-----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, DbI/8ln9ujslElqdkb2RxFNzoErEJ91q5YpeJ+EEfGGSESEpEGMKjw0QcdDBxofX pHUUMAwznQMERo13mgEpLA== 0000793306-97-000012.txt : 19971114 0000793306-97-000012.hdr.sgml : 19971114 ACCESSION NUMBER: 0000793306-97-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 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: SEC FILE NUMBER: 000-15905 FILM NUMBER: 97714987 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 09/30/97 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, 1997 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. 67,186,971 shares $.01 par value outstanding at October 31,1997 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, 1997 1996 (Unaudited) ASSETS Current Assets: Cash $ 1,122,782 $ 1,207,323 Trade accounts receivable 1,138,318 744,283 Crude oil inventory 16,860 28,460 Prepaid expenses 101,151 70,340 Total Current Assets 2,379,111 2,050,406 Property and Equipment, at cost, using full cost method for oil and gas properties. Includes $884,706 and $1,902,955 of leases held for sale at September 30, 1997 and December 31, 1996 23,748,565 24,029,957 Accumulated depletion, depreciation and amortization (4,762,368) (4,535,945) 18,986,197 19,494,012 Land 1,133,333 1,133,333 Other Assets 1,930,035 1,548,860 Total Assets $ 24,428,676 $ 24,226,611 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expenses $ 629,417 $ 1,094,473 Accrued interest payable 52,979 -- Current portion of accrued abandonment costs 331,000 -- Accrued income taxes payable 77,180 38,820 Total Current Liabilities 1,090,576 1,133,293 Long-Term Debt, less current portion 2,060,600 2,060,600 Accrued Abandonment Costs, less current portion 20,264 798,185 Deferred Income Taxes 976,552 633,956 Common Stock 669,275 667,691 Additional Paid-in Capital 17,018,630 17,007,087 Accumulated Earnings since January 1, 1990 2,592,779 1,925,799 Total Liabilities and Stockholders' Equity $ 24,428,676 $ 24,226,611
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
Three Months Ended September 30 1997 1996 Revenue from operations: Pipeline operations $ 1,255,628 $ 775,459 Oil and gas sales and operating fees 185,961 181,718 REVENUE FROM OPERATIONS 1,441,589 957,177 Cost of operations: Pipeline operating expenses 188,220 217,392 Lease operating expenses 162,183 146,359 Repair and maintenance costs 91,889 244,314 Depletion, depreciation, and amortization 90,107 80,830 COST OF OPERATIONS 532,399 688,895 909,190 268,282 Other income (expense): General and administrative (316,004) (328,510) Interest expense (54,801) (2,962) Interest and other income 28,283 35,336 INCOME BEFORE INCOME TAXES 566,668 (27,854) Provision for income taxes (202,666) 66 NET INCOME (LOSS) 364,002 (27,788) Dividend requirements on preferred stock -- 72,801 Net income (loss) applicable to common stockholders $ 364,002 $ (100,589) Net income (loss) per common share $ 0.005 $ (0.002) Weighted average number of common shares outstanding 67,850,678 53,027,407 Net income per common share (fully diluted) $ 0.005 Weighted average number of common shares outstanding (fully diluted) 68,040,189
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
Nine Months Ended September 30, 1997 1996 Revenue from operations: Pipeline operations $ 3,188,320 $ 2,375,241 Oil and gas sales and operating fees 620,786 707,569 REVENUE FROM OPERATIONS 3,809,106 3,082,810 Cost of operations: Pipeline operating expenses 606,523 645,110 Lease operating expenses 486,704 485,283 Repair and maintenance costs 310,808 383,836 Depletion, depreciation, and amortization 276,784 326,281 COST OF OPERATIONS 1,680,819 1,840,510 2,128,287 1,242,300 Other income (expense): General and administrative (983,763) (968,750) Interest expense (165,731) (16,549) Interest and other income 76,601 94,153 INCOME BEFORE INCOME TAXES 1,055,394 351,154 Provision for income taxes (388,414) (147,607) NET INCOME 666,980 203,547 Dividend requirements on preferred stock -- 218,403 Net income (loss) applicable to common stockholders $ 666,980 $ (14,856) Net income per common share $ 0.01 $ -- Weighted average number of common shares outstanding 67,652,559 50,007,664 Net income per common share (fully diluted) $ 0.01 Weighted average number of common shares outstanding (fully diluted) 67,715,729
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
Nine Months Ended September 30, 1997 1996 OPERATING ACTIVITIES Net income $ 666,980 $ 203,547 Adjustments to reconcile net income to net cash provided by operating activities: Depletion, depreciation and amortization 276,784 326,281 Gain on Sale of Property and Equipment -- (4,397) Deferred income taxes 342,596 104,857 Changes in operating assets and liabilities: (Increase) Decrease in trade accounts receivable (394,035) 47,896 (Increase) Decrease in crude oil inventory and prepaid expenses (19,211) 43,905 (Decrease) in accounts payable and other current liabilities (292,717) (895,673) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 580,397 (173,584) INVESTING ACTIVITIES Oil and gas prospect generation costs (518,111) (1,497,953) Proceeds from sales of oil and gas prospects 1,018,289 -- Purchases of property and equipment (208,158) (339,705) Increase in other assets (50,311) (164,115) Funds escrowed for abandonment costs (339,999) (326,999) Abandonment of oil and gas properties (569,147) -- Exploration and development costs (10,627) (111,913) NET CASH (USED IN) INVESTING ACTIVITIES (678,064) (2,440,685) FINANCING ACTIVITIES Net proceeds from the exercise of warrants -- 1,657,558 Net proceeds from the exercise of stock options 13,126 25,522 NET CASH PROVIDED BY FINANCING ACTIVITIES 13,126 1,683,080 (DECREASE) IN CASH (84,541) (931,189) CASH AT BEGINNING OF YEAR 1,207,323 2,748,467 CASH AT SEPTEMBER 30 $ 1,122,782 $ 1,817,278 SUPPLEMENTARY CASH FLOW INFORMATION Interest paid $ 110,470 $ 16,549 Income taxes paid $ 39,600 $ 46,365
BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED SEPTEMBER 30, 1997 EARNINGS PER COMMON SHARE Fully diluted earnings per share has not been presented for the three months and six months ended September 30, 1996, because it is antidilutive. ACCOUNTING STANDARDS The Company will implement SFAS No. 128, "Earnings per Share" for year-end 1997 financial reporting. This standard requires presentation of both "basic" and, where capital structures are complex, "diluted" earnings per share disclosure in the statement of operations. The Company expects that implementation of this standard will not have a material effect on earnings per share as currently calculated. 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. Certain of the statements included below, including those regarding future financial performance or results, or that are not historical facts, are or contain "forward-looking" information as that term is defined in the Securities Act of 1933, as amended. The words "expect," "believe," "anticipate," "project," "estimate," and similar expressions are intended to identify forward-looking statements. The Company cautions readers that any such statements are not guarantees of future performance or events and such statements involve risks, uncertainties and assumptions, including but not limited to industry conditions, prices of crude oil and natural gas, regulatory changes, general economic conditions, interest rates, competition, and other factors discussed below. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual results and outcomes may differ materially from those indicated in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. FINANCIAL CONDITION At September 30, 1997, the Company's working capital (current assets less current liabilities) was $1,288,535, representing an increase of $371,422 as compared with working capital of $917,113 at December 31, 1996. The increase in working capital is principally due to the net effect of the sale of an oil and gas prospect in the second quarter 1997 for approximately $1,000,000 and offsetting well abandonment costs of approximately $819,000. Pursuant to the rules of the full cost method of accounting for oil and gas properties, approximately $900,000 of lease acquisition costs associated with the Company's oil and gas prospect generation activities, which costs the Company expects to recover in late 1997 or early 1998 through sale of prospects, are excluded from working capital at September 30, 1997. The Company maintains a $10,000,000 reducing revolving credit facility with Bank One, Texas, N.A. Effective September 1, 1997, the borrowing base was adjusted to $900,000, reducing by $90,000 per month beginning October 1, 1997. The borrowing base and reducing amount are redetermined semi-annually. The maturity date is January 14, 2000, when the then outstanding principal balance, if any, is due and payable. 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. During the nine months ended September 30, 1997, offshore activity in the vicinity of the Blue Dolphin Pipeline System remained active. Four additional wells were tied into the pipeline system, resulting in a 56% increase in daily gas volumes transported compared to the same period in 1996. An existing producer/shipper terminated its oil transportation and processing agreements with the Company effective BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) October 26, 1997. Revenues generated from oil transportation and processing fees from this producer/shipper represented 25% of the Company's revenues for the nine months ended September 30, 1997. The Company expects that certain of its operating costs will be reduced and/or eliminated as a result of the reduced oil throughput. In an ongoing effort to expand the Company's pipeline market area and to enhance the value of its pipeline system, during 1997 the Company acquired two 8 inch diameter flowlines, totalling approximately 16 miles in length. Additionally, the Company has acquired an out-of-service 12 inch diameter, 18 mile offshore line. Future utilization of the Company's pipelines and related facilities will depend upon the success of drilling programs in and around the Company's pipeline corridors, attraction and retention to the systems, and execution of contracts with producer/shippers to transport their gas and oil through the Company's transportation facilities. In August 1996, the Minerals Management Service conducted an annual inspection of the Buccaneer Field production platforms and facilities. In addition to certain repairs, the Company was required to remove piping and other equipment that was no longer in use. The removal and abandonment work, and the repairs to the platforms were completed in March 1997. For the period ended September 30, 1997, the Company incurred costs totalling approximately $112,000 for removal and abandonment work and approximately $112,000 for repairs to the platforms. Additionally, a previously inactive well was plugged and abandoned at a cost of approximately $457,000. Removal of the associated satellite platform and site clearance is expected to take place later this year or early in 1998, at an estimated cost of $250,000. The Company currently holds interests in two lease blocks prospective for oil and gas in the High Island Area of the Gulf of