UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED DECEMBER 31, 1998
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
605 21st Street North
Birmingham, Alabama 35203
Telephone Number 205/326-2700
http://www.energen.com
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 February 11, 1999:
Energen Corporation, $0.01 par value 29,569,925 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 DECEMBER 31, 1998
TABLE OF CONTENTS
Page
PART I: FINANCIAL INFORMATION (Unaudited)
Item 1. Financial Statements
(a) Consolidated Statements of Income of Energen Corporation 3
(b) Consolidated Balance Sheets of Energen Corporation 4
(c)Consolidated Statements of Cash Flows of Energen Corporation 6
(d) Statements of Income of Alabama Gas Corporation 7
(e) Balance Sheets of Alabama Gas Corporation 8
(f) Statements of Cash Flows of Alabama Gas Corporation 10
(g) Notes to Unaudited Financial Statements 11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 15
Selected Business Segment Data of Energen Corporation 19
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
PART II: OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 22
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
ENERGEN CORPORATION
(Unaudited)
Three months ended December 31,
(in thousands, except share data) 1998 1997
Operating Revenues
Natural gas distribution $71,557 $95,755
Oil and gas production activities 42,411 30,133
Total operating revenues 113,968 125,888
Operating Expenses
Cost of gas 26,663 50,747
Operations and maintenance 42,847 34,282
Depreciation, depletion and amortization 23,204 17,836
Taxes, other than income taxes 8,293 9,881
Total operating expenses 101,007 112,746
Operating Income 12,961 13,142
Other Income (Expense)
Interest expense (9,875) (7,235)
Other, net 478 818
Total other expense (9,397) (6,417)
Income Before Income Taxes 3,564 6,725
Income tax (benefit) expense (278) 598
Net Income $ 3,842 $6,127
Basic Earnings Per Average
Common Share* $ 0.13 $ 0.21
Diluted Earnings Per Average
Common Share* $ 0.13 $ 0.21
Dividends Per Common Share* $ 0.16 $0.155
Basic Average Common Shares
Outstanding* 29,435,038 28,887,220
*Share amounts reflect a 2-for-1 stock split effective March 2, 1998
The accompanying Notes are an integral part of these financial
statements.
<PAGE> 3
CONSOLIDATED BALANCE SHEETS
ENERGEN CORPORATION
December 31, 1998 September 30, 1998
(in thousands) (unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 7,349 $103,231
Accounts receivable, net of
allowance for doubtful accounts
of $3,543 at December 31, 1998,
and $3,547 at September 30, 1998 90,988 64,173
Inventories, at average cost
Storage gas 26,405 21,237
Materials and supplies 7,759 8,670
Liquified natural gas
in storage 3,667 3,381
Deferred gas cost 10,430 1,774
Deferred income taxes 11,627 12,569
Prepayments and other 8,090 3,418
Total current assets 166,315 218,453
Property, Plant and Equipment
Oil and gas properties, successful
efforts method 670,653 516,040
Less accumulated depreciation,
depletion and amortization 110,425 88,306
Oil and gas properties, net 560,228 427,734
Utility plant 641,969 632,165
Less accumulated depreciation 313,491 307,488
Utility plant, net 328,478 324,677
Other property, net 2,938 3,933
Total property, plant
and equipment, net 891,644 756,344
Other Assets
Deferred income taxes 11,139 10,942
Deferred charges and other 7,707 7,716
Total other assets 18,846 18,658
TOTAL ASSETS $1,076,805 $993,455
The accompanying Notes are an integral part of these financial
statements.
<PAGE> 4
CONSOLIDATED BALANCE SHEETS
ENERGEN CORPORATION
(in thousands, December 31, 1998 September 30, 1998
except share data) (unaudited)
CAPITAL AND LIABILITIES
Current Liabilities
Long-term debt due within one year $ 4,984 $ 7,209
Notes payable to banks 190,000 153,000
Accounts payable 46,900 33,533
Accrued taxes 18,693 21,255
Customers' deposits 17,395 16,344
Amounts due customers 13,911 12,070
Accrued wages and benefits 15,864 15,299
Other 53,118 25,531
Total current liabilities 360,865 284,241
Deferred Credits and Other Liabilities
Other 11,353 7,183
Total deferred credits and
other liabilities 11,353 7,183
Commitments and Contingencies - -
Capitalization
Preferred stock, cumulative
$0.01 par value, 5,000,000
shares authorized - -
Common shareholders' equity*
Common stock, $0.01 par value;
75,000,000 shares authorized, 29,512,994 shares
outstanding at December 31, 1998, and
29,326,597 shares outstanding at
September 30, 1998 295 293
Premium on capital stock 199,296 195,874
Capital surplus 2,802 2,802
Retained earnings 129,410 130,280
Deferred compensation plan 959 873
Treasury stock, at cost
(49,203 shares at December 31, 1998,
and 49,096 shares at
December 31, 1997) (959) (873)
Total common shareholders' equity 331,803 329,249
Long-term debt 372,784 372,782
Total capitalization 704,587 702,031
TOTAL CAPITAL AND LIABILITIES $1,076,805 $993,455
*Share amounts reflect a 2-for-1 stock split effective March 2, 1998
The accompanying Notes are an integral part of these financial statements.
