1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to Current Report on
Form 8-K
on
Form 8-K/A
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: April 11, 1997
UTI ENERGY CORP.
(Exact name of registrant as specified in its charter)
Delaware 001-12542 23-2037823
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
485 Devon Park Drive, Suite 112
Wayne, Pennsylvania 19087
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): (610) 971-9600
Not applicable
(Former name or former address, if changes since last report.)
Exhibit Index Begins on Page 12.
2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
The following financial statements of Southland Drilling Company, Ltd.
are included in Appendix A hereto and incorporated herein by reference:
Statement of Net Assets Acquired of Southland Drilling Company, Ltd. as
of April 11, 1997 and Statements of Revenues and Direct and Indirect
Operating Expenses (Excluding Depreciation) of Southland Drilling
Company, Ltd. for the years ended December 31, 1996 and 1995.
(b) Pro Forma Financial Information
The pro forma financial information is included in Appendix B hereto and
incorporated herein by reference.
(c) Exhibits
* 2.1 Asset Purchase Agreement dated March 5, 1997 (the "Asset Purchase
Agreement"), by and between UTI Energy Corp. and Southland Drilling
Company, Ltd.(incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996). Pursuant
to Item 601(b)(2) of Regulation S-K, certain schedules and similar
attachments to the Asset Purchase Agreement have not been filed with
this exhibit. Schedule 2.1(a), 2.1(b), 2.1(c), 2.1(d) and 2.1(e)
contain lists of certain of the assets purchased by the Company
pursuant to the terms and conditions of the Asset Purchase
Agreement. The Company agrees to furnish supplementally any omitted
schedule to the Securities and Exchange Commission upon request.
* 2.2 First Amendment to Asset Purchase Agreement dated April 11, 1997, by
and between UTI Energy Corp., Triad Drilling Company and Southland
Drilling Company, Ltd.
* 10.1 Warrant Agreement, dated April 11, 1997, by and between UTI Energy
Corp. and Southland Drilling Company, Ltd.
* 10.2 Loan and Security Agreement dated April 11, 1997, by and among FWA
Drilling Company, Inc., International Petroleum Service Company,
Triad Drilling Company, Universal Well Services, Inc., USC,
Incorporated, UTI Energy Corp., UTICO, Inc., Panther Drilling, Inc.
and Mellon Bank, N.A.
* 10.3 Fourth Amendment and Modification to the Mellon Line of Credit dated
April 11, 1997, by and among FWA Drilling Company, Inc.,
International Petroleum Service Company, Triad Drilling Company,
Universal Well Services, Inc., USC, Incorporated, UTI Energy Corp.,
UTICO, Inc., Panther Drilling, Inc. and Mellon Bank, N.A.
* 10.4 Note Purchase Agreement dated April 11, 1997, by and among FWA
Drilling Company, Inc., International Petroleum Service Company,
Triad Drilling Company, Universal Well Services, Inc., USC,
Incorporated, Panther Drilling, Inc. and Canpartners Investments IV,
LLC (incorporated by reference to Schedule 13D relating to the
Company filed on April 22, 1997 by Canpartners Investments IV, LLC,
Canpartners Incorporated, Mitchell R. Julis, Joshua S. Friedman and
R. Christian B. Evensen).
2
3
* 10.5 Note dated April 11, 1997, payable by FWA Drilling Company, Inc.,
International Petroleum Service Company, Triad Drilling Company,
Universal Well Services, Inc., USC, Incorporated and Panther
Drilling, Inc. to Canpartners Investments IV, LLC.
* 10.6 Warrant Agreement dated April 11, 1997, by and between UTI Energy
Corp. and Canpartners Incorporated IV, LLC.
* 10.7 Warrant dated April 11, 1997, by and between UTI Energy Corp. and
Canpartners Incorporated IV, LLC.
* 10.8 Registration Rights Agreement Dated April 11, 1997, by and between
UTI Energy Corp. and Canpartners Investments IV, LLC.
23.1 Consent of Ernst & Young LLP.
*Previously filed with the Company's Current Report on Form 8-K dated
April 11, 1997.
3
4
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, hereunto duly authorized.
UTI ENERGY CORP.
-------------------------------------
(REGISTRANT)
Date: June 27, 1997 /s/ P. Blake Dupuis
-------------------------------------
P. Blake Dupuis, Vice President,
Chief Financial Officer and
Chief Accounting Officer
Signing on behalf of the registrant
and as principal financial officer
4
5
APPENDIX A
FINANCIAL STATEMENTS
OF
BUSINESS ACQUIRED
A-1
6
SOUTHLAND DRILLING COMPANY, LTD.
