-----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, BxZrIO3XhwqJ5DZihKaOnu2Aizz24LEVU6V5TIPgirImbzM2CkyYb/fl13fukzth H3pg2/yKclpZ2Ud47q4N3A== 0000355115-96-000020.txt : 19960514 0000355115-96-000020.hdr.sgml : 19960514 ACCESSION NUMBER: 0000355115-96-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 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: 96561358 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 FIRST 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 March 31, 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 May 1, 1996, is set forth below: Class of Stock Number of Shares Outstanding Common Stock, $.10 par value 4,717,774 PART I. Financial Information Pages Item 1. Financial Statements Condensed Consolidated Statements of Income . . . . . . . . . 3 for the three months ended March 31, 1996 and 1995 Condensed Consolidated Balance Sheets as of . . . . . . . . . 4-5 March 31, 1996 and December 31, 1995 Condensed Consolidated Statements of Cash Flows . . . . . . . 6 for the three months ended March 31, 1996 and 1995 Condensed Consolidated Statements of Stockholders' . . . . . . 7 Equity for the three months ended March 31, 1996 and 1995 Notes to the Condensed Consolidated Financial . . . . . . . . 8 Statements Item 2. Management's Discussion and Analysis of . . . . . . . . . . . 9-10 Financial Condition and Results of Operations PART II. Other Information Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 11 Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Three Months Ended March 31, ----------------- 1996 1995 ---- ---- Revenues: Gas and oil sales $ 6,187 $ 3,011 Well tending income 179 249 Other 258 200 ------ ------- Total revenues 6,624 3,460 ------ ------- Expenses: Operating 2,073 1,561 General and administrative 711 777 Depreciation, depletion and amortization 1,078 1,016 Interest 341 299 ------- -------- Total expenses 4,203 3,653 ------- -------- Income (loss) from operations 2,421 (193) Other nonoperating income, net 83 64 -------- ------- Income (loss) before income taxes 2,504 (129) Income tax provision (benefit) 828 (27) -------- ------- Net income (loss) $1,676 ($ 102) ======== ======= Net income (loss) per share (Note 6) $0.34 ($0.02) ======== ======== Weighted average number of common and common equivalent shares outstanding 4,865,865 4,653,382 ========= ========== March 31, December 31, 1996 1995 ---- ---- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 3,243 $ 3,297 Accounts receivable 5,468 3,116 Due from partnerships and programs 57 72 Inventories and other current assets 288 368 ------ ------ Total current assets 9,056 6,853 ------ ------ Property and equipment: Gas and oil producing properties (Successful Efforts Method) 79,530 78,076 Other property and equipment 6,755 5,740 ------ ------- 86,285 83,816 Less accumulated depreciation, depletion and amortization 33,153 32,201 ------- ------- 53,132 51,615 Other assets 1,217 1,294 ------- ------- Total assets $63,405 $59,762 ======= ======= (Continued) March 31, 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 847 1,026 Accrued expenses 1,313 1,545 Due working interest and royalty owners 1,911 3,309 Deferred revenue 7 113 Income tax payable 51 -- ------- ------- Total current liabilities 4,164 6,026 ------- ------- Long-term debt and capital lease obligations 16,857 13,674 Due working interest and royalty owners 273 325 Deferred revenue 27 29 Deferred taxes 9,572 8,936 Other long-term liabilities 378 429 ------- ------- Total liabilities 31,271 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; 4,768,898 and 4,762,898 shares issued and outstanding, respectively including treasury stock 477 476 Additional paid-in capital 31,338 31,243 Retained earnings (deficit) 524 (1,152) -------- ------- 32,339 30,567 Less: Treasury stock, at cost, 51,124 and 62,405 shares of common stock, respectively 205 224 ------- ------- Total stockholders' equity 32,134 30,343 -------- ------- Total liabilities and stockholders' equity $ 63,405 $ 59,762 ======= ======= Three Months Ended March 31, ----------------- 1996 1995 ---- ---- Cash flows from operating activities: Net income (loss) $ 1,676 ($ 102) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 1,078 1,016 Deferred taxes 636 57 Gains on asset sales (26) (22) Issuance of stock for employee benefits and compensation expense 111 70 Other factors, net 1 2 Increase (decrease) in cash from changes in: Accounts receivable (2,352) 330 Due from partnerships and programs 15 13 Due working interest and royalty owners (1,398) 69 Inventories and other current assets 80 33 Accounts payable & accrued expenses (411) (958) Deferred revenue (106) 93 Income tax