-----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, Eagf/Vc547FX+ezPr56PXD2vmGzKDPR3GHXppZfREc1LCetC3YgM+fEz9ZrqbFoy vNofo+AWfcoG6WdSIjs+Qg== 0000033213-97-000025.txt : 19970815 0000033213-97-000025.hdr.sgml : 19970815 ACCESSION NUMBER: 0000033213-97-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NYSE SROS: PHLX FILER: COMPANY DATA: COMPANY CONFORMED NAME: EQUITABLE RESOURCES INC /PA/ CENTRAL INDEX KEY: 0000033213 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION & DISTRIBUTION [4923] IRS NUMBER: 250464690 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03551 FILM NUMBER: 97661105 BUSINESS ADDRESS: STREET 1: 420 BLVD OF THE ALLIES CITY: PITTSBURGH STATE: PA ZIP: 15219 BUSINESS PHONE: 4122613000 MAIL ADDRESS: STREET 1: 420 BOULEVARD OF THE ALLIES CITY: PITTSBURGH STATE: PA ZIP: 15219 FORMER COMPANY: FORMER CONFORMED NAME: EQUITABLE GAS CO DATE OF NAME CHANGE: 19841120 10-Q 1 FORM 10-Q FOR THE PERIOD ENDING JUNE 30, 1997 UNITED STATES 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 QUARTERLY PERIOD ENDED JUNE 30, 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 1-3551 EQUITABLE RESOURCES, INC. (Exact name of registrant as specified in its charter) PENNSYLVANIA 25-0464690 (State of incorporation or organization) (IRS Employer Identification No.) 420 BOULEVARD OF THE ALLIES, PITTSBURGH, PENNSYLVANIA 15219 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (412) 261-3000 ------------ NONE (Former name, former address and former fiscal year, if changed since last report) ------------ 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 Indicate the number of shares outstanding of each of issuer's classes of common stock, as of the close of the period covered by this report. Outstanding at Class June 30, 1997 Common stock, no par value 34,598,715 shares EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Index Page No. PART I. FINANCIAL STATEMENTS: Statements of Consolidated Income for the Three Months Ended June 30, 1997 and 1996, the Six Months Ended June 30, 1997 and 1996, and the Twelve Months Ended June 30, 1997 and 1996 1 Statements of Condensed Consolidated Cash Flows for the Three Months Ended June 30, 1997 and 1996, the Six Months Ended June 30, 1997 and 1996, and the Twelve Months Ended June 30, 1997 and 1996 2 Consolidated Balance Sheets, June 30, 1997 and 1996 and December 31, 1996 3 - 4 Notes to Consolidated Financial Statements 5 - 6 Gas Produced, Purchased and Sold 7 - 12 Information by Business Segment 13 Management's Discussion and Analysis of Financial Condition and Results of Operations 14 - 22 PART II. OTHER INFORMATION 23 SIGNATURE 24
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Statements of Consolidated Income (Thousands Except Per Share Amounts) Three Months Ended Six Months Ended Twelve Months Ended June 30, June 30, June 30, ------------------------------------------------------------------------------ 1997 1996 1997 1996 1997 1996 ------------------------------------------------------------------------------ Operating Revenues......... $ 400,760 $ 391,767 $ 953,335 $ 1,032,045 $ 1,783,089 $ 1,736,810 Cost of Energy Purchased .. 293,676 296,372 697,067 771,843 1,293,380 1,205,923 ---------- ---------- ----------- ----------- ----------- ----------- Net operating revenues 107,084 95,395 256,268 260,202 489,709 530,887 ---------- ---------- ----------- ----------- ----------- ----------- Operating Expenses: Operation............... 62,339 50,922 117,504 103,583 227,694 204,150 Maintenance............. 7,915 6,359 14,587 12,267 28,864 25,701 Depreciation and depletion 20,318 20,076 40,300 41,658 81,023 88,858 Impairment of assets.... 13,000 - 13,000 - 13,000 121,081 Taxes other than income. 9,439 9,055 23,457 24,308 41,306 44,103 ---------- ---------- ----------- ----------- ----------- ----------- Total operating expenses 113,011 86,412 208,848 181,816 391,887 483,893 ---------- ---------- ----------- ----------- ----------- ----------- Operating Income (Loss) ... (5,927) 8,983 47,420 78,386 97,822 46,994 Other Income .............. 1,684 2,686 3,413 4,855 1,556 5,406 Interest Charges........... 11,133 9,938 22,432 20,412 43,845 44,966 ---------- ---------- ----------- ----------- ----------- ----------- Income (Loss) Before Income Taxes .... (15,376) 1,731 28,401 62,829 55,533 7,434 Income Taxes (Benefits).... (6,113) 803 9,874 23,175 17,281 (7,175) ---------- ---------- ----------- ----------- ----------- ----------- Net Income (Loss).......... $ (9,263) $ 928 $ 18,527 $ 39,654 $ 38,252 $ 14,609 ========== ========== =========== =========== =========== =========== Average Common Shares Outstanding...... 35,289 35,113 35,355 35,070 35,325 34,989 ========== ========== =========== =========== ========== =========== Earnings (Loss) Per Share of Common Stock............ $(.26) $.03 $.52 $1.13 $1.08 $.42 ===== ==== ==== ===== ===== ==== Dividends Per Share of Common Stock............ $ - $ - $.59 $.59 $1.18 $1.18 ===== ===== ==== ==== ===== =====
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Statements of Condensed Consolidated Cash Flows (Thousands) Three Months Ended Six Months Ended Twelve Months Ended June 30, June 30, June 30, --------------------------------------------------------------------------------- 1997 1996 1997 1996 1997 1996 --------------------------------------------------------------------------------- Net cash provided (used) by operating activities..................... $ 13,238 $ (19,036) $ 71,490 $ 48,759 $ 88,299 $ 242,918 ----------- ------------ ---------- ----------- ----------- ----------- Cash Flows from Investing Activities: Capital expenditures..................... (32,340) (23,851) (52,172) (42,682) (119,774) (105,804) Proceeds from sale of property........... 97 1,078 313 1,503 2,990 25,360 ----------- ----------- ----------- ----------- ---------- ----------- Net cash used in investing activities........................ (32,243) (22,773) (51,859) (41,179) (116,784) (80,444) ----------- ----------- ----------- ----------- ---------- ----------- Cash Flows from Financing Activities: Issuance of common stock................. 314 648 354 1,191 1,469 2,745 Purchase of treasury stock............... (23,751) (8) (23,751) (8) (23,776) (174) Dividends paid........................... (48) (7) (20,648) (20,708) (41,488) 41,344) Proceeds from issuance of long-term debt......................... - - - - 144,919 (42) Repayments and retirements of long-term debt......................... - (84,823) (157) (84,823) (65,774) (109,323) Increase in short-term loans............. 35,769 96,306 51,201 92,652 28,449 3,578 ----------- ----------- ----------- ----------- ---------- ----------- Net cash provided (used) by financing activities.......... 12,284 12,116 6,999 (11,696) 43,799 (144,560) ----------- ----------- ----------- ----------- ---------- ------------ Increase in cash and cash equivalents....... (6,721) (29,693) 26,630 (4,116) 15,314 17,914 Cash and cash equivalents at beginning of period ...................... 48,088 55,746 14,737 30,169 26,053 8,139 ----------- ----------- ----------- ----------- ---------- ----------- Cash and cash equivalents at end of period.. $ 41,367 $ 26,053 $ 41,367 $ 26,053 $ 41,367 $ 26,053 =========== =========== =========== =========== ========== =========== Cash paid during the period for: Interest (net of amount capitalized)..... $ 2,358 $ 13,124 $ 15,037 $ 24,812 $ 33,250 $ 41,793 =========== =========== =========== =========== ========== =========== Income taxes............................. $ 10,500 $ 9,025 $ 5,273 $ 9,631 $ 6,098 $ 43,362 =========== =========== =========== =========== ========== ===========
