.1 million improvement by PIASA. The increase
in earnings from Pool Arabia was due primarily to higher income earned from Pool
Arabia's operation of two rigs leased from the Company. The loss attributable to
the Company's 51% share of PIASA was less in the second quarter of 1999 than in
the comparable period of 1998 due to the implementation of a cost reduction
program in Argentina.
Costs and Expenses. The Company's costs and expenses were $78.2 million in
the second quarter of 1999, a 30% reduction compared to costs and expenses of
$112.1 million in the corresponding quarter of 1998. Generally, costs and
expenses declined due to the company-wide drop in equipment utilization
experienced in 1999. As a percentage of revenue, costs and expenses were 107%
and 88% for the respective periods. The second quarter of 1999 included
approximately $1.1 million of Merger expenses. Depreciation expense, one of the
cost components included with costs and expenses, increased in 1999 due to the
additional vessels delivered this year, the 1998 rig upgrades in Oman, Alaska
and the Gulf of Mexico and the 1998 addition of a new rig which is being leased
to Pool Arabia.
Other Income - Net. Other income - net was $4.3 million in the second
quarter of 1999 due primarily to the recording of a $4.0 million receivable
related to the 1997 loss of a rig in the Gulf of Mexico.
Interest Expense. Interest expense in the second quarter of 1999 was $4.6
million, $0.3 million higher than in the corresponding period of 1998, primarily
due to higher borrowings under the Company's three-year $180 million syndicated
bank credit agreement (the "Credit Agreement") during the 1999 period.
19
<PAGE> 20
Income Taxes. The Company recorded an income tax credit of $2.1 million on
a loss before income taxes of $4.0 million in the second quarter of 1999,
compared to income tax expense of $5.4 million on income before income taxes of
$13.0 million in the second quarter of 1998. The decrease in income tax expense
in the second quarter of 1999, compared to the second quarter of 1998, was
primarily due to a decrease in pre-tax income in the second quarter of 1999, as
a result of the factors described above, and the reversal of a $0.5 million
deferred foreign income tax liability. 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 tax jurisdictions.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1999 AND 1998
The Company incurred a net loss of $1.3 million in the first six months of
1999, compared with net income of $15.1 million generated during the first six
months of 1998. Results from each of the Company's operating segments for the
first half of 1999 were less than reported results for the same period in 1998
except for the Company's international operations which were improved due to
higher earnings attributable to Pool Arabia and in Alaska due to the receipt of
a payment related to the early termination of a drilling contract. Overall, the
Company's utilization and rates were down due to reduced demand for the
Company's services resulting from depressed oil prices for a sustained period of
time which bottomed out in the last quarter of 1998 and, although oil prices had
meaningfully improved by the second quarter of 1999, the improvement did not
result in an overall increase in demand for the Company's services.
Revenues. Revenues were $154.1 million in the first six months of 1999, a
37% decrease compared to revenues of $245.7 million in the first six months of
1998. Each of the Company's operating segments contributed to the $91.6 million
decline.
Domestic onshore well-servicing and production services revenues decreased
$50.9 million or 36% in the first six months of 1999 from the corresponding
period of 1998 due to the negative effect of low oil and gas prices. Domestic
onshore rig utilization was 36% in the first six months of 1999, compared to 52%
in the first six months of 1998. Domestic onshore rig hours decreased from
approximately 628,000 in 1998 to 419,000 in 1999, although rates remained
relatively flat. The Company's truck and frac tank activity levels also declined
by approximately 35% and 60%, respectively. Gulf of Mexico workover and drilling
revenues decreased from $43.0 million in 1998 to $15.1 million in 1999.
Utilization for the offshore rig fleet declined from 66% in the first half of
1998 to 33% in the comparable period of 1999, while average day rates decreased
36% comparing the same periods. Sea Mar, acquired on March 31, 1998, had
revenues of $10.5 million for the first six months of 1999.
International operations revenues decreased to $20.9 million for the first
six months of 1999 compared to $28.5 million in the 1998 period. The $7.6
million revenue decline was attributable to a reduction in utilization of rigs
in Ecuador, Guatemala, Oman and Pakistan, partially offset by higher revenue
generated from Rig 453 in Australia, which earned higher day rates and
mobilization revenue after it was converted for drilling operations during the
second quarter of 1998. In Alaska, revenues of $17.2 million for the first six
months of 1999 represented a $1.7 million reduction from the 1998 period. The
decline was due to lower utilization of the Company's rig fleet and reduced
revenues from labor contacts, but these decreases were partially offset by a
payment received during the first half of 1999 related to the early
termination of a drilling contract.
