<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
------- Exchange Act of 1934
For the quarter ended March 31, 1995
or
Transition Report Pursuant to Section 13 or 15 (d) of the
------- Securities Exchange Act of 1934 {No Fee Required}
For the Transition Period From to
---------- ----------
Commission file number 0-9498
BELLWETHER EXPLORATION COMPANY
(Exact name of registrant as specified in its charter)
Delaware 74-0437769
(State of incorporation) (I.R.S. Employer Identification No.)
1221 Lamar, Suite 1600, Houston, Texas 77010-3039
(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:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- - - - ---------------------------- ---------------------
Common Stock, $ 01 par value NASDAQ
Securities registered pursuant to Section 12(g) of the Act: None
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
--- ----
At May 8, 1995 9,045,479 shares of Common Stock of Bellwether Exploration
Company were outstanding and the aggregate market value of such Common Stock
held by nonaffiliates (based upon the closing price of the stock on such date)
was approximately $36,257,000.
================================================================================
1
<PAGE>
BELLWETHER EXPLORATION COMPANY
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION: Page
-------
<S> <C> <C>
Item 1. Consolidated Financial Statements......................
Balance Sheets
March 31, 1995 (Unaudited) and
June 30, 1994.......................................... 3
Statements of Earnings (Unaudited)
For the Three and Nine Month Periods
Ended March 31, 1995 and 1994.......................... 4
Statements of Cash Flows (Unaudited)
for the Three and Nine Month Periods
Ended December 31, 1995 and 1994....................... 5
Notes to Financial Statements.......................... 6 - 10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations.......................................... 10 - 17
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote
of Security Holders.................................... 17
Item 5. Other Information...................................... 17 - 18
Item 6. Exhibits and Reports on Form 8-K....................... 18
SIGNATURES 18
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, June 30,
ASSETS 1995 1994
---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,470,981 $ 1,452,507
Accounts receivable and accrued revenues 5,624,807 2,798,943
Prepaid expenses 376,406 67,714
------------ ------------
Total current assets 9,472,194 4,319,164
------------ ------------
Property, plant and equipment:
Oil and gas properties (full cost method) 70,576,304 29,749,228
Investment in gas plants 13,029,417 12,962,220
Gas gathering system 5,978,177 5,873,221
------------ ------------
89,583,898 48,584,669
Less accumulated depletion, depreciation and
amortization (21,282,952) (17,979,148)
------------ ------------
Net property, plant and equipment 68,300,946 30,605,521
------------ ------------
Other assets 862,884 945,802
------------ ------------
Total assets $ 78,636,024 $ 35,870,487
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 3,192,411 $ 2,744,846
Current maturities of notes payable 7,061,583 1,823,160
------------ ------------
Total current liabilities 10,253,994 4,568,006
------------ ------------
Notes payable to bank 20,460,000 12,796,503
------------ ------------
Deferred income taxes 2,400,000 -
------------ ------------
Minority interest in gas plant ventures 215,611 134,272
------------ ------------
Stockholders' equity
Preferred stock, $0.01 par value per share,
1,000,000 shares authorized, none issued - -
Common stock, $0.01 par value, 15,000,000
shares authorized, 9,045,479 shares
issued and outstanding at March 31, 1995
and 3,722,322 shares issued and
outstanding at June 30, 1994 90,455 37,374
Additional paid-in capital 41,471,210 15,489,348
Retained earnings 3,744,754 2,944,162
Less treasury stock at cost; none at
March 31, 1995 and 15,048 common shares
at June 30, 1994 - (99,178)
------------ ------------
Total stockholders' equity 45,306,419 18,371,706
------------ ------------
Total liabilities and stockholders' equity $ 78,636,024 $ 35,870,487
============ ============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
------------------------ ------------------------
1995 1994 1995 1994
