================================================================================
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, 2000
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 1-7176
THE COASTAL CORPORATION
(Exact name of registrant as specified in its character)
Delaware 74-1734212
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Coastal Tower
Nine Greenway Plaza
Houston, Texas 77046-0995
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 877-1400
---------------------------
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 31, 2000, there were outstanding 214,153,426 shares of Common
Stock, 33-1/3 (cent) par value per share, and 327,997 shares of Class A Common
Stock, 33-1/3 (cent) par value per share, of the Registrant.
================================================================================
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
The financial statements of The Coastal Corporation ("Coastal") and its
subsidiaries (collectively the "Company") are presented herein and are
unaudited, except for balances as of December 31, 1999, 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 sales and deliveries of natural gas and petroleum
products.
THE COASTAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 2000 1999
--------------- -------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................................... $ 66.1 $ 44.4
Receivables, less allowance for doubtful accounts of $17.0 million
(2000) and $17.4 million (1999)...................................... 1,732.3 1,932.5
Inventories............................................................. 1,082.3 732.7
Prepaid expenses and other.............................................. 205.7 213.9
----------- -----------
Total Current Assets................................................. 3,086.4 2,923.5
----------- -----------
Property, Plant and Equipment - at cost:
Natural gas systems..................................................... 6,421.5 6,328.7
Refining, crude oil and chemical facilities............................. 2,592.7 2,555.0
Gas and oil properties - at full cost................................... 4,614.0 3,832.0
Other................................................................... 621.8 581.5
----------- -----------
14,250.0 13,297.2
Accumulated depreciation, depletion and amortization.................... 4,174.6 3,959.8
----------- -----------
10,075.4 9,337.4
----------- -----------
Other Assets:
Goodwill................................................................ 442.3 451.8
Investments - equity method............................................. 1,533.2 1,434.9
Other................................................................... 1,016.7 975.4
----------- -----------
2,992.2 2,862.1
----------- -----------
$ 16,154.0 $ 15,123.0
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
- 1 -
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<TABLE>
<CAPTION>
June 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
--------------- ------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Notes payable........................................................... $ 238.7 $ 105.9
Accounts payable........................................................ 1,968.3 2,350.1
Accrued expenses........................................................ 503.5 420.0
Current maturities on long-term debt.................................... 261.1 161.6
----------- -----------
Total Current Liabilities............................................ 2,971.6 3,037.6
----------- -----------
Debt:
Long-term debt, excluding current maturities............................ 5,645.1 4,798.2
----------- -----------
Deferred Credits and Other:
Deferred income taxes................................................... 1,833.4 1,814.2
Other deferred credits.................................................. 729.4 785.2
----------- -----------
2,562.8 2,599.4
----------- -----------
Securities of Subsidiaries:
Company-obligated mandatory redemption
preferred securities of a consolidated trust......................... 300.0 300.0
Preferred stock issued by subsidiaries.................................. 165.0 165.0
Consolidated joint venture.............................................. 285.8 285.9
----------- -----------
750.8 750.9
----------- -----------
Common Stock and Other Stockholders' Equity:
Cumulative preferred stock (with aggregate liquidation preference
of $7.1 million)..................................................... - -
Class A common stock.................................................... .1 .1
Common stock............................................................ 72.8 72.5
Additional paid-in capital.............................................. 1,043.9 1,031.7
Retained earnings....................................................... 3,239.5 2,965.1
----------- -----------
4,356.3 4,069.4
Less common stock in treasury - at cost................................. 132.6 132.5
----------- -----------
4,223.7 3,936.9
----------- -----------
$ 16,154.0 $ 15,123.0
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
- 2 -
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED OPERATIONS
(Millions of Dollars, Except Per Share)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ---------------------
2000 1999 2000 1999
--------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Operating Revenues............................................ $ 3,071.1 $ 1,892.1 $ 5,998.7 $ 3,601.7
--------- ---------- --------- ---------
Operating Costs and Expenses:
Purchases.................................................. 2,164.7 1,184.3 4,168.8 2,130.2
Operating and general expenses............................. 502.8 413.1 976.8 824.5
Depreciation, depletion and amortization................... 151.7 115.8 294.2 224.4
--------- ---------- --------- ---------
2,819.2 1,713.2 5,439.8 3,179.1
--------- ---------- --------- ---------
Other Income - net............................................ 33.0 29.8 64.6 55.1
--------- ---------- --------- ---------
Earnings Before Interest and Income Taxes..................... 284.9 208.7 623.5 477.7
--------- ---------- --------- ---------
Interest and debt expense, less $14.0 million (2000)
and $8.4 million (1999) three months and $26.6
million (2000) and $15.8 million (1999)
six months capitalized..................................... 100.4 81.5 190.6 158.5
Taxes on income............................................... 56.8 33.9 131.6 91.4
--------- ---------- --------- ---------
Net Earnings.................................................. 127.7 93.3 301.3 227.8
Dividends on Preferred Stock.................................. .1 .1 .2 .2
--------- ---------- --------- ---------
Net Earnings Available
to Common Stockholders..................................... $ 127.6 $ 93.2 $ 301.1 $ 227.6
========= ========== ========= =========
Basic Earnings Per Share...................................... $ .60 $ .44 $ 1.41 $ 1.07
========= ========== ========= =========
Diluted Earnings Per Share.................................... $ .58 $ .43 $ 1.38 $ 1.05
========= ========== ========= =========
Cash Dividends Per Common Share............................... $ .0625 $ .0625 $ .125 $ .125
========= ========== ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
- 3 -
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
(Thousands of Shares and Millions of Dollars)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------------------------------
2000 1999
------------------------ ------------------------
Shares Amount Shares Amount
