<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, 1996
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 1-13926
DIAMOND OFFSHORE DRILLING, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 76-0321760
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
</TABLE>
15415 Katy Freeway
Houston, Texas
77094
(Address of principal executive offices)
(Zip Code)
(713) 492-5300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
As of September 30, 1996 Common stock, $.01 par value per share
68,286,529 shares
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DIAMOND OFFSHORE DRILLING, INC.
TABLE OF CONTENTS FOR FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PAGE NO.
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COVER PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DOCUMENT TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PART I. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . 11
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ITEM 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . . . . . 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . 19
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . 19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
--------------- ---------------
1996 1995
--------------- ---------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . $ 11,357 $ 10,306
Short-term investments . . . . . . . . . . . . . . . 6,827 5,041
Accounts receivable . . . . . . . . . . . . . . . . 135,008 74,496
Rig inventory and supplies . . . . . . . . . . . . . 30,678 15,330
Prepaid expenses and other . . . . . . . . . . . . . 11,460 10,601
--------------- ---------------
Total current assets . . . . . . . . . . 195,330 115,774
DRILLING AND OTHER PROPERTY AND EQUIPMENT, LESS
ACCUMULATED DEPRECIATION . . . . . . . . . . . . . 1,128,653 502,278
GOODWILL, NET OF AMORTIZATION . . . . . . . . . . . . . . 86,258 --
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . 3,778 --
--------------- ---------------
Total assets . . . . . . . . . . . . . . $ 1,414,019 $ 618,052
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . $ 46,216 $ 32,765
Accrued liabilities . . . . . . . . . . . . . . . . 35,331 19,486
--------------- ---------------
Total current liabilities . . . . . . . 81,547 52,251
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . 55,000 --
DEFERRED TAX LIABILITY . . . . . . . . . . . . . . . . . 134,268 72,907
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . 5,870 --
--------------- ---------------
Total liabilities . . . . . . . . . . . 276,685 125,158
--------------- ---------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock (par value $.01, 25,000,000 shares
authorized, none issued and outstanding) . . . . . -- --
Common stock (par value $.01, 200,000,000 shares
authorized, 68,286,529 and 50,000,000 shares
issued and outstanding at September 30, 1996 and
December 31, 1995, respectively) . . . . . . . . . 683 500
Additional paid-in capital . . . . . . . . . . . . . 1,219,416 665,107
Accumulated deficit . . . . . . . . . . . . . . . . (81,210) (171,444)
Cumulative translation adjustment . . . . . . . . . (1,555) (1,269)
--------------- ---------------
Total stockholders' equity . . . . . . . 1,137,334 492,894
--------------- ---------------
Total liabilities and stockholders' equity $ 1,414,019 $ 618,052
=============== ===============
</TABLE>
3
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DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
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<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- --------------------------
1996 1995 1996 1995
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 170,622 $ 91,716 $ 424,473 $ 238,582
OPERATING EXPENSES:
Contract drilling 94,355 63,828 242,109 185,260
General and administrative 4,109 2,979 10,661 9,453
Depreciation and amortization 21,597 13,361 52,062 41,425
Gain on sale of assets (6,959) (24) (10,189) (454)
------------ ----------- ------------ ------------
Total operating expenses 113,102 80,144 294,643 235,684
------------ ----------- ------------ ------------
OPERATING INCOME 57,520 11,572 129,830 2,898
OTHER INCOME (EXPENSE):
Interest expense -- (8,874) (104) (26,139)
Currency transaction gains (losses) (34) (133) 42 (179)
Other 443 438 1,075 1,263
------------ ----------- ------------ ------------
INCOME (LOSS) BEFORE INCOME TAX (EXPENSE) BENEFIT 57,929 3,003 130,843 (22,157)
INCOME TAX (EXPENSE) BENEFIT (19,449) (1,581) (40,609) 9,237
------------ ----------- ------------ ------------
NET INCOME (LOSS) $ 38,480 $ 1,422 $ 90,234 $ (12,920)
============ =========== ============ ============
NET INCOME PER SHARE $ 0.56 $ 1.50
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 68,282 60,179
============ ============
</TABLE>
4
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DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . . . . . . . . . $ 90,234 $ (12,920)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . 52,062 39,503
Gain on sale of assets . . . . . . . . . . . . . . . . . (10,189) (454)
Write-down of asset . . . . . . . . . . . . . . . . . . -- 1,922
Accrued interest converted to notes payable to Loews . . -- 26,123
Deferred tax provision (benefit) . . . . . . . . . . . . 34,773 (9,679)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . (27,509) (8,425)
Rig inventory and supplies and other current assets . . (2,082) (2,205)
Other assets, non-current . . . . . . . . . . . . . . . (1,566) --
Accounts payable and accrued liabilities . . . . . . . . 16,063 (5,842)
Other liabilities, non-current . . . . . . . . . . . . . 1,113 --
Other, net . . . . . . . . . . . . . . . . . . . . . . . (263) 266
---------------- ---------------
Net cash provided by operating activities . . . . . 152,636 28,289
---------------- ---------------
INVESTING ACTIVITIES:
Cash acquired in Arethusa merger . . . . . . . . . . . . 20,883 --
Capital expenditures . . . . . . . . . . . . . . . . . . (174,863) (34,653)
Proceeds from sale of assets . . . . . . . . . . . . . . 14,062 645
Change in short-term investments . . . . . . . . . . . . (1,786) 6
---------------- ---------------
Net cash used in investing activities . . . . . . . (141,704) (34,002)
FINANCING ACTIVITIES:
Net borrowings on revolving line of credit . . . . . . . 55,000 --
Repayment of debt assumed in Arethusa merger . . . . . . (67,477) --
Deferred financing costs . . . . . . . . . . . . . . . . (1,803) --
Proceeds from stock options exercised . . . . . . . . . . 4,399 --
Net repayments to Loews . . . . . . . . . . . . . . . . . -- (2,000)
---------------- ----------------
Net cash used in financing activities . . . . . . . (9,881) (2,000)
NET CHANGE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . 1,051 (7,713)
Cash and cash equivalents, beginning of period . . . . . 10,306 17,770
---------------- ---------------
Cash and cash equivalents, end of period . . . . . . . . $ 11,357 $ 10,057
================ ===============
</TABLE>
5
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DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The consolidated financial statements of Diamond Offshore Drilling, Inc.
