-----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, OgCJ4e9E1yCSWabQkS3UktRnoFycFt4y4eC8Uwigr4bo57BnAmT7HzDglEpOxP02 JwRGUoYWTizzHOxg5YtEVA== 0000277595-96-000005.txt : 19960216 0000277595-96-000005.hdr.sgml : 19960216 ACCESSION NUMBER: 0000277595-96-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960214 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: 96520161 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: 96520162 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, 1995 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, 1996: Energen Corporation, $0.01 par value 11,008,419 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, 1995 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 17 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-k 18 SIGNATURES 20 (This page intentionally left blank.) ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME Energen Corporation and Subsidiaries (Unaudited) Three months ended December 31, (in thousands, except share data) 1995 1994 Operating Revenues Natural gas distribution $ 73,185 $ 67,226 Oil and gas production activities 5,796 5,931 Other 536 594 Intercompany eliminations (694) (944) Total operating revenues 78,823 72,807 Operating Expenses Cost of gas 34,084 31,050 Operations 23,569 21,614 Maintenance 2,603 2,264 Depreciation, depletion and amortization 7,810 6,962 Taxes, other than income taxes 5,984 5,636 Total operating expenses 74,050 67,526 Operating Income 4,773 5,281 Other Income (Expense) Interest expense (3,381) (2,749) Other, net 1,543 853 Total other income (expense) (1,838) (1,896) Income Before Income Taxes 2,935 3,385 Income taxes 657 649 Net Income $ 2,278 $ 2,736 Earnings Per Average Common Share $ 0.21 $ 0.25 Dividends Per Common Share $ 0.29 $ 0.28 Average Common Shares Outstanding 10,949 10,920 The accompanying Notes are an integral part of these statements. CONSOLIDATED BALANCE SHEETS Energen Corporation and Subsidiaries (Unaudited) December 31,September 30, (in thousands) 1995 1995 ASSETS Property, Plant and Equipment Utility plant $ 511,113 $ 504,371 Less accumulated depreciation 252,368 247,926 Utility plant, net 258,745 256,445 Oil and gas properties, successful efforts method 134,281 117,339 Less accumulated depreciation, depletion and amortization 52,484 51,170 Oil and gas properties, net 81,797 66,169 Other property, net 4,387 4,650 Total property, plant and equipment, net 344,929 327,264 Current Assets Cash and cash equivalents 3,158 36,695 Accounts receivable, net of allowance for doubtful accounts of $2,208 at December 31, 1995 and $2,533 at September 30, 1995 50,224 30,813 Inventories, at average cost Storage gas 17,156 20,276 Materials and supplies 7,485 7,711 Liquified natural gas in storage 3,318 3,539 Regulatory asset 5,007 6,321 Deferred gas costs 14,692 1,426 Deferred income taxes 7,257 9,667 Prepayments and other 4,625 2,583 Total current assets 112,922 119,031 Other Assets Notes receivable 2,820 3,095 Deferred charges and other 9,351 9,694 Total other assets 12,171 12,789 TOTAL ASSETS $ 470,022 $ 459,084 The accompanying Notes are an integral part of these statements. CONSOLIDATED BALANCE SHEETS Energen Corporation and Subsidiaries (Unaudited) December 31,September 30, (in thousands) 1995 1995 CAPITAL AND LIABILITIES Capitalization Preferred stock, cumulative $0.01 par value, 5,000,000 shares authorized $ - $ - Common shareholders' equity Common stock, $0.01 par value; 30,000,000 shares authorized, 10,979,966 shares outstanding at December 31, 1995 and 10,910,106 shares outstanding at September 30, 1995 110 109 Premium on capital stock 82,696 81,243 Capital surplus 2,802 2,802 Retained earnings 89,121 90,020 Treasury stock at cost, 4,600 shares at December 31, 1995 And 11,627 shares at September 30, 1995 (110) (250) Total common shareholders' equity 174,619 173,924 Long-term debt 131,494 131,600 Total capitalization 306,113 305,524 Current Liabilities Long-term debt due within one year 1,775 1,775 Notes payable to banks 28,000 32,300 Accounts payable 53,560 32,242 Accrued taxes 10,162 11,339 Customers' deposits 18,354 18,218 Amounts due customers 10,704 16,546 Accrued wages and benefits 11,667 10,955 Other 16,000 14,923 Total current liabilities 150,222 138,298 Deferred Credits and Other Liabilities Deferred income taxes 2,404 2,540 Accumulated deferred investment tax credits 3,982 4,103 Other 7,301 8,619 Total deferred credits and other liabilities 13,687 15,262 Commitments and Contingencies - - TOTAL CAPITAL AND LIABILITIES $ 470,022 $ 459,084 