<PAGE>
================================================================================
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 September 30, 1997
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 1-14344
__________________________
PATINA OIL & GAS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-2629477
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1625 Broadway
Denver, Colorado 80202
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (303) 389-3600
Title of class Name of exchange on which listed
___________________________________________ ________________________________
Common Stock, $.01 par value New York Stock Exchange
Convertible Preferred Stock, $.01 par value New York Stock Exchange
Common Stock Warrants New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 ___________.
-----------
There were 15,854,981 shares of common stock outstanding on October 27, 1997.
================================================================================
<PAGE>
PART I. FINANCIAL INFORMATION
Patina Oil & Gas Corporation (the "Company") was formed in early 1996
to hold the assets and operations of Snyder Oil Corporation ("SOCO") in the
Wattenberg Field and to facilitate the acquisition of Gerrity Oil & Gas
Corporation ("GOG Acquisition"). The results of operations of the Company for
periods prior to the GOG Acquisition reflected in these financial statements
include only the historical results of SOCO's Wattenberg operations.
The financial statements included herein have been prepared in
conformity with generally accepted accounting principles. The statements are
unaudited but reflect all adjustments which, in the opinion of management, are
necessary to fairly present the Company's financial position and results of
operations.
2
<PAGE>
PATINA OIL & GAS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents $ 6,153 $ 9,751
Accounts receivable 19,977 13,017
Inventory and other 1,457 3,162
--------- ---------
27,587 25,930
--------- ---------
Oil and gas properties, successful efforts method 559,072 567,471
Accumulated depletion, depreciation and amortization (160,432) (195,105)
--------- ---------
398,640 372,366
--------- ---------
Gas facilities and other 6,421 5,261
Accumulated depreciation (4,917) (3,684)
--------- ---------
1,504 1,577
--------- ---------
Other assets, net 2,502 1,541
--------- ---------
$ 430,233 $ 401,414
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 15,063 $ 19,901
Accrued liabilities 11,509 6,762
--------- ---------
26,572 26,663
--------- ---------
Senior debt 94,500 72,000
Subordinated notes 103,094 97,683
Other noncurrent liabilities 9,831 7,372
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par, 5,000,000 shares
authorized, 1,593,608 and 1,467,926 shares issued
and outstanding 16 15
Common stock, $.01 par, 40,000,000 shares
authorized, 18,886,932 and 18,821,184 shares
issued and outstanding 189 188
Capital in excess of par value 194,066 189,629
Retained earning 1,965 7,864
--------- ---------
196,236 197,696
--------- ---------
$ 430,233 $ 401,414
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
PATINA OIL & GAS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1996 1997 1996 1997
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues
Oil and gas sales $22,729 $21,252 $52,546 $73,365
Other 368 451 661 679
------- ------- ------- -------
23,097 21,703 53,207 74,044
------- ------- ------- -------
Expenses
Direct operating 4,161 4,185 9,562 13,507
Exploration 18 58 167 121
General and administrative 1,547 1,186 4,661 3,797
Interest and other 4,808 3,988 9,787 12,473
Depletion, depreciation and amortization 13,232 11,487 31,955 36,263
------- ------- ------- -------
Income (loss) before taxes (669) 799 (2,925) 7,883
------- ------- ------- -------
Provision (benefit) for income taxes
Current - - - -
Deferred - - (394) -
------- ------- ------- -------
- - (394) -
------- ------- ------- -------
Net income (loss) $ (669) $ 799 $(2,531) $ 7,883
======= ======= ======= =======
Net income (loss) per common share $ (.07) $ .01 $ (.23) $ .31
======= ======= ======= =======
Weighted average shares outstanding 19,866 18,901 17,271 18,908
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
PATINA OIL & GAS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Capital Retained
--------------------- --------------------- Excess of Investment Earnings
Shares Amount Shares Amount Par Value By Parent (Deficit)
------- ------- ------ ------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 - $ - 14,000 $140 $ - $ 113,523 $ -
Credit in lieu of taxes - - - - - 171 -
Change in investment by parent - - - - - (7,514) -
Net loss through the GOG Acquisition date - - - - - (532) -
GOG Acquisition 1,205 12 6,000 60 194,291 (105,648) -
Issuance of common - - 4 - 27 - -
Repurchase of common and warrants - - (1,117) (11) (9,722) - -
Issuance of preferred 389 4 - - 9,470 - -
Preferred dividends - - - - - - (2,129)
Net income subsequent to the
GOG Acquisition - - - - - - 4,094
----- ------- ------ ---- -------- --------- -------
Balance, December 31, 1996 1,594 16 18,887 189 194,066 - 1,965
Issuance of common - - 5 - 40 - -
Repurchase of common and preferred (126) (1) (71) (1) (4,477) - -
Preferred dividends - - - - - - (1,984)
Net income - - - - - - 7,883
----- ------- ------ ---- -------- --------- -------
Balance, September 30, 1997 (Unaudited) 1,468 $ 15 18,821 $188 $189,629 $ - $ 7,864
===== ======= ====== ==== ======== ========= =======
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
PATINA OIL & GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
------------------
1996 1997
------ -----
(UNAUDITED)
<S> <C> <C>
Operating activities
Net income (loss) $ (2,531) $ 7,883
Adjustments to reconcile net income (loss) to net
cash provided by operations
Exploration expense 167 121
Depletion, depreciation and amortization 31,955 36,263
Deferred taxes (394) -
Amortization of deferred credits (605) -
Gain on sale of oil and gas properties - (338)
Changes in current and other assets and liabilities
Decrease in
Accounts receivable 4,904 6,838
Inventory and other 304 61
Increase (decrease) in
Accounts payable (4,085) 4,715
Accrued liabilities 1,428 (4,425)
Other liabilities 2,357 (2,417)
-------- --------
Net cash provided by operations 33,500 48,701
-------- --------
Investing activities
Acquisition, development and exploration (3,042) (11,759)
Other (2,019) -
Sale of oil and gas properties 1,111 1,030
-------- --------
Net cash used by investing (3,950) (10,729)
-------- --------
Financing activities
Decrease in debt to parent (80,288) -
Increase (decrease) in indebtedness 79,783 (27,911)
Deferred credits 814 -
Change in investment by parent (7,514) -
Cost of common stock issuance (11,534) -
Repurchase of common and preferred stock (923) (4,479)
Preferred dividends (1,419) (1,984)
-------- --------
Net cash used by financing (21,081) (34,374)
-------- --------
Increase in cash 8,469 3,598
Cash and equivalents, beginning of period 1,000 6,153
-------- --------
Cash and equivalents, end of period $ 9,469 $ 9,751
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
PATINA OIL & GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND NATURE OF BUSINESS
Patina Oil & Gas Corporation (the "Company"), is an independent energy company
engaged in the acquisition, development, exploitation and production of oil and
natural gas in the Wattenberg field ("Wattenberg") of Colorado's Denver-
Julesburg Basin (the "D-J Basin"). The Company was formed in early 1996 to hold
the Wattenberg assets of Snyder Oil Corporation ("SOCO") and to facilitate the
acquisition of Gerrity Oil & Gas Corporation (the "GOG Acquisition"), in May
1996.
The above transactions were accounted for as a purchase of GOG. The amounts
and results of operations of the Company for periods prior to the GOG
Acquisition include the historical amounts and results of SOCO's Wattenberg
operations. Certain amounts in the accompanying financial statements have been
allocated in a reasonable and consistent manner in order to depict the
historical financial position, results of operations and cash flows of the
Company on a stand-alone basis prior to the GOG Acquisition.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Producing Activities
The Company utilizes the successful efforts method of accounting for its oil
and gas properties. Leasehold costs are capitalized when incurred. Unproved
properties are assessed periodically within specific geographic areas and
impairments in value are charged to expense. Exploratory expenses, including
geological and geophysical expenses and delay rentals, are charged to expense as
incurred. Exploratory drilling costs are initially capitalized, but charged to
expense if and when the well is determined to be unsuccessful. Costs of
productive wells, unsuccessful developmental wells and productive leases are
capitalized and amortized on a unit-of-production basis over the life of the
remaining proved or proved developed reserves, as applicable. Gas is converted
to equivalent barrels at the rate of six Mcf to one barrel. Amortization of
capitalized costs has generally been provided over the entire D-J Basin as the
wells are located in the same reservoir. No accrual has been provided for
future abandonment costs as management estimates that salvage value will
approximate such costs.
In 1995, the Company adopted Statement of Financial Accounting Standards No.
121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets." SFAS
121 requires the Company to assess the need for an impairment of capitalized
costs of oil and gas properties on a field-by-field basis. During the nine
months ended September 30, 1996 and 1997, the Company did not provide for any
impairments. Changes in the underlying assumptions, including oil and gas
prices, or the amortization units could, however, result in impairments in the
future.
