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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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Form 10-Q
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED DECEMBER 31, 2003
COMMISSION FILE NUMBER 1-13167
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
ATWOOD OCEANICS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1611874
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
15835 Park Ten Place Drive 77084
Houston, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
281-749-7800
---------------
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 and (2) has been subject to such filings
requirements for the past 90 days. Yes X No___
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.) Yes X No __.
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of January 31, 2004: 13,852,301 shares of common stock $1
par value
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ATWOOD OCEANICS, INC.
FORM 10-Q
For the Quarter Ended December 31, 2003
INDEX
Part I. Financial Information
Item 1. Unaudited Condensed Consolidated Financial Statements Page
a) Condensed Consolidated Statement of Operations
For the Three Months Ended December 31, 2003 and 2002............4
b) Condensed Consolidated Balance Sheets
As of December 31, 2003 and September 30, 2003...................5
c) Condensed Consolidated Statements of Cash Flows
For the Three Months Ended December 31, 2003 and 2002............7
d) Notes to Condensed Consolidated Financial Statements...................8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................12
Item 3. Quantitative and Qualitative Disclosures about Market Risk......16
Item 4. Controls and Procedures.........................................16
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K................................18
Signature...................................................................20
Certifications..............................................................22
PART I. FINANCIAL INFORMATION
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
This Form 10-Q for the quarterly period ended December 31, 2003 includes
"forwarding-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended. All statements other than statements of
historical facts included in this Form 10-Q regarding our financial position,
business strategy, budgets and plans and objectives for future operations are
forward-looking statements. These forward-looking statements involve risks and
uncertainties that may cause our actual future activities and results of
operation to be materially different from those suggested or described in the
Form 10-Q.
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended
December 31,
------------------------------------
2003 2002
----------- -----------
(Unaudited)
REVENUES:
Contract drilling $35,325 $29,841
------- -------
COSTS AND EXPENSES:
Contract drilling 22,533 19,345
Depreciation 7,842 5,392
General and administrative 2,688 2,680
-------- ------
33,063 27,417
-------- ------
OPERATING INCOME 2,262 2,424
-------- ------
OTHER INCOME (EXPENSE)
Interest expense (2,334) (113)
Interest income 8 63
-------- ------
(2,326) (50)
-------- ------
INCOME (LOSS) BEFORE INCOME TAXES (64) 2,374
PROVISION FOR INCOME TAXES 1,840 1,424
-------- ------
NET INCOME (LOSS) $ (1,904) $ 950
======== ======
EARNINGS (LOSS) PER COMMON SHARE:
Basic $ (.14) $ .07
Diluted (.14) .07
AVERAGE COMMON SHARES OUTSTANDING:
Basic 13,852 13,845
Diluted 13,852 13,912
The accompanying notes are an integral part of these condensed consolidated
financial statements.
