-----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, Wzr3DXwiu0XBEgCI6MeJVLhnh7uSYWGHFMiEShPTqBM1Eq34NqRnfCdeLdCT4XLo tIdueeTg2C2uxDQbvR7pCA== 0000899243-97-000958.txt : 19970515 0000899243-97-000958.hdr.sgml : 19970515 ACCESSION NUMBER: 0000899243-97-000958 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELLWETHER EXPLORATION CO CENTRAL INDEX KEY: 0000319459 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 760437769 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09498 FILM NUMBER: 97603738 BUSINESS ADDRESS: STREET 1: 1221 LAMAR ST STE 1600 CITY: HOUSTON STATE: TX ZIP: 77010-3039 BUSINESS PHONE: 7136501025 MAIL ADDRESS: STREET 1: 1221 LAMAR STREET 2: STE 1600 CITY: HOUSTON STATE: TX ZIP: 77010-3039 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________ FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES - ---------- EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 1997 or - ---------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From __________ to __________ Commission file number 0-9498 BELLWETHER EXPLORATION COMPANY (Exact name of registrant as specified in its charter) Delaware 74-0437769 (State of incorporation) (IRS Employer Identification Number) 1331 Lamar, Suite 1455 Houston, Texas 77010-3039 (Address of principal executive offices) (ZIP Code) Registrant's telephone number, including area code: (713) 650-1025 NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - ------------------- --------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock, $ 0.01 par value NASDAQ/NMS Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ ___ As of May 9, 1997, 13,844,965 shares of common stock of Bellwether Exploration Company were outstanding. ================================================================================ 1 BELLWETHER EXPLORATION COMPANY ------------------------------ INDEX -----
PART I. FINANCIAL INFORMATION Page # ITEM 1. Financial Statements Condensed Consolidated Balance Sheets: March 31, 1997 (Unaudited) and June 30, 1996................... 3 Condensed Consolidated Statements of Operations (Unaudited): Three and nine months ended March 31, 1997 and March 31, 1996.. 5 Condensed Consolidated Statements of Cash Flows (Unaudited): Nine months ended March 31, 1997 and March 31, 1996............ 6 Notes to Condensed Consolidated Financial Statements (Unaudited).... 8 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................ 11 PART II. OTHER INFORMATION.................................................. 15
2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ----------------------------- BELLWETHER EXPLORATION COMPANY ------------------------------ CONDENSED CONSOLIDATED BALANCE SHEETS ------------------------------------- (Amounts in Thousands) ASSETS ------
March 31, 1997 June 30, 1996 --------------- -------------- (Unaudited) CURRENT ASSETS: Cash and cash equivalents............... $ 782 $ 783 Accounts receivable and accrued revenues 6,391 5,990 Due from related parties................ 95 1,417 Prepaid expenses and other.............. 689 314 -------------- ------------- Total current assets................... 7,957 8,504 -------------- ------------- PROPERTY AND EQUIPMENT, AT COST: Oil and gas properties (full cost method)................................ 89,915 76,043 Gas plant facilities.................... 12,849 12,840 -------------- ------------- 102,764 88,883 Accumulated depreciation, depletion and amortization........................... (39,210) (30,748) -------------- ------------- 63,554 58,135 -------------- ------------- OTHER ASSETS............................ 520 586 -------------- ------------- $ 72,031 $ 67,225 ============== =============
See accompanying notes to condensed consolidated financial statements 3 BELLWETHER EXPLORATION COMPANY ------------------------------ CONDENSED CONSOLIDATED BALANCE SHEETS ------------------------------------- (Amounts in Thousands, Except Share Data) LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------
March 31, 1997 June 30, 1996 --------------- ------------- (Unaudited) CURRENT LIABILITIES: Accounts payable and accrued liabilities $ 3,127 $ 2,634 Due to related parties.................. 888 702 -------------- ------------- Current maturities of long-term debt.... -- -- Total current liabilities.............. 4,015 3,336 -------------- ------------- LONG-TERM DEBT.......................... 12,000 13,048 DEFERRED INCOME TAXES................... 4,624 2,861 OTHER LIABILITIES....................... 1,134 1,383 STOCKHOLDERS' EQUITY: Preferred stock, $0.01 par value, 1,000,000 shares authorized; none issued or outstanding at March 31, 1997 and June 30, 1996................. -- -- Common stock, $0.01 par value, 15,000,000 shares authorized, 9,157,979 and 9,075,479 shares issued and outstanding at March 31, 1997 and June 30, 1996, respectively............ 92 91 Additional paid-in capital.............. 42,104 41,639 Retained earnings....................... 8,062 4,867 -------------- ------------- Total stockholders' equity........... 50,258 46,597 -------------- ------------- $ 72,031 $67,225 ============== =============
