<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1998
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: 0-18309
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MARINE DRILLING COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Texas 74-2558926
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
One Sugar Creek Center Blvd., Suite 600, Sugar Land, Texas 77478-3556
(Address of principal executive offices and zip code)
(281) 243-3000
(Registrant's telephone number, including area code)
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(Former name, former address and formal 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 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 .
--- ---
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AT July 28, 1998 -- 52,275,984
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MARINE DRILLING COMPANIES, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Index to Financial Statements
Independent Auditors' Review Report . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Balance Sheets -
June 30, 1998 (unaudited) and December 31, 1997 . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Operations (unaudited) -
Three and Six Months Ended June 30, 1998 and 1997 . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows (unaudited) -
Six Months Ended June 30, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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INDEPENDENT AUDITORS' REVIEW REPORT
The Board of Directors and Shareholders
Marine Drilling Companies, Inc.:
We have reviewed the accompanying consolidated balance sheet of Marine
Drilling Companies, Inc. and subsidiaries as of June 30, 1998, and the related
consolidated statements of operations and cash flows for the three-month and
six-month periods ended June 30, 1998 and 1997. These consolidated financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Marine Drilling Companies, Inc.
and subsidiaries as of December 31, 1997, and the related consolidated
statements of operations, shareholders' equity and cash flows for the year then
ended (not presented herein); and in our report dated January 20, 1998, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying consolidated
balance sheet as of December 31, 1997 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.
KPMG PEAT MARWICK LLP
Houston, Texas
July 22, 1998
1
<PAGE> 4
MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------- ---------------
(Unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 45,958 $ 20,619
Accounts receivable - trade and other, net 34,868 46,680
Prepaid expenses and other 4,256 5,048
------------ ------------
Total current assets 85,082 72,347
Property and equipment 376,570 310,122
Less accumulated depreciation 59,406 49,635
------------ ------------
Property and equipment, net 317,164 260,487
Other 3,610 1,348
------------ ------------
$ 405,856 $ 334,182
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 14,529 $ 6,367
Accrued expenses 24,318 7,824
Current tax liability 3,775 2,113
Employer's liability claims, current 1,038 571
------------ ------------
Total current liabilities 43,660 16,875
Employer's liability claims, non-current and other 1,790 1,776
Deferred income taxes 24,001 18,090
Minority interest in subsidiary - 1,699
Shareholders' equity:
Common stock, par value $.01. Authorized 200,000,000 shares;
Issued and outstanding 52,255,683 and 51,890,444 shares,
as of June 30, 1998 and December 31, 1997, respectively 522 519
Common stock restricted (1,846) (1,249)
Additional paid-in capital 205,626 201,236
Retained earnings from January 1, 1993 132,103 95,236
------------ ------------
Total shareholders' equity 336,405 295,742
------------ ------------
Commitments and contingencies - -
------------ ------------
$ 405,856 $ 334,182
============ ============
</TABLE>
See notes to consolidated financial statements and accompanying auditors
review report.
2
<PAGE> 5
MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ---------------------------
1998 1997 1998 1997
----------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Revenues $ 64,141 $ 44,486 $ 121,605 $ 81,236
Costs and Expenses:
Contract drilling 25,153 18,557 49,206 35,033
Depreciation and amortization 5,134 4,047 10,167 7,628
General and administrative 2,990 2,007 5,890 3,788
----------- ------------ ----------- ----------
33,277 24,611 65,263 46,449
----------- ------------ ----------- ----------
Operating income 30,864 19,875 56,342 34,787
----------- ------------ ----------- ----------
Other Income (Expense):
Interest expense (153) (71) (239) (421)
Interest income 551 669 1,088 1,726
Other income 207 47 477 87
----------- ------------ ----------- ----------
605 645 1,326 1,392
----------- ------------ ----------- ----------
Income before income taxes 31,469 20,520 57,668 36,179
Income tax expense 11,360 7,182 20,801 12,663
----------- ------------ ----------- ----------
Net income $ 20,109 $ 13,338 $ 36,867 $ 23,516
=========== ============ =========== ==========
Earnings per share:
Basic $ 0.38 0.26 0.71 0.46
Diluted $ 0.38 0.25 0.70 0.45
Average common shares:
Basic 52,240 51,408 52,114 51,369
Diluted 52,932 52,604 52,765 52,552
</TABLE>
See notes to consolidated financial statements and accompanying auditors
review report.
