-----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, Ucst37UD1PiXPW+L0kgqt77jDspbke9JycmeAEfzlZ5Hja9gJ7eXDgCgupGBubYA 7dFKyiASvfiioERyT8dihw== 0000950152-96-003769.txt : 19960807 0000950152-96-003769.hdr.sgml : 19960807 ACCESSION NUMBER: 0000950152-96-003769 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960806 SROS: NASD 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: 96604529 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 FORM 10-Q - QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended June 30, 1996 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________________to _______________________ Commission File Number: 0-20100 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) (330) 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 July 31, 1996 11,171,081 2 BELDEN & BLAKE CORPORATION INDEX - --------------------------------------------------------------------------------
Page ---- PART I Financial Information: - ------ Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 1996 and 1 December 31, 1995 Consolidated Statements of Operations for the three and 3 six months ended June 30, 1996 and 1995 Consolidated Statements of Shareholders' Equity for the 4 six months ended June 30, 1996 and the years ended December 31, 1995 and 1994 Consolidated Statements of Cash Flows for the six 5 months ended June 30, 1996 and 1995 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition 7 and Results of Operations PART II Other Information - ------- Item 4. Submission of Matters to a Vote of Security Holders 14 Item 6. Exhibits and Reports on Form 8-K 14
3 BELDEN & BLAKE CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
JUNE 30, DECEMBER 31, 1996 1995 ------------ ------------ (UNAUDITED) ASSETS CURRENT ASSETS Cash and cash equivalents $ 12,569 $ 12,322 Accounts receivable, net 29,792 28,123 Inventories 9,478 9,253 Deferred income taxes 2,658 2,254 Other current assets 2,094 2,198 ------------ ------------ TOTAL CURRENT ASSETS 56,591 54,150 PROPERTY AND EQUIPMENT Oil and gas properties (successful efforts method) 242,371 235,344 Gas gathering systems 25,572 25,416 Land, buildings, machinery and equipment 30,878 29,977 ------------ ------------ 298,821 290,737 Less accumulated depreciation, depletion and amortization 72,807 59,209 ------------ ------------ PROPERTY AND EQUIPMENT, NET 226,014 231,528 OTHER ASSETS 10,928 11,620 ------------ ------------ $ 293,533 $ 297,298 ============ ============
The balance sheet at December 31, 1995 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. 1 4 BELDEN & BLAKE CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31, 1996 1995 ----------- ------------ (UNAUDITED) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 9,703 $ 11,004 Accrued expenses 22,984 23,811 Current portion of long-term liabilities 494 1,976 ------------ ------------ TOTAL CURRENT LIABILITIES 33,181 36,791 LONG-TERM LIABILITIES Bank and other long-term debt 57,213 67,223 Senior notes 35,000 35,000 Convertible subordinated debentures 6,800 6,800 Other 1,484 1,500 ------------ ------------ 100,497 110,523 DEFERRED INCOME TAXES 10,242 7,693 SHAREHOLDERS' EQUITY Common stock without par value; $.10 stated value per share; authorized 50,000,000 shares; issued and outstanding 11,171,081 and 11,136,496 shares 1,117 1,114 Preferred stock without par value; $100 stated value per share; authorized 8,000,000 shares; issued and outstanding 24,000 shares 2,400 2,400 Paid in capital 126,686 126,063 Retained earnings 19,557 12,820 Unearned portion of restricted stock (147) (106) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 149,613 142,291 ------------ ------------ $ 293,533 $ 297,298 ============ ============
The balance sheet at December 31, 1995 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 CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, 1996 1995 1996 1995 -------- -------- -------- -------- REVENUES Oil and gas sales $ 18,512 $ 9,767 $ 38,190 $ 18,974 Gas marketing and gathering 8,588 8,789 21,789 17,705 Oilfield sales and service 5,442 3,508 10,922 6,256 Interest and other 1,108 232 1,741 414 --------- --------- --------- --------- 33,650 22,296 72,642 43,349 EXPENSES Production expense 4,341 2,269 8,485 4,538 Production taxes 717 408 1,511 773 Cost of gas and gathering expense 6,870 7,351 18,127 15,253 Oilfield sales and service 5,051 3,327 10,152 6,067 Exploration expense 1,343 919 2,873 1,814 General and administrative expense 1,395 1,065 2,613 2,014 Interest expense 1,813 1,316 3,824 2,452 Depreciation, depletion and amortization 7,133 3,925 14,701 7,376 --------- --------- --------- --------- 28,663 20,580 62,286 40,287 --------- --------- --------- --------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 4,987 1,716 10,356 3,062 Provision for income taxes 1,585 633 3,529 1,128 --------- --------- --------- --------- INCOME FROM CONTINUING OPERATIONS 3,402 1,083 6,827 1,934 LOSS FROM DISCONTINUED OPERATIONS -- (167) -- (279) --------- --------- --------- --------- NET INCOME $ 3,402 $ 916 $ 6,827 $ 1,655 ========= ========= ========= ========= PER COMMON SHARE: CONTINUING OPERATIONS $ 0.30 $ 0.14 $ 0.60 $ 0.26 DISCONTINUED OPERATIONS -- (0.02) -- (0.04) --------- --------- --------- --------- NET INCOME $ 0.30 $ 0.12 $ 0.60 $ 0.22 ========= ========= ========= ========= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 11,171 7,106 11,166 7,104 ========= ========= ========= =========