and subsidiaries (the "Company") should be read in conjunction with the Annual
Report on Form 10-K for the year ended December 31, 1995 (File No. 1-13926).
Interim Financial Information
The accompanying consolidated financial statements 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 disclosures required by generally
accepted accounting principles for complete financial statements. The
consolidated financial information has not been audited but, in the opinion of
management, includes all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of the consolidated balance sheets,
statements of operations, and statements of cash flows at the dates and for the
periods indicated. Results of operations for interim periods are not
necessarily indicative of results of operations for the respective full years.
Cash and Cash Equivalents
All short-term, highly liquid investments that have an original maturity
of three months or less are considered cash equivalents.
In order to guarantee the Company's performance under drilling contracts
in Indonesia and India and rig availability for certain drilling contract bids,
the Company maintains deposits which are restricted as to withdrawal or usage.
As of September 30, 1996, the Company had $3.0 million in such restricted
accounts.
Supplementary Cash Flow Information
Non-cash financing activities for the nine months ended September 30, 1996
included $550.7 million for the issuance of 17.9 million shares of common stock
and the assumption of stock options for the purchase of 0.5 million shares in
connection with the merger between the Company and Arethusa (Off-Shore) Limited
("Arethusa"). Non-cash investing activities for the nine months ended
September 30, 1996 included $532.9 million of net assets acquired in the merger
with Arethusa (see Note 2).
Non-cash financing activities for the nine months ended September 30, 1995
included $26.1 million of interest expense accrued and included in long-term
debt and a $39.7 million capital contribution from Loews Corporation ("Loews").
Cash payments made for interest on long-term debt, including commitment
fees, and for U.S. income taxes for the nine months ended September 30, 1996
totaled $2.5 million and $1.4 million, respectively.
Drilling and Other Property and Equipment
For financial reporting purposes, depreciation is provided on the
straight-line method over the remaining estimated useful lives from the date
the asset is placed into service. The Company believes that certain offshore
drilling rigs, due to their upgrade and design capabilities and maintenance
history, have an
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operating life in excess of their depreciable life as originally assigned. For
this reason, a change in accounting estimate, effective January 1, 1996,
increased the estimated useful lives for certain classes of offshore drilling
rigs. As compared to the original estimate of useful lives, the effect of such
change reduced depreciation expense and increased net income for the quarter
ended September 30, 1996 by approximately $2.1 million and $1.4 million ($0.02
per share), respectively. For the nine months ended September 30, 1996, the
effect of such change reduced depreciation expense and increased net income by
approximately $6.4 million and $4.1 million ($0.07 per share), respectively.
The estimated useful lives of the Company's offshore drilling rigs, after the
change in estimate, range from 10 to 25 years.
Goodwill
Goodwill is amortized on a straight-line basis over 20 years.
Amortization charged to operating expense during the nine months ended
September 30, 1996 totaled $1.8 million.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those estimated.
Reclassifications
Certain amounts applicable to the prior periods have been reclassified to
conform to the classifications currently followed. Such reclassifications do
not affect earnings.
2. MERGER WITH ARETHUSA
On April 29, 1996, the Company acquired 100% of the stock of Arethusa.
Arethusa owned a fleet of 11 mobile offshore drilling rigs, operated two
additional mobile offshore drilling rigs pursuant to bareboat charters and
provided drilling services worldwide to international and government-controlled
oil and gas companies. The consideration consisted of the following (in
thousands):
Common stock issued to Arethusa shareholders ............... $ 539,296
Arethusa stock options assumed ............................. 11,381
---------
Total equity consideration ............................. $ 550,677
=========
The Company issued 17.9 million common shares to the Arethusa shareholders
based on an exchange ratio of .88 shares for each share of issued and
outstanding Arethusa common stock. The shares were valued for financial
reporting purposes at $30.14 based on a seven-day average of the closing price
of the Company's common stock at the time the merger was announced (December 7,
1995). In addition to equity consideration, the Company has incurred
approximately $10.9 million of acquisition costs associated with the merger.
The merger with Arethusa was accounted for as a purchase. The purchase
price included, at estimated fair value, current assets of $67.2 million,
drilling and other property and equipment of $505.5 million, and the assumption
of current liabilities of $12.6 million, other net long-term liabilities of
$3.9 million, and debt of $67.5 million. In addition, a deferred tax liability
of $26.1 million was recorded primarily for the difference in the basis for tax
and financial reporting purposes of the net assets acquired. The excess of the
purchase price over the estimated fair value of net assets acquired amounted to
approximately $88.1 million, which has been accounted for as goodwill and is
being amortized over 20 years using the straight-line method. This allocation
is based on preliminary estimates and may be revised
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at a later date. It is not expected that the final allocation of the purchase
price will result in any material difference (see Note 6).
