-----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, Nnpn7cWZPj9TQ16fOuxbNnNS5DHvL9L6p7E4oWYweStYv3VUrCW99vnKIvbNyyxn 6DQFh5AXxPM6SlocR80CGw== 0000932384-96-000115.txt : 19960517 0000932384-96-000115.hdr.sgml : 19960517 ACCESSION NUMBER: 0000932384-96-000115 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BASIN EXPLORATION INC CENTRAL INDEX KEY: 0000827795 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 841143307 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20125 FILM NUMBER: 96567740 BUSINESS ADDRESS: STREET 1: 370 SEVENTEENTH ST STE 1800 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3036858000 MAIL ADDRESS: STREET 2: 370 SEVENTEENTH STREET SUITE 1800 CITY: DENVER STATE: CO ZIP: 80202 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 ------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 0-20125 -------------------------------------------------------- BASIN EXPLORATION, INC. -------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 84-1143307 ---------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 370 17th Street, Suite 1800, Denver, CO 80202 ------------------------------------------------------ (Address of principal executive offices) (Zip Code) (303) 685-8000 ---------------------------------------------------- (Registrant's telephone number, including area code) 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 ----- ------ Indicate the number of shares outstanding of each of the issuer's classes of Common stock, as of the latest practicable date. Outstanding at Class March 31, 1996 ---------------------------- ----------------- Common stock, $.01 par value 10,686,662 shares BASIN EXPLORATION, INC. INDEX PART I. FINANCIAL INFORMATION Page ---- Item 1. Consolidated Financial Statements Consolidated Balance Sheets- March 31, 1996 and December 31, 1995. . . . . . . 3 Consolidated Income Statements- Three Months Ended March 31, 1996 and 1995. . . . 5 Consolidated Statements of Changes in Stockholders' Equity. . . . . . . . . . . . . . . 6 Consolidated Statements of Cash Flows- Three Months Ended March 31, 1996 and 1995. . . . 7 Notes to Consolidated Financial Statements. . . . 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . 9 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . 15 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 EXHIBITS - Index to Exhibits . . . . . . . . . . . . . . . . . . . . . . 17 2 BASIN EXPLORATION, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS MARCH 31, 1996 AND DECEMBER 31, 1995 ASSETS ------
(In thousands) March 31, December 31, 1996 1995 --------- ------------ CURRENT ASSETS: Cash and cash equivalents $ 1,209 $ 1,613 Accounts receivable 5,591 7,029 Stockholder note receivable 559 559 Inventory and other current assets 949 1,116 -------- -------- Total current assets 8,308 10,317 -------- -------- PROPERTY AND EQUIPMENT, at cost: Oil and gas properties, under the full cost method of accounting Proved 172,225 206,880 Unproved 5,606 5,001 Less accumulated depreciation, depletion and amortization (84,070) (80,961) --------- --------- 93,761 130,920 Furniture and equipment, net 3,493 3,678 -------- -------- 97,254 134,598 -------- -------- OTHER ASSETS: Restricted cash 594 578 Other, net 1,179 1,158 -------- -------- 1,773 1,736 -------- -------- $ 107,335 $ 146,651 ======== ========
The accompanying notes to consolidated financial statements are an integral part of these balance sheets. 3 BASIN EXPLORATION, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS MARCH 31, 1996 AND DECEMBER 31, 1995 LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------
(In thousands) March 31, December 31, 1996 1995 --------- ------------ CURRENT LIABILITIES: Current portion of long-term debt (Note 3) $ 35 $ 175 Accounts payable and accrued expenses 6,766 7,985 Accrued ad valorem taxes 4,646 4,368 -------- -------- Total current liabilities 11,447 12,528 -------- -------- LONG-TERM DEBT, net of current portion (Note 3) 40,164 77,172 AD VALOREM TAXES AND OTHER 3,311 3,664 STOCKHOLDERS' EQUITY: Preferred stock, par value $.01 per share; authorized 10,000,000 shares, no shares issued and outstanding - - Common stock, par value $.01 per share, authorized 50,000,000 shares, 10,724,000 shares issued 107 107 Additional paid-in capital 59,335 59,288 Retained earnings (deficit) (6,930) (6,014) Common stock held in treasury, at cost, 37,000 shares (99) (94) --------- --------- Total stockholders' equity 52,413 53,287 -------- -------- $ 107,335 $ 146,651 ======== ========
The accompanying notes to consolidated financial statements are an integral part of these balance sheets. 4 BASIN EXPLORATION, INC. AND SUBSIDIARY CONSOLIDATED INCOME STATEMENTS
For the Three Months Ended March 31, (In thousands, except per share data) 1996 1995 --------- --------- REVENUES: Oil sales $ 3,875 $ 5,762 Gas sales 3,611 5,532 Other 23 259 ---------- ---------- 7,509 11,553 ---------- ---------- OPERATING COSTS AND EXPENSES: Lease operating expenses 1,676 2,070 Production taxes 726 1,004 Depreciation, depletion and amortization 3,354 4,634 General and administrative, net 1,189 1,543 Other 18 144 ---------- ---------- 6,963 9,395 ---------- ---------- OPERATING INCOME 546 2,158 ---------- ---------- OTHER INCOME (EXPENSE): Interest expense (1,529) (1,622) Other 67 (18) ---------- ---------- (1,462) (1,640) ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES (916) 518 Income tax provision - (193) ---------- ---------- NET INCOME (LOSS) $ (916) $ 325 ========== ========= EARNINGS (LOSS) PER SHARE $ (0.09) $ 0.03 ========== ========= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 10,687 10,679 ========= =========
