SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
____________________________________________
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________________ to _________________
_____________________________________________
Commission File Number 1-8097
ENSCO INTERNATIONAL INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 76-0232579
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2700 Fountain Place
1445 Ross Avenue, Dallas Texas 75202 - 2792
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 922-1500
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 twelve 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 [ ]
There were 60,435,218 shares of Common Stock, $.10 par value, of the
registrant outstanding as of August 7, 1995.
ENSCO INTERNATIONAL INCORPORATED
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1995
PAGE
------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet
June 30, 1995 and December 31, 1994 3
Consolidated Statement of Operations
Three Months Ended June 30, 1995 and 1994 4
Consolidated Statement of Operations
Six Months Ended June 30, 1995 and 1994 5
Consolidated Statement of Cash Flows
Six Months Ended June 30, 1995 and 1994 6
Notes to Consolidated Financial Statements 7 - 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 - 17
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
SIGNATURES 19
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, DECEMBER 31,
1995 1994
----------- ------------
(Unaudited)
(In thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents..................... $ 97,613 $148,209
Short-term investments........................ 2,990 5,869
Accounts receivable, net...................... 54,377 40,137
Prepaid expenses and other.................... 9,132 18,155
Total current assets.................... 164,112 212,370
INVESTMENTS..................................... 6,609 6,970
PROPERTY AND EQUIPMENT, AT COST................. 747,380 666,363
Less accumulated depreciation................. 164,924 137,342
Property and equipment, net............. 582,456 529,021
OTHER ASSETS
Goodwill...................................... 20,665 21,159
Other......................................... 7,969 5,863
Total other assets...................... 28,634 27,022
$781,811 $775,383
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.............................. $ 18,687 $ 12,742
Accrued liabilities........................... 43,759 34,718
Current maturities of long-term debt.......... 42,339 40,750
Total current liabilities............... 104,785 88,210
LONG-TERM DEBT.................................. 141,157 162,466
DEFERRED INCOME TAXES........................... 23,529 22,989
OTHER LIABILITIES............................... 16,202 13,768
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 125.0 million
shares authorized, 66.7 million and 66.6
million shares issued....................... 6,665 6,657
Additional paid-in capital.................... 613,419 612,318
Accumulated deficit........................... (56,951) (71,657)
Restricted stock (unearned compensation)...... (5,891) (5,518)
Cumulative translation adjustment............. (1,195) (1,210)
Treasury stock at cost, 6.2 million and
5.6 million shares.......................... (59,909) (52,640)
Total stockholders' equity ............. 496,138 487,950
$781,811 $775,383
The accompanying notes are an integral part of these financial statements.
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED
JUNE 30,
1995 1994
-------- --------
(In thousands, except
per share data)
OPERATING REVENUES........................... $ 66,547 $ 67,075
OPERATING EXPENSES
Operating costs............................ 39,613 36,947
Depreciation and amortization.............. 14,876 13,495
General and administrative................. 2,478 2,342
56,967 52,784
OPERATING INCOME............................. 9,580 14,291
OTHER INCOME (EXPENSE)
Interest income............................ 1,659 932
Interest expense........................... (4,104) (2,609)
Income from equity affiliates, net......... 50 28
Other, net................................. 782 (415)
(1,613) (2,064)
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND MINORITY INTEREST......... 7,967 12,227
PROVISION FOR INCOME TAXES................... 298 1,047
MINORITY INTEREST............................ 585 645
NET INCOME .................................. 7,084 10,535
PREFERRED STOCK DIVIDEND REQUIREMENT......... - 1,065
INCOME APPLICABLE TO COMMON STOCK............ $ 7,084 $ 9,470
INCOME PER COMMON SHARE...................... $ .12 $ .17
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING... 60,389 56,044
The accompanying notes are an integral part of these financial statements.
