-----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, Di1cVYdhClWbly1gceK8/198KJnPuNtQGmo45hsRbeoC+wEe3v8/+QbSOcZLTB8F ZikjLil9hKozKn72sZKFoA== 0000003146-97-000002.txt : 19970222 0000003146-97-000002.hdr.sgml : 19970222 ACCESSION NUMBER: 0000003146-97-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970214 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENERGEN CORP CENTRAL INDEX KEY: 0000277595 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 630757759 STATE OF INCORPORATION: AL FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07810 FILM NUMBER: 97534671 BUSINESS ADDRESS: STREET 1: 2101 SIXTH AVE N CITY: BIRMINGHAM STATE: AL ZIP: 35203 BUSINESS PHONE: 2053262742 MAIL ADDRESS: STREET 1: 2101 SIXTH AVE N CITY: BIRNINGHAM STATE: AL ZIP: 35203 FORMER COMPANY: FORMER CONFORMED NAME: ALAGASCO INC DATE OF NAME CHANGE: 19851002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALABAMA GAS CORP CENTRAL INDEX KEY: 0000003146 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 63022000 STATE OF INCORPORATION: AL FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-70466 FILM NUMBER: 97534672 BUSINESS ADDRESS: STREET 1: 2101 SIXTH AVE NORTH CITY: BIRMINGHAM STATE: AL ZIP: 35203 BUSINESS PHONE: 2053268100 MAIL ADDRESS: STREET 1: 2101 SIXTH AVE NORTH CITY: BIRMINGHAM STATE: AL ZIP: 35203 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED DECEMBER 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___ TO ___ Commission IRS Employer File State of Identification Number Registrant Incorporation Number 1-7810 Energen Corporation Alabama 63-0757759 2-38960 Alabama Gas Corporation Alabama 63-0022000 2101 Sixth Avenue North Birmingham, Alabama 35203 Telephone Number 205/326-2700 Alabama Gas Corporation, a wholly owned subsidiary of Energen Corporation, meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with reduced disclosure format pursuant to General Instruction H(2). Indicate by a check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. YES X NO Indicate the number of shares outstanding of each of the issuers' classes of common stock, as of February 9, 1997: Energen Corporation, $0.01 par value 13,027,248 shares Alabama Gas Corporation, $0.01 par value 1,972,052 shares ENERGEN CORPORATION AND ALABAMA GAS CORPORATION FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1996 TABLE OF CONTENTS Page PART I: FINANCIAL INFORMATION (Unaudited) Item 1. Financial Statements (a) Consolidated Statements of Income of Energen Corporation 4 (b) Consolidated Balance Sheets of Energen Corporation 5 (c) Consolidated Statements of Cash Flows of Energen Corporation 7 (d) Statements of Income of Alabama Gas Corporation 8 (e) Balance Sheets of Alabama Gas Corporation 9 (f) Statements of Cash Flows of Alabama Gas Corporation 11 (g) Notes to Unaudited Financial Statements 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . 15 Selected Business Segment Data of Energen Corporation. . . . .18 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 19 SIGNATURES 21 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME Energen Corporation and Subsidiaries (Unaudited)
Three months ended December 31, (in thousands, except per share data) 1996 1995 Operating Revenues Natural gas distribution $ 83,305 $ 73,185 Oil and gas production activities 13,697 5,638 --------- -------- Total operating revenues 97,002 78,823 --------- -------- Operating Expenses Cost of gas 41,460 34,084 Operations 27,536 23,569 Maintenance 2,566 2,603 Depreciation, depletion and amortization 10,397 7,810 Taxes, other than income taxes 7,088 5,984 --------- -------- Total operating expenses 89,047 74,050 --------- -------- Operating Income 7,955 4,773 --------- -------- Other Income (Expense) Interest expense (4,945) (3,381) Other, net 1,175 1,543 --------- -------- Total other income (expense) (3,770) (1,838) --------- -------- Income Before Income Taxes 4,185 2,935 Income taxes 1,008 657 --------- -------- Net Income $ 3,177 $ 2,278 ========= ========= Earnings Per Average Common Share $ 0.28 $ 0.21 --------- -------- Dividends Per Common Share $ 0.30 $ 0.29 --------- -------- Average Common Shares Outstanding 11,234 10,949 ======== ======== The accompanying Notes are an integral part of these statements. CONSOLIDATED BALANCE SHEETS Energen Corporation and Subsidiaries (Unaudited) December 31, September 30, (in thousands) 1996 1996 ASSETS Property, Plant and Equipment Utility plant $ 549,106 $ 544,643 Less accumulated depreciation 272,233 268,110 --------- -------- Utility plant, net 276,873 276,533 --------- -------- Oil and gas properties, successful efforts method 232,562 224,469 Less accumulated depreciation, depletion and amortization 64,592 