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Thousands) June 30, December 31, ----------------------------------------------- 1997 1996 1996 ----------------------------------------------- ASSETS Current Assets: Cash and cash equivalents............................... $ 41,367 $ 26,053 $ 14,737 Accounts receivable (less accumulated provision for doubtful accounts: June 30, 1997 $12,277; 1996 $13,635; December 31, 1996, $10,714)........................... 275,447 247,712 296,175 Unbilled revenues ...................................... 1,190 2,031 24,157 Gas stored underground - current inventory.............. 9,304 7,644 19,497 Material and supplies................................... 17,238 10,658 18,512 Deferred purchased gas cost............................. 36,027 40,278 60,079 Prepaid expenses and other.............................. 42,325 33,548 52,604 ------------- ------------ ------------- Total current assets............................... 422,898 367,924 485,761 ------------- ------------ ------------- Property, Plant and Equipment: Supply and Logistics (successful efforts method) ....... 1,250,041 1,193,825 1,220,756 Utilities .............................................. 1,003,471 962,923 988,425 Services................................................ 6,281 124 1,810 ------------- ------------ ------------- Total property, plant and equipment................ 2,259,793 2,156,872 2,210,991 Less accumulated depreciation and depletion........... 767,797 702,405 731,306 ------------- ------------ ------------- Net property, plant and equipment.................. 1,491,996 1,454,467 1,479,685 ------------- ------------ ------------- Other Assets: Regulatory assets....................................... 71,818 84,809 73,150 Goodwill ............................................... 12,291 - 8,396 Other................................................... 56,137 42,632 49,307 ------------- ------------ ------------- Total other assets.................................... 140,246 127,441 130,853 ------------- ------------ ------------- Total.............................................. $ 2,055,140 $ 1,949,832 $ 2,096,299 ============= ============ =============
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Thousands) June 30, December 31, ------------------------------------------------- 1997 1996 1996 ------------------------------------------------- CAPITALIZATION AND LIABILITIES Current Liabilities: Long-term debt payable within one year............. $ 5,000 $ - $ - Short-term loans................................... 256,101 143,652 204,900 Accounts payable................................... 163,851 152,818 231,969 Accrued taxes...................................... 14,197 19,864 20,645 Accrued interest................................... 11,288 8,786 11,852 Refunds due customers.............................. 23,530 16,832 14,889 Deferred income taxes.............................. 8,633 9,858 19,009 Customer credit balances........................... 1,335 1,125 7,051 Other.............................................. 28,276 21,222 10,099 ------------ ------------- ------------- Total current liabilities..................... 512,211 374,157 520,414 ------------ ------------- ------------- Long--Term Debt ....................................... 417,075 415,870 422,112 ------------ ------------- ------------- Deferred and Other Credits: Deferred income taxes.............................. 270,949 261,766 260,700 Deferred investment tax credits.................... 19,347 20,441 19,892 Deferred revenue................................... 94,179 116,580 107,674 Other.............................................. 20,770 23,703 23,224 ------------ ------------- ------------- Total deferred and other credits.............. 405,245 422,490 411,490 ------------ ------------- ------------- Common stockholders' equity: Common stock, no par value, authorized 80,000 shares; shares issued June 30, 1997, 35,699; June 30, 1996, 35,469; December 31, 1996, 35,515 .................... 232,136 225,200 227,660 Retained earnings ............................... 517,744 520,982 519,867 Treasury stock, shares at cost June 30, 1997, 1,101; June 30, 1996, 339; December 31, 1996, 169........................ (27,774) (7,730) (4,023) Foreign currency translation..................... (1,497) (1,137) (1,221) ------------ ------------- ------------- Total common stockholders' equity............. 720,609 737,315 742,283 ------------ ------------- ------------- Total..................................... $ 2,055,140 $ 1,949,832 $ 2,096,299 ============ ============= =============
Equitable Resources, Inc. and Subsidiaries Notes to Consolidated Financial Statements A. The accompanying financial statements should be read in conjunction with the Company's 1996 Summary Annual Report and Form 10-K. B. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position as of June 30, 1997 and 1996 and the results of operations for the three, six and twelve months then ended and cash flows for the three, six and twelve months then ended. All adjustments are of a normal, recurring nature unless otherwise indicated. C. The results of operations for the three- and six-month periods ended June 30, 1997 and 1996 are not indicative of results for a full year because of the seasonal nature of the Company's operations and volatility of oil and gas commodity prices. D. Certain amounts contained in prior period comparative information have been reclassified to conform with the 1997 presentation. E. As more fully described in Management's Discussion and Analysis of Financial Condition and Results of Operations, the Company has a $13.0 million investment in a 25% general partnership interest in the Avoca bedded salt, natural gas storage project. The project had encountered technical difficulties related to brine disposal which resulted in the discontinuation of the project. Although alternative methods of disposing of the brine water have been studied, none have proved to be economically viable. As a result, the Company has written down its investment resulting in a $13 million charge in June 1997. F. On January 24, 1997, the Company acquired all of the outstanding stock of Scallop Thermal Management, Inc. (Scallop) in exchange for 128,397 authorized, but previously unissued shares of the Company's common stock valued at $3.75 million. This acquisition was accounted for under the purchase method of accounting. Scallop is an energy services and performance contracting company specializing in energy management solutions for institutional, municipal and Fortune 500 customers. The effect of this acquisition on the consolidated financial statements of the Company is not material. G. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128 - "Earnings per Share" effective for interim and annual periods ending after December 15, 1997. This statement replaces primary earnings per share (EPS) with a newly defined basic EPS and modifies the computation of diluted EPS. The Company's basic and diluted EPS computed using the requirements of SFAS No. 128 are not significantly different from the currently disclosed EPS. H. At June 30, 1997, 10,309,000 shares of Common Stock were reserved as follows: 566,000 shares for issuance under the Key Employee Restricted Stock Option and Stock Appreciation Rights Incentive Compensation Plan, 1,726,000 shares for issuance under the Long-Term Incentive Plan, 76,000 shares for issuance under the Non-Employee Directors' Stock Incentive Plan, 70,000 shares for issuance under the Company's Dividend Reinvestment and Stock Purchase Plan, and 7,871,000 shares for possible use in connection with future acquisitions. I. In July 1997, the Company completed its acquisition of Northeast Energy Services, Inc. (NORESCO) in exchange for a combination of the Company's stock, stock options and cash valued at approximately $77 million. The transaction will be treated as a purchase for accounting purposes. NORESCO is a provider of comprehensive energy efficiency systems and services for commercial, industrial, government, and institutional customers. In connection with this acquisition, the Company issued 2,091,407 shares of common stock. The Company repurchased one million shares of stock in June and July 1997 at an average price of $28.54 per share. Proforma financial information is not required as the acquisition is less than 10 percent of the total assets of the Company. J. In July 1997, the Company entered into agreements with five parties for the sale of the Company's oil and natural gas properties in the Western United States and Canada. The aggregate cash sales price will be approximately $174 million payable at closings which are expected to occur on or before September 30, 1997. The sales are subject to buyers' confirmation of title and site inspection of the properties in addition to certain other conditions. The sale is not reflected in the consolidated financial statements and the discontinued operations are not material to the consolidated financial statements of the Company.
