-----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, JxwOn1UQigqKUA6jPcpEaXlGhRD7XCSKNSAoxpB4aN0YTWs3ZP8uy7A8EUoeEcVz doD3YeHshmkl4uP5JTkwWw== 0000033213-97-000028.txt : 19971117 0000033213-97-000028.hdr.sgml : 19971117 ACCESSION NUMBER: 0000033213-97-000028 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 001-03551 FILM NUMBER: 97720108 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 PERIOD END SEPTEMBER 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 SEPTEMBER 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 September 30, 1997 Common stock, no par value 36,782,230 shares EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Index Page No. PART I. FINANCIAL STATEMENTS: Statements of Consolidated Income for the Three Months Ended September 30, 1997 and 1996, the Nine Months Ended September 30, 1997 and 1996, and the Twelve Months Ended September 30, 1997 and 1996 1 Statements of Condensed Consolidated Cash Flows for the Three Months Ended September 30, 1997 and 1996, the Nine Months Ended September 30, 1997 and 1996, and the Twelve Months Ended September 30, 1997 and 1996 2 Consolidated Balance Sheets, September 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 - 23 PART II. OTHER INFORMATION 24 SIGNATURE 25
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Statements of Consolidated Income (Thousands Except Per Share Amounts) Three Months Ended Nine Months Ended Twelve Months Ended September 30, September 30, September 30, ------------------------------------------------------------------------------ 1997 1996 1997 1996 1997 1996 ------------------------------------------------------------------------------ Operating Revenues......... $ 508,102 $ 357,011 $ 1,461,437 $ 1,389,056 $ 1,934,180 $ 1,822,829 Cost of Energy Purchased .. 378,717 262,943 1,075,784 1,034,786 1,409,154 1,297,261 ---------- ---------- ----------- ----------- ----------- ----------- Net operating revenues 129,385 94,068 385,653 354,270 525,026 525,568 ---------- ---------- ----------- ----------- ----------- ----------- Operating Expenses: Operation............... 70,574 54,543 188,078 158,126 251,095 213,325 Maintenance............. 7,668 7,653 22,255 19,920 28,879 26,911 Depreciation, depletion and amortization ..... 23,624 20,805 63,924 62,463 83,842 82,937 Impairment of assets and nonrecurring items.. 10,725 - 23,725 - 16,355 121,081 Taxes other than income. 6,843 7,207 30,300 31,515 40,942 44,918 ---------- ---------- ----------- ----------- ----------- ----------- Total operating expenses 119,434 90,208 328,282 272,024 421,113 489,172 ---------- ---------- ----------- ----------- ----------- ----------- Operating Income .......... 9,951 3,860 57,371 82,246 103,913 36,396 Other Income .............. 27,355 (751) 30,768 4,104 29,662 6,082 Interest Charges........... 11,421 10,311 33,853 30,723 44,955 42,603 ---------- ---------- ----------- ----------- ----------- ----------- Income (Loss) Before Income Taxes .... 25,885 (7,202) 54,286 55,627 88,620 (125) Income Taxes (Benefits).... 8,898 (3,515) 18,772 19,660 29,694 (9,364) ---------- ---------- ----------- ----------- ----------- ----------- Net Income (Loss).......... $ 16,987 $ (3,687) $ 35,514 $ 35,967 $ 58,926 $ 9,239 ========== ========== =========== =========== =========== =========== Average Common Shares Outstanding...... 36,185 35,267 35,763 35,143 35,663 35,107 ========== ========== =========== =========== ========== =========== Earnings (Loss) Per Share of Common Stock............ $.47 $(.10) $.99 $1.02 $1.65 $.26 ==== ===== ==== ===== ===== ==== Dividends Per Share of Common Stock............ $.29 $.29 $.88 $.88 $1.18 $1.18 ==== ==== ==== ==== ===== =====
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Statements of Condensed Consolidated Cash Flows (Thousands) Three Months Ended Nine Months Ended Twelve Months Ended September 30, September 30, September 30, ----------------------------------------------------------------------------------- 1997 1996 1997 1996 1997 1996 -------------------------------------------------------------------------------- Net cash provided (used) by operating activities..................... $ 6,272 $ 20,409 $ 77,762 $ 69,168 $ 74,162 $ 245,846 ----------- ----------- ---------- ----------- ----------- ----------- Cash Flows from Investing Activities: Capital expenditures.................. (71,843) (38,493) (124,015) (81,175) (153,124) (117,343) Proceeds from sale of property........ 119,679 40 119,992 1,543 122,629 21,932 ----------- ----------- ----------- ----------- ---------- ----------- Net cash used in investing activities................... 47,836 (38,453) (4,023) (79,632) (30,495) (95,411) ----------- ----------- ------------ ----------- ----------- ----------- Cash Flows from Financing Activities: Issuance of common stock.............. 3,673 496 4,027 1,687 4,646 2,705 Purchase of treasury stock............ (4,845) - (28,596) (8) (28,621) (167) Dividends paid........................ (10,838) (10,418) (31,486) (31,126) (41,908) (41,450) Proceeds from issuance of long-term debt...................... - 144,919 - 144,919 - 144,877 Repayments and retirements of long-term debt...................... - (65,617) (157) (150,440) (157) (160,440) Increase in short-term loans.......... 51,458 (38,003) 102,659 54,649 117,910 (86,303) ----------- ----------- ----------- ----------- ---------- ----------- Net cash provided (used) by financing activities....... 39,448 31,377 46,447 19,681 51,870 (140,778) ----------- ----------- ----------- ----------- ---------- ------------ Increase in cash and cash equivalents.... 93,556 13,333 120,186 9,217 95,537 9,657 Cash and cash equivalents at beginning of period ............................. 41,367 26,053 14,737 30,169 39,386 29,729 ----------- ----------- ----------- ----------- ---------- ----------- Cash and cash equivalents at end of period.............................. $ 134,923 $ 39,386 $ 134,923 $ 39,386 $ 134,923 $ 39,386 =========== =========== =========== =========== ========== =========== Cash paid during the period for: Interest (net of amount capitalized).. $ 21,695 $ 6,659 $ 36,732 $ 31,471 $ 48,286 $ 40,851 =========== =========== =========== =========== ========== =========== Income taxes.......................... $ 2,489 $ 486 $ 7,762 $ 10,117 $ 8,101 $ 39,123 =========== =========== =========== =========== ========== ===========
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Thousands) September 30, December 31, ------------------------------------------------- 1997 1996 1996 ------------------------------------------------ ASSETS Current Assets: Cash and cash equivalents............................... $ 134,923 $ 39,386 $ 14,737 Accounts receivable (less accumulated provision for doubtful accounts: September 30, 1997 $8,117; 1996 $12,966; December 31, 1996, $10,714)........................... 274,873 186,206 296,175 Unbilled revenues ...................................... 4,924 5,330 24,157 Gas stored underground - current inventory.............. 17,746 18,110 19,497 Material and supplies................................... 14,551 9,071 18,512 Deferred purchased gas cost............................. 49,228 56,859 60,079 Prepaid expenses and other.............................. 55,538 69,906 52,604 ------------- ------------ ------------- Total current assets............................... 551,783 384,868 485,761 ------------- ------------ ------------- Property, Plant and Equipment: Supply and Logistics (successful efforts method) ....... 1,114,220 1,202,329 1,220,756 Utilities .............................................. 1,015,732 975,886 988,425 Services................................................ 9,149 1,347 1,810 ------------- ------------ ------------- Total property, plant and equipment................ 2,139,101 2,179,562 2,210,991 Less accumulated depreciation and depletion........... 702,015 713,512 731,306 ------------- ------------ ------------- Net property, plant and equipment.................. 1,437,086 1,466,050 1,479,685 ------------- ------------ ------------- Other Assets: Regulatory assets....................................... 70,872 72,638 73,150 Goodwill ............................................... 68,738 - 8,396 Other................................................... 78,904 56,156 49,307 ------------- ------------ ------------- Total other assets.................................... 218,514 128,794 130,853 ------------- ------------ ------------- Total.............................................. $ 2,207,383 $ 1,979,712 $ 2,096,299 ============= ============ =============
