UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from.............. to .............
Commission file number 0-22149
EDGE PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 76-0511037
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Texaco Heritage Plaza
1111 Bagby, Suite 2100
Houston, Texas 77002
(Address of principal executive offices)
(713) 654-8960
(Registrant's telephone number, including area code)
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding at May 11, 1999
------------ ------------------------------
Common Stock 7,758,667
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
EDGE PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
<TABLE>
- -----------------------------------------------------------------------------------------------------------------
March 31, December 31,
1999 1998
-------------- --------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 259,652 $ 272,428
Accounts receivable, trade 3,297,701 2,237,113
Accounts receivable, joint interest owners, net 2,096,201 2,215,096
Receivable from related parties 204,740 228,922
Other current assets 280,213 313,631
------------ ------------
Total current assets 6,138,507 5,267,190
PROPERTY AND EQUIPMENT, Net - full cost method of accounting
for oil and natural gas properties 46,675,307 47,258,993
INVESTMENT IN FRONTERA 3,750,561 3,744,935
OTHER ASSETS 7,789 7,789
------------ ------------
TOTAL ASSETS $ 56,572,164 $ 56,278,907
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade $ 4,256,976 $ 2,948,791
Accrued liabilities 3,484,658 3,799,881
Accrued interst payable 95,687 93,880
Current portion of long-term debt 7,400,000 6,700,000
------------ -----------
Total current liabilities 15,237,321 13,522,552
------------ -----------
LONG-TERM DEBT 4,600,000 5,800,000
------------ -----------
Total liabilities 19,837,321 19,322,552
------------ -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01par value; 5,000,000 shares authorized; none outstanding
Common stock, $.01par value; 25,000,000 shares authorized; 7,758,667 shares
issued and outstanding at March 31, 1999 and December 31, 1998 77,586 77,586
Additional paid-in capital 47,769,159 47,769,159
Retained earnings (deficit) (9,703,898) (9,398,410)
Unearned compensation - restricted stock (1,408,004) (1,491,980)
------------ ------------
Total stockholders' equity 36,734,843 36,956,355
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 56,572,164 $ 56,278,907
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
EDGE PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
---------------------------
1999 1998
<S> <C> <C>
OIL AND NATURAL GAS REVENUES $ 3,542,188 $ 3,785,666
OPERATING EXPENSES:
Lifting Costs 479,128 370,059
Severance and ad valorem taxes 352,689 301,125
Depletion, depreciation and amortization 1,902,760 1,186,586
General and administrative expenses 1,001,819 866,311
Unearned compensation expense 83,976 155,052
----------- -----------
Total operating expenses 3,820,372 2,879,133
----------- -----------
OPERATING INCOME (LOSS) (278,184) 906,533
OTHER INCOME AND EXPENSE:
Interest expense (38,326)
Interest income 11,022 46,045
----------- -----------
NET INCOME BEFORE INCOME TAX EXPENSE AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (305,488) 952,578
INCOME TAX EXPENSE (333,881)
----------- -----------
NET INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE (305,488) 618,697
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 1,780,835
----------- -----------
NET INCOME (LOSS) $ (305,488) $2,399,532
=========== ===========
BASIC EARNINGS(LOSS)PER SHARE:
Net income (loss) before cumulative effect of accounting change $(0.04) $ 0.08
Cumulative effect of accounting change 0.23
------ ------
Basic earnings(loss)per share $(0.04) $ 0.31
====== ======
DILUTED EARNINGS(LOSS)PER SHARE:
Net income (loss) before cumulative effect of accounting change $(0.04) $ 0.08
Cumulative effect of accounting change 0.23
------ ------
Diluted earnings (loss)per share $(0.04) $ 0.31
====== ======
BASIC WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,758,667 7,760,869
========= =========
DILUTED WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,758,667 7,794,098
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
EDGE PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Unearned
Common Stock Additional Compensation- Total
------------------------- Paid-in Retained Restricted Stockholders'
Shares Amount Capital Earnings(Deficit) Stock Equity
---------- -------- ------------ ----------------- -------------- --------------
BALANCE,
<S> <C> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1999 7,758,667 $ 77,586 $ 47,769,159 $(9,398,410) $ (1,491,980) $36,956,355
Unearned compensation expense 83,976 83,976
Net loss (305,488) (305,488)
---------- --------- ------------ ----------- ------------- ------------
BALANCE,
MARCH 31, 1999 7,758,667 $ 77,586 $ 47,769,159 $(9,703,898) $ (1,408,004) $36,734,843
========== ========= ============ =========== ============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
EDGE PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
------------------------------
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ (305,488) $2,399,532
Adjustments to reconcile net income(loss)to net cash provided by operating
activities:
Cumulative effect of accouning change (1,780,835)
Depletion, depreciation and amortization 1,902,760 1,186,586
Deferred income taxes 333,881
Unearned compensation expense 83,976 155,052
Changes in assets and liabilities:
Accounts receivable, trade (1,060,588) (348,061)
Accounts receivable, joint interest owners, net 118,895 3,304,666
Receivable from related parties 24,182 63,269
Other current assets 33,418 48,950
Other assets (7,463)
Accounts payable, trade 1,308,185 (1,011,655)
Accounts payable, related party (40,000)
Accrued liabilities (295,223) (31,532)
Accrued interest payable 1,807
----------- -----------
Net cash provided by operating activities 1,811,924 4,272,390
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Oil and natural gas property and equipment purchases (2,967,791) (8,468,415)
Proceeds from the sale of oil and natural gas properties 1,648,717 1,783,124
Investment in Frontera (5,626)
----------- -----------
Net cash used in investing activities (1,324,700) (6,685,291)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on long-term debt (500,000)
----------- -----------
Net cash used in financing activities (500,000)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (12,776) (2,412,901)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 272,428 3,777,950
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 259,652 $ 1,365,049
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES - Cash paid for interest, net of amounts capitalized $ 38,305
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
EDGE PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements included herein have been prepared by Edge
Petroleum Corporation, a Delaware corporation (the "Company"), without audit
pursuant to the rules and regulations of the Securities and Exchange Commission,
and reflect all adjustments which are, in the opinion of management, necessary
to present a fair statement of the results for the interim periods on a basis
consistent with the annual audited consolidated financial statements. All such
adjustments are of a normal recurring nature. The results of operations for the
interim periods are not necessarily indicative of the results to be expected for
an entire year. Certain information, accounting policies and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. Certain prior year
amounts have been reclassified to conform to the current year presentation. Such
reclassifications do not affect net income (loss). These financial statements
should be read in conjunction with the Company's audited consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
Accounting Change - The Company uses the full-cost method of accounting
for its oil and natural gas properties. Under this method, all acquisition,
exploration and development costs that are directly attributable to the
Company's acquisition, exploration and development activities are capitalized in
a "full-cost pool" as incurred. In the second quarter of 1998 and effective
January 1, 1998, the Company changed its method of accounting for internal
geological and geophysical ("G&G") costs to one of capitalization of such costs,
which are directly attributable to acquisition, exploration and development
activities, to oil and natural gas properties. Prior to the change the Company
expensed these costs as incurred. The Company believes the accounting change
provides for a better matching of revenues and expenses and enhances the
comparability of it's financial statements with those of other companies that
follow the full-cost method of accounting. Accordingly, the financial results
for the period ended March 31, 1998 have been restated to give effect to the
change in accounting method effective January 1, 1998. The $1,780,835 cumulative
effect of the change in prior years (after reduction for income taxes of
$958,910) is included in income for the three months ended March 31, 1998. The
effect of the accounting change on the three months ended March 31, 1998 was to
increase net income by $2,041,066 or $0.26 basic and diluted earnings per share
($260,231 before cumulative effect of accounting change or $0.03 basic and
diluted earnings per share).
