<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
------ ------
Commission File Number 1-12542
UTI ENERGY CORP.
----------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 23-2037823
------------------------------------------------ --------------------------------------
<S> <C>
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
SUITE 225N
16800 GREENSPOINT PARK
HOUSTON, TEXAS 77060
----------------------------------------------- --------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (281) 873-4111
-------------------------------------
- - ---------------------------------------------------------------------------------------------------
(Former Address)
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each class of issuer's common
stock, as of the latest practicable date.
15,949,321 SHARES OF COMMON STOCK AT NOVEMBER 1, 1998.
<PAGE> 2
INDEX
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<CAPTION>
Page No.
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at September 30, 1998
and December 31, 1997 ................................................................... 3
Condensed Consolidated Statements of Income for the Three and
Nine Months ended September 30, 1998 and 1997 ............................................ 4
Condensed Consolidated Statements of Cash Flows for the
Nine Months ended September 30, 1998 and 1997............................................. 5
Notes to Condensed Consolidated Financial Statements....................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................................. 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................... 17
Item 2. Changes in Securities...................................................................... 17
Item 6. Exhibits and Reports on Form 8-K........................................................... 17
Signatures................................................................................. 19
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UTI ENERGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(In thousands)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ....................................................... $ 6,993 $ 58,347
Accounts receivable, net ........................................................ 31,108 35,589
Materials and supplies .......................................................... 1,635 1,363
Prepaid expenses ................................................................ 2,436 749
--------- ---------
42,172 96,048
PROPERTY AND EQUIPMENT:
Land ............................................................................ 1,225 1,149
Buildings and improvements ...................................................... 3,031 2,819
Machinery and equipment ......................................................... 199,494 116,357
Oil and gas working interests ................................................... 1,893 1,893
Construction in process ......................................................... 3,383 4,305
--------- ---------
209,026 126,523
Less accumulated depreciation and amortization .................................. 42,457 31,508
--------- ---------
166,569 95,015
GOODWILL, less accumulated amortization of $1,703 in 1998 and $652 in 1997 .......... 21,173 17,758
OTHER ASSETS ........................................................................ 1,511 166
--------- ---------
$ 231,425 $ 208,987
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt ............................................... $ 8 $ 50
Accounts payable ................................................................ 15,378 14,087
Accrued payroll costs ........................................................... 3,616 5,048
Accrued income taxes ............................................................ 152 3,375
Other accrued expenses .......................................................... 5,382 3,036
--------- ---------
24,536 25,596
LONG-TERM DEBT, less current portion ................................................ 31,562 23,458
DEFERRED INCOME TAXES ............................................................... 29,689 15,256
OTHER LONG-TERM LIABILITIES ......................................................... 348 356
COMMITMENTS AND CONTINGENCIES
REDEEMABLE STOCK, Common Stock, $.001 par value, none
outstanding in 1998 and 309,374 issued and outstanding in 1997 .................. -- 6,701
SHAREHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 5,000,000 shares authorized,
none issued and outstanding in 1998 and 1997 ................................. -- --
Common Stock, $.001 par value, 50,000,000 shares authorized,
16,552,595 issued and 16,093,221 outstanding in 1998, 16,146,741
issued and outstanding in 1997 ................................................ 17 16
Additional capital .............................................................. 128,562 120,208
Retained earnings ............................................................... 25,714 17,441
Restricted stock plan unearned compensation ..................................... (11) (45)
Treasury stock, 459,374 shares in 1998, at cost ................................. (8,992) --
--------- ---------
145,290 137,620
--------- ---------
$ 231,425 $ 208,987
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
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UTI ENERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------------------- ---------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(In thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
REVENUES .................................. $ 48,690 $ 50,310 $ 145,410 $ 127,118
COST OF REVENUES .......................... 35,713 36,808 105,678 97,270
------------ ------------ ------------ ------------
GROSS PROFIT .............................. 12,977 13,502 39,732 29,848
OTHER COSTS AND EXPENSES:
Selling, general and administrative ... 3,277 3,180 9,479 8,156
Provision for bad debts ............... 361 99 1,143 297
Other charge (note 5) ................. 785 -- 785 --
Depreciation and amortization ......... 5,055 3,009 13,409 7,029
------------ ------------ ------------ ------------
9,478 6,288 24,816 15,482
------------ ------------ ------------ ------------
OPERATING INCOME .......................... 3,499 7,214 14,916 14,366
OTHER INCOME (EXPENSE):
Interest expense ...................... (987) (1,639) (2,744) (3,393)
Interest income ....................... 68 3 1,027 9
Other, net ............................ 127 88 556 336
------------ ------------ ------------ ------------
(792) (1,548) (1,161) (3,048)
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES ................ 2,707 5,666 13,755 11,318
INCOME TAXES .............................. 1,083 1,772 5,482 3,803
------------ ------------ ------------ ------------
NET INCOME ................................ $ 1,624 $ 3,894 $ 8,273 $ 7,515
============ ============ ============ ============
EARNINGS PER COMMON SHARE:
Basic ................................. $ 0.10 $ 0.31 $ 0.51 $ 0.63
============ ============ ============ ============
Diluted ............................... $ 0.10 $ 0.26 $ 0.48 $ 0.54
============ ============ ============ ============
AVERAGE COMMON SHARES OUTSTANDING:
Basic ................................. 16,087,173 12,468,156 16,093,648 11,958,179
Diluted ............................... 16,747,414 15,192,308 17,060,911 14,042,144
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 5
UTI ENERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
--------------------------
1998 1997
-------- --------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................................. $ 8,273 $ 7,515
