0000277595-95-000017.txt : 19950815 0000277595-95-000017.hdr.sgml : 19950815 ACCESSION NUMBER: 0000277595-95-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 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: 95562782 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: 95562783 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 JUNE 30, 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 August 8, 1995: Energen Corporation, $0.01 par value 10,903,396 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 JUNE 30, 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 18 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 19 SIGNATURES 20 2 (This page intentionally left blank.) 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME Energen Corporation and Subsidiaries (Unaudited)
Three months ended Nine months ended June 30, June 30, (in thousands, except share data) 1995 1994 1995 1994 Operating Revenues Natural gas distribution 55,865 66,070 257,232 303,331 Oil and gas production activities 5,317 6,414 17,559 18,785 Other 2,101 2,477 6,659 13,286 Intercompany eliminations (1,751) (1,836) (5,614) (6,271) Total operating revenues 61,532 73,125 275,836 329,131 Operating Expenses Cost of gas 19,653 30,669 118,669 167,955 Operations 24,128 23,180 69,717 70,020 Maintenance 2,462 2,490 7,368 7,179 Depreciation, depletion, and amortization 7,022 7,029 21,182 20,536 Taxes, other than income taxes 4,951 5,432 19,846 23,033 Total operating expenses 58,216 68,800 236,782 288,723 Operating Income 3,316 4,325 39,054 40,408 Other Income (Expense) Interest expense, net of amounts capitalized (2,738) (2,837) (8,183) (8,582) Gain on sale of assets - 2,142 - 2,142 Other, net 923 2,403 2,183 3,247 Total other income (expense) (1,815) 1,708 (6,000) (3,193) Income Before Income Taxes 1,501 6,033 33,054 37,215 Income taxes 372 2,083 7,475 8,773 Net Income 1,129 3,950 25,579 28,442 Earnings Per Average Common Share $ 0.10 $ 0.36 $ 2.34 $ 2.63 Dividends Per Common Share $ 0.28 $ 0.27 $ 0.84 $ 0.81 Average Common Shares Outstanding 10,897 10,917 10,908 10,806 The accompanying Notes are an integral part of these statements.
4 CONSOLIDATED BALANCE SHEETS Energen Corporation and Subsidiaries (Unaudited)
June 30, September 30, (in thousands) 1995 1994 ASSETS Property, Plant and Equipment Utility plant $491,801 $464,593 Less accumulated depreciation 244,014 231,327 Utility plant, net 247,787 233,266 Oil and gas properties, successful efforts method 103,473 92,355 Less accumulated depreciation, depletion and amortization 48,100 43,052 Oil and gas properties, net 55,373 49,303 Other property, net 4,019 4,613 Total property, plant and equipment, net 307,179 287,182 Current Assets Cash and cash equivalents 62,418 27,526 Accounts receivable, net of allowance for doubtful accounts of $2,014 at June 30, 1995 and $2,037 at September 30, 1994 32,368 34,145 Inventories, at average cost Storage gas 16,483 24,363 Materials and supplies 7,815 7,589 Liquefied natural gas in storage 3,249 3,349 Deferred gas costs 1,561 1,460 Regulatory asset 7,200 - Deferred income taxes 11,598 7,542 Prepayments and other 1,342 3,117 Total current assets 144,034 109,091 Other Assets Notes receivable 3,279 3,911 Deferred charges and other 11,341 11,130 Total other assets 14,620 15,041 TOTAL ASSETS $465,833 $411,314 The accompanying Notes are an integral part of these statements.
5 CONSOLIDATED BALANCE SHEETS Energen Corporation and Subsidiaries (Unaudited)
June 30, September 30, (in thousands, except share data) 1995 1994 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, 10,885,143 shares outstanding at June 30, 1995 and 10,917,904 shares outstanding at September 30, 1994 109 109 Premium on capital stock 81,186 81,073 Capital surplus 2,802 2,802 Retained earnings 99,454 83,042 Treasury stock at cost, 35,958 shares (740) - Total common shareholders' equity 182,811 167,026 Long-term debt 116,390 118,302 Total capitalization 299,201 285,328 Current Liabilities Long-term debt due within one year 36,613 10,123 Notes payable to banks - 6,000 Accounts payable 31,026 27,480 Accrued taxes 19,400 13,083 Customers' deposits 18,091 17,462 Amounts due customers 19,084 11,734 Accrued wages and benefits 12,827 9,662 Other 14,688 15,129 Total current liabilities 151,729 110,673 Deferred Credits and Other Liabilities Deferred income taxes 1,712 1,706 Accumulated deferred investment tax credits 4,225 4,590 Other 8,966 9,017 Total deferred credits and other liabilities 14,903 15,313 Commitments and Contingencies - - TOTAL CAPITAL AND LIABILITIES $465,833 $411,314 The accompanying Notes are an integral part of these statements.
