-----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, HjOxWl4NgF3dl76c5FqLhECBHtPwmvOuI/Y5v0pLiQA9P7Z+hi8TGsBoJdF5SRiL o+PmhtqrCHl/lo+/yQOc8g== 0000230463-97-000005.txt : 19970428 0000230463-97-000005.hdr.sgml : 19970428 ACCESSION NUMBER: 0000230463-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970425 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: POGO PRODUCING CO CENTRAL INDEX KEY: 0000230463 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 741659398 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07792 FILM NUMBER: 97587356 BUSINESS ADDRESS: STREET 1: 5 GREENWAY PLAZA STE 2700 STREET 2: P O BOX 2504 CITY: HOUSTON STATE: TX ZIP: 77046-0504 BUSINESS PHONE: 7132975017 MAIL ADDRESS: STREET 1: 5 GREENWAY PLAZA SUITE 2700 STREET 2: P O BOX 2504 CITY: HOUSTON STATE: TX ZIP: 77046-0504 FORMER COMPANY: FORMER CONFORMED NAME: PENNZOIL OFFSHORE GAS OPERATORS INC /TX/ DATE OF NAME CHANGE: 19600201 10-Q 1 1ST QUARTER 1997 10Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERION FROM ______ TO _____ Commission file number 1-7792 Pogo Producing Company (Exact name of registrant as specified in its charter) Delaware 74-1659398 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5 Greenway Plaza, Suite 2700 Houston, Texas 77046-0504 (Address of principal executive offices) (Zip Code) (713) 297-5000 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) 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 requirement for the past 90 days: Yes X No Registrant's number of common shares outstanding as of March 31, 1997: 33,363,089 Part I. Financial Information Item 1. Financial Statements Pogo Producing Company and Subsidiaries Consolidated Statements of Income (Unaudited)
Three Months Ended March 31, 1997 1996 --------------- --------------- (Expressed in thousands, except per share amounts) Revenues: Oil and gas $ 61,314 $ 48,217 Loss on sale -- (165) _____________ _______________ Total 61,314 48,052 ------------- --------------- Operating Costs and Expenses: Lease operating 12,297 8,875 General and administrative 5,836 5,421 Exploration 1,900 3,910 Dry hole and impairment 921 2,550 Depreciation, depletion and amortization 18,420 15,713 ------------- --------------- Total 39,374 36,469 ------------- --------------- Operating Income 21,940 11,583 Interest: Charges (4,295) (3,012) Income 56 15 Capitalized 1,870 826 ------------- --------------- Income Before Income Taxes 19,571 9,412 Income Tax Expense (6,753) (3,147) ------------- --------------- Net Income $ 12,818 $ 6,265 ============= =============== Earnings Per Common Share Primary $ 0.38 $ 0.19 ============= =============== Diluted $ 0.36 $ 0.19 ============= =============== Dividends Per Common Share $ 0.03 $ 0.03 ============= =============== Weighted Average Number of Common Stock and Common Stock Equivalent Shares Outstanding Primary 34,176 33,834 Diluted 40,789 33,856
See accompanying notes to consolidated financial statements. - 1 - Pogo Producing Company and Subsidiaries Consolidated Balance Sheets
March 31, December 31, 1997 1996 ------------- ------------- (Unaudited) (Expressed in thousands, except share amounts) Assets Current Assets: Cash and cash investments $ 9,586 $ 3,054 Accounts receivable 29,545 30,031 Other receivables 47,560 35,027 Inventories - Product 1,966 -- Inventories - Tubulars 6,759 6,165 Other 214 641 ------------- ------------- Total current assets 95,630 74,918 ------------- _____________ Property and Equipment: Oil and gas, on the basis of successful efforts accounting Proved properties being amortized 1,186,528 1,079,523 Evaluated properties and properties under development, not being amortized 71,138 111,192 Other, at cost 10,570 8,773 -------------- ------------- 1,268,236 1,199,488 Less--accumulated depreciation, depletion and amortization, including $5,067 and $4,822, respectively, applicable to other property 832,826 814,623 -------------- ------------- 435,410 384,865 -------------- ------------- Other 21,792 19,459 -------------- ------------- $ 552,832 $ 479,242 ============== ============= Liabilities and Shareholders' Equity Current Liabilities: Accounts payable $ 10,969 $ 7,676 Other payables 39,099 56,961 Accrued interest payable 2,562 1,957 Accrued payroll and related benefits 2,287 1,490 Other 139 163 -------------- ------------- Total current liabilities 55,056 68,247 Long-Term Debt 306,230 246,230 Deferred Federal Income Tax 59,873 46,321 Deferred Credits 11,435 11,162 -------------- ------------- Total liabilities 432,594 371,960 -------------- ------------- Shareholders' Equity: Preferred stock, $1 par; 2,000,000 shares authorized - - Common stock, $1 par; 100,000,000 shares authorized, 33,378,664 and 33,321,381 shares issued, respectively 33,379 33,321 Additional capital 140,496 139,337 Retained earnings (deficit) (53,258) (65,075) Currency translation adjustment (55) 23 Treasury stock, at cost (324) (324) -------------- ------------- Total shareholders' equity 120,238 107,282 -------------- ------------- $ 552,832 $ 479,242 ============== =============
