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
QUARTERLY PERIOD ENDED MARCH 31, 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 April 30, 2009: 64,186,527 shares of common stock, $1 par
value
ATWOOD
OCEANICS, INC.
FORM
10-Q
For the
Quarter Ended March 31, 2009
Part
I. Financial Information
|
|
|
|
Item
1.
|
Unaudited
Condensed Consolidated Financial Statements
|
Page
|
|
|
a)
|
Condensed
Consolidated Statements of Operations
For
the Three and Six Months Ended March 31, 2009 and 2008
|
3
|
|
|
b)
|
Condensed
Consolidated Balance Sheets
As
of March 31, 2009 and September 30, 2008
|
4
|
|
|
c)
|
Condensed
Consolidated Statements of Cash Flows
For
the Six Months Ended March 31, 2009 and 2008
|
5
|
|
|
d)
|
Condensed
Consolidated Statement of Changes in Shareholders’
Equity
for the Six Months Ended March 31, 2009
|
6
|
|
|
e)
|
Notes
to Condensed Consolidated Financial Statements
|
7
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
16
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
27
|
|
|
Item
4.
|
Controls
and Procedures
|
28
|
|
Part
II. Other Information
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
29
|
|
|
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
|
|
|
Six
Months Ended
|
|
|
|
March
31,
|
|
|
March
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
drilling
|
|
$
|
140,652
|
|
|
$
|
113,530
|
|
|
$
|
306,156
|
|
|
$
|
224,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS
AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
drilling
|
|
|
53,008
|
|
|
|
51,845
|
|
|
|
108,405
|
|
|
|
102,905
|
|
Depreciation
|
|
|
8,143
|
|
|
|
8,586
|
|
|
|
16,052
|
|
|
|
17,043
|
|
General
and administrative
|
|
|
7,645
|
|
|
|
7,173
|
|
|
|
17,889
|
|
|
|
15,482
|
|
Gains
on sale of equipment, net
|
|
|
(229
|
)
|
|
|
(112
|
)
|
|
|
(181
|
)
|
|
|
(85
|
)
|
|
|
|
68,567
|
|
|
|
67,492
|
|
|
|
142,165
|
|
|
|
135,345
|
|
OPERATING
INCOME
|
|
|
72,085
|
|
|
|
46,038
|
|
|
|
163,991
|
|
|
|
89,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net of capitalized interest
|
|
|
(604
|
)
|
|
|
(139
|
)
|
|
|
(909
|
)
|
|
|
(942
|
)
|
Interest
income
|
|
|
52
|
|
|
|
455
|
|
|
|
167
|
|
|
|
1,174
|
|
|
|
|
(552
|
)
|
|
|
316
|
|
|
|
(742
|
)
|
|
|
232
|
|
INCOME
BEFORE INCOME TAXES
|
|
|
71,533
|
|
|
|
46,354
|
|
|
|
163,249
|
|
|
|
89,465
|
|
PROVISION
FOR INCOME TAXES
|
|
|
15,106
|
|
|
|
4,599
|
|
|
|
28,459
|
|
|
|
9,161
|
|
NET
INCOME
|
|
$
|
56,427
|
|
|
$
|
41,755
|
|
|
$
|
134,790
|
|
|
$
|
80,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS
PER COMMON SHARE (NOTE 3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.88
|
|
|
$
|
0.66
|
|
|
$
|
2.10
|
|
|
$
|
1.26
|
|
Diluted
|
|
|
0.88
|
|
|
|
0.65
|
|
|
|
2.10
|
|
|
|
1.25
|
|
AVERAGE
COMMON SHARES OUTSTANDING (NOTE 3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
64,186
|
|
|
|
63,602
|
|
|
|
64,134
|
|
|
|
63,486
|
|
Diluted
|
|
|
64,235
|
|
|
|
64,428
|
|
|
|
64,284
|
|
|
|
64,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
March
31,
|
|
|
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
213,881
|
|
|
$
|
121,092
|
|
Accounts
receivable, net of an allowance
|
|
|
|
|
|
|
|
|
of
$1,079 and $114 at March 31, 2009
|
|
|
|
|
|
|
|
|
and
September 30, 2008, respectively
|
|
|
113,134
|
|
|
|
132,367
|
|
Insurance
receivable
|
|
|
3,068
|
|
|
|
-
|
|
Income
tax receivable
|
|
|
4,315
|
|
|
|
3,292
|
|
Inventories
of materials and supplies
|
|
|
50,686
|
|
|
|
37,906
|
|
Deferred
tax assets
|
|
|
21
|
|
|
|
21
|
|
Prepaid
expenses and deferred costs
|
|
|
4,389
|
|
|
|
10,225
|
|
Total
Current Assets
|
|
|
389,494
|
|
|
|
304,903
|
|
|
|
|
|
|
|
|
|
|
NET
PROPERTY AND EQUIPMENT
|
|
|
983,860
|
|
|
|
787,838
|
|
|
|
|
|
|
|
|
|
|
DEFERRED
COSTS AND OTHER ASSETS
|
|
|
5,697
|
|
|
|
3,856
|
|
|
|
$
|
1,379,051
|
|
|
$
|
1,096,597
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
17,216
|
|
|
$
|
16,987
|
|
Accrued
liabilities
|
|
|
57,982
|
|
|
|
39,560
|
|
Deferred
credits
|
|
|
367
|
|
|
|
304
|
|
Total
Current Liabilities
|
|
|
75,565
|
|
|
|
56,851
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM
DEBT
|
|
|
300,000
|
|
|
|
170,000
|
|
|
|
|
300,000
|
|
|
|
170,000
|
|
LONG
TERM LIABILITIES:
|
|
|
|
|
|
|
|
|
Deferred
income taxes
|
|
|