3
<PAGE> 6
MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
<S> <C> <C>
Cash Flows From Operating Activities: 1998 1997
---------- ----------
Net income $ 36,867 $ 23,516
Adjustments to reconcile net income to net cash provided
by operating activities:
Deferred income taxes 5,911 943
Pre-quasi-reorganization net operating loss carryforward - 5,631
Tax benefits related to common stock issued pursuant to
long-term incentive plan 1,928 795
Depreciation and amortization 10,167 7,628
Changes in operating assets and liabilities:
Receivables 11,812 (15,537)
Other current assets 792 (987)
Payables, accrued expenses, current taxes and
employer's liability claims 26,799 6,802
Other (1,527) (617)
---------- ----------
Net cash provided by operating activities 92,749 28,174
---------- ----------
Cash Flows From Investing Activities:
Purchase of short-term investments - (19,514)
Maturity of short-term investments - 19,967
Purchase of equipment (66,352) (29,965)
Proceeds from disposition of equipment 574 72
Acquisition of remaining minority interest in consolidated subsidiary - (52,134)
(2,319) -
---------- ----------
Net cash used in investing activities (68,097) (81,574)
---------- ----------
Cash Flows From Financing Activities:
Proceeds from exercise of stock options 687 299
Payment of debt - (10,000)
---------- ----------
Net cash provided by (used in) financing activities 687 (9,701)
---------- ----------
Net increase (decrease) in cash and cash equivalents 25,339 (63,101)
Cash and cash equivalents at beginning of period $ 20,619 $ 71,961
---------- ----------
Cash and cash equivalents at end of period $ 45,958 $ 8,860
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 189 $ 468
Income taxes paid 10,207 3,698
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Issuance of 62,300 and 62,000 shares in 1998 and 1997 respectively, of
restricted common stock $ 958 $ 1,081
Forfeitures of 1,650 and 3,000 shares in 1998 and 1997 respectively, of
restricted common stock 25 50
BUSINESS ACQUISITION, NET OF CASH ACQUIRED:
Working capital, other than cash $ $ 750
Plant and equipment - (54,146)
Purchase price in excess of the net assets acquired - (455)
Minority Interest - 1,717
---------- ----------
Net cash used for acquisition $ - $ (52,134)
========== ==========
</TABLE>
See notes to consolidated financial statements and accompanying auditors
review report.
4
<PAGE> 7
MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) INTERIM FINANCIAL INFORMATION
The consolidated interim financial statements of Marine Drilling
Companies, Inc. and subsidiaries (the "Company" or the "Registrant") presented
herein have been prepared without audit pursuant to the rules and regulations
of the Securities and Exchange Commission. Accordingly, certain information
and notes required by generally accepted accounting principles for complete
financial statements have been condensed or omitted. In the opinion of
management, these statements include all adjustments (all of which consist of
normal recurring adjustments except as otherwise noted herein) necessary to
present fairly the Company's financial position and results of operations for
the interim periods presented. The financial data for the six months ended
June 30, 1998 included herein has been subjected to a limited review by KPMG
Peat Marwick LLP, the Registrants' independent auditors, whose report is
included herein. These statements should be read in conjunction with the
audited financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997. The results of
operations for the six months ended June 30, 1998 are not necessarily
indicative of the results of operations that may be expected for the year.
(2) EARNINGS PER SHARE
Effective December 1997 the Company was required to adopt Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
SFAS 128 introduces the concept of basic earnings per share, which represents
net income divided by the weighted average common shares outstanding - without
the dilutive effects of common stock equivalents (options, warrants, etc).
Common stock equivalents with a weighted average of 692,000 and 1,196,000 are
reflected in the calculation of diluted earnings per share for the quarters
ended June 30, 1998 and 1997, respectively. Common stock equivalents with a
weighted average of 651,000 and 1,183,000 are reflected in the calculation of
diluted earnings per share for the six months ended June 30, 1998 and 1997,
respectively. No adjustment to net income was made in calculating diluted
earnings per share for the quarters ended June 30, 1998 and 1997 or for the six
months ended June 30, 1998 and 1997.
(3) COMMITMENTS AND CONTINGENCIES
Legal Proceedings -- Jagson International Limited, an Indian entity,
has brought suit against Marine Drilling Companies, Inc. and Marine 300 Series,
Inc. in Bombay, India. The plaintiff has alleged that the Company agreed to
charter two jack-up rigs to the plaintiff during 1992 and that it breached the
agreement by failing to charter the rigs resulting in damages in excess of
$14,500,000. The Company disputes the existence of the agreement and intends to
vigorously defend the suit. Although the litigation is in an early stage, based
on a number of substantive and procedural defenses that the Company believes are
available to it, the Company does not believe the ultimate resolution of this
dispute will have a material adverse effect on the Company's results of
operations or financial condition.
The Company is involved in various other claims and legal actions
arising in the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse effect
on the Company's consolidated financial position, results of operations or
liquidity.
Shipyard Contracts -- In December 1997 Marine Drilling Companies
(Norway) ASA ("Owner") entered into an agreement with HAM Marine, Inc. ("HAM")
to complete construction of the MARINE 700. The shipyard contract is for
$87,000,000 and the project is expected to be completed during the first
quarter of 1999. Payments are to be made monthly based upon the percentage
complete. Subject to certain exceptions, if the construction is not complete
by the scheduled delivery date per the contract, HAM is obligated to pay the
Owner $100,000 for every day late not to exceed $6,000,000. Likewise, if
delivery of the completed rig is early, then the Owner is obligated to pay HAM
$100,000 per day up to $6,000,000. The shipyard is located in Pascagoula,
Mississippi. Additional expenditures of approximately $99,000,000 will be
required to equip the MARINE 700, of which $29,700,000 has been spent as of
June 30, 1998.
5
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MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On December 19, 1997 the Company signed a contract with Jurong
Shipyard Limited ("Jurong") in Singapore to upgrade the MARINE 500. The
contract is for approximately $38,000,000 and is expected to take approximately
six months. As in all construction projects there can be no guarantee that
delays will not prevent the upgrade from being completed on schedule.
Currently the rig is expected to arrive in the shipyard in mid-September 1998.
Once the upgrade begins if it is completed early then Jurong will be entitled
to receive $30,000 per day for each day ahead of schedule up to $2,000,000. On
the other hand, if the work is delayed beyond the scheduled completion date,
December 31, 1998, due to events that are within the control of Jurong then the
Company shall be entitled to $60,000 per day for each day late up to a maximum
of $4,000,000.
