-----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, SMzbpsJFh9EjEDJtCLQy5wc8jvIXq7O3iUXd6Lv/knH+L/oY7XM/EU1sLP+Zknp9 dA/yT/lf2Rv+6EnwutXJag== 0000277595-96-000010.txt : 19960517 0000277595-96-000010.hdr.sgml : 19960517 ACCESSION NUMBER: 0000277595-96-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 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: 96565892 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: 96565893 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 MARCH 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 May 5, 1996: Energen Corporation, $0.01 par value 10,995,990 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 MARCH 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 4. Submission of Matters to a Vote of Security Holders. .19 Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . .19 SIGNATURES 20 (This page intentionally left blank.) PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME Energen Corporation and Subsidiaries (Unaudited) Three months ended Six months ended March 31, March 31, (in thousands, except share data) 1996 1995 1996 1995 Operating Revenues Natural gas distribution $162,143 $134,141 $235,328 $201,367 Oil and gas production activities 8,979 6,311 14,775 12,242 Other 562 583 1,098 1,177 Intercompany eliminations (697) (869) (1,391) (1,813) Total operating revenues 170,987 140,166 249,810 212,973 Operating Expenses Cost of gas 89,984 67,966 124,068 99,016 Operations 23,862 22,885 47,431 44,499 Maintenance 3,191 2,642 5,794 4,906 Depreciation, depletion, and amortization 9,169 7,188 16,979 14,150 Taxes, other than income taxes 11,138 9,248 17,122 14,884 Total operating expenses 137,344 109,929 211,394 177,455 Operating Income 33,643 30,237 38,416 35,518 Other Income (Expense) Interest expense, net of amounts capitalized (3,305) (2,639) (6,686) (5,388) Other, net 163 570 1,706 1,423 Total other income (expense) (3,142) (2,069) (4,980) (3,965) Income Before Income Taxes 30,501 28,168 33,436 31,553 Income taxes 7,071 6,454 7,728 7,103 Net Income $ 23,430 $ 21,714 $ 25,708 $24,450 Earnings Per Average Common Share $ 2.13 $ 1.99 $ 2.34 $2.24 Dividends Per Common Share $ 0.29 $ 0.28 $ 0.58 $0.56 Average Common Shares Outstanding 11,005 10,908 10,977 10,914 The accompanying Notes are an integral part of these statements. CONSOLIDATED BALANCE SHEETS Energen Corporation and Subsidiaries (Unaudited) March 31,September 30, (in thousands) 1996 1995 ASSETS Property, Plant and Equipment Utility plant $ 521,499 $ 504,371 Less accumulated depreciation 256,883 247,926 Utility plant, net 264,616 256,445 Oil and gas properties, successful efforts method 148,598 117,339 Less accumulated depreciation , depletion and amortization 56,061 51,170 Oil and gas properties, net 92,537 66,169 Other property, net 4,183 4,650 Total property, plant and equipment, net 361,336 327,264 Current Assets Cash and cash equivalents 14,461 36,695 Accounts receivable, net of allowance for doubtful accounts of $2,300 at March 31, 1996 and $2,037 at September 30, 1995 67,659 30,813 Inventories, at average cost Storage gas 9,234 20,276 Materials and supplies 8,009 7,711 Liquified natural gas in storage 1,392 3,539 Deferred gas costs 11,015 1,426 Regulatory asset 3,566 6,321 Deferred income taxes 7,351 9,667 Prepayments and other 6,640 2,583 Total current assets 129,327 119,031 Other Assets Notes receivable 2,314 3,095 Deferred charges and other 11,723 9,694 Total other assets 14,037 12,789 TOTAL ASSETS $ 504,700 $ 459,084 The accompanying Notes are an integral part of these statements. CONSOLIDATED BALANCE SHEETS Energen Corporation and Subsidiaries (Unaudited) March 31, September 30, (in thousands, except share data) 1996 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, 11,033,919 shares outstanding at March 31, 1996 and 10,921,733 shares outstanding at September 30, 1995 110 109 Premium on capital stock 83,903 81,243 Capital surplus 2,802 2,802 Retained earnings 109,353 90,020 Treasury stock at cost, 52,006 shares at March 31, 1996 and 11,627 shares at September 30,1995 (1,174) (250) Total common shareholders' equity 194,994 173,924 Long-term debt 130,652 131,600 Total capitalization 325,646 305,524 Current Liabilities Long-term debt due within one year 1,825 1,775 Notes payable to banks 34,000 32,300 Accounts payable 50,737 32,242 Accrued taxes 16,673 11,339 Customers' deposits 18,829 18,218 Amounts due customers 10,694 16,546 Accrued wages and benefits 12,119 10,955 Other 18,839 14,923 Total current liabilities 163,716 138,298 Deferred Credits and Other Liabilities