UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D. C. 20549
----------------
Form
10-Q
x
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR
THE QUARTERLY PERIOD ENDED JUNE 30, 2009
o
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION
FILE NUMBER 1-13167
ATWOOD
OCEANICS
,
INC
.
(Exact
name of registrant as specified in its charter)
TEXAS
|
|
74-1611874
|
(State
or other jurisdiction of incorporation or
organization)
|
|
(I.R.S.
Employer Identification No.)
|
|
|
|
|
|
15835
Park Ten Place Drive
|
|
77084
|
Houston,
Texas
(Address
of principal executive offices)
|
|
(Zip
Code)
|
|
|
281-749-7800
|
|
|
|
(Registrant's
telephone number, including area code)
|
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filings requirements for
the past 90 days. Yes
X
No___
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (
§
232.405 of this
chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes___
No___
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act
Large
accelerated filer
X
Accelerated
filer ___
Non-accelerated
filer
___ Smaller
reporting company ___
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes___ No
X
Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of July 31, 2009: 64,195,084 shares of common stock, $1 par
value
_______________________________________________________________________________
ATWOOD
OCEANICS, INC.
FORM
10-Q
For the
Quarter Ended June 30, 2009
INDEX
Part
I. Financial Information
|
|
|
|
Item
1.
|
Unaudited
Condensed Consolidated Financial Statements
|
Page
|
|
|
a)
|
Condensed
Consolidated Statements of Operations
For
the Three and Nine Months Ended June 30, 2009 and 2008
|
3
|
|
|
b)
|
Condensed
Consolidated Balance Sheets
As
of June 30, 2009 and September 30, 2008
|
4
|
|
|
c)
|
Condensed
Consolidated Statements of Cash Flows
For
the Nine Months Ended June 30, 2009 and 2008
|
5
|
|
|
d)
|
Condensed
Consolidated Statement of Changes in Shareholders’
Equity
for the Nine Months Ended June 30, 2009
|
6
|
|
|
e)
|
Notes
to Condensed Consolidated Financial Statements
|
7
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
17
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
28
|
|
|
Item
4.
|
Controls
and Procedures
|
29
|
|
Part
II. Other Information
|
|
|
|
Item
6.
|
Exhibits
|
30
|
|
Signatures
|
31
|
|
PART
I. ITEM I - FINANCIAL STATEMENTS
ATWOOD
OCEANICS, INC. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In
thousands, except per share amounts)
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
drilling
|
|
$
|
149,307
|
|
|
$
|
141,372
|
|
|
$
|
455,463
|
|
|
$
|
365,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS
AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
drilling
|
|
|
58,366
|
|
|
|
57,094
|
|
|
|
166,771
|
|
|
|
159,999
|
|
Depreciation
|
|
|
9,529
|
|
|
|
8,871
|
|
|
|
25,581
|
|
|
|
25,914
|
|
General
and administrative
|
|
|
6,894
|
|
|
|
7,567
|
|
|
|
24,783
|
|
|
|
23,049
|
|
(Gain)
loss on sale of equipment, net
|
|
|
129
|
|
|
|
(129
|
)
|
|
|
(52
|
)
|
|
|
(214
|
)
|
|
|
|
74,918
|
|
|
|
73,403
|
|
|
|
217,083
|
|
|
|
208,748
|
|
OPERATING
INCOME
|
|
|
74,389
|
|
|
|
67,969
|
|
|
|
238,380
|
|
|
|
157,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net of capitalized interest
|
|
|
(735
|
)
|
|
|
(204
|
)
|
|
|
(1,644
|
)
|
|
|
(1,146
|
)
|
Interest
income
|
|
|
90
|
|
|
|
301
|
|
|
|
257
|
|
|
|
1,475
|
|
|
|
|
(645
|
)
|
|
|
97
|
|
|
|
(1,387
|
)
|
|
|
329
|
|
INCOME
BEFORE INCOME TAXES
|
|
|
73,744
|
|
|
|
68,066
|
|
|
|
236,993
|
|
|
|
157,531
|
|
PROVISION
FOR INCOME TAXES
|
|
|
6,073
|
|
|
|
7,685
|
|
|
|
34,532
|
|
|
|
16,846
|
|
NET
INCOME
|
|
$
|
67,671
|
|
|
$
|
60,381
|
|
|
$
|
202,461
|
|
|
$
|
140,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS
PER COMMON SHARE (NOTE 3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.05
|
|
|
$
|
0.94
|
|
|
$
|
3.16
|
|
|
$
|
2.21
|
|
Diluted
|
|
|
1.05
|
|
|
|
0.93
|
|
|
|
3.14
|
|
|
|
2.18
|
|
AVERAGE
COMMON SHARES OUTSTANDING (NOTE 3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
64,190
|
|
|
|
64,023
|
|
|
|
64,152
|
|
|
|
63,665
|
|
Diluted
|
|
|
64,617
|
|
|
|
64,776
|
|
|
|
64,395
|
|
|
|
64,509
|
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
|
PART
I. ITEM I - FINANCIAL STATEMENTS
ATWOOD
OCEANICS, INC. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In
thousands)
|
|
|
June
30,
|
|
|
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
91,032
|
|
$
|
121,092
|
Accounts receivable, net of an allowance
|
|
|
|
|
of $1,051 and $114 at June 30, 2009
|
|
|
|
|
|
and September 30, 2008, respectively
|
|
126,012
|
|
|
132,367
|
Insurance receivable
|
|
|
6,940
|
|
|
-
|
Income tax receivable
|
|
|
5,838
|
|
|
3,292
|
Inventories of materials and supplies
|
|
53,531
|
|
|
37,906
|
Deferred tax assets
|
|
|
25
|
|
|
21
|
Prepaid expenses and deferred costs
|
|
2,814
|
|
|
10,225
|
Total Current Assets
|
|
|
286,192
|
|
|
304,903
|
|
|
|
|
|
|
|
NET
PROPERTY AND EQUIPMENT
|
|
1,112,044
|
|
|
787,838
|
|
|
|
|
|
|
|
DEFERRED
COSTS AND OTHER ASSETS
|
6,749
|
|
|
3,856
|
|
|
$
|
1,404,985
|
|
$
|
1,096,597
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
18,124
|
|
$
|
16,987
|
Accrued
liabilities
|
|
|
37,227
|
|
|
23,551
|
Income
tax payable
|
|
|
22,225
|
|
|
16,009
|
Deferred
credits
|
|
|
6,123
|
|
|
304
|
Total
Current Liabilities
|
|
|
83,699
|
|
|
56,851
|
|
|
|
|
|
|
|
LONG-TERM
DEBT
|
|
|
250,000
|
|
|
170,000
|
|
|
|
|
|
|
|
LONG
TERM LIABILITIES:
|
|
|
|
|
|
|
Deferred
income taxes
|
|
|
8,516
|
|
|
10,595
|
Deferred
credits
|
|
|
3,166
|
|
|
7,942
|
Other
|
|
|
7,503
|
|
|
7,519
|
|
|
|
19,185
|
|
|
26,056
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES (SEE NOTE 9)
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY:
|
|
|
|
|
|
|
Preferred stock, no par value;
|
|
|
|
|
|
1,000 shares authorized, none outstanding
|
-
|
|
|
-
|
Common stock, $1 par value: 90,000 shares
|
|
|
|
|
authorized with 64,195 and 64,031 issued
|
|
|
|
|
and outstanding at June 30, 2009
|
|
|
|
|
|
and September 30, 2008, respectively
|
|
64,195
|
|
|
64,031
|
Paid-in
capital
|
|
|
120,590
|
|
|
114,804
|
Retained
earnings
|
|
|
867,316
|
|
|
664,855
|
Total Shareholders' Equity
|
|
1,052,101
|
|
|
843,690
|
|
|
$
|
1,404,985
|
|
$
|
1,096,597
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
PART
I. ITEM I - FINANCIAL STATEMENTS
ATWOOD
OCEANICS, INC. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands)
|
|
Nine
Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
income
|
|
$
|
202,461
|
|
|
$
|
140,685
|
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
provided
(used) by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
25,581
|
|
|
|
25,914
|
|
Amortization
of debt issuance costs
|
|
|
515
|
|
|
|
586
|
|
Amortization of deferred items
|
|
|
(9,335
|
)
|
|
|
(7,726
|
)
|
Provision
for doubtful accounts
|
|
|
937
|
|
|
|
240
|
|
Provision
for inventory obsolesence
|
|
|
240
|
|
|
|
130
|
|
Deferred
income tax benefit
|
|
|
(2,083
|
)
|
|
|
(2,273
|
)
|
Stock-based
compensation expense
|
|
|
5,884
|
|
|
|
5,644
|
|
Gains
on sale of equipment
|
|
|
(52
|
)
|
|
|
(214
|
)
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
(Increase)
decrease in accounts receivable
|
|
|
5,418
|
|
|
|
(35,168
|
)
|
Increase
in insurance receivable
|
|
|
(461
|
)
|
|
|
-
|
|
Increase
in income tax receivable
|
|
|
(2,546
|
)
|
|
|
(486
|
)
|
Increase
in inventory
|
|
|
(16,144
|
)
|
|
|
(7,535
|
)
|
Decrease
in prepaid expenses
|
|
|
7,419
|
|
|
|
7,381
|
|
Increase
in deferred costs and other assets
|
|
|
(2,593
|
)
|
|
|
(1,162
|
)
|
Increase
in accounts payable
|
|
|
57
|
|
|
|
5,453
|
|
Increase
in accrued liabilities
|
|
|
12,143
|
|
|
|
3,657
|
|
Increase
in income tax payable
|
|
|
6,216
|
|
|
|
2,962
|
|
Increase
(decrease) in deferred credits and other liabilities
|
|
|
12,150
|
|
|
|
(663
|
)
|
Net
cash provided by operating activities
|
|
|
245,807
|
|
|
|
137,425
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM INVESTING
ACTIVITIES
:
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(353,610
