SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period 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 file number 0-9408
PRIMA ENERGY CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 84-1097578
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1801 Broadway, Suite 500, Denver CO 80202
(Address of principal executive offices) (Zip Code)
(303) 297-2100
(Registrant's telephone number, including area code)
NO CHANGE
(Former name, former address and former fiscal year, if changed from last
report.)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [x] No [ ]
As of May 1, 1996, the Registrant had 3,880,396 shares of Common Stock,
$0.015 Par Value, outstanding.
<PAGE>
PRIMA ENERGY CORPORATION
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Unaudited consolidated balance sheets................. 3
Unaudited consolidated statements of income .......... 5
Unaudited consolidated statements of cash flows....... 6
Notes to unaudited consolidated financial statements.. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.... 8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................. 11
Signature.................................................. 12
<PAGE>
PRIMA ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
CURRENT ASSETS
Cash and cash equivalents....................... $ 4,116,000 $ 3,977,000
Available for sale securities, at market........ 1,327,000 1,180,000
Receivables (net of allowance for doubtful
accounts: 3/31/96, $43,000; 12/31/95, $43,000). 3,974,000 3,087,000
Tubular goods inventory......................... 260,000 217,000
Deferred tax asset.............................. 47,000 101,000
Other........................................... 108,000 230,000
---------- ----------
Total current assets............................ 9,832,000 8,792,000
---------- ----------
OIL AND GAS PROPERTIES, at cost, accounted
for using the full cost method................. 46,549,000 45,774,000
Less accumulated depreciation,
depletion and amortization.................... (18,830,000) (17,730,000)
---------- ----------
Oil and gas properties - net.............. 27,719,000 28,044,000
---------- ----------
PROPERTY AND EQUIPMENT, at cost
Oilfield service equipment...................... 1,900,000 1,888,000
Furniture and equipment......................... 542,000 518,000
Field office, shop and land..................... 338,000 334,000
---------- ----------
2,780,000 2,740,000
Less accumulated depreciation................... (1,742,000) (1,666,000)
---------- ----------
Property and equipment - net.................... 1,038,000 1,074,000
---------- ----------
OTHER ASSETS
Cash, designated................................ 449,000 326,000
Other........................................... 322,000 329,000
---------- ----------
Total other assets........................ 771,000 655,000
---------- ----------
$39,360,000 $38,565,000
========== ==========
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
PRIMA ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (cont'd.)
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
CURRENT LIABILITIES
Accounts payable................................ $ 511,000 $ 1,746,000
Amounts payable to oil and gas property owners.. 1,056,000 1,086,000
Production taxes payable........................ 1,281,000 1,239,000
Accrued and other liabilities................... 377,000 429,000
---------- ----------
Total current liabilities................. 3,225,000 4,500,000
PRODUCTION TAXES, non-current................... 1,263,000 1,012,000
DEFERRED TAX LIABILITY.......................... 3,430,000 3,137,000
---------- ----------
Total liabilities......................... 7,918,000 8,649,000
---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value,
2,000,000 shares authorized;
no shares issued or outstanding............... 0 0
Common stock, $0.015 par value, 8,000,000
shares authorized; 3,880,396 shares
issued and outstanding........................ 58,000 58,000
Additional paid-in capital...................... 4,251,000 4,251,000
Retained earnings............................... 27,213,000 25,684,000
Unrealized loss on available for sale
securities.................................... (80,000) (77,000)
---------- ----------
Total stockholders' equity................ 31,442,000 29,916,000
---------- ----------
$39,360,000 $38,565,000
========== ==========
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
PRIMA ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
1996 1995
----------- -----------
REVENUES
Oil and gas sales............................... $ 3,384,000 $ 3,295,000
Trading revenues................................ 2,195,000 1,576,000
Oilfield services............................... 419,000 496,000
Management and operator fees.................... 265,000 263,000
Interest and dividend income.................... 80,000 26,000
