-----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, HYUrGYD4Ow+u4bj8bg3vj6AUYwaVZURqONSdNYJNn92joY6Z1rz3+u8K79JBZrGc 4WVkVrk1KLcZM2VYGe1LZQ== 0000793306-96-000041.txt : 19960816 0000793306-96-000041.hdr.sgml : 19960816 ACCESSION NUMBER: 0000793306-96-000041 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 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: 96612710 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 06/30/96 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: JUNE 30, 1996 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. 52,026,984 shares $.01 par value outstanding at August 13, 1996 --------------------------------------------------------------- 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 June 30, December 31, 1996 1995 --------- ----------- (Unaudited) ASSETS Current Assets: Cash $ 2,305,047 $ 2,748,467 Trade accounts receivable 947,934 860,691 Crude oil inventory 34,640 19,180 Prepaid expenses 128,725 72,824 Current deferred taxes -- 173,188 ---------- ---------- Total Current Assets 3,416,346 3,874,350 Property and Equipment, at cost, using full cost method for oil and gas properties, including $1,902,995 at June 30, 1996 and $2,402,796 at December 31, 1995, of leases expected to be sold in 1996 and 1997 23,485,801 23,335,378 Accumulated depletion, depreciation and amortization (4,420,362) (4,267,431) ---------- ---------- 19,065,439 19,067,947 Land 1,133,333 1,133,333 Escrow for abandonment costs 831,487 569,861 Other Assets 492,811 423,687 ---------- ---------- Total Assets $ 24,939,416 $ 25,069,178 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 902,215 $ 1,008,251 Oil and gas lease bonus payable -- 1,375,488 Current portion of accrued abandonment costs -- 547,948 Other liabilities and accrued expenses 54,493 32,871 Accrued income taxes payable 237,688 250,100 ---------- ---------- Total Current Liabilities 1,194,396 3,214,658 Long-Term Debt, less current portion 10,000 10,000 Accrued Abandonment Costs, less current portion 1,276,987 1,242,615 Deferred Income Taxes 702,587 756,602 Dividends Payable on Preferred Stock 1,893,248 1,747,646 Cumulative Convertible Preferred Stock 1,456,048 1,456,048 Common Stock 520,003 353,247 Additional Paid-in Capital 15,675,713 14,163,661 Accumulated Earnings since January 1, 1990 2,210,434 2,124,701 ---------- ---------- Total Liabilities and Stockholders' Equity $ 24,939,416 $ 25,069,178 =========== =========== BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED Three Months Ended June 30, 1996 1995 ---------- ---------- Revenue from operations: Pipeline operations $ 798,690 $ 1,229,277 Oil and gas sales and operating fees 259,586 351,771 ---------- ---------- REVENUE FROM OPERATIONS 1,058,276 1,581,048 Cost of operations: Pipeline operating expenses 207,450 313,840 Lease operating expenses 158,688 178,418 Repair and maintenance costs 89,934 95,670 Depletion, depreciation, and amortization 113,381 166,436 ---------- ---------- COST OF OPERATIONS 569,453 754,364 ---------- ---------- 488,823 826,684 Other income (expense): General and administrative (324,469) (362,459) Interest expense (9,382) (155,638) Interest and other income 34,631 4,681 INCOME BEFORE INCOME TAXES 189,603 313,268 Provision for income taxes (73,870) (115,916) ---------- ---------- NET INCOME 115,733 197,352 Dividend requirements on preferred stock 72,801 72,801 ---------- ---------- Net income applicable to common stockholders $ 42,932 $ 124,551 ========== ========== Net income per common share $ 0.001 $ 0.003 ========== ========== Weighted average number of common shares and common share equivalents outstanding 47,935,067 46,659,352 ========== ========== BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED Six Months Ended June 30, 1996 1995 --------- ----------- Revenue from operations: Pipeline operations $ 1,599,782 $ 2,414,485 Oil and gas sales and operating fees 525,851 645,166 ---------- ---------- REVENUE FROM OPERATIONS 2,125,633 3,059,651 Cost of operations: Pipeline operating expenses 427,718 595,804 Lease operating expenses 338,924 425,543 Repair and maintenance costs 139,522 176,641 Depletion, depreciation, and amortization 245,451 319,058 ---------- ---------- COST OF OPERATIONS 1,151,615 1,517,046 ---------- ---------- 974,018 1,542,605 Other income (expense): General and administrative (640,240) (721,896) Interest expense (13,587) (301,855) Interest and other income 58,817 8,461 INCOME BEFORE INCOME TAXES 379,008 527,315 Provision for income taxes (147,673) (198,097) ---------- ---------- NET INCOME 231,335 329,218 Dividend requirements on preferred stock 145,602 145,602 ---------- ---------- Net income applicable to common stockholders $ 85,733 $ 183,616 ========== ========== Net income per common share $ 0.002 $ 0.004 ========== ========== Weighted average number of common shares and common share equivalents outstanding 48,457,547 46,914,141 ========== ========== BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