Three Months Ended June 30, 1997 ---------------------------------------------------------------------------------------- Supply and Intersegment Logistics Utilities Services Eliminations Consolidated ---------------------------------------------------------------------------------------- Gas Produced, Purchased and Sold (MMcf): Produced 13,584 409 13,993 --------- --------- --------- --------- --------- Purchased: Other producers 92,902 11,006 7,703 111,611 Inter-segment purchases 242 1,020 19,460 (20,722) --------- --------- --------- --------- --------- Total purchases 93,144 12,026 27,163 (20,722) 111,611 --------- --------- --------- --------- --------- Total produced and purchased 106,728 12,435 27,163 (20,722) 125,604 Deduct: Net increase (decrease) in gas in storage 1,506 1,506 Extracted natural gas liquids (equivalent gas volumes) 2,588 2,588 System use and unaccounted for 549 307 856 --------- --------- --------- --------- --------- Total 103,591 10,622 27,163 (20,722) 120,654 ========= ========= ========= ========= ========= Gas Sales (MMcf): Residential 4,411 4,411 Commercial 444 444 Industrial and Utility 4,350 (1,644) 2,706 Production 13,584 (90) 13,494 Marketing 90,007 1,417 27,163 (18,988) 99,599 --------- --------- --------- --------- --------- Total 103,591 10,622 27,163 (20,722) 120,654 ========= ========= ========= ========= ========= Natural Gas Transported (MMcf) 33,212 21,126 (10,526) 43,812 ========= ========= ========= ========= ========= Oil Produced and Sold (thousands of bls) 421 421 ========= ========= Natural Gas Liquids Sold (thousands of gallons) 74,081 74,081 ========= ========= Average Selling Price: Residential Gas Sales (per Mcf) 11.090 Commercial Gas Sales 10.910 Industrial and Utility Gas Sales 2.323 Produced Natural Gas 2.110 Marketed Natural Gas 2.399 3.292 2.595 Oil (per barrel) 17.181 Natural Gas Liquids (per gallon) 0.330
Three Months Ended June 30, 1996 ---------------------------------------------------------------------------------------- Supply and Intersegment Logistics Utilities Services Eliminations Consolidated ---------------------------------------------------------------------------------------- Gas Produced, Purchased and Sold (MMcf): Produced 13,711 642 14,353 --------- --------- --------- --------- --------- Purchased: Other producers 124,701 17,392 142,093 Inter-segment purchases 1,916 1,598 (3,514) --------- --------- --------- --------- --------- Total purchases 126,617 18,990 (3,514) 142,093 --------- --------- --------- --------- --------- Total produced and purchased 140,328 19,632 (3,514) 156,446 Deduct: Net increase (decrease) in gas in storage 2,808 2,808 Extracted natural gas liquids (equivalent gas volumes) 2,361 2,361 System use and unaccounted for 556 (517) 39 --------- --------- --------- --------- --------- Total 137,411 17,341 (3,514) 151,238 ========= ========= ========= ========= ========= Gas Sales (MMcf): Residential 4,284 4,284 Commercial 1,982 1,982 Industrial and Utility 8,499 (1,112) 7,387 Production 13,711 (104) 13,607 Marketing 123,700 2,576 (2,298) 123,978 --------- --------- --------- --------- --------- Total 137,411 17,341 (3,514) 151,238 ========= ========= ========= ========= ========= Natural Gas Transported (MMcf) 30,321 17,425 (8,552) 39,194 ========= ========= ========= ========= ========= Oil Produced and Sold (thousands of bls) 442 442 ========= ========= Natural Gas Liquids Sold (thousands of gallons) 73,921 73,921 ========= ========= Average Selling Price: Residential Gas Sales (per Mcf) 9.480 Commercial Gas Sales 6.077 Industrial and Utility Gas Sales 2.845 Produced Natural Gas 1.453 Marketed Natural Gas 1.980 2.830 Oil (per barrel) 15.287 Natural Gas Liquids (per gallon) 0.333
Six Months Ended June 30, 1997 ---------------------------------------------------------------------------------------- Supply and Intersegment Logistics Utilities Services Eliminations Consolidated ---------------------------------------------------------------------------------------- Gas Produced, Purchased and Sold (MMcf): Produced 26,312 969 27,281 --------- --------- --------- --------- --------- Purchased: Other producers 165,157 24,693 24,259 214,109 Inter-segment purchases 440 3,563 33,466 (37,469) --------- --------- --------- --------- --------- Total purchases 165,597 28,256 57,725 (37,469) 214,109 --------- --------- --------- --------- --------- Total produced and purchased 191,909 29,225 57,725 (37,469) 241,390 Deduct: Net increase (decrease) in gas in storage (3,739) (3,739) Extracted natural gas liquids (equivalent gas volumes) 4,849 4,849 System use and unaccounted for 1,072 377 1,449 --------- --------- --------- --------- --------- Total 185,988 32,587 57,725 (37,469) 238,831 ========= ========= ========= ========= ========= Gas Sales (MMcf): Residential 17,307 17,307 Commercial 2,117 2,117 Industrial and Utility 9,781 (4,203) 5,578 Production 26,312 (299) 26,013 Marketing 159,676 3,382 57,725 (32,967) 187,816 --------- --------- --------- --------- --------- Total 185,988 32,587 57,725 (37,469) 238,831 ========= ========= ========= ========= ========= Natural Gas Transported (MMcf) 61,735 41,615 (22,213) 81,137 ========= ========= ========= ========= ========= Oil Produced and Sold (thousands of bls) 832 832 ========= ========= Natural Gas Liquids Sold (thousands of gallons) 142,869 142,869 ========= ========= Average Selling Price: Residential Gas Sales (per Mcf) 10.431 Commercial Gas Sales 10.213 Industrial and Utility Gas Sales 2.765 Produced Natural Gas 2.183 Marketed Natural Gas 2.814 3.218 3.052 Oil (per barrel) 17.694 Natural Gas Liquids (per gallon) 0.363
