<PAGE> 1
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
===============================================================================
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from................to..................
Commission file number 333-31625*
PETSEC ENERGY INC.*
(Exact name of Registrant as specified in its charter)
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)
(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 [ X ] NO [ ]
*Petsec Energy Inc. is a wholly owned operating subsidiary of Petsec Energy Ltd,
a listed Australian public company registered with the Commission as a result of
its public offering in July 1996 of American Depositary Receipts ("ADRs") which
were listed on The Nasdaq Stock MarketSM (symbol: PSALY). As of May 18, 1998 the
ADRs will be traded on the New York Stock Exchange (symbol: PSJ). Shareholders
and holders of American Depositary Shares are advised to refer to the filings of
Petsec Energy Ltd for the consolidated results.
<PAGE> 2
PETSEC ENERGY INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
IMPORTANT NOTE: The financial information in this Quarterly Report
refers to Petsec Energy Inc., a wholly owned subsidiary of Petsec
Energy Ltd. The publicly listed Petsec Energy Ltd files its annual
consolidated financial statements separately under form 20-F and a
summary of its quarterly consolidated financial statements under form
6-K.
Item 1. Financial Statements....................................................... 3
Balance Sheets......................................................... 3
Statements of Operations and Retained Earnings......................... 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 6. Exhibits and Reports on Form 8-K........................................... 13
SIGNATURES........................................................................... 14
</TABLE>
<PAGE> 3
PETSEC ENERGY INC.
A WHOLLY OWNED SUBSIDIARY OF PETSEC ENERGY LTD
BALANCE SHEETS
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
(UNAUDITED) (AUDITED)
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 1,604 $ 7,431
Accounts receivable 10,869 13,978
Other receivables 101 80
Inventories of crude oil 62 43
Prepaid expenses 83 258
----------- -----------
Total Current Assets 12,719 21,790
----------- -----------
Property, plant and equipment - at cost under the successful
efforts method of accounting for oil and gas properties
Proved oil and gas properties 237,185 227,049
Unproved oil and gas properties 32,299 20,759
Production facilities 71,534 66,956
Other 1,911 1,527
----------- -----------
342,929 316,291
Less accumulated depletion, depreciation and amortization (130,236) (106,977)
----------- -----------
Net property, plant and equipment 212,693 209,314
----------- -----------
Other Assets 2,920 3,000
----------- -----------
Total Assets $ 228,332 $ 234,104
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Trade accounts payable 16,789 15,107
Interest payable 3,386 1,720
Other accrued liabilities 12,285 11,967
----------- -----------
Total Current Liabilities 32,460 28,794
Senior subordinated notes 99,636 99,630
Bank credit facility 4,000 --
Subordinated shareholder loan 37,437 37,298
Provision for dismantlement 3,625 3,289
Deferred income taxes 11,385 16,458
----------- -----------
Total Liabilities 188,543 185,469
----------- -----------
Shareholder's Equity:
Common stock, $1 par value. Authorized
1,000,000 shares; Issued and outstanding 1 share -- --
Additional paid in capital 21,156 20,981
Retained earnings 18,633 27,654
----------- -----------
Total Shareholder's Equity 39,789 48,635
----------- -----------
Total Liabilities and Shareholder's Equity $ 228,332 $ 234,104
=========== ===========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
PETSEC ENERGY INC.
A WHOLLY OWNED SUBSIDIARY OF PETSEC ENERGY LTD
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1998 1997
---- ----
<S> <C> <C>
Revenue:
Oil and gas sales $ 27,986 $ 30,921
------- ------
Operating Expenses:
Lease operating expenses 4,088 2,081
Production taxes 148 211
Exploration expenditures 1,824 1,293
Dry hole costs and impairments 16,951 --
General and administrative 1,551 1,404
Stock compensation 175 209
Depletion, depreciation and amortization 15,095 14,095
------ ------
Total operating expenses: 39,832 19,293
------ ------
Income (loss) from operations (11,846) 11,628
------ ------
Other income (expenses):
Interest expense (2,212) (727)
Interest income 102 54
Other, principally foreign exchange loss (138) --
------ ------
(2,248) (673)
------ ------
Income (loss) before income taxes (14,094) 10,955
Income tax benefit (expense) 5,073 (3,425)
------ ------
Net income (loss) (9,021) 7,530
Retained earnings at beginning of period 27,654 14,554
------ ------
Retained earnings at end of period $ 18,633 $ 22,084
========= =========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
PETSEC ENERGY INC.