Other........................................... 42,000 46,000
---------- ----------
6,385,000 5,702,000
---------- ----------
EXPENSES
General, administrative and cost of
oilfield services............................. 808,000 856,000
Depreciation, depletion and amortization........ 1,176,000 1,206,000
Lease operating expense......................... 381,000 391,000
Production taxes................................ 239,000 209,000
Cost of trading................................. 1,792,000 1,408,000
---------- ----------
4,396,000 4,070,000
---------- ----------
INCOME BEFORE INCOME TAXES...................... 1,989,000 1,632,000
PROVISION FOR INCOME TAXES...................... 460,000 375,000
---------- ----------
NET INCOME...................................... $ 1,529,000 $ 1,257,000
========== ==========
NET INCOME PER COMMON SHARE AND COMMON
SHARE EQUIVALENT:
Primary..................................... $ 0.39 $ 0.32
========== ==========
Fully Diluted............................... $ 0.39 $ 0.32
========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
AND COMMON SHARE EQUIVALENTS:
Primary..................................... 3,880,396 3,880,396
========== ==========
Fully Diluted............................... 3,880,396 3,883,266
========== ==========
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
PRIMA ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
1996 1995
---------- -----------
OPERATING ACTIVITIES
Net income ..................................... $ 1,529,000 $ 1,257,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization..... 1,176,000 1,206,000
Deferred income taxes........................ 348,000 282,000
Other........................................ 135,000 174,000
---------- ----------
3,188,000 2,919,000
Changes in current assets and liabilities:
Receivables................................ (887,000) 901,000
Inventory.................................. (43,000) 69,000
Other current assets....................... 122,000 (70,000)
Payables................................... (1,223,000) (3,037,000)
Accrued and other liabilities.............. (52,000) 16,000
---------- ----------
Net cash provided by operating
activities.............................. 1,105,000 798,000
---------- ----------
INVESTING ACTIVITIES
Additions to oil and gas properties............. (911,000) (976,000)
Purchases of other property..................... (40,000) (63,000)
Purchases of available for sale securities...... (151,000) (14,000)
Proceeds from sales of oil and gas properties... 136,000 0
---------- ----------
Net cash used by investing activities.... (966,000) (1,053,000)
---------- ----------
FINANCING ACTIVITIES
Payments on line of credit...................... 0 (400,000)
---------- ----------
Net cash used by financing activities.... 0 (400,000)
---------- ----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS............................ 139,000 (655,000)
CASH AND CASH EQUIVALENTS, beginning of period.. 3,977,000 1,558,000
---------- ----------
CASH AND CASH EQUIVALENTS, end of period........ $ 4,116,000 $ 903,000
========== ==========
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
PRIMA ENERGY CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The financial information contained herein is unaudited but includes
all adjustments (consisting of only normal recurring accruals) which, in
the opinion of management, are necessary to present fairly the information
set forth. The consolidated financial statements should be read in
conjunction with the Notes to Consolidated Financial Statements which are
included in the Annual Report on Form 10-K of Prima Energy Corporation for
the year ended December 31, 1995.
The results for interim periods are not necessarily indicative of
results to be expected for the fiscal year of the Company ending December 31,
1996. The Company believes that the three month report filed on Form 10-Q is
representative of its financial position, its results of operations and its
cash flows for the periods ended March 31, 1996 and 1995 covered thereby.
2. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of Prima Energy Corporation ("Prima") and its subsidiaries, herein
collectively referred to as the "Company." All significant intercompany
transactions have been eliminated. Certain amounts in prior years have been
reclassified to conform with the classifications at March 31, 1996.
3. LINE OF CREDIT
Prima maintains an $8,000,000 unsecured line of credit with a
commercial bank. The line bears interest at the bank's prime rate (8.25% at
March 31, 1996), with interest payable monthly. Funds are available on a
revolving basis until April 30, 1998. The balance of principal plus accrued
interest is payable at maturity, May 1, 1998. At December 31, 1995 and March
31, 1996, there were no amounts outstanding on the line of credit.
