<PAGE> 1
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------
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 SEPTEMBER 30, 2000
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: 1-14389
----------
MARINE DRILLING COMPANIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
TEXAS 74-2558926
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
</TABLE>
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)
--------------------------------------------------------------------------------
(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 NOVEMBER 1, 2000--58,544,028
--------------------------------------------------------------------------------
<PAGE> 2
MARINE DRILLING COMPANIES, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Index to Financial Statements
Independent Auditors' Review Report.............................................. 1
Consolidated Balance Sheets -
September 30, 2000 (unaudited) and December 31, 1999............................. 2
Consolidated Statements of Operations (unaudited) -
Three and Nine Months Ended September 30, 2000 and 1999.......................... 3
Consolidated Statements of Cash Flows (unaudited) -
Nine Months Ended September 30, 2000 and 1999.................................... 4
Notes to Consolidated Financial Statements....................................... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................................... 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk............................. 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings...................................................................... 16
Item 6. Exhibits and Reports on Form 8-K....................................................... 16
SIGNATURES....................................................................................... 17
</TABLE>
(i)
<PAGE> 3
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 September 30, 2000, the related
consolidated statements of operations for the three-month and nine-month periods
ended September 30, 2000 and 1999, and the related consolidated statements of
cash flows for the nine-month periods ended September 30, 2000 and 1999. 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, 1999, 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 25, 2000, 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, 1999 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
KPMG LLP
Houston, Texas
October 25, 2000
1
<PAGE> 4
MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
2000 1999
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 5,098 $ 4,664
Accounts receivable - trade and other, net 49,143 29,332
Income tax receivable -- 18,904
Prepaid expenses and other 2,474 2,091
Inventory 474 402
--------- ---------
Total current assets 57,189 55,393
Property and equipment 740,889 705,351
Less accumulated depreciation 129,574 97,511
--------- ---------
Property and equipment, net 611,315 607,840
Other 2,250 2,909
--------- ---------
$ 670,754 $ 666,142
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 8,829 $ 13,919
Accrued expenses 13,451 9,998
Employer's liability claims, current 630 660
--------- ---------
Total current liabilities 22,910 24,577
Long-term debt 120,000 180,000
Other non-current liabilities 2,266 4,406
Deferred income taxes 59,799 44,414
Shareholders' equity:
Common stock, par value $.01. Authorized 200,000,000 shares;
issued and outstanding 58,540,793 and 57,199,489 shares,
as of September 30, 2000 and December 31, 1999, respectively 585 572
Common stock restricted (693) (1,073)
Additional paid-in capital 287,671 263,319
Retained earnings from January 1, 1993 178,216 149,927
--------- ---------
Total shareholders' equity 465,779 412,745
--------- ---------
Commitments and contingencies -- --
--------- ---------
$ 670,754 $ 666,142
========= =========
</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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
2000 1999 2000 1999
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 72,507 $ 35,263 $ 183,949 $ 70,593
Costs and Expenses:
Contract drilling 29,903 19,801 87,090 53,095
Depreciation and amortization 11,192 9,622 32,892 19,113
General and administrative 3,902 2,314 10,914 9,211
--------- --------- --------- ---------
44,997 31,737 130,896 81,419
--------- --------- --------- ---------
Operating income (loss) 27,510 3,526 53,053 (10,826)
--------- --------- --------- ---------
Other Income (Expense):
Interest expense (2,825) (2,144) (9,221) (2,565)
Interest income 97 378 388 803
Other income 375 323 1,407 282
--------- --------- --------- ---------
(2,353) (1,443) (7,426) (1,480)
--------- --------- --------- ---------
Income (loss) before income taxes 25,157 2,083 45,627 (12,306)
Income tax expense (benefit) 9,559 (813) 17,338 (3,691)
--------- --------- --------- ---------
Net income (loss) $ 15,598 $ 2,896 $ 28,289 $ (8,615)
========= ========= ========= =========
Earnings (loss) per share:
Basic $ 0.27 $ 0.05 $ 0.48 $ (0.16)
Diluted $ 0.26 $ 0.05 $ 0.48 $ (0.16)
Average common shares outstanding:
Basic 58,524 57,133 58,354 54,633
Diluted 59,432 57,708 59,206 54,633
</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, except share data)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ 28,289 $ (8,615)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Deferred income taxes 15,385 (4,353)
Tax benefits related to common stock issued pursuant to
long-term incentive plan 1,956 48
Depreciation and amortization 32,892 19,113
Changes in operating assets and liabilities:
Receivables (19,811) 2,365
Income tax receivable 18,904 --
Other current assets (455) 660
Payables, accrued expenses and employer's liability claims (3,807) 1,830
Other 732 2,462
--------- ---------
Net cash provided by operating activities 74,085 13,510
--------- ---------
Cash Flows From Investing Activities:
Purchase of equipment (36,466) (197,986)
Proceeds from disposition of equipment 1,343 428
--------- ---------
Net cash used in investing activities (35,123) (197,558)
--------- ---------
Cash Flows From Financing Activities:
Proceeds from long-term debt 2,000 125,000
Payments on long-term debt (62,000) --
Proceeds from sale of common stock 18,461 54,417
Proceeds from exercise of stock options 3,011 377
--------- ---------
Net cash provided by (used in) financing activities (38,528) 179,794
--------- ---------
Net increase (decrease) in cash and cash equivalents 434 (4,254)
Cash and cash equivalents at beginning of period 4,664 12,576
--------- ---------
Cash and cash equivalents at end of period $ 5,098 $ 8,322
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 9,785 $ 5,254
Income taxes paid 308 3,171
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Issuance of 5,000 and 11,350 shares in 2000 and 1999 respectively, of
restricted common stock $ 137 $ 145
Forfeitures of 2,025 and 5,450 shares in 2000 and 1999 respectively, of
restricted common stock (32) (58)
</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. (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 nine months ended September 30, 2000 included herein
has been subjected to a limited review by KPMG 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, 1999.
