UNITED STATES |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, |
OR |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to |
Commission File Number 1-8097 |
ENSCO International Incorporated |
DELAWARE (State or other jurisdiction of incorporation or organization) 500 North Akard Street Suite 4300 Dallas, Texas (Address of principal executive offices) | 76-0232579 (I.R.S. Employer Identification No.) 75201-3331 (Zip Code) |
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Title of each class Common Stock, par value $.10 | Name of each exchange on which registered New York Stock Exchange |
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Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ý No o Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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: Indicate by check mark whether the registrant is a shell company (as defined in The aggregate market value of the common stock (based upon the closing price on the New York Stock Exchange on June 30, As of February DOCUMENTS INCORPORATED BY REFERENCE Certain sections of the Company's definitive proxy statement to be filed under the Securities Exchange Act of 1934 within 120 days of the end of the Company's fiscal year ended December 31, |
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PART I | |
ITEM 1. BUSINESS | 3 |
Overview and Operating Strategy | 3 |
Contract Drilling Operations | 4 |
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Backlog Information | 5 |
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Major Customers | |
Industry Conditions | |
Competition | |
Governmental Regulation | |
Environmental Matters | |
International Operations | |
Executive Officers of the Registrant | |
Employees | |
Available Information | |
ITEM 1A. RISK FACTORS | 12 |
ITEM 1B. UNRESOLVED STAFF COMMENTS | 26 |
ITEM 2. PROPERTIES | |
Contract Drilling | |
Discontinued Operations | |
Other Property | |
ITEM 3. LEGAL PROCEEDINGS | |
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
PART II | |
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | |
ITEM 6. SELECTED FINANCIAL DATA | |
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |
Introduction | |
Business Environment | |
Results of Operations | |
Liquidity and Capital Resources | |
Market Risk | |
Outlook | |
Critical Accounting Policies and Estimates | |
New Accounting Pronouncements | |
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | |
ITEM 9A. CONTROLS AND PROCEDURES | |
ITEM 9B. OTHER INFORMATION |
PART III | |
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT | |
ITEM 11. EXECUTIVE COMPENSATION | |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | |
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES |
PART IV | |
ITEM 15. EXHIBITS, |
SIGNATURES |
FORWARD-LOOKING STATEMENTS
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• | market price of oil and gas and the stability | |
• | production levels and | |
• | regional supply and demand for natural gas, | |
• | worldwide expenditures for offshore oil and gas drilling, | |
• | level of worldwide economic activity, | |
• | long-term effect of worldwide energy conservation measures, and | |
• | the development and use of alternatives to hydrocarbon-based energy sources. | |
The drilling services provided by the Company are conducted on a "day rate" contract basis. Under day rate contracts, the Company provides the drilling rig and rig crews and receives a fixed amount per day for drilling the well, and the customer bears substantially all of the ancillary costs of constructing the well and supporting drilling operations, as well as the economic risk relative to the success of the well. The customer may pay all or a portion of the cost of moving the Company's equipment and personnel to the well site and, in the case of platform rigs, the cost of assembling and dismantling the equipment. The Company does not provide "turnkey" or other risk-based drilling services. |
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2004 | 2003 | 2002(1) | 2001 | 2000 | |||||||
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Rig utilization:(2) | |||||||||||
Jackup rigs | |||||||||||
North America | 84% | 86% | 87% | 82% | 99% | ||||||
Europe/Africa | 82% | 93% | 81% | 88% | 59% | ||||||
Asia Pacific | 82% | 82% | 78% | 96% | 73% | ||||||
South America/Caribbean | 97% | 99% | 100% | -- | -- | ||||||
Total jackup rigs | 84% | 86% | 84% | 86% | 85% | ||||||
Semisubmersible rig - North America | 51% | 96% | 92% | 92% | 77% | ||||||
Barge rig - Asia Pacific(3) | 100% | 99% | 40% | -- | -- | ||||||
Barge rigs - South America/Caribbean | 15% | 20% | 17% | 34% | 33% | ||||||
Platform rigs | 40% | 67% | 95% | 64% | 50% | ||||||
Total | 73% | 78% | 75% | 75% | 72% | ||||||
Average day rates:(4) | |||||||||||
Jackup rigs | |||||||||||
North America | $ | 42,006 | $ | 31,679 | $ | 26,939 | $ | 46,783 | $ | 34,982 | |
Europe/Africa | 60,542 | 64,615 | 74,759 | 65,172 | 38,560 | ||||||
Asia Pacific | 63,226 | 63,154 | 58,836 | 42,313 | 37,548 | ||||||
South America/Caribbean | 87,529 | 86,381 | 77,223 | -- | -- | ||||||
Total jackup rigs | 53,429 | 48,428 | 45,798 | 50,045 | 35,945 | ||||||
Semisubmersible rig - North America | 123,988 | 188,335 | 185,655 | 180,146 | 173,905 | ||||||
Barge rig - Asia Pacific(3) | 48,317 | 41,333 | 41,750 | -- | -- | ||||||
Barge rigs - South America/Caribbean | 37,437 | 39,475 | 39,987 | 42,553 | 39,897 | ||||||
Platform rigs | 29,401 | 26,124 | 25,852 | 27,751 | 24,713 | ||||||
Total | $ | 53,416 | $ | 50,393 | $ | 48,128 | $ | 50,997 | $ | 35,806 | |
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• | demand for oil and gas, | |
• | regional and global economic conditions and expected changes therein, | |
• | political, social and legislative environments in the U.S. and other major oil-producing countries, | |
• | production levels and related activities of OPEC and other oil and gas producers, | |
• | technological advancements that impact the methods or cost of oil and gas exploration and | |
• | the impact these and other events have on the current and expected future pricing of oil and natural gas. | |
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Industry conditions fluctuate in response to supply and demand forces. During industry upturns, the Company usually experiences higher utilization and day rates, and generally is able to negotiate more favorable contract terms. During industry downturns, the Company competes more aggressively for contracts at lower day rates and may accept less favorable commercial terms and contractual liability and indemnity provisions that do not offer the same level of protection against potential losses as can be obtained during industry upturns. Increased contractual liabilities may have an adverse effect on results of operations in connection with risks for which the Company is uninsured or
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The following table sets forth certain information regarding the current executive officers of the Company: |
Name | Age | Position with the Company | ||
Carl F. Thorne | Chairman of the Board and Chief Executive Officer | |||
William S. Chadwick, Jr. | ||||
Senior Vice President - | ||||
P. J. | Senior Vice President - | |||
Vice President - | ||||
Vice President - | ||||
Vice President, | ||||
�� | ||||
Treasurer | ||||
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Carl F. Thorne has been a Director of the Company since December 1986. He was elected President and Chief Executive Officer of the Company in May 1987, and served as President until January 2002. He was first elected Chairman of the Board of Directors in November 1987. Mr. Thorne holds a Bachelor of Science Degree in Petroleum Engineering from The University of Texas at Austin and a Juris Doctorate Degree from Baylor University College of Law. William S. Chadwick, Jr. joined the Company in June 1987 and was elected to his present position of
J. W. Swent joined the Company in July 2003 and was elected to his present position of Senior Vice President and Chief Financial Officer effective July 28, 2003. Mr. Swent previously held various financial executive positions in the information technology, telecommunications and manufacturing industries, including Memorex Corporation and Nortel Networks. He served as Chief Financial Officer and Chief Executive Officer of Cyrix Corporation from 1996 to 1997 and Chief Financial Officer and Chief Executive Officer of American Pad and Paper Company from 1998 to 2000. Prior to joining the Company, Mr. Swent had served as Co-Founder and Managing Director of Amrita Holdings, LLC since 2001. He is a graduate of the University of California at Berkeley, where he received a Bachelor of Science Degree in Finance and Masters Degree in Business Administration. P. J. Saile joined the Company in August 1987 and was elected Senior Vice President - Business Development and SHE in August 2005. In addition, he serves as the Senior Executive having oversight responsibility for Engineering. Prior to assuming his current position, Mr. Saile served the Company as Senior Vice President, Member - Office of the President and Chief Operating Officer, and as Vice President - Operations until June 2002 when he became President and Chief Operating Officer of ENSCO Offshore International Company, a subsidiary of the parent company, a position he held until July 2005. Mr. Saile holds a Bachelor of Business Administration Degree from the University of Mississippi. |
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Richard A. LeBlanc joined the Company in July 1989 as Manager of Finance. He assumed responsibilities for the investor relations function in March H. E. Malone, Jr. joined the Company in August 1987 and was elected Vice President - Finance effective May 2004. Prior to his current position, Mr. Malone served the Company as Vice President - Accounting, Tax and Information Systems, Vice President - Finance and Vice President - Controller. Mr. Malone holds Bachelor of Business Administration Degrees from The University of Texas at Austin and Southern Methodist University and a Master of Business Administration Degree from the University of North Texas. Paul Mars joined the Company in June 1998 and Charles A. Mills joined the Cary A. Moomjian, Jr. joined the Company in January 2002 and thereupon was elected Vice President, General Counsel and Secretary. Mr. Moomjian has over |
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Ramon Yi joined the Company in August 2004 as Treasurer. Mr. Yi has over Officers each serve for a one-year term or until their successors are elected and qualified to serve. Mr. Thorne and Mr. Malone are brothers-in-law. On February 6, 2006, Daniel W. Rabun, age 51, was named by ENSCO's Board of Directors to serve as President of the Company and as a member of the Board of Directors, effective on or before March 31, 2006. Mr. Rabun has been a partner at the international law firm of Baker & McKenzie where he has practiced law since 1986. He left the firm from October 2000 to August 2001, to serve as vice president, general counsel and secretary of Chorum Technologies Inc. Mr. Rabun has provided legal advice and counsel to ENSCO for over fifteen years, and served as a Director of the Company during 2001. He holds a B.B.A. in Accounting from the University of Houston and a Juris Doctorate Degree from Southern Methodist University. He has been a Certified Public Accountant since 1976 and was admitted to the Texas Bar in 1983. Mr. Rabun will report to Carl F. Thorne who will continue to serve as ENSCO's Chairman and Chief Executive Officer. It is currently contemplated that Mr. Thorne will step down as Chief Executive Officer within the next year, at which time Mr. Rabun will be appointed to serve as ENSCO's Chief Executive Officer. Mr. Thorne will thereupon continue to serve as Chairman of the Board. |
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• | demand for oil and gas, | |
• | the ability of OPEC to set and maintain production levels and pricing, | |
• | the level of production by non-OPEC countries, | |
• | domestic and foreign tax policy, | |
• | laws and governmental regulations that restrict exploration and development of oil and natural gas in various jurisdictions, | |
• | advances in exploration and development technology, and | |
• | the worldwide military or political environment, including uncertainty or instability resulting from an escalation or additional outbreak of armed hostilities or other crises in oil or natural gas producing areas of the Middle East or geographic areas in which we operate, or acts of terrorism in the United States or elsewhere. |