The accompanying notes to consolidated financial statements are an integral part of these statements. 5 BASIN EXPLORATION, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD FROM JANUARY 1, 1995 THROUGH MARCH 31, 1996
ADDITIONAL RETAINED TOTAL COMMON STOCK PAID-IN TREASURY STOCK EARNINGS SHAREHOLDERS' (IN THOUSANDS) SHARES AMOUNT CAPITAL SHARES AMOUNT (DEFICIT) EQUITY - ---------------------------------------------------------------------------------------------------------------------- BALANCES, December 31, 1994 10,692 $107 $58,985 (13) $(47) $13,529 $72,575 Issuance and vesting of restricted stock and stock options 32 - 302 - - - 302 Purchase of treasury stock - - - (19) (47) - (47) Net loss - - - - - (19,543) (19,543) -------------------------------------------------------------------------------- BALANCES, December 31, 1995 10,724 $107 $59,288 (32) $(94) $(6,014) $53,287 Issuance and vesting of restricted stock and stock options - - 47 - - - 47 Purchase of treasury stock - - - (5) (5) - (5) Net loss - - - - - (916) (916) -------------------------------------------------------------------------------- BALANCES, March 31, 1996 10,724 $107 $59,335 (37) $(99) $(6,930) $52,413 ================================================================================
The accompanying notes to consolidated financial statements are an integral part of these statements. 6 BASIN EXPLORATION, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) For the Three Months Ended March 31, 1996 1995 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (916) $ 325 Adjustments to reconcile net income (loss) to net cash provided by Depreciation, depletion and amortization 3,354 4,634 Deferred income tax expense - 193 Restricted stock compensation 47 97 Amortization of prepaid expenses 65 96 Changes in operating assets and liabilities: Decrease (increase) in: Restricted cash (16) (19) Receivables 1,438 1,824 Inventory and other, net 81 401 Increase (decrease) in: Accounts payable and accrued expenses 13 (8,791) Ad valorem taxes and other (75) (861) Unearned income - (529) --------- --------- Net cash provided by (used in) operating activities 3,991 (2,630) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital additions (3,512) (7,085) Increase (decrease) in drilling payables (931) 2,020 Proceeds from sale of property and equipment 37,202 2,400 --------- --------- Net cash provided by (used in) investing activities 32,759 (2,665) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable and long-term debt - 2,979 Principal payments on notes payable and long-term debt (37,149) (217) Purchase of treasury stock (5) - --------- --------- Net cash provided by (used in) financing activities (37,154) 2,762 --------- --------- DECREASE IN CASH AND CASH EQUIVALENTS (404) (2,533) CASH AND CASH EQUIVALENTS, beginning of period 1,613 5,394 --------- --------- CASH AND CASH EQUIVALENTS, end of period $ 1,209 $ 2,861 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ 1,271 $ 1,400 ========= ========= Cash paid for income taxes $ - $ - ========= =========
The accompanying notes to consolidated financial statements are an integral part of these statements. 7 BASIN EXPLORATION, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) GENERAL -------- The interim financial data is unaudited. However, in the opinion of management, all necessary adjustments have been made for a fair presentation of the financial position of the Company at March 31, 1996 and the results of operations for the interim periods presented. All such adjustments made have been of a normal and recurring nature. Because of various factors, results of operations for this period are not necessarily indicative of results to be expected for the full year. For a more thorough understanding of the Company's operations and financial position, these statements should be read in conjunction with the Company's December 31, 1995 audited financial statements, including the notes thereto. (2) DIVESTITURE OF OIL AND GAS PROPERTIES ------------------------------------- In February 1996, the Company entered into two sales agreements with HS Resources, Inc. ("HS Resources"). The first agreement provided for the Company to sell certain assets in the D-J Basin to HS Resources for approximately $38.0 million. This transaction was closed on March 15, 1996. The second agreement provides for the Company to sell the remainder of its D-J Basin assets for approximately $87.5 million, subject to approval by shareholders representing a majority of the Company's outstanding common shares. Both transactions are subject to typical buyer due diligence review (some of which may be completed post-closing for the first transaction) which may result in adjustments to the agreed upon purchase prices. The transactions have an effective date of January 1, 1996 and the agreements provide for the Company to receive interest on the purchase prices from the effective date to the respective closing dates, at 7.5% per annum. The second transaction is expected to close in June 1996, after a shareholder vote scheduled for June 6. Proceeds from the sales are expected to be used to pay off all outstanding bank debt and fund potential acquisitions and drilling opportunities. Combined, these sales will result in Basin selling its interests in two-thirds of its producing wells and approximately 70% of its proved oil and gas reserves at December 31, 1995. (3) LONG TERM DEBT -------------- The Company utilized most of the proceeds from the closing of the first transaction discussed in Note 2 above to pay down its bank debt from $77 million to $40 million. The borrowing base under the Company's revolving line of credit was concurrently reduced from $80 million to $55 million. When the revolving period expires, the credit facility will convert to a four year amortizing term loan. Unless extended, the revolving period will expire April 30, 1997. The borrowing base is subject to redetermination at least semi-annually. 