<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 September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-22664
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 November 12, 1999 the issuer had outstanding 32,680,678 shares of common
stock, $0.01 par value, its only class of voting stock.
- --------------------------------------------------------------------------------
<PAGE> 2
PATTERSON ENERGY, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants, PricewaterhouseCoopers LLP........................... 3
Part I - Financial Information
Item 1. Financial Statements
Unaudited condensed consolidated balance sheets...................... 4
Unaudited condensed consolidated statements of operations............ 6
Unaudited condensed consolidated statement of stockholders' equity... 7
Unaudited condensed consolidated statements of cash flows............ 8
Notes to unaudited condensed consolidated financial statements....... 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................... 13
Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act of 1995................. 18
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders.................. 19
Item 6. Exhibits and Reports on Form 8-K..................................... 20
Signatures.............................................................................. 24
</TABLE>
2
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
of Patterson Energy, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
Patterson Energy, Inc. and its Subsidiaries as of September 30, 1999 and the
related condensed consolidated statements of operations for each of the three
and nine month periods ended September 30, 1999 and 1998 and the related
condensed consolidated statement of stockholders' equity for the nine month
period ended September 30, 1999 and the related condensed consolidated
statements of cash flows for the nine month periods ended September 30, 1999 and
1998. 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 condensed consolidated interim financial
statements for them to be in conformity with generally accepted accounting
principles.
We previously audited, in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1998 and the related
consolidated statements of income and of cash flows for the year then ended (not
presented herein); and in our report dated March 1, 1999, 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, 1998, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ PricewaterhouseCoopers LLP
Dallas, Texas
November 12, 1999
3
<PAGE> 4
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The following unaudited condensed 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
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
December 31, September 30,
1998 1999
------------ -------------
(in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................... $ 8,986 $ 10,582
Accounts receivable:
Trade, less allowance for doubtful accounts of $417,519 and
$492,519 at December 31, 1998 and September 30, 1999,
respectively............................................................ 28,616 28,325
Oil and natural gas sales................................................ 426 825
Costs of uncompleted drilling contracts in
excess of related billings............................................... 100 1,063
Accrued Federal income taxes receivable..................................... 8,400 1,247
Inventory................................................................... 1,283 1,173
Deferred income taxes....................................................... 1,568 1,568
Undeveloped oil and natural gas properties held for resale.................. 3,214 4,981
Other current assets........................................................ 890 1,634
--------- ---------
Total current assets.................................................... 53,483 51,398
Property and equipment, at cost, net............................................ 136,677 131,142
Intangible assets, net.......................................................... 45,875 43,025
Other assets.................................................................... 570 993
--------- ---------
Total assets............................................................ $ 236,605 $ 226,558
========= =========
</TABLE>
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
(continued)
4
<PAGE> 5
PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Unaudited)
December 31, September 30,
1998 1999
------------ -------------
(in thousands)
<S> <C> <C>
Current liabilities:
Current maturities of note payable .................................... $ 8,571 $ 8,571
Accounts payable:
Trade .............................................................. 9,748 14,598
Revenue distribution ............................................... 1,390 2,336
Other .............................................................. 73 211
Accrued expenses ...................................................... 3,170 4,347
-------- --------
Total current liabilities ......................................... 22,952 30,063
-------- --------
Deferred income taxes, net ................................................ 9,566 3,404
Deferred liabilities ...................................................... 92 72
Note payable, less current maturities ..................................... 47,143 40,714
-------- --------
56,801 44,190
-------- --------
Commitments and contingencies ............................................. -- --
Stockholders' equity:
Preferred stock, par value $.01; authorized 1,000,000 shares,
no shares issued .................................................... -- --
Common stock, par value $.01; authorized 50,000,000 shares
with 31,671,132 and 32,672,778 issued and outstanding
at December 31, 1998 and September 30, 1999, respectively ........... 317 327
Additional paid-in capital ............................................. 112,544 117,346
Retained earnings ...................................................... 43,991 34,632
-------- --------
Total stockholders' equity ........................................ 156,852 152,305
-------- --------
Total liabilities and stockholders' equity ........................ $236,605 $226,558
======== ========
</TABLE>
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
5
<PAGE> 6
PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
1998 1999 1998 1999
--------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Operating revenues:
Drilling .................................................. $ 37,704 $ 34,579 $ 137,914 $ 83,754
Drilling fluids ........................................... 2,900 2,722 10,689 7,461
Oil and natural gas sales ................................. 1,289 2,075 4,409 4,619
Well operation fees ....................................... 363 388 1,098 1,125
Other ..................................................... 2 48 50 135
--------- --------- --------- ---------
42,258 39,812 154,160 97,094
--------- --------- --------- ---------
Operating costs and expenses:
Direct drilling costs ..................................... 30,423 30,513 104,834 73,646
Drilling fluids ........................................... 2,274 2,278 8,017 6,428
Lease operating and production ............................ 419 411 1,364 1,088
Impairment of oil and natural gas
