<PAGE> 1
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-22664
PATTERSON ENERGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of 75-2504748
incorporation or organization) (I.R.S. Employer Identification No.)
P. O. BOX 1416, 4510 LAMESA HIGHWAY, SNYDER, TEXAS, 79550
(Address of principal executive offices) (Zip Code)
(915) 573-1104
(Registrant's telephone number, including area code)
No change
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities 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 [ ]
As of August 13, 1997 the issuer had outstanding 14,760,914 shares of common
stock, $0.01 par value, its only class of voting stock.
- -------------------------------------------------------------------------------
<PAGE> 2
PATTERSON ENERGY, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Accountants, Coopers & Lybrand L.L.P............... 3
Part I - Financial Information
Item 1. Financial Statements
Unaudited consolidated balance sheets..................... 4
Unaudited consolidated statements of income............... 6
Unaudited consolidated statement of stockholders' equity.. 7
Unaudited consolidated statements of cash flows........... 8
Notes to unaudited consolidated financial statements...... 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 15
Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act of 1995.. 20
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K........................... 21
Signatures............................................................... 26
</TABLE>
2
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
of Patterson Energy, Inc.:
We have reviewed the accompanying consolidated balance sheet of Patterson
Energy, Inc. and Subsidiaries as of June 30,1997, the related consolidated
statements of income for the three and six months ended June 30, 1997 and 1996
and cash flows for the six months ended June 30, 1997 and 1996 and the related
consolidated statement of stockholders' equity for the six months ended June
30, 1997. These 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 upon our review, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements 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 as of December 31, 1996 and the
related consolidated statements of income and cash flows for the year then
ended (not presented herein); and in our report dated March 10, 1997, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1996, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/S/ COOPERS & LYBRAND L.L.P.
Dallas, Texas
July 24, 1997
3
<PAGE> 4
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE FOLLOWING UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS INCLUDE ALL
ADJUSTMENTS, WHICH IN THE OPINION OF MANAGEMENT, ARE NECESSARY IN
ORDER TO MAKE SUCH FINANCIAL STATEMENTS NOT MISLEADING.
PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
------------ ------------
(in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................... $ 3,494 $ 11,358
Marketable securities.......................................... 544 551
Accounts receivable:
Trade....................................................... 23,743 31,049
Oil and natural gas sales................................... 999 1,161
Costs of uncompleted drilling contracts in excess of related
billings.................................................... 274 158
Deferred income taxes.......................................... 1,483 1,483
Undeveloped oil and natural gas properties held for resale..... 4,670 4,427
Other current assets........................................... 274 974
--------- ----------
Total current assets..................................... 35,481 51,161
Property and equipment, at cost, net.............................. 51,308 81,663
Intangible assets, net............................................ -- 19,576
Deposits on workers' compensation insurance policy................ 412 412
Other assets...................................................... 712 668
--------- ----------
Total assets............................................. $ 87,913 $ 153,480
========= ==========
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
(continued)
4
<PAGE> 5
PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
------------- ------------
(in thousands)
<S> <C> <C>
Current liabilities:
Current maturities of notes payable........................... $ 117 $ 323
Accounts payable:
Trade....................................................... 12,129 14,106
Revenue distribution........................................ 2,432 4,742
Other....................................................... 965 466
Accrued expenses.............................................. 2,246 5,947
----------- ---------
Total current liabilities........................... 17,889 25,584
Deferred income taxes............................................ 96 896
Deferred liabilities............................................. 714 700
Notes payable, less current maturities........................... 25,732 5,677
----------- ---------
Total liabilities................................... 44,431 32,857
----------- ---------
Commitments and contingencies.................................... -- --
Stockholders' equity:
Preferred stock - par value $.01; authorized
1,000,000 shares, no shares issued.......................... --
--
Common stock - par value $.01; authorized 9,000,000 shares of
December 31, 1996 and 18,000,000 shares June 30, 1997 with
4,943,591 and 14,738,514 (affected by a two-for-one stock
split, See Note 5) issued and outstanding at December 31,
1996 and June 30, 1997, respectively........................ 49 147
Additional paid-in capital.................................... 21,359 92,484
Retained earnings............................................. 22,074 27,992
----------- ---------
Total stockholders' equity.......................... 43,482 120,623
----------- ---------
Total liabilities and stockholders' equity.......... $ 87,913 $ 153,480
=========== =========
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
5
<PAGE> 6
PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -------------------------
1996 1997 1996 1997
----------- --------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Operating revenues:
Drilling ........................................ $ 16,112 $ 37,592 $ 30,208 $ 65,156
Oil and natural gas sales ....................... 1,954 2,702 3,644 5,335
Well operation fees ............................. 385 398 771 822
Other ........................................... 96 -- 170 20
-------- -------- -------- --------
18,547 40,692 34,793 71,333
-------- -------- -------- --------
Operating costs and expenses:
Direct drilling costs ........................... 13,318 28,066 24,741 50,386
Lease operating and production .................. 515 545 996 1,062
Impairment of oil and natural gas
properties ................................... -- 300 159 450
Exploration costs ............................... 117 166 233 325
Dry holes and abandonments ...................... 202 370 354 593
Depreciation, depletion and amortization ........ 2,494 3,905 4,787 7,200
General and administrative expense .............. 1,269 1,294 2,646 2,631
-------- -------- -------- --------
17,915 34,646 33,916 62,647
-------- -------- -------- --------
Operating income .................................... 632 6,046 877 8,686
-------- -------- -------- --------
Other income (expense):
Net gain on sale of assets ...................... 349 183 399 318
Interest income ................................. 128 356 248 640
Interest expense ................................ (315) (26) (645) (509)
Non-recurring acquisition costs ................. (505) -- (505) --
Other ........................................... 13 121 74 140
-------- -------- -------- --------
(330) 634 (429) 589
-------- -------- -------- --------
Income before income taxes .......................... 302 6,680 448 9,275
-------- -------- -------- --------
Income tax expense (benefit):
Current ......................................... 30 1,977 92 2,474
Deferred ........................................ 17 425 (2,386) 883
-------- -------- -------- --------
47 2,402 (2,294) 3,357
-------- -------- -------- --------
Net income .......................................... $ 255 $ 4,278 $ 2,742 $ 5,918
======== ======== ======== ========
Net income per common share:
Primary ......................................... $ .03 $ 0.29 $ 0.28 $ 0.42
======== ======== ======== ========
Fully diluted ................................... $ .03 $ 0.29 $ 0.28 $ 0.42
======== ======== ======== ========
Weighted average number of common shares outstanding:
Primary ......................................... 9,866 14,703 9,865 13,947
======== ======== ======== ========
Fully diluted ................................... 9,866 14,760 9,913 14,026
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
6
<PAGE> 7
PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Common Stock
---------------------------- Additional
Number paid-in Retained
of shares Amount capital earnings Total
------------ ----------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996........ 4,944 $ $ 21,359 $ 22,074 $ 43,482
49
Issuances of common stock......... 2,346 23 68,292 -- 68,315
Issuance of stock purchase
warrant....................... -- -- 1,248 -- 1,248
Exercise of stock options......... 79 1 647 -- 648
Tax benefit related to stock
options....................... -- -- 1,012 -- 1,012
Net income........................ -- -- -- 5,918 5,918
Effect of 2-for-1 stock split
(See Note 5).................. 7,369 74 (74) -- --
------- -------- --------- --------- ----------
Balance, June 30, 1997............ 14,738 $ 147 $ 92,484 $ 27,992 $ 120,623
======= ======== ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
7
<PAGE> 8
PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------
1996 1997
---------- ---------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................. $ 2,742 $ 5,918
Adjustments to reconcile net income to net cash from
operating activities:
Abandonment of oil and natural gas properties .......................... 119 483
Depreciation, depletion and amortization ............................... 4,787 7,200
Impairment of oil and natural gas properties ........................... 159 450
Net gain on sale of assets ............................................. (399) (318)
Deferred income tax expense (benefit) .................................. (2,386) 883
Tax benefit related to stock options ................................... -- 1,012
Increase (decrease) in deferred compensation liabilities ............... 23 (14)
Change in operating assets and liabilities:
Increase in trade accounts receivable ............................. (2,295) (7,306)
(Increase) decrease in oil and natural gas sales receivables ...... 13 (162)
Increase in undeveloped oil and natural gas
properties held for resale .................................... (422) (171)
(Increase) decrease in other current assets ....................... 951 (584)
Increase in trade accounts payable ................................ 1,958 1,977
Increase in revenue distribution payable .......................... 538 2,310
Increase in accrued expenses ...................................... 103 3,701
Decrease in other current payables ................................ (1) (499)
-------- --------
Net cash provided by operating activities ..................... 5,890 14,880
-------- --------
Cash flows from investing activities:
Net sales (purchases) of investment securities ......................... 1,947 (7)
Cash paid for acquisitions ............................................. -- (30,687)
Purchases of property and equipment .................................... (6,550) (17,144)
Sale of property and equipment ......................................... 804 578
Change in other assets 82 44
-------- --------
Net cash used in investing activities ......................... (3,717) (47,216)
-------- --------
Cash flows from financing activities:
Proceeds from notes payable ............................................ 2,440 6,000
Payments of notes payable .............................................. (323) (25,849)
Issuance of common stock ............................................... -- 59,401
Proceeds from exercise of stock options ................................ 71 648
-------- --------
Net cash provided by financing activities ..................... 2,188 40,200
-------- --------
Net increase in cash and cash equivalents ..................... 4,361 7,864
Cash and cash equivalents at beginning of period ............................ 7,209 3,494
-------- --------
Cash and cash equivalents at end of period .................................. $ 11,570 $ 11,358
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ............................................................... $ 645 $ 509
Income taxes ........................................................... 142 745
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
(continued)
8
<PAGE> 9
PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Unaudited)
Supplemental disclosure of cash flow information - continued:
During the quarter ended June 30, 1997, the Company acquired the drilling
assets of Ziadril, Inc. and Wes-Tex Drilling Company for a total purchase
price of approximately $40,850,000 of which, $30,687,000 was paid in cash
as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Fair value of assets acquired.................... $ 40,850
Less non-cash items:
Common stock issued........................... (8,915)
Three-year stock purchase warrant............. (1,248)
-----------
Total cash paid.......................... $ 30,687
===========
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
9
<PAGE> 10
PATTERSON ENERGY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF CONSOLIDATION AND PRESENTATION
The consolidated financial statements include the accounts of Patterson
Energy, Inc. ("Patterson"), and its wholly-owned subsidiaries, Patterson
Drilling Company, Patterson Petroleum, Inc., Patterson Petroleum Trading
Company, Inc. and Patterson Drilling Programs, Inc. (collectively referred to
hereafter as the "Company"). All significant intercompany accounts and
transactions have been eliminated.
