<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1995
--------------
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 0-9498
BELLWETHER EXPLORATION COMPANY
(Exact name of registrant as specified in its charter)
Delaware 76-0437769
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1221 Lamar, Suite 1600, Houston, Texas 77010
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 650-1025
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange
------------------- on which registered
-------------------
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $0.01 par value
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
--- ---
The aggregate market value of the voting stock held by non-affiliates of
the registrant at September 5, 1995, was approximately $37,533,000.
As of September 5, 1995, the number of outstanding shares of the
registrant's common stock was 9,045,479.
Documents Incorporated by Reference. Portions of the registrant's annual
proxy statement, to be filed within 120 days after June 30, 1995, are
incorporated by reference into Part III.
================================================================================
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
PART I
Item 1 Business................................................ 3
Item 2 Properties.............................................. 9
Item 3 Legal Proceedings....................................... 12
Item 4 Submission of Matters to a Vote of Security Holders..... 12
PART II
Item 5 Market for the Registrant's Common Equity and Related
Stockholder Matters.................................... 13
Item 6 Selected Financial Data................................. 14
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 15
Item 8 Financial Statements and Supplementary Data............. 20
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................... 45
PART III
Item 10 Directors and Executive Officers of the Registrant...... 45
Item 11 Executive Compensation.................................. 45
Item 12 Security Ownership of Certain Beneficial Owners and
Management............................................. 45
Item 13 Certain Relationships and Related Transactions.......... 45
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports
on Form 8-K............................................ 45
-- Signatures
</TABLE>
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
PART I
------
ITEM 1. BUSINESS
-----------------
General
-------
Bellwether Exploration Company ("Bellwether" or the "Company") is an
independent energy company engaged in the acquisition, exploitation,
development, exploration and production of oil and gas properties and gathering
and processing of natural gas. The Company's operations are concentrated in the
Texas and Louisiana Gulf Coast region. At June 30, 1995, the Company's estimated
proved reserves totaled 2.6 MMBbl of oil and 30.2 Bcf of natural gas and had a
PV-10 Value of $37.3 million. On a BOE basis, approximately 66% of the Company's
estimated net proved reserves were natural gas at such date. In addition, the
Company has significant interests in natural gas processing and gathering
facilities.
The Company was formed as a Delaware corporation in 1994 to succeed to the
business and properties of its predecessor company pursuant to a merger, the
primary purpose of which was to change the predecessor company's state of
incorporation from Colorado to Delaware. In connection with the merger, the
predecessor company effected a 1-for-8 reverse stock split. The predecessor
company was formed in 1980 from the consolidation of the business and properties
of related oil and gas limited partnerships. References to Bellwether or the
Company include the predecessor company, unless the context requires otherwise.
BACKGROUND
In 1987 and 1988, the Company merged with two independent oil and gas
companies owned by institutional investors and managed by Torch Energy Advisors
Incorporated ("Torch"). Since those mergers, the Company has operated under
management agreements, pursuant to which Torch administers substantially all
business activities of the Company.
In July 1993, the Company acquired an interest in the Snyder and Diamond
M - Sharon Ridge Gas Processing Plants the operations of which were subsequently
consolidated (collectively, the "Gas Plant") for $8.45 million. In December
1993, the Company acquired Associated Gas Resources, Inc. ("AGRI"), a
corporation managed by Torch, for the issuance of 1.4 million shares of its
common stock ("Common Stock") and $231,878 in cash. AGRI's assets included
additional interests in the Gas Plant. AGRI's assets also included the Louisiana
Gathering System, a related long-term gas sales contract, and interests in oil
and gas properties in Louisiana and Oklahoma with estimated net proved reserves
of approximately 4.3 Bcf as of December 31, 1993. The Gas Plant Acquisition and
AGRI Acquisition diversified the Company's asset base and its sources of cash
flow.
In August 1994, Bellwether acquired by merger certain of the assets,
liabilities and properties of Odyssey Partners, Ltd. ("Odyssey"), an exploration
company specializing in 3-D seismic and computer-aided exploration ("CAEX")
technology, in exchange for 916,665 shares of Common Stock and $5.6 million in
cash. As of June 30, 1994, Odyssey's estimated net proved oil and gas reserves
consisted of 354 MBbls of oil and 3.7 Bcf of gas, and had a PV-10 Value of $8.5
million. The Odyssey merger provided the Company with significant 3-D seismic
and CAEX technology expertise.
3
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
On February 28, 1995, Bellwether acquired Hampton Resources Corporation
("Hampton") by merger for $17.0 million in cash and approximately 1.0 million
shares of Common Stock. Hampton was a publicly held oil and gas company based in
Houston, Texas. As of June 30, 1994, Hampton's estimated net proved reserves
consisted of 1,205 MBbls of oil and 19.0 Bcf of gas, with a PV-10 Value of $22.7
million.
BUSINESS STRATEGY
The Company intends to continue to increase its reserves, cash flow and net
asset value through a balanced strategy that includes exploration, exploitation
and development drilling activities and strategic acquisitions of oil and gas
properties and other facilities.
Key elements of the Company's strategy include the following:
Torch Relationship. The Company intends to capitalize on its affiliation
------------------
with Torch. The Company believes it will benefit from the Torch relationship by
having access to a large staff of financial professionals, accountants,
geologists and engineers, exposure to significant oil and gas acquisition
opportunities and increased access to capital markets. These resources are
generally only available to oil and gas companies that are significantly larger
than the Company.
Dependable Cash Flow From Mid-Stream Assets. The Company intends to
-------------------------------------------
use the dependable cash flow generated from its Gas Processing and Gas Gathering
System to fund the acquisition and exploitation of properties. The Gas Plant and
Gas Gathering System generate cash flow based on through-puts of natural gas
which, although declining over time as reserves are produced, have the potential
to benefit from successful exploitation and development activities funded by
others. Producers have disclosed plans to commit significant expenditures to
develop additional reserves in the vicinity of the Gas Plant.
Increased Drilling Activities. The Company plans to aggressively exploit
-----------------------------
the inventory of development, exploitation and exploration projects acquired in
recent acquisitions.
Strategic Acquisitions. The Company will continue to seek
----------------------
acquisitions on a selective basis, with a particular emphasis on identifying
properties in close proximity to the Company's current reserves, in areas where
it maintains geological expertise, and where reserves can be increased through
development drilling and the application of advanced technologies.
Application of Advanced Technologies. The Company will rely heavily
------------------------------------
on state-of-the-art 3-D seismic and CAEX technologies to add value to its
drilling efforts and reduce risk associated with exploration and exploitation
activities. These advanced technologies are particularly useful in the highly
faulted structures common to the Company's existing properties and the
geographic areas in which the Company focuses.
Industry Segment Information
----------------------------
For industry segment data, see Note 8 of the Notes to Consolidated
Financial Statements.
4
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
Markets
-------
The ability of the Company to market oil and gas from its wells will depend
upon numerous factors beyond its control, including the extent of domestic
production and imports of oil and gas, the proximity of the Company's gas
production to gas pipelines, the availability of capacity in such pipelines, the
demand for oil and gas by utilities and other end users, the effects of
inclement weather, state and federal regulation of oil and gas production and
federal regulation of gas sold or transported in interstate commerce. There is
no assurance that the Company will be able to market all of the oil or gas
produced by it or that favorable prices can be obtained for the oil and gas it
produces.
The supply of natural gas capable of being produced has exceeded demand in
recent years due to decreased demand for natural gas in response to economic
factors, conservation, lower prices for alternative energy sources and other
factors. As a result of this excess supply of natural gas, natural gas producers
have experienced increased competitive pressure and lower prices. Many natural
gas pipelines reduced their takes from producers below the amount for which, by
contract, they were obligated to take or pay at fixed prices in excess of spot
prices or have renegotiated their obligations to reflect more market responsive
terms. The decline in demand for natural gas resulted in many pipelines reducing
or ceasing altogether their purchases of new gas. Substantially all of the
Company's natural gas production, other than that sold under the Gas Contract,
is sold at market responsive prices.
In view of the many uncertainties affecting the supply and demand for crude
oil, natural gas and refined petroleum products, the Company is unable to
accurately predict future oil and gas prices and demand or the overall effect
they will have on the Company. The Company does not believe that the loss of any
of its oil purchasers would have a material adverse effect on the Company's
operations. Additionally, since substantially all of the Company's gas sales are
on the spot market, the loss of one or more gas purchasers should not materially
and adversely affect the Company's financial condition.
Sales to Texas Gas Transmission Company and Warren Petroleum Corporation
accounted for 42% of 1995 revenues. Sales to Texas Gas Transmission Company,
Warren Petroleum Corporation and United LP Gas Corporation accounted for 58% of
revenues in 1994. Sales to American Exploration Company, Bass Enterprises
Production Co., Unocal Exploration Corp. and Monterey Pipeline Company accounted
for 48% of revenues in 1993. Management of the Company does not believe that the
loss of any single customer or contract would materially affect the Company's
business.
Regulation
----------
Oil and Gas Regulation
The availability of a ready market for any oil and gas production depends
upon numerous factors beyond the Company's control. These factors include state
and Federal regulation of oil and gas production as well as regulations
governing environmental quality and pollution control, state limits on allowable
rates of production by a well or proration unit, the amount of oil and gas
available for sale, the availability of adequate pipeline and other
transportation and processing facilities and the marketing of competitive fuels.
For example, a productive gas well may be "shut-in" because of an over-supply of
gas or lack of
5
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
an available gas pipeline in the areas in which the Company may conduct
operations. State and Federal regulations generally are intended to prevent
waste of oil and gas, protect rights to produce oil and gas between owners in a
common reservoir, control the amount of oil and gas produced by assigning
allowable rates of production and control contamination of the environment.
Pipelines and gas plants also are subject to the jurisdiction of various
Federal, state and local agencies.
Environmental Regulation
General. The Company's activities are subject to existing federal, state
and local laws and regulations governing environmental quality and pollution
control. It is anticipated that, absent the occurrence of an extraordinary
event, compliance with existing federal, state and local laws, rules and
regulations controlling the release of materials in the environment or otherwise
relating to the protection of the environment will not have a material effect
upon the operations, capital expenditures, earnings or the competitive position
of the Company.
Activities of the Company with respect to exploration, drilling and
production from wells, natural gas facilities, including the operation and
construction of pipelines, plants and other facilities for transporting,
processing, treating or storing natural gas and other products, are subject to
stringent environmental regulation by state and federal authorities including
the Environmental Protection Agency ("EPA"). Such regulation can increase the
cost of planning, designing, installing and operating such facilities. In most
instances, the regulatory requirements relate to water and air pollution control
measures.