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, September 30,
2003 2003
-------------- --------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 19,253 $21,551
Accounts receivable 20,779 30,864
Income tax receivable 3,278 3,278
Inventories of materials and supplies,
at lower of average cost or market 12,076 12,583
Deferred tax assets 550 550
Prepaid expenses and other 6,410 7,186
------- -----
Total Current Assets 62,346 76,012
------- ------
NET PROPERTY AND EQUIPMENT 435,901 443,102
------- -------
DEFERRED COSTS AND OTHER ASSETS 3,761 3,560
------- -------
$502,008 $522,674
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, September 30,
2003 2003
------------------- -----------------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 27,000 $ 24,000
Accounts payable 3,747 10,403
Accrued liabilities 8,530 8,851
Deferred credits 1,500 6,695
-------- --------
Total Current Liabilities 40,777 49,949
-------- --------
LONG-TERM DEBT, net of current maturities: 172,000 181,000
-------- --------
OTHER LONG-TERM LIABILITIES:
Deferred income taxes 20,618 21,217
Deferred credits and other 7,041 7,041
---------- --------
27,659 28,258
SHAREHOLDERS' EQUITY:
Preferred stock, no par value;
1,000,000 shares authorized, none outstanding
Common stock, $1 par value; --- ---
20,000,000 shares authorized with 13,852,000
and 13,851,000 shares
issued and outstanding at December 31, 2003
and September 30, 2003,
respectively
Paid-in-capital 13,852 13,851
Retained earnings 57,412 57,404
Total Shareholders' Equity 190,308 192,212
-------- --------
261,572 263,467
-------- --------
$502,008 $522,674
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended December 31,
-------------------------------------
2003 2002
------------- --------------------
(Unaudited)
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income (loss) ($1,904) $ 950
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation 7,842 5,392
Amortization of debt issuance costs 165 72
Amortization of deferred items 63 34
Deferred income tax provision (benefit) (600) 450
Changes in assets and liabilities:
Decrease in accounts receivable 10,085 1,850
Decrease in inventory 507 152
Increase in deferred costs and other assets (83) (4,505)
Increase (decrease) in accounts payable (6,656) 111
Decrease in accrued liabilities (321) (574)
Net mobilization fees and credits (5,327) 774
Other increases 907 1,816
------- -------
6,582 5,572
------- -------
Net cash provided by operating activities 4,678 6,522
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (647) (35,694)
Other 6 90
------- -------
Net cash used by investing activities (641) (35,604)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceed from the exercises of stock options 8 ---
Debt issuance costs paid (343) (531)
Proceeds from credit facilities --- 20,000
Principal payments on debt (6,000) (1,811)
------- -------
Net cash provided (used) by financing activities (6,335) 17,658
------- -------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (2,298) (11,424)
CASH AND CASH EQUIVALENTS, at beginning of period 21,551 27,055
-------- --------
CASH AND CASH EQUIVALENTS, at end of period $ 19,253 $ 15,631
-------- --------
- ---------------------------
Supplemental disclosure of cash flow information:
Cash paid during the quarter for domestic
and foreign income taxes $ 1,556 $ 1,737
======== ========
Cash paid during the quarter for interest,
net of amounts capitalized $ 2,357 $ ---
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
PART I. ITEM 1 - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. UNAUDITED INTERIM INFORMATION
The unaudited interim condensed consolidated financial statements as of
December 31, 2003 and for each of the three month periods ended December 31,
2003 and 2002, included herein, have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and with the instructions for Form 10-Q and Article 10 of
Regulation S-X. The yearend condensed consolidated balance sheet data was
derived from the audited financial statements as of September 30, 2003. Although
these financial statements and related information have been prepared without
audit, and certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted, we believe that the note disclosures
are adequate to make the information not misleading. The interim financial
results may not be indicative of results that could be expected for a full year.
It is suggested that these condensed consolidated financial statements be read
in conjunction with the consolidated financial statements and the notes thereto
included in our Annual Report to Shareholders for the year ended September 30,
2003. In our opinion, the unaudited interim financial statements reflect all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation of the financial position and results of operations of
our Company for the periods presented.
2. SIGNIFICANT ACCOUNTING POLICIES
We apply the recognition and measurement principles of APB Opinion No. 25
"Accounting for Stock Issued to Employees", and related interpretations.