Six Months Ended June 30, 1996 ---------------------------------------------------------------------------------------- Supply and Intersegment Logistics Utilities Services Eliminations Consolidated ---------------------------------------------------------------------------------------- Gas Produced, Purchased and Sold (MMcf): Produced 30,089 1,215 31,304 --------- --------- --------- --------- --------- Purchased: Other producers 259,885 36,711 296,596 Inter-segment purchases 2,847 6,957 (9,804) --------- --------- --------- --------- --------- Total purchases 262,732 43,668 (9,804) 296,596 --------- --------- --------- --------- --------- Total produced and purchased 292,821 44,883 (9,804) 327,900 Deduct: Net increase (decrease) in gas in storage (2,491) (2,491) Extracted natural gas liquids (equivalent gas volumes) 4,096 4,096 System use and unaccounted for 995 2,187 3,182 --------- --------- --------- --------- --------- Total 287,730 45,187 (9,804) 323,113 ========= ========= ========= ========= ========= Gas Sales (MMcf): Residential 19,301 19,301 Commercial 8,314 8,314 Industrial and Utility 11,888 (1,559) 10,329 Production 30,089 (399) 29,690 Marketing 257,641 5,684 (7,846) 255,479 --------- --------- --------- --------- --------- Total 287,730 45,187 (9,804) 323,113 ========= ========= ========= ========= ========= Natural Gas Transported (MMcf) 60,598 29,674 (15,874) 74,398 ========= ========= ========= ========= ========= Oil Produced and Sold (thousands of bls) 892 892 ========= ========= Natural Gas Liquids Sold (thousands of gallons) 125,400 125,400 ========= ========= Average Selling Price: Residential Gas Sales (per Mcf) 8.387 Commercial Gas Sales 6.179 Industrial and Utility Gas Sales 3.164 Produced Natural Gas 1.948 Marketed Natural Gas 2.453 3.454 Oil (per barrel) 16.114 Natural Gas Liquids (per gallon) 0.331
Twelve Months Ended June 30, 1997 ---------------------------------------------------------------------------------------- Supply and Intersegment Logistics Utilities Services Eliminations Consolidated ---------------------------------------------------------------------------------------- Gas Produced, Purchased and Sold (MMcf): Produced 53,518 2,272 55,790 --------- --------- --------- --------- --------- Purchased: Other producers 355,352 54,109 48,448 457,909 Inter-segment purchases 4,516 12,400 65,192 (82,108) --------- --------- --------- --------- --------- Total purchases 359,868 66,509 113,640 (82,108) 457,909 --------- --------- --------- --------- --------- Total produced and purchased 413,386 68,781 113,640 (82,108) 513,699 Deduct: Net increase (decrease) in gas in storage 408 408 Extracted natural gas liquids (equivalent gas volumes) 9,144 9,144 System use and unaccounted for 1,953 3,162 5,115 --------- --------- --------- --------- --------- Total 402,289 65,211 113,640 (82,108) 499,032 ========= ========= ========= ========= ========= Gas Sales (MMcf): Residential 28,555 28,555 Commercial 4,308 4,308 Industrial and Utility 24,540 (8,078) 16,462 Production 53,518 (34,052) 19,466 Marketing 348,771 7,808 113,640 (39,978) 430,241 --------- --------- --------- --------- --------- Total 402,289 65,211 113,640 (82,108) 499,032 ========= ========= ========= ========= ========= Natural Gas Transported (MMcf) 121,500 82,286 (42,963) 160,823 ========= ========= ========= ========= ========= Oil Produced and Sold (thousands of bls) 1,667 1,667 ========= ========= Natural Gas Liquids Sold (thousands of gallons) 298,048 298,048 ========= ========= Average Selling Price: Residential Gas Sales (per Mcf) 10.166 Commercial Gas Sales 8.972 Industrial and Utility Gas Sales 2.863 Produced Natural Gas 2.022 Marketed Natural Gas 2.398 2.872 2.973 Oil (per barrel) 15.517 Natural Gas Liquids (per gallon) 0.372
Twelve Months Ended June 30, 1996 ---------------------------------------------------------------------------------------- Supply and Intersegment Logistics Utilities Services Eliminations Consolidated ---------------------------------------------------------------------------------------- Gas Produced, Purchased and Sold (MMcf): Produced 60,247 2,761 63,008 --------- --------- --------- --------- --------- Purchased: Other producers 487,745 58,344 546,089 Inter-segment purchases 14,841 13,476 (28,317) --------- --------- --------- --------- Total purchases 502,586 71,820 (28,317) 546,089 --------- --------- --------- --------- --------- Total produced and purchased 562,833 74,581 (28,317) 609,097 Deduct: Net increase (decrease) in gas in storage (1,269) (1,269) Extracted natural gas liquids (equivalent gas volumes) 8,312 8,312 System use and unaccounted for 2,097 350 2,447 --------- --------- --------- --------- --------- Total 552,424 75,500 (28,317) 599,607 ========= ========= ========= ========= ========= Gas Sales (MMcf): Residential 31,311 31,311 Commercial 10,449 10,449 Industrial and Utility 21,020 (11,908) 9,112 Production 60,247 (556) 59,691 Marketing 492,177 12,720 (15,853) 489,044 --------- --------- --------- --------- --------- Total 552,424 75,500 (28,317) 599,607 ========= ========= ========= ========= ========= Natural Gas Transported (MMcf) 125,481 67,602 (34,710) 158,373 ========= ========= ========= ========= ========= Oil Produced and Sold (thousands of bls) 1,813 1,813 ========= ========= Natural Gas Liquids Sold (thousands of gallons) 257,229 257,229 ========= ========= Average Selling Price: Residential Gas Sales (per Mcf) 8.515 Commercial Gas Sales 6.556 Industrial and Utility Gas Sales 2.754 Produced Natural Gas 1.802 Marketed Natural Gas 2.075 2.612 Oil (per barrel) 16.098 Natural Gas Liquids (per gallon) 0.303
