SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___ TO ___
Commission IRS Employer
File State of Identification
Number Registrant Incorporation Number
1-7810 Energen Corporation Alabama 63-0757759
2-38960 Alabama Gas Corporation Alabama 63-0022000
2101 Sixth Avenue North
Birmingham, Alabama 35203
Telephone Number 205/326-2700
Alabama Gas Corporation, a wholly owned subsidiary of Energen Corporation, meets
the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and
is therefore filing this Form with reduced disclosure format pursuant to General
Instruction H(2).
Indicate by a check mark whether the 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 the number of shares outstanding of each of the issuers' classes of
common stock, as of May 5, 1996:
Energen Corporation, $0.01 par value 10,995,990 shares
Alabama Gas Corporation, $0.01 par value 1,972,052 shares
ENERGEN CORPORATION AND ALABAMA GAS CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996
TABLE OF CONTENTS
Page
PART I: FINANCIAL INFORMATION (Unaudited)
Item 1. Financial Statements
(a)Consolidated Statements of Income of Energen Corporation. . . . . 4
(b)Consolidated Balance Sheets of Energen Corporation. . . . . . . . 5
(c)Consolidated Statements of Cash Flows of Energen Corporation. . . 7
(d)Statements of Income of Alabama Gas Corporation . . . . . . . . . 8
(e)Balance Sheets of Alabama Gas Corporation . . . . . . . . . . . . 9
(f)Statements of Cash Flows of Alabama Gas Corporation . . . . . . .11
(g)Notes to Unaudited Financial Statements . . . . . . . . . . . . .12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . .15
Selected Business Segment Data of Energen Corporation.18
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. .19
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . .19
SIGNATURES 20
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
Energen Corporation and Subsidiaries
(Unaudited)
Three months ended Six months ended
March 31, March 31,
(in thousands,
except share data) 1996 1995 1996 1995
Operating Revenues
Natural gas distribution $162,143 $134,141 $235,328 $201,367
Oil and gas production
activities 8,979 6,311 14,775 12,242
Other 562 583 1,098 1,177
Intercompany
eliminations (697) (869) (1,391) (1,813)
Total operating
revenues 170,987 140,166 249,810 212,973
Operating Expenses
Cost of gas 89,984 67,966 124,068 99,016
Operations 23,862 22,885 47,431 44,499
Maintenance 3,191 2,642 5,794 4,906
Depreciation, depletion,
and amortization 9,169 7,188 16,979 14,150
Taxes, other than
income taxes 11,138 9,248 17,122 14,884
Total operating
expenses 137,344 109,929 211,394 177,455
Operating Income 33,643 30,237 38,416 35,518
Other Income (Expense)
Interest expense,
net of
amounts capitalized (3,305) (2,639) (6,686) (5,388)
Other, net 163 570 1,706 1,423
Total other income
(expense) (3,142) (2,069) (4,980) (3,965)
Income Before
Income Taxes 30,501 28,168 33,436 31,553
Income taxes 7,071 6,454 7,728 7,103
Net Income $ 23,430 $ 21,714 $ 25,708 $24,450
Earnings Per Average
Common Share $ 2.13 $ 1.99 $ 2.34 $2.24
Dividends Per
Common Share $ 0.29 $ 0.28 $ 0.58 $0.56
Average Common Shares
Outstanding 11,005 10,908 10,977 10,914
The accompanying Notes are an integral part of these statements.
CONSOLIDATED BALANCE SHEETS
Energen Corporation and Subsidiaries
(Unaudited)
March 31,September 30,
(in thousands) 1996 1995
ASSETS
Property, Plant and Equipment
Utility plant $ 521,499 $ 504,371
Less accumulated depreciation 256,883 247,926
Utility plant, net 264,616 256,445
Oil and gas properties,
successful efforts method 148,598 117,339
Less accumulated depreciation
, depletion and amortization 56,061 51,170
Oil and gas properties, net 92,537 66,169
Other property, net 4,183 4,650
Total property, plant and equipment, net 361,336 327,264
Current Assets
Cash and cash equivalents 14,461 36,695
Accounts receivable, net of
allowance for doubtful
accounts of $2,300 at March 31, 1996
and $2,037 at September 30, 1995 67,659 30,813
Inventories, at average cost
Storage gas 9,234 20,276
Materials and supplies 8,009 7,711
Liquified natural gas in storage 1,392 3,539
Deferred gas costs 11,015 1,426
Regulatory asset 3,566 6,321
Deferred income taxes 7,351 9,667
Prepayments and other 6,640 2,583
Total current assets 129,327 119,031
Other Assets
Notes receivable 2,314 3,095
Deferred charges and other 11,723 9,694
Total other assets 14,037 12,789
TOTAL ASSETS $ 504,700 $ 459,084
The accompanying Notes are an integral part of these statements.
