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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q*
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997*
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF SECURITIES EXCHANGE ACT OF 1934
For the transition period
from to
------------------- -------------------------
Commission file number 333-31625*
PETSEC ENERGY INC.
(Exact name of Registrant as specified in its charter)*
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<S> <C>
NEVADA 84-1157209
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
143 RIDGEWAY DRIVE, SUITE 113
LAFAYETTE, LOUISIANA 70503
(Address of principal executive offices) (Zip Code)
</TABLE>
(318) 989-1942
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [ ] NO [ ] NOT APPLICABLE [ X ]*
*This report is being voluntarily filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Registrant's contractual
obligations to file with the Commission the annual report, quarterly reports
and other documents that the Company would be required to file if it were
subject to Section 13 or 15 of the Securities Exchange Act of 1934. The
Registrant is not required to file report pursuant to Section 13 or 15 (d) of
this Securities Exchange Act of 1934. The Commission file number refers to the
Company's Form S-4 Registration Statement filed pursuant to the Securities Act
of 1933, which Registration Statement has not yet become effective.
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PETSEC ENERGY INC.
INDEX TO FORM 10-Q
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements ...................................................... 3
Balance Sheets .......................................................... 3
Statements of Operations ................................................ 4
Statements of Cash Flows ................................................ 5
Notes to Financial Statements ........................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .................................................... 7-12
PART II. OTHER INFORMATION
Item 5. Other Information ......................................................... 13
Item 6. Exhibits and Reports on Form 8-K .......................................... 14
SIGNATURES ........................................................................... 15
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2
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PETSEC ENERGY INC.
BALANCE SHEETS
(UNAUDITED)
(Dollars in thousands, except share amounts)
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ASSETS
------
JUNE 30, DECEMBER 31,
1997 1996
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<S> <C> <C>
Current Assets:
Cash $ 38,769 $ 342
Accounts receivable 11,191 11,855
Other receivables 96 101
Inventories of crude oil 41 45
Prepaid expenses 632 168
------------- -------------
Total Current Assets 50,729 12,511
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Property, plant and equipment - at cost under the successful
efforts method of accounting for oil and gas properties
Proved oil and gas properties 175,549 131,933
Unproved oil and gas properties 22,623 7,276
Production facilities 50,789 38,049
Other 1,307 1,040
------------- -------------
250,268 178,298
Less accumulated depletion, depreciation and amortization (73,498) (44,664)
------------- -------------
Net property, plant and equipment 176,770 133,634
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Other Assets 2,908 -
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Total Assets $ 230,407 $ 146,145
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Trade accounts payable 20,672 18,364
Interest payable 590 202
Other accrued liabilities 7,161 6,003
------------- -------------
Total Current Liabilities 28,423 24,569
Senior subordinated notes 99,618 -
Bank credit facility - 37,000
Subordinated shareholder loan 39,453 57,954
Provision for dismantlement 2,317 1,738
Deferred income taxes 14,982 9,848
------------- -------------
Total Liabilities 184,793 131,109
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Shareholders' Equity:
Common stock, $1 par value. Authorized
1,000,000 shares; Issued and outstanding 1 share - -
Additional paid in capital 20,494 482
Retained earnings 25,120 14,554
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Total Shareholders' Equity 45,614 15,036
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Total Liabilities and Shareholders' Equity $ 230,407 $ 146,145
============= =============
</TABLE>
See accompanying notes to financial statements.