Charter Agreement -- The Company entered into a Charter Agreement with
Shanghai Bureau of Marine Geological Survey to charter the MARINE 510, a
semi-submersible, for a period of five years. The Charter Agreement began when
the rig commenced operations under a drilling contract in May 1998. The
charter and related fees, which average $29,500 per day, are only payable
during the time the rig is earning a daily rate. The charter rate goes to zero
when the rig is not employed. During the first two years the Agreement cannot
be terminated. During years three through five the agreement can only be
terminated in the event the rig does not have a contract within 50 days of a
completed contract with at least 10 days written notice prior to termination.
6
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MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(4) SEGMENT REPORTING
For segment reporting purposes the Company defines its segments as
jack-up operations (predominately shallow water drilling) and semi-operations
(deep water drilling). Operating income consists of revenues less the related
operating costs and expenses, including depreciation and allocated operation
support, excluding interest and unallocated corporate expenses. Identifiable
assets by operating segment include assets directly identified with those
operations.
The following table sets forth consolidated financial information with
respect to the Company and its subsidiaries by operating segment (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended: Jack-up Semi Corporate &
Operations Operations Other Total
------------ ------------ -------------- ----------
<S> <C> <C> <C> <C>
June 30, 1998
Revenues $ 54,709 $ 9,432 $ - $ 64,141
Operating Income (Loss) 30,923 3,609 (3,668) 30,864
Identifiable Assets 159,092 182,719 64,045 405,856
Capital Expenditures 972 37,693 3,477 42,142
Depreciation & Amortization 3,479 977 678 5,134
June 30, 1997
Revenues $ 39,497 $ 4,989 $ - $ 44,486
Operating Income (Loss) 20,942 1,465 (2,532) 19,875
Identifiable Assets 161,090 95,217 30,113 286,420
Capital Expenditures 16,608 54,246 331 71,185
Depreciation & Amortization 2,552 970 525 4,047
Six Months Ended:
June 30, 1998
Revenues $ 106,517 $ 15,088 $ - $ 121,605
Operating Income (Loss) 57,613 5,934 (7,205) 56,342
Identifiable Assets 159,092 182,719 64,045 405,856
Capital Expenditures 2,622 59,594 4,136 66,352
Depreciation & Amortization 6,888 1,964 1,315 10,167
June 30, 1997
Revenues $ 73,837 $ 7,399 $ - $ 81,236
Operating Income (Loss) 38,194 1,618 (5,025) 34,787
Identifiable Assets 161,090 95,217 30,113 286,420
Capital Expenditures 27,048 55,332 1,731 84,111
Depreciation & Amortization 5,098 1,293 1,237 7,628
</TABLE>
7
<PAGE> 10
MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company also provides services in both domestic and foreign
locations. The following table sets forth financial information with respect
to the Company and its subsidiaries by geographic area (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- --------------------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
---------- ---------- ---------- -----------
Revenues:
United States $ 46,585 $ 38,211 $ 90,504 $ 71,191
India 1,340 1,286 2,639 2,646
Southeast Asia 16,216 4,989 28,462 7,399
Other Foreign - - - -
Operating Income:
United States 26,156 18,287 46,949 33,018
India 9 141 97 197
Southeast Asia 5,059 1,465 9,691 1,618
Other Foreign (360) (18) (395) (46)
Identifiable Assets:
United States 277,171 193,624 277,171 193,624
India 13,698 15,027 13,698 15,027
Southeast Asia 114,713 41,005 114,713 41,005
Other Foreign 274 36,764 274 36,764
</TABLE>
The Company negotiates drilling contracts with a number of customers
for varying terms, and management believes it is not dependent upon any single
customer. For the six months ending June 30, 1998 and 1997, revenue from
customers that represented 10% or more of consolidated drilling revenues were
as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
---------------------------- ----------------------------
% of Total % of Total
Revenue Revenue Revenue Revenue
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Customer A $ 26,423 22% $ 18,094 22%
Customer B 13,105 11% - -
Customer C 2,934 2% 8,671 11%
</TABLE>
As is typical in the industry, the Company does business with a
relatively small number of customers at any given time. The loss of any one
customer could, at least on a short-term basis, have a material adverse effect
on the Company's profitability. However, management believes that the loss of
any one customer would not have a material adverse effect on the Company on a
long-term basis.
(5) SUBSEQUENT EVENTS
In July 1998, the Company filed for listing on the New York Stock
Exchange and will begin trading on that stock exchange on August 14, 1998. The
Company's stock will cease trading on Nasdaq at closing on August 13, 1998.
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MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On August 12, 1998, the Company amended its existing credit agreement
to extend the term to a 5-year revolver and increase the credit line to $200
million (the "Amended Credit Facility"). Also, five additional banks were
admitted in the facility. The Company and its subsidiaries will be required to
comply with various covenants and restrictions, including, but not limited to,
the maintenance of financial ratios and the restriction of payments of
dividends. Interest will accrue at (i) LIBOR plus a margin of .75% to 1.25%
with margins determined pursuant to a debt to EBITDA calculation or (ii) prime
if a Base Rate Loan. The Amended Credit Facility is secured by substantially all
of the Company's assets, including its current rig fleet.
9
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INDUSTRY OVERVIEW
Demand for offshore drilling services is primarily driven by the
economics of oil and gas exploration, development and production, which, in
turn, are closely linked to current and projected oil and gas prices. Since the
mid-1980's, oil and gas prices have been volatile and generally lower than
prices experienced during the early 1980's, resulting in volatile and, until
recently, generally reduced demand for offshore drilling services. In addition,
during the early 1980's, the industry built a substantial number of new offshore
drilling rigs. The oversupply of rigs and lower oil and gas prices caused
decreased demand and utilization resulting in significantly lower day rates.
