-----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, MtgQxrtVBu/VMSSszISHwnbZHEYTVFn+o0DYPQLu+OQxoTsYWhUn4bk2dFdK9n3j Qs2IwsxkNBmrPebnbWRcUQ== 0000927356-01-500181.txt : 20010517 0000927356-01-500181.hdr.sgml : 20010517 ACCESSION NUMBER: 0000927356-01-500181 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARRETT RESOURCES CORP CENTRAL INDEX KEY: 0000351993 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PETROLEUM & PETROLEUM PRODUCTS (NO BULK STATIONS) [5172] IRS NUMBER: 840832476 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-13446 FILM NUMBER: 1640936 BUSINESS ADDRESS: STREET 1: 1515 ARAPAHOE ST STREET 2: TOWER 3 STE 1000 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3032973900 MAIL ADDRESS: STREET 1: 1515 ARAPAHOE ST STREET 2: TOWER 3 STE 1000 CITY: DENVER STATE: CO ZIP: 80202 FORMER COMPANY: FORMER CONFORMED NAME: AIMEXCO INC DATE OF NAME CHANGE: 19840215 10-Q/A 1 d10qa.txt QUARTERLY REPORT - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A1 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2001 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 1-13446 Barrett Resources Corporation (Exact name of registrant as specified in its charter) Delaware 84-0832476 (State or other jurisdiction of (I.R.S. Employer) Incorporation or organization) Identification No.) 1515 Arapahoe Street, Tower 3, Suite 1000 Denver, Colorado (Address of principal executive offices) 80202 (Zip Code) (303) 572-3900 (Registrant's telephone number, including area code) 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 [_] There were 33,461,004 shares of the registrant's $.01 par value common stock outstanding as of May 9, 2001. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- BARRETT RESOURCES CORPORATION INDEX PART I. FINANCIAL INFORMATION
Page ---- Item 1.Financial Statements Consolidated Condensed Balance Sheets--March 31, 2001 and December 31, 2000........................................................... 3 Consolidated Condensed Statements of Operations--Three Months Ended March 31, 2001 and 2000............................................. 4 Consolidated Condensed Statement of Comprehensive (Loss) Income..... 5 Consolidated Condensed Statements of Cash Flows--Three months ended March 31, 2001 and 2000............................................. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................... 12 Item 3.Quantitative and Qualitative Disclosures About Market Risk....... 14 PART II. OTHER INFORMATION Item 6.Recent Developments.............................................. 16 Item 7.Exhibits and Reports on Form 8-K................................. 17
2 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS BARRETT RESOURCES CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands)
March 31, 2001 December 31, 2000 -------------- ----------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents................... $ 22,830 $ 25,454 Receivables, net............................ 177,519 297,766 Gas inventory held for sale, at market...... 855 27,418 Deferred income tax asset................... 26,372 -- Other current assets........................ 18,436 29,042 ---------- ---------- Total current assets...................... 246,012 379,680 Net property and equipment (full cost method)...................................... 907,494 869,606 Other assets, net............................. 9,264 4,547 ---------- ---------- $1,162,770 $1,253,833 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............................ $ 147,352 $ 234,739 Amounts payable to oil and gas property owners..................................... 13,144 18,672 Production taxes payable.................... 44,039 39,229 Accrued and other liabilities............... 20,571 20,917 Derivative fair value--trading activities... 12,393 47,745 Derivative fair value--hedging activities... 69,400 -- ---------- ---------- Total current liabilities................. 306,899 361,302 Long-term debt................................ 295,005 406,269 Other long-term liabilities................... 20,000 -- Deferred income taxes......................... 52,560 39,003 Derivative fair value--trading activities..... 36,340 31,446 Derivative fair value--hedging activities..... 51,439 -- Stockholders' equity: Preferred stock, $.001 par value: 1,000,000 shares authorized, none outstanding........ -- -- Common stock, $.01 par value: 45,000,000 shares authorized; 33,466,003 issued (33,394,063 at December 31, 2000).......... 335 334 Additional paid-in capital.................. 298,534 296,043 Retained earnings........................... 176,446 119,436 Accumulated other comprehensive income...... (74,525) -- Treasury stock, at cost..................... (263) -- ---------- ---------- Total stockholders' equity................ 400,527 415,813 ---------- ---------- $1,162,770 $1,253,833 ========== ==========
The accompanying notes are an integral part of these statements. 3 BARRETT RESOURCES CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data)
Three Months Ended -------------------- March 31, March 31, 2001 2000 --------- --------- Operating revenues: Oil and gas production................................... $161,430 $67,204 Other income............................................. 3,553 1,907 -------- ------- 164,983 69,111 Operating expenses: Lease operating expenses................................. 25,983 11,356 Transportation and gathering............................. 10,572 6,503 Depreciation, depletion and amortization................. 26,309 25,211 General and administrative............................... 5,603 7,825 -------- ------- 68,467 50,895 -------- ------- Operating income from oil and gas operations............... 96,516 18,216 Other income and (expenses): Interest income.......................................... 371 207 Interest expense......................................... (5,766) (6,097) Trading activities, net.................................. 3,440 297 Other.................................................... (2,608) -- -------- ------- (4,563) (5,593) -------- ------- Income before income taxes................................. 91,953 12,623 Provision for income taxes................................. 34,942 4,797 -------- ------- Net income................................................. $ 57,011 $ 7,826 ======== ======= Earnings (loss) per common share Basic.................................................... $ 1.70 $ 0.24 ======== ======= Assuming dilution........................................ $ 1.67 $ 0.24 ======== ======= Weighted average shares of common stock outstanding: Basic.................................................... 33,453 32,600 ======== ======= Assuming dilution........................................ 34,205 32,888 ======== =======
