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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, 2007
COMMISSION FILE NUMBER 1-13167
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
ATWOOD OCEANICS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1611874
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
15835 Park Ten Place Drive 77084
Houston, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
281-749-7800
---------------
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 and (2) has been subject to such filings
requirements for the past 90 days. Yes X No___
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
One):
Large accelerated filer X Accelerated filer ___ Non-accelerated filer ___
---
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, 2007: 31,478,777 shares of common stock, $1 par
value
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ATWOOD OCEANICS, INC.
FORM 10-Q
For the Quarter Ended March 31, 2007
INDEX
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, 2007 and 2006.....3
b) Condensed Consolidated Balance Sheets
As of March 31, 2007 and September 30, 2006....................4
c) Condensed Consolidated Statements of Cash Flows
For the Six Months Ended March 31, 2007 and 2006.........5
d) Condensed Consolidated Statement of Changes in Shareholders'
Equity for the Six Months Ended March 31, 2007.................6
e) Notes to Condensed Consolidated Financial Statements....................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................13
Item 3. Quantitative and Qualitative Disclosures about Market Risk....24
Item 4. Controls and Procedures.......................................25
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders............26
Item 6. Exhibits .....................................................27
Signatures...................................................................28
2
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,
------------------------------ ------------------------------
2007 2006 2007 2006
---- ---- ---- ----
REVENUES:
Contract drilling $ 94,262 $ 67,529 $ 180,504 $ 122,943
Business interruption proceeds - - 2,558 -
-------- -------- --------- ---------
94,262 67,529 183,062 122,943
-------- -------- --------- ---------
COSTS AND EXPENSES:
Contract drilling 43,617 37,270 92,727 71,040
Depreciation 8,329 6,207 16,344 12,597
General and administrative 4,851 4,605 12,042 10,598
Gain on sale of equipment (137) - (184) (9,275)
-------- -------- --------- ---------
56,660 48,082 120,929 84,960
-------- -------- --------- ---------
OPERATING INCOME 37,602 19,447 62,133 37,983
-------- -------- --------- ---------
OTHER INCOME (EXPENSE)
Interest expense, net of capitalized interest (388) (1,467) (925) (3,207)
Interest income 404 338 873 569
-------- -------- --------- ---------
16 (1,129) (52) (2,638)
-------- -------- --------- ---------
INCOME BEFORE INCOME TAXES 37,618 18,318 62,081 35,345
PROVISION FOR INCOME TAXES 5,861 2,689 9,239 5,193
-------- -------- --------- ---------
NET INCOME $ 31,757 $ 15,629 $ 52,842 $ 30,152
======== ======== ========= =========
EARNINGS PER COMMON SHARE (SEE NOTE 2):
Basic $ 1.02 $ 0.51 $ 1.70 $ 0.98
Diluted 1.01 0.50 1.67 0.96
AVERAGE COMMON SHARES OUTSTANDING
(SEE NOTE 2):
Basic 31,148 30,926 31,104 30,832
Diluted 31,577 31,446 31,595 31,327
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, September 30,
2007 2006
----------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 59,749 $ 32,276
Accounts receivable, net of an allowance of 73,157 80,222
$750 at both March 31, 2007 and
September 30, 2006, respectively
Income tax receivable 3,578 65
Insurance receivable 1,557 550
Inventories of materials and supplies 24,090 22,124
Deferred tax assets 1,466 2,563
Prepaid expenses and other 4,261 9,873
--------- ---------
Total Current Assets 167,858 147,673
--------- ---------
NET PROPERTY AND EQUIPMENT 461,687 436,166
--------- ---------
DEFERRED COSTS AND OTHER ASSETS 9,846 9,990
--------- ---------
$ 639,391 $ 593,829
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of notes payable $ 36,000 $ 36,000
Accounts payable 10,708 11,760
Accrued liabilities 19,929 13,201
Deferred Credits 36 404
--------- ---------
Total Current Liabilities 66,673 61,365
--------- ---------
LONG-TERM DEBT,
net of current maturities: - 28,000
--------- ---------
- 28,000
--------- ---------
OTHER LONG TERM LIABILITIES:
Deferred income taxes 17,438 18,591
Deferred credits 31,472 23,284
Other 2,974 3,695
--------- ---------
51,884 45,570
--------- ---------
SHAREHOLDERS' EQUITY:
Preferred stock, no par value;
1,000 shares authorized, none outstanding - -
Common stock, $1 par value, 50,000 shares
authorized with 31,232 and 31,046 issued
and outstanding at March 31, 2007 and
September 30, 2006, respectively 31,232 31,046
Paid-in capital 124,828 115,916
Retained earnings 364,774 311,932
--------- ---------
Total Shareholders' Equity 520,834 458,894
--------- ---------
$ 639,391 $ 593,829
========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
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,
-----------------------------------
2007 2006
---------------- -------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $52,842 $30,152
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 16,344 12,597
Amortization of debt issuance costs 402 402
Amortization of deferred items (20,408) 9,311
Provision for doubtful accounts 113 196
Deferred income tax expense (benefit) (558) 310
Stock-based compensation expense 2,494 2,275
Tax benefit from the exercise of stock options - (620)
Gain on sale of equipment (184) (9,275)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 6,952 (17,432)
Increase in insurance receivable (1,007) -
Decrease (increase) in income tax receivable (3,513) 2,168
Increase in inventory (1,966) (3,367)
Decrease in prepaid expenses and other 4,677 691
Increase in deferred costs and other assets (3,143) (3,967)
