<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
[_] 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.)
500 DALLAS 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
--- ----
16,964,128 shares of common stock $0.10 par value, issued and outstanding at
July 30, 1999.
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
PART I. FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets:
June 30, 1999 and December 31, 1998......................... 3
Consolidated Statements of Income:
For the three and six months ended June 30, 1999 and 1998... 4
Consolidated Statements of Cash Flows:
For the six months ended June 30, 1999 and 1998............. 5
Notes to Consolidated Financial Statements.................... 6
Page 2 of 18
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, December 31,
1999 1999
---------- ------------
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 13,058 $ 6,544
Accounts receivable 346,493 128,875
Inventory 60,510 42,520
Prepaid expenses and other 4,984 1,527
---------- ----------
Total current assets 425,045 179,466
---------- ----------
PROPERTY AND EQUIPMENT
Oil and natural gas properties -
full cost method
Subject to amortization 627,746 596,203
Not subject to amortization 59,374 54,545
Crude oil pipeline, gathering and
terminal assets 513,226 378,254
Other property and equipment 10,462 8,606
---------- ----------
1,210,808 1,037,608
Less allowance for depreciation,
depletion and amortization (389,833) (375,882)
---------- ----------
820,975 661,726
---------- ----------
OTHER ASSETS 153,505 133,075
---------- ----------
$1,399,525 $ 974,267
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other
current liabilities $ 397,530 $ 170,985
Interest payable 7,800 7,950
Royalties payable 2,851 4,211
Notes payable and other obligations 23,161 10,261
---------- ----------
Total current liabilities 431,342 193,407
BANK DEBT 117,300 52,000
BANK DEBT OF A SUBSIDIARY 289,350 175,000
SUBORDINATED DEBT 202,302 202,427
OTHER LONG-TERM DEBT 2,556 2,556
OTHER LONG-TERM LIABILITIES 7,289 13,967
---------- ----------
1,050,139 639,357
---------- ----------
MINORITY INTEREST 180,340 173,461
---------- ----------
SERIES E CUMULATIVE CONVERTIBLE PREFERRED
STOCK, STATED AT LIQUIDATION PREFERENCE 92,655 88,487
---------- ----------
NON-REDEEMABLE PREFERRED STOCK, COMMON
STOCK AND OTHER STOCKHOLDERS' EQUITY
Series D Cumulative Convertible Preferred
Stock, $1.00 par value, 46,600 shares
authorized, issued and outstanding, net
of discount of $687,000 and $1,354,000,
respectively 22,613 21,946
Common Stock, $.10 par value, 50,000,000
shares authorized; issued and
outstanding 16,927,474 and 16,881,938
shares, respectively 1,693 1,688
Additional paid-in capital 125,139 124,679
Accumulated deficit (73,054) (75,351)
---------- ----------
76,391 72,962
---------- ----------
$1,399,525 $ 974,267
========== ==========
See notes to consolidated financial statements
Page 3 of 18
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PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited) (in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ---------------------------
1999 1998 1999 1998
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
REVENUES
Oil and natural gas sales $ 25,189 $ 25,547 $ 46,331 $ 51,711
Marketing, transportation, storage and terminalling revenues 861,850 163,479 1,317,610 330,683
Interest and other income 238 415 307 619
-------- -------- ---------- --------
887,277 189,441 1,364,248 383,013
-------- -------- ---------- --------
EXPENSES
Production expenses 12,100 12,835 23,663 25,673
Marketing, transportation, storage and terminalling expenses 835,984 158,283 1,272,380 321,483
General and administrative 7,655 2,437 11,717 4,813
Depreciation, depletion and amortization 8,275 6,838 15,445 13,593
Interest expense 10,764 6,757 19,517 12,866
-------- -------- ---------- --------
874,778 187,150 1,342,722 378,428
-------- -------- ---------- --------
Income before income taxes and minority interest 12,499 2,291 21,526 4,585
Minority interest 5,016 - 9,836 -
-------- -------- ---------- --------
Income before income taxes 7,483 2,291 11,690 4,585
Income tax expense:
Current - 19 - 22
Deferred 2,918 854 4,559 1,714
-------- -------- ---------- --------
NET INCOME 4,565 1,418 7,131 2,849
Less: cumulative preferred stock dividends 2,473 316 4,834 628
-------- -------- ---------- --------
NET INCOME AVAILABLE TO
COMMON STOCKHOLDERS $ 2,092 $ 1,102 $ 2,297 $ 2,221
======== ======== ========== ========
Earnings per common share:
Basic $ 0.12 $ 0.07 $ 0.14 $ 0.13
======== ======== ========== ========
Diluted $ 0.11 $ 0.06 $ 0.13 $ 0.12
======== ======== ========== ========
</TABLE>
See notes to consolidated financial statements
Page 4 of 18
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------
1999 1998
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 7,131 $ 2,849
Items not affecting cash flows from operating activities:
Depreciation, depletion and amortization 15,445 13,593
Minority interest in income of a subsidiary 9,836 -
Deferred income taxes 4,559 1,714
Other non-cash items 971 131
