<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995 Commission File No. 1-3183
ENSERCH CORPORATION
Incorporated - State of Texas I.R.S. Identification No. 75-0399066
ENSERCH Center, 300 South St. Paul, Dallas, Texas 75201
Registrant's telephone number, including Area Code: 214-651-8700
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 twelve 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
----- -----
Number of shares of Common Stock of Registrant outstanding as of
August 11, 1995: 68,402,627
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<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
(In thousands except per share amounts)
<S> <C> <C> <C> <C>
Revenues
Natural gas and oil exploration and production. . . . . . $ 47,987 $ 44,473 $ 89,648 $ 95,210
Natural gas pipeline & GPM. . . . . . . . . . . . . . . . 234,644 266,178 505,344 573,548
Natural gas distribution. . . . . . . . . . . . . . . . . 144,736 140,521 507,981 502,311
Power . . . . . . . . . . . . . . . . . . . . . . . . . . 8,933 9,979 17,524 18,166
Less intercompany revenues. . . . . . . . . . . . . . . . (40,140) (51,189) (111,696) (143,092)
--------- -------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . 396,160 409,962 1,008,801 1,046,143
--------- -------- --------- ---------
Costs and Expenses
Gas purchase. . . . . . . . . . . . . . . . . . . . . . . 240,315 271,049 635,671 686,300
Operating expenses. . . . . . . . . . . . . . . . . . . . 98,367 85,305 191,196 174,579
Depreciation and amortization . . . . . . . . . . . . . . 38,543 33,245 69,758 67,315
Gross receipts and production taxes . . . . . . . . . . . 12,961 12,489 29,384 30,085
Payroll, ad valorem and other taxes . . . . . . . . . . . 9,912 8,683 19,198 17,437
--------- -------- --------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . 400,098 410,771 945,207 975,716
--------- -------- --------- --------
Operating Income (Loss). . . . . . . . . . . . . . . . . . . (3,938) (809) 63,594 70,427
Other Income (Expense) - Net . . . . . . . . . . . . . . . . 114 (688) (775) (2,054)
Interest Expense . . . . . . . . . . . . . . . . . . . . . . (18,919) (16,683) (36,505) (33,283)
--------- -------- -------- --------
Income (Loss) Before Income Taxes. . . . . . . . . . . . . . (22,743) (18,180) 26,314 35,090
Income Taxes (Benefit) . . . . . . . . . . . . . . . . . . . (8,231) (6,057) 9,890 11,762
--------- -------- -------- --------
Income (Loss) from Continuing Operations . . . . . . . . . . (14,512) (12,123) 16,424 23,328
Income from Discontinued Operations. . . . . . . . . . . . . 743 1,305
--------- -------- -------- --------
Net Income (Loss). . . . . . . . . . . . . . . . . . . . . . (14,512) (11,380) 16,424 24,633
Provision for Dividends on Preferred Stock . . . . . . . . . 3,101 2,892 6,257 5,856
--------- -------- -------- --------
Earnings (Loss) Applicable to Common Stock . . . . . . . . . $ (17,613) $(14,272) $ 10,167 $ 18,777
========= ======== ======== ========
Per Share of Common Stock
Income (loss) from continuing operations after provision
for dividends on preferred stock. . . . . . . . . . . . $ (.26) $ (.22) $ .15 $ .26
Discontinued operations . . . . . . . . . . . . . . . . . .01 .02
-------- -------- -------- --------
Earnings (loss) applicable to common stock. . . . . . . . $ (.26) $ (.21) $ .15 $ .28
======== ======== ======== ========
Cash dividends declared . . . . . . . . . . . . . . . . . $ .05 $ .05 $ .10 $ .10
======== ======== ======== ========
Average Common and Dilutive Common
Equivalent Shares Outstanding. . . . . . . . . . . . . . . 68,198 67,968 68,233 68,014
======== ======== ======== ========
Operating Income (Loss) of Major Businesses
Natural gas and oil exploration and production . . . . . . $ (4,346) $ 6,603 $ (3,990) $ 16,200
Natural gas pipeline & GPM . . . . . . . . . . . . . . . . 1,506 (700) 35,845 31,228
Natural gas distribution . . . . . . . . . . . . . . . . . 1,488 (5,295) 36,122 27,483
Power. . . . . . . . . . . . . . . . . . . . . . . . . . . (788) 799 (515) 248
<FN>
See accompanying Notes.
</TABLE>
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<TABLE>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED STATEMENTS OF CONSOLIDATED
CASH FLOWS (UNAUDITED)
<CAPTION>
Six Months Ended
June 30
------------------------
1995 1994
---- ----
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . $ 16,424 $ 23,328
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . 69,758 67,315
Deferred income-tax expense. . . . . . . . . . . . . . . . . . . . . . . . . . 4,681 6,555
Recoveries of gas-purchase contract settlements. . . . . . . . . . . . . . . . 20,994 22,800
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,581 (20,613)
Changes in current operating assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,244 79,753
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,893 (1,694)
Accounts payable and other accrued liabilities . . . . . . . . . . . . . . . (64,001) (49,596)
Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . (4,606) 328
Litigation judgement payable . . . . . . . . . . . . . . . . . . . . . . . . (62,498)
-------- --------
Net cash flows from operating activities . . . . . . . . . . . . . . . . . 170,968 65,678
-------- --------
INVESTING ACTIVITIES
Purchases of businesses, net of cash acquired. . . . . . . . . . . . . . . . . (340,888)
Additions to property, plant and equipment . . . . . . . . . . . . . . . . . . (135,516) (122,394)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (36,640) (11,987)
Discontinued operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,965 (90,161)
-------- --------
Net cash flows used for investing activities . . . . . . . . . . . . . . . (505,079) (224,542)
-------- --------
FINANCING ACTIVITIES
Change in commercial paper and other short-term borrowings . . . . . . . . . . (32,038) 152,640
Borrowings under EEX bank revolving credit agreement . . . . . . . . . . . . . 350,000
Borrowings under EEX bridge loan . . . . . . . . . . . . . . . . . . . . . . . 150,000
Repayment of DALEN bank debt assumed at acquisition. . . . . . . . . . . . . . (115,000)
Issuance of senior long-term debt. . . . . . . . . . . . . . . . . . . . . . . 149,045 149,253
Retirement of senior long-term debt. . . . . . . . . . . . . . . . . . . . . . (155,640) (109,683)
Issuance of Series F Preferred Stock . . . . . . . . . . . . . . . . . . . . . 72,836
Retirement of Series D Preferred Stock . . . . . . . . . . . . . . . . . . . . (75,000)
Other financing activities - net . . . . . . . . . . . . . . . . . . . . . . . 2,447 (31,272)
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,309 1,909
Cash dividends paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,016) (12,451)
-------- --------
Net cash flows from financing activities . . . . . . . . . . . . . . . . . 338,107 148,232
-------- --------
Net Increase (Decrease) in Cash and Equivalents. . . . . . . . . . . . . . . . . 3,996 (10,632)
Cash and Equivalents at Beginning of Period. . . . . . . . . . . . . . . . . . . 9,811 32,920
-------- --------
Cash and Equivalents at End of Period. . . . . . . . . . . . . . . . . . . . . . $ 13,807 $ 22,288
======== ========
<FN>
See accompanying Notes.
