-----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, ROt+3hGU0B6uddgWY9CjkFFrAt8tGc6U3tGj2/QJ/JytygnEXjnc4j7Ri4ICsJpg URSCNJAZJ/EjymmdkO6u/w== 0000793306-95-000029.txt : 19951119 0000793306-95-000029.hdr.sgml : 19951119 ACCESSION NUMBER: 0000793306-95-000029 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLUE DOLPHIN ENERGY CO CENTRAL INDEX KEY: 0000793306 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 731268729 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15905 FILM NUMBER: 95593019 BUSINESS ADDRESS: STREET 1: 11 GREENWAY PLZ STE 1606 CITY: HOUSTON STATE: TX ZIP: 77046 BUSINESS PHONE: 7136213993 MAIL ADDRESS: STREET 2: 11 GREENWAY PLAZA SUITE 1606 CITY: HOUSTON STATE: TX ZIP: 77046 FORMER COMPANY: FORMER CONFORMED NAME: MUSTANG RESOURCES CORP DATE OF NAME CHANGE: 19900122 FORMER COMPANY: FORMER CONFORMED NAME: ZIM ENERGY CORP DATE OF NAME CHANGE: 19870921 10-Q 1 QUARTERLY REPORT FOR 09/30/95 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended: SEPTEMBER 30, 1995 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: 0-15905 BLUE DOLPHIN ENERGY COMPANY (Exact name of registrant as specified in its charter) DELAWARE 73-1268729 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ELEVEN GREENWAY PLAZA, SUITE 1606, HOUSTON, TEXAS 77046 (Address of principal executive offices) (Zip Code) (713) 621-3993 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. 35,214,738 shares $.01 par value outstanding at November 14, 1995 BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES PART. I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The condensed consolidated financial statements of Blue Dolphin Energy Company and Subsidiaries (the "Company") included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and, in the opinion of management, reflect all adjustments necessary to present a fair statement of operations, financial position and cash flows. The Company follows the full cost method of accounting for oil and gas properties, wherein costs incurred in the acquisition, exploration and development of oil and gas reserves are capitalized. The Company believes that the disclosures are adequate and the information presented is not misleading, although certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, 1995 1994 _____________ ______________ (Unaudited) ASSETS Current Assets: Cash $ 3,969,803 $ 434,157 Trade accounts receivable 1,451,295 774,362 Crude oil inventory 21,650 17,350 Prepaid expenses 48,961 113,754 _____________ _____________ Total Current Assets 5,491,709 1,339,623 Property and Equipment, at cost, using full cost method for oil and gas properties 21,920,122 21,746,729 Accumulated depletion, depreciation and amortization (4,168,893) (4,299,078) _____________ _____________ 17,751,229 17,447,651 Land 1,133,333 1,700,000 Other Assets 842,867 272,064 _____________ _____________ Total Assets $ 25,219,138 $ 20,759,338 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expenses $ 871,145 $ 643,754 Oil and gas lease bonus payable 1,438,848 --- Current portion of long-term debt --- 1,392,299 Current portion of accrued abandonment costs 552,875 716,144 Accrued interest payable --- 50,566 Accrued income taxes payable 453,598 55,400 _____________ _____________ Total Current Liabilities 3,316,466 2,858,163 Long-Term Debt, less current portion 10,000 4,450,000 Accrued Abandonment Costs, less current portion 1,335,358 1,924,321 Deferred income taxes 467,976 --- Dividends Payable on Preferred Stock 1,674,845 1,456,442 Cumulative Convertible Preferred Stock 1,456,048 1,456,048 Common Stock 352,064 343,791 Additional Paid-in Capital 14,311,635 13,210,354 Accumulated Earnings(Deficit) since January 1, 1990 2,294,746 (4,939,781) _____________ _____________ Total Liabilities and Stockholders' Equity $ 25,219,138 $ 20,759,338 ============= ============= BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED Three Months Ended September 30, _______________________ 1995 1994 _____________ _____________ Revenue from operations: Pipeline operations (See Footnotes) $ 827,377 $ 1,368,243 Oil and gas sales and operating fees 327,013 427,619 _____________ _____________ REVENUE FROM OPERATIONS 1,154,390 1,795,862 Cost of operations: Pipeline operating expenses (See Footnotes) 242,153 290,477 Lease operating expenses 225,385 190,649 Repair and maintenance costs 116,947 197,157 Depletion, depreciation, and amortization 164,222 181,576 _____________ _____________ COST OF OPERATIONS 748,707 859,859 ____________ _____________ 405,683 936,003 Other income (expense): General and administrative (328,111) (369,302) Interest expense (103,822) (141,371) Gain on sale of assets 8,809,114 --- Interest and other income 28,650 1,319 _____________ _____________ INCOME BEFORE INCOME TAXES 8,811,514 426,649 Provision for income taxes (1,687,802) (171,286) _____________ _____________ NET INCOME 7,123,712 255,363 Dividend requirements on preferred stock 72,801 72,801 _____________ _____________ Net income applicable to common stockholders $ 7,050,911 $ 182,562 ============= ============= Net income per common share $ 0.148 $ 0.004 ============= ============= Weighted average number of common shares and common share equivalents outstanding 47,762,793 47,665,617 ============= ============= Net income per common share (fully diluted) $ 0.112 ============= Weighted average number of common shares and dilutive common share equivalents outstanding 63,657,649 ============= BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED Nine Months Ended September 30, ______________________ 1995 1994 _____________ _____________ Revenue from operations: Pipeline operations (See Footnotes) $ 3,241,862 $ 3,926,756 Oil and gas sales and operating fees 972,179 1,429,639 _____________ _____________ REVENUE FROM OPERATIONS 4,214,041 5,356,395 Cost of operations: Pipeline operating expenses (See Footnotes) 837,957 759,500 Lease operating expenses 650,928 598,133 Repair and maintenance costs 293,588 486,342 Depletion, depreciation, and amortization 483,280 567,405 _____________ _____________ COST OF OPERATIONS 2,265,753 2,411,380 _____________ _____________ 1,948,288 2,945,015 Other income (expense): General and administrative (1,050,007) (1,121,224) Interest expense (405,677) (461,939) Gain on sale of assets 8,809,114 --- Interest and other income 37,111 37,414 _____________ _____________ INCOME BEFORE INCOME TAXES 9,338,829 1,399,266 Provision for income taxes (1,885,899) (556,428) _____________ _____________ INCOME BEFORE EXTRAORDINARY ITEM 7,452,930 842,838 Extraordinary item-gain from early retirement of debt, net of income taxes --- 616,695 ___________ ___________ NET INCOME 7,452,930 1,459,533 Dividend requirements on preferred stock 218,403 218,403 Net income applicable to common stockholders $ 7,234,527 $ 1,241,130 ========== ========== Net income per common share, extraordinary item --- $ 0.013 ========== Net income per common share $ 0.153 $ 0.026 ========== ========== Weighted average number of common shares and common share equivalents outstanding 47,198,495 48,129,073 ========== ========== Net income per common share (fully diluted) 0.119 $ 0.023 ========== ========== Weighted average number of common shares and dilutive common share equivalents outstanding 62,400,983 62,812,076 ========== ========== BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
Nine Months Ended September 30, -------------------------- 1995 1994 -------- -------- OPERATING ACTIVITIES Net income $ 7,452,930 $ 1,459,533 Adjustments to reconcile net income to net cash provided by operating activities: Depletion, depreciation and amortization 483,280 567,405 Extraordinary gain-early retirement of debt --- (616,695) Gain on sale of assets (8,809,114) --- Gain on sale of securities --- (33,678) Unrealized appreciation on government bonds --- (4,680) Charge in lieu of taxes 992,573 449,128 Deferred income tax expense 467,976 --- Changes in operating assets and liabilities: (Increase) Decrease in trade accounts receivable (676,933) 31,214 Decrease in crude oil inventory and prepaid expenses 60,493 30,942 Increase (Decrease) in accounts payable and accrued expenses 11,451 (754,133) Increase in oil and gas lease bonus payable 1,438,848 --- ---------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,421,504 1,129,036 INVESTING ACTIVITIES Oil and gas prospect generation costs (1,305,938) (103,449) Purchases of property and equipment (183,660) (976,517) Investment in other assets (270,456) --- Net proceeds from sale of assets 9,940,051 --- Net proceeds from redemption of investments --- 305,688 Exploration and development costs (1,773) (90,578) ---------- --------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 8,178,224 (864,856) FINANCING ACTIVITIES Payments on borrowings (6,757,299) (5,930,667) Proceeds from borrowings 925,000 5,321,284 Funds escrowed for future abandonment obligations (348,764) (168,378) Net proceeds from capital funding 116,981 87,512 ---------- --------- NET CASH (USED IN) FINANCING ACTIVITIES (6,064,082) (690,249) ---------- --------- INCREASE (DECREASE) IN CASH 3,535,646 (426,069) CASH AT BEGINNING OF YEAR 434,157 650,933 ---------- --------- CASH AT SEPTEMBER 30, $ 3,969,803 $ 224,864 ========== ========== SUPPLEMENTARY CASH FLOW INFORMATION Interest paid $ 405,677 $ 783,000 ========== ========== Income taxes paid $ 37,572 $ 78,450 ========== ==========
