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, 1995
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 31, 1995:
27,256,002
WAINOCO OIL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
INDEX Page
Part I - Financial Information
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II - Other Information 13
Definitions of Terms
mcf = one thousand cubic feet
mmcf = one million cubic feet
bbl(s) = barrel(s)
bpd = one barrel per day
Equivalent information is based on British Thermal Units at a ratio of six
mcf of natural gas to one bbl of oil. All dollar amounts are expressed in
United States dollars unless otherwise indicated as Canadian dollars (C$).
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
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Refined products $245,460 $230,741 $ 88,500 $ 88,695
Oil and gas sales 19,664 30,093 5,384 10,273
Other 6,885 1,460 411 530
-------- -------- -------- --------
272,009 262,294 94,295 99,498
-------- -------- -------- --------
Costs and Expenses:
Refining operating costs 236,357 202,986 82,841 78,332
Oil and gas operating costs 7,617 9,958 2,191 3,583
Selling and general expenses 8,484 8,606 2,698 2,758
Depreciation, depletion and amortization 16,416 19,872 5,032 7,282
-------- -------- -------- --------
268,874 241,422 92,762 91,955
-------- -------- -------- --------
Operating Income 3,135 20,872 1,533 7,543
Interest Expense, Net 15,091 15,474 5,020 5,233
-------- -------- -------- --------
Income (Loss) Before Income Taxes (11,956) 5,398 (3,487) 2,310
Provision (Benefit) for Income Taxes 100 (690) 32 (302)
-------- -------- -------- --------
Net Income (Loss) $(12,056) $ 6,088 $ (3,519) $ 2,612
======== ======== ======== ========
Income (Loss) Per Share $ (.44) $ .22 $ (.13) $ .10
======== ======== ======== ========
</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, 1995 and December 31, 1994 1995 1994
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash, including cash equivalents of
$1,432 in 1995 and $467 in 1994 $ 1,830 $ 5,831
Trade receivables 21,428 17,990
Joint operators and other receivables 2,335 3,209
Inventory of crude oil, products and other 23,338 23,618
Other current assets 648 1,129
-------- --------
Total current assets 49,579 51,777
-------- --------
Property and Equipment, at cost:
Oil and gas properties, on a full-cost basis 220,373 454,559
Refinery and pipeline 136,446 132,872
Furniture, fixtures and other equipment 5,456 5,505
-------- --------
362,275 592,936
Less - Accumulated depreciation, depletion and amortization 157,543 372,937
-------- --------
204,732 219,999
Other Assets 5,532 5,760
-------- --------
$259,843 $277,536
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 32,220 $ 32,991
Oil and gas proceeds payable 2,630 3,421
Accrued interest 3,740 5,602
Accrued turnaround cost 1,249 2,245
Accrued liabilities and other 4,572 5,986
-------- --------
Total current liabilities 44,411 50,245
-------- --------
Long-Term Debt
Revolving credit facilities 10,700 15,000
12% Senior Notes 100,000 100,000
7 3/4% Convertible Subordinated Debentures 46,000 46,000
10 3/4% Subordinated Debentures 9,848 9,797
-------- --------
166,548 170,797
-------- --------
Deferred Credits and Other 5,694 4,627
Deferred Income Taxes 2,418 2,418
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,
27,313,502 shares and 27,310,842 shares issued in
1995 and 1994, respectively 57,172 57,172
Paid-in capital 81,767 81,758
Retained earnings (deficit) (90,960) (78,904)
Cumulative translation adjustment (6,948) (10,307)
Treasury stock, 57,500 and 60,000 shares
in 1995 and 1994, respectively (259) (270)
-------- --------
Total Shareholders' Equity 40,772 49,449
-------- --------
$259,843 $277,536
======== ========
</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, 1995 1994
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(12,056) $ 6,088
Depreciation, depletion and amortization 16,416 19,872
Gain on sale of interest in gas marketing company (1,780) 0
Deferred credits and other (60) (707)
-------- --------
2,520 25,523
Change in working capital from operations (2,509) (6,926)
-------- --------
Net cash provided by operating activities 11 18,327
INVESTING ACTIVITIES
Additions to property and equipment (14,419) (18,930)
