-----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, Lvcl9qp/YvC7pjNdrLd1sm5RhE+jqws2OsnooixtRoMCn/Pn9EtiCdEikTcA5fXL u0yi2KJn7A0q0jMEOKWHWg== 0000927356-99-001921.txt : 19991125 0000927356-99-001921.hdr.sgml : 19991125 ACCESSION NUMBER: 0000927356-99-001921 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991124 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTERN GAS RESOURCES INC CENTRAL INDEX KEY: 0000856716 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION [4922] IRS NUMBER: 841127613 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-10389 FILM NUMBER: 99763928 BUSINESS ADDRESS: STREET 1: 12200 N PECOS ST CITY: DENVER STATE: CO ZIP: 80234-3439 BUSINESS PHONE: 3034525603 MAIL ADDRESS: STREET 1: 12200 NORTH PECOS ST CITY: DENVER STATE: CO ZIP: 80234 10-Q/A 1 AMENDMENT TO FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q\A (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 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 1-10389 ------- WESTERN GAS RESOURCES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 84-1127613 - ------------------------------------- ------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 12200 N. Pecos Street, Denver, Colorado 80234-3439 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (303) 452-5603 - -------------------------------------------------------------------------------- Registrant's telephone number, including area code No Changes - -------------------------------------------------------------------------------- (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 _____ ----- On November 1, 1999, there were 32,152,731 shares of the registrant"s Common Stock outstanding. This form 10-Q/A for the quarterly period ended September 30, 1999 is being filed to correct an inaccurate subtotal on the Consolidated Statement of Cash Flows (unaudited) appearing on page 4 of Item 1. Financial Statements (unaudited). The line entitled "Net cash provided by (used in) operating activities" for the nine months ended September 30, 1998 should have totaled $(55,288) instead of $(96,001). This subtotal is also corrected in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations on page 12 in the table comparing results of operations for the nine months ended September 30, 1999 to the results of operations for the nine months ended September 30, 1998. ================================================================================ 1 Western Gas Resources, Inc. Form 10-Q/A Table of Contents PART I - Financial Information Page - ------------------------------ ---- Item 1. Financial Statements (Unaudited) Consolidated Balance Sheet - September 30, 1999 and December 31, 1998........................................................ 3 Consolidated Statement of Cash Flows - Nine months ended September 30, 1999 and 1998..................................... 4 Consolidated Statement of Operations - Three and nine months ended September 30, 1999 and 1998............................... 5 Consolidated Statement of Changes in Stockholders' Equity - Nine months ended September 30, 1999............................ 6 Notes to Consolidated Financial Statements...................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................... 12 Signatures................................................................. 19 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements -------------------- WESTERN GAS RESOURCES, INC. CONSOLIDATED BALANCE SHEET (Dollars in thousands, except share data)
September 30, December 31, 1999 1998 -------------- ------------- ASSETS (Unaudited) ------ Current assets: Cash and cash equivalents.................................................... $ 5,472 $ 4,400 Trade accounts receivable, net............................................... 220,069 233,574 Product inventory............................................................ 30,031 46,207 Parts inventory.............................................................. 9,952 10,153 Other........................................................................ - 2,951 ---------- ---------- Total current assets........................................................ 265,524 297,285 ---------- ---------- Property and equipment: Gas gathering, processing, storage and transmission.......................... 789,353 952,531 Oil and gas properties and equipment......................................... 153,957 111,602 Construction in progress..................................................... 47,343 87,943 ---------- ---------- 990,653 1,152,076 Less: Accumulated depreciation, depletion and amortization.................. (297,628) (305,589) ---------- ---------- Total property and equipment, net........................................... 693,025 846,487 ---------- ---------- Other assets: Gas purchase contracts (net of accumulated amortization of $30,258 and $29,978, respectively)...................................................... 37,390 41,263 Other........................................................................ 42,602 34,342 ---------- ---------- Total other assets.......................................................... 79,992 75,605 ---------- ---------- Total assets.................................................................. $1,038,541 $1,219,377 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable............................................................. $ 244,253 $ 245,315 Accrued expenses............................................................. 26,979 31,727 Dividends payable............................................................ 4,217 4,217 ---------- ---------- Total current liabilities.................................................. 275,449 281,259 Long-term debt................................................................ 214,333 504,881 Senior subordinated debt...................................................... 155,000 - Deferred income taxes payable................................................. 38,816 48,021 ---------- ---------- Total liabilities.......................................................... 683,598 834,161 ---------- ---------- Commitments and contingent liabilities........................................ - - Stockholders' equity: Preferred stock, par value $.10; 10,000,000 shares authorized: $2.28 cumulative preferred stock; 1,400,000 shares issued and outstanding ($35,000,000 aggregate liquidation preference)............................. 140 140 $2.625 cumulative convertible preferred stock; 2,760,000 shares issued and outstanding ($138,000,000 aggregate liquidation preference)................ 276 276 Common stock, par value $.10; 100,000,000 shares authorized; 32,177,247 and 32,173,009 shares issued and outstanding, respectively..................... 3,218 3,217 Treasury stock, at cost, 25,016 shares....................................... (788) (788) Additional paid-in capital................................................... 397,397 397,344 Accumulated deficit.......................................................... (45,605) (17,075) Accumulated other comprehensive income....................................... 1,189 3,053 Notes receivable from key employees secured by common stock.................. (884) (951) ---------- ---------- Total stockholders' equity................................................. 354,943 385,216 ---------- ---------- Total liabilities and stockholders' equity.................................... $1,038,541 $1,219,377 ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. 3 WESTERN GAS RESOURCES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (Dollars in thousands)