See accompanying notes. 3 6 BELDEN & BLAKE CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (IN THOUSANDS)
UNEARNED COMMON COMMON PREFERRED PAID IN RETAINED RESTRICTED SHARES STOCK STOCK CAPITAL EARNINGS STOCK TOTAL ------- ---------- ---------- --------- ---------- ---------- ----------- JANUARY 1, 1994 7,053 $ 706 $ 2,400 $ 69,865 $ 4,216 $ (330) $ 76,857 Stock issued 32 3 385 388 Net income 3,843 3,843 Preferred stock dividend (180) (180) Restricted stock 129 105 234 - ------------------------------------------------------------------------------------------------------------------ DECEMBER 31, 1994 7,085 709 2,400 70,379 7,879 (225) 81,142 Stock issued 4,028 403 55,264 55,667 Net income 5,121 5,121 Preferred stock dividend (180) (180) Stock options exercised 2 -- 25 25 Employee stock bonus 22 2 251 253 Restricted stock 144 119 263 - ------------------------------------------------------------------------------------------------------------------ DECEMBER 31, 1995 11,137 1,114 2,400 126,063 12,820 (106) 142,291 Net income 6,827 6,827 Preferred stock dividend (90) (90) Stock options exercised 2 -- 31 31 Employee stock bonus 26 2 419 421 Restricted stock 6 1 169 (41) 129 Other 4 4 - ------------------------------------------------------------------------------------------------------------------ JUNE 30, 1996 (UNAUDITED) 11,171 $ 1,117 $ 2,400 $ 126,686 $ 19,557 $ (147) $ 149,613 ==================================================================================================================
See accompanying notes. 4 7 BELDEN & BLAKE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30 ------------------------- 1996 1995 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 6,827 $ 1,655 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 14,701 7,500 (Gain) loss on disposal of property and equipment (8) 119 Deferred income taxes 2,145 501 Deferred compensation and stock grants 682 555 Change in operating assets and liabilities, net of effects of purchases of businesses: Accounts receivable and other operating assets (1,092) (1,309) Inventories (225) 1,121 Accounts payable and accrued expenses (966) (1,052) ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 22,064 9,090 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of businesses, net of cash acquired (254) (23,183) Proceeds from property and equipment disposals 2,059 382 Additions to property and equipment (11,368) (6,594) (Increase) decrease in other assets (501) (334) ---------- ---------- NET CASH USED IN INVESTING ACTIVITIES (10,064) (29,729) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving line of credit and long-term debt 7,105 35,011 Repayment of long-term debt and other obligations (18,768) (10,908) Preferred stock dividends (90) (90) ---------- ---------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (11,753) 24,013 ---------- ---------- NET INCREASE IN CASH AND CASH EQUIVALENTS 247 3,374 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,322 3,649 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 12,569 $ 7,023 ========== ========== CASH PAID DURING THE PERIOD FOR: Interest $ 4,241 $ 2,192 Income taxes 951 597 NON-CASH INVESTING AND FINANCING ACTIVITIES: Acquisition of assets in exchange for long-term obligations -- 8,460
See accompanying notes. 5 8 BELDEN & BLAKE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (UNAUDITED) JUNE 30, 1996 - -------------------------------------------------------------------------------- (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Belden & Blake Corporation (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 six month periods ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. 