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) 1995 1994 Operating Activities Net Income $ 2,278 $ 2,736 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 7,814 6,966 Deferred income taxes, net 2,042 (103) Deferred investment tax credits, net (121) (121) Gain on sale of properties (581) - Net change in: Accounts receivable (19,411) (10,933) Inventories 3,567 (789) Deferred gas cost (13,266) (7,445) Accounts payable gas purchases 18,548 11,318 Accounts payable other trade 2,770 (3,612) Other current assets and liabilities (5,891) 2,903 Other, net 643 (125) Net cash provided by (used in) operating activities (1,608) 795 Investing Activities Additions to property, plant and equipment (26,664) (12,558) Proceeds from sale of properties 2,123 - Payments on notes receivable 275 228 Other, net 30 4 Net cash used in investing activities (24,236) (12,326) Financing Activities Payment of dividends on common stock (3,178) (3,058) Issuance of common stock - 61 Purchase of treasury stock (109) (49) Reduction of long-term debt (106) (6,422) Net change in short-term debt (4,300) (4,000) Net cash used in financing activities (7,693) (13,468) Net change in cash and cash equivalents (33,537) (24,999) Cash and cash equivalents at beginning of period 36,695 27,526 Cash and Cash Equivalents at End of Period $ 3,158 $ 2,527 The accompanying Notes are an integral part of these statements. STATEMENTS OF INCOME Alabama Gas Corporation (Unaudited) Three months ended December 31, (in thousands) 1995 1994 Operating Revenues $ 73,185 $ 67,226 Operating Expenses Cost of gas 34,778 31,994 Operations 19,943 18,357 Maintenance 2,574 2,228 Depreciation 5,108 4,737 Income taxes Current (1,139) 1,062 Deferred, net 2,194 (118) Deferred investment tax credits, net (122) (122) Taxes, other than income taxes 5,725 5,392 Total operating expenses 69,061 63,530 Operating Income 4,124 3,696 Other Income Allowance for funds used during construction 341 186 Other, net 136 158 Total other income 477 344 Interest Charges Interest on long-term debt 2,138 1,757 Other interest expense 477 532 Total interest charges 2,615 2,289 Net Income Available for Common $ 1,986 $ 1,751 The accompanying Notes are an integral part of these statements. BALANCE SHEETS Alabama Gas Corporation (Unaudited) December 31,September 30, (in thousands) 1995 1995 ASSETS Property, Plant and Equipment Utility plant $ 511,113 $ 504,371 Less accumulated depreciation 252,368 247,926 Utility plant, net 258,745 256,445 Other property, net 246 193 Current Assets Cash and cash equivalents (48) 727 Accounts receivable Gas 39,332 22,215 Merchandise 1,916 1,546 Other 1,982 1,598 Allowance for doubtful accounts (2,200) (2,000) Inventories, at average cost Storage gas 17,156 20,276 Materials and supplies 5,920 5,860 Liquified natural gas in storage 3,318 3,539 Deferred gas costs 14,692 1,426 Regulatory asset 5,007 6,321 Deferred income taxes 5,038 7,416 Prepayments and other 2,061 2,302 Total current assets 94,174 71,226 Deferred Charges and Other Assets 7,409 7,403 TOTAL ASSETS $ 360,574 $ 335,267 The accompanying Notes are an integral part of these statements. BALANCE SHEETS Alabama Gas Corporation (Unaudited) December 31,September 30, (in thousands) 1995 1995 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, 1995 and September 30, 1995 $ 20 $ 20 Premium on capital stock 31,682 31,682 Capital surplus 2,802 2,802 Retained earnings 86,454 87,638 Total common shareholder's equity 120,958 122,142 Cumulative preferred stock, $0.01 par value, 120,000 shares authorized, issuable in series $4.70 Series - - Long-term debt 100,000 100,000 Total capitalization 220,958 222,142 Current Liabilities Long-term debt due within one year Notes payable to banks 10,000 - Accounts payable 49,806 26,160 Accrued taxes 9,291 10,236 Customers' deposits 18,354 18,218 Supplier refunds due customers 3,498 3,315 Other amounts due customers 7,206 13,231 Accrued wages and benefits 6,420 5,228 Other 8,100 9,444 Total current liabilities 112,675 85,832 Deferred Credits and Other Liabilities Deferred income taxes 16,391 16,343 Accumulated deferred investment tax credits 3,982 4,103 Regulatory liability 5,722 6,001 Customer advances for construction and other 846 846 Total deferred credits and other liabilities 26,941 27,293 Commitments and Contingencies TOTAL CAPITAL AND LIABILITIES $ 360,574 $ 335,267 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) 1995 1994 Operating Activities Net Income $ 1,986 $ 1,751 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,108 4,737 