The interim consolidated financial statements have been prepared by
management of the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to
such rules and regulations, although the Company believes that the disclosures
included herein are adequate to make the information presented not misleading.
In the opinion of management, all adjustments (consisting of only normal
recurring accruals) considered necessary for presentation of the information
have been included. The 1996 financial information presented herein has been
restated to reflect the July 30, 1996 merger with Tucker Drilling Company, Inc.
under the pooling of interests method of accounting. The balance sheet as of
December 31, 1996, as presented herein, was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.
The results of operations for the three and six months ended June 30,
1997, are not necessarily indicative of the results to be expected for the full
year.
Certain reclassifications have been made to the 1996 consolidated
financial statements in order for them to conform with the 1997 presentation.
Except with respect to the Company's earnings per share and weighted
average number of common shares outstanding for all periods presented and as
otherwise indicated herein, no effect has been given to a two-for-one split of
Patterson's common stock effected on July 25, 1997.
2. RECENT ACQUISITIONS
On April 22, 1997, the Company acquired certain assets of Ziadril,
Inc. ("Ziadril"), a privately-owned, non-affiliated contract drilling company
based in Hobbs, New Mexico for a purchase price of $5.5 million. The assets
acquired consisted of five fully operable contract drilling rigs, two rig
hauling trucks, an office, shop and a yard. The acquisition was treated as a
purchase for purposes of financial accounting. The acquisition was funded with
cash on hand at the date of the transaction. As such, fair market values of the
acquired assets were determined and the purchase price, as of the date of the
acquisition, was allocated based on estimated fair values as follows:
<TABLE>
<S> <C>
Contract drilling assets.................... $ 3,652,000
Goodwill.................................... 1,648,000
Covenants not to compete.................... 200,000
------------
Total purchase price ..................... $ 5,500,000
============
</TABLE>
On June 12, 1997, the Company consummated an acquisition to purchase
the contract drilling assets of Wes-Tex Drilling Company ("Wes-Tex"), a
privately-held, non-affiliated company based in Abilene, Texas, for a purchase
price of approximately $35.4 million; consisting of $25 million in cash,
283,000 shares of Patterson common stock valued at $31.50 per share, which
represented the approximate fair market value on the date the terms of the
acquisition were agreed to and announced, a three-year stock purchase warrant
(valued at $6.24 per share) to purchase 200,000
(continued)
10
<PAGE> 11
PATTERSON ENERGY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
2. RECENT ACQUISITIONS - CONTINUED
additional shares of Patterson common stock at an exercise price of $32 per
share and approximately $190,000 of other direct costs incurred relative to the
transaction. The acquisition was funded using $19 million of the Company's cash
on hand and $6 million provided by a $30 million line of credit (discussed
below in Note 4). The assets acquired consisted of 21 fully operable contract
drilling rigs, all related rolling stock and a shop and yard. The purchase
price, as of the date of acquisition, was allocated as follows:
<TABLE>
<S> <C>
Contract drilling assets.................... $ 17,450,000
Goodwill.................................... 16,629,000
Covenants not to compete.................... 1,273,000
-------------
Total purchase price...................... $ 35,352,000
=============
</TABLE>
The aforementioned acquisitions have been accounted for as purchases
and the results of operations and cash flows of the acquired entities have been
included in the consolidated financial statements since the dates of
acquisition. The purchase price allocations as detailed above are preliminary
in nature and subject to change.
The following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if Wes-Tex had been acquired at January
1, 1996, after including the impact of certain adjustments, such as restatement
of depreciation using the fair values instead of the book values of the assets
acquired, the increased interest expense on the acquisition debt, increased
amortization expense on intangible assets, conforming accounting treatment of
wells in progress and the related income tax effects.
<TABLE>
<CAPTION>
Six Months Ended June 30
-------------------------------
1996 1997
------- -------
(in thousands, except
per share data)
<S> <C> <C>
Revenues......................... $57,389 $94,419
Net income....................... 2,486 5,997
Net income per fully
diluted share................ 0.25 0.43
</TABLE>
The pro forma results are not necessarily indicative of what actually
would have occurred if the acquisition had been in effect for the entire
periods presented. In addition, they are not intended to be a projection of
future results and do not reflect any synergies that might be achieved from
combined operations.
3. INTANGIBLE ASSETS
Intangible assets consist of covenants not to compete and goodwill
arising from the Company's acquisitions described above in Note 2. The
covenants are being amortized on a straight line basis over their contractual
lives of five years. Goodwill, representing the excess of the purchase price
over the estimated fair value of the assets acquired, is being amortized on a
straight line basis over fifteen years.
<TABLE>
<CAPTION>
Balance at
June 30, 1997
--------------
<S> <C>
Covenants not to compete................ $ 1,473,000
Goodwill................................ 18,277,000
-------------
19,750,000
Less accumulated amortization........... 174,000
-------------
$ 19,576,000
==============
</TABLE>
(continued)
11
<PAGE> 12
PATTERSON ENERGY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
3. INTANGIBLE ASSETS - CONTINUED
Management continually reviews the carrying amounts of goodwill for
recoverability based on the anticipated undiscounted cash flows of the assets
for which it relates. The Company considers operating results, trends and
prospects of the Company, as well as competitive comparisons. The Company also
takes into consideration competition within the industry and any other events
or circumstances which might indicate potential impairment. If goodwill is
determined to not be recoverable an impairment charge will be recognized to the
extent that the carrying value of the related assets, including goodwill,
exceeds the estimated fair value.
4. NOTE PAYABLE
During June 1997, the Company entered into a line of credit agreement
with Norwest Bank Texas, N.A. (the "Norwest Line") providing a $30 million
credit facility. The Norwest Line allows for advances under the facility until
December 31, 1997, at which time the outstanding principal balance would be
converted to a term loan with a maturity date of January 1, 2000, and a
seven-year amortization. The credit facility is payable interest only until
December 31, 1997 at the LIBOR 90-day rate plus 2.50% (8.2812% at June 30,
1997). The Norwest Line is unsecured, but does not permit any liens to exist on
assets of the Company. The credit agreement governing the Norwest Line requires
the Company to, among other things, maintain a ratio of cash flows to current
maturities of long-term debt plus capital lease payments of 2.0 to 1.0 on a
rolling four month basis, a debt-to-tangible net worth ratio of not more than
0.60 to 1.0 at the end of each quarter, a current ratio of at least 1.75 to 1.0
at the end of each quarter, and a positive net income on a rolling four quarter
basis. The credit agreement prohibits the Company from having any other
indebtedness for borrowed money, secured or unsecured, with the exception of
normal trade payables and prohibits the Company from paying any dividends
without the consent of the bank.
The Company paid an origination fee of $75,000 which is being
amortized over the term of the loan and borrowed $6 million under the Norwest
Line during June 1997 to partially fund the Wes-Tex acquisition (as described
in Note 2).