|
)
|
|
|
(193,281
|
)
|
Proceeds
from sale of equipment
|
|
|
288
|
|
|
|
267
|
|
Net
cash used by investing activities
|
|
|
(353,322
|
)
|
|
|
(193,014
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Principal
payments on debt
|
|
|
(50,000
|
)
|
|
|
(18,000
|
)
|
Proceeds
from debt
|
|
|
130,000
|
|
|
|
170,000
|
|
Proceeds
from exercise of stock options
|
|
|
66
|
|
|
|
5,988
|
|
Debt
issuance costs paid
|
|
|
(2,611
|
)
|
|
|
(1,336
|
)
|
Net
cash provided by financing activities
|
|
|
77,455
|
|
|
|
156,652
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
$
|
(30,060
|
)
|
|
$
|
101,063
|
|
CASH AND CASH
EQUIVALENTS,
at beginning of period
|
|
$
|
121,092
|
|
|
$
|
100,361
|
|
CASH AND CASH
EQUIVALENTS,
at end of period
|
|
$
|
91,032
|
|
|
$
|
201,424
|
|
-----------------------------------------------------------------------
|
|
|
|
|
|
|
|
|
Non-cash
activities
|
|
|
|
|
|
|
|
|
Increase
in insurance receivable related to reduction in value
|
|
|
|
|
|
|
|
|
of
spare capital equipment and inventory
|
|
$
|
6,479
|
|
|
$
|
-
|
|
Increase
in accrued liabilities related to capital
|
|
|
|
|
|
|
|
|
expenditures
|
|
$
|
2,613
|
|
|
$
|
9,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
PART
I. ITEM I - FINANCIAL STATEMENTS
ATWOOD
OCEANICS, INC. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN
SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Common
Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Shareholders’
|
|
(In
thousands)
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2008
|
|
|
64,031
|
|
|
$
|
64,031
|
|
|
$
|
114,804
|
|
|
$
|
664,855
|
|
|
$
|
843,690
|
|
Net
income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
202,461
|
|
|
|
202,461
|
|
Restricted
stock awards
|
|
|
157
|
|
|
|
157
|
|
|
|
(157
|
)
|
|
|
-
|
|
|
|
-
|
|
Exercise
of employee stock options
|
|
|
7
|
|
|
|
7
|
|
|
|
59
|
|
|
|
-
|
|
|
|
66
|
|
Stock
option and restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
award
compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
5,884
|
|
|
|
-
|
|
|
|
5,884
|
|
June
30, 2009
|
|
|
64,195
|
|
|
$
|
64,195
|
|
|
$
|
120,590
|
|
|
$
|
867,316
|
|
|
$
|
1,052,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. UNAUDITED
INTERIM INFORMATION
The unaudited interim condensed
consolidated financial statements as of June 30, 2009 and for the three and nine
month periods ended June 30, 2009 and 2008, 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 year end condensed
consolidated balance sheet data was derived from the audited financial
statements as of September 30, 2008. 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 fiscal
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, 2008. In our opinion, the unaudited interim
financial statements reflect all adjustments considered necessary for a fair
statement of our financial position and results of operations for the periods
presented.
Certain reclassifications have been
made to the prior year end financial statements to conform to the current
interim period presentation.
2. SHARE-BASED
COMPENSATION
We
recognize compensation expense on grants of share-based compensation awards on a
straight-line basis over the required service period for each award. As of June
30, 2009, unrecognized compensation cost, net of estimated forfeitures, related
to stock options and restricted stock awards was approximately $4.6 million
and $8.2 million, respectively, which we expect to recognize over a weighted
average period of approximately 2.2 years. The recognition of
share-based compensation expense had the following effect on our consolidated
statements of operations (in thousands, except per share amounts):
|
|
Three
Months
|
|
|
Nine
Months
|
|
|
|
Ended
|
|
|
Ended
|
|
June
30, 2009:
|
|
|
|
|
|
|
Increase
in contract drilling expenses
|
|
$
|
574
|
|
|
$
|
1,712
|
|
Increase
in general and administrative expenses
|
|
|
1,346
|
|
|
|
4,172
|
|
Decrease
in income tax provision
|
|
|
(471
|
)
|
|
|
(1,460
|
)
|
Decrease
of net income
|
|
$
|
1,449
|
|
|
$
|
4,424
|
|
|
|
|
|
|
|
|
|
|
Decrease
in earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.02
|
|
|
$
|
0.07
|
|
Diluted
|
|
$
|
0.02
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2008:
|
|
|
|
|
|
|
|
|
Increase
in contract drilling expenses
|
|
$
|
599
|
|
|
$
|
1,496
|
|
Increase
in general and administrative expenses
|
|
|
1,555
|
|
|
|
4,148
|
|
Decrease
in income tax provision
|
|
|
(544
|
)
|
|
|
(1,452
|
)
|
Decrease
of net income
|
|
$
|
1,610
|
|
|
$
|
4,192
|
|
|
|
|
|
|
|
|
|
|
Decrease
in earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.03
|
|
|
$
|
0.07
|
|
Diluted
|
|
$
|
0.02
|
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
Awards of
restricted stock and stock options have both been granted under our stock
incentive plans during the current fiscal year. We deliver newly
issued shares of common stock for restricted stock awards upon vesting and upon
exercise of stock options. All stock incentive plans currently in
effect have been approved by the shareholders of our outstanding common
stock.
Stock
Options
Under
our stock incentive plans, the exercise price of each stock option equals
the fair market value of one share of our common stock on the date of grant,
with all outstanding options having a maximum term of 10
years. Options vest ratably over a period from the end of the first
to the fourth year from the date of grant. Each option is for the
purchase of one share of our common stock.
The per
share weighted average fair value of stock options granted during the nine
months ended June 30, 2009 was $5.75. We estimated the fair value of each stock
option then outstanding using the Black-Scholes pricing model and the following
assumptions for the nine months ended June 30, 2009:
Risk-Free
Interest Rate
|
1.5%
|
Expected
Volatility
|
42%
|
Expected
Life (Years)
|
5.2
|
Dividend
Yield
|
None
|
|
|
The
average risk-free interest rate is based on the five-year U.S. treasury security
rate in effect as of the grant date. We determined expected volatility using a
six year historical volatility figure and determined the expected term of the
stock options using 10 years of historical data. We have never paid
any cash dividends on our common stock.
A summary
of stock option activity during the nine months ended June 30, 2009 is as
follows:
|
|
|
|
|
|
|
|
Wtd. Avg
.
|
|
|
|
|
|
|
|
|
|
Wtd.
Avg.
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number
of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Options (000s)
|
|
|
Price
|
|
|
Life (Years)
|
|
|
Value (000s)
|
|
Outstanding
at October 1, 2008
|
|
|
1,253
|
|
|
$
|
18.82
|
|
|
|
6.5
|
|
|
$
|
22,035
|
|
Granted
|
|
|
286
|
|
|
$
|
14.65
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(7
|
)
|
|
$
|
10.20
|
|
|
|
|
|
|
$
|
91
|
|
Forfeited
|
|
|
(19
|
)
|
|
$
|
26.46
|
|
|
|
|
|
|
|
|
|
Outstanding
at June 30, 2009
|
|
|
1,513
|
|
|
$
|
17.97
|
|
|
|
6.5
|
|
|
$
|
10,505
|
|
Exercisable
at June 30, 2009
|
|
|
962
|
|
|
$
|
14.67
|
|
|
|
5.2
|
|
|
$
|
9,859
|
|
Restricted
Stock
We have
also awarded restricted stock to certain employees and to our non-employee
directors. For our employees, the awards of restricted stock have
vesting periods and restrictions on transfer ranging from three
to four years from the date of grant. Awards of restricted stock to our
non-employee directors made prior to Amendment No. 1 to the
Atwood Oceanics, Inc. 2007 Long-Term Incentive Plan (the “2007 Plan”) have
vesting periods ranging from immediately to three years, with restrictions
on transfer for three years from the date of grant. Awards of
restricted stock to our non-employee directors made after Amendment No. 1 to the
2007 Plan have a vesting period and restrictions on transfer
for 13 months from the date of grant. We value restricted stock awards at fair
market value of our common stock on the date of grant.
A summary
of restricted stock activity for the nine months ended June 30, 2009, is as
follows:
|
|
Number
of
|
|
|
Wtd.
