-----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, Lm8M5RCOZjW9zS4Ze+MoQrYPItpVDhQenFtNMFqXK3tGEOIh2c53C50mbX9uwKlt ZWXiBJEy89FlOW/hOLFQ/A== 0000355115-96-000025.txt : 19960814 0000355115-96-000025.hdr.sgml : 19960814 ACCESSION NUMBER: 0000355115-96-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALAMCO INC CENTRAL INDEX KEY: 0000355115 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 550615701 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08490 FILM NUMBER: 96609142 BUSINESS ADDRESS: STREET 1: 200 W MAIN ST CITY: CLARKSBURG STATE: WV ZIP: 26301 BUSINESS PHONE: 3046236671 MAIL ADDRESS: STREET 1: P.O. BOX 1740 STREET 2: 200 W. MAINE STREET CITY: CLARKSBURG STATE: WV ZIP: 26301 FORMER COMPANY: FORMER CONFORMED NAME: ALLEGHENY LAND & MINERAL CO DATE OF NAME CHANGE: 19830718 10-Q 1 SECOND QUARTER 10-Q 1996 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 1-8490 ALAMCO, INC. (Exact name of registrant as specified in its charter) Delaware 55-0615701 (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) 200 West Main Street, Clarksburg, WV 26301 (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code (304) 623-6671 - -------------------------------------------------------------------------------- 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ The number of shares outstanding of each of the registrant's classes of common stock as of August 1, 1996, is set forth below: Class of Stock Number of Shares Outstanding Common Stock, $.10 par value 4,749,782 PART I. Financial Information Pages Item 1. Financial Statements Condensed Consolidated Statement of Income . . . . . . . . . . 3 for the three and six months ended June 30, 1996 and 1995 Condensed Consolidated Balance Sheet as of . . . . . . . . . 4 - 5 June 30, 1996 and December 31, 1995 Condensed Consolidated Statement of Cash Flows . . . . . . . . 6 for the six months ended June 30, 1996 and 1995 Condensed Consolidated Statement of Stockholders' . . . . . . 7 Equity for the six months ended June 30, 1996 and 1995 Notes to the Condensed Consolidated Financial . . . . . . . 8 - 9 Statements Item 2. Management's Discussion and Analysis of . . . . . . . . . . 10 - 13 Financial Condition and Results of Operations PART II. Other Information Item 4. Submission of Matters to a Vote of Security Holders . . . . . 14 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 14 Signature Page . . . . . . . . . . . . . . . . . . . . . . . 15 Three Months Ended Six Months Ended June 30, June 30, ------------------- ---------------- 1996 1995 1996 1995 ---- ---- ---- ---- Revenues: Gas and oil sales $4,655 $3,048 $10,842 $6,059 Well tending income 224 287 403 536 Other revenue 258 195 516 395 ------ ------ ------ ------ Total revenues 5,137 3,530 11,761 6,990 ------ ------ ------ ------ Expenses: Operating 2,010 1,609 4,083 3,170 General & administrative 876 781 1,587 1,558 Depreciation, depletion & amortization 1,139 1,029 2,217 2,045 Interest 234 332 575 631 ------ ------ ------ ------ Total expenses 4,259 3,751 8,462 7,404 ------ ------ ------ ------ Income (loss) from operations 878 (221) 3,299 (414) Other nonoperating income, net 68 50 151 114 ------ ------ ------ ------ Income (loss) before income taxes 946 (171) 3,450 (300) Income tax provision (benefit) 381 (96) 1,209 (123) ------ ------ ------ ------- Net income (loss) $ 565 ($75) $2,241 ($177) ====== ====== ====== ====== Net income (loss) per share $0.11 ($0.02) $0.45 ($0.04) ===== ===== ===== ===== Weighted average number of shares outstanding 4,934,523 4,677,257 4,930,973 4,665,385 ========= ========= ========= ========= June 30, December 31, 1996 1995 ---- ---- (Unaudited) ASSETS Current assets: Cash and cash equivalents $2,974 $3,297 Accounts receivable 4,878 3,116 Due from partnerships and programs 88 72 Inventories and other current assets 188 368 ------ ------ Total current assets 8,128 6,853 ------ ------ Property and equipment: Gas and oil producing properties (Successful Efforts Method) 81,905 78,076 Other property and equipment 6,456 5,740 ------ ------- 88,361 83,816 Less accumulated depreciation, depletion and amortization 33,637 32,201 ------- ------- 54,724 51,615 Other assets 1,038 1,294 ------- ------- Total assets $63,890 $59,762 ======= ======= (Continued) June 30, December 31, 1996 1995 ---- ---- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt and capital lease obligations $ 35 $ 33 Accounts payable 1,456 1,026 Accrued expenses and other 1,410 1,545 Due working interest and royalty owners 1,386 3,309 Deferred revenue 211 113 Income tax payable 99 0 ------- ------- Total current liabilities 4,597 6,026 ------- ------- Long-term debt and capital lease obligations, less current portion 15,857 13,674 Due working interest and royalty owners 317 325 Deferred revenue 0 29 Deferred taxes 9,905 8,936 Other long-term liabilities 499 429 ------- ------- Total liabilities 31,175 29,419 ------- ------- Commitments and contingencies Stockholders' equity: Preferred stock, par value $1.00 per share; 1,000,000 shares authorized; none issued Common stock, par value $.10 per share; 15,000,000 shares authorized, 4,775,790 and 4,762,898 shares issued and outstanding, respectively, including treasury stock 478 476 Additional paid-in capital 31,368 31,243 Retained earnings (deficit) 1,089 (1,152) -------- ------- 32,935 30,567 Less: Treasury stock, 52,520 and 62,405 shares of common stock, respectively 220 224 ------- ------- Total stockholders' equity 32,715 30,343 ------- ------- Total liabilities and stockholders' equity $63,890 $59,762 ======= ======= Six Months Ended June 30, ----------------- 1996 1995 ---- ---- Net income (loss) $ 2,241 ($177) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 2,217 2,045 Change in deferred tax liability 969 (123) (Gains) losses on asset sales (54) (22) Issuance of stock for employee benefits and compensation expense 111 70 Other factors, net 3 2 Increases (decreases) in cash from changes in: Accounts receivable (1,762) 57 Due from partnerships and programs (16) (32) Due working interest and royalty owners (1,923) 133 Inventories and other current assets 180 9 Accounts payable & accrued expenses 295 (1,055) Deferred revenue 98 (261) Income tax payable 99 0 -------- ------- Net cash provided by operating activities 2,458 646 -------- ------- Cash flows from investing activities: Proceeds from disposal of fixed assets 63 237 Capital expenditures, including dry hole costs (5,257) (2,356) Other assets 178 (8) -------- ------- Net cash used in investing activities (5,016) (2,127) -------- ------- Cash flows from financing activities: Borrowings under line of credit agreement 3,200 1,800 Payments on line of credit (1,000) (500) Additions to long-term debt 0 32 Principal payments on long-term debt and capital lease obligations (18) (63) Acquisition of treasury stock (30) (46) Proceeds from exercise of stock options 50 106 Other liabilities 33 (545) ------- ------- Net cash provided by financing activities 2,235 784 ------- ------- Net decrease in cash and temporary investments (323) (697) Cash and cash equivalents - beginning of period 3,297 2,632 ------- ------- Cash and cash equivalents - end of period $ 2,974 $ 1,935 ======= ======= Supplemental disclosure of cash flow information: Cash paid during the year for: Interest $694 $628 Common Stock Additional Retained Treasury Stock ------------- Paid-in Earnings ------------- Shares Dollars Capital (Deficit) Shares Dollars ------ ------- -------- -------- ------ ------- Balance December 31, 1994 4,712,713 $471 $31,039 ($2,847) 63,360 $188 Issuance of treasury stock -- -- 36 -- (10,370) (34) Acquisition of treasury stock -- -- -- -- 6,402 46 Exercise of stock options 32,700 4 102 -- -- -- Net loss -- -- -- (177) -- -- --------- ----- ------- -------- -------- ----- Balance June 30, 1995 4,745,413 $475 $31,177 ($3,024) 59,392 $200 ========= ===== ======= ======== ======== ===== Balance December 31, 1995 4,762,898 $476 $31,243 ($1,152) 62,405 $224 Issuance of treasury stock -- -- 77 -- (12,929) (34) Acquisition of treasury stock -- -- -- -- 3,044 30 Exercise of stock options 12,892 2 48 -- -- -- Net income -- -- -- 2,241 -- -- --------- ----- ------- -------- -------- ----- Balance June 30, 1996 4,775,790 $478 $31,368 $1,089 52,520 $220 ========= ===== ======= ======== ========= ===== 1. Accounting Policies Reference is hereby made to the Company's Annual Report on Form 10-K for the year ended December 31, 1995 ("1995 10-K"), which includes additional information about the Company, its operations and its consolidated financial statements, and contains a summary of major accounting policies followed by the Company in preparation of its consolidated financial statements. These policies were also followed in preparing the quarterly financial statements included herein. The year-end consolidated balance sheet data contained herein was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The management of the Company believes that all adjustments necessary to make a fair statement of the results in these interim periods have been made. All adjustments reflected in the financial statements are of a normal recurring nature except as described in the Notes to Condensed Consolidated Financial Statements. Net results for the six month period ended June 30, 1996 are not necessarily indicative of the results to be expected for the full year. The disclosure provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" will be adopted by the Company in its 1996 annual financial statements. 