6 CONSOLIDATED STATEMENTS OF CASH FLOW Energen Corporation and Subsidiaries (Unaudited)
Nine months ended June 30, (in thousands) 1995 1994 Operating Activities Net Income $ 25,579 $28,442 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 21,182 20,536 Deferred income taxes, net (4,593) (6,502) Deferred investment tax credits, net (365) (365) Gain on sale of assets - (2,142) Gain on sale of equity securities - (2,878) Net change in: Accounts receivable 1,777 10,780 Inventories 7,754 (18,227) Accounts payable 3,546 (8,042) Other current assets and liabilities 11,494 23,647 Other, net (302) 437 Net cash provided by operating activities 66,072 45,686 Investing Activities Additions to property, plant and equipment (40,465) (25,765) Proceeds from sale of equity securities - 4,808 Proceeds from sale of assets - 8,624 Payments on notes receivable 632 1,394 Other, net 101 1,640 Net cash used in investing activities (39,732) (9,299) Financing Activities Payment of dividends on common stock (9,170) (8,689) Issuance of common stock 116 14,699 Purchase of treasury stock (740) (44) Reduction of long-term debt and preferred stock of subsidiary (9,422) (10,542) Proceeds from issuance of medium-term notes 33,768 49,670 Net change in short-term debt (6,000) (40,000) Net cash provided by financing activities 8,552 5,094 Net change in cash and cash equivalents 34,892 41,481 Cash and cash equivalents at beginning of period 27,526 15,008 Cash and Cash Equivalents at End of Period $62,418 $56,489 The accompanying Notes are an integral part of these statements.
STATEMENTS OF INCOME Alabama Gas Corporation (Unaudited)
Three months ended Nine months ended June 30, June 30, (in thousands) 1995 1994 1995 1994 Operating Revenues $ 55,865 $66,070 $257,232 $303,331 Operating Expenses Cost of gas 20,461 31,604 121,290 171,144 Operations 19,380 18,023 57,589 54,553 Maintenance 2,442 2,390 7,277 6,885 Depreciation 4,870 4,505 14,391 13,373 Income taxes Current (291) 1,280 15,339 16,760 Deferred, net 1,033 (335) (3,742) (6,154) Deferred investment tax credits, net (122) (122) (365) (365) Taxes, other than income taxes 4,709 5,145 19,098 22,125 Total operating expenses 52,482 62,490 230,877 278,321 Operating Income 3,383 3,580 26,355 25,010 Other Income Allowance for funds used during construction 282 90 691 277 Other, net 166 207 409 188 Total other income 448 297 1,100 465 Interest Charges Interest on long-term debt 1,713 1,717 5,150 4,795 Other interest expense 346 361 1,515 1,497 Total interest charges 2,059 2,078 6,665 6,292 Net Income Available for Common $1,772 $1,799 $20,790 $19,183 The accompanying Notes are an integral part of these statements. 8
BALANCE SHEETS Alabama Gas Corporation (Unaudited)
June 30,September 30, (in thousands) 1995 1994 ASSETS Property, Plant and Equipment Utility plant $491,801 $464,593 Less accumulated depreciation 244,014 231,327 Utility plant, net 247,787 233,266 Other property, net 172 183 Current Assets Cash and cash equivalents 43,383 156 Accounts receivable Gas 22,377 22,209 Merchandise 1,415 1,326 Other 1,268 1,512 Allowance for doubtful accounts (2,000) (2,000) Inventories, at average cost Storage gas 16,483 24,363 Materials and supplies 5,645 5,688 Liquefied natural gas in storage 3,249 3,349 Deferred gas costs 1,561 1,460 Regulatory asset 7,200 Deferred income taxes 9,737 5,724 Prepayments and other 1,048 2,595 Total current assets 111,366 66,382 Deferred Charges and Other Assets 9,133 9,074 TOTAL ASSETS $368,458 $308,905 The accompanying Notes are an integral part of these statements. 9
BALANCE SHEETS Alabama Gas Corporation (Unaudited)
June 30, September 30, (in thousands, except share data) 1995 1994 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 June 30, 1995 and September 30, 1994 $ 20 $ 20 Premium on capital stock 31,682 31,682 Capital surplus 2,802 2,802 Retained earnings 92,707 81,087 Total common shareholder's equity 127,211 115,591 Cumulative preferred stock, $0.01 par value, 120,000 shares authorized, issuable in series $4.70 Series - - Long-term debt 84,740 84,391 Total capitalization 211,951 199,982 Current Liabilities Long-term debt due within one year 34,838 2,823 Notes payable to banks - 4,000 Accounts payable Other 23,848 19,002 Affiliated companies 516 132 Accrued taxes 19,153 14,241 Customers' deposits 18,091 17,462 Supplier refunds due customers 3,205 832 Other amounts due customers 15,879 10,902 Accrued wages and benefits 7,067 5,659 Other 7,797 7,605 Total current liabilities 130,394 82,658 Deferred Credits and Other Liabilities Deferred income taxes 14,518 13,704 Accumulated deferred investment tax credits 4,225 4,590 Regulatory liability 6,275 6,960 Customer advances for construction and other 1,095 1,011 Total deferred credits and other liabilities 26,113 26,265 Commitments and Contingencies - - TOTAL CAPITAL AND LIABILITIES $368,458 $308,905 The accompanying Notes are an integral part of these statements. 10