Change in assets and liabilities from operating activities:
Accounts receivable (69,163) 9,524
Inventory (1,170) (9,330)
Prepaid expenses and other (3,457) 197
Purchase of pipeline linefill (4) -
Accounts payable and other current liabilities 63,178 (7,016)
Interest payable (150) 499
Royalties payable (1,360) (354)
--------- ---------
Net cash provided by operating activities 25,816 11,807
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Cost incurred in connection with acquisitions (see Note 3) (141,971) -
Payment for crude oil pipeline, gathering and terminal assets (4,677) -
Payment for acquisition, exploration and developments costs (50,980) (39,405)
Payment for additions to other property and assets (1,322) (951)
--------- ---------
Net cash used in investing activities (198,950) (40,356)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 308,021 119,560
Proceeds from short-term debt 24,150 17,900
Principal payments of long-term debt (127,721) (63,560)
Principal payments of short-term debt (11,900) (18,000)
Distribution to public Unitholders (8,413) -
Other (4,489) 519
--------- ---------
Net cash provided by financing activities 179,648 56,419
--------- ---------
Net increase in cash and cash equivalents 6,514 27,870
Cash and cash equivalents, beginning of period 6,544 3,714
--------- ---------
Cash and cash equivalents, end of period $ 13,058 $ 31,584
========= =========
</TABLE>
See notes to consolidated financial statements
Page 5 of 18
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PLAINS RESOURCES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- ORGANIZATION AND ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Plains Resources
Inc. (the "Company"), its wholly-owned subsidiaries and Plains All American
Pipeline, L.P. ("PAA") in which the Company has an approximate 59% ownership
interest. The operations of PAA are conducted through Plains Marketing, L.P.,
All American Pipeline, L.P. and Plains Scurlock Permian, L.P. ("Plains
Scurlock"). Plains All American Inc. ("PAAI"), a wholly owned subsidiary of the
Company, is the general partner ("General Partner") of PAA.
The accompanying consolidated financial statements at June 30, 1999, and for
the three and six months ended June 30, 1999, are unaudited and have been
prepared in accordance with the instructions to interim financial reporting as
prescribed by the Securities and Exchange Commission ("SEC"). 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, 1998, filed with the SEC.
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. The results for the three
and six months ended June 30, 1999, are not necessarily indicative of the final
results to be expected for the full year. Certain reclassifications have been
made to the prior year statements to conform to 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 June 30, 1999, 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.
Recent Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("FAS 133"). FAS 133 is effective for all
fiscal years beginning after June 15, 2000. FAS 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. For fair-value
hedge transactions in which the Company is hedging changes in an asset's,
liability's, or firm commitment's fair value, changes in the fair value of the
derivative instrument will generally be offset in the income statement by
changes in the hedged item's fair value. For cash-flow hedge transactions, in
which the Company is hedging the variability of cash flows related to a
variable-rate asset, liability, or a forecasted transaction, changes in the fair
value of the derivative instrument will be reported in other comprehensive
income. The gains and losses on the derivative instrument that are reported in
other comprehensive income will be reclassified as earnings in the periods in
which earnings are affected by the variability of the cash flows of the hedged
item. The Company is required to adopt this statement beginning in 2001. The
Company has not yet determined the impact that the adoption of FAS 133 will have
on its earnings or financial position.
NOTE 2 -- INVENTORY AND OTHER ASSETS
Inventory consists of the following:
June 30, December 31,
1999 1998
-------- ------------
(in thousands)
Crude oil $55,698 $37,702
Materials and supplies 4,812 4,818
------- -------
$60,510 $42,520
======= =======
Page 6 of 18
<PAGE>
Other assets consist of the following:
June 30, December 31,
1999 1998
-------- ------------
(in thousands)
Pipeline linefill $ 70,572 $ 54,511
Deferred tax asset 44,118 47,785
Land 8,853 8,853
Debt issue costs 22,997 18,668
Other 13,968 8,245
-------- --------
160,508 138,062
Accumulated amortization (7,003) (4,987)
-------- --------
$153,505 $133,075
======== ========
NOTE 3 -- ACQUISITIONS
Scurlock Acquisition
On May 12, 1999, Plains Scurlock, a limited partnership of which PAAI is the
general partner and Plains Marketing, L.P. is the limited partner, completed the
acquisition of Scurlock Permian LLC ("Scurlock") and certain other pipeline
assets (the "Scurlock Acquisition") from Marathon Ashland Petroleum LLC ("MAP").