See accompanying notes to condensed consolidated financial statements 4 BELLWETHER EXPLORATION COMPANY ------------------------------ CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ----------------------------------------------- (UNAUDITED) (Amounts in Thousands, Except per Share Data)
Three Months Ended Nine Months Ended March 31, March 31, --------------------------------------- 1997 1996 1997 1996 --------------------------------------- REVENUES: Oil and gas revenues................... $6,492 $3,983 $16,338 $11,125 Gas plant and gas gathering revenues... 1,577 2,314 5,456 7,237 Interest and other income.............. 42 41 95 98 ------ ------ ------- ------- 8,111 6,338 21,889 18,460 ------ ------ ------- ------- COST AND EXPENSES: Production expenses.................... 1,310 1,413 4,371 3,860 Gas plant and gas gathering expenses... 815 1,451 2,642 4,457 Depreciation, depletion and amortization.......................... 2,478 1,746 6,645 5,612 General and administrative expenses.... 895 779 2,347 2,338 Interest expense....................... 309 404 829 1,360 Other expense.......................... 1 3 1 158 ------ ------ ------- ------- 5,808 5,796 16,835 17,785 ------ ------ ------- ------- Income before income taxes.............. 2,303 542 5,054 675 Provision for income taxes.............. 841 (15) 1,859 117 ------ ------ ------- ------- NET INCOME.............................. $1,462 $ 557 $ 3,195 $ 558 ====== ====== ======= ======= NET INCOME PER SHARE.................... $0.16 $0.06 $0.34 $0.06 ====== ====== ======= ======= WEIGHTED AVERAGE COMMON AND COMMON 9,398 9,046 9,385 9,046 EQUIVALENT SHARES OUTSTANDING........... ====== ====== ======= =======
See accompanying notes to condensed consolidated financial statements 5 BELLWETHER EXPLORATION COMPANY ------------------------------ CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- (UNAUDITED) (Amounts in Thousands)
Nine Months Ended March 31, --------------------- 1997 1996 --------------------- NET INCOME.............................. $ 3,195 $ 558 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization...................... 6,995 5,749 Deferred income taxes.............. 1,795 --- Other.............................. (3) --- Change in assets and liabilities: Accounts receivable and accrued revenue (401) (176) Accounts payable and other liabilities. 244 256 Due (to) from related parties.......... 1,508 (416) Other.................................. (530) (264) -------- -------- NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES............................ 12,803 5,707 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to oil and gas properties.... (13,872) (3,202) Proceeds from sales of properties...... 1,686 --- Other.................................. (36) (57) -------- -------- NET CASH FLOWS USED IN INVESTING ACTIVITIES............................ (12,222) (3,259) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings............... 14,000 --- Payments of long-term debt............. (15,048) (10,500) Proceeds from gas contract assumption.. --- 9,875 Exercise of stock options.............. 466 28 -------- -------- NET CASH FLOWS USED IN FINANCING ACTIVITIES............................ (582) (597) -------- -------- Net increase (decrease) in cash and cash equivalents...................... (1) 1,851 Cash and cash equivalents at beginning of period............................. 783 1,088 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD................................. $ 782 $ 2,939 ======== ========
See accompanying notes to condensed consolidated financial statements 6 BELLWETHER EXPLORATION COMPANY ------------------------------ CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) ----------------------------------------------------------- (UNAUDITED) (Amounts in Thousands)
Nine Months Ended March 31, --------------- 1997 1996 ------- ------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest............................... $ 601 $ 927 Income taxes (net of prior period refunds).............................. $ 63 $ 161
See accompanying notes to condensed consolidated financial statements 7 BELLWETHER EXPLORATION COMPANY ------------------------------ NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------------- (UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and, therefore, do not include all disclosures required by generally accepted accounting principles. However, in the opinion of management, these statements include all adjustments, which are of a normal recurring nature, necessary to present fairly the financial position at March 31, 1997 and June 30, 1996, and the results of operations and changes in cash flows for the periods ended March 31, 1997 and 1996. These financial statements should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements in the 1996 Form 10-K of Bellwether Exploration Company ("the Company") that was filed with the Securities and Exchange Commission on September 26, 1996 for additional information. 2. INDUSTRY SEGMENT INFORMATION ---------------------------- The Company's operations are concentrated primarily in two segments: 1) the exploration and production of oil and natural gas and, 2) gas plant and gas gathering operations.