INDEX TO FINANCIAL STATEMENTS
APRIL 11, 1997
CONTENTS
Page No.
--------
Report of Independent Auditors .................................. A-3
Statement of Net Assets Acquired ................................ A-4
Statements of Revenues and Direct and Indirect Operating Expenses
(Excluding Depreciation) ........................................ A-5
Notes to Financial Statements ................................... A-6
A-2
7
REPORT OF INDEPENDENT AUDITORS
Board of Directors
UTI Energy Corp.
We have audited the accompanying statement of net assets acquired of Southland
Drilling Company, Ltd. ("Southland"), as of April 11, 1997, and the historical
statement of revenues and direct and indirect operating expenses (excluding
depreciation) for the years ended December 31, 1996 and 1995. These statements
are the responsibility of Southland's management and UTI Energy Corp.'s
management. Our responsibility is to express an opinion on these statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
Statement. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statements were prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission (for inclusion
in the registration statement on Form 8-K of UTI Energy Corp.) and are not
intended to be a complete presentation of the financial position or the
revenues and expenses of the assets or of the entity mentioned above.
In our opinion, the statements referred to above present fairly, in all
material respects, the net assets acquired of Southland, as described in Note
2, as of April 11, 1997, and its historical revenues and direct and indirect
operating expenses (excluding depreciation) for the years ended December 31,
1996 and 1995, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP.
Houston, Texas
June 18, 1997
A-3
8
SOUTHLAND DRILLING COMPANY, LTD.
STATEMENT OF NET ASSETS ACQUIRED
April 11, 1997
Drilling and related equipment:
Rigs $11,577,551
Tubulars 2,851,738
Yard equipment 2,287,552
Land and building 502,611
Goodwill 9,938,000
-----------
Net assets acquired $27,157,452
===========
See accompanying notes.
A-4
9
SOUTHLAND DRILLING COMPANY, LTD.
STATEMENTS OF REVENUES AND DIRECT AND INDIRECT OPERATING EXPENSES
(EXCLUDING DEPRECIATION)
For the Years Ending
January 1, 1997 December 31,
to April 11, 1997 1996 1995
----------------- ----------- -----------
(Unaudited)
Revenues
Turnkey $2,985,276 $10,963,939 $11,811,762
Daywork 4,211,280 14,282,568 9,874,426
Consulting 149,771 412,599 39,185
---------- ----------- -----------
Total revenues 7,346,327 25,659,106 21,725,373
Direct and indirect operating expenses:
Drilling expense - direct 2,719,647 7,809,920 6,622,607
Repairs and maintenance 845,078 2,655,911 2,174,924
Mobilization 220,130 1,263,223 1,067,738
Turnkey expenses 1,692,960 9,062,359 8,815,245
Indirect drilling expenses 133,129 318,012 298,977
---------- ----------- -----------
Total direct and indirect operating expenses 5,610,944 21,109,425 18,979,491
---------- ----------- -----------
Excess of revenues over direct and indirect
drilling expenses 1,735,383 4,549,681 2,745,882
Selling, general and administrative
expenses directly associated with
acquired operations 293,779 1,217,138 1,805,260
---------- ----------- -----------
Revenues in excess of direct and indirect
drilling expenses and selling,
general and administrative expenses
directly associated with acquired
operations $1,441,604 $ 3,332,543 $ 940,622
========== =========== ===========
Capital Expenditures $ 163,528 $ 129,392 $ 157,156
========== =========== ===========
See accompanying notes.
A-5
10
SOUTHLAND DRILLING COMPANY, LTD.
NOTES TO FINANCIAL STATEMENTS
1. ACQUISITION
Effective April 11, 1997, UTI Energy Corp. ("UTI") acquired certain
drilling rigs and related equipment (the "Assets") from Southland Drilling
Company, Ltd. ("Southland"), pursuant to an asset purchase agreement dated
March 5, 1997. The purchase price of the Assets consisted of $27,068,000
in cash and 100,000 warrants to purchase UTI common stock at $48.00 per
share.
2. BASIS OF PRESENTATION
The statements are not intended to be a complete presentation in
conformity with generally accepted accounting principles, but present the
net assets acquired and the historical gross drilling contract revenues,
operating expenses and selling, general and administrative expenses
directly associated with assets acquired by UTI, excluding depreciation
expense. The statements have been prepared in accordance with generally
accepted accounting principles which require management to make estimates
and assumptions that affect the amounts reported in the statements.