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THE OFFSHORE CONTRACT DRILLING INDUSTRY IS CYCLICAL, WITH PERIODS OF LOW DEMAND AND EXCESS RIG AVAILABILITY THAT COULD RESULT IN ADVERSE EFFECTS ON OUR BUSINESS.Financial operating results in the offshore contract drilling industry have historically been very cyclical and primarily are related to the demand for drilling rigs and the available supply of rigs. Demand for rigs is directly related to the regional and worldwide levels of offshore exploration and development spending by oil and gas companies, which is beyond our control. Offshore exploration and development spending may fluctuate substantially from year to year and from region to region as noted in "THE SUCCESS OF OUR BUSINESS WILL DEPEND ON THE LEVEL OF ACTIVITY IN THE OIL AND NATURAL GAS INDUSTRY, WHICH IS SIGNIFICANTLY AFFECTED BY VOLATILE OIL AND GAS PRICES" above. The supply of drilling rigs is limited and new rigs require a substantial capital investment and a long period of time to construct. Currently, there are over seventy new rigs, primarily jackup rigs, reported to be on order for delivery by the end of 2009. There are no assurances that the market will be able to fully absorb the supply of new rigs scheduled to enter the market in future periods. It is time consuming and costly to move rigs between geographic areas. Accordingly, as demand changes in a particular market, the supply of rigs may not adjust quickly, and therefore the utilization and day rates of rigs could fluctuate significantly. Certain events, such as hurricanes, craterings, punchthrough and blowouts may impact the supply of rigs in a particular market and cause rapid fluctuations in rig demand, utilization and day rates. Periods of decreased demand and excess rig supply may require us to idle rigs or to enter into lower rate contracts. There can be no assurance that the current demand for drilling rigs will not decline in future periods, nor can there be any assurance concerning any adverse effect resulting from such decrease in activity. |
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THE OFFSHORE CONTRACT DRILLING INDUSTRY IS HIGHLY COMPETITIVE WHICH COULD LEAD US TO ACCEPT LOWER DAY RATES AND LESS FAVORABLE CONTRACT TERMS DURING INDUSTRY DOWNTURNS.The offshore contract drilling industry is highly competitive with numerous industry participants. The industry has experienced consolidation in recent years and may experience additional consolidation. Furthermore, recent mergers among oil and natural gas exploration and production companies have reduced the number of available customers. Drilling contracts are, for the most part, awarded on a competitive bid basis. Price competition is often the primary factor in determining which qualified contractor is awarded a contract, although quality of service, operational and safety performance, equipment suitability and availability, reputation and technical expertise are also factors. We will compete with numerous offshore drilling contractors, several of which are larger and have greater resources than us. During good industry market cycles we experience higher utilization, receive relatively high average day rates, and also generally are able to negotiate more favorable contract terms. During adverse industry market cycles, we compete more aggressively for contracts at lower day rates and may have to accept contractual liability and indemnity provisions that do not offer the same level of protection against potential losses as can be obtained during good industry market cycles. Lower day rates and/or utilization will adversely affect our results of operations. Increased contractual liabilities may also have an adverse effect on results of operations, especially in respect of risks for which we are uninsured or underinsured, or in relation to increased cost of insurance. |
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WE MAY SUFFER LOSSES IF OUR CUSTOMERS TERMINATE OR SEEK TO RENEGOTIATE OUR CONTRACTS.Our drilling contracts often are cancelable upon specific notice by the customer. Although contracts may require the customer to pay an early termination payment upon cancellation, such payment may not fully compensate for the loss of the contract. In periods of rapid market downturn, our customers may not honor the terms of existing contracts, may terminate contracts or may seek to renegotiate contract rates and terms to conform with depressed market conditions. Furthermore, contracts customarily specify automatic termination or termination at the option of the customer in the event of a total loss of the drilling rig and often include provisions addressing termination rights or cessation of day rates if operations are suspended for extended periods by reason of excessive downtime for repairs, acts of God or other specified conditions. Our operating results may be adversely affected by early termination of contracts, contract renegotiations or cessation of day rates while operations are suspended. OUR BUSINESS MAY BE MATERIALLY ADVERSELY AFFECTED IF CERTAIN CUSTOMERS CEASE TO DO BUSINESS WITH US.We provide our services to major international, government-owned and independent oil and gas companies. However, the number of customers served by us has decreased in recent years as a result of mergers among the major international oil companies and large independent oil companies. ExxonMobil provided approximately 12% of our consolidated revenues in 2005. The next four largest customers for 2005 accounted in the aggregate for approximately 30% of our 2005 consolidated revenues. Our results of operations may be materially adversely affected if any major customer terminates its contracts with us, fails to renew its existing contracts with us, or declines to award new contracts to us. |
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• | rig or other property damage resulting from hurricanes and other severe weather conditions, collisions, groundings, blowouts, fires, explosions and other accidents or terrorism, | |
• | blowouts, fires, explosions and other loss of well control events causing damage to wells, reservoirs, production facilities and other properties and which may require wild well control, including drilling of relief wells, | |
• | craterings, punchthroughs or other events causing rigs to capsize, sink or otherwise incur significant damage, | |
• | extensive uncontrolled fires, blowouts, oil spills or other discharges of pollutants causing damage to the environment, | |
• | machinery breakdowns, equipment failures, personnel shortages, failure of subcontractors and vendors to perform or supply goods and services and other events causing the suspension or cancellation of drilling operations, and | |
• | unionization or similar collective actions by our employees or employees of subcontractors causing significant increases in operating costs. |
We currently maintain broad insurance coverage, subject to certain significant deductibles and levels of self-insurance, but it does not cover all types of losses and in some situations it may not provide full coverage of losses or liabilities resulting from our operations. We have historically maintained insurance coverage for damage to our drilling rigs for amounts not less than the estimated fair market value thereof. However, in the event of total loss, such coverage is unlikely to be sufficient to recover the cost of a newly constructed replacement rig. Additionally, we do not generally maintain business interruption or loss of hire insurance. |
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Our contracts generally protect us from certain losses sustained as a result of our negligence. However, losses resulting from contracts that do not contain such protection could have a material adverse affect on our financial position, results of operations and cash flows. Losses resulting from our gross negligence or willful misconduct may not be protected contractually by specific provision or by application of law, and our insurance may not provide adequate protection for such losses. Moreover, the cost of many of the types of insurance coverage maintained by us has increased significantly during recent years. In addition, insurance market conditions have resulted in retention of additional risk by us, primarily through higher insurance deductibles. Very few insurance underwriters offer certain types of insurance coverage maintained by us, and there can be no assurance that any particular type of insurance coverage will continue to be available in the future, that we will not accept retention of additional risk through higher insurance deductibles or otherwise, or that we will be able to purchase our desired level of insurance coverage at commercially feasible rates. Further, due to the losses sustained by us and the offshore drilling industry as a consequence of hurricanes that occurred in the Gulf of Mexico in 2005 and 2004, we may not be able to obtain future insurance coverage comparable with that of prior years, thus putting us at a greater risk of loss due to severe weather conditions which could have a material adverse effect on our financial position, results of operations and cash flows. In addition, we are likely to experience increased cost for available insurance coverage which may impose higher deductibles and limit maximum aggregate recoveries for certain perils such as hurricane related windstorm damage or loss. Our primary insurance policies renew annually effective July 1, and we may modify our risk management program in response to changes in the insurance market, including possible implementation of a captive insurance program or increased risk retention. |
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• | foreign terrorist acts, war and civil disturbances, | |
• | expropriation, nationalization or deprivation of our equipment, | |
• | expropriation or nationalization of a customer's property or drilling rights, | |
• | repudiation of contracts, | |
• | assaults on property or personnel, | |
• | foreign exchange restrictions, | |
• | foreign currency fluctuations, | |
• | foreign taxation, | |
• | limitations on the ability to repatriate income or capital to the United States, | |
• | changing local and international political conditions, and | |
• | foreign and domestic monetary policies. |
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We are subject to various tax laws and regulations in substantially all of the foreign countries in which we operate. We evaluate applicable tax laws and employ various business structures and operating strategies in foreign countries to obtain the optimal level of taxation on our revenues, income, assets and personnel. Actions by foreign tax authorities that impact our business structures and operating strategies, such as changes to tax treaties, laws and regulations, or repeal of same, adverse rulings in connection with audits, or other challenges, may result in substantially increased tax expense. Our international operations also face the risk of fluctuating currency values, which can impact revenues and operating costs denominated in foreign currencies. In addition, some of the countries in which we operate have occasionally enacted exchange controls. Historically, we have been able to limit these risks by invoicing and receiving payment in U.S. dollars or freely convertible international currency and, to the extent possible, by limiting acceptance of foreign currency to amounts which approximate our expenditure requirements in such currencies. However, there is no assurance that we will be able to renegotiate such terms in the future. We also use foreign currency purchase options or futures contracts to reduce our exposure to foreign currency risk. We currently conduct contract drilling operations in certain countries that have experienced substantial devaluations of their currency compared to the U.S. dollar. However, since our drilling contracts generally stipulate payment wholly or substantially in U.S. dollars, we have experienced no significant losses due to the devaluation of such currencies. However, there is no assurance that we will be able to negotiate such payment terms in the future. Our international operations are also subject to various laws and regulations in countries in which we operate, including laws and regulations relating to the equipment and operation of drilling rigs. Governments in some foreign countries have become increasingly active in regulating and controlling the ownership of concessions and companies holding concessions, the exploration of oil and gas and other aspects of the oil and gas industries in their countries. In addition, government action, including initiatives by OPEC, may continue to cause oil or gas price volatility. In some areas of the world, this government activity has adversely affected the amount of exploration and development work done by major oil companies and may continue to do so. There can be no assurance that these laws and regulations or activities will not have a material adverse effect on our operations in the future. |
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• | shortages of materials or skilled labor, | |
• | unforeseen engineering problems, | |
• | unanticipated actual or purported change orders, | |
• | work stoppages, | |
• | financial or operating difficulties of the shipyard upgrading, refurbishing or constructing the rig, | |
• | adverse weather conditions, | |
• | unanticipated cost increases, | |
• | inability to obtain any of the requisite permits or approvals, and | |
• | additional risks inherent to ship building and ship repairing in a foreign location. |
The risks are concentrated in respect of our three rigs currently under construction at one shipyard in Singapore. Significant shipyard project cost overruns or delays could materially and adversely affect our financial condition and results of operations. |