Sales of oil and gas properties 13,516 928
Sale of interest in gas marketing company 1,824 0
Net cash distributed as operator of properties and other (174) (1,394)
-------- --------
Net cash (used in) provided by investing activities 747 (19,396)
FINANCING ACTIVITIES
Long-term bank borrowings 33,700 10,364
Payments of long-term bank debt (38,000) (10,564)
Other (437) 56
-------- --------
Net cash provided by financing activities (4,737) (144)
Effect of exchange rate changes on cash (22) 116
-------- --------
Decrease in Cash and Cash Equivalents (4,001) (1,097)
Cash and Cash Equivalents, beginning of period 5,831 3,770
-------- --------
Cash and Cash Equivalents, end of period $ 1,830 $ 2,673
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
WAINOCO OIL CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM FINANCIAL STATEMENTS
September 30, 1995
(Unaudited)
1. Financial statement presentation and earnings per share
Financial statement presentation
The condensed consolidated financial statements include the accounts
of Wainoco Oil Corporation, a Wyoming Corporation, and its wholly owned
subsidiaries, including Frontier Holdings Inc. (Frontier) and Wainoco Oil &
Gas Company, 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, 1994.
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. The effect of dilution for the fully diluted
computation was immaterial. No effect was given for the addition of
dilutive stock options for the 1995 periods as losses were incurred. The
primary and fully diluted average shares outstanding for the three months
and nine months ended September 30, 1995 were 27,256,002 and 27,253,174 and
in 1994 were 27,356,514 and 27,363,864, respectively.
2. Schedule of major components of inventory
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
(in thousands)
<S> <C> <C>
Crude oil and raw materials $ 3,852 $ 6,135
Unfinished products 6,145 3,489
Finished products 6,671 7,737
Chemicals and in-transit inventory 1,227 1,277
Repairs and maintenance supplies and other 5,443 4,980
-------- --------
$ 23,338 $ 23,618
======== ========
</TABLE>
3. 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.
As of September 30, 1995, price declines for oil and gas resulted in
Canadian oil and gas property costs exceeding the limitation. However,
subsequent higher pricing was used to reevaluate proved oil and gas
reserves, and an additional provision for DD&A was not necessary. A
downward revision in the present value of future net income, resulting from
future price declines, might result in Wainoco providing an additional
provision for DD&A in future periods.
4. Restructuring of operations
In the first six months of 1995, Wainoco closed sales of all of the
United States properties except for the Conroe field and certain minor
properties. A loss was accrued for these sales in the fourth quarter of
1994.
Wainoco recorded revenue and expenses from these properties until the
property sales were closed. During the nine months ended September 30,
1995, the Company recorded the following for the properties sold:
<TABLE>
<CAPTION>
<S> <C>
Financial information (in thousands)
Oil and gas revenue $ 2,732
Operating costs 1,414
DD&A 1,173
Production volumes
Oil (bbls) 119,000
Gas (mmcf) 486
</TABLE>
5. Nonrecurring transactions
In the first quarter of 1995 the Company received $856,000 in
settlement of a Frontier contract dispute. During the second quarter of
1995 the Company's Canadian operations sold its 9.9% interest in a Canadian
gas marketing company for a net gain of $1,780,000. Additionally, during
the second quarter of 1995 the Company's United States oil and gas
operations recorded $2,206,000 resulting from the settlement of a breach of
contract claim against a former gas purchaser. All such amounts have been
classified as other revenues in the Consolidated Statement of Operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Nine months ended September 30, 1995 compared with the same period in 1994
The Company had a net loss for the nine months ended September 30,
1995 of $12,056,000, or $.44 per share, compared to net income of
$6,088,000, or $.22 per share, for the same period in 1994. A 35% decrease
in refined product spread per barrel was the primary cause of this decline.
