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): March 10, 2016
 
 
 
 
 
 
PARAGON OFFSHORE plc
(Exact name of Registrant as specified in its charter)

 
 
 
 
 
 
 
 
 
 
 
 
England and Wales
 
001-36465
 
98-1146017
(State or other jurisdiction of
incorporation or organization)
 
(Commission
file number)
 
(I.R.S. employer
identification number)
 
 
 
 
3151 Briarpark Drive, Suite 700
Houston, Texas
 
77042
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: + 1 832 783 4000
 
 
 
 
 
 
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))



Item 2.02.    Results of Operation and Financial Condition.
On March 10, 2016, Paragon Offshore plc (the “Company”) issued a press release announcing its consolidated and combined financial results for the year ended December 31, 2015. A copy of such press release is included as Exhibit 99.1 hereto and will be published on the Company’s web site at www.paragonoffshore.com.
Pursuant to the rules and regulations of the Securities and Exchange Commission, the press release is being furnished and shall not be deemed to be “filed” under the Securities Exchange Act of 1934.
 

Item 9.01.    Financial Statements and Exhibits.
 
(d)
Exhibits

Exhibit 99.1
Paragon Offshore plc Press Release dated March 10, 2016.



2


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.
 
 
 
 
 
 
 
 
 
 
 
 
Paragon Offshore plc, a public limited company incorporated under the laws of England and Wales
 
 
 
 
Date:
March 10, 2016
 
 
 
 
 
 
 
 
 
 
 
By:
 
/s/ Steven A. Manz
 
 
 
Name:
 
Steven A. Manz
 
 
 
Title:
 
Senior Vice President and Chief Financial Officer


3


INDEX TO EXHIBITS

Exhibit No.
Description

99.1
Paragon Offshore plc Press Release dated March 10, 2016, announcing its consolidated and combined financial results for the year ended December 31, 2015.            



4





EXHIBIT 99.1
 
Paragon Offshore plc
3151 Briarpark Drive
Suite 700
Houston, Texas 77042
 
 
 
 
PRESS RELEASE

PARAGON OFFSHORE REPORTS FOURTH QUARTER AND FULL YEAR 2015 RESULTS

•
Fourth quarter adjusted EBITDA of $95.9 million net of impairments, gains, and taxes; revenues of $299.6 million
•
Full year 2015 adjusted EBITDA of $561.3 million net of impairments, gains, and taxes; revenues of $1.5 billion
•
Contract drilling services costs 18 percent lower quarter-on-quarter; 14 percent lower year-on-year
•
General and administrative costs, excluding restructuring, 20 percent lower quarter-on-quarter; 19 percent lower year-on-year
•
Cash balance at December 31, 2015 of $776.6 million
•
Contract backlog at December 31, 2015 of $1.0 billion
 
HOUSTON, March 10, 2016 - Paragon Offshore plc (“Paragon”) (OTC: PGNPQ) today reported a fourth quarter 2015 net loss of $23.3 million, or a loss of $0.27 per diluted share, as compared to fourth quarter 2014 net income of $2.8 million, or $0.03 per diluted share. Results for the fourth quarter 2015 included a $28.8 million, or $0.33 per share, non-cash asset impairment charge related to fixed assets under construction and capital spare parts, a net gain on sale of assets of $0.5 million, or $0.01 per share, and a $2.1 million, or $0.02 per share, tax benefit as a result of the impairment.

Excluding the above charge, gain, and tax benefit, Paragon’s adjusted net income for the fourth quarter 2015 was $3.0 million, or $0.03 per diluted share (for a reconciliation to net income for all “adjusted” metrics, see the Reconciliation of GAAP to Non-GAAP Financial Measures Table). Results for the fourth quarter 2014 included a $130.5 million, or $1.47 per diluted share, non-cash impairment charge related to four cold-stacked units each of which the company decided to scrap. Fourth quarter 2014 results also included an $11.7 million, or $0.13 per diluted share, gain related to the repurchase of an aggregate principal amount of $35.2 million of the company’s senior unsecured notes. Excluding the impairment, the tax impact of the loss on the impairment, and the gain, Paragon’s adjusted net income for the fourth quarter 2014 was $80.3 million, or $0.90 per diluted share.

