UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly Report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1994
OR
Transition Report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from . . . . to . . . .
Commission file number 1-7627
WAINOCO OIL CORPORATION
(Exact name of registrant as specified in its charter)
Wyoming 74-1895085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 Smith Street, Suite 2100 77002-4367
Houston, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (713) 658-9900
Not Applicable
-----------------------------------
Former name, former address and former fiscal year, if
changed since last report.
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 . . .
Registrant's number of common shares outstanding as of October 27, 1994:
27,247,792
WAINOCO OIL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1994
INDEX
Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II - Other Information
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except per share)
Nine Months Ended Three Months Ended
September 30 September 30
1994 1993 1994 1993
------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Refined products $230,741 $238,078 $ 88,695 $ 84,988
Oil and gas sales 30,093 29,255 10,273 9,775
Other 1,460 2,217 530 448
-------- -------- -------- --------
262,294 269,550 99,498 95,211
-------- -------- -------- --------
Costs and Expenses:
Refining operating costs 202,986 225,055 78,332 78,560
Oil and gas operating costs 9,958 9,847 3,583 3,621
Selling and general expenses 8,606 8,200 2,758 2,685
Depreciation, depletion
and amortization 19,872 17,041 7,282 5,453
-------- -------- -------- --------
241,422 260,143 91,955 90,319
-------- -------- -------- --------
Operating Income 20,872 9,407 7,543 4,892
Interest Expense, Net 15,474 15,147 5,233 4,948
-------- -------- -------- --------
Income (Loss) Before Income Taxes 5,398 (5,740) 2,310 (56)
Provision (Benefit) for Income Taxes (690) (346) (302) (190)
-------- -------- -------- --------
Net Income (Loss) $ 6,088 $ (5,394) $ 2,612 $ 134
======== ======== ======== ========
Income (Loss) Per Share $ .22 $ (.23) $ .10 $ .01
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands except shares)
September 30, 1994 and December 31, 1993 1994 1993
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash, including cash equivalents of
$2,385 in 1994 and $2,078 in 1993 $ 2,673 $ 3,770
Trade receivables 20,715 16,281
Joint operators and other receivables 3,099 2,790
Inventory of crude oil, products and other 24,160 21,086
Other current assets 941 2,331
-------- --------
Total current assets 51,588 46,258
-------- --------
Property and Equipment, at cost:
Oil and gas properties, on a full-cost basis 457,165 448,649
Refinery and pipeline 131,671 124,705
Furniture, fixtures and other equipment 5,895 5,820
-------- --------
594,731 579,174
Less - Accumulated depreciation, depletion
and amortization 353,460 334,905
-------- --------
241,271 244,269
Other Assets 6,083 6,284
-------- --------
$298,942 $296,811
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 31,688 $ 30,514
Oil and gas proceeds payable 3,522 4,095
Accrued interest 3,919 5,681
Accrued turnaround cost 1,505 3,741
Accrued liabilities and other 4,463 4,132
-------- --------
Total current liabilities 45,097 48,163
-------- --------
Long-Term Debt
Revolving credit facilities 18,500 18,700
12% Senior Notes 100,000 100,000
7 3/4% Convertible Subordinated Debentures 46,000 46,000
10 3/4% Subordinated Debentures 12,263 12,200
-------- --------
176,763 176,900
-------- --------
Deferred Income Taxes 2,388 2,298
Other Deferred Credits 3,413 3,410
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $100 par value, 500,000
shares authorized, no shares issued 0 0
Common stock, no par, 50,000,000 shares
authorized, 27,306,892 shares and 27,122,177
shares issued in 1994 and 1993, respectively 57,171 57,153
Paid-in capital 81,715 80,855
Retained earnings (deficit) (60,209) (66,297)
Cumulative translation adjustment (7,123) (6,233)
Treasury stock, 60,000 shares (270) (270)
Other (3) 832
-------- --------
Total Shareholders' Equity 71,281 66,040
-------- --------
$298,942 $296,811
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
For the nine months ended September 30, 1994 1993
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 6,088 $ (5,394)
Depreciation, depletion and amortization 19,872 17,041
Deferred credits and other (707) (1,123)
-------- --------
25,253 10,524
Change in working capital from operations (6,926) (432)
-------- --------
Net cash provided by operating activities 18,327 10,092