Accordingly, no compensation costs have been recognized in net income (loss)
from the granting of options pursuant to our stock option plans, as all options
granted under those plans had an exercise price equal to the market value of the
underlying common stock on the date of grant. We do not intend to adopt the fair
value based method of stock-based compensation. Had compensation costs been
determined based on the fair value at the grant dates consistent with the method
of SFAS No. 123, our net income (loss) and earnings (loss) per share would have
been reduced to the pro forma amounts indicated below (in thousands, except for
per share amounts):
Three Months Ended
December 31,
------------------------
2003 2002
------ ------
Net income (loss), as reported $(1,904) $ 950
-------
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all
awards, net of related tax effects (625) (538)
------- ------
Pro Forma, net income $(2,529) $ 412
======== ======
Earnings (loss) per share:
Basic - as reported $ (.14) $ .07
Basic - pro forma $ (.18) $ .03
Diluted - as reported $ (.14) $ .07
Diluted - pro forma $ (.18) $ .03
3. EARNINGS (LOSS) PER COMMON SHARE
The computation of basic and diluted earnings (loss) per share is as
follows (in thousands, except per share amounts):
Three Months Ended
Per Share
Net Income Shares Amount
---------- ------ ---------
December 31, 2003:
Basic loss per share ($1,904) 13,852 ($ .14)
Effect of dilutive securities -
Stock options --- --- ---
-------- ------ -----
Diluted loss per share ($1,904) 13,852 ($ .14)
======== ====== =======
December 31, 2002:
Basic earnings per share $ 950 13,845 $ .07
Effect of dilutive securities -
Stock options --- 67 ---
-------- ------- ------
Diluted earnings per share $ 950 13,912 $ .07
======== ======= ======
4. PROPERTY AND EQUIPMENT
A summary of property and equipment by classification is as follows (in
thousands):
December 31, September 30,
2003 2003
----------- -------------
Drilling vessels and related equipment
Cost $ 619,241 $ 618,943
Accumulated depreciation (189,253) (181,924)
--------- ---------
429,988 437,019
--------- ---------
Drill pipe
Cost 10,555 10,224
Accumulated depreciation (6,350) (6,010)
--------- ---------
Net book value 4,205 4,214
--------- ---------
Furniture and other
Cost 9,079 9,072
Accumulated depreciation (7,371) (7,203)
--------- --------
Net book value 1,708 1,869
--------- --------
NET PROPERTY AND EQUIPMENT $ 435,901 $ 443,102
========= =========
Effective October 1, 2003, we extended the remaining depreciable life of
the RICHMOND from 2 to 5 years, due to our recent assessment of the rig's
commercial viability, coupled with our intent to continue marketing and
operating the rig beyond 2 years. We believe that this change in depreciable
life provides a better matching of the revenues and expenses of this asset over
its anticipated remaining useful life. As a result of this change in depreciable
life, depreciation expense for the quarter ended December 31, 2003 was reduced
by approximately $200,000 which reduced net loss per share by approximately
$.01.
5. LONG-TERM DEBT
In November 2003, the $250 million Senior Secured Credit Facility was
amended to redefine the calculation of the ratio of outstanding debt to
earnings, before interest, income taxes and depreciation. The amendment
increased the permitted ratio levels from 5.75 to 6.25 at December 31, 2003
through and including March 30, 2004, reducing to 5.50 at March 31, 2004 through
and including September 29, 2004, 4.00 at September 30, 2004 through and
including December 30, 2004 and 3.00 thereafter. On an as amended basis, we are
in compliance with all financial covenants at December 31, 2003.
6. COMMITMENTS AND CONTINGENCIES
We are party to a number of lawsuits which are ordinary, routine litigation
incidental to our business, the outcome of which, individually, or in the
aggregate, is not expected to have a material adverse effect on our financial
position or results of operations.
7. INCOME TAXES
Virtually all of our tax provision for the three months ended December 31,
2003 and 2002 relates to taxes in foreign jurisdiction. Due to the operating
loss in the United States, in addition to operating losses in certain nontaxable
jurisdictions, our effective tax rate for fiscal year 2004 is expected to exceed
the United States statutory rate.
PART I. ITEM 2
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
All non-historical information set forth herein is based upon expectations
and assumptions we deemed reasonable. We can give no assurance that such
expectations and assumptions will prove to be correct, and actual results could
differ materially from the information presented herein. Our periodic reports
filed with the SEC should be consulted for a description of risk factors
associated with an investment in our Company.