9,709
|
|
|
|
10,595
|
|
Deferred
credits
|
|
|
4,937
|
|
|
|
7,942
|
|
Other
|
|
|
6,387
|
|
|
|
7,519
|
|
|
|
|
21,033
|
|
|
|
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 64,186 and 64,031 issued
|
|
|
|
|
|
|
|
|
and
outstanding at March 31, 2009
|
|
|
|
|
|
|
|
|
and
September 30, 2008, respectively
|
|
|
64,186
|
|
|
|
64,031
|
|
Paid-in
capital
|
|
|
118,622
|
|
|
|
114,804
|
|
Retained
earnings
|
|
|
799,645
|
|
|
|
664,855
|
|
Total
Shareholders' Equity
|
|
|
982,453
|
|
|
|
843,690
|
|
|
|
$
|
1,379,051
|
|
|
$
|
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)
|
|
Six
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
income
|
|
$
|
134,790
|
|
|
$
|
80,304
|
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
provided
(used) by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
16,052
|
|
|
|
17,043
|
|
Amortization
of debt issuance costs
|
|
|
314
|
|
|
|
515
|
|
Amortization
of deferred items
|
|
|
(6,849
|
)
|
|
|
(5,168
|
)
|
Provision
for doubtful accounts
|
|
|
965
|
|
|
|
650
|
|
Provision
for inventory obsolesence
|
|
|
470
|
|
|
|
130
|
|
Deferred
income tax benefit
|
|
|
(886
|
)
|
|
|
(1,526
|
)
|
Stock-based
compensation expense
|
|
|
3,965
|
|
|
|
3,489
|
|
Gains
on sale of equipment
|
|
|
(181
|
)
|
|
|
(85
|
)
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
(Increase)
decrease in accounts receivable
|
|
|
18,268
|
|
|
|
(8,079
|
)
|
Increase
in insurance receivable
|
|
|
(1,812
|
)
|
|
|
-
|
|
(Increase)
decrease in income tax receivable
|
|
|
(1,023
|
)
|
|
|
670
|
|
Increase
in inventory
|
|
|
(13,529
|
)
|
|
|
(5,211
|
)
|
Decrease
in prepaid expenses
|
|
|
6,002
|
|
|
|
3,898
|
|
Increase
in deferred costs and other assets
|
|
|
(764
|
)
|
|
|
(1,288
|
)
|
Increase
in accounts payable
|
|
|
229
|
|
|
|
1,140
|
|
Increase
in accrued liabilities
|
|
|
18,697
|
|
|
|
5,681
|
|
Increase
in deferred credits and other liabilities
|
|
|
3,829
|
|
|
|
842
|
|
Net
cash provided by operating activities
|
|
|
178,537
|
|
|
|
93,005
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM INVESTING
ACTIVITIES
:
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(213,433
|
)
|
|
|
(128,138
|
)
|
Proceeds
from sale of equipment
|
|
|
288
|
|
|
|
138
|
|
Net
cash used by investing activities
|
|
|
(213,145
|
)
|
|
|
(128,000
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Principal
payments on debt
|
|
|
-
|
|
|
|
(18,000
|
)
|
Proceeds
from debt
|
|
|
130,000
|
|
|
|
50,000
|
|
Proceeds
from exercise of stock options
|
|
|
8
|
|
|
|
3,176
|
|
Debt
issuance costs paid
|
|
|
(2,611
|
)
|
|
|
(1,336
|
)
|
Net
cash provided by financing activities
|
|
|
127,397
|
|
|
|
33,840
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
$
|
92,789
|
|
|
$
|
(1,155
|
)
|
CASH AND CASH
EQUIVALENTS,
at beginning of period
|
|
$
|
121,092
|
|
|
$
|
100,361
|
|
CASH AND CASH
EQUIVALENTS,
at end of period
|
|
$
|
213,881
|
|
|
$
|
99,206
|
|
|
|
|
|
|
|
|
|
|
Non-cash
activities
|
|
|
|
|
|
|
|
|
Increase
in insurance receivable related to reduction in value of spare capital
equipment and inventory
|
|
|
|
|
|
|
|
|
of
spare capital equipment and inventory
|
|
$
|
1,256
|
|
|
$
|
-
|
|
Increase
(decrease) in accrued liabilities related to capital
|
|
|
|
|
|
|
|
|
expenditures
|
|
$
|
(275
|
)
|
|
$
|
2,294
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
Stockholders’
|
|
(In
thousands)
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2008
|
|
|
64,031
|
|
|
$
|
64,031
|
|
|
$
|
114,804
|
|
|
$
|
664,855
|
|
|
$
|
843,690
|
|
Net
income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
134,790
|
|
|
|
134,790
|
|
Restricted
stock awards
|
|
|
154
|
|
|
|
154
|
|
|
|
(154
|
)
|
|
|
|
|
|
|
-
|
|
Exercise
of employee stock options
|
|
|
1
|
|
|
|
1
|
|
|
|
7
|
|
|
|
-
|
|
|
|
8
|
|
Stock
option and restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
award
compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
3,965
|
|
|
|
-
|
|
|
|
3,965
|
|
March
31, 2009
|
|
|
64,186
|
|
|
$
|
64,186
|
|
|
$
|
118,622
|
|
|
$
|
799,645
|
|
|
$
|
982,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 March 31, 2009 and for the three and six
month periods ended March 31, 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.
