<PAGE>
<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 1-4874
COLORADO INTERSTATE GAS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 84-0173305
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two North Nevada Avenue
Colorado Springs, Colorado 80903-1087
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (719) 473-2300
-----------------------
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, and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__ No _____
As of July 29, 1994, there were outstanding 10 shares of common stock
of the Registrant, $5.00 par value per share, its only class of common
stock. None of the voting stock of the Registrant is held by non-affiliates.
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<PAGE>
<PAGE> 2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
The financial statements of Colorado Interstate Gas Company and its
subsidiaries (the "Company" or "Colorado") are presented herein and are
unaudited, except for balances as of December 31, 1993, and therefore are
subject to year-end adjustments; however, all adjustments which are, in the
opinion of management, necessary for a fair statement of the results of
operations for the periods covered have been made. The adjustments which
have been made are of a normal recurring nature. Such results are not
necessarily indicative of results to be expected for the year due to
seasonal variations and market conditions affecting natural gas sales and
transportation services.
COLORADO INTERSTATE GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1994 1993
--------------- --------------
(Unaudited)
<S> <C> <C>
Plant, Property and Equipment, at cost:
Gas pipeline . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 989,281 $ 980,839
Gas and oil properties, at full-cost . . . . . . . . . . . . . . . . 139,583 139,757
--------------- --------------
1,128,864 1,120,596
Accumulated depreciation, depletion and amortization . . . . . . . . 617,045 601,890
--------------- --------------
511,819 518,706
--------------- --------------
Current Assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473 704
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,038 172,787
Receivables from affiliates . . . . . . . . . . . . . . . . . . . . 223,091 148,180
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,424 9,545
Prepayments and other . . . . . . . . . . . . . . . . . . . . . . . 1,084 979
Current portion of deferred income taxes . . . . . . . . . . . . . . 27,657 23,539
--------------- --------------
357,767 355,734
--------------- --------------
Other Assets:
Other deferred charges . . . . . . . . . . . . . . . . . . . . . . . 21,427 27,187
--------------- --------------
$ 891,013 $ 901,627
--------------- --------------
--------------- --------------
</TABLE>
See Notes to Consolidated Financial Statements.
- 1 -
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<PAGE> 3
COLORADO INTERSTATE GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
<TABLE>
<CAPTION>
June 30, December 31,
STOCKHOLDERS' EQUITY AND LIABILITIES 1994 1993
--------------- --------------
(Unaudited)
<S> <C> <C>
Common Stock and Other Stockholders' Equity:
Common stock, $5 par value, authorized 10,000 shares; issued and
outstanding 10 shares at stated value . . . . . . . . . . . . . . $ 27,561 $ 27,561
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 19,035 19,035
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 329,434 311,451
------------ ------------
376,030 358,047
------------ ------------
Mandatory Redemption Preferred Stock, $100 par value, authorized
550,000 shares, outstanding 5,560 shares-5.50% Series . . . . . . . 556 556
------------ ------------
Debt:
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,188 179,145
------------ ------------
Current Liabilities:
Accounts payable and accrued expenses . . . . . . . . . . . . . . . 203,797 233,802
Accounts payable to affiliates . . . . . . . . . . . . . . . . . . . 34,211 43,786
Taxes on income . . . . . . . . . . . . . . . . . . . . . . . . . . 11,774 1,275
------------ ------------
249,782 278,863
------------ ------------
Deferred Credits:
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . 81,062 80,684
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,395 4,332
------------ ------------
85,457 85,016
------------ ------------
$ 891,013 $ 901,627
------------ ------------
------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
<PAGE> 4
COLORADO INTERSTATE GAS COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED EARNINGS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1994 1993 1994 1993
--------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Operating revenues:
Nonaffiliates . . . . . . . . . . . . . . . . . . . . $ 69,465 $ 69,373 $ 162,565 $ 185,483