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Information by Business Segment (Thousands) Three Months Ended Six-Months Ended Twelve Months Ended June 30, June 30, June 30, -------------------------------------------------------------------------------------------- 1997 1996 1997 1996 1997 1996 -------------------------------------------------------------------------------------------- (Thousands) OPERATING REVENUES: Supply and logistics..... $ 284,750 $ 305,545 $ 593,572 $ 764,311 $ 1,147,922 $1,329,882 Utilities ............... 83,425 93,717 277,521 296,101 488,861 483,733 Services................. 74,096 1,133 182,698 3,228 351,805 3,701 Sales between segments... (41,511) (8,628) (100,456) (31,595) (205,499) (80,506) ----------- ----------- ----------- ------------ ------------ ------------ Total......... $ 400,760 $ 391,767 $ 953,335 $ 1,032,045 $ 1,783,089 $ 1,736,810 =========== =========== =========== ============ ============ ============= OPERATING INCOME (LOSS): Supply and logistics..... $ 8,208 $ 1,592 $ 23,248 $ 22,706 $ 52,552 $ (13,062) Utilities................ (8,827) 10,027 30,446 62,508 57,258 67,872 Services................. (5,308) (2,636) (6,274) (6,828) (11,988) (7,816) ----------- ----------- ----------- ------------ ------------ ------------ Total......... $ (5,927) $ 8,983 $ 47,420 $ 78,386 $ 97,822 $ 46,994 =========== =========== =========== ============ ============ ============ CAPITAL EXPENDITURES: Supply and logistics..... $ 21,811 $ 16,280 $ 32,931 $ 29,460 $ 76,088 $ 62,104 Utilities................ 9,920 7,571 18,303 13,222 41,912 43,669 Services................. 609 - 938 - 1,774 31 ----------- ----------- ----------- ------------ ------------ ------------ Total......... $ 32,340 $ 23,851 $ 52,172 $ 42,682 $ 119,774 $ 105,804 =========== =========== =========== ============ ============ ============
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW THREE MONTHS ENDED JUNE 30, 1997 VS. THREE MONTHS ENDED JUNE 30, 1996 Equitable's consolidated net loss for the quarter ended June 30, 1997 was $9.3 million, or $.26 per share, compared with net income of $928,000, or $.03 per share, for the quarter ended June 30, 1996. Earnings for the current period include a one-time after-tax charge of $8.5 million for an asset write-down related to the Company's investment in a bedded salt, natural gas storage project in Avoca, New York. Earnings for the 1996 quarter include a one-time after-tax charge of $1.2 million resulting from closing of some of the Company's natural gas price hedge positions. The decrease in income, excluding the charges detailed above, is due to a 16 percent increase in operating expenses and lower margins from unregulated gas sales. These items were partially offset by a 45 percent increase in average selling prices for produced natural gas and higher margins from the sale of natural gas liquids. SIX MONTHS ENDED JUNE 30, 1997 VS. SIX MONTHS ENDED JUNE 30, 1996 Consolidated net income for the six months ended June 30, 1997 was $18.5 million or $.52 per share, compared with $39.7 million or $1.13 per share for the six months ended June 30, 1996. The decrease in net income, excluding the 1997 effect of the Avoca write-down discussed above, is due to a 10 percent increase in operating expenses primarily related to the services segment which experienced longer than anticipated delays in project construction start-ups, lower margins for natural gas marketing, a 13 percent decrease in natural gas production, and decreased commercial and industrial gas sales volumes. These items were partially offset by higher margins from sale of natural gas liquids and increased average selling prices for produced natural gas. TWELVE MONTHS ENDED JUNE 30, 1997 VS. TWELVE MONTHS ENDED JUNE 30, 1996 Consolidated net income for the twelve months ended June 30, 1997 was $38.3 million or $ 1.08 per share, compared with $14.6 million or $.42 per share for the twelve months ended June 30, 1996. Earnings for the current period include the one-time $8.5 million Avoca charge discussed above and a one-time after-tax gain of $4.4 million, or $.13 per share, from the curtailment of the Company's defined benefit pension plan for certain non-utility employees. Earnings for the prior period include a one-time after-tax charge of $74.2 million , or $2.12 per share, due to the recognition of impairment of assets of $121.1 million, pursuant to the methodology of Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Earnings for the prior period also include a non-recurring after-tax gain of $29.1 million, or $.83 per share, related to the Columbia Gas Transmission (Columbia) bankruptcy settlement and $6.6 million, or $.19 per share, resulting from regulatory approval for accelerated recovery of future gas costs. The decrease in net income, excluding the effect of the items detailed above, is primarily due to decreased retail gas sales to residential and commercial customers, a six percent increase in operating expenses primarily related to the services segment's start-up and development costs and longer than anticipated delays in project construction start-ups, and lower margins from marketed natural gas. These items were partially offset by higher margins from sale of natural gas liquids, increased average selling prices for produced natural gas, and increased industrial sales. RESULTS OF OPERATIONS SUPPLY AND LOGISTICS Supply and logistics operations are comprised of the sale of produced natural gas, oil and natural gas liquids, contract drilling, marketing of natural gas and electricity, and storage and intrastate transportation of natural gas in Louisiana.
