-----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, WNiHxlh5kt5HtG9nFcSyTUwIsjwpRbl2U893VpbPzPPrp2ZXPLuB0wp2BUa7aU+S WKdH+8pl1tznMPOnqaufrg== 0000950134-96-002161.txt : 19960517 0000950134-96-002161.hdr.sgml : 19960517 ACCESSION NUMBER: 0000950134-96-002161 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: AMEX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHOENIX RESOURCE COMPANIES INC CENTRAL INDEX KEY: 0000097483 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 951927105 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00547 FILM NUMBER: 96566016 BUSINESS ADDRESS: STREET 1: 6525 N MERIDIAN AVE STREET 2: SUITE 102 CITY: OKLAHOMA CITY STATE: OK ZIP: 73116-1491 BUSINESS PHONE: 4057285100 MAIL ADDRESS: STREET 1: 6525 N MERIDIAN AVENUE STREET 2: SUITE 102 CITY: OKLAHOMA CITY STATE: OK ZIP: 73116-1491 FORMER COMPANY: FORMER CONFORMED NAME: TEXAS INTERNATIONAL CO DATE OF NAME CHANGE: 19900415 FORMER COMPANY: FORMER CONFORMED NAME: TEXAS INTERNATIONAL PETROLEUM CORP DATE OF NAME CHANGE: 19720201 FORMER COMPANY: FORMER CONFORMED NAME: NORDON CORP LTD DATE OF NAME CHANGE: 19700407 10-Q 1 FORM 10-Q PERIOD END MARCH 31, 1996 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended MARCH 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to _________ Commission file number 1-547 __________________________ THE PHOENIX RESOURCE COMPANIES, INC. (Exact name of registrant as specified in its charter) Delaware 95-1927105 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 6525 North Meridian Avenue Oklahoma City, Oklahoma 73116-1491 (Address of Principal Executive Offices) (Zip Code) (405) 728-5100 (Registrant's Telephone Number, Including Area Code) __________________________ Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: At May 8, 1996 there were 16,099,880 shares of the registrant's common stock outstanding. 2 TABLE OF CONTENTS
Page PART I Consolidated Statement of Income - Three Months Ended March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . 3 Consolidated Balance Sheet at March 31, 1996 and December 31, 1995 . . . . . . . . . . . . . . . 4 Consolidated Statement of Cash Flows - Three Months Ended March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . 5 Notes to Unaudited Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . 6 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . 8 PART II Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2 3 THE PHOENIX RESOURCE COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (In thousands, except per share amounts) (Unaudited)
Three Months Ended March 31, ------------------------ 1996 1995 ----------- --------- Revenues: Oil and gas revenues . . . . . . . . . . . . . . . . . . . . . . . . $ 9,107 $ 5,486 Revenues dedicated to foreign tax liability . . . . . . . . . . . . . 3,329 2,831 ------ ------- Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . 12,436 8,317 Interest and other income . . . . . . . . . . . . . . . . . . . . . . 413 370 ------ ------- 12,849 8,687 ------ ------- Costs and Expenses: Production costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,183 1,377 Depreciation, depletion and amortization . . . . . . . . . . . . . . . 2,282 795 General and administrative . . . . . . . . . . . . . . . . . . . . . . 751 547 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 -- Merger costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334 -- ------ ------- 5,759 2,719 ------ ------- Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . 7,090 5,968 Provision for income taxes: U.S. alternative minimum tax . . . . . . . . . . . . . . . . . . . . . 66 53 Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,329 2,831 ------ ------- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,695 $ 3,084 ====== ======= Income Per Share: Weighted average common and common equivalent shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . 16,798 15,984 ====== ======= Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.22 $ 0.19 ====== =======
The accompanying notes are an integral part of this statement. 3 4 THE PHOENIX RESOURCE COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (In thousands, except per share data) ASSETS
MARCH 31, December 31, 1996 1995 ------------- ----------- Current Assets: (Unaudited) Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 25,377 $ 22,759 Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . 7,408 5,639 Receivable for payment of foreign taxes . . . . . . . . . . . . . 11,026 11,026 Other current assets . . . . . . . . . . . . . . . . . . . . . . . 3,843 2,072 -------- -------- 47,654 41,496 -------- -------- Property and Equipment, at cost: Oil and gas properties (using full cost accounting) . . . . . . . 51,398 40,842 Other property and equipment . . . . . . . . . . . . . . . . . 923 983 -------- -------- 52,321 41,825 Less: Accumulated depreciation, depletion and amortization . . . . . 20,895 18,672 -------- -------- Net Property and Equipment . . . . . . . . . . . . . . . . . . . . 