<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission file number 0-22695
SHERIDAN ENERGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 76-0507664
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Louisiana, Suite 800
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
(713) 651-7899
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed pursuant to 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 Sections 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
---- ----
As of August 14, 1998, there were 6,731,331 outstanding shares of Sheridan
Energy, Inc. Common Stock, $.01 par value.
<PAGE>
SHERIDAN ENERGY, INC.
Report on Form 10-QSB For The Quarter Ended June 30, 1998
Index
Page
Part I. Financial Information.............................................. 3
Item 1. Financial Statements (Unaudited)........................... 3
Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997........................ 4
Consolidated Statements of Operations -
Three and Six Month Periods Ended June 30, 1998 and 1997... 5
Consolidated Statements of Cash Flows -
Six Month Periods Ended June 30, 1998 and 1997............. 6
Notes to Consolidated Financial Statements - Unaudited..... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................10
Part II. Other Information..................................................18
Forward-Looking Statements
Stockholders are cautioned that all forward-looking statements involve
risks and uncertainties, including without limitation, statements about the
costs of exploring and developing new oil and natural gas reserves, the price
for which such reserves can be sold, the Company's attempts to reduce overhead
and eliminate non-core assets, environmental concerns affecting the drilling of
oil and natural gas wells, pending litigation, compliance with all Year 2000
issues, and general market conditions, competition and pricing. Although the
Company believes that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
there can therefore be no assurance that the forward-looking statements included
in this Form 10-QSB will prove accurate. Because of the significant
uncertainties inherent in the forward-looking statements contained in this Form
10-QSB, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
<PAGE>
SHERIDAN ENERGY, INC.
Report on Form 10-QSB For the Quarter Ended June 30, 1998
Part I. Financial Information
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
The accompanying unaudited consolidated financial statements of Sheridan
Energy, Inc. and its subsidiary (collectively the "Company") have been prepared
in accordance with Rule 310 of Regulation S-B, "Interim Financial Statements,"
and accordingly do not include all information and notes required under
generally accepted accounting principles for complete financial statements. The
financial statements have been prepared in conformity with the accounting
principles and practices as disclosed in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1997. These interim financial
statements reflect all adjustments (which were normal recurring adjustments)
which are, in the opinion of management, necessary for a fair presentation, in
all material respects, of the Company's financial position as of June 30, 1998.
Results of operations for the six month period ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. It is recommended that these unaudited consolidated financial
statements be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1997.
3
<PAGE>
SHERIDAN ENERGY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(in thousands, except for share and per share data)
<TABLE>
<CAPTION>
ASSETS June 30, December 31,
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents.......................................... $ - $ 274
Accounts receivable, net of allowance for doubtful accounts
of $90............................................................ 4,787 3,109
Deferred tax asset................................................. 165 165
Other current assets............................................... 591 244
-------- --------
Total current assets.............................................. 5,543 3,792
-------- --------
Property and equipment:
Oil and natural gas properties..................................... 78,676 70,139
Other property and equipment....................................... 603 427
Accumulated depletion, depreciation and amortization............... (12,641) (7,694)
-------- --------
Property and equipment, net....................................... 66,638 62,872
-------- --------
Investment in natural gas treating plant............................ 392 505
Deferred tax asset.................................................. 765 765
Other assets........................................................ 674 765
-------- --------
Total other assets................................................. 1,831 2,035
-------- --------
TOTAL ASSETS........................................................ $ 74,012 $ 68,699
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities........................... $ 8,703 $ 4,836
Current maturities of long term debt............................... 3,025 -
-------- --------
Total current liabilities......................................... 11,728 4,836
Long term debt...................................................... 32,850 31,500
-------- --------
Total liabilities................................................. 44,578 36,336
-------- --------
Commitments and contingencies (Note 3)
Redeemable Preferred Stock, 1,000,000 shares outstanding;
redemption value $10,000........................................... 10,000 10,000
Stockholders' equity:
Common Stock, 6,731,331 shares outstanding......................... 67 67
Additional paid-in capital......................................... 29,005 29,005
Accumulated deficit................................................ (9,638) (6,709)
-------- --------
Total stockholders' equity........................................ 19,434 22,363
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......................... $ 74,012 $ 68,699
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
SHERIDAN ENERGY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except for per share data)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
-------------- --------------
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Oil and natural gas sales..................................... $ 4,612 $ 1,409 $ 9,064 $ 3,198
Natural gas gathering......................................... 63 51 119 108
Gain on property sale......................................... 8 46 186 46
-------- -------- -------- --------
4,683 1,506 9,369 3,352
-------- -------- -------- --------
COST AND EXPENSES:
Operating expense............................................. 1,489 408 2,976 798
Treating and transportation expense........................... 221 134 413 281
Depletion, depreciation and amortization...................... 2,427 445 4,931 791
General and administrative expense............................ 1,003 399 2,147 1,029
Exploration costs............................................. 1 -- 30 13
-------- -------- -------- --------
5,141 1,386 10,497 2,912
-------- -------- -------- --------
OPERATING INCOME (LOSS)........................................ (458) 120 (1,128) 440
-------- -------- -------- --------
Other income (expenses):
Equity earnings in natural gas treating plant................. 157 112 313 202
Interest and other income..................................... - 49 - 125
Interest expense.............................................. (807) (30) (1,481) (74)
-------- -------- -------- --------
(650) 131 (1,168) 253