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Thousands) September 30, December 31, -------------------------------------------------- 1997 1996 1996 -------------------------------------------------- CAPITALIZATION AND LIABILITIES Current Liabilities: Long-term debt payable within one year............. $ 5,000 $ - $ - Short-term loans................................... 307,559 189,649 204,900 Accounts payable................................... 163,355 152,359 231,969 Accrued taxes...................................... 24,925 17,189 20,645 Accrued interest................................... 6,492 6,368 11,852 Refunds due customers.............................. 20,887 16,941 14,889 Deferred income taxes.............................. 13,502 17,354 19,009 Customer credit balances........................... 8,202 6,383 7,051 Other.............................................. 46,569 15,782 10,099 ------------ ------------- ------------- Total current liabilities..................... 596,491 422,025 520,414 ------------ ------------- ------------- Long--Term Debt ....................................... 417,320 421,920 422,112 ------------ ------------- ------------- Deferred and Other Credits: Deferred income taxes.............................. 272,096 253,178 260,700 Deferred investment tax credits.................... 19,070 20,164 19,892 Deferred revenue................................... 89,611 110,062 107,674 Other.............................................. 26,554 23,519 23,224 ------------ ------------- ------------- Total deferred and other credits.............. 407,331 406,923 411,490 ------------ ------------- ------------- Common stockholders' equity: Common stock, no par value, authorized 80,000 shares; shares issued September 30, 1997, 36,838; September 30, 1996, 35,492; December 31, 1996, 35,515 .................... 263,951 227,038 227,660 Retained earnings ............................... 523,894 506,877 519,867 Treasury stock, shares at cost September 30, 1997, 56; September 30, 1996, 168; December 31, 1996, 169........................ (1,550) (3,998) (4,023) Foreign currency translation..................... (54) (1,073) (1,221) ------------- ------------- ------------- Total common stockholders' equity............. 786,241 728,844 742,283 ------------ ------------- ------------- Total..................................... $ 2,207,383 $ 1,979,712 $ 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 September 30, 1997 and 1996 and the results of operations for the three, nine and twelve months then ended and cash flows for the three, nine 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 nine-month periods ended September 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. Results for the periods ended September 30, 1997, include a non-recurring pre-tax charge of $10.7 million related to evaluation and reduction of corporate office and non-core business functions. As more fully described in Management's Discussion and Analysis of Financial Condition and Results of Operations, the Company has an investment in a 25 percent general partnership interest in the Avoca bedded salt, natural gas storage project. The project has 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. In December 1996, the Company recognized a pre-tax gain of $7.4 million related to the curtailment of the Company's defined benefit pension plan for non-utility employees. The above items are reflected as impairment of assets and non-recurring items in the Statements of Consolidated Income. F. 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 with a newly defined basic earnings per share and modifies the computation of diluted earnings per share. The adoption of the new Standard will not have a material effect on the earnings per share presently disclosed. SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," were issued in 1997. These new standards will be adopted by the Company when required, and are not expected to have a material effect on the consolidated financial statements. G. At September 30, 1997, 9,171,000 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, 59,000 shares for issuance under the Company's Dividend Reinvestment and Stock Purchase Plan, and 6,744,000 shares for possible use in connection with future acquisitions. H. 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. NORESCO is a provider of comprehensive energy efficiency systems and services for commercial, industrial, government, and institutional customers. NORESCO's primary assets are accounts receivable from customers and deferred contract costs which are included in other assets in the consolidated balance sheets. The transaction is treated as a purchase for accounting purposes. Based upon a preliminary valuation of the assets and liabilities of NORESCO, the Company has recorded goodwill of $57 million which will be amortized over 20 years. In connection with this acquisition, the Company issued 2,091,407 shares of common stock. Prior to completing the purchase, the Company repurchased one million shares of outstanding 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 not material to the financial position or results of operations of the Company. I. 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 sales were completed in September and October for an aggregate cash sales price of approximately $174 million. The sale resulted in a gain of approximately $50 million of which $25.6 million was recognized in September and is included in other income in the Statements of Consolidated Income. As part of a tax deferred like-kind exchange, a portion of the proceeds were placed in escrow. Amounts held in escrow at September 30, 1997, are included in cash and cash equivalents in the Consolidated Balance Sheets. In October 1997, the Company completed an $80 million acquisition of Louisiana offshore properties from Chevron. The properties, which are in areas where the Company already has interests, have existing net production of about 22 million cubic feet of gas and 1,800 barrels of oil per day. J. In August 1997, the Company completed a $22 million acquisition of a 67-mile pipeline in Louisiana from the Department of Energy. The pipeline, formerly used for crude oil transportation, has been converted to natural gas transmission capable of handling in excess of 500,000 MMBtu per day of offshore production. The pipeline began transporting natural gas in October.