Earnings Attributable to Unconsolidated Affiliates. Earnings attributable
to unconsolidated affiliates were $5.1 million in the first six months of 1999,
compared to $1.1 million in the first six months of 1998. Earnings attributable
to Pool Arabia increased $3.4 million from the first six months of 1998 to $5.8
million in the first half of 1999, primarily due to Pool Arabia's operation of
two rigs leased from the Company and the reversal of $2.2 million of excess
deferred foreign income tax reserves related to the 1996 tax year, which has now
been audited by the applicable foreign tax authorities. The loss attributable to
PIASA was $0.6 million less in the first half of 1999 than in the comparable
period of 1998 due to the implementation of a cost reduction program in
Argentina.
20
<PAGE> 21
Costs and Expenses. The Company's costs and expenses were $159.7 million in
the first six months of 1999, a 26% decrease compared to costs and expenses of
$216.2 million in the corresponding period of 1998. Generally, costs and
expenses declined due to the company-wide decrease in equipment utilization
experienced in 1999. However, the decline in 1999 was partially offset by the
1999 inclusion of a full six months of Sea Mar expenses compared to the 1998
period, which included only three months of Sea Mar costs. As a percentage of
revenue, costs and expenses were 104% and 88% for the respective periods. The
first six months of 1999 included approximately $1.6 million of Merger related
expenses. Depreciation expense, one of the cost components included within costs
and expenses, increased in 1999 due to additional vessels delivered this year,
the 1998 rig upgrades in Oman, Alaska and the Gulf of Mexico and the 1998
addition of a new rig which is being leased to Pool Arabia.
Other Income - Net. Other income - net was $5.0 million during the first
six months of 1999 due primarily to the recording of a $4.0 million receivable
related to the 1997 loss of a rig in the Gulf of Mexico.
Interest Expense. Interest expense for the first six months of 1999 was
$8.8 million. The $2.7 million increase over the comparable period of 1998
primarily resulted from interest expense related to the $150 million Notes
issued in March 1998, but was also from higher borrowings under the Company's
Credit Agreement in the 1999 period.
Income Taxes. The Company recorded an income tax credit of $3.0 million on
a loss before income taxes of $4.4 million in the first six months of 1999,
compared to income tax expense of $10.1 million on income before income taxes of
$25.2 million in the first six months of 1998. The decrease in income tax
expense in the first half of 1999, compared to the first half of 1998, was
primarily due to a decrease in pre-tax income in the first six months of 1999,
as a result of the factors described above, and the $1.2 million reversal of
overaccrued deferred foreign income tax liabilities. 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 tax
jurisdictions.
FINANCIAL CONDITION AND LIQUIDITY
Cash Flows. The Company had cash and cash equivalents of $13.7 million at
June 30, 1999 compared to $33.3 million at December 31, 1998. Working capital
was $46.8 million and $50.2 million at June 30, 1999 and December 31, 1998,
respectively. The Company used a net $43.9 million for investing activities in
the first half of 1999, primarily for capital expenditures of $41.4 million,
including $24.5 million paid for the balance of the purchase price of three
offshore support vessels, as well as $2.9 million of additional cash
consideration paid for the acquisition of Sea Mar as a result of its financial
performance for the fiscal year ended December 31, 1998. The Company used a net
$102.7 million for investing activities in the first six months of 1998,
primarily for capital expenditures of $50.8 million and $51.7 million, net of
cash acquired, for the purchase of Sea Mar.
$150 Million Senior Subordinated Notes. In March 1998, the Company issued
8 5/8% Notes in the aggregate principal amount of $150 million and used the net
proceeds from the sale thereof to fund the cash portion of the Sea Mar purchase,
to repay the existing debt of Sea Mar and to reduce the outstanding balance
under the Credit Agreement.
