<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
( X ) Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1994 or
( ) Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 1-7792
Pogo Producing Company
(Exact Name of Registrant as Specified in Its Charter)
Delaware 74-1659398
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5 Greenway Plaza, Suite 2700
Houston, Texas 77046-0504
(Address of Principal Executive Offices) (Zip Code)
(713) 297-5000
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirement for the past 90 days: Yes X No
Registrant's number of common shares outstanding
as of September 30, 1994: 32,778,219
<PAGE>
Part I. Financial Information
Pogo Producing Company and Subsidiaries
Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- -------------------------------
1994 1993 1994 1993
------------- --------------- ----------- --------------
(Expressed in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Oil and gas $ 46,452 $ 34,789 $ 134,026 $ 103,650
Interest on tax refund -- 2,322 -- 2,322
Gains on sales -- 99 52 452
------------- --------------- ----------- --------------
Total 46,452 37,210 134,078 106,424
------------- --------------- ----------- --------------
Operating Costs and Expenses:
Lease operating 8,098 7,197 22,462 20,048
General and administrative 3,876 3,655 11,680 10,831
Exploration 902 386 2,208 1,216
Dry hole and impairment 2,049 1,047 6,265 3,865
Depreciation, depletion and amortization 17,641 10,677 46,244 30,670
------------- --------------- ----------- --------------
Total 32,566 22,962 88,859 66,630
------------- --------------- ----------- --------------
Operating Income 13,886 14,248 45,219 39,794
Interest:
Charges (2,450) (2,670) (7,714) (8,517)
Income 10 6 43 13
Capitalized 199 122 530 332
------------- --------------- ----------- --------------
Income Before Income Taxes
and Extraordinary Loss 11,645 11,706 38,078 31,622
Income Tax Expense (4,212) (4,545) (13,464) (11,705)
------------- --------------- ----------- --------------
Income Before Extraordinary Loss 7,433 7,161 24,614 19,917
Extraordinary Loss on
Early Extinguishment of Debt -- -- (307) --
------------- --------------- ----------- --------------
Net Income $ 7,433 $ 7,161 $ 24,307 $ 19,917
============= =============== =========== ==============
Primary Earnings Per Share:
Income before extraordinary loss $ 0.22 $ 0.22 $ 0.74 $ 0.61
Extraordinary loss -- -- (0.01) --
------------- --------------- ----------- --------------
Net Income $ 0.22 $ 0.22 $ 0.73 $ 0.61
============= =============== =========== ==============
Fully Diluted Earnings Per Share:
Income before extraordinary loss $ 0.22 $ 0.22 $ 0.73 $ 0.61
Extraordinary loss -- -- (0.01) --
------------- --------------- ----------- --------------
Net Income $ 0.22 $ 0.22 $ 0.72 $ 0.61
============= =============== =========== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
- 1 -
<PAGE>
Pogo Producing Company and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
-------------- -------------
(Unaudited)
(Expressed in thousands,
except share amounts)
<S> <C> <C>
Assets
Current Assets:
Cash and cash investments $ 4,695 $ 6,713
Accounts receivable 25,776 18,480
Other receivables 10,589 10,123
Federal income taxes and interest receivable -- 3,320
Inventories 2,755 1,105
Other 1,182 727
------------- -------------
Total current assets 44,997 40,468
------------- -------------
Property and Equipment:
Oil and gas, on the basis of successful efforts accounting
Proved properties being amortized 873,591 817,218
Unproved properties and properties
under development, not being amortized 6,390 6,465
Other, at cost 7,873 6,961
-------------- -------------
887,854 830,644
Less--accumulated depreciation, depletion and
amortization, including $4,874 and $4,452,
respectively, applicable to other property 683,598 638,658
-------------- -------------
204,256 191,986
-------------- -------------
Other 11,478 7,320
-------------- -------------
$ 260,731 $ 239,774
============== =============
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 8,879 $ 8,307
Other payables 7,481 22,955
Current portion of long-term debt -- 4,000
Accrued interest payable 1,225 1,202
Accrued payroll and related benefits 950 1,005
Other 43 122
-------------- -------------
Total current liabilities 18,578 37,591
Long-Term Debt 135,698 130,539
Deferred Federal Income Tax 34,481 29,724
Deferred Credits 10,125 8,117
-------------- -------------
Total liabilities 198,882 205,971
-------------- -------------
Shareholders' Equity:
Preferred stock, $1 par; 2,000,000 shares authorized -- --
Common stock, $1 par; 43,333,333 shares authorized,
32,793,794 and 32,449,197 shares issued, respectively 32,794 32,449
Additional capital 130,295 125,919
Retained earnings (deficit) (100,916) (124,241)
Treasury stock, at cost (324) (324)
-------------- -------------