3
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PETSEC ENERGY INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
(Dollars in thousands)
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THREE MONTHS ENDED SIX MONTHS ENDED
----------------------- ------------------------
JUNE 30, JUNE 30,
----------------------- ------------------------
1997 1996 1997 1996
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Revenue:
Oil and gas sales $ 28,381 $ 15,771 $ 59,302 $ 29,506
---------- ---------- ---------- -----------
Operating Expenses:
Lease operating expenses 2,294 1,227 4,375 2,608
Production taxes 177 149 388 274
Exploration expenditures including dry hole costs 3,395 893 4,688 1,812
General and administrative 1,202 1,570 2,606 2,800
Stock compensation 209 - 418 -
Depletion, depreciation and amortization 15,330 7,780 29,425 14,210
---------- ---------- ---------- -----------
Total operating expenses: 22,607 11,619 41,900 21,704
---------- ---------- ---------- -----------
Income from operations 5,774 4,152 17,402 7,802
---------- ---------- ---------- -----------
Other income (expenses):
Interest expense (1,372) (1,183) (2,099) (1,870)
Interest income 149 16 203 34
Foreign exchange gain 191 - 191 -
Other 3 2 3 2
---------- ---------- ---------- -----------
(1,029) (1,165) (1,702) (1,834)
---------- ---------- ---------- -----------
Income before income taxes 4,745 2,987 15,700 5,968
Income tax expense 1,709 1,118 5,134 2,788
---------- ---------- ---------- -----------
Net income 3,036 1,869 10,566 3,180
Retained earnings at beginning of period 22,084 6,941 14,554 5,630
---------- ---------- ---------- -----------
Retained earnings at end of period $ 25,120 $ 8,810 $ 25,120 $ 8,810
========== ========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
4
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PETSEC ENERGY INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
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SIX MONTHS ENDED
JUNE 30,
----------------------------
1997 1996
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Cash flows from operating activities:
Net income $ 10,566 $ 3,180
Adjustments to reconcile income to net
cash provided by operating activities:
Depletion, depreciation and amortization 29,425 14,210
Deferred income taxes 5,134 2,788
Dry hole costs and abandonments 2,272 2
Stock compensation expense 418 -
Unrealized foreign exchange gain (191) -
Changes in operating assets and liabilities:
Decrease in receivables 664 859
Decrease in inventories 4 47
Increase in prepayments (464) (295)
Decrease (increase) in other receivables 5 (312)
Decrease in other assets - 436
Increase (decrease) in trade accounts payable 2,308 (2,900)
Increase in other accrued liabilities 1,158 280
Increase (decrease) in interest payable 388 (13)
----------- ---------
Net cash provided by operating activities 51,687 18,282
----------- ---------
Cash flows from investing activities:
Lease acquisitions (5,510) (6,350)
Exploration and development expenditures (68,465) (31,063)
Other asset additions (267) (336)
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Net cash used in investing activities (74,242) (37,749)
----------- ---------
Cash flows from financing activities:
Proceeds from senior subordinated notes 96,697 -
Proceeds from bank credit facility 21,000 56,540
Repayment of bank credit facility (58,000) (36,890)
Proceeds from shareholder loans 1,500 -
Repayment of shareholder loans (215) -
----------- ---------
Net cash provided by financing activities 60,982 19,650
----------- ---------
Net increase in cash 38,427 183
Cash at beginning of period 342 1,418
----------- ---------
$ 38,769 $ 1,601
=========== =========
</TABLE>
See accompanying notes to financial statements.
5
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PETSEC ENERGY INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - Basis of Presentation
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation have been included.
Certain reclassifications have been made to the prior period to
conform to the current period's presentations.
The interim financial information has been prepared without audit.
The results of operations for interim periods are not necessarily
indicative of the operating results that may be expected for the
full fiscal year.
NOTE 2 - Litigation
The Company is involved in certain lawsuits arising in the ordinary
course of business. While the outcome of any of these lawsuits
cannot be predicted with certainty, management expects these matters
to have no material adverse effect on the financial position,
results of operations or liquidity of the company.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The following discussion is intended to assist in the understanding of
Petsec Energy Inc.'s (the "Company's") historical financial position and results
of operations for the three month and six month periods ended June 30, 1996 and
1997. The Company's unaudited financial statements and notes thereto should be
referred to in conjunction with the following discussion.