Affiliates . . . . . . . . . . . . . . . . . . . . . 25,101 14,963 41,836 31,836
--------- --------- --------- ---------
94,566 84,336 204,401 217,319
Other income - net . . . . . . . . . . . . . . . . . . . 2,172 1,705 3,448 5,011
--------- --------- --------- ---------
96,738 86,041 207,849 222,330
--------- --------- --------- ---------
Costs and Expenses:
Cost of gas sold:
Nonaffiliates . . . . . . . . . . . . . . . . . . . . 13,202 7,108 28,487 54,030
Affiliates . . . . . . . . . . . . . . . . . . . . . 1,473 3,229 1,895 7,595
--------- --------- --------- ---------
14,675 10,337 30,382 61,625
Operation and maintenance . . . . . . . . . . . . . . . 38,467 37,073 83,099 73,666
Depreciation, depletion and amortization . . . . . . . . 9,683 8,352 20,519 17,145
Interest expense . . . . . . . . . . . . . . . . . . . . 4,751 5,220 9,421 10,430
Taxes on income . . . . . . . . . . . . . . . . . . . . 9,508 8,676 21,329 20,088
--------- --------- --------- ---------
77,084 69,658 164,750 182,954
--------- --------- --------- ---------
Net Earnings . . . . . . . . . . . . . . . . . . . . . . . $ 19,654 $ 16,383 $ 43,099 $ 39,376
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
<PAGE> 5
COLORADO INTERSTATE GAS COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1994 1993
----------- ----------
(Unaudited)
<S> <C> <C>
Net Cash Flow From Operating Activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,099 $ 39,376
Add (subtract) items not requiring (providing) cash:
Depreciation, depletion and amortization . . . . . . . . . . . . . . . 20,519 17,145
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . (4,028) 404
Producer contract reformation cost recoveries . . . . . . . . . . . . . 2,969 68
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,867 (606)
Working capital and other changes, excluding changes relating to cash
and non-operating activities:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,749 58,084
Receivables from affiliates . . . . . . . . . . . . . . . . . . . . . 11,093 (2,637)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 (217)
Gas stored underground and prepaid expenses . . . . . . . . . . . . . 7,603 9,622
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . (30,005) (81,490)
Accounts payable to affiliates . . . . . . . . . . . . . . . . . . . (18,280) (1,968)
Taxes on income . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,499 (4,158)
----------- ----------
123,206 33,623
----------- ----------
Cash Flow from Investing Activities:
Purchases of plant, property and equipment . . . . . . . . . . . . . . . . (23,410) (33,909)
Proceeds from sale of plant, property and equipment . . . . . . . . . . . 1,023 49
Investments - other . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,229 (148)
Net (increase) decrease in note receivable from associated company . . . . (86,004) 217,514
Gas supply prepayments and settlements . . . . . . . . . . . . . . . . . . (15) (47)
Recovery of gas supply prepayments . . . . . . . . . . . . . . . . . . . . 150 3,444
----------- ----------
(107,027) 186,903
----------- ----------
Cash Flow from Financing Activities:
Net increase in notes payable . . . . . . . . . . . . . . . . . . . . . . - 701
Preferred dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . (10) (12)
Common dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . (16,400) (220,800)
----------- ----------
(16,410) (220,111)
----------- ----------
Net Increase (Decrease) in Cash . . . . . . . . . . . . . . . . . . . . . . . (231) 415
Cash at Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . 704 9
----------- ----------
Cash at End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 473 $ 424
----------- ----------
----------- ----------
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE> 6
COLORADO INTERSTATE GAS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
For additional information relative to operations and financial
position, reference is made to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993. Certain minor reclassifications of
prior period statements have been made to conform with current reporting
practices. The effect of the reclassifications was not material to the
Company's results of operations or financial position.
Supplemental information relative to the Statement of Consolidated Cash
Flows includes the following: The Company made cash payments for interest
and financing fees, net of amounts capitalized, of $8.9 million and $10.2
million for the six months ended June 30, 1994 and 1993, respectively. Cash
payments for income taxes amounted to $13.9 million and $23.9 million for
the six months ended June 30, 1994 and 1993, respectively.
Materials and supplies inventories are carried principally at average
cost. Gas stored underground is carried at last-in, first-out cost ("LIFO").