----------- ---------- ----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Preferred stock, par value
33-1/3 (cent) per share, authorized 50,000,000 shares:
Cumulative convertible preferred:
$1.19, Series A, redemption or liquidation
amount of $33 per share:
Beginning balance........................... 53 $ - 56 $ -
Converted to common......................... (1) - (2) -
----------- ---------- ----------- ----------
Ending balance.............................. 52 - 54 -
=========== ---------- =========== ----------
$1.83, Series B, redemption or liquidation
amount of $50 per share:
Beginning balance........................... 58 - 61 -
Converted to common......................... (2) - (1) -
----------- ---------- ----------- ----------
Ending balance.............................. 56 - 60 -
=========== ---------- =========== ----------
$5.00, Series C, redemption or liquidation
amount of $100 per share:
Beginning balance........................... 27 - 28 -
Converted to common......................... (1) - (1) -
----------- ---------- ----------- ----------
Ending balance.............................. 26 - 27 -
=========== ---------- =========== ----------
Class A common stock, par value 33-1/3 (cent) per
share, authorized 2,700,000 shares:
Beginning balance................................ 345 .1 354 .1
Converted to common.............................. (16) - (8) -
Exercise of stock options........................ - - 2 -
----------- ---------- ----------- ----------
Ending balance................................... 329 .1 348 .1
=========== ---------- =========== ----------
Common stock, par value 33-1/3 (cent) per share,
authorized 500,000,000 shares:
Beginning balance................................ 217,705 72.5 216,765 72.2
Conversion of preferred stock.................... 31 - 42 -
Conversion of Class A common stock............... 16 - 8 -
Exercise of stock options........................ 777 .3 638 .3
----------- ---------- ----------- ----------
Ending balance................................... 218,529 $ 72.8 217,453 $ 72.5
=========== ---------- =========== ----------
</TABLE>
See Notes to Consolidated Financial Statements.
- 4 -
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
(Thousands of Shares and Millions of Dollars)
(Continued)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------------------------------
2000 1999
------------------------ ------------------------
Shares Amount Shares Amount
----------- ---------- ----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Additional paid-in capital:
Beginning balance................................... $ 1,031.7 $ 1,016.2
Exercise of stock options........................... 12.2 10.0
---------- ----------
Ending balance...................................... 1,043.9 1,026.2
---------- ----------
Retained earnings:
Beginning balance................................... 2,965.1 2,519.8
Net earnings for period............................. 301.3 227.8
Dividends on preferred stock........................ (.2) (.2)
Dividends on common stock........................... (26.7) (26.6)
---------- ----------
Ending balance...................................... 3,239.5 2,720.8
---------- ----------
Less treasury stock - at cost.......................... 4,400 132.6 4,397 132.5
=========== ---------- =========== ----------
Total.................................................. $ 4,223.7 $ 3,687.1
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
- 5 -
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(Millions of Dollars)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
2000 1999
--------- --------
(Unaudited)
<S> <C> <C>
Net Cash Flow From Operating Activities:
Net earnings................................................................ $ 301.3 $ 227.8
Add (subtract) items not requiring (providing) cash:
Depreciation, depletion and amortization................................. 296.1 226.2
Deferred income taxes.................................................... 99.1 69.3
Undistributed earnings from equity investments........................... (51.7) (23.6)
Working capital and other changes, excluding changes relating to cash and
non-operating activities:
Accounts receivable................................................... 200.9 (100.1)
Inventories........................................................... (275.6) (19.5)
Prepaid expenses and other............................................ (5.9) 5.1
Accounts payable...................................................... (444.4) (113.3)
Accrued expenses...................................................... 61.7 45.7
Other................................................................. (81.4) 138.9
--------- --------
100.1 456.5
--------- --------
Cash Flow From Investing Activities:
Purchases of property, plant and equipment.................................. (1,056.9) (663.4)
Proceeds from sale of property, plant and equipment......................... 3.8 4.9
Additions to investments.................................................... (125.2) (163.1)
Proceeds from investments................................................... 111.3 19.1
Net from discontinued operations............................................ 1.0 (15.6)
--------- --------
(1,066.0) (818.1)
--------- --------
Cash Flow From Financing Activities:
Increase (decrease) in short-term notes .................................... 307.8 (57.0)
Proceeds from issuing common stock.......................................... 12.4 10.3
Proceeds from long-term debt issues......................................... 968.8 618.1
Payments to retire long-term debt........................................... (274.5) (207.0)
Dividends paid.............................................................. (26.9) (26.8)
--------- --------
987.6 337.6
--------- --------
Net Increase (Decrease) in Cash and Cash Equivalents........................... 21.7 (24.0)
Cash and Cash Equivalents at Beginning of Period............................... 44.4 106.9
--------- --------
Cash and Cash Equivalents at End of Period..................................... $ 66.1 $ 82.9
========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
- 6 -
<PAGE>
THE COASTAL CORPORATION 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, 1999. 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 consolidated
results of operations, financial position or cash flows.
Repair and maintenance costs incurred in connection with planned major
maintenance activities at certain refineries or plants are accrued as a
liability in a systematic and rational manner over the period of time until the
planned major maintenance activities occur. Any difference between the accrued
liability and the actual costs incurred in performing the accrual maintenance
activities are charged or credited to expense at the time the maintenance
occurs. At certain other refineries or plants, the cost of each major
maintenance activity is capitalized and amortized to expense in a systematic and
rational manner over the estimated period extending to the next planned major
maintenance activity.
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"), as amended by Statements of Financial
Accounting Standards No. 137 and No. 138, to be effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. FAS 133 requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
accounting for changes in the fair value of a derivative will depend on the
intended use of the derivative and the resulting designation. The Company is
currently evaluating the impact of FAS 133.
