<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, 1998
or
----- Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Transition Period From __________ to __________
Commission file number 0-9498
BELLWETHER EXPLORATION COMPANY
(Exact name of registrant as specified in its charter)
Delaware 74-0437769
(State of incorporation) (IRS Employer Identification Number)
1331 Lamar, Suite 1455 Houston, Texas 77010-3039
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (713) 650-1025
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------- ---------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, $ 0.01 par value NASDAQ/NMS
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
-
As of May 4, 1998, 14,136,820 shares of common stock of Bellwether Exploration
Company were outstanding.
1
<PAGE>
BELLWETHER EXPLORATION COMPANY
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page #
ITEM 1. Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets:
March 31, 1998 (Unaudited) and December 31, 1997........................................ 3
Condensed Consolidated Statements of Operations (Unaudited):
Three months ended March 31, 1998 and March 31, 1997.................................... 5
Condensed Consolidated Statements of Cash Flows (Unaudited):
Three months ended March 31, 1998 and March 31, 1997.................................... 6
Notes to Condensed Consolidated Financial Statements (Unaudited)............................. 8
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................................................... 12
PART II. OTHER INFORMATION........................................................................... 16
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BELLWETHER EXPLORATION COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
ASSETS
------
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------------- -------------------
(Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents....................................... $ 15,444 $ 2,699
Accounts receivable and accrued revenues........................ 14,384 18,293
Due from related parties........................................ 1,792 4,645
Prepaid expenses and other...................................... 2,475 3,240
------------------- -------------------
Total current assets........................................... 34,095 28,877
------------------- -------------------
PROPERTY AND EQUIPMENT, AT COST:
Oil and gas properties (full cost method)....................... 260,084 250,227
Gas plant facilities............................................ 16,726 16,717
------------------- -------------------
276,810 266,944
Accumulated depreciation, depletion and amortization............ (95,838) (86,811)
------------------- -------------------
180,972 180,133
------------------- -------------------
OTHER ASSETS.................................................... 5,550 5,747
------------------- -------------------
$220,617 $214,757
=================== ===================
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
BELLWETHER EXPLORATION COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share information)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------------------- ------------------
(Unaudited)
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable and accrued liabilities....................... $ 19,744 $ 14,241
Due to related parties......................................... 611 672
Total current liabilities..................................... 20,355 14,913
-------------------- ------------------
LONG-TERM DEBT................................................. 100,000 100,000
DEFERRED INCOME TAXES.......................................... 6,543 7,106
OTHER LIABILITIES.............................................. 950 1,069
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 1,000,000 shares authorized;
none issued or outstanding at March 31, 1998 and December
31, 1997...................................................... -- --
Common stock, $0.01 par value, 30,000,000 shares authorized,
14,136,791 and 13,891,465 shares issued and outstanding at
March 31, 1998 and December 31, 1997, respectively............ 141 139
Additional paid-in capital..................................... 79,960 78,470
Retained earnings.............................................. 12,668 13,060
Total stockholders' equity.................................. 92,769 91,669
-------------------- ------------------
$220,617 $214,757
==================== ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
BELLWETHER EXPLORATION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Amounts in thousands, except per share information)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
REVENUES:
Oil and gas revenues................................... $19,424 $6,492
Gas plant operations, net.............................. 226 762
Interest and other income.............................. 187 41
---------------- ----------------
19,837 7,295
---------------- ----------------
COST AND EXPENSES:
Production expenses.................................... 6,133 1,310
Depreciation, depletion and amortization............... 8,738 2,478
General and administrative expenses.................... 2,611 895
Interest expense....................................... 2,979 309
---------------- ----------------
20,461 4,992
---------------- ----------------
Income (loss) before income taxes....................... (624) 2,303