FOR THE NINE MONTHS ENDED MARCH 31, --------------------------- 1997 1996 --------------------------- Sales to unaffiliated customers: Oil and gas...................... $16,338 $11,125 Gas plants and gas gathering..... 5,456 7,237 Other revenues................... 95 98 ------- ------- Total revenues............. 21,889 18,460 ======= ======= Operating profit before income tax Oil and gas...................... 5,984 2,647 Gas plants and gas gathering..... 2,152 1,786 ------- ------- 8,136 4,433 Unallocated corporate expenses........ 2,253 2,398 Interest expense...................... 829 1,360 ------- ------- Income before income taxes. 5,054 675 ======= ======= Depreciation, depletion and amortization: Oil and gas...................... 5,983 4,618 Gas plants and gas gathering..... 662 994 ------- ------- $ 6,645 $ 5,612 ======= =======
8 BELLWETHER EXPLORATION COMPANY ------------------------------ NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) ---------------------------------------------------------------- (UNAUDITED) 3. ACQUISITIONS ------------ On April 9 and 15, 1997, the Company closed acquisitions of oil and gas properties, totaling $141.8 million, from certain partnerships and other entities managed or sponsored by Torch Energy Advisors Incorporated ("Torch"). The acquisitions were financed by the sale of 4.4 million shares of common stock, the sale of $100.0 million of 10-7/8% senior subordinated notes due in 2007 and the use of $33.3 million of a new $90.0 million senior unsecured credit facility (including the repayment of $22.0 million on the Existing Credit Facility). Pro forma reserves at June 30, 1996 were 46.6 MMBOE, including 39.2 MMBOE attributable to the acquisitions. See the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on April 24, 1997. 4. LONG TERM DEBT -------------- On February 28, 1995, the Company entered into a credit facility ("Credit Facility") with a commercial bank providing an initial borrowing base of $29.8 million. The borrowings under the Credit Facility were secured by the Company's interests in oil and gas properties, a gathering system and two gas plants. The maturity date, as modified in the second quarter of fiscal 1996, was March 31, 2001 and the borrowing base was $20.1 million. The Credit Facility was retired in October 1996. In October 1996, the Company entered into a syndicated credit facility ("Existing Credit Facility") in an amount up to $50.0 million with an initial borrowing base of $27.0 million, to be redetermined semi-annually. At Bellwether's option, the interest rate varied, based upon borrowing base usage, from LIBOR plus 7/8% to LIBOR plus 1-1/4%, or the greater of the prime rate or Fed Funds plus 1/2%. The Existing Credit Facility was unsecured with respect to oil and gas assets and was retired in April 1997. In April 1997, the Company entered into a senior revolving unsecured credit facility ("Senior Credit Facility") in an amount up to $90.0 million, with an initial borrowing base of $90.0 million to be redetermined semi- annually. Bellwether may elect an interest rate based either on a margin plus LIBOR or the higher of the prime rate or the sum of 1/2 of 1% plus the Federal Funds Rate. For LIBOR borrowings, the interest rate will vary from LIBOR plus 0.875% to LIBOR plus 1.25% based upon borrowing base usage. In connection with the acquisition of oil and gas properties, $33.3 million was drawn under this facility. The Senior Credit Facility contains various covenants including certain required financial measurements for a current ratio, consolidated tangible net worth and interest coverage ratio. In addition, the Senior Credit Facility includes certain limitations on restricted payments, dividends, incurrence of additional funded indebtedness and asset sales. In April 1977, the Company issued $100.0 million of 10-7/8% senior subordinated notes ("Notes") that mature April 1, 2007. Interest on the Notes is payable semi-annually on April 1 and October 1 commencing on October 1, 1997. The Notes will be redeemable, in whole or in part, at the option of 9 BELLWETHER EXPLORATION COMPANY ------------------------------ NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) ---------------------------------------------------------------- (UNAUDITED) the Company at any time on or after April 1, 2002 at 105.44% which decreases annually to 100.00% on April 1, 2005 and thereafter, plus accrued and unpaid interest. In the event of Change of Control of the Company, each holder of the Notes will have the right to require the Company to repurchase all or part of such holder's Notes at an offer price in cash equal to 100.00% of the aggregate principal amount thereof, plus accrued and unpaid interest to the date of purchase. The Notes are guaranteed by the Company and its wholly owned subsidiaries, Odyssey Petroleum Company, Blackhawk Oil Company and 1989-I TEAI Limited Partnership. The Notes contain certain covenants, including limitations on indebtedness, restricted payments, transactions with affiliates, liens, guarantees of indebtedness by subsidiaries, dividends and other payment restrictions affecting restricted subsidiaries, issuance and sales of restricted subsidiary stock, disposition of proceeds of asset sales, and restrictions on mergers, consolidations or sales of assets. 