-----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, U1EDVoHHjn4P8wc9QapvEXnDmcuupWXQSSx3r63XM8ZRENFLKLehvbWOvpm7/TBE RiU2L0g/CcrL7Ro/nQ+cEg== 0000950134-96-002091.txt : 19960621 0000950134-96-002091.hdr.sgml : 19960621 ACCESSION NUMBER: 0000950134-96-002091 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DLB OIL & GAS INC CENTRAL INDEX KEY: 0000945982 STANDARD INDUSTRIAL CLASSIFICATION: 1311 IRS NUMBER: 731358299 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26484 FILM NUMBER: 96564837 BUSINESS ADDRESS: STREET 1: 1601 NORTHWEST EXPRESSWAY STREET 2: STE 700 CITY: OKLAHOMA CITY STATE: OK ZIP: 73118 BUSINESS PHONE: 4058488808 MAIL ADDRESS: STREET 1: 100N BROADWAY STREET 2: 20TH FLOOR CITY: OKLAHOMA CITY STATE: OK ZIP: 73102 10-Q 1 FORM 10-Q FOR QUARTER ENDED MARCH 31, 1996 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No 0-26484 DLB OIL & GAS, INC. (Exact name of registrant as specified in its charter) OKLAHOMA 73-1358299 (State or other jurisdiction of (IRS Employer Identification No.) incorporation of organization) 1601 NORTHWEST EXPRESSWAY, SUITE 700 OKLAHOMA CITY, OKLAHOMA 73118-1401 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (405) 848-8808 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 report), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of Registrant's common stock, $.001 par value, as of April 30, 1996 was 12,975,000. 2 DLB OIL & GAS, INC. TABLE OF CONTENTS FORM 10-Q QUARTERLY REPORT PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements: Consolidated Balance Sheets March 31, 1996 (Unaudited) and December 31, 1995 (Audited) 3 Consolidated Statements of Operations (Unaudited) For the Three Months Ended March 31, 1996 and1995 4 Statements of Consolidated Shareholders' Equity As of December 31, 1994 and 1995 (Audited) and March 31, 1996 (Unaudited) 5 Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 1996 and 1995 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 11 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 16 Signatures 18
2 3 PART 1. FINANCIAL INFORMATION Item 1. DLB OIL & GAS, INC. CONSOLIDATED BALANCE SHEETS ASSETS
MARCH 31, DECEMBER 31, ------------ ------------- 1996 1995 ------------ ------------- (UNAUDITED) (AUDITED) Current assets: Cash and cash equivalents $ 9,344,000 $ 14,313,000 Accounts receivable 3,212,000 4,850,000 Prepaid expenses 199,000 324,000 ------------ ------------- Total current assets 12,755,000 19,487,000 Property and equipment - at cost, based on the full cost ------------ ------------- method of accounting for oil and natural gas properties (Notes 6&7): Oil and natural gas properties subject to amortization 64,510,000 62,275,000 Oil and natural gas properties not subject to amortization 12,737,000 10,037,000 Natural gas processing plants and gathering systems 1,111,000 3,094,000 Saltwater disposal system 1,119,000 1,119,000 Other property and equipment 1,021,000 948,000 ------------ ------------- 80,498,000 77,473,000 Accumulated depreciation, depletion and amortization (19,908,000) (18,812,000) ------------ ------------- 60,590,000 58,661,000 ------------ ------------- Investments (Note 3) 3,675,000 -- Other assets 58,000 59,000 ------------ ------------- Total assets $ 77,078,000 $ 78,207,000 ============ ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 2,172,000 $ 3,853,000 Revenue and royalty distributions payable 1,108,000 1,527,000 Drilling advances and other liabilities 511,000 190,000 Accrued liabilities 210,000 193,000 ------------ ------------- Total current liabilities 4,001,000 5,763,000 ------------ ------------- Deferred income tax liability (Note 4) 13,209,000 12,900,000 Shareholders' equity (Note 5): Preferred stock, 5,000,000 shares authorized; no shares issued and outstanding -- -- Common stock, 130,000,000 shares authorized; 13,000,000 shares issued; 12,975,000 and 13,000,000 outstanding at March 31, 1996 and December 31, 1995, respectively 13,000 13,000 Additional paid in capital 57,910,000 57,910,000 Retained earnings 2,126,000 1,621,000 Treasury stock (25,000 shares at March 31, 1996, at cost) (181,000) -- ------------ ------------- Total shareholders' equity 59,868,000 59,544,000 ------------ ------------- Total liabilities and shareholders' equity $ 77,078,000 $ 78,207,000 ============ =============
