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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1995
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COMMISSION IRS EMPLOYER
FILE STATE OF IDENTIFICATION
NUMBER REGISTRANT INCORPORATION NUMBER
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<S> <C> <C> <C>
1-7810 Energen Corporation Alabama 63-0757759
2-38960 Alabama Gas Corporation Alabama 63-0022000
</TABLE>
2101 Sixth Avenue North
Birmingham, Alabama 35203
(205) 326-2700
Securities Registered Pursuant to Section 12(b) of the Act:
<TABLE>
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TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED
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<S> <C>
Energen Corporation Common Stock, $0.01 par value New York Stock Exchange
Energen Corporation Preferred Stock Purchase Rights New York Stock Exchange
</TABLE>
Securities Registered Pursuant to Section 12(g) of the Act: NONE
Indicate by a check mark whether registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports) and (2) have been subject to
such filing requirements for the past 90 days. YES X NO
--- ---
Indicate by a check mark if disclosure of delinquent files pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ( )
Aggregate market value of the voting stock held by non-affiliates of the
registrants as of December 18, 1995:
Energen Corporation $271,868,000
Indicate number of shares outstanding of each of the registrant's classes of
common stock as of December 18, 1995:
Energen Corporation 10,984,566 shares
Alabama Gas Corporation 1,972,052 shares
DOCUMENTS INCORPORATED BY REFERENCE
o Energen Corporation Proxy Statement to be filed on or about December 21,
1995 (Part III, Item 10-13)
o Portions of Energen Corporation 1995 Annual Report to Stockholders are
incorporated by reference into Part II, Items 5, 6, 7, and 8 of this report
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ENERGEN CORPORATION
1995 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . 8
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters . . . . . . . . . . 12
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . 13
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PART III
Item 10. Directors and Executive Officers of the Registrants . . . . . . . . . . . . . . . . . . 13
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . 13
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . 13
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . 14
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This Form 10-K is filed on behalf of Energen Corporation (Energen
or the Company) and Alabama Gas Corporation (Alagasco).
PART I
ITEM 1. BUSINESS
GENERAL
Energen is a diversified energy holding company engaged primarily in natural
gas distribution and the exploration and production of natural gas and oil.
Energen was incorporated in Alabama in 1978 in connection with the
reorganization of its largest subsidiary, Alagasco. Alagasco was formed in
1948 by the merger of Alabama Gas Company into Birmingham Gas Company, the
predecessors of which had been in existence since the late 1800's. Alagasco
became a public company in 1953.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The information required by this item is incorporated by reference from Note 15
to the Consolidated Financial Statements of the 1995 Annual Report to
Stockholders, and is attached herein as Part IV, Item 14, Exhibit 13.
NARRATIVE DESCRIPTION OF BUSINESS
o NATURAL GAS DISTRIBUTION
GENERAL: Alagasco, Energen's principal subsidiary, is the largest natural
gas distribution utility in the state of Alabama. Alagasco purchases
natural gas through interstate and intrastate suppliers and distributes the
purchased gas through its distribution facilities for sale to residential,
commercial, industrial and other end-users of natural gas. Alagasco also
provides transportation services to industrial and commercial customers
located on its distribution system. These transportation customers, acting
on their own or using Alagasco as their agent, purchase gas directly from
producers or other suppliers and arrange for delivery of the gas into the
Alagasco distribution system. Alagasco then charges a fee to transport this
customer-owned gas through its distribution system to the customer's
facility.
Alagasco's service territory is located primarily in central and north
Alabama and includes over 175 communities in 30 counties. Birmingham, the
largest city in Alabama, and Montgomery, the state capital, are served by
Alagasco. The counties in which Alagasco provides service have an aggregate
area of more than 22,000 square miles and include the service territories of
various municipal gas distribution systems.
The aggregate population of the counties served by Alagasco is estimated to
be 2.4 million. During 1995 Alagasco served an average of 410,515
residential customers, 33,115 small commercial and industrial customers, and
48 large commercial and industrial customers. The Alagasco distribution
system includes approximately 8,650 miles of main, more than 9,500 miles of
service lines, odorization and regulation facilities, and customer meters.
Alagasco also operates two liquefied natural gas facilities which it uses to
meet peak demands.
APSC REGULATION: As a public utility in the state of Alabama, Alagasco is
subject to regulation by the Alabama Public Service Commission (APSC), which
has adopted several innovative approaches to rate regulation, including
Alagasco's Rate Stabilization and Equalization (RSE) rate-setting process.
Implemented in 1983 and modified in 1985, 1987, and 1990, RSE replaced the
traditional utility rate case
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with APSC-monitored periodic rate adjustments presently designed to give
Alagasco the opportunity to earn an average return on equity (ROE) at its
fiscal year-end within a specified range. Under Alagasco's current RSE
order, which became effective December 1990, Alagasco's allowed ROE range is
13.15 percent to 13.65 percent. The APSC conducts quarterly reviews to
determine, based on Alagasco's budget and fiscal year-to-date performance,
whether Alagasco's projected ROE for the fiscal year will be within the
allowed range. Reductions in rates can be made quarterly to bring the
projected ROE within the allowed range. Increases, however, are permitted
only once each fiscal year effective on December 1, and cannot exceed 4
percent of prior-year revenues.
RSE limits Alagasco's equity upon which a return is permitted to 60 percent
of total capitalization and provides for a cost control measure designed to
monitor Alagasco's operations and maintenance (O & M) expense. If increases
in O & M expense per customer fall within 1.25 percent above or below the
Consumer Price Index for all Urban Customers (index range), no adjustment is
required. If, however, increases in O & M expense per customer exceed the
index range, three-fourths of the difference is returned to customers. To
the extent increases in O & M expense per customer are less than the index
range, Alagasco will benefit by one-half of the difference through future
rate adjustments.
Under its terms, Alagasco's current RSE order continues until, after notice
to Alagasco, the APSC votes to either modify or discontinue its operation.
On October 4, 1993, the APSC unanimously voted to extend RSE until such time
as certain hearings mandated by the Energy Policy Act of 1992 (Energy Act)
in connection with integrated resource planning and demand side management
programs are completed. The Energy Act proceedings are expected to conclude
during fiscal 1996 at which time the Commission is expected to begin a
review of Alagasco's RSE. No time table for review has yet been
established.
FERC REGULATION: Alagasco's interstate pipeline suppliers, Southern
Natural Gas Company (Southern) and Transcontinental Gas Pipeline Corporation
(Transco), are subject to regulation by the Federal Energy Regulatory
Commission (FERC). Among other things, FERC regulates the character of
services that Southern and Transco can offer and the rates and fees they can
charge Alagasco and other customers for gas transportation services; thus,
FERC can directly affect Alagasco's services and operating expenses.
On March 15, 1995, Southern filed a comprehensive settlement with the FERC
in the form of a Stipulation and Agreement (the Settlement) to resolve all
issues in Southern's six pending rate cases, as well as to resolve all Gas
Supply Realignment (GSR) and transition cost issues resulting from the
implementation of FERC Order 636. The Settlement is supported by parties
representing more than 90 percent of the firm transportation demand on
Southern's system, including local distribution companies (including
Alagasco), municipal distribution systems, major gas producers, large
industrial end users, marketers, and state commissions (including the APSC).
On September 29, 1995, the FERC issued its Order Accepting Settlement,
Severing Contesting parties, and Issuing Certificates and Approving
Abandonment (Settlement Order). The Settlement Order approves the Settlement
with minor modifications. Contesting parties had 30 days from the date of
the Settlement Order to file motions for rehearing and several such motions
were timely filed. Until such motions are ruled on by the FERC, the
Settlement Order is not considered to be final.
Specifically, the Settlement provides for the following: (1) the resolution
of all cost of service and rate design issues in Southern's six pending rate
cases and the establishment of reduced rates for the purpose of calculating
rate case refunds; (2) the implementation of reduced settlement rates on an
interim basis for supporting parties commencing March 1, 1995 (by order
dated April 4, 1995, FERC approved these interim rates pending its final
review of the merits of the Settlement); (3) the resolution of all GSR and
other transition cost issues resulting from FERC Order 636; (4) lower GSR
cost recovery through the reduction and earlier payout of GSR costs; (5) a
three-year moratorium on general rate increases; and (6) the resolution and
disposition of all rate case and GSR refunds for supporting parties. With
respect to this
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last point, the Settlement provides that all rate case refunds will be used
to offset a portion of Southern's remaining GSR liability. In addition, as a
result of the recalculated GSR surcharges for the period January 1, 1994, to
February 28, 1995, Southern will refund over-collected GSR costs. Neither
the total amount of this refund nor Alagasco's share has yet been
determined; therefore, no amounts have been recorded in the financial
statements. In the Settlement filing with FERC, Southern has represented
that the Settlement will allow Southern and the supporting parties to
resolve all issues relating to GSR and other transition costs, the majority
of which costs will be collected by the end of calendar 1995. Alagasco
estimates that it has a remaining GSR liability of approximately $2.4
million to be paid through December 1995 and approximately $2.6 million in
other transition costs to be paid through June 1998 and has recorded
such amounts in the financial statements. Because these costs will be
recovered in full from Alagasco's customers in a timely manner through the
GSA rider of Alagasco's Tariff, the Company has recorded a corresponding
regulatory asset in the accompanying financial statements.
GAS SUPPLY: The Alagasco distribution system is connected to and has firm
transportation contracts with two major interstate pipeline
systems--Southern and Transco. Effective November 1, 1993, Alagasco's
pre-Order 636 contract demand and firm transportation with Southern
converted to 250,924 Mcf (thousand cubic feet) per day of No-Notice Firm
Transportation service for a period of 15 years, 91,946 Mcf per day of Firm
Transportation service for 15 years, and 50,000 Mcf per day of Firm
Transportation for five years. Southern also unbundled its existing storage
capacity. Alagasco's pro rata share of this storage is 12,426,687 Mcf.
Alagasco has a maximum withdrawal rate from storage of 250,924 Mcf per day
and a maximum injection rate into storage of 95,590 Mcf per day. The Transco
firm transportation contract, which expires in 2001, provides for maximum
daily firm transportation of up to 100,000 Mcf. Thus the Company has a peak
day firm interstate pipeline transportation capacity of 492,870 Mcf per day.
Alagasco has replaced the sales service formerly provided by Southern with
purchases from various gas producers and marketers including affiliates of
Southern and Transco and from certain intrastate producers including Basin
Pipeline Corp., an Energen subsidiary. Alagasco has contracts in place to
purchase up to a total of 286,776 Mcf per day of firm supply, of which
241,946 is supported by firm transportation on the Transco and Southern
systems, 14,830 Mcf provides redundant supply on the Southern system, and
30,000 Mcf is purchased at the city gate from intrastate suppliers. This
volume, along with Alagasco's maximum withdrawal from storage of 250,924 Mcf
per day and 200,000 Mcf per day of liquefied natural gas peak shaving
capacity, gives Alagasco a peak day firm supply of 722,870 Mcf per day.
Alagasco also utilizes the Southern and Transco pipeline systems to access
spot market gas in order to supplement its firm system supply and serve its
industrial transportation customers.
COMPETITION AND PRICING: The price of natural gas is a significant
marketing factor in the territory served by Alagasco; propane, coal and fuel
oil are readily available, and many major industrial customers have the
capability to switch to alternate fuels. In the residential and small
industrial and commercial markets, electricity is the principal competitor.
Natural gas service available to Alagasco customers generally falls into two
categories -- interruptible and firm. Interruptible service is
contractually subject to interruption by Alagasco for various reasons, the
most common of which is curtailment of industrial customers during periods
of peak residential heating demand on the Alagasco system. Firm service is
generally not subject to interruption and, therefore, is more expensive than
interruptible service. Firm service is generally provided to residential
and small commercial and industrial customers. Interruptible service is
generally provided to large commercial and industrial customers which
typically have the capacity to reduce consumption by adjusting their
production schedules or by switching to alternate fuels during periods of
interruption. Deliveries of sales and transportation gas totaled 101,447
MMcf (million cubic feet) in 1995.
In 1994, capitalizing on federally mandated changes in the natural gas
industry, Alagasco implemented the "P" Rate. This tariff allows the utility
to, in effect, release available pipeline capacity thereby reducing
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pipeline transportation costs for its 250 transportation customers. The
lower costs help prevent bypass. Also, because revenue received from
capacity release reduces core market gas costs, Alagasco's competitive
position in the residential and small commercial markets is enhanced as
well.
Alagasco has a Competitive Fuel Clause (CFC) as part of its rate tariff
which allows Alagasco to adjust large commercial and industrial prices on a
case-by-case basis to compete with either alternate fuels or alternate
sources of gas. The GSA rider to Alagasco's tariff increases the rates paid
by other customers to recover the reduction in rates allowed under the CFC
because the retention of any customer, particularly large commercial and
industrial, benefits all customers by recovering a portion of the system's
fixed cost. Alagasco also has a Transportation Tariff (the Tariff) which
allows the Company to transport gas for customers rather than buying and
reselling gas to them. The Tariff is based on Alagasco's gas sales profit
margin so that Alagasco's net income is not affected whether it transports
or sells gas. The Tariff also may be adjusted under the CFC. Of Alagasco's
total large commercial and industrial customer deliveries during 1995, 99.5
percent (46,207 MMcf) was from transportation of customer-owned gas.
GROWTH: Alagasco has supplemented traditional service area growth with
acquisitions of municipally-owned gas distribution systems. Since 1985
Alagasco has acquired 20 such systems, including the 500-customer gas system
of Ragland purchased in early fiscal 1996. More than 42,000 customers have
been added through initial system purchases and subsequent customer
additions, as Alagasco has increased the relatively low saturation rates in
the acquired areas through a variety of marketing efforts including offering
natural gas service to propane customers already situated on the municipal
system lines, extending the acquired municipal system into nearby
neighborhoods that desire natural gas service, and marketing natural gas
appliances to existing and new customers. Approximately 80 municipal
systems, representing about 250,000 customers, remain in Alabama, and many
are located in or near Alagasco's existing service territory. The Company is
optimistic that additional acquisition opportunities will arise in the
future.
WEATHER: Alagasco's gas distribution business is highly seasonal since a
material portion of Alagasco's total sales and delivery volumes is to
customers whose use varies depending upon temperature, principally
residential, small commercial and small industrial customers. Alagasco's
rate tariff includes a temperature adjustment rider which is designed to
mitigate the effect of departures from normal temperature on Alagasco's
earnings. The calculation is performed monthly and adjustments are made to
customers' bills in the actual month the weather variation occurs.
ENVIRONMENTAL MATTERS: Alagasco is in the chain of title of eight former
manufactured gas plant sites, of which it still owns four, and five
manufactured gas distribution sites, of which it still owns one. A
preliminary investigation of the sites does not indicate the present need
for remediation activities. Management expects that, should remediation of
any such sites be required in the future, Alagasco's share, if any, of such
costs will not materially affect the results of operations or financial
condition of Alagasco.
o OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
Energen's oil and gas exploration and production activities are conducted by
its subsidiary, Taurus Exploration, Inc. (Taurus), and involve the
exploration for and the production of natural gas and oil from conventional
and nonconventional reservoirs. Taurus's 1995 oil and gas production
totaled 10.1 Bcf (with oil expressed in natural gas equivalents), and the
average sales price was $1.83 per Mcf equivalent. Conventional oil and gas
reserves of 70,179 MMcf equivalents plus nonconventional gas reserves of
25,004 MMcf combine for total oil and gas reserves at fiscal year-end of
95,183 MMcf equivalents.
CONVENTIONAL: Taurus's conventional oil and gas strategy is to aggressively
grow its reserve base primarily by making significant acquisitions of oil
and gas properties through its joint acquisition agreements with Sonat
Exploration Company, PMC Reserve Acquisition Company, and United Meridian
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Corporation (UMC), formerly General Atlantic Resources, Inc., along with its
internal and independent evaluation of other property acquisition
opportunities. A more thorough discussion of Taurus's acquisition strategy
is included in the 1995 Annual Report to Stockholders, pages 32 and 33.
Taurus will continue to supplement its returns with exploratory drilling.
Taurus utilizes several avenues to help ensure a continuing flow of high
quality exploratory prospects including its participation in UMC's offshore
exploratory program, a multi-year 3-D seismic joint venture with King Ranch
and Holley Petroleum, Inc. covering 200 offshore Texas blocks, and other
offshore lease sales with various industry partners.
Taurus's exploration activities are concentrated in the shallow waters of
the Gulf of Mexico. Eight successful discoveries during 1995 added reserves
of 10 Bcf equivalents. Proved property acquisitions added reserves of 26.7
Bcf equivalents.
NONCONVENTIONAL: Taurus's nonconventional gas strategy is to focus on
operating the large projects in which it has a small working interest and
operating for others; supplementing these activities, Taurus also consults
on a limited basis. Taurus does not anticipate additional major project
development in the Black Warrior Basin. Taurus does plan, however, to
continue its operating activities.
As a result of its 1994 evaluation of North American coalbed methane
investment opportunities which indicated that available opportunities did
not meet Taurus's current risk profile, Taurus reduced and reorganized its
coalbed methane staff during 1995 to match its ongoing operational needs. No
additional restructuring is anticipated at this time.
At September 30, 1995, Taurus had working interests in 418 coalbed methane
wells and royalty interests in an additional 216 wells, all located in
Alabama's Black Warrior Basin. Gas produced from these wells through the
year 2002 qualifies for the Section 29 tax credit for producing fuel from
nonconventional sources.
Taurus is the operator of more than 950 coalbed methane wells, including
wells in an existing project owned by TECO Coalbed Methane, Inc., one of
Taurus's coalbed methane joint venture partners in other projects. Under
the terms of the agreement, Taurus provides technical, administrative and
operating services for a fee and receives additional compensation based on
the project's profitability.
During 1994, Taurus signed a multi-year strategic alliance with Conoco, Inc.
designed to enhance both companies' coalbed methane programs. During 1995,
Taurus provided consulting and associated services relative to the
acquisition, exploration and development of coalbed methane properties to
complement Conoco's capabilities and the companies mutually agreed to
terminate the alliance late in the fiscal year. Also during 1995, Taurus
decided that it would not pursue international coalbed methane investment
opportunities since such opportunities did not meet Taurus's risk parameters.
Most of the gas produced from the coalbed methane wells in which Taurus has
an interest is being sold under long-term contracts which provide markets
for 100 percent of the wells' production capacity and is sold at prices
indexed to the monthly Gulf Coast spot market.
ENVIRONMENTAL MATTERS: Taurus is subject to various environmental
regulations. Management believes that Taurus is in compliance with
currently applicable standards of the environmental agencies to which it is
subject and that potential environmental liabilities, if any, are minimal.
Also, to the extent Taurus has operating agreements with various joint
venture partners, environmental costs, if any, would be shared
proportionately.
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o INTRASTATE GAS GATHERING AND TRANSMISSION
Energen operates an intrastate gas pipeline and gathering system through its
subsidiary, Basin Pipeline Corp. (Basin). Basin's pipeline and gathering
facilities primarily serve certain Taurus coalbed methane properties.
o COMBUSTION TECHNOLOGY
Prior to May 1994, through its American Heat Tech, Inc. (Heat Tech)
subsidiary, Energen owned a 41 percent equity interest in American
Combustion, Inc. During May 1994, a substantial portion of this interest
was sold leaving Heat Tech with approximately an 8 percent ownership
interest. ACI designs, manufactures and markets high temperature combustion
technology products.
o PROPANE SALES
Prior to the June 1994 sale of substantially all of the assets of W & J
Propane Gas, Inc., Energen had been involved in the retail propane
distribution business.
EMPLOYEES
The Company has 1,431 employees; Alagasco employs 1,288; Taurus employs 130;
and Energen's other subsidiaries employ 13.
ITEM 2. PROPERTIES
The corporate headquarters of Energen, Alagasco and Taurus are located in
leased office space in Birmingham, Alabama.
The properties of Alagasco consist primarily of its gas distribution system,
which includes more than 8,650 miles of main, more than 9,500 miles of service
lines, odorization and regulation facilities, and customer meters. Alagasco
also has two liquefied natural gas facilities, 23 commercial offices, nine
service centers, and other related property and equipment, some of which are
leased by Alagasco.
For a description of Taurus's oil and gas properties, see the discussion under
Item 1--Business. Information concerning Taurus's production, reserves and
development is included in Note 14 to the Consolidated Financial Statements
which is incorporated by reference from the 1995 Annual Report to Stockholders
and is included in Part IV, Item 14, Exhibit 13, herein. The proved reserve
estimates are consistent with comparable reserve estimates filed by Taurus with
any federal authority or agency.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending, other than routine litigation
incidental to the Company's business, in which the Company or any of its
subsidiaries is a party. There are no material legal proceedings to which any
officer or director of the Company or any of its subsidiaries is a party or has
a material interest adverse to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1995.
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EXECUTIVE OFFICERS OF THE REGISTRANTS
ENERGEN CORPORATION
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Name Age Position (1)
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Rex J. Lysinger 58 Chairman of the Board and Chief Executive Officer (2)
Wm. Michael Warren, Jr. 48 President and Chief Operating Officer (3)
Geoffrey C. Ketcham 44 Executive Vice President, Chief Financial Officer and
Treasurer (4)
Dudley C. Reynolds 42 General Counsel and Secretary (5)
Gary C. Youngblood 52 Executive Vice President and Chief Operating Officer of
Alagasco (6)
James T. McManus 37 Executive Vice President and Chief Operating Officer of
Taurus (7)
John A. Wallace 51 Senior Vice President--Methane of Taurus (8)
J. David Woodruff, Jr. 39 Vice President--Legal and Assistant Secretary and Vice
President, Corporate Development (9)
</TABLE>
NOTES: (1) All executive officers of Energen have been employed by Energen or
a subsidiary for the past five years. Officers serve at the
pleasure of its Board of Directors.
(2) Served as Vice President of Alagasco from July 1975 to January
1977, when he was elected President. Elected President of Energen
upon its formation in 1978. Elected Chairman of the Board of
Energen and its subsidiaries September 1982. Currently Chairman of
the Board of Energen and all subsidiaries and Chief Executive
Officer of Energen. Serves as a Director of Energen and each of
its subsidiaries.
(3) Served as Senior Vice President and General Counsel of Alagasco
from September 1983 to October 1984, when he was elected President
and Chief Operating Officer of that corporation. Elected Executive
Vice President of Energen June 1987 and elected President and Chief
Operating Officer of Energen April 1991. Elected President and
Chief Operating Officer of all Energen subsidiaries (except W & J)
January 1992. Elected Chief Executive Officer of Alagasco and
Taurus effective October 1995. Serves as a Director of Energen and
each of its subsidiaries.
(4) Elected Controller of Alagasco November 1981, Vice President and
Controller June 1984, Vice President--Finance and Planning of
Alagasco June 1985 and Vice President--Planning of Energen August
1986. Elected Vice President--Finance, Chief Financial Officer and
Treasurer of Energen and each of its subsidiaries June 1987.
Elected Senior Vice President--Finance, Chief Financial Officer and
Treasurer of Energen and each of its subsidiaries April 1989.
Elected Executive Vice President, Chief Financial Officer and
Treasurer of Energen and each of its subsidiaries April 1991.
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(5) Served as Staff Attorney for Energen and its subsidiaries to
November 1984, when he was named Senior Attorney. Elected
Assistant Secretary in 1985 and Secretary effective September 1986.
Elected Vice President--Legal and Secretary of Energen and each of
its subsidiaries June 1987. Elected General Counsel and Secretary
of Energen and each of its subsidiaries April 1991.
(6) Served as District Manager--Birmingham District until June 1985,
when he was elected Vice President--Birmingham Operations; Elected
Senior Vice President-Administration of Alagasco April 1991.
Elected Executive Vice President of Alagasco October 1993. Elected
Chief Operating Officer of Alagasco effective October 1995.
(7) Served as Director of Corporate Accounting of Energen until
November 1988, when he was elected Controller of Energen; Elected
Controller of Alagasco May 1989. Elected Assistant Vice
President--Corporate Development of Energen June 1990. Elected
Vice President--Finance and Corporate Development of Energen and
Vice President--Finance and Planning of Alagasco effective April
1991. Elected Executive Vice President and Chief Operating Officer
of Taurus effective October 1995.
(8) Served as Manager, Methane Development of Taurus until August 1988,
when he was elected Vice President Methane Operations of Taurus.
Elected Vice President Methane Exploration and Production of Taurus
November 1990. Elected Senior Vice President--Methane of Taurus
February 1992.
(9) Served as Staff Attorney for Alagasco from March 1986 to June 1987
when he was named Senior Attorney. Elected Assistant Vice
President--Legal and Assistant Secretary of Energen and each of its
subsidiaries November 1988. Elected Vice President--Legal and
Assistant Secretary of Energen and each of its subsidiaries April
1991. Elected Vice President--Legal, and Assistant Secretary and
Vice President--Corporate Development of Energen and each of its
subsidiaries October 1995.
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ALABAMA GAS CORPORATION
<TABLE>
<CAPTION>
Name Age Position (1)
---- --- ------------
<S> <C> <C>
Rex J. Lysinger 58 Chairman of the Board (2)
Wm. Michael Warren, Jr. 48 President and Chief Executive Officer (2)
Geoffrey C. Ketcham 44 Executive Vice President and Chief Financial Officer (2)
Dudley C. Reynolds 42 General Counsel and Secretary (2)
Gary C. Youngblood 52 Executive Vice President and Chief Operating Officer (2)
Roy F. Etheredge 59 Senior Vice President (3)
George M. Taylor 59 Vice President--State Operations (4)
Gerald G. Turner 61 Vice President--Rates (5)
Donald C. Wiseman 57 Senior Vice President--Gas Supply (6)
J. David Woodruff, Jr. 39 Vice President--Legal and Assistant Secretary (2)
Paula H. Rushing 42 Controller (7)
</TABLE>
NOTES: (1) All executive officers of Alagasco have been employed by
Energen or a subsidiary for the past five years. Officers
serve at the pleasure of the Board of Directors.
(2) See discussion of Energen officers on prior pages.
(3) Elected Assistant Vice President in 1983, Vice
President--Northern Division in 1984. Elected Vice
President--State Operations in May 1985. Elected Senior Vice
President--Operations April 1991.
(4) Elected Assistant Vice President--Birmingham Operations in
1988. Elected Vice President-- Birmingham Operations in 1991.
Elected Vice President--Technical Services in 1993. Elected
Vice President--State Operations in May 1995.
(5) Served as Director of Rates and Regulations until he was
elected Assistant Vice President--Rates in June 1987. Elected
Vice President--Rates May 1989.
(6) Elected Assistant Vice President--Gas Supply in 1988. Elected
Vice President--Gas Supply in 1990. Elected Senior Vice
President--Gas Supply in October 1995.
(7) Served as Director of General Accounting of Alagasco until
October 1995 when she was elected Controller.
11
<PAGE> 13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The information regarding Energen's common stock and the frequency and amount
of dividends paid during the past two years with respect to such stock is
incorporated by reference from the 1995 Annual Report to Stockholders, page 34,
and is included in Part IV, Item 14, Exhibit 13, herein. At October 29, 1995,
there were approximately 6,000 holders of record of Energen's common stock. For
restrictions on Energen's present and future ability to pay dividends, see Note
3 to the Consolidated Financial Statements which is incorporated by reference
from the 1995 Annual Report to Stockholders and is included in Part IV, Item
14, Exhibit 13, herein.
At the date of this filing, Energen Corporation owns all the issued and
outstanding common stock of Alabama Gas Corporation.
ITEM 6. SELECTED FINANCIAL DATA
Energen Corporation
The information regarding selected financial data is incorporated by reference
from the 1995 Annual Report to Stockholders, pages 56-57, and is included in
Part IV, Item 14, Exhibit 13, herein.
