-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ozoWyAmE28Lhz9yFW9s7yiucHUsDIePwrAeyyWoBR21ckoyMdGLb4kObD8iRnAii PKP2Iqw2wBLkRwqstW42Mg== 0000890566-94-000441.txt : 19941116 0000890566-94-000441.hdr.sgml : 19941116 ACCESSION NUMBER: 0000890566-94-000441 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: POGO PRODUCING CO CENTRAL INDEX KEY: 0000230463 STANDARD INDUSTRIAL CLASSIFICATION: 1311 IRS NUMBER: 741659398 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-07792 FILM NUMBER: 94559016 BUSINESS ADDRESS: STREET 1: 5 GREENWAY PLAZA STE 2700 STREET 2: P O BOX 2504 CITY: HOUSTON STATE: TX ZIP: 77046 BUSINESS PHONE: 7136514300 FORMER COMPANY: FORMER CONFORMED NAME: PENNZOIL OFFSHORE GAS OPERATORS INC /TX/ DATE OF NAME CHANGE: 19600201 10-Q/A 1 AMMENDMENT NO. 1 TO 3RD QUARTER 10Q (TO CORRECT FRONT PAGE) SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A ( X ) Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1994 or ( ) Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period 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 September 30, 1994: 32,778,219 Part I. Financial Information Pogo Producing Company and Subsidiaries Consolidated Statements of Income (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------------- ------------------------------- 1994 1993 1994 1993 ------------- --------------- ----------- -------------- (Expressed in thousands, except per share amounts) Revenues: Oil and gas $ 46,452 $ 34,789 $ 134,026 $ 103,650 Interest on tax refund -- 2,322 -- 2,322 Gains on sales -- 99 52 452 ------------- --------------- ----------- -------------- Total 46,452 37,210 134,078 106,424 ------------- --------------- ----------- -------------- Operating Costs and Expenses: Lease operating 8,098 7,197 22,462 20,048 General and administrative 3,876 3,655 11,680 10,831 Exploration 902 386 2,208 1,216 Dry hole and impairment 2,049 1,047 6,265 3,865 Depreciation, depletion and amortization 17,641 10,677 46,244 30,670 ------------- --------------- ----------- -------------- Total 32,566 22,962 88,859 66,630 ------------- --------------- ----------- -------------- Operating Income 13,886 14,248 45,219 39,794 Interest: Charges (2,450) (2,670) (7,714) (8,517) Income 10 6 43 13 Capitalized 199 122 530 332 ------------- --------------- ----------- -------------- Income Before Income Taxes and Extraordinary Loss 11,645 11,706 38,078 31,622 Income Tax Expense (4,212) (4,545) (13,464) (11,705) ------------- --------------- ----------- -------------- Income Before Extraordinary Loss 7,433 7,161 24,614 19,917 Extraordinary Loss on Early Extinguishment of Debt -- -- (307) -- ------------- --------------- ----------- -------------- Net Income $ 7,433 $ 7,161 $ 24,307 $ 19,917 ============= =============== =========== ============== Primary Earnings Per Share: Income before extraordinary loss $ 0.22 $ 0.22 $ 0.74 $ 0.61 Extraordinary loss -- -- (0.01) -- ------------- --------------- ----------- -------------- Net Income $ 0.22 $ 0.22 $ 0.73 $ 0.61 ============= =============== =========== ============== Fully Diluted Earnings Per Share: Income before extraordinary loss $ 0.22 $ 0.22 $ 0.73 $ 0.61 Extraordinary loss -- -- (0.01) -- ------------- --------------- ----------- -------------- Net Income $ 0.22 $ 0.22 $ 0.72 $ 0.61 ============= =============== =========== ==============
See accompanying notes to consolidated financial statements. - 1 - Pogo Producing Company and Subsidiaries Consolidated Balance Sheets
September 30, December 31, 1994 1993 -------------- ------------- (Unaudited) (Expressed in thousands, except share amounts) Assets Current Assets: Cash and cash investments $ 4,695 $ 6,713 Accounts receivable 25,776 18,480 Other receivables 10,589 10,123 Federal income taxes and interest receivable -- 3,320 Inventories 2,755 1,105 Other 1,182 727 ------------- ------------- Total current assets 44,997 40,468 ------------- ------------- Property and Equipment: Oil and gas, on the basis of successful efforts accounting Proved properties being amortized 873,591 817,218 Unproved properties and properties under development, not being amortized 6,390 6,465 Other, at cost 7,873 6,961 -------------- ------------- 887,854 830,644 Less--accumulated depreciation, depletion and amortization, including $4,874 and $4,452, respectively, applicable to other property 683,598 638,658 -------------- ------------- 