Three Months Ended September 30, 1997 Supply and Intersegment Logistics Utilities Services Eliminations Consolidated ----------------------------------------------------------------------------------- Gas Produced, Purchased and Sold (MMcf): Produced 13,976 814 14,790 --------- --------- --------- --------- --------- Purchased: Other producers 149,881 9,492 33 159,406 Inter-segment purchases 1,674 597 17,684 (19,955) --------- --------- --------- --------- --------- Total purchases 151,555 10,089 17,717 (19,955) 159,406 --------- --------- --------- --------- --------- Total produced and purchased 165,531 10,903 17,717 (19,955) 174,196 Deduct: Net increase (decrease) in gas in storage 3,024 3,024 Extracted natural gas liquids (equivalent gas volumes) 3,461 3,461 System use and unaccounted for 491 (664) (173) --------- ---------- --------- --------- --------- Total 161,579 8,543 17,717 (19,955) 167,884 ========= ========= ========= ========= ========= Gas Sales (MMcf): Residential 1,941 1,941 Commercial 162 162 Industrial and Utility 3,545 (1,675) 1,870 Production 13,976 (27) 13,949 Marketing 147,603 2,895 17,717 (18,253) 149,962 --------- --------- --------- ---------- --------- Total 161,579 8,543 17,717 (19,955) 167,884 ========= ========= ========= ========== ========= Natural Gas Transported (MMcf) 21,172 20,444 (10,665) 30,951 ========= ========= ========= ========== ========= Oil Produced and Sold (thousands of bls) 361 361 ========= ========= Natural Gas Liquids Sold (thousands of gallons) 75,483 75,483 ========= ========= Average Selling Price: Residential Gas Sales (per Mcf) 12.690 Commercial Gas Sales 12.370 Industrial and Utility Gas Sales 2.384 Produced Natural Gas 2.105 Marketed Natural Gas 2.335 1.629 2.831 Oil (per barrel) 16.222 Natural Gas Liquids (per gallon) 0.333
Three Months Ended September 30, 1996 Supply and Intersegment Logistics Utilities Services Eliminations Consolidated ----------------------------------------------------------------------------------- Gas Produced, Purchased and Sold (MMcf): Produced 13,696 661 14,357 --------- --------- --------- --------- --------- Purchased: Other producers 107,223 15,898 25,408 148,529 Inter-segment purchases (93) 1,187 (1,094) ---------- --------- --------- ---------- --------- Total purchases 107,130 17,085 25,408 (1,094) 148,529 --------- --------- --------- --------- --------- Total produced and purchased 120,826 17,746 25,408 (1,094) 162,886 Deduct: Net increase (decrease) in gas in storage 3,597 3,597 Extracted natural gas liquids (equivalent gas volumes) 2,436 2,436 System use and unaccounted for 561 861 1,422 --------- --------- --------- --------- --------- Total 117,829 13,288 25,408 (1,094) 155,431 ========= ========= ========= ========= ========= Gas Sales (MMcf): Residential 2,087 2,087 Commercial 1,012 1,012 Industrial and Utility 9,255 1,512 10,767 Production 13,696 (24) 13,672 Marketing 104,133 934 25,408 (2,582) 127,893 --------- --------- --------- ---------- --------- Total 117,829 13,288 25,408 1,094 155,431 ========= ========= ========= ========= ========= Natural Gas Transported (MMcf) 31,260 15,855 (3,528) 43,587 ========= ========= ========= ========= ========= Oil Produced and Sold (thousands of bls) 420 420 ========= ========= Natural Gas Liquids Sold (thousands of gallons) 76,785 76,785 ========= ========= Average Selling Price: Residential Gas Sales (per Mcf) 10.852 Commercial Gas Sales 5.985 Industrial and Utility Gas Sales 2.694 Produced Natural Gas 1.636 Marketed Natural Gas 1.736 3.394 2.462 Oil (per barrel) 14.705 Natural Gas Liquids (per gallon) 0.326
Nine Months Ended September 30, 1997 Supply and Intersegment Logistics Utilities Services Eliminations Consolidated ----------------------------------------------------------------------------------- Gas Produced, Purchased and Sold (MMcf): Produced 40,288 1,783 42,071 --------- --------- --------- --------- --------- Purchased: Other producers 360,040 34,185 24,292 418,517 Inter-segment purchases 2,114 4,160 51,150 (57,424) --------- --------- --------- ---------- --------- Total purchases 362,154 38,345 75,442 (57,424) 418,517 --------- --------- --------- ---------- --------- Total produced and purchased 402,442 40,128 75,442 (57,424) 460,588 Deduct: Net increase (decrease) in gas in storage (715) (715) Extracted natural gas liquids (equivalent gas volumes) 8,310 8,310 System use and unaccounted for 1,563 (287) 1,276 --------- ---------- --------- --------- --------- Total 392,569 41,130 75,442 (57,424) 451,717 ========= ========= ========= ========== ========= Gas Sales (MMcf): Residential 19,248 19,248 Commercial 2,279 2,279 Industrial and Utility 13,326 (5,878) 7,448 Production 40,288 (326) 39,962 Marketing 352,281 6,277 75,442 (51,220) 382,780 --------- --------- --------- ---------- --------- Total 392,569 41,130 75,442 (57,424) 451,717 ========= ========= ========= ========== ========= Natural Gas Transported (MMcf) 82,907 62,059 (32,878) 112,088 ========= ========= ========= ========== ========= Oil Produced and Sold (thousands of bls) 1,193 1,193 ========= ========= Natural Gas Liquids Sold (thousands of gallons) 218,352 218,352 ========= ========= Average Selling Price: Residential Gas Sales (per Mcf) 10.659 Commercial Gas Sales 10.366 Industrial and Utility Gas Sales 2.663 Produced Natural Gas 2.156 Marketed Natural Gas 2.254 2.485 3.000 Oil (per barrel) 17.248 Natural Gas Liquids (per gallon) 0.352