Increase (decrease) in accounts payable (1,052) 463
Increase in accrued liabilities 6,728 9,252
Increase in deferred credits and other liabilities 31,327 1,191
Other increases (11) 4
-------- -------
Net cash provided by operating activities 90,037 34,351
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (42,109) (43,516)
Proceeds from sale of equipment 439 25,177
------ -------
Net cash used by investing activities (41,670) (18,339)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 2,880 5,466
Tax benefit from the exercise of stock options 4,226 620
Principal payments on debt (28,000) (18,000)
------- -------
Net cash used by financing activities (20,894) (11,914)
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 27,473 4,098
CASH AND CASH EQUIVALENTS, at beginning of period $32,276 $18,982
------- -------
CASH AND CASH EQUIVALENTS, at end of period $59,749 $23,080
======= =======
-----------------------------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
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, 2006 31,046 $31,046 $115,916 $311,932 $458,894
Net income - - - 52,842 52,842
Restricted stock awards 6 6 (6) - -
Exercise of employee stock options 180 180 2,700 - 2,880
Stock option and restricted stock
award compensation expense - - 2,494 - 2,494
Tax benefit from exercise of employee
stock options - - 3,724 - 3,724
------ ------- -------- -------- --------
March 31, 2007 31,232 $31,232 $124,828 $364,774 $520,834
====== ======= ======== ======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
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, 2007 and for each of the three and six month periods ended March 31,
2007 and 2006, 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, 2006. 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 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,
2006. In our opinion, the unaudited interim financial statements reflect all
adjustments (consisting of normal recurring 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, 2007, unrecognized compensation cost, net of estimated
forfeitures, related to stock options and restricted stock awards was
approximately $5.2 million and $5.3 million, respectively, which we expect to
recognize over a weighted average period of approximately 2.5 years. The
recognition of share-based compensation expense had the following effect on our
consolidated statements of operations (in thousands, except per share amounts):
7
Three Months Ended Six Months Ended
------------------ ----------------
March 31, 2007:
Increase in contract drilling expenses $ 331 $ 591
Increase in general and administrative expenses 950 1,903
Decrease in income tax provision (333) (666)
----- ------
Decrease of net income $ 949 $1,828
===== ======
Decrease in earnings per share:
Basic $0.03 $ 0.06
Diluted $0.03 $ 0.06
March 31, 2006:
Increase in contract drilling expenses $ 150 $ 300
Increase in general and administrative expenses 1,325 1,975
Decrease in income tax provision (464) (691)
------ ------
Decrease of net income $1,011 $1,584
====== ======
Decrease in earnings per share:
Basic $0.03 $0.05
Diluted $0.03 $0.05
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, 2007 was $23.64. 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, 2007:
Risk-Free Interest Rate 4.5%
Expected Volatility 46%
Expected Life (Years) 5.25
Dividend Yield None
8
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 6-year historical volatility figure and determined the expected term of
the stock options using 10 years of historical data. The expected dividend yield
is based on the expected annual dividend as a percentage of the market value of
our common stock as of the grant date.
A summary of stock option activity during the six months ended March 31,
2007 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, 2006 1,437 $ 19.56
Granted 79 $ 49.97
Exercised (177) $ 16.11 $ 6,492
Forfeited (10) $ 28.35
-----
Outstanding at March 31, 2007 1,329 $ 21.77 6.4 $ 49,067
=====
Exercisable at March 31, 2007 917 $ 17.74 5.5 $ 37,557
=====
Restricted Stock
We have also awarded restricted stock to certain employees and to our
non-employee directors. The awards of restricted stock to employees are subject
to three year vesting. Awards of restricted stock to non-employee directors
prior to March 2007 vest immediately while awards granted in March 2007 are
subject to three year vesting. All restricted stock awards granted to date are
restricted from transfer for three years from the date of grant, whether vested
or unvested. 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,
2007, is as follows:
Number of Wtd. Avg.
Shares (000s) Fair Value
------------- ----------
Unvested at September 30, 2006 93 $ 38.07
Granted 78 $ 49.99
Vested (6) $ 46.92
Forfeited (1) $ 49.97
---- -------
Unvested at March 31, 2007 164 $ 43.36
==== =======
9
3. EARNINGS (LOSS) PER COMMON SHARE
The computation of basic and diluted earnings (loss) 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, 2007:
Basic earnings per share $ 31,757 31,148 $ 1.02 $ 52,842 31,104 $ 1.70
Effect of dilutive securities:
Stock options options --- 429 $ (0.01) --- 491 $ (0.03)
------ ------ ------- -------- ------ -------
Diluted earnings per share $ 31,757 31,577 $ 1.01 $ 52,842 31,595 $ 1.67
======== ====== ======= ======== ====== =======
March 31, 2006:
Basic earnings per share $ 15,629 30,926 $ 0.51 $ 30,152 30,832 $ 0.98
Effect of dilutive securities:
Stock options options --- 520 $ (0.01) --- 495 $ (0.02)
-------- ------ ------- -------- ------ -------
Diluted earnings per share $ 15,629 31,446 $ 0.50 $ 30,152 31,327 $ 0.96
======== ====== ======= ======== ====== =======
The calculation of diluted earnings per share for the three and six month
periods ending March 31, 2007 excludes consideration of shares of common stock
related to 203,000 outstanding stock options because such options were
anti-dilutive. These options could potentially dilute basic earnings per share
in the future.