Waste Disposal. The Company currently owns or leases, and has in the past
owned or leased, numerous properties that have been used for production of oil
and gas for many years. Although the Company has utilized operating and disposal
practices that were standard in the industry at the time, hydrocarbons or other
wastes may have been disposed of or released on or under the properties owned or
leased by the Company. In addition, many of these properties have been operated
by third parties over whom the Company had no control as to such entities'
treatment of hydrocarbons or other wastes or the manner in which such substances
may have been disposed of or released. State and federal laws applicable to oil
and gas wastes and properties have become more strict. Under these new laws, the
Company could be required to remove or remediate previously disposed wastes
(including wastes disposed of or released by prior owners or operators) or
property contamination (including groundwater contamination) or to perform
remedial plugging operations to prevent future contamination.
The Company may generate wastes, including hazardous wastes, that are
subject to the Federal Resource Conservation and Recovery Act and comparable
state statutes. The EPA has limited the disposal options for certain hazardous
wastes and is considering the adoption of stricter disposal standards for
nonhazardous wastes. Furthermore, certain wastes generated by the Company's oil
and gas operations that are currently exempt from treatment as "hazardous
wastes" may in the future be designated as "hazardous wastes," and therefore be
subject to more rigorous and costly operating and disposal requirements.
6
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
Superfund. The Federal Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), also known as the "Superfund law", imposes joint
and several liability, without regard to fault or the legality of the original
conduct, on certain classes of persons with respect to the release of a
"hazardous substance" into the environment. These persons include the current
owner and operator of a facility and persons that disposed of or arranged for
the disposal of the hazardous substances found at a facility. CERCLA also
authorizes the EPA and, in some cases, third parties to take actions in response
to threats to the public health or the environment and to seek to recover from
the responsible classes of persons the costs of such action. In the course of
its operations, the Company may have generated and may generate wastes that fall
within CERCLA's definition of hazardous substances. The Company may also be an
owner of facility on which hazardous substances have been released by previous
owners or operators. The Company may be responsible under CERCLA for all or part
of the costs to clean up facilities at which such wastes have been released.
Neither the Company nor, to its knowledge, its predecessors has been named a
potentially responsible person under CERCLA nor does the Company know of any
prior owners or operators of its properties that are named as potentially
responsible parties related to their ownership or operation of such property.
Air Emissions. The operations of the Company are subject to local, state
and federal regulations for the control of emissions of air pollution.
Administrative enforcement actions for failure to comply strictly with air
pollution regulations or permits are generally resolved by payment of monetary
fines and correction of any identified deficiencies. Alternatively, regulatory
agencies could require the Company to forego construction, modification or
operation of certain air emission sources, although the Company believes that in
the latter cases it would have enough permitted or permittable capacity to
continue its operations without a material adverse effect on any particular
producing field.
Oil Pollution Act. The Oil Pollution Act of 1990 ("OPA") and regulations
thereunder impose a variety of regulations on "responsible parties" related to
the prevention of oil spills and liability for damages resulting from such
spills in United States waters. A responsible party includes the owner or
operator of a facility or vessel, or the lessee or permittee of the area in
which a facility covered by OPA is located. OPA assigns joint and several
liability to each responsible party for oil removal costs and a variety of
public and private damages. Few defenses exist to the liability imposed by OPA.
OPA also imposes ongoing requirements on a responsible party, including
proof of financial responsibility to cover at least some costs in a potential
spill. On August 25, 1993, an advance notice of intention to adopt a rule under
OPA was published that would require owners and operators of offshore oil and
gas facilities to establish $150 million in financial responsibility. Under the
proposed rule, financial responsibility could be established through insurance,
guaranty, indemnity, surety bond, letter of credit, qualification as a self-
insurer or a combination thereof. There is substantial uncertainty as to whether
insurance companies or underwriters will be willing to provide coverage under
OPA because the statute provides for direct lawsuits against insurers who
provide financial responsibility coverage, and most insurers have strongly
protested this requirement. The financial tests or other criteria that will be
used to judge self-insurance are also uncertain. The Company cannot predict the
final form of the financial responsibility rule that will be adopted but such
rule has the potential to result in the imposition of substantial additional
7
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
annual costs on the Company or otherwise materially adversely affect the
Company. The impact of the rule should not be any more adverse to the Company
than it will be to other similarly situated or less capitalized owners or
operators in the Gulf of Mexico.
Management believes that the Company is in substantial compliance with
current applicable environmental laws and regulations and that continued
compliance with existing requirements will not have a material adverse impact on
the Company.
Competition
-----------
The oil and gas industry is highly competitive in all of its phases. The
Company will encounter competition from other oil and gas companies in all areas
of its operations, including the acquisition of producing properties and the
marketing of oil and gas. Many of these companies possess greater financial and
other resources than the Company and Torch. Torch also manages companies that
may compete with the Company. Competition for acquisition of producing
properties will be affected by the amount of funds available to the Company,
information about a producing property available to the Company and any standard
established by the Company for the minimum projected return on investment.
Because gathering systems are the only practical method for the intermediate
transportation of natural gas, competition is presented by other pipelines and
gas gathering systems. Competition may also be presented by alternative fuel
sources, including heating oil and other fossil fuels. Because the primary
markets for NGLs are refineries, petrochemical plants and fuel distributors,
prices are generally set by or in competition with the prices for refined
products in the petrochemical, fuel and motor gasoline markets.
8
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
ITEM 2. PROPERTIES
-------------------
Reserves, Productive Wells, Acreage and Production
--------------------------------------------------
The Company holds interests in oil and gas properties, all of which are
located in the United States. The Company's principal developed properties are
located in Texas, Louisiana and the Gulf of Mexico in state and federal waters,
and undeveloped acreage is located primarily in Texas and Louisiana. Estimated
net proved oil and gas reserves at June 30, 1995 increased approximately 365%
over June 30, 1993, primarily as a result of acquisitions of producing
properties. (See Note 3 of the Notes to Consolidated Financial Statements). The
Company has not filed any oil or gas reserve information with any foreign
government or Federal authority or agency.
The following table sets forth certain information, as of June 30, 1995,
which relates to the Company's principal oil and gas properties:
<TABLE>
<CAPTION>
Net Proved
Reserves 1995 Net Production
------------------------- -------------------------
Oil Gas Oil Gas
Field (MBBLS) (MMCF) (MBBLS) (MMCF)
----- ------- ------ ------- ------
<S> <C> <C> <C> <C>
Fort Trinidad field, TX.............. 585 2,984 10 /(2)/ 52 /(2)/
McFarlan field, TX................... 20 3,010 4 /(1)/ 635 /(1)/
Giddings field, TX................... 193 2,751 16 /(2)/ 197 /(2)/
Fausse Pointe field, LA.............. 481 144 --- ---
Cove field, TX....................... 11 6,968 --- 110 /(2)/
S. Fort Trinidad field,TX............ 310 --- 21 /(2)/ ---
Monroe Gas field, LA................. --- 2,042 --- 310
S.W. Lake Bouef field, LA............ 91 391 6 /(2)/ 25 /(2)/
Lake Hatch field, LA................. 117 268 6 /(2)/ 37 /(2)/
N.W. Panther Reef field, TX.......... 28 1,044 3 116
Others............................... 761 10,557 150 1,450
------- -------- ------ -------
Total........................... 2,597 30,159 216 2,932
======= ======== ====== =======
</TABLE>
(1) Includes production from date of acquisition on August 26, 1994
(2) Includes production from date of acquisition on February 28, 1995
Acreage
-------
The following table sets forth the acres of developed and undeveloped oil
and gas properties in which the Company held an interest as of June 30, 1995.
Undeveloped acreage is considered to be those leased acres on which wells have
not been drilled or completed to a point that would permit the production of
commercial quantities of oil and gas, regardless of whether or not such acreage
contains proved reserves. A gross acre in the following table refers to the
number of acres in which a working interest is owned directly by the Company.
The number of net acres is the sum of the fractional ownership of working
interests owned directly by the Company in the gross acres expressed as a whole
number and percentages thereof. A net acre is deemed to exist when the sum of
fractional ownership of working interests in gross acres equals one.
9
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
<TABLE>
<CAPTION>
Gross Net
----- ---
<S> <C> <C>
Developed Acreage 251,365 27,425
Undeveloped Acreage 75,954 18,660
--------- --------
Total 327,319 46,085
========= ========
</TABLE>
Development of the Company's acreage in Fausse Pointe field is to begin in late
1995.
Productive Wells
----------------
The following table sets forth Bellwether's gross and net interests in
productive oil and gas wells as of June 30, 1995. Productive wells are producing
wells and wells capable of production.
<TABLE>
<CAPTION>
Gross Net
----- ---
<S> <C> <C>
Oil Wells.......... 407.00 53.35
Gas Wells.......... 1,402.00 660.59
-------- ---------
Total 1,809.00 713.94
======== =========
</TABLE>
Production
----------
The Company's principal production volumes during the year ended June
30, 1995 were from the states of Louisiana and Texas, and from the Gulf of
Mexico in federal and state waters.
Data relating to production volumes, average sales prices, average
unit production costs and oil and gas reserve information appears in Note 10 of
the Notes to Consolidated Financial Statements.
Drilling Activity and Present Activities
----------------------------------------
During the three year period ended June 30, 1995, the Company's
principal drilling activities occurred in the continental United States and
offshore in federal and state waters.
The Company had two gross (.29 net) wells drilling and one gross (.03
net) well awaiting completion at June 30, 1995. The following table sets forth
the results of drilling activity by the Company, net to its interest, for the
last three calendar years. Gross wells, as it applies to wells in the following
tables, refers to the number of wells in which a working interest is owned
directly by the Company. A "net well" is deemed to exist when the sum of
fractional ownership working interests in gross wells equals one. The number of
net wells is the sum of the fractional ownership of working interests owned
directly by the Company in gross wells expressed as whole numbers and
percentages thereof.
10
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BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
<TABLE>
<CAPTION>
Exploratory Wells
-----------------
Gross Net
----------------------------------- ---------------------------------------
Dry Dry
Productive Holes Total Productive Holes Total
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1993 1 4 5 .09 .51 .60
1994 1 1 2 .10 .20 .30
1995 3 4/(1)/ 7 .27 .65 .92
</TABLE>
<TABLE>
<CAPTION>
Development Wells
-----------------
Gross Net
----------------------------------- ---------------------------------------
Dry Dry
Productive Holes Total Productive Holes Total
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1993 1 --- 1 .30 --- .30
1994 1 2 3 .08 .27 .35
1995 1 2 3 .30 .18 .48
</TABLE>
/(1)/ Includes well drilled on the Serj Permit in Tunisia
11
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BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
Gas Plant and Gas Gathering Facilities
--------------------------------------
As of June 30, 1995 the Company owned interests in the following gas plant and
gas gathering facilities:
<TABLE>
<CAPTION>
1995
Capacity Throughput Ownership
Facility State Operator MMCFD MMCFD Interest
-------- ----- -------- ----- ----- --------
<S> <C> <C> <C> <C> <C>
Snyder Gas TX Torch Energy 60 24.3 11.98%
Plant Marketing Inc.