MARKET OUTLOOK
Worldwide utilization of offshore drilling units continues to remain in the
high -70% to low - 80% range. The continuing disconnect between relatively high
commodity prices and soft market conditions continues to reflect increased
conservatism by exploration and production companies due to a number of factors
including weak capital markets, increased focus on reducing debt, and a host of
geopolitical uncertainties (for example, those in Iraq, Venezuela and Nigeria),
which continue to curtail drilling. Semisubmersible utilization remains the
weakest sector of the drilling market, while utilization of jack-up drilling
units remains as one of the stronger sectors of the market mainly as a result of
increased demand in the Gulf of Mexico, Asia Pacific and Mexico. Despite
incurring a net loss in the first quarter of fiscal year 2004, based upon
current contract commitments and opportunities, we currently expect to be
profitable for fiscal year 2004. We will continue to emphasize utilization over
higher dayrates.
During the quarter ended December 31, 2003 (excluding mobilization
periods), the ATWOOD EAGLE, ATWOOD SOUTHERN CROSS, ATWOOD HUNTER and SEAHAWK had
idle revenue days of 38, 21, 16 and 14, respectively. The ATWOOD EAGLE is
currently being mobilized to Australia, with expected arrival in mid-February
2004 and commencement of drilling operations around March 1, 2004. The ATWOOD
SOUTHERN CROSS is currently idle in India; however, we expect the rig will
return to work sometime in March 2004. At the end of December 2003, the ATWOOD
HUNTER commenced a one year contract off the coast of Egypt. The SEAHAWK, after
incurring a mooring equipment problem, returned to work in early January 2004
under its contract in Malaysia. The ATWOOD FALCON, VICKSBURG, ATWOOD BEACON and
RICHMOND were fully utilized during the first quarter of fiscal year 2004 and
are expected to remain highly utilized during the remainder of fiscal year 2004.
In fiscal year 2003, we incurred significant expense relating to
mobilization costs. In fiscal year 2004, the relocation of the ATWOOD SOUTHERN
CROSS from the Mediterranean to India and the ATWOOD FALCON from Malaysia to
Japan have been fully funded by our clients. The current relocation of the
ATWOOD EAGLE from West Africa to Australia is also expected to be fully funded
by the client.
We remain optimistic about the longer-term outlook and fundamentals of the
offshore drilling market. If the ATWOOD SOUTHERN CROSS returns to work in March
2004, as currently expected, we anticipate that our operating results for the
second quarter of fiscal year 2004 will be at a breakeven level and that we
should return to profitable operations during the second half of fiscal year
2004. With the operations of our seven upgraded drilling units plus the newly
constructed jack-up drilling unit, the ATWOOD BEACON, we believe that we are
well positioned, in an improving market environment, for increases in earnings
and cash flows.
RESULTS OF OPERATIONS
Contract drilling revenues for the three months ended December 31, 2003
increased 18% compared to the three months ended December 31, 2002. A
comparative analysis of contract drilling revenues is as follows:
CONTRACT DRILLING REVENUES
(In millions)
------------------------------------------------------
Three Months Ended December 31,
------------------------------------------------------
2003 2002 Variance
-------- --------- ---------
ATWOOD EAGLE $ 4.7 $ 0.0 $ 4.7
ATWOOD BEACON 4.4 0.0 4.4
ATWOOD SOUTHERN CROSS 3.9 2.3 1.6
RICHMOND 2.2 2.0 0.2
SEAHAWK 5.2 5.3 (0.1)
VICKSBURG 5.8 6.4 (0.6)
ATWOOD FALCON 6.0 6.9 (0.9)
ATWOOD HUNTER 2.7 6.4 (3.7)
OTHER 0.4 0.5 (0.1)
----- ----- -----
$35.3 $29.8 $ 5.5
===== ===== =====
The ATWOOD EAGLE completed its $90 million upgrade and was relocating to
Angola during the first quarter of the prior fiscal year; and the ATWOOD BEACON
was under construction thus, both rigs generated no revenue versus a full
quarter of revenues generated during the current quarter. The ATWOOD SOUTHERN
CROSS received a $3 million mobilization payment to relocate to India and worked
for approximately one month at $30,000 per day during the current quarter
compared to working approximately 40 days in the prior year quarter at $60,000
per day. Even though the SEAHAWK incurred 14 idle revenue days in the current
quarter as previously stated, contract revenues were comparable to the first
quarter of the prior fiscal year as this rig incurred 11 idle revenue days for
repairs and maintenance. The VICKSBURG experienced 50 days of weather and
standby time during the current quarter at a reduced dayrate approximately
$10,000 per day lower than the full operating rate compared to operating at its
full operating rate for the entire first quarter in the prior fiscal year. The
average dayrate for the ATWOOD FALCON decreased from $95,000 during the first
quarter of the prior fiscal year to $83,000 during the first quarter of the
current fiscal year as the rig worked in Australia at a rate of $109,000 for
part of the quarter in the prior fiscal year. The decrease in revenue for the
ATWOOD HUNTER is due to the rig working a full quarter at an average dayrate of
$70,000 during the first quarter of fiscal year 2003 compared to working two
months at an average dayrate of $40,000 during the first quarter of fiscal year
2004.