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
ENERGEN CORPORATION
(Unaudited)
Three months ended December 31,
(in thousands) 1998 1997
Operating Activities
Net income $ 3,842 $ 6,127
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, depletion and
amortization 23,204 17,836
Deferred income taxes, net 618 (1,375)
Deferred investment tax credits, net (112) (117)
Net change in:
Accounts receivable (8,614) (20,274)
Inventories (4,543) 1,261
Deferred gas cost (8,656) (14,165)
Accounts payable - gas purchases 12,870 17,211
Accounts payable - trade 497 (1,890)
Other current assets and liabilities 5,609 1,462
Other, net 4,198 872
Net cash provided by
operating activities 28,913 6,948
Investing Activities
Additions to property, plant
and equipment (34,481) (68,556)
Acquisition, net of cash acquired (123,816) -
Other, net 15 433
Net cash used in investing activities (158,282) (68,123)
Financing Activities
Payment of dividends on common stock (4,711) (4,480)
Issuance of common stock 3,423 2,982
Payment of note payable issued
to purchase U.S. Treasury securities (100,571) (98,636)
Net change in short-term debt 135,346 64,636
Net cash provided by (used in)
financing activities 33,487 (35,498)
Net change in cash and
cash equivalents (95,882) (96,673)
Cash and cash equivalents at
beginning of period 103,231 105,402
Cash and Cash Equivalents at
End of Period $ 7,349 $ 8,729
The accompanying Notes are an integral part of these financial
statements.
<PAGE> 6
STATEMENTS OF INCOME
ALABAMA GAS CORPORATION
(Unaudited)
Three months ended December 31,
(in thousands) 1998 1997
Operating Revenues $71,557 $95,755
Operating Expenses
Cost of gas 27,146 51,404
Operations and maintenance 24,995 25,000
Depreciation 6,588 6,197
Income taxes
Current 1,022 2,148
Deferred, net 593 (927)
Deferred investment tax credits, net (112) (117)
Taxes, other than income taxes 5,746 7,252
Total operating expenses 65,978 90,957
Operating Income 5,579 4,798
Other Income (Expense)
Allowance for funds used
during construction 66 85
Other, net (97) 79
Total other income (expense) (31) 164
Interest Charges
Interest on long-term debt 2,199 2,210
Other interest expense 494 569
Total interest charges 2,693 2,779
Net Income $ 2,855 $ 2,183
The accompanying Notes are an integral part of these financial
statements.
<PAGE> 7
BALANCE SHEETS
ALABAMA GAS CORPORATION
December 31, 1998 September 30, 1998
(in thousands) (unaudited)
ASSETS
Property, Plant and Equipment
Utility plant $641,969 $632,165
Less accumulated depreciation 313,491 307,488
Utility plant, net 328,478 324,677
Other property, net 315 318
Current Assets
Cash and cash equivalents 3,008 1,222
Accounts receivable
Gas 42,725 32,191
Merchandise 2,170 2,362
Other 2,029 1,621
Allowance for doubtful accounts (3,482) (3,482)
Inventories, at average cost
Storage gas 26,405 21,237
Materials and supplies 5,511 5,533
Liquified natural gas in storage 3,667 3,381
Deferred gas cost 10,430 1,774
Deferred income taxes 9,455 10,470
Prepayments and other 6,265 2,112
Total current assets 108,183 78,421
Deferred Charges and Other Assets 4,682 4,733
TOTAL ASSETS $441,658 $408,149
The accompanying Notes are an integral part of these financial
statements.
<PAGE> 8
BALANCE SHEETS
ALABAMA GAS CORPORATION
December 31, 1998 September 30, 1998
(in thousands,except share data) (unaudited)
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
December 31, 1998, and
September 30, 1998 $ 20 $ 20
Premium on capital stock 31,682 31,682
Capital surplus 2,802 2,802
Retained earnings 123,059 120,205
Total common shareholder's
equity 157,563 154,709
Cumulative preferred stock,
$0.01 par value, 120,000 shares
authorized, issuable in
series-$4.70 Series - -
Long-term debt 119,650 119,650
Total capitalization 277,213 274,359
Current Liabilities
Long-term debt due within one year 3,150 5,350
Notes payable to banks 35,000 15,000
Accounts payable
Trade 30,959 23,217
Affiliated companies 4,557 2,738
Accrued taxes 18,911 19,428
Customers' deposits 17,395 16,344
Other amounts due customers 13,911 12,070
Accrued wages and benefits 7,827 4,217
Other 9,874 11,915
Total current liabilities 141,584 110,279
Deferred Credits and Other Liabilities
Deferred income taxes 16,841 17,136
Accumulated deferred
investment tax credits 2,549 2,661
Regulatory liability 2,718 2,910
Customer advances for
construction and other 753 804
Total deferred credits
and other liabilities 22,861 23,511
Commitments and Contingencies - -
TOTAL CAPITAL AND LIABILITIES $441,658 $408,149
The accompanying Notes are an integral part of these financial statements.
<PAGE> 9
STATEMENTS OF CASH
FLOWS ALABAMA GAS
CORPORATION
(Unaudited)
Three months ended
December 31, (in thousands) 1998 1997
Operating Activities
Net income $ 2,855 $ 2,183
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 6,588 6,197
Deferred income taxes, net 593 (927)
Deferred investment tax credits (112) (117)
Net change in:
Accounts receivable (10,750) (21,441)
Inventories (5,432) 1,027
Deferred gas cost (8,656) (14,165)
Accounts payable - gas purchases 12,870 17,211
Accounts payable - other trade (5,128) (559)
Other current assets and liabilities (62) 5,112
Other, net (279) 677
Net cash used in operating activities (7,513) (4,802)
Investing Activities
Additions to property, plant and equipment (10,307) (8,197)
Net advances from affiliates 1,819 3,281
Other, net (13) (21)
Net cash used in investing activities (8,501) (4,937)
Financing Activities
Net change in short-term debt 17,800 14,000
Net cash provided by
financing activities 17,800 14,000
Net change in cash and
cash equivalents 1,786 4,261
Cash and cash equivalents at
beginning of period 1,222 2,580
Cash and Cash Equivalents at
End of Period $ 3,008 $ 6,841
The accompanying Notes are an integral part of these financial
statements.