Actual results could differ from those estimates. The Statement of Net
Assets Acquired gives effect to the allocation of the purchase price,
which is based on UTI's experience in the industry, purchases of similar
assets in the past and on a fair market value appraisal of eight similar
drilling rigs purchased on January 27, 1997, by an independent valuation
firm, dated March 6, 1997. The Statements of Revenues and Direct and
Indirect Operating Expenses (Excluding Depreciation) reflects the
historical gross drilling contract revenues, operating expenses and
selling, general and administrative expenses directly associated with the
assets acquired and, accordingly, includes contract revenues and operating
expenses related to both dayrate and turnkey contracts and selling, general
and administrative expenses directly associated with the personnel and
facilities acquired. Southland recognized revenues and expenses on
dayrate contracts as the work progressed and recognized turnkey contract
revenues on a percentage of completion method, measured by the ratio which
contract costs incurred to date bear to total estimated contract costs.
Southland was primarily engaged in the domestic onshore contract oil and
gas drilling operations and development of domestic oil and gas reserves.
Southland's historical accounting records reflect the direct operating
revenues, direct operating expenses and selling, general and
administrative expenses directly associated with its contract drilling
operations.
As noted above, UTI acquired substantially all of the direct operating
assets of Southland's drilling operations and assumed all drilling
contracts in existence on the closing date, however, UTI did not acquire
Southland's corporate assets. Certain corporate overhead and other
expenses were allocated by related entities and owners to Southland in its
internal financial records. That portion of such expenses not directly
associated with assets acquired or personnel transferring to UTI have been
excluded from expenses in these financial statements. Additionally,
interest expense, interest income and other income and expenses have also
not been included in such statement as the related assets were not
purchased nor the related liabilities assumed.
In the opinion of management, the unaudited Statements of Revenue and
Direct and Indirect Operating Expenses (Excluding Depreciation) includes
all adjustments, consisting solely of normal recurring adjustments,
necessary for a fair presentation of the results of operations for the
period January 1, 1997 through April 11, 1997. Although management
believes the disclosures in these Statements are adequate to make the
information presented not misleading, certain information and footnote
disclosures normally included in annual audited financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission.
A-6
11
SOUTHLAND DRILLING COMPANY, LTD.
NOTES TO FINANCIAL STATEMENTS
3. TRANSACTIONS WITH AFFILIATED PARTIES
During the years ended December 31, 1996 and December 31, 1995, Southland
had the following transactions with affiliated parties:
o Southland provided drilling services to affiliated companies in the
amount of $3,232,440 during 1996, and $3,214,340 during 1995.
o Southland made payments to affiliated companies for drilling services
and equipment rental in the amount of $207,914 during 1996, and
$48,451 during 1995.
4. SUBSEQUENT EVENTS
The asset purchase agreement (Section 3.2) states that UTI purchased
Southland's trade accounts receivable, prepaid assets, and assumed the
trade accounts payable, and subject to evaluation by both UTI and
Southland, Southland would pay UTI cash for any amount for which the
accounts payable exceeded the accounts receivable and prepaid assets.
However, subsequent to closing, UTI and Southland verbally agreed to
disregard Section 3.2 of the agreement, and therefore UTI did not acquire
the accounts receivable and prepaid assets nor assume the accounts
payable. Rather, Southland would continue to own and service these
accounts in all respects. As no value was assigned to the net value of
these assets with regard to the purchase price, the accounts receivable,
prepaid assets, and accounts payable accounts were not included in the
Statement of Net Assets Acquired.
A-7
12
APPENDIX B
PRO FORMA FINANCIAL INFORMATION
B-1
13
UTI ENERGY CORP.
INDEX TO PRO FORMA FINANCIAL INFORMATION
CONTENTS
Page No.
--------
Pro Forma Financial Statements, Acquisition of
Southland Drilling Company, Ltd., Acquisition of
Quarles Drilling Corporation, Acquisition of
Viersen & Cochran Drilling Company (Unaudited) ......... B-3
Pro Forma Condensed Consolidated Balance Sheet
(Unaudited) ............................................ B-6
Pro Forma Condensed Consolidated Statement of
Income (Unaudited) Year Ended December 31, 1996 ........ B-7
Pro Forma Condensed Consolidated Statement of
Income (Unaudited) Three Months Ended March 31, 1997 ... B-8
Notes to Pro Forma Condensed Consolidated
Financial Statements ................................... B-9
B-2
14
UTI ENERGY CORP.
