-----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, SfAwm+qvkMJt6dxlqPVlTbecRFQAV6jXLOHN13QZUx24O3QnJKAX3eEFI9u3jbtq 5VtqPuX9LzDa0CoWwJwRcw== 0000950152-95-002601.txt : 19951119 0000950152-95-002601.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950152-95-002601 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELDEN & BLAKE CORP /OH/ CENTRAL INDEX KEY: 0000880114 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 341686642 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20100 FILM NUMBER: 95591024 BUSINESS ADDRESS: STREET 1: 5200 STONEHAM RD STREET 2: P O BOX 2500 CITY: NORTH CANTON STATE: OH ZIP: 44720 BUSINESS PHONE: 2164991660 MAIL ADDRESS: STREET 1: 5200 STONEHAM RD STREET 2: P O BOX 2500 CITY: NORTH CANTON STATE: OH ZIP: 44720 10-Q 1 BELDEN & BLAKE 10-Q 1 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 period ended September 30, 1995 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: 0-20100 BELDEN & BLAKE CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 34-1686642 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5200 Stoneham Road North Canton, Ohio 44720 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (216) 499-1660 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Number of common shares of Belden & Blake Corporation Outstanding as of November 7, 1995 11,136,496 2 BELDEN & BLAKE CORPORATION INDEX
Page ---- PART I Financial Information: - ------ Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 1995 and 1 December 31, 1994 Consolidated Statements of Operations for the three and 3 nine months ended September 30, 1995 and 1994 Consolidated Statements of Shareholders' Equity as of 4 September 30, 1995 and December 31, 1994 and 1993 Consolidated Statements of Cash Flows for the nine 5 months ended September 30, 1995 and 1994 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition 9 and Results of Operations PART II Other Information - -------- Item 6. Exhibits and Reports on Form 8-K 15
3 BELDEN & BLAKE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, 1995 1994 ---------------- ---------------- (UNAUDITED) ASSETS CURRENT ASSETS Cash and cash equivalents $ 17,970,734 $ 3,649,005 Accounts receivable, net 23,953,108 13,068,663 Inventories 8,356,575 6,676,884 Deferred income taxes 1,847,495 1,741,093 Other current assets 4,007,406 956,699 ---------------- ---------------- TOTAL CURRENT ASSETS 56,135,318 26,092,344 PROPERTY AND EQUIPMENT Oil and gas properties (successful efforts method) 224,386,856 122,279,367 Gas gathering systems 25,225,935 18,120,365 Land, buildings, machinery and equipment 27,990,112 19,564,247 ---------------- ---------------- 277,602,903 159,963,979 Less accumulated depreciation, depletion and amortization 53,359,944 40,788,899 ---------------- ---------------- PROPERTY AND EQUIPMENT, NET 224,242,959 119,175,080 OTHER ASSETS 8,433,733 2,905,371 ---------------- ---------------- $ 288,812,010 $ 148,172,795 ================ ================
The balance sheet at December 31, 1994 has been derived from the audited financial statements at that date but does not include all of the information and footnotes generally required by genarally accepted accounting principles for complete financial statements. See accompanying notes. 1 4 BELDEN & BLAKE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, 1995 1994 ---------------- ---------------- (UNAUDITED) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 8,266,375 $ 3,593,811 Accrued expenses 19,711,444 8,440,315 Current portion of long-term liabilities 2,002,918 447,257 ---------------- ---------------- TOTAL CURRENT LIABILITIES 29,980,737 12,481,383 LONG-TERM LIABILITIES Senior notes 35,000,000 35,000,000 Convertible subordinated debentures 7,250,000 7,350,000 Bank and other long-term debt 67,158,603 4,239,682 Capitalized lease obligations 398,759 645,314 Other 968,124 623,162 ---------------- ---------------- TOTAL LONG-TERM LIABILITIES 110,775,486 47,858,158 DEFERRED INCOME TAXES 7,937,565 6,691,408 SHAREHOLDERS' EQUITY Common stock without par value; $.10 stated value per share; authorized 12,000,000 shares; issued and outstanding 11,136,496 and 7,084,737 shares 1,113,650 708,474 Preferred stock without par value; $100 stated value per share; authorized 8,000,000 shares; issued and outstanding 24,000 shares 2,400,000 2,400,000 Paid in capital 126,185,380 70,378,839 Retained earnings 10,554,145 7,879,483 Unearned portion of restricted stock (134,953) (224,950) ---------------- ---------------- TOTAL SHAREHOLDERS' EQUITY 140,118,222 81,141,846 ---------------- ---------------- $ 288,812,010 $ 148,172,795 ================ ================