<PAGE> 10
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 of normal recurring items and
immaterial adjustments. The consolidated financial
statements and notes thereto should be read in conjunction with
the financial statements and notes for the years ended September
30, 1998, 1997, and 1996, included in the 1998 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
natural gas distribution 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, Alabama Gas Corporation (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 with
modifications in 1985, 1987 and 1990. On October 7, 1996, RSE was
extended, without change, for a five-year period through January
1, 2002. Under the terms of that extension, RSE will continue
after January 1, 2002, unless, after notice to the Company and a
hearing, the Commission votes to either modify or discontinue its
operation.
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
Alagasco's operations and maintenance (O&M) expense. If the
change in 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, the change in O&M expense per customer exceeds the index
range, three-quarters of the difference is returned to customers.
To the extent the change is less than the index range, the
utility benefits by one-half of the difference through future rate
adjustments. Under RSE as extended, an $11.8 million annual increase
in revenue became effective December 1, 1997, a $2.5 million annual
decrease in revenue became effective July 1, 1998, and a $6.6
million annual increase in revenue became effective December 1,
1998.
Alagasco calculates a temperature adjustment to customers' 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 billing cycle
the weather variation occurs. Substantially all the customers to whom
the temperature adjustment applies are residential, small commercial
and small industrial. Alagasco'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.
The APSC approved an Enhanced Stability Reserve (ESR), beginning
fiscal year 1998, to which Alagasco may charge the full amount
of: (1) extraordinary O&M expenses resulting from force majeure
events such as storms, severe weather, and outages, when one or a
combination of two such events results in more than $200,000 of
additional O&M expense during a fiscal year; or (2) individual
industrial and commercial customer revenue losses that exceed
$250,000 during the fiscal year, if such losses cause Alagasco's
return on equity to fall below 13.15 percent. The APSC approved the
reserve on October 6, 1998, in the amount of $3.9 million; the
maximum approved funding level of the ESR is $4 million. The APSC
provides for accretions to the ESR in an amount of no more than
$40,000 monthly following a year in which a charge against the ESR
is made until the maximum funding level is achieved. The APSC
will re-evaluate the operation of the ESR following the conclusion
of Alagasco's fiscal year 2000.
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. Remaining
excess utility deferred taxes of $1.9 million are being returned
to ratepayers over approximately 12 years. At December 31,
1998, and September 30, 1998, a regulatory liability related to
income taxes of $2.7 million and $2.9 million, respectively, was
included in the consolidated financial statements.
As of November 1, 1998, the Company offered a Voluntary Early
Retirement Program to certain eligible employees. At December 31,
1998, a regulatory asset of $3.2 million for costs associated with
this early retirement program is included in the consolidated
financial statements. The APSC has allowed these costs to be
amortized over a three-year period.
3. CAPITAL STOCK
On January 28, 1998, Energen announced a 2-for-1 split of the
Company's common stock.The split was in the form of a 100
percent stock dividend and was payable on March 2, 1998, to
shareholders of record on February 13, 1998. All
per-share amounts and the number of shares of capital stock
outstanding have been adjusted to reflect the stock split.
Effective January 30, 1998, the Restated Certificate of
Incorporation of Energen Corporation was amended to increase
Energen's authorized common stock, par value $0.01 per share,
from 30,000,000 shares to 75,000,000 shares.
4. DERIVATIVE COMMODITY INSTRUMENTS
Energen Resources periodically enters into derivative commodity
instruments to hedge its exposure to price fluctuations on oil
and gas production. Such instruments include regulated natural
gas and crude oil futures contracts traded on the New York
Mercantile Exchange and over-the-counter swaps and basis hedges
with major energy derivative product specialists. These
transactions are accounted for under the hedge method of
accounting. Under this method, any unrealized gains and losses
are recorded as a current receivable/payable and a deferred
gain/loss. Realized gains and losses are deferred as
current liabilities or assets until the revenues from the related
hedged volumes are recognized in the income statement. Cash flows
from derivative instruments are recognized as incurred through
changes in working capital. The Company had
deferred gains of $18.8 million and $0.6 million on the
balance sheet at December 31, 1998, and September 30, 1998,
respectively.
At December 31, 1998, Energen Resources had entered into contracts
and swaps for 35.5 Bcf of its remaining estimated 1999 flowing gas
production at an average contract price of $2.29 per Mcf and for
810 MBbl of its remaining estimated flowing oil production at
an average contract price of $16.80 per barrel. Fiscal year
2000 contracts and swaps were in place for 4.5 Bcf of flowing gas
production at an average contract price of $2.22 per Mcf and for
180 MBbl of flowing oil production at an average contract price
of $17.31 per barrel. Realized prices are anticipated to be
lower than hedged prices due to basis differences and other
factors. To help mitigate this variance, the Company has hedged
the basis difference on 0.9 Bcf of its remaining 1999 San
Juan production.