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, 1995. (2) SUBSEQUENT EVENTS In July 1996, the Company acquired working interests averaging 40% in 17 producing wells, four proved undeveloped locations and 7,000 undeveloped leasehold acres in Ohio from North American Gas Investment Trust for $1.2 million. The Company operates the wells and owns the remaining working interests. The interests acquired had estimated proved developed reserves of 0.6 Bcf (billion cubic feet) of natural gas and 53,000 Bbls (barrels) of oil at January 1, 1996. In July 1996, the Company signed a letter of intent with NYLife Equity, Inc. to acquire working interests in 209 wells in Ohio from various NYLife Energy Investors partnerships for $2.5 million. The Company has operated the wells on behalf of the NYLife partnerships since 1990. The interests to be acquired had estimated proved developed reserves of 3.5 Bcf of natural gas and 152,000 Bbls of oil at July 1, 1996. (3) CHANGE IN ACCOUNTING PRINCIPLE In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Company adopted Statement 121 in the first quarter of 1996. The Company's estimate of undiscounted cash flows indicated that such carrying amounts of assets are expected to be recovered. However, it is possible that the estimates may change in the future resulting in the write-down of assets to fair value. 6 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) ------------------------------------------------------ (4) SALE OF TAX CREDIT PROPERTIES In February and March 1996, the Company sold certain interests that qualify for the nonconventional fuel source tax credit. The interests were sold in two separate transactions for approximately $750,000 and $100,000, respectively, in cash and a volumetric production payment under which 100% of the cash flow from the properties will go to the Company until approximately 11.7 Bcf and 3.4 Bcf, respectively, of gas has been produced and sold. In addition to receiving 100% of the cash flow from the properties, the Company will receive quarterly incentive payments based on production from the interests. The Company has the option to repurchase the interests at a future date. (5) HEDGING ACTIVITIES As a result of certain 1995 acquisitions, the Company has several contracts to sell gas at indexed prices. The Company may, from time to time, partially hedge these contract prices by selling futures contracts on the NYMEX. The Company began partially hedging its gas price exposure in January 1996. For the first half of 1996, the Company incurred a $258,000 pretax loss on its hedging activities due to rapidly rising gas prices during the period. At June 30, 1996, the Company did not have any open futures contracts. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - SECOND QUARTERS OF 1996 AND 1995 COMPARED OIL AND GAS SALES. Oil and gas sales increased $8.7 million (90%) in the second quarter of 1996 compared to the same period of 1995 due to an increase in oil and gas volumes sold and a higher average price paid for the Company's oil and gas. Oil volumes increased 62,000 Bbls (49%) from 124,000 Bbls in the second quarter of 1995 to 186,000 Bbls in the second quarter of 1996 resulting in an increase in oil sales of approximately $1.1 million. Gas volumes increased 2.6 Bcf (80%) from 3.3 Bcf in the second quarter of 1995 to 5.9 Bcf in the second quarter of 1996 resulting in an increase in gas sales of approximately $6.0 million. These volume increases were primarily due to production from properties acquired and wells drilled in 1995. The average price paid for the Company's oil increased from $17.71 per barrel in the second quarter of 1995 to $20.33 per barrel in the second quarter of 1996 which increased oil sales by approximately $490,000. The average price paid for the Company's natural gas increased $.19 per Mcf (thousand cubic feet) to $2.48 per Mcf in the second quarter of 1996 compared to the second quarter of 1995 which increased gas sales in the second quarter of 1996 by approximately $1.1 million. GAS MARKETING AND GATHERING REVENUE. Gas marketing and gathering revenue decreased $201,000 (2%) from $8.8 million in the second quarter of 1995 to $8.6 million in the second quarter of 1996 due to a decrease in the volume of gas purchased from third parties and resold. The decrease was partially offset by an increase in the average selling price of gas and an increase in gas gathering revenues. 7 10 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service revenue increased $1.9 million (55%) from $3.5 million in the second quarter of 1995 to $5.4 million in the second quarter of 1996. This increase was primarily due to the sales generated by the three oilfield sales and service companies acquired by the Company in 1995. INTEREST AND OTHER REVENUE. Interest and other revenue increased $876,000 (378%) from $232,000 in the second quarter of 1995 to $1.1 million in the second quarter of 1996 primarily due to the recognition of income in 1996 from incentive production payments associated with certain properties operated by Ward Lake. PRODUCTION EXPENSE. Production expense increased $2.0 million (91%) from $2.3 million in the second quarter of 1995 to $4.3 million in the second quarter of 1996. This increase was largely due to the increased production