The balance sheet at December 31, 1994 has been derived from the audited financial statements at that date but does not include all of the information and footnotes generally required by generally accepted accounting principles for complete financial statements. See accompanying notes. 2 5 BELDEN & BLAKE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 1995 1994 1995 1994 --------------- --------------- --------------- --------------- REVENUES Oil and gas sales $ 12,949,105 $ 8,069,062 $ 31,923,560 $ 24,616,133 Gas marketing and gathering 9,211,521 8,397,772 26,916,529 26,123,864 Oilfield sales and service 6,200,276 3,897,631 12,455,363 9,014,437 Contract claim income 1,342,900 -- 1,342,900 -- Interest and other 330,710 269,591 744,681 400,903 --------------- --------------- --------------- --------------- 30,034,512 20,634,056 73,383,033 60,155,337 EXPENSES Production expense 4,384,069 2,379,177 9,694,939 6,946,510 Cost of gas and gathering expense 7,506,660 7,191,187 22,759,257 22,875,597 Oilfield sales and service 5,587,079 3,628,555 11,654,140 8,618,137 Exploration expense 1,578,620 732,366 3,392,272 1,995,031 General and administrative expense 1,052,576 1,008,679 3,066,402 3,164,317 Interest expense 1,560,761 876,343 4,013,240 2,659,522 Depreciation, depletion and amortization 5,468,878 3,018,151 12,844,420 9,001,245 --------------- --------------- --------------- --------------- 27,138,643 18,834,458 67,424,670 55,260,359 --------------- --------------- --------------- --------------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 2,895,869 1,799,598 5,958,363 4,894,978 Provision for income taxes 1,062,825 644,576 2,194,547 1,821,805 --------------- --------------- --------------- --------------- NET INCOME FROM CONTINUING OPERATIONS 1,833,044 1,155,022 3,763,816 3,073,173 NET LOSS FROM DISCONTINUED OPERATIONS (678,102) (75,085) (954,154) (81,069) --------------- --------------- --------------- --------------- NET INCOME $ 1,154,942 $ 1,079,937 $ 2,809,662 $ 2,992,104 =============== =============== =============== =============== NET INCOME PER COMMON SHARE CONTINUING OPERATIONS $ 0.18 $ 0.16 $ 0.45 $ 0.41 DISCONTINUED OPERATIONS (0.07) (0.01) (0.12) (0.01) --------------- --------------- --------------- --------------- $ 0.11 $ 0.15 $ 0.33 $ 0.40 =============== =============== =============== =============== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 9,741,156 7,084,737 7,992,704 7,078,707 ============== =============== =============== ==============
Prior periods have been restated to reflect the Company's wholly-owned subsidiary, EPS, as discontinued operations. See accompanying notes. 3 6 BELDEN & BLAKE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
UNEARNED COMMON COMMON PREFERRED PAID-IN RETAINED RESTRICTED SHARES STOCK STOCK CAPITAL EARNINGS STOCK TOTAL ---------- ---------- ---------- ---------- ---------- ---------- ---------- JANUARY 1, 1993 3,355,241 $ 335,524 $2,400,000 $25,550,711 $ 1,176,536 $(440,000) $ 29,022,771 Stock issued 60,000 6,000 491,150 497,150 Stock issued 168,000 16,800 1,658,702 1,675,502 Stock issued 3,450,000 345,000 41,817,720 42,162,720 Net income 3,220,026 3,220,026 Preferred stock dividend (180,000) (180,000) Employee stock bonus 22,325 2,232 237,762 239,994 Restricted stock grant 108,999 110,000 218,999 Other (2,485) (248) 248 -- - ---------------------------------------------------------------------------------------------------------------------------------- DECEMBER 31, 1993 7,053,081 705,308 2,400,000 69,865,292 4,216,562 (330,000) 76,857,162 Stock issued 31,656 3,166 384,622 387,788 Net income 3,842,921 3,842,921 Preferred stock dividend (180,000) (180,000) Restricted stock grant 128,925 105,050 233,975 - ---------------------------------------------------------------------------------------------------------------------------------- DECEMBER 31, 1994 7,084,737 708,474 2,400,000 70,378,839 7,879,483 (224,950) 81,141,846 Stock issued 4,025,000 402,500 55,387,490 55,789,990 Stock issued 3,000 300 43,580 43,880 Stock options exercised 2,250 225 25,244 25,469 Net income 2,809,662 2,809,662 Preferred stock dividend (135,000) (135,000) Employee stock bonus 21,509 2,151 250,580 252,731 Restricted stock grant 99,647 89,997 189,644 - ---------------------------------------------------------------------------------------------------------------------------------- (UNAUDITED) SEPTEMBER 30, 1995 11,136,496 $1,113,650 $2,400,000 $ 126,185,380 $10,554,145 $(134,953) $140,118,222 ==================================================================================================================================