Total shareholders' equity 61,849 33,803
-------------- -------------
$ 260,731 $ 239,774
============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
- 2 -
<PAGE>
Pogo Producing Company and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------
1994 1993
-------------- --------------
(Expressed in thousands)
<S> <C> <C>
Cash Flows from Operating Activities:
Cash received from customers $ 129,044 $ 107,996
Operating, exploration, and general
and administrative expenses paid (35,537) (33,736)
Interest paid (7,588) (7,089)
Federal income taxes paid (7,500) (2,800)
Federal income taxes and interest received 3,364 --
Settlement of natural gas transportation and exchange imbalance (2,168) --
Other (542) 57
-------------- --------------
Net cash provided by operating activities 79,073 64,428
-------------- --------------
Cash Flows from Investing Activities:
Capital expenditures (64,520) (34,218)
Purchase of proved reserves (17,319) --
Proceeds from the sales of properties 52 1,096
-------------- --------------
Net cash used in investing activities (81,787) (33,122)
-------------- --------------
Cash Flows from Financing Activities:
Proceeds from issuance of new debt 86,250 --
Net borrowings under uncommitted money market line of credit 5,000 --
Net payments under revolving credit agreement (66,000) (3,000)
Other payments of long-term debt (24,472) (4,000)
Principal payments of production payment obligation -- (23,864)
Payment of debt issue expenses (2,446) --
Payment of cash dividend on common stock (982) --
Purchase of 8% debentures due 2005 (91) --
Proceeds from exercise of stock options 3,437 2,285
-------------- --------------
Net cash provided by (used in) financing activities 696 (28,579)
-------------- --------------
Net Increase (Decrease) in Cash and Cash Investments (2,018) 2,727
Cash and Cash Investments at the Beginning of the Year 6,713 5,037
-------------- --------------
Cash and Cash Investments at the End of the Period $ 4,695 $ 7,764
============== ==============
Reconciliation of Net Income to Net
Cash Provided by Operating Activities:
Net income $ 24,307 $ 19,917
Adjustments to reconcile net income to
net cash provided by operating activities -
Extraordinary loss on early extinguishment of debt 307 --
Gains from the sales of properties (52) (452)
Depreciation, depletion and amortization 46,244 30,670
Dry hole and impairment 6,265 3,865
Interest capitalized (530) (332)
Deferred federal income taxes 6,206 10,011
Change in operating assets and liabilities (3,674) 749
-------------- --------------
Net Cash Provided by Operating Activities $ 79,073 $ 64,428
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
- 3 -
<PAGE>
Pogo Producing Company and Subsidiaries
Consolidated Statements of Shareholders' Equity (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------------------------------------
1994 1993
-------------------------- -----------------------------
Shares Amount Shares Amount
---------- ------------ ---------- -------------
(Expressed in thousands, except share amounts)
<S> <C> <C> <C> <C>
Common Stock:
$1.00 par - 43,333,333 shares authorized
Balance at beginning of year 32,449,197 $ 32,449 32,103,864 $ 32,104
Stock options exercised 344,597 345 337,942 338
---------- ------------ ---------- -------------
Issued at end of period 32,793,794 32,794 32,441,806 32,442
---------- ------------ ---------- -------------
Additional Capital:
Balance at beginning of year 125,919 122,846
Stock options exercised 4,376 3,006
-------------- -------------
Balance at end of period 130,295 125,852
-------------- -------------
Retained Earnings (Deficit):
Balance at beginning of year (124,241) (149,302)
Net income 24,307 19,917
Dividends ($0.03 per common share) (982) --
------------ -------------
Balance at end of period (100,916) (129,385)
------------ -------------
Treasury Stock:
Balance at beginning of year (15,575) (324) -- --
Activity during period -- -- -- --
---------- ------------ ---------- -------------
Balance at end of period (15,575) (324) -- --
---------- ------------ ---------- -------------
Common Stock Outstanding,
at the End of the Period 32,778,219 32,441,806
========== ==========
Total Shareholders' Equity $ 61,849 $ 28,909
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
- 4 -
<PAGE>
Pogo Producing Company and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(1) General Information -
The consolidated financial statements included herein have been
prepared by Pogo Producing Company (the "Company") without audit and
include all adjustments (of a normal and recurring nature) which are, in
the opinion of management, necessary for the fair presentation of interim
results which are not necessarily indicative of results for the entire
year. The financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's latest annual report.