Alabama Gas Corporation
(unaudited)
<TABLE>
<CAPTION>
====================================================================================================
YEARS ENDED SEPTEMBER 30, 1995 1994 1993 1992 1991
(IN THOUSANDS)
====================================================================================================
<S> <C> <C> <C> <C> <C>
Operating revenues $295,967 $344,637 $330,560 $310,726 $309,128
Net income $ 15,721 $ 14,896 $ 13,024 $ 12,420 $ 11,970
Cash dividends on common stock $ 9,170 $ 8,695 $ 7,975 $ 7,630 $ 6,994
Cash dividends on preferred stock $ -- $ -- $ 70 $ 85 $ 85
- ----------------------------------------------------------------------------------------------------
Total assets $335,267 $308,905 $264,548 $258,902 $246,573
Long-term debt $100,000 $ 84,391 $ 43,912 $ 60,979 $ 66,307
Preferred stock $ -- $ -- $ -- $ 1,800 $ 1,800
====================================================================================================
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This information is incorporated by reference from the 1995 Annual Report to
Stockholders, pages 25-33, and is included in Part IV, Item 14, Exhibit 13,
herein.
12
<PAGE> 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item for Energen Corporation and subsidiaries
is incorporated by reference from the 1995 Annual Report to Stockholders and is
included in Part IV, Item 14, Exhibit 13, herein. The information required by
this item for Alabama Gas Corporation is contained in Part IV, Item 14, herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the executive officers of both Energen and Alagasco is
included in Part I. The other information required by Item 10 is incorporated
herein by reference from Energen's definitive proxy statement for the Annual
Meeting of Stockholders to be held January 24, 1996. The proxy statement will
be filed within 120 days after the end of the fiscal year covered by this Form
10-K. The directors and nominees for director of Alagasco are the same as
those of Energen except the Alagasco directors do not have staggered terms,
thus the entire Alagasco Board has been nominated for re-election to an annual
term at the Annual Meeting.
ITEM 11. EXECUTIVE COMPENSATION
The information regarding executive compensation is incorporated herein by
reference from Energen's definitive proxy statement for the Annual Meeting of
Stockholders to be held January 24, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
A. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The information regarding the security ownership of the beneficial owners
of more than five percent of Energen's common stock is incorporated herein
by reference from Energen's definitive proxy statement for the Annual
Meeting of Stockholders to be held January 24, 1996.
B. SECURITY OWNERSHIP OF MANAGEMENT
The information regarding the security ownership of management is
incorporated herein by reference from Energen's definitive proxy statement
for the Annual Meeting of Stockholders to be held January 24, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information regarding certain relationships and related transactions is
incorporated herein by reference from Energen's definitive proxy statement for
the Annual Meeting of Stockholders to be held January 24, 1996.
13
<PAGE> 15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
a. DOCUMENTS FILED AS PART OF THIS REPORT
(1) FINANCIAL STATEMENTS
The financial statements listed in the accompanying Index to
Financial Statements and Financial Statement Schedules are filed as
part of this report and are included in Part IV, Item 14, Exhibit 13,
herein.
(2) FINANCIAL STATEMENT SCHEDULES
The financial statement schedules listed in the accompanying Index to
Financial Statements and Financial Statement Schedules are filed as
part of this report.
(3) EXHIBITS
The exhibits listed on the accompanying Index to Exhibits are filed
as part of this report.
b. REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter of 1995.
14
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrants have duly caused this report to be signed
on their behalf by the undersigned thereunto duly authorized.
ENERGEN CORPORATION
(Registrant)
ALABAMA GAS CORPORATION
(Registrant)
<TABLE>
<S> <C>
December 20, 1995 /s/Rex J. Lysinger
- ------------------------- -------------------------------------------------
DATE Rex J. Lysinger
Chairman of the Board of Directors of Energen
and all subsidiaries, Chief Executive Officer of
Energen
</TABLE>
15
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrants
and in the capacities and on the dates indicated:
<TABLE>
<S> <C>
December 20, 1995 /s/Rex J. Lysinger
- -------------------------- -----------------------------------------------------------
DATE Rex J. Lysinger
Chairman of the Board of Directors of Energen and all
subsidiaries, Chief Executive Officer of Energen
December 20, 1995 /s/Wm. Michael Warren, Jr.
- -------------------------- -----------------------------------------------------------
DATE Wm. Michael Warren, Jr.
President and Director of Energen and all
subsidiaries, Chief Executive Officer of Alagasco and Chief
Operating Officer of Energen
December 20, 1995 /s/Geoffrey C. Ketcham
- -------------------------- -----------------------------------------------------------
DATE Geoffrey C. Ketcham
Executive Vice President, Chief
Financial Officer and Treasurer
December 20, 1995 /s/Paula H. Rushing
- -------------------------- -----------------------------------------------------------
DATE Paula H. Rushing
Controller of Alagasco
December 20, 1995 /s/Stephen D. Ban
- -------------------------- -----------------------------------------------------------
DATE Stephen D. Ban
Director
December 20, 1995 /s/James S. M. French
- -------------------------- -----------------------------------------------------------
DATE James S. M. French
Director
December 20, 1995 /s/Harris Saunders, Jr.
- -------------------------- -----------------------------------------------------------
DATE Harris Saunders, Jr.
Director
December 20, 1995 /s/Judy M. Merritt
- -------------------------- -----------------------------------------------------------
DATE Judy M. Merritt
Director
</TABLE>
16
<PAGE> 18
ENERGEN CORPORATION
ALABAMA GAS CORPORATION
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
ITEM 14(a)
<TABLE>
<CAPTION>
Reference Page
--------------
1995
1995 Annual
10-K Report
---- ------
<S> <C> <C> <C>
1. Energen Corporation
-------------------
A. Financial Statements
Report of Independent Certified Public Accountants . . . . . . . . . 55
Consolidated statements of income for the years ended
September 30, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . 35
Consolidated balance sheets as of September 30,
1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Consolidated statements of shareholders' equity for the years
ended September 30, 1995, 1994 and 1993 . . . . . . . . . . . . . . 38
Consolidated statements of cash flows for the years ended
September 30, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . 39
Notes to consolidated financial statements . . . . . . . . . . . . . 40
B. Financial Statement Schedules
Report of Independent Certified Public Accountants . . . . . . . . . 39
Schedule II Valuation and Qualifying Accounts . . . . . . . . . 40
2. Alabama Gas Corporation
-----------------------
A. Financial Statements
Report of Independent Certified Public Accounts . . . . . . . . . . 22
Statements of income for the years ended
September 30, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . 23
Balance sheets as of September 30, 1995 and 1994 . . . . . . . . . . 24
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
Reference Page
--------------
1995
1995 Annual
10-K Report
---- ------
<S> <C> <C> <C>
Statements of shareholder's equity for the years ended
September 30, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . 26
Statements of cash flows for the years ended
September 30, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . 27
Notes to financial statements . . . . . . . . . . . . . . . . . . . 28
B. Financial Statement Schedules
Schedule II Valuation and Qualifying Accounts . . . . . . . . . 41
</TABLE>
Schedules other than those listed above are omitted for the reason that they
are not required or are not applicable, or the required information is shown in
the financial statements or notes thereto.
18
<PAGE> 20
ENERGEN CORPORATION
ALABAMA GAS CORPORATION
INDEX TO EXHIBITS
ITEM 14(A)(3)
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
*3(a) Restated Certificate of Incorporation of Energen Corporation (formerly Alagasco, Inc.) which was filed as
Exhibit 4(a) to Energen's Registration Statement on Form S-8 (Registration No. 33-14855).
*3(b) Amendment to the Restated Certificate of Incorporation of Energen Corporation (formerly Alagasco, Inc.)
adopted on July 18, 1985, which was filed as Exhibit 4(b) to Energen's Registration Statement on Form S-8
(Registration No. 33-14855).
*3(c) Amendment to the Restated Certificate of Incorporation of Energen Corporation adopted on January 15, 1987,
which was filed as Exhibit 4(c) to Energen's Registration Statement on Form S-8 (Registration No.
33-14855).
*3(d) Amendment to the Restated Certificate of Incorporation of Energen Corporation adopted on January 25, 1989,
which was filed as Exhibit 4(d) to Energen's Registration Statement on Form S-3 (Registration No.
33-70464).
3(e) Articles of Amendment to the Restated Certificate of Incorporation of Energen Corporation dated February
3, 1995.
3(f) Restated Conformed Certificate of Incorporation of Energen Corporation, as amended through February 3,
1995.
*3(g) Certificate of Adoption of Resolutions designating Series A Junior Participating Preferred Stock (June 27,
1988) which was filed as Exhibit 4(e) to Energen's Registration Statement on Form S-2 (Registration No.
33-25435).
*3(h) Bylaws of Energen Corporation, which were filed as Exhibit 4(e) to Energen's Registration Statement on
Form S-8 (Registration No. 33-14855).
3(i) Articles of Amendment and Restatement of the Articles of Incorporation of Alabama Gas Corporation, dated
September 27, 1995.
*3(j) By-Laws of Alabama Gas Corporation, which was filed as Exhibit 4(k) to Alabama Gas' Registration Statement
on Form S-3 (Registration No. 33-12841).
*4(a) Rights Agreement, dated as of July 27, 1988, between Energen Corporation and AmSouth Bank, N.A., Rights
Agent, which was filed as Exhibit 1 to Energen's Registration Statement on Form 8-A (File No. 1-7810).
*4(b) Amendment of Rights Agreement, dated as of February 28, 1990, between Energen Corporation and AmSouth
Bank, N.A., Rights Agent, which was filed as Exhibit 2 to Energen's Form 8 Amendment No. 2 to its
Registration Statement on Form 8-A (File No. 1-7810).
</TABLE>
19
<PAGE> 21
<TABLE>
<S> <C>
*4(c) Indenture, dated as of January 1, 1992, between Energen Corporation and Boatmen's Trust Company, Trustee,
which was filed as Exhibit 4 to Energen's Amendment No. 1 to Registration Statement on Form S-3
(Registration No. 33-44936).
*4(d) Indenture, dated as of March 1, 1993, between Energen Corporation and Boatmen's Trust Company, Trustee,
which was filed as Exhibit 4 to Energen's Registration Statement on Form S-3 (Registration No.
33-25435).
*4(e) Indenture dated as of November 1, 1993, between Alabama Gas Corporation and NationsBank of Georgia,
National Association, Trustee, which was filed as Exhibit 4(k) to Alabama Gas's Registration Statement on
Form S-3 (Registration No. 33-70466).
*10(a) Form of Service Agreement Under Rate Schedule CSS (No. S10710), between Southern Natural Gas Company and
Alabama Gas Corporation as filed as Exhibit 10(a) to Energen's Annual Report on Form 10-K for the year
ended September 30, 1993.
*10(b) Form of Service Agreement Under Rate Schedule IT (No. 790420), between Southern Natural Gas Company and
Alabama Gas Corporation as filed as Exhibit 10(b) to Energen's Annual Report on Form 10-K for the year
ended September 30, 1993.
*10(c) Form of Service Agreement Under Rate Schedule FT-NN (No. 866941), between Southern Natural Gas Company and
Alabama Gas Corporation as filed as Exhibit 10(c) to Energen's Annual Report on Form 10-K for the year
ended September 30, 1993.
*10(d) Form of Service Agreement Under Rate Schedule FT (No. 866940) between Southern Natural Gas Company and
Alabama Gas Corporation as filed as Exhibit 10(d) to Energen's Annual Report on Form 10-K for the year
ended September 30, 1993.
*10(e) Form of Executive Retirement Supplement Agreement between Energen Corporation and certain executive
officers as filed as Exhibit 10(f) to Energen's Annual Report on Form 10-K for the year ended September
30, 1993.
*10(f) Amendment to Executive Retirement Supplement Agreement effective as of June 22, 1994, between Energen
Corporation and certain executive officers as filed as Exhibit 10(f) to Energen's Annual Report on Form
10-K for the year ended September 30, 1994.
*10(g) Restricted Stock Incentive Plan of Energen Corporation, which was filed as Exhibit 4 to Post Effective
Amendment No. 2 to Energen Corporation's Registration Statement on Forms S-8 and S-3 (Registration No.
2-89855).
*10(h) Severance Compensation Agreement between Energen Corporation and certain executive officers, which was
filed as Exhibit 10(e) to Energen's Annual Report on Form 10-K for the year ended September 30, 1992.
*10(i) Energen Corporation 1988 Stock Option Plan as filed as Exhibit 10(i) to Energen's Annual Report on Form
10-K for the year ended September 30, 1993.
*10(j) Energen Corporation 1992 Long-Range Performance Share Plan, dated as of October 1, 1991, which was filed
as Exhibit A to the Registrant's Proxy Statement for its January 22, 1992, Annual Meeting (File No.
1-7810).
</TABLE>
20
<PAGE> 22
<TABLE>
<S> <C>
*10(k) Energen Corporation 1992 Directors Stock Plan, effective as of January 22, 1992, which was filed as
Exhibit B to Energen's Proxy Statement for its January 22, 1992, Annual Meeting (File No. 1-7810).
*10(l) Energen Corporation Director Fees Deferral Plan as filed as Exhibit 10(l) to Energen's Annual Report on
Form 10-K for the year ended September 30, 1993.
*10(m) Energen Corporation Annual Incentive Compensation Plan, Revised 5/90, as amended effective October 1,
1993, as filed as Exhibit 10(m) to Energen's Annual report on Form 10-K for the year ended September 30,
1994.
13 Information incorporated by reference from pages 25-59 of the Energen Corporation 1995 Annual Report to
Stockholders
21 Subsidiaries of Energen Corporation
23(a) Consent of Independent Certified Public Accountants (Energen)
23(b) Consent of Independent Certified Public Accountants (Alagasco)
27.1 Financial Data Schedule of Alabama Gas Corporation (for SEC purposes only)
27.2 Financial Data Schedule of Energen Corporation (for SEC purposes only)
</TABLE>
*Incorporated by reference
21
<PAGE> 23
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF ALABAMA GAS CORPORATION:
We have audited the financial statements and the financial statement schedules
of Alabama Gas Corporation listed in the index on pages 17 and 18 of this Form
10-K. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alabama Gas Corporation as of
September 30, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1995, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedules referred to above, when considered
in relation to the basic financial statements taken as a whole, present fairly,
in all material respects, the information required to be included therein.
As discussed in Note 6 to the financial statements, the Company changed its
method of accounting for certain other post-retirement benefits, effective
October 1, 1993.
Coopers & Lybrand L.L.P.
Birmingham, Alabama
October 25, 1995
22
<PAGE> 24
STATEMENTS OF INCOME
ALABAMA GAS CORPORATION
<TABLE>
<CAPTION>
===========================================================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
===========================================================================================================
<S> <C> <C> <C>
OPERATING REVENUES $295,967 $344,637 $330,560
- -----------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Cost of gas 133,556 188,592 187,800
Operations 78,139 72,639 66,196
Maintenance 9,727 9,147 8,781
Depreciation 19,370 17,941 17,206
Income taxes
Current 8,392 10,623 5,407
Deferred, net 177 (2,418) 1,530
Deferred investment tax credits, net (487) (487) (528)
Taxes, other than income taxes 22,662 26,301 24,196
- -----------------------------------------------------------------------------------------------------------
Total operating expenses 271,536 322,338 310,588
- -----------------------------------------------------------------------------------------------------------
OPERATING INCOME 24,431 22,299 19,972
- -----------------------------------------------------------------------------------------------------------
OTHER INCOME
Allowance for funds used during construction 1,054 465 163
Other, net (112) 452 376
- -----------------------------------------------------------------------------------------------------------
Total other income 942 917 539
- -----------------------------------------------------------------------------------------------------------
INTEREST CHARGES
Interest on long-term debt 7,730 6,475 5,532
Other interest expense 1,922 1,845 1,955
- -----------------------------------------------------------------------------------------------------------
Total interest charges 9,652 8,320 7,487
- -----------------------------------------------------------------------------------------------------------
NET INCOME 15,721 14,896 13,024
Less cash dividends on cumulative preferred stock -- -- 70
- -----------------------------------------------------------------------------------------------------------
NET INCOME AVAILABLE FOR COMMON $ 15,721 $ 14,896 $ 12,954
===========================================================================================================
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
statements.
23
<PAGE> 25
BALANCE SHEETS
ALABAMA GAS CORPORATION
<TABLE>
<CAPTION>
===========================================================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1995 1994
===========================================================================================================
<S> <C> <C>
ASSETS
PROPERTY, PLANT AND EQUIPMENT
Utility plant $504,371 $464,593
Less accumulated depreciation 247,926 231,327
- -----------------------------------------------------------------------------------------------------------
Utility plant, net 256,445 233,266
- -----------------------------------------------------------------------------------------------------------
Other property, net 193 183
- -----------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash 727 156
Accounts receivable
Gas 22,215 22,209
Merchandise 1,546 1,326
Other 1,598 1,512
Allowance for doubtful accounts (2,000) (2,000)
Inventories, at average cost
Storage gas inventory 20,276 24,363
Materials and supplies 5,860 5,688
Liquified natural gas in storage 3,539 3,349
Deferred gas costs 1,426 1,460
Regulatory asset 6,321 --
Deferred income taxes 7,416 5,724
Prepayments and other 2,302 2,595
- -----------------------------------------------------------------------------------------------------------
Total current assets 71,226 66,382
- -----------------------------------------------------------------------------------------------------------
DEFERRED CHARGES AND OTHER ASSETS 7,403 9,074
- -----------------------------------------------------------------------------------------------------------
TOTAL ASSETS $335,267 $308,905
===========================================================================================================
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
statements.
24
<PAGE> 26
BALANCE SHEETS
ALABAMA GAS CORPORATION
<TABLE>
<CAPTION>
===========================================================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1995 1994
===========================================================================================================
<S> <C> <C>
CAPITAL AND LIABILITIES
CAPITALIZATION
Common shareholder's equity
Common stock, $0.01 par value; 3,000,000 shares authorized,
1,972,052 shares outstanding in 1995 and 1994 $ 20 $ 20
Premium on capital stock 31,682 31,682
Capital Surplus 2,802 2,802
Retained Earnings 87,638 81,087
- -----------------------------------------------------------------------------------------------------------
Total common shareholder's equity 122,142 115,591
Cumulative preferred stock, $0.01 par value, 120,000 shares
authorized -- --
Long-term debt 100,000 84,391
- -----------------------------------------------------------------------------------------------------------
Total capitalization 222,142 199,982
- -----------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Long-term debt due within one year -- 2,823
Notes payable to banks -- 4,000
Accounts payable
Other 26,160 19,002
Affiliated companies -- 132
Accrued taxes 10,236 14,241
Customers' deposits 18,218 17,462
Supplier refunds due customers 3,315 832
Other amounts due customers 13,231 10,902
Accrued wages and benefits 5,228 5,659
Other 9,444 7,605
- -----------------------------------------------------------------------------------------------------------
Total current liabilities 85,832 82,658
- -----------------------------------------------------------------------------------------------------------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes 16,343 13,704
Accumulated deferred investment tax credits 4,103 4,590
Regulatory liability 6,001 6,960
Customer advances for construction and other 846 1,011
- -----------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 27,293 26,265
- -----------------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND LIABILITIES $335,267 $308,905
===========================================================================================================
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
statements.
25
<PAGE> 27
STATEMENTS OF SHAREHOLDER'S EQUITY
ALABAMA GAS CORPORATION
<TABLE>
<CAPTION>
============================================================================================================
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
============================================================================================================
COMMON STOCK
----------------
NUMBER OF PAR PREMIUM ON CAPITAL RETAINED
SHARES VALUE CAPITAL STOCK SURPLUS EARNINGS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1992 1,972,052 $20 $21,682 $2,802 $69,907
Net income 13,024
Cash dividends -- $1.05 per share (7,975)
Less cash dividends on preferred stock 70
- ------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1993 1,972,052 20 21,682 2,802 74,886
Net income 14,896
Cash dividends -- $1.09 per share (8,695)
Capital contribution from parent 10,000
- ------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1994 1,972,052 20 31,682 2,802 81,087
Net income 15,721
Cash dividends -- $1.13 per share (9,170)
- ------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1995 1,972,052 $20 $31,682 $2,802 $87,638
============================================================================================================
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
statements.
26
<PAGE> 28
STATEMENTS OF CASH FLOWS
ALABAMA GAS CORPORATION
<TABLE>
<CAPTION>
===========================================================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
===========================================================================================================
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 15,721 $ 14,896 $ 13,024
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 19,370 17,941 17,206
Deferred income taxes, net 177 (2,418) 1,530
Deferred investment tax credits (487) (487) (528)
Net change in:
Accounts receivable (113) 896 (3,787)
Inventories 3,526 (23,913) (94)
Accounts payable 7,026 (890) 3,398
Other current assets and liabilities (3,023) 17,268 968
Other, net 673 (2,116) (1,536)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 42,870 21,177 30,181
- -----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to property, plant and equipment (41,560) (37,853) (21,743)
Net advances (to) from parent company -- 87 (87)
Other, net (15) 181 (320)
- -----------------------------------------------------------------------------------------------------------
Net cash used in investing activities (41,575) (37,585) (22,150)
- -----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Payment of dividends on common stock (9,170) (8,695) (7,975)
Payment of dividends on preferred stock -- -- (70)
Reduction of long-term debt and preferred stock (37,214) (9,891) (19,500)
Proceeds from medium term notes 49,660 49,670 --
Proceeds from capital contribution from parent -- 10,000 --
Net advances to parent company -- -- (6,299)
Net change in short-term debt (4,000) (25,000) 24,000
Other, net -- -- (101)
- -----------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (724) 16,084 (9,945)
- -----------------------------------------------------------------------------------------------------------
Net change in cash 571 (324) (1,914)
Cash at beginning of period 156 480 2,394
- -----------------------------------------------------------------------------------------------------------
Cash at end of period $ 727 $ 156 $ 480
===========================================================================================================
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
statements.
27
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Alabama Gas Corporation (Alagasco), a wholly-owned subsidiary of Energen
Corporation, is the largest natural gas distribution utility in the State of
Alabama, serving customers primarily in central and north Alabama. The
following is a description of its significant accounting policies and
practices.
A. UTILITY PLANT AND DEPRECIATION
Utility plant is stated at original cost which includes an allowance for funds
used during construction. Maintenance is charged for the cost of normal
repairs and the renewal or replacement of an item of property which is less
than a retirement unit. When property which represents a retirement unit is
replaced or removed, the cost of such property is credited to utility plant
and, together with the cost of removal less salvage, is charged to the
accumulated reserve for depreciation.
Depreciation is provided on the straight-line method over the estimated useful
lives of utility property at rates established by the Alabama Public Service
Commission (APSC). Approved depreciation rates averaged approximately 4.3
percent in 1995, 1994 and 1993.
B. OPERATING REVENUE AND GAS COSTS
In accordance with industry practice, Alagasco records revenue on a monthly and
cycle billing basis. Alagasco extends credit to its residential and industrial
utility customers which are located primarily in central and north Alabama.
The commodity cost of purchased gas applicable to gas delivered to customers
but not yet billed under the cycle billing method is deferred as a current
asset.
C. INCOME TAXES
Alagasco files a consolidated income tax return with its parent. The
consolidated income taxes are allocated to the appropriate subsidiaries using
the separate return method. Deferred income taxes reflect the impact of
temporary differences between the tax basis of assets and liabilities and their
carrying amounts for financial reporting purposes, and are measured in
compliance with enacted tax laws. Investment tax credits have been deferred
and are being amortized over the lives of the related assets.
D. CASH EQUIVALENTS
Alagasco includes highly liquid marketable securities and debt instruments
purchased with a maturity of three months or less in cash equivalents.
28
<PAGE> 30
2. LONG-TERM DEBT AND NOTES PAYABLE
Long-term debt consists of the following:
<TABLE>
<CAPTION>
=============================================================================================================
AS OF SEPTEMBER 30, (IN THOUSANDS) 1995 1994
=============================================================================================================
<S> <C> <C>
Medium term notes, interest ranging from 5.4% to 7.7%, for notes
redeemable December 1, 1998 to June 27, 2025 $100,000 $50,000
First Mortgage Bonds, 11% Series H, defeased during fiscal
year 1995 -- 7,500
9% debentures, defeased during fiscal year 1995 -- 28,758
Mortgage note payable, paid in full during fiscal year 1995 -- 956
- -------------------------------------------------------------------------------------------------------------
Total 100,000 87,214
Less amounts due within one year -- 2,823
- -------------------------------------------------------------------------------------------------------------
Total $100,000 $84,391
=============================================================================================================
</TABLE>
During the fourth quarter, Alagasco deposited $37.6 million into an irrevocable
trust to complete an in-substance defeasance of the 9 percent debentures and 11
percent Series H First Mortgage Bonds. The funds in the trust, primarily
obtained through the issuance of medium-term notes and short-term borrowings,
will be used solely to satisfy the principal, interest, and call premium of the
defeased debt. Accordingly, the debt and related accrued interest have been
excluded from the 1995 consolidated balance sheet. No gain or loss was recorded
in the financial statements as the APSC has granted Alagasco regulatory relief
related to the income statement impact of this defeasance.
The aggregate maturities of long-term debt for the next five years are as
follows:
<TABLE>
<CAPTION>
=======================================================================================================
YEARS ENDING SEPTEMBER 30, (IN THOUSANDS)
=======================================================================================================
1996 1997 1998 1999 2000
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-- -- -- $5,350 --
=======================================================================================================
</TABLE>
29
<PAGE> 31
Energen and Alagasco have short-term credit lines and other credit facilities
of $110 million available to either entity for working capital needs. The
following is a summary of information relating to notes payable to banks:
<TABLE>
<CAPTION>
============================================================================================================
AS OF SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
============================================================================================================
<S> <C> <C> <C>
Alagasco outstanding $ -- $ 4,000 $ 29,000
Other Energen outstanding 32,300 2,000 11,000
Available for borrowings 77,700 104,000 70,000
- ------------------------------------------------------------------------------------------------------------
Total $110,000 $110,000 $110,000
============================================================================================================
Maximum amount outstanding at any month-end $ 5,000 $ 60,000 $ 29,000
Average daily amount outstanding $ 447 $ 13,460 $ 23,071
Weighted average interest rates based on:
Average daily amount outstanding 5.69% 3.32% 3.41%
Amount outstanding at year-end -- 5.17% 3.35%
============================================================================================================
</TABLE>
Total interest expense in 1995, 1994 and 1993 was $9,652,000, $8,320,000, and
$7,487,000, respectively.
3. REGULATORY
As an Alabama utility, Alagasco is subject to regulation by the APSC which, in
1983, established the Rate Stabilization and Equalization (RSE) rate-setting
process. RSE was extended for the third time on December 3, 1990, for a
three-year period. Under the terms of that extension, RSE shall continue
after November 30, 1993, unless, after notice to the Company, the Commission
votes to either modify or discontinue its operation. On October 4, 1993, the
Commission unanimously voted to extend RSE until such time as certain hearings
mandated by the Energy Policy Act of 1992 (Energy Act) in connection with
integrated resource planning and demand side management programs are completed.
The Energy Act proceedings are expected to conclude during fiscal 1996 at which
time it is expected that the Commission will begin reviewing Alagasco's RSE.
No time table for review has yet been established.
Under RSE as extended, the APSC conducts quarterly reviews to determine, based
on Alagasco's projections and fiscal year-to-date performance, whether
Alagasco's return on equity for the fiscal year will be within the allowed
range of 13.15 percent to 13.65 percent. Reductions in rates can be made
quarterly to bring the projected return within the allowed range; increases,
however, are allowed only once each fiscal year, effective December 1, and
cannot exceed 4 percent of prior-year revenues. RSE limits the utility's equity
upon which a return is permitted to 60 percent of total capitalization and
provides for certain cost control measures designed to monitor the Company's
operations and maintenance (O&M) expense. If O&M expense per customer falls
within 1.25 percentage points above or below the Consumer Price Index For All
Urban Customers (index range), no adjustment is required. If, however, O&M
expense per customer exceeds the index range, three-quarters of the difference
will be returned to the customers. To the extent O&M expense per customer is
less than the index range, the utility will benefit by one-half of the
difference through future rate adjustments. Under RSE as extended, a $1.1
million decrease in revenue became effective October 1, 1994, and a $5.2
million annual increase in revenue became effective December 1, 1994.
Effective December 15, 1990, the APSC approved a temperature adjustment to
customers' monthly bills to remove the effect of departures from normal
temperature on Alagasco's earnings. The calculation is performed monthly, and
the adjustments to customers' bills are made in the same month the weather
variation occurs.
30
<PAGE> 32
The Company's rate schedules for natural gas distribution charges contain a Gas
Supply Adjustment (GSA) rider, established in 1993, which permits the
pass-through to customers of changes in the cost of gas supply, including Gas
Supply Realignment (GSR) surcharges imposed by the Company's suppliers
resulting from changes in gas supply purchases related to the implementation of
FERC Order 636.