31,426 23,153 Deferred Receivable for payment of foreign taxes . . . . . . . . . . 6,326 2,997 Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 957 687 -------- -------- $ 86,363 $ 68,333 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . $ 875 $ 562 Accrued foreign taxes . . . . . . . . . . . . . . . . . . . . . . 11,026 11,026 Other accrued liabilities . . . . . . . . . . . . . . . . . . . . 1,262 952 -------- -------- 13,163 12,540 -------- -------- Long-Term Obligations: Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . 12,500 -- Deferred foreign taxes . . . . . . . . . . . . . . . . . . . . . . 6,326 2,997 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . 1,173 988 -------- -------- 19,999 3,985 -------- -------- Commitments and Contingencies (Note 5) Stockholders' Equity: Preferred stock, par value $0.01 (authorized 5,000 shares, none outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- Common stock, par value $0.01 (authorized 20,000 shares, 16,098 shares outstanding in 1996 and 16,190 in 1995) . . . . . . . . . 170 170 Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 45,190 45,170 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 15,493 12,281 Treasury stock, at cost (864 shares in 1996 and 772 shares in 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,652) (5,813) -------- -------- 53,201 51,808 -------- -------- $ 86,363 $ 68,333 ======== ========
The accompanying notes are an integral part of this balance sheet. 4 5 THE PHOENIX RESOURCE COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (In thousands) (Unaudited)
Three Months Ended March 31, ------------------------ 1996 1995 ----------- --------- Cash flows from operating activities: Cash received from purchasers . . . . . . . . . . . . . . . . . . . . $ 7,560 $ 3,746 Cash paid to suppliers and employees . . . . . . . . . . . . . . . . . (4,281) (2,502) Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . -- (23) Interest and other cash receipts . . . . . . . . . . . . . . . . . . . 318 315 ------- -------- Net cash provided by operating activities . . . . . . . . . . . . . 3,597 1,536 ------- -------- Cash flows from investing activities: Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . (10,819) (2,195) -------- -------- Net cash used in investing activities . . . . . . . . . . . . . . . (10,819) (2,195) -------- -------- Cash flows from financing activities: Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . 12,500 -- Debt issue cost . . . . . . . . . . . . . . . . . . . . . . . . . . . (321) -- Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . (1,905) (1,421) Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . (483) (311) Proceeds from stock options exercised . . . . . . . . . . . . . . . . 49 -- ------- -------- Net cash provided by (used in) financing activities . . . . . . . . 9,840 (1,732) ------- -------- Net increase (decrease) in cash and cash equivalents . . . . . . . . . . 2,618 (2,391) Cash and cash equivalents, beginning of period . . . . . . . . . . . . . 22,759 26,536 ------- -------- Cash and cash equivalents, end of period . . . . . . . . . . . . . . $ 25,377 $ 24,145 ======== ======== Reconciliation of net income to net cash provided by operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,695 $ 3,084 -------- -------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization . . . . . . . . . . . . . . 2,282 795 Capitalized general and administrative . . . . . . . . . . . . . . . (701) (172) Increase in accounts receivable related to operating activities . . (1,769) (1,988) Increase (decrease) in accounts payable related to operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 (78) Increase (decrease) in accrued liabilities related to operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310 (294) Other noncash items . . . . . . . . . . . . . . . . . . . . . . . . (318) 189 -------- -------- Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . (98) (1,548) -------- --------- Net cash provided by operating activities . . . . . . . . . . . $ 3,597 $ 1,536 ======== ========
The accompanying notes are an integral part of this statement. 5 6 THE PHOENIX RESOURCE COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES: All references herein to the "Company" mean The Phoenix Resource Companies, Inc. and/or one or more of its wholly-owned subsidiaries. The accompanying unaudited consolidated financial statements and notes thereto have been prepared in accordance with accounting policies set forth in the Company's 1995 Annual Report on Form 10-K and should be read in conjunction with the Notes to Consolidated Financial Statements therein. The financial statements reflect all adjustments, consisting of normal recurring accruals, which the Company considers necessary for a fair presentation of the financial position and the results of operations for such periods. NOTE 2 -- PROPOSED MERGER: A special meeting of the Company's stockholders will