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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
1996 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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from . . . . . . . . . . to . . . . . . . . . .
Commission File Number 1-8097
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. [ ]
As of January 31, 1997, 70,863,520 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 January 31, 1997
of $55.125) of ENSCO International Incorporated held by nonaffiliates of
the registrant at that date was approximately $2,670,094,035.
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, 1996, 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.
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TABLE OF CONTENTS
PAGE
----
PART ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . 1
I Overview and Operating Strategy . . . . . . . . . 1
Acquisition of Dual Drilling . . . . . . . . . . 1
Contract Drilling Operations . . . . . . . . . . 1
Marine Transportation Operations . . . . . . . . 2
Segment Information . . . . . . . . . . . . . . . 3
Major Customers . . . . . . . . . . . . . . . . . 4
Industry Conditions and Competition . . . . . . . 4
Governmental Regulation . . . . . . . . . . . . . 4
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 . . . . . . . . . . . . . . 10
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
II RELATED 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 . . . . . . . . . . . . . . . . . . 21
Private Litigation Securities Reform Act of 1995 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . 22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . 43
________________________________________________________________________
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 . . . . . 43
________________________________________________________________________
PART ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
IV REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 44
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 49
- i -
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 Gulf of Mexico. The Company's complement of
offshore drilling rigs includes 35 jackup rigs, 10 barge drilling rigs and
eight platform rigs. 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, the construction of eight new barge drilling rigs for the
Company's Venezuelan rig fleet during 1993 and 1994 and the addition of
three harsh environment jackup rigs to its North Sea fleet, two in 1994 and
one in 1995. In June 1996, the Company acquired DUAL DRILLING COMPANY
("Dual") in a transaction which added 20 rigs to the Company's fleet. The
Company subsequently purchased another jackup rig in November 1996.
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. 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.
ACQUISITION OF DUAL DRILLING
On June 12, 1996, the Company acquired Dual pursuant to an Agreement and
Plan of Merger among the Company, a wholly owned subsidiary and Dual. The
acquisition was approved on that date by Dual stockholders who received
0.625 shares of the Company's common stock for each share of Dual common
stock. The Company issued approximately 10.1 million shares of its common
stock to Dual stockholders in connection with the acquisition, resulting in
an acquisition price of approximately $218.4 million.
The acquired Dual operations consisted of a fleet of 20 offshore drilling
rigs, including 10 jackup rigs and 10 platform rigs. Subsequent to the
date of acquisition, two platform rigs located off the coast of California
were retired.
The Company accounted for the Dual acquisition as a purchase. The purchase
price allocation has been based on preliminary estimates of fair value and
is subject to adjustment as additional information becomes available and is
evaluated.
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 international oil and gas companies, government
owned oil and gas companies and independent oil and gas companies. The
Company currently owns 35 jackup rigs, 10 barge drilling rigs and seven
platform rigs. Of the 35 jackup rigs, 23 are located in the Gulf of
Mexico, six are located in the North Sea and six are located in Asia. The
10 barge drilling rigs are all located in Venezuela and the seven platform
rigs are all located in the Gulf of Mexico. An additional platform rig,
which is not owned but is operated under a management contract, is
located off the coast of China. The Company's Venezuela contract drilling
operations are conducted through its 85% ownership interest in ENSCO
Drilling (Caribbean), Inc. ("Caribbean").
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 worldwide expenditures for oil and gas
drilling, the level of worldwide economic activity and the long-term effect
of worldwide energy conservation measures.
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. However, due to extension clauses included in the
contracts, approximately 67% of the Company's rigs have worked for the same
customer for greater than six months and over 48% of the Company's rigs
have worked for the same customer for longer than one year. The backlog of
business for the Subsidiaries, excluding operations conducted through
Caribbean, at February 1, 1997 was approximately $220.5 million as compared
to approximately $59.8 million in February 1996. Caribbean has a number of
term contracts which terminate in 1998 and 1999, with a backlog as of
February 1, 1997 of approximately $140.6 million as compared to
approximately $162.9 million in February 1996.
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 Gulf of Mexico.
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 1, 1997, ENSCO Marine had a backlog of contracts for
its services of approximately $32.3 million compared to $10.5 million for
such services in February 1996.
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, 1996:
1996 1995 1994 1993 1992
-------- ------- ------- -------- --------
Offshore Drilling Rig Utilization and Day Rates
Utilization:
Jackup rigs
North America . . . . . . . . . . . . . . 93% 90% 91% 97% 61%
Europe . . . . . . . . . . . . . . . . . . 88% 73% 71% 58% 66%
Asia . . . . . . . . . . . . . . . . . . . 86% -- 29% 10% 7%
South America . . . . . . . . . . . . . . -- -- 62% 100% 91%
Total jackup rigs . . . . . . . . . 92% 87% 83% 84% 61%
Barge drilling rigs - South America . . . . . 91% 86% 100% 100% 100%
Platform rigs . . . . . . . . . . . . . . . . 78% -- -- -- --
Total . . . . . . . . . . . . . . . . . . 90% 86% 87% 87% 64%
Average day rates:
Jackup rigs
North America . . . . . . . . . . . . . . $27,793 $20,559 $21,531 $20,035 $13,118
Europe . . . . . . . . . . . . . . . . . 47,714 42,631 24,528 27,014 27,528
Asia . . . . . . . . . . . . . . . . . . 26,751 -- 27,739 20,424 23,619
South America . . . . . . . . . . . . . . -- -- 24,629 24,125 23,686
Total jackup rigs . . . . . . . . . 31,505 24,813 22,269 21,572 18,122
Barge drilling rigs - South America . . . . . 22,608 19,631 16,413 15,432 11,332
Platform rigs . . . . . . . . . . . . . . . . 16,913 -- -- -- --
Total . . . . . . . . . . . . . . . . . . $28,238 $23,196 $20,539 $20,281 $17,201
Marine Fleet Utilization and Day Rates
Utilization:
AHTS . . . . . . . . . . . . . . . . 79% 84% 81% 76% 56%
Supply . . . . . . . . . . . . . . . . . 92% 84% 86% 84% 61%
Mini-supply . . . . . . . . . . . . . . . 87% 65% 93% 95% 100%
Total . . . . . . . . . . . . . . . . 89% 79% 86% 84% 64%
Average day rates:
AHTS . . . . . . . . . . . . . . . . $ 9,321 $ 7,732 $ 7,686 $ 6,987 $ 6,309
Supply . . . . . . . . . . . . . . . . . 4,729 3,136 3,173 3,039 2,047
Mini-supply . . . . . . . . . . . . . . . 2,972 1,985 1,663 1,677 1,133
Total . . . . . . . . . . . . . . . . $ 5,016 $ 3,753 $ 3,826 $ 3,559 $ 2,669
Offshore Drilling Rig information includes the results of Dual rigs from the June 12, 1996 acquisition date. Asia
and Platform rig information in 1996 results from the Dual acquisition.
Offshore Drilling Rig and Marine Fleet information includes 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.
/TABLE
Financial information regarding the Company's operating segments and
foreign and domestic operations is presented in Note 10 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 and gas companies, government owned oil and gas
companies and independent oil and gas companies.
During 1996, aggregate revenues provided to the Company's contract drilling
operations by Lagoven S.A. ("Lagoven"), a subsidiary of Venezuela's
national oil company, were $75.5 million, or 16% of total revenues.
Additionally, revenues of $63.7 million, or 14% 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 AND COMPETITION
After several years of depressed market conditions resulting from the
supply of offshore rigs exceeding demand, uncertainty over low oil and gas
prices and reductions in expenditures by oil and gas companies, the
offshore contract drilling market has shown distinct improvement over the
last two years, but most significantly in 1996. Worldwide drilling
activity in 1996 continued to demonstrate a sustained recovery as supply
and demand in the offshore drilling market reached near equilibrium, a
level not attained since the early 1980's. The increase in drilling
activity pushed day rates to levels not experienced since the early 1980's
as well. These increases are primarily driven by the strengthening of oil
and natural gas prices and new technologies which are making exploration
and production more cost effective for the Company's customers. With
expected capital expenditure increases for major and independent oil
companies in 1997, the Company anticipates that the offshore drilling
market will remain strong unless there is a significant deterioration in
oil and natural gas prices.
The contract drilling business is highly competitive and 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.
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.
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 political developments and by
federal, state, foreign and local laws and regulations that relate directly
to the oil and gas industry. The industry is also affected by changing tax
laws, price controls and other laws affecting the energy business. 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, as well as
increasing the costs of operations.
The Company and its rigs and operations are subject to federal, state,
local and foreign laws and regulations relating to engineering, design,
structural, safety and operational and inspection standards.
Most of the Company's marine transportation operations are conducted in
U.S. waters and are subject to the coastwise laws of the United States,
principally, the Jones Act. Such laws reserve marine transportation
between points in the United States to vessels built and documented under
U.S. laws and owned and manned by U.S. citizens. Certain interests opposed
to the Jones Act have announced an intention to seek changes to the Jones
Act. Although the Company believes it is unlikely that the Jones Act will
be substantively modified or repealed, there can be no assurance that the
Jones Act may not be modified or repealed. Such changes in the Jones Act
could have a material adverse effect on the Company's operations and
financial condition.
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 cost of offshore exploration,
development or production of oil and gas, the Company could be materially
adversely affected.
The United States Oil Pollution Act of 1990 ("OPA '90") and similar
legislation in Texas, Louisiana and other coastal states address oil spill
prevention and control and significantly expand liability exposure across
all segments of the oil and gas industry. OPA '90, such similar
legislation and related regulations impose a variety of obligations on the
Company related to the prevention of oil spills and liability for resulting
damages. OPA '90 imposes strict and, with limited exceptions, joint and
several liability upon each responsible party for oil removal costs and a
variety of damages. OPA '90 imposes ongoing financial responsibility
requirements. A failure to comply with OPA '90 may subject a responsible
party to civic or criminal enforcement action. The U.S. Minerals
Management Service is required to promulgate regulations to implement the
financial responsibility requirements which could increase the cost of
doing business in U.S. waters and adversely affect the ability of some of
the Company's customers to operate in U.S. waters.
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.
Also, there can be no assurance that any particular insurance claim will be
paid or that the Company will be able to procure adequate insurance
coverage at commercially reasonable rates in the future.