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED SEPTEMBER 30, 1995 SALE OF ASSETS Effective August 1, 1995, the Company sold a one-third interest in its' Blue Dolphin Pipeline System and Freeport, Texas, acreage, for $10,000,000 cash. The Blue Dolphin Pipeline System (the "Blue Dolphin Pipeline System") consists of the Blue Dolphin pipeline, the Buccaneer pipeline and barge loading terminal, and onshore receiving, separation, dehydration, and general processing facilities (the "Shore Facilities"). The Freeport, Texas, acreage consists of 360 acres upon which are located the Shore Facilities and associated pipeline rights-of-way and easements. The Company recorded federal and state tax expense at statutory rates and reduced its deferred tax valuation allowance on the gain recognized from the sale of assets as noted above. Due to the utilization of net operating loss carryforwards, management believes that the deferred income tax assets more likely than not will be realized. Accordingly, income tax expense was reduced by the tax benefit from the decrease in the deferred income tax asset valuation allowance attributable to post quasi-reorganization net operating loss carryforwards of $1,444,964. The deferred tax asset valuation allowance attributable to pre-quasi-reorganization net operating loss carryforwards of $827,039 was credited to additional paid-in-capital. EARNINGS PER COMMON SHARE Fully diluted earnings per share have not been presented for the three months ended September 30, 1994, because conversion of the preferred stock was antidilutive. BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a review of certain aspects of the financial condition and results of operations of the Company and should be read in conjunction with the Condensed Consolidated Financial Statements of the Company included in Item 1. of this report. As previously reported, the Company sold a one-third interest in its' Blue Dolphin Pipeline System for $10,000,000, in an all cash transaction. The sale was effective August 1, 1995. Sale of the minority interest in the Blue Dolphin Pipeline System represents the successful partial monetization of assets sought to provide resources to meet planned operating and growth requirements. Proceeds from the sale have been and/or will be used for funding diversification and acquisition opportunities, debt retirement and for general corporate purposes. The transaction resulted in approximately $8,800,000 of other income before taxes, reported as a gain on sale of assets, in the third quarter 1995. Coincident with closing the transaction on August 31, 1995, the Company retired its' senior debt totaling approximately $5,600,000. For the nine months ended September 30, 1995, net income increased $5,993,397 or 411% to $7,452,930, compared to net income of $1,459,533 for the nine months ended September 30, 1994. Results for the nine months ended September 30, 1995, included a provision for income taxes of $1,885,899 of which, $992,573 was offset with an increase to paid-in capital reflecting utilization of net operating loss carryforwards that were incurred prior to a quasi-reorganization recorded at December 31, 1989, with $467,976 recorded as a deferred tax liability. FINANCIAL CONDITION At September 30, 1995, the Company's working capital (current assets less current liabilities) increased by $3,693,783 to $2,175,243 as compared with a working capital deficit of $1,518,540 at December 31, 1994. The increase in working capital is due to the receipt of the proceeds from the sale of the one-third interest in the Blue Dolphin Pipeline System in August 1995. Upon receipt of the sale proceeds the Company paid down the borrowings under its $10,000,000 reducing revolving credit facility with Bank One, Texas, N.A. to $10,000. The borrowing base and reducing amount are currently being redetermined. The