5. GAS CONTRACT LIABILITY ---------------------- The Company and certain third parties were the beneficiaries of an agreement ("Purchase Agreement") whereby another party had an obligation to purchase, until May 1999, the gas produced by the Company and such third parties from the West Monroe field in Union Parish, Louisiana at a price of $4.50 per MMBTU. The Company owned a large majority of the gas produced and sold pursuant to the Purchase Agreement. In March 1996, in exchange for the Company's agreement to assume this obligation to purchase gas under the Purchase Agreement, the Company was paid $9.9 million. As a result of this transaction, the Company removed the net book value of the gas gathering system from the balance sheet and recorded a liability of $2.0 million to cover estimated liabilities under the contract. Gas gathering operations of the subsidiary and payments to third parties are charged to the liability as incurred. From the proceeds, $9.5 million was paid on the Company's Credit Facility. 6. NEW ACCOUNTING PRONOUNCEMENTS ----------------------------- In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 ("SFAS 128") "Earnings per Share". SFAS 128 establishes standards for computing and presenting earnings per share (EPS) and applies to entities with publicly held common stock or potential common stock. This Statement simplifies the standards for computing EPS previously found in Accounting Principles Board ("APB") Opinion No. 15, "Earnings per Share", and makes them comparable to international EPS standards. This Statement is effective for financial statements issued for periods after December 15, 1997, including interim periods; earlier application is not permitted. This Statement requires restatement of all prior-period EPS data presented. Considering the guidelines as prescribed by SFAS 128, management believes that the adoption of this Statement will not have a material effect on EPS, thus pro forma EPS, as suggested for all interim and annual periods prior to required adoption, have been omitted. 10 BELLWETHER EXPLORATION COMPANY ------------------------------ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL - ------- ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- Capital Resources and Liquidity - ------------------------------- The Company's strategy is to maximize long-term shareholder value through aggressive growth in reserves and cash flow using advanced technologies, implementation of a low cost structure and maintenance of a capital structure supportive of growth. The Company continues to acquire producing oil and gas properties through mergers, acquisitions and development, to participate in certain gas processing and gas gathering investments, and to participate selectively in exploration activities. The funding of these activities has been provided by operating cash flows, bank financing and equity placements. Net cash provided by operating activities was $12.8 million for the nine months ended March 31, 1997 compared to $5.7 million provided by operating activities in the same period of 1996. The Company invested $13.9 million in oil and gas properties for the nine months ended March 31, 1997 versus $3.2 million in 1996. The Company and certain third parties were the beneficiaries of an agreement ("Purchase Agreement") whereby another party had an obligation to purchase, until May 1999, the gas produced by the Company and such third parties from the West Monroe field in Union Parish, Louisiana at a price of $4.50 per MMBTU. The Company owned a large majority of the gas produced and sold pursuant to the Purchase Agreement. In March 1996, in exchange for Bellwether's agreement to assume this obligation to purchase gas under the Purchase Agreement, the Company was paid $9.9 million. As a result of this transaction, the Company removed the net book value of the gas gathering system from the balance sheet and recorded a liability of $2.0 million to cover estimated losses under the contract. Gas gathering operations of the subsidiary and payments to third parties are charged to the liability as