A WHOLLY OWNED SUBSIDIARY OF PETSEC ENERGY LTD
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (9,021) $ 7,530
Adjustments to reconcile income to net
cash provided by operating activities:
Depletion, depreciation and amortization 15,095 14,095
Deferred income taxes (5,073) 3,425
Dry hole costs and impairments 17,632 --
Other 399 209
Changes in operating assets and liabilities:
Decrease in receivables 3,109 954
Increase in inventories (19) (19)
Decrease in prepayments 175 82
Decrease (increase) in other receivables (21) 20
Decrease in trade accounts payable (476) (1,390)
Decrease in other accrued liabilities (932) (220)
Increase in interest payable 1,666 54
-------- --------
Net cash provided by operating activities 22,534 24,740
-------- --------
Cash flows from investing activities:
Lease acquisitions (1,680) (1,127)
Exploration and development expenditures (30,269) (32,599)
Other asset additions (412) (240)
-------- --------
Net cash used in investing activities (32,361) (33,966)
-------- --------
Cash flows from financing activities:
Proceeds from bank credit facility 4,000 8,000
Proceeds from shareholder loans -- 1,500
Repayment of shareholder loans -- (217)
-------- --------
Net cash provided by financing activities 4,000 9,283
-------- --------
Net increase (decrease) in cash (5,827) 57
Cash at beginning of period 7,431 342
-------- --------
Cash at end of period $ 1,604 $ 399
======== ========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
PETSEC ENERGY INC.
A WHOLLY-OWNED SUBSIDIARY OF PETSEC ENERGY LTD
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. The financial statements and footnotes should
be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 and the accompanying notes and
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The financial information for the three months ended March 31, 1998
and 1997 has not been audited. However, 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 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
<PAGE> 7
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 periods ended March 31, 1998 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 wholly owned principal operating subsidiary of
Petsec Energy Ltd, (the "Parent"). The Parent is an Australian public company
with ordinary shares listed on the Australian Stock Exchange (symbol: PSA) and
American Depositary Receipts ("ADRs") listed on The Nasdaq Stock MarketSM
(symbol: PSALY). Effective May 18, 1998, the ADRs will be listed on the New York
Stock Exchange (symbol: PSJ). The results discussed in this report refer only to
the Company. The Parent's results are filed with the Securities and Exchange
Commission separately under forms 6-K (quarterly) and 20-F (annual) and
shareholders and ADR holders are advised to refer to these filings.
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 that 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 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.
7
<PAGE> 8
RESULTS OF OPERATIONS
The following table sets forth certain operating information with
respect to the oil and gas operations of the Company.
Three Months Ended
March 31,
-------------------------
1998 1997
---- ----
NET PRODUCTION:
Gas (MMcf) 7,582 5,868
Oil (MBbls) 683 747
Total (MMcfe) 11,680 10,350
NET SALES DATA (IN THOUSANDS):
Gas $17,033 $14,930
Oil $10,953 $15,991
Total $27,986 $30,921
AVERAGE SALES PRICE (1):
Gas (per Mcf) $ 2.25 $ 2.54
Oil (per Bbl) $ 16.04 $ 21.41
Total (per Mcfe) $ 2.40 $ 2.99
AVERAGE COSTS (PER MCFE):
Lease operating expenses $ 0.36 $ 0.22
Depletion, depreciation, and amortization $ 1.29 $ 1.36
General, administrative and other expenses $ 0.13 $ 0.14
(1) Includes effects of hedging activities
GENERAL. During the three-month period ended March 31, 1998 the Company
commenced the drilling of exploration wells at West Cameron 480, South Marsh
Island 189 and High Island 308 and one development well at Main Pass 91. Of the
four wells, two are still drilling while the South Marsh Island well was plugged
and abandoned and the West Cameron well was cased and suspended. In addition,
the previously suspended Ship Shoal 193 A-6 well was re-entered and sidetracked
and is expected to begin production in late May 1998.
OIL AND GAS REVENUES. Oil and gas revenues for the three months ended
March 31, 1998 were $28.0 million, a decrease of $2.9 million, or 9% below $30.9
million for the comparable period in 1997. A 29% increase in gas production
offset by an 11% decrease in gas prices resulted in a $2.1 million increase in
gas revenues. A 9% decrease in oil production coupled with a 25% decrease in oil
prices resulted in a $5.0 million decrease in oil revenues.
First quarter production was impacted by severe weather conditions
causing delays in the commencement of production at the Main Pass 104 and 84
fields and safety shut downs at existing facilities.
For the three months ended March 31, 1998, the average realized gas
price was $2.25 per Mcf, or 4% above the $2.17 per Mcf average gas price that
would otherwise have been received if no hedging had been undertaken. Over the
same period, the average realized oil price was $16.04 per Bbl, or 14% above the
$14.13 per Bbl average oil price that would otherwise have been received if no
hedging had taken place. Hedging activities resulted in a $1.9 million increase
in oil and gas revenues. For the comparable period in 1997 the average realized
gas price was $2.54 per Mcf, or 10% below the $2.81 per Mcf average gas price
that would otherwise have been received if no hedging had been undertaken. Over
8
<PAGE> 9
the same period, oil price hedging had no effect on the average realized price
of $21.41 per Bbl. Hedging activities resulted in a $1.5 million decrease in oil
and gas revenues for the three-month period ended March 31, 1997.