facility is available for the acquisition of oil and gas reserve based assets and other working capital needs. The Loan Agreement includes certain restrictive covenants, including restrictions on the payment of dividends on capital stock, and the maintenance of certain financial coverage ratios. Although no significant change is expected in the Company's oil and gas production activities in the short term, revenues from its pipeline operations business segment are expected to improve. During 1995, an existing shipper drilled and completed three new oil wells. Production from the first well commenced in May 1995. However, production was shut-in during most of June and July while the producer's offshore platform facilities were being modified to handle the increased oil production. Production from the second and third wells has commenced, but is being limited until the Company completes expansion of its onshore liquids handling facilities. Existing onshore liquids handling capacity restricts receipt of additional liquids throughput. The Company is currently increasing the capacity of its onshore oil and condensate handling facilities at an estimated cost of $570,000, with completion expected by late-November 1995. Additionally, production from a new shipper transporting both gas and oil commenced in October 1995. The Company's 3-D seismic based offshore oil and gas prospect generation program has identified oil and gas prospects on four offshore federal lease blocks in the High Island Area of the Gulf of Mexico. The Company participated in the Minerals Management Service September 13, 1995, Western Gulf of Mexico lease sale to acquire the necessary acreage for further development of the prospects for sale to industry. To date, the Company has been awarded two of the lease blocks with award of the remaining two lease blocks expected by mid-December 1995. Acquisition cost for the four leases totals approximately $4,000,000. A 25% interest in the four blocks has been sold to a third party participant. The participant has provided funding for an additional 25% of the lease acquisition costs, with such funding to be recovered by the participant from proceeds from sale of the remaining interest. The Company is currently pursuing the sale of the remaining interest in each prospect to other third party participants. In addition to recovering its out of pocket costs to develop the prospects, the Company will retain a reversionary interest in each prospect. In March 1995, the acquisition of Petroport, L.C. was completed. Petroport, L.C. holds proprietary technology, represented by certain patents issued and/or pending, associated with the development and operation of an offshore deepwater crude oil and products port and storage facility. The form of the transaction was a merger of Petroport, L.C. into Petroport, Inc., a wholly owned subsidiary of the Company. Consideration paid included a small amount of cash and future consideration contingent upon the successful development and operation of the primary Petroport facility, planned for the Western Gulf of Mexico off the Texas coast. The contingent consideration primarily includes the issuance of Common Stock, with issuance dependent upon successful completion of the facility and maintaining a prespecified throughput volume. The Petroport offshore terminal and storage facility will receive and store imported crude oil and refined products with deliveries into U.S. markets. Petroport will provide importers with a competitive and environmentally attractive alternative to the lightering of large tankers as well as low cost, long-term storage of crude oil and products. Cost of the facility is currently estimated at approximately $500 million, with operations expected to commence in 1999. In general, the Company believes that it has or can obtain adequate capital resources and liquidity to continue to meet its anticipated business requirements. RESULTS OF OPERATIONS Net income for the nine months ended September 30, 1995, ("current period") represents an increase of $5,993,397 or 411%, compared to net income of $1,459,533 reported for the corresponding period of the previous year ("previous period"). The increase in current period net income is due to the gain on the sale of the one-third interest in the Blue Dolphin Pipeline System. The previous period net income included an extraordinary gain from early retirement of debt