Deferred income taxes 2,041 2,540 Accumulated deferred investment tax credits 3,860 4,103 Other 9,437 8,619 Total deferred credits and other liabilities 15,338 15,262 Commitments and Contingencies TOTAL CAPITAL AND LIABILITIES $ 504,700 $ 459,084 The accompanying Notes are an integral part of these statements. CONSOLIDATED STATEMENTS OF CASH FLOW Energen Corporation and Subsidiaries (Unaudited) Six months ended March 31, (in thousands) 1996 1995 Operating Activities Net Income $ 25,708 $ 24,450 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 16,979 14,150 Deferred income taxes, net 1,352 (4,770) Deferred investment tax credits, net (243) (243) Gain on sale of assets (647) 0 Net change in: Accounts receivable (36,846) (9,498) Inventories 12,891 9,312 Deferred gas cost (9,589) (2,502) Accounts payable gas purchases 17,691 391 Accounts payable other trade 804 6,996 Other current assets and liabilities 3,802 10,114 Other, net 434 (148) Net cash provided by operating activities 32,336 48,252 Investing Activities Additions to property, plant and equipment (52,108) (26,469) Proceeds from sale of assets 2,452 0 Payments on notes receivable 781 420 Other, net 25 131 Net cash used in investing activities (48,850) (25,918) Financing Activities Payment of dividends on common stock (6,374) (6,113) Issuance of common stock 1,355 90 Purchase of treasury stock (1,503) (361) Reduction of long-term debt (898) (9,136) Net change in short-term debt 1,700 (6,000) Net cash used in financing activities (5,720) (21,520) Net change in cash and cash equivalents (22,234) 814 Cash and cash equivalents at beginning of period 36,695 27,526 Cash and Cash Equivalents at End of Period $ 14,461 $ 28,340 The accompanying Notes are an integral part of these statements. STATEMENTS OF INCOME Alabama Gas Corporation (Unaudited) Three months ended Six months ended March 31, March 31, (in thousands) 1996 1995 1996 1995 Operating Revenues $ 162,143 $134,141 $ 235,328 $ 201,367 Operating Expenses Cost of gas 90,681 68,835 125,459 100,829 Operations 20,647 19,852 40,590 38,209 Maintenance 3,134 2,607 5,708 4,835 Depreciation 5,143 4,784 10,251 9,521 Income taxes Current 11,101 14,568 9,962 15,630 Deferred, net (436) (4,657) 1,758 (4,775) Deferred investment tax credits, net (121) (121) (243) (243) Taxes, other than income taxes 10,723 8,997 16,448 14,389 Total operating expenses 140,872 114,865 209,933 178,395 Operating Income 21,271 19,276 25,395 22,972 Other Income Allowance for funds used during construction 346 223 687 409 Other, net (576) 85 (440) 243 Total other income (230) 308 247 652 Interest Charges Interest on long-term debt 1,734 1,680 3,872 3,437 Other interest expense 661 637 1,138 1,169 Total interest charges 2,395 2,317 5,010 4,606 Net Income Available for Common $ 18,646 $ 17,267 $ 20,632 $19,018 The accompanying Notes are an integral part of these statements. BALANCE SHEETS Alabama Gas Corporation (Unaudited) March 31, September 30, (in thousands) 1996 1995 ASSETS Property, Plant and Equipment Utility plant $ 521,499 $ 504,371 Less accumulated depreciation 256,883 247,926 Utility plant, net 264,616 256,445 Other property, net 288 193 Current Assets Cash and cash equivalents 1,119 727 Accounts receivable Gas 50,311 22,215 Merchandise 1,251 1,546 Other 6,498 1,598 Allowance for doubtful accounts (2,289) (2,000) Inventories, at average cost Storage gas 9,234 20,276 Materials and supplies 6,291 5,860 Liquified natural gas in storage 1,392 3,539 Deferred gas costs 11,015 1,426 Regulatory asset 3,566 6,321 Deferred income taxes 5,183 7,416 Prepayments and other 2,135 2,302 Total current assets 95,706 71,226 Deferred Charges and Other Assets 7,419 7,403 TOTAL ASSETS $ 368,029 $ 335,267 The accompanying Notes are an integral part of these statements. BALANCE SHEETS Alabama Gas Corporation (Unaudited) March 31, September 30, (in thousands, except share data) 1996 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 March 31, 1996 and September 30, 1995 $ 20 $ 20 Premium on capital stock 31,682 31,682 Capital surplus 2,802 2,802 Retained earnings 101,910 87,638 Total common shareholder's equity 136,414 122,142 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 236,414 222,142 Current Liabilities Long-term debt due within one year Notes payable to banks Accounts payable 40,938 26,160 Accrued taxes 17,499 10,236 Customers' deposits 18,829 18,218 Supplier refunds due customers 14,364 3,315 Other amounts due customers (3,670) 13,231 Accrued wages and benefits 6,659 5,228 Other 10,569 9,444 Total current liabilities 105,188 85,832 