CONSOLIDATED BALANCE SHEETS
Energen Corporation and Subsidiaries
(Unaudited)
March 31, September 30,
(in thousands, except share data) 1996 1995
CAPITAL AND LIABILITIES
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,
11,033,919 shares outstanding at
March 31, 1996 and
10,921,733 shares outstanding
at September 30, 1995 110 109
Premium on capital stock 83,903 81,243
Capital surplus 2,802 2,802
Retained earnings 109,353 90,020
Treasury stock at cost,
52,006 shares at March 31, 1996
and 11,627 shares at September 30,1995 (1,174) (250)
Total common shareholders' equity 194,994 173,924
Long-term debt 130,652 131,600
Total capitalization 325,646 305,524
Current Liabilities
Long-term debt due within one year 1,825 1,775
Notes payable to banks 34,000 32,300
Accounts payable 50,737 32,242
Accrued taxes 16,673 11,339
Customers' deposits 18,829 18,218
Amounts due customers 10,694 16,546
Accrued wages and benefits 12,119 10,955
Other 18,839 14,923
Total current liabilities 163,716 138,298
Deferred Credits and Other Liabilities
Deferred income taxes 2,041 2,540
Accumulated deferred investment tax credits 3,860 4,103
Other 9,437 8,619
Total deferred credits
and other liabilities 15,338 15,262
Commitments and Contingencies
TOTAL CAPITAL AND LIABILITIES $ 504,700 $ 459,084
The accompanying Notes are an integral part of these statements.
CONSOLIDATED STATEMENTS OF CASH FLOW
Energen Corporation and Subsidiaries
(Unaudited)
Six months ended March 31, (in thousands) 1996 1995
Operating Activities
Net Income $ 25,708 $ 24,450
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 16,979 14,150
Deferred income taxes, net 1,352 (4,770)
Deferred investment tax credits, net (243) (243)
Gain on sale of assets (647) 0
Net change in:
Accounts receivable (36,846) (9,498)
Inventories 12,891 9,312
Deferred gas cost (9,589) (2,502)
Accounts payable gas purchases 17,691 391
Accounts payable other trade 804 6,996
Other current assets and liabilities 3,802 10,114
Other, net 434 (148)
Net cash provided by
operating activities 32,336 48,252
Investing Activities
Additions to property, plant and equipment (52,108) (26,469)
Proceeds from sale of assets 2,452 0
Payments on notes receivable 781 420
Other, net 25 131
Net cash used in investing activities (48,850) (25,918)
Financing Activities
Payment of dividends on common stock (6,374) (6,113)
Issuance of common stock 1,355 90
Purchase of treasury stock (1,503) (361)
Reduction of long-term debt (898) (9,136)
Net change in short-term debt 1,700 (6,000)
Net cash used in financing activities (5,720) (21,520)
Net change in cash and cash equivalents (22,234) 814
Cash and cash equivalents at beginning of period 36,695 27,526
Cash and Cash Equivalents at End of Period $ 14,461 $ 28,340
The accompanying Notes are an integral part of these statements.
