<PAGE>
File Nos. 70-5543/70-6958
70-7055/70-6513
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report
Pursuant to Rule 24 under the
Public Utility Holding Company Act of 1935
NEW ENGLAND ELECTRIC SYSTEM (NEES)
NEW ENGLAND ENERGY INCORPORATED (NEEI)
In accordance with the Orders of the Securities and Exchange Commission
dated July 19, 1978, October 22, 1985, October 3, 1991 and December 8, 1987,
following is a report for the first quarter of 1994:
For the purpose of this report and following the Commission's Order dated
October 22, 1985 (Release No. 23873), references herein to "Old Program"
relate to that portion of the NEEI oil and gas exploration and development
program which consists of prospects entered into through December 31, 1983.
Likewise, references to "New Program" relate to prospects entered into since
December 31, 1983. In 1991, NEEI sold substantially all of the properties in
the New Program. No new prospects have been acquired since December 31, 1986.
a. Investment in partnerships by prospect: See Exhibit a.
b. Summary statement of proved and probable reserves:
Old Program
-----------
Natural Gas
Oil and ----------- Total
Condensate Equivalent Equivalent
Bbl. MCF Bbl. Bbl.
---------- ---------- ---------- ----------
Balance 1/1/94 1,246,976 83,027,322 13,837,887 15,084,863
Additions & Revisions
through 3/31/94 124,200 2,664,024 444,004 568,204
--------- ----------- ---------- ----------
Balance 1,371,176 85,691,346 14,281,891 15,653,067
Production 1st Qtr. 1994 (103,978) (5,619,654) (936,609) (1,040,587)
--------- ----------- ---------- ----------
Balance 3/31/94 1,267,198 80,071,692 13,345,282 14,612,480
--------- ----------- ---------- ----------
New Program
-----------
None.
<PAGE>
-2-
c. Production and revenue by prospect: See Exhibit c.
d. Description of Operations:
NEEI has participated through its partnership with Samedan Oil
Corporation (Samedan) in drilling operations with the results as
summarized below. Also shown are activities on properties acquired
from a former partner, Dorchester Exploration, Inc. (Dorchester),
prior to termination of that partnership. NEEI sold its remaining
interests in "Dorchester" properties as of June 1, 1988.
Old Program
-----------
Since
Quarter Inception
------- ---------
No. of dry holes
Samedan 6 732
Dorchester 0 51
-- -----
6 783
-- -----
No. of productive wells
Samedan 1 1,162*
Dorchester 0 69*
-- ------
1 1,231*
-- ------
No. of wells drilled 7 2,014
(both exploration and development) -- -----
* Includes depleted/sold wells as follows:
Samedan 0 465
Dorchester 0 69
-- -----
0 534
-- -----
New Program
-----------
None.
INVESTMENT
----------
Budget Authorized
Actual By SEC
---------------------- -----------------
Since
Quarter 1/1/94 1994
---------- ---------- -----------------
Samedan $2,090,331 $2,090,331 $10,000,000 (A)
(A) Authorized through December 31, 1994, by Order dated
December 21, 1993 (Release No. 35-25958).
<PAGE>
-3-
e. Fuel Production, Sales and Other Income:
Old Program:
1. Sales to affiliates:
There have been no direct sales of NEEI oil and gas production
to affiliates.
Quarter Inception
Ended Thru
3/31/94 3/31/94
-------- --------
2. Sales to nonaffiliates
(Exhibit c.):
Equivalent barrels of fuel
produced 1,040,587 42,981,995
Average price per barrel $ 12.72 $ 14.48
----------- ------------
Sales revenues $13,237,190 $622,506,177
3. Loss to NEP 11,000,552 256,306,992
4. Flow through of excess deferred 1,682,399 73,556,688
taxes
5. Investment tax credit - 13,817,248
6. Depletion - 6,740,318
7. Deferred tax related to reserve - 9,080,000
addition
8. Transfer of reserve (net) from - 6,400,000
NEES
----------- ------------
Total $25,920,141 $988,407,423
----------- ------------
New Program: None.