OVERVIEW
The Company is the principal operating subsidiary of Petsec Energy
Ltd, (the "Parent") an Australian public company with American Depositary
Shares listed on the Nasdaq National Market System (symbol: PSALY). The
Company was incorporated in March 1990 to evaluate oil and gas exploration
opportunities in the United States. In 1990, the Company participated in an
oil discovery in the Paradox Basin in Colorado. In addition the Company
acquired oil and gas lease interests in northern California. The Company also
established an office in Lafayette, Louisiana, hired several former employees
of Tenneco Oil Company and acquired leases in the Gulf of Mexico, offshore
Louisiana. The Company subsequently made a strategic decision to focus its
efforts entirely in the Gulf of Mexico and disposed of its interests in the
Paradox Basin in January 1995.
The Company markets its oil through spot price contracts and typically
receives a premium above the price posted. Gas production is sold under
contracts which generally reflect spot market conditions in the central Gulf of
Mexico. The Company has historically entered into crude oil and natural gas
price swaps to reduce its exposure to price fluctuations. The results of
operations described herein reflect any hedging transactions undertaken.
The Company follows the successful efforts method of accounting. Under
this method, lease acquisition costs, costs to drill and complete exploration
wells in which proven reserves are discovered and costs to drill and complete
development wells are capitalized. Seismic, geological and geophysical, and
delay rental expenditures are expensed as incurred.
The Company is allocated stock compensation expense in respect to
options in the Parent which are granted to the Company's employees and certain
consultants. In 1996, the Parent adopted SFAS No. 123, Accounting for
Stock-Based Compensation under which it recognizes as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
The Company reimburses the Parent for direct expenses incurred in
connection with its operations. In addition, the Company has received
subordinated loans from the Parent to finance its operations. See
"---Liquidity and Capital Resources."
The Company's revenues, profitability and future rate of growth are
substantially dependent upon prevailing prices for oil and gas, which are in
turn dependent upon numerous factors that are beyond the Company's control,
such as economic, political and regulatory developments and competition from
other sources of energy. The energy markets have historically been volatile,
and there can be no assurance that oil and gas prices will not be subject to
wide fluctuations in the future. A substantial or extended decline in oil and
gas prices could have a material adverse effect on the Company's financial
position, results of operations and access to capital, as well as the
quantities of oil and gas reserves that may be economically produced.
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RESULTS OF OPERATIONS
The following table sets forth certain operating information with
respect to the oil and gas operations of the Company.
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
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1997 1996 1997 1996
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NET PRODUCTION:
Oil (Mbbls) 802 544 1,549 1,005
Gas (Mmcf) 6,216 2,793 12,084 5,648
Total (Mmcfe) 11,028 6,057 21,378 11,678
NET SALES DATA (IN THOUSANDS):
Oil $15,319 $10,625 $31,310 $19,066
Gas $13,062 $ 5,146 $27,992 $10,440
Total $28,381 $15,771 $59,302 $29,506
AVERAGE SALES PRICE (1):
Oil (per Bbl) $19.10 $ 19.53 $ 20.21 $ 18.97
Gas (per Mcf) $2.10 $ 1.84 $ 2.32 $ 1.85
Total (per Mcfe) $2.57 $ 2.60 $ 2.77 $ 2.53
AVERAGE COSTS (PER MCFE):
Lease operating expenses $0.22 $ 0.23 $ 0.22 $ 0.25
Depletion, depreciation, and $1.39 $ 1.28 $ 1.38 $ 1.22
amortization
General and administrative expenses $0.11 $ 0.26 $ 0.12 $ 0.24
</TABLE>
(1) Includes effects of hedging activities
GENERAL. The Company drilled six exploration wells during the three
month period ended June 30, 1997. Four wells discovered oil and gas, one well
was suspended pending evaluation of future sidetrack options and one well was
plugged and abandoned.
During the six months to June 30, 1997, the Company has drilled 11
wells, of which nine were oil and gas discoveries, one is suspended and one
plugged and abandoned.