(2) Long-Term Debt -
Long-term debt and the amount due within one year at September 30,
1994 and December 31, 1993, consists of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
-------------- -------------
(Expressed in thousands)
<S> <C> <C>
Senior debt --
$10,000,000 uncommitted money market credit line,
at an average interest rate of 6.27% $ 6,000 $ --
Bank revolving credit agreement -- 67,000
Subordinated debt --
5 1/2% Convertible subordinated notes due 2004 86,250 --
8% Convertible subordinated debentures due 2005 43,448 43,539
10.25% Convertible subordinated notes due 1999 -- 24,000
-------------- -------------
Total debt $ 135,698 $ 134,539
Amount due within one year consisting of sinking fund requirement on 10.25% Notes -- (4,000)
-------------- -------------
Long-term debt $ 135,698 $ 130,539
============== =============
</TABLE>
On March 16, 1994, the Company issued $86,250,000 of 5 1/2%
Convertible Subordinated Notes due 2004 (the "5 1/2% Notes"). The 5 1/2%
Notes are convertible into common stock of the Company at a price of
$22.188 per share. The proceeds from the issuance of the 5 1/2% Notes
were used to retire the remaining balance of the Company's 10.25%
Convertible Subordinated Notes due 1999 (the "10.25% Notes") and to
reduce the amount outstanding under the Company's bank revolving
credit agreement. Refer to Note 3 of the Notes to Consolidated Financial
Statements included in the Company's latest annual report for a further
discussion of the bank revolving credit agreement and the 8% convertible
subordinated debentures due 2005 (the "8% Debentures").
- 5 -
<PAGE>
Pogo Producing Company and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(3) Earnings per Share -
Earnings per common and common equivalent share (primary earnings
per share) are based on the weighted average number of shares of common
stock and common equivalent shares outstanding during the periods. The
dilutive effect of stock options was considered in the earnings per share
reported for the periods. The 8% Debentures are common stock equivalents
and were ant-dilutive in all periods. Earnings per common and common
equivalent share assuming full dilution (fully diluted earnings per share)
considered the 10.25% Notes (retired on April 18, 1994) which were
anti-dilutive in all periods in which they were outstanding and the 5 1/2%
Notes (issued on March 16, 1994) which were dilutive in the 1994 periods
they were outstanding. Earnings per share are based on the following:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- -------------------------------
1994 1993 1994 1993
------------- --------------- ----------- --------------
(Expressed in thousands)
<S> <C> <C> <C> <C>
Earnings applicable to common stock:
Primary --
Income before extraordinary loss $ 7,433 $ 7,161 $ 24,614 $ 19,917
Extraordinary loss -- -- (307) --
------------- --------------- ----------- --------------
Net Income $ 7,433 $ 7,161 $ 24,307 $ 19,917
============= =============== =========== ==============
Fully diluted --
Income before extraordinary loss $ 8,204 $ 7,161 $ 26,224 $ 19,917
Extraordinary loss -- -- (307) --
------------- --------------- ----------- --------------
Net Income $ 8,204 $ 7,161 $ 25,917 $ 19,917
============= =============== =========== ==============
Weighted average number of common
stock and common equivalent
shares outstanding:
Primary 33,422 33,100 33,335 32,845
Fully diluted 37,309 33,196 36,168 32,903
</TABLE>
- 6 -
<PAGE>
Pogo Producing Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
This discussion should be read in conjunction
with Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the
Company's annual report on Form 10-K for the year
ended December 31, 1993.