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STATEMENTS OF INCOME
Alabama Gas Corporation
(Unaudited)
Three months ended Six months ended
March 31, March 31,
(in thousands) 1996 1995 1996 1995
Operating Revenues $ 162,143 $134,141 $ 235,328 $ 201,367
Operating Expenses
Cost of gas 90,681 68,835 125,459 100,829
Operations 20,647 19,852 40,590 38,209
Maintenance 3,134 2,607 5,708 4,835
Depreciation 5,143 4,784 10,251 9,521
Income taxes
Current 11,101 14,568 9,962 15,630
Deferred, net (436) (4,657) 1,758 (4,775)
Deferred investment
tax credits, net (121) (121) (243) (243)
Taxes, other than
income taxes 10,723 8,997 16,448 14,389
Total operating
expenses 140,872 114,865 209,933 178,395
Operating Income 21,271 19,276 25,395 22,972
Other Income
Allowance for funds used
during construction 346 223 687 409
Other, net (576) 85 (440) 243
Total other income (230) 308 247 652
Interest Charges
Interest on long-term debt 1,734 1,680 3,872 3,437
Other interest expense 661 637 1,138 1,169
Total interest charges 2,395 2,317 5,010 4,606
Net Income Available
for Common $ 18,646 $ 17,267 $ 20,632 $19,018
The accompanying Notes are an integral part of these statements.
BALANCE SHEETS
Alabama Gas Corporation
(Unaudited)
March 31, September 30,
(in thousands) 1996 1995
ASSETS
Property, Plant and Equipment
Utility plant $ 521,499 $ 504,371
Less accumulated depreciation 256,883 247,926
Utility plant, net 264,616 256,445
Other property, net 288 193
Current Assets
Cash and cash equivalents 1,119 727
Accounts receivable
Gas 50,311 22,215
Merchandise 1,251 1,546
Other 6,498 1,598
Allowance for doubtful accounts (2,289) (2,000)
Inventories, at average cost
Storage gas 9,234 20,276
Materials and supplies 6,291 5,860
Liquified natural gas
in storage 1,392 3,539
Deferred gas costs 11,015 1,426
Regulatory asset 3,566 6,321
Deferred income taxes 5,183 7,416
Prepayments and other 2,135 2,302
Total current assets 95,706 71,226
Deferred Charges and Other Assets 7,419 7,403
TOTAL ASSETS $ 368,029 $ 335,267
The accompanying Notes are an integral part of these statements.
BALANCE SHEETS
Alabama Gas Corporation
(Unaudited)
March 31, September 30,
(in thousands, except share data) 1996 1995
CAPITAL AND LIABILITIES
Capitalization
Common shareholder's equity
Common stock, $0.01 par value; 3,000,000
shares authorized, 1,972,052 shares
outstanding at March 31, 1996 and
September 30, 1995 $ 20 $ 20
Premium on capital stock 31,682 31,682
Capital surplus 2,802 2,802
Retained earnings 101,910 87,638
Total common shareholder's equity 136,414 122,142
Cumulative preferred stock,
$0.01 par value, 120,000 shares
authorized, issuable in series $4.70 Series
Long-term debt 100,000 100,000
Total capitalization 236,414 222,142
Current Liabilities
Long-term debt due within one year
Notes payable to banks
Accounts payable 40,938 26,160
Accrued taxes 17,499 10,236
Customers' deposits 18,829 18,218
Supplier refunds due customers 14,364 3,315
Other amounts due customers (3,670) 13,231
Accrued wages and benefits 6,659 5,228
Other 10,569 9,444
Total current liabilities 105,188 85,832
Deferred Credits and Other Liabilities
Deferred income taxes 16,333 16,343
Accumulated deferred investment tax credits 3,860 4,103
Regulatory liability 5,442 6,001
Customer advances for construction and other 792 846
Total deferred credits
and other liabilities 26,427 27,293
Commitments and Contingencies
TOTAL CAPITAL AND LIABILITIES $ 368,029 $ 335,267
The accompanying Notes are an integral part of these statements.
STATEMENTS OF CASH FLOW
Alabama Gas Corporation
(Unaudited)
Six months ended March 31, (in thousands) 1996 1995
Operating Activities
Net Income $ 20,632 $19,018
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,251 9,521
Deferred income taxes, net 1,758 (4,775)
Deferred investment tax credits (243) (243)
Net change in:
Accounts receivable (32,411) (12,054)
Inventories 12,757 9,880
Deferred gas costs (9,589) (2,502)
Accounts payable gas purchases 17,691 391
Accounts payable other trade (2,913) 9,520
Other current assets and liabilities 4,533 9,299
Other, net (815) (345)
Net cash provided by
operating activities 21,651 37,710
Investing Activities
Additions to property, plant and equipment (17,774) (16,729)
Other, net (92) (138)
Net cash used in investing activities (17,866) (16,867)
Financing Activities
Payment of dividends on common stock (6,360) (6,115)
Reduction of long-term debt 0 (1,610)
Net advances from affiliates 2,967 4,512
Net change in short-term debt 0 (4,000)
Net cash used in financing activities (3,393) (7,213)
Net change in cash and cash equivalents 392 13,630
Cash and cash equivalents at beginning of period 727 156
Cash and Cash Equivalents at End of Period $ 1,119 $ 13,786
The accompanying Notes are an integral part of these statements.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Energen Corporation and Alabama Gas Corporation
1. BASIS OF PRESENTATION
All adjustments to the unaudited financial statements which are, in
the opinion of management, necessary for a fair statement of the
results of operations for the interim periods have been recorded.