See accompanying notes to consolidated financial statements 3 4 DLB OIL & GAS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ---------------------------- 1996 1995 ----------- ----------- Revenues: Oil and natural gas sales $ 4,481,000 $ 4,240,000 Natural gas gathering, processing and transportation, net 77,000 664,000 Interest 183,000 26,000 Other 13,000 339,000 ----------- ----------- 4,754,000 5,269,000 Expenses: Lease operating 1,211,000 1,238,000 Depreciation, depletion, and amortization 1,794,000 1,631,000 General and administrative 727,000 329,000 Interest -- 179,000 Loss on sale of assets (Note 6) 208,000 -- ----------- ----------- 3,940,000 3,377,000 ----------- ----------- Income before income taxes 814,000 1,892,000 Deferred income taxes (Note 4) 309,000 -- Pro forma income taxes (Note 4) -- 757,000 ----------- ----------- Net income $ 505,000 $ 1,135,000 =========== =========== Net income per common share $ 0.04 $ 0.11 =========== =========== Weighted average common shares outstanding 12,987,500 10,000,000 =========== ===========
See accompanying notes to consolidated financial statements 4 5 DLB OIL & GAS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, ------------------ ------------------------- MARCH 31, 1996 1995 1994 ------------------ ----------- ---------- (UNAUDITED) (AUDITED) (AUDITED) Common stock - shares outstanding: Balance, beginning of period 13,000,000 -- -- Issuance of stock in connection with the Merger -- 10,000,000 -- Sale of stock in connection with the public offering, net of costs -- 3,000,000 -- ------------ ------------ ------------ Balance, end of period 13,000,000 13,000,000 -- ============ ============ ============ Common stock - amount: Balance, beginning of period $ 13,000 $ -- $ -- Issuance of stock in connection with the Merger -- 10,000 -- Sale of stock in connection with the public offering, net of costs -- 3,000 -- ------------ ------------ ------------ Balance, end of period $ 13,000 $ 13,000 $ -- ============ ============ ============ Additional paid in capital: Balance, beginning of period $ 57,910,000 $ -- $ -- Issuance of stock in connection with the Merger -- 31,017,000 -- Sale of stock in connection with the public offering, net of costs -- 26,893,000 -- ------------ ------------ ------------ Balance, end of period $ 57,910,000 $ 57,910,000 $ -- ============ ============ ============ Retained earnings: Balance, beginning of period $ 1,621,000 $ -- $ -- Post-public offering net income -- 1,621,000 -- Net income 505,000 -- -- ------------ ------------ ------------ Balance, end of period $ 2,126,000 $ 1,621,000 $ -- ============ ============ ============ Treasury stock: Balance, beginning of period $ -- $ -- $ -- Repurchase of stock (Note 5) (181,000) -- $ -- ------------ ------------ ------------ Balance, end of period $ (181,000) $ -- $ -- ============ ============ ============ Total: Balance, beginning of period $ 59,544,000 $ -- $ -- Issuance of stock in connection with the Merger -- 31,027,000 -- Sale of stock in connection with the public offering, net of costs -- 26,896,000 -- Post-public offering net income -- 1,621,000 -- Repurchase of stock (Note 5) (181,000) -- -- Net income 505,000 -- -- ------------ ------------ ------------ Balance, end of period $ 59,868,000 $ 59,544,000 $ -- ============ ============ ============ Combined shareholders' equity: Balance, beginning of period $ -- $ 39,012,000 $ 30,164,000 Contributed capital -- 4,000 2,138,000 Distributions to stockholders -- (1,192,000) (3,196,000) Pre-public offering net income (loss) -- (6,797,000) 9,906,000 Issuance of stock in connection with the Merger -- (31,027,000) -- ------------ ------------ ------------ Balance, end of period $ -- $ -- $ 39,012,000 ============ ============ ============