10
4. PROPERTY AND EQUIPMENT
A summary of property and equipment by classification is as follows (in
thousands):
March 31, September 30,
2007 2006
---------- ------------
Drilling vessels and related equipment
Cost $ 731,669 $ 691,289
Accumulated depreciation (277,106) (261,682)
--------- ---------
Net book value 454,563 429,607
--------- ---------
Drill pipe
Cost 14,065 13,271
Accumulated depreciation (8,940) (8,257)
--------- ---------
Net book value 5,125 5,014
--------- ---------
Furniture and other
Cost 8,407 7,920
Accumulated depreciation (6,408) (6,375)
--------- ---------
Net book value 1,999 1,545
--------- ---------
NET PROPERTY AND EQUIPMENT $ 461,687 $ 436,166
========= =========
ATWOOD BEACON
During the first quarter of the current fiscal year, we completed the work
to restore the ATWOOD BEACON to its original condition prior to the July 2004
incident offshore of Indonesia whereby all three legs and the derrick incurred
damage while positioning for a well. The majority of the restoration work was
completed in early calendar year 2005, at which time the rig was placed back
into service. The more recent repairs were needed to finish the final leg
extensions to restore the rig to its original condition. We had insurance
coverage to reimburse the costs of repairs and loss of hire coverage of $70,000
per day. Approximately $0.6 million of capitalized costs and $1.0 million of
other costs were incurred for the leg installation during the prior quarter. In
addition, $2.6 million of revenue recognized from the loss of hire coverage
during the quarter ended December 31, 2006 was subsequently collected during the
current quarter and is reflected as business interruption proceeds in our
Consolidated Statement of Operations. We expect to collect the remaining
insurance receivable during the next quarter.
SALE OF EQUIPMENT
In October 2005, we sold our semisubmersible hull, SEASCOUT, for $10
million (net after certain expenses) and our spare 15,000 P.S.I. BOP Stack for
approximately $15 million for a gain of approximately $9.3 million. We had no
operations or revenues associated with these assets prior to their sale.
11
5. INCOME TAXES
Virtually all of our tax provision for each of the three and six months
ended March 31, 2007 and 2006 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, 2007 and 2006, our effective tax rate for these periods is
significantly less than the United States federal statutory rate.
6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities", which provides companies with an
option to report selected financial assets and liabilities at fair value and
establishes presentation and disclosure requirements to facilitate comparisons
between companies that choose different measurement attributes for similar types
of assets and liabilities. GAAP has required different measurement attributes
for different assets and liabilities that can create artificial volatility in
earnings. The objective of SFAS No. 159 is to help mitigate this type of
volatility in the earnings by enabling companies to report related assets and
liabilities at fair value, which would likely reduce the need for companies to
comply with complex hedge accounting provisions. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007. We are currently analyzing the
provisions of SFAS No. 159 and determining how it will affect accounting
policies and procedures, but we have not yet made a determination of the impact
the adoption will have on our consolidated financial position, results of
operations and cash flows.
In June 2006, the Financial Accounting Standards Board issued FIN 48,
"Accounting for Uncertainty in Income Taxes - an Interpretation of FASB
Statement 109." FIN 48 prescribes a comprehensive model for recognizing,
measuring, presenting, and disclosing uncertain tax positions within the
financial statements. The provisions of FIN 48 are effective for fiscal years
beginning after December 15, 2006. We will be evaluating the impact of the
adoption of FIN 48 on our consolidated financial position.
In September 2005, the FASB issued SFAS No. 157, "Fair Value Measurements",
which defines fair value, establishes methods used to measure fair value and
expands disclosure requirements about fair value measurements. SFAS No. 157 is
effective for financial statements issued for fiscal year beginning after
November 15, 2007, and interim periods within those fiscal periods. We are
currently analyzing the provisions of SFAS No. 157 and determining how it will
affect accounting policies and procedures, but we have not yet made a
determination of the impact the adoption will have on our consolidated financial
position, results of operations and cash flows.
7. 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.
12
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, 2007 includes
statements about Atwood Oceanics, Inc. (which together with its subsidiaries is
identified as the "Company," "we" or "our," unless the context requires
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 to 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;
- 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 such things as 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 the war with Iraq or other military operations, terrorist
acts or embargoes elsewhere;
- 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;
13
- 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;
- 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,
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;
- rig availability;
- 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;
- the risks involved in the construction, upgrade and repair of our
drilling units; and
14
- 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, 2006. 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. .