The accompanying consolidated statements of operations reflect the
operating results of Arethusa since April 29, 1996, the effective date of the
merger. Pro forma consolidated operating results of the Company and Arethusa
for the nine months ended September 30, 1996 and 1995, assuming the acquisition
had been made as of January 1, 1996 and 1995, are summarized below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------
1996 1995
-------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Revenue ........................ $480,586 $ 329,956
Net income ..................... 97,730 236
Net income per share ........... 1.44 0.00
</TABLE>
The pro forma information for the nine months ended September 30, 1996 and
1995 includes adjustments for additional depreciation based on the fair market
value of the drilling and other property and equipment acquired and the
amortization of goodwill arising from the transaction. The pro forma
information for the nine months ended September 30, 1995 also includes
adjustments for (i) the acquisition of the Arethusa Yatzy, which occurred on
May 3, 1995, (ii) the sale of the Treasure Stawinner by Arethusa, which
occurred June 30, 1995, (iii) the dividend and capital distribution declared by
Arethusa on June 30, 1995 and paid July 28, 1995, (iv) the Company's initial
public offering and, in connection therewith, the use of the proceeds to repay
all of the Company's then outstanding indebtedness to Loews and to fund the
payment of a special dividend to Loews, and (v) interest expense for working
capital borrowings, and commitment and other fees, under a credit facility as
if each had occurred at the beginning of the period. The pro forma information
is not necessarily indicative of the results of operations had the transactions
been effected on the assumed dates.
3. DRILLING AND OTHER PROPERTY AND EQUIPMENT
Cost and accumulated depreciation of drilling and other property and
equipment are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
-------------------------------
1996 1995
-------------------------------
(IN THOUSANDS)
<S> <C> <C>
Drilling rigs and equipment..... $1,288,635 $689,438
Construction work in progress... 79,729 19,016
Land and buildings ............. 13,474 3,655
Office equipment and other ..... 9,001 6,300
-------------------------------
1,390,839 718,409
Less accumulated depreciation... (262,186) (216,131)
-------------------------------
Total................. $1,128,653 $502,278
===============================
</TABLE>
For the nine months ended September 30, 1996, the Company capitalized
interest cost of $2.5 million in construction work in progress with respect to
qualifying construction projects.
During the nine months ended September 30, 1996, the Company sold two of
its shallow water jack-up drilling rigs that had previously been stacked,
increasing net income by $6.4 million, or $0.11 per share. The Ocean Magallanes
was sold in May 1996 for approximately $4.2 million and generated an after-tax
gain during the second quarter of 1996 of $2.0 million, or $0.03 per share. The
Ocean Conquest was sold in July 1996 for approximately $9.0 million and
generated an after-tax gain during the third quarter of 1996 of $4.4
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million, or $0.07 per share.
4. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
-------------------------------
1996 1995
-------------------------------
(IN THOUSANDS)
<S> <C> <C>
Personal injury and other claims...... $19,228 $11,056
Payroll and benefits.................. 7,848 6,346
Taxes................................. 5,504 1,860
Other................................. 2,751 224
-------------------------------
Total....................... $35,331 $19,486
===============================
</TABLE>
5. LONG-TERM DEBT
In connection with the merger between the Company and Arethusa, the
Company assumed long-term debt (including the current portion) of $67.5 million
on two credit agreements with a group of banks. During May 1996, using cash
acquired in the merger supplemented by borrowings on the Company's $150.0
million revolving credit facility with a group of banks (the "Credit
Facility"), both Arethusa loans were repaid in full. Interest expense includes
interest for the period from the effective date of the merger to the date of
repayment of the loans and the payment of breakage and penalty charges.
The Credit Facility is a revolving line of credit for a five-year term
expiring in 2001 which provides a maximum credit commitment of $150.0 million.
The unused credit available under the Credit Facility at September 30, 1996 was
$95.0 million. Interest expense on borrowings under the Credit Facility are
capitalized to qualified construction projects (see Note 3). The weighted
average interest rate, including commitment and arrangement fees, was 8.7% for
the nine months ended September 30, 1996. The Company is required, under the
Credit Facility, to maintain certain consolidated financial ratios and the
Credit Facility places certain limitations on dividends and similar payments.
As of September 30, 1996, the Company was in compliance with each of these
covenants.
6. CONTINGENCIES
The survivors of a deceased employee of a subsidiary of the Company,
Diamond M Onshore, Inc., have sued such subsidiary in Duval County, Texas, for
damages as a result of the death of the employee. The plaintiffs have obtained
a judgment in the trial court for $15.7 million plus post-judgment interest.
The Company intends to vigorously prosecute an appeal of the judgment. The
Company has received notices from certain of its insurance underwriters
reserving their rights to deny coverage on the Company's insurance policies in
excess of $2.0 million for damages resulting from such lawsuit. Management
believes that the Company has complied with all conditions to coverage and
expects that it will ultimately be determined that the Company has insurance
coverage for final unappealable damages, if any, in the case. The Company has
not established a liability for such claim at this time.
A subsidiary of the Company is defending and indemnifying Zapata Off-Shore
Company and Zapata Corporation, pursuant to a contractual defense and
indemnification agreement, in a suit for tortious interference with contract
and conspiracy to tortiously interfere with contract. The Company intends to
vigorously defend the suit and no liability has been established at this time.
Various other claims have been filed against the Company in the ordinary
course of business, particularly claims alleging personal injuries. Management
believes that the Company has recorded
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adequate reserves for any liabilities that may reasonably be expected to result
from these claims. In the opinion of management, no pending or threatened
claims, actions or proceedings against the Company are expected to have a
material adverse effect on the Company's financial position or results of
operations.