For the twelve month period ending December 31, 2015, Paragon reported a loss of $999.6 million, or $11.65 per diluted share, on revenues of $1.5 billion compared to a net loss of $646.7 million, or a loss of $7.63 per diluted share, on revenues of $2.0 billion for the twelve month period ending December 31, 2014. Results for the full year 2015 included non-cash impairment charges of $1.2 billion as well as gains totaling $17.6 million related to the sale of assets and the repurchase of the company’s senior unsecured notes. Excluding these items, Paragon’s adjusted net income for full year 2015 was $95.7 million, or $1.04 per diluted share. This compares to net income for full year 2014 of $351.8 million, or $4.07 per diluted share, after adjusting 2014 results for non-cash impairment charges of $1.1 billion primarily related to four cold-stacked units and gains of $18.7 million related to the repurchase of the company’s senior unsecured notes.

For the fourth quarter 2015, adjusted EBITDA, defined as net income (loss) before taxes, less interest expense, interest income, depreciation, losses on impairments, sale of assets and extinguishments of debt, was $95.9 million, compared to $140.3 million in the third quarter of 2015. For the twelve month period ending December 31, 2015, adjusted EBITDA was $561.3 million compared to $942.3 million for the full year 2014.

“Paragon responded to the deteriorating environment in the fourth quarter by reducing costs and advancing our efforts to strengthen the balance sheet,” said Randall D. Stilley, President and Chief Executive Officer. “We lowered contract drilling costs in the fourth quarter by 18 percent and general and administrative costs by 20 percent, exclusive of restructuring costs, compared to the previous quarter. We also continued to reduce capital spending. Our restructuring efforts were rewarded as we were able to reach the

5


recently announced agreements with debtholders to eliminate more than $1.1 billion in debt while preserving the flexibility to navigate this downturn.”

Total revenues for the fourth quarter of 2015 were $299.6 million compared to $369.0 million in the third quarter of 2015. Paragon reported utilization for its marketed rig fleet, which excludes available days related to rigs that were stacked and not marketed during the quarter, as 56 percent for the fourth quarter of 2015 compared to 69 percent for the third quarter of 2015. Average daily revenues decreased three percent in the fourth quarter of 2015 to $140,000 per rig compared to the previous quarter average of $144,000 per rig. Contract drilling services costs declined 18 percent in the fourth quarter to $156.8 million compared to $190.5 million in the third quarter of 2015.

General and administrative (“G&A”) costs for the fourth quarter 2015 totaled $17.6 million compared to $12.8 million for the third quarter of 2015 and $24.1 million for the fourth quarter of 2014. Restructuring costs totaled $8.2 million in the fourth quarter 2015 compared to $1.2 million in the third quarter 2015. Excluding restructuring costs, G&A costs were $9.3 million and $11.7 million for the fourth and third quarters of 2015, respectively. For the full year 2015, G&A costs totaled $50.1 million excluding $9.4 million in restructuring costs compared to $62.1 million for full year 2014.