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
SIX MONTHS ENDED
JUNE 30,
1995 1994
-------- --------
(In thousands, except
per share data)
OPERATING REVENUES........................... $131,766 $132,440
OPERATING EXPENSES
Operating costs............................ 79,114 72,687
Depreciation and amortization.............. 29,022 26,197
General and administrative................. 4,621 4,493
112,757 103,377
OPERATING INCOME............................. 19,009 29,063
OTHER INCOME (EXPENSE)
Interest income............................ 3,812 1,996
Interest expense........................... (8,495) (5,315)
Income from equity affiliates, net......... 200 272
Other, net................................. 1,684 (379)
(2,799) (3,426)
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND MINORITY INTEREST......... 16,210 25,637
PROVISION FOR INCOME TAXES................... 337 2,222
MINORITY INTEREST............................ 1,167 1,483
NET INCOME................................... 14,706 21,932
PREFERRED STOCK DIVIDEND REQUIREMENT......... - 2,130
INCOME APPLICABLE TO COMMON STOCK............ $ 14,706 $ 19,802
INCOME PER COMMON SHARE...................... $ .24 $ .35
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING... 60,518 56,023
The accompanying notes are an integral part of these financial statements.
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
JUNE 30,
1995 1994
-------- --------
(In thousands)
OPERATING ACTIVITIES
Net income........................................ $ 14,706 $ 21,932
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................ 29,022 26,197
Deferred income tax provision (benefit)...... (1,352) 1,353
Amortization of other assets................. 1,787 1,359
Provision for compensatory stock grants...... 483 507
Distributed (undistributed) income from
equity affiliates.......................... 225 (272)
Other........................................ (371) 846
Changes in operating assets and liabilities:
(Increase) decrease in accounts
receivable............................... (13,783) 2,988
Decrease in prepaid expenses and other..... 8,974 5,036
Increase in accounts payable and accrued
liabilities.............................. 2,970 4,068
Net cash provided by operating
activities........................... 42,661 64,014
INVESTING ACTIVITIES
Additions to property and equipment............... (68,788) (109,310)
Proceeds from disposition of assets............... 1,413 12,025
Sale of short-term investments.................... 2,879 -
Other............................................. (1,857) (1,441)
Net cash used by investing activities......... (66,353) (98,726)
FINANCING ACTIVITIES
Long-term borrowings.............................. - 30,040
Reduction of long-term borrowings................. (19,851) (12,675)
Repurchase of common stock........................ (7,210) -
Preferred stock dividends......................... - (2,130)
Other............................................. 157 376
Net cash provided (used) by financing
activities.................................... (26,904) 15,611
DECREASE IN CASH AND CASH EQUIVALENTS............... (50,596) (19,101)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...... 148,209 128,060
CASH AND CASH EQUIVALENTS, END OF PERIOD............ $ 97,613 $108,959
The accompanying notes are an integral part of these financial statements.
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - UNAUDITED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared by
ENSCO International Incorporated (the "Company"), without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission and
in accordance with generally accepted accounting principles and, in the
opinion of management, reflect all adjustments (which consist of normal
recurring adjustments) which are necessary for a fair statement of the
results of operations for the interim periods presented.
It is recommended that these statements be read in conjunction with the
Company's consolidated financial statements and notes thereto for the year
ended December 31, 1994 included in the Company's Annual Report to the
Securities and Exchange Commission on Form 10-K.
NOTE 2 - CHANGE IN THE NAME OF THE COMPANY
At the Company's Annual Meeting of the Stockholders held on May 23, 1995,
the stockholders of the Company approved the change in the name of the
Company from Energy Service Company, Inc. to ENSCO International
Incorporated.
NOTE 3 - ACQUISITION
On March 23, 1995, the Company purchased a jackup rig located in the North
Sea and simultaneously entered into a bareboat charter agreement with the
seller, which is expected to continue through late 1995 or early 1996. The
purchase price consisted of $12.8 million paid at closing and an additional
$13.0 million to be paid at the end of the bareboat charter period.
NOTE 4 - STOCKHOLDERS' EQUITY
In December 1994, the Company's Board of Directors authorized the
repurchase of up to $50.0 million of the Company's common stock. As of
June 30, 1995, the Company had repurchased 800,769 shares of its common
stock at an average price of $11.92 per share, of which 599,369 shares were
repurchased in the first six months of 1995.