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAX................................ (1,108) 251 (2,296) 693
-------- -------- -------- --------
Income tax expense:
Current....................................................... - - 10
Deferred...................................................... - 250 - 250
-------- -------- -------- --------
- 251 - 260
-------- -------- -------- --------
NET INCOME (LOSS).............................................. (1,108) 1 (2,296) 433
Preferred stock dividends...................................... (274) (2,596) (633) (5,841)
Accretion of TGX Senior Preferred Stock redemption value....... - (1,452) - (3,205)
-------- -------- -------- --------
NET LOSS APPLICABLE TO COMMON STOCK............................ $ 1,382 $ (4,047) $ (2,929) $ (8,613)
======== ======== ======== ========
LOSS PER SHARE - BASIC......................................... $ (0.21) $ (0.94) $ (0.44) $ (2.01)
======== ======== ======== ========
LOSS PER SHARE - DILUTED....................................... $ (0.20) $ (0.94) $ (0.43) $ (2.01)
======== ======== ======== ========
WEIGHTED AVERAGE SHARES:
Basic.......................................................... 6,731 4,281 6,731 4,304
======== ======== ======== ========
Diluted........................................................ 6,865 4,281 6,861 4,304
======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
SHERIDAN ENERGY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flow from operating activities:
Net income (loss)................................................................ $ (2,296) $ 433
Adjustments to reconcile net income (loss) to cash provided by
operating activities:
Depletion, depreciation and amortization....................................... 4,931 791
Amortization of debt transaction costs and stock compensation.................. 114 (6)
Distribution in excess of equity earnings...................................... 113 64
Gain on property sales......................................................... (186) 46
Changes in current operating assets and liabilities:
Increase in accounts receivable.............................................. (1,677) (23)
Decrease in deferred tax asset............................................... - 340
Increase in other current assets............................................. (347) (200)
Increase (decrease) in accounts payable and accrued liabilities.............. 3,233 528
Deferred tax asset............................................................. - (90)
-------- --------
Net cash provided by operating activities...................................... 3,885 1,791
-------- --------
Cash flow from investing activities:
Capital expenditures............................................................. (8,713) (3,288)
Proceeds from disposal of other assets........................................... 186 46
Decrease in other assets......................................................... 16 9
-------- --------
Net cash used in investing activities............................................ (8,511) (3,233)
-------- --------
Cash flow from financing activities:
Payments on revolving credit facility and notes payable.......................... (8,000) (1,850)
Borrowings under revolving credit facility....................................... 12,375 1,962
Debt transaction costs and other................................................. (23) (19)
-------- --------
Net cash provided by financing activities........................................ 4,352 93
-------- --------
Net decrease in cash and cash equivalents.......................................... (274) (1,349)
Cash and cash equivalents at beginning of period................................... 274 1,924
-------- --------
Cash and cash equivalents at end of period......................................... $ - $ 575
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE>
SHERIDAN ENERGY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
1. BUSINESS AND EQUITY RESTRUCTURING
Business
Sheridan Energy, Inc. ("Sheridan" or the "Company") is the surviving entity
resulting from the merger (the "Merger") effective June 12, 1997 with its former
parent company, TGX Corporation ("TGX"). Sheridan is a domestic independent
energy company engaged in the production of oil and natural gas. The Company is
also engaged in intrastate natural gas gathering and treating.
Equity Restructuring
Pursuant to the Merger, holders of TGX Senior Preferred Stock received
0.5 shares of Sheridan common stock ("Sheridan Common Stock") for each share
of TGX Senior Preferred Stock, resulting in the issuance of approximately
4.3 million shares of Sheridan Common Stock. Other classes of TGX Preferred
Stock and TGX Common Stock (collectively "Other TGX Stock") were eliminated
pursuant to the Merger. The Merger was accounted for as a reorganization of
related parties with carry-over basis of assets and liabilities. The Sheridan
Common Stock was recorded at the combined carrying value of Other TGX Stock and
the initial value ascribed to the TGX Senior Preferred Stock upon their issuance
on the date of the Merger. Accordingly, upon cancellation, all recorded TGX
Preferred Stock liabilities, including accretion and unpaid dividends, were
credited to accumulated deficit. No gain or loss was recognized upon
consummation of the Merger, and all pre-Merger results, including TGX Senior
Preferred Stock dividends and accretion charges, were reflected as Sheridan
activity. The costs of soliciting proxies and effecting the Merger were charged
to expense as incurred. All prior period per share data and amounts has been
restated to reflect issuance of Sheridan Common Stock on a retroactive basis.
The following table reflects pro forma earnings per share for 1997 as if
the Merger had been effective as of January 1, 1997 and all TGX Senior Preferred
Stock and other classes of TGX Preferred Stock dividend and related accretion
charges had been eliminated as of such date:
<TABLE>
<CAPTION>
BASIC Diluted
1997 1997
---- ----
(in thousands, except per share data)
<S> <C> <C>
Pro forma net income per share....................... $ 0.10 $ 0.10
======== ========
Weighted average shares outstanding.................. 4,304 4,304
======== ========
</TABLE>
2. LONG TERM DEBT AND NOTES PAYABLE
As of June 30, 1998 and December 31, 1997 the components of long term debt
were as follows:
<TABLE>
<CAPTION>
JUNE 30, December 31,
1998 1997
---- ----
(in thousands)
<S> <C> <C>
Secured bank debt under revolving credit facility.............. $ 35,875 $ 31,500
Less current maturities........................................ (3,025) --
-------- --------
Long term debt................................................. $ 32,850 $ 31,500
======== ========
</TABLE>
In late 1997, in conjunction with the Pioneer Acquisition, as defined below
and Grand Gulf Acquisition, as defined below, the Bank One credit facility was
amended and the maturity was extended to June 30, 2000. The Company may elect
to borrow at Bank One's stated rate (8.5% at June 30, 1998) or LIBOR plus 2.5%
(8.16% at June
7
<PAGE>
30,1998). In addition, the Company must pay a commitment fee of 0.375% per annum
on the unused portion of the borrowing base. The facility is secured by
substantially all of the Company's oil and gas properties and is repayable
through monthly borrowing base reductions of $550,000. The borrowing base is
redetermined every six months or at Bank One's discretion or at Company request.
At June 30, 1998, the Company's borrowing base under this facility was
approximately $39.5 million. Based on the current borrowing base reduction rate
of $550,000, approximately $3.0 million of debt was reflected as current
maturities. (See Note 6 of Notes of Consolidated Financial Statements -
Unaudited.)