payable 51 -- -------- ------- Net cash (used in) provided by operating activities (645) 601 -------- ------- Cash flows from investing activities: Proceeds from disposal of fixed assets 36 233 Capital expenditures (2,566) (1,350) Investment in limited partnership (21) -- Other assets 59 (9) -------- ------- Net cash used in investing activities (2,492) (1,126) -------- ------- Cash flows from financing activities: Borrowings under line of credit 3,200 750 Payments on line of credit -- (500) Principal payments on long-term debt and capital lease obligations (16) (47) Acquisition of treasury stock (15) (5) Proceeds from exercise of stock options 19 11 Other liabilities (105) (635) ------- ------- Net cash provided by (used in) financing activities 3,083 (426) ------- ------- Net decrease in cash and cash equivalents (54) (951) Cash and cash equivalents - beginning of period 3,297 2,632 ------- ------- Cash and cash equivalents - end of period $ 3,243 $ 1,681 ======= ======= Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 341 $ 303 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 -- -- -- -- 795 5 Exercise of stock options 3,733 1 10 -- -- -- Net loss -- -- -- (102) -- -- --------- ----- ------- -------- -------- ----- Balance March 31, 1995 4,716,446 $472 $31,085 ($2,949) 53,785 $159 ========= ===== ======= ======== ======== ===== 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 -- -- -- -- 1,648 15 Exercise of stock options 6,000 1 18 -- -- -- Net income -- -- -- 1,676 -- -- --------- ----- ------- -------- -------- ----- Balance March 31, 1996 4,768,898 $477 $31,338 $ 524 51,124 $205 ========= ===== ======= ======== ========= ===== 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 three month period ended March 31, 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 $3,243,000 at March 31, 1996. Of this amount, approximately $2,694,000 was available for general corporate purposes and the balance was held for third parties, including $392,000 in gas and oil sales proceeds held for eventual distribution to outside working interest and royalty owners, $40,000 in drilling advances from other owners and $117,000 withheld from outside working interest owners' distributions to be utilized for future ad valorem tax payments (Note 3). The Company's cash balance at March 31, 1996 includes $2,980,000 invested in commercial paper, U.S. Government and Agency Securities with an annualized 4.97 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 $389,000 at March 31, 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 $272,000 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 first quarter 1996 is higher than for first quarter 1995 due to 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-month periods ended March 31, 1996 and 1995, respectively, are presented below. Results of Operations The Company recorded net income of $1,676,000 for the three months ended March 31, 1996, compared to a net loss of $102,000 for the same period in 1995. Income from operations for the first quarter of 1996 totalled $2,421,000 compared to a loss from operations of $193,000 for the first quarter of 1995. Total revenues of $6,624,000 in the first three months of 1996 were $3,164,000 or 91 percent higher than total revenues of $3,460,000 in the first three months of 1995. Gas and oil sales totalled $6,187,000 in the first quarter of 1996 and represented a $3,176,000 increase over the same period last year. Higher gas prices, higher gas sales volumes and higher oil sales volumes and prices contributed $2,517,000, $582,000 and $77,000, respectively, to the increase as compared to the first quarter of 1995. Gas and oil sales volumes totalled 1,685,700 equivalent thousand cubic feet ("EMCF"), a 21 percent increase over the 1,392,400 EMCF sold during the three month period ending March 31, 1995. The Company received an average of $3.74 per MCF for gas and $17.31 per barrel ("BBL") for oil for the three month period ending March 31, 1996, compared to $2.11 per MCF and $16.05 per BBL in the same period last year. Well tending income decreased $70,000 due principally to the reduction in the number of wells the Company operates for outside investors. Other operating revenue increased $58,000 due primarily to increased marketing revenue as a result of higher gas and oil sales. Total expenses in the first quarter of 1996 were $4,203,000, an increase of $550,000 or 15 percent compared to expenses in the first three months of 1995 of $3,653,000. Operating expenses were higher by $512,000 or 33 percent due primarily to the Company's higher well ownership percentage. First quarter 1996 included higher operating expenses