properties ............................................. 300 -- 1,089 --
Exploration costs ......................................... 166 151 503 459
Dry holes and abandonments ................................ -- -- 123 41
Depreciation, depletion and
amortization ........................................... 7,441 7,295 20,060 21,421
General and administrative expense ........................ 1,487 1,868 7,029 5,295
--------- --------- --------- ---------
42,510 42,516 143,019 108,378
--------- --------- --------- ---------
Operating income (loss) ....................................... (252) (2,704) 11,141 (11,284)
--------- --------- --------- ---------
Other income (expense):
Net gain (loss) on sale of assets ......................... 267 54 639 (27)
Interest income ........................................... 200 132 646 348
Interest expense .......................................... (1,195) (968) (3,360) (2,994)
Other ..................................................... 59 4 152 44
--------- --------- --------- ---------
(669) (778) (1,923) (2,629)
--------- --------- --------- ---------
Income (loss) before income taxes ............................. (921) (3,482) 9,218 (13,913)
--------- --------- --------- ---------
Income tax expense (benefit):
Current ................................................... (1,064) 4,714 786 1,608
Deferred .................................................. 672 (5,842) 2,707 (6,162)
--------- --------- --------- ---------
(392) (1,128) 3,493 (4,554)
--------- --------- --------- ---------
Net income (loss) ............................................. $ (529) $ (2,354) $ 5,725 $ (9,359)
========= ========= ========= =========
Net income (loss) per common share:
Basic ..................................................... $ (0.02) $ (0.07) $ 0.18 $ (0.29)
========= ========= ========= =========
Diluted ................................................... $ (0.02) $ (0.07) $ 0.18 $ (0.29)
========= ========= ========= =========
Weighted average number of common shares outstanding:
Basic ..................................................... 31,671 32,527 31,636 32,452
========= ========= ========= =========
Diluted ................................................... 31,671 32,527 31,910 32,452
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
6
<PAGE> 7
PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONDENSED 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, 1998 .............. 31,671 $ 317 $ 112,544 $ 43,991 $ 156,852
Issuances of common stock ............... 826 8 4,200 -- 4,208
Exercise of stock options .............. 176 2 602 -- 604
Net loss ................................ -- -- -- (9,359) (9,359)
--------- --------- --------- --------- ---------
Balance, September 30, 1999 ............. 32,673 $ 327 $ 117,346 $ 34,632 $ 152,305
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
7
<PAGE> 8
PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1998 1999
----------- --------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) .................................................... $ 5,725 $ (9,359)
Adjustments to reconcile net income (loss) to net cash from
operating activities:
Depreciation, depletion and amortization ............................. 20,060 21,421
Impairment of oil and natural gas properties ......................... 1,089 --
Net (gain) loss on sale of assets .................................... (639) 27
Deferred income tax expense (benefit) ................................ 2,707 (6,162)
Decrease in deferred compensation liabilities ........................ (493) (20)
Change in operating assets and liabilities:
Decrease in trade accounts receivable ........................... 9,196 291
Increase in oil and natural gas sales receivables ............... (106) (399)
Decrease in accrued Federal income taxes receivable ............. -- 7,235
(Increase) decrease in inventory held for resale ................ (973) 110
Increase in undeveloped oil and natural gas
properties held for resale .................................. (1,588) (1,767)
Increase in uncompleted drilling contracts ...................... -- (963)
Increase in other current assets ................................ (4,197) (744)
Increase in trade accounts payable .............................. 1,813 4,850
Increase (decrease) in revenue distribution payable ............. (1,416) 946
Increase (decrease) in accrued expenses ......................... (428) 1,177
Decrease in accrued state and Federal income taxes payable ...... (4,204) --
Increase (decrease) in other current payables ................... (1,377) 138
-------- --------
Net cash provided by operating activities ................... 25,169 16,781
-------- --------
Cash flows from investing activities:
Net sales of investment securities ................................... 566 --
Acquisitions ......................................................... (45,453) --
Purchases of property and equipment .................................. (28,692) (9,703)
Sale of property and equipment ....................................... 639 766
Change in other assets ............................................... 474 (423)
-------- --------
Net cash used in investing activities ....................... (72,466) (9,360)
-------- --------
Cash flows from financing activities:
Proceeds from note payable ........................................... 40,150 --
Payments of note payable ............................................. (5,542) (6,429)
Proceeds from exercise of stock options .............................. 299 604
-------- --------
Net cash provided by (used in) financing activities ......... 34,907 (5,825)
-------- --------
Net (decrease) increase in cash and cash equivalents ........ (12,390) 1,596
Cash and cash equivalents at beginning of period .......................... 23,338 8,986
-------- --------
Cash and cash equivalents at end of period ................................ $ 10,948 $ 10,582
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ............................................................. $ 3,360 $ 2,994
Income taxes ......................................................... 8,000 --
</TABLE>
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
(continued)
8
<PAGE> 9
PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Unaudited)
Supplemental disclosure of cash flow information - continued:
On January 27, 1999, the Company issued 800,000 shares of its common
stock to acquire certain drilling assets of Padre Industries, Inc. for an
aggregate purchase price of approximately $4.0 million (See Notes 2 and 4).
On June 1, 1999, the Company issued 25,776 shares of its common stock
to purchase certain drilling equipment for an estimated purchase price of
$208,000 (See Note 4).
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
9
<PAGE> 10
PATTERSON ENERGY, INC.
NOTES TO UNAUDITED CONDENSED 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 Onshore Drilling Company, Lone Star Mud, Inc., 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 condensed 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 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 condensed consolidated balance sheet as of
December 31, 1998, as presented herein, was derived from the audited balance
sheet, but does not include all disclosures required by generally accepted
accounting principles.