The Notes are general unsecured obligations of the Company, subordinated in
right of payment to all existing and future senior indebtedness of the Company,
and are unconditionally guaranteed, jointly and severally, by each of the
Subsidiary Guarantors. The Notes contain certain covenants that, among other
things, limit the ability of the Company and the Subsidiary Guarantors to incur
additional indebtedness, issue capital stock of Subsidiary Guarantors, pay
dividends or make other restricted payments, incur liens, enter into certain
transactions with affiliates, enter into certain mergers or consolidations or
sell all or substantially all of the assets of the Company and its subsidiaries.
21
<PAGE> 22
$180 Million Credit Agreement. In March 1998, simultaneously with the issuance
of the Notes and the acquisition of Sea Mar, the Company executed an amendment
to its three-year $130 million Credit Agreement to provide for maximum
borrowings of up to $180 million which was further amended to include up to $25
million that may be used to support letters of credit. At June 30, 1999, the
Company had drawn $30.0 million in cash under the Credit Agreement, and an
additional $9.4 million was being utilized to support the issuance of letters of
credit, primarily related to insurance obligations and long-term notes issued in
connection with the 1995 acquisition of Golden Pacific Corp.
Borrowings under the Credit Agreement bear interest, at the Company's option, at
either (i) the Base Rate (defined as the higher of the administrative agent
bank's prime lending rate or 1/2 of 1% in excess of the federal funds rate) plus
a margin ranging from zero to .50%, or (ii) the Eurodollar Rate (equivalent to
the London Interbank Offered Rate plus a margin ranging from 1% to 1.75% with
the Company's option of a one-, two-, three-or six-month interest period). The
applicable margin for each interest option depends on the Company's leverage
ratio for the fiscal quarter preceding the interest period. Based upon the
Company's leverage ratio at June 30, 1999, the applicable Eurodollar margin
would be 1.75% for borrowings during the third quarter of 1999. The Credit
Agreement will mature on October 2, 2000 and is subject to being extended on a
year-to-year basis at the discretion of the lenders. Revolving loans issued
under the Credit Agreement are prepayable at any time and are due at expiration
on October 2, 2000. The Credit Agreement imposes certain financial covenants,
including ones requiring the maintenance of a minimum net worth, a minimum
interest coverage ratio, a minimum fixed charge coverage ratio, a maximum
leverage ratio and a maximum debt-to-equity ratio. It also imposes certain other
restrictions, including ones related to liens, other indebtedness, asset sales,
investments, acquisitions or mergers and the payment of dividends. The Credit
Agreement is guaranteed on an unsecured basis by substantially all of the
Company's domestic subsidiaries. Advances under the Credit Agreement are secured
by a pledge of 66% of the capital stock of certain of the Company's foreign
subsidiaries. During the first six months of 1999, the Company drew $35.0
million in cash and made payments of $15.0 million to reduce borrowings under
the Credit Agreement and made a $0.6 million scheduled principal payment on
long-term debt. During the first six months of 1998, the Company made payments
of $80.8 million to reduce borrowings under the Credit Agreement, repaid Sea
Mar's existing debt of $15.7 million and made $1.0 million of scheduled
principal payments on long-term debt.
Sale and Leaseback. In December 1998, the Company entered into sale and
leaseback agreements with a leasing company with respect to two offshore jackup
rigs. These rigs had been leased by the Company from another leasing company for
the previous five years and were purchased by the Company for $2.3 million in
December 1998 through the exercise of a purchase option. The rigs were sold to
the new leasing company for $20.0 million in cash. The current leases for the
two rigs have an aggregate annual lease rate of approximately $2.7 million
through December 2004.
Capital Expenditures. The Company anticipates that 1999 capital
expenditures will principally consist of (i) approximately $11 million for
maintaining its existing rig and offshore support vessel fleet, (ii)
approximately $6 million to complete construction of a new Arctic drilling rig
in Alaska and (iii) approximately $33 million for the payment of the balance of
the purchase price for four new offshore support vessels that Sea Mar had
contracted for prior to its being acquired by the Company. The Company
anticipates that these expenditures will be financed by internally generated
funds, borrowings under the Credit Agreement and other financing arrangements as
needed. Except for the foregoing, capital spending generally has been suspended
by the Company pending consummation of the Merger.
