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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
________________________________
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
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 1-8097
ENSCO INTERNATIONAL INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 76-0232579
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2700 Fountain Place
1445 Ross Avenue
Dallas, Texas 75202-2792
(Address of principal executive offices)
Registrant's telephone number, including area code: (214) 922-1500
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ----------------------------- -----------------------------------------
Common Stock, par value $.10 New York Stock Exchange
Preferred Share Purchase Right New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
As of February 20, 1996, 60,656,735 shares of the registrant's common stock
were outstanding. The aggregate market value of the common stock (based
upon the closing price on the New York Stock Exchange on February 20, 1996
of $26.375) of ENSCO International Incorporated held by nonaffiliates of
the registrant at that date was approximately $1,132,454,065.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the Company's definitive proxy statement, which
involves the election of directors and is to be filed under the Securities
Exchange Act of 1934 within 120 days of the end of the Company's fiscal
year on December 31, 1995, are incorporated by reference into Part III
hereof. Except for those portions specifically incorporated by reference
herein, such document shall not be deemed to be filed with the Commission
as part of this Form 10-K.
TABLE OF CONTENTS
PAGE
----
PART ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . 1
I Overview and Operating Strategy . . . . . . . . . 1
Recent Events . . . . . . . . . . . . . . . . . . 1
Contract Drilling Operations . . . . . . . . . . 1
Marine Transportation Operations . . . . . . . . 2
Segment Information . . . . . . . . . . . . . . . 3
Major Customers . . . . . . . . . . . . . . . . . 3
Industry Conditions . . . . . . . . . . . . . . . 4
Governmental Regulation . . . . . . . . . . . . . 5
Environmental Matters . . . . . . . . . . . . . . 5
Operational Risks and Insurance . . . . . . . . . 5
International Operations . . . . . . . . . . . . 5
Executive Officers of the Registrant . . . . . . 6
Employees . . . . . . . . . . . . . . . . . . . . 7
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . 8
Contract Drilling . . . . . . . . . . . . . . . . 8
Marine Transportation . . . . . . . . . . . . . . 9
Other Property . . . . . . . . . . . . . . . . . 10
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS . . . . . . . . . . . . . . . . . . . . . 10
- --------------------------------------------------------------------
PART ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
II STOCKHOLDER MATTERS . . . . . . . . . . . . . . . 11
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . 13
Business Environment . . . . . . . . . . . . . . 13
Results of Operations . . . . . . . . . . . . . . 14
Liquidity and Capital Resources . . . . . . . . . 20
Other Matters . . . . . . . . . . . . . . . . . . 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . 23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . 45
- --------------------------------------------------------------------
PART ITEMS 10-13
III DIRECTORS AND EXECUTIVE OFFICERS, EXECUTIVE
COMPENSATION, SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT, AND CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . 45
- --------------------------------------------------------------------
PART ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
IV REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 46
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 51
PART I
Item 1. Business
OVERVIEW AND OPERATING STRATEGY
ENSCO International Incorporated ("ENSCO" or the "Company") is an
international offshore contract drilling company that also provides marine
transportation services in the U.S. Gulf of Mexico. The Company's
compliment of offshore drilling rigs includes 24 jackup rigs and 10 barge
drilling rigs, and the Company's marine transportation fleet consists of 37
vessels. The Company's operations are integral to the exploration,
development and production of oil and gas.
Since 1987, the Company has pursued a strategy of building its fleet of
offshore drilling rigs. This strategy was exemplified by the Company's
acquisition of the remainder of Penrod Holding Corporation ("Penrod") in
August 1993 and the expansion of the Company's Venezuelan rig fleet during
1993 and 1994 with the delivery of four new barge drilling rigs in each
year. The Company also added three harsh environment jackup rigs to its
North Sea fleet, two in 1994 and one in 1995.
With the Company's increasing emphasis on offshore markets, the Company has
disposed of businesses that are not offshore oriented or that management
believed would not meet the Company's standards for financial performance.
Accordingly, in 1993 the Company's supply business was sold, in 1994 the
Company sold substantially all of its land rigs and in 1995 the Company
sold its technical services business.
The Company was formed as a Texas corporation in 1975 and was
reincorporated in Delaware in 1987. At the Company's Annual Meeting of
Stockholders held on May 23, 1995, the stockholders approved the change in
the name of the Company from Energy Service Company, Inc. to ENSCO
International Incorporated. The Company's principal office is located at
2700 Fountain Place, 1445 Ross Avenue, Dallas, Texas, 75202-2792 and its
telephone number is (214) 922-1500.
RECENT EVENTS
On January 25, 1996, the Company entered into a letter of intent with DUAL
DRILLING COMPANY ("Dual") under which the Company would acquire Dual,
subject to certain conditions. Dual operates a fleet of 20 offshore
drilling rigs, including 10 jackup rigs and 10 self-contained platform
rigs. Twelve of Dual's rigs are currently located in the U.S., with three
jackup rigs and seven platform rigs located in the U.S. Gulf of Mexico and
two platform rigs off the coast of California. The remainder of the fleet
operates in international waters, with rigs currently located offshore
India, Mexico, Qatar, Indonesia and China. Under the proposed transaction,
Dual's common stockholders would receive 0.625 shares of the Company's
common stock for each share of Dual common stock, which would result in the
issuance of approximately 9.9 million shares of the Company's common stock.
The Company expects to account for the combination as a purchase
acquisition. The transaction is subject to execution of definitive
agreements, approval by the stockholders of Dual and requisite governmental
and other approvals. Subject to the satisfaction of these conditions,
closing of the transaction is expected before June 30, 1996.
CONTRACT DRILLING OPERATIONS
The Company's contract drilling operations are conducted by a number of
wholly owned subsidiaries ("the Subsidiaries"). The Subsidiaries engage in
the drilling of oil and gas wells in domestic and international markets
under contracts with major and independent oil companies. The Company
currently owns 24 jackup drilling rigs of which 18 are located in the U.S.
Gulf of Mexico and six are in the North Sea. The Company also conducts
contract drilling operations through its 85% ownership interest in ENSCO
Drilling (Caribbean), Inc. ("Caribbean"). Caribbean and its subsidiary own
ten barge drilling rigs on Lake Maracaibo, Venezuela.
The Company's contract drilling services and equipment are used in
connection with the process of drilling and completing oil and gas wells.
Demand for the Company's drilling services is based upon many factors over
which the Company has no control, including the market price of oil and
gas, the stability of such prices, the production levels and other
activities of OPEC and other oil and gas producers, the regional supply and
demand for natural gas, the level of worldwide economic activity and the
long-term effect of worldwide energy conservation measures. These factors,
in turn, will affect the level of drilling and production activity.
The drilling services provided by the Company are conducted on a contract
basis. The Company generally provides drilling services on a "daywork"
basis. Under daywork contracts, the Company receives a fixed amount per
day for drilling the well and the customer bears a major portion of the
out-of-pocket costs of drilling. The customer may pay the cost of moving
the equipment to the job site and assembling and dismantling the equipment.
In some cases, the Company provides drilling services on a daywork contract
basis along with "well management" services which provide additional
incentive compensation to the Company for completion of drilling activity
ahead of budgeted targets set by the customer.
During the past several years, contracts have typically been short-term,
particularly in the U.S. Accordingly, the Subsidiaries have had no
material backlog of contracts for their drilling services in recent years.
However, due to extension clauses included in the contracts, approximately
45% of the Company's rigs have worked for the same customer for greater
than six months and over 40% of the Company's rigs have worked for the same
customer for longer than one year. The backlog of business for the
Subsidiaries, excluding ENSCO Drilling Company's operations conducted
through Caribbean, at February 20, 1996 was approximately $59.8 million as
compared to approximately $45.3 million in March 1995. The Company's
subsidiary in Venezuela, Caribbean, has a number of term contracts, which
terminate in 1998 and 1999, with a backlog as of February 20, 1996 of
approximately $162.9 million as compared to approximately $212.8 million in
March 1995.
The contract drilling business is highly competitive and has recently
suffered from a substantial oversupply of drilling rigs. ENSCO competes
with other drilling contractors on the basis of quality of service, price,
equipment suitability and availability, reputation and technical expertise.
Competition is usually on a regional basis, but drilling rigs are mobile
and may be moved from one region to another in response to demand.
Drilling operations are generally conducted throughout the year with some
seasonal declines in winter months.
MARINE TRANSPORTATION OPERATIONS
The Company conducts its marine transportation operations through a wholly
owned subsidiary, ENSCO Marine Company ("ENSCO Marine"), based in
Broussard, Louisiana. The Company has a marine transportation fleet of 37
vessels consisting of six anchor handling tug supply ("AHTS") vessels, 23
supply vessels and eight mini-supply vessels. All of the Company's marine
transportation vessels are currently located in the U.S. Gulf of Mexico.
In December 1995, the Company acquired six supply vessels, four of which
were previously operated under operating lease agreements. In mid-1995,
the Company completed the conversion of four utility vessels into mini-
supply vessels, which was consistent with the Company's strategy to
concentrate its fleet on the larger, more capable vessels and to exit the
unprofitable utility boat market.
The Company's six AHTS vessels ordinarily support semi-submersible drilling
rigs and large offshore construction projects or provide towing services.
The 23 supply vessels and eight mini-supply vessels support general
drilling and production activity by ferrying supplies from land and between
offshore rigs. All of the Company's marine transportation vessels have
drilling fluid handling capabilities which management believes enhance
their marketability. The Company's vessels are typically chartered on a
well-to-well basis, or on term contracts which may be terminated on short
notice. At February 20, 1996, ENSCO Marine had a backlog of contracts for
its services of approximately $10.5 million compared to $4.2 million for
such services in March 1995.
As the Company's marine transportation services are used primarily in
connection with the process of servicing offshore oil and gas operations,
demand for these services is largely dependent on the factors affecting the
level of activity in the offshore oil and gas industry. ENSCO Marine
competes with numerous vessel operators on the basis of quality of service,
price, vessel suitability and availability and reputation. Marine
transportation operations are conducted throughout the year, but some
reductions in vessel utilization and charter rates may be experienced
during winter months due to seasonal declines in offshore activities.
SEGMENT INFORMATION
The following table provides operational information regarding the
Company's contract drilling and marine transportation operations for each
of the five years ended December 31, 1995:
1995 1994 1993 1992 1991
------- -------- -------- -------- --------
OFFSHORE DRILLING RIG UTILIZATION AND DAY RATES
Utilization:
Jackup rigs
United States . . . . . . . . . . . . . . 90% 91% 97% 61% 96%
International . . . . . . . . . . . . . . 73% 63% 62% 60% --
Total jackup rigs . . . . . . . . . . 87% 83% 84% 61% 96%
Barge drilling rigs - Venezuela . . . . . . . 86% 100% 100% 100% 100%
Total . . . . . . . . . . . . . . . . . 86% 87% 87% 64% 98%
Average day rates:
Jackup rigs
United States . . . . . . . . . . . . . $20,559 $21,531 $20,035 $13,118 $15,280
International . . . . . . . . . . . . . . 42,631 24,765 25,715 26,959 --
Total jackup rigs . . . . . . . . . . 24,813 22,269 21,572 18,122 15,280
Barge drilling rigs - Venezuela . . . . . . . 19,631 16,413 15,432 11,332 10,342
Total . . . . . . . . . . . . . . . . . $23,196 $20,539 $20,281 $17,201 $12,992
MARINE FLEET UTILIZATION AND DAY RATES
Utilization:
AHTS . . . . . . . . . . . . . . . . 84% 81% 76% 56% 71%
Supply . . . . . . . . . . . . . . . . . 84% 86% 84% 61% 74%
Mini-supply . . . . . . . . . . . . . . . 65% 93% 95% 100% 99%
Total . . . . . . . . . . . . . . . . 79% 86% 84% 64% 77%
Average day rates:
AHTS . . . . . . . . . . . . . . . . $ 7,732 $ 7,686 $ 6,987 $ 6,309 $ 4,417
Supply . . . . . . . . . . . . . . . . . 3,136 3,173 3,039 2,047 2,482
Mini-supply . . . . . . . . . . . . . . . 1,985 1,663 1,677 1,133 1,348
Total . . . . . . . . . . . . . . . . $ 3,753 $ 3,826 $ 3,559 $ 2,669 $ 2,585
Offshore Drilling Rig and Marine Fleet information includes Penrod rigs and vessels acquired in 1993.
Offshore Drilling Rig and Marine Fleet information excludes Penrod rigs and vessels acquired in 1993.
Excludes utility vessels. As of December 31, 1994, the Company no longer had utility vessels available for work.
Anchor handling tug supply vessels.
Financial information regarding the Company's operating segments and
foreign and domestic operations is presented in Note 13 of the Notes to
Consolidated Financial Statements included in "Item 8. Financial
Statements and Supplementary Data." Additional financial information
regarding the Company's operating segments is presented in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
MAJOR CUSTOMERS
The Company provides its services to a broad customer base which includes
major international oil companies, government owned oil companies and
independent domestic oil producers.
During 1995, aggregate revenues provided to the Company's contract drilling
operations by Lagoven, S.A. were $62.0 million, or 22% of total revenues.
Additionally, revenues of $34.3 million, or 12% of total revenues, all of
which were from contract drilling operations, were provided to the Company
by Nederlandse Aardolie Maatschappij B.V., a Royal Dutch/Shell affiliate.
INDUSTRY CONDITIONS
Demand for the Company's services is significantly affected by worldwide
expenditures for oil and gas drilling. Expenditures for oil and gas
drilling activity fluctuate based upon many factors including world
economic conditions, the legislative environment in the U.S. and other
major countries, production levels and other activities of OPEC and other
oil and gas producers and the impact that these and other events have on
the current and expected future pricing of oil and natural gas.
Domestic drilling activity peaked in late-1981 after which the number of
working rigs began a general downward trend through mid-1992. An
improvement in natural gas prices in 1992 and 1993 resulted in the working
rig count increasing, especially in the U.S. Gulf of Mexico, and such
increased activity levels generally continued through 1995. However, the
Company's day rates for its U.S. Gulf of Mexico rigs declined throughout
1994, although remaining higher on average than in 1993, and such declining
day rate trend continued through the first half of 1995. The declining day
rate levels were due primarily to the mobilization of a number of
competitors' rigs to the U.S. Gulf of Mexico in 1994 and the weakening of
domestic natural gas prices. Activity levels for U.S. Gulf of Mexico rigs
increased in the second half of 1995 as the industry average working jackup
rig count increased to 115 from 100 in the first half of 1995. The
increased U.S. Gulf of Mexico activity levels were due, in part, to
increased domestic natural gas prices during early to mid-1995. The
Company's U.S. Gulf of Mexico rigs experienced increased day rates during
the second half of 1995 primarily related to the increased activity levels.
Unless there is a significant deterioration in domestic natural gas prices,
management believes current U.S. Gulf of Mexico rig activity levels are
sustainable during 1996. Management also believes that the demand for
cantilever jackup rigs, in particular, is expected to remain strong due to
the increased level of development activity which requires cantilevered
drilling over existing production platforms.
To date in 1996, the Gulf of Mexico rig count has remained comparable to
levels prevalent at the end of 1995. Average Gulf of Mexico jackup day
rates similar to the type the Company operates are currently in the range
of $19,000 - $35,000 compared to $14,000 - $21,000 approximately one year
ago.
Oil and natural gas prices have remained volatile for many years. As
described above, changes in oil and gas prices can have significant effects
on the Company's business. Spot natural gas prices were under pressure
throughout 1994 and into early 1995 after which prices increased in mid-
1995 and late 1995. Henry Hub spot natural gas prices were approximately
$1.50 per mcf at the beginning of 1995 and ended 1995 at approximately $2.75
per mcf. Crude oil prices increased in 1994 fueled by worldwide economic
growth and remained strong in 1995. West Texas Intermediate crude oil
prices were approximately $18.00 per barrel at the beginning of 1995 and
$19.00 per barrel at the end of 1995.
In the North Sea, a reduction in the number of available rigs has been the
primary contributing factor to increased industry utilization levels during
1995. The increased utilization has led to increased North Sea day rates
in 1995. The standard jackup rig day rates in the North Sea for the type
of jackup rigs the Company owns showed significant improvement in 1995 with
day rates ranging from $24,000 to $28,000 at the beginning of the year and
$37,000 to $42,000 at the end of 1995. Demand for standard jackup rigs in
the North Sea has remained strong in early 1996 and is likely to continue
throughout the year.
The marine transportation industry is highly competitive and utilization
rates for vessels vary significantly, depending on drilling and
construction activity. Demand is largely dependent on offshore drilling
activity of new wells or the workover of older wells. When oil and gas
prices declined during the 1980's, the demand for vessels was significantly
reduced. Beginning in the fourth quarter of 1992, increased drilling
activity in the U.S. Gulf of Mexico caused utilization and day rates for
marine transportation vessels to increase. The activity level for marine
transportation vessels in the U.S. Gulf of Mexico increased throughout 1993
and remained fairly stable in 1994. Activity levels in early 1995
decreased and subsequently showed significant improvement in the second
half of 1995 related primarily to increased drilling activity in the second
half of 1995. The average number of oilfield supply vessels operating in
the U.S. Gulf of Mexico increased to 249 in 1995 from 235 in 1994, with
average utilization of 90% and 89% for 1995 and 1994, respectively. Unless
there is a significant deterioration in domestic natural gas prices,
management believes current U.S. Gulf of Mexico activity levels are
sustainable during 1996.
Additional information regarding industry conditions and industry
utilization rates is presented in "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations" included
elsewhere herein.
GOVERNMENTAL REGULATION
The Company's businesses are affected by changes in public policy and by
federal, state, foreign and local laws and regulations relating to the
energy industry. The adoption of laws and regulations curtailing
exploration and development drilling for oil and gas for economic,
environmental or other policy reasons adversely affects the Company's
operations by limiting available drilling and other opportunities in the
energy service industry.
The Company is subject to the requirements of the federal Occupational
Safety and Health Act ("OSHA") and comparable state statutes. The OSHA
hazard communication standard, the Environmental Protection Agency
"community right-to-know" regulations under Title III of the Federal
Superfund Amendment and Reauthorization Act and comparable state statutes
require the Company to report certain information about the hazardous
materials used in its operations to employees, state and local government
authorities, and local citizens.
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state and local laws and
regulations controlling the discharge of materials into the environment or
otherwise relating to the protection of the environment. Laws and
regulations specifically applicable to the Company's business activities
could impose significant liability on the Company for damages, clean-up
costs and penalties in the event of the occurrence of oil spills or similar
discharges of pollutants into the environment in the course of the
Company's operations, although, to date, such laws and regulations have not
had a material adverse effect on the Company's results of operations, nor
has the Company experienced an accident that has exposed it to material
liability for discharges of pollutants into the environment. In addition,
events in recent years have heightened environmental concerns about the oil
and gas industry generally. From time to time, legislative proposals have
been introduced which would materially limit or prohibit offshore drilling
in certain areas. To date, no proposals which would materially limit or
prohibit offshore drilling in the Company's principal areas of operation
have been enacted into law. If laws are enacted or other governmental
action is taken that restrict or prohibit offshore drilling in the
Company's areas of operation or impose environmental protection
requirements that materially increase the costs of offshore exploration,
development or production of oil and gas, the Company could be materially
adversely affected.