See accompanying notes to consolidated financial statements. - 2 - Pogo Producing Company and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, ------------------------------------ 1997 1996 ------------- -------------- (Expressed in thousands) Cash Flows from Operating Activities: Cash received from customers $ 59,834 $ 46,037 Operating, exploration, and general and administrative expenses paid (16,740) (18,607) Interest paid (3,690) (3,413) Federal income taxes received (paid) 7,037 (2,000) Other (542) (358) ------------- -------------- Net cash provided by operating activities 45,899 21,659 ------------- -------------- Cash Flows from Investing Activities: Capital expenditures (70,388) (22,753) Purchase of proved reserves (28,617) -- Proceeds from the sale of a property -- 100 ------------- -------------- Net cash used in investing activities (99,005) (22,653) ------------- -------------- Cash Flows from Financing Activities: Net borrowings under revolving credit agreement 60,000 8,000 Payment of cash dividend on common stock (1,001) (989) Proceeds from exercise of stock options 717 1,871 ------------- -------------- Net cash provided by financing activities 59,716 8,882 ------------- -------------- Effect of exchange rate change (78) -- ------------- -------------- Net Increase in Cash and Cash Investments 6,532 7,888 Cash and Cash Investments at the Beginning of the Year 3,054 4,481 ------------- -------------- Cash and Cash Investments at the End of the Period $ 9,586 $ 12,369 ============= ============== Reconciliation of Net Income to Net Cash Provided by Operating Activities: Net income $ 12,818 $ 6,265 Adjustments to reconcile net income to net cash provided by operating activities - Losses from the sale of a property -- 165 Depreciation, depletion and amortization 18,420 15,713 Dry hole and impairment 921 2,550 Interest capitalized (1,870) (826) Deferred federal income taxes 14,052 330 Change in operating assets and liabilities 1,558 (2,538) ------------- -------------- Net cash provided by operating activities $ 45,899 $ 21,659 ============= ==============
See accompanying notes to consolidated financial statements. - 3 - Pogo Producing Company and Subsidiaries Consolidated Statements of Shareholders' Equity (Unaudited)
Three Months Ended March 31, -------------------------------------------------------------- 1997 1996 -------------------------- ----------------------------- Shares Amount Shares Amount ---------- ------------ ---------- ------------- (Expressed in thousands, except share amounts) Common Stock: $1.00 par - 100,000,000 shares authorized Balance at beginning of year 33,321,381 $ 33,321 33,006,972 $ 33,007 Stock options exercised 57,283 58 136,348 136 ---------- ------------ ---------- ------------- Issued at end of period 33,378,664 33,379 33,143,320 33,143 ---------- ------------ ---------- ------------- Additional Capital: Balance at beginning of year 139,337 132,881 Stock options exercised 1,159 2,407 ------------ ------------- Balance at end of period 140,496 135,288 ------------ ------------- Retained Earnings (Deficit): Balance at beginning of year (65,075) (93,856) Net income 12,818 6,265 Dividends ($0.03 per common share) (1,001) (989) ------------ ------------- Balance at end of period (53,258) (88,580) ------------ ------------- Cumulative Foreign Currency Translation: Balance at beginning of year 23 -- Activity during the period (78) -- ------------ ------------- Balance at end of period (55) -- ------------ ------------- Treasury Stock: Balance at beginning of year (15,575) (324) (15,575) (324) Activity during period -- -- -- -- ---------- ------------ ---------- ------------- Balance at end of period (15,575) (324) (15,575) (324) ---------- ------------ ---------- ------------- Common stock outstanding, at the end of the period 33,363,089 33,127,745 ========== ========== Total Shareholders' Equity $ 120,238 $ 79,527 ============ =============
See accompanying notes to consolidated financial statements. - 4 - Pogo Producing Company and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (1) General Information - The consolidated financial statements included herein have been prepared by Pogo Producing Company (the "Company") without audit and include all adjustments (of a normal and recurring nature) which are, in the opinion of management, necessary for the fair presentation of interim results which are not necessarily indicative of results for the entire year. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1996. (2) Long-Term Debt - Long-term debt and the amount due within one year at March 31, 1997 and December 31, 1996, consists of the following:
March 31, December 31, 1997 1996 -------------- ------------- (Expressed in thousands) Senior debt -- Bank revolving credit agreement LIBO Rate based loans, borrowings at March 31, 1997 and December 31, 1996 at average interest rates of 6.53% and 6.59%, respectively $ 77,000 $ 22,000 Prime rate based loans, borrowings at March 31, 1997 and December 31, 1996 at interest rates of 8.5% and 8.25%, respectively 18,000 13,000 Uncommitted credit lines with banks, borrowings at March 31, 1997 and December 31, 1996 at average interest rates of 6.42% and 7.0%, respectively 10,000 10,000 -------------- ------------- Total senior debt 105,000 45,000 -------------- ------------- Subordinated debt -- 5 1/2% Convertible subordinated notes due 2004 ("2004 Notes") 86,230 86,230 5 1/2% Convertible subordinated notes due 2006 ("2006 Notes") 115,000 115,000 -------------- ------------- Total subordinated debt 201,230 201,230 -------------- ------------- Total debt 306,230 246,230 Amount due within one year -- -- Long-term debt $ 306,230 $ 246,230 ============== =============
Refer to Note 3 of the Notes to Consolidated Financial Statements included in the Company's annual report on Form 10-K for the year ended December 31, 1996, for a further discussion of the bank revolving credit agreement, the Company's uncommitted credit lines, the 2006 Notes and the 2004 Notes. - 5 - Pogo Producing Company and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (3) Earnings per Share - Earnings per share (in thousands, except per share amounts) are based on the following:
Three Months Ended March 31, 1997 -------------------------------------------- Income Shares Per Share -------------- ------------- ----------- Primary earnings per share -- $ 12,818 33,348 Effect of dilutive securities: Options to purchase common shares at average price 828 _____________ ____________ Primary earnings per share $ 12,818 34,176 $ 0.38 ========== 2004 Notes 771 3,887 2006 Notes 1,028 2,726 ------------- ------------ Fully diluted earnings per share $ 14,617 40,789 $ 0.36 ============= ============ ========== Antidilutive securities -- Options to purchase common shares 11 $ 44.27