Accounting Pronouncements
Derivatives - In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activity" ("SFAS 133"). SFAS 133 establishes accounting
and reporting standards for derivative instruments and hedging activities that
require an entity to recognize all derivatives as an asset or liability measured
at fair value. Depending on the intended use of the derivatives, changes in its
fair value will be reported in the period of change as either a component of
earnings or a component of other comprehensive income.
SFAS 133 is effective for all fiscal quarters beginning after June 15, 1999.
Earlier application of SFAS 133 is encouraged, but not prior to the beginning of
any fiscal quarter that begins after issuance of the statement. Retroactive
application to periods prior to adoption is not allowed. The Company has not
quantified the impact of adoption on its financial statements or the date it
intends to adopt.
6
<PAGE>
2. LONG TERM DEBT
During July 1995, the Company entered into a revolving credit facility
(the "Revolving Credit Facility") with a bank to finance temporary working
capital requirements. The Revolving Credit Facility provided up to $20 million
in borrowings limited by a borrowing base, as defined by the Revolving Credit
Facility. The Revolving Credit Facility provided for interest at the lender's
prime rate plus 0.75%. The borrowing base was subject to review by the bank on a
quarterly basis and could be adjusted subject to the provisions of the Revolving
Credit Facility. Effective April 1, 1998, the Company amended and restated its
Revolving Credit Facility to provide a revolving line of credit of up to $100
million bearing interest at a rate equal to prime or LIBOR plus 1.5% - 2%
depending on the level of borrowing base utilization. The Company's initial
borrowing base authorized by the banks was approximately $15 million. The
Revolving Credit Facility is secured by substantially all the assets of the
Company.
Effective September 29, 1998, the Company had its borrowing base
redetermined and amended its Revolving Credit Facility. The initial borrowing
base authorized by the bank was $15 million. Beginning October 1, 1998, and on
the first day of each month thereafter, the borrowing base was required to be
reduced by $550,000.
The Revolving Credit Facility provides for certain restrictions, including
but not limited to, limitations on additional borrowings and issues of capital
stock, sales of its oil and natural gas properties or other collateral, engaging
in merger or consolidation transactions and prohibitions of dividends and
certain distributions of cash or properties and certain liens. The Revolving
Credit Facility also contains certain financial covenants.
Effective March 1, 1999, the Company and the Bank amended the Revolving
Credit Facility to include the following terms; 1),the initial borrowing base
is $12 million comprised of a two tranche financing of a $9 million Revolving
Credit Facility and a $3 million term facility, 2) Beginning May 1, 1999,
and on the first day of each month thereafter, the Revolving Credit Facility
borrowing base is required to be reduced by $400,000, 3) 75% of prospect sales
will be used to pay down the term facility with the remaining unpaid term
facility balance maturing on August 31, 1999. The Company and the Bank also
amended the Revolving CreditFacility to replace the financial covenants on a
go forward basis with a Tangible Net Worth Covenant and Fixed Charge Covenant.
TheTangible Net Worth Covenant requires that at the end of each quarter the
Company's Tangible Net Worth be at least 90% of the Company's actual tangible
networth as reported at December 31, 1998 (or $33,260,720) plus 50% of
positive net income and 100% of other increases in equity for all fiscal
quarters ending subsequent to December 31, 1998. The Fixed Charge Covenant
requires that at the end of each quarterbeginning June 30, 1999, the ratio of
annualized EBITDA (as defined) to the sum of annualized interest expense plus
50% of the quarter end loans outstanding must be at least 1.25 to 1.00.
Interest will accrue at a rate of LIBOR plus 1.75% - 2.75% depending on the
borrowing base utilization.
3. EARNINGS PER SHARE
The Company accounts for earnings per share in accordance with Statement of
Financial Accounting Standard No. 128 - "Earnings per Share," ("SFAS No. 128")
which establishes the requirements for presenting earnings per share ("EPS").
SFAS No. 128 requires the presentation of "basic" and "diluted" EPS on the face
of the income statement. Basic earnings per common share amounts are calculated
using the average number of common shares outstanding during each period.
Diluted earnings per share assumes the exercise of all stock options having
exercise prices less than the average market price of the common stock using the
treasury stock method.
