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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 3, 2017

ATWOOD OCEANICS, INC.
(Exact name of registrant as specified in its charter)

Texas
1-13167
74-1611874
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)


15011 Katy Freeway, Suite 800, Houston, Texas
77094
(Address of principal executive offices)
(Zip Code)
 
 
 
 
 Registrant’s telephone number, including area code: (281) 749-7800
 
 
N/A
 
 
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
 





ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

Our press release dated August 3, 2017, concerning financial results for the third quarter ended June 30, 2017, furnished as Exhibit 99.1, is incorporated herein by reference.


SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d)
EXHIBITS

The exhibits to this report furnished pursuant to item 9.01 are as follows:

99.1
Press Release dated August 3, 2017







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.


 
ATWOOD OCEANICS, INC.
 
(Registrant)
Date: August 3, 2017


 
/s/ Mark W. Smith
 
Mark W. Smith
 
Senior Vice President and Chief Financial Officer






EXHIBIT INDEX


EXHIBIT NO
DESCRIPTION
 
 
99.1
 
Press Release dated August 3, 2017




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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


Exhibit 99.1
FOR IMMEDIATE RELEASE - EARNINGS

HOUSTON, August 3, 2017 -- Atwood Oceanics, Inc. (NYSE: ATW) ("Company"), announced today that it had recognized a net loss of 4.3 million or $(0.05) per diluted share, on revenues of $117.2 million for the quarter ended June 30, 2017 compared to net loss of 28.9 million or $(0.37) per diluted share on revenues of $167.7 million for the quarter ended March 31, 2017 and compared to net income of $99.5 million or $1.53 per diluted share, on revenues of $227.8 million for the quarter ended June 30, 2016. For the nine months ended June 30, 2017, the Company recognized a net loss of 23.5 million or $(0.32) per diluted share, on revenues of $442.5 million compared to net income of $261.0 million or $4.02 per diluted share, on revenues of $832.0 million for the nine months ended June 30, 2016.

Rob Saltiel, President and Chef Executive Officer, commented on the Company’s third quarter financial results. “Our third quarter revenues were impacted negatively by lower fleet revenue efficiency due to isolated downtime incidents. In contrast, the rig fleet operated at a revenue efficiency of approximately 99% for the month of July. Third quarter contract drilling costs were significantly lower than those of the second quarter due to excellent cost control and efficient progression of the Atwood Condor project as this rig prepares for work in Australia commencing January 2018.”    

During the nine months ended June 30, 2016, we repurchased, through open market transactions, $159.3 million aggregate principal amount of our Senior Notes for $102.5 million, including accrued interest. As a result of the repurchases, we recognized a total gain on debt retirement, net of the related debt issuance costs and premium, of $58.9 million ($44.1 million, net of tax, or $0.68 per diluted share) in Gains on extinguishment of debt on our Condensed Consolidated Statements of Operations for the nine ended June 30, 2016.

These repurchases, in the nine month periods ended June 30, 2016, allowed us to reduce our outstanding indebtedness and related interest expense at a significant discount to the face value of our Senior Notes. The gain associated with the repurchases was subject to tax and increased our effective tax rate. However, due to the availability of operating loss carry-forwards the actual cash tax impact was minimal. The repurchases were made using available cash balances.

Pending Merger with Ensco plc ("Ensco")
On May 29, 2017, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Ensco and Echo Merger Sub LLC, a wholly owned subsidiary of Ensco (“Merger Sub”), pursuant to which Ensco will acquire the Company in an all-stock transaction. Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, each share of common stock, par value $1.00 per share (other than shares of Company common stock held by Ensco, Merger Sub or the Company), will be converted into the right to receive 1.60 validly issued, fully paid and nonassessable Class A ordinary shares of Ensco, nominal value $0.10.
The Merger Agreement contains customary representations, warranties and covenants by the Company, Merger Sub and Ensco. The Merger Agreement also contains customary pre-closing covenants, including the obligation of the Company and Ensco to conduct their respective businesses in the ordinary course of business and to refrain from taking specified actions without the consent of the other party.
The consummation of the Merger is subject to satisfaction of customary closing conditions, including among other things, the approval of the allotment and issuance of Ensco shares by Ensco’s shareholders, approval of the Merger by both the Company’s and Ensco's shareholders, the expiration or termination of any waiting period applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Acts of 1976 (the "HSR Act") and similar regulatory clearances in certain other jurisdictions. On June 29, 2017, the transaction received early termination of the waiting period under the HSR Act. The Merger is expected to close in the third quarter of calendar 2017.

Conference Call

Given the proposed Merger with Ensco, the Company will not hold a conference call to discuss its quarterly results.


