<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1997
REGISTRATION NUMBER 333-35109
================================================================================
SECURITIES AND EXCHANGE COMMISSION
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
UTI ENERGY CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 23-2037823
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
VAUGHN E. DRUM
UTI ENERGY CORP.
16800 GREENSPOINT PARK 16800 GREENSPOINT PARK
SUITE 225N SUITE 225N
HOUSTON, TEXAS 77060 HOUSTON, TEXAS 77060
(281) 873-4111 (281) 873-4111
(Address, including zip code, and telephone (Name, address, including zip code, and
number, including area code, of registrant's telephone number, including area code, of agent
principal executive offices) for service)
</TABLE>
Copies to:
<TABLE>
<S> <C>
CURTIS W. HUFF WALTER J. SMITH
FULBRIGHT & JAWORSKI L.L.P. BAKER & BOTTS, L.L.P.
1301 MCKINNEY ONE SHELL PLAZA
SUITE 5100 910 LOUISIANA
HOUSTON, TEXAS 77010-3095 HOUSTON, TEXAS 77002-4995
(713)651-5151 (713) 229-1234
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being offered on this Form are being offered
pursuant to dividend and interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION -- DATED SEPTEMBER 29, 1997
PROSPECTUS
- --------------------------------------------------------------------------------
5,915,500 Shares
UTI ENERGY CORP.
[UTI ENERGY CORP. LOGO]
Common Stock
- --------------------------------------------------------------------------------
Of the 5,915,500 shares of common stock, par value $.001 per share (the "Common
Stock"), offered hereby, 1,575,000 shares are being sold by UTI Energy Corp.
(the "Company" or "UTI") and 4,340,500 shares are being sold by the selling
stockholders (the "Selling Stockholders"). See "Principal and Selling
Stockholders".
The Common Stock is listed on the American Stock Exchange (the "AMEX") under the
symbol "UTI". On September 12, 1997, the last reported sales price of the Common
Stock as reported on the AMEX was $36.25 per share. See "Price Range of Common
Stock and Dividend Policy".
SEE "RISK FACTORS" ON PAGES 8 TO 12 FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=======================================================================================================================
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Stockholders(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.............................. $ $ $ $
- -----------------------------------------------------------------------------------------------------------------------
Total(3)............................... $ $ $ $
=======================================================================================================================
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting".
(2) Before deducting expenses payable by the Company and the Selling
Stockholders, estimated to be $350,000 and $15,000, respectively. The
Company will receive $12,480,000 from the exercise of warrants relating to
1,425,000 of the shares being offered by the Selling Stockholders.
(3) The Company and certain Selling Stockholders of the Company have granted the
several Underwriters 30-day over-allotment options to purchase, in the
aggregate, up to an additional 887,325 shares of Common Stock, including
warrants to purchase shares of Common Stock, on the same terms and
conditions as set forth above less the exercise price of any warrants. If
all such additional shares are purchased by the Underwriters, the total
Price to Public will be $ , the total Underwriting Discounts and
Commissions will be $ , the total Proceeds to Company will be
$ , and the total Proceeds to Selling Stockholders will be
$ . See "Underwriting".
- --------------------------------------------------------------------------------
The shares of Common Stock are offered by the several Underwriters, subject to
delivery by the Company and the Selling Stockholders and acceptance by the
Underwriters, to prior sale and to withdrawal, cancellation or modification of
the offer without notice. Delivery of the shares to the Underwriters is expected
to be made at the offices of Prudential Securities Incorporated, One New York
Plaza, New York, New York, on or about September , 1997.
PRUDENTIAL SECURITIES INCORPORATED
LEHMAN BROTHERS
RAUSCHER PIERCE REFSNES, INC.
SIMMONS & COMPANY
INTERNATIONAL
September , 1997
<PAGE> 3
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES
OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements included or incorporated in
this Prospectus. Unless the context otherwise requires, references in this
Prospectus to "UTI" or the "Company" shall mean UTI Energy Corp. and its
subsidiaries. Unless otherwise noted herein, the information contained in this
Prospectus assumes the Underwriters' over-allotment options will not be
exercised and gives effect to the Company's three-for-one stock split effected
on September 5, 1997.
THE COMPANY
UTI is a leading provider of onshore contract drilling services to
exploration and production companies and operates one of the largest land
drilling rig fleets in the United States. The Company's drilling operations
currently are concentrated in the prolific oil and natural gas producing basins
of Oklahoma, Texas and the Gulf Coast. The Company's rig fleet currently
consists of 89 land drilling rigs that are well suited to the requirements of
its markets. The Company also provides drilling and pressure pumping services in
the Appalachian Basin.
Beginning in 1995, the Company made a strategic decision to focus its
efforts on the expansion of its land drilling operations to take advantage of
improving market conditions and of the benefits arising from a consolidation in
the land drilling industry. To effect this strategy, the Company embarked on an
acquisition program aimed at expanding the Company's presence in select oil and
gas producing regions in the United States. Since 1995, the Company has more
than tripled the size of its rig fleet through acquisitions that have improved
its drilling capabilities, diversified its operations geographically and
expanded its market share in its core areas of operations. These acquisitions
also have provided the Company with significant operational leverage through its
75 currently marketed and 14 stacked rigs, a large inventory of drilling
equipment and approximately 250,000 feet of spare drill pipe. The Company
estimates that its stacked rigs could be placed in service at an average capital
cost of approximately $250,000 per rig.
The Company's drilling operations are managed on a regional basis through
local operating units and by managers with expertise and knowledge of regional
drilling conditions and needs. These units are supported by centralized
management responsible for the allocation and sharing of equipment, supplies and
personnel and the establishment of bidding parameters. The Company believes that
this organizational structure provides it with an important competitive
advantage in both operations and acquisitions in the fragmented land drilling
market.
Since 1994, the Company's financial results, including revenues, net income
and earnings from continuing operations before interest, other income, taxes,
depreciation and amortization ("EBITDA"), have increased substantially as a
result of its acquisitions, improved market conditions and higher margins
associated with increased day and contract rates. Revenues have grown from $36.3
million for the year ended December 31, 1994 to $97.3 million for the year ended
December 31, 1996. Over the same period, net income and EBITDA have grown from
$1.1 million to $4.9 million and from $3.5 million to $11.3 million,
respectively. For the six months ended June 30, 1997, the Company's revenues,
net income and EBITDA were $76.8 million, $3.6 million and $11.2 million,
respectively. In addition, the number of wells drilled by the Company has
increased from 287 in 1994 to 625 in 1996 and 403 for the first six months of
1997.
INDUSTRY CONDITIONS
Industry conditions in the United States land drilling market have improved
significantly over the last two years, which has resulted in improved financial
performance and increased industry and company-wide rig utilization and contract
rates. The market improvements have resulted from a number of factors, including
a consolidation of existing drilling equipment, an increase in domestic
exploration and development drilling activity, the mobilization of rigs to
international markets and the use of components from stacked rigs to refurbish
other rigs. While the improved market conditions have led to increasing contract
rates on a daily and footage basis in the Company's markets, the Company does
not believe that such rates have reached levels
3
<PAGE> 5
that justify the construction of new rigs. Further, shortages of qualified
personnel to staff stacked rigs that are placed into operation have limited the
number of rigs that may be returned to the market.
The number of available land rigs in the United States has declined from
approximately 4,700 rigs in 1981 to less than 1,500 in 1997. During the period
from 1988 to 1996, the number of drilling contractors also has declined from
approximately 600 to 290, with the top four companies, including the Company,
currently owning approximately 42% of the available land rigs in the United
States. In 1996, approximately 33% of the footage drilled in the United States
was drilled by only ten contractors, down from 25 contractors in 1993. Increased
land drilling activity is reflective of improvements in exploration and
development technologies, in particular the greater use of 3-D seismic data and
horizontal drilling. These technological advancements have increased drilling
success rates, lowered finding costs and increased well production rates, which
in turn have allowed producers to conduct more consistent and active drilling
programs, even in periods of lower oil and natural gas prices.
BUSINESS STRATEGY
The Company's strategy is to continue to be one of the leading
consolidators in the industry and to take advantage of improving market
conditions and the benefits of consolidation. The Company also intends to expand
its operations through the redeployment of equipment among the Company's
existing regional operations. Key aspects of the Company's business strategy
include:
Acquisitions and Consolidations. The Company seeks acquisitions of
companies with existing operations, established reputations for quality
operations and equipment that can be assimilated into the Company's operations.
These acquisitions are intended to supplement the Company's existing operations
by providing additional equipment, experienced employees, higher market share
and improved operating leverage.
Decentralized Operating Structure. The Company maintains a decentralized
operating structure with regional managers who are responsible for the
day-to-day operations and customer relations in their areas. The Company
believes that expansion of market share in its core operating areas and its
regional operating structure provide for cost savings and efficiencies.
Diversified Drilling Operations. The Company seeks to achieve a diversified
mix of drilling equipment that is well suited to meet its customers' regional
demands for rigs. The Company's rig fleet has depth capabilities ranging from
5,000 to 25,000 feet and is located in the prolific oil and natural gas
producing basins of Oklahoma, Texas and the Gulf Coast.
Large Inventory of Available Equipment. The Company seeks operational
leverage through the ownership of available equipment that can be utilized when
needed in a cost effective manner. Rigs, drill pipe and other equipment are
allocated among regional drilling units based on the needs and profitability of
the units.
Disciplined Pricing Approach. The Company maintains a disciplined approach
to bidding on drilling contracts, with a focus on profitability rather than on
the maximization of rig utilization.
RECENT ACQUISITIONS
J.S.M. & Associates, Inc. On September 11, 1997, the Company acquired
J.S.M. & Associates, Inc. ("JSM"), a West Texas land drilling contractor, for
618,748 shares of Common Stock (including 61,874 escrow shares to be issued
following a contractual post-closing adjustment period) and $2.6 million in
cash, subject to adjustment. The acquisition provided the Company with seven
actively marketed and fully manned high-quality land drilling rigs having depth
capabilities ranging from 10,000 to 14,000 feet. The acquisition also provided
the Company with an additional office and warehouse in Odessa, Texas, various
spare equipment and supplies and $950,000 in net working capital. The JSM
acquisition makes the Company one of the two largest land drilling contractors
in the Permian Basin with a rig fleet of 33 rigs.
Southland Drilling Company. In April 1997, the Company completed the
acquisition of the contract drilling assets of Southland Drilling Company, Ltd.
("Southland") for $27.1 million in cash and warrants to purchase 300,000 shares
of Common Stock at $16.00 per share. The acquisition provided eight actively
4
<PAGE> 6
marketed high-quality land drilling rigs having depth capabilities ranging from
12,000 feet to 16,000 feet and experienced rig crews. During 1996, these eight
rigs operated at an average utilization rate of approximately 90%. The Southland
acquisition provided the Company with an operating base in South Texas and
expanded the Company's presence in the South Texas and Gulf Coast markets.
Quarles Drilling Corporation. In January 1997, the Company completed the
acquisition of the contract drilling assets of Quarles Drilling Corporation
("Quarles") for $8.1 million in cash and 733,779 shares of Common Stock having a
value at the time of $8.1 million. The assets acquired from Quarles consisted of
nine actively marketed high-quality land drilling rigs, including three electric
deep drilling rigs. This acquisition expanded the Company's operations in
Oklahoma and East Texas and allowed the Company to enter the Texas Gulf Coast
market with the electric deep drilling rigs.
Viersen and Cochran Drilling Company. In August 1996, the Company completed
the acquisition of Viersen and Cochran Drilling Company ("Viersen") for
approximately $6.0 million in cash, a two-year $8.0 million note and warrants to
purchase 600,000 shares of Common Stock at $5.00 per share. Viersen's assets
consisted of 13 high-quality land drilling rigs, two of which were electric deep
drilling rigs, over 500,000 feet of spare drill pipe, over 800 drill collars and
other spare drilling equipment. Since the Viersen acquisition, the Company has
redeployed eight of the Viersen rigs into the Company's Texas and Oklahoma
operations and is utilizing the acquired drill pipe and related drilling
equipment throughout its operations as needed.
FWA Drilling Company. In November 1995, the Company completed the
acquisition of FWA Drilling Company ("FWA") for $14.0 million ($12.9 million net
of working capital). The FWA acquisition added 29 land drilling rigs to the
Company's fleet and expanded the Company's operations into the East and West
Texas markets where it had previously not been operating.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company.............. 1,575,000 shares
Common Stock Offered by the Selling
Stockholders................................... 4,340,500 shares(1)
Total.................................. 5,915,500 shares
Common Stock to be Outstanding after the
Offering....................................... 15,956,515 shares(2)
Use of Proceeds.................................. Net proceeds to the Company will be used for
repayment of debt and for general corporate
purposes. See "Use of Proceeds".
American Stock Exchange Symbol................... UTI
</TABLE>
- ---------------
(1) The Company will receive approximately $12.5 million of the net proceeds
from the sale of the shares by the Selling Stockholders from the exercise of
warrants relating to 1,425,000 of the shares being offered by them.
(2) Includes 1,425,000 shares to be issued upon exercise of warrants to purchase
shares that are being sold by Selling Stockholders in the Offering and
61,874 escrow shares issuable to the prior JSM shareholders. Does not
include an aggregate of 1,388,850 shares reserved for issuance for
outstanding options pursuant to the Company's various employee and director
stock option plans. Also does not include an aggregate of 1,035,000 shares
of Common Stock reserved for issuance pursuant to outstanding warrants that
are not being exercised in connection with this Offering.
RISK FACTORS
Investors should consider the material risk factors involved in connection
with an investment in the Common Stock and the impact to investors from various
events that could adversely affect the Company's business. See "Risk Factors".
5
<PAGE> 7
SUMMARY OPERATING DATA
The following table sets forth certain historical operating data for the
Company for each of the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------ SIX MONTHS ENDED
1994 1995 1996 JUNE 30, 1997
------ ------ ------ ----------------
<S> <C> <C> <C> <C>
Drilling rigs owned (at end of period)..... 27 55 65 82
Average number of owned rigs during
period................................... 27 31 59 77
Utilization rate(1)........................ 40% 39% 54% 69%
Number of wells drilled.................... 287 231 625 403
Average revenue per day(2)................. $4,915 $4,790 $5,390 $6,050
Operating days(3).......................... 3,931 4,405 11,912 9,571
</TABLE>
- ---------------
(1) Utilization rates are based on a 365-day year and are calculated by dividing
the number of rigs utilized by the total number of rigs in the Company's
drilling fleet, including stacked rigs. A rig is considered utilized when it
is being operated, mobilized, assembled or dismantled while under contract.
For the six months ended June 30, 1997, the utilization rate of the
Company's rigs, excluding stacked rigs, was 87%.
(2) Calculated as (i) total revenues from dayrate, footage and turnkey contracts
less well costs incidental to drilling footage and turnkey wells divided by
(ii) the aggregate number of operating days.
(3) An operating day is defined as a day during which a rig is being operated,
mobilized, assembled or dismantled while under contract.
6
<PAGE> 8
SUMMARY HISTORICAL AND PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain summary historical and pro forma
condensed consolidated financial data of the Company. The data derived from the
unaudited pro forma condensed consolidated statements of income give effect to
the acquisitions of Viersen, Quarles and Southland and this Offering and the
application of the net proceeds to the Company therefrom and the exercise of
warrants by the Selling Stockholders as if these transactions occurred on
January 1, 1996. The as adjusted balance sheet data gives effect to the sale of
shares of Common Stock offered by the Company in this Offering (assuming an
offering price of $36.25 per share), the issuance of shares of Common Stock upon
exercise of warrants to purchase shares of Common Stock that are being sold by
Selling Stockholders in this Offering, the application of the net proceeds to
the Company therefrom and the acquisition of JSM on September 11, 1997, as if
these transactions had occurred on June 30, 1997. The unaudited pro forma
information set forth below is not necessarily indicative of the results that
actually would have been achieved had such transactions been consummated as of
January 1, 1996, or that may be achieved in the future. This information should
be read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations, the Selected Consolidated Financial Data,
the Pro Forma Condensed Consolidated Statements of Income and the financial
statements and the related notes thereto of the Company, Viersen and the
acquired businesses of Quarles and Southland included elsewhere or incorporated
by reference herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------------------- ---------------------------
PRO PRO
FORMA FORMA
1994 1995 1996 1996 1996 1997 1997
------- ------- ------- -------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................................ $36,275 $40,124 $97,301 $148,914 $40,065 $76,808 $87,562
Cost of sales........................... 27,857 32,685 78,257 125,499 32,702 60,462 70,064
Selling, general and administrative
expenses.............................. 4,958 5,082 7,768 9,523 3,447 5,174 5,558
Depreciation and amortization........... 2,302 2,552 4,292 8,731 1,979 4,020 4,777
------- ------- ------- -------- ------- ------- -------
Operating income (loss)................. 1,158 (195) 6,984 5,161 1,937 7,152 7,163
Other income............................ 461 293 1,341 1,341 854 254 254
Interest expense........................ (260) (265) (1,148) (3,630) (432) (1,754) (2,148)
Income taxes (benefit).................. 293 (592) 2,324 919 678 2,031 1,897
------- ------- ------- -------- ------- ------- -------
Income from continuing operations....... 1,066 425 4,853 1,953 1,681 3,621 3,372
Income from discontinued operations
(less applicable income taxes)(1)..... 26 38 -- -- -- -- --
Loss on disposal of discontinued
operations (less applicable tax
benefit)(1)........................... -- (361) -- -- -- -- --
------- ------- ------- -------- ------- ------- -------
Net Income....................... $ 1,092 $ 102 $ 4,853 $ 1,953 $ 1,681 $ 3,621 $ 3,372
======= ======= ======= ======== ======= ======= =======
EARNINGS PER SHARE (FULLY DILUTED)(2):
Continuing operations................... $ 0.11 $ 0.04 $ 0.42 $ 0.13 $ 0.15 $ 0.26 $ 0.21
Discontinued operations................. -- -- -- -- -- -- --
Loss on disposal of discontinued
operations............................ -- (0.03) -- -- -- -- --
------- ------- ------- -------- ------- ------- -------
Earnings per common share(2).............. $ 0.11 $ 0.01 $ 0.42 $ 0.13 $ 0.15 $ 0.26 $ 0.21
======= ======= ======= ======== ======= ======= =======
Weighted average shares outstanding (fully
diluted)(2)............................. 9,732 9,899 11,559 15,198 10,888 13,683 16,288
======= ======= ======= ======== ======= ======= =======
OTHER DATA:
EBITDA(3)............................... $ 3,460 $ 2,357 $11,276 $ 13,892 $ 3,916 $11,172 $11,946
Capital expenditures.................... 1,343 1,910 4,311 2,074 6,767
Cash flow from operations............... 5,177 (508) 6,323 2,336 3,573
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets.............................................. $116,953 $164,809
Working capital........................................... 8,408 47,964
Long-term debt, less current portion and discount......... 48,520 23,180
Stockholders' equity...................................... 37,289 117,071
</TABLE>
- ---------------
(1) Attributable to the Company's oilfield distribution segment that was sold in
September 1995.
(2) Share and per share amounts have been restated to reflect the Company's
three-for-one stock split effected on September 5, 1997.
(3) EBITDA, or "earnings from continuing operations before interest expense,
other income, income taxes, depreciation and amortization", is a
supplemental financial measurement used by the Company in the evaluation of
its business and should not be construed as an alternative to income from
operations or to cash flow from operations and is presented solely as a
supplemental disclosure.
7
<PAGE> 9
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should carefully consider the following risk
factors, in addition to other information contained in this Prospectus in
connection with an investment in the Common Stock offered hereby.
This Prospectus, including the information incorporated by reference
herein, contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
including statements regarding, among other items, (i) the Company's growth
strategies, including its intention to make acquisitions, (ii) anticipated
trends in the Company's business and its future results of operations, (iii)
market conditions in the oil and gas industry, (iv) demand and pricing for the
Company's contract drilling services, (v) the ability of the Company to make and
integrate acquisitions and (vi) the outcome of litigation and the impact of
governmental regulation. These forward-looking statements are based largely on
the Company's expectations and are subject to a number of risks and
uncertainties, many of which are beyond the Company's control. Actual results
could differ materially from these forward-looking statements as a result of the
factors described in this Prospectus including, without limitation, the
information set forth below and under the headings "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business". In
light of these risks and uncertainties, there can be no assurance that actual
results will be as projected in the forward-looking statements.
DEPENDENCE ON VOLATILE OIL AND GAS INDUSTRY. Demand and prices for the
Company's services depend upon the level of activity in the onshore oil and gas
exploration and production industry in the United States, which in turn depends
upon numerous factors over which the Company has no control, including the level
of oil and gas prices, expectations about future oil and gas prices, the ability
of the Organization of Petroleum Exporting Countries ("OPEC") to set and
maintain production levels and prices, the cost of exploring for, producing and
delivering oil and gas, the level and price of foreign imports of oil and
natural gas, the discovery rate of new oil and gas reserves, available pipeline
and other oil and gas transportation capacity, worldwide weather conditions,
international political, military, regulatory and economic conditions and the
ability of oil and gas companies to raise capital. Domestic exploration activity
also has been particularly affected by an increase in the exploration and demand
for natural gas. The level of drilling activity in the onshore oil and gas
exploration and production industry in the United States has been volatile and
no assurance can be given that current levels of oil and gas exploration
activities in the Company's markets will continue or that demand for the
Company's services will correspond to the level of activity in the industry
generally. Further, any material changes in the demand for or supply of natural
gas could materially impact the demand for the Company's services. Prices for
oil and gas are expected to continue to be volatile and to affect the demand for
and pricing of the Company's services. A material decline in oil or gas prices
or industry activity in the United States could have a material adverse effect
on the Company's results of operations and financial condition.
MARKET CONDITIONS FOR LAND CONTRACT DRILLING SERVICES. The United States
land drilling industry has been adversely affected for many years by an
oversupply of drilling rigs and a large number of drilling contractors. These
conditions resulted in depressed dayrates and substantial competition for
available contracts. Although there recently have been improvements in the
United States land drilling market, future declines in demand, ongoing movement
or reactivation of onshore drilling rigs or new construction of drilling rigs
could adversely affect rig utilization rates and pricing, even in an environment
of stronger oil and natural gas prices and increased drilling activity. The
Company cannot predict either the future level of demand for its contract
drilling services or future conditions in the land contract drilling services
industry. Any significant decrease in demand for, or the prices received for,
the Company's services could have a material adverse effect on the Company's
results of operations and financial condition.
AVAILABILITY AND ASSIMILATION OF ACQUISITIONS. The Company's growth has
been enhanced materially by strategic acquisitions that have substantially
increased the Company's drilling rig fleet. While the Company believes that the
land drilling industry is highly fragmented and that significant acquisition
opportunities are available, there can be no assurance that suitable acquisition
candidates can be found, and the Company faces increased competition from other
companies for available acquisition opportunities. If the prices paid by
8
<PAGE> 10
buyers of drilling rigs continue to rise, the Company may find fewer acceptable
acquisition opportunities. The Company may elect or be required to incur
substantial indebtedness to finance future acquisitions and also may issue
equity securities or convertible securities in connection with such
acquisitions. Additional debt service requirements could represent a significant
burden on the Company's results of operations and financial condition, and the
issuance of additional equity or convertible securities could result in dilution
to stockholders. In addition, there can be no assurance that the Company will
successfully integrate the operations and assets of any future acquisition with
its own, that the Company's management will be able to manage effectively the
growth and increased size of the Company or that the Company will be successful
in deploying idle or stacked rigs acquired by it or in maintaining the crews and
market share attributable to operable drilling rigs acquired by the Company. Any
failure by the Company to successfully effect and implement its acquisition
strategy could have a material adverse effect on the Company's future results of
operations and financial condition. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".
COMPETITION. The contract drilling, workover and well servicing industry is
a highly-fragmented, intensely competitive and cyclical business. Since 1982,
the contract drilling business has been severely impacted by the decline and
continued instability in the prices of oil and natural gas. Though these
depressed economic conditions have resulted in a consolidation of the number of
competitors and the reduction of the number of rigs available, the supply of
available rigs, particularly in the domestic land markets, still exceeds the
demand for those rigs. This excess capacity in the industry has resulted in
substantial competition. Competition for services in a particular market is
based on price, location, type and condition of available equipment and quality
of service. A number of large and small contractors provide competition for
drilling contracts in all areas of the Company's business. Although no single
drilling competitor operates in all such areas, certain competitors are present
in more than one of those areas and drilling rigs are mobile and can be moved
from one region to another in response to increased demand. Some of the
Company's competitors have greater financial resources than the Company, which
may enable them to better withstand industry downturns, to compete more
effectively on the basis of price, to acquire existing rigs or to build new
rigs. See "Business -- Competition and Seasonality".
LABOR SHORTAGES. Increases in domestic drilling demand since mid-1995 and
increases in contract drilling activity have resulted in a shortage in many
areas of qualified drilling rig personnel in the industry. These shortages make
it more difficult for the Company and other contractors to return stacked rigs
to the market and to retain crews. If the Company is unable to attract and
retain sufficient qualified personnel, its ability to market and operate its
active drilling rigs and return its 14 currently stacked rigs to the market will
be restricted, which could have a material adverse effect on the Company's
results of operations. Further, wage rates of qualified rig crews have begun to
rise in the land drilling industry in response to the increasing number of
active rigs in service, which could ultimately have the effect of reducing the
Company's operating margins and results of operations. See
"Business -- Employees".
RISK ASSOCIATED WITH FOOTAGE AND TURNKEY CONTRACTS. The Company performs
drilling services pursuant to footage and turnkey drilling contracts under which
the Company agrees to drill a well to a specified depth for a fixed price. As of
September 1, 1997, the Company had 58% of its operating rigs under footage or
turnkey contracts. Most of the Company's footage contracts are for shallow wells
in West Texas that can be drilled in less than 15 days. Under such contracts,
the Company is not entitled to payment unless the well is drilled to the
specified depth, and the Company must bear the costs of performing drilling
services until the well has been drilled. Accordingly, the Company typically
will invest working capital in footage and turnkey projects prior to receiving
payment for its services. In addition, profitability of the contract is
dependent upon keeping expenses within the estimates used by the Company in
determining the contract price and completing the contracts on schedule. Turnkey
and footage contracts offer the possibility of greater profits than conventional
dayrate contracts, but also entail more financial risk. The risks associated
with a turnkey or footage contract are greater than on a well drilled on a
dayrate basis because in a turnkey or footage contract the contractor assumes
most of the risks associated with drilling operations generally assumed by the
operator in a dayrate contract, including risk of blowout, loss of hole, stuck
drill string, machinery breakdowns, abnormal drilling conditions and risks
associated with subcontractors' services, supplies and personnel. There
9
<PAGE> 11
can be no assurance that the Company will not incur losses on turnkey and
footage contracts in the future. See "Business -- Contract Drilling Services".
OPERATING HAZARDS AND UNINSURED RISKS. The Company's drilling operations
and fleet are subject to the many hazards inherent in the onshore drilling
industry, such as blowouts, explosions, cratering, well fires and spills. These
hazards can result in personal injury and loss of life, severe damage to or
destruction of property and equipment, pollution or environmental damage and
suspension of operations. The Company maintains insurance protection as it deems
appropriate. Such insurance coverage, however, may not in all situations provide
sufficient funds to protect the Company from all liabilities that could result
from its operations, and claims will be subject to various retentions and
deductibles. The Company generally seeks to obtain indemnity agreements whenever
possible from the Company's customers requiring its customers to hold the
Company harmless in the event of loss of production or reservoir damage. Even
when obtained, however, contractual indemnification may not be supported by
adequate insurance maintained by the customer. There can be no assurance that
the Company's insurance or contractual indemnity protection will be sufficient
or effective under all circumstances or against all hazards to which the Company
may be subject. The occurrence of a significant event not fully insured or
indemnified against or the failure of a customer to meet its indemnification
obligations could have a material adverse effect on the Company's results of
operations and financial condition. Moreover, no assurance can be given that the
Company will be able to maintain insurance in the future at rates it considers
reasonable. See "Business -- Operating Risks and Insurance".
SHORTAGE OF DRILL PIPE IN THE CONTRACT DRILLING INDUSTRY. There is
currently a growing shortage of drill pipe in the contract drilling industry in
the United States. This shortage has caused the price of drill pipe to increase
significantly and has required orders for new drill pipe to be placed up to nine
to 12 months in advance of expected use. The Company currently has an inventory
of approximately 250,000 feet of spare drill pipe, which the Company believes is
sufficient to supply its current fleet for the next two years based upon the
Company's current size and level of operations. The Company has also benefited
from the ownership and availability of this low cost drill pipe through lower
depreciation and operating expenses. There can be no assurance, however, that
any continued expansion caused by the Company's implementation of its growth
strategy will not require the Company to increase its capital expenditures with
respect to drill pipe and other equipment. Any significant delays in the Company
obtaining drill pipe, or the inability of the Company to acquire drill pipe at
prices that can be fully passed on to the customer through higher prices, could
have a material adverse effect on the Company's results of operations and
financial condition. See "Business -- Contract Drilling Services -- Drilling
Rigs and Other Contract Drilling Assets".
ENVIRONMENTAL RISKS. The Company is subject to numerous domestic
governmental regulations that relate directly or indirectly to its operations,
including certain regulations controlling the discharge of materials into the
environment, requiring removal and cleanup under certain circumstances, or
otherwise relating to the protection of the environment. For example, the
Company may be liable for damages and for the cost of removing oil spills for
which it is held responsible and for which it is not insured or contractually
indemnified. Laws and regulations protecting the environment have become more
stringent in recent years and may in certain circumstances impose "strict
liability" and render a company liable for environmental damage without regard
to negligence or fault on the part of such company. Such laws and regulations
may expose the Company to liability for the conduct of, or conditions caused by,
others, or for acts of the Company that were in compliance with all applicable
laws at the time such acts were performed. The application of these requirements
or the adoption of new requirements could have a material adverse effect on the
Company.
While the Company has generally been able to obtain some degree of
contractual indemnification from its customers in most of its dayrate drilling
contracts against pollution and environmental damages, there can be no assurance
that such indemnification will be enforceable in all instances, that the
customer will be financially able in all cases to comply with its indemnity
obligations or that the Company will be able to obtain such indemnification
agreements in the future. No such indemnification is typically available for
footage or turnkey contracts.
The Company also maintains insurance coverage against certain environmental
liabilities, including pollution caused by sudden and accidental oil spills.
There can be no assurance that this insurance will
10
<PAGE> 12
continue to be available or carried by the Company or, if available and carried,
will be adequate to cover the Company's liability in all circumstances. See
"Business -- Environmental Regulation".
RELATIONSHIP WITH REMY. Remy Capital Partners III, L.P. ("Remy"), a Selling
Stockholder, currently beneficially owns 5,383,650 shares of Common Stock. Since
Remy's investment in the Company in early 1995, representatives of Remy
Investors and Consultants, Incorporated ("Remy Consultants"), the sole general
partner of Remy, have assisted the Company in pursuing and effecting the
Company's acquisition and business strategies. In addition, representatives of
Remy Consultants, including Mark Siegel, Chairman of the Board of Directors of
the Company, have provided the Company with various financial and management
assistance. Remy Consultants and its representatives have generally been
compensated by the Company for their assistance and services through the grant
of options or warrants. In December 1995, warrants to purchase an aggregate of
360,000 shares of Common Stock at the then market price were granted to Remy and
its affiliates in consideration for the services provided to the Company by them
in 1995. These warrants will be used in connection with the Underwriters'
over-allotment options. Similarly, in January 1997 and July 1997 options to
purchase an aggregate of 180,000 shares and 165,000 shares, respectively, of
Common Stock at the then market price were granted to representatives of Remy
Consultants in their capacities as employees of the Company. It is anticipated
that options and similar stock-based and other compensation may be paid by the
Company to Remy Consultants and its representatives in the future for services
provided by them on behalf of the Company. Although it currently is anticipated
that Remy Consultants and its representatives will continue to be active in the
formulation and implementation of the acquisition and management strategy of the
Company after this Offering, there can be no assurance in this regard or as to
the level of such participation in the future.
After this Offering, Remy, Remy Consultants and their representatives will
own approximately 25% of the outstanding Common Stock (24% if the over-allotment
options are exercised in full) and options and warrants that, if exercised,
would result in it and its affiliates owning 31% of the Common Stock. While Remy
will not have absolute control following this Offering to determine all matters
to come before the stockholders of the Company, it and its affiliates will have
significant influence over the Company's management. See "Principal and Selling
Stockholders".
SHARES ELIGIBLE FOR FUTURE SALE. At September 12, 1997, the Company had
outstanding options and warrants to purchase an aggregate of 3,848,850 shares of
Common Stock at prices ranging from $1.77 to $20.00 per share, of which warrants
to purchase an aggregate of 1,425,000 shares of Common Stock at an average
exercise price of $8.69 per share will be exercised in connection with this
Offering. In addition, following this Offering, Remy and various other
stockholders will have registration rights with respect to 3,630,262 and
1,510,211 shares of Common Stock, respectively. The Company, the Company's
directors and officers and the Selling Stockholders have agreed with the
representatives of the Underwriters not to directly or indirectly offer, sell,
offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale, contract
of sale, pledge, grant of any option to purchase or other sale or disposition)
of any shares of Common Stock or other capital stock of the Company or any
securities convertible into or exchangeable for any shares of Common Stock or
other capital stock of the Company, for a period of 90 days from the date of
this Prospectus without the prior written consent of Prudential Securities
Incorporated on behalf of the Underwriters, except that such agreements do not
prevent the Company from granting additional options under any employee benefit
plan or additional shares or rights to acquire shares in connection with
acquisitions of businesses or assets or other business combinations, provided
that the Company will not grant any demand registration rights covering any
shares issued in connection with such an acquisition or other business
combination that are exercisable prior to 90 days following the date of this
Prospectus. Prudential Securities Incorporated may, in its sole discretion, at
any time and without notice, release all or any portion of the shares of Common
Stock subject to such agreements. Sales of substantial amounts of Common Stock
into the public market, or a perception that such sales could occur, and the
existence of options or warrants to purchase shares of Common Stock at prices
that may be below the then current market price of the Common Stock could
adversely affect the market price of the Common Stock and could impair the
Company's ability to raise capital through the sale of its equity securities.
See "Principal and Selling Stockholders", "Description of Capital
Stock -- Registration Rights", "Shares Eligible for Future Sale" and
"Underwriting".
11
<PAGE> 13
ABSENCE OF DIVIDENDS. The Company has not declared or paid any cash
dividends on the Common Stock and currently anticipates that, for the
foreseeable future, any earnings will be retained for the development of the
Company's business. Accordingly, no cash dividends are contemplated to be
declared or paid on the Common Stock. In addition, the Company's existing credit
arrangements with its bank prohibit the payment of cash dividends and the
Company's 12% Senior Subordinated Notes due 2001 (the "Subordinated Notes") also
limit cash dividends and restricted payments. See "Price Range of Common Stock
and Dividend Policy".
12
<PAGE> 14
USE OF PROCEEDS
The net proceeds to the Company from the sale of Common Stock being offered
by the Company hereby, assuming an offering price of $36.25 per share, are
estimated to be approximately $54.2 million ($68.5 million if the Underwriters'
over-allotment options are exercised in full). The Company will not receive any
proceeds from the sale of Common Stock offered by the Selling Stockholders in
this Offering. The Company, however, will receive $12.5 million from the
exercise of warrants held by the Selling Stockholders in connection with the
sale of Common Stock offered by them ($13.2 million if the Underwriters'
over-allotment options are exercised in full), resulting in total net proceeds
to the Company of $66.7 million ($81.7 million if the Underwriters'
over-allotment options are exercised in full).
The Company will use approximately $22.9 million of the total estimated net
proceeds to the Company from this Offering, including proceeds from the exercise
of warrants held by the Selling Stockholders, to repay in full the outstanding
principal and accrued interest under the Company's Loan and Security Agreement
with Mellon Bank, N.A. ("Mellon") dated April 11, 1997 (the "Term Loan") and
approximately $7.0 million to repay in full the outstanding borrowings and
accrued interest on its Amended and Restated Loan and Security Agreement with
Mellon dated December 7, 1995, as amended (the "Working Capital Line").
Indebtedness under the Term Loan was incurred by the Company to partially
finance the Southland acquisition and to repay then-existing indebtedness
incurred in connection with the FWA, Viersen and Quarles acquisitions.
Indebtedness under the Term Loan bears annual interest at Mellon's prime rate
(8.5% at August 30, 1997) and is required to be repaid in monthly installments
through June 1, 2000. The Company also is required to prepay the Term Loan
without penalty utilizing the net proceeds to the Company from any public
offering of Common Stock, including this Offering. The Working Capital Line
provides for a revolving line of credit up to $12 million, subject to collateral
requirements. Interest under the Working Capital Line is calculated at the lower
of Mellon's prime rate or other rate options available at the time of borrowing,
depending on the Company's financial performance. Current borrowings under the
Working Capital Line bear interest at an annual rate of 8.5%. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".
The remaining $36.8 million of the total estimated net proceeds to the
Company from this Offering will be utilized by the Company for general corporate
purposes, including to fund the expansion of the Company's business through
selective acquisitions of businesses and assets. Pending such application, such
funds will be invested in short-term, interest-bearing, investment-grade
securities or will be utilized by the Company to repay all or a portion of the
Subordinated Notes, subject to the waiver of certain restrictions on their
prepayment. If the Subordinated Notes are prepaid, the Company will have no
outstanding long-term debt. The Company believes that it has significant
borrowing capacity and currently intends to utilize such capacity to facilitate
future acquisitions.
13
<PAGE> 15
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is traded on the AMEX under the symbol "UTI". The
following table sets forth, for the periods indicated, the high and low sales
prices per share for the Common Stock as reported on the AMEX adjusted for the
Company's three-for-one stock split effected on September 5, 1997.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Year ended December 31, 1995
First quarter............................................. $ 1.60 $ 1.17
Second quarter............................................ 1.75 1.46
Third quarter............................................. 1.71 1.50
Fourth quarter............................................ 1.93 1.33
Year ended December 31, 1996
First quarter............................................. $ 2.38 $ 1.75
Second quarter............................................ 4.83 2.29
Third quarter............................................. 5.42 3.79
Fourth quarter............................................ 12.96 5.25
Year ending December 31, 1997
First quarter............................................. $12.29 $ 6.83
Second quarter............................................ 15.33 8.46
Third quarter (through September 12, 1997)................ 38.00 15.21
</TABLE>
The last reported sale price of the Common Stock on September 12, 1997, as
reported on the AMEX, was $36.25. As of September 12, 1997, the Company had
approximately 1,052 stockholders of record.
The Company has not declared or paid any cash dividends on the Common Stock
and currently anticipates that, for the foreseeable future, any earnings will be
retained for the development of the Company's business. Accordingly, no cash
dividends are expected to be declared or paid on the Common Stock for the
foreseeable future. In addition, the terms of the Term Loan and Working Capital
Line prohibit the Company from paying cash dividends on the Common Stock, and
the Subordinated Notes restrict the ability of the Company to pay cash dividends
through limitations on dividends and restricted payments. The declaration of all
dividends is at the discretion of the Company's Board of Directors.
14
<PAGE> 16
CAPITALIZATION
The following table sets forth the historical consolidated capitalization
of the Company at June 30, 1997, and as adjusted to reflect the issuance of the
Common Stock offered by the Company hereby (assuming an offering price of $36.25
per share), the application of the net proceeds to the Company therefrom and the
exercise of warrants to purchase 1,425,000 shares of Common Stock by the Selling
Stockholders in connection with the Offering and the acquisition of JSM on
September 11, 1997, for 618,748 shares of Common Stock and approximately $2.6
million in cash as if such transactions occurred on June 30, 1997. This table
should be read in conjunction with the Consolidated Financial Statements of the
Company, including the notes thereto, contained elsewhere or incorporated by
reference in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 49 $ 33,555
======= ========
Short-term borrowings and current portion of long-term
debt...................................................... 5,226 126
Long-term debt, less current portion........................ 48,520 23,180
Stockholders' equity:
Common stock, $.001 par value, 50,000,000 shares
authorized; 12,110,187 shares issued and outstanding
(15,728,935 shares as adjusted)(1)(2).................. 12 21
Capital in excess of par(2)............................... 28,816 108,862
Retained earnings......................................... 8,537 8,264
Restricted stock plan unearned compensation............... (76) (76)
------- --------
Total stockholders' equity........................ 37,289 117,071
------- --------
Total capitalization.............................. $91,035 $140,377
======= ========
</TABLE>
- ---------------
(1) Does not include an aggregate of 1,388,850 shares reserved for issuance
pursuant to outstanding options under the Company's various employee and
director stock option plans. The historical and as adjusted also exclude the
aggregate of 2,460,000 and 1,035,000 shares of Common Stock, respectively,
reserved for issuance for outstanding warrants.