Cash paid for interest as of June 30, 1998 and 1997 totaled approximately
$1.2 million and $64,000, respectively.
3. COMMITMENTS AND CONTINGENCIES
Litigation
(a) In July 1992, certain unleased mineral interest owners commenced a
legal action in the 19th Judicial District for East Baton Rouge, Parish,
Louisiana against Sheridan's predecessor, TGX, as operator of three wells. The
petition alleges that the unleased owners are entitled to a refund of revenues
paid to TGX and other working interest owners, since first production, which are
attributable to the unleased owners' proportionate unit interest which are
utilized to offset the plaintiffs' proportionate share of cost associated with
drilling the wells. The Louisiana District Court has entered a judgment against
the Company for an amount to be determined at a later time which the Company has
appealed. Sheridan also argued that any claim which arose prior to the date of
the entry of the order confirming the Reorganization Plan has been discharged
through bankruptcy. The Company filed a lawsuit in the U.S. Bankruptcy Court
for the Western District of Louisiana ("Bankruptcy Court") claiming such a
defense. However, the Bankruptcy Court rejected that defense and the Company's
appeal of such ruling was also denied. The unleased mineral owners have filed a
summary judgement partial claim of $2.4 million, plus interest and court costs.
A hearing on this matter is scheduled for August 24, 1998. The Company plans to
continue to vigorously defend against these actions but is unable to predict the
final outcome.
(b) In July 1995, certain royalty owners in the same wells commenced a
separate legal action alleging that the Company and other working interest
owners improperly profited under the terms of a gas gathering and transportation
agreement. In 1996, the court entered an order granting a motion on behalf of
TGX for a partial summary judgment, holding that all of the royalty owner's
claims preceding the filing of the suit by more than three years were time-
barred. The Company has asked the court to dismiss the remaining claims
asserted by the royalty owners. If not dismissed, the Company will vigorously
defend against this lawsuit.
(c) In December 1996, Tomcat Exploration, Inc. and others brought suit
against Sheridan's predecessor, TGX, in the 215th District Court of Harris
County, Texas alleging that TGX's operation of the Sinclair No. 1 Well in
Louisiana was negligent and, as a result, caused damage and loss to the
plaintiffs. The suit alleges, among other things, that TGX negligently ceased
to properly treat the corrosive environments around the tubing in the well,
resulting in the well ceasing production and causing plaintiffs' loss. Sheridan
has responded by claiming, among other things, that its activities did not cause
the loss, that even if there were any such loss, plaintiffs were aware of the
state of the well prior to their acquisition of their interest in the well, and
plaintiffs' workover operation on the well, after their acquisition of their
interest, caused the well to cease production. The Company filed a lawsuit in
Bankruptcy Court claiming that the plaintiff's improperly were pursuing a pre-
petition claim against the Company regarding this matter. The Bankruptcy Court
ruled that the plaintiffs' were barred from pursuing any damages that may have
occurred pre-petition. The Bankruptcy Court ruling does allow the plaintiffs to
pursue any post-bankruptcy claims, if any. Extensive pre-trial production and
depositions have been taken, and a trial is scheduled to commence in late
October 1998.
As a result of management's assessment of the likelihood of losses from the
various litigation matters against the Company, based on advice of legal counsel
and review of the facts, circumstances, and developments surrounding the various
litigation matters, the Company recorded a provision of $1.0 million in the
fourth quarter of 1997, representing its estimate of losses and/or related costs
and expenses associated with such litigation matters.
8
<PAGE>
From time to time, in the normal course of business, the Company is a party
to other litigation matters. The outcome of the foregoing matters, to the
extent not otherwise provided for, should not, in the opinion of management,
have a material adverse effect on the Company's financial position.
4. ACCOUNTS RECEIVABLE
As of June 30, 1998 and December 31, 1997, the primary components of
accounts receivable were:
<TABLE>
<CAPTION>
JUNE 30, December 31,
1998 1997
---- ----
(in thousands)
<S> <C> <C>
Accrued oil and gas sales........................................ $ 3,996 $ 1,783
Receivables for pre-closing activity for purchased properties.... - 923
Joint interest billing and other................................. 881 493
Allowance for doubtful accounts.................................. (90) (90)
------- -------
$ 4,787 $ 3,109
======= =======
5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of June 30, 1998 and December 31, 1997, the primary components of
accounts payable and accrued liabilities were:
JUNE 30, December 31,
1998 1998
---- ----
(in thousands)
<S> <C> <C>
Accounts payable................................................ $ 1,700 $ 953
Undistributed net oil and natural gas revenues.................. 3,922 1,457
Provision for litigation expenses............................... 1,100 1,100
Accrued operating and tax expenses.............................. 1,376 638
Accrued professional fees....................................... 109 350
Miscellaneous accruals.......................................... 496 338
------- -------
$ 8,703 $ 4,836
======= =======
</TABLE>
6. SUBSEQUENT EVENT
On August 6, 1998, the Company completed two separate non-strategic
producing property sales for gross proceeds of $11.2 million and a 25%
working interest in a 5,300 acre prospect in Zapata County, Texas. The
sale proceeds were used to reduce bank debt to a balance of $26.2 million
as of August 6, 1998. In conjunction with the property sales, the Bank One
borrowing base was reduced to approximately $34.5 million.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion is intended to assist in an understanding of the
Company's financial position and results of operations and those presently known
events, trends or uncertainties that are reasonably likely to have a material
impact on the Company's future results of operations and conditions or that are
reasonably likely to cause the historical financial statements not to be
necessarily indicative of future operating results or condition. It should be
read in conjunction with the unaudited consolidated financial statements and
related notes appearing elsewhere herein and the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1997.
Stockholders are cautioned that all forward-looking statements involve
risks and uncertainty, including without limitation, statements about the cost
of exploring and developing new oil and natural gas reserves, the price for
which such reserves can be sold, the Company's attempts to reduce overhead and
eliminate non-core assets, environmental concerns affecting the drilling of oil
and natural gas wells, the attempts to acquire producing and non-producing oil
and gas properties, the ability of the Company to make projected capital
expenditures and to achieve projected quarterly results, compliance with all
Year 2000 issues, and general market conditions, competition and pricing.