The results of operations for the nine months ended September 30, 2000 are not
necessarily indicative of the results of operations that may be expected for the
year.
(2) EARNINGS PER SHARE
The Company's basic earnings (loss) per share, which is based upon the
weighted average common shares outstanding - without the dilutive effects of
common stock equivalents (options, warrants, etc.), for the quarters ended
September 30, 2000 and 1999 is $0.27 and $0.05, respectively. Common stock
equivalents with a weighted average of 907,274 and 851,607 are reflected in the
calculation of diluted earnings per share for the three and nine-month periods
ended September 30, 2000, respectively. For the three and nine-month periods
ended September 30, 2000, there were 245,000 and 250,000 stock options
outstanding, respectively, which were not included in the computation of diluted
earnings per share. For the three and nine-month periods ended September 30,
1999, there were 2,713,500 stock options outstanding that were not included in
the computation of diluted earnings per share because the exercise price of
these options was greater than the average market price of the common shares. No
adjustment to net income was made in calculating diluted earnings per share for
the three and nine-month periods ended September 30, 2000 and 1999.
(3) CREDIT FACILITY
On August 12, 1998, the Company entered into a credit agreement (the
"Credit Facility") with a consortium of domestic and international banks
providing financing of up to $200 million to be used for rig acquisitions and
upgrades as well as for general corporate purposes. The Credit Facility is a
five-year revolving credit facility and is secured by substantially all of the
Company's assets, including a majority of its rig fleet. The Company and its
subsidiaries are required to comply with various covenants and restrictions,
including, but not limited to, the maintenance of financial ratios and the
restriction on payments of dividends. Interest accrues at a rate of (i) London
Interbank Offered Rate ("LIBOR") plus a margin determined pursuant to a debt to
EBITDA calculation or (ii) prime if a Base Rate Loan.
On September 21, 1999, the Company amended the Credit Facility. The
significant elements of the amendment include (i) an increase in the maximum
permitted ratio of debt to EBITDA to 4 to 1 compared to the original 3 to 1,
(ii) a modification to the definition of EBITDA to give pro forma effect to
certain newly acquired assets or long-term contracts, and (iii) a change to the
definition of working capital to include any available commitments under the
Credit Facility for purposes of satisfying the positive working capital
requirement. Also, the margin over LIBOR that the Company pays under the Credit
Facility was increased from a range of 75 to 125 basis points to 100 to 250
basis points.
As of September 30, 2000, $120 million in principal was outstanding
under the Credit Facility. Subsequent to September 30, 2000, the Company made
$10 million in principal payments, reducing the outstanding principal balance
under the Credit Facility to $110 million as of November 1, 2000.
5
<PAGE> 8
MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
During the nine months ended September 30, 2000, the Company incurred
$9.2 million of interest expense, including amortization of deferred financing
costs related to the Credit Facility. Interest expense for the construction and
refurbishment of qualifying assets is capitalized. Accordingly, there was no
capitalized interest expense for the nine months ended September 30, 2000 and
$3.6 million of interest expense was capitalized in the same period ended
September 30, 1999.
(4) COMMITMENTS AND CONTINGENCIES
India Lawsuit -- Jagson International Limited ("Jagson"), an Indian
entity, has brought suit against Marine Drilling Companies, Inc. and one of its
subsidiaries, Marine 300 Series, Inc. 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. In August 1995, Jagson filed a suit against the Company
in New Delhi, India that was subsequently withdrawn and filed a second suit in
New Delhi against the Company in October 1995 that was dismissed by the court.