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization ............................................ 13,409 7,029
Deferred income taxes .................................................... 547 946
Amortization of debt discount ............................................ 356 258
Stock compensation expense ............................................... 34 37
Gain on disposal of fixed assets ......................................... (362) (356)
Changes in operating assets and liabilities, net of
effect of businesses acquired:
Accounts receivable and prepaids ....................................... 6,635 (11,280)
Materials and supplies ................................................. (193) (823)
Accounts payable, accrued expenses and accrued payroll costs .......... (3,404) 6,567
Other, net ............................................................. (2,235) (149)
-------- --------
Net cash provided by operating activities ............................ 23,060 9,744
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ........................................................ (33,698) (10,122)
Acquisition of businesses, net of cash ...................................... (33,646) (37,542)
Proceeds from sale of property and equipment ................................ 763 808
-------- --------
Net cash used by investing activities ................................ (66,581) (46,856)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt .................................... -- 58,900
Proceeds from issuance of Common Stock, options and warrants ................ 1,243 986
Repayments of long-term debt ................................................ (84) (21,626)
Redemption of stock and purchase of treasury stock .......................... (8,992) --
-------- --------
Net cash (used) provided by financing activities ..................... (7,833) 38,260
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS ....................................... (51,354) 1,148
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................................ 58,347 570
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................................... $ 6,993 $ 1,718
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 6
UTI ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1998
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements at
September 30, 1998 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 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 nine months ended
September 30, 1998 are not necessarily indicative of the results for the
entire year ending December 31, 1998. 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, 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share (SFAS 128).
SFAS 128 replaced the calculation of primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share is similar
to the previously reported fully diluted earnings per share. All earnings
per share amounts for all periods have been presented, and where
appropriate, restated to conform to the SFAS 128 requirements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information (SFAS 131). SFAS 131, which is effective
for fiscal years beginning after December 15, 1997, established revised
guidelines for determining an entity's operating segments, as well as the
type and level of financial information to be disclosed. The Company has not
applied SFAS 131 to the 1998 interim financial statements as this
information is not required in the initial year of application.
Reclassifications
Certain items in the prior period's financial statements have been
reclassified to conform with the presentation in the current period.
3. ACQUISITIONS
On January 27, 1997, the Company acquired the land drilling assets of
Quarles Drilling Corporation ("Quarles") for $16.2 million, consisting of
$8.1 million cash and 733,779 shares of Common Stock (after adjustment
pursuant to the purchase agreement). The acquired assets consisted of nine
land drilling rigs, various equipment, rig components and other equipment
used in Quarles' contract drilling business. The acquisition was accounted
for using the purchase method, and the operating results since January 27,
1997 from the land drilling assets acquired from Quarles have been
consolidated with the operating results of the Company. No goodwill was
recorded as the estimated fair market value of the assets acquired exceeded
the purchase price.
On April 11, 1997, the Company acquired the land drilling operations of
Southland Drilling Company Ltd. ("Southland") for approximately $27.1
million cash and a five-year warrant to purchase 300,000 shares of Common
Stock at an exercise price of $16.00 per share. The acquired assets
consisted of nine drilling rigs, various equipment, components and other
equipment used in Southland's contract drilling business. The acquisition
was accounted for using the purchase method, and the operating results since
April 11, 1997 from the land drilling operations acquired from Southland
have been consolidated with the operating results of the Company. Goodwill
of $10.1 million was recorded related to this acquisition and is being
amortized over a period of 15 years.
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<PAGE> 7
UTI ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1998
3. ACQUISITIONS (CONTINUED)
On September 11, 1997, the Company acquired all of the capital stock of
J.S.M. & Associates, Inc. ("JSM") for 618,748 shares of Common Stock and
$2.6 million in cash. In January 1998, the former shareholders of JSM
exercised their right to redeem one half of the shares issued to them by the
Company (309,374 shares) for $21.66 per share. This redemption was accounted
for as a treasury stock transaction. Prior to this date, JSM was an
independent contract land driller in the Permian Basin. JSM's assets at the
time of acquisition included seven land drilling rigs, an office and
warehouse in Odessa, Texas and approximately $1.0 million in net working
capital. The acquisition was accounted for using the purchase method of
accounting, and JSM's operating results since September 11, 1997 have been
consolidated with the operating results of the Company. Goodwill of $9.1
million was recorded related to this acquisition and is being amortized over
a period of 15 years. The amortization of this goodwill is nondeductible for
tax purposes.
On April 9, 1998, the Company acquired all of the capital stock of Peterson
Drilling Company ("Peterson") for $20.4 million in cash. Peterson's assets
included eight land drilling rigs, related drilling equipment and $4.0
million in net working capital. The acquisition was accounted for using the
purchase method, and Peterson's operating results since April 9, 1998 have
been consolidated with the operating results of the Company. Goodwill of
$3.6 million was recorded related to this acquisition and is being amortized
over a period of 15 years. The amortization of this goodwill is
nondeductible for tax purposes.
On June 24, 1998, the Company acquired the land drilling assets of LaMunyon
Drilling Corporation ("LaMunyon") for $12.2 million in cash. The acquired
assets consisted of five land drilling rigs, related spare parts, office
equipment and rolling stock. The acquisition was accounted for using the
purchase method, and the operating results since June 24, 1998 from the land
drilling assets acquired from LaMunyon have been consolidated with the
operating results of the Company. No goodwill was recorded as the estimated
fair market value of the assets acquired exceeded the purchase price.