Results of Operations -
The Company reported net income for the
third quarter of 1994 of $7,433,000 or $0.22 per share
(on both a primary and fully diluted basis) compared to net income
for the third quarter of 1993 of $7,161,000 or $0.22
per share (primary and fully diluted). For the
first nine months of 1994, the Company reported net
income of $24,307,000 or $0.73 per share ($0.72 on a
fully diluted basis) compared to net income for the
first nine months of 1993 of $19,917,000 or $0.61 per
share (on both a primary and fully diluted basis). Earnings
per common share are based on the
weighted average number of shares of common and common
equivalent shares outstanding for the third quarter and
first nine months of 1994 of 33,422,000 and
33,335,000, respectively, compared to 33,100,000 and
32,845,000, respectively, for the third quarter and
first nine months of 1993. The increase in the
weighted average number of common and common equivalent
shares outstanding for the third quarter and first nine months of 1994,
compared to the third quarter and first nine months of 1993, was related
to common stock issued in connection with the
exercise of stock options pursuant to the Company's
stock option plans. Earnings per common share
computations on a fully diluted basis reflect
additional common shares issuable upon the assumed
conversion of the Company's 5 1/2% Notes (the only
convertible securities of the Company that were
dilutive during the applicable periods) and the
elimination of related interest requirements, as adjusted for
applicable federal income taxes. The weighted average
number of shares of common and common equivalent shares
outstanding on a fully diluted basis for the third
quarter and first nine months of 1994 were 37,309,000 and
36,168,000, respectively, compared to 33,196,000 and
32,903,000, respectively, for the third quarter and
first nine months of 1993. Earnings applicable to common stock,
assuming full dilution, for the third quarter and first nine months of
1994 increased to $8,204,000 and $25,917,000, respectively,
compared to $7,161,000 and $19,917,000, respectively, for
the third quarter and first nine months of 1993.
The Company's total revenues for the third
quarter of 1994 were $46,452,000, an increase of
approximately 25% compared to total revenues of
$37,210,000 for the third quarter of 1993. The
increase in the Company's total revenues for the third
quarter of 1994, compared to the third quarter of
1993, was primarily related to increases of
approximately 77% in the Company's natural gas production volumes
and 11% in its total liquid hydrocarbon (including crude oil,
condensate and plant product) production volumes,
which was partially offset by declines in the prices
received by the Company for such production volumes.
The Company's total revenues for the first nine
months of 1994 were $134,078,000, an increase of
approximately 26% compared to total revenues of
$106,424,000 for the first nine months of 1993. The
increase in the Company's total revenues for the first nine
months of 1994, compared to the first nine months of 1993,
was primarily related to increased natural gas, crude oil
and condensate production volumes, together with a slightly
higher average price for the Company's natural gas production.
Partially offsetting volume increases and natural gas price
increases during the first nine months of 1994, compared to the first
nine months of 1993, were substantial decreases in the prices that the
Company received for its crude oil and condensate volumes. In addition,
the Company's total revenues for the third quarter and first nine months
of 1993 were positively affected by revenues from settlement of a
dispute with the Internal Revenue Service in the third quarter of 1993
and, to a lesser extent, gains related to the sale of non-strategic
properties during the third quarter and first nine months of 1993 that
were substantially completed during that year.
- 7 -
<PAGE>
Pogo Producing Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Continued)
The following table reflects an analysis of differences
in the Company's oil and gas revenues (expressed
in thousands of dollars) between the third quarter and
first nine months of 1994 and the same periods in the preceding year.