OIL AND GAS REVENUES. Oil and gas revenues for the three months ended
June 30, 1997 were $28.4 million, an increase of $12.6 million, or 80% above
$15.8 million for the comparable period in 1996. A 47% increase in oil
production and a 2% decrease in oil prices combined to account for $4.7
million of the increase. A 123% increase in gas production and a 14% increase
in gas prices accounted for the remaining $7.9 million of the increase.
Oil and gas revenues for the six month period to June 1996 were $59.3
million, an increase of $29.8 million, or 101% above $29.5 million for the
comparable period in 1996. Oil and gas production in the first half of 1997
increased 54% and 114% respectively over the comparable 1996 period. The
average realized prices of oil and gas increased by 7% and 25% respectively.
The increased oil production follows the successful drilling and
development of the Ship Shoal 194 field and the Ship Shoal 193 B-1 well, while
the increased gas production stems from successful drilling at the Main Pass
6/7 and 91, and West Cameron 543/544 fields.
For the three months ended June 30, 1997, the average realized gas
price was $2.10 per Mcf, or 1% below the $2.13 per Mcf average gas price that
would otherwise have been received if no hedging had taken place. Over the same
period, the average realized oil price was $19.10 per Bbl, or 4% above the
$18.45 per Bbl average oil price that would otherwise have been received if no
8
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hedging had taken place. Hedging activities resulted in a $0.3 million increase
in oil and gas revenues. For the comparable period in 1996 the average realized
gas price was $1.84 per Mcf, or 25% below the $2.45 per Mcf average gas price
that would otherwise have been received if no hedging had taken place. In the
same period the average realized oil price was $19.53, or 4% below the $20.36
per Bbl average oil price that would otherwise been received if no hedging had
taken place. Hedging activities resulted in a $2.2 million decrease in oil and
gas revenues for the three month period ended June 30, 1996.
In the six month period to June 30, 1997 the average realized gas
price was $2.32 per Mcf, or 6% below the $2.46 per Mcf average gas price that
would otherwise have been received if no hedging had taken place. Over the
same period, the average realized oil price was $20.21 per Bbl, or 2% above the
$19.88 per Bbl average oil price that would otherwise have been received if no
hedging had taken place. Hedging activities resulted in a $1.2 million
decrease in oil and gas revenues. In the six month period to June 30, 1996,
the average realized gas price was $1.85 per Mcf, or 28% below the $2.57 per
Mcf average gas price that would otherwise have been received if no hedging
taken place. Over the same period the average realized oil price was $18.97
per Bbl, or 4% below the $19.68 per Bbl average oil price that would otherwise
have been received if no hedging had taken place. Hedging activities resulted
in a $4.8 million decrease in oil and gas revenues for the six month period to
June 30, 1996.
LEASE OPERATING EXPENSES. Lease operating expenses increased $1.1
million, or 80% to $2.5 million for the three months ended June 30, 1997, from
$1.4 million for the three months ended June 30, 1996. The increase is
attributable to increased production. Lease operating expenses per Mcfe
decreased from $0.23 for the comparable period in 1996 to $0.22 for the three
months ended June 30, 1997.
Lease operating expenses for the six month period to June 1997 were
$4.8 million, an increase of 65% over the corresponding period in 1996. The
increase is attributable to increased production. Lease operating expenses
per Mcfe decreased from $0.25 for the comparable period in 1996 to $0.22 for
the first half of 1997.
The decrease in unit rates in both periods continues the trend of
previous years reflecting economies of scale from higher rates of production.
DEPLETION, DEPRECIATION AND AMORTIZATION ("DD&A"). DD&A expense
increased $7.5 million, or 96%, to $15.3 million for the three months ended
June 30, 1997, from $7.8 million for the same period in 1996. Production
increases accounted for $6.4 million of the increase while an increase in the
unit rate from $1.28 to $1.39 per Mcfe accounted for the balance.