Avg.
|
|
|
|
Shares (000s)
|
|
|
Fair Value
|
|
Unvested
at September 30, 2008
|
|
|
581
|
|
|
$
|
32.50
|
|
Granted
|
|
|
173
|
|
|
$
|
14.65
|
|
Vested
|
|
|
(157
|
)
|
|
$
|
19.82
|
|
Forfeited
|
|
|
(11
|
)
|
|
$
|
32.58
|
|
Unvested
at June 30, 2009
|
|
|
586
|
|
|
$
|
30.63
|
|
3. EARNINGS
PER COMMON SHARE
The computation of basic and diluted
earnings per share is as follows (in thousands, except per share
amounts):
|
|
Three Months Ended
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
Per
Share
|
|
|
Net
|
|
|
|
|
|
Per
Share
|
|
|
|
Income
|
|
|
Shares
|
|
|
Amount
|
|
|
Income
|
|
|
Shares
|
|
|
Amount
|
|
June
30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
67,671
|
|
|
|
64,190
|
|
|
$
|
1.05
|
|
|
$
|
202,461
|
|
|
|
64,152
|
|
|
$
|
3.16
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
---
|
|
|
|
427
|
|
|
$
|
-
|
|
|
|
---
|
|
|
|
243
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$
|
67,671
|
|
|
|
64,617
|
|
|
$
|
1.05
|
|
|
$
|
202,461
|
|
|
|
64,395
|
|
|
$
|
3.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
60,381
|
|
|
|
64,023
|
|
|
$
|
0.94
|
|
|
$
|
140,685
|
|
|
|
63,665
|
|
|
$
|
2.21
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
---
|
|
|
|
753
|
|
|
$
|
(0.01
|
)
|
|
|
---
|
|
|
|
844
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$
|
60,381
|
|
|
|
64,776
|
|
|
$
|
0.93
|
|
|
$
|
140,685
|
|
|
|
64,509
|
|
|
$
|
2.18
|
|
The
calculation of diluted earnings per share for the three and nine month periods
ended June 30, 2009 excludes consideration of shares of common stock related to
316,000 outstanding stock options because such options were
anti-dilutive. These options could potentially dilute basic earnings
per share in the future.
4. PROPERTY
AND EQUIPMENT
A summary of property and equipment by
classification is as follows (in thousands):
|
|
|
|
June
30,
|
|
|
September
30,
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Drilling
vessels and related equipment
|
|
|
|
|
|
Cost
|
|
|
$
|
1,455,268
|
|
|
$
|
1,106,709
|
|
|
Accumulated
depreciation
|
|
|
(347,868
|
)
|
|
|
(324,376
|
)
|
|
|
Net
book value
|
|
|
1,107,400
|
|
|
|
782,333
|
|
|
|
|
|
|
|
|
|
|
|
|
Drill
Pipe
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
15,275
|
|
|
|
15,568
|
|
|
Accumulated
depreciation
|
|
|
(12,700
|
)
|
|
|
(12,139
|
)
|
|
|
Net
book value
|
|
|
2,575
|
|
|
|
3,429
|
|
|
|
|
|
|
|
|
|
|
|
|
Furniture
and other
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
9,863
|
|
|
|
9,423
|
|
|
Accumulated
depreciation
|
|
|
(7,794
|
)
|
|
|
(7,347
|
)
|
|
|
Net
book value
|
|
|
2,069
|
|
|
|
2,076
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
PROPERTY AND EQUIPMENT
|
|
$
|
1,112,044
|
|
|
$
|
787,838
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
June 30, 2009, we had approximately $245 million and $279 million of
construction in progress related to the construction of the ATWOOD OSPREY, our
new conventionally moored semisubmersible, and our new to-be-named dynamically
positioned semisubmersible, respectively, of which $286 million was expended in
the first nine months of fiscal year 2009. Between September
30, 2008, and June 30, 2009, we also expended approximately $45 million on the
ATWOOD AURORA, for a total construction cost of $197 million, which commenced
operations in April 2009.
Warehouse
Fire
On
October 25, 2008, a fire occurred in a third party warehouse facility in
Houston, Texas that we use to store fleetwide spare capital
equipment. In addition, this third party provides international
freight forwarding services, and thus, the location was also used as a staging
area for equipment shipments to our international fleet. Although the
fire was contained primarily to one area of the facility, we did incur
significant damage to our fleet spares and other equipment
in-transit. We have insurance to cover the cost of replacing and
repairing damaged equipment in excess of a $2,500 deductible. The
amount of the deductible was recorded as an expense during the first quarter of
fiscal year 2009.
We are
continuing the process of evaluating the fire damage to determine if the
equipment can be repaired or if it must be replaced. The process is
anticipated to last well in to the second half of calendar year
2009. However, based on the work to date, estimated property losses
plus actual costs incurred to inspect and evaluate damaged equipment is
approximately $6.9 million. Thus, as of June 30, 2009, an insurance
receivable has been recorded for our estimated insurance recoveries in an amount
equal to the estimated losses and actual costs, less our
deductible.
A summary
of long-term debt is as follows (in thousands):
|
|
June
30,
|
|
|
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
2007
credit facility, bearing interest (market adjustable)
|
|
|
|
|
|
|
at
approximately 1.9% and 3.5% per annum at
|
|
|
|
|
|
|
June
30, 2009 and September 30, 2008, respectively
|
|
$
|
200,000
|
|
|
$
|
170,000
|
|
2008
credit facility, bearing interest (market adjustable)
|
|
|
|
|
|
|
|
|
at
approximately 4.1% per annum at June 30, 2009
|
|
|
50,000
|
|
|
|
-
|
|
|
|
$
|
250,000
|
|
|
$
|
170,000
|
|
During
October 2007, we entered into a credit agreement with several banks, with Nordea
Bank Finland plc, New York Branch, as Administrative Agent for the lenders, as
well as Lead Arranger and Book Runner (the “2007 Credit Agreement”). The 2007
Credit Agreement provides for a secured 5-year $300 million revolving loan
facility with maturity in October 2012, subject to acceleration upon certain
specified events of default, including but not limited to: delinquent payments,
bankruptcy filings, breaches of representation or covenants, material adverse
judgments, guarantees or security documents not in full effect, non-compliance
with the Employee Retirement Income Security Act of 1974, defaults under other
agreements including existing credit agreements, and a change in
control. In addition, the 2007 Credit Facility contains a number of
limitations on our ability to: incur liens; merge, consolidate or sell assets;
pay dividends; incur additional indebtedness; make advances, investments or
loans; and transact with affiliates.
Loans
under this facility will bear interest at varying rates ranging from 0.70% to
1.25% over the Eurodollar Rate, depending upon the ratio of outstanding debt to
earnings before interest, taxes and depreciation. The credit agreement supports
the issuance, when required, of standby letters of credit. The collateral
for the 2007 Credit Agreement consists primarily of preferred mortgages on
three of our active drilling units (the ATWOOD EAGLE, the ATWOOD HUNTER and the
ATWOOD BEACON). Under the 2007 Credit Facility, we are required to pay a
fee ranging from 0.225% - 0.375% per annum on the unused portion of
the credit facility and certain other administrative costs. As of June 30,
2009, we have $100 million of funds available to borrow under this credit
facility, with standby letters of credit in the aggregate amount of
approximately $4.6 million outstanding.
During
November 2008, we entered into a new credit agreement with several banks with
Nordea Bank Finland plc, New York Branch as Administrative Agent for
the lenders, as well as Lead Arranger and Book Runner (“the 2008 Credit
Facility”). The 2008 Credit Facility provides for a secured 5-year
$280 million reducing revolving loan facility with maturity in November 2013,
subject to acceleration upon certain specified events of default, including but
not limited to: delinquent payments, bankruptcy filings, breaches of
representation or covenants, material adverse judgments, guarantees or security
documents not in full effect, non-compliance with the Employee Retirement Income
Security Act of 1974, defaults under other agreements including existing credit
agreements, such as our 2007 Credit Facility, and a change in
control. In addition, the 2008 Credit Facility contains a number of
limitations on our ability to: incur liens; merge, consolidate or sell assets;
pay dividends; incur additional indebtedness; make advances, investments or
loans; and transact with affiliates.
The 2008
Credit Facility requires a mandatory quarterly commitment reduction of $7
million beginning at the earlier of three months after delivery of either
semisubmersible drilling unit currently under construction or December 31,
2011. The commitment under this facility may be increased up to $20
million for a total commitment of $300 million. Loans under the 2008
Credit Facility will bear interest at 1.50% over the Eurodollar
Rate. The collateral for the 2008 Credit Facility consists primarily
of preferred mortgages on three of our drilling units (the ATWOOD FALCON, the
ATWOOD SOUTHERN CROSS, and the ATWOOD AURORA). Under the 2008 Credit
Facility, we are required to pay a fee of 0.75% per annum on the unused portion
of the credit facility and certain other administrative costs. As of June 30,
2009, we have $230 million of funds available to borrow under this credit
facility, with standby letters of credit in the aggregate amount of
approximately $0.7 million outstanding.