<TABLE>
<CAPTION>
3rd Qtr '94 9 mos. '94
Compared to Compared to
3rd Qtr '93 9 mos. '93
----------- ----------
<S> <C> <C>
Increase (decrease) in oil and gas revenues
resulting from differences in :
Natural gas --
Price . . . . . . . . . . . . . . . . $ (1,063) $ 1,131
Production . . . . . . . . . . . . . . 11,323 27,905
--------- ---------
10,260 29,036
--------- ---------
Crude oil and condensate --
Price . . . . . . . . . . . . . . . . (157) (7,058)
Production . . . . . . . . . . . . . . 1,042 6,943
--------- ---------
885 (115)
--------- ---------
Natural gas liquids ("NGL") and
other, net . . . . . . . . . . . . . . 518 1,455
Increase in oil and gas revenues . . . . $ 11,663 $ 30,376
========= =========
</TABLE>
Prices received by the Company for its
natural gas production during the third quarter of
1994 averaged $1.79 per thousand cubic feet ("Mcf"), a
decrease of approximately 7% from the average price of
$1.92 per Mcf that the Company received during the
third quarter of 1993. The Company believes that the
decrease in the average price that it received for its natural gas
production during the third quarter of 1994, compared
to the third quarter of 1993, was primarily related to
increased availability of supplies of natural gas in the
United States, milder weather and the resumption of power
generation by certain nuclear plants that were not
operating in the third quarter of 1993. Prices received
by the Company for its natural gas production during
the first nine months of 1994 averaged $1.97 per Mcf, an
increase of approximately 2% from the average price of
$1.93 per Mcf that the Company received during the
first nine months of 1993. The Company believes that the
increase in the average price that it received for its natural gas
production during the first nine months of 1994,
compared to the first nine months of 1993, was
primarily related to the increased severity of the
winter weather in the northeast and central portions of
the United States during the first quarter of 1994
compared to the first quarter of 1993, that was
partially offset by weakening prices in the second and third quarters of
1994 resulting from the reasons discussed above. The Company's
natural gas production during the third quarter of 1994
averaged 158.2 million cubic feet per day, an increase
of approximately 77% from an average of 89.5 million cubic feet
per day that the Company produced during the third
quarter of 1993. The Company's natural gas production
during the first nine months of 1994 averaged 146 million
cubic feet per day, an increase of approximately 55% from an
average of 94.2 million cubic feet per day that the Company
produced during the first nine months of 1993.
The increase in the Company's natural gas production during
the third quarter and first nine months of 1994, compared to
the third quarter and first nine months of 1993, was primarily
related to natural gas production from the Company's Eugene Island
295 "B" platform from which production commenced in late February
1994, and the continued success of the Company's offshore drilling
and workover program which has been partially offset by a natural
decline in deliverability from certain of the Company's more
mature properties.
Prices received by the Company for its crude
oil and condensate production averaged $17.37 per barrel during
the third quarter of 1994, a decrease of approximately 1% from
the average price of $17.53 per barrel that the Company
received during the third quarter of 1993. Prices received by
the Company for its crude oil and condensate production averaged
$15.93 during the first nine months of 1994, a decrease of
approximately 14% from the average price of $18.63 per barrel
that the Company received during the first nine months of 1993.
The Company's crude oil and condensate production during the third
quarter of 1994 averaged 10,983 barrels per day, an increase of
approximately 6% from an average of 10,332 barrels per day during
the third quarter of 1993. The Company's crude oil and
- 8 -
<PAGE>
Pogo Producing Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Continued)
condensate production during the first nine months of 1994 averaged 11,154
barrels per day, an increase of approximately 17% from an average of
9,562 barrels per day during the first nine months of 1993.
The increase in the Company's crude oil and condensate production during
the third quarter and first nine months of 1994, compared to the
third quarter and first nine months of 1993, was primarily related
to an increased interest in, and development drilling on, certain
offshore Gulf of Mexico Main Pass area blocks.
As of September 30, 1994, the Company had entered into crude oil swap
agreements with other parties in which it swapped the floating market
price it receives from purchasers of its crude oil for a fixed price
of $16.00 per barrel on 1,000 barrels per day of the Company's production
for a period ending January 31, 1995 and a fixed price of $17.08 per
barrel on another 1,000 barrels per day of the Company's production for a
period ending October 31, 1994, which has been extended at the other party's
option through April 30, 1995.