Since 1993 activity in the contract drilling industry has improved due to
increased worldwide demand stemming from higher levels of pricing for oil and
natural gas. The supply of offshore drilling rigs has declined while the demand
for such rigs has increased resulting in higher day rates and worldwide
utilization rates. During 1996, both jack-up and deep water drilling markets
showed substantial improvement that continued throughout most of 1997. However,
oil and natural gas prices have declined substantially since October 1997
lowering current day rates and rig utilization, particularly in the
shallow-water Gulf of Mexico market. No assurance can be given that drilling
market conditions will not be further adversely effected in the future.
During the first half of 1998 there has been a decline in worldwide
utilization for jack-up rigs. According to Offshore Data Services, as of July
28, 1998, worldwide jack-up utilization was 82% (313 rigs working out of a
supply of 380 rigs) compared to 88% average utilization experienced during the
first six months of 1997. Worldwide semi-submersible rig utilization has
declined during 1998, and as of July 28, 1998 was 77% (116 rigs working out of a
supply of 150 rigs) compared to 81% average utilization during the first six
months of 1997.
DRILLING MARKETS
Gulf of Mexico. The jack-up drilling market in the Gulf of Mexico is
highly competitive. A significant number of offshore drilling companies have
rigs in this market and, as a result, no one contractor is able to materially
affect pricing levels. Day rates can and have fluctuated significantly on
relatively small changes in the rig supply and demand situation in this market.
Since mid-1995, a combination of improved jack-up rig demand and rig
mobilizations to other markets has resulted in improved jack-up utilization and
day rates; however, in October 1997 oil prices fell sharply which has dampened
demand in this market. During the first half of 1998 average day rates and
utilization in the Gulf of Mexico have declined since the end of 1997.
Utilization of jack-up rigs in this market as of July 28, 1998 was 77% (100
rigs working out of a supply of 130 rigs), compared with an average of 90% for
the first six months of 1997. The company has 12 of its 14 jack-up rigs
located in the Gulf of Mexico.
During January 1998, the Company signed a contract with Esso
Exploration Inc., an affiliate of Exxon Corporation for the MARINE 700 with an
initial term of three years and an option to extend the contract to a five-year
term. In June 1998, Esso Exploration exercised the option to extend the
contract to five years with a base day rate of $165,000 per day. This contract
is expected to begin the first quarter of 1999 and generate aggregate day rate
revenues of approximately $302 million over the five-year term.
India. In 1995, the Company entered into a one-year term contract for
the MARINE 201 to operate off the east coast of India. The rig commenced
operations under this contract in mid-November 1995. Under the contract, the
customer had options to extend the contract for up to eight three-month
periods. All of the options have been exercised ensuring the rig's employment
through November 1998.
Southeast Asia. In January 1997, the Company entered into a one-year
contract with a major oil company for the MARINE 305 to begin work in Southeast
Asia. The contract began in August 1997 and ended in July 1998. During June
1998, the Company signed a 4 well contract for the MARINE 305. The contract is
expected to generate revenue of approximately $18,166,000 and commenced in late
July 1998. The customer has the option to extend this contract for 5 additional
wells.
10
<PAGE> 13
In December 1996, the Company acquired the MARINE 500, a
second-generation semi-submersible rig. The rig began operating in late
February drilling offshore Indonesia on a short-term contract. In April 1997,
the Company entered into a three-well contract for the MARINE 500 to operate in
the Gulf of Thailand offshore Malaysia. This contract included three option
wells, which were exercised and will extend the contract until early September
1998. In July 1997, the Company entered into a three-year contract for the
MARINE 500 to commence on or before January 1, 1999 and includes operations in
Southeast Asia, the Pacific Rim, offshore Australia and New Zealand. Before
this contract can commence, the MARINE 500 will be upgraded to work in water
depths up to 5,000 feet with 15,000 psi drilling equipment. The upgrade is
expected to take four to six months. Currently the rig is expected to arrive
in the shipyard in mid- September 1998 and is expected to be completed and
commence operations during March 1999.
In December 1997 the Company signed a nine-month contract to operate
the MARINE 510, a bareboat charter, in Southeast Asia which commenced
operations in May 1998.
CONTRACTS AND CUSTOMERS
The Company obtains most of its contracts through competitive bidding
against other contractors in response to oil and gas companies' solicitations
of bids. The Company's current drilling contracts, both foreign and domestic,
provide for payment in U.S. Dollars.
The Company provides drilling services to a customer base that
includes independent and major foreign and domestic oil and gas companies. As
is typical in the industry, the Company does business with a relatively small
number of customers at any given time. During the first six months of 1998,
the Company performed services for approximately 23 different customers. For
the six months ended June 30, 1998, one customer, Applied Drilling Technology,
Inc., accounted for approximately 22% of the Company's total consolidated
revenues. The loss of any one of the Company's customers could, at least on a
short-term basis, have a material adverse effect on the Company's
profitability. Management believes, however, the Company would have alternative
customers for its services if it lost any single customer, and that the loss of
any one customer would not have a material adverse effect on the Company on a
long-term basis. See Note 4 of Notes to Consolidated Financial Statements for
further information regarding the Company's major customers.