Mexico. The lease blocks were acquired in January 1996. Approximately $825,000 was invested to acquire the two leases, in addition to approximately $60,000 associated with technical development of the prospects. A 43.75% interest in each of these prospective lease blocks has been sold. Efforts to sell the remaining 56.25% interest in each lease block are ongoing. Additionally, the Company has finalized a multi-year agreement with three independent oil and gas companies, whereby in exchange for certain participation rights, these companies will partially fund the costs associated with the Company's ongoing offshore prospect generation program. The remaining program costs will be reimbursed to the Company as prospects are developed and leases acquired. In August 1994, the Company entered into a multi-year 3-D seismic data acquisition and licensing agreement providing access to over 2,000,000 acres of 3-D seismic data, primarily in the Western Gulf of Mexico, and over 200,000 line miles of close grid 2-D seismic data. Development of the Petroport deepwater terminal and offshore storage facility continues to proceed as anticipated. Efforts remain 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. BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) It is currently estimated that pre-licensing costs will total approximately $1,250,000. Approximately $665,000 has been committed through September 30, 1997. 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 1998, with operations commencing in the year 2001. 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 applicable to common stockholders for the nine months ended September 30, 1997, ("current period") increased $672,012 to $661,156 compared to a net loss applicable to common stockholders of $14,856 reported for the first nine months of 1996 ("previous period"). REVENUES: Revenues for the current period increased by $726,296 or 24% to $3,809,106 compared to revenues of $3,082,810 reported for the previous period. Revenues from pipeline operations increased by $813,079 or 34% from the previous period. Gas transportation revenues increased $607,000, resulting from a 56% increase in gas transportation volumes due to additional wells tied into the system in late 1996 and 1997. Oil transportation revenues increased $188,000, resulting from a 14% increase in oil transportation volumes associated with increased production from an existing producer/shipper. Revenues from oil and gas sales and operating fees for the current period decreased by $86,783 from those of the previous period. Oil and gas sales decreased $31,000 due to decreased production volumes. Operating fees declined approximately $27,000 due to termination of production activities by a producer for whom the Company provided contract operation and maintenance services and $28,000 due to decreased production volumes from a second producer for whom the Company provides similar services. COSTS AND EXPENSES: Repair and maintenance costs for the current period decreased by $73,028 due primarily to non-recurring repair costs and expenses associated with modifications to the Buccaneer Field production platforms and facilities incurred in 1996. Depletion, depreciation, and amortization expense for the current period decreased $49,497 as compared to the previous period, due to a decrease of approximately $27,000 in amortization as a result of deferred loan costs being fully amortized during 1996, and a decrease of approximately $24,000 in depletion, resulting from decreased oil and gas production volumes. BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Interest expense increased $149,182 in the current period as a result of promissory notes totalling $2,050,600, issued December 31, 1996. The notes are associated with the conversion of the issued and outstanding preferred stock to common stock. CAPITALIZATION On October 29, 1997, the Company announced approval, by majority consent of Stockholders, of a one-for-fifteen reverse stock split. The effective date is expected to be on or around December 8, 1997. The reverse stock split is intended to help the Company meet the new minimum bid price requirement of $1.00 imposed by the National Association of Securities Dealers Automated Quotation Stock Market ("NASDAQ"), which will be effective February 23, 1998. The Company believes this action, in addition to supporting continued NASDAQ listing, should enhance the acceptability of the common stock by the financial community and investing public and, in general, broaden investor interest in the Company. There are currently 67,186,971 shares of common stock issued and outstanding. After the reverse stock split there will be approximately 4,479,131 shares of common stock issued and outstanding. BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES PART II. OTHER INFORMATION ITEM 4. The Company's preliminary Information Statement on Schedule 14C, filed October 29, 1997, regarding the approval, by majority consent of Stockholders, of a one-for-fifteen reverse stock split is incorporated herein by reference. 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: /S/ MICHAEL J. JACOBSON Michael J. Jacobson President and Chief Executive Officer /S/ 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 INCORPORATED HEREIN BY REFERENCE. 9-MOS DEC-31-1997 SEP-30-1997 1,122,782 0 1,138,318 0 16,860 2,379,111 23,748,565 4,762,368 24,428,676 1,090,576 2,060,600 0 0 669,275 19,611,409 24,428,676 312,408 3,809,106 707,620 2,664,582 0 0 165,731 1,055,394 388,414 666,980 0 0 0 666,980 .01 .01
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