SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000.
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: 333-29001-01
ENERGY CORPORATION OF AMERICA
(Exact name of registrant as specified in its charter)
WEST VIRGINIA 84-1235822
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
4643 SOUTH ULSTER STREET, SUITE 1100
DENVER, COLORADO 80237
(Address of principal executive offices and zip code)
(303) 694-2667
(Registrant's telephone number, including area code)
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 ___
The number of shares of the Registrant's common stock, par value $1.00 per
share, outstanding at
March 31, 2000 was 646,087 shares.
1
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ENERGY CORPORATION OF AMERICA
TABLE OF CONTENTS
<S> <C>
PAGES
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31, 2000 (unaudited) and June 30, 1999 . . . . . . . . . . . . 3
Unaudited Condensed Consolidated Statements of Operations
For the three and nine months ended March 31, 2000 and 1999. . . . . 5
Unaudited Condensed Consolidated Statements of Cash Flows
For the nine months ended March 31, 2000 and 1999. . . . . . . . . . 6
Notes to Unaudited Condensed Consolidated Financial Statements. . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation. . . . . . . . . . . . . . . . . . . . . . . . . . 14
PART II OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 21
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . 21
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . 21
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . 21
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . 21
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . 21
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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ENERGY CORPORATION OF AMERICA
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
- -----------------------------------------
MARCH 31 JUNE 30
2000 1999
(UNAUDITED) *
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . $ 4,306 $ 13,101
Accounts receivable, net of allowance for doubtful
accounts of $429 . . . . . . . . . . . . . . . . . . 14,637 14,920
Net utility assets held for sale. . . . . . . . . . . . 68,638 70,139
Gas in storage, at average cost . . . . . . . . . . . . 282 357
Income tax receivable . . . . . . . . . . . . . . . . . 2,801 3,580
Prepaid and other current assets. . . . . . . . . . . . 7,783 1,338
--------- --------
Total current assets . . . . . . . . . . . . . . . . 98,447 103,435
--------- --------
Property, plant and equipment, net of accumulated
depreciation and depletion of $89,894 and $82,158 . . . 163,260 158,442
--------- --------
OTHER ASSETS
Deferred financing costs, net of accumulated
amortization of $2,246 and $1,647. . . . . . . . . . 5,410 6,009
Notes receivable, less allowance for doubtful accounts
of $440. . . . . . . . . . . . . . . . . . . . . . . 3,068 3,384
Other . . . . . . . . . . . . . . . . . . . . . . . . . 14,721 14,807
--------- --------
Total other assets . . . . . . . . . . . . . . . . . 23,199 24,200
--------- --------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 284,906 $286,077
========= ========
<FN>
* Condensed from audited consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</TABLE>
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ENERGY CORPORATION OF AMERICA
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
- -----------------------------------------
MARCH 31 JUNE 30
2000 1999
(UNAUDITED) *
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . $ 16,649 $ 15,474
Short-term borrowings. . . . . . . . . . . . . . . . . . 2,000 -
Current portion of long-term debt. . . . . . . . . . . . 1,954 6,618
Funds held for future distribution . . . . . . . . . . . 4,941 5,378
Accrued taxes, other than income . . . . . . . . . . . . 4,570 4,497
---------- ---------
Total current liabilities . . . . . . . . . . . . . . 30,114 31,967
LONG-TERM OBLIGATIONS
Long-term debt . . . . . . . . . . . . . . . . . . . . . 217,853 219,886
Gas delivery obligation and deferred trust revenue . . . 22,179 13,839
Deferred income tax liability. . . . . . . . . . . . . . 2,527 4,877
Other long-term obligation . . . . . . . . . . . . . . . 995 1,031
---------- ---------
Total liabilities . . . . . . . . . . . . . . . . . . 273,668 271,600
---------- ---------
STOCKHOLDERS' EQUITY
Common stock, par value $1.00; 2,000,000 shares
authorized; 721,000 shares issued . . . . . . . . . . 721 721
Class A stock, no par value; 100,000 shares authorized;
26,000 shares issued. . . . . . . . . . . . . . . . . 2,940 2,940
Additional paid in capital . . . . . . . . . . . . . . . 4,656 4,656
Retained earnings. . . . . . . . . . . . . . . . . . . . 10,457 13,598
Treasury stock and notes receivable arising from the
issuance of common stock. . . . . . . . . . . . . . . (7,493) (7,261)
Accumulated comprehensive income (loss). . . . . . . . . (43) (177)
---------- ---------
Total Stockholders' equity. . . . . . . . . . . . . . 11,238 14,477
---------- ---------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 284,906 $286,077
========== =========
<FN>
* Condensed from audited consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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ENERGY CORPORATION OF AMERICA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED - AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- ------------------------------------------------------------------
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
MARCH 31 MARCH 31
<S> <C> <C> <C> <C>
2000 1999 2000 1999
REVENUES:
Gas marketing and pipeline sales . . . . . . . . . . . $15,894 $18,922 $ 54,734 $ 70,941
Oil and gas sales. . . . . . . . . . . . . . . . . . . 5,932 3,993 17,223 13,703
Well operations and service revenues . . . . . . . . . 1,398 1,546 4,587 4,921
Other revenue. . . . . . . . . . . . . . . . . . . . . - - - 191
-------- -------- --------- ---------
23,224 24,461 76,544 89,756
-------- -------- --------- ---------
COST AND EXPENSES:
Gas marketing and pipeline cost. . . . . . . . . . . . 15,504 17,761 53,463 68,018
Field operating expenses . . . . . . . . . . . . . . . 2,032 1,980 6,054 6,048
General and administrative . . . . . . . . . . . . . . 3,096 2,676 8,428 7,761
Taxes, other than income . . . . . . . . . . . . . . . 324 303 1,000 836
Depletion and depreciation, oil and gas related. . . . 2,174 1,946 6,587 6,020
Depreciation of pipelines and equipment. . . . . . . . 706 804 2,171 2,416
Exploration and impairment . . . . . . . . . . . . . . 532 2,293 3,469 5,104
-------- -------- --------- ---------
24,368 27,763 81,172 96,203
-------- -------- --------- ---------
Loss from operations . . . . . . . . . . . . . . . . . (1,144) (3,302) (4,628) (6,447)
-------- -------- --------- ---------
OTHER (INCOME) EXPENSE
Interest . . . . . . . . . . . . . . . . . . . . . . . 5,441 5,044 16,956 15,097