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For the Three Months Ended
 
(Unaudited)
(In thousands, except per share amounts)
June 30,
2017
 
March 31,
2017
 
June 30,
2016
Revenues
$
117,234

 
$
167,706

 
$
227,797

Income (Loss) before Income Taxes
(1,768
)
 
(27,316
)
 
120,116

Provision for Income Taxes
(2,581
)
 
(1,546
)
 
(20,611
)
Net Income (Loss)
$
(4,349
)
 
$
(28,862
)
 
$
99,505

 
 
 
 
 
 
Earnings per Common Share -
 
 
 
 
 
Basic
$
(0.05
)
 
$
(0.37
)
 
$
1.54

Diluted
$
(0.05
)
 
$
(0.37
)
 
$
1.53


 
 
 
Nine Months Ended
 
 
 
(Unaudited)
(In thousands, except per share amounts)
 
 
June 30,
2017
 
June 30,
2016
Revenues
 
 
$
442,496

 
$
831,967

Income (Loss) before Income Taxes
 
 
(17,021
)
 
306,837

Provision for Income Taxes
 
 
(6,520
)
 
(45,814
)
Net Income (Loss)
 
 
$
(23,541
)
 
$
261,023

 
 
 
 
 
 
Earnings per Common Share -
 
 
 
 
 
Basic
 
 
$
(0.32
)
 
$
4.03

Diluted
 
 
$
(0.32
)
 
$
4.02


6




ATWOOD OCEANICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 
Three Months Ended June 30,
 
Nine Months Ended June 30,
(In thousands, except per share amounts)
2017
 
2016
 
2017
 
2016
REVENUES:
 
 
 
 
 
 
 
Contract drilling
$
111,803

 
$
217,818

 
$
423,906

 
$
794,979

Revenues related to reimbursable expenses
5,431

 
9,979

 
18,590

 
36,988

Total revenues
117,234

 
227,797

 
442,496

 
831,967

 
 
 
 
 
 
 
 
COSTS AND EXPENSES:
 
 
 
 
 
 
 
Contract drilling
48,182

 
80,524

 
178,129

 
301,094

Reimbursable expenses
3,245

 
5,489

 
14,521

 
22,898

Depreciation
38,500

 
41,084

 
121,751

 
124,964

General and administrative
15,557

 
12,028

 
43,193

 
38,693

Asset impairment
211

 
(659
)
 
59,173

 
64,773

Loss on sale of assets
379

 

 
261

 
77

Other, net

 
16

 

 
(1,044
)
 
106,074

 
138,482

 
417,028

 
551,455

 
 
 
 
 
 
 
 
OPERATING INCOME
11,160

 
89,315

 
25,468

 
280,512

 
 
 
 
 
 
 
 
OTHER (EXPENSE) INCOME:
 
 
 
 
 
 
 
Interest expense, net of capitalized interest
(13,636
)
 
(19,674
)
 
(43,464
)
 
(50,533
)
Interest income
708

 
9

 
975

 
19

Gains on extinguishment of debt

 
50,466

 

 
58,863

Other income

 

 

 
17,976

 
(12,928
)
 
30,801

 
(42,489
)
 
26,325

 
 
 
 
 
 
 
 
(LOSS) INCOME BEFORE INCOME TAXES
(1,768
)
 
120,116

 
(17,021
)
 
306,837

PROVISION FOR INCOME TAXES
2,581

 
20,611

 
6,520

 
45,814

NET (LOSS) INCOME
$
(4,349
)
 
$
99,505

 
$
(23,541
)
 
$
261,023

 
 
 
 
 
 
 
 
(LOSS) EARNINGS PER COMMON SHARE (NOTE 3):
 
 
 
 
 
 
 
Basic
$
(0.05
)
 
$
1.54

 
$
(0.32
)
 
$
4.03

Diluted
$
(0.05
)
 
$
1.53

 
$
(0.32
)
 
$
4.02

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (NOTE 3):
 
 
 
 
 
 
 
Basic
80,542

 
64,795

 
74,515

 
64,750

Diluted
80,542

 
64,847

 
74,515

 
64,852



7



ATWOOD OCEANICS, INC. AND SUBSIDIARIES
UNAUDITED ANALYSIS OF REVENUES AND DRILLING COSTS

 
REVENUES
 
Three Months Ended
 
Nine Months Ended
(In millions)
June 30,
2017
 
March 31,
2017
 
June 30,
2016
 
June 30,
2017
 
June 30,
2016
Ultra-Deepwater
$
109

 
$
162

 
$
182

 
$
419

 
$
553

Deepwater

 

 

 

 
131

Jackups
3

 

 
36

 
5

 
111

Reimbursable
5

 
6

 
10

 
18

 
37

 
$
117

 
$
168

 
$
228

 
$
442

 
$
832



 
DRILLING COSTS
 
Three Months Ended
 
Nine Months Ended
(In millions)
June 30,
2017
 
March 31,
2017
 
June 30,
2016
 
June 30,
2017
 
June 30,
2016
Ultra-Deepwater
$
43

 
$
53

 
$
54

 
$
146

 
$
168

Deepwater

 

 
10

 
1

 
71

Jackups
7

 
11

 
16

 
32

 
62

Reimbursable
3

 
5

 
5

 
15

 
23

Other
(2
)
 

