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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
[ ] 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: 0-9808
PLAINS RESOURCES INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-2898764
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 SMITH STREET
HOUSTON, TEXAS 77002
(Address of principal executive offices)
(Zip Code)
(713) 654-1414
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [x] NO
------ ----
11,593,457 shares of common stock $.10 par value, issued and outstanding at May
8, 1995.
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PLAINS RESOURCES INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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PAGE
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PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets:
March 31, 1995 and December 31, 1994................................ 3
Condensed Consolidated Statements of Operations:
For the three months ended March 31, 1995 and 1994.................. 4
Condensed Consolidated Statements of Cash Flows:
For the three months ended March 31, 1995 and 1994.................. 5
Notes to Condensed Consolidated Financial Statements................. 6
MANAGEMENT'S DISCUSSION AND ANALYSIS................................... 7
PART II. OTHER INFORMATION............................................ 10
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2
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PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
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<CAPTION>
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MARCH 31, DECEMBER 31,
1995 1994
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(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,735 $ 1,291
Cash in compensating balance account 1,500 1,500
Accounts receivable and other 40,141 33,370
Inventory 5,380 5,525
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Total current assets 54,756 41,686
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PROPERTY AND EQUIPMENT
Oil and natural gas properties - full cost method:
Subject to amortization 267,203 265,123
Not subject to amortization 36,754 35,779
Crude oil terminal and storage facility 30,584 30,576
Other property and equipment 7,954 7,780
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342,495 339,258
Less allowance for depreciation, depletion and amortization (125,379) (121,656)
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217,116 217,602
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OTHER ASSETS 8,570 7,616
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$ 280,442 $ 266,904
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities $ 44,410 $ 36,282
Interest payable 7,092 3,617
Royalties payable 4,899 4,702
Notes payable and other current obligations 1,552 1,550
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Total current liabilities 57,953 46,151
BANK DEBT 47,800 45,100
SUBORDINATED DEBT 100,000 100,000
OTHER LONG-TERM LIABILITIES 7,503 8,254
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213,256 199,505
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SERIES C CUMULATIVE CONVERTIBLE PREFERRED STOCK,
STATED AT LIQUIDATION PREFERENCE 20,937 20,937
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NON-REDEEMABLE PREFERRED STOCK, COMMON STOCK
AND OTHER STOCKHOLDERS' EQUITY
Preferred stock, stated at liquidation preference 481 481
Common stock, $.10 par value, 50,000,000 shares authorized;
issued and outstanding 11,593,457 shares at March 31, 1995
and December 31, 1994 1,159 1,159
Additional paid-in capital 89,274 89,274
Accumulated deficit (44,665) (44,452)
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46,249 46,462
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$ 280,442 $ 266,904
========= =========
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See notes to condensed consolidated financial statements.
3
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PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in
thousands, except per share data)
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<CAPTION>
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THREE MONTHS ENDED
MARCH 31,
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1995 1994
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REVENUE
Oil and natural gas sales $ 14,689 $ 12,394
Marketing, transportation and storage 78,886 38,148
Interest and other income 72 42
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93,647 50,584
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EXPENSES
Production expenses 6,759 6,348
Purchases, transportation and storage 77,388 36,495
General and administrative 1,898 1,866
Depreciation, depletion and amortization 3,998 3,909
Interest expense 3,285 3,144
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93,328 51,762
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NET INCOME (LOSS) $ 319 $ (1,178)
========= =========
Net loss per common and common equivalent share $ (.02) $ (.10)
========= =========
Weighted average number of common
and common equivalent shares 11,593 11,567
========= =========
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See notes to condensed consolidated financial statements.
4
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PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands)
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THREE MONTHS ENDED
MARCH 31,
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1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 319 $ (1,178)
Item not affecting cash flows from operating activities:
Depreciation, depletion and amortization 3,998 3,909
Change in assets and liabilities resulting from operating activities:
Accounts receivable and other (8,141) (1,217)
Inventory 145 3,600
Accounts payable and other current liabilities 7,904 (132)
Interest payable 2,834 2,774
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Net cash provided by operating activities 7,059 7,756
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of oil and natural gas properties 1,936 207
Payment for acquisition, exploration and development costs (3,526) (7,557)
Payment for additions to other property (195) (110)
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Net cash used in investing activities (1,785) (7,460)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 9,850 18,800
Proceeds from short-term debt --- 6,213
Principal payments of long-term debt (7,150) (9,400)
Principal payments of short-term debt --- (9,010)
Payments of other long-term liabilities (1,500) (144)
Other (30) (97)
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Net cash provided by financing activities 1,170 6,362
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Net increase in cash and cash equivalents 6,444 6,658
Cash and cash equivalents, beginning of period 1,291 3,783
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Cash and cash equivalents, end of period $ 7,735 $ 10,441
======== =========
</TABLE>
See notes to condensed consolidated financial statements.