The Company provides a dual presentation of its earnings per share;
Basic Earnings per Share ("Basic EPS") and Diluted Earnings per Share ("Diluted
EPS"). Basic EPS is based on the weighted average number of shares outstanding
during the year. Diluted EPS includes common stock equivalents, which are
dilutive to earnings per share. For the three months ended September 30, 1998,
dilutive securities of approximately 377,000 shares were excluded for the
calculation of Diluted EPS due to the Company's net loss for the three-month
period. For the nine months ended September 30, 1998, dilutive securities of
approximately 274,000 shares were included in the calculation of Diluted EPS.
For the three and nine months ended September 30, 1999, dilutive securities of
approximately 1.3 million shares and 1.2 million shares, respectively, were
excluded from the calculation of Diluted EPS due to the Company's net loss for
each of the respective periods.
The results of operations for the three and nine months ended September
30, 1999, are not necessarily indicative of the results to be expected for the
full year.
Certain reclassifications have been made to the 1998 consolidated
financial statements in order for them to conform with the 1999 presentation.
2. RECENT ACQUISITION
On January 27, 1999, the Company completed the acquisition of five
drilling rigs and other related equipment from Padre Industries, Inc., a
privately-held, non-affiliated entity based in Corpus Christi, Texas. The
purchase price consisted of 800,000 restricted shares of the Company's common
stock valued at $4.00 per share and a contingent payment based on a guarantee
that the Company's common stock will be at least $5.00 per share one year from
the acquisition date. The contingent cash payment will be calculated by
multiplying the 800,000 shares by the difference of the closing sales price of
the Company's common stock one year from the closing date and $5.00. The maximum
cash payment will be $800,000 [($5.00 - $4.00) x 800,000] plus $80,000 of
interest. The ultimate cash payment will be ratably reduced if the price of the
Company's common stock, one year from the acquisition date exceeds $5.00. No
cash payment will be required if the Company's common stock is at least $5.50
per share one year from the acquisition date. The Company has the option to buy
back 300,000 shares at $5.50 per share on February 1, 2000. The fair market
values of the assets acquired were estimated and the purchase price of $4.0
million, representing the guaranteed value of the Company's common stock, was
allocated among such assets.
(continued)
10
<PAGE> 11
PATTERSON ENERGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
3. INTANGIBLE ASSETS
Intangible assets as of the balance sheet date consist of covenants not
to compete and goodwill arising from the Company's acquisitions completed during
fiscal years 1997 and 1998. 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 15 years.
Intangible assets consisted of the following at September 30, 1999 (in
thousands):
<TABLE>
<S> <C>
Goodwill........................................ $ 47,300
Covenants not to compete........................ 1,673
Other........................................... 979
---------
49,952
Less accumulated amortization................... (6,927)
---------
$ 43,025
=========
</TABLE>
Management continually reviews the carrying amounts of intangible
assets for recoverability based on the anticipated undiscounted cash flows of
the assets to 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 intangible
assets are determined to not be recoverable an impairment charge will be
recognized to the extent that the carrying value of the related assets,
including intangible assets, exceeds the estimated fair value.
4. STOCKHOLDERS' EQUITY
During January 1999, the Company issued 800,000 shares of its common
stock as consideration for the Company's acquisition of certain contract
drilling assets of Padre Industries, Inc. (See Note 2). The common stock was
recorded at its guaranteed value of $5.00 per share for purposes of the
transaction. The fair market value of the Company's common stock on the date of
the transaction was $4.00 per share. During June 1999, the Company issued 25,776
shares of its common stock as consideration for its purchase of certain drilling
equipment. The common stock was recorded at $8.0625 per share, its fair market
value on the date of purchase.
(continued)
11
<PAGE> 12
PATTERSON ENERGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
5. BUSINESS SEGMENTS
The Company conducts its business through three distinct operating
activities: contract drilling of oil and natural gas wells, oil and natural gas
exploration, development, acquisition and production and, providing drilling
fluid services to operators in the oil and natural gas industry. Separate
financial data for each of the Company's three business segments is provided
below.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
1998 1999 1998 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(in thousands)
Revenues:
Contract drilling ..................... $ 37,704 $ 34,579 $ 137,914 $ 83,754
Oil and natural gas ................... 1,654 2,511 5,557 5,879
Drilling fluids ....................... 2,900 2,722 10,689 7,461
--------- --------- --------- ---------
Total operating revenues .................. $ 42,258 $ 39,812 $ 154,160 $ 97,094
========= ========= ========= =========
Income (loss) from operations:
Contract drilling ..................... $ 794 $ (3,096) $ 12,014 $ (10,939)
Oil and natural gas ................... (961) 739 (1,385) 1,021
Drilling fluids ....................... (26) (343) 664 (1,322)
--------- --------- --------- ---------
(193) (2,700) 11,293 (11,240)
Net gain (loss) on sale of assets ......... 267 54 639 (27)
Interest income ........................... 200 132 646 348
Interest expense .......................... (1,195) (968) (3,360) (2,994)
--------- --------- --------- ---------
Income (loss) before income taxes ......... $ (921) $ (3,482) $ 9,218 $ (13,913)
========= ========= ========= =========
</TABLE>
6. RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," in June 1998. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement, as amended by SFAS No. 137 is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The provisions of SFAS No. 133 are
not expected to have a material impact to the Company.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the Company had working capital of
approximately $21.3 million and cash and cash equivalents of approximately $10.6
million as compared to working capital of approximately $30.5 million and cash
and cash equivalents of approximately $9.0 million as of December 31, 1998. For
the nine months ended September 30, 1999, the Company generated net cash from
operations of approximately $16.8 million, sold property and equipment for
proceeds of approximately $766,000 and received approximately $604,000 from the
exercise of employee stock options. The net cash generated from operations was
largely attributable to a $7.2 million net reduction in the Company's current
receivables and a $7.1 million net increase in the Company's current payables.