Provision for income taxes.............................. (232) 841
---------------- ----------------
NET INCOME (LOSS)....................................... $ (392) $1,462
================ ================
Net income (loss) per share............................. $ (.03) $ .16
================ ================
Net income (loss) per share-diluted..................... $ (.03) $ .16
================ ================
Weighted average common shares
outstanding............................................ 14,049 9,156
================ ================
Weighted average common shares outstanding-diluted...... 14,049 9,230
================ ================
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
BELLWETHER EXPLORATION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------------
1998 1997
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
NET INCOME (LOSS)................................................. $ (392) $ 1,462
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation, depletion and amortization..................... 8,958 2,556
Deferred income taxes........................................ (563) 840
---------------- ----------------
8,003 4,858
Change in assets and liabilities:
Accounts receivable and accrued revenue.......................... 3,911 905
Accounts payable and other liabilities........................... 5,503 (754)
Due from (to) related parties.................................... 2,793 685
Other............................................................ 628 4
---------------- ----------------
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES.................. 20,838 5,698
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to properties.......................................... (9,874) (6,433)
Proceeds from sales of properties................................ 289 21
---------------- ----------------
Net cash flows used in investing activities...................... (9,585) (6,412)
---------------- ----------------
Cash flows from financing activities:
Proceeds from borrowings......................................... --- 1,000
Exercise of stock options........................................ 1,492 46
---------------- ----------------
Net cash flows provided by financing activities.................. 1,492 1,046
---------------- ----------------
Net increase in cash and cash equivalents........................ 12,745 332
Cash and cash equivalents at beginning of period................. 2,699 450
---------------- ----------------
Cash and cash equivalents at end of period........................ $15,444 $ 782
================ ================
</TABLE>
See accompanying notes to condensed consolidated financial statements
6
<PAGE>
BELLWETHER EXPLORATION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------------
1998 1997
----------------- ----------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.................................................... $ 58 $ 253
Income taxes................................................ $ 864 $ ---
</TABLE>
See accompanying notes to condensed consolidated financial statements
7
<PAGE>
BELLWETHER EXPLORATION COMPANY
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with instructions to Form 10-Q and, therefore,
do not include all disclosures required by generally accepted accounting
principles. However, in the opinion of management, these statements
include all adjustments, which are of a normal recurring nature, necessary
to present fairly the financial position at March 31, 1998 and the results
of operations and changes in cash flows for the periods ended March 31,
1998 and 1997. These financial statements should be read in conjunction
with the consolidated financial statements and notes to the consolidated
financial statements in the December 31, 1997 Form 10-K of Bellwether
Exploration Company ("the Company") that was filed with the Securities and
Exchange Commission on March 27, 1998.
Certain reclassifications of prior period statements have been made to
conform with current reporting practices.
In order to prepare these financial statements in conformity with generally
accepted accounting principles, management of the Company has made a number
of estimates and assumptions relating to the reporting of assets and
liabilities, the disclosure of contingent assets and liabilities, and
reserve information. Actual results could differ from those estimates.
2. ACQUISITIONS
On April 9 and 15, 1997, the Company closed acquisitions of oil and gas
properties (the "Partnership Transactions"), totaling $145.2 million
(inclusive of working capital acquired of $13.9 million), from certain
partnerships and other entities managed or sponsored by Torch Energy
Advisors Incorporated ("Torch"). The acquisitions were financed by the
sale of 4.4 million shares of common stock, the sale of $100.0 million of
10-7/8% senior subordinated notes due in 2007 and borrowings under the
Company's senior unsecured revolving credit facility.
The following table presents the unaudited pro forma results of operations
as if the Partnership Transactions had occurred on January 1, 1997. The
Partnership Transactions were accounted for as purchases, and their results
of operations are included in the Company's results of operations from the
date 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 in the future or such results had the
transaction occurred as of January 1, 1997 (in thousands, except earnings
per share).