On February 21, 1995, the Board of Directors of the Company adopted a
shareholder rights plan and declared a dividend of one preferred share
purchase right (a "Right") for each share of the Company's common stock
outstanding on March 6, 1995. Each Right initially entitles its holder to
purchase 1/100th of a share of the Company's Series A Junior Participating
Preferred Stock for $50.00, subject to adjustment. The Rights generally
will not become exercisable until 10 days after a public announcement that
a person or group has acquired 15% or more of the Company's common stock
(thereby becoming an "Acquiring Person") or the commencement of a tender or
exchange offer upon consummation of which such person or group would own
15% or more of the Company's common stock (the earlier of such dates being
called the "Distribution Date"). Rights will be issued with all shares of
the Company's common stock issued between March 6, 1995 and the
Distribution Date. Until the Distribution Date, the Rights will be
evidenced by the certificates representing the Company's common stock and
will be transferrable only with the Company's common stock. If any person
or group becomes an Acquiring Person each Right, other than Rights
beneficially owned by the Acquiring Person (which will thereupon become
void), will thereafter entitle its holder to purchase, at the Right's then
current exercise price, shares of the Company's common stock having a
market value of two times the exercise price of the Right. If, after a
person or group has become an Acquiring Person, the Company is acquired in
a merger or other business combination transaction or 50% or more of its
assets or earning power are sold, each Right (other than Rights owned by an
Acquiring Person which will have become void) will entitle its holder to
purchase, at the Rights then current exercise price, that number of shares
of common stock of the person with whom the Company has engaged in the
foregoing transaction (or its parent) which at the time of such transaction
will have a market value of two times the exercise price of the Right.
After any person or group has become an Acquiring Person, the Company's
Board of Directors may, under certain circumstances, exchange each Right
(other than Rights of the Acquiring Person) for shares of the Company's
common stock having a value equal to the difference between the market
value of the shares of the Company's common stock receivable upon exercise
of the Right and the exercise price of the Right. The Company will
generally be entitled to redeem the Rights for $.01 per Right at any time
until 10 days after a public announcement that a 15% position has been
acquired. The Rights expire on February 21, 2005.
NOTE 5 - PROVISION FOR INCOME TAXES
The income tax provisions for the three and six months ended June 30, 1995
primarily include U.S. alternative minimum taxes, current and deferred
taxes related to the Company's operations in Venezuela and deferred taxes
related to the Company's operations in the United Kingdom. The income tax
provisions were decreased by $1.6 million and $3.3 million during the three
and six months ended June 30, 1995, respectively, due to reductions in the
deferred tax asset valuation allowance as management considers it more
likely than not that certain additional U.S. net operating loss
carryforwards will be utilized prior to their expiration. No provisions
for regular U.S. federal income taxes have been recorded for the three and
six months ended June 30, 1995 due to the utilization of net operating loss
carryforwards to offset taxes currently payable.
At June 30, 1995, the Company had regular and alternative minimum tax net
operating loss and investment tax credit carryforwards of approximately
$276.4 million, $157.2 million, and $2.7 million, respectively.
NOTE 6 - MINORITY INTEREST
On March 29, 1995, a wholly owned subsidiary of the Company purchased an
additional 15% equity interest in ENSCO Drilling (Caribbean), Inc.
("Caribbean") from the minority interest partner in Caribbean. The
purchase, which was effective January 1, 1995, increased the wholly owned
subsidiary's interest in Caribbean from 70% to 85%. In consideration for
the additional 15% interest in Caribbean acquired, the wholly owned
subsidiary makes payments to the minority interest partner that are based
upon, in general, the utilization of existing Caribbean rigs. In addition,
in the event of a future sale of any rigs currently owned by Caribbean, the
minority interest partner is entitled to an additional 15% of the net
proceeds upon sale.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BUSINESS ENVIRONMENT
The Company conducts its business in the contract drilling, marine
transportation and technical services segments of the oil and gas industry
with operations primarily in the Gulf of Mexico, the North Sea and
Venezuela. Average day rate and utilization levels for the Company's Gulf
of Mexico rigs and vessels declined for the three and six months ended June
30, 1995, in comparison to the same periods in the prior year, due
primarily to an increase in the total number of industry rigs and vessels
available in the Gulf of Mexico. The Company's Gulf of Mexico rigs were
also negatively impacted by decreased activity levels from the prior year.
Activity levels for rigs and vessels in the Gulf of Mexico have recently
increased from the low point experienced in March 1995. However, it is
uncertain whether such increased activity levels are sustainable in view of
the continued depressed prices for natural gas.
An improvement in oil prices in 1994 and the first part of 1995 and a
reduction in the number of available rigs have been contributing factors to
increased industry utilization levels in the North Sea during the three and
six months ended June 30, 1995. The increased utilization has led to
higher average day rates in the North Sea for the three and six months
ended June 30, 1995 compared to the latter part of 1994. Management
anticipates, based on current market conditions, that North Sea day rate
and utilization levels should remain fairly stable for the remainder of
1995.