The 2008
Credit Facility and the 2007 Credit Facility contain various financial covenants
that, among other things, require the maintenance of a leverage ratio, not to
exceed 5.0 to 1.0, an interest expense coverage ratio not to be less than 2.5 to
1.0 and a required level of collateral maintenance whereby the aggregate
appraised collateral value shall not be less than 150% of the total credit
facility commitment. As of June 30, 2009, our leverage ratio was
0.46, our interest expense coverage ratio was 30.1 and our collateral
maintenance percentage was in excess of 300%. We were in compliance
with all financial covenants under the 2008 Credit Facility and the 2007 Credit
Facility at June 30, 2009 and at all times during the nine months ended June 30,
2009. As of August 5, 2009, no additional funds have been borrowed under
either the 2007 Credit Facility or the 2008 Credit Facility subsequent to June
30, 2009.
6.
|
FAIR
VALUE OF FINANCIAL INSTRUMENTS
|
On
October 1, 2008, we adopted, without any impact to our financial position,
operating results or cash flows, the provisions of SFAS No.
157, “Fair Value Measurement”, for our financial assets and
liabilities with respect to which we have recognized or disclosed at fair value
on a recurring basis. At June 30, 2009, the carrying amounts of our
cash and cash equivalents, receivables and payables approximated their fair
values due to the short maturity of such financial instruments. The carrying
amount of our floating-rate debt approximated its fair value at June 30, 2009 as
such instruments bear short-term, market-based interest rates.
At June
30, 2009, we had approximately $2.7 million of reserves for uncertain tax
positions, including estimated accrued interest and penalties of $0.3
million which are included as Other Long Term Liabilities in the
Consolidated Balance Sheet. At June 30, 2009, all $2.7 million of the
net uncertain tax liabilities would affect our effective tax rate if
recognized. A summary of activity related to the net uncertain tax
positions for the nine months ended June 30, 2009 is as follows (in
thousands):
|
|
Liability
for Uncertain Tax Positions
|
|
|
|
|
Balance
at October 1, 2008
|
|
$
|
3,492
|
|
|
|
|
|
|
Increases
based on tax positions
|
|
|
|
|
related
to the current fiscal year
|
|
$
|
289
|
|
Decreases
based on tax positions
|
|
|
|
|
related
to prior fiscal years
|
|
|
(1,044
|
)
|
|
|
|
|
|
Balance
at June 30, 2009
|
|
$
|
2,737
|
|
Our
United States tax returns for fiscal year 2006 and subsequent years remain
subject to examination by tax authorities. As we conduct business
globally, we have various tax years remaining open to examination in our
international tax jurisdictions. We do not anticipate that any
tax contingencies resolved during the next 12 months will have a material impact
on our consolidated financial position, results of operations or cash
flows.
Virtually
all of our tax provision for each of the three and nine months ended June 30,
2009 and 2008 relates to taxes in foreign jurisdictions. Accordingly,
due to the high level of operating income earned in certain nontaxable and
deemed profit tax jurisdictions during the three and nine months ended June 30,
2009 and 2008, our effective tax rate for these periods was significantly less
than the United States federal statutory rate.
8. RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS
In April
2009, the FASB issued Staff Position FAS 157-4 "Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly" ("FSP FAS 157-4").
FSP FAS 157-4 provides additional guidance for estimating fair value in
accordance with SFAS No. 157, “Fair Value Measurements”, when the volume and
level of activity for the asset or liability have significantly decreased. The
staff position also includes guidance on identifying circumstances that indicate
a transaction is not orderly. FSP FAS 157-4 is effective for interim and annual
periods ending after June 15, 2009 and shall be applied prospectively. We
adopted FSP FAS 157-4 during the quarter ended June 30, 2009 with no material
impact to our financial position, operating results or cash
flows.
In April 2009, the FASB issued Staff
Position FAS 107-1 and APB 28-1 "Interim Disclosures about Fair Value of
Financial Instruments" ("FSP FAS 107-1 and APB 28-1"). FSP FAS 107-1 and APB
28-1 amends SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments", to require disclosures about the fair value of financial
instruments for interim reporting periods of publicly traded companies in
addition to annual financial statements. The staff position also amends APB
Opinion No. 28, "Interim Financial Reporting", to require fair value disclosures
in summarized financial information at interim reporting periods. FSP FAS 107-1
and APB 28-1 are effective for interim periods ending after June 15, 2009. We
adopted FSP FAS 107-1 and APB 28-1 during the quarter ended June 30,
2009 with no significant changes to the disclosures in our financial
statements.
In May 2009, the FASB issued SFAS No.
165, “Subsequent Events” (“SFAS 165”). SFAS 165 establishes general
standards of accounting for, and disclosure of events that occur, after the
balance sheet date but before financial statements are issued or are available
to be issued. SFAS 165 is effective for interim or annual periods
ending after June 15, 2009. We adopted SFAS 165 during the quarter
ended June 30, 2009 with no significant changes to subsequent events that we are
required to recognize or disclose in our financial statements. We
have performed an evaluation of subsequent events through August 6, 2009 which
is the date the financial statements were issued.
In
June 2009, the FASB issued SFAS No. 168, “The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles — a replacement of FASB Statement No. 162” (“SFAS 168”). On the
effective date of SFAS 168, the FASB Accounting Standards Codification
(“Codification”) will become the source of authoritative U.S. generally accepted
accounting principles. Following SFAS 168, the FASB will not issue new standards
in the form of Statements, FASB Staff Positions or EITF Abstracts. Instead, it
will issue Accounting Standards Updates to update the Codification. SFAS 168 is
effective for financial statements issued for interim and annual periods ending
after September 15, 2009. We anticipate the adoption of FAS 168
will not have a material impact to the Company.
9. 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, results of
operations, or cash flows.
Other
Matters
The
ATWOOD BEACON operated in India from early December 2006 to the end of July
2009. A service tax was enacted in 2004 on revenues derived from seismic and
exploration activities. This service tax law was subsequently amended on
June 1, 2007 and again in 2008 to state that revenues derived from mining
services and drilling services were specifically subject to this service
tax. The ATWOOD BEACON contract terms with our customer in
India provided that any liability incurred by us related to any taxes
pursuant to laws not in effect at the time the contract was executed in 2005 was
to be reimbursed by our customer. In our opinion, which is supported by
our legal and tax advisors, any such service taxes assessed by the Indian tax
authorities under either provision of the 2007 or 2008 amendments would be the
obligation of our customer. Our customer is disputing this obligation on the
basis, in their opinion, that revenues derived from drilling services were
taxable under the initial 2004 law, which, based on our contract terms, would
provide that the service tax is our obligation.
After
reviewing the status of the drilling service we provided to our customer, the
Indian tax authorities assessed service tax obligations on revenues derived from
the ATWOOD BEACON commencing on June 1, 2007. The relevant Indian tax
authority issued an extensive written ruling on this matter setting forth the
proper application of the June 1, 2007 service tax regulation, confirming our
position on this matter that the drilling services were not covered by the
original 2004 service tax law. Therefore, as the Indian tax
authority’s service tax assessments was made under the provision of the 2007
amendment to the service tax law and not pursuant to a law in effect at the time
we executed the ATWOOD BEACON contract, we believe our customer is obligated
under the terms of our contract to reimburse us for all service tax
payments.
As of
June 30, 2009, we have paid to the Indian government $7.7 million in service tax
and have accrued $3.7 million of additional obligations in accrued liabilities
and recorded a corresponding $11.4 million account receivable from our customer
for such service taxes. We plan to pursue all options available to us
to collect this account receivable from our customer for such service
taxes.
PART
I. ITEM 2
MANAGEMENT'S
DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This
Form 10-Q for the quarterly period ended June 30, 2009 includes statements about
Atwood Oceanics, Inc. (which together with its subsidiaries is identified as the
“Company,” “we,” or “our,” unless the context indicates otherwise) which are not
historical facts (including any statements concerning plans and objectives of
management for future operations or economic performance, or assumptions related
thereto) which are forward-looking statements. In addition, we and our
representatives may, from time to time, make other oral or written statements
which are also forward-looking statements.
These forward-looking statements are
made based upon management's current plans, expectations, estimates, assumptions
and beliefs concerning future events impacting us, and therefore involve a
number of risks and uncertainties. We caution that forward-looking
statements are not guarantees and that actual results could differ materially
from those expressed or implied in the forward-looking statements.