See accompanying notes. 4 7 BELDEN & BLAKE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, ---------------------------------------- 1995 1994 ------------------ ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,809,662 $ 2,992,104 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 13,261,382 9,089,916 Loss on disposal of property and equipment 182,720 77,783 Deferred income taxes 1,139,755 1,268,034 Deferred compensation and stock grants 790,255 156,392 Change in operating assets and liabilities, net of effects of purchases of businesses: Accounts receivable (7,858,336) (2,103,296) Inventories 942,986 (1,250,389) Other operating assets (3,378,637) (266,780) Accounts payable and accrued expenses 7,009,444 2,537,140 ------------------ ----------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 14,899,231 12,500,904 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of businesses, net of cash acquired (90,097,695) (16,960,021) Proceeds from property and equipment disposals 182,601 188,534 Additions to property and equipment (14,042,121) (12,893,901) (Increase) decrease in other assets (1,075,693) 12,497 ------------------ ----------------- NET CASH USED IN INVESTING ACTIVITIES (105,032,908) (29,652,891) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving line of credit and long-term debt 66,000,000 2,100,000 Repayment of long-term debt (17,007,852) (412,476) Repayment of capital lease obligations (261,084) (226,874) Proceeds from sale of common stock 59,438,099 -- Common stock placement cost (3,578,757) -- Preferred stock dividends (135,000) (135,000) ------------------ ----------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 104,455,406 1,325,650 ------------------ ----------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 14,321,729 (15,826,337) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,649,005 22,244,231 ------------------ ----------------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 17,970,734 $ 6,417,894 ================== ================= CASH PAID DURING THE PERIOD FOR: Interest $ 3,935,857 $ 2,732,509 Income taxes, net of refunds received 599,381 (130,637) NON-CASH INVESTING AND FINANCING ACTIVITIES: Acquisition of assets in exchange for debt 15,394,044 -- Acquisition of assets in exchange for other long-term obligations -- 498,499 Acquisition of assets in exchange for stock -- 387,788 Sale of assets in exchange for notes receivable -- 689,289
See accompanying notes. 5 8 BELDEN & BLAKE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (UNAUDITED) SEPTEMBER 30, 1995 - ------------------------------------------------------------------------------- (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Belden & Blake Corporation and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1995 are not necessarily indicative of the results that may be expected for the year ended December 31, 1995. For further information, refer to the consolidated financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended December 31, 1994. (2) ACQUISITIONS In September 1995, the Company purchased from Savoy Oil & Gas, Inc., a privately owned independent energy company headquartered in Traverse City, Michigan, oil and gas properties in northern Michigan with estimated proved developed reserves, associated with 24 Antrim Shale wells, of 11 Bcf (billion cubic feet) of natural gas net to the Company's interest. The Company's average working interest in these wells is 78 percent and account for approximately half of the purchase price of $10.3 million. The remainder of the purchase price is associated with the Company's 94% working interest in undeveloped well locations on approximately 17,000 leasehold acres. The pro forma results of these properties, if reported, would not be materially different from results of operations as reported. In September 1995, the Company purchased oil and gas properties located in Ohio from KST Oil & Gas Co., Inc. ("KST") for $8.6 million. In aggregate, the Company acquired an average working interest of 60% in approximately 511 wells. The wells had estimated proved developed reserves of 8.8 billion cubic feet equivalent of natural gas at December 31, 1994. Approximately $5.3 million of the purchase price was allocated to the purchase of the reserves. The purchase also included approximately 125 miles of gathering systems. In July 1995, the Company purchased from Quaker State Corporation most of its oil and gas properties and related assets in the Appalachian Basin (the "Quaker State Properties") for approximately $50 million. The Quaker State Properties include approximately 1,460 gross (1,100 net) wells with estimated proved reserves of 2.2 MMBbl (million barrels) of oil and 46.8 Bcf of gas at December 31, 1994, approximately 250 miles of gas gathering systems, undeveloped oil and gas leases and fee mineral interests covering approximately 250,000 acres, an extensive geologic and geophysical database and other assets. In May 1995, the Company purchased an average working interest of 78% in 239 wells located in New York and Pennsylvania from U.S. Energy Development Corporation ("USE"), a privately-held company, for $4.2 million. The interests acquired had estimated proved developed reserves of 6.2 Bcf of 6 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) ------------------------------------------------------ gas and 24,300 Bbls (barrels) of oil at December 31, 1994. The Company has since assumed operations of the wells. In