15
MARKET OUTLOOK
--------------
We have 100% of available rig days for the remainder of fiscal year 2007
contracted, with contracted rig days for fiscal years 2008 and 2009 at
approximately 75% and 30%, respectively. A comparison of the average per day
revenues for fiscal year 2006 and for the first six months of fiscal year 2007
for each of our eight drilling units to their current highest contracted dayrate
commitments is as follows:
Average Per Day Revenues(1)
-----------------------------
Current Highest Percentage Change from
Fiscal Fiscal Contracted Fiscal Year-to-Date 2007
Year Year-to-Date Dayrate to Highest Contracted
2006 2007 Commitment Dayrate Commitment
----------- -------------- ------------------ --------------------------
ATWOOD EAGLE $129,000 $156,000 $405,000 160%
ATWOOD HUNTER 172,000 213,000 245,000 15%
ATWOOD FALCON 83,000 116,000 200,000 72%
ATWOOD SOUTHERN CROSS 82,000 129,000 325,000 152%
ATWOOD BEACON 88,000 105,000 133,500 29%
VICKSBURG 82,000 93,000 154,000 66%
SEAHAWK 32,000 87,000 68,400(2) (2)---
RICHMOND 55,000 81,000 80,000 ---
(1) Includes dayrate and service revenues
(2) Does not include amortized deferred fees of approximately $19,000 per day.
The ATWOOD EAGLE is currently working offshore Australia for BHP Billiton
Petroleum ("BHPB") on a drilling program currently expected to extend into
January 2008. Immediately following the completion of the BHPB work, the rig has
a one-well commitment at a dayrate of $360,000 and a two-year commitment with
Woodside Energy Limited ("Woodside") (expected to commence in March 2008) at a
dayrate of $405,000. The ATWOOD HUNTER is currently working offshore Libya for
Woodside at a dayrate of $245,000. The current Woodside contract extends to
April/May 2008. The ATWOOD FALCON has contractual commitments offshore Malaysia
with Sarawak Shell Berhad that extend to July 2009, with an operating dayrate of
$113,000 until July 2007, then increasing to $160,000 to $200,000 per day for
two years thereafter. The ATWOOD SOUTHERN CROSS currently has contractual
commitments in the Black Sea with dayrates ranging from $125,000 to $325,000.
These commitments could extend into the third quarter of fiscal year 2008 if all
option wells are exercised. Currently, the ATWOOD BEACON is working under a
long-term contract commitment offshore India that extends to January 2009. The
dayrate for the contract is $113,000 to January 2008 and $133,500 for one year
thereafter. The VICKSBURG is currently working offshore Thailand under a
contract commitment for Chevron Overseas Petroleum which provides a dayrate of
$94,500 to June 2007 and $154,000 for two years thereafter. The SEAHAWK has a
contract commitment offshore Equatorial Guinea which extends to September 2008
at a dayrate of approximately $68,400 plus amortized deferred fees of
approximately $20,000 per day. The RICHMOND, our only rig in the U.S. Gulf of
Mexico, has a current contract commitment which should extend to October 2007 at
a dayrate of $80,000. The Australian management contract, which provided an
income of approximately $5,000 per day during the first six months of fiscal
year 2007, is expected to terminate in May 2007.
16
Our contract drilling costs increased 31% for the first six months of fiscal
year 2007 compared to the same period in fiscal year 2006. A comparative
analysis of per day contract drilling costs is as follows:
Average Per Day Contract Drilling Costs
--------------------------------------------------------------------------
Percentage Change
from Fiscal Year
First Second 2006 Compared to
Fiscal Quarter Quarter of Second Quarter
Year of Fiscal Fiscal Fiscal Year 2007
2006 Year 2007 Year 2007
-------------- ------------ --------------- --------------------
ATWOOD EAGLE $74,000 $86,000 $94,000 27%
ATWOOD HUNTER 51,000 65,000 65,000 27%
ATWOOD FALCON 45,000 95,000(1) 50,000 11%
ATWOOD SOUTHERN CROSS 66,000(2) 57,000 48,000 (27%)
ATWOOD BEACON 29,000 44,000 39,000 34%
VICKSBURG 33,000 41,000 33,000 ---
SEAHAWK 23,000 74,000(3) 77,000(3) 235%
RICHMOND 28,000 33,000 38,000 36%
OTHER 17,000 12,000 26,000 53%
(1) Daily operating costs were high due to planned maintenance during the
period the rig was in a shipyard undergoing its water depth upgrade.
(2) The daily average operating costs of the ATWOOD SOUTHERN CROSS was high
due to $8.6 million of mobilization expense amortization during the
fiscal year 2006 resulting
from the rig being relocated from Southeast Asia to the Mediterranean
during the fourth quarter of fiscal year 2005.
(3) During fiscal year 2006, the SEAHAWK worked the first half of the year
in a relatively low operating cost area of Southeast Asia compared to
its current operating area of West Africa and was upgraded and
relocated to West Africa during the second half of
fiscal year 2006 which also contributed to the rig incurring low
operating costs during fiscal year 2005. Daily operating costs for
fiscal year 2007 also include amortized deferred costs of approximately
$15,000 per day.