The Company's barge drilling rigs in Venezuela generally operate under
long-term contracts for a national oil company. As a result, their day
rate and utilization levels are not as dependent on oil and natural gas
prices.
Offshore rig and marine vessel industry utilization for the three and six
months ended June 30, 1995 and 1994 is summarized below:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
INDUSTRY WIDE AVERAGES * 1995 1994 1995 1994
------------------------ ------ ------ ------ ------
Offshore Rigs
Gulf of Mexico:
All Rigs:
Rigs Under Contract 129 131 124 128
Total Rigs Available 178 174 178 171
% Utilization 72% 75% 70% 75%
Jackup Rigs:
Rigs Under Contract 104 109 100 104
Total Rigs Available 141 135 141 132
% Utilization 74% 81% 71% 79%
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
INDUSTRY WIDE AVERAGES(continued)* 1995 1994 1995 1994
---------------------------------- ------ ------ ------ ------
Worldwide:
All Rigs:
Rigs Under Contract 535 531 529 534
Total Rigs Available 645 660 649 659
% Utilization 83% 80% 82% 81%
Jackup Rigs:
Rigs Under Contract 319 324 315 323
Total Rigs Available 389 391 390 391
% Utilization 82% 83% 81% 83%
Marine Vessels:
Gulf of Mexico:
Vessels Under Contract 246 213 240 217
Total Vessels Available 277 257 277 253
% Utilization 89% 83% 87% 86%
* Industry utilization based on data published by
OFFSHORE DATA SERVICES, INC.
RESULTS OF OPERATIONS
The following analysis highlights the Company's operating results for the
three and six months ended June 30, 1995 and 1994 (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30,
-------------------- --------------------
1995 1994 1995 1994
-------- -------- -------- --------
OPERATING RESULTS
Operating revenues $ 66,547 $ 67,075 $131,766 $132,440
Operating margin 26,934 30,128 52,652 59,753
Operating income 9,580 14,291 19,009 29,063
Other income (expense), net (1,613) (2,064) (2,799) (3,426)
Provision for income tax 298 1,047 337 2,222
Minority interest 585 645 1,167 1,483
Net income 7,084 10,535 14,706 21,932
Preferred stock dividend
requirements - 1,065 - 2,130
Income applicable to
common stock 7,084 9,470 14,706 19,802
Revenues and operating margin (defined as revenues less operating expenses
excluding depreciation and general and administrative expenses) for each of
the Company's operating segments are provided below for the three and six
months ended June 30, 1995 and 1994 (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1995 1994 1995 1994
-------- -------- -------- --------
OPERATING REVENUES
Contract drilling
Jackup rigs
United States $ 26,172 $ 27,380 $ 53,894 $ 54,136
International 12,128 12,304 22,809 21,815
Total jackup rigs 38,300 39,684 76,703 75,951
Barge drilling rigs -
Venezuela 15,649 8,969 31,146 18,272
Total offshore rigs 53,949 48,653 107,849 94,223
Land rigs (1) - 5,395 - 11,840
Total contract drilling 53,949 54,048 107,849 106,063
Marine transportation
AHTS (2) 3,382 3,522 6,175 6,080
Supply 4,357 4,712 8,289 9,831
Mini-supply 737 438 1,242 882
Sub total 8,476 8,672 15,706 16,793
Utility (3) - 477 - 860
Total marine
transportation 8,476 9,149 15,706 17,653
Technical services 4,122 3,878 8,211 8,724
Total $ 66,547 $ 67,075 $131,766 $132,440
OPERATING MARGIN
Contract drilling
Jackup rigs
United States $ 8,723 $ 12,985 $ 19,004 $ 26,556
International 4,913 6,591 8,433 10,689
Total jackup rigs 13,636 19,576 27,437 37,245
Barge drilling rigs -
Venezuela 9,920 5,698 19,654 12,053
Total offshore rigs 23,556 25,274 47,091 49,298
Land rigs (1) (65) 167 (179) 862
Total contract drilling 23,491 25,441 46,912 50,160
Marine transportation
AHTS (2) 1,488 1,811 2,573 2,780
Supply 1,224 1,562 1,769 3,655
Mini-supply 58 170 42 348
Sub total 2,770 3,543 4,384 6,783
Utility (3) - (130) - (266)
Total marine
transportation 2,770 3,413 4,384 6,517
Technical services 673 1,274 1,356 3,076
Total $ 26,934 $ 30,128 $ 52,652 $ 59,753
(1) United States and international land rigs are combined. As of
September 30, 1994, the Company no longer has land rigs available for
work.