Contract drilling costs for the three months ended December 31, 2003 increased
17% compared to the three months ended December 31, 2002. An analysis of
contract drilling costs by rig is as follows:
CONTRACT DRILLING COSTS
CONTRACT DRILLING COSTS
(In millions)
---------------------------------------------------
Three Months Ended December 31,
---------------------------------------------------
2003 2002 Variance
--------- --------- ---------
ATWOOD EAGLE $3.8 $0.0 $ 3.8
ATWOOD BEACON 3.3 0.0 2.2
ATWOOD SOUTHERN CROSS 4.4 3.8 0.6
RICHMOND 1.9 2.0 (0.1)
SEAHAWK 2.1 2.4 (0.3)
VICKSBURG 2.2 2.5 (0.3)
ATWOOD HUNTER 2.9 3.5 (0.6)
ATWOOD FALCON 2.4 4.1 (1.7)
OTHER 0.6 1.0 (0.4)
----- ----- ------
$22.5 $19.3 $ 3.2
===== ===== ======
Due to the ATWOOD EAGLE completing its $90 million upgrade and being
relocated to Angola and the ATWOOD BEACON being under construction during the
first quarter of the prior fiscal year, neither rig incurred any operating costs
during the first quarter of fiscal year 2003 compared to a full quarter of
operations during fiscal year 2004. The increase in operating costs for the
ATWOOD SOUTHERN CROSS is primarily due to the rig incurring $1.6 million in boat
towing costs to relocate to India during the current quarter partially offset by
higher operating costs of approximately $10,000 per day in the first quarter of
prior fiscal year due to operating in Italy. The decrease in operating costs for
the SEAHAWK and VICKSBURG is primarily due to lower repair and maintenance costs
compared to the first quarter of the prior fiscal year. Operating costs for the
ATWOOD HUNTER decreased due to the prior year quarter having amortization of
mobilization expenses related to its relocation to the Mediterranean. Drilling
costs decreased on the ATWOOD FALCON due to the rig operating in Australia for
40 days in the first quarter of the prior fiscal year at approximately $25,000
per day higher operating costs than in Malaysia. Additionally, the rig was being
relocated to Japan the last 20 days of the first fiscal quarter of 2004, and no
operating costs were recognized during this period as such mobilization costs
were capitalized and will be amortized over the expected term of the Japan
contract.