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We require highly skilled personnel to operate and provide technical services and support for our business. Competition for the skilled and other labor required for drilling operations has intensified as the number of rigs activated or added to worldwide fleets or under construction has increased in the last few years. Specfically, there are over seventy new rigs, primarily jackup rigs, reported to be on order for delivery by the end of 2009, which will require new skilled and other personnel to operate. Although competition for skilled and other labor has not materially affected us to date, the possibility exists that competition for skilled and other labor for operations could limit our results of operations in the future. In 2001, we entered into a voluntary agreement with a labor union in the North Sea and have not experienced any significant work stoppages or strikes as a result of labor disputes. Although none of our domestic employees are currently represented by unions, there may be continued labor union efforts to organize offshore employees in the Gulf of Mexico. Unionization or similar collective actions by our employees, domestically and internationally, may adversely impact our cost of labor. |
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Terrorist acts or acts of war may cause damage to or disruption of our United States or international operations, employees, property and equipment, or customers, suppliers and subcontractors, which could significantly impact our financial position, results of operations and cash flows. Terrorist acts often create many economic and political uncertainties and the potential for future terrorist acts, the national and international responses to terrorism, and other acts of war or hostility could create many economic and political uncertainties, including an impact upon oil and gas drilling, exploration and development, which could adversely affect our business in ways that cannot readily be determined. |
The Company has no unresolved Securities and Exchange Commission staff comments. |
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Item 2. Properties Contract Drilling The following table provides certain information about the Company's drilling rig fleet as of February 15, JACKUP RIGS |
Rig Name | Year Built/ Rebuilt | Rig Make | Maximum Water Depth/ Drilling Depth | Current Location | Current Customer | ||||||
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North America | |||||||||||
ENSCO 60 | 1981/2003 | 300'/25,000' | Gulf of Mexico | ||||||||
ENSCO 68 | 1976/2004 | 400'/30,000' | Gulf of Mexico | ||||||||
ENSCO 69 | 1976/1995 | 400'/25,000' | Gulf of Mexico | ||||||||
ENSCO 74 | 1999 | MLT Super 116-C | 400'/30,000' | Gulf of Mexico | |||||||
ENSCO 75 | 1999 | MLT Super 116-C | 400'/30,000' | Gulf of Mexico | |||||||
ENSCO | MLT | 350'/30,000' | Gulf of Mexico | ||||||||
ENSCO 82 | 1979/2003 | 300'/30,000' | Gulf of Mexico | ||||||||
ENSCO 83 | 1979 | 250'/25,000' | Gulf of Mexico | ||||||||
ENSCO 84 | 1981/2005 | 250'/25,000' | Gulf of Mexico | ||||||||
ENSCO 86 | 250'/30,000' | Gulf of Mexico | |||||||||
ENSCO 87 | 350'/25,000' | Gulf of Mexico | |||||||||
ENSCO 89 | 250'/25,000' | Gulf of Mexico | |||||||||
ENSCO 90 | 1982/2002 | 250'/25,000' | Gulf of Mexico | ||||||||
ENSCO 93 | 1982/2002 | 250'/25,000' | Gulf of Mexico | Hunt Oil | |||||||
ENSCO 98 | 1977/2003 | 250'/25,000' | Gulf of Mexico | ||||||||
ENSCO 99 | 250'/30,000' | Gulf of Mexico | |||||||||
ENSCO 105 | 2002 | 400'/30,000' | Gulf of Mexico | ||||||||
Europe/Africa | |||||||||||
ENSCO 70 | 1981/1996 | 250'/30,000' | |||||||||
ENSCO 71 | 1982/1995 | 225'/25,000' | Denmark | Maersk | |||||||
ENSCO 72 | 1981/1996 | 225'/25,000' | |||||||||
ENSCO 80 | 1978/1995 | 225'/30,000' | United Kingdom | ||||||||
ENSCO 85 | 1981/1995 | 225'/25,000' | United Kingdom | ||||||||
ENSCO 92 | 1982/1996 | 225'/25,000' | United Kingdom | ConocoPhillips | |||||||
ENSCO 100 | 1987/2000 | 350'/30,000' | Nigeria | ExxonMobil | |||||||
ENSCO 101 | 2000 | 400'/30,000' | Tullow | ||||||||
ENSCO 102 | 2002 | KFELS MOD V-A | 400'/30,000' | United Kingdom | ConocoPhillips | ||||||
Asia Pacific | |||||||||||
ENSCO 50 | 1983/1998 | 300'/25,000' | India | British Gas | |||||||
ENSCO 51 | 1981/2002 | 300'/25,000' | Brunei | Shell | |||||||
ENSCO 52 | 1983/1997 | 300'/25,000' | Malaysia | Petronas Carigali | |||||||
ENSCO 53 | 1982/1998 | 300'/25,000' | |||||||||
ENSCO 54 | 1982/1997 | 300'/25,000' | Qatar | Ras Gas | |||||||
ENSCO 56 | 1982/1997 | 300'/25,000' | |||||||||
ENSCO 57 | 1982/2003 | 300'/25,000' | Malaysia | Murphy | |||||||
ENSCO 67 | 1976/ | 400'/30,000' | |||||||||
ENSCO 76 | 2000 | MLT Super 116-C | 350'/30,000' | Saudi Arabia | Saudi Aramco | ||||||
ENSCO 88 | 1982/2004 | 250'/25,000' | Qatar | Ras Gas | |||||||
ENSCO 94 | 1981/2001 | 250'/25,000' | Qatar | Ras Gas | |||||||
ENSCO 95 | 1981/2005 | 250'/25,000' | |||||||||
ENSCO 96 | 1982/1997 | 250'/25,000' | |||||||||
ENSCO 97 | 1980/1997 | 250'/25,000' | |||||||||
ENSCO 104 | 2002 | 400'/30,000' |
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Rig Name | Year Built/ Rebuilt | Rig Make | Maximum Water Depth/ Drilling Depth | Current Location | Current Customer | ||||||
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Asia Pacific (Continued) | |||||||||||
ENSCO 106 | 2005 | 400'/30,000' | Australia | Apache | |||||||
ENSCO 107 | 2006 | KFELS MOD V-B | 400'/30,000' | Singapore | Committed | ||||||
ENSCO 108 | 2007 | KFELS MOD V-B | 400'/30,000' | Singapore | Under construction(6) |
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ULTRA-DEEPWATER SEMISUBMERSIBLE |
Rig Name | Year Built | Rig | Maximum Water Depth/ Drilling Depth | Current Location | Current Customer | ||||||
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ENSCO 7500 | 2000 | Dynamically Positioned | 8,000'/30,000' | Gulf of Mexico | | ||||||
ENSCO 8500 | 2008 | Dynamically Positioned | 8,500'/35,000' | Singapore | Under construction(6) | ||||||
ENSCO 8501 | 2009 | Dynamically Positioned | 8,500'/35,000' | Singapore | Under construction(6) |
BARGE | |||||||||||
Rig Name | Year | Maximum Drilling Depth | Current Location | Current Customer | |||||||
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ENSCO I | 1999 | 30,000' | Indonesia | Total | |||||||
PLATFORM | |||||||||||
Rig Name | Year Built/ Rebuilt | Maximum Drilling Depth | Current Location | Current Customer | |||||||
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ENSCO 25 | 1980/1998 | 30,000' | Gulf of Mexico | ||||||||
(1) | ENSCO March 2006. |
(2) | ENSCO |
(3) |
(4) |
(5) | On January 23, 2006, the Company accepted delivery of ENSCO |
(6) | For additional information concerning the two ultra-deepwater semisubmersible rigs and one ultra-high specification jackup rig under construction, see "Outlook" section included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." The ENSCO 8500 and ENSCO 8501 are subject to long-term drilling contracts of four years and three and one half years, respectively. ENSCO 108 is scheduled to commence a one year contract upon construction completion. |
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Jackup rigs stand on the ocean floor with their hull and drilling equipment elevated above the water on connected leg supports. Jackup rigs are generally preferred over other rig types in water depths of 400 feet or less, primarily because jackup rigs provide a more stable drilling platform with above water blowout prevention equipment. All of the Company's jackup rigs are of the independent leg design. All but A semisubmersible rig is a floating offshore drilling unit with pontoons and columns that, when flooded with water, cause the unit to be partially submerged to a predetermined depth. Barge rigs are towed to the drilling location and are held in place by anchors while drilling activities are conducted. The Company's barge Platform rigs are designed to be temporarily installed on permanently constructed customer offshore platforms. The platform rig sections are lifted onto the offshore platforms with heavy lift cranes. A platform rig typically remains at a location for a longer period of time than a jackup rig, because several wells can be drilled from a single offshore platform. Over the life of a typical rig, several of the major components are replaced due to normal wear and tear or due to technological advancements in drilling equipment. All of the Company's rigs are in good |
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First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Year | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Year | |||||||||||||
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2005 High | $41.42 | $39.49 | $47.85 | $50.34 | $50.34 | |||||||||||||||||
2005 Low | $30.32 | $29.25 | $35.22 | $39.42 | $29.25 | |||||||||||||||||
2004 High | $30.79 | $29.16 | $33.15 | $34.15 | $34.15 | $30.79 | $29.16 | $33.15 | $34.15 | $34.15 | ||||||||||||
2004 Low | $26.35 | $24.95 | $26.95 | $28.25 | $24.95 | $26.35 | $24.95 | $26.95 | $28.25 | $24.95 | ||||||||||||
2003 High | $30.75 | $31.10 | $28.43 | $29.00 | $31.10 | |||||||||||||||||
2003 Low | $24.24 | $24.32 | $23.58 | $24.49 | $23.58 |
The Company's common stock (Symbol: ESV) is traded on the New York Stock Exchange. At February 1, The Company initiated the payment of a $.025 per share quarterly cash dividend on its common stock during the third quarter of 1997 and has continued to pay such quarterly dividends through December 31, |
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Following is a summary of all repurchases by the Company of its common stock during the three month period ended December 31, |
Issuer Purchases of Equity Securities | ||||||||||||||||||||||||||||
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Total Number | Maximum | Total Number | Maximum | |||||||||||||||||||||||||
of Shares | Number of | of Shares | Number of | |||||||||||||||||||||||||
Average | Purchased as | Shares that | Average | Purchased as | Shares that | |||||||||||||||||||||||
Total | Price | Part of Publicly | May Yet Be | Total | Price | Part of Publicly | May Yet Be | |||||||||||||||||||||
Number of | Paid | Announced | Purchased | Number of | Paid | Announced | Purchased | |||||||||||||||||||||
Shares | per | Plans or | Under Plans | Shares | per | Plans or | Under Plans | |||||||||||||||||||||
Period | Period | Purchased | Share | Programs | or Programs | Period | Purchased | Share | Programs | or Programs | ||||||||||||||||||
October | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||
November | 5,955 | $30.26 | -- | -- | 862 | $44.86 | -- | -- | ||||||||||||||||||||
December | 629 | $29.06 | -- | -- | 7,755 | $46.98 | -- | -- | ||||||||||||||||||||
Total | 6,584 | $30.15 | -- | -- | 8,617 | $46.76 | -- | -- | ||||||||||||||||||||
All of the shares repurchased during the three month period ended December 31, |
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Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||
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2004 (1) | 2003 (2) | 2002 (3) | 2001 | 2000 | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||
(in millions, except per share amounts) | (in millions, except per share amounts) | |||||||||||||||||||||
Consolidated Statement of Income Data | ||||||||||||||||||||||
Revenues | $ | 768.0 | $ | 781.2 | $ | 641.6 | $ | 731.0 | $ | 473.7 | $ | 1,046.9 | $ | 740.6 | $ | 742.3 | $ | 602.4 | $ | 655.8 | ||
Operating expenses | ||||||||||||||||||||||
Contract drilling | 425.5 | 445.2 | 341.5 | 309.3 | 249.5 | 454.4 | 406.1 | 420.8 | 315.5 | 271.4 | ||||||||||||
Depreciation and amortization | 144.1 | 130.2 | 112.0 | 103.6 | 88.4 | 154.8 | 134.7 | 119.5 | 97.9 | 92.5 | ||||||||||||
Impairment of assets | -- | -- | 59.9 | 9.2 | -- | -- | -- | -- | -- | 9.2 | ||||||||||||
General and administrative | 26.3 | 22.0 | 18.6 | 16.8 | 13.3 | 25.8 | 26.3 | 22.0 | 18.6 | 16.8 | ||||||||||||
Operating income | 172.1 | 183.8 | 109.6 | 292.1 | 122.5 | 411.9 | 173.5 | 180.0 | 170.4 | 265.9 | ||||||||||||
Other expense, net | (32.6 | ) | (31.6 | ) | (19.6 | ) | (25.4 | ) | (6.6 | ) | (20.7 | ) | (33.6 | ) | (32.8 | ) | (23.1 | ) | (25.5 | ) | ||
Income from continuing operations before income taxes | 139.5 | 152.2 | 90.0 | 266.7 | 115.9 | 391.2 | 139.9 | 147.2 | 147.3 | 240.4 | ||||||||||||
Provision for income taxes | 36.0 | 43.1 | 28.8 | 75.1 | 36.6 | 107.3 | 35.2 | 43.3 | 41.2 | 65.3 | ||||||||||||
Income from continuing operations | 103.5 | 109.1 | 61.2 | 191.6 | 79.3 | 283.9 | 104.7 | 103.9 | 106.1 | 175.1 | ||||||||||||
Income (loss) from discontinued operations | (.7 | ) | (.8 | ) | (1.9 | ) | 15.7 | 6.1 | 10.3 | (1.9 | ) | 4.4 | (46.8 | ) | 32.2 | |||||||
Net income | $ | 102.8 | $ | 108.3 | $ | 59.3 | $ | 207.3 | $ | 85.4 | $ | 294.2 | $ | 102.8 | $ | 108.3 | $ | 59.3 | $ | 207.3 | ||
Earnings (loss) per share - basic | ||||||||||||||||||||||
Continuing operations | $ | .69 | $ | .73 | $ | .43 | $ | 1.40 | $ | .58 | $ | 1.87 | $ | .70 | $ | .69 | $ | .75 | $ | 1.28 | ||
Discontinued operations | (.01 | ) | (.01 | ) | (.01 | ) | .11 | .04 | .07 | (.02 | ) | .03 | (.33 | ) | .23 | |||||||
$ | .68 | $ | .72 | $ | .42 | $ | 1.51 | $ | .62 | $ | 1.94 | $ | .68 | $ | .72 | $ | .42 | $ | 1.51 | |||
Earnings (loss) per share - diluted | ||||||||||||||||||||||
Continuing operations | $ | .69 | $ | .73 | $ | .43 | $ | 1.39 | $ | .57 | $ | 1.86 | $ | .70 | $ | .69 | $ | .75 | $ | 1.27 | ||
Discontinued operations | (.01 | ) | (.01 | ) | (.01 | ) | .11 | .04 | .07 | (.02 | ) | .03 | (.33 | ) | .23 | |||||||