(2) Anchor handling tug supply vessels.
(3) As of December 31, 1994, the Company no longer has utility vessels
available for work.
The following is an analysis of certain operating information of the
Company for the three and six months ended June 30, 1995 and 1994:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1995 1994 1995 1994
-------- -------- -------- --------
OFFSHORE DRILLING
Rig utilization:
Jackup rigs
United States 84% 94% 86% 88%
International 57% 75% 59% 72%
Total jackup rigs 78% 88% 80% 83%
Barge drilling rigs -
Venezuela 87% 100% 93% 100%
Total offshore rigs 81% 90% 84% 87%
Average day rates:
Jackup rigs
United States $ 19,139 $ 21,458 $ 19,571 $ 22,737
International 43,410 24,816 41,269 25,034
Total jackup rigs 23,205 22,375 23,216 23,338
Barge drilling rigs -
Venezuela 19,717 15,233 18,542 15,523
Total offshore rigs $ 22,028 $ 20,681 $ 21,595 $ 21,369
MARINE TRANSPORTATION (1)
Fleet utilization:
AHTS (2) 87% 84% 78% 76%
Supply 79% 83% 75% 85%
Mini-supply 57% 98% 49% 98%
Total 75% 85% 70% 84%
Average day rates:
AHTS (2) $ 7,124 $ 6,854 $ 7,069 $ 7,399
Supply 2,897 3,214 2,887 3,376
Mini-supply 1,786 1,641 1,757 1,652
Total $ 3,543 $ 3,694 $ 3,511 $ 3,864
TECHNICAL SERVICES INFORMATION
Job Days:
Drilling 587 476 1,176 1,040
Guidance 507 500 1,069 1,168
Total 1,094 976 2,245 2,208
Average revenue per job day:
Drilling $ 77,200 $110,700 $ 85,100 $107,600
Guidance 44,300 51,500 46,400 51,600
Total $ 61,500 $ 77,600 $ 64,700 $ 74,600
(1) Excludes utility vessels. As of December 31, 1994, the
Company no longer has utility vessels available for work.
(2) Anchor handling tug supply vessels.
The Company's consolidated revenues for the three and six months ended June
30, 1995 were virtually unchanged from the comparable periods in 1994.
However, the Company did recognize an increase in revenues for the three
and six months ended June 30, 1995 as compared to 1994 from four barge
drilling rigs which commenced operations in the third quarter of 1994.
Revenues also increased due to improved results in the North Sea primarily
related to an increase in average day rates and the Company assuming
operations, effective January 1, 1995, of two jackup rigs acquired in mid-
February 1994 that had operated for the remainder of 1994 under bareboat
charter contracts.
These revenue increases were offset by decreased revenues associated with
the sale of substantially all of the Company's land rig operations in 1994
and reduced Gulf of Mexico day rate and utilization levels for its contract
drilling and marine transportation segments. The revenue decline was also
due to three of the Company's jackup rigs undergoing modifications and
enhancements and therefore being unavailable for work for substantially all
of the first half of 1995.
Operating income for the three and six months ended June 30, 1995 decreased
from the comparable periods in 1994 due primarily to the reasons stated
above and also due to increased depreciation related to rigs added to the
fleet in the second half of 1994 and the first half of 1995.
CONTRACT DRILLING
The following is an analysis of the location of the Company's offshore rigs
at June 30, 1995 and 1994:
1995 1994
---- ----
Jackup rigs:
U.S. Gulf of Mexico 17 15
North Sea 6 5
Other International - 2
Total jackup rigs 23 22
Barge drilling rigs -
Venezuela 10 6
Total offshore rigs 33 28
The Company mobilized a jackup rig from Brazil that began operating in the
Gulf of Mexico in the fourth quarter of 1994. Another jackup rig arrived
in the Gulf of Mexico in January 1995 from Dubai and is currently
undergoing modifications and enhancements, including extending the rig's
water depth capability to approximately 400 feet. Due to the modifications
and enhancements, the rig was unavailable for work during the first half of
1995 and is expected to be available for work in the Gulf of Mexico mid-way
through the third quarter of 1995.