</TABLE>
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<TABLE>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(June 30, 1995 Unaudited)
<CAPTION>
June 30 December 31
1995 1994
------- -----------
(In thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,807 $ 9,811
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 166,091 224,500
Gas stored underground . . . . . . . . . . . . . . . . . . . . . . . . . . 109,210 114,862
Advances and prepayments for gas . . . . . . . . . . . . . . . . . . . . . 22,319 28,622
Gas-purchase settlements recoverable from customers. . . . . . . . . . . . 14,820 23,943
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,228 128,706
---------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 395,475 530,444
---------- ----------
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,962 56,165
---------- ----------
Property, Plant and Equipment (full-cost
method for gas and oil properties) . . . . . . . . . . . . . . . . . . . . 4,371,480 3,803,202
Less accumulated depreciation and amortization . . . . . . . . . . . . . . (1,607,082) (1,549,717)
---------- ----------
Net property, plant and equipment. . . . . . . . . . . . . . . . . . . . 2,764,398 2,253,485
---------- ----------
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,470 48,443
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,272,305 $2,888,537
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Commercial paper and other short-term borrowings . . . . . . . . . . . . . $ 122,203 $ 154,241
Current portion of senior long-term debt . . . . . . . . . . . . . . . . . 312,000 10,600
Accounts payable and other accrued liabilities . . . . . . . . . . . . . . 333,024 434,262
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,849 35,885
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,849 52,552
---------- ----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . 840,925 687,540
---------- ----------
Senior Long-term Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . 757,968 715,721
---------- ----------
Convertible Subordinated Debentures. . . . . . . . . . . . . . . . . . . . . 90,750 90,750
---------- ----------
Deferred Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 287,110 280,051
---------- ----------
Other Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226,079 201,187
---------- ----------
Minority Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,073 12,101
---------- ----------
Shareholders' Equity
Adjustable rate preferred stock. . . . . . . . . . . . . . . . . . . . . . 175,000 175,000
---------- ----------
Common shareholders' equity
Common stock (100,000 shares authorized;
68,377 and 68,158 shares outstanding). . . . . . . . . . . . . . . . . 304,276 303,301
Paid in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337,337 334,672
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,545 89,054
Unamortized restricted stock compensation. . . . . . . . . . . . . . . . (1,758) (840)
---------- ----------
Common shareholders' equity. . . . . . . . . . . . . . . . . . . . . . 732,400 726,187
---------- ----------
Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . 907,400 901,187
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,272,305 $2,888,537
========== ==========
<FN>
See accompanying Notes.
</TABLE>
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<PAGE>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements
1. Effective with the second quarter of 1995, the pipeline and gas marketing
operations, formerly reported under the Natural Gas Transmission and
Distribution segment, and the gas processing operations, formerly reported
separately as the Natural Gas Liquids Processing segment, have been
combined to form the Natural Gas Pipeline & Gathering, Processing and
Marketing (GPM) business segment. Distribution utility operations have
been reported as the Natural Gas Distribution segment. Prior-period
results have been restated to reflect this realignment of business
segments.
2. On June 8, 1995, the Corporation, through its subsidiary, Enserch
Exploration, Inc. (EEX), acquired all the capital stock of DALEN
Corporation for cash of $340 million and refinanced DALEN's bank debt of
$115 million. The acquisition has been accounted for as a purchase. The
acquired assets, consisting principally of gas and oil properties, and the
liabilities assumed are being evaluated for purposes of assigning the
purchase price. It is anticipated that essentially all of the valuation
adjustments will be assigned to gas and oil properties.
EEX borrowed $350 million under a four-year revolving credit agreement (at
an interest rate based on LIBOR) to pay the purchase price and reduce
advances from ENSERCH by $10 million. In addition, EEX borrowed $150
million under a bridge loan to repay DALEN's bank debt of $115 million and
reduce advances from ENSERCH by $35 million. A registration statement for
a planned offering of approximately 20 million shares of EEX common stock
has been filed with the Securities and Exchange Commission. The borrowing
under the revolving credit agreement will be reduced with the proceeds
from the offering. Accordingly, $300 million of the borrowing under the
revolving credit agreement has been classified as a current liability.
The bridge loan was repaid on August 4, 1995 with the proceeds from a $150
million preferred stock offering by a subsidiary of EEX. Accordingly, the
$150 million bridge loan has been classified as minority interest on the
balance sheet.
Following is a summary of pro forma results of operations of the
Corporation assuming the DALEN acquisition had occurred at the beginning
of the periods presented:
Six Months Ended
June 30
--------------------------------
1995 1994
------------ --------------
(In thousands, except per share)
Revenues $1,057,125 $1,125,233
Net Income 7,924 26,047
Earnings Applicable to Common
Stock 1,667 20,191
Earnings Applicable to Common
Stock - per share .02 .30
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3. On June 29, 1995, ENSERCH purchased the principal operating assets of
Sunrise Energy Services, Inc. and subsidiaries (Sunrise), a nonregulated
marketer of natural gas, for approximately $8.2 million in cash, including
$7.5 million of cost in excess of net assets acquired that will be
amortized on the straight-line method over twenty years. The acquired
Sunrise operations had revenues of approximately $76 million and $144
million for the six months ended June 30, 1995 and 1994, respectively.