In May 1996, Jagson filed a third suit against the Company in Bombay, India for
the same claim and attempted to attach the MARINE 201, located in India at the
time, to the claim. In March 1998, the court dismissed the motion for
attachment. Although the third suit is still on file with the court, the MARINE
201 is no longer in India and there have been no further proceedings in the
lawsuit. The Company disputes the existence of the agreement and intends to
vigorously defend the suit. The Company does not believe this dispute will have
a material adverse effect on its results of operations or financial condition.
Class Action Lawsuit -- An offshore worker brought a class action suit
against the Company, Marine Drilling International Inc. and a number of offshore
drilling contractors. The suit, Bryant vs. R&B Falcon Drilling USA Inc., et al
Civil Action No. G-00-488 in the United States District court for the Southern
District of TX, Galveston Division, was filed in August 2000. The plaintiff,
previously employed by another defendant in the action purports to be an
"offshore worker" and alleges that a number of offshore drilling contractors
have acted in concert to depress wages and benefits paid to their offshore
employees. Plaintiff contends that this is a violation of federal and state
antitrust laws and seeks an unspecified amount of treble damages, attorney's
fees and costs on behalf of himself and an alleged class of offshore workers.
The Company denies the allegations and based on information presently available,
does not expect the outcome of this claim to have a material adverse effect on
its results of operations or financial condition.
Other Legal Proceedings -- 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.
Marketing Agreement for NANHAI VI. In August 1998, the Company entered
into an agreement effective through October 1, 1999, with the Peoples Republic
of China's Southern Drilling Company to market the 1,500-foot water depth rated
semi-submersible NANHAI VI outside China. The agreement has been extended
through December 31, 2000. The NANHAI VI is a self-propelled, semi-submersible
drilling rig, which was built in 1982 and modified and refurbished in 1995.
Under the agreement, the Company is to receive $3,000 per day in management fees
while the rig is operating and 50% of all rig-level profits after management
fees and amortization over a 36-month period of the costs of any upgrades to the
vessel. The rig is technically suitable to be upgraded to 5,000-foot water depth
capability. Pursuant to the marketing agreement, if the rig is required to be
upgraded, the cost of the upgrade will be funded by the owner. The Company is
actively marketing the rig, which will be made available by Southern Drilling
Company upon consummation of a mutually agreeable drilling contract.
(5) RIG ACQUISITION
In January 2000, the Company acquired a jack-up rig, the Baruna V, for
$13.5 million. The rig is a Bethlehem mat cantilever capable of working in up to
200 feet of water. The rig was built in 1980 and was previously located in
Southeast Asia. The rig was renamed the MARINE 202 and was mobilized to the Gulf
of Mexico during the second quarter, along with the MARINE 201, previously
located in the United Arab Emirates.
6
<PAGE> 9
MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
To fund the acquisition, upgrade and mobilization of the MARINE 202
drilling rig, the Company completed an offering of one million shares of its
common stock in January 2000. The offering was an underwritten offering at a net
price of $18.50 per share, or $18.5 million.
(6) SEGMENT REPORTING
For reporting purposes the Company defines its segments as shallow
water drilling (jack-up rigs) and deepwater drilling (semi-submersibles). The
accounting policies of the reportable segments are the same as those described
in Note 1 of Notes to Consolidated Financial Statements included in the
Company's annual report on Form 10-K. The Company evaluates the performance of
its operating segments based on income before taxes and non-recurring items.
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>
JACK-UP SEMI CORPORATE &
OPERATIONS OPERATIONS OTHER TOTAL
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
THREE MONTHS ENDED:
SEPTEMBER 30, 2000
Revenues $ 43,687 $ 28,820 $ -- $ 72,507
Operating Income (Loss) 16,144 16,019 (4,653) 27,510
Identifiable Assets 184,801 470,560 15,393 670,754
Capital Expenditures 4,879 440 408 5,727
Depreciation & Amortization 4,471 5,970 751 11,192
SEPTEMBER 30, 1999
Revenues $ 14,825 $ 20,438 $ -- $ 35,263
Operating Income (Loss) (3,549) 10,216 (3,141) 3,526
Identifiable Assets 147,682 477,533 20,944 646,159
Capital Expenditures 994 30,270 852 32,116
Depreciation & Amortization 3,980 4,815 827 9,622
NINE MONTHS ENDED:
SEPTEMBER 30, 2000
Revenues $ 97,555 $ 86,394 $ -- $ 183,949
Operating Income (Loss) 19,816 46,467 (13,230) 53,053
Identifiable Assets 184,801 470,560 15,393 670,754
Capital Expenditures 30,021 4,893 1,552 36,466
Depreciation & Amortization 12,738 17,838 2,316 32,892
SEPTEMBER 30, 1999
Revenues $ 50,124 $ 20,469 $ -- $ 70,593
Operating Income (Loss) (7,720) 8,538 (11,644) (10,826)
Identifiable Assets 147,682 477,533 20,944 646,159
Capital Expenditures 1,931 194,711 1,344 197,986
Depreciation & Amortization 11,863 4,817 2,433 19,113
</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>
AS OF AND FOR THE AS OF AND FOR THE
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
United States $ 53,415 $ 21,387 $130,816 $ 56,686
Australia 15,724 13,876 45,645 13,876
Southeast Asia 3,368 -- 6,565 31
Other Foreign -- -- 923 --
Long-Lived Assets:
United States 414,244 365,254 414,244 365,254
Australia 153,770 172,261 153,770 172,261
Southeast Asia 43,301 39,916 43,301 39,916
Other Foreign -- 33,006 -- 33,006
</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 nine months ended September 30, 2000 and 1999, sales to
customers that represented 10% or more of consolidated drilling revenues were as
follows (dollars in thousands):
<TABLE>
<CAPTION>
2000 1999
----------------------- ------------------------
% OF TOTAL % OF TOTAL
REVENUE REVENUE REVENUE REVENUE
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Semi Operations:
Chevron Australia Pty., Ltd $47,209 26% $13,876 20%
Esso Exploration, Inc. 39,185 21% -- --
Jack-up Operations:
Applied Drilling Technology, Inc. 38,388 21% 19,690 28%
</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 of
such customers could have a material adverse effect on the Company's
profitability.