2. Cash and Cash Equivalents Cash and cash equivalents totalled $2,974,000 at June 30, 1996. Of this amount, approximately $2,539,000 was available for general corporate purposes and the balance was held for third parties, including $317,000 in gas and oil sales proceeds held for eventual distribution to outside working interest and royalty owners, and $118,000 withheld from outside working interest owners' distributions to be utilized for future ad valorem tax payments (Note 3). The Company's cash balance at June 30, 1996 includes $2,698,000 invested in commercial paper and U.S. Government and Agency Securities with an annualized 5.05 percent return. 3. Plugging and Ad Valorem Tax Funds The Company retains a portion of outside investors' monthly gas and oil production proceeds to be utilized for anticipated future well plugging and abandonment costs and ad valorem tax payments. The funds, totalling $435,000 at June 30, 1996, are invested in securities issued or guaranteed by the United States Treasury at Bank One, Texas, N.A. ("Bank One") in accounts segregated from those of the Company, of which $317,000 is included in other assets. Interest earned on the funds accrues to the benefit of the working interest owners. Amounts corresponding to these assets are recorded in liabilities. 4. Income Taxes Income taxes are provided for financial reporting purposes based on management's best estimate of the effective tax rate expected to be applicable for the full calendar year. The effective tax rate for the first half of 1996 is higher than first half of 1995, due to the decreased effect of percentage depletion deductions. 5. Common Stock Held In Treasury The Company contributed 8,750 and 10,370 shares of its common stock held in treasury to the Company's 401(k) Plan on January 16, 1996 and February 28, 1995. 6. Earnings Per Share Primary earnings per share is based on the weighted average number of common and common equivalent shares outstanding. Common equivalent shares are included in the calculation beginning in 1996. They were not significant in previous years. Primary and fully diluted earnings per share are the same. Management's discussion and analysis of changes in the Company's financial condition, including results of operations and liquidity and capital resources during the three and six-month periods ended June 30, 1996 and 1995, respectively, are presented below. Results of Operations The Company recorded net income of $2,241,000 for the six months ended June 30, 1996, compared to a net loss of $177,000 for the same period of 1995. Income from operations for the first six months of 1996 totalled $3,299,000 compared to a loss from operations of $414,000 for the first six months of 1995. Total revenues of $11,761,000 in the first six months of 1996 were $4,771,000 or 68 percent higher than total revenues of $6,990,000 in the first six months of 1995. Gas and oil sales totalled $10,842,000 in the first six months of 1996 and represented a $4,783,000 increase over the same period last year. Revenues were increased $3,678,000 by substantially higher gas prices as compared to the first six months of 1995. Higher gas sales volumes, higher oil sales volumes and higher oil prices contributed $936,000, $78,000 and $91,000, respectively, to the increase. Gas and oil sales volumes totalled 3,360,802 equivalent thousand cubic feet ("EMCF"), a 17 percent increase over the 2,875,445 EMCF sold during the six month period ended June 30, 1995. The Company received on average $3.24 per MCF and $18.21 per barrel ("BBL") for the six month period ended June 30, 1996, compared to $2.05 per MCF and $16.28 per BBL in the same period last year. Well tending income decreased $133,000 due principally to the reduction in the number of wells the Company operates for outside investors. Other operating revenue increased $121,000 due primarily to increased marketing revenue as a result of higher gas and oil sales. Total expenses in the first six months of 1996 were $8,462,000, an increase of $1,058,000 or 14 percent from expenses in the first six months of 1995 of $7,404,000. Operating expenses were higher by $913,000 or 29 percent due primarily to increased production taxes as a result of increased revenues and the accrual of a three year state severance tax audit settlement. General and administrative expenses for the first six months of 1996 were higher by $29,000 or 2 percent as compared to last year. Depreciation, depletion and amortization expense was higher by $172,000 in the first six months of 1996 due to higher production and property and equipment levels, partially offset by higher oil and gas reserve levels. Interest expense for the first six months of 1996 was $575,000, a decrease of $56,000 over the same period last year due to more interest capitalization resulting from increased drilling in 1996. Non-operating income in the first six months of 1996 totalled $151,000 as compared to $114,000 in the same period last year. The Company recorded an income tax provision of $1,209,000 