7
<PAGE>
The following is presented as a reconciliation of the numerators
and denominators of basic and diluted earnings per share computations, in
accordance with SFAS No. 128.
<TABLE>
Three Months Ended
--------------------------------------------------------------------------------
March 31, 1999 March 31, 1998
------------------------------------- -------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
Basic EPS
Income (loss) available to
<S> <C> <C> <C> <C> <C> <C>
common stockholders $ (305,488) 7,758,667 $(0.04) $2,399,532 7,760,869 $ 0.31
Effect of Dilutive Securities
Common stock options 33,229
----------- --------- ------- ----------- --------- -------
Diluted EPS
Income (loss) available to
common stockholders $ (305,488) 7,758,667 $(0.04) $2,399,532 7,794,098 $ 0.31
=========== ========= ======= =========== ========= =======
</TABLE>
4. SUBSEQUENT EVENT
On May 6, 1999, the Company completed a private offering of 1,400,000
shares of common stock based on a market price of $5.3125 per common share. The
private offering also provides for warrants, which were purchased for $0.125 per
share, to acquire an additional 420,000 shares of common stock at $5.35 per
share. Total proceeds, net of offering costs, were approximately $7.4 million of
which $4.9 million was used to repay debt under the Revolving Credit Facility
with the remainder to be used to satisfy working capital requirements and fund a
portion of the Company's future exploration program. After the repayment of debt
the Company has available approximately $1.5 million under its Revolving Credit
Facility for future borrowings.
5. INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109 - "Accounting for Income Taxes," ("SFAS
No. 109") which provides for an asset and liability approach for accounting for
income taxes. Under this approach, deferred tax assets and liabilities are
recognized based on anticipated future tax consequences, using currently enacted
tax laws, attributable to differences between financial statement carrying
amounts of assets and liabilities and their respective tax bases. Due to the
Company incurring a net loss for the three months ended March 31, 1999 and due
to the Company having significant deferred tax assets, no tax benefit (expense)
was recorded. Due to the uncertainty of the Company's ability to become
profitable in the future an allowance has been provided to offset the tax
benefits of certain tax assets. Should the Company have net income in future
periods income tax expense will be recorded upon utilization of deferred tax
assets.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors that have affected certain aspects of the Company's
financial position and operating results during the periods included in the
accompanying unaudited condensed consolidated financial statements. This
discussion should be read in conjunction with the accompanying unaudited
condensed consolidated financial statements included elsewhere in this Form 10-Q
and with the Company's audited consolidated financial statements included in the
Company's annual report on Form 10-K for the year ended December 31, 1998.
Unless otherwise indicated by the context, references herein to the "Company"
mean Edge Petroleum Corporation, a Delaware corporation that is the registrant,
and its corporate subsidiaries .
Overview
Edge Petroleum Corporation is an independent energy company engaged in
the exploration, development and production of oil and natural gas. Edge
conducts its operations primarily along the onshore Gulf Coast with its primary
emphasis in South Texas and South Louisiana where it currently controls
interests in excess of 222,000 gross acres under lease and option. The Company
explores for oil and natural gas by emphasizing an integrated application of
highly advanced data visualization techniques and computerized 3-D seismic data
analysis to identify potential hydrocarbon accumulations. The Company believes
its approach to processing and analyzing geophysical data differentiates it from
other independent exploration and production companies and is more effective
than conventional 3-D seismic data interpretation methods. The Company also
believes it maintains one of the largest databases of onshore South Texas Gulf
Coast 3-D seismic data of any independent oil and natural gas company, and is
continuously acquiring additional data within this core region.
The Company acquires 3-D seismic data by organizing and designing
regional data acquisition surveys for its proprietary use, as well as through
selective participation in regional non-proprietary 3-D surveys. The Company
negotiates seismic options for a majority of the areas encompassed by its
proprietary surveys, thereby allowing it to secure identified prospect leasehold
interests on a non-competitive, pre-arranged basis. In the Company's
non-proprietary 3-D survey areas, the Company's technical capabilities allow it
to rapidly and comprehensively evaluate large volumes of regional 3-D seismic
data, facilitating its ability to identify attractive prospects within a
surveyed region and to secure the corresponding leasehold interests ahead of
other industry participants.
The Company's extensive technical expertise has enabled it to
internally generate substantially all of its 3-D prospects drilled to date and
to assemble a large portfolio of 3-D based prospects for future drilling. The
Company pursues drilling opportunities that include a blend of shallower,
normally pressured reservoirs that generally involve moderate costs and risks as
well as deeper, over-pressured reservoirs that generally involve greater costs
and risks, but have higher economic potential. During the past year, the Company
has expanded its relative focus to increase its exposure to exploration
opportunities in the deeper geological section. The Company mitigates its
exposure to exploration costs and risk by conducting its operations with
industry partners, including major oil companies and large independents, that
generally pay a disproportionately greater share of seismic acquisition and, in
many instances, leasing and drilling costs than the Company. The Company may
seek to participate in an increased number of externally generated prospects,
including those in which the Company pays a disproportionate share of the cost,
depending upon the quality, size, price and other factors relating to such
prospects.
The Company uses the full-cost method of accounting for its oil and
natural gas properties. Under this method, all acquisition, exploration and
development costs, including certain general and administrative costs that are
9
<PAGE>
directly attributable to the Company's acquisition, exploration and development
activities, are capitalized in a "full-cost pool" as incurred. The Company
capitalizes internal Geological and Geophysical ("G&G") costs that are directly
attributable to acquisition, exploration and development activities to oil and
natural gas properties. Total internal G&G costs capitalized during the three
months ended March 31, 1999 and 1998 were $563,592 and $539,965, respectively.
The Company records depletion of its full-cost pool using the unit of production
method. Investments in unproved properties are not subject to amortization until
the proved reserves associated with the projects can be determined or until
impaired. To the extent that capitalized costs subject to amortization in the
full-cost pool (net of depletion, depreciation and amortization and related
deferred taxes) exceed the present value (using a 10% discount rate) of
estimated future net after-tax cash flows from proved oil and natural gas
reserves, such excess costs are charged to operations. Once incurred, an
impairment of oil and natural gas properties is not reversible at a later date.