 
1

 
(1
)
 

 
$
51

 
$
69

 
$
86

 
$
193

 
$
324





8



ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)
June 30,
2017
 
September 30,
2016
 
(Unaudited)
 
 
 ASSETS
 
 
 
Cash
$
474,313

 
$
145,427

Accounts receivable, net
78,140

 
113,091

Income tax receivable
2,769

 
6,095

Inventories of materials and supplies, net
102,444

 
109,925

Prepaid expenses, deferred costs and other current assets
13,617

 
18,504

Total current assets
671,283

 
393,042

 
 
 
 
Property and equipment, net
4,137,741

 
4,127,696

 
 
 
 
Other receivables
11,831

 
11,831

Deferred income taxes
165

 
165

Deferred costs and other assets
7,174

 
7,058

Total assets
$
4,828,194

 
$
4,539,792

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Accounts payable
$
35,822

 
$
25,299

Accrued liabilities
11,034

 
7,868

Interest payable
13,571

 
7,096

Income tax payable
7,239

 
8,294

Deferred credits and other liabilities
8,663

 
799

 Total current liabilities
76,329

 
49,356

 
 
 
 
Long-term debt
1,298,136

 
1,227,919

Deferred income taxes
1,815

 
1,202

Deferred credits
12,429

 

Other
39,663

 
30,929

 Total long-term liabilities
1,352,043

 
1,260,050

 
 
 
 
Commitments and contingencies (Note 9)
 
 
 
 
 
 
 
Preferred stock, no par value, 1,000 shares authorized, none outstanding

 

Common stock, $1.00 par value, 180,000 shares authorized with 80,544 issued (Note 10) and outstanding as of June 30, 2017 and 180,000 shares authorized and 64,799 shares issued and outstanding as of September 30, 2016
80,544

 
64,799

 Paid-in capital
413,831

 
237,542

 Retained earnings
2,905,334

 
2,929,839

 Accumulated other comprehensive loss
113

 
(1,794
)
Total shareholders' equity
3,399,822

 
3,230,386

Total liabilities and shareholders' equity
$
4,828,194

 
$
4,539,792





9



ATWOOD OCEANICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


 
Nine Months Ended June 30,
(In thousands)
2017
 
2016
Cash flows from operating activities:
 
 
 
Net (loss) income
$
(23,541
)
 
$
261,023

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
Depreciation
121,751

 
124,964

Amortization
4,357

 
2,407

Provision for doubtful accounts
2,472

 
4,619

Deferred income tax benefit
86

 
(378
)
Share-based compensation expense
10,657

 
8,224

Asset impairment
59,173

 
64,753

Loss (gain) on sale of assets
261

 
(71
)
Gain on extinguishment of debt

 
(58,863
)
Other, net

 
(1,137
)
Changes in assets and liabilities:
 
 
 
Accounts receivable
32,479

 
121,964

Income tax receivable
3,326

 
511

Inventories of materials and supplies
(891
)
 
12,988

Prepaid expenses, deferred costs and other current assets
6,324

 
19,377

Deferred costs and other assets
(6,440
)
 
(1,019
)
Accounts payable
911

 
(33,674
)
Accrued liabilities
10,400

 
(3,274
)
Income tax payable
(1,055
)
 
(376
)
Deferred credits and other liabilities
28,558

 
(6,623
)
Net cash provided by operating activities
248,828

 
515,415

 
 
 
 
Cash flows from investing activities:
 
 
 
Capital expenditures
(173,246
)
 
(198,248
)
Proceeds from sale of assets
2,338

 
20,813

Net cash used in investing activities
(170,908
)
 
(177,435
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Proceeds from issuance of long-term debt
125,000

 
45,000

Principal payments on long-term debt
(55,000
)
 
(290,110
)
Dividends paid

 
(21,746
)
Payments related to exercise of stock options

 
(930
)
Proceeds from issuance of common stock
180,966

 

Windfall tax benefits from share-based payment arrangements

 
14,797

Net cash provided by (used in) financing activities
250,966

 
(252,989
)
Net increase in cash and cash equivalents
328,886

 
84,991

Cash and cash equivalents, at beginning of period
145,427

 
113,983

Cash and cash equivalents, at end of period
$
474,313

 
$
198,974

 
 
 
 
Non-cash activities:
 
 
 
Increase in accounts payable related to capital expenditures
$
9,612

 
$
7,902



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Atwood Oceanics, Inc. is a leading offshore drilling company engaged in the drilling and completion of exploration and development wells for the global oil and gas industry. The Company currently owns 10 mobile offshore drilling units and is constructing two ultra-deepwater drillships. The Company was founded in 1968 and is headquartered in Houston, Texas. Atwood Oceanics, Inc. common stock is traded on the New York Stock Exchange under the symbol "ATW." For more information about the Company, please visit www.atwd.com.


Contact: Mark W. Smith
Senior Vice President and Chief Financial Officer
(281) 749-7840



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