(2) Adjusted to give effect to the Company's three-for-one stock split effected
on September 5, 1997.
15
<PAGE> 17
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected historical consolidated financial information for
each of the years in the three-year period ended December 31, 1996, and the
unaudited consolidated financial information for the six-month periods ended
June 30, 1996 and 1997, are derived from the Company's audited and unaudited
Consolidated Financial Statements included elsewhere herein. The statement of
operations data for the six months ended June 30, 1997 is not necessarily
indicative of results that may be expected for the year ending December 31,
1997. The consolidated financial information for the six-month periods ended
June 30, 1996 and 1997 are derived from unaudited financial statements, which,
in the opinion of management, include all adjustments that are only of a normal
recurring nature and necessary for a fair presentation. The selected financial
data set forth in the table below should be read in conjunction with the
financial statements and related notes thereto of the Company, Viersen and the
acquired businesses of Quarles and Southland included elsewhere or incorporated
by reference herein and "Management's Discussion and Analysis of Financial
Condition and Results of Operations". The historical financial statements of the
Company included herein have been restated to reflect the Company's
three-for-one stock split effected on September 5, 1997, and supersede the
Company's financial statements included in its Annual Report on Form 10-K for
the year ended December 31, 1996, and Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997, that have been incorporated herein by reference.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................................................. $36,275 $40,124 $97,301 $40,065 $76,808
Cost of sales............................................ 27,857 32,685 78,257 32,702 60,462
Selling, general and administrative expenses............. 4,958 5,082 7,768 3,447 5,174
Depreciation and amortization............................ 2,302 2,552 4,292 1,979 4,020
------- ------- ------- ------- -------
Operating income (loss).................................. 1,158 (195) 6,984 1,937 7,152
Other income............................................. 461 293 1,341 854 254
Interest expense......................................... (260) (265) (1,148) (432) (1,754)
Income taxes (benefit)................................... 293 (592) 2,324 678 2,031
------- ------- ------- ------- -------
Income from continuing operations........................ 1,066 425 4,853 1,681 3,621
Income from discontinued operations (less applicable
income taxes)(1)....................................... 26 38 -- -- --
Loss on disposal of discontinued operations (less
applicable tax benefit)(1)............................. -- (361) -- -- --
------- ------- ------- ------- -------
Net income........................................ $ 1,092 $ 102 $ 4,853 $ 1,681 $ 3,621
======= ======= ======= ======= =======
EARNINGS PER SHARE (FULLY DILUTED):
Continuing operations.................................... $ 0.11 $ 0.04 $ 0.42 $ 0.15 $ 0.26
Discontinued operations.................................. -- -- -- -- --
Loss on disposal of discontinued operations.............. -- (0.03) -- -- --
------- ------- ------- ------- -------
Earnings per common share(2)............................... $ 0.11 $ 0.01 $ 0.42 $ 0.15 $ 0.26
======= ======= ======= ======= =======
Weighted average shares outstanding (fully diluted)(2)..... 9,732 9,899 11,559 10,888 13,683
======= ======= ======= ======= =======
OTHER DATA:
EBITDA(3)................................................ $ 3,460 $ 2,357 $11,276 $ 3,916 $11,172
Capital expenditures..................................... 1,343 1,910 4,311 2,074 6,767
Cash flow from operations................................ 5,177 (508) 6,323 2,336 3,573
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------------------- --------
1994 1995 1996 1997
------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.............................................. $22,474 $33,990 $61,870 $116,953
Long-term debt, less current portion...................... 2,211 8,701 14,658 48,520
Working capital........................................... 8,179 5,427 5,761 8,408
Stockholders' equity...................................... 13,745 14,990 22,696 37,289
</TABLE>
- ---------------
(1) Attributable to the Company's oilfield distribution segment that was sold in
September 1995.
(2) Share and per share amounts have been restated to reflect the Company's
three-for-one stock split effected on September 5, 1997.
(3) EBITDA, or "earnings from continuing operations before interest expense,
other income, income taxes, depreciation and amortization", is a
supplemental financial measurement used by the Company in the evaluation of
its business and should not be construed as an alternative to income from
operations or to cash flow from operations and is presented solely as a
supplemental disclosure.
16
<PAGE> 18
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
The following tables set forth the unaudited pro forma condensed
consolidated statements of income for the Company for the year ended December
31, 1996 and the six months ended June 30, 1997, after giving effect to the
Company's acquisition of Viersen and the contract drilling assets of Quarles and
Southland (collectively, the "Acquisitions") and this Offering. The pro forma
financial information assumes that the Acquisitions and this Offering occurred
on January 1, 1996. The Acquisitions were accounted for using the purchase
method of accounting. The pro forma information does not give effect to the
recent acquisition of JSM.
The following unaudited pro forma condensed consolidated statements of
income should be read in conjunction with the Consolidated Financial Statements
of the Company and the related notes thereto included elsewhere herein as well
as the audited balance sheets as of December 31, 1995 and 1994 and the related
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1995 of Viersen incorporated by
reference herein, the audited statement of net assets acquired as of December
31, 1996 and the historical statement of gross drilling contract revenues,
direct operating expenses and depreciation of the drilling operations of
Quarles, for the year ended December 31, 1996, incorporated by reference herein,
and the audited historical statement of net assets acquired as of April 11, 1997
and historical statement of revenues and direct and indirect operating expenses
(excluding depreciation) of the contract drilling operations of Southland for
the years ended December 31, 1996 and 1995, incorporated by reference herein.
The pro forma information is not necessarily indicative of the results that
might have occurred had the Acquisitions taken place at the beginning of the
period specified and is not intended to be a projection of future results.
17
<PAGE> 19
UTI ENERGY CORP.
PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(1) (2) PRO
UTI QUARLES SOUTHLAND FORMA PRO FORMA
AS AS AS ACQUISITION FOR OFFERING AS ADJUSTED
REPORTED REPORTED REPORTED ADJUSTMENTS ACQUISITIONS ADJUSTMENTS FOR OFFERING
---------- -------- --------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues........................... $ 76,808 $3,407 $7,347 $ -- $ 87,562 -- 87,562
Costs and Expenses
Cost of sales.................... 60,462 4,081 5,611 (90)A 70,064 -- 70,064
Selling, general and
administrative................. 5,174 -- 294 90A 5,558 -- 5,558
Depreciation and amortization.... 4,020 66 -- 691B 4,777 -- 4,777
---------- ------ ------ ------- ---------- ---------- ----------
69,656 4,147 5,905 691 80,399 -- 80,399
---------- ------ ------ ------- ---------- ---------- ----------
Operating Income (Loss)............ 7,152 (740) 1,442 (691) 7,163 -- 7,163
Other Income (Expense)
Interest expense................. (1,754) -- -- (1,077)C (2,831) 683F (2,148)
Other............................ 254 -- -- 254 -- 254
---------- ------ ------ ------- ---------- ---------- ----------
(1,500) -- -- (1,077) (2,577) 683 (1,894)
---------- ------ ------ ------- ---------- ---------- ----------
Income (Loss) Before Income
Taxes............................ 5,652 (740) 1,442 (1,768) 4,586 683 5,269
Income Taxes....................... 2,031 -- -- (380)D 1,651 246D 1,897
---------- ------ ------ ------- ---------- ---------- ----------
Net Income (Loss).................. $ 3,621 $ (740) $1,442 $(1,388) $ 2,935 437 3,372
========== ====== ====== ======= ========== ========== ==========
Earnings per common share
Primary.......................... $ 0.27 $ .22 .21
========== ========== ==========
Fully diluted.................... $ 0.26 $ .21 .21
========== ========== ==========
Average common shares outstanding
Primary.......................... 13,403,994 72,183E 13,476,177 2,729,385G 16,205,562
Fully diluted.................... 13,682,508 50,172E 13,732,680 2,555,316G 16,287,996
</TABLE>
- ---------------
(1) This Statement reflects the historical gross drilling contract revenues,
direct operating expenses, and depreciation directly related to the assets
acquired.
(2) This Statement reflects the historical revenues and direct and indirect
operating expenses directly related to the assets acquired (excluding
depreciation).
See accompanying notes to Pro Forma Condensed Consolidated Financial Statements.
18
<PAGE> 20
UTI ENERGY CORP.
PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME (UNAUDITED)
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO
FORMA
(1) (2) AS
UTI VIERSEN QUARLES SOUTHLAND PRO FORMA ADJUSTED
AS AS AS AS ACQUISITION FOR OFFERING FOR
REPORTED REPORTED REPORTED REPORTED ADJUSTMENTS ACQUISITIONS ADJUSTMENTS OFFERING
---------- -------- -------- --------- ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................. $ 97,301 $3,248 $24,228 $25,659 (1,522)A $ 148,914 -- $ 148,914
Costs and Expenses
Cost of sales........... 78,257 1,842 24,711 21,109 (420)B 125,499 -- 125,499
Selling, general and
administrative........ 7,768 747 -- 1,217 (209)B 9,523 -- 9,523
Depreciation and
amortization.......... 4,292 88 847 -- 3,504C 8,731 -- 8,731
---------- ------ ------- ------- -------- --------- --------- ----------
90,317 2,677 25,558 22,326 2,875 143,753 143,753
---------- ------ ------- ------- -------- --------- --------- ----------
Operating Income (Loss)... 6,984 571 (1,330) 3,333 (4,397) 5,161 5,161
Other Income (Expense)
Interest expense........ (1,148) -- -- -- (4,806)D (5,954) 2,324G (3,630)
Other................... 1,341 -- -- -- -- 1,341 1,341
---------- ------ ------- ------- -------- --------- --------- ----------
193 -- -- -- (4,806) (4,613) 2,324 (2,289)
---------- ------ ------- ------- -------- --------- --------- ----------
Income (Loss) Before
Income Taxes............ 7,177 571 (1,330) 3,333 (9,203) 548 2,324 2,872
Income Taxes.............. 2,324 -- -- -- (2,149)E 175 774E 919
---------- ------ ------- ------- -------- --------- --------- ----------
Net Income (Loss)......... $ 4,853 $ 571 $(1,330) $ 3,333 (7,054) $ 373 1,580 1,953
========== ====== ======= ======= ======== ========= ========= ==========
Earnings per common share
Primary................. $ 0.42 $ 0.03 .13
========== ========= ==========
Fully diluted........... $ 0.42 $ 0.03 .13
========== ========= ==========
Average common shares
outstanding
Primary................. 11,439,186 733,776F 12,172,962 2,936,181H 15,109,143
Fully diluted........... 11,559,492 768,474F 12,327,966 2,870,484H 15,198,450
</TABLE>
- ---------------
(1) This Statement reflects the historical gross drilling contract revenues,
direct operating expenses, and depreciation directly related to the assets
acquired.
(2) This Statement reflects the historical revenues and direct and indirect
operating expenses directly related to the assets acquired.
See accompanying notes to Pro Forma Condensed Consolidated Financial Statements.
19
<PAGE> 21
UTI ENERGY CORP.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Adjustments to Pro Forma Condensed Consolidated Statement of Income (Unaudited)
for the six months ended June 30, 1997.
(A) Eliminate selling, general and administrative expenses which the Company
believes will not be incurred on an ongoing basis. Selling, general and
administrative expenses directly related to the acquired assets are included
in the numbers as reported. The Company does not expect to incur any
incremental selling, general and administrative expenses as a result of the
Acquisitions. Additionally, costs and expenses related to selling activities
have been reclassified to conform to the Company's presentation.
(B) Adjust depreciation and amortization expense based upon the restated value
of the acquired property and equipment and goodwill.
(C) Increase interest expense resulting from acquisition debt.
(D) Adjust tax expense (benefit) at Company's marginal tax rate.
(E) The shares of Common Stock issued to Quarles effective January 27, 1997,
have been included in the average common shares outstanding for the Company
at June 30, 1997. The shares issued reflected in the Pro Forma Condensed
Consolidated Statement of Income assume the shares were issued effective
January 1, 1996.
(F) Eliminate interest expense related to debt retired from Offering proceeds.
(G) Issuance of shares of Common Stock pursuant to this Offering.
Adjustments to Pro Forma Condensed Consolidated Statement of Income (Unaudited)
for the year ended December 31, 1996.
(A) Eliminate gain on sale of assets.
(B) Eliminate selling, general and administrative expenses which the Company
believes will not be incurred on an ongoing basis. Selling, general and
administrative expenses directly related to the acquired assets are
included in the historical amounts as reported amounts. The Company does
not expect to incur any incremental selling, general and administrative
expenses as a result of the Acquisitions. Additionally, costs and expenses
related to selling activities have been reclassified to conform to the
Company's presentation.
(C) Adjust depreciation expense based upon the restated value of the acquired
property and equipment and goodwill.
(D) Increase interest expense resulting from acquisition debt offset by debt not
assumed.
(E) Adjust tax expense (benefit) at Company's marginal tax rate.
(F) The warrants issued in the Viersen Acquisition have been included in the
determination of average common shares outstanding for the Company at
December 31, 1996. Also includes stock issued pursuant to the Quarles
Acquisition and the dilutive effect of warrants issued in connection with
the 12% Subordinated Notes.
(G) Eliminate interest expense related to debt retired from Offering proceeds.
(H) Issuance of shares of Common Stock pursuant to this Offering.
20
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
UTI is a leading provider of contract drilling services in the United
States. The Company's drilling operations are currently concentrated in the
prolific oil and natural gas producing basins of Oklahoma, Texas and the Gulf
Coast. The Company's rig fleet currently consists of 89 land drilling rigs with
effective depth capabilities ranging from 5,000 to 25,000 feet. The Company's
contract drilling services are performed through various regional drilling units
and are marketed under the names Triad, FWA, Southland, Cougar, JSM and
International Petroleum Service Company ("IPSCO"). The Company also provides
drilling and pressure pumping services in the Appalachian Basin.
Beginning in 1995, the Company made a strategic decision to focus its
efforts on the expansion of its land drilling operations to take advantage of
improving market conditions and the benefits arising from consolidation in the
land drilling industry. To effect this strategy, the Company disposed of its
oilfield distribution business in September 1995 and immediately embarked on a
directed acquisition program aimed at expanding the Company's presence in select
oil and gas producing regions of the United States.
Since November 1995, the Company has acquired 66 rigs in five transactions:
(i) FWA was acquired in November 1995 for $12.9 million net of working capital,
(ii) Viersen was acquired in August 1996 for approximately $6.0 million cash, a
two-year $8.0 million note and warrants to purchase 600,000 shares of Common
Stock at $5.00 per share, (iii) the contract drilling assets of Quarles were
acquired in January 1997 for $8.1 million cash and shares of Common Stock having
a value at the time of $8.1 million, (iv) the contract drilling business of
Southland was acquired in April 1997 for $27.1 million in cash and warrants to
purchase 300,000 shares of Common Stock at $16.00 per share and (v) JSM was
acquired on September 11, 1997, for 618,748 shares of Common Stock and
approximately $2.6 million in cash. These acquisitions have resulted in the
Company realizing substantial growth in its revenues and income.
The Company's results for the six months ended June 30, 1997, and the year
ended December 31, 1996, also reflect a strong improvement in market conditions
in the United States land drilling markets resulting from an increase in demand
for drilling services and industry consolidation. Fleet utilization (based on
total rigs owned) increased to 69% for the six months ended June 30, 1997, from
54% and 39% for the years ended December 31, 1996 and 1995, respectively. Of the
Company's available rigs, fleet utilization for the six months ended June 30,
1997 was 87%. The Company continues to focus on streamlining operations and
reducing its cost structure, which has further increased operating margins and
profitability.
The Company currently expects that its land drilling operations will
continue to benefit from improved market conditions and the effects of its prior
acquisitions. The Company intends to continue its strategy of growth through
acquisitions of rigs and equipment that can be integrated into its fleet and
operations and through acquisitions of other drilling contractors that may
provide opportunities for expansion of the Company's markets and services.
RESULTS OF OPERATIONS
The Company views the number of rigs actively drilling in the United States
as a barometer of the overall strength of the domestic oilfield service
industry. Without giving effect to acquisitions, variations in revenues and
gross margins of the Company's core business generally follow the rig count
trend.
21
<PAGE> 23
The following table presents certain results of operations data for the
Company and the average United States rig count as reported by Baker Hughes
Incorporated for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------ --------------
1994 1995 1996 1996 1997
----- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C>
Average U.S. land rig count(1)............ 637 601 673 754 614
Number of owned rigs (at end of period)... 27 55 65 55 82
Average number of owned rigs during
period.................................. 27 31 59 55 77
Utilization rate(2)....................... 40% 39% 54% 49% 69%
Operating days(3)......................... 3,931 4,405 11,912 4,920 9,571
</TABLE>
- ---------------
(1) Baker Hughes Incorporated is an international oilfield service and equipment
company which for more than 20 years has conducted and published a weekly
census of active drilling rigs. Its active rig count is generally regarded
as an industry standard for measuring industry activity levels.
(2) Utilization rates are based on a 365-day year and are calculated by dividing
the number of rigs utilized by the total number of rigs in the Company's
drilling fleet, including stacked rigs. For the six months ended June 30,
1997, the utilization rate of the Company's rigs, excluding stacked rigs,
was 87%. A rig is considered utilized when it is being operated, mobilized,
assembled or dismantled while under contract.
(3) An operating day is defined as a day during which a rig is being operated,
mobilized, assembled or dismantled while under contract.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Revenue increased 92% to $76.8 million for the first six months of 1997
from $40.1 million for the first six months of 1996, primarily due to the
increase in demand for drilling services and growth in the Company's rig fleet.
The revenue increase of $36.7 million consisted of a $33.9 million increase in
contract drilling revenue and an increase of $2.6 million in pressure pumping
revenue. The Company's rig fleet was employed for 9,571 days during the first
six months of 1997, compared to 4,920 days in the corresponding period of 1996.
The Company completed 1,395 pressure pumping jobs during the six months ended
June 30, 1997, as compared to 1,130 jobs during the six months ended June 30,
1996, an increase of approximately 24%. Revenue increases also reflected
improvements in average dayrates and prices received for footage and turnkey
contracts.
Gross profit increased 120% to $16.3 million for the first six months of
1997 compared to $7.4 million for the same period in 1996, due to higher
revenues, increased prices and consolidation savings. Contract drilling gross
profit as a percentage of revenue was 19.9% for the first six months of 1997 and
17.5% for the first six months of 1996. Pressure pumping gross profit as a
percentage of revenue was 33.0% for the first six months of 1997 and 22.2% for
the first six months of 1996.
Depreciation and amortization expense increased $2.0 million primarily due
to the acquisitions of Viersen, Quarles, and Southland. Depreciation and
amortization expense will increase in future periods as a result of the
Company's acquisitions of Quarles, Southland and JSM.
Selling, general, and administrative expenses increased $1.7 million for
the first six months of 1997 compared to the first six months of 1996, primarily
due to the acquisitions of Viersen and the contract drilling assets of Quarles
and Southland and a related increase in the average number of rigs operating
during the period. As a percentage of revenues, selling, general, and
administrative expenses decreased to 6.7% from 8.6% during the first six months
of 1997 compared to the first six months of 1996.
Other income decreased $600,000 for the first six months of 1997 compared
to the first six months of 1996, primarily because the prior period included a
one-time payment of $671,000 that the Company received as a result of a
favorable resolution of a dispute with the United States government over mineral
rights owned by the Company in southeastern New Mexico.
22
<PAGE> 24
Interest expense increased $1.3 million for the first six months of 1997
compared to the first six months of 1996 primarily due to interest on the debt
associated with the Viersen and Quarles acquisitions. Average outstanding debt
during the first six months of 1997 was $37.4 million, compared to $10.7 million
for the first six months of 1996.
Net income for the first six months of 1997 was $3.6 million, compared to
$1.7 million for the first six months of 1996. This increase reflects the
improved revenues and gross profit resulting from the Company's growth and
improved market conditions.
COMPARISON OF YEARS ENDED 1996 AND 1995
During the year ended December 31, 1996, the Company experienced
significant growth in its income, revenues and operating margins. This growth
reflected the successful implementation of the Company's growth strategy as well
as improvements in market conditions in the industry and a continued emphasis on
increasing operating efficiencies.
The Company's revenues for the year ended December 31, 1996, increased by
$57.2 million, or 143%, to a record $97.3 million, compared to $40.1 million for
the year ended December 31, 1995. This substantial increase in revenues
reflected a $52.8 million increase in contract drilling revenue and a $3.8
million increase in pressure pumping revenue. Of the $52.8 million increase in
contract drilling revenue, $45.8 million was attributable to the FWA
acquisition, with the remainder attributable to higher dayrates and rig
utilization. The Company's rig fleet was employed for 11,912 days during the
year ended December 31, 1996, compared to 4,405 days during the year ended
December 31, 1995. The Company completed 2,999 pressure pumping jobs during the
year ended December 31, 1996, up from 2,544 jobs during the year ended December
31, 1995.
The Company's gross profit increased 156% to $19.0 million for the year
ended December 31, 1996, from $7.4 million for the year ended December 31, 1995.
Contract drilling gross profit as a percentage of sales was 16.5% for the year
ended December 31, 1996, up from 13.4% for the year ended December 31, 1995.
This increase in gross profit percentage was attributable to higher dayrates and
rates received for footage and turn-key contracts and rig utilization. Pressure
pumping gross profit as a percentage of revenue was 33% for the year ended
December 31, 1996, up from 30% for the year ended December 31, 1995.
The Company's depreciation and amortization expense for the year ended
December 31, 1996, increased $1.7 million from the year ended December 31, 1995,
due to the FWA acquisition and, to a lesser extent, the acquisition of Viersen.
Selling, general and administrative expenses for the year ended December
31, 1996, increased $2.7 million from the year ended December 31, 1995. This
increase was a result of the FWA acquisition and higher performance-based bonus
accruals. Selling, general and administrative expense as a percentage of
revenues, however, decreased from 12.7% to 8.0% for the year ended December 31,
1996, compared to the year ended December 31, 1995, as a result of increased
utilization and revenues.
Other income for the year ended December 31, 1996, increased $1.0 million
compared to the year ended December 31, 1995. This increase was primarily due to
a favorable resolution of a dispute with the United States government over
mineral rights owned by the Company in southeastern New Mexico.
Interest expense for the year ended December 31, 1996, increased $883,000
from the year ended December 31, 1995. The increase in interest expense was due
to interest on the debt associated with the Company's acquisitions of FWA and
Viersen.
Income from continuing operations was $4.9 million for the year ended
December 31, 1996, compared to $425,000 for the year ended December 31, 1995.
This increase reflects the improved revenues and gross profit resulting from the
Company's growth and improved market conditions.
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994
Revenues increased 10.6% to $40.1 million for the year ended December 31,
1995, from $36.3 million for the year ended December 31, 1994, as the revenues
from the acquisition of FWA offset a 4.2% decline in the
23
<PAGE> 25
revenues of the Company's other operations. The United States average onshore
rig count declined 5.7% from 637 in 1994 to 601 in 1995, primarily in response
to soft natural gas prices that prevailed during the first three quarters of
1995. The number of the Company's contract drilling operating days increased
12.1% during 1995 reflecting the acquisition of FWA. The number of the Company's
total pressure pumping jobs decreased 6.7% during 1995.
Gross profit declined 11.6% from $8.4 million for the year ended December
31, 1994, to $7.4 million for the year ended December 31, 1995. The decline in
gross profit resulted from $750,000 in losses suffered on a footage and a
turnkey well during the fourth quarter of 1995, competitive pricing pressure in
the Appalachian Basin and lower productivity in Appalachian drilling operations.
Depreciation and amortization expense for the year ended December 31, 1995,
increased $250,000 from the year ended December 31, 1994, due to the acquisition
of FWA.
Selling, general and administrative expense for the year ended December 31,
1995, increased $124,000 from the year ended December 31, 1994, primarily as a
result of the FWA acquisition.
Other income for the year ended December 31, 1995, decreased $168,000 from
the year ended December 31, 1994, primarily because 1994 included a one time
benefit of $200,000 from an antitrust settlement.
Interest expense was essentially flat period to period as the interest on
the debt financing associated with the purchase of FWA in 1995 was offset by the
decline in interest on short-term debt. The Company had no short-term debt
outstanding during 1995.
Income tax declined from an expense of $293,000 for the year ended December
31, 1994, to a benefit of $592,000 for the year ended December 31, 1995. The
1995 income tax benefit resulted from the reduction of a valuation allowance
against the Company's deferred tax asset consisting primarily of prior year tax
credits. The valuation was reduced based on the Company's expectation that the
deferred tax asset will be realized from future taxable income.
Income from continuing operations was $425,000 for the year ended December
31, 1995, a $641,000 decline from the year ended December 31, 1994, primarily as
a result of the decline in gross profit.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
The Company's primary cash needs for operations historically have been to
fund working capital requirements and to make capital expenditures to replace
and expand its drilling rig fleet and for acquisitions. The Company's ongoing
operations have been funded through existing cash, cash provided from operations
and borrowings under the Working Capital Line. To date, acquisitions have been
funded with available cash, borrowings and issuances of Common Stock and
warrants to purchase Common Stock.
During the six months ended June 30, 1997, and the year ended December 31,
1996, cash balances, net cash provided by operations and borrowings under the
Working Capital Line were utilized to fund the Company's normal recurring cash
requirements. The maximum borrowing availability under the Working Capital Line
was increased during the second quarter of 1997 from $8.4 million to $12.0
million. At June 30, 1997, the Company's borrowing availability under the
Working Capital Line was $5.3 million. The Company intends to utilize a portion
of the net proceeds to the Company from this Offering to repay all outstanding
borrowings under the Working Capital Line, after which the Company will have the
entire $12.0 million of borrowing available. See "Use of Proceeds".
The Working Capital Line is secured by a pledge of the Company's accounts
receivable and inventory and includes financial covenants covering tangible net
worth, interest coverage and debt service coverage and prohibits the payment of
cash dividends by the Company. Advances under the line are limited by levels of
accounts receivable and inventory. Interest under the facility is calculated at
the lower of the prime rate or
24
<PAGE> 26
such other rate options available at the time of borrowing, depending upon the
Company's financial performance. The facility expires on June 30, 1998.
Long-Term Debt Facilities
On April 11, 1997, the Company issued $25.0 million principal amount of the
Subordinated Notes and entered into the Term Loan. The net proceeds of the two
financings were used to fund the Southland acquisition in the amount of $27.1
million and to refinance approximately $18.4 million of debt incurred in
connection with the prior acquisitions of FWA and Viersen and the contract
drilling assets of Quarles. The Company incurred a one-time prepayment penalty
of approximately $132,000 in connection with such refinancing. In addition to
funding the Southland acquisition and the refinancing, the Company also repaid
$4.1 million of its borrowings under the Working Capital Line with the net
proceeds from the financing.
Subordinated Notes. The Subordinated Notes were issued at a 2% discount
along with seven-year warrants to purchase 1,200,000 shares of Common Stock at
an exercise price of $10.83 per share. The 12% Subordinated Notes contain
various affirmative and negative covenants customary in such private placements,
including restrictions on additional indebtedness unless certain pro forma
financial coverage ratios are met and restrictions on dividends, distributions
and other restricted payments.
Term Loan. The Term Loan bears interest at prime rate and is secured by
substantially all of the Company's rig assets, inventory and accounts
receivable. As of September 1, 1997, indebtedness outstanding under the Term
Loan was $22.9 million. The Term Loan contains various customary affirmative and
negative covenants, including restrictions on incurrence of additional
indebtedness, restrictions on dividends and distributions and acquisitions and
capital expenditures, and various financial covenants. Indebtedness under the
Term Loan is required to be repaid in monthly installments through June 1, 2000.
In addition, the Company is required to prepay the Term Loan without penalty
utilizing the net proceeds to the Company from any public offering of Common
Stock in full, including this Offering. The Company intends to utilize a portion
of the net proceeds to the Company from this Offering to repay in full the
outstanding indebtedness and accrued interest on the Term Loan. See "Use of
Proceeds".
Other
On September 11, 1997, the Company acquired JSM for 618,748 shares of
Common Stock, including 61,874 escrow shares, and $2.6 million cash, subject to
adjustment. The acquisition provided the Company with seven actively marketed
and fully manned high-quality land drilling rigs having depth capabilities
ranging from 10,000 to 14,000 feet. The acquisition also provided the Company
with an additional office and warehouse in Odessa, Texas, various spare
equipment and supplies and $950,000 in net working capital. Under the terms of
the JSM acquisition agreement, the Company granted to the prior shareholders of
JSM demand and piggyback registration rights exercisable beginning December 10,
1997. The Company also agreed to provide the prior JSM shareholders with the
right, exercisable for a period of 30 days beginning December 10, 1997, to
require the Company to purchase one-half of the shares of Common Stock issued in
the transaction for a purchase price of $21.66 per share, which price
represented the average closing price of the Common Stock during a 30 day period
prior to the closing less $.75 and was the price used for calculating the
purchase price.
The Company is continuing to review potential acquisitions of rigs and rig
contractors. Although there can be no assurance that such acquisitions will be
completed or as to the terms thereof, such acquisitions would further expand the
Company's rig fleet and operations. The Company believes that following the
application of the net proceeds to the Company from this Offering, it will have
significant borrowing capacity and intends to utilize such capacity to fund
additional acquisitions. Acquisitions may also be financed with existing cash
and, depending on the size and scope of any future acquisition or group of
acquisitions, through additional Common Stock and warrants.
Management believes its internally generated cash, availability under the
Working Capital Line, and the net proceeds to the Company from this Offering
will be sufficient to meet its working capital, capital expenditure, and debt
service requirements for the next twelve months. Acquisitions are expected to be
funded
25
<PAGE> 27
with available cash, borrowings under the Working Capital Line and issuances of
Common Stock. In addition, depending on the number and size of any acquisitions
consummated by the Company, the Company may be required to obtain additional
capital through public or private offerings of debt or equity securities.
INFLATION
Inflation has not had a significant impact on the Company's comparative
results of operations.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, ("FAS No. 128") which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The impact is expected to
result in an increase in primary earnings per share for the three months and six
months ended June 30, 1997 of $0.02 and $0.04 per share, respectively, and an
increase to the three months and six months ended June 30, 1996 of $.01 for each
period. The impact of FAS No. 128 on the calculation of fully diluted earnings
per share for these quarters is not expected to be material.
26
<PAGE> 28
BUSINESS
INTRODUCTION
UTI is a leading provider of onshore contract drilling services to
exploration and production companies and operates one of the largest land
drilling rig fleets in the United States. The Company's drilling operations
currently are concentrated in the prolific oil and natural gas producing basins
of Oklahoma, Texas and the Gulf Coast. The Company's rig fleet currently
consists of 89 land drilling rigs that are well suited to the requirements of
its markets. The Company also provides drilling and pressure pumping services in
the Appalachian Basin.
Beginning in 1995, the Company made a strategic decision to focus its
efforts on the expansion of its land drilling operations to take advantage of
improving market conditions and of the benefits arising from a consolidation in
the land drilling industry. To effect this strategy, the Company embarked on an
acquisition program aimed at expanding the Company's presence in select oil and
gas producing regions in the United States. Since 1995, the Company has more
than tripled the size of its rig fleet through acquisitions that have improved
its drilling capabilities, diversified its operations geographically and
expanded its market share in its core areas of operations. These acquisitions
also have provided the Company with significant operational leverage through its
75 currently marketed and 14 stacked rigs, a large inventory of drilling
equipment and approximately 250,000 feet of spare drill pipe. The Company
estimates that its stacked rigs could be placed in service at an average capital
cost of approximately $250,000 per rig.
The Company's drilling operations are managed on a regional basis through
local operating units and by managers with expertise and knowledge of regional
drilling conditions and needs. These units are supported by centralized
management responsible for the allocation and sharing of equipment, supplies and
personnel and the establishment of bidding parameters. The Company believes that
this organizational structure provides it with an important competitive
advantage in both operations and acquisitions in the fragmented land drilling
market.
Since 1994, the Company's financial results, including revenues, net income
and EBITDA, have increased substantially as a result of its acquisitions,
improved market conditions and higher margins associated with increased day and
contract rates. Revenues have grown from $36.3 million for the year ended
December 31, 1994 to $97.3 million for the year ended December 31, 1996. Over
the same period, net income and EBITDA have grown from $1.1 million to $4.9
million and from $3.5 million to $11.3 million, respectively. For the six months
ended June 30, 1997, the Company's revenues, net income and EBITDA were $76.8
million, $3.6 million and $11.2 million, respectively. In addition, the number
of wells drilled by the Company has increased from 287 in 1994 to 625 in 1996
and 403 for the first six months of 1997.
The Company is a Delaware corporation formed in 1986 for the purpose of
acquiring certain operating subsidiaries of UGI Corporation that provided
onshore contract drilling and other oil field services and owned certain oil and
gas properties. The Company's corporate offices are located at 16800 Greenspoint
Park, Suite 225N, Houston, Texas, 77060 and its telephone number is (281)
873-4111.
INDUSTRY CONDITIONS
Industry conditions in the United States land drilling market have improved
significantly over the last two years, which has resulted in improved financial
performance and increased industry and company-wide rig utilization and contract
rates. The market improvements have resulted from a number of factors, including
a consolidation of existing drilling equipment, an increase in domestic
exploration and development drilling activity, the mobilization of rigs to
international markets and the use of components from stacked rigs to refurbish
other rigs. While the improved market conditions have led to increasing contract
rates on a daily and footage basis in the Company's markets, the Company does
not believe that such rates have reached levels that justify the construction of
new rigs. Further, shortages of qualified personnel to staff stacked rigs that
are placed into operation has limited the number of rigs that may be returned to
the market.
27
<PAGE> 29
The number of available land rigs in the United States has declined from
approximately 4,700 rigs in 1981 to less than 1,500 in 1997. During the period
from 1988 to 1996, the number of drilling contractors also has declined from
approximately 600 to 290, with the top four companies, including the Company,
currently owning approximately 42% of the available land rigs in the United
States. In 1996, approximately 33% of the footage drilled in the United States
was drilled by only ten contractors, down from 25 contractors in 1993. Increased
land drilling activity is reflective of improvements in exploration and
development technologies, in particular the greater use of 3-D seismic data and
horizontal drilling. These technological advancements have increased drilling
success rates, lowered finding costs and increased well production rates, which
in turn have allowed producers to conduct more consistent and active drilling
programs, even in periods of lower oil and natural gas prices.
BUSINESS STRATEGY
The Company's strategy is to continue to be one of the leading
consolidators in the industry and to take advantage of improving market
conditions and the benefits of consolidation. The Company also intends to expand
its operations through the redeployment of equipment among the Company's
existing regional operations. Key aspects of the Company's business strategy
include:
Acquisitions and Consolidations. The Company seeks acquisitions of
companies with existing operations, established reputations for quality
operations and equipment that can be assimilated into the Company's operations.
These acquisitions are intended to supplement the Company's existing operations
by providing additional equipment, experienced employees, higher market share
and improved operating leverage.
Decentralized Operating Structure. The Company maintains a decentralized
operating structure with regional managers who are responsible for the
day-to-day operations and customer relations in their areas. The Company
believes that expansion of market share in its core operating areas and its
regional operating structure provide for cost savings and efficiencies.
Diversified Drilling Operations. The Company seeks to achieve a diversified
mix of drilling equipment that is well suited to meet its customers' regional
demands for rigs. The Company's rig fleet has depth capabilities ranging from
5,000 to 25,000 feet and is located in the prolific oil and natural gas
producing basins of Oklahoma, Texas and the Gulf Coast.
Large Inventory of Available Equipment. The Company seeks operational
leverage through the ownership of available equipment that can be utilized when
needed in a cost effective manner. Rigs, drill pipe and other equipment are
allocated among regional drilling units based on the needs and profitability of
the units.
Disciplined Pricing Approach. The Company maintains a disciplined approach
to bidding on drilling contracts, with a focus on profitability rather than on
the maximization of rig utilization.
RECENT ACQUISITIONS
J.S.M. & Associates, Inc. On September 11, 1997, the Company acquired JSM,
a West Texas land drilling contractor, for 618,748 shares of Common Stock
(including 61,874 escrow shares to be issued following a contractual
post-closing adjustment period) and $2.6 million in cash, subject to adjustment.
The acquisition provided the Company with seven actively marketed and fully
manned high-quality land drilling rigs having depth capabilities ranging from
10,000 to 14,000 feet. The acquisition also provided the Company with an
additional office and warehouse in Odessa, Texas, various spare equipment and
supplies and $950,000 in net working capital. The JSM acquisition makes the
Company one of the two largest land drilling contractors in the Permian Basin
with a rig fleet of 33 rigs.
Southland Drilling Company. In April 1997, the Company completed the
acquisition of the contract drilling assets of Southland for $27.1 million in
cash and warrants to purchase 300,000 shares of Common Stock at $16.00 per
share. The acquisition provided eight actively marketed high-quality land
drilling rigs having depth capabilities ranging from 12,000 feet to 16,000 feet
and experienced rig crews. During 1996, these eight rigs operated at an average
utilization rate of approximately 90%. The Southland acquisition provided the
Company with an operating base in South Texas and expanded the Company's
presence in the South Texas and Gulf Coast markets.
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<PAGE> 30
Quarles Drilling Corporation. In January 1997, the Company completed the
acquisition of the contract drilling assets of Quarles for $8.1 million in cash
and 733,779 shares of Common Stock having a value at the time of $8.1 million.
The assets acquired from Quarles consisted of nine actively marketed
high-quality land drilling rigs, including three electric deep drilling rigs.
This acquisition expanded the Company's operations in Oklahoma and East Texas
and allowed the Company to enter the Texas Gulf Coast market with the electric
deep drilling rigs.
Viersen and Cochran Drilling Corporation. In August 1996, the Company
completed the acquisition of Viersen for $6.0 million in cash, a two-year $8.0
million note and warrants to purchase 600,000 shares of Common Stock at $5.00
per share. Viersen's assets consisted of 13 high-quality land drilling rigs, two
of which were electric deep drilling rigs, over 500,000 feet of spare drill
pipe, over 800 drill collars and other spare drilling equipment. Since the
Viersen acquisition, the Company has redeployed eight of the Viersen rigs into
the Company's Texas and Oklahoma operations and is utilizing the acquired drill
pipe and related drilling equipment throughout its operations as needed.
FWA Drilling Company. In November 1995, the Company completed the
acquisition of FWA for $14.0 million ($12.9 million net of working capital). The
FWA acquisition added 29 land drilling rigs to the Company's fleet and expanded
the Company's operations into the East and West Texas markets where it had
previously not been operating.
CONTRACT DRILLING SERVICES
General
The Company's contract drilling fleet currently consists of 89 land
drilling rigs having effective depth capabilities ranging from 5,000 to 25,000
feet. As of June 30, 1997, the Company had a total of 68 rigs available for
contract, up from 50 rigs available for contract at December 31, 1996. The
Company's rig utilization rate (based on total owned rigs) was 54% for the year
ended December 31, 1996 and 69% for the six months ended June 30, 1997. The
Company believes that its excess capacity provides substantial potential for
growth.
The Company's contract drilling services are performed through various
regional drilling units and marketed under the names Triad Drilling Company
("Triad"), FWA, Southland, Cougar, JSM and IPSCO. The Company's drilling
operations currently are concentrated in the prolific oil and natural gas
producing regions of Texas, Oklahoma and the Gulf Coast. The Company also
markets five smaller rigs in the Appalachian Basin in Ohio, Pennsylvania and New
York. Drilling operations are managed through regional offices located in
Oklahoma City, Oklahoma, Midland, Odessa, Tyler, Houston and Victoria, Texas and
Sheffield, Pennsylvania. Rigs and equipment are deployed and allocated among the
various drilling units based on regional need and profitability. The Company's
contract drilling customers include major oil companies and independent
producers, both large and small. For the year ended December 31, 1996, one
customer represented 25% of the Company's total revenues.
Day-to-day drilling operations are managed at the Company's regional
offices through a team of unit managers who are responsible for designated rigs
and locations and clients at those locations. Drilling contracts are bid on the
basis of profitability and local market conditions and not to maximize rig
utilization at the expense of profitability.
The Company maintains an incentive compensation plan for its managerial and
key employees based on operating and budgeted results. The Company believes that
this plan provides the Company with the ability to attract and retain qualified
managers and key operating employees. The Company also provides incentive
compensation to its rig workers based on operating results and safety records.
Drilling Rigs and Other Contract Drilling Assets
A land drilling rig consists of various components including engines,
drawworks or hoist, derrick or mast, pumps, blowout preventers and drill pipe.