Important
factors that could cause our actual results of operations, financial conditions
or cash flows to differ include, but are not necessarily limited
to:
|
-
|
our
dependence on the oil and gas
industry;
|
|
-
|
the
operational risks involved in drilling for oil and
gas;
|
|
-
|
risks
associated with the current global economic crisis and its impact on
capital markets, liquidity and financing of future drilling
activity;
|
|
-
|
changes
in rig utilization and dayrates in response to the level of activity in
the oil and gas industry, which is significantly affected by indications
and expectations regarding the level and volatility of oil and gas prices,
which in turn are affected by political, economic and weather conditions
affecting or potentially affecting regional or worldwide demand for oil
and gas, actions or anticipated actions by OPEC, inventory levels,
deliverability constraints, and future market
activity;
|
|
-
|
the
extent to which customers and potential customers continue to pursue
deepwater drilling;
|
|
-
|
exploration
success or lack of exploration success by our customers and potential
customers;
|
|
-
|
the
highly competitive and cyclical nature of our business, with periods of
low demand and excess rig
availability;
|
|
-
|
the
impact of possible disruption in operations due to terrorism, acts of
piracy, embargoes, war or other military
operations;
|
|
-
|
our
ability to enter into and the terms of future drilling
contracts;
|
|
-
|
the
availability of qualified
personnel;
|
|
-
|
our
failure to retain the business of one or more significant
customers;
|
|
-
|
the
termination or renegotiation of contracts by
customers;
|
|
-
|
the
availability of adequate insurance at a reasonable
cost;
|
|
-
|
the
occurrence of an uninsured loss;
|
|
-
|
the
risks of international operations, including possible economic, political,
social or monetary instability and compliance with foreign
laws;
|
|
-
|
the
effect public health concerns could have on our international operations
and financial results;
|
|
-
|
compliance
with or breach of environmental
laws;
|
|
-
|
the
incurrence of secured debt or additional unsecured indebtedness or other
obligations by us or our
subsidiaries;
|
|
-
|
the
adequacy of sources of liquidity for our operations and those of our
customers;
|
|
-
|
currently
unknown rig repair needs and/or additional opportunities to accelerate
planned maintenance expenditures due to presently unanticipated rig
downtime;
|
|
-
|
higher
than anticipated accruals for performance-based compensation due to better
than anticipated performance by us, higher than anticipated severance
expenses due to unanticipated employee terminations, higher than
anticipated legal and accounting fees due to unanticipated financing or
other corporate transactions and other factors that could increase general
and administrative expenses;
|
|
-
|
the
actions of our competitors in the offshore drilling industry, which could
significantly influence rig dayrates and
utilization;
|
|
-
|
changes
in the geographic areas in which our customers plan to operate or the tax
rate in such jurisdiction, which in turn could change our expected
effective tax rate;
|
|
-
|
changes
in oil and gas drilling technology or in our competitors' drilling rig
fleets that could make our drilling rigs less competitive or require major
capital investments to keep them
competitive;
|
|
-
|
the
effects and uncertainties of legal and administrative proceedings and
other contingencies;
|
|
-
|
the
impact of governmental laws and regulations and the uncertainties involved
in their administration, particularly in some foreign
jurisdictions;
|
|
-
|
changes
in accepted interpretations of accounting guidelines and other accounting
pronouncements and tax laws;
|
-
|
risks
involved in the construction of a dynamically positioned semisubmersible
drilling unit without a contract;
|
-
|
although
our current long-term contract commitments do not provide for early
termination due to market deterioration, market declines could result in
requests to amend some of these contracts which, if amended, could alter
the timing and amount of our current contracted cash
flows;
|
|
-
|
the
risks involved in the construction, upgrade and repair of our drilling
units, including project delays effecting our ability to meet contractual
commitments, as well as commencement of operations of our drilling units
following delivery; and
|
-
|
such
other factors as may be discussed in this report and our other reports
filed with the Securities and Exchange Commission, or
SEC.
|
These
factors are not necessarily all of the important factors that could cause actual
results to differ materially from those expressed in any of our forward-looking
statements. Other unknown or unpredictable factors could also have
material adverse effects on future results. The words “believe,”
“impact,” “intend,” “estimate,” “anticipate,” “plan,” and similar expressions
identify forward-looking statements. These forward-looking statements
are found at various places throughout the Management’s Discussion and Analysis
in Part I, Item 2 hereof and elsewhere in this report. When
considering any forward-looking statement, you should also keep in mind the risk
factors described in other reports or filings we make with the SEC from time to
time, including our Form 10-K for the year ended September 30,
2008. Undue reliance should not be placed on these forward-looking
statements, which are applicable only on the date hereof. Neither we nor our
representatives have a general obligation to revise or update these
forward-looking statements to reflect events or circumstances that arise after
the date hereof or to reflect the occurrence of unanticipated
events.
MARKET
OUTLOOK
The current global financial recession
continues to negatively impact the worldwide offshore drilling
market. Due to the ongoing negative market environment, oil and gas
companies continue to delay certain exploration, development and production
activities. These delays have led to significantly reduced contract
bid requests which have resulted in declining dayrates, increasing worldwide rig
fleet availability for jack-up rigs and semisubmersible drilling units
technically similar to the ATWOOD SOUTHERN CROSS and increasing bidding
competition for future contract opportunities. The continuing
delivery of newly constructed jack-up rigs is also negatively impacting the
worldwide supply relative to current market demand. Despite the declining trends
for jack-up drilling and semisubmersible drilling for rigs like the ATWOOD
SOUTHERN CROSS, we believe that the long-term outlook for the worldwide
deepwater drilling remains positive. The current global financial
crisis has also created significant reductions in available capital and
liquidity from banks and other providers of credit, and, while not currently
impacting us, this could adversely affect our customers’ and lenders’ ability to
fulfill their obligations to us in the future.
While we are now seeing some signs of
increased interest for drilling programs later this fiscal year and next fiscal
year, there still remains uncertainty with regard to future work and dayrates
for our three idle rigs that are current without future contracts: the ATWOOD
SOUTHERN CROSS, the ATWOOD BEACON and the RICHMOND. The ATWOOD
SOUTHERN CROSS has been idle since mid-December 2008, the ATWOOD BEACON became
idle at the end of July 2009 and the RICHMOND has been idle since early June
2009. We are pursuing additional contract commitments for these three
rigs; however, there is no guarantee that we will not continue to incur idle
time on some or all of these units for the remainder of fiscal year 2009 and
into fiscal year 2010.
We are currently building two
semisubmersibles for deepwater drilling: (1) the ATWOOD OSPREY, a conventionally
moored, 6,000 foot water depth unit, (scheduled for delivery in early 2011, with
an estimated total cost of $600 million to $625 million), and (2) a to-be-named
dynamically positioned, 10,000 foot water depth unit (scheduled for delivery in
mid-2012, with an estimated total cost of approximately $750
million). Through June 30, 2009, we have invested approximately $525
million toward the construction of these two drilling units. We
expect funding of the $825 million to $850 million remaining on the construction
of these two units will come from internally generated funds and borrowings
under our two credit facilities.
With the April 2009 commencement of
drilling operations of the ATWOOD AURORA, we now have nine (9) owned operational
drilling units and two (2) drilling units currently under construction, of which
five (5) have current contract commitments that extend into fiscal year 2011 or
later; one (1) has a current contract commitment that extends through fiscal
year 2010; one (1) has a firm three month commitment commencing in September
2009; three (3) have no current contract commitments; and one (1) under
construction, scheduled for delivery in mid-2012, is currently also without a
contract. We currently have an estimated contract revenue backlog of
approximately $1.8 billion compared to approximately $1.0 billion of current
estimated capital commitments relating primarily to the two new semisubmersibles
under construction.
Currently,
we have approximately 65% and 60% of our available rig days contracted for the
fourth quarter of fiscal year 2009 and fiscal year 2010,
respectively. A comparison of the average per day revenues for fiscal
years 2007 and 2008 and for the first nine months of fiscal year 2009 for our
active drilling units is as follows:
Average
Per Day Revenues
|
|
|
|
Fiscal
Year 2007
|
|
|
Fiscal
Year 2008
|
|
|
First
Nine Months of Fiscal Year 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATWOOD
HUNTER
|
|
$
|
234,000
|
|
|
$
|
246,000
|
|
|
$
|
514,000
|
|
|
|
|
ATWOOD
EAGLE
|
|
|
160,000
|
|
|
|
241,000
|
|
|
|
395,000
|
|
|
|
|
ATWOOD
FALCON
|
|
|
138,000
|
|
|
|
216,000
|
|
|
|
201,000
|
|
|
|
|
ATWOOD
SOUTHERN CROSS
|
|
|
171,000
|
|
|
|
321,000
|
|
|
|
94,000
|
(1)
|
|
|
|
|
VICKSBURG
|
|
|
110,000
|
|
|
|
155,000
|
|
|
|
145,000
|
(2)
|
|
|
|
|
ATWOOD
BEACON
|
|
|
109,000
|
|
|
|
128,000
|
|
|
|
130,000
|
|
|
|
|
|
ATWOOD
AURORA
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
128,000
|
(3)
|
|
|
|
|
SEAHAWK
|
|
|
84,000
|
|
|
|
88,
000
|
|
|
|
86,000
|
|
|
|
|
|
RICHMOND
|
|
|
81,000
|
|
|
|
44,000
|
(4)
|
|
|
69,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Rig has been idle since mid-December 2008.
|
|
|
|
|
|
(2)
Rig is currently undergoing a life-enhancing upgrade.
|
|
|
|
|
|
(3)
Rig commenced operations on April 21, 2009.
|
|
|
|
|
|
(4)
Rig incurred a life-enhancing upgrade during fiscal year
2008.
|
|
|
|
|
|
The ATWOOD HUNTER is currently working
under contract commitments that extend to October/November 2012 at operating
dayrates that range from $538,000 to $545,000, subject to adjustment for cost
escalations. The ATWOOD EAGLE is currently working under a contract
commitment offshore Australia at a dayrate of $405,000, which extends to June
2010. Following completion of this commitment, the rig will commence
a drilling program that could extend for six months or longer at a dayrate of
approximately $430,000 to approximately $450,000, subject to adjustment for cost
escalations. The ATWOOD FALCON is currently working under a contract
until August 19, 2009 at a dayrate of $160,000. Following completion
of this contract commitment, the rig will then commence a two-year contract
commitment on August 20, 2009 at a dayrate of $425,000, subject to adjustment
for cost escalations.