Refining operating income decreased $18,068,000 to $1,205,000 for the
nine months ended September 30, 1995 due to extremely poor margins on light
refined products, primarily gasoline and diesel. During the nine months of
1995, refined product spread was $4.05 per barrel compared with $6.20 per
barrel for the same period in 1994. Despite growth in demand in our
market, continued high refinery output nationwide coupled with high
nationwide product inventories at the beginning of the year and increased
product pipeline deliveries into Frontier's marketing area have kept
margins throughout 1995 significantly lower than in 1994. Frontier has
experienced its lowest margins for both gasoline and diesel since its
acquisition by the Company in 1991.
Refined product revenues increased 6% resulting primarily from
increased sales volumes as the average price per barrel increased less than
1%. During the first quarter of 1995, Frontier settled a contract dispute
for $856,000 which is included in other revenues.
Increased sales of light refined products were achieved by increasing
crude oil input 8% during 1995 with yields of gasoline and distillate up by
7% and 6%, respectively. The sweet/sour spread declined to $3.09 per
barrel in 1995 from $3.72 per barrel for the same period in 1994, a result
of the increased competition for Wyoming sour crude oil, the refinery's
preferred sour crude oil based on price and quality. Factors increasing
demand for Wyoming sour crude oil include more sour refining capacity
inside and outside our region, a decrease in the supply of Wyoming sour
crude and a worldwide increase in demand for sour crude oils. Refining
material costs increased 14% per barrel in 1995 due to higher crude oil
prices. Refining operating expenses decreased 9% per barrel reflecting the
increase in product sales and a 3% decrease in operating expenses.
Operating expenses in the first quarter of 1995 included repair costs of
$1.2 million necessitated by an explosion of natural gas that had migrated
from a leaking pipeline near our refinery. In the third quarter of 1994,
repair costs of $1 million resulting from a fire at the Refinery's crude
unit were included in operating expenses.
Oil and gas exploration and production segment operating income
increased $567,000 to $3,989,000 during the first nine months of 1995
compared to the prior year period. Excluding the impact of the gain on the
sale of Canada's 9.9% interest in a gas marketing company and the United
States oil and gas operations settlement of a breach of contract claim
against a former gas purchaser, segment income decreased $3,419,000. The
decrease in segment operating income primarily results from lower gas
prices.
Canadian oil and gas revenues decreased 23% primarily the result of a
31% decrease in gas revenues as the average price for natural gas declined
34% to $.90/mcf from $1.37/mcf in the prior year period. Canadian gas
production was up slightly in spite of the sale of the Chin Lake field at
January 1, 1995 which produced 556 mmcf during the first nine months of
1994. Canadian oil sales increased 32% as a result of a 15% average oil
price increase and a 15% increase in production volume, principally the
result of successful oil exploration in 1995. In Canada, operating costs
increased 5% due to production costs associated with new wells and adding
compression at various mature fields to maintain or increase gas production
levels.
Canadian depreciation, depletion and amortization (DD&A) decreased
slightly in the 1995 nine-month period as compared to the same period in
1994. However, as a percentage of oil and gas sales, the Canadian oil and
gas DD&A rate increased to 55% from 43%, primarily due to the impact of the
lower 1995 gas prices.
United States oil and gas exploration and production operations have
been significantly curtailed through sales of producing properties.
Excluding the revenues and operating costs applicable to properties sold
and the contract settlement gain, the nine-month period of 1995 operating
margin would have been $1,573,000 compared to $1,040,000 (pro forma results
of properties retained) in the 1994 period. This increase results from
both higher oil prices and volumes at the Conroe field.
The provision for income taxes increased as the Alberta Royalty Tax
Credit, beginning in 1995, is classified as oil and gas revenue whereas it
was classified as a tax benefit in prior years. The credits were $429,000
and $866,000 during the first nine months of 1995 and 1994, respectively.