60,152 --------- -------- Oil and gas properties, net 167,970 164,317 --------- -------- Other property, net 4,112 4,066 --------- -------- Total property, plant and equipment, net 448,955 444,916 --------- -------- Current Assets Cash and cash equivalents 23,029 17,074 Accounts receivable, net of allowance for doubtful accounts of $3,433 at December 31, 1996 and $3,002 at September 30, 1996 72,316 42,353 Inventories, at average cost Storage gas 28,742 28,214 Materials and supplies 6,916 7,704 Liquified natural gas in storage 2,691 2,417 Deferred gas costs 15,354 1,975 Deferred income taxes 6,707 7,995 Prepayments and other 11,071 7,563 --------- -------- Total current assets 166,826 115,295 --------- -------- Other Assets Deferred charges and other 10,752 10,760 --------- -------- Total other assets 10,752 10,760 --------- -------- TOTAL ASSETS $ 626,533 $ 570,971 ======= ======== The accompanying Notes are an integral part of these statements. CONSOLIDATED BALANCE SHEETS Energen Corporation and Subsidiaries (Unaudited) December 31, September 30, (in thousands) 1996 1996 CAPITAL AND LIABILITIES Capitalization Preferred stock, cumulative $0.01 par value, 5,000,000 shares authorized $ 0 $ 0 Common shareholders' equity Common stock, $0.01 par value; 30,000,000 shares authorized, 11,286,441 shares outstanding at December 31, 1996 and 11,162,634 shares outstanding at September 30, 1996 113 112 Premium on capital stock 89,971 86,833 Capital surplus 2,802 2,802 Retained earnings 98,458 98,658 --------- -------- Total common shareholders' equity 191,344 188,405 Long-term debt 195,492 195,545 --------- -------- Total capitalization 386,836 383,950 --------- -------- Current Liabilities Long-term debt due within one year 1,805 1,805 Notes payable to banks 67,000 59,000 Accounts payable 72,452 32,659 Accrued taxes 19,625 17,567 Customers' deposits 18,190 17,364 Amounts due customers 14,958 17,746 Accrued wages and benefits 12,183 11,584 Other 22,053 18,049 --------- -------- Total current liabilities 228,266 175,774 --------- -------- Deferred Credits and Other Liabilities Deferred income taxes 1,529 972 Other 9,902 10,275 --------- -------- Total deferred credits and other liabilities 11,431 11,247 --------- -------- Commitments and Contingencies -- -- TOTAL CAPITAL AND LIABILITIES $ 626,533 $ 570,971 ======== ======== The accompanying Notes are an integral part of these statements. CONSOLIDATED STATEMENTS OF CASH FLOW Energen Corporation and Subsidiaries (Unaudited) Three months ended December 31, (in thousands) 1996 1995 Operating Activities Net Income $ 3,177 $ 2,278 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation, depletion and amortization 10,397 7,814 Deferred income taxes, net 1,640 2,042 Deferred investment tax credits, net (122) (121) Net change in: Accounts receivable (29,963) (19,411) Inventories (14) 3,567 Deferred gas cost (13,379) (13,266) Accounts payable gas purchases 39,192 18,548 Accounts payable other trade 601 2,770 Other current assets and liabilities 1,191 (5,891) Other, net 1,146 (782) --------- -------- Net cash provided by (used in) operating activities 13,866 (2,452) --------- -------- Investing Activities Additions to property, plant and equipment (14,792) (26,664) Proceeds from sale of properties 0 2,123 Payments on notes receivable 185 275 Other, net 470 30 --------- -------- Net cash used in investing activities (14,137) (24,236) --------- -------- Financing Activities Payment of dividends on common stock (3,375) (3,178) Issuance of common stock 1,654 851 Purchase of treasury stock 0 (116) Reduction of long-term debt (53) (106) Net change in short-term debt 8,000 (4,300) --------- -------- Net cash provided by (used in) financing activities 6,226 (6,849) --------- -------- Net change in cash and cash equivalents 5,955 (33,537) Cash and cash equivalents at beginning of period 17,074 36,695 --------- -------- Cash and Cash Equivalents at End of Period $ 23,029 $ 3,158 ========= ========= The accompanying Notes are an integral part of these statements. STATEMENTS OF INCOME Alabama Gas Corporation (Unaudited) Three months ended December 31, (in thousands) 1996 1995 Operating Revenues $ 83,305 $ 73,185 --------- -------- Operating Expenses Cost of gas 42,092 34,778 Operations 21,649 19,943 Maintenance 2,556 2,574 Depreciation 5,759 5,108 Income taxes Current 22 (1,139) Deferred, net 966 2,194 Deferred investment tax credits, net (122) (122) Taxes, other than income taxes 6,328 5,725 --------- -------- Total operating expenses 79,250 69,061 --------- -------- Operating Income 4,055 4,124 --------- -------- Other Income Allowance for funds used during construction 136 341 Other, net 374 136 --------- -------- Total other income 510 477 --------- -------- Interest Charges Interest on long-term debt 2,211 2,138 Other interest expense 547 477 --------- -------- Total interest charges 2,758 2,615 --------- -------- Net Income $ 1,807 $ 1,986 ========= ========= The accompanying Notes are an integral part of these statements. BALANCE SHEETS Alabama Gas Corporation (Unaudited) December 31, September 30, (in thousands) 1996 1996 ASSETS Property, Plant and Equipment Utility plant $ 549,106 $ 544,643 Less accumulated depreciation 272,233 268,110 --------- -------- Utility plant, net 276,873 276,533 --------- -------- Other property, net 396 394 --------- -------- Current Assets Cash and cash equivalents 8,643 803 Accounts receivable Gas 53,788 26,999 Merchandise 2,137 1,730 Other 4,901 2,955 Affiliated companies 673 10,582 Allowance for doubtful accounts (3,413) (2,985) Inventories, at average cost Storage gas 28,742 28,214 Materials and supplies 5,335 5,828 Liquified natural gas in storage 2,691 2,417 Deferred gas costs 15,354 1,975 Deferred income taxes 5,024 6,344 Prepayments and other 3,461 5,150 --------- -------- Total current assets 127,336 90,012 --------- -------- Deferred Charges and Other Assets 7,312 7,467 --------- -------- TOTAL ASSETS $ 411,917 $ 374,406 ========= ========= The accompanying Notes are an integral part of these statements. BALANCE SHEETS Alabama Gas Corporation (Unaudited) December 31, September 30, (in thousands) 1996 1996 CAPITAL AND LIABILITIES Capitalization Common shareholder's equity Common stock, $0.01 par value; 3,000,000 shares authorized, 1,972,052 shares outstanding at December 31, 1996 and September 30, 1996 $ 20 $ 20 Premium on capital stock 31,682 31,682 Capital surplus 2,802 2,802 Retained earnings 93,501 95,044 --------- -------- Total common shareholder's equity 128,005 129,548 Cumulative preferred stock, $0.01 par value, 120,000 shares authorized, issuable in series $4.70 Series Long-term debt 125,000 125,000 --------- -------- Total capitalization 253,005 254,548 --------- -------- Current Liabilities: Long-term debt due within one year 0 0 Notes payable to banks 0 0 Accounts payable Trade 60,735 23,758 Affiliated companies 5,330 1,512 Accrued taxes 18,972 18,067 Customers' deposits 18,190 17,364 Supplier refunds due customers 17,474 17,257 Other amounts due customers (2,516) 489 Accrued wages and benefits 6,037 4,459 Other 8,867 10,611 --------- -------- Total current liabilities 133,089 93,517 Deferred Credits and Other Liabilities Deferred income taxes 16,734 16,883 Accumulated deferred investment tax credits 3,495 3,617 Regulatory liability 4,772 5,038 Customer advances for construction and other 822 803 --------- -------- Total deferred credits and other liabilities 25,823 26,341 --------- -------- Commitments and Contingencies TOTAL CAPITAL AND LIABILITIES $ 411,917 $ 374,406 ========= ========= The accompanying Notes are an integral part of these statements. STATEMENTS OF CASH FLOW Alabama Gas Corporation (Unaudited) Three months ended December 31, (in thousands) 1996 1995 Operating Activities Net Income $ 1,807 $ 1,986 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 5,759 5,108 Deferred income taxes, net 966 2,194 Deferred investment tax credits (122) (122) Net change in: Accounts receivable (28,714) (17,043) Inventories (309) 3,281 Deferred gas costs (13,379) (13,266) Accounts payable gas purchases 39,192 18,548 Accounts payable other trade (2,215) 1,910 Other current assets and liabilities 466 (7,883) Other, net (6) (381) --------- -------- Net cash provided by (used in) operating activities 3,445 (5,668) --------- -------- Investing Activities Additions to property, plant and equipment (6,403) (7,050) Net advances to affiliates 13,727 5,195 Other, net 421 (82) --------- -------- Net cash provided by (used in) investing activities 7,745 (1,937) --------- -------- Financing Activities Payment of dividends on common stock (3,350) (3,170) Net change in short-term debt 0 10,000 --------- -------- Net cash provided by (used in) financing activities (3,350) 6,830 --------- -------- Net change in cash and cash equivalents 7,840 (775) Cash and cash equivalents at beginning of period 803 727 --------- -------- Cash and Cash Equivalents at End of Period $ 8,643 $ (48) ======== ======== The accompanying Notes are an integral part of these statements.