Rig size and configuration vary with depth, terrain and operator requirements.
An active maintenance program during the life of a drilling rig permits the
maintenance, replacement and upgrading of its components on an individual basis.
Over the life of a typical drilling rig,
29
<PAGE> 31
major components, such as engines, pumps, drawworks and drill pipe are replaced
or rebuilt on a periodic basis as required while other components, such as the
mast and substructure, can be utilized for extended periods of time with proper
maintenance. The Company follows a policy of keeping its drilling rigs well
maintained and technologically competitive for the regions in which they
operate.
As of September 12, 1997, the Company had an inventory of 89 land drilling
rigs, 67 of which were active. The Company's rig fleet is configured to suit
local requirements in the Company's various operating regions with drilling
depths capabilities ranging to 25,000 feet. The Company allocates its rigs among
its operating regions based upon market conditions and in accordance with the
needs of its customers and the capabilities of its rigs. The Company maintains a
disciplined approach to bidding on drilling contracts, with a focus on
profitability rather than the maximization of rig utilization.
The following table sets forth certain information with respect to the
Company's rig fleet and the current distribution of rigs among the Company's
operating regions as of September 12, 1997.
<TABLE>
<CAPTION>
AVERAGE
RATED
STACKED IDLE ACTIVE TOTAL DRILLING
REGION RIGS(1) RIGS(1) RIGS(1) RIGS DEPTHS
------ ------- ------- ------- ----- ---------
<S> <C> <C> <C> <C> <C>
Arklatex................................... -- -- 11 11 15,000 ft.
Permian.................................... 1 7 25 33 12,500 ft.
Gulf Coast/South Texas..................... 1 -- 11 12 17,000 ft.
Mid Continent.............................. 11 -- 15 26 13,000 ft.
Northeast.................................. 1 1 4 6 8,500 ft.
Other(2)................................... -- -- 1 1 25,000 ft.
-- -- -- --
Total............................ 14 8 67 89
</TABLE>
(1) A rig is considered active when under contract. An idle rig is one that is
not under contract but is available and being marketed. A stacked rig is not
currently being marketed and cannot be made available without incurring
refurbishing expenses.
(2) Located in Wyoming.
The Company's 14 stacked rigs can be placed into operation at an average
capital cost per rig of $250,000. The Company intends to place its stacked rigs
into service in an orderly basis as regional market conditions merit and trained
crews are retained. See "Risk Factors -- Labor Shortages".
The following table sets forth for the periods indicated certain data
concerning the utilization of the Company's drilling rigs based on the Company's
total fleet, including stacked and idle rigs:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------ -----------------
1994 1995 1996 1996 1997
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Drilling rigs owned (at end of period)..... 27 55 65 55 82
Average number of owned rigs during
period................................... 27 31 59 55 77
Utilization rate(1)........................ 40% 39% 54% 49% 69%
Number of wells drilled.................... 287 231 625 259 403
Average revenue per day(2)................. $4,915 $4,790 $5,390 $5,380 $6,050
Operating days(3).......................... 3,931 4,405 11,912 4,920 9,571
</TABLE>
- ---------------
(1) Utilization rates are based on a 365-day year and are calculated by dividing
the number of rigs utilized by the total number of rigs in the Company's
drilling fleet, including stacked rigs. A rig is considered utilized when it
is being operated, mobilized, assembled or dismantled while under contract.
For the six months ended June 30, 1997, the utilization rate of the
Company's rigs, excluding stacked rigs, was 87%.
(2) Calculated as (i) total revenues from dayrate, footage and turnkey contracts
less well costs incidental to drilling footage and turnkey wells divided by
(ii) the aggregate number of operating days.
(3) An operating day is defined as a day during which a rig is being operated,
mobilized, assembled or dismantled while under contract.
30
<PAGE> 32
The Company currently owns yards in Woodward and Oklahoma City, Oklahoma,
Midland, Tyler, Odessa and Victoria, Texas and Sheffield, Pennsylvania. The
Company also maintains a fleet of trucks that are utilized in certain regions to
mobilize and demobilize its drilling rigs among its various regional operating
units.
As a result of the Company's acquisition of Viersen, the Company had an
inventory as of September 1, 1997, of more than 250,000 feet of spare drill pipe
available for its operations. The price of drill pipe recently has increased
substantially and many contractors are subject to allocations and back orders.
The Company estimates that its inventory of spare drill pipe should satisfy the
drill pipe needs of its current fleet for the next two years based on the
Company's current size and level of operations. The Company believes that the
availability of this large inventory of drill pipe provides it with a
competitive advantage over many of its competitors who may have difficulty in
securing drill pipe and whose cost of drill pipe is substantially in excess of
the amounts paid by the Company for the pipe acquired by it in the Viersen
acquisition.
Drilling Contracts
The Company's drilling rigs are employed under individual contracts which
extend either over a stated period of time or the time required to drill a well
or a number of wells. Drilling contracts are generally obtained through
competitive bidding, although some may be obtained by negotiation. Contracts
generally are subject to termination by the customer on short notice, but can be
firm for a number of wells or years. Drilling contracts may provide for
compensation on a footage, turnkey or dayrate basis. For the six months ended
June 30, 1997, approximately 74%, 8% and 18% of the Company's contracts were on
a footage basis, turnkey and dayrate basis, respectively. The Company estimates
that approximately 50% of the Company's contract drilling revenues were
attributable to dayrate contracts during the first six months of 1997. Footage
contracts are primarily limited to shallow wells that can be drilled in less
than 15 days, while turnkey contracts are pursued on a limited basis considering
the risks and potential benefits of the contracts. Dayrate contracts are used
primarily for deeper wells and wells that present higher risks.
The Company maintains a disciplined approach to bidding. Contracts are bid
on the basis of profitability rather than on the maximization of rig
utilization. Footage and turnkey contracts are bid based on the Company
experience and expertise in the geological and operational aspects of the
project and when the Company believes that the anticipated benefits of the
contract merit the risk.
A dayrate contract provides for a basic rate per day when drilling and for
lower rates when the rig is moving, or when drilling operations are interrupted
or restricted by equipment breakdowns, actions of the customer or adverse
weather conditions or other conditions beyond the control of the Company. In
addition, the dayrate contracts typically provide for a lump sum fee for the
mobilization and demobilization of the drilling rig. The dayrate depends on
market and competitive conditions, the nature of the operations to be performed,
the duration of the work, the equipment and services to be provided, the
geographic area involved and other variables.
In a turnkey contract, the Company undertakes to drill a well to a
specified depth for a fixed price. In a footage contract, the Company undertakes
to drill a well to a specified depth at a fixed price per foot of hole. In both
turnkey and footage contracts, the Company must bear the cost of performing the
drilling services until the well has been drilled, and accordingly, such
contracts require significant cash commitments by the Company. In both turnkey
and footage contracts, the Company generally agrees to furnish services such as
testing, coring and casing the hole and other services which are not normally
provided by a drilling contractor working under a dayrate contract. In both
situations, compensation is earned upon completion of the well to the specified
depth. If the well is not completed to the specified depth, the Company may not
receive the fixed turnkey or footage price. Although the Company seeks to
minimize the risks associated in the footage and turnkey contracts by generally
limiting these contracts to shallower and lower risk wells such as those drilled
by the Company in West Texas, footage and turnkey contracts nevertheless involve
a higher degree of risk to the Company than dayrate contracts because the
Company assumes greater risks and bears the cost of unanticipated downhole
problems and cost escalation.
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<PAGE> 33
PRESSURE PUMPING SERVICES AND OTHER OPERATIONS
Pressure Pumping
The Company through its Universal Well Services Inc. ("Universal") unit is
the leading provider of pressure pumping services in the northern Appalachian
Basin. Pressure pumping services consist primarily of well stimulation and
cementing for the completion of new wells and remedial work on existing wells.
Generally, all completed Appalachian Basin wells require cementing services
before production commences. In addition, substantially all completed wells
drilled in the Appalachian Basin require some form of fracturing or other
stimulation to enhance the flow of gas and oil to the well bore. With the
purchase of proprietary technology and equipment in 1995, Universal has added
the capability to fracture wells using liquid carbon dioxide and sand. Under
certain conditions, this technology is believed to produce superior results
relative to fracturing methods that use water or other fluids in the fracturing
process.
Universal maintains four base camps in the Appalachian Basin: one each in
Punxsutawney, Bradford and Meadville, Pennsylvania and Wooster, Ohio. These
camps typically consist of an office area, an equipment maintenance facility, a
bulk storage facility and a storage yard for vehicles and other materials.
Universal also maintains a portable, temporary facility which is available for
special projects.
The Company's pressure pumping equipment consists of cement, fracturing and
nitrogen pumpers, blenders, and cement, sand, acid, connection and nitrogen
transport trucks. The Company maintains its pressure pumping equipment in good
condition. Virtually all of the Company's pressure pumping equipment is in use
on a regular basis. At September 1, 1997, the Company owned or leased the
following equipment:
<TABLE>
<CAPTION>
EQUIPMENT TYPE NUMBER OF UNITS
-------------- ---------------
<S> <C>
Pumper Trucks............................................... 37
Blender Trucks.............................................. 9
Bulk Cement Trucks.......................................... 14
Sand Trucks................................................. 17
Acid Trucks................................................. 11
Connection Trucks........................................... 7
Miscellaneous Trucks........................................ 5
---
Total............................................. 100
===
</TABLE>
Other Operations
The Company also operates a horizontal hard rock boring division
("Boring"). Boring applies vertical drilling technology to bore horizontal
holes, using a patented process and equipment, for the placement of pipelines
and cables, including fiber optic cables, under obstacles such as highways and
railroads when hard rock conditions are encountered. Boring currently markets it
services in the eastern half of the United States.
In addition to its operating activities, the Company has invested in
working interests in gas and oil wells from time to time, principally in the
Appalachian and Permian Basins. The net book value of such investments at
December 31, 1996 and June 30, 1997 was $351,000 and $367,000, respectively.
VOLATILITY OF OIL AND GAS INDUSTRY
Demand and prices for the Company's services depend upon the level of
activity in the onshore oil and gas exploration and production industry in the
United States, which in turn depends upon numerous factors over which the
Company has no control, including the level of oil and gas prices, expectations
about future oil and gas prices, the ability of OPEC to set and maintain
production levels and prices, the cost of exploring for, producing and
delivering oil and gas, the level and price of foreign imports of oil and
natural gas, the discovery rate of new oil and gas reserves, available pipeline
and other oil and gas transportation capacity, worldwide weather conditions,
international political, military, regulatory and economic conditions and the
ability of oil and gas companies to raise capital. Domestic exploration activity
also has been particularly affected by an increase in the exploration and demand
for natural gas. The level of drilling activity in the onshore oil and gas
32
<PAGE> 34
exploration and production industry in the United States has been volatile and
no assurance can be given that current levels of oil and gas exploration
activities in the Company's markets will continue or that demand for the
Company's services will correspond to the level of activity in the industry
generally. Further, any material changes in the demand for or supply of natural
gas could materially impact the demand for the Company's services. Prices for
oil and gas are expected to continue to be volatile and to affect the demand for
and pricing of the Company's services. A material decline in oil or gas prices
or industry activity in the United States could have a material adverse effect
on the Company's results of operations and financial condition.
COMPETITION AND SEASONALITY
The contract drilling, workover and well servicing industry is a
highly-fragmented, intensely competitive and cyclical business. Since 1982, the
contract drilling business has been severely impacted by the decline and
continued instability in the prices of oil and natural gas. Though these
depressed economic conditions have resulted in a consolidation of the number of
competitors and the reduction of the number of rigs available, the supply of
available rigs, particularly in the domestic land markets, still exceeds the
demand for those rigs. This excess capacity in the industry has resulted in
substantial competition. Competition for services in a particular market is
based on price, location, type and condition of available equipment and quality
of service. A number of large and small contractors provide competition for
drilling contracts in all areas of the Company's business. Although no single
drilling competitor operates in all such areas, certain competitors are present
in more than one of those areas and drilling rigs are mobile and can be moved
from one region to another in response to increased demand. During the last two
years, prices for land drilling rigs have started to increase. Seasonality is
not a significant factor with respect to the overall operations of the Company,
although the Company's drilling pressure pumping services in Appalachia are
subject to a period downturn during spring months.
OPERATING RISKS AND INSURANCE
The Company's drilling operations and fleet are subject to the many hazards
inherent in the onshore drilling industry, such as blowouts, explosions,
cratering, well fires and spills. These hazards can result in personal injury
and loss of life, severe damage to or destruction of property and equipment,
pollution or environmental damage and suspension of operations. The Company
maintains insurance protection as it deems appropriate. Such insurance coverage,
however, may not in all situations provide sufficient funds to protect the
Company from all liabilities that could result from its operations, and claims
will be subject to various retentions and deductibles. The Company generally
seeks to obtain indemnity agreements whenever possible from the Company's
customers requiring its customers to hold the Company harmless in the event of
loss of production or reservoir damage. Even when obtained, however, contractual
indemnification may not be supported by adequate insurance maintained by the
customer. There can be no assurance that the Company's insurance or contractual
indemnity protection will be sufficient or effective under all circumstances or
against all hazards to which the Company may be subject. The occurrence of a
significant event not fully insured or indemnified against or the failure of a
customer to meet its indemnification obligations could have a material adverse
effect on the Company's results of operations and financial condition. Moreover,
no assurance can be given that the Company will be able to maintain insurance in
the future at rates it considers reasonable.
ENVIRONMENTAL REGULATION
The Company's activities are subject to existing federal, state and local
laws and regulations governing environmental quality and pollution control. It
is not anticipated that compliance with existing laws and regulations regulating
the release of materials into the environment or otherwise relating to the
protection of the environment will have a material adverse effect upon the
operations, capital expenditures or earnings of the Company in the foreseeable
future, absent the occurrence of an extraordinary event. The Company cannot
predict what effect additional regulation or legislation, enforcement policies
thereunder and claims for damages to property, employees, other persons and the
environment could have on its activities.
The Company's operations routinely involve the handling of various
materials, some of which are classified as hazardous materials. The Company's
operations and facilities are subject to numerous state and federal
environmental laws, rules and regulations, including, but not limited to, laws
concerning the
33
<PAGE> 35
containment and disposal of hazardous materials, oil field waste, other waste
materials and acids, and the use of underground storage tanks. Laws protecting
the environment have generally become more restrictive in recent years. In
addition, environmental laws and regulations may impose strict liability whereby
the Company could be liable for clean-up costs, even if the situation resulted
from previous conduct of the Company that was lawful at the time conducted or
from improper conduct of, or conditions caused by, previous property owners or
other persons not associated with the Company. From time to time, claims may be
made and litigation might be brought against the Company under these laws. Such
clean-up costs or costs associated with changes in environmental laws and
regulations could be substantial and could have a material adverse effect on the
Company's financial condition. However, the cost of environmental compliance has
not had any material adverse effect on the Company's financial condition in the
past. The Company is unable to predict the effect of new regulations and
amendments to existing regulations governing its operations, and therefore is
unable to determine the ultimate costs of complying with environmental laws and
regulations.
The Oil Pollution Act of 1990 ("OPA") amends certain provisions of the
federal Water Pollution Control Act of 1972, commonly referred to as the Clean
Water Act ("CWA"), and other statutes as they pertain to the prevention of and
response to oil spills into navigable waters. The OPA subjects owners of
facilities to strict, joint and several liability for all containment and
cleanup costs and certain other damages arising from a spill, including, but not
limited to, the costs of responding to a release of oil to surface waters. The
CWA provides penalties for any discharges of petroleum products in reportable
quantities and imposes substantial liability for the costs of removing a spill.
State laws for the control of water pollution also provide varying civil and
criminal penalties and liabilities in the case of releases of petroleum or its
derivatives into surface waters or into the ground. The Environmental Protection
Agency ("EPA") is also authorized to seek preliminary and permanent injunctive
relief and, in certain cases, criminal penalties and fines. In the event that a
discharge occurs at a well site at which the Company is conducting drilling or
pressure pumping operations, the Company may be exposed to claims that it is
liable under the CWA.
Certain of the Company's facilities are also subject to regulations of the
EPA, including regulations that require the preparation and implementation of
spill prevention control and countermeasure plans relating to the possible
discharge of oil into navigable waters.
The Comprehensive Environmental Response, Compensation and Liability Act,
as amended ("CERCLA"), also known as the "Superfund" law, imposes liability,
without regard to fault or the legality of the original conduct, on certain
classes of persons with respect to the release of any "hazardous substance" into
the environment. These persons include the owner and operator of a site and
persons that disposed of or arranged for the disposal of the hazardous
substances found at the site. CERCLA currently exempts crude oil, and the
Resource Conservation and Recovery Act, as amended, currently exempts certain
drilling materials, such as drilling fluids and production waters, from the
definitions of hazardous substances. There can be no assurance that such
exemptions will be preserved in future amendments of such acts, if any, or that
more stringent laws and regulations protecting the environment will not be
adopted. In addition, the Company's operations may involve the use or handling
of acids currently classified as hazardous substances and other materials that
may in the future be classified as hazardous substances.
The operations of the Company are subject to local, state and federal
regulations for the control of emissions and air pollution. Legal and regulatory
requirements in this area are increasing, and there can be no assurance that
significant costs and liabilities will not be incurred in the future as a result
of new regulatory developments. In particular, regulations promulgated under the
Clean Air Act Amendments of 1990 may impose additional compliance requirements
that could affect the Company's operations. The Company may in the future be
subject to civil or administrative enforcement actions for failure to comply
strictly with air regulations and permits. These enforcement actions are
generally resolved by payment of monetary fines and correction of any identified
deficiencies. Alternatively, regulatory agencies could require the Company to
forego construction or operation of certain air emission sources.
Management believes that the Company is in substantial compliance with
environmental laws and regulations.
34
<PAGE> 36
EMPLOYEES
At September 12, 1997, the Company had approximately 1,815 full-time
employees, of which 1,690 were rig personnel and 125 were employed in support
and administrative capacities.
Increases in domestic drilling demand since mid-1995 and increases in
contract drilling activity have resulted in a shortage in many areas of
qualified drilling rig personnel in the industry. These shortages make it more
difficult for the Company and other contractors to return stacked rigs to the
market and to retain crews. If the Company is unable to attract and retain
sufficient qualified personnel, its ability to market and operate its active
drilling rigs and return its 14 currently stacked rigs to the market will be
restricted, which could have a material adverse effect on the Company's results
of operations. Further, wage rates of qualified rig crews have begun to rise in
the land drilling industry in response to the increasing number of active rigs
in service, which could ultimately have the effect of reducing the Company's
operating margins and results of operations.
In addition to the services of its employees, the Company employs the
services of consultants as required. None of the Company's employees is
represented by a labor union. There have been no work stoppages or strikes
during the last three years which have resulted in the loss of production or
production delays. The Company believes its relations with its employees are
good.
LEGAL PROCEEDINGS
The Company is involved in several claims arising in the ordinary course of
business. In the opinion of management, all of these claims are covered by
insurance and these matters will not have a material adverse effect on the
Company's financial position.
The Company and its operating subsidiaries are sometimes named as a
defendant in litigation usually relating to personal injuries alleged to result
from negligence. The Company maintains insurance coverage against such claims to
the extent deemed prudent by management.
There can be no assurance that the Company will be able to maintain
adequate insurance in the future at rates it considers reasonable, and there can
be no assurance that insurance will continue to be available on terms as
favorable as those that currently exist. The occurrence of an adverse claim in
excess of the coverage limits maintained by the Company could have a material
adverse effect on the Company's financial condition and results of operations.
35
<PAGE> 37
MANAGEMENT
Set forth below is certain information concerning the executive officers
and directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Mark S. Siegel...... 46 Chairman of the Board and Director
Vaughn E. Drum...... 51 President, Chief Executive Officer and Director
Karl W. Benzer...... 46 Vice President; President and Chief Operating Officer
of FWA
P. Blake Dupuis..... 44 Vice President, Secretary, Treasurer and Chief
Financial Officer
Gerald J. Guz....... 56 Senior Vice President; President and Chief Operating
Officer of Universal Well Services, Inc.
Terry L. Pope....... 45 Vice President; President and Chief Operating Officer
of Triad
Willard E. White.... 64 Vice President; President and Chief Operating Officer
of IPSCO
Kenneth N. Berns.... 37 Director
Terry H. Hunt....... 49 Director
Nadine C. Smith..... 40 Director
Robert B. Spears.... 71 Director
</TABLE>
Mr. Siegel was appointed to serve as a director on March 14, 1995, by a
vote of the remaining directors. Mr. Siegel has been President of Remy
Consultants since 1993. From 1992 to 1993, Mr. Siegel was President, Music
Division, Blockbuster Entertainment Corp. From 1988 through 1992, Mr. Siegel was
an Executive Vice President of Shamrock Holdings, Inc. and Managing Director of
Shamrock Capital Advisors, Incorporated. Mr. Siegel holds a B.A. from Colgate
University and a J.D. from the University of California at Berkeley (Boalt Hall)
School of Law.
Mr. Drum has served as President, Chief Executive Officer and a director of
the Company since its founding in 1986. From 1980 through November 1986, Mr.
Drum served in various capacities for UGI Development Company ("UGIDC"), a
subsidiary of UGI Corporation ("UGI"). Mr. Drum holds a B.S. in Petroleum
Engineering from Marietta College.
Mr. Benzer has served as a Vice President of the Company since August 1994
and President of its FWA since January 1997. From 1991 through July 1994, he was
President of S. W. Jack Drilling Company. From 1986 to 1991, Mr. Benzer was
President of Cubby Drilling Company and from 1984 through 1986 was Operations
Manager of Hinton Drilling Company. From 1974 through 1984, Mr. Benzer served in
a number of operations management positions with Noble Drilling Company. Mr.
Benzer holds a B.S. Degree in Mechanical Engineering and a M.B.A. from the
University of Rhode Island.
Mr. Dupuis has served as Vice President and Chief Financial Officer of the
Company since August 1996. From April 1996 to September 1996, Mr. Dupuis served
as Chief Financial Officer of ADCOR-Nicklos Drilling Company and from December
1993 to April 1996 he served as Chief Financial Officer of Coastwide Energy
Services, Inc. From September 1989 to December 1993, Mr. Dupuis served as Chief
Financial Officer of EVI, Inc. Mr. Dupuis is a Certified Public Accountant and
holds a B.S. in Business Administration from the University of Southwestern
Louisiana.
Mr. Guz has served as Senior Vice President of the Company and President of
Universal, a wholly owned subsidiary of the Company, since December 1986. From
1986 to 1994, Mr. Guz also served as a director of the Company. From 1981
through 1986, he served in various capacities for UGIDC. Mr. Guz holds a B.S. in
Business Management from St. Vincent College.
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<PAGE> 38
Mr. Pope has served as President of Triad, a wholly owned subsidiary of the
Company since January 1996. From 1987 through January 1996, Mr. Pope served as
President of IPSCO. From 1980 through 1987, he served in various capacities for
IPSCO and Triad.
Mr. White has served as President of IPSCO since September 1994. From 1988
until September 1994, he was President of W. E. White, Inc., Petroleum
Consultants. Prior to 1988, Mr. White held a number of positions including
President of Belden and Blake Corporation, President of Resource Exploration,
Inc. and served as a private consultant to the oil field industry. Mr. White
holds a B.S. in Petroleum Engineering from Marietta College.
Mr. Berns was appointed to serve as a director on May 24, 1995, by a vote
of the remaining directors. Mr. Berns has been an employee of Remy Consultants
since 1994. From 1990 through 1994, Mr. Berns was employed by affiliated real
estate development and management companies, including Ridge Properties, Ltd.,
Ridge Development, Ltd. and Spound Company. Prior to 1990, Mr. Berns was a
senior manager of Spicer & Oppenheim and a Vice President of Cantor Fitzgerald
Financial Corporation. Mr. Berns is the majority stockholder of RD Management,
Inc., which is the general partner of Ridge Properties, Ltd. Mr. Berns is a
Certified Public Accountant and holds a Bachelors Degree in Business
Administration from San Diego State University and a Masters Degree in Taxation
from Golden Gate University.
Mr. Hunt has served as the President and Chief Executive Officer of Penn
Fuel Gas, Inc., a natural gas and propane distribution company since 1992. From
1989 to 1992, Mr. Hunt was the President and Chairman of Carnegie Natural Gas
Company, a gas distribution and transportation company, and of Apollo Gas
Company, a natural gas distributor. From 1984 through 1988, he served as Vice
President of Delhi Gas Pipeline Corporation, a gas distribution company. He has
served as a director of UTI since 1994.
Ms. Smith is President and Chief Executive Officer of Enidan Capital, an
investment company that makes equity investments in public and privately held
companies. Prior to co-founding Enidan Capital in 1997, Ms. Smith was an
investment banker and principal with NC Smith & Co. and The First Boston
Corporation and a management consultant with McKinsey & Co. Ms. Smith also is
President and Chief Executive Officer of Sirrom Resource Funding LP, which
finances environmental companies. Ms. Smith is a director of American Retirement
Corporation, Sirrom Partners, L.P. and Carson Resources, Inc. Ms. Smith earned a
Bachelors Degree in Economics from Smith College and a Masters Degree in
Business Administration from Yale University. She has served as a director since
1995.
Mr. Spears has served as the Chairman and Vice President, Business
Development of Spears & Associates, Inc. since 1989. Spears & Associates is a
leading research-based consulting firm to the oil and natural gas industry
worldwide. He has served as a director of UTI since 1994.
37
<PAGE> 39
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership and voting power of the Common Stock at September 12, 1997 (except as
otherwise noted) before and after the Offering and after giving effect to the
issuance of 618,748 shares of Common Stock in the JSM acquisition with respect
to (i) each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) the Selling Stockholders, (iii) each
named executive officer and director and (iv) all executive officers and
directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE OFFERING SHARES OWNED AFTER OFFERING
---------------------- TO BE ---------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
------------------------ ---------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Remy Capital Partners III, L.P...................... 5,383,650(1) 41.0% 1,588,388 3,795,262 23.5%
Remy Investors and Consultants, Incorporated........ 5,548,650(1) 41.8 1,588,388 3,960,262 24.3
Quarles Drilling Corporation........................ 733,779(2) 5.7 733,779 -- --
Shamrock Holdings of California, Inc................ 666,666(3) 5.1 533,333 133,333 *
Sam Viersen Family Foundation, Inc.................. 200,000(4) 1.5 200,000 -- --
Sam K. Viersen, Jr. Trust dated September 9, 1986... 400,000(4) 3.0 400,000 -- --
Canpartners Investments IV, L.L.C................... 1,200,000(5) 8.5 720,000 480,000 2.9
Neil E. Hanson...................................... 95,040(6) * 31,800 63,240 *
Chris N. Hanson..................................... 72,000(6) * 30,000 42,000 *
Kurt M. Hanson...................................... 14,400(6) * 14,400 -- --
Erik G Hanson....................................... 28,800(6) * 28,800 -- --
Four Flags Holding Company.......................... 111,000(7) 1.2 60,000 51,000 *
Mark S. Siegel...................................... 5,848,650(1) 43.0 1,588,388 4,260,262 25.7
Vaughn E. Drum...................................... 438,360(8) 3.3 -- 438,360 2.7
Kenneth N. Berns.................................... 75,000(9) * -- 75,000 *
Terry H. Hunt....................................... 7,500(10) * -- 7,500 *
Nadine C. Smith..................................... 10,500(10) * -- 10,500 *
Robert B. Spears.................................... 8,400(10) * -- 8.400 *
P. Blake Dupuis..................................... 45,000(8) * -- 45,000 *
Gerald J. Guz....................................... 261,573(8) 2.0 -- 261,573 1.6
Terry L. Pope....................................... 130,788(8) 1.0 -- 130,788 *
Karl W. Benzer...................................... 3,000(8) * -- 3,000 *
(All Directors and Executive Officers as a group --
11 persons)....................................... 6,828,771(11) 48.2 1,588,388 5,240,383 30.5
</TABLE>
- ---------------
* Less than 1%.
(1) Remy's ownership includes 5,218,650 shares of Common Stock owned of record
by Remy and 165,000 shares of Common Stock underlying warrants held by
Remy. The Common Stock beneficially owned by Remy Consultants, which is the
General Partner of Remy, includes the 5,383,650 shares of Common Stock and
warrants owned by Remy as well as presently exercisable warrants to
purchase 165,000 shares of Common Stock held by Remy. The Common Stock
beneficially owned by Mr. Siegel, who is the President and sole stockholder
of Remy Consultants, includes the 5,548,650 shares of Common Stock and
warrants beneficially owned by Remy Consultants; as well as presently
exercisable options to purchase 300,000 shares of Common Stock held by Mr.
Siegel. The address of Remy, Remy Consultants and Mr. Siegel is 1801
Century Park East, Suite 111, Los Angeles California 90067. Remy and Remy
Consultants have granted to the Underwriters a 30-day overallotment option
with respect to 165,000 shares of Common Stock each. If such options are
exercised, Remy and Remy Consultants would beneficially own 3,630,262
shares of Common Stock after the Offering, representing 22.3% of the
outstanding shares of Common Stock after the Offering.
(2) The address for Quarles Drilling Corporation is 6506 South Lewis, Suite
204, Tulsa, Oklahoma 74136.
(3) The address for Shamrock Holdings of California, Inc. is 4444 Lakeside
Drive, Burbank, California 91505.
(4) Represents presently exercisable shares pursuant to the Stock Purchase
Warrant to Purchase Shares of Common Stock of UTI Energy Corp. held by such
entities at $5.00 per share. The addresses of the Sam
38
<PAGE> 40
Viersen Family Foundation, Inc. and Sam K. Viersen, Jr. Trust dated
September 9, 1986 is c/o the Trust Company of Oklahoma, P.O. Box 3627,
Tulsa, Oklahoma 74101-3627.
(5) Represents 1,200,000 shares of Common Stock underlying warrants to purchase
Common Stock at a price of $10.84 per share. Based solely upon a Schedule
13D dated April 11, 1997, Canpartners Investments IV, LLC is controlled by
Canpartners Incorporated ("Canpartners"), which is deemed to have sole
voting and dispositive power over the shares underlying such warrant. Can
Partners Investments IV, L.L.C. holds the warrants on behalf of funds and
managed accounts advised by Canyon Capital Management, L.P. ("CCM").
Canpartners and CCM are controlled by Joshua S. Friedman, Mitchell R. Julis
and R. Christian Evensen, whose Schedule 13D states, are deemed as a group
to have sole voting and dispositive power of the shares underlying such
warrant.
(6) Represents presently exercisable options to purchase shares at $16.00 per
share pursuant to outstanding warrants.
(7) The address for Four Flags Holding Company ("Four Flags") is 200 Webster
Building, 3411 Silverside Road, Wilmington, Delaware 19810.
(8) Includes shares underlying presently exercisable stock options held by the
following individuals in the following amounts: Mr. Drum, 291,960 shares;
Mr. Guz, 115,173 shares; Mr. Pope, 42,588 shares; Mr. Benzer, 3,000 shares;
and Mr. Dupuis, 45,000 shares. Does not include shares underlying stock
options held by the following individuals which options are not presently
exercisable and will not become exercisable within 60 days in the following
amounts: Mr. Drum, 30,000 option shares; Mr. Guz, 128,787 shares; Mr. Pope,
58,392 shares; Mr. Benzer 12,000 shares; and Mr. Dupuis 180,000 shares. Mr.
Drum has granted to the Underwriter a 30-day overallotment option with
respect to 112,500 shares of Common Stock held by him. If this option is
exercised, Mr. Drum would beneficially own 325,860 shares of Common Stock
or 2.0% of the outstanding shares of Common Stock after the Offering.
(9) Represents presently exercisable warrants and options to purchase 75,000
shares. Does not include shares of Common Stock or warrants beneficially
owned by Remy Consultants, by whom Mr. Berns is employed. Mr. Berns
disclaims beneficial ownership of such shares and warrants. Mr. Berns has
granted to the Underwriters a 30-day overallotment option with respect to
30,000 shares underlying options of Common Stock held by him. If this
option is exercised, Mr. Berns would beneficially own 45,000 shares of
Common Stock after the Offering.
(10) Includes presently exercisable options to purchase 7,500 shares owned by
each of Mr. Hunt, Ms. Smith and Mr. Spears. Does not include options to
purchase 3,750 shares owned by such individuals, which are not exercisable
within 60 days.
(11) Includes presently exercisable warrants and options to purchase 1,225,221
shares.
Except as stated herein, there are no arrangements known to the Company
that may result in a change in control of the Company and each stockholder has
sole voting and investment power with respect to the securities included in the
above table.
The Company will pay the expenses of registering the shares of Common Stock
to be offered by the Selling Stockholders under the Securities Act, including
the registration and filing fees, printing expenses and the fees and
disbursements of counsel and accountants for the Company.
Included in the shares offered by the Selling Stockholders are 1,588,388
shares of Common Stock held by Remy, an investment fund in which Remy
Consultants is the general partner. Remy, Remy Consultants, Ken Berns and Vaughn
Drum have also granted to the several Underwriters 30-day over-allotment options
to purchase up to 165,000, 165,000, 30,000 and 112,500 shares of Common Stock,
respectively. The options from Remy, Remy Consultants and Ken Berns will be
effected through an option to purchase their warrants covering their shares at
the public offering price, less the underwriting discounts and commissions and
the warrant exercise price. The option from Mr. Drum will be to purchase shares
held by him at the public offering price, less underwriting discounts and
commissions. Mark Siegel, Chairman of the Board of the Company, is the President
and sole stockholder of Remy Consultants. Ken Berns is a director of the Company
and an employee of Remy Consultants. Vaughn Drum is a director and the President
of the Company. The
39
<PAGE> 41
shares subject to the option granted by Remy, Remy Consultants and Mr. Berns
were received by them in connection with prior services provided by Remy
Consultants for the Company.
Included in the shares offered by the Selling Stockholders are 30,000,
shares of Common Stock held by Chris Hanson, an employee of the Company, that
were received by him in connection with the Company's acquisition of the
contract drilling assets of Southland.
DESCRIPTION OF CAPITAL STOCK
The Company's Restated Certificate of Incorporation (as amended,
"Certificate of Incorporation") authorizes the issuance of up to 50,000,000
shares of Common Stock, par value $.001 per share and 5,000,000 shares of
preferred stock, $.01 par value ("Preferred Stock"). The summary description of
the Company's securities below is qualified in its entirety by the provisions of
the Company's Certificate of Incorporation.
COMMON STOCK
As of September 12, 1997, the Company had outstanding 12,956,515 shares of
Common Stock and had 3,848,850 shares reserved for issuance for outstanding
options and warrants. Each holder of Common Stock is entitled to one vote per
share on all matters submitted to a vote of stockholders. Subject to the rights
of the holders of Preferred Stock, the holders of shares of Common Stock are
entitled to receive dividends when, as and if declared by the Board of
Directors, out of funds legally available therefor, and in the event of the
liquidation, dissolution or winding up of the Company to share ratably in all
assets remaining after the payment of liabilities. There are no preemptive or
other subscription rights, conversion rights or redemption or sinking fund
provisions with respect to shares of Common Stock. All the shares of Common
Stock outstanding upon consummation of the Offering will be fully paid and
nonassessable.
PREFERRED STOCK
The Board of Directors of the Company is empowered, without approval of the
stockholders, to authorize the issuance of up to 5,000,000 shares of Preferred
Stock, in one or more series, to establish the number of shares to be included
in each such series, and to fix the rights, powers, preferences and limitations
of each series. As a result, the Board of Directors has the power to afford the
holders of any series of Preferred Stock preferences, powers and rights, voting
or otherwise, senior to or greater than the rights of holders of Common Stock.
The ability of the Board of Directors to establish such rights, powers and
preferences to issue the Preferred Stock could be used as an anti-takeover
devise without further action on the part of the holders of Common Stock. The
Company currently has no plans to issue any Preferred Stock.
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION
The Company's Certificate of Incorporation includes certain provisions
which may render more difficult or tend to discourage attempts to acquire the
Company. Under such provisions, the Company's Board of Directors is divided into
three classes serving staggered three year terms. These provisions also preclude
the removal of a director, except for cause. These provisions cannot be amended
without the approval of holders of at least 66 2/3% of the Company's outstanding
capital stock entitled to vote thereon.
Under Delaware law, a corporation may include provisions in its certificate
of incorporation that will relieve its directors of monetary liability for
breaches of their fiduciary duty to the corporation, except under certain
circumstances, including a breach of the director's duty of loyalty, acts or
omissions of the director not in good faith or which involve intentional
misconduct or a knowing violation of law, the approval of an improper payment of
a dividend or an improper purchase by the Company of stock or any transaction
from which the director derived an improper personal benefit. The Company's
Certificate of Incorporation provides that the Company's directors are not
liable to the Company or its stockholders for monetary damages for breach of
their fiduciary duty, subject to the above described exceptions specified by
Delaware law.
As a Delaware corporation, the Company is subject to Section 203 of the
Delaware General Corporation Law. In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15%
40
<PAGE> 42
or more of a corporation's outstanding voting stock) from engaging in a
"business combination" (as defined) with a Delaware corporation for three years
following the date such person became an interested stockholder unless (i)
before such person became an interested stockholder, the board of directors of
the corporation approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination; (ii) upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owns at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding stock held by directors who are also officers of the
corporation and by employee stock plans that do not provide employees with the
rights to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer); or (iii) following the transaction
in which such person became an interested stockholder, the business combination
is approved by the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of two-thirds of
the outstanding voting stock of the corporation not owned by the interested
stockholder. Prior to Remy's acquisition of 5,218,650 shares of the Company's
Common Stock in March 1995, the Board of Directors approved such acquisition,
thus, exempting Remy from the operation of Section 203.
Under Section 203, the restrictions described above also do not apply to
certain business combinations proposed by an interested stockholder following
the announcement or notification of one of certain extraordinary transactions
involving the corporation and a person who had not been an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of a majority of the corporation's directors, if
such extraordinary transaction is approved or not opposed by a majority of the
directors who were directors prior to any person becoming an interested
stockholder during the previous three years or were recommended for election or
elected to succeed such directors by a majority of such directors.
WARRANTS
The Company currently has outstanding warrants to purchase an aggregate of
2,460,000 shares of Common Stock, including warrants (the "Remy Warrants") to
purchase 360,000 shares of Common Stock at $1.90 per share owned by Remy and
affiliates of Remy. The outstanding warrants have an average exercise price of
$8.73 per share and expiration dates ranging from August 14, 1998 to April 11,
2004. Following this Offering, and assuming the overallotment options are not
exercised, the Company will have outstanding warrants, including the Remy
Warrants, to purchase an aggregate of 1,035,000 shares of Common Stock at an
average exercise price of $8.70 per share. All outstanding warrants contain
customary anti-dilution provisions.
REGISTRATION RIGHTS
The Company currently has outstanding registration rights covering an
aggregate of 9,218,650 shares of Common Stock (5,140,473 shares following this
Offering), including 2,100,000 shares of Common Stock underlying warrants to
purchase Common Stock (675,000 shares following this Offering).
Remy has registration rights covering 5,218,650 shares of Common Stock
(3,630,262 shares following this Offering) that require the Company on up to
three separate occasions to register all or a portion of such shares at the
request of Remy. The Company also is obligated to offer to Remy the right to
include such shares of Common Stock in certain registration statements filed by
the Company subject to certain limitations on timing, the size of the
contemplated offering and the number of shares owned by Remy at such time.
Quarles, Shamrock, Four Flags and the prior shareholders of JSM each have
registration rights covering 733,779, 666,666, 111,000 and 611,878 shares of
Common Stock, respectively (zero, 133,333, 51,000 and 611,878 shares,
respectively, following this Offering) and Canpartners Investments IV, L.L.C.
("Canpartners"), the Sam Viersen Jr. Trust dated September 9, 1986, and the Sam
Viersen Family Foundation, Inc. (collectively, the "Viersen Parties") and the
prior Southland partners (the "Southland Parties") each have registration rights
covering 1,200,000, 600,000 and 300,000 shares underlying warrants to purchase
shares of Common Stock (480,000, zero and 195,000 shares following this
Offering). The Company is required to register the shares owned or underlying
warrants owned by each of Canpartners, the Viersen Parties, Southland Parties
and Four Flags at such parties request, subject to certain limitations relating
to
41
<PAGE> 43
timing and size of such offerings. The Company also has the ability to delay
such registrations under certain circumstances. In addition, such parties,
including Shamrock, Quarles, the prior shareholders of JSM and Four Flags, are
entitled to include the shares owned by or underlying warrants owned by them in
certain registration statements filed by the Company, subject to certain
limitations on timing and the size of the contemplated offering. The
registration rights of the prior shareholders of JSM may only be exercised after
December 10, 1997.