INTERNATIONAL OPERATIONS
A significant portion of the Company's contract drilling operations are
conducted in foreign countries. Revenues from international operations
were 41% of the Company's total revenues in 1996. 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. In April 1996, the Venezuelan government removed the exchange
control policies previously established and allowed the Venezuelan currency
to become freely traded. The Venezuelan currency has remained relatively
stable subsequent to that change. 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 56 Chairman of the Board,
President, Chief Executive
Officer and Director
Richard A. Wilson 59 Senior Vice President, Chief
Operating Officer and Director
Marshall Ballard 54 Vice President - Business
Development and Quality
William S. Chadwick, Jr. 49 Vice President - Administration
and Secretary
C. Christopher Gaut 40 Vice President - Finance and
Chief Financial Officer
H. E. Malone 53 Vice President - Controller and
Chief Accounting Officer
Frank B. Williford 57 Vice President - Engineering
Richard A. LeBlanc 46 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 3,800 full-time employees worldwide as of
February 1, 1997. 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 1, 1997, certain information
regarding the offshore drilling rigs owned by the Company:
JACKUP RIGS
- -----------
YEAR BUILT/ WATER DEPTH/
RIG NUMBER REBUILT RIG TYPE NOTES RATED DEPTH
- ---------- ---------- -------- ----- -----------
North America
- -------------
ENSCO 51 1982 FG-780II-C 2 300'/25,000'
ENSCO 54 1982 FG-780II-C 2 300'/25,000'
ENSCO 55 1981 FG-780II-C 2 300'/25,000'
ENSCO 60 1981 Lev-111-C 2 300'/25,000'
ENSCO 64 1974 MLT 53-S 1,2*,3 250'/30,000'
ENSCO 67 1976/1996 MLT 84-S 1,2 400'/30,000'
ENSCO 68 1976 MLT 84-S 350'/30,000'
ENSCO 69 1976/1995 MLT 84-S 1,2 400'/25,000'
ENSCO 81 1979 MLT 116-C 1,2 350'/25,000'
ENSCO 82 1979 MLT 116-C 1,2,3 300'/25,000'
ENSCO 83 1979 MLT 82 SD-C 2 250'/25,000'
ENSCO 84 1981 MLT 82 SD-C 2 250'/25,000'
ENSCO 86 1981 MLT 82 SD-C 1,2 250'/30,000'
ENSCO 87 1982 MLT 116-C 1,2 350'/25,000'
ENSCO 88 1982 MLT 82 SD-C 1,2 250'/25,000'
ENSCO 89 1982 MLT 82 SD-C 1,2 250'/25,000'
ENSCO 90 1982 MLT 82 SD-C 1,2 250'/25,000'
ENSCO 93 1982 MLT 82 SD-C 2 250'/25,000'
ENSCO 94 1981 Hitachi-250C 1,2 250'/25,000'
ENSCO 95 1981 Hitachi-250C 2 250'/25,000'
ENSCO 98 1977 MLT 82 SD-C 2 250'/25,000'
ENSCO 99 1985 MLT 82 SD-C 1,2 250'/30,000'
Europe
- ------
ENSCO 70 1981/1996 Hitachi-300C NS 1,2,3,4 250'/30,000'
ENSCO 71 1982/1995 Hitachi-300C NS 1,2,3 225'/25,000'
ENSCO 72 1981/1996 Hitachi-300C NS 1,2,3 225'/25,000'
ENSCO 80 1978/1995 MLT 116-CE 1,2,3 225'/30,000'
ENSCO 85 1981/1995 MLT 116-C 1,2,3 225'/25,000'
ENSCO 92 1982/1996 MLT 116-C 1,2,3 225'/25,000'
Asia
- ----
ENSCO 50 1983 FG-780II-C 300'/25,000'
ENSCO 52 1983 FG-780II-C 2 300'/25,000'
ENSCO 53 1982 FG-780II-C 300'/30,000'
ENSCO 56 1983 FG-780II-C 2 300'/25,000'
ENSCO 57 1982 FG-780II-C 2 300'/25,000'
ENSCO 96 1982 Hitachi-250C 2 250'/25,000'
ENSCO 97 1980 MLT 82 SD-C 2,5 250'/20,000'
_______________________
Notes:
1) Zero discharge capabilities permitting operation in environmentally
sensitive areas.
2) Top drive (or 2* side drive).
3) 350 ft. water depth capability with the addition of leg sections.
4) 15,000 psi blowout preventor for high pressure drilling capability.
5) In transit from North America to Asia.
BARGE DRILLING RIGS
- -------------------
YEAR BUILT/
RIG NUMBER REBUILT RATED DEPTH LOCATION
- ---------- ---------- ----------- --------
ENSCO V 1982/1996 15,000' Venezuela
ENSCO VI 1991/1996 15,000' Venezuela
ENSCO VII 1993 20,000' Venezuela
ENSCO VIII 1993 20,000' Venezuela
ENSCO IX 1993 20,000' Venezuela
ENSCO X 1993 20,000' Venezuela
ENSCO XI 1994 25,000' Venezuela
ENSCO XII 1994 25,000' Venezuela
ENSCO XIV 1994 25,000' Venezuela
ENSCO XV 1994 25,000' Venezuela
___________________________________________________________________________
PLATFORM RIGS
- -------------
YEAR BUILT/
RIG NUMBER REBUILT NOTES RATED DEPTH LOCATION
- ---------- ---------- ----- ----------- --------
ENSCO 20 1980 1,2 25,000' China
ENSCO 21 1982/1996 1 25,000' GOM
ENSCO 22 1982/1997 1 25,000' GOM
ENSCO 23 1980 1 30,000' GOM
ENSCO 24 1980 1 25,000' GOM
ENSCO 25 1980 1 30,000' GOM
ENSCO 26 1982 1 30,000' GOM
ENSCO 29 1981 1 30,000' GOM
_______________________
Notes:
1) Top-drive unit
2) Rig managed by ENSCO, not owned
___________________________________________________________________________
The Company's drilling rigs consist of engines, drawworks, derricks, pumps
to circulate the drilling fluid, blowout preventers, drill string and
related equipment. The engines power a drive mechanism 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.
The Company's platform rigs are designed to be temporarily installed on
permanently constructed offshore platforms. A platform rig typically stays
at a location for a longer period of time than a jackup rig as several
wells can be drilled from a support platform.
Over the life of a typical rig, several of the major components are
replaced due to normal wear and tear. All of the Company's rigs are in
good condition.
Certain of the Company's jackup rigs, which had a combined net book value
of $388.3 million at December 31, 1996, are pledged as collateral in favor
of a financial institution to secure payment of the Company's revolving
credit facility.
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 at the job site, at the Company's facilities, or
vendor facilities. The Company owns or leases field locations and repair
facilities for its drilling rigs in Louisiana, Venezuela, the Netherlands,
Scotland, Indonesia, India, Qatar and Malaysia.
MARINE TRANSPORTATION
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 Gulf of Mexico. Substantially all of the
Company's marine transportation vessels, which had a combined net book
value of $40.6 million at December 31, 1996, are pledged as collateral to
secure payment of secured term loans.
The following table provides, as of February 1, 1997, 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 Louisiana and Scotland. The Company
rents office space in the Netherlands, India, Indonesia, Malaysia, Qatar
and Venezuela.
ITEM 3. LEGAL PROCEEDINGS
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 1996.
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:
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- --------
1996 High . . $29 1/8 $33 $36 $50 1/8 $50 1/8
1996 Low . . . $20 $25 3/8 $26 3/4 $31 1/2 $20
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
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 February 6, 1997, there were approximately
2,800 stockholders of record of the Company's Common Stock.
Since inception, no dividends have been declared on the Company's Common
Stock.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below for the five years
ended December 31, 1996 has been derived from the Company's audited
consolidated financial statements. 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,
-------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- --------- --------- --------- ---------
(In thousands, except per share amounts)
Statement of Operations Data
Operating revenues . . . . . . . . . . . . . . . . . $ 468,833 $279,114 $245,451 $227,410 $ 84,271
Operating expenses, excluding D&A . . . . . . . . . 238,334 165,529 144,581 151,182 81,999
Depreciation and amortization (D&A) . . . . . . . . 81,760 58,390 51,798 41,181 12,539
Operating income (loss) . . . . . . . . . . . . . . 148,739 55,195 49,072 35,047 (10,267)
Other expense . . . . . . . . . . . . . . . . . . . 6,059 7,856 8,751 6,696 8,028
Income (loss) from continuing operations before
income taxes, minority interest and cumulative
effect of accounting change . . . . . . . . . . 142,680 47,339 40,321 28,351 (18,295)
Provision for income taxes . . . . . . . . . . . . . 44,009 3,397 3,759 5,942 2,007
Minority interest . . . . . . . . . . . . . . . . . 3,271 2,179 2,984 6,932 --
Income (loss) from continuing operations . . . . . . 95,400 41,763 33,578 15,477 (20,302)
Income (loss) from discontinued operations . . -- 6,296 3,593 3,556 (9,062)
Income (loss) before cumulative effect of
accounting change . . . . . . . . . . . . . . . 95,400 48,059 37,171 19,033 (29,364)
Cumulative effect of accounting change, net
of minority interest . . . . . . . . . . . -- -- -- (2,542) --
Net income (loss) . . . . . . . . . . . . . . . . . 95,400 48,059 37,171 16,491 (29,364)
Preferred stock dividend requirements . . . . . . . -- -- 2,135 4,260 4,260
Income (loss) applicable to common stock . . . . . . $ 95,400 $ 48,059 $ 35,036 $ 12,231 $(33,624)
Income (loss) per common share:
Continuing operations . . . . . . . . . . . . . $ 1.44 $ .69 $ .55 $ .28 $ (.82)
Discontinued operations . . . . . . . . . . . . -- .10 .06 .09 (.30)
Cumulative effect of accounting change . . . . . -- -- -- (.07) --
Income (loss) per common share . . . . . . . . . $ 1.44 $ .79 $ .61 $ .30 $ (1.12)
Weighted average common shares outstanding . . . . . 66,286 60,527 57,843 40,325 30,003
Balance Sheet Data
Working capital . . . . . . . . . . . . . . . . . . $ 107,519 $ 78,945 $129,172 $124,587 $ 33,771
Total assets . . . . . . . . . . . . . . . . . . . . 1,315,420 821,451 773,090 689,254 272,397
Long-term debt, net of current portion . . . . . . . 258,635 159,201 162,466 125,983 23,628
$1.50 preferred stock . . . . . . . . . . . . . . . -- -- -- 70,977 70,977
Stockholders' equity . . . . . . . . . . . . . 845,951 531,249 487,950 383,925 142,512
The Company acquired Dual on June 12, 1996. Statement of Operations
Data includes the results of Dual from the acquisition date.
The Company completed the step acquisition of Penrod in August 1993.
Amounts have been restated for adoption of Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes."
The Company sold its technical services segment in 1995 and its
supply segment in 1993. 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 13 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."
Since inception, no dividends have been declared on the Company's
Common Stock.
/TABLE
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Business Environment
- --------------------
ENSCO International Incorporated (the "Company") is one of the largest
providers of offshore drilling services and marine transportation services
to the oil and gas industry. The Company's operations are conducted in the
geographic cores of North America, Europe, Asia and South America. The
Company's largest geographic core is North America where the Company
operates primarily in the Gulf of Mexico. The Europe operations are
concentrated in the North Sea and the South America operations are
currently conducted on Lake Maracaibo, 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.
Worldwide drilling activity in 1996 continued to demonstrate a
sustained recovery as supply and demand in the offshore drilling market
reached near equilibrium, a level not attained since the early 1980's. The
increase in drilling activity pushed day rates to levels not experienced
since the early 1980's as well. These increases are primarily driven by
the strengthening of oil and natural gas prices and new technologies which
are making exploration and production more cost effective for the Company's
customers. With expected capital expenditure increases for major and
independent oil companies in 1997, the Company anticipates that the
offshore drilling market will remain strong unless there is a significant
deterioration in oil and natural gas prices.