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED JUNE 30, JUNE 30, JUNE 30, --------------------------------------------------------------------------------------- 1997 1996 1997 1996 1997 1996 --------------------------------------------------------------------------------------- SUPPLY AND LOGISTICS OPERATING REVENUES (THOUSANDS): Marketed Natural Gas.............. $ 215,912 $ 244,867 $ 449,287 $ 631,990 $ 836,517 $ 1,021,355 Produced Natural Gas.............. 28,658 19,924 57,443 58,619 108,224 108,557 Produced Natural Gas Liquids...... 24,430 24,594 51,822 41,515 110,935 77,915 Produced Oil...................... 7,233 6,757 14,721 14,374 25,867 29,185 Contract Drilling................. 5,284 5,007 8,737 8,171 19,756 16,792 Marketed Electricity.............. --- 1,160 3,253 2,521 15,899 2,521 Natural Gas Transportation........ 1,069 1,478 2,850 3,201 7,319 7,896 Natural Gas Storage............... 662 150 1,615 150 2,564 150 Direct Billing Settlements........ --- --- --- --- 7,815 32,582 Other............................. 1,502 1,608 3,844 3,770 13,026 32,929 ------------ ---------- ----------- ---------- ----------- ------------ Total Revenues.................. 284,750 305,545 593,572 764,311 1,147,922 1,329,882 COST OF ENERGY PURCHASED 229,170 259,852 482,665 656,014 919,590 1,066,575 ------------ ---------- ----------- ---------- ----------- ------------ Net Operating Revenues 55,580 45,693 110,907 108,297 228,332 263,307 ------------ ---------- ----------- ---------- ----------- ------------ OPERATING EXPENSES: Production........................ 8,804 7,686 17,670 15,938 36,255 31,455 Exploration....................... 4,096 2,422 5,789 4,638 16,865 11,290 Gas Processing.................... 3,183 3,913 5,749 5,203 11,030 10,694 Contract Drilling................. 4,388 3,825 7,522 6,557 16,846 13,164 Other............................. 13,648 12,677 24,551 24,575 41,671 52,035 Depreciation and Depletion........ 13,253 13,578 26,378 28,680 53,113 62,654 Impairment of Assets.............. --- --- --- --- --- 95,077 ------------ ---------- ----------- ---------- ----------- ------------ Total Operating Expenses........ 47,372 44,101 87,659 85,591 175,780 276,369 ------------ ---------- ----------- ---------- ----------- ------------ OPERATING INCOME (LOSS)............... $ 8,208 $ 1,592 $ 23,248 $ 22,706 $ 52,552 $ (13,062) ============ ========== =========== ========== =========== ============ SALES QUANTITIES: Marketed Natural Gas (MMcf)....... 90,007 123,700 159,676 257,641 348,771 492,177 Produced Natural Gas (MMcf)....... 13,584 13,711 26,312 30,089 53,518 60,247 Oil (MBls)........................ 421 442 832 892 1,667 1,813 Natural Gas Liquids............... (thousands of gallons).......... 74,081 73,921 142,869 125,400 298,048 257,229 Transportation Deliveries (MMcf) 33,212 30,321 61,735 60,598 121,500 125,481
THREE MONTHS ENDED JUNE 30, 1997 VS. THREE MONTHS ENDED JUNE 30, 1996 Operating revenues were $284.8 million for the quarter ended June 30, 1997 compared with $305.5 million for the quarter ended June 30, 1996. The decrease in operating revenues is due to a 27% decrease in marketed natural gas sales volumes and decreased marketed sales of electricity. The decreased operating revenues were offset by a 21% increase in the average selling price of marketed natural gas, and a 45% increase in the average selling price of produced natural gas. The lower average prices for produced natural gas in the 1996 period are due in part to a $2.0 million hedging charge in the second quarter of 1996 to close natural gas hedge positions related to production for the second half of 1996. Cost of energy purchased includes natural gas and electricity purchased for marketing activities and natural gas purchased for the production of natural gas liquids. The cost of energy purchased amounted to $229.2 million for the quarter ended June 30, 1997 compared with $259.9 million for the quarter ended June 30, 1996. The decrease for the quarter reflects primarily the lower requirements for decreased marketed natural gas sales activity. Other operating expenses were $47.4 million for the quarter ended June 30, 1997 compared with $44.1 million for the quarter ended June 30, 1996. This increase reflects higher well operating expenses and higher dry hole cost. SIX MONTHS ENDED JUNE 30, 1997 VS. SIX MONTHS ENDED JUNE 30, 1996 Operating revenues for the six months ended June 30, 1997 were $593.6 million compared with $764.3 million for the six months ended June 30, 1996. The $170.7 million decrease in revenues is due primarily to a 38% decrease in marketed natural gas sales volumes and a 13% decrease in natural gas production. These decreases were partially offset by a 15% increase in the average selling price of marketed natural gas, an increase in both the production and average selling price of natural gas liquids of 14% and 10%, respectively, a 12% increase in the average selling price of produced natural gas, and increased storage service which began full operations during the second quarter of 1996. Energy purchased for the six months ended June 30, 1997 amounted to $482.7 million compared to $656.0 million for the six months ended June 30, 1996. The decrease in purchased energy for the six month period is due to decreased marketed natural gas requirements, partially offset by increased production of natural gas liquids. Other operating expenses for the six months ended June 30, 1997 were $87.7 million compared with $85.6 million for the six months ended June 30, 1996. The increase in operating expenses for the current period is due primarily to increased well operating expenses and dry hole costs, partially offset by decreased depreciation expense reflecting lower production. TWELVE MONTHS ENDED JUNE 30, 1997 VS. TWELVE MONTHS ENDED JUNE 30, 1996 Operating revenues for the twelve months ended June 30, 1997 were $1,147.9 million compared with $1,329.9 million for the twelve months ended June 30, 1996. The 1996 revenues include $40.2 million of nonrecurring amounts from the Columbia bankruptcy settlement and $11.0 million of additional revenue from direct bill settlements. The decrease in revenues of $130.8 million, excluding the nonrecurring amounts, is due primarily to a 29% decrease in marketed natural gas sales volumes, an 11% decrease in natural gas production, and an 8% decrease in oil production. These decreases were partially offset by a 16% increase in the average selling price of marketed natural gas, an increase in both the average selling price and production of natural gas liquids of 23% and 16%, respectively, increased revenues from the marketing of electricity, a 12% increase in the average selling price of produced natural gas, and increased storage service which began full operations during the second quarter of 1996. Energy purchased for the twelve months ended June 30, 1997 amounted to $919.6 million compared to $1,066.6 million for the twelve months ended June 30, 1996. The decrease in purchased energy for the twelve month period is due to decreased marketed natural gas requirements partially offset by increased production of natural gas liquids and increased marketed electricity activity. Other operating expenses for the twelve months ended June 30, 1997 were $175.8 million compared with $276.4 million for the twelve months ended June 30, 1996. Other operating expenses for 1996 include a charge of $95.1 million for impairment of assets. The decrease in operating expenses for the current period, excluding the charge for asset impairment, is due primarily to decreased depreciation and depletion expense, reflecting lower production and lower depletion rates, partially offset by increased well operating and exploration costs. UTILITIES Utilities operations are comprised of the sale and transportation of natural gas to retail customers at state-regulated rates, interstate transportation and storage of natural gas subject to federal regulation and the marketing of natural gas. The results for all 1997 periods discussed below include a charge of $13.0 million for an asset write-down on the Company's investment in a 25% general partnership interest in the Avoca, New York bedded salt natural gas storage project. ET Avoca Company, a special purpose subsidiary of the Company, filed a petition for relief under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. The project encountered technical difficulties related to the proper disposal of the brine water resulting from the leaching process of the salt formation. Although alternative methods of disposing of the brine water have been studied, none have proved to be economically viable resulting in project termination. THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED JUNE 30, JUNE 30, JUNE 30, --------------------------------------------------------------------------------------- 1997 1996 1997 1996 1997 1996 --------------------------------------------------------------------------------------- UTILITIES OPERATING REVENUES (THOUSANDS): Residential Gas Sales............... $ 48,920 $ 40,613 $ 180,529 $ 161,881 $ 290,284 $ 266,626 Commercial Gas Sales................ 