SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1998
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________ to_______________
Commission File Number 0-22078
DUAL HOLDING COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 51-0327704
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2700 Fountain Place
1445 Ross Avenue, Dallas, Texas 75202 - 2792
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214)922-1500
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 twelve 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
There were 1,000 shares of Common Stock, $.10 par value, of the registrant
outstanding as of July 31, 1998.
<PAGE>
DUAL HOLDING COMPANY
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet
June 30, 1998 and December 31, 1997 3
Consolidated Statement of Operations
Three months ended June 30, 1998, and 1997 4
Consolidated Statement of Operations
Six months ended June 30, 1998, and 1997 5
Consolidated Statement of Cash Flows
Six months ended June 30, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
SIGNATURES 14
Separate financial statements of the subsidiaries of Dual Holding Company (the
"Company") that guarantee the Company's Senior Subordinated Notes due 2004 (the
"Notes") are not included herein. Such subsidiary guarantors are jointly and
severally liable with respect to the Company's obligations pursuant to such
Notes, and the aggregate total assets, equity and net income (loss) of such
subsidiary guarantors are substantially equivalent to the total assets, equity
and net income (loss) of the Company on a consolidated basis. The total assets,
equity and net income (loss) of subsidiaries of the Company not guaranteeing the
Notes on a combined basis are not significant compared to the respective amounts
reported in the Consolidated Financial Statements of the Company and its
subsidiaries.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DUAL HOLDING COMPANY AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF ENSCO INTERNATIONAL INCORPORATED)
CONSOLIDATED BALANCE SHEET
(In thousands, except for share amounts)
June 30, December 31,
1998 1997
----------- -----------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents ....................... $ 13,858 $ 10,071
Accounts receivable, net ........................ 8,794 12,108
Prepaid expenses and other ...................... 8,521 9,009
-------- --------
Total current assets ...................... 31,173 31,188
-------- --------
PROPERTY AND EQUIPMENT, AT COST ................... 410,849 326,670
Less accumulated depreciation ................... 41,521 32,923
-------- --------
Property and equipment, net ............... 369,328 293,747
-------- --------
OTHER ASSETS, NET ................................. 109,891 110,524
-------- --------
$510,392 $435,459
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Payable to ENSCO ................................ $ 10,754 $ 5,633
Accounts payable ................................ 527 661
Accrued liabilities ............................. 30,514 22,471
-------- --------
Total current liabilities ................. 41,795 28,765
-------- --------
LONG-TERM DEBT .................................... 98,449 98,762
NOTES PAYABLE TO ENSCO ............................ 50,000 --
DEFERRED INCOME TAXES ............................. 18,138 14,545
OTHER LIABILITIES ................................. 15,644 14,490
STOCKHOLDER'S EQUITY
Common stock ($.10 par value, 10,000 shares
authorized, 1,000 shares issued and
outstanding) .................................. -- --
Additional paid-in capital ...................... 264,824 264,824
Retained earnings ............................... 21,542 14,073
-------- --------
Total stockholder's equity ................ 286,366 278,897
-------- --------
$510,392 $435,459
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
DUAL HOLDING COMPANY AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF ENSCO INTERNATIONAL INCORPORATED)
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands)
(Unaudited)
Three Months Three Months
Ended Ended
June 30, June 30,
1998 1997
------------- ------------
OPERATING REVENUES
Drilling services ......................... $ 13,383 $ 14,887
ENSCO charter fees ........................ 9,201 6,990
-------- --------
22,584 21,877
-------- --------
OPERATING EXPENSES
Operating costs ............................ 7,789 8,041
Depreciation and amortization .............. 5,082 6,989
ENSCO administrative charge ............... 1,200 1,200
-------- --------
14,071 16,230
-------- --------
OPERATING INCOME ............................. 8,513 5,647
OTHER INCOME (EXPENSE)
Interest income ............................ 308 238
Interest expense, net ...................... (2,660) (2,952)
Other, net ................................. (62) 10
-------- --------
(2,414) (2,704)
-------- --------
INCOME BEFORE INCOME TAXES ................... 6,099 2,943
PROVISION FOR INCOME TAXES
Current income taxes ...................... 603 195
Deferred income taxes ..................... 2,297 52
-------- --------
2,900 247
-------- --------
NET INCOME ................................... $ 3,199 $ 2,696
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
DUAL HOLDING COMPANY AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF ENSCO INTERNATIONAL INCORPORATED)
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands)
(Unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
1998 1997
---------- ----------
OPERATING REVENUES
Drilling services ........................... $ 25,335 $ 28,965
ENSCO charter fees .......................... 17,623 10,786
-------- --------
42,958 39,751
-------- --------
OPERATING EXPENSES