On July 31, 1998, the Company acquired all of the capital stock of Suits
Enterprises, Inc. ("Suits") for approximately $2.6 million in cash,
approximately $7.8 million in 7% four-year notes and 100,000 five-year
warrants. Warrants to purchase 75,000 shares of Common Stock are exercisable
at $26.50 per share and warrants to purchase 25,000 shares of Common Stock
are exercisable at $35.00 per share. The Suits assets consisted of seven
land drilling rigs plus assorted spare parts and drilling equipment and a
fleet of rolling stock. The acquisition was accounted for using the purchase
method, and Suits' operating results since July 31, 1998 have been
consolidated with the operating results of the Company. No goodwill was
recorded as the estimated fair market value of the assets acquired exceeded
the purchase price.
The following pro forma operating results reflect the inclusion of Peterson
as if the acquisition occurred on January 1, 1997 (such pro forma operating
results, however, exclude the operations of the LaMunyon assets prior to
June 24, 1998 and the operations of Suits prior to July 31, 1998 as neither
of these acquisitions were significant to the Company's operations):
Nine Months Ended
September 30,
-------------------------------
1998 1997
-------------- -------------
Revenue.............................. $ 151,559 $ 142,423
============== =============
Net income........................... $ 8,931 $ 8,010
============== =============
Earnings per share:
-Basic.......................... $ 0.55 $ 0.67
============== =============
-Diluted........................ $ 0.52 $ 0.57
============== =============
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UTI ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1998
4. FINANCING AGREEMENTS
In connection with the acquisition of Suits, the Company issued notes for
$7.8 million which bear interest at 7% and mature July 30, 2002.
5. OTHER CHARGE
The Company undertook a series of actions during the third quarter of 1998
designed to improve efficiency, increase productivity and make the Company
more competitive in the marketplace, including the streamlining of certain
contract drilling operations and changes to the accounting and
administrative functions. The accounting and administrative changes
included the relocation of certain accounting functions from Oklahoma City
to the Company's corporate headquarters in Houston and certain personnel
changes. This consolidation of operations reduced the Company's number of
regional operating units from nine to seven and reduced the Company's staff
by twenty individuals.
As a result of these actions, a charge of approximately $.8 million was
recorded which included approximately $.6 million of employee-related
expenses associated with the termination of certain administrative and
operational activities and personnel. Approximately $.2 million of costs
were related to the relocation of the accounting function.
6. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Numerator:
Net income ................................... $ 1,624 $ 3,894 $ 8,273 $ 7,515
=========== =========== =========== ===========
Denominator:
Denominator for basic earning per
share - weighted-average shares ............ 16,087,173 12,468,156 16,093,648 11,958,179
Effect of dilutive securities:
Stock options .............................. 660,241 1,471,205 865,284 1,297,226
Warrants ................................... -- 1,252,947 101,979 754,099
Other ...................................... -- -- -- 32,640
----------- ----------- ----------- -----------
Dilutive potential common shares ............. 660,241 2,724,152 967,263 2,083,965
----------- ----------- ----------- -----------
Denominator for diluted earnings per
share-adjusted weighted-average
shares and assumed conversions ............. 16,747,414 15,192,308 17,060,911 14,042,144
=========== =========== =========== ===========
Basic earnings per share ......................... $ 0.10 $ 0.31 $ 0.51 $ 0.63
=========== =========== =========== ===========
Diluted earnings per share ....................... $ 0.10 $ 0.26 $ 0.48 $ 0.54
=========== =========== =========== ===========
</TABLE>
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UTI ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1998
7. 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 or 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 $100,000 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.
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<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
UTI Energy Corp. 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
are currently concentrated in the prolific oil and natural gas producing basins
of New Mexico, Oklahoma, Texas and the Gulf Coast. The Company also provides
drilling and pressure pumping services in the Appalachian Basin.
The Company's current rig fleet consists of 109 land drilling rigs that
are well suited to the requirements of its markets. The Company's contract
drilling services are performed through various regional drilling units and are
marketed under the names FWA, IPSCO, JSM, LaMunyon, Peterson, Southland and
Triad.
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 the
oil and gas producing regions in the United States.
Since November 1995, the Company has acquired 86 rigs in eight
transactions. (i) FWA Drilling Company, Inc. was acquired in November 1995 for
$14.0 million in cash; (ii) Viersen & Cochran Drilling Company 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 Drilling Corporation ("Quarles")
were acquired in January 1997 for $8.1 million cash and 733,779 shares of Common
Stock having a fair market value at the time of acquisition of $8.1 million;
(iv) the contract drilling business of Southland Drilling Company, Ltd.
("Southland") were 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; (v)
J.S.M. & Associates, Inc. ("JSM") was acquired in September 1997, for 618,748
shares of Common Stock (of which 309,374 shares have been redeemed for $6.7
million) and approximately $2.6 million in cash; (vi) Peterson Drilling Company
("Peterson") was acquired on April 9, 1998 for $20.4 million in cash; (vii) the
contract drilling assets of LaMunyon Drilling Corporation ("LaMunyon") were
acquired on June 24, 1998 for $12.2 million in cash; and (viii) Suits
Enterprises, Inc. ("Suits") was acquired on July 31, 1998 for approximately $2.6
million in cash, $7.8 million in 7% four-year notes, warrants to purchase 75,000
shares of Common Stock at $26.50 per share and warrants to purchase 25,000
shares of Common Stock at $35.00 per share. These acquisitions have resulted in
the Company realizing substantial growth in its revenues and earnings.