INVESTING ACTIVITIES
Additions to property and equipment (18,930) (35,305)
Sales of oil and gas properties 928 1,682
Net cash distributed as operator of properties (1,394) (111)
-------- --------
Net cash used in investing activities (19,396) (33,734)
FINANCING ACTIVITIES
Long-term bank borrowings 10,364 31,500
Payments of long-term bank debt and debentures (10,564) (26,699)
Common stock offering and other 56 21,335
-------- --------
Net cash provided by financing activities (144) 26,136
Effect of exchange rate changes on cash 116 (335)
-------- --------
Increase (Decrease) in Cash and Cash Equivalents (1,097) 2,159
Cash and Cash Equivalents, beginning of period 3,770 3,710
-------- --------
Cash and Cash Equivalents, end of period $ 2,673 $ 5,869
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
WAINOCO OIL CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM FINANCIAL STATEMENTS
September 30, 1994
(Unaudited)
1. Financial statement presentation
The condensed consolidated financial statements include the accounts
of Wainoco Oil Corporation, a Wyoming Corporation, and its wholly owned
subsidiaries, including Wainoco Oil & Gas Company and Frontier Holdings
Inc. ("Frontier" or the "Refinery"), collectively referred to as Wainoco or
the Company. These financial statements have been prepared by the
registrant without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC) and include all adjustments
(comprised of only normal recurring adjustments) which are, in the opinion
of management, necessary for a fair presentation. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
Wainoco believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that the financial statements
included herein be read in conjunction with the financial statements and
the notes thereto included in Wainoco's annual report on Form 10-K for the
year ended December 31, 1993.
2. Accounting policy for oil and gas properties
Wainoco follows the accounting policy (commonly referred to as "full-
cost" accounting) of capitalizing costs incurred in the acquisition,
exploration and development of oil and gas reserves. No gains or losses
are recognized upon the sale or disposition of oil and gas properties,
except for significant transactions.
Wainoco computes the provision for depreciation, depletion and
amortization of oil and gas properties, by country, on a quarterly basis
using the composite unit-of-production method based on future gross revenue
attributable to proved reserves.
Capitalized oil and gas property costs can not exceed the limitation
on capitalized costs provided by the rules of the SEC, and when capitalized
costs exceed the limit, an additional provision for depreciation, depletion
and amortization may be required. The limitation is based, after
consideration of income tax effects, on: (1) the present value of future
net income from estimated production of proved oil and gas reserves
discounted at 10%; (2) the cost of significant investments in unproved and
unevaluated properties excluded from the costs being amortized; and (3) the
lower of cost or estimated fair market value of unproved properties
included in the costs being amortized.
As of September 30, 1994, price declines for oil and gas resulted in
U.S. oil and gas property costs exceeding the limitation. However,
pursuant to the rules of the SEC, subsequent higher pricing was used to
reevaluate proved oil and gas reserves, and an additional provision for
depreciation, depletion and amortization was not necessary.
3. Earnings per share
Primary and fully diluted earnings per share have been computed on the
weighted average number of common shares outstanding and assume the
exercise of stock option shares for the three months and nine months ended
September 30, 1994 and the three months ended September 30, 1993. The
effect of dilution for the fully diluted computations were immaterial. No
effect was given for the addition of dilutive stock options for the nine
months ended September 30, 1993 as a loss was incurred. The primary and
fully diluted average shares outstanding for the three months ended
September 30, 1994 and 1993 were 27,356,514 and 26,461,583, respectively,
and for the nine months ended September 30, 1994 and 1993 were 27,363,864
and 23,475,220, respectively.
4. Nonrecurring transactions
During the first quarter of 1993, the Company received payments of
insurance proceeds, as reimbursement for losses incurred, resulting in
nonrecurring income of $1.0 million, which has been classified as other
income in the consolidated statement of operations.