The accompanying notes are an integral part of these statements. 4 BARRETT RESOURCES CORPORATION CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED) (in thousands)
For the Three Month Period Ended ------------ March 31, 2001 ------------ Net income........................................................ $ 57,011 Other comprehensive (loss) income, net of tax Cash flow hedges Cumulative effect of change in accounting principle to record the fair value of derivatives at January 1, 2001, net of tax benefits of $62.1 million..................................... (101,300) Unrealized gain due to change in fair value, net of tax effects of $0.3 million................................................ 664 Less: reclassification adjustment for losses included in net income, net of tax effect of $16.1 million..................... 26,111 --------- Total other comprehensive (loss).................................. (74,525) --------- Comprehensive (loss) income....................................... $ (17,514) =========
The accompanying notes are an integral part of these statements. 5 BARRETT RESOURCES CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)
Three Months Ended -------------------- March 31, March 31, 2001 2000 --------- --------- Cash flows from operations: Net income.............................................. $ 57,011 $ 7,826 Adjustments needed to reconcile to net cash provided by operations: Depreciation, depletion and amortization.............. 26,513 25,312 Deferred income taxes................................. 33,104 4,545 Unrealized (gain) loss on mark to market transactions......................................... (14,374) 1,029 Other................................................. (945) -- --------- -------- 101,309 38,712 Change in current assets and liabilities: Receivables............................................. 120,247 (46,564) Other current assets.................................... 21,556 (2,183) Accounts payable........................................ (87,387) 36,736 Amounts due oil and gas owners.......................... (5,528) 3,743 Production taxes payable................................ 4,810 3,121 Accrued and other liabilities........................... (1,520) (2,508) --------- -------- Net cash flow provided by operations...................... 153,487 31,057 --------- -------- Cash flows from investing activities: Proceeds from sale of oil and gas properties............ 249 16,377 Acquisition of property and equipment................... (64,525) (89,655) --------- -------- Net cash flow used in investing activities.............. (64,276) (73,278) --------- -------- Cash flows from financing activities: Proceeds from issuance of common stock.................. 1,926 403 Proceeds from long-term borrowing....................... 64,000 58,000 Payments on long-term debt.............................. (172,843) (28,809) Deferred Revenue........................................ 20,000 -- Other................................................... (4,918) -- --------- -------- Net cash flow (used) provided by financing activities..... (91,835) 29,594 --------- -------- Decrease in cash and cash equivalents..................... (2,624) (12,627) Cash and cash equivalents at beginning of period.......... 25,454 20,634 --------- -------- Cash and cash equivalents at end of period................ $ 22,830 $ 8,007 ========= ========
The accompanying notes are an integral part of these statements. 6 BARRETT RESOURCES CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS March 31, 2001 1. UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments necessary to present fairly the financial position of Barrett Resources Corporation and its subsidiaries, collectively referred to as the "Company", as of March 31, 2001 and the results of operations and cash flows for the periods presented. All such adjustments are of a normal recurring nature. The results of operations for the periods presented are not necessarily indicative of the results for the full year. The accounting policies followed by the Company are set forth in Note 1 to the Company's financial statements in Form 10-K for the year ended December 31, 2000. These financial statements should be read in conjunction with the financial statements and notes included in the Form 10-K. Also see Note 6 to these Consolidated Financial Statements regarding recently adopted accounting standards. Certain reclassifications have been made to 2000 amounts to conform to the 2001 presentation. 2. INCOME TAXES Provisions for income taxes were calculated in accordance with Statement of Financial Accounting Standards No. 109 which provides that a deferred tax liability or asset be determined based on the timing differences between the basis used for financial versus tax reporting of assets and liabilities as measured by the effective tax rates. For the quarter ended March 31, 2001, the Company used an estimated effective tax rate of 38 percent. Also see Note 6. 3. LONG-TERM DEBT The Company's long-term debt consists of the following (in thousands):
March December 31, 31, 2001 2000 -------- ------------ Line of Credit......................................... $140,000 $248,000 7.55% Senior Notes..................................... 150,000 150,000 Production Payments.................................... 13,209 15,298 -------- -------- Total................................................ 303,209 413,298 Less: current portion.................................. 8,204 7,029 -------- -------- Long-term debt......................................... $295,005 $406,269 ======== ========
In December 2000, the Company entered into a revolving senior credit facility under which up to $350 million is available for loans and letters of credit. This revolving line of credit expires December 15, 2005. As of March 31, 2001 the Company's effective interest rate, on the outstanding balance on its line of credit averaged 6.4% per annum. 7 BARRETT RESOURCES CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued) March 31, 2001 The Company's outstanding letters of credit totaled $36.3 million and $40.3 million at March 31, 2001 and December 31, 2000, respectively. 4. EARNINGS PER SHARE The following data shows the amounts used in computing earnings per share and the effect on income and the weighted average number of shares of dilutive potential common stock.