All hedge transactions are subject to the Company's risk
management policy, approved by the Board of Directors, which does
not permit speculative positions. To apply the hedge method of
accounting, management must demonstrate that a high correlation
exists between the value of the derivative commodity instrument and
the value of the item hedged. Management uses the historic
relationships between the derivative instruments and the sales
prices of the hedged volumes to ensure that a high level of
correlation exists.
5. ACCOUNTING FOR LONG-LIVED ASSETS
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for LongLived Assets to be Disposed Of, requires that an
impairment loss be recognized when the carrying amount of an
asset exceeds the sum of the undiscounted estimated future cash
flow of the asset. The Statement also provides that all long-lived
assets to be disposed of be reported at the lower of the carrying
amount or fair value. Accordingly, during the second fiscal
quarter of 1998, Energen Resources recorded a pre-tax writedown
of $4.7 million on certain oil and gas properties, adjusting the
carrying amount of the properties to their fair value based
upon expected future discounted cash flows. This writedown
primarily reflected the impact of a decline in crude oil prices. The
expense was recorded as additional depreciation, depletion and
amortization.
6. RECENT PRONOUNCEMENTS OF THE FASB
The FASB issued SFAS No. 130, Reporting Comprehensive Income, in
June 1997, which requires the reporting and display of
comprehensive income and its components in an entity's
financial statements. There currently are no
differences between the Company's net income and comprehensive
income. In February 1998, the FASB issued SFAS No. 132,
Employers' Disclosures about Pensions and Other Postretirement
Benefits, which revises employers' disclosures about pension and
other postretirement benefit plans. This pronouncement relates
solely to disclosure provisions, and therefore will have no effect
on the results of operations or financial position of the Company.
The Company is required to adopt these statements in fiscal year
1999.
In June 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, which establishes
accounting and reporting standards for derivative instruments.
The Company is required to adopt this statement in fiscal year
2000. The impact of this pronouncement on the Company currently is
being evaluated.
7. INDUSTRY SEGMENT INFORMATION
Effective September 30, 1998, the Company early adopted SFAS
No. 131, Disclosures about Segments of an Enterprise and
Related Information. The Company is principally engaged in
two business segments: the purchase, distribution and sale of
natural gas in central and north Alabama (natural gas distribution)
and the acquisition, development, exploration and production of
oil and gas in the continental United States (oil and gas
activities).
Three months ended December 31,
(in thousands) 1998 1997
Operating revenues
Natural gas distribution $71,557 $95,755
Oil and gas activities 42,411 30,133
Total $113,968 $125,888
Operating income (loss)
Natural gas distribution $ 7,082 $ 5,902
Oil and gas activities 6,196 7,541
Eliminations and corporate expenses (317) (301)
Total $ 12,961 $ 13,142
Identifiable assets
Natural gas distribution $441,658 $429,905
Oil and gas activities 648,451 476,656
Eliminations and other (13,304) (10,660)
Total $1,076,805 $895,901
<PAGE> 15
8. RECONCILIATION OF EARNINGS PER SHARE
(in thousands, Three months ended Three months ended
except per share amounts) December 31, 1998 December 31, 1997
Per Share Per Share
Income Shares Amount Income Shares Amount
Basic EPS $3,842 29,435 $ 0.13 $ 6,127 28,887 $ 0.21
Effect of Dilutive Securities
Long-range performance
shares 115 107
Non-qualified stock
options 170 173
Diluted EPS $ 3,842 29,720 $ 0.13 $ 6,127 29,167 $ 0.21
9. ACQUISITION OF TOTAL MINATOME CORPORATION
On October 15, 1998, Energen Resources purchased the stock of the
TOTAL Minatome Corporation (TOTAL), a Houston-based unit of
TOTAL American Holding Inc. Immediately upon closing the
transaction, Energen Resources sold a 31 percent undivided
interest in TOTAL's assets to Westport Oil and Gas Company
Inc. Energen Resources' net adjusted price totaled
approximately $135 million, including the assumption of certain
legal and financial obligations. Energen Resources gained an
estimated 200 billion cubic feet equivalent of proved domestic
oil and natural gas reserves. The acquisition was accounted for as
a purchase and the results of operations since the acquisition date
are included in the consolidated financial statements. A summary
of net assets acquired is as follows:
Oil and gas properties $ 134,856
Less liabilities assumed (10,611)
Less cash acquired (429)
Acquisition cost, net of cash acquired $ 123,816
Summarized below are the consolidated results of operations for the
three months ended December 31, 1998 and 1997, on an unaudited pro
forma basis, as if the TOTAL acquisition were made on October
1, 1997. The pro forma financial information is based on the
Company's consolidated results of operations for the three months
ended December 31, 1998 and 1997, and on the data provided by TOTAL
after giving effect to certain pro forma adjustments. The pro
forma financial information does not purport to be indicative of
results of operations that would have occurred had the
transactions occurred on the basis assumed above nor are they
indicative of results of the future operations of the
combined enterprises.