NOTES TO UNAUDITED FINANCIAL STATEMENTS Energen Corporation and Alabama Gas Corporation 1. BASIS OF PRESENTATION All adjustments to the unaudited financial statements which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim periods have been recorded. Such adjustments consisted only of normal recurring items. The consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes for the years ended September 30, 1996, 1995, and 1994 included in the 1996 Annual Report of Energen Corporation (the Company) on Form 10-K. Certain reclassifications were made to conform prior years' financial statements to the current quarter presentation. The Company's primary business is seasonal in character and influenced by weather conditions. Results of operations for the interim periods are not necessarily indicative of the results which may be expected for the fiscal year. 2. REGULATORY As an Alabama utility, Alabama Gas Corporation (Alagasco) is subject to regulation by the Alabama Public Service Commission (APSC) which, in 1983, established the Rate Stabilization and Equalization (RSE) rate-setting process. RSE was extended for the fourth time on October 7, 1996, for a five-year period through January 1, 2002. Under the terms of that extension, RSE will continue after January 1, 2002, unless, after notice to the Company and a hearing, the Commission votes to either modify or discontinue its operation. Under RSE as extended, the APSC conducts quarterly reviews to determine, based on Alagasco s projections and fiscal year-to-date performance, whether Alagasco s return on equity for the fiscal year will be within the allowed range of 13.15 percent to 13.65 percent. Reductions in rates can be made quarterly to bring the projected return within the allowed range; increases, however, are allowed only once each fiscal year, effective December 1, and cannot exceed 4 percent of prior-year revenues. RSE limits the utility s equity upon which a return is permitted to 60 percent of total capitalization and provides for certain cost control measures designed to monitor Alagasco s operations and maintenance (O&M) expense. If the change in O&M expense per customer falls within 1.25 percentage points above or below the Consumer Price Index For All Urban Customers (index range), no adjustment is required. If, however, the change in O&M expense per customer exceeds the index range, three-quarters of the difference is returned to customers. To the extent the change is less than the index range, the utility benefits by one-half of the difference through future rate adjustments. Under RSE as extended, a $1.3 million decrease in revenue became effective October 1, 1996, and a $7.7 million annual increase became effective December 1, 1996. Alagasco calculates a temperature adjustment to customers' monthly bills to remove the effect of departures from normal temperature on Alagasco s earnings. The calculation is performed monthly, and the adjustments to customers bills are made in the same billing cycle the weather variation occurs. Alagasco s rate schedules for natural gas distribution charges contain a Gas Supply Adjustment (GSA) rider, established in 1993, which permits the pass-through to customers of changes in the cost of gas supply, including Gas Supply Realignment (GSR) surcharges imposed by Alagasco s suppliers resulting from changes in gas supply purchases related to the implementation of Federal Energy Regulatory Commission (FERC) Order 636. On October 7, 1996, the APSC issued an order providing for the refund to customers of approximately $17 million, including interest, of supplier refunds. The Order provides that refunds be returned to customers prior to January 31, 1997; during January 1997, the Company refunded these amounts to customers. These refunds were collected from a variety of sources and most relate to the settlement of rate case and FERC Order 636 proceedings of Southern Natural Gas Company (Southern) as described herein. On September 9, 1996, the APSC approved Alagasco s application to issue $25 million of debt, a portion of which were used to fund the supplier refunds discussed above. In accordance with APSC-directed regulatory accounting procedures, Alagasco in 1989 began returning to customers excess utility deferred taxes which resulted from a reduction in the federal statutory tax rate from 46 percent to 34 percent using the average rate assumption method. This method provides for the return to ratepayers of excess deferred taxes over the lives of the related assets. In 1993 those excess taxes were reduced as a result of a federal tax rate increase from 34 percent to 35 percent. Remaining excess utility deferred taxes of $2.6 million are being returned to ratepayers over approximately 14 years. At December 31, 1996, and September 30, 1996, a regulatory liability of $4.7 million and $5 million, respectively, was included in the consolidated financial statements related to income taxes. FERC Regulation: In 1995, Southern filed a comprehensive settlement