Three Months Ended ------------------- March 31, March 31, 2001 2000 --------- --------- (in thousands) Income available to common stockholders................. $57,011 $ 7,826 ======= ======= Weighted average number of common shares used in basic EPS.................................................... 33,453 32,600 Effect of dilutive stock options........................ 752 288 ------- ------- Weighted average number of common shares and dilutive potential common stock used in EPS-assuming dilution... 34,205 32,888 ======= =======
5. DERIVATIVES AND TRADING ACTIVITIES The Company uses swap agreements to reduce the effect of price volatility on a portion of its natural gas production. For its trading activities, the Company enters into a variety of contracts to purchase and sell natural gas and oil at both fixed prices and at index based prices. The Company also enters into financial instruments (derivatives) that seek to reduce sensitivity to price movements or to create guaranteed margins on certain trading delivery and purchase commitments. The Company accounts for and reports the fair value of its production and trading derivatives in accordance with Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities", adopted January 1, 2001. SFAS 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. It also requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. (Changes in the fair value are often referred to as unrealized mark to market adjustments.) Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. In conjunction with SFAS 133, contracts to purchase and sell natural gas and derivative positions for the Company's trading activity are marked to market at the end of each reporting period as trading activities. 8 BARRETT RESOURCES CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued) March 31, 2001 Production Hedges With the adoption of SFAS 133 on January 1, 2001, the Company recognized other comprehensive loss of $101.3 million, net of tax benefits of $62.1 million, and an additional liability of $163.4 million for the unrealized fair value of its derivative positions qualifying as cash flow hedges on 57.4 Bcf of its natural gas production. As of March 31, 2001, the Company held derivative positions on 51.0 Bcf of its natural gas production. The fair value of these derivatives at March 31, 2001, is a negative $120.8 million and is reflected on the Company's balance sheet as a liability (current $69.4 million and long term $51.4 million). Changes in the fair value of the derivatives, reclassification of derivative losses offsetting related results on hedged production recognized in the income statement and assessment of hedge effectiveness decreased the Company's other comprehensive loss to $74.5 million. (See Statement of Consolidated Condensed Comprehensive (Loss) Income.) For the three months ended March 31, 2001 and 2000, the Company recorded unrealized mark to market losses under its natural gas production swap agreements of $31.6 million and $4.7 million, respectively. Trading Activities The fair value of the Company's trading contracts and financial instruments as of March 31, 2001 was an estimated net negative of $48.7 million, an increase in value of $30.5 million from the $79.2 million fair value recorded at December 31, 2000. Net trading activities include a net unrealized mark to market gain of $14.8 million inclusive of mark to market adjustments on its natural gas inventory for the three months ended March 31, 2001. For the same period of 2000, the Company recognized a net unrealized mark to market loss of $1 million. Gross trading activities are summarized in the table below.