Nine Months Ended September 30, 1996 Supply and Intersegment Logistics Utilities Services Eliminations Consolidated ----------------------------------------------------------------------------------- Gas Produced, Purchased and Sold (MMcf): Produced 43,785 1,876 45,661 --------- --------- --------- --------- --------- Purchased: Other producers 367,108 52,609 25,408 445,125 Inter-segment purchases 2,754 8,144 (10,898) --------- --------- --------- --------- --------- Total purchases 369,862 60,753 25,408 (10,898) 445,125 --------- --------- --------- --------- --------- Total produced and purchased 413,647 62,629 25,408 (10,898) 490,786 Deduct: Net increase (decrease) in gas in storage 1,106 1,106 Extracted natural gas liquids (equivalent gas volumes) 6,532 6,532 System use and unaccounted for 1,556 3,048 4,604 --------- --------- --------- --------- --------- Total 405,559 58,475 25,408 (10,898) 478,544 ========= ========= ========= ========= ========= Gas Sales (MMcf): Residential 21,388 21,388 Commercial 9,326 9,326 Industrial and Utility 21,143 (47) 21,096 Production 43,785 (423) 43,362 Marketing 361,774 6,618 25,408 (10,428) 383,372 --------- --------- --------- ---------- --------- Total 405,559 58,475 25,408 (10,898) 478,544 ========= ========= ========= ========== ========= Natural Gas Transported (MMcf) 91,858 45,529 (19,402) 117,985 ========= ========= ========= ========= ========= Oil Produced and Sold (thousands of bls) 1,312 1,312 ========= ========= Natural Gas Liquids Sold (thousands of gallons) 202,185 202,185 ========= ========= Average Selling Price: Residential Gas Sales (per Mcf) 8.628 Commercial Gas Sales 6.158 Industrial and Utility Gas Sales 2.958 Produced Natural Gas 1.850 Marketed Natural Gas 2.247 3.445 2.462 Oil (per barrel) 15.663 Natural Gas Liquids (per gallon) 0.329
Twelve Months Ended September 30, 1997 Supply and Intersegment Logistics Utilities Services Eliminations Consolidated ----------------------------------------------------------------------------------- Gas Produced, Purchased and Sold (MMcf): Produced 53,798 2,425 56,223 --------- --------- --------- --------- --------- Purchased: Other producers 451,041 47,703 23,073 521,817 Inter-segment purchases 6,283 11,810 82,876 (100,969) --------- --------- --------- ---------- --------- Total purchases 457,324 59,513 105,949 (100,969) 521,817 --------- --------- --------- ---------- --------- Total produced and purchased 511,122 61,938 105,949 (100,969) 578,040 Deduct: Net increase (decrease) in gas in storage (165) (165) Extracted natural gas liquids (equivalent gas volumes) 10,169 10,169 System use and unaccounted for 1,883 1,637 3,520 --------- --------- --------- --------- --------- Total 499,070 60,466 105,949 (100,969) 564,516 ========= ========= ========= ========== ========= Gas Sales (MMcf) Residential 28,409 28,409 Commercial 3,458 3,458 Industrial and Utility 18,830 (11,265) 7,565 Production 53,798 (34,055) 19,743 Marketing 445,272 9,769 105,949 (55,649) 505,341 --------- --------- --------- ---------- --------- Total 499,070 60,466 105,949 (100,969) 564,516 ========= ========= ========= ========== ========= Natural Gas Transported (MMcf) 111,412 86,875 (50,100) 148,187 ========= ========= ========= ========== ========= Oil Produced and Sold (thousands of bls) 1,608 1,608 ========= ========= Natural Gas Liquids Sold (thousands of gallons) 296,746 296,746 ========= ========= Average Selling Price: Residential Gas Sales (per Mcf) 10.288 Commercial Gas Sales 10.005 Industrial and Utility Gas Sales 2.856 Produced Natural Gas 2.142 Marketed Natural Gas 2.247 2.454 3.072 Oil (per barrel) 15.887 Natural Gas Liquids (per gallon) 0.374
Twelve Months Ended September 30, 1996 Supply and Intersegment Logistics Utilities Services Eliminations Consolidated ----------------------------------------------------------------------------------- Gas Produced, Purchased and Sold (MMcf): Produced 59,841 2,787 62,628 --------- --------- --------- --------- --------- Purchased: Other producers 483,172 69,608 25,408 578,188 Inter-segment purchases 7,952 12,513 (20,465) --------- --------- --------- --------- --------- Total purchases 491,124 82,121 25,408 (20,465) 578,188 --------- --------- --------- --------- --------- Total produced and purchased 550,965 84,908 25,408 (20,465) 640,816 Deduct: Net increase (decrease) in gas in storage (628) (628) Extracted natural gas liquids (equivalent gas volumes) 8,622 8,622 System use and unaccounted for 2,113 5,749 7,862 --------- --------- --------- --------- --------- Total 540,230 79,787 25,408 (20,465) 624,960 ========= ========= ========= ========= ========= Gas Sales (MMcf): Residential 31,494 31,494 Commercial 11,064 11,064 Industrial and Utility 26,637 (4,309) 22,328 Production 59,841 (552) 59,289 Marketing 480,389 10,592 25,408 (15,604) 500,785 --------- --------- --------- --------- --------- Total 540,230 79,787 25,408 (20,465) 624,960 ========= ========= ========= ========= ========= Natural Gas Transported (MMcf) 118,570 56,477 (21,523) 153,524 ========= ========= ========= ========= ========= Oil Produced and Sold (thousands of bls) 1,751 1,751 ========= ========= Natural Gas Liquids Sold (thousands of gallons) 266,804 266,804 ========= ========= Average Selling Price: Residential Gas Sales (per Mcf) 8.506 Commercial Gas Sales 6.418 Industrial and Utility Gas Sales 2.871 Produced Natural Gas 1.847 Marketed Natural Gas 2.136 2.885 2.462 Oil (per barrel) 15.774 Natural Gas Liquids (per gallon) 0.318