8
<PAGE>
BELLWETHER EXPLORATION COMPANY
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
<TABLE>
<CAPTION>
(UNAUDITED)
-----------------------------
THREE MONTHS ENDED
MARCH 31, 1997
-----------------------------
<S> <C>
Revenues.............................................................. $32,878
Expenses.............................................................. 23,874
--------------------
Income before income taxes............................................ 9,004
Income taxes.......................................................... 3,320
Net earnings.......................................................... $ 5,684
Net earnings per common share......................................... $ 0.41
====================
Net earnings per common share-diluted................................. $ 0.41
====================
</TABLE>
3. LONG TERM DEBT
In April 1997, the Company entered into a senior unsecured revolving
credit facility ("Senior Credit Facility") in an amount up to $90.0
million, with an initial borrowing base of $90.0 million to be redetermined
annually, and a maturity date of March 31, 2002. The Company may elect an
interest rate based either on a margin plus LIBOR or the higher of the
prime rate or the sum of 1/2 of 1% plus the Federal Funds Rate. For LIBOR
borrowings, the interest rate will vary from LIBOR plus 0.875% to LIBOR
plus 1.25% based upon the borrowing base usage. In connection with the
acquisition of oil and gas properties, $33.3 million was drawn under this
facility ($22 million of which was used to retire outstandings under the
previous bank credit facility). As of March 31, 1998 the borrowing base
was $75 million and there were no balances outstanding under the Senior
Credit Facility.
The Senior Credit Facility contains various covenants including certain
required financial measurements for current ratio, consolidated tangible
net worth and interest coverage ratio. In addition, the Senior Credit
Facility includes certain limitations on restricted payments, dividends,
incurrence of additional funded indebtedness and asset sales.
In April 1997, the Company issued $100.0 million of 10-7/8% senior
subordinated notes ("Notes") that mature April 1, 2007. Interest on the
Notes is payable semi-annually on April 1 and October 1. The Notes are
guaranteed by the Company's wholly-owned subsidiaries, Odyssey Petroleum
Company, Black Hawk Oil Company and 1989-I TEAI Limited Partnership. The
Notes contain certain covenants, including limitations on indebtedness,
liens, dividends and other payment restrictions affecting restricted
subsidiaries, issuance and sales of restricted subsidiary stock,
dispositions of proceeds of asset sales and restrictions on mergers and
consolidations or sales of assets.
4. NEW ACCOUNTING PRONOUNCEMENTS
Effective December 1997, the Company retroactively adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
SFAS 128 introduces the concept of basic earnings per share, which
represents net income divided by the weighted average common shares
outstanding without the dilutive effects of common stock equivalents
(options, warrants, etc.).
9
<PAGE>
BELLWETHER EXPLORATION COMPANY
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Additionally, SFAS No. 128 replaces fully diluted EPS with diluted EPS.
Diluted EPS reflects the potential dilution that could occur if securities
or other contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. The Company's dilutive securities include
stock options and warrants. The assumed conversion of these securities is
anti-dilutive for a period if the option or warrant exercise price exceeds
the average market price for the periods. In accordance with SFAS No. 128,
the Company retroactively restated all prior period EPS data (including
interim EPS) included in these financial statements and footnotes. The
impact of adopting SFAS 128 is immaterial. SFAS No. 128 also requires a
reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation. Diluted earnings per common share are not calculated below
since the issuance or conversion of additional securities would have an
anti-dilutive effect.