The ATWOOD SOUTHERN CROSS has been idle
since mid-December 2008. Before that, the rig was working at a
dayrate of $352,000. The rig has been undergoing certain equipment repairs
and maintenance which has kept its average operating costs relatively high at
approximately $65,000 per day during this idle
period. Per day operating costs are expected to decline
below $50,000 during the fourth quarter of fiscal year 2009 and stay at this
level as long as the rig remains “ready stacked.” On June 23,
2009, the VICKSBURG completed its contract offshore Thailand and was immediately
moved to a shipyard in Thailand to undergo an approximate $8 million
life-enhancing upgrade. This upgrade is expected to be completed on
or before August 28, 2009. Upon completion of this upgrade, the
VICKSBURG will commence working offshore Thailand under a firm three month
contract which could be extended to six months. This contract
provides for a dayrate of $90,000 to $95,000 depending of the term of the
contract, compared to its previous contract dayrate of approximately
$154,000. The ATWOOD BEACON completed its contract offshore India at
the end of July 2009 and is currently demobilizing to a stacking location
offshore India. During this initial stacking period, the rig will
undergo certain maintenance that will keep its operating costs for the fourth
quarter of fiscal year 2009 relatively high at approximately $65,000 per
day. On April 21, 2009, the ATWOOD AURORA commenced working offshore
Egypt under its two-year contract at a dayrate of $133,000.
The SEAHAWK is working offshore West
Africa under a drilling contract that currently extends into September
2010. For the prior two fiscal years, the SEAHAWK’s operating costs
exceeded or were relatively consistent with revenues; however, for fiscal year
2009, we expect that its revenue will exceed operating costs. Our
only rig in the U.S. Gulf of Mexico, the RICHMOND, is currently “ready stacked”
after completing its contract in early June 2009. We believe this rig
will return to work before the end of the calendar year at a dayrate that could
be in the $30,000’s. Upon delivery, the ATWOOD OSPREY has a
three-year contract that provides for a dayrate of $470,000, with an option to
extend this commitment to six years at a dayrate of $450,000. Both
dayrates are subject to adjustments for cost escalations. We expect
this drilling unit will be mobilized to Australia in early calendar year 2011.
Our to-be-named dynamically positioned semisubmersible is currently without a
contract.
We currently have $250 million borrowed
under our credit facilities, which have a combined borrowing capacity of $580
million, and expect that our outstanding debt will be around $300 million by the
end of fiscal year 2009, with a total debt to capitalization ratio of just over
20%. Our objective is to endeavor to keep our maximum borrowing below
$450 million during the construction of our two deepwater
semisubmersibles. With our approximate $1.8 billion of contracted
backlog revenues expected to remain intact, since our current long-term contract
commitments do not provide for early termination or modification due to market
deterioration, coupled with our additional borrowing capacity of around $330
million (with a current average interest cost of less than 3%), we believe that
we can complete the funding of the construction of our two deepwater
semisubmersibles and maintain a strong balance sheet without requiring any
additional sources of capital. We will remain focused on executing
our current newbuild program and do not anticipate pursuing any further growth
at this time.
RESULTS OF
OPERATIONS
Revenues
for the three and nine months ended June 30, 2009 increased 6% and 24%,
respectively, compared to the three and nine months ended June 30,
2008. A comparative analysis of revenues is as
follows:
|
|
REVENUES
|
|
|
|
(In
millions)
|
|
|
|
Three
Months Ended June 30,
|
|
|
Nine
Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Variance
|
|
|
2009
|
|
|
2008
|
|
|
Variance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATWOOD
HUNTER
|
|
$
|
48.6
|
|
|
$
|
21.5
|
|
|
$
|
27.1
|
|
|
$
|
140.5
|
|
|
$
|
67.7
|
|
|
$
|
72.8
|
|
ATWOOD
EAGLE
|
|
|
36.5
|
|
|
|
26.1
|
|
|
|
10.4
|
|
|
|
107.9
|
|
|
|
53.3
|
|
|
|
54.6
|
|
ATWOOD
AURORA
|
|
|
9.1
|
|
|
|
-
|
|
|
|
9.1
|
|
|
|
9.1
|
|
|
|
-
|
|
|
|
9.1
|
|
ATWOOD
FALCON
|
|
|
18.3
|
|
|
|
17.2
|
|
|
|
1.1
|
|
|
|
55.0
|
|
|
|
51.0
|
|
|
|
4.0
|
|
SEAHAWK
|
|
|
8.0
|
|
|
|
8.3
|
|
|
|
(0.3
|
)
|
|
|
23.4
|
|
|
|
24.1
|
|
|
|
(0.7
|
)
|
ATWOOD
BEACON
|
|
|
11.6
|
|
|
|
12.3
|
|
|
|
(0.7
|
)
|
|
|
35.5
|
|
|
|
34.5
|
|
|
|
1.0
|
|
VICKSBURG
|
|
|
12.8
|
|
|
|
13.9
|
|
|
|
(1.1
|
)
|
|
|
39.6
|
|
|
|
42.6
|
|
|
|
(3.0
|
)
|
RICHMOND
|
|
|
4.4
|
|
|
|
6.0
|
|
|
|
(1.6
|
)
|
|
|
18.9
|
|
|
|
9.9
|
|
|
|
9.0
|
|
ATWOOD
SOUTHERN CROSS
|
|
|
-
|
|
|
|
36.1
|
|
|
|
(36.1
|
)
|
|
|
25.6
|
|
|
|
82.9
|
|
|
|
(57.3
|
)
|
|
|
$
|
149.3
|
|
|
$
|
141.4
|
|
|
$
|
7.9
|
|
|
$
|
455.5
|
|
|
$
|
366.0
|
|
|
$
|
89.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increases
in revenues for the ATWOOD HUNTER and ATWOOD EAGLE were related to each drilling
unit working under significantly higher dayrate contracts during the current
quarter and fiscal year to date period compared to the prior fiscal year
periods. Our new drilling rig, the ATWOOD AURORA, commenced drilling operations
in April 2009 and thus, earned no revenue in the prior fiscal year
periods. Revenues for the ATWOOD FALCON, SEAHAWK, ATWOOD BEACON and
VICKSBURG during the current quarter and fiscal year to date period were
relatively consistent with the prior fiscal year periods. The
decrease in revenue for the RICHMOND for the current quarter is due to the rig
becoming idle in early June 2009 compared to no idle time in the prior fiscal
year quarter, while the increase in revenue for the fiscal year to date period
is due to the rig being in a shipyard undergoing a life-enhancing upgrade for a
significant portion of the first and second quarters of fiscal year 2008 and
thus, earning no revenue during that time as compared to the current fiscal year
in which it had been continuously working until early June
2009. Since the ATWOOD SOUTHERN CROSS has been idle and earning no
revenue since mid December 2008, revenues have decreased during the three and
nine months ended June 30, 2009 when compared to the three and nine months ended
June 30, 2008.
