UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
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 1-3551
EQUITABLE RESOURCES, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-0464690
(State of incorporation or organization) (IRS Employer Identification No.)
420 BOULEVARD OF THE ALLIES, PITTSBURGH, PENNSYLVANIA 15219 (Address of
principal executive offices, including zip code)
Registrant's telephone number, including area code: (412) 261-3000
------------
NONE
(Former name, former address and former fiscal year,
if changed since last report)
------------
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
Indicate the number of shares outstanding of each of issuer's classes of common
stock, as of the close of the period covered by this report.
Outstanding at
Class June 30, 1997
Common stock, no par value 34,598,715 shares
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Index
Page No.
PART I. FINANCIAL STATEMENTS:
Statements of Consolidated Income for the
Three Months Ended June 30, 1997 and 1996,
the Six Months Ended June 30, 1997 and
1996, and the Twelve Months Ended June 30,
1997 and 1996 1
Statements of Condensed Consolidated Cash Flows
for the Three Months Ended June 30, 1997 and
1996, the Six Months Ended June 30, 1997
and 1996, and the Twelve Months Ended
June 30, 1997 and 1996 2
Consolidated Balance Sheets, June 30, 1997
and 1996 and December 31, 1996 3 - 4
Notes to Consolidated Financial Statements 5 - 6
Gas Produced, Purchased and Sold 7 - 12
Information by Business Segment 13
Management's Discussion and Analysis of
Financial Condition and Results of Operations 14 - 22
PART II. OTHER INFORMATION 23
SIGNATURE 24
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Statements of Consolidated Income
(Thousands Except Per Share Amounts)
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
------------------------------------------------------------------------------
1997 1996 1997 1996 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues......... $ 400,760 $ 391,767 $ 953,335 $ 1,032,045 $ 1,783,089 $ 1,736,810
Cost of Energy Purchased .. 293,676 296,372 697,067 771,843 1,293,380 1,205,923
---------- ---------- ----------- ----------- ----------- -----------
Net operating revenues 107,084 95,395 256,268 260,202 489,709 530,887
---------- ---------- ----------- ----------- ----------- -----------
Operating Expenses:
Operation............... 62,339 50,922 117,504 103,583 227,694 204,150
Maintenance............. 7,915 6,359 14,587 12,267 28,864 25,701
Depreciation and depletion 20,318 20,076 40,300 41,658 81,023 88,858
Impairment of assets.... 13,000 - 13,000 - 13,000 121,081
Taxes other than income. 9,439 9,055 23,457 24,308 41,306 44,103
---------- ---------- ----------- ----------- ----------- -----------
Total operating expenses 113,011 86,412 208,848 181,816 391,887 483,893
---------- ---------- ----------- ----------- ----------- -----------
Operating Income (Loss) ... (5,927) 8,983 47,420 78,386 97,822 46,994
Other Income .............. 1,684 2,686 3,413 4,855 1,556 5,406
Interest Charges........... 11,133 9,938 22,432 20,412 43,845 44,966
---------- ---------- ----------- ----------- ----------- -----------
Income (Loss)
Before Income Taxes .... (15,376) 1,731 28,401 62,829 55,533 7,434
Income Taxes (Benefits).... (6,113) 803 9,874 23,175 17,281 (7,175)
---------- ---------- ----------- ----------- ----------- -----------
Net Income (Loss).......... $ (9,263) $ 928 $ 18,527 $ 39,654 $ 38,252 $ 14,609
========== ========== =========== =========== =========== ===========
Average Common
Shares Outstanding...... 35,289 35,113 35,355 35,070 35,325 34,989
========== ========== =========== =========== ========== ===========
Earnings (Loss) Per Share of
Common Stock............ $(.26) $.03 $.52 $1.13 $1.08 $.42
===== ==== ==== ===== ===== ====
Dividends Per Share of
Common Stock............ $ - $ - $.59 $.59 $1.18 $1.18
===== ===== ==== ==== ===== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Statements of Condensed Consolidated Cash Flows
(Thousands)
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
---------------------------------------------------------------------------------
1997 1996 1997 1996 1997 1996
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided (used)
by operating activities..................... $ 13,238 $ (19,036) $ 71,490 $ 48,759 $ 88,299 $ 242,918
----------- ------------ ---------- ----------- ----------- -----------
Cash Flows from Investing Activities:
Capital expenditures..................... (32,340) (23,851) (52,172) (42,682) (119,774) (105,804)
Proceeds from sale of property........... 97 1,078 313 1,503 2,990 25,360
----------- ----------- ----------- ----------- ---------- -----------
Net cash used in investing
activities........................ (32,243) (22,773) (51,859) (41,179) (116,784) (80,444)
----------- ----------- ----------- ----------- ---------- -----------
Cash Flows from Financing Activities:
Issuance of common stock................. 314 648 354 1,191 1,469 2,745
Purchase of treasury stock............... (23,751) (8) (23,751) (8) (23,776) (174)
Dividends paid........................... (48) (7) (20,648) (20,708) (41,488) 41,344)
Proceeds from issuance of
long-term debt......................... - - - - 144,919 (42)
Repayments and retirements of
long-term debt......................... - (84,823) (157) (84,823) (65,774) (109,323)
Increase in short-term loans............. 35,769 96,306 51,201 92,652 28,449 3,578
----------- ----------- ----------- ----------- ---------- -----------
Net cash provided (used) by
financing activities.......... 12,284 12,116 6,999 (11,696) 43,799 (144,560)
----------- ----------- ----------- ----------- ---------- ------------
Increase in cash and cash equivalents....... (6,721) (29,693) 26,630 (4,116) 15,314 17,914
Cash and cash equivalents at
beginning of period ...................... 48,088 55,746 14,737 30,169 26,053 8,139
----------- ----------- ----------- ----------- ---------- -----------
Cash and cash equivalents at end of period.. $ 41,367 $ 26,053 $ 41,367 $ 26,053 $ 41,367 $ 26,053
=========== =========== =========== =========== ========== ===========
Cash paid during the period for:
Interest (net of amount capitalized)..... $ 2,358 $ 13,124 $ 15,037 $ 24,812 $ 33,250 $ 41,793
=========== =========== =========== =========== ========== ===========
Income taxes............................. $ 10,500 $ 9,025 $ 5,273 $ 9,631 $ 6,098 $ 43,362
=========== =========== =========== =========== ========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Thousands)
June 30, December 31,
-----------------------------------------------
1997 1996 1996
-----------------------------------------------
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents............................... $ 41,367 $ 26,053 $ 14,737
Accounts receivable (less accumulated
provision for doubtful accounts:
June 30, 1997 $12,277; 1996 $13,635;
December 31, 1996, $10,714)........................... 275,447 247,712 296,175
Unbilled revenues ...................................... 1,190 2,031 24,157
Gas stored underground - current inventory.............. 9,304 7,644 19,497
Material and supplies................................... 17,238 10,658 18,512
Deferred purchased gas cost............................. 36,027 40,278 60,079
Prepaid expenses and other.............................. 42,325 33,548 52,604
------------- ------------ -------------
Total current assets............................... 422,898 367,924 485,761