5. STOCKHOLDERS' EQUITY
On January 27, 1997, on a Form S-3 Registration Statement, the Company
completed a public offering of 1.763 million shares of common stock at a price
of $30.75 per share. In February 1997, the underwriters of the Company's public
offering exercised their overallotment option to purchase 300,000 additional
shares of common stock. Net proceeds from the offering totaled approximately
$59.4 million to the Company. Certain of the proceeds were used to pay, prior
to maturity, notes payable and accrued interest of approximately $25.8 million
and prepayment penalties of approximately $191,000. Additionally, approximately
$74,000 in deferred financing costs were written off in connection with the
prepayment of the notes payable. The expenses are not being reflected as an
extraordinary item because management does not expect the amount to be material
for fiscal year 1997.
On July 1, 1997, Patterson's Board of Directors authorized a 2-for-1
stock split in the form of a 100% stock dividend payable on July 25, 1997 to
stockholders of record on July 11, 1997. Par value remained at $0.01 per common
share. The stock split resulted in the transfer of $73,692 at June 30, 1997
from additional paid-in capital to common stock, representing the par value of
the shares then outstanding. Accordingly, earnings per share and weighted
average number of common shares outstanding have been restated for all periods
presented to reflect the stock split.
(continued)
12
<PAGE> 13
PATTERSON ENERGY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
6. RECENT ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("Statement 128") which is effective for financial statements of the Company
for periods ending after December 15, 1997. Statement 128 specifies the
computation, presentation and disclosure requirements for earnings per share
("EPS"). Some of the changes made to current EPS standards include: (i)
eliminating the presentation of Primary EPS and replacing it with Basic EPS,
with the principal difference being that common stock equivalents are not
considered in computing Basic EPS, (ii) eliminating the modified treasury stock
method and the three percent materiality provisions, and (iii) revising the
contingent share provisions and the supplemental EPS data requirements.
Statement 128 also requires dual presentation of Basic and Diluted EPS on the
face of the income statement, as well as a reconciliation of the numerator and
denominator used in the two computations of EPS. Basic EPS is defined by
Statement 128 as net income from continuing operations divided by the average
number of common shares outstanding without the consideration of common stock
equivalents which may be dilutive to EPS. The Company's current methodology for
computing Diluted EPS will not change in future periods as a result of its
adoption of Statement 128. Had the Company implemented Statement 128 at June
30, 1997, it would have reported Basic EPS of $0.44 per common share on
13,534,346 shares of common stock (giving effect to the two-for-one stock
split).
During the fiscal quarter ended March 31, 1997, the Company adopted
Statement of Financial Accounting Standards No. 129, "Disclosure of Information
about Capital Structure" (Statement 129). Statement 129 establishes certain
standards for disclosing information about an entity's capital structure. The
Company does not anticipate a change in its disclosures as a result of its
adoption of Statement 129.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("Statement
130") which establishes standards for reporting and presentation of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. Statement 130 requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. Statement 130
requires that an enterprise (i) classify items of other comprehensive income by
their nature in a financial statement (ii) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of a statement of financial position.
Statement 130 is effective for fiscal years beginning after December 15, 1997.
The Company does not anticipate any significant changes in its current
reporting disclosures as a result of the implementation of Statement 130 during
fiscal 1998.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("Statement 131"). Statement 131 establishes revised
guidelines for determining an entity's operating segments and the type and
level of financial information to be disclosed. Statement 131 is effective for
fiscal years beginning after December 15, 1997. The Company does not anticipate
any significant changes in its current reporting disclosures as a result of the
implementation of Statement 131 during fiscal 1998.
(continued)
13
<PAGE> 14
PATTERSON ENERGY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
7. SUBSEQUENT EVENTS
The stockholders of Patterson, at the July 1, 1997 Annual Meeting of
Stockholders, approved an amendment to Patterson's Certificate of Incorporation
increasing the number of authorized shares of common stock from 9,000,000 to
18,000,000.
On August 1, 1997, the Company completed the acquisition of the
contract drilling assets of a privately-held, non-affiliated company based in
Midland, Texas for a purchase price of $4.25 million. The purchase price was
funded with proceeds provided by the Norwest Line (discussed in Note 4). The
assets acquired consisted of three fully operable contract drilling rigs and a
vehicle.
14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
THE FINANCIAL INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996, IS BASED
ON HISTORICAL FINANCIAL INFORMATION THAT HAS BEEN RESTATED TO REFLECT THE
MERGER OF THE COMPANY AND TUCKER DRILLING COMPANY, INC. ON JULY 30, 1996, UNDER
THE POOLING OF INTERESTS METHOD OF ACCOUNTING.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had working capital of approximately
$25.6 million and cash and cash equivalents of approximately $11.4 million as
compared to a working capital of approximately $17.6 million and cash and cash
equivalents of approximately $3.5 million as of December 31, 1996. Included in
the change in the Company's working capital from December 31, 1996 to June 30,
1997 is a $7.3 million increase and a $7.5 million increase in accounts
receivable-trade and current liabilities, respectively. The increase in
accounts receivable-trade and current liabilities was largely attributable to
the increased level of contract drilling activity provided by the Company's
expanded contract drilling fleet (further described below). For the six months
ended June 30, 1997, the Company generated net cash from operations of
approximately $14.9 million, received proceeds of approximately $648,000 from
the exercise of stock options, sold property and equipment for proceeds of
approximately $578,000, borrowed $6 million under an existing credit facility
and raised through an equity offering an additional $59.4 million. These funds
were used primarily to acquire drilling and other related equipment of
approximately $43.9 million, to fund leasehold acquisition, exploration and
development of approximately $3.9 million, to reduce certain notes payable by
approximately $25.8 million and to increase cash by approximately $7.9 million.
During June 1997, the Company negotiated a $30 million credit facility
with Norwest Bank Texas, N.A. Terms of the credit facility provide for an
advancing line of credit until December 31, 1997, at which time the outstanding
principal balance of the line will be converted to a term loan with a maturity
date of January 1, 2000, and a seven-year amortization. The credit facility is
payable, interest only at the LIBOR 90-day rate plus 2.50% (8.2812% at June 30,
1997) until December 31, 1997. Proceeds of the credit facility will be used by
the Company for acquisitions, capital expenditures and working capital
purposes. As of June 30, 1997, the Company had borrowed $6 million under the
credit facility to partially fund its acquisition of the contract drilling
operations of Wes-Tex Drilling Company (as described below).
During April 1997, using $5.5 million of proceeds provided by its
equity offering, the Company acquired five fully operable contract drilling
rigs and other related property and equipment from a privately-held,
non-affiliated company based in Hobbs, New Mexico. On June 12, 1997, the
Company consummated the acquisition of the contract drilling operations of
Wes-Tex Drilling Company ("Wes-Tex"), a non-affiliated, privately-owned company
based in Abilene, Texas. Pursuant to this transaction, the Company acquired 21
fully operable contract drilling rigs, rig hauling trucks and trailers, and a
yard and shop located in Abilene, in consideration for $25 million in cash,
283,000 shares of the Company's common stock valued at $31.50 per share and a
stock purchase warrant, exercisable at $32.00 per share, to purchase an
additional 200,000 shares of common stock. Of the $25 million cash, $19 million
was paid using proceeds provided by the Company's equity offering and $6
million was borrowed by the Company under its $30 million credit facility
referenced above. On August 1, 1997, the Company completed the acquisition of
the contract drilling assets of a privately-held, non-affiliated company based
in Midland, Texas for a purchase price of $4.25 million. The purchase price was
funded with proceeds provided by the Company's $30 million credit facility.
The acquisition included three fully operable contract drilling rigs, a vehicle
and other related equipment.
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<PAGE> 16
The Company believes it must continually upgrade and maintain its
contract drilling fleet and has expended approximately $13.2 million for
capital expenditures in fiscal year 1997 for this purpose with respect to its
existing contract drilling rig fleet, including $4.5 million for modifications
and upgrades of the nine inoperable drilling rigs purchased during November and
December 1996. As a result of the latter expenditure, three of the Company's
nine inoperable rigs were placed into operation during the six months ended
June 30, 1997, increasing the number of operable drilling rigs at the end of
the quarter to 81. The remaining inoperable rigs are expected to be placed into
operation during the third and fourth quarters of 1997.
The Company has budgeted approximately $5.0 million for capital
expenditures in its oil and natural gas segment. The Company intends to use
these funds for leasehold acquisition, exploration and development of oil and
natural gas properties. During the six months ended June 30, 1997,
approximately $3.9 million had been expended for this purpose.
Management believes that the current level of cash and short-term
investments, together with cash generated from operations and the credit
facility discussed above, should be sufficient to meet the Company's immediate
capital needs excluding acquisitions. From time to time, the Company reviews
acquisition opportunities relating to its business segments. The timing, size or
success of any acquisition and the associated capital commitments are
unpredictable. Should further opportunities for growth requiring additional
capital arise, the Company believes it would be able to satisfy these needs
through a combination of working capital, cash generated from operations, and
either debt or equity financing. However, there can be no assurance that such
capital would be available.