Net cash from operating activities was $97.0 million in the fourth quarter of 2015 as compared to $79.7 million for the third quarter of 2015. Capital expenditures in the fourth quarter totaled $46.2 million, and $202.9 million for the full year. At December 31, 2015, liquidity, defined as cash and cash equivalents plus availability under the company’s revolving credit facility, totaled $775.8 million while the company’s leverage ratio, the ratio of the company’s net debt to trailing twelve months EBITDA as defined in the company’s revolving credit facility, was 3.78 at December 31, 2015.
Operating Highlights
Paragon’s total contract backlog at December 31, 2015 was an estimated $1.01 billion compared to $1.29 billion at September 30, 2015, including approximately $142.1 million of backlog for the Paragon DPDS3 that Paragon’s customer Petrobras has indicated it may contest in connection with the length of prior shipyard projects relating to the rig. There were no new contracts or contract extensions in the fourth quarter of 2015.
Utilization of Paragon’s marketed floating rig fleet decreased to 61 percent in the fourth quarter compared to 100 percent utilization achieved in the third quarter of 2015. Average daily revenues for Paragon’s floating rig fleet declined by three percent to $252,000 per rig in the fourth quarter of 2015 from $260,000 per rig in the third quarter of 2015.
Utilization of Paragon’s marketed jackup rig fleet decreased to 55 percent in the fourth quarter compared to the 64 percent in the third quarter of 2015. Average daily revenues for Paragon’s jackup fleet during the fourth quarter increased by four percent to $121,000 per rig from $116,000 per rig during the third quarter of 2015.
At the end of the fourth quarter of 2015, an estimated 36 percent of the company’s marketed rig operating days were committed for 2016, including 28 percent and 37 percent of the floating and jackup rig days, respectively. The calculations for committed operating days exclude available days related to rigs that were stacked and not marketed during the quarter.
Restructuring Update
As announced on February 15, 2016, Paragon commenced proceedings to restructure its balance sheet under Chapter 11 of the United States Bankruptcy Code (“Chapter 11”) in the United States Bankruptcy Court in the District of Delaware. The company has entered into a Plan Support Agreement (“PSA”) with an ad hoc committee representing approximately 77 percent in the aggregate of holders (the “Bondholders”) of its senior unsecured notes and a group comprising approximately 96 percent of the amounts outstanding (the “Revolver Lenders”) under Paragon’s Senior Secured Revolving Credit Agreement (the “Revolving Credit Agreement”). Approval of the transaction by the Revolver Lenders and the Bondholders will require that 2/3 in principal amount and 1/2 in number of those voting in each class to approve the transaction. Paragon also reached an agreement with Noble Corporation (“Noble”) whereby Noble will provide Mexican tax bonding and assume certain tax liabilities.
Outlook
“It’s already clear that 2016 will be a year of significantly reduced activity across the industry,” Mr. Stilley said. “We are re-examining our capital and operating expenditures every day as we look to improve our financial performance. Our focus for the year is to proceed as quickly as possible with our restructuring efforts, ensure that we maintain adequate liquidity, capture any contract opportunities that become available, and position ourselves for growth when commodity prices eventually trigger renewed customer interest in offshore drilling.”

6


Paragon Provides Additional Information: Prior Period Adjustment and Going Concern Risk
For periods prior to Paragon’s spin-off from Noble Corporation plc (“Noble”) on August 1, 2014 (the “Spin-Off”), results of operations are based on Noble’s standard-specification business (our “Predecessor”) and include contributions from three standard specification rigs retained by Noble and three standard specification rigs that were sold prior to the Spin-Off. For more information regarding the Spin-Off, please see Paragon’s filings with the U.S. Securities and Exchange Commission (the “SEC”) available on the company’s website at www.paragonoffshore.com.

The accompanying consolidated financial statements have been prepared assuming that Paragon will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The company’s ability to continue as a going concern is contingent upon the Bankruptcy Court’s approval of its reorganization plan. This represents a material uncertainty related to events and conditions that may cause significant doubt on the company’s ability to continue as a going concern and, therefore, the company may be unable to realize its assets and discharge its liabilities in the normal course of business. While operating as debtors in possession under Chapter 11, Paragon may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business (and subject to restrictions in our debt agreements), for amounts other than those reflected in the company’s consolidated financial statements. Investors are urged to review the contents of the company’s Form 10-K including the discussions under “Risk Factors” when the document is filed.
About Paragon Offshore
Paragon is a global provider of offshore drilling rigs. Paragon’s operated fleet includes 34 jackups, including two high specification heavy duty/harsh environment jackups, and six floaters (four drillships and two semisubmersibles). Paragon’s primary business is contracting its rigs, related equipment and work crews to conduct oil and gas drilling and workover operations for its exploration and production customers on a dayrate basis around the world. Paragon’s principal executive offices are located in Houston, Texas. Paragon is a public limited company registered in England and Wales with company number 08814042 and registered office at 20-22 Bedford Row, London, WC1R 4JS, England. Additional information is available at www.paragonoffshore.com.
Forward-Looking Disclosure Statement
This release contains forward-looking statements. Statements regarding contract backlog, earnings, costs, cost reductions, revenue, rig demand, fleet condition or performance, shareholder value, contract commitments, dayrates, contract commencements, contract extensions or renewals, contract disputes, industry fundamentals, customer relationships and requirements, strategic initiatives, future performance, growth opportunities, market outlook, compliance with financial covenants, ability to achieve value through our Chapter 11 filing, our ability to implement the transactions contemplated by the PSA, as well as any other statements that are not historical facts in this release, are forward-looking statements that involve certain risks, uncertainties and assumptions. These include but are not limited to risks associated with the general nature of the oil and gas industry, risks associated with the operation of Paragon as a separate, publicly traded company, actions by regulatory authorities, customers and other third parties, and other factors detailed in the “Risk Factors” section of Paragon’s annual report on Form 10-K for the fiscal year ended December 31, 2014, and in Paragon’s other filings with the SEC, which are available free of charge on the SEC’s website at www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated.
Conference Call
Paragon also scheduled a teleconference and webcast related to its fourth quarter 2015 results on Friday, March 11, 2016, at 8:00 a.m. U.S. Central Time. The teleconference can be accessed from the U.S. and Canada by dialing 1-888-771-4371, or internationally by dialing 1-847-585-4405, and using access code: 41861337. Interested parties may also listen to the webcast through a link posted on Paragon’s website at www.paragonoffshore.com, under “Events & Presentations” in the “Investor Relations” section of the website.
A telephonic replay of the conference call will be available on Friday, March 11, 2016, beginning at approximately 11:00 a.m. U.S. Central Time, through Friday, March 25, 2016, ending at approximately 11:00 p.m. U.S. Central Time. The phone number for the conference call replay is 1-888-843-7419 or, for calls from outside of the U.S., 1-630-652-3042, using access code: 41861337.  A replay of the conference call will also be available on Paragon’s website at www.paragonoffshore.com, under “Events & Presentations” in the “Investor Relations” section of the website.