The Company is obligated to pay all expenses incidental to any registration
of Common Stock pursuant to the above described registration rights, excluding
fees of counsel to the selling stockholders, underwriters' discounts and
commissions and transfer taxes.
TRANSFER AGENT
The registrar and transfer agent for the Common Stock is Chase Mellon
Shareholder Services, New York, New York.
42
<PAGE> 44
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering and giving effect to the issuance of the
618,748 shares issued or issuable in the JSM acquisition, the Company will have
15,956,515 shares of Common Stock outstanding (16,731,340 shares if the
Underwriters' over-allotment options are exercised in full), of which 10,651,475
shares (11,426,300 shares if the Underwriters' over-allotment options are
exercised in full) will be freely tradeable without substantial restriction or
the requirement of future registration under the Securities Act. Of the
remaining 5,305,040 shares, 4,018,162 shares will be held by "affiliates" of the
Company, as that term is defined in Rule 144 under the Securities Act ("Rule
144"), and may be sold subject to the provisions of Rule 144. Of these 4,018,162
shares, 3,630,262 shares will be held by Remy and be subject to registration
rights. In addition, third parties will hold registration rights covering
1,510,211 shares of Common Stock, including 675,000 shares underlying warrants.
See "Description of Common Stock -- Registration Rights". The Company has
reserved an aggregate of 2,379,000 shares of Common Stock for issuance of
options granted or that may be granted under the Company's stock option plans
(collectively, the "Benefit Plans"), and has filed registration statements on
Form S-8 to register the issuance of such shares under the Benefit Plans, thus
permitting the sale of such shares by non-affiliates of the Company in the
public market without restrictions under the Securities Act.
The Company, the executive officers and directors of the Company and the
Selling Stockholders have agreed that they will not, for a period of 90 days
from the date of this Prospectus, directly or indirectly, offer, sell, offer to
sell, contract to sell, pledge, grant any option to purchase or otherwise sell
or dispose (or announce any offer, sale, offer of sale, pledge, contract of
sale, grant of any option to purchase or other sale or disposition) of any
shares of Common Stock or other capital stock of the Company or any securities
convertible into, or exercisable or exchangeable for, any shares of Common Stock
or other capital stock of the Company without the prior written consent of
Prudential Securities Incorporated, on behalf of the Underwriters, except that
such agreement does not prevent the Company from granting additional options
under any of the Benefit Plans or additional shares or rights to acquire shares
in connection with acquisitions of businesses or assets or other business
combinations, provided that the Company will not grant any demand registration
rights covering any shares of Common Stock issued in connection with any such
acquisitions or other business combinations that are exercisable prior to 90
days following the date of this Prospectus. Upon the expiration of the lockup
agreements, 8,583,273 shares (which include 2,379,900 shares reserved for
issuance of options granted or that may be granted pursuant to the Benefit Plans
and warrants to purchase 1,035,000 shares) held by such executive officers,
directors and Selling Stockholders will become eligible for sale in the public
market, subject to the applicable volume and manner-of-sale limitations of Rule
144 and vesting requirements with respect to options or the filing of a
registration statement pursuant to demand registration rights. Prudential
Securities Incorporated may, in its sole discretion, at any time and without
notice, release all or any portion of the shares of Common Stock subject to such
agreements.
Under Rule 144, the volume limitations permit the sale of a number of
shares during any three month period by each seller (aggregated into sales of
certain related persons) that does not exceed the greater of (a) 1% of the then
outstanding shares of Common Stock (approximately 153,000 shares immediately
after this Offering, assuming no exercise of the over-allotment options) or (b)
the average weekly trading volume of the Common Stock on the AMEX during the
four calendar weeks preceding the sale, subject to the filing of a Form 144 with
respect to such sale and certain other limitations and restrictions.
Sales of substantial amounts of Common Stock in the public market could
adversely affect the prevailing market price and could impair the Company's
future ability to raise capital through an offering of its equity securities.
43
<PAGE> 45
UNDERWRITING
The Underwriters named below (the "Underwriters") for whom Prudential
Securities Incorporated, Lehman Brothers Inc., Rauscher Pierce Refsnes, Inc. and
Simmons & Company International are acting as representatives (collectively, the
"Representatives") have severally agreed, subject to the terms and conditions
contained in the Underwriting Agreement, to purchase from the Company and the
Selling Stockholders the number of shares of Common Stock set forth below
opposite their respective names.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Prudential Securities Incorporated..........................
Lehman Brothers Inc.........................................
Rauscher Pierce Refsnes, Inc................................
Simmons & Company International.............................
---------
Total............................................. 5,915,500
=========
</TABLE>
The Company and the Selling Stockholders are obligated to sell, and the
Underwriters are obligated to purchase, all the shares of Common Stock offered
hereby if any are purchased.
The Underwriters, through their Representatives, have advised the Company
and the Selling Stockholders that they propose to offer the Common Stock
initially at the public offering price set forth on the cover page of this
Prospectus; that the Underwriters may allow to selected dealers a concession of
$ per share; and that such dealers may reallow a concession of
$ per share to certain other dealers. After the public offering, the
public offering price and the concessions may be changed by the Representative.
The Company and certain Selling Stockholders have granted the Underwriters
over-allotment options, exercisable for 30 days from the date of this
Prospectus, to purchase up to 887,325 additional shares of Common Stock,
including warrants to purchase shares of Common Stock, at the public offering
price, less underwriting discounts and commissions and the exercise price of any
warrants, as set forth on the cover page of this Prospectus. See "Principal and
Selling Stockholders". The Underwriters may exercise such options solely for the
purpose of covering over-allotments incurred in the sale of the shares of Common
Stock offered hereby. To the extent such options to purchase are exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number set
forth next to such underwriter's name in the preceding table bears to 5,915,500.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters or contribute to losses arising out of certain liabilities,
including liabilities under the Securities Act.
The Company, its executive officers and directors and the Selling
Stockholders have agreed that they will not, directly or indirectly, offer,
sell, contract to sell, grant any option to sell or otherwise dispose of,
directly or indirectly, any shares of Common Stock (or securities convertible
into or exchangeable for, or any rights to purchase or acquire, Common Stock),
for a period of 90 days after the date of this Prospectus, without the prior
written consent of Prudential Securities Incorporated, on behalf of the
Underwriters, except that such agreement does not prevent the Company from
granting additional options under any of the Benefit Plans or issuing additional
shares or rights to acquire shares in connection with acquisitions of businesses
or assets or other business combinations, provided that the Company will not
grant any demand registration rights covering any shares issued in connection
with any such acquisition or other business combination that are
44
<PAGE> 46
exercisable prior to 90 days following the date of this Prospectus. Prudential
Securities Incorporated may, in its sole discretion, at any time and without
prior notice, release all or any portion of the shares of Common Stock subject
to such agreements.
In connection with this Offering, certain Underwriters and selling group
members (if any) and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock for the purpose of stabilizing its market price. The
Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the Offering than
they are committed to purchase from the Company and the Selling Stockholders,
and in such case may purchase Common Stock in the open market following
completion of the Offering to cover all or a portion of such short position. The
Underwriters may also cover all or a portion of such short position, up to
887,325 shares of Common Stock, by exercising the Underwriters' over-allotment
options referred to above. In addition, Prudential Securities Incorporated, on
behalf of the Underwriters, may impose "penalty bids" under contractual
arrangements with the Underwriters whereby it may reclaim from an Underwriter
(or any selling group member participating in the Offering) for the account of
the other Underwriters, the selling concession with respect to Common Stock that
is distributed in this Offering but subsequently purchased for the account of
the Underwriters in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the price of the Common Stock at a
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph are required and, if they are
undertaken, they may be discontinued at any time.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholders by Fulbright & Jaworski
L.L.P., Houston, Texas. Certain legal matters will be passed upon for the
Underwriters by Baker & Botts, L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of UTI Energy Corp. at December 31,
1996 and 1995, and for each of the three years in the period ended December 31,
1996, appearing in this Prospectus and Registration Statement have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The financial statements of Viersen & Cochran Drilling Company for the
years ended December 31, 1995 and 1994 and the statements of operations and cash
flows for the year ended December 31, 1993, appearing in UTI Energy Corp.'s
Current Report on Form 8-K dated August 28, 1996, as amended by the Form 8-K/A
dated October 28, 1996, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The statement of net assets acquired as of December 31, 1996 and the
historical statement of gross contract drilling revenues, direct operating
expenses and depreciation of the drilling operations of Quarles Drilling
Corporation for the year ended December 31, 1996, incorporated by reference into
this Prospectus, have been incorporated herein in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The statement of net assets acquired as of April 11, 1997 and the
historical statement of revenues and direct and indirect operating expenses
(excluding depreciation) for the years ended December 31, 1996 and 1995 of
Southland Drilling Company, Ltd. appearing in UTI Energy Corp.'s Current Report
on Form 8-K dated April 11, 1997, as amended by the Form 8-K/A dated June 27,
1997 for the years ended December 31,
45
<PAGE> 47
1996 and 1995, have been audited by Ernst & Young LLP, independent auditors, as
set forth in their report thereon included therein and incorporated herein by
reference. Such statements are incorporated herein by reference in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed by the Company with the
Commission can be inspected at the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
the Regional Offices of the Commission at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60621-2511, and Seven World Trade Center,
13th Floor, New York, New York 10048. Copies of such material also can be
obtained from the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains an Internet Website that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission (http://www.sec.gov). Such reports, proxy and
information statements and other information concerning the Company also can be
inspected and copied at the offices of the AMEX, 86 Trinity Place, New York, New
York 10005, on which the Common Stock is listed.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act, with respect to the Common Stock offered hereby.
This Prospectus, which constitutes a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement,
certain items of which are contained in exhibits to the Registration Statement
as permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement, including the exhibits thereto,
which may be inspected without charge at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Regional Offices of the Commission, and copies of which may be
obtained from the Commission at prescribed rates. Statements made in this
Prospectus concerning the contents of any document referred to herein are not
necessarily complete. With respect to each such document filed with the
Commission as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1996;
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997;
(c) The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997, as amended by Amendment No. 1 thereto dated September 15, 1997;
(d) The Company's Current Report on Form 8-K dated August 28, 1996, as
amended by Amendment No. 1 thereto dated October 28, 1996;
(e) The Company's Current Report on Form 8-K dated January 27, 1997, as
amended by Amendment No. 1 thereto dated April 14, 1997;
(f) The Company's Current Report on Form 8-K dated April 11, 1997, as
amended by Amendment No. 1 thereto dated June 27, 1997; and
(g) The Company's Current Report on Form 8-K dated September 15, 1997.
46
<PAGE> 48
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the offering of the Common Stock pursuant hereto
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date of the filing of such documents. Any statement
contained in this Prospectus or in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon the written or oral request of
any such person, a copy of any or all of the documents incorporated by reference
herein, other than the exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates. Written or oral requests for such copies should be directed to the
Company at 16800 Greenspoint Park, Suite 225N, Houston, Texas 77060, Attention:
Corporate Secretary (Telephone number: (281) 873-4111).
47
<PAGE> 49
UTI ENERGY CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-2
Audited Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1995 and
1996................................................... F-3
Consolidated Statements of Income for the years ended
December 31, 1994, 1995 and 1996....................... F-4
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1994, 1995, and
1996................................................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996....................... F-6
Notes to Consolidated Financial Statements................ F-7
Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheet as of December 31,
1996 and June 30, 1997................................. F-17
Condensed Consolidated Statements of Income for the three
months and six months ended June 30, 1996 and June 30,
1997................................................... F-18
Condensed Consolidated Statements of Changes in
Shareholders' Equity for the six months ended June 30,
1997................................................... F-19
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 1996 and 1997................ F-20
Notes to Condensed Consolidated Financial Statements...... F-21
</TABLE>
F-1
<PAGE> 50
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
UTI Energy Corp.
We have audited the accompanying consolidated balance sheets of UTI Energy
Corp. as of December 31, 1995 and 1996, and the related consolidated statements
of income, changes in shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
UTI Energy Corp. at December 31, 1995 and 1996, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/S/ ERNST & YOUNG LLP
Philadelphia, Pennsylvania
February 28, 1997, except for Note 13,
as to which the date is September 5, 1997
F-2
<PAGE> 51
UTI ENERGY CORP.
CONSOLIDATED BALANCE SHEETS
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Current Assets:
Cash...................................................... $ 2,273 $ 570
Accounts receivable, net of allowance for doubtful
accounts of $193 in 1995 and $305 in 1996.............. 9,370 17,831
Other receivables......................................... 669 598
Materials and supplies.................................... 803 874
Prepaid expenses.......................................... 2,261 1,749
------- -------
15,376 21,622
Property and Equipment:
Land...................................................... 775 749
Buildings and improvements................................ 1,792 1,760
Machinery and equipment................................... 33,504 58,421
Oil and gas working interests............................. 1,690 1,732
Construction in process................................... 292 338
------- -------
38,053 63,000
Less accumulated depreciation and amortization............ 20,269 23,149
------- -------
17,784 39,851
Deferred Income Taxes....................................... 551 --
Other Assets................................................ 279 397
------- -------
$33,990 $61,870
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt......................... $ 2,542 $ 4,507
Accounts payable.......................................... 4,244 7,945
Accrued payroll costs..................................... 1,399 2,445
Other accrued expenses.................................... 1,764 964
------- -------
9,949 15,861
Long-Term Debt, less current portion........................ 8,701 14,658
Deferred Income Taxes....................................... -- 8,305
Other Liabilities........................................... 350 350
Commitments and Contingencies
Shareholders' Equity
Preferred stock, $.01 par value, 5,000,000 shares
authorized on August 28, 1997, none issued or
outstanding in 1995 and 1996........................... -- --
Common stock, $.001 par value, 50,000,000 (10,000,000
prior to August 28, 1997) shares authorized, 10,398,666
shares issued and outstanding in 1995, 10,807,008
shares issued and outstanding in 1996.................. 10 11
Additional capital........................................ 15,088 17,870
Retained earnings......................................... 63 4,916
Restricted stock plan unearned compensation............... (171) (101)
------- -------
14,990 22,696
------- -------
$33,990 $61,870
======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE> 52
UTI ENERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
----------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AND
SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues:
Oilfield service...................................... $ 35,831 $ 39,844 $ 96,628
Other................................................. 444 280 673
----------- ---------- ----------
36,275 40,124 97,301
Costs and Expenses:
Cost of sales
Oilfield service................................... 27,710 32,507 77,891
Other.............................................. 147 178 366
Selling, general and administrative................... 4,958 5,082 7,768
Depreciation and amortization......................... 2,302 2,552 4,292
----------- ---------- ----------
35,117 40,319 90,317
----------- ---------- ----------
Operating Income (Loss)................................. 1,158 (195) 6,984
Other Income (Expense)
Interest expense...................................... (260) (265) (1,148)
Other, net............................................ 461 293 1,341
----------- ---------- ----------
201 28 193
----------- ---------- ----------
Income (Loss) from Continuing Operations Before Income
Taxes................................................. 1,359 (167) 7,177
Income Taxes............................................ 293 (592) 2,324
----------- ---------- ----------
Income from Continuing Operations....................... 1,066 425 4,853
Income from Discontinued Operations..................... 26 38 --
Loss on Disposal of Discontinued Operations............. -- (361) --
----------- ---------- ----------
Net Income.............................................. $ 1,092 $ 102 $ 4,853
=========== ========== ==========
Primary Earnings Per Common Share:
Continuing operations................................. $ 0.11 $ 0.04 $ 0.42
Discontinued operations............................... -- -- --
Loss on disposal of discontinued operations........... -- (0.03) --
----------- ---------- ----------
$ 0.11 $ 0.01 $ 0.42
=========== ========== ==========
Fully Diluted Earnings Per Common Share:
Continuing operations................................. $ 0.11 $ 0.04 $ 0.42
Discontinued operations............................... -- -- --
Loss on disposal of discontinued operations........... -- (0.03) --
----------- ---------- ----------
$ 0.11 $ 0.01 $ 0.42
=========== ========== ==========
Average Common Shares Outstanding:
Primary............................................... 9,732,000 9,898,668 11,439,186
Fully Diluted......................................... 9,732,000 9,898,668 11,559,492
</TABLE>
See accompanying notes.
F-4
<PAGE> 53
UTI ENERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
<TABLE>
<CAPTION>
COMMON STOCK RESTRICTED
---------------------- RETAINED STOCK PLAN
NUMBER ADDITIONAL EARNINGS UNEARNED
OF SHARES PAR $.001 CAPITAL (DEFICIT) COMPENSATION TOTAL
---------- --------- ---------- --------- ------------ -------
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993...... 9,732,000 $10 $14,109 $(1,131) $(400) $12,588
Net income...................... -- -- 1,092 -- 1,092
Vesting of restricted stock
plan......................... -- (15) -- 80 65
---------- --- ------- ------- ----- -------
Balance at December 31, 1994...... 9,732,000 10 14,094 (39) (320) 13,745
Net income...................... -- -- 102 -- 102
Issuance of common stock........ 666,666 -- 994 -- -- 994
Vesting of restricted stock
plan......................... -- -- -- 149 149
---------- --- ------- ------- ----- -------
Balance at December 31, 1995...... 10,398,666 10 15,088 63 (171) 14,990
Net income...................... -- -- 4,853 -- 4,853
Warrants issued................. -- 710 -- -- 710
Exercise of options............. 408,342 1 1,838 -- -- 1,839
Vesting of restricted stock
plan......................... -- 234 -- 70 304
---------- --- ------- ------- ----- -------
Balance at December 31, 1996...... 10,807,008 $11 $17,870 $ 4,916 $(101) $22,696
========== === ======= ======= ===== =======
</TABLE>
See accompanying notes.
F-5
<PAGE> 54
UTI ENERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1995 1996
------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows From Operating Activities
Income from continuing operations......................... $ 1,066 $ 425 $ 4,853
Adjustments to reconcile income from continuing operations
to net cash provided by continuing operations:
Depreciation and amortization........................ 2,302 2,552 4,292
Deferred income taxes................................ (187) (650) 799
Amortization of debt discount........................ -- -- 68
Stock compensation expense........................... 65 149 304
Provision (recovery) for bad debts................... 70 (10) 112
Gain on disposal of fixed assets..................... (142) (63) (517)
Change in operating assets and liabilities, net of
effect of business acquired:
Accounts receivable and prepaids.................. 956 (2,316) (7,990)
Materials and supplies............................ (82) 35 (71)
Accounts payable, accrued expenses and accrued
payroll costs................................... (824) 564 4,647
Other............................................. (38) (86) (174)
------- -------- -------
Net cash provided by continuing operations................ 3,186 600 6,323
Net cash provided (used) by discontinued operations....... 1,991 (1,108) --
------- -------- -------
Net cash provided (used) by operating
activities...................................... 5,177 (508) 6,323
Cash Flows from Investing Activities
Capital expenditures...................................... (1,343) (1,910) (4,311)
Acquisitions of businesses................................ -- (12,946) (6,000)
Proceeds from sale of discontinued operations............. -- 4,870 --
Proceeds from sale of property and equipment.............. 350 304 1,113
------- -------- -------
Net cash used by investing activities............. (993) (9,682) (9,198)
Cash Flows From Financing Activities
Proceeds from issuance of long-term debt.................. 264 9,264 2,600
Repayments of long-term debt.............................. (892) (1,580) (2,467)
Proceeds from issuance of common stock.................... -- 994 1,039
------- -------- -------
Net cash provided (used) by financing
activities...................................... (628) 8,678 1,172
------- -------- -------
Net Increase (Decrease) in Cash............................. 3,556 (1,512) (1,703)
Cash at Beginning of Year................................... 229 3,785 2,273
------- -------- -------
Cash at End of Year......................................... $ 3,785 $ 2,273 $ 570
======= ======== =======
</TABLE>
See accompanying notes.
F-6
<PAGE> 55
UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
UTI Energy Corp. (the "Company") is engaged in the businesses of contract
drilling, providing oil and gas well stimulation, and cementing and completion
services. The primary market for the Company's services is the domestic onshore
oil and gas industry, and the customers consist primarily of major oil
companies, and independent oil and gas producers.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly owned. Intercompany accounts and
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Inventories
Materials and supplies are stated at the lower of cost (first-in, first-out
method) or market.
Property and Equipment
Property and equipment are stated on the basis of cost. Improvements are
capitalized and depreciated over the period of benefit. Amortization of assets
acquired under capital leases is included in depreciation expense. The provision
for depreciation was determined by the straight-line method over the estimated
useful lives of the related assets which are as follows: buildings -- 30 years,
building improvements -- 7-10 years, machinery and equipment -- 2-15 years.
Working Interests in Oil and Gas Wells
The Company accounts for its oil and gas operations under the successful
efforts method of accounting.
The Company recognizes oil and gas revenue from its working interests based
upon the sales method. Working interests in wells are included in property and
equipment and are stated at cost less accumulated amortization. Amortization is
based on the units of production method utilizing estimated reserves and sales
of oil and gas from the wells.
Revenue Recognition
Revenues are recognized when services have been performed. Revenues from
footage and turnkey drilling contracts are recognized using the percentage of
completion method of accounting. Losses, if any, are provided for in the period
in which the loss is determined.
Earnings Per Share
Earnings per common share is calculated by dividing net income by the
aggregate of the weighted average shares outstanding during the period and the
dilutive effect, if any, of common stock equivalents that are outstanding.
F-7
<PAGE> 56
UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
Stock-Based Compensation
The Company follows the method of accounting for employee stock
compensation plans prescribed by APB No. 25, which is permitted by Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
("SFAS No. 123"). In accordance with APB No. 25, the Company has not recognized
compensation expense for stock options because in each case the exercise price
of the options equals the market price of the underlying stock on the date of
grant, which is the measurement date.
Changes in Accounting Principles
Effective January 1, 1996, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of. This statement
requires companies to write down to estimated fair value long-lived assets that
are impaired. This change did not have a significant effect on the Company's
financial statements.
Reclassifications
Certain items in the prior years' financial statements have been
reclassified to conform with the presentation in the current year.
2. ACQUISITIONS
Effective November 1, 1995, the Company purchased all of the capital stock
of FWA Drilling Company, Inc. ("FWA") for $14,000,000 in cash. FWA is engaged in
contract drilling in Texas. The acquisition was accounted for using the purchase
method, and FWA's operating results since November 1, 1995, have been
consolidated with the operating results of the Company. The estimated fair
market value of the assets acquired exceeded the purchase price by $4.9 million,
which reduced long-term assets acquired.
On August 14, 1996, the Company purchased all of the capital stock of the
Viersen & Cochran Drilling Company ("Viersen"). Viersen was engaged in contract
drilling in Oklahoma but had suspended its operations prior to the closing date.
The consideration paid for Viersen consisted of (i) $6,000,000 in cash paid on
August 14, 1996; (ii) a two-year $8,000,000 promissory note executed by the
Company in favor of the Seller; and (iii) stock warrants with a two-year term to
purchase 600,000 shares of the Company's common stock, $.001 par value, at $5
per share. The acquisition was accounted for using the purchase method, and
Viersen's operating results since August 14, 1996, have been consolidated with
the operating results of the Company.
The following pro forma operating results reflect the inclusion of FWA for
1994 and 1995, and the inclusion of Viersen for 1995 and 1996:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue................................................. $72,715 $77,405 $99,027
======= ======= =======
Income from continuing operations....................... $ 2,343 $ 151 $ 3,935
======= ======= =======
Earnings per share from continuing operations........... $ .24 $ .02 $ .34
======= ======= =======
</TABLE>
F-8
<PAGE> 57
UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
3. DISCONTINUED OPERATIONS
On September 29, 1995, the Company sold its oilfield supply business for
cash of $4,870,000. The net results of the oilfield supply business for all
periods presented are reported separately in the Consolidated Statement of
Income as "Income from discontinued operations." Prior period financial
statements have been restated to report the oilfield supply business as a
discontinued operation.
The following is a summary of the results of operations of the Company's
oilfield supply business:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revenue..................................................... $18,617 $13,407
======= =======
Income from operations (net of income taxes of $13, and
$14)...................................................... $ 26 $ 38
Loss on disposal (net of income tax benefit of $129)........ -- (361)
------- -------
Income (loss) from discontinued operations.................. $ 26 $ (323)
======= =======
</TABLE>
4. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31, 1995 and
1996, are as follows:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Alternative minimum tax credits........................... $ 1,056 $ 675
Investment tax credits.................................... 531 232
Fuel tax credit........................................... 73 --
Accrued liabilities....................................... 646 780
Valuation allowance....................................... (636) (232)
------- -------
Total deferred tax asset.......................... 1,670 1,455
Deferred tax liabilities:
Depreciation.............................................. (1,119) (9,760)
------- -------
Net deferred tax asset (liability).......................... $ 551 $(8,305)
======= =======
</TABLE>
SFAS No. 109 requires that deferred tax assets be reduced by a valuation
allowance if it is more likely than not that some or all of the deferred tax
assets will not be realized. During 1995 and 1996, the Company decreased its
valuation allowance since management believes that it is more likely than not
that the deferred tax asset will be realized primarily from future taxable
income over the next several years. Management assesses the realizability of the
Company's deferred tax asset on a continuous basis and adjusts the valuation
allowance in the event that circumstances affecting the realization of the
deferred tax asset change.
At December 31, 1996, the Company has available approximately $232,000 of
investment tax credit carryforwards for which a valuation allowance has been
provided in as much as it is the Company's opinion that these credits will not
be available to reduce future tax payments. The credits expire between 1998 and
2001. The Company utilizes the flow-through method for recognizing investment
tax credits.
F-9
<PAGE> 58
UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
The components of the provision for income taxes from continuing operations
are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1994 1995 1996
----- ----- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes:
Current:
Federal................................................. $ 442 $ 57 $1,372
State................................................... 38 1 153
----- ----- ------
480 58 1,525
Deferred:
Federal................................................. (95) (622) 740
State................................................... (92) (28) 59
----- ----- ------
(187) (650) 799
----- ----- ------
$ 293 $(592) $2,324
===== ===== ======
</TABLE>
The difference between tax expense on continuing operations computed at the
federal income tax rate of 34% and actual tax expense is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1994 1995 1996
----- ----- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Taxes at 34% applied to pre-tax income (loss)............. $ 462 $ (57) $2,440
State income tax.......................................... (36) (17) 141
Permanent differences, principally nondeductible
expenses................................................ 125 81 123
Change in valuation allowance and realization of tax
credit carryforwards.................................... (217) (577) (404)
Other..................................................... (41) (22) 24
----- ----- ------
$ 293 $(592) $2,324
===== ===== ======
</TABLE>
5. WARRANTS
As part of the consideration for redemption of its Series A Preferred Stock
in December 1993, the Company issued warrants to purchase up to 486,000 shares
of Common Stock at an exercise price of $2.67 per share. The warrants are
exercisable in whole or in part for the three years beginning December 14, 1995.
As part of the consideration paid to acquire Viersen & Cochran Drilling
Company, the Company issued warrants to purchase up to 600,000 shares of Common
Stock at an exercise price of $5 per share. The warrants are exercisable in
whole or part for two years beginning August 14, 1996.
F-10
<PAGE> 59
UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
6. LEASES
Future minimum payments, for each year and in the aggregate, under capital
leases and noncancelable operating leases with initial or remaining terms of one
year or more consist of the following at December 31, 1996:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(IN THOUSANDS)
<S> <C> <C>
1997........................................................ $225 $297
1998........................................................ 54 236
1999........................................................ 2 116
2000........................................................ -- 90
2001 and thereafter......................................... -- 83
---- ----
Total minimum lease payments................................ 281 $822
====
Amounts representing interest............................... 22
----
Present value of net minimum lease payments................. $259
====
</TABLE>
Rental expense for all operating leases was approximately $221,000,
$181,000 and $448,000 for the years ended December 31, 1994, 1995 and 1996,
respectively.
7. SUPPLEMENTAL CASH FLOW INFORMATION
On August 14, 1996, the Company purchased all of the capital stock of
Viersen & Cochran Drilling Company. In connection with the acquisition, the
Company incurred deferred tax liabilities, assumed certain other liabilities and
issued debt and Common Stock warrants to the seller as follows (in thousands):
<TABLE>
<S> <C>
Cash paid for the capital stock............................. $ 6,000
Long-term debt issued....................................... 8,000
Less: discount............................................ (312)
Deferred tax liabilities.................................... 8,057
Other directly related liabilities.......................... 100
Common Stock warrants issued................................ 710
-------
Total purchase price........................................ $22,555
=======
</TABLE>
Other non-cash investing and financing activities for 1996 are as follows
(in thousands):
<TABLE>
<S> <C>
Tax benefit of exercised options reflected as additional
capital................................................... $ 800
Long-term debt issued for equipment acquisitions............ 34
</TABLE>
Interest paid amounted to approximately $388,000, $427,000 and $893,000 for
the years ended December 31, 1994, 1995 and 1996, respectively.
Income taxes of approximately $329,000, $339,000 and $1,389,000 were paid
in the years ended December 31, 1994, 1995 and 1996, respectively.
F-11
<PAGE> 60
UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
8. LONG-TERM DEBT
The Company's long-term debt at December 31, 1995 and 1996, consisted of
the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Promissory note, other, dated August 14, 1996, fixed rate
(6.0%), due in two installments of $1,500,000 due August
1997 and February 1998, with the final installment of
$5,000,000 due August 1998................................ $ -- $ 8,000
</TABLE>
Promissory notes, financial institution, dated November 20,
1995, variable rate (7.975% at December 31, 1996) due in
$150,000 monthly installments through 2000................ 8,850 7,050
Revolving credit agreement, bank, effective December 7,
1995, up to $8,400,000 through June 30, 1998, at the lower
of the prime rate or other rate options available at the
time of borrowing (8.25% at December 31, 1996)............ -- 2,600
Promissory note, other, dated December 15, 1993, fixed rate
(5.75%), due in minimum annual installments of $500,000
through 1999.............................................. 2,000 1,500
Capital lease obligations, interest at fixed (ranging from
5.5% to 9.5%) and variable (8.25% at December 31, 1996)
rates, due in varying amounts through February 1999....... 393 259
------- -------
11,243 19,409
Less unamortized discount................................... -- 244
Less current portion........................................ 2,542 4,507
------- -------
$ 8,701 $14,658
======= =======
Maturities of long-term debt, excluding unamortized discount, for the
succeeding five years as of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
LONG-TERM CAPITAL
DEBT LEASES TOTAL
--------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
1997.......................................... $ 4,300 $207 $ 4,507
1998.......................................... 11,400 50 11,450
1999.......................................... 1,800 2 1,802
2000.......................................... 1,650 -- 1,650
</TABLE>
The promissory note dated August 14, 1996, is guaranteed by a subsidiary of
the Company and is secured by certain assets of that subsidiary.
The promissory notes dated November 20, 1995, are secured by certain
drilling equipment owned by subsidiaries of the Company and the Company is a
guarantor of these notes. The notes also include certain financial covenants
covering tangible net worth, debt service coverage and leverage ratios.
The revolving credit agreement, which is to be used for working capital and
general corporate purposes, is secured by the pledge of Company accounts
receivable and inventory. Maximum borrowings under this facility in 1996 were
$6,000,000, with average borrowings during the year of $1,116,308 and a weighted
average interest rate on borrowings during the year of 8.32%. A standby letter
of credit of $400,000 is issued under this agreement. The agreement also
includes certain financial covenants covering tangible net worth, debt service
F-12
<PAGE> 61
UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
coverage and prohibits the payment of cash dividends by the Company. The entire
outstanding balance at December 31, 1996 has been treated as long-term, as at
that date it was the Company's intention not to pay this amount down until June
1998.
The promissory note dated December 15, 1993, requires annual mandatory
prepayments not exceeding $500,000 per year of principal, commencing on April 1,
1995, until the note is fully repaid in an amount equal to the Company's excess
cash flow as defined. Excess cash flow is generally net income adjusted for
noncash expenditures, less the Company's $500,000 required annual redemption and
the lesser of $1,750,000 or actual capital expenditures. The Company will make a
mandatory prepayment of $500,000 on April 1, 1997.
9. STOCK PLANS
In December 1993, the Company established a Restricted Stock Plan and a
Non-Qualified Stock Option Plan.
Under the Restricted Plan, 150,000 shares of Common Stock were awarded to
certain full-time employees of the Company. Common Stock awarded under the
Restricted Stock Plan vests in five equal annual installments contingent upon
the beneficiaries' continued employment by the Company. As of December 31, 1996,
38,010 shares were unvested.
Under the Non-Qualified Stock Option Plan, the Company awarded options to
senior management to purchase 1,459,800 shares of Common Stock with an exercise
price of $2.67 per share. The options vest in five equal annual installments
contingent upon continued employment by the Company. On December 15, 1995, the
options were repriced from $2.67 to prices ranging from $1.77 (the fair market
value on December 15, 1995) to $2.13 depending upon the individual as well as
the vesting date of the option. In addition, the term of each option was reduced
from ten years from the original date of grant to five years from date of
repricing. As of December 31, 1996, options to purchase 540,522 shares were
exercisable and options to purchase 350,358 shares were unvested.
In July 1996, the Company's shareholders approved the award of options to
purchase 360,000 shares of the Company's common stock at a price equal to the
fair market value of the stock at the date of grant to Remy Investors and
Consultants, Inc., general partner of Remy Capital Partners III, L.P., an owner
of 48.2% of the Company's common stock. These options expire five years from the
date of grant. The options were awarded in December of 1995 as a result of the
services Remy Investors and Consultants, Inc. rendered in connection with the
acquisition and related financing of FWA and the Company's sale of the assets of
Union Supply Company.
In July 1996, the Company's shareholders approved the Non-Employee Director
Stock Option Plan ("Director Plan"), a non-qualified stock option plan. Under
the Director Plan, options to purchase up to an aggregate of 300,000 shares of
Common Stock of the Company may be granted to non-employee directors of the
Company. The Director Plan provides for the grant of an option to purchase 7,500
shares of Common Stock to each non-employee director as of December 19, 1995 and
to each future non-employee director as of the date he is first elected. Options
granted pursuant to the Director Plan stipulate that the purchase price per
share be equal to the fair market value of the Common Stock as of the date of
grant. Commencing on December 31, 1996, each non-employee director who has
served for a period of at least one year will automatically be granted on each
December 31 an option to purchase 3,750 shares of Common Stock at a purchase
price equal to the fair market value of the Common Stock as of the date of
grant. At December 31, 1996, 266,250 shares were available for granting of such
options. No options under this plan will be granted after December 18, 2005. All
options issued expire five years from the date of grant.
In July 1996, the Company's shareholders approved the UTI Energy Corp. 1996
Employee Stock Option Plan. Under the plan, the Company can award options on up
to 900,000 shares of Common Stock to certain full-time employees at a price
equal to the fair market value of the stock at the date the option is granted.
F-13
<PAGE> 62
UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
During 1996, the Company awarded options to purchase 285,000 shares of Common
Stock at an exercise price of $4.58 per share. The options vest over one to five
years, with no options being exercisable at December 31, 1996.
FASB Statement 123 requires that pro forma information regarding net income
and earnings per share be determined as if the Company had accounted for its
employee stock options under the fair value method as defined in that Statement
for options granted or modified after December 31, 1994. The fair value for
applicable options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1995
and 1996, respectively: risk-free interest rates of 5.38% and 6.70%; dividend
yield of 0%; volatility factors of the expected market price of the Company's
common stock of .307 and .438 and a weighted average expected life of the option
of 2.64 and 3.52 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands except for earnings per share
information):
<TABLE>
<CAPTION>
1995 1996
----- ------
<S> <C> <C>
Pro forma net income (loss)................................ $(107) $4,739
Pro forma earnings (loss) per share:
Primary.................................................. $(.01) $ .41
Fully diluted............................................ $(.01) $ .41
</TABLE>
A summary of the Company's stock option activity and related information
for the years ended December 31 follows:
<TABLE>
<CAPTION>
WEIGHTED-
SHARES AVERAGE
UNDER EXERCISE
OPTION PRICE
--------- ---------
<S> <C> <C>
Outstanding, December 31, 1993 and 1994..................... 1,459,800 $2.67
Granted................................................... 1,303,380 $1.85
Cancelled................................................. (920,880) $2.67
---------
Outstanding, December 31, 1995.............................. 1,842,300 $2.09
Granted................................................... 296,250 $4.86
Exercised................................................. (408,342) $2.54
Cancelled................................................. (160,578) $2.67
---------
Outstanding, December 31, 1996.............................. 1,569,630 $2.43
=========
Exercisable, December 31,
1994...................................................... 291,960 $2.67
1995...................................................... 1,133,700 $2.12
1996...................................................... 923,040 $1.88
</TABLE>
F-14
<PAGE> 63
UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
Weighted-average fair value of options granted during 1995 and 1996 were
$.44 per share and $1.86 per share, respectively.
Exercise prices for options outstanding as of December 31, 1996, ranged
from $1.77 per share to $11.79 per share. The weighted-average remaining
contractual life of those options is 4.25 years.
10. DEFINED CONTRIBUTION PLANS
The Company maintains two defined contribution plans. Employees who have
completed one year of service (1,000 active work hours) and are age 21 or older
are eligible to participate. Company matching provisions and vesting schedules
vary by plan. For the years ended December 31, 1994, 1995 and 1996, the Company
made matching contributions totaling approximately $189,000, $156,000 and
$406,000, respectively. Effective January 1, 1997, the two plans were combined.
11. CONTINGENCIES
The Company is involved in several claims arising in the ordinary course of
business. In the opinion of management, all of these claims are covered by
insurance and these matters will not have a material adverse effect on the
Company's financial position.
The Company is partially self-insured for employee health insurance claims
and for workers' compensation. The Company incurs a maximum of $75,000 per
employee under medical claims and a maximum of $250,000 per event for workers'
compensation claims. Although the Company believes that adequate reserves have
been provided for expected liabilities arising from its self-insured
obligations, it is reasonably possible that management's estimates of these
liabilities will change over the near term as circumstances develop.
12. FINANCIAL INSTRUMENTS
Concentrations of credit risk:
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash balances and trade
accounts receivable.
In 1996, one customer accounted for approximately 25% of the revenue and
approximately 20% of accounts receivable at December 31, 1996.
The Company performs ongoing credit evaluations of its customers and
generally does not require material collateral. The Company provides allowances
for potential credit losses when necessary.
The Company maintains cash balances with various financial institutions.
These financial institutions are located throughout the country and Company
policy is designed to limit exposure to any one institution. However, at
December 31, 1996, the Company had cash in one institution in excess of insured
limits. The Company performs periodic evaluations of the relative credit
standing of those financial institutions that are considered in the Company's
investment strategy to ensure high credit quality.
Cash, accounts receivable and accounts payable: The carrying amounts
reported in the balance sheets approximate fair value.
Long and short-term debt: The carrying amounts of the Company's borrowings
under its short-term revolving credit arrangements and all promissory notes
approximate their fair value. The fair value of debt was estimated by management
based upon current interest rates available to the Company at the respective
balance sheet dates for similar issues.
F-15
<PAGE> 64
UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
13. SUBSEQUENT EVENTS
On January 27, 1997, the Company acquired the contract drilling assets of
Quarles Drilling Corporation ("Quarles") for $16.2 million, consisting of $8.1
million in cash and 733,779 shares of Common Stock as adjusted pursuant to the
purchase agreement. The Acquisition was accounted for using the purchase method,
and Quarles operating results since January 27, 1997 have been consolidated with
the operating results of the Company.
On February 13, 1997, the Company exercised its option to purchase a leased
facility for $485,000.
On April 11, 1997, the Company acquired the land drilling operations of
Southland Drilling Company Ltd., ("Southland") for approximately $27.1 million
in cash and a five-year warrant to purchase 300,000 shares of Common Stock, at
an exercise price of $16 per share (the "Southland Acquisition"). The acquired
assets included eight land drilling rigs, various equipment and rig components,
and other equipment used in Southland's contract drilling business. The Company
also assumed various drilling contracts of Southland and hired Southland's rig
crews. The Acquisition was accounted for using the purchase method, and
Southland's operating results since April 11, 1997 have been consolidated with
the operating results of the Company.