with the FERC in the form of a Stipulation and Agreement (the Settlement) to resolve all issues in Southern s six pending rate cases, as well as to resolve all GSR and transition cost issues resulting from the implementation of FERC Order 636. Alagasco was a supporting party to the Settlement. The Settlement, as approved by FERC, resolves all issues relating to GSR and other transition costs with respect to supporting parties. Alagasco estimates that it has a remaining GSR liability of approximately $0.2 million to be paid through December 1997 and approximately $1.1 million in other transition costs to be paid through June 1998. Because these costs will be recovered in full from its customers, Alagasco recorded a regulatory asset of $1.3 million and $2.2 million at December 31, 1996, and September 30, 1996, respectively. 3. SUBSEQUENT EVENTS Subsequent to December 31, 1996, Taurus entered into a definitive purchase and sale agreement with Burlington Resources Inc. to acquire approximately 225 Bcfe of oil and high BTU content natural gas reserves in the San Juan Basin for $77.8 million. Taurus plans to operate half of the approximately 1,750 producing wells. An estimated 80 percent of the total proved reserves are developed and producing. Taurus plans to spend an additional $18.5 million to fully develop these long-lived predominately natural gas reserves. Closing is expected to take place in March with an effective date of January 1, 1997. In January 1997, Energen issued 1,725,000 shares of common stock generating net proceeds of $49.1 million. These proceeds have been used to repay a portion of the short-term debt incurred to fund the acquisition of various oil and natural gas properties during fiscal 1996. 4. RECENT PRONOUNCEMENTS OF THE FASB During fiscal 1997, the Company is required to adopt three statements issued in 1995 by the Financial Accounting Standards Board. Statement of Financial Accounting Standard (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, requires long-lived assets to be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount for an asset may not be recoverable. Based on the significant acquisition discussed in Footnote 3, the Company has begun to reexamine certain of its oil and gas properties to determine their strategic fit regarding future development priorities and is, accordingly, evaluating the disposition of certain of its holdings which could result in adjustments under SFAS 121. The Company has not determined the fair market value of any such properties as of this date and, therefore, cannot determine the impact on the financial statements. SFAS No. 123, Accounting for Stock-Based Compensation, establishes a fair value-based method of accounting for employee stock options but allows companies to continue to follow the accounting treatment prescribed by APB Opinion 25 with proper disclosure. The Company has not yet determined the method of accounting that it will follow for stock options but does not expect the requirements of SFAS No. 123 to have a material impact on the Company's financial statements. SFAS No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, as issued provides accounting and reporting standards for such transactions. Its adoption in the second quarter of this year is not expected to impact the Company's financial statements. 3. SUPPLEMENTAL CASH FLOW INFORMATION Energen Corporation Three months ended December 31, (in thousands) 1996 1995 Interest paid, net of amounts capitalized $ 4,825 $ 4,660 Income taxes paid $ 253 $ 8 Noncash investing activities (capitalized depreciation and allowance for funds used during construction) $ 182 $ 387 Alabama Gas Corporation Three months ended December 31, (in thousands) 1996 1995 Interest paid $ 3,986 $ 4,414 Income taxes paid $ 1,954 $ (181) Noncash investing activities (capitalized depreciation and allowance for funds used during construction) $ 182 $ 387 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated net income for the first quarter of fiscal 1997 was $3,177,000 ($0.28 per share) compared to $2,278,000 ($0.21 per share) in the prior year. Taurus Exploration Inc. (Taurus) earned $1.5 million as compared with $0.2 million in the same period last year as oil and gas production more than doubled to 5.5 billion cubic feet equivalent (Bcfe). In addition, higher average sales prices and increased operating fees were only partially offset by increased interest expense and depreciation, depletion and amortization. Energen's natural gas utility, Alabama Gas Corporation, earned within its allowed return range on a higher level of equity representing investment in utility plant; however, the utility's $1.8 million in