Thus far, fiscal year 2007 factors impacting operating cost increases, are
as follows: (1) end of calendar year bonuses paid to rig shorebase personnel;
(2) general salary increases to all rig-based personnel; (3) start-up costs
associated with rigs commencing operations in new drilling areas (VICKSBURG in
Thailand), (ATWOOD BEACON in India) and (SEAHAWK in West Africa); costs
associated with maintenance during shipyard periods (ATWOOD FALCON and ATWOOD
BEACON); higher than normal maintenance costs incurred on the ATWOOD HUNTER
during the fourteen zero rate days in December 2006 when the rig was undergoing
required regulatory inspections and higher than normal payroll costs incurred by
the ATWOOD EAGLE due to extra personnel assigned to the rig for training
purposes. Operating costs will vary for all rigs depending upon each rig's
specific operating activities.
During the last quarter of fiscal year 2007 and first half of fiscal year
2008, some of our rigs are expected to incur some zero rate days for required
regulatory inspections and planned maintenance. Our goal is to maintain our
fleet and plan our downtime maintenance periods with a focus on minimizing
downtime and achieving longer term returns. The VICKSBURG could be off dayrate
for ten to fourteen days during the last quarter of fiscal year 2007. The ATWOOD
EAGLE could incur ten to fourteen zero rate days during the first or second
quarter of fiscal year 2008, while the ATWOOD HUNTER could incur five to ten
17
zero rate days during the fourth quarter of fiscal year 2007. The ATWOOD
SOUTHERN CROSS could incur five to ten zero rate days during the last quarter of
fiscal year 2007; while the RICHMOND could incur fourteen to twenty-one zero
rate days during the first quarter of fiscal year 2008. In addition to our
planned downtime, we would also expect to incur some unplanned downtime for
maintenance and repairs. Historically, approximately 1% to 1 1/2% of zero rate
downtime days has been experienced.
With a skilled labor shortage continuing to develop in the offshore
drilling industry coupled with our continuing focus on developing and training
personnel, we expect our personnel related costs will continue to be at higher
levels. We currently estimate that daily operating costs for our eight operating
units could range as follows:
ATWOOD EAGLE $95,000 to $105,000
ATWOOD HUNTER $65,000 to $75,000
ATWOOD FALCON $50,000 to $60,000
ATWOOD SOUTHERN CROSS $50,000 to $60,000
SEAHAWK $65,000 to $75,000*
ATWOOD BEACON $35,000 to $45,000
VICKSBURG $35,000 to $45,000
RICHMOND $35,000 to $45,000
*Includes amortized deferred costs of approximately $15,000 per day.
Our ninth mobile offshore drilling unit, an ultra-premium class jack-up to
be named the ATWOOD AURORA, is currently under construction in Brownsville,
Texas, with delivery to occur by September 30, 2008. We estimate the total costs
of construction (including capitalized interest) will be approximately $160
million. We intend to finance the construction of the new rig primarily from
expected operating cash flows and cash on hand balances; however, if and when
necessary, the $100 million revolving portion of our credit facility may provide
some funding for the new rig. As of May 8, 2007, we have no outstanding
borrowing under the $100 million revolving credit portion of our credit
facility.
We will continue to explore opportunities for growth. Revenues, operating
cash flows and earnings for fiscal year 2006 were the highest in our history.
With our backlog of contracted days at historically high dayrates providing
increasing revenue expectations, we anticipate that operating results for fiscal
year 2007 and 2008 will reflect significant improvement over fiscal year 2006
operating results.
18
RESULTS OF OPERATIONS
Revenues for the three and six months ended March 31, 2007 increased 40%
and 49%, respectively, compared to the three and six months ended March 31,
2006. A comparative analysis of revenues is as follows:
REVENUES
(In millions)
---------------------------------------------------------------------------
Three Months Ended March 31, Six Months Ended March 31,
------------------------------------ ------------------------------------
2007 2006 Variance 2007 2006 Variance
----------- --------- ----------- ------------ --------- ----------
ATWOOD HUNTER $ 21.0 $ 12.1 $ 8.9 $ 38.7 $ 22.4 $ 16.3
ATWOOD FALCON 12.1 6.6 5.5 21.0 13.4 7.6
SEAHAWK 7.8 2.9 4.9 15.9 7.5 8.4
ATWOOD BEACON 10.3 7.1 3.2 19.1 13.0 6.1
RICHMOND 7.2 4.1 3.1 14.7 8.1 6.6
ATWOOD SOUTHERN CROSS 12.0 10.7 1.3 23.4 16.7 6.7
VICKSBURG 8.5 7.8 0.7 17.0 14.5 2.5
ATWOOD EAGLE 13.6 13.4 0.2 28.4 21.4 7.0
AUSTRALIA MANAGEMENT CONTRACTS 1.8 2.8 (1.0) 4.9 5.9 (1.0)
------ ------ ------- ------ ------ ------
$ 94.3 $ 67.5 $ 26.8 $183.1 $122.9 $ 60.2
====== ====== ======= ====== ====== ======
The increase in fleetwide revenues for the current quarter and year-to-date
periods is primarily attributable to the increase in average dayrates due to
improving market conditions and strong demand for offshore drilling equipment as
previously discussed in "Market Outlook". Increases in revenues for the ATWOOD
HUNTER, ATWOOD FALCON, SEAHAWK, ATWOOD BEACON, RICHMOND, ATWOOD SOUTHERN CROSS,
VICKSBURG and the ATWOOD EAGLE were related to each of these drilling units
working under higher dayrate contracts during the current quarter compared to
the first quarter of the prior fiscal year. Revenue for the AUSTRALIA MANAGEMENT
CONTRACTS was lower for the three and six month periods ended March 31, 2007
when compared to the prior fiscal year periods due to decreased activity during
the current quarter as the most recent drilling program was completed at the end
of the first quarter of fiscal year 2007.