7. INCOME TAXES
The Company's income tax expense for the quarter and nine months ended
September 30, 1996 differs from that expected using statutory tax rates
primarily because of net income for which income tax expense is provided at
other than U.S. rates.
For the quarter ended September 30, 1995, the Company's tax expense was
higher than that using statutory rates primarily due to losses in foreign
jurisdictions for which no tax benefit was recognized. The Company's tax
benefit was higher than that using statutory rates for the nine months ended
September 30, 1995 primarily due to profits in foreign jurisdictions where the
Company's tax liability was minimal.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Company's Consolidated Financial Statements (including the Notes thereto)
included elsewhere herein.
GENERAL
Effective April 29, 1996, the merger between the Company and Arethusa
(Off-Shore) Limited ("Arethusa") was completed (the "Merger"). Arethusa owned
a fleet of 11 mobile offshore drilling rigs, operated two additional mobile
offshore drilling rigs pursuant to bareboat charters, and provided drilling
services worldwide to international and government-controlled oil and gas
companies. Because the Merger was accounted for as a purchase for financial
reporting purposes, results of operations include those of Arethusa from the
effective date of the Merger. See Note 2 to the Company's Consolidated
Financial Statements.
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RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Comparative data relating to the Company's revenues and operating
expenses by equipment type are listed below (eliminations offset dayrate
revenues earned when the Company's rigs are utilized in its turnkey operations
and intercompany expenses charged to rig operations). Certain amounts
applicable to the prior periods have been reclassified to conform to the
classifications currently followed. Such reclassifications do not affect
earnings.
During September 1996, the Company completed its major upgrade of the
Ocean Quest, expanding the rig to have fourth-generation capabilities. Upon
completion, the Ocean Quest is included in Fourth-Generation Semisubmersibles
for discussion purposes (prior period information will continue to include the
rig in Other Semisubmersibles). The Company's drillship, Ocean Clipper I, is
included in Other Semisubmersibles for discussion purposes.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
----------------------- INCREASE/
1996 1995 (DECREASE)
------------------------------------
(in thousands)
<S> <C> <C> <C>
REVENUES
Fourth-Generation Semisubmersibles . . . . . $ 28,779 $ 19,358 $ 9,421
Other Semisubmersibles . . . . . . . . . . . 99,263 45,481 53,782
Jack-ups . . . . . . . . . . . . . . . . . . 35,001 17,568 17,433
Turnkey . . . . . . . . . . . . . . . . . . 8,702 8,319 383
Land . . . . . . . . . . . . . . . . . . . . 5,838 5,081 757
Other . . . . . . . . . . . . . . . . . . . -- (67) 67
Eliminations . . . . . . . . . . . . . . . . (6,961) (4,024) (2,937)
---------- ---------- ----------
Total Revenues $ 170,622 $ 91,716 $ 78,906
========== ========== ==========
CONTRACT DRILLING EXPENSE
Fourth-Generation Semisubmersibles . . . . . $ 9,000 $ 8,303 $ 697
Other Semisubmersibles . . . . . . . . . . . 56,456 32,524 23,932
Jack-ups . . . . . . . . . . . . . . . . . . 25,573 15,156 10,417
Turnkey . . . . . . . . . . . . . . . . . . 7,476 7,415 61
Land . . . . . . . . . . . . . . . . . . . . 4,582 4,312 270
Other . . . . . . . . . . . . . . . . . . . (963) 627 (1,590)
Eliminations . . . . . . . . . . . . . . . . (7,769) (4,509) (3,260)
---------- ---------- ----------
Total Contract Drilling Expense . . $ 94,355 $ 63,828 $ 30,527
========== ========== ==========
OPERATING INCOME (LOSS)
Fourth-Generation Semisubmersibles . . . . . $ 19,779 $ 11,055 $ 8,724
Other Semisubmersibles . . . . . . . . . . . 42,807 12,957 29,850
Jack-ups . . . . . . . . . . . . . . . . . . 9,428 2,412 7,016
Turnkey . . . . . . . . . . . . . . . . . . 1,226 904 322
Land . . . . . . . . . . . . . . . . . . . . 1,256 769 487
Other . . . . . . . . . . . . . . . . . . . 963 (694) 1,657
Eliminations . . . . . . . . . . . . . . . . 808 485 323
General and Administrative Expense . . . . . (4,109) (2,979) (1,130)
Depreciation and Amortization Expense . . . (21,597) (13,361) (8,236)
Gain on Sale of Assets . . . . . . . . . . . 6,959 24 6,935
---------- ---------- ----------
Total Operating Income $ 57,520 $ 11,572 $ 45,948
========== ========== ==========
</TABLE>
Revenues. The $9.4 million increase in revenues from fourth-generation
semisubmersibles resulted primarily from improvements in dayrates ($8.5
million) and increases in utilization ($0.9 million). The
12
<PAGE> 13
$53.8 million increase in revenues from other semisubmersibles was primarily the
result of (i) $32.9 million of revenue generated by the eight semisubmersibles
acquired in the Merger, (ii) revenue from three rigs which were out of service
while modifications were being performed during the quarter ended September 30,
1995 and (iii) revenue from one rig which was cold stacked during the same
period of the prior year. In addition, improvements in dayrates, primarily in
the Gulf of Mexico and the North Sea, contributed an increase in revenue of
$11.6 million. The $17.4 million increase in revenues from jack-ups reflect
$10.3 million generated by the five jack-ups acquired in the Merger and from
improved dayrates.