Some $11 million of the period-to-period decrease in revenues relates to
the decline in natural-gas prices, and the remainder relates principally
to activities that Sunrise did not conduct in the 1995 period. Operating
results of the Sunrise operations for these periods were not significant.
The operations acquired do not constitute a significant acquisition;
therefore, pro forma information is not presented.
4. Effective June 30, 1995, the Corporation exchanged 1,204,098 shares of
ENSERCH common stock for 100% of the outstanding shares of DGS Holdings
Corp. (DGS), which through its subsidiary is a major marketer of natural
gas and natural-gas services. The pooling-of-interests method is being
used to account for the transaction. Accordingly, the Corporation's
financial statements have been restated for all periods presented to
include the results of DGS in the Natural Gas Pipeline & GPM segment.
DGS's net income for the 1995 and 1994 periods was impacted by significant
financing expenses that will not be incurred under ENSERCH ownership.
DGS's 1994 results reflect significant severance, relocation and other
costs relating to an acquisition at yearend 1993 and subsequent
reorganization. Synergies will be realized by combining offices of DGS,
Sunrise and Enserch Gas Company. Revenues and net income of the separate
companies for the periods preceding the acquisition were as follows (in
thousands):
<TABLE>
<CAPTION>
ENSERCH DGS COMBINED
--------- --------- ----------
<S> <C> <C> <C>
Six Months Ended June 30:
1995:
Revenues $888,771 $120,030 $1,008,801
Net Income 15,897 527 16,424
1994:
Revenues $915,851 $130,292 $1,046,143
Net Income (Loss) 24,699 (66) 24,633
</TABLE>
5. At June 30, 1995, based on a preliminary allocation of the DALEN purchase
price, ENSERCH's full cost ceiling amount attributable to the properties
acquired was approximately $42 million ($27 million after tax) less than
the unamortized cost of producing properties acquired. ENSERCH believes
that the DALEN properties have significant exploration and development
potential. ENSERCH expects to be able to utilize its expertise,
particularly with respect to tight sands reservoirs, to enhance production
and cash flows from these properties because of the geologic similarity
and proximity of DALEN's major producing properties to ENSERCH's
properties. ENSERCH believes that the unamortized cost of the gas and oil
properties acquired in the DALEN acquisition is recoverable from future
production and was not in fact impaired at June 30, 1995. Accordingly,
ENSERCH did not recognize a charge to earnings at June 30, 1995; however,
if an excess exists after a year of operation, a write-off may be
required.
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<PAGE>
At June 30, 1995, because of recent significant declines in natural-gas
prices, ENSERCH's full cost ceiling amount (exclusive of the DALEN
acquisition) was approximately $55 million ($36 million after tax) less
than the recorded cost of its gas and oil properties. ENSERCH's gas and
oil operations are conducted by EEX, which has filed a registration
statement for the sale to the public of approximately 20 million shares of
its common stock. The current market price and the offering price of EEX
shares expected by ENSERCH are substantially in excess of ENSERCH's cost
basis. The EEX current share price supports that the economic value of
the properties exceeds the recorded cost of ENSERCH's gas and oil
properties. After accounting for the effects of the EEX common stock
offering, the carrying value of ENSERCH's gas and oil properties as of
June 30, 1995 will not exceed its full cost ceiling amount and,
accordingly, the properties were not in fact impaired at that date.
Therefore, ENSERCH did not recognize a charge to earnings at June
30, 1995.
6. Earnings per share applicable to common stock are based on the weighted
average number of common shares outstanding during the periods, including
common equivalent shares when dilutive. Fully diluted earnings per share
are not presented since the assumed exercise of stock options and
conversion of debentures would not be dilutive.
7. In the opinion of management, all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the results of
operations for the interim periods included herein have been made.
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INDEPENDENT ACCOUNTANTS' REPORT
ENSERCH Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
ENSERCH Corporation and subsidiary companies as of June 30, 1995, and the
related condensed statements of consolidated income for the three months and
six months ended June 30, 1995 and 1994, and the condensed statements of
consolidated cash flows for the six months ended June 30, 1995 and 1994.
These financial statements are the responsibility of the Corporation's
management. The consolidated financial statements give retroactive effect to
the combination of ENSERCH Corporation and DGS Holdings Corp. which has been
accounted for as a pooling-of-interests as described in Note 4 of the Notes
to Condensed Consolidated Financial Statements.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data, and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of ENSERCH Corporation and
subsidiary companies as of December 31, 1994, and the related consolidated
statements of income, cash flows and common shareholders' equity for the year
then ended prior to restatement for the combination described in Note 4 of the
Notes to Condensed Consolidated Financial Statements (not presented herein);
and in our report dated February 10, 1995, we expressed an unqualified opinion
on those consolidated financial statements. We also audited the adjustments
that were applied to restate the December 31, 1994 consolidated balance sheet
of ENSERCH Corporation and subsidiary companies. In our opinion, such
adjustments are appropriate and have been properly applied and the information
set forth in the accompanying condensed consolidated balance sheet as of
December 31, 1994, is fairly stated in all material respects, in relation to
the restated consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Dallas, Texas
August 4, 1995
-7-
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Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
CONSOLIDATED RESULTS - ENSERCH had a 1995 second-quarter loss applicable to
common stock of $17.6 million ($.26 per share), compared with a loss of
$14.3 million ($.21 per share) for the second quarter of 1994. The operating
loss for the 1995 second quarter was $3.9 million, compared with an operating
loss of $.8 million for the year-ago quarter. The increased loss for the
second quarter of 1995 was attributable to natural-gas prices being $.36 per
thousand cubic feet (Mcf), or 17%, below the 1994 second quarter, which
reduced operating income of the natural gas and oil exploration and production
segment by $10.9 million. Results for other segments of ENSERCH's natural-gas
operations were improved.
For the first six months of 1995, earnings applicable to common stock were
$10.2 million ($.15 per share), compared with $18.8 million ($.28 per share)
for the like period in 1994. Income from continuing operations was
$16.4 million versus $23.3 million for the same period of 1994. Operating
income for the first half of 1995 was $64 million versus $70 million for the
year-ago period on slightly lower revenues. Compared with the year-earlier
period, the six months results reflect a 9% reduction in heating weather and
a 12% decline in natural-gas prices. Interest expense for the first six
months of 1995 of $37 million was $3.2 million, or 10%, above the year-ago
period due to a temporarily higher debt level primarily associated with
business acquisitions in June 1995.
