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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 10, 1995
CONSOLIDATED NATURAL GAS COMPANY
________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 1-3196 13-0596475
________________________________________________________________________
(State of incorporation) (Commission (IRS Employer
File Number) Identification No.)
CNG Tower, 625 Liberty Avenue, Pittsburgh, PA 15222-3199
________________________________________________________________________
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (412) 227-1000
Not Applicable
________________________________________________________________________
(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS
IMPAIRMENT OF GAS AND OIL PRODUCING PROPERTIES
As described in the 1994 Annual Report on Form 10-K of Consolidated Natural
Gas Company (Company or Consolidated), Consolidated follows the full cost
method of accounting for its gas and oil producing activities prescribed by
the Securities and Exchange Commission (SEC). Under this method, all costs
directly associated with property acquisition, exploration and development
activities are capitalized, with the limitation that such amounts, net of
related deferred taxes, not exceed the present value of the estimated future
revenues expected from the production of the related proved gas and oil
reserves. The estimate of future revenues is determined under guidelines
established by the SEC and is not necessarily indicative of the future
economic value of the Company's proved reserves. However, if net capitalized
costs exceed the estimated value at the end of any quarterly period, then a
permanent write-down of the assets must be recognized in that period.
Due primarily to the decline in wellhead gas prices since December 31, 1994,
reflecting ample supplies nationwide and high storage inventory levels
attributable to the mild winter weather during the latter part of 1994 and the
first quarter of 1995, the Company will be required to recognize an impairment
of its gas and oil producing properties at March 31, 1995. The actual effect
on earnings will not be known until the completion of the first quarter
closing. However, based on current estimates, the impact of this noncash
charge is expected to be in the range of $100 million to $150 million, net of
tax, or $1.08 to $1.61 per share.
As a result of this charge, the Company's ability to issue funded debt will be
restricted for a period of time (see "Restrictions Under Certain Debt
Agreements," page 4, of the Company's 1994 Annual Report on Form 10-K).
However, the Company has adequate alternative financing resources available to
meet expected operating and capital requirements.
WORK FORCE REDUCTION PROGRAM
In March 1995, Consolidated's Board of Directors approved a work force
reduction program as part of the Company's efforts to permanently reduce costs
in response to competitive conditions. The work force reduction program
consists of a voluntary early retirement program, with eligibility based upon
the employee's age and years of service as of December 31, 1995, and an
involuntary separation program. The early retirement incentives include five
additional years of age and pension service for determining pension benefits.
The early retirement program is being offered at six of the Company's
subsidiaries from April 1 through May 31, 1995, with eligible
employees retiring before December 31, 1995. The involuntary separation
program will involve severance benefit payments to affected employees. The
Company is expected to permanently eliminate approximately 470 positions as a
result of this program. Management is currently considering a work force
reduction program at a seventh subsidiary.
The charges to earnings resulting from the approved work force reduction
program are expected to be material to the Company's 1995 results of
operations and will be recognized in the second quarter of 1995. However, the
savings attributable to reduced salary and benefit costs will positively
impact the last six months of 1995 and future periods. Also, the recovery of
the costs of the program at the rate-regulated subsidiaries may be sought, if
appropriate, in future rate-making proceedings.
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ITEM 5. OTHER EVENTS (Concluded)
ENVIRONMENTAL MATTER
The Company has determined through its environmental monitoring practices that
one of its subsidiaries, The East Ohio Gas Company (East Ohio Gas), may not
have been in full compliance with the Resource Conservation and Recovery Act
(RCRA) and the Toxic Substances Control Act (TSCA) which govern the handling,
storage and disposal of pipeline drip fluids that are contaminated with
hazardous substances such as polychlorinated biphenyls (PCBs). East Ohio Gas
has taken appropriate action to bring its operations into compliance with the
TSCA and RCRA regulations and is voluntarily reporting its non-compliance to
the appropriate state and federal environmental agencies. Although East Ohio
Gas is subject to civil penalties as a result of this non-compliance, the
Company is unable to estimate the amount of any fines at this time. Based
upon its investigation, the Company does not expect that these fines and any
related remediation costs will have a material effect on the Company's
financial position, results of operations, or cash flows.
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SIGNATURE
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 hereunto duly authorized.
CONSOLIDATED NATURAL GAS COMPANY
________________________________
(Registrant)
By L. D. JOHNSON
_____________________________
(L. D. Johnson)
Vice Chairman
April 10, 1995 and Chief Financial Officer