An analysis of depreciation expense by rig for the three months ended December
31, 2003 compared to the three months ended December 31, 2002 is as follows:
DEPRECIATION EXPENSE
(In millions)
--------------------------------------------
Three Months Ended December 31,
--------------------------------------------
2003 2002 Variance
-------- --------- -----------
ATWOOD EAGLE $ 1.3 $ 0.0 $ 1.3
ATWOOD BEACON 1.3 0.0 1.3
ATWOOD FALCON 0.7 0.6 0.1
VICKSBURG 0.7 0.6 0.1
ATWOOD SOUTHERN CROSS 1.0 1.0 0.0
SEAHAWK 1.2 1.2 0.0
ATWOOD HUNTER 1.3 1.4 (0.1)
RICHMOND 0.2 0.4 (0.2)
OTHER 0.1 0.2 (0.1)
--- --- ------
$7.8 $5.4 $ 2.4
==== ==== =====
We do not recognize depreciation expense during the period a rig is out of
service for a significant upgrade or construction, which accounts for the
increase in depreciation expense for the ATWOOD EAGLE and ATWOOD BEACON. The
decrease in depreciation expense for the RICHMOND is due to extending the
remaining depreciable life of the rig from 2 to 5 years at the beginning of the
current year fiscal quarter.
The approximate $2.3 million increase in net interest expense is due to an
increase in the average amount of debt outstanding for the quarter ended
December 31, 2003 compared to the quarter ended December 31, 2002. Additionally,
we capitalized no interest during the quarter ended December 31, 2003 as a
result of the completion of our upgrade program and construction of the ATWOOD
BEACON during fiscal year 2003 as compared to having $1.2 million of capitalized
interest for the quarter ended December 31, 2002.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of fiscal year 2004, we utilized $1.9 million of
cash on hand at the beginning of the quarter plus $4.7 million net cash provided
by operating activities during the quarter to repay $6 million of long-term debt
and finance $0.6 million of capital expenditures.
With the completion of the ATWOOD EAGLE upgrade and ATWOOD BEACON
construction, we have completed our $460 million fleet upgrade and construction
program that commenced in 1997 on time and within cost estimates. We presently
have no plans to incur any upgrade costs or other significant capital projects
during fiscal year 2004 other than planned capital maintenance items of
approximately $5 -10 million. Including the $24 million required principal
payments on our long-term debt, we feel that our expected net cash provided by
operating activities of approximately $30-35 million will adequately meet these
forecasted cash requirements for fiscal year 2004.
In November 2003, the $250 million Senior Secured Credit Facility was
amended to redefine the calculation of the ratio of outstanding debt to
earnings, before interest, income taxes and depreciation. The amendment also
increased the permitted ratio levels from 5.75 to 6.25 at December 31, 2003
through and including March 30, 2004, reducing to 5.50 at March 31, 2004 through
and including September 29, 2004, 4.00 at September 30, 2004 through and
including December 30, 2004 and 3.00 thereafter. On an as-amended basis, we are
in compliance with all financial covenants at December 31, 2003. The bank
group's collateral for the credit agreement consists primarily of preferred
mortgages on all of our active drilling fleet. Currently, we have an additional
$45 million of borrowing capacity under our current credit facilities, which as
mentioned previously, should not be needed for general operating purposes if we
maintain a high utilization of our drilling equipment. We will continue to
periodically review and adjust our planned capital expenditures and financing of
such expenditures in light of the current market conditions as previously
discussed herein.
PART I. ITEM 3
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk, including adverse change in interest rates
and foreign currency exchange rates as discussed below.
INTEREST RATE RISK
With the interest rate on our long-term debt under our current credit
facilities at a floating rate, the outstanding long-term debt of $199 million at
December 31, 2003 approximates its fair value. The impact on annual cash flow of
a 10% change in the floating rate (approximately 40 basis points) would be
approximately $0.8 million. We did not have any open derivative contracts
relating to our floating rate debt at December 31, 2003.
FOREIGN CURRENCY RISK
Certain of our subsidiaries have monetary assets and liabilities that are
denominated in a currency other than their functional currencies. Based on
December 31, 2003 amounts, a decrease in the value of 10% in the foreign
currencies relative to the U.S. dollar from the year-end exchange rates would
result in a foreign currency transaction loss of approximately $0.1 million. We
did not have any open derivative contracts relating to foreign currencies at
December 31, 2003.
