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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission file number: 0-16961
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PRIDE PETROLEUM SERVICES, INC.
(Exact name of registrant as specified in its charter)
Louisiana 76-0069030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 City West Blvd., Suite 400
Houston, Texas 77042
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 789-1400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant at February 1, 1996, based on the closing price on the NASDAQ
National Market System on such date was $233,487,569. (The officers and
directors of the registrant are considered affiliates for the purposes of this
calculation.)
The number of shares of the registrant's common stock outstanding on
February 1, 1996 was 24,819,456.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement for the Annual
Meeting of Shareholders to be held on May 16, 1996 are incorporated by
reference into Part III of this report.
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PART I
ITEM 1. Business
GENERAL
Pride Petroleum Services, Inc. ("Pride" or the "Company") is a leading
domestic and international provider of well servicing, workover, contract
drilling, completion and plugging and abandonment services, both on land and
offshore. The Company's fleet of 518 rigs is the world's second largest,
consisting of 429 land rigs divided among three operating regions in the United
States, 64 land rigs deployed in international markets, 23 offshore platform
rigs located in the Gulf of Mexico and two drilling/workover barge rigs located
in Venezuela. The Company performs maintenance and workovers necessary to
operate producing oil and gas wells efficiently and provides contract drilling
of new wells in certain international and offshore markets. The Company also
provides services for the completion of newly drilled oil and gas wells, and
plugging and abandonment services at the end of a well's useful life.
Pride is a Louisiana corporation with its principal executive offices
located at 1500 City West Blvd., Suite 400, Houston, Texas 77042. Its
telephone number at such address is (713) 789-1400.
BUSINESS STRATEGY
The Company's goal is to achieve revenue and earnings growth through a
strategy of (i) acquisitions in both international and domestic markets, (ii)
redeployment of existing domestic land-based capacity to more profitable
international markets and (iii) upgrades to enhance the capabilities and
profitability of its existing rig fleet. International and offshore operations
generally have greater profit potential than domestic land-based operations
because of less competition, higher utilization rates and stronger demand
resulting from a general trend by major oil operators toward shifting
expenditures to exploration and development activities abroad. For these
reasons, the Company has actively sought to diversify beyond its domestic land-
based operations, which prior to mid-1993 accounted for substantially all of
the Company's revenues and earnings.
In implementing its strategy, since mid-1993, the Company has acquired
four businesses with 47 land-based rigs serving international markets and a
fleet of 22 rigs serving the domestic offshore market. The Company has further
expanded international operations by re-deploying 28 underutilized rigs from
its U.S. fleet to Argentina, Venezuela and Russia since entering those markets.
Additionally, in 1994 the Company constructed two drilling/workover barge rigs
now operating in Venezuela, and in 1995 constructed one new platform rig now
operating in the Gulf of Mexico.
The Company believes that providing high quality equipment, employees and
services and a safe work environment is critical to its strategy. The Company
has committed substantial capital to an ongoing rig refurbishment program to
provide technological enhancements and to maintain the Company's equipment in
high quality condition. Additionally, the Company has invested in quality,
safety and management training programs. The Company believes that many
smaller competitors have not undertaken comparable maintenance and upgrading of
equipment or training of personnel, and do not have the financial resources to
enable them to do so. The Company believes that certain of its customers give
significant consideration to safety records and quality management systems of
contractors in their screening and selecting processes, and that such factors
will gain further importance in the future.
INTERNATIONAL OPERATIONS
Since the beginning of 1993, the Company has expanded its international
operations through acquisitions and deployment of underutilized domestic assets
into Argentina, Venezuela, Colombia and Russia. The Company operates 45 rigs
in Argentina, 10 land-based and two barge rigs in Venezuela, six rigs in
Colombia and three rigs in Russia. In July 1993, the Company purchased
established well servicing and drilling operations in Argentina and Venezuela
and, in February 1994, acquired a four-rig competitor in Argentina. The
Company has also upgraded and deployed 25 rigs from its U.S. land-based fleet
to Argentina and Venezuela and plans to upgrade and deploy an additional four
drilling and seven workover rigs to international markets in early 1996. In
1994, the Company built two drilling/workover barge rigs, which were placed in
operation in Venezuela in 1995 under ten-year contracts. In October 1995, the
Company acquired a six-rig drilling operation in Colombia. During 1993, the
Company deployed three rigs from its U.S. land-based fleet to Western Siberia.
The Company continues to review opportunities to expand internationally through
redeployment of underutilized domestic assets, acquisitions and new rig
construction projects.
In Argentina, the Company's fleet currently consists of 45 rigs, seven of
which are drilling rigs and the balance of which are workover rigs. The
Argentine oil production market has improved in recent years as a result of
general economic reform, sales of certain state-owned oilfields to private
operators and privatization of the state-owned oil company, the predecessor of
YPF Sociedad Anonima ("YPF"). These improved conditions have resulted in
additional demand for rig services. The Company operates a fleet of oilfield
haul trucks and maintains camps to provide eating and sleeping accommodations
for its employees and for employees of certain of its customers. The Argentine
base camps are stocked with significant levels of spare parts and operating
supplies to avoid interruption of services. The Company believes that this
established infrastructure provides the Company with a competitive advantage in
the Argentine market.
The Company's fleet in Venezuela currently consists of 10 land rigs and
two drilling/workover barge rigs. In recent years, the Venezuelan national oil
company has entered into operating service agreements with a number of
international oil companies to rehabilitate and develop approximately 80
"marginal" fields. Development of these fields is providing additional demand
for rig services in Venezuela. In July 1995, the Venezuelan Congress enacted
legislation that, through production sharing contracts, creates a new mechanism
for private sector involvement in the oil and gas industry in that country.
Venezuelan government estimates indicate that more than $10 billion of new
investment will be made over the next ten years to develop the initial eight
projects which were awarded in early 1996 for private sector development
pursuant to production sharing contracts. The Company believes it is well
positioned to capitalize on resulting opportunities.
In January 1995, the Company's two drilling/workover barge rigs began
operations on Lake Maracaibo, Venezuela, pursuant to contracts with Lagoven,
S.A. ("Lagoven"), a subsidiary of the Venezuelan national oil company, which
run through 2004. The two barge rigs were completed for an aggregate total
cost of approximately $42 million, which was financed on a project basis by two
Japanese trading firms. Terms of the financing agreement limit the lenders'
recourse essentially to the barge rigs, related contract proceeds and the
assets of the Company's Venezuelan subsidiary. The Company also provided the
lenders a limited guaranty with respect to certain political risks. The
Company has obtained political risks insurance policies from the Overseas
Private Investment Corporation ("OPIC") to protect against political risks that
could result in potential payments under the terms of the Company's guaranty.
In October 1995, the Company purchased all of the capital stock of Marlin
Colombia Drilling Co. Inc. ("Marlin") from a member of the Royal Dutch/Shell
Group of Companies for approximately $6 million. For the twelve months ended
September 30, 1995, Marlin generated revenues of approximately $7 million.
In 1993, the Company formed a Russian company and deployed one
workover/drilling rig and two small well servicing rigs in Russia. These rigs
have been equipped for severe cold weather conditions and are supported by
heavy equipment, including oilfield trucks and a large capacity forklift with
earth moving capability. The Company believes that there will be significant
opportunities in Russia if, and when, the political situation in that country
stabilizes and allows a more meaningful flow of international investment
capital for rehabilitation and development of its oil fields.
DOMESTIC OFFSHORE OPERATIONS
In June 1994, the Company commenced operations in the Gulf of Mexico
through the acquisition of the largest fleet of offshore platform workover rigs
in that market. The Company operates 23 platform rigs, a fleet approximately
twice as large as that of its next largest competitor. The Company has made
substantial capital improvements in this fleet and believes it has one of the
most technologically advanced fleets in the industry.
The Company generally utilizes its offshore rigs to service wells located
on platforms in water depths of greater than 125 feet. Platform rigs consist
of well servicing equipment and machinery arranged in modular packages which
are transported to and assembled and installed on fixed offshore platforms
owned by the customer. Fixed offshore platforms are steel tower-like
structures that stand on the ocean floor, with the top portion, or platform,
above the water level and providing the foundation upon which the platform rig
is placed. Certain of the Company's heavy workover platform rigs are capable
of operating at well depths of up to 20,000 feet. In addition to providing
workover services offshore, the Company is performing an increasing amount of
drilling and horizontal re-entry services utilizing top drives, enhanced pumps
and solids control equipment for drilling fluids.
DOMESTIC LAND-BASED OPERATIONS
The Company's domestic land-based fleet consists of 429 rigs that operate
from 21 service locations in California, the Permian Basin areas of West Texas
and New Mexico, and the Texas and Louisiana Gulf Coast. Pride has enhanced the
profitability of its domestic land-based operations by increasing efficiency
and implementing cost-saving measures. The Company actively considers
acquisition opportunities in its three principal domestic markets when such
acquisitions may result in significant consolidation savings and operating
efficiencies. In March 1995, the Company acquired an operator of 35 well
servicing rigs in New Mexico.
During 1995, the Company's average utilization rate per working day (rig
hours worked divided by total available hours) for its domestic land rigs was
approximately 50%. The Company worked 337 of its 429 domestic land rigs at
some time during 1995, with most of the inactive rigs being maintained in
workable condition. The Company's inactive rigs generally can be mobilized
quickly, giving Pride substantial operating leverage to take advantage of new
market opportunities. As a result of international opportunities for Pride's
services and equipment, the Company has shipped 28 previously inactive rigs
from its U.S. fleet to international markets since mid-1993.
SERVICES PROVIDED
The Company provides oil field services to oil and gas exploration and
production companies, primarily through the use of mobile well servicing rigs,
together with crews of generally three to four persons. Additional equipment,
such as pumps, tanks, blowout preventers, power swivels, coiled tubing units,
and foam units, is also provided by the Company as may be required and
requested by the customer for a particular job. The Company also provides
trucking services for moving large equipment and hauling fluids to and from the
job sites of its customers.
Well servicing can be categorized as to the type of job performed:
maintenance, workover or completion.
MAINTENANCE SERVICES
Maintenance services are required on producing oil and natural gas wells
to ensure efficient, continuous operation. These services consist of routine
mechanical repairs necessary to maintain production from the well, such as
repairing parted sucker rods or replacing a defective downhole pump in an oil
well or replacing defective tubing in a gas well. The Company provides the
rigs, equipment and crews for these maintenance services, which are performed
on both oil and gas wells but which are more often required on oil wells. Many
of the Company's rigs also have pumps and tanks that can be used for
circulating fluids into and out of the well. Maintenance jobs are often
performed on a series of wells in geographic proximity to each other, typically
take less than 48 hours per well to complete and generally require little, if
any, revenue-generating equipment other than a rig.
Maintenance services are generally required throughout the life of a
well. The need for these services does not depend on the level of drilling
activity and is generally independent of short-term fluctuations in oil and gas
prices. Accordingly, the demand for maintenance services is generally more
stable than for other well servicing activities. The general level of
maintenance, however, is affected by changes in the total number of producing
oil and gas wells.
WORKOVER SERVICES
In addition to needing periodic maintenance, producing oil and natural
gas wells occasionally require major repairs or modifications, called
"workovers". Workover services include the opening of new producing zones in
an existing well, recompletion of a well in which production has declined,
drilling out plugs and packers and the conversion of a producing well to an
injection well during enhanced recovery operations. These extensive workover
operations are normally performed by a well servicing rig with additional
specialized accessory equipment, which may include rotary drilling equipment,
mud pumps, mud tanks and blowout preventers, depending upon the particular type
of workover operation. Most of the Company's rigs are designed and equipped to
handle the more complex workover operations. A workover may last anywhere from
a few days to several weeks and generally requires additional revenue-
generating equipment.
The level of workover services is sensitive to changes in oil and gas
prices. When oil and gas prices are low, there is less incentive to perform
workovers on wells to increase production, and operators of wells tend to defer
workover services. As oil and gas prices increase, the incentive to increase
production also improves and the number of workovers increases as operators
seek to increase production by enhancing the efficiency of their wells through
workovers.
COMPLETION SERVICES
Completion services prepare a newly drilled well for production. The
completion process may involve selectively perforating the well casing at the
depth of discrete producing zones, stimulating and testing these zones and
installing downhole equipment. Newly drilled wells are often completed by a
well servicing rig so that an operator can avoid using a higher-cost drilling
rig any longer than necessary. The completion process may require a few days
to several weeks, depending on the nature and type of the completion, and will
also generally require additional revenue-generating equipment.
The market for well completions is directly related to drilling activity
levels which are very sensitive to changes in oil and gas prices. During
periods of weak drilling demand, drilling contractors will frequently price the
well completion work competitively with a workover rig so that the drilling rig
stays on the job for a longer period of time. Thus, excess drilling capacity
will serve to reduce the amount of completion work available to the well
servicing industry.
DRILLING SERVICES
The Company provides contract drilling services to oil and gas operators
in certain international and offshore markets. Some of the Company's workover
rigs that are operating internationally can also be used for drilling, although
the Company has specialized drilling rigs and ancillary equipment in its
international locations.
ADDITIONAL SERVICES
The Company also provides packer sales and service, oil field trucking,
plugging and abandonment services and well bore cleaning and production
enhancement services. In addition, the Company sells oil field supplies on a
retail basis through a wholly owned subsidiary.
COMPETITION
Competition in the international markets in which the Company operates is
generally limited to substantially fewer companies than in the domestic land-
based market. These companies range from large multinational competitors
offering a wide range of well servicing and drilling services to smaller,
locally owned businesses. The Company believes that it is competitive in terms
of pricing, performance, equipment, safety, availability of equipment to meet
customer needs and availability of experienced, skilled personnel in those
international areas in which it operates. Currently, the Company has a strong
market position in Argentina and Venezuela, and believes it is well positioned
in Colombia and Russia.
The Company believes that in the Gulf of Mexico there are approximately
12,000 producing oil and gas wells and that such wells generally require
workovers about once every five years in order to maintain optimal production
levels. The market for offshore platform workover rig services is highly
competitive, with the Company's two most significant competitors having an
aggregate of approximately 19 rigs, as compared to 23 rigs for the Company.
The domestic land-based well servicing industry is highly fragmented and
is characterized by a few large companies and numerous smaller companies.