The Company's performance improved despite market deterioration in the
United States land drilling markets during the nine months ended September 30,
1998 compared to the conditions that prevailed in the corresponding period of
1997. Contract drilling revenue per day for the quarter ended September 30, 1998
was approximately $7,800 compared to $7,500 for the same period of 1997.
Contract drilling revenue per day for the nine months ended September 30, 1998
was approximately $8,000 compared to $7,300 for the same period of 1997. Since
December 1997, however, the worldwide price of oil has declined and prices for
natural gas have weakened. As prices for oil have declined, exploration and
production companies, including the Company's customers, have announced
reductions in previously disclosed spending budgets. Such reductions have
reduced the demand for drilling services and increased competitive pressures,
leading to lower contract rates for the Company's contract drilling services
than those received during the third and fourth quarters of 1997. In addition,
contract rates for the Company's contract drilling services received during the
third quarter of 1998 have decreased from those received during the first two
quarters of 1998. The Company currently does not expect contract rates for its
services to recover until commodity prices for oil and natural gas improve, and
any prolonged continuation of depressed oil and natural gas prices, or any
further decline in oil and natural gas prices, could cause demand, and contract
rates for the Company's contract drilling services, to decline further. Although
all of the Company's operating regions have been affected by the above-mentioned
factors, certain of the Company's operating regions, particularly the Permian
Basin, that are more sensitive to changes in oil prices, have and will be more
significantly affected by current market conditions.
In response to these depressed industry conditions, the Company undertook
a series of actions during the third quarter designed to improve efficiency,
increase productivity and make the Company more competitive in the market place.
These actions included the streamlining of certain contract drilling operations
and changes to the accounting and administrative functions, including the
relocation of certain accounting functions from Oklahoma City to the Company's
corporate headquarters in Houston and certain personnel changes. This
consolidation of operations
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<PAGE> 11
reduced the Company's number of regional operating units from nine to seven and
reduced the Company's administrative staff by twenty individuals. As a result of
these actions, the Company recorded a one-time other charge during the third
quarter of $.8 million, which included approximately $.6 million of
employee-related expenses.
Although conditions in the contract drilling industry have significantly
declined over prior periods and further declines are possible, the Company
intends to continue to pursue its strategy of making strategic and opportunistic
acquisitions of additional rigs and equipment and other contract drilling
contractors. Any such acquisitions will be funded by cash on hand, borrowings
under the Company's existing credit facility or issuances of equity or debt
securities.
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.
The following table presents certain results of operations data for the
Company and the average United States land rig count as reported by Baker Hughes
Inc.(1) for the periods indicated:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------------ ------------------------
1998 1997 1998 1997
-------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Operating Data:
Average U.S. land rig count(1).................... 654 836 710 781
Number of owned rigs at end of period ............ 109 89 109 89
Average number of rigs owned during period ....... 107 84 97 79
Contract drilling:
Land drilling revenue ............................ $ 41,665 $ 43,628 $127,654 $112,076
Operating days(2) ................................ 5,349 5,810 15,950 15,381
Average revenue per day .......................... $ 7.8 $ 7.5 $ 8.0 $ 7.3
Gross profit per day ............................. $ 1.8 $ 1.8 $ 2.0 $ 1.6
Utilization rates(3) ............................. 54% 75% 60% 71%
Pressure pumping:
Cementing:
Cementing revenue .............................. $ 2,509 $ 2,232 $ 6,263 $ 5,352
Number of jobs ................................. 693 643 1,758 1,661
Revenue per job ................................ $ 3.6 $ 3.5 $ 3.6 $ 3.2
Gross profit per job ........................... $ 2.1 $ 1.9 $ 1.9 $ 1.7
Stimulation:
Stimulation revenue ............................ $ 4,466 $ 4,398 $ 11,341 $ 9,493
Number of jobs ................................. 300 295 751 672
Revenue per job ................................ $ 14.9 $ 14.9 $ 15.1 $ 14.1
Gross profit per job ........................... $ 5.6 $ 6.6 $ 5.6 $ 4.6
- - -----------
</TABLE>
(1) Baker Hughes, Inc. is an international oilfield service and
equipment company which for more than twenty 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) An operating day is defined as a day during which a rig is being
operated, mobilized, assembled or dismantled while under
contract.
(3) Utilization rates are based on a 365-day year and are calculated
by dividing the number of operating days by the total number of
available operating days. Total available days is calculated by
multiplying the total number of rigs in the Company's drilling
fleet, including stacked rigs, by days in the period. A rig is
considered utilized when it is being operated, mobilized,
assembled or dismantled while under contract.
- 11 -
<PAGE> 12
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Revenues by operating segment for the three months ended September 30,
1998 and 1997 are as follows:
Three Months
Ended September 30, %
------------------------------------ increase
1998 1997 (decrease)
------------- ------------- ------------
(In thousands)
Revenues:
Land Drilling $ 41,665 $ 43,628 (4.5%)
Pressure Pumping 6,975 6,630 5.2%
Other 50 52 (3.8%)
------------- -------------
$ 48,690 $ 50,310 (3.2%)
============= =============
The decrease in land drilling revenue relates to a decline in operating
days caused by a reduction in demand and prices received for the Company's
contract drilling services due to current industry conditions. The increase in
pressure pumping revenue is a result of an increase in pressure pumping jobs,
which have not been adversely affected by declining oil and gas prices to the
same extent as the Company's land drilling operations.