4,844 12,044 21,620 51,376 38,652 68,501 Industrial and Utility Gas Sales.... 10,107 24,177 27,040 37,609 70,264 57,883 Marketed Gas Sales.................. 4,665 7,290 10,883 19,631 22,424 33,222 Transportation Service.............. 10,806 5,181 29,291 16,797 50,661 36,724 Storage Service..................... 1,878 1,781 3,786 3,594 7,497 7,207 Other............................... 2,205 2,631 4,372 5,213 9,079 13,570 ----------- ----------- ----------- ----------- ---------- ------------ Total Revenues................... 83,425 93,717 277,521 296,101 488,861 483,733 COST OF ENERGY PURCHASED............... 36,218 43,090 142,004 142,652 245,675 212,957 ----------- ----------- ----------- ----------- ---------- ------------ Net Operating Revenues........... 47,207 50,627 135,517 153,449 243,186 270,776 ----------- ----------- ----------- ----------- ---------- ------------ OPERATING EXPENSES: Other............................... 36,228 34,102 78,618 77,963 145,845 151,135 Depreciation and Depletion.......... 6,806 6,498 13,453 12,978 27,083 26,205 Impairment of Assets................ 13,000 - 13,000 - 13,000 25,564 ----------- ----------- ----------- ----------- ---------- ------------ Total Operating Expenses......... 56,034 40,600 105,071 90,941 185,928 202,904 ----------- ----------- ----------- ----------- ---------- ------------ OPERATING INCOME (LOSS)................ $ (8,827) $ 10,027 $ 30,446 $ 62,508 $ 57,258 $ 67,872 =========== =========== =========== =========== ========== ============ SALES QUANTITIES (MMCF): Residential Gas Sales.............. 4,411 4,284 17,307 19,301 28,555 31,311 Commercial Gas Sales............... 444 1,982 2,117 8,314 4,308 10,449 Industrial and Utility Gas Sales... 4,350 8,499 9,781 11,888 24,540 21,020 Marketed Gas Sales................. 1,417 2,576 3,382 5,684 7,808 12,720 Transportation Deliveries.......... 21,126 17,425 41,615 29,674 82,286 67,602 Heating Degree Days................ 919 656 3,642 3,746 5,874 6,043
THREE MONTHS ENDED JUNE 30, 1997 VS. THREE MONTHS ENDED JUNE 30, 1996 Revenues were $83.4 million for the quarter ended June 30, 1997 compared with $93.7 million for the quarter ended June 30, 1996. The decrease in revenues is due to a 54% decrease in commercial and industrial gas sales volumes reflecting the effect of commercial customers switching to transportation service and the movement of several commercial customers from the Company's utilities segment to the services segment. The decreased revenues are also attributed to a decline of 45% in the sales volumes of marketed natural gas. These decreases were offset by higher residential and commercial rates reflecting pass-through of higher regulatory purchased gas costs to customers and slightly higher residential gas sales volumes reflecting colder weather compared to the 1996 quarter. Cost of energy purchased amounted to $36.2 million for the quarter ended June 30, 1997 compared with $43.1 million for the quarter ended June 30, 1996. The decrease is a result of reduced gas sales partially offset by the pass-through of higher regulatory purchased gas costs to retail customers. Other operating expenses for the quarter ended June 30, 1997, excluding the Avoca charge described above, were $43.0 million compared with $40.6 million for the quarter ended June 30, 1996. The increase in operating expenses is primarily due to increased customer assistance expenses and higher reserve for doubtful accounts. SIX MONTHS ENDED JUNE 30, 1997 VS. SIX MONTHS ENDED JUNE 30, 1996 Operating revenues for the six months ended June 30, 1997 were $277.5 million compared with $296.1 million for the six months ended June 30, 1996. The decrease in revenues of $18.6 million is due primarily to a 41% decrease in commercial and industrial gas sales volumes reflecting the effect of commercial customers switching to transportation service and the movement of several commercial customers from the Company's utilities segment to the services segment, 10% lower residential sales volumes reflecting customer conservation and weather that was three percent warmer than the prior year, and a decline of 40% in the sales volumes of marketed natural gas reflecting the transfer of a portion of these sales to the services segment. These items were partially offset by higher residential and commercial rates reflecting pass-through of higher regulatory purchased gas costs to customers, and the effect of commercial customers switching to transportation service. Energy purchased for the six months ended June 30, 1997 was $142.0 million compared with $142.7 million for the six months ended June 30, 1996. The decrease is due to lower purchased quantities of gas as a result of reduced gas sales, partially offset by the pass-through of higher regulatory purchased gas costs to retail customers. Other operating expenses for the six months ended June 30, 1997, excluding the Avoca charge described above, were $92.1 million compared with $90.9 million for the six months ended June 30, 1996. The increase in operating expenses is primarily due to increased customer assistance expenses and higher reserve for doubtful accounts, both reflecting higher rates in effect for retail customers. TWELVE MONTHS ENDED JUNE 30, 1997 VS. TWELVE MONTHS ENDED JUNE 30, 1996 Operating revenues for the twelve months ended June 30, 1997 were $488.9 million compared with $483.7 million for the twelve months ended June 30, 1996. Operating revenues for the 1996 period include $4.8 million related to the Columbia bankruptcy settlement. The increase in revenues, excluding the effect of the settlement, is due primarily to higher residential and commercial rates reflecting pass-through of higher regulatory purchased gas costs to customers and a 17% increase in industrial and utility gas sales volumes. These items were partially offset by decreased commercial sales, reflecting the switch of commercial customers to transportation service and the movement of several commercial customers from the Company's utilities segment to the services segment, lower sales to residential customers, and a 39% decline in the sales volumes of marketed natural gas. Energy purchased for the twelve months ended June 30, 1997 was $245.7 million compared with $213.0 million for the twelve months ended June 30, 1996. The increase is due to the pass-through of higher regulatory purchased gas costs to retail customers and increased purchases for industrial and utility gas sales, partially offset by lower retail and marketed sales volumes. Other operating expenses for the twelve months ended June 30, 1997, excluding the Avoca charge described above, were $172.9 million compared with $202.9 million for the twelve months ended June 30, 1996. Other operating expenses for the twelve months ended June 30, 1996 include a charge of $25.6 million for impairment of assets. Operating expenses for the twelve-month period, excluding the charge for impairment of assets and the gain recognized in the fourth quarter of 1996 related to the curtailment of the Company's defined