Three Months ended March 31 ---------------------------- Trading Activities 2001 2000 ------------------ ------------- ------------- (in thousands) Revenues, gross.............................. $ 447,149 $ 274,689 Operating expenses, gross.................... (458,478) (273,363) Unrealized gains (losses) on mark to market transactions................................ 14,769 (1,029) ------------- ------------- Net trading (expenses) income................ $ 3,440 $ 297 ============= =============
9 BARRETT RESOURCES CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued) March 31, 2001 6. BUSINESS SEGMENT INFORMATION The Company operates principally in two business segments: oil and gas exploration and production and natural gas trading. In addition to marketing its own gas, the Company engages in natural gas trading activities, which involves purchasing natural gas from and selling natural gas to third parties at prices and volumes that management anticipates will result in profits to the Company. The Company evaluates segment performance based on the profit or loss from operations before income taxes. Corporate general and administrative expenses are unallocated, except for certain direct costs associated with the Company's trading activity. Consolidated and segment financial information is as follows:
Quarter ended March 31, 2001 ------------------------------------------------------ Natural Oil & Gas Segments Corporation Gas E&P Trading Total & Unallocated Consolidated -------- ------- -------- ------------- ------------ (in thousands) Operating Revenues...... $161,630 $ 0 $161,630 $ 3,353 $164,983 DD&A.................... 24,323 0 24,323 1,986 26,309 Unrealized gains on mark to market transactions........... 0 14,769 14,769 0 14,769 Profit (loss)........... 100,752 3,143 103,895 (11,942) 91,953 Expenditures for assets, net.................... 60,576 0 60,576 3,700 64,276 Quarter ended March 31, 2000 ------------------------------------------------------ Natural Oil & Gas Segments Corporation Gas E&P Trading Total & Unallocated Consolidated -------- ------- -------- ------------- ------------ (in thousands) Operating Revenues...... $ 67,296 $ 0 $ 67,296 $ 1,815 $ 69,111 DD&A.................... 24,106 0 24,106 1,105 25,211 Unrealized (losses) on mark to market transactions........... 0 (1,029) (1,029) 0 (1,029) Profit (loss)........... 25,330 (104) 25,226 (12,603) 12,623 Expenditures for assets, net.................... 73,003 0 73,003 275 73,278
7. SUBSEQUENT EVENT On May 7, 2001, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with the Williams Companies, Inc.("Williams") and Williams' wholly-owned subsidiary Resources Acquisition Corp. ("Acquiror") in a transaction valued at approximately $2.8 billion, including the assumption of approximately $300 million in debt. Pursuant to the terms of the Merger Agreement, on May 14, 2001 Williams, through Acquiror, commenced a cash tender offer at $73.00 per share for 50 percent of the Company's outstanding common stock (the "Offer"). The Merger Agreement provides that, following consummation of the Offer and the satisfaction or waiver of the conditions set forth in the Merger Agreement, the Company and Acquiror will merge pursuant to which each remaining share of the Company's common stock will be converted into 1.767 shares of Williams' common stock. 10 BARRETT RESOURCES CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued) March 31, 2001 The transaction, which is contingent upon approval from federal anti-trust regulators and the tender of at least 50 percent of the Company's common stock, is expected to close in 60 to 90 days. The Merger Agreement provides for a termination fee of $75.5 million and reimbursement of up to $15 million in expenses each payable to Williams upon certain events of termination. 8. STATEMENT OF CASH FLOWS SUPPLEMENTAL INFORMATION
Three Months ended March 31 --------------- 2001 2000 ------- ------- (in thousands) Cash amounts paid for interest and income taxes are as follows: Interest..................................................... $ 9,641 $ 9,731 Income Taxes................................................. 74 287 Non-cash investing and financing activities: Common Stock/treasury share options exercised................ 263 0 Compensation associated with acceleration of vesting stock options..................................................... 304 0
11 BARRETT RESOURCES CORPORATION For the Quarter Ended March 31, 2001 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources For the three months ended March 31, 2001, total assets decreased $91 million, or seven percent, to $1.16 billion as compared with total assets of $1.25 billion at December 31, 2000. The Company's net cash flow from operations (see Consolidated Statement of Cash Flow) generated funds that were used to fund capital expenditures for the period and to reduce the Company's long term debt by $108.8 million. The Company's cash and cash equivalents at March 31, 2001 decreased by $2.6 million to $22.8 million and working capital decreased from December 31, 2000 by $79.3 million. The decrease in working capital is attributed to the monetization through collections and sale, respectively, of the Company's receivables and natural gas inventory. Furthermore, as of March 31, 2001 and in accordance with SFAS 133, adopted January 1, 2001, the Company recognized an additional liability of $120.8 million, of which $69.4 million was current, for the fair value of its production hedging positions. (See Note 5 to the Consolidated Financial Statements.) For the three months ended March 31, 2001, the Company generated operating cash flow of $101.3 million before working capital changes compared with $38.7 million in 2000. After working capital changes, cash