-----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, M4ocj0dW5QMmoRi0glDITk8SegDiJZqbAV38ImdvvtKIwIO8yoVIam+7m7JwH70H IboAV0X+/OVzjY+ob5+qgQ== 0000890566-97-001719.txt : 19970808 0000890566-97-001719.hdr.sgml : 19970808 ACCESSION NUMBER: 0000890566-97-001719 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970807 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: 97652727 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 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, 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. 66,835,792 SHARES $.01 PAR VALUE OUTSTANDING AT AUGUST 7, 1997 1 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. 2 BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1997 1996 ----------------- ------------------ (Unaudited) ASSETS Current Assets: Cash $ 753,264 $ 1,207,323 Trade accounts receivable 736,858 744,283 Receivable from prospect sales 1,018,289 -- Crude oil inventory 26,080 28,460 Prepaid expenses 105,672 70,340 ----------------- ------------------ Total Current Assets 2,640,163 2,050,406 Property and Equipment, at cost, using full cost method for oil and gas properties. Includes $884,706 and $1,902,995 of leases held for sale at June 30, 1997 and December 31, 1996 23,283,381 24,029,957 Accumulated depletion, depreciation and amortization (4,686,619) (4,535,945) ----------------- ------------------ 18,596,762 19,494,012 Land 1,133,333 1,133,333 Other Assets 1,872,336 1,548,860 ----------------- ------------------ Total Assets $ 24,242,594 $ 24,226,611 ================= ================== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expenses $ 597,359 $ 1,094,473 Accrued interest payable 104,230 -- Current portion of accrued abandonment costs 450,000 -- Accrued income taxes payable 52,340 38,820 ----------------- ------------------ Total Current Liabilities 1,203,929 1,133,293 Long-Term Debt, less current portion 2,060,600 2,060,600 Accrued Abandonment Costs, less current portion 278,077 798,185 Deferred Income Taxes 789,036 633,956 Common Stock 668,358 667,691 Additional Paid-in Capital 17,013,817 17,007,087 Accumulated Earnings since January 1, 1990 2,228,777 1,925,799 ----------------- ------------------ Total Liabilities and Stockholders' Equity $ 24,242,594 $ 24,226,611 ================= ==================
3 BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
Three Months Ended June 30 1997 1996 ------------ ------------ Revenue from operations: Pipeline operations .................................... $ 1,021,663 $ 798,690 Oil and gas sales and operating fees ................... 187,034 259,586 ------------ ------------ REVENUE FROM OPERATIONS ................ 1,208,697 1,058,276 Cost of operations: Pipeline operating expenses ............................ 205,813 207,450 Lease operating expenses ............................... 178,635 158,688 Repair and maintenance costs ........................... 65,137 89,934 Depletion, depreciation, and amortization .............. 81,628 113,381 ------------ ------------ COST OF OPERATIONS ..................... 531,213 569,453 ------------ ------------ 677,484 488,823 Other income (expense): General and administrative ............................. (342,737) (324,469) Interest expense ....................................... (54,497) (9,382) Interest and other income .............................. 20,978 34,631 ------------ ------------ INCOME BEFORE INCOME TAXES ............. 301,228 189,603 Provision for income taxes ............. (112,594) (73,870) ------------ ------------ NET INCOME (LOSS) .......................................... 188,634 115,733 Dividend requirements on preferred stock ................... -- 72,801 ------------ ------------ Net income applicable to common stockholders ............... $ 188,634 $ 42,932 ============ ============ Net income per common share ................................ $ 0.003 $ 0.001 ============ ============ Weighted average number of common shares outstanding ........................................... 67,349,712 47,935,067 ============ ============ Net income per common share (fully diluted) ................ $ 0.003 ============ Weighted average number of common shares outstanding ............................................ 67,349,712 ============
4 BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
Six Months Ended June 30, 1997 1996 ------------ ------------ Revenue from operations: Pipeline operations ...................................... $ 1,932,692 $ 1,599,782 Oil and gas sales and operating fees ..................... 434,825 525,851 ------------ ------------ REVENUE FROM OPERATIONS .................. 2,367,517 2,125,633 Cost of operations: Pipeline operating expenses .............................. 418,303 427,718 Lease operating expenses ................................. 324,521 338,924 Repair and maintenance costs ............................. 218,919 139,522 Depletion, depreciation, and amortization ................ 186,677 245,451 ------------ ------------ COST OF OPERATIONS ....................... 1,148,420 1,151,615 ------------ ------------ 1,219,097 974,018 Other income (expense): General and administrative ............................... (667,759) (640,240) Interest expense ......................................... (110,930) (13,587) Interest and other income ................................ 