8 BASIN EXPLORATION, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- Basin's revenues are significantly affected by changes in oil and gas prices. Assuming level production, the Company's total revenue would generally be higher in the first and fourth quarters due to higher natural gas prices resulting from greater demand during colder months. The following table reflects the Company's average oil and gas prices and its average daily oil and gas production for the periods presented:
Three Months Ended March 31, --------------------- 1996 1995 ---- ---- Average price: Oil (per Bbl) $17.94 $16.83 Oil, excluding hedging (per Bbl) $18.51 $16.83 Gas (per Mcf) $ 1.47 $ 1.60 Gas, excluding hedging and Section 29 tax credit income (per Mcf) $ 1.47 $ 1.45 Average daily production: Oil (Bbl) 2,374 3,805 Gas (Mcf) 27,000 38,500
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 AND 1995 - -------------------------------------------------------- OPERATING REVENUE. Operating revenue for the first quarter decreased by $4,044,000, or, 35%, to $7,509,000, from $11,553,000 in the same period in 1995. The decrease was primarily due to lower production levels in 1996. Gas production dropped 30% and oil production declined 38% in the first quarter of 1996 compared to the prior year. These decreases were due to the Company's significant reduction in capital expenditures in 1995 (when it drilled only four wells compared to 152 wells drilled in 1994), asset sales during 1995 and in the first quarter of 1996, and natural production declines. Gas prices declined by 8% while oil prices rose 7%. For the first three months of 1995, the Company recognized gas revenues for payments received with respect to transferred Section 29 tax credits in the amount of $528,000. 9 BASIN EXPLORATION, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LEASE OPERATING EXPENSES. Total lease operating expenses for the first quarter decreased by $394,000, or 19%, compared to the same period in 1995, but the amount per barrel of oil equivalent (BOE) produced increased to $2.68 in 1996, from $2.36 in the first quarter of 1995. The increased cost per BOE was caused primarily by a decline in the number of new wells brought on line, since such wells typically have relatively high initial production rates, generating average unit production costs that are lower than for more mature properties. PRODUCTION TAXES. Production taxes decreased with oil and gas sales, but represented 9.7% of sales in 1996 compared to 8.9% in 1995. The increased average tax rate was due to a greater portion of sales occuring in higher-tax jurisdictions in 1996. DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and amortization expense declined $1,280,000, or 28%, as the result of less depletion due to lower production volumes in the current period. The current year depletion rate of $4.97 per BOE produced was approximately the same as in the prior period. GENERAL AND ADMINISTRATIVE, NET. Net general and administrative expenses for the first quarter of 1996 decreased by $354,000, or 23%, compared to the prior year. This decrease resulted primarily from staff reductions made during the second half of 1995. INTEREST EXPENSE. Interest expense during the first quarter decreased by $93,000, or 6%, to $1,529,000 in 1996 from $1,622,000 in 1995. The effects of decreased average bank borrowings were partially offset by higher interest rates in the current period. Average debt outstanding for the first quarter decreased to $71.1 million in 1996 from $78.7 million in 1995, due largely to an asset sale closed during March 1996 (further discussed below). The Company's average effective interest rate for the first quarter of 1996 increased to 8.6%, from 8.2% in 1995, due to higher prevailing market rates and an increased spread over benchmark rates applicable under the Company's bank line of credit. 