See accompanying notes to consolidated financial statements. 5 6 DLB OIL & GAS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, --------------------------- 1996 1995 ------------ ------------ Cash flows from operating activities: Net income $ 505,000 $ 1,135,000 Adjustments to reconcile net income to net cash provided by operating activites: Depreciation, depletion, and amortization 1,794,000 1,631,000 Pro forma income taxes -- 757,000 Deferred income taxes 309,000 -- Loss on sale of assets 208,000 -- (Increase) decrease in accounts receivable 1,638,000 (107,000) (Increase) decrease in prepaid expenses 125,000 (188,000) Decrease in accounts payable, distributions payable and accrued liabilities (2,082,000) (1,955,000) Increase (decrease) in drilling advances and other liabilities 321,000 (208,000) ------------ ------------ Net cash provided by operating activities 2,818,000 1,065,000 ------------ ------------ Cash flows from investing activities: Expenditures for property and equipment (5,303,000) (3,138,000) Purchase of investments and note advances (3,683,000) (26,000) Proceeds from sales of assets 1,380,000 -- ------------ ------------ Net cash used in investing activities (7,606,000) (3,164,000) ------------ ------------ Cash flows from financing activities Proceeds of long-term debt -- 1,000,000 Contributed capital -- 4,000 Distributions to shareholders -- (481,000) Purchase of treasury stock (181,000) -- ------------ ------------ Net cash provided by (used in) financing activities (181,000) 523,000 ------------ ------------ Net increase (decrease) in cash and cash equivalents: (4,969,000) (1,576,000) Cash and cash equivalents beginning of year 14,313,000 3,059,000 ------------ ------------ Cash and cash equivalents end of year $ 9,344,000 $ 1,483,000 ============ ============ Supplemental cash flow information: Cash payments for interest $ -- $ 186,000 ============ ============
See accompanying notes to consolidated financial statements 6 7 DLB OIL & GAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1996 AND 1995 (1) ORGANIZATION AND DESCRIPTION OF BUSINESS DLB Oil & Gas, Inc. (DLB or the Company) engages primarily in the exploration for and development of shallow crude oil and natural gas fields. The Company focuses its efforts and is one of the most active explorers in Oklahoma and Kansas. The Company also engages to a lesser extent, in the gathering, processing, transportation and marketing of hydrocarbons and conducts secondary oil recovery activities. The accompanying consolidated financial statements covering periods prior to July 20, 1995, the date of the merger of Davidson Oil and Gas, Inc. (Davidson) into DLB, include each of their accounts and their proportionate share of a venture involved in the production of oil and natural gas and in the gathering, processing and transporting of natural gas. Due to the nature of a joint venture agreement between the Company and Davidson, the Company and Davidson were considered to be under common control prior to the merger. The accompanying consolidated financial statements covering periods on or after July 20, 1995, include the consolidated accounts of the Company and its wholly owned subsidiaries, and its proportionate share of a venture involved in the production of oil and natural gas and in the gathering, processing and transporting of natural gas. All intercompany transactions and balances have been eliminated in consolidation. (2) INITIAL PUBLIC OFFERING On July 25, 1995, the Company issued 3,000,000 shares of common stock through a public offering at $10 per share. Net proceeds to the Company from the offering, after selling and offering costs, were $26,896,000. The Company used $11,231,000 of these proceeds to retire indebtedness under its revolving line of credit facilities. (3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements and notes thereto have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The accompanying consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes included in DLB's 1995 annual report on Form 10-K. 7 8 DLB OIL & GAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) In the opinion of DLB's management, all adjustments (all of which are normal and recurring) have been made which are necessary to fairly state the consolidated financial position of the Company and its subsidiaries as of March 31, 1996, and the results of their operations and their cash flows for the three month periods ended March 31, 1996 and 1995. Other Investments During the first three months of 1996, the Company acquired $11,627,000 of senior unsecured notes in open market transactions for $3,675,000. The notes were issued by an oil and gas company that had previously filed for Chapter 11 reorganization. (4) INCOME TAXES Prior to the merger and initial public offering, the