discussed above. The average production cost increased from $.56 per Mcfe (equivalent Mcf of natural gas) in the second quarter of 1995 to $.62 per Mcfe in the second quarter of 1996. This increase was largely due to increased weather-related repair and maintenance expenses. PRODUCTION TAXES. Production taxes increased $309,000 (76%) from $408,000 in the second quarter of 1995 to $717,000 in the second quarter of 1996. This increase was primarily due to the increased production volumes discussed above. COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense decreased $481,000 (7%) from $7.4 million in the second quarter of 1995 to $6.9 million in the second quarter of 1996 due to a decrease in volumes of gas purchased from third parties. The decrease was partially offset by an increase in the cost of gas. OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service expense increased $1.7 million (52%) from $3.3 million in the second quarter of 1995 to $5.1 million in the second quarter of 1996 primarily as a result of the increased cost of goods sold associated with increased sales resulting from the acquisitions described above. EXPLORATION EXPENSE. Exploration expense increased $424,000 (46%) from $919,000 in the second quarter of 1995 to $1.3 million in the second quarter of 1996 primarily due to higher levels of geological, geophysical and leasing activity and increases in the size of the technical staff in conjunction with increased drilling activity. GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense increased $330,000 (31%) from $1.1 million in the second quarter of 1995 to $1.4 million in the second quarter of 1996 primarily due to an increase in franchise taxes and an increase in estimated profit sharing and bonuses for 1996. INTEREST EXPENSE. Interest expense increased $497,000 (38%) from $1.3 million in the second quarter of 1995 to $1.8 million in the second quarter of 1996. This increase was primarily due to higher average debt balances incurred to finance the 1995 acquisitions. DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and amortization increased by $3.2 million (82%) from $3.9 million in the second quarter of 1995 to $7.1 million in the 8 11 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) second quarter of 1996. Depletion expense increased $2.4 million (83%) from $3.0 million in the second quarter of 1995 to $5.4 million in the second quarter of 1996. This increase was primarily due to the increased production volumes described above. Depletion per Mcfe increased from $.73 per Mcfe in the second quarter of 1995 to $.77 per Mcfe in the second quarter of 1996. This increase was primarily the result of proved reserves added through acquisitions and drilling at a higher cost per Mcfe. INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES. Income from continuing operations before income taxes increased $3.3 million (191%) from $1.7 million in the second quarter of 1995 to $5.0 million in the second quarter of 1996. The operating income from the oil and gas operations segment increased $2.8 million (98%) from $2.8 million in the second quarter of 1995 to $5.6 million in the second quarter of 1996. The increase was attributable to the items discussed above. The operating income from the oilfield sales and service segment increased $130,000 from an operating loss of $29,000 in the second quarter of 1995 to operating income of $101,000 in the second quarter of 1996. INCOME FROM CONTINUING OPERATIONS. Income from continuing operations increased $2.3 million (214%) from $1.1 million in the second quarter of 1995 to $3.4 million in the second quarter of 1996. This increase in income from continuing operations was primarily the result of the items discussed above. Provision for income taxes from continuing operations increased $952,000 (150%) from $633,000 in the second quarter of 1995 to $1.6 million in the second quarter of 1996. This increase was attributable to an increase in income from continuing operations before income taxes partially offset by a decrease in the effective tax rate. Income from continuing operations on a per share basis increased from $.14 per share in the second quarter of 1995 to $.30 per share in the second quarter of 1996. This increase was primarily the result of the factors discussed above. LOSS FROM DISCONTINUED OPERATIONS. Loss from discontinued operations was $258,000 ($167,000 net of tax benefit or $.02 per share) in the second quarter of 1995. RESULTS OF OPERATIONS - SIX MONTHS OF 1996 AND 1995 COMPARED OIL AND GAS SALES. Oil and gas sales increased $19.2 million (101%) in the first six months of 1996 compared to the same period of 1995 due to an increase in oil and gas volumes sold and a higher average price paid for the Company's oil and gas. Oil volumes