Operating costs .............................. 12,904 19,614
Depreciation and amortization ................ 10,049 13,347
ENSCO administrative charge .................. 2,400 2,400
-------- --------
25,353 35,361
-------- --------
OPERATING INCOME ............................... 17,605 4,390
OTHER INCOME (EXPENSE)
Interest income .............................. 509 561
Interest expense, net ........................ (5,005) (5,899)
Other, net ................................... (95) (1)
-------- --------
(4,591) (5,339)
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES .............. 13,014 (949)
PROVISION FOR INCOME TAXES
Current income taxes ........................ 1,952 696
Deferred income taxes ....................... 3,593 104
-------- --------
5,545 800
-------- --------
NET INCOME (LOSS) .............................. $ 7,469 $ (1,749)
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
DUAL HOLDING COMPANY AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF ENSCO INTERNATIONAL INCORPORATED)
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
1998 1997
----------- -----------
OPERATING ACTIVITIES
Net income (loss) .................................. $ 7,469 $ (1,749)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization ................... 10,049 13,347
Deferred income taxes ........................... 3,593 104
Other ........................................... (260) (314)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable .... 3,314 (541)
(Increase) decrease in prepaid expenses
and other ................................. (314) 3,424
Increase in accounts payable .................. 4,871 10,546
Decrease in accrued and other liabilities ..... (1,910) (5,683)
-------- --------
Net cash provided by operating activities .. 26,812 19,134
-------- --------
INVESTING ACTIVITIES
Additions to property and equipment ................ (73,095) (49,741)
Proceeds from sale of assets ....................... 70 22,442
-------- --------
Net cash used by investing activities ........... (73,025) (27,299)
-------- --------
FINANCING ACTIVITIES
Long-term borrowings ............................... 50,000 15,000
Reduction of long-term borrowings .................. -- (250)
Reduction in restricted cash........................ -- 1,075
-------- --------
Net cash provided by financing activities ....... 50,000 15,825
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS ................ 3,787 7,660
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ....... 10,071 9,397
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............. $ 13,858 $ 17,057
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
DUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Unaudited Financial Statements
The consolidated financial statements included herein have been prepared by Dual
Holding Company (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission and in accordance with
generally accepted accounting principles and, in the opinion of management,
reflect all adjustments (which consist of normal recurring adjustments) which
are necessary for a fair presentation of the financial position, results of
operations, and of cash flows for the interim periods presented. The Company is
a wholly-owned subsidiary of ENSCO International Incorporated ("ENSCO").
It is recommended that these financial statements be read in conjunction with
the Company's consolidated financial statements and notes thereto for the year
ended December 31, 1997 included in the Company's Annual Report on Form 10-K.
Note 2 - Change in Depreciable Lives
During the latter part of 1997, the Company performed an engineering and
economic study of the Company's asset base. As a result of this study, the
Company, effective January 1, 1998, extended the depreciable lives of its
drilling rigs by an average of four years. The Company believes that this change
provides a better matching of the revenues and expenses of the Company's assets
over their anticipated useful lives. The effect of this change on the Company's
financial results for the three and six months ended June 30, 1998 was to reduce
depreciation expense by approximately $2.3 million and $4.6 million,
respectively.
Note 3 - Related Party Transactions
At June 30, 1998, the Company's three jackup rigs and seven platform rigs in the
Gulf of Mexico were under bareboat charter to a wholly owned subsidiary of ENSCO
to achieve certain operating and marketing efficiencies. The terms of the
bareboat charter agreements with ENSCO provide for fixed daily rates to be paid
to the Company. If a rig is idle for more than 30 consecutive days, the charter
rate is reduced by 50% of the normal rate. The bareboat charter agreements may
be terminated with one month's prior notice by either party.
On March 31, 1998, the Company executed a promissory note and borrowed $25.0
million from ENSCO. On June 30, 1998, the Company executed a second promissory
note and borrowed an additional $25.0 million from ENSCO. The purpose of the
<PAGE>
loans is to provide additional cash to the Company for the ongoing and planned
capital upgrades to the Company's drilling rigs. The terms of the loans provide
for payment of the principal amount and interest on or before March 31, 2000 and
June 30, 2000, respectively. The notes bear interest at 5% per annum.
The Company has a Master Services Agreement with ENSCO. Under the terms of the
Master Services Agreement, ENSCO provides certain shorebase and corporate
support services for the Company's domestic and foreign operations. The Company
pays ENSCO a monthly fee of $400,000 for these services, which the Company
believes is reasonable for the services provided.