On June 8, 1995, ENSERCH, through its subsidiary Enserch Exploration, Inc.
(EEX), acquired for cash all of the capital stock of DALEN Corporation
(DALEN). The acquisition of DALEN achieves the goals of increasing reserves
and lowering average reserve life. On June 29, 1995, ENSERCH purchased the
principal operating assets of Sunrise Energy Services, Inc. and subsidiaries
(Sunrise), a nonregulated marketer of natural gas. Effective June 30, 1995,
ENSERCH exchanged 1,204,098 shares of its common stock for all of the common
stock of DGS Holdings Corp. (DGS). DGS, through its subsidiary, is a major
marketer of natural gas and natural-gas services. The DGS and Sunrise
acquisitions expand ENSERCH's energy services capabilities in trading and
other services and broaden its marketing relationships into new areas on the
West Coast and in the Midwest and Northeast. The "purchase" method was used
to account for the DALEN and Sunrise acquisitions; therefore, consolidated
results include results of operations for these businesses from the date of
acquisition. The "pooling of interests" method was used to account for the
DGS transaction, and consolidated results for all periods presented have been
restated to include the results of DGS.
Effective with the second quarter of 1995, ENSERCH operations have been
realigned for segment of business reporting. The pipeline and gas marketing
operations, formerly reported with the Natural Gas Transmission and
Distribution segment, and the gas processing operations, formerly reported
separately as the Natural Gas Liquids Processing segment, have been combined
to form the Natural Gas Pipeline & Gathering, Processing and Marketing (GPM)
business segment. Distribution utility operations have been reported as the
Natural Gas Distribution business segment. In the discussions that follow,
all prior-period results have been reclassified to reflect the new alignments.
-8-
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<PAGE>
NATURAL GAS AND OIL EXPLORATION AND PRODUCTION - The 1995 second-quarter
operating loss for Exploration and Production operations was $4.3 million,
compared with income of $6.6 million for the year-earlier quarter, with the
lower results principally attributable to a sharp decline in natural-gas
prices. DALEN operations, which have been included from the date of
acquisition, added operating income of $.1 million, after a $1.0 million
charge for severance costs related to the acquisition.
Second-quarter 1995 revenues totaled $48 million, including $10.6 million from
DALEN, compared with $44 million in the 1994 second quarter. Natural-gas
revenues for the second quarter of 1995 of $35 million, including $7.5 million
from DALEN, were $.8 million below the second quarter of 1994. Natural-gas
sales volumes for the second quarter of 1995 of 20.1 billion cubic feet (Bcf),
including DALEN sales of 4.6 Bcf, were up 3.1 Bcf, or 18%, from the second
quarter of last year. However, the average price of natural gas declined 17%
from the second quarter last year to $1.75 per Mcf. Oil revenues for the 1995
second quarter of $11.7 million, including revenues from DALEN of $2.8
million, were $3.6 million greater than in the 1994 second quarter. The
average price received for oil increased 10% from the second quarter last year
to $17.12 per barrel, and sales volumes of 685 thousand barrels were 31%
higher than in the year-ago quarter, entirely due to DALEN production.
ENSERCH uses gas and oil swaps, collars and futures agreements to hedge
volatile product prices for a portion (normally 30 to 70 percent) of
anticipated future gas and oil production. Hedges increased natural-gas
revenues by $1.1 million in the second quarter of 1995 versus $.5 million in
the 1994 second quarter. Hedges reduced 1995 and 1994 second-quarter oil
revenues by $.5 million and $.4 million, respectively.
Operating expenses for the 1995 second quarter were $52 million, compared with
$38 million in the second-quarter of 1994. The 1995 second quarter reflects
DALEN expenses of $10.5 million, including the $1.0 million charge for
severance costs related to the acquisition. The remaining $4 million variance
was principally due to higher maintenance costs in 1995 and non-recurring
credits of $2.0 million associated with litigation accruals recorded in the
second quarter of last year.
For the first six months of 1995, Exploration and Production operations had
an operating loss of $4 million versus income of $16 million for the same
period a year-ago. Revenues for the first half of 1995 of $90 million were
$5.6 million, or 6%, less than in the same period of 1994. Natural-gas
revenues of $67 million were down $11.4 million, or 15%, from the 1994 period,
with the average sales price declining 12% and sales volumes, including DALEN
production, 3% lower. Hedges increased natural-gas revenues for the 1995
year-to-date period by $4.1 million, compared with $.5 million in the 1994
period. Oil revenues for the first half of 1995 increased 31%, with the
average sales price of $16.98 per barrel up 12% and sales volumes of
1.2 million barrels (MMBbls) some 18% higher, principally due to volumes
contributed by DALEN. Hedges reduced oil revenues for the first six months
of 1995 by $.6 million but added $.3 million in the 1994 period. Operating
expenses for the year-to-date period were $14.6 million higher than in the
1994 period, including the $10.5 million attributable to DALEN. Expenses for
the year-earlier period benefited from non-recurring credits of $2.0 million
-9-
<PAGE>
<PAGE>
associated with litigation accruals, and maintenance expenses were higher
than in the 1995 period.
In April 1995, a Mobil Corporation (Mobil) affiliate exercised its option to
acquire a 40% working interest in EEX's Garden Banks project. In May 1995,
another affiliate of Mobil signed a letter of intent to purchase a 40%
interest in EEX's Green Canyon project. An affiliate of Reading & Bates Corp.
had previously signed a letter of intent to purchase a 20% interest in the
project. These transactions are expected to be completed in the third quarter
of 1995, after which EEX will own a 60% working interest in the Garden Banks
project and a 40% working interest in the Green Canyon project and will remain
the operator of both projects. These transactions are expected to provide
cash of approximately $31 million in the third quarter of 1995. EEX also
expects to receive an interest in a gas and oil property and future work
commitments on the Garden Banks and Green Canyon projects. In addition, EEX
will be relieved of capital and operating lease obligations of approximately
$140 million on the Garden Banks project, as well as a portion of future
capital expenditure requirements on the Garden Banks and Green Canyon
projects.