earnings fell just short of the same period last year primarily due to the timing of operations and maintenance expenses. Revenues: Utility natural gas revenues increased $10.1 million for the quarter. A significant increase in the commodity cost of gas, which is passed through to customers in rates, more than offset the impact of a decrease in cycle sales volumes. Weather warmer than that of the prior year caused an 8 percent decrease in residential volumes. Revenues from oil and gas production activities more than doubled in the current year to $13.7 million. Increased volumes and prices resulted in gas revenues of $9.4 million compared to $3.4 million in the prior year. Total gas production was 4.5 Bcf compared to 2 Bcf in the prior year. After giving effect to hedged volumes, gas prices were $2.07 per Mmcf compared to $1.74 per Mmcf in the prior year. In addition, oil production increased to 157.3 MBbl from 90.5 MBbl in the prior year. Oil prices had a similar impact as Taurus realized $17.70 per barrel compared to $14.40 in the prior year. Taken together, volumes and pricing resulted in oil production revenues of $2.8 million compared to $1.3 million in the prior year. To hedge its exposure to energy price fluctuations on oil and gas production over the remainder of this fiscal year, Taurus has entered into contracts for the sale of 19.0 Bcf of its gas production at an average contract price of $2.15 per Mcf and for the sale of 428 MBbl of its oil production at an average contract price of $20.43 per Bbl. The program has been extended into fiscal year 1998 with hedges and contracts in place for the sale of 20.5 Bcf of gas production with an average contract price of 2.09 per Mcf and for the sale of 33 MBbl of oil at an average contract price of $18.71 per Bbl. Hedged prices do not reflect any basis difference which my occur when open hedge contracts are closed. Operating Expenses: Cost of gas at the utility increased $7.3 million in the current year. As with natural gas revenues, cost of gas was most significantly influenced by higher commodity cost of gas offset partially by decreased sales volumes to residential customers due largely to weather warmer than that of the prior year. Operations and maintenance expense (O&M) increased $3.9 million in the current year due to almost equal contribution from both Alagasco and Taurus. At Alagasco, O&M increases were due largely to higher labor-related and marketing expenses while, at Taurus, lease operating expenses were higher due to the current year's increased production activity. Taurus's significantly higher production volumes as compared with the prior year caused the majority of the DD&A increase for the quarter. However, the effects of normal plant growth at Alagasco also contributed to the increase. The Company's expense for taxes other than income primarily reflects the various state and local income and business taxes paid by Alagasco as well as various payroll-related taxes. State and local business taxes are generally based on gross receipts of Alagasco and fluctuate accordingly. Non-Operating Items: Interest expense for the quarter was $4.9 million compared to $3.4 million in the prior year. Primarily to fund the aggressive growth strategy currently underway at Taurus, the Company has increased borrowings under its short-term credit facilities and, in the fourth quarter of the prior year, issued $40 million in Energen medium-term notes (MTNs). In addition, Alagasco issued $25 million in MTNs in the fourth quarter of the prior year to fund customer refunds, gas storage inventory replacement and facilities upgrade and acquisition. The Company's effective tax rates are lower than statutory federal tax rates primarily due to the recognition of nonconventional fuel tax credits and the amortization of investment tax credits. The change in income tax expense in the first quarter is due largely to increased pre-tax income. The Company's effective tax rates are expected to remain lower than statutory federal rates through December 31, 2002, as tax credits generated each year are expected to be fully recognized in the financial statements. FINANCIAL POSITION AND LIQUIDITY The item most significantly influencing operating cash flows for the current quarter is the increase in commodity cost of gas coupled with fluctuations in payables and receivables which are influenced by both throughput and timing of payments. Net cash used in financing activities decreased $10 million largely due to the timing of acquisitions and development at Taurus. In the current year Taurus has acquired 3.4 Bcf of proved reserves for $1.7 million and an additional $5.3 million in development