Three months ended September 30, 1995 compared with the same period in 1994
The Company had a loss for the three months ended September 30, 1995
of $3,519,000, or $.13 per share, compared to net income of $2,612,000, or
$.10 per share, for the same period in 1994.
Revenues decreased 5% as compared to the same period in 1994,
primarily the result of dispositions of United States oil and gas
properties and the decline in the Canadian gas price.
Refining operating income decreased $4,957,000 to $2,582,000 for the
three months ended September 30, 1995. This decrease is the result of the
refined product spread decreasing to $4.46 per barrel in 1995 as compared
to $6.47 in 1994. Increased product availability in Frontier's market
areas kept continued downward pressure on wholesale product prices.
Despite growth in demand in our market, high nationwide refinery output and
increased deliveries from product pipelines into our marketing area kept
margins lower.
Crude oil input averaged 37,103 bpd, a 13% increase from 1994 with
yields of gasoline and distillate up by 7% and 14%, respectively. In the
third quarter of 1994 a fire at the crude unit significantly curtailed
crude oil charge for approximately two weeks.
Refined product revenues were approximately the same between the
periods as the 11% increase in sales volumes were offset by a 10% decrease
in sales price per barrel. Raw material costs decreased 3% primarily due
to the decrease in crude oil prices. Per barrel operating expenses
decreased 14% per barrel reflecting the increase in product sales and a 5%
decrease in operating expenses. Included in 1994 operating costs are
additional operating costs of $1 million as a result of the crude unit
fire. The sweet/sour spread declined to $3.21 in 1995 from $3.57 per
barrel in 1994. The factors contributing to this decrease were discussed
previously.
Oil and gas exploration and production segment operating income
decreased $751,000 to an operating loss of $236,000 during the third
quarter of 1995 compared to the prior year period. The decrease in segment
operating income primarily results from lower gas prices and the sales of
United States properties.
Canadian oil and gas revenues decreased 25% compared to the prior year
third quarter primarily the result of a 34% decrease in gas sales as the
average price for natural gas declined 27% to $.93/mcf from $1.27/mcf in
the prior year period. Canadian gas volumes declined 9% to 3,522 mmcf as a
result of increased curtailments and the sale of our Chin Lake field. This
decline in volumes was mitigated by the inclusion of volumes associated
with the ARTC as discussed on page 11. Canadian oil sales increased 27%, a
result of successful oil exploration in 1995.
Canadian depreciation, depletion and amortization decreased $263,000
in the 1995 third quarter period as compared to the same period in 1994.
However, as a percentage of oil and gas sales, the Canadian oil and gas
DD&A rate increased to 56% from 47%, primarily the impact of the lower
third quarter 1995 gas prices.
United States oil and gas exploration and production operations have
been significantly curtailed through sales of producing properties.
Excluding the revenues and operating costs applicable to properties sold,
the third quarter 1995 operating margin would have been $477,000 compared
to $387,000 (pro forma results of properties retained) in the 1994 third
quarter. This increase results from both higher oil prices and volumes at
the Conroe field.
The provision for income taxes increased as the Alberta Royalty Tax
Credit, beginning in 1995, is classified as oil and gas revenue whereas it
was classified as a tax benefit in prior years. The credits were $120,000
and $366,000 during the third quarters of 1995 and 1994, respectively.