STATEMENTS OF CASH FLOW Alabama Gas Corporation (Unaudited)
Nine months ended June 30, (in thousands) 1995 1994 Operating Activities Net Income $20,790 $19,183 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,391 13,373 Deferred income taxes, net (3,742) (6,154) Deferred investment tax credits (365) (365) Net change in: Accounts receivable (14) 2,067 Inventories 8,024 (18,031) Accounts payable 4,686 1,005 Other current assets and liabilities 8,737 21,816 Other, net (519) 939 Net cash provided by operating activities 51,988 33,833 Investing Activities Additions to property, plant and equipment (27,992) (21,069) Net advances to holding company - 87 Other, net (275) (118) Net cash used in investing activities (28,267) (21,100) Financing Activities Payment of dividends on common stock (9,170) (8,695) Reduction of long-term debt (1,636) (9,892) Proceeds from issuance of medium-term notes 33,768 49,670 Proceeds from equity infusion from parent - 10,000 Net advances from affiliates 544 1,823 Net change in short-term debt (4,000) (29,000) Net cash provided by financing activities 19,506 13,906 Net change in cash and cash equivalents 43,227 26,639 Cash and cash equivalents at beginning of period 156 480 Cash and Cash Equivalents at End of Period $43,383 $27,119 The accompanying Notes are an integral part of these statements. 11
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, 1994, 1993, and 1992 included in the 1994 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 Alabama Public Service Commission (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. 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 adjustment to customers' bills is made in the same month the weather variation occurs. Under RSE as extended, a $1.1 million decrease in revenue became effective October 1, 1994, and a $5.2 million annual increase in revenue became effective December 1, 1994. The Company's rate schedules for natural gas distribution charges contained a Gas Supply Adjustment rider which permits the pass- through of changes in gas costs to customers and gas supply realignment surcharges imposed by the Company's suppliers resulting from changes in gas supply purchases related to the implementation of FERC Order 636. In accordance with APSC-directed regulatory accounting procedures, Alagasco in 1989 began returning 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 $3.1 million of remaining excess utility deferred taxes is being returned to ratepayers over approximately 16 years. FERC Regulation On March 15, 1995 Southern Natural Gas Company (Southern) filed a comprehensive settlement with the Federal Energy Regulatory Commission (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 gas supply realignment and transition cost issues resulting from the implementation of FERC Order 636. The Settlement is supported by parties representing over 90% 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). The Settlement is subject to FERC approval which has not yet occurred as of the date of this filing. 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 Gas Supply Realignment (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 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 1995. Alagasco estimates that it has a remaining GSR liability of approximately $6.0 million to be paid through December 1995 and approximately $1.2 million in other transition costs to be paid through March 1998, and 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 (approved by APSC order dated October 4, 1993 in docket U-3497), the Company has recorded a corresponding regulatory asset in the accompanying financial statements. 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. 3. SUPPLEMENTAL CASH FLOW INFORMATION Energen Corporation
Nine months ended June 30, (in thousands) 1995 1994 Interest paid, net of amounts capitalized $10,101 $ 9,029 Income taxes paid $ 3,642 $ 7,571 Noncash investing activities (capitalized depreciation and allowance for funds used during construction) $ 815 $ 396 Noncash financing activities (debt issuance costs) $ 232 $ 330 Alabama Gas Corporation Nine months ended June 30, (in thousands) 1995 1994 Interest paid $ 8,816 $ 7,135 Income taxes paid $ 8,152 $ 8,843 Noncash investing activities (capitalized depreciation and allowance for funds used during construction) $ 815 $ 396 Noncash financing activities (debt issuance costs) $ 232 $ 330