for the six month period ended June 30, 1996, as compared to an income tax benefit of $123,000 last year. The Company reported net income of $565,000 for the three months ended June 30, 1996, compared to a net loss of $75,000 for the three months ended June 30, 1995. Income from operations totalled $878,000 for the second quarter of 1996, compared to a loss from operations of $221,000 for the same period last year. Second quarter 1996 revenues of $5,137,000 were higher by $1,607,000 or 46 percent compared to total revenues of $3,530,000 for the same period last year. Gas and oil sales increased by $1,607,000 to $4,655,000 over second quarter 1995 gas and oil sales of $3,048,000 due primarily to higher average gas and oil prices of $1,155,000 and $61,000, respectively. Higher gas and oil volumes of $361,000 and $30,000, respectively, also contributed to the increase. Gas and oil sales volumes totalled 1,675,144 EMCF and 1,483,025 EMCF for the second quarters of 1996 and 1995, respectively. The Company received an average $2.74 per MCF and $19.12 per BBL for the second quarter of 1996 compared to $1.99 per MCF and $16.50 per BBL last year. Well tending income of $224,000 for the three months ended June 30, 1996, was lower by $63,000. Other revenue increased $63,000 due principally to increased marketing revenue from higher gas and oil sales. Expenses in the three months ended June 30, 1996 totalled $4,259,000 and were $508,000 or 14 percent higher than the three months ended June 30, 1995, when expenses totalled $3,751,000. Operating expenses of $2,010,000 for the quarter were $401,000 or 25 percent higher than the second quarter last year due principally to higher production taxes and the accrual of a three year state severance tax audit settlement. General and administrative expenses were $95,000 or 12 percent higher than the same period last year due to higher employee-related expenses. Depreciation, depletion and amortization expense was higher by $110,000 for the same reason stated in the six-months results. Interest expense was lower by $98,000 due to higher interest capitalization. Non-operating income in the second quarter of 1996 totalled $68,000 or an increase of $18,000 from the second quarter of 1995 due to higher gains on asset sales. The Company recorded an income tax provision of $381,000 in the second quarter of 1996 as compared to an income tax benefit of $96,000 for the second quarter of 1995. Liquidity and Capital Resources Working Capital. At June 30, 1996, the Company had working capital of $3,531,000, as compared to $827,000 at December 31, 1995. The $2,704,000 increase in working capital is primarily due to higher accounts receivables resulting from the higher price received by the Company for gas sales in the first six months of 1996 as compared to that received in the fourth quarter of 1995. Because the Bank One credit facility agreement, as amended, calls for the payment of interest only until July 1, 1998, current liabilities on the Company's June 30, 1996, balance sheet do not include any principal payments for this credit facility. Cash and cash equivalents totalled $2,974,000 at June 30, 1996. Of this amount, approximately $2,539,000 was available for general corporate purposes and the balance was held for third parties. Operating activities provided a net $2,458,000 which was negatively impacted by $1.9 million due to the payment of proceeds to outside owners from the Columbia settlement. Investment activities used a net $5,016,000 including $5,257,000 in capital expenditures. Financing activities provided a net $2,235,000. Revolving Credit Facility. The Company has in place a $30.0 million revolving credit facility with Bank One. Currently $14.2 million is available for borrowing by the Company. Interest accrues and is paid monthly at a rate of Bank One's prime rate plus one-fourth of one percent. Capital Expenditures and Commitments. In the first six months of 1996, the Company's capital expenditures totalled $5,257,000 including approximately $3,970,000 spent on gas and oil exploration, development and acquisition activities. The Company's executive offices, approximately 20,000 square feet, were purchased on January 5, and February 7, 1996 for $568,000 using funds borrowed from the Bank One credit facility. The remaining capital expenditures were spent on other property and equipment. Most of the Company's capital spending is discretionary and the ultimate level of spending will be dependent, among other things, on the Company's assessment of the gas and oil business environment, the number of gas and oil prospects available to the Company, and gas and oil business opportunities in general. As of August 2, the Company has drilled 19 wells this year, 16 of which have been successful, 2 dry holes and 1 well is still being evaluated. Alamco currently plans