The Southland Acquisition was financed with a combination of the Company's
existing cash, the net proceeds from the private placement of $25 million
principal amount of its 12% Senior Subordinated Notes due 2001 (the
"Subordinated Notes") and the net proceeds from a new $25 million 38-month term
loan facility. The Company also increased the amount available under its line of
credit from $8.4 million to $12.0 million. The Subordinated Notes were issued by
the Company at a discount of 2% together with a seven-year warrant to purchase
1,200,000 shares of Common Stock at an exercise price of $10.83 per share. The
warrants are subject to call at $.08 per warrant after six months under certain
circumstances if the market price of the Common Stock is greater than $15 per
share over a 90 day period. The Company utilized a portion of the net proceeds
from the term loan to refinance approximately $18.6 million in indebtedness that
was incurred in connection with its prior acquisitions of FWA, Viersen and the
contract drilling assets of Quarles. The indebtedness under the term loan is
secured by substantially all of the Company's rig assets, inventory and accounts
receivable.
On July 28, 1997 the Company's Board of Directors approved a 3 for 1 stock
split subject to receiving stockholder approval of an increase in the number of
authorized shares of the Company's common stock from 10 million to 50 million
shares. On August 28, 1997 the Company's stockholders approved the increase in
authorized shares of the Company's Common Stock and also approved an amendment
to the Company's Restated Certificate of Incorporation to authorize the issuance
of up to 5,000,000 shares of preferred stock. The stock split has been given
retroactive effect in these financial statements.
F-16
<PAGE> 65
UTI ENERGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
(SEE NOTE) (UNAUDITED)
------------ -----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets
Cash...................................................... $ 570 $ 49
Accounts receivable, net of allowance for doubtful
accounts of $305 in 1996 and $413 in 1997.............. 17,831 27,838
Other receivables......................................... 598 688
Materials and supplies.................................... 874 1,109
Prepaid expenses.......................................... 1,749 1,213
-------- --------
21,622 30,897
Property and Equipment
Land...................................................... 749 899
Buildings and improvements................................ 1,760 2,196
Machinery and equipment................................... 58,421 96,736
Oil and gas working interests............................. 1,732 1,813
Construction in process................................... 338 923
-------- --------
63,000 102,567
Less accumulated depreciation and amortization............ 23,149 26,704
-------- --------
39,851 75,863
Goodwill, less amortization of $0 in 1996 and $166 in
1997...................................................... -- 9,772
Other Assets................................................ 397 421
-------- --------
$ 61,870 $116,953
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt......................... $ 4,507 $ 5,226
Accounts payable.......................................... 7,945 10,070
Accrued payroll costs..................................... 2,445 3,468
Other accrued expenses.................................... 964 3,725
-------- --------
15,861 22,489
Long-Term Debt, less current portion........................ 14,658 48,520
Deferred Income Taxes....................................... 8,305 8,305
Other Liabilities........................................... 350 350
Commitments and Contingencies
Shareholders' Equity
Preferred stock $.01 par value, 5,000,000 shares
authorized on August 28, 1997, none issued or
outstanding in 1996 and 1997........................... -- --
Common stock, $.001 par value, 50,000,000 (10,000,000
prior to August 28, 1997) shares authorized,10,807,008
shares issued and outstanding in 1996, 12,110,187
shares issued and outstanding in 1997.................. 11 12
Additional capital........................................ 17,870 28,816
Retained earnings......................................... 4,916 8,537
Restricted stock plan unearned compensation............... (101) (76)
-------- --------
22,696 37,289
-------- --------
$ 61,870 $116,953
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
- ---------------
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements but does not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. See Note 1 to condensed consolidated
financial statements.
F-17
<PAGE> 66
UTI ENERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
1996 1997 1996 1997
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues
Oilfield service........................ $19,586 $42,139 $39,906 $76,434
Other................................... 73 301 159 374
------- ------- ------- -------
19,659 42,440 40,065 76,808
Costs and Expenses
Cost of sales
Oilfield service..................... 16,107 33,056 32,645 60,385
Other................................ 26 44 57 77
Selling, general and administrative..... 1,774 2,840 3,447 5,174
Depreciation and amortization........... 1,006 2,475 1,979 4,020
------- ------- ------- -------
18,913 38,415 38,128 69,656
------- ------- ------- -------
Operating Income.......................... 746 4,025 1,937 7,152
Other Income (Expense)
Interest................................ (209) (1,275) (432) (1,754)
Other, net.............................. 107 27 854 254
------- ------- ------- -------
(102) (1,248) 422 (1,500)
------- ------- ------- -------
Income Before Income Taxes................ 644 2,777 2,359 5,652
Income Taxes.............................. 163 1,000 678 2,031
------- ------- ------- -------
Net Income................................ $ 481 $ 1,777 $ 1,681 $ 3,621
======= ======= ======= =======
Earnings Per Common Share:
Primary................................. $ 0.04 $ 0.13 $ 0.15 $ 0.27
======= ======= ======= =======
Fully Diluted........................... $ 0.04 $ 0.13 $ 0.15 $ 0.26
======= ======= ======= =======
Average Common Shares Outstanding
Primary................................. 11,305,881 13,540,446 10,852,275 13,403,994
Fully Diluted........................... 11,378,907 14,097,471 10,888,188 13,682,508
</TABLE>
See notes to condensed consolidated financial statements.
F-18
<PAGE> 67
UTI ENERGY CORP.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
<TABLE>
<CAPTION>
RESTRICTED
STOCK PLAN
NUMBER PAR ADDITIONAL RETAINED UNEARNED
OF SHARES $.001 CAPITAL EARNINGS COMPENSATION TOTAL
--------- ----- ---------- -------- ------------ -------
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996......... 10,807,008 $11 $17,870 $4,916 $(101) $22,696
Net income......................... -- -- 3,621 -- 3,621
Issuance of common stock........... 733,779 1 8,099 -- -- 8,100
Exercise of options................ 83,400 -- 141 -- -- 141
Exercise of warrants............... 486,000 -- 1,296 -- -- 1,296
Warrants issued.................... -- 1,410 -- -- 1,410
Vesting of restricted stock plan... -- -- -- 25 25
----------- --- ------- ------ ----- -------
Balance at June 30, 1997............. 12,110,187 $12 $28,816 $8,537 $ (76) $37,289
=========== === ======= ====== ===== =======
</TABLE>
See notes to condensed consolidated financial statements.
F-19
<PAGE> 68
UTI ENERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1996 1997
------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash Flows From Operating Activities
Income from operations.................................... $ 1,681 $ 3,621
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 1,979 4,020
Deferred income taxes.................................. 97 --
Amortization of debt discount.......................... -- 115
Stock compensation expense............................. 21 25
Provision for bad debts................................ 17 108
Gain on disposal of fixed assets....................... (38) (290)
Change in operating assets and liabilities, net of
effect of businesses acquired:
Accounts receivable and prepaids..................... (2,624) (9,669)
Materials and supplies............................... (171) (235)
Accounts payable, accrued expenses and accrued
payroll costs....................................... 1,233 5,909
Other................................................ 141 (31)
------- --------
Net cash provided by operating activities......... 2,336 3,573
Cash Flows From Investing Activities
Capital expenditures...................................... (2,074) (6,767)
Acquisition of businesses................................. -- (35,247)
Proceeds from sale of property and equipment.............. 163 617
------- --------
Net cash used by investing activities............. (1,911) (41,397)
Cash Flows From Financing Activities
Proceeds from issuance of long-term debt.................. 34 57,190
Repayments of long-term debt.............................. (1,041) (20,324)
Proceeds from issuance of common stock, options and
warrants............................................... -- 437
------- --------
Net cash provided (used) by financing
activities...................................... (1,007) 37,303
------- --------
Net Decrease in Cash........................................ (582) (521)
Cash at Beginning of Period................................. 2,273 570
------- --------
Cash at End of Period....................................... $ 1,691 $ 49
======= ========
</TABLE>
See notes to condensed consolidated financial statements.
F-20
<PAGE> 69
UTI ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements at June 30,
1997, have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation of the financial position and operating
results for the interim periods have been included. The results of operations
for the three and six months ended June 30, 1997, are not necessarily indicative
of the results for the entire year ending December 31, 1997. For further
information, refer to the Consolidated Financial Statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
2. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. The impact is expected to result in an
increase in primary (renamed basic) earnings per share for the three months and
six months ended June 30, 1997 of $.02 and $.04 per share, respectively, and an
increase to the three months and six months ended June 30, 1996 of $.01 per
share for each period. The impact of Statement 128 on the calculation of fully
diluted earnings per share for these quarters is not expected to be material.
3. ACQUISITIONS AND DISPOSITIONS
On August 14, 1996, the Company purchased all of the capital stock of the
Viersen & Cochran Drilling Company ("Viersen"). Viersen was engaged in contract
drilling in Oklahoma but had suspended its operations prior to the closing date.
The consideration paid for Viersen consisted of (i) $6,000,000 in cash paid on
August 14, 1996 (a portion of which the Company borrowed under its existing
credit agreement); (ii) a two-year $8,000,000 promissory note (the "Promissory
Note") executed by the Company in favor of the Seller; and (iii) stock warrants
with a two-year term to purchase 600,000 shares of the Company's common stock,
$.001 par value, at $5 per share. On April 11, 1997, the Company prepaid the
Promissory Note at a contractually agreed upon discounted balance of $7,655,000
plus accrued interest incurring an immaterial penalty. The acquisition of
Viersen was accounted for using the purchase method, and Viersen's operating
results since August 14, 1996, have been consolidated with the operating results
of the Company.
On January 27, 1997, the Company acquired the contract drilling assets of
Quarles Drilling Corporation ("Quarles") for $16.2 million, consisting of $8.1
million in cash and 733,779 shares of Common Stock as adjusted pursuant to the
purchase agreement. The acquisition was accounted for using the purchase method,
and Quarles' operating results since January 27, 1997 have been consolidated
with the operating results of the Company.
On April 11, 1997, the Company acquired the land drilling operations of
Southland Drilling Company Ltd., ("Southland") for approximately $27.1 million
in cash and a five-year warrant to purchase 300,000 shares of Common Stock, at
an exercise price of $16 per share (the "Southland Acquisition"). The acquired
assets included eight land drilling rigs, various equipment and rig components,
and other equipment used in Southland's contract drilling business. The Company
also assumed various drilling contracts of Southland and
F-21
<PAGE> 70
UTI ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
JUNE 30, 1997
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
hired Southland's rig crews. The acquisition was accounted for using the
purchase method, and Southland's operating results since April 11, 1997 have
been consolidated with the operating results of the Company. Goodwill of $9.9
million has been recorded related to this acquisition.
Provision for amortization of goodwill was determined by the straight-line
method over 15 years.
The Southland Acquisition was financed with a combination of the Company's
existing cash, the net proceeds from the private placement of $25 million
principal amount of its 12% Senior Subordinated Notes due 2001 (the
"Subordinated Notes") and the net proceeds from a new $25 million 38-month term
loan facility. The Company also increased the amount available under its line of
credit from $8.4 million to $12.0 million. The Subordinated Notes were issued by
the Company at a discount of 2% together with a seven-year warrant to purchase
1,200,000 shares of Common Stock at an exercise price of $10.83 per share. The
1,200,000 warrants were valued at $1,400,000 at the date of issuance. The
warrants are subject to call at $.08 per warrant after six months under certain
circumstances if the market price of the Common Stock is greater than $15 per
share over a 90 day period. The Company utilized a portion of the net proceeds
from the term loan to refinance approximately $18.6 million in indebtedness that
was incurred in connection with its prior acquisitions of FWA Drilling Company,
Inc., Viersen and the contract drilling assets of Quarles. The indebtedness
under the term loan is secured by substantially all of the Company's rig assets,
inventory and accounts receivable. The Subordinated Notes contain restrictions
on the Company's ability to declare dividends and other limitations typical in
this type of financing.
The following pro forma operating results reflect the inclusion of Viersen
in 1996, and the inclusion of Quarles and Southland for 1996 and 1997 as if the
acquisitions occurred on January 1, 1996:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------- -------------------
1996 1997 1996 1997
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue.......................... $28,388 $44,207 $66,428 $87,562
======= ======= ======= =======
Net income (loss)................ $(1,183) $ 1,946 $(1,233) $ 2,935
======= ======= ======= =======
Earnings per share:
-- Primary..................... $ (.10) $ .14 $ (.11) $ .22
======= ======= ======= =======
-- Fully diluted............... $ (.10) $ .14 $ (.11) $ .21
======= ======= ======= =======
</TABLE>
4. SUPPLEMENTAL CASH FLOW INFORMATION
On January 27, 1997, the Company acquired the contract drilling division of
Quarles for cash and stock as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Cash paid for assets........................................ $ 8,100
Common stock issued......................................... 8,100
-------
Total purchase price................................... $16,200
=======
</TABLE>
F-22
<PAGE> 71
UTI ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
JUNE 30, 1997
(ALL PER SHARE AND SHARE AMOUNTS REFLECT THE 3:1 STOCK SPLIT EFFECTIVE SEPTEMBER
5, 1997)
On April 11, 1997, the Company acquired the contract operations of
Southland for cash and a warrants as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Cash paid for assets........................................ $27,147
Warrants issued............................................. 10
-------
Total purchase price................................... $27,157
=======
</TABLE>
On May 15, 1997, a warrant holder redeemed 375,000 warrants for an equal
amount of shares of common stock. The warrant holder cancelled an outstanding
promissory note from the Company totaling $1 million, an amount equal to the
exercise price.
5. COMMITMENTS AND CONTINGENCIES
The Company is involved in several claims arising in the ordinary course of
business. In the opinion of management, all of these claims are covered by
insurance and these matters will not have a material adverse effect on the
Company's financial position.
The Company is partially self-insured for employee health insurance claims
and for workers' compensation. The Company incurs a maximum of $75,000 per
employee under medical claims and a maximum of $250,000 per event for workers'
compensation claims. Although the Company believes that adequate reserves have
been provided for expected liabilities arising from its self-insured
obligations, it is reasonably possible that management's estimates of these
liabilities will change over the near term as circumstances develop.
6. SUBSEQUENT EVENTS
On July 28, 1997 the Company's Board of Directors approved a 3 for 1 stock
split subject to receiving stockholder approval of an increase in the number of
authorized shares of the Company's common stock from 10 million to 50 million
shares. On August 28, 1997 the Company's stockholders approved the increase in
authorized shares of the Company's Common Stock and also approved an amendment
to the Company's Restated Certificate of Incorporation to authorize the issuance
of up to 5,000,000 shares of preferred stock. The stock split has been given
retroactive effect in these financial statements.
F-23
<PAGE> 72
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDERS OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON
STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
Use of Proceeds....................... 13
Price Range of Common Stock and
Dividend Policy..................... 14
Capitalization........................ 15
Selected Consolidated Financial
Data................................ 16
Pro Forma Condensed Consolidated
Statements of Income................ 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 21
Business.............................. 27
Management............................ 36
Principal and Selling Stockholders.... 38
Description of Capital Stock.......... 40
Shares Eligible for Future Sale....... 43
Underwriting.......................... 44
Legal Matters......................... 45
Experts............................... 45
Available Information................. 46
Incorporation of Certain Documents by
Reference........................... 46
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
======================================================
======================================================
5,915,500 Shares
[UTI ENERGY CORP. LOGO]
UTI ENERGY CORP.
Common Stock
------------------------
PROSPECTUS
------------------------
PRUDENTIAL SECURITIES INCORPORATED
LEHMAN BROTHERS
RAUSCHER PIERCE REFSNES, INC.
SIMMONS & COMPANY
INTERNATIONAL
September , 1997
======================================================
<PAGE> 73
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with this Offering are:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 57,784
NASD Fee.................................................... 19,564
American Stock Exchange Listing Fee......................... 15,000
Legal Fees and Expenses of the Company...................... 100,000
Legal Fees and Expenses of Selling Stockholders............. 15,000
Accounting Fees and Expenses................................ 50,000
Blue Sky Fees and Expenses (including legal fees)........... 2,000
Printing Expenses........................................... 100,000
Transfer Agent and Registrar Fees........................... 5,000
Miscellaneous............................................... 652
--------
TOTAL............................................. $365,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Delaware law, a corporation may include provisions in its certificate
of incorporation that will relieve its directors of monetary liability for
breaches of their fiduciary duty to the corporation, except under certain
circumstances, including a breach of the director's duty of loyalty, acts or
omissions of the director not in good faith or which involve intentional
misconduct or a knowing violation of law, the approval of an improper payment of
a dividend or an improper purchase by the corporation of stock or any
transaction from which the director derived an improper personal benefit. The
Company's Certificate of Incorporation provides that the Company's directors are
not liable to the Company or its stockholders for monetary damages for breach of
their fiduciary duty, subject to the described exceptions specified by Delaware
law.
Section 145 of the Delaware General Corporation Law grants to the Company
the power to indemnify each officer and director of the Company against
liabilities and expenses incurred by reason of the fact that he is or was an
officer or director of the Company if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Company
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The By-laws of the Company provide for
indemnification of each officer and director of the Company to the fullest
extent permitted by Delaware law.
Section 145 of the Delaware General Corporation Law also empowers the
Company to purchase and maintain insurance on behalf of any person who is or was
an officer or director of the Company against liability asserted against or
incurred by him in any such capacity, whether or not the Company would have the
power to indemnify such officer or director against such liability under the
provisions of Section 145. The Company maintains a directors' and officers'
liability policy for such purpose.
II-1
<PAGE> 74
ITEM 16. EXHIBITS.
<TABLE>
<S> <S>
*1.1 -- Form of Underwriting Agreement.
2.1 -- Agreement for Purchase and Sale of Common Stock of FWA
Drilling Company, Inc. dated November 17, 1995, between
UTI Energy Corp. and USX Corporation (incorporated by
reference to Exhibit 2.1 to the Company's Current Report
on Form 8-K dated December 1, 1995).
2.2 -- Stock Purchase Agreement dated August 14, 1996, between
the Sam K. Viersen, Jr. Trust dated September 9, 1986, as
Amended and Restated on May 11, 1994, and UTI Energy
Corp. (incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated August 28,
1996).
2.3 -- Asset Purchase Agreement dated December 21, 1996, between
the Company and Quarles Drilling Corporation
(incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated January 27,
1997).
2.4 -- Asset Purchase Agreement dated March 5, 1997 (the "Asset
Purchase Agreement"), by and between UTI Energy Corp. and
Southland Drilling Company, Ltd., (incorporated by
reference to Exhibit 2.1 to the Company's Current Report
on Form 8-K dated April 11, 1997).
2.5 -- First Amendment to Asset Purchase Agreement dated April
11, 1997, by and between UTI Energy Corp., Triad Drilling
Company and Southland Drilling Company, Ltd.
(incorporated by reference to Exhibit 2.2 to the
Company's Current Report on Form 8-K dated April 11,
1997).
2.6 -- Agreement and Plan of Merger dated September 11, 1997,
between the Company, J Acquisition Corp., J.S.M. &
Associates, Inc., Jim James and James F. Silhan
(incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated September 11,
1997).
3.1 -- Restated Certificate of Incorporation of the Company
(incorporated by reference to Amendment No. 1 to the
Company's Registration Statement on Form S-1 (No.
33-69726).
3.2 -- Amendment to Restated Certificate of Incorporation
(incorporated by reference to Amendment No. 1 to the
Company's Registration Statement on Form S-1 (No.
33-69726).
3.3 -- Amendment to Restated Certificate of Incorporation
(incorporated by reference to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994).
**3.4 -- Amendment to Restated Certificate of Incorporation dated
August 28, 1997.
3.5 -- By-laws of the Company, as amended (incorporated by
reference to Exhibit 3.3 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1993).
4.1 -- See Exhibits Nos. 3.1 and 3.2 for provisions of the
Restated Certificate of Incorporation and amended By-laws
of the Company defining the rights of the holders of
Common Stock.
4.2 -- Form of Common Stock Certificate (incorporated by
reference to Amendment No. 1 to the Company's
Registration Statement on Form S-1 (No. 33-69726)).
4.3 -- Stock Purchase Warrant dated August 14, 1996, between the
Sam K. Viersen, Jr. Trust dated September 9, 1986 as
Amended and Restated on May 11, 1994 and UTI Energy Corp
(incorporated by reference to Exhibit 4.3 to the
Company's Current Report on Form 8-K dated August 28,
1996).
4.4 -- Registration Rights Agreement with Bear Stearns & Co.
Inc. dated March 25, 1994, as assigned to Remy Capital
Partners III, L.P. (incorporated by reference to Exhibit
10.17 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993).
</TABLE>
II-2
<PAGE> 75
<TABLE>
<C> <S>
4.5 -- Asset Purchase Agreement dated December 21, 1996, between
the Company and Quarles Drilling Corporation
(incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated January 27,
1997).
4.6 -- Stock Option Agreement dated as of December 19, 1995,
between the Company and Remy Consultants Incorporated
(incorporated by reference to Exhibit 2 to the Company's
Amendment No. 1 to Schedule 13D dated August 8, 1996).
4.7 -- Subscription Agreement dated September 19, 1995, by and
between Shamrock Holdings of California, Inc. and UTI
Energy Corp. (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December
31, 1995).
4.8 -- UTI Energy Corp. 1996 Employee Stock Option Plan
(incorporated by reference to the Company's Registration
Statement on Form S-8 dated October 2, 1996).
4.9 -- Warrant Agreement, dated April 11, 1997, by and between
UTI Energy Corp. And Southland Drilling Company, Ltd.
(incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K dated April 11,
1997).
4.10 -- Loan and Security Agreement dated April 11, 1997, by and
among FWA Drilling Company, Inc., International Petroleum
Service Company, Triad Drilling Company, Universal Well
Services, Inc., USC, Incorporated, UTI Energy Corp.,
UTICO, Inc., Panther Drilling, Inc., and Mellon Bank,
N.A. (incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K dated April 11,
1997).
4.11 -- Fourth Amendment and Modification to the Mellon Line of
Credit dated April 11, 1997, by and among FWA Drilling
Company, Inc., International Petroleum Service Company,
Triad Drilling Company, Universal Well Services, Inc.,
USC, Incorporated, UTI Energy Corp., UTICO, Inc., Panther
Drilling, Inc., and Mellon Bank, N.A. (incorporated by
reference to Exhibit 10.3 to the Company's Current Report
on Form 8-K dated April 11, 1997).
4.12 -- Note Purchase Agreement dated April 11, 1997, by and
among FWA Drilling Company, Inc., International Petroleum
Service Company, Triad Drilling Company, Universal Well
Services, Inc., USC, Incorporated, Panther Drilling,
Inc., and Canpartners Investments IV, LLC (incorporated
by reference to Schedule 13D relating to the Company
filed on April 22, 1997 by Canpartners Investments IV,
LLC, Canpartners Incorporated, Mitchell R. Julis, Joshua
S. Friedman and R. Christian B. Evensen).
4.13 -- Note dated April 11, 1997, payable by FWA Drilling
Company, Inc., International Petroleum Service Company,
Triad Drilling Company, Universal Well Services, Inc.,
USC, Incorporated and Panther Drilling, Inc. to
Canpartners Investments IV, LLC. (incorporated by
reference to Exhibit 10.5 to the Company's Current Report
on Form 8-K dated April 11, 1997).
4.14 -- Warrant Agreement dated April 11, 1997, by and between
UTI Energy Corp. and Canpartners Investments IV, LLC.
(incorporated by reference to Exhibit 10.6 to the
Company's Current Report on Form 8-K dated April 11,
1997).
4.15 -- Warrant dated April 11, 1997, by and between UTI Energy
Corp. and Canpartners Investments IV, LLC. (incorporated
by reference to Exhibit 10.7 to the Company's Current
Report on Form 8-K dated April 11, 1997).
4.16 -- Registration Rights Agreement dated April 11, 1997, by
and between UTI Energy Corp. and Canpartners Investments
IV, LLC. (incorporated by reference to Exhibit 10.8 to
the Company's Current Report on Form 8-K dated April 11,
1997).
*4.17 -- Registration Rights Agreement with Four Flags Holding
Company.
*4.18 -- Registration Rights Agreement between the Company and
Vaughn E. Drum
*4.19 -- Registration Rights Agreement between the Corps and
Kenneth N. Berns
*4.20 -- Registration Rights Agreement between the Company and
Remy Investors & Consultants, Incorporated
</TABLE>
II-3
<PAGE> 76
<TABLE>
<S> <C>
*4.21 -- Registration Rights Agreement between the Company and
Remy Capital Partners III, L.P.
*5 -- Opinion of Fulbright & Jaworski L.L.P.
**11.1 -- Statement re Computation of Per Share Earnings.
*23.1 -- Consent of Fulbright & Jaworski L.L.P. (included in
Exhibit 5.1).
**23.2 -- Consent of Ernst & Young LLP.
**23.3 -- Consent of Ernst & Young LLP, with respect to the
financial statements of Viersen & Cochran Drilling
Company, Inc. (included in Exhibit 23.2).
**23.4 -- Consent of Coopers & Lybrand LLP, with respect to the
financial statements of Quarles Drilling Corporation.
**23.5 -- Consent of Ernst & Young LLP with respect to the
financial statements of Southland Drilling Corporation
(included in Exhibit 23.2).
*24.1 -- Powers of Attorney from certain members of the Board of
Directors of the Company (contained on page II-4).
27.1 -- Financial Data Schedule (previously filed with the
Company's Quarterly Report on Form 10-Q for the three
months ended June 30, 1997).
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Securities Act or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
the Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 77
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Houston, State of Texas on September 25, 1997.
UTI ENERGY CORP.
By: /s/ VAUGHN E. DRUM
----------------------------------
Vaughn E. Drum
President, Chief Executive
Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ VAUGHN E. DRUM President, Chief Executive September 25, 1997
- ----------------------------------------------------- Officer and Director
Vaughn E. Drum (Principal Executive
Officer)
/s/ P. BLAKE DUPUIS Vice President Chief September 25, 1997
- ----------------------------------------------------- Financial Officer and Chief
P. Blake Dupuis Accounting Officer
(Principal Financial and
Accounting Officer)
* Director and Chairman of the September 25, 1997
- ----------------------------------------------------- Board
Mark S. Siegel
* Director September 25, 1997
- -----------------------------------------------------
Kenneth N. Berns
* Director September 25, 1997
- -----------------------------------------------------
Terry H. Hunt
* Director September 25, 1997
- -----------------------------------------------------
Nadine C. Smith
* Director September 25, 1997
- -----------------------------------------------------
Robert B. Spears
*By: /s/ VAUGHN E. DRUM
------------------------------------------------
Vaughn E. Drum
Attorney-in-fact
</TABLE>
II-5
<PAGE> 78
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <S>
*1.1 -- Form of Underwriting Agreement.
2.1 -- Agreement for Purchase and Sale of Common Stock of FWA
Drilling Company, Inc. dated November 17, 1995, between
UTI Energy Corp. and USX Corporation (incorporated by
reference to Exhibit 2.1 to the Company's Current Report
on Form 8-K dated December 1, 1995).
2.2 -- Stock Purchase Agreement dated August 14, 1996, between
the Sam K. Viersen, Jr. Trust dated September 9, 1986, as
Amended and Restated on May 11, 1994, and UTI Energy
Corp. (incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated August 28,
1996).
2.3 -- Asset Purchase Agreement dated December 21, 1996, between
the Company and Quarles Drilling Corporation
(incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated January 27,
1997).
2.4 -- Asset Purchase Agreement dated March 5, 1997 (the "Asset
Purchase Agreement"), by and between UTI Energy Corp. and
Southland Drilling Company, Ltd., (incorporated by
reference to Exhibit 2.1 to the Company's Current Report
on Form 8-K dated April 11, 1997).
2.5 -- First Amendment to Asset Purchase Agreement dated April
11, 1997, by and between UTI Energy Corp., Triad Drilling
Company and Southland Drilling Company, Ltd.
(incorporated by reference to Exhibit 2.2 to the
Company's Current Report on Form 8-K dated April 11,
1997).
2.6 -- Agreement and Plan of Merger dated September 11, 1997,
between the Company, J Acquisition Corp., J.S.M. &
Associates, Inc., Jim James and James F. Silhan
(incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated September 11,
1997).
3.1 -- Restated Certificate of Incorporation of the Company
(incorporated by reference to Amendment No. 1 to the
Company's Registration Statement on Form S-1 (No.
33-69726).
3.2 -- Amendment to Restated Certificate of Incorporation
(incorporated by reference to Amendment No. 1 to the
Company's Registration Statement on Form S-1 (No.
33-69726).
3.3 -- Amendment to Restated Certificate of Incorporation
(incorporated by reference to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994).
**3.4 -- Amendment to Restated Certificate of Incorporation dated
August 28, 1997.
3.5 -- By-laws of the Company, as amended (incorporated by
reference to Exhibit 3.3 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1993).
4.1 -- See Exhibits Nos. 3.1 and 3.2 for provisions of the
Restated Certificate of Incorporation and amended By-laws
of the Company defining the rights of the holders of
Common Stock.
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
4.2 -- Form of Common Stock Certificate (incorporated by
reference to Amendment No. 1 to the Company's
Registration Statement on Form S-1 (No. 33-69726)).
4.3 -- Stock Purchase Warrant dated August 14, 1996, between the
Sam K. Viersen, Jr. Trust dated September 9, 1986 as
Amended and Restated on May 11, 1994 and UTI Energy Corp
(incorporated by reference to Exhibit 4.3 to the
Company's Current Report on Form 8-K dated August 28,
1996).
4.4 -- Registration Rights Agreement with Bear Stearns & Co.
Inc. dated March 25, 1994, as assigned to Remy Capital
Partners III, L.P. (incorporated by reference to Exhibit
10.17 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993).
4.5 -- Asset Purchase Agreement dated December 21, 1996, between
the Company and Quarles Drilling Corporation
(incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated January 27,
1997).
4.6 -- Stock Option Agreement dated as of December 19, 1995,
between the Company and Remy Consultants Incorporated
(incorporated by reference to Exhibit 2 to the Company's
Amendment No. 1 to Schedule 13D dated August 8, 1996).
4.7 -- Subscription Agreement dated September 19, 1995, by and
between Shamrock Holdings of California, Inc. and UTI
Energy Corp. (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December
31, 1995).
4.8 -- UTI Energy Corp. 1996 Employee Stock Option Plan
(incorporated by reference to the Company's Registration
Statement on Form S-8 dated October 2, 1996).
4.9 -- Warrant Agreement, dated April 11, 1997, by and between
UTI Energy Corp. And Southland Drilling Company, Ltd.
(incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K dated April 11,
1997).
4.10 -- Loan and Security Agreement dated April 11, 1997, by and
among FWA Drilling Company, Inc., International Petroleum
Service Company, Triad Drilling Company, Universal Well
Services, Inc., USC, Incorporated, UTI Energy Corp.,
UTICO, Inc., Panther Drilling, Inc., and Mellon Bank,
N.A. (incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K dated April 11,
1997).
4.11 -- Fourth Amendment and Modification to the Mellon Line of
Credit dated April 11, 1997, by and among FWA Drilling
Company, Inc., International Petroleum Service Company,
Triad Drilling Company, Universal Well Services, Inc.,
USC, Incorporated, UTI Energy Corp., UTICO, Inc., Panther
Drilling, Inc., and Mellon Bank, N.A. (incorporated by
reference to Exhibit 10.3 to the Company's Current Report
on Form 8-K dated April 11, 1997).
4.12 -- Note Purchase Agreement dated April 11, 1997, by and
among FWA Drilling Company, Inc., International Petroleum
Service Company, Triad Drilling Company, Universal Well
Services, Inc., USC, Incorporated, Panther Drilling,
Inc., and Canpartners Investments IV, LLC (incorporated
by reference to Schedule 13D relating to the Company
filed on April 22, 1997 by Canpartners Investments IV,
LLC, Canpartners Incorporated, Mitchell R. Julis, Joshua
S. Friedman and R. Christian B. Evensen).
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
4.13 -- Note dated April 11, 1997, payable by FWA Drilling Company, Inc., International
Petroleum Service Company, Triad Drilling Company, Universal Well Services, Inc., USC,
Incorporated and Panther Drilling, Inc. to Canpartners Investments IV, LLC.
(incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K
dated April 11, 1997).
4.14 -- Warrant Agreement dated April 11, 1997, by and between UTI Energy Corp. and Canpartners
Investments IV, LLC. (incorporated by reference to Exhibit 10.6 to the Company's
Current Report on Form 8-K dated April 11, 1997).
4.15 -- Warrant dated April 11, 1997, by and between UTI Energy Corp. and Canpartners
Investments IV, LLC. (incorporated by reference to Exhibit 10.7 to the Company's
Current Report on Form 8-K dated April 11, 1997).
4.16 -- Registration Rights Agreement dated April 11, 1997, by and between UTI Energy Corp. and
Canpartners Investments IV, LLC. (incorporated by reference to Exhibit 10.8 to the
Company's Current Report on Form 8-K dated April 11, 1997).
*4.17 -- Registration Rights Agreement with Four Flags Holding Company.
*4.18 -- Registration Rights Agreement between the Company and Vaughn E. Drum
*4.19 -- Registration Rights Agreement between the Corps and Kenneth N. Berns
*4.20 -- Registration Rights Agreement between the Company and Remy Investors & Consultants,
Incorporated
*4.21 -- Registration Rights Agreement between the Company and Remy Capital Partners III, L.P.
*5.1 -- Opinion of Fulbright & Jaworski L.L.P.
**11.1 -- Statement re Computation of Per Share Earnings.
*23.1 -- Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.1).
**23.2 -- Consent of Ernst & Young LLP.
**23.3 -- Consent of Ernst & Young LLP, with respect to the financial statements of Viersen &
Cochran Drilling Company, Inc. (included in Exhibit 23.2).
**23.4 -- Consent of Coopers & Lybrand LLP, with respect to the financial statements of Quarles
Drilling Corporation.
**23.5 -- Consent of Ernst & Young LLP with respect to the financial statements of Southland
Drilling Corporation (included in Exhibit 23.2).
**24.1 -- Powers of Attorney from certain members of the Board of Directors of the Company
(contained on page II-4).
27.1 -- Financial Data Schedule (previously filed with the Company's Quarterly Report on Form
10-Q for the three months ended June 30, 1997).
</TABLE>
<PAGE> 1
EXHIBIT 1.1
UTI ENERGY CORP.
5,915,500 Shares(1)
Common Stock
UNDERWRITING AGREEMENT
_____________, 1997
PRUDENTIAL SECURITIES INCORPORATED
LEHMAN BROTHERS INC.
RAUSCHER PIERCE REFSNES, INC.
SIMMONS & COMPANY INTERNATIONAL
As a Representatives of the several Underwriters
c/o Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Dear Sirs:
Each of UTI Energy Corp., a Delaware corporation (the
"Company"), the selling securityholders set forth in Schedule 1-A hereto (the
"Selling Securityholders"), and the selling securityholders set forth on
Schedule 1-B hereto (the "Additional Securityholders"), hereby confirms its
agreement with the several underwriters named in Schedule 2 hereto (the
"Underwriters"), for whom you have been duly authorized to act as
representatives (in such capacities, the "Representatives"), as set forth
below. If you are the only Underwriters, all references herein to the
Representatives shall be deemed to be to the Underwriters.
1. Securities. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell, and each Selling
Securityholder proposes to sell, to the several Underwriters an aggregate of
1,575,000 shares and 4,340,500 shares, respectively (the "Firm Securities"), of
the Company's Common Stock, par value $.001 per share ("Common Stock"). The
Company also proposes to issue and sell to the several Underwriters not more
than 414,825 additional shares of Common Stock and the Additional Selling
Securityholders propose to sell to the several Underwriters not more than
112,500 additional shares of Common Stock and warrants to purchase 360,000
shares of Common Stock having an exercise price of $1 43/48 per share (the
"Warrants"), if requested by the Representatives as provided in Section 4 of
this Agreement. Any and all shares of Common Stock to be purchased by the
Underwriters pursuant to such options, including the shares of Common Stock
__________________________________
(1) Plus options to purchase from the Company up to 414,825 additional shares
and from the Additional Selling Securityholders up to 112,400 additional shares
and warrants to purchase 360,000 shares to cover over-allotments.
-1-
Draft Dated September 26, 1997
<PAGE> 2
issuable upon the exercise of the Warrants, are referred to herein as the
"Option Securities", and the Firm Securities and any Option Securities are
collectively referred to herein as the "Securities".
2. Representations and Warranties of the Company and Drum. The
Company and Vaughn E. Drum ("Drum") jointly and severally represent and warrant
to, and agree with, each of the several Underwriters that:
(a) The Company meets the requirements for use of Form
S-3 under the Securities Act of 1933, as amended (the "Act"). A
registration statement on such Form (File No. 333-35109) with respect
to the Securities, including a prospectus subject to completion, has
been filed by the Company with the Securities and Exchange Commission
(the "Commission") under the Act, and one or more amendments to such
registration statement may have been so filed. After the execution of
this Agreement, the Company will file with the Commission either (i)
if such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act, either (A)
if the Company relies on Rule 434 under the Act, a Term Sheet (as
hereinafter defined) relating to the Securities, that shall identify
the Preliminary Prospectus (as hereinafter defined) that it
supplements and, if required to be filed pursuant to Rules 434(c)(2)
and 424(b), an Integrated Prospectus (as hereinafter defined), in
either case, containing such information as is required or permitted
by Rule 434, 430A and 424(b) under the Act or (B) if the Company does
not rely on Rule 434 under the Act, a prospectus in the form most
recently included in an amendment to such registration statement (or,
if no such amendment shall have been filed, in such registration
statement), with such changes or insertions as are required by Rule
430A under the Act or permitted by Rule 424(b) under the Act, and in
the case of clause (i)(A) or (i)(B) of this sentence as have been
provided to and approved by the Representatives prior to the execution
of this Agreement, or (ii) if such registration statement, as it may
have been amended, has not been declared by the Commission to be
effective under the Act, an amendment to such registration statement,
including a form of prospectus, a copy of which amendment has been
furnished to and approved by the Representatives prior to the
execution of this Agreement. The Company may also file a related
registration statement with the Commission pursuant to Rule 462(b)
under the Act for the purpose of registering certain additional
Securities. As used in this Agreement, the term "Original
Registration Statement" means the registration statement initially
filed relating to the Securities, as amended at the time when it was
or is declared effective, including (A) all financial schedules and
exhibits thereto, (B) all documents incorporated by reference therein
filed under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and (C) any information omitted therefrom pursuant to
Rule 430A under the Act and included in the Prospectus (as hereinafter
defined) or, if required to be filed pursuant to Rule 434(c)(2) and
424(b), in the Integrated Prospectus; the term "Rule 462(b)
Registration Statement" means any registration statement filed with
the Commission pursuant to Rule 462(b) under the Act (including the
Registration Statement and any Preliminary Prospectus or Prospectus
incorporated therein at the time such Registration Statement becomes
effective); the term "Registration Statement" includes both the
Original Registration Statement and any Rule 462(b) Registration
Statement; the term "Preliminary Prospectus" means each prospectus
subject to completion filed with such registration statement or any
amendment thereto
-2-
Draft Dated September 26, 1997
<PAGE> 3
(including the prospectus subject to completion, if any, included in
the Registration Statement or any amendment thereto at the time it was
or is declared effective), including all documents incorporated by
reference therein filed under the Exchange Act the term "Prospectus"
means:
(A) if the Company relies on Rule 434 under the Act, the
Term Sheet relating to the Securities that is first filed
pursuant to Rule 424(b)(7) under the Act, together with the
Preliminary Prospectus identified therein that such Term Sheet
supplements:
(B) if the Company does not rely on Rule 434 under the
Act, the prospectus first filed with the Commission pursuant
to Rule 424(b) under the Act; or
(C) if the Company does not rely on Rule 434 under the
Act and if no prospectus is required to be filed pursuant to
Rule 424(b) under the Act, the prospectus included in the
Registration Statement, including, in the case of clauses (A),
(B) or (C) of this sentence, all documents incorporated by
reference therein filed under the Exchange Act; the term
"Integrated Prospectus" means a prospectus first filed with
the Commission pursuant to Rules 434(c)(2) and 424(b) under
the Act; and the Term "Term Sheet" means any abbreviated term
sheet that satisfies the requirements of Rule 434 under the
Act. Any reference in this Agreement to an "amendment or
supplement" to any Preliminary Prospectus, the Prospectus or
any Integrated Prospectus or an "amendment" to any
registration statement (including the Registration Statement)
shall be deemed to include any document incorporated by
reference therein that is filed with the Commission under the
Exchange Act after the date of such Preliminary Prospectus,
Prospectus, Integrated Prospectus or registration statement,
as the case may be; any reference herein to the "date" of a
Prospectus that includes a Term Sheet shall mean the date of
such Term Sheet. For purposes of the preceding sentence, any
reference to the "effective date" of an amendment to a
registration statement shall, if such amendment is effected by
means of the filing with the Commission under the Exchange Act
of a document incorporated by reference in such registration
statement, be deemed to refer to the date on which such
document was so filed with the Commission.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. When any
Preliminary Prospectus and any amendment or supplement thereto was
filed with the Commission, it (i) contained all statements required to
be stated therein in accordance with, and complied in all material
respects with the requirements of, the Act, the Exchange Act and the
respective rules and regulations of the Commission thereunder, and
(ii) did not include any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. When the Registration Statement or any amendment
thereto was or is declared effective, it (i) contained or will contain
all statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements
of, the Act, the Exchange Act and the respective rules and regulations
of the Commission thereunder and (ii) did not or will not include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements
-3-
Draft Dated September 26, 1997
<PAGE> 4
therein not misleading. When the Prospectus or any Term Sheet that is
a part thereof or any Integrated Prospectus or any amendment or
supplement to the Prospectus is filed with the Commission pursuant to
Rule 424(b) (or, if the Prospectus or part thereof or such amendment
or supplement is not required to be so filed, when the Registration
Statement or the amendment thereto containing such amendment or
supplement to the Prospectus was or is declared effective), on the
date when the Prospectus is otherwise amended or supplemented and on
the Firm Closing Date and any Option Closing Date (both as hereinafter
defined), each of the Prospectus, and, if required to be filed
pursuant to Rules 434(c)(2) and 424(b) under the Act, the Integrated
Prospectus as amended or supplemented at any such time, (i) contained
or will contain all statements required to be stated therein in
accordance with, and complied or will comply in all material respects
with the requirements of, the Act, the Exchange Act and the respective
rules and regulations of the Commission thereunder and (ii) did not or
will not include any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. The foregoing provisions of this paragraph (b) do not
apply to statements or omissions made in any Preliminary Prospectus or
any amendment or supplement thereto, the Registration Statement or any
amendment thereto the Prospectus or, if required to be filed pursuant
to Rules 434(c)(2) and 424(b) and the Act, the Integrated Prospectus
or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by any
Underwriter through the Representatives specifically for use therein.