Loss (gain) on sale of assets. . . . . . . . . . . . . (68) 17 (73) (1,080)
Other. . . . . . . . . . . . . . . . . . . . . . . . . (27) (49) (630) (844)
-------- -------- --------- ---------
Loss from continuing operations before income
taxes and minority interest. . . . . . . . . . . . . . (6,490) (8,314) (20,881) (19,620)
Benefit from income taxes . . . . . . . . . . . . . . . . (2,143) (2,861) (6,392) (6,249)
-------- -------- --------- ---------
Loss from continuing operations before minority interest. (4,347) (5,453) (14,489) (13,371)
Minority interest . . . . . . . . . . . . . . . . . . . . - - - 7
-------- -------- --------- ---------
Loss from continuing operations . . . . . . . . . . . . . (4,347) (5,453) (14,489) (13,378)
Disposal of utility operations:
Income from utility operations, net of income tax
provision of $3,598, $6,255, $5,866 and $8,318 . . . 6,901 9,740 11,348 13,183
-------- -------- --------- ---------
NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . . . $ 2,554 $ 4,287 $ (3,141) $ (195)
======== ======== ========= =========
Basic and diluted earnings per common share:
Loss from continuing operations. . . . . . . . . . . . $ (6.54) $ (7.98) $ (21.75) $ (19.90)
Income from disposed utility operations. . . . . . . . 10.39 14.25 17.04 19.61
-------- -------- --------- ---------
Net income (loss). . . . . . . . . . . . . . . . . . . $ 3.85 $ 6.27 $ (4.71) $ (0.29)
======== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
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<TABLE>
<CAPTION>
ENERGY CORPORATION OF AMERICA
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - AMOUNTS IN THOUSANDS)
- ---------------------------------------
FOR THE NINE MONTHS ENDED
MARCH
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from continuing operations. . . . . . . . . . . . . . . . . . . . . . $(14,489) $(13,378)
Adjustment to reconcile net loss to net cash used by operating activities
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 7
Depletion, depreciation and amortization. . . . . . . . . . . . . . . . . . 9,357 9,036
Gain on sale of assets. . . . . . . . . . . . . . . . . . . . . . . . . . . (73) (1,080)
Exploration and impairment. . . . . . . . . . . . . . . . . . . . . . . . . 2,291 4,714
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,862) (1,072)
--------- ---------
(6,776) (1,773)
Changes in assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283 927
Gas in storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 285
Prepaid and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 555 3,980
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,248 (6,619)
Funds held for future distributions. . . . . . . . . . . . . . . . . . . . . . (437) (870)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,532) (11,059)
--------- ---------
Net cash used by operating activities from continuing operations. . . . . . (7,584) (15,129)
Net cash provided by operating activities from disposed operations. . . . . 7,105 11,160
--------- ---------
Net cash used by operating activities . . . . . . . . . . . . . . . . . . . (479) (3,969)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment . . . . . . . . . . . . . . . . (15,790) (19,735)
Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . 346 3,126
Notes receivable and other . . . . . . . . . . . . . . . . . . . . . . . . . . (27) 107
--------- ---------
Net cash used by investing activities from continuing operations. . . . . . (15,471) (16,502)
Net cash used by investing activities from disposed operations. . . . . . . (20,901) (7,904)
--------- ---------
Net cash used by investing activities . . . . . . . . . . . . . . . . . . . (36,372) (24,406)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . 7,250 2,500
Principal payment on long-term debt. . . . . . . . . . . . . . . . . . . . . . (13,947) (2,939)
Proceeds from short-term borrowing . . . . . . . . . . . . . . . . . . . . . . 2,000 -
Purchase of treasury stock and other financing activities. . . . . . . . . . . (233) (729)
Prepayment of future gas delivery. . . . . . . . . . . . . . . . . . . . . . . 10,000 -
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (967)
--------- ---------
Net cash provided (used) by financing activities from continuing operations 5,070 (2,135)
Net cash provided by financing activities from disposed operations. . . . . 22,986 11,784
--------- ---------
Net cash provided by financing activities . . . . . . . . . . . . . . . . . 28,056 9,649
--------- ---------
Net increase (decrease) in cash and cash equivalents. . . . . . . . . . . . (8,795) (18,726)
Cash and cash equivalents, beginning of period. . . . . . . . . . . . . . . 13,101 20,485
--------- ---------
Cash and cash equivalents, end of period. . . . . . . . . . . . . . . . . . . . . $ 4,306 $ 1,759
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
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ENERGY CORPORATION OF AMERICA
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
1. Nature of Organization
Energy Corporation of America (the "Company") was formed in June 1993 through an
exchange of shares with the common stockholders of Eastern American Energy
Corporation ("Eastern American"). The Company is an independent integrated
energy company. All references to the "Company" include Energy Corporation of
America and its consolidated subsidiaries.
Oil and Gas Exploration, Development, Production and Marketing - The Company,
- -----------------------------------------------------------------
primarily through Eastern American, is engaged in exploration, development and
production, transportation and marketing of natural gas primarily within the
Appalachian Basin states of West Virginia, Pennsylvania and Ohio.
The Company, through its wholly owned subsidiaries Westech Energy Corporation
and Westech Energy New Zealand, is engaged in the exploration for and production
of oil and natural gas primarily in the Rocky Mountains, New Zealand and
Australia.
2. Accounting Policies
Reference is hereby made to the Company's Annual Report on Form 10-K for 1999,
which contains a summary of major accounting policies followed in preparation of
its consolidated financial statements. These policies were also followed in
preparing the quarterly report included herein.
Management of the Company believes that all adjustments (consisting of only
normal recurring accruals) necessary for a fair presentation of the results of
such interim periods, included herein, have been made. The results of
operations for the period ended March 31, 2000 are not necessarily indicative of
the results to be expected for the full year.
Certain amounts in the financial statements of prior periods have been
reclassified to conform to the current period presentation. In addition, due to
the sale of the utility operations, see Note 4, amounts in the financial
statements and related notes for all periods presented have been reclassified.