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $2,242,663 $ 993,791 $ 4,883,578 $2,696,329
Gas Plant revenues 1,300,535 1,411,457 4,283,944 2,902,471
Gas gathering revenues 1,228,799 1,179,224 3,761,416 1,179,224
Interest and other
income 10,766 22,262 36,648 34,239
---------- ----------- ----------- ----------
Total revenues 4,782,763 3,606,734 12,965,586 6,812,263
---------- ----------- ----------- ----------
Expenses:
Production expenses 737,532 370,919 1,655,291 923,016
Gas Plant expenses 669,356 734,244 2,234,877 1,425,840
Gas gathering expenses 707,187 790,199 2,328,099 790,199
Depreciation,
depletion and
amortization 1,335,468 824,353 3,301,403 1,667,188
General and
administrative 757,042 365,972 1,816,606 861,958
Interest expense 338,431 247,269 694,887 506,477
---------- ----------- ----------- ----------
Total expenses 4,545,016 3,332,956 12,031,163 6,174,678
---------- ----------- ----------- ----------
Earnings before minority
interest 237,747 273,778 934,423 637,585
Minority interests in Gas
Plant Ventures 39,204 96,660 133,832 98,660
---------- ----------- ----------- ----------
Net earnings $ 198,543 $ 177,118 $ 800,591 $ 538,925
========== =========== =========== ==========
Earnings per common share $0.02 $0.05 $0.11 $0.19
----- ----- ----- -----
Average common shares
outstanding 8,385,690 3,721,826 7,270,645 2,764,822
========== =========== =========== ==========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31. March 31.
-------------------------------- --------------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES:
Net earnings $ 198,543 $ 177,118 $ 800,591 $ 538,925
Adjustments to reconcile
net earnings to net
cash provided by
operating activities:
Depreciation,
depletion and
amortization 1,368,478 830,766 3,386,022 1,682,424
Minority interest in
gas plant ventures 31,573 94,814 81,339 86,213
Changes in assets and
liabilities:
Accounts receivable
and accrued revenues 2,108,936 1,208,233 1,494,015 (166,239)
Prepaid expenses (19,412) 49,573 (41,674) (33,369)
Accounts payable and
accrued expenses (9,071) 286,380 (2,044,334) 1,807,587
Other assets 221,818 (212,369) 123,755 (378,092)
------------ ------------ ------------ ------------
Net cash flows
provided by
operating activities 3,900,865 2,434,515 3,799,714 3,537,449
------------ ------------ ------------ ------------
CASH FLOWS USED IN
INVESTING ACTIVITIES:
Additions to oil and gas
properties (531,069) (337,768) (2,464,212) (1,154,747)
Additions to gas plants (19,351) (115,973) (67,197) (7,710,901)
Additions to gas
gathering system (28,074) (401) (104,956) (401)
Cash paid for acquisition
of Odyssey - - (5,714,628) -
Net cash paid for
acquisition of Hampton (18,185,849) - (18,185,849) -
Investment in energy
related securities 2,606,570 - - -
Additions to office
furniture and automobiles - - (21,185) (1,213)
Proceeds from sale of oil
and gas properties - - 79,812 32,897
Investment in mining
venture - - (17,370) (19,980)
------------ ------------ ------------ ------------
Net cash flows used in
investing activities (16,157,773) (454,142) (26,495,585) (8,854,345)
------------ ------------ ------------ ------------
CASH FLOWS PROVIDED BY
(USED IN)
FINANCING ACTIVITIES:
Proceeds from bank loans 15,300,000 21,152 20,335,000 8,471,152
Repayment of bank loans (913,417) (240,000) (12,958,080) (789,156)
Net proceeds (costs) from
stock offering (2,419) 15,823 17,337,425 15,823
------------ ------------ ------------ ------------
Net cash flows
provided by financing
activities 14,384,164 (203,025) 24,714,345 7,697,819
------------ ------------ ------------ ------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 2,127,256 1,777,348 2,018,474 2,380,923
Cash and cash equivalents
at beginning of period 1,343,725 1,022,763 1,452,507 419,188
------------ ------------ ------------ ------------
Cash and cash equivalents
at end of period $ 3,470,981 $ 2,800,111 $ 3,470,981 $ 2,800,111
============ ============ ============ ============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
BELLWETHER EXPLORATION COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
The financial statements include the accounts of Bellwether Exploration Company
(the "Company") and its majority owned subsidiaries. These statements have been
prepared in accordance with the instructions to Form 10-Q and do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements.