Six Months Ended June 30, --------------- 1996 1995 --------- ---------- OPERATING ACTIVITIES Net income $ 231,335 $ 329,218 Adjustments to reconcile net income to net cash provided by operating activities: Depletion, depreciation and amortization 245,451 319,058 Charge in lieu of taxes -- 169,597 Deferred income tax expense 119,173 -- Changes in operating assets and liabilities: (Increase) Decrease in trade accounts receivable (87,243) 4,851 (Increase) in crude oil inventory and prepaid expenses (71,361) (97,821) (Decrease) in accounts payable and accrued expenses (644,649) (541,176) ---------- ---------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (207,294) 183,727 INVESTING ACTIVITIES Oil and gas prospect generation costs (1,155,795) -- Purchases of property and equipment (339,352) (75,155) Investment in other assets (107,185) (217,084) Exploration and development costs (50,976) (1,280) Funds escrowed for abandonment costs (261,626) (63,217) ---------- ---------- NET CASH (USED IN) INVESTING ACTIVITIES (1,914,934) (356,736) FINANCING ACTIVITIES Payments on borrowings -- (751,849) Proceeds from borrowings -- 925,000 Net proceeds from capital funding 1,678,808 90,824 ---------- ---------- NET CASH PROVIDED BY FINANCING ACTIVITIES 1,678,808 263,975 ---------- ----------- INCREASE (DECREASE) IN CASH (443,420) 90,966 CASH AT BEGINNING OF YEAR 2,748,467 434,157 CASH AT JUNE 30, $ 2,305,047 $ 525,123 ========== =========== SUPPLEMENTARY CASH FLOW INFORMATION Interest paid $ 13,587 $ 301,289 ========== =========== Income taxes paid $ 46,365 $ 37,600 ========== ===========
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED JUNE 30, 1996 EARNINGS PER COMMON SHARE Fully diluted earnings per share have not been presented for 1996 and 1995, because conversion of the preferred stock was antidilutive. STOCKHOLDERS EQUITY In April 1996, 16,575,578 warrants to purchase 16,575,578 shares of the Company's Common Stock at $.10 per share were exercised. Proceeds received by the Company from the exercise were $1,657,558. There are no outstanding warrants remaining. If the warrants had been exercised on January 1, 1995 or January 1, 1996, there would have been no effect on earnings per share. ACCOUNTING FOR STOCK-BASED COMPENSATION Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," was issued in October 1995. SFAS No. 123 addresses the timing and measurement of stock-based compensation expense. The Company adopted SFAS No. 123 on January 1, 1996, with respect to the disclosure requirements set forth therein for companies retaining the intrinsic value approach of Accounting Principles Board opinion No. 25. DEPLETION, DEPRECIATION AND AMORTIZATION Effective January 1, 1996, the Company extended the estimated useful lives of its pipelines and related shore facilities, which lives are used to determine the rates at which provision of depreciation and abandonment expenses are calculated. The change in the estimated useful lives of the pipelines and related shore facilities has resulted in a decrease in depletion, depreciation and amortization of $23,794 for the six months ended June 30, 1996. LONG-TERM DEBT The Company maintains a $10,000,000 reducing revolving credit facility with Bank One, Texas, N.A. Bank One is currently in the process of documenting an extension of the maturity date of the facility from January 14, 1997 to January 14, 2000. 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 included in Item 1. of this report. FINANCIAL CONDITION At June 30, 1996, the Company's working capital (current assets less current liabilities) was $2,221,950, representing an increase of $1,562,258 as compared with working capital of $659,692 at December 31, 1995. The increase in working capital was a result of the exercise of warrants to purchase Company Common Stock in April 1996. The Company received cash of $1,657,558 and issued 16,575,578 shares of Common Stock. Pursuant to the rules of the full cost method of accounting for oil and gas properties, $1,902,995 and $2,402,796 of lease acquisition costs associated with the Company's oil and gas prospect generation activities, which costs the Company expects to recover in 1996 and 1997 through sale of prospects, are excluded from working capital at June 30, 1996 and December 31, 1995, respectively. The Company maintains a $10,000,000 reducing revolving credit facility with Bank One, Texas, N.A. Effective December 1, 1995, the borrowing base was adjusted to $3,335,000, reducing by $155,000 per month beginning January 1, 1996. The borrowing base is currently being redetermined. The borrowing base and reducing amount are redetermined semi-annually. Maturity date is January 14, 1997, when the then outstanding principal balance, if any, is due and payable. Bank One is currently in the process of documenting an extension of the facility maturity date from January 14, 1997 to January 14, 2000. The current outstanding balance under the credit facility is $10,000. 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. Offshore activity in the vicinity of the Blue Dolphin Pipeline has remained active. The Company is currently negotiating agreements for provision of transportation and related services for a new discovery in the vicinity of the Blue Dolphin Pipeline. Production operations are expected to commence during late third quarter or early fourth quarter 1996. In April 1996, the Company reperforated a currently producing well in the Buccaneer Field, resulting in a moderate increase in production. The Company is currently evaluating application of horizontal drilling and new completion techniques to existing shut-in wells in the Field. If feasible, additional drilling in the Field utilizing these recovery methods could commence in 1997. The current focus of the Company's 3-D seismic based offshore oil and gas prospect generation program is the development of biddable prospects for the upcoming Federal Western Gulf of Mexico and Texas State Lease Sales in September and October 1996, respectively. Agreements are being negotiated with various partners to form a bidding group to participate in