atwood oceanics, inc. annual report 2014
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ANNUAL REPORT 2014
Strong Performance
INTRODUCTION // HIGHLIGHTS
“We achieved record revenues and the second-highest earnings in our 46-year history.”
2008 2014
REVENUESDOLLARS IN MILLIONS
$1,174
2008 2014
NET INCOME
DOLLARS IN MILLIONS
$341
PP. // 01
The past year has been a year of contrasts for Atwood Oceanics. Notably, we achieved
record revenues and the second-highest earnings in our 46-year history. We realized
our best-ever safety results, as measured by incident frequency, even as we continued
to expand our workforce and our rig fleet. We delivered and commissioned our first
two ultradeepwater drillships and demonstrated our ability to operate them reliably and safely. In
addition, our Board of Directors declared our first quarterly dividend, a vehicle to return cash to our
shareholders beginning in calendar 2015.
However, this past year was also marked by a sharp decline in market conditions for the offshore
drilling industry. Demand for offshore drilling services did not materialize as expected, and oil prices
declined to levels not seen in recent years. The delivery of new build rigs from shipyards, including
some without contracts, created excess rig supplies in many regional markets. As a result, utilization
and day rates decreased across all rig classes and one of our active rigs experienced extended idle time.
Despite these challenges, the Atwood Team delivered solid results and achieved significant milestones
in 2014. “Strong performance” has become the hallmark of our company—delivered by our employees
for the benefit of our clients and our investors.
Operational excellence has long been a key differentiator of our drilling services,
and 2014 was no exception. Our five high-specification jackups operated at
approximately 98% revenue efficiency for the year. Our five semisubmersibles
delivered solid results which engendered favorable client feedback and the signing
of longer-term contracts on two of these rigs. In addition, we successfully completed
two extensive maintenance and upgrade projects—one in West Africa and the other in the
Mediterranean—that facilitated follow-on drilling programs with new clients.
LETTER TO OUR SHAREHOLDERS
STRONG PERFORMANCE BEGINS WITH SOLID OPERATIONS
A YEAR OF CONTRASTS
Fellow Shareholders,
The delivery and start-up of our first two ultradeepwater drillships, the Atwood Advantage and the
Atwood Achiever, marked a major milestone in our fleet growth strategy. The Advantage and Achiever
are currently operating in the Gulf of Mexico and Northwest Africa, respectively, under multi-year
agreements with long-time Atwood clients. Each of these drilling vessels offers best-in-class drilling
and water depth capabilities along with a dual BOP system for additional safety and reliability. Most
importantly, our offshore rig teams have performed well in starting up these impressive machines and
running them without major incident during their first months of operations.
Our most critical company value embodied in Our Guiding Principles remains “Safety and
Environmental Stewardship.” In fiscal 2014, we delivered our best (i.e. lowest) recordable incident
rate in our history, reduced our impact on the environment, while our people worked a record
number of man-hours. In addition, our senior management completed Process Safety discussions with
all offshore personnel involved in drilling positions to emphasize the importance of proper well
control. Finally, Atwood was named as the #1 offshore driller for Health, Safety and Environmental
performance in an independent customer survey for the second consecutive year.
Following on our strong operational performance, we posted our highest revenue
ever at $1.17 billion. Our net income of $341 million nearly matched last year’s
record result. Strong revenue recognition from our rigs coupled with cost discipline—
onshore and offshore—contributed to healthy margins and a solid bottom line.
We also improved our financial flexibility by increasing our revolving credit facility by $450 million to
$1.55 billion, while reducing our borrowing costs. Our key credit metric of debt-to-capitalization
peaked in late August at approximately 41% with the delivery of the Atwood Achiever and is projected
to improve going forward. The capital expenditures for our two drillships under construction are fully
funded by cash flow secured by our nearly $3 billion revenue backlog and the available capacity on our
credit facility. In short, our balance sheet is in good shape.
Our Board of Directors declared our first-ever quarterly dividend in September, with the initial
payment to be made in January 2015. We initiated the dividend with a lower yield than many of our
PP. 02 // 03
STRONG FINANCIAL PERFORMANCE
peer companies in order to ensure its sustainability and to preserve our ability to fund future fleet
growth. We believe that our dividend represents an important source of value to our shareholders and
that it will attract new investors to Atwood stock.
Our company’s success would not be possible without the efforts of the nearly 1,900
competent and motivated personnel who comprise the worldwide Atwood Team. We
have increased our workforce substantially over the past five years, and our new
employees have brought us skills and experiences vital to the execution of our growth
strategy. Our reputation for operational excellence and financial stability continues to attract people
considering a career, or a career change, in the offshore drilling industry.
In 2014, we significantly increased our commitment to the training and development of our people.
In August, our Competence Assurance Program for offshore employees received full accreditation
from the International Association of Drilling Contractors (IADC). In addition, we augmented our
offshore leadership training to emphasize the importance of job planning, setting expectations and
proper supervision. To supplement these internal efforts, we also retained industry experts to work
with our rig-based employees to improve their knowledge of our equipment, our procedures and
industry best practices.
We expect that 2015 will be characterized by demanding business conditions for
our industry. Meaningful improvement is not likely to occur until we experience a
recovery in oil prices and our competitors retire a significant number of their older
rigs. The industry downturn may also be elongated as our peers struggle with the
permanent loss of employees, equipment and earnings potential. These concerns underpinned our
decision in early November to delay the deliveries of the Atwood Admiral and Atwood Archer by six
months each.
Fortunately, our backlog is strong and our rig fleet is generally well-contracted as we begin 2015.