Impairment of oil and natural gas properties is assessed on a quarterly basis in
conjunction with the Company's quarterly filings with the Commission. At March
31, 1999, no full cost ceiling test write down of oil and natural gas properties
was necessary.
Due to the instability of oil and natural gas prices, the Company has
entered into, from time to time, price risk management transactions (e.g., swaps
and collars) for a portion of its natural gas production to achieve a more
predictable cash flow, as well as to reduce exposure from price fluctuations.
While the use of these arrangements limits the benefit to the Company of
increases in the price of natural gas it also limits the downside risk of
adverse price movements. The Company's hedging arrangements apply to only a
portion of its production and provide only partial price protection against
declines in natural gas prices and limits potential gains from future increases
in prices. The Company accounts for these transactions as hedging activities
and, accordingly, gains and losses are included in oil and natural gas revenues
during the period the hedged transactions occur. During December 1998, the
Company entered into a fixed price swap for $1.96 per MMbtu (delivered price
basis, Houston Ship Channel), with settlement for each calendar month occurring
five business days following the publishing of the Inside F.E.R.C. Gas Marketing
Report. This fixed price swap covers 13,000 MMbtu per day and is effective
beginning March 1, 1999 and expires on October 31, 1999. Total natural gas
production hedged under this arrangement was 403,000 MMbtu for the three months
ended March 31, 1999 or 21% of the current quarter's production. Existing swaps
currently cover approximately 68% of current daily production. During April
1999, the Company entered into a fixed price swap for $2.15 per MMbtu. This
fixed price swap covers 3,000 MMbtu per day and is effective beginning May 1,
1999 and expires on October 31, 1999. During the three months ended March 31,
1998, the Company had in place two natural gas commodity collars with a
financial institution one of which expired on January 31, 1998 with the other
expiring on April 30, 1998. These collars each covered 5,000 MMbtu per day, or
approximately 29% of the Company's daily production, with floating floor and
ceiling prices ranging between $2.25 MMbtu and $3.15 per MMbtu. Total natural
gas production hedged under these collars was 450,000 MMbtu for the three months
ended March 31, 1998 or 29% of production. Included within natural gas revenues
for the three month periods ended March 31, 1999 and 1998 was $142,346 and
$36,700, respectively, representing net gains from swap and collar activities.
The Company's revenue, profitability and future rate of growth and
ability to borrow funds or obtain additional capital, and the carrying value of
its properties, are substantially dependent upon prevailing prices for oil and
natural gas. These prices are dependent upon numerous factors beyond the
Company's control, such as economic, political and regulatory developments and
competition from other sources of energy. Oil prices have declined significantly
during the past year and more recently natural gas prices have shown similar
declines. Even though prices have shown signs of resent recovery since March 31,
1999, a substantial or extended decline in oil and natural gas prices could have
a material adverse effect on the Company's financial condition, results of
operation and access to capital, as well as the quantities of oil and natural
gas reserves that the Company may economically produce.
10
<PAGE>
RESULTS OF OPERATIONS
Three Months Ended March 31, 1999 Compared to the Three Months Ended
March 31,1998
Revenue and Production
Oil and natural gas revenues for the three months ended March 31, 1999
decreased 6% from $3.8 million to $3.5 million, as compared to the three months
ended March 31, 1998. Production volumes for oil and condensate for the three
months ended March 31, 1999 decreased 11% from 42 MBbls to 37 MBbls, as compared
to the three months ended March 31, 1998. The decrease in oil and condensate
production during the three months ended March 31, 1999 decreased revenues by
$64,580 (based on 1998 comparable quarter average prices), further decreased by
a 26% decrease in the average oil and condensate sales price which decreased
revenues by $134,857 (based on current quarter production). Production volumes
for natural gas for the three months ended March 31, 1999 increased 26% from
1,323 MMcf to 1,668 MMcf, as compared to the three months ended March 31, 1998.
The increase in natural gas production during the three months ended March 31,
1999 increased revenues by $838,089, offset by a 22% decrease in the average
natural gas sales price which decreased revenues by $882,130. The increase in
oil and natural gas production was primarily due to 42 gross (16.94 net) new
successful exploratory and development wells being drilled and completed since
March 31, 1998 offset by normal production declines from existing wells. As
described above, included within natural gas revenues for the three months ended
March 31, 1999 and 1998 was $142,346 and $36,700, respectively, representing
gains from current swap and collar activity. Hedging activities increased the
effective natural gas sales price by approximately $0.09 per Mcf and $0.03 per
Mcf, respectively, or 5% and 1%, respectively, for the three-months ended March
31, 1999 and 1998.
The following table sets forth certain operational data of the Company
for the periods presented:
<TABLE>
Three Months Ended 1999 Period Compared
March 31, to 1998 Period
---------------------------- ------------------------
Increase % Increase
1999 1998 (Decrease) (Decrease)
Production volumes:
<S> <C> <C> <C> <C>
Oil and condensate (Bbls) 37,410 42,139 (4,729) (11)%
Natural gas (Mcf) 1,668,423 1,323,022 345,401 26 %
Natural gas equivalents (Mcfe) 1,892,883 1,575,856 317,027 20 %
Average sales prices:
Oil and condensate ($ per Bbl) $ 10.05 $ 13.66 $ (3.61) (26)%
Natural gas ($ per Mcf) $ 1.90 $ 2.43 $ (0.53) (22)%
Natural gas equivalent ($per Mcfe) $ 1.87 $ 2.40 $ (0.53) (22)%
Operating revenues:
Oil and condensate $ 376,019 $ 575,456 $ (199,437) (35)%
Natural gas 3,166,169 3,210,210 (44,041) (1)%
----------- ----------- ----------
Total $ 3,542,188 $ 3,785,666 $ (243,478) (6)%
=========== =========== ==========
</TABLE>
Costs and Operating Expenses
Lifting costs for the three months ended March 31, 1999 increased 29%
from $370,059 to $479,128 as compared to the three months ended March 31, 1998,
due primarily to increased oil and natural gas production. Lifting costs were
$0.25 per Mcfe and $0.24 per Mcfe for the three-month periods ended March 31,
1999 and 1998, respectively.