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 $175.5 million and $146.8 million
for the six months ended June 30, 2000 and 1999, respectively. Cash payments for
income taxes amounted to $14.4 million and $1.9 million for the six months ended
June 30, 2000 and 1999, respectively.
2. Inventories
Inventories were as follows (millions of dollars):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------------- ------------
(Unaudited)
<S> <C> <C>
Refined products, crude oil and chemicals............................... $ 908.3 $ 576.2
Coal, materials and supplies............................................ 174.0 156.5
----------- ----------
$ 1,082.3 $ 732.7
=========== ==========
<FN>
Elements included in inventory cost are material, labor and manufacturing
expense.
</FN>
</TABLE>
3. Debt
At June 30, 2000, the Company had $888.7 million of outstanding
indebtedness under the Company's commercial paper program and indebtedness to
banks under short-term lines of credit. The Company's financial statements at
June 30, 2000 reflect $650 million of short-term borrowings which have been
reclassified as long-term, based on the availability of committed credit lines
with maturities in excess of one year and the Company's intent to maintain such
amounts as long-term borrowings. There was a similar reclassification of $475
million as of December 31, 1999.
- 7 -
<PAGE>
In August 2000, the Company issued $300 million of 7 1/2% Notes due in
2006. The net proceeds from the sale of the Notes will be used for general
corporate purposes, including the repayment of floating rate indebtedness.
In July 2000, the Company issued $200 million of Floating Rate Notes due in
2003. The Notes bear interest at a rate equal to the three-month London
Interbank Offered Rate ("LIBOR") plus 0.60%. The net proceeds from the sale were
used for general corporate purposes, including the repayment of floating rate
indebtedness.
In June 2000, the Company issued $400 million of 7 3/4% Notes due in 2010.
The net proceeds from the sale of the Notes were used to repay floating rate
indebtedness, including indebtedness of a subsidiary under a revolving credit
facility, and for general corporate purposes.
4. Common Stock
On June 30, 2000, 11,811,985 shares of Common Stock of the Company were
reserved for stock option plans, 1,168,164 shares were reserved for conversion
of the Series A, B, and C Preferred Stocks, 328,811 shares were reserved for
conversion of outstanding Class A Common Stock and 15,947 shares were reserved
for conversion of Class A Common Stock subject to future issuance. The Class A
Common Stock reserved for future issuance consists of shares reserved for
conversion of the Series A, B, and C Preferred Stocks.
5. Segment Information
The Company's operating revenues from external customers, intersegment
revenues and earnings (loss) before interest and income taxes for the three and
six months ended June 30, 2000 and 1999 are shown as follows (millions of
dollars):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ---------------------
2000 1999 2000 1999
--------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Operating Revenues From External Customers:
Natural gas............................................. $ 351.8 $ 285.2 $ 747.2 $ 620.5
Refining, marketing and chemicals....................... 2,353.7 1,402.3 4,543.2 2,588.5
Exploration and production.............................. 256.2 107.8 481.5 202.8
Power................................................... 32.7 34.6 78.8 60.7
Coal.................................................... 75.0 61.1 144.5 125.9
Corporate and other..................................... 1.7 1.1 3.5 3.3
--------- ---------- --------- ---------
$ 3,071.1 $ 1,892.1 $ 5,998.7 $ 3,601.7
========= ========== ========= =========
</TABLE>
Intersegment revenues for the three-month period were as follows: Natural
gas - $4.5 million (2000), $1.0 million (1999); Refining, marketing and
chemicals - $2.0 million (2000), $.4 million (1999); Exploration and production
- $15.4 million (2000), $5.6 million (1999); and Corporate and other - $2.2
million (2000), $2.0 million (1999).
- 8 -
<PAGE>
Intersegment revenues for the six-month period were as follows: Natural gas
- $8.0 million (2000), $1.6 million (1999); Refining, marketing and chemicals -
$3.8 million (2000), $.9 million (1999); Exploration and production - $28.0
million (2000), $11.1 million (1999); and Corporate and other - $4.2 million
(2000), $4.1 million (1999).
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ---------------------
2000 1999 2000 1999
--------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Earnings (Loss) Before Interest and Income Taxes:
Natural gas............................................. $ 129.3 $ 115.5 $ 321.6 $ 302.4
Refining, marketing and chemicals....................... 51.8 63.7 91.1 133.3
Exploration and production.............................. 119.0 24.1 220.1 35.5
Power................................................... 25.4 24.8 67.9 43.7
Coal.................................................... 4.2 2.6 7.4 6.9
Corporate and other..................................... (44.8) (22.0) (84.6) (44.1)
--------- ---------- --------- ---------
$ 284.9 $ 208.7 $ 623.5 $ 477.7
========= ========== ========= =========
</TABLE>
6. Income Taxes
Provisions for income taxes were as follows (millions of dollars):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ---------------------
2000 1999 2000 1999
--------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Current Income Taxes:
Federal................................................. $ (5.5) $ 7.3 $ 19.5 $ 16.0
Foreign................................................. 2.1 1.3 4.8 2.8
State................................................... 3.3 (.3) 8.2 3.3
--------- ---------- --------- ---------
(.1) 8.3 32.5 22.1
--------- ---------- --------- ---------
Deferred Income Taxes:
Federal................................................. 55.2 26.7 97.7 70.0
Foreign................................................. .7 .9 1.6 1.7
State................................................... 1.0 (2.0) (.2) (2.4)
--------- ---------- --------- ---------
56.9 25.6 99.1 69.3
--------- ---------- --------- ---------
$ 56.8 $ 33.9 $ 131.6 $ 91.4
========= ========== ========= =========
<FN>
Interim period provisions for federal income taxes are based on estimated
effective annual income tax rates.