7
<PAGE>
Other Assets
Other assets reflect the value assigned to a noncompete agreement entered into
as part of the GOG Acquisition. The value is being amortized over five years at
a rate intended to approximate the decline in the value of the agreement.
Amortization expense for the nine months ended September 30, 1996 and 1997 was
$1,603,000 and $1,333,000, respectively. Scheduled amortization for the next
four years is $167,000 for the remainder of 1997, $500,000 in 1998, and $250,000
in each of 1999 and 2000.
Section 29 Tax Credits
The Company from time to time enters into arrangements to monetize its Section
29 tax credits. These arrangements result in revenue increases of approximately
$.40 per Mcf on production volumes from qualified Section 29 properties. As a
result of such arrangements, the Company recognized additional gas revenues of
$1.2 million and $1.3 million during the nine months ended September 30, 1996
and 1997, respectively. These arrangements are expected to increase revenues
through 2002.
Gas Imbalances
The Company uses the sales method to account for gas imbalances. Under this
method, revenue is recognized based on the cash received rather than the
Company's proportionate share of gas produced. Gas imbalances at December 31,
1996 and September 30, 1997 were insignificant.
Financial Instruments
The book value and estimated fair value of cash and equivalents was $6.2
million and $9.8 million at December 31, 1996 and September 30, 1997. The book
value approximates fair value due to the short maturity of these instruments.
The book value and estimated fair value of the Company's senior debt was $94.5
million and $72.0 million at December 31, 1996 and September 30, 1997. The fair
value is presented at face value given its floating rate structure. The book
value of the Senior Subordinated Notes ("Subordinated Notes" or "Notes") was
$103.1 million and $97.7 million at December 31, 1996 and September 30, 1997 and
the estimated fair value was $105.6 million and $100.6 million at December 31,
1996 and September 30, 1997, respectively. The fair value is estimated based on
the market price of the Notes on the New York Stock Exchange.
From time to time, the Company hedges a portion of its physical oil and
natural gas production utilizing a variety of instruments, including fixed price
swaps and options and exchange-traded futures contracts and options thereon.
Gains and losses on such contracts are deferred and recognized in income as an
adjustment to oil and gas sales revenues in the period to which the contracts
relate. The Company currently has approximately 50% of its projected natural
gas production and approximately 42% of its projected oil production hedged in
the fourth quarter of 1997 and approximately 33% of its projected gas production
and approximately 23% of the projected oil production hedged in the first
quarter of 1998.
In 1997, the Company entered into various oil and gas hedging contracts. The
Company recognized $19,000 of oil hedging gains and $1.7 million of gas hedging
gains related to these contracts based on settlements during the nine months
ended, September 30, 1997. These gains were reflected as additions to oil and
gas revenues in the period settled.
8
<PAGE>
Risks and Uncertainties
Historically, the market for oil and gas has experienced significant price
fluctuations. Prices for natural gas in the Rocky Mountain region have
traditionally been particularly volatile and have generally been depressed since
1994. In large part, the decreased prices are the result of mild weather,
increased production in the region and limited transportation capacity to other
regions of the country. Increases or decreases in prices received could have a
significant impact on the Company's future results of operations.
Other
All liquid investments with an original maturity of three months or less are
considered to be cash equivalents. Certain amounts in prior period consolidated
financial statements have been reclassified to conform with current
classification.
All cash payments for income taxes were made by SOCO through May 2, 1996 at
which point the Company began paying its own taxes. The Company was charged
interest by SOCO on its debt to SOCO of $1.6 million through May 2, 1996, which
was reflected as an increase in debt to SOCO.
In the opinion of management, those adjustments to the financial statements
(all of which are of a normal and recurring nature) necessary to present fairly
the financial position and results of operations have been made. These interim
financial statements should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
9
<PAGE>
(3) OIL AND GAS PROPERTIES
The cost of oil and gas properties at December 31, 1996 and September 30, 1997
includes approximately $7.0 million of proved undeveloped leasehold costs.
Acreage is generally held for exploration, development or resale and its value,
if any, is excluded from amortization. The following table sets forth costs
incurred related to oil and gas properties.
<TABLE>
<CAPTION>
NINE
YEAR ENDED MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
Acquisition $218,380 $ 337
Development 8,301 11,321
Exploration and other 224 121
-------- -------
$226,905 $11,779
======== =======
</TABLE>
In May 1996, the GOG Acquisition discussed in Note 1 was consummated. The
following table summarizes the unaudited pro forma effects on the Company's
financial statements assuming that the GOG Acquisition and the Exchange Offer
had been consummated on January 1, 1996. Future results may differ
substantially from pro forma results due to changes in these assumptions,
changes in oil and gas prices, production declines and other factors.
Therefore, pro forma statements cannot be considered indicative of future
operations. The pro forma results for the nine months ended September 30, 1996
are as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
<S> <C>
Total revenues $70,157
Total expenses $57,396
Depletion, depreciation and amortization $40,607
Net income (loss) $(6,191)
Net income (loss) per common share $ (.31)
Weighted average shares outstanding 19,943
</TABLE>
(4) INDEBTEDNESS
The following indebtedness was outstanding on the respective dates:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Bank facility $ 94,500 $72,000
Less current portion - -
-------- -------
Senior debt, net $ 94,500 $72,000
======== =======
Subordinated notes $103,094 $97,683
======== =======
</TABLE>
10
<PAGE>
In April 1997, the Company entered into an amended bank credit agreement (the
"Facility"). The Facility is a revolving credit facility in an aggregate amount
up to $140.0 million. The amount available under the Facility is adjusted
semiannually and equaled $110.0 million at September 30, 1997, with $72.0
million outstanding under the revolving credit facility.
The borrower may elect that all or a portion of the Facility bear interest at
a rate equal to: (i) the higher of (a) prime rate plus a margin equal to .25%
(the "Applicable Margin") or (b) the Federal Funds Effective Rate plus .5% plus
the Applicable Margin, or (ii) the rate at which Eurodollar deposits for one,
two, three or six months (as selected by the Company) are offered in the
interbank Eurodollar market plus a margin which fluctuates from .625% to 1.125%,
determined by a debt to EBITDA ratio. During the nine months ended September
30, 1997, the average interest rate under the Facility approximated 6.8%.
The bank credit agreement contains certain financial covenants, including but
not limited to, a maximum total debt to capitalization ratio, a maximum total
debt to EBITDA ratio and a minimum current ratio. The bank credit agreement
also contains certain negative covenants, including but not limited to
restrictions on indebtedness; certain liens; guaranties, speculative derivatives
and other similar obligations; asset dispositions; dividends, loans and
advances; creation of subsidiaries; investments; leases; acquisitions; mergers;
changes in fiscal year; transactions with affiliates; changes in business
conducted; sale and leaseback and operating lease transactions; sale of
receivables; prepayment of other indebtedness; amendments to principal
documents; negative pledge clauses; issuance of securities; and non-speculative
commodity hedging.
In conjunction with the GOG Acquisition, the Company assumed $100 million of
11.75% Senior Subordinated Notes due July 15, 2004 issued by GOG in 1994. Under
purchase accounting, the Notes have been reflected in the accompanying financial
statements at a book value of 105.875% of their principal amount. Interest is
payable each January 15 and July 15. The Notes are redeemable at the option of
the Company, in whole or in part, at any time on or after July 15, 1999,
initially at 105.875% of their principal amount, declining to 102.938% on or
after July 15, 2000 and declining to 100% on or after July 15, 2001. Upon a
change of control, as defined in the Notes, the Company is obligated to make an
offer to purchase all outstanding Notes at a price of 101% of the principal
amount thereof. In addition, the Company would be obligated, subject to certain
conditions, to make offers to purchase the Notes with the net cash proceeds of
certain asset sales or other dispositions of assets at a price of 101% of the
principal amount thereof. Subsequent to the GOG Acquisition, the Company
repurchased and retired $7.7 million of the Notes, resulting in $92.3 million of
principal amount of Notes outstanding, or a book value of $97.7 million in the
accompanying financial statements. The Notes are unsecured general obligations
of the Company and are subordinated to all senior indebtedness of the Company
and to any existing and future indebtedness of the Company's subsidiaries.
The Notes contain covenants that, among other things, limit the ability of the
Company to incur additional indebtedness, pay dividends, engage in transactions
with shareholders and affiliates, create liens, sell assets, engage in mergers
and consolidations and make investments in unrestricted subsidiaries.
Specifically, the Notes restrict the Company from incurring indebtedness
(exclusive of the Notes) in excess of approximately $51 million, if after giving
effect to the incurrence of such additional indebtedness and the receipt and
application of the proceeds therefrom, the Company's interest coverage ratio is
less than 2.5:1 or adjusted consolidated net tangible assets is less than 150%
of the aggregate indebtedness of the Company. The Company currently meets these
ratios and accordingly, is not limited in its ability to incur additional debt.