$ | .68 | $ | .72 | $ | .42 | $ | 1.50 | $ | .61 | $ | 1.93 | $ | .68 | $ | .72 | $ | .42 | $ | 1.50 | |||
Weighted average common shares outstanding: | ||||||||||||||||||||||
Basic | 150.5 | 149.6 | 140.7 | 136.9 | 137.6 | 151.7 | 150.5 | 149.6 | 140.7 | 136.9 | ||||||||||||
Diluted | 150.6 | 150.1 | 141.4 | 137.9 | 139.3 | 152.4 | 150.6 | 150.1 | 141.4 | 137.9 | ||||||||||||
Cash dividends per common share | $ | .10 | $ | .10 | $ | .10 | $ | .10 | $ | .10 | $ | .10 | $ | .10 | $ | .10 | $ | .10 | $ | .10 | ||
Consolidated Balance Sheet Data | ||||||||||||||||||||||
Working capital | $ | 277.9 | $ | 355.9 | $ | 189.2 | $ | 312.0 | $ | 171.6 | $ | 347.0 | $ | 277.9 | $ | 355.9 | $ | 189.2 | $ | 312.0 | ||
Total assets | 3,322.0 | 3,183.0 | 3,061.5 | 2,323.8 | 2,108.0 | 3,617.9 | 3,322.0 | 3,183.0 | 3,061.5 | 2,323.8 | ||||||||||||
Long-term debt, net of current portion | 527.1 | 549.9 | 547.5 | 462.4 | 422.2 | 475.4 | 527.1 | 549.9 | 547.5 | 462.4 | ||||||||||||
Stockholders' equity | 2,181.9 | 2,081.1 | 1,967.0 | 1,440.2 | 1,328.9 | 2,533.2 | 2,181.9 | 2,081.1 | 1,967.0 | 1,440.2 | ||||||||||||
Cash flow from continuing operations | 355.7 | 247.8 | 273.2 | 180.3 | 363.6 |
(1) |
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• | demand for oil and gas, | |
• | regional and global economic conditions and expected changes therein, | |
• | political, social and legislative environments in the U.S. and other major oil-producing countries, | |
• | production levels and related activities of OPEC and other oil and gas producers, | |
• | technological advancements that impact the methods or cost of oil and gas exploration and development, and | |
• | the impact that these and other events have on the current and expected future pricing of oil and natural gas. |
Since factors that affect offshore exploration and development spending are beyond the control of the Company and rig demand can change quickly, it is difficult for the Company to predict industry conditions or trends in operating results. Periods of low demand result in excess rig supply, which generally reduces rig utilization levels and day rates; periods of high demand tighten rig supply, generally resulting in increased rig utilization levels and day rates. |
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2004 | 2003 | 2002 | 2005 | 2004 | 2003 | |||||||||||||||||
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Revenues | $ | 768.0 | $ | 781.2 | $ | 641.6 | $ | 1,046.9 | $ | 740.6 | $ | 742.3 | ||||||||||
�� Operating expenses | ||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||
Contract drilling | 425.5 | 445.2 | 341.5 | 454.4 | 406.1 | 420.8 | ||||||||||||||||
Depreciation and amortization | 144.1 | 130.2 | 112.0 | 154.8 | 134.7 | 119.5 | ||||||||||||||||
Impairment of assets | -- | -- | 59.9 | |||||||||||||||||||
General and administrative | 26.3 | 22.0 | 18.6 | 25.8 | 26.3 | 22.0 | ||||||||||||||||
Operating income | 172.1 | 183.8 | 109.6 | 411.9 | 173.5 | 180.0 | ||||||||||||||||
Other expense, net | (32.6 | ) | (31.6 | ) | (19.6 | ) | (20.7 | ) | (33.6 | ) | (32.8 | ) | ||||||||||
Provision for income taxes | 36.0 | 43.1 | 28.8 | 107.3 | 35.2 | 43.3 | ||||||||||||||||
Income from continuing operations | 103.5 | 109.1 | 61.2 | 283.9 | 104.7 | 103.9 | ||||||||||||||||
Loss from discontinued operations | (.7 | ) | (.8 | ) | (1.9 | ) | ||||||||||||||||
Income (loss) from discontinued operations | 10.3 | (1.9 | ) | 4.4 | ||||||||||||||||||
Net income | $ | 102.8 | $ | 108.3 | $ | 59.3 | $ | 294.2 | $ | 102.8 | $ | 108.3 |
In 2005, net income increased by $191.4 million, or 186%, and operating income increased by $238.4 million, or 137%, as compared to 2004. The increases are primarily due to improved average day rates for the Company's jackup rigs and ENSCO 7500 and improved utilization of the Europe/Africa jackup rigs and ENSCO 7500, as compared to the prior year period. In 2004, net income for the Company decreased by $5.5 million, or 5%, and operating income decreased by
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The following is an analysis of the Company's revenues, |
2004 | 2003 | 2002 | 2005 | 2004 | 2003 | |||||||||
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Revenues | ||||||||||||||
Jackup rigs: | ||||||||||||||
North America | $255.5 | $213.8 | $164.3 | $362.2 | $243.2 | $201.8 | ||||||||
Europe/Africa | 146.0 | 179.7 | 180.6 | 241.5 | 146.0 | 179.7 | ||||||||
Asia Pacific | 268.8 | 233.3 | 182.1 | 354.9 | 268.8 | 233.3 | ||||||||
South America/Caribbean | 31.5 | 32.4 | 11.4 | 4.0 | 31.5 | 32.4 | ||||||||
Total jackup rigs | 701.8 | 659.2 | 538.4 | 962.6 | 689.5 | 647.2 | ||||||||
Semisubmersible rig - North America | 23.8 | 66.2 | 61.6 | 52.0 | 23.8 | 66.2 | ||||||||
Barge rig - Asia Pacific | 18.0 | 19.5 | 2.5 | 19.7 | 18.0 | 19.5 | ||||||||
Barge rigs - South America/Caribbean | 13.7 | 18.2 | 17.7 | |||||||||||
Platform rigs - North America | 10.7 | 18.1 | 21.4 | |||||||||||
Platform rig - North America | 12.6 | 9.3 | 9.4 | |||||||||||
Total | $768.0 | $781.2 | $641.6 | $1,046.9 | $740.6 | $742.3 | ||||||||
Contract Drilling Expense | ||||||||||||||
Jackup rigs: | ||||||||||||||
North America | $137.4 | $145.1 | $121.6 | $130.9 | $131.3 | $137.7 | ||||||||
Europe/Africa | 95.8 | 99.2 | 81.8 | 112.5 | 95.8 | 99.2 | ||||||||
Asia Pacific | 136.2 | 134.1 | 81.4 | 170.4 | 136.2 | 134.1 | ||||||||
South America/Caribbean | 12.5 | 13.3 | 5.3 | 2.8 | 12.5 | 13.3 | ||||||||
Total jackup rigs | 381.9 | 391.7 | 290.1 | 416.6 | 375.8 | 384.3 | ||||||||
Semisubmersible rig - North America | 15.8 | 19.4 | 21.6 | 21.3 | 15.8 | 19.4 | ||||||||
Barge rig - Asia Pacific | 8.9 | 11.4 | 2.8 | 9.4 | 8.9 | 11.4 | ||||||||
Barge rigs - South America/Caribbean | 10.2 | 11.8 | 13.7 | |||||||||||
Platform rigs - North America | 8.7 | 10.9 | 13.3 | |||||||||||
Platform rig - North America | 7.1 | 5.6 | 5.7 | |||||||||||
Total | $425.5 | $445.2 | $341.5 | $454.4 | $406.1 | $420.8 | ||||||||
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2005 | 2004 | 2003 | |||||||||
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Rig utilization(1) | |||||||||||
Jackup rigs | |||||||||||
North America | 85% | 85% | 86% | ||||||||
Europe/Africa | 96% | 82% | 93% | ||||||||
Asia Pacific | 84% | 82% | 82% | ||||||||
South America/Caribbean | 100% | 97% | 99% | ||||||||
Total jackup rigs | 87% | 84% | 86% | ||||||||
Semisubmersible rig - North America | 86% | 51% | 96% | ||||||||
Barge rig - Asia Pacific | 98% | 100% | 99% | ||||||||
Platform rig | 99% | 100% | 99% | ||||||||
Total | 87% | 84% | 87% | ||||||||
Average day rates(2) | |||||||||||
Jackup rigs | |||||||||||
North America | $ 67,725 | $ 41,800 | $ 31,445 | ||||||||
Europe/Africa | 84,441 | 60,542 | 64,615 | ||||||||
Asia Pacific | 69,506 | 63,226 | 63,154 | ||||||||
South America/Caribbean | 77,589 | 87,529 | 86,381 | ||||||||
Total jackup rigs | 71,694 | 53,570 | 47,236 | ||||||||
Semisubmersible rig - North America | 161,527 | 123,988 | 188,335 | ||||||||
Barge rig - Asia Pacific | 52,684 | 48,317 | 41,333 | ||||||||
Platform rig | 35,848 | 29,401 | 28,161 | ||||||||
Total | $ 72,721 | $ 53,939 | $ 51,687 | ||||||||
(1) | Utilization is derived by dividing the number of days under contract, including days associated with compensated mobilizations, by the number of days in the period. |
(2) | Average day rates are derived by dividing contract drilling revenue by the aggregate number of contract days, adjusted to exclude certain types of non-recurring reimbursable revenue and lump sum revenue and contract days associated with certain mobilizations, demobilizations, shipyard contracts and standby contracts. |
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2004 | 2003 | 2002 | 2005 | 2004 | 2003 | |||||||||
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Jackup rigs: | ||||||||||||||
North America(1)(2) | 18 | 21 | 21 | |||||||||||
North America(1) | 17 | 17 | 20 | |||||||||||
Europe/Africa | 8 | 8 | 8 | 9 | 8 | 8 | ||||||||
Asia Pacific(1) | 15 | 12 | 12 | |||||||||||
Asia Pacific(1)(2)(3)(4) | 16 | 15 | 12 | |||||||||||
South America/Caribbean | 1 | 1 | 1 | -- | 1 | 1 | ||||||||
Total jackup rigs | 42 | 42 | 42 | 42 | 41 | 41 | ||||||||
Semisubmersible rig - North America | 1 | 1 | 1 | 1 | 1 | 1 | ||||||||
Barge rig - Asia Pacific | 1 | 1 | 1 | 1 | 1 | 1 | ||||||||
Barge rigs - South America/Caribbean | 6 | 6 | 6 | |||||||||||
Platform rigs - North America(3) | 3 | 3 | 3 | |||||||||||
Platform rig - North America | 1 | 1 | 1 | |||||||||||
Total(4) | 53 | 53 | 53 | |||||||||||
Total(5) | 45 | 44 | 44 | |||||||||||
(1) | During 2004, the Company mobilized |
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(3) |
(4) |
(5) | The total number of rigs for each period excludes rigs reclassified as discontinued operations (See Note 10 to the Company's Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" for information concerning the Company's discontinued operations), and rigs under construction at December 31, |
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In 2005, revenues for the North America jackup rigs increased by $119.0 million, or 49%, and contract drilling expense decreased by $400,000, as compared to 2004. The increase in revenues is due primarily to a 62% increase in average day rates, partially offset by decreased revenue attributable to the reduced size of the Company's North America jackup rig fleet resulting from the relocation of three jackup rigs from the Gulf of Mexico in 2004. The significant increase in average day rates is primarily attributable to a reduction in the supply of available rigs in the region and increased demand. The decrease in the supply of jackup rigs was partially due to several of the Company's competitors' rigs being taken out of operation in the second half of 2005 to prepare for international contract commitments. Additionally, Hurricane Katrina and Hurricane Rita disrupted drilling operations and severely damaged or destroyed several rigs operating in the region thereby reducing the number of available rigs even further. Demand increased due to higher levels of spending by oil and gas companies resulting from an increasing global demand for oil coupled with record level oil and natural gas prices. The slight decrease in contract drilling expense is primarily attributable to $4.0 million of costs incurred during the second quarter of 2004 relating to the termination of a rig transportation contract associated with the delayed relocation of two jackup rigs from the Gulf of Mexico to the Middle East and to the reduced size of the fleet in 2005, partially offset by an increase in repair costs and the receipt of a $500,000 insurance premium rebate in the prior year third quarter, which resulted from the low level of claims experienced during the Company's prior policy year. In 2004, revenues for the North America jackup rigs increased by
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In 2005, revenues for the Europe/Africa jackup rigs increased by $95.5 million, or 65%, and contract drilling expense increased by $16.7 million, or 17%, as compared to 2004. The increase in revenues is primarily attributable to a 39% increase in average day rates and an increase in utilization to 96% in 2005 from 82% in 2004. The improvement in day rates and utilization is attributable to increased spending by oil and gas companies. Contract drilling expense increased due to increased utilization and an increase in reimbursable expenses. In 2004, revenues for the Europe/Africa jackup rigs decreased by $33.7 million, or 19%, and contract drilling
Asia Pacific Jackup Rigs In 2005, revenues for the Asia Pacific jackup rigs increased by $86.1 million, or 32%, and contract drilling expense increased by $34.2 million, or 25%, as compared to 2004. The increase in revenues is primarily due to the increased size of the Asia Pacific jackup rig fleet. The Company relocated three rigs to the Asia Pacific region during the second and third quarters of 2004, which commenced operations after completing enhancement and contract preparation procedures. Additionally, the Company acquired ENSCO 106 in February 2005, which commenced operations shortly thereafter. Contract drilling expense increased primarily due to the increased size of the Asia Pacific jackup rig fleet in 2005. In 2004, revenues for the Asia Pacific jackup rigs increased by $35.5 million, or 15%, and contract drilling |
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South America/Caribbean Jackup Rig In 2005, revenues for the South American/Caribbean jackup rig decreased by $27.5 million, or 87%, and contract drilling expense decreased by $9.7 million, or 78%, as compared to 2004. The decrease in revenues and contract drilling expense is due to the completion of a long-term contract in February 2005 and the subsequent mobilization of ENSCO 76 from Trinidad and Tobago, compared to operating at near full utilization during the prior year period. In 2004, revenues for the South American/Caribbean jackup rig decreased by $900,000, or 3%, and contract drilling expenses decreased by $800,000, or 6%, as compared to 2003. The decrease in revenues is primarily due to a decrease in revenue associated with reimbursed costs. The decrease in contract drilling expense is due primarily to minor decreases in personnel, repair and maintenance, insurance and reimbursable expenses.