204,256 191,986 -------------- ------------- Other 11,478 7,320 -------------- ------------- $ 260,731 $ 239,774 ============== ============= Liabilities and Shareholders' Equity Current Liabilities: Accounts payable $ 8,879 $ 8,307 Other payables 7,481 22,955 Current portion of long-term debt -- 4,000 Accrued interest payable 1,225 1,202 Accrued payroll and related benefits 950 1,005 Other 43 122 -------------- ------------- Total current liabilities 18,578 37,591 Long-Term Debt 135,698 130,539 Deferred Federal Income Tax 34,481 29,724 Deferred Credits 10,125 8,117 -------------- ------------- Total liabilities 198,882 205,971 -------------- ------------- Shareholders' Equity: Preferred stock, $1 par; 2,000,000 shares authorized -- -- Common stock, $1 par; 43,333,333 shares authorized, 32,793,794 and 32,449,197 shares issued, respectively 32,794 32,449 Additional capital 130,295 125,919 Retained earnings (deficit) (100,916) (124,241) Treasury stock, at cost (324) (324) -------------- ------------- Total shareholders' equity 61,849 33,803 -------------- ------------- $ 260,731 $ 239,774 ============== =============
See accompanying notes to consolidated financial statements. - 2 - Pogo Producing Company and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, ----------------------------------- 1994 1993 -------------- -------------- (Expressed in thousands) Cash Flows from Operating Activities: Cash received from customers $ 129,044 $ 107,996 Operating, exploration, and general and administrative expenses paid (35,537) (33,736) Interest paid (7,588) (7,089) Federal income taxes paid (7,500) (2,800) Federal income taxes and interest received 3,364 -- Settlement of natural gas transportation and exchange imbalance (2,168) -- Other (542) 57 -------------- -------------- Net cash provided by operating activities 79,073 64,428 -------------- -------------- Cash Flows from Investing Activities: Capital expenditures (64,520) (34,218) Purchase of proved reserves (17,319) -- Proceeds from the sales of properties 52 1,096 -------------- -------------- Net cash used in investing activities (81,787) (33,122) -------------- -------------- Cash Flows from Financing Activities: Proceeds from issuance of new debt 86,250 -- Net borrowings under uncommitted money market line of credit 5,000 -- Net payments under revolving credit agreement (66,000) (3,000) Other payments of long-term debt (24,472) (4,000) Principal payments of production payment obligation -- (23,864) Payment of debt issue expenses (2,446) -- Payment of cash dividend on common stock (982) -- Purchase of 8% debentures due 2005 (91) -- Proceeds from exercise of stock options 3,437 2,285 -------------- -------------- Net cash provided by (used in) financing activities 696 (28,579) -------------- -------------- Net Increase (Decrease) in Cash and Cash Investments (2,018) 2,727 Cash and Cash Investments at the Beginning of the Year 6,713 5,037 -------------- -------------- Cash and Cash Investments at the End of the Period $ 4,695 $ 7,764 ============== ============== Reconciliation of Net Income to Net Cash Provided by Operating Activities: Net income $ 24,307 $ 19,917 Adjustments to reconcile net income to net cash provided by operating activities - Extraordinary loss on early extinguishment of debt 307 -- Gains from the sales of properties (52) (452) Depreciation, depletion and amortization 46,244 30,670 Dry hole and impairment 6,265 3,865 Interest capitalized (530) (332) Deferred federal income taxes 6,206 10,011 Change in operating assets and liabilities (3,674) 749 -------------- -------------- Net Cash Provided by Operating Activities $ 79,073 $ 64,428 ============== ==============
See accompanying notes to consolidated financial statements. - 3 - Pogo Producing Company and Subsidiaries Consolidated Statements of Shareholders' Equity (Unaudited)