Two of the Company's North Sea jackup rigs were undergoing modifications
and enhancements for substantially all of the first half of 1995. One of
the North Sea jackup rigs exited the shipyard and began its contract early
in the third quarter of 1995 and the second jackup rig, which is being
converted from a slot rig to a cantilever rig, is expected to exit the
shipyard and begin its contract late in the third quarter of 1995. On
March 23, 1995, the Company purchased a jackup rig located in the North Sea
and simultaneously entered into a bareboat charter agreement with the
seller, which is expected to continue through late 1995 or early 1996. See
Note 3 to Consolidated Financial Statements.
The Company added four new barge drilling rigs in the third quarter of 1994
which, in addition to the previously existing six barge drilling rigs, are
all located on Lake Maracaibo, Venezuela. Two of the Company's barge
drilling rigs completed their contracts during the second quarter of 1995
and are currently idle. To date, the Company has not been successful in
negotiating new contracts for these two rigs. The other eight barge
drilling rigs in Venezuela are on long-term contracts that extend to 1998
and 1999.
The Company sold its U.S. land rig operations effective June 30, 1994 and
three of the Company's four land rigs located in the Middle East in the
fourth quarter of 1994. The Company continues to own one land rig, located
in Dubai, which is currently inactive.
Revenues were little changed while operating margins were down for the
Company's contract drilling segment for the three and six months ended June
30, 1995 as compared to the same periods in 1994. Revenues and operating
margins in 1995 were negatively impacted by the Company's U.S. jackup rigs
experiencing decreased average day rate and utilization levels, three of
the Company's jackup rigs undergoing modifications and enhancements and
being unavailable for work for substantially all of the first half of 1995
and also due to the sale of substantially all of the Company's land rigs in
1994. The decreases in revenues and operating margins were partially
offset by improved results in the North Sea due primarily to improved
average day rates and the Company assuming operations in 1995 of two jackup
rigs acquired in mid-February 1994. Revenues and operating margins were
also positively impacted by the addition of four new barge drilling rigs in
Venezuela.
The Venezuelan currency experienced significant devaluation in the first
half of 1994 and the Venezuelan government established policies to control
the exchange rate of the Venezuelan currency and severely restricted the
conversion of Venezuelan currency to U.S. dollars. To date, ENSCO Drilling
(Caribbean), Inc. ("Caribbean") has not experienced problems associated
with receiving U.S. dollar payments with respect to the U.S. dollar portion
of its contracts with Lagoven, S.A. ("Lagoven"), a subsidiary of the
Venezuelan national oil company. Changes in these conditions, other policy
enactments, or political developments in Venezuela could have an adverse
effect upon the Company. However, the Company believes such adverse
effects are unlikely due to the volume of U.S. dollars paid to the parent
company of Lagoven for its oil exports and the contractual protection
available to Caribbean if U.S. dollar payments are not made.
MARINE TRANSPORTATION
The Company has a marine transportation operating fleet of 35 vessels of
which 31 are owned by the Company and four are leased under long-term
agreements. Of the 31 vessels owned by the Company, four were being
converted into larger 146-foot mini-supply vessels during the first half of
1995. Two of these converted mini-supply vessels became available for work
in late April 1995 and the remaining two vessels were completed in late-
July and early-August 1995, respectively. The Company's marine
transportation vessels are all currently located in the Gulf of Mexico.
The Company operated four vessels in Singapore through a joint venture
beginning in August 1993. The Singapore joint venture was terminated in
May 1994 and three of the vessels were mobilized to the Gulf of Mexico and
the remaining vessel, a utility boat, was sold. The Company had one vessel
working offshore Brazil at the beginning of 1994 which returned to the Gulf
of Mexico in February 1994.
Revenues and operating margins for the Company's marine transportation
segment decreased for the three and six months ended June 30, 1995 as
compared to the same periods in 1994 due primarily to the Company
experiencing decreased average day rate and utilization levels. The
decreased average day rates were due primarily to the increased supply of
vessels in the Gulf of Mexico. The Company experienced decreased
utilization levels due primarily to four vessels being converted into
larger 146-foot mini-supply vessels during the first half of 1995.