North America Semisubmersible Rig In 2005, revenues for ENSCO 7500 increased by $28.2 million, or 118%, and contract drilling expense increased by $5.5 million, or 35%, as compared to 2004. The increase in revenues and contract drilling expense is attributable to the rig being idle while undergoing minor improvements, regulatory inspection and maintenance procedures during approximately six months of 2004. In 2004, revenues for ENSCO 7500 decreased by $42.4 million, or 64%, and contract drilling
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In 2005, revenues for the Asia Pacific barge rig, which is currently located in Indonesia, increased by $1.7 million, or 9%, and contract drilling expense increased by $500,000, or 6%, as compared to 2004. The increase in revenues is primarily due to a 9% increase in the average day rate of ENSCO I. The increase in contract drilling expense is primarily due to increased repair, maintenance and supply costs. In 2004, revenues for the Asia Pacific barge rig decreased by $1.5 million, or 8%, and contract drilling
North America Platform In |
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Depreciation and amortization expense for
Depreciation and amortization expense for 2004 increased by
General and administrative expense for
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General and administrative expense for 2004 increased by $4.3 million, or 20%, as compared to 2003. The increase is primarily attributable to increased personnel costs, audit fees and consulting services related to information systems, the Sarbanes-Oxley Act and other projects, offset in part by a decrease resulting from a $1.1 million payment of one-time severance costs during the first quarter of 2003 under an employment contract assumed in connection with |
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2004 | 2003 | 2002 | 2005 | 2004 | 2003 | |||||||||||||||||
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Interest income | $ | 3.7 | $ | 3.4 | $ | 5.1 | $ | 7.0 | $ | 3.7 | $ | 3.4 | ||||||||||
Interest expense, net: | ||||||||||||||||||||||
Interest expense | (40.5 | ) | (38.7 | ) | (36.2 | ) | (37.7 | ) | (40.5 | ) | (38.7 | ) | ||||||||||
Capitalized interest | 3.9 | 2.0 | 5.1 | 8.9 | 3.9 | 2.0 | ||||||||||||||||
(36.6 | ) | (36.7 | ) | (31.1 | ) | (28.8 | ) | (36.6 | ) | (36.7 | ) | |||||||||||
Other, net | .3 | 1.7 | 6.4 | 1.1 | (.7 | ) | .5 | |||||||||||||||
$ | (32.6 | ) | $ | (31.6 | ) | $ | (19.6 | ) | $ | (20.7 | ) | $ | (33.6 | ) | $ | (32.8 | ) |
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Interest a decrease in outstanding debt. Interest expense increased by $1.8 million in 2004, as compared to 2003, due primarily to a minor increase in average effective interest rates. Capitalized interest increased by rig construction and enhancement projects, primarily the ENSCO 107, ENSCO 108 and ENSCO 8500 construction projects and the enhancement projects associated with ENSCO 67 and ENSCO 87. Capitalized interest increased by $1.9 million in 2004, as compared to 2003, due to an increase in the amount invested in rig construction and enhancement projects, primarily the ENSCO 107 construction project and the enhancement projects associated with ENSCO 68, ENSCO 88 and ENSCO 67. |
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Other, net for 2004 consists primarily of a $5.5 million loss for the insurance deductible related to damages sustained on ENSCO 64 and ENSCO 25 during Hurricane Ivan in the Gulf of Mexico, partially offset by a $3.9 million gain resulting from the settlement of an insurance claim related to ENSCO 7500 hull repairs and lost revenue in the first quarter of 2002 and net foreign currency translation gains of Other, net for 2003 consists primarily of a $3.0 million gain related to the receipt and sale of shares of common stock of Prudential Financial, Inc. The shares were issued to the Company as a result of the Company's previous purchase of a Group Annuity Contract upon termination of a predecessor consolidated pension plan and the conversion of Prudential Financial, Inc. from a mutual company to a stock company. Other net for 2003 also includes
The Company recorded income tax expense of $107.3 million and $35.2 million in the years ended December 31, 2005 and 2004, respectively. The $72.1 million increase in the income tax provision from 2004 to 2005 is primarily attributable to increased profitability and an increase in the effective income tax rate, partially offset by the impact of a $6.5 million net benefit included in the income tax provision for The Company's effective income tax rate |
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Discontinued Operations The ENSCO 29 platform rig sustained substantial damage as a consequence of Hurricane Katrina in September 2005. On January 5, 2006, beneficial ownership of ENSCO 29 effectively transferred to the Company's insurance underwriters following their acknowledgement that the rig was a constructive total loss under the terms of the Company's insurance policies. Accordingly, the Company will receive the rig's net insured value of $10.0 million. The $7.5 million carrying value of the rig remains classified in "Property and equipment, net" on the December 31, 2005 consolidated balance sheet. The Company expects to record the disposal of the rig in the first quarter of 2006 and recognize a pre-tax gain equivalent to the excess of the insurance proceeds received over the carrying value of the rig. The operating results of ENSCO 29 have been reclassified as discontinued operations in the consolidated statements of income for each of the years in the three-year period ended December 31, 2005. On October 20, 2005, the Company sold the ENSCO 26 platform rig for $12.0 million and recognized a minimal gain. The operating results of ENSCO 26 have been reclassified as discontinued operations in the consolidated statements of income for each of the years in the three-year period ended December 31, 2005. On June 30, 2005, the Company sold its six South America/Caribbean barge rigs for $59.6 million and recognized a pre-tax gain of $9.6 million, which is included in "Gain on disposal of discontinued operations, net" in the consolidated statement of income for the year ended December 31, 2005. The net book value of the rigs was $45.1 million on the date of sale. The operating results of the six South America/Caribbean barge rigs have been reclassified as discontinued operations in the consolidated statements of income for each of the years in the three-year period ended December 31, 2005. The ENSCO 64 jackup rig sustained substantial damage during Hurricane Ivan in September 2004. On April 15, 2005, beneficial ownership of ENSCO 64 effectively transferred to the Company's insurance underwriters following their acknowledgement that the rig was a constructive total loss under the terms of the Company's insurance policies. Accordingly, the Company received the rig's full insured value of $65.0 million. On the date of transfer, the net book value of the rig was $52.8 million. The Company recognized a pre-tax gain of $11.7 million upon receipt of the insurance proceeds, which is included in "Gain on disposal of discontinued operations, net" in the consolidated statement of income for year ended December 31, 2005. The operating results of ENSCO 64 have been reclassified as discontinued operations in the consolidated statements of income for each of the years in the three-year period ended December 31, 2005. |
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In February 2003, the Company reached an agreement to sell its 27-vessel marine transportation fleet. After receipt of various regulatory consents, the transaction was finalized in April 2003 for approximately $79.0 million. The Company recognized a pre-tax gain of approximately $6.4 million related to the Following is a summary of |
2004 | 2003 | 2002 | 2005 | 2004 | 2003 | |||||||||||||||||
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Revenues | ||||||||||||||||||||||
Contract drilling | $ | 2.6 | $ | 9.6 | $ | 7.9 | $ | 15.0 | $ | 30.0 | $ | 48.5 | ||||||||||
Marine transportation | -- | 7.6 | 48.6 | -- | -- | 7.6 | ||||||||||||||||
2.6 | 17.2 | 56.5 | 15.0 | 30.0 | 56.1 | |||||||||||||||||
Operating expenses | ||||||||||||||||||||||
Operating expenses and other | ||||||||||||||||||||||
Contract drilling | 3.7 | 12.5 | 12.4 | 20.1 | 31.5 | 46.4 | ||||||||||||||||
Marine transportation | -- | 12.2 | 47.0 | -- | -- | 12.2 | ||||||||||||||||
3.7 | 24.7 | 59.4 | 20.1 | 31.5 | 58.6 | |||||||||||||||||
Operating loss before income taxes | (1.1 | ) | (7.5 | ) | (2.9 | ) | (5.1 | ) | (1.5 | ) | (2.5 | ) | ||||||||||
Income tax benefit | .4 | 2.6 | 1.0 | |||||||||||||||||||
Gain on sale of discontinued operations, net | -- | 4.1 | -- | |||||||||||||||||||
Income tax benefit (expense) | 1.5 | (.4 | ) | 2.8 | ||||||||||||||||||
Gain on disposal of discontinued operations, net | 13.9 | -- | 4.1 | |||||||||||||||||||
Loss from discontinued operations | $ | (.7 | ) | $ | (.8 | ) | $ | (1.9 | ) | |||||||||||||
Income (loss) from discontinued operations | $ | 10.3 | $ | (1.9 | ) | $ | 4.4 |
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Detailed explanations of the Company's liquidity and capital resources for each of the years in the three-year period ended December 31, Cash Flow from Continuing Operations and Capital Expenditures The Company's cash flow from continuing operations and capital expenditures on continuing operations for each of the years in the three-year period ended December 31, |
2004 | 2003 | 2002 | 2005 | 2004 | 2003 | |||||||||
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Cash flow from continuing operations | $ | 258.4 | $ | 290.6 | $ | 202.1 | $ | 355.7 | $ | 247.8 | $ | 273.2 | ||
Capital expenditures on continuing operations: | ||||||||||||||
Rig acquisition | $ | 94.6 | $ | -- | $ | -- | $ | 80.5 | $ | 94.6 | $ | -- | ||
New construction | 1.6 | 1.0 | 31.8 | 139.3 | 1.6 | 1.0 | ||||||||
Enhancements | 161.8 | 139.6 | 147.7 | 208.0 | 161.8 | 139.6 | ||||||||
Minor upgrades and improvements | 46.6 | 45.5 | 38.5 | 50.3 | 46.5 | 45.1 | ||||||||
$ | 304.6 | $ | 186.1 | $ | 218.0 | $ | 478.1 | $ | 304.5 | $ | 185.7 |
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Cash flow from continuing operations in 2004 decreased by |
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The Company continues to expand the size and quality of its fleet of drilling rigs. During the past three years, the Company has invested
On January 23, 2006, the |
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The Company's long-term debt, total capital and long-term debt to total capital ratios at December 31, 2005, 2004 |
2004 | 2003 | 2002 | 2005 | 2004 | 2003 | |||||||||
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Long-term debt | $ 527.1 | $ 549.9 | $ 547.5 | $ 475.4 | $ 527.1 | $ 549.9 | ||||||||
Total capital* | 2,709.0 | 2,631.0 | 2,514.5 | 3,008.6 | 2,709.0 | 2,631.0 | ||||||||
Long-term debt to total capital | 19.5% | 20.9% | 21.8% | 15.8% | 19.5% | 20.9% | ||||||||
* | Total capital includes long-term debt plus stockholders' equity. |
2005. At December 31, On June 23, 2005, the Company amended and |
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The Company maintains investment grade credit ratings of Baa1 from Moody's and BBB+ from Standard & Poor's. |
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During recent years the Company entered into two separate joint venture arrangements with KFELS in connection with the construction and ownership of two jackup rigs. ENSCO Enterprises Limited ("EEL") was established by the Company (with an initial 25% ownership interest) and KFELS (with an initial 75% ownership interest) to own and charter ENSCO 102. Construction of ENSCO 102 commenced in 2000 and was completed in May 2002, after which the Company chartered ENSCO 102 from EEL. In January 2004, the Company exercised a purchase option and acquired ENSCO 102 from EEL and EEL was liquidated. ENSCO Enterprises Limited II ("EEL II") was established by the Company (25% ownership interest) and KFELS (75% ownership interest) in March 2003 to construct and own ENSCO 106. Upon completion of rig construction in February 2005, the Company exercised a purchase option and acquired ENSCO 106 from EEL II and EEL II was effectively liquidated. The Company's equity interests in EEL and EEL II constituted variable interests in variable interest entities, as defined in the Financial Accounting Standards Board's Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51" ("FIN 46R"). However, the Company did not absorb a majority of the expected losses or receive a majority of the expected residual returns of EEL and EEL II, as defined by FIN 46R, and accordingly was not required to consolidate EEL or EEL II. |
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The Company's significant contractual obligations as of December 31, |
Payments due by period | Payments due by period | |||||||||||||||||||||
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2006 | 2008 | 2007 | 2009 | |||||||||||||||||||
and | and | After | and | and | After | |||||||||||||||||
2005 | 2007 | 2009 | 2009 | Total | 2006 | 2008 | 2010 | 2010 | Total | |||||||||||||
Principal payments on long-term debt | $ | 23.0 | $ | 196.0 | $ | 46.0 | $ | 287.5 | $ | 552.5 | $ | 17.2 | $ | 184.4 | $ | 34.4 | $ | 258.2 | $ | 494.2 | ||
Interest payments on long-term debt | 35.1 | 66.2 | 40.6 | 224.2 | 366.1 | 31.9 | 50.6 | 36.4 | 205.6 | 324.5 | ||||||||||||
Operating leases | 5.1 | 4.2 | .8 | -- | 10.1 | 4.9 | 3.6 | .1 | -- | 8.6 | ||||||||||||
ENSCO 107 construction agreement | 55.0 | -- | -- | -- | 55.0 | |||||||||||||||||
Other* | 86.4 | -- | -- | -- | 86.4 | |||||||||||||||||
New rig construction agreements | 159.7 | 172.6 | -- | -- | 332.3 | |||||||||||||||||
Total contractual cash obligations | $ | 204.6 | $ | 266.4 | $ | 87.4 | $ | 511.7 | $ | 1,070.1 | $ | 213.7 | $ | 411.2 | $ | 70.9 | $ | 463.8 | $ | 1,159.6 | ||
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Liquidity The Company's liquidity position at December 31, 2005, 2004 |
2004 | 2003 | 2002 | 2005 | 2004 | 2003 | |||||||||
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Cash and short-term investments | $267.0 | $354.0 | $185.5 | $268.5 | $267.0 | $354.0 | ||||||||
Working capital | 277.9 | 355.9 | 189.2 | 347.0 | 277.9 | 355.9 | ||||||||
Current ratio | 2.3 | 2.9 | 2.0 | 2.5 | 2.3 | 2.9 |
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In connection with The Company utilizes derivative instruments and undertakes hedging activities in accordance with its established policies for the management of market risk. The Company does not enter into derivative instruments for trading or other speculative purposes. Management believes that the Company's use of derivative instruments and related hedging activities do not expose the Company to any material interest rate risk, foreign currency exchange rate risk, commodity price risk, credit risk or any other market rate or price risk. |
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ENSCO ENSCO 86 entered a shipyard in Enhancement procedures were recently completed on ENSCO 56 and it is currently en route to New Zealand where it is expected to commence a long term contract in March 2006. ENSCO 105 is scheduled to continue its commitment for work in the Gulf of Mexico through early 2007 when it is expected to mobilize to Tunisia for an estimated two year contract, plus options. Industry Conditions Demand for offshore drilling rigs is strong, and utilization and day rates are generally improving, in all of the major geographical markets in which the Company currently operates. The Company has substantial contract backlog and the durations of recently executed contracts are generally greater than historical average contract durations in all of the Company's major geographical markets. While it is not possible to project the period of time for which current industry conditions will be sustained or predict long-term trends in industry conditions, the Company does not anticipate significant changes in current industry conditions in the near-term. Hurricane Damage During the third quarter 2005, ENSCO 7500 sustained minor damage during Hurricane Katrina. The rig was repaired in early 2006 in conjunction with minor enhancement and preparatory work for its pending two year contract. The Company believes the insurance claim for the ENSCO 7500 hull repairs will be finalized by the end of the second quarter of 2006 with no significant gain or loss realized. Additional information regarding the resolution of insurance claims relating to hurricane damage is included in Note 11 to the Company's Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data." Although several of the Company's jackup rigs |
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Useful lives of rigs are difficult to estimate due to a variety of factors, including technological advances that impact the methods or cost of oil and gas exploration and development, changes in market or economic conditions, and changes in laws or regulations affecting the drilling industry. The Company evaluates the remaining useful lives of its rigs on a periodic basis, considering operating condition, functional capability and market and economic factors. The Company's most recent change in estimated useful lives occurred in January 1998, when the Company extended the useful lives of its drilling rigs by an average of five to six years.