5. Schedule of major components of inventory
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------ ------------
(in thousands)
<S> <C> <C>
Crude oil $ 6,352 $ 2,803
Unfinished products 3,444 4,487
Finished products 8,049 7,435
Chemicals and in-transit inventory 1,315 1,589
Repairs and maintenance supplies and other 5,000 4,772
------------ ------------
$ 24,160 $ 21,086
============ ============
</TABLE>
6. Long-term debt
During the second quarter 1994, Wainoco renegotiated and extended its
two oil and gas long-term credit facilities. The interest rates for both
facilities are based, at the Company's option, on 1) the bank's prime rate
plus from one-half to three-quarters percent, or 2) LIBOR plus from one
and one-half percent to one and three-quarters percent. The loan covenants
for both facilities include net worth and minimum cash flow coverage of
interest requirements.
Commitments under the Company's United States oil and gas credit
facility, secured by substantially all of its United States oil and gas
properties, were reduced to $18 million from $22 million as of June 30,
1994 and the revolving period was extended from December 31, 1994 to
December 31, 1995 with payments commencing on March 31, 1996.
Commitments under the Company's Canadian oil and gas credit facility,
secured by substantially all of its Canadian oil and gas properties, were
reduced to Canadian $34 million from Canadian $37.5 million as of June 30,
1994, and the revolving period was extended to December 31, 1995, with
payments commencing on March 31, 1996.
In a recent amendment to Frontier's working capital facility, the
revolving period has been extended from April 2, 1995 to April 2, 1996.
Additionally, the commitment fee for the facility was decreased from one-
half of 1% to .425 of 1%. The prime rate margin was narrowed from one and
three-quarters percent to one and one-quarter percent and the reserve-
adjusted LIBOR margin was reduced from three percent to two and one-quarter
percent.
7. Securities offering
In July, 1993, the Company sold five million shares of common stock
through a public offering. The net proceeds of $20.8 million were used to
pay down borrowings under its revolving credit facilities and to retire $5
million principal amount of its 10 3/4% Subordinated Debentures which were
applied to its 1993 and 1994 sinking fund requirements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Nine months ended September 30, 1994 compared with the same period in 1993
The Company had net income for the nine months ended September 30,
1994 of $6,088,000, or $.22 per share, compared to a net loss of
$5,394,000, or $.23 per share, for the same period in 1993.
Revenues decreased 3% as compared to the same period in 1993,
primarily the result of refined products revenues decreasing 3%. The
decrease in refined products revenues resulted from the decrease in average
product sales prices, primarily reflecting a lower average price level.
Oil and gas revenues increased 3% as a result of increased natural gas
prices in the United States and Canada, offset somewhat by 14% lower oil
prices, lower oil sales volumes in the U.S. and lower natural gas sales
volumes in Canada. The average price for natural gas increased 25% in
Canada and 1% in the United States. The average price for Canadian natural
gas in Canadian dollars actually rose 34%, to C$1.87/mcf from C$1.40/mcf,
but the Canadian/United States dollar exchange rate fell from last year's
first nine months average of .7825 to .7250, resulting in the smaller price
increase when translated into United States dollars.
Natural gas production decreased 3% during the first nine months.
During the first quarter of 1994, natural gas production was 13% lower than
in the first quarter of 1993 as a result of compressor repairs at two large
fields in Canada and the impact of reduced drilling in 1992 and 1993 due to
the large capital requirements at the Refinery. This shortfall was reduced
during the second and third quarters as production problems decreased and
successful exploration wells in the United States and Canada began
production.
Refining operating costs decreased 10% in 1994 due to a decrease in
the price of feedstocks, primarily crude oil.
The Refinery had improved operations on a comparative basis.
Manufactured product yields increased 5% and a higher conversion rate was
achieved (more gasoline and distillates were produced) in response to a
change in the composition of crude oil runs and newly installed advanced
controls on the crude unit. Operating margins increased from $.83/bbl
during the first nine months of 1993 to $2.14/bbl in the nine months ended
September 30, 1994.
Depreciation, depletion and amortization increased 17% in the 1994
nine-month period as compared to the same period in 1993. The increase
results from refining DD&A increasing 28% in the period as a result of the
Refinery capital plant improvement program completed in late 1993 and oil
and gas DD&A increasing 17% as a result of reduced period end oil prices
which decreased future gross revenues, thus increasing DD&A under the unit-
of-production method of computing the provision based on future gross
revenues. As a percentage of oil and gas sales, the DD&A rate increased to
47% in the 1994 nine-month period from 41% in the same period in 1993.