All statements, other than statements of historical facts, included or
incorporated by reference in this document that address activities, events or
developments that the Company expects or anticipates will or may incur in the
future, including such things as future capital expenditures and acquisitions,
business strategy and measures to implement such strategy, competitive
strengths, goals, expansion and growth of the Company's business and operations,
plans, references to future success as well as other statements which include
words such as "anticipate," "believe," "plan," "estimate," "expect," and
"intend," and other similar expressions constitute forward-looking statements.
Although the Company believes that the assumptions underlying the forward-
looking statements contained herein are reasonable, any of the assumptions could
be inaccurate, and therefore, there can be no assurance that the forward-looking
statements included in this document will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
RESULTS OF OPERATIONS
General
Sheridan Energy, Inc. is the surviving entity resulting from the Merger
with its former parent company, TGX, effective June 12, 1997. Pursuant to the
Merger, all persons owning TGX Senior Preferred Stock had their preferred shares
exchanged for Sheridan Common Stock on the basis of 0.5 shares of Sheridan
Common Stock for each share of TGX Preferred Stock owned. At the same time,
holders of all other classes of equity securities of TGX had their securities
eliminated.
The following events affect the comparative results of operations and
financial condition for the three and six month periods ended June 30, 1998 and
1997 and may impact future operations and financial conditions.
1997 Acquisitions. In 1997, the Company purchased $52.5 million of
producing and non-producing oil and gas properties with effective dates at
various times during the year, including two significant transactions, which
closed in December 1997. In one transaction, effective November 1, 1997 but
closed December 15, 1997, the Company purchased, for cash, $46.7 million of oil
and gas producing and non-producing properties from Pioneer Natural Resources
USA, Inc. (the "Pioneer Acquisition"). In a second transaction, effective
September 1, 1997 but closed December 31, 1997, the Company acquired $4.1
million of oil and gas producing and non-producing properties from Grand Gulf
Production, L.L.C. and JEDI Hydrocarbon Investments I Limited Partnership
through the issuance of 850,000 shares of Sheridan Common Stock and warrants to
purchase an additional 150,000 shares of Sheridan Common Stock (the "Grand Gulf
Acquisition").
1997 Sale of Sheridan Common Stock and Sheridan Preferred Stock. In
connection with the Pioneer Acquisition, the Company issued 1.6 million shares
of Sheridan Common Stock for $10.0 million ($9.2 million net of expenses) and
1.0 million shares of Sheridan Preferred Stock for $10.0 million ($9.6 million
net of expenses) to Enron Capital & Trade Resources Corp. ("ECT"). The Company
also issued 850,000 shares of Sheridan Common Stock and
10
<PAGE>
warrants to purchase an additional 150,000 shares of Sheridan Common Stock at
$5.50 per share as part of the Grand Gulf Acquisition.
Three Months Ended June 30, 1998 ("1998") Compared to Three Months Ended
June 30, 1997 ("1997")
Oil and Gas Operations. The following table sets forth certain information
with respect to the oil and gas operations of the Company for the respective
three month periods. Oil and condensate and natural gas prices are shown on a
per barrel and per Mcf basis, respectively. Oil and condensate and natural gas
volumes are shown in barrels and million of cubic feet (MMcf), respectively.
Total production is shown on an equivalent Mcf basis ("Mcfe"), where one barrel
of oil or condensate is equal to six Mcf of natural gas.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------
1998 1997 Change
------- -------- ---------
Production:
<S> <C> <C> <C>
Oil and condensate (Bbl)........................................ 49,878 21,100 136%
Natural gas (MMcf).............................................. 1,946 506 285%
Total production (Mmcfe)........................................ 2,245 663 255%
Natural gas production as a percentage of total production...... 87% 80% 9%
Oil, condensate and natural gas sales (in thousands, except
percentages):
Oil and condensate sales........................................ $ 713 $ 401 78%
Natural gas sales (includes product liquids).................... $ 3,899 $ 1,008 287%
Total oil, condensate and natural gas sales..................... $ 4,612 $ 1,409 227%
Natural gas revenues as a percentage of oil and gas revenues.... 85% 72% 18%
Average realized price:
Oil and condensate (per Bbl).................................... $ 14.29 $ 19.01 (25)%
Natural gas (per Mcf)........................................... $ 2.00 $ 1.99 1%
Average cost (per Mcfe):
Operating expenses (excludes production taxes).................. $ 0.54 $ 0.55 (2)%
Depreciation, depletion and amortization exclude Impairment) $ 1.06 $ 0.70 51%
General and administrative expense.............................. $ 0.44 $ 0.62 (29)%
</TABLE>
Production
Natural gas sales volumes for the second quarter of 1998 were 1,946 MMcf,
up 285% from sales reported for the comparable 1997 period of 506 MMcf. Oil
volumes for the current quarter of 1998 were 49,878 barrels, up 136% over
comparable 1997 volumes of 21,100 barrels. The natural gas and oil sales volume
increases for 1998 reflect the full period impact of the late 1997 Pioneer and
Grand Gulf Acquisitions and the successful results of the Company's 1998
drilling and workover activity. Total production for the second quarter of 1998
was up 12% from the first quarter of 1998.
Revenues
Revenues from the sale of oil, condensate and natural gas for the second
quarter of 1998 were approximately $4.6 million, an increase of $3.2 million
over 1997 revenues of approximately $1.4 million. Of this increase, sales
volume increases contributed $3.4 million of additional revenues which were
partially offset by an oil price decline. The average realized oil price per
barrel for the second quarter of 1998, after product price hedging, was $14.29,
a decrease of $4.72 per barrel, or 25%, as compared to the 1997 second quarter
price of $19.01. Oil product price
11
<PAGE>
hedging during the second quarter of 1998 increased revenues by $136,000 or
$2.73 per barrel. The average quarterly realized price per Mcf of natural gas
for 1998, after product price hedging, was $2.00, as compared to $1.99 for 1997.