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, 1995 and 1994. Operating income (loss) is income (loss)
before net interest expense and provision for income taxes and does not
include unallocated net corporate expense of $2,059,000 and $1,823,000 in
the nine months ended September 30, 1995 and 1994, respectively, and
$813,000 and $511,000 in the three months ended September 30, 1995 and
1994, 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,
1995 - Operating margin $ 10,988 $ 5,290 $ 11,888 $ 17,178
Selling and general expenses 3,525 1,308 1,723 3,031
Depreciation, depletion and amortization 6,258 2,705 7,453 10,158
---------- ---------- ---------- ----------
Operating income $ 1,205 $ 1,277 $ 2,712 $ 3,989
========== ========== ========== ==========
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
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Oil and Gas
Exploration and Production
---------------------------------
United
States
Refining and Other Canada Total
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Three Months Ended September 30,
1995 - Operating margin $ 5,878 $ 459 $ 3,057 $ 3,516
Selling and general expenses 1,181 248 587 835
Depreciation, depletion and amortization 2,115 474 2,443 2,917
---------- ---------- ---------- ----------
Operating income (loss) $ 2,582 $ (263) $ 27 $ (236)
========== ========== ========== ==========
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
========== ========== ========== ==========
</TABLE>
REFINING OPERATING STATISTICAL INFORMATION
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Raw material input (bpd)
Sweet crude 8,894 6,777 15,314 6,702
Sour crude 26,423 25,976 21,789 26,042
Other feed and blend stocks 4,730 3,772 4,106 4,249
-------- -------- -------- --------
Total 40,047 36,525 41,209 36,993
Manufactured product yields (bpd)
Gasoline 17,047 15,870 17,020 15,859
Distillates 13,279 12,483 12,817 11,282
Asphalt and other 8,213 6,599 9,752 8,149
-------- -------- -------- --------
Total 38,539 34,952 39,589 35,290
Total product sales (bpd)
Gasoline 20,789 19,218 21,430 19,612
Distillates 12,953 12,262 12,941 11,237
Asphalt and other 6,685 6,665 8,484 7,702
-------- -------- -------- --------
Total 40,427 38,145 42,855 38,551
Operating margin information (per sales bbl)
Average sales price $ 22.24 $ 22.16 $ 22.45 $ 25.01
Material costs
(under FIFO inventory accounting) 18.19 15.96 17.99 18.54
-------- -------- -------- --------
Product spread 4.05 6.20 4.46 6.47
Operating expenses excluding depreciation 3.23 3.53 3.03 3.54
Depreciation .55 .53 .52 .55
-------- -------- -------- --------
Operating margin $ .27 $ 2.14 $ .91 $ 2.38
Manufactured product margin
before depreciation (per bbl) $ .82 $ 2.69 $ 1.43 $ 2.98
Purchase product margin
(per purchased product bbl) $ .97 $ 1.44 $ 2.06 $ 1.35
Sweet/sour spread (per bbl) $ 3.09 $ 3.72 $ 3.21 $ 3.57
Average sales price (per sales bbl)
Gasoline $ 25.14 $ 25.12 $ 25.16 $ 28.98
Distillates 22.94 23.07 23.57 25.34
Asphalts and other 11.89 11.96 13.91 14.43
</TABLE>
OIL AND GAS EXPLORATION AND PRODUCTION STATISTICAL INFORMATION
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Oil and gas revenue (in thousands)
Net oil and condensate sales
Canada $ 2,840 $ 2,158 $ 1,007 $ 794
United States 5,302 7,845 1,074 2,785
-------- -------- -------- --------
8,142 10,003 2,081 3,579
-------- -------- -------- --------
Net gas sales
Canada 10,703 15,526 3,294 4,969
United States 819 4,564 9 1,725
-------- -------- -------- --------
11,522 20,090 3,303 6,694
-------- -------- -------- --------
$ 19,664 $ 30,093 $ 5,384 $ 10,273
======== ======== ======== ========
Production
Net oil and condensate (bbls)
Canada 197,000 172,000 72,000 56,000
United States 332,000 530,000 73,000 168,000
-------- -------- -------- --------
529,000 702,000 145,000 224,000
======== ======== ======== ========
Net gas (mmcf)
Canada 11,848 11,353 3,532 3,899
United States 497 2,218 1 848
-------- -------- -------- --------
12,345 13,571 3,533 4,747
======== ======== ======== ========
Price
Average oil and condensate sales (per bbl)
before deduction for production taxes
Canada $ 14.40 $ 12.55 $ 13.92 $ 14.13
United States 15.98 14.81 14.79 16.59
Weighted average 15.39 14.26 14.36 15.97
Canada in Canadian dollars C$ 19.82 C$ 17.18 C$ 18.87 C$ 19.49
Average gas sales (per mcf) before
deduction for production taxes
Canada $ .90 $ 1.37 $ .93 $ 1.27
United States 1.65 2.06 N/A 2.03
Weighted average .93 1.48 .93 1.41
Canada in Canadian dollars C$ 1.25 C$ 1.87 C$ 1.26 C$ 1.76
</TABLE>
The following presents Canadian production information which is
equivalent to reporting used by other Canadian oil and gas companies.