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 March
31, 2009, unrecognized compensation cost, net of estimated forfeitures, related
to stock options and restricted stock awards was approximately $5.1 million
and $9.6 million, respectively, which we expect to recognize over a weighted
average period of approximately 2.4 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
|
|
|
Six
Months
|
|
|
|
Ended
|
|
|
Ended
|
|
March
31, 2009:
|
|
|
|
|
|
|
Increase
in contract drilling expenses
|
|
$
|
574
|
|
|
$
|
1,138
|
|
Increase
in general and administrative expenses
|
|
|
1,344
|
|
|
|
2,827
|
|
Decrease
in income tax provision
|
|
|
(470
|
)
|
|
|
(989
|
)
|
Decrease
of net income
|
|
$
|
1,448
|
|
|
$
|
2,976
|
|
|
|
|
|
|
|
|
|
|
Decrease
in earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.02
|
|
|
$
|
0.05
|
|
Diluted
|
|
$
|
0.02
|
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31, 2008:
|
|
|
|
|
|
|
|
|
Increase
in contract drilling expenses
|
|
$
|
541
|
|
|
$
|
897
|
|
Increase
in general and administrative expenses
|
|
|
1,528
|
|
|
|
2,592
|
|
Decrease
in income tax provision
|
|
|
(535
|
)
|
|
|
(907
|
)
|
Decrease
of net income
|
|
$
|
1,534
|
|
|
$
|
2,582
|
|
|
|
|
|
|
|
|
|
|
Decrease
in earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.02
|
|
|
$
|
0.04
|
|
Diluted
|
|
$
|
0.02
|
|
|
$
|
0.04
|
|
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 six months
ended March 31, 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 six months ended March 31, 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 six months ended March 31, 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
|
|
|
(1
|
)
|
|
$
|
7.68
|
|
|
|
|
|
|
$
|
11
|
|
Forfeited
|
|
|
(14
|
)
|
|
$
|
25.63
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2009
|
|
|
1,524
|
|
|
$
|
17.98
|
|
|
|
6.7
|
|
|
$
|
(2,118
|
)
|
Exercisable
at March 31, 2009
|
|
|
968
|
|
|
$
|
14.64
|
|
|
|
5.5
|
|
|
$
|
1,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 six months ended March 31, 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
|
|
|
(154
|
)
|
|
$
|
19.47
|
|
Forfeited
|
|
|
(9
|
)
|
|
$
|
33.47
|
|
Unvested
at March 31, 2009
|
|
|
591
|
|
|
$
|
30.64
|
|
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
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
Per
Share
|
|
|
Net
|
|
|
|
|
|
Per
Share
|
|
|
|
Income
|
|
|
Shares
|
|
|
Amount
|
|
|
Income
|
|
|
Shares
|
|
|
Amount
|
|
March
31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
56,427
|
|
|
|
64,186
|
|
|
$
|
0.88
|
|
|
$
|
134,790
|
|
|
|
64,134
|
|
|
$
|
2.10
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
---
|
|
|
|
49
|
|
|
$
|
-
|
|
|
|
---
|
|
|
|
150
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$
|
56,427
|
|
|
|
64,235
|
|
|
$
|
0.88
|
|
|
$
|
134,790
|
|
|
|
64,284
|
|
|
$
|
2.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
41,755
|
|
|
|
63,602
|
|
|
$
|
0.66
|
|
|
$
|
80,304
|
|
|
|
63,486
|
|
|
$
|
1.26
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
---
|
|
|
|
826
|
|
|
$
|
(0.01
|
)
|
|
|
---
|
|
|
|
890
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$
|
41,755
|
|
|
|
64,428
|
|
|
$
|
0.65
|
|
|
$
|
80,304
|
|
|
|
64,376
|
|
|
$
|
1.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
calculation of diluted earnings per share for the three and six month periods
ended March 31, 2009 excludes consideration of shares of common stock related to
543,000 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):
|
|
|
|
March
31,
|
|
|
September
30,
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Drilling
vessels and related equipment
|
|
|
|
|
|
Cost
|
|
|
$
|
1,317,449
|
|
|
$
|
1,106,709
|
|
|
Accumulated
depreciation
|
|
|
(338,512
|
)
|
|
|
(324,376
|
)
|
|
|
Net
book value
|
|
|
978,937
|
|
|
|
782,333
|
|
|
|
|
|
|
|
|
|
|
|
|
Drill
Pipe
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
15,671
|
|
|
|
15,568
|
|
|
Accumulated
depreciation
|
|
|
(12,754
|
)
|
|
|
(12,139
|
)
|
|
|
Net
book value
|
|
|
2,917
|
|
|
|
3,429
|
|
|
|
|
|
|
|
|
|
|
|
|
Furniture
and other
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
9,615
|
|
|
|
9,423
|
|
|
Accumulated
depreciation
|
|
|
(7,609
|
)
|
|
|
(7,347
|
)
|
|
|
Net
book value
|
|
|
2,006
|
|
|
|
2,076
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
PROPERTY AND EQUIPMENT
|
|
$
|
983,860
|
|
|
$
|
787,838
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
March 31, 2009, we had approximately $187 million and $208 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. We have also expended
approximately $195 million on the ATWOOD AURORA, which was delivered in December
2008 and 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. Thus, we are currently unable to provide a reasonable estimate
as to the total damage caused by the fire. However, we have
specifically identified approximately $1.0 million of capital equipment and $0.3
million of inventory that needs to be replaced which has therefore been written
off. In addition, $1.8 million of costs have been incurred to assess
and repair certain damaged equipment. We have also recorded our
estimated insurance recoveries in an amount equal to these losses and costs,
less our deductible. Thus, as of March 31, 2009, an insurance
receivable has been recorded for our estimated insurance
recoveries.