March 1995, the Company purchased all the producing properties of The East Ohio Gas Company ("EOG") for $6.5 million. The assets acquired include a 100% working interest in 378 natural gas wells and drilling rights on more than 250,000 acres of adjacent properties. A substantial majority of the wells acquired are adjacent to properties currently being operated by the Company. The wells had estimated proved reserves of 8.5 Bcf of natural gas and 80,000 Bbls of oil at December 31, 1994. In January 1995, the Company purchased Ward Lake Drilling, Inc. ("Ward Lake"), a privately-held exploration and production company headquartered in Gaylord, Michigan, for $15.1 million. Ward Lake operates and holds a production payment interest and working interests averaging 13.6% in approximately 500 Antrim Shale gas wells located in Michigan's lower peninsula. The purchase also included approximately 5,500 undeveloped leasehold acres that Ward Lake owns in Michigan. At December 31, 1994, the wells had estimated proved developed natural gas reserves totaling 98 Bcf (14 Bcf net to the Company's interest). Approximately one half of the purchase price represented payment for the proved reserves, with the balance associated with other oil and gas and corporate assets. The following table presents the unaudited pro forma results of operations for the three and nine months ended September 30, 1995 and 1994 as if the acquisition of the Quaker State Properties, Ward Lake, KST, EOG and USE and the common stock offering completed in August 1995 had occurred on January 1, 1994.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------- ------------------------- PRO FORMA PRO FORMA 1995 1994 1995 1994 ----------- ----------- -------- ---------- (in thousands except per share data) Total revenues $ 30,449 $ 29,062 $ 88,173 $ 85,439 Net income from continuing operations 1,879 3,102 7,175 8,915 Net income per share - continuing operations $ .16 $ .28 $ .63 $ .79 Weighted average common shares outstanding 11,132 11,110 11,129 11,105
Through the third quarter of 1995, the Company purchased additional working interests averaging 24% in the wells operated by Ward Lake for approximately $12 million. The interests acquired had estimated proved developed reserves of 16 Bcf at December 31, 1994. The interests acquired also qualify for tax credits that may be available to offset a portion of the Company's federal income tax liability through 2002. (3) SHAREHOLDERS' EQUITY In August 1995, the Company sold 4,025,000 shares of Common Stock at $14.75 per share ($13.93 net after underwriting commissions and discounts), Net proceeds, after deducting underwriting discounts and expenses, totaled approximately $55.8 million. 7 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) ------------------------------------------------------ Approximately $50 million of the net proceeds were used to purchase the Quaker State Properties, and the remaining proceeds were used to reduce the outstanding balance under the Company's revolving credit agreement, under which $35 million was outstanding at July 31, 1995. (4) CONTRACT CLAIMS The Company has a claim in the Columbia Gas Transmission Corporation ("Columbia") bankruptcy reorganization proceedings arising from the rejection of certain contracts for the purchase of natural gas. In Columbia's Amended Plan of Reorganization dated April 17, 1995, Columbia scheduled proposed allowed amounts for the Company of approximately $2 million. The anticipated payout amount currently stated in Columbia's reorganization plan is approximately sixty-eight (68%) of such proposed allowed amount. In the third quarter of 1995 the Company recognized $1.3 million of these anticipated proceeds. The Company believes that Columbia's proposed allowed amount is inadequate and intends to pursue the recovery of a greater amount from Columbia and anticipates hearings with respect to its claims to take place in early 1996, but the exact amount of any additional recovery has not been determined. (5) DISCONTINUED OPERATIONS The Company plans to sell Engine Power Systems, Inc. (EPS), a wholly-owned subsidiary. EPS is engaged in engine sales and system packaging for power generation, co-generation, gas compression and air compression applications. The Company acquired EPS in February 1994 with the objectives of increasing its vertical integration in gas marketing and strengthening its gas marketing capability. The decision to sell EPS was made in September, 1995 and resulted in a loss from discontinued operations, net of income tax, of $678,102 in the third quarter to account for operating losses, the write-down of various assets and inventories to estimated realizable value and to provide for the estimated costs related to asset disposals and future losses prior to the sale. The loss from discontinued operations through the first nine months of 1995 was $954,154 net of income taxes.