10 BASIN EXPLORATION, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Company presently has no major capital expenditure commitments pending, other than approximately $7.2 million for the balance owing on leases on which the Company was high bidder at a federal offshore (Central Gulf of Mexico) lease sale held in late April 1996 (further discussed below). The Company's capital expenditures are generally discretionary and activity levels are determined by a number of factors, including oil and gas prices, interest rates, availability of funds, quantity and character of identified investment projects and competition. Most capital expenditures during the past several years have been for the acquisition and development of properties with established proved and probable oil and gas reserves, but the portion targeted toward exploration has been increasing over time. The Company's borrowing base under its revolving line of credit was $80 million at December 31, 1995, compared to an outstanding balance of $77 million. In order to improve its liquidity to fund an expanded capital expenditure program, the Company determined in late 1995 to pursue a transaction to monetize a portion of its developed oil and gas reserves. This objective was satisfied in March 1996 through the sale of a portion of the Company's D-J Basin assets to HS Resources for approximately $38 million. Following this transaction, the Company's bank debt was paid down to $40 million and the borrowing base under the Company's bank line of credit was redetermined to be $55 million, establishing unutilized borrowing capacity under the line of $15 million. The improved ratio of bank debt to total capitalization after the sale will also result in a revised applicable interest rate of 1.125% above LIBOR, as compared to 2.0% above LIBOR before the sale. The Company executed a second agreement with HS Resources that provides for the sale of the remainder of the Company's D-J properties for approximately $87.5 million. This transaction is presently pending. As more fully described below, these two transactions, with an aggregate sales price of $125.5 million, will significantly improve the Company's liquidity and financial flexibility, but will also greatly reduce the Company's oil and gas property base and related cash flows. Another consequence of these asset sales will be a significant reduction in the Company's inventory of development projects, resulting in an increased portion of the Company's capital budget being targeted toward new proved property acquisitions and exploration. During the second half of 1995 and the first quarter of 1996, the Company added senior level exploration and acquisition personnel to enable it to more effectively pursue opportunities in its historical operating areas in the Rocky Mountain region and to expand into other major producing basins. In a departure from its previous practices, the Company intends to direct a substantial portion of its future exploration budget toward the Gulf of Mexico area, where utilization of 3-D geophysical data and computer-aided exploration ("CAEX") technology for prospect identification and delineation has proven to be effective in improving drilling success rates and economic returns. To implement this strategy, the Company established a Houston-based exploration office in December 1995. Exploration in the Gulf Coast typically will involve larger targets with commensurately greater economic investment per well than the Company's historical exploration efforts. Preliminarily, the Company has established a 1996 capital budget for Gulf Coast exploration of approximately 11 BASIN EXPLORATION, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS $13 million, excluding any related development costs for successful prospects. This budget anticipates participation in up to eight prospect test wells during the year. However, inasmuch as 1996 will be the Company's first year of Gulf Coast operations, it began the period with no prospect inventory and, therefore, considerable uncertainty regarding the volume of business activity that will actually develop. Through the first four months of 1996 (mostly in April), the Company acquired 75% and 100% working interests, respectively, in two lease blocks offshore Texas, and was the high bidder on six blocks offshore Louisiana at a Central Gulf of Mexico federal lease sale. The Company's total initial leasehold investment for these eight blocks, provided that the Minerals Management Service ("MMS") awards all blocks on which the Company was the high bidder at the Central Gulf of Mexico sale, will be approximately $10 million. The Company has paid 20% of its bid amount for the leases on which it was the high bidder at the Central Gulf of Mexico federal lease sale. The balance will be due when the leases are awarded, within 120 days of the lease sale unless the MMS exercises its right to reject all bids on selected blocks. The Company plans to generally reduce its interests in these prospects through sale of promoted interests or through swapping for other prospect interests. Although exchanging prospect interests would result in less cost recoupment for the Company, it would be consistent with the Company's overall objectives of prospect diversification and risk management, and would accelerate development of prospect inventory. If the Company is able to, and elects to, swap a portion of its prospects for interests in other prospects, rather than re-selling such interests, its Gulf Coast exploration capital budget for 1996 may be increased from $13 million to $20 million or more to provide for the additional investment in prospect inventory. The Company is not anticipating a current year contribution of production or cash flow resulting from Gulf Coast exploration, even if it makes one or more discoveries, since at least nine months is typically required for platform fabrication and installation for a new discovery (unless such infrastructure is already in place). In addition to Gulf Coast exploration activities, the Company expects to invest up to $4 million in 1996 on development of its proved properties in Wyoming and up to $1 