11
<PAGE>
Prior to the GOG Acquisition, SOCO financed all of the Company's activities.
A portion of such financing was considered to be an investment by parent in the
Company with the remaining portion being considered debt to parent. The portion
considered to be debt to parent versus an investment by parent was a
discretionary percentage determined by SOCO after consideration of the Company's
internally generated cash flows and level of capital expenditures. Subsequent
to the GOG Acquisition, the $75.0 million debt to parent was paid in full.
On the portion of such financing which was considered to be debt to parent,
SOCO charged interest at a rate which approximated the average interest rate
being paid by SOCO under its revolving credit facility (6.9% for the four months
ended May 2, 1996).
Scheduled maturities of indebtedness for the next five years are zero for the
remainder of 1997, 1998 and 1999, and $72.0 million in 2000, and zero in 2001.
The long-term portions of the Facility are scheduled to expire in 2000; however,
it is management's intent to review both the short-term and long-term facilities
and extend the maturities on a regular basis.
Cash payments for interest were $8.2 million and $15.5 million for the nine
months ended September 30, 1996 and 1997, respectively.
(5) STOCKHOLDERS' EQUITY
A total of 40.0 million common shares, $.01 par value, are authorized of which
18.8 million were issued and outstanding at September 30, 1997. Of the 18.8
million shares outstanding, 2.0 million are designated as Series A Common Stock.
The Series A Common Stock is identical to the common shares except that the
Series A Common Stock is entitled to three votes per share rather than one vote
per share. The Series A Common Stock is owned by SOCO and reverts to regular
common shares under certain conditions. During the first nine months of 1997,
the Company repurchased 70,500 shares of common stock and 125,682 preferred
shares for $4.5 million. No dividends have been paid on common stock as of
September 30, 1997.
A total of 5.0 million preferred shares, $.01 par value, are authorized of
which 1.5 million were issued and outstanding at September 30, 1997. The stock
is convertible into common stock at any time at $8.61 per share. The 7.125%
preferred stock pays dividends, when declared by the Board of Directors, based
on an annual rate of $1.78 per share. The preferred stock is redeemable at the
option of the Company at any time after May 2, 1998 if the average closing price
of the Company's common stock for 20 of the 30 days prior to not less than five
days preceding the redemption date is greater than $12.92 per share, or at any
time after May 2, 1999. The liquidation preference is $25 per share, plus
accrued and unpaid dividends. The Company paid $2.0 million ($.4453 per
preferred share per quarter) in preferred dividends during the nine months ended
September 30, 1997 and had accrued an additional $321,000 at September 30, 1997
for dividends.
In 1996, the shareholders adopted a stock option plan for employees providing
for the issuance of options at prices not less than fair market value. Options
to acquire up to three million shares of common stock may be outstanding at any
given time. The specific terms of grant and exercise are determinable by a
committee of independent members of the Board of Directors. A total of 512,000
options were issued in 1996 with an exercise price of $7.75 per common share and
271,000 options were issued in February 1997 with an exercise price of $9.25 per
common share. The options vest over a three-year period (30%, 60%, 100%) and
expire five years from date of grant.
12
<PAGE>
In 1996, the shareholders adopted a stock grant and option plan ("Directors'
Plan") for non-employee Directors of the Company. The Directors' Plan provides
for each non-employee Director to receive common shares having a market value
equal to $2,250 quarterly in payment of one-half their retainer. A total of
3,632 shares were issued in 1996 and 3,012 shares were issued during the first
nine months of 1997. It also provides for 5,000 options to be granted annually
to each non-employee Director. A total of 20,000 options were issued in May
1996 with an exercise price of $7.75 per common share and 20,000 options were
issued in May 1997 with an exercise price of $8.625. The options vest over a
three-year period (30%, 60%, 100%) and expire five years from date of grant.
Earnings per share is computed by dividing net income, less dividends on
preferred stock, by weighted average common shares outstanding. Net income
(loss) applicable to common for the nine months ended September 30, 1996 and
1997, was ($3,950,000) and $5,899,000, respectively. Differences between
primary and fully diluted earnings per share were insignificant for all periods
presented.
(6) FEDERAL INCOME TAXES
Prior to the GOG Acquisition, the Company had been included in SOCO's tax
return. Current and deferred income tax provisions allocated by SOCO were
determined as though the Company filed as an independent company, making the
same tax return elections used in SOCO's consolidated return. Subsequent to the
GOG Acquisition, the Company will not be included in SOCO's tax return.
A reconciliation of the statutory rate to the Company's effective rate as they
apply to the benefit for the nine months ended September 30, 1996 and 1997
follows:
<TABLE>
<CAPTION> NINE MONTHS ENDED SEPTEMBER 30
------------------------------
1996 1997
------ ------
<S> <C> <C>
Federal statutory rate (35%) 35%
Utilization of net deferred tax asset - (35%)
Tax benefit recognized prior to GOG Acquisition 18% -
---- ----
Effective income tax rate (17%) -
==== ====
</TABLE>
For tax purposes, the Company had regular net operating loss carry
forwards of $70.2 million and alternative minimum tax ("AMT") loss carry
forwards of $35.1 million at December 31, 1996. Utilization of $31.9 million
regular net operating loss carry forwards and $31.6 million AMT loss carry
forwards will be limited to $5.2 million per year as a result of the merger of
GOG and SOCO Wattenberg Corporation on May 2, 1996. These carry forwards expire
from 2006 through 2011. At December 31, 1996, the Company had alternative
minimum tax credit carry forwards of $478,000 which are available indefinitely.
No cash payments were made by the Company for federal taxes during 1995 and
1996. As discussed in Note 1, the accompanying financial statements include
certain Wattenberg operations previously owned directly by SOCO. Accordingly,
certain operating losses generated by these properties were retained by SOCO.
In addition, certain taxable income generated by SOCO did not offset the
Company's net operating loss carryforwards. Prior to the GOG Acquisition, the
effect of such items has been reflected as a charge or credit in lieu of taxes
in the Company's consolidated statement of changes in stockholders' equity.
13
<PAGE>
(7) MAJOR CUSTOMERS
During the nine months ended September 30, 1996 and 1997, Duke Energy
accounted for 33% and 42%, Amoco Production Company accounted for 20% and 16%,
and Total Petroleum accounted for 12% and 8% of revenues, respectively.
Management believes that the loss of any individual purchaser would not have a
long-term material adverse impact on the financial position or results of
operations of the Company.
(8) RELATED PARTY
Prior to the GOG Acquisition, the Company did not have its own
employees. Employees, certain office space and furniture, fixtures and
equipment were provided by SOCO. SOCO allocated general and administrative
expenses to the Company based on its estimate of expenditures incurred on behalf
of the Company. Subsequent to the GOG Acquisition, certain field,
administrative and executive employees of SOCO and GOG became employees of the
Company. SOCO continues to provide certain services to Patina under a
corporate services agreement. During the nine months ended September 30, 1997,
the Company paid approximately $1.3 million to SOCO under the corporate services
agreement for office rent, administrative services and insurance.
(9) COMMITMENTS AND CONTINGENCIES
The Company leases office space and certain equipment under non-
cancelable operating leases. Future minimum lease payments under such leases
approximate $500,000 per year from 1997 through 2001.
The Company is a party to various lawsuits and other legal proceedings
incidental to its business, none of which are anticipated to have a material
adverse impact on its financial position or results of operations.
(10) SUBSEQUENT EVENT
On October 17, 1997 the common shareholders approved each of the
proposals required to effectuate a series of transactions which redistributed
SOCO's majority ownership of the Company. The transactions included: (i) SOCO
sold 10 million common shares of its Patina stock in a secondary offering at
$9.875 per share, (ii) the Company repurchased and retired all remaining 4
million common shares from SOCO at $9.332 per share, (iii) the Company sold $40
million of 8.50% convertible preferred stock to certain institutional investors
and (iv) management purchased $3 million of common shares at $9.875 per share.
Excess proceeds were used to reduce bank debt. Subsequent to the transaction,
the Company has 15.9 million shares of common stock outstanding and $76.7
million at liquidation value of convertible preferred stock outstanding. Pro
forma results for the nine month period ended, September 30, 1997, as if the
transactions occurred on January 1, 1997 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Total revenues $74,044
Total depletion, depreciation and amortization 36,263
Total expenses 67,213
Net income 6,831
Net income per share .08
Weighted average shares outstanding 15,942
</TABLE>
14
<PAGE>
PATINA OIL & GAS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
In May 1996, Gerrity Oil & Gas Corporation ("GOG") was acquired by a wholly
owned subsidiary of the Company (the "GOG Acquisition"). This transaction was
accounted for as a purchase of GOG. Accordingly, the results of operations
since the GOG Acquisition reflect the impact of the purchase.