incurred. From the proceeds, $9.5 million was paid on the Company's Credit Facility. Gas Balancing - ------------- It is customary in the industry for various working interest partners to sell more or less than their entitled share of natural gas. The settlement or disposition of existing gas balancing positions is not anticipated to materially impact the financial condition of the Company. Fiscal 1997 Capital Expenditures - -------------------------------- In February 1997, the Company acquired a 25% interest in the Mud Lake Field, Cameron Parish, Louisiana for $2.0 million in cash. In April 1997, the Company acquired oil and gas properties for $141.8 million, which was financed through the sale of common stock, issuance of 10-7/8% senior subordinated notes and borrowings from a new Senior Credit Facility. During fiscal 1997, the Company anticipates investing approximately $19.3 million, excluding acquisition costs, which is comprised of $14.2 million for development drilling activities, $5.0 million for exploratory drilling activities, and $0.1 million for gas plant and gas gathering facilities. Development expenditures include $4.2 million related to the properties acquired in the April 1997 acquisition. The Company believes its cash flow provided by operating activities and the proceeds from credit facilities will be sufficient to meet these projected capital investments (See Notes 3 and 4 of the Notes to Condensed Consolidated Financial Statements). The Company continues to seek acquisition opportunities and the consummation of such a transaction may directly impact anticipated capital expenditures. 11 BELLWETHER EXPLORATION COMPANY ------------------------------ MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS (CONTINUED) ----------------------------------------------- Results of Operations (three and nine months ended March 31, 1997 and 1996) - --------------------------------------------------------------------------- The following table sets forth certain operating information of the Company for the periods presented:
Three Months Ended March 31, Nine Months Ended March 31, ------------------------------------------------------------ Increase/ Increase/ 1997 1996 (Decrease) 1997 1996 (Decrease) ------------------------------------------------------------ Production: Oil and condensate (MBBLs)............ 78 76 2.6% 221 260 (15.0%) Natural gas (MMCF).................... 1,745 1,320 32.2% 4,559 3,748 21.6% Average sales price: Oil and condensate (per BBL).......... $21.24 $18.46 15.1% $21.47 $16.75 28.2% Natural gas (1) (per MCF)............. $ 2.77 $ 2.19 26.5% $ 2.54 $ 1.81 40.3% Average unit production cost per BOE (2) $ 3.55 $ 4.77 (25.6%) $ 4.46 $ 4.36 2.3% Gas plant and gas gathering operations: Average daily net production (BBLs)... 778 876 (11.2%) 886 864 2.5% Average NGL sales price (per BBL)..... $17.37 $14.56 19.3% $17.89 $12.66 41.3% Gas gathering throughput (MMCF) (3)... --- 298 --- --- 1,036 --- - ----------------------------------------------------------------------------------------------------
(1) Average sales price for natural gas includes revenues received from the sale of natural gas liquids which were removed from the Company's gas production. (2) Rate is based upon costs incurred to operate and maintain wells and related equipment and facilities including ad valorem and severance taxes. (3) Operations are charged to gas contract liability subsequent to March 1, 1996. (See Note 5 of the Notes to Condensed Consolidated Financial Statements) 12 BELLWETHER EXPLORATION COMPANY ------------------------------ MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS (CONTINUED) ----------------------------------------------- Revenues - -------- Oil and gas revenues for the three and nine months ended March 31, 1997 were $6.5 million and $16.3 million, as compared to $4.0 million and $11.1 million for the respective periods in 1996. The increase, which is 63% for the three month period and 47% for the nine month period, is attributable primarily to production from new drilling and workovers and an increase in oil and gas prices. Gas plant and gas gathering revenues were $1.6 million and $5.5 million in the three and nine months ended March 31, 1997, respectively, and $2.3 million and $7.2 million, respectively, in the same periods of fiscal 1996. Gas plant revenues of approximately $1.6 million and $5.5 million are reflected in the three and nine months ended March 31, 1997, respectively, compared to $1.5 million and $3.9 million in the same periods of 1996. Higher natural gas liquids prices were the primary cause of the increase. Gas gathering revenues were $0.8 million and $3.4 million for the three and nine months ended