f. Credits applied to
New England Power Company (NEP):
1. Disposition of proceeds:
Amortization of cost of
fuel reserves $24,464,210 $909,301,020
Production costs 855,931 69,016,155
State taxes 600,000 4,612,500
Savings to NEP - 8,701,242
Royalty to NEP - 1,099,807
Other - 65,472
----------- ------------
Total $25,920,141 $992,796,196
----------- ------------
Net income/(loss)/retained $ - $ (4,388,773)
deficit ----------- ------------
<PAGE>
-4-
f. continued
Quarter Inception
Ended Thru
3/31/94 3/31/94
-------- ---------
2. Royalties prepaid to NEP:
Beginning balance in account $ 342,312 $ -
------------ ------------
Royalties/savings earned - (9,801,049)
Royalties passed on to NEP - 10,143,361 *
------------ ------------
Ending balance in account $ 342,312 $ 342,312
------------ ------------
3. Losses to be passed on to NEP:
Beginning balance in account $ 46,354,838 $ -
------------ ------------
Losses accrued 11,000,552 256,306,992
Losses passed on to NEP** (18,558,013) (217,509,615)
------------ ------------
Ending balance in account $ 38,797,377 $ 38,797,377
------------ ------------
* Includes $8,701,242 savings passed on to NEP for sales prior to 1/1/84
pursuant to Commission Order File No. 70-5543.
** Consistent with pricing policy approved in Release No. 23873, current
year losses cannot be recovered until the following year.
<PAGE>
-5-
g. Investment by NEES compared with Commission Authorization:
<TABLE>
<CAPTION>
Release No./Date
-------------------------------------------
25129 24847 24847
----- ----- -----
8/8/90 3/29/89 3/29/89
------ ------- -------
<S> <C> <C> <C>
Maximum NEES Investment authorized: $45,000,000(1) $75,000,000 $400,000,000
----------- ----------- ------------
1. Investments by NEES-inception through
December 31, 1993 (net)
Subordinated notes 10,190,065 19,517,691(2) -
Common stock and premium 250,000 - -
----------- ----------- ------------
Total investment by NEES 10,440,065 19,517,691 -
Investment by NEES-during the
quarter (net)
Subordinated notes (10,599,355) - -
Total investment by NEES through
March 31, 1994 (net)
Subordinated notes (409,290) 19,517,691(2) -
Common stock and premium 250,000 - -
----------- ----------- ------------
$ (159,290) $19,517,691 $ -
----------- ----------- ------------
2. Increase or Reduction in Investment
by NEES:
Date Amount Date Amount Date Amount
---- ------ ---- ------ ---- ------
Issues of subordinated notes
to NEES during quarter 1/4/94 $ 171,257 $ - $ -
ended March 31, 1994 2/4/94 119,673
3/4/94 109,715
Payments of
subordinated notes to NEES
during quarter ended
March 31, 1994 1/4/94 $ 11,000,000 $ - $ -
------------ ------- -------
Net change in investment $(10,599,355) $ - $ -
------------ ------- -------
_______________
(1) Plus any after-tax net loss attributable to the expensing of interest
on up to $37,200,000 of borrowings in connection with the Old Program.
(2) Includes $1,620,000 authorized for investment in the Old Program.
</TABLE>
<PAGE>
-6-
h. Financial Statements:
Exhibit h-1 Balance Sheet of NEEI at March 31, 1994, (unaudited, subject
to adjustment)
Exhibit h-2 Statement of Income and Retained Deficit of NEEI for the
quarter ended March 31, 1994 (unaudited, subject to adjustment)
Exhibit h-3 Statement of Cash Flows of NEEI for the quarter ended
March 31, 1994 (unaudited, subject to adjustment)
Exhibit h-4 Computation of Bank Interest for the quarter ended
March 31, 1994
i. Fuel purchased during quarter for NEP:
(Summary: See Exhibit i for detail.)
1. From proceeds from sale of NEEI Old Program production
Date purchased (delivered) 1st Quarter
Quantity of fuel (equiv. bbl) 1,505,451.92
Average net price (per equiv. bbl) $ 12.87
-------------
Cost to NEEI $ 19,374,875
Loss from NEEI fuel
exploration activities 18,558,013
-------------
Cost to NEP 37,932,888
Adjustments, inspection charges, etc. 28,525
------------- -----------
Total $37,961,413
===========
j. Copies of filings on Form 423 related to the above sales are attached. (See
Exhibits j-1 through j-6.)
k. Use of Proceeds from Sales of NEEI New Program Production:
None.