22
<PAGE> 23
OTHER MATTERS
Market Outlook. Historically, the demand for the Company's services has had
a strong correlation with the fluctuations in oil and natural gas prices. Crude
oil prices began declining in October 1997 when the average price was
approximately $21.46 per barrel. By January 1998 the average price was down to
approximately $16.67 per barrel and continued to deteriorate thereafter until it
reached a low of approximately $11.07 in December 1998. However, in January 1999
oil prices began recovering. The average price per barrel rose to approximately
$12.59 that month. By June 1999 the price had risen to an average of
approximately $17.96 per barrel. Similarly, the average price for domestic
natural gas declined from $2.90 per MMbtu in October 1997 to $1.99 per MMbtu in
January 1998 and then further decreased to $1.66 per MMbtu in December 1998.
Like oil, natural gas prices began climbing again in 1999, with prices of $1.73
per MMbtu in January 1999 increasing to $2.16 per MMbtu in June 1999. The
falling oil and gas prices, which began in late 1997, have negatively affected
the activity levels and financial results of the Company, particularly since
mid-1998. With the 1999 upward trend of oil and gas prices, the Company is
optimistic about a recovery in the demand for its services and improvements in
its rates and believes this will be evident by the last quarter of 1999. The
Company remains confident that market conditions will improve over the longer
term, as supply and demand for its services become more in balance, and is
optimistic about the long-term outlook.
Accounting Standards. In June 1998, the FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This statement
establishes accounting and reporting standards for derivative instruments and
for hedging activities. In June 1999, the FASB issued SFAS 137, "Accounting for
Derivative Investments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133" which will delay the effective date of SFAS 133 to
fiscal years beginning after June 15, 2000. The Company is still in process of
evaluating what effect, if any, SFAS 133 will have on the Company's financial
statements. The Company will adopt this statement no later than January 1, 2001.
Impact of the Year 2000 Issue. Some of the Company's older computer
programs were written using a two digit year. As a result, those computer
programs may be unable to process date-sensitive information in the year 2000
and beyond. This situation, frequently referred to as the Year 2000 or Y2K
issue, could cause a temporary disruption of the ordinary course of business.
The Company has developed a plan to address its exposure to the impact of the
Year 2000 issue. An assessment of the critical financial and operational systems
has been made and the remediation of these systems is approximately 95%
complete. The testing phase of the critical systems is 90% complete, and these
systems are expected to be Year 2000 compliant by September 1999. The inventory,
assessment, modification and testing of the smaller, less critical, financial
and operational systems, many located internationally, have been substantially
completed. The assessment of systems embedded in the Company's buildings,
equipment and other infrastructures has been completed. To date, there has been
no discovery of a significant non-compliant embedded system. As of June 30,
1999, the Company has spent approximately $0.4 million, exclusive of internal
costs, on its Year 2000 initiatives, primarily for incremental software
purchases and outside consulting. The Company does not separately track internal
Year 2000 costs, which are largely salaries and benefits of Company personnel
working on the project. The Company expects the incremental cost of full
implementation of its Year 2000 plan to be approximately $0.5 million, exclusive
of internal costs.
The Company has formally communicated with the suppliers, customers and
financial institutions that it considers to be material third parties and is
evaluating its risks related to any possible failure of such third parties to be
Year 2000 compliant. The effect, if any, on the Company's results of operations
arising from the failure of these third parties to be Year 2000 compliant is not
reasonably estimable at this time. Risk assessment and contingency plans related
to these parties are expected to be complete by September 1999.
Contingency plans to protect the Company from Year 2000-related
interruptions are being developed and are expected to be complete by September
1999.
23
<PAGE> 24
The dates on which the Company plans to become Year 2000 compliant and the
costs associated with the related modifications are based on management's best
estimates, which were derived utilizing numerous assumptions regarding future
events, including the continued availability of certain resources, third party
modification plans and other factors. There can be no assurance that these time
or cost estimates will be achieved, and the actual results could be materially
different. Although the Company expects to be Year 2000 compliant by September
1999 and believes that in a "most reasonably likely worst case scenario" it will
not be materially impacted by any third party non-compliance, failure by the
Company or by material third parties to fully implement appropriate Year 2000
plans could have a material adverse effect on the Company's results of
operations. Adverse effects on the Company could include, among other things,
business disruptions, increased costs, loss of business and other similar risks.