PART I. ITEM 4
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and
Chief Financial Officer, evaluated the effectiveness of our disclosure control
and procedures as of the end of the period covered by this report. Based on that
evaluation , the Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures as of the end of the period covered
by this report have been designed and are functioning effectively to provide
reasonable assurance that the information required to be disclosed by us in our
periodic SEC Filing is recorded, process, summarized and reported within the
time periods specified in the SEC's rules and forms. We believe that a controls
system, no matter how well designed and operated, cannot provide absolute
assurance that the objectives of the controls system are met, and no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within a company have been detected.
(b) Change in Internal Control over Financial Reporting
No change in our internal control over financial reporting occurred during
the fiscal quarter covered by this report that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
PART II. OTHER INFORMATION
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1.1 Restated Articles of Incorporation dated January 1972
(Incorporated herein by reference to Exhibit 3.1.1 of our Form
10-K for the year ended September 30, 2002).
3.1.2 Articles of Amendment filed March 1975 (Incorporated herein by
reference to Exhibit 3.1.2 of our Form 10-K for the year ended
September 30, 2002).
3.1.3 Articles of Amendment dated March 1992 (Incorporated herein by
reference to Exhibit 3.1.3 of our Form 10-K for the year ended
September 30, 2002).
3.1.4 Articles of Amendment dated November 1997 (Incorporated herein
by reference to Exhibit 3.1.4 of our Form 10-K for the year
ended September 30, 2002).
3.1.5 Certificate of Designations of Series A Junior Participating
Preferred Stock of Atwood Oceanics, Inc. dated October 17,
2002 (Incorporated herein by reference to Exhibit 3.1.5 of our
Form 10-K for the year ended September 30, 2002).
3.2 Bylaws, as amended and restated, dated January 1993
(Incorporated herein by reference to Exhibit 3.2 of our Form
10-K for the year ended September 30, 1993).
4.1 Rights Agreement dated effective October 18, 2002 between the
Company and Continental Stock & Transfer & Trust Company
(Incorporated herein by reference to Exhibit 4.1 of our Form
8-A filed October 21, 2002).
10.1 Third Amendment to Credit Agreement dated November 12, 2003
between the Company and Nordea Bank Finland plc, and other
Financial Institutions (Incorporated herein by reference to
Exhibit 99.2 of our Form 8-K filed November 13, 2003).
*31.1 Certification of Chief Executive Officer
*31.2 Certification of Chief Financial Officer
*32.1 Certificate of Chief Executive Officer pursuant to Section
906 of Sarbanes - Oxley Act of 2002.
*32.2 Certificate of Chief Financial Officer pursuant to Section
906 of Sarbanes - Oxley Act of 2002.
*Filed herewith
(b) Reports on Form 8-K
1) On October 1, 2003, we furnished a report on Form 8-K announcing
that the ATWOOD EAGLE had completed its contractual work for
ExxonMobil and was preparing to commence a one-well program for
CNR Ranger (Angola) Limited and that the ATWOOD HUNTER was
expected to complete its one-well program in Israel in early
October 2003.
2) On October 6, 2003, we furnished a report on Form 8-K announcing
that the ATWOOD SOUTHERN CROSS had been awarded a contract by
Cairn Energy India Pty. and that the RICHMOND has been awarded two
additional wells by Union Oil Company of California.
3) On October 31, 2003, we furnished a report on Form 8-K announcing
that the ATWOOD HUNTER had been awarded a contract by MP Zarat to
drill one-well offshore Tunisia.
4) On November 13, 2003, we filed a report on Form 8-K announcing
that we had executed a third amendment to our $250 million senior
secured credit facility.
5) On November 18, 2003, we furnished a report on Form 8-K announcing
our earnings for the quarter and year ended September 30, 2003,
along with supporting information.
