A. MARK ABRAMOVIC
Senior Vice President and
Chief Financial Officer
Phone: (412) 261-3000
May 12, 1997
Securities and Exchange Commission
Washington, DC 20549
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of 1934, we are
transmitting herewith the attached Form 10-Q for the quarter ended March 31,
1997.
Sincerely yours,
EQUITABLE RESOURCES, INC.
/s/ A. Mark Abramovic
A. Mark Abramovic
Senior Vice President and
Chief Financial Officer
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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 March 31, 1997
Common stock, no par value 35,519,102 shares
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Index
Page No.
PART I. FINANCIAL STATEMENTS:
Statements of Consolidated Income for the Three
Months Ended March 31, 1997 and 1996,
and the Twelve Months Ended March 31,
1997 and 1996 1
Statements of Consolidated Cash Flows for the
Three Months Ended March 31, 1997 and
1996 and the Twelve Months Ended
March 31, 1997 and 1996 2
Consolidated Balance Sheets, March 31, 1997
and 1996 and December 31, 1996 3 - 4
Long-Term Debt, March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Gas Produced, Purchased and Sold 7 - 10
Information by Business Segment 11
Management's Discussion and Analysis of
Financial Condition and Results of Operations 12 - 18
PART II. OTHER INFORMATION 19
SIGNATURE 20
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Statements of Consolidated Income
(Thousands Except Per Share Amounts)
Three Months Ended Twelve Months Ended
March 31, March 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Operating Revenues.......................... $ 552,575 640,278 $ 1,774,096 $ 1,661,577
Cost of Energy Purchased.................... 401,189 475,471 1,293,874 1,128,272
----------- ---------- ----------- ---------
Net operating revenues................. 151,386 164,807 480,222 533,305
----------- ---------- ----------- -----------
Operating Expenses:
Operation................................ 57,367 52,661 218,479 202,848
Maintenance.............................. 6,672 5,908 27,308 25,565
Depreciation and depletion............... 19,982 21,582 80,781 97,582
Impairment of assets..................... - - - 121,081
Taxes other than income.................. 14,018 15,253 40,922 43,186
----------- ---------- ----------- -----------
Total operating expenses............... 98,039 95,404 367,490 490,262
----------- ---------- ----------- -----------
Operating Income............................ 53,347 69,403 112,732 43,043
Other Income................................ 1,729 2,169 2,558 3,167
Interest Charges............................ 11,299 10,474 42,650 47,706
----------- ---------- ----------- -----------
Income (Loss) Before Income Taxes........... 43,777 61,098 72,640 (1,496)
Income Taxes (Benefits)..................... 15,987 22,372 24,197 (14,015)
----------- ---------- ----------- -----------
Net Income ................................. $ 27,790 $ 38,726 $ 48,443 $ 12,519
=========== =========== ========== ===========
Average Common Shares Outstanding........... 35,462 35,035 35,301 34,892
=========== ========== =========== ===========
Earnings Per Share of Common Stock.......... $.78 $1.11 $1.37 $.36
==== ===== ===== ====
Dividends Per Share of Common Stock......... $.59 $.59 $1.18 $1.18
==== ==== ===== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Statements of Consolidated Cash Flows
(Thousands)
Three Months Ended Twelve Months Ended
March 31, March 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income........................................... $ 27,790 $ 38,726 $ 48,443 $ 12,519
--------- --------- --------- ---------
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Impairment of assets.............................. - - - 121,081
Depreciation and depletion........................ 19,982 21,582 80,781 97,582
Deferred income taxes (benefits).................. (444) 12,824 12,823 (51,908)
Other - net....................................... 3,132 2,754 1,436 (556)
Changes in other assets and liabilities:
Accounts receivable and unbilled revenues....... 27,455 (89,321) 68,867 (143,435)
Gas stored underground.......................... 15,156 9,758 (4,177) 3,525
Material and supplies........................... 3,661 2,068 (4,342) (552)
Deferred purchased gas cost..................... 22,022 (8,583) (19,314) (19,548)
Prepaid expenses and other...................... 9,272 (341) (668) (6,438)
Regulatory assets............................... 268 365 282 2,154
Accounts payable................................ (57,390) 68,853 (76,459) 138,041