Three months ended December 31, (in thousands) 1998 1997
Operating revenues $113,968 $148,597
Net income $ 3,842 $ 6,911
Basic Earnings Per Average Common Share $ 0.13 $ 0.24
Diluted Earnings Per Average Common Share $ 0.13 $ 0.24
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Energen's net income for the three months ended December 31, 1998,
totaled $3.8 million ($0.13 per basic share) and compares to net
income of $6.1 million ($0.21 per basic share) recorded in
the same period last year. Energen
Resources Corporation, Energen's oil and gas subsidiary, realized
net income of $1.0 million in the first fiscal quarter as compared
with $3.8 million in the same period last year. Increased
production-related income largely was offset by significantly lower
realized oil prices and slightly lower realized gas prices. Also
affecting income adversely were increased interest expense and
exploration expense and decreased recognition of nonconventional
fuels tax credits on an interim basis. Alagasco, Energen's
natural gas utility, reported net income of $2.9 million in the
current quarter. This $672,000 increase from the same period
last year primarily reflects the utility's ability to earn within
its allowed range of return on an increased level of equity
representing investment in utility plant.
Natural Gas Distribution
Natural gas distribution revenues decreased $24.2 million for
the quarter primarily due to decreased sales volumes resulting
from weather which was significantly warmer than in the prior
year as well as a decrease in charges recovered through the Gas
Supply Adjustment (GSA) rider. Gas price fluctuations are passed
through volumetrically to the customer via the Company's GSA rider.
Weather that was 55 percent warmer than the same period last year
contributed to a 40.3 percent decrease in residential sales volumes,
a 12.8 percent decrease in commercial and industrial sales volumes,
and a 47.2 percent decrease in cost of gas primarily due to
reduced purchase volumes. The temperature adjustment provision
allows customer bills for substantially all residential,
small commercial and small industrial customers to be adjusted on a
real-time basis so that temperature variances from normal do not
affect Alagasco's operating margins for these customers.
Operations and maintenance expenses remained stable in the
current year, as increases in advertising and bad debt expenses
were offset by decreased general liability insurance expense.
A slight increase in depreciation expense primarily was due to
normal growth of the utility's distribution system. Taxes other
than income primarily reflect various state and local business
taxes as well as payroll-related taxes. State and local business
taxes are generally based on gross receipts and fluctuate
accordingly.
As discussed more fully in Note 2, Alagasco is subject to
regulation by the APSC. On October 7, 1996, the APSC issued an
order extending the Company's current rate-setting mechanism
through January 1, 2002. Under the terms of that extension, RSE
will continue after January 1, 2002, unless, after notice to the
Company and a hearing, the Commission votes to either modify or
discontinue its operation.
Oil and Gas Activities
Revenues from oil and gas production activities rose 40.7
percent to $42.4 million for the three months ended December
31, 1998, primarily reflecting Energen Resources' current- and
prior-year property acquisitions. Natural gas comprised 72 percent
of Energen Resources' production for first fiscal quarter. Natural
gas production increased 40.7 percent to 14.5 Bcf, and oil volumes
more than tripled to 782 MBbl. In addition, Energen Resources'
high BTU-content natural gas reserves in the San Juan Basin
yielded 158 MBbl in natural gas liquids in the current quarter.
Offsetting the impact of higher production were realized natural gas
prices that were slightly lower than in the same period last year
and significantly lower realized oil prices. For the quarter,
realized gas prices decreased 2.3 percent
to $2.16 per Mcf while realized oil prices decreased 30.6 percent
to $11.91 per barrel. Natural gas liquids sold for an average price
of $7.17 per barrel for the quarter as compared to $9.38 per
barrel in the prior period.
Energen Resources enters into derivative commodity instruments to
hedge its exposure to the impact of price fluctuations on oil and
gas production. Such instruments include regulated natural gas and
crude oil futures contracts traded on the New York Mercantile
Exchange and over-the-counter swaps and basis hedges with major
energy derivative product specialists. All hedge transactions are
subject to the Company's risk management policy, approved by
the Board of Directors, which does not permit speculative
positions. At December 31, 1998, Energen Resources had entered
into contracts and swaps for 35.5 Bcf of its remaining estimated
1999 flowing gas production at an average contract price of $2.29
per Mcf and for 810 MBbl of its remaining estimated flowing oil
production at an average contract price of $16.80 per barrel.
Fiscal year 2000 contracts and swaps were in place for 4.5 Bcf of
flowing gas production at an average contract price of $2.22 per
Mcf and for 180 MBbl of flowing oil production at an average
contract price of $17.31 per barrel. Realized prices are
anticipated to be lower than hedged prices due to basis differences
and other factors. To help mitigate this variance, the Company has
hedged the basis difference on 0.9 Bcf
of its remaining 1999 San Juan production.
O&M expense increased $8.6 million for the quarter primarily due to
significant production growth and acquisition activity at
Energen Resources. Lease operating expenses rose by $5.6
million for the quarter due to the acquisition of oil and gas
properties. Exploration expense increased $1.3 million for the
quarter due to the timing of exploratory efforts and
drilling activity associated with certain properties.
Energen Resources' significantly higher production volumes
generated the majority of the $5.0 million increase in depreciation,
depletion and amortization for the quarter. The average depletion rate for
the quarter decreased to $0.81 as compared to $0.87 for the same
period last year, due primarily to trading certain offshore
properties in the fourth quarter of fiscal 1998 for onshore
properties which had lower depletion rates.
Energen Resources' expense for taxes other than income
primarily reflects production-related taxes which were $1.2 million
higher this quarter as a result of increased production.
Non-Operating Items
Interest expense for the Company increased $2.6 million in
the quarter. Influencing the increase in interest expense for the
current period is the $100 million of medium-term notes (MTNs)
issued in February 1998 in connection with the growth at Energen
Resources. The Company also significantly increased its average
borrowings under its short-term credit facilities for the same
purpose.