In the opinion of management, the financial statements include all material
adjustments, which consist only of normal recurring adjustments necessary for a
fair presentation of the Company's financial position, results of operations and
cash flows. The results for these interim periods are not necessarily
indicative of results for the entire year.
Oil and Gas Properties
The Company uses the full cost method of accounting for exploration and
development activities. Under this method of accounting, the costs of
unsuccessful as well as successful exploration and development activities are
capitalized as properties and equipment.
The sum of net capitalized costs and estimated future development and
dismantlement costs is amortized over the production of proved reserves using
the unit of production method. The costs of unproved properties are excluded
from amortization until the properties are evaluated. Should the net
capitalized costs exceed the estimated present value of future cash inflows from
proved oil and gas reserves reduced by operating expenses and future development
expenditures, such excess costs would be charged to current operations. Gain or
loss on the sale or other disposition of oil and gas properties are not
recognized unless a significant amount of the Company's oil and gas reserves are
involved.
Gas Plants and Gas Gathering Facilities
The Company computes the provision for depreciation of gas plants and gas
gathering facilities on the straight-line method based on estimated useful lives
of 15 years.
(2) INCOME TAXES
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.
6
<PAGE>
Under Statement 109, deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
At June 30, 1994 the Company had net operating loss carryforwards for income tax
purposes of approximately $12.6 million and no loss carryforwards for financial
reporting purposes.
(3) TRANSACTIONS WITH RELATED PARTIES
The Company has a management agreement (the "Agreement") with Torch Energy
Advisors Incorporated ("TEAI"), an affiliate of Black Hawk Oil Company (a
Bellwether stockholder) pursuant to which the Company's administrative and
management services are provided by TEAI. The agreement was last amended on
January 1, 1994 and it expires on December 31, 1999. Pursuant to the terms of
the Agreement, during the three and nine months periods ended March 31, 1995,
$290,000 and $778,000, respectively, were charged to the Company under this
agreement and during the same periods ended March 31, 1994, $207,000 and
$446,000 respectively were charged.
Torch Operating Company ("TOC") and Torch Energy Marketing, Inc. ("TEMI"),
subsidiaries of TEAI receive revenues and disburse production expenses for the
Company, and TEAI disburses general and administrative costs on behalf of the
Company. Included in accounts receivable at March 31, 1995 is the excess of oil
and gas revenues received by TOC and TEMI over production expenses and
operational costs paid by them. Accounts payable includes the accrued general
and administrative costs to be paid to TEAI. All receivable and payable
balances with affiliated companies are settled on a monthly basis.
(4) NOTES PAYABLE TO BANK
The Company executed a loan agreement on February 28, 1995 with an initial
borrowing base of $29.8 million, of which $21.4 million corresponds to Facility
A, a revolving line of credit, and $8.4 million corresponds to Facility B, a
declining revolving line of credit. These loans are secured by the Company's
interests in oil and gas properties and in its gathering system and gas
processing plants. The maturity date for both facilities is March 31, 1999. The
interest rate is either the Bank's Prime Rate or the adjusted Eurodollar Rate
plus 1 3/4% at the Company's option and a commitment fee of three-eighths of one
percent (0.375%) per annum is charged on the unused portion of the Credit
Commitment. The Eurodollar interest rate at March 31, 1995 was 7.9375%.
7
<PAGE>
Loan maturities by fiscal year are as follows:
<TABLE>
<CAPTION>
<S> <C>
Year ending June 30, 1996 $ 8,815,000
Year ending June 30, 1997 7,490,000
Year ending June 30, 1998 6,745,000
Year ending June 30, 1999 4,300,000
-----------
$27,350,000
===========
</TABLE>
Prior to the execution of the new loan agreement the Company had outstanding
loans of $9.0 million with the same lending institution. These loans were
incorporated into the new loan agreement. On February 28, 1995 the Company drew
$4.1 million against the new credit facility to pay off the existing bank debt
of Hampton Resources Corporation and on March 1, the Company drew an additional
$15.3 million to use in purchasing Hampton stock in conjunction with the merger
which took place on February 28, 1995. On March 31, 1995 the Company made a
loan repayment of $900,000, leaving loans payable of $27.5 million at that time.