<PAGE>
PRIMA ENERGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company's principal internal sources of liquidity are internally
generated cash flows and existing cash and cash equivalents. Net cash
provided by operating activities before working capital changes for the three
months ended March 31, 1996 was $3,188,000 compared to $2,919,000 for the
same three month period of 1995. Net working capital at March 31, 1996 was
$6,607,000 compared to $4,292,000 at December 31, 1995. Current liabilities
at March 31, 1996 decreased from December 31, 1995 levels by $1,275,000;
while current assets increased by $1,040,000 for the same period. The
increase in working capital of $2,315,000 was primarily generated by cash
flows from operations during the quarter ended March 31, 1996.
The Company has external borrowing capacity through an $8,000,000
unsecured line of credit with a commercial bank, all of which is available to
be drawn.
The Company invested $951,000 in property and equipment during
the quarter ended March 31, 1996 compared to $1,039,000 for the 1995 quarter.
The Company expended $822,000 during the 1996 quarter for its proportionate
share of the costs of drilling and completing wells, $77,000 for undeveloped
acreage, $12,000 for purchases of producing properties and $40,000 for other
property and equipment. These expenditures compare to $452,000 for well
costs, $524,000 for undeveloped acreage and $63,000 for other equipment in
the 1995 quarter. The Company drilled and completed two wells (1.87 net) in
the Wattenberg Field in northeastern Colorado during the first quarter of
1996. The Company also participated in the drilling and completion of four
non-operated development wells (.80 net) in the Bonny Field in eastern
Colorado during the 1996 quarter. The three wells in the Cave Gulch Unit in
central Wyoming which were waiting on completion at December 31, 1995, were
completed during the first quarter of 1996.
The Company regularly reviews opportunities for acquisition of assets or
companies related to the oil and gas industry which could expand or enhance
its existing business. The Company expects its operations, including
acquisition, drilling, completion and recompletion well costs, will be
financed by funds provided by operations, working capital, additional
borrowings on the line of credit, various cost-sharing arrangements, or from
other financing alternatives.
Results of Operations
For the quarter ended March 31, 1996, the Company earned net income of
$1,529,000, or $.39 per share, on revenues of $6,385,000, compared to net
income of $1,257,000, or $.32 per share on revenues of $5,702,000 for the
comparable quarter of 1995. Expenses were $4,396,000 for the 1996 quarter
compared to $4,070,000 for the 1995 quarter. Revenues increased $683,000, or
12.0%, expenses increased $326,000, or 8.0% and net income increased
$272,000, or 21.6%. The increase in both revenues and expenses is primarily
attributable to increased trading of natural gas and related costs.
<PAGE>
Oil and gas sales for the quarter ended March 31, 1996 were $3,384,000
compared to $3,295,000 for the same period of 1995, an increase of $89,000 or
2.7%. The increase is attributable to increased production of natural gas
and increased prices for both oil and natural gas, which more than offset a
decline in oil production. The Company's net natural gas production was
1,209,000 Mcf and 1,117,000 Mcf for the first quarters of 1996 and 1995,
respectively, an increase of 92,000 Mcf or 8.2%. Its net oil
production was 69,000 barrels compared to 87,000 barrels for the
same periods, a decrease of 18,000 barrels or 20.7%. The average price
received for natural gas production was $1.76 per Mcf for the 1996 quarter
compared to $1.63 per Mcf for the 1995 quarter, an increase of $.13 per Mcf
or 8.0%. Approximately 5% of the natural gas production at March 31, 1996 is
attributable to production sold under a fixed contract price of $5.90 per
MMBtu. The average price for the Company's natural gas production exclusive
of the fixed price contract gas was $1.53 for the 1996 quarter compared to
$1.52 for the 1995 quarter. The average price received for oil in 1996 was
$18.35 per barrel compared to $17.00 per barrel for the same period of 1995,
an increase of $1.35 per barrel or 7.9%.