</FN>
</TABLE>
- 9 -
<PAGE>
7. Earnings Per Share
Earnings per share are calculated following Statement of Financial
Accounting Standards No. 128. The following data shows the amounts used in
computing basic earnings per share and the effects on income and the weighted
average number of shares of dilutive securities.
<TABLE>
<CAPTION>
Three Months Ended June 30, 2000 Six Months Ended June 30, 2000
------------------------------------- ---------------------------------------
Income Shares Income Shares
(Numerator) (Denominator) Per-Share (Numerator) (Denominator) Per-Share
(Millions) (Thousands) Amount (Millions) (Thousands) Amount
------------ ------------- ---------- ------------ ------------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net earnings............. $ 127.7 $ 301.3
Less preferred stock
dividends................ .1 .2
---------- ----------
Basic earnings per share
Income available to
common stockholders.... 127.6 214,130 $ .60 301.1 213,903 $ 1.41
========= =========
Effect of dilutive securities
Options................ - 3,457 - 3,001
FELINE PRIDES(sm)...... - 1,538 - 769
Convertible preferred stock .1 1,196 .2 1,203
---------- ------------ ---------- ------------
Diluted earnings per share
Income available to
common stockholders
plus assumed conversions $ 127.7 220,321 $ .58 $ 301.3 218,876 $ 1.38
========== ============ ========= ========== ============ =========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999 Six Months Ended June 30, 1999
------------------------------------- ---------------------------------------
Income Shares Income Shares
(Numerator) (Denominator) Per-Share (Numerator) (Denominator) Per-Share
(Millions) (Thousands) Amount (Millions) (Thousands) Amount
----------- ------------- ---------- ------------ ------------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net earnings............. $ 93.3 $ 227.8
Less preferred stock
dividends................ .1 .2
---------- ----------
Basic earnings per share
Income available to
common stockholders.... 93.2 213,214 $ .44 227.6 212,998 $ 1.07
========= =========
Effect of dilutive securities
Options................ - 2,693 - 2,368
Convertible preferred stock .1 1,243 .2 1,258
---------- ------------ ---------- ------------
Diluted earnings per share
Income available to
common stockholders
plus assumed conversions $ 93.3 217,150 $ .43 $ 227.8 216,624 $ 1.05
========== ============ ========= ========== ============ =========
</TABLE>
8. Litigation, Regulatory and Environmental Matters
Litigation Matters
In December 1992, certain of Colorado Interstate Gas Company's ("Colorado"
or "CIG") natural gas lessors in the West Panhandle Field filed a complaint in
the U.S. District Court, Northern District of Texas, claiming underpayment of
royalties, breach of fiduciary duty, fraud and negligent misrepresentation.
Management believes that CIG has numerous defenses to the lessors' claims,
including (i) that the royalties were properly paid, (ii) that the majority of
the
- 10 -
<PAGE>
claims were released by written agreement and (iii) that the majority of the
claims are barred by the statute of limitations. In March of 1995, the trial
court granted a partial summary judgment in favor of CIG, holding that the
four-year statute of limitations had not been tolled and the releases are valid
and dismissing all tort claims and claims for breach of any duty of disclosure.
The remaining claim for underpayment of royalties was tried to a jury which, in
May 1995, made findings favorable to CIG. On June 7, 1995, the trial court
entered a judgment that the lessors recover no monetary damages from CIG and
permanently estopping the lessors from asserting any claim based on an
interpretation of the contract different than that asserted by CIG in the
litigation. The lessors' motion for a new trial was denied on July 18, 1997, and
both parties filed appeals. On June 7, 1996, the same plaintiffs sued CIG in
state court in Amarillo, Texas, for underpayment of royalties. CIG removed the
second lawsuit to federal court which granted a stay of the second suit pending
the outcome of the first lawsuit. Oral arguments were heard before the Fifth
Circuit Court of Appeals on December 4, 1998, and the parties are awaiting the
Court's decision.
In October 1996, the Company, along with several subsidiaries, was named as
a defendant in a suit filed by several former and current African American
employees in the U.S. District Court, Southern District of Texas ("Texas suit").
The Texas suit alleges racially discriminatory employment policies and
practices. Coastal vigorously denies these allegations and has filed responsive
pleadings. Plaintiffs' counsel are seeking to have the Texas suit certified as a
class action of all former and current African American employees and initially
claimed compensatory and punitive damages of $400 million. In February 1999, in
response to Coastal's motion to deny class certification, plaintiffs' counsel
obtained permission from the Court to delete all claims for compensatory and
punitive damages and to seek equitable relief only.
In January 1998, the plaintiffs in the Texas suit amended their suit to
exclude ANR Pipeline Company ("ANR Pipeline") employees from the potential
class. A new suit was then filed in state court in Wayne County, Michigan,
seeking to have the Michigan suit certified as a class action of African
American employees of ANR Pipeline and seeking unspecified damages as well as
attorneys and expert fees. ANR Pipeline has filed responsive pleadings denying
these allegations. In August 1999, the court denied plaintiffs' motion to have
the Michigan suit certified as a class action. Plaintiffs filed with the
Michigan Court of Appeals an application for leave to appeal the denial of the
class certification. On November 5, 1999, the Michigan Court of Appeals denied
the application for leave to appeal. The matter has been settled at a cost to
ANR Pipeline of less than $1 million. The parties have agreed to the dismissal
of the case with prejudice.