RESULTS OF OPERATIONS
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
For the six months ended June 30, 1997, contract drilling revenues
were approximately $65.2 million as compared to $30.2 million for the same
period in 1996; an increase of 116%. Average rig utilization was 88% for the
six months ended June 30, 1997, as compared to 69% for the same period in 1996.
Direct contract drilling expenses for the six months ended June 30, 1997 were
approximately $50.4 million, or 77% of the contract drilling revenues, as
compared to approximately $24.7 million, or 82% of the contract drilling
revenues, for the same period in 1996. The increase in contract drilling
revenues and direct contract drilling expenses is largely attributable to an
increase, primarily through a series of acquisitions since the third quarter of
1996, in the number of operable drilling rigs. As a result of the rig
acquisitions, and, in the case of two of the rigs, modifications and upgrades,
the number of operable drilling rigs increased from 40 at June 30, 1996 to 81
as of June 30, 1997. Additionally, the Company experienced rate increases for
its contract drilling services contributing to the increased gross margins
realized during the six months ended June 30, 1997. General and administrative
expense for the contract drilling segment was approximately $1.9 million for
the six months ended June 30, 1997 as compared to $1.7 million for the same
period in 1996. Depreciation and amortization expense was approximately $5.0
million for the six months ended June 30, 1997 as compared to $3.2 million for
the same period in 1996. The increase in depreciation expense was primarily due
to the addition of 41 drilling rigs to the Company's contract drilling fleet,
as discussed above. For the six months ended June 30, 1997, income from this
segment was approximately $8.205 million as compared to approximately $498,000
for the same period in 1996.
Oil and natural gas revenue was approximately $6.2 million for the six
months ended June 30, 1997, as compared to approximately $4.6 million for the
six months ended June 30, 1996. The volume of crude oil sold increased by 49%
while the volume of natural gas sold decreased by 6% for the six months ended
June 30, 1997, as
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<PAGE> 17
compared to the same period in 1996. The average price per barrel of crude oil
was $20.33 in the first six months of 1997 as compared to $19.21 for the same
period in 1996, and the average price per mcf of natural gas was $2.49 in the
first six months of 1997 as compared to $1.80 for the first six months of fiscal
year 1996. Lease operating and production costs were $3.59 per barrel of oil
equivalent for the six months ended June 30, 1997 as compared to $4.01 per
barrel of oil equivalent for the same period in 1996. Depreciation and depletion
expense was approximately $2.2 million for the six months ended June 30, 1997 as
compared to approximately $1.6 million for the same six months ended in 1996.
The increase in depreciation and depletion expense was due primarily to the
segment's growth through leasehold acquisition and continued development of
existing properties resulting in significant increases in the segment's
production of crude oil (as indicated above). General and administrative expense
for the oil and natural gas segment was approximately $695,000 for the first six
months of 1997 as compared to $932,000 for the first six months of 1996. For the
six months ended June 30, 1997, income from the oil and natural gas segment was
approximately $939,000 as compared to approximately $347,000 for the same period
in 1996.
For the six months ended June 30, 1997, interest expense was
approximately $509,000 as compared to $645,000 for the same period in 1996. The
1997 interest expense amount includes approximately $265,000 of prepayment
penalties and fees incurred as a result of the Company's payment in full of its
notes payable prior to their respective maturities. Interest income for the
first six months of 1997 increased 158% to approximately $640,000 as a result
of cash provided by the Company's equity offering in January 1997.
COMPARISON OF THE FISCAL QUARTERS ENDED JUNE 30, 1997 AND 1996
For the fiscal quarter ended June 30, 1997, contract drilling revenues
were approximately $37.6 million as compared to $16.1 million for the same
fiscal quarter in 1996; an increase of 134%. Average rig utilization was 90%
for the fiscal quarter ended June 30, 1997, as compared to 71% for the same
fiscal quarter in 1996. Direct contract drilling costs for the fiscal quarter
ended June 30, 1997 were approximately $28.1 million, or 75% of contract
drilling revenues, as compared to approximately $13.3 million, or 83% of
contract drilling revenues, for the same fiscal quarter in 1996. The increase
in contract drilling revenues and direct contract drilling costs was due
largely to the addition, primarily through a series of strategic acquisitions
(as discussed previously), of 41 operable drilling rigs since the second
quarter of 1996. General and administrative expense for the contract drilling
segment was approximately $926,000 for the fiscal quarter ended June 30, 1997
as compared to approximately $932,000 for the same fiscal quarter in 1996.
Depreciation expense was approximately $2.8 million for the fiscal quarter
ended June 30, 1997 as compared to $1.2 million for the same fiscal quarter in
1996. The increase in depreciation expense was due primarily to the
aforementioned 41 drilling rigs added to the Company's contract drilling fleet.
For the fiscal quarter ended June 30, 1997, income from this segment was
approximately $6.047 million as compared to approximately $435,000 for the same
fiscal quarter in 1996.
Oil and natural gas revenue was approximately $3.1 million for the
fiscal quarter ended June 30, 1997, as compared to approximately $2.4 million
for the same fiscal quarter in 1996. The volume of crude oil sold increased by
77%, while the volume of natural gas sold decreased by 9% for the quarter ended
June 30, 1997, as compared to the same period in 1996. The average price per
barrel of crude oil was $19.75 for the three months ended June 30, 1997 as
compared to $20.22 for the same period in 1996, and the average price per mcf
of natural gas was $1.96 for the three months ended June 30, 1997 as compared
to $2.07 for the same period in 1996. Lease operating and production costs were
$3.41 per barrel of oil equivalent in the fiscal quarter ended June 30, 1997,
as compared to $4.26 per barrel of oil equivalent for the same period in 1996.
Depreciation and depletion expense was approximately $1.1 million for the three
months ended June 30, 1997 as compared to approximately $1.3 million for
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<PAGE> 18
the same three months ended in 1996. General and administrative expense for the
oil and natural gas segment was approximately $368,000 for the second quarter
ended 1997 as compared to $337,000 for the same period in 1996. In the fiscal
quarter ended June 30, 1997, income from the oil and natural gas segment was
approximately $303,000 as compared to approximately $54,000 for the fiscal
quarter ended June 30, 1996.
For the fiscal quarter ended June 30, 1997, interest expense was
approximately $26,000 as compared to $315,000 for the same period in 1996. The
decrease in interest expense is attributable to the Company's payment in full
of its notes payable during the first quarter of 1997. Interest income for the
three months ended June 30, 1997 was $356,000 as compared to $128,000 for the
same three month period in 1996. The increase in interest income was due to
cash provided by the Company's equity offering in January 1997.
INCOME TAXES
During the six months ended June 30, 1997, the Company incurred income
tax expense of approximately $3.4 million ($2.5 million current and $883,000
deferred) as compared to a net deferred income tax benefit of approximately
$2.3 million for the same period ended June 30, 1996. The increase in income
tax expense was primarily due to the Company's decision during the quarter
ended March 31, 1996, to relieve its valuation allowance fully recognizing its
deferred tax assets of $2.4 million. As the benefits of such deferred tax
assets are utilized in fiscal year 1997 and future periods, a corresponding
charge to income tax expense will be incurred.
VOLATILITY OF OIL AND NATURAL GAS PRICES
The Company's revenue, profitability and future rate of growth are
substantially dependent upon prevailing prices for oil and gas, both with
respect to its contract drilling and its oil and gas segments. Historically,
oil and gas prices and markets have been extremely volatile. Prices are
affected by market supply and demand factors as well as actions of state and
local agencies, the United States and foreign governments and international
cartels. All of these are beyond the control of the Company. Any significant or
extended decline in oil and/or gas prices could have a material adverse effect
on the Company's financial condition and results of operations.
RECENT ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("Statement 128") which is effective for financial statements of the Company
for periods ending after December 15, 1997. Statement 128 specifies the
computation, presentation and disclosure requirements for earnings per share
("EPS"). Some of the changes made to current EPS standards include: (i)
eliminating the presentation of Primary EPS and replacing it with Basic EPS,
with the principal difference being that common stock equivalents are not
considered in computing Basic EPS, (ii) eliminating the modified treasury stock
method and the three percent materiality provisions, and (iii) revising the
contingent share provisions and the supplemental EPS data requirements.
Statement 128 also requires dual presentation of Basic and Diluted EPS on the
face of the income statement, as well as a reconciliation of the numerator and
denominator used in the two computations of EPS. Basic EPS is defined by
Statement 128 as net income from continuing operations divided by the average
number of common shares outstanding without the consideration of common stock
equivalents which may be dilutive to EPS. The Company's current methodology for
computing Diluted EPS will not change in future periods as a result of its
adoption of Statement 128. Had the Company implemented Statement 128 at June
30, 1997, it would have reported Basic EPS of $0.44 per common share on
13,534,346 shares of common stock (giving effect to the two-for-one stock
split).