The Company's results have benefitted from the increase in drilling
activity discussed above. Of the geographical markets in which the Company
operates, the Gulf of Mexico and the North Sea experienced the most
significant impact from the increased drilling activity in 1996. The Asia
market in general did not experience the same level of increased activity
as the Gulf of Mexico and the North Sea for most of 1996. Recently, the
Asia market has shown significant improvement and the Company believes the
Asia market will continue to improve in 1997 as all offshore drilling
markets in general continue to tighten. The Company's South America barge
drilling rigs operate under long-term contracts with Lagoven S.A.
("Lagoven"), a subsidiary of Venezuela's national oil company. As a
result, their day rate and utilization levels are not as dependent on oil
and natural gas prices. Activity levels for the Company's marine
transportation vessels generally correspond with the activity levels for
the Company's drilling rigs operating in the Gulf of Mexico.
Offshore rig and oilfield supply vessel industry utilization is
summarized below:
INDUSTRY WIDE AVERAGES
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994
---- ---- ----
OFFSHORE RIGS
Gulf of Mexico:
All rigs:
Rigs under contract . . . 158 134 133
Total rigs available . . 179 176 175
% Utilization . . . . . . 88% 76% 76%
Jackup rigs:
Rigs under contract . . . 122 107 109
Total rigs available . . 136 140 136
% Utilization . . . . . . 90% 76% 80%
Platform rigs:
Rigs under contract . . . 19 13 14
Total rigs available . . 25 25 28
% Utilization . . . . . . 76% 52% 50%
Worldwide:
All rigs:
Rigs under contract . . . 572 539 536
Total rigs available . . 639 644 661
% Utilization . . . . . . 90% 84% 81%
Jackup rigs:
Rigs under contract . . . 347 324 322
Total rigs available . . 383 388 392
% Utilization . . . . . . 91% 84% 82%
Platform rigs:
Rigs under contract . . . 111 103 112
Total rigs available . . 121 118 129
% Utilization . . . . . . 92% 87% 87%
OILFIELD SUPPLY VESSELS
Gulf of Mexico:
Vessels under contract . . 263 249 235
Total vessels available . . 279 277 264
% Utilization . . . . . . . 94% 90% 89%
Industry utilization based on data published by OFFSHORE DATA
SERVICES, INC.
Excludes utility vessels.
/TABLE
Results of Operations
- ---------------------
On June 12, 1996, the Company acquired DUAL DRILLING COMPANY ("Dual")
in a purchase acquisition. The Company's consolidated financial statements
include the results of Dual from the acquisition date. The acquired Dual
operations consisted of a fleet of 20 offshore drilling rigs, including 10
jackup rigs and 10 platform rigs. Five of the jackup rigs are presently
located in the Gulf of Mexico, two are located offshore India, one offshore
Indonesia and one each in shipyards in Malaysia and Sharjah undergoing
modifications and enhancements. Of the 10 platform rigs acquired from
Dual, seven are currently located in the Gulf of Mexico and one, which is
not owned but managed, is located off the coast of China. The remaining
two platform rigs, formerly located off the coast of California, have been
retired.
The following analysis highlights the Company's operating results for
the years indicated (in thousands):
1996 1995 1994
-------- -------- --------
OPERATING RESULTS
Revenues . . . . . . . . . . . . . . . . . $468,833 $279,114 $245,451
Operating margin . . . . . . . . . . . . . 241,518 123,154 110,122
Operating income . . . . . . . . . . . . . 148,739 55,195 49,072
Other expense . . . . . . . . . . . . . . . 6,059 7,856 8,751
Provision for income tax . . . . . . . . . 44,009 3,397 3,759
Minority interest . . . . . . . . . . . . . 3,271 2,179 2,984
Income from continuing operations . . . . . 95,400 41,763 33,578
Income from discontinued operations . . . . -- 6,296 3,593
Net income . . . . . . . . . . . . . . . . 95,400 48,059 37,171
Preferred stock dividend requirements . . . -- -- 2,135
Income applicable to common stock . . . . . 95,400 48,059 35,036
/TABLE
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
-------- -------- --------
REVENUES
Contract drilling
Jackup rigs
North America . . . . . . . . . . $197,227 $119,275 $109,012
Europe . . . . . . . . . . . . . 91,831 59,525 30,635
Asia . . . . . . . . . . . . 23,783 -- 2,913
South America . . . . . . . . . . -- -- 4,187
Total jackup rigs . . . . . 312,841 178,800 146,747
Barge drilling rigs - South America . 75,536 61,975 48,227
Platform rigs . . . . . . . . . . 20,237 -- --
Total offshore rigs . . . . . . . 408,614 240,775 194,974
Land rigs . . . . . . . . . . . . -- -- 12,807
Total contract drilling . . . . . 408,614 240,775 207,781
Marine transportation
AHTS . . . . . . . . . . . . . . 16,120 14,421 14,743
Supply . . . . . . . . . . . . . . . . 36,509 20,143 19,362
Mini-supply . . . . . . . . . . . . . 7,590 3,775 1,701
Subtotal . . . . . . . . . . . . 60,219 38,339 35,806
Utility . . . . . . . . . . . . . -- -- 1,864
Total marine transportation . . . 60,219 38,339 37,670
Total . . . . . . . . . . . . . . . . $468,833 $279,114 $245,451
OPERATING MARGIN
Contract drilling
Jackup rigs
North America . . . . . . . . . . $106,440 $ 46,366 $ 49,607
Europe . . . . . . . . . . . . . 40,268 23,062 16,732
Asia . . . . . . . . . . . . 7,878 -- (920)
South America . . . . . . . . . . -- -- (63)
Total jackup rigs . . . . . 154,586 69,428 65,356
Barge drilling rigs - South America . 49,033 39,017 31,720
Platform rigs . . . . . . . . . . 5,484 -- --
Total offshore rigs . . . . . . . 209,103 108,445 97,076
Land rigs . . . . . . . . . . . . 708 (228) 481
Total contract drilling . . . . 209,811 108,217 97,557
Marine transportation
AHTS . . . . . . . . . . . . . . 8,078 7,353 6,022
Supply . . . . . . . . . . . . . . . . 20,043 6,709 6,877
Mini-supply . . . . . . . . . . . . . 3,586 875 585
Subtotal . . . . . . . . . . . . 31,707 14,937 13,484
Utility . . . . . . . . . . . . . -- -- (919)
Total marine transportation . . . 31,707 14,937 12,565
Total . . . . . . . . . . . . . . . . $241,518 $123,154 $110,122
Asia and Platform rig information in 1996 results from the Dual
acquisition.
The Company sold all but one of its land rigs in 1994. The remaining
land rig was sold in July 1996.
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 amortization and general and administrative
expenses.
/TABLE
The consolidated revenues, operating margin and operating income of the
Company for 1996 increased significantly as compared to 1995. These
increases were due to increased average day rates and utilization for
nearly all of the Company's drilling rigs and marine vessels and the impact
from the Dual acquisition. The increase in average day rates and
utilization is a result of increased worldwide oil and gas drilling
activity. Operating income for 1996 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 and 1996.
The Company's increase in consolidated revenues, operating margin and
operating income for 1995 as compared to 1994 was primarily due to a full
year of operation of four drilling rigs which commenced operations in
Venezuela and two drilling rigs which commenced operations in the North Sea
during 1994 coupled with an increase in North Sea average day rates. These
increases were offset, in part, by decreased 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.
CONTRACT DRILLING. The Company's contract drilling segment
currently consists of 35 jackup rigs, 10 barge drilling rigs and eight
platform rigs. The following is an analysis of the location of the
Company's offshore drilling rigs at December 31, 1996, 1995 and 1994.
1996 1995 1994
------ ------ ------
Jackup rigs:
North America . . . . . . 23 18 18
Europe . . . . . . . . . 6 6 5
Asia . . . . . . . . . . 6 (1) -- --
------ ------ ------
Total jackup rigs . . . 35 24 23
Barge drilling rigs -
South America . . . . . . 10 10 10
Platform rigs . . . . . . . 8 (2) -- --
------ ------ ------
Total . . . . . . . . . 53 34 33
====== ====== ======
Notes:
(1) Includes one jackup rig operated by the Company that is 49% owned.
(2) Seven are located in the Gulf of Mexico and one, which is not owned
but is operated under a management contract, is located off the
coast of China.
The Company's North America jackup and platform rigs operate under
relatively short-term agreements with contract durations normally not
exceeding six months. Four of the Company's six Europe jackup rigs are
committed under contract to a joint venture of major oil and gas
exploration companies and are expected to work under these contracts
through 1997, however, the joint venture may terminate any of the contracts
with six months notice. The Company's Asia jackup rigs generally operate
under contracts with one to two year terms. The Company's ten barge
drilling rigs in Venezuela operate under long-term contracts for Lagoven
expiring in 1998 and 1999. The contracts with Lagoven for the ten 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:
1996 1995 1994
------ ------ ------
North America jackup rigs . 7,072 5,642 5,063
Europe jackup rigs . . . . 1,881 1,337 1,221
Asia jackup rigs . . . . . 880 -- 105
South America jackup rigs . -- -- 170
South America barge
drilling rigs . . . . . . 3,332 3,147 3,479
Platform rigs . . . . . . . 1,108 -- --
------ ------ ------
14,273 10,126 10,038
====== ====== ======
For the year ended December 31, 1996, revenues and operating margin for
the Company's North America jackup rigs increased by 65% and 130%,
respectively, as compared to 1995. These increases were primarily due to
an increase in average day rates of approximately $7,200 from the prior
year. In addition, the acquired Dual North America jackup rigs contributed
$26.7 million in revenue and $15.7 million in operating margin,
representing 34% and 26% of the respective increases. The significant
percent increase in operating margin as compared to the percent increase in
revenue is attributable to the fact that operating costs for rigs are
relatively fixed once a rig is fully utilized, and therefore additional
revenues significantly impact the operating margin.
For the year ended December 31, 1995, revenues from the Company's North
America 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 jackup
rigs to the Gulf of Mexico in 1994, one from South America which commenced
operations in the third quarter of 1994 and one from Asia which commenced
operations in the third quarter of 1995. The cost to mobilize the two
jackup rigs totalled $3.5 million and was charged against 1994 earnings,
resulting in negative operating margins for the Asia and South America
jackup rigs in 1994. 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.
Revenues and operating margin from the Company's Europe jackup rigs
increased by 54% and 75%, respectively, in 1996 as compared to 1995. These
increases are primarily due to an approximate 15% increase in utilization
and a $5,100 increase in average day rates for these rigs. Two of the
Company's Europe jackup rigs were off contract undergoing modifications and
enhancements for the majority of 1995 and an additional jackup rig,
acquired in March 1995, was previously operated under a bareboat charter
for all of 1995.
Revenues and operating margin from the Company's Europe jackup rigs
increased by 94% and 38%, respectively, in 1995 as compared to 1994, due
primarily to an increase of approximately $18,100 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. These increases were offset, in part, by the
effect of two of the Company's Europe jackup rigs undergoing modifications
and enhancements during the majority of 1995 while off contract.
The Company's current Asia jackup rigs were acquired in the Dual
acquisition. These rigs contributed approximately $23.8 million in revenue
and $8.0 million in operating margin for the period they were included in
the Company's 1996 operations. The Company purchased an additional jackup
rig in Asia in the fourth quarter of 1996 which did not operate as it was
undergoing modifications. The Company had one jackup rig that operated in
Asia for part of 1994 before it was mobilized to North America. The
Company had no jackup rigs in Asia during 1995.