Deferred Credits and Other Liabilities Deferred income taxes 16,333 16,343 Accumulated deferred investment tax credits 3,860 4,103 Regulatory liability 5,442 6,001 Customer advances for construction and other 792 846 Total deferred credits and other liabilities 26,427 27,293 Commitments and Contingencies TOTAL CAPITAL AND LIABILITIES $ 368,029 $ 335,267 The accompanying Notes are an integral part of these statements. STATEMENTS OF CASH FLOW Alabama Gas Corporation (Unaudited) Six months ended March 31, (in thousands) 1996 1995 Operating Activities Net Income $ 20,632 $19,018 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,251 9,521 Deferred income taxes, net 1,758 (4,775) Deferred investment tax credits (243) (243) Net change in: Accounts receivable (32,411) (12,054) Inventories 12,757 9,880 Deferred gas costs (9,589) (2,502) Accounts payable gas purchases 17,691 391 Accounts payable other trade (2,913) 9,520 Other current assets and liabilities 4,533 9,299 Other, net (815) (345) Net cash provided by operating activities 21,651 37,710 Investing Activities Additions to property, plant and equipment (17,774) (16,729) Other, net (92) (138) Net cash used in investing activities (17,866) (16,867) Financing Activities Payment of dividends on common stock (6,360) (6,115) Reduction of long-term debt 0 (1,610) Net advances from affiliates 2,967 4,512 Net change in short-term debt 0 (4,000) Net cash used in financing activities (3,393) (7,213) Net change in cash and cash equivalents 392 13,630 Cash and cash equivalents at beginning of period 727 156 Cash and Cash Equivalents at End of Period $ 1,119 $ 13,786 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 $.5 million remaining at March 31, 1996. 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. On April 11, 1996, the FERC issued its Order on Rehearing approving the Settlement with minor modifications. 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, subsequent to quarter end, Southern refunded over-collected GSR costs, Alagasco's share of which has been determined to be $4.5 million. This amount has been recorded in the accompanying financial statements as a receivable with a corresponding refund due customers. 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 $1.1 million to be paid through March 1997 and approximately $2.0 million in other transition costs to be paid through June 1998. Such amounts have been recorded 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 Six months ended March 31, (in thousands) 1996 1995 Interest paid, net of amounts capitalized $ 6,646 $ 6,675 Income taxes paid $ 1,089 $ 2,615 Noncash investing activities (capitalized depreciation and allowance for funds used during construction) $ 773 $ 487 Alabama Gas Corporation Six months ended March 31, (in thousands) 1996 1995 Interest paid $ 5,025 $ 5,531 Income taxes paid $ 2,258 $ 6,647 Noncash investing activities (capitalized depreciation and allowance for funds used during construction) $ 773 $ 487 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated net income for the second quarter of fiscal 1996 of $23,430,000 ($2.13 per share) exceeded the prior year's results of $21,714,000 ($1.99 per share). The contribution to consolidated earnings from Energen's natural gas distribution company, Alagasco, was $1.4 million greater this quarter due largely to the utility earning its allowed return on a higher level of investment required to support the needs of its service territory. Taurus Exploration Inc., Energen's oil and gas exploration and production subsidiary, also improved its quarterly earnings contribution primarily due to increased conventional oil and gas production and higher gas prices partially offset by increased depreciation, depletion, and amortization (DD&A) and interest expense. In addition, Taurus's prior-period earnings included a $.5 million gain from the buy out of a gas sales contract. For the 1996 fiscal year-to-date, Energen's net income totaled $25,708,000 ($2.34 per share) compared with $24,450,000 ($2.24 per share) for the first six months of fiscal 1995. Alagasco increased its contribution to consolidated net income by $1.6 million primarily by earning its allowed return on a higher level of investment. Excluding the prior-period gain from the sales contract buy out, Taurus's year-to-date earnings remained virtually unchanged, with increased in production and gas prices being largely offset by increased DD&A, exploration and interest expenses. Weather colder than that of the prior year had the most significant impact on natural gas