Company and Davidson filed separate income tax returns as Subchapter S corporations under the provisions of the Internal Revenue Code. The Company's S election terminated upon the merger and initial public offering. As a result of the Company's termination of the S election, the Company recognized a charge against operations in the amount of $11,500,000 for deferred income taxes during 1995. The charge represented the tax effect of the difference between the financial statement carrying values and the income tax basis of the Company's assets and liabilities on the date the S election was terminated. Tax strategies implemented by the shareholders prior to the merger are not reflective of the results that the Company would have achieved if the Company had been directly subject to income taxes. Therefore, results of the operations for the periods prior to the offering, reflect a pro forma provision for income tax expense at a rate of approximately 40% (based upon blended Federal and state rates) of income before taxes. (5) SHAREHOLDERS' EQUITY Effective with the merger of the Company and Davidson, the capital structure of the Company consisted of 130,000,000 authorized common shares ($.001 par value) with 10,000,000 shares outstanding along with 5,000,000 authorized preferred shares with no preferred shares outstanding. The former shareholders of DLB and Davidson hold 10,000,000 shares of the Company's common stock. For financial reporting purposes, combined shareholder's equity at the date of the merger was converted into the Company's common stock and additional paid-in-capital. 8 9 DLB OIL & GAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) As detailed in Note 2, the Company issued 3,000,000 shares of common stock through a public offering at $10 per share. On February 8, 1996, the Company announced a common stock repurchase plan. Under terms of the plan, up to $5,000,000 of common stock can be repurchased from time to time. On February 7, 1996, approximately 25,000 shares were repurchased for $181,000. Repurchased stock is held as treasury stock by the Company. In connection with the public offering, the Company issued stock options covering 1,625,000 shares of common stock to its employees. Options for 1,300,000 shares vest and are exercisable at $10 per share in 20 equal quarterly installments which commenced with the quarter ended October 31, 1995. The remaining 325,000 options vest in five equal annual installments commencing January 1, 1996 and are exercisable at $10 per share. As of March 31, 1996, 195,000 options have vested and are exercisable. (6) SETTLEMENT OF CONTINGENCY In February 1996, the Company settled claims that it had submitted to arbitration against a joint venture partner alleging breach of contract and tortuous conduct. The claims arose under the terms of the Carmen Field Joint Venture Agreement dated May 26, 1993, between the Company and Magic Circle Acquisition Corporation ("Magic Circle"). The Company settled its claims by the agreement dated February 9, 1996. The settlement agreement provided for mutual releases of all claims arising out of the Carmen Field Joint Venture ("CFJV"), dissolution of the CFJV, assignment to the Company of its interest in the CFJV oil and natural gas properties, the payment of $3,349,000 to the Company, the transfer to the Company of its share of a small gathering system in Stephens County, Oklahoma, and the transfer to Magic Circle of gathering, processing and compression facilities in Alfalfa and Woodward Counties, Oklahoma. The Company recognized a net loss of $208,000, which included $212,000 of legal and accounting expenses, related to the transfer of the gathering, processing and compression facilities. (7) SUBSEQUENT EVENTS On April 16, 1996, the Company agreed to purchase, effective January 1, 1996, all of the Oklahoma oil and gas producing properties, mineral rights and leasehold acreage of Amerada Hess Corporation, except two fields in southwestern Oklahoma. The purchase price of $35,028,000 will be adjusted for the properties' revenues and expenses from the effective date to the date of closing. Closing is anticipated to be May 31, 1996. The acquisition will be financed primarily by borrowings under the Company's credit facility. 