Natural gas product price hedging during the second quarter of 1998 decreased
the average realized price per Mcf by $0.03, or natural gas revenues by $58,000.
The decline in realized product prices, after product hedging, reduced second
quarter revenues by approximately $216,000.
Costs and Expenses
Operating expense. For the second quarter of 1998, total operating
expense, which includes through wellhead production costs (lifting costs),
severance taxes and workover costs, increased approximately $1.1 million, or
265%, to approximately $1.5 million, as compared to approximately $408,000 for
1997. This increase was primarily the result of higher production volumes and
taxes. Production taxes for the second quarter of 1998 and 1997 totaled
$260,000 and $57,000, respectively. Operating expense, excluding production
taxes, per Mcfe decreased 2%, from $0.55 in 1997 to $0.54 in 1998 due to the
inclusion of one-time operating enhancement costs related to the acquisition of
properties and higher workover expenses. Workover costs, which are included as
part of operating expense, for the second quarter of 1998 and 1997 totaled
$156,000 and $31,000, respectively, and primarily represent discretionary
remedial well activities that are implemented to enhance or increase production
from existing producing zones.
Treating and transportation expense. Treating and transportation expense
in 1998 increased to $221,000, as compared to $134,000 in 1997. These costs
represent post wellhead expenses incurred primarily to treat the Company's
Comite Field gas to comply with pipeline specifications or to transport Company
gas to market.
Depletion, depreciation, and amortization. Depletion, depreciation, and
amortization ("DD&A") expense for the second quarter of 1998 was approximately
$2.4 million, an increase of approximately $2.0 million from the $445,000
reported for the same period in 1997. This increase primarily was due to a 256%
increase in equivalent volumes produced and a 53% increase in the DD&A rate.
DD&A per Mcfe for the second quarter of 1998 was $1.06, as compared to $0.70 for
the same period in 1997. The increase in the per Mcfe rate reflects the
production and cost characteristics of recent acquisitions.
General and administrative expense. General and administrative expense in
the second quarter of 1998 was approximately $1.0 million, an increase of
$604,000 from $399,000 for the comparative period in 1997. This increase was
primarily attributable to 1998 staff additions as a result of the 1997 Pioneer
and Grand Gulf Acquisitions and increases in professional fees. General and
administrative expenses for the second quarter of 1997 also included $111,000 of
one-time costs and fees related to the Merger which was partially offset by the
collection of $80,000 of previously allowed for doubtful accounts receivable.
Other Income (Expenses)
Equity earnings in the Company's natural gas treating plant (the "Comite
Plant") increased by 40% to a combined total of $157,000 for the current quarter
of 1998, compared to $112,000 for the same period in 1997. This increase was
primarily attributable to the impact of two wells added to the Comite Plant as
the result of adjacent field development.
Interest and other income. Interest and other income for 1997 is comprised
primarily of interest income.
Interest expense. Interest expense for the second quarter of 1998
increased to $807,000 from $30,000 in 1997, primarily due to an increase in long
term debt resulting from the 1997 acquisitions.
Preferred Dividends and Accretion of Preferred Stock
Pursuant to the terms of the Reorganization Plan, dividends accrued on the
TGX Senior Preferred Stock at 10%, compounded annually, and on the TGX Old
Preferred at 9% payable through the issuance of additional TGX Old Preferred
shares. The accretion of the TGX Senior Preferred Stock redemption value, also
a non-cash item, was calculated based on the interest method. Effective with
the Merger, all dividends and accretion obligations were
12
<PAGE>
eliminated; however, all pre-Merger Effective Date dividend and accretion
charges continue to be reflected in the historical results of 1997. Pursuant to
the Merger each share of TGX Senior Preferred Stock was exchanged for 0.5 shares
of Sheridan Common Stock, and the TGX Old Preferred was canceled.
The 1998 preferred stock dividend expense of $274,000 represents annual
cash dividend rate of 12% related to the $10.0 million of Sheridan Preferred
Stock issued in conjunction with the Pioneer Acquisition. At the discretion of
the Company, dividends may be paid by issuing fully paid shares of Sheridan
Preferred Stock in an amount equal to 0.0675 additional shares (a 13.5% annual
rate) for each share of Sheridan Preferred Stock then issued and outstanding.
The Company elected to pay the cash dividend rate on June 15, 1998 of $600,000.
Six Months Ended June 30, 1998 ("1998") Compared to Six Months Ended June 30,
1997 ("1997")
Oil and Gas Operations. The following table sets forth certain information
with respect to the oil and gas operations of the Company for the first six
months of 1998 and 1997. Oil and condensate and natural gas prices are shown on
a per barrel and per Mcf basis, respectively. Oil and condensate and natural
gas volumes are shown in barrels and MMcf, respectively, while total production
is shown on a Mcfe basis.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1998 1997 Change
-------- ------- ------
Production:
<S> <C> <C> <C>
Oil and condensate (Bbl)........................................ 105,486 38,764 172%
Natural gas (MMcf).............................................. 3,632 994 266%
Total production (MMcfe)........................................ 4,265 1,227 247%
Natural gas production as a percentage of total production...... 85% 81% 5%
Oil, condensate and natural gas sales (in thousands, except
percentages):
Oil and condensate sales........................................ $ 1,463 $ 787 86%
Natural gas sales (includes liquids)............................ $ 7,601 $ 2,411 215%
Total oil, condensate and natural gas sales..................... $ 9,064 $ 3,198 183%
Natural gas revenues as a percentage of oil and gas revenues.... 84% 75% 12%
Average realized price:
Oil and condensate (per Bbl).................................... $ 13.87 $ 20.30 (32%)
Natural gas (per Mcf)........................................... $ 2.09 $ 2.43 (14%)
Average cost (per Mcfe):
Operating expenses (excludes production taxes).................. $ 0.56 $ 0.53 6%
Depreciation, depletion and amortization (excludes impairment) $ 1.07 $ 0.64 67%
General and administrative expense.............................. $ 0.50 $ 0.83 (40)%
</TABLE>
Production
Natural gas sales volumes for the first half of 1998 were 3,632 MMcf, up
266% from sales reported for the comparable 1997 period of 994 MMcf. Oil
volumes for the first six months of 1998 were 105,486 barrels, up 172% over 1997
comparable volumes of 38,764 barrels. The natural gas and oil sales volume
increases for 1998 reflect the full period impact of the late 1997 Pioneer and
Grand Gulf Acquisitions and the successful results of the Company's 1998
drilling and workover activity.
