United states securities and exchange commission

 

 

 

76
 

 
 

Report of Independent Registered Publi c Accounting Firm

 

The Board of Directors and Stockholders

Pacific Drilling S.A.:

We have audited the accompanying consolidated balance sheets of Pacific Drilling S.A. and subsidiaries (the Company) as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three year period ended December 31, 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Pacific Drilling S.A. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 18 to the consolidated financial statements, the Company expects to be in violation of certain of its financial covenants in the next 12 months, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in note 18. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ KPMG LLP

Houston, Texas

February 24, 2017

F-1
 

 


PACIFIC DRILLING S.A. AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share information)

		Years Ended December 31,
		2016			2015			2014
Revenues
Contract drilling		$	769,472		$	1,085,063		$	1,085,794
Costs and expenses
Operating expenses			(290,038)			(431,261)			(459,617)
General and administrative expenses			(63,379)			(55,511)			(57,662)
Depreciation expense			(275,901)			(243,457)			(199,337)
			(629,318)			(730,229)			(716,616)
Loss from construction contract rescission			—			(40,155)			—
Operating income			140,154			314,679			369,178
Other income (expense)
Interest expense			(189,044)			(156,361)			(130,130)
Gain on debt extinguishment			36,233			—			—
Other expense			(2,393)			(3,217)			(5,171)
Income (loss) before income taxes			(15,050)			155,101			233,877
Income tax expense			(22,107)			(28,871)			(45,620)
Net income (loss)		$	(37,157)		$	126,230		$	188,257
Earnings (loss) per common share, basic (Note 9)		$	(1.76)		$	5.97		$	8.67
Weighted-average number of common shares, basic (Note 9)			21,167			21,145			21,722
Earnings (loss) per common share, diluted (Note 9)		$	(1.76)		$	5.97		$	8.66
Weighted-average number of common shares, diluted (Note 9)			21,167			21,156			21,737

 

See accompanying notes to consolidated financial statements.

F-2
 

 


PACIFIC DRILLING S.A. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(in thousands)

		Years Ended December 31,
		2016			2015			2014
Net income (loss)		$	(37,157)		$	126,230		$	188,257
Other comprehensive income (loss):
Unrecognized loss on derivative instruments			(6,290)			(14,889)			(19,385)
Reclassification adjustment for loss on derivative instruments realized in net income (Note 10)			8,798			10,440			7,737
Reclassification adjustment for loss on derivative instruments realized in property and equipment (Note 10)			1,789			1,164			—
Total other comprehensive income (loss)			4,297			(3,285)			(11,648)
Total comprehensive income (loss)		$	(32,860)		$	122,945		$	176,609