(c) If the Company has elected to rely on Rule 462(b) and
the Rule 462(b) Registration Statement has not been declared effective
(i) the Company has filed a Rule 462(b) Registration Statement in
compliance with and that is effective upon filing pursuant to Rule
462(b) and has received confirmation of its receipt and (ii) the
Company has given irrevocable instructions for transmission of the
applicable filing fee in connection with the filing of the Rule 462(b)
Registration Statement, in compliance with Rule 111 promulgated under
the Act or the Commission has received payment of such filing fee.
(d) Schedule 3 hereto is a complete and accurate schedule
of (i) the names and jurisdictions of organization of all
corporations, partnerships and joint ventures (the "Subsidiaries") in
which the Company has a direct or indirect majority equity interest
and which is required to be listed on Exhibit 21 to an Annual Report
on Form 10-K of the Company if such report were to be filed with the
Commission at the time of the execution and delivery of this
Agreement. The Company and each of the Subsidiaries have been duly
organized and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation and
are duly qualified to transact business as foreign corporations and
are in good standing under the laws of all other jurisdictions where
the ownership or leasing of their respective properties or the conduct
of their respective businesses requires such qualification, except
where the failure to do so or qualify or be in good standing would not
have a material adverse effect on the business, financial condition or
results of operations of the Company and the Subsidiaries, taken as a
whole (a "Material Adverse Effect").
-4-
Draft Dated September 26, 1997
<PAGE> 5
(e) The Company and each of its subsidiaries have full
corporate power to own or lease their respective properties and
conduct their respective businesses as described in the Registration
Statement, each of the Prospectus and any Integrated Prospectus or, if
the Prospectus and any required Integrated Prospectus are not in
existence, the most recent Preliminary Prospectus; and the Company has
full corporate power to enter into this Agreement and to carry out all
the terms and provisions hereof to be carried out by it.
(f) The issued shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued,
are fully paid and nonassessable and are owned beneficially by the
Company free and clear of any security interests, liens, encumbrances,
equities or claims except as set forth on Schedule 3 hereto.
(g) The Company has an authorized, issued and outstanding
capitalization as set forth in each of the Prospectus and any
Integrated Prospectus or, if the Prospectus and any required
Integrated Prospectus are not in existence, the most recent
Preliminary Prospectus. All of the issued shares of capital stock of
the Company have been duly authorized and validly issued and are fully
paid and nonassessable. The Firm Securities and the Option Securities
have been duly authorized and at the Firm Closing Date or the related
Option Closing Date (as the case may be), after payment therefor in
accordance herewith and the exercise of the Warrants by the
Underwriters in accordance with the terms of the Warrants, will be
validly issued, fully paid and nonassessable. No holders of
outstanding shares of capital stock of the Company are entitled as
such to any preemptive or other rights to subscribe for any of the
Securities, and no holder of securities of the Company has any right
which has not been fully exercised or waived to require the Company to
register the offer or sale of any securities owned by such holder
under the Act in the public offering contemplated by this Agreement.
(h) The capital stock of the Company conforms to the
description thereof contained in each of the Prospectus and any
Integrated Prospectus or, if the Prospectus and any required
Integrated Prospectus are not in existence, the most recent
Preliminary Prospectus.
(i) Except as described or specifically referred to in
each of the Prospectus and any Integrated Prospectus (or, if the
Prospectus and any required Integrated Prospectus are not in
existence, the most recent Preliminary Prospectus), there are not
outstanding (A) securities or obligations of the Company or any of its
subsidiaries convertible into or exchangeable for any capital stock of
the Company or any such subsidiary, (B) warrants, rights or options to
subscribe for or purchase from the Company or any such subsidiary any
such capital stock or any such convertible or exchangeable securities
or obligations, or (C) obligations of the Company or any such
subsidiary to issue any shares of capital stock, any such convertible
or exchangeable securities or obligations, or any such warrants,
rights or options.
(j) The historical consolidated financial statements and
schedules of the Company and its consolidated subsidiaries included in
the Registration Statement and the Prospectus or any Integrated
Prospectus (or, if the Prospectus and any required Integrated
Prospectus are not in existence, the most recent Preliminary
Prospectus) fairly present the financial position of the
-5-
Draft Dated September 26, 1997
<PAGE> 6
Company and its consolidated subsidiaries and the results of
operations and the cash flows of the Company and its consolidated
subsidiaries at the respective dates and for the respective periods to
which they apply. Such financial statements and schedules have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as
otherwise noted therein). The selected financial data set forth under
the caption "Selected Consolidated Financial Data" in each of the
Prospectus and any Integrated Prospectus or, if the Prospectus and any
required Integrated Prospectus are not in existence, the most recent
Preliminary Prospectus, fairly present, on the basis stated in each of
Prospectus and any Integrated Prospectus (or such Preliminary
Prospectus), the information included therein.
(k) Ernst & Young, LLP, who have certified certain
financial statements of the Company and its consolidated subsidiaries
and delivered their reports with respect to the audited consolidated
financial statements and schedules included in the Registration
Statement and each of the Prospectus and any Integrated Prospectus
(or, if the Prospectus and any required Integrated Prospectus are not
in existence, the most recent Preliminary Prospectus), are independent
public accountants within the meaning of the Act, the Exchange Act and
the related published rules and regulations thereunder.
(l) Coopers & Lybrand L.L.P., who have certified certain
financial statements of Quarles Drilling Company and delivered their
report with respect to such financial statements included or
incorporated by reference in the Registration Statement and each of
the Prospectus and any Integrated prospectus (or, if the Prospectus
and any required Integrated Prospectus are not in existence, the most
recent Preliminary Prospectus), are independent public accountants
within the meaning of the Act, the Exchange Act and the related
published rules and regulations thereunder.
(m) The execution and delivery of this Agreement have
been duly authorized by the Company and this Agreement has been duly
executed and delivered by the Company, and is the valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except as rights to indemnity and
contribution may be limited under applicable law.
(n) No legal or governmental proceedings are pending to
which the Company or any of its subsidiaries is a party or to which
the property of the Company or any of its subsidiaries is subject that
are required to be described in the Registration Statement or each of
the Prospectus and any Integrated Prospectus (or, if the Prospectus
and any required Integrated Prospectus are not in existence, the most
recent Preliminary Prospectus), and no such proceedings have been
threatened against the Company or any of its subsidiaries or with
respect to any of their respective properties; and no contract or
other document is required to be described in the Registration
Statement or the Prospectus or any Integrated Prospectus or to be
filed as an exhibit to the Registration Statement that is not
described therein (or, if the Prospectus and any required Integrated
Prospectus are not in existence, the most recent Preliminary
Prospectus) or filed as required.
-6-
Draft Dated September 26, 1997
<PAGE> 7
(o) The issuance, offering and sale of the Securities to
the Underwriters by the Company pursuant to this Agreement, the
compliance by the Company with the other provisions of this Agreement
and the consummation of the other transactions herein contemplated do
not (i) require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as
have been obtained, such as may be required under state securities or
blue sky laws and, if the Registration Statement is not effective
under the Act as of the time of execution hereof, such as may be
required (and shall be obtained as provided in this Agreement) under
the Act, or (ii) conflict with or result in a breach or violation of
any of the terms and provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries or any of their
respective properties are bound, or the charter documents or by-laws
of the Company or any of its subsidiaries, or any statute or any
judgment, decree, order, rule or regulation of any court or other
governmental authority or any arbitrator applicable to the Company or
any of its subsidiaries except for such conflicts, defaults,
violations, creations or impositions that would not affect the
consummation of the Agreement or the issuance of the Securities or
have a Material Adverse Effect.
(p) Subsequent to the respective dates as of which
information is given in the Registration Statement the Prospectus or
any Integrated Prospectus (or, if the Prospectus and any required
Integrated Prospectus are not in existence, the most recent
Preliminary Prospectus), neither the Company nor any of its
subsidiaries has sustained any loss that is material to the Company
and its subsidiaries taken as a whole or interference with their
respective businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or
from any labor dispute or any legal or governmental proceeding and
there has not been any material adverse change, or any development
involving a prospective material adverse change, in the condition
(financial or otherwise), management, business prospects, net worth,
or results of operations of the Company and its subsidiaries taken as
a whole, except in each case as described in or contemplated by the
each of the Prospectus and any Integrated Prospectus (or, if the
Prospectus and any required Integrated Prospectus are not in
existence, the most recent Preliminary Prospectus).
(q) The Company has not, directly or indirectly, (i)
taken any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities or (ii)
since the filing of the Registration Statement (A) sold, bid for,
purchased, or paid anyone any compensation for soliciting purchases
of, the Securities or (B) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities
of the Company (except for the sale of Securities by the Selling
Securityholders and Additional Selling Securityholders under this
Agreement and except in connection with acquisitions by the Company or
its subsidiaries of assets or businesses in the oilfield services
industry).
-7-
Draft Dated September 26, 1997
<PAGE> 8
(r) The Company has not distributed and, prior to the
later of (i) the Closing Date and (ii) the completion of the
distribution of the Securities, will not distribute any offering
material in connection with the offering and sale of the Securities
other than the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or other materials, if any, permitted by the Act.
(s) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus): (1) the Company and its subsidiaries, prior
to the Firm Closing Date, have not entered into any transaction not in
the ordinary course of business that is material to the Company and
its subsidiaries taken as a whole; (2) the Company has not purchased
any of its outstanding capital stock, nor declared, paid or otherwise
made any dividend or distribution of any kind on its capital stock;
and (3) there has not been any material change in the capital stock,
short-term debt or long-term debt of the Company and its consolidated
subsidiaries, except in each case as described in or contemplated by
the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus).
(t) The Company and each of its subsidiaries have good
title in fee simple to all items of real property and good title to
all personal property owned by each of them, in each case free and
clear of any security interests, liens, encumbrances, equities, claims
and other defects, except such as do not materially and adversely
affect the value of such property and do not interfere with the use
made or proposed to be made of such property by the Company or such
subsidiary, and any real property and buildings held under lease by
the Company or any such subsidiary are held under valid, subsisting
and enforceable leases, with such exceptions as are not material to
the Company and its subsidiaries taken as a whole and do not
materially interfere with the use made or proposed to be made of such
property and buildings by the Company or such subsidiary, in each case
except as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus).
(u) The Company and each of its subsidiaries are insured
by insurers of recognized financial responsibility against such losses
and risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; neither the Company nor any such
subsidiary has been refused any insurance coverage sought or applied
for; and neither the Company nor any such subsidiary has any reason to
believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the
condition (financial or otherwise), business prospects, net worth or
results of operations of the Company and its subsidiaries taken as a
whole, except as described in or contemplated by the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary
Prospectus).
(v) The Company and its subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct
their respective businesses, and neither the Company nor any
-8-
Draft Dated September 26, 1997
<PAGE> 9
such subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a material
adverse change in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company and its
subsidiaries taken as a whole, except as described in or contemplated
by the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus) .
(w) The Company is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended (the "1940
Act"), and is not subject to regulation as an investment company under
the 1940 Act. This transaction will not cause the Company to become
an investment company subject to registration under such Act.
(x) The Company has filed all foreign, federal, state and
local tax returns that are required to be filed or has requested
extensions thereof (except in any case in which the failure so to file
would not have a Material Adverse Effect) and has paid all taxes
required to be paid by it and any other assessment, fine or penalty
levied against it, to the extent that any of the foregoing is due and
payable, except for any such assessment, fine or penalty that would
not have a Material Adverse Effect that is currently being contested
in good faith or as described in or contemplated by the Prospectus
(or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(y) Neither the Company nor any of its subsidiaries is in
violation of any federal or state law or regulation relating to
occupational safety and health or to the storage, handling or
transportation of hazardous or toxic materials and the Company and its
subsidiaries have received all permits, licenses or other approvals
required of them under applicable federal and state occupational
safety and health and environmental laws and regulations to conduct
their respective businesses, and the Company and each such subsidiary
is in compliance with all terms and conditions of any such permit,
license or approval, except any such violation of law or regulation,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals which would not, singly or in the aggregate,
have a Material Adverse Effect, except as described in or contemplated
by the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus).
(z) Each certificate signed by any officer of the Company
and delivered to the Representatives or counsel for the Underwriters
pursuant to this Agreement or in connection with the payment of the
purchase price and delivery of the certificates for the Firm
Securities or the Option Securities shall be deemed to be a
representation and warranty by the Company to each Underwriter as to
the matters covered thereby.
-9-
Draft Dated September 26, 1997
<PAGE> 10
3. Representations and Warranties of the Selling Securityholders.
Each Selling Securityholder represents and warrants to, and
agrees with, each of the several Underwriters that:
(a) Such Selling Securityholder has full power (corporate
and other) to enter into this Agreement and to sell, assign, transfer
and deliver to the Underwriters the Securities to be sold by such
Selling Securityholder hereunder in accordance with the terms of this
Agreement; the execution and delivery of this Agreement have been duly
authorized by all necessary corporate and other action of such Selling
Securityholder; and this Agreement has been duly executed and
delivered by such Selling Securityholder.
(b) Such Selling Securityholder has duly executed and
delivered a power of attorney and custody agreement (with respect to
such Selling Securityholder, the "Power-of-Attorney" and the "Custody
Agreement", respectively), each in the form heretofore delivered to
the Representatives, appointing Mark S. Siegel, Vaughn E. Drum and P.
Blake Dupuis, and each of them, as such Selling Securityholder's
attorney-in-fact (the "Attorney-in-Fact") with authority to execute,
deliver and perform this Agreement on behalf of such Selling
Securityholder and appointing Chase Mellon Shareholder Services as
custodian thereunder (the "Custodian"). Certificates in negotiable
form, endorsed in blank or accompanied by blank stock powers duly
executed, with signatures appropriately guaranteed, representing the
Securities to be sold by such Selling Securityholder hereunder have
been deposited with the Custodian pursuant to the Custody Agreement
for the purpose of delivery pursuant to this Agreement. Such Selling
Securityholder has full power (corporate and other) to enter into the
Custody Agreement and the Power-of-Attorney and to perform its
obligations under the Custody Agreement. The execution and delivery of
the Custody Agreement and the Power-of-Attorney have been duly
authorized by all necessary corporate and other action of such Selling
Securityholder; the Custody Agreement and the Power-of-Attorney have
been duly executed and delivered by such Selling Securityholder and,
assuming due authorization, execution and delivery by the Custodian,
are the legal, valid, binding and enforceable instruments of such
Selling Securityholder. Such Selling Securityholder agrees that each
of the Securities represented by the certificates on deposit with the
Custodian is subject to the interests of the Underwriters hereunder,
that the arrangements made for such custody, the appointment of the
Attorney-in-Fact and the right, power and authority of the
Attorney-in-Fact to execute and deliver this Agreement, to agree on
the price at which the Securities (including such Selling
Securityholder's Securities) are to be sold to the Underwriters, and
to carry out the terms of this Agreement, are to that extent
irrevocable and that the obligations of such Selling Securityholder
hereunder shall not be terminated, except as provided in this
Agreement or the Custody Agreement, by any act of such Selling
Securityholder, by operation of law or otherwise, whether in the case
of any individual Selling Securityholder by the death or incapacity of
such Selling Securityholder, in the case of a trust or estate by the
death of the trustee or trustees or the executor or executors or the
termination of such trust or estate, or in the case of a corporate or
partnership Selling Securityholder by its liquidation or dissolution
or by the occurrence of any other event. If any individual Selling
Securityholder, trustee or
-10-
Draft Dated September 26, 1997
<PAGE> 11
executor should die or become incapacitated or any such trust should
be terminated, or if any corporate or partnership Selling
Securityholder shall liquidate or dissolve, or if any other event
should occur, before the delivery of such Securities hereunder, the
certificates for such Securities deposited with the Custodian shall be
delivered by the Custodian in accordance with the respective terms and
conditions of this Agreement as if such death, incapacity,
termination, liquidation or dissolution or other event had not
occurred, regardless of whether or not the Custodian or the
Attorney-in-Fact shall have received notice thereof.
(c) Such Selling Securityholder has valid title to the
Securities to be sold by such Selling Securityholder hereunder and
upon sale and delivery of, and payment for, such Securities, as
provided herein, and the payment of the exercise price with respect to
any Securities issuable on exercise of the Warrants, the Underwriters
will receive valid title to such Securities free and clear of any
adverse claims, assuming that the Underwriters have acquired such
Securities for value, in good faith and without notice of any adverse
claim.
(d) Such Selling Securityholder has not, directly or
indirectly, (i) taken any action designed to cause or result in, or
that has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Securities or (ii) since the filing of the Registration Statement (A)
sold, bid for, purchased, or paid anyone any compensation for
soliciting purchases of, the Securities or (B) paid or agreed to pay
to any person any compensation for soliciting another to purchase any
other securities of the Company (except for the sale of Securities by
the Selling Securityholders under this Agreement).
(e) To the extent that any statements or omissions are
made in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto in reliance upon and
in conformity with written information furnished to the Company by
such Selling Securityholder specifically for use therein, such
Preliminary Prospectus did, and the Registration Statement and the
Prospectus and any amendments or supplements thereto, when they become
effective or are filed with the Commission, as the case may be, will,
with respect to such information, conform in all material respects to
the requirements of the Act, the Exchange Act and the respective rules
and regulations of the Commission thereunder and will, with respect to
such information, not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they are made, not misleading. Such Selling
Securityholder has reviewed the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus) and the
Registration Statement, and the information regarding such Selling
Securityholder set forth therein under the caption "Principal and
Selling Stockholders" is complete and accurate.
(f) The sale by such Selling Securityholder of Securities
pursuant hereto is not prompted by any adverse information concerning
the Company that is not set forth in the Registration Statement or the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
-11-
Draft Dated September 26, 1997
<PAGE> 12
(g) The sale of the Securities to the Underwriters by
such Selling Securityholder pursuant to this Agreement, the compliance
by such Selling Securityholder with the other provisions of this
Agreement, the Custody Agreement and the consummation of the other
transactions herein contemplated do not (i) require the consent,
approval, authorization, registration or qualification of or with any
governmental authority, except such as have been obtained, such as may
be required under state securities or blue sky laws and, if the
registration statement filed with respect to the Securities (as
amended) is not effective under the Act as of the time of execution
hereof, such as may be required (and shall be obtained as provided in
this Agreement) under the Act and the Exchange Act, or (ii) conflict
with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under any indenture, mortgage,
deed of trust, lease or other agreement or instrument to which such
Selling Securityholder or any of its subsidiaries is a party or by
which such Selling Securityholder or any of its subsidiaries or any of
such Selling Securityholder's properties are bound, or the charter
documents or by-laws of such Selling Securityholder or any of its
subsidiaries or any statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any
arbitrator applicable to such Selling Securityholder or any of its
subsidiaries."
(h) The Selling Securityholders have not distributed and,
prior to the later of (i) the Closing Date and (ii) the completion of
the distribution of the shares, will not distribute any offering
material in connection with the offering and sale of the Securities
other than the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or other materials, if any, permitted by the Act.
4. Purchase, Sale and Delivery of the Securities. (a) On the
basis of the representations, warranties, agreements and covenants herein
contained and subject to the terms and conditions herein set forth, the Company
agrees to issue and sell, and each of the Selling Securityholders, severally
and not jointly, agrees to sell, to each of the Underwriters, and each of the
Underwriters, severally and not jointly, agrees to purchase from the Company,
at a purchase price of $_______ per share, the number of Firm Securities set
forth opposite the name of such Underwriter in Schedule 2 hereto. One or more
certificates in definitive form for the Firm Securities that the several
Underwriters have agreed to purchase hereunder, and in such denomination or
denominations and registered in such name or names as the Representatives
request upon notice to the Company at least 48 hours prior to the Firm Closing
Date, shall be delivered by or on behalf of the Company and each of the Selling
Securityholders to the Representatives for the respective accounts of the
Underwriters, against payment by or on behalf of the Underwriters of the
purchase price therefor by wire transfer in same-day funds (the "Wired Funds")
to the account designated by the Company and each of the Selling
Securityholder. Such delivery of and payment for the Firm Securities shall be
made at the offices of Baker & Botts, L.L.P., One Shell Plaza, 910 Louisiana,
Houston, Texas 77002 at 9:30 A.M., New York City time, on ____________, 1997,
or at such other place, time or date as the Representatives and the Company may
agree upon or as the Representatives may determine pursuant to Section 11
hereof, such time and date of delivery against payment being herein referred to
as the "Firm Closing Date". The Company and each of the Selling
Securityholders will make such certificate or certificates for the Firm
Securities available for checking and packaging by the Representatives at the
offices in New York, New York of the Company's transfer
-12-
Draft Dated September 26, 1997
<PAGE> 13
agent or registrar or of Prudential Securities Incorporated at least 24 hours
prior to the Firm Closing Date.
(b) For the purpose of covering any over-allotments in connection
with the distribution and sale of the Firm Securities as contemplated by the
Prospectus, the Company and Drum hereby grant to the several Underwriters an
option to purchase, severally and not jointly, the Option Securities to be sold
by them. The purchase price to be paid for any Option Securities shall be the
same price per share as the price per share for the Firm Securities set forth
above in paragraph (a) of this Section 4, plus if the purchase and sale of any
Option Securities takes place after the Firm Closing Date and after the Firm
Securities are trading "ex-dividend", an amount equal to the dividend payable
on such Option Securities. For purposes of covering any over-allotments in
connection with the distribution and sale of Option Securities as contemplated
by the Prospectus, Remy Capital Partners III, L.P. ("Remy"), Remy Investors and
Consultants, Incorporated ("Remy Consultants") and Kenneth N. Berns hereby
grant to the several underwriters an option to purchase, severally and not
jointly, Warrants to purchase 165,000, 165,000 and 30,000 shares of Common
Stock, respectively, at an exercise price of $1 43/48 per share. The purchase
price to be paid for such Warrants shall be at a price per Warrant to purchase
one share of Common Stock equal to the price per share for the Firm Securities
set forth above in paragraph (a) of this Section 4 less the warrant exercise
price, plus, if the purchase and sale of any Option Securities takes place
after the Firm Closing Date and after the Firm Securities are trading
"ex-dividend", an amount equal to the dividend payable on such Option
Securities. The options granted hereby may be exercised as to all or any part
of the Option Securities, including for this purpose, the Warrants, from time
to time within 30 days after the date of the Prospectus (or, if such 30th day
shall be a Saturday or Sunday or a holiday, on the next business day thereafter
when the New York Stock Exchange is open for trading). The Underwriters shall
not be under any obligation to purchase any of the Option Securities prior to
the exercise of such options. The Representatives may from time to time
exercise the options granted hereby by giving notice in writing or by telephone
(confirmed in writing) to the Company and the Additional Selling
Securityholders as to the number of Option Securities (including the number of
Warrants pursuant to which Securities may be issuable) as to which the several
Underwriters are then exercising the options and the date and time for delivery
of and payment for such Option Securities or Warrants. The exercise of such
options shall be effected on a pro rata basis between the Company and the
Additional Selling Securityholders. Any such date of delivery shall be
determined by the Representatives but shall not be earlier than two business
days or later than five business days after such exercise of the option and, in
any event, shall not be earlier than the Firm Closing Date. The time and date
set forth in such notice, or such other time on such other date as the
Representatives and the Company may agree upon or as the Representatives may
determine pursuant to Section 11 hereof, is herein called the "Option Closing
Date" with respect to such Option Securities and Warrants. Upon the exercise
of the options as provided herein, the Company and the Additional Selling
Securityholders shall become obligated to sell to each of the Underwriters and,
subject to the terms and conditions set forth herein, each of the Underwriters
(severally and not jointly) shall become obligated to purchase from the Company
and such Additional Selling Securityholders, the same percentage of the total
number of the Option Securities (including for this purpose the number of
Warrants to purchase Securities) as to which the several Underwriters are then
exercising the options as such Underwriter is obligated to purchase of the
aggregate number of Firm Securities, as adjusted by the Representatives in such
manner as they deem advisable to avoid fractional Shares. If the options
-13-
Draft Dated September 26, 1997
<PAGE> 14
are exercised as to all or a portion of the Option Securities, one or more
certificates in definitive form for such Option Securities, and payment
therefor shall be delivered on the related Option Closing Date in the manner,
and upon the terms and conditions, set forth in paragraph (a) of this Section
4, except that reference therein to the Firm Securities and the Firm Closing
Date shall be deemed, for purposes of this paragraph (b), to refer to such
Option Securities and Option Closing Date, respectively. With respect to the
exercise of the options as to all or a portion of the Warrants to purchase
Option Securities, such Warrants shall be assigned to the Underwriters on the
same percentage of the total number of the Option Securities as to which the
several Underwriters are then exercising the options as such Underwriter is
obligated to purchase the aggregate number of Firm Securities, as adjusted by
the Representatives in such manner as they deem advisable to avoid fractional
Shares. The Company agrees to issue the shares of Common Stock subject to such
Warrants, upon payment by the Underwriters to the Company of the Exercise Price
with respect to such Warrants.
(c) The Company, each Selling Securityholder and each Additional
Selling Securityholder acknowledge that the wire transfer by or on behalf of
the Underwriters of the purchase price for any Securities or Warrants does not
constitute a closing of a purchase and sale of the Securities or Warrants.
Only execution and delivery of a receipt for Securities or Warrants, as the
case may be, by the Underwriters indicates completion of the closing of a
purchase of the Securities or Warrants as the case may be, from the Company and
each Selling Securityholder or Additional Selling Securityholder. Furthermore,
in the event that the Underwriters wire funds to the Company prior to the
completion of the closing of a purchase of Securities or Warrants, as the case
may be, the Company, each Selling Securityholder and each Additional Selling
Securityholder acknowledge that until the Underwriters execute and deliver a
receipt for the Securities or Warrants as the case may be, by facsimile or
otherwise, the Company and each Selling Securityholder will not be entitled to
the wired funds and shall return the wired funds to the Underwriters as soon as
practicable (by wire transfer of same-day funds) upon demand. In the event
that the closing of a purchase of Securities or Warrants is not completed and
the wire funds are not returned by the Company and each Selling Securityholder
or Additional Selling Securityholder to the Underwriters on the same day the
wired funds were received by the Company, the Company and each Selling
Securityholder and Additional Selling Securityholder agree to pay to the
Underwriters in respect of each day the wire funds are not returned by the
Company or any Selling Securityholder or Additional Selling Securityholder, as
the case may be, in same-day funds, interest on the amount of such wire funds
in an amount representing the Underwriters' cost of financing as reasonably
determined by Prudential Securities Incorporated.
(d) It is understood that any of you, individually and not as one
of the Representatives, may (but shall not be obligated to) make payment on
behalf of any Underwriter or Underwriters for any of the Securities or Warrants
to be purchased by such Underwriter or Underwriters. No such payment shall
relieve such Underwriter or Underwriters from any of its or their obligations
hereunder.
5. Offering by the Underwriters. Upon your authorization of the
release of the Firm Securities, the several Underwriters propose to offer the
Firm Securities for sale to the public upon the terms set forth in the
Prospectus.
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Draft Dated September 26, 1997
<PAGE> 15
6. Covenants of the Company. The Company covenants and agrees
with each of the Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of
this Agreement, and any amendments thereto to become effective as
promptly as possible. If required, the Company will file the
Prospectus or any Term Sheet that constitutes a part thereof and any
amendment or supplement thereto with the Commission in the manner and
within the time period required by Rule 434 and 424(b) under the Act.
During any time when a prospectus relating to the Securities is
required to be delivered under the Act, the Company (i) will comply
with all requirements imposed upon it by the Act and the Exchange Act
and the respective rules and regulations of the Commission thereunder
to the extent necessary to permit the continuance of sales of or
dealings in the Securities in accordance with the provisions hereof
and of each of the Prospectus and any Integrated Prospectus, as then
amended or supplemented, and (ii) will not file with the Commission
the Prospectus or the amendment referred to in the third sentence of
Section 2(a) hereof, any amendment or supplement to such prospectus or
any amendment to the Registration Statement or any Rule 462(b)
Registration Statement of which the Representatives shall not
previously have been advised and furnished with a copy for a
reasonable period of time prior to the proposed filing and as to which
filing the Representatives shall not have given their consent;
provided, that the foregoing provision of this clause (ii) does not
prohibit the Company from making filings with the Commission of
statements and reports that it reasonably believes are required to be
made under the Exchange Act. The Company will prepare and file with
the Commission, in accordance with the rules and regulations of the
Commission, promptly upon request by the Representatives or counsel
for the Underwriters, any amendments to the Registration Statement or
amendments or supplements to the Prospectus and any Integrated
Prospectus that may be necessary or advisable in connection with the
distribution of the Securities by the several Underwriters, and will
use its best efforts to cause any such amendment to the Registration
Statement to be declared effective by the Commission as promptly as
possible. The Company will advise the Representatives, promptly after
receiving notice thereof, of the time when the Registration Statement
or any amendment thereto has been filed or declared effective or the
Prospectus and any Integrated Prospectus or any amendment or
supplement thereto has been filed and will provide evidence
satisfactory to the Representatives of each such filing or
effectiveness.
(b) The Company will advise the Representatives, promptly
after receiving notice or obtaining knowledge thereof, of (i) the
issuance by the Commission of any stop order suspending the
effectiveness of the Original Registration Statement or any Rule
462(b) Registration Statement or any post-effective amendment thereto
or any order directed at any document incorporated by reference in the
Registration Statement or the Prospectus and any required Integrated
Prospectus or any amendment or supplement thereto or any order
preventing or suspending the use of any Preliminary Prospectus, or the
Prospectus and any Integrated Prospectus or any amendment or
supplement thereto, (ii) the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, (iii) the
institution, threatening or contemplation of any proceeding for any
such purpose or (iv) any request made
-15-
Draft Dated September 26, 1997
<PAGE> 16
by the Commission for amending the Original Registration Statement or
any Rule 462(b) Registration Statement, for amending or supplementing
any Preliminary Prospectus the Prospectus and any Integrated
Prospectus or for additional information. The Company will use its
best efforts to prevent the issuance of any such stop order and, if
any such stop order is issued, to obtain the withdrawal thereof as
promptly as possible.
(c) The Company will arrange for the qualification of the
Securities for offering and sale under the securities or blue sky laws
of such jurisdictions as the Representatives may reasonably designate
and will continue such qualifications in effect for as long as may be
necessary to complete the distribution of the Securities, provided,
however, that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction.
(d) If, at any time prior to the later of (i) the final
date when a prospectus relating to the Securities is required to be
delivered under the Act or (ii) the Option Closing Date, any event
occurs as a result of which the Prospectus as then amended or
supplemented, would include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, or if for any other reason it is necessary
at any time to amend or supplement, the Prospectus to comply with the
Act, the Exchange Act or the respective rules or regulations of the
Commission thereunder, the Company will promptly notify the
Representatives thereof and, subject to Section 6(a) hereof, will
prepare and file with the Commission, at the Company's expense, an
amendment to the Registration Statement or an amendment or supplement
to the Prospectus or any Integrated Prospectus that corrects such
statement or omission or effects such compliance.
(e) The Company will, without charge, provide (i) to the
Representatives and to counsel for the Underwriters a conformed copy
of the registration statement originally filed with respect to the
Securities and each amendment thereto (in each case including exhibits
thereto) or any Rule 462(b) Registration Statement and (ii) so long as
a prospectus relating to the Securities is required to be delivered
under the Act, as many copies of each Preliminary Prospectus or the
Prospectus or any Integrated Prospectus or any amendment or supplement
thereto as the Representatives may reasonably request; without
limiting the application of clause (iii) of this sentence, the
Company, not later than (A) 6:00 P.M., New York City time, on the date
of determination of the public offering price, if such determination
occurred at or prior to 10:00 A.M., New York City time on such date of
(B) 2:00 P.M., New York City time, on the business day following the
date of determination of the public offering price, if such
determination occurred after 10:00 A.M., New York City time, on such
date, will deliver to the Underwriters, without charge, as many copies
of the Prospectus and any amendment or supplement thereto as the
Representatives may reasonably request for purposes of confirming
orders that are expected to settle on the Firm Closing Date.
(f) The Company, as soon as practicable when required,
will make generally available to its securityholders and to the
Representatives a consolidated earnings statement of
-16-
Draft Dated September 26, 1997
<PAGE> 17
the Company and its subsidiaries that satisfies the provisions of
Section 11(a) of the Act and Rule 158 thereunder.
(g) The Company will apply the net proceeds to the
Company from the sale of the Securities as set forth under "Use of
Proceeds" in the Prospectus or any Integrated Prospectus.
(h) The Company will not, directly or indirectly, without
the prior written consent of Prudential Securities Incorporated, on
behalf of the Underwriters, offer, sell, offer to sell, contract to
sell, pledge, grant any option to purchase or otherwise sell or
dispose (or announce any offer, sale, offer of sale, contract of sale,
pledge, grant of any option to purchase or other sale or disposition)
of any shares of Common Stock or any securities convertible into, or
exchangeable or exercisable for, shares of Common Stock for a period
of 90 days after the date hereof, except pursuant to this Agreement
and except for issuances pursuant to the exercise of warrants
outstanding on the date hereof and for the grant of options pursuant
to the Company's employee stock option plans existing on the date
hereof and the issuance of Common Stock upon the exercise of such
options and except for issuances of additional shares of Common Stock
or rights to acquire Common Stock in connection with acquisitions of
businesses or assets or other business combinations, provided that the
Company will not grant any demand registration rights covering any
shares issued in connection with any such acquisition or business
combination that are exercisable prior to 90 days following the date
of this Agreement.
(i) The Company will not, directly or indirectly, (i)
take any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities or (ii) (A)
sell, bid for, purchase, or pay anyone any compensation for soliciting
purchases of, the Securities or (B) pay or agree to pay to any person
any compensation for soliciting another to purchase any other
securities of the Company (except for the sale of Securities by the
Selling Securityholders and Additional Selling Securityholders under
this Agreement and except in connection with acquisitions by the
Company or its subsidiaries of assets or businesses in the oilfield
services industry).
(j) The Company will obtain the agreements described in
Section 9(f) hereof prior to the Firm Closing Date.
(k) If at any time during the 30-day period after the
Registration Statement becomes effective or the period prior to the
Option Closing Date, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion
the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or
event necessitates a supplement to or amendment of the Prospectus and
any Integrated Prospectus), the Company will, after notice from you
advising the Company to the effect set forth above, consult with you
concerning the necessity and substance of a press release or other
public statement responding to or commenting on such rumor,
publication or event.
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Draft Dated September 26, 1997
<PAGE> 18
(l) If the Company elects to rely on Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) and pay the applicable fees
in accordance with Rule 111 promulgated under the Act.
(m) The Company will use its best efforts to cause the
Securities to be duly authorized for listing by the American Stock
Exchange.
7. Covenants of Selling Securityholders and Additional Selling
Securityholders.
(a) Each Selling Securityholder and Additional Selling
Securityholders will not, directly or indirectly, without the prior
written consent of Prudential Securities Incorporated, offer, sell,
offer to sell, contract to sell, pledge, grant any option to purchase
or otherwise sell or dispose (or announce any offer, sale, offer of
sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) of any Securities legally or beneficially
owned by such Selling Securityholder or any securities convertible
into, or exchangeable or exercisable for, Securities for a period of
90 days after the date hereof except in connection with any transfer
of any Securities to a related party that agrees to be bound by this
restriction.
(b) Such Selling Securityholder will not, directly or
indirectly, (i) take any action designed to cause or result in, or
that has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Securities or (ii) sell, bid for, purchase, or pay anyone any
compensation for soliciting purchases of, the Securities (except for
the sale of Securities by the Selling Securityholders under this
Agreement).
(c) Each Selling Securityholder agrees to deliver to you
prior to or at the Firm Closing Date a properly completed and executed
United States Treasury Department Form W-9 (or other applicable form
or statement specified by Treasury Department regulation in lieu
thereof).
8. Expenses. The Company will pay all costs and expenses
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 13 hereof, including all costs and expenses
incident to (i) the printing or other production of documents with respect to
the transactions, including any costs of printing the registration statement
originally filed with respect to the Securities and any amendment thereto, any
Rule 462(b) Registration Statement, any Preliminary Prospectus, the Prospectus
and any Integrated Prospectus and any amendment or supplement thereto, this
Agreement and any blue sky memoranda, (ii) all arrangements relating to the
delivery to the Underwriters of copies of the foregoing documents, (iii) the
fees and disbursements of the counsel, accountants and any other experts or
advisors retained by the Company, (iv) preparation, issuance and delivery to
the Underwriters of any certificates evidencing the Securities, including
transfer agent's and registrar's fees, (v) the qualification of the Securities
under state securities and blue sky laws, including filing fees and reasonable
fees and disbursements of counsel for the Underwriters relating thereto, (vi)
the filing fees of the Commission (and the National Association of Securities
Dealers, Inc.) relating to the Securities,
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Draft Dated September 26, 1997
<PAGE> 19
(vii) the listing of the Securities on the American Stock Exchange,
(viii) meetings with prospective investors in the Securities (other
than shall have been arranged by the Representatives or specifically
approved by the Representatives to be paid for by the Underwriters)
and (ix) advertising relating to the offering of the Securities (other
than shall have been specifically approved by the Representatives to
be paid for by the Underwriters). If the sale of the Securities
provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 9 hereof is not
satisfied, because this Agreement is terminated pursuant to Section 13
hereof or because of any failure, refusal or inability on the part of
the Company to perform all obligations and satisfy all conditions on
its part to be performed or satisfied hereunder other than by reason
of a default by any of the Underwriters, the Company will reimburse
the Underwriters severally upon demand for all out-of-pocket expenses
(including fees and disbursements of counsel) that shall have been
incurred by them in connection with the proposed purchase and sale of
the Securities. The Company shall not in any event be liable to any
of the Underwriters for the loss of anticipated profits from the
transactions covered by this Agreement.