------------- ------------ -------------
Property, Plant and Equipment:
Supply and Logistics (successful efforts method) ....... 1,250,041 1,193,825 1,220,756
Utilities .............................................. 1,003,471 962,923 988,425
Services................................................ 6,281 124 1,810
------------- ------------ -------------
Total property, plant and equipment................ 2,259,793 2,156,872 2,210,991
Less accumulated depreciation and depletion........... 767,797 702,405 731,306
------------- ------------ -------------
Net property, plant and equipment.................. 1,491,996 1,454,467 1,479,685
------------- ------------ -------------
Other Assets:
Regulatory assets....................................... 71,818 84,809 73,150
Goodwill ............................................... 12,291 - 8,396
Other................................................... 56,137 42,632 49,307
------------- ------------ -------------
Total other assets.................................... 140,246 127,441 130,853
------------- ------------ -------------
Total.............................................. $ 2,055,140 $ 1,949,832 $ 2,096,299
============= ============ =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Thousands)
June 30, December 31,
-------------------------------------------------
1997 1996 1996
-------------------------------------------------
CAPITALIZATION AND LIABILITIES
<S> <C> <C> <C>
Current Liabilities:
Long-term debt payable within one year............. $ 5,000 $ - $ -
Short-term loans................................... 256,101 143,652 204,900
Accounts payable................................... 163,851 152,818 231,969
Accrued taxes...................................... 14,197 19,864 20,645
Accrued interest................................... 11,288 8,786 11,852
Refunds due customers.............................. 23,530 16,832 14,889
Deferred income taxes.............................. 8,633 9,858 19,009
Customer credit balances........................... 1,335 1,125 7,051
Other.............................................. 28,276 21,222 10,099
------------ ------------- -------------
Total current liabilities..................... 512,211 374,157 520,414
------------ ------------- -------------
Long--Term Debt ....................................... 417,075 415,870 422,112
------------ ------------- -------------
Deferred and Other Credits:
Deferred income taxes.............................. 270,949 261,766 260,700
Deferred investment tax credits.................... 19,347 20,441 19,892
Deferred revenue................................... 94,179 116,580 107,674
Other.............................................. 20,770 23,703 23,224
------------ ------------- -------------
Total deferred and other credits.............. 405,245 422,490 411,490
------------ ------------- -------------
Common stockholders' equity:
Common stock, no par value, authorized
80,000 shares; shares issued June 30,
1997, 35,699; June 30, 1996, 35,469;
December 31, 1996, 35,515 .................... 232,136 225,200 227,660
Retained earnings ............................... 517,744 520,982 519,867
Treasury stock, shares at cost June 30,
1997, 1,101; June 30, 1996, 339;
December 31, 1996, 169........................ (27,774) (7,730) (4,023)
Foreign currency translation..................... (1,497) (1,137) (1,221)
------------ ------------- -------------
Total common stockholders' equity............. 720,609 737,315 742,283
------------ ------------- -------------
Total..................................... $ 2,055,140 $ 1,949,832 $ 2,096,299
============ ============= =============
</TABLE>
<PAGE>
Equitable Resources, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
A. The accompanying financial statements should be read in conjunction with the
Company's 1996 Summary Annual Report and Form 10-K.
B. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly the financial position as of June 30, 1997 and 1996 and the
results of operations for the three, six and twelve months then ended and
cash flows for the three, six and twelve months then ended. All adjustments
are of a normal, recurring nature unless otherwise indicated.
C. The results of operations for the three- and six-month periods ended June
30, 1997 and 1996 are not indicative of results for a full year because of
the seasonal nature of the Company's operations and volatility of oil and
gas commodity prices.
D. Certain amounts contained in prior period comparative information have been
reclassified to conform with the 1997 presentation.
E. As more fully described in Management's Discussion and Analysis of
Financial Condition and Results of Operations, the Company has a $13.0
million investment in a 25% general partnership interest in the Avoca
bedded salt, natural gas storage project. The project had encountered
technical difficulties related to brine disposal which resulted in the
discontinuation of the project. Although alternative methods of
disposing of the brine water have been studied, none have proved to be
economically viable. As a result, the Company has written down its
investment resulting in a $13 million charge in June 1997.
F. On January 24, 1997, the Company acquired all of the outstanding stock of
Scallop Thermal Management, Inc. (Scallop) in exchange for 128,397
authorized, but previously unissued shares of the Company's common stock
valued at $3.75 million. This acquisition was accounted for under the
purchase method of accounting. Scallop is an energy services and
performance contracting company specializing in energy management
solutions for institutional, municipal and Fortune 500 customers. The
effect of this acquisition on the consolidated financial statements of
the Company is not material.
G. In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128 - "Earnings
per Share" effective for interim and annual periods ending after December
15, 1997. This statement replaces primary earnings per share (EPS) with
a newly defined basic EPS and modifies the computation of diluted EPS.
The Company's basic and diluted EPS computed using the requirements of
SFAS No. 128 are not significantly different from the currently disclosed
EPS.
<PAGE>
H. At June 30, 1997, 10,309,000 shares of Common Stock were reserved as
follows: 566,000 shares for issuance under the Key Employee Restricted
Stock Option and Stock Appreciation Rights Incentive Compensation Plan,
1,726,000 shares for issuance under the Long-Term Incentive Plan, 76,000
shares for issuance under the Non-Employee Directors' Stock Incentive
Plan, 70,000 shares for issuance under the Company's Dividend
Reinvestment and Stock Purchase Plan, and 7,871,000 shares for possible
use in connection with future acquisitions.
I. In July 1997, the Company completed its acquisition of Northeast Energy
Services, Inc. (NORESCO) in exchange for a combination of the Company's
stock, stock options and cash valued at approximately $77 million. The
transaction will be treated as a purchase for accounting purposes.
NORESCO is a provider of comprehensive energy efficiency systems and
services for commercial, industrial, government, and institutional
customers. In connection with this acquisition, the Company issued
2,091,407 shares of common stock. The Company repurchased one million
shares of stock in June and July 1997 at an average price of $28.54 per
share. Proforma financial information is not required as the acquisition
is less than 10 percent of the total assets of the Company.