flow provided by operations was $153.5 million, an increase of $122.4 million over 2000. These increases are primarily attributable to higher prices received in 2001 for gas sales. The Company had $140 million outstanding under its bank credit facility at March 31, 2001, down $108.8 million from the December 31, 2000 outstanding balance. The Company's oil and gas property expenditures for the first quarter of 2001 totaled $64.5 million, compared to $89.7 million for the same period of 2000. Of these expenditures, $25.9 million (40 percent) was invested in the Piceance Basin, $13.2 million (20 percent) in the Powder River Basin--Coal Bed Methane area, $10.6 million (16 percent) in the Raton Basin and $7.7 million (12 percent) in the Uinta Basin. In October 2000, the Company entered into a ten-year firm transportation commitment to transport its gas on a pipeline to be placed in service in May 2002. In January 2001, for consideration of $20.0 million, the Company assigned its rights and obligations for a 33 month period of that ten-year commitment commencing July 1, 2002. The Company is obligated to refund all or some of the consideration if, in the unlikely event, the pipeline is not constructed or its in-service date is delayed. On April 23, 2001, the Colorado Oil and Gas Conservation Commission issued a ruling to approve 20-acre increased density drilling covering 16,000 acres of Federal lands in the Piceance Basin. As a result of this ruling, the Company added 212 Bcf of proved gas reserves attributed to 202 additional well locations in the Piceance Basin. 12 As of April 30, 2001, including the increased well density in the Piceance Basin and other additions resulting from on-going drilling activities, the Company's total proved gas and oil reserves were 2.1 trillion cubic feet of gas equivalents, or an increase of 53 percent over the December 31, 2000 volumes. The incremental proved reserves consist of 645 Bcf and 54 Bcf of gas reserves in the Piceance and Powder River Basins, respectively, and 37 Bcfe of oil and gas reserves in the Uinta Basin. The Company expects cash flow from its producing properties and its borrowing capacity to be sufficient to fund its anticipated capital and operating requirements, including any contingencies. The Company's operating results are directly affected by oil and gas prices. Oil and gas prices also affect the reserve values used in determining the "ceiling test" limitation for the Company's capitalized oil and gas property costs accounted for under the full cost method. Should the net capitalized costs of the Company's oil and gas properties exceed the estimated present value of future net cash flows from proved oil and gas reserves, such excess costs would be recognized as an impairment and charged to current expense. A decline in oil and gas sales prices could possibly result in the recognition of an impairment expense in future periods. Results of Operations For the quarter ended March 31, 2001, the Company earned net income of $57.0 million ($1.67 per share), compared to net income of $7.8 million ($0.24 per share) in 2000. Excluding the effects of the unrealized non-cash mark to market gains and losses and related income tax effects, the Company's net income for 2001 and 2000 would have been $47.9 million ($1.40 per share) and $8.4 million ($0.26 per share), respectively. Operating income for the 2001 quarter was $96.5 million, an increase of $78.3 million compared to $18.2 million for the same period in 2000. This increase is primarily attributable to higher average sales prices received for gas in the 2001 quarter. Production revenues and related volumes and average prices during the periods presented were as follows:
Quarter Ended March 31, ---------------- 2001 2000 -------- ------- Gas Revenues (000's)....................................... $156,163 $61,392 Gas Production (Bcf)....................................... 29.1 28.8 Average Price per Mcf...................................... $ 5.38 $ 2.13 Oil Revenues (000's)....................................... $ 5,267 $ 5,812 Oil Production (MBbls)..................................... 221 231 Average Price per Barrel................................... $ 23.89 $ 25.16
(Note: Bcf = billion cubic feet; Mcf = thousand cubic feet; MBbls = thousand barrels.) First quarter gas revenues increased 154 percent as compared with the same period in 2000, principally due to a 153 percent increase in average prices. During the three months ended March 31, 2001, the Company recognized net production hedging losses of approximately $31.2 million and $0.4 million of expense associated with ineffective hedge assessment (see Note 5 to the Consolidated Financial Statements), which were recorded in the consolidated statements of income as adjustments to gas production revenue. 13 The nine percent decrease in the first quarter 2001 oil revenues from the same period in 2000 is attributed to a five percent decrease in average oil prices received together with a four percent decrease in oil production volumes. The decrease in oil production volumes is principally attributable to the sale of the Company's Permian Basin oil properties, effective February 1, 2000. Lease operating expenses of $25.9 million averaged $0.85 per Mcfe compared to $0.38 per Mcfe in 2000. The increase is primarily attributable to higher average sales prices received in 2001 resulting in increases in value related production and ad valorem taxes and net profits expense. Transportation and gathering expenses for the first quarter of 2001 averaged $0.35 per Mcfe compared to $0.22 per Mcfe for 2000. Depreciation, depletion and amortization increased $1.1 million. On a per unit of production basis, depletion rates were unchanged and averaged $0.80 per Mcfe for both 