Contract Drilling Expense. Contract drilling expense for
fourth-generation semisubmersibles was relatively unchanged from the third
quarter of the prior year. The $23.9 million increase in expenses for other
semisubmersibles resulted from $14.5 million associated with rigs acquired in
the Merger, increased expenses for shipyard repairs on one rig, and additional
operating expenses incurred on a semisubmersible in the Gulf of Mexico which
was cold stacked in the comparable period of the prior year. The $10.4 million
increase in expenses for jack-ups resulted primarily from the additional rigs
acquired in the Merger. Other expenses decreased $1.6 million due to
collections from a settlement in connection with a lawsuit and collections on
accounts written off in the prior year used to reduce contract drilling
expense. A reduction in maintenance and repairs on spare equipment also
decreased contract drilling expense as compared to the prior year.
General and Administrative Expense. General and administrative expense of
$4.1 million for the quarter ended September 30, 1996 increased due to the
Merger; however, these increases were partially offset by cost savings in rent
due to the February 1996 purchase of the building in which the Company has its
corporate headquarters. In addition, approximately $0.7 million of general and
administrative expense associated with construction on the Ocean Quest, Ocean
Star, and Ocean Clipper I was capitalized to these projects during the third
quarter of 1996.
Depreciation and Amortization Expense. Depreciation and amortization
expense of $21.6 million for the quarter ended September 30, 1996 increased
primarily due to additional expense for (i) the eight semisubmersibles and
three jack-up drilling rigs acquired in the Merger, (ii) goodwill amortization
expense associated with the Merger, (iii) three rig upgrades completed in the
third and fourth quarters of 1995, and (iv) capital expenditures associated
with the Company's continuing rig enhancement program. Partially offsetting
these increases was a change in accounting estimate to increase the estimated
useful lives for certain classes of rigs. This change reduced depreciation
expense by approximately $2.1 million, as compared to the quarter ended
September 30, 1995.
Gain on Sale of Assets. Gain on sale of assets for the quarter ended
September 30, 1996 consists primarily of a gain on the sale of the Ocean
Conquest, a shallow water jack-up drilling rig located in the Gulf of Mexico.
Interest Expense. Interest expense of $1.2 million incurred during the
quarter ended September 30, 1996 was capitalized to qualified construction
projects on the Ocean Quest, Ocean Star, and Ocean Clipper I. See Note 5 to
the Company's Consolidated Financial Statements. The decrease from $8.9
million for the same period of the prior year was attributable to a reduction
in outstanding indebtedness resulting from the repayment of the Company's loan
from Loews Corporation ("Loews") in connection with the initial public offering
in October 1995.
Income Tax (Expense) Benefit. The income tax expense for the quarter ended
September 30, 1996 was $19.4 million as compared to $1.6 million for the
comparable period of the prior year. This change resulted primarily from the
increase of $54.9 million in the Company's income before income tax expense.
In addition, during the quarter ended September 30, 1995, the Company's tax
expense reflects the effects of losses in foreign jurisdictions for which no
income tax benefit was recognized.
Net Income (Loss). Net income for the quarter ended September 30, 1996
increased $37.1 million to $38.5 million, as compared to $1.4 million for the
comparable period of the prior year. The increase
13
<PAGE> 14
resulted primarily from an increase in operating income of $45.9 million and a
decrease in interest expense of $8.9 million, partially offset by an increase in
income tax expense of $17.9 million.
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Comparative data relating to the Company's revenues and operating
expenses by equipment type are listed below (eliminations offset dayrate
revenues earned when the Company's rigs are utilized in its turnkey operations
and intercompany expenses charged to rig operations). Certain amounts
applicable to the prior periods have been reclassified to conform to the
classifications currently followed. Such reclassifications do not affect
earnings.
During September 1996, the Company completed its major upgrade of the
Ocean Quest, expanding the rig to have fourth-generation capabilities. Upon
completion, the Ocean Quest is included in Fourth-Generation Semisubmersibles
for discussion purposes (prior period information will continue to include the
rig in Other Semisubmersibles). The Company's drillship, Ocean Clipper I, is
included in Other Semisubmersibles for discussion purposes.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------- INCREASE/
1996 1995 (Decrease)
------------------------------------
(in thousands)
<S> <C> <C> <C>
REVENUES
Fourth-Generation Semisubmersibles . . . . . $ 76,622 $ 46,656 $ 29,966
Other Semisubmersibles . . . . . . . . . . . 237,206 121,615 115,591
Jack-ups . . . . . . . . . . . . . . . . . . 83,235 49,939 33,296
Turnkey . . . . . . . . . . . . . . . . . . 27,219 11,866 15,353
Land . . . . . . . . . . . . . . . . . . . . 16,380 14,746 1,634
Other . . . . . . . . . . . . . . . . . . . -- -- --
Eliminations . . . . . . . . . . . . . . . . (16,189) (6,240) (9,949)
---------- ---------- ----------
Total Revenues $ 424,473 $ 238,582 $ 185,891
========== ========== ==========
CONTRACT DRILLING EXPENSE
Fourth-Generation Semisubmersibles . . . . . $ 25,860 $ 25,790 $ 70
Other Semisubmersibles . . . . . . . . . . . 137,311 94,759 42,552
Jack-ups . . . . . . . . . . . . . . . . . . 59,040 46,061 12,979
Turnkey . . . . . . . . . . . . . . . . . . 25,533 12,334 13,199
Land . . . . . . . . . . . . . . . . . . . . 13,748 12,877 871
Other . . . . . . . . . . . . . . . . . . . (1,174) 1,116 (2,290)
Eliminations . . . . . . . . . . . . . . . . (18,209) (7,677) (10,532)
---------- ---------- ----------
Total Contract Drilling Expense . . $ 242,109 $ 185,260 $ 56,849