J. In July 1997, the Company entered into agreements with five parties for
the sale of the Company's oil and natural gas properties in the Western
United States and Canada. The aggregate cash sales price will be
approximately $174 million payable at closings which are expected to
occur on or before September 30, 1997. The sales are subject to buyers'
confirmation of title and site inspection of the properties in addition
to certain other conditions. The sale is not reflected in the
consolidated financial statements and the discontinued operations are not
material to the consolidated financial statements of the Company.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended June 30, 1997
----------------------------------------------------------------------------------------
Supply and Intersegment
Logistics Utilities Services Eliminations Consolidated
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gas Produced, Purchased and Sold (MMcf):
Produced 13,584 409 13,993
--------- --------- --------- --------- ---------
Purchased:
Other producers 92,902 11,006 7,703 111,611
Inter-segment purchases 242 1,020 19,460 (20,722)
--------- --------- --------- --------- ---------
Total purchases 93,144 12,026 27,163 (20,722) 111,611
--------- --------- --------- --------- ---------
Total produced and purchased 106,728 12,435 27,163 (20,722) 125,604
Deduct:
Net increase (decrease) in gas in storage 1,506 1,506
Extracted natural gas liquids
(equivalent gas volumes) 2,588 2,588
System use and unaccounted for 549 307 856
--------- --------- --------- --------- ---------
Total 103,591 10,622 27,163 (20,722) 120,654
========= ========= ========= ========= =========
Gas Sales (MMcf):
Residential 4,411 4,411
Commercial 444 444
Industrial and Utility 4,350 (1,644) 2,706
Production 13,584 (90) 13,494
Marketing 90,007 1,417 27,163 (18,988) 99,599
--------- --------- --------- --------- ---------
Total 103,591 10,622 27,163 (20,722) 120,654
========= ========= ========= ========= =========
Natural Gas Transported (MMcf) 33,212 21,126 (10,526) 43,812
========= ========= ========= ========= =========
Oil Produced and Sold (thousands of bls) 421 421
========= =========
Natural Gas Liquids Sold
(thousands of gallons) 74,081 74,081
========= =========
Average Selling Price:
Residential Gas Sales (per Mcf) 11.090
Commercial Gas Sales 10.910
Industrial and Utility Gas Sales 2.323
Produced Natural Gas 2.110
Marketed Natural Gas 2.399 3.292 2.595
Oil (per barrel) 17.181
Natural Gas Liquids (per gallon) 0.330
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended June 30, 1996
----------------------------------------------------------------------------------------
Supply and Intersegment
Logistics Utilities Services Eliminations Consolidated
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gas Produced, Purchased and Sold (MMcf):
Produced 13,711 642 14,353
--------- --------- --------- --------- ---------
Purchased:
Other producers 124,701 17,392 142,093
Inter-segment purchases 1,916 1,598 (3,514)
--------- --------- --------- --------- ---------
Total purchases 126,617 18,990 (3,514) 142,093
--------- --------- --------- --------- ---------
Total produced and purchased 140,328 19,632 (3,514) 156,446
Deduct:
Net increase (decrease) in gas in storage 2,808 2,808
Extracted natural gas liquids
(equivalent gas volumes) 2,361 2,361
System use and unaccounted for 556 (517) 39
--------- --------- --------- --------- ---------
Total 137,411 17,341 (3,514) 151,238
========= ========= ========= ========= =========
Gas Sales (MMcf):
Residential 4,284 4,284
Commercial 1,982 1,982
Industrial and Utility 8,499 (1,112) 7,387
Production 13,711 (104) 13,607
Marketing 123,700 2,576 (2,298) 123,978
--------- --------- --------- --------- ---------
Total 137,411 17,341 (3,514) 151,238
========= ========= ========= ========= =========
Natural Gas Transported (MMcf) 30,321 17,425 (8,552) 39,194
========= ========= ========= ========= =========
Oil Produced and Sold (thousands of bls) 442 442
========= =========
Natural Gas Liquids Sold
(thousands of gallons) 73,921 73,921
========= =========
Average Selling Price:
Residential Gas Sales (per Mcf) 9.480
Commercial Gas Sales 6.077
Industrial and Utility Gas Sales 2.845
Produced Natural Gas 1.453
Marketed Natural Gas 1.980 2.830
Oil (per barrel) 15.287
Natural Gas Liquids (per gallon) 0.333
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1997
----------------------------------------------------------------------------------------
Supply and Intersegment
Logistics Utilities Services Eliminations Consolidated
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gas Produced, Purchased and Sold (MMcf):
Produced 26,312 969 27,281
--------- --------- --------- --------- ---------
Purchased:
Other producers 165,157 24,693 24,259 214,109
Inter-segment purchases 440 3,563 33,466 (37,469)
--------- --------- --------- --------- ---------
Total purchases 165,597 28,256 57,725 (37,469) 214,109
--------- --------- --------- --------- ---------
Total produced and purchased 191,909 29,225 57,725 (37,469) 241,390
Deduct:
Net increase (decrease) in gas in storage (3,739) (3,739)
Extracted natural gas liquids
(equivalent gas volumes) 4,849 4,849
System use and unaccounted for 1,072 377 1,449
--------- --------- --------- --------- ---------
Total 185,988 32,587 57,725 (37,469) 238,831
========= ========= ========= ========= =========
Gas Sales (MMcf):
Residential 17,307 17,307
Commercial 2,117 2,117
Industrial and Utility 9,781 (4,203) 5,578
Production 26,312 (299) 26,013
Marketing 159,676 3,382 57,725 (32,967) 187,816
--------- --------- --------- --------- ---------
Total 185,988 32,587 57,725 (37,469) 238,831
========= ========= ========= ========= =========
Natural Gas Transported (MMcf) 61,735 41,615 (22,213) 81,137
========= ========= ========= ========= =========
Oil Produced and Sold (thousands of bls) 832 832
========= =========
Natural Gas Liquids Sold
(thousands of gallons) 142,869 142,869
========= =========
Average Selling Price:
Residential Gas Sales (per Mcf) 10.431
Commercial Gas Sales 10.213
Industrial and Utility Gas Sales 2.765
Produced Natural Gas 2.183
Marketed Natural Gas 2.814 3.218 3.052
Oil (per barrel) 17.694
Natural Gas Liquids (per gallon) 0.363
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1996
----------------------------------------------------------------------------------------
Supply and Intersegment
Logistics Utilities Services Eliminations Consolidated
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gas Produced, Purchased and Sold (MMcf):
Produced 30,089 1,215 31,304
--------- --------- --------- --------- ---------
Purchased:
Other producers 259,885 36,711 296,596
Inter-segment purchases 2,847 6,957 (9,804)
--------- --------- --------- --------- ---------
Total purchases 262,732 43,668 (9,804) 296,596
--------- --------- --------- --------- ---------
Total produced and purchased 292,821 44,883 (9,804) 327,900
Deduct:
Net increase (decrease) in gas in storage (2,491) (2,491)
Extracted natural gas liquids
(equivalent gas volumes) 4,096 4,096
System use and unaccounted for 995 2,187 3,182
--------- --------- --------- --------- ---------
Total 287,730 45,187 (9,804) 323,113
========= ========= ========= ========= =========
Gas Sales (MMcf):
Residential 19,301 19,301
Commercial 8,314 8,314
Industrial and Utility 11,888 (1,559) 10,329