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated net income for the third quarter was $1,129,000 ($0.10 per share), compared with the prior year's $3,950,000 ($.36 per share). Prior year third quarter results include a $1,987,000 ($0.18 per share) gain from the sale of Energen's propane assets and a reduction in the Company's investment in high-temperature combustion technology. Excluding the one-time gain, Energen's lower net income primarily was due to Taurus Exploration, Inc.'s (Taurus's) decline in earnings which were attributable to lower natural gas production volumes and lower coalbed methane operating fees resulting from lower natural gas prices. Earnings at Alabama Gas Corporation (Alagasco) were virtually unchanged. Consolidated net income for the nine months was $25,579,000 ($2.34 per share), compared to $28,442,000 ($2.63 per share) in the prior year. In addition to those factors influencing the quarter, nine month results were impacted negatively by the effect of lower natural gas prices on production volumes. Two factors created the majority of the 15 percent decrease in utility natural gas revenues for the quarter and year to date. The benefit of lower commodity cost of gas was passed through to customers in reduced rates. Additionally, warmer than normal weather resulted in a significant reduction in gas sales volumes to residential customers for both periods; partially offsetting that impact on revenues was the recovery of margins associated with departures from normal weather allowed by Alagasco's temperature adjustment provision. Having the most impact on the 17 percent decrease in oil and gas production revenues for the quarter was a .6 Bcf decrease in gas production volumes coupled with a slight decline in the average sales price of natural gas. After giving effect to hedged volumes, the average sales price per Mcf was $1.79 compared to $1.83 in the prior year. Also influencing the quarter was the effect of a 16 percent decrease in the average index price of natural gas on operating fees. Operating fees on certain coalbed methane properties are impacted by a variety of factors as defined by the operating agreements, including production volume, operating expenses and the price of natural gas. As with the quarter, the decrease in oil and gas revenues for the nine months is due to both decreased natural gas production revenues and decreased operating fees. The decrease in operating fees is largely due to a 26 percent decrease in the average index price of natural gas. Likewise, gas production revenues were impacted by a .5 Bcf decline in production volumes as well as a lower average sales price, which, after giving effect to hedged volumes, was $1.79 per Mcf compared to $1.93 per Mcf in the prior year. Partially offsetting these items was the buyout of the five remaining years of a long-term sales contract ($0.8 million) which covered a portion of the Company's coalbed methane production. A new contract has been executed which should provide a market for all of the Company's production for five years at prices tied to spot market indices. 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 .75 Bcf of its gas production at an average contract price of $1.93 per Mcf, and for the sale of 13 MBbl of its oil production at an average contract price of $18.44 per Bbl. Based on current estimates for fiscal 1995 production (excluding additional producing property acquisitions), over 75 percent of gas production and over 50 percent of oil production are hedged. At June 30, 1995, the Company's deferred gains related to its futures contracts totalled $0.2 million. Current year earnings are expected to continue to be lower than 1994 due to the price risk associated with both unhedged production volumes and operating fees. The program has been extended into fiscal 1996 for the sale of 3.9 Bcf of gas production with an average contract price of $1.78 per Mcf. Other revenues for the quarter and year to date were significantly lower than in the prior year primarily due to the absence of revenues from propane operations following its sale. Excluding the effect of propane revenues, other revenues would have increased slightly for the quarter as a result of increased merchandise sales and would have decreased slightly for the nine months as a result of lower merchandise sales. As with natural gas revenues, decreased commodity cost coupled with decreased sales volumes associated with warmer weather created a majority of the 35 percent and 29 percent decrease in cost of gas for the quarter and year to date, respectively. Consolidated operations and maintenance (O&M) expense was relatively constant for both periods as the impact of the sale of propane assets in the prior year was offset by