of $48,000 due to snow removal, higher gas and oil production taxes of $186,000 and higher employee-related expenses of $169,000. General and administrative expenses for the first quarter of 1996 were lower by $66,000 or 8 percent as compared to last year mainly because of lower employee-related expenses. Depreciation, depletion and amortization expense was higher by $62,000 in the first quarter 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 three months of 1996 was $341,000, an increase of $42,000 over the same period last year due primarily to higher debt balances. Non-operating income in the first quarter of 1996 totalled $83,000 as compared to $64,000 in the same period last year due to higher interest income. The Company recorded an income tax provision of $828,000 in the first quarter of 1996 as compared to an income tax benefit of $27,000 for the first quarter of 1995. Liquidity and Capital Resources Working Capital. At March 31, 1996, the Company had working capital of $4,892,000, as compared to $827,000 at December 31, 1995. The $4,065,000 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 quarter of 1996 as compared to that received in the fourth quarter of 1995. Because the Bank One credit facility agreement requires the payment of interest only until July 1, 1998, current liabilities on the Company's March 31, 1996 balance sheet do not include any principal payments for this credit facility. Cash and cash equivalents totalled $3,243,000 at March 31, 1996. Of this amount, approximately $2,694,000 was available for general corporate purposes and the balance was held for third parties. Operating activities used a net $645,000 which was negatively impacted by $1.9 million due to the payout of proceeds to outside owners from the Columbia settlement. Investing activities used a net $2,492,000 including $2,566,000 in capital expenditures, and financing activities provided a net $3,083,000. Revolving Credit Facility. The Company has in place a $30.0 million revolving credit facility with Bank One. Currently $13.2 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 quarter of 1996, the Company's capital expenditures totalled $2,566,000, including approximately $1,454,000 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, and gas and oil business opportunities in general. The level of the Company's 1996 capital expenditures will to a great extent depend upon the gas prices received by the Company. As of May 6, 1996, the Company has drilled 9 wells this year, 7 of which have been successful, 1 dry hole and 1 well is still being evaluated. Based on current gas futures prices, Alamco currently plans to drill up to 30 wells in 1996. 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 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 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 may be "forward-looking" statements. Refer to the Company's 1995 10-K for a discussion of factors that may affect forward-looking statements. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit No. Description Filing ---------- ----------- ------ 10.1 Master Gas Purchase Contract Filed herewith between the Company and Hope Gas, Inc. dated April 4, 1996 27 Financial Data Schedule Filed herewith (b) No current reports on Form 8-K were filed during the quarter ended March 31, 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 undersigned thereunto duly authorized. May 9, 1996 /s/ John L. Schwager ----------------------------------- John L. Schwager, President, Chief Executive Officer, and Principal Financial Officer EX-10 2 Exhibit 10.1 MASTER GAS PURCHASE CONTRACT ALAMCO, INC. CONTRACT NO. 9131-C THIS MASTER GAS PURCHASE CONTRACT ("Agreement") is made and entered into as of the 4th day of April, 1996, by and between ALAMCO, INC., a Delaware corporation, ("Seller") with its principal address at 200 West Main Street, Clarksburg, WV 26301, and HOPE GAS, INC., a West Virginia corporation ("Buyer"), whose address is P. O. Box 2868, Clarksburg, West Virginia 26302-2868. WHEREAS, Seller and Buyer are parties to a letter Agreement dated November 23, 1994; and, WHEREAS, Seller and Buyer wish to replace said Letter Agreement with the terms and conditions set forth herein; and, NOW, THEREFORE, WITNESSETH, in consideration of the mutual covenants and promises set forth below, and intending to be bound by them, Seller and Buyer covenant and agree: ARTICLE I SALE & PURCHASE OBLIGATIONS 1.01 Seller shall produce and sell to Buyer at the Points of Delivery listed in Article III herein, and Buyer shall take and pay for, volumes of natural gas from the wells and MID numbers set forth in Appendix B (attached), as amended from time to time. Notwithstanding the foregoing, Buyer shall be under no obligation to purchase any of the production offered by Seller in the event that Buyer has insufficient pipeline capacity or market demand to facilitate the sale and/or use of Seller's natural gas. However, Buyer shall use its best efforts to ensure sufficient pipeline capacity and market demand to facilitate the sale and/or use of Seller's natural gas. Further, in the event of a curtailment, Buyer shall not discriminate against the gas described in Appendix B, and any suspensions of deliveries shall be on a nondiscriminatory basis. 