48,318 58,817 ------------ ------------ INCOME BEFORE INCOME TAXES ............... 488,726 379,008 Provision for income taxes ............... (185,748) (147,673) ------------ ------------ NET INCOME (LOSS) ............................................ 302,978 231,335 Dividend requirements on preferred stock ..................... -- 145,602 ------------ ------------ Net income applicable to common stockholders ................. $ 302,978 $ 85,733 ============ ============ Net income per common share .................................. $ 0.004 $ 0.002 ============ ============ Weighted average number of common shares outstanding ............................................. 67,552,718 48,457,547 ============ ============ Net income per common share (fully diluted) .................. $ 0.004 ============ Weighted average number of common shares outstanding .............................................. 67,552,718 ============
5 BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
Six Months Ended June 30, 1997 1996 ----------- ----------- OPERATING ACTIVITIES Net income .................................................................. $ 302,978 $ 231,335 Adjustments to reconcile net income to net cash provided by operating activities: Depletion, depreciation and amortization ........................... 186,677 245,451 Deferred income taxes .............................................. 155,080 119,173 Changes in operating assets and liabilities: (Increase) Decrease in trade accounts receivable ............... 7,425 (87,243) (Increase) in crude oil inventory and prepaid expenses ......... (32,952) (71,361) (Decrease) in accounts payable and other current liabilities ................................. (379,364) (644,649) ----------- ----------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ................ 239,844 (207,294) INVESTING ACTIVITIES Oil and gas prospect generation costs ..................................... (160,750) (1,155,795) Purchases of property and equipment ....................................... (107,470) (339,352) Increase in other assets .................................................. (37,930) (107,185) Funds escrowed for abandonment costs ...................................... (291,636) (261,626) Abandonment of oil and gas properties ..................................... (98,634) -- Exploration and development costs ......................................... (4,880) (50,976) ----------- ----------- NET CASH (USED IN) INVESTING ACTIVITIES ................ (701,300) (1,914,934) FINANCING ACTIVITIES Net proceeds from the exercise of warrants ................................ -- 1,657,558 Net proceeds from the exercise of stock options ........................... 7,397 21,250 ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES ................ 7,397 1,678,808 (DECREASE) IN CASH .................. (454,059) (443,420) CASH AT BEGINNING OF YEAR ..................................................... 1,207,323 2,748,467 ----------- ----------- CASH AT JUNE 30 ............................................................... $ 753,264 $ 2,305,047 =========== =========== SUPPLEMENTARY CASH FLOW INFORMATION Interest paid ............................................................. $ 6,741 $ 13,587 =========== ============ Income taxes paid ......................................................... $ 39,660 $ 46,365 =========== ============
6 BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED JUNE 30, 1997 EARNINGS PER COMMON SHARE Fully diluted earnings per share has not been presented for the three months and six months ended June 30, 1996, because conversion of the outstanding options and preferred stock was antidilutive. All outstanding preferred shares were converted to an equivalent number of common shares effective December 31, 1996. ACCOUNTING STANDARDS Blue Dolphin Energy 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. 7 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 June 30, 1997, the Company's working capital (current assets less current liabilities) was $1,436,234, representing an increase of $519,121 as compared with working capital of $917,113 at December 31, 1996. The increase in working capital is principally due to sale of an oil and gas prospect in the second quarter 1997 for approximately $1,000,000, offset in part by reclassification from long term to current of certain well abandonment costs of approximately $450,000. 