Accrued taxes................................... 2,409 8,347 (3,400) 10,550
Accrued interest................................ (4,208) (2,203) (4,995) 1,218
Refunds due customers........................... 4,943 672 3,157 (8,372)
Customer credit balances........................ (6,167) (8,716) (159) (186)
Deferred revenue................................ (8,530) (5,426) (25,304) 124,448
Other - net..................................... (1,099) 16,437 (20,947) 6,029
--------- --------- --------- ---------
Total adjustments............................. 30,462 29,070 7,581 273,633
--------- --------- --------- ---------
Net cash provided by
operating activities...................... 58,252 67,796 56,024 286,152
--------- --------- --------- ---------
Cash Flows from Investing Activities:
Capital expenditures................................. (19,832) (18,831) (111,285) (106,219)
Proceeds from sale of property....................... 216 425 3,971 24,388
--------- --------- --------- ---------
Net cash used in investing activities....... (19,616) (18,406) (107,314) (81,831)
--------- --------- --------- ---------
Cash Flows from Financing Activities:
Issuance of common stock............................. 40 543 1,803 2,641
Purchase of treasury stock........................... - - (33) (171)
Dividends paid....................................... (20,600) (20,702) (41,446) (51,575)
Proceeds from issuance of long-term debt............. - - 144,919 17,836
Repayments and retirements of long-term debt......... (157) - (150,597) (24,500)
Increase (decrease) in short-term loans.............. 15,432 (3,654) 88,986 (109,513)
--------- --------- --------- ---------
Net cash (used) provided by
financing activities...................... (5,285) (23,813) 43,632 (165,282)
--------- --------- --------- ---------
Increase (decrease) in cash and cash equivalents........ 33,351 25,577 (7,658) 39,039
Cash and cash equivalents at beginning of period ....... 14,737 30,169 55,746 16,707
--------- --------- --------- ---------
Cash and cash equivalents at end of period.............. $ 48,088 $ 55,746 $ 48,088 $ 55,746
========= ========= ========= =========
Cash paid (received) during the period for:
Interest (net of amount capitalized)................. $ 12,679 $ 11,688 $ 44,016 $ 44,629
========= ========= ========= =========
Income taxes......................................... $ (5,227) $ 606 $ 4,623 $ 42,343
======== ========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Thousands)
March 31, December 31,
1997 1996 1996
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents............................... $ 48,088 $ 55,746 $ 14,737
Accounts receivable (less accumulated
provision for doubtful accounts:
March 31, 1997 $13,601; 1996 $13,075;
December 31, 1996, $10,714)........................... 269,079 336,771 296,175
Unbilled revenues ...................................... 20,911 22,612 24,157
Gas stored underground - current inventory.............. 4,341 164 19,497
Material and supplies................................... 14,851 10,509 18,512
Deferred purchased gas cost............................. 38,057 18,743 60,079
Prepaid expenses and other.............................. 43,332 42,664 52,604
------------- ------------ -------------
Total current assets............................... 438,659 487,209 485,761
------------- ------------ -------------
Property, Plant and Equipment:
Supply and Logistics (successful efforts method) ....... 1,231,850 1,177,124 1,220,756
Utilities .............................................. 996,330 957,225 988,425
Services................................................ 2,001 111 1,810
------------- ------------ -------------
Total property, plant and equipment................ 2,230,181 2,134,460 2,210,991
Less accumulated depreciation and depletion........... 750,240 682,507 731,306
------------- ------------ -------------
Net property, plant and equipment.................. 1,479,941 1,451,953 1,479,685
------------- ------------ -------------
Other Assets:
Regulatory assets....................................... 72,882 84,876 73,150
Goodwill ............................................... 11,634 - 8,396
Other................................................... 48,336 49,567 49,307
------------- ------------ -------------
Total other assets.................................... 132,852 134,443 130,853
------------- ------------ -------------
Total.............................................. $ 2,051,452 $ 2,073,605 $ 2,096,299