The loan 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 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.
A copy of the new credit agreement was filed with the Securities and Exchange
Commission on March 15, 1995 as Exhibit N to Amendment No. 6 to the Company's
Schedule 13D, and it is incorporated herein by reference.
(5) ACQUISITIONS AND PRO FORMA FINANCIAL INFORMATION
On July 30, 1993 the Company acquired certain interests in the Snyder Gas Plant
and the Diamond M Sharon Ridge Gas Plant (the "Gas Plants"), both in Scurry
County, Texas, for a purchase price of $8.45 million.
On December 31, 1993 Associated Gas Resources, Inc. ("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 $231,878. AGRI's principal assets are a gas
gathering system located in Union Parish, Louisiana; a 4.12% interest in the
Snyder Gas Plant; a 12.52% interest in the Diamond M Sharon Ridge Gas Plant
("Diamond M Gas Plant"); small non-operated working interests in approximately
137 gas wells in Oklahoma; and operated working interests in approximately 795
gas wells in Union Parish, Louisiana.
On August 26, 1994 the Company acquired Odyssey Partners, Ltd. ("Odyssey") in
exchange for $5.6 million in cash (funded from the
8
<PAGE>
Offering which closed on the same date) and 916,665 shares of the Company's
common stock. 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 US Gulf Coast region and the Permian Basin area of West Texas
and Southeast New Mexico.
On February 28, 1995 the Company acquired Hampton Resources Corporation
("Hampton") in exchange for $17.0 million in cash (funded from the new loan
agreement dated February 28, 1995) and 1,006,458 shares of the Company's common
stock which were valued at $4.8125 (average of high and low quotations on the
NASDAQ exchange on February 28, 1995) per share for a total stock valuation of
$4.8 million. The Company had previous to the merger paid $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.
The following table presents the unaudited pro forma results of operations as if
the Odyssey merger, the Offering of 3,400,000 shares of the Company's common
stock and the Hampton merger had all occurred on July 1 of the period presented.
The acquisitions 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 necessarily indicative of the Company's results of
operations had the transactions occurred as of July 1 of the period presented,
or those in the future (in thousands, except earnings per share).
<TABLE>
<CAPTION>
Nine Months Ended March 31,
---------------------------
1995 1994
-------- --------
<S> <C> <C>
Revenues $ 18,404 $ 18,330
Expenses 17,964 16,728
-------- --------
Earnings before minority
interest and income taxes 440 1,602
Minority interest 134 107
-------- --------
Net earnings $ 306 $ 1,495
======== ========
Net earnings per common share $0.03 $0.17
</TABLE>
9
<PAGE>
(7) INDUSTRY SEGMENT INFORMATION
Prior to fiscal 1994 all of the Company's operations were in the exploration and
production of crude oil and natural gas. Effective August 1, 1993 the Company
acquired interests in two natural gas processing plants, and on December 31,
1993, the Company acquired a gas gathering system and additional interests in
the two gas plants through a merger. The results of operations of these
business segments for the nine months ended March 31, 1995 and 1994 are as
follows (in thousands):
<TABLE>
<CAPTION>
For the Nine Months Ended
-------------------------
March 31, March 31,
1995 1994
--------- ---------
<S> <C> <C>
Revenues
Oil and gas $ 4,884 $2,696
Gas plants 4,284 2,902
Gas gathering 3,761 1,179
Other revenues 37 35
------- ------
Total revenues $12,966 $6,812
======= ======
Operating profit before income tax
Oil and gas $ 959 $ 646
Gas plants 1,255 923
Gas gathering 1,062 303
------- ------
3,276 1,872
Unallocated corporate expenses 1,780 827
Interest expense 695 506
------- ------
Income before taxes $ 801 $ 539
======= ======
Depreciation, depletion and
amortization:
Oil and gas $ 2,269 $1,127
Gas plants 661 454
Gas gathering 371 86
------- ------
$ 3,301 $1,667
======= ======
</TABLE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Management believes, based on current cash flow projections, that the Company
will generate sufficient funds from operations to allow it to pay all current
liabilities as they become due and to
10
<PAGE>
maintain current operations.