3. Recently Issued Accounting Pronouncements
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting Comprehensive Income", effective July 1, 1998. The standard
establishes rules for the reporting of comprehensive income and its components.
The Company's comprehensive income (loss) consists of foreign currency
translation adjustments.
7
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In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued, which is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and hedging activities. It requires
the recognition of all derivative instruments as assets or liabilities in the
Company's balance sheet and measurement of those instruments at fair value. The
accounting treatment of changes in fair value is dependent upon whether or not a
derivative instrument is designated as a hedge and if so, the type of hedge.
The Company has not fully analyzed what impact the provisions of SFAS No. 133
will have on the Company's financial statements.
4. Disposal of Utility Operations
On December 20, 1999, the Company agreed to sell its utility operations,
Mountaineer Gas Company and its Subsidiaries ("Mountaineer"), to Allegheny
Energy, Inc. ("Allegheny") pursuant to a stock purchase agreement for $323
million, which includes the assumption of approximately $100 million of long
term debt and is subject to certain adjustments, resulting in net proceeds of
$223 million prior to other adjustments. The transaction is conditioned upon
the prior receipt of regulatory approval, including the approval of the
Securities and Exchange Commission pursuant to the Public Utility Holding
Company Act of 1935, the West Virginia Public Service Commission ("WVPSC") and
the Federal Trade Commission ("FTC"). The waiting period under FTC guidelines
has expired and the WVPSC issued an order on May 11, 2000 authorizing the
transaction with limited conditions. Subject to the remaining approvals being
received, the Company expects that the transaction will close in the first
quarter of the next fiscal year.
The Company has also entered into a gas sale and purchase agreement with
Allegheny whereby it will begin the delivery of natural gas beginning on or
after July 1, 2001. The Company has received a $10 million prepayment pursuant
to the agreement, which is recorded as long term deferred revenue on the balance
sheet. Potentially, the Company has the ability to receive additional
prepayments up to $20 million, pending the ability to present a letter of credit
equal to the prepayment.
The utility operations have historically been reported as a separate segment.
As a result of the sale, its disposition is considered, for accounting purposes,
to be a discontinued operation. Accordingly, amounts in the financial
statements and related notes for all periods presented have been restated.
Summarized financial statements for the utility operations are as follows, in
thousands:
8
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<S> <C> <C>
March 31, 2000 June 30, 1999
ASSETS
Cash and cash equivalents . . . . $ 3,808 $ 457
Accounts receivable . . . . . . . 41,011 22,117
Prepaid and other current assets. 13,533 24,682
--------------- --------------
Total current assets . . . . . 58,352 47,256
Property, plant and equipment . . 166,068 156,873
Deferred utility charges. . . . . 16,619 18,785
Other . . . . . . . . . . . . . . 2,663 2,674
--------------- --------------
TOTAL. . . . . . . . . . . . . . . . $ 243,702 $ 225,588
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable. . . . . . . . . $ 12,285 $ 24,575
Short term borrowings . . . . . . - 16,799
Other current liabilities . . . . 30,970 18,596
--------------- --------------
Total current liabilities. . . 43,255 59,970
Long-term debt. . . . . . . . . . 100,120 60,135
Deferred income tax liability . . 22,635 22,991
Other long-term obligation. . . . 10,862 10,819
--------------- --------------
Total liabilities. . . . . . . 176,872 153,915
Total Stockholders' equity . . 66,830 71,673
--------------- --------------
TOTAL. . . . . . . . . . . . . . . . $ 243,702 $ 225,588
=============== ==============
</TABLE>
<TABLE>
<CAPTION>
For the For the
Three Months Ended Nine Months Ended
March 31 March 31
----------------- -----------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
REVENUES:
Utility gas sales and transportation. . $74,279 $70,640 $145,112 $137,674
Other revenue . . . . . . . . . . . . . 2,124 3,115 7,593 10,116
-------- ------- --------- ---------
76,403 73,755 152,705 147,790
-------- ------- --------- ---------
COST AND EXPENSES:
Utility gas purchased . . . . . . . . . 40,547 33,421 73,934 66,162
Utility operations and maintenance. . . 6,106 5,853 17,018 16,431
General and administrative. . . . . . . 5,409 4,533 11,950 10,891
Depreciation of pipelines and equipment 4,857 4,352 10,015 8,974
Other . . . . . . . . . . . . . . . . . 6,887 7,970 16,602 18,893
-------- ------- --------- ---------
63,806 56,129 129,519 121,351
-------- ------- --------- ---------
Income from operations. . . . . . . . . 12,597 17,626 23,186 26,439
-------- ------- --------- ---------
OTHER (INCOME) EXPENSE
Interest. . . . . . . . . . . . . . . . 2,144 1,623 6,136 4,981
Other . . . . . . . . . . . . . . . . . (46) 8 (164) (43)
-------- ------- --------- ---------
Income before income taxes. . . . . . . 10,499 15,995 17,214 21,501
Provision for income taxes . . . . . . . . 3,598 6,255 5,866 8,318
-------- ------- --------- ---------
NET INCOME . . . . . . . . . . . . . . . . $ 6,901 $ 9,740 $ 11,348 $ 13,183
======== ======= ========= =========
</TABLE>
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<TABLE>
<CAPTION>
For the Nine Months Ended
March
-------------------------
<S> <C> <C>
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . . . . $ 11,348 $ 13,183
Adjustment to reconcile earnings to net cash
provided by operating activities
Depletion, depreciation and amortization . . . . 10,015 8,974
Other, net . . . . . . . . . . . . . . . . . . . (2,633) (3,434)
Changes in assets and liabilities:
Current assets. . . . . . . . . . . . . . . . . . . (5,215) (7,155)
Current liabilities . . . . . . . . . . . . . . . . (3,599) (453)
--------- ---------
Net cash provided by operating activities. . . . 9,916 11,115
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment. . . (20,901) (7,904)
--------- ---------
Net cash used by investing activities. . . . . . (20,901) (7,904)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt. . . . . . . . . . . . 40,000 -
Short term borrowings, net of prepayments . . . . . (16,814) 11,784
Debt issuance costs . . . . . . . . . . . . . . . . (200) -
Dividends to parent company . . . . . . . . . . . . (8,650) (14,500)
--------- ---------
Net cash provided (used) by financing activities 14,336 (2,716)
--------- ---------
Net increase in cash and cash equivalents. . . . 3,351 495
Cash and cash equivalents, beginning of period . 457 1,062
--------- ---------
Cash and cash equivalents, end of period . . . . . . . $ 3,808 $ 1,557
========= =========
</TABLE>
Mountaineer's various debt agreements contain certain restrictions and
conditions, including restrictions in the payment of dividends to the Company.