Three months ended September 30, 1997 compared to three months ended September
30, 1996. Total revenues for the three month period ended September 30, 1997
decreased from $23.1 million to $21.7 million, representing a decrease of 6%
from the prior year period. The revenue decrease was due to lower oil and gas
production. Net income for the third quarter 1997 was $799,000 compared to a
net loss of $669,000 for the same period in 1996. The increase in net income is
primarily attributed to decreased general and administrative expenses, interest
expense and depletion expenses, partially offset by lower oil and gas revenue.
Oil and gas sales less direct operating expenses for the three months ended
September 30, 1997 were $17.1 million, an 8.0% decrease from the prior year
period. Average daily production in the third quarter of 1997 was 4,946 barrels
and 71.4 MMcf (101.1 MMcfe), decreases of 11% and 5%, respectively. The
decrease resulted from a decline in production due to the Company's limited
development schedule and expected initial declines on the large number of wells
drilled and completed in 1994 and early 1995. In the future, a decrease in
production from existing oil and gas properties is expected unless development
activity is increased or acquisitions are consummated. The decision to increase
development activity is heavily dependent on the prices being received for
production.
Average oil prices decreased from $19.92 per barrel in the third quarter of
1996 to $18.69 in 1997. Natural gas prices increased from $1.83 per Mcf in the
third quarter of 1996 to $1.94 in 1997. The increase in natural gas prices was
primarily the result of the 20% increase in the average CIG index for the three
month period offset by lower natural gas liquid prices. Direct operating
expenses increased to $.45 per Mcfe compared to $.42 in the prior year quarter.
The increase is primarily attributed to focusing more attention on enhancing
production through increased well workovers, additional field staff overtime and
the overall increase in production taxes as a result of higher natural gas
prices.
General and administrative expenses, net of reimbursements, for the third
quarter 1997 were $1.2 million, a 23% decrease from the same period in 1996.
The decrease was due to efficiencies realized as a result of the GOG Acquisition
including reduced expenses for insurance, legal work and rent.
Interest and other expense was $4.0 million compared to $4.8 million in the
third quarter of 1996. Interest expense decreased as a result of lower average
outstanding debt levels. The Company's average interest rate remained at
approximately 9.5% for each of the respective quarters.
Depletion, depreciation and amortization expense for the third quarter of 1997
totalled $11.5 million, a decrease of $1.7 million or 13% from the same period
in 1996. The decrease resulted primarily from lower oil and gas production and
lower amortization expense associated with a noncompete agreement entered into
as part of the GOG Acquisition. Amortization of the noncompete agreement
totaled $167,000 in the third quarter of 1997 as compared to $963,000 in 1996.
The Company's depletion rate for the third quarter 1997 was $1.21 per Mcfe as
compared to $1.20 in 1996.
15
<PAGE>
Nine months ended September 30, 1997 compared to nine months ended September
30, 1996. Total revenues for the nine month period ended September 30, 1997
increased to $74.0 million from $53.2 million, representing an increase of 39%
from the prior year period. The revenue increase was due to the higher
production associated with the GOG Acquisition and improved oil and gas prices.
Net income for the nine months ended September 30, 1997 was $7,883,000 compared
to a net loss of $2,531,000 for the same period in 1996. The increase in net
income is primarily attributed to the increased revenue, partially offset by
increased interest expense and higher depletion, depreciation and amortization
expense.
Oil and gas sales less direct operating expenses for the nine months ended
September 30, 1997 were $59.9 million, a 39% increase from the prior year
period. Average daily production for the nine months ended September 30, 1997
was 5,275 barrels and 74.2 MMcf (105.9 MMcfe), increases of 20% and 18%,
respectively. The production increases resulted solely from the GOG
Acquisition. Exclusive of the GOG Acquisition, production continued to decline
due to the Company's limited development schedule and expected initial declines
on the large number of wells drilled and completed in 1994 and early 1995. There
were seven wells placed on production in the first nine months of 1996 compared
to 22 wells in the first nine months of 1997. In the future, a decrease in
production from existing oil and gas properties is expected unless development
activity is increased or acquisitions are consummated. The decision to increase
development activity is heavily dependent on the prices being received for
production.
Average oil prices increased from $19.71 per barrel for the nine months ended
September 30, 1996 to $19.78 in 1997. Natural gas prices increased from $1.65
per Mcf for the nine months ended September 30, 1996 to $2.21 in 1997. The
increase in natural gas prices was primarily the result of the 63% increase in
the average CIG index for the nine month period offset by lower natural gas
liquid prices. Direct operating expenses increased to $.47 per Mcfe compared to
$.39 in the prior year period. The increase is primarily attributed to focusing
more attention on enhancing production through increased well workovers,
additional field staff overtime and the overall increase in production taxes as
a result of higher oil and gas prices.
General and administrative expenses, net of reimbursements, for the nine
months ended September 30, 1997 totaled $3.8 million, a 19% decrease from the
same period in 1996. Prior to the GOG Acquisition, the Company did not have
its own employees. Employees and certain office space and furniture, fixtures
and equipment were provided by SOCO. SOCO allocated general and administrative
expenses based on estimates of expenditures incurred on behalf of the Company.
The decrease was due to efficiencies realized as a result of the GOG Acquisition
including reduced expenses for insurance, legal work and rent.
Interest and other expense was $12.5 million compared to $9.8 million for the
nine months ended September 30, 1996. Interest expense increased as a result of
higher average outstanding debt levels due to additional debt recorded as a
result of the GOG Acquisition. The Company's average interest rate was 9.5%
compared to 9.3% in the prior year period. This increase is due primarily to the
Subordinated Notes.
Depletion, depreciation and amortization expense for the nine months ended
September 30, 1997 totaled $36.3 million, an increase of $4.3 million or 13%
from the same period in 1996. The increase resulted from higher oil and gas
production as a result of the GOG Acquisition, partially offset by a decreased
depletion, depreciation and amortization rate of $1.26 per Mcfe compared to
$1.31 in 1996. The decreased rate was attributed to a decrease in the
depletion rate from $1.22 per Mcfe in 1996 to $1.20 in 1997 and $1,333,000 of
amortization, related to a noncompete agreement entered into as part of the GOG
Acquisition during the nine months ended September 30, 1997 as compared to
$1,603,000 in 1996.
16
<PAGE>
DEVELOPMENT, ACQUISITION AND EXPLORATION
During the nine months ended September 30, 1997, the Company incurred $11.8
million in capital expenditures, as the Company has begun to increase its
development activity based on recent results of the capital expenditure program
and improved Rocky Mountain natural gas prices. The Company anticipates
incurring development capital expenditures of approximately $4.2 million during
the remaining three months of 1997.
FINANCIAL CONDITION AND CAPITAL RESOURCES
At September 30, 1997, the Company had total assets of $401.4 million. Total
capitalization was $367.4 million, of which 54% was represented by stockholders'
equity, 20% by senior debt and 26% by subordinated debt. During the nine months
ended September 30, 1997, net cash provided by operations was $48.7 million, as
compared to $33.5 million for the same period in 1996. As of September 30,
1997, there were no significant commitments for capital expenditures. The
Company anticipates that 1997 expenditures for development drilling and
recompletion activity will be approximately $16.0 million, which will allow for
a reduction of indebtedness or provide funds to pursue acquisitions. The level
of these and other future expenditures is largely discretionary, and the amount
of funds devoted to any particular activity may increase or decrease
significantly, depending on available opportunities and market conditions. The
Company plans to finance its ongoing development, acquisition and exploration
expenditures using internal cash flow, proceeds from asset sales and its bank
credit facilities. In addition, joint ventures or future public and private
offerings of debt or equity securities may be utilized.
Prior to the GOG Acquisition, SOCO financed all of the Company's activities.
A portion of such financing was considered to be an investment by parent in the
Company with the remaining portion being considered debt payable to SOCO. In
conjunction with the GOG Acquisition, the $75.0 million debt to SOCO was paid in
full.
In April 1997, the Company entered into an amended bank credit agreement (the
"Facility"). The Facility is a revolving credit facility in an aggregate
amount up to $140.0 million. The amount available under the Facility is
adjusted semiannually and equaled $110.0 million at September 30, 1997, with
$72.0 million outstanding under the Facility.
As of October 27, 1997, the Company had approximately $149.7 million of debt
outstanding, consisting of $52.0 million of senior debt and $97.7 million of
Subordinated Notes.
The bank credit agreement contains certain financial covenants, including but
not limited to a maximum total debt to capitalization ratio, a maximum total
debt to EBITDA ratio and a minimum current ratio and various other negative
covenants that could limit the Company's ability to incur other debt, dispose of
assets, pay dividends or repurchase securities. Borrowings under the Facility
mature in 2000, but may be prepaid at anytime. The Company has periodically
renegotiated its loan agreement to extend the Facility; however, there is no
assurance the Company will continue to do so in the future.