Nine Months Ended September 30, -------------------------------------------------------------- 1994 1993 -------------------------- ----------------------------- Shares Amount Shares Amount ---------- ------------ ---------- ------------- (Expressed in thousands, except share amounts) Common Stock: $1.00 par - 43,333,333 shares authorized Balance at beginning of year 32,449,197 $ 32,449 32,103,864 $ 32,104 Stock options exercised 344,597 345 337,942 338 ---------- ------------ ---------- ------------- Issued at end of period 32,793,794 32,794 32,441,806 32,442 ---------- ------------ ---------- ------------- Additional Capital: Balance at beginning of year 125,919 122,846 Stock options exercised 4,376 3,006 -------------- ------------- Balance at end of period 130,295 125,852 -------------- ------------- Retained Earnings (Deficit): Balance at beginning of year (124,241) (149,302) Net income 24,307 19,917 Dividends ($0.03 per common share) (982) -- ------------ ------------- Balance at end of period (100,916) (129,385) ------------ ------------- Treasury Stock: Balance at beginning of year (15,575) (324) -- -- Activity during period -- -- -- -- ---------- ------------ ---------- ------------- Balance at end of period (15,575) (324) -- -- ---------- ------------ ---------- ------------- Common Stock Outstanding, at the End of the Period 32,778,219 32,441,806 ========== ========== Total Shareholders' Equity $ 61,849 $ 28,909 ============ =============
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 latest annual report. (2) Long-Term Debt - Long-term debt and the amount due within one year at September 30, 1994 and December 31, 1993, consists of the following:
September 30, December 31, 1994 1993 -------------- ------------- (Expressed in thousands) Senior debt -- $10,000,000 uncommitted money market credit line, at an average interest rate of 6.27% $ 6,000 $ -- Bank revolving credit agreement -- 67,000 Subordinated debt -- 5 1/2% Convertible subordinated notes due 2004 86,250 -- 8% Convertible subordinated debentures due 2005 43,448 43,539 10.25% Convertible subordinated notes due 1999 -- 24,000 -------------- ------------- Total debt $ 135,698 $ 134,539 Amount due within one year consisting of sinking fund requirement on 10.25% Notes -- (4,000) -------------- ------------- Long-term debt $ 135,698 $ 130,539 ============== =============
On March 16, 1994, the Company issued $86,250,000 of 5 1/2% Convertible Subordinated Notes due 2004 (the "5 1/2% Notes"). The 5 1/2% Notes are convertible into common stock of the Company at a price of $22.188 per share. The proceeds from the issuance of the 5 1/2% Notes were used to retire the remaining balance of the Company's 10.25% Convertible Subordinated Notes due 1999 (the "10.25% Notes") and to reduce the amount outstanding under the Company's bank revolving credit agreement. Refer to Note 3 of the Notes to Consolidated Financial Statements included in the Company's latest annual report for a further discussion of the bank revolving credit agreement and the 8% convertible subordinated debentures due 2005 (the "8% Debentures"). - 5 - Pogo Producing Company and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (3) Earnings per Share - Earnings per common and common equivalent share (primary earnings per share) are based on the weighted average number of shares of common stock and common equivalent shares outstanding during the periods. The dilutive effect of stock options was considered in the earnings per share reported for the periods. The 8% Debentures are common stock equivalents and were ant-dilutive in all periods. Earnings per common and common equivalent share assuming full dilution (fully diluted earnings per share) considered the 10.25% Notes (retired on April 18, 1994) which were anti-dilutive in all periods in which they were outstanding and the 5 1/2% Notes (issued on March 16, 1994) which were dilutive in the 1994 periods they were outstanding. Earnings per share are based on the following:
Three Months Ended Nine Months Ended September 30, September 30, --------------------------------- ------------------------------- 1994 1993 1994 1993 ------------- --------------- ----------- -------------- (Expressed in thousands) Earnings applicable to common stock: Primary -- Income before extraordinary loss $ 7,433 $ 7,161 $ 24,614 $ 19,917 Extraordinary loss -- -- (307) -- ------------- --------------- ----------- -------------- Net Income $ 7,433 $ 7,161 $ 24,307 $ 19,917 ============= =============== =========== ============== Fully diluted -- Income before extraordinary loss $ 8,204 $ 7,161 $ 26,224 $ 19,917 Extraordinary loss -- -- (307) -- ------------- --------------- ----------- -------------- Net Income $ 8,204 $ 7,161 $ 25,917 $ 19,917 ============= =============== =========== ============== Weighted average number of common stock and common equivalent shares outstanding: Primary 33,422 33,100 33,335 32,845 Fully diluted 37,309 33,196 36,168 32,903