The table below provides gross profit and gross profit percentage by
operating segment for the three months ended September 30, 1998 and 1997.
Three Months
Ended September 30,
-------------------------------
1998 % 1997 %
------ ------ ------ -----
(In thousands)
Gross Profit:
Land Drilling $ 9,838 23.6 $10,267 23.5
Pressure Pumping 3,119 44.7 3,200 48.3
Other 20 40.0 35 67.3
------- -------
$12,977 26.7 $13,502 26.8
======= =======
Pressure pumping gross profit percentage decreased due to a decrease in
gross profit per job on stimulation jobs for the three months ended September
30, 1998 compared to the same period of 1997.
Selling, general and administrative expenses increased $.1 million
during the three months ended September 30, 1998 compared to three months ended
September 30, 1997 primarily due to acquisitions consummated during the third
and fourth quarters of 1997 and during 1998.
Provision for bad debts increased $.3 million for the three months
ended September 30, 1998 compared to the three months ended September 30, 1997
primarily due to existing industry conditions.
The other charge of $.8 million for the three months ended September
30, 1998 was the result of the streamlining of certain contract drilling
operations and changes to the accounting and administrative functions.
Depreciation and amortization expense increased $2.1 million during the
three months ended September 30, 1998 compared to the three months ended
September 30, 1997, primarily due to acquisitions consummated during the third
and fourth quarters of 1997 and during 1998.
Interest expense decreased $.6 million during the quarter ended
September 30, 1998 compared to the quarter ended September 30, 1997. This
decrease was primarily due to a reduction in outstanding debt for the three
months ended September 30, 1998 compared to the same period of 1997. Average
debt outstanding was $27.7 million during the quarter ended September 30, 1998
compared to $53.3 million for the quarter ended September 30, 1997, and the
effective interest rate for the quarter ended September 30, 1998 was 14.3%
compared to 12.3% for the quarter ended September 30, 1997.
Income taxes decreased $.7 million during the quarter ended September
30, 1998, compared to the quarter ended September 30, 1997, primarily due to
lower taxable income in 1998. The Company's effective tax rate for the quarter
ended September 30, 1998 was 40.0% and 31.3% for the quarter ended September 30,
1997, with the increase primarily attributable to goodwill amortization
associated with the acquisitions of JSM and Peterson that is nondeductible for
tax purposes.
- 12 -
<PAGE> 13
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Revenues by operating segment for the nine months ended September 30,
1998 and 1997 are as follows:
Nine Months
Ended September 30, %
------------------------------------- increase
1998 1997 (decrease)
------------- ------------- ------------
(In thousands)
Revenues:
Land Drilling $ 127,654 $ 112,076 13.9%
Pressure Pumping 17,604 14,845 18.6%
Other 152 197 (22.8%)
------------- -------------
$ 145,410 $ 127,118 14.4%
============= =============
The increase in land drilling revenue relates to the increase in
operating days between periods. Operating days increased primarily as a result
of acquisitions during 1997 and 1998, offset in part by declines in demand and
prices for the Company's land drilling services due to current industry
conditions. The increase in pressure pumping revenue relates to the increase of
pressure pumping jobs between periods.
The table below provides gross profit and gross profit percentage by
operating segment for the nine months ended September 30, 1998 and 1997.
Nine Months
Ended September 30,
----------------------------------
1998 % 1997 %
------ ---- ------ ----
(In thousands)
Gross Profit:
Land Drilling 32,095 25.1% $23,813 21.2%
Pressure Pumping 7,575 43.0% 5,913 39.8%
Other 62 41.1% 122 61.9%
------ -------
39,732 27.3% $29,848 23.5%
====== =======
Land drilling gross profit improved as a result of more favorable
market conditions in early 1998 which benefited the nine months ended September
30, 1998 compared to the same period of 1997. Pressure pumping gross profit
improved due to the mix of higher margin jobs done in 1998 compared to 1997.
Selling, general and administrative expenses increased $1.3 million
during the nine months ended September 30, 1998 compared to nine months ended
September 30, 1997 primarily due to acquisitions consummated during 1997 and
1998.
The Company realized an $.8 million increase in the provision for bad
debts for the nine months ended September 30, 1998 compared to the same period
of 1997 primarily due to existing industry conditions.
The other charge of $.8 million for the nine months ended September 30,
1998 was the result of the streamlining of certain contract drilling operations
and changes to the accounting and administrative functions.
Depreciation and amortization expense increased $6.4 million during the
nine months ended September 30, 1998 compared to the nine months ended September
30, 1997, primarily due to acquisitions consummated during 1997 and 1998.
Interest expense decreased $.6 million during the nine months ended
September 30, 1998 compared to the nine months ended September 30, 1997. Average
debt outstanding was $25.2 million during the nine months ended September 30,
1998 compared to $40.3 million for the nine months ended September 30, 1997, the
effective interest rate for the nine months ended September 30, 1998 was 14.5%
compared to 11.2% for the nine months ended September 30, 1997.
Interest income increased $1.0 million during the nine months ended
September 30, 1998 compared to the nine months ended September 30, 1997,
primarily due to the investment of the remaining proceeds to the Company from
its secondary offering of Common Stock in October 1997. The excess funds were
invested in short-term, interest-bearing securities and are being utilized by
the Company for general corporate purposes, including the expansion of the
Company's business through selective acquisitions of businesses and assets.