increased 115,000 Bbls (48%) from 242,000 Bbls in the first six months of 1995 to 357,000 Bbls in the first six months of 1996 resulting in an increase in oil sales of approximately $2.0 million. Gas volumes increased 6.1 Bcf (98%) from 6.2 Bcf in the first six months of 1995 to 12.3 Bcf in the first six months of 1996 resulting in an increase in gas sales of approximately $14.6 million. These volume increases were primarily due to production from properties acquired and wells drilled in 1995. The average price paid for the Company's oil increased from $17.22 per barrel in the first six months of 1995 to $19.09 per barrel in the first six months of 1996 which increased oil sales by approximately $670,000. The average price paid for the Company's natural gas increased $.16 per Mcf to $2.54 per Mcf in the first six months of 1996 compared to the first six months of 1995 which increased gas sales in the first six months of 1996 by approximately $2.0 million. 9 12 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) GAS MARKETING AND GATHERING REVENUE. Gas marketing and gathering revenue increased $4.1 million (23%) from $17.7 million in the first six months of 1995 to $21.8 million in the first six months of 1996 due to an increase in the volume of gas marketed, an increase in the average selling price of gas and an increase in gas gathering revenues. OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service revenue increased $4.6 million (75%) from $6.3 million in the first six months of 1995 to $10.9 million in the first six months of 1996. This increase was primarily due to the sales generated by the three oilfield sales and service companies acquired by the Company in 1995. INTEREST AND OTHER REVENUE. Interest and other revenue increased $1.3 million (321%) from $414,000 in the first six months of 1995 to $1.7 million in the first six months of 1996 primarily due to the recognition of income in 1996 from incentive production payments associated with certain properties operated by Ward Lake. PRODUCTION EXPENSE. Production expense increased $4.0 million (87%) from $4.5 million in the first six months of 1995 to $8.5 million in the first six months of 1996. This increase was largely due to the increased production discussed above. The average production cost remained consistent at $.59 per Mcfe in the first six months of 1995 and 1996. PRODUCTION TAXES. Production taxes increased $738,000 (95%) from $773,000 in the first six months of 1995 to $1.5 million in the first six months of 1996. This increase was primarily due to the increased production volumes discussed above. COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense increased $2.8 million (19%) from $15.3 million in the first six months of 1995 to $18.1 million the first six months of 1996 due to an increase in volumes of gas purchased and an increase in the cost of gas. OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service expense increased $4.1 million (67%) from $6.1 million in the first six months of 1995 to $10.2 million in the first six months of 1996 primarily as a result of the increased cost of goods sold associated with increased sales resulting from the acquisitions described above. EXPLORATION EXPENSE. Exploration expense increased $1.1 million (58%) from $1.8 million in the first six months of 1995 to $2.9 million in the first six months of 1996 primarily due to higher levels of geological, geophysical and leasing activity and increases in the size of the technical staff in conjunction with increased drilling activity. GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense increased $599,000 (30%) from $2.0 million in the first six months of 1995 to $2.6 million in the first six months of 1996 primarily due to an increase in franchise taxes and an increase in estimated profit sharing and bonuses for 1996. INTEREST EXPENSE. Interest expense increased $1.3 million (56%) from $2.5 million in the first six months of 1995 to $3.8 million in the first six months of 1996. This increase was primarily due to higher average debt balances incurred to finance the 1995 acquisitions. 