These funds were used primarily to acquire and refurbish drilling and other
related equipment of approximately $8.2 million, to fund leasehold acquisition,
exploration and development of approximately $1.5 million and to reduce certain
notes payable by approximately $6.4 million.
On January 27, 1999, the Company completed the acquisition of five
drilling rigs and other related equipment from Padre Industries, Inc., a
privately-held, non-affiliated entity based in Corpus Christi, Texas. The
purchase price of approximately $4.0 million consisted of 800,000 restricted
shares of the Company's common stock valued at $4.00 per share and a contingent
payment based on a guarantee that the Company's common stock will be trading at
$5.00 per share one year from the acquisition date. The contingent cash payment
will be calculated by multiplying the 800,000 shares by the difference of the
closing sales price of the Company's common stock one year from the closing date
and $5.00. The maximum cash payment will be $800,000 [($5.00 - $4.00) x 800,000]
plus $80,000 of interest accrued thereon. The ultimate cash payment will be
ratably reduced if the price of the Company's common stock, one year from the
acquisition date exceeds $5.00. No cash payment will be required if the
Company's common stock is at least $5.50 per share one year from the acquisition
date. The Company has the option to buy back 300,000 shares at $5.50 per share
on February 1, 2000.
At September 30, 1999, the Company was in violation of the Cash Flow
Coverage covenant contained in its credit agreement with Norwest Bank Texas,
N.A. The Company obtained a waiver of such violation as of September 30, 1999.
Management believes that the current level of cash and short-term
investments, together with cash generated from operations should be sufficient
to meet the Company's immediate capital needs. From time to time, the Company
reviews acquisition opportunities relating to its business. The timing, size or
success of any acquisition and the associated capital commitments are
unpredictable. Should further opportunities for growth requiring capital arise,
the Company believes it would be able to satisfy these needs through a
combination of working capital, cash 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 NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
For the nine months ended September 30, 1999, contract drilling
revenues were approximately $83.8 million as compared to $137.9 million for the
same period in 1998, a decrease of 39%. Average rig utilization was 39% for the
nine months ended September 30, 1999, as compared to 61% for the same period in
1998. Direct contract drilling expenses for the nine months ended September 30,
1999 were approximately $73.6 million, or 88% of related contract drilling
revenues, as compared to approximately $104.8 million, or 76% of contract
drilling revenues, for the same period in 1998. The decrease in contract
drilling revenues and direct contract drilling expenses was largely attributable
to the 36% decrease in rig utilization and commodity prices, as stated above.
General and administrative
13
<PAGE> 14
expense for the contract drilling segment was approximately $2.8 million for the
nine months ended September 30, 1999 as compared to $4.7 million for the same
period in 1998. The decrease in general and administrative expense was largely
attributable to the Company's decision to close its administrative offices in
Dallas, Abilene and Wichita Falls, Texas. The Dallas office was acquired during
February 1998 in the Company's acquisition of Robertson Onshore Drilling Company
and the Abilene office was acquired during September 1997 in the Company's
acquisition of Wes-Tex Drilling Company. Additionally, the Company imposed a
company-wide compensation reduction and certain layoffs during January and
February 1999 in an effort to reduce its overhead costs in response to the
significantly weakened economic conditions of the industry. Depreciation and
amortization expense for the contract drilling segment was approximately $18.2
million for the nine months ended September 30, 1999, as compared to
approximately $16.4 million for the same nine-month period in 1998. For the nine
months ended September 30, 1999, the contract drilling segment generated an
operating loss of approximately $10.9 million as compared to operating income of
approximately $12.0 million for the same nine-month period in 1998. The decline
in the contract drilling segment's operating results was reflective of reduced
pricing in the Company's contract services caused by significantly weakened
commodity prices, particularly for crude oil throughout fiscal year 1998 and the
initial months of 1999, and the resulting 36% decrease in the Company's
utilization rate. Notwithstanding the recent improvement in oil and natural gas
prices, there can be no assurance that the demand for contract drilling services
will increase proportionally with the current higher commodity prices or of the
duration of the higher commodity prices.
Oil and natural gas sales revenues were approximately $4.6 million for
the nine months ended September 30, 1999, as compared to approximately $4.4
million in 1998. The volume of oil and natural gas sold by the Company decreased
by approximately 9% in the first nine months of 1999, as compared to the same
nine-month period in 1998. The average price per Bbl of crude oil received by
the Company was $16.06 in 1999, as compared to $12.93 in 1998, and the average
price per Mcf of natural gas was $2.05 in 1999, as compared to $2.07 per Mcf in
1998. General and administrative expense for the oil and natural gas segment was
approximately $847,000 and $976,000 for the nine months ended September 30, 1999
and 1998, respectively. Exploration costs were approximately $459,000 and
$503,000 for the nine months ended September 30, 1999 and 1998, respectively.