increases at Alagasco and Taurus. Excluding the effect of propane operations, O&M expense would have increased 6 percent for the quarter and nine month periods primarily due to increased labor and related expenses at both Alagasco and Taurus and increased exploration expense at Taurus. Depreciation expense for the quarter did not vary significantly, as the effect of normal plant growth at Alagasco was offset by decreased depletion associated with decreased production at Taurus. For the nine months, a 3 percent increase in depreciation was due to the effect of normal plant growth at Alagasco offset in part by the absence of depreciation on propane assets. The Company's expense for taxes other than income taxes primarily reflects various state and local business taxes paid by Alagasco as well as various payroll-related taxes. State and local business taxes generally are based on gross receipts of Alagasco and fluctuate accordingly. A significant reduction in average short-term debt outstanding and the early repayment of certain long-term notes more than offset the effect of medium-term notes issued in December and January of the prior fiscal year and June of this year; the resulting decrease in interest expense for the quarter and year to date was 3 percent and 4 percent, respectively. During the third quarter of the prior year, the Company sold all of the operating assets of its propane distribution subsidiary resulting in a pretax gain of $2.1 million and sold a majority of its investment in a high-temperature combustion company for a pretax gain of $1.5 million, accounting for the majority of the significant decrease in other income for the quarter and year to date. The variance in income tax expense for the quarter and year to date was due largely to the effect of decreased pretax income offset slightly by increased recognition of nonconventional fuel tax credits on an interim basis. Nonconventional fuel tax credits are available on production from qualifying wells through the year 2002; therefore, the Company anticipates effective tax rates to remain lower than statutory rates through that period as it expects to recognize all tax credits generated for financial statement purposes. As previously discussed, the Company's business is seasonal in character and influenced by weather conditions. Results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year. As more fully discussed in Note 2, Alagasco is subject to regulation by the APSC, which is expected to consider renewal of the utility's rate-setting mechanism following the completion of its review of certain mandates under the Energy Policy Act of 1992. Changes, if any, to the utility's present rate-setting assumptions or provisions could have an impact on its net income. Liquidity and Capital Resources The item primarily responsible for the significant change in cash provided by operations was the prior year initial investment in underground storage working gas that represented a use of cash totaling $18 million at June 30, 1994. In the current year, storage gas has created a $7.9 million source of cash due largely to a 13 percent decrease in the average cost per Mcf of storage gas. Fluctuations in receivables and payables are generally the result of timing of payments. Net cash used in investing activities primarily was influenced by two factors. Capital expenditures exceeded those of the prior year due largely to Alagasco's acquisition of the 2,200-customer Alabaster gas system and Taurus's investment in proved properties of $6 million adding 9 Bcf of oil and gas reserves. Additionally, the inclusion in the prior year of proceeds related to the sale of propane assets and equity securities served to reduce that quarter's cash used in investing activities. Net cash provided by financing activities has been influenced by several occurrences in both the current and prior years. In the prior year Energen issued 550,000 shares of its common stock which generated $13.5 million, and Alagasco issued $49.6 million in medium-term notes. These proceeds were used to fund the investment in underground working storage gas, redeem its 8.75 percent debentures, reduce short-term debt outstanding, and fund additional capital needs. During the current quarter, Alagasco issued $33.8 million in medium-term notes (with maturites ranging from August 1, 2002 to June 27, 2025, at rates ranging from 6.6 percent to 7.7 percent) the proceeds of which will be used to fund, in early fiscal 1996, the early redemption of its 9 percent debentures and its 11 percent first mortgage bonds. At June 30, 1995, the Company held 35,958 shares of common stock acquired through its stock repurchase program. Future Capital