Nine Months Ended September 30, ------------------------- 1999 1998 ----------- ----------- Reconciliation of net income to net cash (used in) provided by operating activities: Net income............................................................................ $ (15,882) $ 5,893 Add income items that do not affect working capital: Depreciation, depletion and amortization............................................. 37,850 43,605 Deferred income taxes................................................................ (9,204) 4,412 Distributions (less than) in excess of equity income, net............................ (354) 438 (Gain) loss on the sale of property and equipment.................................... 21,406 (14,813) Foreign currency translation adjustments............................................. (1,864) 214 Other non-cash items, net............................................................ 493 964 Adjustments to working capital to arrive at net cash (used in) provided by operating activities: Decrease in trade accounts receivable................................................ 4,910 62,735 Decrease in product inventory........................................................ 16,176 (44,277) Decrease in parts inventory.......................................................... 201 (896) Increase in other current assets..................................................... 11,546 1,854 Decrease in other assets and liabilities, net........................................ 444 143 Decrease in accounts payable......................................................... (1,062) (115,237) Decrease in accrued expenses......................................................... (5,085) (323) ----------- ----------- Net cash provided by (used in) operating activities................................... 59,575 (55,288) ----------- ----------- Cash flows from investing activities: Purchase of property and equipment................................................... (49,043) (72,887) Proceeds from the dispositions of property and equipment............................. 148,100 22,600 Contributions to equity investees.................................................... (100) (748) ----------- ----------- Net cash provided by (used in) investing activities................................... 98,957 (51,035) ----------- ----------- Cash flows from financing activities: Net proceeds from exercise of common stock options................................... 54 23 Proceeds from issuance of long-term debt............................................. 155,000 - Debt issue costs paid................................................................ (9,319) (45) Payments on revolving credit facility................................................ (2,022,000) (2,266,350) Borrowings under revolving credit facility........................................... 1,815,500 2,380,350 Payments on long-term debt........................................................... (84,047) (7,143) Dividends paid....................................................................... (12,648) (12,651) ----------- ----------- Net cash (used in) provided by financing activities................................... (157,460) 94,184 ----------- ----------- Net increase (decrease) in cash and cash equivalents.................................. 1,072 (12,139) Cash and cash equivalents at beginning of period...................................... 4,400 19,777 ----------- ----------- Cash and cash equivalents at end of period............................................ $ 5,472 $ 7,638 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. 4 WESTERN GAS RESOURCES, INC. CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (Dollars in thousands, except share and per share amounts)
Three Months Ended Nine Months Ended September 30, September 30, ------------------------- ------------------------- 1999 1998 1999 1998 ----------- ----------- ----------- ----------- Revenues: Sale of residue gas.................................... $ 392,679 $ 402,600 $ 1,107,734 $ 1,207,572 Sale of natural gas liquids............................ 97,660 99,947 237,514 332,571 Processing, transportation and storage revenue......... 11,799 11,459 36,118 33,450 Other, net............................................. 3,439 2,253 (11,844) 23,892 ----------- ----------- ----------- ----------- Total revenues....................................... 505,577 516,259 1,369,522 1,597,485 ----------- ----------- ----------- ----------- Costs and expenses: Product purchases...................................... 456,246 469,367 1,251,424 1,429,835 Plant operating expense................................ 17,096 22,258 50,615 62,919 Oil and gas exploration and production expense......... 2,346 2,050 6,029 5,045 Depreciation, depletion and amortization............... 13,095 14,277 37,850 43,605 Selling and administrative expense..................... 5,759 6,917 21,711 21,824 Interest expense....................................... 9,365 8,969 25,118 25,265 ----------- ----------- ----------- ----------- Total costs and expenses............................. 503,907 523,838 1,392,747 1,588,493 ----------- ----------- ----------- ----------- Income (loss) before income taxes....................... 1,670 (7,579) (23,225) 8,992 Provision (benefit) for income taxes: Current................................................ (528) 2,336 754 (1,313) Deferred............................................... 1,140 (5,268) (9,204) 4,412 ----------- ----------- ----------- ----------- Total provision (benefit) for income taxes........... 612 (2,932) (8,450) 3,099 ----------- ----------- ----------- ----------- Income (loss) before extraordinary items................ 1,058 (4,647) (14,775) 5,893 Extraordinary charge for early extinguishment of debt, net of tax benefit of $700,000......................... - - (1,107) - ----------- ----------- ----------- ----------- Net income (loss)....................................... 1,058 (4,647) (15,882) 5,893 Preferred stock requirements............................ (2,610) (2,610) (7,829) (7,829) ----------- ----------- ----------- ----------- Income (loss) attributable to common stock.............. $ (1,552) $ (7,257) $ (23,711) $ (1,936) =========== =========== =========== =========== Income (loss) per share of common stock................. $(.05) $(.23) $(.74) $(.06) =========== =========== =========== =========== Weighted average shares of common stock outstanding..... 32,150,111 32,147,993 32,148,699 32,147,354 =========== =========== =========== =========== Income (loss) per share of common stock - assuming dilution...................................... $(.05) $(.23) $(.74) $(.06) =========== =========== =========== =========== Weighted average shares of common stock outstanding - assuming dilution...................................... 32,516,287 32,147,993 32,332,631 32,148,655 =========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. 5 WESTERN GAS RESOURCES, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) (Dollars in thousands, except share amounts)
Shares of Shares of $2.625 $2.625 $2.28 Cumulative Shares $2.28 Cumulative Cumulative Convertible Shares Of Common Cumulative Convertible Preferred Preferred of Common Stock Preferred Preferred Common Treasury Stock Stock Stock in Treasury Stock Stock Stock Stock ---------- ----------- ---------- ----------- ---------- ----------- ------ -------- Balance at December 31, 1998............................. 1,400,000 2,760,000 32,147,993 25,016 $ 140 $ 276 $3,217 $ (788) Comprehensive Income: Net loss......................... - - - - - - - - Foreign Currency Translation..................... - - - - - - - - Comprehensive Income Dividends: Dividends declared on common stock............................ - - - - - - - - Dividends declared on $2.28 cumulative preferred stock....... - - - - - - - - Dividends declared on $2.625 cumulative convertible preferred stock............................ - - - - - - - - Loans forgiven.................... - - - - - - - - Stock Options Exercised - - 4,238 - - - 1 - ---------- ----------- ---------- ----------- ---------- ----------- ------ -------- Balance at September 30, 1999..... 1,400,000 2,760,000 32,152,231 25,016 $ 140 $ 276 $3,218 $ (788) ---------- ----------- ---------- ----------- ---------- ----------- ------ -------- Accumulated Other Notes Total Additional Compre- Receivable Stock- Paid-in Accumulated Hensive from Key holders' Capital Deficit Income Employees Equity ---------- ----------- ----------- ---------- -------- Balance at December 31, 1998............................. $ 397,344 $ (17,075) $ 3,053 $ (951) $385,216 Comprehensive Income: Net loss......................... - (15,882) - - (15,882) Foreign Currency Translation..................... - - (1,864) - (1,864) -------- Comprehensive Income (17,746) ======== Dividends: Dividends declared on common stock............................ - (4,821) - - (4,821) Dividends declared on $2.28 cumulative preferred stock....... - (2,394) - - (2,394) Dividends declared on $2.625 cumulative convertible preferred stock............................ - (5,433) - - (5,433) Loans forgiven.................... - - - 67 67 Stock Options Exercised 53 - - - 54 ---------- ----------- ----------- ---------- -------- Balance at September 30, 1999..... $ 397,397 $ (45,605) $ 1,189 $ (884) $354,943 ========== =========== =========== ========== ========