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During the fiscal quarter ended March 31, 1997, the Company adopted
Statement of Financial Accounting Standards No. 129, "Disclosure of Information
about Capital Structure" (Statement 129). Statement 129 establishes certain
standards for disclosing information about an entity's capital structure. The
Company does not anticipate a change in its disclosures as a result of its
adoption of Statement 129.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("Statement
130") which establishes standards for reporting and presentation of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. Statement 130 requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. Statement 130
requires that an enterprise (i) classify items of other comprehensive income by
their nature in a financial statement (ii) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of a statement of financial position.
Statement 130 is effective for fiscal years beginning after December 15, 1997.
The Company does not anticipate any significant changes in its current
reporting disclosures as a result of the implementation of Statement 130 during
fiscal 1998.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("Statement 131"). Statement 131 establishes revised
guidelines for determining an entity's operating segments and the type and
level of financial information to be disclosed. Statement 131 is effective for
fiscal years beginning after December 15, 1997. The Company does not anticipate
any significant changes in its current reporting disclosures as a result of the
implementation of Statement 131 during fiscal 1998.
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----------------------
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in Item 2 of this Report contains
forward-looking statements which are made pursuant to the "safe harbor"
provisions of The Private Securities Litigation Reform Act of 1995. These
statements include, without limitation, statements relating to: liquidity;
financing of operations; continued volatility of oil and natural gas prices;
estimates of, and budgets for, capital expenditures in the oil and natural gas
segment, for modifications and upgrades to certain of the drilling rigs
acquired by the Company during the fourth quarter of 1996 and for maintenance
of its contract drilling fleet during fiscal year 1997; timing of the placement
into operation of its currently inoperable drilling rigs; source and
sufficiency of funds required for immediate capital needs and additional rig
acquisitions (if further opportunities arise); and such other matters. The
words "believes," "plans," "intends," "expected" or "budgeted" and similar
expressions identify forward-looking statements. The forward-looking statements
are based on certain assumptions and analyses made by the Company in light of
its experience and its perception of historical trends, current conditions,
expected future developments and other factors it believes are appropriate in
the circumstances. The Company does not undertake to update, revise or correct
any of the forward-looking information. Factors that could cause actual results
to differ materially from the Company's expectations expressed in the
forward-looking statements include, but are not limited to, the following:
intense competition in the contract drilling industry; volatility of oil and
natural gas prices; market conditions for contract drilling services;
continuation of severe drill-pipe shortage; operational risks (such as blow
outs, fires and loss of production); labor shortage, primarily qualified
drilling rig personnel; insurance coverage limitations and requirements;
potential liability imposed by government regulation of the contract drilling
industry (including environmental regulation); the need to develop and replace
its oil and natural gas reserves; the substantial capital expenditures required
to fund its operations; risks related to exploration and development drilling;
uncertainties about oil and natural gas reserve estimates; no assurance of
additional growth through acquisitions; risk associated with recent rapid
growth; and the loss of key personnel, particularly Cloyce A. Talbott and A.
Glenn Patterson, the Chairman and Chief Executive Officer and the President and
Chief Operating Officer of the Company, respectively. For a more complete
explanation of these various factors, see "Cautionary Statement for Purposes of
the 'Safe Harbor' Provisions of the Private Securities Litigation Reform Act of
1995" included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, beginning on page 13.
----------------------
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
The following exhibits are filed herewith or incorporated by reference:
<TABLE>
<S> <C>
2.1 Plan and Agreement of Merger dated October 14, 1993, between
Patterson Energy, Inc., a Texas corporation, and Patterson
Energy, Inc., a Delaware corporation, together with related
Certificates of Merger.(1)
2.2 Agreement and Plan of Merger, dated April 22, 1996 among
Patterson Energy, Inc., Patterson Drilling Company and Tucker
Drilling Company, Inc.(11)
2.2.1 Amendment to Agreement and Plan of Merger, dated May 16, 1996
among Patterson Energy, Inc.Patterson Drilling Company and
Tucker Drilling Company, Inc.(12)
2.3 Asset Purchase Agreement, dated April 22, 1997, among and
between Patterson Drilling Company and Ziadril, Inc.(2)
2.4 Asset Purchase Agreement, dated June 4, 1997, among Patterson
Energy Inc., Patterson Drilling Company and Wes-Tex Drilling
Company.(3)
2.4.1 Amendment to Asset Purchase Agreement, dated June 4, 1997,
among Patterson Energy Inc., Patterson Drilling Company and
Wes-Tex Drilling Company.(3)
2.5 Agreement, dated June 4, 1997, among Patterson Energy Inc.,
Patterson Drilling Company, Greathouse Foundation and Myrle
Greathouse, Trustee under Agreement dated June 2, 1997.(3)
2.6 Asset Purchase Agreement, dated June 4, 1997, among Patterson
Energy Inc., Patterson Drilling Company and McGee Drilling
Company.(2)
3.1 Restated Certificate of Incorporation.(4)
3.1.1 Certificate of Amendment to the Certificate of Incorporation.
3.2 Bylaws.(1)
4.1 Excerpt from Restated Certificate of Incorporation of Patterson
Energy, Inc. regarding authorized Common Stock and Preferred
Stock.(5)
4.2 Registration Rights Agreement, dated June 12, 1997, among
Patterson Energy Inc. and Wes-Tex Drilling Company, Greathouse
Foundation and Myrle Greathouse, Trustee under Agreement dated
June 2, 1997.(6)
</TABLE>
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<TABLE>
<S> <C>
4.3 Stock Purchase Warrant of Patterson Energy, Inc., dated
June 12, 1997.(6)
5.1 Opinion of Baker & Hostetler LLP regarding legality of
shares to be offered.(2)
10.1 Non-Competition Agreement, dated April 22, 1997, by and
between Patterson Drilling Company and Ziadril, Inc.(2)
10.1.1 Non-Competition Agreement, dated April 22, 1997, by and between
Patterson Drilling Company and Joe Smith.(2)
10.1.2 Non-Competition Agreement, dated April 22, 1997, by and between
Patterson Drilling Company and Ken Bromley.(2)
10.1.3 Non-Competition Agreement, dated April 22, 1997, by and between
Patterson Drilling Company and Billy Jensen.(2)
10.1.4 Non-Competition Agreement, dated April 22, 1997, by and between
Patterson Drilling Company and Lee Roberson.(2)
10.2 Credit Agreement dated June 3, 1997 by and between Patterson
Energy, Inc., Patterson Drilling Company, Patterson Drilling
Programs, Inc., Patterson Petroleum, Inc., Patterson Trading
Company, Inc. and Norwest Bank Texas, N.A.(3)
10.2.1 Promissory Note dated June 3, 1997 among Patterson Energy, Inc.
and Norwest Bank Texas, National Association.(3)
10.2.2 Corporate Guarantees of Patterson Drilling Company, Patterson
Petroleum, Inc., Patterson Drilling Programs, Inc. and
Patterson Trading Company, Inc.(3)
10.3 Non-Competition Agreement, dated April 22, 1997, by and between
Patterson Energy, Inc., Patterson Drilling Company and Wes-Tex
Drilling Company.(6)
10.3.1 Non-Competition Agreement, dated April 22, 1997, by and between
Patterson Energy, Inc., Patterson Drilling Company and Myrle
Greathouse.(6)
10.3.2 Non-Competition Agreement, dated April 22, 1997, by and between
Patterson Energy, Inc., Patterson Drilling Company and Charles
Ezzell.(6)
10.3.3 Non-Competition Agreement, dated April 22, 1997, by and between
Patterson Energy, Inc., Patterson Drilling Company and Danny
Mullen.(6)
10.4 Aircraft Lease, dated January 15, 1997, (effective January 1,
1997) between Talbott Aviation, Inc. and Patterson Energy,
Inc.(7)
10.5 Asset Purchase Agreement, dated May 23, 1995, between
Perry E. Esping and Patterson Energy, Inc., together with
related Stock Purchase Warrant and Registration Rights
Agreement.(8)
</TABLE>
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<TABLE>
<S> <C>
10.6 Participation Agreement, dated October 19, 1994, between
Patterson Petroleum Trading Company, Inc. and BHT Marketing,
Inc.(8)
10.6.1 Participation Agreement dated October 24, 1995, between
Patterson Petroleum Trading Company, Marketing, Inc.(9)
10.7 Crude Oil Purchase Contract, dated October 19, 1994, between
Patterson Petroleum, Inc. and BHT Marketing, Inc.(10)
10.7.1 Crude Oil Purchase Contract, dated October 24, 1995,
between Patterson Petroleum, Inc. and BHT Marketing, Inc.(9)
10.8 Patterson Energy, Inc. 1993 Stock Incentive Plan.(10)
10.8.1 Patterson Energy, Inc. 1993 Stock Incentive Plan, as
amended.(14)
10.9 Patterson Energy, Inc. Non-Employee Director's Stock Option
Plan.(10)
10.10 Consulting and Stock Option Agreement, dated as of November 15,
1994, between Patterson Energy, Inc. and E. Peter Hoffman,
Jr.(9)
10.11 Consulting and Stock Option Agreement, dated as of February 15,
1995, between Patterson Energy, Inc. and E. Peter Hoffman,
Jr.(9)
10.12 Consulting and Stock Option Agreement, dated as of August 2,
1995, between Patterson Energy, Inc. and Peter Hoffman, Jr.(9)
10.13.1 Non-Competition Agreement, dated October 23, 1996, by and
between Patterson Drilling Company and Michael G. Sledge.(12)
10.13.2 Non-Competition Agreement, dated October 23, 1996, by and
between Patterson Drilling Company and H. Gene Sledge.(12)
10.1 Model Form Operating Agreement.(13)
10.2 Form of Drilling Bid Proposal and Footage Drilling Contract.(13)
10.3 Form of Turnkey Drilling Agreement.(13)
10.15 Non-Competition Agreement, dated October 23, 1996, by and
between Patterson Drilling Company and David W. Sledge.(12)