As of March 31, 2000, approximately $2.7 million was available for the
declaration of dividends. Mountaineer's scheduled maturities of long term debt
for each of the periods indicated is as follows (in thousands):
<TABLE>
<CAPTION>
For the Quarter Ending:
<S> <C>
June 30, 2000 . . . . . . $ 4
September 30, 2000. . . . 4
December 31, 2000 . . . . 3
March 31, 2001. . . . . . 4
--------
Total current . . . . . . 15
June 30, 2001 . . . . . . 4
For the Fiscal Year Ending:
June 30, 2002 . . . . . . 3,348
June 30, 2003 . . . . . . 3,348
June 30, 2004 . . . . . . 3,348
June 30, 2005 . . . . . . 3,348
Thereafter. . . . . . . . 86,724
--------
Total. . . . . . . . . $100,135
========
</TABLE>
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5. Earnings per Share
A reconciliation of the components of basic and diluted net loss per common
share is as follows:
<TABLE>
<CAPTION>
Per-Share
Loss Shares Amount
----- -------- --------
<S> <C> <C> <C>
Three months ended March 31, 2000
Basic and Diluted Earnings per Share
Loss from continuing operations available to
common shareholders . . . . . . . . . . . $ (4,347,000) 664,401 $ (6.54)
Nine months ended March 31, 2000
- -------------------------------------------------
Basic and Diluted Earnings per Share
Loss from continuing operations available to
common shareholders . . . . . . . . . . . $(14,489,000) 666,003 $(21.75)
Three months ended March 31, 1999
- -------------------------------------------------
Basic and Diluted Earnings per Share
Loss from continuing operations available to
common shareholders . . . . . . . . . . . $ (5,453,000) 683,350 $ (7.98)
Nine months ended March 31, 1999
- -------------------------------------------------
Basic and Diluted Earnings per Share
Loss from continuing operations available to
common shareholders . . . . . . . . . . . $(13,378,000) 672,121 $(19.90)
</TABLE>
The effect of outstanding stock options during the current period was not
included in the computation of diluted earnings per share because to do so would
have been antidilutive.
6. The Company adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," in fiscal 1999. The Company's reportable
business segments have been identified based on the differences in products and
service provided. Revenues for the exploration and production segment are
derived from the production and sale of natural gas and crude oil. Revenues for
the marketing and pipeline segment arise from the marketing of both Company and
third party produced natural gas volumes and the related transportation. The
Company utilizes earnings before interest, taxes, depreciation, depletion,
amortization and exploratory costs ("EBITDAX") to evaluate the operations of
each segment.
11
<PAGE>
Summarized financial information for the Company's reportable segments for
continuing operations is as follows (in thousands):
<TABLE>
<CAPTION>
Exploration Marketing
and and
Production Pipeline Other Consolidated
----------- --------- ------ -------------
<S> <C> <C> <C> <C>
For the nine months ended March 31, 2000
Sales to unaffiliated customers. . . . . . . . . . $ 21,810 $54,734 $ 76,544
Intersegment revenues. . . . . . . . . . . . . . . - - -
Depreciation, depletion, amortization. . . . . . . 7,716 773 269 8,758
Exploratory costs. . . . . . . . . . . . . . . . . 3,469 3,469
Operating profit (loss). . . . . . . . . . . . . . (545) (637) (3,446) (4,628)
Interest expense . . . . . . . . . . . . . . . . . 48 2 16,906 16,956
EBITDAX. . . . . . . . . . . . . . . . . . . . . . 11,188 (155) (2,731) 8,302
Total assets, net of utility assets held for sale. 130,753 59,449 26,066 216,268
Capital expenditures . . . . . . . . . . . . . . . 15,607 131 52 15,790
- ----------------------------------------------------- --------- -------- -------- ---------
For the nine months ended March 31, 1999
- -----------------------------------------------------
Sales to unaffiliated customers. . . . . . . . . . 18,624 63,747 191 82,562
Intersegment revenues. . . . . . . . . . . . . . . 7,194 7,194
Depreciation, depletion, amortization. . . . . . . 7,346 831 259 8,436
Exploratory costs. . . . . . . . . . . . . . . . . 5,104 5,104
Operating profit (loss). . . . . . . . . . . . . . (3,779) 471 (3,139) (6,447)
Interest expense . . . . . . . . . . . . . . . . . 85 2 15,010 15,097
EBITDAX. . . . . . . . . . . . . . . . . . . . . . 10,564 1,163 (2,717) 9,010
Total assets, net of utility assets held for sale. 127,366 61,480 27,092 215,938
Capital expenditures . . . . . . . . . . . . . . . 16,722 419 2,594 19,735
- ----------------------------------------------------- --------- -------- -------- ---------
</TABLE>
Operating profit (loss) represents revenues less costs which are directly
associated with such operations. Revenues are priced and accounted for
consistently for both unaffiliated and intersegment sales. The 'Other' column
includes corporate-related items, including corporate debt, non-reportable
segments and elimination items. Included in the total assets of the exploration
and production segment are net long-lived assets located in New Zealand of $4.5
million and $3.9 million, as of March 31, 2000 and 1999, respectively. Net
long-lived assets located in Australia as of March 31, 2000 totaled $0.5
million.