9 10 DLB OIL & GAS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) The acquisition includes ownership in 44 fields, nine of which DLB will operate, and 1,196 wells. Proved reserves attributable to the acquisition are independently estimated at approximately 7.22 Mmboe (million barrels of oil equivalent) and are divided approximately 43% oil and 57% natural gas. If the acquisition had been made January 1, 1996, the Company's total proved reserves would have increased approximately 77% from 9.4 Mmboe to approximately 16.6 Mmboe. DLB intends to use this strategically located property base to increase exploration and exploitation operations in its core area. The Company will also acquire approximately 15,100 miles of proprietary seismic data, geologic and well data, 67,981 net acres of leasehold rights, 11,358 net acres of mineral rights and interests in certain gas gathering and processing assets. 10 11 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion is intended to assist in an understanding of the Company's financial position as of March 31, 1996, and its results of operations for the three month periods ended March 31, 1996 and 1995. The Consolidated Financial Statements and Notes included in this report contain additional information and should be referred to in conjunction with this discussion. It is presumed that the readers have read or have access to DLB's 1995 annual report on Form 10-K. 11 12 RESULTS OF OPERATIONS The following table sets forth certain financial and production information of the Company.
FINANCIAL DATA (in thousands) THREE MONTHS ENDED MARCH 31, -------------------- 1996 1995 --------- -------- Revenues Oil $ 2,671 $ 2,917 Natural gas 1,810 1,323 --------- -------- 4,481 4,240 --------- -------- Natural gas gathering, processing & trans. 77 664 Interest & other income 196 365 --------- -------- 4,754 5,269 --------- -------- Expenses Lease operating (1) 1,211 1,238 General & administrative 727 329 Loss on sale of assets 208 -- --------- -------- 2,146 1,567 EBITDA (2) 2,608 3,702 Depreciation, depletion & amortization 1,794 1,631 Earnings before interest and taxes 814 2,071 Interest expense -- 179 Earnings before taxes 814 1,892 Income taxes Pro forma -- 757 Deferred 309 -- -------- -------- Net income $ 505 $ 1,135 ======== ======== PER SHARE DATA Net income $ 0.04 $ 0.11 ======== ======== Average shares outstanding (in thousands) 12,988 10,000 PRODUCTION DATA(in thousands except prices) Oil (Mbbl) 143 179 Natural gas (Mmcf) 883 756 Barrel oil equivalent (MBOE) 290 305 Oil ($/Bbl) $ 18.65 $ 16.30 Gas ($/Mcf) 2.05 1.75 $/BOE 15.43 13.90 EXPENSE DATA($/BOE) Lease operating $ 4.18 $ 4.06 Depreciation, depletion and amortization (3) 5.76 4.98 General and administrative 2.50 1.08 --------------------------------------------
(1) The components of lease operating expense may vary substantially among wells depending on the methods of recovery employed and other factors, but generally include production taxes, administrative overhead, maintenance and repairs, labor and utilities. (2) EBITDA is defined as earnings before interest, taxes, depreciation, depletion and amortization. (3) The DD&A reflected on a BOE basis excludes DD&A associated with gas plant, salt water disposal system, and other non-oil and gas property and equipment. 12 13 THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THE THREE MONTHS ENDED MARCH 31,1995 Revenues. Total revenues for the three months ended March 31, 1996 were $4.8 million, a reduction of $0.5 million from the comparable period in 1995. This decrease is primarily related to the dissolution of the CFJV. (See Note 6 to the Consolidated Financial Statements). The dissolution resulted in the sale of certain gas gathering and compression assets, which reduced gas gathering, processing and transportation revenues to $0.1 million for the three months ended March 31, 1996 from $0.7 million for the three months ended March 31, 1995. Additionally, other income for the three months ended March 31, 1996 was $0.2 million as compared to $0.4 million for the three months ended March 31, 1995. This decrease resulted from the loss of a one-time management fee associated with the termination of the Company's management agreement with LEDCO, Inc. in February, 1995. Production of oil and gas was 143 Mbbl and 883 Mmcf, respectively, in