SFAS NO. 128 RECONCILIATION (AMOUNTS IN THOUSANDS):
<TABLE>
<CAPTION>
For the Three Months Ended For the Three Months Ended
March 31, 1998 March 31, 1997
------------------------------------------------ -------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
-------------- ------------- ------------ ----------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS (LOSS) PER COMMON SHARE:
Income (loss) available to common
stockholders................... $ (392) 14,049 $ (.03) $ 1,462 9,156 $ .16
========= =======
EFFECT OF DILUTIVE SECURITIES:
Options and Warrants............ $ --- --- $ --- 74
---------- -------- --------- -------
EARNINGS (LOSS) PER COMMON
SHARE-DILUTED:
Income (loss) available to common
stockholders and assumed
conversions.................... $ (392) 14,049 $ (.03) $ 1,462 9,230 $ .16
========== ======== ========= ========= ======= =======
</TABLE>
10
<PAGE>
BELLWETHER EXPLORATION COMPANY
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
5. NATURAL GAS AND CRUDE OIL HEDGING
Commodity derivatives utilized as hedges include swap contracts. In order
to qualify as a hedge, price movements in the underlying commodity
derivative must be sufficiently correlated with the hedged commodity.
Settlement of gains and losses on price swap contracts are realized
monthly, generally based upon the difference between the contract price and
the average closing New York Mercantile Exchange ("NYMEX") price and are
reported as a component of oil and gas revenues and operating cash flows in
the period realized. Gains and losses attributable to the termination of a
swap contract are deferred on the balance sheet and recognized in revenue
when the hedged crude oil and natural gas is sold. There were no such
deferred gains or losses at March 31, 1998 or 1997.
Oil and gas revenues increased $524,500 in the three months ended March 31,
1998 and $222,300 in the same period of 1997 as a result of such hedging
activity.
11
<PAGE>
BELLWETHER EXPLORATION COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
Condition and Results of Operations
Liquidity and Capital Resources
The Company's strategy is to maximize long-term shareholder value through
aggressive growth in reserves and cash flow using advanced technologies,
implementation of a low cost structure and maintenance of a capital structure
supportive of growth. The Company intends to continue to acquire producing oil
and gas properties through mergers or acquisitions and will increase its
emphasis on growth through development and exploration activities. The funding
of these activities has historically been provided by operating cash flows, bank
financing, equity placements and sale of non-core assets. The Company invested
$9.9 million in properties for the three months ended March 31, 1998 versus $6.4
million in 1997. Cash flows from operations before changes in assets and
liabilities were $8.0 million for the three months ended March 31, 1998 compared
to $4.9 million provided by operating activities in the same period of 1997. At
March 31, 1998, the Company had $75 million of available debt capacity under the
Senior Credit Facility.
Partnership Transactions
In April 1997, the Company purchased oil and gas properties and $13.9 million of
working capital from affiliates of Torch for an adjusted purchase price at
closing of $141.8 million, plus a contingent payment of $3.4 million, the amount
of which was based on 1997 gas prices. The acquisitions were recorded effective
April 1, 1997 and the operations of the Company include the Partnership
Transactions from that date. The Partnership Transactions were financed with
$34.1 million of the net of proceeds of a Common Stock offering, $97.0 million
from the net proceeds of 10 7/8% Senior Subordinated Notes due 2007 (the
"Offerings") and borrowings under the Senior Credit Facility. In addition,
Torch was issued 150,000 shares of the Company's common stock and a warrant to
purchase 100,000 shares at $9.90 for advisory services rendered in connection
with the Partnership Transactions. The warrant and shares were valued at $1.5
million and recorded as a cost of the Partnership Transactions.
Change in Fiscal Year
Effective July 1, 1997 the Company changed its fiscal year to the calendar year.
As a result, the Company reported a six month transition period ended December
31, 1997.
Fiscal 1998 Capital Expenditures
During fiscal 1998, the Company anticipates investing approximately $42.0
million, primarily for development and exploratory drilling activities and
acquisitions. The Company believes its cash flow provided by operating
activities and the proceeds from credit facilities will be sufficient to meet
these projected capital investments (See Notes 2 and 3 of the Notes to Condensed
Consolidated Financial Statements). The Company continues to seek acquisition
opportunities and the consummation of such a transaction may directly impact
anticipated capital expenditures.
12
<PAGE>
BELLWETHER EXPLORATION COMPANY
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Gas Balancing
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 existing gas balancing positions is not anticipated to materially
impact the financial condition of the Company.