Three months Nine months ended ended September 30, September 30, 1995 1995 -------------- ------------ Loss from operation of discontinued segment $ (270,003) $ (701,335) Income tax (97,201) (252,481) -------------- ------------ (172,802) (448,854) Loss on disposal of segment (789,531) (789,531) Income tax (284,231) (284,231) -------------- ------------ (505,300) (505,300) -------------- ------------ Net loss from discontinued operations $ (678,102) $ (954,154) ============== ============
8 11 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS ------------------------- RESULTS OF OPERATIONS - THIRD QUARTERS OF 1995 AND 1994 COMPARED OIL AND GAS SALES. Oil and gas sales increased $4.9 million (60%) in the third quarter of 1995 compared to the same period of 1994 due primarily to an increase in oil and gas volumes sold. The increase was partially offset by the lower average prices paid for the Company's oil and natural gas. Oil volumes increased 44,924 Bbls (37%) from 120,291 Bbls in the third quarter of 1994 to 165,215 Bbls in the third quarter of 1995 resulting in an increase in oil sales of approximately $780,000. Gas volumes increased 2.4 Bcf (95%) from 2.5 Bcf in the third quarter of 1994 to 4.9 Bcf in the third quarter of 1995 resulting in an increase in gas sales of approximately $5.7 million. These volume increases were primarily due to the Company's 1995 acquisitions and production from wells drilled in 1994 and 1995. These volume increases were partially offset by curtailed gas production due to lower spot market gas prices and by interstate pipeline repairs and construction. The average price paid for the Company's oil decreased from $17.26 per barrel in the third quarter of 1994 to $16.27 per barrel in the third quarter of 1995 which reduced oil sales by approximately $160,000. The average price paid for the Company's natural gas decreased $.30 per Mcf to $2.11 per Mcf in the third quarter of 1995 compared to the third quarter of 1994 which decreased gas sales in the third quarter of 1995 by approximately $1.4 million. The decrease in the average gas price was largely the result of lower gas prices received on the Company's recently acquired Michigan production and production from the Quaker State Properties. GAS MARKETING AND GATHERING REVENUE. Gas marketing and gathering revenue increased $813,749 (10%) in the third quarter of 1995 compared with 1994 primarily due to an increase in volumes purchased from third parties and resold. The increase was partially offset by a lower average selling price. OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service revenue increased $2.3 million (59%) from $3.9 million in the third quarter of 1994 to $6.2 million in the third quarter of 1995. This increase was primarily due to the sales generated by the three oilfield service companies acquired by the Company in 1994 and three oilfield sales and service companies acquired in 1995. CONTRACT CLAIM INCOME. Revenue increased $1.3 million in the third quarter of 1995 due to the recognition of anticipated proceeds from contract rejection claims that have been filed in the bankruptcy proceedings of Columbia Gas Transmission Corporation. See Note 4 - "Contract Claims". INTEREST AND OTHER REVENUE. Interest and other revenue increased $61,119 (23%) from $269,591 in the third quarter of 1994 to $330,710 in the third quarter of 1995 due to the recognition of income in 1995 from an incentive production payment associated with certain properties operated by Ward Lake. PRODUCTION EXPENSE. Production expense increased from $2.4 million in the third quarter of 1994 to $4.4 million in the third quarter of 1995. This increase was largely due to the increased production volumes discussed above. The average production cost in the third quarter of 1995 was $.75 per Mcfe (equivalent Mcf of natural gas) compared to $.74 per Mcfe in the third quarter of 1994. 9 12 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS (CONTINUED) ------------------------------------- COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense in the third quarter of 1995 increased $315,473 (4%) compared with the third quarter of 1994 primarily due to an increase in volumes purchased from third parties and resold. The increase was partially offset by a lower average purchase price. OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service expense increased $2.0 million (54%) from $3.6 million in the third quarter of 1994 to $5.6 million in the third quarter of 1995 primarily as a result of the increased cost of goods sold and expenses associated with increased sales made by the acquisitions described above. EXPLORATION EXPENSE. Exploration expense increased $846,254 (116%) from $732,366 in the third quarter of 1994 to $1.6 million in the third quarter of 1995 primarily due to increases in the size of the technical staff and higher levels of geological and geophysical activity. GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense in the third quarter of 1995 was consistent with the third quarter of 1994, notwithstanding the continued growth of the Company. INTEREST EXPENSE. Interest expense increased from $876,343 in the third quarter of 1994 to $1.6 million in the third quarter of 1995. This increase was primarily due to a $65 million increase in bank and other long-term debt incurred to finance the 1995 acquisitions (Note 2 - "Acquisitions"). DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and