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when the drilling market became more favorable. All of CDC's
original drilling rigs were stacked after July 1984. After the
boom period of the early 1980's ended, it was industry practice
for drilling companies to stack their deep rigs for long periods
before they were able to use those rigs again.
Companies owning smaller rigs for use in drilling shallow
wells were better suited than CDC to the demands of the market in
the mid-1980's. In fact, industrywide, only 7 percent of deep
rigs were working in 1986. From 1984 through 1987, there were
very few drilling contracts available. During this time, wells
were drilled by contractors pursuant to long-term contracts
entered into before the decline or by contractors willing to
drill at a loss in order to generate cash-flow and keep rigs
together.
In 1982, due to industry conditions, equipment manufacturers
reduced their production of new rig components. A main source
for components became "used" rigs and rig equipment. Rig buyers
could, and some did, generate profits by purchasing a complete
rig and then reselling the components. CDC never cannibalized
its rigs or sold them piecemeal; to do so would have required a
large startup time before a rig could be used for drilling.
There were no sales of CDC's rigs from January 1, 1986, through
June 30, 1987.
Effect of Economic Downturn on CDC
On December 31, 1981, CDC had a working capital deficit of
$19,207,000. As of December 31, 1981, CDC had total liabilities
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