11.1 Statement re Computation of Per Share Earnings.
15.1 Awareness Letter of Independent Accountants.
</TABLE>
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<TABLE>
<S> <C>
23.1 Consent of Coopers & Lybrand L.L.P.
27.1 Financial Data Schedule as of June 30, 1997 and for the three
and six months ended June 30, 1997 and 1996.
__________________________________________
(1) Incorporated herein by reference to Item 27, "Exhibits" to Amendment No.
2 to Registration Statement on Form SB-2 (File No. 33-68058-FW); filed
October 28, 1993.
(2) Incorporated herein by reference to Item 16, "Exhibits" to Amendment No.
1 to Registration Statement on Form S-3 (File No. 333-29035); filed
August 5, 1997.
(3) Incorporated herein by reference to Item 7, "Financial Statements and
Exhibits", to Form 8-K dated June 3, 1997; filed June 11, 1997.
(4) Incorporated herein by reference to Item 6, "Exhibits and Reports on
Form 8-K" to Form 10-Q for the quarterly period ended June 30, 1996;
filed August 12, 1996.
(5) Incorporated by reference to Item 16. "Exhibits" to Registration
Statement on Form S-3 filed with the Securities Exchange Commission on
December 18, 1996.
(6) Incorporated herein by reference to Item 7, "Financial Statements and
Exhibits", to Form 8-K dated June 12, 1997; filed June 19, 1997.
(7) Incorporated herein by reference to Item 14, "Exhibits, Financial
Statement Schedules and Reports on Form 8-K" of the Companys 1996 Annual
Report on Form 10-K.
(8) Incorporated by reference to Item 27. "Exhibits" to Post Effective
Amendment No. 1 to Registration Statement on Form SB-2 (File No.
33-68058-FW).
(9) Incorporated by reference to Item 7. "Financial Statements and
Exhibits" to Form 10-KSB for the year ended December 31, 1995.
(10) Incorporated by reference to Item 5. "Other Items" to Form 8-K dated
December 1, 1995 and filed on January 16, 1996.
(11) Incorporated by reference to Item 7. "Financial Statements and
Exhibits" to Form 8-K dated April 22, 1996 and filed on April 30, 1996.
(12) Incorporated by reference to Item 7. "Financial Statements and
Exhibits" to Form 8-K dated May 16, 1996 and filed on May 22, 1996.
(13) Incorporated by reference to Item 27. "Exhibits" to Registration
Statement filed with the Securities and Exchange Commission on August
30, 1993.
(14) Incorporated herein by reference to Item 8 "Exhibits" to Amendment No. 1
to Registration Statement on Form S-8 (File No. 33-97972); filed July
17, 1997.
</TABLE>
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<TABLE>
<S> <C>
(b) REPORTS ON FORM 8-K.
The following reports on Form 8-K were filed with the Securities and Exchange
Commission during the fiscal quarter ended June 30, 1997 related to:
(1) Report dated May 7, 1997 announcing the execution of an
agreement in principle between Patterson Drilling Company and
Wes-Tex Drilling Company; filed May 19, 1997.
(2) Report dated June 3, 1997 regarding the execution of a
definitive purchase agreement among and between Patterson and
Wes-Tex Drilling Company and the execution of a credit
agreement among and between and Norwest Bank Texas, N.A.; filed
June 11, 1997.
(3) Report dated June 12, 1997 regarding Patterson's consummation of
the acquisition of the contract drilling operations of Wes-Tex
Drilling Company; filed June 19, 1997.
</TABLE>
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SIGNATURE
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PATTERSON ENERGY, INC.
By: /s/ Cloyce A. Talbott
--------------------------------
Cloyce A. Talbott
Chairman of the Board and
Chief Executive Officer
By: /s/ James C. Brown
--------------------------------
James C. Brown
Vice President-Finance
DATED: August 12, 1997
26
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
-------- -----------
<S> <C>
2.1 Plan and Agreement of Merger dated October 14, 1993, between
Patterson Energy, Inc., a Texas corporation, and Patterson
Energy, Inc., a Delaware corporation, together with related
Certificates of Merger.(1)
2.2 Agreement and Plan of Merger, dated April 22, 1996 among
Patterson Energy, Inc., Patterson Drilling Company and Tucker
Drilling Company, Inc.(11)
2.2.1 Amendment to Agreement and Plan of Merger, dated May 16, 1996
among Patterson Energy, Inc.Patterson Drilling Company and
Tucker Drilling Company, Inc.(12)
2.3 Asset Purchase Agreement, dated April 22, 1997, among and
between Patterson Drilling Company and Ziadril, Inc.(2)
2.4 Asset Purchase Agreement, dated June 4, 1997, among Patterson
Energy Inc., Patterson Drilling Company and Wes-Tex Drilling
Company.(3)
2.4.1 Amendment to Asset Purchase Agreement, dated June 4, 1997,
among Patterson Energy Inc., Patterson Drilling Company and
Wes-Tex Drilling Company.(3)
2.5 Agreement, dated June 4, 1997, among Patterson Energy Inc.,
Patterson Drilling Company, Greathouse Foundation and Myrle
Greathouse, Trustee under Agreement dated June 2, 1997.(3)
2.6 Asset Purchase Agreement, dated June 4, 1997, among Patterson
Energy Inc., Patterson Drilling Company and McGee Drilling
Company.(2)
3.1 Restated Certificate of Incorporation.(4)
3.1.1 Certificate of Amendment to the Certificate of Incorporation.
3.2 Bylaws.(1)
4.1 Excerpt from Restated Certificate of Incorporation of Patterson
Energy, Inc. regarding authorized Common Stock and Preferred
Stock.(5)
4.2 Registration Rights Agreement, dated June 12, 1997, among
Patterson Energy Inc. and Wes-Tex Drilling Company, Greathouse
Foundation and Myrle Greathouse, Trustee under Agreement dated
June 2, 1997.(6)
</TABLE>
<PAGE> 28
<TABLE>
<S> <C>
4.3 Stock Purchase Warrant of Patterson Energy, Inc., dated
June 12, 1997.(6)
5.1 Opinion of Baker & Hostetler LLP regarding legality of
shares to be offered.(2)
10.1 Non-Competition Agreement, dated April 22, 1997, by and
between Patterson Drilling Company and Ziadril, Inc.(2)
10.1.1 Non-Competition Agreement, dated April 22, 1997, by and between
Patterson Drilling Company and Joe Smith.(2)
10.1.2 Non-Competition Agreement, dated April 22, 1997, by and between
Patterson Drilling Company and Ken Bromley.(2)
10.1.3 Non-Competition Agreement, dated April 22, 1997, by and between
Patterson Drilling Company and Billy Jensen.(2)
10.1.4 Non-Competition Agreement, dated April 22, 1997, by and between
Patterson Drilling Company and Lee Roberson.(2)
10.2 Credit Agreement dated June 3, 1997 by and between Patterson
Energy, Inc., Patterson Drilling Company, Patterson Drilling
Programs, Inc., Patterson Petroleum, Inc., Patterson Trading
Company, Inc. and Norwest Bank Texas, N.A.(3)
