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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE QUARTERLY PERIOD ENDED COMMISSION FILE NUMBER
MARCH 31, 1995 1-13446
---------------------
BARRETT RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State of other jurisdiction of incorporation or organization)
1125 SEVENTEENTH STREET, SUITE 2400
DENVER, COLORADO 80202
TELEPHONE: (303) 297-3900
(Address and telephone number of principal executive offices)
84-0832476
(IRS Employer Identification Number)
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
---- ----
There were 11,957,560 shares of registrant's $.01 par value common stock
outstanding as of May 1, 1995.
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<PAGE>
BARRETT RESOURCES CORPORATION
-----------------------------
INDEX
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PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Consolidated Condensed Balance
Sheets - March 31, 1995 and
September 30, 1994 ............................ 3
Consolidated Condensed Statements of
Income - Three Months Ended
March 31, 1995 and 1994........................ 4
Consolidated Condensed Statements of
Income - Six Months Ended
March 31, 1995 and 1994........................ 5
Consolidated Condensed Statements of
Cash Flows - Six Months Ended
March 31, 1995 and 1994........................ 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations ................................. 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders............................... 12
Item 6. Exhibits and Reports on Form 8-K .............. 12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
BARRETT RESOURCES CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
----------- -------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,047 $ 7,760
Short-term investments -- 1,970
Receivables 22,071 18,826
Other current assets 212 264
-------- --------
Total current assets 33,330 28,820
Property and equipment, net 98,360 76,925
Other assets 150 147
-------- --------
$131,840 $105,892
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,115 $ 20,371
Amounts payable to oil and gas property
owners 15,440 11,560
Accrued and other liabilities 2,162 1,089
-------- --------
Total current liabilities 26,717 33,020
Long-term debt 31,000 --
Stockholders' equity:
Preferred stock, $.001 par value: 1,000,000
shares authorized, none outstanding -- --
Common stock, $.01 par value: 17,000,000
shares authorized; 11,900,310 issued
(11,845,083 at September 30, 1994) 119 118
Additional paid-in capital 59,132 58,992
Retained earnings 14,872 13,762
-------- --------
Total stockholders' equity 74,123 72,872
-------- --------
$131,840 $105,892
======== ========
</TABLE>
See accompanying notes.
3
<PAGE>
BARRETT RESOURCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
------------------------
March 31, March 31,
1995 1994
----------- -----------
<S> <C> <C>
Revenues:
Oil and gas production $ 6,346 $ 4,943
Trading revenues 7,788 4,337
Revenue from gas gathering 291 87
Interest income 115 232
Other income 5 44
----------- -----------
14,545 9,643
Operating expenses:
Lease operating expense 1,456 802
Cost of trading 7,452 4,150
Depreciation, depletion and amortization 3,038 1,808
General and administrative 1,358 1,158
Interest expense 319 4
----------- -----------
13,623 7,922
----------- -----------
Income for the period before income taxes 922 1,721
Provision for income taxes 19 34
----------- -----------
Net income for the period $ 903 $ 1,687
=========== ===========
Net income per common share and common
share equivalent $ .07 $ .14
=========== ===========
Weighted average number of shares of common
stock and common stock equivalents 12,109,515 11,922,952
=========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
BARRETT RESOURCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended
------------------------
March 31, March 31,
1995 1994
----------- -----------
<S> <C> <C>
Revenues:
Oil and gas production $ 10,343 $ 9,416
Trading revenues 18,520 9,398
Revenue from gas gathering 442 137
Interest income 205 472
Other income 41 44
----------- -----------
29,551 19,467
Operating expenses:
Lease operating expense 2,390 1,742
Cost of trading 17,869 8,954
Depreciation, depletion and amortization 4,806 3,485
General and administrative 2,983 2,423
Interest expense 370 4
----------- -----------
28,418 16,608
----------- -----------
Income for the period before income taxes 1,133 2,859
Provision for income taxes 23 57
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Net income for the period $ 1,110 $ 2,802
=========== ===========
Net income per common share and common
share equivalent $ .09 $ .23
=========== ===========
Weighted average number of shares of common
stock and common stock equivalents 12,105,999 11,909,878
=========== ===========
</TABLE>
See accompanying notes.