OPERATIONAL RISKS AND INSURANCE
Contract drilling and oil and gas operations are subject to various risks
including blowouts, craterings, fires and explosions, each of which could
result in damage to or destruction of drilling rigs and oil and gas wells,
personal injury and property damage, suspension of operations or
environmental damage through oil spillage or extensive, uncontrolled fires.
The Company's marine transportation operations are subject to various
risks, which include property and environmental damage and personal injury.
The Company generally insures its drilling rigs and marine transportation
vessels for amounts not less than the estimated fair market value thereof.
The Company also maintains liability insurance coverage in amounts and
scope which management believes are comparable to the levels of coverage
carried by other energy service companies. To date, the Company has not
experienced difficulty in obtaining insurance coverage. While the Company
believes its insurance coverages are customary for the energy service
industry, the occurrence of a significant event not fully insured against
could have a material adverse effect on the Company's financial position.
INTERNATIONAL OPERATIONS
A significant portion of the Company's contract drilling operations are
conducted in foreign countries. Revenues from international operations
were 44% of the Company's total revenues in 1995. The Company's
international operations are subject to political, economic, and other
uncertainties, such as the risks of expropriation of its equipment,
expropriation of a customer's property or drilling rights, repudiation of
contracts, adverse tax policies, general hazards associated with
international sovereignty over certain areas in which the Company operates
and fluctuations in international economies.
The Company's international operations also face the risk of fluctuating
currency values and exchange controls. Occasionally the countries in which
the Company operates have enacted exchange controls. Historically, the
Company has been able to limit these risks by obtaining compensation in
United States dollars or freely convertible international currency and, to
the extent possible, by limiting acceptance of blocked currency to amounts
which match its expenditure requirements in local currencies.
The Venezuelan currency experienced significant devaluation during the
first half of 1994. In June 1994, the Venezuelan government established
exchange control policies and severely restricted the conversion of
Venezuelan currency to U.S. dollars. In late 1995, the Venezuelan
government further devalued the Venezuelan currency against the U.S.
dollar. To date, the Company has not experienced problems associated with
receiving U.S. dollar payments with respect to the U.S. dollar portion of
its contracts with Lagoven. Changes in these conditions, other policy
enactments, or political developments in Venezuela could have an adverse
effect upon the Company. However, the Company believes such adverse
effects are not probable due to the volume of U.S. dollars paid to the
parent company of Lagoven for its oil exports.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the executive
officers of the Company:
NAME AGE POSITION WITH THE COMPANY
Carl F. Thorne 55 Chairman of the Board, President, Chief
Executive Officer and Director
Richard A. Wilson 58 Senior Vice President, Chief Operating
Officer and Director
Marshall Ballard 53 Vice President - Business Development
and Quality
William S. Chadwick, Jr. 48 Vice President - Administration and
Secretary
C. Christopher Gaut 39 Vice President - Finance and Chief
Financial Officer
H. E. Malone 52 Vice President - Controller and Chief
Accounting Officer
Frank B. Williford 56 Vice President - Engineering
Richard A. LeBlanc 45 Treasurer
Set forth below is certain additional information concerning the executive
officers of the Company, including the business experience of each during
the past five years.
Carl F. Thorne has been a director of the Company since December 1986. He
was elected President and Chief Executive Officer of the Company in May
1987 and was elected Chairman of the Board of Directors in November 1987.
Mr. Thorne holds a Bachelor of Science Degree in Petroleum Engineering from
the University of Texas and a Juris Doctorate Degree from Baylor University
College of Law.
Richard A. Wilson has been a director of the Company since June 1990. Mr.
Wilson joined the Company in July 1988 and was elected President of ENSCO
Drilling Company in August 1988. Mr. Wilson was elected Senior Vice
President - Operations of the Company in October 1989 and to his present
position in June 1991. Mr. Wilson holds a Bachelor of Science Degree in
Petroleum Engineering from the University of Wyoming.
Marshall Ballard joined the Company in connection with the acquisition of
Penrod Holding Corporation and was elected Vice President of Business
Development and Quality in August 1993. From September 1977 through August
1993, Mr. Ballard served in various capacities as an employee of Penrod
Holding Corporation, most recently as President. Mr. Ballard holds a
Bachelor of Arts Degree in History from the University of North Carolina
and a Law Degree from Tulane University.
William S. Chadwick, Jr. joined the Company as Director of Administration
in June 1987, has been a Vice President of the Company since July 1988 and
was elected Secretary of the Company in May 1993. Mr. Chadwick holds a
Bachelor of Science Degree in Industrial Management from the University of
Pennsylvania.
C. Christopher Gaut joined the Company in December 1987 and was elected
Treasurer and Chief Financial Officer in February 1988 and Vice President -
Finance in January 1991. Mr. Gaut holds a Bachelor of Arts Degree in
Engineering Science from Dartmouth College and a Master of Business
Administration Degree in Finance from The Wharton School of the University
of Pennsylvania.
H. E. Malone joined the Company in August 1987 and was elected Controller
and Chief Accounting Officer in January 1988 and Vice President -
Controller and Chief Accounting Officer in February 1995. Mr. Malone holds
Bachelor of Business Administration Degrees from the University of Texas
and Southern Methodist University and a Master of Business Administration
Degree from the University of North Texas.
Frank B. Williford joined the Company and was elected Vice President -
Engineering in February 1996. From January 1966 through January 1996, Mr.
Williford served in various capacities as an employee of Sedco, Inc. and
Sedco Forex, previously as Vice President and General Manager of
Engineering. Mr. Williford holds a Bachelor of Science Degree in
Structural Engineering from Texas A&M University.
Richard A. LeBlanc joined the Company in July 1989 as Manager of Finance.
He assumed responsibilities for the investor relations function in March
1993 and was promoted to Treasurer and Director of Investor Relations in
May 1995. Mr. LeBlanc holds a Bachelor of Science Degree in Finance and a
Master of Business Administration degree from Louisiana State University.
Officers each serve for a one-year term or until their successors are
elected and qualified to serve. Mr. Thorne and Mr. Malone are brothers-in-
law.
EMPLOYEES
The Company had approximately 2,300 full-time employees worldwide as of
February 20, 1996. In addition, the Company employs local personnel in
foreign countries to work on rigs on a job-by-job basis. The Company
considers relations with its employees to be satisfactory. None of the
Company's domestic employees are represented by unions. The Company has
not experienced any significant work stoppages or strikes as a result of
labor disputes.
Item 2. Properties
CONTRACT DRILLING
The following table sets forth as of February 20, 1996 certain information
regarding the offshore drilling rigs owned by the Company:
JACKUP RIGS
-----------
BUILT/ WATER DEPTH/
RIG NAME REBUILT RIG DESIGN RIG TYPE RATED DEPTH LOCATION STATUS
- -------- --------- ---------- -------- ------------ -------- ------
ENSCO 63 1977 MLT 82 SD CANT-TD 250 /25,000 GOM A
ENSCO 64 1974 MLT 53 SLOT-SD-Z 250 /30,000 GOM A
ENSCO 67 1976/1996 MLT 84 SLOT-TD-Z 400 /30,000 GOM S
ENSCO 68 1976 MLT 84 SLOT 350 /30,000 GOM A
ENSCO 69 1976/1995 MLT 84 SLOT-TD-Z 400 /30,000 GOM S
ENSCO 70 1981/1996 HITACHI-300 CANT-TD-Z 250 /25,000 NS SC
ENSCO 71 1982/1995 HITACHI-300 CANT-TD-Z 225 /25,000 NS A
ENSCO 72 1981 HITACHI-300 CANT-TD-Z 225 /25,000 NS SC
ENSCO 80 1978/1995 MLT 116 CANT-TD-Z 225 /25,000 NS A
ENSCO 81 1979 MLT 116 CANT-TD-Z 350 /25,000 GOM A
ENSCO 82 1979 MLT 116 CANT-TD-Z 300 /25,000 GOM A
ENSCO 83 1979 MLT 82 SD CANT-TD 250 /25,000 GOM A
ENSCO 84 1981 MLT 82 SD CANT-TD 250 /25,000 GOM A
ENSCO 85 1981/1995 MLT 116 CANT-TD-Z 225 /25,000 NS A
ENSCO 86 1981 MLT 82 SD CANT-TD-Z 250 /30,000 GOM A
ENSCO 87 1982 MLT 116 CANT-TD-Z 350 /25,000 GOM A
ENSCO 88 1982 MLT 82 SD CANT-TD-Z 250 /25,000 GOM A
ENSCO 89 1982 MLT 82 SD CANT-TD-Z 250 /25,000 GOM A
ENSCO 90 1982 MLT 82 SD CANT-TD-Z 250 /25,000 GOM A
ENSCO 92 1982 MLT 116 CANT-SD-Z 225 /25,000 NS A
ENSCO 93 1982 MLT 82 SD CANT-TD 250 /25,000 GOM A
ENSCO 94 1981 HITACHI-250 CANT-TD-Z 250 /25,000 GOM A
ENSCO 95 1981 HITACHI-250 CANT-TD 250 /25,000 GOM A
ENSCO 99 1985 MLT 82 SD CANT-TD-Z 250 /30,000 GOM A
/TABLE
BARGE DRILLING RIGS
-------------------
RATED
RIG NAME BUILT DRAWWORKS DEPTH LOCATION STATUS
- -------- ----- --------- ------ -------- ------
ENSCO V 1982 GD1100E 15,000 VENEZUELA S
ENSCO VI 1991 GD1100E 15,000 VENEZUELA S
ENSCO VII 1993 N 840E 20,000 VENEZUELA A
ENSCO VIII 1993 I 1700E 20,000 VENEZUELA A
ENSCO IX 1993 N 840E 20,000 VENEZUELA A
ENSCO X 1993 I 1700E 20,000 VENEZUELA A
ENSCO XI 1994 MC1220E 25,000 VENEZUELA A
ENSCO XII 1994 MC1220E 25,000 VENEZUELA A
ENSCO XIV 1994 N1320E 25,000 VENEZUELA A
ENSCO XV 1994 N1320E 25,000 VENEZUELA A
NOTES: RIG TYPE LOCATION STATUS
-------- -------- ------
CANT - Cantilever GOM - Gulf of Mexico A - Active
SLOT - Slot NS - North Sea S - In shipyard
SD - Side Drive SC - In or in route to shipyard for
TD - Top Drive upgrade - committed to work
Z - Zero Discharge capabilities upon completion
permitting operation in evniron-
mentally sensitive areas
The Company continues to own one land rig, which is stacked, located in the
Middle East.
The Company's drilling rigs consist of engines, drawworks, masts, pumps to
circulate the drilling fluid, blowout preventers, drill string and related
equipment. The engines power a rotary table that turns a bit consisting of
rotating cones so that the hole is drilled by grinding the rock which is
then carried to the surface by the drilling fluid. The intended well depth
and the drilling conditions are the principal factors that determine the
size and type of rig most suitable for a particular drilling job.
The Company's offshore jackup rigs consist of mobile drilling platforms
equipped with legs that can be lowered to the ocean floor to provide
support for the drilling platform. All the Company's jackup rigs are of
the independent leg design. The jackup rig hull includes the drilling rig,
jacking system, crew quarters, storage and loading facilities, helicopter
landing pad and related equipment.
The Company's barge drilling rigs have all of the crew quarters, storage
facilities, and related equipment mounted on floating barges with the
drilling equipment cantilevered from the stern of the barge. The barges
are held in place by anchors while drilling activities are conducted.
Over the life of a typical rig, several of the major components are
replaced due to normal wear and tear.
Certain of the Company's jackup rigs, which had a combined net book value
of $278.8 million at December 31, 1995, are pledged as collateral in favor
of a financial institution to secure payment of a secured term loan.
All of the Company's rigs are in good condition.
Depending upon the nature of the work, the proximity of the job site to the
Company's repair facilities and certain other factors, rig maintenance and
repairs are performed either at the job site or at the Company's
facilities. The Company owns or leases field locations and repair
facilities for its drilling rigs in Las Morochas, Venezuela; Beverwijk,
Holland; Broussard, Louisiana; and Aberdeen, Scotland.
MARINE TRANSPORTATION
In December 1995, the Company purchased six supply vessels, four of which
were previously operated under operating lease agreements. In the fourth
quarter of 1994, the Company entered into an agreement with an unrelated
third party to purchase a supply vessel, convert four of the Company's
utility vessels into four larger, 146-foot mini-supply vessels and assign
ownership of four of the Company's utility vessels to the unrelated third
party. In 1994, the Company also sold one utility boat and converted
another to a mini-supply vessel. The Company has a marine transportation
fleet of 37 vessels consisting of six anchor handling tug supply vessels,
23 supply vessels and eight mini-supply vessels. All of the Company's
marine transportation vessels are currently located in the U.S. Gulf of
Mexico. Substantially all of the Company's marine transportation vessels,
which had a combined net book value of $43.0 million at December 31, 1995,
are pledged as collateral to secure payment of secured term loans.
The following table provides as of February 20, 1996 certain information
regarding the Company's marine transportation vessels:
MARINE FLEET
------------
NO. OF YEAR HORSE
VESSEL TYPE VESSELS BUILT POWER LENGTH
----------- ------- ----- ----- ------
KODIAKS - AHTS 2 1983 12,000 225
OTHER- AHTS 4 1976-1983 5,800-7,240 185 -230
SUPPLY 23 1977-1985 1,800-3,000 166 -185
MINI - SUPPLY 8 1981-1984 1,200 140 -146
All of the Company's marine transportation vessels are in good condition.
OTHER PROPERTY
The Company leases its executive offices in Dallas, Texas. The Company
owns offices and other facilities in Houma, Shreveport and Broussard,
Louisiana and Aberdeen, Scotland; and rents offices in Las Morochas,
Venezuela and Beverwijk, Holland.
Item 3. Legal Proceedings
Prior to October 1990, Penrod was self-insured for the majority of its
maritime claims exposure. During the period from October 1990 to the
August 1993 acquisition date, Penrod had insurance coverage which limited
its maritime claims exposure to a maximum of the $25,000 deductible for
each claim, plus a fluctuating aggregate of $500,000 to $1.5 million in
excess of the $25,000 claim deductible for each policy year. Penrod is
also a defendant in lawsuits with certain of its insurers and the
administrator of its self-insurance program, and personal injury and
maritime liability lawsuits filed by present and former employees.
Management has provided reserves in the Company's financial statements for
such claims as it considers appropriate given the facts currently known.
On February 13, 1991, Penrod filed an action against TransAmerican Natural
Gas Corporation ("TransAmerican") which is presently pending in the U.S.
District Court Southern District of Texas, Houston Division, seeking
damages for breach of contract. On August 21, 1991, TransAmerican filed an
action against Penrod in the 133rd Judicial District Court, Harris County,
Texas, seeking damages for breach of contract and tort claims. Management
of the Company believes that the outcome of this litigation will be
favorable to the Company.
In addition to the matters discussed above, the Company is from time to
time involved in litigation incidental to the conduct of its business. In
the opinion of management, none of such litigation in which the Company is
currently involved would, individually or in the aggregate, have a material
adverse effect on its financial condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders in the fourth
quarter of 1995.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The following table sets forth the high and low sales prices for each
period indicated for the Company's common stock, $.10 par value (the
"Common Stock") for each of the last two fiscal years, restated for the
reverse stock split as discussed below:
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- -------
1995 High . . . $14 3/8 $17 3/8 $19 1/2 $23 $23
1995 Low . . . . $11 1/4 $14 $14 1/4 $16 $11 1/4
1994 High . . . $17 $18 5/8 $19 1/4 $15 1/2 $19 1/4
1994 Low . . . . $12 1/2 $13 1/2 $14 5/8 $10 3/4 $10 3/4
The Company's Common Stock (Symbol: ESV) began trading on the New York
Stock Exchange on December 20, 1995, prior to which it was traded on the
American Stock Exchange. At December 31, 1995, there were approximately
3,455 stockholders of record of the Company's Common Stock.
Since inception, no dividends have been declared on the Company's Common
Stock, and the Company does not expect to declare dividends on its Common
Stock in the near future.
The Company's stockholders approved a one share for four shares reverse
stock split of the Company's common stock at the Company's Annual Meeting
of Stockholders held on May 24, 1994.
In August 1994, the Company issued a redemption notice for the 2,839,110
outstanding shares of its $1.50 Cumulative Convertible Exchangeable
Preferred Stock ("1.50 Preferred Stock"). Holders of 2,807,147 shares of
the $1.50 Preferred Stock elected to convert each of their shares into
approximately 1.786 shares of the Company's common stock which resulted in
the issuance of 5,012,762 shares of the Company's common stock. Holders of
the remaining 31,963 shares of the $1.50 Preferred Stock elected to redeem
their shares for cash.
Item 6. Selected Consolidated Financial Data
The selected consolidated financial data set forth below for the five years
ended December 31, 1995 has been derived from the Company's audited
consolidated financial statements (in thousands, except per share amounts).
This information should be read in conjunction with the audited
consolidated financial statements and notes thereto included in "Item 8.
Financial Statements and Supplementary Data."
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(In thousands, except per share amounts)
Statement of Operations Data
Operating revenues . . . . . . . . . . . . . . . . . $279,114 $245,451 $227,410 $ 84,271 $ 76,221
Operating expenses, excluding D&A . . . . . . . . . 165,529 144,581 151,182 81,999 66,301
Depreciation and amortization (D&A) . . . . . . . . 58,390 51,798 41,181 12,539 13,030
Operating income (loss) . . . . . . . . . . . . . . 55,195 49,072 35,047 (10,267) (3,110)
Other expense . . . . . . . . . . . . . . . . . . . (7,856) (8,751) (6,696) (8,028) (2,025)
Income (loss) from continuing operations before
income taxes, minority interest and cumulative
effect of accounting change . . . . . . . . . . 47,339 40,321 28,351 (18,295) (5,135)
Provision for income taxes . . . . . . . . . . . . . (3,397) (3,759) (5,942) (2,007) (4,109)
Minority interest . . . . . . . . . . . . . . . . . (2,179) (2,984) (6,932) -- --
Income (loss) from continuing operations . . . . . . 41,763 33,578 15,477 (20,302) (9,244)
Income (loss) from discontinued operations . . 6,296 3,593 3,556 (9,062) (3,543)
Income (loss) before cumulative effect of
accounting change . . . . . . . . . . . . . . . 48,059 37,171 19,033 (29,364) (12,787)
Cumulative effect of accounting change, net
of minority interest . . . . . . . . . . . -- -- (2,542) -- --
Net income (loss) . . . . . . . . . . . . . . . . . 48,059 37,171 16,491 (29,364) (12,787)
Preferred stock dividend requirements . . . . . . . -- (2,135) (4,260) (4,260) (4,607)
Income (loss) applicable to common stock . . . . . . $ 48,059 $ 35,036 $ 12,231 $(33,624) $(17,394)
Income (loss) per common share:
Continuing operations . . . . . . . . . . . . . $ .69 $ .55 $ .28 $ (.82) $ (.57)
Discontinued operations . . . . . . . . . . . . .10 .06 .09 (.30) (.14)
Cumulative effect of account change . . . . . . -- -- (.07) -- --
Income (loss) per common share . . . . . . . . . $ .79 $ .61 $ .30 $ (1.12) $ (.71)
Weighted average common shares outstanding . . . . . 60,527 57,843 40,325 30,003 24,407
Balance Sheet Data
Working capital . . . . . . . . . . . . . . . . . . $ 78,945 $129,172 $124,587 $ 33,771 $ 22,947
Total assets . . . . . . . . . . . . . . . . . . . . 821,451 773,090 689,254 272,397 295,722
Long-term debt, net of current portion . . . . . . . 159,201 162,466 125,983 23,628 31,437
$1.50 preferred stock . . . . . . . . . . . . . . . -- -- 70,977 70,977 70,977
Stockholders' equity . . . . . . . . . . . . . 531,249 487,950 383,925 142,512 163,990
Amounts have been restated for adoption of Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes." See
Note 1 to the Company's Consolidated Financial Statements.