RESULTS OF OPERATIONS
Operating results are primarily a function of day rates and
utilization. The number of rigs the Company has available for service and the
demand for contract drilling services by energy companies affect the
utilization rates and day rates of the Company's active rigs. Operating costs
include all direct costs and expenditures associated with operating the
Company's rigs. These costs include rig labor, repair, maintenance and supply
expenditures, insurance costs, mobilization costs and other costs related to
operations. Operating expenses do not necessarily fluctuate in proportion to
changes in operating revenues due to the continuation of personnel on board and
equipment maintenance when the rigs are stacked. Labor costs increase
primarily due to higher salary levels, rig staffing requirements and inflation.
Equipment maintenance expenses fluctuate depending upon the type of activity
the rig is performing and the age and condition of the equipment. Inflation is
another contributing factor in the fluctuation of operating expenses.
The changes in operating income are more directly affected by revenue
factors than expense factors. Changes in day rates directly impact revenues
but not expenses. Utilization rate changes have a significant impact on
revenues, but in the short-term do not impact expenses. Over a long period
significant changes in utilization may cause the Company to adjust the level of
its actively marketed rig fleet and labor force to match anticipated levels of
demand, thus changing the level of operating expenses. General and
administrative expenses do not vary significantly unless the Company materially
expands its asset base. Depreciation, which is affected by the Company's level
of capital expenditures and depreciation practices is another major determinant
of operating income, and is not affected by changes in day rates or
utilization.
11
<PAGE> 14
The following table sets forth the average rig utilization rates,
operating days, average day rates, revenues and operating expenses of the
Company by operating segments for the periods indicated (dollars in thousands
except per day data):
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
--------------------------- --------------------------
1998 1997 1998 1997
---------- ---------- --------- --------
<S> <C> <C> <C> <C>
Jack-ups
Operating days 1,269 1,161 2,502 2,241
Utilization (1) 99% 100% 99% 100%
Average revenue per day $ 43,112 $ 34,020 $ 42,573 $ 32,948
Revenue 54,709 39,497 106,517 73,837
Contract drilling expense 20,307 16,003 42,016 30,545
Depreciation 3,479 2,552 6,888 5,098
Operating income 30,923 20,942 57,613 38,194
Semi-submersibles
Operating days 131 91 221 133
Utilization (1) 100% 100% 100% 100%
Average revenue per day $ 72,000 $ 54,824 $ 68,271 $ 55,632
Revenue 9,432 4,989 15,088 7,399
Contract drilling expense 4,846 2,554 7,190 4,488
Depreciation 977 970 1,964 1,293
Operating income 3,609 1,465 5,934 1,618
Total Company:
Operating days 1,400 1,252 2,723 2,374
Utilization (1) 99% 100% 99% 100%
Average revenue per day $ 45,815 $ 35,532 $ 44,658 $ 34,219
Revenue 64,141 44,486 121,605 81,236
Contract drilling expense 25,153 18,557 49,206 35,033
Depreciation and amortization 5,134 4,047 10,167 7,628
General and administrative expense 2,990 2,007 5,890 3,788
Operating income 30,864 19,875 56,342 34,787
</TABLE>
(1) Based on the number of actively marketed rigs. Excluding rigs under
construction or in the process of substantial upgrading, the Company had
no non-marketed rigs during the second quarter of 1998 and an average 1.2
non-marketed rigs during the second quarter of 1997. For the six months
ended June 30, 1998 and 1997 the Company had an average of 0.2 and 1.9
non-marketed rigs, respectively.
Revenues. The Company's drilling revenues increased $19,655,000 or
44%, and $40,369,000, or 50%, during the three and six month periods ended June
30, 1998, respectively, as compared to the corresponding periods in 1997. The
increase in revenues was mainly attributable to increased day rates in 1998
compared to 1997 and the activation of the MARINE 305, a jack-up rig, during
August 1997, and the activation of two semi-submersibles the MARINE 500 in late
February 1997 and the MARINE 510 in late May 1998.
12
<PAGE> 15
Contract Drilling Expenses. Contract drilling expenses for the three
and six months ended June 30, 1998 increased $6,596,000, or 36%, and
$14,173,000, or 40%, respectively, over the comparable periods in the prior
year. The increase was primarily a result of increased activity and fleet size
along with increased international operations, which have higher average
operating costs than domestic rig operations. Operating days for the three and
six month periods ended June 30, 1998 increased 148 and 349 days, respectively,
as compared to the same periods in 1997. The increase in operating days can be
attributed to placing into service the MARINE 305 in August 1997, the MARINE
500 in February 1997 and the MARINE 510 in May 1998.
Depreciation and Amortization. Depreciation and amortization expense
increased $1,087,000, or 27%, and $2,539,000, or 33%, for the three and six
months ended June 30, 1998, respectively, as compared to the same prior-year
periods. The increase was due to depreciation associated with expenditures for
the acquisition of the MARINE 500 and MARINE 305.
General and Administrative. General and administrative expenses for
the three and six month periods ended June 30, 1998 increased $983,000 and
$2,102,000, respectively, over the same periods in 1997. The increase was
attributed to an increase in professional services and increased personnel
costs consistent with the increased level of operations and increased
international activity.
Interest Expense. Interest expense for the six months ended June 30,
1998 was $239,000 compared to $421,000 for the same period in 1997. The
decrease was primarily the result of the prepayment and termination of the
Company's prior $35 million credit facility in February 1997.
Interest Income. Interest income for the three and six months ended
June 30, 1998 decreased $118,000 and $638,000, respectively, from the
comparable prior-year periods. The decrease was related primarily to decreased
cash balances throughout the first half of 1998.
Income Taxes. Income tax expense increased for the three and six
month periods ended June 30, 1998 as compared to the same periods in 1997,
primarily due to an increase in the Company's pretax income.