5
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PLAINS RESOURCES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
(UNAUDITED)
NOTE 1--ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to interim financial reporting as
prescribed by the Securities and Exchange Commission. For further information,
refer to the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, filed
with the Securities and Exchange Commission.
All material adjustments consisting only of normal recurring adjustments which,
in the opinion of management, were necessary for a fair statement of the results
for the interim periods, have been reflected. Certain reclassifications have
been made to the prior year statements to conform with the current year
presentation. The Company evaluates the capitalized costs of its oil and
natural gas properties on an ongoing basis and has utilized the most recently
available information to estimate its reserves at March 31, 1995, in order to
determine the realizability of such capitalized costs. Future events, including
drilling activities, product prices and operating costs, may affect future
estimates of such reserves.
NOTE 2 -- EARNINGS PER SHARE
Primary earnings per share is based on the weighted average number of common and
common equivalent shares of Common Stock outstanding. Common equivalent shares
include employee stock options and warrants. For purposes of this calculation,
net income available to common shareholders has been reduced to reflect accrued
preferred stock dividends. Excluding accrued dividends on the Company's Series
C Cumulative Convertible Preferred Stock (the "Series C Preferred Stock") which
may be paid in additional shares of such stock, net income per common and common
equivalent share was $.02 for the three months ended March 31, 1995.
If the Company elects to pay dividends on the Series C Preferred Stock in
additional shares of such stock, accounting pronouncements require the Company
to retroactively restate earnings per share to reflect such dividends by
increasing the weighted average number of common and common equivalent shares
assumed to be outstanding for this calculation. The effects of accrued cash
dividends will also be eliminated from the calculation in such circumstance.
The indenture governing the Company's $100 million principal amount 12% Senior
Subordinated Notes contains certain restrictions regarding the payment of cash
dividends on the Series C Preferred Stock.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Three month periods ended March 31, 1995 and 1994
For the quarter ended March 31, 1995, the Company reported net income of
$319,000 on total revenue of $93.6 million. This compares with a net loss of
$1.2 million on total revenue of $50.6 million for the first quarter of 1994.
After deducting approximately $516,000 of dividends accrued on the Company's
Series C Cumulative Convertible Preferred Stock (the "Series C Preferred
Stock"), the Company reported a net loss of $.02 per common share as compared to
a net loss of $.10 per common share in last year's quarter. Excluding accrued
dividends on the Series C Preferred Stock which may be paid in additional shares
of such stock, net income per common share was $.02 for the quarter ended March
31, 1995. Cash flow from operations (net income plus non-cash expenses)
increased 58% to $4.3 million for the first quarter of 1995 versus $2.7 million
for the 1994 period. Earnings before interest, taxes, depreciation, depletion
and amortization ("EBITDA") increased 29% to $7.6 million for the quarter ended
March 31, 1995 from $5.9 million reported for the 1994 comparative period.
Oil and natural gas production for the first quarter of 1995 increased to 1.15
million barrels of oil equivalent ("BOE"), up 17% over the 982,000 BOE produced
in last year's first quarter. Oil production, the Company's principal product,
increased by 23% to 1,018,000 barrels from 827,000 barrels produced during the
first quarter of 1994. The production increases are primarily a result of the
Company's continuing focus on the development and exploitation of its principal
properties and the acquisition of the remaining 50% working interest in its
properties in the Sunniland Trend of South Florida (the "Sunniland Trend
Properties") effective May 1, 1994. Production from the Company's LA Basin
properties was negatively affected by downtime associated with unusual rainfall
in the first quarter of 1995 (approximately 8,000 BOE, net to the Company's
interest) and the Los Angeles earthquake in the first quarter of 1994
(approximately 40,000 BOE, net to the Company's interest). Natural gas
production declined from .9 billion cubic feet to .8 billion cubic feet in the
current year quarter primarily as a result of natural depletion in the Company's
Gulf Coast properties.