9. Conditions of the Underwriters' Obligations. The obligations
of the several Underwriters to purchase and pay for the Firm Securities shall
be subject, in the Representatives' sole discretion, to the accuracy of the
representations and warranties of the Company and each Selling Securityholder
contained herein as of the date hereof and as of the Firm Closing Date, as if
made on and as of the Firm Closing Date, to the accuracy of the statements of
the Company's and each Selling Securityholder's officers made pursuant to the
provisions hereof, to the performance by the Company and each Selling
Securityholder of its covenants and agreements hereunder and to the following
additional conditions:
(a) If the Original Registration Statement or any
amendment thereto filed prior to the Firm Closing Date has not been
declared effective as of the time of execution hereof, the Original
Registration Statement or such amendment and, if the Company has
elected to rely upon Rule 462(b), the Rule 462(b) Registration
Statement shall have become effective not later than the earlier of
(i) 11:00 A.M., New York time, on the date on which the amendment to
the registration statement originally filed with respect to the
Securities or to the Registration Statement, as the case may be,
containing information regarding the initial public offering price of
the Securities has been filed with the Commission and (ii) the time
confirmations are sent or given as specified by Rule 462(b)(2), or
with respect to the Original Registration Statement, or such later
time and date as shall have been consented to by the Representatives;
if required, the Prospectus or any Term Sheet that constitutes a part
thereof and any Integrated Prospectus and any amendment or supplement
thereto shall have been filed with the Commission in the manner and
within the time period required by Rule 434 and 424(b) under the Act;
no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereto and no order
directed at any document incorporated by reference in the Registration
Statement or the Prospectus or any Integrated Prospectus or any
amendment or supplement thereto shall have been issued and no
proceedings for that purpose shall have been instituted or threatened
or, to the knowledge of the Company or the Representatives, shall be
contemplated by the Commission; and the Company shall have complied
with any request of
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Draft Dated September 26, 1997
<PAGE> 20
the Commission for additional information (to be included in the
Registration Statement, or the Prospectus or any Integrated Prospectus
or otherwise).
(b) The Representatives shall have received an opinion,
dated the Firm Closing Date, of Fulbright & Jaworski, L.L.P., counsel
for the Company, to the effect that:
(i) the Company and each of its subsidiaries
listed in Schedule 3 hereto (the "Subsidiaries") have been
duly incorporated and are validly existing as corporations in
good standing under the laws of their respective jurisdictions
of incorporation;
(ii) the Company and each of the Subsidiaries have
corporate power to own or lease their respective properties
and conduct their respective businesses as described in the
Registration Statement and the Prospectus or any Integrated
Prospectus, and the Company has corporate power to enter into
this Agreement and to carry out all the terms and provisions
hereof and thereof to be carried out by it;
(iii) the issued shares of capital stock of each of
the Subsidiaries have been duly authorized and validly issued,
are fully paid and nonassessable and, except as noted in such
opinion, to such counsel's knowledge, are owned beneficially
by the Company free and clear of any perfected security
interest;
(iv) the Company has an authorized, capitalization
as set forth in the Prospectus; the Securities, other than the
Securities issuable on exercise of the Warrants, have been
duly authorized and validly issued and are fully paid and
nonassessable; the Firm Securities have been duly authorized
by all necessary corporate action of the Company and, when
issued and delivered to and paid for by the Underwriters
pursuant to this Agreement, will be validly issued, fully paid
and nonassessable; the Securities have been duly authorized
for listing, subject to official notice of issuance, on the
American Exchange; no holders of outstanding shares of capital
stock of the Company are entitled as such to any preemptive or
other rights to subscribe for any of the Securities under the
Delaware General Corporation Law or the Company's Certificate
of Incorporation or by-laws; and to such counsel's knowledge,
except as disclosed in the Prospectus, no holders of
securities of the Company are entitled to have such securities
registered under the Registration Statement or to any
preemptive or other rights to subscribe for any of the
Securities that are contained in any agreements described in
clause (viii) (B) of this Section 9(b);
(v) the Common Stock conforms in all material
respects to the description thereof set forth under the
heading "Description of Capital Stock" in the Prospectus;
(vi) the execution and delivery of this Agreement
have been duly authorized by all necessary corporate action of
the Company and this Agreement has been duly executed and
delivered by the Company;
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Draft Dated September 26, 1997
<PAGE> 21
(vii) to such counsel's knowledge, there are no
legal or governmental proceedings pending or threatened to
which the Company or any of the Subsidiaries is a party or to
which the property of the Company or any of the Subsidiaries
is subject that are required to be described in the
Registration Statement and any Integrated Prospectus and are
not described therein; and, to such counsel's knowledge, no
contract or other document is required to be filed as an
exhibit to the Registration Statement that is not described
therein or filed as required;
(viii) the issuance, offering and sale of the
Securities to the Underwriters by the Company pursuant to this
Agreement, the compliance by the Company with the other
provisions of this Agreement and the consummation of the other
transactions herein contemplated do not: (A) require the
consent, approval, authorization, registration or
qualification of or with any governmental authority having
jurisdiction over the Company, except such as have been
obtained or such as may be required under state securities or
blue sky laws; (B) conflict with or result in a breach of the
terms and provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, lease or other instrument
relating to the borrowing of money known to such counsel to
which the Company or any Subsidiary is bound or any other
agreement identified to such counsel by the Company as being
material to the Company and the Subsidiaries, taken as a
whole; or (C) violate the certificate of incorporation or
by-laws of the Company or the charter documents or by-laws of
any of the Subsidiaries; or (D) violate any statute or
judgment, decree, order, rule or regulation of any court or
other governmental authority or arbiter known to such counsel
to be applicable to the Company or any of the Subsidiaries;
(ix) the Registration Statement has become
effective under the Act and, to such counsel's knowledge, and
no stop order suspending the effectiveness of the Registration
Statement or any post- effective amendment thereto and no
order directed at any document incorporated by reference in
the Registration Statement, the Prospectus and any Integrated
Prospectus or any amendment or supplement thereto has been
issued, and, to such counsel's knowledge, no proceedings for
that purpose have been instituted or threatened or are
contemplated by the Commission; and
(x) the Registration Statement and the Prospectus
(excluding the financial statements and other financial or
statistical information contained or incorporated by reference
therein and any information furnished by the Underwriters, the
Selling Securityholders or the Additional Selling
Securityholders, as to which such counsel need express no
opinion) comply or their face as to form in all material
respects with the applicable requirements of the Act and the
respective rules and regulations of the Commission thereunder.
Such counsel shall also state that it has participated in conferences with
officers and other representatives of the Company, the Underwriters, the
Selling Securityholders and the Additional Selling Securityholders, counsel to
the Underwriters and representatives of the independent public
-21-
Draft Dated September 26, 1997
<PAGE> 22
accountants of the Company and with your representatives, at which conferences
the contents of the Registration Statement and the Prospectus were discussed.
Although such counsel need not pass upon and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus and need not make any representation
that it has independently verified the accuracy, completeness or fairness of
such statements, such counsel shall state that on the basis of the foregoing
and the information disclosed to it (relying as to materiality to a large
extent upon the officers and other representatives of the Company, the
Underwriters, Selling Securityholders and Additional Selling Securityholders),
(i) no facts came to its attention that lead it to believe that the
Registration Statement, as of the time it was declared effective under the Act,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading (it being understood that such counsel need
not express any view with respect to the financial statements, including the
notes and schedules thereto and the auditor's report thereon, or any other
information of a financial, numerical, statistical or accounting nature set
forth or referred to in the Registration Statement or any document incorporated
therein by reference or any exhibits thereto), and (ii) no facts have come to
such counsel's attention that lead it to believe that the Prospectus, as of the
time it was filed with the Commission, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being understood
that such counsel need not express any view with respect to the financial
statements, including the notes and schedules thereto and the auditor's report
thereon, or any other information or a financial, numerical, statistical or
accounting nature set forth or referred to in the Prospectus or any document
incorporated therein by reference).
In rendering any such opinion, such counsel may rely, as to
matters of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company and public officials.
References to the Registration Statement and the Prospectus in
this paragraph (b) shall include any amendment or supplement thereto at the
date of such opinion.
(c) The Selling Securityholders shall have furnished to
the Representatives the opinion of ________________________, counsel
for the Selling Securityholder[s], dated the Closing Date, to the
effect that:
(i) each Selling Securityholder has full
corporate and other power to enter into this Agreement, the
Custody Agreement and the Power-of-Attorney and to sell,
transfer and deliver the Securities being sold by such Selling
Securityholder hereunder in the manner provided in this
Agreement and to perform its obligations under the Custody
Agreement; the execution and delivery of this Agreement, the
Custody Agreement and the Power-of-Attorney have been duly
authorized by all necessary corporate and other action of each
Selling Securityholder; this Agreement, the Custody Agreement
and the Power-of-Attorney have been duly executed and
delivered by each Selling Securityholder; assuming due
authorization, execution and delivery by the Custodian, the
Custody Agreement and the Power-of-Attorney are the legal,
valid,
-22-
Draft Dated September 26, 1997
<PAGE> 23
binding and enforceable instruments of such Selling
Securityholder, subject to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and
subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding
in equity or at law);
(ii) the delivery by each Selling Securityholder
to the several Underwriters of certificates for the Securities
being sold hereunder by such Selling Securityholder against
payment therefor as provided herein, will convey valid title
to such Securities to the several Underwriters, free and clear
of all security interests, liens, encumbrances, equities,
claims or other defects;
(iii) the sale of the Securities to the
Underwriters by such Selling Securityholder pursuant to this
Agreement, the compliance by such Selling Securityholder with
the other provisions of this Agreement the Custody Agreement
and the consummation of the other transactions herein
contemplated do not (i) require the consent, approval,
authorization, registration or qualification of or with any
governmental authority, except such as have been obtained and
such as may be required under state securities or blue sky
laws, or (ii) conflict with or result in a breach or violation
of any of the terms and provisions of the charter documents or
by-laws of such Selling Securityholder or any of its
subsidiaries or any statute or any judgment, decree, order,
rule or regulation of any court or other governmental
authority or any arbitrator applicable to such Selling
Securityholder or any of its subsidiaries.
In rendering such opinion, such counsel may rely, as to
matters of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company and public officials.
References to the Registration Statement and the Prospectus in
this paragraph (c) shall include any amendment or supplement thereto at the
date of such opinion.
(d) The Representatives shall have received an opinion,
dated the Firm Closing Date, of Baker & Botts, L.L.P., One Shell
Plaza, 910 Louisiana, Houston, Texas 77002, counsel for the
Underwriters, with respect to the issuance and sale of the Firm
Securities, the Registration Statement, the Prospectus or any
Integrated Prospectus, and such other related matters as the
Representatives may reasonably require, and the Company shall have
furnished to such counsel such documents as they may reasonably
request for the purpose of enabling them to pass upon such matters.
(e) The Representatives shall have received from Ernst &
Young LLP a letter or letters dated, respectively, the date hereof and
the Firm Closing Date, in form and substance satisfactory to the
Representatives, to the effect that:
(i) they are independent accountants with respect
to the Company and its consolidated subsidiaries within the
meaning of the Act, and the Exchange Act and the applicable
rules and regulations thereunder;
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Draft Dated September 26, 1997
<PAGE> 24
(ii) in their opinion, the audited consolidated
financial statements and schedules examined by them and
included in the Registration Statement, the Prospectus and any
Integrated Prospectus comply in form in all material respects
with the applicable accounting requirements of the Act, the
Exchange Act and the related published rules and regulations
thereunder;
(iii) on the basis of a reading of the latest
available interim unaudited consolidated condensed financial
statements of the Company and its consolidated subsidiaries,
carrying out certain specified procedures (which do not
constitute an examination made in accordance with generally
accepted auditing standards) that would not necessarily reveal
matters of significance with respect to the comments set forth
in this paragraph (iii), a reading of the minute books of the
shareholders, the board of directors and any committees
thereof of the Company and each of its consolidated
subsidiaries, and inquiries of certain officials of the
Company and its consolidated subsidiaries who have
responsibility for financial and accounting matters, nothing
came to their attention that caused them to believe that:
(A) the unaudited condensed consolidated
financial statements of the Company and its
consolidated subsidiaries included or incorporated by
reference in the Registration Statement, the
Prospectus and any Integrated Prospectus do not
comply in form in all material respects with the
applicable accounting requirements of the Act, the
Exchange Act and the related published rules and
regulations thereunder, or are not in conformity with
generally accepted accounting principles applied on a
basis substantially consistent with that of the
audited consolidated financial statements included in
the Registration Statement, the Prospectus and any
Integrated Prospectus; and
(B) at a specific date not more than
five business days prior to the date of such letter,
there were any changes in the capital stock or
long-term debt of the Company and its consolidated
subsidiaries or any decreases in net current assets
or stockholders' equity of the Company and its
consolidated subsidiaries, in each case compared with
amounts shown on the June 30, 1997 unaudited
condensed consolidated balance sheet included in the
Registration Statement, the Prospectus and any
Integrated Prospectus, or for the period from July 1,
1997 to such specified date there were any decreases,
as compared with the corresponding period in the
preceding year and with a period of corresponding
length ending on June 30, 1997, in net revenues, net
income before income taxes or total or per share
amounts of net income of the Company and its
consolidated subsidiaries, except in all instances
for changes, decreases or increases set forth in such
letter;
(iv) they have carried out certain specified
procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information that are
-24-
Draft Dated September 26, 1997
<PAGE> 25
derived from the general accounting records of the Company and
its consolidated subsidiaries and are included or incorporated
by reference in the Registration Statement, the Prospectus and
any Integrated Prospectus and have compared such amounts,
percentages and financial information with such records of the
Company and its consolidated subsidiaries and with information
derived from such records and have found them to be in
agreement, excluding any questions of legal interpretation;
and
(v) on the basis of a reading of the unaudited
pro forma condensed consolidated financial statements included
in the Registration Statement, the Prospectus and any
Integrated Prospectus, carrying out certain specified
procedures that would not necessarily reveal matters of
significance with respect to the comments set forth in this
paragraph (v), inquiries of certain officials of the Company
and its consolidated subsidiaries who have responsibility for
financial and accounting matters and proving the arithmetic
accuracy of the application of the pro forma adjustments to
the historical amounts in the unaudited pro forma consolidated
condensed financial statements, nothing came to their
attention that caused them to believe that the unaudited pro
forma consolidated condensed financial statements do not
comply in form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X or
that the pro forma adjustments have not been properly applied
to the historical amounts in the compilation of such
statements.
In the event that the letters referred to above set forth any
such changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriters that (A) such letters shall be accompanied by a
written explanation of the Company as to the significance thereof, unless the
Representatives deem such explanation unnecessary, and (B) such changes,
decreases or increases do not, in the sole judgment of the Representatives,
make it impractical or inadvisable to proceed with the purchase and delivery of
the Securities as contemplated by the Registration Statement, as amended as of
the date hereof.
References to the Registration Statement, the Prospectus and
any Integrated Prospectus in this paragraph (d) with respect to either letter
referred to above shall include any amendment or supplement thereto at the date
of such letter.
(f) The Representatives shall have received from Coopers
& Lybrand, L.L.P. a letter or letters dated, respectively, the date
hereof and the Firm Closing Date, in form and substance satisfactory
to the Representatives, to the effect that:
(i) they are independent accountants with respect
to the Company and its consolidated subsidiaries and Quarles
Drilling Corporation within the meaning of the Act, and the
Exchange Act and the applicable rules and regulations
thereunder;
(ii) in their opinion, the financial statements
examined by them and included or incorporated by reference in
the Registration Statement, the Prospectus and any Integrated
Prospectus comply in form in all material respects with the
applicable
-25-
Draft Dated September 26, 1997
<PAGE> 26
accounting requirements of the Act, the Exchange Act and the
related published rules and regulations thereunder;
(g) The Representatives shall have received a
certificate, dated the Firm Closing Date, of the principal executive
officer and the principal financial or accounting officer of the
Company to the effect that:
(i) the representations and warranties of the
Company in this Agreement are true and correct as if made on
and as of the Firm Closing Date; the Registration Statement,
as amended as of the Firm Closing Date, does not include any
untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not
misleading, and the Prospectus and any Integrated Prospectus,
as amended or supplemented as of the Firm Closing Date, does
not include any untrue statement of a material fact or omit to
state any material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading; and the Company has
performed all covenants and agreements and satisfied all
conditions on its part to be performed or satisfied at or
prior to the Firm Closing Date;
(ii) no stop order suspending the effectiveness of
the Registration Statement or any post- effective amendment
thereto and no order directed at any document incorporated by
reference in the Registration Statement or the Prospectus or
any amendment or supplement thereto has been issued, and no
proceedings for that purpose have been instituted or
threatened or, to the best of the Company's knowledge, are
contemplated by the Commission; and
(iii) subsequent to the respective dates as of
which information is given in the Registration Statement, the
Prospectus and any Integrated Prospectus, neither the Company
nor any of its Subsidiaries has sustained any material loss or
interference with their respective businesses or properties
from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any labor dispute
or any legal or governmental proceeding, and there has not
been any material adverse change, or any development involving
a prospective material adverse change, in the condition
(financial or otherwise), management, business prospects, net
worth or results of operations of the Company or any of its
subsidiaries, except in each case as described in or
contemplated by the Prospectus and any Integrated Prospectus.
(h) The Representatives shall have received from each
person who is a director or officer of the Company an agreement to the
effect that such person will not, directly or indirectly, without the
prior written consent of Prudential Securities Incorporated, on behalf
of the Underwriters, offer, sell, offer to sell, contract to sell,
pledge, grant any option to purchase or otherwise sell or dispose (or
announce any offer, sale, offer of sale, contract of sale, pledge,
grant of an option to purchase or other sale or disposition) of any
shares of Common Stock or any securities convertible into, or
exchangeable or exercisable for, shares of Common Stock
-26-
Draft Dated September 26, 1997
<PAGE> 27
for a period of 90 days after the date of this Agreement except in
connection with any transfer of any Securities to a related party that
agrees to be bound by this restriction.
(i) On or before the Firm Closing Date, the
Representatives and counsel for the Underwriters shall have received
such further certificates, documents or other information as they may
have reasonably requested from the Company.
(j) Prior to the commencement of the offering of the
Securities, the Securities shall have been approved for listing on the
Stock Exchange, subject to official notice of issuance.
All opinions, certificates, letters and documents delivered
pursuant to this Agreement will comply with the provisions hereof only if they
are reasonably satisfactory in all material respects to the Representatives and
counsel for the Underwriters. The Company shall furnish to the Representatives
such conformed copies of such opinions, certificates, letters and documents in
such quantities as the Representatives and counsel for the Underwriters shall
reasonably request.
The respective obligations of the several Underwriters to
purchase and pay for any Option Securities shall be subject, in their
discretion, to each of the foregoing conditions to purchase the Firm
Securities, except that all references to the Firm Securities and the Firm
Closing Date shall be deemed to refer to such Option Securities and the related
Option Closing Date, respectively.
10. Indemnification and Contribution.
(a) The Company and, subject to the provisions of Section 10(e),
Drum jointly and severally agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter or such controlling person may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement made
by the Company in Section 2 of this Agreement,
(ii) any untrue statement or alleged untrue statement of
any material fact contained in (A) the Registration Statement or any
amendment thereto, any Preliminary Prospectus, the Prospectus and any
Integrated Prospectus or any amendment or supplement thereto or (B)
any application or other document, or any amendment or supplement
thereto, executed by the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in
order to qualify the Securities under the securities or blue sky laws
thereof or filed with the Commission or any securities association or
securities exchange (each an "Application");
(iii) the omission or alleged omission to state in the
Registration Statement or any amendment thereto, any Preliminary
Prospectus the Prospectus and any Integrated Prospectus
-27-
Draft Dated September 26, 1997
<PAGE> 28
or any amendment or supplement thereto, or any Application a material
fact required to be stated therein or necessary to make the statements
therein not misleading; or
(iv) any untrue statement or alleged untrue statement of
any material fact contained in any audio or visual materials used in
connection with the marketing of the Securities, including without
limitation, slides, videos, films and tape recordings,
and will reimburse, as incurred, each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement or any amendment thereto, any Preliminary Prospectus,
the Prospectus or any amendment or supplement thereto, or any Application in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter through the Representatives specifically for use
therein; and provided, further, that the Company will not be liable to any
Underwriter or any person controlling such Underwriter with respect to any such
untrue statement or omission made in any Preliminary Prospectus that is
corrected in the Prospectus (or any amendment or supplement thereto) if the
person asserting any such loss, claim, damage or liability purchased Securities
from such Underwriter but was not sent or given a copy of the Prospectus (as
amended or supplemented), other than the documents incorporated by reference
therein, at or prior to the written confirmation of the sale of such Securities
to such person in any case where such delivery of the Prospectus (as amended or
supplemented) is required by the Act, unless such failure to deliver the
Prospectus (as amended or supplemented) was a result of noncompliance by the
Company with Section 6(d) and (a) of this Agreement. This indemnity agreement
will be in addition to any liability which the Company may otherwise have. The
Company will not, without the prior written consent of the Underwriter or
Underwriters purchasing, in the aggregate, more than fifty percent (50%) of the
Securities, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not any such Underwriter or
any person who controls any such Underwriter within the meaning of Section 15
of the Act or Section 20 of the Exchange Act is a party to such claim, action,
suit or proceeding), unless such settlement, compromise or consent includes an
unconditional release of all of the Underwriters and such controlling persons
from all liability arising out of such claim, action, suit or proceeding.
(b) Each Selling Securityholder, severally and not jointly, agrees
to indemnify and hold harmless the Company, each of its directors, each of its
officers who signs the Registration Statement or any amendment thereto, each
Underwriter and each person who controls the Company or any Underwriter within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act against
any losses, claims, damages or liabilities, joint or several, to which the
Company, any such director, officer, such Underwriter or any such controlling
person may become subject under the Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any
-28-
Draft Dated September 26, 1997
<PAGE> 29
material fact contained in the Registration Statement or any amendment thereto,
any Preliminary Prospectus, the Prospectus or any Integrated Prospectus or any
amendment or supplement thereto, or (ii) the omission or the alleged omission
to state therein a material fact required to be stated in the Registration
Statement or any amendment thereto, any Preliminary Prospectus, the Prospectus
or any Integrated Prospectus or any amendment or supplement thereto, or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with the written information furnished to the Company by such
Selling Securityholder for use therein. Subject to the limitations set forth
in the immediately preceding sentence, each Selling Securityholder, severally
and not jointly, will reimburse, as incurred, any legal or other expenses
reasonably incurred by the Company, any such director, officer, such
Underwriter or any such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or any action in respect
thereof. This indemnity agreement will be in addition to any liability which
any Selling Securityholder may otherwise have. Each Selling Securityholder
will not, without the prior written consent of the Underwriter or Underwriters
purchasing, in the aggregate, more than fifty percent (50%) of the Securities,
settle or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not any such Underwriter or
any person who controls any such Underwriter within the meaning of Section 15
of the Act or Section 20 of the Exchange Act is a party to such claim, action,
suit or proceeding), unless such settlement, compromise or consent includes an
unconditional release of all of the Underwriters and such controlling persons
from all liability arising out of such claim, action, suit or proceeding.
(c) Each Underwriter, severally and not jointly, will indemnity
and hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement, each Selling Securityholder and each
Additional Selling Securityholder and each person, if any, who controls the
Company, such Selling Securityholder or such Additional Selling Securityholder
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
against any losses, claims, damages or liabilities to which the Company or any
such director, officer, Selling Securityholder, Additional Selling
Securityholder or controlling person may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement or any amendment thereto, any Preliminary
Prospectus, the Prospectus or any Integrated Prospectus or any amendment or
supplement thereto, or any Application or (ii) the omission or the alleged
omission to state therein a material fact required to be stated in the
Registration Statement or any amendment thereto, any Preliminary Prospectus,
the Prospectus or any amendment or supplement thereto, or any Application or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter through the Representatives specifically for use therein; and,
subject to the limitation set forth immediately preceding this clause, will
reimburse, as incurred, any legal or other expenses reasonably incurred by the
Company or any such director, officer, Selling Securityholder, Additional
Selling Securityholder or controlling person in connection with
-29-
Draft Dated September 26, 1997
<PAGE> 30
investigating or defending any such loss, claim, damage, liability or any
action in respect thereof. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
(d) Promptly after receipt by an indemnified party under this
Section 10 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 10, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under this Section 10. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party; provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be one or more
legal defenses available to the indemnified party and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party and would make the representation of all such parties
inappropriate, the indemnifying party shall not have the right to direct the
defense of such action on behalf of such indemnified party or parties and such
indemnified party or parties shall have the right to select separate counsel to
defend such action on behalf of such indemnified party or parties. After
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof and approval by such indemnified party of counsel
appointed to defend such action, the indemnifying party will not be liable to
such indemnified party under this Section 10 for any legal or other expenses,
other than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that in
connection with such action the indemnifying party shall not be liable for the
expenses of more than one separate counsel (in addition to local counsel) in
any one action or separate but substantially similar actions in the same
jurisdiction arising out of the same general allegations or circumstances,
designated by the Representatives in the case of paragraph (a) of this Section
10, representing the indemnified parties under such paragraph (a) who are
parties to such action or actions) or (ii) the indemnifying party does not
promptly retain counsel satisfactory to the indemnified party or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. After such notice from the
indemnifying party to such indemnified party, the indemnifying party will not
be liable for the costs and expenses of any settlement of such action effected
by such indemnified party without the consent of the indemnifying party.
(e) The indemnification obligations of Drum pursuant to Section
10(a) are subject to the following provision: Drum shall not have any
liability under this Agreement in an amount exceeding the amount of cash
received by him upon the sale of his Common Stock.
(f) In circumstances in which the indemnity agreement provided for
in the preceding paragraphs of this Section 10 is unavailable or insufficient,
for any reason, to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the
-30-
Draft Dated September 26, 1997
<PAGE> 31
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect (i) the relative benefits received by
the indemnifying party or parties on the one hand and the indemnified party or
parties on the other from the offering of the Securities or (ii) if the
allocation provided by the foregoing clause (i) is not permitted by applicable
law, not only such relative benefits but also the relative fault of the
indemnifying party or parties on the one hand and the indemnified party or
parties on the other in connection with the statements or omissions or alleged
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company and
the Selling Securityholders on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total proceeds from the
offering (before deducting expenses) received by the Company and the Selling
Securityholders bear to the total underwriting discounts and commissions
received by the Underwriters. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company, the
Selling Securityholders or the Underwriters, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, and any other equitable considerations appropriate in
the circumstances. The Company, the Selling Securityholders and the
Underwriters agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation that does not take into account the equitable
considerations referred to above in this paragraph (d). Notwithstanding any
other provision of this paragraph (d), no Underwriter shall be obligated to
make contributions hereunder that in the aggregate exceed the total public
offering price of the Securities purchased by such Underwriter under this
Agreement, less the aggregate amount of any damages that such Underwriter has
otherwise been required to pay in respect of the same or any substantially
similar claim, and no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute hereunder are several in proportion to
their respective underwriting obligations and not joint, and contributions
among Underwriters shall be governed by the provisions of the Prudential
Securities Incorporated Master Agreement Among Underwriters. For purposes of
this paragraph (d), each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such Underwriter, and each director of the
Company, each officer of the Company who signed the Registration Statement and
each person, if any, who controls the Company or any Selling Securityholder
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
shall have the same rights to contribution as the Company or such Selling
Securityholder, as the case may be.
11. Default of Underwriters. If one or more Underwriters default
in their obligations to purchase Firm Securities or Option Securities hereunder
and the aggregate number of such Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase is ten percent or less of the
aggregate number of Firm Securities or Option Securities to be purchased by all
of the Underwriters at such time hereunder, the other Underwriters may make
arrangements satisfactory to the Representatives for the purchase of such
Securities by other persons (who may include one or more
-31-
Draft Dated September 26, 1997
<PAGE> 32
of the non-defaulting Underwriters, including the Representatives), but if no
such arrangements are made by the Firm Closing Date or the related Option
Closing Date, as the case may be, the other Underwriters shall be obligated
severally in proportion to their respective commitments hereunder to purchase
the Firm Securities or Option Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase. If one or more Underwriters so
default with respect to an aggregate number of Securities that is more than ten
percent of the aggregate number of Firm Securities or Option Securities, as the
case may be, to be purchased by all of the Underwriters at such time hereunder,
and if arrangements satisfactory to the Representatives are not made within 36
hours after such default for the purchase by other persons (who may include one
or more of the non-defaulting Underwriters, including the Representatives) of
the Securities with respect to which such default occurs, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or
the Company other than as provided in Section 12 hereof. In the event of any
default by one or more Underwriters as described in this Section 11, the
Representatives shall have the right to postpone the Firm Closing Date or the
Option Closing Date, as the case may be, established as provided in Section 4
hereof for not more than seven business days in order that any necessary
changes may be made in the arrangements or documents for the purchase and
delivery of the Firm Securities or Option Securities, as the case may be. As
used in this Agreement, the term "Underwriter" includes any person substituted
for an Underwriter under this Section 11. Nothing herein shall relieve any
defaulting Underwriter from liability for its default.
12. Survival. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, its
officers, the Selling Securityholders and the several Underwriters set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company, any of its officers or
directors, and Selling Securityholder any Underwriter or any controlling
person referred to in Section 10 hereof and (ii) delivery of and payment for
the Securities. The respective agreements, covenants, indemnities and other
statements set forth in Sections 8 and 10 hereof shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement.
13. Termination. (a) This Agreement may be terminated with
respect to the Firm Securities or any Option Securities in the sole discretion
of the Representatives by notice to the Company given prior to the Firm Closing
Date or the related Option Closing Date, respectively, in the event that the
Company or any Selling Securityholder shall have failed, refused or been unable
to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder at or prior thereto or, if at or prior to the
Firm Closing Date or such Option Closing Date, respectively;
(i) the Company or any of its subsidiaries shall have, in
the sole judgment of the Representatives, sustained any material loss
or interference with their respective businesses or properties from
fire, flood, hurricane, accident or other calamity, whether or not
covered by insurance, or from any labor dispute or any legal or
governmental proceeding or there shall have been any material adverse
change, or any development involving a prospective material adverse
change (including without limitation a change in management or control
of the Company), in the condition (financial or otherwise), business
prospects, net worth or results
-32-
Draft Dated September 26, 1997
<PAGE> 33
of operations of the Company and its subsidiaries, except in each case
as described in or contemplated by the Prospectus (exclusive of any
amendment or supplement thereto);
(ii) trading in the Common Stock shall have been suspended
by the Commission or the American Stock Exchange or trading in
securities generally on the New York or American Stock Exchange shall
have been suspended or minimum or maximum prices shall have been
established on either any such exchange;
(iii) a banking moratorium shall have been declared by New
York or United States authorities; or
(iv) there shall have been (A) an outbreak or escalation
of hostilities between the United States and any foreign power, (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or (C) any other calamity or crisis or
material adverse change in general economic, political or financial
conditions having an effect on the U. S. financial markets that, in
the sole judgment of the Representatives, makes it impractical or
inadvisable to proceed with the public offering or the delivery of the
Securities as contemplated by the Registration Statement, as amended
as of the date hereof.
(b) Termination of this Agreement pursuant to this Section 13
shall be without liability of any party to any other party except as provided
in Section 12 hereof.
14. Information Supplied by Underwriters. The statements set
forth in the last paragraph on the front cover page and under the heading
"Underwriting" in any Preliminary Prospectus, the Prospectus or any Integrated
Prospectus (to the extent such statements relate to the Underwriters)
constitute the only information furnished by any Underwriter through the
Representatives to the Company for the purposes of Sections 2(b) and 10 hereof.
The Underwriters confirm that such statements (to such extent) are correct.
15. Notices. All communications hereunder shall be in writing
and, if sent to any of the Underwriters, shall be delivered or sent by mail,
telex or facsimile transmission and confirmed in writing to Prudential
Securities Incorporated, One New York Plaza, New York, New York 10292,
Attention: Equity Transactions Group, (facsimile: (212) 778-4312); and if sent
to the Company, shall be delivered or sent by mail, telex or facsimile
transmission and confirmed in writing to the Company at 16800 Greenspoint Park,
Suite 225N, Houston, Texas 77060, (facsimile: (281) 873-4141); and if to the
Selling Securityholders, shall be delivered or sent by mail, telex or facsimile
transmission and confirmed in writing to the Selling Securityholders c/o Vaughn
E. Drum at 16800 Greenspoint Park, Suite 225N, Houston, TX 77630, (facsimile:
(281) 873-4141).
16. Successors. This Agreement shall inure to the benefit of and
shall be binding upon the several Underwriters, the Company, the Selling
Securityholders the Additional Selling Securityholders and their respective
successors and legal representatives, and nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any other person any
legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained, this
-33-
Draft Dated September 26, 1997
<PAGE> 34
Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such persons and for the benefit of
no other person except that (i) the indemnities of the Company contained in
Section 10 of this Agreement shall also be for the benefit of any person or
persons who control any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act and (ii) the indemnities of the Underwriters
contained in Section 8 of this Agreement shall also be for the benefit of the
Selling Securityholders, the Additional Selling Securityholders, directors of
the Company, the officers of the Company who have signed the Registration
Statement and any person or persons who control the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act. No purchaser of
Securities from any Underwriter shall be deemed a successor because of such
purchase.
17. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.
18. Consent to Jurisdiction and Service of Process. All judicial
proceedings arising out of or relating to this Agreement may be brought in any
state or federal court of competent jurisdiction in the State of New York, and
by execution and delivery of this Agreement, each Selling Securityholder
accepts for itself and in connection with its properties, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts and
waives any defense of forum non conveniens and irrevocably agrees to be bound
by any judgment rendered thereby in connection with this Agreement. Each
Selling Securityholder designates and appoints Vaughn E. Drum and such other
persons as may hereafter be selected by each Selling Securityholder irrevocable
agreeing in writing to so serve, as its agent to receive on its behalf service
of all process in any such proceedings in any such court, such service being
hereby acknowledged by the Selling Shareholder to be effective and binding
service in every respect. A copy of any such process so served shall be mailed
by registered mail to the Selling Securityholder at its address provided in
Section 15 hereof; provided, however, that, unless otherwise provided by
applicable law, any failure to mail such copy shall not affect the validity of
service of such process. If any agent appointed by a Selling Shareholder
refuses to accept service, such Selling Securityholder hereby agrees that
service of process sufficient for personal jurisdiction in any action against
each Selling Securityholder in the State of New York may be made by registered
or certified mail, return receipt requested, to the Selling Shareholder at its
address provided in Section 15 hereof, and each Selling Securityholder hereby
acknowledges that such service shall be effective and binding in every respect.
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of any Underwriter to bring
proceedings against the Selling Securityholder in the courts of any other
jurisdiction.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-34-
Draft Dated September 26, 1997
<PAGE> 35
If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute an agreement binding the
Company and each of the several Underwriters.
Very truly yours,
UTI ENERGY CORP.
By
------------------------------------
Name:
Title:
SELLING SECURITYHOLDERS
By
------------------------------------
Name:
Attorney-in-Fact for
Selling Securityholders
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
PRUDENTIAL SECURITIES INCORPORATED
LEHMAN BROTHERS INC.
RAUSCHER PIERCE REFSNES, INC.
SIMMONS & COMPANY INTERNATIONAL
By PRUDENTIAL SECURITIES INCORPORATED
By
--------------------------------------
Jean-Claude Canfin
Managing Director
For itself and on behalf of the Representatives.
-35-
Draft Dated September 26, 1997
<PAGE> 36
SCHEDULE 1-A
SELLING SECURITYHOLDERS
<TABLE>
<CAPTION>
Number of
Firm Securities
Selling Securityholders: to be Sold
----------
<S> <C>
Remy Capital Partners III, L.P. . . . . . . . . . . . . . . . . . 1,588,388
Remy Investors and Consultants, Incorporated . . . . . . . . . . ____
Quarles Drilling Corporation . . . . . . . . . . . . . . . . . . 733,779
Shamrock Holdings of California, Inc. . . . . . . . . . . . . . . 533,333
Sam K. Viersen Family Foundation, Inc. . . . . . . . . . . . . . 200,000
The Sam K. Viersen Trust dated September 9, 1986,
as Amended and Restated on May 11, 1994 . . . . . . . . . . . 400,000
Canpartners Investments IV, L.L.C. . . . . . . . . . . . . . . . 720,000
Four Flags Drilling Company . . . . . . . . . . . . . . . . . . . 60,000
Neil E. Hanson . . . . . . . . . . . . . . . . . . . . . . . . . 31,800
Chris N. Hanson . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Kurt M. Hanson . . . . . . . . . . . . . . . . . . . . . . . . . 14,400
Erik G. Hanson . . . . . . . . . . . . . . . . . . . . . . . . . 28,800
Kenneth N. Berns . . . . . . . . . . . . . . . . . . . . . . . . ____
Vaughn E. Drum . . . . . . . . . . . . . . . . . . . . . . . . . ---------
4,340,500
=========
</TABLE>
S-1A
Draft Dated September 26, 1997
<PAGE> 37
SCHEDULE 1-B
ADDITIONAL SELLING SECURITYHOLDERS
<TABLE>
<CAPTION>
Number of Option
Securities to be
sold if Maximum
Additional Selling Securityholders: Option Exercised
----------------
<S> <C>
Remy Capital Partners III, L.P. . . . . . . . . . . . . . . . . . 165,000
Remy Investors and Consultants, Incorporated . . . . . . . . . . 165,000
Kenneth N. Berns . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Vaughn E. Drum . . . . . . . . . . . . . . . . . . . . . . . . . 112,500
-------
472,500
=======
</TABLE>
S-1B
Draft Dated September 26, 1997
<PAGE> 38
SCHEDULE 2
UNDERWRITERS
<TABLE>
<CAPTION>
Number of Firm
Securities to
Underwriter be Purchased
- ----------- -------------
<S> <C>
Prudential Securities Incorporated . . . . . . . . . . . . . . . .
Lehman Brothers Inc. . . . . . . .. . . . . . . . . . . . . . . .
Rauscher Pierce Refsnes, Inc. . . .. . . . . . . . . . . . . . . .
Simmons & Company International . .. . . . . . . . . . . . . . . . ________
Total . . . . . . . . . .. . . . . . . . . . . . . . . . 5,915,500
=========
</TABLE>
S-2
Draft Dated September 26, 1997
<PAGE> 39
SCHEDULE 3
SUBSIDIARIES
<TABLE>
<CAPTION>
Name Jurisdiction of Incorporation
- ---- -----------------------------
<S> <C>
</TABLE>
S-3
Draft Dated September 26, 1997
<PAGE> 1
EXHIBIT 4.17
UTI ENERGY CORP.
485 Devon Park Drive, Suite 112
Wayne, Pennsylvania 19087
May 15 1997
Four Flags Holding Company
460 N. Gulph Road
King of Prussia, PA 19406
Attention: Mr. Charles L. Ladner, President
Dear Mr. Grady:
This letter confirms our agreement with Four Flags Holding Company
("Four Flags") with respect to the proposed exercise of warrants (the
"Warrants") to purchase shares of Common Stock ("Common Stock") of UTI Energy
Corp., a Delaware corporation ("UTI"), currently held by Four Flags. As you are
aware, the Warrants were issued to Four Flags Drilling Company, Inc., an
affiliate of Four Flags, on December 14, 1993, and provide the holder with the
right to purchase an aggregate of 162,000 shares of Common Stock at an exercise
price per share of $8.00. The Warrants are currently reflected in two
certificates representing the right to purchase 125,000 and 37,000 shares of
Common Stock respectively. Four Flags also holds a promissory note dated
December 15, 1993, from UTI to UGID Holding Company having a current
outstanding principal amount of $1,000,000 plus accrued and unpaid interest of
$30,798.02 as of May 15, 1997 (the "Note").
Four Flags has requested the right to exercise the Warrant to purchase
125,000 shares of Common Stock with the Note. UTI has agreed to accept the Note
as consideration for this exercise on the following terms:
1. Four Flags shall deliver to UTI the Note marked "Canceled",
together with a certificate executed by an executive officer of Four Flags
certifying that (i) the Note is owned by Four Flags free and clear of any liens
and encumbrances or rights of any third party and (ii) upon UTI's acceptance of
the Note and the issuance of 125,000 shares of Common Stock issuable upon the
exercise of the Warrant, UTI shall have no further liability or obligations
with respect to the Note. The outstanding principal amount of the Note shall be
applied against the exercise price of the Warrant to purchase 125,000 shares of
Common Stock.
2. The accrued and unpaid interest on the Note shall be applied
against the exercise price of the Warrant to purchase 37,000 shares of Common
Stock. Four Flags shall deliver to UTI by wire transfer in immediately
available funds an amount of cash equal to the unpaid exercise price of the
Warrant to purchase 37,000 shares of Common Stock not covered by the accrued
and unpaid interest on the Note.
3. Subject to the receipt of an opinion of counsel that the
shares of Common Stock issuable to Four Flags upon exercise of the Warrant to
purchase 125,000 shares of Common Stock with the Note (the "Note Shares") may
be issued without a restrictive legend for
<PAGE> 2
Four Flags Holding Company
May 15, 1997
Page 2
purposes of the Securities Act of 1933, as amended (the "Act"), pursuant to
Rule 144(k) under the Act, UTI shall issue to Four Flags the Note Shares.