Two legal proceedings, one in federal court and the other in state court,
have been instituted against a number of gas pipeline companies and their
affiliates, including Coastal and several of its subsidiaries. The plaintiffs in
each suit seek damages for the alleged undermeasurement of the heating value and
the volume of natural gas. In the federal proceeding, Jack Grynberg filed 77
separate False Claim Act suits in September 1997 against natural gas
transmission companies and producers, gatherers, and processors of natural gas,
seeking unspecified damages which could include treble damages for the maximum
period permitted by law (potentially as much as ten years) and penalties of up
to $10,000 per false claim. In addition to the measurement claims, these suits
also allege that the defendants undervalued the gas in paying royalties. The
Coastal defendants were sued in the U.S. District Courts of Colorado and the
Eastern District of Michigan. In April 1999, the U.S. Department of Justice
notified the Company that the United States would not intervene in these cases
at that time. The MultiDistrict Litigation Panel has consolidated the Grynberg
suits with several other Grynberg cases for pre-trial proceedings in Wyoming.
The defendants filed a motion to dismiss which was argued in March 2000, and the
parties are awaiting the Court's decision. The United States has filed a motion
to dismiss part of the Grynberg case.
In the state proceedings, the Quinque Operating Company, on behalf of
itself and subclasses of gas producers, royalty owners, overriding royalty
owners, and state taxing authorities, in May 1999, instituted a legal proceeding
in State Court in Stevens County, Kansas against over 200 gas companies,
including several Coastal subsidiaries. The Quinque suit seeks unspecified
actual, punitive and treble damages for the alleged undermeasurement of all
natural gas measured in the United States from non-federal and non-Indian lands
since 1974. The plaintiffs are seeking certification of a national class of all
similarly situated gas producers, royalty owners, overriding royalty owners, and
state taxing authorities. The suit was removed to the U.S. District Court for
the District of Kansas. The plaintiffs filed a motion to remand the case back to
the state court. The MultiDistrict Litigation Panel has transferred the Quinque
suit to Wyoming
- 11 -
<PAGE>
and consolidated it with the Grynberg proceedings as a result of a motion filed
by several of the defendants in the Quinque suit.
Numerous 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 such 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.
Environmental Matters
The Company's operations are subject to extensive and evolving federal,
state and local environmental laws and regulations. Compliance with such laws
and regulations can be costly. Additionally, governmental authorities may
enforce the 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," imposes liability for the release of a "hazardous
substance" into the environment. Superfund liability is imposed without regard
to fault and even if the waste disposal was in compliance with the then current
laws and regulations. With the joint and several liability imposed under
Superfund, a potentially responsible party ("PRP") may be required to pay more
than its proportional share of such costs. Certain subsidiaries of the Company
and a company in which Coastal owns a 50% interest have been named as a PRP in
various "Superfund" waste disposal sites. At the eight sites for which there is
sufficient information, total cleanup costs are estimated to be approximately
$605 million, and the Company estimates its pro-rata exposure, to be paid over a
period of years, is approximately $4 million and has made appropriate
provisions. At eleven other sites, the U.S. Environmental Protection Agency
("EPA") is currently unable to provide the Company with an estimate of total
cleanup costs and, accordingly, the Company is unable to calculate its share of
those costs.
Additionally, certain subsidiaries of the Company have been named as PRPs
in four state sites. At one site, the North Carolina Department of Health,
Environmental and Natural Resources has estimated the total cleanup costs to be
approximately $50 million, but the Company believes the subsidiary's activities
at this site were de minimis. At a second state site, the Florida Department of
Environmental Protection has demanded reimbursement of its costs, which total
approximately $300,000, and suitable remediation, with approximately $100,000
potentially attributable to the Coastal subsidiary's activities. At the third
site, the Texas Natural Resource Conservation Commission has estimated the total
cleanup costs to be approximately $2 million, but the Company believes the
subsidiary's activities at this site were de minimis. At the fourth site, a
remediation plan has been submitted to the Utah Department of Environmental
Quality for approval, with current estimated cleanup costs of approximately $1.2
million attributable to the Coastal subsidiary's activities.
Future information and developments, including legislative and enforcement
developments, will require the Company to continually reassess the expected
impact of these environmental matters. However, the Company has evaluated its
total environmental exposure based on currently available data, including its
potential joint and several liability, and believes that compliance with all
applicable laws and regulations will not have a material adverse impact on the
Company's consolidated financial position or results of operations.
Regulatory Matters
In 1999, the Federal Energy Regulatory Commission ("FERC") approved a
settlement between Wyoming Interstate Company, Ltd. ("WIC") and its customers
which resolved WIC's 1997 general rate case ("1997 rate case"). Two parties who
objected to the settlement appealed the FERC's approval to the U. S. Court of
Appeals, District of Columbia. Those parties later sought rehearing of a FERC
order which clarified the scope of the settlement. On May 19, 2000, the Court of
Appeals dismissed that appeal on the grounds that a party may not seek agency
rehearing of an order and simultaneously seek judicial review of the same order.
WIC has made refunds as required by the settlement, but has authority to recoup
those refunds in the event that the settlement is overturned or modified.
- 12 -
<PAGE>
On July 1, 1999, WIC filed with the FERC a new rate case to increase its
rates by approximately $8 million annually (based on the rates determined under
the 1997 rate case). On July 29, 1999, the FERC issued its order accepting the
rate filing and suspending it for five months to become effective on January 1,
2000. The order also set the case for hearing, which is currently scheduled to
commence in the fourth quarter of 2000. WIC has filed to place its new rates
into effect on January 1, 2000, and is collecting those rates subject to refund.