Three Months Ended March 31, 1996 -------------------------------------------- Income Shares Per Share -------------- ------------- ----------- Primary earnings per share -- $ 6,265 33,064 Effect of dilutive securities: Options to purchase common shares at average price 770 _____________ ____________ Primary earnings per share $ 6,265 33,834 $ 0.19 ========== Options to purchase common shares at closing price 22 ------------- ------------ Fully diluted earnings per share $ 6,265 33,856 $ 0.19 ============= ============ ========== Antidilutive securities -- 8% Convertible subordinated debentures due 2005 ("2005 Debentures") $ 546 1,063 $ 0.51 2004 Notes $ 771 3,887 $ 0.20
The 2005 Debentures (retired on June 28, 1996) were common stock equivalents. The 2004 Notes and the 2006 Notes (issued on June 18, 1996) are not common stock equivalents. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings per Share ("SFAS 128"). It is effective for periods ending after December 15, 1997, and early adoption is not permitted. The following is the pro forma effect (in thousands, except per share amounts) of applying the provisions of SFAS 128 to the periods indicated:
Three Months Ended March 31, 1997 (Pro forma) -------------------------------------------- Income Shares Per Share -------------- ------------- ----------- Basic earnings per share -- $ 12,818 33,348 $ 0.38 ========== Effect of dilutive securities: Options to purchase common shares 828 2004 Notes 771 3,887 2006 Notes 1,028 2,726 ------------- ------------ Diluted earnings per share $ 14,617 40,789 $ 0.36 ============= ============ ==========
- 6 - Pogo Producing Company and Subsidiaries Notes to Consolidated Financial Statements (Unaudited)
Three Months Ended March 31, 1996 (Pro forma) -------------------------------------------- Income Shares Per Share -------------- ------------- ----------- Basic earnings per share -- $ 6,265 33,064 $ 0.19 ========== Effect of dilutive securities: Options to purchase common shares 770 ------------- ------------ Diluted earnings per share $ 6,265 33,834 $ 0.19 ============= ============ ==========
- 7 - Pogo Producing Company and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations This discussion should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's annual report on Form 10-K for the year ended December 31, 1996. Certain statements contained herein are "Forward Looking Statements" and are thus prospective. As further discussed in the Company's annual report on Form 10-K, such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Results of Operations - The Company reported net income for the first quarter of 1997 of $12,818,000 or $0.38 per share ($0.36 per share on a fully diluted basis) compared to net income for the first quarter of 1996 of $6,265,000 or $0.19 per share (on both a primary and a fully diluted basis). Earnings per common share are based on the weighted average number of common and common equivalent shares outstanding for the first quarter of 1997 of 34,176,000 (40,789,000 on a fully diluted basis), compared to 33,834,000 (33,856,000 on a fully diluted basis) for the first quarter of 1996. The increase in the weighted average number of common and common equivalent shares outstanding for the first quarter of 1997, compared to the first quarter of 1996, resulted primarily from the issuance of shares of common stock upon the exercise of stock options pursuant to the Company's stock option plans and the conversion of $1,300,000 of the Company's 2005 Debentures in July 1996. The increase in the number of shares used in the fully-diluted computation of earnings per share primarily reflects additional shares of common stock issuable upon the assumed conversion of the Company's 2004 Notes (which were dilutive in both periods) and the 2006 Notes (which were dilutive during the first quarter of 1997, the only comparative period in which they were outstanding) and the elimination of related interest requirements, as adjusted for applicable federal income taxes. Earnings applicable to common stock, assuming full dilution, for the first quarter of 1997 was $14,617,000, compared to $6,265,000 for the first quarter of 1996. The Company's total revenues for the first quarter of 1997 were $61,314,000, an increase of approximately 28% from total revenues of $48,052,000 for the first quarter of 1996. The increase in the Company's total revenues for the first quarter of 1997, compared to the first quarter of 1996, resulted primarily from increases in the Company's natural gas, crude oil and condensate production volumes and, to a lesser extent, increases in the average prices that the Company received for its natural gas and liquid hydrocarbon (including crude oil, condensate and natural gas liquids ("NGL")) production volumes, that was only partially offset by a decrease in the Company's NGL production volumes. The following table reflects an analysis of differences in the Company's oil and gas revenues (expressed in thousands of dollars) between the first quarter of 1997 and the first quarter of 1996: - 8 - Pogo Producing Company and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)
1st Qtr '97 Compared to 1st Qtr '96 ----------- Increase (decrease) in oil and gas revenues resulting from differences in : Natural gas -- Price . . . . . . . . . . . . . . . . $ 2,581 Production . . . . . . . . . . . . . . 4,140 --------- 6,721 --------- Crude oil and condensate -- Price . . . . . . . . . . . . . . . . 2,900 Production . . . . . . . . . . . . . . 3,774 --------- 6,674 --------- NGL and other, net . . . . . . . . . . . (298) --------- Increase in oil and gas revenues . . . . $ 13,097 =========