Only one of our active floaters, the Atwood Hunter, is expected to remain idle in the near term. Our
other four semisubmersibles and two drillships are each contracted until at least the first quarter
OUR PEOPLE DELIVER THE PERFORMANCE
PREPARED FOR A CHALLENGING 2015
LETTER TO OUR SHAREHOLDERS
of calendar 2016. Four of our five high-specification jackups are under contract through at least
December of this year. The Atwood Admiral, now scheduled for delivery in late September, is our
only ultradeepwater rig with availability in calendar 2015.
Despite this challenging outlook, I have no doubt that the Atwood Team will once again deliver
strong performance. Our operations team will be focused on reducing the well costs for our clients
by improving the efficiency of our drilling services. In addition, we will identify ways to eliminate
unnecessary activities and reduce expenses across our organization. Of course, these goals will be
pursued without ever compromising our safety and environmental responsibilities.
As our company begins its 47th year, I want to extend my sincere thanks to the men
and women who comprise the worldwide Atwood Team for their continued dedication
to our success. I also want to recognize our many loyal clients and investors—their
continual support is a source of inspiration for our strong performance.
OUR 47TH YEAR
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Rob Saltiel
PP. 04 // 05
SAFETY & OPERATIONS // FINANCIAL HIGHLIGHTS
SAFETY PERFORMANCE
“We delivered our lowest recordable incident rate in our history while our people worked a record number of man-hours.”
1.5
0.9
0.6
0.3
0 0
1
2
3
4
5
1.2
2009 2010 2011 2012 2013 2014
4.94.5
3.23.0
3.3
2.8
.92
.80.68
.58
1.14
.67
RECORDABLE INCIDENTS PER 200,000 MAN-HOURS MILLION MAN-HOURS WORKED
PP. 06 // 07
“The capital expenditures for our two drill-ships under construction are fully funded. Our balance sheet is in good shape.”
FINANCIAL HIGHLIGHTS (IN THOUSANDS, EXCEPT PER SHARE DATA) 2014 2013 2012
OPE R ATING RE SU LTS :
Total revenues $ 1,173,953 $ 1,063,663 $ 787,421
EBITDA 594,776 552,205 389,297
Operating income 438,784 429,471 319,410
Net income 340,822 350,224 272,171
Earnings per common share (diluted) 5.24 5.32 4.14
FINANCIAL POS ITION :
Cash $ 80,080 $ 88,770 $ 77,871
Net working capital 330,430 296,888 232,887
Net property and equipment 3,967,028 3,164,724 2,537,340
Total debt 1,754,007 1,271,303 835,148
Shareholder’s equity 2,555,524 2,207,371 1,939,422
CAS H FLOW DATA :
Net cash provided by operating activities $ 442,620 $ 432,110 $ 255,603
Capital expenditures 975,731 745,223 785,083
“The delivery and start-up of our first two ultradeepwater drillships marked a major milestone in our fleet growth strategy.”
FLEET GROWTH & TRANSFORMATION
FLEET GROWTH PLAN (CALENDAR YEARS 2011–2016)
2014 2015 20162011 2012 2013
ATWOOD CONDOR
ATWOOD ADVANTAGE
ATWOOD ACHIEVER
ATWOOD OSPREY
ATWOOD MANTA
ATWOOD MAKO
ATWOOD ORCA
ATWOOD ADMIRAL
ATWOOD ARCHERDRILLSHIP
DRILLSHIP
DRILLSHIP
DRILLSHIP
JACKUP
JACKUP
JACKUP
SEMISUBMERSIBLE
SEMISUBMERSIBLE
DELIVERED SCHEDULED
FINANCIAL INFORMATION
Financials Form 10-K
CORPORATE DIRECTORY
ROBERT J. SALTIEL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MARK L. MEY
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
ARTHUR M. POLHAMUS
VICE PRESIDENT, OPERATIONS
BARRY M. SMITH
VICE PRESIDENT, TECHNICAL SERVICES
WALTER A. BAKER
VICE PRESIDENT, GENERAL COUNSEL AND CORPORATE SECRETARY
GEOFFREY C. WAGNER
VICE PRESIDENT, MARKETING AND BUSINESS DEVELOPMENT
MARK W. SMITH
VICE PRESIDENT, CHIEF ACCOUNTING OFFICER AND CONTROLLER
STUART D. ALLEN
VICE PRESIDENT, HUMAN RESOURCES AND ADMINISTRATIVE SERVICES
JOHN K. GIDLEY
VICE PRESIDENT, HEALTH, SAFETY & ENVIRONMENT
Officers
GEORGE S. DOTSON
CHAIRMAN
DEBORAH A. BECK
JACK E. GOLDEN
HANS HELMERICH
JEFFREY A. MILLER
JAMES R. MONTAGUE
ROBERT J. SALTIEL
PHIL D. WEDEMEYER
Directors
CORPORATE HEADQUARTERS
15011 KATY FREEWAY, SUITE 800
HOUSTON, TEXAS 77094
OFFICE: 281-749-7800
WWW.ATWD.COM
COMMON STOCK LISTING
NEW YORK STOCK EXCHANGE
SYMBOL: ATW
ANNUAL MEETING
ATWOOD SHAREHOLDERS ARE INVITED TO ATTEND OUR ANNUAL MEETING WHICH WILL BE HELD ON WEDNESDAY, FEBRUARY 18, 2015 AT 12:00 PM CST AT OUR PRINCIPAL OFFICE.
TRANSFER AGENT & REGISTRAR
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
17 BATTERY PLACE, 8TH FLOOR
NEW YORK, NEW YORK 10004
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PRICEWATERHOUSECOOPERS LLP
HOUSTON, TEXAS
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