-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UsMWk2jSKkZnvq9zvCgMq26Z3JKb17XJl8+z4d7L8alOOYandNjgzyEg5DAoqtyz rHKbwWkx67ZrERqomMSVvw== 0000909334-95-000043.txt : 19960411 0000909334-95-000043.hdr.sgml : 19960411 ACCESSION NUMBER: 0000909334-95-000043 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950927 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BONRAY DRILLING CORP CENTRAL INDEX KEY: 0000351693 STANDARD INDUSTRIAL CLASSIFICATION: 1381 IRS NUMBER: 731086424 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-09953 FILM NUMBER: 95576521 BUSINESS ADDRESS: STREET 1: 4701 N E 23RD ST STREET 2: P O BOX 50128 CITY: OKLAHOMA CITY STATE: OK ZIP: 73121 BUSINESS PHONE: 4054244327 MAIL ADDRESS: STREET 1: 4701 NE 23RD STREET STREET 2: P O BOX 50128 CITY: OKLAHOMA CITY STATE: OK ZIP: 73140 10-K405 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] For the fiscal year ended June 30, 1995 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the transition period from _______ to _________ Commission File Number 0-9953 BONRAY DRILLING CORPORATION (Exact name of registrant as specified in its charter) Delaware 73-1086424 (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification Number) 4701 N. E. 23rd Street, Oklahoma City, OK 73121 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 405/424-4327 Securities registered pursuant to Section 12(b) of the Act: None Title of each class: Name of each exchange on which register: None N/A Securities registered pursuant to Section 12(g) of the Act: Common Stock Title of Class Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No 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. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant at August 31, 1995 was $2,090,830. The number of shares of common stock, $1.00 par value, outstanding at August 31, 1995 was 423,540. Part III incorporates information by reference from the Proxy Statement for the Annual Meeting of Stockholders on November 14, 1995. PART I ITEM 1. BUSINESS Introduction - - ------------ Bonray Drilling Corporation, a Delaware corporation formed in March 1980, is successor to a contract drilling business which has been in operation since 1957. The term "Company" includes Bonray Drilling Corporation and its predecessor corporate and divisional operations unless the context otherwise requires. The Company is engaged in domestic onshore contract drilling of oil and gas wells. It currently owns and has available for operation fifteen drilling rigs in Oklahoma, having depth capabilities ranging from 7,000 to 25,000 feet. The Company will extend its geographical area of operation if appropriate opportunities are presented. Industry conditions and utilization rates - - ----------------------------------------- The Company's contract drilling revenues depend upon the utilization of, and contract rates for, its drilling rigs. These factors are affected by a number of variables, including competitive conditions in the drilling industry and the amount of exploration and development activity conducted by oil and gas producers. The level of domestic drilling activity has historically fluctuated widely and cannot be predicted because of the uncertainty of numerous factors affecting the petroleum industry, including oil and gas selling prices and the degree of government regulation of the industry. The demand for rigs has greatly declined since the fourth quarter of 1982 due to the decline in the exploration for and development of oil and gas reserves, which resulted from the decrease in the sales price of oil and gas. Lower rig utilization rates have caused intense price competition in the industry. During the month of July 1995, the Company operated at approximately 49.7% of capacity. The following table sets forth certain information with respect to the drilling activities of the Company. The utilization rate represents the number of days during which a rig was operating or being made ready to operate in a given period, expressed as a percentage of the number of days that the rig was owned by the Company and available for work during that same period.
Years ended June 30, ------------------------------------ 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Utilization rate 43.4% 38.6% 41.9% 28.0% 37.3% Rigs available for work at end of period 15 14 14 14 14 Wells drilled 62 59 61 43 53 Footage drilled (thousands) 505 489 547 344 457 - - --------------- Rigs being dismantled, moved and assembled were treated as utilized if the Company was paid by a customer or if the Company allowed for such activity in determining the price under a related drilling contract.
Contracts - - --------- The terms and rates of the Company's drilling contracts vary depending upon the location, duration and complexity of the drilling, the equipment and services provided, and other factors. As of August 31, 1995, seven rigs were under contract for the drilling of twelve wells. As of that date, five of the Company's rigs were operating on a daywork basis, pursuant to which the Company is paid monthly a specified amount per day based on the depth capability of the rig. The Company is paid for all days during the term of the contracts except days for which the rigs are not in operation because of repairs or maintenance. Daywork contracts generally specify the type of equipment to be used, the size of the hole and the depth of the well to be drilled, and provide for payment by the customer of certain costs and expenses of transporting, assembling and dismantling the rigs. While working under daywork contracts, the Company bears no part of the costs due to in-hole losses such as time delays for various reasons, including stuck drill strings and blowouts. The Company also enters into footage and turnkey contracts. Footage and turnkey contracts, as opposed to daywork contracts, shift the risk of loss in drilling from the customer to the drilling contractor and, as a consequence, result in greater variation in profitability. As of August 31, 1995, two rigs were operating under footage contracts. Footage contracts usually provide for payment of an agreed price per foot of hole drilled to a specified depth regardless of the time required or the problems encountered. Turnkey contracts, of which none were in process at August 31, 1995, provide for payment of an agreed price upon the attainment of a specified objective. Turnkey contracts require more services of the contractor and, consequently, result in additional risks, costs and higher revenues which are not inherent in footage or daywork contracts. Turnkey contracts include costs for casing, cementing, drilling mud, and logging services. The Company determines the manner of drilling and type of equipment to be used, subject to customer specifications. The Company prefers to work on a daywork basis, as it does not believe the potentially higher profit margins of footage and turnkey contracts justify the associated increased risks. However, in periods of lesser demand, the Company is generally required to work on a footage or turnkey basis, particularly with respect to shallow drilling. The following table indicates the percentage of drilling revenues attributable to the foregoing types of contracts for the periods indicated:
Years ended June 30, -------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Type of Contract: Daywork 88.5% 77.0% 42.8% 70.5% 43.3% Footage 10.5% 12.0% 18.4% 26.7% 18.8% Turnkey 1.0% 11.0% 38.8% 2.8% 37.9%
Customers and competition - - ------------------------- The Company's customers include major integrated oil companies and independent oil and gas producers. The following table summarizes the Company's sources of contract drilling revenue and wells drilled for each of the three years in the period ended June 30, 1995:
Years ended June 30, (Dollars in thousands) --------------------------------------------------------------------------- 1995 1994 1993 Wells Wells Wells Drld. Amount % Drld. Amount % Drld. Amount % ----- ------ -- ----- ------ -- ----- ------ -- Avalon Exploration 9 $2,561 30 13 $2,324 29 6 $1,933 20 Sanguine, Ltd. 4 879 10 1 162 2 5 1,506 16 Marathon Oil 6 2,082 25 10 1,766 22 8 1,731 18 DLB Energy - - - 4 871 11 9 1,480 15 All Others 43 2,964 35 31 2,789 36 33 2,981 31 -- ------ --- -- ------ --- -- ------ --- Totals 62 $8,486 100 59 $7,912 100 61 $9,631 100 == ====== === == ====== === == ====== ===
The Company competes with a large number of companies in the marketing of its drilling services, some of which have substantially greater resources available than the Company. The Company believes that competition is based principally on the availability of suitable drilling rigs and related equipment, expertise, price and reputation, and believes that it is able to compete effectively with respect to each of such factors. Competition is primarily regional and may vary from time to time by region. Rigs can be moved, however, from one region to another in response to perceived demand. Conditions in the industry remain very competitive. Maintenance of on-going customer relationships is extremely important. However, vigorous competition will make it difficult to maintain such relationships. The Company maintains four trucks in order to move some of its rigs to drill sites on an economic basis but contracts with common carriers and contractors for rig assembly and disassembly. The cost of transportation is usually included in the daywork rate, with some reimbursements generally allowed. Footage and turnkey contracts usually require the Company to absorb these costs. Regulatory matters - - ------------------ General - The production and sale of crude oil and natural gas are currently subject to extensive regulation and significant taxation by both federal and state authorities. Most states (including Oklahoma) have regulations which pertain to spacing of wells, preventing waste of oil and gas, limiting rates of production, proration of production, prevention and clean-up of pollution and similar matters. These regulations