Forward-Looking Information. The statements included in this report on Form
10-Q regarding future financial performance and results of operations and other
statements that are not historical facts are 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. Statements to
the effect that the Company or management "anticipates," "believes,"
"estimates," "expects," "predicts," or "projects" a particular result or course
of events, or that such result or course of events "should" occur, and similar
expressions, are also intended to identify forward-looking statements. In
connection with such statements, it should be noted that the Company's
operations and financial results are subject to numerous risks, uncertainties
and assumptions, including but not limited to uncertainties related to industry
and market conditions, prices of crude oil and natural gas, foreign exchange and
currency fluctuations, political instability in foreign jurisdictions, the
ability of the Company to integrate newly acquired operations, the success of
the Company and material third party business partners or suppliers in
implementing their Year 2000 compliance plans and other factors discussed in
this quarterly report and in the Company's other filings with the Securities and
Exchange Commission. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those stated.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The following discussion of the Company's market sensitive financial
instruments contains "forward-looking statements." All items described are
non-trading.
INTEREST RATE RISK
There have been no material changes in the Company's market risk during the
six months ended June 30, 1999. The Company currently has minimal interest rate
risk since a majority of the Company's long-term debt is fixed-rate and,
therefore, does not expose the Company to risk of earnings loss due to changes
in market interest rates. The Company is, however, subject to the risk of
fluctuating interest rates under the Credit Agreement, since it provides for
borrowings which bear interest at variable rates.
<TABLE>
<CAPTION>
FAIR VALUE
06/30/99
-------------
LONG-TERM DEBT (IN MILLIONS)
<S> <C>
8 5/8% Senior Subordinate Notes Due 2008, Series B
Fixed interest rate - 8 5/8% .................................................... $152.3
9% Notes (DA&S)
Fixed interest rate - 9% ........................................................ $10.4
10% Notes (GPC)
Fixed interest rate - 10% ....................................................... $4.2
Revolving Credit Agreement Loans
Variable interest rate - 6.21% at June 30, 1999 ................................. $30.0
</TABLE>
24
<PAGE> 25
FOREIGN EXCHANGE RISK
The Company operates internationally, giving rise to exposure to market
risks from changes in foreign exchange rates to the extent that transactions are
not denominated in U.S. dollars. Wherever possible, the Company denominates its
contracts in U.S. dollars to mitigate the exposure to fluctuations in foreign
currencies. The Company uses forward exchange contracts as economic hedges of
exposed net investments in foreign entities in which that exposure exceeds $0.2
million and for which contracts in the appropriate currency are available. The
Company's foreign exchange contracts do not subject the Company to the risk of
changing rate movements because gains and losses on these contracts offset gains
and losses on the exposed investments being hedged. The forward exchange
contracts generally have maturities which do not exceed 31 days.
25
<PAGE> 26
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO. DOCUMENT
- ----------- --------
10.1(*) - May 1999 Amendment to the Company's $180,000,000 Credit Agreement
and Waiver and Consent dated May 21, 1999.
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, 1999.
26
<PAGE> 27
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 13, 1999 /s/ E. J. SPILLARD
------------------------------- -----------------------------------
(Date) E. J. Spillard
Senior Vice President, Finance
(principal financial officer)
AUGUST 13, 1999 /s/ B. G. GORDON
------------------------------- -----------------------------------
(Date) B. G. Gordon
Controller
(principal accounting officer)
27
<PAGE> 1
EXHIBIT 10.1
MAY 1999 AMENDMENT TO THE CREDIT AGREEMENT
AND WAIVER AND CONSENT
MAY 1999 AMENDMENT TO THE CREDIT AGREEMENT AND WAIVER AND
CONSENT (this "Amendment"), dated as of May 21, 1999, among Pool Energy Services
Co. ("PESCO"), Pool Company (formerly Pool Energy Holding, Inc. and the
successor by merger to Pool Company (the "Borrower")), and various banks party
to the hereinafter defined Credit Agreement. All capitalized terms defined in
the Credit Agreement shall have the same meaning when used herein unless
otherwise defined herein.