FINANCIAL CONDITION--LIQUIDITY AND CAPITAL RESOURCES
Liquidity. At June 30, 1998, the Company had working capital of
$41,422,000 as compared to working capital of $55,472,000 at December 31, 1997.
Net cash provided by operating activities for the six months ended June 30,
1998 increased by $64,575,000 to $92,749,000 compared to $28,174,000 for the
same period in the prior year. The increase is primarily attributable to the
increased rig operating activity coupled with the timing of cash receipts and
payments. Capital expenditures for the first half of 1998 increased
$36,387,000 over the first six months of 1997 to $66,352,000 due to
construction of the MARINE 700 and the MARINE 500 upgrade. Cash used in
investing activities for the six months ended June 30, 1997 included the
$52,134,000 acquisition of Marine Drilling Companies (Norway) ASA formerly
known as Deep Sea ASA and owner of the rig hull on which the MARINE 700 is
being constructed.
In March 1997, the Company entered into a credit agreement ("Credit
Facility") with Bankers Trust Company ("BTCo"), Christiania Bank og Kreditkasse
("CBK"), and certain other banks providing financing up to $100 million to be
used for rig acquisitions and upgrades. This agreement includes a revolving
credit facility available through December 31, 1999 that can be converted into
a four-year term loan. Interest and facility fees are generally payable
quarterly during the terms of both facilities. Principal during the term loan
facility is payable quarterly in equal installments beginning March 31, 2000.
Interest accrues at (i) LIBOR plus a margin of .75% to 1.25% or (ii) prime plus
a margin of 0% to .50%, with margins determined pursuant to a debt to capital
calculation. The borrowings are secured by all of the Company's current rig
fleet, except for the MARINE 700, as well as certain other collateral
assignments. The Company has no borrowings outstanding under this agreement at
June 30, 1998. The Credit Facility restricts the payment of dividends by the
Company. In connection with the consummation of the Credit Facility, the
Company repaid and terminated its prior $35 million credit facility with a U.S.
financial institution.
13
<PAGE> 16
On August 12, 1998, the Company entered into an agreement (the "Amended
Credit Facility") with a consortium of international banks, which amends the
Credit Facility to a 5-year revolver, eliminates the term loan conversion
feature and increases the credit line to $200 million. The Amended Credit
Facility is now secured by substantially all of the Company's assets, including
its rig fleet. The Company and its subsidiaries will be required to comply with
various covenants and restrictions, including, but not limited to, the
maintenance of financial ratios and the restriction of payments of dividends.
Interest will accrue at (i) LIBOR plus a margin of .75% to 1.25% with margins
determined pursuant to a debt to EBITDA calculation or (ii) prime if a Base Rate
Loan.
During 1997, the improvement in the offshore drilling market allowed
the Company to place some of its offshore rigs under term contracts ranging from
one to three years in duration. During June 1998, the Company signed a contract
for the MARINE 305 for a term of 4 wells with the customer's option to extend
the contract for an additional 5 wells. The contract commenced the end of July
1998 and is expected to generate revenues of $18 million. A three-year contract
for the MARINE 500 was signed in July 1997 and is expected to produce total
revenues of $164 million to $188 million beginning the first quarter of 1999
upon completion of a $100 million upgrade to enable the rig to operate in water
depths up to 5,000 feet. In December 1997, the Company entered into a
nine-month contract for the MARINE 510 that commenced mid-May 1998 and is
expected to generate revenues of $23 million. The MARINE 510 is being chartered
from Shanghai Bureau of Marine Geological Survey for a period of five years.
Charter fees are payable only when the rig is under contract. In January 1998,
the MARINE 700 obtained a three-year contract with an option to extend to a
five-year term. In June 1998 the customer exercised the option and extended the
contract to five years. The contract is expected to generate aggregate day rate
revenues of approximately $302,000,000 over the five-year term of the contract,
which is scheduled to begin the second quarter of 1999.
The current level of crude oil and natural gas prices has impacted
demand for drilling rigs, thus lowering day rates and rig utilization,
particularly in the shallow-water Gulf of Mexico market, where the Company has
12 jack-up rigs located. At the end of June 1998, one of the Company's 12
jack-up rigs completed its existing contract and did not work for 44 days.
Currently all 12 jack-up rigs located in the Gulf of Mexico are under contract,
4 have contracts that expire during the third quarter of 1998, 5 have contracts
that expire during the fourth quarter of 1998, and 3 have contracts into 1999.
Capital Resources. During the second quarter of 1998 the Company
expended $66.4 million in capital expenditures consisting of disbursements for
(i) the completion of the MARINE 700, (ii) the upgrade of the MARINE 500 and
(iii) purchase of drill pipe and other rig machinery.
In April 1998 the Company signed a memorandum of agreement to acquire
the "Maersk Explorer" a jack-up drilling rig capable of operating in 205 feet
of water that is currently being utilized as an accommodation unit in the
Danish sector of the North Sea. It is anticipated that the Company will take
delivery of the rig between October and December 1998 at a total cost of $22.9
million. Depending upon market conditions, the rig will either be marketed as
an accommodation unit or upgraded to competitive drilling status for
approximately $50 million and will take approximately nine months. If
upgraded, the rig will be outfitted with the drilling equipment removed from
the MARINE 500 and will be capable of operating in the North Sea. The upgrade
should take approximately nine months.