On June 12, 1995, the APSC approved Alagasco's application to issue $50 million
of new debt. A portion of the proceeds was used to redeem all of Alagasco's 9
percent debentures and 11 percent First Mortgage Bonds. In connection with the
early call of the redeemed debt, Alagasco paid an early call premium of
approximately $1.3 million during the fourth quarter. Because the APSC Order
authorized Alagasco to collect the early call premium through customer rates
during the fiscal year ending September 30, 1996, Alagasco recorded a
regulatory asset of $1.3 million during the fourth quarter ending September 30,
1995.
In accordance with APSC-directed regulatory accounting procedures, Alagasco in
1989 began returning to customers excess utility deferred taxes which resulted
from a reduction in the federal statutory tax rate from 46 percent to 34
percent using the average rate assumption method. This method provides for the
return to ratepayers of excess deferred taxes over the lives of the related
assets. In 1993 those excess taxes were reduced as a result of a federal tax
rate increase from 34 percent to 35 percent. Approximately $2.9 million of the
remaining excess utility deferred taxes is being returned to ratepayers over
approximately 15 years.
FERC REGULATION: On March 15, 1995, Southern Natural Gas Company (Southern)
filed a comprehensive settlement with the FERC in the form of a Stipulation and
Agreement (the Settlement) to resolve all issues in Southern's six pending rate
cases, as well as to resolve all GSR and transition cost issues resulting from
the implementation of FERC Order 636. The Settlement is supported by parties
representing more than 90 percent of the firm transportation demand on
Southern's system, including local distribution companies (including Alagasco),
municipal distribution systems, major gas producers, large industrial end
users, marketers, and state commissions (including the APSC).
On September 29, 1995, the FERC issued its Order Accepting Settlement, Severing
Contesting parties, and Issuing Certificates and Approving Abandonment
(Settlement Order). The Settlement Order approves the Settlement with minor
modifications. Contesting parties had 30 days from the date of the Settlement
Order to file motions for rehearing and several such motions were timely filed.
Until such motions are ruled on by the FERC, the Settlement Order is not
considered to be final.
Specifically, the Settlement provides for the following: (1) the resolution of
all cost of service and rate design issues in Southern's six pending rate cases
and the establishment of reduced rates for the purpose of calculating rate case
refunds; (2) the implementation of reduced settlement rates on an interim basis
for supporting parties commencing March 1, 1995 (by order dated April 4, 1995,
FERC approved these interim rates pending its final review of the merits of the
Settlement); (3) the resolution of all GSR and other transition cost issues
resulting from FERC Order 636; (4) lower GSR cost recovery through the
reduction and earlier payout of GSR costs; (5) a three-year moratorium on
general rate increases; and (6) the resolution and disposition of all rate case
and GSR refunds for supporting parties. With respect to this last point, the
Settlement provides that all rate case refunds will be used to offset a portion
of Southern's remaining GSR liability. In addition, as a result of the
recalculated GSR surcharges for the period January 1, 1994, to February 28,
1995, Southern will refund over-collected GSR costs. Neither the total amount
of this refund nor Alagasco's share has yet been determined; therefore, no
amounts have been recorded in the financial statements. In the Settlement
filing with FERC, Southern has represented that the Settlement will allow
Southern and the supporting parties to resolve all issues relating to GSR and
other transition costs, the majority of which costs will be collected by the
end of calendar 1995. Alagasco estimates that it has a remaining GSR liability
of approximately $2.4 million to be paid through December 1995 and
approximately $2.6 million in other transition costs to be paid through June
1998 and that it has recorded such amounts in the financial statements. Because
these costs will be recovered in full from Alagasco's customers in a timely
31
<PAGE> 33
manner through the GSA rider of Alagasco's Tariff, the Company has recorded a
corresponding regulatory asset in the accompanying financial statements.
4. CAPITAL STOCK
Alagasco's authorized common stock consists of 3 million, $0.01 par value
common shares. At September 30, 1995 and 1994, 1,972,052 shares were issued
and outstanding. Alagasco is authorized to issue 120,000 shares of preferred
stock, par value $0.01 per share, in one or more series. There are no shares
currently outstanding.
5. INCOME TAXES
The components of income taxes consist of the following:
<TABLE>
<CAPTION>
============================================================================================================
FOR THE YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
============================================================================================================
<S> <C> <C> <C>
Taxes estimated to be payable currently:
Federal $7,633 $ 9,664 $4,911
State 759 959 496
- ------------------------------------------------------------------------------------------------------------
Total current 8,392 10,623 5,407
- ------------------------------------------------------------------------------------------------------------
Taxes deferred:
Federal (326) (2,689) 867
State 16 (216) 135
- ------------------------------------------------------------------------------------------------------------
Total deferred (310) (2,905) 1,002
- ------------------------------------------------------------------------------------------------------------
Total income tax expense $8,082 $ 7,718 $6,409
============================================================================================================
</TABLE>
32
<PAGE> 34
Temporary differences and carryforwards which give rise to a significant
portion of deferred tax assets and liabilities for 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
============================================================================================================
1995 1994
---------------------------------------------------------
AS OF SEPTEMBER 30, (IN THOUSANDS) CURRENT NONCURRENT CURRENT NONCURRENT
============================================================================================================
<S> <C> <C> <C> <C>
Deferred tax assets:
Deferred investment tax credits $ -- $ 1,386 $ -- $ 1,567
Regulatory liabilities -- 2,229 -- 2,585
Unbilled revenue 1,565 -- 1,454 --
Insurance and accruals 1,923 -- 1,339 --
Gas supply adjustment 930 -- 1,123 --
Accrued vacation 988 -- 981 --
Allowance for uncollectible accounts 902 -- 878 --
Other, net 2,022 52 1,477 96
- ------------------------------------------------------------------------------------------------------------
Subtotal 8,330 3,667 7,252 4,248
Valuation allowance -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Total deferred tax assets $8,330 $ 3,667 $7,252 $ 4,248
============================================================================================================
Deferred tax liabilities:
Depreciation and basis differences $ -- $19,297 $ -- $17,704
Pension and other benefit costs 912 -- 1,457 --
Other, net 2 713 71 248
- ------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities $ 914 $20,010 $1,528 $17,952
============================================================================================================
</TABLE>
No valuation allowance with respect to deferred taxes is deemed necessary, as
the Company anticipates generating adequate future taxable income to realize
the benefits of all deferred tax assets on the balance sheet.
Total income tax expense differs from the amount which would be provided by
applying the statutory federal income tax rate to pretax earnings as
illustrated below:
<TABLE>
<CAPTION>
============================================================================================================
FOR THE YEAR ENDED SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
============================================================================================================
<S> <C> <C> <C>
Income tax expense at statutory federal income tax rate $8,331 $7,915 $6,729
Increase (decrease) resulting from:
Investment tax credits -- deferred (487) (487) (528)
State income taxes, net of federal income tax benefit 512 486 412
Other, net (274) (196) (204)
- ------------------------------------------------------------------------------------------------------------
Total income tax expense $8,082 $7,718 $6,409
============================================================================================================
</TABLE>
There were no tax-related balances due to affiliates at September 30, 1995, or
1994.
33
<PAGE> 35
6. RETIREMENT INCOME PLANS AND OTHER BENEFITS
All information presented concerning retirement income and other benefit plans
includes other affiliates of Energen Corporation as well as Alagasco.
The Company has two defined benefit non-contributory pension plans which cover
a majority of the employees. Benefits are based on years of service and final
earnings. The Company's policy is to use the "projected unit credit" actuarial
method for funding and financial reporting purposes. The expense (income) for
the plan covering the majority of employees (Plan A) for the years ended
September 30, 1995, 1994 and 1993, was $1,158,000, $15,000, and $(118,000),
respectively. The expense for the second plan covering employees under labor
union agreements (Plan B) for 1995, 1994 and 1993 was $339,000, $555,000 and
$557,000, respectively.
The funded status of the plans is as follows:
<TABLE>
<CAPTION>
=============================================================================================================
AS OF JUNE 30, (IN THOUSANDS) PLAN A PLAN B
=============================================================================================================
1995 1994 1995 1994
------------------------ ---------------------
<S> <C> <C> <C> <C>
Vested benefits $(46,073) $(48,354) $(13,499) $(12,860)
Nonvested benefits (5,912) (5,530) (2,083) (2,253)
- -------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation (51,985) (53,884) (15,582) (15,113)
Effects of salary progression (11,047) (10,332) -- --
- -------------------------------------------------------------------------------------------------------------
Projected benefit obligation (63,032) (64,216) (15,582) (15,113)
Fair value of plan assets, primarily equity and
fixed income securities 69,431 72,004 16,429 11,863
Unrecognized net gain 1,470 2,646 296 1,034
Unrecognized prior service cost 41 46 1,412 1,554
Unrecognized net transition obligation (asset) (5,111) (6,524) 396 452
Additional minimum liability -- -- -- (3,040)
- -------------------------------------------------------------------------------------------------------------
Accrued pension asset (liability) $ 2,799 $ 3,956 $ 3,951 $ (3,250)
=============================================================================================================
</TABLE>
At September 30, 1995 and 1994, for both plans the discount rate used to
measure the projected benefit obligation was 7.5 percent, and the expected
long-term rate of return on plan assets was 8.25 percent. The annual rate of
salary increase for the salaried plan was 5.5 percent for both years.
34
<PAGE> 36
The components of net pension costs for 1995, 1994 and 1993 were:
<TABLE>
<CAPTION>
=============================================================================================================
FOR THE YEARS ENDED SEPTEMBER 30,
(IN THOUSANDS) PLAN A PLAN B
=============================================================================================================
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 2,052 $ 1,873 $ 1,678 $ 224 $ 224 $ 187
Interest cost on projected
benefit obligation 4,728 4,550 4,097 1,095 1,042 1,018
Actual (return) on plan assets (8,787) (504) (6,858) (2,172) (372) (1,048)
Net amortization and deferral 2,106 (5,904) 965 1,192 (339) 400
Loss due to special termination
benefits 1,489 -- -- -- -- --
Settlement gain (430) -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------
Net pension (income) expense $ 1,158 $ 15 $ (118) $ 339 $ 555 $ 557
=============================================================================================================
</TABLE>
In 1995 the Company recognized a loss for special termination benefits of
$1,489,000 and a settlement gain of $430,000 pursuant to a voluntary early
retirement option offered to all salaried, non-officer employees of at least 58
years of age with a minimum of 5 years' service. Of the 55 eligible employees,
41 accepted.
Energen has deferred compensation plan agreements for certain key executives
providing for payments on retirement, death or disability. The deferred
compensation expense under these agreements for 1995, 1994 and 1993 was
$808,000, $461,000, and $650,000, respectively.
In addition to providing pension benefits, the Company provides certain
post-retirement health care and life insurance benefits. Substantially all of
the Company's employees may become eligible for such benefits if they reach
normal retirement age while working for the Company. In a prior year, the
company adopted SFAS No. 106, Employers' Accounting for Post-retirement
Benefits Other Than Pensions, with respect to the accrual of such costs for
salaried employees. During fiscal year 1994, the Company adopted SFAS 106 with
respect to such costs for employees under collective bargaining agreements.
There is no cumulative effect on the income statement resulting from the
adoption of SFAS 106 as the Company elected to amortize transition costs over a
20-year period. On December 6, 1993, the APSC adopted Order 4-3454 which allows
the Company to recover all costs accrued under SFAS 106 through rates.
While the Company has not adopted a formal funding policy, all of its accrued
post-retirement liability was funded at year-end. The expense for salaried
employees for the years ended September 30, 1995, 1994 and 1993 was $2,271,000,
$2,319,000, and $2,677,000, respectively. The expense for union employees was
$3,613,000, $3,685,000 and $982,000 during 1995, 1994 and 1993, respectively.
Prior to 1994, the Company recognized the cost of providing post-retirement
benefits for union employees on a "pay-as-you-go" basis. These benefits were
provided through a self-insurance arrangement and through insurance companies
whose premiums were based on the benefits paid during the year. The "projected
unit credit" actuarial method was used to determine the normal cost and
actuarial liability.
35
<PAGE> 37
A reconciliation of the estimated status of the obligation is as follows:
<TABLE>
<CAPTION>
=============================================================================================================
AS OF JUNE 30, (IN THOUSANDS) SALARIED EMPLOYEES UNION EMPLOYEES
=============================================================================================================
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Accumulated post-retirement benefit obligation $(20,757) $(21,296) $(29,600) $(24,564)
Plan assets 12,659 9,408 4,419 1,248
Unamortized amounts 7,550 11,751 24,237 21,357
- -------------------------------------------------------------------------------------------------------------
Accrued post-retirement benefit liability $ (548) $ (137) $ (944) $ (1,959)
=============================================================================================================
</TABLE>
Net periodic post-retirement benefit cost for the years ended September 30,
1995, 1994 and 1993, included the following:
<TABLE>
<CAPTION>
=============================================================================================================
FOR THE YEAR ENDED SEPTEMBER 30, (IN THOUSANDS) SALARIED EMPLOYEES UNION EMPLOYEES
=============================================================================================================
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 512 $ 450 $ 464 $ 807 $ 481 $ --
Interest cost on accumulated post-retirement
benefit obligation 1,696 1,726 1,457 1,793 1,920 --
Amortization of transition obligation 723 723 842 1,285 1,285 --
Amortization of actuarial gains and losses -- -- 49 -- -- --
Deferred asset (gain) loss 539 (453) -- 424 -- --
Actual (return) on plan assets (1,199) (127) (135) (696) (1) --
- -------------------------------------------------------------------------------------------------------------
Net periodic post-retirement benefit expense $ 2,271 $2,319 $2,677 $3,613 $3,685 $ --
=============================================================================================================
</TABLE>
The weighted average health care cost trend rate used in determining the
accumulated post-retirement benefit obligation was 8 percent in 1995 and 1994.
That assumption has a significant effect on the amounts reported. For example,
with respect to salaried employees, increasing the weighted average health care
cost trend rate by 1 percent would increase the accumulated post-retirement
benefit obligation by 3 percent and the net periodic post-retirement benefit
cost by 2.1 percent. For union employees increasing the weighted average health
care cost trend rate by 1 percent would increase the accumulated
post-retirement benefit obligation by 7.1 percent and the net periodic
post-retirement benefit cost by 7 percent. The weighted average discount rate
used in determining the accumulated post-retirement benefit obligation was 7.5
percent in 1995 and 1994.
The Company has a long-term disability plan covering most salaried employees.
Expense for the years ended September 30, 1995, 1994 and 1993 was $155,000,
$150,000, and $129,000, respectively.
7. COMMITMENTS
Alagasco has various firm gas supply and firm gas transportation contracts,
which expire at various dates through the year 2008. These contracts typically
contain minimum demand charge obligations on the part of Alagasco.
Alagasco entered into an agreement with a financial institution whereby it can
sell on an ongoing basis, with recourse, certain installment receivables
related to its merchandising program up to a maximum of $20 million. During
1995 and 1994, Alagasco sold $8,454,000 and $6,784,000, respectively, of
installment receivables. At September 30, 1995 and 1994, the balance of these
installment receivables was $15,618,000 and $13,027,000, respectively.
Receivables sold under this agreement are considered financial instruments with
off-balance-sheet risk. Alagasco's exposure to credit loss in the event of
non-performance by customers is represented by the balance of installment
receivables.
36
<PAGE> 38
Various legal proceedings arising in the normal course of business are
currently in progress and Alagasco currently accrues provisions for estimated
cost. Although the outcome of any litigation cannot be predicted with
certainty, management does not believe that the ultimate outcome will have a
material adverse effect on Alagasco's financial position or results of
operations.
8. LEASES
Total payments related to leases included as operating expense in the
accompanying statements of income amounted to $2,201,000, $2,147,000, and
$2,332,000 in 1995, 1994 and 1993, respectively. Minimum future rental
payments (in thousands) required after 1995 under leases with initial or
remaining noncancelable lease terms in excess of one year are as follows:
<TABLE>
<CAPTION>
==========================================================================================================
1996 1997 1998 1999 2000 2001 AND THEREAFTER
==========================================================================================================
<S> <C> <C> <C> <C> <C>
$1,749 $1,577 $463 $81 $81 $125
==========================================================================================================
</TABLE>
9. ENVIRONMENTAL MATTERS
Alagasco is in the chain of title of eight former manufactured gas plant sites,
of which it still owns four, and five manufactured gas distribution sites, of
which it still owns one. A preliminary investigation of the sites does not
indicate the present need for remediation activities. Management expects that,
should remediation of any such sites be required in the future, Alagasco's
share, if any, of such costs will not materially affect the results of
operations or financial condition of Alagasco.
10. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental information concerning cash flow activities is as follows:
<TABLE>
<CAPTION>
===========================================================================================================
FOR THE YEAR ENDED SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
===========================================================================================================
<S> <C> <C> <C>
Interest paid, net of amount capitalized $11,166 $7,762 $8,726
Income taxes paid $10,920 $9,097 $5,844
Noncash investing activities:
Capitalized depreciation $ 166 $ 155 $ 187
Allowance for funds used during construction $ 1,054 $ 465 $ 163
Noncash financing activities (debt issuance costs) $ 340 $ 330 $ --
===========================================================================================================
</TABLE>
37
<PAGE> 39
11. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following data summarize operating results for the four quarters of 1995
and 1994. Alagasco's business is seasonal in character and strongly influenced
by weather conditions.
<TABLE>
<CAPTION>
============================================================================================================
1995 FISCAL QUARTERS
(IN THOUSANDS) FIRST SECOND THIRD FOURTH
============================================================================================================
<S> <C> <C> <C> <C>
Operating revenues $67,226 $134,141 $55,865 $38,735
Operating income (loss) $ 3,696 $ 19,276 $ 3,383 $(1,924)
Net income (loss) available for common $ 1,751 $ 17,267 $ 1,772 $(5,069)
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
============================================================================================================
1994 FISCAL QUARTERS
(IN THOUSANDS) FIRST SECOND THIRD FOURTH
============================================================================================================
<S> <C> <C> <C> <C>
Operating revenues $78,993 $158,268 $66,070 $41,306
Operating income (loss) $ 2,945 $ 18,485 $ 3,580 $(2,711)
Net income (loss) available for common $ 696 $ 16,688 $ 1,799 $(4,287)
===========================================================================================================
</TABLE>
12. TRANSACTIONS WITH RELATED PARTIES
Alagasco purchased natural gas from affiliates amounting to $4,644,000,
$10,255,000, and $13,826,000, in 1995, 1994, and 1993, respectively. These
amounts are included in gas purchased for resale. Alagasco had net
receivables from affiliates of $183,000 at September 30, 1995, and net payables
to affiliates of $132,000 at September 30, 1994.
13. FINANCIAL INSTRUMENTS
In accordance with the requirements of SFAS No. 107 (Disclosures about Fair
Value of Financial Instruments), the estimated fair values of Alagasco's
financial instruments at September 30, 1995, were as follows:
<TABLE>
<CAPTION>
==============================================================================================================
CARRYING FAIR
AS OF SEPTEMBER 30, 1995 (IN THOUSANDS) AMOUNT VALUE
==============================================================================================================
<S> <C> <C>
Cash and cash equivalents $ 727 $ 727
Receivables, net of allowance account $ 23,359 $23,359
Long-term debt (including current maturities) $100,000 $98,750
==============================================================================================================
</TABLE>
The following methods and assumptions were used to estimate the fair value of
financial instruments:
o CASH AND CASH EQUIVALENTS: Fair value was considered to be the same as the
carrying amount.
o RECEIVABLES: The Company believes that, in the aggregate, current and
non-current net receivables were not materially different from the fair
value of those receivables.
o LONG-TERM DEBT: The fair value of fixed-rate long-term debt was based on
the market value of debt with similar maturities and with interest rates
currently trading in the marketplace; the carrying amount of variable rate
long-term debt was assumed to approximate fair value.
38
<PAGE> 40
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF ENERGEN CORPORATION:
Our report on the consolidated financial statements of Energen Corporation and
subsidiaries has been incorporated by reference in this Form 10-K from page 55
of the 1995 Annual Report to Stockholders of Energen Corporation and
subsidiaries. In connection with our audits of such financial statements, we
have also audited the related financial statement schedules listed in the index
on page 17 and 18 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects the information required to be
included therein.
Coopers & Lybrand L.L.P.
Birmingham, Alabama
October 25, 1995
39
<PAGE> 41
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
ENERGEN CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
====================================================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
====================================================================================================
<S> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Balance at beginning of year $2,037 $1,927 $1,927
- ----------------------------------------------------------------------------------------------------
Additions:
Charged to income: 2,431 1,825 1,656
Recoveries and adjustments 67 153 81
- ----------------------------------------------------------------------------------------------------
2,498 1,978 1,737
- ----------------------------------------------------------------------------------------------------
Less uncollectible accounts written off 2,002 1,868 1,737
- ----------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR $2,533 $2,037 $1,927
====================================================================================================
</TABLE>
40
<PAGE> 42
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
ALABAMA GAS CORPORATION
<TABLE>
<CAPTION>
====================================================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
====================================================================================================
<S> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Balance at beginning of year $2,000 $1,800 $1,800
- ----------------------------------------------------------------------------------------------------
Additions:
Charged to income: 1,935 1,805 1,613
Recoveries and adjustments 67 263 78
- ----------------------------------------------------------------------------------------------------
2,002 2,068 1,691
- ----------------------------------------------------------------------------------------------------
Less uncollectible accounts written off 2,002 1,868 1,691
- ----------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR $2,000 $2,000 $1,800
====================================================================================================
</TABLE>
41
<PAGE> 1
EXHIBIT 3(e)
ARTICLES OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF ENERGEN CORPORATION
TO THE HONORABLE JUDGE OF PROBATE, JEFFERSON COUNTY, ALABAMA:
Pursuant to the provisions of Article 10 of Chapter 2B of Title 10
of the Code of Alabama of 1975 (Section 10-2B-10.01, et seq.), the
undersigned corporation executes the following Articles of Amendment to
its Restated Certificate of Incorporation:
(1) The name of the corporation is Energen Corporation.
(2) The Restated Certificate of Incorporation of the said
corporation is amended as follows:
(a) A new Article XI is added to read in its
entirety as follows:
XI. Limitation of Liability
11.01 A director of the Corporation
shall not be liable to the Corporation or its
shareholders for money damages for any action
taken, or failure to take action, as a director,
except for (i) the amount of a financial benefit
received by such director to which such director
is not entitled; (ii) an intentional infliction
of harm by such director on the Corporation or
its shareholders; (iii) a violation of Section
10-2B-8.33 of the Code of Alabama of 1975 or
any successor provision to such section; (iv)
an intentional violation by such director of
criminal law; or (v) a breach of such director's
duty of loyalty to the Corporation or its
shareholders. If the Alabama Business Corporation
Act, or any successor statute thereto, is hereafter
amended to authorize the further elimination or
limitation of the liability of a director of a
corporation, then the liability of a director of
the Corporation, in addition to the limitations on
liability provided herein, shall be limited to
the fullest extent permitted by the Alabama Business
Corporation Act, as amended, or any successor
statute thereto. The limitation on liability of
directors of the Corporation contained herein shall
apply to liabilities arising out of acts or omissions
occurring subsequent to the adoption of this Article
XI and, except to the extent prohibited by law, to
liabilities arising out of acts or omissions
occurring prior to the adoption of this Article XI.
Any repeal or modification of this Article XI by the
shareholders of the Corporation shall be prospective
only and shall not adversely affect any limitation
on the liability of a director of the Corporation
existing at the time of such repeal or modification.
(b) The provisions of the Restated Certificate of
Incorporation which constituted Article XI prior to the
adoption of the foregoing Article XI shall be renumbered as
Article XII and all sections therein, or references thereto,
shall be correspondingly renumbered to reflect the foregoing
amendment.
(3) The foregoing amendment to the Restated Certificate of
Incorporation was adopted by the shareholders of the said Corporation on
January 25, 1995 in the manner prescribed by the Alabama Business
Corporation Act.
(4) The common stock of the Corporation, par value $0.01 per
share, was the only voting group entitled to vote on the amendment. As
of the record date for the meeting, there were 10,919,977 shares of such
common stock outstanding, and the holders of such shares were entitled
to cast one vote per share, or an aggregate of 10,919,977 votes. There
were 9,156,260 votes entitled to be cast by the holders of the common
stock of the Corporation indisputably represented at the meeting.
(5) The total number of undisputed votes cast for the
amendment by the holders of the common stock of the Corporation was
8,150,902, and the number of votes cast for the amendment was sufficient
for approval of the amendment by the holders of the common stock of the
Corporation.
Dated as of February 3, 1995.
ENERGEN CORPORATION
BY /s/ Rex J. Lysinger
--------------------------
Rex J. Lysinger
Its Chairman of the Board
of Directors
ATTEST:
/s/ J. D. Woodruff, Jr.
- ---------------------------
J. D. Woodruff, Jr.
Assistant Secretary
<PAGE> 1
EXHIBIT 3(f)
RESTATED CONFORMED CERTIFICATE OF INCORPORATION
OF
ENERGEN CORPORATION
[AS AMENDED THROUGH FEBRUARY 3, 1995]
STATE OF ALABAMA )
)
COUNTY OF JEFFERSON )
TO THE HONORABLE JUDGE OF PROBATE, JEFFERSON COUNTY, ALABAMA:
Pursuant to the provisions of Article 10 of Chapter 2B of
Title 10 of the Code of Alabama of 1975 (Section Section 10-2A-110, et seq.),
the undersigned corporation executes the following Restated Certificate of
Incorporation:
I. NAME OF CORPORATION:
1.01 The name of the corporation shall be Energen
Corporation.
II. OBJECTS:
2.01 To manufacture, produce, buy, deal in, use, sell,
distribute, furnish and supply gas; to construct, equip, use, operate and
maintain works for holding, receiving, purifying and distributing gas, and all
buildings, works, meters, pipes, fittings, machinery, apparatus and appliances
convenient or necessary in connection therewith.
1
<PAGE> 2
2.02 To carry on the business of a gas company in all its
branches; to manufacture, use, deal in, render salable and sell all products,
by-products and residual products obtained in the production of gas; to
manufacture, buy, sell, rent and deal in all kinds of goods, wares, merchandise
and personal property which may seem calculated directly or indirectly to
promote the consumption of gas.
2.03 To manufacture, produce, buy, deal in, use, sell,
distribute, furnish and supply petroleum, petroleum products and by-products;
to construct, equip, use, operate and maintain works for holding, receiving,
purifying and distributing petroleum, petroleum products and by-products, and
all buildings, works, meters, pipes, fittings, machinery, apparatus and
appliances convenient or necessary in connection therewith.
2.04 To acquire, buy, hold, own, sell, lease, exchange,
dispose of, finance, deal in, construct, build, equip, improve, use, operate,
maintain and work upon any and all kinds of works, plants, stations, systems,
machinery, generators, apparatus, devices, supplies and articles of every kind
pertaining to or in anywise connected with the production, use, distribution,
regulation, control or application of light, heat, refrigeration, ice, water,
water-power, electricity, gas, and any other force.
2.05 To acquire, buy, hold, own, sell, lease, exchange,
dispose of, distribute, deal in, use, produce, furnish and supply light, heat,
refrigeration, ice, water, water-power, electricity, and any other power or
force.
2.06 To acquire, buy, hold, own, sell, lease, exchange and
dispose of lands or the gas, oil and mineral rights in lands; to develop such
lands by drilling gas and oil wells thereon; to produce therefrom gas, oil or
other volatile or mineral substances; to produce, deal in, use, distribute,
furnish and sell such gas or oil or other volatile or mineral substances; to
install, construct, build, equip, improve, use, operate and maintain any and
all manner of plants, machinery and appliances for any and all such purposes
and the marketing and selling of such products.
2
<PAGE> 3
2.07 To carry on the business of aiding in the
construction and operations of plants and works, including those of gas
companies, electric companies, and other public utility companies, and for or
in connection with any or all of the foregoing purposes to furnish services and
advice of engineers, auditors, executives and other experts.
2.08 To acquire, organize, assemble, develop, build up and
operate, constructing and operating and other organizations and systems and to
hire, sell, lease, exchange, turn over, deliver and dispose of such
organizations, in whole or in part, and to enter into and perform contracts,
agreements and undertakings of any kind in connection with any or all of the
foregoing objects.