The Company executed a new loan agreement on March 14, 1994 with a borrowing
base of $17.9 million, of which $8.2 million corresponds to Facility A, a
revolving line of credit, and $9.7 million corresponds to Facility B, a
declining revolving line of credit. These loans are secured by the Company's
interests in oil and gas properties and in its gas gathering system and gas
processing plants. The maturity dates are March 31, 1998 for the Facility A
loan and September 30, 1999 for the Facility B loan. The interest rate is
either the Bank's Prime Rate or the adjusted Eurodollar Rate plus 1 3/4% at the
Company's option, and a commitment fee of three-eighths of one percent (0.375%)
per annum is charged on the unused portion of the Credit Commitment. The
outstanding loan principal balance at December 31, 1994 was $9.0 million. The
Eurodollar interest rate, including the 1 3/4% add-on, was 8.125% at December
31, 1994.
On August 26, 1994, the Company acquired certain of the assets of Odyssey
Partners, Ltd. Odyssey was a privately held, independent exploration company
which assembled, exploited and operated 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 US Gulf Coast region and the
Permian Basin area of West Texas and Southeast New Mexico.
The offering of 3,400,000 shares of the Company's common stock generated cash
proceeds of $18.1 million, which were received on August 26, 1994. On the same
date, $5.6 million of these proceeds was used to pay for the acquisition of
Odyssey, $10.6 million was used to pay down the Company's debt and $1.4 million
was used to repay the outstanding bank loan of Odyssey. In the last four months
of 1994 the Company made additional loan drawings of $5.1 million, $2.7 million
of which was used to purchase equity shares of Hampton Resources Corporation
("Hampton") and $2.4 million was used to fund Odyssey's interest in the Fausse
Point (Etouffee) 3-D Project, three exploratory wells and one development well.
At December 31, 1994, the Company's debt principal was $9.0 million and the
unused portion of the bank credit commitment was $5.9 million. The remaining
credit facility was available to develop the prospects acquired in the merger
with Odyssey.
The Company consummated a merger with Hampton Resources Corporation on February
28, 1995. In this regard the Company has acquired all of the outstanding common
and preferred stock of Hampton on that date at a total cost of $17.0 million in
cash plus 1,006,458 shares of Bellwether common stock. The cash payments to
Hampton shareholders was financed by new bank loans which were effective
February 28, 1995.
On February 28, 1995 the Company signed the Third Amended and Restated Credit
Agreement with First Interstate Bank of Texas N.A.
11
<PAGE>
increasing the borrowing base from $17.9 million to $29.8 million. The terms of
the amended agreement were the same as for the prior agreement, except that both
of the loan facilities mature on March 31, 1999. On February 28, 1995 the
Company drew $4.1 million to pay off the outstanding bank loan of Hampton and in
March the Company paid $17.0 million to Hampton's stock transfer agent for
distribution to Hampton shareholders in exchange for their Hampton common and
preferred stock. Prior to signing the amended loan agreement the Company's
outstanding bank loans totaled $9.0 million. These balances were rolled into the
new loan agreement and additional loans were drawn on February 28 ($4.1 million)
and March 1 ($15.3 million) and on March 31 the Company repaid $900,000, leaving
loan balances of $27.5 million at March 31, 1995.
The current maturities of these notes are as follows:
<TABLE>
<CAPTION>
<S> <C>
Due June 30, 1995 $ 171,583
Due September 30, 1995 2,300,000
Due December 31, 1995 2,300,000
Due March 31, 1996 2,290,000
----------
Total current maturities $7,061,583
==========
</TABLE>
RESULTS OF OPERATIONS
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THE THREE
MONTHS ENDED MARCH 31, 1994
OIL AND GAS OPERATIONS:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------ Increase
1995 1994 <Decrease>
---------- ---------- ----------
<S> <C> <C> <C>
Sales volume:
Oil - barrels 51,984 17,138 34,846
Gas - MCF 720,434 368,063 352,371
Average sales prices:
Oil - per barrel $ 17.26 $ 12.72 $ 4.54
Gas - per MCF $ 1.87 $ 2.11 $ <$0.24>
Sales revenue:
Oil $ 897,139 $ 217,935 $ 679,204
Gas 1,345,524 775,856 569,668
---------- ---------- ----------
Total oil and gas
revenues 2,242,663 993,791 1,248,872
Production expenses 737,532 370,919 366,613
---------- ---------- ----------
Operating income $1,505,131 $ 622,872 $ 882,259
========== ========== ==========
Depletion, per net
equivalent barrel $ 5.73 $ 6.60 <$0.87>
</TABLE>
12
<PAGE>
Six MCF of gas equals one Net Equivalent Barrel (NEB).