amortization increased by $2.5 million (81%) in the third quarter of 1995 compared to the third quarter of 1994. This increase was primarily due to additional depletion expense associated with the production volumes described above. INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES. Income from continuing operations before income taxes increased $1.1 million (61%) from $1.8 million in the third quarter of 1994 to $2.9 million in the third quarter of 1995. The oil and gas operations segment increased operating income $1.5 million (68%) from $2.3 million in 1994 to $3.8 million in 1995. The increase was attributable to the Columbia contract claim and other items discussed above. The oilfield sales and service segment operating income increased $195,102 from an operating income of $153,894 in 1994 to $348,996 in 1995. The increase was attributable to the items discussed above. NET INCOME FROM CONTINUING OPERATIONS. Net income from continuing operations for the third quarter of 1995 was $1.8 million compared to $1.2 million in the third quarter of 1994. This increase in net income was primarily the result of the items discussed above. Provision for income taxes from continuing operations increased from $644,576 in the third quarter of 1994 to $1.1 million in the third quarter of 1995 due to the increase in income from continuing operations before income taxes. Net income from continuing operations on a per share basis increased from $.16 per share in the third quarter of 1994 to $.18 per share in the third quarter of 1995. This increase was primarily the result of the factors discussed above. 10 13 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS (CONTINUED) ------------------------------------- NET LOSS FROM DISCONTINUED OPERATIONS. Net loss from discontinued operations (net of tax benefit) for the third quarter of 1995 was $678,102 compared to $75,085 in the third quarter of 1994. The loss in the third quarter of 1995 includes the write-down of various assets and inventories to estimated realizable value and a provision for estimated costs of asset disposals and future losses related to the Company's decision to sell EPS. RESULTS OF OPERATIONS - NINE MONTHS OF 1995 AND 1994 COMPARED OIL AND GAS SALES. Oil and gas sales increased $7.3 million (30%) in the first nine months of 1995 compared to the same period of 1994 due primarily to an increase in oil and gas volumes sold and a higher average price paid for the Company's oil which more than offset a lower average price paid for the Company's natural gas. Oil volumes increased 34,950 Bbls (9%) from 372,098 Bbls to 407,048 Bbls in the first nine months of 1995 resulting in an increase in oil sales of approximately $560,000. Gas volumes increased 3.9 Bcf (54%) from 7.2 Bcf in the first nine months of 1994 to 11.1 Bcf in the first nine months of 1995 resulting in an increase in gas sales of approximately $10.1 million. The gas volume increase was primarily due to the Company's 1995 acquisitions and production from wells drilled in 1994 and 1995. These volume increases were partially offset by curtailed gas production due to lower spot market gas prices and by interstate pipeline repairs and construction. The average price paid for the Company's oil increased from $15.85 per barrel in the first nine months of 1994 to $16.83 per barrel in the first nine months of 1995 which increased oil sales by approximately $400,000. The average price paid for the Company's natural gas decreased $.34 per Mcf to $2.26 per Mcf in the first nine months of 1995 compared to the first nine months of 1994 resulting in decreased gas sales of approximately $3.8 million. GAS MARKETING AND GATHERING REVENUE. Gas marketing and gathering revenue in the first nine months of 1995 was consistent with the same period in 1994. Increased volumes purchased from third parties and resold were offset by a lower average selling price. OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service revenue increased $3.5 million (38%) from $9.0 million in the first nine months of 1994 to $12.5 million in the first nine months of 1995. This increase was primarily due to the sales generated by the three oilfield service companies acquired by the Company in 1994 and three oilfield sales and service companies acquired in 1995. CONTRACT CLAIM INCOME. Revenue increased $1.3 million due to the recognition of anticipated proceeds from contract rejection claims that have been filed in the bankruptcy proceedings of Columbia Gas Transmission Corporation. See Note 4 - "Contract Claims". INTEREST AND OTHER REVENUE. Interest and other revenue increased $343,778 (86%) from $400,903 in the first nine months of 1994 to $744,681 in the first nine months of 1995 primarily due to the recognition of income in 1995 from an incentive production payment associated with certain properties operated by Ward Lake. 11 14 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS (CONTINUED) ------------------------------------- PRODUCTION EXPENSE. Production expense increased from $6.9 million in the first nine months of 1994 to $9.7 million in the first nine months of 1995. This increase was largely due to the increased production volumes discussed above. The average production cost in the first nine months of 1995 was $.72 per Mcfe compared to $.74 per Mcfe in the first nine months of 1994. COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense in the