Competition is primarily on a local market basis, and the Company generally
competes with several well servicing contractors within a 50-mile radius of
each service location. Pride and its most significant competitor in this
market, Pool, are the largest companies serving the domestic land-based well
servicing market. Both Pride and Pool operate in multiple geographic regions
and each has in excess of 400 domestic land-based rigs. Pride competes with
Pool in all three of the Company's principal domestic regions. Two other
competitors, each having 100 to 200 rigs, compete with the Company in separate
domestic regions. There are several regional companies that have fleets of 30
to 60 rigs which operate from several service bases within each region.
Numerous other competitors have 10 or fewer rigs and operate in limited market
areas.
Excess capacity in the well servicing industry has resulted in severe
price competition throughout much of the past decade. In the well servicing
market, possibly the most important competitive factor in establishing and
maintaining long-term customer relationships is having an experienced, skilled
and well-trained work force. In recent years, customers have placed emphasis
not only on pricing, but also increasingly on safety and quality of service.
The Company believes that certain of its customers give significant
consideration to safety records and quality management systems of contractors
in their screening and selecting processes, and that such factors will gain
further importance in the future. In that regard, the Company has directed
substantial resources toward employee safety and quality management training
programs, as well as its employment review process. While the Company's
efforts in these areas are not unique, many competitors, particularly small
contractors, have not been able to undertake similar training programs for
their employees. One of the benefits of distinguishing itself in safety and
quality is that the Company has been able to establish strategic alliances with
certain major customers.
CUSTOMERS
In international markets, the Company works for government-owned oil
companies, large multinational oil companies and locally owned independent
operators. In Argentina, approximately 69% of the Company's business during
1995 was conducted for YPF, the successor to the operations of the former
state-owned oil company. Services provided to YPF accounted for approximately
17% of the Company's consolidated 1995 revenues. The remainder of the
Company's Argentine customers are large multinational oil companies and locally
owned independent operators. In Venezuela, the Company provides services for
three subsidiaries of Petroleos de Venezuela, S.A., the state-owned oil
company, as well as multinational oil companies. In Russia, the Company's
current contracts are with joint venture entities co-owned by large
multinational operators and Russian production associations.
In the United States, the Company's customers are predominantly major
integrated and large independent operators. One customer, Shell Oil Company,
accounted for approximately 54% of revenues from domestic offshore operations
in 1995. Revenues from Shell Oil Company and its affiliates from both land-
based and offshore operations accounted for approximately 13% of consolidated
revenues during such period. Approximately 60% of revenues from domestic land-
based operations were generated from the Company's 20 largest U.S. customers,
with no one customer accounting for more than 10% of such revenues in 1995.
CONTRACTS
Most of the Company's contracts provide for compensation on either an
hourly or daily basis. Under such contracts, the Company receives a fixed
amount per hour or per day for servicing or drilling the well. Such contracts
also generally provide that the customer pay for movement of the equipment to
the job site, assembly and dismantling.
In the United States, many jobs are performed on a "call-out" or "as
requested" basis and may involve one or multiple wells. Such work is performed
pursuant to the Company's published operating rates and general work terms and
conditions or according to the terms of service arrangements established with
the operators.
In international markets, contracts generally provide for longer terms.
Such contracts are often awarded to the successful bidder of the customer's
project tender. When contracting abroad, the Company is faced with the risks
of currency fluctuation and, in certain cases, exchange controls. Typically,
the Company limits these risks by obtaining contracts providing for payment in
freely convertible foreign currency or U.S. dollars. To the extent possible,
the Company seeks to limit its exposure to potentially devaluating currencies
by matching its acceptance thereof to its expense requirements in such local
currencies. There can be no assurance that the Company will be able to
continue to take such actions in the future, thereby exposing the Company to
foreign currency fluctuations which could have a material adverse effect upon
its results of operations and financial condition. Currently, foreign exchange
in Argentina and Colombia is carried out on a free-market basis. However,
there can be no assurances that the local monetary authorities in these
countries will not implement exchange controls in the future. In Venezuela,
the government has imposed exchange control policies and has established an
official exchange rate relative to the U.S. dollar. To date, contracts for the
Company's operations in Russia have provided for payment in U.S. dollars.
The Company's contracts with Lagoven for the operation of the two
drilling/workover barge rigs on Lake Maracaibo, Venezuela provide for a term
which runs through 2004. Rates under the contracts are subject to contractual
escalation and are denominated in part in U.S. dollars and in part in local
currency. The portion of the rate denominated in U.S. dollars may be paid in
local currency based on prevailing exchange rates provided that exchange into
U.S. dollars can be readily effected. Presently, the U.S. dollar portion of
the Company's contracts with Lagoven is being paid in U.S. dollars.
SEASONALITY
In general, the Company's business activities are not significantly
affected by seasonal fluctuations. In the United States, all of the Company's
rigs are located in geographical areas which are not subject to severe weather
that would halt operations for prolonged periods. The Company's rigs in Russia
have been winterized so that they may continue to operate during periods of
severe cold weather.
EMPLOYEES
The Company currently employs approximately 900 salaried employees and
approximately 3,200 hourly paid employees. Approximately 2,500 of the
employees are located in the United States and 1,600 are located abroad.
Hourly rig crew members comprise the vast majority of employees. Typically, a
land-based rig crew consists of an operator, a derrick man and two crewmen on
the rig floor. Offshore platform and barge rig crews also typically include a
crane operator, two roustabouts and an electrician. In most cases, a rig
supervisor oversees the rig crew, secures work orders from customers and
maintains contact with the customer throughout the job.
None of the Company's U.S. employees are represented by a collective
bargaining unit. Many of the Company's international employees are subject to
industry-wide labor contracts within their respective countries. Management
believes that the Company's employee relations are good.
SEGMENT INFORMATION
Information with respect to revenues, earnings from operations and
identifiable assets attributable to the Company's industry segments and
geographic areas of operations for the last three fiscal years is presented in
Note 12 of the Notes to Consolidated Financial Statements included in Part II
of this report.
OTHER CONSIDERATIONS
INDUSTRY CONDITIONS
The Company's current business and operations are substantially dependent
upon the conditions in the oil and gas industry and, specifically, the
exploration and production expenditures of oil and gas companies. The demand
for well servicing and workover activities is directly influenced by oil and
gas prices, expectations about future prices, the cost of producing and
delivering oil and gas, government regulations, local and international
political and economic conditions, including the ability of the Organization of
Petroleum Exporting Countries ("OPEC") to set and maintain production levels
and prices, the level of production by non-OPEC countries and the policies of
the various governments regarding exploration and development of their oil and
gas reserves. A substantial amount of the Company's land-based equipment is
currently in service in U.S. markets where, despite occasional upturns, the
demand for well servicing and related services has been severely depressed for
most of the last decade due in large part to prolonged weakness and uncertainty
in oil and gas prices. Diminished demand during this period has led to lower
day rates and lower utilization of available equipment.
OPERATING RISKS AND INSURANCE
The Company's operations are subject to the many hazards inherent in the
well servicing industry. Performance of the Company's services requires the
use of heavy equipment and exposure to hazardous conditions, which may subject
the Company to liability claims by employees, customers and third parties.
These hazards can cause personal injury or loss of life, severe damage to or
destruction of property and equipment, pollution or environmental damage and
suspension of operations. The Company's offshore platform rigs and its
Venezuelan barge rigs are also subject to hazards inherent in marine
operations, either while on site or during mobilization, such as capsizing,
sinking and damage from severe weather conditions. In certain instances,
contractual indemnification of customers or others is required of the Company.
The Company maintains workers' compensation insurance for its employees and
other insurance coverage for normal business risks, including general liability
insurance. Although the Company believes its insurance coverages to be
adequate and in accordance with industry practice against normal risks in its
operations, there can be no assurance that any insurance protection will be
sufficient or effective under all circumstances or against all hazards to which
the Company may be subject. The Company has elected not to insure most of its
domestic land-based rigs against property damage. Because the Company is able
to use its fleet of excess rigs to repair or replace damaged domestic rigs, the
Company believes such action is cost effective. The occurrence of a
significant event against which the Company is not fully insured, or of a
number of lesser events against which the Company is insured, but subject to
substantial deductibles, could materially and adversely affect the Company's
operations and financial condition. Moreover, no assurance can be given that
the Company will be able to maintain adequate insurance in the future at rates
or on terms it considers reasonable or acceptable.
INTERNATIONAL OPERATIONS
An increasingly significant portion of the Company's revenues are
attributable to international operations which provided approximately 38% of
the Company's revenues during the year ended December 31, 1995. Risks
associated with operating in international markets include foreign exchange
restrictions and currency fluctuations, foreign taxation, changing political
conditions and foreign and domestic monetary policies, expropriation,
nationalization, nullification, modification or renegotiation of contracts, war
and civil disturbances or other risks that may limit or disrupt markets.
Although the Company has obtained political risks insurance from OPIC with
respect to its Venezuelan operations, and from commercial insurers with respect
to its Colombian and Russian operations, such insurance cannot fully protect
the Company against all possible losses. Additionally, the ability of the
Company to compete in the international well servicing and drilling markets may
be adversely affected by foreign governmental regulations that favor or require
the awarding of such contracts to local contractors, or by regulations
requiring foreign contractors to employ citizens of, or purchase supplies from,
a particular jurisdiction. No predictions can be made as to what foreign
governmental regulations may be enacted in the future that could be applicable
to the Company's operations.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
Many aspects of the Company's operations are affected by domestic and
foreign political developments and are subject to numerous state, federal and
foreign governmental regulations that may relate directly or indirectly to the
well servicing industry. The Company's operations routinely involve the
handling of waste materials, some of which are classified as hazardous
substances. Consequently, the regulations applicable to the Company's
operations include those with respect to containment, disposal and controlling
the discharge of hazardous oilfield waste and other non-hazardous waste
materials into the environment, requiring removal and cleanup under certain
circumstances, or otherwise relating to the protection of the environment.
Laws and regulations protecting the environment have become more stringent in
recent years, and may in certain circumstances impose "strict liability,"
rendering a party liable for environmental damage without regard to negligence
or fault on the part of such party. Such laws and regulations may expose the
Company to liability for the conduct of, or conditions caused by, others, or
for acts of the Company which were in compliance with all applicable laws at
the time such acts were performed. The application of these requirements or
the adoption of new requirements could have a material adverse effect on the
Company. In addition, the modification of existing laws or regulations or the
adoption of new laws or regulations curtailing exploratory or development
drilling for oil and gas for economic, environmental or other reasons could
have a material adverse effect on the Company's operations by limiting future
well servicing opportunities.
The primary environmental statutory and regulatory programs that affect
the Company's operations include the following:
WASTE DISPOSAL. The Company's operations can involve the generation, use
or handling of materials that may be classified as hazardous waste, and that
are subject to the federal Resource Conservation and Recovery Act ("RCRA") and
comparable state and foreign statutes. The Environmental Protection Agency
("EPA") and various state agencies have limited the disposal options for
certain hazardous and non-hazardous wastes and is considering the adoption of
stricter handling and disposal standards for non-hazardous wastes.
Additionally, any hazardous wastes or materials transported by or on behalf of
the Company are also subject to regulation pursuant to the Hazardous Materials
Transportaton Act.
OIL POLLUTION ACT AND CLEAN WATER ACT. The Oil Pollution Act of 1990
("OPA") amends certain provisions of the federal Water Pollution Control Act of
1972, commonly referred to as the Clean Water Act ("CWA"), and other statutes
as they pertain to the prevention of and response to releases of hazardous
substances and oil spills into navigable waters. Federal law imposes strict,
joint and several liability on facility owners for containment and cleanup
costs and can impose liability for natural resource damages arising from a
spill or release. The CWA also requires that no discharge of pollutants may be
made into the navigable waters of the United States without a permit
authorizing such a discharge.
NORM. Oil and gas production activities have been identified as
generators of naturally-occuring radioactive materials ("NORM"). The
generation, handling and disposal of NORM due to oil and gas production
activities are currently regulated in certain states and in federal waters.
Compliance with such regulations is not expected to have a material effect on
the Company's future operations or financial condition.
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT
("CERCLA"). The Company's operations are subject to CERCLA, which imposes
strict, joint and several liability for cleanup of releases of hazardous
substances into the environment. The Company's operations can involve releases
of hazardous substances into the environment with respect to both its onshore
and offshore activities.
ITEM 2. Property
The Company's property consists primarily of well servicing rigs,
drilling rigs and ancillary equipment, essentially all of which are owned by
the Company.
A well servicing rig consists of a mobile carrier, engine, drawworks and
derrick. The primary function of a well servicing rig is to act as a hoist so
that pipe, rods and down hole equipment can be run into and out of a well. A
single derrick rig is able to stand up single joints of tubing in the derrick
and hang double joints of rods. A double derrick rig is able to stand up
double joints of tubing in the derrick and hang triple joints of rods. A swab
unit is a specialized piece of equipment used solely for swabbing or cleaning
operations. It includes a short derrick and small drawworks mounted on a
truck. The majority of the Company's domestic land rigs are large capacity
double derrick type units. All of the Company's well servicing rigs can be
readily moved between well sites and between geographic areas of operations.
A drilling rig consists of engines, drawworks, a mast, pumps to circulate
the drilling fluid, blowout preventers, drill string and related equipment.
The engines power a rotary table that turns the drill string, causing the drill
bit to bore through the subsurface rock layers. Rock cuttings are carried to
the surface by the circulating drilling fluid. The intended well depth and the
drilling site conditions are the principal factors that determine the size and
type of rig most suitable for a particular drilling job.
The Company's drilling/workover barge rigs have 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 towed to
the drilling location and are held in place by anchors while drilling or
workover activities are conducted.
The Company owns and operates vacuum, transport and winch trucks;
plugging and cementing units; hyperclean and filtration units; and foam units,
pumps, generators, power swivels, coiled tubing units and similar ancillary
equipment. The Company owns approximately 730 vehicles and leases
approximately 600 others. The Company also owns 17 sets of accommodation
modules which may be leased to customers to provide temporary living quarters
for crews working on offshore platforms, as well as several cranes utilized for
lifting heavy equipment onto the platforms.