Such adjustments consisted only of normal recurring items. The
consolidated financial statements and notes thereto should be read in
conjunction with the financial statements and notes for the years
ended September 30, 1995, 1994, and 1993 included in the 1995 Annual
Report of Energen Corporation (the Company) on Form 10-K. Certain
reclassifications were made to conform prior years' financial
statements to the current quarter presentation. The Company's
primary business is seasonal in character and influenced by weather
conditions. Results of operations for the interim periods are not
necessarily indicative of the results which may be expected for the
fiscal year.
2. 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,
an $8.2 million annual increase in revenue became effective December
1, 1995.
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. The
rider 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 of fiscal 1995. 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
quarter ended September 30, 1995, with approximately $.5 million
remaining at March 31, 1996.
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.
On April 11, 1996, the FERC issued its Order on Rehearing
approving the Settlement with minor modifications.
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, subsequent to quarter end,
Southern refunded over-collected GSR costs, Alagasco's share of
which has been determined to be $4.5 million. This amount has been
recorded in the accompanying financial statements as a receivable
with a corresponding refund due customers. 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 1996. Alagasco estimates that it has
a remaining GSR liability of approximately $1.1 million to be paid
through March 1997 and approximately $2.0 million in other transition
costs to be paid through June 1998. Such amounts have been recorded
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. SUPPLEMENTAL CASH FLOW INFORMATION
Energen Corporation
Six months ended March 31,
(in thousands) 1996 1995
Interest paid,
net of amounts capitalized $ 6,646 $ 6,675
Income taxes paid $ 1,089 $ 2,615
Noncash investing activities
(capitalized depreciation
and allowance for funds
used during construction) $ 773 $ 487
Alabama Gas Corporation
Six months ended March 31,
(in thousands) 1996 1995
Interest paid $ 5,025 $ 5,531
Income taxes paid $ 2,258 $ 6,647
Noncash investing activities
(capitalized depreciation
and allowance for funds
used during construction) $ 773 $ 487
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Consolidated net income for the second quarter of fiscal 1996 of $23,430,000
($2.13 per share) exceeded the prior year's results of $21,714,000 ($1.99 per
share). The contribution to consolidated earnings from Energen's natural gas
distribution company, Alagasco, was $1.4 million greater this quarter due
largely to the utility earning its allowed return on a higher level of
investment required to support the needs of its service territory.
Taurus Exploration Inc., Energen's oil and gas exploration and
production subsidiary, also improved its quarterly earnings contribution
primarily due to increased conventional oil and gas production and higher gas
prices partially offset by increased depreciation, depletion, and amortization
(DD&A) and interest expense. In addition, Taurus's prior-period earnings
included a $.5 million gain from the buy out of a gas sales contract.
For the 1996 fiscal year-to-date, Energen's net income totaled $25,708,000
($2.34 per share) compared with $24,450,000 ($2.24 per share) for the first
six months of fiscal 1995. Alagasco increased its contribution to
consolidated net income by $1.6 million primarily by earning its allowed
return on a higher level of investment. Excluding the prior-period gain from
the sales contract buy out, Taurus's year-to-date earnings remained virtually
unchanged, with increased in production and gas prices being largely offset by
increased DD&A, exploration and interest expenses.
Weather colder than that of the prior year had the most significant impact on
natural gas revenues in the current year evidenced by a 3 Bcf and 5.4 Bcf
increase in residential sales volumes for the quarter and year-to-date,
respectively, as well as a significant increase in natural gas pricing.