decrease producer profitability which in turn decreases the demand for contract drilling. Environmental regulation - The Company's operations are subject to numerous federal, state and local laws and regulations controlling the discharge of material into the environment or otherwise relating to the protection of the environment. The Company believes that it complies with those regulations and laws affecting its operations. Such compliance has not had and is not currently expected to have, a material effect upon the Company's capital expenditures, earnings or competitive position. Operating risks and insurance - - ----------------------------- Contract drilling by its nature involves numerous operating hazards and risks, including blowouts, craterings, fires and explosions, any of which can cause serious damage to property and equipment and personal injuries or loss of life. There is also a risk that oil spillage, gas leakage or fires could result in serious environmental damage. The Company carries insurance customary for the industry but may not be fully insured against all risks either because they are not fully insurable or because premium costs are prohibitive. The occurrence of an event against which the Company is not fully insured could cause the Company to incur substantial costs and loss of revenue. The Company insures its rigs for amounts approximating their fair market values (less $25,000 deductible per occurrence). The Company purchases workers' compensation insurance under a loss rating plan. This plan affords the Company the opportunity to pay less than standard premium or the risk of paying more than standard premium depending on losses incurred. The Company limits its exposure within the plan to $250,000 ($100,000 beginning June 1995) per incident. Employees - - --------- As of June 30, 1995, the Company had 24 salaried and approximately 115 hourly employees. The number of hourly employees varies, depending upon the level of rig utilization. EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information regarding the executive officers of the Company: Name Age Positions ---- --- --------- Raymond H. Hefner, Jr. 68 Chairman of the Board of Directors Richard B. Hefner 35 President and Chief Executive Officer Officers are elected annually by the Board of Directors. Raymond H. Hefner, Jr., was elected Chairman of the Board of Directors of the Company upon its inception in March 1980. He served as Chief Executive Officer from that time until June 30, 1993. He founded Bonray Energy Corporation ("BEC"), a company engaged in oil and gas exploration and production and the predecessor of the Company's operations, in 1957. He served as Chairman of the Board, Chief Executive Officer and Treasurer of BEC from 1957 until November 1, 1991, when BEC was sold to Ensign Oil & Gas, Inc., and became EOG (Oklahoma) Inc. Mr. Hefner also serves as President of Bonray, Inc., a privately held oil and gas investment company. He previously served as Chairman of the Board of Liberty Bank and Trust Company of Oklahoma City, N.A., a national bank; Vice Chairman of the Board of Liberty Bancorp, Inc., a bank holding company; and currently serves as a director of Liberty Bancorp, Inc., Liberty Bank and Trust Company of Oklahoma City, N.A., Liberty Bank and Trust Company of Tulsa, N.A., Oklahoma Health System, Liberty Mutual Insurance Company, Liberty Mutual Life Insurance Company, Liberty Financial Companies, Inc. and is a Southwest advisory director for Liberty Mutual Insurance Company. Mr. Hefner joined the board of directors for Gulf Canada Resources Limited January 25, 1995. He is the father of Richard B. Hefner. Richard B. Hefner was elected Chief Executive Officer effective June 30, 1993. He has served as President, Chief Operating Officer and Director of the Company since October 1990. Mr. Hefner is a general partner of Hefner Enterprises, a Texas general partnership, and serves as Vice President of Bonray, Inc., a privately held oil and gas investment company. He has served as Vice President and General Manager of Canadian Valley Ranch, Inc., a pure-bred livestock production company, since 1982. He is the son of Raymond H. Hefner, Jr. ITEM 2. PROPERTIES The Company owns approximately forty acres of land located in Oklahoma City, Oklahoma, on which an office building and repair, support and storage facilities for the Company's operations are located. These facilities include a repair shop (8,000 square feet) and three warehouses. The office building (3,600 square feet) was renovated in fiscal year 1992 to be used by office personnel. The Company presently owns and operates fifteen drilling rigs. Although four of these drilling rigs have been "mothballed", thus requiring major expenditures in order to become productive, the remaining eleven rigs are in good operating condition. Although the rigs with less depth capacity have had greater utilization in recent years, those rigs with deeper capacity are available if deep gas drilling activity increases. (See "Item 1. Business" for utilization rates, drilling contracts and customers.) The following table sets forth certain information relating to the Company's drilling rigs presently available for operation:
Depth Rig Capability Customer at Number (feet) Type August 31, 1995 - - ------ ----------- ----------- --------------- 1 16,000 Oilwell 760 Marathon 2 20,000 Oilwell 860 mothballed 3 10,000 Ideco 525 mothballed 4 12,000 Unit U-40 Avalon 5 9,000 National 50-A 6 9,000 National 50-A mothballed 7 7,000 Cooper 550 Hollrah 8 10,000 Cooper LTO 750 Keener 10 12,000 National 55 21 12,000 Ideco 750 Bolin 30 20,000 National 1320-M mothballed 31 25,000 National 1320-M 32 20,000 National 110-M Avalon 33 20,000 Mid Continent U914 Sanguine 34 25,000 Gardner Denver 1500 Depth capabilities are based upon the use of 4.5 inch or 5 inch drill pipe and normal casing designs. The capabilities may vary as a result of the use of different drill pipe or unusual casing designs. Not operating at August 31, 1995.
ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company is a party or any of its property is subject. There are no material administrative or judicial proceedings arising under any federal, state, or local provisions regulating the discharge of materials into the environment or otherwise relating to the protection of the environment. No such proceedings are known to be contemplated by governmental authorities. No material legal proceedings were terminated during the fourth quarter ended June 30, 1995. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of stockholders through the solicitation of proxies or otherwise during the fourth quarter of the year ended June 30, 1995. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The common stock of the Company is traded over-the-counter under the NASDAQ symbol BNRY. The following is the range of prices for the Company's common stock for each of the quarters in the two year period ended June 30, 1995:
1995 Bids 1994 Bids ------------------ ---------------- Quarter High Low High Low - - ------- ------ ------ ------ ------ First $ 7.50 $ 7.00 $ 8.75 $ 8.25 Second $ 8.25 $ 7.75 $ 8.50 $ 8.00 Third $ 8.50 $ 8.50 $ 8.00 $ 7.25 Fourth $ 8.50 $ 8.50 $ 7.25 $ 7.25 Bid quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
No dividends have been paid since the inception of the Company. At present, the Company intends to maintain a policy of retaining any earnings for its operations. At August 31, 1995, Bonray Drilling Corporation had approximately 571 stockholders of record, not including individual stockholders whose shares are held in street name by brokerage, nominee or depository firms. ITEM 6. SELECTED FINANCIAL DATA
1995 1994 1993 1992 1991 ------ ------- ------- ------- ------- Operating revenues $8,486 $ 7,912 $ 9,631 $ 5,145 $ 8,619 ====== ======= ======= ======= ======= Net income (loss) $ 866 $ (575) $(1,551) $(1,179) $(5,283) ====== ======= ======= ======= ======= Net income (loss) per share $ 2.05 $ (1.36) $ (3.66) $ (2.78) $(12.47) ====== ======= ======= ======= ======= Weighted average shares outstanding 423,540 423,540 423,540 423,540 423,540 Total assets $10,647 $ 8,896 $ 9,419 $10,295 $11,391 ======= ======= ======= ======= ======= Obligations due after one year $ 693 $ 214 $ 388 $ - $ - ======= ======= ======= ======= ======= No cash dividends were declared or paid during the periods. Includes $5,106,000 ($12.05 per share) relating to a write-down of the Company's drilling equipment during the year. Includes cumulative effect on prior years of $100,000 ($.24 per share) due to change in method of accounting for income taxes. See Note 2 of Notes to Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS References to 1995, 1994 and 1993 refer to the Company's fiscal years ended June 30, 1995, June 30, 1994 and June 30, 1993, respectively. Liquidity and capital resources - - ------------------------------- The Company reported net working capital on June 30, 1995 of $508,000 and a ratio of current assets to current liabilities of 1.27 to 1. The $157,000 increase in working capital was largely a result of a higher utilization rate than reported for the previous year. The Company will continue to maintain its drilling rig fleet in good operating condition through the use of working capital generated from operations. Due to the depressed status of the energy industry, some of the Company's customers pay for services on a basis of sixty to ninety days. Due to the delay in collecting receivables, it became necessary to obtain a line of credit with a local bank. The credit agreement provides for a maximum of $750,000 at an interest rate of 1/2% above the national prime lending rate recognized by the bank and is collateralized by accounts receivable. The agreement expires October 31, 1995, unless renewed. At June 30, 1995, the Company had no borrowings under this agreement. In connection with the purchase of drilling equipment, a note payable was issued to the seller for $828,000, payable in monthly installments of