4. The 37,000 shares of Common Stock issuable to Four Flags upon
exercise of the Warrant to purchase 37,000 shares of Common Stock with cash and
the accrued and unpaid interest on the Note will be considered restricted
shares and will bear a restrictive legend. Four Flags agrees that such shares
will not be transferred, sold or otherwise disposed of by it except in
compliance with all applicable securities laws and that any transfer or
proposed transfer by it will be subject to the Company receiving an acceptable
opinion of counsel that the transfer is exempt from registration under Act, and
any applicable state securities law.
5. Upon the issuance of the shares of Common Stock on exercise of
the Warrants held by Four Flags as provided herein, Four Flags agrees that,
except as provided in this Section 5, it will have no further registration
rights in regard to UTI or the shares acquired by it and that the Warrants will
be deemed fully exercised. Four Flags further agrees that upon such exercise
and receipt of shares, it will have no further rights in or with respect to the
Warrants. UTI hereby grants to Four Flags piggy-back registration rights
relating to shares not sold as contemplated under paragraph 6 below the same as
those granted to Viersen & Cochran Drilling Company ("Viersen") pursuant to
that certain Stock Purchase Agreement dated August 14, 1996, between the
Company and Viersen. UTI further agrees that, subject in all respects to the
rights of Shamrock Holdings of California, Inc. ("Shamrock") pursuant to that
certain Subscription Agreement dated September 19, 1995, between Shamrock and
UTI, and Canpartners Investments IV, LLC ("Canyon") pursuant to that certain
Registration Rights Agreement dated April 11, 1997, between Canyon and UTI,
Four Flags will be entitled to include, on a substantially similar basis as
Canyon and Shamrock, shares acquired upon exercise of the Warrants for sale
pursuant to the same plan of distribution in a registration of shares of Common
Stock by Remy Capital Partners III, L.P. ("Remy") pursuant to the exercise by
Remy of its demand rights under that certain Registration Rights Agreement
dated March 25, 1994, between Remy (as successor-in-interest by assignment to
Bear, Stearns & Co., Inc.) and UTI.
6. Four Flags has advised UTI that it currently intends to sell
100,000 of the Note Shares in a transaction to be effected through Johnson Rice
& Company L.L.C. ("J&R") to its designee immediately following Four Flag's
exercise of the Warrants. Four Flags further agrees that the remaining Note
Shares not sold through J&R pursuant to the preceding sentence will not be
transferred, sold or otherwise disposed of prior to August 1, 1997, and in the
event the 100,000 Note Shares contemplated to be sold through J&R are not
actually sold due to non-performance by J&R, then Four Flags agrees that such
100,000 Note Shares will not be sold by Four Flags prior to July 1, 1997. In
connection with such sales, UTI agrees, at the request of Four Flags, to
authorize its transfer agent to issue without restrictive legend up to 100,000
of the Note Shares to such person or persons as may be requested by Four Flags
in writing.
7. Four Flags agrees that prior to August 1, 1997, it will not
transfer, sell or otherwise dispose of more than 100,000 of the Note Shares.
Four Flags further agrees that, except for the sale of the 100,000 Note Shares
as contemplated in paragraph 6 above, it will
<PAGE> 3
Four Flags Holding Company
May 15, 1997
Page 3
not, without the prior written consent of UTI, sell more than 12,500 shares
during any calendar month.
8. Four Flags further agrees that, except for the certificates
representing the 100,000 Note Shares, UTI may place stop transfer instructions
with its transfer agent in regard to sales by Four Flags in excess of 12,500
shares per month and that the certificates representing such shares may contain
a restrictive legend to the effect that a sale or disposition of those shares
is subject to the terms of this agreement. UTI agrees to promptly remove such
restrictive legend and permit the sale of the shares of Common Stock held by
Four Flags to the extent that such sales are made in compliance with this
Agreement, and in this regard, agrees that on August 1, 1997, it will remove
the restrictive legend relating to this Agreement on certificates representing
12,500 shares. In addition, UTI agrees that on the first business day of each
month following August 1, 1997, so long as Four Flags still holds shares of
Common Stock issued upon exercise of the Warrants, UTI will cause the
restrictive legend relating to this Agreement to be removed so that Four Flags
holds on such date certificates without the restrictive legend relating to this
Agreement representing 12,500 shares of Common Stock (or such lesser number in
the event Four Flags then owns less than 12,500 shares of Common Stock).
9. The parties agree that the rights of Four Flags under this
Agreement are assignable to an affiliate of Four Flags so long as such rights
do not adversely impact the rights of UTI hereunder.
If the foregoing accurately reflects your understanding with respect
to these matters, please execute the enclosed copy of this letter and return it
to me.
Very truly yours,
UTI ENERGY CORP.
By /s/ Mark S. Siegel
------------------------------
Name: Mark S.Siegel
Title: Chairman of the Board
<PAGE> 4
Four Flags Holding Company
May 15, 1997
Page 4
ACCEPTED AND AGREED TO:
FOUR FLAGS HOLDING COMPANY
By /s/ Charles L. Ladner
-------------------------
Name: Charles L. Ladner
----------------------
Title: President
---------------------
Date: 5/15/97
----------------------
<PAGE> 1
EXHIBIT 4.18
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT dated as of September 25, 1997 (this
"Agreement"), by and between UTI ENERGY CORP, a Delaware corporation (the
"Company"), and VAUGHN E. DRUM ("Mr. Drum").
W I T N E S S E T H :
WHEREAS, the Company intends to file a Registration Statement on Form
S-3 (the "Registration Statement") with the Securities and Exchange Commission
(the "Commission") to register up to 2,580,842 shares (the "Shares") of the
Company's common stock, $.01 par value (the "Common Stock"), under the
Securities Act of 1933 (the "1933 Act"); and
WHEREAS, in connection with the filing of the Registration Statement
to register the Shares, the Company intends to initiate an underwritten public
offering (the "Offering") of the Shares; and
WHEREAS, subject to the terms and conditions hereof, the Company and
Mr. Drum have agreed to allow Mr. Drum to include up to 112,500 shares of
Common Stock in the Offering;
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements herein contained, the parties hereto agree as follows:
SECTION 1. PARTICIPATION IN REGISTRATION.
(a) In addition to the Shares, the Company agrees,
subject to the provisions hereof, to include up to 112,500 shares of Common
Stock owned by Mr. Drum (the "Additional Shares") in the Registration Statement
(the filing of the Registration Statement to register the Shares and the
Additional Shares referred to as the "Registration").
(b) The Additional Shares included for sale in the
Offering shall be on the same terms and conditions as the Shares to be
registered and sold through underwriters pursuant to the Registration
Statement; provided, however, that as a condition to the inclusion of the
Additional Shares, Mr. Drum shall execute an underwriting agreement acceptable
to the Company and the underwriters and, if requested, a custody agreement
having such customary terms as the underwriters shall request, including
indemnification, and if the managing underwriter determines and advises the
Company and Mr. Drum in writing that the inclusion in the Offering of all of
the Additional Shares and any other shares of Common Stock sought to be
registered
<PAGE> 2
by any other stockholder of the Company exercising rights comparable to those
of Mr. Drum under this Agreement (the "Other Common Stock") would, in its
reasonable and good faith judgment, interfere with the successful marketing of
the Shares to be registered for sale in the Offering by the Company, then the
number of Additional Shares and shares of Other Common Stock requested to be
included in the Offering shall be reduced pro rata among Mr. Drum and the
holders of Other Common Stock requesting inclusion in the Offering and may, in
the determination of such managing underwriter, be reduced to zero.
(c) At any time prior to the filing of the Registration
Statement, the Company may terminate this Agreement if the Company determines
that it is not in the interests of the Company to pursue the Offering at such
time. Nothing contained in this Agreement, however, shall limit the Company's
right to cancel, terminate, postpone or withdraw the Registration for any
reason.
SECTION 2. EXPENSES OF REGISTRATION. In connection with the
Registration, the Company will pay all (i) printing expenses, (ii) fees and
expenses of counsel for the Company and (iii) fees and expenses of accountants
for the Company. Mr. Drum will pay (i) all fees and expenses of his counsel,
(ii) all underwriting fees and discounts and brokerage and selling commissions
and (iii) his pro rata registration and filing fees and any fees and expenses
of underwriters' counsel relating to the registration, offering and sale of the
Additional Shares.
SECTION 3. INDEMNIFICATION.
(a) In the event of the Registration of the Additional
Shares pursuant to this Agreement, the Company will indemnify and hold harmless
Mr. Drum within the meaning of Section 15 of the 1933 Act, against any losses,
claims, damages or liabilities, joint or several, to which Mr. Drum may become
subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities or actions in respect thereof arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained, on the effective date thereof, in the Registration Statement, the
final prospectus, or any amendment thereof or supplement thereto, including all
documents incorporated by reference therein, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and will reimburse Mr. Drum for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in the Registration
Statement, such final prospectus or such amendment or supplement, including all
documents incorporated by reference therein, in reliance upon and in conformity
with information furnished to the Company by or on behalf of Mr. Drum
specifically for use in the preparation thereof.
-2-
<PAGE> 3
(b) In the event of the Registration of the Additional
Shares pursuant to this Agreement, Mr. Drum will indemnify and hold harmless
the Company and each person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act, each officer of the Company who signs
the Registration Statement, each director of the Company and each underwriter
and each person who controls any underwriter within the meaning of Section 15
of the 1933 Act, against any and all such losses, claims, damages, liabilities
or actions which the Company or such officer, director, underwriter or
controlling person may become subject under the 1933 Act or otherwise, and will
reimburse the Company, each such officer, director, underwriter and controlling
person for any legal or any other expenses reasonably incurred by such party in
connection with investigating or defending any such loss, claim, damage,
liability or action, to the extent and only to the extent (a) such loss, claim,
damage, liability or action in respect thereof arises out of or is based upon
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement or any such prospectus, or any amendment thereof
or supplement thereto, or arises out of or is based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading and (b) any such
statement or omission of a material fact was made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
Mr. Drum specifically for use in connection with the preparation of the
Registration Statement or prospectus. Mr. Drum also agrees to indemnify each
such underwriter and each person who controls any such underwriter within the
meaning of Section 15 of the 1933 Act as may reasonably and customarily be
requested by the underwriters in connection with the Offering.
(c) Promptly after receipt by any indemnified person of
notice of any claim or commencement of any action in respect of which indemnity
is to be sought against an indemnifying person pursuant to this Agreement, such
indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, and, subject to provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified of the
same, such indemnifying person shall be entitled to participate therein, and,
to the extent it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person, and after notice from the
indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person in connection with the defense thereof; provided, however,
if there exists or will exist a conflict of interest which would make it
inappropriate in the reasonable judgment of the indemnified person for the same
counsel to represent both the indemnified person and such indemnifying person
then such indemnified person shall be entitled to retain its own counsel at the
expense of such indemnifying person; provided further, however, the
indemnifying person shall not be required to pay for more than one separate
counsel for all of the indemnified persons in addition to any local counsel.
-3-
<PAGE> 4
SECTION 4. TRANSFER OF REGISTRATION RIGHTS. The rights granted
to Mr. Drum under this Agreement may not be assigned or transferred by Mr. Drum
to any other person.
SECTION 5. AMENDMENT, MODIFICATION AND WAIVER. This Agreement
may be amended with the consent of the Company and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, modification, action or omission to act, of Mr. Drum.
SECTION 6. ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and, with
respect to the Company, its respective successors and assigns.
SECTION 7. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of Texas, without regard
to the conflicts or choice of law rules of the State of Texas.
SECTION 8. NOTICES. Any notice, request, instruction or other
document to be given hereunder by any party hereto to any other party shall be
in writing and delivered personally, by facsimile (with receipt confirmed) or
by registered or certified mail, postage prepaid:
(a) If to the Company, to:
UTI Energy Corp
16800 Greenspoint Park, Suite 225N
Houston, Texas 77060
Attention: P. Blake Dupuis
Facsimile: (281) 873-4141
Confirm: (281) 873-4111
with copies to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attention: Curtis W. Huff
Facsimile: (713) 651-5246
Confirm: (713) 651-5151
-4-
<PAGE> 5
(b) If to Mr. Drum, to:
Vaughn E. Drum
c/o UTI Energy Corp
16800 Greenspoint Park, Suite 225N
Houston, Texas 77060
Facsimile: (281) 873-4141
Confirm: (281) 873-4111
Any notice which is delivered personally in the manner
provided herein shall be deemed to have been duly given to the party to whom it
is directed upon actual receipt by such party (or its agent for notices
hereunder). Any notice which is addressed and mailed in the manner herein
provided shall be conclusively presumed to have been duly given to the party to
which it is addressed at the close of business, local time of the recipient, on
the third day after the day it is so placed in the mail. Any notice which is
sent by facsimile shall be deemed to have been duly given to the party to which
it is addressed upon telephonic confirmation of the same as provided herein. A
copy of any notices delivered by facsimile shall promptly be mailed in the
manner herein provided to the party to which such notice was given.
SECTION 9. COUNTERPARTS. This Agreement may be executed in
separate counterparts, each of which will be deemed to be an original, but all
of which shall be considered one and the same instrument.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
UTI ENERGY CORP
By /s/ P. Blake Dupuis
-------------------------------
P. Blake Dupuis
Chief Financial Officer
VAUGHN E. DRUM
By /s/ Vaughn E. Drum
-------------------------------
Vaughn E. Drum
-6-
<PAGE> 1
EXHIBIT 4.19
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT dated as of September 25, 1997
(this "Agreement"), by and between UTI ENERGY CORP, a Delaware corporation (the
"Company"), and KENNETH N. BERNS ("Mr. Berns").
W I T N E S S E T H :
WHEREAS, the Company intends to file a Registration Statement on Form
S-3 (the "Registration Statement") with the Securities and Exchange Commission
(the "Commission") to register up to 2,580,842 shares (the "Shares") of the
Company's common stock, $.01 par value (the "Common Stock"), under the
Securities Act of 1933 (the "1933 Act"); and
WHEREAS, in connection with the filing of the Registration Statement
to register the Shares, the Company intends to initiate an underwritten public
offering (the "Offering") of the Shares; and
WHEREAS, subject to the terms and conditions hereof, the Company and
Mr. Berns have agreed to allow Mr. Berns to include up to 30,000 shares of
Common Stock in the Offering;
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements herein contained, the parties hereto agree as follows:
SECTION 1. PARTICIPATION IN REGISTRATION.
(a) In addition to the Shares, the Company agrees,
subject to the provisions hereof, to include up to 30,000 shares of Common
Stock underlying warrants owned by Mr. Berns (the "Additional Shares") in the
Registration Statement (the filing of the Registration Statement to register
the Shares and the Additional Shares referred to as the "Registration").
(b) The Additional Shares included for sale in the
Offering shall be on the same terms and conditions as the Shares to be
registered and sold through underwriters pursuant to the Registration
Statement; provided, however, that as a condition to the inclusion of the
Additional Shares, Mr. Berns shall execute an underwriting agreement acceptable
to the Company and the underwriters and, if requested, a custody agreement
having such customary terms as the underwriters shall request, including
indemnification, and if the managing underwriter determines and advises the
Company and Mr. Berns in writing that the inclusion in the Offering of all of
the Additional Shares and any other shares of Common Stock sought to be
registered
<PAGE> 2
by any other stockholder of the Company exercising rights comparable to those
of Mr. Berns under this Agreement (the "Other Common Stock") would, in its
reasonable and good faith judgment, interfere with the successful marketing of
the Shares to be registered for sale in the Offering by the Company, then the
number of Additional Shares and shares of Other Common Stock requested to be
included in the Offering shall be reduced pro rata among Mr. Berns and the
holders of Other Common Stock requesting inclusion in the Offering and may, in
the determination of such managing underwriter, be reduced to zero.
(c) At any time prior to the filing of the Registration
Statement, the Company may terminate this Agreement if the Company determines
that it is not in the interests of the Company to pursue the Offering at such
time. Nothing contained in this Agreement, however, shall limit the Company's
right to cancel, terminate, postpone or withdraw the Registration for any
reason.
SECTION 2. EXPENSES OF REGISTRATION. In connection with the
Registration, the Company will pay all (i) printing expenses, (ii) fees and
expenses of counsel for the Company and (iii) fees and expenses of accountants
for the Company. Mr. Berns will pay (i) all fees and expenses of his counsel,
(ii) all underwriting fees and discounts and brokerage and selling commissions
and (iii) his pro rata registration and filing fees and any fees and expenses
of underwriters' counsel relating to the registration, offering and sale of the
Additional Shares.
SECTION 3. INDEMNIFICATION.
(a) In the event of the Registration of the Additional
Shares pursuant to this Agreement, the Company will indemnify and hold harmless
Mr. Berns within the meaning of Section 15 of the 1933 Act, against any losses,
claims, damages or liabilities, joint or several, to which Mr. Berns may become
subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities or actions in respect thereof arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained, on the effective date thereof, in the Registration Statement, the
final prospectus, or any amendment thereof or supplement thereto, including all
documents incorporated by reference therein, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and will reimburse Mr. Berns for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in the Registration
Statement, such final prospectus or such amendment or supplement, including all
documents incorporated by reference therein, in reliance upon and in conformity
with information furnished to the Company by or on behalf of Mr. Berns
specifically for use in the preparation thereof.
-2-
<PAGE> 3
(b) In the event of the Registration of the Additional
Shares pursuant to this Agreement, Mr. Berns will indemnify and hold harmless
the Company and each person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act, each officer of the Company who signs
the Registration Statement, each director of the Company and each underwriter
and each person who controls any underwriter within the meaning of Section 15
of the 1933 Act, against any and all such losses, claims, damages, liabilities
or actions which the Company or such officer, director, underwriter or
controlling person may become subject under the 1933 Act or otherwise, and will
reimburse the Company, each such officer, director, underwriter and controlling
person for any legal or any other expenses reasonably incurred by such party in
connection with investigating or defending any such loss, claim, damage,
liability or action, to the extent and only to the extent (a) such loss, claim,
damage, liability or action in respect thereof arises out of or is based upon
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement or any such prospectus, or any amendment thereof
or supplement thereto, or arises out of or is based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading and (b) any such
statement or omission of a material fact was made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
Mr. Berns specifically for use in connection with the preparation of the
Registration Statement or prospectus. Mr. Berns also agrees to indemnify each
such underwriter and each person who controls any such underwriter within the
meaning of Section 15 of the 1933 Act as may reasonably and customarily be
requested by the underwriters in connection with the Offering.
(c) Promptly after receipt by any indemnified person of
notice of any claim or commencement of any action in respect of which indemnity
is to be sought against an indemnifying person pursuant to this Agreement, such
indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, and, subject to provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified of the
same, such indemnifying person shall be entitled to participate therein, and,
to the extent it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person, and after notice from the
indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person in connection with the defense thereof; provided, however,
if there exists or will exist a conflict of interest which would make it
inappropriate in the reasonable judgment of the indemnified person for the same
counsel to represent both the indemnified person and such indemnifying person
then such indemnified person shall be entitled to retain its own counsel at the
expense of such indemnifying person; provided further, however, the
indemnifying person shall not be required to pay for more than one separate
counsel for all of the indemnified persons in addition to any local counsel.
-3-
<PAGE> 4
SECTION 4. TRANSFER OF REGISTRATION RIGHTS. The rights granted
to Mr. Berns under this Agreement may not be assigned or transferred by Mr.
Berns to any other person.
SECTION 5. AMENDMENT, MODIFICATION AND WAIVER. This Agreement
may be amended with the consent of the Company and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, modification, action or omission to act, of Mr. Berns.
SECTION 6. ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and, with
respect to the Company, its respective successors and assigns.
SECTION 7. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of Texas, without regard
to the conflicts or choice of law rules of the State of Texas.
SECTION 8. NOTICES. Any notice, request, instruction or other
document to be given hereunder by any party hereto to any other party shall be
in writing and delivered personally, by facsimile (with receipt confirmed) or
by registered or certified mail, postage prepaid:
(a) If to the Company, to:
UTI Energy Corp
16800 Greenspoint Park, Suite 225N
Houston, Texas 77060
Attention: Vaughn E. Drum
Facsimile: (281) 873-4141
Confirm: (281) 873-4111
with copies to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attention: Curtis W. Huff
Facsimile: (713) 651-5246
Confirm: (713) 651-5151
-4-
<PAGE> 5
(b) If to Mr. Berns, to:
Kenneth N. Berns
c/o Remy Investors and Consultants, Inc.
1801 Century Park East, Suite 1111
Los Angeles, California 90067
Facsimile: (310) 843-0010
Confirm: (310) 843-0050
Any notice which is delivered personally in the manner
provided herein shall be deemed to have been duly given to the party to whom it
is directed upon actual receipt by such party (or its agent for notices
hereunder). Any notice which is addressed and mailed in the manner herein
provided shall be conclusively presumed to have been duly given to the party to
which it is addressed at the close of business, local time of the recipient, on
the third day after the day it is so placed in the mail. Any notice which is
sent by facsimile shall be deemed to have been duly given to the party to which
it is addressed upon telephonic confirmation of the same as provided herein. A
copy of any notices delivered by facsimile shall promptly be mailed in the
manner herein provided to the party to which such notice was given.
SECTION 9. COUNTERPARTS. This Agreement may be executed in
separate counterparts, each of which will be deemed to be an original, but all
of which shall be considered one and the same instrument.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
UTI ENERGY CORP
By /s/ Vaughn E. Drum
--------------------------
Vaughn E. Drum
President
KENNETH N. BERNS
By /s/ Kenneth N. Berns
--------------------------
Kenneth N. Berns
-6-
<PAGE> 1
EXHIBIT 4.20
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT dated as of September 25, 1997
(this "Agreement"), by and between UTI ENERGY CORP, a Delaware corporation (the
"Company"), and REMY INVESTORS AND CONSULTANTS, INC., a California corporation
("Remy Investors").
W I T N E S S E T H :
WHEREAS, the Company intends to file a Registration Statement on Form
S-3 (the "Registration Statement") with the Securities and Exchange Commission
(the "Commission") to register up to 2,580,842 shares (the "Shares") of the
Company's common stock, $.01 par value (the "Common Stock"), under the
Securities Act of 1933 (the "1933 Act"); and
WHEREAS, in connection with the filing of the Registration Statement
to register the Shares, the Company intends to initiate an underwritten public
offering (the "Offering") of the Shares; and
WHEREAS, subject to the terms and conditions hereof, the Company and
Remy Investors have agreed to allow Remy Investors to include up to 165,000
shares of Common Stock in the Offering;
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements herein contained, the parties hereto agree as follows:
SECTION 1. PARTICIPATION IN REGISTRATION.
(a) In addition to the Shares, the Company agrees,
subject to the provisions hereof, to include up to 165,000 shares of Common
Stock underlying warrants owned by Remy Investors (the "Additional Shares") in
the Registration Statement (the filing of the Registration Statement to
register the Shares and the Additional Shares referred to as the
"Registration").
(b) The Additional Shares included for sale in the
Offering shall be on the same terms and conditions as the Shares to be
registered and sold through underwriters pursuant to the Registration
Statement; provided, however, that as a condition to the inclusion of the
Additional Shares, Remy Investors shall execute an underwriting agreement
acceptable to the Company and the underwriters and, if requested, a custody
agreement having such customary terms as the underwriters shall request,
including indemnification, and if the managing underwriter determines and
advises the Company and Remy Investors in writing that the inclusion in the
Offering of all of the Additional Shares and any other shares of Common Stock
sought to be registered by any other stockholder of the Company exercising
rights comparable to those of Remy Investors under this Agreement (the "Other
Common Stock") would, in
<PAGE> 2
its reasonable and good faith judgment, interfere with the successful marketing
of the Shares to be registered for sale in the Offering by the Company, then
the number of Additional Shares and shares of Other Common Stock requested to
be included in the Offering shall be reduced pro rata among Remy Investors and
the holders of Other Common Stock requesting inclusion in the Offering and may,
in the determination of such managing underwriter, be reduced to zero.
(c) At any time prior to the filing of the Registration
Statement, the Company may terminate this Agreement if the Company determines
that it is not in the interests of the Company to pursue the Offering at such
time. Nothing contained in this Agreement, however, shall limit the Company's
right to cancel, terminate, postpone or withdraw the Registration for any
reason.
SECTION 2. EXPENSES OF REGISTRATION. In connection with the
Registration, the Company will pay all (i) printing expenses, (ii) fees and
expenses of counsel for the Company and (iii) fees and expenses of accountants
for the Company. Remy Investors will pay (i) all fees and expenses of its
counsel, (ii) all underwriting fees and discounts and brokerage and selling
commissions and (iii) its pro rata registration and filing fees and any fees
and expenses of underwriters' counsel relating to the registration, offering
and sale of the Additional Shares.
SECTION 3. INDEMNIFICATION.
(a) In the event of the Registration of the Additional
Shares pursuant to this Agreement, the Company will indemnify and hold harmless
Remy Investors and any other person, if any, who controls Remy Investors within
the meaning of Section 15 of the 1933 Act, against any losses, claims, damages
or liabilities, joint or several, to which Remy Investors or such controlling
person may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities or actions in respect thereof arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in the Registration
Statement, the final prospectus, or any amendment thereof or supplement
thereto, including all documents incorporated by reference therein, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse Remy Investors and each such
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
such final prospectus or such amendment or supplement, including all documents
incorporated by reference therein, in reliance upon and in conformity with
information furnished to the Company by or on behalf of Remy Investors or any
controlling person of Remy Investors specifically for use in the preparation
thereof.
-2-
<PAGE> 3
(b) In the event of the Registration of the Additional
Shares pursuant to this Agreement, Remy Investors will indemnify and hold
harmless the Company and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act, each officer of the Company who
signs the Registration Statement, each director of the Company and each
underwriter and each person who controls any underwriter within the meaning of
Section 15 of the 1933 Act, against any and all such losses, claims, damages,
liabilities or actions which the Company or such officer, director, underwriter
or controlling person may become subject under the 1933 Act or otherwise, and
will reimburse the Company, each such officer, director, underwriter and
controlling person for any legal or any other expenses reasonably incurred by
such party in connection with investigating or defending any such loss, claim,
damage, liability or action, if (a) such loss, claim, damage, liability or
action in respect thereof arises out of or is based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement or any such prospectus, or any amendment thereof or supplement
thereto, or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading and (b) any such statement or
omission of a material fact was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of Remy Investors
specifically for use in connection with the preparation of the Registration
Statement or prospectus. Remy Investors also agrees to indemnify each such
underwriter and each person who controls any such underwriter within the
meaning of Section 15 of the 1933 Act as may reasonably and customarily be
requested by the underwriters in connection with the Offering.
(c) Promptly after receipt by any indemnified person of
notice of any claim or commencement of any action in respect of which indemnity
is to be sought against an indemnifying person pursuant to this Agreement, such
indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, and, subject to provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified of the
same, such indemnifying person shall be entitled to participate therein, and,
to the extent it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person, and after notice from the
indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person in connection with the defense thereof; provided, however,
if there exists or will exist a conflict of interest which would make it
inappropriate in the reasonable judgment of the indemnified person for the same
counsel to represent both the indemnified person and such indemnifying person
then such indemnified person shall be entitled to retain its own counsel at the
expense of such indemnifying person; provided further, however, the
indemnifying person shall not be required to pay for more than one separate
counsel for all of the indemnified persons in addition to any local counsel.
-3-
<PAGE> 4
SECTION 4. TRANSFER OF REGISTRATION RIGHTS. The rights granted
to Remy Investors under this Agreement may not be assigned or transferred by
Remy Investors to any other person.
SECTION 5. AMENDMENT, MODIFICATION AND WAIVER. This Agreement
may be amended with the consent of the Company and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, modification, action or omission to act, of Remy Investors.
SECTION 6. ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and, with
respect to the Company, its respective successors and assigns.
SECTION 7. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of Texas, without regard
to the conflicts or choice of law rules of the State of Texas.
SECTION 8. NOTICES. Any notice, request, instruction or other
document to be given hereunder by any party hereto to any other party shall be
in writing and delivered personally, by facsimile (with receipt confirmed) or
by registered or certified mail, postage prepaid:
(a) If to the Company, to:
UTI Energy Corp
16800 Greenspoint Park, Suite 225N
Houston, Texas 77060
Attention: Vaughn E. Drum
Facsimile: (281) 873-4141
Confirm: (281) 873-4111
with copies to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attention: Curtis W. Huff
Facsimile: (713) 651-5246
Confirm: (713) 651-5151
(b) If to Remy Investors, to:
Remy Investors and Consultants, Inc.
1801 Century Park East, Suite 1111
Los Angeles, California 90067
Attention: Mark Siegel
Facsimile: (310) 843-0010
Confirm: (310) 843-0050
-4-
<PAGE> 5
Any notice which is delivered personally in the manner
provided herein shall be deemed to have been duly given to the party to whom it
is directed upon actual receipt by such party (or its agent for notices
hereunder). Any notice which is addressed and mailed in the manner herein
provided shall be conclusively presumed to have been duly given to the party to
which it is addressed at the close of business, local time of the recipient, on
the third day after the day it is so placed in the mail. Any notice which is
sent by facsimile shall be deemed to have been duly given to the party to which
it is addressed upon telephonic confirmation of the same as provided herein. A
copy of any notices delivered by facsimile shall promptly be mailed in the
manner herein provided to the party to which such notice was given.
SECTION 9. COUNTERPARTS. This Agreement may be executed in
separate counterparts, each of which will be deemed to be an original, but all
of which shall be considered one and the same instrument.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
UTI ENERGY CORP
By /s/ Vaughn E. Drum
---------------------------
Vaughn E. Drum
President
REMY INVESTORS AND CONSULTANTS, INC.
By /s/ Mark S. Siegel
---------------------------
Mark Siegel
President
-6-
<PAGE> 1
EXHIBIT 4.21
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT dated as of September 25, 1997
(this "Agreement"), by and between UTI ENERGY CORP, a Delaware corporation (the
"Company"), and REMY CAPITAL PARTNERS III, L.P., a Delaware limited partnership
("Remy Capital").
W I T N E S S E T H :
WHEREAS, the Company intends to file a Registration Statement on Form
S-3 (the "Registration Statement") with the Securities and Exchange Commission
(the "Commission") to register up to 2,580,842 shares (the "Shares") of the
Company's common stock, $.01 par value (the "Common Stock"), under the
Securities Act of 1933 (the "1933 Act"); and
WHEREAS, in connection with the filing of the Registration Statement
to register the Shares, the Company intends to initiate an underwritten public
offering (the "Offering") of the Shares; and
WHEREAS, subject to the terms and conditions hereof, the Company and
Remy Capital have agreed to allow Remy Capital to include up to 165,000 shares
of Common Stock in the Offering;
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements herein contained, the parties hereto agree as follows:
SECTION 1. PARTICIPATION IN REGISTRATION.
(a) In addition to the Shares, the Company agrees,
subject to the provisions hereof, to include up to 165,000 shares of Common
Stock underlying warrants owned by Remy Capital (the "Additional Shares") in
the Registration Statement (the filing of the Registration Statement to
register the Shares and the Additional Shares referred to as the
"Registration").
(b) The Additional Shares included for sale in the
Offering shall be on the same terms and conditions as the Shares to be
registered and sold through underwriters pursuant to the Registration
Statement; provided, however, that as a condition to the inclusion of the
Additional Shares, Remy Capital shall execute an underwriting agreement
acceptable to the Company and the underwriters and, if requested, a custody
agreement having such customary terms as the underwriters shall request,
including indemnification, and if the managing underwriter determines and
advises the Company and Remy Capital in writing that the inclusion in the
Offering of all of the Additional Shares and any other shares of Common Stock
sought to be
<PAGE> 2
registered by any other stockholder of the Company exercising rights comparable
to those of Remy Capital under this Agreement (the "Other Common Stock") would,
in its reasonable and good faith judgment, interfere with the successful
marketing of the Shares to be registered for sale in the Offering by the
Company, then the number of Additional Shares and shares of Other Common Stock
requested to be included in the Offering shall be reduced pro rata among Remy
Capital and the holders of Other Common Stock requesting inclusion in the
Offering and may, in the determination of such managing underwriter, be reduced
to zero.
(c) At any time prior to the filing of the Registration
Statement, the Company may terminate this Agreement if the Company determines
that it is not in the interests of the Company to pursue the Offering at such
time. Nothing contained in this Agreement, however, shall limit the Company's
right to cancel, terminate, postpone or withdraw the Registration for any
reason.
SECTION 2. EXPENSES OF REGISTRATION. In connection with the
Registration, the Company will pay all (i) printing expenses, (ii) fees and
expenses of counsel for the Company and (iii) fees and expenses of accountants
for the Company. Remy Capital will pay (i) all fees and expenses of its
counsel, (ii) all underwriting fees and discounts and brokerage and selling
commissions and (iii) its pro rata registration and filing fees and any fees
and expenses of underwriters' counsel relating to the registration, offering
and sale of the Additional Shares.
SECTION 3. INDEMNIFICATION.
(a) In the event of the Registration of the Additional
Shares pursuant to this Agreement, the Company will indemnify and hold harmless
Remy Capital and any other person, if any, who controls Remy Capital within the
meaning of Section 15 of the 1933 Act, against any losses, claims, damages or
liabilities, joint or several, to which Remy Capital or such controlling person
may become subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities or actions in respect thereof arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained, on the effective date thereof, in the Registration Statement,
the final prospectus, or any amendment thereof or supplement thereto, including
all documents incorporated by reference therein, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse Remy Capital and each such controlling person
for any legal or any other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage or liability arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, such final prospectus or
such amendment or supplement, including all documents incorporated by reference
therein, in reliance upon and in conformity with
-2-
<PAGE> 3
information furnished to the Company by or on behalf of Remy Capital or any
controlling person of Remy Capital specifically for use in the preparation
thereof.
(b) In the event of the Registration of the Additional
Shares pursuant to this Agreement, Remy Capital will indemnify and hold
harmless the Company and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act, each officer of the Company who
signs the Registration Statement, each director of the Company and each
underwriter and each person who controls any underwriter within the meaning of
Section 15 of the 1933 Act, against any and all such losses, claims, damages,
liabilities or actions which the Company or such officer, director, underwriter
or controlling person may become subject under the 1933 Act or otherwise, and
will reimburse the Company, each such officer, director, underwriter and
controlling person for any legal or any other expenses reasonably incurred by
such party in connection with investigating or defending any such loss, claim,
damage, liability or action, if (a) such loss, claim, damage, liability or
action in respect thereof arises out of or is based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement or any such prospectus, or any amendment thereof or supplement
thereto, or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading and (b) any such statement or
omission of a material fact was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of Remy Capital
specifically for use in connection with the preparation of the Registration
Statement or prospectus. Remy Capital also agrees to indemnify each such
underwriter and each person who controls any such underwriter within the
meaning of Section 15 of the 1933 Act as may reasonably and customarily be
requested by the underwriters in connection with the Offering.
(c) Promptly after receipt by any indemnified person of
notice of any claim or commencement of any action in respect of which indemnity
is to be sought against an indemnifying person pursuant to this Agreement, such
indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, and, subject to provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified of the
same, such indemnifying person shall be entitled to participate therein, and,
to the extent it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person, and after notice from the
indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person in connection with the defense thereof; provided, however,
if there exists or will exist a conflict of interest which would make it
inappropriate in the reasonable judgment of the indemnified person for the same
counsel to represent both the indemnified person and such indemnifying person
then such indemnified person shall be entitled to retain its own counsel at the
expense of such indemnifying person; provided further, however, the
indemnifying person shall not be required to pay for more than one separate
counsel for all of the indemnified persons in addition to any local counsel.
-3-
<PAGE> 4
SECTION 4. TRANSFER OF REGISTRATION RIGHTS. The rights granted
to Remy Capital under this Agreement may not be assigned or transferred by Remy
Capital to any other person.
SECTION 5. AMENDMENT, MODIFICATION AND WAIVER. This Agreement
may be amended with the consent of the Company and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, modification, action or omission to act, of Remy Capital.
SECTION 6. ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and, with
respect to the Company, its respective successors and assigns.
SECTION 7. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of Texas, without regard
to the conflicts or choice of law rules of the State of Texas.
SECTION 8. NOTICES. Any notice, request, instruction or other
document to be given hereunder by any party hereto to any other party shall be
in writing and delivered personally, by facsimile (with receipt confirmed) or
by registered or certified mail, postage prepaid:
(a) If to the Company, to:
UTI Energy Corp
16800 Greenspoint Park, Suite 225N
Houston, Texas 77060
Attention: Vaughn E. Drum
Facsimile: (281) 873-4141
Confirm: (281) 873-4111
with copies to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attention: Curtis W. Huff
Facsimile: (713) 651-5246
Confirm: (713) 651-5151
(b) If to Remy Capital, to:
Remy Capital Partners III, L.P.
1801 Century Park East, Suite 1111
Los Angeles, California 90067
Attention: Mark Siegel
Facsimile: (310) 843-0010
Confirm: (310) 843-0050
-4-
<PAGE> 5
Any notice which is delivered personally in the manner
provided herein shall be deemed to have been duly given to the party to whom it
is directed upon actual receipt by such party (or its agent for notices
hereunder). Any notice which is addressed and mailed in the manner herein
provided shall be conclusively presumed to have been duly given to the party to
which it is addressed at the close of business, local time of the recipient, on
the third day after the day it is so placed in the mail. Any notice which is
sent by facsimile shall be deemed to have been duly given to the party to which
it is addressed upon telephonic confirmation of the same as provided herein. A
copy of any notices delivered by facsimile shall promptly be mailed in the
manner herein provided to the party to which such notice was given.
SECTION 9. COUNTERPARTS. This Agreement may be executed in
separate counterparts, each of which will be deemed to be an original, but all
of which shall be considered one and the same instrument.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
UTI ENERGY CORP
By /s/ Vaughn E. Drum
------------------------
Vaughn E. Drum
President
REMY CAPITAL PARTNERS III, L.P.,
BY REMY INVESTORS AND CONSULTANTS, INC.,
ITS GENERAL PARTNER
By /s/ Mark S. Siegel
------------------------
Mark Siegel
President
-6-
<PAGE> 1
[FULBRIGHT & JAWORSKI L.L.P. LETTERHEAD]
September 26, 1997
UTI Energy Corp.
16800 Greenspoint Park, Suite 225N
Houston, Texas 77060
Gentlemen:
We have acted as counsel for UTI Energy Corp., a Delaware corporation
(the "Company"), in connection with the registration under the Securities Act
of 1933 of 7,393,842 shares of the Company's common stock, $.001 par value (the
"Shares"), to be offered upon the terms and subject to the conditions set forth
in a proposed Underwriting Agreement to be entered into by and among the
Company, Prudential Securities Incorporated, Lehman Brothers, Rauscher Pierce
Refsnes, Inc. and Simmons & Company International, as representatives of the
several underwriters to be listed therein, and the selling stockholders (the
"Selling Stockholders") of the Company listed therein (the "Underwriting
Agreement").
In connection therewith, we have examined the Company's Registration
Statement on Form S-3 covering the Shares (the "Registration Statement") filed
with the Securities and Exchange Commission, originals or copies certified or
otherwise identified to our satisfaction of the Restated Certificate of
Incorporation of the Company, the amended By- laws of the Company, the
corporate proceedings with respect to the offering of the Shares and such other
documents and instruments as we have deemed necessary or appropriate for the
expression of the opinions contained herein.
We have assumed the authenticity and completeness of all records,
certificates and other instruments submitted to us as originals, the conformity
to original documents of all records, certificates and other instruments
submitted to us as copies, the authenticity and completeness of the originals
of those records, certificates and other instruments submitted to us as copies
and the correctness of all statements of fact contained in all records,
certificates and other instruments that we have examined.
Based on the foregoing, and having regard for such legal
considerations as we have deemed relevant, we are of the opinion that:
(i) The shares of Common Stock proposed to be offered by
the Company have been duly and validly authorized for issuance and,
when issued and paid for in accordance with the terms of the
Underwriting Agreement, will be duly and validly issued, fully paid
and nonassessable.
<PAGE> 2
UTI Energy Corp.
September 26, 1997
Page 2
(ii) The shares of Common Stock proposed to be offered by
the Selling Stockholders have been duly and validly authorized for
issuance and are duly and validly issued, fully paid and nonassessable
or in the case of Shares underlying options or warrants will be duly
and validly issued, fully paid and nonassessable when exercised in
accordance with the applicable warrant or option agreement.
The opinions expressed herein relate solely to, are based solely upon
and are limited exclusively to the laws of the State of Delaware and the
federal laws of the United States of America, to the extent applicable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus included as part of the Registration Statement.
Very truly yours,
/s/ Fulbright & Jaworski L.L.P.
Fulbright & Jaworski L.L.P.