The accompanying notes are an integral part of the consolidated financial statements. 6 WESTERN GAS RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) GENERAL The interim consolidated financial statements presented herein should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 1998. The interim consolidated financial statements as of September 30, 1999 and for the three and nine month periods ended September 30, 1999 and 1998 included herein are unaudited but reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly present the results for such periods. The results of operations for the three and nine months ended September 30, 1999 are not necessarily indicative of the results of operations expected for the year ended December 31, 1999. Certain prior year amounts in the interim consolidated financial statements and notes have been reclassified to conform to the presentation used in 1999. SALE OF SENIOR SUBORDINATED DEBT In June 1999, we sold $155.0 million of Senior Subordinated Notes in a private placement. These notes bear interest at 10% and were priced at 99.225% to yield 10.125%. We received net proceeds of approximately $150.0 million from the offering of these notes, after deducting underwriters' discounts and estimated expenses of the offering. We applied a portion of the net proceeds to repay approximately $33.3 million of outstanding indebtedness under the Master Shelf Agreement, on which pre-tax make-whole payments of $1.1 million were also paid. The remaining proceeds of approximately $115.6 million were used to repay a portion of the outstanding indebtedness under our Revolving Credit Facility. We are in the process of making a registered Exchange Offer to the private noteholders to exchange these privately placed notes for registered publicly tradable notes under the same terms and conditions. EXTRAORDINARY ITEM - EARLY EXTINGUISHMENT OF DEBT In addition to the $1.1 million make-whole payment incurred in connection with the repayments under the Master Shelf Agreement, we incurred an additional $700,000 in fees and expenses related to these prepayments as well as prepayments of a portion of the 1995 Senior Notes and the prepayment of the 1993 Senior Notes. The total costs incurred of approximately $1.8 million, net of a tax benefit of $700,000, were reflected as an extraordinary loss on early extinguishment of debt in the second quarter of 1999. The net extraordinary loss of $1.1 million resulted in an increase in loss per share of common stock - assuming dilution of $.03. EARNINGS (LOSS) PER SHARE OF COMMON STOCK Earnings per share of common stock is computed by dividing income attributable to common stock by the weighted average shares of common stock outstanding. In addition, earnings per share of common stock - assuming dilution is computed by dividing income attributable to common stock by the weighted average shares of common stock outstanding as adjusted for potential common shares. Income attributable to common stock is income less preferred stock dividends. We declared preferred stock dividends of $2.6 million and $7.8 million, respectively, for both of the three and nine month periods ended September 30, 1999 and 1998. Common stock options, which are potential common shares, had a dilutive effect on earnings and increased the weighted average shares of common stock outstanding by 1,301 for the nine month periods ended September 30, 1998. Common stock options were anti-dilutive for the three month periods ended September 30, 1998 and 1999 and the nine month period ended September 30, 1999, and were not included in the calculation of earnings per share. The numerators and the denominators for the three and nine month periods ended September 30, 1999 and 1998 are not adjusted to reflect our outstanding $2.625 Cumulative Convertible Preferred Stock. These shares are antidilutive as the incremental shares available upon conversion result in an increase in earnings per share or decrease in the loss per share, after giving effect to the dividend requirements. 7 ASSET SALES Giddings. In April 1999, we sold our Giddings gathering system in Texas to GPM Gas Corporation, a business unit of Phillips Petroleum Company. This transaction had an effective date of January 1, 1999. The proceeds from this sale were $36.0 million. This sale resulted in an approximate pre-tax loss of $6.6 million in the second quarter of 1999, subject to final accounting adjustment. Katy. Effective April 30, 1999, we sold all the stock of our wholly owned subsidiary, Western Gas Resources Storage, Inc., to the Aquila Energy Corporation, a business unit of Utilicorp United, for gross proceeds of $100.0 million. The sole asset of this subsidiary was the Katy Hub and Gas Storage Facility. This transaction resulted in an approximate pre-tax loss of $16.6 million, in the second quarter of 1999, subject to final accounting adjustments. In April 1999, we also sold 5.1 Bcf of stored gas in the Katy facility to the same purchaser for total sales proceeds of $11.7 million, which approximated our cost of the inventory. To meet the needs of our marketing operations, we will continue to contract for storage capacity. Accordingly, we entered into a long- term agreement with the purchaser for approximately 3 Bcf of storage capacity at market rates. MiVida. In June 1999, we sold our MiVida treating facility for gross proceeds of $12.0 million. This transaction resulted in an approximate pre-tax gain of $1.2 million in the second quarter of 1999, subject to final accounting adjustments. The proceeds from all of these sales were used to reduce borrowings outstanding under the revolving credit facility. SUPPLEMENTARY CASH FLOW INFORMATION Interest paid was $21.6 million and $26.5 million, respectively, for the nine months ended September 30, 1999 and 1998. No income taxes were paid for the nine months ended September 30, 1999 and 1998, respectively. SEGMENT REPORTING We operate in four principal business segments, as follows: Gas Gathering and Processing, Producing Properties, Marketing and Transmission. These segments are separately monitored by management for performance against its internal forecasts and are consistent with our internal financial reporting package. These segments have been identified based upon the differing products and services, regulatory environment and the expertise required for these operations. The Gas Gathering and Processing segment connects producers' wells to its gathering systems for delivery to its processing or treating plants, processes the natural gas to extract NGLs and treats the natural gas in order to meet pipeline specifications. The residue gas and NGLs extracted at the processing facilities are sold by the Marketing segment. The activities of the Producing Properties segment include the exploration and development of oil and gas producing properties in basins where our facilities are located. The majority of the gas and oil produced from these properties is sold by the Marketing segment. The Marketing segment buys and sells gas and NGLs nationwide and in Canada, providing storage, transportation, scheduling, peaking and other services to our customers. In addition, this segment also markets gas and NGLs produced by our facilities. The gains and losses from any hedges on equity gas and NGL volumes are included in this segments' results. The operations associated with the Katy Facility and the loss from the sale of this facility are included in the Marketing segment, as are our Canadian marketing operations (which are immaterial for separate presentation). The Transmission segment reflects the operations of our MIGC and MGTC pipelines. The majority of the revenue presented in this segment is derived from transportation of residue gas. 8 The following table sets forth our segment information as of and for the three and nine month periods ended September 30, 1999 and 1998 (dollars in thousands). Due to our integrated operations, the use of allocations in the determination of business segment information is necessary. Intersegment revenues are valued at prices comparable to those of unaffiliated customers.