1.02 Additional wells. Wells accepted by Buyer, under the terms of this Agreement, shall be added to Appendix B along with their corresponding MID numbers. ARTICLE II TERM 2.01 This Agreement shall be in full force and effect from November 1, 1995, through October 31, 1999, and thereafter unless terminated by either Buyer or Seller upon sixty (60) days' prior written notification. ARTICLE III DELIVERY POINTS 3.01 The Points of Delivery for natural gas purchased hereunder shall be at existing or future interconnections between the facilities of Buyer and Seller at those MID numbers listed on Appendix B (attached). 3.02 Termination for low volume. In the event that Seller cannot deliver to Buyer an average of five thousand (5,000) cubic feet of natural gas per day at a Point of Delivery, during the period November 1, through April 30, then Buyer may, in its sole discretion, either terminate the contract as it relates to such Point of Delivery by giving Seller notice in writing ten (10) days prior to the effective date of termination or withhold from Seller's proceeds, or invoice Seller, for any costs imposed upon Buyer by upstream transporters as a result of Seller's inability to transport certain minimum quantities. ARTICLE IV METER SITE AND FACILITIES 4.01 Buyer's Facilities; Meter Site. All gas sold by Seller to Buyer shall be measured by a meter owned, installed, maintained, and read by Buyer upon a site satisfactory to Buyer. Rights-of-way and the related surface grants for such site shall be furnished by Seller to Buyer free of all costs and from all claims. In the event Buyer is at any time required to pay for such rights-of-way or such costs or claims, then the amounts paid therefor and other expenses related thereto may be deducted from the payments to be made for gas purchased from Seller and applied to the reimbursement of Buyer for such payments. Seller warrants generally that title to the rights-of-way and the related surface grants conveyed hereunder shall be free and clear of all liens, encumbrances, and claims whatsoever and free of any claim, rightful or otherwise, of any third person by way of infringement. 4.02 Meter maintenance fee. Seller agrees that should the amount of gas passing through any meter installed, maintained, and operated hereunder during any month, be less than a daily average of ten thousand (10,000) cubic feet, it will pay to Buyer a mutually agreed upon reasonable fee for maintaining and operating each such meter for each month. Buyer shall render a bill for such meter operating charge or deduct the amount thereof from the monthly settlements hereunder. ARTICLE V PRICE 5.01 Commodity Rate. The price (per MMBtu) of natural gas purchased hereunder shall be ninety-eight percent (98%) of the price set forth in Inside F.E.R.C.'s Gas Market Report "Prices of Spot Gas Delivered to Pipelines". The specific posting to be used for the pricing of all production under this Agreement shall be that set forth under the column labeled "Index" and described as "CNG Transmission Corporation: Appalachia". In the event that Inside F.E.R.C.'s Gas Market Report ceases to be published, then the parties will immediately negotiate in good faith to agree upon a substitute publication or posting. 5.02 Price Renegotiation. Not less than thirty (30) days prior to October 31, 1998, the parties will have negotiated in good faith to agree on the price to be paid for gas sold and purchased hereunder for the succeeding year, or for such other period as may be agreed upon by the parties. If, after good faith negotiations, Buyer and Seller fail to agree upon the price to be paid for gas for the succeeding term, either party may terminate this Agreement upon thirty (30) days written notice. Buyer and Seller expressly agree that the price to be paid for natural gas purchased through October 31, 1998, is non- negotiable and that fluctuations in the market will not serve as grounds for renegotiation. 