Depreciation and depletion expense was approximately $2.4 million in 1999 and
$3.0 million in 1998. Additionally, during 1998 the Company incurred
approximately $1.1 million of impairment costs associated with its oil and
natural gas properties. Other revenues generated by the oil and natural gas
segment, consisting primarily of well operation fees, were approximately $1.3
million and $1.1 million for the nine months ended September 30, 1999 and 1998,
respectively. For the nine months ended September 30, 1999, the oil and natural
gas segment generated income from operations of approximately $1.0 million as
compared to a loss of approximately $1.4 million for the same nine-month period
in 1998. The increase in the segment's operating results was largely
attributable to the 24% increase in the price received for crude oil and reduced
production costs, on an equivalent unit basis, resulting from the Company's
decision to cease production efforts on marginally productive wells and, as
discussed above, the Company incurred $1.1 million of impairment costs to its
oil and natural gas properties during the nine months ended September 30, 1998.
Operating revenues from the Company's drilling fluid services were
approximately $7.5 million and $10.7 million for the nine months ended September
30, 1999 and 1998, respectively. Operating costs incurred by the drilling fluids
segment were approximately $6.4 million for the first nine months September 30,
1999 as compared to costs of approximately $8.0 million in 1998. For the nine
months ended September 30, 1999, depreciation and amortization expense was
$786,000 as compared to $630,000 in 1998. General and administrative expense for
the drilling fluids segment was approximately $1.6 million and $1.4 million for
the nine months ended September 30, 1999 and 1998, respectively. This increase
was partially due to the addition of the administrative office in Corpus
Christi, Texas acquired during September 1998 with the Company's purchase of
Tejas Drilling Fluids, Inc. For the nine months ended September 30, 1999, the
drilling fluids segment generated a net loss from operations of approximately
$1.3 million as compared to net operating income of approximately $664,000 for
the comparative nine-month period in 1998. The net loss from operations was
consistent with the decline in the segment's operating revenues and expenses as
discussed above and reflective of the deterioration in the industry's economic
conditions.
For the nine months ended September 30, 1999, interest expense was
approximately $3.0 million as compared to $3.4 million for the same period in
1998. Interest income for the first nine months of 1999 was approximately
$348,000 as compared to approximately $646,000 in 1998. The Company incurred a
net loss on the
14
<PAGE> 15
sale of certain assets of approximately $27,000 during the nine months ended
September 30, 1999 versus a net gain of approximately $639,000 in 1998.
COMPARISON OF THE FISCAL QUARTERS ENDED SEPTEMBER 30, 1999 AND 1998
For the fiscal quarter ended September 30, 1999, contract drilling
revenues were approximately $34.6 million as compared to $37.7 million for the
same fiscal quarter in 1998, a decrease of 8%. Average rig utilization was 50%
for the fiscal quarters ended September 30, 1999 and 1998. Direct contract
drilling costs for the fiscal quarter ended September 30, 1999 were
approximately $30.5 million, or 88% of contract drilling revenues, as compared
to approximately $30.4 million, or 81% of contract drilling revenues, for the
same fiscal quarter in 1998. Additional operating costs incurred during July and
August 1999 as the Company's rig utilization rate increased from 36% in June
1999 to approximately 51% in August 1999 further contributed to the segment's
weakened operating margin. General and administrative expense for the contract
drilling segment was approximately $1.0 million for the fiscal quarter ended
September 30, 1999 as compared to approximately $787,000 for the same fiscal
quarter in 1998. Depreciation and amortization expense was approximately $6.1
million for the fiscal quarter ended September 30, 1999 as compared to $5.7
million for the same fiscal quarter in 1998. For the fiscal quarter ended
September 30, 1999, the operating loss from the contract drilling segment was
approximately $3.1 million as compared to operating income of approximately
$794,000 for the same fiscal quarter in 1998. The decrease in net operating
profits from the contract drilling segment was reflective of the significantly
weakened economic conditions prevalent in the industry throughout fiscal year
1998 and the first few months of 1999 and the resulting downward pressure on
pricing for the Company's services. Notwithstanding the recent improvement in
oil and natural gas prices, there can be no assurance that the demand for
contract drilling services will increase proportionally with the current higher
commodity prices or of the duration of the higher commodity prices.
Oil and natural gas sales revenues were approximately $2.1 million for
the three months ended September 30, 1999, as compared to approximately $1.3
million in 1998. The volume of oil and natural gas sold by the Company increased
by approximately 7% for the second quarter in 1999, as compared to the same
three-month period in 1998. The average price per Bbl of crude oil received by
the Company was $19.68 in 1999, as compared to $11.64 in 1998, and the average
price per Mcf of natural gas was $2.42 in 1999, as compared to $1.91 per Mcf in
1998. General and administrative expense for the oil and natural gas segment was
approximately $283,000 for the three months ended September 30, 1999 and
approximately $281,000 for the three months ended September 30, 1998.
Exploration costs were approximately $151,000 and $166,000 for the quarters
ended September 30, 1999 and 1998, respectively. Depreciation and depletion
expense was approximately $927,000 in 1999, as compared to approximately $1.5
million in 1998. The Company incurred approximately $300,000 of impairment costs
to its oil and natural gas properties during the third fiscal quarter of 1998.
Other revenues generated by the oil and natural gas segment, consisting
primarily of fees generated from lease operating activities, were approximately
$436,000 and $365,000 for the three-months ended September 30, 1999 and 1998,
respectively. For the three months ended September 30, 1999, the oil and natural
gas segment generated operating income of approximately $739,000 as compared to
a loss from operations of approximately $961,000 for the same three-month period
in 1998. The increase in the segment's operating results was primarily
attributable to the 69% increase in the price received for crude oil and, as
discussed above, the Company incurred approximately $300,000 of impairment costs
to its oil and natural gas properties during the fiscal quarter ended September
30, 1998.