principal and interest in the amount of $50,000 until paid in full with interest at a rate of 1% above the national prime lending rate (aggregate rate of 10% at June 30, 1995), and is secured by the equipment purchased. Over the last several years, the Company generated additional net operating losses for tax purposes due primarily to its use of accelerated depreciation which exceeds accumulated book deprecation. The Company was able to utilize a portion of these losses in its current year tax return. The remaining net operating losses are available for use in future periods due to carryover provisions. These carryover provisions will begin to expire in the year 2001. At the end of the year, the Company had no material commitments for capital expenditures. Results of operations - - --------------------- Revenues from drilling operations were $8,486,000 in 1995, an increase of 7% from $7,912,000 in 1994 and a decrease of 12% from $9,631,000 reported in 1993. The increase from 1994 is represented by a higher utilization of the Company's drilling fleet while the decrease from 1993 is due to the decrease in the number of turnkey contracts in relation to total contracts. Unstable natural gas prices and fluctuating crude oil prices have continued to depress the drilling industry. Competition for contracts remains strong. However, the Company's attempts to raise rates have been somewhat successful. The Company's ability to operate on a large percentage of daywork contracts as opposed to footage and turnkey contracts, along with a reduction in depreciation in 1995, resulted in gross profit on drilling contracts (drilling operations revenue less drilling operations' cost and depreciation) of $491,000 compared to a gross profit of $51,000 reported in 1994 and a gross loss of $823,000 reported in 1993. The decrease in depreciation expense in 1995 and 1994 is due to the cost of certain rigs more regularly operated becoming fully depreciated during the period. A significant charge results from depreciating mothballed drilling rigs pursuant to the Company's policy initiated in 1986. Additional depreciation under this policy amounted to $36,000 in 1995, $131,000 in 1994 and $223,000 in 1993. Without the mothballed drilling rig depreciation gross profit on drilling contracts would have been $527,000 in 1995 and $182,000 in 1994, while gross loss on drilling contracts would have been $600,000 in 1993. The income before provision for income taxes this year of $901,000 is the result of a gain of approximately $1,000,000 from the sale of one of the Company's rigs and related equipment. Workers' compensation insurance costs and claims for self-insured risks account for the Company's highest cash expense other than labor. These costs were $979,000 in 1995, $876,000 in 1994 and $1,047,000 in 1993 or 25%, 23% and 27%, respectively, of payroll expenditures. Of the amount expended in 1995, 1994, and 1993 for workers' compensation insurance costs, 4%, 11% and 2%, respectively, were due to revisions in estimates of claims from prior fiscal years. To place greater emphasis on safety, the Company implemented a tenure and drug screening program in 1991 to help reduce these costs. The tenure program was changed to a Safety Award Program in 1994. Because workers' compensation law and insurance coverage allow claims to remain open after a policy year ends, it is difficult to determine the Company's total liability for any given year. The following table indicates the percentage of the Company's drilling revenues attributable to the various types of contracts for each of the three years ended June 30, 1995:
Years ended June 30, ---------------------------- 1995 1994 1993 ---- ---- ---- Type of Contract: Daywork 88.5% 77.0% 42.8% Footage 10.5% 12.0% 18.4% Turnkey 1.0% 11.0% 38.8%
Gross profit, excluding indirect costs associated with contract drilling operations and depreciation of mothballed drilling rigs, attributable to the various types of contracts for the same three years are as follows:
Years ended June 30, -------------------------- 1995 1994 1993 ---- ---- ---- Type of Contract: Daywork 91.0% 80.1% 67.2% Footage 8.2% 12.6% 23.8% Turnkey .8% 7.3% 9.0%
Inflation - - --------- The effect of inflation on the Company's operations has been insignificant because of the low rate of inflation in recent years. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements of the Company, together with the report thereon of Ernst & Young LLP, are set forth on pages 13 through 22 hereof. (See Item 14 for Index.) ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The information required by Item 304 of Regulation S-K is not applicable to the Company. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information relating to the identification, business experience, and directorships of each director and nominee for director of the Company required by Item 401 of Regulation S-K and presented in the section entitled "Information Concerning Nominees and Directors" of the Company's Proxy Statement for the annual meeting of Stockholders on November 14, 1995, is hereby incorporated by reference. (See Item 1 for information relating to the identification and business experience of the Company's executive officers). The information required by Item 405 of Regulation S-K does not require disclosure by the Company. ITEM 11. EXECUTIVE COMPENSATION The information relating to the remuneration of directors and officers required by Item 402 of Regulation S-K and presented in the section entitled "Executive Compensation" of the Company's Proxy Statement for the annual meeting of Stockholders on November 14, 1995, is hereby incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information relating to security ownership required by Item 403 of Regulation S-K and presented in the section entitled "Voting Securities Outstanding, Security Ownership of Management and Principal Stockholders," of the Company's Proxy Statement for the annual meeting of Stockholders on November 14, 1995, is hereby incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information relating to transactions with management and business relationships required by Item 404 of Regulation S-K and presented in the section entitled "Transactions With Management" of the Company's Proxy Statement for the annual meeting of Stockholders on November 14, 1995, is hereby incorporated by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report: 1 and 2. Index to Financial Statements and Financial Statement Schedules. --------------------------------------------------------------- Report of independent auditors Covered by report of independent auditors: Balance sheets at June 30, 1995 and 1994 Statements of operations and accumulated deficit for each of the three years in the period ended June 30, 1995 Statements of cash flows for each of the three years in the period ended June 30, 1995 Notes to financial statements All financial statement schedules are inapplicable or the required information is included in the financial statements or the notes thereto. 3. Exhibits -------- The following documents are exhibits to this Form 10-K. Each document marked by an asterisk is hereby incorporated herein by reference to same document previously filed with the Securities and Exchange Commission. Exhibit Number Document - - ------- -------- 3(a) Registrant's Certificate of Incorporation and all amendments (filed as Exhibit 19(a) to Form 10-Q for the six months ended December 31, 1986).* 3(b) Registrant's Restated By-Laws (dated May 6, 1981, as amended November 25, 1986)(filed as Exhibit 19(b) to Form 10-Q for the six months ended December 31, 1986).* 10(a) 1981 Incentive Stock Option Plan for Bonray Drilling Corporation and its Subsidiaries. 10(b) Commercial Promissory Note - Fixed or Variable Rate by and between Bonray Drilling Corporation and BancFirst. (b) Reports on Form 8-K A report on Form 8-K was filed on April 13, 1995. Report of Independent Auditors The Board of Directors and Stockholders Bonray Drilling Corporation We have audited the accompanying balance sheets of Bonray Drilling Corporation as of June 30, 1995 and 1994, and the related statements of operations and accumulated deficit and cash flows for each of the three years in the period ended June 30, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bonray Drilling Corporation at June 30, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 1995, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Ernst & Young LLP Oklahoma City, Oklahoma August 11, 1995
BONRAY DRILLING CORPORATION BALANCE SHEETS June 30, 1995 and 1994 ASSETS 1995 1994 (Dollars in thousands) Current assets: Cash and cash equivalents $ 160 $ 9 Accounts receivable (Note 3) 2,139 1,705 Drilling contracts in progress 21 34 Prepaid expenses 94 103 ------- ------- Total current assets 2,414 1,851 Properties and equipment: Drilling equipment (Note 3) 20,766 20,941 Land 110 110 Buildings 356 346 Other equipment 1,093 1,069 ------- ------- 22,325 22,466 Less accumulated depreciation 14,092 15,421 ------- ------- Net properties and equipment 8,233 7,045 ------- ------- $10,647 $ 8,896 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 965 $ 897 Notes payable (Note 3): Short term line of credit - 165 Other 551 - Accrued liabilities: Salaries and wages 163 162 Payroll and other taxes 61 67 Workers' compensation insurance (Note 4) 66 135 Other 100 74 ------- ------- Total current liabilities 1,906 1,500 Obligations due after one year: Workers' compensation insurance (Note 4) 447 188 Notes payable (Note 3) 191 - Other 55 26 Stockholders' equity (Note 5): Common stock, $1.00 par value; 800,000 shares authorized, 432,740 shares issued 433 433 Capital in excess of par value 12,497 12,497 Accumulated deficit (4,790) (5,656) ------- ------- 8,140 7,274 Less 9,200 shares of treasury stock, at cost 92 92 ------- ------- Total stockholders' equity 8,048 7,182 ------- ------- $10,647 $ 8,896 ======= =======
The accompanying notes are an integral part of these financial statements.