first nine months of 1995 was consistent with the same period in 1994. Increased volumes purchased from third parties and resold were offset by a lower average purchase price. OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service expense increased $3.1 million (35%) from $8.6 million in the first nine months of 1994 to $11.7 million in the first nine months of 1995 primarily as a result of the increased cost of goods sold and expenses associated with increased sales made by the acquisitions described above. EXPLORATION EXPENSE. Exploration expense increased $1.4 million (70%) from $2.0 million in the first nine months of 1994 to $3.4 million in the first nine months of 1995 primarily due to increases in the size of the technical staff and higher levels of geological and geophysical activity. GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense decreased from $3.2 million in the first nine months of 1994 to $3.1 million in the first nine months of 1995, notwithstanding the continued growth of the Company. INTEREST EXPENSE. Interest expense increased from $2.7 million in the first nine months of 1994 to $4.0 million in the first nine months of 1995. This increase was primarily due to a $65 million increase in bank and other long-term debt incurred to finance the 1995 acquisitions (Note 2 - "Acquisitions"). DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and amortization increased by $3.8 million (43%) in the first nine months of 1995 compared to the first nine months of 1994. This increase was primarily due to additional depletion expense associated with the increased production volumes described above. INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES. Income from continuing operations before income taxes increased $1.1 million (22%) from $4.9 million in the first nine months of 1994 to $6.0 million in the first nine months of 1995. The oil and gas operations segment increased operating income $2.0 million (28%) from $7.1 million in 1994 to $9.1 million in 1995. The increase was attributable to the items discussed above. The oilfield sales and service segment operating income increased $62,802 from $56,081 in 1994 to $118,883 in 1995. NET INCOME FROM CONTINUING OPERATIONS. Net income from continuing operations for the first nine months of 1995 was $3.8 million compared to net income of $3.1 million in the first nine months of 1994. This increase in net income from continuing operations was primarily the result of the items discussed above. Provision for income taxes from continuing operations increased from $1.8 million in the first nine months of 1994 to $2.2 million in the first nine months of 1995 due to the increase in income from continuing operations before income taxes partially offset by a decrease in the effective tax 12 15 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS (CONTINUED) ------------------------------------- rate. Net income from continuing operations on a per share basis increased from $.41 per share in the first nine months of 1994 to $.45 per share in the first nine months of 1995. This increase was primarily the result of the factors discussed above. NET LOSS FROM DISCONTINUED OPERATIONS. Net loss from discontinued operations (net of tax benefit) for the first nine months of 1995 was $954,154 compared to $81,069 in the first nine months of 1994. The loss in the first nine months of 1995 includes the write-down of various assets and inventories to estimated realizable value and a provision for estimated costs of asset disposals and future losses related to the Company's decision to sell EPS. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital is closely related to and dependent on the current prices paid for its oil and gas. The Company's current ratio at September 30, 1995 was 1.87 to 1.00. During the first nine months of 1995, working capital increased $12.6 million from $13.6 million to $26.2 million. The increase was primarily due to an increase in cash ($14.3 million) and an increase in accounts receivable ($10.9 million) related to the Quaker State and other 1995 acquisitions, which was largely offset by an increase in accounts payable and accrued expenses ($15.9 million) from these same 1995 acquisitions. The Company's operating activities provided cash flow of $14.9 million during the first nine months of 1995. On May 25, 1995, the Company's bank group amended its revolving bank facility. The facility was increased to $200 million, the maturity date was extended to March 31, 1999, and the borrowing base was increased to $81 million. The Company's borrowing base is calculated by the bank group and is based on the cash flows generated by its proved developed reserves, gas gathering systems and other corporate assets. Generally, the Company can expect to have the borrowing base increased by at least 50% of the present value before income taxes (discounted at 10% per annum) of any proved developed reserves added through acquisition or drilling. Outstanding balances under the agreement bear interest at the Company's choice of either: (1) the one, two or three-month LIBOR + 2% (7.97% for the three-month LIBOR interest rate option at September 30, 1995) or (2) the bank's prime rate (8.75% at September 30, 1995). At September 30, 1995, the Company had $60 million outstanding under this facility. The amended agreement will continue to restrict the sale of assets to no more than 15% of shareholders' equity in any one year and will require the Company to maintain certain levels of net worth, working capital and debt service coverage. During 1993, the Company placed $35 million of 7% fixed-rate senior notes with five insurance companies in a private placement. These notes, which are interest-only for four years, mature on September 30, 2005. Equal annual principal payments of $3,888,888 will be required on each September 30 commencing in 1997. The note agreement limits the Company's senior debt to 50% of the Company's discounted present value (at 10%) of its oil and gas reserves plus the net book value of its gas gathering systems. Other terms and covenants are substantially the same as those contained in the $200 million revolving credit facility. 