The excess of replacement cost over the carrying value of gas in underground
storage carried by the LIFO method, which is classified as Plant, Property
and Equipment, was $31.9 million and $52.6 million at June 30, 1994 and
December 31, 1993, respectively.
2. Income Taxes
Provisions for income taxes are composed of the following (thousands of
dollars):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1994 1993 1994 1993
--------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Current Income Taxes:
Federal . . . . . . . . . . . . . . . . . . . . . . . $ 13,108 $ 9,059 $ 22,716 $ 17,476
State . . . . . . . . . . . . . . . . . . . . . . . . 1,461 933 2,641 2,208
--------- ---------- --------- ---------
14,569 9,992 25,357 19,684
--------- ---------- --------- ---------
Deferred Income Taxes
Federal . . . . . . . . . . . . . . . . . . . . . . . (4,589) (1,285) (3,800) 718
State . . . . . . . . . . . . . . . . . . . . . . . . (472) (31) (228) (314)
--------- ---------- --------- ---------
(5,061) (1,316) (4,028) 404
--------- ---------- --------- ---------
Taxes on Income . . . . . . . . . . . . . . . . . . . . $ 9,508 $ 8,676 $ 21,329 $ 20,088
--------- ---------- --------- ---------
--------- ---------- --------- ---------
</TABLE>
Interim period provisions for income taxes are based on estimated
effective annual income tax rates.
- 5 -
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<PAGE> 7
3. Common Stock
All of the issued and outstanding common stock of the Company is owned
by Coastal Natural Gas Company, a wholly-owned subsidiary of The Coastal
Corporation. Therefore, earnings and cash dividends per common share have no
significance and are not presented.
4. Litigation and Regulatory Matters
Litigation Matters
In December 1992, certain of Colorado's natural gas lessors in the West
Panhandle Field filed a complaint in the U.S. District Court for the
Northern District of Texas, claiming underpayment, breach of fiduciary duty,
fraud and negligent misrepresentation. Management believes that Colorado has
numerous defenses to the lessors' claims, including (i) that the royalties
were properly paid, (ii) that the majority of the claims were released by
written agreement, and (iii) that the majority of the claims are barred by
the statute of limitations. The matter has not been set for trial at this
time.
Other lawsuits and other proceedings which have arisen in the ordinary
course of business are pending or threatened against the Company or its
subsidiaries.
Although no assurances can be given and no determination can be made at
this time as to the outcome of any particular lawsuit or proceeding, the
Company believes there are meritorious defenses to substantially all of the
above claims and that any liability which may finally be determined should
not have a material adverse effect on the Company's consolidated financial
position or results of operations.
Regulatory Matters
On April 8, 1992, the Federal Energy Regulatory Commission ("FERC")
issued Order No. 636 ("Order 636"), which required significant changes in
the services provided by interstate natural gas pipelines. The Company and
numerous other parties have sought judicial review of aspects of Order 636.
On July 2, 1993, the Company submitted to the FERC an unanimous offer of
settlement which resolved all the Order 636 restructuring issues which had
been raised in its restructuring proceeding. That settlement was ultimately
approved (except for minor issues), and the Company's restructured services
became effective October 1, 1993. As of October 1, 1993, Colorado separated
all of its services and separately contracts for each service on a stand-
alone or "unbundled" basis. Gathering, storage and transportation services
are provided at negotiated rates established between minimum and maximum
levels approved by the FERC, while gas processing rates are not subject to
FERC regulations.
Colorado's gas sales contracts extend through September 30, 1996, but
provide for reduced customer purchases to be made each year. Under Order
636, Colorado's certificate to sell gas for resale allows sales to be made
at negotiated prices and not at prices established by the FERC. Colorado is
also authorized to abandon all sales for resale without prior FERC approval
at such time as the contracts expire. Effective October 1, 1993, Colorado
formed an unincorporated Merchant Division to conduct most of the Company's
sales activity in the Order 636 environment. The gas sales volumes reported
include those sales which continue to be made by Colorado together with
those of its Merchant Division.