Gas Gathering Elim- and Producing Trans- inating Processing Properties Marketing mission Corporate Entries Total ---------- ---------- --------- ------- --------- --------- -------- Three months ended September 30, 1999 Revenues from unaffiliated customers.............................. $ 10,231 $ (18) $ 492,135 $ 1,706 $ 1,037 $ (12) $505,079 Interest income........................ - - 4 - 6,114 (5,975) 143 Other, net............................. 616 24 (285) - - - 355 Intersegment sales..................... 111,630 9,565 24,784 4,012 - (149,991) - ---------- ---------- --------- ------- --------- --------- -------- Total revenues......................... 122,477 9,571 516,638 5,718 7,151 (155,978) 505,577 ---------- ---------- --------- ------- --------- --------- -------- Product purchases...................... 81,254 551 519,456 91 (19) (145,087) 456,246 Plant operating expense................ 13,783 621 143 2,951 163 (565) 17,096 Oil and gas exploration and production expense................. - 2,343 - - 3 - 2,346 ---------- ---------- --------- ------- --------- --------- -------- Operating margin....................... $ 27,440 $ 6,056 $ (2,961) $ 2,676 $ 7,004 $ (10,326) $ 29,889 ========== ========== ========= ======= ========= ========= ======== Depreciation, depletion and amortization........................... 8,198 3,284 41 324 1,180 68 13,095 Interest expense....................... 9,365 Selling and administrative expense..... 5,759 -------- Income before income taxes............. $ 1,670 ======== Identifiable assets.................... $ 523,928 $ 96,127 $ 88 $67,892 $ 37,252 $ - $725,287 ========== ========== ========= ======= ========= ========= ======== Gas Gathering Elim- and Producing Trans- inating Processing Properties Marketing mission Corporate Entries Total ---------- ---------- --------- ------- --------- --------- -------- Three months ended September 30, 1998 Revenues from unaffiliated customers.............................. $ 9,987 $ 593 $ 504,384 $ 559 $ 332 $ 69 $515,924 Interest income........................ 1 - - - 7,380 (7,204) 177 Other, net............................. (37) - 195 - - - 158 Intersegment sales..................... 103,367 4,916 17,390 2,858 - (128,531) - ---------- ---------- --------- ------- --------- --------- -------- Total revenues......................... 113,318 5,509 521,969 3,417 7,712 (135,666) 516,259 ---------- ---------- --------- ------- --------- --------- -------- Product purchases...................... 83,441 301 511,941 35 (635) (125,716) 469,367 Plant operating expense................ 20,646 314 1,771 2,216 129 (2,818) 22,258 Oil and gas exploration and production expense................. 1 1,909 118 - (1) 23 2,050 ---------- ---------- --------- ------- --------- --------- -------- Operating margin....................... $ 9,230 $ 2,985 $ 8,139 $ 1,166 $ 8,219 $ (7,155) $ 22,584 ========== ========== ========= ======= ========= ========= ======== Depreciation, depletion and amortization........................... 9,563 2,287 1,047 253 1,161 (34) 14,277 Interest expense....................... 8,969 Selling and administrative expense..... 6,917 -------- (Loss) before income taxes............. $ (7,579) ======== Identifiable assets.................... $ 649,423 $ 108,527 $ 119,735 $56,215 $ 32,793 $ - $966,693 ========== ========== ========= ======= ========= ========= ========
9
Gas Gathering Elim- and Producing Trans- inating Processing Properties Marketing mission Corporate Entries Total ---------- ---------- ---------- ------- --------- --------- ---------- Nine months ended September 30, 1999 Revenues from unaffiliated customers............................. $ 33,362 $ 1,062 $1,347,586 $ 5,402 $ 2,759 $ (41) $1,390,130 Interest income....................... 1 - 28 - 19,422 (19,165) 286 Other, net............................ (4,173) 24 (16,745) - - - (20,894) Intersegment sales.................... 274,835 22,648 63,724 12,194 - (373,401) - ---------- ---------- ---------- ------- --------- --------- ---------- Total revenues........................ 304,025 23,734 1,394,593 17,596 22,181 (392,607) 1,369,522 ---------- ---------- ---------- ------- --------- --------- ---------- Product purchases..................... 209,053 1,450 1,408,636 609 (1,520) (366,804) 1,251,424 Plant operating expense............... 38,703 1,623 1,816 8,322 2,079 (1,928) 50,615 Oil and gas exploration and production expense................ - 5,940 (44) - 133 - 6,029 ---------- ---------- ---------- ------- --------- --------- ---------- Operating margin...................... $ 56,269 $ 14,721 $ (15,815) $ 8,665 $ 21,489 $ (23,875) $ 61,454 ========== ========== ========== ======= ========= ========= ========== Depreciation, depletion and amortization.......................... 23,830 8,553 1,250 844 3,373 - 37,850 Interest expense...................... 25,118 Selling and administrative expense.... 21,711 ---------- (Loss) before income taxes............ $ (23,225) ========== Identifiable assets................... $ 523,928 $ 96,127 $ 88 $67,892 $ 37,252 $ - $ 725,287 ========== ========== ========== ======= ========= ========= ========== Gas Gathering Elim- and Producing Trans- inating Processing Properties Marketing mission Corporate Entries Total ---------- ---------- ---------- ------- --------- --------- ---------- Nine months ended September 30, 1998 Revenues from unaffiliated customers............................. $ 27,938 $ 1,453 $1,545,803 $ 3,879 $ 678 $ 617 $1,580,368 Interest income....................... 1 - - - 26,551 (25,625) 927 Other, net............................ 15,360 703 143 (16) - - 16,190 Intersegment sales.................... 328,670 18,253 61,324 8,346 - (416,593) - ---------- ---------- ---------- ------- --------- --------- ---------- Total revenues........................ 371,969 20,409 1,607,270 12,209 27,229 (441,601) 1,597,485 ---------- ---------- ---------- ------- --------- --------- ---------- Product purchases..................... 257,428 1,021 1,584,718 126 (2,665) (410,793) 1,429,835 Plant operating expense............... 51,624 1,653 4,651 7,533 2,564 (5,106) 62,919 Oil and gas exploration and production expense................ - 4,877 125 - 2 41 5,045 ---------- ---------- ---------- ------- --------- --------- ---------- Operating margin...................... $ 62,917 $ 12,858 $ 17,776 $ 4,550 $ 27,328 $ (25,743) $ 99,686 ========== ========== ========== ======= ========= ========= ========== Depreciation, depletion and amortization.......................... 27,796 8,518 3,139 760 3,494 (102) 43,605 Interest expense...................... 25,265 Selling and administrative expense.... 21,824 ---------- Income before income taxes............ $ 8,992 ========== Identifiable assets................... $ 649,423 $ 108,527 $ 119,735 $56,215 $ 32,793 $ - $ 966,693 ========== ========== ========== ======= ========= ========= ==========