A summary
of long-term debt is as follows (in thousands):
|
|
|
March
31,
|
|
|
September
30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
credit facility, bearing interest (market adjustable)
|
|
|
|
|
|
|
|
at
approximately 4.4% and 3.5% per annum at
|
|
|
|
|
|
|
|
March
31, 2009 and September 30, 2008, respectively
|
|
$
|
200,000
|
|
|
$
|
170,000
|
|
|
2008
credit facility, bearing interest (market adjustable)
|
|
|
|
|
|
|
|
|
|
at
approximately 4.1% per annum at March 31, 2009
|
|
|
100,000
|
|
|
|
-
|
|
|
|
|
$
|
300,000
|
|
|
$
|
170,000
|
|
|
|
|
|
|
|
|
|
|
|
During
November 2008, we entered into a new credit agreement with several banks with
Nordea Bank Finland plc, New York Branch acting 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 (with terms as
defined in the credit agreement), 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 2008 Credit Facility contains a
number of limitations on our ability, along with our subsidiaries, 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.
The 2008
Credit Facility and the $300 million Credit Facility established in 2007 (“the
2007 Credit Facility”) contain various financial covenants (with terms as
defined in the credit agreement) 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 March 31,
2009, our leverage ratio was 0.26, our interest expense coverage ratio was 22.1
and our collateral maintenance % was in excess of 300%. We were in
compliance with all financial covenants under the 2008 Credit Facility and the
2007 Credit Facility at March 31, 2009 and at all times during the six months
ended March 31, 2009. As of May 7, 2009, no additional funds have been
borrowed under either the 2007 Credit Facility or the 2008 Credit Facility
subsequent to March 31, 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 March 31, 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 March 31, 2009
as such instruments bear short-term, market-based interest rates.
At March
31, 2009, we had approximately $2.4 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 March 31, 2009, all $2.4 million of
the net unrecognized tax benefits would affect our effective tax rate if
recognized. A summary of activity related to the net unrecognized tax
benefits for the six months ended March 31, 2009 is as follows (in
thousands):
|
|
Liability
for Uncertain Tax Positions
|
|
|
|
|
|
Balance
at October 1, 2008
|
|
$
|
3,492
|
|
|
|
|
|
|
Decreases
based on tax positions
|
|
|
|
|
related
to prior fiscal years
|
|
|
(1,080
|
)
|
|
|
|
|
|
Balance
December 31, 2008
|
|
$
|
2,412
|
|
|
|
|
|
|
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 six months ended March 31,
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 six months ended March 31,
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 do not
anticipate that the adoption of FSP FAS 157-4 will have a material impact
on 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
are in the process of reviewing the additional disclosure requirements of FSP
FAS 107-1 and APB 28-1.
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
In India,
where we currently operate and have previously operated in the prior two
fiscal years, a new service tax of approximately 12% was enacted in 2004 on
revenues derived from seismic and exploration activities. This law was
subsequently amended in 2007 and 2008 to state that revenues derived from mining
services and drilling services, respectively, were specifically subject to this
service tax. The contract terms with our customer in
India provide that any liability related to any taxes pursuant to laws
not in effect at the time the contract was executed is the obligation of our
customer. As a result, in our opinion, which is supported by our legal and
tax advisors, any such service taxes under either provision of the 2007 or 2008
amendments would be the obligation of our customer. Our customer is
currently 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. In our opinion and the opinion of our legal and tax advisors,
drilling services were not covered by the 2004 law; thereby, making any service
tax assessments under our current contract terms the obligation of our
customer.
As of
March 31, 2009, we have accrued for service taxes on drilling services performed
from June 1, 2007 to March 31, 2009 as such services were provided subsequent to
the effective date of the 2007 amendment of the law establishing the service
tax. Even though we believe the tax is ultimately the responsibility
of our customer, we have registered with the Indian tax authorities and have
remitted service taxes on behalf of our customer and recorded a receivable from
our customer for such taxes. As of March 31, 2009, we have paid to
the Indian government $6.8 million in service tax on behalf of our customer and
have accrued $3.4 million of additional obligations in accrued liabilities and
recorded a corresponding $10.2 million account receivable from our customer for
such service taxes.
10.
RECLASSIFICATIONS
Certain reclassifications have been
made to the prior year end financial statements to conform to the current
interim period presentation.
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 March 31, 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 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 10K 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 crisis
coupled with reduced prices for oil and natural gas 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.
Besides the ATWOOD SOUTHERN CROSS,
which is currently idle, we could also incur idle time on the RICHMOND
commencing in June 2009 and on the ATWOOD BEACON and VICKSBURG commencing in
July 2009 based upon current expected timing of contract terminations for each
drilling unit. We will continue to pursue additional contract
commitments for these four rigs; however, there is no guarantee that we will not
incur idle time on some or all of these units. We expect that any
additional contract commitments we are able to secure for the VICKSBURG and
ATWOOD BEACON will be at dayrate levels below their current dayrates of $154,000
and $133,500, respectively. The current dayrate on the RICHMOND
is $52,500 compared to $85,000 on its previous well.