The increase in oil sales volume of 34,846 barrels (203.3%) was due to sales of
20,000 barrels by Odyssey, which was acquired in a merger on August 26, 1994 and
20,000 barrels by Hampton, which was acquired on February 28, 1995. Most other
oil wells are experiencing natural production declines. The net increase in oil
sales volume has accounted for higher sales revenue of approximately $443,000 in
the current quarter compared to the same quarter last year.
The increase in gas sales volume of 352,371 MCF (95.7%) was due to sales of
269,000 MCF by Odyssey and 207,000 MCF by Hampton. Most other gas producing
wells are experiencing natural production declines. The net increase in gas
sales volume has accounted for higher sales revenue of approximately $743,000 in
the current quarter compared to the same quarter last year.
The average oil sales price increased by $4.54 per barrel (35.7%) in the current
quarter, which has accounted for higher sales revenue of $236,000 in the current
quarter compared to the same quarter last year.
The average gas sales price decreased by $0.24 per MCF(11.4%) in the current
quarter, which has accounted for lower sales revenue of $173,000 in the current
quarter compared to the same quarter last year.
GAS PLANT OPERATIONS:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------ Increase
1995 1994 <Decrease>
---------- ---------- -----------
<S> <C> <C> <C>
Product sales volume -
gallons 3,626,742 5,101,645 <1,474,903>
Average sales price per
gallon $0.29 $0.24 $0.05
Revenues:
Sales of NGL products $1,062,478 $1,241,190 <$178,712>
Residual gas sales 98,639 - 98,639
Processing fees 139,418 170,267 <30,849>
---------- ---------- -----------
Total Gas plant revenues 1,300,535 1,411,457 <110,922>
Operating expenses 669,356 734,244 <64,888>
---------- ---------- -----------
Income from operations 631,179 677,213 <46,034>
Depreciation 224,000 221,180 2,820
Minority Interest 39,204 96,660 <57,456>
---------- ---------- -----------
Operating income $ 367,975 $ 359,373 $ 8,602
========== ========== ===========
</TABLE>
13
<PAGE>
The decrease in NGL product sales volume of 1,474,903 gallons (28.9%) was due
to: (1) a decline in gas volume produced by the SACROC Unit because of a change
in the ratio of carbon dioxide injection versus water injection in the field,
and (2) allocations of gas processed by the Diamond M-Sharon Ridge Gas Plant, in
which the Company owns three times the interest that it owns in the Snyder Gas
Plant, were 72% higher during the quarter ended March 31, 1994 in order to make
up on the imbalance that existed at the time the Company acquired its interest
in the gas plants.
The Gas Plant investments are being depreciated over 15 years using the straight
line method.
GAS GATHERING OPERATIONS (THESE OPERATIONS WERE ACQUIRED IN THE AGRI MERGER ON
DECEMBER 31, 1993):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------ Increase
1995 1994 <Decrease>
---------- ---------- ----------
<S> <C> <C> <C>
Gas gathering revenues $1,228,799 $1,179,224 $ 49,575
Gas gathering expenses 707,187 790,199 <83,012>
Depreciation of gas gathering
facilities 124,468 85,662 38,806
---------- ---------- --------
Operating income $ 397,144 $ 303,363 $ 93,781
========== ========== ========
</TABLE>
The gas gathering facilities are being depreciated over 15 years using the
straight line method.