Management anticipates a general increase in Company utilization throughout
the remainder of 1995.
TECHNICAL SERVICES
The Company's technical services operations are presently conducted in the
U.S., primarily in the Austin Chalk trend in the Southern U.S., Canada and
the North Sea. Technical services activity of the Company for the three
and six months ended June 30, 1995 increased from the comparable periods in
1994. However, revenues for the six months ended June 30, 1995 were down,
and for the three months ended June 30, 1995 were up only slightly, due
primarily to lower Canadian job pricing. The operating margin decreases
for the three and six months ended June 30, 1995 as compared to the same
periods of 1994 were due primarily to the collection of a receivable in the
first and second quarters of 1994 that had been fully reserved in a prior
period and to the change in revenues as discussed above. There are
currently no indications of substantial change in horizontal drilling
activity during 1995, although management anticipates that the demand for
specialized drilling applications will increase.
DEPRECIATION AND AMORTIZATION
The increase in depreciation and amortization for the three months ended
June 30, 1995 as compared to the same period in 1994 is primarily
attributable to depreciation on four barge drilling rigs delivered to
Venezuela in the third quarter of 1994 and depreciation on a North Sea
jackup rig acquired on March 23, 1995. The increase in depreciation for
the six months ended June 30, 1995 as compared to the same period in 1994
is due to the reasons stated above and also due to a full six months
depreciation in the first half of 1995 related to two North Sea jackup rigs
that were acquired in mid-February 1994. The 1995 increased depreciation
levels were partially offset by reduced depreciation related to the sale of
substantially all of the Company's land rig operations in 1994.
OTHER INCOME (EXPENSE), NET
The Company's other expense, net decreased for the three and six months
ended June 30, 1995 as compared to the same periods in 1994 due primarily
to increased interest income and increased other income offset, in part, by
increased interest expense. Interest income for the three and six months
ended June 30, 1995 increased by $727,000 and $1.8 million, respectively,
due primarily to higher average cash levels and increased interest rates.
Interest expense for the three and six months ended June 30, 1995 increased
by $1.5 million and $3.2 million, respectively, due primarily to interest
expense related to the financing of four barge drilling rigs added in
Venezuela in the third quarter of 1994. The increases in other income for
the three and six months ended June 30, 1995 of $1.2 million and $2.1
million, respectively, were primarily attributable to the comparable
periods in 1994 including foreign currency translation losses and a loss on
the sale of the Company's U.S. land rig operations while the 1995 periods
include certain investment related gains and additional net gains related
to equipment lost downhole for which the customer reimbursement exceeded
the net book value of the equipment lost.
PROVISION FOR INCOME TAXES
The 1995 and 1994 provisions include primarily U.S. alternative minimum
taxes, current and deferred taxes related to the Company's operations in
Venezuela and deferred taxes related to the Company's operations in the
United Kingdom. The income tax provisions were decreased during the three
and six months ended June 30, 1995 due to reductions in the deferred tax
asset valuation allowance. See Note 5 to Consolidated Financial
Statements.
MINORITY INTEREST
Minority interest for the three and six months ended June 30, 1995
decreased as compared to the same periods in 1994 due primarily to a
reduction in Caribbean's minority shareholder's interest from 30% to 15%,
effective January 1, 1995, offset by increased earnings in Venezuela as
discussed above in "Contract Drilling." See Note 6 to Consolidated
Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW AND CAPITAL EXPENDITURES
The Company's cash flow from operations and capital expenditures for the
six months ended June 30, 1995 and 1994 are as follows (in thousands):
1995 1994
-------- --------
Cash flow from operations $ 42,661 $ 64,014
Capital expenditures 68,788 109,310
Cash flow from operations decreased by $21.4 million for the six months
ended June 30, 1995 as compared to the same period in 1994. The decrease
is primarily a result of a decline in operating results and an increase in
accounts receivable. The increase in accounts receivable at June 30, 1995
is due primarily to the Company now operating, effective January 1, 1995,
two rigs acquired in mid-February 1994 that previously operated under
bareboat charter contracts and a $3.8 million receivable from a customer
for specified rig enhancements.
The Company's capital expenditures for the six months ended June 30, 1995
consisted principally of $7.7 million for sustaining operations, $48.3
million for modifications and enhancements of rigs and vessels and $12.8
million for the purchase of a jackup rig located in the North Sea.