of $616,695. REVENUES: Revenues for the current period decreased by $1,142,354 or 21% to $4,214,041 compared to revenues of $5,356,395 reported for the previous period. Revenues from pipeline operations decreased by $684,894 or 17% during the current period. Gas transportation revenues decreased by $922,438 due primarily to a 30% reduction in gas transportation volumes which resulted in a $768,438 reduction in revenues and the sale of the one-third interest in the Blue Dolphin Pipeline System effective August 1, 1995, which resulted in a $154,000 reduction in revenues. The decreased gas transportation revenues were partially offset by an increase in revenues from transportation of oil and condensate of $218,691, which resulted from an increase in throughput volumes from an existing shipper. Oil and gas sales and operating fees decreased in the current period from those of the previous period by $457,460. Gas sales decreased $360,000 due to a 37% decline in Buccaneer Field gas production and a 12 1/2% decline in gas prices. Operating fees declined $79,000 due to termination of production activities by a producer for whom the Company provided contract operation and maintenance services. COSTS AND EXPENSES: Pipeline operating expenses for the current period increased by $78,457 from those of the previous period. The increase was due primarily to incremental costs associated with the transportation and handling of increased oil throughput. The increase in pipeline operating expenses was partially offset by the sale of the one-third interest in the Blue Dolphin Pipeline System effective August 1, 1995. Lease operating expenses increased $52,795 in the current period from those of the previous period. The increase is due to increased labor and supply costs of $79,000, partially offset by a decrease in insurance and contract transportation costs of $35,000. Repair and maintenance costs for the current period decreased by $192,754. The previous period included non-recurring costs of $160,000 associated with repairs to the Blue Dolphin pipeline, $106,000 for required five year subsea inspection of the Buccaneer Field production and quarters platforms, and $43,000 for general repairs to a Buccaneer Field production platform. The current period included non-recurring costs of $37,000 for repairs to an onshore Blue Dolphin Pipeline System oil storage tank, $43,000 for downhole well repairs and $31,000 for repairs to a Buccaneer Field production platform. Depletion, depreciation, and amortization expense for the current period decreased by $84,126 compared to the previous period. The decrease resulted from a reduction in depletion of approximately $80,000 due to a decline in gas sales in the current period and an approximately $12,000 decrease in depreciation resulting from the sale of the one-third interest in the Blue Dolphin Pipeline System in August 1995. General and administrative expenses decreased $71,215 in the current period. This decrease is primarily due to legal expenses incurred in the prior period of approximately $55,000 associated with the Company's participation in hearings related to competing interstate pipeline system rate restructurings under FERC Order No. 636. Interest expense decreased in the current period by $56,263 as a result of the Company retiring substantially all of its outstanding debt on August 31, 1995, upon consummation of the sale of the minority interest in the Blue Dolphin Pipeline System. BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORT ON FORM 8-K A) Exhibits - None B) Report on Form 8-K/A - Form 8-K/A dated August 31, 1995, relating to the sale of a one-third interest in the Blue Dolphin Pipeline System BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES 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. By: BLUE DOLPHIN ENERGY COMPANY Date: November 14, 1995 Michael J. Jacobson Michael J. Jacobson President and Chief Executive Officer G. Brian Lloyd G. Brian Lloyd Secretary and Treasurer EX-27 2 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES' CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1995 SEP-30-1995 3,969,803 0 1,451,295 0 21,650 5,491,709 21,920,122 4,168,893 25,219,138 3,316,466 10,000 352,064 0 1,456,048 16,606,381 25,219,138 564,608 4,214,041 930,089 3,315,760 0 0 405,677 9,338,829 1,885,899 7,452,930 0 0 0 7,452,930 .153 .119
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