13
<PAGE>
Revenues
Revenues from the sale of oil, condensate and natural gas for the first
half of 1998 were approximately $9.1 million, an increase of $5.9 million, or
183%, over 1997 comparable revenues of approximately $3.2 million. Of this
increase, sales volume increases contributed $7.8 million of additional revenues
which was offset by significant product price declines. The average oil price
per barrel for 1998, after product price hedging, was $13.87, a decrease of
$6.43 per barrel, or 32%, as compared to the 1997 price of $20.30. Commencing
April 1998, the Company hedged 12,000 barrels of oil per month through December
1998 at a weighted average price of approximately $17.89. The oil price hedge
for the first half of 1998 increased oil revenues by $136,000 or $2.73 per
barrel. The average realized price per Mcf of natural gas for the first six
months of 1998, after product price hedging, was $2.09, a decrease of $0.33 per
Mcf, or 40%, from the first half 1997 price per Mcf of $2.43. Natural gas
product price hedging during the first half of 1998 decreased the average
realized price per Mcf by $0.05, or natural gas revenues by $158,000. The
Company currently has third and fourth quarter 1998 gas Mcf volumes of
approximately 1,111,000 and 815,000, respectively, hedged at approximately $2.25
and $2.34, respectively.
For 1998, the Company recorded gains on property sales of $185,000
primarily related to the sale of undeveloped acreage.
Costs and Expenses
Operating expense. For the first half of 1998, total operating expense,
which includes through wellhead production costs (lifting costs), severance
taxes and workover costs, increased approximately $2.2 million, or 273%, to
approximately $3.0 million, as compared to approximately $798,000 for the
comparable 1997 period. This increase was primarily the result of higher
production volumes and taxes. Production taxes for the first half of 1998 and
1997 totaled $550,000 and $138,000, respectively. Operating expense, excluding
production taxes, per Mcfe increased 6%, from $0.53 in 1997 to $0.56 in 1998 due
primarily to anticipated clean-up and production enhancement costs related to
the acquisition properties. Workover costs, which are typically included as
part of operating expense, for the first six months of 1998 and 1997 totaled
$275,000 and $92,000, respectively, and primarily represent discretionary
remedial well activities that are implemented to enhance or increase production
from existing producing zones.
Treating and transportation expense. Treating and transportation expense
for the first half of 1998 increased to $413,000, as compared to $280,000 for
the comparable 1997 period. These costs represent post wellhead expenses
incurred primarily to treat the Company's Comite Field gas to comply with
pipeline specifications or to transport the gas to market.
Depletion, depreciation, and amortization. DD&A expense for the first half
of 1998, excluding impairment provision, was approximately $4.6 million, an
increase of approximately $3.8 million from the $791,000 reported for the same
period in 1997. This increase primarily was due to a 247% increase in equivalent
volumes produced and a 69% increase in the DD&A rate. DD&A per Mcfe for 1998,
excluding the impairment provision, was $1.07, as compared to $0.64 for 1997.
The increase in the per Mcfe rate reflects the production and cost
characteristics of recent acquisitions. Also included in 1998 DD&A is a
provision for impairment loss on oil and gas properties of $300,000. This
impairment provision is due to mechanical problems on a well in Louisiana. The
cost anticipated to be incurred to repair the well exceeded anticipated future
recoverable reserves fair value, and thus, the Company expensed the remaining
unamortized cost. Salvage value is estimated to approximate abandonment cost.
General and administrative expense. General and administrative expense for
the first half of 1998 was approximately $2.1 million, an increase of $1.1
million from $1.0 million for the comparable 1997 period. This increase was
primarily attributable to 1998 staff additions as a result of the 1997 Pioneer
and Grand Gulf Acquisitions and increases in legal and other professional fees..
Legal expenses for 1998 increased $212,000 due primarily to the activity related
to the Tomcat Exploration, Inc. litigation matter (See Note 3 of the Notes to
Consolidated Financial Statements-Unaudited). Legal costs are anticipated to
continue to run at increased levels from 1997, as this litigation matter and the
unleased mineral owners' lawsuit proceed to trial. General and administrative
expenses for 1997 also included one-time net termination expenses of $186,000
related to the former president and another officer's resignation and $156,000
14
<PAGE>
of one-time costs and fees related to the Merger. These 1997 one-time expenses
were partially offset by the collection of $80,000 of previously allowed for
doubtful accounts receivable.
Other Income (Expenses)
Equity earnings in the the Comite Plant increased by 55% to a combined
total of $313,000 for the first six months of 1998, compared to $202,000 for the
comparable 1997 period. This increase was primarily attributable to lower plant
operating expenses and the full quarter impact of two wells added to the Comite
Plant as the result of adjacent field development.
Interest and other income. Interest and other income for the first half
of 1997 is comprised primarily of interest income of $25,000 and the sale of an
option to purchase a pipeline for $50,000.
Interest expense. Interest expense for the first half of 1998 increased to
approximately $1.5 million from $74,000 in 1997, primarily due to an increase in
long term debt resulting from the 1997 acquisitions. Included in 1998 and 1997
interest expense is approximately $78,000 and $10,000, respectively, of
amortization of credit facility establishment costs which are being amortized
over the remaining term of the facility.