8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INDUSTRY OVERVIEW
Demand for the Company's offshore drilling services is primarily driven
by the worldwide expenditures for oil and gas drilling which is closely linked
to the underlying economics of oil and gas exploration, development and
production. The economics of oil and gas business activities is impacted by
current and projected oil and gas prices. Oil and gas prices are volatile and
somewhat unpredictable, which results in significant fluctuations in oil and gas
drilling expenditures. Many factors influence oil and gas prices, including
world economic conditions, worldwide oil and gas production and the activities
of the Organization of Petroleum Exporting Countries ("OPEC").
The rates that the industry can charge for drilling services is a
function of not only demand for services but the supply of drilling rigs
available in the market to provide service. During the early 1980's when oil and
gas prices were high and significant demand for drilling services existed, the
industry built a significant number of offshore drilling rigs. In the mid-1980's
when oil and gas prices declined significantly and the corresponding demand for
drilling services declined, the supply of drilling rigs was significantly
greater than the industry needed. This resulted in an imbalance of supply and
demand causing low utilization with dayrates declining to virtually cash
operating costs.
During 1996 and early 1997, oil and gas prices rose to a level that
stimulated significant oil and gas drilling activity resulting in improved
utilization and dayrates for the drilling industry. However, oil and gas prices
declined significantly beginning in October 1997, and reached multi-year lows in
various markets in early 1999. As a result of oil price declines in 1997 and
early 1999, oil and gas companies made significant cutbacks in their drilling
programs. This reduced rig utilization industry wide, including the U.S. Gulf of
Mexico where the Company operates most of its rigs, which not only sharply
reduced dayrates, but also shortened the average length of drilling contracts
primarily to a well-by-well basis. Oil and gas prices improved during 1999 and
have continued to improve during the first nine months of 2000, resulting in
increases in rig utilization and dayrates, particularly in the Gulf of Mexico
jack-up market.
The following table sets forth rig utilization rates, as reported by
Offshore Data Services:
<TABLE>
<CAPTION>
AVERAGE FOR THE
NINE MONTHS ENDED SEPTEMBER 30,
AS OF -------------------------------
OCTOBER 31, 2000 2000 1999
---------------- ------------ ------------
<S> <C> <C> <C>
Gulf of Mexico jack-up rigs 88% 84% 63%
Gulf of Mexico semi-submersible rigs 65% 59% 62%
Worldwide jack-up rigs 80% 75% 65%
Worldwide semi-submersible rigs 72% 65% 65%
</TABLE>
As of November 6, 2000, fourteen of the Company's 16 jack-up rigs were
working, all located in the Gulf of Mexico, under short-term contracts that
expire during the fourth quarter of 2000 or the first quarter of 2001, one
international jack-up rig is under contract until the fourth quarter of 2001,
and the remaining international rig configured as an accommodation unit is
currently idle. The Company's two semi-submersible rigs, the MARINE 500 and
MARINE 700 are currently operating under long-term contracts.
CONTRACTS AND CUSTOMERS
The Company obtains most of its drilling 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.
9
<PAGE> 12
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 nine months of 2000, the Company
performed services for approximately 34 different customers. For the period
ended September 30, 2000, Chevron Australia Pty., Ltd. ("CAPL") accounted for
approximately 26% of the Company's revenues, Esso Exploration, Inc. accounted
for approximately 21% of the Company's revenues and Applied Drilling Technology,
Inc., a subsidiary of Global Marine Inc., accounted for approximately 21% of the
Company's revenues. The loss of any one of these customers could have a material
adverse effect on the Company's results of operations. See Note 6 of Notes to
Consolidated Financial Statements for further information regarding these
customers.