PRO FORMA FINANCIAL STATEMENTS
ACQUISITION OF SOUTHLAND DRILLING COMPANY, LTD.
ACQUISITION OF QUARLES DRILLING CORPORATION
ACQUISITION OF VIERSEN & COCHRAN DRILLING COMPANY
(UNAUDITED)
Southland
On April 11, 1997, UTI Energy Corp., a Delaware corporation (the "Company"),
acquired the land drilling operations of Southland Drilling Company Ltd., a
Texas limited partnership ("Southland") for approximately $27.1 million in cash
and a five-year warrant to purchase 100,000 shares of the Company's common
stock, $.001 par value ("Common Stock"), at an exercise price of $48.00 per
share (the "Southland Acquisition"). The purchase price was determined through
arms-length negotiations between the parties. The acquired assets include
eight land drilling rigs, various equipment and rig components, and other
equipment used in Southland's contract drilling business. The Company also
assumed various drilling contracts of Southland and hired Southland's rig
crews. The Company intends to utilize the Southland assets and crews in its
existing land drilling operations. The Southland Acquisition further expands
the Company's operations in the active oil and gas producing areas in South
Texas and the Gulf Coast and increases the Company's rig fleet to 82 rigs.
The Southland Acquisition was effected pursuant to an Asset Purchase Agreement
dated as of March 5, 1997, by and between the Company and Southland. The
Southland Acquisition was funded with a combination of the Company's existing
cash, the net proceeds from the private placement of $25 million principal
amount of its 12% Senior Subordinated Notes due 2001 (the "Subordinated Notes")
and the net proceeds from a new $25 million three-year term-loan facility with
Mellon Bank N.A. (the "Mellon Term Loan"). In connection with the Mellon Term
Loan, the Company also increased the amount available under its line of credit
(the "Line of Credit") with Mellon Bank N.A. ("Mellon") from $8.4 million to
$12.0 million. The Subordinated Notes were issued by the Company at a discount
of 2% and were issued with a seven-year warrant to purchase 400,000 shares of
Common Stock at an exercise price of $32.50 per share. The warrants are also
subject to call at $.25 per warrant after six months under certain circumstances
if the market price of the Common Stock is greater than $45.00 per share over a
90 day period. The Company utilized a portion of the net proceeds from the
Mellon Term Loan to refinance approximately $18.6 million in indebtedness that
was incurred in connection with its prior acquisitions of FWA Drilling Company,
Inc., Viersen & Cochran Drilling Company ("Viersen") and the contract drilling
assets of Quarles Drilling Corporation ("Quarles"). The indebtedness under the
Mellon Term Loan is secured by substantially all of the Company's rig assets,
inventory and accounts receivable.
Quarles
On January 27, 1997, pursuant to the terms and conditions of an Asset Purchase
Agreement dated as of December 31, 1996 (the "Quarles Agreement"), by and
between the Company and Quarles, the Company purchased the contract drilling
assets (the "Quarles Assets") of Quarles for a total purchase price of $16.2
million (the "Quarles Purchase Price"). The Quarles Purchase Price was
determined through arms-length negotiations between the parties. The Quarles
Assets, which were utilized in Quarles' contract drilling business, consist of
eight operating drilling rigs and one stacked drilling rig and various
equipment and rig components. The Company has utilized the Quarles Assets in
its existing contract drilling operations.
B-3
15
UTI ENERGY CORP.
PRO FORMA FINANCIAL STATEMENTS
ACQUISITION OF SOUTHLAND DRILLING COMPANY, LTD.
ACQUISITION OF QUARLES DRILLING CORPORATION
ACQUISITION OF VIERSEN & COCHRAN DRILLING COMPANY
(UNAUDITED)
In connection with the Company's acquisition of the Quarles Assets, the Company
retained Don Quarles, the President of Quarles, as a consultant to the Company.
Pursuant to the terms of the Quarles Agreement, the Quarles Purchase Price was
paid utilizing $8.1 million in cash and 256,175 shares of Common Stock having a
value at the time the agreement was negotiated of $8.1 million, subject to
adjustment as described below. The cash portion of the Quarles Purchase Price
was funded with a $4.1 million in borrowings under the Line of Credit and a new
$4.0 million term loan (the "Interim Term Loan") with Mellon. The borrowings
under the Line of Credit and Interim Term Loan bore interest at the bank's prime
rate and were secured by a pledge of certain of the Company's rigs, accounts
receivable and inventory. The Interim Term Loan was repaid by the Company on
April 11, 1997.