Alagasco's residential operating margins, however are unaffected due to the
APSC-approved temperature adjustment provision which allows for the adjustment
of customer's bills on a real-time basis to reflect usage under normal
temperature conditions.
Revenues from oil and gas production activities were significantly higher in
the second quarter this year. Production volumes from both natural gas and
oil were up by .5 Bcf each, largely associated with current year acquisitions.
The impact of higher production was magnified by an increased average sales
price for both gas and oil. After giving effect to hedged volumes, the
average per Mcf sales price of natural gas was $2.15 compared to $1.76 in the
prior year, and the average per barrel sales price of oil was $16.04 compared
to $15.31 in the prior year. These factors similarly influenced the six month
comparison. Natural gas and oil production increased .3 Bcf and .8 Bcf,
respectively; while after giving effect to hedged volumes, the average per Mcf
sales price of natural gas was $1.97 compared to $1.78 in the prior year, and
the average per barrel sales price of oil was $15.42 compared to $15.55 in the
prior year. Operating and consulting fees did not vary significantly for the
quarter or year-to-date.
To hedge its exposure to energy price fluctuations on oil and gas production
over the remainder of this fiscal year, Taurus has entered into contracts for
the sale of 4.2 Bcf of its gas production at an average contract price of
$1.84 per Mcf and for the sale of 210 MBbl of its oil production at an average
contract price of $17.49 per Bbl. Based on current estimates for fiscal 1996
production (excluding additional producing property acquisitions),
approximately 67 percent of estimated firm gas production and 100 percent of
estimated firm oil production are hedged. At March 30, 1996, the Company's
deferred losses related to its futures contracts totaled $1.7 million. The
program has been extended into fiscal 1997 for the sale of 7.6 Bcf of gas
production with an average contract price of $1.97 per Mcf.
Increased volumes, primarily associated with colder weather, and increased
commodity cost of natural gas resulted in an increase in cost of gas for both
periods.
For the quarter, consolidated operations and maintenance expense (O&M)
increased 6 percent due primarily to increased activities associated with
colder weather, and increased marketing expenses at Alagasco.
For the year-to-date higher lease operating and
exploration expenses at Taurus combined with the above to create an 8 percent
increase in O&M.
The 12 percent increase in depreciation expense for the quarter and six months
is related primarily to an increased DD&A rate (associated with prior year
reserve revisions) and increased production volumes at Taurus, and the effects
of normal plant growth at Alagasco.
The Company's expense for taxes other than income primarily reflects the
various state and local income business taxes paid by Alagasco as well as
various payroll-related taxes. State and local business taxes are generally
based on gross receipts of Alagasco and fluctuate accordingly.
Higher average short-term debt outstanding related to the initial financing of
Taurus's multi-year acquisition and development strategy was primarily
responsible for the increase in interest expense for the quarter and
year-to-date.
The reduction in other income for the quarter was primarily due to the
amortization of the call premium associated with Alagasco's early redemption
of long-term debt. For the year-to-date, the impact of this amortization was
offset by income recorded in the first quarter at Taurus related to a sale of
proved properties.
The variance in income tax expense for the quarter and year-to-date was due
largely to the effect of higher consolidated pretax income offset somewhat
by increased recognition of nonconventional fuel tax credits on an interim
basis. 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.
Liquidity and Capital Resources
Weather colder than that of the prior year had the most significant impact on
the $16 million decrease in cash provided by operations due to its effect on
the timing of collection of certain gas supply costs from customers. Also
influencing the change was a decrease in Alagasco's storage gas inventory as
the colder weather necessitated greater use of the inventory to meet system
requirements. Fluctuations in receivables and payables have been influenced
by greater throughput in the current year and are also the result of timing of
payments.
The increase in cash used in investing activities is largely the result of
Taurus's initial acquisition investment of $26.4 million for producing oil and
gas properties adding approximately 18.6 Bcf of gas and 3.8 Mmbl of oil, and
an additional $8.5 million in offshore exploration and development.
Offsetting that impact was the receipt of proceeds from the sale of certain
proved producing properties at Taurus. Included in Alagasco's capital
expenditures for the six months was the $2.5 million acquisition of an 1,100
customer municipal gas system.