Revenues and operating margin from the Company's South America barge
drilling rigs increased by 22% and 26%, respectively, for the year ended
December 31, 1996 as compared to 1995, due primarily to an approximate 5%
increase in utilization and an increase in average day rates of
approximately $3,000 from the prior year. The utilization increase
resulted from the return to work, in May and July 1996, of two of the
Company's barge drilling rigs that had previously been undergoing
modifications.
For the year ended December 31, 1995, revenues and operating margin
from the Company's barge drilling rigs in South America increased by 29%
and 23%, respectively, 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 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. In April 1996, the Venezuelan government removed the exchange
control policies previously established and allowed the Venezuelan currency
to become freely traded. The Venezuelan currency has remained relatively
stable subsequent to that change. 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's platform rigs were acquired in the Dual acquisition and
contributed approximately $20.2 million in revenues and $5.5 million in
operating margin for the period they were included in the Company's
operations.
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
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 4 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 vessel and converted
another to a mini-supply vessel.
Revenues and operating margin for the Company's marine transportation
vessels increased by 57% and 112%, respectively, in 1996 as compared to
1995, due primarily to increased utilization and day rates for the
Company's supply vessels. Revenues and operating margin for 1995 as
compared to 1994 increased by 2% and 19%, respectively, 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.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
for the year ended December 31, 1996 increased by 40% from 1995 due
primarily to depreciation and amortization associated with the rigs
acquired from Dual, depreciation associated with major modifications and
enhancements on various rigs and vessels that returned to work in 1995 and
1996, and depreciation on six supply vessels purchased in late 1995.
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 1995 increase was partially 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 programs in 1996 and 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. The effect of the 1996 change in estimate was to
increase net income for the year ended December 31, 1996 by $1.4 million,
or $.02 per share. The effect of the 1995 change in estimate was to
increase net income for the year ended December 31, 1995 by $892,000, or
$.01 per share.
GENERAL AND ADMINISTRATIVE. General and administrative expense
decreased as a percentage of revenue to 2.4% in 1996 from 3.4% in 1995,
demonstrating the Company's ability to achieve efficiencies from the Dual
acquisition and as a result of increased revenue from average day rate and
utilization increases. General and administrative expense as a percentage
of revenue was comparable for 1995 and 1994.
OTHER INCOME (EXPENSE). Other income (expense) for each of the three
years in the period ended December 31, 1996 was as follows (in thousands):
1996 1995 1994
-------- -------- --------
Interest income . . . . . . $ 4,518 $ 6,310 $ 5,252
Interest expense . . . . . (20,888) (16,564) (13,377)
Other, net . . . . . . . . 10,311 2,398 (626)
-------- -------- --------
$ (6,059) $ (7,856) $ (8,751)
======== ======== ========
The Company reported a decrease in interest income in 1996 as compared
to 1995 primarily resulting from lower average cash balances. Interest
income increased in 1995 as compared to 1994 due to increased average
interest rates which more than offset the effect of lower average cash
balances in 1995.
Interest expense increased in 1996 as compared to 1995 as a result of
the additional debt assumed in the Dual acquisition. See Note 2 and Note 4
to the Company's Consolidated Financial Statements. Interest expense
increased in 1995 as compared to 1994 primarily due to costs associated
with financing four barge drilling rigs in July through September 1994.
See Note 4 to the Company's Consolidated Financial Statements.
"Other, net" income increased in 1996 as compared to 1995 primarily due
to a $6.4 million gain on a litigation settlement as discussed in Note 9 to
the Company's Consolidated Financial Statements and a $2.9 million gain on
the sale of securities related to the 1995 sale of the Company's technical
services operation as discussed in Note 13 to the Company's Consolidated
Financial Statements. The Company reported "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.
PROVISION FOR INCOME TAXES. For the years ended December 31, 1996,
1995 and 1994 the Company recorded provisions for income taxes of $44.0
million, $3.4 million and $3.8 million, respectively, resulting in
effective tax rates of 30.8%, 7.2% and 9.3%, respectively. The Company's
provision for income taxes increased significantly in 1996 due primarily to
an increase in deferred income taxes. Deferred income taxes increased, in
part, as a result of increased capital spending and increased
profitability. 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 8 to the Company's
Consolidated Financial Statements.
MINORITY INTEREST. The minority interest of $3.3 million, $2.2
million and $3.0 million in 1996, 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%.
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. As a result of this
transaction, the Company's financial statements were reclassified to
present the Company's technical services segment as a discontinued
operation 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. Revenues from the technical services
operations were $13.4 million and $16.5 million in 1995 and 1994,
respectively. See Note 13 to the Company's Consolidated Financial
Statements.
Liquidity and Capital Resources
- -------------------------------
CASH FLOW AND CAPITAL EXPENDITURES.
Year Ended December 31,
------------------------------------
1996 1995 1994
-------- -------- --------
(in thousands)
Cash flow from operations . . . . . . . . . . . . . . . $198,550 $ 84,565 $109,217
======== ======== ========
Capital expenditures, excluding discontinued
operations and Dual acquisition:
Sustaining . . . . . . . . . . . . . . . . . . . . $ 19,318 $ 11,335 $ 22,201
Enhancements . . . . . . . . . . . . . . . . . . . 99,398 109,706 10,301
New construction . . . . . . . . . . . . . . . . . -- 911 62,206
Acquisitions . . . . . . . . . . . . . . . . . . . 57,269 21,278 55,650
-------- -------- --------
$175,985 $143,230 $150,358
======== ======== ========
The Company issued approximately 10.1 million shares of its common
stock in the acquisition of Dual in 1996, resulting in an acquisition price
of approximately $218.4 million.
Cash flow from operations in 1996 as compared to 1995 increased by
$114.0 million, or 135%, due primarily to increased operating results. The
Company's cash flow from operations decreased in 1995 as compared to 1994
by $24.7 million, or 23%, due primarily to an increase in accounts
receivable.
The Company's consolidated statement of cash flows for the year ended
December 31, 1996 includes the cash and cash equivalents acquired in the
acquisition of Dual, plus the cash provided by operating activities of Dual
subsequent to the acquisition. The cash flows for investing and financing
activities of Dual 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, 1996.
The cash provided by operating activities and the cash flows for investing
and financing activities of Dual prior to the acquisition 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, 1996
included $99.4 million for modifications and enhancements of rigs and
vessels and $57.3 million associated with the acquisition of a jackup rig
located in Southeast Asia and the remaining payment on a jackup rig located
in Europe which was acquired in 1995. 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 Europe. 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 Europe.
Management anticipates that capital expenditures in 1997 will be
approximately $35.0 million for existing operations and $135.0 million for
upgrades and enhancements of rigs and vessels. The Company may spend
additional funds to acquire rigs or vessels in 1997, 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. The Company sold its remaining land rig in 1996.
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,
--------------------------------
1996 1995 1994
---------- -------- --------
Long-term debt . . . . . . . . . $ 258,635 $159,201 $162,466
Total capital . . . . . . . . . . 1,104,586 690,450 650,416
Long-term debt to total capital . 23.4% 23.1% 25.0%
The increase in long-term debt in 1996 as compared to 1995 primarily
relates to $129.0 million of debt assumed in the acquisition of Dual
offset, in part, by scheduled repayments of existing debt. The decrease in
long-term debt in 1995 as compared to 1994 is due primarily to scheduled
repayments offset partially by increased borrowings under the Company's
revolving credit facility. See Note 4 to the Company's Consolidated
Financial Statements. The total capital of the Company increased in 1996
as compared to 1995 due primarily to the issuance of shares of the
Company's common stock in the Dual acquisition valued at $218.4 million,
the net increase in long-term debt as discussed above, and the
profitability of the Company in 1996. The total capital of the Company
increased in 1995 as compared to 1994 due primarily to increased
profitability of the Company offset partially by repurchases of the
Company's common stock. See Note 6 to the Company's Consolidated Financial
Statements.
The Company had $17.9 million undrawn on its revolving line of credit
at December 31, 1996. The revolver is reduced semi-annually by $7.0
million with the remaining line expiring in October 2001. As of December
31, 1996, the Company was negotiating to reduce the interest rate margin
and to increase availability on its revolving line of credit from $150
million to $200 million. See Note 4 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"). 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 5 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,
------------------------------
1996 1995 1994
-------- -------- --------
Cash and short-term investments . $ 80,698 $82,064 $153,720
Working capital . . . . . . . . . 107,519 78,945 129,172
Current ratio . . . . . . . . . . 2.0 1.9 2.5
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
- -------------
During 1996, the Company purchased $23.2 million (face amount) of the
Dual 9 7/8% Senior Subordinated Notes due 2004 (the "Notes") on the open
market. Additionally, in July 1996, $5.0 million (face amount) of the
Notes were redeemed pursuant to an offer required to be made by Dual under
the terms of the Notes. See Note 4 to the Company's Consolidated Financial
Statements.
Private Litigation Securities Reform Act of 1995
- ------------------------------------------------
This report contains forward-looking statements based on current
expectations that involve a number of risks and uncertainties. Generally,
forward-looking statements include words or phrases such as "management
anticipates", "the Company believes", "the Company anticipates" and words
and phrases of similar impact. The forward-looking statements are made
pursuant to safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The factors that could cause actual results to differ
materially include the following: (i) industry conditions and competition,
(ii) cyclical nature of the industry, (iii) worldwide expenditures for oil
and gas drilling, (iv) operational risks and insurance, (v) risks
associated with operating in foreign jurisdictions, (vi) environmental
liabilities which may arise in the future which are not covered by
insurance or indemnity, (vii) the impact of current and future laws and
government regulation, as well as repeal or modification of same, affecting
the oil and gas industry and the Company's operations in particular, and
(viii) the risks described from time to time in the Company's reports to
the Securities and Exchange Commission. Significant and unexpected
deterioration in oil and natural gas prices could adversely affect the
level of offshore drilling activity the Company believes is sustainable in
1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF MANAGEMENT
--------------------
The management of ENSCO International Incorporated and its subsidiaries
has responsibility for the preparation, integrity and reliability of the
consolidated financial statements and related financial information
contained in this report.
The consolidated financial statements included in this report have been
prepared in conformity with generally accepted accounting principles and
prevailing practices of the industries in which the Company operates. In
some instances, these financial statements include amounts that are based
on management's best estimates and judgments.
The Company maintains a system of procedures and controls over
financial reporting that is designed to provide reasonable assurance to the
Company's management and Board of Directors regarding the integrity and the
fair and reliable preparation and presentation, in all material respects,
of its published financial statements. This system of financial controls
and procedures is reviewed, modified, and improved as changes occur in
business conditions and operations, and as a result of suggestions from the
independent auditors. There are inherent limitations in the effectiveness
of any system of internal control and even an effective system of internal
control can provide only reasonable assurance with respect to the financial
statement preparation and may vary over time. Management believes that, as
of December 31, 1996, the Company's internal control system provides
reasonable assurance that material errors or irregularities will be
prevented or detected within a timely period and is cost effective.
As part of management's responsibility for monitoring compliance with
established policies and procedures, it relies on, among other things,
audit procedures performed by corporate and independent auditors to give
assurance that established policies and procedures are adhered to in all
areas subject to their audits. The Board of Directors, operating through
its Audit Committee composed solely of outside directors, meets
periodically with management and the independent auditors for the purpose
of monitoring their activities to ensure that each is properly discharging
its responsibilities. The Audit Committee and independent auditors have
unrestricted access to one another to discuss their findings.