The Company from time to time enters into arrangements to monetize its Section
29 tax credits. These arrangements result in revenue increases of approximately
$.40 per Mcf on production volumes from qualified Section 29 properties. As a
result of such arrangements, the Company recognized additional gas revenues of
$1.2 million and $1.3 million during the nine months ended September 30, 1996
and 1997, respectively. These arrangements are expected to increase revenues
through 2002.
The Company believes that its capital resources are adequate to meet the
current requirements of its business. However, future cash flows are subject to
a number of variables including the level of production
17
<PAGE>
and oil and gas prices, and there can be no assurance that operations and other
capital resources will provide cash in sufficient amounts to maintain planned
levels of capital expenditures or that significant increases in capital
expenditures related to acquisitions and active development, recompletion and
exploitation, will not be undertaken.
INFLATION AND CHANGES IN PRICES
While certain of its costs are affected by the general level of inflation,
factors unique to the oil and gas industry result in independent price
fluctuations. Over the past five years, significant fluctuations have occurred
in oil and gas prices. Although it is particularly difficult to estimate future
prices of oil and gas, price fluctuations have had, and will continue to have, a
material effect on the Company.
The following table indicates the average oil and gas prices received over the
last five years and highlights the price fluctuations by quarter for 1996 and
1997. Average price computations exclude hedging gains or losses and other
nonrecurring items to provide comparability. Average prices per equivalent Mcf
indicate the composite impact of changes in oil and gas prices. Oil production
is converted to natural gas equivalents at the rate of one barrel per six Mcf.
<TABLE>
<CAPTION>
Average Prices
---------------------------------
Natural
Crude Oil Gas Mcfe
--------- ------- ----
(Per Bbl) (Per Mcf)
<S> <C> <C> <C>
Annual
------
1992 $19.06 $1.82 $2.19
1993 15.87 2.08 2.22
1994 14.84 1.70 1.94
1995 16.43 1.34 1.73
1996 20.47 1.99 2.41
Quarterly
---------
1996
----
First $18.31 $1.55 $1.96
Second 20.24 1.60 2.13
Third 19.92 1.83 2.29
Fourth 22.35 2.78 3.07
1997
----
First $21.79 $2.63 $2.93
Second 19.09 1.85 2.26
Third 18.69 1.94 2.28
</TABLE>
18
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On October 17, 1997 a Special Meeting of the Company's common
stockholders was held. A summary of the proposals upon which a vote was
taken and the results of the voting follows.
<TABLE>
<CAPTION>
COMMON STOCK SERIES A COMMON STOCK
NUMBER OF SHARES VOTED NUMBER OF SHARES VOTED
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
--- ------- ------- --- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PROPOSALS
- ---------
1) Approval of a Secondary Offering of 14,616,752 48,603 32,082 2,000,000 --- ---
10,000,000 shares of the common stock
of the Company owned by Snyder Oil
Corporation ("SOCO") (11,500,000
shares if the underwriters' overallot-
ment option is fully exercised or such
greater or lesser number as the
underwriters, the Company and SOCO
may agree to include in the Secondary
Offering).
2) Approval of the repurchase by the 14,611,353 49,563 36,521 2,000,000 --- ---
Company of all remaining shares of
the common stock of the Company
owned by SOCO that are not sold in
the Secondary Offering (other than
70,000 such shares which SOCO
agreed to deliver to the investors in
the Company's New 8.5% Convertible
Preferred Stock ("New Preferred
Stock")).
3) Approval of the New Preferred Stock 14,426,338 235,196 35,903 2,000,000 --- ---
issuance by the Company to a limited
number of investors of between
1,600,000 and 2,520,000 shares (as
determined by a Company in its sole
discretion) of the Company's New
Preferred Stock, including the related
issuance by the Company to such
investors of 160,000 shares of
common stock.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK SERIES A COMMON STOCK
NUMBER OF SHARES VOTED NUMBER OF SHARES VOTED
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
--- ------- ------- --- ------- -------
<S> <C> <C> <C> <C> <C> <C>
4) Approval of the management stock 14,508,238 146,365 42,834 2,000,000 --- ---
issuance providing for the issuance
and sale by the Company to manage-
ment investors of $3 million of
common stock and the grant of
150,000 shares of restricted common
stock to the management investors
(other than Thomas J. Edelman, the
Chairman and President of the
Company), and the grant of 350,000
shares of restricted common stock
to Mr. Edelman as consideration for
his efforts in structuring and arranging
the private placement of the New
Preferred Stock.
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
EXHIBIT NO. DESCRIPTION
- ---------- -----------
1. - Underwriting Agreement dated October 15, 1997 by and
among the Company, Smith Barney Inc., Morgan Stanley &
Co. Incorporated, as Representatives of the Several
Underwriters, and Snyder Oil Corporation./1/
10.1.8 Second Amendment to Amended and Restated Credit
Agreement dated as of September 15, 1997 by and amound
the Company and Texas Commerce Bank National
Association, as Administrative Agent, NationsBank of
Texas, N.A., as Documentary Agent, Wells Fargo Bank,
N.A., CIBI, Inc. and Credit Lyonnais New York Brance, as
Co-Agents and the financial institrtuions a party to the
Credit Agreement./1/
10.5 Stock Purchase Agreement dated as of July 31, 1997 by
and among the Company and the Investors named therein as
amended on September 19, 1997./1/
10.6 - Share Repurchase Agreement dated as of July 31, 1997 by
and between the Company and Snyder Oil Corporation/1/ as
amended and restated on September 19, 1997* and as
amended as of October 15, 1997* and amended by letter
agreement dated October 21, 1997.*
10.7 - Employment Agreement dated July 31, 1997 by and between
the Company and Thomas J. Edelman./1/
20
<PAGE>
10.8 - Management Stock Purchase Agreement dated as of
September 4, 1997 by and among the Company and certain
Management Investors./1/
10.9 - Restricted Stock Agreement dated as of September 4, 1997
by and among the Company and certain Management
Investors./1/
10.10 - Transition Agreement dated as of October 21, 1997 by and
between the Company and Snyder Oil Corporation./1/
27. - Financial Data Schedule.*
___________________
/1/Incorporated herein by reference to the Exhibits to the Company's
Amendment No. 3 to Form S-3 as filed with the Securities Exchange Commission on
October 10, 1997. (Registration No. 333-32671)
*Filed herewith.
(b) No reports on Form 8-K were filed by Registrant during the quarter ended
September 30, 1997.
21
<PAGE>
SIGNATURES
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.
PATINA OIL & GAS CORPORATION
By /s/ David J. Kornder
---------------------------------------
David J. Kornder, Vice President and
Chief Financial Officer
October 28, 1997
22
<PAGE>
EXHIBIT 10.6
AMENDED AND RESTATED
SHARE REPURCHASE AGREEMENT
This Amended and Restated Share Repurchase Agreement dated as of July 31,
1997 and amended and restated as of September 19, 1997 (this "Agreement") by and
between Snyder Oil Corporation, a Delaware corporation ("SOCO") and Patina Oil &
Gas Corporation, a Delaware corporation ("Patina").
WHEREAS, SOCO owns beneficially and of record 14,000,000 shares (the
"Shares") of Common Stock of Patina ("Common Stock"), 2,000,000 of which are
designated Series A Common Stock;
WHEREAS, SOCO and Patina have entered into that certain Registration Rights
Agreement dated as of May 2, 1996 (the "Registration Rights Agreement"),
pursuant to which SOCO has certain rights to cause Patina, at its expense, to
register the sale of Shares by SOCO under the Securities Act of 1933, as amended
(the "Securities Act");
WHEREAS, SOCO desires, subject to the terms and conditions set forth in
this Agreement, to sell all but 70,000 of the Shares through a combination of:
(i) an underwritten secondary offering of a portion of the Shares by SOCO (the
"Offering") and (ii) a repurchase of all but 70,000 of the Shares not sold in
the Offering by Patina, which repurchase would be consummated simultaneously
with the consummation of the Offering (the "Repurchase");
WHEREAS, SOCO and Patina acknowledge that certain third parties may have an
interest in pursing an acquisition of all or a portion of the capital stock of
Patina, and that it would be in the best interests of Patina and its
stockholders to permit those third parties ("Prospective Purchasers") to review
certain confidential information relating to Patina and its assets, Liabilities
and operations, provided that such Prospective Purchasers execute a
confidentiality and standstill agreement mutually acceptable to SOCO and Patina;
WHEREAS, Patina and certain investors (the "Investors") have entered into a
Stock Purchase Agreement dated as of July 31, 1997 (as amended, the "Stock
Purchase Agreement") pursuant to which such investors have agreed to acquire
shares of 8.5% Convertible Preferred Stock (the "New Preferred Stock"), of
Patina on the terms and subject to the conditions set forth herein;
WHEREAS, SOCO has (i) granted options to the Investors (or, in certain
instances, affiliates thereof) to purchase an aggregate of 2,000,000 shares of
Common Stock and (ii) agreed to transfer to such optionees an aggregate of
70,000 Shares, in each case pursuant to and subject to the terms and conditions
set forth in the Stock Option Agreements with such optionees (as amended, the
"Stock Option Agreement");
<PAGE>
NOW THEREFORE, in consideration of the foregoing premises and other good
and Valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1 Demand Registration. Pursuant to Section 2(A) of the Registration