7


For additional information, contact:
For Investors
  
Lee M. Ahlstrom
& Media:
  
Senior Vice President – Investor Relations, Strategy and Planning
 
  
 +1.832.783.4040

8


PARAGON OFFSHORE plc
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
 
 
2015
 
2014
 
2015
 
2014
Operating revenues
 
 
 
 
 
 
 
 
Contract drilling services
 
$
267,113

 
$
456,026

 
$
1,368,731

 
$
1,866,497

Labor contract drilling services
 
7,884

 
8,482

 
29,108

 
33,401

Reimbursables and other
 
24,566

 
30,485

 
94,589

 
93,864

 
 
299,563

 
494,993

 
1,492,428

 
1,993,762

Operating costs and expenses
 
 
 
 
 
 
 
 
 Contract drilling services
 
156,763

 
224,536

 
769,373

 
890,694

 Labor contract drilling services
 
4,513

 
5,745

 
20,599

 
24,774

 Reimbursables
 
23,118

 
26,401

 
81,291

 
77,843

 Depreciation and amortization
 
58,694

 
91,088

 
339,268

 
422,235

 General and administrative
 
17,574

 
24,116

 
59,475

 
62,081

 Loss on impairments
 
28,811

 
130,540

 
1,181,358

 
1,059,487

 Gain on sale of assets, net
 
(500
)
 
—

 
(13,217
)
 
—

 Gain on repurchase of long-term debt
 
—

 
(11,744
)
 
(4,345
)
 
(18,675
)
 
 
288,973

 
490,682

 
2,433,802

 
2,518,439

Operating income (loss)
 
10,590

 
4,311

 
(941,374
)
 
(524,677
)
Other income (expense)
 
 
 
 
 
 
 
 
Interest expense, net of amount capitalized
 
(36,929
)
 
(27,964
)
 
(130,036
)
 
(56,654
)
Other, net
 
(1,731
)
 
3,090

 
(310
)
 
3,920

Loss before income taxes
 
(28,070
)
 
(20,563
)
 
(1,071,720
)
 
(577,411
)
Income tax benefit (provision)
 
4,807

 
23,307

 
72,108

 
(69,394
)
Net income (loss)
 
$
(23,263
)
 
$
2,744

 
$
(999,612
)
 
$
(646,805
)
Net income (loss) attributable to non-controlling interest
 
—

 
59

 
(31
)
 
59

Net income (loss) attributable to Paragon
 
$
(23,263
)
 
$
2,803

 
$
(999,643
)
 
$
(646,746
)
 
 
 
 
 
 
 
 
 
Earnings (loss) per share
 
 
 
 
 
 
 
 
Basic and diluted
 
$
(0.27
)
 
$
0.03

 
$
(11.65
)
 
$
(7.63
)


9


PARAGON OFFSHORE plc
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
 
 
December 31,
 
December 31,
 
 
2015
 
2014
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
773,571

 
$
56,772

Restricted cash
 
3,000

 
12,502

Accounts receivable, net of allowance for doubtful accounts
 
266,325

 
539,376

Prepaid and other current assets
 
110,027

 
104,644

Total current assets
 
1,152,923

 
713,294

 
 