The Company's effective tax rates are lower than statutory federal
tax rates primarily due to the recognition of nonconventional
fuels tax credits and the amortization of investment tax credits.
Nonconventional fuels tax credits are generated annually and
expire effective December 31, 2002. They are expected to be
recognized fully in the financial statements, and effective tax
rates are expected to continue to remain lower than statutory
federal rates. Income tax expense decreased in the current
quarter due to lower consolidated pretax income, partially
offset by decreased recognition of nonconventional fuels tax
credits on an interim basis.
FINANCIAL POSITION AND LIQUIDITY
Cash flow from operations for the current quarter increased
approximately $22 million compared to the same period in the
prior year. Net income decreased during the period but was
more than offset by increases in working capital items, which are
highly influenced by throughput, oil and gas production volumes and
timing of payments.
The Company invested $158.3 million through the three months ended
December 31, 1998, primarily in the addition of property, plant
and equipment. Energen Resources invested $147.9 million in
capital expenditures for the year-to-date related to the
acquisition and development of oil and gas properties. In
October 1998, Energen Resources acquired the stock of TOTAL Minatome
Corporation (TOTAL) and, immediately upon closing, sold a 31
percent interest in TOTAL's assets to Westport Oil and Gas
Company Inc. Energen Resources' net adjusted purchase price
totaled approximately $135 million, including the assumption of
certain legal and financial obligations. Energen Resources gained
an estimated 200 Bcfe of proved domestic oil and natural gas
reserves. Utility capital expenditures totaled $10.3 million
and represented primarily normal system distribution expansion
and support facilities.
Cash provided by financing activities totaled $33.5 million
for financing activities in the first quarter of fiscal 1999. For
tax planning purposes, the Company borrowed $100.6 million in
September 1998 to invest in short-term federal obligations.
The Treasuries matured in early October and the proceeds were used
to repay the debt. Increased borrowings under Energen's short-term
credit facilities were used to finance Energen Resources'
acquisition strategy.
FUTURE CAPITAL RESOURCES AND LIQUIDITY
The Company plans to continue to implement its diversified growth
strategy which calls for Energen Resources to invest
approximately $1 billion in the
acquisition and development of producing properties and in
exploration and related development over the five-year period
ending September 30, 2003. In fiscal year 1999, Energen
Resources plans to spend approximately $200 million, including an
approximate $135 million net adjusted purchase price for the TOTAL
property acquisition and $65 million for development of current-
and prior-year property acquisitions. Energen Resources'
continued ability to invest in property acquisitions will be
influenced significantly by industry trends as the producing
property acquisition market has historically been cyclical. From
time to time, Energen Resources also may be engaged in negotiations
to sell, trade or otherwise dispose of previously acquired property.
To finance Energen Resources' investment program, the Company will
continue to utilize its short-term credit facilities to supplement
internally generated cash flow, with long-term debt and equity
providing permanent financing. In December 1997, Energen filed a
$400 million shelf registration for debt and common stock. Under
that registration, Energen issued $100 million of Series B
MTNs in February 1998, the proceeds from which were used to
repay short-term debt. During 1998, Energen increased its
available short-term credit facilities to $228 million to
accommodate its growth plans. Energen may issue common equity near
the end of fiscal year 1999 to assist in financing current-year
investing activity.
Utility capital expenditures for normal distribution system
renewals and expansion plus support facilities could approximate
$50 million in fiscal 1999. Alagasco also will maintain an
investment in storage working gas which is expected to average
approximately $22 million in 1999. The utility anticipates funding
these capital requirements through internally generated capital and
the utilization of short-term credit facilities. The Company closed
on a sale and leaseback of its new headquarters building in
January 1999; the proceeds approximated the investment in the
facility.
Year 2000 Readiness
Year 2000 issues result from computer applications that use
only two-digit representations to refer to a year. Many computer
applications could fail or create erroneous results if Year
2000 issues are not properly addressed. Energen has evaluated
and continues to evaluate its computer software and hardware to
assess the need for modifications for the Year 2000. Over the past
three years, the Company has made a substantial investment in
software and computer infrastructure and non-information
technology systems that either comply with Year 2000
requirements or can be upgraded. A full-time senior
management-level position was established and a primary contractor
was selected in 1996 to address the Year 2000 issue. The plan of
work established involves the following phases: inventory,
assessment, testing, certification and change control. A number of
inventory reviews have been completed and will continue to be
updated in the future. Tools to test, age and evaluate data
software and hardware have been purchased and installed and are
being utilized for Year 2000 compliance. Test plans for items
identified as critical systems either are being deployed or
currently developed. Testing and remediating high priority systems
and devices are scheduled for completion by September 30, 1999.
A third-party assessment of Year 2000 readiness was conducted by
an outside entity for both information technology and non-
information technology systems as of December 1, 1998, and indicated
that mission-critical functions including the flow of gas into homes
and commercial accounts are not likely to be impacted by the Year
2000 changeover. In response to the independent assessment,
several program changes have been implemented or are in the
process of implementation. A steering committee of the Company's
executive management has and will continue to review the millennium
project progress on a regular basis. With respect to material
third-party relationships, the Company, in addition to responding
to questions concerning Year 2000 issues from customers and
regulators, is requesting information from certain vendors and
partners designed to determine their ability to continue
uninterrupted supply of materials or services to the Company. This
process is scheduled for completion during the third fiscal
quarter of 1999.