On April 21, 2009, the ATWOOD AURORA,
our newly constructed ultra-premium jack-up unit, commenced working offshore
Egypt under its two-year contract with RWE Dea Nile GmbH (“RWE
Dea”). Delays in RWE Dea accepting the rig due to a longer than
expected period for completing final rig commissioning of certain equipment in
order to commence operations resulted in an adjustment in the dayrate to
$133,000. This contract includes a cost escalation clause and
provides an option for one additional year at a dayrate of
$178,000.
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 approximately $600 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 March 31, 2009, we have invested approximately $400
million toward the construction of these two drilling units. Funding
of the approximate $950 million remaining on the construction of these two units
will come from internally generated funds and borrowings under our two credit
facilities, which have a combined borrowing capacity of $580
million. We currently have $300 million borrowed under our credit
facilities and will endeavor to keep our maximum borrowing below $500 million
during the construction of these two units.
With the recent commencement of
drilling operations of the ATWOOD AURORA, we now have nine (9) owned operational
drilling units and two drilling units currently under construction, of which
five (5) have current contract commitments that extend into fiscal year 2011 or
later; one (1) has an
option
which is expected to be exercised and, if exercised, will extend the contract
commitment through fiscal year 2010; three (3) have current contract commitments
that expire during fiscal year 2009; one (1) is currently idle; and one (1)
under construction, scheduled for delivery in mid-2012, is currently without a
contract. We currently have an estimated contract revenue backlog of
approximately $2.0 billion compared to approximately $1.0 billion of estimated
capital commitments relating primarily to the two new semisubmersibles under
construction.
Currently,
we have approximately 70% of our available rig days contracted for the second
half of fiscal year 2009. A comparison of the average per day
revenues for fiscal years 2007 and 2008 and for the first six months of fiscal
year 2009 for our active drilling units is as follows:
Average
Per Day Revenues
|
|
|
|
Fiscal
Year 2007
|
|
|
Fiscal
Year 2008
|
|
|
First
Six Months of Fiscal Year 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATWOOD
HUNTER
|
|
$
|
234,000
|
|
|
$
|
246,000
|
|
|
$
|
505,000
|
|
|
|
|
ATWOOD
EAGLE
|
|
|
160,000
|
|
|
|
241,000
|
|
|
|
392,000
|
|
|
|
|
ATWOOD
FALCON
|
|
|
138,000
|
|
|
|
216,000
|
|
|
|
202,000
|
|
|
|
|
ATWOOD
SOUTHERN CROSS
|
|
|
171,000
|
|
|
|
321,000
|
|
|
|
141,000
|
(1)
|
|
|
|
|
VICKSBURG
|
|
|
110,000
|
|
|
|
155,000
|
|
|
|
148,000
|
|
|
|
|
|
ATWOOD
BEACON
|
|
|
109,000
|
|
|
|
128,000
|
|
|
|
131,000
|
|
|
|
|
|
SEAHAWK
|
|
|
84,000
|
|
|
|
88,000
|
|
|
|
85,000
|
|
|
|
|
|
RICHMOND
|
|
|
81,000
|
|
|
|
44,000
|
(2)
|
|
|
79,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1)
Rig has been idle since mid-December 2008.
|
|
|
|
|
|
2)
Rig incurred life-enhancing upgrade during fiscal year
2008.
|
|
|
|
|
|
The ATWOOD HUNTER is currently working
under contract commitments that extend to September 2012 at operating dayrates
that range from $511,000 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 of cost
escalations. The ATWOOD FALCON is currently working under its
contract which extends to August 2009 at a dayrate of $160,000 or $200,000,
depending upon water depth of each well drilled. Following completion
of this contract commitment, the rig will then commence a two-year contract
commitment 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. During this idle period, the rig has been undergoing
certain equipment repairs and maintenance which has kept its operating costs
relatively high at approximately $70,000 per day during the second quarter of
fiscal year 2009. This planned level of maintenance is not expected
to be completed until the end of the third quarter of fiscal year 2009, which
will continue to keep its operating costs around $70,000 per
day. However, if the rig remains idle, per day operating
costs are
expected to decline below $50,000 during the fourth quarter of fiscal year
2009. The VICKSBURG has a current contract commitment offshore
Thailand at a dayrate of $154,000 which is currently expected to extend into
July 2009. Upon termination of the VICKSBURG’s contract, we
anticipate that the rig will be moved to a shipyard in Thailand to undergo a $7
million to $8 million life enhancing upgrade that could take approximately 8
weeks to complete. The ATWOOD BEACON is drilling its final well at a
dayrate of $133,500 under its current contract offshore India that is also
currently expected to extend into July 2009. Virtually all of these
upgrade costs are expected to be capitalized. If the ATWOOD BEACON
becomes idle in July 2009, we expect that the rig will be moved to a stacking
location, probably in India, and will undergo certain maintenance that will keep
its operating costs for the fourth quarter of fiscal year 2009 relatively high
at around $70,000 per day.
The SEAHAWK is working offshore West
Africa under a drilling contract that currently extends into March 2010;
however, this contract provides for one additional six-month option which we
expect to be exercised. For the last 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,
currently has a one well contract commitment that should extend through most of
May 2009. Upon delivery, the ATWOOD OSPREY has a three-year contract
with Chevron Australia Pty. Ltd. 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.
Even with an expected increase in our
outstanding debt to around $400 million by the end of fiscal year 2009, we
expect that our debt to total capitalization ratio is unlikely to exceed
30%. If our current contract backlog remains intact, as currently
expected as our current long-term contract commitments do not provide for early
termination or modification due to market deterioration, we anticipate
maintaining a strong balance sheet and remaining focused on executing on our
current newbuild program. We anticipate pursuing no further growth
during fiscal year 2009.