In 1995, the Company sold its technical services segment and during
1993 the Company sold its supply segment. Prior years results of
the technical services segment and the supply segment have been
reclassified for comparative purposes. The 1995 results include a
gain of $5.2 million in connection with the sale of the technical
services segment and the 1993 results include a gain of $2.1 million
in connection with the sale of the supply segment. See Note 16 to
the Company's Consolidated Financial Statements.
Effective January 1, 1993, Penrod adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." See Note 10 to the
Company's Consolidated Financial Statements.
The Company has never paid cash dividends on its common stock and
has no plans to pay dividends on its common stock in the near
future.
/TABLE
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
BUSINESS ENVIRONMENT.
ENSCO International Incorporated (the "Company") provides contract
drilling and marine transportation services to the oil and gas industry
with operations in the U.S. Gulf of Mexico, the North Sea and Venezuela.
Demand for the Company's services is significantly affected by worldwide
expenditures for oil and gas drilling. Expenditures for oil and gas
drilling activity fluctuate based upon many factors including world
economic conditions, the legislative environment in the U.S. and other
major countries, production levels and other activities of OPEC and other
oil and gas producers and the impact that these and other events have on
the current and expected future pricing of oil and natural gas.
Domestic drilling activity peaked in late-1981 after which the number
of working rigs began a general downward trend through mid-1992. An
improvement in natural gas prices in 1992 and 1993 resulted in the working
rig count increasing, especially in the U.S. Gulf of Mexico, and such
increased activity levels generally continued through 1995. However, the
Company's day rates for its U.S. Gulf of Mexico rigs declined throughout
1994, although remaining higher on average than in 1993, and such declining
day rate trend continued through the first half of 1995. The declining day
rate levels were due primarily to the mobilization of a number of
competitors' rigs to the U.S. Gulf of Mexico in 1994 and the weakening of
domestic natural gas prices. Activity levels for U.S. Gulf of Mexico rigs
increased in the second half of 1995 due, in part, to increased domestic
natural gas prices during early to mid-1995 with the Company's U.S. Gulf of
Mexico rigs experiencing a corresponding increase in day rates during the
second half of 1995. Unless there is a significant deterioration in
domestic natural gas prices, management believes current U.S. Gulf of
Mexico rig activity levels are sustainable during 1996. Management also
believes that the demand for cantilever jackup rigs, in particular, is
expected to remain strong due to the increased level of development
activity which requires cantilevered drilling over existing production
platforms. Activity levels for the Company's marine transportation vessels
generally correspond with activity levels experienced for the Company's
U.S. Gulf of Mexico rigs.
In the North Sea, a reduction in the number of available rigs has been
the primary contributing factor to increased industry utilization levels
during 1995. The increased utilization has led to increased North Sea day
rates in 1995 for the industry, including the Company's North Sea rigs.
Management believes, based upon current market conditions, that North Sea
day rate and utilization levels should remain fairly stable in 1996,
although lower spot prices for natural gas in the United Kingdom present
some uncertainty.
The Company's barge drilling rigs in Venezuela generally operate under
long-term contracts for the national oil company. As a result, their day
rate and utilization levels are not as dependent on oil and natural gas
prices.
Offshore rig and oilfield supply vessel industry utilization is
summarized below:
INDUSTRY WIDE AVERAGES
YEAR ENDED DECEMBER 31,
-----------------------
1995 1994 1993
---- ---- ----
OFFSHORE RIGS
Gulf of Mexico:
All rigs:
Rigs under contract . . . 134 133 116
Total rigs available . . 176 175 152
% Utilization . . . . . . 76% 76% 76%
Jackup rigs:
Rigs under contract . . . 107 109 93
Total rigs available . . 140 136 116
% Utilization . . . . . . 76% 80% 80%
Worldwide:
All rigs:
Rigs under contract . . 539 536 545
Total rigs available . . 644 661 666
% Utilization . . . . . 84% 81% 82%
Jackup rigs:
Rigs under contract . . 324 322 332
Total rigs available . . 388 392 394
% Utilization . . . . . 84% 82% 84%
OILFIELD SUPPLY VESSELS:
Gulf of Mexico:
Vessels under contract . . 249 235 213
Total vessels available . . 277 264 247
% Utilization . . . . . . . 90% 89% 86%
Industry utilization based on data published by OFFSHORE DATA
SERVICES, INC.
Excludes utility vessels.
/TABLE
RESULTS OF OPERATIONS.
The following analysis highlights the Company's operating results for
the years indicated (in thousands):
1995 1994 1993
--------- --------- ---------
OPERATING RESULTS
Revenues . . . . . . . . . . . . . . . . $279,114 $245,451 $227,410
Operating margin . . . . . . . . . . . . 123,154 110,122 87,954
Operating income . . . . . . . . . . . . 55,195 49,072 35,047
Other expense . . . . . . . . . . . . . (7,856) (8,751) (6,696)
Provision for income tax . . . . . . . . (3,397) (3,759) (5,942)
Minority interest . . . . . . . . . . . . (2,179) (2,984) (6,932)
Income from continuing operations . . . . 41,763 33,578 15,477
Income from discontinued operations . . . 6,296 3,593 3,556
Cumulative effect of accounting change,
net of minority interest . . . . . . -- -- (2,542)
Net income . . . . . . . . . . . . . . . 48,059 37,171 16,491
Preferred stock dividend requirements . . -- (2,135) (4,260)
Income applicable to common stock . . . . 48,059 35,036 12,231
/TABLE
Year Ended December 31,
-------------------------------------
1995 1994 1993
--------- --------- ---------
REVENUES
Contract drilling
Jackup rigs
United States . . . . . . . . . . $119,275 $109,012 $ 91,387
International . . . . . . . . . . 59,525 37,735 43,532
Total jackup rigs . . . . . 178,800 146,747 134,919
Barge drilling rigs - Venezuela . . . 61,975 48,227 28,966
Total offshore rigs . . . . . . . 240,775 194,974 163,885
Land rigs . . . . . . . . . . . . -- 12,807 28,235
Total contract drilling . . . . . 240,775 207,781 192,120
Marine transportation
AHTS . . . . . . . . . . . . . . 14,421 14,743 12,673
Supply . . . . . . . . . . . . . . . . 20,143 19,362 18,251
Mini-supply . . . . . . . . . . . . . 3,775 1,701 1,747
Subtotal . . . . . . . . . . . . 38,339 35,806 32,671
Utility . . . . . . . . . . . . . -- 1,864 2,619
Total marine transportation . . . 38,339 37,670 35,290
Total . . . . . . . . . . . . . . . . $279,114 $245,451 $227,410
OPERATING MARGIN
Contract drilling
Jackup rigs
United States . . . . . . . . . . $ 46,366 $ 49,607 $ 42,635
International . . . . . . . . . . 23,062 15,749 12,830
Total jackup rigs . . . . . 69,428 65,356 55,465
Barge drilling rigs - Venezuela . . . 39,017 31,720 18,354
Total offshore rigs . . . . . . . 108,445 97,076 73,819
Land rigs . . . . . . . . . . . . (228) 481 3,677
Total contract drilling . . . . 108,217 97,557 77,496
Marine transportation
AHTS . . . . . . . . . . . . . . 7,353 6,022 3,458
Supply . . . . . . . . . . . . . . . . 6,709 6,877 6,653
Mini-supply . . . . . . . . . . . . . 875 585 745
Subtotal . . . . . . . . . . . . 14,937 13,484 10,856
Utility . . . . . . . . . . . . . -- (919) (398)
Total marine transportation . . . 14,937 12,565 10,458
Total . . . . . . . . . . . . . . . . $123,154 $110,122 $ 87,954
United States and international land rigs are combined. The Company sold all but one of its land rigs in 1994.
Anchor handling tug supply vessels.
As of December 31, 1994, the Company no longer had utility vessels available for work.
Defined as operating revenues less operating expenses, exclusive of depreciation and general and administrative expenses.
/TABLE
The consolidated revenues, operating margin and operating income
(defined as operating revenues less operating expenses, depreciation and
general and administrative expenses) of the Company for 1995 increased as
compared to 1994 due primarily to a full year of operation of six drilling
rigs which commenced operations in Venezuela and the North Sea during 1994
and an increase in North Sea average day rates. These increases were
offset, in part, by decreased U.S. Gulf of Mexico jackup rig average day
rates and by the unavailability of three of the Company's jackup rigs that
were undergoing modifications and enhancements for the majority of 1995.
The Company's 1995 revenues were reduced, while operating income increased,
due to the sale of substantially all of the Company's land rig operations
in 1994. Operating income for 1995 was reduced by additional depreciation
expense associated with additional rigs added to the Company's fleet and
depreciation associated with major modifications and enhancements of rigs
and vessels in 1995.
The Company's increases in consolidated revenues, operating margin and
operating income in 1994 as compared to 1993 are primarily attributable to
higher average U.S. Gulf of Mexico day rates for the Company's contract
drilling and marine transportation segments, the addition of six drilling
rigs in 1994 and a full year of operation from four rigs constructed and
placed into service in the first half of 1993. Operating income was also
positively impacted by lower general and administrative costs but reduced
by additional depreciation and amortization expense.
CONTRACT DRILLING. The Company's contract drilling segment currently
consists of 24 jackup rigs, of which 18 are located in the U.S. Gulf of
Mexico and six in the North Sea, and 10 barge drilling rigs located on Lake
Maracaibo, Venezuela. As of February 20, 1996, all but two of the
Company's U.S. Gulf of Mexico jackup rigs, all of the Company's North Sea
jackup rigs and eight of the Company's ten barge drilling rigs in Venezuela
were operating or were committed under contract. One of the uncommitted
U.S. Gulf of Mexico jackup rigs, which was acquired from the Company's
joint venture partner in late 1995 as discussed in Note 4 to the Company's
Consolidated Financial Statements, is undergoing major modifications and is
expected to be available for work in the second quarter of 1996. The
second uncommitted U.S. Gulf of Mexico jackup rig, which was damaged as it
was preparing to jack up on a new location in mid-January 1996, is
currently undergoing repairs and is expected to be available for work in
mid-1996. The two uncommitted barge drilling rigs in Venezuela are
undergoing modifications and the Company is currently in final negotiations
with Lagoven, S.A. ("Lagoven"), a subsidiary of the Venezuelan national oil
company, for the rigs to begin operating in the second quarter of 1996.
The Company's U.S. Gulf of Mexico jackup rigs operate under relatively
short-term agreements with contract durations normally not exceeding six
months. Four of the Company's six North Sea jackup rigs operate, or are
committed under contract, for a joint venture of major oil and gas
exploration companies and are expected to work under these contracts
through 1996, however, the joint venture may terminate any of the contracts
with six months notice. The remaining two North Sea jackup rigs operate
under relatively short-term contracts with contract durations normally not
exceeding six months. The Company's eight committed barge drilling rigs
in Venezuela operate under five-year contracts expiring in 1998 and 1999
for Lagoven. The contracts with Lagoven for the eight barge drilling rigs
afford Lagoven the option to buy each of the rigs during or at the end of
the contracts.
The following analysis highlights the Company's contract drilling
segment offshore operating days (days for which the rig is under contract
earning revenue) for the years indicated:
1995 1994 1993
------ ------ ------
U.S. Gulf of Mexico jackup rigs 5,642 5,063 4,558
International jackup rigs 1,337 1,496 1,691
Venezuela barge drilling rigs 3,147 3,479 2,393
------ ------ ------
10,126 10,038 8,642
====== ====== ======
For the year ended December 31, 1995, revenues for the Company's U.S.
Gulf of Mexico jackup rigs increased by 9% and operating margin decreased
by 7% as compared to 1994. The revenue increase is primarily due to an
increase in operating days related to the relocation of two of the
Company's international jackup rigs to the U.S. Gulf of Mexico, which
commenced operations in the third quarter of 1994 and early 1995 after
undergoing modifications and enhancements. The revenue increase was
partially offset by, and the operating margin decrease was primarily
attributable to, a decrease of approximately $1,000 in average day rates.
The Company's revenues and operating margin for its jackup rigs
operating in the U.S. Gulf of Mexico increased by 19% and 16%,
respectively, for the year ended December 31, 1994 compared to 1993 due to
higher average day rates of approximately $1,500 and an increase in
operating days primarily related to the relocation of four of the Company's
international jackup rigs to the U.S. Gulf of Mexico during 1993 and 1994.
The improved 1994 results were offset partially by a decrease in
utilization from the prior year.
Revenues and operating margin for the Company's international jackup
rigs increased by 58% and 46%, respectively, in 1995 as compared to 1994
due primarily to an increase of approximately $18,000 in average day rates.
Revenues in 1995 also benefitted from the Company assuming operation,
effective January 1, 1995, of two jackup rigs that previously operated
under bareboat charters. The revenue increase was offset, in part, by
reduced operating days primarily due to the mobilization of two jackup rigs
to the U.S. Gulf of Mexico, one in the third quarter of 1994 from Brazil
and one which began mobilizing in the fourth quarter of 1994 from Dubai.
These rigs were included in the international jackup rig results for
substantially all of the year ended December 31, 1994. The cost to
mobilize the two jackup rigs totalled $3.5 million and was charged against
1994 earnings. Two of the Company's jackup rigs located in the North Sea
were off contract undergoing modifications and enhancements during the
majority of 1995. A North Sea jackup rig acquired by the Company in March
1995 completed its bareboat charter contract in February 1996 and is
currently undergoing modifications and enhancements. The rig is under
contract to commence operations immediately upon completion of the
modifications and enhancements, which is expected in April 1996.
For the year ended December 31, 1994, revenues for the Company's
international jackup rigs decreased by 13% and operating margin increased
by 23% as compared to 1993. The revenue decrease is primarily attributable
to reduced operating days related to the mobilization of five international
jackup rigs to the U.S. Gulf of Mexico, three in the second, third and
fourth quarters of 1993 from the North Sea, one in the third quarter of
1994 from Brazil and one in the fourth quarter of 1994 from Dubai. These
rigs were included in the international jackup rig results for a portion or
all of the year ended December 31, 1993. The revenue decrease was
partially offset by, and the operating margin increase was primarily
attributable to, two North Sea jackup rigs acquired in mid-February 1994
that operated under bareboat charter agreements.
Revenues and operating margin from the Company's barge drilling rigs in
Venezuela increased by 29% and 23%, respectively, for the year ended
December 31, 1995 as compared to 1994 due primarily to a full year of
operation of four barge drilling rigs that began operating in the third
quarter of 1994 offset, in part, by two of the Company's barge drilling
rigs completing their contracts in the second quarter of 1995 and remaining
idle through the end of 1995. The Company's revenues and operating margin
from its barge drilling rigs in Venezuela increased by 66% and 73%,
respectively, for the year ended December 31, 1994 as compared to 1993
primarily due to the addition of four barge drilling rigs in the third
quarter of 1994 and a full year's contribution from four barge drilling
rigs that began operating in March through June of 1993.
The Venezuelan currency experienced significant devaluation during the
first half of 1994. In June 1994, the Venezuelan government established
exchange control policies and severely restricted the conversion of
Venezuelan currency to U.S. dollars. In late 1995, the Venezuelan
government further devalued the Venezuelan currency against the U.S.
dollar. To date, the Company has not experienced problems associated with
receiving U.S. dollar payments with respect to the U.S. dollar portion of
its contracts with Lagoven. Changes in these conditions, other policy
enactments, or political developments in Venezuela could have an adverse
effect upon the Company. However, the Company believes such adverse
effects are not probable due to the volume of U.S. dollars paid to the
parent company of Lagoven for its oil exports.
The Company sold substantially all of its land rig operations in 1994.
Revenues and operating margin for the Company's land rigs for the year
ended December 31, 1994 decreased by $15.4 million and $3.2 million,
respectively, compared to 1993 primarily as a result of the sales.
On January 25, 1996, the Company entered into a letter of intent with
DUAL DRILLING COMPANY ("Dual") under which the Company would acquire Dual,
subject to certain conditions. Dual currently operates a fleet of 20
offshore drilling rigs, including 10 jackup rigs and 10 self-contained
platform rigs. Twelve of Dual's rigs are currently located in the U.S.,
with three jackup rigs and seven platform rigs located in the U.S. Gulf of
Mexico and two platform rigs off the coast of California. The remainder of
Dual's fleet is currently located in international waters, with rigs
offshore India, Mexico, Qatar, Indonesia and China. The transaction is
subject to execution of definitive agreements, approval by the stockholders
of Dual and requisite governmental and other approvals. Subject to the
satisfaction of these conditions, closing of the transaction is expected
before June 30, 1996.
MARINE TRANSPORTATION. The Company currently has a marine
transportation fleet of 37 vessels, consisting of six anchor handling tug
supply vessels, 23 supply vessels and eight mini-supply vessels. All of
the Company's marine transportation vessels are currently located in the
U.S. Gulf of Mexico. Contract durations for the Company's marine
transportation vessels are relatively short-term and normally do not exceed
six months.
In December 1995, the Company purchased six supply vessels in two
separate transactions. Four of the supply vessels purchased were
previously operated under operating lease agreements. See Notes 3 and 5 to
the Company's Consolidated Financial Statements. In the fourth quarter of
1994, the Company entered into an agreement with an unrelated third party
to purchase a supply vessel, convert four of the Company's utility vessels
into four larger mini-supply vessels and assign ownership of four of the
Company's utility vessels to the unrelated third party. The conversion of
the four utility vessels into mini-supply vessels was completed in mid-
1995. In 1994, the Company also sold one utility boat and converted
another to a mini-supply vessel.
During 1992, the Company mobilized six marine vessels to Singapore for
work possibilities. Two of the vessels returned to the U.S. Gulf of Mexico
in 1993. The Company chartered the remaining four vessels in Singapore to
a 50% owned joint venture beginning in August 1993. The Singapore joint
venture was terminated in May 1994 and three of the vessels were mobilized
to the U.S. Gulf of Mexico. The remaining vessel, a utility boat, was sold
effective June 30, 1994. The charter fees from the joint venture were
recorded as operating revenue by the Company and the Company's 50% interest
in the results of the joint venture operations were reported in "Income
From Equity Affiliates." During most of 1993 the Company operated two
anchor handling vessels offshore Brazil. One vessel returned to the U.S.
Gulf of Mexico in the fourth quarter of 1993 and the other vessel returned
to the U.S. Gulf of Mexico in February 1994.