Management anticipates that capital expenditures in 1995 will total
approximately $20.0 million for sustaining operations, $100.0 million for
modifications and enhancements of rigs and vessels and $25.8 million for
the purchase of a jackup rig located in the North Sea. See Note 3 to
Consolidated Financial Statements. The Company may spend additional funds
to acquire rigs or vessels in 1995 depending on market conditions and
opportunities.
FINANCING AND CAPITAL RESOURCES
The Company's long-term debt, total capital and debt to capital ratios at
June 30, 1995 and December 31, 1994 are summarized below (in thousands,
except percentages):
JUNE 30, DECEMBER 31,
1995 1994
-------- ------------
Long-term debt $141,157 $162,466
Total capital 637,295 650,416
Long-term debt to total capital 22% 25%
The decrease in long-term debt relates to scheduled repayments. The total
capital of the Company decreased due primarily to the decrease in long-term
debt and repurchases of common stock partially offset by the profitability
of the Company for the six months ended June 30, 1995. See Note 4 to
Consolidated Financial Statements.
The Company had a $37.0 million undrawn revolving line of credit at June
30, 1995. The revolver is reduced semi-annually by $1.0 million over five
years with the final $30.0 million line expiring in December 1998.
The Company's liquidity position at June 30, 1995 and December 31, 1994 is
summarized in the table below (in thousands, except ratios):
JUNE 30, DECEMBER 31,
1995 1994
-------- ------------
Cash and short-term investments $100,603 $154,078
Working capital 59,327 124,160
Current ratio 1.6 2.4
The Company utilizes a conservative investment philosophy with respect to
its cash and short-term investments and does not invest in any derivative
financial instruments.
Based on current energy industry conditions, management believes cash flow
from operations, the Company's existing credit facility and the Company's
working capital should be sufficient to fund the Company's required debt
service and capital additions for the next twelve months.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a vote of Security Holders
On May 23, 1995, the Company held an annual meeting of stockholders to
consider the following proposals: "Proposal 1" - To elect three Class
III directors; "Proposal 2" - To approve the amendment of the Company's
Certificate of Incorporation to provide for the change of the name of
the Company to ENSCO International Incorporated and the elimination of
the Company's currently authorized Convertible Common Stock; and
"Proposal 3" - To approve the appointment of Price Waterhouse LLP as
the Company's independent accountants for 1995. A description of the
foregoing matters is contained in the Company's proxy statement, dated
April 13, 1995, relating to the 1995 annual meeting of stockholders.
There were 60,372,461 shares of the Company's common stock entitled to
vote at the annual meeting based on the April 4, 1995 record date. The
Company solicited proxies pursuant to Regulation 14 of the Securities
Exchange Act of 1934, and there was no solicitation in opposition to
management's nominees for directors as listed in the proxy statement.
Each director received a minimum of 53,000,000 votes, which was in
excess of 88% of the outstanding common shares entitled to vote.
With respect to Proposal 1 listed above, the voting was as follows:
VOTES FOR ABSTENTIONS
---------- -----------
Orville D. Gaither 53,108,978 4,020,734
Dillard S. Hammett 53,108,612 4,021,100
Thomas L. Kelly, II 53,108,295 4,021,417
With respect to Proposals 2 and 3 listed above, the voting was as
follows:
PROPOSAL VOTES FOR VOTES AGAINST ABSTENTIONS
-------- ---------- ----------- -----------
2 56,979,681 73,671 76,361
3 56,910,396 145,851 32,498
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits and Exhibit Index
EXHIBIT NO.
-----------
*27 Financial Data Schedule
________________
* filed herewith
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated May 23,
1995, with respect to the approval of the change in the name of
the Company to ENSCO International Incorporated and other items
acted upon at the Company's Annual Meeting of Stockholders held
on May 23, 1995.
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.
ENSCO INTERNATIONAL INCORPORATED
Date: August 8, 1995 [ /s/ C. Christopher Gaut ]
-------------------- ----------------------------------
C. Christopher Gaut
Chief Financial Officer
[ /s/ H. E. Malone ]
----------------------------------
H. E. Malone, Corporate Controller
and Chief Accounting Officer
EXHIBIT INDEX
SEQUENTIALLY
NUMBERED
EXHIBIT DOCUMENT
NO. DOCUMENT PAGE
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27 Financial Data Schedule 21