Depreciation, depletion and amortization expenses increased $511,000 in the
current quarter compared to the same quarter last year. This increase is
attributable to an increase of $470,000 in depletion of oil and gas properties,
and an increase of $40,000 in the depreciation of gas gathering facilities.
The depletion of oil and gas properties increased due to the increase of 94,000
net equivalent barrels sold in the current quarter, partially offset by the
decrease in the depletion rate.
General and administrative ("G&A") expenses have increased by $391,000 in the
current quarter compared to the same quarter last year principally because of an
increase of $83,000 in the management fee paid to TEAI as a result of the
Odyssey and Hampton mergers and the revised method of computing the fee as
specified in the management agreement renegotiated effective January 1, 1994;
$110,000 of expenses incurred by Odyssey's office in Dallas; $131,000 of
expenses incurred by Hampton in March 1995 (Hampton's G & A expenses will end at
April 30, 1995 when all Hampton employees were terminated); and an increase in
insurance expense of $36,000.
14
<PAGE>
OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 1995 COMPARED TO THE NINE MONTHS
ENDED MARCH 31, 1994
OIL AND GAS OPERATIONS:
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
------------------------ Increase
1995 1994 <Decrease>
---------- ---------- ----------
<S> <C> <C> <C>
Sales volume:
Oil - barrels 115,315 53,066 62,249
Gas - MCF 1,683,183 852,422 830,761
Average sales prices:
Oil - per barrel $ 16.51 $ 15.05 $ 1.46
Gas - per MCF $ 1.77 $ 2.23 <$0.46>
Sales revenue:
Oil $1,904,161 $ 798,532 $1,105,629
Gas 2,979,417 1,897,797 1,081,620
---------- ---------- ----------
Total oil and gas
revenues 4,883,578 2,696,329 2,187,249
Production expenses 1,655,291 923,016 732,275
---------- ---------- ----------
Operating income $3,228,287 $1,773,313 $1,454,974
========== ========== ==========
Depletion per net
equivalent barrel $ 5.83 $ 5.78 $ 0.05
</TABLE>
The increase in oil sales volume of 62,249 barrels (117.3%) was due to sales of
51,000 barrels by Odyssey, which was acquired in a merger on August 26, 1994 and
20,000 barrels by Hampton, which was acquired on February 28, 1995. Most other
oil wells are experiencing natural production declines. The increase in oil
sales volume has accounted for higher sales revenue of approximately $937,000 in
the current nine month period compared to the same nine month period last year.
The increase in gas sales volume of 830,761 MCF (97.5%) was due to sales of
605,000 MCF by Odyssey and 207,000 by Hampton and higher sales of 247,000 MCF by
AGRI, which produced for nine months in the current nine month period compared
to only three months in the same period last year; AGRI was acquired on December
31, 1993. Most other gas producing wells are experiencing natural production
declines. The net increase in gas sales volume has accounted for higher sales
revenue of approximately $1,850,000 in the current nine month period compared to
the same nine month period last year.
The average oil sales price increased by $1.46 per barrel (9.7%) in the current
nine month period, which has accounted for higher sales revenue of $169,000 in
the current nine month period compared to the same nine month period last year.
15
<PAGE>
The average gas sales price decreased by $0.46 per MCF(20.6%) in the current
nine month period, which has accounted for lower sales revenue of $768,000 in
the current nine month period compared to the same nine month period last year.
GAS PLANT OPERATIONS:
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-------------------------- Increase
1995 1994 <Decrease>
----------- ----------- ----------
<S> <C> <C> <C>
Product sales volume -
gallons 12,373,556 10,656,701 1,716,855
Average sales price per
gallon $0.28 $0.24 $0.04
Revenues:
Sales of NGL products $ 3,507,096 $ 2,576,602 $ 930,494
Residual gas sales 269,646 - 269,646
Processing fees 507,202 325,869 181,333
----------- ----------- ----------
Total gas plant revenues 4,283,944 2,902,471 1,381,473
Operating expenses 2,234,877 1,425,840 809,037
----------- ----------- ----------
Income from operations 2,049,067 1,476,631 572,436
Depreciation 660,587 454,015 206,572
Minority Interest 133,832 98,660 35,172
----------- ----------- ----------
Operating income $ 1,254,648 $ 923,956 $ 330,692
=========== =========== ==========
</TABLE>
The 1995 Gas Plants activity includes the results for nine months of operations
from interests of 11.98% in the Snyder Gas Plant and 35.78% in the Diamond M Gas
Plant, whereas 1994 activity only includes results for five months for interests
of 7.64% in the Snyder Gas Plant and 23.26% in the Diamond M Gas Plant and three
months for interests of 11.98% in the Snyder and 35.78% in the Diamond M plants.