Oil and natural gas revenues increased approximately 19% to $14.7 million versus
$12.4 million for the first quarter of 1994 due to increased production volumes
and slightly higher product prices. The Company's average wellhead price, which
represents a combination of fixed and floating price sales arrangements and
incorporates location and quality discounts from benchmark New York Mercantile
Exchange prices, increased 2% to $12.82 per BOE for the quarter ended March 31,
1995. Such increase is attributable to an increase in the spot oil price in the
first quarter of 1995 offset by lower average natural gas prices. The posted
wellhead price for the benchmark West Texas Intermediate crude oil averaged
$16.81 per barrel during the quarter as compared to the first quarter 1994
average of $13.16 per barrel. The Company routinely maintains fixed price
arrangements on approximately 60% to 70% of its crude oil production. The
Company's average oil price was $13.61 per barrel for the three months ended
March 31, 1995 versus $13.32 per barrel in the prior year period. The Company's
average natural gas price decreased 26% to $1.09 per thousand cubic feet ("Mcf")
during the first quarter of 1995 as compared to $1.48 received in the 1994 first
quarter. Financial swap arrangements and futures transactions entered into by
the Company to hedge production are included in the foregoing prices. Such
transactions (which do not include fixed price, physical delivery arrangements)
had the effect of decreasing the average price per BOE by $.46 in the first
quarter of 1995 and increasing the average price per BOE by $0.71 in the first
quarter of 1994.
The Company's crude oil marketing and transportation activities continued to
benefit from access to the Company's new crude oil storage and terminalling
facility in Cushing, Oklahoma (the "Cushing Terminal"). Construction of the
Cushing Terminal was completed in December 1993. Aggregate gross profit from
the Company's downstream operations for the first quarter of 1995 was $1,498,000
on total
7
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revenue of $78.9 million. Gross profit from marketing and transportation nearly
doubled to $1,241,000 for the quarter ended March 31, 1995 versus gross profit
of $644,000 in the prior year period. The Company recorded $1,653,000 of
aggregate downstream gross profit on total revenue of $38.1 million in the first
quarter of 1994. Such amount included approximately $603,000 of gross profit
from contango market inventory transactions. Due to the strong near-term demand
for crude oil, no material contango market inventory transactions occurred in
the 1995 period. Excluding such inventory transactions, gross profit from the
downstream segment's primary business activities rose nearly 40%, increasing to
$1,468,000 in the 1995 period from $1,050,000 in last year's quarter. The trend
of increased revenues and corresponding gross profit is reflective of increases
in the quantity of crude oil marketed on behalf of other producers (46,000
barrels per day in the first quarter of 1995 versus 21,000 barrels per day in
the 1994 quarter) and additional markets made available by the Cushing Terminal.
Unit production expenses decreased approximately 9% to $5.90 per BOE for the
first quarter of 1995 from $6.47 per BOE in the prior year comparative period.
Annual unit production expenses were $7.36, $6.65 and $6.15 per BOE in 1992,
1993 and 1994, respectively. The unit expense reductions are primarily the
result of the Company's ongoing focus on cost reduction and cost control and to
increased production volumes. Unit production expenses will vary throughout
each year due to seasonal demand charges for peak electricity usage and periodic
workover expenses associated with the Company's production and exploitation
activities. Total production expenses increased to $6.8 million from $6.3
million for the first quarter of 1994 as a result of increased production
volumes.
General and administrative ("G&A") expenses, which exclude amounts capitalized
as direct oil and natural gas acquisition, exploration and development costs,
remained relatively constant at $1.9 million for the three months ended March
31, 1995 and 1994. Excluding G&A expenses related to the Company's downstream
activities, unit G&A expenses declined 17% to $1.09 per BOE as compared to $1.31
per BOE reported in the prior year quarter. On an annual basis, unit general
and administrative expenses were $2.48, $1.34 and $1.04 per BOE in 1992, 1993
and 1994, respectively.