11
<PAGE>
Severance and ad valorem taxes for the three months ended March 31, 1999
increased 17% from $301,125 to $352,689 as compared to the three months ended
March 31, 1998, due primarily to increased ad valorem taxes. Severance and ad
valorem taxes were $0.19 per Mcfe for both three-month periods ended March 31,
1999 and 1998, respectively.
Depletion, depreciation and amortization expense ("DD&A") for the three
months ended March 31, 1999 increased 60% from $1.2 million to $1.9 million, as
compared to the three months ended March 31, 1998. Included within DD&A for the
three-month periods ended March 31, 1999 and 1998 was $1.7 million and $1
million, respectively, representing depletion expense of oil and natural gas
property, which increased by 67%. Increased oil and natural gas production
increased depletion expense by approximately $206,000 and a 39% increase in the
overall depletion rate further increased depletion expense by approximately
$494,000. The increase in the depletion rate was primarily attributable to
abandonments of certain projects, prospects and wells at December 31, 1998 and
dry holes drilled since March 31, 1998 contributing to an overall increase in
finding cost. Depletion expense on a unit of production basis for the
three-month periods ended March 31, 1999 and 1998 was $0.90 per Mcfe and $0.65
per Mcfe, respectively. The remaining increase in DD&A is due primarily to
depreciation of new computer hardware, software and office improvements
purchased since March 31, 1998 and the amortization of deferred loan cost on the
Credit Facility which was effective in April 1998.
General and administrative expenses ("G&A") for the three months ended
March 31, 1999 increased 16% from $866,311 to $1 million, as compared to the
three months ended March 31, 1998. The increase in G&A was primarily
attributable to a $144,000 decrease in overhead and management fees received
from various management, operating and seismic agreements during the three
months ended March 31, 1999. Total overhead and management fees are recorded as
a reduction of G&A and were approximately $54,000 and $200,000, respectively,
for the three months ended March 31, 1999 and 1998. G&A on a unit of production
basis for the three-month periods ended March 31, 1999 and 1998 was $0.53 per
Mcfe and $0.55 per Mcfe, respectively.
Unearned compensation expense for the three months ended March 31, 1999
decreased from $155,052 to $83,976, as compared to the three months ended March
31, 1998. The decrease is due to the resignation of the former CEO and Chairman
of the Board during November of 1998 whereby he vested in his remaining
restricted stock grant. The Company charged to expense his unamortized unearned
compensation upon his resignation.
Interest expense for the three months ended March 31, 1999 was $38,326
net of amounts capitalized of $225,597. The increase in interest expense is due
to increased borrowings under the Company's Credit Facility since March 31,
1998. The weighted average debt was $12 million for the three months ended March
31, 1999. There was no debt outstanding during the three-month period ended
March 31, 1998.
Interest income for the three months ended March 31, 1999 decreased from
$46,045 to $11,022, as compared to the three months ended March 31, 1998. The
decrease in interest income is due to the overall reduction in invested funds
during the comparable periods.
Due to the Company incurring a net loss for the three months ended March
31, 1999 and due to the Company having significant deferred tax assets, no tax
benefit (expense) was recorded. Due to the uncertainty of the Company's ability
to become profitable in the future an allowance has been provided to offset the
tax benefits of certain tax assets. Should the Company have net income in future
periods income tax expense will be recorded upon utlization of available tax
assets. Tax expense for the three months ended March 31, 1998 was $333,881.
12
<PAGE>
For the three months ended March 31, 1999, the Company had an operating
loss of $(278,184) compared to operating income of $906,533 for the three month
period ended March 31, 1998, primarily due to significantly lower natural gas
and oil and condensate prices, further reduced by increased operating expenses
and increased DD&A expense offset by increased oil and natural gas production.
Net loss was $(305,488) for the three months ended March 31, 1999, or $(0.04)
basic and diluted loss per share, as compared to net income of $2.4 million, or
$0.31 basic and diluted earnings per share, ($618,697 before cumulative effect
of accounting change or $0.08 basic and diluted earnings per share), for the
three-month period ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents at March 31, 1999 of $259,652
consisting primarily of short-term money market investments, as compared to
$272,428 at December 31, 1998. Working capital was $(9.1) million at March 31,
1999, as compared to $(8.3) million at December 31, 1998.
Operating cash flow was approximately $1.7 million and $2.3 million for
the three-month periods ended March 31, 1999 and 1998, respectively. Operating
cash flow, a measure of performance for exploration and production companies,
represents cash flows from operating activities prior to changes in assets and
liabilities. Operating cash flow should not be considered in isolation or as a
substitute for net income, operating income, cash flows from operating
activities or any other measure of financial performance presented in accordance
with generally accepted accounting principles or as a measure of profitability
or liquidity.
During the three months ended March 31, 1999, the Company continued to
reinvest a substantial portion of its cash flows to increase its 3-D project
portfolio, improve its 3-D seismic interpretation technology and fund its
drilling program. Capital expenditures during the three months ended March 31,
1999 were approximately $3 million as compared to $8.5 million during the same
period in 1998. The Company expended $1.3 million in its drilling operations
resulting in the drilling of 6 gross (2.53 net) wells during the three months
ended March 31, 1999 as compared to 22 gross (10.29 net) wells during the same
period in 1998. Two wells are currently drilling, the Varn #2 located in South
Louisiana and the Worsham/O'Conner #1 located in South Texas. Land and data
acquisition expenditures were $1.7 million and were largely attributable to its
Nodosaria Embayment 3-D Project Area in South Louisiana. Total capital
expenditures for 1999 are expected to be approximately $18 million.