10 13 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and amortization increased by $7.3 million (99%) from $7.4 million in the first six months of 1995 to $14.7 million in the first six months of 1996. Depletion expense increased $6.0 million (109%) from $5.4 million in the first six months of 1995 to $11.4 million in the first six months of 1996. This increase was primarily due to the increased production volumes described above. Depletion per Mcfe increased from $.71 per Mcfe in the first six months of 1995 to $.78 per Mcfe in the first six months of 1996. This increase was primarily the result of proved reserves added through acquisitions and drilling at a higher cost per Mcfe. INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES. Income from continuing operations before income taxes increased $7.3 million (238%) from $3.1 million in the first six months of 1995 to $10.4 million in the first six months of 1996. The operating income from the oil and gas operations segment increased $6.9 million (130%) from $5.3 million in the first six months of 1995 to $12.2 million in the first six months of 1996. The increase was attributable to the items discussed above. The operating income from the oilfield sales and service segment increased $422,000 from an operating loss of $228,000 in the first six months of 1995 to operating income of $194,000 in the first six months of 1996. INCOME FROM CONTINUING OPERATIONS. Income from continuing operations increased $4.9 million (253%) from $1.9 million in the first six months of 1995 to $6.8 million in the first six months of 1996. This increase in income from continuing operations was primarily the result of the items discussed above. Provision for income taxes from continuing operations increased $2.4 million (213%) from $1.1 million in the first six months of 1995 to $3.5 million in the first six months of 1996. This increase was attributable to an increase in income from continuing operations before income taxes partially offset by a decrease in the effective tax rate. Income from continuing operations on a per share basis increased from $.26 per share in the first six months of 1995 to $.60 per share in the first six months of 1996. This increase was primarily the result of the factors discussed above. LOSS FROM DISCONTINUED OPERATIONS. Loss from discontinued operations was $431,000 ($279,000 net of tax benefit or $.04 per share) in the first six months of 1995. 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 June 30, 1996 was 1.71 to 1.00. During the first six months of 1996, working capital increased $6.0 million from $17.4 million to $23.4 million. The increase was primarily due to a reduction in accounts payable and accrued expenses ($2.1 million), an increase in accounts receivable ($1.7 million) and a reduction in the current portion of long-term liabilities ($1.5 million). The reduction in the current portion of long-term debt was due to a final principal payment of $1.5 million on a note used to finance the U.S. Energy acquisition in 1995. The Company's operating activities provided cash flow of $22.1 million during the first six months of 1996. On May 25, 1995, the Company's revolving bank facility was amended. 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 borrowing base is calculated by the bank group and is based on the 11 14 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) cash flows generated by the Company's 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. On February 16, 1996, the Company's revolving bank facility was further amended. The maturity date was extended to March 31, 2001 and the LIBOR interest rate option was modified to decrease from LIBOR + 2% to a range of LIBOR + 1-1/4% to LIBOR + 3/4% as outstanding balances decrease in relation to the borrowing base. Outstanding balances under the facility incur interest at the Company's choice of either: (1) the one, two or three-month LIBOR + 1.25% (6.84% for the three-month LIBOR interest rate option at June 30, 1996) or (2) the bank's prime rate (8.25% at June 30, 1996). During the first half of 1996, the Company paid down its outstanding balances on this facility by $10 million. At June 30, 1996, the Company had $57 million outstanding under this facility. The amended facility 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. When market conditions are favorable, the Company may enter into interest rate swap arrangements, whereby a portion of the Company's floating rate exposure is exchanged for a fixed interest rate. The Company had no such derivative financial instruments at June 30, 1996. 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 senior 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. The Company seeks to replace its production and expand its reserve base through the acquisition of producing oil and gas properties, development drilling in the shallow blanket formations and exploratory and development drilling in the less developed and deeper formations in the Appalachian and Michigan Basins. The Company's acquisition activities in 1996 are discussed in Note (2) to the Consolidated Financial Statements. The Company plans to drill approximately 200 gross wells in 1996. The following table summarizes the Company's drilling activities for the six months ended June 30, 1996. 12 15 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) 1996 DRILLING RESULTS