10.2.1 Promissory Note dated June 3, 1997 among Patterson Energy, Inc.
and Norwest Bank Texas, National Association.(3)
10.2.2 Corporate Guarantees of Patterson Drilling Company, Patterson
Petroleum, Inc., Patterson Drilling Programs, Inc. and
Patterson Trading Company, Inc.(3)
10.3 Non-Competition Agreement, dated April 22, 1997, by and between
Patterson Energy, Inc., Patterson Drilling Company and Wes-Tex
Drilling Company.(6)
10.3.1 Non-Competition Agreement, dated April 22, 1997, by and between
Patterson Energy, Inc., Patterson Drilling Company and Myrle
Greathouse.(6)
10.3.2 Non-Competition Agreement, dated April 22, 1997, by and between
Patterson Energy, Inc., Patterson Drilling Company and Charles
Ezzell.(6)
10.3.3 Non-Competition Agreement, dated April 22, 1997, by and between
Patterson Energy, Inc., Patterson Drilling Company and Danny
Mullen.(6)
10.4 Aircraft Lease, dated January 15, 1997, (effective January 1,
1997) between Talbott Aviation, Inc. and Patterson Energy,
Inc.(7)
10.5 Asset Purchase Agreement, dated May 23, 1995, between
Perry E. Esping and Patterson Energy, Inc., together with
related Stock Purchase Warrant and Registration Rights
Agreement.(8)
</TABLE>
<PAGE> 29
<TABLE>
<S> <C>
10.6 Participation Agreement, dated October 19, 1994, between
Patterson Petroleum Trading Company, Inc. and BHT Marketing,
Inc.(8)
10.6.1 Participation Agreement dated October 24, 1995, between
Patterson Petroleum Trading Company, Marketing, Inc.(9)
10.7 Crude Oil Purchase Contract, dated October 19, 1994, between
Patterson Petroleum, Inc. and BHT Marketing, Inc.(10)
10.7.1 Crude Oil Purchase Contract, dated October 24, 1995,
between Patterson Petroleum, Inc. and BHT Marketing, Inc.(9)
10.8 Patterson Energy, Inc. 1993 Stock Incentive Plan.(10)
10.8.1 Patterson Energy, Inc. 1993 Stock Incentive Plan, as
amended.(14)
10.9 Patterson Energy, Inc. Non-Employee Director's Stock Option
Plan.(10)
10.10 Consulting and Stock Option Agreement, dated as of November 15,
1994, between Patterson Energy, Inc. and E. Peter Hoffman,
Jr.(9)
10.11 Consulting and Stock Option Agreement, dated as of February 15,
1995, between Patterson Energy, Inc. and E. Peter Hoffman,
Jr.(9)
10.12 Consulting and Stock Option Agreement, dated as of August 2,
1995, between Patterson Energy, Inc. and Peter Hoffman, Jr.(9)
10.13.1 Non-Competition Agreement, dated October 23, 1996, by and
between Patterson Drilling Company and Michael G. Sledge.(12)
10.13.2 Non-Competition Agreement, dated October 23, 1996, by and
between Patterson Drilling Company and H. Gene Sledge.(12)
10.1 Model Form Operating Agreement.(13)
10.2 Form of Drilling Bid Proposal and Footage Drilling Contract.(13)
10.3 Form of Turnkey Drilling Agreement.(13)
10.15 Non-Competition Agreement, dated October 23, 1996, by and
between Patterson Drilling Company and David W. Sledge.(12)
11.1 Statement re Computation of Per Share Earnings.
15.1 Awareness Letter of Independent Accountants.
</TABLE>
<PAGE> 30
<TABLE>
<S> <C>
23.1 Consent of Coopers & Lybrand L.L.P.
27.1 Financial Data Schedule as of June 30, 1997 and for the three
and six months ended June 30, 1997 and 1996.
__________________________________________
(1) Incorporated herein by reference to Item 27, "Exhibits" to Amendment No.
2 to Registration Statement on Form SB-2 (File No. 33-68058-FW); filed
October 28, 1993.
(2) Incorporated herein by reference to Item 16, "Exhibits" to Amendment No.
1 to Registration Statement on Form S-3 (File No. 333-29035); filed
August 5, 1997.
(3) Incorporated herein by reference to Item 7, "Financial Statements and
Exhibits", to Form 8-K dated June 3, 1997; filed June 11, 1997.
(4) Incorporated herein by reference to Item 6, "Exhibits and Reports on
Form 8-K" to Form 10-Q for the quarterly period ended June 30, 1996;
filed August 12, 1996.
(5) Incorporated by reference to Item 16. "Exhibits" to Registration
Statement on Form S-3 filed with the Securities Exchange Commission on
December 18, 1996.
(6) Incorporated herein by reference to Item 7, "Financial Statements and
Exhibits", to Form 8-K dated June 12, 1997; filed June 19, 1997.
(7) Incorporated herein by reference to Item 14, "Exhibits, Financial
Statement Schedules and Reports on Form 8-K" of the Companys 1996 Annual
Report on Form 10-K.
(8) Incorporated by reference to Item 27. "Exhibits" to Post Effective
Amendment No. 1 to Registration Statement on Form SB-2 (File No.
33-68058-FW).
(9) Incorporated by reference to Item 7. "Financial Statements and
Exhibits" to Form 10-KSB for the year ended December 31, 1995.
(10) Incorporated by reference to Item 5. "Other Items" to Form 8-K dated
December 1, 1995 and filed on January 16, 1996.
(11) Incorporated by reference to Item 7. "Financial Statements and
Exhibits" to Form 8-K dated April 22, 1996 and filed on April 30, 1996.
(12) Incorporated by reference to Item 7. "Financial Statements and
Exhibits" to Form 8-K dated May 16, 1996 and filed on May 22, 1996.
(13) Incorporated by reference to Item 27. "Exhibits" to Registration
Statement filed with the Securities and Exchange Commission on August
30, 1993.
(14) Incorporated herein by reference to Item 8 "Exhibits" to Amendment No. 1
to Registration Statement on Form S-8 (File No. 33-97972); filed July
17, 1997.
</TABLE>
<PAGE> 1
EXHIBIT 3.1.1
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION OF
PATTERSON ENERGY, INC.
Pursuant to the provisions of Section 242 of the General Corporation
Law of Delaware, the undersigned corporation adopts the following amendment to
its Certificate of Incorporation:
FIRST: The name of the Corporation is PATTERSON ENERGY, INC.
SECOND: The following amendment to the Certificate of Incorporation
was adopted by a vote of the stockholders sufficient for approval effective on
July 1, 1997, in the manner prescribed by the General Corporation Law of the
State of Delaware:
Article FOURTH of the Certificate of Incorporation is amended to read
in its entirety as follows:
FOURTH: The total number of shares of stock that the
Corporation shall have authority to issue is nineteen million
(19,000,000) shares, of which eighteen million (18,000,000) shares
shall be Common Stock, having a par value of $0.01 per share, and one
million (1,000,000) shares shall be Preferred Stock, having a par
value of $0.01 per share. The shares of such classes of stock shall
have the following express terms:
Section 1. PREFERRED STOCK
1.1 Authority of the Board of Directors to Create Series.
The Board of Directors is hereby expressly granted authority, to the
full extent now or hereafter permitted herein and by the General
Corporation Law of the State of Delaware, at any time or from time to
time, by resolution or resolutions, to create one or more series of
Preferred Stock, to fix the authorized number of shares of any series
(which number of shares may vary as between series and be changed from
time to time by like action), and to fix the terms of such series,
including, but not limited to, the following:
(a) the designation of such series, which may be
by distinguishing number, letter, or title;
(b) the rate or rates at which shares of such
series shall be entitled to receive dividends; the periods in
respect of which dividends are payable; the conditions upon,
and times of payment
<PAGE> 2
of, such dividends; the relationship and preference, if any,
of such dividends to dividends payable on any other class or
classes or any other series of stock; whether such dividends
shall be cumulative and, if cumulative, the date or dates from
which such dividends shall accumulate; and the other terms and
conditions applicable to dividends upon shares of such series;
(c) the rights of the holders of the shares of
such series in case the Corporation be liquidated, dissolved
or wound up (which may vary depending upon the time, manner,
or voluntary or involuntary nature or other circumstances of
such liquidation, dissolution, or winding up) and the
relationship and preference, if any, of such rights to rights
of holders of shares of stock of any other class or classes or
any other series of stock;
(d) the right, if any, of the Corporation to
redeem shares of such series at its option, including any
limitation of such right, and the amount or amounts to be
payable in respect of the shares of such series in case of
such redemption (which may vary depending on the time, manner,
or other circumstances of such redemption), and the manner,
effect, and other terms and conditions of any such redemption;
(e) the obligation, if any, of the Corporation to
purchase, redeem, or retire shares of such series and/or to
maintain a fund for such purpose, and the amount or amounts to
be payable from time to time for such purpose or into such
fund, or the number of shares to be purchased, redeemed, or
retired, the per share purchase price or prices, and the other
terms and conditions of any such obligation or obligations;
(f) the voting rights, if any, which, if granted,
may be full, special, or limited, to be given the shares of
such series, including, without limiting the generality of the
foregoing, the right, if any, as a series or in conjunction
with other series or classes, to elect one or more members of
the Board of Directors either generally or at certain times or
under certain circumstances, and restrictions, if any, on
particular corporate acts without a specified vote or consent
of holders of such shares (such as, among others, restrictions
on modifying the terms of such series or of the Preferred
Stock, restricting the permissible terms of other series or
the permissible variations between series of the Preferred
Stock, authorizing or issuing additional shares of the
Preferred Stock,
-2-
<PAGE> 3
creating debt, or creating any class of stock ranking prior to
or on a parity with the Preferred Stock or any series thereof
as to dividends, or assets remaining for distribution to the
stockholders in the event of the liquidation, dissolution, or
winding up of the Corporation);
(g) the right, if any, to exchange or convert the
shares into shares of any other series of the Preferred Stock
or into shares of any other class of stock of the Corporation
or the securities of any other corporation, and the rate or
basis, time, manner, terms, and conditions of exchange or
conversion or the method by which the same shall be
determined; and
(h) the other special powers, preferences, or
rights, if any, and the qualifications, limitations, or
restrictions thereof, of the shares of such series.