RESULTS OF
OPERATIONS
Revenues
for the three and six months ended March 31, 2009 increased 24% and 36%,
respectively, compared to the three and six months ended March 31,
2008. A comparative analysis of revenues is as
follows:
|
|
REVENUES
|
|
|
|
(In
millions)
|
|
|
|
Three
Months Ended March 31,
|
|
|
Six
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Variance
|
|
|
2009
|
|
|
2008
|
|
|
Variance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATWOOD
HUNTER
|
|
$
|
49.2
|
|
|
$
|
17.4
|
|
|
$
|
31.8
|
|
|
$
|
91.8
|
|
|
$
|
46.1
|
|
|
$
|
45.7
|
|
ATWOOD
EAGLE
|
|
|
35.0
|
|
|
|
14.9
|
|
|
|
20.1
|
|
|
|
71.4
|
|
|
|
27.2
|
|
|
|
44.2
|
|
RICHMOND
|
|
|
7.3
|
|
|
|
3.0
|
|
|
|
4.3
|
|
|
|
14.5
|
|
|
|
3.9
|
|
|
|
10.6
|
|
ATWOOD
BEACON
|
|
|
12.0
|
|
|
|
11.6
|
|
|
|
0.4
|
|
|
|
23.8
|
|
|
|
22.2
|
|
|
|
1.6
|
|
ATWOOD
FALCON
|
|
|
16.0
|
|
|
|
16.7
|
|
|
|
(0.7
|
)
|
|
|
36.7
|
|
|
|
33.9
|
|
|
|
2.8
|
|
SEAHAWK
|
|
|
7.7
|
|
|
|
8.6
|
|
|
|
(0.9
|
)
|
|
|
15.5
|
|
|
|
15.8
|
|
|
|
(0.3
|
)
|
VICKSBURG
|
|
|
13.5
|
|
|
|
14.8
|
|
|
|
(1.3
|
)
|
|
|
26.9
|
|
|
|
28.7
|
|
|
|
(1.8
|
)
|
ATWOOD
SOUTHERN CROSS
|
|
|
-
|
|
|
|
26.5
|
|
|
|
(26.5
|
)
|
|
|
25.6
|
|
|
|
46.8
|
|
|
|
(21.2
|
)
|
|
|
$
|
140.7
|
|
|
$
|
113.5
|
|
|
$
|
27.2
|
|
|
$
|
306.2
|
|
|
$
|
224.6
|
|
|
$
|
81.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. The increase in revenues for the RICHMOND for the three and six months
ended March 31, 2009 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, earned no revenue during that time as
compared to the current period when it has been continuously
working. Revenues for the ATWOOD BEACON, ATWOOD FALCON, SEAHAWK
and VICKSBURG during the current quarter and fiscal year to date period were
relatively consistent with the prior fiscal year periods. Since the
ATWOOD SOUTHERN CROSS has been idle and earning no revenue since mid December
2008, revenues have decreased during the three and six months ended March 31,
2009 when compared to the three and six months ended March 31,
2008.
Contract
drilling costs for the three and six months ended March 31, 2009 increased 2%
and 5%, respectively, compared to the three and six months ended March 31,
2008. An analysis of contract drilling costs by rig is as
follows:
|
|
CONTRACT
DRILLING COSTS
|
|
|
|
(In
millions)
|
|
|
|
Three
Months Ended March 31,
|
|
|
Six
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Variance
|
|
|
2009
|
|
|
2008
|
|
|
Variance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATWOOD
HUNTER
|
|
$
|
8.5
|
|
|
$
|
6.9
|
|
|
$
|
1.6
|
|
|
$
|
17.4
|
|
|
$
|
14.5
|
|
|
$
|
2.9
|
|
ATWOOD
EAGLE
|
|
|
11.4
|
|
|
|
10.2
|
|
|
|
1.2
|
|
|
|
21.4
|
|
|
|
20.1
|
|
|
|
1.3
|
|
ATWOOD
FALCON
|
|
|
6.5
|
|
|
|
5.9
|
|
|
|
0.6
|
|
|
|
13.1
|
|
|
|
11.4
|
|
|
|
1.7
|
|
RICHMOND
|
|
|
3.0
|
|
|
|
3.0
|
|
|
|
-
|
|
|
|
6.8
|
|
|
|
4.7
|
|
|
|
2.1
|
|
ATWOOD
BEACON
|
|
|
4.9
|
|
|
|
5.0
|
|
|
|
(0.1
|
)
|
|
|
9.3
|
|
|
|
9.4
|
|
|
|
(0.1
|
)
|
VICKSBURG
|
|
|
4.1
|
|
|
|
4.4
|
|
|
|
(0.3
|
)
|
|
|
8.2
|
|
|
|
8.8
|
|
|
|
(0.6
|
)
|
SEAHAWK
|
|
|
5.6
|
|
|
|
7.7
|
|
|
|
(2.1
|
)
|
|
|
11.6
|
|
|
|
16.3
|
|
|
|
(4.7
|
)
|
ATWOOD
SOUTHERN CROSS
|
|
|
6.0
|
|
|
|
8.6
|
|
|
|
(2.6
|
)
|
|
|
14.1
|
|
|
|
16.3
|
|
|
|
(2.2
|
)
|
OTHER
|
|
|
3.0
|
|
|
|
0.1
|
|
|
|
2.9
|
|
|
|
6.5
|
|
|
|
1.4
|
|
|
|
5.1
|
|
|
|
$
|
53.0
|
|
|
$
|
51.8
|
|
|
$
|
1.2
|
|
|
$
|
108.4
|
|
|
$
|
102.9
|
|
|
$
|
5.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. The increase in drilling
costs for the ATWOOD EAGLE for the three and six months ended March 31, 2009 is
attributable to higher local payroll and payroll related costs due to the
continuing tight labor market in Australia and the weakening United States
dollar relative to the Australian dollar. The ATWOOD FALCON has
incurred higher equipment related costs during the current quarter and fiscal
year to date period due to an increase in maintenance projects while undergoing