============= ============ =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Thousands)
March 31, December 31,
1997 1996 1996
CAPITALIZATION AND LIABILITIES
<S> <C> <C> <C>
Current Liabilities:
Short-term loans................................... $ 220,332 $ 131,346 $ 204,900
Accounts payable................................... 174,579 251,038 231,969
Accrued taxes...................................... 23,054 26,454 20,645
Accrued interest................................... 7,644 12,639 11,852
Refunds due customers.............................. 19,832 16,675 14,889
Customer credit balances........................... 884 1,043 7,051
Deferred income taxes.............................. 8,617 10,352 19,009
Other.............................................. 16,489 26,520 10,099
------------ ------------- -------------
Total current liabilities..................... 471,431 476,067 520,414
------------ ------------- -------------
Long--Term Debt ....................................... 421,830 415,692 422,112
------------ ------------- -------------
Deferred and Other Credits:
Deferred income taxes.............................. 265,360 277,377 260,700
Deferred investment tax credits.................... 19,619 20,716 19,892
Deferred revenue................................... 99,144 124,448 107,674
Other.............................................. 20,759 23,605 23,224
------------ ------------- -------------
Total deferred and other credits.............. 404,882 446,146 411,490
------------ ------------- -------------
Capitalization:
Common stockholders' equity:
Common stock, no par value, authorized 80,000
shares; shares issued March 31, 1997, 35,688;
March 31, 1996, 35,440; December 31, 1996,
35,515 ....................................... 231,820 224,500 227,660
Retained earnings ............................... 527,057 520,060 519,867
Treasury stock, shares at cost March 31, 1997,
169 ; March 31, 1996, 339; December 31,
1996, 169..................................... (4,023) (7,722) (4,023)
Foreign currency translation..................... (1,545) (1,138) (1,221)
------------ ------------- -------------
Total common stockholders' equity............. 753,309 735,700 742,283
------------ ------------- -------------
Total..................................... $ 2,051,452 $ 2,073,605 $ 2,096,299
============ ============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Long-Term Debt
(Thousands)
Annual Maturities
Debt Maturities After One Year
March 31, March 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
8 1/4% Debentures, due July 1, 1996 (a)............... $ - $ - $ - $ 75,000
7 1/2% Debentures, due July 1, 1999
($75,000 principal amount net of
unamortized original issue discount) (b).......... - - 72,450 71,540
9 1/2% Convertible subordinated
debentures, due January 15, 2006.................. - 652
9.9% Debentures, due April 15, 2013 (c,d)............. 5,880 75,000
7 3/4% Debentures, due July 15, 2026 (b).............. 150,000 -
Medium-Term Notes:
7.2% to 9.0% Series A, due 1998 thru 2021......... 100,000 100,000
5.1% to 7.6% Series B, due 2003 thru 2023......... 75,500 75,500
6.8% to 7.6% Series C, due 2007 thru 2018......... 18,000 18,000
-------- --------- ----------- -----------
Total.......................................... $ - $ - $ 421,830 $ 415,692
======== ========= =========== ===========
<FN>
(a) 8 1/4% Debentures were retired with proceeds from issuance of the 7 3/4%
Debentures due July 15, 2026.
(b) Not redeemable prior to maturity.
(c) $69,120,000 retired as of March 31, 1997 through tender offer. Financing
of the tender offer was through issuance of the 7 3/4% Debentures due
July 15, 2026.
(d) Annual sinking fund payments of $3,750,000 are required beginning in 1999.
</FN>
</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 consolidated
financial statements contain all adjustments necessary to present fairly the
financial position as of March 31, 1997 and 1996 and the results of
operations for the three and twelve months then ended and cash flows for the
three and twelve months then ended. See Note G below.
C. The results of operations for the three-month periods ended March 31, 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. At March 31, 1997, 10,320,000 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, 81,000 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.
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. The Company currently has a $12.5 million investment in a 25% general
partnership interest in the Avoca bedded salt, natural gas storage project.