GAS GATHERING OPERATIONS (THESE OPERATIONS WERE ACQUIRED IN THE AGRI MERGER ON
DECEMBER 31, 1993):
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
------------------------ Increase
1995 1994 <Decrease>
---------- ---------- ----------
<S> <C> <C> <C>
Gas gathering revenues $3,761,416 $1,179,224 $2,582,192
Gas gathering expenses 2,328,099 790,199 1,537,900
Depreciation of gas gathering
facilities 370,816 85,662 285,154
---------- ---------- ----------
Operating income $1,062,501 $ 303,363 $ 759,138
========== ========== ==========
</TABLE>
16
<PAGE>
Depreciation, depletion and amortization expenses increased by $1,634,000 in the
current nine months period compared to the same period last year. This increase
is attributable to an increase of $1,142,000 in depletion of oil and gas
properties, an increase of $207,000 in gas plant depreciation and an increase of
$285,000 in depreciation of gas gathering facilities. The depletion of oil and
gas properties increased mainly due to the increase of 201,000 in net
equivalent barrels sold. The gas plants were acquired on August 1, 1993, and
December 31, 1993, and the gas gathering facilities were acquired in the AGRI
merger on December 31, 1993; both of these assets are being depreciated over
fifteen years on the straight line basis.
General and administrative expenses increased $955,000 in the current nine
months period compared to the same period last year principally due to higher
management fees paid to TEAI ($331,000), expenses incurred by Odyssey's office
in Dallas ($321,000), Hampton G&A expenses ($131,000), and higher insurance
expense ($97,000).
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information
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
share's of the Company's common stock to be issued in conjunction with the
merger with Hampton Resources Corporation.
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.
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.
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.
17
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27 --Financial Data Schedule
(b) The Company filed a report on Form 8-K dated February 28, 1995, reporting
the merger of Hampton Resources Corporation into a wholly-owned subsidiary
of the Company effective February 28, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BELLWETHER EXPLORATION COMPANY
REGISTRANT
DATE: May 12, 1995 /s/ J. Darby Sere'
--------------------------------
J. DARBY SERE', President
DATE: May 12, 1995 /s/ James M. Vanderhider
--------------------------------
JAMES M. VANDERHIDER, Vice President
and Chief Financial Officer
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1995 JUN-30-1995
<PERIOD-START> JAN-01-1995 JUL-01-1994
<PERIOD-END> MAR-31-1995 MAR-31-1995
<CASH> 3,470,981 0
<SECURITIES> 0 0
<RECEIVABLES> 5,624,807 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 9,472,194 0
<PP&E> 89,583,898 0
<DEPRECIATION> (21,282,952) 0
<TOTAL-ASSETS> 78,636,024 0
<CURRENT-LIABILITIES> 12,269,329 0
<BONDS> 0 0
<COMMON> 90,455 0
0 0
0 0
<OTHER-SE> 46,003,077 0
<TOTAL-LIABILITY-AND-EQUITY> 78,636,024 0
<SALES> 3,573,198 9,167,522
<TOTAL-REVENUES> 4,782,763 12,965,586
<CGS> 2,114,075 6,218,267
<TOTAL-COSTS> 3,449,543 9,519,670
<OTHER-EXPENSES> 757,042 1,816,606
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 338,431 694,887
<INCOME-PRETAX> 237,747 934,423
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 39,204 133,832
<CHANGES> 0 0
<NET-INCOME> 198,543 800,591
<EPS-PRIMARY> 0.02 0.11
<EPS-DILUTED> 0.02 0.11
</TABLE>