Prices that the Company received for its natural gas production during the first quarter of 1997 averaged $2.67 per thousand cubic feet ("Mcf"),compared to $2.41 per Mcf for the first quarter of 1996, an increase of approximately 11% The average price that the Company received for its natural gas production includes an average price of approximately $1.50, or a discount of 25% off of the contract price of approximately $2.00 that the Company is currently receiving under its long term gas sales contract governing production from the Tantawan Field in the Gulf of Thailand. The Company received the discounted price (denominated in Baht as set forth in the gas sales contract) for its natural gas production from the Tantawan Field during the startup phase of production from the Tantawan Field, which period ended on March 15, 1997. The Company's natural gas production during the first quarter of 1997 averaged 129.7 million cubic feet ("MMcf") per day, an increase of approximately 17% from an average of 111.2 MMcf per day during the first quarter of 1996. The increase in the Company's natural gas production during the first quarter of 1997, compared to the first quarter of 1996, was related in large measure to production from the Tantawan Field (an average over the quarter of 17.6 MMcf per day net to the Company's working interest) which commenced in early February, 1997. During the first two weeks of April, production from the Tantawan Field averaged 88.7 MMcf per day (41.1 MMcf per day net to the Company's working interest). In addition, production from the Company's new "E" platform on East Cameron Block 334, which commenced production in early April, 1997, is not included in the results for the first quarter. As of April 17, 1997, production from the East Cameron Block 334 "E" platform was averaging approximately 145 MMcf per day (approximately 84.5 MMcf per day net to the Company's working interest). As of April 25, 1997, the Company was not a party to any natural gas futures contracts. - 9 - Pogo Producing Company and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Prices received by the Company for its crude oil and condensate production during the first quarter of 1997 averaged $22.29 per barrel, an increase of approximately 14% from the average price of $19.61 per barrel that the Company received for its crude oil and condensate production during the first quarter of 1996. The Company's crude oil and condensate production during the first quarter of 1997 averaged 13,903 barrels per day, an increase of approximately 17% from an average of 11,889 barrels per day during the first quarter of 1996. This increase resulted primarily from new production from the Tantawan Field which, during the first two weeks in April 1997, averaged 6,158 barrels per day (2,854 barrels net to the Company's working interest) and, to a lesser extent, the success of the Company's oil well drilling and workover operations in the offshore Gulf of Mexico. This increased production does not include any crude oil, condensate or NGL production attributable to the Company's East Cameron Block 334 "E" platform, from which production commenced in early April, 1997. As of April 17, 1997, oil and condensate production from this new field was averaging approximately 5,000 barrels per day (approximately 2,900 barrels per day net to the Company's working interest). As of April 25, 1997, the Company was not a party to any crude oil swap agreements. Liquid products are often extracted from natural gas streams and sold separately as NGL. The prices that the Company receives for its NGL production is related to crude oil prices. However, because NGL is extracted from liquid rich natural gas, the Company's NGL production volumes correlate most closely with increases (or decreases) from certain of the Company's natural gas fields. Natural gas production from the Company's East Cameron Block 334 "E" platform is considered to be relatively rich in NGL. Therefore, the Company currently anticipates that its NGL production volumes should increase in the future as a result of production from this field. However, the Company can give no assurances that such increases will not be offset by decreases in NGL production volumes from other fields where the Company extracts NGL from the natural gas it produces. In addition, the Company's oil and gas revenues for the first quarter of 1997 and the first quarter of 1996 also reflect adjustments for various miscellaneous items. The Company's NGL and other net revenues for the first quarter of 1997 decreased $298,000 from those reported in the first quarter of 1996. The decrease in the Company's NGL revenues for the first quarter of 1997, compared to the first quarter of 1996, primarily resulted from decreased NGL production volumes that were not entirely offset by increased prices that the Company received for its NGL production and various miscellaneous net income items. The Company's average liquid hydrocarbons (including crude oil, condensate and NGL) production during the first quarter of 1997 was 15,215 barrels per day, an increase of approximately 10% from an average liquid hydrocarbons production of 13,874 barrels per day during the first quarter of 1996. The increase in the Company's average liquid hydrocarbon production during the first quarter of 1997, compared to the first quarter of 1996, primarily resulted from an increase in the Company's crude oil and condensate production, that was only partially offset by a decline in the Company's NGL production. Lease operating expenses for the first quarter of 1997 were $12,297,000, an increase of approximately 39% from lease operating expenses of $8,875,000 for the first quarter of 1996. The increase in lease operating expenses for the first quarter of 1997, compared to the first quarter of 1996, resulted primarily from the higher expenses of operating in Thailand, including expenses related to the leasing of equipment (principally the FPSO); increased severance