========== ========== ==========
OPERATING INCOME (LOSS)
Fourth-Generation Semisubmersibles . . . . . $ 50,762 $ 20,866 $ 29,896
Other Semisubmersibles . . . . . . . . . . . 99,895 26,856 73,039
Jack-ups . . . . . . . . . . . . . . . . . . 24,195 3,878 20,317
Turnkey . . . . . . . . . . . . . . . . . . 1,686 (468) 2,154
Land . . . . . . . . . . . . . . . . . . . . 2,632 1,869 763
Other . . . . . . . . . . . . . . . . . . . 1,174 (1,116) 2,290
Eliminations . . . . . . . . . . . . . . . . 2,020 1,437 583
General and Administrative Expense . . . . . (10,661) (9,453) (1,208)
Depreciation and Amortization Expense . . . (52,062) (41,425) (10,637)
Gain on Sale of Assets . . . . . . . . . . . 10,189 454 9,735
---------- ---------- ----------
Total Operating Income . . . . . . $ 129,830 $ 2,898 $ 126,932
========== ========== ==========
</TABLE>
14
<PAGE> 15
Revenues. The $30.0 million increase in revenues from fourth-generation
semisubmersibles resulted from improvements in dayrates ($22.1 million) and
increases in utilization ($7.8 million). The improvement in utilization for
1996 was partially attributable to the relocation of two fourth-generation rigs
during the comparable period of the prior year, reducing the days worked for
these rigs during that period. The $115.6 million increase in revenues from
other semisubmersibles was primarily attributable to $57.1 million of revenues
from the eight semisubmersibles acquired in the Merger and increases in
dayrates in both the North Sea and the Gulf of Mexico. The $33.3 million
increase in revenues from jack-ups resulted primarily from revenues associated
with rigs acquired in the Merger and improvements in dayrates in the Gulf of
Mexico. The $15.4 million increase in turnkey revenues resulted from turnkey
projects of greater magnitude and overall project management services completed
during 1996 as compared to those completed during the same period of the prior
year.
Contract Drilling Expense. Contract drilling expense for
fourth-generation semisubmersibles was relatively unchanged from the first nine
months of the prior year. The $42.6 million increase for other
semisubmersibles resulted from the additional rigs acquired in the Merger,
increased expenses for shipyard repairs on three rigs, and increased expenses
associated with a rig working during the current year but cold stacked during
the comparable period of the prior year. The $13.0 million increase in jack-up
expense resulted primarily from the rigs acquired in the Merger, partially
offset by decreased operating expenses for two rigs which were cold stacked
during 1996. The $13.2 million increase in turnkey expense resulted from more
extensive turnkey wells drilled, project management services provided and cost
overruns on one turnkey well during the current year. Other expenses decreased
$2.3 million due to collections from a settlement in connection with a lawsuit
and collections on accounts written off in the prior year used to reduce
contract drilling expense. A reduction in maintenance and repairs on spare
equipment also decreased contract drilling expense as compared to the prior
year.
General and Administrative Expense. General and administrative expense of
$10.7 million for the nine months ended September 30, 1996 increased due to the
Merger; however, these increases were partially offset by cost savings in rent
due to the February 1996 purchase of the building in which the Company has its
corporate headquarters. In addition, approximately $1.1 million of general and
administrative expense associated with construction on the Ocean Quest, Ocean
Star, and Ocean Clipper I was capitalized to these projects during the third
quarter of 1996.
Depreciation and Amortization Expense. Depreciation and amortization
expense of $52.1 million for the nine months ended September 30, 1996 increased
primarily due to additional expense for (i) the eight semisubmersibles and
three jack-up drilling rigs acquired in the Merger, (ii) goodwill amortization
expense associated with the Merger, (iii) three rig upgrades completed in the
third and fourth quarters of 1995, and (iv) capital expenditures associated
with the Company's continuing rig enhancement program. Partially offsetting
these increases was a change in accounting estimate to increase the estimated
useful lives for certain classes of rigs. This change reduced depreciation
expense by approximately $6.4 million, as compared to the nine months ended
September 30, 1995.
Gain on Sale of Assets. Gain on sale of assets for the nine months ended
September 30, 1996 consists primarily of gains on the sale of two of the
Company's shallow water jack-up drilling rigs, the Ocean Magallanes and the
Ocean Conquest.
Interest Expense. Interest expense of $0.1 million for the nine months
ended September 30, 1996 consists of interest costs incurred of $2.6 million,
net of capitalized interest of $2.5 million. See Note 5 to the Company's
Consolidated Financial Statements. The decrease from $26.1 million for the
same period of the prior year was attributable to a reduction in outstanding
indebtedness resulting from the repayment of the Company's loan from Loews in
connection with the initial public offering in October 1995.
Income Tax (Expense) Benefit. The income tax (expense) benefit for the
nine months ended September 30, 1996 was $(40.6) million as compared to $9.2
million for the comparable period of the prior year. This change resulted
primarily from the increase of $153.0 million in the Company's income before
15
<PAGE> 16
income tax expense. In addition, during the nine months ended September 30,
1995, the Company's tax benefit reflects the effects of profits in foreign
jurisdictions where the Company's tax liability was minimal.
Net Income (Loss). Net income (loss) for the nine months ended September
30, 1996 increased $103.1 million to $90.2 million, as compared to $(12.9)
million for the comparable period of the prior year. The increase resulted
primarily from an increase in operating income of $126.9 million and a decrease
in interest expense of $26.0 million, partially offset by an increase in income
tax expense of $49.8 million.