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES Information by Business Segment (Thousands) Three Months Ended Nine Months Ended Twelve Months Ended September 30, September 30, September 30, ----------------------------------------------------------------------------- 1997 1996 1997 1996 1997 1996 ----------------------------------------------------------------------------- (Thousands) OPERATING REVENUES: Supply and logistics. $ 441,355 $ 268,212 $1,034,927 $1,032,523 $1,321,065 $1,348,623 Utilities ........... 54,552 66,639 332,073 362,740 476,774 502,247 Services............. 72,867 63,074 255,565 66,302 361,598 66,745 Sales between segments (60,672) (40,914) (161,128) (72,509) (225,257) (94,786) --------- --------- ---------- ---------- ---------- ---------- Total...... $ 508,102 $ 357,011 $1,461,437 $1,389,056 $1,934,180 $1,822,829 ========= ========= ========== ========== ========== ========== OPERATING INCOME (LOSS) (A): Supply and logistics. $ 22,768 $ 11,418 $ 46,016 $ 34,124 $ 63,902 $ (15,865) Utilities............ (10,893) (2,297) 19,553 60,211 48,662 65,195 Services............. (1,924) (5,261) (8,198) (12,089) (8,651) (12,934) --------- --------- --------- ---------- ---------- ---------- Total...... $ 9,951 $ 3,860 $ 57,371 $ 82,246 $ 103,913 $ 36,396 ========= ========= ========= ========== ========== ========== CAPITAL EXPENDITURES (B): Supply and logistics. $ 50,801 $ 28,631 $ 83,732 $ 58,091 $ 98,258 $ 76,798 Utilities............ 16,921 9,062 35,224 22,284 49,771 39,714 Services............. 80,993 800 81,931 800 81,967 831 --------- --------- --------- ---------- ---------- ---------- Total...... $ 148,715 $ 38,493 $ 200,887 $ 81,175 $ 229,996 $ 117,343 ========= ========= ========= ========== ========== ========== (a) Includes impairment of assets and nonrecurring items. (b) Includes acquisitions.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW THREE MONTHS ENDED SEPTEMBER 30, 1997 VS. THREE MONTHS ENDED SEPTEMBER 30, 1996 Equitable's consolidated net income for the quarter ended September 30, 1997 was $17.0 million, or $.47 per share, compared with net loss of $3.7 million, or $.10 per share, for the quarter ended September 30, 1996. The 1997 results include a pre-tax gain of $25.6 million from completion of a portion of the sale of the Company's western region oil and gas production properties and a non-recurring pre-tax charge of $10.7 million related to evaluation and reduction of corporate office and non-core business functions. The increase in income, excluding the items detailed above, is due to a 29 percent increase in the average selling price for produced natural gas and lower exploration expenses. NINE MONTHS ENDED SEPTEMBER 30, 1997 VS. NINE MONTHS ENDED SEPTEMBER 30, 1996 Consolidated net income for the nine months ended September 30, 1997 was $35.5 million or $.99 per share, compared with $36.0 million or $1.02 per share for the nine months ended September 30, 1996. In addition to the gain on sale of property and the non-recurring charge described above, the 1997 results include a pre-tax charge of $13.0 million for an asset write-down related to the Company's investment in a bedded salt, natural gas storage project in Avoca, New York. The increase in income, excluding the items discussed above, is due to a 17 percent increase in average selling prices for produced natural gas, higher margins from sale of natural gas liquids and lower exploration expenses which were substantially offset by a 3.5 Bcf decrease in natural gas production and lower margins from gas sales for the utility segment. TWELVE MONTHS ENDED SEPTEMBER 30, 1997 VS. TWELVE MONTHS ENDED SEPTEMBER 30, 1996 Consolidated net income for the twelve months ended September 30, 1997 was $58.9 million or $1.65 per share, compared with $9.2 million or $.26 per share for the twelve months ended September 30, 1996. In addition to the impairment of assets and nonrecurring items described above, the 1997 period includes a one-time pre-tax gain of $7.4 million from the curtailment of the Company's defined benefit pension plan for certain non-utility employees. Earnings for the twelve months ended September 30, 1996 include a one-time pre-tax charge of $121.1 million, due to the recognition of impairment of assets 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 1996 period also include a non-recurring pre-tax gain of $45.0 million related to the Columbia Gas Transmission (Columbia) bankruptcy settlement. The increase in net income, excluding the effect of the items detailed above, is due to a 16 percent increase in average selling prices for produced natural gas, higher margins from sale of natural gas liquids and lower exploration expenses. These increases were partially offset by a 6.0 Bcf decrease in natural gas production and lower margins from gas sales for the utility segment. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) 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 NINE MONTHS ENDED TWELVE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SUPPLY AND LOGISTICS 1997 1996 1997 1996 1997 1996 OPERATING REVENUES (THOUSANDS): Marketed Natural Gas.... $ 344,635 $180,753 $ 793,922 $ 812,743 $1,000,399 $1,026,259 Produced Natural Gas.... 29,414 22,401 86,857 81,020 115,237 110,531 Produced Natural Gas Liquids 25,110 25,029 76,932 66,544 111,016 84,916 Produced Oil............ 5,856 6,176 20,577 20,550 25,547 27,620 Contract Drilling....... 7,949 6,079 16,686 14,250 21,626 18,599 Marketed Electricity.... 15,858 10,180 19,111 12,701 21,577 15,222 Natural Gas Transportation 1,856 2,955 4,706 6,156 6,220 7,775 Natural Gas Storage..... 731 365 2,346 515 2,930 515 Direct Billing Settlements 7,815 7,815 7,815 7,815 7,815 21,586 Other................... 2,131 6,459 5,975 10,229 8,698 35,600 --------- -------- --------- --------- ---------- --------- Total Revenues........ 441,355 268,212 1,034,927 1,032,523 1,321,065 1,348,623 COST OF ENERGY PURCHASED 372,070 209,284 854,735 865,298 1,082,376 1,089,603 --------- -------- --------- --------- ---------- --------- Net Operating Revenues 69,285 58,928 180,192 167,225 238,689 259,020 --------- -------- --------- --------- --------- --------- OPERATING EXPENSES: Production.............. 7,897 7,791 25,567 23,729 36,361 31,635 Exploration............. 816 7,420 6,605 12,058 10,261 15,779 Gas Processing.......... 2,789 2,483 8,538 7,686 11,336 11,196 Contract Drilling....... 6,499 4,660 14,021 11,217 18,685 14,745 Other................... 13,985 11,182 38,536 35,757 44,474 49,996 Depreciation, Depletion and Amortization..... 13,331 13,974 39,709 42,654 52,470 56,457 Impairment of Assets and Nonrecurring items .. 