19
Contract drilling costs for the three and six months ended March 31, 2007
increased 17% and 31%, respectively compared to the three and six months ended
March 31, 2006. 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,
------------------------------------ -----------------------------------
2007 2006 Variance 2007 2006 Variance
----------- --------- ----------- ----------- --------- -----------
SEAHAWK $ 6.9 $ 1.7 $ 5.2 $ 13.7 $ 4.1 $ 9.6
ATWOOD EAGLE 8.5 6.2 2.3 16.4 12.2 4.2
ATWOOD HUNTER 5.8 3.9 1.9 11.8 7.7 4.1
ATWOOD FALCON 4.6 3.5 1.1 13.3 7.2 6.1
RICHMOND 3.4 2.5 0.9 6.4 4.9 1.5
ATWOOD BEACON 3.5 2.8 0.7 7.6 5.1 2.5
VICKSBURG 2.9 2.5 0.4 6.6 6.0 0.6
AUSTRALIA MANAGEMENT CONTRACTS 1.4 2.4 (1.0) 3.9 5.2 (1.3)
ATWOOD SOUTHERN CROSS 4.3 10.6 (6.3) 9.6 16.1 (6.5)
OTHER 2.3 1.2 1.1 3.4 2.5 0.9
------ ------ ------ ------ ------ ------
$ 43.6 $ 37.3 $ 6.3 $ 92.7 $ 71.0 $ 21.7
====== ====== ====== ====== ====== ======
On a fleetwide basis, wage increases and extra personnel for development or
training have resulted in higher personnel costs during the three and six months
ended March 31, 2007 for virtually every rig when compared to the prior fiscal
year periods. With the SEAHAWK and ATWOOD HUNTER currently working offshore West
and North Africa, respectively, both rigs have experienced increased travel,
freight and shorebase costs due to higher transportation and living expenses in
West and North Africa. Contract drilling costs for the SEAHAWK also reflect
amortization of approximately $1.4 million and $2.7 million of deferred expenses
in the second quarter and year-to-date period of fiscal year 2007, respectively,
compared to none in for the same periods of fiscal year 2006. The ATWOOD HUNTER
incurred additional maintenance costs during a planned regulatory inspection
period in December 2006. In addition to the rising personnel costs mentioned
above, the ATWOOD EAGLE and RICHMOND incurred higher maintenance costs during
the both quarters of fiscal year 2007 due to the amount and timing of certain
maintenance projects when compared to the same periods in the prior fiscal year.
The year-to-date increase in drilling costs for the ATWOOD FALCON is primarily
attributable to planned maintenance during its water depth upgrade which was
completed during the first quarter of the current fiscal year. The ATWOOD BEACON
has also experienced higher year-to-date maintenance costs while in a Singapore
shipyard having its last leg sections reattached during the first quarter of
fiscal year 2007. While drilling costs for the VICKSBURG have remained
relatively consistent other than higher personnel costs, AUSTRALIA MANAGEMENT
CONTRACTS costs have decreased due to the decreased activity resulting from the
completion of the current drilling program at the end of the first quarter of
the current fiscal year. Drilling costs for the ATWOOD SOUTHERN CROSS have
decreased primarily due to $6.0 million of mobilization expense amortization
during the second quarter of the prior fiscal year compared to none during the
current quarter. Other drilling costs have also increased due to rising
personnel costs.