Due to the Company's active exploration and development and technology
enhancement programs, the Company has experienced and expects to continue to
experience substantial working capital requirements. The Company intends to fund
its 1999 capital expenditures, commitments and working capital requirements
through cash flows from operations, available borrowings under its existing
Revolving Credit Facility, and to the extent necessary other financing
activities. To provide additional working capital the Company continues to
market a portion of its interest in various Company generated drill ready
prospects. Additionally, the Company is currently evaluating various financing
and refinancing options as well as divestitures of certain non-core and under
performing assets. The Company believes it will be able to generate capital
resources and liquidity sufficient to fund its capital expenditures and meet
such financial obligations as they come due. In the event such capital resources
are not available to the Company, its drilling and other activities may be
curtailed.
13
<PAGE>
Subsequent Event
On May 6, 1999, the Company completed a private offering of 1,400,000
shares of common stock based on a market price of $5.3125 per common share. The
private offering also provides for warrants, which were purchased for $0.125 per
share, to acquire an additional 420,000 shares of common stock at $5.35 per
share. Total proceeds, net of offering costs, were approximately $7.4 million of
which $4.9 million was used to repay debt under the Revolving Credit Facility
with the remainder to be used to satisfy working capital requirements and fund a
portion of the Company's future exploration program. After the repayment of debt
the Company has available approximately $1.5 million under its Revolving Credit
Facility for future borrowings.
Revolving Credit Facility
During July 1995, the Company entered into a revolving credit facility (the
"Revolving Credit Facility") with a bank to finance temporary working capital
requirements. The Revolving Credit Facility provided up to $20 million in
borrowings limited by a borrowing base, as defined by the Revolving Credit
Facility. The Revolving Credit Facility provided for interest at the lender's
prime rate plus 0.75%. The borrowing base was subject to review by the bank on a
quarterly basis and could be adjusted subject to the provisions of the Revolving
Credit Facility. Effective April 1, 1998, the Company amended and restated its
Revolving Credit Facility to provide a revolving line of credit of up to $100
million bearing interest at a rate equal to prime or LIBOR plus 1.5% - 2%
depending on the level of borrowing base utilization. The Company's initial
borrowing base authorized by the banks was approximately $15 million. The
Revolving Credit Facility is secured by substantially all the assets of the
Company.
Effective September 29, 1998, the Company had its borrowing base
redetermined and amended its Revolving Credit Facility. The initial borrowing
base authorized by the bank was $15 million. Beginning October 1, 1998, and on
the first day of each month thereafter, the borrowing base was required to be
reduced by $550,000.
The Revolving Credit Facility provides for certain restrictions, including
but not limited to, limitations on additional borrowings and issues of capital
stock, sales of its oil and natural gas properties or other collateral, engaging
in merger or consolidation transactions and prohibitions of dividends and
certain distributions of cash or properties and certain liens. The Revolving
Credit Facility also contains certain financial covenants.
Effective March 1, 1999, the Company and the Bank amended the Revolving
Credit Facility to include the following terms; 1),the initial borrowing base
is $12 million comprised of a two tranche financing of a $9 million Revolving
Credit Facility and a $3 million term facility, 2) Beginning May 1, 1999,
and on the first day of each month thereafter, the Revolving Credit Facility
borrowing base is required to be reduced by $400,000, 3) 75% of prospect sales
will be used to pay down the term facility with the remaining unpaid term
facility balance maturing on August 31, 1999. The Company and the Bank also
amended the Revolving CreditFacility to replace the financial covenants on a
go forward basis with a Tangible Net Worth Covenant and Fixed Charge Covenant.
TheTangible Net Worth Covenant requires that at the end of each quarter the
Company's Tangible Net Worth be at least 90% of the Company's actual tangible
networth as reported at December 31, 1998 (or $33,260,720) plus 50% of
positive net income and 100% of other increases in equity for all fiscal
quarters ending subsequent to December 31, 1998. The Fixed Charge Covenant
requires that at the end of each quarterbeginning June 30, 1999, the ratio of
annualized EBITDA (as defined) to the sum of annualized interest expense plus
50% of the quarter end loans outstanding must be at least 1.25 to 1.00.
Interest will accrue at a rate of LIBOR plus 1.75% - 2.75% depending on the
borrowing base utilization.
Accounting Change
The Company uses the full-cost method of accounting for its oil and
natural gas properties. Under this method, all acquisition, exploration and
development costs that are directly attributable to the Company's acquisition,
exploration and development activities are capitalized in a "full-cost pool" as
incurred. In the second quarter of 1998 and effective January 1, 1998, the
Company changed its method of accounting for direct internal geological and
geophysical ("G&G") costs to one of capitalization of such costs, which are
directly attributable to acquisition, exploration and development activities, to
14
<PAGE>
oil and natural gas property. Accordingly, the financial results for the period
ended March 31, 1998 have been adjusted to give effect to the change in
accounting method effective January 1, 1998. Prior to the change the Company
expensed these costs as incurred. The Company believes the accounting change
provides for a better matching of revenues and expenses and enhances the
comparability of its results of operations with those of other oil and natural
gas companies that follow the full cost method of accounting (See note 1 to the
consolidated financial statements).
Year 2000
The Company has completed its assessment of the year 2000 processing
issues of its internal technology systems, considering current financial and
accounting, production, land and geological computer systems and software
utilized by the Company. Due to the need for improved management reporting, the
Company is in the process of replacing its existing financial and accounting,
production and land applications with new software which is year 2000 compliant.
Implementation is expected to be completed on or before September 30, 1999 at a
total cost of approximately $235,000. As of March 31, 1999, the Company has
incurred approximately $180,000 converting to its new financial and accounting
system and software with a majority of the remaining cost to be incurred prior
to June 30, 1999. Production and land applications will be operational on or
before June 30, 1999. These costs have been funded from cash flows from
operations and the cost of the new software and necessary hardware upgrades have
been capitalized. Based on assertions made by vendors, the Company believes its
geological systems and software are year 2000 compliant. In addition the Company
is performing other forms of due diligence to ensure that its geological systems
are compliant.