7. Debt
A rollforward of the debt from June 30, 1999 to March 31, 2000, is as follows
(in thousands):
<TABLE>
<CAPTION>
Current
Portion Long Long Term Total Long
Term Debt Debt Term Debt
---------- --------- ----------
<S> <C> <C> <C>
Balance at June 30, 1999 . . . $ 6,618 $219,886 $226,504
Long term debt payment . . . (13,947) (13,947)
Draw on revolving debt . . . 7,250 7,250
Reclassify long term debt to
current portion . . . . . 2,033 (2,033)
--------- --------- ---------
Balance at March 31, 2000. . . $ 1,954 $217,853 $219,807
========= ========= =========
</TABLE>
12
<PAGE>
The Company's scheduled maturities of long term debt for each of the periods
indicated is as follows (in thousands):
<TABLE>
<CAPTION>
For the Quarter Ending:
<S> <C>
June 30, 2000 . . . . . . $ 898
September 30, 2000. . . . 889
December 31, 2000 . . . . 139
March 31, 2001. . . . . . 28
--------
Total current . . . . . . 1,954
June 30, 2001 . . . . . . 28
For the Fiscal Year Ending:
June 30, 2002 . . . . . . 17,363
June 30, 2003 . . . . . . 113
June 30, 2004 . . . . . . 113
June 30, 2005 . . . . . . 113
Thereafter. . . . . . . . 200,123
--------
Total. . . . . . . . . $219,807
========
</TABLE>
The Company's various debt agreements contain certain restrictions and
conditions among which are limitations on indebtedness, funding of certain
subsidiaries, dividends and investments, and certain tangible net worth and debt
and interest coverage ratio requirements. The agreements require the Company to
maintain certain financial conditions, including a minimum net worth,
restriction on funded debt and restrictions on the amount of dividends that can
be declared.
8. Contingencies
The Company is involved in various legal actions and claims arising in the
ordinary course of business. Management does not expect these matters to have a
material adverse effect on the Company's financial position.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
------- --------------------------------------------------
OPERATIONS AND FINANCIAL CONDITION
----------------------------------
This discussion and analysis of financial condition and results of
operations, and other sections of this Form 10-Q, contain forward-looking
statements that are based on management's beliefs, assumptions, current
expectations, estimates and projections about the oil and gas industry, the
economy and about the Company itself. Words such as "anticipates," "believes,"
"estimates," "expects," "forecasts," "intends," "is likely," "plans,"
"predicts," "projects," variations of such words and similar expressions are
intended to identify such forward-looking statements. These statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict with regard to timing, extent,
likelihood and degree of occurrence. Therefore, actual results and outcomes may
materially differ from what may be expressed or forecasted in such
forward-looking statements. Furthermore, the Company undertakes no obligation
to update, amend or clarify forward-looking statements, whether as a result of
new information, future events or otherwise.
Important factors that could cause actual results to differ materially from
the forward-looking statements include, but are not limited to, weather
conditions, changes in production volumes, worldwide demand and commodity prices
for petroleum natural resources, the timing and extent of the Company's success
in discovering, acquiring, developing and producing oil and natural gas
reserves, risks incident to the drilling and operation of oil and natural gas
wells, future production and development costs, the effect of existing and
future laws, governmental regulations and the political and economic climate of
the United States, Australia and New Zealand, the effect of hedging activities,
and conditions in the capital markets.
DISPOSAL OF UTILITY OPERATIONS
- ---------------------------------
On December 20, 1999, the Company entered into a stock purchase and sale
agreement, a copy of which was filed on the Company's form 8-K filed January 10,
2000, with Allegheny Energy, Inc., wherein the Company agreed to sell all of the
stock its wholly owned utility, Mountaineer Gas Company ("Mountaineer") and
Subsidiaries for $323 million, which includes the assumption of approximately
$100 million of debt, ($223 million net to the Company). The sale is subject to
regulatory approval by the Securities and Exchange Commission pursuant to the
Public Utility Holding Company Act of 1935, the West Virginia Public Service
Commission ("WVPSC") and the Federal Trade Commission ("FTC"). The waiting
period under FTC guidelines has expired and the WVPSC issued an order on May 11,
2000 authorizing the transaction with limited conditions. Subject to the
remaining approvals being received, the Company expects that the transaction
will close in the first quarter of the next fiscal year. At this time, the
Company expects to realize an after-tax gain of approximately $100 million on
this transaction and to net approximately $175 million in cash proceeds from
this sale. The use of these proceeds are restricted by debt covenants.
The financial statements have been reclassified to exclude the operating
results of this segment from continuing operations, effective December 31, 1999,
and for accounting purposes classify such results as discontinued operations
(see Note 4). The following discussion, unless otherwise noted, relates only to
the Company's continuing operations.
14
<PAGE>
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000
- --------------------------------------------------------------------------------
AND 1999
- ---------
The Company recorded a net loss from continuing operations of $4.3 million
for the three months ended March 31, 2000 compared to a net loss from continuing
operations of $5.4 million for the same period in 1999. The increase in income
of $1.1 million is attributed to the net of a $1.2 million decrease in revenue,
a $3.4 million decrease in operating expenses, a $0.1 million increase in other
non-operating income, a $0.4 million increase in interest expense and a $0.8
million decrease in income tax benefits.
REVENUES. Total revenues decreased $1.2 million or 5.1% between the periods.
- --------
The decrease was due to a 16.0% decrease in gas marketing and pipeline sales,
which was offset by a 48.6% increase in oil and gas sales.
Revenues from gas marketing and pipeline sales decreased $3.0 million from
$18.9 million during the period ended March 31, 1999 to $15.9 million during the
period ended March 31, 2000. The decrease in revenue is primarily attributable
to a 29% decline in marketed gas volumes from 7.9 Mmbtu to 5.6 Mmbtu, partially
offset by a 19% increase in the average sales price per Mmbtu from $2.31 for the
quarter ended March 31, 1999 to $2.74 for the quarter ended March 31, 2000. The
decline in volumes for the quarter ended March 31, 2000 was primarily
attributable to the reduction of trading activity volumes as a result of a
change in the marketing focus. At the end of the last fiscal year, the Company
determined that it would no longer enter into contracts to purchase and resell
independent producers gas, as this business was becoming more competitive and
less economical to maintain.