Operating results for 1995 are expected to be affected by the third-quarter
commencement of production from the Garden Banks project. Revenues from the
initial production of the two existing wells may not be sufficient to cover
operating costs, amortization and the equipment lease costs on the floating
production platform and related facilities. Some operating costs and
amortization vary with production, but other costs and the equipment lease
costs are essentially fixed and decline on a per unit basis as production
increases. Operating results are expected to improve in 1996 as production
begins from several additional development wells in the Garden Banks project,
and as the related equipment lease and other fixed costs are spread over
greater production.
The assets acquired in the DALEN acquisition, consisting principally of gas
and oil properties, and the liabilities assumed are being evaluated for
purposes of assigning the purchase price. It is anticipated that essentially
all of the valuation adjustments will be assigned to gas and oil properties.
At June 30, 1995, based on a preliminary allocation of the DALEN purchase
price, ENSERCH's full cost ceiling amount attributable to the properties
acquired was approximately $42 million ($27 million after tax) less than the
unamortized cost of producing properties acquired. ENSERCH believes the DALEN
properties have significant exploration and development potential. ENSERCH
expects to be able to utilize its expertise, particularly with respect to
tight sands reservoirs, to enhance production and cash flows from these
properties because of the geologic similarity and proximity of DALEN's major
producing properties to ENSERCH's properties. ENSERCH believes that the
unamortized cost of the gas and oil properties acquired in the DALEN
acquisition is recoverable from future production and was not in fact impaired
at June 30, 1995. Accordingly, ENSERCH did not recognize a charge to earnings
at June 30, 1995; however, if an excess exists after a year of operation, a
write-off may be required.
At June 30, 1995, because of recent significant declines in natural-gas
prices, ENSERCH's full cost ceiling amount (exclusive of the DALEN
acquisition) was approximately $55 million ($36 million after tax) less than
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<PAGE>
<PAGE>
the recorded cost of its gas and oil properties. ENSERCH's gas and oil
operations are conducted by EEX, which has filed a registration statement for
the sale to the public of approximately 20 million shares of its common stock.
The current market price and the offering price of EEX shares expected by
ENSERCH are substantially in excess of ENSERCH's cost basis. The EEX current
share price supports that the economic value of the properties exceeds the
recorded cost of ENSERCH's gas and oil properties. After accounting for the
effects of the EEX common stock offering, the carrying value of ENSERCH's gas
and oil properties as of June 30, 1995 will not exceed its full cost ceiling
amount and, accordingly, the properties were not in fact impaired at that
date. Therefore, ENSERCH did not recognize a charge to earnings at June 30,
1995. However, product prices are subject to seasonal and other fluctuations.
A decline in prices from June 1995 levels or other factors, without mitigating
circumstances, could cause a future write-down of capitalized costs and a non-
cash charge against income.
ENSERCH's estimated net proved reserves at June 30, 1995, giving effect to the
DALEN acquisition, the sale of a 60% interest in the Green Canyon project and
the sale of a 40% interest in the Garden Banks project, are as follows:
<TABLE>
<CAPTION>
Natural Oil and
Gas Gas Liquids Total
(Bcf) (MMBbls) (Bcfe) (3)
-------- --------- --------
<S> <C> <C> <C>
ENSERCH proved reserves at December 31,
1994 - as originally reported (1) 1,041.7 50.5 1,345.3
January through June 1995:
Additions to reserves:
Green Canyon project (2) 88.7 42.6 344.6
Other 1.8 1.0 7.7
Production (29.9) (1.1) (36.9)
Sales of reserves:
60% interest in Green Canyon project (53.2) (25.5) (206.8)
40% interest in Garden Banks project (13.6) (11.3) (81.2)
------- ------ -------
ENSERCH proved reserves at June 30,
1995 before DALEN acquisition 1,035.5 56.2 1,372.7
DALEN proved reserves at June 30, 1995 (1)(4) 330.6 11.0 396.8
------- ------ -------
ENSERCH proved reserves at June 30, 1995 1,366.1 67.2 1,769.5
======= ====== =======
<FN>
(1) As estimated by DeGolyer and MacNaughton (D&M), independent petroleum
consultants.
(2) Net of royalty interests. Based on D&M's report at March 1, 1995 of
gross proved reserves of 102.2 Bcf of gas and 49.2 MMBbls of oil.
(3) Billion cubic feet equivalents.
(4) After production from date of acquisition of 4.6 Bcf of gas and .2 MMBbls
of oil and gas liquids.
</TABLE>
At June 30, 1995, ENSERCH had outstanding swaps, collars and futures
agreements extending through June 1996 to exchange payments on some 11.6 Bcf
of gas and 1.0 MMBbls of oil on which ENSERCH had $4.6 million of net
unrealized gains. At June 30, 1995, realized gains on hedging activities of
$.6 million were deferred.
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<PAGE>
<PAGE>
NATURAL GAS PIPELINE & GPM - Second-quarter 1995 operating income for the
Natural Gas Pipeline & GPM segment was $1.5 million, compared with a loss of
$.7 million in the second quarter of 1994. Improvements in pipeline and gas
processing operations were partially offset by lower income from gas
marketing activities. For the first six months of 1995, operating income for
this business segment was $36 million, compared with $31 million in the year-
ago period, with most of the improvement from gas processing operations.
Pipeline operations had a 1995 second-quarter loss of $.2 million, compared
with a loss of $2.8 million in the 1994 second quarter. Second-quarter
revenues of $28.4 million were $.9 million (3%) higher than in the second
quarter last year. Also, unrecovered gas-purchase costs were $2.0 million
lower than in the 1994 period; these costs fluctuate from period to period
due to various factors, including temperature extremes, metering variances
and billing estimates. Pipeline throughput for the 1995 second quarter of
133 Bcf was up 2% from the same period of 1994. For the first half of 1995,
operating income for pipeline operations was $30 million, slightly better
than in the like period a year ago. Revenues for the year-to-date period
were $4.9 million (6%) lower than in the 1994 period, and operating expenses
were up $1.2 million (3%) from the year-earlier period. However, unrecovered
gas-purchase costs were $6.8 million less than the same period of 1994.
Pipeline throughput for the first half of 1995 of 286 Bcf was 6% less than in
the year-ago period.