Deferred income taxes, net 2,194 (118) Deferred investment tax credits (122) (122) Net change in: Accounts receivable (17,043) (9,349) Inventories 2,653 (416) Deferred gas cost (13,266) (7,445) Accounts payable gas purchases 18,548 11,318 Accounts payable other trade 1,910 (1,978) Other current assets and liabilities (7,883) 416 Other, net (381) (175) Net cash used in operating activities (6,296) (1,381) Investing Activities Additions to property, plant and equipment (7,050) (9,551) Other, net (82) (57) Net cash used in investing activities (7,132) (9,608) Financing Activities Payment of dividends on common stock (3,170) (3,060) Reduction of long-term debt - (62) Net advances from affiliates 5,823 17,346 Net change in short-term debt 10,000 (2,000) Net cash provided by financing activities 12,653 12,224 Net change in cash and cash equivalents (775) 1,235 Cash and cash equivalents at beginning of period 727 156 Cash and Cash Equivalents at End of Period $ (48) $ 1,391 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, 1995, 1994, and 1993 included in the 1995 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, Alagasco is subject to regulation by the APSC which, in 1983, established the Rate Stabilization and Equalization (RSE) rate-setting process. RSE was extended for the third time on December 3, 1990, for a three-year period. Under the terms of that extension, RSE shall continue after November 30, 1993, unless, after notice to the Company, the Commission votes to either modify or discontinue its operation. On October 4, 1993, the Commission unanimously voted to extend RSE until such time as certain hearings mandated by the Energy Policy Act of 1992 (Energy Act) in connection with integrated resource planning and demand side management programs are completed. The Energy Act proceedings are expected to conclude during fiscal 1996 at which time it is expected that the Commission will begin reviewing Alagasco's RSE. No time table for review has yet been established. 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 the Company's operations and maintenance (O&M) expense. If 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, O&M expense per customer exceeds the index range, three-quarters of the difference will be returned to the customers. To the extent O&M expense per customer is less than the index range, the utility will benefit by one-half of the difference through future rate adjustments. Under RSE as extended, an $8.2 million annual increase in revenue became effective December 1, 1995. Effective December 15, 1990, the APSC approved 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 month the weather variation occurs. The Company's rate schedules for natural gas distribution charges contain a Gas Supply Adjustment (GSA) rider, established in 1993. The rider permits the pass through to customers of changes in the cost of gas supply, including Gas Supply Realignment (GSR) surcharges imposed by the Company's suppliers resulting from changes in gas supply purchases related to the implementation of FERC Order 636. On June 12, 1995, the APSC approved Alagasco's application to issue $50 million of new debt. A portion of the proceeds was used to redeem all of Alagasco's 9 percent debentures and 11 percent First Mortgage Bonds. In connection with the early call of the redeemed debt, Alagasco paid an early call premium of approximately $1.3 million during the fourth quarter of fiscal 1995. Because the APSC Order authorized Alagasco to collect the early call premium through customer rates during the fiscal year ending September 30, 1996, Alagasco recorded a regulatory asset of $1.3 million during the quarter ended September 30, 1995, with approximately $1 million remaining at December 31, 1995. 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. Approximately $2.9 million of the remaining excess utility deferred taxes is being returned to ratepayers over approximately 15 years. FERC Regulation: On March 15, 1995, Southern Natural Gas Company (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. The Settlement is supported by parties representing more than 90 percent of the firm transportation demand on Southern's system, including local distribution companies (including Alagasco), municipal distribution systems, major gas producers, large industrial end users, marketers, and state commissions (including the APSC). On September 29, 1995, the FERC issued its Order Accepting Settlement, Severing Contesting parties, and Issuing Certificates and Approving Abandonment (Settlement Order). The Settlement Order approves the Settlement with minor modifications. Contesting parties had 30 days from the date of the Settlement Order to file motions for rehearing and several such motions were timely filed. Until such motions are ruled on by the FERC, the Settlement Order is not considered to be final. Specifically, the Settlement provides for the following: (1) the resolution of all cost of service and rate design issues in Southern's six pending rate cases and the establishment of reduced rates for the purpose of calculating rate case refunds; (2) the implementation of reduced settlement rates on an interim basis for supporting parties commencing March 1, 1995 (by order dated April 4, 1995, FERC approved these interim rates pending its final review of the merits of the Settlement); (3) the resolution of all GSR and other transition cost issues resulting from FERC Order 636; (4) lower GSR cost recovery through the reduction and earlier payout of GSR costs; (5) a three-year moratorium on general rate increases; and (6) the resolution and disposition of all rate case and GSR refunds for supporting parties. With respect to this last point, the Settlement provides that all rate case refunds will be used to offset a portion of Southern's remaining GSR liability. In addition, as a result of the recalculated GSR surcharges for the period January 1, 1994, to February 28, 1995, Southern will refund over-collected GSR costs. Neither the total amount of this refund nor Alagasco's share has yet been determined; therefore, no amounts have been recorded in the financial statements. In the Settlement filing with FERC, Southern has represented that the Settlement will allow Southern and the supporting parties to resolve all issues relating to GSR and other transition costs, the majority of which costs will be collected by the end of calendar 1996. Alagasco estimates that it has a remaining GSR liability of approximately $1.7 million to be paid through December 1996 and approximately $2.3 million in other transition costs to be paid through June 1998 and that it has recorded such amounts in the financial statements. Because these costs will be recovered in full from Alagasco's customers in a timely manner through the GSA rider of Alagasco's Tariff, the Company has recorded a corresponding regulatory asset in the accompanying financial statements. 3. SUPPLEMENTAL CASH FLOW INFORMATION Energen Corporation Three months ended December 31, (in thousands) 1995 1994 Interest paid, net of amounts capitalized $ 4,660 $ 4,736 Income taxes paid $ (88) $ (51) Noncash investing activities (capitalized depreciation and allowance for funds used during construction) $ 387 $ 227 Alabama Gas Corporation Three months ended December 31, (in thousands) 1995 1994 Interest paid $ 4,501 $ 4,414 Income taxes paid $ (181) $ 1,712 Noncash investing activities (capitalized depreciation and allowance for funds used during construction) $ 387 $ 227 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated net income for the first quarter of fiscal 1996 was $2,278,000 ($0.21 per share) down from the prior year's first quarter results of $2,736,000 ($0.25 per share). While increased contribution from Alabama Gas Corporation (Alagasco) reflected the utility earning its allowed return on a higher level of investment, earnings from Taurus Exploration, Inc. (Taurus) were negatively affected by several factors including increased depreciation, depletion, and amortization (DD&A) and increased exploration expense. Two factors created a majority of the 9 percent increase in utility natural gas revenues for the quarter. Weather colder than that of the prior year resulted in a 3.1 Bcf increase in gas sales volumes to residential customers. Alagasco's operating margins, however, are unaffected due to the APSC-approved temperature adjustment provision which allows for the adjustment of customers' bills on a real-time basis to reflect usage under normal temperature conditions. Also, revenue from commercial and industrial customers was greater because of increased usage by existing customers and customer additions. Revenues from oil and gas production activities did not vary significantly from those of the prior year. Production revenues were virtually unchanged as the impact of increased total production volumes was offset by decreased oil and gas prices. After giving effect to hedged volumes, the average per Mcf sales price of natural gas was $1.74 compared to $1.81 in the prior year, and the average per barrel sales price of oil was $14.40 compared to $15.84 in the prior year. Operating fees represent a percentage of net proceeds on certain coalbed methane properties, as defined by the related operating agreements, and vary with changes in natural gas prices, production volumes, and operating expenses. Revenues from operating fees remained virtually the same in the current year. While natural gas prices have increased 20 percent, the prior year quarter includes a one-time asset disposition fee offsetting the impact of increased prices. 