OUTLOOK
The deep water and harsh environment markets for semisubmersible rigs
continue to experience improved demand and higher dayrates due in part to the
increasing impact of technological advances, including 3-D seismic, horizontal
drilling, and subsea completion procedures. Both the Gulf of Mexico and the
North Sea semisubmersible markets have experienced increased utilization and
significantly higher dayrates during 1996. Currently, average operating
dayrates earned by the Company's semisubmersible fleet are approximately 37%
higher than those earned during the same period of 1995. In addition, the
Company's semisubmersible rigs marketed and available for contract are
essentially working at full utilization. Consequently, many customers are
contracting rigs serving these markets under term contracts (as opposed to
contracts let on a single well or well-to-well basis). Of the Company's 30
semisubmersibles, 24 are committed under term contracts with renewal
opportunities beginning in late 1996.
The Company continues to enhance its fleet to meet customer demand for
diverse drilling capabilities, including those required for deep water and harsh
environment operations. During September 1996, the Company completed its major
upgrade of the Ocean Quest and the rig began its three-year commitment. The rig,
which had been cold stacked in the Gulf of Mexico, now has fourth-generation
capabilities, including variable deckload of 5,000 long tons, a mooring system
to meet 3,500 foot water depth requirements, enhanced subsea equipment, and
upgraded mud pit capacity. The Ocean Victory, previously stacked in the North
Sea, arrived in the Gulf of Mexico in September 1996 and began modifications in
connection with its three-year deep water drilling program anticipated to begin
during the fourth quarter of 1997. In addition, upgrades continue on the Ocean
Star and Ocean Clipper I which are anticipated to be completed during the first
and second quarters of 1997, respectively.
The market for jack-up rigs continues to strengthen. Average operating
dayrates earned by the Company's jack-up fleet are approximately 29% higher
than those earned during the same period of 1995. The Company's marketed
jack-ups in the Gulf of Mexico are currently experiencing full utilization,
although contracts generally remain on a short-term or well-to-well basis. The
Company considers its upcoming contract expirations for these rigs typical of
prevailing market conditions. The Company's four international jack-ups are
contracted for terms expiring from May 1997 to February 1998.
Historically, the offshore contract drilling market has been highly
competitive and cyclical, and the Company cannot predict the extent to which
current conditions will continue.
LIQUIDITY
Net cash provided by operating activities for the nine months ended
September 30, 1996 increased by $124.3 million to $152.6 million, as compared
to $28.3 million for the comparable period of the prior year. This increase
was attributable to a $103.1 million increase in net income and a $44.5 million
increase in the deferred tax provision for 1996, partially offset by the
elimination of accrued interest on notes payable to Loews, which totaled $26.1
million for the nine months ended September 30, 1995. Cash used in investing
activities increased $107.7 million primarily due to capital expenditures for
major upgrades during 1996 of $154.6 million, partially offset by cash acquired
in the Merger and proceeds from the sale of assets. Cash used in financing
activities for the nine months ended September 30, 1996 increased $7.9 million
primarily
16
<PAGE> 17
due to repayment of debt assumed in the Merger, partially offset by net
borrowings of $55.0 million on the Credit Facility as compared to $2.0 million
of net repayments on the Company's indebtedness to Loews during the same period
of the prior year.
The Company uses funds available under a revolving credit facility with a
group of banks (the "Credit Facility"), together with cash flow from
operations, to fund its capital expenditure and working capital requirements.
The Credit Facility is a revolving line of credit for a five-year term
providing a maximum credit commitment of $150.0 million until February 1998, at
which time and at the end of each six-month period thereafter, the commitment
will decrease by $12.5 million to a final maximum credit commitment of $75.0
million during the last six months. Borrowings under the Credit Facility bear
interest, at the Company's option, at a per annum rate equal to a base rate
(equal to the greater of (i) the prime rate announced by Bankers Trust Company
or (ii) the Federal Funds rate plus .50%) plus .25% or the Eurodollar rate plus
1.25%. The Company is required to pay a commitment fee of .375% on the unused
available portion of the maximum credit commitment. Borrowings are secured by
security interests in certain of the Company's assets. The Credit Facility
also contains covenants that limit the amount of total consolidated debt,
require the maintenance of certain consolidated financial ratios and limit
dividends and similar payments. As of September 30, 1996, the Company was in
compliance with each of these covenants.
It is anticipated that the Credit Facility will be used primarily to fund
rig upgrades and similar capital expenditure requirements. In management's
opinion, the Company's cash generated from operations and borrowings available
under its Credit Facility are sufficient to meet its anticipated short and
long-term liquidity needs, including its capital expenditure requirements.
CAPITAL RESOURCES
Cash requirements for capital commitments result from rig upgrades to
meet specific customer requirements and from the Company's continuing rig
enhancement program, including top-drive drilling system installations and
water depth and drilling capability upgrades. It is management's opinion that
significant improvements in operating cash flow resulting from current
conditions of improved dayrates and the increasing number of term contracts for
rigs in certain markets, in conjunction with borrowings under the Credit
Facility, will be sufficient to meet these capital requirements.
The Company expects to spend approximately $243.5 million, including
interest expense to be capitalized, during 1996 for rig upgrades in connection
with contract requirements. Expenditures budgeted for upgrades of the Ocean
Quest, Ocean Star and Ocean Clipper I total $157.6 million. Also included in
the Company's major upgrade budget is $22.3 million to increase the water depth
capability to 3,000 feet on the Ocean Winner (formerly the Arethusa Neptune)
and $17.7 million for 1996 expenditures to upgrade the Ocean Victory for deep
water drilling in the Gulf of Mexico. During the nine months ended September
30, 1996, $154.6 million was expended on these projects. Because these projects
are accompanied by term contracts at favorable dayrates, the expenditures are,
in the Company's opinion, financially justified. The Company expects to
evaluate other projects as opportunities arise.