expenditures. Financing activities provided a source of $6.2 million in the current quarter due primarily to increased borrowings under Energen's short-term credit facilities used to finance, in part, Taurus's acquisition and development strategy. FUTURE CAPITAL RESOURCES AND LIQUIDITY The Company's strategy to grow its oil and gas exploration and production subsidiary involves investing $400 million in the acquisition of producing properties with development potential and $100 million in offshore Gulf of Mexico exploration and development in the five-year period ending September 30, 2000. During 1997 Taurus plans to invest approximately $100 million in property acquisitions and in the development of existing reserves and $20 million in offshore exploration and development. It should be noted that Taurus's continued ability to invest in property acquisitions over the five-year period will be significantly influenced by industry trends as the producing property acquisition market has historically been cyclical. In a major step towards accomplishing that goal, subsequent to December 31, 1996, Taurus entered into a definitive purchase and sale agreement with Burlington Resources Inc. to acquire approximately 225 Bcfe of oil and high BTU content natural gas reserves in the San Juan Basin for $77.8 million. Taurus plans to operate half of the approximately 1,750 producing wells. An estimated 80 percent of the total proved reserves are developed and producing. Taurus plans to spend an additional $18.5 million to fully develop these long-lived predominately natural gas reserves. Closing is expected to take place in March with an effective date of January 1, 1997. To finance Taurus's investment program, the Company initially has and will continue to utilize available short-term credit facilities of $156 million to supplement internally generated cash flow, but long-term debt and equity will be issued for permanent financing. To that end, during fiscal 1996, Energen filed a $250 million shelf registration for debt and common stock. In January 1997, Energen issued 1.7 million shares of common stock generating proceeds of $49 million. These proceeds have been used to repay a portion of the short-term debt incurred to fund the acquisition of various oil and natural gas properties during fiscal 1996. In the prior year, under the shelf registration, Energen issued MTNs of $40 million in September 1996. The Company plans to issue additional long-term debt during the remainder of fiscal 1997. As referred to in Note 1, Alagasco received amounts from Southern Natural Gas Company and other suppliers in settlement of matters before FERC. During January 1997, the Company refunded these amounts, including interest, for a total of approximately $17 million, to its customers. Utility capital expenditures could approximate $37.6 million in 1997 and primarily represent additions for normal distribution system expansion. Alagasco also will maintain an investment in storage working gas which is expected to average approximately $24 million in 1997. Alagasco anticipates funding these capital requirements through internally generated capital and the utilization of short-term credit facilities. Other: Energen and its subsidiaries are engaged in businesses that involve risks and uncertainties as well as significant estimates. Some of these include, but are not limited to, economic and competitive conditions, inflation rates, regulatory changes, financial market conditions, future business decisions, and other uncertainties, all of which are difficult to predict and most of which are beyond the control of the Company. There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves and in projecting future rates of production and timing of development expenditures, including many factors beyond the control of the Company. The total amount or timing of actual future production may vary significantly from the amount of reserves previously disclosed. In the event Taurus is unable to fully invest its planned acquisition expenditures, future operating revenues and proved reserves would be negatively affected. The Company's results of operations and cash flows also could be affected by changing oil and gas prices. Although Taurus makes use of futures contracts to mitigate risk, fluctuations in oil and gas prices may affect the Company's financial position and results of operation. Recent Pronouncements of the FASB During fiscal 1997, the Company is required to adopt three statements issued in 1995 by the Financial Accounting Standards Board. Statement of Financial Accounting Standard (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, requires long-lived assets to