Production 30,089 (399) 29,690
Marketing 257,641 5,684 (7,846) 255,479
--------- --------- --------- --------- ---------
Total 287,730 45,187 (9,804) 323,113
========= ========= ========= ========= =========
Natural Gas Transported (MMcf) 60,598 29,674 (15,874) 74,398
========= ========= ========= ========= =========
Oil Produced and Sold (thousands of bls) 892 892
========= =========
Natural Gas Liquids Sold
(thousands of gallons) 125,400 125,400
========= =========
Average Selling Price:
Residential Gas Sales (per Mcf) 8.387
Commercial Gas Sales 6.179
Industrial and Utility Gas Sales 3.164
Produced Natural Gas 1.948
Marketed Natural Gas 2.453 3.454
Oil (per barrel) 16.114
Natural Gas Liquids (per gallon) 0.331
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Twelve Months Ended June 30, 1997
----------------------------------------------------------------------------------------
Supply and Intersegment
Logistics Utilities Services Eliminations Consolidated
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gas Produced, Purchased and Sold (MMcf):
Produced 53,518 2,272 55,790
--------- --------- --------- --------- ---------
Purchased:
Other producers 355,352 54,109 48,448 457,909
Inter-segment purchases 4,516 12,400 65,192 (82,108)
--------- --------- --------- --------- ---------
Total purchases 359,868 66,509 113,640 (82,108) 457,909
--------- --------- --------- --------- ---------
Total produced and purchased 413,386 68,781 113,640 (82,108) 513,699
Deduct:
Net increase (decrease) in gas in storage 408 408
Extracted natural gas liquids
(equivalent gas volumes) 9,144 9,144
System use and unaccounted for 1,953 3,162 5,115
--------- --------- --------- --------- ---------
Total 402,289 65,211 113,640 (82,108) 499,032
========= ========= ========= ========= =========
Gas Sales (MMcf):
Residential 28,555 28,555
Commercial 4,308 4,308
Industrial and Utility 24,540 (8,078) 16,462
Production 53,518 (34,052) 19,466
Marketing 348,771 7,808 113,640 (39,978) 430,241
--------- --------- --------- --------- ---------
Total 402,289 65,211 113,640 (82,108) 499,032
========= ========= ========= ========= =========
Natural Gas Transported (MMcf) 121,500 82,286 (42,963) 160,823
========= ========= ========= ========= =========
Oil Produced and Sold (thousands of bls) 1,667 1,667
========= =========
Natural Gas Liquids Sold
(thousands of gallons) 298,048 298,048
========= =========
Average Selling Price:
Residential Gas Sales (per Mcf) 10.166
Commercial Gas Sales 8.972
Industrial and Utility Gas Sales 2.863
Produced Natural Gas 2.022
Marketed Natural Gas 2.398 2.872 2.973
Oil (per barrel) 15.517
Natural Gas Liquids (per gallon) 0.372
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Twelve Months Ended June 30, 1996
----------------------------------------------------------------------------------------
Supply and Intersegment
Logistics Utilities Services Eliminations Consolidated
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gas Produced, Purchased and Sold (MMcf):
Produced 60,247 2,761 63,008
--------- --------- --------- --------- ---------
Purchased:
Other producers 487,745 58,344 546,089
Inter-segment purchases 14,841 13,476 (28,317)
--------- --------- --------- ---------
Total purchases 502,586 71,820 (28,317) 546,089
--------- --------- --------- --------- ---------
Total produced and purchased 562,833 74,581 (28,317) 609,097
Deduct:
Net increase (decrease) in gas in storage (1,269) (1,269)
Extracted natural gas liquids
(equivalent gas volumes) 8,312 8,312
System use and unaccounted for 2,097 350 2,447
--------- --------- --------- --------- ---------
Total 552,424 75,500 (28,317) 599,607
========= ========= ========= ========= =========
Gas Sales (MMcf):
Residential 31,311 31,311
Commercial 10,449 10,449
Industrial and Utility 21,020 (11,908) 9,112
Production 60,247 (556) 59,691
Marketing 492,177 12,720 (15,853) 489,044
--------- --------- --------- --------- ---------
Total 552,424 75,500 (28,317) 599,607
========= ========= ========= ========= =========
Natural Gas Transported (MMcf) 125,481 67,602 (34,710) 158,373
========= ========= ========= ========= =========
Oil Produced and Sold (thousands of bls) 1,813 1,813
========= =========
Natural Gas Liquids Sold
(thousands of gallons) 257,229 257,229
========= =========
Average Selling Price:
Residential Gas Sales (per Mcf) 8.515
Commercial Gas Sales 6.556
Industrial and Utility Gas Sales 2.754
Produced Natural Gas 1.802
Marketed Natural Gas 2.075 2.612
Oil (per barrel) 16.098
Natural Gas Liquids (per gallon) 0.303
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Information by Business Segment
(Thousands)
Three Months Ended Six-Months Ended Twelve Months Ended
June 30, June 30, June 30,
--------------------------------------------------------------------------------------------
1997 1996 1997 1996 1997 1996
--------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Supply and logistics..... $ 284,750 $ 305,545 $ 593,572 $ 764,311 $ 1,147,922 $1,329,882
Utilities ............... 83,425 93,717 277,521 296,101 488,861 483,733
Services................. 74,096 1,133 182,698 3,228 351,805 3,701
Sales between segments... (41,511) (8,628) (100,456) (31,595) (205,499) (80,506)
----------- ----------- ----------- ------------ ------------ ------------
Total......... $ 400,760 $ 391,767 $ 953,335 $ 1,032,045 $ 1,783,089 $ 1,736,810
=========== =========== =========== ============ ============ =============
OPERATING INCOME (LOSS):
Supply and logistics..... $ 8,208 $ 1,592 $ 23,248 $ 22,706 $ 52,552 $ (13,062)
Utilities................ (8,827) 10,027 30,446 62,508 57,258 67,872
Services................. (5,308) (2,636) (6,274) (6,828) (11,988) (7,816)
----------- ----------- ----------- ------------ ------------ ------------
Total......... $ (5,927) $ 8,983 $ 47,420 $ 78,386 $ 97,822 $ 46,994
=========== =========== =========== ============ ============ ============
CAPITAL EXPENDITURES:
Supply and logistics..... $ 21,811 $ 16,280 $ 32,931 $ 29,460 $ 76,088 $ 62,104
Utilities................ 9,920 7,571 18,303 13,222 41,912 43,669
Services................. 609 - 938 - 1,774 31
----------- ----------- ----------- ------------ ------------ ------------
Total......... $ 32,340 $ 23,851 $ 52,172 $ 42,682 $ 119,774 $ 105,804
=========== =========== =========== ============ ============ ============
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
THREE MONTHS ENDED JUNE 30, 1997
VS. THREE MONTHS ENDED JUNE 30, 1996
Equitable's consolidated net loss for the quarter ended June 30, 1997 was
$9.3 million, or $.26 per share, compared with net income of $928,000, or $.03
per share, for the quarter ended June 30, 1996. Earnings for the current period
include a one-time after-tax charge of $8.5 million for an asset write-down
related to the Company's investment in a bedded salt, natural gas storage
project in Avoca, New York. Earnings for the 1996 quarter include a one-time
after-tax charge of $1.2 million resulting from closing of some of the Company's
natural gas price hedge positions. The decrease in income, excluding the charges
detailed above, is due to a 16 percent increase in operating expenses and lower
margins from unregulated gas sales. These items were partially offset by a 45
percent increase in average selling prices for produced natural gas and higher
margins from the sale of natural gas liquids.