BONRAY DRILLING CORPORATION STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT Years ended June 30, 1995, 1994 and 1993 (Dollars in thousands, except per share amounts) 1995 1994 1993 ---- ---- ---- Revenues: Contract drilling operations (Note 6) $ 8,486 $ 7,912 $ 9,631 Gain (loss) from sale of assets 1,029 (3) (25) Interest and other income 172 137 66 ------- ------- ------- 9,687 8,046 9,672 Costs and expenses (Note 4): Contract drilling operations 6,865 6,649 8,924 General and administrative 752 687 713 Interest and other expense 39 73 56 Depreciation 1,130 1,212 1,530 ------- ------- ------- 8,786 8,621 11,223 Income (loss) before provision for income taxes 901 (575) (1,551) Provision for income taxes (Note 2) 35 - - ------- ------- ------- Net income (loss) 866 (575) (1,551) Accumulated deficit at beginning of year (5,656) (5,081) (3,530) ------- ------- ------- Accumulated deficit at end of year $(4,790) $(5,656) $(5,081) ======= ======= ======= Net income (loss) per share $ 2.05 $ (1.36) $ (3.66) ======= ======= ======= Weighted average shares outstanding 423,540 423,540 423,540 ======= ======= =======
The accompanying notes are an integral part of these financial statements.
BONRAY DRILLING CORPORATION STATEMENTS OF CASH FLOWS Years ended June 30, 1995, 1994 and 1993 (Dollars in thousands) 1995 1994 1993 ---- ---- ---- Cash flows from operating activities: Cash received from customers $10,910 $10,492 $12,948 Cash paid to suppliers and employees (10,178) (10,285) (12,239) Interest received 36 - - Interest paid (27) (31) (16) Income taxes paid (30) - - Other cash receipts 152 124 115 ------- ------- ------- Net cash provided by operating activities 863 300 808 Cash flows from investing activities: Proceeds from sales of assets 1,659 4 25 Capital expenditures (2,120) (424) (759) Insurance proceeds for reimbursements of losses pertaining to properties and equipment - - 153 ------- ------- ------- Net cash used by investing activities (461) (420) (581) Cash flows from financing activities: Payments on notes payable (86) - - Net increase (decrease) in borrowings on short-term line of credit (165) 65 (200) ------- ------- ------- Net cash provided (used) by financing activities (251) 65 (200) ------- ------- ------- Net increase (decrease) in cash and cash equivalents 151 (55) 27 Cash and cash equivalents at beginning of year 9 64 37 ------- ------- ------- Cash and cash equivalents at end of year $ 160 $ 9 $ 64 ======= ======= ======= Reconciliation of net income (loss) to net cash provided by operating activities: Net income (loss) $ 866 $ (575) $(1,551) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 1,130 1,212 1,530 (Gain) loss on sales of assets (1,029) 3 25 Change in assets and liabilities: Decrease (increase) in current assets: Accounts receivable (434) (578) (233) Drilling contracts in progress 13 196 (28) Prepaid expenses 9 (14) 135 Increase (decrease) in current liabilities: Accounts payable 68 107 313 Accrued liabilities (48) 54 174 Accrued workers' compensation insurance and other due after one year 288 (174) 388 Other - 69 55 ------- ------- ------- Total adjustments (3) 875 2,359 ------- ------- ------- Net cash provided by operating activities $ 863 $ 300 $ 808 ======= ======= =======
Disclosure of noncash investing and financing activities: During the year ended June 30, 1995, the Company acquired property, plant and equipment by issuing a note payable of $828,050. The accompanying notes are an integral part of these financial statements. BONRAY DRILLING CORPORATION NOTES TO FINANCIAL STATEMENTS Years ended June 30, 1995, 1994 and 1993 1. Basis of financial statements and significant accounting policies ----------------------------------------------------------------- Cash and cash equivalents - Cash and cash equivalents include cash deposits in banks and short-term investments with original maturities of three months or less from the date of purchase by the Company. Contract drilling operations - Revenue earned from footage and turnkey contracts is recognized by the completed contract method, while revenue earned from daywork contracts is recognized by the percentage-of-completion method. Provision is made for the entire amount of expected losses on contracts, if any, in the period in which such losses are first determined. Valuation of properties and equipment - Drilling equipment is stated at amounts representing historical cost adjusted by prior year write-downs totaling approximately $21,000,000 based on the expected future economic value of such equipment. This value was determined by projecting the estimated future cash flows generated by drilling equipment based on the Company's historical utilization rates and profit margins as well as consideration of the economic conditions of the industry. Additions to drilling equipment, land, buildings and other equipment are reported at cost. In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Under the new rules long-lived assets must be reviewed for impairment at the lowest level for which there are identifiable cash flows for the Company's asset base and any impairment would be measured based on the fair value of the assets and would be reported in the year in which the statement is initially adopted. The statement is required to be adopted by the Company by fiscal year 1997. The Company is in the preliminary stages of evaluating the financial statement impact of adoption of this statement and, accordingly, such impact has not been determined. Depreciation - Depreciation of drilling equipment is computed on an operating day basis (net of estimated salvage value), except for drilling rigs and related equipment which are "mothballed" or otherwise not expected to be used for an extended period of time. Annual depreciation of these inactive rigs and related equipment is equal to 20% of the amount of depreciation which would be computed using the straight-line method over the estimated useful life of such drilling equipment. To the extent that the inactive rigs and related equipment are utilized during the year, depreciation is provided on an annual basis at the greater of the amount computed using the 20% rate or the operating day basis. The specific inactive drilling equipment used in any year may vary so the net book value of this equipment and the depreciation expense relating to it will vary accordingly. The net book value of such drilling equipment is $733,000 and $1,356,000 at June 30, 1995 and 1994, respectively. The Company recorded $36,000 of depreciation in 1995, $131,000 in 1994 and $223,000 in 1993 on these inactive rigs and related equipment, or $.08 per share, $.31 per share, and $.53 per share, respectively. Depreciation of buildings and other equipment is computed by the straight-line method over the estimated useful lives of the assets. Income (loss) per share - Income (loss) per share is computed on the basis of weighted average number of shares of common stock and dilutive common stock equivalents outstanding. Credit risk - The Company operates fifteen drilling rigs in the state of Oklahoma and grants credit, which is generally unsecured, to its customers (Note 6). At June 30, 1995 approximately 84% of the Company's accounts receivable were from three customers. The Company has not experienced any significant credit losses in 1995, 1994 or 1993 and is not aware of any significant uncollectible accounts at June 30, 1995. 2. Income taxes ------------ Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of June 30, 1995 and 1994 are as follows (dollars in thousands):
1995 1994 ---- ---- Deferred tax liability - tax depreciation over book depreciation and write-downs $ 807 $ 1,198 ======= ======= Deferred tax assets: Net revenues and expenses recognized for tax purposes which are deferred for financial purposes $ 7 $ 10 Net operating loss carryforwards 2,216 2,934 ------- ------- Total deferred tax assets before valuation allowance 2,223 2,944 Less: Valuation allowance recognized 1,416 1,746 ------- ------- Net deferred tax assets $ 807 $ 1,198 ======= =======
The deferred tax assets and liability are offset and, therefore, no deferred tax asset or liability is reflected in the Company's balance sheets at June 30, 1995 and 1994. The difference between the amount of the credit for income taxes and the amount which would result from the application of the statutory rate to income (loss) before provision (credit) for income taxes is analyzed as follows (dollars in thousands):
1995 1994 1993 ---- ---- ---- Provision (credit) for income taxes at statutory rate $ 306 $ (201) $ (527) Difference resulting from: Increase (decrease) in valuation allowance for net deferred tax assets (330) 215 547 Alternative minimum tax 35 - - Other 24 (14) (20) ------ ------ ------ Provision for income taxes $ 35 $ - $ - ====== ====== ======