DD&A expense for the six month period to June 1997 increased to $29.4
million from $14.2 million, for the corresponding period in 1996. The depletion
rate per unit of $1.38 per Mcfe for the six month period to June 1997 increased
from $1.22 per Mcfe for the corresponding period in 1996.
The increase in the unit rate in both periods was due to increased
capital expenditures from the Company's exploration and development activities
coupled with increased costs of drilling goods and services, platform and
facilities construction and transportation services in the industry.
EXPLORATION EXPENDITURES INCLUDING DRY HOLE COSTS. During the three
month period ended June 30, 1997, $2.3 million was expensed as dry hole cost
for the West Cameron 480 #1 well. There were no dry hole costs in the 1996
period. Seismic, geological and geophysical expenditures of $1.1 million were
expensed during the three month period ended June 30, 1997, an increase of $0.2
million over the comparable period in 1996. Exploration expenditures for the
six months to June 30, 1997 totaled $2.4 million an increase of $0.6 million
for the comparable period in 1996.
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GENERAL, ADMINISTRATIVE AND STOCK COMPENSATION EXPENSE. General,
administrative and stock compensation expense decreased $0.2 million, or 13%,
to $1.4 million for the three months ended June 30, 1997 from $1.6 million for
the comparable period in 1996. For the six month period to June 30, 1997, the
expense increased $0.2 million to $3.0 million from $2.8 million for the
comparable period in 1996. On a per mcfe basis the rate decreased dramatically
from $0.26/mcfe and $0.24/mcfe for the three and six month periods ended June
30, 1996 to $0.11/mcfe and $0.12/mcfe for the respective periods in 1997.
NET INCOME. As a result of the conditions discussed above, net income
for the three months ended June 30, 1997 was $3.0 million, an increase of $1.1
million, or 58% over the earnings of $1.9 million for the three months ended
June 30, 1996. Net income for the six months ended June 30, 1997 was $10.6
million, an increase of $7.4 million, or 231% over the earnings of $3.2 million
for the comparable period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The following table represents cash flow data for the Company for the
periods indicated.
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Six Months Ended
June 30,
(in Thousands)
1997 1996
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Cash flow data:
Net cash provided by operating activities $51,687 $18,282
Net cash used in investing activities 74,242 37,749
Net cash provided by financing activities 60,982 19,650
</TABLE>
The fluctuation in cash provided by operating activities from 1996 to
1997 was primarily due to increased oil and gas production coupled with higher
prices for both commodities.
The increase in cash used in investing activities in 1997 over 1996
was due to expenditures on exploration and development.
The cash provided by financing activities in 1996 consisted of
borrowings under the bank credit facility. The cash provided by financing
activities in 1997 consisted primarily of proceeds from a Senior Subordinated
Note issue.
Since 1990 the Company has financed its working capital needs,
operations and growth primarily with advances from the Parent, cash flow from
operations and bank borrowings.
Petsec Energy Ltd made an initial cash investment of $11.4 million in
the Company and, subsequently, increased this investment with advances of $18.5
million from an Australian offering of Ordinary Shares in September 1995 and
$31.0 million out of net proceeds from a U.S. offering of ADSs in July 1996.
Funds advanced by the Parent have historically been provided in the
form of subordinated loans. These loans are subordinated to the bank credit
facility and Senior Subordinated Notes. Effective as of June 1, 1997, the US
dollar loans bear interest at 6% and in the case of Australian dollar
borrowings, 6.24%. The loans from the Parent do not have mandatory principal
payments due
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until December 31, 2007. No interest has been paid or accrued on these loans
prior to June 1, 1997. Payments or distributions made by the Company to its
Parent have been made principally for reimbursement of direct expenses incurred
in connection with the Company's operations.