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Stockholders of ENSCO International
Incorporated
In our opinion, 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, 1996 and 1995, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, 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
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 provide a reasonable
basis for the opinion expressed above.
/S/ PRICE WATERHOUSE LLP
- ------------------------
Dallas, Texas
January 28, 1997
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
REVENUES
Contract drilling . . . . . . . . . . $408,614 $240,775 $207,781
Marine transportation . . . . . . . . 60,219 38,339 37,670
468,833 279,114 245,451
OPERATING EXPENSES
Contract drilling . . . . . . . . . . 198,803 132,558 110,224
Marine transportation . . . . . . . . 28,512 23,402 25,105
Depreciation and amortization . . . . 81,760 58,390 51,798
General and administrative . . . . . . 11,019 9,569 9,252
320,094 223,919 196,379
OPERATING INCOME . . . . . . . . . . . . 148,739 55,195 49,072
OTHER INCOME (EXPENSE)
Interest income . . . . . . . . . . . 4,518 6,310 5,252
Interest expense . . . . . . . . . . . (20,888) (16,564) (13,377)
Other, net . . . . . . . . . . . . . . 10,311 2,398 (626)
(6,059) (7,856) (8,751)
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY
INTEREST . . . . . . . . . . . . . . . 142,680 47,339 40,321
PROVISION FOR (BENEFIT FROM) INCOME TAXES
Current income taxes . . . . . . . . . 5,399 3,828 4,638
Deferred income taxes . . . . . . . . 38,610 (431) (879)
44,009 3,397 3,759
MINORITY INTEREST . . . . . . . . . . . . 3,271 2,179 2,984
INCOME FROM CONTINUING OPERATIONS . . . . 95,400 41,763 33,578
INCOME FROM DISCONTINUED OPERATIONS . . . -- 6,296 3,593
NET INCOME . . . . . . . . . . . . . . . 95,400 48,059 37,171
PREFERRED STOCK DIVIDEND REQUIREMENTS . . -- -- 2,135
INCOME APPLICABLE TO COMMON STOCK . . . . $ 95,400 $ 48,059 $ 35,036
INCOME PER COMMON SHARE:
Continuing operations . . . . . . . . $ 1.44 $ .69 $ .55
Discontinued operations . . . . . . . -- .10 .06
$ 1.44 $ .79 $ .61
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING . . . . . . . . . . . . . 66,286 60,527 57,843
The accompanying notes are an integral part of these financial statements.
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands, except for share amounts)
DECEMBER 31,
----------------------
1996 1995
---------- --------
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . $ 80,698 $ 77,064
Short-term investments . . . . . . . . . . . . -- 5,000
Accounts and notes receivable, net . . . . . . 111,033 60,796
Prepaid expenses and other . . . . . . . . . . 19,668 22,893
Total current assets . . . . . . . . . . . . 211,399 165,753
PROPERTY AND EQUIPMENT, AT COST . . . . . . . . . 1,248,873 818,266
Less accumulated depreciation . . . . . . . . . 257,284 185,334
Property and equipment, net . . . . . . . . . 991,589 632,932
OTHER ASSETS, NET . . . . . . . . . . . . . . . . 112,432 22,766
$1,315,420 $821,451
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . $ 11,447 $ 8,936
Accrued liabilities . . . . . . . . . . . . . . 57,490 45,820
Current maturities of long-term debt . . . . . 34,943 32,052
Total current liabilities . . . . . . . . . . 103,880 86,808
LONG-TERM DEBT . . . . . . . . . . . . . . . . . 258,635 159,201
DEFERRED INCOME TAXES . . . . . . . . . . . . . . 72,963 26,800
OTHER LIABILITIES . . . . . . . . . . . . . . . . 33,991 17,393
COMMITMENTS AND CONTINGENCIES . . . . . . . . . .
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 125.0 million
shares authorized, 77.2 million and 66.9
million shares issued . . . . . . . . . . . . 7,718 6,689
Additional paid-in capital . . . . . . . . . . 835,475 615,644
Retained earnings (deficit) . . . . . . . . . . 71,802 (23,598)
Restricted stock (unearned compensation) . . . (4,929) (5,263)
Cumulative translation adjustment . . . . . . . (1,086) (1,086)
Treasury stock at cost, 6.3 million and 6.3
million shares . . . . . . . . . . . . . . . (63,029) (61,137)
Total stockholders' equity . . . . . . . . . 845,951 531,249
$1,315,420 $821,451
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,
------------------------------------------
1996 1995 1994
-------- -------- --------
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 95,400 $ 48,059 $ 37,171
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . 81,760 58,390 51,798
Deferred income tax provision (benefit) . . . . . . . . . . . . 38,610 (431) (879)
Amortization of other assets . . . . . . . . . . . . . . . . . . 4,430 3,383 3,205
Discontinued operations . . . . . . . . . . . . . . . . . . . . -- (5,026) 2,859
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (470) (1,221) 2,690
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable . . . . . . . . . (28,581) (23,438) 11,964
(Increase) decrease in prepaid expenses and other . . . . . . 1,013 4,314 (7,546)
Increase (decrease) in accounts payable . . . . . . . . . . . 849 (3,834) 5,287
Increase in accrued and other liabilities . . . . . . . . . . 5,539 4,369 2,668
Net cash provided by operating activities . . . . . . . . 198,550 84,565 109,217
INVESTING ACTIVITIES
Additions to property and equipment . . . . . . . . . . . . . . . . (175,985) (143,230) (150,358)
Net cash acquired in Dual acquisition . . . . . . . . . . . . . . . 8,529 -- --
Net proceeds from sales of discontinued operations . . . . . . . . . 5,060 11,790 652
(Purchase) sale of short-term investments, net . . . . . . . . . . . 5,000 869 (5,869)
Proceeds from disposition of assets . . . . . . . . . . . . . . . . 5,298 1,125 23,160
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,048 (2,383) (1,835)
Net cash used by investing activities . . . . . . . . . . (150,050) (131,829) (134,250)
FINANCING ACTIVITIES
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . 59,000 24,043 114,698
Reduction of long-term borrowings . . . . . . . . . . . . . . . . . (85,400) (40,749) (64,641)
Pre-acquisition purchase of Dual debt . . . . . . . . . . . . . . . (18,112) -- --
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . -- (7,211) (2,426)
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . -- -- (2,135)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (354) 394 (668)
Net cash provided (used) by financing activities . . . . . (44,866) (23,523) 44,828
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,634 (70,787) 19,795
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR . . . . . . . . . . . . . . 77,064 147,851 128,056
CASH AND CASH EQUIVALENTS, END OF YEAR . . . . . . . . . . . . . . . . . $ 80,698 $ 77,064 $147,851
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 3 "Property and
Equipment." All significant intercompany accounts and transactions have
been eliminated.
On June 12, 1996, the Company acquired DUAL DRILLING COMPANY ("Dual").
See Note 2 "Acquisition of Dual Drilling." The Company's consolidated
financial statements include the results of Dual from the June 12, 1996
acquisition date.
In August 1993, the Company completed the step acquisition of Penrod
Holding Corporation ("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.
Cash Equivalents
----------------
For purposes of the consolidated balance sheet and statement of cash
flows, the Company considers all highly liquid investments 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 all of the Company's
foreign subsidiaries. The financial statements of foreign subsidiaries 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 foreign subsidiaries are reflected in the
consolidated statement of income. Translation losses were $329,000,
$422,000 and $1.3 million for the years ended December 31, 1996, 1995 and
1994, respectively. In prior years, the financial statements of certain
foreign subsidiaries were maintained in the local foreign currency.
Foreign currency translation adjustments for those subsidiaries were
accumulated as a separate component of equity.
Short-Term Investments
----------------------
Short-term investments are comprised of investments having maturities
of greater than three months and less than one year at the date of
purchase. Short-term investments at December 31, 1995 consisted of debt
instruments issued by U.S. government agencies. The aggregate fair value
of short-term investments at December 31, 1995 approximated cost.
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 programs in 1996 and
1995, the remaining useful lives of certain of the Company's jackup rigs,
for which major enhancements were performed, have been extended to twelve
years from the time each respective rig left the shipyard to better reflect
their remaining economic lives. The effect of the 1995 change in estimate
was to increase net income for the year ended December 31, 1995 by
$892,000, or $.01 per share. The effect of the 1996 change in estimate was
to increase net income for the year ended December 31, 1996 by $1.4
million, or $.02 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 acquisitions is amortized on the straight-line
basis over periods ranging from 10 to 40 years. See Note 2 "Acquisition of
Dual Drilling." Amortization of goodwill was $1.7 million, $485,000 and
$802,000 for the years ended December 31, 1996, 1995 and 1994,
respectively. Goodwill, net of accumulated amortization, was $106.2
million and $7.3 million at December 31, 1996 and 1995, respectively, and
is included in Other Assets, Net. On a periodic basis the Company
estimates the undiscounted future cash flows to be generated by the
acquired operations to ensure the carrying value of goodwill has not been
impaired.
Impairment of Assets
--------------------
In 1995, the Company adopted Statement of Financial Accounting
Standards ("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 before
interest.
Revenue Recognition
-------------------
The Company's drilling and marine services contracts generally provide
for payment on a day rate basis, and revenues are recognized as the work is
performed.
Income Taxes
------------
Deferred tax liabilities and assets are recognized for the anticipated
future tax effects of temporary differences between the financial statement
basis and the tax basis of the Company's assets and liabilities using the
enacted tax rates in effect at year end. A valuation allowance for
deferred tax assets is recorded when it is more likely than not that the
benefit from the deferred tax asset will not be realized.
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 acquired
in Caribbean, 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 shareholder's interest included in
the Company's consolidated balance sheet at December 31, 1996 and 1995 was
$8.5 million and $5.2 million, respectively, and is included in Other
Liabilities.
Stock Based Employee Compensation
---------------------------------
In October 1995, the Financial Accounting Standards Board issued 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." The
Company has elected to continue to apply the provisions of Opinion 25.
Under Opinion 25, if the exercise price of the Company's stock options
equals the market value of the underlying stock on the date of grant, no
compensation expense is recognized. SFAS No. 123 requires disclosure of
pro forma information regarding net income and earnings per share as if the
Company had accounted for its employee stock options under the fair value
method of the statement. See Note 7 "Employee Benefit Plans."
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 reflect the
one share for four shares reverse stock split ("reverse stock split") which
was effective June 1, 1994. See Note 6 "Stockholders' Equity."
Reclassifications
-----------------
Certain previously reported amounts have been reclassified to conform
to the 1996 presentation.
2. ACQUISITION OF DUAL DRILLING
On June 12, 1996, the Company acquired Dual pursuant to an Agreement
and Plan of Merger among the Company, a wholly owned subsidiary and Dual.
The acquisition was approved on that date by Dual stockholders who received
0.625 shares of the Company's common stock for each share of Dual common
stock. The Company issued approximately 10.1 million shares of its common
stock to Dual stockholders in connection with the acquisition, resulting in
an acquisition price of approximately $218.4 million.