Second-quarter 1995 operating income from natural gas marketing operations
was $.1 million versus $2.5 million in the 1994 second-quarter, with the
lower results entirely attributable to a decline in gas sales margin. The
volume of gas sold for the second quarter of 106 Bcf was 2% higher than in
the second quarter last year. For the first six months of 1995, gas
marketing operations had operating income of $3.8 million, about the same as
in the 1994 period, with the margin on gas sales slightly lower than in the
1994 period. Gas sales volumes for the first half of 1995 were 214 Bcf, 6%
higher than in the year-earlier period. For the first six months of 1995,
DGS contributed operating income of $1.0 million versus $.3 million for the
same period in 1994.
Natural gas processing activities contributed second-quarter 1995 operating
income of $1.6 million, compared with last year's second-quarter loss of
$.4 million, reflecting higher prices and sales volumes for natural gas
liquids processed and lower operating expenses. The average sales price per
barrel for the second quarter of 1995 of $11.85 was up 5% from the 1994
second quarter, and sales volumes of 1.6 MMBbls barrels were 21% higher than
in the second quarter of 1994, primarily due to diverting product volumes to
inventory in the second quarter last year. Operating expenses for the 1995
second quarter were below the 1994 period, principally because several
processing plants became fully depreciated at the end of 1994. During the
first half of 1995, natural gas processing operations had operating income of
$2.5 million versus a loss of $1.4 million for the year-earlier period, with
sales volumes up 5%, the average sales price 9% higher and depreciation
expense lower, as noted above.
At June 30, 1995, Lone Star Pipeline Company had an unrecovered balance of
gas-purchase contract settlements of $40 million, including $24 million that
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<PAGE>
represented prepayments expected to be recouped under contracts covering
future gas purchases. The remaining $16 million represented amounts to be
recovered from customers under existing gas-cost recovery provisions. At
June 30, 1995, outstanding supplier claims approximated $10 million. Lone
Star Pipeline Company expects to recoup or recover the remaining balances of
gas settlement payments made to date, as well as any future payments made in
settlement of remaining claims.
NATURAL GAS DISTRIBUTION - Second-quarter 1995 operating income for Natural
Gas Distribution operations was $1.5 million, compared with a loss of
$5.3 million in the 1994 second quarter, reflecting an improved margin on
residential and commercial gas sales and cost reductions. The overall margin
on gas sales increased $2.1 million, or 5%, and operating expenses were
$4.9 million, or 9%, less than the second quarter of 1994, primarily due to
re-engineering efforts in prior years. The total volume of gas sold in the
second quarter of 1995 of 22.6 Bcf was slightly above the second quarter of
1994, with higher-margin residential and commercial gas sales volumes of
18.8 Bcf up 3% from the 1994 second quarter and sales volumes to industrial
and electric generation customers virtually the same as the year-ago quarter.
Operating income for the first half of 1995 was $36 million versus
$27 million for the year-earlier period. The improved results reflect a
slight increase in margin on residential and commercial gas sales and a
$7.3 million, or 6%, reduction in operating expenses principally resulting
from re-engineering efforts in prior years, with more than half of the
decrease in expenses attributable to lower compensation and employee benefit
costs. Total gas sales volumes of 84.1 Bcf were down 6% from the like period
of 1994. Residential and commercial sales volumes of 73.2 Bcf declined 5%
from the year-earlier period, with heating degree days some 9% lower than in
the 1994 period and 17% below normal.
POWER - Power activities, comprised of Enserch Development Corporation (EDC)
and Lone Star Energy Company, had a 1995 second-quarter loss of $.8 million,
compared with income of $.8 million for the same period a year ago. Results
for the 1994 second quarter included certain non-recurring income associated
with operating the 160-megawatt cogeneration plant in Bellingham, Washington,
a project developed by EDC. First half 1995 operating income was below the
1994 period for the reason noted.
LIQUIDITY AND FINANCIAL RESOURCES - Operating activities of continuing
operations for the first six months of 1995 provided net cash flows of
$171 million, a significant improvement from the $66 million provided in the
first half of 1994, which reflected a $62 million payment relating to an
adverse judgment in litigation in 1993. Changes in other assets and
liabilities resulted in a year-to-year improvement in cash flows of
$37 million. Also, there was $43 million provided by a reduction in current
operating assets and liabilities in 1995 versus $29 million provided in 1994,
exclusive of the litigation payment. The $39 million provided by a decrease
in other current assets included a $24 million recovery of expenditures on
the Garden Banks project from the increase in the leasing program and the
collection of $10 million of previously deferred billings on the Bellingham,
Washington cogeneration facilities developed by EDC.
-13-
<PAGE>
<PAGE>
Investing activities required net cash flows of $505 million, including
$333 million for the DALEN acquisition and $8 million for the Sunrise
acquisition, compared with $225 million in the year-ago period. Discontinued
operations provided cash of $8 million in the first half of 1995 versus a
requirement of $90 million in the same period of 1994.
Planned property, plant and equipment additions for 1995 are expected to
total $277 million and include $175 million designated for Natural Gas and
Oil Exploration and Production, $40 million for Natural Gas Pipeline & GPM,
$61 million for Natural Gas Distribution and $1 million for other
requirements. The estimated expenditures are $15 million higher than the
originally planned expenditures of $262 million, reflecting a $39 million
reduction in the originally planned expenditures for the Natural Gas and Oil
Exploration and Production segment because of low natural-gas prices and a
$54 million addition for the 1995 exploration and development of DALEN
properties following the acquisition. The expenditures are expected to be
funded from internal cash flow, plus external financings as required. Costs
of the floating production platform and related facilities for the Garden
Banks project, which are financed by an operating lease arrangement, are not
included. During the first quarter of 1995, the lease arrangement for the
Garden Banks facilities was increased to $350 million to cover design
modifications and other costs for Block 388 facilities and for Block 387
facilities. ENSERCH's obligation is expected to be reduced to $210 million
following the completion of the transaction with the Mobil affiliate.
On June 8, 1995, EEX borrowed $350 million under a four-year revolving credit
agreement and $150 million under a bridge loan to pay the purchase price of
$340 million for the capital stock of DALEN, repay DALEN's bank debt of
$115 million and reduce advances from ENSERCH by $45 million. A registration
statement for a planned offering of approximately 20 million shares of EEX
common stock has been filed with the Securities and Exchange Commission. The
borrowing under the revolving credit agreement will be reduced with the
proceeds from the offering. Accordingly, $300 million of the borrowing under
the revolving credit agreement has been classified as a current liability.