to spend $13,100,000 on 1996 gas and oil investments and has expanded its original 1996 drilling program from 30 wells to 39 wells. As part of its 1996 capital program, Alamco will be installing a 6-inch, 20 mile pipeline in Tennessee to interconnect a substantial portion of its Tennessee and Kentucky production and improve its gas marketing opportunities. Alamco will continue with its enhancement program on existing wells. The Company plans to continue with its acreage acquisition strategy and will position itself to increase both exploratory and development drilling. The Company remains committed to the acquisition of producing properties at favorable prices. On July 11, 1996, the Company entered into a contract to sell 6,000 MMBtus of gas per day on the CNG Transmission Corporation pipeline for the period October 1, 1996 through March 31, 1997 at a price of $3.22 per MMBtu. The price was based on the gas futures price on the New York Mercantile & Exchange, plus a premium as consideration for Appalachian gas. The sale was made through Phoenix-Alamco Ventures, a limited liability company, of which Alamco is a 50 percent owner. As a result of this contract and prior contracts, the Company will sell approximately 47 percent of its gas during the winter season at an average price of $3.02 per MCF. Shut-in of Gas Volumes. Effective August 1, 1996, the Company will be required to shut-in the majority of its gas volumes on the CNG Transmission Corporation ("CNG") pipeline due to maintenance on the system. CNG estimates that the shut-in will last approximately three (3) weeks, which will mean a reduction of approximately 128,000 MMBtus net to the Company. Assuming the volumes are curtailed for the period projected, the Company will experience a reduction in revenues in excess of $300,000. The Company has experienced these shut-ins in previous years. On April 18, 1996, the Company agreed with the United States Environmental Protection Agency ("EPA") to settle its outstanding administrative complaint issued by the EPA for an amount significantly less than the initial proposed penalty of nearly $124,000. The Company has previously recorded the agreed-upon amount in prior years and will, therefore, not realize any expense in its 1996 financial statements. The EPA issued the complaint on May 23, 1994 for alleged violations of the Clean Water Act resulting from an oil discharge at Alamco's Days Chapel Field in Claiborne County, Tennessee. The incident occurred in December 1993 when vandals severed locks securing the valves on the Alamco storage tanks and discharged approximately 174 barrels of oil into a local creek. The Company expects that the consent decree finalizing this matter will be completed and signed before year-end. Other. Some of the statements contained in this Form 10-Q, including without limitation projections of capital expenditure and percentages of lock-in volumes, may be "forward-looking" statements. Reference is hereby made to the Company's 1995 10-K for a discussion of factors that may affect forward-looking statements. Item 4. Submission of Matters to a Vote of Security Holders The 1996 Annual Meeting of Stockholders of the Company was held on May 10, 1996, for the purpose of electing two directors each to serve a three year term expiring at the 1999 Annual Meeting of Stockholders. Stephen L. Barr and John L. Schwager were each reelected to three year terms. Messrs. Barr and Schwager received the following votes: Votes Against/ Votes For Withheld Abstentions --------- -------- ----------- Stephen L. Barr 4,248,496 2,371 0 John L. Schwager 4,248,386 2,481 0 The stockholders also approved the Alamco, Inc. 1996 Stock Option Plan for Non-Employee Directors, which provides for 170,000 shares of common stock to be available for issuance in accordance with the Plan. There were 3,566,370 shares voted in favor of the Plan, 564,245 against and 105,886 abstaining. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit No. Description Filing ---------- ----------- ------ 27 Financial Data Schedule. Filed herewith (b) No current reports on Form 8-K were filed during the quarter ended June 30, 1996. 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 under- signed thereunto duly authorized. August 8, 1996 /s/ John L. Schwager ------------------------------- John L. Schwager, President, Chief Executive Officer, and Principal Financial Officer EX-27 2
5 This schedule contains summary financial information extracted from the statement of income and balance sheet and is qualified in its entirety by references to such financial statements. 1,000 6-MOS DEC-31-1996 APR-01-1996 JUN-30-1996 2,974 0 4,885 7 69 8,128 88,361 33,637 63,890 4,597 15,857 0 0 478 32,237 63,890 10,842 11,761 4,083 2,217 0 0 575 3,450 1,209 2,241 0 0 0 2,241 .45 .45
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