Excluding expenditures for the Maersk Explorer, the Company expects to
spend approximately $250 million in 1998 for capital expenditures, consisting
primarily of expenditures to upgrade and complete the MARINE 500 and MARINE
700. The MARINE 500 will be upgraded to work in water depths up to 5,000 feet
at a projected cost of approximately $100 million. In December 1997, the
Company signed a contract with Jurong Shipyard Limited in Singapore to perform
the upgrade. The MARINE 700 will require expenditures of approximately $186
million to complete its construction and equip it for service. Construction
is taking place in Pascagoula, Mississippi at HAM Marine, Inc. shipyard and
should be completed during the first quarter of 1999.
The Company will continue to pursue acquisitions of additional
drilling rigs and related equipment and/or businesses. Future acquisitions, if
any, would likely be funded from the Company's working capital, the Amended
Credit Facility or through the issuance of debt and/or equity securities. The
Company cannot predict whether it will be successful in acquiring additional
rigs, and obtaining financing therefor, on acceptable terms. In addition, it
is currently anticipated that the Company will continue the upgrading of rigs
to enhance their capability to obtain
14
<PAGE> 17
longer-term contracts. The timing and actual amounts expended by the Company
in connection with its plans to upgrade and refurbish selected rigs, as well as
the type of rig modification comprising each program, is subject to the
discretion of the Company and will depend on the Company's view of market
conditions, the Company's cash flow, whether other acquisitions are made, and
other factors.
The Company anticipates that its available funds, together with cash
generated from operations and amounts that may be borrowed under the Amended
Credit Facility and other potential funding sources, such as increased credit
facilities or private or public debt offerings, will be sufficient to fund its
required capital expenditures, working capital and debt service requirements
for the foreseeable future. Future cash flows, however, are subject to a
number of uncertainties, especially the condition of the oil and gas industry.
Accordingly, there can be no assurance that these resources will be sufficient
to fund the Company's cash requirements.
YEAR 2000 ISSUE
Currently, the Company utilizes third party software in all of its
computer applications. The Company's information systems personnel are
currently working with the third party vendors to resolve the potential problems
associated with the year 2000 and the processing of date sensitive information
by the Company's computer and other systems. Based upon a continual evaluation
and working with software vendors, the Company has determined that upgrading its
existing accounting software to a current version will enable the computer
systems to function properly with respect to dates in the year 2000 and
thereafter, with little or no cost to the Company. The Company is still
evaluating the effect of the Year 2000 on other computer systems and
non-information technology systems. With modifications to existing software and
conversions to new software the Year 2000 issue is not expected to pose
significant operational problems for the Company's computer systems. However,
if such modifications or conversions are not made or are not completed timely,
the Year 2000 issue could have a material adverse impact on operations of the
Company. The Company believes that it will be able to implement successfully
the changes necessary to address the Year 2000 issues with reliance on its third
party vendors and does not expect the cost of such changes to have a material
impact on the Company's financial position, results of operations or cash flows
in future periods.
FORWARD-LOOKING STATEMENTS
This Form 10-Q particularly the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
contains certain 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, that are not historical facts concerning,
among other things, market conditions, the demand for offshore drilling
services, future acquisitions and fleet expansion, future financings, future
rig contracts, future capital expenditures including rig construction, upgrades
and refurbishments, and future results of operations. Actual results may
differ materially from those included in the forward-looking statements, and no
assurance can be given that the Company's expectations will be realized or
achieved. Important factors and risks that could cause actual results to
differ materially from those referred to in the forward-looking statements
include (i) a prolonged period of low oil or gas prices; (ii) the inadequacy of
insurance and indemnification to protect the Company against liability from all
consequences of well disasters, fire damage or environmental damage; (iii) the
inability of the Company to obtain insurance at reasonable rates; (iv) a
decrease in the demand for offshore drilling rigs especially in the U.S. Gulf
of Mexico or for slot jack-up rigs; (v) the risks attendant with operations in
foreign countries including actions that may be taken by foreign countries and
actions that may be taken by the United States against foreign countries; (vi)
the failure of the Company to successfully compete with the Company's
competitors that are larger and have a greater diversity of rigs and greater
financial resources than the Company; (vii) a decrease in rig utilization
resulting from reactivation of currently inactive non-marketed rigs or new
construction of rigs; (viii) the risks of delay and cost overruns attendant to
large construction projects such as the upgrade and refurbishment of certain of
the Company's rigs, including shortages of material or skilled labor,
engineering problems, latent defects or damage to current equipment, work
stoppages, weather interference and inability to obtain requisite permits or
approvals; (ix) the return of market and other conditions similar to those in
which the Company incurred net losses before extraordinary items for each of
the years ended December 31, 1991, 1992 and 1995; (x) the loss of key
management personnel or the inability of the Company to attract and retain
sufficient qualified personnel to operate its rigs; (xi) the risk that labor
shortages could result in material wage increases; (xii) the adoption of
additional laws or regulations that limit or reduce drilling opportunities or
that increase the cost of drilling or increase the potential liability of the
Company; (xiii) the occurrence of risks attendant to contract drilling
operations including blowouts,
15
<PAGE> 18
cratering, fires and explosions, capsizing, grounding or collision involving
rigs while in operation, mobilization or otherwise or damage to rigs from
weather, sea conditions or unsound location; (xiv) adverse uninsured litigation
results; and (xv) adverse tax consequences with respect to operations. These
forward-looking statements speak only as of the date of this Report. The
Company expressly disclaims any obligation or undertaking to release publicly
any updates or revisions to any forward-looking statement contained herein to
reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any statement is based.