In April 2000, WIC filed an offer of settlement to resolve all issues in the
case for most, if not all, parties to the proceeding. Comments on the settlement
were filed by several parties and on June 28, 2000, the Administrative Law Judge
("ALJ") certified the settlement to the FERC as "uncontested" as to all but two
parties who have opposed the settlement. The ALJ severed those parties from the
settlement's provisions and has allowed them to litigate their issues with the
final outcome applying only to any direct interests those parties may have
(e.g., contracts in their own name to ship gas on WIC). The FERC has not yet
acted on the settlement. Hearing procedures are in place to address the issues
raised by the two parties severed from the settlement.
Certain other regulatory issues remain unresolved among CIG, ANR Pipeline,
ANR Storage Company and WIC, their customers, their suppliers and the FERC. The
Company has made provisions which represent management's assessment of the
ultimate resolution of these issues. As a result, the Company anticipates that
these regulatory matters will not have a material adverse effect on its
consolidated financial position or results of operations. While the Company
estimates the provisions to be adequate to cover potential adverse rulings on
these and other issues, it cannot estimate when each of these issues will be
resolved.
9. Merger
Coastal and El Paso Energy Corporation ("El Paso Energy") announced, on
January 18, 2000, the execution of definitive agreements for the merger of
Coastal and a subsidiary of El Paso Energy. Each share of Coastal common stock
and Class A common stock will be converted on a tax-free basis (except for cash
paid in lieu of fractional shares) into 1.23 shares of El Paso Energy common
stock. The outstanding convertible preferred stock of Coastal will be exchanged
tax free (except for cash paid in lieu of fractional shares) for El Paso Energy
common stock on the same basis as if the preferred stock had been converted into
Coastal common stock immediately prior to the merger. On May 5, 2000, the merger
was approved by the shareholders of Coastal and El Paso Energy. It is expected
that the merger will be completed during the fourth quarter of 2000 and be
accounted for as a pooling of interests. The merger is subject to additional
conditions, particularly federal regulatory approval.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
This report, including Management's Discussion and Analysis of Financial
Condition and Results of Operations, includes certain forward-looking
statements. The forward-looking statements reflect the Company's expectations,
objectives and goals with respect to future events and financial performance,
and are based on assumptions and estimates which the Company believes are
reasonable. However, actual results could differ materially from anticipated
results. Important factors which may affect the actual results include, but are
not limited to, commodity prices, political developments, market and economic
conditions, industry competition, the weather, changes in financial markets and
changing legislation and regulations. The forward-looking statements contained
in this Report are intended to qualify for the safe harbor provisions of Section
21E of the Securities Exchange Act of 1934, as amended.
The Notes to Consolidated Financial Statements contain information that is
pertinent to the following analysis.
- 13 -
<PAGE>
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,
2000 1999
-------------- ---------------
(Unaudited)
<S> <C> <C>
Return on average common stockholders' equity.................. 14.5% 13.5%
Cash flow from operating activities to long-term debt.......... 12.2% 21.8%
Total debt to total capitalization............................. 55.3% 51.9%
Times interest earned (before tax)............................. 3.2 3.1
</TABLE>
The decrease in the cash flow from operating activities to long-term debt
ratio resulted primarily from changes in working capital and long-term debt. The
increase in the total debt to total capitalization ratio resulted from the
changes in debt.
In August 2000, the Company issued $300 million of 7 1/2% Notes due in
2006. The net proceeds from the sale of the Notes will be used for general
corporate purposes, including the repayment of floating rate indebtedness.
In July 2000, the Company issued $200 million of Floating Rate Notes due in
2003. The Notes bear interest at a rate equal to the three-month LIBOR plus
0.60%. The net proceeds from the sale were used for general corporate purposes,
including the repayment of floating rate indebtedness.
In June 2000, the Company issued $400 million of 7 3/4% Notes due in 2010.
The net proceeds from the sale of the Notes were used to repay floating rate
indebtedness, including indebtedness of a subsidiary under a revolving credit
facility, and for general corporate purposes.
In March 2000, the Company issued $400 million of Floating Rate Notes due
in 2002. The Notes bear interest at a rate equal to the three-month LIBOR plus
0.45%. The net proceeds from the sale of the Notes were used for general
corporate purposes, including the repayment of indebtedness of Coastal and its
subsidiaries.
The Company has entered into hedging transactions to manage price risk
relating to a portion of the Company's future natural gas production. At June
30, 2000, the Company had entered into hedging contracts on 138 billion cubic
feet ("Bcf") of remaining year 2000 natural gas production and on 165 Bcf of
year 2001 natural gas production. Average monthly prices on these contracts
range from $2.53 to $2.76 per thousand cubic feet (based on the Henry Hub
price).
Financing for capital expansion, mandatory debt retirements and other
expenditures will be provided by internally generated funds, existing credit
lines, and new financings.
Funding for certain proposed projects is anticipated to be provided through
non-recourse project financings in which the projects' assets and contracts will
be pledged as collateral. Equity participation by other entities will be
considered. To the extent required, cash for equity contributions to projects
will be from general corporate funds.
Unused lines of credit at June 30, 2000 were as follows (millions of
dollars):
Short-term...................................... $ 638.8
Long-term*...................................... 1,552.8
-----------
$ 2,191.6
===========
*$461.7 million of unused long-term credit lines is dedicated to a
specific use.
- 14 -
<PAGE>
The FASB has issued FAS 133, as amended by Statements of Financial
Accounting Standards No. 137 and No. 138, to be effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. FAS 133 requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
accounting for changes in the fair value of a derivative will depend on the
intended use of the derivative and the resulting designation. The Company is
currently evaluating the impact of FAS 133.