the above sales. The Company purchased four lease blocks in the High Island Area of the Gulf of Mexico prospective for oil and gas in the last Federal Western Gulf of Mexico lease sale. Approximately $2,000,000 was invested to acquire the necessary acreage for further prospect development, in addition to costs of approximately $400,000 associated with technical development of the prospects. One of these prospective lease blocks was sold in June 1996. An unsuccessful well was drilled and has been plugged and abandoned. A 43.75% interest in each of the three remaining prospective lease blocks has been sold. Sale of the remaining interests in each block will be pursued after additional technical development of the prospects has been completed following the upcoming Federal and State lease sales. Development of the Petroport deepwater port and offshore storage facility project has focused on pre-licensing activities and regulatory matters. Major pre-licensing activities include: development of support for the project from both Federal and State agencies that have jurisdiction over or impact deepwater port licensing, construction and operation; facility commercial profile development; development of the engineering design and capital and operating cost estimates; development of the cost estimate for obtaining the necessary license and permits; and development of a financing strategy. It is currently estimated that pre-licensing costs will total between $1,000,000 - $1,250,000. A financing strategy will be developed addressing funding requirements for both the remaining pre-licensing activities and the actual licensing and permitting process. Total cost of the facility is currently estimated at approximately $500 million. The Company expects to submit the Petroport deepwater port license application and associated permit requests in 1997, with operations commencing in the year 2000. The Company believes that it has or can obtain adequate capital resources to continue to meet its anticipated business requirements. RESULTS OF OPERATIONS Net income for the six months ended June 30, 1996, ("current period") represents a decrease of $97,883 or 30%, compared to net income of $329,218 reported for the corresponding period of the previous year ("previous period"). REVENUES: Revenues for the current period decreased by $934,018 or 31% to $2,125,633 compared to revenues of $3,059,651 reported for the previous period. Revenues from pipeline operations decreased by $814,703 or 34% due primarily to a decrease in gas transportation revenues of $461,693 resulting from a 30% reduction in gas transportation volumes and the sale of a one-third interest in the Blue Dolphin Pipeline System in August 1995 (the "Pipeline Sale"), which resulted in a $392,036 reduction in revenues. Revenues from oil and gas sales and operating fees for the current period decreased by $119,315 from those of the previous period due primarily to a 23% reduction in gas sales volumes which resulted in a $105,457 decrease in revenues. COSTS AND EXPENSES: Pipeline operating expenses for the current period decreased by $168,086 from those of the previous period. The decrease was due primarily to a reduction of expenses of $213,399 resulting from the Pipeline Sale. This reduction in costs was partially offset by an increase in expenses associated with transporting increased liquids volumes, incurred prior to the completion of onshore pipeline system modifications which were designed to lower the operating costs of handling the increased liquids throughput. Lease operating expenses decreased $86,619 in the current period from those of the previous period. The decrease is due to cost reductions for chemicals and other operating supplies realized in the current period. Repair and maintenance costs for the current period decreased by $37,119 due primarily to the Pipeline Sale. Depletion, depreciation, and amortization expense for the current period decreased by $73,607 compared to the previous period, due to a decrease of approximately $55,247 in depreciation and amortization resulting from the Pipeline Sale, and a decrease of approximately $23,794 due to the effect on depreciation and amortization rates of extending the estimated useful lives of the pipelines and related shore facilities. General and administrative expenses decreased $81,656 in the current period. The decrease is primarily due to the Pipeline Sale. Upon consummation of the Pipeline Sale in August 1995, the Company retired substantially all of its bank debt. Elimination of the debt resulted in a decrease in interest expense in the current period of $288,268. Investment of available cash from the Pipeline Sale and exercise of warrants resulted in a $50,356 increase in interest income in the current period. BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORT ON FORM 8-K A) Exhibits - None B) Form 8-K - None 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: August 14, 1996 ------------------------------- Michael J. Jacobson Michael J. Jacobson President and Chief Executive Officer ------------------------------- G. Brian Lloyd G. Brian Lloyd Secretary and Treasurer EX-27 2 FINANCIAL DATA SCHEDULE
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. 6-MOS DEC-31-1996 JUN-30-1996 2,305,047 0 947,934 0 34,640 3,416,346 23,485,801 4,420,362 24,939,416 1,194,396 10,000 520,003 0 1,456,048 17,886,147 24,939,416 272,015 2,125,633 452,780 1,791,855 0 0 13,587 379,008 147,673 231,335 0 0 0 231,335 .002 .004
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