MARINE 305 Drilling Contract. On July 8, 2000, the MARINE 305 began
operating in Malaysia at a dayrate of approximately $36,400 per day for Sarawak
Shell Berhad/Sabah Shell Petroleum Company. The contract is for a term of
486-days with termination provisions after the first nine months that includes
the payment of certain unrecovered contract costs. The contract allows for a
contract extension for up to eight wells or up to two platforms with multi-wells
on each platform at mutually agreed rates.
MARINE 700 Drilling Contract. On August 5, 1999, the Company began
operating the MARINE 700 under a five-year contract with Esso Exploration, Inc.
("Esso"), an affiliate of Exxon Mobil Corporation, at an initial dayrate of
$130,000 per day plus certain dayrate adjustments as allowed by the contract for
additional labor costs and construction and equipment changes requested by Esso
during the construction process. Currently, these adjustments to the initial
dayrate total approximately $12,000 per day. The initial dayrate is subject to a
potential increase in years two through five of the contract to the market
dayrate for comparable rigs such that total revenue from the contract could
range from $237 million to $302 million depending on drilling market conditions.
In years two and three of the contract, the dayrate cannot be greater than
$165,000, plus adjustments, and in years four and five, the dayrate cannot be
greater than the amount that would make the cumulative revenue greater than $302
million. Dayrates are subject to adjustments for changes in indexed operating
cost elements, changes in cost arising from moving the rig outside the U.S. Gulf
of Mexico, or changes in personnel requirements.
The MARINE 700 contract was subject to a potential increase for year
two, effective August 5, 2000 as stated in the contract. The Company and Esso
have not been able to agree on what increases, if any, the Company is entitled
to, and, pursuant to the contract, have agreed to pursue arbitration to
determine any increases in the dayrate.
MARINE 500 Drilling Contract. In July 1997, the Company entered into a
drilling contract with a drilling consortium led by West Australian Petroleum
Pty., Ltd. ("WAPET") for the MARINE 500. The consortium consists of WAPET,
Indonesia Petroleum, Ltd. ("INPEX") and Mobil Exploration and Producing
Australia ("MEPA"). Effective March 2000, WAPET assigned all of its rights and
obligations under the contract to Chevron Australia PTY., Ltd. Certain other oil
companies have an option to participate in the consortium. During the term of
this contract, the MARINE 500 will work predominately in Western Australia,
although the consortium members may use the rig in Southeast Asia, the Pacific
Rim, and/or New Zealand.
The consortium drilling contract is a master agreement that
contemplates separate drilling contracts with the individual consortium members
at a dayrate which is adjusted for each contract based on operating costs in
the area in which the rig is to be used to ensure the Company a $127,500 per day
operating margin. Two of the consortium members, CAPL and INPEX, have committed
to drilling contracts under the consortium agreement and have agreed under the
consortium agreement to be liable for the contract minimum payments to the
Company for the initial contract term ending December 31, 2001. The optional
consortium members have made no commitments under the agreement, and are not
liable for any payments under the consortium contract until they commit to a
drilling contract. The INPEX drilling contract was a two-well contract with up
to three option wells to be drilled at an operating dayrate of $150,000 per day
and was completed on January 5, 2000. The CAPL drilling contract provides for a
dayrate of $168,600 for an unspecified number of wells.
When the rig departed the shipyard in Singapore on July 5, 1999, the
Company, in accordance with the consortium drilling contract, received a fee of
$6 million for performing the upgrade to enable the rig to work in water depths
up to 5,000 feet with 15,000 psi drilling equipment. This $6 million fee is
being recognized as revenue over the term of the drilling contract.
10
<PAGE> 13
The contract expires on December 31, 2001 and provides that the
consortium can terminate the contract at any time after January 1, 2001 in
exchange for a termination payment of $95,890 for each day remaining in the term
of the contract, subject to offset if the rig is otherwise employed. On
September 1, 2000, the Company received notice from CAPL that current plans are
to utilize the MARINE 500 through February 2001 after which they intend to
exercise their termination rights under the drilling contract. Additionally, if
the rig is otherwise employed the contract provides that the consortium will
make payments, if necessary to the Company to insure that the operating margin
on the MARINE 500 is $127,500 per day. The Company is confident it will be able
to secure future work for this rig.
Marketing Agreement for NANHAI VI. In August 1998, the Company entered
into an agreement effective through October 1, 1999, with the Peoples Republic
of China's Southern Drilling Company to market the 1,500-foot water depth rated
semi-submersible NANHAI VI outside China. The agreement has been extended
through December 31, 2000. The NANHAI VI is a self-propelled, semi-submersible
drilling rig, which was built in 1982 and modified and refurbished in 1995.