- 6 - 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, 1993. Results of Operations - The Company reported net income for the third quarter of 1994 of $7,433,000 or $0.22 per share (on both a primary and fully diluted basis) compared to net income for the third quarter of 1993 of $7,161,000 or $0.22 per share (primary and fully diluted). For the first nine months of 1994, the Company reported net income of $24,307,000 or $0.73 per share ($0.72 on a fully diluted basis) compared to net income for the first nine months of 1993 of $19,917,000 or $0.61 per share (on both a primary and fully diluted basis). Earnings per common share are based on the weighted average number of shares of common and common equivalent shares outstanding for the third quarter and first nine months of 1994 of 33,422,000 and 33,335,000, respectively, compared to 33,100,000 and 32,845,000, respectively, for the third quarter and first nine months of 1993. The increase in the weighted average number of common and common equivalent shares outstanding for the third quarter and first nine months of 1994, compared to the third quarter and first nine months of 1993, was related to common stock issued in connection with the exercise of stock options pursuant to the Company's stock option plans. Earnings per common share computations on a fully diluted basis reflect additional common shares issuable upon the assumed conversion of the Company's 5 1/2% Notes (the only convertible securities of the Company that were dilutive during the applicable periods) and the elimination of related interest requirements, as adjusted for applicable federal income taxes. The weighted average number of shares of common and common equivalent shares outstanding on a fully diluted basis for the third quarter and first nine months of 1994 were 37,309,000 and 36,168,000, respectively, compared to 33,196,000 and 32,903,000, respectively, for the third quarter and first nine months of 1993. Earnings applicable to common stock, assuming full dilution, for the third quarter and first nine months of 1994 increased to $8,204,000 and $25,917,000, respectively, compared to $7,161,000 and $19,917,000, respectively, for the third quarter and first nine months of 1993. The Company's total revenues for the third quarter of 1994 were $46,452,000, an increase of approximately 25% compared to total revenues of $37,210,000 for the third quarter of 1993. The increase in the Company's total revenues for the third quarter of 1994, compared to the third quarter of 1993, was primarily related to increases of approximately 77% in the Company's natural gas production volumes and 11% in its total liquid hydrocarbon (including crude oil, condensate and plant product) production volumes, which was partially offset by declines in the prices received by the Company for such production volumes. The Company's total revenues for the first nine months of 1994 were $134,078,000, an increase of approximately 26% compared to total revenues of $106,424,000 for the first nine months of 1993. The increase in the Company's total revenues for the first nine months of 1994, compared to the first nine months of 1993, was primarily related to increased natural gas, crude oil and condensate production volumes, together with a slightly higher average price for the Company's natural gas production. Partially offsetting volume increases and natural gas price increases during the first nine months of 1994, compared to the first nine months of 1993, were substantial decreases in the prices that the Company received for its crude oil and condensate volumes. In addition, the Company's total revenues for the third quarter and first nine months of 1993 were positively affected by revenues from settlement of a dispute with the Internal Revenue Service in the third quarter of 1993 and, to a lesser extent, gains related to the sale of non-strategic properties during the third quarter and first nine months of 1993 that were substantially completed during that year. - 7 - Pogo Producing Company and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) The following table reflects an analysis of differences in the Company's oil and gas revenues (expressed in thousands of dollars) between the third quarter and first nine months of 1994 and the same periods in the preceding year.