2.09 To purchase, acquire, hold, own, develop and dispose
of lands and interests in and rights with respect to lands and waters and fixed
and movable property, franchises, concessions, consents, privileges and
licenses in its opinion useful or desirable for or in connection with any or
all of the foregoing objects.
2.10 To acquire by purchase, subscription or otherwise,
and to sell, use, assign, transfer, mortgage, pledge, exchange or otherwise
dispose of, and to make and enter into all manner and kinds of contracts,
agreements and obligations for the purchasing, acquiring, dealing in or selling
of, real and personal property of every sort and description and wheresoever
situated, including shares of stock, bonds, debentures, notes, scrip,
securities, evidences of indebtedness, contracts or obligations of any
corporation or corporations, association or associations, domestic or foreign,
or of any firm or individual of the United States or any state, territory or
dependency of the United States or any foreign country, or any municipality or
local authority within or without the United States, and also to issue in
exchange therefor stocks, bonds or other securities or evidences of
indebtedness of the Corporation and while the owner or holder of any such
property, to receive, collect and dispose of the interest, dividends and income
on or from such property, and to possess and exercise in respect thereto all of
the rights, powers and privileges of ownership, including voting rights.
2.11 To act as financial, business, managing and/or
purchasing agent, general or special.
3
<PAGE> 4
2.12 To carry on the business of general brokers and
dealers in stocks, bonds, securities, mortgages and other choses in action,
including the acquisition thereof by original subscription; to make investments
in such property; and to hold, manage, mortgage, pledge, sell and dispose of
the same in like manner as individuals may do.
2.13 To acquire by purchase or otherwise and to own, hold,
buy, sell, donate, convey, lease, mortgage or incumber real or personal
property both within and without the State of Alabama; to survey, sub-divide,
plat, improve and develop lands for the purposes of sale or otherwise; to lay
off such lands in streets, lanes, squares, parks and alleys, city blocks and
lots and to sell or otherwise dispose of lots and to secure the purchase by
purchase-money notes, mortgages, or otherwise, to open and improve the
streets, lanes, parks, squares and alleys which may be laid off and to do and
perform all things needful for the development and improvement of such lands
for trade or business and to make donations of any of its lands when in the
opinion of its Board of Directors the same may be desirable to further the
Corporation's interest.
2.14 To engage in and carry on a general mercantile and
trade business and to buy, manufacture, produce or otherwise acquire, hold,
own, use, import, export, trade or otherwise deal in or turn to account, sell,
lease, pledge or otherwise dispose of any and all kinds of goods, wares and
merchandise and other articles of commercial and personal property without
limit as to character or manner.
2.15 To borrow or otherwise raise moneys for any of the
purposes of the Corporation from time to time and without limit as to amount,
except as may be provided in a resolution or resolutions adopted by the
shareholders of the Corporation, to issue bonds, debentures, notes or other
obligations of any nature, or in any manner, and to secure the payment of the
principal and interest of any thereof by mortgage upon, or pledge or conveyance
or assignment in trust of, the whole or any part of the property of the
Corporation, real and personal, whether at the time owned or thereafter
acquired, including contract rights; and to sell, pledge, or otherwise dispose
of such bonds, debentures, notes or other obligations of any nature of the
Corporation for its corporate purposes.
4
<PAGE> 5
2.16 To lend and advance money and extend credit, either
with or without security, and to underwrite for investment, resale or otherwise
stocks, bonds and other securities, and to aid the organization, financing,
liquidation or reorganization of corporations, associations or firms.
2.17 To purchase or otherwise acquire and to hold, cancel,
re-issue, sell or transfer shares of its own capital stock (so far as may be
permitted by law) and its bonds, debentures, notes, scrip or other securities
or evidences of indebtedness, provided that it shall not use its funds or
property for the purchase of shares of its own capital stock when such use
would cause any impairment of its capital, and provided, further, that shares
of its own capital stock belonging to it shall not be voted directly or
indirectly.
2.18 In connection with the purchase or lease or other
acquisition by the Corporation of any property of whatever nature, to pay
therefor in cash or property or to issue in exchange therefor shares of its
capital stock, bonds, or other obligations or other securities of the
Corporation and to assume any liabilities of any person, firm, association or
corporation.
2.19 To sell, exchange or barter for other property,
assign, transfer, lease as lessor, mortgage, pledge or otherwise dispose of or
encumber any part or parts, or all, of the property or assets of the
Corporation; to cease to conduct the business connected with any such property
or assets so disposed of; to resume any business which it shall cease to
conduct; and the Corporation may receive any form of; to resume any business
which it shall cease to conduct; and the Corporation may receive any form of
consideration for property so sold, exchanged, bartered or otherwise disposed
of, including (but not excluding other forms of consideration) bonds,
debentures and/or other obligations and/or shares of stock of any existing
corporate or other entity or of any corporate or other entity in process of
organization.
2.20 To endorse, or otherwise guarantee, or become a
surety with respect to, or obligate itself for, or without becoming liable
therefor, nevertheless, to pledge or mortgage all or any part of its properties
to secure the payment of the principal of, and interest on, or either thereof,
any bonds, including construction or performance bonds, debentures, notes,
scrip,
5
<PAGE> 6
coupons, contracts or other obligations or evidences of indebtedness, or the
performance of any contract, lease, construction, performance or other bond,
mortgage, or obligation of any other corporation or association, domestic or
foreign, or of any firm, partnership, joint venture, or other person
whatsoever, in which this Corporation may have a lawful interest, or on account
of, or with respect to, any transaction in which this Corporation shall receive
any lawful consideration, advantage or benefit, on any account whatsoever.
Irrespective of the relative net worth of the corporations, associations, or
persons involved, and of the relative amounts of obligations involved, this
Corporation shall be deemed to have a lawful interest in any corporation,
association or person (A) which owns stock in this Corporation, or (B) which
owns stock in another corporation which owns stock in this Corporation, or (C)
in which this Corporation owns stock, or (D) in which another corporation owns
stock which also owns stock in this Corporation, or (E) in which any one or
more persons who own stock in this Corporation also own stock, or (F) which or
who has entered into any contractual arrangement pursuant to which any such
corporation or persons undertakes corresponding or like obligations of
endorsement, guarantee, or suretyship, with respect to all or any such
obligations or evidences of indebtedness, contracts of this Corporation, or
which may engage with this Corporation, in the conduct of any joint venture or
enterprise, or in the use of common facilities or services.
2.21 To engage in any commercial, financial, mercantile,
industrial, manufacturing, marine, exploration, mining, agricultural, research,
licensing, servicing or agency business not prohibited by law, and any, some or
all of the foregoing.
2.22 In general, to do any or all of the things
hereinbefore set forth to the same extent as natural persons could do, and as
principal or agent or otherwise, and either alone or in conjunction with any
other persons, firms, associations or corporations.
2.23 To exercise its powers in accomplishment of its
objects and purposes in any part of the world and to have one or more offices
out of the State of Alabama.
6
<PAGE> 7
2.24 To do all acts and things which it shall find
necessary or convenient to do in aid of or in connection with the transaction,
promotion and carrying on of the objects and purposes hereinabove stated or
necessary or incidental to the protection and benefit of the corporation, and
in general to carry on any lawful business necessary or incidental to the
attainment of the purposes of the Corporation, whether such business is similar
in nature to the objects and powers hereinabove set forth or otherwise.
2.25 The Corporation's power to acquire property of any
kind which it is or shall be authorized to acquire may be exercised directly or
indirectly through the acquisition of stocks and bonds representative of such
property and for the purpose of acquiring and holding either in perpetuity or
for a limited period.
The foregoing clauses shall be construed as powers and
provisions for the regulation of the business and the conduct and affairs of
the Corporation, the Directors and stockholders and each class of stockholders,
and it is hereby expressly provided that the foregoing specific enumeration
shall not be held to limit or restrict in any manner the powers of the
Corporation.
III. LOCATION:
3.01 The location of the Corporation's principal office in
the State of Alabama shall be:
1918 First Avenue North
Birmingham, Alabama 35295
IV. CAPITAL STOCK:
4.01 The total number of shares of stock which the
Corporation shall have authority to issue is as follows:
(a) Five million (5,000,000) shares, par value of
$0.01 per share, which are hereby designated as preferred stock (hereinafter
called "Preferred Stock").
7
<PAGE> 8
(b) Thirty million (30,000,000) shares, par value
of $0.01 per share, which are hereby designated as common stock (hereinafter
called "Common Stock").
4.02 (a) The Preferred Stock may be issued in such one
or more series as shall from time to time be created and authorized to be
issued by the Board of Directors as hereinafter provided.
The Board of Directors is hereby expressly authorized, by
resolution or resolutions from time to time adopted providing for the issuance
of Preferred Stock, to fix and determine, to the extent not fixed by the
provisions hereinafter set forth, the relative rights and preferences of the
shares of each series of Preferred Stock, including (but without limiting the
generality of the foregoing) any of the following with respect to which the
Board of Directors may make specific provisions:
(i) the distinctive name and any serial
designations;
(ii) the annual dividend rate or rates and the
dividend payment dates;
(iii) with respect to the declaration and payment of
dividends upon each series of the Preferred Stock,
whether such dividends are to be cumulative or
noncumulative, preferred, subordinate or equal to
dividends declared and paid upon other series of the
Preferred Stock or upon any other shares of stock of
the Corporation, and the participating or other
special rights, if any, of such dividends;
(iv) the redemption provisions, if any, with
respect to any series, and if any series is
subject to redemption, the manner and time of
redemption and the redemption price or
prices;
8
<PAGE> 9
(v) the amount or amounts of preferential or
other payment to which any series of
Preferred Stock is entitled over any other
series of Preferred Stock or over the Common
Stock on voluntary or involuntary
liquidation, dissolution or winding-up,
subject to the provisions set forth in
paragraph (c)(ii) of Section 4.02 hereof;
(vi) any sinking fund or other retirement
provisions and the extent to which the
charges therefor are to have priority over
the payment of dividends on or the making of
sinking fund or other like retirement
provisions for shares of any other series of
Preferred Stock or for shares of the Common
Stock;
(vii) any conversion, exchange, purchase or other
privileges to acquire shares of any other
series of Preferred Stock or of the Common
Stock;
(viii) the number of shares of such series; and
(ix) the voting rights, if any, of such series,
subject to the provisions set forth in
paragraph (c)(I) of Section 4.02 hereof.
Each share of each series of Preferred Stock shall have the
same relative rights and be identical in all respects with all the other shares
of the same series.
Before the Corporation shall issue any shares of Preferred
Stock of any series authorized as hereinbefore provided, a statement setting
forth a copy of the resolution or resolutions with respect to such series
adopted by the Board of Directors of the Corporation pursuant to the foregoing
authority vested in said Board shall be made, filed and recorded in accordance
with the then
9
<PAGE> 10
applicable requirements, if any, of the laws of the State of Alabama, or, if no
statement is then so required, a certificate shall be signed and acknowledged
on behalf of the Corporation by its Chairman of the Board, President or a
Vice-President and its corporate seal shall be affixed thereto and attested by
its Secretary or an Assistant Secretary and such certificate shall be filed and
kept on file at the principal office of the Corporatio in the State of Alabama
and in such other place or places as the Board of Directors shall designate.
(b) The authority of the Board of Directors to
provide for the issuance of any shares of the Corporation's stock shall
include, but shall not be limited to, authority to issue shares of stock of the
Corporation for any purpose and in any manner (including issuance pursuant to
rights, warrants, or other options) permitted by law, for delivery as all or
part of the consideration for or in connection with the acquisition of all or
part of the stock of another corporation or of all or part of the assets of
another corporation or enterprise, irrespective of the amount by which the
issuance of such stock shall increase the number of shares outstanding (but not
in excess of the number of shares authorized).
(C) The following relative rights and preferences
of the stock of the Corporation are fixed as follows:
(I) Voting Rights.
(A) Common Stock. At all elections of directors of the
Corporation, and in respect of all other matters as to which
the vote or consent of stockholders of the Corporation shall
be required to be taken, the holders of the Common Stock shall
be entitled to one (1) vote for each share held by them.
(B) Preferred Stock. The holders of each series of the
Preferred Stock shall have such voting rights as may be fixed
by resolution or by resolutions of the Board of Directors
providing for the issuance of each such series.
10
<PAGE> 11
(ii) Liquidation, Dissolution, etc. In the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation, the assets of the Corporation available for distribution to the
stockholders (whether from capital or surplus) shall be distributed among those
of the respective series of the outstanding Preferred Stock, if any, as may be
entitled to any preferential amounts and among the respective holders thereof
in accordance with the relative rights and preferences, if any, fixed and
determined for each such series and the holders thereof by resolution or
resolutions of the Board of Directors providing for the issue of each such
series of the Preferred Stock; and after payment in full of the amounts payable
in respect of the Preferred Stock, if any, the holders of any series of the
outstanding Preferred Stock who are not entitled to preferential treatment
pursuant to resolutions of the Board of Directors providing for the issue
thereof and the holders of the outstanding Common Stock shall be entitled (to
the exclusion of the holders of any series of the outstanding Preferred Stock
entitled to preferential treatment pursuant to resolutions of the Board of
Directors providing for the issue thereof) to share ratably in all the
remaining assets of the Corporation available for distribution to its
stockholders.
A merger, consolidation or reorganization of the Corporation
with or into one or more corporations, or a sale, lease or other transfer of
all or substantially all the assets of the Corporation, that does not result in
the termination of the enterprise and distribution of the assets to
stockholders, shall not be deemed to constitute a liquidation, dissolution or
winding-up of the Corporation within the meaning of this paragraph (c)(ii) of
Section 4.02 hereof, notwithstanding the fact that the Corporation may cease to
exist or may surrender its Certificate of Incorporation.
(iii) Dividends. Dividends on any stock of the Corporation
shall be payable only out of earnings or assets of the Corporation legally
available for the payment of such dividends and only as and when declared by
the Board of Directors.
(d) No holder of any share or shares of
any class of stock of the Corporation shall have any preemptive rights to
subscribe for any shares of stock of any class of the Corporation now or
hereafter authorized or for any securities convertible into or carrying any
optional rights to purchase or subscribe for any shares of stock of any class
of the Corporation now or hereafter authorized, provided, however, that no
provision of the Certificate of Incorporation shall be deemed to deny to the
Board of Directors the right, in its discretion, to grant to the holders of
shares of any class of stock at the time outstanding the right to purchase or
11
<PAGE> 12
subscribe for shares of stock of any class or any other securities of the
Corporation now or hereafter authorized at such prices and upon such other
terms and conditions as the Board of Directors, in its discretion, may fix.
4.03 The amount of the capital stock with which the
Corporation shall begin business shall be 1,000 shares of Common Stock.
V. OFFICER TO RECEIVE SUBSCRIPTION:
5.01 The name and post office address of the officer
designated by the incorporators to receive subscriptions to the capital of the
Corporation are:
Name: A. S. Lacy
Post Office
Address: 1918 First Avenue North
Birmingham Alabama 35295
12
<PAGE> 13
VI. INCORPORATORS AND SHARES:
The names and post office addresses of the incorporators and
the number of shares of Common Stock subscribed for by each are as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
NAME POST OFFICE ADDRESS SUBSCRIBED FOR
<S> <C> <C>
Howard Higgins 1918 First Avenue North 334
Birmingham, Alabama 35295
Rex J. Lysinger 1918 First Avenue North 333
Birmingham, Alabama 35295
A. S. Lacy 1918 First Avenue North 333
Birmingham, Alabama 35295
-----
Total 1,000
</TABLE>
VII. DIRECTORS AND OFFICERS:
7.01 The number of directors constituting the initial
board of directors of the Corporation shall be nine. Subject to Section 10.01
of Article X hereof, the number of directors of the Corporation shall be as
provided in and fixed by the Bylaws of the Corporation. The names and post
office addresses of the directors and the officers chosen for the first year
are:
13
<PAGE> 14
DIRECTORS
<TABLE>
<CAPTION>
NAME POST OFFICE ADDRESS
<S> <C>
Emory O. Cunningham Post Office Box 2581
Birmingham, Alabama 35202
James S. M. French Post Office Box 247
Birmingham, Alabama 35201
Robert F. Henry Post Office Box 2230
Montgomery, Alabama 36103
Howard Higgins 1918 First Avenue North
Birmingham, Alabama 35295
Norman R. Kerredge 1918 First Avenue North
Birmingham, Alabama 35295
Rex J. Lysinger 1918 First Avenue North
Birmingham, Alabama 35295
Harry H. Pritchett Post Office Box 2389
Tuscaloosa, Alabama 35401
Richard A. Puryear, Jr. 3700-A Country Club Drive
Birmingham, Alabama 35213
Robert S. Weatherly 2865 Stratford Road
Birmingham, Alabama 35213
OFFICERS
OFFICERS TITLE POST OFFICE ADDRESS
Howard Higgins Chairman of the 1918 First Avenue N.
Board and CEO Birmingham, AL 35295
Rex J. Lysinger President 1918 First Avenue N.
Birmingham, AL 35295
A. S. Lacy Vice President and 1918 First Avenue N.
Secretary Birmingham, AL 35295
Richard J. Patzke Vice President and 1918 First Avenue N.
Treasurer Birmingham, AL 35295
VIII. TIME LIMIT:
8.01 The duration of the Corporation shall be perpetual.
</TABLE>
IX. CERTAIN PROVISIONS RESPECTING BUSINESS COMBINATIONS:
9.01 Definitions.
For the purposes of this Article IX:
(a) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on June
11, 1984.
(b) "Announcement Date" means, with respect to
any Business Combination, the date of the first public
announcement of such Business Combination.
(c) A person shall be a "beneficial owner" of
any Voting Stock:
(I) which such person or any of its
Affiliates or Associates beneficially owns,
directly or indirectly; or
(ii) which such person or any of its
Affiliates or Associates has (A) the right
to acquire (whether such right is
exercisable immediately or only after the
passage of time) pursuant to any agreement,
arrangement or understanding or upon the
exercise of conversion rights, exchange
rights, warrants or options, or otherwise,
or (B) the right to vote or direct the vote
pursuant to any agreement, arrangement or
understanding; or
(iii) which is beneficially owned, directly
or indirectly, by any other person with
which such person or any of its
14
<PAGE> 15
Affiliates or Associates has any agreement,
arrangement, or understanding for the
purpose of acquiring, holding, voting or
disposing of any shares of capital stock of
the Corporation.
(d) For the purposes of determining whether
a person is an Interested Stockholder pursuant to
paragraph (k) of this Section 9.01 hereof, the
number of shares of Voting Stock deemed to be
outstanding shall include shares deemed owned by
the Interested Stockholder through application of
paragraph (C) of Section 9.01 hereof, but shall
not include any other shares of Voting Stock
which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants
or options, or otherwise.
(e) "Board" means the Board of Directors of
the Corporation.
(f) A "Business Combination" shall mean any
one or more of the following:
(I) any merger or consolidation-dation of
the Corporation or any Subsidiary with or
into (A) any Interested Stockholder or (B)
any other corporation (whether or not itself
an Interested Stockholder) which is, or after
such merger or consolidation would be, an
Affiliate of an Interested Stockholder; or
15
<PAGE> 16
(ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition (in
one transaction or a series of transactions)
to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of
any assets of the Corporation or any
Subsidiary having an aggregate Fair Market
Value of $1,000,000 or more; or
(iii) the issuance or transfer by the
Corporation or any Subsidiary (in one
transaction or a series of transactions) of
any securities of the Corporation or any
Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder
in exchange for cash, securities or other
property (or a combination thereof) having
an aggregate Fair Market Value of $1,000,000
or more; or
(iv) the adoption of any plan or proposal for
the liquidation or dissolution of the
Corporation proposed by or on behalf of an
Interested Stockholder or an Affiliate of
any Interested Stockholder; or
(v) any reclassification of securities
(including any reverse stock split), or
recapitalization of the Corporation, or any
merger or consolidation of the Corporation
with any of its Subsidiaries or any similar
transaction (whether or not with or into or
otherwise involving an Interested
Stockholder) which has the effect, directly
or indirectly, of increasing the
proportionate share of the outstanding
shares of any class of equity securities, or
securities convertible into equity
securities, of the Corporation or any
Subsidiary, including, without limitation,
any class or series of Protected Stock,
which is directly or indirectly owned by any
Interested Stockholder or any Affiliate of
any Interested Stockholder.
16
<PAGE> 17
(g) "Consummation Date" means, with respect
to any Business Combination, the date on which
such Business Combination is effected.
(h) "Determination Date" means, with respect
to any Interested Stockholder, the date on which
such Interested Stockholder first became an
Interested Stockholder.
(I) "Disinterested Director" means any
member of the Board who is unaffiliated with,
and not a nominee of, the Interested Stockholder
and was a member of the Board prior to the time
that the Interested Stockholder became an
Interested Stockholder, and any successor of a
Disinterested Director who is a member of the
Board and who is unaffiliated with, and not a
nominee of, the Interested Stockholder and was
recommended to succeed a Disinterested Director by
a majority of Disinterested Directors on the Board
at the time of such recommendation.
(j) "Fair Market Value" means (I) in the case
of stock, the highest closing sale price during
the thirty-day period immediately preceding the
date in question of a share of such stock on the
Composite Tape for New York Stock Exchange, Inc.
Listed Stocks, or, if such stock is not quoted on
the Composite Tape, on the New York Stock
Exchange, Inc., or, if such stock is not listed
on the New York Stock Exchange, Inc., on the
principal United States securities exchange
registered under the Securities Exchange Act of
1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the
highest closing bid quotation with respect to a
share of such stock during the thirty-day period
preceding the date in question as reported by the
National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in
use, or if no such quotations are available, the
fair market value on the date in question of a
share of such stock as determined by a majority
of the Disinterested Directors in good
17
<PAGE> 18
faith; and (ii) in the case of property other
than cash or stock, the fair market value of such
property on the date in question as determined by
a majority of the Disinterested Directors in good
faith.
(k) "Interested Stockholder" shall mean, in
respect of any Business Combination, any person
(other than the Corporation) who or which, as of
the date of the first public announcement of such
Business Combination, or on the day immediately
prior to the consummation of any such Business
Combination:
(I) is the beneficial owner, directly or
indirectly, of ten percent (10%) or more of
the voting power of the outstanding Voting
Stock; or
(ii) is an Affiliate of the Corporation
and at any time within two years prior there
to was the beneficial owner, directly or
indirectly, of ten percent (10%) or more of
the voting power of the then outstanding
Voting Stock; or
(iii) is an assignee of or has otherwise
succeeded to any shares of Voting Stock of
the Corporation which were at any time
within the two-year period immediately prior
to the date in question beneficially owned
by any Interested Stockholder, if such
assignment or succession shall have occurred
in the course of a transaction or series of
transactions not involving a public offering
within the meaning of the Securities Act of
1933.
(l) A "person" shall mean any individual,
firm, corporation or other entity.
(m) "Protected Stock" means all Voting Stock
and all other shares of capital stock of the
Corporation having, or which may have upon the
18
<PAGE> 19
happening of some contingency, the right to vote
for the election of some or all of the directors
of the Corporation, regardless of whether at the
time in question such shares then have a present
right to so vote.
(n) "Subsidiary" means any corporation of
which a majority of any class of equity security
is owned, directly or indirectly, by the
Corporation.
(o) "Voting Stock" means, at any time, all
shares of capital stock of the Corporation
entitled to vote generally in the election of
directors, which shares shall be considered for
the purpose of the vote required by this Article
IX as one class.
(p) In the event of any Business Combination
in which the Corporation survives, the phrase
"other consideration to be received" as used in
clauses (I) and (ii) of paragraph (b) of 9.03 of
this Article IX shall include the shares of
Common Stock and/or the shares of any other class
of outstanding Protected Stock retained by the
holders of such shares.
9.02 Higher Vote for Certain Business
Combinations. In addition to any affirmative vote required by law or this
Certificate of Incorporation, and except as otherwise expressly provided in
9.03 of this Article IX, any Business Combination shall require the affirmative
vote of the holders of at least eighty percent (80%) of the then outstanding
shares of Voting Stock. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that some lesser
percentage may be specified, by law or under the rules of, or in any agreement
with, any United States securities exchange registered under the Securities
Exchange Act of 1934, or any successor act thereto, on which any of the Voting
Stock is listed, or otherwise.
9.03 When Higher Vote Is Not Required. The
provisions of 9.02 of this Article IX shall not be applicable to any particular
Business Combination, and such Business Combination shall require only such
affirmative vote, if any, as is required by law and any other Article of this
Certificate of Incorporation, if all of the
19
<PAGE> 20
conditions specified in either of the following paragraphs (a) and (b) are met:
(a) Approval by the Disinterested Directors.
The Business Combination shall have been approved
by a majority of the Disinterested Directors.
(b) Price and Procedure Requirements. All of
the following conditions shall have been met:
(I) Common Stock. The aggregate amount of
the cash and the Fair Market Value as of the
Consummation Date of consideration other
than cash to be received by holders of the
Common Stock of the Corporation in such
Business Combination, computed on a per
share basis, shall be at least equal to the
higher of the following:
(A) (if applicable) the highest per share
price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees)
paid by the Interested Stockholder for any
shares of Common Stock acquired by the
Interested Stockholder (I) within the
two-year period immediately prior to the
Announcement Date or (II) in the transaction
or transactions by which the Interested
Stockholder became an Interested
Stockholder, whichever is higher; or
(B) the Fair Market Value per share of the
Common Stock on the Announcement Date or the
Determination Date, whichever is higher.
(ii)Protected Stock. The aggregate amount
of cash and the Fair Market Value as of the
Consummation Date of consideration other than
cash to be received per share by holders of
shares of any other class of outstanding
Protected Stock regardless of whether the
Interested Stockholder has previously acquired
20
<PAGE> 21
any shares of a particular class of such Protected
Stock shall be at least equal to the highest of the
following:
(A) (if applicable) the highest per share price
(including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by the
Interested Stockholder for any shares of such
class of Protected Stock acquired by the
Interested Stockholder (I) within the two- year
period immediately prior to the Announcement Date
or (II) in the transaction or transactions by
which the Interested Stockholder became an
Interested Stockholder, whichever is higher;
(B) the highest preferential amount per share to
which the holders of shares of such class of
Protected Stock are entitled in the event of any
voluntary or involuntary liquidation, dissolution
or winding up of the Corporation; or
(C) the Fair Market Value per share of such class of
Protected Stock on the Announcement Date or the
Determination Date, whichever is higher.
21
<PAGE> 22
(iii) Form of Consideration. The
consideration to be received by holders of a
particular class or series of outstanding
Protected Stock (including Common Stock)
shall be in cash or in the same form as the
Interested Stockholder has paid for shares
of such class of Protected Stock prior to
the Consummation Date. If the Interested
Stockholder has paid for shares of any class
of Protected Stock with varying forms of
consideration, the form of consideration for
such class of Protected Stock shall be
either cash or the form used to acquire the
largest number of shares of such class of
Protected Stock previously acquired by it.
(iv) Maintain Dividends. After such
Interested Stockholder has become an
Interested Stockholder and prior to the
consummation of such Business Combination:
(A) except as approved by a majority of the
Disinterested Directors, there shall have
been no failure to declare and pay at the
regular date therefor any full quarterly
dividends (whether or not cumulative) on any
outstanding Preferred Stock of the
Corporation; and (B) there shall have been
(I) no reduction in the annual rate of
dividends paid on the Common Stock except as
necessary to reflect any subdivision of the
Common Stock, except as approved by a
majority of the Disinterested Directors, and
(II) an increase in such annual rate of
dividends as necessary to reflect any
reclassification (including any reverse
stock split), recapitalization,
reorganization or any similar transaction
which has the effect of reducing the number
of outstanding shares of the Common Stock
unless the failure so to increase such
annual rate is approved by a majority of the
Disinterested Directors.
(v) Acquisition of Additional Shares.
After such Interested Stockholder has become
22
<PAGE> 23
an Interested Stockholder and prior to the
consummation of such Business Combination,
such Interested Stockholder shall not have
become the beneficial owner of any
additional shares of Voting Stock except as
part of the transaction which results in
such Interested Stockholder becoming an
Interested Stockholder.