The project has recently encountered technical difficulties which have
significantly delayed development and could potentially result in the
discontinuation of the project. The Company is reevaluating the project's
economic viability and will determine the appropriate reserve for loss
upon completion of that evaluation.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1997
Supply and Intersegment
Logistics Utilities Services Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Gas Produced, Purchased and Sold (MMcf):
Produced 12,728 560 13,288
--------- --------- --------- --------- ---------
Purchased:
Other producers 72,255 13,687 16,556 102,498
Inter-segment purchases 198 2,543 14,006 (16,747)
--------- --------- --------- ---------
Total purchases 72,453 16,230 30,562 (16,747) 102,498
--------- --------- --------- --------- ---------
Total produced and purchased 85,181 16,790 30,562 (16,747) 115,786
Deduct:
Net increase (decrease) in gas in storage (5,245) (5,245)
Extracted natural gas liquids
(equivalent gas volumes) 2,261 2,261
System use and unaccounted for 523 70 593
--------- --------- --------- --------- ---------
Total 82,397 21,965 30,562 (16,747) 118,177
========= ========= ========= ========= =========
Gas Sales (MMcf):
Residential 12,896 12,896
Commercial 1,673 1,673
Industrial and Utility 5,431 (2,559) 2,872
Production 12,728 (209) 12,519
Marketing 69,669 1,965 30,562 (13,979) 88,217
--------- --------- --------- --------- ---------
Total 82,397 21,965 30,562 (16,747) 118,177
========= ========= ========= ========= =========
Natural Gas Transported (MMcf) 28,523 20,489 (11,687) 37,325
========= ========= ========= ========= =========
Oil Produced and Sold (thousands of bls) 411 411
========= =========
Natural Gas Liquids Sold
(thousands of gallons) 68,788 68,788
========= =========
Average Selling Price:
Residential Gas Sales (per Mcf) $10.205
Commercial Gas Sales 10.027
Industrial and Utility Gas Sales 3.118
Produced Natural Gas $ 2.262
Marketed Natural Gas 3.350 3.164 $3.459
Oil (per barrel) 18.219
Natural Gas Liquids (per gallon) .398
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1996
Supply and Intersegment
Logistics Utilities Services Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Gas Produced, Purchased and Sold (MMcf):
Produced 16,378 573 16,951
--------- --------- --------- --------- ---------
Purchased:
Other producers 135,184 19,319 154,503
Inter-segment purchases 931 5,359 (6,290)
--------- --------- --------- ---------
Total purchases 136,115 24,678 (6,290) 154,503
--------- --------- --------- --------- ---------
Total produced and purchased 152,493 25,251 (6,290) 171,454
Deduct:
Net increase (decrease) in gas in storage (5,299) (5,299)
Extracted natural gas liquids
(equivalent gas volumes) 1,735 1,735
System use and unaccounted for 439 2,704 3,143
--------- --------- --------- --------- ---------
Total 150,319 27,846 (6,290) 171,875
========= ========= ========= =========- =========
Gas Sales (MMcf):
Residential 15,017 15,017
Commercial 6,332 6,332
Industrial and Utility 3,389 (447) 2,942
Production 16,378 (295) 16,083
Marketing 133,941 3,108 (5,548) 131,501
--------- --------- --------- --------- ---------
Total 150,319 27,846 (6,290) 171,875
========= ========= ========= ========= =========
Natural Gas Transported (MMcf) 30,277 12,249 (7,322) 35,204
========= ========= ========= ========= =========
Oil Produced and Sold (thousands of bls) 450 450
========= =========
Natural Gas Liquids Sold
(thousands of gallons) 51,479 51,479
========= =========
Average Selling Price:
Residential Gas Sales (per Mcf) $8.075
Commercial Gas Sales 6.212
Industrial and Utility Gas Sales 3.963
Produced Natural Gas $ 2.363
Marketed Natural Gas 2.890 3.971
Oil (per barrel) 16.927
Natural Gas Liquids (per gallon) .329
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Twelve Months Ended March 31, 1997
Supply and Intersegment
Logistics Utilities Services Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Gas Produced, Purchased and Sold (MMcf):
Produced 53,645 2,505 56,150
--------- --------- --------- --------- ---------
Purchased:
Other producers 387,151 60,495 40,745 488,391
Inter-segment purchases 6,190 12,978 45,732 (64,900)
--------- --------- --------- ---------
Total purchases 393,341 73,473 86,477 (64,900) 488,391
--------- --------- --------- --------- ---------
Total produced and purchased 446,986 75,978 86,477 (64,900) 544,541
Deduct:
Net increase (decrease) in gas in storage 1,710 1,710
Extracted natural gas liquids
(equivalent gas volumes) 8,917 - 8,917
System use and unaccounted for 1,960 2,338 4,298
--------- --------- --------- --------- ---------
Total 436,109 71,930 86,477 (64,900) 529,616
========= ========= ========= ========= =========
Gas Sales (MMcf):
Residential 28,428 28,428
Commercial 5,846 5,846
Industrial and Utility 28,689 (7,546) 21,143
Production 53,645 (34,066) 19,579
Marketing 382,464 8,967 86,477 (23,288) 454,620
--------- --------- --------- --------- ---------
Total 436,109 71,930 86,477 (64,900) 529,616
========= ========= ========= ========= =========
Natural Gas Transported (MMcf) 118,609 78,585 (40,989) 156,205
========= ========= ========= ========= =========