The benefit for income taxes increased $344,000 in the first nine
months of 1994 as compared to the same period in 1993, primarily
attributable to a $414,000 increase in the Alberta Royalty Tax Credit
(ARTC) earned on the increased Canadian natural gas revenues.
Three months ended September 30, 1994 compared with the same period in 1993
The Company had net income for the three months ended September 30,
1994 of $2,612,000, or $.10 per share, compared to $134,000, or $.01 per
share, for the same period in 1993.
On August 10, 1994, a fire at the Refinery's crude unit significantly
curtailed crude oil charge for approximately two weeks.
Revenues for the 1994 three-month period increased 5% over the same
period in 1993. Refined product revenues increased 4% in 1994 due
primarily to a 15% increase in average product sales prices, primarily
reflecting an increase in the price of crude oil, offset by reduced
purchases of finished products for resale. Oil and gas revenues increased
5%, principally the result of a 14% increase in natural gas prices and a 4%
increase in oil prices. Oil production decreased 13% in 1994 as a result
of reservoir declines and the sale of producing properties. The natural
gas price increase in the third quarter compared to the prior year's third
quarter was primarily the result of the Canadian gas price rising 24%, to
C$1.76/mcf from C$1.42/mcf. However, the Canadian/United States dollar
exchange rate fell from last year's third quarter average of .7672 to
.7248, resulting in a smaller 17% price increase when translated into
United States dollars.
Refining operating costs decreased marginally in 1994. The Refinery
purchased more lower price sour crude and reduced its purchases of higher
cost finished products during 1994. However, this was partially offset by
marginally higher raw material volumes and an overall increase in the price
of both sweet and sour crude. Additionally, as a result of the crude unit
fire, approximately $1 million of additional operating expenses, after
consideration of insurance recovery, were incurred as a result of the crude
unit fire.
The Refinery had improved operations on a comparative basis as yields
increased 4% even with the negative impact of the crude unit fire and
associated down time. Also, a change in the composition of crude runs and
the benefits of the newly installed advanced controls on the crude unit
produced higher yields of gasoline, which sold at a higher margin in the
1994 third quarter. As a result, operating margins increased $1.11/bbl in
the quarter ended September 30, 1994, as compared to the same period in
1993.
Depreciation, depletion and amortization increased 34% in the 1994
three-month period as compared to the same period in 1993. Refining DD&A
increased 27% in the three-month period ended September 30, 1994 as a
result of the Refinery capital improvement program completed in late 1993,
and oil and gas operations DD&A increased 41%, primarily the result of the
fall in natural gas prices at September 30, 1994, which decreased future
gross revenues, thus increasing DD&A under the unit-of-production method of
computing the provision based on future gross revenues. As a percentage of
oil and gas sales, the DD&A rate increased to 51% in the 1994 three-month
period from 38% in the same period in 1993.
The benefit for income taxes increased $112,000 in the three-months
ended September 30, 1994 as compared to the same period in 1993, primarily
attributable to an $146,000 increase in the ARTC earned on the increased
Canadian natural gas revenues.
OPERATING EARNINGS BY SEGMENT
The following (in thousands) presents the operating income (loss) by
operating segment, by country for the nine months and three months ended
September 30, 1994 and 1993. Operating income (loss) is income (loss)
before net interest expense and provision for income taxes and does not
include unallocated net corporate expense of $1,823,000 and $2,112,000 in
the nine months ended September 30, 1994 and 1993, respectively, and
$511,000 and $670,000 in the three months ended September 30, 1994 and
1993, respectively.