taxes resulting from increased production from certain of the Company's onshore properties that have higher severance tax obligations; increased operating activity by the Company; and increased costs to the Company (and the entire offshore oil industry) due to a shortage of qualified - 10 - Pogo Producing Company and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) offshore service contractors, which has permitted such contractors to increase the costs of their services. General and administrative expenses for the first quarter of 1997 were $5,836,000, an increase of approximately 8% from general and administrative expenses of $5,421,000 for the first quarter of 1996. The increase in general and administrative expenses for the first quarter of 1997, compared to the first quarter of 1996, was related to, among other things, an increase in the size of the Company's work force and leased office space in the United States and Bangkok, Thailand and normal salary and concomitant benefit expense adjustments that were not entirely offset by decreases in various general and administrative expense items. Exploration expenses consist primarily of delay rentals and geological and geophysical costs which are expensed as incurred. Exploration expenses for the first quarter of 1997 were $1,900,000, a decrease of approximately 51% from exploration expenses of $3,910,000 for the first quarter of 1996. This decrease in exploration expenses resulted primarily from the completion of certain proprietary 3-D seismic surveys on Company leases in South Louisiana and East Texas incurred in the first quarter of 1996 and for which no comparable expense was incurred in the first quarter of 1997. This decrease in exploration expenses was partially offset by ongoing geophysical activity by the Company in other regions. Dry hole and impairment expenses relate to costs of unsuccessful wells drilled, along with impairments due to decreases in expected reserves from producing wells. The Company's dry hole and impairment expenses for the first quarter of 1997 were $921,000, a decrease of approximately 64% from dry hole and impairment expenses of $2,550,000 for the first quarter of 1996. The Company accounts for its oil and gas activities using the successful efforts method of accounting. Under the successful efforts method, lease acquisition costs and all development costs are capitalized. Proved properties are reviewed whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Unproved properties are reviewed quarterly, with any such impairment charged to expense in the period. Exploratory drilling costs are capitalized until the results are determined. If proved reserves are not discovered, the exploratory drilling costs are expensed. Other exploratory costs are expensed as incurred. The provision for depreciation, depletion and amortization ("DD&A") is based on the capitalized costs, as determined in the preceding paragraph, plus future costs to abandon offshore wells and platforms, and is determined on a cost center by cost center basis using the units of production method. The Company's DD&A expense for the first quarter of 1997 was $18,420,000, an increase of approximately 17% from DD&A expense of $15,713,000 for the first quarter of 1996. The increase in the Company's DD&A expense for the first quarter of 1997, compared to the first quarter of 1996, resulted primarily from increased oil and natural gas production from the Company's properties and, to a lesser extent, from an increase in the Company's DD&A rate. The composite DD&A rate for all of the Company's producing fields for the first quarter of 1997 was $0.912 per equivalent Mcf ($5.47 per equivalent barrel), an increase of approximately 4% from a composite DD&A rate of $0.877 per equivalent Mcf ($5.26 per equivalent barrel) for the first quarter of 1996. - 11 - Pogo Producing Company and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) The increase in the composite DD&A rate for all of the Company's producing fields for the first quarter of 1997, compared with the first quarter of 1996, resulted primarily from an increased percentage of the Company's production coming from certain of the Company's fields that have DD&A rates that are higher than the Company's recent historical composite rate and a corresponding decrease in the percentage of the Company's production from fields that have DD&A rates that are lower than the Company's recent historical composite DD&A rate. The Company produced 19,888,000 equivalent Mcf (3,315,000 equivalent barrels) during the first quarter of 1997, an increase of approximately 12% from the 17,696,000 equivalent Mcf (2,949,000 equivalent barrels) produced by the Company during the first quarter of 1996. The Company incurred interest charges of $4,295,000 for the first quarter of 1997, an increase of approximately 43% from interest charges of $3,012,000 for the first quarter of 1996. The increase in interest charges for the first quarter of 1997, compared to the first quarter of 1996, resulted primarily from an increase in the amount of the Company's outstanding debt and, to a lesser extent, increased amortization and debt issuance expense resulting from the issuance of the 2006 Notes, that was partially offset by lower average interest rate levels on the debt outstanding (resulting primarily from the retirement of the 2005 Debentures which bore interest at an 8% annual rate and the issuance of the 2006 Notes that bear interest at a 5-1/2% annual rate). Capitalized interest expense for the first quarter of 1997 was $1,870,000, an increase of approximately 126% from capitalized interest expense of $826,000 for the first quarter of 1996. The increase in capitalized interest expense for the first quarter of 1997, compared to the first quarter of 1996, resulted primarily from the requirement to capitalize interest expense attributable to