Operating revenues from the Company's drilling fluid services were
approximately $2.7 million and approximately $2.9 million for the quarters ended
September 30, 1999 and 1998, respectively. Operating costs incurred by the
drilling fluids segment were approximately $2.3 million for each of the quarters
ended September 30, 1999 and 1998. For the three months ended September 30, 1999
depreciation and amortization expense was $257,000 as compared to $222,000 in
1998. General and administrative expense for the drilling fluids segment was
approximately $537,000 and $419,000 for the three months ended September 30,
1999 and 1998, respectively. This increase was primarily due to the addition of
the administrative office in Corpus Christi, Texas acquired during September
1998 with the Company's purchase of Tejas Drilling Fluids, Inc. For the fiscal
quarter ended September 30, 1999, the drilling fluids segment generated a net
loss from operations of approximately $343,000 as compared to a net operating
loss of approximately $26,000 for the comparative three-month period in 1998.
15
<PAGE> 16
For the three months ended September 30, 1999, interest expense was
approximately $968,000 as compared to $1.2 million for the same period in 1998.
Interest income for the second quarter of 1999 was approximately $132,000 as
compared to approximately $200,000 in 1998. The Company incurred a net gain on
the sale of certain assets of approximately $54,000 during the three months
ended September 30, 1999 versus a net gain of approximately $267,000 for the
same three month period in 1998.
VOLATILITY OF OIL AND NATURAL GAS PRICES AND ITS IMPACT ON OPERATIONS
The Company's revenue, profitability and future rate of growth are
substantially dependent upon prevailing prices for oil and natural gas, both
with respect to its contract drilling and its oil and natural gas segments.
Historically, oil and natural 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 natural gas prices will have a
material adverse effect on the Company's financial condition and results of
operations. Low level commodity prices beginning in the fourth quarter of 1997
and continuing into mid-1999 have adversely impacted the Company's operations.
Although there has been significant improvement in oil and natural gas prices
since mid-1999, Patterson expects oil and natural gas prices to continue to be
volatile and therefore to affect the financial condition and operations of
Patterson and its ability to access capital.
IMPACT OF INFLATION
The Company believes that inflation will not have a significant impact
on its financial position.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities" in September 1998. SFAS No. 133 establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement, as amended by SFAS No. 137, is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The provisions of SFAS No. 133 are
not expected to have a material impact to the Company.
YEAR 2000 COMPLIANCE PROGRAM
During fiscal year 1997, the Company began implementation of its
program for alleviating potential business interruptions that could be caused by
the year 2000. The Company's program identified two principal areas of concern:
supporting information technology systems ("IT systems") and the Company's
related vulnerability to external providers of services and materials.
The Company currently maintains three separate infrastructures to
facilitate the processing of daily transactions and financial reporting. Each of
the lines of business engaged in by the Company function separately from the
other and therefore operates on individual computer platforms. The Company has
completed its conversion of each of the computer platforms resulting in the
replacement and modification of certain hardware and software applications that
previously were determined not to be compliant with year 2000 issues.
The ability of the Company to conduct its business efficiently and
productively requires that providers of services and materials to the Company,
as well as, major customers to the Company (collectively referred to herein as
"external agents") be year 2000 compliant. The Company has implemented a process
whereby external agents are identified and prioritized by level of exposure.
Management of the Company is in the process of assessing the readiness and
effectiveness of its external agents for the year 2000. Surveys, solicitations
and other forms of inquiry are being used to make this determination. Management
intends to interpret the responses and information gathered and determine on an
individual basis whether the Company is vulnerable to that external agent. This
process will
16
<PAGE> 17
continue through January 2000 as a means to provide a continuous update as to
the external agents' status and success.
The Company does not expect the total cost associated with the
Company's efforts to become year 2000 compliant to be material to the Company's
financial position. The total amount expended on the project through September
30, 1999 was approximately $1.75 million. The Company expects to significantly
reduce its level of uncertainty about year 2000 issues and, in particular, about
the year 2000 compliance and readiness of its external agents. Accordingly, the
Company does not deem it necessary to formally adopt a contingency plan.
The failure to correct a material year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the year 2000 problem, resulting in part from the
uncertainty of the year 2000 readiness of third-party suppliers and customers,
the Company is unable to determine at this time whether the consequences of year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Company believes that, with
the implementation of new business systems and completion of its program as
scheduled, the possibility of significant interruptions of normal operations
should be reduced.
The foregoing disclosure constitutes "Year 2000 Readiness Disclosure"
within the meaning of the Year 2000 Information and Readiness Disclosure Act.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has exposure to market risk associated with the floating
rate portion of the interest charged on its term loan with Norwest Bank Texas,
N.A. The term loan, which matures on January 1, 2001, bears interest at LIBOR
plus 2.375%. The Company's exposure to interest rate risk due to changes in
LIBOR is not expected to be material. At September 30, 1999, The fair value
of the obligation approximates its related carrying value because the obligation
bears interest at the current market rate.
17
<PAGE> 18
---------------
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;
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," "expects," "expected,"
"estimates" 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; fall of oil and natural gas prices; continued adverse market
conditions for contract drilling services; drill-pipe shortages; labor
shortages, primarily qualified drilling rig personnel; insurance coverage
limitations and requirements; inability to acquire additional drilling rigs on
terms favorable to the Company 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 and
others, 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, 1998,
beginning on page 13.