Gross volumes represent the Company's working interest plus associated
freehold, provincial and other royalties.
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Gross Volume - Oil (bbls) 220,000 204,000 79,000 65,000
Gas (mmcf) 13,404 13,451 3,935 4,625
Net Volume - Oil (bbls) 197,000 172,000 72,000 56,000
Gas (mmcf) 11,848 11,353 3,532 3,899
Gross Revenue (in thousands) - Oil $ 3,168 $ 2,542 $ 1,096 $ 914
Gas 12,014 18,451 3,645 5,927
Net Revenue (in thousands) - Oil 2,840 2,158 1,007 794
Gas 10,703 15,526 3,294 4,969
</TABLE>
The Alberta Royalty Tax credit (ARTC) was accounted for as a tax
credit in 1994, and it was excluded from net volume and net revenue. The
1994 ARTC volumes were 10,000 bbls and 515 mmcf for the nine-month period
and 2,000 bbls and 241 mmcf for the three-month period. The associated
dollars were $118,000 and $748,000 for oil and gas, respectively, for the
nine-month period and $33,000 and $333,000 for oil and gas, respectively,
for the third quarter. ARTC is included in net revenues and net volumes in
1995. The 1995 ARTC volumes were 10,000 bbls and 302 mmcf for the nine-
month period, and 3,000 bbls and 96 mmcf for the three-month period. The
associated dollars were $137,000 and $292,000 for oil and gas,
respectively, for the nine-month period and $39,000 and $83,000 for oil and
gas, respectively, for the third quarter.
Wainoco has sold all of its United States oil and gas properties,
except for its Conroe field reserves and certain other minor properties.
The oil and gas revenues, operating costs and production for the three
months and nine months ended September 30, 1995 and 1994 for the currently
retained United States properties are as follows:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Financial information (in thousands)
Oil and gas revenues
Net oil and condensate sales $ 3,377 $ 2,710 $ 1,081 $ 926
Net gas sales 12 19 3 3
-------- -------- -------- --------
3,389 2,729 1,084 929
Operating costs 1,816 1,689 607 542
-------- -------- -------- --------
Operating margin $ 1,573 $ 1,040 $ 477 $ 387
======== ======== ======== ========
Operations information
Net oil and condensate
production (bbls) 213,000 176,000 73,000 54,000
Average oil and condensate
sales price (per bbl) before
deduction for production taxes $ 15.85 $ 15.37 $ 14.81 $ 17.15
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $11,000 for the nine
months ended September 30, 1995. In the first nine months of 1994, cash
flows of $18,327,000 were provided by operating activities reflecting the
stronger 1994 operating results. In the first nine months of 1995, the
Company reduced reserved-based borrowings $9,000,000 and increased
borrowings under the Frontier working capital facility by $4,700,000.
Reserve-based borrowing reductions were provided by proceeds from property
sales.