The Company is a guarantor of ENSCO's $185 million revolving credit agreement
established in May 1998. As of June 30, 1998 there were no borrowings
outstanding under the credit agreement.
Note 4 - Comprehensive Income
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standard No. 130, "Reporting Comprehensive Income." The adoption of this
statement had no effect on the Company's financial statements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BUSINESS ENVIRONMENT AND OUTLOOK
Dual Holding Company (the "Company") contracts its offshore drilling equipment
for use in the Gulf of Mexico and the Asia Pacific region. During the second
quarter of 1998, demand for offshore drilling equipment declined as oil prices
continued to deteriorate from price levels at the end of 1997 and at the end of
the first quarter of 1998. Oil prices have recently been at the lowest levels
experienced during the last twelve years due to, among other things, concerns
about an excess supply of oil in the world markets and reduced growth in
worldwide demand due to the impact of the economic slowdown in Southeast Asia.
In an attempt to prevent further deterioration in oil prices, members of OPEC
and some other oil and gas producers recently agreed to reduce their current oil
production levels. However, there can be no assurance that these agreements will
reduce oil production levels or if or when these measures will increase oil
prices and return them to higher levels that have prevailed over much of the
last decade. As oil prices have declined, companies exploring for oil and
natural gas have deferred some of their drilling programs thereby reducing
demand for drilling equipment and resulting in reductions in day rates and
utilization. Because of this, the Company's financial results for the second
half of 1998 could be adversely affected.
RESULTS OF OPERATIONS
For the three and six month periods ended June 30, 1998, revenues increased
approximately $700,000, or 3%, and $3.2 million, or 8%, respectively, as
compared to the prior year periods. These increases are due primarily to
improved day rates for the Company's drilling rigs and to an increase in
platform rig utilization, offset in part by the sale of two jackup rigs in May
and December 1997. The day rate improvements are primarily attributable to
improved market conditions and to enhancements to the Company's drilling rigs,
while the increase in platform rig utilization is attributable to a reduction in
shipyard downtime for enhancement projects.
The Company's operating margin (defined as revenues less operating expenses,
exclusive of depreciation and general and administrative expenses) increased
approximately $1.0 million, or 7%, and $9.9 million, or 49%, for the three and
six month periods ended June 30, 1998, respectively, as compared to the prior
year periods. The increase in operating margin is primarily due to the
improvement in day rates and utilization discussed above, and to the reversal of
$1.0 million in the first quarter of 1998 that was previously accrued for the
settlement of maritime claims.
In June 1997, the Company sold its 49% interest in a jointly-owned jackup rig to
ENSCO. In December 1997, the Company sold another jackup rig to ENSCO. The
impact of the sale of these rigs on the operating margin in 1998, as compared to
<PAGE>
1997, was more than offset by higher day rates for the remaining fleet and
increased utilization of the platform rigs.
Depreciation and amortization decreased by $1.9 million, or 27%, and $3.3
million, or 25% for the three and six month periods ended June 30, 1998,
respectively, as compared with the prior year periods. These decreases are due
primarily to the sale of the two jackup rigs to ENSCO in 1997 and the impact of
a change in the estimated depreciable lives of the Company's drilling rigs
effective January 1, 1998. See Note 2 to the financial statements of the Company
included herein, "Change in Depreciable Lives."
Interest expense decreased from the prior year periods due to a decrease in
average debt outstanding. Interest expense will increase in the remaining
quarters of 1998 as compared to the first six months due to the additional
borrowings from ENSCO.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow and Capital Expenditures
The Company's cash provided by operations and cash used for capital expenditures
for the six months ended June 30, 1998 and 1997 were as follows (in thousands):
1998 1997
------- -------
Cash provided by operations $26,812 $19,134
======= =======
Capital expenditures $73,095 $49,741
======= =======
Cash flow from operations increased by $7.7 million for the six months ended
June 30, 1998 as compared with the prior year period. The increase in cash flow
from operations is primarily a result of the increase in operating margin
resulting from the day rate improvements and the overall reduction of shipyard
downtime during the first half of 1998 when compared with the prior year period,
offset, in part, by the net change in various working capital accounts.
Capital expenditures for the six months ended June 30, 1998 relate to
enhancements to the Company's jackup rigs and platform rigs in 1998. During the
second quarter of 1998 the Company had two jackup rigs and three platform rigs
in shipyards for enhancements. The enhancements to the jackup rigs are expected
to be completed in the third quarter of 1998. The enhancements to one platform
rig were completed in May 1998, the enhancements to another were completed in
July 1998 and the enhancements to the remaining platform rig are expected to be
completed in the fourth quarter of 1998.