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<PAGE>
<PAGE> 8
On March 31, 1993, the Company filed at FERC to increase its rates by
approximately $26.5 million annually. Such rates (adjusted to reflect the
Company's Order 636 program) became effective subject to refund on October
1, 1993.
Certain rate issues remain unresolved between the Company, its
customers, its suppliers, and the FERC. The Company has made provisions
which represent management's assessment of the ultimate resolution of these
issues. While the Company estimates the provisions to be adequate to cover
potential adverse rulings on these issues, it cannot estimate when each of
these issues will be resolved.
5. Take-or-Pay Obligations
The Consolidated Balance Sheet includes assets of $7.2 million and $13.2
million at June 30, 1994 and December 31, 1993, respectively, relating to
prepayments for gas under gas purchase contracts with producers and
settlement payment amounts relative to the restructuring of gas purchase
contracts as negotiated with producers. As a result of implementing Order
636 on October 1, 1993 (see Note 4 of Notes to Consolidated Financial
Statements), future gas sales will be made at negotiated prices and will not
be subject to regulatory price controls. This will not affect the
recoverability or the results of pending take-or-pay litigation or any take-
or-pay or contractual reformation settlements that the Company may achieve
with respect to periods before October 1, 1993. A portion of the costs
associated with take-or-pay incurred prior to October 1, 1993 may continue
to be recovered pursuant to FERC's Order No. 528.
A few gas producers have instituted litigation arising out of take-or-
pay claims against the Company. In the Company's experience, producers'
claims are generally vastly overstated and do not consider all adjustments
provided for in the contract or allowed by law. The Company has resolved the
majority of the exposure with its suppliers for approximately 11% of the
amounts claimed. At December 31, 1993, the Company estimated that unresolved
asserted and unasserted producers' claims amounted to approximately $22.9
million. The remaining disputes will be settled where possible and litigated
if settlement is not possible.
At December 31, 1993, the Company was committed to make future purchases
under certain take-or-pay contracts with fixed, minimum or escalating price
provisions. Based on contracts in effect at that date, and before
considering reductions provided in the contracts or applicable law, such
commitments are estimated to be $1.2 million, $1.0 million, $1.0 million,
$.9 million and $.8 million for the years 1994-1998, respectively, and $4.8
million thereafter. Such commitments have also not been adjusted for amounts
which may be assigned or released, or for the results of future litigation
or negotiation with producers.
The Company has made provisions, which it believes are adequate, for
payments to producers that may be required for settlement of take-or-pay
claims and restructuring of future contractual commitments. In determining
the net loss relating to such provisions, the Company has also made accruals
for the estimated portion of such payments which would be recoverable
pursuant to FERC approved settlements with customers. Such provisions and
accruals were not material to the Company for the calendar year 1993 and the
six-month period ended June 30, 1994.
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<PAGE>
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Notes to Consolidated Financial Statements contain information that
is pertinent to the following analysis.
Liquidity and Capital Resources
The Company uses the following consolidated ratios to measure liquidity
and its ability to meet future funding needs and debt service requirements.
<TABLE>
<CAPTION>
Twelve Months Ended
--------------------------------
June 30, December 31,
1994 1993
---------------- -------------
(Unaudited)
<S> <C> <C>
Cash flow from operating activities to capital expenditures
and debt service requirements . . . . . . . . . . . . . . . . . . . 193.3% 80.0%
Total debt to total capitalization . . . . . . . . . . . . . . . . . 32.2% 33.3%
Times interest earned (before tax) . . . . . . . . . . . . . . . . . 7.0 6.5
</TABLE>
The increase in the cash flow from operating activities to capital
expenditures and debt service requirements ratio is due mainly to working
capital changes and a decrease in capital expenditures. The decrease in the
total debt to total capitalization ratio is due to increased retained
earnings resulting from first half 1994 earnings. The increase in the times
interest earned ratio can be attributed to increased earnings before tax and
reduced interest expense.
The Company's primary needs for cash are for general corporate purposes,
capital expenditures and debt service requirements. Management believes that
the Company's stable financial position and earnings ability will enable it
to continue to generate and obtain capital for financing needs in the
foreseeable future.