Including working capital adjustments and associated closing and financing
costs, the cash purchase price was approximately $141 million.
Scurlock, previously a wholly owned subsidiary of MAP, is engaged in crude oil
transportation, trading and marketing, operating in 14 states with more than
2,400 miles of active pipelines, numerous storage terminals and a fleet of more
than 225 trucks. Its largest asset is an 800-mile pipeline and gathering system
located in the Spraberry Trend in West Texas that extends into Andrews,
Glasscock, Martin, Midland, Regan and Upton Counties, Texas. The assets acquired
also include approximately 2.4 million barrels of crude oil.
Financing for the Scurlock Acquisition was provided through (i) a borrowing of
approximately $92 million under Plains Scurlock's limited recourse bank facility
with BankBoston, N.A. (the "Plains Scurlock Credit Facility"), (ii) the sale to
the General Partner of 1.3 million Class B Common Units ("Class B Units") of PAA
at $19.125 per unit, the price equal to the market value of PAA's common units
("Common Units") on May 12, 1999, for a total cash consideration of $25 million
and (iii) a $25 million draw under PAA's existing revolving credit agreement.
The funds for the purchase of the Class B Units by the General Partner were
provided through a capital contribution by the Company, which was financed by
the Company's revolving credit facility (the "Revolving Credit Facility").
The Plains Scurlock Credit Facility consists of (i) a five-year $126.6 million
term loan and (ii) a three-year $35 million revolving credit facility. The
Plains Scurlock Credit Facility is nonrecourse to PAA, Plains Marketing, L.P.
and All American Pipeline, L.P. and is secured by the assets acquired.
Borrowings under the term loan bear interest at the London Interbank Offering
Rate ("LIBOR") plus 3% and under the revolving credit facility at LIBOR plus
2.75%. A commitment fee equal to one-half of one percent per year is charged on
the unused portion of the revolving credit facility. The revolving credit
facility, which may be used for borrowings or letters of credit to support crude
oil purchases, matures in May 2002. The term loan provides for principal
amortization of $0.7 million annually beginning May 2000, with a final maturity
of May 2004. As of June 30, 1999, letters of credit of approximately $15.2
million were outstanding under the revolver and borrowings of $90 million were
outstanding under the term loan.
The Class B Units are initially pari passu with Common Units with respect to
distributions, and after six months are convertible into Common Units upon
approval of a majority of Common Unitholders. After such six month period, the
Class B Unitholder may request that PAA call a meeting of Common Unitholders to
consider approval of the conversion of Class B Units into Common Units. If the
approval of such conversion by the Common Unitholders is not obtained within 120
days of such request (the "Initial Approval Period"), the Class B Unitholders
will be entitled to receive distributions, on a per Unit basis, equal to 110% of
the amount of distributions paid on a Common Unit, with such distribution right
increasing to 115% if such approval is not secured within 90 days after the end
of the Initial Approval Period. Except for the vote to approve the conversion,
Class B Units have the same voting rights as the Common Units.
Page 7 of 18
<PAGE>
The assets, liabilities and results of operations of Scurlock are included in
the Consolidated Financial Statements of the Company effective May 1, 1999. The
Scurlock Acquisition has been accounted for using the purchase method of
accounting and the purchase price was allocated in accordance with Accounting
Principles Board Opinion No. 16, Business Combinations ("APB 16") as follows:
(in thousands)
Crude oil pipeline, gathering and terminal assets $124,615
Other property and equipment 1,546
Pipeline linefill 16,057
Other assets (debt issue costs) 3,100
Environmental accrual (1,000)
Net working capital items (3,090)
--------
Cash paid $141,228
========
The purchase price allocation was based on preliminary estimates of fair value
and is subject to adjustment as additional information becomes available and is
evaluated. The purchase accounting entries include a $1.0 million accrual for
estimated environmental remediation costs. Under the agreement for the sale of
Scurlock by MAP to Plains Scurlock, MAP has agreed to indemnify and hold
harmless Scurlock and Plains Scurlock for claims, liabilities and losses
(collectively "Losses") resulting from any act or omission attributable to
Scurlock's business or properties occurring prior to the date of the closing of
such sale to the extent the aggregate amount of such losses exceed $1.0 million;
provided however, that claims for such Losses must individually exceed $25,000
and must be asserted by Scurlock against MAP on or before May 15, 2003.
Chevron Asset Acquisition
On July 15, 1999, Plains Scurlock completed the acquisition of a West Texas
crude oil pipeline and gathering system from Chevron Pipe Line Company for
approximately $36.6 million including transaction costs (the "Chevron Asset
Acquisition"). The principal assets acquired include approximately 450 miles of
crude oil transmission mainlines, approximately 340 miles of associated
gathering and lateral lines and approximately three million barrels of crude oil
storage and terminalling capacity in Crane, Ector, Midland, Upton, Ward and
Winkler Counties, Texas. Financing for the Chevron Asset Acquisition was
provided by a draw of $36.6 million under the term loan portion of the Plains
Scurlock Credit Facility.
