GlobalSantaFe Reports 2001 Results
|Wednesday, January 23, 2002
Houston-based worldwide drilling contractor GlobalSantaFe Corporation reported net income for the quarter ended Dec. 31, 2001, of $11.7 million, or $0.07 per diluted share, on revenues of $384 million, as compared to net income of $40.9 million, or $0.34 per diluted share, on revenues of $332 million for the same quarter in 2000. For the year ended Dec. 31, 2001, the company reported net income of $198.8 million, or $1.50 per diluted share, on revenues of $1.3 billion. This compares to net income of $113.9 million, or $0.95 per diluted share, on revenues of $1.0 billion for the year ended Dec. 31, 2000. Net income for the fourth quarter and the full year 2001 included two significant nonrecurring charges -- a restructuring charge of $22.3 million ($14.5 million after tax) related to the Global Marine and Santa Fe International merger completed in November 2001, and a noncash charge of $47.2 million to reduce the company's deferred tax asset position. Full year 2001 net income was additionally impacted by a $35.1 million ($22.8 million after tax) gain on the sale of a special-purpose Arctic drilling unit during the second quarter. Exclusive of these special items, net income for the quarter was $73.4 million, or $0.43 per share, and for the full year 2001 it was $237.7 million, or $1.78 per diluted share. GlobalSantaFe President and Chief Executive Officer Sted Garber said, "The most exciting news of 2001 was the merger between Global Marine and Santa Fe International. We are pleased with the considerable progress we have already made in integrating the two organizations. As one company, we are better positioned to serve the world's largest oil and gas companies in every major offshore drilling region, as well as in many of the world's most important onshore drilling markets. Our investors benefit from our increased size and market liquidity and a balance sheet that allows us to better manage through market cycles to build long-term shareholder value. Reported financial results were impacted by merger-related charges and include 42 days of Santa Fe International's results. Accordingly, comparisons to prior period results, which are Global Marine's stand-alone results, may not be meaningful." Commenting about the company's financial and operating performance, Garber said, "In 2001, our contract drilling segment benefited significantly from improvement in international offshore drilling markets as major oil and gas companies stepped-up their drilling activity. Consequently, drilling rig dayrates and utilization in these markets increased. On the domestic front, however, declining U.S. natural gas prices caused offshore drilling activity in the Gulf of Mexico to drop off significantly in the second half of the year. Despite these weakened market conditions, GlobalSantaFe currently has eight of its ten jackups working in the Gulf of Mexico and expects another to return to work later this week." The drilling management services segment also turned in a strong performance this year. Despite a reduced activity level in 2001 compared to the previous year, the group delivered operating profit of $33.4 million in 2001 compared to $21.6 million in 2000. This year-over-year improvement was largely due to better operating performance and an improved pricing structure at Applied Drilling Technology Inc. -- the company's domestic drilling management services subsidiary. During the course of the year, the drilling management services subsidiaries drilled a total of 97 turnkey wells and performed 22 well completions, compared to 122 turnkey wells and 27 well completions in 2000. Regarding the nonrecurring charges in the company's fourth quarter financial results, Garber said that the $22.3 million ($14.5 million after tax) restructuring charge for certain merger-related expenses was associated primarily with employee severance costs and termination of office leases. The company also took a noncash charge of $47.2 million to establish a valuation allowance against a tax asset related to U.S. net operating loss (NOL) carryforwards. As a result of the merger, the company's NOL expirations were accelerated by a year; at the same time, domestic taxable income is being reduced by the downturn in Gulf of Mexico activity levels. "While we intend to evaluate strategies to preserve the benefits of the company's expiring NOLs, we considered it prudent to recognize the risk of their expiration by establishing a valuation allowance against the related tax asset," Garber said. "With customer budgets in the international arena projected to increase slightly in 2002," Garber said, "we expect international drilling activity to remain relatively strong throughout the year. In comparison, the weak U.S. economy and warmer than normal winter will likely delay the recovery of U.S. natural gas prices, and consequently the domestic offshore drilling market, into the second half of 2002. Until U.S. natural gas prices improve, demand for jackup rigs in the Gulf of Mexico is expected to remain soft, and dayrates for these rigs are therefore anticipated to remain near cash-breakeven levels. However, with about 75 percent of the company's offshore drilling rig fleet operating in international markets at year-end, the company is more insulated from the weaker Gulf of Mexico market." The company continues to make progress with its newbuild rig construction projects. The first of two high-performance jackups is expected to be delivered during the first quarter of 2003, and the first of two ultra-deepwater semisubmersibles is expected to be delivered in the fourth quarter of 2003. The newbuild program represents approximately $365 million of the company's capital expenditures for 2002, which are estimated to total about $630 million. The company's financial condition remains very strong with a debt-to-total-book capitalization of approximately 18 percent and cash and marketable securities totaling approximately $700 million at Dec. 31, 2001.