Under the agreement, the Company is to receive $3,000 per day in management fees
while the rig is operating and 50% of all rig-level profits after management
fees and amortization over a 36-month period of the costs of any upgrades to the
vessel. The rig is technically suitable to be upgraded to 5,000-foot water depth
capability. Pursuant to the marketing agreement, if the rig is required to be
upgraded, the cost of the upgrade will be funded by the owner. The Company is
actively marketing the rig, which will be made available by Southern Drilling
Company upon consummation of a mutually agreeable drilling contract.
RESULTS OF OPERATIONS
The number of rigs the Company has available for service and the
utilization and dayrates of the Company's active rigs are the most significant
factors affecting the Company's level of revenues. 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 cost of maintaining personnel on board the rigs
and equipment maintenance when the rigs are idle. 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 since changes in dayrates directly impact revenues
but not expenses. Utilization 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 or contracts 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 dayrates 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:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS
SEPTEMBER 30, ENDED SEPTEMBER 30,
--------------------------- ---------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
(dollars in thousands except per day data)
<S> <C> <C> <C> <C>
Jack-ups
Operating days 1,317 918 3,527 2,564
Utilization (1) 92% 69% 85% 63%
Average revenue per day $ 33,171 $ 16,149 $ 27,659 $ 19,549
Revenue 43,687 14,825 97,555 50,124
Contract drilling expense (2) 23,072 14,394 65,000 45,981
Depreciation 4,471 3,980 12,738 11,863
Operating income (loss) 16,144 (3,549) 19,816 (7,720)
Semi-submersibles
Operating days 184 144 548 144
Utilization (1) 100% 87% 100% 42%
Average revenue per day $ 156,630 $ 141,930 $ 157,653 $ 142,146
Revenue 28,820 20,438 86,394 20,469
Contract drilling expense (2) 6,831 5,407 22,090 7,114
Depreciation 5,970 4,815 17,838 4,817
Operating income (loss) 16,019 10,216 46,467 8,538
Total Company:
Operating days 1,501 1,062 4,075 2,708
Utilization (1) 93% 71% 87% 62%
Average revenue per day $ 48,306 $ 33,204 $ 45,141 $ 26,068
Revenue 72,507 35,263 183,949 70,593
Contract drilling expense (2) 29,903 19,801 87,090 53,095
Depreciation and amortization 11,192 9,622 32,892 19,113
General and administrative expense 3,902 2,314 10,914 9,211
Operating income (loss) 27,510 3,526 53,053 (10,826)
</TABLE>
(1) Based on the number of actively marketed rigs. Excluding rigs under
construction or in the process of substantial upgrading.
(2) Excludes depreciation and amortization and general and administrative
expenses.
Revenues. The Company's drilling revenues increased $37,244,000 or
106%, and $113,356,000 or 161% during the three and nine-month periods ended
September 30, 2000, respectively, as compared to the same periods in 1999. The
increase in revenues was primarily due to higher average daily revenue and rig
utilization. Average daily revenue and rig utilization increased to $48,306 and
93%, respectively, for the quarter ended September 30, 2000 as compared to
$33,204 and 71%, respectively, for the same period in 1999. For the nine months
ended September 30, 2000 the average daily revenue and rig utilization increased
to $45,141 and 87%, respectively, from average daily revenue of $26,068 and rig
utilization of 62%, respectively, for the same period in 1999. The higher
average daily revenue and increased utilization were due to the MARINE 500 and
MARINE 700 semi-submersible rigs that began operating in the third quarter of
1999, coupled with improved market conditions in the Gulf of Mexico jack-up
market.
Contract Drilling Expense. Contract drilling expenses for the three and
nine months ended September 30, 2000 increased $10,102,000 or 51% and
$33,995,000 or 64%, respectively, as compared to the same periods in 1999. The
increase was primarily a result of the MARINE 500 and MARINE 700 that began
operating in the third
12
<PAGE> 15
quarter of 1999, and higher utilization rates in the Gulf of Mexico jack-up
market. Additionally, the MARINE 202 began working in the Gulf of Mexico during
the third quarter 2000.
Depreciation and Amortization. Depreciation and amortization expense
for the three months ended September 30, 2000 increased $1,570,000, compared to
the same period in 1999, due to depreciation associated with the deployment of
the MARINE 202 in August 2000. For the nine months ended September 30, 2000,
depreciation and amortization expense increased by $13,779,000 as compared to
the same period in 1999 due to the upgrade of the MARINE 500 which was placed
back in service in July 1999 and the construction of the MARINE 700, which was
placed in service in August 1999.
General and Administrative. General and administrative expenses for the
three and nine-month periods ended September 30, 2000 increased $1,588,000 and
$1,703,000, respectively, compared to the same periods in 1999. The increase is
primarily due to 1999 not including any bonus expense. The Company's bonus plan
provides for no bonuses in a year in which the Company does not generate net
income, as was the case in 1999.