Chevron U.S.A Inc. ("Chevron"), which currently transports approximately
24,000 barrels of crude oil per day on the system, will continue to transport
its equity crude oil production from the region on the system under a twelve-
year contractual arrangement.
Pro Forma Results for the Scurlock Acquisition and All American Acquisition
The following unaudited pro forma data is presented to show pro forma
revenues, net income and basic and diluted net income per share as if the
Scurlock Acquisition and the acquisition of the All American Pipeline and
Celeron Gathering system ("All American Acquisition") had both occurred on
January 1, 1998.
Six Months Ended
June 30,
-------------------------------
1999 1998
--------------- --------------
(in thousands)
Revenues $2,409,209 $2,487,524
========== ==========
Net income $ 9,631 $ 4,641
========== ==========
Net income per share:
Basic $ 0.28 $ 0.00
========== ==========
Diluted $ 0.26 $ 0.00
========== ==========
Page 8 of 18
<PAGE>
Point Arguello Acquisition
On July 1, 1999, Arguello Inc., a wholly owned subsidiary of the Company,
acquired Chevron's interests in the Point Arguello Field. The interests acquired
include Chevron's 26% working interest in the Point Arguello Field and
associated onshore processing facilities, Chevron's right to participate in
surrounding leases and certain fee acreage onshore. The acquisition, which was
funded from the Company's working capital, has an effective date of July 1,
1999. Chevron retained the obligation of (i) removing, dismantling, and
disposing of all existing offshore platforms, (ii) removing and disposing of all
existing pipelines and (iii) removing, dismantling, disposing and remediation of
all existing onshore facilities. The Company assumed its 26% share of (i)
plugging and abandoning all existing well bores, (ii) removing conductors, (iii)
flushing all lines and vessels, and (iv) removing/abandoning all structures,
fixtures and conditions created subsequent to closing.
Arguello Inc. will be the operator of record for the Point Arguello field and
has entered into an outsourcing agreement with a unit of Torch Energy Advisors,
Inc. for the conduct of daily operations and field management.
NOTE 4 -- EARNINGS PER SHARE
The following is a reconciliation of the numerators and the denominators of
the basic and diluted earnings per share ("EPS") computations for income from
continuing operations for the three and six months ended June 30, 1999, and
1998, as required by Statement of Financial Accounting Standards No. 128,
Earnings Per Share.
<TABLE>
<CAPTION>
For the Three Months Ended June 30,
--------------------------------------------------------------------
1999 1998
---------------------------------- ---------------------------------
Income Shares Per Income Shares Per
(Numera- (Denomi- Share (Numera- (Denomi- Share
tor) nator) Amount tor) nator) Amount
------------ ----------- --------- ------------ ---------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net income $ 4,565 $ 1,418
Less: preferred stock dividends (2,473) (316)
-------- --------
Income available to common
stockholders 2,092 16,914 $ 0.12 1,102 16,820 $ 0.07
====== ======
Effect of dilutive securities:
Employee stock options - 1,137 - 1,151
Warrants - 545 - 579
------- ------- ------- -------
Income available to common
stockholders assuming dilution $ 2,092 18,596 $ 0.11 $ 1,102 18,550 $ 0.06
======= ======= ====== ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
--------------------------------------------------------------------
1999 1998
---------------------------------- ---------------------------------
Income Shares Per Income Shares Per
(Numera- (Denomi- Share (Numera- (Denomi- Share
tor) nator) Amount tor) nator) Amount
------------ ----------- --------- ------------ ---------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net income $ 7,131 $ 2,849
Less: preferred stock dividends (4,834) (628)
------- --------
Income available to common
stockholders 2,297 16,902 $ 0.14 2,221 16,772 $ 0.13
====== ======
Effect of dilutive securities:
Employee stock options - 882 - 1,090
Warrants - 470 - 549
------- ------- ------- -------
Income available to common
stockholders assuming dilution $ 2,297 18,254 $ 0.13 $ 2,221 18,411 $ 0.12
======= ======= ====== ======= ======= ======
</TABLE>
Certain options and warrants to purchase shares of the Company's common stock
("Common Stock") were not included in the computations of diluted EPS because
the exercise prices were greater than the average market price of the Common
Stock during the periods of the EPS calculations, resulting in antidilution. In
addition, the Company's preferred stock is convertible into Common Stock but was
not included in the computation of diluted EPS because the effect was
antidilutive.