Revenues and operating margin for the Company's marine transportation
vessels increased by 2% and 19%, respectively, in 1995 as compared to 1994
due primarily to increased utilization for the Company's anchor handling
tug supply vessels. The 1995 operating margin also benefitted from exiting
the unprofitable utility vessel business in late 1994. The Company's
revenues and operating margin for its marine transportation vessels in 1994
increased by 7% and 20%, respectively, as compared to 1993 due primarily to
increased average day rates for the Company's U.S. Gulf of Mexico vessels
and improved work opportunities in the latter part of 1994 for three of the
Company's vessels that returned to the U.S. Gulf of Mexico from Singapore.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization
expense for the year ended December 31, 1995 increased by 13% from 1994 due
primarily to a full year of depreciation on four barge drilling rigs
delivered to Venezuela in July through September of 1994, a full year of
depreciation on two North Sea jackup rigs acquired in mid-February 1994,
depreciation on a North Sea jackup rig acquired in March 1995 and
depreciation associated with major modifications and enhancements of rigs
and vessels in 1995. See Note 3 to the Company's Consolidated Financial
Statements. The above increases were offset by reduced depreciation
associated with the sale of substantially all of the Company's land rigs in
1994.
In connection with the Company's rig upgrade program in 1995, the
remaining useful lives of certain of the Company's jackup rigs, for which
major enhancements were performed, were extended to twelve years from the
time each respective rig left the shipyard to better reflect their
remaining economic lives. See Note 1 to the Company's Consolidated
Financial Statements.
Depreciation and amortization expense for the year ended December 31,
1994 increased by 26% from 1993. The increase is primarily attributable to
a full year of depreciation and amortization related to the step-up in
basis of the assets acquired in the acquisition of Penrod Holding
Corporation ("Penrod"), a full year of depreciation on four barge drilling
rigs delivered to Venezuela in March through June of 1993, depreciation on
four additional barge drilling rigs delivered to Venezuela in July through
September of 1994 and depreciation on two North Sea jackup rigs acquired in
mid-February 1994. See Notes 1 and 2 to the Company's Consolidated
Financial Statements. Depreciation expense in 1994 was reduced by the sale
of substantially all of the Company's land rigs during 1994.
GENERAL AND ADMINISTRATIVE. General and administrative expense as a
percentage of revenue in 1995 was comparable to the 1994 level. General
and administrative expense for the year ended December 31, 1994 decreased
significantly from the prior year due primarily to the benefits realized in
1994 from integrating Penrod's general and administrative functions into
the Company following the acquisition of Penrod in August 1993.
OTHER INCOME (EXPENSE). Other income (expense) for each of the three
years in the period ending December 31, 1995 was as follows (in thousands):
1995 1994 1993
--------- --------- --------
Interest income . . . . . . . $ 6,310 $ 5,252 $ 2,816
Interest expense . . . . . . (16,564) (13,377) (9,917)
Income from equity affiliates 200 607 432
Other, net . . . . . . . . . 2,198 (1,233) (27)
--------- --------- --------
$ (7,856) $ (8,751) $(6,696)
========= ========= ========
The Company reported an increase in interest income in 1995 as compared
to 1994 primarily related to increased average interest rates more than
offsetting the effect of lower average cash balances. Interest income
increased in 1994 as compared to 1993 due to higher average cash levels and
increased interest rates.
Interest expense increased in 1995 as compared to 1994, and in 1994 as
compared to 1993, primarily due to costs associated with the financing of
four barge drilling rigs added in Venezuela in July through September of
1994 and costs associated with the financing of four barge drilling rigs
added in Venezuela in March through June of 1993. See Note 6 to the
Company's Consolidated Financial Statements.
The Company reported under "Other, net" income in 1995 as compared to
net expense in 1994 due primarily to gains on the sale of foreign currency
denominated securities and decreased foreign currency translation losses in
1995. "Other, net" expense of the Company increased in 1994 as compared to
1993 due primarily to non-recurring miscellaneous income items in 1993.
PROVISION FOR INCOME TAXES. For the years ended December 31, 1995,
1994 and 1993 the Company recorded provisions for income taxes of $3.4
million, $3.8 million and $5.9 million, respectively, resulting in
effective tax rates of 7.2%, 9.3% and 21.0%, respectively. The Company's
effective tax rate varies between years due primarily to the Company's
level of profitability, the expected utilization or non-utilization of U.S.
net operating loss carryforwards, foreign taxes and the recording of
deferred taxes. See Note 11 to the Company's Consolidated Financial
Statements.
MINORITY INTEREST. The minority interest of $2.2 million and $3.0
million in 1995 and 1994, respectively, consists of the minority
shareholder's interest in the net income of ENSCO Drilling (Caribbean),
Inc. ("Caribbean"). In March 1995, the Company purchased an additional 15%
equity interest in Caribbean from the minority shareholder decreasing the
minority shareholder's ownership interest to 15%. Minority interest of
$6.9 million for the year ended December 31, 1993 consists of $4.5 million
related to the preacquisition earnings of the 64% of Penrod which the
Company did not own prior to the acquisition of Penrod and $2.4 million
related to the minority shareholder's interest in the net income of
Caribbean. See Note 1 to the Company's Consolidated Financial Statements.
INCOME FROM DISCONTINUED OPERATIONS. Effective September 30, 1995,
the Company exited the technical services business through the sale of
substantially all of the assets of its wholly owned subsidiary, ENSCO
Technology Company, for total consideration of $19.8 million, including
liabilities of $1.9 million assumed by the purchaser. In 1993, the Company
completed a series of transactions that resulted in the sale of
substantially all of the Company's supply business, conducted by its wholly
owned subsidiary, ENSCO Tool and Supply Company, for net proceeds of
approximately $12.3 million. As a result of these transactions, the
Company's financial statements were reclassified to present the Company's
technical services and supply segments as discontinued operations for all
years presented. Included in the 1995 Income from Discontinued Operations
is a gain on the sale of the technical services business of $5.2 million
and income from operations of the technical services business for the nine
months ended September 30, 1995. The 1994 Income from Discontinued
Operations consists of income from operations of the technical services
business. Included in the 1993 Income from Discontinued Operations is a
gain on the sale of the supply business of $2.1 million and results of
operations of the supply business and technical services business.
Revenues from the technical services operations were $13.4 million, $16.5
million and $18.8 million in 1995, 1994 and 1993, respectively, and
revenues from the supply operations were $22.2 million in 1993. See Note
16 to the Company's Consolidated Financial Statements.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF MINORITY INTEREST.
Effective January 1, 1993, Penrod adopted Statement of Financial Accounting
Standards No. 106 ("SFAS No. 106"), "Employers' Accounting for
Postretirement Benefits Other Than Pensions," which requires the accrual,
during the year the employee renders the service, of the estimated cost of
providing postretirement non pension benefit payments. The cumulative
effect after taxes and minority interest on the Company resulting from
Penrod's adoption of SFAS No. 106 was $2.5 million ($.07 per share after
the reverse stock split). See Note 10 to the Company's Consolidated
Financial Statements.
PREFERRED STOCK DIVIDEND REQUIREMENTS. Preferred stock dividends
decreased to $2.1 million for the year ended December 31, 1994 as compared
to $4.3 million in 1993 due to the conversion/redemption of all of the
Company's preferred stock in August 1994. See Note 7 to the Company's
Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES.
CASH FLOW AND CAPITAL EXPENDITURES.
Year Ended December 31,
-----------------------------
1995 1994 1993
-------- -------- -------
Cash flow from operations . . . . . . $ 84,565 $109,217 $56,390
Capital expenditures, excluding the
acquisition of Penrod and discontinued
operations:
Sustaining . . . . . . . . . . . $ 11,335 $ 22,201 $11,910
Enhancements . . . . . . . . . . 109,706 10,301 -
New Construction . . . . . . . . 911 62,206 69,886
Acquisitions . . . . . . . . . . 21,278 55,650 -
-------- -------- -------
$143,230 $150,358 $81,796
======== ======== =======
Cash flow from operations in 1995 as compared to 1994 decreased by
$24.7 million, or 23%, due primarily to an increase in accounts receivable
offset partially by improved operating results. The increase in accounts
receivable is due primarily to increased revenue levels at the end of 1995
as compared to the end of 1994 and the Company assuming operation,
effective January 1, 1995, of two North Sea jackup rigs that previously
operated under bareboat charter contracts for which the bareboat charter
fees were paid in advance. Cash flow from operations in 1994 increased by
$52.8 million, or 94%, compared to 1993. The increase in 1994 cash flow is
primarily a result of improved operating results and a full year's
contribution from the cash flow of the ex-Penrod operations.
The Company's consolidated statement of cash flows for the year ended
December 31, 1993 includes the cash and cash equivalents acquired in the
acquisition of Penrod in August 1993, plus the cash provided by operating
activities of Penrod subsequent to the acquisition. The cash flows from
investing and financing activities of Penrod subsequent to the acquisition,
including capital expenditures for property and equipment, long-term
borrowings, and repayments of long-term borrowings, are also included in
the Company's consolidated statement of cash flows for the year ended
December 31, 1993. The cash provided by operating activities of Penrod
prior to the acquisition of Penrod and the cash flows from investing and
financing activities of Penrod prior to the acquisition of Penrod have not
been included in the Company's consolidated statement of cash flows. See
Note 2 to the Company's Consolidated Financial Statements.
The Company's capital expenditures for the year ended December 31, 1995
included $109.7 million for modification and enhancements of rigs and
vessels and $12.8 million associated with the purchase of a jackup rig
located in the North Sea. Capital expenditures for 1994 included $62.2
million for the construction of four barge drilling rigs delivered for
operation in Venezuela in July through September of 1994 and $55.7 million
for the purchase of two jackup rigs located in the North Sea. The
Company's capital expenditures for the year ended December 31, 1993
included $65.7 million in connection with the construction of four barge
drilling rigs that commenced operations in Venezuela in 1993.
Management anticipates that capital expenditures in 1996, excluding any
amounts associated with Dual, will be approximately $30.0 million for
existing operations, $13.0 million related to a deferred purchase payment
on a North Sea jackup rig acquired in March 1995 and $70.0 million for
upgrades and enhancements of rigs and vessels. The Company may spend
additional funds to acquire rigs or vessels in 1996, depending on market
conditions and opportunities.
During 1994, the Company sold substantially all of its land rig
operations for aggregate proceeds of $23.0 million, consisting of cash, a
promissory note which was repaid prior to December 31, 1994 and
receivables.
FINANCING AND CAPITAL RESOURCES. The Company's long-term debt,
total capital and debt to capital ratios are summarized below (in
thousands, except percentages):
At December 31,
----------------------------
1995 1994 1993
-------- -------- --------
Long-term debt . . . . . . . . . . $159,201 $162,466 $125,983
Total capital . . . . . . . . . . . 690,450 650,416 580,885
Long-term debt to total capital . . 23.1% 25.0% 21.7%
The decrease in long-term debt in 1995 as compared to 1994 is due
primarily to scheduled repayments offset partially by increased borrowings
under an amended and restated loan arrangement. See Note 6 to the
Company's Consolidated Financial Statements. The total capital of the
Company increased in 1995 as compared to 1994 due primarily to the
profitability of the Company offset partially by repurchases of the
Company's common stock. See Note 8 to the Company's Consolidated Financial
Statements.
The increase in long-term debt in 1994 as compared to 1993 primarily
relates to an additional $76.5 million borrowed by Caribbean, on a non-
recourse basis to the Company, in connection with the construction of four
barge drilling rigs which were completed and placed into service in the
third quarter of 1994. This increase in long-term debt was partially
offset by scheduled repayments and the redemption of the Company's
convertible subordinated debentures in March 1994. The total capital of
the Company increased in 1994 as compared to 1993 due primarily to the net
increase in long-term debt as discussed above and the profitability of the
Company.
On January 25, 1996, the Company entered into a letter of intent to
acquire Dual, subject to certain conditions. Under the proposed
transaction, Dual's common stockholders would receive 0.625 shares of the
Company's common stock for each share of Dual common stock, which would
result in the issuance of approximately 9.9 million shares of the Company's
common stock. The transaction is subject to execution of definitive
agreements, approval by the stockholders of Dual and requisite governmental
and other approvals. Subject to the satisfaction of these conditions,
closing of the transaction is expected before June 30, 1996.
The Company had a $64.0 million undrawn revolving line of credit at
December 31, 1995. The revolver is reduced semi-annually by $6.0 million
with the remaining line expiring in October 2001. See Note 6 to the
Company's Consolidated Financial Statements.
In August 1994, the Company issued a redemption notice for the
2,839,110 outstanding shares of its $1.50 Cumulative Convertible
Exchangeable Preferred Stock ("$1.50 Preferred Stock"), which was also the
number of shares outstanding at December 31, 1993. Holders of
substantially all of the $1.50 Preferred Stock elected to convert each of
their shares into approximately 1.786 shares of the Company's common stock.
See Note 7 to the Company's Consolidated Financial Statements.
The Company's liquidity position is summarized in the table below (in
thousands, except ratios):
At December 31,
----------------------------
1995 1994 1993
-------- -------- --------
Cash and short-term investments . . $ 82,064 $153,720 $128,057
Working capital . . . . . . . . . . 78,945 129,172 124,587
Current ratio . . . . . . . . . . . 1.9 2.5 3.0
Based on current energy industry conditions, management believes cash
flow from operations, the Company's existing credit facility and the
Company's working capital should be sufficient to fund the Company's short
and long-term liquidity needs.
OTHER MATTERS.
In 1995, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," which did not have an impact upon
the Company. As required, the Company evaluates the realizability of its
long-lived assets, including property and equipment and goodwill, based
upon expectations of undiscounted cash flows and operating income.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock-Based Compensation," which establishes accounting and
reporting standards for various stock based compensation plans. SFAS No.
123 encourages the adoption of a fair value based method of accounting for
employee stock options, but permits continued application of the accounting
method prescribed by Accounting Principles Board Opinion No. 25 ("Opinion
25"), "Accounting for Stock Issued to Employees." Entities that continue
to apply the provisions of Opinion 25 must make pro forma disclosures of
net income and earnings per share as if the fair value based method of
accounting had been applied. The Company will adopt SFAS No. 123 in 1996
and currently expects to continue to account for its employee stock options
in accordance with the provisions of Opinion 25.
On February 21, 1995, the Board of Directors of the Company adopted a
shareholder rights plan and declared a dividend of one preferred share
purchase right (a "Right") for each share of the Company's common stock
outstanding on March 6, 1995. Each Right initially entitles its holder to
purchase 1/100th of a share of the Company's Series A Junior Participating
Preferred Stock for $50.00, subject to adjustment. The Rights generally
will not become exercisable until 10 days after a public announcement that
a person or group has acquired 15% or more of the Company's common stock
(thereby becoming an "Acquiring Person") or the commencement of a tender or
exchange offer upon consummation of which such person or group would own
15% or more of the Company's common stock (the earlier of such dates being
called the "Distribution Date"). Rights will be issued with all shares of
the Company's common stock issued from March 6, 1995 to the Distribution
Date. Until the Distribution Date, the Rights will be evidenced by the
certificates representing the Company's common stock and will be
transferrable only with the Company's common stock. If any person or group
becomes an Acquiring Person, each Right, other than Rights beneficially
owned by the Acquiring Person (which will thereupon become void), will
thereafter entitle its holder to purchase, at the Right's then current
exercise price, shares of the Company's common stock having a market value
of two times the exercise price of the Right. If, after a person or group
has become an Acquiring Person, the Company is acquired in a merger or
other business combination transaction or 50% or more of its assets or
earning power are sold, each Right (other than Rights owned by an Acquiring
Person which will have become void) will entitle its holder to purchase, at
the Rights then current exercise price, that number of shares of common
stock of the person with whom the Company has engaged in the foregoing
transaction (or its parent) which at the time of such transaction will have
a market value of two times the exercise price of the Right. After any
person or group has become an Acquiring Person, the Company's Board of
Directors may, under certain circumstances, exchange each Right (other than
Rights of the Acquiring Person) for shares of the Company's common stock
having a value equal to the difference between the market value of the
shares of the Company's common stock receivable upon exercise of the Right
and the exercise price of the Right. The Company will generally be
entitled to redeem the Rights for $.01 per Right at any time until 10 days
after a public announcement that a 15% position has been acquired. The
Rights expire on February 21, 2005.
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT ACCOUNTANTS
----------------------------------
To the Board of Directors and Stockholders of ENSCO International
Incorporated
In our opinion, based upon our audits and the report of other auditors,
the accompanying consolidated balance sheet and the related consolidated
statements of income and of cash flows present fairly, in all material
respects, the financial position of ENSCO International Incorporated and
its subsidiaries at December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of the Company's Venezuelan operations for the year ended
December 31, 1993, which statements reflect total revenues of $28,970,000
for the year then ended. Those statements were audited by other auditors
whose report thereon has been furnished to us, and our opinion expressed
herein, insofar as it relates to the amounts included for the Company's
Venezuelan operations, is based solely on the report of the other auditors.
We conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits and report of other
auditors provide a reasonable basis for the opinion expressed above.
As discussed in Note 10, in 1993 the Company changed its method of
accounting for postretirement benefits other than pensions.
Dallas, Texas
February 2, 1996
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands, except for share amounts)
December 31,
-------------------
1995 1994
-------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . $ 77,064 $147,851
Short-term investments . . . . . . . . . . . . 5,000 5,869
Accounts and notes receivable, net . . . . . . 60,796 36,479
Prepaid expenses and other . . . . . . . . . . 22,893 17,593
Net assets of discontinued operations . . . . . -- 7,862
Total current assets . . . . . . . . . . . . 165,753 215,654
INVESTMENT IN EQUITY AFFILIATE . . . . . . . . . -- 6,970
PROPERTY AND EQUIPMENT, AT COST . . . . . . . . . 818,266 652,573
Less accumulated depreciation . . . . . . . . . 185,334 129,129
Property and equipment, net . . . . . . . . . 632,932 523,444
OTHER ASSETS . . . . . . . . . . . . . . . . . . 22,766 27,022
$821,451 $773,090
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . $ 8,936 $ 12,509
Accrued liabilities . . . . . . . . . . . . . . 45,820 33,223
Current maturities of long-term debt . . . . . 32,052 40,750
Total current liabilities . . . . . . . . . . 86,808 86,482
LONG-TERM DEBT . . . . . . . . . . . . . . . . . 159,201 162,466
DEFERRED INCOME TAXES . . . . . . . . . . . . . . 26,800 22,989
OTHER LIABILITIES . . . . . . . . . . . . . . . . 17,393 13,203
COMMITMENTS AND CONTINGENCIES . . . . . . . . . .
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 125.0 million
shares authorized, 66.9 million and 66.6
million shares issued . . . . . . . . . . . . 6,689 6,657
Additional paid-in capital . . . . . . . . . . 615,644 612,318
Accumulated deficit . . . . . . . . . . . . . (23,598) (71,657)
Restricted stock (unearned compensation) . . . (5,263) (5,518)
Cumulative translation adjustment . . . . . . . (1,086) (1,210)
Treasury stock at cost, 6.3 million and 5.6
million shares . . . . . . . . . . . . . . . (61,137) (52,640)
Total stockholders' equity . . . . . . . . 531,249 487,950
$821,451 $773,090
======== ========
The accompanying notes are an integral part of these financial statements.