be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount for an asset may not be recoverable. Based on the significant acquisition discussed in Footnote 3, the Company has begun to reexamine certain of its oil and gas properties to determine their strategic fit regarding future development priorities and is, accordingly, evaluating the disposition of certain of its holdings which could result in adjustments under SFAS 121. The Company has not determined the fair market value of any such properties as of this date and, therefore, cannot determine the impact on the financial statements. SFAS No. 123, Accounting for Stock-Based Compensation, establishes a fair value-based method of accounting for employee stock options but allows companies to continue to follow the accounting treatment prescribed by APB Opinion 25 with proper disclosure. The Company has not yet determined the method of accounting that it will follow for stock options but does not expect the requirements of SFAS No. 123 to have a material impact on the Company's financial statements. SFAS No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, as issued provides accounting and reporting standards for such transactions. Its adoption in the second quarter of this year is not expected to impact the Company's financial statements. SELECTED BUSINESS SEGMENT DATA Energen Corporation
Three months ended December 31, (in thousands, except average sales data) 1996 1995 Natural Gas Distribution Operating revenues Residential $ 55,524 $ 47,737 Commercial and industrial - small 19,416 16,870 Commercial and industrial - large 38 56 Transportation 8,554 8,157 Other (227) 365 --------- -------- Total $ 83,305 $ 73,185 ========= ========= Volumes sold and transported (thousands of Mcf) Residential 7,182 7,790 Commercial and industrial - small 3,029 3,376 Commercial and industrial - large 7 9 Transportation 16,336 16,247 --------- -------- Total 26,554 27,422 ========= ========= Depreciation and amortization $ 5,759 $ 5,108 Capital expenditures $ 6,585 $ 7,437 Operating income $ 4,921 $ 5,057 Oil and Gas Exploration and Production Operating revenues Natural gas $ 9,386 $ 3,418 Oil 2,785 1,303 Other 1,526 917 --------- -------- Total $ 13,697 $ 5,638 ========= ========= Sales volume - natural gas (thousands of Mcf) 4,534 1,965 Sales volume - oil (thousands of barrels) 157 91 Average sales price - natural gas (per Mcf) $ 2.07 $ 1.74 Average sales price - oil (per barrel) $ 17.70 $ 14.40 Other data Depreciation, depletion and amortization $ 4,553 $ 2,571 Capital expenditures $ 8,389 $ 19,615 Exploration expenditures $ 645 $ 1,053 Operating income (loss) $ 3,761 $ (138) Other Business Depreciation and amortization $ 85 $ 131 Capital expenditures $ 0 $ 0 Operating income $ 59 $ 95 Eliminations and Corporate Expenses Operating income (loss) $ (786) $ (241)
PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits 27.1 Financial data schedule of Energen Corporation (for SEC purposes only) 27.2 Financial data schedule of Alabama Gas Corporation (for SEC purposes only) b. Reports on Form 8-K No reports on Form 8-K were filed for the three months ended December 31, 1996. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ENERGEN CORPORATION ALABAMA GAS CORPORATION February 11, 1997 By/s/ Rex J. Lysinger DATE Rex J. Lysinger Chairman of the Board of Directors of Energen and all subsidiaries, Chief Executive Officer of Energen February 11, 1997 By/s/ G. C. Ketcham DATE G. C. Ketcham Executive Vice President, Chief Financial Officer and Treasurer February 11, 1997 By/s/ Paula H. Rushing DATE Paula H. Rushing Controller of Alagasco EX-27 2
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF ENERGEN CORPORATION FOR THE QUARTER ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000277595 ENERGEN CORPORATION 1,000 3-MOS SEP-30-1997 DEC-31-1996 PER-BOOK 276,873 172,082 166,826 10,752 0 626,533 113 92,773 98,458 191,344 0 0 195,492 67,000 0 0 1,805 0 0 0 170,892 626,533 97,002 1,008 89,047 90,055 6,947 1,175 8,122 4,945 3,177 0 3,177 3,375 3,554 13,866 0.28 0.28
EX-27 3
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF ALABAMA GAS CORPORATION FOR THE QUARTER ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000003146 ALABAMA GAS CORPORATION 1,000 3-MOS SEP-30-1997 DEC-31-1996 PER-BOOK 276,873 396 127,336 7,312 0 411,917 20 34,484 93,501 128,005 0 0 125,000 0 0 0 0 0 0 0 158,912 411,917 83,305 866 78,384 79,250 4,055 510 4,565 2,758 1,807 0 1,807 3,350 2,211 3,445 0 0 Alabama Gas Corporation (Alagasco) is a subsidiary of Energen Corporation. Earnings per share is not calculated for Alagasco as amount would not be meaningful.
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