10 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," ("SFAS No. 133") with an effective date for fiscal years beginning after June 15, 1999. In June 1999, FASB issued Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133" ("SFAS No. 137"). SFAS No. 137 amended the earlier statement to defer the effective date one year. The statement will now be effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. We have not yet completed our evaluation of the impact that SFAS No. 133 will have upon our financial statements. When required, we will comply with the accounting and reporting requirements of SFAS No. 133. LEGAL PROCEEDINGS Reference is made to "Part II - Other Information - Item 1. Legal Proceedings," of this Form 10-Q. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS ------------- The following discussion and analysis relates to factors, which have affected our consolidated financial condition and our results of operations for the three and nine month periods ended September 30, 1999 and 1998. Certain prior year amounts have been reclassified to conform to the presentation used in 1999. Reference should also be made to our interim consolidated financial statements and notes thereto included elsewhere in this document. This section, as well as other sections in this Form 10-Q, contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by the use of forward-looking terminology, such as "may," "intend," "will," "expect," "anticipate," "estimate," or "continue" or the negative thereof or other variations thereon or comparable terminology. In addition to the important factors referred to herein, numerous factors affecting the gas processing industry generally and in the specific markets for gas and NGLs in which we operate, could cause actual results to differ materially from those in such forward-looking statements. Results of Operations Three and nine months ended September 30, 1999 compared to the three and nine months ended September 30, 1998 (Dollars in thousands, except per share amounts and operating data).
Three Months Ended Nine Months Ended September 30, September 30, ------------------- Percent ----------------------- Percent 1999 1998 Change 1999 1998 Change -------- -------- ------- ---------- ---------- ------- Financial results: Revenues................................... $505,577 $516,259 (2) $1,369,522 $1,597,485 (14) Gross profit............................... 16,794 8,307 102 23,604 56,081 (58) Net income (loss).......................... 1,058 (4,647) - (15,882) 5,893 - Income (loss) per share of common stock.... (.05) (.23) 78 (.74) (.06) - Income (loss) per share of common stock - assuming dilution..................... (.05) (.23) 78 (.73) (.06) - Net cash (used in) provided by operating activities..................... $ 15,827 $(44,416) - $ 59,575 $ (55,288) - Operating data: Average gas sales (MMcf/D)................. 1,775 2,295 (23) 1,960 2,200 (11) Average NGL sales (MGal/D)................. 2,815 4,345 (35) 2,875 4,540 (37) Average gas prices ($/Mcf)................. $ 2.41 $ 1.90 (27) $ 2.07 $ 2.01 3 Average NGL prices ($/Gal)................. $ .38 $ .25 (52) $ .30 $ .27 11
Net income increased $5.7 million and decreased $21.8 million for the three and nine months ended September 30, 1999, respectively, compared to the same periods in 1998. The increase in net income for the third quarter was primarily due to increased prices, as well as lower operating costs. The decrease for the nine month period was primarily due to losses of $14.2 million associated with the sales of the Giddings gathering systems and the Katy facility, severance charges associated with a corporate restructuring of $700,000 and an extraordinary loss on the early extinguishment of debt of $1.1 million. Also included in the 1998 results was the gain on the sale of the Perkins facility. Revenues from the sale of residue gas decreased approximately $9.9 million to $392.7 million for the quarter ended September 30, 1999 compared to the same period in 1998, as average gas sales volumes decreased 520 MMcf per day to 1,775 MMcf per day and average gas prices increased $.51 per Mcf to $2.41 per Mcf. The decrease in sales volumes was primarily related to the reduction in the sale of residue gas purchased from third parties. The reduction in third party sales was prompted by a continuing reduction in margins obtained on the sale of third party residue gas. Revenues from the sale of residue gas decreased approximately $99.8 million to $1,107.7 million for the nine months ended September 30, 1999 compared to the same period in 1998, as average gas sales volumes decreased 240 MMcf per day to 1,960 MMcf per day and average gas prices increased $.06 per Mcf to $2.07 per Mcf. The decrease in sales volumes was primarily 12 related to the reduction in the sale of residue gas purchased from third parties. The reduction in third party sales was prompted by a continuing reduction in margins obtained on the sale of third party residue gas. Included in the average gas price was approximately $2.0 million and $2.3 million of loss recognized for the three and nine months ended September 30, 1999, respectively, related to futures positions on equity gas volumes. We have entered into futures positions for a portion of our equity gas for the remainder of 1999 and in 2000. See further discussion in "Liquidity and Capital Resources - - Risk Management Activities." Revenues from the sale of NGLs decreased approximately $2.3 million to $97.7 million for the quarter ended September 30, 1999 compared to the same period in 1998 as average NGL sales volumes decreased 1,530 MGal per day to 2,815 MGal per day although average NGL prices increased $.13 per gallon to $.38 per gallon. The decreases in sales volumes were related to a decrease in sales of NGLs purchased from third parties and a decrease in plant sales volumes. Plant NGL sales volumes were largely affected by increased volumes taken in kind and curtailed drilling activity due to low oil prices by a producer behind Midkiff, and the sale of the Edgewood and Giddings facilities. Volumes taken in kind affect sales volumes and revenues but do not materially affect income. Revenues from the sale of NGLs decreased approximately $95.1 million to $237.5 million for the nine months ended September 30, 1999 compared to the same period in 1998 as average NGL sales volumes decreased 1,665 MGal per day to 2,875 MGal per day and average NGL prices increased $.03 per gallon to $.30 per gallon. Plant sales volumes were largely affected by increased volumes taken in kind and curtailed drilling activity due to low oil prices by a producer behind Midkiff, and the sale of the Giddings and Edgewood facilities. Volumes taken in kind affect sales volumes and revenues but do not materially affect income. Included in the average NGL prices was approximately $2.4 million and $4.4 million of loss recognized for the three and nine months ended September 30, 1999, respectively, related to futures positions on equity volumes. We have entered into futures positions for a portion of our equity production for the remainder of 1999 and in 2000. See further discussion in "Liquidity and Capital Resources - Risk Management Activities." Overall, excluding the impact of the plants sold in 1998 and 1999, the production of residue gas and NGLs at our facilities increased in both the three and nine month periods ended September 30, 1999. Other net revenue decreased $36.5 million for the nine months ended September 30, 1999 due to the net losses on the sales of the Katy, Giddings and MiVida assets of $22.3 million in 1999 compared to a $14.9 million gain recognized on the sale of the Perkins facility in March 1998. Product purchases decreased $13.1 million and decreased $178.4 million for the three and nine months ended September 30, 1999, respectively, compared to the same periods in 1998. The decrease in product purchases