2001 and 2000. Depreciation expense averaged $0.06 per Mcfe for the 2001 quarter and $0.03 per Mcfe for the same period of 2000. The increase in depreciation is due to the acquisitions of additional gas gathering and compression facilities in the Raton Basin in the fourth quarter of 2000 and first quarter of 2001. Interest expense for the first quarter of 2001, net of capitalized interest of $1.4 million, decreased five percent ($0.3 million) compared to the same period of 2000. The decrease is a result of lower debt outstanding during the 2001 quarter. The Company reports its trading activities on a net basis (trading revenues net of associated costs). Excluding unrealized mark to market adjustments, the Company's net trading activities decreased from a $1.3 million gain in the first quarter of 2000 to an $11.3 million loss in 2001. Gas trading volumes decreased 51 percent from 118.6 Bcf in the first quarter of 2000 to 58.3 Bcf for 2001. High volatility and higher gas prices resulted in higher settlement costs on fixed price sales and financial derivative positions. The Company's first quarter 2001 other expense includes $1.9 million of costs associated with the Company's response to a hostile tender offer commenced on March 7, 2001. The Company's largest source of operating income is from gas and oil production. The levels of the Company's revenues and earnings from gas and oil production and trading activities are affected by prices at which natural gas and oil are being sold. This is particularly true with respect to natural gas, which accounted for approximately 97 percent of the Company's production revenue for the first quarter of 2001. As a result, the Company's operating results for any prior period are not necessarily indicative of future operating results because of the fluctuations in gas and oil prices and the lack of predictability of those fluctuations as well as changes in production levels. Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Commodity Price Risk Commodity financial instruments are intended to reduce the Company's exposure to declines in the market price of natural gas and oil. Such instruments may also limit the Company's gain from increases in the market price of natural gas and oil. Fluctuations or changes in the settlement values of commodity financial instruments are generally offset by similar changes in the realized price of natural gas and oil. The Company uses commodity derivative financial instruments, including futures and swaps, to reduce the effect of natural gas price volatility on a portion of its natural gas production. Commodity swap agreements are generally used to fix a price at the natural gas market location or to fix a price differential between two pricing 14 points. Settlements are based on the difference between a fixed and a variable price as specified in the agreement. The following table summarizes the Company's derivative financial instrument position on its natural gas production as of March 31, 2001. The fair value of these instruments reflected in the table below is the estimated amount that the Company would receive or (pay) to settle the contracts as of March 31, 2001. Actual settlement of these instruments when they mature will differ from these estimates reflected in the table. Gains or losses realized from these instruments hedging the Company's production are expected to be offset by changes in the actual sales price received by the Company for its natural gas production.
For the year Bcf Price Range Per MMBtu Fair Value ------------ ---- --------------------- --------------- 2001 19.4 $1.6376--$2.84 $(50.2) million 2002 27.2 $1.6376--$2.84 $(60.5) million 2003 4.4 $1.6396--$1.72 $(10.1) million
The Company also uses commodity derivative financial instruments and contracts for the purchase and sale of natural gas at both fixed and indexed based prices in its trading activities. The financial instruments seek to reduce sensitivity to price movements, to lock in margins on its trading positions and to hedge the value of stored gas. The following tables summarize the Company's derivative positions on its natural gas trading activities as of March 31, 2001. The fair value of these instruments reflects the estimated amounts that the Company would receive or (pay) to settle the contracts as of March 31, 2001. Actual settlement of these instruments as they mature will differ from these estimates. CONTRACTS TO PURCHASE NATURAL GAS
Price Range Per For the year Bcf MMBtu Fair Value ------------ ----- --------------- --------------- 2001 1.7 $ 2.465--$5.46 $ 4.3 million 67.4 Indexed Based $ (0.4) million 2002 .2 $ 2.465 $ 0.5 million 21.9 Indexed Based $ (0.4) million 2003 14.7 Indexed Based $ 0.2 million 2004 11.9 Indexed Based $ 0.3 million 2005 2.3 Indexed Based $ 0.1 million CONTRACTS TO SELL NATURAL GAS Price Range Per For the year Bcf MMBtu Fair Value ------------ ----- --------------- --------------- 2001 11.7 $ 1.92--$5.46 $(16.9) million 136.7 Indexed Based $ 9.2 million 2002 5.6 $ 2.3725--$5.46 $ (4.6) million 71.4 Indexed Based $ 2.3 million 2003 2.7 $2.3725--$2.465 $ (3.6) million 52.8 Indexed Based $ (0.1) million 2004 2.7 $2.3725--$2.465 $ (3.0) million 45.4 Indexed Based $ (0.5) million 2005 1.4 $2.3725--$2.465 $ (1.4) million 15.6 Indexed Based $ (0.3) million Thereafter 3.9 $ 2.465 $ (3.3) million 9.5 Indexed Based $ (0.5) million
15 DERIVATIVE FINANCIAL INSTRUMENT POSITIONS*
For the year Bcf Price Range Per MMBtu Fair Value ------------ ---- ---------------------------- -------------- 2001 (8.3) $1.905--$5.055/Indexed Based $(4.2) million 2002 7.8 $2.84 /Indexed Based $(9.4) million 2003 8.0 Indexed Based $(4.5) million 2004 5.8 Indexed Based $(4.8) million 2005 (1.6) Indexed Based $(2.0) million Thereafter (3.9) Indexed Based $(5.7) million