<PAGE>
-7-
<TABLE>
Sale of NEEI Wells
------------------
Old Program
- -----------
During the period from January 1, 1994 through March 31, 1994, NEEI
disposed of its interest in Existing (Old) Program wells containing proved or
probable reserves as follows:
<CAPTION>
Est. Net Reserves
Effective (Eq. Bbls) as
Date of of Date of
Prospect Location Disposition Disposition
------------ ------------------ ------------- ---------------
<S> <C> <C> <C>
Banner Canadian County, OK
W.T. Porter No. 1 02/01/94 2,804
J & J Farms #3 03/01/94 0
Felix Campbell County, WY
Felix Unit 08/01/93* 0
-------
2,804
=======
* Reported by Samedan in the first quarter of 1994.
</TABLE>
The order of the Securities and Exchange Commision dated October 22, 1985
(Release No. 23873) requires NEEI to include the reserves associated with the
above wells as production upon which royalties would be payable to NEP, but
authorizes NEEI to defer such inclusion to coincide with the estimated
production cycle for each well. However, in light of the particularly small
quantities of reserves represented in the table above, NEEI will include the
total 2,804 barrels of remaining reserves in the calculation of the royalty
for 1994. Due to operating losses, no royalty has been paid since 1985.
Losses Passed to NEP
--------------------
Through December 31, 1985, NEEI's Old Program generated customer savings.
Due to precipitous declines in oil and gas market prices, the Old Program
generated operating losses for the first time during 1986. As a result of the
losses during 1986, the crossover reserve, which was $24.1 MM at December 31,
1985, was exhausted. NEEI passed its 1986 losses in excess of the reserve,
$277,732, on to NEP in 1987. NEEI's Old Program incurred losses in 1987
through 1992 totalling $198,673,870 which were passed on to NEP in 1988
through 1993. NEEI's Old Program loss of $46,354,838, incurred in 1993, is
being passed on to NEP in 1994.
<PAGE>
-8-
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, each undersigned company has duly caused this report (Commission's File
Nos. 70-5543, 70-6513, 70-6958, and 70-7055) to be signed on its behalf, as
indicated, by the undersigned officer thereunto duly authorized by each such
company.
NEW ENGLAND ELECTRIC SYSTEM
s/Michael E. Jesanis
Michael E. Jesanis, Treasurer
NEW ENGLAND ENERGY INCORPORATED
s/John G. Cochrane
John G. Cochrane, Treasurer
Date: May 16, 1994
The name "New England Electric System" means the trustee or trustees for the
time being (as trustee or trustees but not personally) under an agreement and
declaration of trust dated January 2, 1926, as amended, which is hereby
referred to, and a copy of which as amended has been filed with the Secretary
of the Commonwealth of Massachusetts. Any agreement, obligation or liability
made, entered into or incurred by or on behalf of New England Electric System
binds only its trust estate, and no shareholder, director, trustee, officer or
agent thereof assumes or shall be held to any liability therefor.