Interest Expense. Interest expense for the three and nine months ended
September 30, 2000 has increased compared to the same periods in 1999. The
increases are primarily the result of increased borrowings under the Company's
credit facility, coupled with $900,000 and $3,600,000 in capitalized interest
associated with the upgrade of the MARINE 500 and construction of the MARINE 700
for the three and nine-month periods ended September 30, 1999, respectively.
Interest Income. Interest income decreased $281,000 or 74% and $415,000
or 52% for the three and nine months ended September 30, 2000, respectively,
from the comparable prior-year periods. The decrease was related primarily to
decreased cash balances.
Other Income. Other income of $375,000 and $1,407,000 for the three and
nine months ended September 30, 2000, respectively, was generated primarily from
the sale of drill pipe.
Income Taxes. Income tax expense increased for the three and nine-month
periods ended September 30, 2000 compared to the same periods in 1999, primarily
due to an increase in the Company's pretax income.
FINANCIAL CONDITION -- LIQUIDITY AND CAPITAL RESOURCES
Liquidity. At September 30, 2000, the Company had working capital of
$34,279,000 compared to working capital of $30,816,000 at December 31, 1999.
Net cash provided by operating activities for the nine months ended
September 30, 2000 increased by $60,575,000 to $74,085,000 compared to
$13,510,000 for the same period in the prior year. The increase is primarily
attributable to the increased dayrates and rig operating activity coupled with
the collection of a $19,297,000 income tax refund. Cash used in investing
activities decreased $162,435,000 during the first nine months of 2000 to
$35,123,000 from $197,558,000 during the same period in 1999 due to completion
of the MARINE 500 upgrade and construction of the MARINE 700 partially offset by
the purchase of the MARINE 202 in January 2000. Net cash used in financing
activities during the nine months ended September 30, 2000 of $38,528,000
resulted primarily from $62,000,000 in debt repayments, partially offset by
$18,461,000 in net proceeds from the sale of 1,000,000 shares of common stock in
January 2000. The proceeds of the stock offering were used to purchase, upgrade
and mobilize the MARINE 202.
On August 12, 1998, the Company entered into a credit agreement (the
"Credit Facility") with a consortium of domestic and international banks
providing financing of up to $200,000,000 to be used for rig acquisitions and
upgrades, as well as for general corporate purposes. The Credit Facility is a
five-year revolving credit facility and is secured by substantially all of the
Company's assets, including a majority of its rig fleet. The Company and its
subsidiaries are required to comply with various covenants and restrictions,
including, but not limited to, the maintenance of financial ratios and the
restriction on payments of dividends. Interest accrues at a rate of (i) London
Interbank Offered Rate ("LIBOR") plus a margin determined pursuant to a debt to
EBITDA calculation or (ii) prime if a Base Rate Loan.
13
<PAGE> 16
On September 21, 1999, the Company amended the Credit Facility. The
significant elements of the amendment include (i) an increase in the maximum
permitted ratio of debt to EBITDA to 4 to 1 compared to the original 3 to 1,
(ii) a modification to the definition of EBITDA to give pro forma effect to
certain newly acquired assets or long-term contracts, and (iii) a change to the
definition of working capital to include any available commitments under the
Credit Facility for purposes of satisfying the positive working capital
requirement. Also, the margin over LIBOR that the Company pays under the Credit
Facility was increased from a range of 75 to 125 basis points to 100 to 250
basis points.
As of September 30, 2000, $120,000,000 in principal was outstanding
under the Credit Facility. Subsequent to September 30, 2000, the Company made
$10,000,000 in principal payments, reducing the outstanding principal balance
under the Credit Facility to $110,000,000 as of November 1, 2000.
During 1997, and again recently in 2000, the improvement in the
offshore drilling market allowed the Company to place some of its offshore rigs
under longer-term contracts. The MARINE 305, MARINE 500 and MARINE 700 are
operating under long-term contracts that are expected to generate contract
revenues in excess of $265,000,000 over the remaining life of the contracts.
This amount assumes the continued employment of the MARINE 500 and no change in
rates for the MARINE 700.
Capital Resources. During the nine months ended September 30, 2000 the
Company spent $36,466,000 in capital expenditures consisting primarily of
disbursements for the acquisition, upgrade and mobilization of the MARINE 202
and the purchase of other rig machinery. On January 10, 2000, the Company
completed an offering of 1,000,000 shares of its Common Stock in an underwritten
offering at a net price of $18.50 per share. The net proceeds from the offering
were $18,500,000 and were used to acquire, upgrade and mobilize the MARINE 202.