March 31, 1996, respectively. Commencing in March 1996, gas gathering revenues have been applied to the gas contract liability. (See Note 5 of the Notes to Condensed Consolidated Financial Statements) Expenses - -------- Production expenses for the three and nine months ended March 31, 1997 totaled $1.3 and $4.4 million, or 7% under and 13% over the $1.4 million and $3.9 million for the three and nine months ended March 31, 1996, respectively. Lease operating expenses per barrel of oil equivalent were 26% lower and 2% higher, respectively, for the three and nine months ended March 31, 1997, when compared to the respective periods in fiscal 1996. The increases were primarily the result of higher severance taxes from increases in oil prices of 15.1% and 28.2% and increases in natural gas prices of 26.5% and 40.3% for the three and nine months ended March 31, 1997 and 1996, respectively. The quarterly decrease is the result of a reclassification of marketing charges from expense to revenue and a reclassification of Cove field production taxes and transportation charges. Gas plant and gas gathering expenses were $0.8 million and $2.6 million for the three and nine months ended March 31, 1997 respectively, and $1.5 million and $4.5 million, respectively, in the same periods in fiscal 1996. The decrease in gas plant and gas gathering expenses reflect the reduction in gas gathering activity relating to the contract assumption, offset by higher payments from gas plant operations to producers under the Company's percent-of-proceeds contracts. The higher prices to producers resulted primarily from higher liquids prices received by the Company (See Note 5 of the Notes to Condensed Consolidated Financial Statements). Depreciation, depletion and amortization was $2.5 million and $6.6 million for the three and nine months ended March 31, 1997. These amounts reflect a 47% and 18% increase over the $1.7 million and $5.6 million recorded in the comparable periods in 1996. Increases in oil and gas production and a higher depletion rate per barrel of oil equivalent, resulting from new drilling and workovers, are the main reasons for the increases. 13 BELLWETHER EXPLORATION COMPANY ------------------------------ MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS (CONTINUED) ----------------------------------------------- General and administrative expenses totaled $0.9 million and $2.3 million in the three and nine months ended March 31, 1997 as compared to $0.8 million and $2.3 million for comparable periods of fiscal 1996. Interest expense decreased to $0.3 million and $0.8 million for the three and nine months ended March 31, 1997 from $0.4 million and $1.4 million in the same periods of 1996. The decrease in interest expense is the result of payments on the credit facilities. Income Taxes - ------------ The provision for federal and state income taxes for both the three and nine months ended March 31, 1997 is based upon a 37% effective tax rate. Net Income - ---------- Net income for the three and nine months ended March 31, 1997 is approximately $1.5 million and $3.2 million as compared to net income of $0.6 million and $0.6 million for the respective periods of 1996. 14 BELLWETHER EXPLORATION COMPANY ------------------------------ PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - ------- ----------------- None. ITEM 2. CHANGES IN SECURITIES - ------- --------------------- None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES - ------- ------------------------------- None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------- --------------------------------------------------- None. ITEM 5. OTHER INFORMATION - ------- ----------------- None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------- -------------------------------- a. Exhibits The following exhibits are filed with this Form 10-Q and they are identified by the number indicated. 27 Financial Data Schedule b. Reports on Form 8-K. None. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BELLWETHER EXPLORATION COMPANY ------------------------------ (Registrant) Date: May 14, 1997 By: /s/ J. Darby Sere' ----------------- ------------------------------------ J. Darby Sere' President and Chief Operating Officer Date: May 14, 1997 By: /s/ Charles C. Green, III ----------------- ------------------------------------- Charles C. Green, III Executive Vice President and Chief Financial Officer 16 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS JUN-30-1997 JUL-01-1996 MAR-31-1997 782 0 6,391 0 0 7,957 102,764 (39,210) 72,031 4,015 0 92 0 0 50,166 72,031 8,069 8,111 4,603 5,808 896 0 309 1,771 841 1,462 0 0 0 1,462 0.16 0.15
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