At June 30, 1995, the Company has net operating loss carryforwards for federal tax purposes of approximately $5,100,000 which will expire beginning in the year 2001 if not used. At June 30, 1995, the net operating loss carryforwards for state tax purposes amounted to approximately $12,600,000. 3. Notes Payable ------------- During the year ended June 30, 1995, the Company acquired drilling and other equipment by issuing a note payable of $828,000 to the seller of the equipment. The note is payable in monthly installments of principal and interest in the amount of $50,000 until paid in full with interest at a rate of 1% above the national prime lending rate (aggregate rate of 10% at June 30, 1995) and is secured by the equipment purchased. The balance due under the agreement at June 30, 1995 was $742,000, of which $551,000 is expected to be due within one year with the remainder due in 1997. The note also contains a prepayment option for the Company and allows the Company to defer up to four of the monthly payments. The Company has a revolving line of credit agreement (the "credit agreement") with a bank. Credit availability is subject to a monthly borrowing base determination calculated as 75% of the Company's accounts receivable less than 90 days old, not to exceed $750,000. At June 30, 1994, $165,000 of borrowings were outstanding under the revolving line of credit (none at June 30, 1995). The credit agreement, which expires October 31, 1995 unless renewed, provides for monthly interest payments which accrue at a rate of 1/2 of 1% over the lender's national prime rate (aggregate rate of 9.5% at June 30, 1995, and 7.75% at June 30, 1994). Outstanding advances and accrued interest are due in full upon expiration of the credit agreement. The credit agreement is secured by the Company's accounts receivable. 4. Contingency ----------- The Company is covered by a workers' compensation insurance plan for its employees under which the Company is responsible for claims up to $250,000 ($100,000 beginning June 1995) per incident. The Company changed from a retrospective rating plan to a paid loss plan effective with the year ended June 30, 1995. Under the paid loss plan the Company will reimburse the workers' compensation administrator for costs as those costs are paid by the administrator, normally over a five year period. Of these costs, $302,000 is included in workers' compensation insurance due after one year in the accompanying 1995 balance sheet. Total workers' compensation costs incurred by the Company were $979,000, $876,000 and $1,047,000 for the years ended June 30, 1995, 1994 and 1993 respectively, and were based on actual and estimated claims incurred. Workers' compensation expense for the years ended June 30, 1995, 1994 and 1993 includes $40,000, $99,000 and $24,000 ($.09, $.23 and $.06 per share), respectively, for changes in the claims estimated to be incurred by the Company's workers' compensation administrator for claims arising in prior fiscal years. These changes in estimates are not expected to have a significant effect on subsequent fiscal years. At June 30, 1995, and 1994, the Company has a net liability for accrued workers' compensation insurance totaling $513,000 and $323,000, respectively. Under an agreement with the Company's workers' compensation administrator, the Company will fund certain estimated workers' compensation costs from the 1993 policy year as they are paid by the administrator. The administrator has agreed to continue this arrangement for the retrospective life of that particular policy year, which is normally five years or until there is mutual agreement between the Company and the administrator to do otherwise. Accordingly, the estimated liability of $145,000 at June 30, 1995 related to these costs, expected to be paid by the Company after June 30, 1996, is included in workers' compensation insurance due after one year in the accompanying 1995 balance sheet. Under a similar agreement at June 30, 1994, the Company included $188,000 related to these costs in workers' compensation insurance due after one year. 5. Incentive stock option plan --------------------------- In September 1981, the Company established the 1981 Incentive Stock Option Plan under which the Company was authorized to award options on up to 5,000 shares of common stock to certain officers and key employees of the Company. The 1981 Incentive Stock Option Plan expired in September 1991, and was not renewed, however outstanding options may be exercised any time through June 1999. The following table summarizes the activity in employees' stock options during the year ended June 30, 1995: Outstanding options at beginning of year 1,000 Granted - Exercised - Cancelled - ------- Outstanding options at end of year 1,000 ======= At end of year: Price of outstanding options $14.875 Options exercisable 1,000
6. Major customers --------------- Contract drilling operations revenues include revenues from certain customers which individually account for 10% or more of these contract drilling operations revenues as follows:
1995 1994 1993 ---- ---- ---- Customer A $ 879,000 $ - $1,506,000 B 2,561,000 2,324,000 1,933,000 C - 871,000 1,480,000 D 2,082,000 1,766,000 1,731,000 E - - 1,011,000 ---------- ---------- ---------- $5,522,000 $4,961,000 $7,661,000 ========== ========== ========== SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on September 22, 1995. BONRAY DRILLING CORPORATION RICHARD B. HEFNER Richard B. Hefner President, Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on September 22, 1995. RAYMOND H. HEFNER, JR. Chairman of the Board of Directors Raymond H. Hefner, Jr. RICHARD B. HEFNER President, Chief Executive Officer Richard B. Hefner and Director PHILIP C. DAY Treasurer and Chief Financial Officer Philip C. Day JOANNE BELCHER Controller and Chief Accounting Officer Joanne Belcher WILLIAM B. CLEARY Director William B. Cleary HOBART A. SMITH Director Hobart A. Smith JAMES R. TOLBERT, III Director James R. Tolbert III INDEX TO EXHIBITS PAGE NUMBER OR INCORPORATION EXHIBIT NUMBER BY REFERENCE TO 3(a) Registrant's Certificate Form 10-Q for the six months of Incorporation and all ended December 31, 1986, amendments Exhibit 19(a) 3(b) Registrant's Restated Form 10-Q for the six months By-laws (dated May 6, ended December 31, 1986, 1981, as amended Exhibit 19(a) November 25, 1986) 10(a) 1981 Incentive Option Plan for Bonray Drilling Corporation on its Subsidiaries 10(b) Commercial Promissory Note - Fixed or Variable Rate by and between Bonray Drilling Corporation and BancFirst
EX-1 2 EXHIBIT 10(a) 1981 INCENTIVE STOCK OPTION PLAN FOR BONRAY DRILLING CORPORATION AND ITS SUBSIDIARIES ARTICLE I Purpose The purpose of the 1981 Incentive Stock Option Plan for Bonray Drilling Corporation and Its Subsidiaries ("Plan") shall be to attract, retain and motivate key management employees of Bonray Drilling Corporation ("Company") and its subsidiaries by providing additional compensation to such employees for future services by way of granting incentive stock options ("Stock Options") to such employees to enable them to purchase common stock of the Company. The Stock Options to be granted under the Plan are intended to qualify as "incentive stock options" as defined in Section 422A of the Internal Revenue Code of 1954, as amended (the "Code"). Under the Plan, subsidiaries are corporations of which 80% or more of the outstanding voting stock is owned by the Company, and which are herein referred to as "Subsidiary" or "Subsidiaries." ARTICLE II Administration of the Plan The Plan shall be administered by the Executive Compensation Committee (the "Committee") appointed by the Board of Directors (the "Board") of the Company and consisting of not less than three members from the Board none of whom shall be employees of the Company or a Subsidiary while serving on the Committee. The members of the Committee shall serve at the pleasure of the Board and shall be ineligible to participate under the Plan. Any member may serve concurrently as a member of any other administrative committee of any other plan of the Company or any of its affiliates entitling participants therein to acquire stock, stock options or deferred compensation rights (including stock appreciation rights). No member of the Board may serve on the Committee if such member has been eligible, during the year preceding his appointment, to participate under the Plan or any other plan of the Company entitling participants therein to acquire stock, stock options or deferred compensation rights (including stock appreciation rights). The Committee shall have the power where consistent with the general purpose and intent of the Plan (a) to establish policies and to adopt rules and regulations for carrying out the purposes and provisions of the Plan; (b) to interpret and construe the Plan and determine all questions arising under the Plan and any agreement made pursuant to the Plan, and any such interpretation, construction or determination made by the Committee shall be final, binding and conclusive; (c) to determine the number of shares of common stock of the Company covered by each Stock Option; (d) to determine the time or times when Stock Options will be granted and exercisable; (e) to determine the conditions and restrictions under which Stock Options may be granted and exercised; and (f) to prescribe the form of the instruments relating to the grant, exercise and other terms of Stock Options. A majority of the Committee shall constitute a quorum, and an act of the majority of the members present at any meeting at which a quorum is present shall be the act of the Committee. ARTICLE III Participation in the Plan Stock Options may be granted only to key management employees. The Committee shall determine from time to time those key management employees ("Participants") of the Company or a Subsidiary who are to be granted Stock Options. No Stock Options shall be granted to any person who is not eligible to receive "incentive stock options" as provided in Section 422A of the Code. No Stock Options shall be granted to any Participant if, immediately before the grant of a Stock Option, such Participant owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of a Subsidiary. Provided, the preceding sentence shall not apply if, at the time the Stock Option is granted, the Option Price is at least 110% of the fair market value of the Stock subject to the Stock Option, and such Stock Option by its terms is not exercisable after the expiration of five (5) years from the date such Stock Option is granted. ARTICLE IV Shares Subject to the Plan Subject to adjustment under Article VII hereof, shares of common stock of the Company covered by Stock Options shall not exceed in the aggregate 50,000 shares of the common stock of the Company (such 50,000 shares hereinafter referred to as "Stock"). Either