 
 
 
Property and equipment, net
 
1,111,098

 
2,410,360

Other assets
 
119,844

 
129,735

Total assets
 
$
2,383,865

 
$
3,253,389

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Current liabilities
 
 
 
 
Current maturities of long-term debt
 
$
40,629

 
$
272,166

Accounts payable and accrued expenses
 
85,374

 
160,874

Accrued payroll and related costs
 
48,246

 
81,416

Other current liabilities
 
109,640

 
207,838

Total current liabilities
 
283,889

 
722,294

 
 
 
 
 
Long-term debt
 
2,559,462

 
1,888,439

Deferred income taxes
 
9,373

 
58,497

Other liabilities
 
37,731

 
89,910

Total liabilities
 
2,890,455

 
2,759,140

 
 
 
 
 
Total shareholders’ equity (deficit)
 
(506,590
)
 
491,608

Non-controlling interest
 
—

 
2,641

Total equity (deficit)
 
(506,590
)
 
494,249

Total liabilities and equity
 
$
2,383,865

 
$
3,253,389



10


PARAGON OFFSHORE plc
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
 
Twelve Months Ended
 
 
December 31,
 
 
2015
 
2014
Cash flows from operating activities
 
 
 
 
Net loss
 
$
(999,612
)
 
$
(646,805
)
Adjustments to reconcile net loss to net cash from operating activities:
 
 
 
 
Depreciation and amortization
 
339,268

 
422,235

Loss on impairments
 
1,181,358

 
1,059,487

Gain on sale of assets, net
 
(13,217
)
 
—

Gain on repurchase of long-term debt
 
(4,345
)
 
(18,675
)
Other changes in operating activities
 
(19,719
)
 
(119,253
)
Net cash provided by operating activities
 
483,733

 
696,989

 
 
 
 
 
Cash flows from investing activities
 
 
 
 
Capital expenditures
 
(202,909
)
 
(261,641
)
Proceeds from sale of assets
 
30,816

 
6,570

Acquisition of Prospector Offshore Drilling S.A.
 
—

 
(176,569
)
Acquisition of Prospector Offshore Drilling S.A. non-controlling interest
 
(2,185
)
 
(10,306
)
Change in restricted cash
 
(15,528
)
 
(12,502
)
Change in accrued capital expenditures
 
(14,638
)
 
1,230

Net cash used in investing activities
 
(204,444
)
 
(453,218
)
 
 
 
 
 
Cash flows from financing activities
 
 
 
 
 Net change in borrowings on Predecessor bank credit facilities
 
—

 
707,472

 Net Activity – Revolving Credit Facility
 
11,000

 
154,000

 Additional Borrowings – Revolving Credit Facility
 
543,500

 
—

 Proceeds from issuance of Senior Notes and Term Loan Facility
 
—

 
1,710,550

 Proceeds from Sale-Leaseback Financing, net
 
291,576

 
—

 Repayment of Term Loan Facility
 
(6,500
)
 
(1,625
)
 Repayment of Prospector Senior Credit Facility
 
(265,666
)
 
—

 Repayment of Prospector Bonds
 
(101,000
)
 
—

 Repayments on Sale-Leaseback Financing
 
(28,854
)
 
—

 Purchase of Senior Notes
 
(6,546
)
 
(65,354
)
 Dividends paid
 
—

 
(11,075
)
 Debt issuance costs
 
—

 
(19,253
)
 Net transfers to parent
 
—

 
(2,698,295
)
Net cash provided by (used in) financing activities
 
437,510

 
(223,580
)
Net change in cash and cash equivalents
 
716,799

 
20,191

Cash and cash equivalents, beginning of period
 
56,772

 
36,581

Cash and cash equivalents, end of period
 
$
773,571

 
$
56,772



11


PARAGON OFFSHORE plc
OPERATIONAL INFORMATION
(Unaudited)
 
 
 
As Reported
 
 
Three Months Ended
 
 
December 31,
 
September 30,
 
 
2015
 
2014
 
2015
Rig fleet operating statistics (1)(2)
 
 
 
 
 
 
Jackups:
 
 
 
 
 
 
Average Rig Utilization
 
52
%
 
80
%
 
60
%
Marketed Utilization (3)
 