(vi) No Disproportionate Benefits. After
such Interested Stockholder has become an
Interested Stockholder, such Interested
Stockholder shall not have received the
benefit, directly or indirectly (except
proportionately as a stockholder), of any
loans, advances, guarantees, pledges or
other financial assistance or any tax
credits or other tax advantages provided by
the Corporation, whether in anticipation of
or in connection with such Business
Combination or otherwise.
(vii) Furnish Information. A proxy or
information statement describing the
proposed Business Combination and complying
with the requirements of the Securities
Exchange Act of 1934 and the rules and
regulations thereunder (or any subsequent
provisions replacing such Act, rules or
regulations) shall be mailed to all
stockholders of this Corporation at least 30
days prior to the consummation of such
Business Combination (whether or not such
proxy or information statement is required
to be mailed pursuant to such Act or any
such subsequent provisions).
23
<PAGE> 24
9.04 Powers of Board of Directors. A majority of
the Disinterested Directors of the Corporation shall have the power and duty to
determine for the purposes of this Article IX on the basis of the information
known to them after reasonable inquiry, (1) the number of shares of Voting
Stock beneficially owned by any person, (2) whether a person is an Interested
Stockholder or is an Affiliate or Associate of another person, (3) whether a
person has an agreement, arrangement or understanding with another as to the
matters referred to in paragraph (C) of Section 9.01 of this Article IX, (4)
whether the assets which are the subject of any Business Combination have, or
the consideration to be received for the issuance or transfer of securities by
the Corporation or any Subsidiary in any Business Combination has, an aggregate
Fair Market Value of $1,000,000 or more, or (5) whether the requirements of
paragraph (a) or (b) of Section 9.03 of this Article IX have been met with
respect to any Business Combination.
9.05 No Effect on Fiduciary Obligations of
Interested Stockholders. Nothing contained in this Article IX shall be
construed to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
9.06 Amendment, Repeal, Etc. Notwithstanding any
other provisions of this Certificate of Incorporation or the Bylaws of the
Corporation (and notwithstanding the fact that some lesser percentage may be
specified by law, this Certificate of Incorporation or the Bylaws of the
Corporation), the affirmative vote of the holders of at least eighty percent
(80%) of the shares of the then outstanding Voting Stock shall be required to
amend or repeal, or adopt any provisions inconsistent with, this Article IX of
this Certificate of Incorporation.
X. BOARD OF DIRECTORS:
10.01 (a)Number, election and terms. All
corporate powers shall be exercised by or under the authority of, and the
business and affairs of the Corporation shall be managed under the direction
of, a Board of Directors which, except as otherwise fixed by or pursuant to the
provisions of Article IV hereof relating to the rights of the holders of any
class or series of Preferred Stock to elect additional directors under
specified circumstances, shall
24
<PAGE> 25
consist of not less than nine (9) nor more than fifteen (15) persons. The
exact number of directors within the minimum and maximum limitations specified
in the preceding sentence shall be fixed from time to time by the Board of
Directors pursuant to a resolution adopted by a majority of the entire Board of
Directors. At the annual meeting of stockholders of the Corporation held in
1985, the directors, other than those who may be elected by the holders of any
class or series of Preferred Stock, shall be divided into three classes, as
nearly equal in number as possible, with the term of office of the first class
of directors to expire at the annual meeting of stockholders of the Corporation
to be held in 1986, the term of office of the second class of directors to
expire at the annual meeting of stockholders of the Corporation to be held in
1987 and the term of office of the third class of directors to expire at the
annual meeting of stockholders of the Corporation to be held in 1988. At each
annual meeting of stockholders of the Corporation following such initial
classification and election, and except as otherwise so fixed by or pursuant to
the provisions of Article IV hereof relating to the rights of the holders of
any or series of Preferred Stock to elect additional directors under specified
circumstances, directors elected to succeed those directors whose terms expire
at such annual meeting shall be elected for a term of office to expire at the
third succeeding annual meeting of stockholders of the Corporation after their
election.
(b) Vacancies and Newly Created
Directorships. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the Board of Directors. A director elected to fill a
vacancy shall be elected to serve until the next annual meeting of
stockholders. Any directorship to be filled by reason of an increase in the
number of directors shall be filled by election at an annual meeting or at a
special meeting of stockholders called for that purpose, unless applicable law
then permits such directorship to be filled by the affirmative vote of a
majority of the remaining directors (even though less than a quorum of the
Board of Directors). No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
25
<PAGE> 26
(c) Continuance in Office. Notwithstanding
the foregoing provisions of Section 10.01 hereof, any director whose term of
office has expired shall continue to hold office until his successor shall be
elected and qualify.
(d) Removal. Subject to the rights of the
holders of any class or series of Preferred Stock then outstanding, any
director, or the entire Board of Directors, may be removed from office at any
time, with or without cause, but only by the affirmative vote of the holders of
at least eighty percent (80%) of the voting power of all of the shares of the
Corporation then entitled to vote for the election of directors.
(e) Amendment, repeal, etc. Notwithstanding
any other provisions of this Certificate of Incorporation or the Bylaws of the
Corporation (and notwithstanding the fact that some lesser percentage may be
specified by law, this Certificate of Incorporation or the Bylaws of the
Corporation), the affirmative vote of the holders of at least eighty percent
(80%) of the voting power of all of the shares of the Corporation then entitled
to vote for the election of directors shall be required to amend or repeal, or
to adopt any provision inconsistent with, Section 10.01 hereof.
10.02 In furtherance, not in limitation, of the
powers conferred upon the Board of Directors by statute, the Board of Directors
is expressly authorized, without any vote or other action by stockholders other
than such as at the time shall be expressly required by statute applicable to
such action, to exercise in a manner not inconsistent with any of the
provisions of the Certificate of Incorporation all of the powers, rights and
privileges of the Corporation (whether expressed or implied in this Certificate
of Incorporation or conferred by statute) and do all acts and things which may
be done by the Corporation, and particularly, among other things:
26
<PAGE> 27
(a) Subject to Section 9.06 of Article IX and
paragraph (e) of Section 10.01 hereof, to make, alter and repeal Bylaws of the
Corporation, subject to the power of the stockholders to alter or repeal Bylaws
made by the Board of Directors, which action by the directors shall fully
protect third parties in dealing with the Corporation; provided, however, that
the Board of Directors may not alter, amend or repeal any Bylaw establishing
what constitutes a quorum at any meeting of the stockholders of the
Corporation;
(b) To determine, subject to the provisions
of Article IX hereof, whether any, and if any, what part, of the net income of
the Corporation or of its net assets in excess of its capital shall be declared
in dividends and paid to the stockholders and whether or not in cash or capital
stock of the Corporation or in other property, and generally to determine and
direct the use and disposition of any such net income or any such excess of net
assets over capital; and to fix the times for the declaration and payment of
dividends;
(C) From time to time, to fix the amount to
be reserved over and above the capital stock of the Corporation paid in and to
determine and direct how amount so reserved shall be used;
(d) To determine from time to time at what
times and places and under what conditions and regulations the accounts and
books of the Corporation, or any of them, shall be open to the inspection of
stockholders; and no stockholders shall have any right to inspect any account
or book or document of the Corporation except as conferred by the laws of the
State of Alabama or authorized by resolution of the Board of Directors or of
the stockholders;
(e) From time to time, and without other
limit as to amount, except as may be provided in a resolution or resolutions
adopted by the stockholders of the Corporation, to borrow or otherwise raise
moneys for any of the purposes of the Corporation; to authorize the issue of
bonds, debentures, notes, or other obligations of the Corporation, of any
nature, or in any manner, and to authorize the creation of mortgages upon, or
the pledge or conveyance or assignment in trust of, the whole or any part of
the property of the Corporation, real or personal, whether at the time owned or
thereafter acquired, including contract rights, to secure the payment of any of
such bonds, debentures, notes or other obligations and the interest thereon;
and to authorize the sale or pledge or other disposition of such bonds,
debentures, notes or other obligations of the Corporation for its corporate
purposes;
(f) To provide, subject to the requirements
of law and the bylaws of the Corporation, for the holding of stockholders and
Directors meetings within or without the State of Alabama at such places as may
be from time to time designated by resolution of the Board of Directors and to
provide for an office or offices and for the keeping of the books of the
Corporation (subject to the provisions of the statute) within or without the
State of Alabama;
(g) By resolution adopted by majority vote of
all the Directors of the Corporation as at the time fixed by its bylaws, to
designate three or more of their number to constitute an executive committee,
which, to the extent provided in such resolution or in the bylaws of the
Corporation, shall have and may exercise the powers of the Board of Directors
in the management of the business and affairs of the Corporation, and may have
power to authorize the seal of the Corporation to be affixed to all papers
which may require it, and by like resolution, from time to time, to constitute
other committees out of their number, with such powers as shall be provided in
such resolutions or in the bylaws of the Corporation;
(h) Any action required or permitted to be
taken at any meeting of the Board of Directors or any committee thereof may be
taken without a meeting, if prior to such action a written consent thereto is
signed by all members of the Board or such committee, as the case may be, and
such written consent is filed with the minutes of proceedings of the Board or
committee;
(I) To exercise such further powers as may be
conferred by the bylaws of the Corporation in addition to the powers and
authority expressly conferred in the foregoing or by law.
27
<PAGE> 28
XI. LIMITATION OF LIABILITY:
11.01 A director of the Corporation shall not be
liable to the Corporation or its shareholders for money damages for any action
taken, or failure to take action, as a director, except for (I) the amount of a
financial benefit received by such director to which such director is not
entitled; (ii) an intentional infliction of harm by such director on the
Corporation or its shareholders; (iii) a violation of Section 10-2B-8.33 of the
Code of Alabama of 1975 or any successor provision to such section; (iv) an
intentional violation by such director of criminal law; or (v) a breach of such
director's duty of loyalty to the Corporation or its shareholders. If the
Alabama Business Corporation Act, or any successor statute thereto, is
hereafter amended to authorize the further elimination or limitation of the
liability of a director of a corporation, then the liability of a director of
the Corporation, in addition to the limitations on liability provided herein,
shall be limited to the fullest extent permitted by the Alabama Business
Corporation Act, as amended, or any successor statute thereto. The limitation
on liability of directors of the Corporation contained herein shall apply to
liabilities arising out of acts or omissions occurring subsequent to the
adoption of this Article XI and, except to the extent prohibited by law, to
liabilities arising out of acts or omissions occurring prior to the adoption of
this Article XI. Any repeal or modification of this Article XI by the
shareholders of the Corporation shall be prospective only and shall not
adversely affect any limitation on the liability of a director of the
Corporation existing at the time of such repeal or modification.
XII. GENERAL PROVISIONS
12.01 Capital surplus, paid-in surplus and
premiums on stock of the Corporation now existing or hereafter created shall
not be available for the payment of dividends other than liquidating dividends.
12.02 All persons who shall acquire stock in the
Corporation shall acquire it subject to the provisions of this Certificate of
Incorporation.
28
<PAGE> 29
12.03 So far as not otherwise expressly provided
by the laws of the State of Alabama, the Corporation shall be entitled to treat
the person in whose name any share is registered as the owner thereof for all
purposes and shall not be bound to recognize any equitable or other claim to or
interest in said share on the part of any other person, whether or not the
Corporation shall have notice thereof.
12.04 Attached hereto, marked Exhibit "A" and made
a part hereof, is a statement, under oath, made by A. S. Lacy, the officer or
agent authorized by the incorporators to receive subscriptions to the capital
stock of the Corporation subscribed for and the amount thereof which has been
paid in. There is also attached hereto, marked Exhibit "B" and made a part
hereof, a true and correct copy of the subscription list of the Corporation
showing the amount of capital stock subscribed for by the incorporators and the
manner in which such subscriptions are provided to be discharged.
The board of directors of the Corporation adopted
a resolution with respect to the restatement of the certificate of
incorporation of the corporation on July 19, 1984.
The foregoing restated certificate of
incorporation of the Corporation sets forth all of the operative provisions of
the Certificate of Incorporation of the Corporation, correctly sets forth
without change the corresponding provisions of the Certificate of Incorporation
of the Corporation as heretofore amended and supersedes the original
Certificate of Incorporation of the Corporation and all amendments thereto.
Dated this 20th day of July, 1984.
ENERGEN CORPORATION
By /s/ Rex J. Lysinger
-------------------------------
Its Chairman of the Board of
Directors and President
and /s/ A. S. Lacy
-------------------------------
Its Secretary
29
<PAGE> 30
STATE OF ALABAMA )
)
COUNTY OF JEFFERSON )
Before me, the undersigned authority in and for
said County in said State, personally appeared Rex J. Lysinger known to me, who
being first duly sworn doth depose and say that he is the Chairman of the Board
of Directors and President of Energen Corporation, that he signed the foregoing
Restated Certification of Incorporation of said corporation as Chairman of the
Board of Directors and President of said corporation and with full authority
and that the statements made in the foregoing Restated Certification of
Incorporation of said corporation are true and correct.
/s/ Rex J. Lysinger
-----------------------------
Rex J. Lysinger
Subscribed and sworn before me on this 20th day
of July, 1984, in witness whereof I hereunto subscribe my name and attach the
seal in my office.
Margaret G. Priola
------------------------------
Notary Public
[NOTARIAL SEAL] My Commission Expires: 4/20/85
30
<PAGE> 31
EXHIBIT "A"
STATE OF ALABAMA )
)
COUNTY OF JEFFERSON )
Before me, Evelyn E. Pulley, a Notary Public in
and for said county in said state, personally appeared A. S. Lacy, who is known
to me, and who, being by me first duly sworn according to law, deposed and said
that he is the officer or agent designated and authorized by the incorporators
of Energen Corporation, an corporation proposed to be incorporated under the
laws of the State of Alabama, to receive the subscription to the capital stock
of said corporation; that the amount of capital stock of said corporation that
has been paid in cash is One Thousand Dollars ($1,000.00) which amount is at
least twenty percent (20%) of the stock subscribed; that a true copy of the
subscription list of capital stock of said corporation and the price paid in
cash therefor by each subscriber is attached hereto, marked Exhibit "B" and
made a part hereof; and that affiant now holds said cash for delivery to said
corporation, upon completion of the organization thereof.
/s/ A. S. LACY
----------------------------
A. S. Lacy
Subscribed and sworn to before me this
26th day of October, 1978.
/s/ Evelyn E. Pulley
- --------------------------------------
Notary Public in and for the County of
Jefferson, Alabama
My Commission expires: March 16, 1980
31
<PAGE> 32
EXHIBIT "B"
SUBSCRIPTION LIST OF THE CAPITAL STOCK
OF
ENERGEN CORPORATION
We, the undersigned, do hereby respectively subscribe for and agree to
take and pay in cash for the number of shares of common stock of the par value
of One Dollar ($1.00) per share of Energen Corporation, a corporation proposed
to be organized under the laws of the State of Alabama, that is set opposite our
respective signatures.
IN WITNESS WHEREOF, each of the undersigned subscribers has signed his
name hereto, all opposite the number of shares subscribed for by each of the
undersigned, this 19th day of October, 1978.
<TABLE>
<CAPTION>
NUMBER AMOUNT
OF PAID
SHARES IN CASH
<S> <C> <C>
/s/ Howard Higgins 334 $334.00
- ----------------------------
Howard Higgins
/s/ Rex J. Lysinger 333 $333.00
- ----------------------------
Rex J. Lysinger
/s/ A. S. Lacy 333 $333.00
- ----------------------------
A. S. Lacy
</TABLE>
32
<PAGE> 1
EXHIBIT 3(i)
ARTICLES OF AMENDMENT AND RESTATEMENT
OF THE
ARTICLES OF INCORPORATION
OF
ALABAMA GAS CORPORATION
STATE OF ALABAMA )
:
COUNTY OF JEFFERSON )
TO THE HONORABLE SECRETARY OF STATE OF ALABAMA:
Pursuant to the provisions of Article 10 of Chapter 2B of Title 10 of
the Code of Alabama of 1975 (# 10-2B- 10.01, et seq.), the undersigned
corporation executes the following Articles of Amendment and Restatement of the
Articles of Incorporation:
FIRST: The name of the corporation is Alabama Gas Corporation.
SECOND: The articles of incorporation of the corporation
shall be amended and restated in their entirety to read as follows:
1. The name of the corporation is Alabama Gas Corporation.
2. The aggregate number of shares of all classes of stock which
the corporation is authorized to issue is 3,120,000 shares, of which 120,000
shares, par value of $0.01 per share, are to be preferred stock (hereinafter
called "Preferred Stock"), and 3,000,000 shares, par value of $0.01 per share,
are to be common stock (hereinafter called "Common Stock").
A. The Preferred Stock may be issued in such
one or more series as shall from time to time be created and authorized to be
issued by the board of directors as hereinafter provided. The board of
directors is hereby expressly authorized, in accordance with the requirements
of, and to the fullest extent permitted by, the Alabama Business Corporation
Act, as amended, or any successor statute thereto, to fix and determine, to the
extent not fixed by the provisions hereinafter set forth, the preferences,
limitations and relative rights of the shares of each series of Preferred Stock
before the issuance of any shares of that series. Each share of each series of
Preferred Stock shall have the same preferences, limitations and relative
rights and be identical in all respects with all the other shares of the same
series. Before the corporation shall issue any shares of Preferred Stock of
any series authorized as hereinbefore provided, articles of amendment of the
articles of incorporation of the corporation with respect to such amendment
shall be filed and recorded in accordance with the then applicable
requirements, if any, of the laws of the State of Alabama, or, if no articles
of amendment are then so required, a certificate shall be signed and
acknowledged on behalf of the corporation by its chairman of the board,
president or a vice president and its corporate seal shall be affixed thereto
and attested by its secretary or an assistant secretary and such certificate
1
<PAGE> 2
shall be filed and kept on file at the principal office of the corporation in
the State of Alabama and in such other place or places as the board of
directors shall designate.
B. The authority of the board of directors to
provide for the issuance of any shares of the corporation's stock shall
include, but shall not be limited to, authority to issue shares of stock of the
corporation for any purpose and in any manner (including issuance pursuant to
rights, warrants, or other options) permitted by law, for delivery as all or
part of the consideration for or in connection with the acquisition of all or
part of the stock of another corporation or of all or part of the assets of
another corporation or enterprise, irrespective of the amount by which the
issuance of such stock shall increase the number of shares outstanding (but not
in excess of the number of shares authorized).
C. The following relative rights and
preferences of the stock of the corporation are fixed as follows:
(1) Voting Rights.
(a) Common Stock. At all elections of directors of
the corporation and in respect of all other matters as to which the
vote or consent of shareholders of the corporation shall be required
to be taken, the holders of the Common Stock shall be entitled to one
(1) vote for each share held by them.
(b) Preferred Stock. The holders of each series of
the Preferred Stock shall have such voting rights as may be fixed by
resolution or by resolutions of the board of directors providing for
the issuance of such series.
(2) Liquidation, Dissolution, etc. In the event of
any voluntary or involuntary liquidation, dissolution or winding-up of the
corporation, the assets of the corporation available for distribution to the
shareholders (whether from capital or surplus) shall be distributed among those
of the respective series of the outstanding Preferred Stock, if any, as may be
entitled to any preferential amounts and among the respective holders thereof
in accordance with the relative rights and preferences, if any, fixed and
determined for each such series and the holders thereof by the amendment to the
articles of incorporation of the corporation providing for the issue of each
such series of the Preferred Stock; and after payment in full of the amounts
payable in respect of the Preferred Stock, if any, the holders of any series of
the outstanding Preferred Stock who are not entitled to preferential treatment
pursuant to resolutions of the board of directors providing for the issue
thereof and the holders of the outstanding Common Stock shall be entitled (to
the exclusion of the holders of any series of the outstanding Preferred Stock
entitled to preferential treatment pursuant to resolutions of the board of
directors providing for the issue thereof) to share ratably in all the
remaining assets of the corporation available for distribution to its
shareholders. A merger, consolidation or reorganization of the corporation
with or into one or more corporations, or a sale, lease or other transfer of
all or substantially all the assets of the corporation, that does not result in
the termination of the enterprise and distribution of the assets to
shareholders, shall not be deemed to constitute a liquidation, dissolution or
winding-up of the corporation within the meaning of this paragraph C(2) of this
Article 2, notwithstanding the fact that the corporation may cease to exist and
may surrender its corporate charter.
2
<PAGE> 3
(3) Dividends. Dividends on any stock of the
corporation shall be payable only to the extent distributions are permitted to
be made by the corporation to its shareholders pursuant to the Alabama Business
Corporation Act, as amended, or any successor statute thereto, and only as and
when declared by the board of directors.
D. No holder of any share or shares of any
class of stock of the corporation shall have any preemptive right to subscribe
for any shares of stock of any class of the corporation now or hereafter
authorized or for any securities convertible into or carrying any optional
rights to purchase or subscribe for any shares of stock of any class of the
corporation now or hereafter authorized, provided, however, that no provision
of the articles of incorporation shall be deemed to deny to the board of
directors the right, in its discretion, to grant to the holders of shares of
any class of stock at the time outstanding the right to purchase or subscribe
for shares of stock of any class or any other securities of the corporation now
or hereafter authorized at such prices and upon such other terms and conditions
as the board of directors, in its discretion, may fix.
3. The street address of the registered office of the
corporation is 2101 Sixth Avenue North, Birmingham, Alabama 35203, and the name
of the corporation's registered agent at such address is Dudley C. Reynolds.
4. The purpose or purposes for which the corporation
is organized are the transaction of any or all lawful business for which
corporations may be incorporated under the Alabama Business Corporation Act,
including, without limitation, the following:
(i) The construction, acquisition, maintenance and
operation of natural gas transmission, distribution, storage and
related facilities;
(ii) Engaging in the business of natural gas
distribution as a regulated public utility and in non-regulated
capacities;
(iii) The acquisition, leasing, sale and financing of
appliances, equipment and other merchandise and services at wholesale
and retail; and
(iv) The acquisition, development, leasing, sale and
financing of any and all kinds of property, real, personal and
intangible.
The corporation shall have and may exercise any and all powers which a
corporation incorporated under the Alabama Business Corporation Act, as
amended, or any successor statute thereto, may have and exercise.
5. The number of directors of the corporation shall
consist of not less than one nor more than twenty persons, the exact number of
persons within such minimum and maximum limitations being fixed from time to
time by the board of directors of the corporation pursuant to resolutions
adopted by a majority of the persons constituting the board of directors at the
time such resolutions are adopted. The board of directors shall have the power
to fill all vacancies occurring on the board of directors, including, without
limitation, any vacancies resulting from an increase in
3
<PAGE> 4
the number of directors within the minimum and maximum limitations on the
number of directors of the corporation set forth in this Article 5.
6. A director of the corporation shall not be liable
to the corporation or its shareholders for money damages for any action taken,
or failure to take action, as a director, except for (i) the amount of a
financial benefit received by such director to which such director is not
entitled; (ii) an intentional infliction of harm by such director on the
corporation or its shareholders; (iii) a violation of Section 10-2B-8.33 of the
Code of Alabama of 1975 or any successor provision to such section; (iv) an
intentional violation by such director of criminal law; or (v) a breach of such
director's duty of loyalty to the corporation or its shareholders. If the
Alabama Business Corporation Act, or any successor statute thereto, is
hereafter amended to authorize the further elimination or limitation of the
liability of a director of a corporation, then the liability of a director of
the corporation, in addition to the limitations on liability provided herein,
shall be limited to the fullest extent permitted by the Alabama Business
Corporation Act, as amended, or any successor statute thereto. The limitation
on liability of directors of the corporation contained herein shall apply to
liabilities arising out of acts or omissions occurring subsequent to the
adoption of this Article 6 and, except to the extent prohibited by law, to
liabilities arising out of acts or omissions occurring prior to the adoption of
this Article 6. Any repeal or modification of this Article 6 by the
shareholders of the corporation shall be prospective only and shall not
adversely affect any limitation on the liability of a director of the
corporation existing at the time of such repeal or modification.
THIRD: The foregoing amended and restated articles of
incorporation were adopted by the shareholders of the corporation, by execution
of an action by unanimous written consent of shareholders in lieu of a meeting
dated September 27, 1995, in the manner prescribed by the Alabama Business
Corporation Act.
FOURTH: The common stock of the said corporation, par
value $.01 per share, was the only voting group entitled to vote on the
amendment. There were 1,972,052 shares of such common stock outstanding, and
the holders of such shares were entitled to cast one vote per share, or an
aggregate of 1,972,052 votes. The shareholders executing the action by
unanimous written consent of shareholders in lieu of a meeting were
indisputably entitled to cast 1,972,052 votes with respect to the said
amendment.
FIFTH: The total number of undisputed votes cast for the
amendment by the holders of the common stock of the said corporation, by the
execution of an action by unanimous written consent of the shareholders in lieu
of a meeting, was 1,972,052 and the number of votes cast for the amendment was
sufficient for approval of the amendment by the holders of the common stock of
the said corporation.
4
<PAGE> 5
Dated this 27th day of September, 1995.
ALABAMA GAS CORPORATION
By /s/ Rex J. Lysinger
---------------------------
Rex J. Lysinger
Its Chairman of the Board of Directors
This instrument prepared by:
John K. Molen, Esq.
Bradley, Arant, Rose & White
2001 Park Place, Suite 1400
Birmingham, Alabama 35203
5
<PAGE> 1
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
CONSOLIDATED NET INCOME
Energen Corporation's net income totaled $19.3 million, or $1.77 per share, for
the fiscal year ended September 30, 1995. This compares with last year's
record earnings of $23.8 million, or $2.19 per share, which includes a one-time
gain of $2 million, or 18 cents per share, for the sale of propane assets and a
reduction in investment in high temperature combustion technology. For 1993,
Energen reported earnings of $18.1 million, or $1.77 per share.
1995 vs 1994: Alabama Gas Corporation (Alagasco), Energen's natural gas
utility, achieved record earnings for the fifth consecutive year. In addition
to normal annual equity growth which approximated 4 percent in 1995, Alagasco's
net income of $15.7 million increased 5.4 percent over the prior year primarily
due to the utility earning for a full year on a higher level of equity
generated by a $21 million investment in underground storage working gas made
in 1994 for which the utility received a $10 million equity infusion from
Energen. Partially offsetting this increase was a one-time after-tax charge to
earnings of $503,000 resulting from a voluntary early retirement program.
Energen's oil and gas exploration and production company, Taurus Exploration
Inc. (Taurus), earned net income of $3.5 million in 1995, a decrease of 46
percent from the prior year. As expected, the major factor negatively
affecting Taurus's earnings was comparatively lower natural gas commodity
prices. Depressed prices affected Taurus's gas production revenues as well as
income from price-sensitive coalbed methane operating fees. Taurus's 1995
earnings also were negatively impacted by increased operating expense and
depreciation, depletion, and amortization (DD&A) expense.
1994 vs 1993: Alagasco's 1994 earnings of $14.9 million compared with $13
million in fiscal 1993. The utility's investment in underground storage working
gas in early fiscal 1994 increased the equity upon which Alagasco was able to
earn its allowed return. Taurus's 1994 income of $6.5 million compared with
fiscal 1993 earnings of $5.1 million. The 27 percent increase largely was
associated with increased conventional gas activities as production more than
doubled to 5.5 Bcf. Taurus also benefitted from increased coalbed methane
operating fees.
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<PAGE> 2
OPERATING INCOME
Consolidated operating income in 1995, 1994, and 1993 totaled $32.4 million,
$35.9 million, and $30.3 million, respectively. Lower natural gas commodity
prices and increased operating expense at Taurus significantly affected
operating income in 1995. The increase in operating income in 1994 primarily
was associated with the utility's investment in underground working storage gas
which was financed, in part, through the issuance of equity upon which the
utility was able to earn its allowed return.
ALAGASCO: Alagasco generates revenues through the sale and transportation of
natural gas. Shifts between transportation and sales gas can cause large
variations in natural gas revenues since the transportation rate does not
contain an amount representing the cost of gas. Alagasco's rate structure
allows similar margins on transported and sales gas; therefore, operating
income is not adversely affected. Weather also can cause variations in
revenues, but operating margins remain unaffected due to a real-time
temperature adjustment which lets Alagasco adjust customer bills monthly to
reflect changes in usage due to departures from normal weather.