revenues in the current year evidenced by a 3 Bcf and 5.4 Bcf increase in residential sales volumes for the quarter and year-to-date, respectively, as well as a significant increase in natural gas pricing. Alagasco's residential operating margins, however are unaffected due to the APSC-approved temperature adjustment provision which allows for the adjustment of customer's bills on a real-time basis to reflect usage under normal temperature conditions. Revenues from oil and gas production activities were significantly higher in the second quarter this year. Production volumes from both natural gas and oil were up by .5 Bcf each, largely associated with current year acquisitions. The impact of higher production was magnified by an increased average sales price for both gas and oil. After giving effect to hedged volumes, the average per Mcf sales price of natural gas was $2.15 compared to $1.76 in the prior year, and the average per barrel sales price of oil was $16.04 compared to $15.31 in the prior year. These factors similarly influenced the six month comparison. Natural gas and oil production increased .3 Bcf and .8 Bcf, respectively; while after giving effect to hedged volumes, the average per Mcf sales price of natural gas was $1.97 compared to $1.78 in the prior year, and the average per barrel sales price of oil was $15.42 compared to $15.55 in the prior year. Operating and consulting fees did not vary significantly for the quarter or year-to-date. 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 4.2 Bcf of its gas production at an average contract price of $1.84 per Mcf and for the sale of 210 MBbl of its oil production at an average contract price of $17.49 per Bbl. Based on current estimates for fiscal 1996 production (excluding additional producing property acquisitions), approximately 67 percent of estimated firm gas production and 100 percent of estimated firm oil production are hedged. At March 30, 1996, the Company's deferred losses related to its futures contracts totaled $1.7 million. The program has been extended into fiscal 1997 for the sale of 7.6 Bcf of gas production with an average contract price of $1.97 per Mcf. Increased volumes, primarily associated with colder weather, and increased commodity cost of natural gas resulted in an increase in cost of gas for both periods. For the quarter, consolidated operations and maintenance expense (O&M) increased 6 percent due primarily to increased activities associated with colder weather, and increased marketing expenses at Alagasco. For the year-to-date higher lease operating and exploration expenses at Taurus combined with the above to create an 8 percent increase in O&M. The 12 percent increase in depreciation expense for the quarter and six months is related primarily to an increased DD&A rate (associated with prior year reserve revisions) and increased production volumes at Taurus, and the effects of normal plant growth at Alagasco. The Company's expense for taxes other than income primarily reflects the various state and local income 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. Higher average short-term debt outstanding related to the initial financing of Taurus's multi-year acquisition and development strategy was primarily responsible for the increase in interest expense for the quarter and year-to-date. The reduction in other income for the quarter was primarily due to the amortization of the call premium associated with Alagasco's early redemption of long-term debt. For the year-to-date, the impact of this amortization was offset by income recorded in the first quarter at Taurus related to a sale of proved properties. The variance in income tax expense for the quarter and year-to-date was due largely to the effect of higher consolidated pretax income offset somewhat by increased 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. Liquidity and Capital Resources Weather colder than that of the prior year had the most significant impact on the $16 million decrease in cash provided by operations due to its effect on the timing of collection of certain gas supply costs from customers. Also influencing the change was a decrease in Alagasco's storage gas inventory as the colder weather 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's initial acquisition investment of $26.4 million for producing oil and gas properties adding approximately 18.6 Bcf of gas and 3.8 Mmbl of oil, and an additional $8.5 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 six months was the $2.5 million acquisition of an 1,100 customer municipal gas system. During the six months ended March 31, 1995, the Company redeemed certain of its notes payable. Additionally, the Company has utilized its short-term credit facilities more extensively in the current year to initially finance its multi-year acquisition strategy. Accordingly, cash provided by financing activities has increased $15.8 million. 