20
Depreciation expense for the three and six months ended March 31, 2007
increased 34% and 29% compared to the three months ended March 31, 2006. An
analysis of depreciation expense by rig is as follows:
DEPRECIATION EXPENSE
(In millions)
---------------------------------------------------------------------
Three Months Ended March 31, Six Months Ended March 31,
---------------------------------- --------------------------------
2007 2006 Variance 2007 2006 Variance
------- ------- --------- ------- ------ --------
SEAHAWK $ 1.6 $ 0.1 $ 1.5 $ 3.0 $ 0.3 $ 2.7
ATWOOD FALCON 1.1 0.7 0.4 2.0 1.4 0.6
ATWOOD SOUTHERN CROSS 0.8 0.6 0.2 1.6 1.3 0.3
ATWOOD HUNTER 1.4 1.3 0.1 2.9 2.7 0.2
ATWOOD BEACON 1.3 1.3 - 2.5 2.7 (0.2)
VICKSBURG 0.7 0.7 - 1.4 1.4 -
ATWOOD EAGLE 1.1 1.2 (0.1) 2.3 2.3 -
RICHMOND 0.2 0.3 (0.1) 0.5 0.5 -
OTHER 0.1 0.0 0.1 0.1 0.0 0.1
----- ----- ------ ------ ------ ------
$ 8.3 $ 6.2 $ 2.1 $ 16.3 $ 12.6 $ 3.7
===== ===== ====== ====== ====== ======
Depreciation expense has increased for the SEAHAWK, ATWOOD FALCON and
ATWOOD SOUTHERN CROSS as these rigs have recently undergone upgrades within the
past year, while depreciation expense for all other rigs have has remained
relatively consistent with the prior fiscal year periods. The SEAHAWK was almost
fully depreciated prior to its upgrade; accordingly, ongoing quarterly
depreciation expense will approximate first and second quarter fiscal year 2007
levels.
General and administrative expenses for the six months ended March 31, 2007
increased compared to the prior fiscal year period primarily due to an
approximate $0.7 million increase in annual bonus compensation. Interest expense
has decreased for both the current quarter and year-to-date period primarily due
to the reduction of our outstanding debt and due to $0.8 million and $1.6
million of capitalized interest charges related to the construction of the
ATWOOD AURORA during the three and six months ended March 31, 2007,
respectively. Year-to-date interest income has increased when compared to the
prior fiscal year due to higher interest rates earned on higher cash balances.
Virtually all of our tax provision for each of the three and six months
ended March 31, 2007 and 2006 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, 2007 and 2006, our effective tax rate for these periods is
significantly less than the United States federal statutory rate. Excluding any
discrete items that may be incurred, we expect our effective tax rate to be
between 13% and 16% for the entire fiscal year 2007.
21
LIQUIDITY AND CAPITAL RESOURCES
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 2001 through 2006, net
cash provided by operating activities ranged from a low of approximately $13.7
million in fiscal year 2003 to a high of approximately $85.5 million in fiscal
year 2006. For the six months ended March 31, 2007, net cash provided by
operating activities totaled approximately $90.0 million. Our operating cash
flows are primarily driven by our operating income, which reflects dayrates and
rig utilization. With 100% of our available operating rig days committed for
fiscal year 2007 and approximately 75% committed for fiscal year 2008, at
historically high dayrates, we anticipate significant increases in cash flows
and earnings during fiscal years 2007 and 2008. Other than our expected capital
expenditures of approximately $115 million (including funding for the
construction of our new jack-up rig), the only additional firm cash commitment
for fiscal year 2007, outside of funding current rig operations, is our required
quarterly repayments under the term portion of our senior secured credit
facility which will total $36 million for fiscal year 2007. We expect to
generate sufficient cash flows from operations to satisfy these obligations.
As of March 31, 2007, we had $36 million outstanding under the term portion
of our credit facility and no funds borrowed under the $100 million revolving
portion of our credit facility. We are in compliance with all financial
covenants under our credit facility at March 31, 2007, and expect to remain in
compliance with all financial covenants during the remainder of fiscal year
2007. Aside from unforeseen noncompliance with the financial covenants, no other
provisions exist in the credit facility that could result in acceleration of the
April 1, 2008 maturity date.
At March 31, 2007, the collateral for our credit facility consists
primarily of preferred mortgages on all eight of our active drilling units (with
an aggregate net book value at March 31, 2007 totaling approximately $393
million). We are not required to maintain compensating balances; however, we are
required to pay a fee of approximately 0.60% per annum on the unused portion of
the revolving portion of our credit facility and certain other administrative
costs.
During the first six months of fiscal year 2007, we used internally
generated cash to expend approximately $27 million toward the construction of
the ATWOOD AURORA, approximately $9 million on completing the water depth
upgrade and equipment maintenance of the ATWOOD FALCON and approximately $6
million in other capital expenditures. We had cash and cash equivalents on hand
at March 31, 2007 of approximately $60 million. We estimate that our total
capital expenditures for the second half of fiscal year 2007 will be
approximately $75 million, with approximately $60 million of these estimated
expenditures relating to the construction of the ATWOOD AURORA. In fiscal year
2008, we expect to expend approximately $45 million in completing the
construction of the ATWOOD AURORA. We anticipate using internally generated
funds to satisfy these obligations.
Our portfolio of accounts receivable is comprised of major international
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; however, we have an approximate $0.8
million allowance for doubtful accounts at March 31, 2007.
22
Insurance receivables increased by $1.0 million at March 31, 2007 compared
to September 30, 2006 due to the completion in the first quarter of fiscal year
2007 of the work to restore the ATWOOD BEACON to its original condition prior to
the July 2004 incident when the legs were damaged. We had insurance coverage to
reimburse the costs of repairs and loss of hire coverage of $70,000 per day.
Approximately $0.6 million of capitalized costs and $1.0 million of other costs
were incurred for the leg installation during the prior quarter. In addition,
$2.6 million of revenue recognized from the loss of hire coverage during the
prior quarter was subsequently collected during the current quarter and is
reflected as business interruption proceeds in our Consolidated Statement of
Operations. We expect to collect the remaining insurance receivable during the
next quarter.