* Volumes presented in this table represent the Company's net position. A positive position indicates a net purchase position; a negative position indicates a net sell position. Interest Rate Risk The Company's use of fixed and variable rate long-term debt to partially finance capital expenditures exposes the Company to market risk related to changes in interest rates. As of March 31, 2001, there have been no material changes in the Company's interest rate risk exposure, from that disclosed in the 2000 Form 10-K. This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the Company believes that the expectations reflected in the forward-looking statements and the assumptions upon which such forward-looking statements are based are reasonable, it can give no assurance that such expectations and assumptions will prove to have been correct. See the Company's Annual Report on Form 10-K for additional statements concerning important factors that could cause actual results to differ materially from the Company's expectations. PART II. OTHER INFORMATION Item 6. RECENT DEVELOPMENTS On May 7, 2001, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with the Williams Companies, Inc. ("Williams") and Williams' wholly-owned subsidiary Resources Acquisition Corp. ("Acquiror") in a transaction valued at approximately $2.8 billion, including the assumption of approximately $300 million in debt. Pursuant to the terms of the Merger Agreement, on May 14, 2001 Williams, through Acquiror, commenced a cash tender offer at $73.00 per share for 50 percent of the Company's outstanding common stock (the "Offer"). The Merger Agreement provides that, following consummation of the Offer and the satisfaction or waiver of the conditions set forth in the Merger Agreement, the Company and Acquiror will merge pursuant to which each remaining share of the Company's common stock will be converted into 1.767 shares of Williams' common stock. The transaction, which is contingent upon approval from federal anti-trust regulators and the tender of at least 50 percent of the Company's common stock, is expected to close in 60 to 90 days. The Merger Agreement provides for a termination fee of $75.5 million and reimbursement of up to $15 million in expenses each payable to Williams upon certain events of termination. The description of the Merger Agreement is qualified in its entirety by the terms of the Merger Agreement a copy of which was filed on Exhibit 10.1 on the Company's current report on Form 8-K filed on May 7, 2001. 16 Item 7. EXHIBITS AND REPORTS ON FORM 8-K (a) The following Exhibits are filed as part of this Quarterly Report on Form 10-Q: 2.1 Agreement And Plan of Merger, dated as of May 2, 1995, among Barrett Resources Corporation ("Barrett" or "Registrant"), Barrett Energy Inc. (formerly known as Vanilla Corporation), and Plains Petroleum Company ("Plains") is incorporated by reference from Annex I to the Joint Proxy Statement/Prospectus of Barrett and Plains dated June 13, 1995. 3.1 Restated Certificate Of Incorporation of Barrett Resources Corporation, a Delaware corporation, is incorporated herein by reference from Exhibit 3.2 of Registrant's Registration Statement on Form S-4 dated June 9, 1995. 3.2 Certificate of Amendment to Certificate of Incorporation of Barrett dated June 17, 1997 is incorporated by reference from Exhibit 3.2 of Registrant's Annual Report on Form 10-K for the year ended December 31, 1997. 3.3A Bylaws of Barrett, as amended through February 25, 1998 are incorporated by reference from Exhibit 3.3 of Registrant's Annual Report on Form 10-K for the year ended December 31, 1998. 3.3B Bylaw Amendments dated March 14, 2001 are incorporated by reference from Exhibit (a)(2)(xi) of Registrant's Schedule 14D-9 filed with the SEC on March 23, 2001. 3.3C Bylaw Amendment dated March 22, 2001 is incorporated by reference from Exhibit 3.3C of Registrant's Annual Report on Form 10-K for the year ended December 31, 2000. 4.1A Form of Rights Agreement dated as of August 5, 1997 between Barrett and BankBoston, N.A., which includes, as Exhibit A thereto, the form of Certificate of Designations specifying the terms of the Series A Junior Participating Preferred Stock, and as Exhibit B thereto, the form of Rights Certificate, is incorporated by reference from Exhibit 1 to the Company's Registration Statement on Form 8-A filed August 11, 1997. 4.1B Form of the Amendment to Rights Agreement dated August 5, 1997 between Barrett and BankBoston, N.A. is incorporated by reference from Exhibit 4.1B of Registrant's Annual Report on Form 10-K for the year ended December 31, 2000. 4.1C Form of the Second Amendment to Rights Agreement, dated as of May 7, 2001, between Registrant and BankBoston, N.A. as Rights Agent is incorporated by reference from Exhibit 1 to Registrant's Form 8-A/A2 filed with the SEC on May 7, 2001. 4.2 Revised Form of Indenture between the Company and Bankers Trust Company, as trustee, with respect to Senior Notes including specimen of 7.55% Senior Notes is incorporated by reference from Exhibit 4.1 to the Company's Amendment No. 1 to Registration Statement on Form S- 3 filed February 10, 1997, File No. 333-19363. 4.3 Form of Indenture between the Registrant and Bankers Trust Company, as trustee, with respect to Debt Securities is incorporated by reference from Exhibit 4.2 of Registrant's Registration Statement on Form S-3 filed May 6, 1998 (File No. 333-51985). 10.1 Non-Qualified Stock Option Plan Of Barrett Resources Corporation is incorporated by reference from Registrant's Registration Statement on Form S-8 dated November 15, 1989. 10.2 Registrant's 1990 Stock Option Plan, as amended, is incorporated by reference from the Registrant's Registration Statement on Form S-8 dated March 15, 1995.