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
Year Ended December 31,
----------------------------
1995 1994 1993
-------- -------- --------
REVENUES
Contract drilling . . . . . . . . . . $240,775 $207,781 $192,120
Marine transportation . . . . . . . . 38,339 37,670 35,290
279,114 245,451 227,410
OPERATING EXPENSES
Contract drilling . . . . . . . . . . 132,558 110,224 114,624
Marine transportation . . . . . . . . 23,402 25,105 24,832
Depreciation and amortization . . . . 58,390 51,798 41,181
General and administrative . . . . . . 9,569 9,252 11,726
223,919 196,379 192,363
OPERATING INCOME . . . . . . . . . . . . 55,195 49,072 35,047
OTHER INCOME (EXPENSE)
Interest income . . . . . . . . . . . 6,310 5,252 2,816
Interest expense . . . . . . . . . . . (16,564) (13,377) (9,917)
Income from equity affiliates . . . . 200 607 432
Other, net . . . . . . . . . . . . . . 2,198 (1,233) (27)
(7,856) (8,751) (6,696)
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES, MINORITY INTEREST
AND CUMULATIVE EFFECT OF ACCOUNTING
CHANGE . . . . . . . . . . . . . . . 47,339 40,321 28,351
PROVISION FOR INCOME TAXES . . . . . . . (3,397) (3,759) (5,942)
MINORITY INTEREST . . . . . . . . . . . (2,179) (2,984) (6,932)
INCOME FROM CONTINUING OPERATIONS . . . . 41,763 33,578 15,477
INCOME FROM DISCONTINUED OPERATIONS . . 6,296 3,593 3,556
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE . . . . . . . . . . 48,059 37,171 19,033
CUMULATIVE EFFECT OF ACCOUNTING CHANGE,
NET OF MINORITY INTEREST . . . . . . -- -- (2,542)
NET INCOME . . . . . . . . . . . . . . . 48,059 37,171 16,491
PREFERRED STOCK DIVIDEND REQUIREMENTS . -- (2,135) (4,260)
INCOME APPLICABLE TO COMMON STOCK . . . . $ 48,059 $ 35,036 $ 12,231
INCOME PER COMMON SHARE:
Continuing operations . . . . . . . . $ .69 $ .55 $ .28
Discontinued operations . . . . . . . .10 .06 .09
Cumulative effect of accounting change -- -- (.07)
$ .79 $ .61 $ .30
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING . . . . . . . . . . . . . 60,527 57,843 40,325
The accompanying notes are an integral part of these financial statements.
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Year Ended December 31,
------------------------------------------
1995 1994 1993
-------- -------- --------
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,059 $ 37,171 $ 16,491
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . 58,390 51,798 27,556
Deferred income tax provision (benefit) . . . . . . . . . . . . (431) (878) 3,199
Amortization of other assets . . . . . . . . . . . . . . . . . . 3,383 3,205 2,627
Gain on sale of discontinued operations . . . . . . . . . . . . (5,161) -- (2,122)
Net cash provided by discontinued operations . . . . . . . . . . 135 2,859 3,626
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,221) 2,689 1,422
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable . . . . . . . . . (23,438) 11,964 13,851
(Increase) decrease in prepaid expenses and other . . . . . . 4,314 (7,546) (2,113)
Increase (decrease) in accounts payable . . . . . . . . . . . (3,834) 5,287 (1,781)
Increase (decrease) in accrued and other liabilities . . . . 4,369 2,668 (6,366)
Net cash provided by operating activities . . . . . . . . 84,565 109,217 56,390
INVESTING ACTIVITIES
Additions to property and equipment . . . . . . . . . . . . . . . . (143,230) (150,358) (81,796)
Acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . -- -- 36,819
Net proceeds from sales of discontinued operations . . . . . . . . . 11,790 652 12,275
(Purchase) sale of short-term investments, net . . . . . . . . . . . 869 (5,869) --
Proceeds from disposition of assets . . . . . . . . . . . . . . . . 1,125 23,160 372
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,383) (1,835) (4,889)
Net cash used by investing activities . . . . . . . . . . (131,829) (134,250) (37,219)
FINANCING ACTIVITIES
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . 24,043 114,698 159,113
Reduction of long-term borrowings . . . . . . . . . . . . . . . . . (40,749) (64,641) (72,364)
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . (7,211) (2,426) --
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . -- (2,135) (4,260)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394 (668) 921
Net cash provided (used) by financing activities . . . . . (23,523) 44,828 83,410
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . (70,787) 19,795 102,581
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR . . . . . . . . . . . . . . 147,851 128,056 25,475
CASH AND CASH EQUIVALENTS, END OF YEAR . . . . . . . . . . . . . . . . . $ 77,064 $147,851 $128,056
The accompanying notes are an integral part of these financial statements.
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
ORGANIZATION AND BASIS OF PRESENTATION
ENSCO International Incorporated (the "Company"), a Delaware
corporation, was incorporated in August 1987, and is the successor by
merger to Blocker Energy Corporation. At the Company's Annual Meeting of
Stockholders held on May 23, 1995, the stockholders approved the change in
the name of the Company from Energy Service Company, Inc. to ENSCO
International Incorporated. The accompanying consolidated financial
statements include the accounts of the Company and its majority owned
subsidiaries. The Company's investments in 50% or less owned affiliates
are accounted for under the equity method. See Note 4 "Investment in
Equity Affiliate." All significant intercompany accounts and transactions
have been eliminated.
In August 1993, the Company completed the step acquisition (the
"Penrod Acquisition") of Penrod Holding Corporation ("Penrod"). See Note
2 "Acquisition." The Company has included the income from continuing
operations of Penrod in its consolidated statement of income beginning
January 1, 1993 and has presented the preacquisition earnings related to
the 64% of Penrod which it did not own prior to August 1993 as Minority
Interest.
CONSOLIDATED STATEMENT OF CASH FLOWS
The Company's consolidated statement of cash flows for the year ended
December 31, 1993 includes the cash and cash equivalents acquired in the
Penrod Acquisition, net of acquisition costs, plus the cash provided by
operating activities of Penrod subsequent to the Penrod Acquisition. The
cash flows from investing and financing activities of Penrod subsequent to
the Penrod Acquisition, including additions to property and equipment,
long-term borrowings, and repayments of long-term borrowings, are also
included in the Company's consolidated statement of cash flows for the year
ended December 31, 1993. The cash provided by operating activities of
Penrod prior to the Penrod Acquisition and the cash flows from investing
and financing activities of Penrod prior to the Penrod Acquisition have not
been included in the Company's consolidated statement of cash flows for the
year ended December 31, 1993.
For purposes of the consolidated balance sheet and statement of cash
flows, the Company considers highly liquid debt instruments to be cash
equivalents if they have maturities of three months or less at the date of
purchase.
FOREIGN CURRENCY TRANSLATION
The U.S. dollar is the functional currency of the majority of the
Company's foreign subsidiaries. The financial statements of these
subsidiaries, as well as the financial statements of certain foreign
subsidiaries that operate in highly inflationary economies, are remeasured
in U.S. dollars based on a combination of both current and historical
exchange rates. Gains and losses caused by the remeasurement process
applicable to these foreign subsidiaries are reflected in the consolidated
statement of income. Translation losses were $422,000, $1.3 million and
$1.4 million for the years ended December 31, 1995, 1994 and 1993,
respectively.
SHORT-TERM INVESTMENTS
Short-term investments are comprised of debt instruments having
maturities of greater than three months and less than one year at the date
of purchase and are stated at cost due to the Company's intent and ability
to hold the investments to maturity. The aggregate fair value of short-
term investments at December 31, 1995 approximates cost. As of December
31, 1995, short-term investments consisted of debt instruments issued by U.
S. government agencies.
PROPERTY AND EQUIPMENT
Depreciation on drilling rigs and related equipment and marine vessels
acquired after 1990 is computed using the straight line method over
estimated useful lives ranging from 4 to 15 years. Depreciation for other
equipment and for buildings and improvements is computed using the straight
line method over estimated useful lives ranging from 2 to 6 years and 2 to
30 years, respectively. Depreciation on drilling rigs and related
equipment and marine vessels acquired prior to 1991 is computed using the
units-of-production method over estimated useful lives ranging from 10 to
15 years. Under the units-of-production method, depreciation is based on
the utilization of the drilling rigs and vessels with a minimum provision
when the rigs or vessels are idle.
In connection with the Company's rig upgrade program in 1995, the
remaining useful lives of certain of the Company's jackup rigs, for which
major enhancements were performed, has been extended to twelve years from
the time each respective rig left the shipyard to better reflect their
remaining economic lives. The effect of this change in estimate was to
increase net income for the year ended December 31, 1995 by $892,000, or
$.01 per share.
Maintenance and repair costs are charged to expense as incurred.
Major renewals and improvements are capitalized. Upon retirement or
replacement of assets, the related cost and accumulated depreciation are
removed from the accounts and the resulting gain or loss is included in
income.
GOODWILL
Goodwill arising from the acquisition of Penrod in 1993 and Argosy
Offshore, Ltd. in 1991 is amortized on the straight-line basis over periods
of 40 years and 10 years, respectively. See Note 2 "Acquisition." During
1995, goodwill from the Penrod Acquisition was reduced primarily for
adjustments to deferred taxes. See Note 11 "Income Taxes." Goodwill, net
of accumulated amortization, was $7.3 million and $21.2 million at December
31, 1995 and 1994, respectively, and is included in Other Assets.
IMPAIRMENT OF ASSETS
In 1995, the Company adopted Statement of Financial Accounting
Standards No. 121 ("SFAS No. 121"), "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of," which did not
have an impact upon the Company. As required, the Company evaluates the
realizability of its long-lived assets, including property and equipment
and goodwill, based upon expectations of undiscounted cash flows and
operating income.
INCOME TAXES
In 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes," the
effects of which were applied retroactively to the beginning of 1990. SFAS
No. 109 requires the Company to compute deferred income taxes based upon
the amount of taxes payable in future years after considering changes in
tax rates and other statutory provisions that will be in effect in those
years. The provision for income taxes includes federal, foreign, state and
local income taxes currently payable and those deferred because of
temporary differences between the financial statement and tax bases of
assets and liabilities. See Note 11 "Income Taxes."
MINORITY INTEREST
ENSCO Drilling (Caribbean), Inc. ("Caribbean") has been included in
the Company's consolidated financial statements for all years presented.
In March 1995, the Company purchased an additional 15% equity interest in
Caribbean from the minority shareholder. The purchase, which was effective
January 1, 1995, increased the Company's ownership interest in Caribbean
from 70% to 85%. In consideration for the additional 15% interest in
Caribbean acquired, the Company makes payments to the minority shareholder
that are based upon, in general, the utilization of existing Caribbean
rigs. In addition, in the event of a future sale of any rigs currently
owned by Caribbean, the minority shareholder is entitled to an additional
15% of the net proceeds upon sale. The minority shareholders' interest
included in the Company's consolidated balance sheet at December 31, 1995
and 1994 was $5.2 million and $4.1 million, respectively, and is included
in Other Liabilities.
The Company's consolidated financial statements include Penrod, which
was a 36% owned affiliate prior to the Company's acquisition of the
remaining interest in August 1993. See Note 2 "Acquisition." Minority
interest expense for the year ended December 31, 1993 included $4.5 million
related to the preacquisition earnings of Penrod.
PERVASIVENESS OF ESTIMATES
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
related revenues and expenses, and disclosure of gain and loss
contingencies at the date of the financial statements. Actual results
could differ from those estimates.
INCOME PER COMMON SHARE
Income per common share has been computed based on the weighted
average number of common shares outstanding during the applicable period
after recognition of minority interest charges and preferred stock dividend
requirements. All weighted average share and per share amounts have been
restated to reflect the one share for four shares reverse stock split
("reverse stock split") which was effective June 1, 1994. See Note 8
"Stockholders' Equity."
RECLASSIFICATIONS
Certain previously reported amounts have been reclassified to conform
to the 1995 presentation.
2. ACQUISITION
-----------
In August 1993, the Company acquired the remaining 64% of the common
stock of Penrod not then beneficially owned by the Company. In exchange
for the common stock of Penrod, the Company issued 25.5 million net shares
(102.1 million net shares prior to the reverse stock split) of its common
stock valued at approximately $227.9 million. The exchange was based upon
one common share of the Company's common stock (after the reverse stock
split) for each share of Penrod common stock.
The Company accounted for the Penrod Acquisition, under the rules of
purchase accounting, as a step acquisition. Under a step acquisition, the
acquiring company purchases its controlling interest in the acquired
company through a series of transactions at different time intervals. A
partial step-up or step-down in basis of the acquired company's assets is
recognized in the consolidated financial statements of the acquirer each
time an additional interest is acquired. The purchase by the Company of
the remaining 64% of Penrod was recorded at the price paid at the time of
purchase, while the prior 36% ownership of Penrod obtained by the Company
in prior transactions remained at historical cost.
3. PROPERTY AND EQUIPMENT
----------------------
Property and equipment at December 31, 1995 and 1994 consisted of the
following (in thousands):
1995 1994
-------- --------
Drilling rigs and equipment . . $713,311 $562,722
Marine vessels . . . . . . . . . 77,795 66,729
Other . . . . . . . . . . . . . 11,154 9,871
Work in progress . . . . . . . . 16,006 13,251
-------- --------
$818,266 $652,573
======== ========
In March 1995, the Company purchased a jackup rig located in the North
Sea and simultaneously entered into a bareboat charter agreement with the
seller, which is expected to terminate in February 1996. The purchase
price consisted of $12.8 million paid at closing and an additional $13.0
million to be paid at the end of the bareboat charter period.
In November 1995, the Company purchased the remaining 50% interest in
a jackup rig from its joint venture partner in Mexico. See Note 4
"Investment in Equity Affiliate." In December 1995, the Company purchased
six supply vessels in two separate transactions for aggregate consideration
of $8.8 million. Four of the supply vessels acquired were previously
operated under operating lease agreements. See Note 5 "Leases." The
Company's additions to property and equipment for the year ended December
31, 1995 also included $109.7 million in connection with major
modifications and enhancements of rigs and vessels.
In February 1994, the Company purchased two jackup rigs located in the
North Sea and simultaneously entered into bareboat charter agreements with
the seller, which were terminated on December 31, 1994. The purchase price
consisted of $50.0 million paid at closing, $4.2 million which was credited
against the bareboat charter payments during the fourth quarter of 1994 and
$1.8 million paid in December 1994 upon termination of the bareboat charter
contracts.
The Company's additions to property and equipment for the years ended
December 31, 1994 and 1993 included $62.2 million and $65.7 million,
respectively, in connection with the construction of eight barge drilling
rigs, of which four were delivered to Venezuela in March through June of
1993 and the remaining four were delivered to Venezuela in July through
September of 1994. The rigs immediately commenced operations under five-
year drilling contracts with Lagoven, S.A. ("Lagoven"), an affiliate of the
Venezuelan national oil company. The contracts afford Lagoven the option
to buy the barge drilling rigs during or at the end of the five-year
contracts.
In November and December of 1994, the Company sold three of its land
rigs and related equipment located in the Middle East for $7.5 million. In
June 1994, the Company completed the sale of its United States land rig
operations consisting of twelve land rigs and related equipment, as well as
an office building and yard, for $15.5 million, consisting of cash, a
promissory note and receivables. No significant gains or losses resulted
from the 1994 land rig sales. In November 1993, the Company transferred
three inactive land rigs to work in progress in connection with the
construction of four barge drilling rigs which began operating in July
through September of 1994 in Venezuela. The rigs had a net book value of
$6.8 million at the date of transfer to work in progress.
4. INVESTMENT IN EQUITY AFFILIATE
------------------------------
Investment in equity affiliate at December 31, 1994 consisted
primarily of the Company's 50% interest in a joint venture that owned a
jackup rig operating in the territorial waters of Mexico. In November
1995, the joint venture was effectively dissolved and the Company purchased
the joint venture partner's interest in the jackup rig for total
consideration of $4.2 million. The Company's investment in the joint
venture of $6.6 million, at the date of the purchase, was reclassified to
property and equipment in the Company's consolidated balance sheet. For
the years ended December 31, 1995, 1994 and 1993, the Company recorded
income of $200,000, $700,000 and $561,000, respectively, in Income from
Equity Affiliates from its beneficial ownership in the joint venture. The
Company received distributions from the joint venture of $425,000 in 1995
and $2.2 million in 1994, of which $1.1 million of the 1994 distribution
represented a return of capital. No distributions were received from the
joint venture in 1993.
5. LEASES
------
The Company is obligated under leases for certain of its offices and
equipment. In December 1995, the Company purchased four supply vessels
which were previously operated pursuant to ten-year operating lease
agreements. See Note 3 "Property and Equipment."
Rental expense relating to operating leases was $3.1 million, $3.3
million and $3.7 million for the years ended December 31, 1995, 1994 and
1993, respectively. Future minimum rental payments under the Company's
noncancellable operating lease obligations having initial or remaining
lease terms in excess of one year are as follows: $2.7 million in 1996;
$2.4 million in 1997; $1.9 million in 1998; $1.3 million in 1999; $680,000
in 2000 and $100,000 thereafter.
6. LONG-TERM DEBT
--------------
Long-term debt at December 31, 1995 and 1994 consists of the following
(in thousands):
1995 1994
-------- --------
Secured term loans
(non-recourse to the Company) . . . $102,709 $127,799
Secured term loans . . . . . . . . . . . 88,544 75,417
-------- --------
191,253 203,216
Less current maturities . . . . . . . . (32,052) (40,750)
-------- --------
Total long-term debt . . . . . . . . . . $159,201 $162,466
======== ========
A subsidiary of the Company entered into two financing arrangements,
totalling $143.0 million, with a subsidiary of a Japanese corporation in
connection with the construction of eight barge drilling rigs delivered to
Venezuela in 1993 and 1994. The financing arrangements consist of eight
secured term loans, one for each barge drilling rig. The eight secured
term loans bear interest at an average fixed rate of 8.17% and are each
repayable in 60 equal monthly installments of principal and interest ending
in mid-1998 through the first part of 2000. The term loans are each
secured by a specific barge drilling rig, which had a combined net book
value of $124.2 million at December 31, 1995, and the charter contract on
each rig. The secured term loans are expected to be repaid from the cash
flow generated by the eight barge drilling rigs and are without recourse to
the Company.
In September 1995, the Company amended and restated its original
$100.0 million loan arrangement, which consisted of a $60.0 million secured
term loan and a $40.0 million revolving line of credit, with a group of
large international banks. The amended and restated facility is structured
as a $130.0 million, six year, revolving credit facility ("Facility"), of
which $66.0 million was drawn as of December 31, 1995. The Company incurs
a 0.5% annual commitment fee on the undrawn portion of the Facility.
Availability under the Facility is reduced by $6.0 million on a semi-annual
basis with the remaining outstanding balance due in October 2001. The
Facility carries a floating interest rate tied to London InterBank Offered
Rates ("LIBOR") for which the margin on the Facility may increase by up to
0.5% based upon the Company's debt ratio. As of December 31, 1995, the
interest rate on the Facility was 7.16% per annum. The Company has entered
into interest rate swap agreements with two of the lender banks that
effectively change the interest rate on $32.0 million of the outstanding
Facility from a floating rate to a fixed rate of 7.48%, absent any increase
in the margin level of the Facility associated with the Company's debt
ratio, through October 2000. In January 1996, the Company entered into
another interest rate swap agreement, effective April 1996, with one of
the lender banks that effectively changes the interest rate on an
additional $16.0 million of the outstanding Facility from a floating rate
to a fixed rate of 6.84%, absent any increase in the margin level of the
Facility associated with the Company's debt ratio, through October 2000.