During the six months ended March 31, 1995, the Company redeemed certain of
its notes payable. Additionally, the Company has utilized its short-term
credit facilities more extensively in the current year to initially finance
its multi-year acquisition strategy. Accordingly, cash provided by financing
activities has increased $15.8 million.
Future Capital Expenditures and Liquidity
The most significant event influencing the Company's future capital
expenditures and liquidity is Taurus's plan to increase its level of
investment in the exploration and production business in order 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. To help
facilitate this strategy, Taurus has entered into a three-and-one-half year
agreement with Sonat Exploration Company committing to invest annually up to
between $25 million and $50 million as its proportionate share of acquisitions
in fiscal years 1996 through 1998. The Company has short-term credit
facilities of $116 million that it anticipates using to initially acquire
properties, but long-term debt and equity will be issued for permanent
financing of these investments. The exact timing of the permanent financing
is undeterminable at this time as the Company does not know the exact pace of
acquisitions.
Consolidated capital and exploration expenditures could approximate $150
million in fiscal 1996, excluding additional municipal gas system
acquisitions. Of that, Taurus may invest $100 million or more for property
acquisitions and related development, as well as offshore exploration and
development. 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. Alagasco expects to invest
$48 million in fiscal 1996, excluding additional municipal gas system
acquisition, and primarily represents additions for normal distribution system
expansion.
Recent Pronouncements of the FASB
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (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 fiscal year 1997. The
implementation of SFAS No. 123 is not expected to have a material impact on
the financial statements.<PAGE>
SELECTED BUSINESS SEGMENT DATA
Energen Corporation
Three months ended Six months ended
March 31, March 31,
(in thousands,
except share data) 1996 1995 1996 1995
Natural Gas Distribution
Operating revenues
Residential $ 112,329 $ 92,102 $ 160,065 $ 136,452
Commercial and
industrial - small 40,560 31,887 57,429 47,432
Commercial and industrial
- large 675 219 731 250
Transportation 8,788 9,267 16,945 16,833
Other (209) 666 158 400
Total $ 162,143 $ 134,141 $ 235,328 $ 201,367
Volumes sold and
transported
Residential 18,187 15,219 25,977 20,506
Commercial and industrial
- small 7,003 5,871 10,382 8,338
Commercial and industrial
- large 9 8 18 16
Transportation 14,927 15,796 31,174 30,086
Total 40,126 36,894 67,551 58,946
Other data
Depreciation and
amortization $ 5,143 $ 4,784 $ 10,251 $ 9,521
Capital expenditures $ 11,110 $ 7,438 $ 18,547 $17,216
Operating income $ 31,815 $29,066 $ 36,872 $33,584
Oil and Gas Exploration and Production
Operating revenues
Natural gas $ 5,428 $3,564 $ 8,846 $ 7,512
Oil 2,404 903 3,707 1,695
Other 1,147 1,844 2,222 3,035
Total $ 8,979 $6,311 $ 14,775 $12,242
Sales volume - natural gas 2,519 2,028 4,484 4,209
Sales volume - oil 150 59 240 109
Average sales price
- natural gas (per Mcf) $ 2.15 $ 1.76 $ 1.97 $ 1.78
Average sales price
- oil (per barrel) $ 16.04 $15.31 $ 15.42 $15.55
Other data
Depreciation, depletion
and amortization $ 3,895 $2,304 $ 6,466 $ 4,422
Capital expenditures $ 14,685 $6,730 $ 34,300 $ 9,735
Exploration expenditures $175 $ 187 $ 1,228 $ 616
Operating income $ 2,255 $1,465 $ 2,117 $ 2,619
Other Business
Operating revenues $ 562 $ 583 $ 1,098 $ 1,177
Depreciation and
amortization $ 131 $ 100 $ 262 $ 207
Capital expenditures $ 34 $ 5 $ 34 $ 5
Operating income $ 51 $ (22) $ 146 $ 27
Eliminations and Corporate Expenses
Operating loss $ (478) $(272) $ (719) $ (712)
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. At the annual meeting of shareholders held on January 24, 1996, the Energen
Shareholders elected the following
Directors to serve for three year terms:
Director Votes cast for Votes withheld
J. Mason Davis, Jr. 8,629,177 121,209
James S.M. French 8,641,771 108,615
Wallace L. Luthy 8,633,353 117,033
b. The shareholders also approved a proposal to amend the 1992 Directors
Stock Plan of the Company to increase the size of
The annual grant from 200 shares to 300 shares for
Each non-employee Director beginning in fiscal year 1996.