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
a Investment in partnerships by prospect Filed under
(Old Program) cover of
Form SE
c Production and net revenue (Old Program) Filed under
cover of
Form SE
h-1 Balance Sheet at March 31, 1994 Filed herewith
(Unaudited, Subject to Adjustment)
h-2 Statement of Income and Retained Filed herewith
Deficit for the Quarter Ended
March 31, 1994 (Unaudited,
Subject to Adjustment)
h-3 Statement of Cash Flows for the Quarter Filed herewith
Ended March 31, 1994 (Unaudited,
Subject to Adjustment)
h-4 Computation of Bank Interest for the Filed herewith
Quarter Ended March 31, 1994
i Fuel Purchased for NEP for the Quarter Filed herewith
Ended March 31, 1994
j-1 Monthly Report of Cost and Quality Filed under
of Fuels for Electric Plants cover of
January 1994 (Salem Harbor) Form SE
j-2 Monthly Report of Cost and Quality Filed under
of Fuels for Electric Plants cover of
January 1994 (Brayton Point) Form SE
j-3 Monthly Report of Cost and Quality Filed under
of Fuels for Electric Plants cover of
February 1994 (Salem Harbor) Form SE
j-4 Monthly Report of Cost and Quality Filed under
of Fuels for Electric Plants cover of
February 1994 (Brayton Point) Form SE
j-5 Monthly Report of Cost and Quality Filed under
of Fuels for Electric Plants cover of
March 1994 (Salem Harbor) Form SE
j-6 Monthly Report of Cost and Quality Filed under
of Fuels for Electric Plants cover of
March 1994 (Brayton Point) Form SE
<PAGE>
<TABLE>
Exhibit h-1
NEW ENGLAND ENERGY INCORPORATED
Balance Sheet
March 31, 1994
(Unaudited, Subject to Adjustment)
<CAPTION>
ASSETS
- ------
Old Program New Program Combined
----------- ----------- --------
<S> <C> <C> <C>
Current assets:
Cash, including temporary cash investments
of $7,275,000 with affiliated companies $ 6,600,466 $ 705,919 $ 7,306,385
Accounts receivable:
Affiliated companies:
- accrued loss to be passed
on to affiliate 38,797,377 - 38,797,377
- from sales of oil 4,658,934 - 4,658,934
- other 10,921 2,068 12,989
Prepaid expenses 342,312 - 342,312
-------------- ------------ --------------
Total current assets 50,410,010 707,987 51,117,997
-------------- ------------ --------------
Property at cost:
Cost of fuel reserves:
Exploration and development costs:
Samedan 730,841,676 - 730,841,676
Dorchester 67,401,440 - 67,401,440
Cost of capital 426,528,295 - 426,528,295
Other 28,125,985 - 28,125,985
-------------- ------------ --------------
1,252,897,396 - 1,252,897,396
Less-accumulated amortization (909,301,020) - (909,301,020)
-------------- ------------ --------------
Net cost of fuel reserves 343,596,376 - 343,596,376
Work in process - Samedan 1,988,904 - 1,988,904
-------------- ------------ --------------
Total property 345,585,280 - 345,585,280
-------------- ------------ --------------
$ 395,995,290 $ 707,987 $ 396,703,277
============== ============ ==============
LIABILITIES AND PARENT COMPANY'S INVESTMENT
- -------------------------------------------
Current liabilities:
Accrued exploration and development costs $ 30,037,348 $ - $ 30,037,348*
Accounts payable 3,818,433 357,347 4,175,780
Accrued interest 653,552 - 653,552
Accrued taxes 9,344,915 (1,796,600) 7,548,315
-------------- ------------ --------------
Total current liabilities 43,854,248 (1,439,253) 42,414,995
-------------- ------------ --------------
Deferred income taxes 113,541,072 36,100 113,577,172
-------------- ------------ --------------
Deferred credit 8,040,102 - 8,040,102
-------------- ------------ --------------
Notes payable to banks under credit agreement 234,000,000 - 234,000,000
-------------- ------------ --------------
Parent company's investment:
Subordinated notes payable to parent 1,210,710 17,897,691 19,108,401
Common stock, par value $1 per share 2,500 - 2,500
Paid-in capital 247,500 - 247,500
Retained deficit (4,900,842) (15,786,551) (20,687,393)
-------------- ------------ --------------