SIX MONTHS ENDED JUNE 30, 1997
VS. SIX MONTHS ENDED JUNE 30, 1996
Consolidated net income for the six months ended June 30, 1997 was $18.5
million or $.52 per share, compared with $39.7 million or $1.13 per share for
the six months ended June 30, 1996. The decrease in net income, excluding the
1997 effect of the Avoca write-down discussed above, is due to a 10 percent
increase in operating expenses primarily related to the services segment which
experienced longer than anticipated delays in project construction start-ups,
lower margins for natural gas marketing, a 13 percent decrease in natural gas
production, and decreased commercial and industrial gas sales volumes. These
items were partially offset by higher margins from sale of natural gas liquids
and increased average selling prices for produced natural gas.
TWELVE MONTHS ENDED JUNE 30, 1997
VS. TWELVE MONTHS ENDED JUNE 30, 1996
Consolidated net income for the twelve months ended June 30, 1997 was $38.3
million or $ 1.08 per share, compared with $14.6 million or $.42 per share for
the twelve months ended June 30, 1996. Earnings for the current period include
the one-time $8.5 million Avoca charge discussed above and a one-time after-tax
gain of $4.4 million, or $.13 per share, from the curtailment of the Company's
defined benefit pension plan for certain non-utility employees. Earnings for the
prior period include a one-time after-tax charge of $74.2 million , or $2.12 per
share, due to the recognition of impairment of assets of $121.1 million,
pursuant to the methodology of Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." Earnings for the prior period also include a
non-recurring after-tax gain of $29.1 million, or $.83 per share, related to the
Columbia Gas Transmission (Columbia) bankruptcy settlement and $6.6 million, or
$.19 per share, resulting from regulatory approval for accelerated recovery of
future gas costs. The decrease in net income, excluding the effect of the items
detailed above, is primarily due to decreased retail gas sales to residential
and commercial customers, a six percent increase in operating expenses primarily
related to the services segment's start-up and development costs and longer than
anticipated delays in project construction start-ups, and lower margins from
marketed natural gas. These items were partially offset by higher margins from
sale of natural gas liquids, increased average selling prices for produced
natural gas, and increased industrial sales.
RESULTS OF OPERATIONS
SUPPLY AND LOGISTICS
Supply and logistics operations are comprised of the sale of produced
natural gas, oil and natural gas liquids, contract drilling, marketing of
natural gas and electricity, and storage and intrastate transportation of
natural gas in Louisiana.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30,
---------------------------------------------------------------------------------------
1997 1996 1997 1996 1997 1996
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SUPPLY AND LOGISTICS
OPERATING REVENUES (THOUSANDS):
Marketed Natural Gas.............. $ 215,912 $ 244,867 $ 449,287 $ 631,990 $ 836,517 $ 1,021,355
Produced Natural Gas.............. 28,658 19,924 57,443 58,619 108,224 108,557
Produced Natural Gas Liquids...... 24,430 24,594 51,822 41,515 110,935 77,915
Produced Oil...................... 7,233 6,757 14,721 14,374 25,867 29,185
Contract Drilling................. 5,284 5,007 8,737 8,171 19,756 16,792
Marketed Electricity.............. --- 1,160 3,253 2,521 15,899 2,521
Natural Gas Transportation........ 1,069 1,478 2,850 3,201 7,319 7,896
Natural Gas Storage............... 662 150 1,615 150 2,564 150
Direct Billing Settlements........ --- --- --- --- 7,815 32,582
Other............................. 1,502 1,608 3,844 3,770 13,026 32,929
------------ ---------- ----------- ---------- ----------- ------------
Total Revenues.................. 284,750 305,545 593,572 764,311 1,147,922 1,329,882
COST OF ENERGY PURCHASED 229,170 259,852 482,665 656,014 919,590 1,066,575
------------ ---------- ----------- ---------- ----------- ------------
Net Operating Revenues 55,580 45,693 110,907 108,297 228,332 263,307
------------ ---------- ----------- ---------- ----------- ------------
OPERATING EXPENSES:
Production........................ 8,804 7,686 17,670 15,938 36,255 31,455
Exploration....................... 4,096 2,422 5,789 4,638 16,865 11,290
Gas Processing.................... 3,183 3,913 5,749 5,203 11,030 10,694
Contract Drilling................. 4,388 3,825 7,522 6,557 16,846 13,164
Other............................. 13,648 12,677 24,551 24,575 41,671 52,035
Depreciation and Depletion........ 13,253 13,578 26,378 28,680 53,113 62,654
Impairment of Assets.............. --- --- --- --- --- 95,077
------------ ---------- ----------- ---------- ----------- ------------
Total Operating Expenses........ 47,372 44,101 87,659 85,591 175,780 276,369
------------ ---------- ----------- ---------- ----------- ------------
OPERATING INCOME (LOSS)............... $ 8,208 $ 1,592 $ 23,248 $ 22,706 $ 52,552 $ (13,062)
============ ========== =========== ========== =========== ============
SALES QUANTITIES:
Marketed Natural Gas (MMcf)....... 90,007 123,700 159,676 257,641 348,771 492,177
Produced Natural Gas (MMcf)....... 13,584 13,711 26,312 30,089 53,518 60,247
Oil (MBls)........................ 421 442 832 892 1,667 1,813
Natural Gas Liquids...............