Oil Produced and Sold (thousands of bls) 1,688 1,688
========= =========
Natural Gas Liquids Sold
(thousands of gallons) 297,888 297,888
========= =========
Average Selling Price:
Residential Gas Sales (per Mcf) $9.919
Commercial Gas Sales 7.843
Industrial and Utility Gas Sales 2.940
Produced Natural Gas $ 1.855
Marketed Natural Gas 2.263 2.793 $3.091
Oil (per barrel) 15.042
Natural Gas Liquids (per gallon) .373
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Twelve Months Ended March 31, 1996
Supply and Intersegment
Logistics Utilities Services Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Gas Produced, Purchased and Sold (MMcf):
Produced 64,100 2,712 66,812
--------- --------- --------- --------- ---------
Purchased:
Other producers 485,254 55,816 541,070
Inter-segment purchases 13,698 13,722 (27,420)
--------- --------- --------- ---------
Total purchases 498,952 69,538 (27,420) 541,070
--------- --------- --------- --------- ---------
Total produced and purchased 563,052 72,250 (27,420) 607,882
Deduct:
Net increase (decrease) in gas in storage (1,682) (1,682)
Extracted natural gas liquids
(equivalent gas volumes) 8,086 8,086
System use and unaccounted for 2,108 3,025 5,133
--------- --------- --------- --------- ---------
Total 552,858 70,907 (27,420) 596,345
========= ========= ========= ========= =========
Gas Sales (MMcf):
Residential 31,097 31,097
Commercial 9,048 9,048
Industrial and Utility 18,711 (10,796) 7,915
Production 64,100 (532) 63,568
Marketing 488,758 12,051 (16,092) 484,717
--------- --------- --------- --------- ---------
Total 552,858 70,907 (27,420) 596,345
========= ========= ========= ========= =========
Natural Gas Transported (MMcf) 126,089 67,816 (35,112) 158,793
========= ========= ========= ========= =========
Oil Produced and Sold (thousands of bls) 1,871 1,871
========= =========
Natural Gas Liquids Sold
(thousands of gallons) 249,186 249,186
========= =========
Average Selling Price:
Residential Gas Sales (per Mcf) $8.532
Commercial Gas Sales 6.833
Industrial and Utility Gas Sales 2.439
Produced Natural Gas $1.796
Marketed Natural Gas 1.982 2.466
Oil (per barrel) 16.602
Natural Gas Liquids (per gallon) .291
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
Information by Business Segment
(Thousands)
Three Months Ended Twelve Months Ended
March 31, March 31,
1997 1996 1997 1996
(Thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Supply and logistics.......................... $ 308,822 $ 458,766 $1,168,717 $1,277,083
Utilities .................................... 194,096 202,384 499,153 467,821
Services...................................... 108,602 2,095 278,842 2,568
Sales between segments........................ (58,945) (22,967) (172,616) (85,895)
--------- --------- --------- ---------
Total................................... $ 552,575 $ 640,278 $1,774,096 $1,661,577
========= ========= ========== ==========
OPERATING INCOME (LOSS):
Supply and logistics.......................... $ 15,040 $ 21,114 $ 45,936 $ (15,532)
Utilities..................................... 39,273 52,481 76,112 63,757
Services...................................... (966) (4,192) (9,316) (5,182)
--------- --------- --------- ---------
Total................................... $ 53,347 $ 69,403 $ 112,732 $ 43,043
========= ========= ========= =========
CAPITAL EXPENDITURES:
Supply and logistics.......................... $ 11,120 $ 13,180 $ 70,557 $ 62,419
Utilities..................................... 8,383 5,651 39,563 43,769
Services...................................... 329 - 1,165 31
--------- --------- --------- ---------
Total................................... $ 19,832 $ 18,831 $ 111,285 $ 106,219
========= ========= ========= =========
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
Equitable's consolidated net income for the quarter ended March 31, 1997
was $27.8 million, or $.78 per share, compared with $38.7 million, or $1.11 per
share, for the quarter ended March 31, 1996. The decrease in income is due to
decreased retail gas sales reflecting weather that was 12 percent warmer than
the 1996 period, a 22 percent decrease in natural gas production, and a four
percent decrease in average selling prices for produced natural gas.
Consolidated net income for the twelve months ended March 31, 1997 was
$48.4 million or $ 1.37 per share, compared with $12.5 million or $.36 per share
for the twelve months ended March 31, 1996. Earnings for the current period
include an 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. Although a nonrecurring gain, the curtailment will reduce
operating costs in the future. Earnings for the prior period include an
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. Net
income, excluding the effect of the items detailed above, was 14 percent lower
than the 1996 period due to lower residential and commercial gas sales
reflecting weather that was seven percent warmer than the prior period, lower
nonconventional fuels tax credits, lower natural gas production and costs
incurred for the start-up and development of new operations. These items were
partially offset by higher margins from sale of natural gas liquids, lower
depreciation, lower depletion rates and lower interest costs.