13 16 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS (CONTINUED) ------------------------------------- The Company issued 4,025,000 shares of common stock at a public offering price of $14.75 per share pursuant to an underwriting agreement dated July 26, 1995 with Johnson Rice & Company, McDonald & Company Securities, Inc. and Southcoast Capital Corporation, as representatives of the underwriters. Net proceeds were approximately $55.8 million and were used to purchase the Quaker State Properties for approximately $50 million with the balance used to reduce the outstanding balances under the Company's revolving bank facility. The Company currently expects to spend approximately $20 million during 1995 on its drilling activities and approximately $4.4 million for other capital expenditures. The Company's acquisition program is expected to be financed with any available cash flow over $24.4 million and with its available bank credit line. The Company believes that its existing sources of working capital are sufficient to satisfy all currently anticipated working capital requirements. The level of the Company's cash flow in the future will depend on a number of factors including the demand and price levels for oil and gas, its ability to acquire additional producing properties and the scope and success of its drilling activities. The Company intends to finance such activities principally through its available cash flow, through additional borrowings and, to the extent necessary, the issuance of additional common or preferred stock. See Note 3 - "Shareholders' Equity". 14 17
- -------------------------------------------------------------------------------------------------------------------------------- PART II Other information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (11) Computation of Earnings Per Common and Common Equivalent Shares (27) Financial Data Schedule (b) Reports on Form 8-K The Company filed a Current Report on Form 8-K dated August 9, 1995 on Form 8-K relating to the acquisition of the Quaker State Properties
15 18 - ------------------------------------------------------------------------------- SIGNATURES - ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BELDEN & BLAKE CORPORATION Date: November 7, 1995 By: /S/ Max L. Mardick ---------------------------- ---------------------------- Max L. Mardick Director, President, and Chief Operating Officer Date: November 7, 1995 By: /S/ Ronald E. Huff ---------------------------- ---------------------------- Ronald E. Huff, Director, Senior Vice President and Chief Financial Officer 16 EX-11 2 BELDEN & BLAKE EX-11 1 EXHIBIT 11.1 - -------------------------------------------------------------------------------- BELDEN & BLAKE CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARES
Three months Nine months ended September 30, ended September 30, -------------------------- -------------------------- 1995 1994 1995 1994 ----------- ----------- ----------- ---------- Average shares outstanding ....................... 9,741,156 7,084,737 7,992,704 7,078,707 Net effect of conversion of stock options and warrants ........................................ -- -- -- -- Total primary shares .............................. 9,741,156 7,084,737 7,992,704 7,078,707 Net effect of convertible securities .............. -- -- -- -- Total fully diluted shares ........................ 9,741,156 7,804,737 7,992,704 7,078,707 Net income ........................................ $ 1,154,942 $ 1,079,937 $ 2,809,662 $ 2,992,104 Less preferred stock dividends .................... 45,000 45,000 135,000 135,000 Net income applicable to common shares primary ......................................... 1,109,942 1,034,937 2,674,662 2,857,104 Plus 7.5% preferred stock dividends ............... -- -- -- -- Net income applicable to common shares fully diluted ................................... 1,109,942 1,034,937 2,674,662 2,857,104 Earnings per common share primary ................. .11 .15 .33 .40 Earnings per common share fully diluted .......... .11 .15 .33 .40
The effects of common stock options, warrants and convertible securities have not been included in the computation as their effect is either not dilutive or antidilutive. 17 EX-27 3 BELDEN & BLAKE EX-27
5 0000880114 BELDEN & BLAKE CORP 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 17,970,734 0 23,953,108 0 8,356,575 56,135,318 277,602,903 53,359,944 288,812,010 29,980,737 110,775,486 1,113,650 0 2,400,000 136,604,572 288,812,010 72,638,352 73,383,033 44,108,336 44,108,336 19,303,094 0 4,013,240 5,958,363 2,194,547 3,763,816 (954,154) 0 0 2,809,662 .33 .33
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