capital expenditures on non-producing properties which, during portions of the first quarter of 1997 included capital expenditures related to the Company's development of the Tantawan Field and, during the entire first quarter of 1997, capital expenditures related to development of the Benchamas Field in the Gulf of Thailand and construction and installation of the East Cameron Block 334 "E" platform. As of April 22, 1997, the Company was a party to an interest rate swap agreement. The swap agreement, which terminates on March 10, 1998, effectively changes the interest rate paid by the Company on $5,000,000 of debt from a market based variable rate to a fixed rate of 7.2%. Income tax expense for the first quarter of 1997 was $6,753,000, an increase of approximately 115% from income tax expense of $3,147,000 for the first quarter of 1996. The increase in income tax expense for the first quarter of 1997, compared to the first quarter of 1996, resulted primarily from increased pretax income. Liquidity and Capital Resources - The Company's Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 1997 reflects net cash provided by operating activities of $45,899,000. In addition to net cash provided by operating activities, the Company received $717,000 from the exercise of stock options. The Company also had net borrowings of $60,000,000 under its revolving credit facility. During the first three months of 1997, the Company invested $70,388,000 of such cash flow in capital projects, purchased proved reserves for $28,617,000 and paid $1,001,000 ($0.03 per share) in cash dividends to holders of the Company's common stock. Of the $70,388,000 invested in capital projects, $49,908,000 was - 12 - Pogo Producing Company and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) applicable to 1996 capital projects and $20,480,000 was applicable to 1997 capital projects. As of March 31, 1997, the Company's cash and cash investments were $9,586,000 and its long-term debt stood at $306,230,000. The Company's capital and exploration budget for 1997, which does not include any amounts which may be expended for the purchase of proved reserves or any interest which may be capitalized resulting from projects in progress, was established by the Company's Board of Directors at $210,000,000. In addition to anticipated capital and exploration expenses, other material 1997 cash requirements that the Company currently anticipates include ongoing operating, general and administrative, income tax, interest expense and payments of dividends on its common stock, including a $.03 per share dividend on its common stock to be paid on May 23, 1997, to stockholders of record as of May 9, 1997. The Company currently anticipates that cash provided by operating activities and funds available under its revolving credit facility, uncommitted money market credit lines and amounts that the Company currently believes it can raise from external sources, will be sufficient to fund the Company's ongoing expenses, its 1997 capital and exploration budget and anticipated future dividend payments. The Company is currently discussing an amendment of its bank credit facility that, if consummated, will, among other things, extend the maturity of the facility, increase the maximum commitment amount and expand the borrowing base to include properties located in the Gulf of Thailand. No assurance can be given that the Company and its lenders will consummate this transaction and, if such transaction is agreed to, that it will contain the terms discussed in the preceding sentence. The declaration and payment of future dividends will depend upon, among other things, the Company's future earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate and other factors deemed relevant by the Company's Board of Directors. - 12 - Pogo Producing Company and Subsidiaries Part II. Other Information Item 6. Exhibits and Reports on Form 8-K (A) Exhibits 3(b) Bylaws of Pogo Producing Company, as amended and restated through April 22, 1997. (B) Reports on Form 8-K A report on Form 8-K was filed on January 21, 1997 setting forth under Item 5 thereof, certain information regarding the time and location of the registrant's annual meeting of stockholders. -13- Pogo Producing Company and Subsidiaries Signatures Pursuant to the requirements 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. Pogo Producing Company (Registrant) /s/ THOMAS E. HART Thomas E. Hart Vice President and Controller /s/ JOHN W. ELSENHANS John W. Elsenhans Vice President - Finance and Treasurer Date: April 25, 1997 -14- EX-27 2 FINANCIAL DATA SCHEDULE
5 This Financial Data Schedule contains summary financial information extracted from the Consolidated Financial Statements (Unaudited) of Pogo Producing Company, including the Consolidated Balance Sheets as of March 31, 1997 and the Consolidated Statements of Income for the three months ended March 31, 1997, and is qualified in its entirety by reference to such Consolidated Financial Statements. 1,000 3-MOS DEC-31-1996 MAR-31-1997 9,586 0 77,105 0 8,725 95,630 1,268,236 832,826 552,832 55,056 306,230 33,379 0 0 86,859 552,832 61,314 61,314 12,297 12,297 27,077 0 4,295 19,571 6,753 12,818 0 0 0 12,818 .38 .36 This amount is not disclosed on the face of the Consolidated Financial Statements due to lack of materiality, but is included as a contra-asset in Accounts Receivable. Does not include Gains (Losses) on Property Sales. Includes Lease Operating Expense, but excludes General and Administrative, Exploration, Dry Hole and Impairment and Depreciation, Depletion and Amortization Expenses. Includes General and Administrative, Exploration, Dry Hole and Impairment and Depreciation, Depletion and Amortization Expenses. This amount is not disclosed on the face of the Consolidated Financial Statements due to lack of materiality, but is included in Oil and Gas Revenues.