17 10.3 Registrant's Non-Discretionary Stock Option, as amended, is incorporated by reference from Exhibit 99.2 of the Registrant's Proxy Statement dated April 24, 1997. 10.4 Registrant's 1994 Stock Option Plan, As amended, is incorporated by reference from the Registrant's Registration Statement on Form S-8 dated March 15, 1995. 10.5 Registrant's 1997 Stock Option Plan is incorporated by reference from Exhibit 99.1 of the Registrant's Proxy Statement dated April 24, 1997. 10.6A Revolving Credit Agreement dated as of July 19, 1995 among Barrett and Texas Commerce Bank National Association, as Agent, and Texas Commerce Bank National Association, Nations Bank of Texas, N.A., Bank of Montreal, Houston Agency, Colorado National Bank, and The First National Bank of Boston, as the "Banks", is incorporated by reference from Exhibit 10.6 to Barrett's Annual Report on Form 10-K for the year ended December 31, 1995. 10.6B First Amendment to Revolving Credit Agreement dated October 31, 1996 between and among Barrett, Agent and the Banks is incorporated by reference from Exhibit 10.1 to Amendment No. 2 to Barrett's Registration Statement on Form S-3 (File No. 333-19363) dated February 10, 1997. 10.6C Second Amendment to Revolving Credit Agreement dated February 10, 1997 between and among Barrett, the Agent, and the Banks is incorporated by reference from Exhibit 10.2 to Amendment No. 2 to Barrett's Registration Statement on Form S-3 (File No. 333-19363) dated February 10, 1997. 10.6D Amended and Restated Credit Agreement dated November 12, 1997 between and among Barrett, the Agent, the Banks, and The Chase Manhattan Bank as the "Competitive Bid Auction Agent" is incorporated by reference from Exhibit 10.7D to Registrant's Annual Report on Form 10-K for the Year ended December 31, 1997. 10.6E First Amendment to Amended and Restated Credit Agreement dated December 19, 1997 between and among Barrett, the Agent, the Banks, and the Competitive Bid Auction Agent is incorporated by reference from Exhibit 10.7E to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997. 10.7 Revolving Credit Agreement among Barrett, as Borrower, Bank of America, N.A., as Administrative Agent and Issuing Lender, Banc of America Securities L.L.C., as Sole Lead Arranger and Book Manager, Bank One, NA, as Syndication Agent, Fleet National Bank, as Documentation Agent, and the Lenders Party to that agreement is incorporated by reference from Exhibit 10.7 of Registrant's Annual Report on Form 10-K for the year ended December 31, 2000. 10.8A Severance Protection Agreement dated February 6, 1998 between Registrant and William J. Barrett is incorporated by reference from Exhibit 10.8 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997 10.8B Amendment No. 1 to Severance Protection Agreement dated November 19, 1998 between Registrant and William J. Barrett is incorporated by reference from Exhibit 10.8B of Registrant's Annual Report on Form 10-K for the year ended December 31, 1998. 10.10A Form of Severance Protection Agreement is incorporated by reference from Exhibit 10.9A to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997.
18 10.10B Schedule Identifying Material Differences Among Severance Protection Agreements between Barrett and each of Peter A. Dea, Joseph N. Jaggers, A. Ralph Reed, J. Frank Keller, Eugene A. Lang, Jr. and Bryan G. Hassler is incorporated by reference from Exhibit 10.10B of Registrant's Annual Report on Form 10-K for the year ended December 21, 2000. 10.10C Amendment No. 1 to Severance Protection Agreement dated February 9, 1998 between Registrant and Peter A. Dea is incorporated by reference from Exhibit 10.8C to Registrant's Annual Report on Form 10-K for the year ended December 31, 1999. 10.10D Form of Amendment to Severance Protection Agreement effective May 3, 2001, is incorporated by reference from Exhibit (e)(3) of Registrant's Schedule 14D-9 filed with the SEC on May 14, 2001. 10.11 Agreement and Plan of Merger, dated as of May 7, 2001, between Barrett Resources Corporation, The Williams Companies, Inc. and Resources Acquisition Corp. is incorporated by reference from Exhibit 10.1 of Registrant's Current Report on Form 8-K filed with the SEC on May 7, 2001.
(b) On May 7, 2001, the Company filed a Form 8-K pertaining to the Agreement and Plan of Merger entered into on May 7, 2001 with the Williams Companies, Inc. and Resources Acquisition Corp. 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Barrett Resources Corporation /s/ Peter A. Dea May 15, 2001 By __________________________________ Peter A. Dea Chairman of the Board and Chief Executive Officer /s/ J. Frank Keller May 15, 2001 By __________________________________ J. Frank Keller Chief Financial Officer 20 -----END PRIVACY-ENHANCED MESSAGE-----