The Company accounted for the acquisition of Dual as a purchase. The
purchase price allocation has been based on preliminary estimates of fair
value and is subject to adjustment as additional information becomes
available and is evaluated. The primary areas subject to further purchase
price adjustment are reserves associated with insurance related matters and
taxes. The excess of the purchase price over net assets acquired
approximated $100.7 million and is being amortized over 40 years.
The acquired Dual operations consisted of a fleet of 20 offshore
drilling rigs, including 10 jackup rigs and 10 platform rigs. Five of the
jackup rigs are presently located in the Gulf of Mexico, two are located
offshore India, one offshore Indonesia and one each in shipyards in
Malaysia and Sharjah undergoing modifications and enhancements. Of the
10 platform rigs acquired from Dual, seven are currently located in the
Gulf of Mexico and one, which is not owned but managed, is located off the
coast of China. The remaining two platform rigs, formerly located off the
coast of California, have been retired.
The following unaudited pro forma information shows the consolidated
results of operations for the years ended December 31, 1996 and 1995 based
upon adjustments to the historical financial statements of the Company and
the historical financial statements of Dual to give effect to the
acquisition by the Company as if such acquisition had occurred January 1,
1995 (in thousands, except per share data):
1996 1995
-------- --------
Operating revenues . . . . . . . . . . $522,375 $370,130
Operating income . . . . . . . . . . . 149,636 53,237
Income from continuing operations . . 91,743 30,096
Net income . . . . . . . . . . . . . . 91,743 36,392
Income per common share . . . . . . . $ 1.30 $ .52
The pro forma consolidated results of operations are not necessarily
indicative of the actual results that would have occurred had the
acquisition occurred on January 1, 1995, or of results that may occur in
the future.
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1995 consisted of the
following (in thousands):
1996 1995
---------- --------
Drilling rigs and equipment . . . . . $1,133,944 $713,311
Marine vessels . . . . . . . . . . . . 81,594 77,795
Other . . . . . . . . . . . . . . . . 15,217 11,154
Work in progress . . . . . . . . . . . 18,118 16,006
---------- --------
$1,248,873 $818,266
========== ========
In November 1996, the Company purchased a jackup rig located in
Southeast Asia. The rig is undergoing modifications prior to commencing
work in the second quarter of 1997. The Company's additions to property
and equipment for the year ended December 31, 1996 include approximately
$156.7 million in connection with acquisitions and major modifications and
enhancements of rigs and vessels.
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 terminated in February 1996. The purchase price consisted of
$12.8 million paid at closing and an additional $13.0 million 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 for total
consideration of $4.2 million. The Company's investment in the joint
venture of $6.6 million, at the date of purchase, was reclassified from
investment in equity affiliate to property and equipment in the Company's
consolidated balance sheet. For the years ended December 31, 1995 and
1994, the Company recorded income of $200,000 and $700,000, respectively,
in Other Income, net 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.
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. 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.
4. LONG-TERM DEBT
Long-term debt at December 31, 1996 and 1995 consists of the following
(in thousands):
1996 1995
-------- --------
Revolving credit facility . . . . . . $125,133 $ 65,976
9 7/8% Senior Subordinated Notes . . . 75,159 --
Secured term loans (non-recourse to
the Company) . . . . . . . . . . . . 74,825 102,709
Secured term loans . . . . . . . . . . 18,193 22,568
Other . . . . . . . . . . . . . . . . 268 --
-------- --------
293,578 191,253
Less current maturities . . . . . . . (34,943) (32,052)
-------- --------
Total long-term debt . . . . . . . . . $258,635 $159,201
======== ========
Revolving Credit Facility
-------------------------
On June 13, 1996, the Company amended its $130.0 million revolving
credit facility with a group of international banks, increasing
availability under the revolving credit facility ("Facility") to $150.0
million. On the same date, the Company borrowed an additional $45.0
million under the Facility, increasing outstanding borrowings under the
Facility to $111.0 million. Proceeds from the additional $45.0 million of
borrowings under the Facility were used to refinance approximately $41.8
million of Dual's bank debt. The Company incurs a 0.5% annual commitment
fee on the undrawn portion of the Facility. Availability under the
Facility is reduced by $7.0 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, 1996, the interest rate on the
Facility was 7.0% 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% and on $16.0 million of the outstanding
Facility from a floating rate to a fixed rate of 6.835%, 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 $388.3 million at December 31, 1996. 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.
9 7/8% Senior Subordinated Notes
--------------------------------
At the June 12, 1996 acquisition date, Dual had outstanding $100.0
million (face amount) of 9 7/8% Senior Subordinated Notes due 2004 (the
"Notes"). In July 1996, $5.0 million (face amount) of the Notes were
redeemed pursuant to an offer required to be made by Dual under the terms
of the Notes. Additionally, as of December 31, 1996, the Company had
purchased $23.2 million (face amount) of the Notes on the open market. The
Company's balance sheet at December 31, 1996 reflects long-term debt net of
the $5.0 million redemption and the $23.2 million (face amount) of the
Notes purchased by the Company as well as the premium assigned to the Notes
as a result of purchase accounting. The Notes are unsecured obligations
and are guaranteed by certain of the former Dual subsidiaries. The Notes'
indenture contains certain restrictive covenants relating to debt,
restricted payments, disposition of proceeds of asset sales, transactions
with affiliates, limitation on the payment of dividends and other payment
restrictions, limitations on sale leaseback transactions and restrictions
on mergers, consolidations and transfer of assets. Interest on the Notes
is payable semiannually and the Notes are redeemable at the option of the
Company, in whole or in part at any time, on or after January 15, 1999.
Secured Term Loans (Non-recourse to the Company)
------------------------------------------------
A subsidiary of the Company has two financing arrangements, in an
original principal amount 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 $115.6 million at December 31, 1996,
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.
Secured Term Loans
------------------
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 $36.5 million at December 31, 1996.
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 $4.1 million at December 31, 1996.
Maturities of long-term debt, excluding the premium on the Notes, are
as follows: $34.9 million in 1997; $29.5 million in 1998; $23.3 million in
1999; $5.5 million in 2000; $125.1 million in 2001 and $71.8 million
thereafter.
5. 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"). 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.
6. 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
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, 1996, 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 or in the year ended December 31,
1996. 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.
A summary of activity in the various stockholders' equity accounts for
each of the three years in the period ended December 31, 1996 is as follows
(in thousands):
RESTRICTED
COMMON STOCK ADDITIONAL RETAINED STOCK
----------------------- PAID-IN EARNINGS (UNEARNED TREASURY
SHARES AMOUNT CAPITAL (DEFICIT) COMPENSATION) STOCK
-------- -------- ---------- ----------- ------------- ---------
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)
Net income -- -- -- 95,400 -- --
Common stock issued under
employee benefits plans, net 215 22 2,476 -- (740) (1,892)
Common stock issued in Dual
acquisition 10,069 1,007 217,355 -- -- --
Amortization of unearned
compensation -- -- -- -- 1,074 --
BALANCE, December 31, 1996 77,175 $ 7,718 $835,475 $ 71,802 $(4,929) $(63,029)
At December 31, 1996 and 1995, the outstanding shares of the Company's
common stock was 70.9 million and 60.6 million, respectively.
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.
7. EMPLOYEE BENEFIT PLANS
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. 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.
In May 1996, the stockholders approved the Company's 1996 Non-Employee
Directors Stock Option Plan ("Directors Plan"). Under the Directors Plan,
a maximum of 300,000 shares are reserved for issuance. Options granted
under the Directors Plan become exercisable six months after the date of
grant and expire, if not exercised, five years thereafter.
The exercise price of stock options under the Incentive Plan and the
Directors Plan is the 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.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of
that statement. The fair value of each option grant is estimated on the
date of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions used for grants in 1996 and 1995,
respectively: no dividend yield, expected volatility of 38.7% and 40.2%,
risk free interest rates of 6.3% and 6.8%, and expected lives of four years
each.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information follows (in thousands, except per share
amounts):
1996 1995
----------------- -----------------
AS PRO AS PRO
REPORTED FORMA REPORTED FORMA
-------- ------- -------- -------
Income applicable to
common share . . . . . . . . $95,400 $94,298 $48,059 $47,615
Income per common share . . . 1.44 1.42 .79 .79
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts, as SFAS No. 123 does not apply to awards
prior to 1995 and additional awards are anticipated in future years.
A summary of stock option transactions under the Incentive Plan and
Directors Plan is as follows (share amounts in thousands):
1996 1995 1994
------------------- ------------------- -------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ --------- ------ --------- ------ ---------
Outstanding at beginning of year . 1,121 $13.32 1,005 $10.88 1,075 $ 9.77
Granted . . . . . . . . . . . . 243 31.01 512 16.31 213 15.69
Exercised . . . . . . . . . . . (188) 8.98 (262) 9.27 (244) 9.50
Forfeited . . . . . . . . . . . (25) 18.67 (134) 14.44 (39) 10.15
Outstanding at end of year . . . . 1,151 17.65 1,121 13.32 1,005 10.88
Exercisable at end of year . . . . 474 $13.31 377 $10.45 468 $ 9.80
Weighted-average fair value of
options granted during the year $12.15 $6.62 --
The following table summarizes information about the fixed-price stock
options outstanding at December 31, 1996 (share amounts in thousands):
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------ --------------------------------
NUMBER WEIGHTED-AVERAGE NUMBER
RANGE OF OUTSTANDING REMAINING WEIGHTED-AVERAGE EXERCISABLE WEIGHTED-AVERAGE
EXERCISE PRICES AT 12/31/96 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/96 EXERCISE PRICE
---------------- ------------ ----------------- ---------------- ----------- ----------------
$ 4.75 65 .7 years $ 4.75 65 $ 4.75
11.00 - 12.00 248 1.4 years 11.84 194 11.80
15.69 - 16.31 601 3.2 years 16.15 197 16.05
26.94 - 30.13 169 4.4 years 29.42 18 30.13
32.50 - 44.31 68 4.7 years 35.10 -- --
4.75 - 44.31 1,151 2.9 years 17.65 474 13.31
At December 31, 1996, 2.0 million shares were available for grant as
options or incentive grants under the Incentive Plan and 282,000 shares
were available for grant as options under the Directors Plan.
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 vest on such a
basis as determined by a committee of the Board of Directors. Through
1996, incentive stock grants for 1.2 million shares of common stock were
granted, of which 732,000 were vested at December 31, 1996. During 1996,
1995 and 1994, incentive stock grants for 25,000 shares, 52,500 shares and
60,000 shares, respectively, were granted. The remaining outstanding
incentive stock grants vest as follows: 97,250 in each of the years 1997
and 1998, 94,750 in each of the years 1999 and 2000, 13,750 in each of the
years 2001 through 2004, 7,720 in 2005 and 2,500 in 2006. The Company
charged $1.1 million, $1.1 million and $1.0 million to operations in each
of the years 1996, 1995 and 1994, 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,
1996, 1995 and 1994 of $3.8 million, $1.7 million and $1.1 million,
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 $1.1 million, $702,000 and $307,000 in 1996, 1995 and 1994,
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 feature 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 both 1996 and 1995. A SERP liability of $330,000 and
$139,000 is included in Other Liabilities at December 31, 1996 and 1995,
respectively.