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Increase (decrease) in useful lives of the Company's drilling rigs | Increase (decrease) in useful lives of the Company's drilling rigs | Estimated increase (decrease) in depreciation expense that would have been recognized (in millions) | Increase (decrease) in useful lives of the Company's drilling rigs | Estimated increase (decrease) in depreciation expense that would have been recognized (in millions) | ||
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10% | $(13.1) | $(14.9) | ||||
20% | (24.0) | (27.2) | ||||
(10%) | 15.8 | 15.7 | ||||
(20%) | 35.5 | 37.1 |
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The Company evaluates the carrying value of its property and equipment, primarily its drilling rigs, when events or changes in circumstances indicate that the carrying value of such rigs may not be recoverable. Generally, extended periods of idle time and/or inability to contract rigs at economical rates are an indication that a rig may be impaired. However, the offshore drilling industry is highly cyclical and it is not unusual for rigs to be unutilized or underutilized for significant periods of time and subsequently resume full or near full utilization when business cycles change. Likewise, during periods of supply and demand imbalance, rigs are frequently contracted at or near cash break-even rates for extended periods of time until demand comes back into balance with supply. Impairment situations may arise with respect to specific individual rigs, groups of rigs, such as a specific type of drilling rig, or rigs in a certain geographic location. The Company's rigs are mobile and may generally be moved from markets with excess supply, if economically feasible. The Company's jackup rigs and ultra-deepwater semisubmersible rig are suited for, and accessible to, broad and numerous markets throughout the world. However, there are fewer economically feasible markets available to the Company's barge The Company tests goodwill for impairment on an annual basis, or when events or changes in circumstances indicate that a potential impairment exists. The goodwill impairment test requires the Company to identify reporting units and estimate the fair value of those units as of the testing date. If the estimated fair value of a reporting unit exceeds its carrying value, its goodwill is considered not impaired. If the estimated fair value of a reporting unit is less than its carrying value, the Company estimates the implied fair value of the reporting unit's goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to such excess. In the event the Company disposes drilling rig operations that constitute a business, goodwill would be allocated in the determination of gain or loss on sale. Based on the Company's Asset impairment evaluations are, by nature, highly subjective. In most instances they involve expectations of future cash flows to be generated by the Company's drilling rigs, and are based on management's assumptions and judgments regarding future industry conditions and operations, as well as management's estimates of future expected utilization, contract rates, expense levels and capital requirements of the Company's drilling rigs. The estimates, assumptions and judgments used by management in the application of the Company's asset impairment policies reflect both historical experience and an assessment of current operational, industry, economic and political environments. The use of different estimates, assumptions, judgments and expectations regarding future industry conditions and operations would likely result in materially different carrying values of assets and results of operations. |
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Income Taxes The Company conducts operations and earns income in numerous foreign countries and is subject to the laws of taxing jurisdictions within those countries, as well as U.S. federal and state tax laws. At December 31, The carrying values of deferred income tax assets and liabilities reflect the application of the Company's income tax accounting policies in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), and are based on management's assumptions and estimates regarding future operating results and levels of taxable income, as well as management's judgments regarding the interpretation of the provisions of SFAS 109. Carryforwards and tax credits are assessed for realization as a reduction of future taxable income by using a "more likely than not" determination. A U.S. deferred tax liability has not been recognized for undistributed earnings of foreign subsidiaries because it is not practicable to estimate. Should the Company elect to make a distribution of foreign earnings, or be deemed to have made a distribution of foreign earnings through application of various provisions of the Internal Revenue Code, it may be subject to additional U.S. income taxes. The carrying values of liabilities for income taxes currently payable are based on management's interpretation of applicable tax laws, and incorporate management's assumptions and judgments regarding the use of tax planning strategies in various taxing jurisdictions. The use of different estimates, assumptions and judgments in connection with accounting for income taxes, especially those involving the deployment of tax planning strategies, may result in materially different carrying values of income tax assets and liabilities and results of operations. |
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• | During recent years the portion of the Company's overall operations conducted in foreign tax jurisdictions has been increasing and the Company currently anticipates this trend will continue. | |
• | In order to deploy tax planning strategies and conduct foreign operations efficiently, the Company's subsidiaries frequently enter into transactions with affiliates, which are generally subject to complex tax regulations and frequently are reviewed by tax authorities. | |
• | The Company may conduct future operations in certain tax jurisdictions where tax laws are not well developed and it may be difficult to secure adequate professional guidance. | |
• | Tax laws, regulations, agreements and treaties change frequently, requiring the Company to modify existing tax strategies to conform to such changes. |
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Year Ended December 31, | Year Ended December 31, | |||||||||||||
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2004 | 2003 | 2002 | 2005 | 2004 | 2003 | |||||||||
OPERATING REVENUES | $ | 768.0 | $ | 781.2 | $ | 641.6 | $ | 1,046.9 | $ | 740.6 | $ | 742.3 | ||
OPERATING EXPENSES | ||||||||||||||
Contract drilling | 425.5 | 445.2 | 341.5 | 454.4 | 406.1 | 420.8 | ||||||||
Depreciation and amortization | 144.1 | 130.2 | 112.0 | 154.8 | 134.7 | 119.5 | ||||||||
Impairment of assets | -- | -- | 59.9 | |||||||||||
General and administrative | 26.3 | 22.0 | 18.6 | 25.8 | 26.3 | 22.0 | ||||||||
595.9 | 597.4 | 532.0 | 635.0 | 567.1 | 562.3 | |||||||||
OPERATING INCOME | 172.1 | 183.8 | 109.6 | 411.9 | 173.5 | 180.0 | ||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||
Interest income | 3.7 | 3.4 | 5.1 | 7.0 | 3.7 | 3.4 | ||||||||
Interest expense, net | (36.6 | ) | (36.7 | ) | (31.1 | ) | (28.8 | ) | (36.6 | ) | (36.7 | ) | ||
Other, net | .3 | 1.7 | 6.4 | 1.1 | (.7 | ) | .5 | |||||||
(32.6 | ) | (31.6 | ) | (19.6 | ) | (20.7 | ) | (33.6 | ) | (32.8 | ) | |||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 139.5 | 152.2 | 90.0 | 391.2 | 139.9 | 147.2 | ||||||||
PROVISION FOR INCOME TAXES | ||||||||||||||
Current income tax expense | 12.1 | 14.0 | 18.9 | 105.8 | 13.3 | 15.9 | ||||||||
Deferred income tax expense | 23.9 | 29.1 | 9.9 | 1.5 | 21.9 | 27.4 | ||||||||
36.0 | 43.1 | 28.8 | 107.3 | 35.2 | 43.3 | |||||||||
INCOME FROM CONTINUING OPERATIONS | 103.5 | 109.1 | 61.2 | 283.9 | 104.7 | 103.9 | ||||||||
INCOME (LOSS) FROM DISCONTINUED OPERATIONS | ||||||||||||||
Loss from discontinued operations, net | (.7 | ) | (4.9 | ) | (1.9 | ) | ||||||||
DISCONTINUED OPERATIONS | ||||||||||||||
Income (loss) from discontinued operations, net | (3.6 | ) | (1.9 | ) | .3 | |||||||||
Gain on disposal of discontinued operations, net | -- | 4.1 | -- | 13.9 | -- | 4.1 | ||||||||
(.7 | ) | (.8 | ) | (1.9 | ) | 10.3 | (1.9 | ) | 4.4 | |||||
NET INCOME | $ | 102.8 | $ | 108.3 | $ | 59.3 | $ | 294.2 | $ | 102.8 | $ | 108.3 | ||
EARNINGS (LOSS) PER SHARE - BASIC | ||||||||||||||
Continuing operations | $ | .69 | $ | .73 | $ | .43 | $ | 1.87 | $ | .70 | $ | .69 | ||
Discontinued operations | (.01 | ) | (.01 | ) | (.01 | ) | .07 | (.02 | ) | .03 | ||||
$ | .68 | $ | .72 | $ | .42 | $ | 1.94 | $ | .68 | $ | .72 | |||
EARNINGS (LOSS) PER SHARE - DILUTED | ||||||||||||||
Continuing operations | $ | .69 | $ | .73 | $ | .43 | $ | 1.86 | $ | .70 | $ | .69 | ||
Discontinued operations | (.01 | ) | (.01 | ) | (.01 | ) | .07 | (.02 | ) | .03 | ||||
$ | .68 | $ | .72 | $ | .42 | $ | 1.93 | $ | .68 | $ | .72 | |||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||||||||||||||
Basic | 150.5 | 149.6 | 140.7 | 151.7 | 150.5 | 149.6 | ||||||||
Diluted | 150.6 | 150.1 | 141.4 | 152.4 | 150.6 | 150.1 | ||||||||
CASH DIVIDENDS PER COMMON SHARE | $ | .10 | $ | .10 | $ | .10 | $ | .10 | $ | .10 | $ | .10 | ||
The accompanying notes are an integral part of these consolidated financial statements. |
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December 31, | December 31, | |||||||||
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2004 | 2003 | 2005 | 2004 | |||||||
ASSETS | ||||||||||
CURRENT ASSETS | ||||||||||
Cash and cash equivalents | $ | 267.0 | $ | 354.0 | $ | 268.5 | $ | 267.0 | ||
Accounts receivable, net | 183.0 | 149.4 | 269.0 | 183.0 | ||||||
Prepaid expenses and other | 43.7 | 39.9 | 40.9 | 43.7 | ||||||
Total current assets | 493.7 | 543.3 | 578.4 | 493.7 | ||||||
PROPERTY AND EQUIPMENT, AT COST | 3,445.5 | 3,126.3 | 3,672.8 | 3,445.5 | ||||||
Less accumulated depreciation | 1,014.2 | 909.1 | 1,009.2 | 1,014.2 | ||||||
Property and equipment, net | 2,431.3 | 2,217.2 | 2,663.6 | 2,431.3 | ||||||
GOODWILL | 341.0 | 342.7 | 336.2 | 341.0 | ||||||
OTHER ASSETS, NET | 56.0 | 79.8 | 39.7 | 56.0 | ||||||
$ | 3,322.0 | $ | 3,183.0 | $ | 3,617.9 | $ | 3,322.0 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
CURRENT LIABILITIES | ||||||||||
Accounts payable | $ | 15.6 | $ | 15.8 | $ | 19.1 | $ | 15.6 | ||
Accrued liabilities | 177.2 | 148.6 | 195.1 | 177.2 | ||||||
Current maturities of long-term debt | 23.0 | 23.0 | 17.2 | 23.0 | ||||||
Total current liabilities | 215.8 | 187.4 | 231.4 | 215.8 | ||||||
LONG-TERM DEBT | 527.1 | 549.9 | 475.4 | 527.1 | ||||||
DEFERRED INCOME TAXES | 375.3 | 345.9 | 345.1 | 375.3 | ||||||
OTHER LIABILITIES | 21.9 | 18.7 | 32.8 | 21.9 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||
STOCKHOLDERS' EQUITY | ||||||||||
First preferred stock, $1 par value, 5.0 million shares authorized, | ||||||||||
none issued | -- | -- | ||||||||
Preferred stock, $1 par value, 15.0 million shares authorized, | ||||||||||
none issued | -- | -- | ||||||||
Preferred stock, $1 par value, 20.0 million shares authorized | ||||||||||
and none issued | -- | -- | ||||||||
Common stock, $.10 par value, 250.0 million shares authorized, | ||||||||||
174.5 million and 173.9 million shares issued | 17.5 | 17.4 | ||||||||
176.8 million and 174.5 million shares issued | 17.7 | 17.5 | ||||||||
Additional paid-in capital | 1,420.0 | 1,409.0 | 1,498.5 | 1,420.0 | ||||||
Retained earnings | 1,016.3 | 928.6 | 1,295.3 | 1,016.3 | ||||||
Restricted stock (unearned compensation) | (12.5 | ) | (13.0 | ) | (16.2 | ) | (12.5 | ) | ||
Accumulated other comprehensive loss | (9.0 | ) | (10.9 | ) | (10.9 | ) | (9.0 | ) | ||
Treasury stock, at cost, 23.4 million shares | (250.4 | ) | (250.0 | ) | (251.2 | ) | (250.4 | ) | ||
Total stockholders' equity | 2,181.9 | 2,081.1 | 2,533.2 | 2,181.9 | ||||||
$ | 3,322.0 | $ | 3,183.0 | $ | 3,617.9 | $ | 3,322.0 | |||
The accompanying notes are an integral part of these consolidated financial statements. |
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ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) |
Year Ended December 31, | Year Ended December 31, | |||||||||||||
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2004 | 2003 | 2002 | 2005 | 2004 | 2003 | |||||||||
OPERATING ACTIVITIES | ||||||||||||||
Net income | $ | 102.8 | $ | 108.3 | $ | 59.3 | $ | 294.2 | $ | 102.8 | $ | 108.3 | ||
Adjustments to reconcile net income to net cash provided | ||||||||||||||
by operating activities: | ||||||||||||||
Loss from discontinued operations, net | .7 | 4.9 | 1.9 | |||||||||||
(Income) loss from discontinued operations, net | 3.6 | 1.9 | (.3 | ) | ||||||||||
Gain on disposal of discontinued operations, net | (13.9 | ) | -- | (4.1 | ) | |||||||||
Depreciation and amortization | 144.1 | 130.2 | 112.0 | 154.8 | 134.7 | 119.5 | ||||||||
Impairment of assets | -- | -- | 59.9 | |||||||||||
Expense for redemption of debt | 2.4 | -- | -- | |||||||||||
Deferred income tax provision | 23.9 | 29.1 | 9.9 | 1.5 | 21.9 | 27.4 | ||||||||
Gain on sale of discontinued operations, net | -- | (4.1 | ) | -- | ||||||||||
Tax benefit from stock compensation | 2.1 | 6.6 | 4.0 | 5.2 | 2.1 | 6.6 | ||||||||
Amortization of other assets | 6.3 | 5.6 | 10.3 | 6.0 | 6.2 | 5.6 | ||||||||
Net loss (gain) on asset dispositions | .3 | -- | (5.8 | ) | ||||||||||
Net loss on asset dispositions | 3.7 | .4 | .2 | |||||||||||
Other | 3.5 | 2.5 | 2.5 | 4.2 | 3.5 | 2.5 | ||||||||
Changes in operating assets and liabilities: | ||||||||||||||
Decrease (increase) in accounts receivable | (33.6 | ) | 13.8 | (30.6 | ) | (86.0 | ) | (18.1 | ) | 13.8 | ||||
Increase in prepaid expenses and other assets | (8.0 | ) | (11.6 | ) | (21.2 | ) | (16.8 | ) | (8.0 | ) | (11.6 | ) | ||
Increase (decrease) in accounts payable | (.1 | ) | .6 | (13.5 | ) | 3.5 | (.1 | ) | .6 | |||||