Page 9 of 18
<PAGE>
NOTE 5 - Operating Segments
The Company's operations consist of three operating segments: (i) Upstream
Operations - engages in the acquisition, exploitation, development, exploration
and production of crude oil and natural gas, (ii) Midstream Operations - engages
in crude oil gathering, marketing, terminalling, storage and transportation and
(iii) Corporate - reflects certain amounts that are not directly attributable to
Upstream or Midstream Operations. The Company evaluates segment performance
based on gross margin, gross profit and income before income taxes and minority
interest.
<TABLE>
<CAPTION>
(in thousands) Upstream Midstream Corporate Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For the Three Months Ended June 30, 1999
Revenues:
External Customers $ 25,189 $ 861,850 $ - $ 887,039
Intersegment (a) - 347 - 347
Other income 48 190 - 238
---------- ---------- ---------- ----------
Total revenues of reportable segments $ 25,237 $ 862,387 $ - $ 887,624
========== ========== ========== ==========
Segment gross margin (b) $ 13,089 $ 25,866 $ - $ 38,955
Segment gross profit (c) 11,716 20,097 (513) 31,300
Segment income (loss) before income taxes
and minority interest 1,512 11,726 (739) 12,499
- --------------------------------------------------------------------------------------------------------
For the Three Months Ended June 30, 1998
Revenues:
External Customers $ 25,547 $ 163,479 $ - $ 189,026
Intersegment (a) - 308 - 308
Other income 12 403 - 415
---------- ---------- ---------- ----------
Total revenues of reportable segments $ 25,559 $ 164,190 $ - $ 189,749
========== ========== ========== ==========
Segment gross margin (b) $ 12,712 $ 5,196 $ - $ 17,908
Segment gross profit (c) 11,330 4,141 - 15,471
Segment income (loss) before income taxes
and minority interest (602) 2,893 - 2,291
- --------------------------------------------------------------------------------------------------------
For the Six Months Ended June 30, 1999
Revenues:
External Customers $ 46,331 $1,317,610 $ - $1,363,941
Intersegment (a) - 674 - 674
Other income 20 287 - 307
---------- ---------- ---------- ----------
Total revenues of reportable segments $ 46,351 $1,318,571 $ - $1,364,922
========== ========== ========== ==========
Segment gross margin (b) $ 22,668 $ 45,230 $ - $ 67,898
Segment gross profit (c) 19,685 37,009 (513) 56,181
Segment income (loss) before income taxes
and minority interest (447) 22,712 (739) 21,526
- --------------------------------------------------------------------------------------------------------
For the Six Months Ended June 30, 1998
Revenues:
External Customers $ 51,711 $ 330,683 $ - $ 382,394
Intersegment (a) - 565 - 565
Other income 39 580 - 619
---------- ---------- ---------- ----------
Total revenues of reportable segments $ 51,750 $ 331,828 $ - $ 383,578
========== ========== ========== ==========
Segment gross margin (b) $ 26,038 $ 9,200 $ - $ 35,238
Segment gross profit (c) 23,266 7,159 - 30,425
Segment income (loss) before income taxes
and minority interest (301) 4,886 - 4,585
- --------------------------------------------------------------------------------------------------------
(a) Intersegment revenues and transfers were conducted on an arm's-length basis.
(b) Gross margin is calculated as operating revenues less operating expenses.
(c) Gross profit is calculated as operating revenues less operating and general and administrative expenses.
</TABLE>
Page 10 of 18
<PAGE>
NOTE 6 -- CONSOLIDATING FINANCIAL STATEMENTS
On September 17, 1999, the Company announced that it agreed to sell $75
million principal amount of senior subordinated notes due 2006, Series E (the
"Series E Notes"). Such notes will bear a stated coupon rate of 10.25%, but will
be issued at approximately 101% of par, for a yield-to-worst of 9.97%. The
stated coupon rate of interest and maturity date will be the same as those of
the Company's existing $200 million principal amount of senior subordinated
notes. Closing is expected to occur on September 22, 1999. Net proceeds to the
Company, after costs of the transaction, will be approximately $74.6 million,
and will be used to reduce the outstanding balance on the Revolving Credit
Facility. The Series E Notes will be issued pursuant to a Rule 144A private
placement.
The Series E Notes will be unsecured senior subordinated obligations of the
Company and will be subordinated in right of payment to all existing and future
senior indebtedness of the Company. All of the Company's subsidiaries engaged in
its upstream business segment will initially guarantee payment under the Series
E Notes on a full, unconditional, joint and several basis. The Series E Notes
will not be guaranteed by PAA or any of the Company's other midstream
subsidiaries.
The following financial information presents consolidating financial
statements which include:
. the parent company only ("Parent");
. the guarantor subsidiaries on a combined basis ("Guarantor
Subsidiaries");
. the nonguarantor subsidiaries on a combined basis ("Nonguarantor
Subsidiaries");
. elimination entries necessary to consolidate the Parent, the Guarantor
Subsidiaries and the Nonguarantor Subsidiaries; and
. the Company on a consolidated basis.