The Company's NGL and other, net revenues for the third quarter
and first nine months of 1994 increased $518,000 and $1,455,000,
from the third quarter and first nine months of 1993, respectively.
The increase in the Company's NGL and other, net revenues for the third
quarter and first nine months of 1994, compared to the third quarter
and first nine months of 1993, was primarily related to an increase in NGL
production from the Company's New Mexico properties and, with respect
to the nine month periods, was also partially offset by a decrease in the
average price that the Company received for its NGL production. NGL are
liquid products which are extracted from natural gas streams and
sold separately.
The Company's total liquids production, including
crude oil and condensate, and NGL, during the third quarter
of 1994 averaged 13,722 barrels per day, an increase of
approximately 11% from an average total liquids production
of 12,353 barrels per day during the third quarter of 1993.
The Company's total liquids production during the first nine
months of 1994 averaged 13,394 barrels per day, an increase
of approximately 20% from an average total liquids production
of 11,194 barrels per day during the first nine months of 1993.
Lease operating expenses for the third quarter of
1994 were $8,098,000, an increase of approximately 13% from lease
operating expenses of $7,197,000 for the third quarter of 1993.
Lease operating expenses for the first nine months of 1994 were
$22,462,000, an increase of approximately 12% from lease operating
expenses of $20,048,000 for the first nine months of 1993.
The increases in lease operating expenses for the third quarter
and first nine months of 1994, compared to the third quarter and
first nine months of 1993, were primarily related to the Company's
increased operating activities, including increased operating
costs related to additional properties brought on production
after the third quarter of 1993. The increase in operating costs
for the first nine months of 1994, compared to the first nine months
of 1993, were partially offset by lower maintenance costs. However,
largely due to increased production of natural gas, crude oil and
condensate, and NGL discussed earlier, lease operating costs per
unit of production, in fact, declined.
General and administrative expenses for the third
quarter of 1994 were $3,876,000, an increase of approximately 6% from
general and administrative expenses of $3,655,000 for the third
quarter of 1993. General and administrative expenses for the first
nine months of 1994 were $11,680,000, an increase of approximately 8%
from general and administrative expenses of $10,831,000 for the first
nine months of 1993. The increase in general and administrative
expenses for the third quarter and first nine months of 1994,
compared to the third quarter and first nine months of 1993, was
related to, among other things, an increase in the Company's
work force resulting from increased activity, and to normal salary
and concomitant benefit expense adjustments.
Exploration expenses consist primarily of delay rentals and
geological and geophysical costs which are expensed as incurred.
Exploration expenses for the third quarter of 1994 were $902,000, an
increase of approximately 134% from exploration expenses of $386,000
for the third quarter of 1993. Exploration expenses for the first nine
months of 1994 were $2,208,000, an increase of approximately 82% from
exploration expenses of $1,216,000 for the first nine months of 1993.
The increase in exploration expenses for the third quarter and first
nine months of 1994, compared to the third quarter and first nine
months of 1993, was related primarily to the cost of conducting 3-D
seismic surveys on certain of the Company's onshore properties in
South and West Texas that
- 9 -
<PAGE>
Pogo Producing Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Continued)
commenced during the third quarter of 1994 and, with respect to the first
nine months of 1994, the cost of acquiring significant quantities of
3-D and 2-D seismic data covering protions of the Gulf of Mexico, which
was partially offset by a decrease in exploration expenses attributable
to the Company's oil and gas concession in the Kingdom of Thailand.
Dry hole and impairment expenses relate to costs of
unsuccessful wells drilled, along with impairments to the associated
unproved property costs and impairments to previously proved property
costs as a result of decreases in expected reserves. The Company's dry
hole and impairment expenses for the third quarter of 1994 were
$2,049,000, an increase of approximately 96% from dry hole and
impairment expenses of $1,047,000 for the third quarter of 1993. The
Company's dry hole and impairment expenses for the first nine months of
1994 were $6,265,000, an increase of approximately 62% from dry hole and
impairment expenses of $3,865,000 for the first nine months of 1993.