The Company expects to 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 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 therefore, on acceptable terms. In addition, it is currently
anticipated that the Company will continue the upgrading of rigs to enhance
their capability to obtain 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 Credit
Facility and other potential funding sources, such as increased credit
facilities and private or public debt or equity offerings, will be sufficient to
fund its required capital expenditures, working capital and debt service
requirements for the foreseeable future. Future cash flows and the availability
of other funding sources, 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.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
of Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which establishes standards for accounting for and
disclosure of derivative instruments and hedging activities. SFAS No. 133, as
amended by SFAS No. 137 and SFAS No. 138, is effective for fiscal years
beginning after June 15, 2000. The Company does not expect SFAS No. 133 to have
a material effect on its reported results.
14
<PAGE> 17
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; (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 continuation
of market and other conditions similar to those in which the Company incurred
net losses for the nine months ended September 30, 1999; (ix) the loss of key
management personnel or the inability of the Company to attract and retain
sufficient qualified personnel to operate its rigs; (x) the re-negotiation or
cancellation of the long-term contracts for the MARINE 700 or the MARINE 500,
whether as a result of rig performance or because of some other reason; (xi) 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; (xii) the occurrence of risks attendant to contract
drilling operations including blowouts, 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; (xiii) adverse uninsured litigation results; (xiv) adverse tax
consequences with respect to operations; and (xv) adequacy of the Company's cash
resources in the future. These forward-looking statements speak only as of the
date of this Report. The Company expressly disclaims any obligation or
undertaking to update or revise 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk. The Company is subject to market risk exposure
related to changes in interest rates on its Credit Facility. Interest on
borrowings under the Credit Facility is at either the prime interest rate or
LIBOR plus a margin ranging from 1% to 2.5% determined pursuant to a debt to
EBITDA calculation. The Company may, at its option, fix the LIBOR interest rate
for certain borrowings for 30 days to 6 months, with longer periods requiring
bank approval. As of September 30, 2000, the margin for all LIBOR borrowings was
1.50% and the Company had $120 million in principal outstanding under its Credit
Facility. Effective October 17, 2000, the margin for all LIBOR borrowings was
1.25%. On the $120 million balance, an immediate change of one percent in the
interest rate would cause a change in interest expense of approximately $1.20
million on an annual basis.
Foreign Currency Exchange Rate Risk. The Company conducts business in
several foreign countries. Predominately all of its foreign drilling contracts
are denominated in U.S. dollars. The Company structures its drilling contracts
in U.S. dollars to mitigate its exposure to fluctuations in foreign currencies.
Other than some limited trade payables the Company does not currently have
financial instruments that are sensitive to foreign currency exchange rates.
15
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Jagson International Limited ("Jagson"), an Indian entity, has brought
suit against Marine Drilling Companies, Inc. and one of its subsidiaries, Marine
300 Series, Inc. The plaintiff has alleged that the Company agreed to charter
two jack-up rigs to the plaintiff during 1992 and that the Company breached the
agreement by failing to charter the rigs resulting in damages in excess of
$14,500,000. In August 1995, Jagson filed a suit against the Company in New
Delhi, India that was subsequently withdrawn and filed a second suit in New
Delhi against the Company in October 1995 that was dismissed by the court. In
May 1996, Jagson filed a third suit against the Company in Bombay, India for the
same claim and attempted to attach the MARINE 201, located in India at the time,
to the claim. In March 1998, the court dismissed the motion for attachment.
Although the third suit is still on file with the court, the MARINE 201 is no
longer in India and there have been no further proceedings in the lawsuit. The
Company disputes the existence of the agreement and intends to vigorously defend
the suit. The Company does not believe this dispute will have a material adverse
effect on its results of operations or financial condition.
An offshore worker brought a class action suit against the Company,
Marine Drilling International Inc. and a number of offshore drilling
contractors. The suit, Bryant vs. R&B Falcon Drilling USA Inc., et al Civil
Action No. G-00-488 in the United States District court for the Southern
District of TX, Galveston Division, was filed in August 2000. The plaintiff,
previously employed by another defendant in the action purports to be an
"offshore worker" and alleges that a number of offshore drilling contractors
have acted in concert to depress wages and benefits paid to their offshore
employees. Plaintiff contends that this is a violation of federal and state
antitrust laws and seeks an unspecified amount of treble damages, attorney's
fees and costs on behalf of himself and an alleged class of offshore workers.
The Company denies the allegations and based on information presently available,
does not expect the outcome of this claim to have a material adverse effect on
its 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 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibits No. Description
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.)
(b) Reports on Form 8-K:
(1) The Company filed a report under Item 5 of Form 8-K dated
September 1, 2000.
(2) The Company filed a report under Item 5 of Form 8-K dated
October 25, 2000.
16
<PAGE> 19
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: November 9, 2000 By /s/ Jan Rask
----------------------------------
Jan Rask
President, Chief Executive Officer
And Director
(Principal Executive Officer)
Date: November 9, 2000 By /s/ Dale W. Wilhelm
----------------------------------
Dale W. Wilhelm
Vice President and Controller
(Principal Accounting Officer)
17
<PAGE> 20
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>