EX-3.(II) 3 COMPANY BYLAWS AS AMENDED AND RESTATED THROUGH APRIL 22, 1997. POGO PRODUCING COMPANY BYLAWS (As Amended and Restated) ARTICLE I Meetings of Stockholders Section 1. The annual meeting of the stockholders of this Corporation shall be held on such date and at such time as the Board of Directors shall designate by resolution, or any subsequent day or days to which such meeting may be adjourned, for the purposes of electing directors and of transacting such other business as may properly come before the meeting. The Board of Directors shall fix by resolution the city and the place within such city for the holding of such meeting, and at least ten days notice shall be given to the stockholders of the city and place so fixed. Section 2. Special meetings of the stockholders may be called at any time by the Board of Directors, the Chairman of the Board, the Executive Committee (if any), or the President. Upon written request of any person or persons who have duly called a special meeting, it shall be the duty of the Secretary of the Corporation to fix the date of the meeting to be held not less than ten nor more than sixty days after the receipt of the request and to give due notice thereof. If the Secretary shall neglect or refuse to fix the date of the meeting and give notice thereof, the person or persons calling the meeting may do so. Section 3. Every special meeting of the stockholders shall be held at such place within or without the State of Delaware as the Board of Directors may designate, or, in the absence of such designation, at the registered office of the Corporation in the State of Delaware. Section 4. Written notice of every meeting of the stockholders shall be given by the Secretary of the Corporation to each stockholder of record entitled to vote at the meeting, by placing such notice in the mail at least ten days, but not more than fifty days, prior to the day named for the meeting addressed to each stockholder at his address appearing on the books of the Corporation or supplied by him to the Corporation for the purpose of notice. Section 5. The Board of Directors may fix a date, not less than ten nor more than sixty days preceding the date of any meeting of stockholders, as a record date for the determination of stockholders entitled to notice of, or to vote at, any such meeting. The Board of Directors shall not close the books of the Corporation against transfer of shares during the whole or any part of such period. Section 6. The notice of every meeting of stockholders may be accompanied by a form of proxy approved by the Board of Directors in favor of such person or persons as the Board of Directors may select. Section 7. Except as otherwise provided by law or by the Certificate of Incorporation of the Corporation, as from time to time amended, or by these Bylaws, the presence in person or by proxy of stockholders of the Corporation entitled to cast at least a majority of the votes to be cast thereat shall constitute a quorum at each meeting of the stockholders and all questions shall be decided by majority vote of the shares so presented in person or by proxy at the meeting and entitled to vote thereat. The stockholders present at any duly organized meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Section 8. Any meeting of the stockholders may be adjourned from time to time, without notice other than by announcement at the meeting at which such adjournment is taken, and at any such adjourned meeting at which a quorum shall be present any action may be taken that could have been taken at the meeting originally called; provided that if the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting. Section 9. Subject to the rights of holders of any class or series of stock having a preference over the Common Stock of the Corporation as to dividends or upon liquidation to elect directors under specified circumstances, nominations of persons for election to the Board of Directors may be made only (a) by the Board of Directors or a committee appointed by the Board of Directors or (b) by any stockholder of the Corporation who is a stockholder of record at the time of giving of the stockholder's notice provided for in this Section 9, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 9. For a nomination to be properly made by a stockholder, the stockholder shall have given timely notice of his intention to make such nomination or nominations in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than eighty days nor more than one hundred and ten days prior to the date of the meeting of stockholders at which such nomination is to be made; provided, however, that in the event that less than ninety days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely received by the Corporation must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed to stockholders or such public disclosure was made, whichever first occurs. Such stockholder's notice to the Secretary shall set forth: (i) the name and address, as they appear on the Corporation's books, of the stockholder proposing to make 2 such nomination or nominations; (ii) a representation of the stockholder as to the class and number of shares of capital stock of the Corporation which are beneficially owned by such stockholder, and the stockholder's intent to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iii) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (iv) the name, age, business address and residence address, business experience or other qualifications of the person or persons to be nominated; (v) the principal occupation or employment of such person or persons; (vi) the class and number of shares of capital stock of the Corporation which are beneficially owned by such person or persons; (vii) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board of Directors; and (viii) the consent of each nominee to serve as a director of the Corporation if so elected. No stockholder nomination shall be effective unless made in accordance with the procedures set forth in this Section 9. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a stockholder nomination was not made in accordance with the provisions of the Bylaws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Section 10. At any meeting of stockholders, only such business shall be conducted as shall have been brought before the meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who is a stockholder of record at the time of giving of the stockholder's notice provided for in this Section 10, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 10. For business to be properly brought before a meeting of stockholders by a stockholder, the stockholder shall have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than eighty days nor more than one hundred and ten days prior to the date of the meeting at which such business is to be considered; provided, however that in the event that less than ninety days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely received by the Corporation must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed to stockholders or such public disclosure was made, whichever first occurs. Such stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting: (i) a brief description of the business desired to be brought before the meeting: the reasons for conducting such business at the meeting and, in the event that such business includes a proposal to amend either the Certificate of Incorporation or Bylaws of the Corporation, the language of the proposed amendment, (ii) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (iii) a representation of the stockholder as to the class and number of shares of capital stock of the Corporation which are beneficially owned by such 3 stockholder, and the stockholder's intent to appear in person or by proxy at the meeting to propose such business and (iv) any material interest of such stockholder in such business. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at a stockholders meeting unless brought before the meeting in accordance with the procedures set forth in this Section 10. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of the Bylaws, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Section 11. For purposes of Sections 9 and 10 of these Bylaws, notice of the date of any stockholders' meeting may be included in any (i) report or other communication mailed to stockholders generally or (ii) press release issued by the Corporation. Public disclosure of such date shall be deemed sufficient for such purpose if made in any report filed by the Corporation with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. Notwithstanding the foregoing provisions of Sections 9 and 10, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in Sections 9 and 10. ARTICLE II Board of Directors Section 1. The business, affairs and property of the Corporation shall be managed by the Board of Directors. The number of directors shall be no more than twelve, divided into three classes as provided in the Certificate of Incorporation of the Corporation. The directors shall be elected by the stockholders as provided in the Certificate of Incorporation of the Corporation. A director need not be a resident of the State of Delaware or a stockholder of the Corporation. Section 2. Any vacancy in the Board of Directors, including vacancies resulting from an increase in the number of directors, shall be filled by a majority of the remaining members of the Board though less than a quorum, and the person so chosen shall be a director until the next election by the stockholders of the class for which such director shall have been chosen, and until his successor is elected and qualified. Section 3. Regular meetings of the Board of Directors shall be held at such place or places within or without the State of Delaware, at such hour and on such day as may be fixed by resolution of the Board of Directors, without further notice of such meetings. The time or place of holding regular meetings of the Board of Directors may be changed by the Chairman of the Board or the President by giving written notice thereof as provided in Section 5 of this Article II. 4 Section 4. Special meetings of the Board of Directors shall be held, whenever called by the Chairman of the Board, the President, or by a resolution of a majority of the members of the Board of Directors that are then in office, at such place or places within or without the State of Delaware as may be stated in the notice of the meeting. Section 5. Notice of the time and place of all special meetings of the Board of Directors, and notice of any change in the time or place of holding the regular meetings of the Board of Directors, shall be given to each director either personally or by mail, telephone, telegraph or facsimile, at least one day before the day of the meeting; provided, however, that notice of any meeting need not be given to any director if such director signs a written waiver of such notice at any time, or if such director shall be present at such meeting. Section 6. A majority of the directors in office shall constitute a quorum of the Board of Directors for the transaction of business; but a lesser number may adjourn from day to day until a quorum is present. Except as otherwise provided by law or in these Bylaws, all questions shall be decided by the vote of a majority of the directors present. Section 7. Any action which may be taken at a meeting of the directors or members of the Executive Committee may be taken without a meeting if consent in writing setting forth the action so taken shall be signed by all the directors or members of the Executive Committee, as the case may be, and shall be filed with the Secretary of the Corporation. ARTICLE III Executive Committee The Board of Directors may, by resolution adopted by a majority of the whole Board, designate three or more of its number to constitute an Executive Committee which committee, during intervals between meetings of the Board, shall have and exercise the authority of the Board of Directors in the management of the business of the Corporation to the extent permitted by law, including without limitation the power and authority to declare dividends and authorize the issuance of capital stock. ARTICLE IV Officers Section 1. The officers of the Corporation shall consist of a Chairman of the Board, President, Secretary, Treasurer and such Vice Presidents and other officers as may be elected or appointed by the Board of Directors. Any number of offices may be held by 5 the same person. All officers shall hold office until their successors are elected or appointed, except that the Board of Directors may remove any officer at any time at its discretion. Section 2. The officers of the Corporation shall have such powers and duties as generally pertain to their offices, except as modified herein or by the Board of Directors, as well as such powers and duties as from time to time may be conferred by the Board of Directors. The Chairman of the Board shall be the chief executive officer of the Corporation and shall have general supervision of the business, affairs and property of the Corporation and over its several officers, and shall preside at meetings of the Board and at meetings of the stockholders. The President shall be the chief operating officer of the Corporation and shall have such other duties as may be assigned to him by the Board of Directors. ARTICLE V Seal The seal of the Corporation shall be in such form as the Board of Directors shall prescribe. ARTICLE VI Certificates of Stock The shares of the Corporation shall be represented by certificates of stock, signed by the President or such Vice President or other officer designated by the Board of Directors and countersigned by the Treasurer or the Secretary; and if such certificates of stock are signed or countersigned by a transfer agent other than the Corporation, or, by a registrar other than the Corporation, such signature of the President, Vice President, or other officer and such countersignature of the Treasurer or Secretary, or either of them, may be executed in facsimile, engraved or printed. In case any officer who has signed or whose facsimile signature has been placed upon any share certificate shall have ceased to be such officer because of death, resignation or otherwise before the certificate is issued, it may be issued by the Corporation with the same effect as if the officer had not ceased to be such at the date of its issue. Said certificates of stock shall be in such form as the Board of Directors may from time to time prescribe. 6 ARTICLE VII Indemnification Section 1. Right to Indemnification. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding") by reason of the fact that he, or a person for whom he is the legal representative, is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, fiduciary or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person. The Corporation shall indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the Board of Directors of the Corporation. Section 2. Prepayment of Expenses. The Corporation shall pay the expenses incurred in defending any proceeding in advance of its final disposition, provided, however, that the payment of expenses incurred by a director or officer in his capacity as a director or officer (except with regard to service to an employee benefit plan or non-profit organizations in advance of the final disposition of the proceeding) shall be made only upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should be ultimately determined that the director or officer is not entitled to be indemnified under this Article or otherwise. Section 3. Claims. If a claim for indemnification or payment of expenses under this Article is not paid in full within ninety days after a written claim therefor has been received by the Corporation the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law. Section 4. Non-Exclusivity of Rights. The rights conferred on any person by this Article shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these Bylaws, agreement, vote of stockholders or disinterested directors or otherwise. Section 5. Amendment or Repeal. Any repeal or modification of the foregoing provisions of this Article VII shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. 7 ARTICLE VIII Amendments These Bylaws may be altered, amended, added to or repealed by the stockholders at any annual or special meeting, by the vote of stockholders entitled to cast at least a majority of the vote which all stockholders are entitled to cast, and, except as may be otherwise required by law, the power to alter, amend, add to or repeal these Bylaws is also vested in the Board of Directors, acting by a majority vote of the members of the Board of Directors in office (subject always to the power of the stockholders to change such action); provided, however, that notice of the general nature of any such action proposed to be taken shall be included in the notice of the meeting of stockholders or of the Board of Directors at which such action is taken. Amended and restated in full: 04/22/97 -----END PRIVACY-ENHANCED MESSAGE-----