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 annually 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 $116 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 $150 million in fiscal 1996, excluding additional municipal gas system acquisitions. Of that, Taurus may invest $100 million or more 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 $48 million in fiscal 1996, excluding additional 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 Six months ended March 31, March 31, (in thousands, except share data) 1996 1995 1996 1995 Natural Gas Distribution Operating revenues Residential $ 112,329 $ 92,102 $ 160,065 $ 136,452 Commercial and industrial - small 40,560 31,887 57,429 47,432 Commercial and industrial - large 675 219 731 250 Transportation 8,788 9,267 16,945 16,833 Other (209) 666 158 400 Total $ 162,143 $ 134,141 $ 235,328 $ 201,367 Volumes sold and transported Residential 18,187 15,219 25,977 20,506 Commercial and industrial - small 7,003 5,871 10,382 8,338 Commercial and industrial - large 9 8 18 16 Transportation 14,927 15,796 31,174 30,086 Total 40,126 36,894 67,551 58,946 Other data Depreciation and amortization $ 5,143 $ 4,784 $ 10,251 $ 9,521 Capital expenditures $ 11,110 $ 7,438 $ 18,547 $17,216 Operating income $ 31,815 $29,066 $ 36,872 $33,584 Oil and Gas Exploration and Production Operating revenues Natural gas $ 5,428 $3,564 $ 8,846 $ 7,512 Oil 2,404 903 3,707 1,695 Other 1,147 1,844 2,222 3,035 Total $ 8,979 $6,311 $ 14,775 $12,242 Sales volume - natural gas 2,519 2,028 4,484 4,209 Sales volume - oil 150 59 240 109 Average sales price - natural gas (per Mcf) $ 2.15 $ 1.76 $ 1.97 $ 1.78 Average sales price - oil (per barrel) $ 16.04 $15.31 $ 15.42 $15.55 Other data Depreciation, depletion and amortization $ 3,895 $2,304 $ 6,466 $ 4,422 Capital expenditures $ 14,685 $6,730 $ 34,300 $ 9,735 Exploration expenditures $175 $ 187 $ 1,228 $ 616 Operating income $ 2,255 $1,465 $ 2,117 $ 2,619 Other Business Operating revenues $ 562 $ 583 $ 1,098 $ 1,177 Depreciation and amortization $ 131 $ 100 $ 262 $ 207 Capital expenditures $ 34 $ 5 $ 34 $ 5 Operating income $ 51 $ (22) $ 146 $ 27 Eliminations and Corporate Expenses Operating loss $ (478) $(272) $ (719) $ (712) PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS a. At the annual meeting of shareholders held on January 24, 1996, the Energen Shareholders elected the following Directors to serve for three year terms: Director Votes cast for Votes withheld J. Mason Davis, Jr. 8,629,177 121,209 James S.M. French 8,641,771 108,615 Wallace L. Luthy 8,633,353 117,033 b. The shareholders also approved a proposal to amend the 1992 Directors Stock Plan of the Company to increase the size of The annual grant from 200 shares to 300 shares for Each non-employee Director beginning in fiscal year 1996. The vote was: 7,866,727 for, 690,762 against, and 193,097 abstain. 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 March 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 May 15, 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 May 15, 1996 By/s/ G. C. Ketcham G. C. Ketcham Executive Vice President, Chief Financial Officer and Treasurer May 15, 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 March 31,1996, and is qualified in its entirety by reference to such financial statements. 0000277595 ENERGEN CORPORATION 1,000 6-MOS SEP-30-1996 OCT-01-1995 Mar-31-1996 PER-BOOK 264,616 96,720 129,327 11,723 2,314 504,700 110 86,705 109,353 194,994 0 0 130,652 34,000 0 0 1,825 0 0 0 143,229 504,700 249,810 7,728 211,394 219,122 30,688 1,706 32,394 6,686 25,708 0 25,708 6,374 5,115 32,336 2.34 2.34
EX-27.2 3
UT This schedule contains summary financial information extracted from the Form 10Q for March 31,1996, and is qualified in its entirety by reference to such financial statements. 0000003146 ALABAMA GAS CORPORATION 1,000 6-MOS SEP-30-1996 OCT-01-1995 MAR-31-1996 PER-BOOK 264,616 288 95,706 7,419 0 368,029 20 34,484 101,910 136,414 0 0 100,000 0 0 0 0 0 0 0 131,615 368,029 235,328 11,477 198,456 209,933 25,395 247 25,642 5,010 20,632 0 20,632 6,360 3,872 21,651 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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