3rd Qtr '94 9 mos. '94 Compared to Compared to 3rd Qtr '93 9 mos. '93 ----------- ---------- Increase (decrease) in oil and gas revenues resulting from differences in : Natural gas -- Price . . . . . . . . . . . . . . . . $ (1,063) $ 1,131 Production . . . . . . . . . . . . . . 11,323 27,905 --------- --------- 10,260 29,036 --------- --------- Crude oil and condensate -- Price . . . . . . . . . . . . . . . . (157) (7,058) Production . . . . . . . . . . . . . . 1,042 6,943 --------- --------- 885 (115) --------- --------- Natural gas liquids ("NGL") and other, net . . . . . . . . . . . . . . 518 1,455 Increase in oil and gas revenues . . . . $ 11,663 $ 30,376 ========= =========
Prices received by the Company for its natural gas production during the third quarter of 1994 averaged $1.79 per thousand cubic feet ("Mcf"), a decrease of approximately 7% from the average price of $1.92 per Mcf that the Company received during the third quarter of 1993. The Company believes that the decrease in the average price that it received for its natural gas production during the third quarter of 1994, compared to the third quarter of 1993, was primarily related to increased availability of supplies of natural gas in the United States, milder weather and the resumption of power generation by certain nuclear plants that were not operating in the third quarter of 1993. Prices received by the Company for its natural gas production during the first nine months of 1994 averaged $1.97 per Mcf, an increase of approximately 2% from the average price of $1.93 per Mcf that the Company received during the first nine months of 1993. The Company believes that the increase in the average price that it received for its natural gas production during the first nine months of 1994, compared to the first nine months of 1993, was primarily related to the increased severity of the winter weather in the northeast and central portions of the United States during the first quarter of 1994 compared to the first quarter of 1993, that was partially offset by weakening prices in the second and third quarters of 1994 resulting from the reasons discussed above. The Company's natural gas production during the third quarter of 1994 averaged 158.2 million cubic feet per day, an increase of approximately 77% from an average of 89.5 million cubic feet per day that the Company produced during the third quarter of 1993. The Company's natural gas production during the first nine months of 1994 averaged 146 million cubic feet per day, an increase of approximately 55% from an average of 94.2 million cubic feet per day that the Company produced during the first nine months of 1993. The increase in the Company's natural gas production during the third quarter and first nine months of 1994, compared to the third quarter and first nine months of 1993, was primarily related to natural gas production from the Company's Eugene Island 295 "B" platform from which production commenced in late February 1994, and the continued success of the Company's offshore drilling and workover program which has been partially offset by a natural decline in deliverability from certain of the Company's more mature properties. Prices received by the Company for its crude oil and condensate production averaged $17.37 per barrel during the third quarter of 1994, a decrease of approximately 1% from the average price of $17.53 per barrel that the Company received during the third quarter of 1993. Prices received by the Company for its crude oil and condensate production averaged $15.93 during the first nine months of 1994, a decrease of approximately 14% from the average price of $18.63 per barrel that the Company received during the first nine months of 1993. The Company's crude oil and condensate production during the third quarter of 1994 averaged 10,983 barrels per day, an increase of approximately 6% from an average of 10,332 barrels per day during the third quarter of 1993. The Company's crude oil and - 8 - Pogo Producing Company and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) condensate production during the first nine months of 1994 averaged 11,154 barrels per day, an increase of approximately 17% from an average of 9,562 barrels per day during the first nine months of 1993. The increase in the Company's crude oil and condensate production during the third quarter and first nine months of 1994, compared to the third quarter and first nine months of 1993, was primarily related to an increased interest in, and development drilling on, certain offshore Gulf of Mexico Main Pass area blocks. As of September 30, 1994, the Company had entered into crude oil swap agreements with other parties in which it swapped the floating market price it receives from purchasers of its crude oil for a fixed price of $16.00 per barrel on 1,000 barrels per day of the Company's production for a period ending January 31, 1995 and a fixed price of $17.08 per barrel on another 1,000 barrels per day of the Company's production for a period ending October 31, 1994, which has been extended at the other party's option through April 30, 1995. The Company's NGL and other, net revenues for the third quarter and first nine months of 1994 increased $518,000 and $1,455,000, from the third quarter and first nine months of 1993, respectively. The increase in the Company's NGL and other, net revenues for the third quarter and first nine months of 1994, compared to the third quarter and first nine months of 1993, was primarily related to an increase in NGL production from the Company's New Mexico properties and, with respect to the nine month periods, was