The corporate office in Houston, Texas occupies approximately 20,000
square feet of leased space under a lease that expires in April 1998. The
Company owns 19 and leases 13 of its office and yard locations in Texas,
Louisiana, Oklahoma, New Mexico and California, not all of which are currently
being used. In Argentina, the Company leases 4,500 square feet of office space
in Buenos Aires and owns five operating bases and leases three others. In
Venezuela, the Company leases two operating bases with an office facility at
one. In Colombia, the Company leases office space in Bogota and an operating
base in Neiva. Shore-based operations for the Company's offshore platform rig
operations are conducted from its owned facility in Houma, Louisiana. The
shore facility is located on the intracoastal waterway and provides direct
access to the Gulf of Mexico.
The following table sets forth the type, number and location of the land
rigs owned by the Company and its subsidiaries as of February 1, 1996:
LAND RIG FLEET
Single Double Swab
Location Total Derrick Derrick Unit Drilling
-------- ----- ------- ------- ---- --------
United States:
Southern Area -
Alice, TX . . . . . . . . . . . 14 -- 14 -- --
McAllen, TX . . . . . . . . . . 10 -- 10 -- --
Freer, TX . . . . . . . . . . . 11 5 6 -- --
Liberty, TX . . . . . . . . . . 13 1 12 -- --
Winnsboro, TX . . . . . . . . . 7 -- 7 -- --
Corpus Christi, TX. . . . . . . 10 -- -- 10 --
Panola, TX. . . . . . . . . . . 12 1 7 4 --
Palestine, TX . . . . . . . . . 3 -- 3 -- --
LaGrange, TX. . . . . . . . . . 9 -- 9 -- --
El Campo, TX. . . . . . . . . . 15 -- 14 1 --
South Houston, TX . . . . . . . 9 -- 9 -- --
Lafayette, LA . . . . . . . . . 12 -- 12 -- --
Kilgore, TX . . . . . . . . . . 22 1 19 2 --
Central Area -
Midland, TX . . . . . . . . . . 28 -- 28 -- --
Crane, TX . . . . . . . . . . . 35 -- 35 -- --
Hobbs, NM . . . . . . . . . . . 49 -- 48 1 --
Snyder, TX. . . . . . . . . . . 17 -- 17 -- --
Artesia, NM . . . . . . . . . . 11 -- 11 -- --
Western Area -
Bakersfield, CA . . . . . . . . 61 24 37 -- --
Ventura, CA . . . . . . . . . . 13 1 12 -- --
Taft, CA. . . . . . . . . . . . 47 32 15 -- --
Elk City, OK (storage area) (1) 11 -- 11 -- --
Undergoing Refurbishment (2) . . . 10 -- 10 -- --
--- --- --- --- ---
Total United States. . . . . 429 65 346 18 --
--- --- --- --- ---
International:
Argentina -
Comodora Rivadavia. . . . . . . 24 -- 19 -- 5
Rincon de los Sauces/Neuquen. . 11 -- 9 -- 2
Mendoza . . . . . . . . . . . . 9 -- 9 -- --
Salta . . . . . . . . . . . . . 1 -- 1 -- --
Colombia . . . . . . . . . . . . . 6 -- -- -- 6
Venezuela. . . . . . . . . . . . . 10 -- 7 -- 3
Russia . . . . . . . . . . . . . . 3 -- 1 2 --
--- --- --- --- ---
Total International. . . . . 64 -- 46 2 16
--- --- --- --- ---
Total Company . . . . . . . . . . . . 493 65 392 20 16
=== === === === ===
- ---------
(1) No operations are conducted from this facility.
(2) These rigs are being refurbished for international deployment.
The following table sets forth, as of February 1, 1996, certain
information concerning the Company's offshore platform and Venezuelan barge rig
fleet:
OFFSHORE PLATFORM AND VENEZUELAN BARGE RIGS
Rig Drawworks Rated
No. Rig Type Make/Model Horsepower Depth Status
--- ----------------- ------------------- ---------- ------- ---------
Offshore Platform Rigs
6 Concentric Tubing Gardner Denver 3000 150 12,000' Available
10 Concentric Tubing Gardner Denver 3000 150 12,000' Stacked
11 Light Workover Gardner Denver 3000 350 10,000' Stacked
14 Light Workover Gardner Denver 3000 350 10,000' Active
15 Light Workover Gardner Denver 3000 350 10,000' Active
30 Standard Workover Gardner Denver 500S(1) 650 15,000' Active
80 Standard Workover Gardner Denver 500S 650 15,000' Stacked
100 Standard Workover Gardner Denver 500S 650 15,000' Available
110 Standard Workover Gardner Denver 500S 650 15,000' Available
130 Standard Workover Gardner Denver 500S 650 15,000' Active
170 Standard Workover Gardner Denver 500S 650 15,000' Active
200 Improved Workover Gardner Denver 500S 650 15,000' Active
210 Improved Workover Gardner Denver 500S 650 15,000' Available
220 Improved Workover Gardner Denver 500S 650 15,000' Available
650E Improved Electric Gardner Denver 500S(1) 650 15,000' Active
Workover
651E Improved Electric Gardner Denver 500S(1) 650 15,000' Active
Workover
653E Improved Electric Gardner Denver 500S 650 15,000' Available
Workover
750E Heavy Electric Dreco 750E(1) 750 16,500' Active
Workover
751E Heavy Electric OIME SL-5(1) 800 16,500' Active
Workover
951 Heavy Workover Gardner Denver 1000S 1,000 18,000' Active
952 Heavy Workover Gardner Denver 1000S 1,000 18,000' Active
1001E Heavy Electric OIME SL-7(1) 1,500 20,000' Active
Workover
1002E Heavy Electric OIME SL-7(1) 1,500 20,000' (2)
Workover
Venezuelan Barge Rigs
PRIDE I Drilling/Workover 110UBDE(1) 1,500 20,000' Active
PRIDE II Drilling/Workover 110UBDE 1,500 20,000' Active
- ---------
(1) Equipped with top-drive drilling system.
(2) Undergoing construction and initial rig up.
ITEM 3. Legal Proceedings
The Company is routinely involved in litigation incidental to its
business, which often involves claims for significant monetary amounts, some of
which would not be covered by insurance. In the opinion of management, none of
the existing litigation will have any material adverse effect on the Company's
financial position 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 during the
fourth quarter of 1995.
Executive Officers of the Registrant
The following table and descriptions set forth certain information as of
February 1, 1996 with respect to the executive officers of the Company.
Officers are elected annually by the Board of Directors and serve until their
successors are chosen or until their resignation or removal.
Name Age Position
---- --- --------
Ray H. Tolson 60 Chairman of the Board, President and Chief
Executive Officer
Paul A. Bragg 39 Vice President and Chief Financial Officer
James W. Allen 52 Senior Vice President - Operations
Robert W. Randall 53 Vice President, General Counsel and Secretary
James J. Byerlotzer 49 Vice President - Domestic Operations
RAY H. TOLSON was elected Chairman of the Board in December 1993. He has
served as a director since August 1988 and as President and Chief Executive
Officer of the Company and its predecessor since 1975.
PAUL A. BRAGG joined the Company in July 1993 as its Vice President and
Chief Financial Officer. In 1990, Mr. Bragg became President of BRM Capital
Corporation, a private equity investment entity, of which he was co-founder.
From 1988 through 1989, Mr. Bragg was an independent business consultant and
managed private investments. He previously served as Vice President and Chief
Financial Officer of Energy Service Company, Inc. (now ENSCO International
Incorporated), an oilfield services company, from 1983 through 1987.
JAMES W. ALLEN was appointed Senior Vice President - Operations in
February 1996. He joined the Company in January 1993 and became Senior Vice
President - International Operations in May 1994. From 1988 through 1992, Mr.
Allen was an independent business consultant and managed private investments.
From 1984 to 1988, he was Vice President - Latin America for Energy Service
Company, Inc. Mr. Allen has 28 years of oilfield experience with several
different companies.
ROBERT W. RANDALL has been Vice President and General Counsel of the
Company since May 1991. He was elected Secretary of the Company in 1993.
Prior to 1991 he was Senior Vice President, General Counsel and Secretary for
Tejas Gas Corporation, a natural gas transmission company.
JAMES J. BYERLOTZER was appointed Vice President - Domestic Operations in
February 1996. Prior to this appointment, Mr. Byerlotzer was Vice President -
Central Area. He joined the Company in 1981 and has served in various other
operating positions.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Shareholder Matters
The Company's common stock is traded on the NASDAQ National Market System
under the symbol "PRDE." The following table sets forth the high and low sale
prices of the Company's common stock for the periods indicated below as
reported by NASDAQ.
Price
------------------
High Low
------- -------
1994
First Quarter . . . . . . . . . . . . $ 6 1/4 $ 4 7/8
Second Quarter. . . . . . . . . . . . 5 7/8 4 3/4
Third Quarter . . . . . . . . . . . . 5 7/8 4 5/8
Fourth Quarter. . . . . . . . . . . . 5 1/2 4 5/8
1995
First Quarter . . . . . . . . . . . . 7 3/8 4 3/4
Second Quarter. . . . . . . . . . . . 8 3/4 6 1/2
Third Quarter . . . . . . . . . . . . 10 1/2 7 3/8
Fourth Quarter. . . . . . . . . . . . 11 8
As of February 1, 1996, there were 2,115 holders of record of the
Company's common stock.
The Company has not paid any cash dividends on its common stock since
becoming an independent publicly held corporation in September 1988. The Board
of Directors currently intends to retain any earnings for use in the Company's
business and does not anticipate paying dividends on the Company's common stock
at any time in the forseeable future. Furthermore, the Company may be
restricted from paying cash dividends on its common stock by the terms of
future borrowing agreements.
ITEM 6. Selected Financial Data
The following selected consolidated financial information as of December
31, 1995 and 1994, and for each of the three years in the period ended December
31, 1995 has been derived from the audited consolidated financial statements of
the Company included elsewhere herein. This information should be read in
conjunction with such consolidated financial statements and the notes thereto.
The selected consolidated financial information as of December 31, 1993, 1992
and 1991, and for each of the two years in the period ended December 31, 1992
has been derived from audited consolidated financial statements of the Company
which are not included herein. The pro forma information sets forth selected
balance sheet data as of December 31, 1995, adjusted to give effect to the
issuance and sale by the Company of $80,500,000 principal amount of 6 1/4%
convertible subordinated debentures in January 1996. See also "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(In thousands, except per share amounts)
STATEMENT OF OPERATIONS DATA:
Revenues. . . . . . . . . . . . . . . $ 263,599 $ 182,336 $ 127,099 $ 101,382 $ 112,224
Operating costs . . . . . . . . . . . 188,252 139,653 100,305 83,829 87,700
Depreciation and amortization . . . . 16,657 9,550 6,407 5,649 5,861
Selling, general and administrative . 32,418 25,105 17,572 14,076 13,825
--------- --------- --------- --------- ---------
Earnings (loss) from operations . . . 26,272 8,028 2,815 (2,172) 4,838
Other income (expense). . . . . . . . (3,849) 106 504 813 880
--------- --------- --------- --------- ---------
Earnings (loss) before income taxes
and cumulative effect of change
in accounting for income taxes. . . 22,423 8,134 3,319 (1,359) 5,718
Income tax provision (benefit). . . . 7,064 1,920 1,214 (517) 2,199
--------- --------- --------- --------- ---------
Net earnings (loss) before
cumulative effect of change in
accounting for income taxes . . . . 15,359 6,214 2,105 (842) 3,519
Cumulative effect of change in
accounting for income taxes . . . . -- -- 3,835 -- --
--------- --------- --------- --------- ---------
Net earnings (loss) . . . . . . . . . $ 15,359 $ 6,214 $ 5,940 $ (842) $ 3,519
========= ========= ========= ========= =========
Net earnings (loss) per share before
cumulative effect of change in
accounting for income taxes . . . . $ .60 $ .30 $ .13 $ (.05) $ .22
Cumulative effect of change in
accounting for income taxes . . . . -- -- .23 -- --
--------- --------- --------- --------- ---------
Net earnings (loss) per share . . . . $ .60 $ .30 $ .36 $ (.05) $ .22
========= ========= ========= ========= =========
Weighted average common shares
and equivalents outstanding . . . . 25,465 20,795 16,487 16,245 16,354
PRO FORMA
---------
BALANCE SHEET DATA:
Working capital. . . . . . $ 109,179 $ 31,302 $ 26,640 $ 21,758 $ 29,989 $ 25,983
Property and equipment . . 178,488 178,488 139,899 62,823 45,084 46,424
Total assets . . . . . . . 338,105 257,605 205,193 109,981 94,842 89,819
Long-term debt, net of
current portion. . . . . 141,636 61,136 42,096 200 3,648 4,908
Shareholders' equity . . . 131,239 131,239 111,385 69,126 61,774 62,376
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements as of December 31, 1995 and
1994, and for the years ended December 31, 1995, 1994, and 1993, included
elsewhere herein.
Increases and decreases in domestic well servicing activity historically
have had a significant correlation with changes in oil and natural gas prices.
International well servicing activity is also affected by fluctuations in oil
and natural gas prices, but historically to a lesser extent than domestic
activity. International well servicing contracts are typically for terms of
one year or more, while domestic contracts are typically entered into for one
or multiple wells. Accordingly, international well servicing activities
generally are not as sensitive to short-term changes in oil and gas prices as
domestic operations.
Since 1993, the Company has entered into a number of transactions that
have significantly expanded the Company's operations, including the following:
- In a series of transactions from mid-1993 through 1995, the Company
acquired established businesses in Argentina, Venezuela and Colombia
and deployed 28 rigs from its U.S. land-based fleet to Venezuela,
Argentina and Russia.
- In June 1994, the Company acquired the largest fleet of platform
workover rigs, consisting of 22 units, in the Gulf of Mexico. An
additional platform rig was constructed and added to the fleet in
September 1995.
- In January 1995, the Company commenced operation of two
drilling/workover barge rigs on Lake Maracaibo, Venezuela. The barge
rigs were constructed during 1994 pursuant to ten-year operating
contracts entered into with Lagoven, S.A. ("Lagoven"), a subsidiary of
the Venezuelan national oil company.
- In March 1995, the Company acquired X-Pert Enterprises, Inc.