1,200 1,200 1,200 95,077 --------- -------- --------- --------- --------- ---------- Total Operating Expenses 46,517 47,510 134,176 133,101 174,787 274,885 --------- -------- --------- ---------- --------- ---------- OPERATING INCOME (LOSS)... $ 22,768 $ 11,418 $ 46,016 $ 34,124 $ 63,902 $ (15,865) ========= ======== ========= ========= ========= ========== SALES QUANTITIES: Marketed Natural Gas (MMcf) 147,603 104,133 352,281 361,774 445,272 480,389 Produced Natural Gas (MMcf) 13,976 13,696 40,288 43,785 53,798 59,841 Oil (MBls).............. 361 420 1,193 1,312 1,608 1,751 Natural Gas Liquids..... (thousands of gallons) 75,483 76,785 218,352 202,185 296,746 266,804 Transportation Deliveries (MMcf)(a) 21,172 31,260 82,907 91,858 111,412 118,570 (a)For 1997, deliveries of gas under exchange arrangements are no longer included as transportation throughput. Prior period amounts have not been restated.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) THREE MONTHS ENDED SEPTEMBER 30, 1997 VS. THREE MONTHS ENDED SEPTEMBER 30, 1996 Operating revenues were $441.4 million for the quarter ended September 30, 1997 compared with $268.2 million for the quarter ended September 30, 1996. The increase in operating revenues is due to a 91 percent increase in revenues from marketed gas sales a 29 percent increase in the average selling price for produced natural gas, and higher revenues from marketed electricity. 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 $372.1 million for the quarter ended September 30, 1997 compared with $209.3 million for the quarter ended September 30, 1996. The increase for the quarter reflects increased marketed natural gas sales activity. Other operating expenses were $45.3 million for the quarter ended September 30, 1997, excluding the nonrecurring charge of $1.2 million, compared to $47.5 million for the quarter ended September 30, 1996. Lower dry hole costs were partially offset by increased contract drilling costs reflecting higher contract drilling activity. NINE MONTHS ENDED SEPTEMBER 30, 1997 VS. NINE MONTHS ENDED SEPTEMBER 30, 1996 Operating revenues of $1,034.9 million for the nine months ended September 30, 1997 were substantially the same as the $1,032.5 million for the nine months ended September 30, 1996. A 17 percent increase in the average selling price of produced natural gas, a 16 percent increase in revenues from the sale of natural gas liquids and increased revenues from marketed electricity were substantially offset by lower revenues from marketed gas sales and an 8 percent decrease in natural gas production. Cost of energy purchased for the nine months ended September 30, 1997 amounted to $854.7 million compared to $865.3 million for the nine months ended September 30, 1996. The decrease reflects lower marketed natural gas sales activity. Other operating expenses of $134.2 million for the nine months ended September 30, 1997 were substantially unchanged from the $133.1 million for the nine months ended September 30, 1996. Lower dry hole costs and lower depletion expense were more than offset by increases in expenses for contract drilling, for well operations and for the storage operations which began full operations in the second quarter of 1996. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) TWELVE MONTHS ENDED SEPTEMBER 30, 1997 VS. TWELVE MONTHS ENDED SEPTEMBER 30, 1996 Operating revenues for the twelve months ended September 30, 1997 were $1,321.1 million compared with $1,348.6 million for the twelve months ended September 30, 1996. The 1996 revenues include $40.2 million of nonrecurring amounts from the Columbia bankruptcy settlement. The increase in revenues of $12.7 million, excluding the Columbia settlement, is due to an increase in both the average selling price and production of natural gas liquids of 18 percent and 11 percent, respectively, and a 16 percent increase in the average selling price for produced natural gas. These increases were partially offset by lower marketed gas sales and a 10 percent reduction in natural gas production. Cost of energy purchased for the twelve months ended September 30, 1997 amounted to $1,082.4 million compared to $1,089.6 million for the twelve months ended September 30, 1996. The decrease in purchased energy for the twelve month period is due to decreased marketed natural gas requirements, partially offset by requirements for increased production of natural gas liquids. Other operating expenses for the twelve months ended September 30, 1997 were $174.8 million compared with $274.9 million for the twelve months ended September 30, 1996. Other operating expenses for 1996 include a charge of $95.1 million for impairment of assets as described in the Overview section above. The decrease in operating expenses for the current period, excluding the charge for impairment of assets in the 1996 period, is due primarily to lower exploration costs and decreased depreciation and depletion expense, reflecting lower production and lower depletion rates, which were partially offset by increased well operating costs and higher expenses from contract drilling activities. 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 $9.3 million related to evaluation and reduction of corporate office and non-core business functions. The nine-month and twelve-month periods ended September 30, 1997 also include a charge of $13.0 million for an asset write-down on the Company's investment in a 25 percent 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 has proved to be economically viable resulting in project termination.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, UTILITIES 1997 1996 1997 1996 1997 1996 OPERATING REVENUES (THOUSANDS): Residential Gas Sales.... $ 24,632 $ 22,648 $ 205,161 $ 184,529 $292,268 $ 267,875 Commercial Gas Sales..... 