<TABLE>
<CAPTION>
Oil and Gas
Exploration and Production
---------------------------------
United
States
Refining and Other Canada Total
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Nine Months Ended September 30,
1994 - Operating margin $ 28,361 $ 6,663 $ 14,326 $ 20,989
Selling and general expenses 3,387 1,657 1,739 3,396
Depreciation, depletion
and amortization 5,701 6,557 7,614 14,171
---------- ---------- ---------- ----------
Operating income (loss) $ 19,273 $ (1,551) $ 4,973 $ 3,422
========== ========== ========== ==========
1993 - Operating margin $ 14,452 $ 7,930 $ 12,194 $ 20,124
Selling and general expenses 3,386 1,531 1,519 3,050
Depreciation, depletion
and amortization 4,462 5,682 6,477 12,159
---------- ---------- ---------- ----------
Operating income $ 6,604 $ 717 $ 4,198 $ 4,915
========== ========== ========== ==========
Three Months Ended September 30,
1994 - Operating margin $ 10,680 $ 2,417 $ 4,486 $ 6,903
Selling and general expenses 1,139 580 528 1,108
Depreciation, depletion
and amortization 2,002 2,574 2,706 5,280
---------- ---------- ---------- ----------
Operating income (loss) $ 7,539 $ (737) $ 1,252 $ 515
========== ========== ========== ==========
1993 - Operating margin $ 6,507 $ 2,678 $ 3,785 $ 6,463
Selling and general expenses 1,156 492 451 943
Depreciation, depletion
and amortization 1,571 1,839 1,899 3,738
---------- ---------- ---------- ----------
Operating income $ 3,780 $ 347 $ 1,435 $ 1,782
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
REFINING OPERATING STATISTICAL INFORMATION
Nine Months Ended Three Months Ended
September 30 September 30
------------------ ------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Raw material input (bpd)
Sweet crude 6,777 7,439 6,702 9,392
Sour crude 25,976 24,891 26,042 25,111
Other feed and blend stocks 3,772 2,410 4,249 1,133
-------- -------- -------- --------
Total 36,525 34,740 36,993 35,636
Manufactured product yields (bpd)
Gasoline 15,870 14,229 15,859 14,359
Distillates 12,483 11,341 11,282 11,187
Asphalt and other 6,599 7,660 8,149 8,444
-------- -------- -------- --------
Total 34,952 33,230 35,290 33,990
Total product sales (bpd)
Gasoline 19,218 19,519 19,612 21,255
Distillates 12,262 11,485 11,237 11,061
Asphalt and other 6,665 7,833 7,702 10,084
-------- -------- -------- --------
Total 38,145 38,837 38,551 42,400
Operating margin information (per sales bbl)
Average sales price $ 22.16 $ 22.46 $ 25.01 $ 21.79
Material costs (under FIFO
inventory accounting) 15.96 17.69 18.54 16.90
-------- -------- -------- --------
Product spread 6.20 4.77 6.47 4.89
Operating expenses
excluding depreciation 3.53 3.53 3.54 3.24
Depreciation .53 .41 .55 .38
-------- -------- -------- --------
Operating margin $ 2.14 $ .83 $ 2.38 $ 1.27
Manufactured product margin
before depreciation (per bbl) $ 2.69 $ 1.34 $ 2.98 $ 1.89
Purchase product margin
(per purchased product bbl) $ 1.44 $ (.49) $ 1.35 $ (.69)
Sweet/sour spread (per bbl) $ 3.72 $ 4.63 $ 3.57 $ 4.78
Average sales price (per sales bbl)
Gasoline $ 25.12 $ 25.68 $ 28.98 $ 24.64
Distillates 23.07 24.18 25.34 23.73
Asphalts and other 11.96 11.90 14.43 13.65
</TABLE>
<TABLE>
<CAPTION>
OIL AND GAS EXPLORATION AND PRODUCTION STATISTICAL INFORMATION
Nine Months Ended Three Months Ended
September 30 September 30
------------------ ------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue (in thousands)
Net oil and condensate sales
Canada $ 2,158 $ 2,318 $ 794 $ 727
United States 7,845 9,762 2,785 3,227
-------- -------- -------- --------
10,003 12,080 3,579 3,954
-------- -------- -------- --------
Net gas sales
Canada 15,526 13,194 4,969 4,343
United States 4,564 3,981 1,725 1,478
-------- -------- -------- --------
20,090 17,175 6,694 5,821
-------- -------- -------- --------
$ 30,093 $ 29,255 $ 10,273 $ 9,775
======== ======== ======== ========
Production
Net oil and condensate (bbls)
Canada 172,000 170,000 56,000 58,000
United States 530,000 559,000 168,000 200,000
-------- -------- -------- --------
702,000 729,000 224,000 258,000
======== ======== ======== ========
Net gas (mmcf)
Canada 11,353 12,045 3,899 3,989
United States 2,218 1,951 848 695
-------- -------- -------- --------
13,571 13,996 4,747 4,684
======== ======== ======== ========
Price
Average oil and condensate sales
(per bbl) before deduction
for production taxes
Canada $ 12.55 $ 13.67 $ 14.13 $ 12.43
United States 14.81 17.46 16.59 16.15
Weighted average 14.26 16.58 15.97 15.31
Average gas sales (per mcf) before
deduction for production taxes
Canada $ 1.37 $ 1.10 $ 1.27 $ 1.09
United States 2.06 2.04 2.03 2.13
Weighted average 1.48 1.23 1.41 1.24
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $18,327,000 and
$10,092,000 for the nine months ended September 30, 1994 and 1993,
respectively. Cash applied to financing activities for the nine months
ended September 30, 1994, was used primarily to pay down the Company's bank
lines of credit $200,000 net of borrowings of $10,364,000. For the same
period in 1993, cash from financing activities was provided by an equity
offering in July. The net proceeds of approximately $20,800,000 were used
to pay down the Company's bank lines of credit and retire $5,000,000 of its
10 3/4% Subordinated Debentures due 1993. The Company subsequently had
additional borrowings from its bank credit facilities in conjunction with
additional cash requirements for the Refinery capital improvement program.