- 13 -
<PAGE> 14
Income taxes increased $1.7 million during the nine months ended
September 30, 1998, compared to the same period of 1997, primarily due to higher
taxable income in 1998. The Company's effective tax rate for the nine months
ended September 30, 1998 was 39.9% and 33.6% for the nine months ended September
30, 1997, with the increase primarily attributable to amortization of goodwill
in 1998 relating to the acquisitions of JSM and Peterson that is nondeductible
for income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital at September 30, 1998 was $17.6 million compared to
$70.5 million at December 31, 1997. The Company's primary cash needs
historically have been to fund working capital requirements, to make capital
expenditures, to replace and expand its drilling rig fleet, to fund acquisitions
and to fund its $10.0 million stock repurchase program established in February
1998. The Company's ongoing operations have been funded through available cash,
cash provided from operations and borrowings under the Company's Amended and
Restated Loan and Security agreement dated December 5, 1995 (the "Working
Capital Line"). To date, acquisitions have been funded with available cash,
borrowings and issuances of equity and debt securities.
On October 1997, the Company sold in a public offering 1,792,600 shares
of Common Stock. Shares of Common Stock held by various shareholders of the
Company were also sold in this offering, including 1,707,000 shares of Common
Stock that were subject to outstanding warrants and options. The net proceeds to
the Company from this offering were approximately $80.0 million, including
approximately $13.0 million from the exercise of warrants and options to
purchase shares of Common Stock that were sold in the offering. The Company
utilized approximately $27.9 million of the net proceeds to repay all of its
outstanding debt other than the Subordinated Notes. The Company has utilized
these available cash resources, together with its cash flow from operations, to
continue its acquisition and growth strategy and to fund a stock repurchase
program of up to $10.0 million in Common Stock.
Net cash provided by continuing operations was $23.0 million and $9.7
million, for the nine months ended September 30, 1998 and 1997, respectively.
Such funds were utilized primarily to fund capital expenditures. Capital
expenditures, excluding acquisitions, for the nine months ended September 30,
1998 and 1997 were $33.7 million and $10.1 million, respectively.
Long Term Debt Facilities
Working Capital Line. On June 19, 1998, the Company entered into an
Amended and Restated Loan and Security Agreement (the "Working Capital Line"),
which provides for maximum borrowings of up to $30.0 million. Under the Working
Capital Line, up to $4.0 million may be utilized for letters of credit.
Borrowings under the Working Capital Line bear interest at either the bank's
prime rate or a LIBOR-based rate. Borrowings under the Working Capital Line
mature on June 30, 2000 and are secured by all of the Company's accounts
receivable and inventory (but excluding the Company's drilling rigs, drilling
equipment or drill pipe). The Working Capital Line contains covenants and
restrictions customary in financial instruments of this type, including
covenants relating to the maintenance of financial ratios, changes in control of
the Company and limits on capital expenditures. At September 30, 1998, the
Company had not borrowed under this facility.
Subordinated Notes. On April 11, 1997, the Company issued $25.0 million
principal amount of 12% Subordinated Notes due 2001 (the "Subordinated Notes").
The Subordinated Notes were issued at a 2% discount along with seven-year
warrants to purchase 1.2 million shares of Common Stock at an exercise price of
$10.83 per share, of which warrants to purchase 720,000 shares of Common Stock
issued in connection therewith were exercised in connection with the Company's
October 1997 public offering. The 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), restrictions on dividends, distributions and other
restricted payments.
Promissory Notes. On July 31, 1998, the Company issued $7.8 million
principal amount of unsecured promissory notes. The notes bear interest at 7.0%
and mature on July 31, 2002. The notes were issued in connection with the
acquisition of Suits.
- 14 -
<PAGE> 15
Acquisitions
Peterson. On April 9, 1998, the Company effected the acquisition of
Peterson Drilling Company, for a total purchase price of $20.4 million in cash,
which the Company funded from cash on hand following the public offering in
October 1997. Peterson's assets include eight drilling rigs, as well as related
drilling equipment, office facilities in Midland, Texas, and approximately $4.0
million in net working capital. The Company intends to continue to operate the
business of Peterson and integrate Peterson's operations with the Company's
existing contract drilling operations. The acquisition has been accounted for
under the purchase method of accounting.
LaMunyon. On June 24, 1998, the Company acquired the land drilling
assets of LaMunyon Drilling Corporation for $12.2 million in cash, which the
Company funded from cash on hand following the Company's public offering in
October 1997. The acquired assets consisted of five land drilling rigs, related
spare parts, office equipment and rolling stock. The acquisition has been
accounted for using the purchase method of accounting.
Suits. On July 31, 1998, the Company acquired Suits Enterprises, Inc.
for a total of approximately $10.5 million, comprised of $2.6 million in cash,
$7.8 million in 7% four-year notes and 100,000 five-year warrants of Common
Stock. Warrants to purchase 75,000 shares of Common Stock are exercisable at
$26.50 per share, and warrants to purchase 25,000 shares of Common Stock are
exercisable at $35.00 per share. Included in the acquisition are Suits' seven
complete drilling rigs plus assorted spare parts and drilling equipment and a
fleet of rolling stock. The acquisition has been accounted for using the
purchase method of accounting.