The EEX common stock issue, expected to be completed in the third quarter,
will increase the public ownership in EEX from less than 1% to approximately
17%. The bridge loan was repaid on August 4, 1995 with the proceeds from a
$150 million preferred stock offering by a subsidiary of EEX. Accordingly,
the $150 million bridge loan has been classified as minority interest on the
balance sheet.
Also in June 1995, ENSERCH issued $150 million of 7 1/8% Notes due 2005, with
the proceeds used to prepay a variable rate note due in 1998.
Consolidated senior long-term and convertible debt, including current
maturities, as a percentage of total capitalization was 52.0% at June 30,
1995. The pro forma June 30, 1995 debt ratio, adjusted for the effects of
the planned offering of EEX common stock, was 38.6%, compared with 47.2% at
the end of 1994. EEX has a $350 million four-year revolving credit agreement
noted above. In addition, ENSERCH Corporation has bank lines in the form of
a three-year revolving agreement totaling $600 million, which were all unused
at June 30, 1995.
-14-
<PAGE>
<PAGE>
<TABLE>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
Natural Gas and Oil Exploration and Production Operating Data (Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
---- ------ ---- ------
<S> <C> <C> <C> <C>
Operating Income (Loss)(in millions) . . . . . . . . . . . . . . $ (4.3) $ 6.6 $ (4.0) $ 16.2
====== ====== ====== ======
Revenues (in millions)
Natural gas (a) . . . . . . . . . . . . . . . . . . . . . . . $ 35.1 $ 35.9 $ 67.0 $ 78.4
Oil and condensate. . . . . . . . . . . . . . . . . . . . . . 11.7 8.1 20.7 15.7
Natural gas liquids . . . . . . . . . . . . . . . . . . . . . 1.0 .3 1.7 .8
Other revenues - net. . . . . . . . . . . . . . . . . . . . . .2 .2 .2 .3
------ ------ ------ ------
Total revenues . . . . . . . . . . . . . . . . . . . . . . $ 48.0 $ 44.5 $ 89.6 $ 95.2
====== ====== ====== ======
Sales Volumes
Natural gas (MMcf) (a). . . . . . . . . . . . . . . . . . . . 20,092 17,039 34,453 35,409
Oil and condensate (MBbl) . . . . . . . . . . . . . . . . . . 685 522 1,218 1,036
Average Sales Price
Natural gas (per Mcf) . . . . . . . . . . . . . . . . . . . . $ 1.75 $ 2.11 $ 1.94 $ 2.21
Oil and condensate (per Bbl) . . . . . . . . . . . . . . . . 17.12 15.58 16.98 15.20
Data in Equivalent Energy Content (per Mcfe) (b)
Production revenue. . . . . . . . . . . . . . . . . . . . . . $ 1.93 $ 2.18 $ 2.09 $ 2.26
Production and operating costs (c). . . . . . . . . . . . . . .45 .35 .46 .37
Depreciation and amortization . . . . . . . . . . . . . . . . 1.07 1.06 1.07 1.04
Net Wells
Drilled . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 19 39 35
Productive. . . . . . . . . . . . . . . . . . . . . . . . . . 16 13 26 21
<FN>
(a) Excludes products purchased for resale. Includes affiliated revenues and volumes.
(b) Oil and natural gas liquids are converted to Mcf equivalents (Mcfe) on the basis of one barrel equals
6.0 Mcfe.
(c) Excludes related production, severance and ad valorem taxes.
</TABLE>
-15-
<PAGE>
<PAGE>
<TABLE>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
Natural Gas Pipeline & Gathering, Processing and Marketing Operating Data (Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994(d) 1995 1994(d)
---- ------ ---- ------
<S> <C> <C> <C> <C>
Operating Income (Loss)(in millions)
Pipeline . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (.2) $ (2.8) $ 29.5 $ 28.7
Natural Gas Marketing. . . . . . . . . . . . . . . . . . . . . .1 2.5 3.8 3.9
Natural Gas Processing . . . . . . . . . . . . . . . . . . . . 1.6 (.4) 2.5 (1.4)
------ ------ ------ ------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.5 $ (.7) $ 35.8 $ 31.2
====== ====== ====== ======
Revenues (in millions)
Pipeline (a) . . . . . . . . . . . . . . . . . . . . . . . . . $ 28.4 $ 27.5 $ 83.2 $ 88.1
------ ------ ------ ------
Natural Gas Marketing
On-System . . . . . . . . . . . . . . . . . . . . . . . . . 47.6 57.4 93.1 114.7
Off-System . . . . . . . . . . . . . . . . . . . . . . . . . 134.8 162.2 283.5 331.6
------ ------ ------ ------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . 182.4 219.6 376.6 446.3
------ ------ ------ -------
Natural Gas Processing
Natural gas liquids (b). . . . . . . . . . . . . . . . . . . 18.8 14.8 35.4 30.8
Other(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 5.0 4.3 10.1 8.3
------ ------ ------ ------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . 23.8 19.1 45.5 39.1
------ ------ ------ ------
Total revenues . . . . . . . . . . . . . . . . . . . . . . $ 234.6 $ 266.2 $ 505.3 $ 573.5
====== ====== ====== ======
Volumes
Pipeline throughput (Bcf). . . . . . . . . . . . . . . . . . . 133.4 130.5 286.2 305.1
====== ====== ====== ======
Natural Gas Marketing (Bcf)
On-System . . . . . . . . . . . . . . . . . . . . . . . . . 26.6 27.7 51.9 52.6
Off-System . . . . . . . . . . . . . . . . . . . . . . . . . 79.4 75.8 161.8 148.2
------ ------ ------ ------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . 106.0 103.5 213.7 200.8
====== ====== ====== ======
Natural Gas Processing (MBbl). . . . . . . . . . . . . . . . . 1,591 1,318 2,950 2,810
====== ====== ====== ======
Average Sales Prices
Natural Gas Marketing (per Mcf)
On-System . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.79 $ 2.07 $ 1.79 $ 2.18
Off-System . . . . . . . . . . . . . . . . . . . . . . . . . 1.70 2.14 1.75 2.24
------ ------ ------ ------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.72 $ 2.12 $ 1.76 $ 2.22
====== ====== ====== =======
Natural Gas Liquids (per Bbl)(b) . . . . . . . . . . . . . . . $ 11.85 $ 11.26 $ 11.99 $ 10.97
====== ====== ====== =======
<FN>
(a) Includes transportation services for affiliates and third-parties and other miscellaneous revenues.