Alagasco's gross natural gas sales revenues totaled $265.5 million, $315.3
million, and $303.2 million in 1995, 1994 and 1993, respectively. A lower
commodity cost of gas contributed significantly to the 1995 decrease; the
decreased cost was passed to customers through reduced rates. Additionally,
weather was significantly warmer than normal, resulting in a 12 percent
decrease in sales volumes
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1995 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross natural gas sales revenues $ 265,477 $ 315,317 $ 303,178
Cost of natural gas (133,556) (188,592) (187,800)
Revenue taxes (16,051) (20,018) (18,540)
- --------------------------------------------------------------------------------------
Net natural gas sales margin 115,870 106,707 96,838
Net natural gas transportation margin 30,490 29,320 27,382
- --------------------------------------------------------------------------------------
Net natural gas sales and transportation
margin $ 146,360 $ 136,027 $ 124,220
======================================================================================
Natural gas sales volumes (MMcf)
Residential 27,489 31,254 30,957
Commercial and industrial small 12,288 13,536 13,853
Commercial and industrial large 29 106 282
- --------------------------------------------------------------------------------------
Total natural gas sales volumes 39,806 44,896 45,092
Natural gas transportation volumes (MMcf) 61,640 52,635 49,346
======================================================================================
Total deliveries (MMcf) 101,446 97,531 94,438
======================================================================================
</TABLE>
26
<PAGE> 3
to residential customers; the recovery of margins via the temperature adjustment
partially offset the revenue impact. The majority of the increase in 1994 was
related to rate relief.
Residential sales volumes decreased 12 percent in the current year as weather
in Alagasco's service area was 19 percent warmer than normal. Residential
volumes remained relatively stable in 1994 compared with 1993, as temperatures
were 2 percent and 1 percent colder than normal, respectively. Sales and
transportation volumes to commercial, industrial and municipal customers totaled
74 Bcf in 1995, 66.3 Bcf in 1994, and 63.5 Bcf in 1993. The increase in 1995
and 1994 is due to the addition in each year of several large industrial
customers.
A significant decline in the commodity cost of gas coupled with a decrease in
residential sales volumes attributable to warmer weather contributed to a 29
percent decrease in the cost of gas in fiscal 1995. Cost of gas in 1994
virtually was unchanged from 1993, as the effect of lower prices on stable
volumes was largely offset by the inclusion of gas supply realignment costs
incurred in connection with the implementation of FERC Order 636.
Operations and maintenance (O&M) expense increased 7 percent in 1995 and 9
percent in 1994 primarily due to an increase in labor and related benefits
costs. Included in these costs for the current year was a pre-tax charge of
$1.1 million (net of the related settlement gain) associated with a voluntary
early retirement option offered to all salaried, non-officer employees of at
least 58 years of age with a minimum of five years' service. Of the 55 eligible
employees, 41 accepted. As a result of these costs, the increase in O&M expense
per customer exceeded the inflation-based cap established by the Alabama Public
Service Commission (APSC) and necessitated the return of a portion of the excess
to customers. Of the 9 percent increase in 1994, 3 percent was related to the
adoption of SFAS 106, Employers' Accounting For Postretirement Benefits Other
Than Pensions, for employees under labor union agreements, the cost of which was
allowed to be recovered through rates.
Depreciation expense rose 8 percent in 1995 and 4 percent in 1994 consistent
with growth in the utility's depreciable base. Alagasco's expense for taxes
other than income primarily reflects various state and local business taxes as
well as payroll-related taxes; state and local business taxes generally are
based on gross receipts and fluctuate accordingly.
As discussed more fully in Note 2 to the Consolidated Financial Statements,
Alagasco is subject to regulation by the APSC, which is expected to review the
utility's rate-setting mechanism following its evaluation of certain mandates
under the Energy Policy Act of 1992.
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<PAGE> 4
TAURUS: Weak natural gas prices had the greatest impact on production
revenues. To minimize commodity price volatility, Taurus hedged 65 percent of
its 1995 natural gas production at $2.06 per Mcf, adding 31 cents to Taurus's
average sales price. Despite this hedging program, the average sales price for
1995 gas production of $1.72 per Mcf was 9 percent below the prior year's
average price of $1.89 per Mcf. Natural gas production revenues also were
affected by a 6 percent decline in volumes primarily attributable to lower
offshore production which was not replaced in the current year due in part to
the timing of production schedules. Oil revenues benefitted from an increase in
volumes and prices.
Coalbed methane operating fees represent a percentage of net proceeds on certain
coalbed methane properties, as defined by the related operating agreements, and
vary with changes in natural gas prices, production volumes, and operating
expenses. Revenues in 1995 from operating fees decreased $1.1 million largely
due to lower natural gas prices. Coalbed methane consulting revenues increased
slightly as Taurus earned fees for a full year from its strategic alliance with
Conoco Inc. Also included in current year revenues was a $769,000 gain
associated with the buyout of a long-term sales contract.
For 1994, the $5.8 million increase in natural gas production revenues largely
was due to substantially higher conventional production. Oil revenues declined
slightly as a result of a 17 percent decrease in oil prices. Increased
production and the addition of a new coalbed methane project created the
majority of the $1 million increase in operating fees. Consulting fees
decreased
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30,
(DOLLARS IN THOUSANDS, EXCEPT UNIT PRICE) 1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Natural gas production $ 14,748 $ 17,292 $ 11,449
Oil production 3,765 2,725 3,484
Operating and consulting fees 4,373 5,194 4,954
Other 769 -- --
- ------------------------------------------------------------------------------------------------
Total Revenues $ 23,655 $ 25,211 $ 19,887
================================================================================================
Production volumes
Natural gas (MMcf) 8,597 9,169 6,245
Oil (MBbl) 250 191 204
================================================================================================
Average unit sales price
Natural gas (per Mcf) $ 1.72 $ 1.89 $ 1.83
Oil (per Bbl) $ 15.07 $ 14.25 $ 17.09
================================================================================================
</TABLE>
28
<PAGE> 5
$800,000 due to the completion of several projects but were offset partially by
revenue from the Conoco alliance.
Operations expense increased $3 million in 1995 primarily due to increased
labor and related expense, exploration expense and administrative expense. The
$2 million increase in 1994 operations expense was related to increased
exploratory efforts and the resulting impact on exploration expenses.
The 8 percent increase in DD&A for 1995 was caused by an increased depletion
rate (88 cents per Mcf compared to 78 cents per Mcf) which related to downward
reserve revisions in the current year. DD&A increased 30 percent in 1994
primarily due to a significant increase in production volumes, as the depletion
rate remained unchanged.
OTHER ACTIVITIES AND INTERCOMPANY ELIMINATIONS: Operating income from
Energen's group of other activities decreased $800,000 in 1995 almost
exclusively due to the absence of contribution from propane activities
following the sale of the Company's propane assets in June 1994. The increase
in 1994 operating income from Energen's other activities was due to increased
contribution from propane activities prior to the asset sale and increased
contribution from merchandising operations.
Intercompany eliminations for 1995, 1994 and 1993 totaled $7.4 million, $8.1
million and $8.3 million, respectively, and varied primarily based on
intercompany natural gas and merchandising sales.
NON-OPERATING ITEMS
CONSOLIDATED: Fiscal 1995 interest expense increased 4 percent over 1994
primarily due to the issuance of $50 million of medium-term notes. Partially
offsetting this increase was the repayment of $6.3 million of notes payable in
early fiscal 1995 and a decrease in average short-term borrowings. The 7
percent increase in 1994 interest expense resulted from the issuance of $50
million of medium-term notes in 1994 and the inclusion for a full year of the
Series 1993 Notes, offset in part by decreased average short-term borrowings.
Total other income decreased $3.4 million in 1995 and increased $3.2 million in
1994 largely due to the inclusion in 1994 of one-time, pre-tax gains associated
with the sale of the Company's propane assets ($2.1 million) and the sale of
the Company's investment in equity securities ($1.5 million).
29
<PAGE> 6
The Company's effective tax rates in 1995, 1994, and 1993 were lower than
statutory federal tax rates primarily due to the recognition of nonconventional
fuel tax credits and the amortization of investment tax credits. Changes in
income tax expense in both years resulted primarily from changes in pre-tax
income. The Company's effective tax rates are expected to remain lower than
statutory federal rates through December 31, 2002, as tax credits generated
each year are expected to be fully recognized in the financial statements.
FINANCIAL POSITION AND LIQUIDITY
The Company's net cash from operating activities totaled $60.9 million, $34.3
million, and $40.4 million in 1995, 1994, and 1993, respectively. The
fluctuation in operating cash flow from 1993 through 1995 primarily is due to
the net cash outflow of $24 million in 1994 to purchase storage gas at Alagasco
partially offset by the timing of the recovery of gas supply adjustment costs.
For both years, cash flow was affected by fluctuations in other receivables and
payables which are generally the result of timing.
Cash used in investing activities increased $39.6 million in 1995 largely due
to Taurus's $16.9 million initial investment in proved property acquisitions,
adding 26.8 Bcfe of proved oil and gas reserves. Proceeds of $13.4 million for
the sale of both propane assets and equity securities in the prior year
contributed to the increase in cash used in the current year. In 1994, the
inclusion of the $13.4 million in sales proceeds created a decrease in cash
used in investing activities, as total capital expenditures were essentially
unchanged.
Cash provided by financing activities was $15.9 million in 1995. In the current
year, Alagasco issued $50 million of medium-term notes with interest rates
ranging from 6.6 percent to 7.7 percent and maturities from August 1, 2002, to
June 27, 2025. Proceeds from this issuance primarily were used to defease the
Company's 11 percent First Mortgage Bonds and 9 percent debentures by
depositing all future principal and interest payments into an irrevocable
trust. These funds are invested in essentially risk-free securities backed by
the U.S. government. The remainder of the proceeds will be used to fund other
capital and operating needs. In the prior year, the Company issued 550,000
shares of Energen common stock, generating proceeds of $13.5 million and,
Alagasco issued $50 million of medium-term notes with interest rates ranging
from 5.4 percent to 7.2 percent and maturities from December 1, 1998, to
December 15, 2023. Proceeds from these debt and equity issues were used to fund
the purchase of underground storage working gas, redeem the Company's 8.75
percent debentures, reduce its short-term debt, and fund additional capital
needs.
30
<PAGE> 7
CAPITAL EXPENDITURES
NATURAL GAS DISTRIBUTION: During the last three fiscal years, Alagasco has
invested $103.3 million for capital projects: $80.3 million was spent on normal
expansion replacements and support of its distribution system; $11.6 million was
used in connection with the development of a new customer information system;
$6.2 million was used to improve gas availability; and $5.2 million was used to
purchase two municipal gas systems.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30,
(IN THOUSANDS) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital expenditures for:
Renewals, replacements, system
expansion and other $ 30,611 $ 30,264 $ 19,438
Additions to improve gas availability 3,024 1,644 1,569
Municipal gas system acquisitions 3,972 178 1,086
Customer information system 5,173 6,387 --
- -------------------------------------------------------------------------------------------------------
Total $ 42,780 $ 38,473 $ 22,093
=======================================================================================================
</TABLE>
EXPLORATION AND PRODUCTION: Taurus has spent $59.6 million for capital projects
over the last three fiscal years. Of that total, $4.4 million was charged to
income as exploration expense. Expenditures for conventional oil and gas
activities over the last three years totaled $56 million and primarily reflect
Taurus's investment in proved property acquisitions and exploration and
development of offshore natural gas properties. Expenditures for
nonconventional oil and gas activities for the last three years totaled $2
million.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30,
(IN THOUSANDS) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital and exploration expenditures for:
Conventional oil and gas $ 27,348 $ 7,853 $ 20,777
Nonconventional gas 429 217 1,007
Other 716 900 397
- ------------------------------------------------------------------------------------------
Total $ 28,493 $ 8,970 $ 22,181
==========================================================================================
Exploration expenditures charged to
income (included above) for:
Conventional oil and gas $ 2,038 $ 1,577 $ 731
Nonconventional gas 26 37 1
- ------------------------------------------------------------------------------------------
Total $ 2,064 $ 1,614 $ 732
==========================================================================================
</TABLE>
31
<PAGE> 8
OTHER ACTIVITIES: Capital expenditures by Energen's other activities totaled
$1.8 million in the last three fiscal years and primarily relate to gathering
activities.
RECENT PRONOUNCEMENTS OF THE FASB
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The Company
is required to adopt this Statement in its 1997 fiscal year but implementation
is not expected to have a material impact on the Company's financial
statements.
In October 1995, SFAS No. 123, Accounting for Stock-Based Compensation, was
issued and also requires adoption by the Company in its 1997 fiscal year. The
implementation of SFAS No. 123 is not expected to have a material impact on
the financial statements.
FUTURE CAPITAL RESOURCES AND LIQUIDITY
EXPLORATION AND PRODUCTION: During 1995, the Company's strategic planning
process indicated that an increased level of investment in the exploration and
production business was needed to generate desired earnings growth, increase
shareholder return, and increase total market capitalization. Therefore,
during the next five years, Taurus plans to invest $400 million for property
acquisitions and related development and an additional $100 million for
offshore exploration and development. Although 1996 will likely not yield
dramatically improved earnings, the pace of earnings growth is expected to
accelerate in fiscal 1997 as acquisitions and development of acquired reserves
and exploratory successes occur.
To facilitate this aggressive acquisition strategy, Taurus has entered into a
three-and-one-half-year agreement with Sonat Exploration Company. Under the
agreement, Taurus has committed to invest up to $30 million and $40 million as
its proportionate share of acquisitions made during calendar years 1995 and
1996, respectively, through Sonat Exploration's reserve acquisition program.
In addition, Taurus expects to spend between $25 million and $50 million
annually in the subsequent two years. Related development expenditures are
expected to approximate 50 cents for every acquisition dollar in the next five
years. Taurus also will continue its reserve acquisition efforts with other
partners and expand its offshore exploration and development program, including
increasing its internal generation of acquisition and exploration
opportunities. It should be noted that
32
<PAGE> 9
Taurus's ability to invest in property acquisitions will be significantly
influenced by industry trends as the producing property acquisition market has
historically been cyclical.
The Company expects to finance these acquisitions with issuances of long-term
debt and equity to supplement internally generated cash flows. Over the
five-year period, if the acquisition and development activities are successful,
the Company would need to raise approximately $250 million in new capital, with
new equity issues potentially ranging from $50 million to $75 million. The
Company has short-term credit facilities of $110 million that it anticipates
using to initially acquire properties, but long-term debt and equity will be
issued for permanent financing of these investments. Capital expenditures
could approximate $115 million in 1996.
Taurus has previously entered into futures contracts to hedge its exposure to
price fluctuations on oil and gas production and currently has contracts for
the sale of 5 Bcf of its fiscal 1996 gas production at an average contract
price of $1.81 per Mcf. To better manage the financing risk associated with the
acquisition program, Taurus plans to increase use of futures contracts and
expand its hedging program to include swaps in order to reduce price risk for
longer periods than currently allowed on commodity exchanges. To the extent
that acquisitions include a significant amount of reserves to be developed in
the future, the ability to initially hedge that future production will be
limited; accordingly, although the Company anticipates earnings to increase,
the earnings related to the exploration and production business will be
volatile due to uncertainty surrounding the price of oil and natural gas and
developmental and exploratory risks.
NATURAL GAS DISTRIBUTION: Utility capital expenditures could approximate $43.5
million in 1996 and primarily represent additions for normal distribution
system expansion and the development of a new customer information system. In
addition, Alagasco will maintain an investment in storage working gas which is
expected to average approximately $18.2 million in 1996. The Company
anticipates funding these capital requirements through internally generated
capital and the utilization of short-term credit facilities.
CONSOLIDATED: The Company has short-term credit facilities totaling $110
million available for working capital needs with $32.3 million and $6 million
employed at September 30, 1995, and 1994, respectively.
33
<PAGE> 10
QUARTERLY MARKET PRICES AND DIVIDENDS PAID PER SHARE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
DIVIDENDS
QUARTER ENDED (IN DOLLARS) HIGH LOW CLOSE PAID
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1993 26 5/8 20 1/8 21 1/2 .27
March 31, 1994 23 7/8 20 1/4 20 1/2 .27
June 30, 1994 23 1/4 19 1/4 20 7/8 .27
September 30, 1994 23 1/2 20 3/4 22 1/2 .28
- -----------------------------------------------------------------------------------------------
December 31, 1994 22 3/4 19 3/4 22 .28
March 31, 1995 23 1/2 20 5/8 22 7/8 .28
June 30, 1995 23 1/4 20 1/8 21 1/2 .28
September 30, 1995 22 3/8 21 21 3/4 .29
- -----------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE> 11
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
ENERGEN CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS, EXCEPT SHARE DATA) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES
Natural gas distribution $ 295,967 $ 344,637 $ 330,560
Oil and gas production 23,655 25,211 19,887
Other 9,001 15,401 14,926
Intercompany eliminations (7,419) (8,176) (8,257)
- ------------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 321,204 377,073 357,116
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Cost of gas 130,220 184,458 182,925
Operations 95,509 91,787 84,050
Maintenance 9,849 9,469 9,235
Depreciation, depletion and amortization 29,577 28,000 25,289
Taxes, other than income taxes 23,640 27,451 25,350
- ------------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 288,795 341,165 326,849
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 32,409 35,908 30,267
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest expense, net of amounts capitalized (11,818) (11,345) (10,605)
Gain on sale of assets -- 2,142 --
Other, net 2,398 3,657 1,827
- ------------------------------------------------------------------------------------------------------------------------------------
Total other income (expense) (9,420) (5,546) (8,778)
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 22,989 30,362 21,489
Income taxes 3,681 6,611 3,408
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 19,308 $ 23,751 $ 18,081
====================================================================================================================================
EARNINGS PER AVERAGE COMMON SHARE $ 1.77 $ 2.19 $ 1.77
====================================================================================================================================
AVERAGE COMMON SHARES OUTSTANDING 10,906,315 10,833,619 10,236,926
====================================================================================================================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
35
<PAGE> 12
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ENERGEN CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------------------------------------------------------------
AS OF SEPTEMBER 30, (IN THOUSANDS) 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT
Utility plant $ 504,371 $ 464,593
Less accumulated depreciation 247,926 231,327
- ------------------------------------------------------------------------------------------------------------------------------------
Utility plant, net 256,445 233,266
- ------------------------------------------------------------------------------------------------------------------------------------
Oil and gas properties, successful efforts method 117,339 92,355
Less accumulated depreciation, depletion and amortization 51,170 43,052
- ------------------------------------------------------------------------------------------------------------------------------------
Oil and gas properties, net 66,169 49,303
- ------------------------------------------------------------------------------------------------------------------------------------
Other property, net 4,650 4,613
- ------------------------------------------------------------------------------------------------------------------------------------
Total property, plant and equipment, net 327,264 287,182
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents 36,695 27,526
Accounts receivable, net of allowance for doubtful
accounts of $2,533 in 1995 and $2,037 in 1994 30,813 34,145
Inventories, at average cost
Storage gas inventory 20,276 24,363
Materials and supplies 7,711 7,589
Liquified natural gas in storage 3,539 3,349
Regulatory asset 6,321 --
Deferred gas costs 1,426 1,460
Deferred income taxes 9,667 7,542
Prepayments and other 2,583 3,117
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 119,031 109,091
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS
Notes receivable 3,095 3,911
Deferred charges and other 9,694 11,130
- ------------------------------------------------------------------------------------------------------------------------------------
Total other assets 12,789 15,041
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 459,084 $ 411,314
====================================================================================================================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
36
<PAGE> 13
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, (IN THOUSANDS) 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL AND LIABILITIES
<S> <C> <C>
CAPITALIZATION
Preferred stock, cumulative, $0.01 par value, 5,000,000 shares authorized $ -- $ --
Common shareholders' equity
Common stock, $0.01 par value; 30,000,000 shares authorized, 10,921,733 shares
outstanding in 1995 and 10,917,904 shares outstanding in 1994 109 109
Premium on capital stock 81,243 81,073
Capital surplus 2,802 2,802
Retained earnings 90,020 83,042
Treasury stock, at cost (11,627 shares) (250) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total common shareholders' equity 173,924 167,026
Long-term debt 131,600 118,302
- ------------------------------------------------------------------------------------------------------------------------------------
Total capitalization 305,524 285,328
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Long-term debt due within one year 1,775 10,123
Notes payable to banks 32,300 6,000
Accounts payable 32,242 27,480
Accrued taxes 11,339 13,083
Customers' deposits 18,218 17,462
Amounts due customers 16,546 11,734
Accrued wages and benefits 10,955 9,662
Other 14,923 15,129
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 138,298 110,673
- ------------------------------------------------------------------------------------------------------------------------------------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes 2,540 1,706
Accumulated deferred investment tax credits 4,103 4,590
Other 8,619 9,017
- ------------------------------------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 15,262 15,313
- ------------------------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND LIABILITIES $ 459,084 $ 411,314
====================================================================================================================================
</TABLE>
37
<PAGE> 14
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ENERGEN CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Treasury Stock
--------------------- ----------------------
Number of Par Premium on Capital Retained Number of
Shares Value Capital Stock Surplus Earnings Shares Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1992 10,182,598 $ 102 $ 63,245 $ 2,802 $ 63,709 -- $ --
Net income 18,081
Shares issued for:
Dividend reinvestment plan 20,862 474
Employee benefit plans 116,857 1 2,649
Cash dividends -- $1.05 per share (10,750)
====================================================================================================================================
BALANCE AT SEPTEMBER 30, 1993 10,320,317 103 66,368 2,802 71,040 -- --
Net income 23,751
Shares issued for:
Stock offering 550,000 6 13,531
Dividend reinvestment plan 7,717 181
Employee benefit plans 39,870 993
Cash dividends -- $1.09 per share (11,749)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1994 10,917,904 109 81,073 2,802 83,042 -- --
Net income 19,308
Purchase of treasury shares (128,900) (2,721)
Shares issued for:
Dividend reinvestment plan 14 19,035 394
Employee benefit plans 3,829 156 98,238 2,077
Cash dividends -- $1.13 per share (12,330)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1995 10,921,733 $ 109 $ 81,243 $ 2,802 $ 90,020 (11,627) $ (250)
====================================================================================================================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
38
<PAGE> 15
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ENERGEN CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 19,308 $ 23,751 $ 18,081
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation, depletion and amortization 29,577 28,000 25,289
Deferred income taxes, net (2,061) (2,802) (785)
Deferred investment tax credits, net (487) (487) (528)
Gain on sale of assets -- (2,142) --
Gain on sale of equity securities -- (2,878) --
Net change in:
Accounts receivable 3,332 1,523 (6,360)
Inventories 3,775 (23,467) 466
Accounts payable 4,762 (129) 4,990
Other current assets and liabilities (773) 15,798 (1,808)
Other, net 3,436 (2,824) 1,096
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 60,869 34,343 40,441
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to property, plant and equipment (68,940) (45,543) (43,672)
Proceeds from sale of assets -- 8,624 --
Proceeds from sale of equity securities -- 4,808 --
Payments on notes receivable 816 1,639 1,388
Other, net 501 2,485 819
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (67,623) (27,987) (41,465)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Payment of dividends on common stock (12,330) (11,749) (10,750)
Issuance of common stock 84 14,711 3,124
Purchase of treasury stock (2,721) -- --
Reduction of long-term debt (45,070) (12,470) (21,200)
Proceeds from issuance of long-term debt 49,660 49,670 14,555
Net change in short-term debt 26,300 (34,000) 20,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 15,923 6,162 5,729
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 9,169 12,518 4,705
Cash and cash equivalents at beginning of period 27,526 15,008 10,303
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 36,695 $ 27,526 $ 15,008
====================================================================================================================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
39
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ENERGEN CORPORATION AND SUBSIDIARIES
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Energen Corporation (the Company)
is a diversified energy holding company engaged primarily in the purchase,
distribution, and sale of natural gas, principally in central and north Alabama,
and the exploration, production and development of oil and gas in the
continental United States. The following is a description of the Company's
significant accounting policies and practices.
A. Principles of Consolidation
The accompanying financial statements include the accounts of Energen
Corporation and its subsidiaries, principally Alabama Gas Corporation
(Alagasco), after elimination of all significant intercompany transactions in
consolidation.
B. Property, Plant and Equipment and Related Depreciation
Property, plant and equipment (principally utility plant) is stated at
cost. The cost of utility plant includes an allowance for funds used during
construction. Maintenance is charged for the cost of normal repairs and the
renewal or replacement of an item of property which is less than a retirement
unit. When property which represents a retirement unit is replaced or removed,
the cost of such property is credited to utility plant and, together with the
cost of removal less salvage, is charged to the accumulated reserve for
depreciation. Depreciation is provided on the straight-line method over the
estimated useful lives of utility property at rates established by the Alabama
Public Service Commission (APSC). Approved depreciation rates averaged
approximately 4.3 percent in 1995, 1994 and 1993.
C. Operating Revenue and Gas Costs
In accordance with industry practice, the Company records natural gas
distribution revenues on a monthly- and cycle-billing basis. The Company extends
credit to its residential and industrial utility customers which are located
primarily in central and north Alabama. The commodity cost of purchased gas
applicable to gas delivered to customers but not yet billed under the
cycle-billing method is deferred as a current asset.
D. Income Taxes
The Company's deferred income taxes reflect the impact of temporary
differences between the tax basis of assets and liabilities and their carrying
amounts for financial reporting purposes and are measured in compliance with
enacted tax laws. Investment tax credits have been deferred and are being
amortized over the lives of the related assets.
E. Oil and Gas Producing Activities
The Company follows the successful efforts method of accounting for
costs incurred in the exploration and development of oil and gas reserves. Lease
acquisition costs are capitalized initially, and unproved properties are
reviewed periodically to determine if there has been impairment of the carrying
value, with any such impairment charged to exploration expense currently.
Exploratory drilling costs are capitalized pending determination of proved
reserves. If proved reserves are not discovered, the exploratory drilling costs
are expensed. Other exploration costs, including geological and geophysical
costs, are expensed as incurred. All development costs are capitalized.
Depreciation, depletion and amortization is determined on a field-by-field basis
using the unit-of-production method based on proved reserves. A provision for
anticipated abandonment and restoration costs at the end of a property's useful
life is made through depreciation expense. The Company's oil and gas subsidiary
periodically enters into futures contracts to hedge its exposure to price
fluctuations on oil and gas production. Gains and losses on futures contracts
are recognized in the income statement as the hedged volumes are produced.
F. Cash Equivalents
The Company includes highly liquid marketable securities and debt
instruments purchased with a maturity of three months or less in cash
equivalents.
40
<PAGE> 17
2. REGULATORY As an Alabama utility, Alagasco is subject to regulation
by the Alabama Public Service Commission (APSC) which, in 1983, established the
Rate Stabilization and Equalization (RSE) rate-setting process. RSE was extended
for the third time on December 3, 1990, for a three-year period. Under the terms
of that extension, RSE shall continue after November 30, 1993, unless, after
notice to the Company, the Commission votes to either modify or discontinue its
operation. On October 4, 1993, the Commission unanimously voted to extend RSE
until such time as certain hearings mandated by the Energy Policy Act of 1992
(Energy Act) in connection with integrated resource planning and demand side
management programs are completed. The Energy Act proceedings are expected to
conclude during fiscal 1996 at which time the Commission is expected to begin a
review of Alagasco's RSE. No time table for the review has yet been
established.
Under RSE as extended, the APSC conducts quarterly reviews to determine,
based on Alagasco's projections and fiscal year-to-date performance, whether
Alagasco's return on equity for the fiscal year will be within the allowed range
of 13.15 percent to 13.65 percent. Reductions in rates can be made quarterly to
bring the projected return within the allowed range; increases, however, are
allowed only once each fiscal year, effective December 1, and cannot exceed 4
percent of prior-year revenues. RSE limits the utility's equity upon which a
return is permitted to 60 percent of total capitalization and provides for
certain cost control measures designed to monitor the Company's operations and
maintenance (O&M) expense. If O&M expense per customer falls within 1.25
percentage points above or below the Consumer Price Index For All Urban
Customers (index range), no adjustment is required. If, however, O&M expense per
customer exceeds the index range, three-quarters of the difference is returned
to the customers. To the extent O&M expense per customer is less than the index
range, the utility benefits by one-half of the difference through future rate
adjustments. Under RSE as extended, a $1.1 million decrease in revenue became
effective October 1, 1994, and a $5.2 million annual increase in revenue became
effective December 1, 1994.