Total parent company's investment (3,440,132) 2,111,140 (1,328,992)
-------------- ------------ --------------
$ 395,995,290 $ 707,987 $ 396,703,277
============== ============ ==============
*Accrued exploration and development costs:
Total
(All Samedan)
-------------
Exploration $10,323,176
Development 19,343,329
Work in process 120,305
Advance 250,538
-----------
$30,037,348
===========
</TABLE>
<PAGE>
<TABLE>
Exhibit h-2
NEW ENGLAND ENERGY INCORPORATED
Statements of Income and Retained Deficit
For the Quarter Ended March 31, 1994
(Unaudited, Subject to Adjustment)
<CAPTION>
Old Program New Program Combined
----------- ----------- --------
<S> <C> <C> <C>
Operating revenue:
Sales of fuel to an affiliate $ 37,961,413 $ - $ 37,961,413
Loss passed on to an affiliate (18,558,013) - (18,558,013)
Accrued loss to be passed on to an affiliate 11,000,552 - 11,000,552
Sales to nonaffiliates:
Oil 1,413,830 3,570 1,417,400
Gas 11,823,360 (2,095) 11,821,265
------------ ------------ ------------
Total operating revenue 43,641,142 1,475 43,642,617
------------ ------------ ------------
Operating expenses:
Purchases of fuel for an affiliate 19,403,400 - 19,403,400
Amortization of cost of fuel reserves 24,464,210 - 24,464,210
Production costs 855,931 2,769 858,700
General and administrative expense - 2,118 2,118
------------ ------------ ------------
Total operating expenses 44,723,541 4,887 44,728,428
------------ ------------ ------------
Operating income/(loss) (1,082,399) (3,412) (1,085,811)
Other income/(expense):
Interest income - 5,666 5,666
Interest expense (391,489) - (391,489)
State taxes (600,000) - (600,000)
------------ ------------ ------------
Operating and other income/(loss) (2,073,888) 2,254 (2,071,634)
------------ ------------ ------------
Federal income taxes:
Current federal income taxes 8,318,200 800 8,319,000
Deferred federal income taxes (10,137,500) - (10,137,500)
------------ ------------ ------------
Net federal income taxes (1,819,300) 800 (1,818,500)
------------ ------------ ------------
Net income (254,588) 1,454 (253,134)
Retained deficit at beginning of period (4,646,254) (15,788,005) (20,434,259)
------------ ------------ ------------
Retained deficit at end of period $ (4,900,842) $(15,786,551) $(20,687,393)
============ ============ ============
</TABLE>
<PAGE>
<TABLE>
Exhibit h-3
NEW ENGLAND ENERGY INCORPORATED
Statements of Cash Flows
For the Quarter Ended March 31, 1994
(Unaudited, Subject to Adjustment)
<CAPTION>
Old Program New Program Combined
----------- ----------- --------
<S> <C> <C> <C>
Operating Activities:
Net income $ (254,588) $ 1,454 $ (253,134)
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of cost of fuel reserves 24,464,210 - 24,464,210
Loss passed on to an affiliate 18,558,013 - 18,558,013
Accrued loss to be passed on to an affiliate (11,000,552) - (11,000,552)
Deferred federal income taxes (10,137,500) _ (10,137,500)
(Increase)/decrease in accounts receivable
(excluding loss to be passed on to affiliate) (4,655,553) (171) (4,655,724)
Increase/(decrease) in accrued exploration
and development costs 487,628 - 487,628
Increase/(decrease) in accounts payable 2,033,056 3,604 2,036,660
Increase/(decrease) in accrued interest payable 93,660 - 93,660
Increase/(decrease) in income taxes payable 5,518,200 800 5,519,000
------------ --------- ------------
Net cash provided by operating activities $ 25,106,574 $ 5,687 $ 25,112,261
------------ --------- ------------
Investing Activities:
Investment in property - Samedan:
Exploration (also includes dry holes, depleted
wells and work in process) $ (1,140,599) $ - $ (1,140,599)
Development (also reflects transfer of
depleted wells) (1,124,629) - (1,124,629)
Capital costs (2,225,741) - (2,225,741)
Other (736,179) - (736,179)
------------ --------- ------------
Net cash used in investing activities $ (5,227,148) $ - $ (5,227,148)
------------ --------- ------------
Financing Activities:
Subordinated notes payable to parent-issues $ 400,645 $ - $ 400,645
Subordinated notes payable to parent-retirements (11,000,000) - (11,000,000)
Changes in notes payable to bank under
credit agreement (4,000,000) - (4,000,000)
------------ --------- ------------
Net cash used in financing activities $(14,599,355) $ - $(14,599,355)
------------ --------- ------------
Net increase/(decrease) in cash and cash equivalents $ 5,280,071 $ 5,687 $ 5,285,758
Cash and cash equivalents at beginning of period 1,320,395 700,232 2,020,627
------------ --------- ------------
Cash and cash equivalents at end of period $ 6,600,466 $ 705,919 $ 7,306,385
------------ --------- ------------
</TABLE>
<PAGE>
Exhibit h-4
NEW ENGLAND ENERGY INCORPORATED
Computation of Bank Interest
Quarter Ended March 31, 1994
--------------------------------
Cost of Notes Payable to Banks Under Credit Agreement
- -----------------------------------------------------
Date Paid
Date or Maturity Annual
Amount Issued Date Rate % Total
------ ------ ----------- ------ -----
Old Program
-----------
$ 26,000,000 11/04/93 01/04/94 4.1250 $ 8,937.50
20,000,000 11/16/93 02/16/94 3.7200 95,066.67
10,000,000 11/16/93 02/16/94 3.8000 48,555.55
113,000,000 12/20/93 01/20/94 3.8750 231,100.69
49,000,000 12/22/93 01/24/94 3.8125 119,352.43
20,000,000 12/29/93 01/31/94 3.8750 64,583.33
37,000,000 01/04/94 02/04/94 3.8750 123,461.81
113,000,000 01/20/94 02/22/94 3.7500 388,437.50
49,000,000 01/24/94 02/24/94 3.7500 158,229.16
20,000,000 01/31/94 02/28/94 3.7500 58,333.33
37,000,000 02/04/94 03/04/94 3.8125 109,715.28
23,000,000 02/16/94 03/16/94 4.0000 71,555.55
20,000,000 02/22/94 05/24/94 3.8025 80,275.00
5,000,000 02/22/94 03/22/94 3.7675 14,651.39
88,000,000 02/22/94 03/22/94 4.0625 278,055.56
49,000,000 02/24/94 05/24/94 4.2500 208,250.00
15,000,000 02/28/94 03/28/94 4.1250 48,125.00
37,000,000 03/04/94 09/06/94 4.7500 136,694.44
23,000,000 03/16/94 04/18/94 4.1875 42,805.56
5,000,000 03/22/94 04/22/94 3.9375 5,468.75
85,000,000 03/22/94 04/22/94 4.1875 98,871.53
15,000,000 03/28/94 04/28/94 4.3125 7,187.50
---------------
2,397,713.53
Interest Rate Swap 113,807.49
Fees (Primarily facility) 106,250.66
---------------
Total Old Program $2,617,771.68
---------------
<PAGE>
<TABLE>
Exhibit i
NEW ENGLAND ENERGY INCORPORATED
Fuel Purchased for NEP
for the Quarter Ended March 31, 1994
-----------------------------------------
<CAPTION>
Exploration
- -----------
Date purchased (delivered)
Jan. 8, 1994 Jan. 31, 1994
------------- --------------
<S> <C> <C> <C> <C>
Quantity of fuel (bbl) 206,320.03 76,527.78
Average net price (per bbl) $ 12.15 $ 11.90
------------- -------------
Cost to NEEI $2,506,385.63 $ 910,680.58
Loss from NEEI fuel
exploration activities 2,543,349.97 943,373.58
------------- -------------
Cost to NEP $5,049,735.60 $1,854,054.16
-----------------------------
Date purchased (delivered) Feb. 1, 1994 Feb. 8, 1994 Feb. 13, 1994 Feb. 16, 1994
------------- ------------- ------------- -------------
Quantity of fuel (bbl) 99,914.58 229,937.27 229,040.66 238,002.80
Average net price (per equiv.bbl) $ 11.90 $ 12.94 $ 12.87 $ 16.67
------------- ------------- ---------- --------------------------
Cost to NEEI $1,188,983.50 $2,975,953.98 $2,947,753.29 $3,968,389.39
Loss from NEEI fuel
exploration activities 1,231,667.44 2,834,483.70 2,823,431.01 2,933,909.14
------------- ------------- ------------- -------------
Cost to NEP $2,420,650.94 $5,810,437.68 $5,771,184.30 $6,902,298.53
------------- ------------- ------------- -------------
Date purchased (delivered) Mar. 9, 1994 Mar. 28, 1994
------------- -------------
Quantity of fuel (bbl) 220,441.37 205,267.43
Average net price (per bbl) $ 12.48 $ 10.35
------------- -------------
Cost to NEEI $2,752,210.50 $2,124,517.90
Loss from NEEI fuel
exploration activities 2,717,425.80 2,530,373.55
------------- -------------
Cost to NEP $5,469,636.30 $4,654,891.45
------------- -------------
</TABLE>