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 through sale of prospects, are excluded from working capital at June 30, 1997. The Company maintains a $10,000,000 reducing revolving credit facility with Bank One, Texas, N.A. Effective November 1, 1996, the borrowing base was adjusted to $1,925,000, reducing by $75,000 per month beginning December 1, 1996. The borrowing base and reducing amount can be 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. Offshore activity in the vicinity of the Blue Dolphin Pipeline System continues to be active. During the six months ended June 30, 1997, four new wells from existing producers/shippers were tied into the pipeline system, resulting in a 24% increase in daily gas volumes transported compared to the first half of 1996. An existing producer/shipper has notified the Company that it will terminate its oil transportation and processing 8 BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) agreements with the Company during the third quarter 1997. Revenues generated from oil transportation and processing fees from this producer/shipper represented 24% of the Company's revenues for the six months ended June 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. Future utilization of the Company's pipelines and related facilities will depend upon the success of drilling programs in the Blue Dolphin Pipeline corridor, attraction and retention to the System, and execution of contracts with producer/shippers to transport their gas and oil through the Blue Dolphin Pipeline System. In August 1996, the Minerals Management Service conducted an annual inspection of the Buccaneer Field production platforms and facilities. In addition to effecting 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 June 30, 1997, the Company incurred costs totalling approximately $100,000 for removal and abandonment work and approximately $100,000 for repairs to the platforms. Additionally, the Company plugged and abandoned a previously inactive well, in July 1997, at a cost of approximately $450,000. 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 in the High Island Area of the Gulf of Mexico prospective for oil and gas. The lease blocks were acquired in January 1996. Approximately $825,000 was invested to acquire the two leases for further prospect development, in addition to costs of 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 expects to finalize shortly, a multi-year agreement with several independent oil and gas companies, whereby in exchange for certain participation rights, these companies would partially fund the costs associated with the Company's ongoing prospect generating program. 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 have 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. Expansion of the proposed facility's capabilities to include the ability to receive by pipeline and store natural gas, as well as crude oil and condensate produced from deepwater discoveries on the U.S. Outer Continental Shelf, is being evaluated. 9 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 between $1,000,000 - - $1,250,000. Approximately $650,000 has been committed through June 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 six months ended June 30, 1997, ("current period") increased 253% to $302,978 compared to net income applicable to common stockholders of $85,733 reported for the first half of 1996 ("previous period"). REVENUES: Revenues for the current period increased by $241,884 or 11% to $2,367,517 compared to revenues of $2,125,633 reported for the previous period. Revenues from pipeline operations increased by $332,910 or 21% from the previous period. Gas transportation revenues increased $242,000, resulting from a 36% increase in gas transportation volumes. Oil transportation revenues increased $88,000, resulting from a 5% increase in oil transportation volumes. Revenues from oil and gas sales and operating fees for the current period decreased by $91,026 from those of the previous period. Oil and gas sales decreased $45,000 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 $17,000 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 increased by $79,397 due primarily to repairs and modifications to the Buccaneer Field production platforms and facilities of approximately $98,000 incurred in the first half 1997. Depletion, depreciation, and amortization expense for the current period decreased $58,774 as compared to the previous period, due to a decrease of approximately $32,000 in amortization as a result of deferred loan costs being fully amortized during 1996, and a decrease of approximately $26,000 in depletion, resulting from decreased oil and gas production volumes. 10 BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) General and administrative expenses increased $27,519 in the current period due primarily to timing differences between the current and previous periods that is expected to even out by year end, and an increase in health insurance costs. Interest expense increased $97,343 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. 11 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 12 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 7, 1997 /s/ MICHAEL J. JACOBSON Michael J. Jacobson President and Chief Executive Officer /s/ G. BRIAN LLOYD G. Brian Lloyd Secretary and Treasurer 14 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLUE DOLPHIN ENERGY COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND INCORPORATED HEREIN BY REFERENCE. 6-MOS DEC-31-1997 JUN-30-1997 753,264 0 1,755,147 0 26,080 2,640,163 23,283,381 4,686,619 24,242,594 1,203,929 2,060,600 0 0 668,358 19,242,594 24,242,594 226,584 2,367,517 486,567 1,816,179 0 0 110,930 488,726 185,748 302,978 0 0 0 302,978 .004 .004
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