Effective December 15, 1990, the APSC approved a temperature adjustment
to customers' monthly bills to remove the effect of departures from normal
temperature on Alagasco's earnings. The calculation is performed monthly, and
the adjustments to customers' bills are made in the same month the weather
variation occurs.
The Company's rate schedules for natural gas distribution charges
contain a Gas Supply Adjustment (GSA) rider, established in 1993, which permits
the pass-through to customers of changes in the cost of gas supply, including
Gas Supply Realignment (GSR) surcharges imposed by the Company's suppliers
resulting from changes in gas supply purchases related to the implementation of
FERC Order 636.
On June 12, 1995, the APSC approved Alagasco's application to issue $50
million of new debt. A portion of the proceeds was used to redeem all of
Alagasco's 9 percent debentures and 11 percent First Mortgage Bonds. In
connection with the early call of the redeemed debt, Alagasco paid an early call
premium of approximately $1.3 million during the fourth quarter. Because the
APSC Order authorized Alagasco to collect the early call premium through
customer rates during the fiscal year ending September 30, 1996, Alagasco
recorded a regulatory asset of $1.3 million during the fourth quarter ending
September 30, 1995.
In accordance with APSC-directed regulatory accounting procedures,
Alagasco in 1989 began returning to customers excess utility deferred taxes
which resulted from a reduction in the federal statutory tax rate from 46
percent to 34 percent using the average rate assumption method. This method
provides for the return to ratepayers of excess deferred taxes over the lives of
the related assets. In 1993 those excess taxes were reduced as a result of a
federal tax rate increase from 34 percent to 35 percent. Approximately $2.9
million of remaining excess utility deferred taxes is being returned to
ratepayers over approximately 15 years.
FERC Regulation: On March 15, 1995, Southern Natural Gas Company
(Southern) filed a comprehensive settlement with the FERC in the form of a
Stipulation and Agreement (the Settlement) to resolve all issues in Southern's
six pending rate cases, as well as to resolve all GSR and transition cost issues
resulting from the implementation of FERC Order 636. The Settlement is
supported by parties representing more than 90 percent of the firm
transportation demand on Southern's system, including local distribution
companies (including Alagasco), municipal distribution systems, major gas
producers, large industrial end users, marketers, and state commissions
(including the APSC).
41
<PAGE> 18
On September 29, 1995, the FERC issued its Order Accepting Settlement, Severing
Contesting Parties, and Issuing Certificates and Approving Abandonment
(Settlement Order). The Settlement Order approves the Settlement with minor
modifications. Contesting parties had 30 days from the date of the Settlement
Order to file motions for rehearing and several such motions were timely filed.
Until such motions are ruled on by the FERC, the Settlement Order is not
considered to be final.
Specifically, the Settlement provides for the following: (1) the resolution of
all cost of service and rate design issues in Southern's six pending rate cases
and the establishment of reduced rates for the purpose of calculating rate case
refunds; (2) the implementation of reduced settlement rates on an interim basis
for supporting parties commencing March 1, 1995 (by order dated April 4, 1995,
FERC approved these interim rates pending its final review of the merits of
the Settlement); (3) the resolution of all GSR and other transition cost issues
resulting from FERC Order 636; (4) lower GSR cost recovery through the
reduction and earlier payout of GSR costs; (5) a three-year moratorium on
general rate increases; and (6) the resolution and disposition of all rate case
and GSR refunds for supporting parties. With respect to this last point, the
Settlement provides that all rate case refunds will be used to offset a portion
of Southern's remaining GSR liability. In addition, as a result of the
recalculated GSR surcharges for the period January 1, 1994, to February 28,
1995, Southern will refund over-collected GSR costs. Neither the total amount
of this refund nor Alagasco's share has yet been determined; therefore, no
amounts have been recorded in the financial statements. In the Settlement
filing with FERC, Southern has represented that the Settlement will allow
Southern and the supporting parties to resolve all issues relating to GSR and
other transition costs, the majority of which costs will be collected by the
end of calendar 1995. Alagasco estimates that it has a remaining GSR liability
of approximately $2.4 million to be paid through December 1995 and
approximately $2.6 million in other transition costs to be paid through June
1998 and that it has recorded such amounts in the financial statements.
Because these costs will be recovered in full from Alagasco's customers in a
timely manner through the GSA rider of Alagasco's Tariff, the Company has
recorded a corresponding regulatory asset in the accompanying financial
statements.
3. LONG-TERM DEBT AND NOTES PAYABLE Long-term debt consists of the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
AS OF SEPTEMBER 30, (IN THOUSANDS) 1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C>
Energen Corporation:
8% Debentures, due up to $1,000,000 annually
to February 1, 2007 $ 18,746 $ 19,935
Series 1993 Notes, interest ranging from 4.65%
to 7.25%, due annually beginning March 1, 1996, in
payments ranging from $775,000 to $1,675,000 to
March 1, 2008 14,629 14,976
Notes payable, interest ranging from 9.3% to 10.05%,
paid in full during fiscal year 1995 -- 6,300
Alabama Gas Corporation:
First Mortgage Bonds, 11% Series H, defeased
during fiscal year 1995 -- 7,500
Medium-term Notes, interest ranging from 5.4% to
7.7%, for notes redeemable December 1, 1998, to
June 27, 2025 100,000 50,000
9% Debentures, defeased during fiscal year 1995 -- 28,758
Mortgage note payable, paid in full during fiscal
year 1995 -- 956
- ---------------------------------------------------------------------------------
Total 133,375 128,425
Less amounts due within one year 1,775 10,123
- ---------------------------------------------------------------------------------
Total $131,600 $118,302
=================================================================================
</TABLE>
During the fourth quarter, the Company deposited $37.6 million into an
irrevocable trust to complete an in-substance defeasance of Alagasco's 9 percent
debentures and 11 percent Series H First Mortgage Bonds. The funds in the
trust, primarily obtained through the issuance of medium-term notes and
short-term borrowings, will be used solely to satisfy the principal, interest,
and call premium of the defeased debt. Accordingly, the debt and related
accrued interest have been excluded from the 1995 consolidated balance sheet.
No gain or loss was recorded in the financial statements as the APSC has granted
Alagasco regulatory relief related to the income statement impact of this
defeasance.
42
<PAGE> 19
The aggregate maturities of long-term debt for the next five years are as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEARS ENDING SEPTEMBER 30, (IN THOUSANDS)
- --------------------------------------------------------------------------------
1996 1997 1998 1999 2000
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,775 $1,815 $1,870 $7,222 $1,965
================================================================================
</TABLE>
The Company is subject to various restrictions on the payment of dividends.
Under its 8 percent debentures, the most restrictive provision states that
dividends or other distributions with respect to common stock may not be made
unless the Company maintains a minimum consolidated tangible net worth of $80
million; at September 30, 1995, Energen had a tangible net worth of
$173,697,000.
The Company and Alagasco have short-term credit lines and other credit
facilities of $110 million available to either entity for working capital needs.
The following is a summary of information relating to notes payable to banks:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Amount outstanding $ 32,300 $ 6,000 $ 40,000
Available for borrowings 77,700 104,000 70,000
- --------------------------------------------------------------------------------
Total $110,000 $110,000 $110,000
================================================================================
Maximum amount outstanding at any month-end $ 32,300 $ 60,000 $ 43,000
Average daily amount outstanding $ 917 $ 13,836 $ 31,318
Weighted average interest rates based on:
Average daily amount outstanding 5.76% 3.32% 3.42%
Amount outstanding at year-end 5.96% 5.17% 3.33%
================================================================================
</TABLE>
Total interest expense for Energen in 1995, 1994 and 1993 was $11,818,000,
$11,345,000, and $10,605,000 respectively.
4. INCOME TAXES The components of income taxes consist of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxes estimated to be payable currently:
Federal $ 5,377 $ 8,550 $ 3,905
State 873 1,369 611
- --------------------------------------------------------------------------------
Total current 6,250 9,919 4,516
- --------------------------------------------------------------------------------
Taxes deferred:
Federal (2,580) (2,976) (1,280)
State 11 (332) 172
- --------------------------------------------------------------------------------
Total deferred (2,569) (3,308) (1,108)
- --------------------------------------------------------------------------------
Total income tax expense $ 3,681 $ 6,611 $ 3,408
================================================================================
</TABLE>
43
<PAGE> 20
Temporary differences and carryforwards which give rise to a significant portion
of deferred tax assets and liabilities for 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
1995 1994
AS OF SEPTEMBER 30, (IN THOUSANDS) CURRENT NONCURRENT CURRENT NONCURRENT
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deferred tax assets:
Deferred investment tax credits $ -- $ 1,386 $ -- $ 1,567
Regulatory liabilities -- 2,229 -- 2,585
Minimum tax credit -- 14,622 -- 12,469
Insurance and accruals 2,175 -- 1,568 --
Unbilled revenue 1,565 -- 1,454 --
Other, net 6,691 626 6,302 146
- ------------------------------------------------------------------------------------------
Subtotal 10,431 18,863 9,324 16,767
Valuation allowance -- -- -- --
- ------------------------------------------------------------------------------------------
Total deferred tax assets $10,431 $18,863 $ 9,324 $16,767
==========================================================================================
Deferred tax liabilities:
Depreciation and basis differences $ -- $18,497 $ -- $16,905
Basis differences on oil and gas
producing properties -- 2,160 -- 1,564
Pension and other benefit costs 714 -- 1,306 --
Other, net 50 746 476 4
- ------------------------------------------------------------------------------------------
Total deferred tax liabilities $ 764 $21,403 $ 1,782 $18,473
==========================================================================================
</TABLE>
No valuation allowance with respect to deferred taxes is deemed necessary, as
the Company anticipates generating adequate future taxable income to realize the
benefits of all deferred tax assets on the consolidated balance sheet. As of
September 30, 1995, the amount of minimum tax credit which can be carried
forward indefinitely to reduce future regular tax liability is $14,622,000.
Total income tax expense differs from the amount which would be provided by
applying the statutory federal income tax rate to pre-tax earnings as
illustrated below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense at statutory federal income tax rate $ 8,046 $ 10,627 $ 7,467
Increase (decrease) resulting from:
Nonconventional fuel credits--current (2,343) (4,259) (1,374)
Nonconventional fuel credits--deferred (1,779) 127 (2,446)
Investment tax credits--deferred (487) (487) (528)
State income taxes, net of federal income tax benefit 625 700 639
Other, net (381) (97) (350)
- -------------------------------------------------------------------------------------------
Total income tax expense $ 3,681 $ 6,611 $ 3,408
==========================================================================================
</TABLE>
5. RETIREMENT INCOME PLANS AND OTHER BENEFITS The Company has two defined
benefit non-contributory pension plans which cover a majority of the employees.
Benefits are based on years of service and final earnings. The Company's policy
is to use the "projected unit credit" actuarial method for funding and financial
reporting purposes. The expense (income) for the plan covering the majority of
employees (Plan A) for the years ended September 30, 1995, 1994 and 1993, was
$1,158,000, $15,000, and $(118,000), respectively. The expense for the second
plan covering employees under labor union agreements (Plan B) for 1995, 1994 and
1993 was $339,000, $555,000, and $557,000, respectively.
44
<PAGE> 21
The funded status of the plans is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AS OF JUNE 30, (IN THOUSANDS) Plan A Plan B
- ---------------------------------------------------------------------------------------------------------------------------
1995 1994 1995 1994
---------------------------- ------------------------------
<S> <C> <C> <C> <C>
Vested benefits $ (46,073) $ (48,354) $ (13,499) $ (12,860)
Nonvested benefits (5,912) (5,530) (2,083) (2,253)
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation (51,985) (53,884) (15,582) (15,113)
Effects of salary progression (11,047) (10,332) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation (63,032) (64,216) (15,582) (15,113)
Fair value of plan assets, primarily equity
and fixed income securities 69,431 72,004 16,429 11,863
Unrecognized net gain 1,470 2,646 296 1,034
Unrecognized prior service cost 41 46 1,412 1,554
Unrecognized net transition obligation (asset) (5,111) (6,524) 396 452
Additional minimum liability -- -- -- (3,040)
- ---------------------------------------------------------------------------------------------------------------------------
Accrued pension asset (liability) $ 2,799 $ 3,956 $ 2,951 $ (3,250)
===========================================================================================================================
</TABLE>
At September 30, 1995 and 1994, for both plans the discount rate used to
measure the projected benefit obligation was 7.5 percent, and the expected
long-term rate of return on plan assets was 8.25 percent. The annual rate of
salary increase for the salaried plan was 5.5 percent for both years.
The components of net pension costs for 1995, 1994 and 1993 were:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) Plan A Plan B
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1995 1994 1993
------------------------------------ -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 2,052 $ 1,873 $ 1,678 $ 224 $ 224 $ 187
Interest cost on projected benefit obligation 4,728 4,550 4,097 1,095 1,042 1,018
Actual (return) on plan assets (8,787) (504) (6,858) (2,172) (372) (1,048)
Net amortization and deferral 2,106 (5,904) 965 1,192 (339) 400
Loss due to special termination benefits 1,489 -- -- -- -- --
Settlement gain (430) -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net pension (income) expense $ 1,158 $ 15 $ (118) $ 339 $ 555 $ 557
====================================================================================================================================
</TABLE>
In 1995 the Company recognized a loss for special termination benefits of
$1,489,000 and a settlement gain of $430,000 pursuant to a voluntary early
retirement option offered to all salaried, non-officer employees of at least 58
years of age with a minimum of 5 years' service. Of the 55 eligible employees,
41 accepted.
The Company has deferred compensation plan agreements for certain key
executives providing for payments on retirement, death or disability.
The deferred compensation expense under these agreements for 1995, 1994 and
1993 was $808,000, $461,000, and $650,000, respectively.
In addition to providing pension benefits, the Company provides certain
post-retirement health care and life insurance benefits. Substantially all of
the Company's employees may become eligible for such benefits if they reach
normal retirement age while working for the Company. In a prior year, the
Company adopted SFAS No. 106, Employers' Accounting for Post-retirement benefits
Other Than Pensions, with respect to the accrual of such costs for salaried
employees. During fiscal year 1994, the Company adopted SFAS 106 with respect to
such costs for employees under collective bargaining agreements. There was no
cumulative effect on the income statement resulting from the adoption of SFAS
106, as the Company elected to amortize transition costs over a 20-year
45
<PAGE> 22
period. On December 6, 1993, the APSC adopted Order 4-3454 which allows the
Company to recover all costs accrued under SFAS 106 through rates.
While the Company has not adopted a formal funding policy, all of its accrued
post-retirement liability was funded at year-end. The expense for salaried
employees for the years ended September 30, 1995, 1994, and 1993 was $2,271,000,
$2,319,000, and $2,677,000, respectively. The expense for union employees was
$3,613,000, $3,685,000 and $982,000 during 1995, 1994 and 1993, respectively.
Prior to 1994, the Company recognized the cost of providing post-retirement
benefits for union employees on a pay-as-you-go basis. These benefits were
provided through a self-insurance arrangement and through insurance companies
whose premiums were based on the benefits paid during the year. The projected
unit credit actuarial method was used to determine the normal cost and actuarial
liability.
A reconciliation of the estimated status of the obligation is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AS OF JUNE 30, (IN THOUSANDS) Salaried Employees Union Employees
- ---------------------------------------------------------------------------------------------------------------------------
1995 1994 1995 1994
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Accumulated post-retirement benefit obligation $(20,757) $(21,296) $(29,600) $(24,564)
Fair value of plan assets, primarily equity and
fixed income securities 12,659 9,408 4,419 1,248
Unamortized amounts 7,550 11,751 24,237 21,357
- ---------------------------------------------------------------------------------------------------------------------------
Accrued post-retirement benefit liability $ (548) $ (137) $ (944) $ (1,959)
===========================================================================================================================
</TABLE>
Net periodic post-retirement benefit cost for the years ended September
30, 1995, 1994, and 1993, included the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) Salaried Employees Union Employees
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1995 1994 1993
----------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 512 $ 450 $ 464 $ 807 $ 481 $ --
Interest cost on accumulated post-retirement
benefit obligation 1,696 1,726 1,457 1,793 1,920 --
Amortization of transition obligation 723 723 842 1,285 1,285 --
Amortization of actuarial gains and losses -- -- 49 -- -- --
Deferred asset (gain) loss 539 (453) -- 424 -- --
Actual (return) on plan assets (1,199) (127) (135) (696) (1) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net periodic post-retirement benefit expense $ 2,271 $ 2,319 $ 2,677 $ 3,613 $ 3,685 $ --
====================================================================================================================================
</TABLE>
The weighted average health care cost trend rate used in determining the
accumulated post-retirement benefit obligation was 8 percent in 1995 and 1994.
That assumption has a significant effect on the amounts reported. For example,
with respect to salaried employees, increasing the weighted average health care
cost trend rate by 1 percent would increase the accumulated post-retirement
benefit obligation by 3 percent and the net periodic post-retirement benefit
cost by 2.1 percent. For union employees, increasing the weighted average
health care cost trend rate by 1 percent would increase the accumulated
post-retirement benefit obligation by 7.1 percent and the net periodic
post-retirement benefit cost by 7 percent. The weighted average discount rate
used in determining the accumulated post-retirement benefit obligation was 7.5
percent in 1995 and 1994.
The Company has a long-term disability plan covering most salaried employees.
Expense for the years ended September 30, 1995, 1994, and 1993, was $155,000,
$150,000, and $129,000, respectively.
46
<PAGE> 23
6. COMMON STOCK PLANS A majority of Company employees are eligible to
participate in the Energen Employee Savings Plan (ESP) by investing a portion of
their compensation in the Plan, with the Company matching a part of the employee
investment by contributing Company common stock (new issue or treasury shares)
or funds for the purchase of Company common stock. The ESP also contains
employee stock ownership plan provisions. At September 30, 1995, 481,484 common
shares were reserved for issuance under the ESP. Expense associated with Company
contributions to the ESP was $2,944,000, $2,772,000 and $2,601,000 for 1995,
1994 and 1993, respectively.
In 1992 the Company adopted the Energen Corporation 1992 Long-Range
Performance Plan which provides for the award of up to 500,000 performance
units, with each unit equal to the market value of one share of common stock, to
eligible employees based on predetermined performance criteria at the end of a
four-year award period. Under the Plan, a portion of the performance units is
payable with Company common stock; accordingly, 350,000 shares have been
reserved for issuance. Under the Plan, 56,430, 49,120 and 59,850 performance
units were awarded in 1995, 1994 and 1993, respectively, leaving 280,826
performance units available for award at September 30, 1995. The Company
recorded expense of $1,628,000, $939,000 and $688,000 for 1995, 1994 and 1993,
respectively, under the Plan.
The Restricted Stock Incentive Plan of Energen Corporation, adopted in 1984,
provided for the award of common stock to eligible participants. Stock awarded
under the Plan is subject to certain restrictions against sale or pledge.
Pursuant to its terms, the Plan terminated effective January 1994 subject to
completion of restriction periods applicable to previously awarded shares. Under
the Plan, no common shares were awarded in 1995, 1994, or 1993. Expense of
$121,000, $218,000 and $289,000 was charged during 1995, 1994 and 1993,
respectively, under this Plan.
The Company has a dividend reinvestment plan for which 161,437 common shares
were reserved at September 30, 1995.
The Energen Corporation 1988 Stock Option Plan provides for the grant of
incentive stock options, non-qualified stock options, or a combination thereof
to officers and key employees. Options granted under the Plan provide for
purchase of the Company's common stock at not less than the fair market value on
the date the option is granted. Under the Plan, 270,000 shares of the Company's
common stock have been reserved for issuance. Options were granted in 1995 and
1993 with dividend equivalents, 1,900 of which have been exercised. In 1993,
12,696 options with stock appreciation rights (SARS) were canceled upon
exercise. Options expire 10 years from the date of grant.
Transactions under the Plan are summarized as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year ($16.75 - $20.125) 141,556 141,556 111,152
Granted (at $16.75 - $20.125) 10,500 -- 45,000
Exercised ($22.875 - $25.125) -- -- (1,900)
Canceled upon exercise of Stock Appreciation Rights ($23.25 - $26.375) -- -- (12,696)
Forfeited -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Outstanding at year-end 152,056 141,556 141,556
- ---------------------------------------------------------------------------------------------------------------------------
Exercisable at year-end 152,056 141,556 141,556
- ---------------------------------------------------------------------------------------------------------------------------
Remaining reserved for issuance at year-end 103,348 113,848 113,848
===========================================================================================================================
</TABLE>
In 1992 the Company adopted the Energen Corporation 1992 Directors Stock Plan
to enable the Company to pay part of the compensation of its non-employee
directors in shares of the Company's common stock. Under the Plan, 3,829,
3,515 and 5,085 shares were issued in 1995, 1994 and 1993, respectively, leaving
89,594 shares reserved for issuance at September 30, 1995.
47
<PAGE> 24
The Company has adopted a Shareholder Rights Plan intended to protect
shareholders from coercive or unfair takeover tactics. Under certain
circumstances, shareholders have the right to acquire the Company's Series A
Junior Participating Preferred Stock (or, in certain cases, securities of an
acquiring person) at a significant discount. Terms and conditions are set forth
in a Rights Agreement (dated July 27, 1988, and amended February 28, 1990)
between the Company and its Rights Agent. Under the plan, two-thirds of a right
is associated with each outstanding share of Common Stock. Rights outstanding
under the Shareholder Rights Plan at September 30, 1995 and 1994, were
convertible into 72,734 and 72,786 shares, respectively, of Series A Junior
Participating Preferred Stock (1/100 share of preferred stock for each full
right) subject to adjustment upon the occurrence of certain take-over related
events. No rights were exercised or exercisable at either period. The price at
which the rights would be exercised is $80 per right, subject to adjustment upon
the occurrence of certain take-over related events. In general, in the absence
of certain takeover-related events, as described in the Plan, the rights may be
redeemed prior to their July 27, 1998, expiration for $0.02 per right.
7. PREFERRED STOCK The Company is authorized to issue 5,000,000 shares of
cumulative preferred stock, par value $0.01 per share, in one or more series,
150,000 of which have been designated as Series A Junior Participating
Preferred Stock. There are no shares issued or outstanding. Alagasco is
authorized to issue 120,000 shares of preferred stock, par value $0.01 per
share, in one or more series. There are no shares currently outstanding.
8. ENVIRONMENTAL MATTERS Alagasco is in the chain of title of eight former
manufactured gas plant sites, of which it still owns four, and five
manufactured gas distribution sites, of which it still owns one. A preliminary
investigation of the sites does not indicate the present need for remediation
activities. Management expects that, should remediation of any such sites be
required in the future, Alagasco's share, if any, of such costs will not
materially affect the results of operations or financial condition of Alagasco.
Taurus is subject to various environmental regulations. Management believes
that Taurus is in compliance with the currently applicable standards of the
environmental agencies to which it is subject and that potential environmental
liabilities, if any, are minimal. Also, to the extent Taurus has operating
agreements with various joint venture partners, environmental costs, if any,
would be shared proportionately.
9. COMMITMENTS The Company has various firm gas supply and firm gas
transportation contracts which expire at various dates through the year 2008.
These contracts typically contain minimum demand charge obligations on the
part of the Company.
Taurus has entered into a three-and-one-half-year agreement with Sonat
Exploration Company. Under the agreement, Taurus has committed to invest up to
$30 million as its proportionate share of acquisitions made during calendar year
1995 through Sonat Exploration's reserve acquisition program. In addition,
Taurus expects to spend between $25 million and $50 million annually in the
subsequent years.
The Company has entered into an agreement with a financial institution whereby
it can sell on an ongoing basis, with recourse, certain installment
receivables related to its merchandising program up to a maximum of $20 million.
During 1995 and 1994, the Company sold $8,454,000 and $6,784,000, respectively,
of installment receivables. At September 30, 1995 and 1994, the balance of
these installment receivables was $15,618,000 and $13,027,000, respectively.
Receivables sold under this agreement are considered financial instruments with
off-balance sheet risk. The Company's exposure to credit loss in the event of
non-performance by customers is represented by the balance of installment
receivables.
The Company's oil and gas subsidiary periodically enters into futures contracts
to hedge its exposure to price fluctuations on oil and gas production. Under
this program, Taurus has entered into futures contracts for the sale of 5 Bcf of
its fiscal 1996 gas production at an average contract price of $1.81 per Mcf.
48
<PAGE> 25
Various legal proceedings arising in the normal course of business are
currently in progress and the Company currently accrues provisions for
estimated cost. Although the outcome of any litigation cannot be predicted
with certainty, management does not believe that the ultimate outcome will
have a material adverse effect on the Company's financial position or results
of operations.
10. LEASES Total payments related to leases included as operating expense in
the accompanying consolidated statements of income were $3,035,000,
$2,986,000, and $3,228,000 in 1995, 1994 and 1993, respectively. Minimum
future rental payments (in thousands) required after 1995 under leases with
initial or remaining noncancelable lease terms in excess of one year are as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001 and thereafter
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$2,181 $1,936 $592 $132 $86 $125
================================================================================================
</TABLE>
11. SUPPLEMENTAL CASH FLOW INFORMATION Supplemental information concerning
cash flow activities is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest paid $ 13,994 $ 11,055 $ 11,906
Income taxes paid $ 6,234 $ 10,965 $ 5,133
Noncash investing activities:
Capitalized depreciation $ 166 $ 155 $ 187
Allowance for funds used during construction $ 1,054 $ 465 $ 163
Noncash financing activities (debt issuance costs) $ 340 $ 330 $ 445
==================================================================================================
</TABLE>
12. FINANCIAL INSTRUMENTS In accordance with the requirements of SFAS No. 107,
the estimated fair values of the Company's financial instruments at September
30, 1995, were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Carrying Fair
AS OF SEPTEMBER 30, 1995 (IN THOUSANDS) Amount Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 36,695 $ 36,695
Receivables, net of allowance account $ 30,813 $ 30,813
Short-term debt $ 32,300 $ 32,300
Long-term debt (including current portion) $ 133,375 $ 129,016
=======================================================================================
</TABLE>
The following methods and assumptions were used to estimate the fair value of
financial instruments:
- - Cash and cash equivalents: Fair value was considered to be the same as the
carrying amount.
- - Receivables: The Company believes that, in the aggregate, current and
non-current net receivables were not materially different from the fair value
of those receivables.
- - Short-term debt: The fair value was determined to be the same as the
carrying amount.
- - Long-term debt: The fair value of fixed-rate long-term debt was based on the
market value of debt with similar maturities and with interest rates currently
trading in the marketplace; the carrying amount of variable rate long-term
debt was assumed to approximate fair value.
49
<PAGE> 26
13. SUMMARIZED QUARTERLY FINANCIAL DATA (Unaudited) The following data
summarize quarterly operating results. The Company's business is seasonal in
character and strongly influenced by weather conditions.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1995 FISCAL QUARTERS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) FIRST SECOND THIRD FOURTH
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $ 73,484 $ 140,820 $ 61,532 $ 45,368
Operating income (loss) $ 5,436 $ 30,302 $ 3,316 $ (6,645)
Net income (loss) $ 2,736 $ 21,714 $ 1,129 $ (6,271)
Earnings (loss) per average common share $ 0.25 $ 1.99 $ 0.10 $ (0.58)
- ------------------------------------------------------------------------------------------------------------
1994 FISCAL QUARTERS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) FIRST SECOND THIRD FOURTH
- ------------------------------------------------------------------------------------------------------------
Operating revenues $ 87,919 $ 168,087 $ 73,125 $ 47,942
Operating income (loss) $ 5,713 $ 30,370 $ 4,325 $ (4,500)
Net income (loss) $ 2,300 $ 22,192 $ 3,950 $ (4,691)
Earnings (loss) per average common share $ 0.22 $ 2.03 $ 0.36 $ (0.43)
============================================================================================================
</TABLE>
14. OIL AND GAS PRODUCING ACTIVITIES (Unaudited) The following schedules
detail historical financial data of the Company's oil and gas producing
activities. Certain terms appearing in the schedules are prescribed by the
Securities and Exchange Commission and are briefly described as follows:
- - Lease Acquisition Costs are costs incurred to lease or otherwise acquire a
property.
- - Exploration Expenses are primarily costs associated with drilling
unsuccessful exploratory wells in undeveloped properties, exploratory
geological and geophysical activities, and costs of impaired leaseholds.
- - Development Costs include costs necessary to gain access to, prepare and
equip development wells in areas of proved reserves.