(thousands of gallons).......... 74,081 73,921 142,869 125,400 298,048 257,229
Transportation Deliveries (MMcf) 33,212 30,321 61,735 60,598 121,500 125,481
</TABLE>
THREE MONTHS ENDED JUNE 30, 1997
VS. THREE MONTHS ENDED JUNE 30, 1996
Operating revenues were $284.8 million for the quarter ended June 30, 1997
compared with $305.5 million for the quarter ended June 30, 1996. The decrease
in operating revenues is due to a 27% decrease in marketed natural gas sales
volumes and decreased marketed sales of electricity. The decreased operating
revenues were offset by a 21% increase in the average selling price of marketed
natural gas, and a 45% increase in the average selling price of produced natural
gas. The lower average prices for produced natural gas in the 1996 period are
due in part to a $2.0 million hedging charge in the second quarter of 1996 to
close natural gas hedge positions related to production for the second half of
1996.
Cost of energy purchased includes natural gas and electricity purchased for
marketing activities and natural gas purchased for the production of natural gas
liquids. The cost of energy purchased amounted to $229.2 million for the quarter
ended June 30, 1997 compared with $259.9 million for the quarter ended June 30,
1996. The decrease for the quarter reflects primarily the lower requirements for
decreased marketed natural gas sales activity.
Other operating expenses were $47.4 million for the quarter ended June 30,
1997 compared with $44.1 million for the quarter ended June 30, 1996. This
increase reflects higher well operating expenses and higher dry hole cost.
SIX MONTHS ENDED JUNE 30, 1997
VS. SIX MONTHS ENDED JUNE 30, 1996
Operating revenues for the six months ended June 30, 1997 were $593.6
million compared with $764.3 million for the six months ended June 30, 1996. The
$170.7 million decrease in revenues is due primarily to a 38% decrease in
marketed natural gas sales volumes and a 13% decrease in natural gas production.
These decreases were partially offset by a 15% increase in the average selling
price of marketed natural gas, an increase in both the production and average
selling price of natural gas liquids of 14% and 10%, respectively, a 12%
increase in the average selling price of produced natural gas, and increased
storage service which began full operations during the second quarter of 1996.
Energy purchased for the six months ended June 30, 1997 amounted to $482.7
million compared to $656.0 million for the six months ended June 30, 1996. The
decrease in purchased energy for the six month period is due to decreased
marketed natural gas requirements, partially offset by increased production of
natural gas liquids.
Other operating expenses for the six months ended June 30, 1997 were $87.7
million compared with $85.6 million for the six months ended June 30, 1996. The
increase in operating expenses for the current period is due primarily to
increased well operating expenses and dry hole costs, partially offset by
decreased depreciation expense reflecting lower production.
TWELVE MONTHS ENDED JUNE 30, 1997
VS. TWELVE MONTHS ENDED JUNE 30, 1996
Operating revenues for the twelve months ended June 30, 1997 were $1,147.9
million compared with $1,329.9 million for the twelve months ended June 30,
1996. The 1996 revenues include $40.2 million of nonrecurring amounts from the
Columbia bankruptcy settlement and $11.0 million of additional revenue from
direct bill settlements. The decrease in revenues of $130.8 million, excluding
the nonrecurring amounts, is due primarily to a 29% decrease in marketed natural
gas sales volumes, an 11% decrease in natural gas production, and an 8% decrease
in oil production. These decreases were partially offset by a 16% increase in
the average selling price of marketed natural gas, an increase in both the
average selling price and production of natural gas liquids of 23% and 16%,
respectively, increased revenues from the marketing of electricity, a 12%
increase in the average selling price of produced natural gas, and increased
storage service which began full operations during the second quarter of 1996.
Energy purchased for the twelve months ended June 30, 1997 amounted to
$919.6 million compared to $1,066.6 million for the twelve months ended June 30,
1996. The decrease in purchased energy for the twelve month period is due to
decreased marketed natural gas requirements partially offset by increased
production of natural gas liquids and increased marketed electricity activity.
Other operating expenses for the twelve months ended June 30, 1997 were
$175.8 million compared with $276.4 million for the twelve months ended June 30,
1996. Other operating expenses for 1996 include a charge of $95.1 million for
impairment of assets. The decrease in operating expenses for the current period,
excluding the charge for asset impairment, is due primarily to decreased
depreciation and depletion expense, reflecting lower production and lower
depletion rates, partially offset by increased well operating and exploration
costs.
UTILITIES
Utilities operations are comprised of the sale and transportation of
natural gas to retail customers at state-regulated rates, interstate
transportation and storage of natural gas subject to federal regulation and the
marketing of natural gas.
The results for all 1997 periods discussed below include a charge of $13.0
million for an asset write-down on the Company's investment in a 25% general
partnership interest in the Avoca, New York bedded salt natural gas storage
project. ET Avoca Company, a special purpose subsidiary of the Company, filed a
petition for relief under Chapter 11 of the United States Bankruptcy Code in the
U.S. Bankruptcy Court for the District of Delaware. The project encountered
technical difficulties related to the proper disposal of the brine water
resulting from the leaching process of the salt formation. Although alternative
methods of disposing of the brine water have been studied, none have proved to
be economically viable resulting in project termination.