The Board of Directors shall fix the terms of each such series
by resolution or resolutions adopted at any time prior to the issuance
of the shares thereof, and the terms of each such series may, subject
only to restrictions, if any, imposed by this Certificate of
Incorporation or by applicable law, vary from the terms of other
series to the extent determined by the Board of Directors from time to
time and provided in the resolution or resolutions fixing the terms of
the respective series of the Preferred Stock.
1.2 Status of Certain Shares. Shares of any series of the
Preferred Stock, whether provided for herein or by resolution or
resolutions of the Board of Directors, which have been redeemed
(whether through the operation of a sinking fund or otherwise) or
which, if convertible or exchangeable, have been converted into or
exchanged for shares of stock of any other class or classes, or which
have been purchased or otherwise acquired by the Corporation, shall
have the status of authorized and unissued shares of the Preferred
Stock of the same series and may be reissued as a part of the series
of which they were originally a part or may be reclassified and
reissued as part of a new series of the Preferred Stock to be created
by resolution or resolutions of the Board of Directors or as a part of
any other series of the Preferred Stock, all subject to the conditions
or restrictions on issuance set forth herein or in the resolution or
resolutions adopted by the Board of Directors providing for the issue
of any series of the Preferred Stock.
Section 2. COMMON STOCK
2.1 Issuance, Consideration, and Terms. Any unissued shares
of the Common Stock may be issued from time to time for such
consideration, having a
-3-
<PAGE> 4
value of not less than the par value thereof, as may be fixed from
time to time by the Board of Directors. Any treasury shares may be
disposed of for such consideration as may be determined from time to
time by the Board of Directors. The Common Stock shall be subject to
the express terms of the Preferred Stock and any series thereof. Each
share of Common Stock shall be of equal rank and shall be identical to
every other share of Common Stock. Holders of Common Stock shall have
such rights as are provided herein and by law.
2.2 Voting Rights. Except as expressly required by
law or as provided in or fixed and determined pursuant to
Section 1 of this Article FOURTH, the entire voting power and
all voting rights shall be vested exclusively in the Common
Stock. Each holder of shares of Common Stock shall be
entitled to one (1) vote for each share standing in such
holder's name on the books of the Corporation.
2.3 Dividends. Subject to Section 1 of this Article
FOURTH, the holders of Common Stock shall be entitled to
receive, and shall share equally share for share, when and as
declared by the Board of Directors, out of the assets of the
Corporation which are by law available therefor, dividends or
distributions payable in cash, in property, or in securities
of the Corporation.
THIRD: The Amendment does not provide for the exchange,
reclassification or cancellation of issued shares.
FOURTH: The Amendment does not effect a change in the amount of stated
capital.
Dated: July 1, 1997.
ATTEST: PATTERSON ENERGY, INC.
/s/ JAMES C. BROWN
- ----------------------------------- By: /s/ A. GLENN PATTERSON
James C. Brown, Secretary -------------------------
A. Glenn Patterson, President
Each of the undersigned, A. Glenn Patterson, the President of the
Corporation, and James C. Brown, the Secretary of the Corporation, hereby
affirms and acknowledges, under penalties of perjury, that the respective
signature of the undersigned on the foregoing instrument is his respective act
and deed or the act and deed of the Corporation, and that the facts stated in
the foregoing instrument are true.
/s/ A. GLENN PATTERSON
-----------------------------------
A. Glenn Patterson, President
/s/ JAMES C. BROWN
-----------------------------------
James C. Brown, Secretary
-4-
<PAGE> 1
EXHIBIT 11.1
PATTERSON ENERGY, INC. AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
-------------------- ---------------------
1996 1997 1996 1997
--------- -------- ---------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Net income ....................................... $ 255 $ 4,278 $ 2,742 $ 5,918
======== ======== ========= =========
Shares:
Weighted average number of common shares
outstanding .................................. 9,683 14,268 9,702 13,534
Add-Dilutive effect of outstanding options and
redeemable warrants (as determined by the
application of the treasury stock method) ... 183 435 163 413
------- ------- --------- ---------
Weighted average number of common shares
outstanding, as adjusted .................... 9,866 $ 14,703 9,865 13,947
======== ======== ========= =========
Net income per share: Primary ................... $ 0.03 $ 0.29 $ 0.28 $ 0.42
======== ======== ========= =========
FULLY DILUTED EARNINGS PER SHARE
Net income ....................................... $ 255 $ 4,278 $ 2,742 $ 5, 918
======== ======== ========= =========
Shares:
Weighted average number of common shares
outstanding .................................. 9,683 14,268 9,732 13,534
Add-Dilutive effect of outstanding options and
redeemable warrants (as determined by the
application of the treasury stock method) ... 183 492 181 492
-------- -------- --------- ---------
Weighted average number of common shares
outstanding, as adjusted .................... 9,866 14,760 9,913 14,026
======== ======== ========= =========
Net income per share: Fully Diluted ............. $ 0.03 $ 0.29 $ 0.28 $ 0.42
======== ======== ========= =========
</TABLE>
<PAGE> 1
Exhibit 15.1
July 24, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Patterson Energy, Inc.
We are aware that our report dated July 24, 1997 on our review of interim
financial information of Patterson Energy, Inc. for the period ended June 30,
1997 and included in the Company's Quarterly Report on Form 10-Q for the
quarter then ended is incorporated by reference in the Registration Statements
of Patterson Energy, Inc. on Form S-8, as amended (File No. 333-09243), Form
S-3, as amended (File No. 333-13497) and on Form S-3 (File No.
333-29035).
/s/ Coopers & Lybrand L.L.P.
<PAGE> 1
Exhibit 23.1
CONSENT OF COOPERS & LYBRAND L.L.P.
We consent to the incorporation by reference in the Registration Statements of
Patterson Energy, Inc. on Form S-8, as amended (File No. 333-09243), Form S-3,
as amended, (File No. 333-13497) and on Form S-3 (file No. 333-29035) of our
report dated July 24, 1997, on our review of the interim consolidated financial
statements of Patterson Energy, Inc. and Subsidiaries as of June 30, 1997, and
for the three and six months then ended, which are included in this Quarterly
Report on Form 10-Q.
/s/ Coopers & Lybrand L.L.P.
Dallas, Texas
July 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Unaudited Consolidated Balance Sheet as of June 30, 1996 and related Statements
of Income and Cash flows from the three and six month period ended June 30,
1997 and 1996. This financial information is qualified in its entirety by
reference to filing on Form 10-Q for the Quarterly periods ended June 30, 1997
and 1996.
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 APR-01-1996 JAN-01-1997 JAN-01-1996
<PERIOD-END> JUN-30-1997 JUN-30-1996 JUN-30-1997 JUN-30-1996
<CASH> 11,358 0 0 0
<SECURITIES> 551 0 0 0
<RECEIVABLES> 32,210 0 0 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 51,161 0 0 0
<PP&E> 147,407 0 0 0
<DEPRECIATION> 65,744 0 0 0
<TOTAL-ASSETS> 153,480 0 0 0
<CURRENT-LIABILITIES> 25,584 0 0 0
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 147 0 0 0
<OTHER-SE> 120,476 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 153,480 0 0 0
<SALES> 0 0 0 0
<TOTAL-REVENUES> 40,692 18,547 71,333 34,793
<CGS> 0 0 0 0
<TOTAL-COSTS> 36,646 17,915 62,647 33,916
<OTHER-EXPENSES> (660) 15 (1,098) (216)
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 26 315 509 645
<INCOME-PRETAX> 6,680 302 9,275 448
<INCOME-TAX> 2,402 47 3,357 (2,294)
<INCOME-CONTINUING> 4,278 255 5,918 2,742
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 4,278 255 5,918 2,742
<EPS-PRIMARY> .29 .03 .42 .08
<EPS-DILUTED> .29 .03 .42 .28
</TABLE>