authorized and unissued shares or treasury shares may be delivered pursuant to the Plan. If any Stock Option for shares of Stock granted to a Participant lapses, or is otherwise terminated, the Committee may grant Stock Options for such shares of Stock to other Participants. ARTICLE V Terms of Stock Options and Exercise Each Stock Option granted hereunder shall be in writing and shall contain such terms, restrictions and conditions as the Committee may determine, which terms, restrictions and conditions may or may not be the same in each case, subject to the following: The option price ("Option Price") for shares of Stock shall be determined by the Committee, but in no event shall such Option Price be less than the greater of (a) the fair market value of the common stock of the Company on the date of grant or (b) the par value of the Stock. "Fair market value" shall mean the average of the bid and asked prices of the common stock of the Company as reported by the National Association of Securities Dealers Automated Quotations Systems or, if such common stock should be listed on any securities exchange, the average of the high and low, or closing sales prices as of the granting date, exercise date or other relevant date. The aggregate fair market value (determined as of the time the Stock Option is granted) of the Stock for which any Participant may be granted Stock Options in any calendar year (under all incentive stock option plans qualified under Section 422A of the Code of the Company or a Subsidiary) shall not exceed $100,000 plus the amount of any unused limit carryover applicable to such year as provided in Section 422A(c)(4) of the Code. No Stock Options may be granted under the Plan after September 11, 1991. The maximum period for exercise of a Stock Option shall be established by the Committee at the date of grant, but shall not be more than ten (10) years from the date of grant ("Option Period"). Stock Options may be exercisable in installments (which may be cumulative or noncumulative or subject to acceleration) during an Option Period as may be determined by the Committee at the date of grant. Any shares not purchased on any applicable installment date may, if so provided, be purchased at any time prior to the expiration of the Option Period. A Stock Option shall not be transferrable otherwise than by will or the laws of descent and distribution, and the Stock Option may be exercised, during the lifetime of the Participant, only by him. More particularly (but without limiting the generality of the foregoing), the Stock Option may not be assigned, transferred (except as provided above) pledged or hypothecated in any way, shall not be assignable by operation of law and shall not be subject to execution, attachment, or similar process. Any attempted assignment, transfer, pledge, hypothecation, or other disposition of the Stock Option contrary to the provisions hereof shall be null and void and without effect. At all times during the period commencing with the date a Stock Option is granted to a Participant and ending on the earlier of the expiration of the Option Period applicable to such Stock Option or the date which is three (3) months prior to the date the Stock Option is exercised by such Participant, such Participant must be an employee of either (i) the Company, (ii) a parent or a subsidiary of the Company, or (iii) a corporation or a parent or a subsidiary corporation of such corporation issuing or assuming a Stock Option in a transaction to which Section 425(a) of the Code applies. Provided, in the case of a Participant who is "disabled" (within the meaning of Section 105(d)(4) of the Code) the aforesaid three (3) month period shall mean a one (1) year period. Provided further, in the event a Participant's employment is terminated by reason of his death, his personal representative may exercise any unexercised Stock Option granted to the Participant under the Plan at any time after the Participant's death but in any event not after the expiration of the Option Period applicable to such Stock Option. So long as the Participant shall continue to be an employee of the Company or one or more of its Subsidiaries, any Stock Option granted to him shall not be affected by any change of duties or position. Leaves of absence of a Participant, duly authorized, shall not be deemed termination or interruptions of employment. Nothing in the Plan or in any option agreement shall confer upon any Participant any right to continue in the employ of the Company or of any of its Subsidiaries, or interfere in any way with the right of the Company or of any such Subsidiary to terminate his employment at any time. Any Stock Option granted hereunder to a Participant shall not, by its terms, be exercisable while there is outstanding (within the meaning of Section 422A(c)(7) of the Code) any "incentive stock option" theretofore granted to such Participant to purchase common stock of the Company or in a corporation (which at the time of the granting of such Stock Option hereunder) is a parent or subsidiary of the Company, or is a predecessor corporation of any such corporations. Participants may be granted more than one Stock Option. The granting of a Stock Option shall not affect any outstanding Stock Option previously granted to a Participant under the Plan. To exercise his Stock Option, a Participant shall give written notice to the Secretary of the Company, or other officer designated by the Committee, at the Company's main office in Oklahoma City, Oklahoma at least two (2) days prior to the exercise of the Stock Option. No Stock shall be issued to any Participant until the Company receives full payment for the Stock purchased. Payment for shares of Stock purchased under this Plan shall be made in full, in cash, common stock of the Company or a combination of cash and common stock of the Company, at the time of the exercise of the Stock Option as a condition thereof, and no loan or advance shall be made by the Company for the purpose of financing, in whole or in part, the purchase of Stock. Any cash proceeds of sale of Stock subject to the Stock Option are to be added to the general funds of the Company to be used for its general corporate purposes. In the event that common stock of the Company is utilized as consideration for the purchase of Stock upon the exercise of a Stock Option, such common stock shall be valued at the "fair market value" as defined in this Article V. The Company shall have no liability to issue any Stock hereunder unless such shares and issuance thereof comply with any applicable federal or state securities laws or any other applicable laws. ARTICLE VI Assumption of Outstanding Options To the extent permitted by the then applicable provisions of the Code, another employer succeeding to, or assigned the business of, the Company as the result of or in connection with a corporate merger or consolidation, purchase or acquisition of property or stock, a separation, reorganization or liquidation transaction may assume Stock Options existing under the plan or issue new options in place of existing Stock Options under the Plan. ARTICLE VII Adjustments In the event of a merger, consolidation, reorganization, recapitalization, stock dividend, stock split, reverse stock split, or other change in the corporate structure or capitalization affecting the Company common stock, a fair and equitable adjustment shall be made by the Committee in the number, kind, Option Price, etc., of shares of Stock subject to outstanding Stock Options, including any adjustment in the Option Price, shall be made in such a manner as not to constitute a "modification" as defined in Section 425 of the Code. ARTICLE VIII Amendment and Termination of the Plan The Plan shall terminate after September 11, 1991, provided, the Plan shall continue with respect to Stock Options which are in effect as of such date. Prior to any such termination the Plan may be terminated, altered, changed, modified or amended by the Board for any reason including, but not limited to, the necessity of modifying requirements of the Plan to conform with the law or to meet special circumstances not anticipated or covered by the Plan. Provided, no action of the Board may, without the approval of the shareholders of the Company, increase the aggregate number of shares of Stock which may be purchased under Stock Options granted under the Plan; withdraw the administration of the Plan from the Committee; permit a member of the Board to serve on the Committee, if he has been eligible for the year preceding his appointment, to participate under the Plan or any other plan of the Company entitling Participants therein to acquire stock, stock options or deferred compensation rights (including stock appreciation rights); permit any person while a member of the Committee to be eligible to receive or hold a Stock Option under the Plan; decrease the minimum Option Price; or extend the maximum Option Period or extend the term of the Plan. No amendment, modification or termination of the Plan shall in any manner adversely affect any Stock Option theretofore granted under the Plan without the consent of the affected Participant. ARTICLE IX Effective Date The Plan shall become effective only if approved by a majority of the holders of the Company's common stock at the stockholder meeting to be held within twelve (12) months from September 11, 1981, and if so approved, shall be effective as of said September 11, 1981. STOCK OPTION AGREEMENT FOR 1981 INCENTIVE STOCK OPTION PLAN FOR BONRAY DRILLING CORPORATION AND ITS SUBSIDIARIES THIS STOCK OPTION AGREEMENT (the "Option Agreement"), made as of this ______ day of _____________, 1982, at Oklahoma City, Oklahoma, by and between ________________ (hereinafter referred to as the "Participant"), and Bonray Drilling Corporation and Its