Diamond M-Sharon Ridge Exxon Company, U.S.A. * * 35.78%
Gas Plant TX
Monroe Gas LA West Monroe Gas 4.6 4.1 100%
Gathering System Gathering Corporation,
a subsidiary of the Company
</TABLE>
* The Company owns an interest in the Diamond M-Sharon Ridge Gas Plant,
however, the plant ceased operations in December, 1993 and has been
dismantled. The Snyder Gas Plant processes natural gas on behalf of
the Diamond M Plant owners for a fee.
ITEM 3. LEGAL PROCEEDINGS
--------------------------
Neither the Company nor its subsidiaries is a party to any material
pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year ended June 30, 1995.
12
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BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
--------------------------------------------------------------------------
MATTERS
-------
Since June 30, 1994, the principal market on which the Company's common
stock is traded is the National Market System (NMS) (Symbol:BELW). Prior to June
30, 1994, the Company's common stock was traded on the Small Cap Market. There
were approximately 1,231 stockholders of record as of September 5, 1995. The
Company has not paid dividends on its common stock and does not anticipate the
payment of cash dividends in the immediate future as it contemplates that cash
flows will be used for expansion of its operations. In addition, certain
covenants contained in the Company's financing arrangements restrict the payment
of dividends (See Management's Discussion and Analysis of Financial Condition
and Results of Operations - Financing Activities and Note 6 of the Notes to
Consolidated Financial Statements). The following table sets forth the range of
high and low bid quotations for the Bellwether Common Stock for the periods
indicated through June 30, 1994, and the high and low sales prices, as reported
by the NMS thereafter. The bid quotations represent prices between dealers and
do not include retail mark-up, mark-down or commissions; hence, they do not
represent actual transactions.
<TABLE>
<CAPTION>
Bid/Sales Price /(1)/
--------------------------------
Quarter Ended: High Low
---- ---
<S> <C> <C>
September 30, 1993........................ $ 5.75 $ 4.00
December 31, 1993......................... $ 7.50 $ 4.50
March 31, 1994............................ $ 8.25 $ 6.00
June 30, 1994............................. $ 7.50 $ 5.00
September 30, 1994........................ $ 6.50 $ 5.13
December 31, 1994......................... $ 6.00 $ 4.63
March 31, 1995............................ $ 6.25 $ 4.63
June 30, 1995............................. $ 6.75 $ 5.50
</TABLE>
/(1)/ Prices prior to April 5, 1994 were multiplied by eight to reflect an 8-
for-1 reverse stock split on such date.
13
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BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
ITEM 6. SELECTED FINANCIAL DATA
--------------------------------
The following selected financial data with respect to the Company should be
read in conjunction with the Consolidated Financial Statements and supplementary
information included in Item 8 (amounts in thousands, except per share data).
<TABLE>
<CAPTION>
At and For the Years Ended June 30,
-------------------------------------------------
1995/(1)/ 1994/(2)/ 1993 1992 1991
---------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Oil and gas revenues....... $ 8,507 $ 3,706 $ 3,515 $ 2,774 $ 2,804
Gas plant revenues......... 5,678 4,489 --- --- ---
Gas gathering
revenues................. 5,027 2,441 23 51 54
Interest and other
income................... 97 63 116 82 67
---------- ---------- ------- ------- -------
Total revenues......... 19,309 10,699 3,654 2,907 2,925
Total expenses
(including income
taxes and minority
interest)................ 18,368 9,885 3,613 2,779 2,671
Extraordinary income/(3)/.. --- --- --- 65 130
---------- ---------- ------- ------- -------
Net income................. $ 941 $ 814 $ 41 $ 193 $ 384
========== ========== ======= ======= =======
Earnings per
common and common
equivalent share/(4)/..... $ 0.12 $ 0.27 $ 0.02 $ 0.08 $ 0.17
Total assets............... $ 74,650 $ 35,870 $12,480 $14,140 $10,723
Long-term debt, net of
current maturities........ $ 18,525 $ 12,797 $ 1,000 $--- $ 300
</TABLE>
(1) Reflects operations from Odyssey and Hampton mergers from August, 1994 and
February, 1995, respectively.
(2) Includes operations of the Gas Plant and AGRI from dates of acquisition in
July and December, 1993, respectively.
(3) Extraordinary income in 1992 and 1991 represents reductions of income taxes
resulting from utilization of loss carryforwards.
(4) Restated to reflect a 1-for-8 reverse stock split in 1994.
14
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Capital Resources and Liquidity
-------------------------------
Sources of Capital
------------------
During the fiscal year ended June 30, 1995, the Company's principal sources
of capital were the issuance of its common stock, borrowings under its bank
credit facility and cash flows from operations. During this period, the Company
completed a public offering of its stock, and used the net proceeds of $17.2
million to repay indebtedness and to fund a portion of the Odyssey acquisition.
In addition, in March 1995, the Company borrowed $19.4 million under its credit
facility and used the proceeds to fund the cash portion of the Hampton
acquisition. The Company also issued an aggregate of 1.9 million shares of
common stock in connection with the Odyssey and Hampton acquisitions. During
fiscal year 1995, the Company's cash flows from operations were $5.3 million.
During fiscal 1994, the Company's primary sources of capital were
borrowings under its Credit Facility, which aggregated $8.5 million, and net
cash flows from operations which aggregated $3.1 million. In addition, in
December 1994, the Company issued 1.4 million shares of common stock in
connection with the acquisition of AGRI.
Uses of Capital
---------------
During the past two fiscal years, the Company's primary uses of its captial
have been to fund the acquisitions of the Gas Plant, AGRI, Odyssey and Hampton.
The Company also made capital expenditures of $3.4 million and $1.7 million
during fiscal 1995 and 1994, respectively, primarily in connection with the
development of its properties.
Financing Activities
--------------------
On February 28, 1995, the Company entered into a credit facility ("Credit
Facility") with a commercial bank providing for an initial borrowing base of
$29.8 million. Borrowings under the Credit Facility are secured by the Company's
interests in oil and gas properties and in the Gathering System and the Gas
Plant. The maturity date for both facilities is March 31, 1999. The interest
rate is either the agent bank's prime rate or the adjusted Eurodollar Rate plus
1 3/4% at the Company's option. A commitment fee of three-eighths of one percent
(0.375%) per annum is charged on the unused portion of the Credit Facility. The
interest rate on the Company's borrowings at June 30, 1995 was approximately
7.875%.
The Credit Facility contains various covenants including certain required
financial measurements for a current ratio, consolidated tangible net worth and
a ratio of consolidated liabilities to consolidated tangible net worth. In
addition, the Company may not pay dividends of greater than 20% of its
consolidated after-tax net income in any fiscal year or make any other payment
on account of its capital stock or redeem or purchase any of its capital stock.
15
<PAGE>
BELLWEATHER EXPLORATION COMPANY AND SUBSIDIARIES
------------------------------------------------
Other Matters
-------------
Dividends
---------
At present, there is no plan to pay dividends on common stock. The Company
maintains a policy of reinvesting its discretionary cash flows for the expansion
of its business and operations.
Gas Balancing Positions
-----------------------
It is customary in the industry for various working interest partners to
sell more or less than their entitled share of natural gas. The settlement or
disposition of gas balancing positions as of June 30, 1995 is not anticipated to
adversely impact the financial condition of the Company.
Outlook
-------
The Company has adopted a $5.7 million capital budget for fiscal 1996,
primarily for development drilling activities. The Company believes its working
capital, cash provided by operating activities, property divestitures, project
financing resources and the revolving credit facility are sufficient to meet
these capital commitments. The Company is reviewing several acquisitions, any
one of which could materially exceed the planned capital expenditure levels. It
is anticipated that such acquisitions, if consummated, would be funded through
additional borrowings and/or the issuance of securities.
Inflation has not had a material impact on the Company and is not expected
to have a material effect on the Company in the future.
16
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
------------------------------------------------
Results of Operations
---------------------
The following table sets forth certain oil and gas production information
of the Company for the periods presented.
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Production
Oil and condensate (MBBLS)................... 216 71 89
Natural gas (MMCF)........................... 2,932 1,206 819
Average sales price
Oil and condensate (per barrel).............. $ 16.89 $ 15.27 $19.21
Natural gas (per MCF)........................ $ 1.66 $ 2.17 $ 2.21
Average unit production cost
per equivalent barrel (6 MCF
equal 1 barrel).............................. $ 4.05 $ 4.75 $ 5.65
Average unit depletion rate
per equivalent barrel (6 MCF
equal 1 barrel).............................. $ 5.52 $ 5.71 $ 6.46
</TABLE>
Operations of the Gas Plant, which was acquired July 30, 1993 and December 31,
1993, are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
-----------------------
<S> <C> <C>
Product sales volume - (MGALS).................... 16,045 15,756
Average sales price per gallon.................... $ .29 $ .25
Revenues: ($000)
Product sales................................... $ 4,568 $ 3,868
Operating fees.................................. 768 481
Residual gas sales.............................. 324 140
------- -------
Total revenues.................................... 5,678 4,489
Operating expenses ($000)......................... 3,004 2,421
------- -------
Operating margin ($000)........................... $ 2,674 $ 2,068
======= =======
</TABLE>
Operations of the Gathering System, acquired in December 1994, are summarized as
follows:
<TABLE>
<S> <C> <C>
Net throughput (MMCF per day)..................... 4.1 3.9
Gas gathering revenues ($000)..................... $ 5,027 $ 2,441
Operating expenses ($000)......................... 3,074 1,592
------- -------
Operating margin ($000)........................... $ 1,953 $ 849
======= =======
</TABLE>
See Note 8 for industry segment information.
17
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
Revenues:
---------
Oil and gas revenues for fiscal 1995 were $8.5 million, or 130% higher than
fiscal 1994 oil and gas revenues of $3.7 million. In 1994, oil and gas revenues
were 5% higher than the fiscal 1993 oil and gas revenues of $3.5 million. The
Company's mergers with Odyssey and Hampton are responsible for the increased
revenues during fiscal 1995. During the three year period, the volatility of oil
and gas prices directly impacted revenues. Most significantly, natural gas
prices decreased in fiscal 1995 to $1.66 per MCF from $2.17 per MCF in fiscal
1994.