16
<PAGE> 19
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Jagson International Limited, an Indian entity, has brought suit
against Marine Drilling Companies, Inc. and MARINE 300 Series, Inc. in Bombay,
India. The plaintiff has alleged that the Company agreed to charter two jack-up
rigs to the plaintiff during 1992 and that it breached the agreement by failing
to charter the rigs resulting in damages in excess of $14.5 million. The Company
disputes the existence of the agreement and intends to vigorously defend the
suit. Although the litigation is in an early stage, based on a number of
substantive and procedural defenses that the Company believes are available to
it, the Company does not believe the ultimate resolution of this dispute will
have a material adverse effect on the Company's results of operations or
financial condition.
Various other claims have been filed against the Company and its
subsidiaries in the ordinary course of business, particularly claims alleging
personal injuries. Management believes that the Company has adequate insurance
coverage and has established adequate reserves for any liabilities that may
reasonably be expected to result from these claims. In the opinion of
management, no pending claims, actions or proceedings against the Company or
its subsidiaries are expected to have a material adverse effect on its
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on May 14,
1998. At the meeting, seven directors were elected by a vote of holders of
Common Stock, as outlined in the company's Proxy Statement related to the
meeting. With respect to the election of directors, (i) proxies were solicited
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended, (ii) there was no solicitation in opposition to the management's
nominees as listed in the Proxy Statement, and (iii) all of such nominees were
elected. The following numbers of votes were cast as to the director nominees:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
BROKER
IN FAVOR WITHHELD NON-VOTES ABSTAINING
------------------- ------------------- ------------------- -------------------
NOMINEE VOTES CAST VOTES % VOTES % VOTES % VOTES %
- --------- ---------- ---------- --- ---------- --- ---------- --- ---------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mr. Barbanell 41,700,309 41,639,988 80% 60,321 -% - -% - -%
Mr. Brown 41,700,309 41,642,076 80% 58,233 -% - -% - -%
Mr. Bull 41,700,309 41,642,076 80% 58,233 -% - -% - -%
Mr. Burton 41,700,309 41,646,004 80% 54,305 -% - -% - -%
Mr. Rask 41,700,309 41,646,232 80% 54,077 -% - -% - -%
Mr. Robson 41,700,309 41,645,832 80% 54,477 -% - -% - -%
Mr. Thomas 41,700,309 41,646,390 80% 53,919 -% - -% - -%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibits No. Description
------------ -----------
<S> <C>
15 Letter regarding unaudited interim financial information
27 Financial Data Schedule
(Exhibit 27 is being submitted as an exhibit only in the electronic format of
this Quarterly Report on Form 10-Q being submitted to the U.S. Securities and
Exchange Commission.)
</TABLE>
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the second quarter of 1998
17
<PAGE> 20
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.
MARINE DRILLING COMPANIES, INC.
(Registrant)
Date: August 13, 1998 By /s/ T. Scott O'Keefe
-------------------------------------
T. Scott O'Keefe
Senior Vice President
Chief Financial Officer and Director
(Principal Financial Officer)
Date: August 13, 1998 By /s/ Dale W. Wilhelm
-------------------------------------
Dale W. Wilhelm
Vice President and Controller
(Principal Accounting Officer)
18
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
15 Letter regarding unaudited interim financial information
27 Financial Data Schedule
(Exhibit 27 is being submitted as an exhibit only in the electronic format of this Quarterly
Report on Form 10-Q being submitted to the U.S. Securities and Exchange Commission.)
</TABLE>
<PAGE> 1
EXHIBIT 15
LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFORMATION
The Board of Directors and Shareholders
Marine Drilling Companies, Inc.:
<TABLE>
<CAPTION>
<S> <C>
Re: Registration Statement No. 33-56920 on Form S-8 dated January 11, 1993
No. 33-61901 on Form S-8 dated August 17, 1995
No. 333-6997 on Form S-3 dated June 27, 1996, as amended
No. 333-6995 on Form S-4 dated June 27, 1996, as amended
No. 333-56379 on Form S-3 dated June 9, 1998
</TABLE>
With respect to the subject registration statements, we acknowledge
our awareness of the use therein of our report dated July 22, 1998, related to
our review of interim financial information. Pursuant to Rule 436(c) under the
Securities Act of 1933, such report is not considered part of a registration
statement prepared or certified by an accountant within the meanings of
Sections 7 and 11 of the Act.
KPMG PEAT MARWICK LLP
Houston, Texas
July 22, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 45,958 8,860
<SECURITIES> 0 9,988
<RECEIVABLES> 34,868 36,931
<ALLOWANCES> 0 0
<INVENTORY> 1,056 623
<CURRENT-ASSETS> 85,082 59,124
<PP&E> 376,570 266,199
<DEPRECIATION> 59,406 40,727
<TOTAL-ASSETS> 405,856 286,420
<CURRENT-LIABILITIES> 43,660 17,557
<BONDS> 0 0
0 0
0 0
<COMMON> 522 514
<OTHER-SE> 335,883 252,464
<TOTAL-LIABILITY-AND-EQUITY> 405,856 286,420
<SALES> 121,605 81,236
<TOTAL-REVENUES> 121,605 81,236
<CGS> 49,206 35,033
<TOTAL-COSTS> 49,206 35,033
<OTHER-EXPENSES> 10,167 7,628
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 239 421
<INCOME-PRETAX> 57,668 36,179
<INCOME-TAX> 20,801 12,663
<INCOME-CONTINUING> 36,867 23,516
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 36,867 23,516
<EPS-PRIMARY> 0.71 0.46
<EPS-DILUTED> 0.70 0.45
</TABLE>