Contract
drilling costs for the three and nine months ended June 30, 2009 increased 2%
and 4%, respectively, compared to the three and nine months ended June 30,
2008. An analysis of contract drilling costs by rig is as
follows:
|
|
CONTRACT
DRILLING COSTS
|
|
|
|
(In
millions)
|
|
|
|
Three
Months Ended June 30,
|
|
|
Nine
Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Variance
|
|
|
2009
|
|
|
2008
|
|
|
Variance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATWOOD
AURORA
|
|
$
|
4.7
|
|
|
$
|
-
|
|
|
$
|
4.7
|
|
|
$
|
4.7
|
|
|
$
|
-
|
|
|
$
|
4.7
|
|
ATWOOD
HUNTER
|
|
|
9.4
|
|
|
|
7.4
|
|
|
|
2.0
|
|
|
|
26.8
|
|
|
|
21.9
|
|
|
|
4.9
|
|
ATWOOD
EAGLE
|
|
|
12.8
|
|
|
|
12.5
|
|
|
|
0.3
|
|
|
|
34.2
|
|
|
|
32.6
|
|
|
|
1.6
|
|
ATWOOD
FALCON
|
|
|
6.4
|
|
|
|
6.6
|
|
|
|
(0.2
|
)
|
|
|
19.5
|
|
|
|
18.0
|
|
|
|
1.5
|
|
RICHMOND
|
|
|
3.5
|
|
|
|
3.7
|
|
|
|
(0.2
|
)
|
|
|
10.3
|
|
|
|
8.4
|
|
|
|
1.9
|
|
ATWOOD
BEACON
|
|
|
4.4
|
|
|
|
4.9
|
|
|
|
(0.5
|
)
|
|
|
13.7
|
|
|
|
14.3
|
|
|
|
(0.6
|
)
|
VICKSBURG
|
|
|
4.5
|
|
|
|
5.3
|
|
|
|
(0.8
|
)
|
|
|
12.7
|
|
|
|
14.1
|
|
|
|
(1.4
|
)
|
SEAHAWK
|
|
|
6.7
|
|
|
|
7.7
|
|
|
|
(1.0
|
)
|
|
|
18.3
|
|
|
|
24.0
|
|
|
|
(5.7
|
)
|
ATWOOD
SOUTHERN CROSS
|
|
|
5.5
|
|
|
|
8.1
|
|
|
|
(2.6
|
)
|
|
|
19.6
|
|
|
|
24.4
|
|
|
|
(4.8
|
)
|
OTHER
|
|
|
0.5
|
|
|
|
0.9
|
|
|
|
(0.4
|
)
|
|
|
7.0
|
|
|
|
2.3
|
|
|
|
4.7
|
|
|
|
$
|
58.4
|
|
|
$
|
57.1
|
|
|
$
|
1.3
|
|
|
$
|
166.8
|
|
|
$
|
160.0
|
|
|
$
|
6.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our new
drilling rig, the ATWOOD AURORA, commenced drilling operations in April 2009 and
thus, incurred no contract drilling costs in the prior fiscal year periods. The
increase in contract drilling costs for the ATWOOD HUNTER for the current
quarter and fiscal year to date period is primarily due to higher agent fees
which are based on a percentage of dayrates. Contract drilling costs
for the ATWOOD EAGLE and ATWOOD FALCON for the current quarter and fiscal year
to date periods were relatively consistent with the prior fiscal year
periods. While current quarter contact drilling costs for the
RICHMOND were consistent with the prior fiscal year quarter, the increase in
contract drilling costs for the nine months ended June 30, 2009 is due to the
rig incurring significantly less operating costs during the first and second
quarters of fiscal year 2008 as the rig was in a shipyard undergoing a life
enhancing upgrade, partially offset by higher maintenance costs during the
upgrade. The decrease in contract drilling costs for the ATWOOD
BEACON and VICKSBURG for the quarter ended June 30, 2009 is due to decreases in
equipment related costs primarily associated with the amount and timing of
maintenance projects when compared to the quarter ended June 30,
2008. While contract drilling costs for the nine months ended June
30, 2009 for the ATWOOD BEACON were consistent with the prior fiscal year
period, the decrease in contract drilling costs for the VICKSBURG is also due to
a decrease in equipment related costs and due to certain operating taxes
incurred during the prior fiscal year, compared to no operating taxes in the
current fiscal year. The decrease in contract drilling costs for the
SEAHAWK for both the current quarter and fiscal year to date period ended June
30, 2009 is due to the amortization of deferred expenses in the prior fiscal
year which ended during the fourth quarter of fiscal year 2008. The
decrease in drilling costs for the ATWOOD SOUTHERN CROSS for the three and nine
month periods ended June 30, 2009 is due to a decrease in agent fees and
headcount reduction of non-essential personnel as the rig has been idle since
mid-December 2008. Other drilling costs have decreased for the
current quarter primarily due to recent exchange rate gains resulting from the
strengthening United States dollar. However, the increase for the
current fiscal year to date period is due to an overall exchange loss during
fiscal year 2009 compared to an overall exchange gain in fiscal year
2008.
We
expect that our operating costs for the quarter ending September 30, 2009 will
be approximately $58 million. For fiscal year 2009, we currently
expect an approximate 4% increase in total operating costs when compared to
fiscal year 2008 with primarily all of the increase due to the commencement of
drilling operations for the ATWOOD AURORA during the current fiscal
year.
Depreciation
expense for the three and nine months ended June 30, 2009 increased by 7% and
decreased by 1%, respectively, compared to the three and nine months ended June
30, 2008. An analysis of depreciation expense by rig is as
follows:
|
|
DEPRECIATION
EXPENSE
|
|
|
|
(In
millions)
|
|
|
|
Three
Months Ended June 30,
|
|
|
Nine
Months Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Variance
|
|
|
2009
|
|
|
2008
|
|
|
Variance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATWOOD
AURORA
|
|
$
|
1.4
|
|
|
$
|
-
|
|
|
$
|
1.4
|
|
|
$
|
1.4
|
|
|
$
|
-
|
|
|
$
|
1.4
|
|
ATWOOD
HUNTER
|
|
|
1.6
|
|
|
|
1.5
|
|
|
|
0.1
|
|
|
|
4.7
|
|
|
|
4.4
|
|
|
|
0.3
|
|
ATWOOD
SOUTHERN CROSS
|
|
|
1.0
|
|
|
|
0.9
|
|
|
|
0.1
|
|
|
|
2.9
|
|
|
|
2.8
|
|
|
|
0.1
|
|
ATWOOD
FALCON
|
|
|
1.4
|
|
|
|
1.3
|
|
|
|
0.1
|
|
|
|
4.0
|
|
|
|
3.9
|
|
|
|
0.1
|
|
RICHMOND
|
|
|
0.4
|
|
|
|
0.4
|
|
|
|
-
|
|
|
|
1.3
|
|
|
|
0.6
|
|
|
|
0.7
|
|
VICKSBURG
|
|
|
0.7
|
|
|
|
0.7
|
|
|
|
-
|
|
|
|
2.1
|
|
|
|
2.1
|
|
|
|
-
|
|
ATWOOD
EAGLE
|
|
|
1.1
|
|
|
|
1.1
|
|
|
|
-
|
|
|
|
3.4
|
|
|
|
3.4
|
|
|
|
-
|
|
ATWOOD
BEACON
|
|
|
1.2
|
|
|
|
1.3
|
|
|
|
(0.1
|
)
|
|
|
3.7
|
|
|
|
3.8
|
|
|
|
(0.1
|
)
|
SEAHAWK
|
|
|
0.6
|
|
|
|
1.6
|
|
|
|
(1.0
|
)
|
|
|
1.8
|
|
|
|
4.6
|
|
|
|
(2.8
|
)
|
OTHER
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
-
|
|
|
|
$
|
9.5
|
|
|
$
|
8.9
|
|
|
$
|
0.6
|
|
|
$
|
25.6
|
|
|
$
|
25.9
|
|
|
$
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our new drilling rig, the ATWOOD
AURORA, was placed into service during April 2009 and thus, incurred no
depreciation expense prior to the current quarter. In accordance with
our company policy, no depreciation expense was recorded for a significant
portion of the first and second quarters of fiscal year 2008 for the RICHMOND,
as the rig was undergoing a life enhancing upgrade to extend its remaining
depreciable life from one to ten years. Effective October 1, 2008, we
extended the remaining depreciable life of the SEAHAWK from one year to five
years based upon the length of its current contract commitment coupled with our
intent to continue marketing and operating the rig beyond one year as the rig is
technically capable of working over this revised period. Depreciation
expense for all other rigs has remained relatively consistent with the prior
fiscal year periods.
General
and administrative expenses for the three and nine months ended June 30, 2009
increased when compared to the prior fiscal year periods primarily due to rising
personnel costs, which include headcount and wages increases and increased
annual bonus compensation costs. Interest
expense has increased for the current quarter and fiscal year to date
period due to higher debt balances when compared to the prior fiscal year
periods. Interest income has decreased as interest rates have
decreased significantly when compared to the prior fiscal year
periods.
Virtually
all of our tax provision for each of the three and nine months ended June 30,
2009 and 2008 relates to taxes in foreign jurisdictions. Accordingly,
due to the high level of operating income earned in certain nontaxable and
deemed profit tax jurisdictions during the three and nine months ended June 30,
2009 and 2008, our effective tax rate for these periods was significantly less
than the United States federal statutory rate. Our effective rate for
the current quarter of 8% is relatively consistent with the prior fiscal year
quarter effective rate of 11%, while our effective rate for the fiscal year to
date period of 15% is higher than the 11% effective rate in the prior fiscal
year primarily due to a significantly lower level of operating income earned in
certain nontaxable and deemed profit tax jurisdictions during the current fiscal
year. Excluding any discrete items that may be incurred, we expect
our effective tax rate to be approximately 15% for fiscal year
2009.
LIQUIDITY
AND CAPITAL RESOURCES
As of
June 30, 2009 and August 5, 2009, we have $200 million borrowed under our 5-year
$300 million credit facility executed in October 2007 (the “2007 Credit
Facility”) and $50 million borrowed under our 5-year $280 million credit
facility executed in November 2008 (the “2008 Credit Facility”). Both
credit facilities contain various financial covenants that, among other things,
require the maintenance of certain leverage and interest expense coverage
ratios. The collateral for these two credit facilities, collectively,
primarily consists of preferred mortgages on six of our drilling units (ATWOOD
EAGLE, ATWOOD HUNTER, ATWOOD FALCON, ATWOOD SOUTHERN CROSS, ATWOOD AURORA and
ATWOOD BEACON). These credit facilities will provide funding to
complete the construction of our two deepwater semisubmersibles being
constructed in Singapore and funding for general corporate needs. We
were in compliance with all financial covenants under both credit facilities at
June 30, 2009, at all times during the first nine months of fiscal year 2009 for
the 2007 Credit Facility and since inception for the 2008 Credit
Facility. For more information see footnote 5 to the Consolidated
Financial Statements.