The Company had borrowings of $4,700,000 under the Frontier working
capital facility and $6,000,000 under the Canadian oil and gas line of
credit at September 30, 1995. Additionally, the Company had borrowing
capacity of $22,592,000 available under its oil and gas lines of credit and
$15,300,000 under the Frontier line of credit at that date. The Company
had working capital of $5,168,000 at September 30, 1995 compared with
$1,532,000 at December 31, 1994. At September 30, 1995, the Company
violated an interest coverage covenant under its oil and gas lines of
credit and has obtained bank waivers. If the violation continues, the
Company expects to be able to obtain additional waivers, cure the violation
by repayment of the debt from available cash or, if necessary, proceeds
from the sale of oil and gas properties. The estimated five-year
maturities of long-term debt are $2,500,000 in 1996 and 1997 and $5,000,000
in 1998 assuming that the oil and gas reserve-based credit facilities are
extended during the five-year period.
Investing activities include proceeds from the sale of oil and gas
producing properties and the sale of an interest in a gas marketing company
of $15,340,000 for the nine months ended September 30, 1995. Accrued
additions to property and equipment during the first nine months of 1995
decreased $6,451,000 from the same period in 1994 primarily the result of
reduced capital spending at Frontier. Capital expenditures of
approximately $16,000,000 are currently budgeted for 1995, of which
$12,493,000 had been accrued as of September 30, 1995. The Company is
currently soliciting bids for the sale of the Conroe field, its remaining
significant United States producing property. If the sale is consummated,
the proceeds would be used to reduce bank debt and other long-term debt.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings -
None, which in the opinion of management would have a material
impact on the registrant.
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 -
10.01 - Waiver dated October 24, 1995 to the Amended and Restated
Credit Agreement dated June 29, 1994 with certain banks and Morgan Bank of
Canada.
10.02 - Waiver dated October 24, 1995 to the Amended and Restated
Credit and Guaranty Agreement dated May 31, 1994 with certain banks and
Morgan Guaranty Trust Company of New York.
27 - Financial Data Schedule
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
---------------------------
George E. Aldrich
Vice President - Controller
Date: November 2, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,830
<SECURITIES> 0
<RECEIVABLES> 23,763
<ALLOWANCES> 0
<INVENTORY> 23,338
<CURRENT-ASSETS> 49,579
<PP&E> 362,275
<DEPRECIATION> 157,543
<TOTAL-ASSETS> 259,843
<CURRENT-LIABILITIES> 44,411
<BONDS> 166,548
<COMMON> 57,172
0
0
<OTHER-SE> (16,400)
<TOTAL-LIABILITY-AND-EQUITY> 259,843
<SALES> 265,124
<TOTAL-REVENUES> 272,009
<CGS> 260,390
<TOTAL-COSTS> 260,390
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,091
<INCOME-PRETAX> (11,956)
<INCOME-TAX> 100
<INCOME-CONTINUING> (12,056)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,056)
<EPS-PRIMARY> (0.44)
<EPS-DILUTED> (0.44)
</TABLE>
WAIVER
THIS WAIVER , dated as of October 24, 1995, among
WAINOCO OIL CORPORATION (the "Borrower"), the BANKS listed on the
signature pages hereof (the "Banks") and MORGAN BANK OF CANADA as
Agent (the "Agent").
W I T N E S S E T H:
WHEREAS, the parties hereof have heretofore entered
into an Amended and Restated Credit Agreement dated as of June
29, 1994 (the "Credit Agreement"); and
WHEREAS, the parties hereto desire to waive compliance
with the requirements of Section 5.19 of the Credit Agreement for
the compliance period most recently concluded.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions
Unless otherwise specifically defined herein, each term
used herein which is defined in the Credit Agreement shall have
the meaning assigned to such term in the Credit Agreement.
2. Waiver of Section 5.19 of the Credit Agreement
At the request of the Borrower, the Banks hereby
irrevocably waive compliance with Section 5.19 of the Credit
Agreement for the period of four consecutive fiscal quarters
ending on September 30, 1995. This waiver shall be limited
precisely as written, and shall not extend to (i) any non-
compliance with or breach of any other provision of the Credit
Agreement, (ii) any non-compliance with or breach of Section 5.19
for any other period or (iii) any Default under the Credit
Agreement other than a Default as a result of the non-compliance
with Section 5.19 hereinbefore waived.