<TABLE>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30,
---------------------------------------------------------------------------------------
1997 1996 1997 1996 1997 1996
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
UTILITIES
OPERATING REVENUES (THOUSANDS):
Residential Gas Sales............... $ 48,920 $ 40,613 $ 180,529 $ 161,881 $ 290,284 $ 266,626
Commercial Gas Sales................ 4,844 12,044 21,620 51,376 38,652 68,501
Industrial and Utility Gas Sales.... 10,107 24,177 27,040 37,609 70,264 57,883
Marketed Gas Sales.................. 4,665 7,290 10,883 19,631 22,424 33,222
Transportation Service.............. 10,806 5,181 29,291 16,797 50,661 36,724
Storage Service..................... 1,878 1,781 3,786 3,594 7,497 7,207
Other............................... 2,205 2,631 4,372 5,213 9,079 13,570
----------- ----------- ----------- ----------- ---------- ------------
Total Revenues................... 83,425 93,717 277,521 296,101 488,861 483,733
COST OF ENERGY PURCHASED............... 36,218 43,090 142,004 142,652 245,675 212,957
----------- ----------- ----------- ----------- ---------- ------------
Net Operating Revenues........... 47,207 50,627 135,517 153,449 243,186 270,776
----------- ----------- ----------- ----------- ---------- ------------
OPERATING EXPENSES:
Other............................... 36,228 34,102 78,618 77,963 145,845 151,135
Depreciation and Depletion.......... 6,806 6,498 13,453 12,978 27,083 26,205
Impairment of Assets................ 13,000 - 13,000 - 13,000 25,564
----------- ----------- ----------- ----------- ---------- ------------
Total Operating Expenses......... 56,034 40,600 105,071 90,941 185,928 202,904
----------- ----------- ----------- ----------- ---------- ------------
OPERATING INCOME (LOSS)................ $ (8,827) $ 10,027 $ 30,446 $ 62,508 $ 57,258 $ 67,872
=========== =========== =========== =========== ========== ============
SALES QUANTITIES (MMCF):
Residential Gas Sales.............. 4,411 4,284 17,307 19,301 28,555 31,311
Commercial Gas Sales............... 444 1,982 2,117 8,314 4,308 10,449
Industrial and Utility Gas Sales... 4,350 8,499 9,781 11,888 24,540 21,020
Marketed Gas Sales................. 1,417 2,576 3,382 5,684 7,808 12,720
Transportation Deliveries.......... 21,126 17,425 41,615 29,674 82,286 67,602
Heating Degree Days................ 919 656 3,642 3,746 5,874 6,043
</TABLE>
THREE MONTHS ENDED JUNE 30, 1997
VS. THREE MONTHS ENDED JUNE 30, 1996
Revenues were $83.4 million for the quarter ended June 30, 1997 compared
with $93.7 million for the quarter ended June 30, 1996. The decrease in revenues
is due to a 54% decrease in commercial and industrial gas sales volumes
reflecting the effect of commercial customers switching to transportation
service and the movement of several commercial customers from the Company's
utilities segment to the services segment. The decreased revenues are also
attributed to a decline of 45% in the sales volumes of marketed natural gas.
These decreases were offset by higher residential and commercial rates
reflecting pass-through of higher regulatory purchased gas costs to customers
and slightly higher residential gas sales volumes reflecting colder weather
compared to the 1996 quarter.
Cost of energy purchased amounted to $36.2 million for the quarter ended
June 30, 1997 compared with $43.1 million for the quarter ended June 30, 1996.
The decrease is a result of reduced gas sales partially offset by the
pass-through of higher regulatory purchased gas costs to retail customers.
Other operating expenses for the quarter ended June 30, 1997, excluding the
Avoca charge described above, were $43.0 million compared with $40.6 million for
the quarter ended June 30, 1996. The increase in operating expenses is primarily
due to increased customer assistance expenses and higher reserve for doubtful
accounts.
SIX MONTHS ENDED JUNE 30, 1997
VS. SIX MONTHS ENDED JUNE 30, 1996
Operating revenues for the six months ended June 30, 1997 were $277.5
million compared with $296.1 million for the six months ended June 30, 1996. The
decrease in revenues of $18.6 million is due primarily to a 41% decrease in
commercial and industrial gas sales volumes reflecting the effect of commercial
customers switching to transportation service and the movement of several
commercial customers from the Company's utilities segment to the services
segment, 10% lower residential sales volumes reflecting customer conservation
and weather that was three percent warmer than the prior year, and a decline of
40% in the sales volumes of marketed natural gas reflecting the transfer of a
portion of these sales to the services segment. These items were partially
offset by higher residential and commercial rates reflecting pass-through of
higher regulatory purchased gas costs to customers, and the effect of commercial
customers switching to transportation service.
Energy purchased for the six months ended June 30, 1997 was $142.0 million
compared with $142.7 million for the six months ended June 30, 1996. The
decrease is due to lower purchased quantities of gas as a result of reduced gas
sales, partially offset by the pass-through of higher regulatory purchased gas
costs to retail customers.
Other operating expenses for the six months ended June 30, 1997, excluding
the Avoca charge described above, were $92.1 million compared with $90.9 million
for the six months ended June 30, 1996. The increase in operating expenses is
primarily due to increased customer assistance expenses and higher reserve for
doubtful accounts, both reflecting higher rates in effect for retail customers.
TWELVE MONTHS ENDED JUNE 30, 1997
VS. TWELVE MONTHS ENDED JUNE 30, 1996
Operating revenues for the twelve months ended June 30, 1997 were $488.9
million compared with $483.7 million for the twelve months ended June 30, 1996.
Operating revenues for the 1996 period include $4.8 million related to the
Columbia bankruptcy settlement. The increase in revenues, excluding the effect
of the settlement, is due primarily to higher residential and commercial rates
reflecting pass-through of higher regulatory purchased gas costs to customers
and a 17% increase in industrial and utility gas sales volumes. These items were
partially offset by decreased commercial sales, reflecting the switch of
commercial customers to transportation service and the movement of several
commercial customers from the Company's utilities segment to the services
segment, lower sales to residential customers, and a 39% decline in the sales
volumes of marketed natural gas.
Energy purchased for the twelve months ended June 30, 1997 was $245.7
million compared with $213.0 million for the twelve months ended June 30, 1996.
The increase is due to the pass-through of higher regulatory purchased gas costs
to retail customers and increased purchases for industrial and utility gas
sales, partially offset by lower retail and marketed sales volumes.
Other operating expenses for the twelve months ended June 30, 1997,
excluding the Avoca charge described above, were $172.9 million compared with
$202.9 million for the twelve months ended June 30, 1996. Other operating
expenses for the twelve months ended June 30, 1996 include a charge of $25.6
million for impairment of assets. Operating expenses for the twelve-month
period, excluding the charge for impairment of assets and the gain recognized in
the fourth quarter of 1996 related to the curtailment of the Company's defined
benefit pension plan for non-utility employees, remained substantially
unchanged.
SERVICES
Services operations are comprised of marketing of natural gas,
cogeneration development, water efficiency and program development, performance
contracting, and central facility plant operations. This operation was formed in
mid-1996 by combining certain of the Company's natural gas marketing activities
with the newly acquired operations of Independent Energy Corporation (IEC),
Conogen, Inc. and Pequod Associates, Inc. The Company also acquired Scallop
Thermal Management, Inc. in January, 1997 and Northeast Energy Services, Inc.
(NORESCO) in July, 1997. The variances in the following operating result
comparisons reflect the recent development of this segment.