SIX MONTHS ENDED JUNE 30, 1996 ------------------------- GROSS NET ---------- ---------- Development wells Shallow blanket formations Productive ............................... 41 34.3 Dry ...................................... -- -- Less developed and deeper formations Productive ............................... 12 8.1 Dry ...................................... 5 3.3 Exploratory wells Productive ............................... -- -- Dry ...................................... -- --
The shallow blanket formation wells were drilled in Michigan to the Antrim Shale formation; in New York and Pennsylvania to the Medina Sandstone formation; in New York to the Bass Island Sandstone formation; and in West Virginia to the Devonian Shale formation. The wells drilled to the less developed and deeper formations were drilled to the Dundee Carbonate and Niagaran Carbonate formations in Michigan; to the Beekmantown Dolamite, Rose Run Sandstone and Trempealeau Sandstone formations in Ohio; and to the Onondaga Limestone and Oriskany Sandstone formations in Pennsylvania. The Company currently expects to spend approximately $28 million during 1996 on its direct drilling activities and approximately $9 million for other capital expenditures. The Company's acquisition program is expected to be financed with any available cash flow over $37 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. FORWARD-LOOKING INFORMATION The forward-looking statements regarding future operating and financial performance contained in this report involve risks and uncertainties that include, but are not limited to, the Company's future production and costs of operation, the market demand for, and prices of, oil and natural gas, results of the Company's future drilling and gas marketing activity, the uncertainties of reserve estimates, environmental risks, and other factors detailed in the Company's filings with the Securities and Exchange Commission. Actual results may differ materially from forward-looking statements made in this report. 13 16 - -------------------------------------------------------------------------------- PART II Other information Item 4. Submission of Matters to a Vote of Security Holders At the annual shareholders meeting held May 23, 1996 the shareholders approved an amendment to the Company's Amended Articles of Incorporation to increase the number of authorized common shares available for issuance from 12,000,000 shares to 50,000,000 shares. There were 7,246,285 votes for the amendment, 969,038 votes against the amendment or withheld, 32,031 abstentions, and 1,713,528 broker non-votes. The shareholders also approved an amendment to the Company's Stock Option Plan. There were 8,242,811 votes for the amendment, 409,552 votes against the amendment or withheld, 254,907 abstentions, and 1,713,528 broker non-votes. 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 None 14 17 - -------------------------------------------------------------------------------- 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: August 5, 1996 By:/S/ Henry S. Belden, IV ------------------------ ------------------------------------------ Henry S. Belden, IV, Director, Chairman, and Chief Executive Officer Date: August 5, 1996 By:/S/ Ronald E. Huff ------------------------ ------------------------------------------ Ronald E. Huff, Director, Senior Vice President and Chief Financial Officer 15 EX-11 2 EXHIBIT 11 1 EXHIBIT 11.1 - -------------------------------------------------------------------------------- BELDEN & BLAKE CORPORATION COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARES (in thousands, except per share data)
Three months Six months ended June 30, ended June 30, --------------------------------- ---------------------------- 1996 1995 1996 1995 ---------------- -------------- ------------ ------------- Average shares outstanding 11,171 7,106 11,166 7,104 Net effect of conversion of stock options and warrants -- -- -- -- Total primary shares 11,171 7,106 11,166 7,104 Net effect of convertible securities -- -- -- -- Total fully diluted shares 11,171 7,106 11,166 7,104 Net income $ 3,402 $ 916 $ 6,827 $ 1,655 Less preferred stock dividends 45 45 90 90 Net income applicable to common shares primary 3,357 871 6,737 1,565 Plus 7.5% preferred stock dividends -- -- -- -- Net income applicable to common shares fully diluted 3,357 871 6,737 1,565 Earnings per common share primary .30 .12 .60 .22 Earnings per common share fully diluted .30 .12 .60 .22
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. 16 EX-27 3 EXHIBIT 27
5 0000880114 BELDEN & BLAKE CORPORATION 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 12,569 0 29,792 0 9,478 56,591 298,821 72,807 293,533 33,181 100,497 1,117 0 2,400 146,096 293,533 70,901 72,642 38,275 38,275 20,187 0 3,824 10,356 3,529 6,827 0 0 0 6,827 .60 .60
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