be held on May 20, 1996 to consider the approval of a merger (the "Merger") of the Company and Apache Corporation ("Apache"). Pursuant to the Agreement and Plan of Merger, dated March 27, 1996 (the "Merger Agreement"), if a majority of the stockholders of the Company approve the Merger and certain other conditions are satisfied or waived, each outstanding share of common stock of the Company will be converted into the right to receive .75 shares of Apache common stock and $4.00 in cash, and the Company will become a wholly-owned subsidiary of Apache, all as more particularly described in the Proxy Statement/Prospectus related thereto dated April 17, 1996. If the Merger is consummated the Company will pay, as a result of the Merger, the following amounts: (i) a transaction fee to its investment banker, Petrie Parkman & Co., in the amount of $3.5 million; (ii) payments pursuant to certain employment contracts to executive officers of the Company in an aggregate amount of approximately $1.8 million; (iii) deferred incentive compensation plan payments to executive officers of the Company in an aggregate amount of approximately $1.3 million; (iv) annual incentive compensation plan payments to executive officers of the Company in an aggregate amount of approximately $0.3 million; and (v) other miscellaneous amounts of approximately $0.3 million. Of the foregoing amounts, $0.8 million had been accrued as of March 31, 1996. In addition, whether or not the Merger is consummated, the Company has and will incur in connection with the Merger Agreement up to an additional approximately $0.7 million in professional expenses, printing costs and other expenses which have not yet been accrued. NOTE 3 -- LONG-TERM DEBT: During the first quarter of 1996, the Company completed a $50 million project financing for the Qarun Concession development and borrowed $12.5 million under the loan facility. This financing was arranged by the International Finance Corporation, an affiliate of the World Bank. The loan is secured by the stock and assets of the Company's wholly-owned subsidiary, Phoenix Resources Company of Qarun, and prior to the completion of the development project the loan is guaranteed by the Company. Interest payments will commence June 15, 1996 and will be payable semi- annually at a rate equal to the London Inter-Bank Offered Rate plus 2-3/8% to 3%. Semi-annual principal payments commence June 15, 1998 and continue through 2002. NOTE 4 -- CAPITAL STOCK AND OPTIONS: Capital Stock - A two-for-one split of the number of shares of Common Stock outstanding was effected in September 1995. All references in the accompanying first quarter 6 7 1995 financial statements to the number of common shares and per share amounts have been restated to reflect the split. On February 16, 1996 the Company purchased 100,000 shares of its Common Stock in open market transactions at a price of $19 per share. As of March 31, 1996 a total of 864,164 shares of Common Stock were held as Treasury Stock. NOTE 5 -- COMMITMENTS AND CONTINGENCIES: Substantially all of the Company's operations and reserves are located in Egypt and, therefore, are subject to certain risks relating to economic and political stability in Egypt and the surrounding region. The Company is exposed to certain risks due to its concentration of Egyptian operations, which include possible changes in Egyptian laws, particularly relating to foreign investments and taxation, renegotiation or modification of existing contracts and expropriation. Adverse developments in Egypt and future changes in Egyptian governmental regulations and policies could have a material adverse effect on the Company. The Company does not insure against loss of production or political risks. Egypt retains the right of requisition of production from Egyptian concessions and cancellation of the concession agreements upon the occurrence of specific events, including a national emergency due to war, imminent expectation of war or internal causes, unauthorized assignment of interests in the concession, the concession holder being adjudicated bankrupt by a court of competent jurisdiction and intentional extraction of any mineral not authorized by the concession agreement. Requisition or cancellation of the Company's concession agreements as a result of the foregoing or for any other reasons would have a material adverse effect on the Company. A portion of the Company's operating revenues represents the sale of crude oil produced from Egyptian concessions and allocated to the Company for reimbursement of operating, development and exploration costs. These costs are subject to review and approval by EGPC. Management does not expect the amount of costs rejected for reimbursement by EGPC to have a material adverse effect on the Company's financial position or results of operations. Various lawsuits are pending against the Company. Management is of the opinion, based on advice of independent legal counsel, that the ultimate outcome of all pending litigation is highly unlikely to have a material effect on the financial position or results of operations of the Company. 