Gas plant revenues were $5.7 million in fiscal 1995, or 26.5% higher than
fiscal 1994 revenues of $4.5 million. The increase is due to the purchase of
interests in the Gas Plant in July and December, 1993. Revenues for fiscal 1995
were impacted favorably by a 16% increase in natural gas liquids price per
gallon.
Gas gathering revenues increased to $5.0 million in fiscal 1995, or 106%
over fiscal 1994 revenues of $2.4 million due to the purchase of AGRI in
December, 1993.
Expenses:
---------
Production expenses for fiscal 1995 totaled $2.9 million, as compared to
$1.3 million in fiscal 1994 and $1.3 million in fiscal 1993. The 121% increase
in fiscal 1995 over fiscal 1994 and 1993 was attributable primarily to the
Odyssey and Hampton mergers. Fiscal 1994 and 1993 expenses remained virtually
constant as increases in operating costs due to the AGRI merger were offset by
reductions in operating expenses in Alabama Ferry and other fields.
Gas Plant expenses were $3.0 million or 24% higher in fiscal 1995 than in
fiscal 1994, which was the initial year of Gas Plant operations.
Gas Gathering expenses in fiscal 1995 of $3.1 million are 93% over the
prior year total of $1.6 million, due to the reflection of an entire year of
operations in 1995. The gas gathering facilities were acquired in the AGRI
merger in December 1993.
Depreciation, depletion and amortization of $5.3 million reflects an
increase of 112% for fiscal 1995 over $2.5 million in fiscal 1994. Such increase
reflects additional production volumes from the Odyssey and Hampton mergers.
Additionally, a full year of depreciation was included for the gas plants and
gas gathering facilities in fiscal 1995. In fiscal 1994, depreciation, depletion
and amortization was 71% higher than the fiscal 1993 amount due to the
additional volumes from the AGRI merger and the purchase of the Gas Plants and
the gathering system.
General and administrative expenses totaled $2.7 million, $1.2 million and
$0.8 million for the fiscal years ended June 30, 1995, 1994 and 1993,
respectively. The management fee with Torch accounted for $0.6 million and $0.1
million of the increase in general and administrative expenses in fiscal 1995
and fiscal 1994, respectively, and is due to the significant growth of assets
and cash flows experienced by the Company. Additionally, the mergers with
Odyssey and Hampton added to the increases in salaries and other administrative
overhead.
18
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
Interest expense increased to $1.2 million in fiscal 1995 from $0.7 million
in fiscal 1994 and $77,000 in fiscal 1993. Such increase is due to the increase
of debt facilities which financed a portion of the Mergers.
The Company has not recorded a provision for income taxes in fiscal 1995, 1994
or 1993. The amounts of $9,000 in fiscal 1995 and $21,000 in fiscal 1993 reflect
actual payments of alternative minimum tax. Prior to the Hampton merger, the
Company's net operating loss was sufficient to eliminate any deferred tax
liability. Upon merging with Hampton, the Company was required to record a
deferred tax liability of $2.4 million.
Net Income
----------
Net income of $0.9 million was generated in fiscal 1995, as compared to
$0.8 million and $41,000 in fiscal 1994 and fiscal 1993, respectively.
19
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
-------------------------------------------
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Independent Auditors' Report................................ 21
Financial Statements:
Consolidated Balance Sheets as of June 30, 1995
and 1994................................................. 23
Consolidated Statements of Operations for the Years Ended
June 30, 1995, 1994 and 1993............................. 25
Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended June 30, 1995, 1994 and 1993.. 26
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1995, 1994 and 1993............................. 27
Notes to Consolidated Financial Statements................ 29
</TABLE>
20
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders of
Bellwether Exploration Company and Subsidiaries
We have audited the accompanying consolidated balance sheets of Bellwether
Exploration Company and Subsidiaries as of June 30, 1995 and 1994, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the years in the two-year period ended June 30, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bellwether
Exploration Company and Subsidiaries as of June 30, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
two-year period ended June 30, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 7 to the consolidated financial statements, in 1994 the
Company changed its method of accounting for income taxes to conform with
Statement of Financial Accounting Standards No. 109.
DELOITTE & TOUCHE LLP
Houston, Texas
August 25, 1995
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
Bellwether Exploration Company:
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Bellwether Exploration Company and
subsidiaries for the year ended June 30, 1993. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Bellwether Exploration Company and subsidiaries for the year ended June 30,
1993, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
September 10, 1993
22
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(Amounts in thousands)
ASSETS
------
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1995 1994
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................... $ 1,088 $ 1,452
Accounts receivable and accrued
revenues................................... 5,322 2,243
Accounts receivable - related parties....... --- 556
Prepaid expenses............................ 217 68
-------- --------
Total current assets...................... 6,627 4,319
-------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Oil and gas properties (full cost
method) including $15,125 and $832
of unproved properties which are excluded
from amortization in 1995 and 1994,
respectively............................... 71,426 29,750
Gas gathering system........................ 6,011 5,873
Gas plant facilities........................ 13,049 12,962
-------- --------
90,486 48,585
Less accumulated depreciation,
depletion and amortization................ (23,291) (17,979)
-------- --------
67,195 30,606
-------- --------
OTHER ASSETS................................ 828 945
-------- --------
$ 74,650 $ 35,870
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
23
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
(Amounts in thousands, except shares)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1995 1994
-------- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable - related parties............ $ 76 $ 1,265
Accounts payable and accrued liabilities...... 1,774 1,480
Current maturities of long-term debt.......... 6,023 1,823
------- -------
Total current liabilities................ 7,873 4,568
------- -------
LONG-TERM DEBT, EXCLUDING CURRENT MATURITIES.. 18,525 12,796
DEFERRED INCOME TAXES......................... 2,400 ---
OTHER LIABILITIES............................. 151 ---
MINORITY INTEREST IN GAS PLANT
VENTURES.................................... 254 134
CONTINGENCIES................................. --- ---
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value,
1,000,000 shares authorized, none issued
or outstanding at June 30, 1995 and 1994,
respectively................................. --- ---
Common stock, $.01 par value,
15,000,000 shares authorized, 9,045,479 and
3,722,322 shares issued and outstanding at
June 30, 1995 and 1994, respectively......... 90 37
Additional paid-in capital.................... 41,472 15,490
Retained earnings............................. 3,885 2,944
------- -------
45,447 18,471
Less treasury stock at cost; no shares
and 15,048 common shares at June 30,
1995 and 1994, respectively................. --- (99)
------- -------
Total stockholders' equity................ 45,447 18,372
------- -------
$74,650 $35,870
======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
24
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------
1995 1994 1993
-------------- --------------- -------------
<S> <C> <C> <C>
REVENUES:
Oil and gas revenues.......... $ 8,507 $ 3,706 $ 3,515
Gas plant revenues............ 5,678 4,489 ---
Gas gathering revenues........ 5,027 2,441 23
Interest and other income..... 97 63 116
-------------- --------------- ------------
19,309 10,699 3,654
-------------- --------------- ------------
COSTS AND EXPENSES:
Production expenses........... 2,856 1,294 1,273
Gas plant expenses............ 3,004 2,421 ---
Gas gathering expenses........ 3,074 1,592 ---
General and administrative
expenses..................... 2,739 1,234 787
Depreciation, depletion and
amortization................. 5,269 2,489 1,455
Interest expense.............. 1,245 721 77
-------------- --------------- ------------
18,187 9,751 3,592
-------------- --------------- ------------
Income before income taxes
and minority interest......... 1,122 948 62
Provision for income taxes...... 9 --- 21
Minority interest in gas plant
ventures...................... 172 134 ---
-------------- --------------- ------------
Net income...................... $ 941 $ 814 $ 41
============== =============== ============
Net income per share............ $ 0.12 $ 0.27 $ 0.02
============== =============== ============
Weighted average common and
common equivalent shares
outstanding.................... 7,713 3,006 2,289
============== =============== ============
</TABLE>
See Notes to Consolidated Financial Statements.
25
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES
----------------------------------
IN STOCKHOLDERS' EQUITY
-----------------------
(Amounts in thousands)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PREFERRED STOCK PAID-IN RETAINED TREASURY STOCK
--------------- --------------
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL
------ ------ ------ ------ ------- -------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance June 30,
1992.................... 2,318 $ 1,156 --- $ --- $ 7,598 $2,089 29 $ (115) $10,728
Net earnings............ --- --- --- --- --- 41 -- --- 41
----- ------- ------ ------ ------- ------- ------ ------ -------
Balance June 30,
1993.................... 2,318 1,156 --- --- 7,598 2,130 29 (115) 10,769
Shares issued in merger
with Associated Gas
Resources, Inc.......... 1,419 708 --- --- 6,066 --- -- --- 6,774
To change par value
per share............... --- (1,827) --- --- 1,827 --- -- --- ---
Other................... --- --- --- --- (1) --- (15) 16 15
Net earnings............ --- --- --- --- --- 814 -- --- 814
----- ------- ------ ------ ------- ------- ------ ------ -------
Balance June 30,
1994.................... 3,737 37 --- --- 15,490 2,944 15 (99) 18,372
Shares issued in public
stock offering.......... 3,400 34 --- --- 17,204 --- -- --- 17,238
Cancelation of
treasury stock.......... (15) --- --- --- --- --- (15) 99 99
Shares issued in merger
with Odyssey Partners,
Ltd..................... 917 9 --- --- 3,944 --- -- --- 3,953
Shares issued in merger
with Hampton
Resources Corporation... 1,006 10 --- --- 4,834 --- -- --- 4,844
Net earnings............ 941 941
----- ------- ------ ------ -------- ------ ------ ------ -------
Balance June 30, 1995... 9,045 $ 90 --- $ --- $41,472 $3,885 -- $ --- $45,447
===== ======= ====== ====== ======== ====== ====== ====== =======
</TABLE>
See Notes to Consolidated Financial Statements.