Rights Agreement, SOCO hereby requests registration of at least 5,000,000 Shares
and not more than 7,500,000 Shares (in each case, before giving effect to any
underwriter's overallotment option). Patina acknowledges that such request has
been made in accordance with the Registration Rights Agreement and satisfied the
requirements set forth in Section 2(A). Notwithstanding any provision in this
Agreement to the contrary, SOCO reserves the right, in its absolute and sole
discretion, to withdraw the Shares from the Offering at any time prior to the
Distribution Date (as defined below) by giving notice to Patina
2. Repurchase.
(a) If the Offering is consummated, Patina hereby agrees to purchase from
SOCO, and SOCO agrees to sell to Patina, all the Shares owned by SOCO at the
time of the consummation of the Offering (the "Closing") except for (i) those
Shares that are sold by SOCO to the underwriters at the Closing and (ii) the
70,000 Shares that SOCO is required to transfer to the Investors pursuant to the
Stock Option Agreement (as amended) with such Investors.
(b) (Section 2(b) has been left blank intentionally)
(c) Any Shares required to be repurchased by Patina pursuant to this
Section 2 shall be repurchased for a purchase price equal to the public offering
price in the Offering less underwriters' discounts and commissions, in each case
as shown on the cover page of the final prospectus for the Offering, but without
any deduction for expenses (the "Net Offering Price").
(d) Notwithstanding the foregoing, upon the occurrence of a First Reserve
Funding Delay, then Patina shall not be required to purchase a number of Shares
equal to the First Reserve Shares until the "Fund VII Amount" (as defined in the
Stock Purchase Agreement) is funded by First Reserve Fund VII, Limited
Partnership ("First Reserve") and Patina shall pay as additional consideration
for the First Reserve Shares interest on the Fund VII Amount based upon the
Applicable Rate, with interest accruing from the Closing Date until the receipt
by SOCO of the Fund VII Amount.
(i) The term "Applicable Rate" shall mean an interest rate per annum
equal to (A) 1% plus (B) an interest rate per annum shown on page 3750 of the
Dow Jones & Company Telerate screen or any successor page as the composite
offered rate for London interbank deposits with a period equal to one month as
shown under the heading "USD", as of 11:00 A.M. (London time) on the day of the
Closing; provided that the applicable rate determined pursuant to this
definition shall be rounded to the nearest whole multiple of 1/16 of 1% per
annum, if such rate is not such a multiple.
<PAGE>
(ii) A "First Reserve Funding Delay" shall occur if First Reserve
shall not have delivered funds to Patina at the Closing but instead shall have
delivered to Patina an irrevocable, unconditional commitment to fund the Fund
VII Amount within ten business days after delivery of the Notice in Issuance
with the Stock Purchase Agreement.
(iii) The term "First Reserve Shares" shall mean the maximum number of
whole shares of Common Stock that can be purchased with the First Reserve Amount
at a purchase price equal to the Net Offering Price.
(iv) The term "Notice of Issuance" shall have the meaning set forth in
the Stock Purchase Agreement.
(e) If and to the extent that the underwriters in the Offering do not
exercise any overallotment option (the "Overallotment Option") granted to them
by SOCO in such a manner that such exercise can be consummated at the Closing,
then Patina agrees to repurchase any Shares that remain subject to the
Overallotment Option, but Patina shall acquire such Shares subject to such
Overallotment Option.
(f) Patina represents and warrants that it has sufficient surplus under
the Delaware General Corporation Law in order to effect the Repurchase and
agrees that it will not take any action that would cause it to cease to have
sufficient surplus for such purpose.
3. Conditions to the Obligations of the Parties.
(a) The obligations of both parties to consummate the transactions
contemplated hereby shall be subject to the satisfaction or waiver of the
following conditions:
(i) The registration statement in connection with the Offering shall
have become effective under the Securities Act, and no stop order shall have
been issued in connection therewith; and
(ii) Patina shall have received sufficient funds from the sale by
Patina of capital stock and/or borrowings under Patina's existing credit
facility to pay the full purchase price under the Repurchase; provided however,
that the occurrence of a First Reserve Funding Delay shall be deemed receipt of
the Fund VII Amount for purposes of this clause (ii).
(b) In addition to the conditions set forth in Section 3(a), the
obligations of SOCO to consummate the transactions contemplated hereby shall be
subject to the satisfaction or waiver of the following conditions:
<PAGE>
(i) The representations and warranties contained herein shall be made
again as of the Closing, and such representations and warranties shall be true
and correct in all material respects as of the date hereof and the Closing, and
Patina shall have provided SOCO with an officer's certificate to such effect;
(ii) Patina shall have materially complied with its covenants to be
complied with under this Agreement and the Registration Rights Agreement prior
to the Closing, and Patina shall have provided SOCO with an officer's
certificate to such effect;
(iii) The Net Offering Price in the Offering shall not be less than
$7.0875 per Share;
(iv) The Offering shall have been consummated with respect to at least
5 million Shares on or prior to the earlier of (A) the termination of the
Offering Period (as defined below) and (B) 90 days after July 31, 1997;
(v) Documents in form reasonably acceptable to SOCO terminating the
Business Opportunity Agreement (the "Business Opportunity Agreement") and the
Corporate Services Agreement (the "Corporate Services Agreement"), each of which
is between SOCO and Patina and each of which is dated as of May 2, 1996, shall
have been executed and delivered by Patina, effective as of the Closing; and
(vi) A Transition Agreement in such form as shall be mutually
agreeable to SOCO and Patina in their reasonable judgment shall have been
executed by Patina (the "Transition Agreement"), effective as of the Closing.
(c) In addition to the conditions set forth in Section 3(a), the
obligations of Patina to consummate the transactions contemplated hereby shall
be subject to the satisfaction or waiver of the following conditions:
(I) SOCO shall have complied with its covenants to be complied with
under this Agreement and the Registration Rights Agreement prior to the Closing,
and SOCO shall have provided Patina with an officer's certificate to such
effect;
(ii) John C. Snyder and William J. Johnson shall have tendered their
resignations as directors of Patina, effective as of the Closing;
(iii) Documents in form reasonable acceptable to Patina terminating
the Business Opportunity Agreement and the Corporate Services Agreement shall
have been executed and delivered by SOCO, effective as of the Closing; and
(iv) The Transition Agreement shall have been executed and delivered
by SOCO, effective as of the Closing.
<PAGE>
4. Expenses.
(a) The following terms shall have the following respective
(i) "Sale Transaction" shall mean an acquisition (by tender offer
exchange offer merger, consolidation, share exchange or otherwise) by a third
party of Patina (or its shares or assets) in which such third party acquires,
directly or indirectly, at least a majority of the combined voting power of the
outstanding capital stock of Patina
(ii) "Company Sale Transaction" shall mean a Sale Transaction that is
(A) approved by the Independent Committee (as defined in the Confidentiality and
Standstill Agreement described below) or (B) in which the holders of a majority
of the Common Stock (excluding any shares beneficially owned by SOCO or any
subsidiary thereof) sell or otherwise transfer their shares pursuant to such
Sale Transaction.
(iii) "SOCO Sale Transaction" shall mean a Sale Transaction other than
a Company Sale Transaction.
(iv) "Applicable Period" shall mean the period beginning on July 31,
1997 and ending 12 months following any termination of the this Agreement or
withdrawal of shares from the Offering (whichever is earlier); provided,
however, that with respect to any Sale Transaction involving an acquiror that
does not visit Patina's data room after July 1, 1997 and prior to the
Distribution Date, the term Applicable Period shall mean the period beginning on
the July 31, 1997 and ending six months following any termination of this
Agreement or withdrawal of shares from the Offering (whichever is earlier).
(b) If (i) the Offering is not consummated for any reason and (ii) a SOCO
Sale Transaction is consummated prior to the end of the Applicable Period, then
SOCO shall pay Patina a non-accountable expense reimbursement of $2 million.
(c) If (i) the Offering is not consummated for any reason and (ii) a
Company Sale Transaction is consummated prior to the end of the Applicable
Period, then SOCO shall not be obligated to pay any of Patina's costs or
expenses and Patina shall be solely responsible therefor.
(d) If (i) the Offering is not consummated for any reason and (ii) neither
a SOCO Sale Transaction nor a Company Sale Transaction is consummated prior to
the end of the Applicable Period, then SOCO shall pay Patina a non-accountable
expense reimbursement of $500,000; provided, however, that no such reimbursement
shall be required if any of the conditions set forth in Section 3(b)(i) or
3(b)(ii) shall not have been satisfied.