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 5.1 Bcf of its gas production at an average contract price of $1.79 per Mcf and for the sale of 294 MBbl of its oil production at an average contract price of $17.75 per Bbl. Based on current estimates for fiscal 1996 production (excluding additional producing property acquisitions), approximately 72 percent of gas production and 52 percent of oil production are hedged. At December 31, 1995, the Company's deferred losses related to its futures contracts totalled $1.1 million. The program has been extended into fiscal 1997 for the sale of 5.6 Bcf of gas production with an average contract price of $1.91 per Mcf. The increase in cost of gas for the quarter was due primarily to the 3.4 Bcf increase in gas sales volumes, primarily to residential customers. Consolidated operations and maintenance expense for the quarter increased 10 percent due largely to increased labor and related expenses at Alagasco and increased exploration expense at Taurus. A 12 percent increase in depreciation for the quarter is related primarily to an increased DD&A rate associated with prior year reserve revisions at Taurus and the effects of normal plant growth at Alagasco. The Company's expense for taxes other than income primarily reflects various state and local 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. Medium-term notes outstanding for the full quarter and a higher average short-term debt outstanding contributed to the increase in interest expense for the current quarter. During the current quarter, based on a periodic review of profitability, Taurus sold proved properties which resulted in other income of approximately $580,000. Income tax expense for the quarter did not vary significantly as the effect of lower consolidated pretax income was offset by decreased recognition of nonconventional fuel tax credits on an interim basis. 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. Liquidity and Capital Resources Several factors combined to create the $2.4 million decrease in operating cash flows. The factor having the most impact was the timing of the collection of certain gas supply adjustment costs from customers. Also influencing the change was a 2 Bcf decrease in Alagasco's storage gas inventory as weather colder than that of the prior year necessitated greater use of the inventory to meet system requirements. Fluctuations in receivables and payables have been influenced by greater throughput in the current year and are also the result of timing of payments. The increase in cash used in investing activities is largely the result of Taurus investing $15 million for producing oil and gas properties adding approximately 3.9 Bcf of gas and 3 Mmbl of oil, and an additional $6.1 million in offshore exploration and development. Offsetting that impact was the receipt of proceeds from the sale of certain proved producing properties at Taurus. Included in Alagasco's capital expenditures for the quarter was the $1.9 million acquisition of an 1,100 customer municipal gas system. In the first quarter of the prior year, the Company repaid $6.3 million in notes payable leading to the majority of the decrease in cash used in financing activities for the current quarter. Future Capital Expenditures and Liquidity The most significant event influencing the Company's future capital expenditures and liquidity is Taurus's plan to increase its level of investment in the exploration and production business in order to generate desired earnings growth, increase shareholder return, and increase total market capitalization. Therefore, during the next five years, Taurus plans to invest $400 million for property acquisitions and related development and an additional $100 million for offshore exploration and development. To help facilitate this strategy, Taurus has entered into a three-and-one-half year agreement with Sonat Exploration Company committing to invest up to between $25 million and $50 million as its