5
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BARRETT RESOURCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
---------------------
March 31, March 31,
1995 1994
--------- ----------
<S> <C> <C>
Cash flows from operations:
Net income $ 1,110 $ 2,802
Adjustments needed to reconcile to
net cash provided by operations:
Depreciation, depletion, and amortization 4,806 3,485
Reversal of gas trading allowance -- 92
Change in other assets 58 4
-------- --------
5,858 6,383
Change in current assets and liabilities:
Decrease (increase) in current receivables (1,248) 351
Decrease (increase) in other current assets 52 180
Increase (decrease) in accounts payable (227) 2,438
Increase in accrued and other liabilities 1,073 147
-------- --------
Net cash flow provided by operations 5,508 9,499
-------- --------
Cash flows from investing activities:
Maturity of short-term investments 1,970 5,952
Purchase of short-term investments -- (7,428)
Proceeds from sale of oil and gas properties -- 387
Acquisition of property and equipment (34,361) (14,791)
Other 55 40
-------- --------
Net cash flow used in investing activities (32,336) (15,840)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock 141 105
Decrease (increase) in cash from operating oil
and gas properties (1,026) 790
Borrowings on line of credit 31,000 --
-------- --------
Net cash flow provided by financing activities 30,115 895
-------- --------
Increase (decrease) in cash and cash equivalents 3,287 (5,446)
Cash and cash equivalents at beginning of period 7,760 33,187
-------- --------
Cash and cash equivalents at end of period $ 11,047 $ 27,741
======== ========
</TABLE>
See accompanying notes.
6
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1995
1. UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments necessary to present
fairly the financial position of the Company as of March 31, 1995 and the
results of operations and cash flows for the periods presented. All such
adjustments are of a normal recurring nature. The results of operations
for the periods presented are not necessarily indicative of the results for
the full year.
The accounting policies followed by the Company are set forth in Note 1 to
the Company's financial statements in Form 10-K for the year ended
September 30, 1994. It is suggested that these financial statements be
read in conjunction with the financial statements and notes included in the
Form 10-K.
2. INCOME TAXES
The net deferred tax assets of the Company were $1,151,000 and $2,688,000
as of September 30, 1994 and 1993, respectively. In order to reflect the
amounts not expected to be utilized before the expiration of available net
operating loss carryforwards and due to the effects of anticipated
exploratory drilling costs, a valuation allowance equal to the entire net
deferred tax asset was provided at both September 30, 1994 and 1993.
For the six months ended March 31, 1995, the Company has used its estimated
effective tax rate to compute the provision for income taxes as the Company
does not believe it can reliably estimate its taxable income with any
degree of precision for the current fiscal year. The estimated tax rate
for the quarter and six months ended March 31, 1995 is approximately two
percent.
3. LONG-TERM DEBT
As of March 31, 1995, the commitment amount of the Company's reserve-based
line of credit with a bank was $80 million and the borrowing base was $40
million. In order to reduce the commitment fees, the Company voluntarily
requested that the maximum borrowing be limited to $35 million. At March
31, 1995, $31 million was outstanding on the line of credit.
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4. CAPITALIZED INTEREST
During the six months ended March 31, 1995, the Company borrowed against
its line of credit to fund its oil and gas development and the construction
of a gas plant and a gathering system extension. The Company capitalizes
interest costs on amounts expended on assets during the period in which
activities are occurring to place the asset in service. Excluded from
interest capitalization are amounts spent to develop properties included in
the full cost center of oil and gas properties. The gas plant and
gathering system extension were placed in service on December 1, 1994 while
development of certain unevaluated oil and gas properties continued
throughout the six month period.
Total interest costs incurred for the quarter ended March 31, 1995 were
$470,000. Of this amount $151,000 was capitalized to the specific proj-
ects and $319,000 was recorded as interest expense. For the six month
period $269,000 was capitalized and $370,000 was recorded as interest
expense.
8
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BARRETT RESOURCES CORPORATION
For the Quarter Ended
March 31, 1995
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Liquidity and Capital Resources
- - -------------------------------
As of March 31, 1995, total assets were $131.8 million compared to $105.9
million as of September 30, 1994. This represents an increase of $25.9
million or 24.5 percent. Property and equipment increased $21.4 million
(27.9 percent) and current assets increased $4.5 million (15.5 percent).
Working capital increased by $10.8 million to $6.6 million. These
increases are primarily the result of increased investment in oil and gas
properties, increased gas production that began in the first quarter of
fiscal 1995 and borrowings on the line of credit.
During the six month period ended March 31, 1995, the Company borrowed $31
million on its line of credit with a bank. The line of credit provides up
to $80 million with a borrowing base of $40 million. The Company has
voluntarily requested the maximum borrowing be limited to $35 million.