The Facility is collateralized by certain of the Company's jackup rigs,
which had a combined net book value of $278.8 million at December 31, 1995.
The facility requires that the Company maintain specified minimum balances
of cash and working capital, maintain certain operating cash flows and not
exceed a certain debt to total asset ratio, and it includes certain
limitations on dividends and requires that the appraised value of the rigs
securing the facility exceed the amount drawn under the facility by a
specified factor.
In October 1993, the Company entered into a $25.0 million loan
agreement with a financial institution. The seven year secured term loan
bears interest at a fixed rate of 7.91% per annum, repayable in 28 equal
quarterly installments ending October 15, 2000. The term loan is
collateralized by certain of the Company's marine transportation vessels
which had a combined net book value of $38.5 million at December 31, 1995.
The loan agreement requires that the Company maintain a specified minimum
tangible net worth and that the Company not exceed a certain ratio of
liabilities to tangible net worth.
In December 1995, in connection with the purchase of four supply
vessels that were previously leased, the Company entered into a $4.7
million loan agreement with the seller. The five year secured term loan
bears interest at a fixed rate of 7.75% per annum, repayable in 20 equal
quarterly installments ending January 2001. The term loan is
collateralized by the four supply vessels purchased which had a combined
net book value of $4.5 million at December 31, 1995.
In March 1994, the Company redeemed its convertible subordinated
debentures consisting of $5.1 million principal amount of 8.25% convertible
subordinated debentures.
The Company maintains legally restricted cash balances with a bank as
collateral for a letter of credit issued by the bank related to an
insurance arrangement. These restricted cash balances aggregated $1.3
million at December 31, 1995 and are included in prepaid expenses and
other.
Maturities of long-term debt are as follows: $32.1 million in 1996;
$34.7 million in 1997; $29.5 million in 1998; $23.3 million in 1999; $5.5
million in 2000 and $66.2 million thereafter.
7. PREFERRED STOCK
---------------
In August 1994, the Company issued a redemption notice for the
2,839,110 outstanding shares of its $1.50 Cumulative Convertible
Exchangeable Preferred Stock ("$1.50 Preferred Stock"), which was also the
number of shares outstanding at December 31, 1993. Holders of 2,807,147
shares of the $1.50 Preferred Stock elected to convert each of their shares
into approximately 1.786 shares of the Company's common stock. Such
conversion resulted in the issuance of 5,012,762 shares of the Company's
common stock. Holders of the remaining 31,963 shares of the $1.50
Preferred Stock elected to redeem their shares which resulted in a cash
payment of $799,000. Dividends on the $1.50 Preferred Stock were
cumulative and payable quarterly when declared at a rate of $1.50 per annum
per share.
8. STOCKHOLDERS' EQUITY
--------------------
The Company's stockholders approved a one share for four shares
reverse stock split of the Company's common stock at the Company's Annual
Meeting of Stockholders held on May 24, 1994. All references in the
financial statements to weighted average common shares outstanding, income
per common share amounts and the 1994 share amounts in the table below have
been restated to reflect the reverse stock split. The aggregate par value
of the Company's common stock was reduced and additional paid-in capital
was increased to reflect the decreased aggregate par value of the Company's
common stock outstanding subsequent to the reverse stock split.
In December 1994, the Company's Board of Directors authorized the
repurchase of up to $50.0 million of the Company's common stock. As of
December 31, 1995, the Company had repurchased 800,800 shares of its common
stock, of which 201,400 were repurchased in December 1994 and 599,400
shares were repurchased in the first half of 1995. No shares were
repurchased in the second half of 1995. Management anticipates that any
future repurchases of the Company's common stock will be funded from the
Company's cash flow from operations and working capital.
At the Company's Annual Meeting of Stockholders held on August 10,
1993, the Company's stockholders approved an increase in the number of
authorized shares of common stock ($.10 par value) of the Company from 62.5
million (250.0 million prior to the reverse stock split) to 125.0 million
(500.0 million prior to the reverse stock split).
In March 1988, in connection with borrowings under a secured loan
facility, the Company issued warrants to purchase 625,000 shares (2.5
million shares prior to the reverse stock split) at prices between $15.00
and $18.00 per share ($3.75 and $4.50 per share prior to the reverse stock
split). The warrants were extinguished in October 1993 at the time the
secured loans were repaid.
A summary of activity in the various stockholders' equity accounts for
each of the three years in the period ended December 31, 1995 is as follows
(in thousands):
RESTRICTED
COMMON STOCK ADDITIONAL STOCK
------------------------ PAID-IN ACCUMULATED (UNEARNED TREASURY
SHARES AMOUNT CAPITAL DEFICIT COMPENSATION) STOCK
--------- --------- --------- ----------- ------------- ---------
(in thousands)
BALANCE, December 31, 1992 122,100 $ 12,210 $259,636 $(118,924) $(6,546) $ (2,634)
Net income -- -- -- 16,491 -- --
Common stock issued under
employee benefits plans, net 437 44 1,026 -- (55) (351)
Common stock issued
in acquisition 122,212 12,221 260,438 -- -- (44,828)
Preferred stock dividends -- -- -- (4,260) -- --
Amortization of unearned
compensation -- -- -- -- 987 --
Reorganization adjustments -- -- 449 -- -- --
Exercise/extinguishment
of options/warrants 248 25 (774) -- -- --
BALANCE, December 31, 1993 244,997 24,500 520,775 (106,693) (5,614) (47,813)
Net income -- -- -- 37,171 -- --
Common stock issued under
employee benefits plans, net 309 31 3,491 -- (941) (2,401)
Preferred stock dividends -- -- -- (2,135) -- --
Amortization of unearned
compensation -- -- -- -- 1,037 --
Conversion of preferred stock 5,013 501 69,677 -- -- --
Repurchase of common stock -- -- -- -- -- (2,426)
Reverse stock split (183,748) (18,375) 18,375 -- -- --
BALANCE, December 31, 1994 66,571 6,657 612,318 (71,657) (5,518) (52,640)
Net income -- -- -- 48,059 -- --
Common stock issued under
employee benefits plans, net 320 32 3,326 -- (857) (1,286)
Repurchase of common stock -- -- -- -- -- (7,211)
Amortization of unearned
compensation -- -- -- -- 1,112 --
BALANCE, December 31, 1995 66,891 $ 6,689 $615,644 $ (23,598) $(5,263) $(61,137)
/TABLE
Foreign currency translation adjustments, which are accumulated as a
separate component of stockholders' equity, result from changes in the
exchange rate of certain foreign subsidiaries which maintain their
financial statements in the local currency. Translation adjustment activity
was insignificant for all years presented.
On February 21, 1995, the Board of Directors of the Company adopted a
shareholder rights plan and declared a dividend of one preferred share
purchase right (a "Right") for each share of the Company's common stock
outstanding on March 6, 1995. Each Right initially entitles its holder to
purchase 1/100th of a share of the Company's Series A Junior Participating
Preferred Stock for $50.00, subject to adjustment. The Rights generally
will not become exercisable until 10 days after a public announcement that
a person or group has acquired 15% or more of the Company's common stock
(thereby becoming an "Acquiring Person") or the commencement of a tender or
exchange offer upon consummation of which such person or group would own
15% or more of the Company's common stock (the earlier of such dates being
called the "Distribution Date"). Rights will be issued with all shares of
the Company's common stock issued from March 6, 1995 to the Distribution
Date. Until the Distribution Date, the Rights will be evidenced by the
certificates representing the Company's common stock and will be
transferrable only with the Company's common stock. If any person or group
becomes an Acquiring Person, each Right, other than Rights beneficially
owned by the Acquiring Person (which will thereupon become void), will
thereafter entitle its holder to purchase, at the Right's then current
exercise price, shares of the Company's common stock having a market value
of two times the exercise price of the Right. If, after a person or group
has become an Acquiring Person, the Company is acquired in a merger or
other business combination transaction or 50% or more of its assets or
earning power are sold, each Right (other than Rights owned by an Acquiring
Person which will have become void) will entitle its holder to purchase, at
the Rights then current exercise price, that number of shares of common
stock of the person with whom the Company has engaged in the foregoing
transaction (or its parent) which at the time of such transaction will have
a market value of two times the exercise price of the Right. After any
person or group has become an Acquiring Person, the Company's Board of
Directors may, under certain circumstances, exchange each Right (other than
Rights of the Acquiring Person) for shares of the Company's common stock
having a value equal to the difference between the market value of the
shares of the Company's common stock receivable upon exercise of the Right
and the exercise price of the Right. The Company will generally be
entitled to redeem the Rights for $.01 per Right at any time until 10 days
after a public announcement that a 15% position has been acquired. The
Rights expire on February 21, 2005.
9. EMPLOYEE BENEFIT PLANS
----------------------
EMPLOYEE STOCK OPTIONS
The Company has an employee stock option plan as part of the ENSCO
Incentive Plan (the "Incentive Plan"). The maximum number of shares with
respect to which awards may be made pursuant to the Incentive Plan is 6.3
million. Of the 6.3 million shares, a minimum of 625,000 are reserved for
issuance of incentive stock grants and a minimum of 625,000 are reserved
for issuance as profit sharing grants.
The exercise price of stock options under the Incentive Plan is the fair
market value of the stock at the date the option is granted. Accordingly,
no compensation expense is recognized by the Company with respect to such
grants. Non-qualified options are generally exercisable one year after
grant. Incentive stock options generally become exercisable in 25%
increments over a four-year period. To the extent not exercised, options
expire generally on the fifth anniversary of the date of grant.
A summary of stock option transactions, restated for the reverse stock
split, under the Incentive Plan is as follows (in thousands, except per
share amounts):
Outstanding December 31, 1992 . . . . . . . 1,046
Granted ($12.00 per share) . . . . . . 310
Exercised ($4.75 to $11.00 per share) (89)
Forfeited . . . . . . . . . . . . . . (192)
Outstanding December 31, 1993 . . . . . . . 1,075
Granted ($15.69 per share) . . . . . . 213
Exercised ($4.75 to $16.00 per share) (244)
Forfeited . . . . . . . . . . . . . . (39)
Outstanding December 31, 1994 . . . . . . . 1,005
Granted ($16.31 per share) . . . . . . 512
Exercised ($4.75 to $15.69 per share) (262)
Forfeited . . . . . . . . . . . . . . (134)
Outstanding December 31, 1995 . . . . . . . 1,121
At December 31, 1995, 377,000 options were exercisable at prices
ranging from $4.75 to $15.69 per share. Under the Incentive Plan, 2.3
million shares were available for grant as options or incentive grants at
December 31, 1995.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock-Based Compensation," which establishes accounting and
reporting standards for various stock based compensation plans. SFAS No.
123 encourages the adoption of a fair value based method of accounting for
employee stock options, but permits continued application of the accounting
method prescribed by Accounting Principles Board Opinion No. 25 ("Opinion
25"), "Accounting for Stock Issued to Employees." Entities that continue
to apply the provisions of Opinion 25 must make pro forma disclosures of
net income and earnings per share as if the fair value based method of
accounting had been applied. The Company will adopt SFAS No. 123 in 1996
and currently expects to continue to account for its employee stock options
in accordance with the provisions of Opinion 25.
INCENTIVE STOCK GRANTS
Key employees, who are in a position to contribute materially to the
Company's growth and development and to its long-term success, are eligible
for incentive stock grants under the Incentive Plan through February 8,
1998. Shares of common stock subject to incentive grants shall vest on
such a basis as determined by a committee of the Board of Directors.
Through 1995, incentive stock grants for 1.2 million shares of common stock
were granted, of which 637,250 were vested at December 31, 1995. During
1995, 1994 and 1993, incentive stock grants for 52,500 shares, 60,000
shares and 12,500 shares (50,000 shares prior to the reverse stock split),
respectively, were granted. During 1993, 10,000 shares (40,000 shares
prior to the reverse stock split) were forfeited. The remaining
outstanding incentive stock grants vest as follows: 94,750 in each of the
years 1996 through 1998, 92,250 in each of the years 1999 and 2000, 11,250
in each of the years 2001 through 2004 and 5,250 in 2005. The Company
charged $1.1 million, $1.0 million and $1.0 million to operations in each
of the years 1995, 1994 and 1993, respectively, related to incentive stock
grants. The unvested portion of the incentive stock grants is classified
in the Stockholders' Equity section of the consolidated balance sheet as
Restricted Stock (Unearned Compensation).
SAVINGS PLAN
The Company has a profit sharing plan (the "ENSCO Savings Plan") which
covers eligible employees with more than one year of service, as defined.
Profit sharing contributions require Board of Directors approval and may be
in cash or grants of the Company's common stock. The Company recorded
profit sharing contribution provisions for the years ended December 31,
1995, 1994 and 1993 of $1.7 million, $1.1 million and $500,000,
respectively.
The ENSCO Savings Plan includes a 401(k) savings plan feature which
allows eligible employees with more than three months of service to make
tax deferred contributions to the plan. The Company makes matching
contributions based on the amount of employee contributions and rates set
annually by the Company's Board of Directors. Matching contributions
totalled $702,000, $307,000 and $64,000 in 1995, 1994 and 1993,
respectively. The Company has reserved 500,000 shares of common stock for
issuance as matching contributions under the ENSCO Savings Plan.
SELECT EXECUTIVE RETIREMENT PLAN
The Company implemented the Select Executive Retirement Plan (the
"SERP") effective April 1, 1995 to provide a tax deferred savings plan for
certain highly compensated employees whose participation in the 401(k)
savings plan features of the ENSCO Savings Plan is restricted due to
funding and contribution limitations of the Internal Revenue Code. The
SERP is an unfunded plan and eligibility for participation is determined by
the Company's Board of Directors. The contribution and Company matching
provisions of the SERP are identical to the ENSCO Savings Plan, except that
each participant's contributions and matching contributions under the SERP
are further limited by contribution amounts, if any, under the 401(k)
savings plan feature of the ENSCO Savings Plan. Matching contributions
totalled $22,000 in 1995 and the SERP liability of $139,000 is included in
Other Liabilities at December 31, 1995.
EMPLOYEE RETIREMENT PLAN
Eligible former Penrod employees participate in a noncontributory
defined benefit employee retirement plan. However, the plan was frozen
effective December 31, 1990. Accordingly, no additional participants may
join the plan and no additional benefits have been accrued for participants
subsequent to December 31, 1990. The Company's policy is to fund the plan
based on the minimum funding requirements of the Employee Retirement Income
Security Act of 1974 and tax considerations. The Company has recorded a
plan termination liability, net of plan assets, of $4.5 million, which is
included in Other Liabilities at December 31, 1995. Management intends to
terminate the plan when it is in the best financial interest of the Company
by purchasing annuities or otherwise providing for participants under the
plan. Net periodic pension expense for all years presented was
insignificant. The Company does not expect to incur any future charges or
additional liabilities in connection with the plan prior to its
termination.
EMPLOYEE STOCK PURCHASE PLAN
Under the terms of the Company's employee stock purchase plan (the
"Stock Purchase Plan"), eligible employees could acquire shares of common
stock through payroll deductions of not more than 10% of their base annual
compensation. The price at which shares were purchased was 85% of the
lower of the fair market value for such shares on the first or last day of
each plan year. The Stock Purchase Plan was terminated effective June 30,
1993. For the 1993 plan year, 4,585 shares (18,340 shares prior to the
reverse stock split) were sold at $3.84 per share ($.96 per share prior to
the reverse stock split).
10. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
---------------------------------------------------
Effective January 1, 1993, Penrod adopted Statement of Financial
Accounting Standards No. 106 ("SFAS No. 106"), "Employers' Accounting for
Postretirement Benefits Other Than Pensions." SFAS No. 106 requires the
accrual, during the year the employee renders the service, of the estimated
cost of providing postretirement non-pension benefit payments. SFAS No.
106 allows recognition of the cumulative effect of the liability in the
year of adoption or the amortization of the obligation over a period of up
to twenty years. Penrod elected to recognize this change in accounting on
the immediate recognition basis. The cumulative effect, after taxes and
minority interest, on the Company resulting from Penrod's adoption of SFAS
No. 106 was $2.5 million ($.07 per share after the reverse stock split).
Effective January 1, 1994, the Company's medical plan was amended such that
eligible Penrod retirees and eligible future retirees of the Company could
participate in the Company's medical plan. Retirees participating in the
Company's medical plan make contributions to the plan at a level that is
intended to fund the cost of all retiree medical claims. The Company's
current and contemplated employee benefit plans do not require the
recognition of a liability for postretirement benefits under SFAS No. 106.
11. INCOME TAXES
------------
The Company had income of $33.2 million, $26.8 million and $8.2 million
from its operations before income taxes in the United States and income of
$14.1 million, $13.5 million, and $20.2 million from its operations before
income taxes in foreign countries for the years ended December 31, 1995,
1994 and 1993, respectively.
The provisions for income taxes for the years ended December 31, 1995,
1994 and 1993 are summarized as follows (in thousands):
1995 1994 1993
------- ------- -------
Current:
Federal . . . . . . . . . . . . . . . . . . . $ 1,340 $ 1,047 $ 495
Foreign . . . . . . . . . . . . . . . . . . . 2,488 3,591 1,898
Total current . . . . . . . . . . . . . . 3,828 4,638 2,393
Deferred:
Federal . . . . . . . . . . . . . . . . . . . 900 (650) --
Foreign . . . . . . . . . . . . . . . . . . . 5,169 2,771 3,100
Total deferred . . . . . . . . . . . . . 6,069 2,121 3,100
Effect of enacted rate change on pre quasi-
reorganization net operating loss carryforwards . -- -- 449
Deferred tax asset valuation allowance . . . . . . . (6,500) (3,000) --
Total . . . . . . . . . . . . . . . . . . . . $ 3,397 $ 3,759 $ 5,942
Deferred income tax assets (liabilities) as of December 31, 1995 and
1994 are summarized as follows (in thousands):
1995 1994
--------- ---------
Deferred income tax benefits:
Net operating loss carryforwards . . . . . . . $ 84,884 $104,151
Liabilities not deductible for tax purposes . 3,382 3,251
Safe harbor leases . . . . . . . . . . . . . . 5,805 6,474
Investment tax credit carryforward . . . . . . 2,683 3,584
Unfunded pension liability . . . . . . . . . . 1,560 1,785
Other . . . . . . . . . . . . . . . . . . . . 3,651 2,743
Gross deferred tax assets . . . . . . . . . . 101,965 121,988
Less: Valuation allowance . . . . . . . . . . (9,972) (47,936)
Deferred tax assets, net of valuation
allowance . . . . . . . . . . . . . . . . . 91,993 74,052
Deferred tax liabilities:
Property . . . . . . . . . . . . . . . . . . . (100,380) (92,477)
Tax gain recognized on transfer of assets . . (587) (4,052)
Other . . . . . . . . . . . . . . . . . . . . (1,863) (638)
Gross deferred tax liabilities . . . . . . . . (102,830) (97,167)
Net deferred tax liabilities . . . . . . . $ (10,837) $(23,115)
Net current deferred tax asset (liability) . . . . . $ 9,663 $ (126)
Net noncurrent deferred tax asset . . . . . . . . . 6,300 --
Net noncurrent deferred tax liability . . . . . . . (26,800) (22,989)
Net deferred tax liability . . . . . . . . $ (10,837) $(23,115)
/TABLE
The valuation allowance decreased by $38.0 million in 1995, of which
$13.3 million was recorded as an adjustment to goodwill, and by $13.7
million in 1994, of which $1.6 million was recorded as an adjustment to
goodwill, due to the expected utilization of net operating losses that were
previously projected to expire unutilized. As of December 31, 1995, the
Company expects to realize the full benefit of all of the net operating
loss carryforwards of Penrod that originated prior to the Penrod
Acquisition. Any future adjustments to the valuation allowance related to
the projected utilization or nonutilization of the net operating loss
carryforwards of Penrod that originated prior to the Penrod Acquisition
will be allocated to goodwill.