<PAGE>
Financing and Capital Resources
The Company's liquidity position at June 30, 1998 and December 31, 1997 is
summarized in the table below (in thousands, except ratios):
June 30, December 31,
1998 1997
------------ ------------
Cash $ 13,858 $ 10,071
Working capital (10,622) 2,423
Current ratio .7 1.1
Management believes that the Company may need to supplement its cash flow from
operations in the remaining quarters of 1998 with additional borrowings from
ENSCO in order to meet its planned capital expenditures. The Company anticipates
that capital expenditures for rig upgrades and sustaining operations may
approximate $100.0 to $130.0 million in 1998.
MARKET RISK
The Company uses financial instruments, on a limited basis, to hedge against its
exposure to changes in foreign currencies. The Company does not use financial
instruments for trading purposes. Management believes that the Company's hedging
activities do not expose the Company to any material interest rate risk, foreign
currency exchange rate risk, commodity price risk or any other market rate or
price risk.
YEAR 2000 ISSUE
The Company has completed the initial assessment of its computer systems and
other operational equipment to determine what systems and equipment may be
impacted by the Year 2000 problem. The Company presently believes that it will
be able to implement successfully the required systems and equipment
modifications necessary to make the Company Year 2000 compliant by mid-1999.
Based on the Company's assessment of its computer systems and other operational
equipment to date, the Company believes that the potential impact, if any, of it
not timely implementing the necessary modifications to become Year 2000
compliant would not be material to the operations of the Company. The Company
currently estimates that the costs that will be incurred to become Year 2000
compliant will not be material to the Company.
The Company has initiated formal communication with its significant suppliers,
customers and business partners to determine the extent to which the Company is
vulnerable to these third parties' failure to remedy their own Year 2000 issues.
In addition, third party vendors of hardware and packaged software have been
contacted about their products' compliance status. There can be no guarantee
that the systems of other companies on which the Company's systems rely will be
timely converted, or that a failure to convert by another company, or a
<PAGE>
conversion that is incompatible with the Company's systems, would not have a
material adverse effect on the Company.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement requires companies to record derivatives
on the balance sheet as assets and liabilities, measured at fair value. Gains
and losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. This statement is not expected to have a material impact
on the Company's consolidated financial statements. This statement is effective
for fiscal years beginning after June 15, 1999, with earlier adoption
encouraged.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements based on current expectations
that involve a number of risks and uncertainties. Generally, forward-looking
statements include words or phrases such as "management anticipates," "the
Company believes," "the Company anticipates" and words and phrases of similar
impact, and include but are not limited to statements regarding future
operations and business environment. The forward-looking statements are made
pursuant to safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. The factors that could cause actual results to differ materially
from the forward-looking statements include the following: (i) industry
conditions and competition, (ii) the cyclical nature of the industry, (iii)
worldwide expenditures for oil and gas drilling, (iv) operational risks and
insurance, (v) risks associated with operating in foreign jurisdictions, (vi)
environmental liabilities which may arise in the future and not covered by
insurance or indemnity, (vii) the impact of current and future laws and
government regulation, as well as repeal or modification of same, affecting the
oil and gas industry and the Company's operations in particular, and (viii) the
risks described from time to time in the Company's reports to the Securities and
Exchange Commission, which include the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Filed with this Report
Exhibit No.
-----------
4.1 Promissory Note with ENSCO International Incorporated, dated
June 30, 1998.
10.1 Form of Amendment No.1 to the Standard Bareboat Charter
between ENSCO Offshore Company and the Company.
27.1 Financial Data Schedule. (Exhibit 27.1 is being submitted as
an exhibit only in the electronic format of this Quarterly
Report on Form 10-Q being submitted to the Securities and
Exchange Commission.)
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dual Holding Company
Date: August 11, 1998
--------------- /s/ C. Christopher Gaut
--------------------------------
C. Christopher Gaut
President
(Principal Executive Officer and
Financial Officer)
/s/ H.E. Malone
--------------------------------
H.E. Malone
Secretary
(Principal Accounting Officer)
PROMISSORY NOTE
June 30, 1998
Dallas, Texas
$25,000,000.00
For value received, Dual Holding Company ("Maker"), a Delaware corporation,
promises to pay to the order of ENSCO International Incorporated ("Payee"), the
principal amount of Twenty-Five Million Dollars ($25,000,000.00), with interest
as follows:
1. All payments are to be made at the office of Payee, located at 2700
Fountain Place, 1445 Ross Avenue, Dallas, Texas 75202.