in both periods is primarily due to a decrease in sales volumes of product purchased from third parties. Overall product purchases as a percentage of residue gas and NGL sales remained the same at 93% for the three and nine months ended September 30, 1999, respectively, as compared to the same periods in 1998. Plant operating expense decreased $5.2 million and $12.3 million, respectively, for the three and nine months ended September 30, 1999 compared to the same periods in 1998. The decreases are primarily due to reductions in labor, increased operational efficiencies and the asset sales. Depreciation, depletion and amortization decreased $1.2 million and $5.8 million for the three and nine month periods ended September 30, 1999, respectively, compared to the same periods in 1998. The decrease is primarily due to a reduction in depreciation of the Bethel facility resulting from an impairment charge recorded in the fourth quarter of 1998 and the sale of assets in 1998 and 1999. Selling and administrative expense decreased $1.2 million for the three months ended September 30, 1999. The decrease was primarily related to reductions in labor, resulting from the sale of assets and reductions in residue gas sales volumes in 1998 and 1999. 13 Liquidity and Capital Resources Our sources of liquidity and capital resources historically have been net cash provided by operating activities, funds available under our financing facilities and proceeds from offerings of debt and equity securities. In the past, these sources have been sufficient to meet our needs and finance the growth of our business. We can give no assurance that the historical sources of liquidity and capital resources will be available for future development and acquisition projects, and we may be required to seek alternative financing sources. In 1998, sources of liquidity included the sales of the Perkins facility and the Edgewood facility and related production. In the second quarter of 1999, we completed the sales of our Giddings, Katy and MiVida facilities. In connection with the sale of Katy, we sold gas held in storage at this facility. The total gross proceeds from these 1999 transactions was $160.0 million. We used the proceeds from these sales to reduce debt. Product prices, sales of inventory, the volumes of natural gas processed by our facilities, the margin on third- party product purchased for resale, as well as the timely collection of our receivables will affect all future net cash provided by operating activities. Additionally, our future growth will be dependent upon obtaining additions to dedicated plant reserves, acquisitions, new project development, marketing, efficient operation of our facilities and our ability to obtain financing at favorable terms. We believe that the amounts available to be borrowed under the Revolving Credit Facility, together with net cash provided by operating activities and the sale of non-strategic assets, will provide us with sufficient funds to connect new reserves, maintain our existing facilities and complete our current capital expenditure program. Depending on the timing and the amount of our future projects, we may be required to seek additional sources of capital. Our ability to secure such capital is restricted by our financing facilities, although we may request additional borrowing capacity from our lenders, seek waivers from our lenders to permit us to borrow funds from third parties, seek replacement financing facilities from other lenders, use stock as a currency for acquisitions, sell existing assets or a combination of such alternatives. While we believe that we would be able to secure additional financing, if required, we can provide no assurance that we will be able to do so or as to the terms of any such financing. We also believe that cash provided by operating activities and amounts available under our Revolving Credit Facility will be sufficient to meet our debt service and preferred stock dividend requirements for the remainder of 1999. Historically, while certain individual plants have experienced declines in dedicated reserves, we have been successful in connecting additional reserves to more than offset the natural declines. There has been a reduction in drilling activity, primarily in basins that produce oil and casinghead gas, from levels that existed in prior years. However, higher gas prices experienced over the last several years, improved technology, e.g., 3-D seismic and horizontal drilling, and increased pipeline capacity from the Rocky Mountain region have stimulated drilling in the Powder River basin and Southwest Wyoming. The overall level of drilling will depend upon, among other factors, the prices for gas and oil, the drilling budgets of third-party producers, the energy policy of the federal government and the availability of foreign oil and gas, none of which is within our control. We have increased our dedicated estimated plant reserves from 2.2 Tcf at December 31, 1993 to 3.1 Tcf at December 31, 1998. On average, over this five year period, including the reserves associated with our joint ventures and partnerships and excluding the facilities sold during this period, we connected new reserves to our facilities to replace approximately 165% of throughput over this period. There is no assurance that we will continue to be successful in replacing the dedicated reserves processed at our facilities. In addition to the registration statement for the Exchange Offer discussed above under "Sale of Senior Subordinated Debt," we have effective shelf registration statements filed with the Commission for an aggregate of $200 million of debt securities and preferred stock, along with the shares of common stock, if any, into which such securities are convertible, and $62 million of debt securities, preferred stock or common stock. 14 Our sources and uses of funds for the nine months ended September 30, 1999 are summarized as follows (In thousands):
Sources of funds: Borrowings under revolving credit facility................ $1,815,500 Proceeds from the dispositions of property and equipment.. 148,100 Proceeds from issuance of long-term debt.................. 155,000 Net cash provided by operating activities................. 59,575 Proceeds from exercise of common stock options............ 54 ---------- Total sources of funds.................................. $2,178,229 ========== Uses of funds: Payments related to long-term debt........................ $2,115,366 Capital expenditures...................................... 49,043 Dividends paid............................................ 12,648 ---------- Total uses of funds..................................... $2,177,157 ==========