Results of Operations
The changes in the Company's earnings for the three- and six-month periods
ended June 30, 2000 in comparison to the same periods in 1999 are a result of
the following:
Operating Revenues. The operating revenues by segment were as follows
(millions of dollars):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ---------------------
2000 1999 2000 1999
--------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Natural gas............................................. $ 356.3 $ 286.2 $ 755.2 $ 622.1
Refining, marketing and chemicals....................... 2,355.7 1,402.7 4,547.0 2,589.4
Exploration and production.............................. 271.6 113.4 509.5 213.9
Power................................................... 32.7 34.6 78.8 60.7
Coal.................................................... 75.0 61.1 144.5 125.9
Other................................................... 3.9 3.1 7.7 7.4
Adjustments and eliminations............................ (24.1) (9.0) (44.0) (17.7)
--------- ---------- --------- ---------
$ 3,071.1 $ 1,892.1 $ 5,998.7 $ 3,601.7
========= ========== ========= =========
</TABLE>
Earnings (Loss) Before Interest and Income Taxes. The earnings (loss)
before interest and income taxes by segment was as follows (millions of
dollars):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ---------------------
2000 1999 2000 1999
--------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Natural gas............................................. $ 129.3 $ 115.5 $ 321.6 $ 302.4
Refining, marketing and chemicals....................... 51.8 63.7 91.1 133.3
Exploration and production.............................. 119.0 24.1 220.1 35.5
Power................................................... 25.4 24.8 67.9 43.7
Coal ................................................... 4.2 2.6 7.4 6.9
Corporate and other..................................... (44.8) (22.0) (84.6) (44.1)
--------- ---------- --------- ---------
$ 284.9 $ 208.7 $ 623.5 $ 477.7
========= ========== ========= =========
</TABLE>
Natural Gas. The increases in operating revenues of $70.1 million and
$133.1 million for the three months and six months ended June 30, 2000,
respectively, can be attributed to increased volumes of natural gas liquids,
primarily as a result of gas processing plants acquired during 1999, and higher
prices for natural gas and natural gas liquids. Purchases increased by $69.1
million for the three-month period and $114.9 million for the six-month period
due to higher natural gas prices and increased costs for the gas processing
plants. Gross profit increased by $1.0 million and $18.2 million for the
three-month and six-month periods, respectively.
Earnings before interest and income taxes ("EBIT") increased by $13.8
million for the second quarter as a result of the increased gross profit of $1.0
million, increased earnings from equity investments of $12.6 million and other
- 15 -
<PAGE>
increases of $.2 million. EBIT increased by $19.2 million for the six-month
period as a result of the increased gross profit of $18.2 million, increased
earnings from equity investments of $20.3 million and other increases of $.2
million were partially offset by increased operating and general expenses of
$19.5 million. Operating and general expenses in the six-month period increased
primarily as a result of higher expenses for the gas processing plants.
Refining, Marketing and Chemicals. Operating revenues increased by $953.0
million in the second quarter due primarily to increased prices and volumes. The
six-month increase in operating revenues of $1,957.6 million results primarily
from increased prices partially offset by lower volumes. Purchases increased by
$922.3 million in the second quarter and $1,945.8 million for the six months due
primarily to higher prices. The gross profit increase of $30.7 million for the
three-month period ended June 30, 2000 results from an increase of $21.5 million
from the sale, trading and exchanging of third-party products; increased income
from marine activities of $2.9 million and other increases of $6.3 million.
Gross profit increased by $11.8 million for the six-month period due to an
increase of $20.1 million from the sale, trading and exchanging of third-party
products; increased income from marine activities of $3.5 million and other
increases of $3.5 million partially offset by lower margins of $15.3 million.
The EBIT decrease of $11.9 million for the second quarter results from
increased operating and general expenses of $45.7 million being partially offset
by the increased gross profit of $30.7 million and other increases of $3.1
million. EBIT decreased by $42.2 million for the six months ended June 30, 2000
as increased operating and general expenses of $68.0 million were partially
offset by the increased gross profit of $11.8 million, increased earnings from
equity investments of $13.3 million and other increases of $.7 million. The
increased operating and general expenses for both periods result primarily from
increases for fuel and repairs and maintenance expense. The six-month operating
and general expenses for 2000 include a $6.0 million charge related to a legal
settlement.
Exploration and Production. Operating revenues increased by $158.2 million
and $295.6 million in the three- month and six-month periods, respectively, as a
result of higher production volumes and prices for natural gas, crude oil and
condensate. The EBIT increase of $94.9 million for the second quarter results
from increased prices of $86.1 million and higher volumes of $76.6 million
partially offset by increased depreciation, depletion and amortization of $34.0
million; higher operating and general expenses of $29.4 million and other
decreases of $4.4 million. EBIT increased by $184.6 million in the six months
ended June 30, 2000 as a result of increased prices of $179.3 million and higher
volumes of $131.6 million partially offset by increased depreciation, depletion
and amortization of $66.8 million; higher operating and general expenses of
$43.3 million and other decreases of $16.2 million. Included in the other
decreases for the six-month period is a business tax refund of $7.8 million in
1999. The increases for depreciation, depletion and amortization and operating
and general expenses result primarily from the increased production volumes.
Power. Operating revenues decreased by $1.9 million in the three months
ended June 30, 2000 and increased by $18.1 million in the six-month period. The
$18.1 million increase results primarily from a gain in the 2000 first quarter
of $16.5 million from the disposition of the Company's interest in a Guatemala
power facility. The EBIT increase of $.6 million for the second quarter results
from increased earnings from equity investments of $4.9 million and other
increases of $.7 million partially offset by the operating revenues decrease of
$1.9 million and higher operating and general expenses of $3.1 million. EBIT
increased by $24.2 million for the six months ended June 30, 2000 due to the
$16.5 million gain noted above, increased earnings from equity investments of
$10.4 million and other increases of $.9 million partially offset by higher
operating and general expenses of $3.6 million. The higher operating and general
expenses result primarily from increased fuel costs. The increased earnings from
equity investments results from an additional interest acquired in the Midland
Cogeneration Venture Limited Partnership and new projects.