Revenues from oil and gas sales increased $1.9 million from $4.0 million
for the period ended March 31, 1999 to $5.9 million for the period ended March
31, 2000. The increase in revenue is primarily attributable to a 109% increase
in the average per barrel oil price from $11.31 to $23.63 and a 27.5% increase
in the average per Mcf gas price from $2.02 to $2.58 between March 31, 1999 and
2000. The decline rate for mature Appalachian Basin production from Devonian
formations is approximately 7% per year. The Company's production volume for
the three months ended March 31, 2000 was 2.1 Bcfe, an increase of 10% as
compared to 1.9 Bcfe produced in the three months ended March 31, 1999.
COSTS AND EXPENSES. The Company's costs and expenses decreased $3.4
--------------------
million or 12.2% during this period primarily as the result of a 12.7% decrease
in gas marketing and pipeline costs and a 76.8% decrease in impairment and
exploratory costs. Field and lease operating expenses, general and
administrative expenses, taxes other than income and depreciation, depletion and
amortization costs remained relatively constant between the periods.
The $2.3 million decrease in gas marketing and pipeline costs is primarily
the result of a 30% decline in purchased gas volumes from 8.0 Mmbtu to 5.6 Mmbtu
from March 31, 1999 to March 31, 2000. Partially offsetting this decline in
volume was a 20% increase in the average price paid for gas purchased, from
$2.26 per Mmbtu to $2.70 per Mmbtu between periods. Additionally, approximately
$0.7 million of purchased gas costs were charged against a reserve for losses on
future gas purchases during the three months ended March 31, 1999.
Impairment and exploratory expenses decreased $1.8 million primarily due to a
decrease in Rocky Mountain drilling activity.
INTEREST EXPENSE. Interest expense increased $0.4 million between the periods
- -----------------
due to the net addition to long-term debt, including the current portion, of
$18.2 million, when comparing March 31, 2000 to March 31, 1999.
15
<PAGE>
BENEFIT FOR INCOME TAXES. The benefit for income taxes decreased $0.8
---------------------------
million primarily because of the decreased pre-tax loss.
DISPOSAL OF UTILITY OPERATIONS. Net income from the utility operations
- ---------------------------------
decreased between the periods $2.8 million or 29.2%. The decrease was primarily
the result of increased utility gas purchased and interest expense. The utility
gas purchased costs increased $7.1 million primarily due to a gas supply
agreement, effective November 1, 1998, in which the demand costs associated with
transmission services are included in a fixed price per Dth delivered to
Mountaineer's city gate rather than the previous fixed monthly charge. This was
partially offset by a $3.6 million increase in utility gas sales and transport
related to the acquisition of 3,600 additional customers from Shenandoah Gas
Company. Interest expense increased $0.5 million due primarily to the
additional debt issued November 1, 1999 of $10 million at 7.83% interest and $30
million at 8.09% interest.
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND
- --------------------------------------------------------------------------------
1999
- ----
The Company recorded a net loss from continuing operations of $14.5 million
for the nine months ended March 31, 2000 compared to a net loss from continuing
operations of $13.4 million for the same period in 1999. The decrease in income
of $1.1 million is attributed to the net of a $13.2 million decrease in revenue,
a $15.0 million decrease in operating expenses, a $1.2 million decrease in other
non-operating income, a $1.8 million increase in interest expense and a $0.1
million increase in income tax benefits.
REVENUES. Total revenues decreased $13.2 million or 14.7% between the periods.
- --------
The decrease was due to a 22.8% decrease in gas marketing and pipeline sales,
which was offset by a 25.7% increase in oil and gas sales. Other operating
revenue remained relatively constant between the periods.
Revenues from gas marketing and pipeline sales decreased $16.2 million from
$70.9 million during the period ended March 31, 1999 to $54.7 million during the
period ended March 31, 2000. The decrease in revenue is primarily attributable
to a 35% decline in marketed gas volumes from 30.0 Mmbtu to 19.5 Mmbtu,
partially offset by an 18% increase in the average sales price per Mmbtu from
$2.31 for the nine months ended March 31, 1999 to $2.73 for the nine months
ended March 31, 2000. The decline in volumes for the period ended March 31,
2000 was partially attributable to the expiration of contracts. Also
contributing to the decreased revenue is the reduction of trading activity
volumes as a result of a change in the marketing focus. At the end of the last
fiscal year, the Company determined that it would no longer enter into contracts
to purchase and resell independent producers gas, as this business was becoming
more competitive and less economical to maintain.
Revenues from oil and gas sales increased $3.5 million from $13.7 million
for the period ended March 31, 1999 to $17.2 million for the period ended March
31, 2000. The increase in revenue is primarily attributable to a 102.4%
increase in the average per barrel oil price from $10.29 to $20.83 and a 20.7%
increase in the average per Mcf gas price from $2.16 to $2.61 between March 31,
1999 and 2000. The decline rate for mature Appalachian Basin production from
Devonian formations is approximately 7% per year. The Company's production
volume for the nine months ended March 31, 2000 was 6.0 Bcfe, as compared to 6.1
Bcfe produced in the nine months ended March 31, 1999.
COSTS AND EXPENSES. The Company's costs and expenses decreased $15.0
--------------------
million or 15.6% during this period primarily as the result of a 21.4% decrease
in gas marketing and pipeline costs and a 32% decrease in impairment and
exploratory costs. Field and lease operating expenses, general and
administrative expenses, taxes other than income, and depreciation, depletion
and amortization remained relatively constant between the periods.
16
<PAGE>
The $14.6 million decrease in gas marketing and pipeline costs is primarily
the result of a 35% decline in purchased gas volumes from 30.3 Mmbtu to 19.6
Mmbtu from March 31, 1999 to March 31, 2000. Partially offsetting this decline
in volumes was a 17% increase in the average price paid for gas purchased, from
$2.28 per Mmbtu to $2.66 per Mmbtu between periods. Additionally, approximately
$2.2 million of purchased gas costs were charged against a reserve for losses on
future gas purchases during the nine months ended March 31, 1999.
INTEREST EXPENSE. Interest expense increased $1.8 million between the
-----------------
periods due to the net addition to long-term debt, including the current
portion, of $18.2 million, when comparing March 31, 2000 to March 31, 1999.
OTHER (INCOME) EXPENSE. Other income decreased $1.2 million primarily due
-----------------------
to the recognition of gains on the sale of property during the fiscal year 1999.