("X-Pert"), which operates 35 well servicing rigs in New Mexico.
RESULTS OF OPERATIONS
The following table sets forth selected consolidated financial
information of the Company by segment for the periods indicated:
Year Ended December 31,
---------------------------------------------------
1995 1994 1993
--------------- --------------- ---------------
Revenues:
Domestic land. . . . . $ 113,115 42.9% $ 95,860 52.6% $ 105,865 83.3%
Domestic offshore. . . 49,595 18.8 23,441 12.9 -- --
International. . . . . 100,889 38.3 63,035 34.5 21,234 16.7
--------- ----- --------- ----- --------- -----
Total revenues. . . $ 263,599 100.0% $ 182,336 100.0% $ 127,099 100.0%
========= ===== ========= ===== ========= =====
Earnings from operations:
Domestic land. . . . . $ 6,857 26.1% $ 1,184 14.7% $ 1,307 46.4%
Domestic offshore. . . 6,785 25.8 3,304 41.2 -- --
International. . . . . 12,630 48.1 3,540 44.1 1,508 53.6
--------- ----- --------- ----- --------- -----
Total earnings
from operations . $ 26,272 100.0% $ 8,028 100.0% $ 2,815 100.0%
========= ===== ========= ===== ========= =====
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
REVENUES. Revenues for the year ended December 31, 1995 increased
$81,263,000, or 45%, as compared to the year ended December 31, 1994. Of this
increase, $37,854,000 was attributable to the Company's international
operations. The Company experienced increased activity levels in Argentina,
Venezuela and Russia, due primarily to the utilization of additional assets
deployed in those areas. The Company's offshore operations, which were
acquired in mid-1994, accounted for $26,154,000 of the increase, as those
operations were included for a full year in 1995. Revenues from the Company's
domestic land-based operations increased $17,255,000, due primarily to the
addition of X-Pert in March 1995.
OPERATING COSTS. Operating costs for the year ended December 31, 1995
increased $48,599,000, or 35%, as compared to the year ended December 31, 1994.
Of this increase, $21,957,000 was attributable to the Company's international
operations, due to expansion of those operations, as discussed above,
$17,285,000 was attributable to a full year of operations for the Company's
offshore operations, and $9,357,000 was attributable to the Company's domestic
land-based operations. The Company's domestic land-based operations
experienced improved operating margins, as a result of extensive cost cutting
efforts, improved safety performance and reduced insurance costs (attributable
to both reduced rates and improved claims experience).
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
year ended December 31, 1995 increased $7,107,000, or 74%, as compared to the
year ended December 31, 1994, primarily as a result of expansion of the
Company's domestic offshore and international asset base.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the year ended December 31, 1995 increased $7,313,000, or 29%, as
compared to the year ended December 31, 1994, primarily as a result of the
inclusion of such costs related to acquired businesses. As a percentage of
revenues, total selling, general and administrative expenses declined to
approximately 12% in 1995 from approximately 14% in 1994.
EARNINGS FROM OPERATIONS. The Company generated earnings from operations
for the year ended December 31, 1995 of $26,272,000. Of this amount,
$12,630,000 was generated from international operations, $6,785,000 was
generated from domestic offshore operations and $6,857,000 was generated from
domestic land-based operations. During 1994, international operations
generated earnings from operations of $3,540,000, domestic offshore operations
generated earnings from operations of $3,304,000, and domestic land-based
operations generated earnings from operations of $1,184,000.
OTHER INCOME (EXPENSE). Other income (expense) for the year ended
December 31, 1995 included a gain of $1,049,000 from the insurance recovery
relating to a domestic land rig which was destroyed in an explosion and fire,
and other miscellaneous gains of $638,000 from asset sales, other insurance
recoveries, foreign exchange transactions and other sources. Interest income
increased to $740,000 for the year ended December 31, 1995 from $618,000 in
1994 due to an increase in cash available for investment. Interest expense for
the year ended December 31, 1995 increased by $6,069,000 from 1994, as a result
of borrowings related to the Company's two drilling/workover barge rigs,
acquisitions and other additions to property and equipment.
INCOME TAX PROVISION. The Company's consolidated effective income tax
rate for the year ended December 31, 1995 increased to approximately 32% from
approximately 24% for the year ended December 31, 1994, primarily as a result
of the recognition in 1994 of current tax benefits from the utilization of
approximately $3,000,000 of foreign net operating loss carryforwards. The
Company recognized no such tax benefits from the utilization of foreign net
operating loss carryforwards in 1995.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
REVENUES. Revenues for the year ended December 31, 1994 increased
$55,237,000, or 43%, as compared to the corresponding period in 1993. Of this
increase, $41,801,000 was attributable to the Company's international
operations. The Company's expansion into Argentina and Venezuela did not begin
until July 1993, while such operations generated revenues for all of 1994. The
addition of the Company's domestic offshore operations in mid-1994 accounted
for $23,441,000 of the increase. These increases were partially offset by a
$10,005,000 decline in revenues as a result of a reduction in hours worked due
to weaker demand for the Company's domestic land operations.
OPERATING COSTS. Operating costs for the year ended December 31, 1994
increased $39,348,000, or 39%, as compared to the corresponding period in 1993.
Of this increase, $31,636,000 was attributable to the Company's international
operations and $16,875,000 was a result of the addition of the Company's
offshore operations. These increases were partially offset by a $9,163,000
decline in operating costs as a result of reduced activity for the Company's
domestic land operations.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
year ended December 31, 1994 increased $3,143,000, or 49%, as compared to the
corresponding period in 1993, primarily as a result of provisions for recently
acquired domestic offshore and international assets.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the year ended December 31, 1994 increased $7,533,000, or 43%, as
compared to the corresponding period in 1993, primarily as a result of the
inclusion of such costs for acquired domestic offshore and international
operations, offset somewhat by a decrease in such costs for domestic land
operations. As a percentage of revenues, total selling, general and admin-
istrative expenses remained constant from 1993 to 1994 at approximately 14%.
EARNINGS FROM OPERATIONS. The Company generated earnings from operations
for the year ended December 31, 1994 of $8,028,000. Of this amount,
$3,540,000 was generated from international operations (despite a loss from
operations in Russia of $1,172,000), $3,304,000 was generated from domestic
offshore operations and $1,184,000 was generated from domestic land-based
operations. For the corresponding period in 1993, domestic land operations
generated earnings from operations of $1,307,000 and international operations
generated earnings from operations of $1,508,000, including earnings of
$462,000 from Russian operations.
OTHER INCOME (EXPENSE). Other income (expense) for the year ended
December 31, 1994 consisted principally of net foreign currency translation
losses of $362,000 resulting from the devaluation of the Venezuelan bolivar,
partially offset by other miscellaneous income items. Interest expense of
$207,000 for the twelve months ended December 31, 1994 resulted from debt
related to the Company's newly acquired domestic offshore operations and other
short-term working capital borrowings. During the year ended December 31,
1994, the Company capitalized $458,000 of interest expense in connection with
construction projects, primarily the construction of the two workover/drilling
barge rigs sent to Venezuela. During the corresponding period of 1993, the
Company had no such borrowings or interest expense.
INCOME TAX PROVISION. The Company's consolidated effective income tax
rate for the year ended December 31, 1994 declined to approximately 24% from
approximately 37%, before the cumulative effect of a change in accounting for
income taxes, for the corresponding period in 1993, primarily as a result of
the recognition of current tax benefits from the utilization of approximately
$3,000,000 of foreign net operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
The Company had net working capital of $31,302,000 and $26,640,000 at
December 31, 1995 and 1994, respectively. The Company's current ratio was 1.7
to 1.0 at December 31, 1995 and 1.8 to 1.0 at December 31, 1994. In January
1996, the Company completed the public sale of $80,500,000 principal amount of
convertible subordinated debentures, which resulted in net proceeds to the
Company of approximately $77,585,000. On a pro forma basis, as adjusted to
give effect to the public sale of the convertible subordinated debentures and
receipt of the net proceeds therefrom, the Company had net working capital of
$109,179,000 and a current ratio of 3.6 to 1.0 at December 31, 1995.
Approximately $25,000,000 of such net proceeds will be used to fund various
capital projects and approximately $10,000,000 will be used to repay
outstanding indebtedness. Management believes that the Company's available
funds, including the net proceeds from the public offering of convertible
subordinated debentures, cash generated from operations and existing bank
credit lines, will be sufficient to fund its normal ongoing capital
expenditure, working capital and debt service requirements.
The Company is active in reviewing possible expansion and acquisition
opportunities relating to all of its business segments. From time to time, the
Company has one or more bids outstanding for contracts that could require
significant capital expenditures and mobilization costs. While the Company has
no definitive agreements to acquire additional equipment, suitable
opportunities may arise in the future. The timing, size or success of any
acquisition effort and the associated potential capital commitments are
unpredictable. The Company expects to fund project opportunities and
acquisitions primarily through a combination of working capital, cash flow from
operations and full or limited recourse debt or equity financing.
As of December 31, 1995, the Company had domestic bank commitments
providing for guidance lines of credit of $18,000,000, against which letters of
credit of $11,397,000 were outstanding. Substantially all of these letters of
credit have been issued in favor of the Company's insurance carriers to
guarantee payment of the Company's share of insured claims. As of December 31,
1995, the Company had accrued approximately $7,249,000 of claims liabilities,
of which $3,940,000 was included in current liabilities and $3,309,000 was
reflected as other long-term liabilities in the consolidated balance sheet.
The Company has estimated the amount and timing of payment of these liabilities
based on actuarial studies provided by the insurance carriers and past
experience. Due to the nature of the Company's business and the structure of
its insurance program, the occurrence of a significant event against which the
Company is not fully insured, or of a number of lesser events against which the
Company is insured, but subject to substantial deductibles, could significantly
impact the operating results of the Company for a given period.
During 1994, the Company entered into long-term financing arrangements
with two Japanese trading companies in connection with the construction and
operation of two drilling/workover barge rigs. The financing agreement
provides that the loans are to be collateralized by the barge rigs and related
charter contracts. The aggregate amount of the collateralized term loans was
initially $42,000,000. Pursuant to the terms of the loan agreements,
$2,503,000 of interest, which accrues at a rate of 9.61% per annum, was added
to the principal amount of the loans prior to the first scheduled payment in
July 1995. At December 31, 1995, the outstanding balance of these loans was
$42,320,000. The loans are being repaid from the proceeds of the related
charter contracts in equal monthly installments of principal and interest
through July 2004. In addition, a portion of the contract proceeds is being
held in trust to assure the timely payment of future debt service obligations.
At December 31, 1995, $2,435,000 of such contract proceeds are being held in
trust for the benefit of the lenders, and are not presently available for use
by the Company. The terms of the financing agreement limit the lenders'
recourse essentially to the barge rigs, contract proceeds and the assets of the
Company's Venezuelan subsidiary. The Company also provided the lenders a
limited guaranty with respect to certain political risks. The Company has
obtained political risks insurance policies from the Overseas Private
Investment Corporation to protect against political risks that could result in
potential payments under the terms of the Company's guaranty.
In June 1994, the Company completed the public sale of 6,918,000 shares
of common stock, which resulted in net cash proceeds to the Company of
approximately $32,000,000. The Company utilized $20,608,000 of such proceeds
toward the purchase of 22 offshore platform workover rigs that operate in the
Gulf of Mexico. The balance of the proceeds from the public offering were used
to fund the upgrading of certain of the acquired offshore assets as well as
other capital expenditures for the refurbishment and re-deployment of rigs from
its domestic fleet to Argentina.
In connection with the acquisition and planned upgrading and expansion of
its acquired offshore platform rig fleet in 1994, the Company established
credit facilities with a lending institution in the aggregate amount of
$14,400,000. In February 1995, this credit facility was amended to, among
other things, increase the aggregate borrowing availability to $30,000,000. As
of December 31, 1995, $8,200,000 of secured term loans, $8,850,000 of secured
revolving loans and $762,000 of working capital line of credit borrowings were
outstanding pursuant to this facility.
During the year ended December 31, 1995, the Company spent approximately
$15,100,000 on offshore assets, including: (i) construction of a new "flagship"
state-of-the-art diesel electric platform rig, (ii) major rig refurbishments
and (iii) auxiliary equipment such as top-drive drilling systems and larger
capacity pumps and generators, and improved living quarters. The Company plans
to continue the program to upgrade its offshore platform rig fleet throughout
1996.
In October 1995, the Company purchased all of the capital stock of Marlin
Colombia Drilling Co., Inc. ("Marlin") for cash consideration of approximately
$6,000,000. For the twelve months ended September 30, 1995, Marlin generated
revenues of approximately $7,000,000.
In September 1995, the Company entered into an agreement with a financial
institution for the sale and leaseback of up to $10,000,000 of equipment to be
used in the Company's business. As of December 31, 1995, the Company had
received proceeds of $5,500,000 pursuant to this facility. The Company has
annual purchase and lease renewal options at projected future fair market
values under the agreement. The lease has been classified as an operating
lease for financial statement purposes. Rentals on the initial transaction are
$1,167,000 annually. The net book value of the equipment has been removed from
the balance sheet and the excess of $483,000 realized on the transaction has
been deferred and is being amortized as a reduction of lease expense over the
maximum lease term of five years.
The Company spent approximately $3,800,000 during the year ended December
31, 1995 to complete construction of the two new drilling/workover barge rigs
deployed in Venezuela. Additionally, land-based rig refurbishment and
international deployment costs for the year ended December 31, 1995 and 1994
were approximately $14,600,000 and $9,952,000, respectively.
In March 1995, the Company acquired all of the outstanding capital stock
of X-Pert for consideration of approximately $10,000,000, consisting of
$3,000,000 cash, a note payable to the selling shareholders in the amount of
approximately $6,000,000, and 200,000 shares of the Company's common stock. At
such time, X-Pert had working capital and other monetary assets in excess of
liabilities of approximately $3,000,000.
Capital expenditures related to other domestic operations for the years
ended December 31, 1995 and 1994 were approximately $3,700,000 and $2,300,000,
respectively.
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No.
121"). SFAS No. 121, which is effective for fiscal years beginning after
December 15, 1995, requires that long-lived assets and certain identifiable
intangibles to be held and used by the entity, be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The Company does not expect that the
adoption of SFAS No. 121 will have any material effect on its financial
position or results of operations.