RESULTS OF OPERATIONS
In 1996, the Company began reporting operations in three business
segments--supply and logistics, utilities, and services. The supply and
logistics segment represents primarily the operations previously reported as the
exploration and production segment and the energy marketing segment. The
utilities segment represents primarily the operations previously reported as the
natural gas distribution segment and the natural gas transmission segment. The
services segment represents a portion of marketed gas sales previously reported
in the other segments along with several new lines of business.
This discussion supplements the detailed financial information by business
segment presented on page 11. Parenthetical percentages included in the
discussion of operating income denote the approximate relative impact of the
particular factor on the period-to-period change.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
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. Operating revenues were $308.8 million for the quarter
ended March 31, 1997 compared with $458.8 million for the quarter ended March
31, 1996. The decrease in operating revenues is due to a 48% decrease in
marketed natural gas sales volumes and a decrease in both the production and
average selling price of produced natural gas of 22% and 4%, respectively. The
decreased operating revenues were 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 21% and 34%, respectively, and
higher marketed sales of electricity. Operating revenues for the twelve months
ended March 31, 1997 were $1,168.7 million compared with $1,277.1 million for
the twelve months ended March 31, 1996. The 1996 revenues include $40.2 million
of nonrecurring amounts from the Columbia bankruptcy settlement and $11.0 of
additional revenue from direct bill settlements. The decrease in revenues of
$57.2 million, excluding the nonrecurring amounts, is due primarily to a 22%
decrease in marketed natural gas sales volumes, a 16% decrease in natural gas
production, and a 10% decrease in oil production. These decreases were partially
offset by a 14% 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 28% and 20%, respectively, and increased revenues from the marketing
of electricity.
THREE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, MARCH 31,
SUPPLY AND LOGISTICS 1997 1996 1997 1996
OPERATING REVENUES (THOUSANDS):
Marketed Natural Gas....... $ 233,375 $ 387,123 $ 865,472 $ 968,548
Produced Natural Gas ...... 28,785 38,695 99,490 115,108
Produced Natural Gas Liquids 27,392 16,921 111,099 72,405
Produced Oil............... 7,488 7,617 25,391 31,063
Contract Drilling.......... 3,453 3,164 19,479 14,642
Marketed Electricity....... 4,193 1,361 17,999 1,361
Natural Gas Transportation. 1,781 1,723 7,728 8,835
Natural Gas Storage........ 953 --- 2,052 ---
Direct Billing Settlements. --- --- 7,815 32,582
Other...................... 1,402 2,162 12,192 32,539
- ------------------------------------------------------------------------------
Total Revenues........... $ 308,822 $ 458,766 $1,168,717 $1,277,083
===============================================================================
SALES QUANTITIES:
Marketed Natural Gas (MMcf) 69,669 133,941 382,464 488,758
Produced Natural Gas (MMcf) 12,728 16,378 53,645 64,100
Oil (MBls)................. 411 450 1,688 1,871
Natural Gas Liquids (thousands
of gallons).............. 68,788 51,479 297,888 249,186
Transportation Deliveries (MMcf) 28,523 30,277 118,609 126,089
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
SUPPLY AND LOGISTICS (CONTINUED)
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 $251.3 million for the
quarter ended March 31, 1997 compared with $396.2 million for the quarter ended
March 31, 1996. The decrease for the quarter reflects lower requirements for
decreased marketed natural gas sales activity, partially offset by the increase
in production of natural gas liquids and increased marketed electricity
activity. Energy purchased for the twelve months ended March 31, 1997 amounted
to $948.1 compared to $1,008.9 for the twelve months ended March 31, 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.
Other operating expenses were $42.5 million for the quarter ended March
31, 1997 compared with $41.5 million for the quarter ended March 31, 1996.
Although total operating expenses between periods remained substantially the
same, the 1997 quarter reflects decreased depreciation and depletion expense
resulting from lower natural gas and oil production, in addition to decreased
exploration expense, offset by initial operating costs for storage service which
began full operations during the second quarter of 1996, and higher expenses for
natural gas liquids processing reflecting increased production. Other operating
expenses for the twelve months ended March 31, 1997 were $174.7 million compared
with $283.7 million for the twelve months ended March 31, 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.