7 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following discussion and analysis of the quarter ended March 31, 1996 compared to March 31, 1995 should be read in conjunction with the Consolidated Financial Statements and Notes thereto. Net income for the first quarter of 1996 was $3.7 million, a 20% increase compared to the same period of 1995. Net operating revenues (oil and gas revenues less production costs) for the first quarter of 1996 increased $2.8 million, or 69%, compared to the first quarter of 1995. The increases in net income and net operating revenues were primarily due to production from the Qarun Concession, which commenced in late November 1995, and higher oil prices. Average daily gross oil production from the Qarun Concession was 5,459 barrels per day for the first quarter of 1996. Average daily gross oil production from the Khalda Concession was 31,461 barrels per day for the first quarter of 1996 compared to 31,372 barrels per day in the same period of 1995. The average price for the first quarter of 1996 was $18.61 per barrel, 11% higher than the $16.83 per barrel received in the first quarter of 1995. Depreciation, depletion and amortization ("DD&A") for the first quarter of 1996 increased $1.5 million, or 187%, compared to the first quarter of 1995 primarily due to the inclusion of costs attributable to proved reserves added from the Qarun Concession. The costs recognized on the Qarun Concession for DD&A purposes include future costs for central processing, pipeline and storage facilities, which facilities may be utilized to handle production volumes from subsequent additions to proved reserves. Accordingly, costs attributable to future reserves in Qarun, if and when added, could be less per barrel than that applicable to reserves presently considered proved on the Qarun Concession. General and administrative expense for the first quarter of 1996 increased $0.2 million, or 37%, compared to the first quarter of 1995 primarily due to an increase in the accrual for deferred incentive compensation as a result of an increase in the market price of the Company's Common Stock. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 1996 the Company's working capital (current assets less current liabilities) was $34.5 million, which included cash and cash equivalents of $25.4 million. Net cash provided by operating activities for the quarter ended March 31, 1996 was $3.6 million. Net cash provided by financing activities for the quarter ended March 31, 1996 was $9.8 million. Cash utilized in investing activities was $10.8 million, which was primarily used for development of the Qarun Concession. The Company's current sources of liquidity are working capital, cash flow from operations and a $50 million project financing facility provided by the International Finance Corporation to fund the Company's share of expenditures in the Qarun Concession. In early 1996 the Company borrowed $12.5 million under this facility. Interest payments on the loan facility will commence June 15, 1996 and will be payable semi-annually at a rate equal to the London Inter-Bank Offered Rate plus 2-3/8% to 3%. Semi-annual principal payments commence June 15, 1998 and continue through 2002. The Company believes that its current sources of liquidity are sufficient to meet its obligations during the next 12 months. Excess working capital and net cash flow from operations would be available to fund the development of any of the Company's exploratory successes; to participate in the development of natural gas reserves in the Khalda Concession, including the 8 9 unified Western Desert natural gas pipeline project, if such project is commenced; and to pursue other oil and gas opportunities that may be identified by the Company. To the extent these sources of liquidity are deemed to be inadequate to fund such activities, the Company believes additional external sources of capital would be available. 9 10 PART II Exhibits None. Current Reports on Form 8-K A Current Report on Form 8-K dated March 27, 1996, regarding the proposed merger with Apache Corporation, was filed by the Company, pursuant to Item 5. Other Events. 10 11 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE PHOENIX RESOURCE COMPANIES, INC. ------------------------------------ (Registrant) By: /s/Cheryl A. Rich ------------------------------------------ Cheryl A. Rich Vice President & Chief Financial Officer (Principal Financial & Accounting Officer) DATE: May 14, 1996 11 12 EXHIBIT INDEX Exhibit Number Description - ------- ----------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 25,377 0 7,408 0 0 47,654 52,321 20,895 86,363 13,163 12,500 170 0 0 53,031 86,363 12,436 12,849 2,183 5,550 0 0 209 7,090 3,395 3,695 0 0 0 3,695 0.22 0.22
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