Long-term deferred credits have increased by approximately $8 million at
March 31, 2007 compared to September 30, 2006 primarily due to deferred fees
associated with the upgrade of the ATWOOD FALCON. Lump sum fees received for
upgrade costs reimbursed by our customers are reported as deferred credits in
the accompanying Consolidated Balance Sheets and are recognized as earned on a
straight-line method over the term of the related drilling contract.
23
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 the $36 million of long-term debt outstanding at March 31, 2007, was
floating rate debt. As a result, our annual interest costs in fiscal year 2007
will fluctuate based on interest rate changes. Because the interest rate on our
long-term debt is a floating rate and due to our debt maturing in 2008, the fair
value of our long-term debt approximated carrying value as of March 31, 2007.
The impact on annual cash flow of a 10% change in the floating rate
(approximately 70 basis points) would be approximately $0.3 million, which we
believe to be immaterial. We did not have any open derivative contracts relating
to our floating rate debt at March 31, 2007.
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, 2007 amounts, a decrease in the value of 10% in the foreign currencies
relative to the U.S. Dollar from the year-end exchange rates would result in a
foreign currency transaction gain of approximately $0.5 million. Thus, we
consider our current risk exposure to foreign currency exchange rate movements,
based on net cash flows, to be immaterial. We did not have any open derivative
contracts relating to foreign currencies at March 31, 2007.
24
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, process, summarized and reported within the time
periods specified in the SEC's rules, regulations and forms. 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.
25
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Our annual meeting of shareholders was held on February 8, 2007, at which
the shareholders voted on the election of seven director nominees, all of whom
were incumbent directors and who were elected or re-elected. In addition to
voting on election of seven director nominees, the shareholders voted on a
proposal to adopt the Atwood Oceanics, Inc. 2007 Long-Term Incentive Plan (the
"2007 Plan") which was approved by shareholders. No other matters were presented
for a vote at the annual meeting. Of the 29,436,586 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 the three proposals are as
follows:
ELECTION OF DIRECTORS
NAME CAST FOR VOTES WITHHELD
----------------- ---------- --------------
Deborah A. Beck 28,886,786 549,800
Robert W. Burgess 28,886,556 550,030
George S. Dotson 28,880,521 556,065
Hans Helmerich 28,887,156 549,430
John R. Irwin 28,968,928 467,658
James R. Montague 29,048,288 388,298
William J. Morrissey 27,337,594 2,098,992
PROPOSAL TO ADOPT THE 2007 PLAN
VOTES FOR VOTES AGAINST VOTES WITHHELD
--------- ------------- --------------
24,547,271 2,147,738 2,741,577
26
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
(a) Exhibits
3.1 Amended and Restated Certificate of Formation dated
February 9, 2006 (Incorporated herein by reference to Exhibit
3.1 of our Form 8-K filed February 14, 2006).
3.2 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 10, 2006).
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 See Exhibit Nos. 3.1 and 3.2 for provisions of our Amended and
Restated Certificate of Formation and Second Amended and
Restated By-Laws defining the rights of our shareholders
(Incorporated herein by reference to Exhibit 3.1 of our Form
8-K filed February 14, 2006 and Exhibit 3.2 of our Form 10-Q
filed May 10, 2006).
10.1 Atwood Oceanics, Inc. Long-Term Incentive Plan (Incorporated
herein by reference to Appendix B to our DEF 14A filed
January 9, 2007).
*10.1.1 Form of Atwood Oceanics, Inc. Stock Option Agreement - 2007
Long-Term Incentive Plan.
*10.1.2 Form of Restricted Stock Award Agreement - 2007 Long-Term
Incentive Plan.
*10.1.3 Form of Non-Employee Director Restricted Stock Award Agreement -
2007 Long-Term Incentive Plan.
*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
27
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 9, 2007 /s/JAMES M. HOLLAND_
------------------
James M. Holland
Senior Vice President, Chief Financial Officer,
Chief Accounting Officer and Secretary
28
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 8-K filed February 14, 2006).
3.2 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 10, 2006).
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 See Exhibit Nos. 3.1 and 3.2 for provisions of our Amended and
Restated Certificate of Formation and Second Amended and
Restated By-Laws defining the rights of our shareholders
(Incorporated herein by reference to Exhibit 3.1 of our Form
8-K filed February 14, 2006 and Exhibit 3.2 of our Form 10-Q
filed May 10, 2006).
10.1 Atwood Oceanics, Inc. 2007 Long-Term Incentive Plan
(Incorporated herein by reference to Appendix B to our DEF 14A
filed January 9, 2007).
*10.1.1 Form of Atwood Oceanics, Inc. Stock Option Agreement - 2007
Long-Term Incentive Plan.
*10.1.2 Form of Restricted Stock Award Agreement - 2007 Long-Term
Incentive Plan.
*10.1.3 Form of Non-Employee Director Restricted Stock Award Agreement -
2007 Long-Term Incentive Plan.
*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
29