benefit pension plan for non-utility employees, remained substantially unchanged. SERVICES Services operations are comprised of marketing of natural gas, cogeneration development, water efficiency and program development, performance contracting, and central facility plant operations. This operation was formed in mid-1996 by combining certain of the Company's natural gas marketing activities with the newly acquired operations of Independent Energy Corporation (IEC), Conogen, Inc. and Pequod Associates, Inc. The Company also acquired Scallop Thermal Management, Inc. in January, 1997 and Northeast Energy Services, Inc. (NORESCO) in July, 1997. The variances in the following operating result comparisons reflect the recent development of this segment. Operating results for the quarter ended June 30, 1997 were a loss of $5.3 million compared with a loss of $2.6 million for the quarter ended June 30, 1996. Operating results for the six months ended June 30, 1997 were a loss of $6.3 million compared with a loss of $6.8 million for the six months ended June 30, 1996. Operating results for the twelve months ended June 30, 1997 were a loss of $12.0 million compared with a loss of $7.8 million for the twelve months ended June 30, 1996. The 1996 quarter and six-month period include $1.5 million and $5.2 million, respectively, of start-up and development costs. The operating losses in 1997 are primarily due to construction project start-ups being delayed in addition to the inability to initiate new product sales into a slow-to-develop unregulated marketplace. CAPITAL RESOURCES AND LIQUIDITY OPERATING ACTIVITIES Cash required for operations is affected primarily by the seasonal nature of the Company's natural gas distribution operations and volatility of oil and gas commodity prices. Gas purchased for storage during the nonheating season is financed with short-term loans, which are repaid as gas is withdrawn from storage and sold during the heating season. In addition, short-term loans are used to provide other working capital requirements during the nonheating season and as interim financing for a portion of capital expenditures. The Company expects to finance its 1997 capital expenditures with cash generated from operations and temporarily with short-term loans. The Company uses exchange-traded natural gas, crude oil and propane futures contracts and options and over-the-counter natural gas and crude oil swap agreements and options to hedge exposures to energy price changes. INVESTING ACTIVITIES The Company's business requires major ongoing expenditures for replacements, improvements, and additions to its utility plant and continuing development and expansion of its resource production activities. A total of $187.1 million has been authorized for the 1997 capital expenditure program, with $121.7 million allocated to supply and logistics, $40.4 million for utilities, and $25.0 million for services. Capital expenditures for the six months ended June 30, 1997 were $52.2 million. The Company is in the process of reevaluating its supply and logistics efforts with regard to its oil and gas properties in the western United States and internationally, in addition to its Gulf mid-stream assets. In July 1997, the Company entered into agreements with five parties for the sale of the Company's oil and natural gas properties in the Western United States and Canada. The properties include proved reserves of 191 billion cubic feet of natural gas equivalent and over 700,000 undeveloped acres as of December 31, 1996. The aggregate cash sales price will be approximately $174 million payable at closings which are expected to occur on or before September 30, 1997. The sales are subject to buyers' confirmation of title and site inspection of the properties as well as certain other conditions. The sale will allow the Company to refocus its exploration and development efforts in the Appalachian and Gulf of Mexico areas. The sale is not reflected in the consolidated financial statements and the discontinued operations are not material to the consolidated financial statements of the Company. Proceeds from the sale are intended to be used to pay down short-term debt. FINANCING ACTIVITIES The Company has adequate borrowing capacity to meet its financing requirements. Bank loans and commercial paper, supported by available credit, are used to meet short-term financing requirements. At June 30, 1997, $244.0 million of commercial paper and $11.4 million of bank loans were outstanding at an average annual interest rate of 5.66%. The Company maintains a committed, revolving $500 million credit agreement with a group of banks which expires September 1, 2001. The agreement requires a facility fee of one-tenth of one percent. In July 1997, Moody's Investors Service placed the Company's A2 senior unsecured debt rating, (P)A2 senior unsecured shelf rating, and Prime-1 rating for commercial paper under review for possible downgrade. The action taken by Moody's is not expected to have a significant impact on the Company's liquidity. In July 1997, the Company completed its acquisition of Northeast Energy Services, Inc. (NORESCO) in exchange for a combination of the Company's stock, stock options and cash valued at approximately $77 million. The transaction will be treated as a purchase for accounting purposes. NORESCO is a provider of comprehensive energy efficiency systems and services for commercial, industrial, government, and institutional customers. In connection with this acquisition, the Company issued 2,091,407 shares of common stock. The Company repurchased one million shares of stock in June and July 1997 at an average price of $28.54 per share. Proforma information is not required as the acquisition is less than 10 percent of the total assets of the Company. INFORMATION REGARDING FORWARD LOOKING STATEMENTS This Quarterly Report on Form 10-Q may include forward looking statements. The Company notes that a variety of factors could cause the Company's actual results to differ materially from the anticipated results or other expectations expressed in the Company's forward looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company's business include, but are not limited to, the following: weather conditions, the pace of deregulation of retail natural gas and electricity markets, the timing and extent of the Company's success in acquiring gas and oil properties and in discovering, developing and producing reserves and the impact of competitive factors on profit margins in various markets in which the Company competes. PART II. OTHER INFORMATION Item 4. Results of Votes of Security Holders (a) The Annual Meeting of Shareholders was held on May 23, 1997. (c) Brief description of matters voted upon: (1) Elected the named directors to serve three-year terms as follow: Shares Voted Shares Director For Withheld E. Lawrence Keyes, Jr. 31,032,279 1,834,330 Thomas A. McConomy 31,052,166 1,814,443 Malcolm M. Prine 30,947,228 1,919,381 (2) Ratified appointment of Ernst & Young LLP as independent auditors for the year ended December 31, 1997. Vote was 32,677,359 shares for; 109,110 shares against and 80,140 shares abstained. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: None (b) Reports on Form 8-K during the quarter ended June 30, 1997: Form 8-K dated May 19, 1997, addressing that the Company had reached a definitive agreement to acquire Northeast Energy Services, Inc (NORESCO) in exchange for a combination of the Company's common stock and cash valued at approximately $77 million. Signature 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. EQUITABLE RESOURCES, INC. (Registrant) /s/ A. Mark Abramovic --------------------------------- A. Mark Abramovic Senior Vice President and Chief Financial Officer Date: August 14, 1997 EX-27 2 FDS EXHIBIT
5 1000 6-MOS DEC-31-1996 JUN-30-1997 41,367 0 276,637 12,277 26,542 422,898 2,259,793 767,797 2,055,140 512,211 417,075 0 0 204,362 516,247 2,055,140 953,335 953,335 0 905,915 0 7,394 22,432 28,401 9,874 18,527 0 0 0 18,527 0.52 0.52
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