Preferred Dividends and Accretion of Preferred Stock
Pursuant to the terms of the Reorganization Plan, dividends accrued on the
TGX Senior Preferred Stock at 10%, compounded annually, and on the TGX Old
Preferred at 9% payable through the issuance of additional TGX Old Preferred
shares. The accretion of the TGX Senior Preferred Stock redemption value, also
a non-cash item, was calculated based on the interest method. Effective with
the Merger, all dividends and accretion obligations were eliminated; however,
all pre-Merger Effective Date dividend and accretion charges continue to be
reflected in the historical results of 1997. Pursuant to the Merger each share
of TGX Senior Preferred Stock was exchanged for 0.5 shares of Sheridan Common
Stock, and the TGX Old Preferred was canceled.
The 1998 preferred stock dividend expense is the result of the $10.0
million of Sheridan Preferred Stock issued in conjunction with the Pioneer
Acquisition. The preferred stock dividend expense is based on the annual 12%
cash rate and includes $33,000 of amortization expense related to Sheridan
Preferred Stock fees, which are being amortized over the five year redemption
period. Cash dividends of $600,000 were paid on June 15, 1998.
FINANCIAL CONDITION
At June 30, 1998, the Company had a working capital deficit of
approximately $6.2 million, which includes a provision for litigation expense of
$1.0 million and current maturities on long term debt of $3.0 million. The
increase in working capital deficit from December 31, 1997, excluding current
maturities on long- term debt, of approximately $2.2 million is due to an
increase in undistributed revenues and operating and capital accruals related to
the acquisition of properties.
In late 1997, in conjunction with the Pioneer and Grand Gulf Acquisitions,
the Bank One credit facility borrowing base was increased to $40.0 million, and
the maturity extended to June 30, 2000. Under the current facility, the Company
may elect to borrow at Bank One's stated rate or LIBOR plus 2.5%. The Bank One
facility is secured by substantially all of the Company's oil and gas properties
and is repayable through monthly borrowing base reductions of $550,000. The
borrowing base is redetermined every six months or at Bank One's or Company's
discretion with the next scheduled redetermination due December 1998. At
June 30, 1998, the Company's borrowing base under this facility was
approximately $39.5 million with debt outstanding, of approximately $35.9
million. Due to the borrowing base reduction amount and current borrowings
outstanding at June 30, 1998, the Company reflected approximately $3.0 million
as current maturities. As a result of producing property sales on August 6, 1998
of $11.2 million (See Note 6 of the Notes to Consolidated Financial Statements -
Unaudited), the Company reduced its Bank One borrowing to $26.2 million and had
an adjusted borrowing base of approximately $34.5 million.
15
<PAGE>
The Bank One credit facility requires the maintenance of certain financial
ratios including ratios relating to working capital, as adjusted pursuant to the
credit facility, tangible net worth and an annual limitation on general and
administrative expense of 14% of revenues. In addition, the payment of
dividends on Sheridan Common Stock and Sheridan Preferred Stock is restricted
except that cash dividends may be paid on the Sheridan Preferred Stock if the
Company has a cash flow to debt service ratio of at least 1.2 to 1. At June 30,
1998, the Company did not meet the covenant regarding limitation on general and
administrative expense of revenues but received a waiver from Bank One regarding
such covenant. At current product prices, the Company anticipates that it will
not comply with the general and administrative expense covenant until late 1998
as production is anticipated to increase as a result of recompletion and
drilling activity.
The Company has certain dividend and redemption obligations related to the
Sheridan Preferred Stock. For financial reporting purposes, the Sheridan
Preferred Stock has both debt and equity characteristics and, accordingly, is
not classified as a component of stockholders' equity. At June 30, 1998, the
Sheridan Preferred Stock redemption value was $10.0 million plus accrued
dividends of approximately $50,000. The Company has no redemption obligation on
the Sheridan Preferred Stock until December 15, 2002, at which point all of the
Sheridan Preferred Stock then outstanding, plus any accrued dividends, must be
redeemed.
LIQUIDITY AND CAPITAL RESOURCES
For 1998, cash provided by operating activities was approximately $2.7
million, or $0.40 per common share outstanding.
In connection with the Pioneer Acquisition and the Enron Capital & Trade
Resources Corp. ("ECT") Agreement, the Company entered into swap agreements to
reduce its exposure to price fluctuations on a portion of its natural gas and
oil sales in 1998 and to achieve a more predictable cash flow. The fair value
of the swap agreements is the amount at which they could be settled at June 30,
1998, based on the difference between the price specified in the swap agreement
and the NYMEX futures contract prices existing at such date. If the Company had
elected to terminate its natural gas and oil swap agreements as of June 30,
1998, the Company would have been required to pay approximately $194,000. This
opportunity loss would be substantially offset in the cash market when the
hedged production is delivered. In conjunction with the swap agreements, the
Company was required to issue a letter of credit of $1.0 million to ECT through
which all swap agreements are maintained. The issuance of this letter of
credit does not reduce the Company's availability under the Bank One credit
facility.
At June 30, 1998, the Bank One credit facility had a borrowing base of
$39.5 million with approximately $36.9 million of borrowings outstanding. The
Company had letter of credit commitments, excluding the ECT letter of credit,
totaling $354,000 outstanding under the credit facility, resulting in a quarter
end facility availability of $2.3 million. The borrowing base is reduced
monthly by $550,000, and the next borrowing base redetermination is scheduled
for December 1998. All amounts are due June 30, 2000. Considering the
Company's working capital position, expected operating results and availability
under the credit facility after debt reduction resulting from property sales in
August 1998,capital resources are deemed sufficient for current operating
activities (See Note 6 of Notes to Consolidated Financial Statements -
Unaudited). The Company, however, will be required to seek additional financing
sources to effect any sizeable acquisition or expand its oil and gas exploration
program.