26
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income......................... $ 941 $ 814 $ 41
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion and
amortization..................... 5,382 2,530 1,472
Minority interest in gas
plant ventures................. 120 120 ---
Change in assets and liabilities,
net of acquisition effects:
Accounts receivable and
accrued revenues............... 1,548 (73) 6
Prepaid expenses................. 117 12
Accounts payable and
accrued expenses............... (2,047) (464) (46)
Due (to) from affiliates......... (633) 750 67
Other assets..................... (145) (555) 3
-------- ------- -------
NET CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES.............. 5,283 3,122 1,555
-------- ------- -------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to oil and gas
properties....................... (27,039) (782) (1,789)
Proceeds from sales of
oil and gas properties........... 265 36 431
Additions to gas plant facilities.. (87) (8,567) ---
Additions to gas gathering
system........................... (138) (82) ---
Other.............................. (290) (28) (32)
-------- ------- -------
NET CASH FLOWS USED IN
INVESTING ACTIVITIES.............. (27,289) (9,423) (1,390)
---------- -------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
27
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
-------------------------------------------------
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------
1995 1994 1993
-------------- ------------ --------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from borrowings.......... 25,860 8,471 ---
Net proceeds from issuance of
common stock..................... 17,238 --- ---
Payments of long-term debt........ (21,456) (1,151) ---
Repayment of short-term
payable.......................... --- --- (2,186)
Proceeds from note receivable..... --- 40
Other............................. --- 14 ---
NET CASH FLOWS PROVIDED BY........ -------- ------- ------
(USED IN) FINANCING
ACTIVITIES...................... 21,642 7,334 (2,146)
-------- ------- ------
Net decrease in cash
and cash equivalents............ (364) 1,033 (1,981)
Cash and cash equivalents at
beginning of year............... 1,452 419 2,400
-------- ------- -------
CASH AND CASH EQUIVALENTS AT END
OF YEAR........................... $ 1,088 $ 1,452 $ 419
======== ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
28
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. ORGANIZATION
------------
Bellwether Exploration Company ("the Company") was formed as a Delaware
corporation in 1994 to succeed to the business and properties of its
predecessor company pursuant to a merger, the primary purpose of which was
to change the predecessor company's state of incorporation from Colorado to
Delaware. In connection with the merger, the predecessor company effected
a 1-for-8 reverse stock split. The predecessor company was formed in 1980
from the consolidation of the business and properties of related oil and
gas limited partnerships. References to Bellwether or the Company include
the predecessor company, unless the context requires otherwise.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of Bellwether
Exploration Company and its wholly-owned subsidiaries. Snyder Gas Plant
Venture and NGL/Torch Gas Plant Venture and their 11.98% and 35.78%
investments in the Snyder and Diamond M-Sharon Ridge Gas Plants have been
pro rata consolidated. Minority interests have been deducted from results
of operations and stockholders' equity in the appropriate period. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Oil and Gas Properties
----------------------
The Company utilizes the full cost method to account for its investment in
oil and gas properties. Under this method, all costs of acquisition,
exploration and development of oil and gas reserves (including such costs
as leasehold acquisition costs, geological expenditures, dry hole costs and
tangible and intangible development costs) are capitalized as incurred.
Oil and gas properties, the estimated future expenditures to develop
proved reserves, and estimated future abandonment, site remediation and
dismantlement costs are depleted and charged to operations using the unit-
of-production method based on the ratio of current production to proved oil
and gas reserves as estimated by independent engineering consultants.
Costs directly associated with the acquisition and evaluation of unproved
properties are excluded from the amortization computation until it is
determined whether or not proved reserves can be assigned to the properties
or whether impairment has occurred. Depletion expense per equivalent
barrel of production was approximately $5.52 in 1995, $5.71 in 1994 and
$6.46 in 1993. Dispositions of oil and gas properties are recorded as
adjustments to capitalized costs, with no gain or loss recognized unless
such adjustments would significantly alter the relationship between
capitalized costs and proved reserves of oil and gas. To the extent that
capitalized costs of oil and gas properties, net of accumulated
depreciation, depletion and amortization, exceed the discounted future net
revenues of proved oil and gas reserves, such excess capitalized costs
would be charged to operations. No such write-down in book value was
required in 1995, 1994 and 1993.
29
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
Any reference to oil and gas reserve information in the Notes to
Consolidated Financial Statements is unaudited.
Gas Plants and Gas Gathering Facilities
---------------------------------------
Gas plant and gas gathering facilities include the costs to acquire certain
gas plants, gas gathering facilities and to secure rights-of-way.
Capitalized costs associated with gas plants and gas gathering facilities
are amortized primarily over the estimated useful lives of the various
components of the facilities utilizing the straight-line method. The
estimated useful lives of such assets range from four to fifteen years.
Gas Imbalances
--------------
The Company uses the sales method of accounting for gas imbalances. Under
this method, gas sales are recorded when revenue checks are recieved or are
receivable on the accrual basis. The Company's imbalance was immaterial at
June 30, 1995 and 1994.
Earnings Per Share
------------------
Earnings per share calculations are based on the weighted average number of
common shares and common share equivalents and earnings attributable to
common stockholders. Common share equivalents include dilutive common
stock options. Such options do not have a material effect in the
calculations of earnings per share. Prior periods have been restated to
reflect the 1 for 8 reverse stock split which occurred 1994.
Income Taxes
------------
Deferred taxes are accounted for under the asset and liability method of
accounting for income taxes. Under this method, deferred income taxes are
recognized for the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences
between the financial statement carrying amounts and the tax basis of
existing assets and liabilities. The effect on deferred taxes of a change
in tax rates is recognized in income in the period the change occurs.
Statements of Cash Flows
------------------------
For cash flow presentation purposes, the Company considers all highly
liquid debt instruments purchased with an original maturity of three months
or less to be cash equivalents. Interest paid in cash for 1995, 1994 and
1993 was $1.2 million, $0.7 million and $74,000, respectively. Income
taxes paid in cash for 1995 and 1993 were $9,000 and $21,000, respectively.
During 1995 and 1994, a portion of the the mergers with Associated Gas
Resources Inc. ("AGRI"), Odyssey Partners, Ltd. (Odyssey") and Hampton
Resources Corporation ("Hampton"), collectively the ("Mergers") was
financed by assumption of debt of $6.1 million for AGRI, $1.4 million for
Odyssey and $4.1 million for Hampton. Common stock with a value of $4.0
million and $4.8 million were issued as part of the costs of the Odyssey
and Hampton mergers in 1995, respectively. In 1994, common stock with a
value of $6.8 million was issued for the AGRI merger.
30
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
Reclassifications
-----------------
Certain reclassifications of prior period statements have been made to
conform with current reporting practices.
3. ACQUISITIONS, MERGERS AND PRO FORMA FINANCIAL INFORMATION
---------------------------------------------------------
During the last three years, the Company has completed the following
mergers and acquisitions:
On February 28, 1995 the Company acquired Hampton in exchange for $17.0
million in cash and 1,006,458 shares of the Company's common stock. The
Company had paid previous to the merger $2.7 million to acquire common and
preferred stock of Hampton and incurred $1.4 million in expenses in
arranging the merger, making the total cash outlay of $21.1 million and
common stock valued at $4.8 million for a total cost of $25.9 million for
the acquisition of Hampton. Hampton is an energy company engaged in the
exploration, acquisition and production of oil and natural gas.
On August 26, 1994 the Company acquired Odyssey in exchange for $5.6
million in cash (funded from a common stock offering which closed on the
same date) and 916,665 shares of the Company's common stock for a total
cost of $9.6 million. Odyssey is an exploration company which assembles,
exploits and operates oil and gas properties using state-of-the-art 3-D
seismic and computer-aided exploration technology. Odyssey's primary areas
of operation have been the onshore Gulf Coast region and the Permian Basin
area of West Texas and Southeast New Mexico.
On December 31, 1993 AGRI merged into the Company in consideration of the
issuance of 1,419,726 shares of the Company's common stock and cash
payments of $232,000 for a total cost of $7.0 million. AGRI's principal
assets are a gas gathering system located in Union Parish, Louisiana (the
Gas "Gathering System"); a 4.12% interest in the Snyder Gas Plant; a 12.52%
interest in the Diamond M-Sharon Ridge Gas Plant (the "Gas Plants");
working interests in approximately 828 wells in Union, Morehouse and
Ouachita Parishes, Louisiana; and small non-operated working interests in
approximately 137 gas wells in Oklahoma.
On July 30, 1993 the Company acquired certain interests in the Gas Plants,
both in Scurry County, Texas, for a purchase price of $8.45 million.
The following table presents the unaudited proforma results of operations
as if the mergers had all occurred on July 1, 1993. The Mergers were
accounted for as purchases, and their results of operations are included in
the Company's results of operations from the dates of acquisition. The
Company's pro forma results are based on assumptions and estimates and are
not nessarily indicative of the Company's results of operations had the
transactions occurred as of July 1, 1993, or those in the future (in
thousands, except earnings per share).
31
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1995 1994
---- ----
<S> <C> <C>
Revenues $24,747 $32,347
Expenses 24,099 26,463
------- -------
Earnings before minority
interest and income taxes 648 5,884
Provision for income taxes 9 ---
Minority interest 172 191
------- -------
Net earnings $ 467 $ 5,693
------- -------
Net earnings per common share $ 0.05 $ 0.59
</TABLE>
4. RELATED PARTY TRANSACTIONS
--------------------------
The Company is a party to a management agreement with Torch Energy Advisors
Incorporated ("Torch") which was renewed for one year on September 1, 1993
and amended effective January 1, 1994. Torch is currently an affiliate of
Torchmark Corporation ("Torchmark"), an insurance and diversified financial
services holding company and the parent corporation of Torch. The
management agreement requires Torch to administer the business activities
of the Company for a monthly fee equal to the sum of one-twelfth of 2% of
the average of the book value of the Company's total assets, excluding
cash, plus reimbursement of certain costs incurred on behalf of the Company
for the management of its oil and gas properties, plus 2% of annual
operating cash flows (as defined) during the period in which the services
are rendered. The initial term of this agreement (as amended) is six
years. Thereafter, the agreement renews automatically for successive one-
year periods until terminated by either party in accordance with the
applicable provisions of the agreement. For the years ended June 30, 1995,
1994 and 1993, management fees paid to Torch amounted to $1.2 million, $0.6
million and $0.5 million, respectively. Additionally, in the ordinary
course of business, the Company incurs intercompany balances resulting from
the payment of costs and expenses by affiliated entities on behalf of the
Company. Torch may charge interest on any unpaid balances not paid within
30 days, however, no such interest has been charged by Torch since the
inception of the agreement. In December 1993, Torch was issued a warrant
to purchase 187,500 shares of the Company's common stock at a price of
$6.40 per share for its services in identifying and negotiating the AGRI
merger. Such options expire December 31, 1998. In March 1995, Torchmark
and Summit Partners ("Summit") entered into a letter of intent pursuant to
which Torchmark agreed to sell substantially all of the business of Torch
to a corporation to be formed by Summit and management of Torch. Following
the consummation of such transaction, Torchmark would continue to own 10%
of Torch's outstanding common stock. Closing of such transaction, however,
is subject to the fulfillment of several conditions, including the results
of a due diligence review and the acquisition of
32
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
acceptable financing and regulatory approval. No assurance can be given
that such transaction will be consummated.