the first three months of 1996, as compared to 179 Mbbl and 756 Mmcf, respectively, in the same period of 1995. The increase in oil and gas sales revenues for the three months ended March 31, 1996, of $0.2 million was due to an increase in oil and gas prices from the same period in 1995. The average price received for oil increased to $18.65 per barrel in the first three months of 1996 from $16.30 in the three months ended March 31, 1995. The average price received for natural gas increased to $2.05 per Mcf in the three months ended March 31, 1996 from $1.75 per Mcf for the same period in 1995. Declines in oil production slightly exceeded increases in gas production on a BOE basis. Lease operating expense. Lease operating expenses remained constant at $1.2 million for the three months ended March 31, 1996 and 1995. On a BOE basis, lease operating expense was $4.17 per BOE for the three months ended March 31, 1996 as compared to $4.06 per BOE in the comparable period of 1995 due to a slight decline in production. Depreciation, depletion and amortization expense. Depreciation, depletion and amortization (DD&A) expense was $1.8 and $1.6 million for the three months ended March 31, 1996 and 1995, respectively. The DD&A rate related to oil and gas properties was $5.76 and $4.98 per BOE for the three months ended March 31, 1996 and 1995, respectively. The increase in DD&A per BOE resulted primarily from increased level of capital expenditures for exploration, development, waterfloods, property acquisitions, gas plant and gathering facilities and other property and equipment in the three months ended March 31, 1996 and as compared to1995. General and administrative expense. General and administrative expense increased to $0.7 million for the three months ended March 31, 1996, from $0.3 million in the comparable period in 1995. This increase was primarily attributable to general corporate expenses associated with being a publicly held company and the Company's higher level of activity following the July, 1995 initial public offering. Net loss on sale of assets. The Company recognized a net loss of $0.2 million on the sale of assets for the three months ended March 31, 1996 as a result of the dissolution of the CFJV and the related sale of gathering, processing and compression facilities. (See Note 6 to the Consolidated Financial Statements). Net income. Net income decreased to $0.5 million for the three months ended March 31, 1996 from $1.1 million for the three months ended March 31, 1995, as a result of the items discussed above. 13 14 CAPITAL EXPENDITURES, CAPITAL RESOURCES AND LIQUIDITY The following table presents comparative cash flows of the Company for the three months ended March 31, 1996 and 1995.
Three Months Ended March 31, ---------------------------- 1996 1995 ------------ ------------ (in thousands) Net cash provided by operating activities $ 2,818 $ 1,065 Net cash used in investing activities (7,606) (3,164) Net cash provided by (used in) financing activities (181) 523
Net cash provided from operating activities increased to $2.8 million from $1.1 million from 1995. This increase of $1.7 million relates primarily to a decrease in accounts receivable from the receipt of cash proceeds upon the dissolution of the CFJV. (See Note 6 to the Consolidated Financial Statements.) Net cash used in investing activities was $7.6 million for the first three months of 1996, as compared to $3.2 million in the first three months of 1995. The increase of $4.4 million is primarily attributable to additional expenditures for exploration, development, acquisitions of property and equipment and investments in senior unsecured notes. (See Note 3 to the Consolidated Financial Statements.) As of March 31, 1996, the Company had cash balances of $9.3 million and working capital of $8.8 million. The decrease in working capital of $4.9 million as of March 31, 1996, from $13.7 million as of December 31, 1995, is a result of capital expenditures made during the first three months of 1996. Capital expenditures. The following table sets forth the Company's expenditures for exploration, development, waterfloods and property acquisition, gas plant and gathering facilities and other property and equipment for the three months ended March 31, 1996 and 1995.