The consolidated effective income tax rate for the years ended December
31, 1995, 1994 and 1993 differs from the United States statutory income tax
rate as follows:
1995 1994 1993
------ ------ ------
Statutory income tax rate . . . . . . . 35.0% 35.0% 35.0%
Utilization of net operating loss
carryforwards . . . . . . . . . . . (26.7) (30.3) (9.4)
Change in valuation allowance . . . . . (13.7) (7.4) -
Foreign taxes . . . . . . . . . . . . 7.8 9.8 (7.2)
Alternative minimum tax . . . . . . . . 2.8 2.6 -
Enacted future rate change . . . . . . - - 1.6
Other . . . . . . . . . . . . . . . . 2.0 (0.4) 1.0
Effective income tax rate . . . . . . . 7.2% 9.3% 21.0%
At December 31, 1995, the Company had regular and alternative minimum
tax net operating loss carryforwards of approximately $236.0 million and
$166.2 million, respectively, and investment tax credit and minimum tax
credit carryforwards of $2.7 million and $1.5 million, respectively. If
not utilized, the regular and alternative minimum tax net operating loss
carryforwards expire from 1999 through 2007, and the investment tax credit
carryforwards expire from 1996 through 2000. The minimum tax credit
carryforwards do not expire. As a result of the Penrod Acquisition, the
utilization of a portion of the Company's net operating loss carryforwards
are subject to limitations imposed by the Internal Revenue Code of 1986.
However, the Company does not expect such limitations to have an effect
upon its ability to utilize its net operating loss carryforwards.
It is the policy of the Company to consider that income generated in
foreign subsidiaries is permanently invested. A significant portion of the
Company's undistributed foreign earnings at December 31, 1995 were
generated by controlled foreign corporations. A portion of the
undistributed foreign earnings were taxed, for U.S. tax purposes, in the
year that such earnings arose. Upon distribution of foreign earnings in
the form of dividends or otherwise, the Company may be subject to
additional U.S. income taxes. However, deferred taxes related to the
future remittance of these funds are not expected to be significant to the
financial statements of the Company.
12. COMMITMENTS AND CONTINGENCIES
-----------------------------
Prior to October 1990, Penrod was self-insured for the majority of its
maritime claims exposure. During the period from October 1990 to the
August 1993 acquisition date, Penrod had insurance coverage which limited
its maritime claims exposure to a maximum of the $25,000 deductible for
each claim, plus a fluctuating aggregate of $500,000 to $1.5 million which
is in excess of the $25,000 claim deductible for each policy year. Penrod
is also a defendant in lawsuits with certain of its insurers and the
administrator of its self-insurance program, and personal injury and
maritime liability lawsuits filed by present and former employees.
Management of the Company has provided reserves for such claims as it
considers appropriate given the facts currently known.
On February 13, 1991, Penrod filed an action against TransAmerican
Natural Gas Corporation ("TransAmerican") which is presently pending in the
U.S. District Court Southern District of Texas, Houston Division, seeking
damages for breach of contract. On August 21, 1991, TransAmerican filed an
action against Penrod in the 133rd Judicial District Court, Harris County,
Texas, seeking damages for breach of contract and tort claims. Management
of the Company believes that the outcome of this litigation will be
favorable to the Company.
At December 31, 1995, there were no other contingencies, claims, or
lawsuits against the Company which, in the opinion of management, would
have a material effect on its financial condition or results of operations.
In mid-January 1996, one of the Company's jackup rigs located in the
U.S. Gulf of Mexico experienced damage as it was preparing to jack up on a
new location. The jackup rig was mobilized to a shipyard where it is
currently undergoing repairs and is expected to be available for work in
mid-1996. The Company is fully insured for damage to, loss of, and/or
salvage operations related to the jackup rig and the Company expects that
all such costs incurred will be recoverable from its insurance coverage.
13. SEGMENT INFORMATION
-------------------
Contract drilling and marine transportation are the Company's operating
segments. The Company's contract drilling segment is currently comprised
of 24 offshore jackup rigs, of which 18 are located in the U.S. Gulf of
Mexico and six in the North Sea, and 10 barge drilling rigs located in
Venezuela. The marine transportation segment currently consists of 37
vessels, all of which are located in the U.S. Gulf of Mexico. The
Company's operations are integral to the exploration, development and
production of oil and gas. Business levels for the Company, and its
corresponding operating results, are significantly affected by worldwide
expenditures for oil and gas drilling, particularly in the U.S. Gulf of
Mexico where the Company has a large concentration of its rigs and vessels.
Expenditures for oil and gas drilling activity fluctuate based upon many
factors, including world economic conditions, the legislative environment
in the U.S. and other major countries, production levels and other
activities of OPEC and other oil and gas producers and the impact that
these and other events have on the current and expected future pricing of
oil and natural gas.
The following shows industry segment and geographic region information
for the years ended December 31, 1995, 1994 and 1993 (in thousands):
INDUSTRY SEGMENT
------------------------------------------------
MARINE
CONTRACT TRANS- CORPORATE
DRILLING PORTATION & OTHER TOTAL
--------- --------- --------- --------
1995
- ----
Revenues . . . . . . . . . . . . . . . $240,775 $ 38,339 $ -- $279,114
Operating income (loss) . . . . . . . . 48,022 7,848 (675) 55,195
Income from equity affiliate . . . . . 200 -- -- 200
Identifiable assets . . . . . . . . . . 649,503 66,685 105,263 821,451
Capital expenditures . . . . . . . . . 135,137 7,167 926 143,230
Depreciation and amortization . . . . . 52,160 5,820 410 58,390
1994
- ----
Revenues . . . . . . . . . . . . . . . $207,781 $ 37,670 $ -- $245,451
Operating income (loss) . . . . . . . . 44,597 5,455 (980) 49,072
Income (loss) from equity affiliates . 700 (93) -- 607
Identifiable assets . . . . . . . . . . 553,205 56,142 155,881 765,228
Capital expenditures . . . . . . . . . 142,848 6,951 559 150,358
Depreciation and amortization . . . . . 45,421 5,815 562 51,798
1993
- ----
Revenues . . . . . . . . . . . . . . . $192,120 $ 35,290 $ -- $227,410
Operating income (loss) . . . . . . . . 34,921 3,458 (3,332) 35,047
Income (loss) from equity affiliates . 561 (129) -- 432
Identifiable assets . . . . . . . . . . 532,045 59,210 89,714 680,969
Capital expenditures . . . . . . . . . 79,664 1,920 212 81,796
Depreciation and amortization . . . . . 34,452 5,449 1,280 41,181
/TABLE
GEOGRAPHIC REGION
------------------------------------------------------------------------
NORTH SOUTH NORTH MIDDLE EAST CORPORATE
AMERICA AMERICA SEA & OTHER & OTHER TOTAL
--------- --------- --------- ----------- --------- --------
1995
- ----
Revenues . . . . . . . . . . . . . . . $157,614 $ 61,975 $ 59,525 $ -- $ -- $279,114
Operating income (loss) . . . . . . . . 23,061 26,538 7,040 (769) (675) 55,195
Income from equity affiliate. . . . . . 200 -- -- -- -- 200
Identifiable assets . . . . . . . . . . 358,552 152,785 201,772 3,079 105,263 821,451
1994
- ----
Revenues . . . . . . . . . . . . . . . $155,118 $ 52,532 $ 30,635 $ 7,166 $ -- $245,451
Operating income (loss) . . . . . . . . 28,838 20,954 4,868 (4,608) (980) 49,072
Income (loss) from equity affiliates . 700 -- -- (93) -- 607
Identifiable assets . . . . . . . . . . 330,733 163,042 104,669 10,903 155,881 765,228
1993
- ----
Revenues . . . . . . . . . . . . . . . $146,610 $ 42,628 $ 27,384 $10,788 $ -- $227,410
Operating income (loss) . . . . . . . . 28,710 15,108 (1,364) (4,075) (3,332) 35,047
Income (loss) from equity affiliates . 561 -- -- (129) -- 432
Identifiable assets . . . . . . . . . . 388,133 121,254 59,678 22,189 89,715 680,969
Identifiable assets excluded net assets of discontinued operations of
$7.9 million and $8.3 million at December 31, 1994 and 1993, respectively.
During 1995, revenues from two customers were in excess of 10% of the
Company's total revenues. Revenues from one customer were $62.0 million,
or 22% of total revenues, all of which was from the contract drilling
segment. Revenues from another customer were $34.3 million, or 12% of
total revenues, all of which was from the contract drilling segment.
During 1994, revenues from two customers were in excess of 10% of the
Company's total revenues. Revenues from one customer were $48.2 million,
or 20%, of total revenues, all of which was from the contract drilling
segment. Revenues from another customer were $35.1 million, or 14%, of
total revenues. Of such amount, $33.7 million was from the contract
drilling segment and $1.4 million was from the marine transportation
segment.
During 1993, revenues from one customer were $29.0 million, or 13% of
total revenues, all of which was from the contract drilling segment.
14. TRANSACTIONS WITH RELATED PARTIES
---------------------------------
During 1993, the Company recorded $500,000 of Other Income related to
fees received from a partnership, owned 42% by the Company, for management
services provided by the Company.
The Company paid or accrued legal fees to a firm of which a director
of the Company was a partner in 1993 totalling $369,000. The Company has a
$675,000 note receivable from a director of the Company in connection with
the sale of 168,750 shares (675,000 shares prior to the reverse stock
split) of restricted common stock in 1988. The note, which may be settled
at a formula price in shares of restricted stock of the Company purchased
by the director, is due July 1997 and is noninterest bearing as long as the
payor remains a director of the Company. At December 31, 1995 and 1994,
the note was recorded as a reduction of additional paid-in capital.
15. SUPPLEMENTAL FINANCIAL INFORMATION
----------------------------------
CONSOLIDATED BALANCE SHEET INFORMATION. Accounts and notes
receivable, net at December 31, 1995 and 1994 consists of the following (in
thousands):
1995 1994
------- -------
Trade . . . . . . . . . . . . . . . . . $55,993 $33,865
Other . . . . . . . . . . . . . . . . . 5,268 3,396
------- -------
61,261 37,261
Allowance for doubtful accounts . . . . (465) (782)
------- -------
$60,796 $36,479
======= =======
Prepaid expenses and other at December 31, 1995 and 1994 consists of
the following (in thousands):
1995 1994
------- -------
Tax asset . . . . . . . . . . . . . . . $ 9,663 $ -
Prepaid expenses . . . . . . . . . . . 6,319 5,183
Inventory . . . . . . . . . . . . . . . 2,259 2,859
Other . . . . . . . . . . . . . . . . . 4,652 9,551
------- -------
$22,893 $17,593
======= =======
Accrued liabilities at December 31, 1995 and 1994 consists of the
following (in thousands):
1995 1994
------- -------
Operating expenses . . . . . . . . . . $14,740 $ 8,081
Deferred purchase payment . . . . . . . 13,000 -
Payroll . . . . . . . . . . . . . . . . 7,957 6,337
Taxes . . . . . . . . . . . . . . . . . 3,592 6,157
Insurance . . . . . . . . . . . . . . . 2,837 6,789
Other . . . . . . . . . . . . . . . . . 3,694 5,859
------- -------
$45,820 $33,223
======= =======
CONSOLIDATED STATEMENT OF INCOME INFORMATION. Maintenance and
repairs and taxes, other than payroll and income taxes, for the years ended
December 31, 1995, 1994 and 1993 are as follows (in thousands):
1995 1994 1993
------- ------- -------
Maintenance and repairs . . . . $18,203 $17,637 $21,564
Taxes, other than payroll and
income taxes . . . . . . . . 967 666 838
CONSOLIDATED STATEMENT OF CASH FLOWS INFORMATION. The 1995
consolidated statement of cash flows excludes noncash activities related to
a deferred purchase payment on a jackup rig acquired as described in Note 3
"Property and Equipment," the transfer of the Company's investment in a
joint venture to property and equipment as described in Note 4 "Investment
in Equity Affiliate," the incurrence of long-term debt associated with the
purchase of four supply vessels as described in Note 6 "Long-Term Debt,"
adjustments to goodwill as described in Note 11 "Income Taxes" and
consideration received related to the sale of the Company's technical
services segment as described in Note 16 "Discontinued Operations."
Noncash activities in 1994, which have also been excluded from the
consolidated statement of cash flows, consisted of consideration received
related to the sale of the United States land rig operations as described
in Note 3 "Property and Equipment," the conversion of the $1.50 Preferred
Stock into common stock of the Company as described in Note 7 "Preferred
Stock" and an adjustment to goodwill as described in Note 11 "Income
Taxes." Noncash activities were insignificant in 1993.
Cash paid for interest and income taxes for the years ended December
31, 1995, 1994 and 1993 is as follows (in thousands):
1995 1994 1993
------- ------- -------
Interest . . . . . . . . . . . $15,078 $ 9,940 $ 5,682
Income taxes . . . . . . . . . 5,006 3,104 232
FAIR VALUE OF FINANCIAL INSTRUMENTS. The following disclosure of
the estimated fair value of financial instruments is made in accordance
with the requirements of Statement of Financial Accounting Standards No.
107, "Disclosures about Fair Value of Financial Instruments." The
estimated fair value amounts have been determined by the Company, using
available market information and appropriate valuation methodologies.
However, considerable judgement is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts. The carrying amounts and estimated fair
values at December 31, 1995 and 1994 are as follows (in thousands):
December 31, 1995 December 31, 1994
---------------------- ----------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- --------- -------- ---------
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . $ 5,000 $ 5,000 $ 5,869 $ 5,862
Liabilities - long-term debt, including current maturities . . . . . 191,253 191,358 203,216 200,557
Nonfinancial instruments - other liabilities . . . . . . . . . . . . 17,393 17,393 13,203 13,203
Interest rate swaps - liability position . . . . . . . . . . . . . . -- 408 -- --
The estimated fair values were determined as follows:
SHORT-TERM INVESTMENTS --- The estimated fair value of short-term
investments is based on current interest rates for investments with
similar characteristics.
LONG-TERM DEBT --- Interest rates that are currently available to the
Company for issuance of debt with similar terms and remaining maturities
are used to estimate fair value for debt issues.
OTHER LIABILITIES --- The estimated fair value of other liabilities is
determined by discounting the expected future cash outflows relating to the
other liabilities using long-term borrowing rates available to the Company.
INTEREST RATE SWAPS --- The estimated fair value of interest rate swaps is
based on the difference in the present value of the floating rate future
receipts and fixed rate future payments.
16. DISCONTINUED OPERATIONS
-----------------------
TECHNICAL SERVICES OPERATIONS
Effective September 30, 1995, the Company exited the technical services
business through the sale of substantially all of the assets of its wholly
owned subsidiary, ENSCO Technology Company. The sales price consisted of
$11.8 million in cash, a promissory note for $3.6 million, a convertible
promissory note for $2.5 million and the assumption of $1.9 million of
liabilities. The promissory note and the convertible promissory note bear
interest at prime and are repayable in equal annual principal installments
over a five year period. Interest on the promissory note and the
convertible promissory note is payable quarterly. The convertible
promissory note may be exchanged, at the option of the Company, into equity
of the purchaser.
As a result of the sale, the Company's financial statements have been
reclassified to present the net assets and operating results of the
Company's technical services operations segment as a discontinued
operation. Prior years have been reclassified for comparative purposes.
Included in the 1995 Income from Discontinued Operations is a gain on the
sale discussed above of $5.2 million and income from operations for the
nine months ended September 30, 1995 of $1.1 million. Revenues from the
technical services operations were $13.4 million, $16.5 million and $18.8
million in 1995, 1994 and 1993, respectively.
SUPPLY OPERATIONS
In 1993, the Company completed a series of transactions that resulted
in the sale of substantially all of the Company's supply business conducted
by its wholly owned subsidiary ENSCO Tool and Supply Company. The Company
sold substantially all of the assets of the international supply, tubular
services and engineered products business lines of its supply operations
segment on July 1, 1993. The sales price consisted of $1.0 million in cash
and approximately $3.9 million in notes issued by the purchaser. The notes
were repaid in full in December 1993. In a separate transaction
consummated June 30, 1993, the Company sold all of the shares of capital
stock of Petroil Services Corporation, ENSCO Tool and Supply (Peru) S.A.
and the Egyptian American Technical Services Company owned by the Company
for $5.0 million in cash. Additionally, substantially all of the Company's
remaining supply operations segment real estate was sold in 1993 for
approximately $2.4 million in cash, net of sales costs.
As a result of these transactions, the Company's financial statements
have been reclassified to present the net assets and operating results of
the Company's supply operations segment as a discontinued operation.
Included in the 1993 Income from Discontinued Operations is a gain on the
sales discussed above of $2.1 million (which includes a provision of $1.3
million for operations during the phase out period which began July 1,
1993) and income from operations for the six months ended June 30, 1993 of
$200,000. Revenues from the supply operations segment were $22.2 million in
1993. Substantially all of the remaining assets and liabilities of the
supply business were sold, liquidated or settled in 1994.
17. SUBSEQUENT EVENT
----------------
On January 25, 1996, the Company entered into a letter of intent with
DUAL DRILLING COMPANY ("Dual") under which the Company would acquire Dual,
subject to certain conditions. Dual operates a fleet of 20 offshore
drilling rigs, including 10 jackup rigs and 10 self-contained platform
rigs. Twelve of Dual's rigs are located in the U.S., with three jackup
rigs and seven platform rigs currently located in the U.S. Gulf of Mexico
and two platform rigs off the coast of California. The remainder of the
fleet operates in international waters, with rigs currently located
offshore India, Mexico, Qatar, Indonesia and China. Under the proposed
transaction, Dual's common stockholders would receive 0.625 shares of the
Company's common stock for each share of Dual common stock, which would
result in the issuance of approximately 9.9 million shares of the Company's
common stock. The Company expects to account for the combination as a
purchase acquisition. The transaction is subject to execution of
definitive agreements, approval by the stockholders of Dual and requisite
governmental and other approvals. Subject to the satisfaction of these
conditions, closing of the transaction is expected before June 30, 1996.