5.03 Change in Regulation Results in Material Adverse Effect. If the Public Service Commission of West Virginia or any other successor governmental agency, whether state or federal, takes any action or issues any determination that directly or indirectly results in a material adverse change to any provision of this Agreement, then Buyer may either: (a) continue to fulfill its obligations under this Agreement as altered by the change in regulation; or (b) seek to renegotiate the affected terms of this Agreement by giving notice to Seller within thirty (30) days of the material adverse change. If Buyer elects to renegotiate the terms of this Agreement, both Parties shall be obligated to renegotiate in good faith. ARTICLE VI STATEMENTS AND PAYMENT 6.01 Statements. On or before the last day of each calendar month, Buyer shall mail to Seller a statement showing the quantity of natural gas delivered by Seller to Buyer during the billing period ending with the next preceding calendar month, Buyer's check in payment for said natural gas, and the meter charts, if requested. If the meter charts are mailed to Seller, they shall be returned to Buyer within fifteen days. 6.02 Audits. Buyer shall have the right to audit Seller's accounting records and other documents relating to volumes of gas delivered by or on behalf of Seller for Buyer's account for any calendar year within the forty-eight (48) month period following the end of such calendar year. Buyer shall also have the right to audit Seller's records relative to Hope's Business Ethics policy which has been made available to Seller. Seller shall have the right to audit Buyer's accounting records and other documents relating to volumes of gas delivered by or on behalf of Seller for Buyer's account for any calendar year within the forty-eight (48) month period following the end of such calendar year. This provision shall continue in full force and effect for a period of forty-eight (48) months from the termination of this Agreement. 6.03 Withholding. If Seller fails to comply with any of the covenants contained herein, Buyer may immediately withhold all payments due to Seller under the terms of this Agreement until all necessary actions have been taken by Seller and all adjustments have been made by Seller so that in Buyer's opinion Seller is fully complying with all the covenants and terms of this Agreement. 6.04 Error Correction. In the event an error is discovered in the amount billed in any statement rendered to Seller, such error shall be adjusted within thirty (30) days of the determination thereof; provided that claim therefor shall have been made within sixty (60) days from the date of discovery of such error, but in any event within forty-eight (48) months from the date such statement is rendered. ARTICLE VII POSSESSION 7.01 Seller shall be deemed to be in possession and control of the natural gas sold by it hereunder until it shall have been delivered to Buyer at the Delivery Point(s), after which delivery, as between Buyer and Seller, Buyer shall be deemed to be in control and possession thereof. Buyer shall have no responsibility with respect to any natural gas sold to it hereunder until it is delivered at the Delivery Point(s), and no responsibility therefor because of anything which may be done or may occur with respect to said natural gas before delivery to Buyer at the Delivery Point(s). Seller shall have no responsibility unless the gas does not meet the gas quality provision set forth in Appendix A because of anything which may be done or may occur with respect to said natural gas after its delivery to Buyer at such point of delivery. ARTICLE VIII WARRANTY, INDEMNIFICATION, WITHHOLDING 8.01 Title and Indemnification. Seller warrants generally the title to the natural gas sold and delivered hereunder to Buyer and that at the time of delivery the natural gas is or will be free and clear of all liens, encumbrances, and claims whatsoever and free of any claim, rightful or otherwise, of any third person by way of infringement. Seller further warrants that at the time of delivery Seller will have good right and title to sell the natural gas to Buyer, and that Seller will indemnify Buyer and save it totally harmless from all suits, claims, actions, debts, levies, damages, costs, losses, and expenses of any nature arising from or out of adverse claims of any kind or nature asserted by anyone whatsoever to said natural gas, including but not limited to claims, suits, actions, and demands which may arise due to non- payment of landowner royalties, overriding royalties, or rentals thereof or therefrom. 