The Company is also in the process of evaluating the risk presented by
potential Year 2000 non-compliance by third parties. Because such risks vary
substantially, companies are being contacted based on the estimated magnitude of
risk posed to the Company by their year 2000 non-compliance. The Company
anticipates that these efforts will continue through 1999 and will not result in
significant costs to the Company.
The Company's assessment of its Year 2000 issues involves many
assumptions. There can be no assurance that the Company's assumptions will prove
accurate, and actual results could differ significantly from the assumptions. In
conducting its Year 2000 compliance efforts, the Company has relied primarily on
vendor representations with respect to internal computerized systems and
representations from third parties with which the Company has business
relationships and has not independently verified representations. There can be
no assurance that these representations will prove accurate. A Year 2000 failure
could result in a business interruption that adversely effects the Company's
business, financial condition or results of operations. Although it is not
currently aware of any likely business disruptions, the Company is developing a
contingency plan to address and assess the readiness of its material suppliers,
customers and other entities as it relates to year 2000 processing issues and
expects this work to be completed on or before June 30, 1999. The Company is not
insured for this type of loss should a loss occur.
Accounting Pronouncements
Derivatives - In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activity" ("SFAS 133"). SFAS 133 establishes accounting
and reporting standards for derivative instruments and hedging activities that
require an entity to recognize all derivatives as an asset or liability measured
at fair value. Depending on the intended use of the derivatives, changes in its
fair value will be reported in the period of change as either a component of
earnings or a component of other comprehensive income.
15
<PAGE>
SFAS 133 is effective for all fiscal quarters beginning after June 15,
1999. Earlier application of SFAS 133 is encouraged, but not prior to the
beginning of any fiscal quarter that begins after issuance of the statement.
Retroactive application to periods prior to adoption is not allowed. The Company
has not quantified the impact of adoption on its financial statements or the
date it intends to adopt.
FORWARD LOOKING STATEMENTS
The statements contained in all parts of this document, including, but
not limited to, those relating to the Company's drilling plans, its 3-D project
portfolio, capital expenditures, use of Offering proceeds, future capabilities,
the sufficiency of capital resources and liquidity to support working capital
and capital expenditure requirements, reinvestment of cash flows and any other
statements regarding future operations, financial results, business plans,
sources of liquidity and cash needs and other statements that are not historical
facts are forward looking statements. When used in this document, the words
"anticipate," "estimate," "expect," "may," "project," "believe" and similar
expressions are intended to be among the statements that identify forward
looking statements. Such statements involve risks and uncertainties, including,
but not limited to, those relating to the Company's dependence on its
exploratory drilling activities, the volatility of oil and natural gas prices,
the need to replace reserves depleted by production, operating risks of oil and
natural gas operations, the Company's dependence on its key personnel, the
Company's reliance on technological development and possible obsolescence of the
technology currently used by the Company, significant capital requirements of
the Company's exploration and development and technology development programs,
the potential impact of government regulations, litigation and environmental
matters, the Company's ability to manage its growth and achieve its business
strategy, competition, the uncertainty of reserve information and future net
revenue estimates, property acquisition risks and other factors detailed in the
Company's Form 10-K and other filings with the Securities and Exchange
Commission. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual outcomes may vary
materially from those indicated.
16
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings............................................... None
Item 2 - Changes in Securities and Use of Proceeds....................... None
Item 3 - Defaults Upon Senior Securities................................. None
Item 4 - Submission of Matters to a Vote of Security Holders - .......... None
Item 5 - Other Information............................................... None
Item 6 - Exhibits and Reports on Form 8-K................................
(A) EXHIBITS. The following exhibits are filed as part of this report:
INDEX TO EXHIBITS
Exhibit No.
- --------------
+2.1 -- Amended and Restated Combination Agreement by
and among (i) Edge Group II Limited Partnership, (ii)
Gulfedge Limited Partnership, (iii) Edge Group Partnership,
(iv) Edge Petroleum Corporation, (v) Edge Mergeco, Inc.
and (vi) the Company, dated as of January 13, 1997
(Incorporated by reference from exhibit 2.1 to the Company's
Registration Statement on Form S-4 (Registration No.333-17269)
+3.1 -- Restated Certificate of Incorporated of the Company,
as amended (Incorporated by reference from exhibit 3.1
to the Company's Registration Statement on Form S-4
(Registration No. 333-17269)).
+3.2 -- Bylaws of the Company (Incorporated by reference
from exhibit 3.2 to the Company's Registration Statement
on Form S-4 (Registration No. 333-17269)).
+4.1 -- Amended and Restated Credit Agreement, dated April 1, 1998,
by and between Edge Petroleum Corporation and Edge Petroleum
Exploration Company (collectively the "Borrower") and Compass
Bank, a Texas state chartered banking institution, as Agent
for itself and First National Bank of Chicago and other
lenders party thereto. (Incorporated by Reference to 4.1 to
the Company's Quarterly Report on Form 10-Q for, the quarterly
period ended March 31, 1998).
+4.2 -- First Amendment dated September 29, 1998 to the Amended and
Restated Credit Agreement, dated as of April 1, 1998, by and
between the Borrower and the First National Bank of Chicago as
agent and a Lender thereto (Incorporated by Reference to 4.1
to the Company's Quarterly Report on Form 10-Q for, the
quarterly period ended March 31, 1998).
+4.3 -- Security Agreement, dated as of April 1, 1998, by and
between the Borrower and Compass Bank, a Texas state chartered
banking institution, as Agent for itself and The First
National Bank of Chicago and other lenders party thereto the
Credit Agreement (Incorporated by Reference to 4.1 to the
Company's Quarterly Report on Form 10-Q for, the quarterly
period ended March 31, 1998).
17
<PAGE>
+4.4 -- Security Agreement (Stock Pledge), dated as of April 1,
1998, by and between Edge Petroleum Corporation and Compass
Bank, a Texas state chartered banking institution, as Agent
for itself and The First National Bank of Chicago and other
lenders party thereto the Credit Agreement (Incorporated by
Reference to 4.1 to the Company's Quarterly Report on Form
10-Q for, the quarterly period ended March 31, 1998).