18. UNAUDITED QUARTERLY FINANCIAL DATA
----------------------------------
A summary of unaudited quarterly consolidated financial information
for 1995 and 1994 is as follows (in thousands, except per share amounts):
First Second Third Fourth
1995 Quarter Quarter Quarter Quarter Total
---- ------- ------- ------- ------- --------
Revenues
Contract drilling . . . . . . . . . . . . $53,900 $53,949 $61,162 $71,764 $240,775
Marine transportation . . . . . . . . . . 7,230 8,476 10,631 12,002 38,339
61,130 62,425 71,793 83,766 279,114
Operating expenses
Contract drilling . . . . . . . . . . . . 30,479 30,458 34,413 37,208 132,558
Marine transportation . . . . . . . . . . 5,616 5,706 6,066 6,014 23,402
36,095 36,164 40,479 43,222 155,960
Operating margin . . . . . . . . . . . . . . . 25,035 26,261 31,314 40,544 123,154
Depreciation and amortization . . . . . . . . . 13,546 14,307 14,702 15,835 58,390
General and administrative . . . . . . . . . . 2,143 2,478 2,209 2,739 9,569
Operating income . . . . . . . . . . . . . . . 9,346 9,476 14,403 21,970 55,195
Interest income . . . . . . . . . . . . . . . . 2,149 1,652 986 1,523 6,310
Interest expense . . . . . . . . . . . . . . . (4,391) (4,104) (3,912) (4,157) (16,564)
Other income . . . . . . . . . . . . . . . . . 943 400 874 181 2,398
Income from continuing operations before
income taxes and minority interest . . . . 8,047 7,424 12,351 19,517 47,339
Provision for income taxes . . . . . . . . . . (39) (145) (1,242) (1,971) (3,397)
Minority interest . . . . . . . . . . . . . . . (602) (596) (508) (473) (2,179)
Income from continuing operations . . . . . . . 7,406 6,683 10,601 17,073 41,763
Income from discontinued operations . . . . . . 216 401 5,679 -- 6,296
Net income . . . . . . . . . . . . . . . . . . $ 7,622 $ 7,084 $16,280 $17,073 $ 48,059
Income per common share
Continuing operations . . . . . . . . . . $ .12 $ .11 $ .18 $ .28 $ .69
Discontinued operations . . . . . . . . . .01 .01 .09 -- .10
$ .13 $ .12 $ .27 $ .28 $ .79
First Second Third Fourth
1994 Quarter Quarter Quarter Quarter Total
---- ------- ------- ------- ------- --------
Revenues
Contract drilling . . . . . . . . . . . . $52,015 $54,048 $48,964 $52,754 $207,781
Marine transportation . . . . . . . . . . 8,504 9,149 10,128 9,889 37,670
60,519 63,197 59,092 62,643 245,451
Operating expenses
Contract drilling . . . . . . . . . . . . 27,296 28,607 26,606 27,715 110,224
Marine transportation . . . . . . . . . . 5,400 5,736 7,441 6,528 25,105
32,696 34,343 34,047 34,243 135,329
Operating margin . . . . . . . . . . . . . . . 27,823 28,854 25,045 28,400 110,122
Depreciation and amortization . . . . . . . . . 12,068 12,902 13,214 13,614 51,798
General and administrative . . . . . . . . . . 2,151 2,342 2,160 2,599 9,252
Operating income . . . . . . . . . . . . . . . 13,604 13,610 9,671 12,187 49,072
Interest income . . . . . . . . . . . . . . . . 1,062 929 1,267 1,994 5,252
Interest expense . . . . . . . . . . . . . . . (2,706) (2,609) (3,533) (4,529) (13,377)
Other income (expense) . . . . . . . . . . . . 165 (653) 340 (478) (626)
Income from continuing operations before
income taxes and minority interest . . . . 12,125 11,277 7,745 9,174 40,321
Provision for income taxes . . . . . . . . . . (1,175) (1,047) (685) (852) (3,759)
Minority interest . . . . . . . . . . . . . . . (838) (645) (583) (918) (2,984)
Income from continuing operations . . . . . . . 10,112 9,585 6,477 7,404 33,578
Income from discontinued operations . . . . . . 1,285 950 296 1,062 3,593
Net income . . . . . . . . . . . . . . . . . . 11,397 10,535 6,773 8,466 37,171
Preferred stock dividend requirements . . . . . (1,065) (1,065) (5) -- (2,135)
Income applicable to common stock . . . . . . . $10,332 $ 9,470 $ 6,768 $ 8,466 $ 35,036
Income per common share
Continuing operations . . . . . . . . . . $ .16 $ .15 $ .11 $ .12 $ .55
Discontinued operations . . . . . . . . . .02 .02 .01 .02 .06
$ .18 $ .17 $ .12 $ .14 $ .61
The first and second quarter results for 1995 and also the 1994 results
for all periods were reclassified to reflect the accounting for the
technical services operation as a discontinued operation. The effect of
this change had no impact upon net income, income applicable to common
stock or income per common share. See Note 16 "Discontinued Operations."
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers, Item 11. Executive Compensation,
Item 12. Security Ownership of Certain Beneficial Owners and Management,
and Item 13. Certain Relationships and Related Transactions
Certain information regarding the executive officers of the Company has
been presented in "Executive Officers of the Registrant" as included in
"Item 1. Business."
Pursuant to General Instruction G(3), the additional information
required by these items is hereby incorporated by reference to the
Company's definitive proxy statement, which involves the election of
directors and will be filed with the Commission not later than 120 days
after the end of the fiscal year ended December 31, 1995.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
FILED AS PART OF THIS REPORT:
(1) Financial Statements of ENSCO International Incorporated Page
Report of Independent Accountants - Price Waterhouse LLP 23
Consolidated Balance Sheet . . . . . . . . . . . . . . . 24
Consolidated Statement of Income . . . . . . . . . . . . 25
Consolidated Statement of Cash Flows . . . . . . . . . . 26
Notes to Consolidated Financial Statements . . . . . . . 27
(2) Exhibits
The following instruments are included as exhibits to this
Report. Exhibits incorporated by reference are so indicated by
parenthetical information.
EXHIBIT NO. DOCUMENT
- ----------- --------
* 3.1 - Certificate of Incorporation of the Company, as amended.
3.2 - Bylaws of the Company, as amended (incorporated by reference
to Exhibit 3.2 to the Registrant's Annual Report on Form 10-
K for the year ended December 31, 1992, File No. 1-8097).
3.3 - Certificate of Designation of $1.50 Cumulative Convertible
Exchangeable Preferred Stock (incorporated by reference to
Exhibit 3 to the Registrant's Quarterly Report on Form 10-Q
for the period ended March 31, 1988, File No. 1-8097).
4.1 - Purchase Agreement dated March 28, 1988 among the Company,
ENSCO Marine Company, Prudential-Bache Energy Growth Fund,
L.P. G-2 and Prudential-Bache Energy Growth Fund, L.P. G-3
relating to $26,000,000 aggregate principal amount of Senior
Secured Notes of ENSCO Marine Company and warrants to
purchase 2,500,000 shares of the Company's Common Stock
(incorporated by reference to Exhibit 4.3 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992, File No. 1-8097).
4.2 - Form of 6% Convertible Subordinated Debenture due April 15,
2003 (incorporated by reference to Exhibit 4.10 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1988, File No. 1-8097).
4.3 - Form of Indenture relating to Registrant's 6% Convertible
Subordinated Debentures (incorporated by reference to
Exhibit 4.4 to the Registrant's Quarterly Report on Form 10-
Q for the quarter ended March 31, 1988, File No. 1-8097).
4.4 - Certificate of Designation of $1.50 Cumulative Convertible
Exchangeable Preferred Stock (as set forth in Exhibit 3.3).
4.5 - Form of Rights Agreement dated as of February 21, 1995
between the Company and American Stock Transfer & Trust
Company, as Rights Agent, which includes as Exhibit A the
Form of Certificate of Designations of Series A Junior
Participating Preferred Stock of ENSCO International
Incorporated, as Exhibit B the Form of Right Certificate,
and as Exhibit C the Summary of Rights to Purchase Shares of
Preferred Stock of ENSCO International Incorporated
(incorporated by reference to Exhibit 4 to Registrant's
Current Report on Form 8-K dated February 21, 1995, File No.
1-8097).
10.1 - ENSCO Incentive Plan, as amended (incorporated by reference
to Exhibit 10.1 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993, File No. 1-8097).
10.2 - Employee Stock Purchase Plan of the Company (incorporated by
reference to Exhibit 10.5 of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1988, File No.
1-8097).
10.3 - Restricted Stock Agreement effective as of June 10, 1987
between Morton H. Meyerson and Blocker Energy Corporation
(incorporated by reference to Exhibit 10.6 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992, File No. 1-8097).
10.4 - Restricted Stock Agreement effective as of May 31, 1988
between Morton H. Meyerson and the Company (incorporated by
reference to Exhibit 19.2 to the Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1988,
File No. 1-8097).
10.5 - Termination of Pledge Agreement and Amendment of Restricted
Stock Agreement, dated March 1, 1991, by and between Morton
H. Meyerson and the Company (incorporated by reference to
Exhibit 10.108 to the Registrant's Annual Report on Form 10-
K for the year ended December 31, 1990, File No. 1-8097).
10.6 - First Amendment, dated March 1, 1991, to the Promissory Note
dated July 19, 1988 in the original principal amount of
$675,000 between Morton H. Meyerson and the Company
(incorporated by reference to Exhibit 10.109 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990, File No. 1-8097).
10.7 - Lease Agreement between the Company as tenant and Freeman
Ross, Ltd. as landlord for the Company's corporate office
space at First Interstate Bank Tower at Fountain Place, 1445
Ross Avenue, Dallas, Texas (incorporated by reference to
Exhibit 28.5 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1990, File No. 1-8097).
10.8 - Supplemental Compensation Agreement, dated March 1, 1991,
between Morton H. Meyerson and the Company (incorporated by
reference to Exhibit 10.110 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1990,
File No. 1-8097).
10.9 - Construction and Purchase Agreement dated as of February 3,
1992 between Nissho Iwai Hong Kong Corporation Limited as
Purchaser and ENSCO Drilling Company as Contractor
(incorporated by reference to Exhibit 10.21 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993, File No. 1-8097).
10.10 - Sale and Financing Agreement dated as of February 3, 1992
between ENSCO Drilling Venezuela, Inc. as Purchaser and
Nissho Iwai Hong Kong Corporation Limited as Seller
(incorporated by reference to Exhibit 10.22 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993, File No. 1-8097).
10.11 - Shelf Registration Agreement by and among the Company,
SOLVation Inc., Energy Management Corporation, SEGA
Associates, L.P., Smith Factors Inc., The Summit Trust
Company, as Trustee, Natural Gas Partners, L.P., The Goldman
Sachs Group, L.P., Permian Equities Inc., and others dated
as of May 6, 1993 (incorporated by reference to Exhibit 28.2
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993, File No. 1-8097).
10.12 - Stock Exchange Agreement by and among the Company, ENSCO
Engineering Company, SOLVation Inc., Natural Gas Partners,
L.P., Goldman Sachs Group, L.P., Permian Equities Inc., NGP
No. I, L.P., and the Summit Trust Company, as Trustee dated
as of May 6, 1993 (incorporated by reference to Exhibit 28.1
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993, File No. 1-8097).
10.13 - Loan Agreement dated October 14, 1993, by and among ENSCO
Marine Company and The CIT Group/Equipment Financing, Inc.
(incorporated by reference to Exhibit 10.27 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993, File No. 1-8097).
10.14 - Construction and Purchase Agreement dated November 12, 1993,
by and between ENSCO Drilling Company and Nissho Iwai Hong
Kong Corporation Limited (incorporated by reference to
Exhibit 10.28 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993, File No. 1-8097).
10.15 - Sale and Financing Agreement dated November 12, 1993, by and
between Nissho Iwai Hong Kong Corporation Limited and ENSCO
Drilling Venezuela, Inc. (incorporated by reference to
Exhibit 10.29 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993, File No. 1-8097).
10.16 - Credit Facility Agreement dated December 15, 1993, by and
among ENSCO Offshore Company and ENSCO Offshore U.K.
Limited, as borrowers, and Christiania Bank OG Kreditkasse,
London Branch, den Norske Bank A.S., New York Branch, Banque
Indosuez, and Meespierson N.V., as the Banks (incorporated
by reference to Exhibit 10.30 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993,
File No. 1-8097).
10.17 - Partial Satisfaction of Mortgage, dated November 29, 1994,
between Wilmington Trust Company, as trustee for the benefit
of The CIT Group/Equipment Financing, Inc., and ENSCO Marine
Company (incorporated by reference to Exhibit No. 10.30 of
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994, File No. 1-8097).
10.18 - Modification and Amendment of First Preferred Fleet Ship
Mortgage, dated January 23, 1995, by ENSCO Marine Company
and Wilmington Trust Company, as trustee for the benefit of
The CIT Group/Equipment Financing, Inc. (incorporated by
reference to Exhibit No. 10.31 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994,
File No. 1-8097).
10.19 - Amendment No. 1, dated November 1, 1994, to Credit Facility
Agreement dated December 15, 1993 among ENSCO Offshore
Company and ENSCO Offshore U.K. Limited, as borrowers, and
Christiana Bank OG Kreditkasse, London Branch, den Norske
Bank A.S., New York Branch, Banque Indosuez and Meespierson
N.V., as the banks (incorporated by reference to Exhibit No.
10.32 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994, File No. 1-8097).
10.20 - Amended and Restated Credit Facility Agreement dated
September 27, 1995 by and among ENSCO Offshore Company and
ENSCO Offshore U.K. Limited, as borrowers, and Christiana
Bank OG Kreditkasse, New York Branch, and den Norske Bank
AS, New York Branch, as the Banks (incorporated by reference
to Exhibit No. 10.33 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995, File No.
1-8097).
10.21 - Amendment No. 2, dated September 27, 1995, to the First
Preferred Fleet Mortgage dated December 17, 1993, as
amended, by ENSCO Offshore Company and Bankers Trust
Company, as trustee for the benefit of Christiana Bank OG
Kreditkasse, New York Branch, and den Norske Bank AS, New
York Branch (incorporated by reference to Exhibit No. 10.34
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, File No. 1-8097).
10.22 - Letter of intent dated January 25, 1996 between the Company
and DUAL DRILLING COMPANY (incorporated by reference to
Exhibit 99.5 to the Registrant's Current Report on Form 8-K
dated January 25, 1996, File No. 1-8097).
* 10.23 - Select Executive Retirement Plan of the Company.
* 10.24 - Second Amendment, dated September 14, 1995, to the
Promissory Note dated July 19, 1988 in the original
principal amount of $675,000 between Morton H. Meyerson and
the Company.
* 21 - Subsidiaries of the Registrant.
* 23 - Consent of Price Waterhouse LLP.
* 27 - Financial Data Schedule - December 31, 1995.
* 27.1 - Financial Data Schedule - September 30, 1994 (Restated).
* 27.2 - Financial Data Schedule - December 31, 1994 (Restated).
* 27.3 - Financial Data Schedule - March 31, 1995 (Restated).
* 27.4 - Financial Data Schedule - June 30, 1995 (Restated).
- -----------------
* Filed Herewith
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
The following is a list of all executive compensation plans and
arrangements required to be filed as an exhibit to this Form 10-K:
1. ENSCO Incentive Plan, as amended (filed as Exhibit 10.1 hereto and
incorporated by reference to Exhibit 10.1 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993,
File No. 1-8097).
2. Employee Stock Purchase Plan of the Company (filed as Exhibit 10.2
hereto and incorporated by reference to Exhibit 10.5 of the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1988, File No. 1-8097).
3. Restricted Stock Agreement effective as of June 10, 1987 between
Morton H. Meyerson and the Company (filed as Exhibit 10.3 hereto
and incorporated by reference to Exhibit 10.6 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1992,
File No. 1-8097).
4. Restricted Stock Agreement effective as of May 31, 1988 between
Morton H. Meyerson and the Company (filed as Exhibit 10.4 hereto
and incorporated by reference to Exhibit 19.2 to the Registrant's
Quarterly Report on Form 10-Q for the period ended September 30,
1988, File No. 1-8097).
5. Termination of Pledge Agreement and Amendment of Restricted Stock
Agreement, dated March 1, 1991, by and between Morton H. Meyerson
and the Company (filed as Exhibit 10.5 hereto and incorporated by
reference to Exhibit 10.108 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1990, File No. 1-8097).
6. First Amendment, dated March 1, 1991, to the Promissory Note dated
July 19, 1988 in the original principal amount of $675,000 between
Morton H. Meyerson and the Company (filed as Exhibit 10.6 hereto
and incorporated by reference to Exhibit 10.109 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1990,
File No. 1-8097).
7. Supplemental Compensation Agreement, dated March 1, 1991, between
Morton H. Meyerson and the Company (filed as Exhibit 10.8 hereto
and incorporated by reference to Exhibit 10.110 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1990,
File No. 1-8097).
8. Select Executive Retirement Plan of the Company (filed herewith as
Exhibit 10.23).
9. Second Amendment, dated September 14, 1995, to the Promissory Note
dated July 19, 1988 in the original principal amount of $675,000
between Morton H. Meyerson and the Company (filed herewith as
Exhibit 10.24).
The Company will furnish to the Securities and Exchange Commission upon
request, all constituent instruments defining the rights of holders of
long-term debt of the Company not filed herewith as permitted by paragraph
4(iii)(A) of Item 601 of Regulation S-K.
(b) REPORTS ON FORM 8-K
No Current Reports on Form 8-K were filed by the Company during the
fourth quarter of the year ended December 31, 1995.
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) and Form S-3 under the Securities Act of
1933, the undersigned registrant hereby undertakes as follows, which
undertaking shall be incorporated by reference into registrant's
Registration Statements on Form S-8 Nos. 33-40282 filed May 2, 1991, 33-
41294 filed June 19, 1991, 33-35862 filed July 13, 1990, 33-32447 filed
December 5, 1989 and 33-14714 filed June 1, 1987 and Form S-3 Nos. 33-
64642, 33-49590 filed July 13, 1992 (as amended by Amendment No. 1 filed
July 31, 1992), 33-46500 filed March 18, 1992 (as amended by Amendment No.
1 filed May 7, 1992), 33-43756 filed November 12, 1991 (as amended by
Amendment No. 1 filed December 19, 1991) and 33-42965 filed September 25,
1991 (as amended by Amendment No. 1 and 2 filed October 29, 1991 and
November 18, 1991, respectively):
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on
February 26, 1996.
ENSCO INTERNATIONAL INCORPORATED
(Registrant)
By /s/ CARL F. THORNE
------------------------------------
Carl F. Thorne
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the date indicated.
SIGNATURES TITLE DATE
/S/ CARL F. THORNE Chairman, President,
Carl F. Thorne Chief Executive Officer
and Director
/S/ RICHARD A. WILSON Senior Vice President,
Richard A. Wilson Chief Operating Officer
and Director
/S/ C. CHRISTOPHER GAUT Vice President and Chief
C. Christopher Gaut Financial Officer
/S/ H. E. MALONE Vice President, Chief
H. E. Malone Accounting Officer and
Controller
/S/ CRAIG I. FIELDS Director
Craig I. Fields
February 26, 1996
/S/ ORVILLE D. GAITHER, SR. Director
Orville D. Gaither, Sr.
/S/ GERALD W. HADDOCK Director
Gerald W. Haddock
/S/ DILLARD S. HAMMETT Director
Dillard S. Hammett
/S/ THOMAS L. KELLY, II Director
Thomas L. Kelly, II
/S/ MORTON H. MEYERSON Director
Morton H. Meyerson