proportionate share of acquisitions in fiscal years 1996 through 1998. The Company has short-term credit facilities of $110 million that it anticipates using to initially acquire properties, but long-term debt and equity will be issued for permanent financing of these investments. The exact timing of the permanent financing is undeterminable at this time as the Company does not know the exact pace of acquisitions. Consolidated capital and exploration expenditures could approximate $129 million in fiscal 1996, excluding municipal gas system acquisitions. Of that, Taurus may invest $85 million for property acquisitions and related development, as well as offshore exploration and development. Taurus's ability to invest in property acquisitions will be significantly influenced by industry trends as the producing property acquisition market has historically been cyclical. Alagasco expects to invest $44 million in fiscal 1996, excluding municipal gas system acquisition, and primarily represents additions for normal distribution system expansion. Recent Pronouncements of the FASB In March 1995, the Financial Accounting Standards Board (FASB) issued 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. The Company is required to adopt this Statement in its 1997 fiscal year but implementation is not expected to have a material impact on the Company's financial statements. In October 1995, SFAS No. 123, Accounting for Stock-Based Compensation, was issued and also requires adoption by the Company in its fiscal year 1997. The implementation of SFAS No. 123 is not expected to have a material impact on the financial statements. SELECTED BUSINESS SEGMENT DATA Energen Corporation Three months ended December 31, (in thousands, except share data) 1995 1994 Natural Gas Distribution Operating revenues Residential $ 47,737 $ 44,350 Commercial and industrial - small 16,870 15,545 Commercial and industrial - large 56 31 Transportation 8,157 7,566 Other 365 (266) Total $ 73,185 $ 67,226 Volumes sold and transported (thousands of Mcf) Residential 7,790 5,287 Commercial and industrial - small 3,376 2,466 Commercial and industrial - large 9 8 Transportation 16,247 14,290 Total 27,422 22,051 Other data Depreciation and amortization $ 5,108 $ 4,737 Capital expenditures $ 7,437 $ 9,778 Operating income $ 5,057 $ 4,518 Oil and Gas Exploration and Production Operating revenues Natural gas $ 3,418 $ 3,948 Oil 1,303 792 Other 1,075 1,191 Total $ 5,796 $ 5,931 Sales volume - natural gas (thousands of Mcf) 1,965 2,181 Sales volume - oil (thousands of barrels) 91 50 Average sales price - natural gas (per Mcf) $ 1.74 $ 1.81 Average sales price - oil (per barrel) $ 14.40 $ 15.84 Other data Depreciation, depletion and amortization $ 2,571 $ 2,118 Capital expenditures $ 19,615 $ 3,007 Exploration expenditures $ 1,053 $ 429 Operating income (loss) $ (138) $ 1,154 Other Business Operating revenues $ 536 $ 594 Depreciation and amortization $ 131 $ 24 Capital expenditures $ - $ - Operating income $ 95 $ 49 Eliminations and Corporate Expenses Operating loss $ (241) $ (440) 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 31,1995. 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 13, 1996 By/s/ Rex J. Lysinger Rex J. Lysinger Chairman of the Board of Directors of Energen and all subsidiaries, Chief Executive Officer of Energen February 13, 1996 By/s/ G. C. Ketcham G. C. Ketcham Executive Vice President, Chief Financial Officer and Treasurer February 13, 1996 By/s/ Paula H. Rushing Paula H. Rushing Controller of Alagasco EX-27.1 2
UT This schedule contains summary financial information extracted from the Form 10Q for December 31,1995, and is qualified in its entirety by reference to such financial statements. 0000277595 ENERGEN CORPORATION 1,000 3-MOS SEP-30-1996 OCT-01-1995 DEC-31-1995 PER-BOOK 258,745 86,184 112,922 9,351 2,820 470,022 110 85,388 89,121 174,619 0 0 131,494 28,000 0 0 1,775 0 0 0 134,134 470,022 78,823 657 74,050 74,707 4,116 1,543 5,659 3,381 2,278 0 2,278 3,178 2,747 (1,608) .21 .21
EX-27.2 3
UT 0000003146 ALABAMA GAS CORPORATION 1,000 3-MOS SEP-30-1996 OCT-01-1995 DEC-31-1995 PER-BOOK 258,745 246 94,174 7,409 0 360,574 20 34,484 86,454 120,958 0 0 100,000 10,000 0 0 0 0 0 0 129,616 360,574 73,185 933 68,128 69,061 4,124 477 4,601 2,615 1,986 0 1,986 3,170 2,138 (6,296) 0 0 Earnings per share is calculated for Energen Corporation (parent company of Alagasco) and is not calculated for Alagasco separately as amount would not be meaningful.
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