also partially offset by a decrease in the average price that the Company received for its NGL production. NGL are liquid products which are extracted from natural gas streams and sold separately. The Company's total liquids production, including crude oil and condensate, and NGL, during the third quarter of 1994 averaged 13,722 barrels per day, an increase of approximately 11% from an average total liquids production of 12,353 barrels per day during the third quarter of 1993. The Company's total liquids production during the first nine months of 1994 averaged 13,394 barrels per day, an increase of approximately 20% from an average total liquids production of 11,194 barrels per day during the first nine months of 1993. Lease operating expenses for the third quarter of 1994 were $8,098,000, an increase of approximately 13% from lease operating expenses of $7,197,000 for the third quarter of 1993. Lease operating expenses for the first nine months of 1994 were $22,462,000, an increase of approximately 12% from lease operating expenses of $20,048,000 for the first nine months of 1993. The increases in lease operating expenses for the third quarter and first nine months of 1994, compared to the third quarter and first nine months of 1993, were primarily related to the Company's increased operating activities, including increased operating costs related to additional properties brought on production after the third quarter of 1993. The increase in operating costs for the first nine months of 1994, compared to the first nine months of 1993, were partially offset by lower maintenance costs. However, largely due to increased production of natural gas, crude oil and condensate, and NGL discussed earlier, lease operating costs per unit of production, in fact, declined. General and administrative expenses for the third quarter of 1994 were $3,876,000, an increase of approximately 6% from general and administrative expenses of $3,655,000 for the third quarter of 1993. General and administrative expenses for the first nine months of 1994 were $11,680,000, an increase of approximately 8% from general and administrative expenses of $10,831,000 for the first nine months of 1993. The increase in general and administrative expenses for the third quarter and first nine months of 1994, compared to the third quarter and first nine months of 1993, was related to, among other things, an increase in the Company's work force resulting from increased activity, and to normal salary and concomitant benefit expense adjustments. Exploration expenses consist primarily of delay rentals and geological and geophysical costs which are expensed as incurred. Exploration expenses for the third quarter of 1994 were $902,000, an increase of approximately 134% from exploration expenses of $386,000 for the third quarter of 1993. Exploration expenses for the first nine months of 1994 were $2,208,000, an increase of approximately 82% from exploration expenses of $1,216,000 for the first nine months of 1993. The increase in exploration expenses for the third quarter and first nine months of 1994, compared to the third quarter and first nine months of 1993, was related primarily to the cost of conducting 3-D seismic surveys on certain of the Company's onshore properties in South and West Texas that - 9 - Pogo Producing Company and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) commenced during the third quarter of 1994 and, with respect to the first nine months of 1994, the cost of acquiring significant quantities of 3-D and 2-D seismic data covering protions of the Gulf of Mexico, which was partially offset by a decrease in exploration expenses attributable to the Company's oil and gas concession in the Kingdom of Thailand. Dry hole and impairment expenses relate to costs of unsuccessful wells drilled, along with impairments to the associated unproved property costs and impairments to previously proved property costs as a result of decreases in expected reserves. The Company's dry hole and impairment expenses for the third quarter of 1994 were $2,049,000, an increase of approximately 96% from dry hole and impairment expenses of $1,047,000 for the third quarter of 1993. The Company's dry hole and impairment expenses for the first nine months of 1994 were $6,265,000, an increase of approximately 62% from dry hole and impairment expenses of $3,865,000 for the first nine months of 1993. 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. Unproved properties are reviewed quarterly to determine if there has been impairment of the carrying value, 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 determined on a field-by-field basis using the units of production method. The Company's DD&A expense for the third quarter of 1994 was $17,641,000, an increase of approximately 65% from DD&A expense of $10,677,000 for the third quarter of 1993. The Company's DD&A expense for the first nine months of 1994 was $46,244,000, an increase of approximately 51% from DD&A expense of $30,670,000 for the first nine months of 1993. The increases in DD&A expense for the third quarter and first nine months of 1994, compared to the third quarter and first nine months of 1993, were primarily related to increased volumes produced by the Company (largely related to increased natural gas, crude oil and condensate production discussed earlier) and, to a lesser extent, an increase in the Company's composite DD&A rate. The composite DD&A rate for all of the Company's producing fields for the third quarter of 1994 was $0.79 per equivalent Mcf ($4.74 per equivalent barrel), an increase of approximately 13% from a