Under the terms of the Quarles Agreement, Quarles is entitled to receive
additional shares of Common Stock in the event the average market price (as
defined in the Quarles Agreement) of the Common Stock on the date a registration
statement covering the resale of the Common Stock issued to Quarles is declared
effective is less than $31.69 per share. The number of additional shares will
be equal to a number of shares sufficient to provide Quarles with $8.1 million
of Common Stock based on the average market price of the Common Stock on such
date. In the event the average market price of the Common Stock is greater than
$31.69 per share on such date, Quarles is required to return a number of shares
of Common Stock having a value (at such market price) equal to one-half of the
amount by which the market price of the shares (at such market price) initially
issued is greater than $8.1 million. The Company has granted Quarles certain
registration rights with respect to the Common Stock issued in connection with
the acquisition.
Viersen
On August 14, 1996, the Company entered into a Stock Purchase Agreement with
The Sam K. Viersen Jr. Trust dated September 9, 1986 as Amended and Restated on
May 11, 1994 (the "Stock Purchase Agreement"), pursuant to which a subsidiary of
the Company purchased all of the outstanding shares of capital stock of the
Viersen & Cochran Drilling Company ("Viersen"). Under the terms of the Stock
Purchase Agreement, the consideration paid by the Company for the Shares, which
was arrived at through arms-length negotiations between the parties, consisted
of (i) $6,000,000 in cash paid on August 14, 1996 (a portion of which the
Company borrowed under its then existing credit agreement); (ii) a two-year
$8,000,000 promissory note (the "Promissory Note") executed by the Company in
favor of the Seller; and (iii) stock warrants to purchase 200,000 shares of the
Company's common stock, $.001 par value, at $15 per share.
The Promissory Note bore interest at the rate of 6% per annum and was payable
in full on or before August 14, 1998. The terms of the Promissory Note
required the Company to make a principal payment of $1,500,000 on or before
August 14, 1997 and an additional principal payment of $1,500,000 on or before
February 14, 1998. The Company had the option under the Promissory Note to pay
Seller $7,655,000 plus accrued interest on or before April 14, 1997 in full
satisfaction of the Promissory Note. The Company's obligations under the
Promissory Note were guaranteed by Viersen and were secured by a pledge of the
assets of Viersen pursuant to a security agreement. On April 11, 1997, the
Company repaid in full the outstanding principal and accrued interest on the
Promissory Note.
B-4
16
UTI ENERGY CORP.
PRO FORMA FINANCIAL STATEMENTS
ACQUISITION OF SOUTHLAND DRILLING COMPANY, LTD.
ACQUISITION OF QUARLES DRILLING CORPORATION
ACQUISITION OF VIERSEN & COCHRAN DRILLING COMPANY
(UNAUDITED)
The unaudited pro forma balance sheet as of March 31, 1997 assumes that the
acquisition of Southland occurred on March 31, 1997. The unaudited pro forma
statements of income assume that the acquisitions of Southland, Quarles and
Viersen occurred on January 1, 1996.
B-5
17
UTI ENERGY CORP.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, 1997
(in thousands)
Southland
Acquisition
Adjustments
UTI ---------------
As Amount Pro
Reported (1) Notes Forma
-------- ------- ----- --------
ASSETS
CURRENT ASSETS
Cash $ 807 $ - $ 807
Accounts receivable 19,577 - 19,577
Other receivables 592 - 592
Materials and supplies 974 - 974
Prepaid expenses 1,348 - 1,348
-------- ------- --------
23,298 - 23,298
PROPERTY AND EQUIPMENT
Property and equipment 80,666 17,219 (A) 97,885
Less accumulated depreciation and
amortization (24,626) - (24,626)
-------- ------- --------
56,040 17,219 (A) 73,259
OTHER ASSETS
Goodwill - 9,938 (A) 9,938
Other 1,138 - 1,138
-------- ------- --------
1,138 9,938 11,076
-------- ------- --------
$ 80,476 $27,157 $107,633
======== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 3,957 $ - $ 3,957
Accounts payable 7,310 - 7,310
Accrued payroll costs 2,698 - 2,698
Other accrued expenses 3,141 79 (B) 3,220
-------- ------- --------
17,106 79 17,185
LONG-TERM DEBT, less current portion 22,064 25,668 (C) 47,732
DEFERRED INCOME TAXES 8,305 - 8,305
OTHER LIABILITIES 350 - 350
SHAREHOLDERS' EQUITY
Common stock 4 - 4
Additional capital 25,977 1,410 (D) 27,387
Retained earnings 6,759 - 6,759
Restricted stock plan unearned
compensation (89) - (89)
-------- ------- --------
32,651 1,410 34,061
-------- ------- --------
$ 80,476 $27,157 $107,633
======== ======= ========
(1) The audited Statement of Net Assets Acquired for Southland Drilling
Company, Ltd. as of April 11, 1997, gives effect to the allocation of the
purchase price, which is based on UTI's experience in the industry,
purchases of similar assets in the past and on a fair market value
appraisal of eight similar drilling rigs purchased on January 27, 1997, by
an independent valuation firm, dated March 6, 1997. The amount reported
for Southland property and equipment was derived from this Statement.