Page 11 of 18
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET (unaudited) (in thousands)
JUNE 30, 1999
<TABLE>
<CAPTION>
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,965 $ 290 $ 12,451 $ (1,648) $ 13,058
Accounts receivable 65 3,027 343,401 - 346,493
Inventory - 4,803 55,707 - 60,510
Prepaid expenses and other 1,940 933 2,111 - 4,984
--------- -------- ---------- --------- ----------
Total current assets 3,970 9,053 413,670 (1,648) 425,045
--------- -------- ---------- --------- ----------
PROPERTY AND EQUIPMENT 237,232 458,141 515,435 - 1,210,808
Less allowance for depreciation,
depletion and amortization (229,386) (98,629) (6,432) (55,386) (389,833)
--------- -------- ---------- --------- ----------
7,846 359,512 509,003 (55,386) 820,975
--------- -------- ---------- --------- ----------
INVESTMENTS IN SUBSIDIARIES AND
INTERCOMPANY ADVANCES 301,459 (209,540) (14,492) (77,427) -
OTHER ASSETS 44,745 8,176 100,584 - 153,505
--------- -------- ---------- --------- ----------
$ 358,020 $167,201 $1,008,765 $(134,461) $1,399,525
========= ======== ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities $ 15,438 $ 22,172 $ 372,242 $ (1,671) $ 408,181
Notes payable and other current obligations - 511 22,650 - 23,161
--------- --------- ---------- --------- ----------
Total current liabilities 15,438 22,683 394,892 (1,671) 431,342
BANK DEBT 117,300 - - - 117,300
BANK DEBT OF A SUBSIDIARY - - 289,350 - 289,350
SUBORDINATED DEBT 202,302 - - - 202,302
OTHER LONG-TERM DEBT - 2,556 - - 2,556
OTHER LONG-TERM LIABILITIES 5,381 644 1,264 - 7,289
--------- --------- ---------- --------- ----------
340,421 25,883 685,506 (1,671) 1,050,139
--------- --------- ---------- --------- ----------
MINORITY INTEREST (70,037) - 250,377 - 180,340
--------- --------- ---------- --------- ----------
SERIES E CUMULATIVE CONVERTIBLE
PREFERRED STOCK, STATED AT
LIQUIDATION PREFERENCE 92,655 - - - 92,655
--------- --------- ---------- --------- ----------
NON-REDEEMABLE PREFERRED STOCK,
COMMON STOCK AND
OTHER STOCKHOLDERS' EQUITY
Series D Cumulative Convertible Preferred Stock 22,613 - - - 22,613
Common Stock 1,693 77 - (77) 1,693
Additional paid-in capital 125,139 3,957 63,590 (67,547) 125,139
Retained earnings (accumulated deficit) (154,464) 137,284 9,292 (65,166) (73,054)
--------- --------- ---------- --------- ----------
(5,019) 141,318 72,882 (132,790) 76,391
--------- --------- ---------- --------- ----------
$ 358,020 $ 167,201 $1,008,765 $(134,461) $1,399,525
========= ========= ========== ========= ==========
</TABLE>
Page 12 of 18
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET (IN THOUSANDS)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR INTERCOMPANY
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENTS ASSETS
Cash and cash equivalents $ 142 $ 194 $ 6,408 $ (200) $ 6,544
Accounts receivable 276 8,549 120,050 - 128,875
Inventory - 4,809 37,711 - 42,520
Prepaid expenses and other 561 361 605 - 1,527
--------- --------- --------- --------- ---------
Total current assets 979 13,913 164,774 (200) 179,466
--------- --------- --------- --------- ---------
PROPERTY AND EQUIPMENT 234,127 424,646 378,835 - 1,037,608
Less allowance for depreciation,
depletion and amortization (228,579) (91,118) (799) (55,386) (375,882)
--------- --------- --------- --------- ---------
5,548 333,528 378,036 (55,386) 661,726
--------- --------- --------- --------- ---------
INVESTMENTS IN SUBSIDIARIES AND
INTERCOMPANY ADVANCES 246,581 (179,716) (2,847) (64,018) -
OTHER ASSETS 47,391 8,177 77,507 - 133,075
--------- --------- --------- ---------- ---------
$ 300,499 $ 175,902 $ 617,470 $(119,604) $ 974,267
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities $ 18,425 $ 26,207 $ 138,714 $ (200) $ 183,146
Notes payable and other current obligations - 511 9,750 - 10,261
--------- --------- --------- --------- ---------
Total current liabilities 18,425 26,718 148,464 (200) 193,407
BANK DEBT 52,000 - - - 52,000
BANK DEBT OF A SUBSIDIARY - - 175,000 - 175,000
SUBORDINATED DEBT 202,427 - - - 202,427
OTHER LONG-TERM DEBT - 2,556 - - 2,556
OTHER LONG-TERM LIABILITIES 5,743 8,179 45 - 13,967
--------- --------- --------- --------- ---------
278,595 37,453 323,509 (200) 639,357
--------- --------- --------- --------- ---------
MINORITY INTEREST (70,037) - 243,498 - 173,461
--------- --------- --------- --------- ---------