The Company accounts for its oil and gas activities using the
successful efforts method of accounting. Under the successful
efforts method, lease acquisition costs and all development costs are
capitalized. Unproved properties are reviewed quarterly to determine
if there has been impairment of the carrying value, with any such
impairment charged to expense in the period. Exploratory drilling
costs are capitalized until the results are determined. If proved
reserves are not discovered, the exploratory drilling costs are
expensed. Other exploratory costs are expensed as incurred.
The provision for depreciation, depletion and amortization
("DD&A") is determined on a field-by-field basis using the units of
production method. The Company's DD&A expense for the third quarter of
1994 was $17,641,000, an increase of approximately 65% from DD&A
expense of $10,677,000 for the third quarter of 1993. The Company's
DD&A expense for the first nine months of 1994 was $46,244,000, an
increase of approximately 51% from DD&A expense of $30,670,000 for the
first nine months of 1993. The
increases in DD&A expense for the third quarter and first nine months
of 1994, compared to the third quarter and first nine months of 1993, were
primarily related to increased volumes produced by the Company (largely
related to increased natural gas, crude oil and condensate
production discussed earlier) and, to a lesser extent, an increase in
the Company's composite DD&A rate. The composite DD&A rate for all of the
Company's producing fields for the third quarter of 1994 was $0.79
per equivalent Mcf ($4.74 per equivalent barrel), an increase of
approximately 13% from a composite DD&A rate of $0.70 per equivalent
Mcf ($4.20 per equivalent barrel) for the third quarter of 1993.
The Company produced 22,132,000 equivalent Mcf (3,689,000 equivalent
barrels) during the third quarter of 1994, an increase of approximately
47% from the 15,056,000 equivalent Mcf (2,509,000 equivalent barrels)
produced by the Company during the third quarter of 1993. The composite
DD&A rate for all of the Company's producing fields for the first nine
months of 1994 was $0.74 per equivalent Mcf ($4.45 per equivalent barrel),
an increase of approximately 7% from a composite DD&A rate of $0.69
per equivalent Mcf ($4.13 per equivalent barrel) for the first nine
months of 1993. The Company produced 61,795,000 equivalent Mcf (10,299,000
equivalent barrels) during the first nine months of 1994, an increase of
approximately 40% from the 44,040,000 equivalent Mcf (7,340,000 equivalent
barrels) produced by the Company during the first nine months of 1993.
Interest charges for the third quarter of 1994 were
$2,450,000, a decrease of approximately 8% from interest charges of
$2,670,000 for the third quarter of 1993. Interest charges for the
first nine months of 1994 were $7,714,000, a decrease of approximately
9% from interest charges of $8,517,000 for the first nine months of
1993. The decrease in interest charges for the third quarter and
first nine months of 1994, compared to the third quarter and first
nine months of 1993, was related to lower interest rate
levels on the debt outstanding and decreased debt issue amortization
expenses which were partially offset by the increased
amount of debt outstanding and increased commitment fees resulting
from increased availability under the Company's bank revolving
credit facility. In addition, the Company incurred certain costs
in connection with the retirement of the Company's 10.25% Notes during
the first quarter of 1994 for which there were no comparable offsets in
the first nine months of 1993.
As of November 1, 1994, the Company was not a party to an
interest rate swap agreement.
- 10 -
<PAGE>
Pogo Producing Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Continued)
Liquidity and Capital Resources -
The Company's Condensed Consolidated Statement of Cash Flows for
the nine months ended September 30, 1994 reflects net cash provided by
operating activities of $79,073,000. In addition to net cash provided by
operating activities, the Company received $3,437,000 from the exercise of
stock options and $52,000 from the sale of certain non-strategic properties.
The Company also issued and sold $86,250,000 of 5 1/2% Notes in March 1994
and had net borrowings of $5,000,000 under a money market credit line.
During the first nine months of 1994, the Company invested $64,520,000 of
such cash flow in capital projects, purchased certain
proved reserves for $17,319,000, prepaid the remaining outstanding
principal and prepayment fee on its 10.25% Notes ($24,472,000), made
net payments of $66,000,000 on the Company's revolving credit facility and
paid a $0.03 per share dividend to holders of the Company's common stock.