(e) If the Offering and Repurchase are consummated, then SOCO shall not be
obligated to pay any of Patina's costs or expenses and Patina shall be solely
responsible therefor.
<PAGE>
(f) Except as otherwise expressly provided in this Agreement or the
Registration Rights Agreement, each party shall be responsible for its expenses
in connection with the transactions contemplated by this Agreement.
5. Taking of Necessary Action; Cooperation and Exchange of Information.
(a) Each of the parties hereto agrees to use all reasonable efforts
promptly to take or cause all action and promptly to do or cause to be done all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
Without limiting the generality of the foregoing, SOCO agrees to vote in favor
of any matter submitted to Patina's stockholders by Patina that is required by
law or applicable securities exchange regulation to be approved by Patina's
stockholders in order to consummate the transactions contemplated by the Stock
Purchase Agreement Notwithstanding the foregoing provisions of this paragraph
(a), SOCO's obligations under this paragraph (a) shall be subject to the
provisions of the final sentence of Section I hereof and the parties acknowledge
that SOCO may continue to pursue the sale of all or part of its Shares to one or
more Prospective Purchasers.
(b) Patina agrees that it will not issue directly or indirectly issue any
equity securities of Patina or any subsidiary of Patina or any securities
exercisable for or convertible into any such equity securities, or agree to do
so, unless the consummation of the issuance thereof is conditioned upon the
occurrence of the sale by SOCO of all shares of Common Stock held by SOCO prior
to or simultaneously with such issuance. Patina will promptly provide SOCO with
true and complete copies of any agreements entered into by Patina in connection
with the foregoing, and shall not amend or waive any covenant or condition
contained in any such agreement in a manner that is inconsistent with the
provisions of this paragraph (b). Notwithstanding the foregoing, Patina may
issue equity securities as consideration in acquisition transactions so long as
the aggregate fair market value of any equity securities so issued does not
exceed $10 million For purposes of this paragraph (b) the fair market value of
Common Stock shall be the closing price on the New York Stock Exchange on the
trading day immediately preceding the consummation of the applicable acquisition
transaction and for any other equity security shall be determined by in good
faith by the Board of Directors of Patina.
(c) Patina and SOCO agree to (and to use all reasonable efforts to cause
their respective officers, directors employees, underwriters and advisors to)
cooperate with each other in connection with the Offering, the Repurchase and
the investigation of Patina by Prospective Purchasers, and to promptly disclose
to each other any material developments in connection with such activities.
Patina agrees that it will conduct its business in the ordinary course of
business, consistent with past practice. Except in the ordinary course of
business, neither Patina nor any of its officers, directors, employees,
underwriters or advisors will contact any of the Prospective Purchasers without
reasonable advance notice to SOCO. Furthermore, Patina agrees that neither it
nor any of its officers, directors, employees, underwriters or advisors will
enter into any material acquisition
<PAGE>
transaction or discuss any such transaction with any Prospective Purchaser or
any other third party, without reasonable advance notice to SOCO.
(d) Patina hereby represents and covenants to SOCO that any proxy statement
distributed by Patina to its stockholders in connection with the transactions
contemplated hereby and any related proxy soliciting material (and any
amendments or supplements thereto), on the date filed with the Securities and
Exchange Commission on the date mallet to Patina's stockholders, and on the date
of any related stockholder meeting, will comply in all material respects with
all applicable requirements of the Securities Exchange Act of 1934 and the rules
and regulations thereunder and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided, however, that
no representation or covenant is given in this paragraph (d) with respect to
information furnished in writing by SOCO for use by Patina in any such proxy
statement or proxy soliciting materials.
6. Confidentiality and Standstill Agreement.
(a) SOCO hereby agrees that prior to any Prospective Purchaser's being
given access to any confidential information regarding Patina or its assets,
liabilities or operations, such Prospective Purchaser must execute a
Confidentiality and Standstill Agreement substantially in the form attached
hereto as Appendix I, and Patina agrees that any significant, substantive
modifications to the form of any such agreement will be submitted to SOCO for
its approval prior to the execution thereof by a Prospective Purchaser. For
purposes of this Agreement, a change to the Confidentiality and Standstill
Agreement that adversely affects SOCO's rights shall be deemed, without
limitation, a "significant, substantive modification"" Furthermore, Patina will
not enter into an amendment to any such agreement without the prior consent of
SOCO.
(b) SOCO agrees it w ill not take any action one of the intended
consequences of which is to permit any Prospective Purchaser to enjoy a right
denied to such Prospective Purchaser in its Confidentiality and Standstill
Agreement or avoid an obligation or restriction set forth in such agreement.
(c) SOCO hereby agrees that for a 30-day period (the "Offering Period")
commencing on the date that a preliminary prospectus relating to the Offering is
broadly distributed to prospective offerees in the Offering (the "Distribution
Date"), SOCO and its affiliates will (i) cease all discussions and contacts with
any Prospective Purchasers (regardless of whether previously contacted by SOCO)
with respect to the acquisition of securities or assets of Patina, (ii) not take
any action with respect to, or in pursuit of, the acquisition of securities or
assets of Patina by any third party, and (iii) not resume any such activities
prior to the end of the Offering Period. Patina will give SOCO at least seven
calendar days' notice of the expected Distribution Date (which will not be prior
to the date that is 45 days after July 31, 1997) and in no event shall the
restrictions set forth in this paragraph commence until seven days after the
most recent such notice to SOCO by Patina
<PAGE>
7. Amendments. This Agreement may be amended or modified upon the written
consent thereto of Patina and SOCO.
8. Termination. This Agreement may be terminated upon by SOCO upon the
failure of any condition set forth in Section 3(a) or 3(b) upon five business
days notice to Patina This Agreement may be terminated upon by Patina upon the
failure of any condition set forth in Section 3(a) or 3(c) upon five business
days notice to SOCO.
9. Assignments. This Agreement shall be binding on and inure to the benefit
of the respective successors and assigns of the parties hereto.
10. Entire Agreement; Governing Law. This Agreement constitutes the entire
agreement of the parties relating to the subject matter hereof and all prior or
contemporaneous written or oral agreements are merged herein This Agreement
shall be governed by the laws of the State of Delaware.
11. Notices. Any notice, request, instruction correspondence or other
document to be given hereunder by either party to the other (herein collectively
called "Notice-3 shall be in writing and delivered personally or mailed, postage
prepaid, or by telegram or telecopier, as follows:
If to SOCO:
Snyder Oil Corporation
777 Main Street, Suite 2500
Fort Worth, Texas 76012
Phone: (817) 882-5905
Telecopy No.: (817) 882-5982
Attention: General Counsel
With a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002
Phone: (713) 758-2346
Telecopy No.: (713) 758-2346
Attention: J. Mark Metts, Esq.
<PAGE>
If to Patina:
Patina Oil & Gas Corporation
1625 Broadway
Denver, Colorado 80202
Attention: General Counsel
Phone: (303) 389-3600
Telecopy No.: (303) 595-7407
With copies to:
Thomas J. Edelman
Chairman of Patina Oil & Gas Corporation
667 Madison Avenue, 22nd Floor
New York, New York 10021
Phone: (212) 371-1117
Telecopy No.: (212) 888-6877
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Phone: (212) 455-2000
Telecopy No.: (212) 455-2502
Attention: Robert L. Friedman, Esq.
Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. Any party may change any address
to which Notice is to be given to it by giving Notice as provided above of such
change of address.
12. Counterparts. This Agreement may be executed in multiple counterparts,
each of which taken together shall constitute one and the same instrument
13. References to Other Agreements. To the extent that this Agreement
refers to any other agreement, or any provision thereof, such reference shall be
deemed to be to such agreement or provision in the form initially executed by
the parties thereto (regardless of whether such agreement or provision is
amended) unless and to the extent that (a) such amendment toes not adversely
affect the non-signing party or (b) the non-signing party consents in writing to
such amendment; provided, however, that each party hereby consents to the
amendments (and, if applicable, restatements) of the Stock Option Agreement and
the Stock Purchase Agreement that were executed as of September 19, 1997 and
references in this Agreement to such documents shall be the form of such
document as so amended.
<PAGE>
IN WITNESS WHEREOF, SOCO and Patina have caused this Agreement to be signed by
their respective officers thereunto duly authorized.
SNYDER OIL CORPORATION
By: /s/John C. Snyder
---------------------
Chairman of the Board
PATINA OIL & GAS CORPORATION
By: /s/Thomas J. Edelman
------------------------
Chairman of the Board
<PAGE>
FIRST AMENDMENT TO
AMENDED AND RESTATED
SHARE REPURCHASE AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED SHARE REPURCHASE AGREEMENT,
dated as of October 15, 1997 (this "Amendment"), is by and among Snyder Oil
Corporation, a Delaware corporation ("SOCO"), and Patina Oil & Gas Corporation,
a Delaware corporation ("Patina").