In April 1996, the Company entered into a $75 million bank credit
facility, under which the current borrowing base is $50 million, with a
sublimit of $15 million for letter of credit purposes to support the bonding
requirements of the MMS and commodity swap transactions. At June 30, 1997,
borrowings outstanding under the bank credit facility were nil. The bank
credit facility is a two-year revolving credit facility followed by a two-year
term period with equal quarterly amortization payments maturing in April 2001.
The bank credit facility is secured by the Company's Gulf of Mexico producing
properties and contains financial covenants that require the Company to
maintain a ratio of senior debt to earnings before interest, taxes,
depreciation and amortization of not more than 2.75 to 1.0 and a coverage
ratio of earnings before interest and taxes to total interest of not less than
3.0 to 1.0. The Company is currently in compliance with all financial
covenants under the bank credit facility. Outstanding borrowings accrue
interest at the rate of LIBOR plus a margin of 1.25% to 1.75% per annum,
depending upon the total amount borrowed. The Company is obligated to pay a
fee equal to .3% to .375% per annum based on the unused portion of the
borrowing base under the facility.
The Company's ability to borrow under the bank credit facility is
dependent upon the reserve value of its oil and gas properties, as determined
by the Chase Manhattan Bank ("Chase"). If the reserve value of the Company's
borrowing base declines, the amount available to the Company under the bank
credit facility will be reduced and to the extent that the borrowing base is
less than the amount then outstanding (including letters of credit) under the
bank credit facility, the Company will be obligated to repay such excess amount
upon ninety days' notice from Chase or to provide additional collateral.
In June of 1997, the Company issued $100m of 9 1/2% Senior
Subordinated Notes due in 2007 (the "Notes"). The Notes were issued at a
discount with a yield to maturity of 9.56% per annum. The net proceeds from
the offering of the Notes were approximately $96.7 million. The Company used a
portion of the net proceeds to repay borrowings under the bank credit facility.
The remainder of the net proceeds will be used to provide working capital for
the Company to fund further exploration and development of its oil and gas
properties, the acquisition of lease blocks and other general corporate
purposes.
For 1997, the Company has budgeted capital expenditures of
approximately $140 million on exploration and development drilling and other
capital projects. In the six months ended June 30, 1997, $69.6 million was
incurred on capital expenditures. The Company intends to finance expenditures
for the remainder of 1997 and for 1998 with cash on hand, cash flow from
operations and bank borrowings. The capital expenditure budget is continually
evaluated based on drilling results, commodity prices, cash flow from
operations and property acquisitions.
HEDGING TRANSACTIONS
From time to time, the Company has utilized hedging transactions with
respect to a portion of its oil and gas production to achieve a more
predictable cash flow and to reduce its exposure to oil and gas price
fluctuations. While these hedging arrangements limit the downside risk of
adverse price movements, they may also limit future revenues from favorable
price movements. The use of hedging transactions also involves the risk that
the counterparties will be unable to meet the financial terms of such
transactions. The credit worthiness of counterparties is subject to continuing
review and full performance is anticipated. The Company
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limits the duration of the transactions and the percentage of its expected
aggregate oil and gas production that may be hedged. The Company accounts for
these transactions as hedging activities and, accordingly, gains or losses are
included in oil and gas revenues when the hedged production is delivered.
As of June 30 1997, for the remainder of 1997, the Company had entered
into commodity swaps effectively fixing the price of 7.5 million Mmbtu of gas
at a volume-weighted average New York Mercantile Exchange ("NYMEX") price of
$2.12 per Mmbtu. The Company had also entered into commodity swap contracts for
7.0 million Mmbtu, 1.8 million Mmbtu and 760,000 Mmbtu at volume-weighted
average NYMEX prices of $1.98 per Mmbtu, 2.15 per Mmbtu and 2.15 per Mmbtu for
calendar years 1998, 1999 and 2000 respectively.
As of June 30 1997, for the remainder of 1997, the Company had entered
into commodity swap contracts for 736,000 barrels of oil at a volume-weighted
average NYMEX price of $21.29 per barrel. The Company had also entered into
commodity swap contracts for 761,000 Bbls, 365,000 Bbls and 152,000 Bbls at
volume-weighted average NYMEX prices of $20.10 per Bbl, $19.70 per Bbl and
$19.70 per Bbl for calendar years 1998, 1999 and 2000 respectively.