Coal. Operating revenues increased by $13.9 million and $18.6 million in
the three-month and six-month periods, respectively, as a result of increased
volumes partially offset by lower prices. EBIT increased by $1.6 million for the
three-month period ended June 30, 2000 as the increased revenues of $13.9
million were partially offset by increased operating and general expenses of
$10.3 million and increased depreciation, depletion and amortization of $2.0
million. The EBIT increase of $.5 million for the six-month period results from
the increased revenues of $18.6 million being partially offset by higher
operating and general expenses of $15.2 million and increased depreciation,
depletion and amortization of $2.9 million. Operating and general expenses,
which include cost of coal, and depreciation, depletion and amortization
increased in both periods as a result of the additional volumes sold.
- 16 -
<PAGE>
Corporate and Other. The EBIT for these operations, which include certain
real estate activities and corporate income and expenses not allocated to
operating segments, decreased in both year 2000 periods primarily as a result of
increased dividends/expenses related to the securities of subsidiaries,
merger-related charges and increased expenses from financing activities.
Interest and Debt Expense. Interest and debt expense increased by $18.9
million in the three months and $32.1 million in the six months ended June 30,
2000 due to higher average debt and increased average interest rates partially
offset by increased capitalized interest.
Taxes on Income. Federal income taxes increased by $15.7 million and $31.2
million in the three-month and six-month periods ended June 30, 2000,
respectively, as a result of increased earnings before income taxes and a higher
effective federal income tax rate. State income taxes increased by $6.6 million
and $7.1 million in the three-month and six-month periods, respectively, due to
increased earnings and a tax refund received in 1999.
Environmental Matters
The Company's operations are subject to extensive and evolving federal,
state and local environmental laws and regulations. Compliance with such laws
and regulations can be costly. Additionally, governmental authorities may
enforce the 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," imposes liability for the release of a "hazardous
substance" into the environment. Superfund liability is imposed without regard
to fault and even if the waste disposal was in compliance with the then current
laws and regulations. With the joint and several liability imposed under
Superfund, a PRP may be required to pay more than its proportional share of such
costs. Certain subsidiaries of the Company and a company in which Coastal owns a
50% interest have been named as a PRP in various "Superfund" waste disposal
sites. At the eight sites for which there is sufficient information, total
cleanup costs are estimated to be approximately $605 million, and the Company
estimates its pro-rata exposure, to be paid over a period of years, is
approximately $4 million and has made appropriate provisions. At eleven other
sites, the EPA is currently unable to provide the Company with an estimate of
total cleanup costs and, accordingly, the Company is unable to calculate its
share of those costs.
Additionally, certain subsidiaries of the Company have been named as PRPs
in four sites. At one site, the North Carolina Department of Health,
Environmental and Natural Resources has estimated the total cleanup costs to be
approximately $50 million, but the Company believes the subsidiary's activities
at this site were de minimis. At a second state site, the Florida Department of
Environmental Protection has demanded reimbursement of its costs, which total
approximately $300,000, and suitable remediation, with approximately $100,000
potentially attributable to the Coastal subsidiary's activities. At the third
site, the Texas Natural Resource Conservation Commission has estimated the total
cleanup costs to be approximately $2 million, but the Company believes the
subsidiary's activities at this site were de minimis. At the fourth site, a
remediation plan has been submitted to the Utah Department of Environmental
Quality for approval, with current estimated cleanup costs of approximately $1.2
million attributable to the Coastal subsidiary's activities.
Future information and developments, including legislative and enforcement
developments, will require the Company to continually reassess the expected
impact of these environmental matters. However, the Company has evaluated its
total environmental exposure based on currently available data, including its
potential joint and several liability, and believes that compliance with all
applicable laws and regulations will not have a material adverse impact on the
Company's consolidated financial position or results of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Information on the Company's quantitative and qualitative disclosures about
market risk is presented in Item 7A. in the Company's Annual report on Form 10-K
for the year ended December 31, 1999. The Company has entered into
- 17 -
<PAGE>
hedging transactions to manage price risk relating to a portion of the
Company's future natural gas production. At June 30, 2000, the Company had
entered into hedging contracts on 138 Bcf of remaining year 2000 natural gas
production and on 165 Bcf of year 2001 natural gas production. Average monthly
prices on the contracts range from $2.53 to $2.76 per thousand cubic feet (based
on the Henry Hub prices).
- 18 -
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The information required hereunder is incorporated by reference into
Part II of this Report from Note 8 of the Notes to Consolidated Financial
Statements set forth in Part I of this Report and from Item 2., "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Environmental Matters" 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.
A Special Meeting of Stockholders of the Company was held on May 5,
2000. At such meeting the merger of Coastal and a wholly owned subsidiary of El
Paso Energy Corporation was approved: 202,649,952 votes were cast in favor of
the merger, 2,189,593 votes were cast against the merger and 630,888 shares
abstained.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
11 - Statement re Computation of Per Share Earnings.
27 - Financial Data Schedule.
(b) Reports on Form 8-K.
(1) A report on Form 8-K was filed on June 13, 2000. The item
reported was:
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
(12) Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividends.
- 19 -
<PAGE>
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.
THE COASTAL CORPORATION
(Registrant)
Date: August 10, 2000 By: COBY C. HESSE
---------------------------------
Coby C. Hesse
Senior Executive Vice President
and Principal Accounting Officer
(As Authorized Officer and
Chief Accounting Officer)
- 20 -
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
-------------------------------------------------------------------------------
11 Statement Re Computation of Per Share Earnings
27 Financial Data Schedule
- 21 -