WHEREAS, the parties hereto have entered into that certain Amended and
Restated Share Repurchase Agreement, dated as of July 31, 1997 and amended and
restated as of September 19, 1997 (as amended hereby, the "Agreement")
(capitalized terms used but not defined herein shall have the respective
meanings ascribed to such terms in the Agreement);
WHEREAS, the parties desire to amend the Agreement in order to modify
certain provisions relating to Patina's obligation to repurchase Shares subject
to the Overallotment Option;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. Section 1 of the Agreement is hereby amended to replace the phrase
"7,500,000 Shares" with the phrase "7,500,000 Shares or such larger number as
may be agreed to by SOCO and the underwriters."
2. Section 2(a) of the Agreement is hereby amended by adding the
following proviso at the end thereof:
; provided, however, that the First Reserve Shares and the Unpurchased
Overallotment Shares (in each case, as defined below) shall be purchased by
Patina at the times and for the consideration set forth below.
3. The introductory paragraph of Section 2(d) of the Agreement is hereby
amended to read in its entirety as follows:
Notwithstanding the foregoing, upon the occurrence of a First Reserve
Funding Delay, then Patina shall not be required to purchase a number of
Shares equal to the First Reserve Shares until the "Fund VII Amount" (as
defined in the Stock Purchase Agreement) is funded by First Reserve Fund
VII, Limited Partnership ("First Reserve") and Patina shall pay as
additional consideration for the First Reserve Shares interest on the Fund
VII Amount based upon the Applicable Rate, with interest accruing on any
unpaid portion of the Fund VII Amount from the Closing Date until the
receipt by SOCO; provided however, that if the Overallotment Option is
terminated or expires prior to the funding of the Fund VII Amount, then the
First Reserve Shares that are also Unpurchased Overallotment Shares shall
be
<PAGE>
purchased by Patina on the Overallotment Termination Date, regardless of
whether the corresponding portion of the Fund VII Amount shall have been
received by Patina from First Reserve.
4. Section 2(e) of the Agreement is hereby amended to read in its
entirety as follows:
(e) Notwithstanding the foregoing, if upon consummation of the
transactions to be completed at the Closing, there are any Unpurchased
Overallotment Shares, then Patina will purchase from SOCO on the
Overallotment Termination Date any and all Unpurchased Overallotment Shares
from SOCO remaining at such time. As consideration for any Unpurchased
Overallotment Shares, Patina shall pay an aggregate amount equal to the
Adjusted Overallotment Purchase Price. In order to secure Patina's
obligations to pay for the Unpurchased Overallotment Shares, Patina will
deliver to SOCO at the Closing a standby letter of credit (the "Letter of
Credit") from one or more of Patina's lenders under its existing credit
facility in an aggregate amount equal to the amount that the Adjusted
Overallotment Purchase Price would be if the underwriters elected to let
the Overallotment Option expire at the end of its full term without
purchasing any Shares thereunder. The Letter of Credit (A) shall be issued
in customary form reasonably acceptable to SOCO, (B) shall not expire prior
to (i) the fifth business day after the scheduled expiration of the
Overallotment Option if, on the Overallotment Termination Date, Patina has
not fully discharged all of its obligations set forth in this Section 2(e),
or (ii) the Overallotment Termination Date if, on the Overallotment
Termination Date, Patina has fully discharged such obligations, (C) shall
be payable in the amount of any portion of the Adjusted Overallotment
Purchase Price that remains unpaid at the time of the Overallotment
Termination Date and (D) shall be payable to SOCO by the issuer(s) thereof
subject only to receipt by such issuer(s) of an affidavit (made under
penalties of perjury) from an executive officer of SOCO certifying as to
the amount of any amounts that remain unpaid by Patina after the
Overallotment Termination Date. In addition, if any Shares that were
Unpurchased Overallotment Shares on the Closing Date are subsequently
purchased by the underwriters pursuant to the Overallotment Option, then,
simultaneously with such purchase, Patina shall pay SOCO interest with
respect to such Shares, based upon the Applicable Rate, and accruing from
the Closing Date until the receipt of the applicable funds from the
underwriters by SOCO.
(i) The term "Overallotment Option" shall mean the overallotment
option, if any, granted to the underwriters in the Offering by SOCO.
(ii) The term "Unpurchased Overallotment Shares" shall mean any
Shares subject to the Overallotment Option that are not actually
purchased and paid for by the underwriters.
(iii) The term "Overallotment Termination Date" shall mean the
earlier of (A) the date and time that the Overallotment Option is
terminated or expires or (B) the date and time that all Shares subject
to the Overallotment Option have been actually purchased and paid for
by the underwriters.
2
<PAGE>
(iv) The term "Unadjusted Overallotment Purchase Price" shall
mean the product of (A) the Net Offering Price, multiplied by (B) the
number of Unpurchased Overallotment Shares.
(v) The term "Adjusted Overallotment Purchase Price" shall mean
the sum of (A) the Unadjusted Overallotment Purchase Price, plus (B)
interest (based upon the Applicable Rate) on the Unadjusted
Overallotment Purchase Price, with interest accruing from the Closing
Date until the receipt by SOCO of all amounts required to be paid
pursuant to this Section 2(e).
5. Section 3(a)(ii) of the Agreement is hereby amended by adding the
following provision at the end thereof:
; provided further, that the delivery of the Letter of Credit shall be
deemed receipt of the Adjusted Overallotment Purchase price for
purposes of this clause (ii).
6. Except as expressly set forth herein, the terms and provisions of the
Agreement are hereby ratified and confirmed.
7. This Amendment may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
IN WITNESS WHEREOF, SOCO and Patina have caused this Amendment to be signed
by their respective officers thereunto duly authorized as of the date first
above written.
SNYDER OIL CORPORATION
By: /s/ John C. Snyder
------------------
Name: John C. Snyder
Title: Chairman
PATINA OIL & GAS CORPORATION
By: /s/ Thomas J. Edelman
---------------------
Name: Thomas J. Edelman
Title: Chairman
3
<PAGE>
October 21, 1997
Patina Oil & Gas Corporation
1625 Broadway, Suite 2000
Denver, CO 80202
Ladies and Gentlemen:
Reference is made to that certain Amended and Restated Share Repurchase
Agreement dated as of July 31, 1997 and amended and restated as of September 19,
1997 (as amended, the "Agreement") by and between Snyder Oil Corporation
("SOCO") and Patina Oil & Gas Corporation ("Patina"). Capitalized terms used
but not defined herein shall have the respective meanings ascribed to such terms
in the Agreement.
The parties agree as follows, notwithstanding any provision in the
Agreement to the contrary. At the Closing, Patina will make to SOCO a non-
interest bearing advance in an amount equal to the Unadjusted Overallotment
Purchase Price (the "Advance"), which Advance shall be in addition to the
payment of the consideration for the Shares required to be purchased by Patina
at the Closing. If and to the extent that the underwriters exercise the
Overallotment Option, then on the date of any such exercise, SOCO shall pay the
amount of net proceeds received by SOCO from the underwriters on such date to
Patina in satisfaction of a corresponding amount of the Advance. If on the
Overallotment Termination Date there remain any Unpurchased Overallotment
Shares, then SOCO shall apply any portion of the Advance not repaid to Patina,
to the satisfaction of Patina's remaining obligation to pay the purchase price
for such Unpurchased Overallotment Shares. Upon the making of the Advance by
Patina in accordance with the provisions hereof, (i) Patina's obligation to
deliver the Letter of Credit shall be deemed to have been satisfied and (ii) the
Unadjusted Overallotment Purchase Price shall cease to bear interest in
accordance with the Agreement.
This letter may be executed in multiple counterparts, each of which taken
together shall constitute one and the same instrument.
Very truly yours,
SNYDER OIL CORPORATION
By: /s/ Peter E. Lorenzen
---------------------
Peter E. Lorenzen
Vice President
ACCEPTED AND AGREED
AS OF THE 21ST DAY OF
OCTOBER, 1997
PATINA OIL & GAS CORPORATION
By: /s/ David J. Kornder
--------------------
David J. Kornder
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 9,751
<SECURITIES> 0
<RECEIVABLES> 13,258
<ALLOWANCES> (241)
<INVENTORY> 2,867
<CURRENT-ASSETS> 25,930
<PP&E> 572,732
<DEPRECIATION> 198,789
<TOTAL-ASSETS> 401,414
<CURRENT-LIABILITIES> 26,663
<BONDS> 169,683
0
15
<COMMON> 188
<OTHER-SE> 197,493
<TOTAL-LIABILITY-AND-EQUITY> 401,414
<SALES> 73,365
<TOTAL-REVENUES> 74,044
<CGS> 44,873
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<OTHER-EXPENSES> 121
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