The Company has also budgeted $60.3 million for 1996 capital expenditures
associated with its continuing rig enhancement program. Through September 30,
1996, $20.3 million has been expended on this program.
The Company is analyzing financing alternatives that may be available to
it in the public or private capital markets. Proceeds of any such financing
transactions may be used for repayment of higher cost debt, to fund rig
upgrades or acquisitions or for other corporate purposes. The Company' s
ability to effect any such financings will be dependent on its historical
results of operations, its current financial condition and other factors beyond
the Company's control.
17
<PAGE> 18
Also, from time to time, the Company reviews acquisition opportunities,
although the Company has no current plans to purchase or otherwise acquire
additional rigs.
OTHER
Pending Disposition of Assets. In November 1996, the Company signed a
letter of intent to sell all of the operational assets of Diamond M Onshore,
Inc., a wholly-owned subsidiary of the Company to DI Industries, Inc. for an
anticipated purchase price between $24 million and $26 million in cash. The
assets to be sold consist of ten land drilling rigs, all of which are currently
operating, 18 trucks, a yard facility in Alice, Texas and various other
equipment. The transaction, which is subject to the negotiating of a definitive
agreement and obtaining regulatory approval, is anticipated to close during the
fourth quarter of 1996.
Currency Risk. Certain of the Company's subsidiaries use the local
currency in the country where they conduct operations as their functional
currency. Currency environments in which the Company has material business
operations include the U.K., Australia and Brazil. The Company generally
attempts to minimize its currency exchange risk by seeking international
contracts payable in local currency in amounts equal to the Company's estimated
operating costs payable in local currency and in U.S. dollars for the balance
of the contract. Because of this strategy, the Company has minimized its
unhedged net asset or liability positions denominated in local currencies and
has not experienced significant gains or losses associated with changes in
currency exchange rates. However, contracts presently covering three of the
Company's four rigs operating in the U.K. sector of the North Sea are payable
in U.S. dollars. The Company has not hedged its exposure to changes in the
exchange rate between U.S. dollars and pounds sterling for operating costs
payable in pounds sterling, although it may seek to do so in the future.
Currency translation adjustments are accumulated in a separate section of
stockholders' equity. However, when the Company ceases its operations in a
currency environment, the accumulated adjustments are recognized currently in
results of operations. Translation gains and losses for the Company's
operations in Brazil have been recognized currently due to the
hyperinflationary status of this environment. The effect on results of
operations has not been material and is not expected to have a significant
effect in the future due to the recent stabilization of currency rates in
Brazil.
18
<PAGE> 19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Brown Services, Inc. and KOS Industries, Inc. v. Michael D. Brown, BSI
International, Inc., Robert Brown, Robert Furlough, Power House International,
Inc., Zapata Off-Shore Company and Zapata Corporation; No. 92-05691 in the
334th Judicial District Court of Harris County, Texas, filed February 7, 1992.
Plaintiffs have sued Zapata Off-Shore Company and Zapata Corporation (the
"Zapata Defendants") for tortious interference with contract and conspiracy to
tortiously interfere with contract. Plaintiffs seek $14.0 million in actual
damages and unspecified punitive damages, plus costs of court, interest and
attorney's fees. A subsidiary of the Company is defending and indemnifying the
Zapata Defendants pursuant to a contractual defense and indemnification
agreement. The Company believes the Zapata Defendants have adequate defenses
and intends to vigorously defend their position.
The Company and its subsidiaries are named defendants in certain other
lawsuits and are involved from time to time as parties to governmental
proceedings, all arising in the ordinary course of business. For a description
of one such lawsuit, see Note 6 to the Company's Consolidated Financial
Statements included in this Report. Although the outcome of lawsuits or other
proceedings involving the Company and its subsidiaries cannot be predicted with
certainty and the amount of any liability that could arise with respect to such
lawsuits or other proceedings cannot be predicted accurately, management does
not expect these matters to have a material adverse effect on the financial
position or results of operations of the Company.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K.
None.
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DIAMOND OFFSHORE DRILLING, INC.
(Registrant)
Date 11-Nov-1996 By: \s\ Lawrence R. Dickerson
------------- ----------------------------------
Lawrence R. Dickerson
Senior Vice President and Chief Financial Officer
Date 11-Nov-1996 \s\ Gary T. Krenek
------------- -------------------------------------------------
Gary T. Krenek
Controller and Principal Accounting Officer
20
<PAGE> 21
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's financial statements and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 11,357
<SECURITIES> 6,827
<RECEIVABLES> 135,008
<ALLOWANCES> 0
<INVENTORY> 30,678
<CURRENT-ASSETS> 195,330
<PP&E> 1,390,839
<DEPRECIATION> 262,186
<TOTAL-ASSETS> 1,414,019
<CURRENT-LIABILITIES> 81,547
<BONDS> 55,000
0
0
<COMMON> 683
<OTHER-SE> 1,136,651
<TOTAL-LIABILITY-AND-EQUITY> 1,414,019
<SALES> 0
<TOTAL-REVENUES> 424,473
<CGS> 0
<TOTAL-COSTS> 242,109<F1>
<OTHER-EXPENSES> 52,534<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104
<INCOME-PRETAX> 130,843
<INCOME-TAX> 40,609
<INCOME-CONTINUING> 90,234
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90,234
<EPS-PRIMARY> 1.50
<EPS-DILUTED> 0
<FN>
<F1>Includes contract drilling expenses only.
<F2>Includes other operating expenses.
</FN>
</TABLE>