See accompanying notes to Pro Forma Condensed Consolidated Financial Statements.
B-6
18
UTI ENERGY CORP.
PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME (UNAUDITED)
YEAR ENDED DECEMBER 31, 1997
(in thousands, except share data)
(2)
Acquisition (1) Acquisition Southland Acquisition
UTI V&C Adjustments Quarles Adjustments as Adjustments
as as ------------- as ------------- --------- ------------- Pro
Reported Reported Amount Notes Reported Amount Notes Reported Amount Notes Forma
--------- -------- ------ ----- --------- ------ ----- --------- ------ ----- --------
REVENUES $ 97,301 $ 3,248 (1,522) (A) $24,228 $ - $25,659 $ - $ 148,914
COSTS AND EXPENSES
Cost of Sales 78,257 1,842 - 24,711 (420) (G) 21,109 - 125,499
Selling, General and
administrative 7,768 747 (629) (B) - 420 (G) 1,217 - (I) 9,523
Depreciation and
amortization 4,292 88 577 (C) 847 680 (C) - 2,247 (C) 8,731
--------- ------- ------- -------- ------ -------- ------- ---------
90,317 2,677 (52) 25,558 680 22,326 2,247 143,753
--------- ------- ------- -------- ------ -------- ------- ---------
OPERATING INCOME 6,984 571 (1,470) (1,330) (680) 3,333 (2,247) 5,161
OTHER INCOME (EXPENSE)
Interest Expense (1,148) - (492) (D) - (668) (D) - (3,646) (D) (5,954)
Other 1,341 - - - - - - 1,341
--------- ------- ------- -------- ------ -------- ------- ---------
193 - (492) - (668) - (3,646) (4,613)
--------- ------- ------- -------- ------ -------- ------- ---------
INCOME(LOSS) BEFORE
INCOME TAXES 7,177 571 (1,962) (1,330) (1,348) 3,333 (5,893) 548
INCOME TAXES 2,324 - (473) (E) - (856) (E) - (820) (E) 175
--------- ------- ------- -------- ------ ------- ------- ---------
NET INCOME $ 4,853 $ 571 (1,489) $(1,330) $ (492) $ 3,333 $(5,073) $ 373
========= ======= ======= ======== ====== ======= ======== =========
Earnings per common
share
Primary $ 1.26 $ 50.52 $ 0.09
========= ======= =========
Fully diluted $ 1.27 $ 50.52 $ 0.09
========= ======= =========
Average common shares
outstanding
Primary 3,813,062 11,300 (11,300) (F) 256,175 (E) - - 4,069,237
Fully diluted 3,853,164 11,300 (11,300) (F) 256,175 (E) - 11,565 (J) 4,120,904
(1) This Statement reflects the historical gross drilling contract revenues,
direct operating expenses, and depreciation directly related to the assets
acquired.
(2) This Statement reflects the historical revenues and direct and indirect
operating expenses directly related to the assets acquired.
See accompanying notes to Pro Forma Condensed Consolidated Financial Statements.
B-7
19
UTI ENERGY CORP.
PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997
(in thousands, except share data)
(1) (2)
UTI Quarles Southland
as as as Acquisition Pro
Reported Reported Acquisition Adjustments Reported Adjustments Forma
---------- ----------- ----------------------- ----------- ---------------- --------
Amount Notes Amount Notes
----------- ---------- -------- ------
REVENUES $ 34,368 $3,407 $ - $5,580 $ - $ 43,355
COSTS AND EXPENSES
Cost of Sales 27,362 4,081 (90) (A) 4,357 - 35,710
Selling, General and administrative 2,334 - 90 (A) 223 - (A) 2,647
Depreciation and amortization 1,545 66 61 (B) - 562 (F) 2,234
--------- ---------- ---------- ----------- -------- ---------
31,241 4,147 61 4,580 562 40,591
--------- ---------- ---------- ----------- -------- ---------
OPERATING INCOME 3,127 (740) (61) 1,000 (562)
OTHER INCOME (EXPENSE)
Interest Expense (479) - (56) (C) - (911) (C) (1,446)
Other 227 - - - - 227
--------- ---------- ---------- ----------- -------- ---------
(252) - (56) - (911) (1,219)
---------- ---------- ---------- ----------- -------- ---------
INCOME(LOSS) BEFORE INCOME TAXES 2,875 (740) (117) 1,000 (1,473) 1,545
INCOME TAXES 1,031 - (305) (D) - (170) (D) 556
--------- ---------- ---------- ----------- -------- ---------
NET INCOME $ 1,844 $ (740) $ 188 $1,000 $ (1,303) $ 989
========= ========== ========== =========== ======== =========
Earnings per common share
Primary $ 0.42 $ 0.22
========= =========
Fully diluted $ 0.42 $ 0.22
========= =========
Average common shares outstanding
Primary 4,422,514 - 85,392 (E) - - 4,507,906
Fully diluted 4,422,514 - 85,392 (E) - - 4,507,906
(1) This Statement reflects the historical gross drilling contract revenues,
direct operating expenses, and depreciation directly related to the assets
acquired.
(2) This Statement reflects the historical revenues and direct and indirect
operating expenses directly related to the assets acquired.
See accompanying notes to Pro Forma Condensed Consolidated Financial Statements.
B-8
20
UTI ENERGY CORP.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The purchase of the contract drilling operations of Southland Drilling Company,
Ltd. ("Southland") was completed for $27.1 million in cash and warrants on
April 11, 1997. The pro forma financial statements have been prepared by UTI
management based upon the financial statements of Southland Drilling Company,
Ltd. included elsewhere herein. The pro forma statements may not be indicative
of the results that actually would have occurred if the acquisition had
occurred on the dates indicated or which may be obtained in the future. The
pro forma financial statements should be read in conjunction with the financial
statements and notes of Southland Drilling Company, Ltd. contained elsewhere
herein, UTI's financial statements and notes contained in its Annual Report on
Form 10-K for the year ended December 31, 1996 and the financial statements and
notes of Quarles Drilling Corporation and Viersen & Cochran Drilling Company
contained in UTI's Forms 8-K/A dated January 27, 1997 and August 28, 1996.
A summary of the purchase price calculation for the Southland Assets
acquisition follows:
000's
----------
Cash paid to Seller (borrowed by UTI
under two new term loans) $ 27,068
100,000 warrants of UTI common stock
issued to Seller 10
------
Total cash and warrants 27,078
Add accrual for estimated transaction fees 79
------
$ 27,157
======
Property and equipment $ 16,231
Goodwill 9,938
------
$ 27,157
======
Adjustments to March 31, 1997 Pro Forma Condensed Consolidated Balance Sheet
(Unaudited).
(A) Value of Southland net assets acquired
(B) Accrued estimated transaction costs
(C) Borrowings to fund the acquisition
(D) Warrants issued pursuant to the Southland Agreement and
Subordinated Notes
B-9
21
UTI ENERGY CORP.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Adjustments to Pro Forma Condensed Consolidated Statement of Income (Unaudited)
for the year ended December 31, 1996.
(A) Eliminate gain on sale of assets.
(B) Eliminate selling, general and administrative expenses which
the Company believes will not be incurred on an ongoing basis.
(C) Adjust depreciation expense based upon the restated value of
property and equipment.
(D) Increase interest expense resulting from acquisition debt
offset by debt not assumed for Viersen.
(E) Adjust tax expense or (benefit) at marginal rate.
(F) The warrants issued to seller have been included in the
determination of average common shares outstanding for the Company
at December 31, 1996.
(G) Selling, general and administrative expenses directly related
to the acquired assets are included in the numbers as reported. The
Company does not expect to incur any incremental selling, general
and administrative expenses as a result of the acquisition. Costs
and expenses related to selling activities have been reclassified to
conform to UTI's presentation.
(H) Stock issued pursuant to the Quarles Agreement. The number
of shares ultimately to be issued is dependent upon the average
market price (as defined in the Quarles Agreement) of the Common
Stock on the date a registration statement covering the resale of
the Common Stock issued to Quarles is declared effective. The
shares issued reflected in the Pro Forma Condensed Consolidated
Statement of Income assumed a share price of $31.69.
(I) Selling, general and administrative expenses directly related to the
acquired assets are included in the numbers as reported. The Company
does not expect to incur any incremental selling, general or
administrative expenses as a result of the acquisition.