Increase in accrued and other liabilities | 16.4 | 4.7 | 13.4 | |||||||||||
Increase (decrease) in accrued and other liabilities | (6.7 | ) | .5 | 4.7 | ||||||||||
Net cash provided by operating activities of continuing operations | 258.4 | 290.6 | 202.1 | 355.7 | 247.8 | 273.2 | ||||||||
INVESTING ACTIVITIES | ||||||||||||||
Additions to property and equipment | (304.6 | ) | (186.1 | ) | (218.0 | ) | (478.1 | ) | (304.5 | ) | (185.7 | ) | ||
Net cash used in Chiles acquisition | -- | -- | (99.9 | ) | ||||||||||
Net proceeds from sale of discontinued operations | -- | 78.8 | -- | |||||||||||
Net proceeds from disposal of discontinued operations | 132.9 | -- | 78.8 | |||||||||||
Proceeds from disposition of assets | 3.1 | 5.2 | 24.3 | 6.6 | 2.9 | 5.0 | ||||||||
Sale (purchase) of short-term investments | -- | 38.4 | (6.8 | ) | -- | -- | 38.4 | |||||||
Sale of long-term investments | -- | -- | 23.0 | |||||||||||
Investment in joint ventures | (11.3 | ) | (13.5 | ) | -- | (4.0 | ) | (11.3 | ) | (13.5 | ) | |||
Net cash used in investing activities of continuing operations | (312.8 | ) | (77.2 | ) | (277.4 | ) | ||||||||
Net cash used in investing activities | (342.6 | ) | (312.9 | ) | (77.0 | ) | ||||||||
FINANCING ACTIVITIES | ||||||||||||||
Proceeds from long-term borrowings | -- | 26.7 | 4.4 | -- | -- | 26.7 | ||||||||
Reduction of long-term borrowings | (23.0 | ) | (23.0 | ) | (63.7 | ) | (58.3 | ) | (23.0 | ) | (23.0 | ) | ||
Cash dividends paid | (15.1 | ) | (15.0 | ) | (14.2 | ) | (15.2 | ) | (15.1 | ) | (15.0 | ) | ||
Proceeds from exercise of stock options | 7.8 | 12.4 | 19.5 | 67.2 | 7.8 | 12.4 | ||||||||
Deferred financing costs | -- | (5.8 | ) | (1.3 | ) | (.7 | ) | -- | (5.8 | ) | ||||
Premium related to debt redemption | (1.8 | ) | -- | -- | ||||||||||
Other | (.4 | ) | (.7 | ) | (1.0 | ) | (.7 | ) | (.4 | ) | (.7 | ) | ||
Net cash used in financing activities of continuing operations | (30.7 | ) | (5.4 | ) | (56.3 | ) | ||||||||
Net cash used in financing activities | (9.5 | ) | (30.7 | ) | (5.4 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | (2.0 | ) | .9 | (.9 | ) | (.7 | ) | (.9 | ) | 1.9 | ||||
Net cash (used in) provided by discontinued operations | .1 | (2.0 | ) | .8 | (1.4 | ) | 9.7 | 14.2 | ||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (87.0 | ) | 206.9 | (131.7 | ) | 1.5 | (87.0 | ) | 206.9 | |||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 354.0 | 147.1 | 278.8 | 267.0 | 354.0 | 147.1 | ||||||||
CASH AND CASH EQUIVALENTS, END OF YEAR | $ | 267.0 | $ | 354.0 | $ | 147.1 | $ | 268.5 | $ | 267.0 | $ | 354.0 |
The accompanying notes are an integral part of these consolidated financial statements. |
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1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Business ENSCO International Incorporated and subsidiaries (the "Company") is one of the leading international providers of offshore drilling services to the oil and gas industry. The Company's contract drilling operations are integral to the exploration, development and production of oil and gas. Business levels for the Company, and its corresponding operating results, are significantly affected by worldwide levels of offshore exploration and development spending by oil and gas companies. Levels of offshore exploration and development spending may fluctuate substantially from year to year and from region to region. Such fluctuations result from many factors, including demand for oil and gas, regional and global economic conditions, political and legislative environments in the U.S. and other major oil-producing countries, the production levels and related activities of OPEC and other oil and gas producers, technological advancements that impact the methods or cost of oil and gas exploration and development, and the impact that these and other events have on the current and expected future pricing of oil and natural gas (see Note Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Pervasiveness of Estimates The preparation of financial statements in conformity with |
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The U.S. dollar is the functional currency of all the Company's foreign subsidiaries. The financial statements of foreign subsidiaries are remeasured in U.S. dollars based on a combination of both current and historical exchange rates. Gains and losses caused by the remeasurement process are Cash Equivalents and Short-Term Investments Highly liquid investments with maturities of three months or less at the date of purchase are considered cash equivalents. Highly liquid investments with maturities of greater than three months but less than one year at the date of purchase are classified as short-term investments. Property and Equipment All costs incurred in connection with the acquisition, construction, enhancement and improvement of assets are capitalized, including allocations of interest incurred during periods that drilling rigs are under construction or undergoing major enhancements and improvements. Maintenance and repair costs are charged to operating expenses. Upon sale or retirement of assets, the related cost and accumulated depreciation are removed from the accounts and the resulting gain or loss is included in income. |
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The Company evaluates the carrying value of its property and equipment for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. For property and equipment used in the Company's operations, recoverability is determined by comparing the net carrying value of an asset to either an independent fair value appraisal of the asset or the expected undiscounted future cash flows, before interest, of the asset. The amount of impairment loss, if any, is measured as the difference between the net book value of the asset and its estimated fair value. The Company recorded no impairment charges during the three-year period ended December 31, 2005. Property and equipment held for sale is recorded at the lower of net book value or net realizable value.
Goodwill Goodwill is recorded at fair value. The Company tests goodwill for impairment on an annual basis, or when events or changes in circumstances indicate that a potential impairment exists. During 2005 and
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2004 | 2003 | 2005 | 2004 | |||||||||||||
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Balance as of January 1 | $ | 342.7 | $ | 350.2 | $ | 341.0 | $ | 342.7 | ||||||||
Purchase price adjustments | (1.7 | ) | (7.5 | ) | (4.8 | ) | (1.7 | ) | ||||||||
Balance as of December 31 | $ | 341.0 | $ | 342.7 | $ | 336.2 | $ | 341.0 |
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Substantially all of the Company's drilling services contracts ("contracts") are performed on a day rate basis and the terms of such contracts are typically for a specific period of time or the period of time required to complete a specific task, such as drilling a well. Contract revenue and expenses are recognized on a per day basis, as the work is performed. Day rate revenues are typically earned, and contract drilling expenses are typically incurred, on a uniform basis over the terms of the Company's contracts. In connection with some contracts, the Company receives lump-sum fees or similar compensation for the mobilization of equipment and personnel prior to the commencement of drilling services or the demobilization of equipment and personnel upon contract completion. Fees received for the mobilization or demobilization of equipment and personnel are included in operating revenue. The costs incurred in connection with the mobilization and demobilization of equipment and personnel are included in contract drilling expense. Effective October 1, 2004, the Company changed its method of accounting for the fees received and related costs incurred to mobilize its rigs from one geographic area to another. Mobilization fees received and costs incurred are now deferred and recognized over the period that the related drilling services are performed on a straight-line basis. Prior to October 1, 2004, only the excess of mobilization fees received over costs incurred or the excess of mobilization costs incurred over fees received, as applicable, was deferred and recognized on a straight-line basis over the period that the related drilling services If the method of accounting for mobilization fees and costs adopted on October 1, 2004, had been utilized in prior periods, the Company's operating income and net income would not have changed and the change in the amounts of operating revenue and contract drilling expenses within previously reported periods would not have been material. Demobilization fees and related costs are recognized as incurred, upon contract completion. Costs associated with the mobilization of equipment and personnel to more promising market areas without contracts are expensed as incurred. |
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In connection with some contracts, the Company receives up-front, lump-sum fees or similar compensation for capital improvements to its The Company must obtain certifications from various regulatory bodies in order to operate its drilling rigs and must maintain such certifications through periodic inspections and surveys. The costs incurred in connection with maintaining such certifications, including inspections, tests, surveys and drydock, as well as remedial structural work and other compliance costs, are deferred and amortized over the corresponding certification periods. Deferred regulatory certification and compliance costs are included in prepaid expenses and other current assets and other assets, net, and totaled |
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The Company uses derivative financial instruments ("derivatives") to reduce its exposure to various market risks, primarily interest rate risk and foreign currency risk. The Company employs an interest rate risk management strategy that occasionally utilizes derivatives to minimize or eliminate unanticipated fluctuations in earnings and cash flows arising from changes in, and volatility of, interest rates. The Company maintains a foreign currency risk management strategy that utilizes derivatives to reduce its exposure to unanticipated fluctuations in earnings and cash flows caused by changes in foreign currency exchange rates. The Company does not enter into derivatives for trading or other speculative purposes. All derivatives are recorded on the Company's consolidated balance sheet at fair value. Accounting for the gains and losses resulting from changes in the fair value of derivatives depends on the use of the derivative and whether it qualifies for hedge accounting. Derivatives qualify for hedge accounting when they are formally designated as hedges at inception of the associated derivative contract and are effective in reducing the risk exposure that they are designated to hedge. The Company's assessment for hedge effectiveness is formally documented at hedge inception and the Company reviews hedge effectiveness and measures any ineffectiveness throughout the designated hedge period on at least a quarterly basis. Changes in the fair value of derivatives that are designated as hedges of the fair value of recognized assets or liabilities or unrecognized firm commitments ("fair value hedges") are recorded currently in earnings and included in "other, net" on the consolidated statement of income. Changes in the fair value of derivatives that are designated as hedges of the variability in expected future cash flows associated with existing recognized assets or liabilities or forecasted transactions ("cash flow hedges") are recorded in the accumulated other comprehensive loss section of stockholders' equity. Amounts recorded in accumulated other comprehensive loss associated with cash flow hedges are subsequently reclassified into Gains and losses on a cash flow hedge, or a portion of a cash flow hedge, that no longer qualifies as effective due to an unanticipated change in forecasted transactions are recognized currently in earnings and included in "other, net" on the consolidated statement of income based on the change in the market value of the cash flow hedge. When a forecasted transaction is no longer |
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Derivatives with asset fair values are reported in other current assets or other assets, net, depending on maturity date. Derivatives with liability fair values are reported in accrued current liabilities or other liabilities, depending on maturity date. At December 31, Income Taxes The Company conducts operations and earns income in numerous foreign countries and is subject to the laws of taxing jurisdictions within those countries, as well as U.S. federal and state tax laws. Current income taxes are recognized for the amount of taxes payable or refundable based on the laws and income tax rates in the taxing jurisdictions in which operations are conducted and income is earned. Deferred tax assets and liabilities are recognized for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of the Company's assets and liabilities using the enacted tax rates in effect at year end. A valuation allowance for deferred tax assets is recorded when it is more likely than not that the benefit from the deferred tax asset will not be realized. It is the policy and intention of the Company to permanently reinvest all of the undistributed earnings of its foreign subsidiaries in such subsidiaries. Accordingly, no U.S. deferred taxes are provided on the undistributed earnings of foreign subsidiaries. The Company's drilling rigs are frequently moved from one taxing jurisdiction to another based on where they are contracted to perform drilling services. The movement of drilling rigs among taxing jurisdictions may include a transfer of the ownership of the drilling rig among the Company's subsidiaries. Income taxes attributable to gains resulting from intercompany sales of the Company's drilling rigs, as well as the tax effect of any reversing temporary differences resulting from intercompany sales or transfers, are deferred and amortized on a straight-line basis over the remaining useful life of the rig. In some instances, the Company determines that certain temporary differences may not result in a taxable or deductible amount in future years, as it is more likely than not the Company will commence operations and depart from a given taxing jurisdiction without such temporary differences being recovered or settled. Under these circumstances, no future tax consequences are expected and no deferred taxes are recognized in connection with such operations. The Company evaluates its determinations on a periodic basis and in the event its expectations relative to future tax consequences change, the applicable deferred taxes are recognized. |