a shipyard upgrade during the current quarter. The increase in
contract drilling costs for the RICHMOND for the six months ended March 31, 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. Contract drilling costs for the ATWOOD BEACON and VICKSBURG
for the current quarter and fiscal year to date periods were relatively
consistent with drilling costs for the prior fiscal year periods. The
decrease in drilling costs for the SEAHAWK is due to a decrease in the amount of
maintenance projects. In addition, costs during the first and second
quarters of fiscal year 2008 include the amortization of deferred expenses which
ended during the fourth quarter of fiscal year 2008. The decrease in
drilling costs for the ATWOOD SOUTHERN CROSS for the three and six month periods
ended March 31, 2009 is due to a decrease in agent fees as the rig has been idle
since mid December 2008 and due to decrease in the amount of maintenance
projects when compared to the three and six months ended March 31,
2008. Other drilling costs have increased for the current quarter and
fiscal year to date period primarily due to exchange rate losses resulting from
the weakening United States dollar compared to exchange rate gains incurred in
the prior fiscal year to date periods.
Total
drilling costs of approximately $53 million for the second quarter of fiscal
year 2009 compared to the second quarter of fiscal year 2008 increased
approximately 2%; however, we had stated in our Form 10-Q filed for the quarter
ended December 31, 2008 that we expected approximately $61 million in operating
costs for the quarter ended March 31, 2009. This reduction in costs
from our expectations relates primarily to the ATWOOD AURORA not commencing
operations during the second quarter as anticipated and to less maintenance
costs being incurred on the ATWOOD SOUTHERN CROSS than
expected. With
the commencement of operations of the ATWOOD AURORA in April 2009, we expect
that our operating costs for the quarter ending June 30, 2009 will be
approximately $61 million. For fiscal year 2009, we currently expect
a 6% to 8% increase in total operating costs when compared to fiscal year
2008. Approximately 4% of estimated fiscal year 2009 operating costs
are due to the addition of the ATWOOD AURORA to our fleet while we anticipate
only a slight increase in operating costs for our other drilling units in total
when compared to the prior year.
Depreciation
expense for the three and six months ended March 31, 2009 decreased 6% and 5%,
respectively, compared to the three and six months ended March 31,
2008. An analysis of depreciation expense by rig is as
follows:
|
|
DEPRECIATION
EXPENSE
|
|
|
|
(In
millions)
|
|
|
|
Three
Months Ended March 31,
|
|
|
Six
Months Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Variance
|
|
|
2009
|
|
|
2008
|
|
|
Variance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RICHMOND
|
|
$
|
0.4
|
|
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
$
|
0.9
|
|
|
$
|
0.2
|
|
|
$
|
0.7
|
|
ATWOOD
HUNTER
|
|
|
1.6
|
|
|
|
1.5
|
|
|
|
0.1
|
|
|
|
3.1
|
|
|
|
2.9
|
|
|
|
0.2
|
|
ATWOOD
SOUTHERN CROSS
|
|
|
1.0
|
|
|
|
0.9
|
|
|
|
0.1
|
|
|
|
1.9
|
|
|
|
1.9
|
|
|
|
-
|
|
ATWOOD
FALCON
|
|
|
1.3
|
|
|
|
1.3
|
|
|
|
-
|
|
|
|
2.6
|
|
|
|
2.6
|
|
|
|
-
|
|
ATWOOD
BEACON
|
|
|
1.3
|
|
|
|
1.3
|
|
|
|
-
|
|
|
|
2.5
|
|
|
|
2.5
|
|
|
|
-
|
|
VICKSBURG
|
|
|
0.7
|
|
|
|
0.7
|
|
|
|
-
|
|
|
|
1.4
|
|
|
|
1.4
|
|
|
|
-
|
|
ATWOOD
EAGLE
|
|
|
1.1
|
|
|
|
1.1
|
|
|
|
-
|
|
|
|
2.3
|
|
|
|
2.2
|
|
|
|
0.1
|
|
SEAHAWK
|
|
|
0.6
|
|
|
|
1.5
|
|
|
|
(0.9
|
)
|
|
|
1.2
|
|
|
|
3.1
|
|
|
|
(1.9
|
)
|
OTHER
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
0.2
|
|
|
|
0.2
|
|
|
|
-
|
|
|
|
$
|
8.1
|
|
|
$
|
8.6
|
|
|
$
|
(0.5
|
)
|
|
$
|
16.1
|
|
|
$
|
17.0
|
|
|
$
|
(0.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. Depreciation expense
for all other rigs has remained relatively consistent with the prior fiscal year
periods.