8.02 Withholding. In the event of any adverse claim to or against the proceeds payable under this Agreement is made by any person, Buyer may withhold payment due Seller under this Agreement or any other contract between Buyer and Seller or may refuse to accept delivery of such natural gas until the dispute is settled by contract between Seller and such adverse claimant or by the final decree of a court of competent jurisdiction. If litigation results from any such adverse claim, Buyer may pay any money withheld by it hereunder into court without further liability therefor, or may interplead all claimants, including Seller. Seller will reimburse Buyer for all costs incurred, including reasonable attorney's fees, as a result of litigation. 8.03 Payment Correction. In the event Buyer mistakenly overpays or underpays Seller for natural gas sold and purchased hereunder, which over- or under-payment is the result of a mistake of fact or law, miscalculation, coercion, duress, fraud, governmental or regulatory constraint, ignorance or want of knowledge, then Seller or Buyer, as the case may be, will promptly upon demand by the other party make appropriate refund or adjustment in such over- or under-payments, without liability for payment of interest by either party; provided, however, that the obligation of either party to make restitution hereunder shall be limited to mistaken payments made within the period commencing four (4) years prior to the date on which demand for refund or adjustment shall be made. In the event of Seller's refusal or inability to refund undisputed over-payments, Buyer may withhold payment for the natural gas sold and purchased under this agreement between Seller and Buyer in an amount equivalent to the over-payment, without liability for payment of interest on the amounts so withheld. Nothing in this Agreement shall be construed as a waiver or relinquishment by Seller or Buyer of either of its rights to recover such over-payments. 8.04 Royalties. In no event will Buyer be obligated to make royalty, overriding royalty, or working interest payments to any party or payments to any supplier of Seller for natural gas purchased hereunder. ARTICLE IX COMMUNICATIONS 9.01 Unless otherwise instructed in writing, all communications shall be sent to the parties at the following addresses: Seller: Alamco, Inc. 200 West Main Street P. O. Box 1740 Clarksburg, WV 26301 Attn: Bridget D. Furbee Buyer: Hope Gas, Inc. P. O. Box 2868 Clarksburg, WV 26302-2868 Attn: Manager, Gas Supply ARTICLE X GENERAL PROVISIONS 10.01 Labor. Seller covenants and agrees to comply with all the requirements of the Fair Labor Standards Act of 1938 and the Civil Rights Act of 1964, as amended, with respect to all natural gas produced or sold and delivered under the terms of this Agreement to the extent that said Acts as now or hereafter amended are applicable to Seller and Seller's employees. 10.02 Force Majeure. Neither party to this Agreement shall be liable for any damage or loss that may be due to force majeure as defined herein. In the event either party is rendered unable, wholly or in part, by force majeure to carry out its obligations under this Agreement, other than to demand payment of amounts due hereunder, then the obligations of such party, so far as they are affected by such force majeure, shall be suspended during the continuance of any inability so caused. However, the party claiming the existence of force majeure shall use all reasonable efforts to remedy any situation which may interfere with the performance of its obligations hereunder. The term "force majeure" as used herein, and as applied to either party hereto, shall mean acts of law, acts of God, strikes, lockouts or other labor disturbances, acts of the public enemy, war, blockades, insurrections, riots, epidemics, fires, floods, washouts, arrests and restraints of rules and people, civil disturbances, explosions or any other cause, whether of the kind herein enumerated or otherwise, not reasonably within the control of the party claiming suspension. It is understood that settlement of strikes, lockouts, or labor disturbances shall be entirely within the discretion of the party having the difficulty and that the above requirement that any force majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes, lockouts, or labor disturbances by acceding to the demands of the opposing party when such course is inadvisable in the discretion or judgment of the party having the difficulty. Among other things, the term "Force Majeure" shall not include: (a) any cause resulting from a Party's negligence or willful misconduct; (b) the freezing of any wells or pipelines; and (c) lack of funds by either party. 