Derivative Financial Instruments
The Company periodically uses derivative financial instruments to manage oil and
gas price risk. At March 31, 1998, the Company has entered into contracts to
hedge 31,000 MMBTU of natural gas per day for the months of April through
October 1998 at an average NYMEX quoted price of $2.38 per MMBTU. In addition,
the Company has sold calls on 1,000 barrels of oil per day for the months of
July through December 1998 at a strike price of $18.50 for a premium of $1.00
per barrel.
Results of Operations
The following table sets forth certain operating information of the Company for
the periods presented:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------
1998 1997
--------------- --------------
<S> <C> <C>
Production:
Oil and condensate (MBBLs)...................... 572 78
Natural gas (MMCF).............................. 5,731 1,745
Average sales price: (1)
Oil and condensate (per BBL).................... $12.62 $21.24
Natural gas (per MCF).......................... $ 2.04 $ 2.64
Average costs:
Production expenses (per BOE)................... $ 4.01 $ 3.55
General and administrative expense
(per BOE)(2)................................. $ 1.55 $ 1.86
Depreciation, depletion and amortization
(per BOE)(3)................................. $ 5.42 $ 6.12
</TABLE>
(1) Average sales prices exclude the effect of hedges, which increased revenues
by $524,500 and $222,300 in 1998 and 1997, respectively.
(2) Exclusive of general and administrative expenses allocated to gas plant and
gas gathering facilities.
(3) Excludes depreciation, depletion and amortization on gas plants and other
assets of $466,000 and $227,000 in 1998 and 1997, respectively.
13
<PAGE>
BELLWETHER EXPLORATION COMPANY
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Revenues
Oil and gas revenues for the three months ended March 31, 1998 were $19.4
million, as compared to $6.5 million for the respective period in 1997. The
increase in revenues of 198% is attributable primarily to production from
properties acquired in the Partnership Transactions. Partially offsetting the
revenue increases were unfavorable price variances. Oil prices have declined
41% from $21.24 per barrel in the three months ended March 31, 1997 to $12.62
per barrel in the current period. Oil prices have rebounded somewhat since such
time to a Nymex price on April 30, 1998 of $15.39 per barrel. Natural gas
prices declined 23% from $2.64 per Mcf in the three months ended March 31, 1997
to $2.04 per Mcf for the three months ended March 31, 1998.
Net gas plant operating profit was $226,000 in the three months ended March 31,
1998 and $762,000 in the same period of 1997. The Snyder gas plant was
temporarily shut in 5 days in January for work attributable to a small accident
in an adjacent plant and 3 days in February to tie in new equipment. In
addition, throughput was lower than anticipated due to reduced production
volumes from the North Unit SACROC. Tertiary recovery projects which have been
expanded to increase such North Unit SACROC production are projected to increase
the Snyder gas plant throughput by mid-1998.
Expenses
Production expenses for the three months ended March 31, 1998 totaled $6.1
million, or 369% over the $1.3 million for the three months ended March 31,
1997, due primarily to the effect of the Partnership Transactions.
Depreciation, depletion and amortization was $8.7 million for the three months
ended March 31, 1998. These amounts reflect a 248% increase over the $2.5
million recorded in the comparable period in 1997. Increases in oil and gas
production of 314% and a 11% lower depletion rate per barrel of oil equivalent
are attributable primarily to the acquisitions of the properties from the
Partnership Transactions.
General and administrative expenses totaled $2.6 million in the three months
ended March 31, 1998 as compared to $0.9 million for the comparable period of
fiscal 1997 reflecting higher management fees and fixed costs resulting from the
increase in assets and cash flows. In addition, $.3 million of costs were
incurred in March 1998 as a result of the Company closing its Dallas exploration
office.
Interest expense increased to $3.0 million for the three months ended March 31,
1998 from $0.3 million in the same period of 1997 due to debt incurred in
financing of the Partnership Transactions.