3. Governing Law
This Waiver shall be governed by and construed in
accordance with the laws of the Province of Alberta and the laws
of Canada applicable therein.
4. Counterparts: Effectiveness
This Waiver may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
This Waiver shall become effective as of the date hereof when the
Agent shall have received duly executed counterparts hereof
signed by the Borrower and the Required Banks (or, in the case of
any party as to which an executed counterpart shall not have been
received, the Agent shall have received telegraphic, telex or
other written confirmation from such party of execution of a
counterpart hereof by such party).
IN WITNESS WHEREOF, the parties hereto have caused this
Waiver to be duly executed as of the date first above written.
WAINOCO OIL CORPORATION
By: /s/ Julie H. Edwards
-----------------------------
Title: Senior Vice President - Finance
& Chief Financial Officer
MORGAN BANK OF CANADA
By: /s/ Andrew Shelton
-----------------------------
Title: Vice President
PARIBAS BANK OF CANADA
By: /s/ John Plant
----------------------------
Title:
THE BANK OF TOKYO CANADA
By: /s/ Ivan Hopkins
----------------------------
Title: Vice President
MORGAN BANK OF CANADA, as Agent
By: /s/ Andrew Shelton
----------------------------
Title: Vice President
WAIVER
WAIVER dated as of October 24, 1995 among WAINOCO OIL &
GAS COMPANY (the "Borrower"), WAINOCO OIL CORPORATION
("Wainoco"), the BANKS listed on the signature pages hereof (the
"Banks") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent
(the "Agent").
W I T N E S S E T H:
WHEREAS, the parties hereto have heretofore entered
into an Amended and Restated Credit and Guaranty Agreement dated
as of May 31, 1994, as amended by an Amendment dated as of March
15, 1995 (the "Agreement"); and
WHEREAS, the parties hereto desire to waive compliance
with the requirements of Section 5.19 of the Agreement for the
compliance period most recently concluded.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions. Unless otherwise specifically
defined herein, each term used herein which is defined in the
Agreement shall have the meaning assigned to such term in the
Agreement.
SECTION 2. Waiver of Section 5.19 of the Agreement.
At the request of the Borrower and Wainoco, the Banks hereby
irrevocably waive compliance with Section 5.19 of the Agreement
for the period of four consecutive fiscal quarters ending on
September 30, 1995. This waiver shall be limited precisely as
written, and shall not extend to any Default under any other
provision of the Agreement or to any Default under Section 5.19
for any other period.
SECTION 3. Governing Law. This Waiver shall be
governed by and construed in accordance with the laws of the
State of New York.
SECTION 4. Counterparts: Effectiveness. This Waiver
may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Waiver shall
become effective as of the date hereof when the Agent shall have
received duly executed counterparts hereof signed by the
Borrower, Wainoco and the Required Banks (or, in the case of any
party as to which an executed counterpart shall not have been
received, the Agent shall have received telegraphic, telex or
other written confirmation from such party of execution of a
counterpart hereof by such party).
IN WITNESS WHEREOF, the parties hereto have caused this
Waiver to be duly executed as of the date first above written.
WAINOCO OIL & GAS COMPANY
By: /s/ Julie H. Edwards
----------------------------
Title: Senior Vice President - Finance & Chief Financial Officer
WAINOCO OIL CORPORATION
By: /s/ Julie H. Edwards
----------------------------
Title: Senior Vice President - Finance & Chief Financial Officer
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /s/ Philip W. McNeal
----------------------------
Title: Vice President
BANQUE PARIBAS
By: /s/ Mark Green
----------------------------
Title: Vice President
UNION BANK
By: /s/ Richard P. DeGrey, Jr.
----------------------------
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent
By: /s/ Philip W. McNeal
----------------------------
Title: Vice President