In October 1995, the Financial Acounting Standards Board issued Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"). SFAS No. 123, which is effective for fiscal years beginning after
December 15, 1995, encourages but does not require companies to recognize
compensation expense for grants of stock, stock options and other equity
instruments to employees based on new fair value accounting rules. The Company
has not yet decided if it will adopt this new fair value based method of
accounting for its stock-based incentive plans.
CURRENCY FLUCTUATIONS
Deterioration in economic conditions in Venezuela resulted in significant
devaluation of the country's currency during the first half of 1994. To a
large extent, the Company has been able to insulate its ongoing operations from
currency exchange losses by matching the local currency component of contracts
to the amount of operating costs transacted in local currency. The Company is
continuing its efforts to maximize the U.S. dollar component of its Venezuelan
contracts. During the first two quarters of 1994, the devaluation of the
Venezuelan bolivar resulted in currency translation losses for the Company.
These losses resulted principally from the translation of the net Venezuelan
monetary assets (that is, essentially accounts receivable in excess of trade
payables) at devaluing exchange rates from month to month.
In the latter part of June 1994, the Venezuelan government imposed
exchange control policies and established an official fixed exchange rate of
170 bolivars per U.S. dollar. This official rate was maintained for the
remainder of 1994 and during the first three quarters of 1995. Accordingly, no
currency translation losses resulted in those periods. In December 1995, the
Venezuelan government devalued its currency by revising the official exchange
rate to 290 Venezuelan bolivars per U.S. dollar. The December 1995 devaluation
did not result in the recognition of any material currency translation gain or
loss by the Company in its consolidated financial statements. If the official
rate is subsequently revised or a market exchange mechanism is re-implemented
so that the bolivar "floats" relative to the U.S. dollar, the Company could be
susceptible to future translation losses with respect to its Venezuelan
operations. The Company intends to continue to monitor developments in this
regard and to take such measures as may be practical to limit its exposure to
currency translation losses in future periods.
ITEM 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Pride Petroleum Services, Inc.:
We have audited the consolidated balance sheet of Pride Petroleum
Services, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Pride
Petroleum Services, Inc. and Subsidiaries as of December 31, 1995 and 1994, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note 6 to the financial statements, the Company changed
its method of accounting for income taxes in 1993.
COOPERS & LYBRAND L.L.P.
Houston, Texas
February 26, 1996
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)
DECEMBER 31, 1995
--------------------DECEMBER 31,
PRO FORMA HISTORICAL 1994
--------- --------- ---------
ASSETS (unaudited)
CURRENT ASSETS
Cash and cash equivalents. . . . . . . . . $ 86,880 $ 9,295 $ 5,970
Short-term investments . . . . . . . . . . 2,612 2,612 3,001
Trade receivables, net of allowance
for doubtful accounts of $426,
$426 and $394, respectively. . . . . . . 43,767 43,767 38,334
Parts and supplies . . . . . . . . . . . . 9,473 9,473 4,468
Deferred income taxes. . . . . . . . . . . 1,518 1,518 2,388
Other current assets . . . . . . . . . . . 6,780 6,488 6,128
--------- --------- ---------
Total current assets. . . . . . . . . . 151,030 73,153 60,289
--------- --------- ---------
PROPERTY AND EQUIPMENT, AT COST . . . . . . . 296,939 296,939 246,365
ACCUMULATED DEPRECIATION. . . . . . . . . . . (118,451) (118,451) (106,466)
--------- --------- ---------
Net property and equipment. . . . . . . 178,488 178,488 139,899
--------- --------- ---------
GOODWILL AND OTHER INTANGIBLES, net . . . . . 3,699 3,699 3,580
OTHER ASSETS. . . . . . . . . . . . . . . . . 4,888 2,265 1,425
--------- --------- ---------
$ 338,105 $ 257,605 $ 205,193
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . $ 15,010 $ 15,010 $ 14,715
Accrued expenses . . . . . . . . . . . . . 16,550 16,550 15,332
Current portion of long-term debt. . . . . 10,291 10,291 3,602
--------- --------- ---------
Total current liabilities . . . . . . . 41,851 41,851 33,649
--------- --------- ---------
OTHER LONG-TERM LIABILITIES . . . . . . . . . 4,127 4,127 5,327
LONG-TERM DEBT, net of current portion. . . . 61,136 61,136 42,096
CONVERTIBLE SUBORDINATED DEBENTURES . . . . . 80,500 -- --
DEFERRED INCOME TAXES . . . . . . . . . . . . 19,252 19,252 12,736
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, no par value; 40,000,000
shares authorized; 24,863,072,
24,863,072 and 24,081,872 shares issued
and 24,808,852, 24,808,852 and 24,027,652
shares outstanding, respectively . . . . 1 1 1
Paid-in capital. . . . . . . . . . . . . . 95,751 95,751 91,256
Treasury stock, at cost. . . . . . . . . . (191) (191) (191)
Retained earnings. . . . . . . . . . . . . 35,678 35,678 20,319
--------- --------- ---------
Total shareholders' equity. . . . . . . 131,239 131,239 111,385
--------- --------- ---------
$ 338,105 $ 257,605 $ 205,193
========= ========= =========
The accompanying notes are an integral part of
the consolidated financial statements.
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
REVENUES. . . . . . . . . . . . . . . . . . . $ 263,599 $ 182,336 $ 127,099
--------- --------- ---------
COSTS AND EXPENSES
Operating costs. . . . . . . . . . . . . . 188,252 139,653 100,305
Depreciation and amortization. . . . . . . 16,657 9,550 6,407
Selling, general and administrative. . . . 32,418 25,105 17,572
--------- --------- ---------
Total costs and expenses. . . . . . . . 237,327 174,308 124,284
--------- --------- ---------
Earnings from operations . . . . . . 26,272 8,028 2,815
OTHER INCOME (EXPENSE)
Other income (expense) . . . . . . . . . . 1,687 (305) (135)
Interest income. . . . . . . . . . . . . . 740 618 649
Interest expense . . . . . . . . . . . . . (6,276) (207) (10)
--------- --------- ---------
Total other income (expense), net. . (3,849) 106 504
--------- --------- ---------
EARNINGS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES . . . . . . . . 22,423 8,134 3,319
INCOME TAX PROVISION. . . . . . . . . . . . . 7,064 1,920 1,214
--------- --------- ---------
NET EARNINGS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING FOR INCOME TAXES . . . 15,359 6,214 2,105
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES . . . . . . . . -- -- 3,835
--------- --------- ---------
NET EARNINGS. . . . . . . . . . . . . . . . . $ 15,359 $ 6,214 $ 5,940
========= ========= =========
NET EARNINGS PER SHARE
Before cumulative effect of change
in accounting for income taxes . . . . . $ .60 $ .30 $ .13
Cumulative effect of change in
accounting for income taxes. . . . . . . -- -- .23
--------- --------- ---------
EARNINGS PER SHARE. . . . . . . . . . . . . . $ .60 $ .30 $ .36
========= ========= =========
WEIGHTED AVERAGE COMMON SHARES AND
COMMON SHARE EQUIVALENTS OUTSTANDING. . . . 25,465 20,795 16,487
========= ========= =========
The accompanying notes are an integral part of
the consolidated financial statements.
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands)
COMMON STOCK TREASURY TOTAL
-------------- PAID-IN STOCK RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL AT COST EARNINGS EQUITY
------ ------ -------- ------- -------- ---------
BALANCE - DECEMBER 31, 1992. . . . . 16,034 $ 1 $ 53,915 $ (307) $ 8,165 $ 61,774
Net earnings. . . . . . . . . . . -- -- -- -- 5,940 5,940
Issuance of common stock in
connection with acquisition . . 270 -- 1,099 116 -- 1,215
Exercise of stock options . . . . 17 -- 129 -- -- 129
Tax benefit of non-qualified
stock options . . . . . . . . . -- -- 68 -- -- 68
------ ------ -------- ------- -------- ---------
BALANCE - DECEMBER 31, 1993. . . . . 16,321 1 55,211 (191) 14,105 69,126
Net earnings. . . . . . . . . . . -- -- -- -- 6,214 6,214
Issuance of common stock in
public offering . . . . . . . . 6,918 -- 32,108 -- -- 32,108
Issuance of common stock in
connection with acquisition . . 785 -- 3,925 -- -- 3,925
Exercise of stock options . . . . 4 -- 8 -- -- 8
Tax benefit of non-qualified
stock options . . . . . . . . . -- -- 4 -- -- 4
------ ------ -------- ------- -------- ---------
BALANCE - DECEMBER 31, 1994. . . . . 24,028 1 91,256 (191) 20,319 111,385
Net earnings. . . . . . . . . . . -- -- -- -- 15,359 15,359
Issuance of common stock in
connection with acquisitions. . 525 -- 3,279 -- -- 3,279
Exercise of stock options . . . . 256 -- 739 -- -- 739
Tax benefit of non-qualified
stock options . . . . . . . . . -- -- 477 -- -- 477
------ ------ -------- ------- -------- ---------
BALANCE - DECEMBER 31, 1995. . . . . 24,809 $ 1 $ 95,751 $ (191) $ 35,678 $ 131,239
====== ====== ======== ======= ======== =========
The accompanying notes are an integral part of
the consolidated financial statements.
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
OPERATING ACTIVITIES
Net earnings . . . . . . . . . . . . . . . . . . . . . . . $ 15,359 $ 6,214 $ 5,940
Adjustments to reconcile net earnings to
net cash provided by operating activities -
Depreciation and amortization . . . . . . . . . . . . . 16,657 9,550 6,407
Gain on sale of assets. . . . . . . . . . . . . . . . . (1,544) (475) (241)
Effect of exchange rates. . . . . . . . . . . . . . . . (142) 362 167
Deferred tax provision (benefit). . . . . . . . . . . . 4,602 1,120 (103)
Effect of change in accounting for income taxes . . . . -- -- (3,835)
Changes in assets and liabilities, net of
effects of acquisitions -
Trade receivables. . . . . . . . . . . . . . . . . . (4,493) (10,106) (830)
Parts and supplies . . . . . . . . . . . . . . . . . (2,866) (1,128) (313)
Other current assets . . . . . . . . . . . . . . . . (1,914) (31) (395)
Accounts payable . . . . . . . . . . . . . . . . . . (358) 1,534 2,778
Accrued expenses and other . . . . . . . . . . . . . 1,391 1,331 (343)
--------- --------- ---------
Net cash provided by operating activities . . . . 26,692 8,371 9,232
--------- --------- ---------
INVESTING ACTIVITIES
Purchase of net assets of acquired entities,
including acquisition costs, less cash acquired. . . . . (8,144) (22,217) (9,752)
Purchases of property and equipment. . . . . . . . . . . . (40,636) (59,171) (12,123)
Proceeds from sale of short-term investments . . . . . . . 1,250 1,004 2,852
Proceeds from sale of property and equipment . . . . . . . 6,862 908 285
Purchase of short-term investments . . . . . . . . . . . . (360) -- (2,000)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . (485) (6) 45
--------- --------- ---------
Net cash used in investing activities . . . . . . (41,513) (79,482) (20,693)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of common stock . . . . . . . . . . 1,216 32,116 129
Proceeds from debt borrowings. . . . . . . . . . . . . . . 27,535 39,358 400
Reduction of debt. . . . . . . . . . . . . . . . . . . . . (10,410) (740) (1,797)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . (195) (1,162) --
--------- --------- ---------
Net cash provided (used) by financing activities. 18,146 69,572 (1,268)
--------- --------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . 3,325 (1,539) (12,729)
CASH AND CASH EQUIVALENTS, beginning of period. . . . . . . . 5,970 7,509 20,238
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period. . . . . . . . . . . $ 9,295 $ 5,970 $ 7,509
========= ========= =========
The accompanying notes are an integral part of
the consolidated financial statements.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Pride Petroleum Services, Inc. (the "Company") is a Louisiana corporation
which was organized in 1988 as the successor to a company originally
incorporated in 1968. The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated.
Certain reclassifications have been made to prior year amounts to conform with
the current year presentation.
The accompanying pro forma information sets forth the Company's
consolidated balance sheet as of December 31, 1995, as adjusted to give effect
to the issuance and sale by the Company of $80,500,000 principal amount of
6 1/4% convertible subordinated debentures in January 1996. Net proceeds to
the Company were $77,585,000, after deducting underwriting discounts and
commissions and estimated offering expenses totaling $2,915,000.
CASH EQUIVALENTS
For purposes of the consolidated balance sheet and consolidated statement
of cash flows, the Company considers highly liquid debt instruments having
maturities of three months or less at the date of purchase to be cash
equivalents.
SHORT-TERM INVESTMENTS
Short-term investments include marketable securities, which in the case
of debt instruments have maturities in excess of three months but less than
one year at the date of purchase, and are carried at the lower of cost or
market value. There were no material differences between cost and fair market
value at December 31, 1995.
PARTS AND SUPPLIES
Parts and supplies consist of spare rig parts and supplies held for use
in operations and are valued at the lower of weighted average cost or market
value.
PROPERTY AND EQUIPMENT
Property and equipment are carried at original cost or adjusted net
realizable value, as applicable. Major renewals and improvements are
capitalized and depreciated over the respective asset's useful life.
Maintenance and repair costs are charged to expense as incurred. During the
years ended December 31, 1995, 1994 and 1993, maintenance and repair costs
included in operating costs were $20,776,000, $16,290,000 and $12,541,000,
respectively. When assets are sold or retired, the remaining costs and related
accumulated depreciation are removed from the accounts and any resulting gain
or loss is included in income.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
For financial reporting purposes, depreciation of property and equipment
is provided using primarily the straight line method based upon expected useful
lives of each class of assets. Estimated useful lives of the assets for
financial reporting purposes are as follows:
YEARS
-------
Rigs and rig equipment 5 - 17
Transportation equipment 3 - 7
Buildings and improvements 10 - 20
Furniture and fixtures 5
The Company capitalizes interest applicable to the construction of
significant additions to property and equipment. In 1995 and 1994, total
interest incurred was $6,526,000 and $665,000, respectively, of which $250,000
and $458,000, respectively, was capitalized. No interest was capitalized in
1993.