- - Production (Lifting) Costs include costs incurred to operate and maintain
wells.
- - Gross Revenues are reported after deduction of royalty interest payments.
- - Gross Well or Acre is a well or acre in which a working interest is owned.
- - Net Well or Acre is deemed to exist when the sum of fractional ownership
working interests in gross wells or acres equals one.
- - Dry Well is an exploratory or a development well found to be incapable of
producing either oil or gas in sufficient quantities to justify completion
as an oil or gas well.
- - Productive Well is an exploratory or a development well that is not a dry
well.
CAPITALIZED COSTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
AS OF SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Proved $ 115,720 $ 90,709 $ 84,373
Unproved 1,619 1,646 1,704
- ------------------------------------------------------------------------------------------------------------
Total capitalized costs 117,339 92,355 86,077
Accumulated depreciation, depletion and amortization 51,170 43,052 35,150
- ------------------------------------------------------------------------------------------------------------
Capitalized costs, net $ 66,169 $ 49,303 $ 50,927
============================================================================================================
</TABLE>
50
<PAGE> 27
COSTS INCURRED The following table sets forth costs incurred in property
acquisition and exploration and development activities and includes both
capitalized costs and costs charged to expense during the year:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
AS OF SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Property acquisition:
Proved $ 16,950 $ 1,372 $ 11,645
Unproved 989 1,169 154
Exploration 4,666 4,565 3,336
Development 6,044 1,438 6,673
- ---------------------------------------------------------------------------------
Total costs incurred $ 28,649 $ 8,544 $ 21,808
=================================================================================
</TABLE>
RESULTS OF OPERATIONS The following table sets forth results of the Company's
oil and gas producing activities:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross revenues:
Unaffiliated (excluding consulting revenues) $ 20,397 $ 21,577 $ 14,974
Affiliated 2,259 2,917 3,424
Production (lifting) costs 5,995 5,882 5,383
Exploration expense 2,933 2,088 756
Depreciation, depletion and amortization 8,847 8,080 5,852
Income taxes (2,410) (1,607) (1,185)
- ----------------------------------------------------------------------------------------------------
Results of operations from producing activities $ 7,291 $ 10,051 $ 7,592
====================================================================================================
</TABLE>
AVERAGE SALES PRICE, PRODUCTION COST AND DEPRECIATION RATE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average sales price:
Gas (per Mcf) $ 1.72 $ 1.89 $ 1.83
Oil (per barrel) $ 15.07 $ 14.25 $ 17.09
Average production (lifting) cost (per Mcf equivalent) $ .59 $ 0.57 $ 0.72
Average depreciation rate (per Mcf equivalent) $ .88 $ 0.78 $ 0.78
=======================================================================================================
</TABLE>
DRILLING ACTIVITY The following table sets forth the total number of net
productive and dry exploratory and development wells drilled:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Exploratory:
Productive 0.9 0.6 0.9
Dry 1.0 0.4 0.3
- ------------------------------------------------------------------------------
Total 1.9 1.0 1.2
- ------------------------------------------------------------------------------
Development:
Productive 1.0 0.7 3.7
Dry 0.1 -- --
- ------------------------------------------------------------------------------
Total 1.1 0.7 3.7
==============================================================================
</TABLE>
51
<PAGE> 28
As of September 30, 1995, the Company was participating in the drilling of 2
gross wells, with the Company's interest equivalent to .28 wells.
PRODUCTIVE WELLS AND ACREAGE The following table sets forth the total gross
and net productive gas and oil wells as of September 30, 1995, and developed
and undeveloped acreage as of the latest practicable date prior to year-end:
<TABLE>
- -------------------------------------------------------
GROSS NET
- -------------------------------------------------------
<S> <C> <C>
Gas Wells 926 211
Oil Wells 3,329 70
Developed Acreage 360,215 55,594
Undeveloped Acreage 127,695 14,014
=======================================================
</TABLE>
The Company also had a revenue interest only in an additional 216 gross
wells. There were 57 gross wells with multiple completions with the Company's
interest being an equivalent of 5.9 wells. All wells and acreage are located in,
both onshore and offshore, the United States, with the majority of the net
undeveloped acreage located in the Gulf Coast region.
OIL AND GAS PRODUCING ACTIVITIES Taurus's proved reserves are located in,
both onshore and offshore, the United States and are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
Gas Oil Gas Oil Gas Oil
MMcf MBbl MMcf MBbl MMcf MBbl
------------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Proved reserves at beginning of year 60,057 1,485 67,298 1,289 51,329 338
Revisions of previous estimates (1,462) 142 (3,579) 144 400 (13)
Purchase of minerals in place, net 11,919 2,472 456 201 11,467 1,149
Discoveries and other additions 9,350 137 5,051 42 10,347 19
Production (8,597) (250) (9,169) (191) (6,245) (204)
- ---------------------------------------------------------------------------------------------------------------------
Proved reserves at end of year 71,267 3,986 60,057 1,485 67,298 1,289
- ---------------------------------------------------------------------------------------------------------------------
Proved developed reserves at end of year 50,657 3,380 45,538 1,281 56,207 1,155
=====================================================================================================================
</TABLE>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL
AND GAS RESERVES The standardized measure of discounted future net cash flows
is not intended, nor should it be interpreted, to present the fair market value
of the Company's crude oil and natural gas reserves. An estimate of fair
market value would take into consideration factors such as, but not limited to,
the recovery of reserves not presently classified as proved reserves,
anticipated future changes in prices and costs, and a discount factor more
representative of the time value of money and the risks inherent in reserve
estimates.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Future gross revenues $ 156,367 $ 105,986 $ 164,483
Future production and development costs 82,340 54,137 62,185
- -----------------------------------------------------------------------------------------------------------------
Future net cash flows before income taxes 74,027 51,849 102,298
Future income tax expense (benefit) including tax credits (10,533) (15,856) 1,304
- -----------------------------------------------------------------------------------------------------------------
Future net cash flows after income taxes 84,560 67,705 100,994
Discount at 10% per annum 21,001 16,051 28,210
- -----------------------------------------------------------------------------------------------------------------
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves $ 63,559 $ 51,654 $ 72,784
=================================================================================================================
</TABLE>
52
<PAGE> 29
The following are the principal sources of changes in the standardized
measure of discounted future net cash flows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 51,654 $ 72,784 $ 48,298
- --------------------------------------------------------------------------------------------------------------------------------
Revisions to reserves proved in prior years:
Net changes in prices, production costs and future development costs (1,984) (24,969) 5,789
Net changes due to revisions in quantity estimates (2,474) (2,278) 1,303
Development costs incurred, previously estimated 3,207 1,723 1,700
Accretion of discount 5,166 7,278 4,830
Other (37) (560) (2,638)
- --------------------------------------------------------------------------------------------------------------------------------
Total Revisions 3,878 (18,806) 10,984
New Field discoveries and extensions, net of future production
and development costs 6,021 523 11,906
Sales of oil and gas produced, net of production costs (12,518) (14,635) (9,550)
Purchases of minerals in place, net 13,894 1,354 17,158
Net change in income taxes 630 10,434 (6,012)
- --------------------------------------------------------------------------------------------------------------------------------
Net change in standardized measure of discounted future net
cash flows 11,905 (21,130) 24,486
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 63,559 $ 51,654 $ 72,784
================================================================================================================================
</TABLE>
COALBED METHANE ACTIVITIES The Company is actively engaged in the
development of pipeline-quality natural gas from coal (coalbed methane). The
results of the Company's coalbed methane activities have been included in the
oil and gas disclosures shown previously. Because of the significance of
coalbed methane to the Company, certain data are separately disclosed below.
Production of coalbed methane from wells drilled prior to January 1, 1993,
qualifies through December 31, 2002, for federal income tax credits under
Section 29 of the Internal Revenue Code of 1986, as amended. The tax credit
currently approximates $1 per Mcf of qualifying production. Accordingly, a
significant portion of the value of proved coalbed methane reserves is
associated with this tax credit.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Proved reserves at beginning of year (MMcf) 26,712 34,109 34,306
Revisions of previous estimates 1,842 (3,687) 364
Discoveries and other additions 159 -- 3,231
Production (3,709) (3,710) (3,792)
- ---------------------------------------------------------------------------------------------------------------
Proved reserves at end of year 25,004 26,712 34,109
- ---------------------------------------------------------------------------------------------------------------
Estimated proved reserves qualifying for tax credits (MMcf) 15,837 18,947 21,461
- ---------------------------------------------------------------------------------------------------------------
Net capitalized costs (in thousands) $ 19,370 $ 21,924 $ 24,896
- ---------------------------------------------------------------------------------------------------------------
Gross wells in which Taurus has working and/or revenue interest 634 657 727
- ---------------------------------------------------------------------------------------------------------------
Net productive wells 154.4 164.2 173.2
===============================================================================================================
</TABLE>
53
<PAGE> 30
15. INDUSTRY SEGMENT INFORMATION The Company is principally engaged in the
purchase, distribution and sale of natural gas in central and north Alabama
and the development of oil and gas in the continental United States. The
Company also is engaged in intrastate gas transmission services and
merchandising.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
AS OF SEPTEMBER 30, (IN THOUSANDS) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues, unaffiliated customers:
Natural gas distribution $ 295,967 $ 344,637 $ 330,560
Oil and gas production 21,396 22,294 16,463
Other 3,841 10,142 10,093
- -------------------------------------------------------------------------------------------------------
Total $ 321,204 $ 377,073 $ 357,116
- -------------------------------------------------------------------------------------------------------
Intersegment revenues:
Natural gas distribution $ -- $ -- $ --
Oil and gas production 2,259 2,917 3,424
Other 5,160 5,259 4,833
- -------------------------------------------------------------------------------------------------------
Total $ 7,419 $ 8,176 $ 8,257
- -------------------------------------------------------------------------------------------------------
Depreciation, depletion and amortization expense:
Natural gas distribution $ 19,368 $ 17,941 $ 17,206
Oil and gas production 9,767 9,065 6,947
Other 442 994 1,136
- -------------------------------------------------------------------------------------------------------
Total $ 29,577 $ 28,000 $ 25,289
- -------------------------------------------------------------------------------------------------------
Capital expenditures:
Natural gas distribution $ 42,780 $ 38,473 $ 22,107
Oil and gas production 26,429 7,356 21,449
Other 951 334 480
- -------------------------------------------------------------------------------------------------------
Total $ 70,160 $ 46,163 $ 44,036
- -------------------------------------------------------------------------------------------------------
Identifiable assets (year-end):
Natural gas distribution $ 335,267 $ 308,905 $ 264,548
Oil and gas production 113,701 92,019 84,664
Other 10,116 10,390 21,473
- -------------------------------------------------------------------------------------------------------
Total $ 459,084 $ 411,314 $ 370,685
- -------------------------------------------------------------------------------------------------------
Operating income (loss) before income taxes:
Natural gas distribution $ 32,513 $ 30,017 $ 26,381
Oil and gas production 483 5,701 4,539
Other 612 1,594 929
Eliminations and corporate expenses (1,199) (1,404) (1,582)
- -------------------------------------------------------------------------------------------------------
Total 32,409 35,908 30,267
Interest expense (11,818) (11,345) (10,605)
Dividends on preferred stock of subsidiary -- -- (70)
Gain on sale of assets -- 2,142 --
Other, net 2,398 3,657 1,897
- -------------------------------------------------------------------------------------------------------
Income before income taxes $ 22,989 $ 30,362 $ 21,489
=======================================================================================================
</TABLE>
<PAGE> 31
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements and related notes of
Energen Corporation were prepared by management, which has the primary
responsibility for the integrity of the financial information therein. The
statements were prepared in conformity with generally accepted accounting
principles appropriate in the circumstances and include amounts which are based
necessarily on management's best estimates and judgments. Financial
information presented elsewhere in this report is consistent with the
information in the financial statements.
Management maintains a comprehensive system of internal accounting
controls and relies on the system to discharge its responsibility for the
integrity of the financial statements. This system provides reasonable
assurance that corporate assets are safeguarded and that transactions are
recorded in such a manner as to permit the preparation of reliable financial
information. Reasonable assurance recognizes that the cost of a system of
internal accounting controls should not exceed the related benefits. This
system of internal accounting controls is augmented by written policies and
procedures, internal auditing, and the careful selection and training of
qualified personnel. As of September 30, 1995, management was aware of no
material weaknesses in Energen's system of internal accounting controls.
The consolidated financial statements have been audited by the
Company's independent certified public accountants, whose opinion is expressed
elsewhere on this page. Their audit was conducted in accordance with generally
accepted auditing standards; and, in connection therewith, they obtained an
understanding of the Company's system of internal accounting controls and
conducted such tests and related procedures as they deemed necessary to arrive
at an opinion on the fairness of presentation of the consolidated financial
statements.
The functioning of the accounting system and related internal accounting
controls is under the general oversight of the Audit Committee of the Board of
Directors, which is comprised of four outside Directors. The Audit Committee
meets regularly with the independent public accountants and representatives of
management to discuss matters regarding internal accounting controls, auditing
and financial reporting.
/s/ Geoffrey C. Ketcham
- --------------------------------------
Geoffrey C. Ketcham
Executive Vice President
Chief Financial Officer and Treasurer
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders of Energen:
We have audited the accompanying consolidated balance sheets of Energen
Corporation and Subsidiaries as of September 30, 1995 and 1994, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended September 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Energen
Corporation and Subsidiaries as of September 30, 1995 and 1994, and the
consolidated results of their operations and cash flows for each of the three
years in the period ended September 30, 1995, in conformity with generally
accepted accounting principles.
As discussed in Note 5 to the consolidated financial statements, the Company
changed its method of accounting for certain other post-retirement benefits,
effective October 1, 1993.
/s/ Coopers & Lybrand L.L.P.
- -----------------------------
Coopers & Lybrand L.L.P.
Birmingham, Alabama
October 25, 1995
55
<PAGE> 32
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
ENERGEN CORPORATION AND SUBSIDIARIES
- ---------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME STATEMENT
Operating revenues $ 321,204 $ 377,073 $ 357,116 $ 331,982
Income before cumulative effect of change
in accounting principle $ 19,308 $ 23,751 $ 18,081 $ 15,687
Net income $ 19,308 $ 23,751 $ 18,081 $ 16,628
Earnings per share before cumulative effect $ 1.77 $ 2.19 $ 1.77 $ 1.54
Earnings per average common share $ 1.77 $ 2.19 $ 1.77 $ 1.64
===============================================================================================================
BALANCE SHEET
Capitalization at year-end:
Common shareholders' equity $ 173,924 $ 167,026 $ 140,313 $ 129,858
Preferred stock -- -- -- 1,800
Long-term debt 131,600 118,302 85,852 90,609
- ---------------------------------------------------------------------------------------------------------------
Total capitalization $ 305,524 $ 285,328 $ 226,165 $ 222,267
- ---------------------------------------------------------------------------------------------------------------
Total assets $ 459,084 $ 411,314 $ 370,685 $ 342,119
- ---------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net $ 327,264 $ 287,182 $ 273,097 $ 254,630
===============================================================================================================
COMMON STOCK DATA
Annual dividend rate at year-end $ 1.16 $ 1.12 $ 1.08 $ 1.04
Cash dividends paid per common share $ 1.13 $ 1.09 $ 1.05 $ 1.01
Book value per common share $ 15.94 $ 15.30 $ 13.60 $ 12.75
Market-to-book ratio at year-end (%) 136 147 182 142
Yield at year-end (%) 5.3 5.0 4.4 5.7
Return on average common equity (%) 11.0 14.6 13.0 13.0
Price-to-earnings ratio at year-end 12.3 10.3 14.0 11.1
Shares outstanding at year-end (000) 10,910 10,918 10,320 10,183
Price Range:
High $ 23 1/2 $ 26 5/8 $ 26 3/4 $ 18 7/8
Low $ 19 3/4 $ 19 1/4 $ 17 5/8 $ 15
Close $ 21 3/4 $ 22 1/2 $ 24 3/4 $ 18 1/8
===============================================================================================================
OTHER GENERAL DATA
Capital expenditures $ 70,160 $ 46,163 $ 44,036 $ 22,758
===============================================================================================================
</TABLE>
Note: All information prior to 1989 has been adjusted for the effects of a
three-for-two common stock split.
All information prior to 1990 includes the effects of discontinued
operations.
56
<PAGE> 33
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
1991 1990 1989 1988 1987 1986 1985
- --------------------------------------------------------------------------------------
<S> <C>
$ 325,643 $ 324,860 $ 308,604 $ 353,135 $ 332,590 $ 364,853 $ 378,660
$ 14,112 $ 11,267 $ 6,422 $ 11,667 $ 8,950 $ 1,544 $ 5,248
$ 14,112 $ 11,267 $ 6,422 $ 11,667 $ 8,950 $ 1,544 $ 5,248
$ 1.42 $ 1.15 $ .69 $ 1.53 $ 1.38 $ .24 $ .86
$ 1.42 $ 1.15 $ .69 $ 1.53 $ 1.38 $ .24 $ .86
======================================================================================
$ 121,995 $ 113,316 $ 107,950 $ 86,256 $ 63,687 $ 58,325 $ 59,085
1,800 1,800 2,450 2,450 2,850 3,000 3,150
77,677 82,835 86,188 53,203 54,589 42,286 24,690
- --------------------------------------------------------------------------------------
$ 201,472 $ 197,951 $ 196,588 $ 141,909 $ 121,126 $ 103,611 $ 86,925
- --------------------------------------------------------------------------------------
$ 337,516 $ 326,350 $ 294,614 $ 260,560 $ 237,445 $ 211,055 $ 191,524
- --------------------------------------------------------------------------------------
$ 273,539 $ 250,983 $ 238,329 $ 206,230 $ 191,099 $ 170,952 $ 150,544
======================================================================================
$ 1.00 $ .94 $ .88 $ .827 $ .76 $ .72 $ .693
$ .955 $ .895 $ .843 $ .777 $ .73 $ .70 $ .653
$ 12.07 $ 11.48 $ 11.13 $ 10.80 $ 9.73 $ 9.02 $ 9.45
150 157 190 147 163 140 97
5.5 5.2 4.2 5.2 4.8 5.7 7.6
11.6 10.0 6.0 15.6 14.7 2.6 9.2
12.8 15.7 30.6 10.4 11.5 52.6 10.6
10,104 9,872 9,695 7,989 6,544 6,467 6,253
$ 20 $ 21 1/2 $ 24 3/8 $ 16 1/4 $ 16 1/2 $ 14 3/8 $ 10 3/4
$ 16 $ 16 $ 15 3/8 $ 11 3/8 $ 12 1/2 $ 9 $ 7 7/8
$ 18 1/8 $ 18 $ 21 1/8 $ 15 7/8 $ 15 7/8 $ 12 5/8 $ 9 1/8
======================================================================================
$ 47,024 $ 37,335 $ 54,474 $ 39,260 $ 40,139 $ 39,688 $ 29,182
======================================================================================
</TABLE>
57
<PAGE> 34
SELECTED OPERATING DATA
<TABLE>
<CAPTION>
ENERGEN CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30,
(DOLLARS IN THOUSANDS) 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NATURAL GAS DISTRIBUTION
Gas sold and transported (MMcf)
Residential 27,489 31,254 30,957 29,119
Commercial and industrial--small 12,289 13,536 13,853 13,860
Commercial and industrial--large 29 106 282 2,654
Transportation 61,640 52,635 49,346 46,235
- --------------------------------------------------------------------------------------------------------------------------------
Total 101,447 97,531 94,438 91,868
- --------------------------------------------------------------------------------------------------------------------------------
Revenues from gas sold and transported
Residential $ 194,089 $ 229,019 $ 216,587 $ 198,676
Commercial and industrial--small 68,409 84,443 83,069 78,799
Commercial and industrial--large 290 790 1,223 6,501
Transportation 30,490 29,321 27,382 25,089
Other 2,687 1,064 2,299 1,661
- --------------------------------------------------------------------------------------------------------------------------------
Total $ 295,965 $ 344,637 $ 330,560 $ 310,726
- --------------------------------------------------------------------------------------------------------------------------------
Average number of customers
Residential 410,515 402,531 395,057 387,871
Commercial and industrial--small 33,115 32,563 32,269 31,732
Commercial and industrial--large 48 43 46 41
- --------------------------------------------------------------------------------------------------------------------------------
Total 443,678 435,137 427,372 419,644
- --------------------------------------------------------------------------------------------------------------------------------
Degree days (systemwide)
39-year moving average 2,590 2,590 2,590 2,590
Actual for year 2,101 2,636 2,624 2,434
Ratio of actual to 39-year average (%) .81 101.8 101.3 94.0
================================================================================================================================
OIL AND GAS PRODUCTION
Operating revenues $ 23,655 $ 25,211 $ 19,887 $ 15,718
Coalbed methane proved reserves (MMcf) 25,004 26,712 34,109 34,306
Conventional proved reserves (MMcf)* 70,179 42,261 40,923 19,041
Oil and gas produced (MMcf)* 10,096 10,316 7,468 7,287
================================================================================================================================
OTHER ACTIVITIES
Operating revenues $ 9,001 $ 15,401 $ 14,926 $ 15,099
Operating income $ 612 $ 1,594 $ 929 $ 2,009
Property, plant and equipment, net $ 2,339 $ 1,977 $ 6,273 $ 6,797
================================================================================================================================
</TABLE>
*Oil expressed in natural gas equivalents
58
<PAGE> 35
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1991 1990 1989 1988 1987 1986 1985
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
26,262 28,653 27,210 28,636 27,365 25,373 26,314
14,837 16,581 17,946 21,806 18,482 22,337 22,620
3,411 4,786 9,494 13,026 8,902 20,877 18,365
41,447 39,117 34,447 28,730 26,895 6,636 3,876
- -----------------------------------------------------------------------------------------------------------
85,957 89,137 89,097 92,198 81,644 75,223 71,175
- -----------------------------------------------------------------------------------------------------------
$ 195,250 $188,168 $170,302 $190,836 $181,007 $165,060 $165,034
84,260 85,588 85,477 104,420 93,242 112,580 119,290
8,916 13,596 25,000 37,923 24,982 77,989 87,134
22,890 22,734 19,574 15,158 17,871 3,748 1,802
(2,188) 873 731 689 679 648 507
- -----------------------------------------------------------------------------------------------------------
$ 309,128 $310,959 $301,084 $349,026 $317,781 $360,125 $373,767
- -----------------------------------------------------------------------------------------------------------
382,747 379,362 365,572 358,872 350,712 341,406 334,418
31,432 31,565 30,492 29,717 29,007 28,318 27,817
39 42 42 37 34 32 30
- -----------------------------------------------------------------------------------------------------------
414,218 410,969 396,106 388,626 379,753 369,756 362,265
- -----------------------------------------------------------------------------------------------------------
2,590 2,590 2,585 2,585 2,585 2,585 2,590
2,017 2,378 2,383 2,592 2,523 2,345 2,410
77.9 91.8 92.2 100.3 97.6 90.7 93.1
===========================================================================================================
$ 12,661 $ 12,983 $ 13,469 $ 13,034 $ 9,536 $ 8,163 $ 7,833
61,314 44,881 17,384 8,783 9,450 3,594 --
14,369 14,626 14,060 7,772 8,985 10,796 12,136
6,455 5,434 5,534 5,540 3,975 2,926 2,374
===========================================================================================================
$ 13,951 $ 13,372 $ 5,962 $ 3,345 $ 3,843 $ 734 $ 578
$ 1,395 $ 1,890 $ (94) $ 1,324 $ 1,690 $ 319 $ 317
$ 7,098 $ 7,754 $ 9,004 $ 9,814 $ 5,833 $ 5,581 $ 44
===========================================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF ENERGEN CORPORATION
Alabama Gas Corporation
Taurus Exploration, Inc.
Taurus Exploration USA, Inc.
Basis Pipeline Corp
American Heat Tech, Inc.
Graves Well Drilling Company, Inc.
EGN Services, Inc.
Midtown NGV, Inc.
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Energen Corporation on Forms S-8 and S-3 (File No. 2-89855), Form S-3 (File
No. 33-41997) and Forms S-8 (File No. 33-27869, File No. 33-46641, File No.
33-48504, and File No. 33-48505) of our report, which includes an explanatory
paragraph regarding the Company's change in method of accounting for certain
other post-retirement benefits, dated October 25, 1995, on our audits of the
consolidated financial statements of Energen Corporation as of September 30,
1995 and 1994, and for the years ended September 30, 1995, 1994, and 1993,
which report is incorporated by reference in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Birmingham, Alabama
December 22, 1995
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Alabama Gas Corporation on Form S-3 (File No. 33-70466), of our report, which
includes an explanatory paragraph regarding the change in method of accounting
for certain other post-retirement benefits, dated October 25, 1995, on our
audits of the financial statements and financial statement schedules of Alabama
Gas Corporation as of September 30, 1995 and 1994, and for the years ended
September 30, 1995, 1994, and 1993, which report is included in this Annual
Report on Form 10-K.
Coopers & Lybrand L.L.P.
Birmingham, Alabama
December 22, 1995
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ALABAMA GAS CORPORATION FOR THE YEAR ENDED SEPTEMBER 30,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 256,445
<OTHER-PROPERTY-AND-INVEST> 193
<TOTAL-CURRENT-ASSETS> 71,226
<TOTAL-DEFERRED-CHARGES> 7,403
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 335,267
<COMMON> 20
<CAPITAL-SURPLUS-PAID-IN> 34,484
<RETAINED-EARNINGS> 87,638
<TOTAL-COMMON-STOCKHOLDERS-EQ> 122,142
0
0
<LONG-TERM-DEBT-NET> 100,000
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 113,125
<TOT-CAPITALIZATION-AND-LIAB> 335,267
<GROSS-OPERATING-REVENUE> 295,967
<INCOME-TAX-EXPENSE> 8,082
<OTHER-OPERATING-EXPENSES> 263,454
<TOTAL-OPERATING-EXPENSES> 271,536
<OPERATING-INCOME-LOSS> 24,431
<OTHER-INCOME-NET> 942
<INCOME-BEFORE-INTEREST-EXPEN> 25,373
<TOTAL-INTEREST-EXPENSE> 9,652
<NET-INCOME> 15,721
0
<EARNINGS-AVAILABLE-FOR-COMM> 15,721
<COMMON-STOCK-DIVIDENDS> 9,170
<TOTAL-INTEREST-ON-BONDS> 7,536
<CASH-FLOW-OPERATIONS> 42,870
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1>EARNINGS PER SHARE IS CALCULATED FOR ENERGEN CORPORATION (PARENT COMPANY OF
ALAGASCO) AND IS NOT CALCULATED FOR ALAGASCO SEPARATELY, AS AMOUNT WOULD NOT BE
MEANINGFUL.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ENERGEN CORPORATION FOR THE YEAR ENDED SEPTEMBER 30,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 256,445
<OTHER-PROPERTY-AND-INVEST> 70,819
<TOTAL-CURRENT-ASSETS> 119,031
<TOTAL-DEFERRED-CHARGES> 9,694
<OTHER-ASSETS> 3,095
<TOTAL-ASSETS> 459,084
<COMMON> 109
<CAPITAL-SURPLUS-PAID-IN> 83,795
<RETAINED-EARNINGS> 90,020
<TOTAL-COMMON-STOCKHOLDERS-EQ> 173,924
0
0
<LONG-TERM-DEBT-NET> 131,600
<SHORT-TERM-NOTES> 32,300
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,775
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 119,485
<TOT-CAPITALIZATION-AND-LIAB> 459,084
<GROSS-OPERATING-REVENUE> 321,204
<INCOME-TAX-EXPENSE> 3,681
<OTHER-OPERATING-EXPENSES> 288,795
<TOTAL-OPERATING-EXPENSES> 292,476
<OPERATING-INCOME-LOSS> 28,728
<OTHER-INCOME-NET> 2,398
<INCOME-BEFORE-INTEREST-EXPEN> 31,126
<TOTAL-INTEREST-EXPENSE> 11,818
<NET-INCOME> 19,308
0
<EARNINGS-AVAILABLE-FOR-COMM> 19,308
<COMMON-STOCK-DIVIDENDS> 12,330
<TOTAL-INTEREST-ON-BONDS> 10,021
<CASH-FLOW-OPERATIONS> 60,869
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 1.77
</TABLE>