Our newly
constructed jack-up unit, the ATWOOD AURORA, commenced operations in April 2009
with a total capitalized cost (after being relocated from its construction site
in the United States to its first drilling location offshore Egypt) of
approximately $197 million, with $45 million being incurred in the first nine
months of fiscal year 2009. As of June 30, 2009, we had expended
approximately $245 million towards the construction of the ATWOOD OSPREY and
$279 million towards the construction of our to-be-named dynamically positioned
semisubmersible, with expected total construction costs of approximately $600
million to $625 million and approximately $750 million,
respectively. In addition to these construction projects, we
anticipate that the current upgrade of VICKSBURG will cost approximately $8
million and is expected to be completed on or before August 28,
2009.
Since we
operate in a very cyclical industry, maintaining high equipment utilization in
up, as well as down, cycles is a key factor in generating cash to satisfy
current and future obligations. For fiscal years 2002 through 2008,
net cash provided by operating activities ranged from a low of approximately $14
million in fiscal year 2003 to a high of approximately $192 million in fiscal
year 2008. For the nine months ended June 30, 2009, net cash provided
by operating activities totaled approximately $246 million. Our
operating cash flows are primarily driven by our operating income, which
reflects dayrates and rig utilization. During the first nine months
of fiscal year 2009, we used internally generated cash and funds borrowed under
our credit facilities to expend approximately $45 million toward the completion
of the construction of the ATWOOD AURORA, approximately $286 million towards the
construction of the two deepwater semisubmersibles, and approximately $23
million in other capital expenditures.
We
estimate that our total capital expenditures for the fourth quarter of fiscal
year 2009 will be approximately $50 million, and expect to end fiscal year 2009
with outstanding long-term debt around $300 million. With our current
contract commitments providing for approximately $1.8 billion of backlogged
revenues, coupled with our current additional borrowing capacity of $330 million
under our credit facilities, we believe that we can fund the remaining
construction costs of our two deepwater semisubmersibles and maintain a strong
balance sheet without the need for any additional sources of
capital.
Our
portfolio of accounts receivable is primarily comprised of large independent or
multinational corporate entities with stable payment
experience. Historically, we have not encountered significant
difficulty in collecting receivables and typically do not require collateral for
our receivables.
Inventories
of materials and supplies has increased by approximately $15.6 million at June
30, 2009 compared to September 30, 2008 due to inventory for the ATWOOD AURORA,
which commenced operations in April 2009, and due to increased purchasing of
high dollar, value critical spare parts for our fleet.
Prepaid
expenses and deferred costs have decreased by approximately $7.4 million at June
30, 2009 compared to September 30, 2008 primarily due to the amortization of
annual rig insurance premiums which are generally renewed and paid for during
the fourth quarter of each fiscal year.
Accrued
liabilities have increased by approximately $13.7 million at June 30, 2009
compared to September 30, 2008 primarily due to a higher amount of accrued but
unpaid agent fees and capital expenditures.
Income
tax payable has increased by approximately by approximately $6.2 million at June
30, 2009 compared to September 30, 2008 due to increased tax accruals resulting
from higher earnings and the timing of tax payments associated with these
accruals.
Short-term
deferred credits have increased by approximately $5.8 million at June 30, 2009
compared to September 30, 2008 due to a prepayment of revenue by a customer
during the current quarter which will be recognized as revenue in the quarter
ended September 30, 2009.
Long-term
deferred credits have decreased by approximately $4.8 million at June 30, 2009
compared to September 30, 2008 due to the amortization of deferred fees
associated with the prior upgrade of the ATWOOD FALCON. Lump sum fees
received for upgrade costs reimbursed by our customers are reported as deferred
credits in the accompanying Consolidated Balance Sheets and are recognized as
earned on a straight-line method over the term of the related drilling
contracts.
PART
I. ITEM 3
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk,
including adverse changes in interest rates and foreign currency exchange rates
as discussed below.
INTEREST
RATE RISK
All of our $250 million of long-term
debt outstanding at June 30, 2009, was floating rate debt. As a
result, our annual interest costs in fiscal year 2009 will fluctuate based on
interest rate changes. The impact on annual cash flow of a 10% change
in the floating rate (approximately 25 basis points) would be approximately $0.6
million, which we believe to be immaterial. We did not have any open
derivative contracts relating to our floating rate debt at June 30,
2009.
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 June 30, 2009 amounts, a
decrease in the value of 10% in the foreign currencies relative to the United
States dollar from the year-end exchange rates would result in a foreign
currency transaction gain of approximately $0.5 million. Thus, we consider our
current risk exposure to foreign currency exchange rate movements, based on net
cash flows, to be immaterial. We did not have any open derivative
contracts relating to foreign currencies at June 30, 2009.
PART
I. ITEM 4
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 controls 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 effective at the
reasonable assurance level so that the information required to be disclosed by
us in our periodic SEC filings is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules, regulations and forms and
have been accumulated and communicated to our management, including executive
and financial officers, as appropriate to allow timely decisions regarding
required disclosures. 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)
|
Changes
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
ITEM
6. EXHIBITS
(a) Exhibits
|
3.1
|
Amended
and Restated Certificate of Formation dated February 9, 2006 (Incorporated
herein by reference to Exhibit 3.1 of our Form 10-Q filed May 12,
2008).
|
|
3.2
|
Amendment
No. 1 to Amended and Restated Certificate of Formation dated February 14,
2008 (Incorporated herein by reference to Exhibit 3.2 of our Form 10-Q
filed May 12, 2008).
|
|
3.3
|
Second
Amended and Restated By-Laws, dated May 5, 2006 (Incorporated herein by
reference to Exhibit 3.2 of our Form 10-Q filed May 12,
2008).
|
|
3.4
|
Amendment
No. 1 to Second Amended and Restated By-Laws, dated June 7, 2007
(Incorporated herein by reference to Exhibit 3.4 of our Form 10-Q filed
May 12, 2008).
|
|
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).
|
|
4.2
|
Certificate
of Adjustment of Atwood Oceanics, Inc. dated as of March 17, 2006
(Incorporated herein by reference to Exhibit 4.1 of our Form 8-K filed
March 23, 2006).
|
|
4.3
|
Certificate
of Adjustment of Atwood Oceanics, Inc. dated as of June 25, 2008
(Incorporated herein by reference to Exhibit 4.1 of our Form 8-K filed
June 25, 2008).
|
|
4.4
|
See
Exhibit Nos. 3.1, 3.2, 3.3, and 3.4 hereof for provisions of our Amended
and Restated Certificate of Formation (as amended) and Second Amended and
Restated By-Laws (as amended) defining the rights of our shareholders
(Incorporated herein by reference to Exhibits 3.1, 3.2, 3.3 and 3.4 of our
Form 10-Q filed May 12, 2008).
|
|
*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
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: August
6, 2009
/s
/JAMES M.
HOLLAND
James M.
Holland
Senior
Vice President,
Chief Financial
Officer,
Chief Accounting
Officer and Secretary
EXHIBIT
INDEX
EXHIBIT
NO.
DESCRIPTION
|
3.1
|
Amended
and Restated Certificate of Formation dated February 9, 2006 (Incorporated
herein by reference to Exhibit 3.1 of our Form 10-Q filed May 12,
2008).
|
|
3.2
|
Amendment
No. 1 to Amended and Restated Certificate of Formation dated February 14,
2008 (Incorporated herein by reference to Exhibit 3.2 of our Form 10-Q
filed May 12, 2008).
|
|
3.3
|
Second
Amended and Restated By-Laws, dated May 5, 2006 (Incorporated herein by
reference to Exhibit 3.2 of our Form 10-Q filed May 12,
2008).
|
|
3.4
|
Amendment
No. 1 to Second Amended and Restated By-Laws, dated June 7, 2007
(Incorporated herein by reference to Exhibit 3.4 of our Form 10-Q filed
May 12, 2008).
|
|
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).
|
|
4.2
|
Certificate
of Adjustment of Atwood Oceanics, Inc. dated as of March 17, 2006
(Incorporated herein by reference to Exhibit 4.1 of our Form 8-K filed
March 23, 2006).
|
|
4.3
|
Certificate
of Adjustment of Atwood Oceanics, Inc. dated as of June 25, 2008
(Incorporated herein by reference to Exhibit 4.1 of our Form 8-K filed
June 25, 2008).
|
|
4.4
|
See
Exhibit Nos. 3.1, 3.2, 3.3, and 3.4 hereof for provisions of our Amended
and Restated Certificate of Formation (as amended) and Second Amended and
Restated By-Laws (as amended) defining the rights of our shareholders
(Incorporated herein by reference to Exhibits 3.1, 3.2, 3.3 and 3.4 of our
Form 10-Q filed May 12, 2008).
|
|
*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.
|
|
*32.2
|
Certificate
of Chief Financial Officer pursuant to Section 906 of Sarbanes – Oxley Act
of 2002.
|
*Filed
herewith
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