---------------
18
<PAGE> 19
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on July 1, 1999.
The following table sets forth certain information relating to each of the
matters voted upon at the meeting.
<TABLE>
<CAPTION>
VOTES
----------------------------------------------------
WITHHELD/ BROKER
MATTERS VOTED UPON FOR AGAINST ABSTAIN NON-VOTES
------------------ ---------- ------- ------- ---------
<S> <C> <C> <C> <C>
1. Ratification of PricewaterhouseCoopers LLP
as the independent auditors for the
Company for the fiscal year ended
December 31, 1999..................................... 28,907,058 34,644 55,387 --
2. Election of the following persons to the
Company's Board of Directors:
Cloyce A. Talbott................................... 28,231,694 -- 765,395 --
A. Glenn Patterson.................................. 28,232,785 -- 764,304 --
Robert L. Gist...................................... 28,233,484 -- 763,605 --
Spencer A. Armour, III.............................. 28,137,284 -- 859,805 --
Vincent A. Rossi, Jr................................ 28,260,682 -- 736,407 --
</TABLE>
19
<PAGE> 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
The following exhibits are filed herewith or incorporated by reference:
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. (2)
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. (3)
2.3 Asset Purchase Agreement, dated April 22, 1997, among and between
Patterson Drilling Company and Ziadril, Inc. (4)
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. (5)
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. (5)
2.6 Asset Purchase Agreement, dated September 4, 1997, among Patterson
Energy Inc., Patterson Drilling Company and McGee Drilling Company. (4)
2.7 Agreement and Plan of Merger, dated January 20, 1998, among Patterson
Energy, Inc., Patterson Onshore Drilling Company and Robertson Onshore
Drilling Company. (7)
2.8 Stock Purchase Agreement, dated January 5, 1998, among Patterson
Energy, Inc., Spencer D. Armour, III. And Richard G. Price. (19)
2.9 Stock Purchase Agreement, dated September 17, 1998, among Lone Star
Mud, Inc. and Mark Campbell (shareholder of Tejas Drilling Fluids,
Inc.). (20)
2.10 Asset Purchase Agreement, dated January 27, 1999, among Patterson
Energy, Inc., Patterson Drilling Company and Padre Industries, Inc.
(20)
3.1 Restated Certificate of Incorporation. (8)
3.1.1 Restated Certificate of Amendment to the Certificate of Incorporation.
(9)
3.2 Bylaws. (1)
4.1 Excerpt from Restated Certificate of Incorporation of Patterson Energy,
Inc. regarding authorized Common Stock and Preferred Stock. (10)
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. (11)
4.3 Stock Purchase Warrant of Patterson Energy, Inc., dated June 12, 1997.
(11)
20
<PAGE> 21
10.1 Credit Agreement dated December 9, 1997 among Patterson Energy, Inc.,
Patterson Drilling Company, Patterson Petroleum, Inc., Patterson
Trading Company, Inc. and Norwest Bank Texas, N.A. (6)
10.1.1 Promissory Note dated December 9, 1997 among Patterson Energy, Inc. and
Norwest Bank Texas, N.A. (6)
10.1.2 Security Agreement dated December 9, 1997 between Patterson Drilling
Company and Norwest Bank Texas, N.A. (6)
10.1.3 Corporate Guarantees of Patterson Drilling Company, Patterson
Petroleum, Inc. and Patterson Petroleum Trading Company, Inc. (6)
10.1.4 Amendment to Credit Agreement dated March 4, 1999 among Patterson
Energy, Inc., Patterson Drilling Company, Patterson Petroleum, Inc.,
Patterson Trading Company, Inc. and Norwest Bank Texas, N.A. (20)
10.2 Aircraft Lease, dated December 20, 1998, (effective January 1, 1999)
between Talbott Aviation, Inc. and Patterson Energy, Inc. (20)
10.3 Participation Agreement, dated October 19, 1994, between Patterson
Petroleum Trading Company, Inc. and BHT Marketing, Inc. (12)
10.3.1 Participation Agreement dated October 24, 1995, between Patterson
Petroleum Trading Company, Inc. and BHT Marketing, Inc. (13)
10.4 Crude Oil Purchase Contract, dated October 19, 1994, between Patterson
Petroleum, Inc. and BHT Marketing, Inc. (14)
10.4.1 Crude Oil Purchase Contract, dated October 24, 1995, between Patterson
Petroleum, Inc. and BHT Marketing, Inc. (13)
10.5 Patterson Energy, Inc. 1993 Stock Incentive Plan, as amended. (15)
10.6 Patterson Energy, Inc. Non-Employee Directors' Stock Option Plan, as
amended. (16)
10.7 Model Form Operating Agreement. (17)
10.8 Form of Drilling Bid Proposal and Footage Drilling Contract. (17)
10.9 Form of Turnkey Drilling Agreement. (17)
15.1 Awareness Letter of Independent Accountants - PricewaterhouseCoopers
LLP
21.1 Subsidiaries of the registrant. (18)
27.1 Financial Data Schedule as of September 30, 1999 and for the three and
nine months then ended.
- -----------------------
(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.
21
<PAGE> 22
(2) Incorporated by reference to Item 7, "Financial Statements and
Exhibits" to Form 8-K dated April 22, 1996 and filed on April 30, 1996.