W I T N E S S E T H:
WHEREAS, PESCO, Pool Energy Holdings, Inc., Pool Company,
various Banks, SBC Warburg Dillon Read Inc., as Arranger, Credit Lyonnais New
York Branch, as Administrative Agent, and Swiss Bank Corporation, Stamford
Branch, as Documentation Agent (the "Documentation Agent"), entered into an
Amended and Restated Credit Agreement, dated as of March 26, 1998 (as amended to
date, the "Credit Agreement"); and
WHEREAS, UBS AG, New York Branch, is the successor by merger
to the Documentation Agent; and
WHEREAS, the parties hereto wish to amend the Credit Agreement
as herein provided; and
WHEREAS, the Banks party hereto are willing to grant the
waivers of and consents with respect to the Credit Agreement as set forth
herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto hereby agree as follows:
1. Amendments to the Credit Agreement. (a) Section 9.08 of the
Credit Agreement is hereby amended by deleting the table therein and replacing
it with the following:
Fiscal Quarter Ending Ratio
--------------------- -----
March 31, 1999 1.55:1.00
June 30, 1999 1.33:1.00
September 30, 1999 1.33:1.00
December 31, 1999 1.33:1.00
during 2000 or any year thereafter 1.75:1.00
(b) Clause (y) of Section 9.11 of the Credit Agreement is
hereby amended by deleting the words "for of" and replacing them with "from".
<PAGE> 2
(d) Clause (G) of the definition of "Contingent Obligation" in
Section 11.01 of the Credit Agreement is hereby amended in its entirety to read
as follows:
(G) PESCO's guarantee of the Borrower's obligations relating to any
sale and leaseback transaction with respect to the Ranger Rigs or the
1999 Offshore Vessels.
(c) Section 11.01 of the Credit Agreement is hereby amended by
adding the following defined term thereto in proper alphabetical order:
"1999 Offshore Vessels" shall mean the offshore supply vessels
(i) M/V Cape Byrd (official no. 1076184), (ii) M/V Cape Hope (official
no. 1076117), (iii) M/V Cape Beaufort (official no. 1076186) and (iv)
M/V Cape Hawke (official no. 1076185).
2. Consents and Waivers. The Required Banks hereby grant the
following consents and waivers with respect to the Credit Agreement:
(a) The Banks party hereto hereby consent to (i) the
acquisition by the Borrower of the 1999 Offshore Vessels, (ii) the Borrower
entering into four separate operating lease sale/leaseback transactions with
respect to the 1999 Offshore Vessels (the "New Sale/Leaseback Transactions")
similar to the sale/leaseback transaction presently in effect with respect to
the Ranger Rigs and (iii) the use by the Borrower of the proceeds from the New
Sale/Leaseback Transactions for the acquisition of capital assets and/or the
repayment of debt.
(b) The Banks party hereto hereby waive the applicability of
and compliance by the Borrower with the provisions of Sections 3.03(b), 4.02(f)
and 9.02 of the Credit Agreement with respect to the New Sale/Leaseback
Transactions, agree that the New Sale/Leaseback Transactions shall not be
included in the determination of the aggregate value of asset sales permitted
pursuant to Section 9.02(iv) of the Credit Agreement and agree that the
provisions of clause (G) of the definition of Contingent Obligation in Section
11.01 of the Credit Agreement shall apply to the New Sale/Leaseback
Transactions.
3. Amendment, Consent and Waiver Fee. Provided the Required
Banks execute this Amendment on or prior to May 21, 1999, the Borrower agrees to
pay each Bank that executes this Amendment on or prior to May 21, 1999 an
amendment, consent and waiver fee equal to 0.075% of such Bank's Revolving Loan
Commitment as of May 21, 1999. Such fee shall be paid by the Borrower on or
prior to May 28, 1999.
4. Representations and Warranties. In order to induce the
Required Banks to enter into this Amendment, each of PESCO and the Borrower
hereby represents and warrants that:
(a) no Default or Event of Default will exist as of the date
hereof and after giving effect to this Amendment; and
(b) as of the date hereof, after giving effect to this
Amendment, all representations, warranties and agreements of PESCO or the
Borrower contained in the Credit Agreement will be true and correct in all
material respects.
-2-
<PAGE> 3
5. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF
LAW PROVISIONS THEREOF.
6. Agreement Not Otherwise Amended. This Amendment is limited
precisely as written and shall not be deemed to be an amendment, consent, waiver
or modification of any other term or condition of the Credit Agreement or any of
the instruments or agreements referred to therein, or prejudice any right or
rights which the Banks, the Arranger, the Administrative Agent, the
Documentation Agent or any of them now have or may have in the future under or
in connection with the Credit Agreement or any of the instruments or agreements
referred to therein. Except as expressly modified hereby, the terms and
provisions of the Credit Agreement shall continue in full force and effect.