As of December 31, 1998, the Company has incurred approximately
$755,000 of Year 2000 related costs to date which are being
expensed as incurred. The Company's Year 2000 remediation is
expected to be completed by the end of calendar year 1999 with an
estimated total cost of $2.3 million.
The Company is developing and implementing Year 2000 readiness
procedures to minimize the risks identified to date, including what
it believes are worst case scenarios of reduced gas deliverability
into the Alagasco distribution system, production failures on
Energen Resources properties, or failures of gathering and
pipeline systems to accept Energen Resources production. Specific
Year 2000 contingency plans are scheduled to be incorporated
into the previously established Energen Business Resumption
Plan during fiscal year 1999. The Company's contingency plan
identifies alternate recovery locations, contact lists, and other
equipment, as well as special resource requirements.
The Company's goal is that Year 2000 issues will be addressed on a
schedule and in a manner that will prevent such issues from having
a material effect on the Company's results of operations,
liquidity or financial condition. While the Company has and will
be pursuing Year 2000 compliance, there can be no assurance that
the Company and its vendors will be successful in
identifying and addressing all material Year 2000 issues.
Forward-Looking Statements and Risks
Certain statements in this report, including statements of
future plans, objectives and expected performance of the Company
and its subsidiaries, are forward-looking statements that are
dependent on certain events, risks and uncertainties that may be
outside the Company's control which could cause actual results to
differ materially from those anticipated. Some of these include,
but are not limited to, economic and competitive conditions,
inflation rates, legislative and regulatory changes, financial
market conditions, future business decisions, Year 2000 issues, and
other uncertainties, all of which are difficult to predict. There
are numerous uncertainties inherent in estimating quantities of
proved oil and gas reserves and in projecting future rates of
production and timing of development expenditures. The total amount
or timing of actual future production may vary significantly from
reserves and production estimates. In
the event Energen Resources is unable to invest fully its planned
acquisition, development and exploratory expenditures, future
operating revenues, production and proved reserves could be
negatively affected. The drilling of development and exploratory
wells can involve significant risk including that related to
timing, success rates and cost overruns. These risks can be
impacted by lease and rig availability, complex geology and other
factors. Results of operations
and cash flows also could be affected by future oil and gas
prices. Although Energen Resources makes use of futures, swaps
and fixed price contracts to mitigate risk, fluctuations in oil
and gas prices may affect the Company's financial position and
results of operations.
OTHER
Recent Pronouncements of the FASB
The FASB issued SFAS No. 130, Reporting Comprehensive Income, in
June 1997, which requires the reporting and display of
comprehensive income and its components in an entity's
financial statements. There currently are no
differences between the Company's net income and comprehensive
income. In February 1998, the FASB issued SFAS No. 132,
Employers' Disclosures about Pensions and Other Postretirement
Benefits, which revises employers' disclosures about pension and
other postretirement benefit plans. This pronouncement relates
solely to disclosure provisions, and therefore will have no effect
on the results of operations or financial position of the Company.
The Company is required to adopt these statements in fiscal year
1999.
In June 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, which establishes
accounting and reporting standards for derivative instruments.
The Company is required to adopt this statement in fiscal year
2000. The impact of this pronouncement on the Company currently is
being evaluated.
<PAGE> 18
SELECTED BUSINESS SEGMENT DATA
ENERGEN CORPORATION
(Unaudited)
Three months ended December 31,
(dollars in thousand,
except sales price data) 1998 1997
Natural Gas Distribution
Operating revenues
Residential $45,347 $62,377
Commercial and industrial - small 16,653 23,494
Transportation 8,553 9,357
Other 1,004 527
Total $71,557 $95,755
Gas delivery volumes (MMcf)
Residential 4,679 7,833
Commercial and industrial - small 2,416 3,456
Transportation 14,880 16,374
Total 21,975 27,663
Other data
Depreciation and amortization $ 6,588 $ 6,197
Capital expenditures $10,307 $ 8,314
Operating income $ 7,082 $ 5,902
Oil and Gas Activities
Operating revenues
Natural gas $31,377 $22,789
Oil 9,306 4,445
Natural gas liquids 1,136 1,649
Other 592 1,250
Total $42,411 $30,133
Sales volume
Natural gas (MMcf) 14,493 10,304
Oil (MBbl) 782 259
Natural gas liquids (MBbl) 158 176
Average sales price
Natural gas (MMcf) $ 2.16 $ 2.21
Oil (barrel) $ 11.91 $ 17.15
Natural gas liquids (barrel) $ 7.17 $ 9.38
Other data
Depreciation, depletion and
amortization $16,616 $11,639
Capital expenditures $147,990 $60,359
Exploration expenditures $ 1,376 $ 123
Operating income $ 6,196 $ 7,541
<PAGE> 19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Energen Resources' major market risk exposure is in the pricing
applicable to its oil and gas production. Historically, prices
received for oil and gas production have been volatile because
of seasonal weather patterns, world and national supply and
demand factors and general economic conditions. Crude oil prices
are also affected by quality differentials, by worldwide
political developments and by actions of the Organization of
Petroleum Exporting Countries. Basis differentials, like the
underlying commodity prices, can be volatile because of
regional supply and demand factors, including seasonal factors
and the availability and price of transportation to consuming areas.