(b) Represents revenues from sales of plant production.
(c) Includes revenues from natural gas liquids purchased for resale, gathering fees and other miscellaneous
revenues.
(d) 1994 amounts have been restated for the realignment of business segments and the pooling-of-interests
transaction with DGS.
</TABLE>
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<PAGE>
<PAGE>
<TABLE>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
Natural Gas Distribution Operating Data (Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------- ---------------
1995 1994(b) 1995 1994(b)
----- ------ ----- ------
<S> <C> <C> <C> <C>
Operating Income (Loss)(in millions) . . . . . . . . . . . . . . $ 1.5 $ (5.3) $ 36.1 $ 27.5
====== ====== ====== ======
Natural Gas Sales Revenues by Customer (in millions)
Residential & commercial . . . . . . . . . . . . . . . . . . . $123.8 $119.2 $452.0 $440.8
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . 12.6 13.1 32.5 35.5
Electric generation. . . . . . . . . . . . . . . . . . . . . . 3.5 3.5 13.3 16.0
------ ------ ------ ------
Total gas sales revenues . . . . . . . . . . . . . . . . . . 139.9 135.8 497.8 492.3
Gas transportation revenues(a) . . . . . . . . . . . . . . . . . 2.6 2.6 5.8 5.8
Other revenues . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 2.1 4.4 4.2
------ ------ ------ ------
Total revenues . . . . . . . . . . . . . . . . . . . . . $144.7 $140.5 $508.0 $502.3
====== ====== ====== ======
Natural Gas Sales Volumes by Customer (Bcf)
Residential & commercial . . . . . . . . . . . . . . . . . . . 18.8 18.2 73.2 76.7
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0 3.1 7.9 8.6
Electric generation. . . . . . . . . . . . . . . . . . . . . . .8 .8 3.0 3.8
------ ------ ------ ------
Total gas sales volumes. . . . . . . . . . . . . . . . . . . 22.6 22.1 84.1 89.1
====== ====== ====== ======
Natural Gas Sales Revenues (per Mcf)
Residential & commercial . . . . . . . . . . . . . . . . . . . $ 6.58 $ 6.53 $ 6.18 $ 5.75
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . 4.22 4.25 4.12 4.12
Electric generation. . . . . . . . . . . . . . . . . . . . . . 4.52 4.38 4.36 4.21
Natural Gas Purchase Cost (per Mcf). . . . . . . . . . . . . . . $ 4.17 $ 4.03 $ 4.20 $ 3.92
<FN>
(a) Transportation volumes are included in Natural Gas Pipeline & Gathering, Processing and Marketing
statistics.
(b) 1994 amounts have been restated for the realignment of business segments.
</TABLE>
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<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
15 Letter of Deloitte & Touche LLP dated
August 11, 1995, regarding unaudited
interim financial statements.
23.1 Consent of Deloitte & Touche LLP (included
in Exhibit 15.)
23.2 Consent of DeGolyer & MacNaughton
(b) Reports on Form 8-K
Current Report on Form 8-K dated May 26, 1995.
Acquisition of DALEN Corporation by Enserch
Exploration, Inc. Form 8-K includes: (i) DALEN
Corporation Consolidated Financial Statements as of
December 31, 1994 and 1993, together with Auditor's
Report; (ii) DALEN Corporation Condensed
Consolidated Financial Statements (Unaudited) for
the Periods Ended March 31, 1995 and 1994; and
(iii) ENSERCH Corporation and Subsidiary Companies
Condensed Pro Forma Consolidated Financial
Statements (Unaudited) for the Periods Ended
December 31, 1994 and March 31, 1995.
Current Report on Form 8-K dated May 30, 1995.
Form of underwriting agreement in connection
with issuance and sale of 7 1/8% Notes Due 2005.
<PAGE>
<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.
ENSERCH Corporation
(Registrant)
Date: August 11, 1995 By /s/ S. R. Singer
---------------------------
S. R. Singer, Senior Vice
President, Finance and
Corporate Development, Chief
Financial Officer
Date: August 11, 1995 By /s/ J. W. Pinkerton
---------------------------
J. W. Pinkerton,
Vice President and Controller,
Chief Accounting Officer
-19-
<PAGE>
<PAGE>
EXHIBIT (15)
ENSERCH Corporation:
We have made a review in accordance with standards established by the American
Institute of Certified Public Accountants of the unaudited interim condensed
consolidated financial information of ENSERCH Corporation and subsidiary
companies for the periods ended June 30, 1995 and 1994, as indicated in our
report dated August 4, 1995; because we did not perform an audit, we expressed
no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, is being
used in Registration Statements No. 2-59259, No. 33-40589, No. 33-47911 and
No. 2-77572 on Form S-8, and in Registration Statements No. 33-15623, No. 33-
52525 and No. 33-61635 on Form S-3.
We also are aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that
Act.
DELOITTE & TOUCHE LLP
Dallas, Texas
August 11, 1995
<PAGE>
<PAGE>
EXHIBIT 23.2
DeGolyer and MacNaughton
One Energy Square
Dallas, Texas 75206
August 11, 1995
ENSERCH Corporation
ENSERCH Center
300 South St. Paul Street
Dallas, Texas 75201
Gentlemen:
We hereby consent to (a) the references to us in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
your Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, and
to the use of information contained in our "Report as of July 1, 1995 on the
Reserves of Certain Properties owned by Enserch Exploration, Inc. - DALEN
Corporation Acquisition" and (b) the incorporation by reference in
Registration Statements No. 2-59259, No. 2-77572, No. 33-40589 and No.
33-47911, each on Form S-8, and Registration Statements No. 33-15623, No.
33-52525 and No.33-61635, each on Form S-3, of the references to us described
in (a) above.
Very truly yours,
DeGOLYER and MacNAUGHTON
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ENSERCH
CORPORATION FORM 10-Q FOR THE PERIOD ENDING JUNE 30, 1995 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<NAME> ENSERCH CORPORATION
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