A subsidiary of Torch markets natural gas production from certain oil and
gas properties and gas plants in which the Company owns an interest. Fees
of 2% of revenues are paid for such marketing services; in 1995, 1994 and
1993 such charges were $12,000, $3,000 and $5,000, respectively.
Costs of the evaluation of potential property acquisitions are incurred by
Torch on behalf of the Company. The Company was charged $193,000 and
$38,000 for these costs in 1995 and 1993, respectively.
Torch operates certain oil and gas interests owned by the Company. The
Company is charged, on the same basis as other third parties, for all
customary expenses and cost reimbursements associated with these
activities. Operator's overhead charged for these activities for the years
ended June 30, 1995, 1994 and 1993 was $176,000, $44,000 and $65,000,
respectively. Certain fees for operation of Company properties are paid by
Torch to the Company. Such fees were $62,000, $24,000 and $199,000 in the
years ended June 30, 1995, 1994 and 1993, respectively.
Torch became the operator of the Gas Plants on December 1, 1993. For the
year ended June 30, 1994, operators overhead fees paid to Torch amounted to
$38,000. In fiscal 1995, the fees paid totaled $71,000.
5. STOCKHOLDERS' EQUITY
--------------------
Common and Preferred Stock
--------------------------
The Certificate of Incorporation of the Company authorizes the issuance of
up to 15,000,000 shares of common stock and 1,000,000 shares of preferred
stock, the terms, preferences, rights and restrictions of which are
established by the Board of Directors of the Company. All shares of common
stock have equal voting rights of one vote per share on all matters to be
voted upon by stockholders. Cumulative voting for the election of
directors is not permitted. Certain restrictions contained in the
Company's loan agreements limit the amount of dividends which may be
declared. There is no present plan to pay dividends on common stock as the
Company intends to reinvest its cash flows for the expansion of its
business and operations.
On April 4, 1994, shareholders approved the merger of Bellwether
Exploration Company, a Delaware corporation, into the Company. The common
stock of the Company was converted into one-eighth share of the newly
formed Company's common stock. The number of authorized shares of the
common and preferred shares of the newly formed company was fixed at
15,000,000 and 1,000,000, respectively.
During the first quarter of fiscal 1995, the Company consummated the sale
of 3,650,000 shares of common stock. The net proceeds to the Company were
$17.3 million which were used for the Odyssey and Hampton mergers and
general corporate purposes. Of the shares sold, 3,400,000 were newly-
issued by the Company and 250,000 were sold by certain stockholders.
33
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
1988 Stock Option Plan
----------------------
In 1988, the Board of Directors and stockholders approved the Company's
1988 Non-Qualified Stock Option Plan ("1988 Plan"). The Company has
reserved 131,325 shares of common stock under the 1988 Plan. Options under
the 1988 Plan are granted by the Compensation Committee to any director,
executive officer or key employee of the Company. The exercise price of an
option is 100% of the fair market value on the date of the grant. Options
granted under the 1988 Plan may be exercised at any time for up to 10 years
from the date of grant but prior to termination of the 1988 Plan on March
25, 1998, or such shorter time as the Compensation Committee determines.
1994 Stock Incentive Plan
-------------------------
In 1994, the Board of Directors adopted the Bellwether Exploration Company
1994 Stock Incentive Plan (the "1994 Plan"). The Company has reserved
825,000 shares of Common Stock under the 1994 Plan.
The 1994 Plan is administered by the Compensation Committee of the Board of
Directors. The Compensation Committee has full power to select, from among
the persons eligible for awards, the individuals to whom awards are
granted, to make any combination of awards to any participant and to
determine the specific terms of each grant, subject to the provisions of
the 1994 Plan.
Directors, officers and key employees of the Company and officers and key
employees of Torch who render services for the Company under the Management
Agreement are eligible to receive stock options or performance shares under
the 1994 Plan. Members of the Board of Directors who are not employed by
the Company ("Non-employee Directors") receive annual automatic grants of
stock options.
34
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
Stock Incentive Plans
---------------------
A summary of activity in the stock option plans during 1995, 1994 and 1993
is set forth below:
<TABLE>
<CAPTION>
Option
Number Price
of shares/(1)/ Range/(1)/
--------------- ---------------
<S> <C> <C>
Balance at June 30, 1992............................. 149,215 $ 3.00 -$ 5.25
Granted............................................ 2,500 $ 5.13
--------------- ---------------
Balance at June 30, 1993............................. 151,715 $ 3.00 -$ 5.25
Granted............................................ 456,950 $ 3.88 -$ 7.00
Surrendered........................................ (114,450) $ 4.50
Exercised.......................................... ( 22,890) $ 3.25
--------------- ---------------
Balance at June 30, 1994............................. 471,325 $ 3.00 -$ 7.00
Granted............................................ 450,000 $ 5.56 -$ 5.94
--------------- ---------------
Balance at June 30, 1995............................. 921,325 $ 3.00 -$ 7.00
=============== ===============
Exercisable at June 30, 1995......................... 735,775 $ 3.00 -$ 7.00
=============== ===============
</TABLE>
(1) Restated for 1 for 8 stock split on April 5, 1994.
6. LONG-TERM DEBT
Long-term debt is comprised of the following at June 30, 1995 and 1994 (in
thousands):
<TABLE>
<CAPTION>
1995 1994
--------- -------------
<S> <C> <C>
Bank credit facility............................ $ 24,548 $ 14,619
Less current maturities......................... (6,023) (1,823)
--------- -------------
Long-term debt.................................. $ 18,525 $ 12,796
========= =============
</TABLE>
On February 28, 1995, the Company entered into a credit facility ("Credit
Facility") with a commercial bank providing for an initial borrowing base of
$29.8 million. Borrowings under the Credit Facility are secured by the Company's
interests in oil and gas properties and in the Gathering System and the Gas
Plant. The maturity date for both facilities is March 31, 1999. The interest
rate is either the agent bank's prime rate or the adjusted Eurodollar Rate plus
1 3/4% at the Company's option. A commitment fee of three-eighths of one percent
(0.375%) per annum is charged on the unused portion of the Credit Facility. The
interest rate on the Company's borrowings at June 30, 1995 was approximately
7.875%.
Loan maturities by fiscal year are as follows (in thousands):
<TABLE>
<S> <C>
Year ending June 30, 1996 $ 6,023
Year ending June 30, 1997 7,490
Year ending June 30, 1998 6,745
Year ending June 30, 1999 4,290
Year ending June 30, 2000 ---
-----------
$ 24,548
===========
</TABLE>
35
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
The Credit Agreement has various covenants including certain required
financial measurements for a current ratio, consolidated tangible net worth and
a ratio of consolidated liabilities to consolidated tangible net worth. In
addition, the Company may not pay dividends of greater than 20% of its
consolidated after-tax net income in any fiscal year or make any other payment
on account of its capital stock or redeem or purchase any of its capital stock.
36
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
7. INCOME TAXES (IN THOUSANDS)
---------------------------
Income tax expense is summarized as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------
1995 1994 1993
-------- --------- --------
<S> <C> <C> <C>
Current
Federal...... $ 9 $ --- $ 21
Deferred
Federal...... --- --- ---
State........ --- --- ---
------ ---------
9 --- 21
------ --------- --------
Total income tax expense $ 9 $ --- $ 21
====== ========= ========
</TABLE>
The tax effect of temporary differences that give rise to significant portions
follows:
<TABLE>
<CAPTION>
At June 30,
-------------------
1995 1994
--------- --------
<S> <C> <C>
Net operating loss
carryforwards.................... $ 8,858 $ 4,272
Percentage depletion
carryforwards.................... 271 ---
-------- -------
Total deferred income
tax assets.................. 9,129 4,272
-------- -------
Plant, property and
equipment........................ (11,529) (2,879)
Total deferred income tax
liabilities................. (11,529) ---
-------- -------
Valuation allowances..... --- (1,393)
Net deferred income tax
liability....................... $ (2,400) $ ---
======== =======
</TABLE>
The Company files a consolidated federal income tax return. Deferred
income taxes are provided for transactions which are recognized in
different periods for financial and tax reporting purposes. Such temporary
differences arise primarily from the deduction for tax purposes of certain
oil and gas development costs which are capitalized for financial statement
purposes. In the years ended June 30, 1995, 1994 and 1993, the Company has
not provided a provision for deferred income taxes due to the availability
of sufficient NOLs to offset net income.
37
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
Section 382 of the Internal Revenue Code significantly limits the amount of
net operating loss ("NOL") and investment tax credit carryforwards that are
available to offset future taxable income and related tax liability when a
change in ownership occurs after December 31, 1986.
The Company issued 3,400,000 shares of its common stock on July 20, 1994 to
be sold by the Company. As a result of the common stock issuance, the
Company has undergone an ownership change. Therefore, the Company's
ability to use its NOL for federal income tax purposes is subject to
significant restrictions.
At June 30, 1995, the Company had combined NOL of approximately $26.1
million which will expire in future years beginning in 2002. Due to
provisions of Section 382, the Company is limited to approximately $3.5
million utilization of NOL per year, subject to separate return limitation
year (SRLY) on Odyssey and Hampton separate returns.
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," effective July 1, 1993, and has applied the
provisions of Statement 109 as of that date.
38
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
8. SEGMENT INFORMATION
-------------------
Prior to fiscal 1994 all of the Company's operations were in the exploration and
production of oil and natural gas. In fiscal 1994, the Company purchased
interests in two gas plants, effective July 30, 1993, and on December 31, 1993
through a merger, the Company acquired a gas gathering system and additional
interests in the two gas plants. The results of operations of these business
segments are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
-----------------------------
1995 1994 1993
----------- -------- --------
<S> <C> <C> <C>
Revenues:
Oil and gas $ 8,507 $ 3,706 $ 3,515
Gas plants 5,678 4,489 ---
Gas gathering 5,027 2,441 23
Other revenues 97 63 116
------- ------- -------
Total revenues $19,309 $10,699 $ 3,654
======= ======= =======
Operating profit before income tax
Oil and gas $ 1,758 $ 859 787
Gas plants 1,794 1,258 ---
Gas gathering 1,457 589 23
------- ------- -------
5,009 2,706 810
Unallocated corporate expenses 2,823 1,172 671
Interest expense 1,245 721 77
------- ------- -------
Income before taxes $ 941 $ 813 $ 62
======= ======= =======
Identifiable assets:
Oil and gas $53,218 $13,763 $11,718
Gas plants 12,219 13,284 ---
Gas gathering 6,070 6,001 ---
------- ------- -------
71,507 33,048 11,718
Corporate assets 3,143 2,822 762
------- ------- -------
Total assets $74,650 $35,870 $12,480
======= ======= =======
Capital expenditures
Oil and gas $41,676 $ 3,199 $ 2,289
Gas plants 87 12,962 ---
Gas gathering 138 5,873 ---
------- ------- -------
$41,901 $22,034 $ 2,289
======= ======= =======
Depreciation, depletion and
amortization:
Oil and gas $ 3,893 $ 1,553 $ 1,455
Gas plants 880 677 ---
Gas gathering 496 259 ---
------- ------- -------
$ 5,269 $ 2,489 $ 1,455
======= ======= =======
</TABLE>
The Company does not have export sales or material foreign sales. In 1995, 1994
and 1993, the Company had two customers which accounted for 42% of its revenues,
three customers which accounted for 58% of its revenues and four customers which
accounted for 48% of its revenues, respectively.