BENEFIT FOR INCOME TAXES. The benefit for income taxes increased $0.1
---------------------------
million primarily because of the increased pre-tax loss.
DISPOSAL OF UTILITY OPERATIONS. Net income from the utility operations
- ---------------------------------
decreased between the periods $1.8 million or 13.9%. Revenues increased
primarily due to increased volumes of gas sold resulting from the acquisition of
the West Virginia assets of Shenandoah Gas Company, which included approximately
3,600 additional customers. This increase in revenues was offset by increased
utility gas purchased and interest expense. The utility gas purchased costs
increased $7.8 million primarily due to increased volumes purchased. This
increase was partially offset by a $2.1 million refund from Mountaineer's
primary transmission service provider and a gas supply agreement, effective
November 1, 1998, in which the demand costs associated with transmission
services are included in a fixed price per Dth delivered to Mountaineer's city
gate rather than the previous fixed monthly charge. Interest expense increased
$1.2 million primarily due to the additional debt issued November 1, 1999 of $10
million at 7.83% interest and $30 million at 8.09% interest.
LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------
The Company's financial condition has remained relatively stable during the
current nine month period, as the ratio of current assets to current liabilities
(excluding "net utility assets held for sale" of $68.6 million for the current
period and $70.1 million for the period ended June 30, 1999) decreased
marginally from 1.04:1 at June 30, 1999 to 0.99:1 at March 31, 2000. Cash and
cash equivalents decreased from $13.1 million at June 30, 1999 to $4.3 million
at March 31, 2000. On April 24, 2000, the Company received, in the ordinary
course of business, a $15 million distribution (consisting of a $7.0 million
dividend and $8.0 million tax payment) from its wholly owned subsidiary
Mountaineer (See Disposal of Utility Operations). The dividend was declared
prior to March 31, 2000 and is included on the balance sheet in other current
assets. Subsequent to this declaration, under their debt covenants, Mountaineer
had an additional $2.7 million available for the declaration of dividends. The
Company used the $15 million distribution to pay down its revolving line of
credit. Prior to May 15, 2000, the Company will borrow an additional $11
million on the revolving line of credit and those proceeds, will be used in
part, to pay the semi-annual interest of $9.5 million on the Senior Subordinated
Notes.
17
<PAGE>
The Company's net cash used by operating activities from continuing
operations decreased to $(7.6) million for the nine month period ended March 31,
2000 ("current period") from $(15.1) million for the nine month period ended
March 31, 1999 ("prior period"). The primary net uses of cash from continuing
operations for the current period versus the prior period were the net losses
from continuing operations of $14.5 million and $13.4 million plus adjustments
for non-cash charges inclusive of depreciation, depletion and amortization of
$9.4 million and $9.0 million, exploration and impairment of $2.3 million and
$4.7 million, offset by non-cash gain on the sale of certain non-core assets of
$0.1 million and $1.1 and other non-cash reductions of $3.9 million and $1.1
million respectively. Net cash used by operating activities from continuing
activities was also impacted by decreases in accounts receivable of $0.3 million
and $0.9 million, decreases in gas in storage and prepaid of $0.6 million and
$4.3 million, respectively. These sources were primarily offset by an increase
in accounts payable during the current period of $1.3 million and a decrease in
accounts payable during the prior period of $6.6 million and decreases of $3.0
million and $11.9 million in funds held and other accrued expenses for the
periods, respectively.
The Company incurred a net cash outflow of $15.5 million from investing
activities from continuing activities for the current nine-month period versus a
cash outflow of $16.5 million in the prior period. The reduction in capital
expenditure activities of $15.8 million compared to $19.7 million, respectively,
were related primarily to reduced oil and gas drilling activities. The use of
cash for investing activities was offset by cash received from sales of non-core
assets by $0.3 million in the current period and $3.1 million in the prior
period.
The Company's financing activities from continuing activities in the
current period resulted in the Company's debt balance and borrowing base, under
the revolving credit facility, being reduced by the mandatory payments of $4.5
million in accordance with the Company's amended revolving debt agreement. In
addition, the amended revolving credit agreement requires further mandatory
borrowing base reductions and payments of $0.8 million prior to June 30, 2000
and an additional payment of $0.8 million prior to September 30, 2000.
Moreover, activity in the normal course of business resulted in the Company
repaying an additional $9.0 million and borrowing $7.3 million within the
facility's borrowing limitations. During the current period, short-term debt
increased $2.0 million for the acquisition of an 85% interest in 68.5 net wells
with reserves of 5.1 Bcf for a cost of $3.0 million. This note becomes due on
November 30, 2000. In addition, during the current period the Company purchased
$0.2 million of treasury stock in discretionary transactions. The net cash
inflow of $5.1 million for the current period resulted primarily from the
receipt of $10 million in the form of a cash prepayment under a gas sale
agreement (See Note 4). Under this agreement, the Company will be obligated to
begin delivery of certain volumes of gas on July 1, 2001 or repay the monies
advanced. The primary sources of cash from financing activities in the prior
period were long-term borrowings of $2.5 million offset by principal repayments
on long-term debt of $2.9 million, treasury stock purchases of $0.7 million and
dividend payments of $1.0 million.
At March 31, 2000, the Company's principal sources of liquidity consisted
of $4.3 million of cash, with no amounts available under short-term credit
facilities currently in place. The Company has a $20.5 million revolving line
of credit agreement that will be subject to a borrowing base redetermination by
the lenders on June 30, 2000 and which expires in March 2003. Under this credit
facility, $18.8 million (including short-term portion) was outstanding at March
31, 2000, which provided an availability of $1.7 million at March 31, 2000. The
$20.5 million credit availability will be reduced to $19.7 million at June 30,
2000 and further reduced to $19.0 million at September 30, 2000. The Company
may borrow up to such reduced limits at any time during the periods indicated.
The Company is highly leveraged with a debt to equity ratio of 19.74 to 1 at
March 31, 2000. On October 12, 1999, Moody's Investor Service downgraded the
credit rating of the Company's Senior Subordinated Notes to Caa1 and Standard
and Poor's lowered its credit rating on these notes to single 'B' minus. In the
event that the sale of Mountaineer and Subsidiaries receives regulatory approval
and the transaction is consummated as discussed herein, the debt to equity ratio
of the Company will improve to an estimated 2 to 1.