million on exploration related to its existing Rocky Mountain prospect inventory. Other capital expenditures during the year will be determined primarily based on the level of success achieved in pursuing proved property acquisitions and the amount of development activity generated by exploration discoveries. Such investments could be significant. Although the Company is not in negotiations and cannot predict if or when it will make a material acquisition, or a substantial discovery, the Company believes that it could finance investment opportunities aggregating $75 million or more. The Company expects to be able to fund such capital investments primarily with cash flow from operations and funds made available through the sale of its D-J Basin assets, including availability established under its bank credit line. If the pending asset sale transaction with HS Resources is not closed, the Company may seek additional liquidity through an alternate asset sale or monetization transaction. Further, if conditions warrant, the Company may consider raising additional capital through issuance of debt or equity securities. TRANSACTIONS WITH HS RESOURCES. On February 26, 1996, the Company reached agreements to sell all of its assets in the D-J Basin to HS Resources in two transactions, for total cash consideration of $125.5 million. The first transaction, in which a portion of the Company's D-J Basin assets was sold for approximately $38 million, closed in March 1996. This transaction satisfied certain asset monetization objectives that the Company had earlier established to develop 12 BASIN EXPLORATION, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS the minimum level of liquidity necessary to fund its planned 1996 capital expenditures. The pending second transaction, in which the Company's remaining D-J Basin assets are to be sold for approximately $87.5 million, will require approval by the holders of a majority of the Company's outstanding common shares and is expected to close in June 1996. Both transactions are subject to typical buyer due diligence review (some of which may be completed post-closing for the first transaction) that could result in adjustments to the agreed upon purchase prices. The agreements both provide for a January 1, 1996 effective date and for the Company to receive interest on the purchase prices from the effective date until the respective closing dates, at 7.5% per annum. Together, these transactions involve the sale of approximately two-thirds of the Company's producing wells and 70% of its proved oil and gas reserve volumes as of December 31, 1995. On a pro forma basis as of January 1, 1996, after giving effect to both transactions, the Company would have 10.4 MMBOE of proved reserves, no outstanding bank debt and net working capital of approximately $38 million. Unless renegotiated, the Company's existing credit agreement with its banks will remain effective after the second transaction with HS Resources. Management anticipates that if revisions are made to the credit agreement following such transaction they will generally be favorable to the Company as a consequence of the Company's reduced leverage and improved financial condition. The Company's borrowing capacity after the second transaction with HS Resources is expected to be at least $20 million, although no financial commitment has yet been made or requested, and the Company expects to be in compliance with all existing loan covenants following such transaction without amendment thereof. It is the Company's plan to utilize liquidity created by these asset sales to make new investments in oil and gas properties, through both acquisitions and exploration. Until the sales proceeds are redeployed, however, cash balances will be invested in short term, interest-bearing cash equivalents, and oil and gas assets under management and operational cash flows will be substantially reduced from pre-sale levels. Accordingly, upon completion of the second sale transaction, the Company expects to significantly reduce the size of the office staff at its Denver headquarters. The following is a summary of selected operating data related to the sold D-J Basin assets, the remaining D-J Basin assets that are subject to a purchase and sale agreement with HS Resources, and other oil and gas properties owned by the Company: 13 BASIN EXPLORATION, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
D-J Basin Assets D-J Basin Assets Other Sold March 15, 1996 Under Sales Contract Assets Total ------------------- -------------------- ------ ----- As of December 31, 1995 Proved reserves Oil (Mbbl) 2,849 3,489 6,268 12,606 Gas (MMcf) 31,836 74,596 25,004 131,436 MBOE 8,155 15,922 10,435 34,512 Proved developed reserves Oil (Mbbl) 1,600 2,394 4,403 8,397 Gas (MMcf) 24,368 60,615 21,427 106,410 MBOE 5,661 12,497 7,974 26,132 Present value of future net revenue from proved reserves, before income taxes (in thousands) $28,009 $59,005 $42,054 $129,068 Net developed acreage 18,781 34,821 46,800 100,402 Net undeveloped acreage 22,381 37,051 220,552 279,984 First Quarter, 1996 Average Net Daily Production Oil (bbl) 527 683 1,256 2,466 Gas (Mcf) 6,922 16,499 4,809 28,230 BOE 1,681 3,433 2,057 7,171 ____________________ Through March 15, 1996. Total actual amounts reported for the fiscal quarter are lower since assets sold to HS Resources onMarch 15, 1996 did not contribute for the entire period.