SERIES E CUMULATIVE CONVERTIBLE
PREFERRED STOCK, STATED AT
LIQUIDATION PREFERENCE 88,487 - - - 88,487
--------- --------- --------- --------- ---------
NON-REDEEMABLE PREFERRED STOCK,
COMMON STOCK AND
OTHER STOCKHOLDERS' EQUITY
Series D Cumulative Convertible Preferred Stock 21,946 - - - 21,946
Common Stock 1,688 77 - (77) 1,688
Additional paid-in capital 124,679 3,954 38,727 (42,681) 124,679
Retained earnings (accumulated deficit) (144,859) 134,418 11,736 (76,646) (75,351)
--------- --------- --------- --------- ---------
3,454 138,449 50,463 (119,404) 72,962
--------- --------- --------- --------- ---------
$ 300,499 $ 175,902 $ 617,470 $(119,604) $ 974,267
========= ========= ========= ========= =========
</TABLE>
Page 13 of 18
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS (unaudited) (in thousands)
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
----------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Oil and natural gas sales $ - $45,657 $ - $ 674 $ 46,331
Marketing, transportation, storage and terminalling - - 1,318,284 (674) 1,317,610
Interest and other income (3) 22 288 - 307
------- ------- ---------- ------ ----------
(3) 45,679 1,318,572 - 1,364,248
------- ------- ---------- ------ ----------
EXPENSES
Production expenses - 23,663 - - 23,663
Marketing, transportation, storage and terminalling - - 1,272,380 - 1,272,380
General and administrative 888 2,596 8,233 - 11,717
Depreciation, depletion and amortization 1,260 7,514 6,671 - 15,445
Interest expense 2,613 8,991 7,913 - 19,517
------- ------- ---------- ------ ----------
4,761 42,764 1,295,197 - 1,342,722
------- ------- ---------- ------ ----------
Income (loss) before income taxes and minority
Income (loss) before income taxes
and minority interest (4,764) 2,915 23,375 - 21,526
Minority interest - - 9,836 - 9,836
------- ------- ---------- ------ ----------
Income (loss) before income taxes (4,764) 2,915 13,539 - 11,690
Income tax expense (benefit)
Current (3,156) - 3,156 - -
Deferred 3,012 50 1,497 - 4,559
------- ------- ---------- ------ ----------
NET INCOME (LOSS) (4,620) 2,865 8,886 - 7,131
Less: cumulative preferred stock dividends 4,834 - - - 4,834
------- ------- ----------- ------ ----------
NET INCOME (LOSS) AVAILABLE
TO COMMON STOCKHOLDERS $(9,454) $ 2,865 $ 8,886 $ - $ 2,297
======= ======= =========== ====== ==========
</TABLE>
Page 14 of 18
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS (unaudited) (in thousands)
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Oil and natural gas sales $ 1 $ 51,710 $ - $ - $ 51,711
Marketing, transportation, storage and terminalling - - 330,683 - 330,683
Interest and other income 2 36 581 - 619
--------- ------- -------- --- --------
3 51,746 331,264 - 383,013
--------- ------- -------- --- --------
EXPENSES
Production expenses - 25,673 - - 25,673
Marketing, transportation, storage and terminalling - - 321,483 - 321,483
General and administrative 1,902 870 2,041 - 4,813
Depreciation, depletion and amortization 2,733 10,239 621 - 13,593
Interest expense 4,065 5,344 3,457 - 12,866
-------- ------- -------- --- --------
8,700 42,126 327,602 - 378,428
-------- ------- -------- --- --------
Income (loss) before income taxes and minority interest (8,697) 9,620 3,662 - 4,585
Minority interest - - - - -
-------- ------- -------- --- --------
Income (loss) before income taxes (8,697) 9,620 3,662 - 4,585
Income tax expense (benefit)
Current (2,326) (3) 2,351 - 22
Deferred 10,835 (9,044) (77) - 1,714
-------- ------- -------- --- --------
NET INCOME (LOSS) (17,206) 18,667 1,388 - 2,849
Less: cumulative preferred stock dividends 628 - - - 628
-------- ------- -------- --- --------
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS $(17,834) $18,667 $ 1,388 $ - $ 2,221
======== ======= ======== === ========
</TABLE>
Page 15 of 18
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (unaudited) (in thousands)
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------------- ------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ (4,620) $ 2,865 $ 8,886 $ - $ 7,131
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, depletion, and amortization 1,260 7,514 6,671 - 15,445
Minority interest in income - - 9,836 - 9,836
Deferred income tax 3,012 50 1,497 - 4,559
Other non-cash items 789 - 182 - 971
Change in assets and liabilities resulting from