Energen Resources enters into derivative commodity instruments to
hedge its exposure to the impact of price fluctuations on oil and
gas production. Such instruments include regulated natural gas and
crude oil futures contracts traded on the New York Mercantile
Exchange and over-the-counter swaps and basis hedges with major
energy derivative product specialists. All hedge transactions are
subject to the Company's risk management policy, approved by
the Board of Directors, which does not permit speculative
positions. These transactions are accounted for under the hedge
method of accounting. Under this method, any unrealized gains and
losses are recorded as a current receivable/payable and a deferred
gain/loss. Realized gains and losses are deferred as
current liabilities or assets until the revenues from the related
hedged volumes are recognized in the income statement. Cash flows
from derivative instruments are recognized as incurred through
changes in working capital. The Company had deferred gains of
$18.8 million and $0.6 million on the balance sheet at December
31, 1998, and September 30, 1998, respectively.
<PAGE> 20
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 27, 1999,
the Energen shareholders elected the following Directors to
serve for three year terms expiring in 2002:
Director Votes cast for Votes withheld
J. Mason Davis, Jr. 24,509,924 194,028
James S. M. French 24,529,563 174,389
Wallace L. Luthy 24,520,735 183,217
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
(1) Form 8-K dated October 15, 1998, reporting Energen Resources'
acquisition of TOTAL Minatome Corporation.
(2) Form 8-KA dated October 15, 1998, reporting supplementary
financial information related to Energen Resources'
acquisition of TOTAL Minatome Corporation.
<PAGE> 21
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
February 11, 1999 By /s/ Wm. Michael Warren, Jr.
Wm. Michael Warren, Jr.
Chairman, President and
Chief Executive Officer of
Energen, Chairman and Chief
Executive Officer of
Alabama Gas Corporation
February 11, 1999 By /s/ G. C. Ketcham
G. C. Ketcham
Executive Vice President,
Chief Financial Officer and
Treasurer of Energen and
Alabama Gas Corporation
February 11, 1999 By /s/ Grace B. Carr
Grace B. Carr
Controller of Energen
February 11, 1999 By /s/ Paula H. Rushing
Paula H. Rushing
Vice President-Finance of
Alabama Gas Corporation
<PAGE> 22
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED
FROM THE FINANCIAL STATEMENTS OF ENERGEN CORPORATION
FOR THE THREEMONTHS ENDED DECEMBER 31, 1998, 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> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 328,478
<OTHER-PROPERTY-AND-INVEST> 563,166
<TOTAL-CURRENT-ASSETS> 166,315
<TOTAL-DEFERRED-CHARGES> 18,846
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,076,805
<COMMON> 295
<CAPITAL-SURPLUS-PAID-IN> 202,098
<RETAINED-EARNINGS> 129,410
<TOTAL-COMMON-STOCKHOLDERS-EQ> 331,803
0
0
<LONG-TERM-DEBT-NET> 372,784
<SHORT-TERM-NOTES> 190,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 4,984
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 177,234
<TOT-CAPITALIZATION-AND-LIAB> 1,076,805
<GROSS-OPERATING-REVENUE> 113,968
<INCOME-TAX-EXPENSE> (278)
<OTHER-OPERATING-EXPENSES> 101,007
<TOTAL-OPERATING-EXPENSES> 100,729
<OPERATING-INCOME-LOSS> 12,961
<OTHER-INCOME-NET> (9,397)
<INCOME-BEFORE-INTEREST-EXPEN> 13,717
<TOTAL-INTEREST-EXPENSE> 9,875
<NET-INCOME> 3,842
0
<EARNINGS-AVAILABLE-FOR-COMM> 3,842
<COMMON-STOCK-DIVIDENDS> 4,711
<TOTAL-INTEREST-ON-BONDS> 6,820
<CASH-FLOW-OPERATIONS> 28,913
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED
FROM THE FINANCIAL STATEMENTS OF ALABAMA GAS CORPORATION
FOR THE THREEMONTHS ENDED DECEMBER 31, 1998, 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> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 328,478
<OTHER-PROPERTY-AND-INVEST> 315
<TOTAL-CURRENT-ASSETS> 108,183
<TOTAL-DEFERRED-CHARGES> 4,682
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 441,658
<COMMON> 20
<CAPITAL-SURPLUS-PAID-IN> 34,484
<RETAINED-EARNINGS> 123,059
<TOTAL-COMMON-STOCKHOLDERS-EQ> 157,563
0
0
<LONG-TERM-DEBT-NET> 119,650
<SHORT-TERM-NOTES> 35,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 3,150
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 126,295
<TOT-CAPITALIZATION-AND-LIAB> 441,658
<GROSS-OPERATING-REVENUE> 71,557
<INCOME-TAX-EXPENSE> 1,503
<OTHER-OPERATING-EXPENSES> 64,475
<TOTAL-OPERATING-EXPENSES> 65,978
<OPERATING-INCOME-LOSS> 5,579
<OTHER-INCOME-NET> (31)
<INCOME-BEFORE-INTEREST-EXPEN> 5,548
<TOTAL-INTEREST-EXPENSE> 2,693
<NET-INCOME> 2,855
0
<EARNINGS-AVAILABLE-FOR-COMM> 2,855
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 2,199
<CASH-FLOW-OPERATIONS> (7,513)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>ALABAMA GAS CORPORATION (ALAGASCO) IS A SUBSIDIARY OF
ENERGEN CORPORATION. EARNINGS PER SHARE IS NOT CALCULATED
FOR ALAGASCO AS AMOUNT WOULD NOT BE MEANINGFUL.
</FN>
</TABLE>