(J) Dilutive effect of warrants issued with Subordinated Notes.
Adjustments to Pro Forma Condensed Consolidated Statement of Income (Unaudited)
for the three months ended March 31, 1997.
(A) Selling, general and administrative expenses directly related
to the acquired assets are included in the numbers as reported. The
Company does not expect to incur any incremental selling, general
and administrative expenses as a result of the acquisition. Costs
and expenses related to selling activities have been reclassified.
(B) Adjust depreciation expense based upon the restated value of
property and equipment.
(C) Increase interest expense resulting from acquisition debt.
(D) Adjust tax expense or (benefit) at marginal rate.
B-10
22
UTI ENERGY CORP.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(E) The 256,175 shares of common stock issued to seller effective
January 27, 1997, have been included in the average common shares
outstanding for the Company at March 31, 1997. The number of shares
ultimately to be issued is dependent upon the average market price
(as defined in the Asset Purchase Agreement) of the Common Stock on
the date a registration statement covering the resale of the Common
Stock issued to Quarles is declared effective. The shares issued
reflected in the Pro Forma Condensed Consolidated Statement of
Income assumed a share price of $31.69, with the shares being issued
effective January 1, 1996.
(F) Selling, general and administrative expenses directly related
to the acquired assets are included in the numbers as reported. The
Company does not expect to incur any incremental selling, general
and administrative expenses as a result of the acquisition.
B-11
23
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
* 2.1 Asset Purchase Agreement dated March 5, 1997 (the "Asset Purchase
Agreement"), by and between UTI Energy Corp. and Southland Drilling
Company, Ltd.(incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996). Pursuant
to Item 601(b)(2) of Regulation S-K, certain schedules and similar
attachments to the Asset Purchase Agreement have not been filed with
this exhibit. Schedule 2.1(a), 2.1(b), 2.1(c), 2.1(d) and 2.1(e)
contain lists of certain of the assets purchased by the Company
pursuant to the terms and conditions of the Asset Purchase
Agreement. The Company agrees to furnish supplementally any omitted
schedule to the Securities and Exchange Commission upon request.
* 2.2 First Amendment to Asset Purchase Agreement dated April 11, 1997, by
and between UTI Energy Corp., Triad Drilling Company and Southland
Drilling Company, Ltd.
* 10.1 Warrant Agreement, dated April 11, 1997, by and between UTI Energy
Corp. and Southland Drilling Company, Ltd.
* 10.2 Loan and Security Agreement dated April 11, 1997, by and among FWA
Drilling Company, Inc., International Petroleum Service Company,
Triad Drilling Company, Universal Well Services, Inc., USC,
Incorporated, UTI Energy Corp., UTICO, Inc., Panther Drilling, Inc.
and Mellon Bank, N.A.
* 10.3 Fourth Amendment and Modification to the Mellon Line of Credit dated
April 11, 1997, by and among FWA Drilling Company, Inc.,
International Petroleum Service Company, Triad Drilling Company,
Universal Well Services, Inc., USC, Incorporated, UTI Energy Corp.,
UTICO, Inc., Panther Drilling, Inc. and Mellon Bank, N.A.
* 10.4 Note Purchase Agreement dated April 11, 1997, by and among FWA
Drilling Company, Inc., International Petroleum Service Company,
Triad Drilling Company, Universal Well Services, Inc., USC,
Incorporated, Panther Drilling, Inc. and Canpartners Investments IV,
LLC (incorporated by reference to Schedule 13D relating to the
Company filed on April 22, 1997 by Canpartners Investments IV, LLC,
Canpartners Incorporated, Mitchell R. Julis, Joshua S. Friedman and
R. Christian B. Evensen).
* 10.5 Note dated April 11, 1997, payable by FWA Drilling Company, Inc.,
International Petroleum Service Company, Triad Drilling Company,
Universal Well Services, Inc., USC, Incorporated and Panther
Drilling, Inc. to Canpartners Investments IV, LLC.
* 10.6 Warrant Agreement dated April 11, 1997, by and between UTI Energy
Corp. and Canpartners Incorporated IV, LLC.
* 10.7 Warrant dated April 11, 1997, by and between UTI Energy Corp. and
Canpartners Incorporated IV, LLC.
* 10.8 Registration Rights Agreement Dated April 11, 1997, by and between
UTI Energy Corp. and Canpartners Investments IV, LLC.
23.1 Consent of Ernst & Young LLP.
*Previously filed with the Company's Current Report on Form 8-K dated
April 11, 1997.