Order 636, issued in 1992, required significant changes in natural gas
pipeline services. See Note 4 of Notes to Consolidated Financial Statements.
Results of Operations
On April 8, 1992 the FERC issued Order 636 which required significant
changes in the services provided by interstate natural gas pipelines (see
Note 4 of Notes to Consolidated Financial Statements). The intent of Order
636 is to ensure that interstate pipeline transportation services are equal
in quality for all gas supplies, whether the buyer purchases gas from the
pipeline or from any other gas supplier. The FERC amended its regulations to
require the use of the straight fixed variable ("SFV") rate setting
methodology. In general, SFV provides that all fixed costs to firm customers
(including an authorized return on rate base and associated taxes) are to be
received through fixed monthly demand charges, which are not a function of
volumes transported, while including within the commodity billing component
the pipeline's variable operating costs. In addition, the adoption of Order
636 has resulted in the incurrence of transition costs. However, Order 636
provides mechanisms for the recovery of such costs within a reasonable time
period.
- 8 -
<PAGE>
<PAGE> 10
On July 2, 1993, the Company submitted to the FERC an unanimous offer of
settlement which resolved all the Order 636 restructuring issues which had
been raised in its restructuring proceeding. That settlement was ultimately
approved (except for minor issues), and the Company's restructured services
became effective October 1, 1993. As of October 1, 1993, Colorado separated
all of its services and separately contracts for each service on a stand-
alone or "unbundled" basis. Gathering, storage and transportation services
are provided at negotiated rates established between minimum and maximum
levels approved by the FERC, while gas processing rates are not subject to
FERC regulations.
Colorado's gas sales contracts extend through September 30, 1996, but
provide for reduced customer purchases to be made each year. Under Order
636, Colorado's certificate to sell gas for resale allows sales to be made
at negotiated prices and not at prices established by the FERC. Colorado is
also authorized to abandon all sales for resale without prior FERC approval
at such time as the contracts expire. Effective October 1, 1993, Colorado
formed an unincorporated Merchant Division to conduct most of the Company's
sales activity in the Order 636 environment. The gas sales volumes reported
include those sales which continue to be made by Colorado together with
those of its Merchant Division.
As a result of Order No. 636 (as well as the FERC's earlier orders
requiring pipelines to offer "open access" service), Colorado competes with
numerous other providers for its gas sales services as well as its
gathering, transportation and storage services.
The change in the Company's earnings for the three and six month periods
ended June 30, 1994, in comparison to the corresponding periods in 1993, is
a result of the following:
Operating Revenues. The operating revenues by segment were as follows
(thousands of dollars):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1994 1993 1994 1993
--------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Natural gas . . . . . . . . . . . . . . . . . . . . . . $ 91,336 $ 82,831 $ 196,890 $ 215,677
Exploration and production . . . . . . . . . . . . . . . 4,775 2,517 11,717 7,605
Eliminations . . . . . . . . . . . . . . . . . . . . . . (1,545) (1,012) (4,206) (5,963)
--------- ---------- --------- ---------
$ 94,566 $ 84,336 $ 204,401 $ 217,319
--------- ---------- --------- ---------
--------- ---------- --------- ---------
</TABLE>
Operating revenues from natural gas operations for the three month
period ended June 30, 1994, increased from the comparable 1993 period due to
increased transportation and gathering volumes, gas sales volumes and
contract storage revenues offset by a decrease in the average gas sales
price. Operating revenues for the six month period ending June 30, 1994
decreased from the comparable 1993 period due to a decrease in the average
gas sales price and reduced volumes, pursuant to Order 636, partially offset
by increased transportation and gathering revenues.
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<PAGE>
<PAGE> 11
The increase in exploration and production revenues for both the three
month and six month periods ended June 30, 1994 is due primarily to
increased natural gas and condensate volumes partially offset by lower oil
volumes and lower prices for all products.
Other Income - Net. The increase in the three month period ended June
30, 1994 and the decrease in the six month period ended June 30, 1994 are
due to changes in interest income from affiliates.