Trading revenues and cost of trading represent the marketing of third
party natural gas by Prima Natural Gas Marketing, Inc., a wholly owned
subsidiary. Trading revenues were $2,195,000 for the three months ended
March 31, 1996, a $619,000 increase (39.3%) over the $1,576,000 reported for
the three months ended March 31, 1995. The Company marketed 1,269,000
MMBtu's for the first quarter of 1996 compared to 760,000 MMBtu's marketed
during the comparable quarter of 1995. Costs of trading were $1,792,000 for
the 1996 quarter compared to $1,408,000 for the 1995 quarter, an increase of
$384,000 or 27.3%. Trading activities fluctuate with natural gas markets and
the Company's ability to develop markets that meet the Company's trading
criteria.
Oilfield services represent the revenues earned by Action Oilfield
Services, Inc., a wholly owned subsidiary. These revenues include well
servicing fees from completion and swab rigs, trucking, water hauling and
rental equipment, and other related activities. Revenues were $419,000 for
the quarter ended March 31, 1996 compared to $496,000 for the comparable
quarter of 1995. This $77,000, or 15.5% decrease in revenues is attributable
to decreased activity in the Wattenberg Field area where the service company
is active. This decline in activity is due at least in part to the decline in
natural gas prices sustained during 1995 in the Rocky Mountain region. For
the quarter ended March 31, 1996, 23% of the fees billed by Action were for
Company owned wells compared to 20% for the quarter ended March 31, 1995.
The Company's share of fees paid to Action on Company owned properties and
the costs associated with providing the services are eliminated in
consolidation.
Management and operator fees are earned pursuant to the Company's roles
as operator for approximately 310 oil and natural gas wells located primarily
in the Wattenberg Field area of Weld County, Colorado and as managing
venturer of a joint venture which owns gas gathering and pipeline facilities
in the Bonny Field in Yuma County, Colorado. The Company is a working
interest owner in each of the operated wells. The Company is paid operating
and management fees by the other working interest owners in the properties.
Fees fluctuate with the number of wells operated, the percentage working
interest in a property owned by third parties, and the amount of drilling
activity during the period. Fees for 1996 were $265,000 compared to $263,000
for 1995, an increase of $2,000.
<PAGE>
General, administrative and cost of oilfield services includes the costs
of payroll, insurance, rent, office, maintenance, etc. as well as the direct
and indirect expenses of the Company's service business. These expenses were
$808,000 for the quarter ended March 31, 1996 compared to $856,000 for the
quarter ended March 31, 1995, a decrease of $48,000 or 5.6%. The Company has
sought to reduce its costs consistent with the reduced activity levels in the
service business by stacking equipment and reducing the work force.
Lease operating expenses and production taxes ("LOE") were $620,000 for
the 1996 quarter compared to $600,000 for the 1995 quarter, an increase of
$20,000 or 3.3%. Depreciation, depletion and amortization ("DD&A") was
$1,176,000 for the first quarter of 1996 compared to $1,206,000 for the first
quarter of 1995, a decrease of $30,000 or 2.5%. Production for the quarter
ended March 31, 1996 was 270,000 BOE compared to 273,000 BOE for the quarter
ended March 31, 1994. LOE per equivalent barrel of production was $2.29 for
the first quarter of 1996 compared to $2.20 for the comparable quarter of
1995. DD&A applicable to oil and gas properties was $4.07 per equivalent
barrel of production for the 1996 quarter compared to $4.12 per equivalent
barrel of production for the 1995 quarter. Depreciation of other property and
equipment was $76,000 and $81,000 for the quarters ended March 31, 1996 and
1995, respectively.
The provision for income taxes increased $85,000 to $460,000 for the
three months ended March 31, 1996 compared to $375,000 for the three months
ended March 31, 1995. The increase is attributable to the increase in net
income before income taxes, which totaled $1,989,000 for the 1996 quarter
compared to $1,632,000 for the 1995 quarter, an increase of $357,000, or
21.9%. The effective income tax rate is 23% for both the 1996 and 1995
quarters. Effective tax rates are affected by amounts of temporary and
permanent differences in financial and taxable income and by statutory
depletion deductions and section 29 tax credits.