Income Taxes
The provision for federal and state income taxes for the three months ended
March 31, 1998 is based upon a 37% effective tax rate.
14
<PAGE>
Net Income
Net loss for the three months ended March 31, 1998 is approximately $.4 million
as compared to net income of $1.5 million for the respective period of 1997.
Year 2000
The Company's technical services provider, Torch, plans to upgrade all major
financial and administrative systems to ensure that such systems are Year 2000
compliant. The Year 2000 problem results from data storage of date information
truncating to two places, i.e. 1998 stored as 98. Currently all programs
storing year information as such recognize the year 2000 as 00 (or 1900). Torch
is approaching the Year 2000 project in three steps: 1) awareness and
assessment, 2) conversion or implementation and 3) validation and testing.
Management does not believe that costs incurred to address the Year 2000 issue
with respect to its financial and administrative systems will have a material
impact on the Company's future financial results or operations. At this time,
the Company is uncertain as to the impact that the Year 2000 issue will have on
its operational information systems and as to how the Company will be indirectly
affected by the impact that the Year 2000 issue will have on the companies with
which it conducts business.
Forward Looking Statements
This Form 10-Q contains "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included herein, including without limitation,
statements under "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and in the notes to the financial statements
regarding the Company's financial position, capital budget, intent to acquire
oil and gas properties, estimated quantities and net present values of reserves,
business strategy, plans and objectives of management of the Company for future
operations, and the effect of gas balancing, are forward-looking statements.
There can be no assurances that such forward looking statements will prove to
have been correct. Important factors that could cause actual results to differ
materially from the Company's expectations ("Cautionary Statements") include the
volatility of oil and gas prices, operating hazards, government regulations,
exploration risks and other factors described in the Company's Form 10-K filed
with the Securities and Exchange Commission. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified by the Cautionary Statements.
15
<PAGE>
BELLWETHER EXPLORATION COMPANY
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A Proxy statement was sent to all shareholders of record on April 9,
1998 for the following matters which will be voted on at the Annual
Meeting of Stockholders to be held on May 22, 1998:
1. To elect the nominees of the Board of Directors to serve until
their successors are duly elected and qualified.
2. To consider and act upon a proposal to ratify the appointment of
KPMG Peat Marwick LLP as the independent auditors of the Company
for the period ending December 31, 1998.
3. To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
A copy of the Proxy Statement was filed with the Securities and
Exchange Commission on April 24, 1998 and is incorporated herein by
reference.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
The following exhibits are filed with this Form 10-Q and they
are identified by the number indicated.
27 Financial Data Schedule
b. Reports on Form 8-K.
None.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BELLWETHER EXPLORATION COMPANY
------------------------------
(Registrant)
Date: May 13, 1998 By: /s/ J. Darby Sere'
-------------------- --------------------------------------
J. Darby Sere'
Chairman and Chief Executive Officer
Date: May 13, 1998 By: /s/ William C. Rankin
------------------- -----------------------------------
William C. Rankin
Senior Vice President and Chief Financial
Officer
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 15,444
<SECURITIES> 0
<RECEIVABLES> 16,176
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 34,095
<PP&E> 276,810
<DEPRECIATION> (95,838)
<TOTAL-ASSETS> 220,617
<CURRENT-LIABILITIES> 20,355
<BONDS> 100,000
141
0
<COMMON> 141
<OTHER-SE> 92,628
<TOTAL-LIABILITY-AND-EQUITY> 220,617
<SALES> 19,424
<TOTAL-REVENUES> 19,837
<CGS> 14,871
<TOTAL-COSTS> 20,461
<OTHER-EXPENSES> 2,611
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,979
<INCOME-PRETAX> (624)
<INCOME-TAX> (232)
<INCOME-CONTINUING> (392)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (392)
<EPS-PRIMARY> $ (0.03)
<EPS-DILUTED> $ (0.03)
</TABLE>