There are 1.0 million shares of Sheridan Preferred Stock outstanding with a
redemption value of $10 per share. Cash dividends of $0.60 per share are
payable semi-annually each June 15 and December 15 beginning June 15, 1998 (a
12% annual rate). At the option of the Company, dividends may be paid-in-kind,
semi-annually, in an amount equal to 0.0675 shares for each share then issued
and outstanding (a 13.5% annual rate). The Company has an obligation to redeem
the Sheridan Preferred Stock on December 15, 2002.
Pursuant to the terms of various agreements, the Company, as a working
interest owner, is responsible for marketing its share of natural gas production
from certain properties. If the Company is unable or unwilling to market its
share of natural gas production from a property, its under-produced status is
subject to balancing with other working interest owners who have sold more than
their proportionate share of natural gas production. On an aggregate net basis
for certain natural gas properties, it appears that the Company is in an under-
produced status of approximately
16
<PAGE>
656 MMcf as of June 30, 1998 and is currently recouping or attempting to settle
its net under-produced status. Any balancing recoupments or settlements, which
will typically be over an extended period of time, are not anticipated to be
material to future operating results.
The Company anticipates that continued development drilling and workovers
will maintain or increase current production volumes. The current projected
cash flows from existing properties coupled with projected non-strategic
property sales and borrowings available under the Company's current line of
credit are considered adequate to fund current operating activities. In
addition, the Company is continually evaluating opportunities for acquisition of
producing properties and currently intends to pursue future production volume
and reserve base growth through acquisitions. Any sizeable acquisitions will
have to be financed through a combination of bank borrowings, mezzanine
financing, production payments and additional equity issuance. Effective
implementation of the Company's development and acquisition plans is expected to
meet the Company's long-term operation and liquidity requirements.
Inflation and Changes in Prices
The Company's revenues have been and will continue to be affected by
changes in oil and natural gas prices, which have been very unstable. Although
the futures markets provide some indication of crude oil and natural gas prices
for the subsequent 12 to 18 months, prices in the future markets are subject to
substantial changes in relatively short periods of time. For management
purposes, the Company assumes that oil and natural gas prices will continue to
fluctuate and that operating costs and expenses will escalate at or above the
current inflation per annum rate. The principal effects of inflation on the
Company relate to the costs required to drill, complete and operate oil and
natural gas properties. Drilling costs, which had been on a general downward
trend since the early 1980s, have recently been increasing primarily due to an
industry-wide increase in drilling activity. This increase in drilling costs is
not anticipated to significantly impact the Company's current operations due to
its limited drilling activity and onshore operations.
Year 2000
The Company utilizes and is dependent upon data processing systems and
software to conduct its business. As the Year 2000 approaches, a critical
business issue has emerged regarding how existing application software programs
and operating systems can accommodate this date value. Management is in the
process of working with its software vendors to assure that the Company is
prepared for the Year 2000. In 1997, the Company initiated a review and
assessment of all hardware and software to confirm that it will function
properly in the Year 2000. The Company is in the final stages of identifying
those computer applications where program changes will be required in order for
the applications to process information accurately subsequent to 1999. Since
the Company currently uses an outside service bureau for much of its data
processing, the Company is dependent on the service bureau to be Year 2000
compliant. The service bureau has informed the Company that it is Year 2000
compliant. To date, indications are that all systems are or will be Year 2000
compliant, with no material costs anticipated.
17
<PAGE>
Part II. Other Information
ITEM 1. SUBMISSION OF MATTERS OF SECURITY HOLDERS
On May 21, 1998, the Company held its Annual Meeting of Stockholders. At
such time the following items were submitted to the Company's Stockholders
through the solicitation of proxies.
(A) ELECTION OF DIRECTORS
The following persons were elected to serve on the Board of Directors until
the 1999 Annual Meeting of the Stockholders or until their successors have
been duly elected and qualified. The Directors received the votes set forth
opposite their respective names:
<TABLE>
<CAPTION>
Witheld
Name For Against Authority
<S> <C> <C> <C>
B.A. Berilgen 5,106,981 -0- 4,394
Jonathan P. Carroll 5,107,929 -0- 3,446
W. Craig Childers 5,107,929 -0- 3,446
D. Bradley Dunn 5,107,929 -0- 3,446
Michael A. Gerlich 5,107,929 -0- 3,446
David H. Scheiber 5,107,929 -0- 3,446
Jeffrey E. Susskind 5,107,929 -0- 3,446
</TABLE>
(B) PROPOSALS
The stockholders of the Company were requested to vote on the 1998 Flexible
Incentive Plan. Such proposal was approved by the Stockholders. Such
proposal received 5,098,054 votes in favor, 11,749 votes against, and
11,873 abstained or withheld authority.
ITEM 2. LEGAL PROCEEDINGS
Except as set forth in Note 3 of the notes of Consolidated Financial
Statements Unaudited included in Part 1 hereof, since the filing date of
the Annual Report on Form 10-KSB, there have been no substantial
developments related to the legal proceedings described therein.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
Exhibit 27 - Financial Data Schedule
(B) REPORTS ON FORM 8-K:
None.
18
<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.
SHERIDAN ENERGY, INC.
(Registrant)
Date: August 14, 1998 By: /s/ Michael A. Gerlich
------------------------------------------
Michael A. Gerlich
Vice President and Chief Financial Officer
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 4,877
<ALLOWANCES> 90
<INVENTORY> 0
<CURRENT-ASSETS> 5,543
<PP&E> 79,279
<DEPRECIATION> 12,641
<TOTAL-ASSETS> 74,012
<CURRENT-LIABILITIES> 11,728
<BONDS> 0
10,000
0
<COMMON> 67
<OTHER-SE> 19,367
<TOTAL-LIABILITY-AND-EQUITY> 74,012
<SALES> 9,064
<TOTAL-REVENUES> 9,369
<CGS> 3,389
<TOTAL-COSTS> 3,389
<OTHER-EXPENSES> 4,108
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,481
<INCOME-PRETAX> (2,296)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,296)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,929)
<EPS-PRIMARY> (0.44)
<EPS-DILUTED> (0.43)
</TABLE>