LEASE OPERATING EXPENSES (including production taxes). Lease operating
expenses increased $1.9 million, or 85% to $4.2 million for the three months
ended March 31, 1998, from $2.3 million for the three months ended March 31,
1997. The increase is partly attributable to increased production. Lease
operating expenses per Mcfe increased from $0.22 for the comparable period in
1997 to $0.36 for the three months ended March 31, 1998 due to the additional
costs incurred in bringing new fields at Main Pass 104 and Main Pass 84 into
production coupled with the severe weather conditions that caused operational
problems and production downtime.
DEPLETION, DEPRECIATION AND AMORTIZATION ("DD&A"). DD&A expense
increased $1.0 million, or 7%, to $15.1 million for the three months ended March
31, 1998, from $14.1 million for the same period in 1997. The unit rate was
$1.29 per Mcfe in the three months ended March 31, 1998 compared to $1.36 per
Mcfe for same period in 1997.
EXPLORATION EXPENDITURES. Seismic, geological and geophysical
expenditures of $1.8 million were expensed during the quarter, an increase of
$0.5 million over the comparable period in 1997.
DRY HOLE COSTS AND IMPAIRMENTS. During the three-month period ended
March 31, 1998, $17.0 million was expensed for the dry hole and impairment costs
incurred on the South Marsh Island 189 #1 and West Cameron 480 #2 wells. During
April 1998 the Company incurred an additional $2.7 million on the South Marsh
Island well in plugging and abandonment costs.
GENERAL, ADMINISTRATIVE AND STOCK COMPENSATION EXPENSE. General,
administrative and stock compensation expense increased $0.1 million, or 7%, to
$1.7 million for the three months ended March 31, 1998 from $1.6 million for the
comparable period in 1997. On a per Mcfe basis, the rate decreased from
$0.14/Mcfe for the three-month period ended March 31, 1997 to $0.13/Mcfe for the
comparable period in 1998.
NET INCOME. Primarily as a result of the dry hole costs and
impairments discussed above, a net loss for the three months ended March 31,
1998 of $9.0 million was recorded. This compares to earnings of $7.5 million
for the three months ended March 31, 1997.
9
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
The following table represents cash flow data for the Company for the
periods indicated.
Three Months Ended
March 31,
( in thousands)
1998 1997
---- ----
Cash flow data:
Net cash provided by operating activities $ 22,534 $ 24,740
Net cash used in investing activities 32,361 33,966
Net cash provided by financing activities 4,000 9,283
The fluctuation in cash provided by operating activities from 1997
to 1998 was primarily due to decreased oil production coupled with lower prices
for both commodities.
The decrease in cash used in investing activities in 1998 over 1997
was due to timing of exploration and development projects.
The cash provided by financing activities in both 1998 and 1997
consisted primarily of borrowings under the bank credit facility.
Since 1990 the Company has financed its working capital needs,
operations and growth primarily with advances from its Parent, Petsec Energy
Ltd, 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 ADRs in July 1996.
Funds advanced by the Parent have historically been provided in the
form of subordinated loans. These loans are subordinated to the payment of all
Senior Indebtedness and have been subordinated to the Notes defined herein. At
March 31, 1998 the US dollar loans bear interest at 7.34% and in the case of
Australian dollar borrowings, 6.50%. The loans from the Parent do not have
mandatory principal payments due until December 31, 2007. No interest was paid
or accrued on these loans prior to June 1, 1997. Any payments or distributions
made by the Company to its Parent have been 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 borrowing base at March 31, 1998 was $60 million. As
of May 8, 1998 the borrowing base has been increased to $75 million. In
addition, a sublimit of $15 million exists for letter of credit purposes to
support the bonding requirements of the MMS and commodity swap transactions. At
March 31, 1998, borrowings outstanding under the bank credit facility were $4.0
million. The bank credit facility is a two-year revolving credit facility
followed by a two-year term period with equal quarterly amortization payments.
The facility matures 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, taxes and depletion, depreciation
and amortization ("EBITDA") 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 1.50% per annum, depending upon the total amount
borrowed. The Company is obligated to pay a fee equal to .30% to .35% per
annum based on the unused portion of the borrowing base under the facility.