Operating income was $15.0 million for the quarter ended March 31, 1997
compared with $21.1 million for the quarter ended March 31, 1996. The decrease
in operating income is primarily due to decreased natural gas production (105%),
and decreased average selling prices for produced natural gas (20%). These
factors were partially offset by higher margins from sale of natural gas liquids
(70%) and lower exploration expense (10%). Operating income for the twelve
months ended March 31, 1997 was $45.9 million compared with an operating loss of
$15.5 million for the twelve months ended March 31, 1996. The increase in
operating income of $17.5 million, excluding the effect of nonrecurring items
and charge for impairment of assets in the 1996 period, is a result of lower
depletion rates (65%), higher average selling prices for produced natural gas
(20%), and higher margins from the sale of natural gas liquids (30%). These
items were partially offset by lower natural gas production (70%) and lower
sales of produced oil (35%).
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
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. Revenues were $194.1 million for the quarter ended
March 31, 1997 compared with $202.4 for the quarter ended March 31, 1996. The
decrease in revenues is due to lower residential gas sales volumes reflecting
weather that was 12 percent warmer than the 1996 quarter and customer
conservation, the effect of commercial customers switching to transportation
service, and declines of 20% and 37%, respectively, in the average selling price
and sales volumes of marketed natural gas. These decreases were offset by
increased industrial and utility gas sales, reflecting the switch of industrial
customers from transportation to gas sales service, and higher residential rates
reflecting pass-through of higher regulatory purchased gas costs to customers.
Operating revenues for the twelve months ended March 31, 1997 were $499.2
million compared with $467.8 million for the twelve months ended March 31, 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 rates reflecting
pass-through of higher regulatory purchased gas costs to customers and a 53%
increase in industrial and utility gas sales volumes. These items were partially
offset by lower sales to residential and commercial customers reflecting 7%
warmer weather and the effect of commercial customers switching to
transportation service.
THREE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, MARCH 31,
UTILITIES 1997 1996 1997 1996
OPERATING REVENUES (THOUSANDS):
Residential Gas Sales...... $ 131,609 $ 121,268 $ 281,977 $ 265,316
Commercial Gas Sales ...... 16,776 39,332 45,852 61,829
Industrial and Utility Gas
Sales 16,933 13,432 84,334 45,635
Marketed Gas Sales......... 6,218 12,341 25,049 29,723
Transportation Service..... 18,485 11,616 45,036 42,165
Storage Service............ 1,908 1,813 7,400 7,859
Other...................... 2,167 2,582 9,505 15,294
- ------------------------------------------------------------------------------
Total Revenues........... $ 194,096 $ 202,384 $ 499,153 $ 467,821
==============================================================================
SALES QUANTITIES:
Residential Gas Sales...... 12,896 15,017 28,428 31,097
Commercial Gas Sales ...... 1,673 6,332 5,846 9,048
Industrial and Utility Gas Sales 5,431 3,389 28,689 18,711
Marketed Gas Sales......... 1,965 3,108 8,967 12,051
Transportation Deliveries . 20,489 12,249 78,585 67,816
Heating Degree Days........ 2,723 3,090 5,611 6,042
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
UTILITIES (CONTINUED)
Cost of energy purchased amounted to $105.8 million for the quarter ended
March 31, 1997 compared with $99.6 million for the quarter ended March 31, 1996.
The increase is due to the pass-through of higher regulatory purchased gas costs
to retail customers, partially offset by lower purchased quantities of gas as a
result of reduced gas sales. Energy purchased for the twelve months ended March
31, 1997 was $252.5 million compared with $198.0 million for the twelve months
ended March 31, 1996. The increase is due to the pass-through of higher
regulatory purchased gas costs to retail customers, in addition to increased
purchases for industrial and utility gas sales, partially offset by lower retail
sales volumes.
Other operating expenses for the quarter ended March 31, 1997 of $49.0
million remained substantially the same as the $50.3 million for the quarter
ended March 31, 1996. Other operating expenses for the twelve months ended March
31, 1997 were $170.6 million compared with $206.0 million for the twelve months
ended March 31, 1996. Other operating expenses for the twelve months ended March
31, 1996 include a charge of $25.6 million for impairment of assets. The
decrease in other operating expenses for the twelve-month period, excluding the
charge for impairment of assets, reflects savings from reengineering efforts.