Depreciation, depletion and amortization ("DD&A") expense increased 2% to
approximately $4 million for the quarter ended March 31, 1995. Increased DD&A
attributable to higher production volumes was partially offset by a lower DD&A
rate ($3.00 per BOE in the 1995 quarter versus $3.40 per BOE in the 1994
quarter). Interest expense for the quarter ended March 31, 1995, increased to
$3.3 million from $3.1 million reported for the comparative prior year quarter.
The increase is primarily due to a higher average interest rate.
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL CONDITION
At March 31, 1995, the Company had a working capital deficit of approximately
$3.2 million compared to a deficit of $4.5 million at December 31, 1994. The
Company has historically operated with a working capital deficit due primarily
to ongoing capital expenditures that have been financed through cash flow and
the Company's revolving credit facility. The outstanding balance on the
Company's $55 million revolving credit facility (the "Credit Facility") was
$47.8 million on March 31, 1995.
Investing and Financing Activities
Net cash flows used in investing activities were $1.8 million and $7.5 million
for the three months ended March 31, 1995 and 1994, respectively. Investing
activities include payments for acquisition, exploration
8
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and development costs of $3.5 million and $7.6 million for these same periods,
respectively. Also included in investing activities are proceeds from the sale
of certain minor nonoperated properties of $1.9 million and $.2 million for the
three months ended March 31, 1995, and 1994, respectively.
Net cash provided by financing activities amounted to $1.2 million and $6.4
million for the three months ended March 31, 1995 and 1994, respectively.
Proceeds, net of payments, from long-term debt for the three months ended March
31, 1995 and 1994, were $2.7 million and $9.4 million, respectively. Such
amounts in both years represent net proceeds from the Credit Facility used
primarily to finance acquisition, exploration and development activities.
Short-term debt transactions during the 1994 period reflect borrowings and
repayments associated with crude oil inventory transactions conducted during a
contango crude oil futures market.
9
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PART II. OTHER INFORMATION
Item 1 - None
Item 2 - None
Item 3 - None
Item 4 - None
Item 5 - None
Item 6 -
A. Exhibits
11. Computation of per share earnings
27. Financial Data Schedule
B. Report on Form 8-K
None
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned and thereunto duly authorized.
PLAINS RESOURCES INC.
Date: May 9, 1995 By: /s/ Phillip D. Kramer
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Phillip D. Kramer, Vice President and Chief
Financial Officer (Principal Financial Officer)
11
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EXHIBIT 11. - COMPUTATION OF PER SHARE EARNINGS
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THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1995 MARCH 31, 1994
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COMMON AND COMMON AND
COMMON COMMON
EQUIVALENT FULL EQUIVALENT FULL
SHARES DILUTION SHARES DILUTION
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<S> <C> <C> <C> <C>
Weighted average common shares
outstanding 11,593,457 11,593,457 11,567,013 11,567,013
Incremental shares assumed to be
issued 0 4,029,065 0 0
----------- ----------- ----------- -----------
11,593,457 15,622,522 11,567,013 11,567,013
=========== =========== =========== ===========
Net income (loss) as reported $ 319,000 $ 319,000 $(1,178,000) $(1,178,000)
Deduct dividends on Cumulative
Convertible Preferred Stock (532,000) (15,000) (16,000) (16,000)
----------- ----------- ----------- -----------
Net income (loss) availabe to
common shareholders $ (213,000) $ 304,000 $(1,194,000) $(1,194,000)
=========== =========== =========== ===========
Net income (loss) per share $ (0.02) $ 0.02 $ (0.10) $ (0.10)
========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
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<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 9,235
<SECURITIES> 0
<RECEIVABLES> 40,141
<ALLOWANCES> 0
<INVENTORY> 5,380
<CURRENT-ASSETS> 54,756
<PP&E> 342,495
<DEPRECIATION> 125,379
<TOTAL-ASSETS> 280,442
<CURRENT-LIABILITIES> 57,953
<BONDS> 155,303
<COMMON> 1,159
20,937
481
<OTHER-SE> 44,609
<TOTAL-LIABILITY-AND-EQUITY> 280,442
<SALES> 93,575
<TOTAL-REVENUES> 93,647
<CGS> 84,147
<TOTAL-COSTS> 88,145
<OTHER-EXPENSES> 1,898
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,285
<INCOME-PRETAX> 319
<INCOME-TAX> 0
<INCOME-CONTINUING> 319
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 319
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> 0.02
</TABLE>