The Company is a party to several debt instruments
under which the total amount of securities authorized does not
exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis. Pursuant to paragraph
4(iii)(A) of Item 601(b) of Regulation S-K, the Company agrees
to furnish a copy of such instruments to the Commission upon
request.
+10.1 -- Joint Venture Agreement between Edge Joint Venture II and
Essex Royalty Limited Partnership II, dated as of May 10, 1994
(Incorporated by reference from exhibit 10.2 to the Company's
Registration Statement on Form S-4 (Registration No.
333-17269)).
+10.2 -- Joint Venture Agreement between Edge Joint Venture II and
Essex Royalty Limited Partnership, dated as of April 11, 1992
Incorporated by reference from exhibit 10.3 to the Company's
Registration Statement on Form S-4 (Registration No.
333-17269)).
+10.3 -- Registration Rights Agreement between Edge Holding Company
Limited Partnership and the Company (Incorporated by reference
from exhibit 10.6 to the Company's Registration Statement on
Form S-4 (Registration No.
333-17269)).
+10.4 -- Form of Indemnification Agreement between the
Company and each of its directors (Incorporated by reference
from exhibit 10.7 to the Company's Registration Statement on
Form S-4 (Registration No. 333-17269)).
+10.5 -- Incentive Plan of Edge Petroleum Corporation
(Incorporated by reference from exhibit 10.3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1997).
+10.6 -- Employment Agreement dated February 25, 1997 between Edge
Petroleum Corporation and John E. Calaway (Incorporated by
reference from exhibit 10.4 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997).
18
<PAGE>
+10.7 -- Employment Agreement dated February 25, 1997 between Edge
Petroleum Corporation and James D. Calaway (Incorporated by
reference from exhibit 10.5 Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997).
+10.8 -- Employment Agreement dated as of December 19, 1996, by and
between the Company and Michael G. Long (Incorporated by
reference from exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended September 30,
1998).
+10.9 -- Purchase Agreement between the Company and James C.
Calaway dated as of December 2, 1996 (Incorporated by
reference from exhibit 10.11 to the Company's Registration
Statement on Form S-4 (Registration No. 333-17269)).
+10.10 -- Consulting Agreement of James C. Calaway dated March
18, 1989 (Incorporated by reference from exhibit 10.12
to the Company's Registration Statement on Form S-4
(Registration No. 333-17269)).
+10.11 -- Stock Option Plan of Edge Petroleum Corporation,
a Texas corporation (Incorporated by reference from
exhibit 10.13 to the Company's Registration Statement on Form
S-4 (Registration No. 333-17269)).
+10.12 -- Employment Agreement dated as of November 16, 1998,
by and between the Company and John W. Elias. (Incorporated by
reference from exhibit 10.12 in the Company's Annual Report
on Form 10K for the year ended December 31, 1998)
+10.13 -- Agreement dated as of November 16,1998 by and between
the Company and John E. Calaway. (Incorporated by reference
from exhibit 10.13 in the Company's Annual Report on Form 10K
for the year ended December 31, 1998)
11.1 -- Computation of Earnings Per Share.
27.1 -- Financial Data Schedule.
+ Incorporated by reference as indicated.
(B) Reports on Form 8-K.................................. None
19
<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.
EDGE PETROLEUM CORPORATION,
A DELAWARE CORPORATION
(REGISTRANT)
Date 5/11/99 /S/ John W. Elias
- ----------------------- ------------------------------
John W. Elias
Chief Executive Officer and
Chairman of the Board
Date 5/11/99 /S/ James D. Calaway
- ----------------------- ------------------------------
James D. Calaway
Chief Operations Officer and
President and Director
Date 5/11/99 /S/ Michael G. Long
- ----------------------- -------------------------------
Michael G. Long
Senior Vice President and
Chief Financial Officer
Date 5/11/99 /S/ Brian C. Baumler
- ----------------------- -------------------------------
Brian C. Baumler
Controller and Treasurer
20
<PAGE>
EXHIBIT - 11.1
EDGE PETROLEUM CORPORATION
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
--------------------------------
1999 1998
Basic common and common equivalent shares outstanding,
<S> <C> <C>
beginning of period 7,510,283 7,510,283
Weighted average shares and equivalent shares outstanding:
Issued in connection with the public offering
Restricted stock 248,384 250,586
Basic weighted average common and common equivalent --------- ---------
shares outstanding, end of period 7,758,667 7,760,869
Dilutive common stock options 33,229
--------- ---------
Diluted weighted average common and common equivalent
shares outstanding 7,758,667 7,794,098
========= =========
Net Income before cumulative effect of accounting change $ (305,488) $ 618,697
Cumulative effect of accounting change 1,780,835
----------- -----------
Net Income $ (305,488) $2,399,532
=========== ===========
BASIC EARNINGS PER SHARE:
Net income before cumulative effect of accounting change $(0.04) $ 0.08
Cumulative effect of accounting change - 0.23
------- -------
Basic earnings per share $(0.04) $ 0.31
======= =======
DILUTED EARNINGS PER SHARE:
Net income before cumulative effect of accounting change $(0.04) $ 0.08
Cumulative effect of accounting change - 0.23
------- -------
Diluted earnings per share $(0.04) $ 0.31
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Mar-31-1999
<CASH> 259,652
<SECURITIES> 0
<RECEIVABLES> 5,393,902
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,138,507
<PP&E> 76,068,460
<DEPRECIATION> 29,393,153
<TOTAL-ASSETS> 56,572,164
<CURRENT-LIABILITIES> 15,237,321
<BONDS> 0
0
0
<COMMON> 77,586
<OTHER-SE> 36,657,257
<TOTAL-LIABILITY-AND-EQUITY> 56,572,164
<SALES> 3,542,188
<TOTAL-REVENUES> 3,542,188
<CGS> 0
<TOTAL-COSTS> 3,820,372
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (38,326)
<INCOME-PRETAX> (305,488)
<INCOME-TAX> 0
<INCOME-CONTINUING> (305,488)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (305,488)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