Whenever the Credit Agreement is referred to in the Credit Agreement or any of
the instruments, agreements or other documents or papers executed and delivered
in connection therewith, it shall be deemed to be a reference to the Credit
Agreement as modified hereby.
7. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective duly authorized
officers as of the date first above written.
POOL ENERGY SERVICES CO.
By /s/ E. J. SPILLARD
----------------------------------------
Name: E. J. Spillard
Title: Senior Vice President, Finance
By /s/ R. A. JOHANNSEN
----------------------------------------
Name: R. A. Johannsen
Title: Treasurer
-3-
<PAGE> 4
POOL COMPANY
By /s/ E. J. SPILLARD
----------------------------------------
Name: E. J. Spillard
Title: Senior Vice President, Finance
By /s/ R. A. JOHANNSEN
----------------------------------------
Name: R. A. Johannsen
Title: Treasurer
CREDIT LYONNAIS NEW YORK BRANCH
By /s/ PHILIPPE SOUSTRA
----------------------------------------
Name: Philippe Soustra
Title: Senior Vice President
UBS AG, STAMFORD BRANCH
By /s/ PAUL R. MORRISON
----------------------------------------
Name: Paul R. Morrison
Title: Executive Director
By /s/ ANDREW N. TAYLOR
----------------------------------------
Name: Andrew N. Taylor
Title: Associate Director
BANK ONE, TEXAS, N.A.
By /s/ KAREN A. PATTERSON
----------------------------------------
Name: Karen A. Patterson
Title: Vice President
-4-
<PAGE> 5
HSBC BANK USA
By /s/ GEORGE LINHART
----------------------------------------
Name: George Linhart, #9429
Title: Relationship Manager
ARAB BANKING CORPORATION (B.S.C.)
By /s/ STEPHEN A. PALUCHE'
----------------------------------------
Name: Stephen A. Plauche'
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ A. S. NORSWORTHY
----------------------------------------
Name: A. S. Norsworthy
Title: Sr. Team Leader-Loan Operations
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
By
----------------------------------------
Name:
Title:
DEN NORSKE BANK ASA
By
----------------------------------------
Name:
Title:
By
----------------------------------------
Name:
Title:
-5-
<PAGE> 6
THE FUJI BANK, LIMITED,
NEW YORK BRANCH
By /s/ RAYMOND VENTURA
----------------------------------------
Name: Raymond Ventura
Title: Vice President & Manager
GULF INTERNATIONAL BANK B.S.C.
By
----------------------------------------
Name:
Title:
HIBERNIA NATIONAL BANK
By /s/ BRUCE ROSS
----------------------------------------
Name: Bruce Ross
Title: Senior Vice President
NATEXIS BANQUE BFCE
By /s/ RENAUD J. d'HERBES
----------------------------------------
Name: Renaud J. d'Herbes
Title: Senior Vice President &
Regional Manager
By /s/ N. ERIC DITGES
----------------------------------------
Name: N. Eric Ditges
Title: Assistant Vice President
NATIONAL BANK OF ALASKA
By /s/ PATRICIA JELLEY BENZ
----------------------------------------
Name: Patricia Jelley Benz
Title: Vice President
-6-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 13,671
<SECURITIES> 0
<RECEIVABLES> 50,975
<ALLOWANCES> 739
<INVENTORY> 15,363
<CURRENT-ASSETS> 115,871
<PP&E> 585,158
<DEPRECIATION> 161,058
<TOTAL-ASSETS> 653,234
<CURRENT-LIABILITIES> 69,110
<BONDS> 192,222
0
0
<COMMON> 235,011
<OTHER-SE> 58,161
<TOTAL-LIABILITY-AND-EQUITY> 653,234
<SALES> 0
<TOTAL-REVENUES> 154,107
<CGS> 0
<TOTAL-COSTS> 110,307
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 225
<INTEREST-EXPENSE> 8,785
<INCOME-PRETAX> (4,396)
<INCOME-TAX> (3,024)
<INCOME-CONTINUING> (1,345)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,345)
<EPS-BASIC> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