General
and administrative expenses for the three and six months ended March 31,
2009 increased 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. The increase of the fiscal year to date period is offset by
higher interest expense for the first quarter of fiscal year 2008 which
included the write off of the remaining unamortized loan costs related to a
prior credit facility terminated during the quarter ended December 31,
2007. 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 six months ended March 31,
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 six months ended March 31,
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 and fiscal year to date period of 22% and 18%, respectively,
is higher due to a significantly lower level of operating income earned in
certain nontaxable and deemed profit tax jurisdictions when compared to the
effective rate of 10% for both the three and six months ended March 31,
2008. Excluding any discrete items that may be incurred, we expect
our effective tax rate to be between 17% and 19% for fiscal year 2009, which is
an increase from the 15% to 16% effective rate estimated in the prior quarter
due to additional anticipated rig downtime as mentioned previously in Market
Outlook.
LIQUIDITY
AND CAPITAL RESOURCES
As of
March 31, 2009 and May 7, 2009, we have $200 million borrowed under our 5-year
$300 million credit facility executed in October 2007 and $100 million borrowed
under our 5-year $280 million credit facility executed in November
2008. 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, consist primarily 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, for future growth opportunities
at the appropriate time, and for general corporate needs. We
anticipate pursuing no further growth during fiscal year 2009. We were in
compliance with all financial covenants under both credit facilities at March
31, 2009 and at all times during the first and second quarters of fiscal year
2009. As of March 31, 2009, we had expended approximately $195
million on the construction of the ATWOOD AURORA. The total
construction costs of the two deepwater semisubmersibles are expected to be
approximately $600 million and $750 million, respectively. In
addition to these construction projects, we also anticipate that the VICKSBURG
will undergo an estimated $7 million to $8 million equipment upgrade during
July/August 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 six months ended March 31, 2009, net cash provided
by operating activities totaled approximately $179 million. Our
operating cash flows are primarily driven by our operating income, which
reflects dayrates and rig utilization. During the first six months of
fiscal year 2009, we used internally generated cash and funds borrowed under our
credit facilities to expend approximately $43 million toward the construction of
the ATWOOD AURORA, approximately $157 million towards the construction of the
two deepwater semisubmersibles and approximately $13 million in other capital
expenditures.
We
estimate that our total capital expenditures for the second half of fiscal year
2009 will be approximately $315 million, with approximately $290 million
relating to the construction of the two deepwater
semisubmersibles. Based upon the current expected capital commitments
for the remainder of fiscal year 2009, we expect to end fiscal year 2009 with
outstanding long-term debt around $400 million. We will utilize
internally generated cash flows, as well as cash available under our combined
$580 million credit facilities, to fund our capital commitments for the
remainder of fiscal year 2009.
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. The decrease in accounts receivable of approximately
$19.2 million at March 31, 2009 compared to September 30, 2008 is due to the
current quarter collection of balances due from customers that were outstanding
greater than 60 days at prior quarter end.
Inventories
of materials and supplies has increased by approximately $12.8 million at March
31, 2009 compared to September 30, 2008 due to inventory for the ATWOOD AURORA
in preparation for commencement of drilling operations and due to increased
purchasing of high dollar value critical spare parts for our fleet.
Prepaid
expenses and deferred costs have decreased by approximately $5.8 million at
March 31, 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 $18.4 million at March 31, 2009
compared to September 30, 2008 primarily due to a higher amount of accrued but
unpaid taxes and professional fees.
Long-term
deferred credits have decreased by approximately $3.0 million at March 31, 2009
compared to September 30, 2008 due to the amortization of deferred fees
associated with the prior upgrade of the ATWOOD FALCON partially offset by the
addition of deferred fees associated with an upgrade of the ATWOOD FALCON during
the current quarter. 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 $300 million of long-term
debt outstanding at March 31, 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 45 basis points) would be approximately $1.4
million, which we believe to be immaterial. We did not have any open
derivative contracts relating to our floating rate debt at March 31,
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 March 31, 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 $1.5 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 March 31, 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
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Our annual meeting of shareholders was
held on February 12, 2009, at which the shareholders voted on the election of
six director nominees, all of whom were incumbent directors and who were
re-elected. In addition to voting on election of six director
nominees, the shareholders voted to ratify PricewaterhouseCoopers as our
Independent Registered Public Accounting Firm for fiscal year
2009. No other matters were presented for a vote at the annual
meeting. Of the 60,604,542 shares of common stock present in person
or by proxy, the number of shares voted for or against in connection with the
election of each director and to ratify PricewaterhouseCoopers as our
Independent Registered Public Accounting Firm - are as follows:
ELECTION
OF DIRECTORS
NAME
|
|
CAST
FOR
|
|
VOTE
WITHHELD
|
|
|
|
|
|
|
|
Deborah
A. Beck
|
|
50,710,503
|
|
9,894,039
|
|
|
|
|
|
|
|
Robert
W. Burgess
|
|
50,717,766
|
|
9,886,776
|
|
|
|
|
|
|
|
George
S. Dotson
|
|
50,685,543
|
|
9,918,999
|
|
|
|
|
|
|
|
Hans
Helmerich
|
|
59,930,357
|
|
674,185
|
|
|
|
|
|
|
|
John
R. Irwin
|
|
60,006,033
|
|
598,509
|
|
|
|
|
|
|
|
James
R. Montague
|
|
50,721,816
|
|
9,882,726
|
|
RATIFICATION
OF PRICEWATERHOUSECOOPERS AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR FISCAL YEAR 2009
VOTES
FOR
|
|
VOTES
AGAINST
|
|
VOTES
WITHHELD
|
|
|
|
|
|
|
|
60,181,847
|
|
274,661
|
|
148,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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: May
8, 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.
|
*Filed
herewith
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