CHANGES IN PRICES. The Company's revenues, cash flow, and the value of its oil and gas properties have been, and will continue to be, affected by changes in oil and natural gas prices. The Company's ability to maintain current borrowing capacity and to obtain additional capital on attractive terms is also substantially dependent on oil and natural gas prices. As such, changes in oil and gas prices can significantly affect the amount of the Company's capital expenditures. Oil and natural gas prices are subject to significant seasonal and other fluctuations that are beyond the Company's ability to control or predict. "SAFE HARBOR" STATEMENT UNDER THE UNITED STATES PRIVATE - ------------------------------------------------------- SECURITIES LITIGATION REFORM ACT OF 1995 - ---------------------------------------- Statements that are not historical facts contained in this report are forward looking statements that involve risks and uncertainties that could cause actual results to differ from projected results. Factors that could cause actual results to differ materially include, among others: general economic conditions, the market price of oil and natural gas, the risks associated with exploration in the Gulf Coast and Rocky Mountain regions, the Company's ability to find, acquire, market, develop and produce new properties, operating hazards attendant to the oil and natural gas business, uncertainties in the estimation of proved reserves and in the projection of future rates of production and timing of development expenditures, the strength and financial resources of the Company's competitors, the Company's ability to find and retain skilled personnel, climatic conditions, labor relations, availability and cost of material and equipment, delays in anticipated start-up dates, environmental risks, the results of financing efforts and other risk factors detailed elsewhere herein. 14 BASIN EXPLORATION, INC. AND SUBSIDIARY PART II OTHER INFORMATION -------------------------- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------- -------------------------------- a. Exhibits. 11.1 Computation of earnings per share. 27 Financial Data Schedule b. Reports filed on Form 8-K. February 26, 1996 - Item 5. Other Events - Information relating to agreements to sell assets to HS Resources, Inc. - Item 7. Financial Statements and Exhibits - Pro forma financial information and exhibits. 15 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. BASIN EXPLORATION, INC. ----------------------- (Registrant) Date: May 13,1996 By: Neil L. Stenbuck ----------------------- Neil L. Stenbuck Chief Financial Officer Date: May 13, 1996 By: Michael S. Smith ----------------------- Michael S. Smith President and Chief Executive Officer 16 Index to Exhibits Exhibit Numbers Exhibits Page - --------------- -------- ---- 11.1 Calculation of Earnings Per Share 18 27 Financial Data Schedule 19 17 EX-11 2 CALCULATION OF EARNINGS PER SHARE Exhibit 11.1 Calculation of Earnings Per Share (In thousands, except per share data)
For the Three Months Ended March 31, --------- Weighted Average Calculation: 1996 1995 - ----------------------------- --------- --------- Net income (loss) $ (916) $ 325 ========= ========= Weighted average shares outstanding 10,687 10,679 ========= ========= Earnings per share, based on weighted average shares outstanding $ (0.09) $ 0.03 ========= ========= Primary Calculation: Net income (loss) $ (916) $ 325 ========= ========= Common Stock Equivalents: Weighted average shares outstanding 10,687 10,679 Stock options - 103 --------- --------- 10,687 10,782 ========= ========= Earnings per share, primary $ (0.09) $ 0.03 ========= =========
18 EX-27 3 FDS 3/96
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S INTERIM UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1996 MAR-31-1996 1,209,000 0 5,591,000 0 343,000 8,308,000 184,560,000 (87,306,000) 107,335,000 11,447,000 0 0 0 107,000 52,306,000 107,335,000 7,486,000 7,509,000 1,676,000 6,963,000 0 0 1,529,000 (916,000) 0 (916,000) 0 0 0 (916,000) (.09) (.09) Per share
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