Additional sources of liquidity available to us are our inventories of gas and NGLs in storage facilities. We store gas and NGLs primarily to ensure an adequate supply for long-term sales contracts and for resale during periods when prices are favorable. We held gas in storage and in imbalances of approximately 10.9 Bcf at an average cost of $2.18 per Mcf at September 30, 1999 compared to 21.3 Bcf at an average cost of $2.08 per Mcf at September 30, 1998 under storage contracts at various third-party facilities. At September 30, 1999, we had hedging contracts in place for anticipated sales of approximately 10.8 Bcf of stored gas at a weighted average price of $2.38 per Mcf for the stored inventory. We held NGLs in storage of 15,700 MGal, consisting primarily of propane and normal butane, at an average cost of $.36 per gallon and 50,700 MGal at an average cost of $.28 per gallon at September 30, 1999 and 1998, respectively, at various third-party storage facilities. At September 30, 1999, we had no significant hedging contracts in place for anticipated sales of stored NGLs. Capital Investment Program Largely as a result of low commodity prices experienced in the first half of 1999, we have reduced our budget for capital expenditures in 1999 from the levels expended in 1997 and 1998. We expect capital expenditures related to existing operations to be approximately $78.3 million during 1999, consisting of the following: (i) approximately $41.4 million related to gathering, processing and pipeline assets, of which $6.3 million is for maintaining existing facilities; (ii) approximately $33.5 million on exploration and production activities; and (iii) approximately $3.4 million for miscellaneous items. Overall, capital expenditures in the Powder River basin coal bed methane development and in Southwest Wyoming operations represent 57% and 20%, respectively, of the total 1999 budget. As of September 30, 1999, we have expended $49.1 million, consisting of the following: (i) $28.4 million for new connects, system expansions and asset consolidations; (ii) $1.6 million for maintaining existing facilities; (iii) $18.0 million for exploration and production activities; and (iv) $1.1 million related to other miscellaneous items. Powder River Basin - We continue to develop our Powder River basin coal bed methane natural gas gathering system and our coal seam gas reserves in Wyoming. We have acquired drilling rights on 830,000 gross acres (or 425,000 net acres) in the vicinity of known coal bed methane production. We and other operators in the area have established production from wells drilled to depths of 400 to 1,200 feet. Together with our partner, we expect to drill approximately 580 wells in 1999, of which approximately 484 have been drilled through September 30, 1999, all of which are on locations with proven, undeveloped reserves. The average drilling, completion and gathering cost for our coal bed methane wells is approximately $65,000 with proven reserves per well of approximately 320 MMcf. As deeper wells are drilled, the average cost per well is expected to increase. Production of coal bed methane from the Powder River basin has been expanding, and approximately 139 MMcf/D of gas volumes in the third quarter of 1999 were being produced by several operators in the area as compared to 61 MMcf/D in January 1998. Approximately 63% of this production is from acreage equally owned by our partner, Barrett Resources Corporation, and us. We transport most of the coal bed methane gas through our MIGC interstate pipeline located in Wyoming, for redelivery to gas markets in the Rocky Mountain and Midwest regions of the United States. 15 Current drilling schedules on federal acreage are being delayed subject to approval of the Wyodak Environmental Impact Statement. The record decision for this environmental impact statement is expected to be issued in November 1999. The wells expected to be allowed by this environmental impact statement have been permitted. Further drilling permits will require additional environmental studies. However, we can make no assurance as to the timing or conditions of any future studies. Our drilling plans for the years 2000 and 2001 are primarily scheduled on fee and state lands which will not require federal permits. In addition, the Wyoming Department of Environmental Quality is reviewing the water discharge and quality standards in the Powder River basin, and this review is causing a delay in the issuance of water disposal permits. Currently individual well permits are being issued in certain areas. We believe that the conditions under which water disposal permits will be issued will be clarified within the second quarter of 2000. However, we can make no assurance that the conditions under which permits are granted will not impact the level of drilling or the timing of production. In December 1998, we joined with other industry partners to form Fort Union Gas Gathering, L.L.C., which has substantially completed the 106-mile long, 24-inch gathering pipeline and treater to gather and treat natural gas produced in the Powder River basin. We own a 13% equity interest in Fort Union and are the construction manager and field operator. We expect this new gathering pipeline to have an initial capacity of approximately 450 MMcf/D of natural gas with expansion capability. The pipeline became operational in September 1999. Southwest Wyoming - The United States Geologic Survey estimates that the Greater Green River basin contains over 120 Tcf of unrecovered natural gas reserves. Our facilities are located in the Southwest Wyoming portion of this basin. They include the Granger gathering and processing facility and our 72% ownership interest in the Lincoln Road gathering and processing facility. These facilities have a combined operational capacity of 225 MMcf/D and processed an average of 180 MMcf/D in the third quarter of 1999. We believe that as governmental drilling restrictions affecting a portion of our service area in this basin are removed in the first half of 2000, we may have the opportunity to expand these facilities in future years. 16 Financing Facilities Revolving Credit Facility. The Revolving Credit Facility is with a syndicate of banks and provides for a maximum borrowing commitment of $250 million consisting of an $83 million 364-day Revolving Credit Facility, or Tranche A, and a five-year $167 million Revolving Credit Facility, or Tranche B. At September 30, 1999, $29.0 million was outstanding on this facility. The Revolving Credit Facility bears interest at certain spreads over the Eurodollar rate, or the greater of the Federal Funds rate or the agent bank's prime rate. We have the option to determine which rate will be used. We also pay a facility fee on the commitment. The interest rate spreads and facility fee are adjusted based on our debt to capitalization ratio and range from .75% to 2.00%. At September 30, 1999, the interest rate payable on the facility was 6.88%. We are required to maintain a total debt to capitalization ratio of not more than 60% through December 31, 2000 and of not more than 55% thereafter, and a senior debt to capitalization ratio of not more than 40% beginning September 30, 1999 through December 31, 2001 and of not more than 35% thereafter. The agreement also requires a ratio of EBITDA, excluding certain non-recurring items, to interest and dividends on preferred stock as of the end of any fiscal quarter, for the four preceding fiscal quarters, of not less than 1.35 to 1.0 beginning June 30, 1999 and increasing to 3.25 to 1.0 by December 31, 2002. This facility is guaranteed and secured via a pledge of the stock of certain of our subsidiaries. We generally utilize excess daily funds to reduce any outstanding balances on the Revolving Credit Facility and associated interest expense, and we intend to continue such practice. Master Shelf Agreement. In December 1991, we entered into a Master Shelf Agreement with The Prudential Insurance Company of America. Amounts outstanding under the Master Shelf Agreement at September 30, 1999 are as indicated in the following table (dollars in thousands):