Three Months Ended March 31, ------------------------------ 1996 1995 ------------ ------------ (in thousands) Exploration costs $ 3,957 $ 1,245 Development costs 375 1,576 Waterflood costs 570 242 Property acquisition costs 34 16 Gas plant and gathering facilities 294 15 Other property and equipment 73 44 ------------ ------------ $ 5,303 $ 3,138 ============ ============
The Company intends to finance its capital expenditures with its remaining offering proceeds, cash flows provided by operations and borrowings under the credit facility. The Company expects to spend a total of $60.0 million on capital expenditures in 1996. Of this amount, $5.3 million had been 14 15 expended as of March 31, 1996, which includes $1.0 million related to the Osage Tribe of Indians Exploration and Development Agreement. In addition, as a result of the Amerada Hess acquisition, which is scheduled to close during the second quarter of 1996, the Company will spend approximately $35.0 million. (See Note 7 to the Consolidated Financial Statements.) The remaining budget of $19.7 million will be used for 2-D and 3-D seismic surveys, drilling activity and the acquisition of other mineral interests and leasehold properties. The aggregate level of capital expenditures in 1996 and the allocation thereof is highly dependent upon the Company's success rate on exploration drilling and prevailing conditions in the oil and gas industry. Accordingly, the actual level of capital expenditures may vary materially from the above estimates. Capital resources. Since DLB began operations in 1991, the Company's cash requirements were met primarily through capital contributions from shareholders, cash generated from operations and borrowings under its credit facilities. Such sources were inadequate to fund the Company's desired level of activities, and the Company undertook an initial public offering of its common stock, which was closed in July 1995. Net proceeds from the offering were approximately $26.9 million. Since its initial public offering, the Company has used offering proceeds along with cash flows from operations for cash requirements. The Company expects to borrow approximately $30.0 million to finance the Amerada Hess property acquisition. (See Note 7 to Consolidated Financial Statements). The proved oil and gas reserves added by this acquisition will increase the Company's borrowing base under its credit facility and should provide an additional $20.0 million of borrowing capacity. The Company expects that internal cash sources and borrowing capacity to be sufficient at least through December 31, 1996 to meet its capital expenditure plans. Capital needs beyond that period will depend substantially on the Company's success in employing working capital in exploration and development activities and the level of future activities as well as factors affecting the oil and gas industry generally. Liquidity. The ability of the Company to satisfy its obligations will depend upon its future performance, which will be subject to prevailing economic conditions and to financial and business conditions and other factors, many of which are beyond its control, supplemented, if necessary, with existing cash balances and borrowings under the credit facilities. The Company believes its capital resources are adequate to fund the capital expenditure program through at least the end of 1996. 