39
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
9. CONTINGENCIES
-------------
The Company has been named as a defendant in certain lawsuits incidental to
its business. Management does not believe that the outcome of such
litigation will have a material adverse impact on the Company.
10. SUPPLEMENTAL INFORMATION - (Unaudited)
------------------------
OIL AND GAS PRODUCING ACTIVITIES:
---------------------------------
Included herein is information with respect to oil and gas acquisition,
exploration, development and production activities, which is based on
estimates of year-end oil and gas reserve quantities and estimates of
future development costs and production schedules. Reserve quantities and
future production are based primarily upon reserve reports prepared by the
independent petroleum engineering firms of Williamson Petroleum
Consultants, Inc., R.T. Garcia & Co. Inc. and Cawley, Gillespie &
Associates, Inc. These estimates are inherently imprecise and subject to
substantial revision.
Estimates of future net cash flows from proved reserves of gas, oil,
condensate and natural gas liquids were made in accordance with Statement
of Financial Accounting Standards No. 69, "Disclosures about Oil and Gas
Producing Activities." The estimates are based on prices at year-end.
Estimated future cash inflows are reduced by estimated future development
and production costs based on year-end cost levels, assuming continuation
of existing economic conditions, and by estimated future income tax
expense. Tax expense is calculated by applying the existing statutory tax
rates, including any known future changes, to the pre-tax net cash flows,
less depreciation of the tax basis of the properties and depletion
allowances applicable to the gas, oil, condensate and NGL production. The
results of these disclosures should not be construed to represent the fair
market value of the Company's oil and gas properties. A market value
determination would include many additional factors including: (i)
anticipated future increases or decreases in oil and gas prices and
production and development costs; (ii) an allowance for return on
investment; (iii) the value of additional reserves, not considered proved
at the present, which may be recovered as a result of further exploration
and development activities; and (iv) other business risks.
40
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
Costs incurred (in thousands)
--------------
The following table sets forth the costs incurred in property acquisition
and development activities:
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------
1995 1994 1993
------- ------ ------
<S> <C> <C> <C>
Property acquisition:
Proved properties......... $25,072 $1,896 $ 154
Unproved properties....... 13,233 295 464
Exploration................. 530 364 474
Development................. 2,841 644 1,197
------- ------ ------
$41,676 $3,199 $2,289
======= ====== ======
</TABLE>
Capitalized costs (in thousands)
-----------------
The following table sets forth the capitalized costs relating to oil and
gas activities and the associated accumulated depreciation, depletion and
amortization:
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Proved properties............... $ 56,300 $ 28,917 $ 25,943
Unproved properties............. 15,125 832 643
-------- -------- --------
Total capitalized costs......... 71,425 29,749 26,586
Accumulated depreciation,
depletion and amortization..... (20,983) (17,043) (15,490)
-------- -------- --------
Net capitalized costs........... $ 50,442 $ 12,706 $ 11,096
======== ======== ========
</TABLE>
41
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
Results of operations for producing activities (in thousands)
----------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Revenues from oil and gas
producing activities............. $8,507 $3,706 $3,515
Production costs.................. 2,856 1,294 1,273
Depreciation, depletion
and amortization................. 3,893 1,553 1,455
------ ------ ------
Results of operations
from producing activities
(excluding corporate
overhead and interest
costs).......................... $1,758 $ 859 $ 787
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Per unit sales prices and costs:
-------------------------------
Year Ended June 30,
---------------------------
1995 1994 1993
-------- ------- ---------
<S> <C> <C> <C>
Average sales price:
Oil (per barrel)................ $ 16.89 $ 15.27 $ 19.21
Gas (per MCF)................... $ 1.66 $ 2.17 $ 2.21
Average production cost
per equivalent barrel........... $ 4.05 $ 4.75 $ 5.65
Average unit depletion
rate per equivalent barrel...... $ 5.52 $ 5.71 $ 6.46
</TABLE>
42
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
Reserves
--------
The Company's estimated total proved and proved developed reserves of oil
and gas are as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------------
Description 1995 1994 1993
------------------------------ ------------- --------------- -------------
Oil Gas Oil Gas Oil Gas
(MBBL) (MMCF) (MBBL) (MMCF) (MBBL) (MMCF)
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Proved reserves at beginning
of year....................... 393 10,671 438 7,202 790 8,431
Revisions of previous
estimates..................... (61) (988) (44) 58 (287) (1,202)
Extensions and discoveries...... 724 1,179 --- --- 1 ---
Production...................... (216) (2,932) (71) (1,206) (89) (819)
Sales of reserves in-place...... (1) (3) --- --- --- (15)
Purchases of reserves in-place.. --- 163 67 287 23 807
Reserves added in Mergers....... 1,758 22,069 3 4,330 --- ---
----- ------ --- ------ ---- ------
Proved reserves at end of year.. 2,597 30,159 393 10,671 438 7,202
===== ====== === ====== ==== ======
Proved developed reserves -
Beginning of year............. 361 9,154 410 7,151 724 8,345
===== ====== === ====== ==== ======
End of year .................. 1,891 23,795 361 9,154 410 7,151
===== ====== === ====== ==== ======
</TABLE>
43
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
Discounted future net cash flows (in thousands)
--------------------------------
The standardized measure of discounted future net cash flows and changes therein
related to proved oil and gas reserves are shown below:
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------------------
1995 1994 1993
------------ ---------- ------------
<S> <C> <C> <C>
Future cash inflows................... $ 96,738 $ 31,180 $24,220
Future production costs............... (34,093) (11,462) (7,667)
Future development costs.............. (7,738) (402) (127)
-------- -------- -------
Future net cash flows................. 54,907 19,316 16,426
10% discount factor................... (17,616) (7,272) (5,907)
-------- -------- -------
Standardized measure of
discounted future net
cash flows.......................... $ 37,291 $ 12,044 $10,519
======== ======== =======
</TABLE>
The following are the principal sources of change in the standardized measure of
discounted future net cash flows:
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Standardized measure -
beginning of year................... $ 12,044 $ 10,519 $13,527
Sales, net of production costs........ (5,651) (2,412) (2,243)
Purchases of reserves in-place........ 162 566 1,061
Reserves received in Mergers.......... 34,039 3,598 ---
Net change in prices and
production costs..................... (8,326) (1,500) 1,488
Extensions, discoveries and improved
recovery, net of future production
and development costs............... 5,085 --- 16
Changes in estimated future
development costs.................... (3,148) (163) 45
Development costs incurred during
the period........................... (629) 644 697
Revisions of quantity estimates....... (4) (194) (3,022)
Accretion of discount................. 1,204 1,052 1,353
Sales of reserves in-place............ (5) --- (10)
Changes in production rates and
other................................ 2,520 (66) (2,393)
-------- -------- -------
Standardized measure -
end of year.......................... $ 37,291 $ 12,044 $10,519
======== ======== =======
</TABLE>
44
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
-------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
On June 13, 1994 the Company replaced the firm of KPMG Peat Marwick LLP ("KPMG")
as the Company's principal independent accountants responsible for auditing all
of the Company's financial statements. The decision to make this change was
influenced by the merger of the Company with Associated Gas Resources, Inc. on
December 31, 1993, which was audited by the firm of Deloitte & Touche LLP. The
Company does not and has not during the past two years had any disagreements
with KPMG concerning their audit opinion or the application of accounting
principles according to GAAP.
Part III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
Incorporated by reference to the Proxy Statement for the 1995 Annual Meeting of
Shareholders, November 17, 1995, pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
Incorporated by reference to the Proxy Statement for the 1995 Annual Meeting of
Shareholders, November 17, 1995, pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------
Incorporated by reference to the Proxy Statement for the 1995 Annual Meeting of
Shareholders, November 17, 1995, pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
Incorporated by reference to the Proxy Statement for the 1995 Annual Meeting of
Shareholders, November 17, 1995, pursuant to Regulation 14A.
Part IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------
(a) (1) and (2) Financial Statements and Financial Statement Schedules. See
-------------------------------------------------------
Item 8 of this Report.
3. Exhibits
3.1 Articles of Incorporation and By-Laws were filed with Registration
Statement No. 2-69325 which is incorporated herein by reference.
45
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
3.2 Amendment to the Articles of Incorporation - incorporated by
reference to Exhibit 3.1 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993
3.3 Articles of Amendment to the Articles of Incorporation dated
August 29, 1987 - incorporated by reference to Exhibit 3.1 to the
six months period ended June 30, 1987.
3.4 Articles of Amendment to the By-Laws of the Company dated May 24,
1989 - incorporated by reference to Exhibit 3.4 to the Company's
Report on Form 10-K for the fiscal year ended June 30, 1989.
3.5 Certificate of Incorporation of Bellwether Exploration Company-
Incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement No. 33-76570.
3.6 By-laws of Bellwether Exploration company - Incorporated by
reference to Exhibit 3.2 to the Company's Registration Statement
No. 33-76570.
4.1 Loan Agreement dated January 12, 1986 between Bracewell
Development Corporation and four institutional investors -
incorporated by reference to Exhibit 4.1 to the Company's Report
on Form 8-K dated January 23, 1986.
10.1 1988 Non-qualified Stock Option Plan - incorporated by reference
to Exhibit 10.37 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1988.
10.2 Stock Option Agreement dated March 25, 1988 between the Company
and J. Darby Sere' - incorporated by reference to Exhibit 10.38 to
the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1988.
10.3 Participation Agreement dated February 16, 1989 between the
Company and Andrews Oil & Gas, Inc - incorporated by reference to
Exhibit 10.20 to the Company's Report on Form 10-K for the fiscal
year ended June 30, 1989.
10.4 Agreement dated March 16, 1989 between the Company and O'Sullivan
& Scully, Inc. regarding the purchase of three oil and gas leases
in the N.W. Panther Reef Field, Calhoun County, Texas -
incorporated by reference to Exhibit 10.22 to the Company's Report
on Form 10-K for the fiscal year ended June 30, 1989.