Subsidiaries (hereinafter referred to as the "Company"): W I T N E S S E T H: WHEREAS, the Participant is a key management employee of the Company or one of its subsidiaries, and it is important to the Company that the Participant be encouraged to remain in the employ of the Company or one of its subsidiaries; and WHEREAS, in recognition of such facts, the Company desires, by affording the Participant an opportunity to purchase shares of the common stock of the Company, as hereinafter provided, pursuant to the "1981 Incentive Stock Option Plan for Bonray Drilling Corporation and Its Subsidiaries" (the "Plan"). NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for good and valuable consideration, the Participant and the Company hereby agree as follows: 1. GRANT OF STOCK OPTION. The Company hereby grants to the Participant an option (the "Stock Option") to purchase all or any part of an aggregate of ____________________ (__,000) shares of its common stock (the "Stock") of the Company as set forth below, under and subject to the terms and conditions of this Option Agreement and the Plan which is incorporated herein by reference and made a part hereof for all purposes. The purchase price per share shall be ____________________ ($_______ per share (but in no event shall such price be less than the "fair market value" as defined in Article V of the Plan as of the date hereof). A copy of the Plan has been furnished to the Participant, and the Participant hereby acknowledges the receipt thereof. 2. TIMES OF EXERCISE OF STOCK OPTION. After, and only after, the conditions of paragraph 10 hereof have been satisfied, a Participant shall be eligible to exercise that portion of his Stock Option pursuant to the schedule set forth hereafter. If the Participant's employment with the Company (or its parent or of any one or more of its subsidiaries) remains full-time and continuous at all times to any of the "Exercise Dates" specified hereafter, then the Participant shall be entitled, subject to the applicable provisions of the Plan and this Option Agreement having been satisfied, to exercise on or after the applicable Exercise Date, on a cumulative basis, that number of shares of Stock determined by multiplying the aggregate number of shares set forth in the foregoing paragraph 1 by the designated percentage set forth hereafter. Percent of Stock Exercise Dates Option Exercisable After __________, 1982 20% After _________, 1982 and before __________ , 1983 40% After __________, 1983 and before ___________, 1984 60% After ____________, 1984 and before ____________, 1985 50% After ___________, 1985 and before ____________, 1986 100% 3. TERM OF STOCK OPTION. The term of the Stock Option ("Option Period") shall be for a period of 10 years from the date hereof, subject to earlier termination as provided in paragraph 6 below and pursuant to the terms of the Plan. Except as provided in paragraph 6 hereof, the Stock Option may not be exercised at any time unless the Participant shall have been in the full-time continuous employ of the Company, the parent or of one or more of its subsidiaries, from the date hereof to the date of the exercise of the Stock Option. The holder of the Stock Option shall not have any of the rights of a stockholder with respect to the shares of Stock covered by the Stock Option except and only to the extent that one or more certificates for such shares of Stock shall be delivered to him upon the due exercise of the Stock Option. No Stock Option may be exercised by the Participant (or such Participant's personal representative in the event of his death) after the expiration of the Option Period applicable to such Stock Option. 4. NON-TRANSFERABILITY. A Stock Option shall not be transferable otherwise than by will or the laws of descent and distribution, and the Stock Option may be exercised, during the lifetime of the Participant, only by the Participant. More particularly (but without limiting the generality of the foregoing), the Stock Option may not be assigned, transferred (except as provided above) pledged or hypothecated in any way, shall not be assignable by operation of law and shall not be subject to execution, attachment, or similar process. Any attempted assignment, transfer, pledge, hypothecation, or other disposition of the Stock Option contrary to the provisions hereof shall be null and void and without effect. 5. EMPLOYMENT. So long as the Participant shall continue to be a full-time and continuous employee of the Company or its parent or one or more of its subsidiaries, any Stock Option granted to him shall not be affected by any change of duties or position. Leaves of absence of a Participant, duly authorized by the Company, shall not be deemed termination or interruptions of employment. Nothing in the Plan or in this Option Agreement shall confer upon the Participant any right to continue in the employ of the Company or its parent or of any of its subsidiaries, or interfere in any way with the right of the Company or its parent or of any of its subsidiaries to terminate such Participant's employment at any time. 6. EXPIRATION OF OPTION PERIOD UPON TERMINATION OF EMPLOYMENT. (a) At all times during the period commencing with the date a Stock Option is granted to the Participant and ending on the earlier of the expiration of the Option Period applicable to the Stock Option or the date which is three months prior to the date the Stock Option is exercised by the Participant, the Participant must be an employee of either (i) the Company, (ii) a parent or a subsidiary corporation of the Company, or (iii) a corporation or a parent or a subsidiary corporation of such corporation issuing or assuming a Stock Option in a transaction to which Section 425(a) of the Code applies. Provided, if the Participant is "disabled" (within the meaning of Section 105(d)(4) of the Code) the aforesaid three month period shall mean a one year period. Provided further, in the event the Participant's employment is terminated by reason of his death, his personal representative may exercise any unexercised Stock Option granted to the Participant under the Plan at any time within one year after the Participant's death, but in any event not after the expiration of the Option Period applicable to such Stock Option. (b) Notwithstanding anything herein to the contrary, in the event the employment of the Participant is terminated for any of the reasons as set forth in subparagraph 6(a) hereof, unless otherwise determined by the Committee, the Participant (or the Participant's personal representative in the case of death) shall be permitted to exercise any Stock Option or part thereof to the extent, and only to the extent, that such Stock Option becomes exercisable (as provided in paragraph 2, hereof) as of the date the Participant's employment is terminated. 7. SUCCESSIVE OPTIONS. Any Stock Option granted hereunder shall not be exercisable while there is outstanding (within the meaning of Section 422A(c)(7) of the Code) any "incentive stock option" theretofore granted to the Participant to purchase common stock of the Company or in a corporation (which at the time of the granting of such Stock Option hereunder) is a parent or subsidiary corporation of the Company, or in a predecessor corporation of any such corporations. 8. METHOD OF EXERCISING OPTION. (a) The manner of exercising the Stock Option herein granted shall be by written notice to the Company at least two days before the date the Stock Option, or part thereof, is to be exercised, and in any event prior to the expiration of the Option Period. Such notice shall state the election to exercise the Stock Option and the number of shares of Stock with respect to that portion of the Stock Option being exercised, and shall be signed by the person or persons so exercising the Stock Option. The notice shall be accompanied by payment of the full purchase price of such shares, in which event the Company shall deliver a certificate or certificates representing such shares to the person or persons entitled thereto as soon as practicable after the notice shall be received. (b) Payment for shares of Stock purchased under this Option Agreement shall be made in full, in cash, common stock of the Company or a combination of cash and common stock of the Company, at the time of the exercise of the Stock Option as a condition thereof, and no loan or advance shall be made by the Company for the purpose of financing, in whole or in part, the purchase of Stock. Any cash proceeds of sale of Stock subject to the Stock Option are to be added to the general funds of the Company to be used for its general corporate purposes. In the event that common stock of the Company is utilized as consideration for the purchase of Stock upon the exercise of a Stock Option, such common stock shall be valued at the "fair market value" as defined in Article V of the Plan. (c) In the event the Option is exercised, pursuant to the foregoing provisions of this paragraph 8, by any person or persons other than the Participant in the event of the death of the Participant, such notice shall also be accompanied by appropriate proof of the right of such person or persons to exercise the Stock Option. The notice so required shall be given by personal delivery to the Secretary of the Company or by registered or certified mail, addressed to the Company at 4201 N. Tulsa, Perimeter Center, Suite 200, P. O. Box 12279, Oklahoma City, Oklahoma 73157 and it shall be deemed to have been given when it is so personally delivered or when it is deposited in the United States mail in an envelope addressed to the Company, as aforesaid, properly stamped for delivery as a registered or certified letter. 