18
<PAGE>
Pursuant to the terms of the Company's $200 million Senior Subordinated
Notes (the "Notes"), the Company has the option within 360 days of receipt of
the net proceeds from the sale of the stock of Mountaineer to apply such
proceeds (a) to reduce debt senior to or pari passu with the Notes, provided
that in connection with the reduction of pari passu debt a pro rata portion of
the Notes is redeemed; (b) to acquire a controlling interest in another business
engaged in either natural gas distribution or the exploration, development or
operation of oil, gas or other hydrocarbon properties (an "Energy Business");
(c) to make capital expenditures in respect to the Company's or its restricted
subsidiaries' Energy Business; (d) to purchase long term assets that are used or
useful in the Energy Business; or (e) to repurchase the Notes. If the Company
does not apply all of the net proceeds in accordance with one of the above
options within 360 days of receipt of such proceeds, then with respect to those
net proceeds which were not applied to one of the above options, the Company
must make an offer to the holders of the Notes, (and holders of the pari passu
debt, to the extent required by the terms of the pari passu debt) to repurchase
the maximum principal amount of the Notes and any pari passu debt at an offer
price in cash equal to 100% of the principal amount thereof, plus accrued and
unpaid interest thereon to the date of the purchase.
It is the intention of the Company to seek to reinvest such proceeds into
Energy Business assets. A component of the Company's reinvestment strategy will
be to expand its exploration and development activities, both domestically and
internationally. In addition to the Company's exploration and development
drilling activities associated with this reinvestment program, the Company will
seek to satisfy the reinvestment requirement by engaging in acquisitions of
utility assets or oil and natural gas reserves and properties. There can be no
assurance that the Company will be able to acquire exploration or development
drilling opportunities or to identify acquisition candidates in the required 360
day time period. Further, there can be no assurance that the drilling
activities associated with the reinvestment program will achieve commercial
success or that any future acquisitions made by the Company will achieve desired
profitability objectives. In addition to cash and available credit facilities,
the Company may from time to time seek to raise additional capital in the debt
and capital markets. The availability and attractiveness of such sources of
financing will depend upon a number of factors, some of which will relate to the
financial condition and performance of the Company, and some of which will be
beyond the Company's control, such as prevailing interest rates, oil and gas
prices, weather patterns, credit agency rating reports and other market
conditions. The Company's liquidity is directly affected by such factors.
Other than the reinvestment program described above and certain drilling
obligations ($1.5 million at March 31, 2000) incurred in the normal course of
business, the timing of the Company's capital expenditures is mostly
discretionary with no material capital expenditure commitments. Consequently,
the Company has a significant degree of flexibility to adjust its level of such
expenditures as circumstances warrant. Although the Company's cash requirements
will fluctuate based on timing and the extent of the interplay of the factors
discussed above, management believes that cash generated from continuing oil and
gas operations, the use of net proceeds from the sale of Mountaineer (as
permitted under provisions of the related debt agreements), together with the
liquidity provided by existing cash balances and borrowing capability and by
investments in new "Energy Business" assets, if any, will be sufficient to
satisfy commitments for capital expenditures, debt service obligations, working
capital needs and other cash requirements for the next year.
19
<PAGE>
The Company believes that its existing capital resources, its mitigating
management efforts, and its expected fiscal year 2000 results of operations and
cash flows from operating activities will be sufficient for the Company to
remain in compliance with the requirements of its Senior Subordinated Debt and
its Revolving Credit Facility. However, since future results of operations,
cash flow from operating activities, debt service capability, and levels and
availability of capital resources and continuing liquidity are dependent on
future weather patterns, maintaining current levels of oil and gas commodity
sales prices and production volume levels, future exploration and development
drilling success and successful acquisition transactions, no assurance can be
given that the Company will not continue to report substantial net losses from
continuing operations or that debt service or debt covenant violations will not
occur. In such instances, the Company may elect to increase debt levels (see
discussion above), restructure debt agreements (including debt agreements with
additional lenders), sell core and non-core assets, defer discretionary capital
expenditures, curtail certain domestic and international oil and gas programs or
take other actions necessary to mitigate liquidity short-falls and debt
agreement violations or acquire new or additional capital resources, although no
assurances can be given that such actions will be successful.
20
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any legal actions that would materially affect the
Company's operations or financial statements.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 27 Financial Data Schedule
(b) Reports on Form 8-K. The Company filed a report on Form 8-K, Item 5,
dated January 10, 2000, reporting the arrangement to enter into a stock purchase
agreement to sell its utility operations, Mountaineer Gas Company, to Allegheny
Energy, Inc.
21
<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 under
signed thereunto, duly authorized, in the City of Denver, State of Colorado, on
the 15th day of May, 2000.
ENERGY CORPORATION OF AMERICA
By: /s/John Mork
----------------------
John Mork
Chief Executive
Officer and Director
By: /s/Michael S. Fletcher
------------------------
Michael S. Fletcher
Chief Financial Officer
and Treasurer
22
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
27 Financial Data Schedule
23
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS AND STATEMENTS OF OPERATIONS ON PAGES 3-6 OF THE COMPANY'S MARCH
31, 2000 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 4306
<SECURITIES> 0
<RECEIVABLES> 15066
<ALLOWANCES> 429
<INVENTORY> 282
<CURRENT-ASSETS> 98447
<PP&E> 253244
<DEPRECIATION> 89894
<TOTAL-ASSETS> 284906
<CURRENT-LIABILITIES> 30114
<BONDS> 217853
0
0
<COMMON> 721
<OTHER-SE> 10517
<TOTAL-LIABILITY-AND-EQUITY> 284906
<SALES> 76544
<TOTAL-REVENUES> 76544
<CGS> 59517
<TOTAL-COSTS> 81172
<OTHER-EXPENSES> (673)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16956
<INCOME-PRETAX> (20881)
<INCOME-TAX> (6392)
<INCOME-CONTINUING> (14489)
<DISCONTINUED> 11348
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3141)
<EPS-BASIC> (4.71)
<EPS-DILUTED> (4.71)
</TABLE>