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 $4.2 million, which is
included in Other Liabilities at December 31, 1996. 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.
8. INCOME TAXES
The Company had income of $92.7 million, $33.2 million and $26.8
million from its operations before income taxes in the United States and
income of $49.9 million, $14.1 million and $13.5 million from its
operations before income taxes in foreign countries for the years ended
December 31, 1996, 1995 and 1994, respectively.
The provisions for income taxes for the years ended December 31, 1996,
1995 and 1994 are summarized as follows (in thousands):
1996 1995 1994
-------- -------- --------
Current:
Federal . . . . . . . . . . . . . . . . . . . $ 2,126 $ 1,340 $ 1,047
Foreign . . . . . . . . . . . . . . . . . . . 3,273 2,488 3,591
Total current . . . . . . . . . . . . . . 5,399 3,828 4,638
Deferred:
Federal . . . . . . . . . . . . . . . . . . . 40,861 900 (650)
Foreign . . . . . . . . . . . . . . . . . . . 7,721 5,169 2,771
Total deferred . . . . . . . . . . . . . 48,582 6,069 2,121
Deferred tax asset valuation allowance . . . . . . . (9,972) (6,500) (3,000)
Total . . . . . . . . . . . . . . . . . . . . $44,009 $ 3,397 $ 3,759
/TABLE
Deferred income tax assets (liabilities) as of December 31, 1996 and
1995 are summarized as follows (in thousands):
1996 1995
--------- ---------
Deferred income tax benefits:
Net operating loss carryforwards . . . . . . . $ 61,550 $ 84,884
Liabilities not deductible for tax purposes . 7,144 3,382
Safe harbor leases . . . . . . . . . . . . . . 4,898 5,805
Investment tax credit carryforward . . . . . . 360 2,683
Minimum tax credit carryforward . . . . . . . 2,081 --
Foreign tax credit carryforward . . . . . . . 2,728 --
Unfunded pension liability . . . . . . . . . . 1,471 1,560
Other . . . . . . . . . . . . . . . . . . . . 5,977 3,651
Gross deferred tax assets . . . . . . . . . . 86,209 101,965
Less: Valuation allowance . . . . . . . . . . -- (9,972)
Deferred tax assets, net of valuation
allowance . . . . . . . . . . . . . . . . . 86,209 91,993
Deferred tax liabilities:
Property . . . . . . . . . . . . . . . . . . . (147,990) (100,380)
Tax gain recognized on transfer of assets . . (3,550) (587)
Other . . . . . . . . . . . . . . . . . . . . (2,760) (1,863)
Gross deferred tax liabilities . . . . . . . . (154,300) (102,830)
Net deferred tax liabilities . . . . . . . $ (68,091) $ (10,837)
Net current deferred tax asset . . . . . . . . . . . $ 4,872 $ 9,663
Net noncurrent deferred tax asset . . . . . . . . . -- 6,300
Net noncurrent deferred tax liability . . . . . . . (72,963) (26,800)
Net deferred tax liability . . . . . . . . $ (68,091) $ (10,837)
The valuation allowance decreased by $10.0 million in 1996 and by $38.0
million in 1995. Of the 1995 decrease, $13.3 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, 1996, the entire valuation allowance has been released and the Company
expects to realize the full benefit of all of its net operating loss
carryforwards. Any future adjustments to the valuation allowance related
to the projected utilization or non-utilization of the net operating loss
carryforwards of Penrod or Dual that originated prior to their acquisition
will be allocated to goodwill.
The consolidated effective income tax rate for the years ended December
31, 1996, 1995 and 1994 differs from the United States statutory income tax
rate as follows:
1996 1995 1994
------ ------ ------
Statutory income tax rate . . . . . . . 35.0% 35.0% 35.0%
Utilization of net operating loss
carryforwards . . . . . . . . . . . . -- (26.7) (30.3)
Change in valuation allowance . . . . . (7.0) (13.7) (7.4)
Foreign taxes . . . . . . . . . . . . . (3.3) 7.8 9.8
Alternative minimum tax . . . . . . . . 1.5 2.8 2.6
Other . . . . . . . . . . . . . . . . . 4.6 2.0 (0.4)
Effective income tax rate . . . . . . . 30.8% 7.2% 9.3%
At December 31, 1996, the Company had regular and alternative minimum
tax net operating loss carryforwards of approximately $175.9 million and
$76.1 million, respectively, and investment tax credit, minimum tax credit,
and foreign tax credit carryforwards of $360,000, $2.1 million and $2.7
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 1997 through 2000.
The minimum tax credit carryforwards do not expire. The foreign tax credit
carryforward expires in 2001. As a result of both the Penrod and Dual
acquisitions, 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, 1996 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.
9. COMMITMENTS AND CONTINGENCIES
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, $3.1
million and $3.3 million for the years ended December 31, 1996, 1995 and
1994, 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: $3.6 million in 1997;
$2.6 million in 1998; $1.6 million in 1999; $898,000 in 2000; $841,000 in
2001 and $93,000 thereafter.
Insurance
---------
Prior to its acquisition by the Company, Dual was self-insured for a
substantial portion of its maritime claims exposure, with self-insured
limits of up to $500,000 for each claim. Effective June 12, 1996, the
Company increased Dual's insurance coverage to levels consistent with the
Company's existing policies which, among other things, limits the exposure
to maritime claims to $25,000 for each claim. Based on current
information, the Company has provided adequate reserves for such claims.
Litigation
----------
In February 1991, a subsidiary of the Company filed an action against
TransAmerican Natural Gas Corporation and related subsidiaries and
affiliates ("TransAmerican") seeking damages for breach of contract. On
April 5, 1996, the U.S. District court for the Southern District of Texas,
Houston Division, entered a judgment against TransAmerican. As a result of
the judgment, on April 18, 1996, the subsidiary of the Company entered into
a settlement agreement with TransAmerican. Under the terms of the
settlement agreement, the subsidiary of the Company received approximately
$7.3 million. In the second quarter of 1996, the Company recorded a gain
of $6.4 million in Other Income, net, with a corresponding increase in
deferred income tax expense of $2.2 million for an after tax gain of $4.2
million.
Letters of Credit
-----------------
The Company maintains legally restricted cash balances with banks as
collateral for letters of credit issued by banks. These letters of credit
are required under certain drilling contracts and the Company's insurance
arrangement. Restricted cash balances aggregated $1.6 million and $1.3
million at December 31, 1996 and 1995, respectively, and are recorded in
Prepaid Expenses and Other.
Rig Damage
----------
In mid-January 1996, one of the Company's jackup rigs located in the
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 remained
until late December 1996 while undergoing repairs. The Company was fully
insured for damage and salvage operations related to the jackup rig and the
Company expects that all such costs incurred will be recoverable from its
insurance coverage. The Company has incurred approximately $21.0 million
in charges for salvage operations and repair of damages to the rig. At
December 31, 1996, the Company had collected $14.6 million in reimbursement
for repair of damages to the rig and has a receivable from its insurance
company of $6.4 million related to the rig damage.
At December 31, 1996, 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.
10. SEGMENT INFORMATION
Contract drilling and marine transportation are the Company's operating
segments. The Company's contract drilling segment is currently comprised
of 35 offshore jackup rigs, 10 barge drilling rigs and eight platform
rigs. Of the 35 jackup rigs, 23 are located in the Gulf of Mexico, six
are located in the North Sea and six are located in Asia. The 10 barge
drilling rigs are all located in Venezuela and seven of the platform
rigs are located in the Gulf of Mexico. An additional platform rig, which
is not owned but is operated under a management contract, is located
off the coast of China. The marine transportation segment currently
consists of 37 vessels, all of which are located in the 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 world-
wide expenditures for oil and gas drilling, particularly in the 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, 1996, 1995 and 1994 (in thousands):
INDUSTRY SEGMENT
---------------------------------------------------
MARINE
CONTRACT TRANS- CORPORATE
DRILLING PORTATION & OTHER TOTAL
----------- --------- --------- ----------
1996
- ----
Revenues . . . . . . . . . . . . . . . $ 408,614 $60,219 $ -- $ 468,833
Operating income (loss) . . . . . . . . 125,825 23,414 (500) 148,739
Identifiable assets . . . . . . . . . . 1,165,603 70,496 79,321 1,315,420
Capital expenditures . . . . . . . . . 170,117 4,173 1,695 175,985
Depreciation and amortization . . . . . 74,190 7,070 500 81,760
1995
- ----
Revenues . . . . . . . . . . . . . . . $ 240,775 $38,339 $ -- $ 279,114
Operating income (loss) . . . . . . . . 48,022 7,848 (675) 55,195
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
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
/TABLE
GEOGRAPHIC REGION
--------------------------------------------------------------------------
NORTH SOUTH CORPORATE
AMERICA EUROPE ASIA AMERICA & OTHER TOTAL
--------- --------- --------- -------- --------- ----------
1996
- ----
Revenues . . . . . . . . . . . . . . . $276,934 $ 91,831 $ 24,532 $ 75,536 $ -- $ 468,833
Operating income (loss) . . . . . . . . 91,775 18,455 2,698 36,311 (500) 148,739
Identifiable assets . . . . . . . . . . 647,340 266,517 167,524 154,718 79,321 1,315,420
1995
- ----
Revenues . . . . . . . . . . . . . . . $157,614 $ 59,525 $ -- $ 61,975 $ -- $ 279,114
Operating income (loss) . . . . . . . . 23,061 7,040 (769) 26,538 (675) 55,195
Identifiable assets . . . . . . . . . . 358,552 201,772 3,079 152,785 105,263 821,451
1994
- ----
Revenues . . . . . . . . . . . . . . . $155,118 $ 30,635 $ 7,166 $ 52,532 $ -- $ 245,451
Operating income (loss) . . . . . . . . 28,838 4,868 (4,608) 20,954 (980) 49,072
Identifiable assets . . . . . . . . . . 330,733 104,669 10,903 163,042 155,881 765,228
Identifiable assets excluded net assets of discontinued operations of
$7.9 million at December 31, 1994.
During 1996, revenues from two customers were in excess of 10% of the
Company's total revenues. Revenues from one customer were $75.5 million,
or 16% of total revenues, all of which were from the contract drilling
segment. Revenues from another customer were $63.7 million, or 14% of
total revenues, all of which were from the contract drilling segment.
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 were 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 were 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.
11. TRANSACTIONS WITH RELATED PARTIES
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 by delivery of 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, 1996 and 1995, the note was recorded as a reduction of
additional paid-in capital. This note was subsequently settled in January
1997 and resulted in the director retaining 132,998 net shares of common
stock and $238,000 cash after repayment of the note.