6) On December 12, 2003, we filed a report on Form 8-K announcing
that the ATWOOD HUNTER had been awarded a contract by Burullus Gas
Company to drill ten firm wells, plus options to drill six
additional wells of the coast of Egypt and that the ATWOOD EAGLE
had commitments from BHP Billition Petroleum and Apache Company
Limited to enter into contracts to drill three firm wells, plus
options for four additional wells, off the coast of Australia.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATWOOD OCEANICS, INC.
(Registrant)
Date: February 11, 2004 /s/JAMES M. HOLLAND
------------------
James M. Holland
Senior Vice President, Chief Financial
Officer and Chief Accounting Officer
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ---------- -------------
3.1.1 Restated Articles of Incorporation dated January 1972
(Incorporated herein by reference to Exhibit 3.1.1 of our Form
10-K for the year ended September 30, 2002).
3.1.2 Articles of Amendment filed March 1975 (Incorporated herein by
reference to Exhibit 3.1.2 of our Form 10-K for the year ended
September 30, 2002).
3.1.3 Articles of Amendment dated March 1992 (Incorporated herein by
reference to Exhibit 3.1.3 of our Form 10-K for the year ended
September 30, 2002).
3.1.4 Articles of Amendment dated November 1997 (Incorporated herein
by reference to Exhibit 3.1.4 of our Form 10-K for the year
ended September 30, 2002).
3.1.5 Certificate of Designations of Series A Junior Participating
Preferred Stock of Atwood Oceanics, Inc. dated October 17,
2002 (Incorporated herein by reference to Exhibit 3.1.5 of our
Form 10-K for the year ended September 30, 2002).
3.2 Bylaws, as amended and restated, dated January 1, 1993
(Incorporated herein by reference to Exhibit 3.2 of our Form
10-K for the year ended September 30, 1993).
4.1 Rights Agreement dated effective October 18, 2002 between the
Company and Continental Stock & Transfer & Trust Company
(Incorporated herein by reference to Exhibit 4.1 of our Form
8-A filed October 21, 2002).
10.1 Third Amendment to Credit Agreement dated November 12, 2003
between the Company and Nordea Bank Finland plc, and other
Financial Institutions (Incorporated herein by reference to
Exhibit 99.2 of our Form 8-K filed November 13, 2003).
*31.1 Certification of Chief Executive Officer
*31.2 Certification of Chief Financial Officer
*32.1 Certificate of Chief Executive Officer pursuant to Section
906 of Sarbanes - Oxley Act of 2002.
*32.2 Certificate of Chief Financial Officer pursuant to Section
906 of Sarbanes - Oxley Act of 2002.
*Filed herewith
EXHIBIT 31.1
CERTIFICATIONS
I, John R. Irwin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Atwood
Oceanics, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for,
the periods presented in this report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report
is being prepared;
(b) [Paragraph omitted in accordance with SEC transition
instructions contained in SEC Release 34-47986]; and
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and (b) Any fraud, whether or not
material, that involves management or other employees who have
a significant role in the registrant's internal control over
financial reporting.
Date: February 11, 2004
/s/ JOHN R. IRWIN
John R. Irwin
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATIONS
I, James M. Holland, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Atwood
Oceanics, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report
is being prepared;
(b) [Paragraph omitted in accordance with SEC transition
instructions contained in SEC Release 34-47986]; and
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and (b) Any fraud, whether or not
material, that involves management or other employees who have
a significant role in the registrant's internal control over
financial reporting.
Date: February 11, 2004
/s/ JAMES M. HOLLAND
James M. Holland
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Atwood Oceanics, Inc. (the
"Company") on Form 10-Q for the period ended December 31, 2003, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
John R. Irwin, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company for the periods presented.
Date: February 11, 2004 /s/ JOHN R. IRWIN
John R. Irwin
President and Chief Executive Officer
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Atwood Oceanics, Inc. (the "Company")
on Form 10-Q for the period ended December 31, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, James
M. Holland, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company for the periods presented.
Date: February 11, 2004 /s/JAMES M. HOLLAND
James M. Holland
Senior Vice President and
Chief Financial Officer