2,004 6,057 23,624 57,433 34,599 71,006 Industrial and Utility Gas Sales ............. 8,452 24,929 35,492 62,538 53,787 76,471 Marketed Gas Sales....... 4,715 3,170 15,598 22,801 23,969 30,556 Transportation Service... 8,815 5,986 38,106 22,783 53,490 34,550 Storage Service.......... 2,171 1,842 5,957 5,436 7,826 7,230 Other.................... 3,763 2,007 8,135 7,220 10,835 14,559 --------- --------- --------- --------- -------- --------- Total Revenues......... 54,552 66,639 332,073 362,740 476,774 502,247 COST OF ENERGY PURCHASED... 17,255 31,103 159,259 173,755 231,827 232,539 --------- --------- --------- --------- -------- --------- Net Operating Revenues. 37,297 35,536 172,814 188,985 244,947 269,708 --------- --------- --------- --------- -------- --------- OPERATING EXPENSES: Other.................... 31,953 31,036 110,571 108,999 154,132 152,503 Depreciation, Depletion and Amortization....... 6,912 6,797 20,365 19,775 27,198 26,446 Impairment of Assets and Nonrecurring Items..... 9,325 22,325 14,955 25,564 --------- --------- --------- --------- -------- --------- Total Operating Expenses 48,190 37,833 153,261 128,774 196,285 204,513 --------- --------- --------- --------- ---------- --------- OPERATING INCOME (LOSS).... $ (10,893) $ (2,297) $ 19,553 $ 60,211 $ 48,662 $ 65,195 ========== ========== ========= ========= ======== ========= SALES QUANTITIES (MMCF): Residential Gas Sales.... 1,941 2,087 19,248 21,388 28,409 31,494 Commercial Gas Sales..... 162 1,012 2,279 9,326 3,458 11,064 Industrial and Utility Gas Sales.............. 3,545 9,255 13,326 21,143 18,830 26,637 Marketed Gas Sales....... 2,895 934 6,277 6,618 9,769 10,592 Transportation Deliveries 20,444 15,855 62,059 45,529 86,875 68,450 Heating Degree Days...... 23 109 3,665 3,855 5,788 6,073
THREE MONTHS ENDED SEPTEMBER 30, 1997 VS. THREE MONTHS ENDED SEPTEMBER 30, 1996 Revenues were $54.6 million for the quarter ended September 30, 1997 compared with $66.6 million for the quarter ended September 30, 1996. The decrease in revenues is due primarily to the effect of commercial and industrial gas sales customers switching to transportation service partially offset by higher residential and commercial rates reflecting pass-through of higher regulatory purchased gas costs to customers. Cost of energy purchased amounted to $17.3 million for the quarter ended September 30, 1997 compared with $31.1 million for the quarter ended September 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 September 30, 1997 of $38.9 million, excluding the charge of $9.3 million described in the overview section above, were substantially the same as the $37.7 million for the quarter ended September 30, 1996. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) NINE MONTHS ENDED SEPTEMBER 30, 1997 VS. NINE MONTHS ENDED SEPTEMBER 30, 1996 Operating revenues for the nine months ended September 30, 1997 were $332.1 million compared with $362.7 million for the nine months ended September 30, 1996. The decrease in revenues of $30.6 million is due primarily to the effect of commercial and industrial customers switching from gas sales to transportation service, and a 10 percent decrease in residential sales volumes reflecting customer conservation and weather that was 5 percent warmer than the prior year. These decreases were partially offset by higher residential and commercial rates reflecting pass-through of higher regulatory purchased gas costs to customers. Cost of energy purchased for the nine months ended September 30, 1997 was $159.3 million compared with $173.4 million for the nine months ended September 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 nine months ended September 30, 1997, excluding the charges described in the overview section above, were $130.9 million compared with $128.8 million for the nine months ended September 30, 1996. The increase in operating expenses is primarily due to increased customer assistance expenses and higher reserves for doubtful accounts, both reflecting the impact of higher rates for retail customers. TWELVE MONTHS ENDED SEPTEMBER 30, 1997 VS. TWELVE MONTHS ENDED SEPTEMBER 30, 1996 Operating revenues for the twelve months ended September 30, 1997 were $476.8 million compared with $502.2 million for the twelve months ended September 30, 1996. Operating revenues for the 1996 period include $4.8 million related to the Columbia bankruptcy settlement. The decrease in revenues, excluding the effect of the settlement, is due to the effect of commercial and industrial customers switching to transportation service, lower sales to utility customers, and lower residential gas sales reflecting warmer weather and customer conservation. These decreases were partially offset by higher residential and commercial rates reflecting pass-through of higher regulatory purchased gas costs to customers. Cost of energy purchased of $231.8 million for the twelve months ended September 30, 1997 was substantially unchanged from the $232.5 million for the twelve months ended September 30, 1996. The lower requirements reflecting lower gas sales were substantially offset by the pass-through of higher regulatory purchased gas costs to retail customers. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Other operating expenses for the twelve months ended September 30, 1997, excluding the impairment of assets and nonrecurring items described in the overview section above, were $181.3 million compared with $178.9 million, excluding the impairment of assets, for the twelve months ended September 30, 1996. The increase in operating expenses is primarily due to increased customer assistance expenses and higher reserves for doubtful accounts, both reflecting the impact of higher rates for retail customers. 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 comparison of operating results reflects the recent development of this segment.