operating activities:
Accounts receivable 211 5,414 (74,788) - (69,163)
Inventory - 6 (1,176) - (1,170)
Pipeline linefill - - (4) - (4)
Prepaids and other (1,379) (3,044) 966 - (3,457)
Accounts payable and other current liabilities (2,987) 5,870 60,233 (1,448) 61,668
--------- -------- --------- ------- ---------
NET CASH FLOWS PROVIDED BY
(USED IN) OPERATING ACTIVITIES (3,714) 18,675 12,303 (1,448) 25,816
--------- -------- --------- ------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for acquisition of midstream assets - - (141,971) - (141,971)
Payment for acquisition, exploration,
and development costs (3,021) (47,959) - - (50,980)
Payment for crude oil pipeline, gathering
and terminal assets - - (4,677) - (4,677)
Payment for additions to other property
and other assets (90) (1,074) (158) - (1,322)
--------- -------- --------- ------- ---------
NET CASH USED IN INVESTING ACTIVITIES (3,111) (49,033) (146,806) - (198,950)
--------- -------- --------- ------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Advances/investments with affiliates (42,018) 30,454 11,564 - -
(Payment) proceeds from issuance of
Class B Common Units (25,000) - 25,000 - -
Proceeds from long-term debt 120,400 - 187,621 - 308,021
Proceeds from short-term debt - - 24,150 - 24,150
Principal payments of long-term debt (55,100) - (72,621) - (127,721)
Principal payments of short-term debt - - (11,900) - (11,900)
Distribution to public Unitholders 11,328 - (19,741) - (8,413)
Other (962) - (3,527) - (4,489)
--------- -------- --------- ------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 8,648 30,454 140,546 - 179,648
--------- -------- --------- ------- ---------
Net increase (decrease) in cash and cash equivalents 1,823 96 6,043 (1,448) 6,514
Cash and cash equivalents, beginning of period 142 194 6,408 (200) 6,544
--------- -------- --------- ------- ---------
Cash and cash equivalents, end of period $ 1,965 $ 290 $ 12,451 $(1,648) $ 13,058
========= ======== ========= ======= =========
</TABLE>
Page 16 of 18
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW (unaudited) (in thousands)
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (17,206) $ 18,667 $ 1,388 $ - $ 2,849
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, depletion, and amortization 2,733 10,239 621 - 13,593
Deferred income tax 10,835 (9,044) (77) - 1,714
Other non-cash items 131 - - - 131
Change in assets and liabilities resulting from
operating activities:
Accounts receivable 303 681 8,540 - 9,524
Inventory - (264) (9,066) - (9,330)
Prepaids and other (190) 265 122 - 197
Account payable and other current liabilities (528) (1,040) (5,072) (231) (6,871)
---------- --------- ---------- ---------- ----------
NET CASH FLOWS PROVIDED BY
(USED IN) OPERATING ACTIVITIES (3,922) 19,504 (3,544) (231) 11,807
---------- --------- ---------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for acquisition, exploration,
and development costs (3,060) (36,345) - - (39,405)
Payment for additions to other property
and other assets - (496) (455) (951)
Additions to other assets - 52 (52) - -
---------- ---------- ---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (3,060) (36,789) (507) - (40,356)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances/investments with affiliates (24,162) 17,279 6,883 - -
Proceeds from long-term debt 119,560 - - - 119,560
Proceeds from short-term debt - - 17,900 - 17,900
Principal payment of long-term debt (63,560) - - - (63,560)
Principal payments of short-term debt - - (18,000) - (18,000)
Capital contribution from Parent (28,701) - 28,701 -
Other 519 - - - 519
---------- ---------- ---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,656 17,279 35,484 - 56,419
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (3,326) (6) 31,433 (231) 27,870
Cash and cash equivalents, beginning of period 4,911 263 1,452 (2,912) 3,714
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents, end of period $ 1,585 $ 257 $ 32,885 $ (3,143) $ 31,584
========== ========== ========== ========== ==========
</TABLE>
Page 17 of 18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned and thereunto duly authorized.
PLAINS RESOURCES INC.
Date: September 21, 1999 By: /s/ Cynthia A. Feeback
-----------------------
Cynthia A. Feeback, Vice President -- Accounting
and Assistant Treasurer
(Principal Accounting Officer)
Page 18 of 18