10
<PAGE> 11
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 1997, the Company issued $100 million of 9 1/2% Senior
Subordinated Notes due 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 $96.4 million. The Company used a portion of the
net proceeds to repay borrowings under the bank credit facility. The remainder
of the net proceeds was 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 1998, the Company has budgeted capital expenditures of
approximately $160 million on exploration and development drilling and other
capital projects. The capital expenditures budget is continually re-evaluated
based on drilling results, commodity prices, cash flow from operations and
property acquisitions. In the three months ended March 31, 1998, $35.8 million
was incurred on capital expenditures. In addition, the Company was high bidder
on seven lease blocks at the March 18, 1998, OCS Louisiana Offshore Sale. If the
Company is awarded all of these leases, the remaining committed costs will be
$6.2 million. The Company currently intends to finance expenditures for the
remainder of 1998 with cash flow from operations and bank borrowings.
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 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 limits the duration of the transactions and the
percentage of the Company's 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.
Energy Swaps:
The Company enters into forward swap contracts with major financial
institutions to reduce the price volatility on the sale of oil and gas
production. In swap agreements, the Company receives the difference between a
fixed price per unit of production and a floating price issued by a third party.
If the floating price is higher than the fixed price, the Company pays the
difference.
As of March 31, 1998, for the remainder of 1998, the Company had
entered into commodity swaps effectively fixing the price of 13.2 million MMbtu
of gas at a volume-weighted average New York Mercantile Exchange ("NYMEX") price
of $2.18 per MMbtu. The Company had also entered into commodity swap contracts
for 11.0 million MMbtu and 760,000 MMbtu at volume-weighted average NYMEX prices
of $2.25 per MMbtu and $2.15 per MMbtu for calendar years 1999 and 2000,
respectively.
As of March 31, 1998, for the remainder of 1998, the Company had
entered into commodity swap contracts for 825,000 barrels of oil at a
volume-weighted average NYMEX price of $20.10 per barrel. The Company had also
11
<PAGE> 12
entered into commodity swap contracts for 365,000 Bbls and 152,000 Bbls at
volume-weighted average NYMEX prices of $19.70 per Bbl and $19.70 per Bbl for
calendar years 1999 and 2000, respectively.
The fair value at March 31, 1998, represented by the estimated amount
that would be required to terminate these contracts, was a net cost of $6.9
million for the gas contracts and a net gain of $4.0 million for the oil
contracts.
Collars:
The Company also enters into collar agreements with third parties. A
collar agreement is similar to a swap agreement except that the Company receives
the difference between the floor price and the floating price if the floating
price is below the floor. The Company pays the difference between the ceiling
price and the floating price if the floating price is above the ceiling. The
Company has proved reserves sufficient to cover all of these contracts and does
not trade in derivatives without underlying forecasted production and proved
reserves.
As of March 31, 1998, the Company had 1,375,000 MMbtu of gas hedged
through December 1998 in costless collars with a floor price of $2.00 per MMbtu
and a ceiling price of $3.70 per MMbtu. The effect to the Company to terminate
these contracts at March 31, 1998 was estimated to be a net cost of $14,000.
YEAR 2000
The Company is aware of the issues associated with the programming code
in existing computer systems as the year 2000 approaches. The Company is
utilizing both internal and external resources to identify, correct or
reprogram, and test the systems for the year 2000 compliance. It is anticipated
that all reprogramming efforts will be complete by December 31, 1998, allowing
adequate time for testing. To date, confirmations have been received from the
Company's primary processing vendors that plans are being developed to address
processing of transactions in the year 2000. Management has not yet assessed the
year 2000 compliance expense and related potential effect on the Company's
financial position, results of operations or liquidity.
12
<PAGE> 13
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.
Exhibit No. Exhibit
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
13
<PAGE> 14
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.
May 15, 1998 By: /s/ Ross A. Keogh
------------------------------
Ross A. Keogh
Vice President Finance and
Administration
(principal financial officer)
May 15, 1998 By: /s/ James E. Slatten, III
------------------------------
James E. Slatten, III
Secretary
(duly authorized officer)
14
<PAGE> 15
EXHIBIT INDEX
27 -- Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,604
<SECURITIES> 0
<RECEIVABLES> 10,970
<ALLOWANCES> 0
<INVENTORY> 62
<CURRENT-ASSETS> 12,719
<PP&E> 342,929
<DEPRECIATION> 130,236
<TOTAL-ASSETS> 228,332
<CURRENT-LIABILITIES> 32,460
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 39,789
<TOTAL-LIABILITY-AND-EQUITY> 228,332
<SALES> 27,986
<TOTAL-REVENUES> 27,986
<CGS> 0
<TOTAL-COSTS> 39,832
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,212
<INCOME-PRETAX> (14,094)
<INCOME-TAX> (5,073)
<INCOME-CONTINUING> (9,021)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,021)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