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The Company uses the intrinsic value method of accounting for employee stock options in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). No compensation expense related to employee stock options is included in the Company's net income, as the exercise price of the Company's stock options equals the market value of the underlying stock on the date of grant. The following table includes disclosures required by Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" as amended ("SFAS 123"), and illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of SFAS 123 for each of the years in the three-year period ended December 31, |
2004 | 2003 | 2002 | 2005 | 2004 | 2003 | |||||||||
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Net income, as reported | $ | 102.8 | $ | 108.3 | $ | 59.3 | $ | 294.2 | $ | 102.8 | $ | 108.3 | ||
Less stock-based employee compensation expense, net of tax | (9.7 | ) | (9.2 | ) | (12.6 | ) | ||||||||
Add: Stock-based employee compensation expense included | ||||||||||||||
in reported net income, net of tax | 2.6 | 1.6 | 1.0 | |||||||||||
Deduct: Stock-based employee compensation expense determined under | ||||||||||||||
the fair value based method for all awards, net of tax | (11.8 | ) | (11.3 | ) | (10.2 | ) | ||||||||
Pro forma net income | $ | 93.1 | $ | 99.1 | $ | 46.7 | ||||||||
Net income, pro forma | $ | 285.0 | $ | 93.1 | $ | 99.1 | ||||||||
Basic earnings per share: | ||||||||||||||
As reported | $ | .68 | $ | .72 | $ | .42 | $ | 1.94 | $ | .68 | $ | .72 | ||
Pro forma | .62 | .66 | .33 | 1.88 | .62 | .66 | ||||||||
Diluted earnings per share: | ||||||||||||||
As reported | .68 | .72 | .42 | 1.93 | .68 | .72 | ||||||||
Pro forma | .62 | .66 | .33 | 1.87 | .62 | .66 | ||||||||
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2004 | 2003 | 2002 | 2005 | 2004 | 2003 | |||||||||
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Risk-free interest rate | 3.2% | 2.2% | 3.9% | 3.5% | 3.2% | 2.2% | ||||||||
Expected life (in years) | 4.1 | 4.3 | 4.5 | 5.1 | 4.1 | 4.3 | ||||||||
Expected volatility | 40.7% | 48.1% | 52.5% | 38.8% | 40.7% | 48.1% | ||||||||
Dividend yield | .4% | .3% | .4% | .3% | .4% | .3% |
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Earnings Per Share For each of the years in the three-year period ended December 31,
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2004 | 2003 | 2002 | 2005 | 2004 | 2003 | |||||||||
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Weighted average common shares outstanding (basic) | 150.5 | 149.6 | 140.7 | |||||||||||
Weighted average common shares - basic | 151.7 | 150.5 | 149.6 | |||||||||||
Potentially dilutive common shares: | ||||||||||||||
Restricted stock grants | .1 | .0 | .0 | .1 | .1 | .0 | ||||||||
Stock options | .0 | .5 | .7 | .6 | .0 | .5 | ||||||||
Weighted average common shares outstanding (diluted) | 150.6 | 150.1 | 141.4 | |||||||||||
Weighted average common shares - diluted | 152.4 | 150.6 | 150.1 |
Options to purchase 15,000 shares of common stock in 2005, 3.3 million shares of common stock in 2004 and 3.4 million shares of common stock in 2003 Reclassifications Certain previously reported amounts have been reclassified to conform to the |
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2004 | 2003 | 2002 | |||||||||
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Revenues | |||||||||||
Contract drilling | $ | 2.6 | $ | 9.6 | $ | 7.9 | |||||
Marine transportation | -- | 7.6 | 48.6 | ||||||||
2.6 | 17.2 | 56.5 | |||||||||
Operating expenses | |||||||||||
Contract drilling | 3.7 | 12.5 | 12.4 | ||||||||
Marine transportation | -- | 12.2 | 47.0 | ||||||||
3.7 | 24.7 | 59.4 | |||||||||
Operating loss before income taxes | (1.1 | ) | (7.5 | ) | (2.9 | ) | |||||
Income tax benefit | .4 | 2.6 | 1.0 | ||||||||
Gain on sale of discontinued operations, net | -- | 4.1 | -- | ||||||||
Loss from discontinued operations | $ | (.7 | ) | $ | (.8 | ) | $ | (1.9 | ) | ||
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Property and equipment at December 31, |
2004 | 2003 | 2005 | 2004 | |||||||
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Drilling rigs and equipment | $ | 3,256.8 | $ | 3,046.9 | $ | 3,374.1 | $ | 3,256.8 | ||
Other | 44.2 | 39.7 | 39.4 | 44.2 | ||||||
Work in progress | 144.5 | 39.7 | 259.3 | 144.5 | ||||||
$ | 3,445.5 | $ | 3,126.3 | $ | 3,672.8 | $ | 3,445.5 |
In February 2005, the Company exercised a purchase option and acquired ENSCO 106 from an affiliated joint venture for a net payment of $79.6 million. Additions to drilling rigs and equipment during 2005 include $106.8 million for the acquisition of ENSCO 106, consisting of the $79.6 million payment and the Company's $27.2 million net investment in the joint venture. In January 2004, the Company exercised a purchase option and acquired ENSCO 102 from an affiliated joint venture for a net payment of $94.6 In October 2005, the Company sold the ENSCO 26 platform rig for $12.0 million and in June 2005, the Company sold six South America/Caribbean barge rigs for $59.6 million. In April 2005, beneficial ownership of ENSCO 64 effectively transferred to the Company's insurance underwriters following their acknowledgement that the rig was a constructive total loss under the terms of the Company's insurance policies. ENSCO 64 had sustained substantial damage during Hurricane Ivan in September 2004. The aggregate net book value of the rigs disposed of in 2005 was $108.8 million. In May 2004, the Company Work in progress at December 31, Additions to In January 2006, the Company |
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During the fourth quarter of 2000, the Company entered into an agreement with KFELS, a major international shipyard, and acquired a 25% ownership interest in a harsh environment jackup rig under construction, which was subsequently named ENSCO 102. Upon completion of rig construction in the second quarter of 2002, the Company and KFELS established a joint venture company, ENSCO Enterprises Limited ("EEL"), to own and charter ENSCO 102. The Company and KFELS Concurrent with the transfer of the rig to EEL, the Company agreed to charter ENSCO 102 from EEL for a two-year period that was scheduled to expire in May 2004. |
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Assets | |||||
Cash | $ | 1.5 | |||
Charter revenue receivable | 2.9 | ||||
Property and equipment, net of accumulated depreciation | 122.0 | ||||
$ | 126.4 | ||||
Liabilities and Stockholders' Equity | |||||
Interest payable | $ | 3.1 | |||
Notes payable | 124.9 | ||||
Stockholder's equity | |||||
Common stock and paid in capital | 4.9 | ||||
Accumulated deficit | (6.5 | ) | |||
Total stockholders' equity | (1.6 | ) | |||
$ | 126.4 | ||||
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$300,000 (unaudited) |
Period from | |||||||||||
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Year Ended December 31, | May 7, 2002 (Inception) | ||||||||||
2004 | 2003 | to December 31, 2002 | |||||||||
Charter revenue | $ | 1.6 | $ | 17.1 | $ | .3 | |||||
Depreciation expense | (.5 | ) | (5.9 | ) | (1.9 | ) | |||||
Interest expense | (.8 | ) | (9.7 | ) | (6.4 | ) | |||||
Net income (loss) | $ | .3 | $ | 1.5 | $ | (8.0 | ) | ||||
During the first quarter of 2003, the Company entered into an agreement with KFELS to establish a second joint venture company, ENSCO Enterprises Limited II ("EEL II"), to construct a premium heavy duty jackup rig to be named ENSCO 106. The Company Upon completion of rig construction in February 2005, the Company exercised its purchase option under the terms of the joint venture and acquired ENSCO 106 for a net payment of $79.6 million. EEL II was effectively liquidated upon the Company's acquisition of ENSCO 106. |
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Long-term debt at December 31, |
2004 | 2003 | 2005 | 2004 | |||||||
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4.65% Bonds due 2020 | $ | 72.0 | $ | 76.5 | $ | 67.5 | $ | 72.0 | ||
5.63% Bonds due 2011 | 40.5 | 46.3 | -- | 40.5 | ||||||
6.36% Bonds due 2015 | 139.4 | 152.0 | 126.7 | 139.4 | ||||||
6.75% Notes due 2007 | 149.7 | 149.6 | 149.8 | 149.7 | ||||||
7.20% Debentures due 2027 | 148.5 | 148.5 | 148.6 | 148.5 | ||||||
550.1 | 572.9 | 492.6 | 550.1 | |||||||
Less current maturities | (23.0 | ) | (23.0 | ) | (17.2 | ) | (23.0 | ) | ||
Total long-term debt | $ | 527.1 | $ | 549.9 | $ | 475.4 | $ | 527.1 |
4.65% Bonds Due 2020 In October 2003, the Company issued $76.5 million of 17-year bonds to provide long-term financing for |
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In connection with 6.36% Bonds Due 2015 In January 2001, the Company issued $190.0 million of 15-year bonds to provide long-term financing for Notes Due 2007 and Debentures Due 2027 In November 1997, the Company issued $300.0 million of unsecured debt in a public offering, consisting of $150.0 million of 6.75% Notes due November 15, 2007 (the “Notes”) and $150.0 million of 7.20% Debentures due November 15, 2027 (the “Debentures”). Interest on the Notes and the Debentures is payable semiannually in May and November. The Notes and Debentures may be redeemed at any time at the option of the Company, in whole or in part, at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, and a make-whole premium. The indenture under which the Notes and the Debentures were issued contains limitations on the incurrence of indebtedness secured by certain liens, and limitations on engaging in certain sale/leaseback transactions and certain merger, consolidation or reorganization transactions. The Notes and Debentures are not subject to any sinking fund requirements. |
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Maturities The aggregate maturities of long-term debt, excluding un-amortized discounts of |
2005 | $ | 23.0 | ||||||||
2006 | 23.0 | $ | 17.2 | |||||||
2007 | 173.0 | 167.2 | ||||||||
2008 | 23.0 | 17.2 | ||||||||
2009 | 23.0 | 17.2 | ||||||||
2010 | 17.2 | |||||||||
Thereafter | 287.5 | 258.2 | ||||||||
Total | $ | 552.5 | $ | 494.2 |
The Company is in compliance with the covenants of all of its debt instruments. |
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In connection with
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Unrealized losses to be reclassified to interest expense | $ | 1.2 | |
Unrealized gains to be reclassified to contract drilling expenses | (2.4 | ) | |
Net unrealized gain to be reclassified to earnings | $ | (1.2 | ) |
Unrealized losses to be reclassified to interest expense | $ | 1.1 | |
Net unrealized losses to be reclassified to contract drilling expenses | 1.7 | ||
Net unrealized losses to be reclassified to earnings | $ | 2.8 | |
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The components of the Company's comprehensive income for each of the years in the three-year period ended December 31, |
2004 | 2003 | 2002 | 2005 | 2004 | 2003 | |||||||||
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Net Income | $ | 102.8 | $ | 108.3 | $ | 59.3 | $ | 294.2 | $ | 102.8 | $ | 108.3 | ||
Other comprehensive income (loss) | ||||||||||||||
Net change in fair value of derivatives | 2.4 | .3 | (2.6 | ) | (6.3 | ) | 2.4 | .3 | ||||||
Reclassification of unrealized gains and losses on derivatives from other comprehensive income (loss) into net income | .1 | .9 | .4 | 3.3 | .1 | .9 | ||||||||
Foreign currency translation adjustment | 1.1 | -- | -- | |||||||||||
Other | (.6 | ) | -- | -- | -- | (.6 | ) | -- | ||||||
Net other comprehensive income (loss) | 1.9 | 1.2 | (2.2 | ) | (1.9 | ) | 1.9 | 1.2 | ||||||
Total comprehensive income | $ | 104.7 | $ | 109.5 | $ | 57.1 | ||||||||
Comprehensive income | $ | 292.3 | $ | 104.7 | $ | 109.5 | ||||||||
The components of the accumulated other comprehensive loss section of stockholders' equity at December 31, |
2004 | 2003 | 2005 | 2004 | |||||||
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Net unrealized losses on derivatives, net of tax | $ | 10.9 | $ | 7.9 | ||||||
Cumulative translation adjustment | $ | 1.1 | $ | 1.1 | -- | 1.1 | ||||
Net unrealized losses on derivatives, net of tax | 7.9 | 9.8 | ||||||||
Total accumulated other comprehensive loss | $ | 9.0 | $ | 10.9 | ||||||
Accumulated other comprehensive loss | $ | 10.9 | $ | 9.0 |
7. STOCKHOLDERS' EQUITY The Company initiated the payment of a $.025 per share quarterly cash dividend on its common stock during the third quarter of 1997. Cash dividends of $.10 per share were paid in each of the years in the three-year period ended December 31, On January 1, 2006, the Company will adopt SFAS 123(R). The new standard requires that compensation cost attributable to equity awards be recognized over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). Accordingly, the use of a deferred compensation account will not longer be permitted and |
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