Historically, oil and natural gas prices have been volatile and are
likely to continue to be volatile. Prices are affected by, among other
things, market supply and demand factors, market uncertainty, and actions of
the United States and foreign governments and international cartels. These
factors are beyond the control of the Company. To the extent that oil and
gas prices decline, the Company's revenues, cash flows, earnings and
operations would be adversely impacted. The Company is unable to accurately
predict future oil and natural gas prices.
The Company's main source of revenues is from the sale of oil and
natural gas production. Levels of revenues and earnings are affected by
prices at which oil and natural gas are sold. As a result, the Company's
operating results for any period are not necessarily indicative of future
operating results because of fluctuations in oil and natural gas prices and
production volumes.
<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibit is filed herewith pursuant to Rule 601 of
Regulation S-K.
EXHIBIT NO. DOCUMENT
10-96.1 Extension of Line of Credit Agreement.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the Registrants' fiscal quarter
ended March 31, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRIMA ENERGY CORPORATION
(Registrant)
Date May 6, 1996 By /s/Richard H.Lewis
Richard H. Lewis,
President and
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-Q FOR PRIMA ENERGY CORPORATION FOR THE THREE MONTHS ENDED MARCH 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,116,000
<SECURITIES> 1,327,000
<RECEIVABLES> 4,017,000
<ALLOWANCES> (43,000)
<INVENTORY> 260,000
<CURRENT-ASSETS> 9,832,000
<PP&E> 49,329,000
<DEPRECIATION> (20,572,000)
<TOTAL-ASSETS> 39,360,000
<CURRENT-LIABILITIES> 3,225,000
<BONDS> 0
<COMMON> 58,000
0
0
<OTHER-SE> 31,384,000
<TOTAL-LIABILITY-AND-EQUITY> 39,360,000
<SALES> 5,579,000
<TOTAL-REVENUES> 6,385,000
<CGS> 3,588,000
<TOTAL-COSTS> 3,588,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,989,000
<INCOME-TAX> 460,000
<INCOME-CONTINUING> 1,529,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,529,000
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
</TABLE>
April 25, 1996
Mr. Richard H. Lewis
President
Prima Energy Corporation
Prima Oil & Gas Company
1801 Broadway, Suite 500
Denver, CO 80202
RE: Letter Agreement between Prima Energy Corporation ("PEC"), Prima
Oil & Gas Company ("POGC") and Norwest Bank Colorado, National
Association, Successor in Interest to Norwest Bank Denver, National
Association ("Norwest"), dated as of June 13, 1995 (the
"Agreement").
Dear Mr. Lewis:
This will serve as the first amendment of the Agreement. Effective the
date hereof, the following has been amended, all other terms and conditions
to remain in full force and effect:
STRUCTURE
Funds will be available on a revolving basis (i.e. borrow, repay and
reborrow) through April 30, 1998. All outstanding balances will be due
May 1, 1998.
MATURITY DATE
May 1, 1998.
VII. NOTICES
Lender: Norwest Bank Colorado, N.A.
Energy and Minerals
1740 Broadway
Denver, CO 80274-8699
Sincerely,
NORWEST BANK COLORADO, NATIONAL ASSOCIATION
By:________________________________________
G.S. Todd Berryman
Vice President
Energy & Minerals
AGREED TO AND ACCEPTED THIS 29 DAY OF APRIL, 1996.
PRIMA ENERGY CORPORATION
By:________________________________________
Richard H. Lewis, President
PRIMA OIL & GAS COMPANY
By:________________________________________
Richard H. Lewis, President
ACKNOWLEDGEMENTS
STATE OF COLORADO )
) ss.
CITY AND COUNT OF DENVER )
The foregoing instrument was acknowledged before me this 29th day of
April, 1996 by Richard H. Lewis, President of Prima Energy Corporation and
Prima Oil & Gas Company.
Witness my hand and official seal.
_________________________________
Notary Public - Karen A. Armbrust
My commission expires: 8-31-96