9. ADJUSTMENTS. In the event of a merger, consolidation, reorganization, recapitalization, stock dividend, stock split, reverse stock split, or other change in the corporate structure or capitalization affecting the Company's common stock, a fair and equitable adjustment shall be made in the number, kind, option price, etc., of shares of Stock subject to Stock Option granted hereunder; provided, however, that each such adjustment and the number and kind of shares of Stock subject to outstanding Stock Options, including any adjustment in the option price, shall be made in such a manner as not to constitute a "modification" as defined in Section 425 of the Internal Revenue Code of 1954, as amended. 10. SECURITIES LAW RESTRICTIONS. Stock Options shall be exercised and Stock issued only upon compliance with the Securities Act of 1933, as amended (the "Act"), and any other applicable securities law, or pursuant to an exemption therefrom. 11. GENERAL. The Company shall at all times during the term of this Option Agreement reserve and keep available such number of shares of its common stock as will be sufficient to satisfy the requirements of this Option Agreement. IN WITNESS WHEREOF, the Company has caused this Option Agreement to be duly executed by its officers thereunto duly authorized, and the Participant has hereunto set his hand and seal, all on the day and year first above written. BONRAY DRILLING CORPORATION By_______________________________ ATTEST: President ______________________ "COMPANY" Secretary WITNESSED BY: _________________________________ , an individual _____________________ "PARTICIPANT" EX-2 3 EXHIBIT 10(b) COMMERCIAL PROMISSORY NOTE - FIXED OR VARIABLE RATE CUSTOMER(S) NAME AND ADDRESS: Bonray Drilling Corporation 4701 N.E. 23rd Street Oklahoma City, OK 73121-6818 _________________________________________________________________ PRINCIPAL AMOUNT: $750,000.00 _________________________________________________________________ NOTE NUMBER: 0407045500 R _________________________________________________________________ CUSTOMER NO.: 1913 _________________________________________________________________ DATE: 10-31-94 _________________________________________________________________ MATURITY DATE: 10-31-95 _________________________________________________________________ INTEREST RATE TERMS: ( ) Fixed Interest Rate of ___________% Per Annum _________________________________________________________________ Variable Interest Rate payable at a fluctuating rate Per Annum of .50% above ( ) Lender's Base. (X) Other Index: WSJ Money Center Prime (X) Rate to be Adjusted Date of Change Initial Rate per Annum 8.25% _________________________________________________________________ INTEREST PAYABLE: ( ) At Maturity Date (X) Other (See Comments) _________________________________________________________________ PRINCIPAL PAYABLE: ( ) At Maturity Date (X) Other (See Comments) INSTALLMENT AMOUNT: See Below _________________________________________________________________ FIRST INSTALLMENT DUE: December 4, 1994 _________________________________________________________________ LOAN PURPOSE: Renewal Revolving Line of Credit/Working Capital _________________________________________________________________ COMMENTS/SPECIAL TERMS: Interest only payable monthly beginning December 4, 1994, and continuing on the 4th day of each month thereafter until maturity on October 31, 1995, at which time all unpaid principal plus accrued interest shall be due and payable. _________________________________________________________________ SECURITY ( ) THIS NOTE IS UNSECURED (X) THIS NOTE IS SECURED BY: Accounts Receivable _________________________________________________________________ For value received, the undersigned Customer (whether one or more) promises to pay to the order of the named Lender the principal amount of this Note together with interest as set forth by the above terms. The unpaid balance of the principal amount and interest shall become payable on the maturity date, and any amount not paid when due shall accrue interest at the rate of 5% above the per annum interest rate then in effect until paid but in no event less than 15% per annum. In the event a variable rate of interest is set forth above, changes in the rate charged on this Note are effective without notice to Customer on the same day as the effective change in the lending index specified above, unless a rate adjustment date is specified above, in which case changes in the rate charged on this Note are effective without notice to Customer on each rate adjustment date according to the lending index in effect on such date: provided, however, that in no event shall the interest charged hereunder exceed the maximum allowed by law. Interest on this Note will be computed at a per diem charge based on a 360-day year. Customer agrees that the sum of all advances granted under this Note may exceed the principal amount shown above, but the unpaid outstanding balance shall never exceed the principal Note amount. Any and all advances and payments shall be recorded on Lender's records and such records shall be prima facie evidence of said advances, payments and unpaid principal balance. Any subsequent advances shall be on Lender's option and no continuing line of credit is implied. All payments made by Customer hereunder or for account of Customer shall be applied to any indebtedness now or hereafter owing by Customer to the holder in such order as the holder may elect. This Note and all other obligations of Customer to Lender and all renewals and extensions thereof are secured by the collateral described herein. Holder may from time to time call for security or additional security of such kind and value as will be satisfactory to holder, and, on failure of Customer to comply with such request, or, if in the sole discretion of the holder the security or any additions thereto or substitutes therefor or any part thereof shall have depreciated in value to the extent that this Note is not regarded by the holder as adequately secured, then, at the election of the holder, this Note and all other indebtedness now or hereafter owing by Customer to the holder shall become immediately due and payable. Any indebtedness due from the holder hereof to any party hereto, including without limitation, any deposits or credit balance or any other indebtedness due from holder is pledged and assigned, as collateral, to secure the payment hereof and any other indebtedness to holder of any other party hereto and may at any time while the whole or any part of such indebtedness remains unpaid whether before or after maturity hereof be appropriated, held or applied toward the payment of this Note or any other indebtedness to holder of any party hereto. At the option of the holder hereof, the unpaid balance of this Note, and all other obligations of Customer to the holder, direct, or indirect, absolute or contingent, now existing or hereafter arising, shall be immediately due and payable without demand or demand if: (a) any payment required by this Note or any other note or obligation of Customer due to holder or others is not made when due; (b) any default occurring in the performance of any covenant obligation, warranty, or provision contained in this Note, any loan agreement or other obligation to holder or others, or any instrument securing payment of the same; (c) any warranty, representation, financial information or statement made or furnished to holder by or on behalf of Customer proves to have been false in any material respect when made or furnished; or (d) any Customer, endorser, or guarantor dies, dissolves, becomes insolvent, has an order for bankruptcy relief entered against it, permits a receiver to be appointed for its property, incurs a business failure or upon the occurrence of any other adverse change in the financial condition of any Customer hereto, or any endorser or guarantor; or (e) the holder in its sole discretion believes that the prospect of any payment required by this Note is impaired. All parties which may become liable for all or any part of this Note severally waive demand, presentment, notice of dishonor, protest, notice of protest, notice of nonpayment, and consent to: (a) any and all extensions of time for any term or terms regarding any payment due under this Note, including partial payments or renewals before or after maturity; (b) changes in interest rates; and (c) any substitutions or release of collateral and the addition, substitution or release of any party liable for payment of this Note. Customer and all other signers agree to pay reasonable costs of collection, including attorney's fees of 15% of all sums due upon default. No waiver of any payment or other right under this Note or any related agreement shall operate as a waiver of any other payment. All of the holder's rights hereunder are cumulative and not alternative. This Note shall inure to the benefit of the successors and assigns of the holder and shall be binding upon the heirs, executors, administrators, successors and assigns of Customer. The holder at any time at its option may assign its rights under this Note in whole or part, and any assignee shall have all the rights of the original holder as to the rights or parts thereof so assigned. This Note is to be construed according to the laws of the State of Oklahoma. _________________________________________________________________ LENDER'S NAME AND ADDRESS: BancFirst 101 N. Broadway P.O. Box 26788 Oklahoma City, OK 73126-0788 _________________________________________________________________ Bonray Drilling Corporation By: /s/ Customer Richard B. Hefner, President _________________________________________________________________ EX-27 4
5 0000351693 BONRAY DRILLING CORPORATION 1,000 12-MOS JUN-30-1995 JUN-30-1995 160 0 2,139 0 0 2,414 22,325 14,092 10,647 1,906 0 433 0 0 7,615 10,647 8,486 9,687 6,865 6,865 1,882 0 39 901 35 866 0 0 0 866 2.05 0
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