Stock Repurchase Program
On February 18, 1998, the Board of Directors of the Company approved a
stock repurchase by the Company of up to $10.0 million of Common Stock pursuant
to transactions effected from time to time in the open market. As of October 31,
1998, the Company had utilized $3.3 million to repurchase 293,900 shares of
Common Stock at an average purchase price of $11.15 per share.
Future Acquisitions
Management believes its internally generated cash, availability under
the Working Capital Line, and cash balances on hand will be sufficient to meet
its working capital, capital expenditure and debt service requirements for the
next twelve months. 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. Acquisitions are
expected to be funded with available cash, borrowings under the Working Capital
Line and,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.
Year 2000
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs or hardware that have date-sensitive software or
embedded chips may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
Based on recent assessments, the Company determined that it will be
required to modify or replace portions of its software and certain hardware so
that those systems will properly utilize dates beyond December 31, 1999. The
Company presently believes that with modifications or replacements of existing
software and certain hardware, the Year 2000 Issue can be mitigated. However, if
such modifications and replacements are not made, or are not completed timely,
the Year 2000 Issue could have a material impact on the operations of the
Company. The Company will utilize both internal and external resources to
reprogram, or replace, test and implement the software and operating equipment
for Year 2000 modifications.
The Company's plan to resolve the Year 2000 Issue involves the
following four phases: assessment, remediation, testing and implementation. To
date, the Company has fully completed its assessment of all systems that it
believes could be significantly affected by the Year 2000. The completed
assessment indicated that most of the Company's significant information
technology systems could be affected, particularly the general ledger. The
Company does not believe that the Year 2000 Issue presents a material exposure
as it relates to the Company's services.
- 15 -
<PAGE> 16
For its information technology exposures, to date the Company is 40%
complete on the remediation phase and expects to complete software reprogramming
and replacement no later than March 31, 1999. Once software is reprogrammed or
replaced for a system, the Company begins testing and implementation. These
phases run concurrently for different systems with all remediated systems
expected to be fully tested and implemented by June 30, 1999, with 100%
completion targeted for September 30, 1999.
The Company has queried its significant suppliers and subcontractors
and to date, the Company is not aware of any third parties with a Year 2000
Issue that would materially impact the Company's results of operations,
liquidity, or capital resources. However, the Company has no means of ensuring
that third parties will be Year 2000 ready. The inability of third parties to
complete their Year 2000 resolution process in a timely fashion could materially
impact the Company by causing such third parties to fail to timely deliver or
supply needed material and services to, or on behalf of the Company, thereby
materially adversely affecting the Company's ability to deliver its services in
a timely and cost-effective manner in accordance with Company standards, or by
causing third party customer's operations to temporarily shut-down or delay
operations, thereby materially affecting demand for the Company's services. The
effect of non-compliance by third parties is not determinable.
Management of the Company believes it has an effective program in place
to resolve the Year 2000 Issues in a timely manner. However, the Company has not
yet completed all necessary phases of the Year 2000 program. Disruptions in the
economy generally resulting from Year 2000 Issues could also materially
adversely affect the Company. The Company could be subject to litigation for
computer systems product failure, including equipment shutdown or failure to
properly date business records. The amount of potential liability and lost
revenue cannot be reasonably estimated at this time.
The Company currently has no contingency plans in place in the event it
does not complete all phases of the Year 2000 program. The Company plans to
evaluate the status of completion in March 1999 and determine whether such plans
are necessary.
Management does not anticipate that the Company will incur material
operating expenses or be required to invest heavily in computer system
improvements to be Year 2000 compliant.
FORWARD-LOOKING STATEMENTS
From time to time, the Company may make certain statements that contain
"forward-looking" information (as defined in the Private Securities Litigation
Reform Act of 1995). Words such as "anticipate", "believe", "expect",
"estimate", "project" and similar expressions are intended to identify such
forward-looking statements. Forward-looking statements may be made by management
orally or in writing, including, but not limited to, in press releases, as part
of this "Management's Discussion and Analysis of Financial Condition Results of
Operation" contained in this Report, and in the Company's other filings with the
Securities and Exchange Commission under the Securities Act of 1933 and the
Securities Exchange Act of 1934.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Such forward-looking statements
are subject to certain risks, uncertainties and assumptions, including without
limitation those identified below. Should one or more of these risks or
uncertainties materialize, or should any of the underlying assumptions prove
incorrect, actual results of current and future operations may vary materially
from those anticipated, estimated, or projected. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
their dates.
Among the factors that will have a direct bearing on the Company's
results of operations and the contract drilling service industry in which it
operates are changes in the price of oil and natural gas and the volatility of
the contract drilling service industry in general; including the effects of
recent downturns in prices for oil and natural gas; any difficulties associated
with the Company's ability to successfully integrate recent acquisitions;
contractual risk associated with turnkey and footage contracts; the presence of
competitors with greater financial resources; operating risks inherent in the
contract drilling service industry, such as blowouts, explosions, cratering,
well fires and spills; labor shortages; domestic and world-wide political
stability and economic growth; and other risks associated with the Company's
successful execution of internal operating plans as well as regulatory
uncertainties and legal proceedings. In addition, risks associated with the Year
2000 Issue may have a direct bearing on the Company's results of operations,
including risks of lost revenues, unexpected expenses and third party lawsuits
against the Company caused by a third-party supplier, subcontractor or
customer's failure to by Year 2000 ready or the failure by the Company to be
Year 2000 ready, as well as risks of lost revenues due to a general economic
downturn as a result of the Year 2000 Issue.