Operating income was $39.3 million for the quarter ended March 31, 1997
compared with $52.5 million for the quarter ended March 31, 1996. The decrease
in operating income is due to the impact of lower residential and commercial
sales volumes reflecting 12% warmer weather and commercial customers switching
from gas sales to transportation service. Operating income for the twelve months
ended March 31, 1997 was $76.1 million compared with $63.8 million for the
twelve months ended March 31, 1996. The decrease of $8.5 million in operating
income, excluding the charge for impairment of assets and Columbia settlement in
the 1996 period, is due primarily to a 6 Bcf decrease in residential and
commercial gas sales (170%) and the effect of commercial customers switching to
transportation service (75%), partially offset by lower operating expenses
(125%), increased industrial and utility gas sales (65%), and increased
transportation throughput (35%).
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 Company (IEC), Conogen,
Inc. and Pequod Associates, Inc. In January 1997, the Company also acquired
Scallop Thermal Management, Inc. The variances in the following operating result
comparisons reflect the recent development of this segment.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
SERVICES (CONTINUED)
Operating results for the quarter ended March 31, 1997 were a loss of $1.0
million compared with a loss of $4.2 million for the quarter ended March 31,
1996. Operating results for the twelve months ended March 31, 1997 were a loss
of $9.3 million compared with a loss of $5.2 million for the twelve months ended
March 31, 1996. The variances in these results were caused by the impact of the
start-up and development costs incurred throughout the 1996 calendar year.
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 allocated to supply and logistics, $40.4 for utilities, and $25.0
for services. Capital expenditures for the three months ended March 31, 1997
were $19.8 million.
The Company has a partnership interest in the Avoca bedded salt, natural
gas storage project which has recently encountered technical difficulties. The
Company is currently reevaluating the economic viability of the project. See
Note G to the consolidated financial statements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
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 March 31, 1997, $219.0
million of commercial paper and $1.0 million of bank loans were outstanding at
an average annual interest rate of 5.40%. The Company maintains a revolving
Credit Agreement with a group of banks providing $500 million of available
credit. The agreement requires a facility fee of one-tenth of one percent.
Adequate credit is expected to continue to be available in the future.
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. As a result, the
Company has announced it is considering the sale of certain oil and gas
properties which will allow the Company to refocus its exploration and
development efforts in the Appalachian and Gulf of Mexico areas.
BALANCE SHEET CHANGES
The decrease in accounts receivable and accounts payable is due primarily
to lower gas marketing activity. The change in deferred purchased gas cost is
due to the timing of pass-through of gas costs to ratepayers. Changes in
deferred purchased gas costs generally do not affect results of operations due
to regulatory procedures for purchased gas cost recovery in rates. The increase
in goodwill reflects the acquisition of Conogen, Inc., Pequod Associates, Inc.
and Scallop Thermal Management, Inc.
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities
See Note F to the consolidated financial statements regarding the
Company's acquisition of Scallop Thermal Management, Inc. (Scallop).
The 128,397 shares of the Company's common stock were issued to
Scallop's five shareholders. The shares were deemed exempt from
registration under Section 4(2) of the Securities Act of 1933 because
they were issued only to the five top managers of Scallop, all of
whom received substantial financial information about the Company and
who acknowledged in writing the restrictions on resale under the
Securities Act of 1933 and that they were not acquiring the shares in
connection with any plan of distribution. The shares were
subsequently registered for resale on a Form S-3.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K during the quarter ended March 31, 1997:
Form 8-K dated February 20, 1997, addressing the Company's
periodic release of forward-looking statements related to such
matters as anticipated financial performance, business prospects,
capital projects, new products, and operational matters and the
potential uncertainties that may impact these forward-looking
statements.
<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: May 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 48,088
<SECURITIES> 0
<RECEIVABLES> 289,990
<ALLOWANCES> 13,601
<INVENTORY> 19,192
<CURRENT-ASSETS> 438,659
<PP&E> 2,230,181
<DEPRECIATION> 750,240
<TOTAL-ASSETS> 2,051,452
<CURRENT-LIABILITIES> 471,431
<BONDS> 421,830
0
0
<COMMON> 227,797
<OTHER-SE> 525,512
<TOTAL-LIABILITY-AND-EQUITY> 2,051,452
<SALES> 552,575
<TOTAL-REVENUES> 552,575
<CGS> 0
<TOTAL-COSTS> 499,228
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<LOSS-PROVISION> 5,245
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<INCOME-TAX> 15,987
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