55
%
 
82
%
 
64
%
Operating Days
 
1,625

 
2,548

 
1,891

Average Dayrate
 
$
120,687

 
$
120,252

 
$
116,071

Floaters:
 
 
 
 
 
 
Average Rig Utilization
 
51
%
 
71
%
 
83
%
Marketed Utilization (3)
 
61
%
 
94
%
 
100
%
Operating Days
 
282

 
521

 
459

Average Dayrate
 
$
252,130

 
$
287,303

 
$
259,844

Total:
 
 
 
 
 
 
Average Rig Utilization
 
52
%
 
76
%
 
64
%
Marketed Utilization (3)
 
56
%
 
84
%
 
69
%
Operating Days
 
1,907

 
3,069

 
2,350

Average Dayrate
 
$
140,086

 
$
148,615

 
$
144,158

 
(1)
We define average rig utilization for a specific period as the total number of days our rigs are operating under contract, divided by the product of the total number of our rigs, including cold-stacked rigs, and the number of calendar days in such period. Information reflects our policy of reporting on the basis of the number of available rigs in our fleet.
(2)
Amounts exclude the Paragon FPSO1.
(3)
Marketed utilization excludes the impact of Paragon cold-stacked rigs for the current quarter.


12


PARAGON OFFSHORE plc
CALCULATION OF BASIC AND DILUTED EARNINGS/LOSS PER SHARE
(In thousands, except per share amounts)
(Unaudited)
The following table sets forth the computation of basic and diluted earnings (loss) per share:
 
 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
 
 
2015
 
2014
 
2015
 
2014
Allocation of income (loss):
 
 
 
 
 
 
 
 
Basic and diluted
 
 
 
 
 
 
 
 
Net income (loss) attributable to Paragon
 
$
(23,263
)
 
$
2,803

 
$
(999,643
)
 
$
(646,746
)
Earnings allocated to unvested share-based payment awards (1)
 
—

 
(127
)
 
—

 
—

Net income (loss) to ordinary shareholders - basic and diluted
 
$
(23,263
)
 
$
2,676

 
$
(999,643
)
 
$
(646,746
)
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding - basic and diluted
 
86,026

 
84,753

 
85,785

 
84,753

 
 
 
 
 
 
 
 
 
Weighted average unvested share-based payment awards (1)
 
6,714

 
4,012

 
6,197

 
1,761

 
 
 
 
 
 
 
 
 
Earnings (loss) per share
 
 
 
 
 
 
 
 
Basic and diluted
 
$
(0.27
)
 
$
0.03

 
$
(11.65
)
 
$
(7.63
)

(1)
No earnings were allocated to unvested share-based payment awards in our earnings per share calculation for the three months ended December 31, 2015, twelve months ended December 31, 2015 and 2014 due to net losses in each respective period.
    

13


PARAGON OFFSHORE plc
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts)
(Unaudited)
The following table sets forth the reconciliation of net income (loss) to adjusted net income (non-GAAP):
 
 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
 
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Paragon
 
$
(23,263
)
 
$
2,803

 
$
(999,643
)
 
$
(646,746
)
Adjustments:
 
 
 
 
 
 
 
 
Gain on repurchase of long-term debt
 
—

 
(11,744
)
 
(4,345
)
 
(18,675
)
Gain on sale of assets, net
 
(500
)
 
—

 
(13,217
)
 
—

Loss on impairments
 
28,811

 
130,540

 
1,181,358

 
1,059,487

Tax impact of loss on impairments
 
(2,081
)
 
(41,273
)
 
(68,422
)
 
(42,250
)
Adjusted net income
 
$
2,967

 
$
80,326

 
$
95,731

 
$
351,816

 
 
 
 
 
 
 
 
 
Allocation of adjusted net income:
 
 
 
 
 
 
 
 
Basic and diluted
 
 
 
 
 
 
 
 
Adjusted net income
 
$
2,967

 
$
80,326

 
$
95,731

 
$
351,816

Earnings allocated to unvested share-based payment awards (1)
 
(199
)
 
(3,631
)
 
(6,450
)
 
(7,161
)
Adjusted net income to ordinary shareholders - basic and diluted
 
$
2,768

 
$
76,695

 
$
89,281

 
$
344,655

 
 
 
 
 
 
 
 
 
Weighted average number of shares outstanding - basic and diluted
 
86,026

 
84,753

 
85,785

 
84,753

 
 