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SERVICES 1997 1996 1997 1996 1997 1996 OPERATING REVENUES (THOUSANDS): Marketed Natural Gas..... $ 50,155 $ 62,544 $ 226,358 $ 62,544 $325,423 $ 62,544 Energy Service Contracting 22,500 506 28,456 1,604 35,276 1,604 Other ................... 212 24 751 2,154 899 2,597 --------- --------- --------- --------- -------- --------- Total Revenues...... 72,867 63,074 255,565 66,302 361,598 66,745 COST OF ENERGY PURCHASED... 49,383 61,869 220,880 64,145 316,720 64,659 --------- --------- --------- --------- -------- --------- Net Operating Revenues 23,484 1,205 34,685 2,157 44,878 2,086 --------- --------- --------- --------- -------- --------- OPERATING EXPENSES: Energy Service Contract Costs ................. 16,409 418 20,347 1,019 22,578 1,019 Other.................... 7,645 6,014 20,713 13,193 28,804 13,527 Depreciation, Depletion and Amortization....... 1,154 34 1,623 34 1,947 34 Impairment of Assets and Nonrecurring items..... 200 - 200 - 200 440 --------- --------- --------- --------- -------- --------- Total Operating Expenses............ 25,408 6,466 42,883 14,246 53,529 15,020 --------- -------- --------- --------- --------- --------- OPERATING INCOME (LOSS).... $ (1,924) $ (5,261) $ (8,198) $ (12,089)$ (8,651) (12,934) ========= ========== ========= ========= ========= ========= SALES QUANTITIES: Marketed Natural Gas (MMcf) 17,717 25,408 75,442 25,408 105,949 25,408
Operating results for the quarter ended September 30, 1997 were a loss of $1.9 million compared with a loss of $5.3 million for the quarter ended September 30, 1996. Operating results for the nine months ended September 30, 1997 were a loss of $8.2 million compared with a loss of $12.1 million for the nine months ended September 30, 1996. Operating results for the twelve months ended September 30, 1997 were a loss of $8.7 million compared with a loss of $12.9 million for the twelve months ended September 30, 1996. The losses for the 1996 periods reflect 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. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) 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, the timing of pass-through of changes in gas costs to retail customers in regulated rates 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. The Company's performance contracting business also requires substantial initial working capital investment which is recovered in revenues as future energy savings are realized or when the contract is assigned. 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, excluding acquisitions, with cash generated from operations and temporarily with short-term loans. In September 1997, Equitable Gas Company, the local distribution operations of the Company, received approval from the Pennsylvania Public Utility Commission for an annual increase in base rates of $15.8 million effective October 15, 1997. 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. Capital expenditures, excluding acquisitions that are more fully described below, were $102.0 million for the nine months ended September 30, 1997. In July 1997, the Company completed its acquisition of Northeast Energy Services, Inc. (NORESCO) as more fully described in Note H to the Consolidated Financial Statements. In August 1997, the Company completed a $22 million acquisition of a 67-mile pipeline in Louisiana from the Department of Energy. The pipeline, formerly used for crude oil transportation, has been converted to natural gas transmission capable of handling in excess of 500,000 MMBtu per day. The pipeline began transporting natural gas in October. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) 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 sales were completed in September and October for an aggregate cash sales price of $174 million. The sale resulted in a gain of approximately $50.0 million of which $25.6 million was recognized in September. As part of a tax deferred like-kind exchange, a portion of the proceeds were placed in escrow and are included in cash and cash equivalents in the Consolidated Balance Sheets. In October 1997, the Company completed the acquisition of certain Gulf of Mexico properties from Chevron for approximately $80 million. The acquired properties have existing net production of about 22 million cubic feet of gas and 1,800 barrels of oil per day and are situated in areas where the Company already has interests. In October 1997, the Company completed the sale of its contract drilling assets to a private investor group. Proceeds from the sale were $7.0 million. The Company has begun a 200 million cubic feet per day expansion at its Plaquemine Louisiana processing plant which is part of the LIG system. The expansion will provide for the additional production of up to 850,000 gallons of natural gas liquids per day beginning in late 1998. The cost of the expansion will be approximately $23.0 million. The Company has entered into an amendment to its long-term agreement with AMOCO Production Company for increased processing of their natural gas produced in Louisiana. The Company is presently upgrading many of its financial systems as part of an enterprise-wide initiative to integrate systems and enhance operational efficiencies. These systems are year 2000 compliant. The impact of the year 2000 on other systems is being evaluated. Presently, the estimated costs to convert other systems is not expected to be material. 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 September 30, 1997, $264.9 million of commercial paper and $42.7 million of bank loans were outstanding at an average annual interest rate of 5.74 percent. 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. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) 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 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: None (b) Reports on Form 8-K during the quarter ended September 30, 1997: Form 8-K dated July 17, 1997, announcing the completion of purchase of Northeast Energy Services Company. Form 8-K dated July 21, 1997, announcing the early retirement of Company President and Chief Executive Officer, Frederick H. Abrew, effective July 17, 1997 and appointment of Donald I Moritz as interim Chief Executive Officer. Form 8-K dated July 29, 1997, announcing that the Company had entered into sales agreements with five purchasers covering its oil and natural gas properties in the western United States and Canada. Form 8-K dated August 1, 1997, announcing resignation of A. Mark Abramovic, Senior Vice President and Chief Financial Officer effective August 29, 1997. Form 8-K dated August 1, 1997, announcing that ET Avoca Company, a special purpose subsidiary of the Company, filed a petition for relief under Chapter 11 of the United States Bankruptcy Code related to its partnership interest in the Avoca natural gas storage project which has been discontinued. 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/ Jeffrey C. Swoveland ----------------------------------------- Jeffrey C. Swoveland Vice President - Finance and Treasurer and Interim Chief Financial Officer Date: November 14, 1997 EX-27 2 FDS --
5 1000 9-MOS DEC-31-1996 SEP-30-1997 134,923 0 279,797 8,117 32,297 551,783 2,139,101 702,015 2,207,383 596,491 417,320 0 0 262,401 523,840 2,207,383 1,461,437 1,461,437 0 1,404,066 0 7,826 33,853 54,286 18,772 35,514 0 0 0 35,514 0.99 0.99
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