GOODWILL AND OTHER INTANGIBLES
Goodwill, totalling $2,650,000 and $2,846,000 at December 31, 1995 and
1994, respectively, represents the cost in excess of fair value of the net
assets of companies acquired and is being amortized over 15 years. Other
intangible assets, totalling $1,049,000 and $734,000 at December 31, 1995 and
1994, respectively, represent costs allocated to service contracts, employment
contracts, covenants not to compete and client lists acquired in business
acquisitions. Other intangible assets are being amortized over their estimated
useful lives, which range from three to ten years. Total amortization of
goodwill and other intangible assets for the years ended December 31, 1995,
1994 and 1993 amounted to $543,000, $475,000 and $453,000, respectively.
REVENUE RECOGNITION
The Company recognizes revenue from domestic land well servicing
operations as services are performed based upon actual rig hours worked.
Revenues from international and offshore well servicing and daywork drilling
operations are recognized as services are performed based upon contracted day
rates and the number of operating days during the period. Revenues from
related operations are recognized in the period in which such services are
performed.
INCOME TAXES
Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Deferred tax liabilities
and assets are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the asset is recovered or the liability is
settled.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
FOREIGN CURRENCY TRANSLATION
The Company accounts for translation of foreign currency in accordance
with Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation". The Company's Venezuelan operations are in a "highly
inflationary" economy resulting in the use of the U.S. dollar as the functional
currency. Therefore, certain assets of this operation are translated at
historical exchange rates and all translation gains or losses are reflected in
the period's results of operations. In Argentina and Colombia, the local
currency is considered the functional currency. Translation of Argentine and
Colombian assets and liabilities is made at the prevailing exchange rate as of
the balance sheet date. Revenues and expenses are translated at the average
rate of exchange during the period. The resulting translation adjustments are
recorded as a component of shareholders' equity. In Russia, contracts to date
have called for payment and expenses to be in U.S. dollars; therefore, no
exchange gain or loss has been applicable.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share has been computed based on the weighted average
number of common shares outstanding during the applicable period. Common share
equivalents have been included in periods in which their effect is dilutive.
Common share equivalents include the number of shares issuable upon exercise of
warrants and stock options, less the number of shares that could have been
repurchased with the exercise proceeds, using the treasury stock method. Fully
diluted earnings per share have not been presented as the results are not
materially different.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and trade receivables. The Company places its temporary cash investments in
U.S. Government securities and in other high quality financial instruments. By
policy, the Company limits the amount of credit exposure to any one financial
institution or issuer. The Company's customer base consists primarily of major
integrated and government-owned international oil companies as well as smaller
independent oil and gas producers. Management believes the credit quality of
its customers is generally high. The Company has in place insurance to cover
certain exposure in its foreign operations and provides allowances for
potential credit losses when necessary.
MANAGEMENT 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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. While it is believed that such estimates are reasonable,
actual results could differ from those estimates.
CONDITIONS AFFECTING ONGOING OPERATIONS
Increases and decreases in domestic well servicing activity historically
have had a significant correlation with changes in oil and natural gas prices.
International well servicing activity is also affected by fluctuations in oil
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
and natural gas prices, but historically to a lesser extent than domestic
activity. International well servicing contracts are typically for terms of
one year or more, while domestic contracts are typically entered into for one
or multiple wells. Accordingly, international well servicing activities
generally are not as sensitive to short-term changes in oil and gas prices as
domestic operations.
2. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1994 consists of the
following:
DECEMBER 31,
--------------------
1995 1994
--------- ---------
(in thousands)
Land . . . . . . . . . . . . . . . . . . . . $ 2,458 $ 2,340
Equipment. . . . . . . . . . . . . . . . . . 274,378 191,248
Buildings. . . . . . . . . . . . . . . . . . 6,492 5,495
Other. . . . . . . . . . . . . . . . . . . . 471 251
Construction-in-progress . . . . . . . . . . 13,140 47,031
--------- ---------
296,939 246,365
Accumulated depreciation . . . . . . . . . . (118,451) (106,466)
--------- ---------
$ 178,488 $ 139,899
========= =========
Construction-in-progress as of December 31, 1995 included approximately
$5,700,000 of costs related to the acquisition, refurbishment, equipping and
deploying to international markets of seven land-based workover and four land-
based drilling rigs and approximately $2,500,000 of costs related to the
construction of an offshore platform workover rig. At December 31, 1994,
construction-in-progress included approximately $36,533,000 of costs related to
the construction of the two drilling/workover barge rigs which were placed in
service in January 1995, approximately $4,355,000 of costs related to
improvements to three offshore platform rigs, and $3,701,000 related to the
refurbishment, upgrading and deployment of four additional rigs to Argentina.
3. ACQUISITIONS
In March 1995, the Company acquired all of the outstanding capital stock
of X-Pert Enterprises, Inc. ("X-Pert") for aggregate consideration of
approximately $10,000,000, consisting of $3,000,000 cash, a note payable to the
selling shareholders in the amount of $5,964,000, and 200,000 shares of the
Company's common stock.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The assets acquired and liabilities assumed in the X-Pert acquisition
were as follows:
ASSETS (LIABILITIES)
--------------------
(in thousands)
Cash and cash equivalents. . . . . $ 1,719
Trade receivables. . . . . . . . . 2,254
Other current assets . . . . . . . 80
Property and equipment . . . . . . 10,000
Other assets . . . . . . . . . . . 725
Accounts payable . . . . . . . . . (648)
Accrued expenses . . . . . . . . . (761)
Long-term debt . . . . . . . . . . (569)
Deferred income taxes. . . . . . . (2,800)
-------
$ 10,000
========
Unaudited pro forma results of operations assuming the acquisition of X-
Pert had occurred on January 1, 1994, are as follows:
YEAR ENDED DECEMBER 31,
----------------------
1995 1994
--------- ---------
(in thousands, except
per share data)
Revenues . . . . . . . . . . . . . . . . . $ 265,592 $ 197,154
Net Earnings . . . . . . . . . . . . . . . $ 15,488 $ 7,112
Earnings per share . . . . . . . . . . . . $ .61 $ .34
The pro forma results of operations presented above do not purport to be
indicative of the results of operations of the Company that might have occurred
nor are they indicative of future results.
Also in March 1995, the Company acquired substantially all of the assets
of a fluids hauling business for total consideration of $400,000, consisting of
$350,000 cash and a note payable to the sellers in the amount of $50,000.
In October 1995, the Company purchased all of the outstanding capital
stock of Marlin Colombia Drilling Co., Inc. ("Marlin") for cash consideration
of approximately $6,000,000.
In June 1994, the Company acquired substantially all of the assets of
Offshore Rigs, L.L.C. ("Offshore Rigs") for consideration of $31,213,000,
consisting of $20,608,000 in cash, the issuance of 785,000 shares of the
Company's common stock with a market value of $3,925,000, and the assumption of
existing bank indebtedness of $6,680,000.
In February 1994, the Company acquired all of the outstanding capital
stock of Hydrodrill, S.A. ("Hydrodrill"). The principal assets of Hydrodrill
were four land-based workover rigs located in southern Argentina.
Each of the acquisitions discussed above was recorded using the purchase
method of accounting. The operating results of each acquisition have been
included in consolidated results of operations from the date of acquisition.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
4. DEBT
LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1994 consists of the following:
DECEMBER 31,
-------------------
1995 1994
-------- ---------
(in thousands)
Limited-recourse collateralized term loans. . $ 42,320 $ 33,311
Secured term loans. . . . . . . . . . . . . . 8,200 8,860
Secured revolver. . . . . . . . . . . . . . . 8,850 --
Notes payable . . . . . . . . . . . . . . . . 6,225 202
Acquisition note payable. . . . . . . . . . . 5,070 --
Revolving line of credit. . . . . . . . . . . 762 3,325
-------- --------
71,427 45,698
Less current portion. . . . . . . . . . . . . 10,291 3,602
-------- --------
$ 61,136 $ 42,096
======== ========
During 1994, the Company entered into long-term financing arrangements
with two Japanese trading companies in connection with the construction and
operation of two drilling/workover barge rigs. The term loans are
collateralized by the barge rigs and related charter contracts. The aggregate
amount of the collateralized term loans was initially $42,000,000. During 1994
and 1995, an aggregate of $2,503,000 of accrued interest was added to the
principal amount of the loans. Pursuant to the terms of the loan agreements,
interest, which accrues at a rate of 9.61% per annum, was added to the
principal amount of the loans prior to the first scheduled payment in July
1995. The loans are being repaid from the proceeds of the related charter
contracts in equal monthly installments of principal and interest through July
2004. In addition, a portion of the contract proceeds is being held in trust
to assure timely payment of future debt service obligations. At December 31,
1995, $2,435,000 of such contract proceeds are being held in trust for the
benefit of the lenders, and are not presently available for use by the Company.
The terms of the financing agreements limit the lenders' recourse essentially
to the barge rigs, contract proceeds and the assets of the Company's Venezuelan
subsidiary. The Company also provided the lenders a limited guaranty with
respect to certain political risks. The Company has obtained political risks
insurance policies from the Overseas Private Investment Corporation to protect
against political risks that could potentially result in payments under the
terms of the Company's guaranty.
In connection with the acquisition of the assets of Offshore Rigs in June
1994, the Company's new wholly-owned subsidiary, Pride Offshore, Inc. ("Pride
Offshore"), entered into a $14,400,000 credit facility with a financial
institution. The credit facility included $5,400,000 of secured term loans, a
$4,000,000 secured revolver that was scheduled to convert to a term loan in
January 1995 and a $5,000,000 revolving line of credit. The secured term loan
initially bore interest at a rate of 8% per annum, while the secured revolver
and the revolving line of credit each bore interest at a variable rate of prime
plus 1/2% per annum. At December 31, 1994, the Company had $4,860,000 of
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
borrowings outstanding under the secured term loans, $4,000,000 outstanding
under the secured revolver and $3,325,000 outstanding under the revolving line
of credit.
In February 1995, the credit facility was amended to, among other things,
increase the aggregate borrowing availability under the facility to
$30,000,000, reschedule maturities of the loans and to revise the interest
rates on a portion of the borrowings. Pursuant to the amended credit facility,
the amount of the secured term loan was increased to $10,000,000, with two
tranches. Tranche A had an initial principal amount of $4,680,000, is
repayable in 28 equal monthly principal payments of $90,000 plus interest and
one final principal payment of $2,160,000 in June 1997, and bears interest,
payable monthly, at a rate of 8% per annum. Tranche B had an initial principal
amount of $5,320,000, is repayable in 60 equal monthly principal payments of
$88,667 plus interest and bears interest, payable monthly, at a rate of 9.25%
per annum.
The proceeds of Tranche B of the amended secured term loan were used to
repay the outstanding balance of the original secured revolver and a portion of
the outstanding balance of the revolving line of credit. The secured term loan
is collateralized by certain of the Company's offshore property and equipment.
Pursuant to the amended loan agreements, the amount of borrowing
availability under the secured revolver is $15,000,000. The secured revolver
is to convert in July 1996 to a term loan which is repayable in 60 equal
monthly principal payments plus interest. The secured revolver is
collateralized by certain of the Company's property and equipment and bears
interest, payable monthly, at a variable rate of prime plus 1/2% per annum
(totalling 9% at December 31, 1995).
The $5,000,000 revolving line of credit was amended to extend the
maturity of such loan to April 30, 1996. The revolving line of credit bears
interest, payable monthly, at a variable rate of prime plus 1/2% per annum
(totalling 9% at December 31, 1995) and is collateralized by substantially all
of the accounts receivable of Pride Offshore.
The Company has unconditionally guaranteed the obligations of Pride
Offshore under each of the amended secured term loans, the secured revolver and
the revolving line of credit.
Notes payable include four notes payable to lending institutions totaling
an aggregate $6,175,000 which are collateralized by selected property and
equipment and a note payable in the amount of $50,000 issued to the sellers of
certain assets acquired by the Company during the first quarter of 1995.
In March 1995, the Company entered into a note payable to two individuals
in the amount of $5,964,000 as partial consideration for a business
acquisition. The note bears interest at the rate of 8.5% per annum and is
repayable in quarterly installments through March 2000. The acquistion note is
collateralized by certain of the property and equipment of the acquired
business.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Future maturities of long-term debt are as follows:
AMOUNT
--------
(in thousands)
1996 . . . . . . . . . . . . . . . . . . . . $ 10,291
1997 . . . . . . . . . . . . . . . . . . . . 12,158
1998 . . . . . . . . . . . . . . . . . . . . 9,675
1999 . . . . . . . . . . . . . . . . . . . . 9,583
2000 . . . . . . . . . . . . . . . . . . . . 7,195
Thereafter . . . . . . . . . . . . . . . . . 22,525
The Company has obtained bank commitments which provide for guidance
lines of credit of $18,000,000. As of December 31, 1995, letters of credit
totaling $11,397,000 were outstanding thereunder. Cash and cash equivalents
and a portion of accounts receivable have been pledged as collateral pursuant
to these credit facilities.
Based on rates currently available to the Company for debt with similar
terms and remaining maturities, the Company believes that the recorded value of
long-term debt approximates fair market value at December 31, 1995.
CONVERTIBLE SUBORDINATED DEBENTURES
In January 1996, the Company completed the public sale of $80,500,000
principal amount of 6 1/4% convertible subordinated debentures. The
debentures, which are due February 15, 2006, are convertible into common stock
of the Company at a price of $12.25 per share. The debentures are redeemable
at the option of the Company, in whole or in part, at any time on or after
March 1, 1999, at an initial redemption price of 103.125% of the principal
amount and declining to 100% of the principal amount by February 15, 2002.
Interest is payable semi-annually on February 15 and August 15 of each year,
commencing August 15, 1996.
5. LEASES
In September 1995, the Company entered into an agreement with a financial
institution for the sale and leaseback of up to $10,000,000 of equipment to be
used in the Company's business. As of December 31, 1995, the Company had
received proceeds of $5,500,000 pursuant to this facility attributable to a new
platform workover rig which was placed in service in September 1995. The
Company has purchase and lease renewal options at projected future fair market
values under the agreement. The lease has been classified as an operating
lease for financial statement purposes. Rentals relating to the initial
transaction are $1,167,000 annually. The net book value of the equipment has
been removed from the balance sheet and the excess of funding over such net
book value of $483,000 has been deferred and is being amortized as a reduction
of lease expense over the maximum lease term of five years.
6. INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS 109. During the
first quarter of 1993, the Company recorded a gain in the amount of $3,835,000,
or $.23 per share, which represents the reduction of the deferred tax liability
as of January 1, 1993. The gain has been recorded in the consolidated
statement of operations as "cumulative effect of change in accounting for
income taxes".
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The components of the provision for income taxes were as follows:
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
(in thousands)
United States Federal:
Current . . . . . . . . . . . . . $ 1,650 $ 410 $ 832
Deferred. . . . . . . . . . . . . 3,616 1,526 (14)
-------- -------- --------
5,266 1,936 818
-------- -------- --------
State:
Current . . . . . . . . . . . . . 89 24 85
Deferred. . . . . . . . . . . . . 201 90 (89)
-------- -------- --------
290 114 (4)
-------- -------- --------
Foreign:
Current . . . . . . . . . . . . . 723 366 400
Deferred. . . . . . . . . . . . . 785 (496) --
-------- -------- --------
1,508 (130) 400
-------- -------- --------
Total income tax provision . . $ 7,064 $ 1,920 $ 1,214
======== ======== ========
The difference between the effective federal income tax rate reflected in
the income tax provision and the amounts which would be determined by applying
the statutory federal tax rate to earnings before income taxes is summarized as
follows:
YEAR ENDED DECEMBER 31,
----------------------
1995 1994 1993
------ ------ ------
U.S. statutory rate. . . . . . . . . . . . 34.0% 34.0% 34.0%
Foreign. . . . . . . . . . . . . . . . . . (7.1) (14.0) (1.1)
State and local taxes. . . . . . . . . . . 1.3 1.4 (0.1)
Other. . . . . . . . . . . . . . . . . . . 3.3 2.2 3.8
------ ------ ------
Effective tax rate. . . . . . . . . . . 31.5% 23.6% 36.6%
====== ====== ======
The Company's consolidated effective federal income tax rate for the year
ended December 31, 1995 increased to approximately 32% from approximately 24%
for the corresponding period in 1994, primarily as a result of the recognition
in 1994 of current tax benefits from the utilization of approximately
$3,000,000 of foreign net operating loss carryforwards. The Company had
recognized a valuation allowance for the tax benefits of such foreign net
operating loss carryforwards at the date the related foreign enterprise was
acquired, due to uncertainties then existing regarding the Company's ability to
utilize such tax benefits.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The domestic and foreign components of earnings before income taxes and
cumulative effect of change in accounting for income taxes were as follows:
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
(in thousands)
Domestic . . . . . . . . . . . . . . $ 13,302 $ 5,178 $ 1,933
Foreign. . . . . . . . . . . . . . . 9,121 2,956 1,386
-------- -------- --------
$ 22,423 $ 8,134 $ 3,319
======== ======== ========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax liabilities and deferred tax assets as of December
31, 1995 and 1994 were as follows:
DECEMBER 31,
------------------
1995 1994
-------- --------
(in thousands)
Deferred tax liabilities:
Depreciation . . . . . . . . . . . . . . $ 19,850 $ 13,949
Other. . . . . . . . . . . . . . . . . . 1,133 983
-------- --------
Total deferred tax liabilities. . . . 20,983 14,932
-------- --------
Deferred tax assets:
Foreign net operating loss carryforwards (1,462) --
Insurance claims . . . . . . . . . . . . (2,236) (3,814)
Bad debts. . . . . . . . . . . . . . . . (153) (142)
Other. . . . . . . . . . . . . . . . . . (1,220) (628)
-------- --------
Total deferred tax assets . . . . . . (5,071) (4,584)
Valuation allowance for deferred tax assets 1,822 --
-------- --------
Net deferred tax assets . . . . . . . (3,249) (4,584)
-------- --------
Net deferred tax liability. . . . . . . . . $ 17,734 $ 10,348
======== ========
Applicable U.S. income taxes have not been provided on approximately
$10,300,000 of undistributed earnings of the Company's foreign subsidiaries.
The Company considers such earnings to be permanently invested outside the U.S.
These earnings could be subject to U.S. income tax if distributed to the
Company as dividends or otherwise. The Company anticipates that foreign tax
credits would substantially reduce the amount of U.S. income tax that would be
payable if these earnings were to be repatriated.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
7. EMPLOYEE BENEFITS
The Company has a salary deferral plan covering its employees whereby
employees may elect to contribute up to 15% of their annual compensation. The
Company may at its discretion make matching contributions with respect to an
employee's salary contribution of up to $1,000 or 6% of compensation, whichever
is less. The Company made matching contributions to the plan for the years
ended December 31, 1995, 1994 and 1993 totaling $229,000, $150,000 and
$105,000, respectively.
In 1993, the Company established a deferred compensation plan providing
officers and key employees with the opportunity to participate in an unfunded
deferred compensation program titled the "401(k) Restoration Plan". The 401(k)
Restoration Plan is a non-qualified plan which allows certain employees to
defer up to 100% of base compensation and bonuses earned.
8. SHAREHOLDERS' EQUITY
COMMON STOCK
In April 1995, the Company issued 87,000 shares of common stock pursuant
to the contractual earnout provisions of an acquisition agreement to an
individual who became a director of the Company in connection with such
acquisition. The value of such shares, estimated to be $435,000, has been
allocated to the acquired assets and is being amortized over the remaining
useful lives of such assets. In June 1995, the Company entered into an
agreement with the director pursuant to which it issued 203,000 additional
shares of common stock in exchange for the director's remaining contingent
right to receive up to 73,000 common shares and the exercise of warrants to
acquire an additional 500,000 shares of common stock on a net value basis. The
value of the additional shares issued, estimated to be $1,624,000, was also
allocated to the acquired assets.
Also in April 1995, the Company issued 35,200 shares of common stock,
having an estimated aggregate value of $220,000, to a related party as
consideration for the purchase of support assets.
In June 1994, the Company completed the sale of 6,918,000 shares of
common stock. The public offering resulted in net cash proceeds to the Company
of approximately $32,000,000. The Company utilized $20,608,000 of the proceeds
from the public offering toward the purchase of the assets of Offshore Rigs.
LONG-TERM INCENTIVE PLAN
The Company has a Long-Term Incentive Plan which provides for the
granting or awarding of stock options, restricted stock, stock appreciation
rights and stock indemnification rights to officers and other key employees.
The number of shares authorized and reserved for issuance under the Long-Term
Incentive Plan is limited to 13% of total issued and outstanding shares,
currently 2,775,550, subject to adjustment in the event of certain changes in
the Company's corporate structure or capital stock. Stock options may be
exercised in whole or in part beginning six months from the date of grant and
expire ten years from the date of grant. The stock options also expire 60 days
after termination of employment or one year after retirement, total disability
or death of an employee.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Transactions in stock options pursuant to the Long-Term Incentive Plan
for the last three years are summarized as follows:
NUMBER
OF SHARES
---------
Outstanding at December 31, 1992. . . . . . 833,350
Granted ($4.50 to $5.50 per share) . . . 325,500
Exercised ($2.25 per share). . . . . . . (2,000)
Forfeited ($2.25 per share). . . . . . . (2,000)
---------
Outstanding at December 31, 1993. . . . . . 1,154,850
Granted ($5.25 per share). . . . . . . . 775,000
Exercised ($2.25 per share). . . . . . . (3,500)
Forfeited. . . . . . . . . . . . . . . . --
---------
Outstanding at December 31, 1994. . . . . . 1,926,350
Granted ($6.875 per share) . . . . . . . 483,000
Exercised ($2.25 - $6.875 per share) . . (256,000)
Forfeited. . . . . . . . . . . . . . . . --
---------
Outstanding at December 31, 1995. . . . . . 2,153,350
=========
Exercisable at December 31, 1995. . . . . . 2,153,350
=========
DIRECTORS' STOCK OPTION PLAN
In 1993, the shareholders of the Company approved and ratified the 1993
Directors' Stock Option Plan. The purpose of the plan is to afford the
Company's directors who are not full-time employees of the Company or any
subsidiary of the Company an opportunity to acquire a greater proprietary
interest in the Company. A maximum of 200,000 shares of the Company's common
stock are to be available for purchase upon the exercise of options granted
pursuant to the 1993 Directors' Stock Option Plan. The exercise price of
options is the fair market value per share on the date the option is granted.
Directors' stock options vest over two years at the rate of 50% per year and
expire ten years from the date of grant.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Transactions in the 1993 Directors' Stock Option Plan since inception are
summarized as follows:
NUMBER
OF SHARES
---------
Outstanding at December 31, 1992. . . . . . --
Granted ($4.25 to $6.75 per share) . . . 50,000
Exercised. . . . . . . . . . . . . . . . --
Forfeited ($4.25 per share). . . . . . . (10,000)
---------
Outstanding at December 31, 1993. . . . . . 40,000
Granted ($5.00 per share). . . . . . . . 12,000
Exercised. . . . . . . . . . . . . . . . --
Forfeited ($4.25 to $5.00 per share) . . (13,000)
---------
Outstanding at December 31, 1994. . . . . . 39,000
Granted ($8.375 - $9.125 per share). . . 19,000
Exercised. . . . . . . . . . . . . . . . --
Forfeited. . . . . . . . . . . . . . . . --
---------
Outstanding at December 31, 1995. . . . . . 58,000
=========
Exercisable at December 31, 1995. . . . . . 34,500
=========
9. COMMITMENTS AND CONTINGENCIES
The Company is routinely involved in litigation incidental to its
business, which often involves claims for significant monetary amounts, some of
which would not be covered by insurance. In the opinion of management, none
of the existing litigation will have any material adverse effect on the
Company's financial position or results of operations.
The Company is self-insured with respect to physical damage or loss to
its domestic vehicles, land rigs, and equipment (except for thirteen of its
largest domestic rigs). Thirteen of the Company's largest domestic land rigs
and all of the Company's international land rigs are insured, with deductibles
of generally $25,000 per occurrence. The Company's offshore platform rigs and
barge rigs are insured with deductibles of $50,000 and $150,000, respectively.
Presently, the Company has insurance deductibles of $250,000 per occurrence for
domestic workers' compensation claims, $100,000 per occurrence for domestic
automobile liability claims, and $100,000 for general liability claims. The
Company further limits its exposure by maintaining an accident and health
insurance policy with respect to its domestic employees with a deductible of
$10,000 per occurrence. Coverages with respect to foreign operations for
workers' compensation and automobile claims are subject to deductibles of
$40,000 to $100,000 per occurrence.
In July 1995, one of the Company's domestic land rigs was destroyed in an
explosion and fire. The damaged rig was covered by insurance and the Company
received net insurance proceeds, after repurchasing the salvage, of $1,094,000.
The Company recognized a gain from the insurance recovery of $1,049,000 which
is included in other income in the accompanying consolidated statement of
operations.
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
As of December 31, 1995 and 1994, the Company had accrued approximately
$7,249,000 and $11,111,000, respectively for estimated claims liabilities, of
which $3,940,000 and $6,047,000, respectively, was included in current
liabilities and $3,309,000 and $5,064,000, respectively, was reflected as other
long-term liabilities in the accompanying balance sheet.
As of December 31, 1995, the Company had letters of credit outstanding
totaling $11,397,000. These letters of credit guarantee principally the
funding of the Company's share of insured claims. Cash and cash equivalents
and a portion of accounts receivable have been pledged as security for these
letters of credit. The credit facility provides flexibility to reduce the
pledge of cash and cash equivalents by pledging additional accounts receivable.
Rental expense for equipment, vehicles and various facilities of the
Company for the years ended December 31, 1995, 1994 and 1993 was $9,503,000,
$7,987,000 and $4,505,000, respectively. As of December 31, 1995, future
minimum lease payments for operating leases having initial or remaining
noncancelable lease terms longer than one year are as follows: $218,000 in
1996; $218,000 in 1997; $74,000 in 1998; and none thereafter. The Company
leases vehicles used in its domestic operations under a revolving master lease.
Although any single lease is cancelable by the Company with 60 days notice, the
Company expects to incur this lease expense in increasing amounts for the
foreseeable future. Vehicle lease expense included in the above rental expense
for the years ended December 31, 1995, 1994 and 1993 was $2,218,000, $2,134,000
and $1,809,000, respectively.
10. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Summarized quarterly financial data for 1995 and 1994 are as follows:
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(in thousands, except per share amounts)
1995
Revenues. . . . . . . . . . . . . . $ 62,512 $ 68,856 $ 67,144 $ 65,087
Earnings from operations. . . . . . 5,721 7,081 6,637 6,833
Net earnings. . . . . . . . . . . . 3,012 3,582 4,633 4,132
Earnings per share. . . . . . . . . .12 .14 .18 .16
Weighted average common shares
and equivalents outstanding . . . 24,675 25,496 25,708 25,893
1994
Revenues. . . . . . . . . . . . . . $ 36,805 $ 40,257 $ 50,974 $ 54,300
Earnings from operations. . . . . . 1,264 1,991 1,770 3,003
Net earnings. . . . . . . . . . . . 929 979 1,928 2,378
Earnings per share. . . . . . . . . .06 .06 .08 .10
Weighted average common shares
and equivalents outstanding . . . 16,727 17,537 24,418 24,381
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
11. SUPPLEMENTAL FINANCIAL INFORMATION
OTHER CURRENT ASSETS
Other current assets at December 31, 1995 and 1994 consists of the
following:
DECEMBER 31,
------------------
1995 1994
-------- --------
(in thousands)
Pre-funded construction costs. . . . . . . . . $ -- $ 1,692
Other receivables. . . . . . . . . . . . . . . 1,937 1,382
Prepaid expenses . . . . . . . . . . . . . . . 4,551 3,054
-------- --------
$ 6,488 $ 6,128
======== ========
ACCRUED EXPENSES
Accrued expenses at December 31, 1995 and 1994 consists of the following:
DECEMBER 31,
------------------
1995 1994
-------- --------
(in thousands)
Insurance (excluding the long-term portion
of $3,309 and $5,064, respectively). . . . . $ 3,940 $ 6,047
Payroll. . . . . . . . . . . . . . . . . . . . 6,318 4,149
Taxes, other than income . . . . . . . . . . . 4,186 4,193
Other. . . . . . . . . . . . . . . . . . . . . 2,106 943
-------- --------
$ 16,550 $ 15,332
======== ========
CASH FLOW INFORMATION
Cash paid for interest and income taxes during the years ended December
31, 1995, 1994 and 1993 was as follows:
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994 1993
------- ------- -------
(in thousands)
Cash paid during the year for:
Interest. . . . . . . . . . . . . . . . $ 4,316 $ 623 $ 10
Income taxes - U.S. . . . . . . . . . . 500 1,893 2
Income taxes - foreign. . . . . . . . . 16 28 871
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
12. FINANCIAL DATA OF DOMESTIC AND INTERNATIONAL OPERATIONS
The following table sets forth certain consolidated information with
respect to the Company and its subsidiaries by operating segment:
DOMESTIC DOMESTIC
LAND OFFSHORE INTERNATIONAL TOTAL
--------- --------- --------- ---------
(in thousands)
1995
------
Revenues. . . . . . . . . . . . $ 113,115 $ 49,595 $ 100,889 $ 263,599
Earnings from operations. . . . 6,857 6,785 12,630 26,272
Identifiable assets . . . . . . 77,243 50,978 129,384 257,605
Capital expenditures,
including acquisitions. . . . 14,502 15,066 28,940 58,508
Depreciation and amortization . 5,578 3,091 7,988 16,657
1994
------
Revenues. . . . . . . . . . . . $ 95,860 $ 23,441 $ 63,035 $ 182,336
Earnings from operations. . . . 1,184 3,304 3,540 8,028
Identifiable assets . . . . . . 64,740 46,693 93,760 205,193
Capital expenditures,
including acquisitions. . . . 3,062 34,617 48,987 86,666
Depreciation and amortization . 5,085 1,056 3,409 9,550
1993
------
Revenues. . . . . . . . . . . . $ 105,865 $ -- $ 21,234 $ 127,099
Earnings from operations. . . . 1,307 -- 1,508 2,815
Identifiable assets . . . . . . 78,607 -- 31,374 109,981
Capital expenditures,
including acquisitions. . . . 2,435 -- 21,408 23,843
Depreciation and amortization . 5,241 -- 1,166 6,407
PRIDE PETROLEUM SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following table sets forth certain information with respect to the
Company and its subsidiaries by geographic area:
RUSSIA
NORTH SOUTH AND
AMERICA AMERICA OTHER TOTAL
--------- --------- --------- ---------
(in thousands)
1995
------
Revenues. . . . . . . . . . . . $ 162,710 $ 98,382 $ 2,507 $ 263,599
Earnings from operations. . . . 13,642 12,448 182 26,272
Identifiable assets . . . . . . 128,221 125,939 3,445 257,605
Capital expenditures. . . . . . 29,568 28,940 -- 58,508
Depreciation and amortization . 8,669 7,611 377 16,657
1994
------
Revenues. . . . . . . . . . . . $ 119,301 $ 62,430 $ 605 $ 182,336
Earnings (loss) from operations 4,488 4,712 (1,172) 8,028
Identifiable assets . . . . . . 111,433 90,195 3,565 205,193
Capital expenditures. . . . . . 37,679 48,922 65 86,666
Depreciation and amortization . 6,141 3,216 193 9,550
1993
------
Revenues. . . . . . . . . . . . $ 105,865 $ 18,625 $ 2,609 $ 127,099
Earnings from operations. . . . 1,307 1,046 462 2,815
Identifiable assets . . . . . . 78,607 28,461 2,913 109,981
Capital expenditures. . . . . . 2,435 20,953 455 23,843
Depreciation and amortization . 5,241 927 239 6,407
One customer accounted for approximately 17% and 18% of consolidated
revenues during 1995 and 1994, respectively, representing 69% and 67%,
respectively, of revenues from operations in Argentina during those years.
Another customer accounted for approximately 54% and 40%, respectively, of
revenues from domestic offshore operations during such periods. Revenues from
such customer and its affiliates from both land-based and offshore operations
accounted for approximately 13% and 18% of consolidated revenues during 1995
and 1994, respectively. During 1993, no customer accounted for more than 10%
of consolidated revenues.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There have been no changes in or disagreements with the Company's
independent accountants regarding accounting and financial disclosure matters.
PART III
ITEM 10. Directors and Executive Officers
The information required by this item is incorporated by reference to the
Company's definitive proxy statement which is to be filed with the Commission
pursuant to the Securities Exchange Act of 1934 within 120 days of the end of
the Company's fiscal year on December 31, 1995.
Certain information with respect to the executive officers of the Company
is set forth under the caption "Executive Officers of the Registrant" in Part I
of this report.
ITEM 11. Executive Compensation and Transactions
The information required by this item is incorporated by reference to the
Company's definitive proxy statement which is to be filed with the Commission
pursuant to the Securities Exchange Act of 1934 within 120 days of the end of
the Company's fiscal year on December 31, 1995.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated by reference to the
Company's definitive proxy statement which is to be filed with the Commission
pursuant to the Securities Exchange Act of 1934 within 120 days of the end of
the Company's fiscal year on December 31, 1995.
ITEM 13. Certain Relationships and Related Transactions
The information required by this item is incorporated by reference to the
Company's definitive proxy statement which is to be filed with the Commission
pursuant to the Securities Exchange Act of 1934 within 120 days of the end of
the Company's fiscal year on December 31, 1995.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are included as part of this report:
(1) Financial Statements:
Page
----
Report of Independent Accountants . . . . . . . . . . . . . . . 23
Consolidated Balance Sheet -
December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . 24
Consolidated Statement of Operations -
Years ended December 31, 1995, 1994 and 1993 . . . . . . . . 25
Consolidated Statement of Changes in Shareholders' Equity -
Years ended December 31, 1995, 1994 and 1993 . . . . . . . . 26
Consolidated Statement of Cash Flows -
Years ended December 31, 1995, 1994 and 1993 . . . . . . . . 27
Notes to Consolidated Financial Statements. . . . . . . . . . . 28
PAGE
----
(2) Financial Statement Schedules:
Report of Independent Accountants . . . . . . . . . . . . . . . 47
Schedule II - Valuation and Qualifying Accounts . . . . . . . 48
Financial statement schedules other than those listed have been omitted
as they are not applicable, or the information required thereby is included in
the consolidated financial statements or notes thereto included in this report.
(3) Exhibits:
Exhibit No. Description
- ----------- -----------
3.1 - Restated Articles of Incorporation of Pride Petroleum Services,
Inc. (incorporated by reference to Exhibit 3(a) to the Company's
Registration Statement on Form S-1 dated January 29, 1990, File
No. 33-33233).
3.2 - Amendment to Restated Articles of Incorporation (incorporated by
reference to Exhibit 4.2 to the Company's Registration Statement
on Form S-3 dated June 13, 1994, File No. 33-76310).
3.3 - By-Laws of Pride Petroleum Services, Inc. (incorporated by
reference to Exhibit 3(b) to the Company's Registration Statement
on Form S-1 dated January 29, 1990, File No. 33-33233).
4.1 - Form of Common Stock Certificate (incorporated by reference to
Exhibit 4(b) to the Company's Registration Statement on Form S-1
dated January 29, 1990, File No.33-33233).
4.2 - Sale and Financing Contract for Lake Maracaibo Drilling Barge
dated November 30, 1994, by and between Perforaciones Western,
C.A., Nittetsu Shoji Co., Ltd. and Marubeni Corporation
(incorporated by reference to Exhibit 4.2 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, File
No. 0-16961).
4.3 - Supplemental, Amended and Restated Agented Multiple Lender Loan
Agreement dated February 9, 1995, by and between Pride Offshore,
Inc., Pride Petroleum Services, Inc. and First National Bank of
Commerce, The CIT Group/Equipment Financing, Inc., ArgentBank
(incorporated by reference to Exhibit 4.3 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, File
No. 0-16961).
*4.4 - Indenture dated as of January 26, 1996 by and between Pride
Petroleum Services, Inc. and Marine Midland Bank, as Trustee,
relating to $80,500,000 principal amount of 6 1/4% Convertible
Subordinated Debentures due 2006.
The Company is a party to several debt instruments under which
the total amount of securites authorized does not exceed 10% of
the total assets of the Company and its subsidiaries on a
consolidated basis. Pursuant to paragraph 4(iii)(A) of Item
601(b) of Regulation S-K, the Company agrees to furnish a copy of
such instruments to the Commission upon request.
10.1+ - Form of Indemnity Agreement between Pride Petroleum Services,
Inc. and certain executive officers and directors (incorporated
by reference to Exhibit 10(g) to the Company's Registration
Statement on Form S-1 dated January 29, 1990, File No. 33-33233).
10.2+ - Pride Petroleum Services, Inc Long-Term Incentive Plan
(incorporated by reference to Exhibit 10(h) to the Company's
Registration Statement on Form S-1 dated January 29, 1990, File
No. 33-33233).
10.3+ - Pride Petroleum Services, Inc. Salary Deferral Plan (incorporated
by reference to Exhibit 10(i) to the Company's Registration
Statement on Form S-1 dated January 29, 1990, File No. 33-33233).
10.4+ - Summary of Pride Petroleum Services, Inc. Group Life Insurance
and Accidental Death and Dismemberment Insurance (incorporated by
reference to Exhibit 10(j) to the Company's Registration
Statement on Form S-1 dated January 29, 1990, File No. 33-33233).
10.5+ - Pride Petroleum Services, Inc. 1993 Directors' Stock Option Plan
(incorporated by reference to Exhibit 10(j) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992,
File No. 0-16961).
10.6+ - Pride Petroleum Services, Inc. 401(k) Restoration Plan
(incorporated by reference to Exhibit 10(k) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993,
File No. 0-16961).
10.7 - Asset Purchase Agreement for the Purchase and Sale of All the
Assets of Offshore Rigs, L.L.C. dated March 7, 1994 (incorporated
by reference to Exhibit 2 to the Company's Registration Statement
on Form S-3 dated March 10, 1994, File No. 33-76310).
10.8 - Well Drilling and/or Reconditioning Agreement dated May 1, 1994,
by and between Lagoven, S.A. and Perforaciones Western, C.A
(incorporated by reference to Exhibit 10.8 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994,
File No. 0-16961).
10.9+ - Employment/Non-Competition/Confidentiality Agreement dated August
26, 1994, between Pride Petroleum Services, Inc. and Ray H.
Tolson (incorporated by reference to Exhibit No. 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1994, File No. 0-16961).
10.10+ - Employment/Non-Competition/Confidentiality Agreement dated August
26, 1994, between Pride Petroleum Services, Inc. and Paul A.
Bragg (incorporated by reference to Exhibit No. 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1994, File No. 0-16961).
10.11+ - Employment/Non-Competition/Confidentiality Agreement dated August
26, 1994, between Pride Petroleum Services, Inc. and James W.
Allen (incorporated by reference to Exhibit No. 10.3 to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1994, File No. 0-16961).
10.12+ - Employment/Non-Competition/Confidentiality Agreement dated August
26, 1994, between Pride Petroleum Services, Inc. and Dexter R.
Polk (incorporated by reference to Exhibit No. 10.4 to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1994, File No. 0-16961).
10.13 - Agreement dated as of June 13, 1995 between Pride Petroleum
Services, Inc. and Financial Overseas Management, S.A.
(incorporated by reference to Exhibit No. 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1995, File No. 0-16961).
10.14 - Stock Purchase Agreement dated March 22, 1995 by and among
Raymond H. Eaves and Billy B. Cooper and Pride Petroleum
Services, Inc. (incorporated by reference to Exhibit No. 2 to the
Company's Current Report on Form 8-K dated March 22, 1995, File
No. 0-16961).
*21 - Subsidiaries of Pride Petroleum Services, Inc.
*23 - Consent of Independent Accountants
- ------------
* Filed herewith.
+ Compensatory plan or arrangement.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter ended
December 31, 1995.
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.
PRIDE PETROLEUM SERVICES, INC.
Date: February 26, 1996 By: RAY H. TOLSON
-----------------------------------
(Ray H. Tolson)
President, Chief Executive Officer
and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
RAY H. TOLSON President, Chief Executive Officer February 26, 1996
- ------------------------ and Chairman of the Board
(Ray H. Tolson) (Principal Executive Officer)
PAUL A. BRAGG Vice President and February 26, 1996
- ------------------------ Chief Financial Officer
(Paul A. Bragg) (Principal Financial Officer)
EARL W. MCNIEL Chief Accounting Officer February 26, 1996
- ------------------------ (Principal Accounting Officer)
(Earl W. McNiel)
JAMES B. CLEMENT Director February 26, 1996
- ------------------------
(James B. Clement)
JORGE E. ESTRADA M. Director February 26, 1996
- ------------------------
(Jorge E. Estrada M.)
RALPH D. MCBRIDE Director February 26, 1996
- ------------------------
(Ralph D. McBride)
THOMAS H. ROBERTS, JR. Director February 26, 1996
- ------------------------
(Thomas H. Roberts, Jr.)
JAMES T. SNEED Director February 26, 1996
- ------------------------
(James T. Sneed)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Pride Petroleum Sevices,
Inc.:
Our report on the consolidated financial statements of Pride Petroleum
Services, Inc. is included on page 23 of this Form 10-K. In connection with
our audits of such financial statements, we have also audited the related
financial statement schedule listed in the index on page 44 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Houston, Texas
February 26, 1996
SCHEDULE II
PRIDE PETROLEUM SERVICES, INC.
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1995, 1994 and 1993
(in thousands)
==============================================================================
CHARGED
BALANCE AT TO COSTS BALANCE
BEGINNING AND AT END
OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ------------------------------------------------------------------------------
Allowance for Doubtful Accounts:
1995. . . . . . . . . . . . . . $ 394 $ 174 $ 142 $ 426
===== ===== ===== =====
1994. . . . . . . . . . . . . . $ 811 $ -- $ 417 $ 394
===== ===== ===== =====
1993. . . . . . . . . . . . . . $ 992 $ 116 $ 297 $ 811
===== ===== ===== =====