10.5 Amended and restated credit agreement dated July 30, 1993 to the
Credit Agreement between the Company and First Interstate Bank of
Texas, N.A. -incorporated by reference to Exhibit 10.93.7 to the
Company's Report on Form 8-K dated July 29, 1993.
10.6 Management agreement with Torch Energy Advisors Incorporated
commencing January 1, 1994 - incorporated by reference to
46
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
Exhibit 94-10-3 to the Company's Report on Form 10-Q for the
quarter ended March 31, 1994.
10.7 Loan agreement with bank dated March 14, 1994, amending previous
loan agreements - incorporated by reference to Exhibit 94.10.2 to
the Company's Report on Form 10-Q for the quarter ended March 31,
1994.
10.8 Amended Joint Venture Agreement dated July 29, 1993 between the
Company and NGL Associates - Incorporated by reference to Exhibit
10.93.5 to the Company's Report on Form 10-K dated July 29, 1993.
10.9 Amended Joint Venture dated July 15, 1993 between Torch Energy
Marketing, Inc. and NGL Associates - Incorporated by reference to
Exhibit 10.93.8 to the Company's report on Form 8-K dated December
31, 1993.
10.10 Agreement and Plan of Merger dated December 15, 1993 among the
Company, BEC Acquisitions, Inc. and Associated Gas Resources,
Inc. - Incorporated by reference to Exhibit 10.93.7 to the
Company's Report on Form 8-K dated December 31, 1993.
10.11 Purchase and Sale Agreement dated December 27, 1993 between Torch
Energy Marketing, Inc. and Associated Gas Resources, Inc. -
Incorporated by reference to Exhibit 10.93.9 to the Company's
Report on Form 8-K dated December 31, 1993.
10.12 Registration Rights Agreement dated December 31, 1993 among the
Company and the Stockholders of Associated Gas Resources, Inc. -
Incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement No. 33-76570.
10.13 1994 Stock Incentive Plan - Incorporated by reference to Exhibit
10.9 to the Company's Registration Statement No. 33-76570.
10.14 Torch Energy Warrant to Purchase Common Stock of the Company,
dated December 31, 1993 - Incorporated by reference to Exhibit
10.10 to the Company's Registration Statement No. 33-76570.
10.15 Amendment dated March 14, 1994 to the Amended Joint Venture
Agreement dated as of July 29, 1993 between the Company and NGL
Associates-Incorporated by reference to Exhibit 10.11 to the
Company's Registration Statement No. 33-76570.
10.16 Amendment dated March 14, 1994 to the Amended Joint Venture
Agreement dated as of July 15, 1993 between Torch Energy
Marketing, Inc. and NGL Associates - Incorporated by reference to
Exhibit 10.12 to the Company's Registration Statement No. 33-
76570.
10.17 Asset Purchase and Merger Agreement with Odyssey Partners, Ltd.
dated July 19, 1994 - Incorporated by reference to Exhibit 2.1 to
the Company's Registration Statement No. 33-76570.
47
<PAGE>
BELLWETHER EXPLORATION COMPANY
------------------------------
10.18 Registration Rights Agreement among the Company, Allstate
Insurance Company and the former owners of Odyssey Partners, Ltd.
- Incorporated by reference to Exhibit 10.4 to the Company's
Registration Statement No. 33-76570.
10.19 On February 2, 1995 the Company filed a Registration Statement on
Form S-4 with the Securities and Exchange Commission registering a
maximum of 1,604,253 shares of the Company's common stock to be
issued in conjunction with the merger with Hampton Resources
Corporation.
10.20 On April 18, 1995 the Company filed a Registration Statement on
Form S-8 with the Securities and Exchange Commission for the
registration of 131,325 shares of the Company's common stock to be
issued in connection with the Company's 1988 Non-Qualified Stock
Option Plan.
10.21 On April 18, 1995 the Company filed a Registration Statement on
Form S-8 with the Securities and Exchange Commission for the
registration of 825,000 shares of the Company's common stock to be
issued in connection with the Company's 1994 Stock Incentive Plan.
10.22 On March 15, 1995 the Company filed Amendment No. 6 to its
Schedule 13D reporting its acquisition of the common stock of
Hampton Resources Corporation. Exhibit N, filed with the Schedule
13D, is an Amended and Restated Credit Agreement dated February
28, 1995, between the Company and First Interstate Bank of Texas
N.A.
16.1 Letter from predecessor auditors regarding change in certifying
accountant - Incorporated by reference to Exhibit 16.1 to the
Company's Form 8K/A-1 dated June 30, 1994.
21.1 Subsidiaries of Bellwether Exploration Company - Included
herewith.
23 Consents of experts:
23.1 Consent of Williamson Petroleum Consultants, Inc.
23.2 Consent of R.T. Garcia & Co. Inc.
23.3 Consent of Cawley, Gillespie & Associates, Inc.
23.4 Consent of Deloitte & Touche LLP
23.5 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
(b) The Company filed Form S-1 with the Securities and Exchange Commission
on July 20, 1994 to register shares of the Company's common stock for
sale and to report the merger of Odyssey Partners, Ltd. which was
contingent on and effective with the successful conclusion of the
Company's stock offering on August 26, 1994.
The Company filed Form 8-K on June 17, 1994 and Form 8-K/A-1 on June 30,
1994 reporting a change in the Company's certifying accountant.
48
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Company and in the
capacities and on the dates indicated.
BELLWETHER EXPLORATION COMPANY
/s/ J. Darby Sere'
------------------------------
J. Darby Sere'
President and Chief Executive
Officer
Dated September 21, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
/s/ J. Darby Sere' Director, President September 21, 1995
------------------------------- ------------------
J. Darby Sere' and Chief Executive
Officer
/s/ J.P. Bryan Chairman of Board of September 21, 1995
------------------------------- ------------------
J.P. Bryan Directors
/s/ Charles C. Green Vice President September 21, 1995
------------------------------- ------------------
Charles C. Green
/s/ James M. Vanderhider Vice President, Chief September 21, 1995
------------------------------- ------------------
James M. Vanderhider Financial Officer and
Principal Accounting Officer
/s/ Vincent H. Buckley Director September 21, 1995
------------------------------- ------------------
Vincent H. Buckley
/s/ A. K. McLanahan Director September 21, 1995
------------------------------- ------------------
A. K. McLanahan
_______________________________ Director ------------------
Dr. Jack Birks
/s/ Michael D. Watford Director September 21, 1995
------------------------------- ------------------
Michael D. Watford
/s/ C. Barton Groves Director September 21, 1995
------------------------------- ------------------
C. Barton Groves
/s/ Habib Kairouz Director September 21, 1995
------------------------------- ------------------
Habib Kairouz
</TABLE>
49
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF BELLWETHER EXPLORATION COMPANY
State of Incorporation
----------------------
Bellwether Exploration Company Delaware
Bellwether Exploration Company Colorado
Arkansas Bellwether, Inc. Texas
Snyder Gas Plant Venture Texas
Associated Gas Resources, Inc. Texas
Gas Operations, Inc. Louisiana
West Monroe Gas Gathering Corporation Louisiana
NGL - Torch Gas Plant Venture Texas
Odyssey Petroleum Company Delaware
Hampton Resources Corporation Delaware
Cross Bell Royalty Company Texas
Hampton Operating Company Texas
Spectrum 7 Energy Corporation Colorado
<PAGE>
EXHIBIT 23.1
WILLIAMSON Petroleum Consultants, Inc.
CONSENT OF WILLIAMSON PETROLEUM CONSULTANTS, INC.
As independent oil and gas consultants, Williamson Petroleum Consultants,
Inc. hereby consents to (a) the use of our reserve report entitled
"Evaluation of Oil and Gas Reserves to the Interests of Bellwether
Exploration Company in Certain Properties, Effective June 30, 1995, for
Disclosure to the Securities and Exchange Commission, Williamson Project
5.8286" dated August 30, 1995 and (b) all references to our firm included
in or made a part of the Bellwether Exploration Company Annual Report on
Form 10-K to be filed with the Securities and Exchange Commission on or
about September 21, 1995.
/s/ Williamson Petroleum Consultants, Inc.
WILLIAMSON PETROLEUM CONSULTANTS, INC.
Houston, Texas
September 20, 1995
<PAGE>
EXHIBIT 23.2
[LOGO OF R. T. GARCIA & CO. INC. APPEARS HERE]
September 14, 1995
We do hereby grant consent to Bellwether Exploration Company for the
reference to, or the inclusion of, our Reserve Reports for Associated Gas
Resources, Inc. for the fiscal years ending June 30th 1995, June 30th 1994 and
June 30th 1993, in the Bellwether Exploration Company Form 10-K annual reports.
R. T. GARCIA & CO., INC.
/s/ Raymond T. Garcia, P.E.
Raymond T. Garcia, P.E.
President
<PAGE>
EXHIBIT 23.3
[LETTER HEAD OF CAWLEY, GILLESPIE & ASSOCIATES, INC. APPEARS HERE]
CONSENT OF INDEPENDENT PETROLEUM ENGINEER
We hereby grant consent to Bellwether Exploration Company for the
reference to, or the inclusion of, our Reserve Reports for The Alabama Ferry
North Unit for the fiscal years ended June 30, 1994 and 1993 in the Bellwether
Exploration Company Form 10-K annual reports.
/s/ Cawley, Gillespie & Associates, Inc.
-----------------------------------
CAWLEY, GILLESPIE & ASSOCIATES, INC.
FORTWORTH, TEXAS
September 14, 1995
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in these Registration Statements
Nos. 33-91320 and 33-91326 of Bellwether Exploration Company and subsidiaries on
Form S-8 of our report dated August 25, 1995, appearing in this Annual Report on
Form 10-K of Bellwether Exploration Company and subsidiaries for the year ended
June 30, 1995.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Houston, Texas
September 21, 1995
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Bellwether Exploration Company:
We consent to incorporation by reference in the registration statements (No.
33-91320 and No. 33-91326) on Form S-8 of Bellwether Exploration Company of our
report dated September 10, 1993, relating to the consolidated statements of
operations, stockholders' equity, and cash flows for the year ended June 30,
1993, which report appears in the June 30, 1995 annual report on Form 10-K of
Bellwether Exploration Company.
KPMG Peat Marwick LLP
Houston, Texas
September 21, 1995
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<PAGE>
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<MULTIPLIER> 1,000
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 1,088
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<TOTAL-ASSETS> 74,650
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0
0
<OTHER-SE> 45,357
<TOTAL-LIABILITY-AND-EQUITY> 74,650
<SALES> 19,212
<TOTAL-REVENUES> 19,309
<CGS> 8,934
<TOTAL-COSTS> 14,203
<OTHER-EXPENSES> 2,739
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<INTEREST-EXPENSE> 1,245
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