composite DD&A rate of $0.70 per equivalent Mcf ($4.20 per equivalent barrel) for the third quarter of 1993. The Company produced 22,132,000 equivalent Mcf (3,689,000 equivalent barrels) during the third quarter of 1994, an increase of approximately 47% from the 15,056,000 equivalent Mcf (2,509,000 equivalent barrels) produced by the Company during the third quarter of 1993. The composite DD&A rate for all of the Company's producing fields for the first nine months of 1994 was $0.74 per equivalent Mcf ($4.45 per equivalent barrel), an increase of approximately 7% from a composite DD&A rate of $0.69 per equivalent Mcf ($4.13 per equivalent barrel) for the first nine months of 1993. The Company produced 61,795,000 equivalent Mcf (10,299,000 equivalent barrels) during the first nine months of 1994, an increase of approximately 40% from the 44,040,000 equivalent Mcf (7,340,000 equivalent barrels) produced by the Company during the first nine months of 1993. Interest charges for the third quarter of 1994 were $2,450,000, a decrease of approximately 8% from interest charges of $2,670,000 for the third quarter of 1993. Interest charges for the first nine months of 1994 were $7,714,000, a decrease of approximately 9% from interest charges of $8,517,000 for the first nine months of 1993. The decrease in interest charges for the third quarter and first nine months of 1994, compared to the third quarter and first nine months of 1993, was related to lower interest rate levels on the debt outstanding and decreased debt issue amortization expenses which were partially offset by the increased amount of debt outstanding and increased commitment fees resulting from increased availability under the Company's bank revolving credit facility. In addition, the Company incurred certain costs in connection with the retirement of the Company's 10.25% Notes during the first quarter of 1994 for which there were no comparable offsets in the first nine months of 1993. As of November 1, 1994, the Company was not a party to an interest rate swap agreement. - 10 - Pogo Producing Company and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Liquidity and Capital Resources - The Company's Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 1994 reflects net cash provided by operating activities of $79,073,000. In addition to net cash provided by operating activities, the Company received $3,437,000 from the exercise of stock options and $52,000 from the sale of certain non-strategic properties. The Company also issued and sold $86,250,000 of 5 1/2% Notes in March 1994 and had net borrowings of $5,000,000 under a money market credit line. During the first nine months of 1994, the Company invested $64,520,000 of such cash flow in capital projects, purchased certain proved reserves for $17,319,000, prepaid the remaining outstanding principal and prepayment fee on its 10.25% Notes ($24,472,000), made net payments of $66,000,000 on the Company's revolving credit facility and paid a $0.03 per share dividend to holders of the Company's common stock. Of the $64,520,000 invested in capital projects, $22,821,000 was applicable to 1993 capital projects and $41,699,000 was applicable to 1994 capital projects. As of September 30, 1994, the Company's cash and cash investments were $4,695,000 and its long-term debt stood at $135,698,000. The Company's capital and exploration budget for 1994, previously announced to be $90,000,000, has been increased by the Company's Board of Directors to $100,000,000. The capital and exploration budget has been revised primarily to increase expenditures for exploitation of the Company's producing oil and gas properties in the Gulf of Mexico. In addition to anticipated capital and exploration expenses, other material 1994 cash requirements that the Company currently anticipates include ongoing operating, general and administrative, income tax, and interest expenses and the payment of dividends on its common stock, including a $.03 per share dividend on its common stock to be paid on November 30, 1994 to stockholders of record as of November 8, 1994. The Company currently anticipates that cash provided by operating activities and funds available under its revolving credit facility and money market credit line will be sufficient to fund the Company's ongoing expenses, to fund its 1994 capital and exploration budget and anticipated future dividend payments. In this regard, the Company reinstated the practice of declaring a quarterly cash dividend in the third quarter of 1994. However, 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. - 11 - Pogo Producing Company and Subsidiaries Part II. Other Information Item 6. Exhibits and Reports on Form 8-K (A) Exhibits None (B) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the quarter ended September 30, 1994. - 12 - 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/ D. STEPHEN SLACK D. Stephen Slack Senior Vice President, Chief Financial Officer and Treasurer Date: November 14, 1994 - 13 - 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 September 30, 1994 and the Consolidated Statements of Income for the nine months ended September 30, 1994, and is qualified in its entirety by reference to such Consolidated Financial Statements. 1,000 9-MOS DEC-31-1994 SEP-30-1994 4,695 0 36,365 0 2,755 44,997 887,854 683,598 260,731 18,578 135,698 32,794 0 0 29,055 260,731 134,026 134,078 22,462 22,462 66,397 0 7,714 38,078 13,464 24,614 0 (307) 0 24,307 .73 .72 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 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.
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