2. The principal amount and interest of this Promissory Note are payable
in full on or before June 30, 2000.
3. The principal amount shall bear interest at the rate of five percent
(5%) per annum, compounded annually.
4. This Promissory Note may be prepaid in part or in full at any time
without penalty.
5. Maker agrees to pay on demand all costs of collection, legal expenses,
and attorney's fees incurred or paid by any Holder in collecting or
enforcing this Promissory Note on default.
6. No delay or omission on the part of any Holder in exercising any right
under this Promissory Note will operate as a waiver of such right or
of any other right under this Promissory Note. A waiver on any one
occasion will not be construed as a bar to or waiver of any right or
remedy on any future occasion.
7. As used in this Promissory Note, the term "Holder" means Payee or
other indorsee of this Promissory Note who is in possession of it. If
this Note is signed by more than one person in the capacity of Maker,
it shall be the joint and several liabilities of these persons.
8. It is expressly acknowledged that this Promissory Note is subordinate
in right of payment to the Securities and to the Senior Indebtedness
as such terms are defined in the Trust Indenture between Maker,
certain Subsidiary Guarantors and Shawmut Bank, National Association,
Trustee, dated January 15, 1994, and as thereafter supplemented.
Dual Holding Company, Maker
/s/ C. Christopher Gaut
-------------------------------
C. Christopher Gaut, Presidient
FORM OF AMENDMENT NO. 1
TO
BAREBOAT CHARTER AGREEMENT
This Amendment No. 1 to that certain "Barecon 89" Standard Bareboat
Charter dated June 13, 1996 (the "Charter") between ENSCO Offshore Company II
("Owners"), Owners of the jack-up drilling unit [vessel name] (the "Vessel"),
and ENSCO Offshore Company ("Charterers") is made with effect from June 13,
1996.
WHEREAS, Owners and Charterers wish to amend certain provisions of the
Charter to achieve a fair evaluation of the market price for the Vessel and
reasonable distribution and sharing of the costs of certain modifications to the
Vessel which have been or will be undertaken for and by Owners on behalf of
Charterers.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the Owners and the Charterers hereby agree as follows:
1. Clause 10(a) of the Charter is amended to read as follows:
(a) "Commencing on the date and hour of delivery of the
Vessel to Charterers as shown in Box 14, Charterers
shall pay to Owners for the hire of the Vessel a
rate (the "Hire") of USD $______, which rate shall
remain in effect through June 30, 1997. On July 1,
1997 and each succeeding July 1 thereafter, the Hire
shall be increased by the per diem amount necessary
to achieve a fifteen percent (15%) per annum return
on the fair market value of Owners' capital
investment over the remaining depreciable life of the
Vessel. Any adjustment to Hire as a result of this
Clause 10(a) shall be confirmed in writing, signed by
Owners and Charterers, and shall set forth the date
the adjustment to Hire shall take effect. In no
event shall the Hire be less than USD $______. Hire
shall continue until the date and hour when the
Vessel is redelivered by the Charterers to Owners.
In the event the Vessel is idle for more than thirty
(30) consecutive days, the Hire shall be reduced by
fifty percent (50%) for so long as the Vessel is
continuously idle subsequent to such thirty (30) day
period.
2. Clause 25 of the Charter is hereby deleted in its entirety.
3. Except as herein amended, Owners and Charterers agree the Charter
continues in full force and effect.
ENSCO Offshore Company II, Owners
By: /s/ C. Christopher Gaut
---------------------------
C. Christopher Gaut
Title: Vice President
ENSCO Offshore Company, Charterers
By: /s/ Robert O. Isaac
---------------------------
Robert O. Isaac
Title: Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the June 30,
1998 financial statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000907245
<NAME> DUAL HOLDING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 13,858
<SECURITIES> 0
<RECEIVABLES> 8,794
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31,173
<PP&E> 410,849
<DEPRECIATION> 41,521
<TOTAL-ASSETS> 510,392
<CURRENT-LIABILITIES> 41,795
<BONDS> 148,449
0
0
<COMMON> 0
<OTHER-SE> 286,366
<TOTAL-LIABILITY-AND-EQUITY> 510,392
<SALES> 0
<TOTAL-REVENUES> 42,958
<CGS> 0
<TOTAL-COSTS> 12,904
<OTHER-EXPENSES> 12,449
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,005
<INCOME-PRETAX> 13,014
<INCOME-TAX> 5,545
<INCOME-CONTINUING> 7,469
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,469
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