- 16 -
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 1. 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 or 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 further,
there can be no assurance that insurance will continue to be available on terms
as favorable as those for its existing arrangements. 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.
ITEM 2. CHANGES IN SECURITIES
On February 18, 1998, the Board of Directors of the Company approved a
stock repurchase by the Company of up to $10.0 million of Common Stock pursuant
to transactions effected from time to time in the open market. As of October 31,
1998, the Company had utilized $3.3 million to repurchase 293,900 shares of
Common Stock at an average price of $11.15 per share.
On July 31, 1998, the Company issued 100,000 five-year warrants of
Common Stock in connection with the acquisition of Suits. Warrants to purchase
75,000 shares of Common Stock are exercisable at $26.50 per share, and warrants
to purchase 25,000 shares of Common Stock are exercisable at $35.00 per share.
In addition, in connection with the acquisition of Suits, the Company issued
$7.79 million in 4-year promissory notes bearing interest at 7%. The warrants
and notes were issued pursuant to an exemption from registration under Section
4(2) of the Securities Act of 1933, as amended.
On August 12, 1998, the Company repriced employee stock options issued
in the preceding thirteen months. Options with exercise prices ranging from
$11.38 to $31.63 were repriced to $9.88, the closing price for Common Stock on
the date of repricing. As a result of the repricing, vesting of the options
reverted back to the original terms at the date of repricing.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Title or Description
- - --------------------------------------------------------------------------------
2.3 - Agreement and Plan of Merger dated July 31, 1998, among
the Company, Suits Acquisition Corp., Suits
Enterprises, Inc. ("Suits") and the shareholders of
Suits (incorporated by reference from the Company's
Quarterly Report on Form 10-Q for the three months
ended June 30, 1998). Pursuant to rule 601(b)(2) of
Regulation S-K, schedules, exhibits and similar
attachments to such agreement have not been filed with
this exhibit. Such schedules contain information
relating to the representations and warranties
contained in this agreement. The Company agrees to
furnish supplementally any omitted schedule, exhibit or
attachment to the Securities and Exchange Commission
upon request.
4.1 - Form of Warrant to purchase an aggregate of 75,000
shares of Common Stock at $26.50 per share, which was
issued to the former shareholders of Suits Enterprises,
Inc. listed on such exhibit in the amounts set forth
opposite such former shareholder's name on such exhibit
(incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the three months ended June 30,
1998).
- 17 -
<PAGE> 18
(a) Exhibits (Continued)
Exhibit
Number Title or Description
- - --------------------------------------------------------------------------------
4.2 - Form of Warrant to purchase an aggregate of 25,000
shares of Common Stock at $35.00 per share, which was
issued to the former shareholders of Suits Enterprises,
Inc. listed on such exhibit in the amounts set forth
opposite such former shareholder's name on such exhibit
(incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the three months ended June 30,
1998).
4.3 - Form of Note Payable in the aggregate amount of $7.79
million, which was issued to the former shareholders of
Suits Enterprises, Inc. listed on such exhibit in the
amounts set forth opposite such former shareholder's
name on such exhibit (incorporated by reference from
the Company's Quarterly Report on Form 10-Q for the
three months ended June 30, 1998).
27.1 - Financial Data Schedule.
27.2 - Restated Financial Data Schedule.
(b) Reports on 8-K
None filed.
- 18 -
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
UTI ENERGY CORP.
(REGISTRANT)
Date: November 16, 1998 /s/ John E. Vollmer III
-------------------------------------
John E. Vollmer III
Chief Financial Officer
/s/ Bruce Sauers
-------------------------------------
Bruce Sauers
Vice President and Corporation
Controller
Signed on behalf of the registrant and
as principal financial officer
- 19 -
<PAGE> 20
INDEX TO EXHIBITS
Exhibit
Number Title or Description
- - --------------------------------------------------------------------------------
2.3 - Agreement and Plan of Merger dated July 31, 1998, among
the Company, Suits Acquisition Corp., Suits
Enterprises, Inc. ("Suits") and the shareholders of
Suits (incorporated by reference from the Company's
Quarterly Report on Form 10-Q for the three months
ended June 30, 1998). Pursuant to rule 601(b)(2) of
Regulation S-K, schedules, exhibits and similar
attachments to such agreement have not been filed with
this exhibit. Such schedules contain information
relating to the representations and warranties
contained in this agreement. The Company agrees to
furnish supplementally any omitted schedule, exhibit or
attachment to the Securities and Exchange Commission
upon request.
4.1 - Form of Warrant to purchase an aggregate of 75,000
shares of Common Stock at $26.50 per share, which was
issued to the former shareholders of Suits Enterprises,
Inc. listed on such exhibit in the amounts set forth
opposite such former shareholder's name on such exhibit
(incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the three months ended June 30,
1998).
4.2 - Form of Warrant to purchase an aggregate of 25,000
shares of Common Stock at $35.00 per share, which was
issued to the former shareholders of Suits Enterprises,
Inc. listed on such exhibit in the amounts set forth
opposite such former shareholder's name on such exhibit
(incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the three months ended June 30,
1998).
4.3 - Form of Note Payable in the aggregate amount of $7.79
million, which was issued to the former shareholders of
Suits Enterprises, Inc. listed on such exhibit in the
amounts set forth opposite such former shareholder's
name on such exhibit (incorporated by reference from
the Company's Quarterly Report on Form 10-Q for the
three months ended June 30, 1998).
27.1 - Financial Data Schedule.
27.2 - Restated Financial Data Schedule.
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