10.03 Tax. In the event any tax is now or hereafter imposed on the production, severance, delivery to the point of sale, or sale of natural gas, or upon the business of producing, severing, selling or delivering natural gas to the point of sale, or if such tax is imposed in any other manner so as to constitute directly a charge upon the gas delivered to Buyer hereunder, then the amount of such tax shall be borne by Seller so far as it affects or relates to or is apportionable to the gas delivered to Buyer hereunder. In the event Buyer is required to pay such tax, the amount thereof may be deducted from the payments accruing to Seller under this Agreement. 10.04 Persons Bound. All of the terms, covenants, conditions, and obligations of this Agreement shall extend to and be binding upon the parties hereto and their heirs, successors, and assigns. Any sale or assignment by Seller of its interest in the natural gas delivered hereunder or its interest in this Agreement or its interest in any property, real or personal, required for or dedicated to the performance of this Agreement, shall be made expressly subject to the rights of Buyer hereunder and with provision that the assignee or purchaser shall assume and covenant to perform all of the Seller's obligations hereunder. Seller will give notice in writing to Buyer of any sale or assignment or other disposition of its interest hereunder and will furnish to Buyer copies of any relevant documents evidencing transfer or assignment of Seller's interest. Until notice and relevant documents have been given and furnished to Buyer, Buyer may withhold all payments that may become due hereunder, without interest. 10.05 Terms and Governing Law. The terms and provisions of this Agreement are subject to the limitations of orders of courts and the orders, rules and regulations of all regulatory bodies having jurisdiction. This Agreement shall be interpreted in accordance with the laws of the State of West Virginia. 10.06 Captions. The captions of the articles of this Agreement are inserted for the purpose of convenient reference and are not intended to be a part of this Agreement nor considered in any interpretation of the same. 10.07 Severability. If any part, term, or provision of this Agreement is held by any court to be illegal or in conflict with any law of the State of West Virginia, the validity of the remaining portions or provisions shall not be affected, and the rights and obligations of the parties shall be construed and in force as if the Agreement did not contain the particular part, term, or provision held to be invalid. 10.08 Entire Agreement. This Agreement constitutes the entire agreement between Seller and Buyer with respect to the subject matter hereof and supersedes all prior offers, negotiations, and other written or oral agreements, including the Letter Agreement. This Agreement may only be amended or modified by written instrument signed by duly authorized representatives of Seller and of Buyer. IN WITNESS WHEREOF, Seller and Buyer have duly executed this Agreement as of the day and year first above written. ALAMCO, INC. By /s/ John L. Schwager Its President & CEO HOPE GAS, INC. By /s/ Marc A. Halbritter Its Secretary APPENDIX B GPC #9131 WELL NAME & NO. API NO. MID NO. L. Giles - 1925 47-061-1174 1091201 Boy Scout - 1926 47-061-1179 1091201 C. Hoke - 1965 47-061-1114 1091201 Paulak - 1969 47-061-1118 1091201 L. Giles - 1970 47-061-1127 1091201 Laurita - 1973 47-061-1122 1091201 Laurita - 1974 47-061-1123 1091201 J. Johnson - 1993 47-061-1132 1091201 Johnson - 2046 47-061-1217 1091201 Ludwig - 2053 47-061-1218 1091201 Forlini -1958 47-061-1113 1093101 Forlini - 1967 47-061-1117 1093101 Martin - 1968 47-061-1177 1093101 Brown - 2032 47-061-1178 1093101 McBee - 2033 47-061-1173 1093101 R. Williams - 2039 47-061-1180 1093101 Herron - 2040 47-061-1182 1093101 Teets - 2042 47-061-1192 1093101 Holt - 2049 47-061-1217 1093101 Britton - 2045 47-061-1193 1097301 Rumble - 2050 47-061-1214 1099401 Bolyard - 2051 47-077-0288 1098901 Frey - 2052 47-077-0289 1098901 White - 1930 47-061-1210 1033001 White - 1935 47-061-1233 1033001 Helms - 2058 47-077-0294 1032501 ACCEPTED AND AGREED TO THIS 9TH DAY OF APRIL, 1996. ALAMCO, INC. HOPE GAS, INC. BY: /s/ JOHN L. SCHWAGER BY: /s/ NANCY M. AUCREMANNE TYPED NAME: JOHN L. SCHWAGER TITLE: TYPED NAME: NANCY M. AUCREMANNE TITLE: PRESIDENT & CEO TITLE: MANAGER, GAS SUPPLY EX-27 3
5 This summary contains financial information extracted from the statement of income and balance sheet and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 3,243 0 5,525 59 79 9,056 86,285 33,153 63,405 4,164 16,857 0 0 477 31,657 63,405 6,187 6,624 2,073 1,078 0 0 341 2,504 828 1,676 0 0 0 1,676 0.34 0.34
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