Cost of Gas Sold. The increase in the three month period ended June 30,
1994 from the comparable 1993 period is due to reduced purchase gas cost
deferrals pursuant to Order 636 and increased gas purchase volumes. This was
partially offset by decreased average gas purchase rates and increased
credit for gas used in operations due to MMBtu pricing resulting from tariff
changes implemented pursuant to Order 636. The decrease in the six month
period ended June 30, 1994 is due primarily to an increased credit for gas
used in operations and lower gas purchase costs as a result of decreased
purchase volumes and rates.
Operation and Maintenance. These expenses increased in both 1994
periods over the comparable 1993 periods as a result of increased gas used
in operations, which has a corresponding reduction in the cost of gas sold,
and outside services partially offset by decreases in property taxes, gas
transportation costs paid to others and operating supplies.
Depreciation, Depletion and Amortization. These expenses increased in
both 1994 periods over the comparable 1993 periods primarily as a result of
increased production volumes in the exploration and production segment.
Operating Profit. The operating profit by segment was as follows
(thousands of dollars):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1994 1993 1994 1993
--------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Natural gas . . . . . . . . . . . . . . . . . . . . . . $ 32,786 $ 30,321 $ 71,295 $ 66,333
Exploration and production . . . . . . . . . . . . . . . 131 (637) 1,294 468
--------- ---------- --------- ---------
$ 32,917 $ 29,684 $ 72,589 $ 66,801
--------- ---------- --------- ---------
--------- ---------- --------- ---------
</TABLE>
The natural gas segment's operating profit for the three month period
ended June 30, 1994 increased by $2.5 million over the comparable 1993
period as increases in transportation and gathering revenues, gas sales
volumes and contract storage revenues more than offset lower average sales
prices and increases in the cost of gas sold and other operating charges.
The increase of $5.0 million for the six month period ended June 30, 1994
over the same period in 1993 is primarily a result of increases in
transportation, gathering and contract storage revenues, which more than
offset decreased sales revenues net of cost of gas sold and other increased
operating charges.
- 10 -
<PAGE>
<PAGE> 12
The operating profit for the exploration and production segment
increased by $.8 for both the three month and six month periods ended June
30, 1994, compared with the same periods in 1993, as a result of increased
sales volumes partially offset by increased depreciation, depletion and
amortization expenses and higher operation and maintenance expenses.
Interest Expense. The decreases in 1994 from the comparable 1993
periods are primarily due to lower average debt outstanding.
Taxes on Income. Income taxes increased for both the three and six
month periods ending June 30, 1994, compared with the same periods in 1993,
due to increased earnings before taxes and a higher effective federal income
tax rate.
Environmental Matters
The Company's operations are subject to extensive federal, state and
local environmental laws and regulations which may affect such operations
and costs as a result of their effect on the construction and maintenance of
its pipeline facilities as well as its gas and oil exploration and
production operations. Appropriate governmental authorities may enforce
these laws and regulations with a variety of civil and criminal enforcement
measures, including monetary penalties and remediation requirements.
The Comprehensive Environmental Response, Compensation and Liability
Act, also known as "Superfund," as reauthorized, imposes liability, without
regard to fault or the legality of the original act, for disposal of a
"hazardous substance." The Company is not presently, and has not been in the
past, a potentially responsible party in any "Superfund" waste disposal
sites.
There are additional areas of environmental remediation responsibilities
which may fall upon the Company. Future information and developments will
require the Company to continually reassess the expected impact of all
applicable environmental laws. Compliance with all applicable environmental
protection laws is not expected to have a material adverse impact on the
Company's liquidity, consolidated financial position or results of
operations.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The information required hereunder is incorporated by reference
into Part II of this Report from Notes 4 and 5 of the Notes to Consolidated
Financial Statements set forth in Part I of this Report.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended June
30, 1994.
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.
COLORADO INTERSTATE GAS COMPANY
(Registrant)
Date: August 11, 1994 By: DAN A. HOMEC
---------------------------------
Dan A. Homec
Assistant Vice President
and Controller
(As Authorized Officer and
Chief Accounting Officer)
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