At September 30, 1994, the Company had $24,927,000 available under its
oil and gas lines of credit and $14,900,000 under the Frontier line of
credit. The estimated five-year maturities of long-term debt are
$2,500,000 in 1995, 1996 and 1997 and $5,000,000 in 1998 assuming that the
oil and gas reserved-based credit facilities are extended.
Net cash used in investing activities was $19,396,000 and $33,734,000
for the nine months ended September 30, 1994 and 1993, respectively. The
lower capital spending is primarily the result of reduced capital
expenditures at the Refinery. Capital expenditures of approximately
$26,300,000 ($9,200,000 refining and $17,100,000 oil and gas) are currently
budgeted for 1994, of which $18,900,000 had been incurred as of September
30, 1994. The Company was engaged in a capital improvement program for the
Refinery which commenced in 1992 and was completed in September 1993. This
program, among other things, enables the Company to produce new products
required under the Clean Air Act Amendments of 1990, increases the amount
of sour crude processed, increases the amount of diesel produced, all of
which can be low sulfur, and improves operating reliability.
U.S. OIL AND GAS PROPERTIES
On September 15, 1994, the Company announced its intent to cease all
exploration in the United States and to sell its U.S. oil and gas assets.
All future North American exploration and development activities will be
focused in Canada, where the vast majority of the Company's natural gas
reserves are found and where the Company's history of low-cost reserve
additions has led to a favorable cost structure and consistent earnings.
The net proceeds of the asset sale will be used to pay down debt.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings -
None, which in the opinion of management would have a material
impact on the registrant.
Matters Concerning Protection of the Environment -
Toxic Substances Control Act Matter - On June 27, 1994, the U.S.
Environmental Protection Agency Region VIII served an administrative
Complaint and Notice of Opportunity for Hearing on Frontier Refining Inc.
alleging violations of the Toxic Substances Control Act ("TSCA"), and
proposing a penalty of $150,000. The Complaint alleges that, pursuant to
Section 8(a) of TSCA, Frontier filed required updates to the TSCA Chemical
Inventory after the regulatory filing deadline. The EPA has subsequently
offered to reduce the penalty to $90,000, further consider Frontier's
proposal to group intermediates to further reduce the proposed penalty
amount and consider supplemental environmental projects that may be
undertaken at the refinery to partially offset the remaining monetary
penalty.
National Pollution Discharge Elimination System Matters - On May
18, 1994, the United States Environmental Protection Agency issued to
Frontier a Notice of Violation, which alleged multiple violations of the
Clean Water Act due to exceedances of the effluent limitations in
Frontier's National Pollution Discharge Elimination System ("NPDES")
permit. The Wyoming Department of Environmental Quality ("DEQ"), which has
federal delegation of the NPDES permitting program in Wyoming, is enforcing
action for these alleged violations. Although Frontier contests liability,
a tentative agreement has been reached with the State of Wyoming for
$28,125.
ITEM 2. Changes in Securities -
There have been no changes in the constituent instruments
defining the rights of the holders of any class of registered securities
during the current quarter.
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 -
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
WAINOCO OIL CORPORATION
By: /s/ George E. Aldrich
---------------------
Vice President - Controller
Date: October 28, 1994
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