The vote was: 7,866,727 for, 690,762 against, and
193,097 abstain.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27.1 Financial data schedule of Energen Corporation (for SEC purposes only)
27.2 Financial data schedule of Alabama Gas Corporation
(for SEC purposes only)
b. Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended March 31, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto
duly authorized.
ENERGEN CORPORATION
ALABAMA GAS CORPORATION
May 15, 1996 By/s/ Rex J. Lysinger
Rex J. Lysinger
Chairman of the Board of
Directors of
Energen and all
subsidiaries, Chief
Executive Officer of Energen
May 15, 1996 By/s/ G. C. Ketcham
G. C. Ketcham
Executive Vice President,
Chief
Financial Officer and Treasurer
May 15, 1996 By/s/ Paula H. Rushing
Paula H. Rushing
Controller of Alagasco
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> This schedule contains summary financial information extracted from
the Form 10Q for March 31,1996, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000277595
<NAME> ENERGEN CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> Mar-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 264,616
<OTHER-PROPERTY-AND-INVEST> 96,720
<TOTAL-CURRENT-ASSETS> 129,327
<TOTAL-DEFERRED-CHARGES> 11,723
<OTHER-ASSETS> 2,314
<TOTAL-ASSETS> 504,700
<COMMON> 110
<CAPITAL-SURPLUS-PAID-IN> 86,705
<RETAINED-EARNINGS> 109,353
<TOTAL-COMMON-STOCKHOLDERS-EQ> 194,994
0
0
<LONG-TERM-DEBT-NET> 130,652
<SHORT-TERM-NOTES> 34,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,825
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 143,229
<TOT-CAPITALIZATION-AND-LIAB> 504,700
<GROSS-OPERATING-REVENUE> 249,810
<INCOME-TAX-EXPENSE> 7,728
<OTHER-OPERATING-EXPENSES> 211,394
<TOTAL-OPERATING-EXPENSES> 219,122
<OPERATING-INCOME-LOSS> 30,688
<OTHER-INCOME-NET> 1,706
<INCOME-BEFORE-INTEREST-EXPEN> 32,394
<TOTAL-INTEREST-EXPENSE> 6,686
<NET-INCOME> 25,708
0
<EARNINGS-AVAILABLE-FOR-COMM> 25,708
<COMMON-STOCK-DIVIDENDS> 6,374
<TOTAL-INTEREST-ON-BONDS> 5,115
<CASH-FLOW-OPERATIONS> 32,336
<EPS-PRIMARY> 2.34
<EPS-DILUTED> 2.34
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> This schedule contains summary financial information extracted from
the Form 10Q for March 31,1996, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000003146
<NAME> ALABAMA GAS CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 264,616
<OTHER-PROPERTY-AND-INVEST> 288
<TOTAL-CURRENT-ASSETS> 95,706
<TOTAL-DEFERRED-CHARGES> 7,419
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 368,029
<COMMON> 20
<CAPITAL-SURPLUS-PAID-IN> 34,484
<RETAINED-EARNINGS> 101,910
<TOTAL-COMMON-STOCKHOLDERS-EQ> 136,414
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> 131,615
<TOT-CAPITALIZATION-AND-LIAB> 368,029
<GROSS-OPERATING-REVENUE> 235,328
<INCOME-TAX-EXPENSE> 11,477
<OTHER-OPERATING-EXPENSES> 198,456
<TOTAL-OPERATING-EXPENSES> 209,933
<OPERATING-INCOME-LOSS> 25,395
<OTHER-INCOME-NET> 247
<INCOME-BEFORE-INTEREST-EXPEN> 25,642
<TOTAL-INTEREST-EXPENSE> 5,010
<NET-INCOME> 20,632
0
<EARNINGS-AVAILABLE-FOR-COMM> 20,632
<COMMON-STOCK-DIVIDENDS> 6,360
<TOTAL-INTEREST-ON-BONDS> 3,872
<CASH-FLOW-OPERATIONS> 21,651
<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>