Operating results for the quarter ended June 30, 1997 were a loss of $5.3
million compared with a loss of $2.6 million for the quarter ended June 30,
1996. Operating results for the six months ended June 30, 1997 were a loss of
$6.3 million compared with a loss of $6.8 million for the six months ended June
30, 1996. Operating results for the twelve months ended June 30, 1997 were a
loss of $12.0 million compared with a loss of $7.8 million for the twelve months
ended June 30, 1996. The 1996 quarter and six-month period include $1.5 million
and $5.2 million, respectively, of start-up and development costs. The operating
losses in 1997 are primarily due to construction project start-ups being delayed
in addition to the inability to initiate new product sales into a
slow-to-develop unregulated marketplace.
CAPITAL RESOURCES AND LIQUIDITY
OPERATING ACTIVITIES
Cash required for operations is affected primarily by the seasonal nature
of the Company's natural gas distribution operations and volatility of oil and
gas commodity prices. Gas purchased for storage during the nonheating season is
financed with short-term loans, which are repaid as gas is withdrawn from
storage and sold during the heating season. In addition, short-term loans are
used to provide other working capital requirements during the nonheating season
and as interim financing for a portion of capital expenditures. The Company
expects to finance its 1997 capital expenditures with cash generated from
operations and temporarily with short-term loans.
The Company uses exchange-traded natural gas, crude oil and propane
futures contracts and options and over-the-counter natural gas and crude oil
swap agreements and options to hedge exposures to energy price changes.
INVESTING ACTIVITIES
The Company's business requires major ongoing expenditures for
replacements, improvements, and additions to its utility plant and continuing
development and expansion of its resource production activities. A total of
$187.1 million has been authorized for the 1997 capital expenditure program,
with $121.7 million allocated to supply and logistics, $40.4 million for
utilities, and $25.0 million for services. Capital expenditures for the six
months ended June 30, 1997 were $52.2 million.
The Company is in the process of reevaluating its supply and logistics
efforts with regard to its oil and gas properties in the western United States
and internationally, in addition to its Gulf mid-stream assets. In July 1997,
the Company entered into agreements with five parties for the sale of the
Company's oil and natural gas properties in the Western United States and
Canada. The properties include proved reserves of 191 billion cubic feet of
natural gas equivalent and over 700,000 undeveloped acres as of December 31,
1996. The aggregate cash sales price will be approximately $174 million payable
at closings which are expected to occur on or before September 30, 1997. The
sales are subject to buyers' confirmation of title and site inspection of the
properties as well as certain other conditions. The sale will allow the Company
to refocus its exploration and development efforts in the Appalachian and Gulf
of Mexico areas. The sale is not reflected in the consolidated financial
statements and the discontinued operations are not material to the consolidated
financial statements of the Company. Proceeds from the sale are intended to be
used to pay down short-term debt.
FINANCING ACTIVITIES
The Company has adequate borrowing capacity to meet its financing
requirements. Bank loans and commercial paper, supported by available credit,
are used to meet short-term financing requirements. At June 30, 1997, $244.0
million of commercial paper and $11.4 million of bank loans were outstanding at
an average annual interest rate of 5.66%. The Company maintains a committed,
revolving $500 million credit agreement with a group of banks which expires
September 1, 2001. The agreement requires a facility fee of one-tenth of one
percent. In July 1997, Moody's Investors Service placed the Company's A2 senior
unsecured debt rating, (P)A2 senior unsecured shelf rating, and Prime-1 rating
for commercial paper under review for possible downgrade. The action taken by
Moody's is not expected to have a significant impact on the Company's liquidity.
In July 1997, the Company completed its acquisition of Northeast Energy
Services, Inc. (NORESCO) in exchange for a combination of the Company's stock,
stock options and cash valued at approximately $77 million. The transaction will
be treated as a purchase for accounting purposes. NORESCO is a provider of
comprehensive energy efficiency systems and services for commercial, industrial,
government, and institutional customers. In connection with this acquisition,
the Company issued 2,091,407 shares of common stock. The Company repurchased one
million shares of stock in June and July 1997 at an average price of $28.54 per
share. Proforma information is not required as the acquisition is less than
10 percent of the total assets of the Company.
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q may include forward looking statements.
The Company notes that a variety of factors could cause the Company's actual
results to differ materially from the anticipated results or other expectations
expressed in the Company's forward looking statements. The risks and
uncertainties that may affect the operations, performance, development and
results of the Company's business include, but are not limited to, the
following: weather conditions, the pace of deregulation of retail natural gas
and electricity markets, the timing and extent of the Company's success in
acquiring gas and oil properties and in discovering, developing and producing
reserves and the impact of competitive factors on profit margins in various
markets in which the Company competes.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Results of Votes of Security Holders
(a) The Annual Meeting of Shareholders was held on May 23, 1997.
(c) Brief description of matters voted upon:
(1) Elected the named directors to serve three-year terms as
follow:
Shares Voted Shares
Director For Withheld
E. Lawrence Keyes, Jr. 31,032,279 1,834,330
Thomas A. McConomy 31,052,166 1,814,443
Malcolm M. Prine 30,947,228 1,919,381
(2) Ratified appointment of Ernst & Young LLP as independent
auditors for the year ended December 31, 1997. Vote was
32,677,359 shares for; 109,110 shares against and 80,140
shares abstained.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K during the quarter ended June 30, 1997:
Form 8-K dated May 19, 1997, addressing that the Company had
reached a definitive agreement to acquire Northeast Energy
Services, Inc (NORESCO) in exchange for a combination of the
Company's common stock and cash valued at approximately $77
million.
<PAGE>
Signature
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.
EQUITABLE RESOURCES, INC.
(Registrant)
/s/ A. Mark Abramovic
---------------------------------
A. Mark Abramovic
Senior Vice President and
Chief Financial Officer
Date: August 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 41,367
<SECURITIES> 0
<RECEIVABLES> 276,637
<ALLOWANCES> 12,277
<INVENTORY> 26,542
<CURRENT-ASSETS> 422,898
<PP&E> 2,259,793
<DEPRECIATION> 767,797
<TOTAL-ASSETS> 2,055,140
<CURRENT-LIABILITIES> 512,211
<BONDS> 417,075
0
0
<COMMON> 204,362
<OTHER-SE> 516,247
<TOTAL-LIABILITY-AND-EQUITY> 2,055,140
<SALES> 953,335
<TOTAL-REVENUES> 953,335
<CGS> 0
<TOTAL-COSTS> 905,915
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,394
<INTEREST-EXPENSE> 22,432
<INCOME-PRETAX> 28,401
<INCOME-TAX> 9,874
<INCOME-CONTINUING> 18,527
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,527
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.52
</TABLE>