 
 
 
 
 
 
 
Weighted average unvested share-based payment awards (1)
 
6,714

 
4,012

 
6,197

 
1,761

 
 
 
 
 
 
 
 
 
Adjusted earnings per share
 
 
 
 
 
 
 
 
Basic and diluted
 
$
0.03

 
$
0.90

 
$
1.04

 
$
4.07


(1)
Although no earnings were allocated to unvested share-based payment awards in our earnings per share calculation for the three months ended December 31, 2015, twelve months ended December 31, 2015 and 2014 due to our net loss in each respective period, we have allocated earnings to unvested share-based payment awards in our calculation of adjusted earnings per share.


14


PARAGON OFFSHORE plc
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (Cont’d)
(In thousands)
(Unaudited)
 
 
 
As Reported
 
As Reported
 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
September 30,
 
December 31,
 
 
2015
 
2014
 
2015
 
2015
 
2014
Operating revenues
 
 
 
 
 
 
 
 
 
 
Contract drilling services
 
$
267,113

 
$
456,026

 
$
338,710

 
$
1,368,731

 
$
1,866,497

Labor contract drilling services
 
7,884

 
8,482

 
6,853

 
29,108

 
33,401

Reimbursables and other
 
24,566

 
30,485

 
23,410

 
94,589

 
93,864

 
 
299,563

 
494,993

 
368,973

 
1,492,428

 
1,993,762

Operating costs and expenses
 
 
 
 
 
 
 
 
 
 
Contract drilling services
 
156,763

 
224,536

 
190,536

 
769,373

 
890,694

Labor contract drilling services
 
4,513

 
5,745

 
4,792

 
20,599

 
24,774

Reimbursables
 
23,118

 
26,401

 
19,517

 
81,291

 
77,843

Depreciation and amortization
 
58,694

 
91,088

 
95,826

 
339,268

 
422,235

General and administrative
 
17,574

 
24,116

 
12,800

 
59,475

 
62,081

Loss on impairments
 
28,811

 
130,540

 
1,150,846

 
1,181,358

 
1,059,487

Gain on sale of assets, net
 
(500
)
 
—

 
—

 
(13,217
)
 
—

Gain on repurchase of long-term debt
 
—

 
(11,744
)
 
—

 
(4,345
)
 
(18,675
)
 
 
288,973

 
490,682

 
1,474,317

 
2,433,802

 
2,518,439

Operating income (loss)
 
10,590

 
4,311

 
(1,105,344
)
 
(941,374
)
 
(524,677
)
Other income (expense)
 
 
 
 
 
 
 
 
 
 
Interest expense, net of amount capitalized
 
(36,929
)
 
(27,964
)
 
(33,900
)
 
(130,036
)
 
(56,654
)
Other, net
 
(1,731
)
 
3,090

 
(983
)
 
(310
)
 
3,920

Loss before income taxes
 
(28,070
)
 
(20,563
)
 
(1,140,227
)
 
(1,071,720
)
 
(577,411
)
Income tax benefit (provision)
 
4,807

 
23,307

 
55,389

 
72,108

 
(69,394
)
Net income (loss)
 
(23,263
)
 
2,744

 
(1,084,838
)
 
(999,612
)
 
(646,805
)
Net income attributable to non-controlling interests
 
—

 
59

 
—

 
(31
)
 
59

Net income (loss) attributable to Paragon
 
$
(23,263
)
 
$
2,803

 
$
(1,084,838
)
 
$
(999,643
)
 
$
(646,746
)
 
 
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
58,694

 
91,088

 
95,826

 
339,268

 
422,235

Loss on impairments
 
28,811

 
130,540

 
1,150,846

 
1,181,358

 
1,059,487

Gain on sale of assets, net
 
(500
)
 
—

 
—

 
(13,217
)
 
—

Gain on repurchase of long-term debt
 
—

 
(11,744
)
 
—

 
(4,345
)
 
(18,675
)
Interest expense, net of amount capitalized
 
36,929

 
27,964

 
33,900

 
130,036

 
56,654

Income tax (benefit) provision
 
(4,807
)
 
(23,307
)
 
(55,389
)
 
(72,108
)
 
69,394

EBITDA
 
$
95,864

 
$
217,344

 
$
140,345

 
$
561,349

 
$
942,349


15