15 16 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits required by item 602 of Regulation S-K are as follows: 3.1 Amended and Restated Certificate of Incorporation (1) 3.2 Amended and Restated Bylaws (1) 10.1 Lease of office space, Oklahoma City, Oklahoma (1) 10.2 Credit Agreement dated December 28, 1995, between Registrant and First Union National Bank of North Carolina (2) 10.3 Stock Option Agreement by and between Registrant and Mike Liddell (1) 10.4 Stock Option Agreement by and between Registrant and Mark Liddell (1) 10.5 Employment Agreement by and between Registrant and Mike Liddell (1) 10.6 Employment Agreement by and between Registrant and Mark Liddell (1) 10.7 DLB Oil & Gas Stock Option Plan (1) 10.8 DLB Oil & Gas Omnibus Equity Compensation Plan (1) 10.9 Shareholder's Agreement by and among Charles E. Davidson, Mike Liddell and Mark Liddell dated May 25, 1995 (1) 10.10 Agreement for Dissolution of Joint Venture dated February 9, 1996, between DLB Oil & Gas, Inc., Magic Circle Acquisition Corporation and Magic Circle Energy Corporation, Carmen Field Limited Partnership, and Carmen Field Joint Venture (2) _________________ (1) Previously filed as an exhibit to Registration No. 33-92786 on Form S-1 and incorporated herein by reference. (2) Previously filed as an exhibit to Form 10-K for the year ended December 31, 1995, and incorporated herein by reference. Copies of the foregoing exhibits filed with this report or incorporated by reference are available from the Company upon written request and payment of a reasonable copying fee. 16 17 (b) Registrant filed the following reports on Form 8-K's filed the quarter ended March 31, 1996: Form 8-K filed January 16, 1996, disclosing Registrant's 1995 activity and its 1996 outlook; Form 8-K filed February 16, 1996, disclosing Registrant's 1995 activity and its 1996 outlook; Form 8-K filed February 26, 1996, disclosing the dissolution of Registrant's Carmen Field Joint Venture with Magic Circle Energy Corporation; Form 8-K filed March 25, 1996, disclosing Registrant's fourth quarter and 1995 financial and operating results; and Form 8-K filed March 25, 1996, disclosing an exploration and development agreement with Osage Tribe of Indians of Oklahoma. Registrant filed a Form 8-K on April 22, 1996, disclosing an agreement to acquire oil and gas properties from Amerada Hess Corporation. 17 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. DLB OIL & GAS, INC. Date May 13, 1996 /s/ MARK LIDDELL -------------- ------------------------------------------ Mark Liddell, President Date May 13, 1996 /s/ RONALD D. YOUTSEY -------------- ------------------------------------------ Ronald D. Youtsey, Chief Financial Officer 18 19 INDEX TO EXHIBITS Exhibit No. Description ----------- ----------- 3.1 Amended and Restated Certificate of Incorporation (1) 3.2 Amended and Restated Bylaws (1) 10.1 Lease of office space, Oklahoma City, Oklahoma (1) 10.2 Credit Agreement dated December 28, 1995, between Registrant and First Union National Bank of North Carolina (2) 10.3 Stock Option Agreement by and between Registrant and Mike Liddell (1) 10.4 Stock Option Agreement by and between Registrant and Mark Liddell (1) 10.5 Employment Agreement by and between Registrant and Mike Liddell (1) 10.6 Employment Agreement by and between Registrant and Mark Liddell (1) 10.7 DLB Oil & Gas Stock Option Plan (1) 10.8 DLB Oil & Gas Omnibus Equity Compensation Plan (1) 10.9 Shareholder's Agreement by and among Charles E. Davidson, Mike Liddell and Mark Liddell dated May 25, 1995 (1) 10.10 Agreement for Dissolution of Joint Venture dated February 9, 1996, between DLB Oil & Gas, Inc., Magic Circle Acquisition Corporation and Magic Circle Energy Corporation, Carmen Field Limited Partnership, and Carmen Field Joint Venture (2) 27 Financial Data Schedule _________________ (1) Previously filed as an exhibit to Registration No. 33-92786 on Form S-1 and incorporated herein by reference. (2) Previously filed as an exhibit to Form 10-K for the year ended December 31, 1995, and incorporated herein by reference. Copies of the foregoing exhibits filed with this report or incorporated by reference are available from the Company upon written request and payment of a reasonable copying fee. EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1995 JAN-01-1996 MAR-31-1996 9,344 0 3,212 0 0 12,755 80,498 19,908 77,078 4,001 0 13 0 0 59,855 77,078 4,481 4,754 1,419 1,419 1,794 0 0 814 309 0 0 0 0 505 .04 .04
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