The fair value at June 30, 1996, represented by the estimated amount
that would be required to terminate these contracts, was a net cost of $1.8
million for the gas contracts and a net benefit of $1.0 million for the oil
contracts.
For any particular swap transaction, the counterparty is required to
make a payment to the Company in the event that the average NYMEX reference
prices for any settlement period are less than the swap prices for such hedge,
and the Company is required to make a payment to the counterparty in the event
that the average NYMEX reference prices for any settlement period is greater
than the swap price for such hedge. The Company has proved reserves sufficient
to cover all of these contracts and does not enter into derivatives without
underlying forecasted production and proved reserves.
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ITEM 5. OTHER INFORMATION
The Company filed its Form S-4 Registration Statement with the Commission on
July 18, 1997. The Company seeks to exchange its 9 1/2% Series A Senior
Subordinated Notes due 2007 for its 9 1/2% Series B Senior Subordinated Notes
due 2007. Such Registration Statement has not been declared effective as of
the date of this filing.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following instruments and documents are included as Exhibits to this Form
10-Q. Exhibits incorporated by reference are so indicated by parenthetical
information.
<TABLE>
<CAPTION>
Exhibit No. Exhibit
<S> <C>
4.1 Articles of Incorporation of the Company (filed as Exhibit 4.1
to the Registration Statement on Form S-4 filed on July 18,
1997 and is included herein by reference (File No. 333-31625))
4.2 By-Laws of the Company (filed as Exhibit 4.2- to the
Registration Statement on Form S-4 filed on July 18, 1997 and
is included herein by reference (File No. 333-31625))
4.3 Indenture dated as of June 13, 1997 among the Company, as
issuer, and the Bank of New York, as trustee (filed as Exhibit
4.3- to the Registration Statement on Form S-4 filed on July
18, 1997 and is included herein by reference (File No.
333-31625))
4.4 Registration Rights Agreement dated June 13, 1997 by and among
the Company and Merrill, Lynch, Pierce, Fenner & Smith
Incorporated, Donaldson, Lufkin & Jenrette Securities
Corporation and Salomon Brothers Inc (filed as Exhibit 4.4 to
the Registration Statement on Form S-4 filed on July 18, 1997
and is included herein by reference (File No. 333-31625))
10.1 Credit Agreement by and among Petsec Energy Inc. and Chase
Manhattan Bank and certain financial institutions named
therein as Lenders (filed as Exhibit 10.1 to the Registration
Statement on Form S-4 filed on July 18, 1997 and is included
herein by reference (File No. 333-31625))
27 Financial Data Schedule
</TABLE>
14
<PAGE> 15
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.
Petsec Energy Inc.
August 14, 1997 By: /s/ Alan H. Stevens
------------------------------
Alan H. Stevens
President and
Chief Operating Officer
(duly authorized officer)
August 14, 1997 By: /s/ Ross A. Keogh
------------------------------
Ross A. Keogh
Treasurer
(principal financial
officer)
15
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- --------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 38,769
<SECURITIES> 0
<RECEIVABLES> 11,287
<ALLOWANCES> 0
<INVENTORY> 41
<CURRENT-ASSETS> 50,729
<PP&E> 250,268
<DEPRECIATION> 73,498
<TOTAL-ASSETS> 230,407
<CURRENT-LIABILITIES> 28,423
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 45,614
<TOTAL-LIABILITY-AND-EQUITY> 230,407
<SALES> 59,302
<TOTAL-REVENUES> 59,302
<CGS> 0
<TOTAL-COSTS> 41,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,099
<INCOME-PRETAX> 4,745
<INCOME-TAX> 1,709
<INCOME-CONTINUING> 3,036
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,036
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