(3) Incorporated by reference to Item 7, "Financial Statements and
Exhibits" to Form 8-K dated May 16, 1996 and filed on May 22, 1996.
(4) 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.
(5) Incorporated herein by reference to Item 7, "Financial Statements and
Exhibits", to Form 8-K dated September 3, 1997; filed September 11,
1997.
(6) Incorporated herein by reference to Item 7, "Financial Statements and
Exhibits" to Form 8-K dated November 14, 1997 and filed December 24,
1997.
(7) Incorporated herein by reference to Item 7, "Financial Statements and
Exhibits," to Form 8-K dated January 23, 1998; filed February 3, 1998.
(8) Incorporated herein by reference to Item 6, "Exhibits and Reports on
Form 8-K" to Form 10-Q for the quarterly period ended September 30,
1996; filed August 12, 1996.
(9) 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, 1997;
filed August 14, 1997.
(10) Incorporated herein by reference to Item 16, "Exhibits" to Registration
Statement on Form S-3 filed with the Securities Exchange Commission on
December 18, 1996.
(11) Incorporated herein by reference to Item 7, "Financial Statements and
Exhibits", to Form 8-K dated September 12, 1997; filed September 19,
1997.
(12) Incorporated herein by reference to Item 27, "Exhibits" to Post
Effective Amendment No. 1 to Registration Statement on Form SB-2 (File
No. 33-68058-FW).
(13) Incorporated by reference to Item 7, "Financial Statements and
Exhibits" to Form 10-KSB for the year ended December 31, 1995.
(14) Incorporated by reference to Item 5, "Other Items" to Form 8-K dated
December 1, 1995 and filed on January 16, 1996.
(15) Incorporated herein by reference to Item 8, "Exhibits" to Registration
Statement on Form S-8 (File No. 333-47917); filed March 13, 1998.
(16) Incorporated herein by reference to Item 8, "Exhibits" to Registration
Statement on Form S-8 (File No. 33-39471); filed November 4, 1997.
(17) Incorporated by reference to Item 27, "Exhibits" to Registration
Statement filed with the Securities and Exchange Commission on August
30, 1993.
(18) Incorporated by reference to Item 14, "Exhibits, Financial Statement
Schedules and Reports on Form 8-K" to Form 10-K dated December 31,
1997.
(19) Incorporated herein by reference to Item 16, "Exhibits" to Registration
Statement on Form S-3 filed with the Securities Exchange Commission on
January 5, 1998.
22
<PAGE> 23
(20) Incorporated by reference to Item 14, "Exhibits, Financial Statement
Schedules and Reports on Form 8-K" to Form 10-K dated December 31,
1998.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed with the Securities and
Exchange Commission during the fiscal quarter ended September 30, 1999.
23
<PAGE> 24
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/ JONATHAN D. NELSON
------------------------------
Jonathan D. Nelson
Vice President-Finance
Chief Financial Officer
DATED: November 15, 1999
24
<PAGE> 25
Exhibit Index
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
15.1 Awareness Letter of Independent Accountants,
PricewaterhouseCoopers LLP
27.1 Financial Data Schedule as of September 30, 1999 and for the
three and nine months ended September 30, 1999.
</TABLE>
<PAGE> 1
Exhibit 15.1
November 15, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Commissioners:
We are aware that our report dated November 12, 1999 on our review of interim
financial information of Patterson Energy, Inc. and Subsidiaries (the "Company")
for the period ended September 30, 1999 and included in the Company's quarterly
report on Form 10-Q for the quarter then ended is incorporated by reference in
its Registration Statements on Forms S-8 (File No.'s 333-47917, 33-97972,
33-39471 and 33-35399) and on Form S-3, (File No. 333-89885).
Yours very truly,
/s/ PricewaterhouseCoopers LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Unaudited Condensed Balance Sheet as of September 30,1999 and related unaudited
condensed consolidated Statements of Operations for the three and nine month
periods ended September 30, 1999. This financial information is qualified in
its entirety by reference to filing on Form 10-Q for the Quarterly period ended
September 30, 1999.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-START> JUL-01-1999 JAN-01-1999
<PERIOD-END> SEP-30-1999 SEP-30-1999
<CASH> 10,582 10,582
<SECURITIES> 0 0
<RECEIVABLES> 29,150 29,150
<ALLOWANCES> 0 0
<INVENTORY> 1,173 1,173
<CURRENT-ASSETS> 51,398 51,398
<PP&E> 247,284 247,284
<DEPRECIATION> 116,142 116,142
<TOTAL-ASSETS> 226,558 226,558
<CURRENT-LIABILITIES> 30,063 30,063
<BONDS> 0 0
0 0
0 0
<COMMON> 327 327
<OTHER-SE> 151,978 151,978
<TOTAL-LIABILITY-AND-EQUITY> 226,558 226,558
<SALES> 0 0
<TOTAL-REVENUES> 39,812 97,094
<CGS> 0 0
<TOTAL-COSTS> 42,516 108,378
<OTHER-EXPENSES> (190) (365)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 968 2,994
<INCOME-PRETAX> (3,482) (13,913)
<INCOME-TAX> (1,128) (4,554)
<INCOME-CONTINUING> (2,354) (9,359)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,354) (9,359)
<EPS-BASIC> (0.07) (0.29)
<EPS-DILUTED> (0.07) (0.29)
</TABLE>