Expenditures and Liquidity: Capital and exploration expenditures could exceed $66 million in fiscal 1995, excluding municipal gas system acquisitions, and primarily represent additions for normal distribution system expansion, the development of a new customer information system at Alagasco, and oil and gas development activities. With respect to oil and gas activities, the Company is attempting to invest in proven property acquisitions, but the market for acquisitions has been limited and the economics of current pricing has delayed exploration opportunities; therefore, capital expenditures in the current fiscal year may not reach targeted levels. However, In addition to these expenditures, Taurus has entered into a three and one-half year agreement with Sonat Exploration and has committed to spend up to $30 million as its proportionate share of acquisitions which may be made during the remainder of calendar 1995 and expects to invest $25 to $50 million annually in subsequent years. Development drilling on the acquired properties will involve additional investment by Taurus. The Company anticipates funding these capital requirements through internally generated capital and the utilization of short-term and long-term credit facilities. Energen has short-term credit facilities totaling $110 million available for working capital needs, with no amounts outstanding at June 30, 1995 or 1994. SELECTED BUSINESS SEGMENT DATA Energen Corporation
Three months ended Nine months ended June 30, June 30, (in thousands, except share data) 1995 1994 1995 1994 Natural Gas Distribution Operating revenues Residential 36,311 42,982 172,763 205,166 Commercial and industrial - small 12,790 16,009 60,222 74,644 Commercial and industrial - large 23 30 271 763 Transportation 6,981 6,892 23,814 22,948 Other (240) 157 162 (190) Total 55,865 66,070 257,232 303,331 Volumes sold and transported (Mcf) Residential 4,626 5,129 25,132 28,902 Commercial and industrial - small 2,341 2,498 10,679 12,000 Commercial and industrial - large 7 7 23 98 Transportation 14,930 12,785 45,016 39,700 Total 21,904 20,419 80,850 80,700 Other data Depreciation and amortization 4,870 4,505 14,391 13,373 Capital expenditures 11,591 7,451 28,807 21,465 Operating income 4,003 4,403 37,587 35,251 Oil and Gas Exploration and Production Operating revenues Natural gas 3,347 4,452 10,859 12,607 Oil 862 722 2,557 2,183 Other 1,108 1,240 4,143 3,995 Total 5,317 6,414 17,559 18,785 Sales volume - natural gas (Mcf) 1,866 2,431 6,075 6,368 Sales (barrels) 60 51 169 155 Average sales price - natural gas (per Mcf) $ 1.79 $ 1.83 $ 1.79 $ 1.93 Average sales price - oil (per barrel) $14.37 $ 14.16 $ 15.13 $14.08 Other data Depreciation, depletion and amortization $2,048 $ 2,323 $ 6,470 $6,368 Capital expenditures $2,713 $ 2,226 $12,450 $4,374 Exploration expenditures $1,251 $ 1,093 $ 1,867 $1,287 Operating income $ (637) $ 911 $ 1,982 $4,922 Other Businesses Operating revenues $2,101 $ 2,477 $ 6,659 $13,286 Depreciation and amortization $ 104 $ 201 $ 321 $ 795 Capital expenditures $ 18 $ 125 $ 23 $ 322 Operating income $ 186 $ (299) $ 433 $ 1,547 Eliminations and Corporate Expenses Operating loss $ (236) $ (690) $ (948) $(1,312)
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 June 30, 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 August 14, 1995 By/s/ Rex J. Lysinger Rex J. Lysinger Chairman of the Board and Chief Executive Officer August 14, 1995 By/s/ G. C. Ketcham G. C. Ketcham Executive Vice President, Chief Financial Officer and Treasurer August 14, 1995 By/s/ J. T. McManus J. T. McManus Vice President-Finance and Corporate Development of Energen and Vice President-Finance and Planning of Alagasco EX-27 2
UT This schedule conatins summary financial information extracted from the Form 10Q for June 30, 1995, and is qualified in its entirety by reference to such financial statements. 0000277595 ENERGEN CORPORATION 1,000 9-MOS SEP-30-1995 JUN-30-1995 PER-BOOK 247,787 59,392 144,034 11,341 3,279 465,833 109 83,248 99,454 182,811 0 0 116,390 0 0 0 36,613 0 0 0 130,019 465,833 275,836 7,475 236,782 244,257 31,579 2,183 33,762 8,183 25,579 0 25,579 9,170 7,229 66,072 2.34 2.34
EX-27 3
UT This schedule contains summary financial information extracted from the Form 10Q for June 30, 1995, and is qualified in its entirety by reference to such financial statements. 0000003146 ALABAMA GAS CORPORATION 1,000 9-MOS SEP-30-1995 JUN-30-1995 PER-BOOK 247,787 172 111,366 9,133 0 368,458 20 34,484 92,707 127,211 0 0 84,740 0 0 0 34,838 0 0 0 121,669 368,458 257,232 11,232 219,645 230,877 26,355 1,100 27,455 6,665 20,790 0 20,790 9,170 5,150 51,988 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.