12. SUPPLEMENTAL FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEET INFORMATION. Accounts and notes
receivable, net at December 31, 1996 and 1995 consists of the following (in
thousands):
1996 1995
-------- --------
Trade . . . . . . . . . . . . . . . $101,916 $ 55,993
Other . . . . . . . . . . . . . . . 10,836 5,268
-------- --------
112,752 61,261
Allowance for doubtful accounts . . (1,719) (465)
-------- --------
$111,033 $ 60,796
======== ========
Prepaid expenses and other at December 31, 1996 and 1995 consists of
the following (in thousands):
1996 1995
-------- --------
Tax asset . . . . . . . . . . . . . $ 4,872 $ 9,663
Prepaid expenses . . . . . . . . . 5,496 6,319
Inventory . . . . . . . . . . . . . 2,112 2,259
Deposits . . . . . . . . . . . . . 1,897 1,318
Other . . . . . . . . . . . . . . . 5,291 3,334
-------- --------
$ 19,668 $ 22,893
======== ========
Accrued liabilities at December 31, 1996 and 1995 consists of the
following (in thousands):
1996 1995
-------- --------
Operating expenses . . . . . . . . $ 15,962 $ 8,586
Deferred purchase payment . . . . . -- 13,000
Payroll . . . . . . . . . . . . . . 14,274 7,957
Taxes . . . . . . . . . . . . . . . 8,609 3,592
Insurance . . . . . . . . . . . . . 4,372 2,837
Deferred revenue . . . . . . . . . 4,268 4,656
Accrued interest . . . . . . . . . 5,626 2,222
Other . . . . . . . . . . . . . . . 4,379 2,970
-------- --------
$ 57,490 $ 45,820
======== ========
CONSOLIDATED STATEMENT OF INCOME INFORMATION. Maintenance and
repairs expense for the years ended December 31, 1996, 1995 and 1994 is as
follows (in thousands):
1996 1995 1994
------- ------- -------
Maintenance and repairs . . . . $30,674 $18,203 $17,637
CONSOLIDATED STATEMENT OF CASH FLOWS INFORMATION. The 1996
consolidated statement of cash flows excludes the issuance of common stock
in the acquisition of Dual. See Note 2 "Acquisition of Dual Drilling."
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 3 "Property and Equipment," the incurrence of long-term
debt associated with the purchase of four supply vessels as described in
Note 4 "Long-Term Debt," adjustments to goodwill as described in Note 8
"Income Taxes" and consideration received related to the sale of the
Company's technical services segment as described in Note 13 "Discontinued
Operations." The 1994 consolidated statement of cash flows excludes
noncash activities related to consideration received in connection with the
sale of the Company's United States land rig operations in June 1994, the
conversion of the $1.50 Preferred Stock into common stock of the Company as
described in Note 5 "Preferred Stock" and a $1.6 million adjustment to
goodwill resulting from a decrease in the deferred tax asset valuation
allowance.
Cash paid for interest and income taxes for the years ended December
31, 1996, 1995 and 1994 is as follows (in thousands):
1996 1995 1994
------- ------- -------
Interest . . . . . . . . . . . $20,903 $15,078 $9,940
Income taxes . . . . . . . . . 3,903 5,006 3,104
FAIR VALUE OF FINANCIAL INSTRUMENTS. The following disclosure of
the estimated fair value of financial instruments is made in accordance
with the requirements of SFAS 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,
1996 and 1995 are as follows (in thousands):
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------- ----------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- --------- -------- ---------
9 7/8% Senior Subordinated Notes . . . . . . . . . . . . . . . . . . $ 75,159 $ 77,796 $ -- $ --
Other long-term debt, including current maturities . . . . . . . . . 218,419 218,659 191,253 191,358
Interest rate swaps - liability position . . . . . . . . . . . . . . -- 677 -- 408
The estimated fair values were determined as follows:
9 7/8% SENIOR SUBORDINATED NOTES --- Quoted market price.
OTHER 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.
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.
The estimated fair value of the Company's cash and cash equivalents, short-
term investments, receivables, trade payables and other liabilities
approximated their carrying values at December 31, 1996 and 1995.
CONCENTRATION OF CREDIT RISK. The Company provides services to the
offshore oil and gas industry and the Company's customers consist primarily
of major and independent oil and gas producers as well as government owned
oil companies. The Company performs ongoing credit evaluations of its
customers and generally does not require material collateral. The Company
maintains reserves for potential credit losses, which to date have been
within management's expectations. The Company's cash and cash equivalents
are maintained in major banks and high grade investments. As a result, the
Company believes the credit risk in such instruments is minimal.
13. 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. The sales price consisted of
$11.8 million in cash, an interest-bearing promissory note for $3.6
million, an interest-bearing convertible promissory note for $2.5 million
and the assumption of $1.9 million of liabilities. In July 1996, the
acquiring company successfully completed a public offering which allowed
the Company the right to convert the $2.5 million convertible promissory
note into common stock of the purchaser. The Company exercised this right
and sold the common stock for $5.4 million in July 1996, realizing a pre-
tax gain of approximately $2.9 million on the sale. The pre-tax gain of
$2.9 million is recorded in Other Income, net, with a corresponding
increase in deferred income tax expense of $1.1 million for an after-tax
gain of $1.8 million. Also as a result of the public offering, the $3.6
million promissory note was paid in full in July 1996.
As a result of the sale of the technical services business, 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 and $16.5 million in 1995 and 1994, respectively.
14. UNAUDITED QUARTERLY FINANCIAL DATA
A summary of unaudited quarterly consolidated financial information
for 1996 and 1995 is as follows (in thousands, except per share amounts):
FIRST SECOND THIRD FOURTH
1996 QUARTER QUARTER QUARTER QUARTER YEAR
- ---- ------- ------- -------- --------- --------
Revenues
Contract drilling . . . . . . . . . . . . $72,883 $83,674 $118,247 $133,810 $408,614
Marine transportation . . . . . . . . . . 11,663 13,575 16,341 18,640 60,219
84,546 97,249 134,588 152,450 468,833
Operating expenses
Contract drilling . . . . . . . . . . . . 37,337 42,474 57,374 61,618 198,803
Marine transportation . . . . . . . . . . 6,187 6,753 7,427 8,145 28,512
43,524 49,227 64,801 69,763 227,315
Operating margin . . . . . . . . . . . . . . . 41,022 48,022 69,787 82,687 241,518
Depreciation and amortization . . . . . . . . . 16,374 17,880 23,653 23,853 81,760
General and administrative . . . . . . . . . . 2,215 2,950 2,768 3,086 11,019
Operating income . . . . . . . . . . . . . . . 22,433 27,192 43,366 55,748 148,739
Interest income . . . . . . . . . . . . . . . . 1,236 1,098 1,051 1,133 4,518
Interest expense . . . . . . . . . . . . . . . 4,049 4,387 6,319 6,133 20,888
Other income (expense) . . . . . . . . . . . . 264 7,458 2,803 (214) 10,311
Income from continuing operations before
income taxes and minority interest . . . . . 19,884 31,361 40,901 50,534 142,680
Provision for income taxes . . . . . . . . . . 4,767 8,849 12,979 17,414 44,009
Minority interest . . . . . . . . . . . . . . . 427 931 710 1,203 3,271
Net income . . . . . . . . . . . . . . . . . . $14,690 $21,581 $ 27,212 $ 31,917 $ 95,400
Income per common share . . . . . . . . . . . . $ .24 $ .34 $ .38 $ .45 $ 1.44
/TABLE
FIRST SECOND THIRD FOURTH
1996 QUARTER QUARTER QUARTER QUARTER YEAR
- ---- ------- ------- -------- -------- --------
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
The first and second quarter results for 1995 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 13 "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, 1996.
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 22
Consolidated Statement of Income . . . . . . . . . . . . 23
Consolidated Balance Sheet . . . . . . . . . . . . . . . 24
Consolidated Statement of Cash Flows . . . . . . . . . . 25
Notes to Consolidated Financial Statements . . . . . . . 26
(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
- ----------- --------
2.1 - Agreement and Plan of Merger, dated March 21, 1996, between
ENSCO International Incorporated, DDC Acquisition Company
and DUAL DRILLING COMPANY (incorporated by reference to
Exhibit No. 99.7 to the Registrant's Form 8-K dated March
21, 1996, File No. 1-8097).
2.2 - Principal Stockholder Agreement (incorporated by reference
to Exhibit 99.8 to the Registrant's Form 8-K dated March 21,
1996, File No. 1-8097).
2.3 - Amendment No. 1 to Agreement and Plan of Merger, dated May
7, 1996, between ENSCO International Incorporated, DDC
Acquisition Company and DUAL DRILLING COMPANY (incorporated
by reference to Exhibit 2.2 of Amendment No. 1 to the
Registrant's Registration Statement on Form S-4 filed
May 10, 1996, Registration No. 333-3411).
3.1 - Certificate of Incorporation of the Company, as restated
(incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994, File No. 1-8097).
3.2 - Certificate of Amendment to Certification of Incorporation
(incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995, File No. 1-8097).
3.3 - Certificate of Amendment to Restated Certificate of
Incorporation (incorporated by reference to Exhibit 3.3 to
the Registrant's Annual Report on Form 10-K/A for the year
ended December 31, 1995, File No. 1-8097).
3.4 - 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).
4.1 - 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).
4.2 - 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 Form
8-K dated February 21, 1995, File No. 1-8097).
4.3 - Certificate of Designation of Series A Junior Participating
Preferred Stock of the Company (incorporated by reference to
Exhibit 4.6 to the Registrant's Annual Report on Form 10-K/A
for the year ended December 31, 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 - Restricted Stock Agreement effective as of June 10, 1987
between Morton H. Meyerson and the Company (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).
10.3 - 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).
10.4 - 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).
10.5 - 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).
10.6 - 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).
10.7 - 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).
10.8 - 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).
10.9 - 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).
10.10 - 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).
10.11 - 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).
10.12 - 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).
10.13 - 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).
10.14 - 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).
10.15 - 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).
10.16 - 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).
10.17 - 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).
10.18 - 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).
10.19 - Select Executive Retirement Plan of the Company
(incorporated by reference to Exhibit No. 10.23 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995, File No. 1-8097).
10.20 - 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 (incorporated by reference to Exhibit 10.24 to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995, File No. 1-8097).
10.21 - Amendment No. 1 dated as of June 13, 1996 to the Amended and
Restated Credit Facility Agreement dated as of 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. 10.25 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996, File No. 1-
8097).
10.22 - Amendment No. 3, dated June 13, 1996, 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. 10.26 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996, File No. 1-8097).
10.23 - First Preferred Fleet Mortgage dated June 13, 1996 by ENSCO
Offshore Company II 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. 10.27 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996, File No. 1-8097).
* 10.24 - Letter Agreement, dated January 8, 1997, by and between
Morton H. Meyerson and the Company.
* 21 - Subsidiaries of the Registrant.
* 23 - Consent of Price Waterhouse LLP.
* 27 - Financial Data Schedule.
_____________________
* 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. Restricted Stock Agreement effective as of June 10, 1987 between
Morton H. Meyerson and the Company (filed as Exhibit 10.2 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).
3. Restricted Stock Agreement effective as of May 31, 1988 between
Morton H. Meyerson and the Company (filed as Exhibit 10.3 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).
4. 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 10.4 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).
5. 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 10.5 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).
6. Supplemental Compensation Agreement, dated March 1, 1991, between
Morton H. Meyerson and the Company (filed as Exhibit 10.7 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).
7. Select Executive Retirement Plan of the Company (filed as Exhibit
10.19 hereto and incorporated by reference to Exhibit No. 10.23 to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995, File No. 1-8097).
8. 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 as Exhibit 10.20
hereto and incorporated by reference to Exhibit 10.24 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1995, File No. 1-8097).
9. Letter Agreement, dated January 8, 1997, by and 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, 1996.
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. 333-
03575, 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 20, 1997.
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 20, 1997
/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 __