Of the $64,520,000 invested in capital projects, $22,821,000 was
applicable to 1993 capital projects and $41,699,000 was applicable to 1994
capital projects. As of September 30, 1994, the Company's cash and cash
investments were $4,695,000 and its long-term debt stood at $135,698,000.
The Company's capital and exploration budget for 1994,
previously announced to be $90,000,000, has been increased by the
Company's Board of Directors to $100,000,000. The capital and
exploration budget has been revised primarily to increase expenditures
for exploitation of the Company's producing oil and gas properties
in the Gulf of Mexico. In addition to anticipated capital and
exploration expenses, other material 1994 cash requirements that the
Company currently anticipates include ongoing operating, general and
administrative, income tax, and interest expenses and the payment of
dividends on its common stock, including a $.03 per share dividend
on its common stock to be paid on November 30, 1994 to stockholders of
record as of November 8, 1994. The Company currently
anticipates that cash provided by operating activities and funds
available under its revolving credit facility and money market credit
line will be sufficient to fund the Company's ongoing expenses, to
fund its 1994 capital and exploration budget and anticipated future
dividend payments. In this regard, the Company reinstated the practice
of declaring a quarterly cash dividend in the third quarter of 1994.
However, the declaration and payment of future dividends will depend
upon, among other things, the Company's future earnings and financial
condition, liquidity and capital requirements, the general economic
and regulatory climate and other factors deemed relevant by the Company's
Board of Directors.
- 11 -
<PAGE>
Pogo Producing Company and Subsidiaries
Part II. Other Information
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 by the Company during
the quarter ended September 30, 1994.
- 12 -
<PAGE>
Pogo Producing Company and Subsidiaries
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.
Pogo Producing Company
(Registrant)
/s/ THOMAS E. HART
Thomas E. Hart
Vice President and Controller
/s/ D. STEPHEN SLACK
D. Stephen Slack
Senior Vice President, Chief
Financial Officer and Treasurer
Date: November 14, 1994
- 13 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Financial Data Schedule contains summary financial information extracted
from the Consolidated Financial Statements (Unaudited) of Pogo Producing
Company, including the Consolidated Balance Sheets as of September 30, 1994
and the Consolidated Statements of Income for the nine months
ended September 30, 1994, and is qualified in its entirety by reference
to such Consolidated Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 4,695
<SECURITIES> 0
<RECEIVABLES> 36,365
<ALLOWANCES> 0<F1>
<INVENTORY> 2,755
<CURRENT-ASSETS> 44,997
<PP&E> 887,854
<DEPRECIATION> 683,598
<TOTAL-ASSETS> 260,731
<CURRENT-LIABILITIES> 18,578
<BONDS> 135,698
<COMMON> 32,794
0
0
<OTHER-SE> 29,055
<TOTAL-LIABILITY-AND-EQUITY> 260,731
<SALES> 134,026<F2>
<TOTAL-REVENUES> 134,078
<CGS> 22,462<F3>
<TOTAL-COSTS> 22,462<F3>
<OTHER-EXPENSES> 66,397<F4>
<LOSS-PROVISION> 0<F5>
<INTEREST-EXPENSE> 7,714
<INCOME-PRETAX> 38,078
<INCOME-TAX> 13,464
<INCOME-CONTINUING> 24,614
<DISCONTINUED> 0
<EXTRAORDINARY> (307)
<CHANGES> 0
<NET-INCOME> 24,307
<EPS-PRIMARY> .73
<EPS-DILUTED> .72
<FN>
<F1>This amount is not disclosed on the face of the Consolidated
Financial Statements due to lack of materiality, but is included as
a contra-asset in Accounts Receivable.
<F2>Does not include Gains on Property Sales.
<F3>Includes Lease Operating Expense, but excludes General and
Administrative, Exploration, Dry Hole and Impairment and Depreciation,
Depletion and Amortization Expenses.
<F4>Includes General and Administrative, Exploration, Dry Hole and
Impairment and Depreciation, Depletion and Amortization Expenses.
<F5>This amount is not disclosed on the face of the Consolidated Financial
Statements due to lack of materiality, but is included in Oil and Gas
Revenues.
</FN>
</TABLE>