Interest Final Issue Date Amount Rate Maturity Principal Payments Due - ----------------------- ---------- ---------- ----------------- ------------------------------------------------------ October 27, 1992 $ 8,334 7.51% October 27, 1999 single payment was made at maturity October 27, 1992 25,000 7.99% October 27, 2003 $8,333 on each of October 27, 2001 through 2003 December 27, 1993 25,000 7.23% December 27, 2003 single payment at maturity October 27, 1994 25,000 9.05% October 27, 2001 single payment at maturity October 27, 1994 25,000 9.24% October 27, 2004 single payment at maturity July 28, 1995 50,000 7.61% July 28, 2007 $10,000 on each of July 28, 2003 through 2007 -------- $158,334 ========
In April 1999, effective January 1999, we amended our agreement with Prudential to reflect the following provisions. We are required to maintain a current ratio, as defined therein, of at least .9 to 1.0, a minimum tangible net worth equal to the sum of $300 million plus 50% of consolidated net earnings earned from January 1, 1999 plus 75% of the net proceeds of any equity offerings after January 1, 1999, a total debt to capitalization ratio of not more than 60% through December 31, 2001 and of not more than 55% thereafter and a senior debt to capitalization ratio of 40% through March 2002 and 35% thereafter. This amendment also requires an EBITDA to interest ratio of not less than 1.75 to 1.0 increasing to a ratio of not less than 3.75 to 1.0 by March 31, 2002 and an EBITDA to interest on senior debt ratio of not less than 1.75 to 1.0 increasing to a ratio of not less than 5.50 to 1.0 by March 31, 2002. EBITDA in these calculations excludes certain non-recurring items. In addition, we are prohibited from declaring or paying dividends that in the aggregate exceed the sum of $50 million plus 50% of consolidated net income earned after June 30, 1995, or minus 100% of a net loss, plus the aggregate net cash proceeds received after June 30, 1995 from the sale of any stock. At September 30, 1999, approximately $25.7 million was available under this limitation. We financed the $8.3 million payment due in October 1999 with amounts available under the Revolving Credit Facility. Borrowings under the Master Shelf Agreement are guaranteed and secured via a pledge of the stock of certain of our subsidiaries. In June 1999, we prepaid approximately $33.3 million of notes outstanding under the Master Shelf Agreement with proceeds from the offering of the Subordinated Notes. 17 1995 Senior Notes. In 1995, we sold $42 million of Senior Notes, the 1995 Senior Notes, to a group of insurance companies with an interest rate of 8.16% per annum. In March 1999, we prepaid $15 million of the principal amount outstanding on the 1995 Senior Notes at par. These payments were financed by a portion of the $37 million Bridge Loan described below and by amounts available under the Revolving Credit Facility. The remaining principal amount outstanding of $27 million is due in a single payment in December 2005. The 1995 Senior Notes are guaranteed and secured via a pledge of the stock of certain of our subsidiaries. This facility contains covenants similar to the Master Shelf Agreement. In the second quarter of 1999, we posted letters of credit for a total of approximately $10.8 million for the benefit of the holders of the 1995 Senior Notes. We are currently paying an annual fee of not more than .65% on the amounts outstanding on the Master Shelf Agreement and the 1995 Senior Notes. This fee will continue until we have received an implied investment grade rating on our senior secured debt. This fee is not assessed on the portion of the 1995 Senior Notes for which letters of credit are posted. 1993 Senior Notes. In 1993, we sold $50 million of 7.65% Senior Notes, the 1993 Senior Notes, to a group of insurance companies. Scheduled annual principal payments of $7.1 million on the 1993 Senior Notes were made on April 30 of 1997 and 1998. In February 1999, we prepaid $33.5 million of the total principal amounts outstanding of $35.6 million at par. These payments were financed by a portion of the $37 million Bridge Loan. We prepaid the remaining outstanding principal of $2.1 million in April 1999 with amounts available under the Revolving Credit Facility. In connection with the repayments on the Master Shelf Agreement, the 1995 Senior Notes and the 1993 Senior Notes, we incurred approximately $1.8 million of pre- tax yield maintenance and other charges. These charges are reflected as an extraordinary loss from early extinguishment of long-term debt in the second quarter of 1999. Bridge Loan. In February 1999, in order to finance prepayments of amounts outstanding on the 1993 and 1995 Senior Notes, we entered into a Bridge Loan agreement in the amount of $37 million with our agent bank. This facility was paid in full in April 1999 with proceeds from the sale of the Katy facility. Senior Subordinated Notes. In June 1999, we sold $155.0 million of Senior Subordinated Notes in a private placement. The Subordinated Notes bear interest at 10% and were priced at 99.225% to yield 10.125%. These notes contain maintenance covenants which include limitations on debt incurrence, restricted payments, liens and sales of assets. The Subordinated Notes are unsecured and are guaranteed on a subordinated basis by certain of our subsidiaries. We are in the process of making a registered Exchange Offer to the private noteholders to exchange these privately placed notes for registered publicly tradable notes under the same terms and conditions. Covenant Compliance. Taking into account all the covenants contained in these agreements, we had approximately $124.0 million of available borrowing capacity at September 30, 1999. In the second quarter of 1999, we amended our various financing facilities providing for financial flexibility and covenant modifications and issued the Subordinated Notes. These amendments were needed given the depressed commodity pricing experienced in the industry in general at that time and the disappointing results at our Bethel Treating facility. We can provide no assurance that further amendments or waivers can be obtained in the future, if necessary, or that the terms would be favorable to us. To strengthen our credit ratings and to reduce our overall debt outstanding, we will continue to dispose of non-strategic assets and investigate alternative financing sources including the issuance of public debt, project-financing, joint ventures and operating leases. 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amended report to be signed on its behalf by the undersigned, thereunto duly authorized. WESTERN GAS RESOURCES, INC. --------------------------- (Registrant) Date: November 24, 1999 By: /s/ LANNY F. OUTLAW ------------------------------------- Lanny F. Outlaw Chief Executive Officer and President Date: November 24, 1999 By: /s/ WILLIAM J. KRYSIAK -------------------------------------- William J. Krysiak Vice President - Finance (Principal Financial and Accounting Officer) 19 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1999 SEP-30-1999 5,472 0 220,069 0 39,983 265,524 990,653 (297,628) 1,038,541 275,449 369,333 3,218 0 416 351,309 1,038,541 1,381,366 1,369,522 1,257,453 1,257,453 110,176 0 25,118 (23,225) 8,450 (14,775) 0 (1,107) 0 (15,882) (.74) (.74)
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