For the respective six months ended March 31, 1995 and 1994, operations
provided $5.9 million and $6.4 million of cash flow before working capital
changes. The decrease is primarily due to lower gas prices which resulted
in decreased net income.
The Company invested $34.4 million in the acquisition of property and
equipment during the six months ended March 31, 1995 compared to $14.8
million for the same period of fiscal 1994. During this period, the
Company continued its exploration and development activities in the
Piceance Basin of Colorado, the Wind River Basin in Wyoming and the Arkoma
and Anadarko Basins of Oklahoma.
During December 1994, the Company began production of its Cave Gulch
discovery in the Wind River Basin and began operation of its gas plant and
gathering system extension in the Piceance Basin. These actions
significantly increased production to the Company's interest. Subject to
market availability, these production increases should continue to generate
a corresponding increase in cash flow.
On May 3, 1995, the Company announced a plan for the merger of Plains
Petroleum Company, an independent oil and gas producer, into a wholly owned
subsidiary of the Company to be accounted for using the pooling of
interests method of accounting. As of December 31, 1994, Plains Petroleum
reported proved reserves of 11 million barrels of oil and 312.5 Bcf of gas.
The merger is subject to approval of the stockholders of both
9
<PAGE>
companies and is expected to be consummated in the third quarter of
calendar 1995.
Due to low gas prices, the Company continues to evaluate its opportunities
for investing in oil and gas properties. Management believes that as a
result of this evaluation, its oil and gas investing activities for the
remainder of the year may be reduced compared to previous plans for the
year.
Management believes that its current cash position, anticipated cash flow
and borrowing capacities will adequately fund its fiscal 1995 anticipated
exploration and development activities.
Results of Operations
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Net income for the quarters ended March 31, 1995 and 1994 was $.9 million
($.07 per share) and $1.7 million ($.14 per share), respectively. The
decrease is due primarily to a reduction of average gas prices which are
29% lower for the fiscal 1995 quarter than the fiscal 1994 quarter and the
resulting effect on oil and gas production revenue. Other factors
contributing to the decrease in net income include increases in general and
administrative expenses and interest expense.
For the six months ended March 31, 1995 and 1994, net income was $1.1
million ($.09 per share) and $2.8 million ($.23 per share), respectively.
Due primarily to lower gas prices, production revenue net of lease
operating expense and depreciation, depletion and amortization decreased
from $4.2 million to $3.1 million during this period. Increases in gas
gathering revenue due to the gathering system extension in the Piceance
Basin were offset by increases in general and administrative expenses and
interest expenses.
Production revenue for the second quarter of fiscal 1995 increased from
$4.9 million in 1994 to $6.3 million. During the fiscal quarter, the
Company sold 25,000 barrels of oil and 4,246,000 mcf of gas at an average
price of $1.41 per mcf of gas and $14.26 per barrel of oil. During the
comparable quarter of fiscal 1994, the Company sold 16,000 barrels of oil
and 2,325,000 mcf of gas at an average price of $2.04 per mcf of gas and
$12.29 per barrel of oil. Production quantities increased 82 percent on a
barrel of oil equivalent basis, while product prices decreased 29 percent.
Daily sales on an mcfe basis were 49,000 and 26,900 for the respective
quarters ended March 31, 1995 and 1994.
For the six months ended March 31, 1995, production revenue was $10.3
million compared to revenues of $9.4 million for the six months ended March
31, 1994. The significant increases in production are the result of the
operation of the gas plant and gas gathering system extension in the
Piceance Basin and the production from the Cave Gulch project in the Wind
River Basin, both of which commenced in December 1994.
10
<PAGE>
Total revenues were $14.5 and $9.6 million for the quarters ended March 31,
1995 and 1994 and total expenses were $13.6 million and $7.9 million,
respectively. For the six month periods, total revenues were $29.6 million
and $19.5 million, and expenses were $28.4 million and $16.6 million. The
largest portion of the increases in revenues and expenses for the quarter
and the six months is attributable to trading activities.
In 1995, trading revenues were $7.8 million for the second quarter ($4.3
million in 1994) and $18.5 million for the six month period ($9.4 million
in 1994). The associated costs of trading were $7.5 million and $4.2
million for the quarter ended March 31, 1995 and 1994, respectively and
$17.9 million and $9.0 million for the respective six months. Gross profit
from trading increased to $.3 million from $.2 million for the quarter and
to $.7 million from $.4 million for the six months.
General and administrative expenses for the quarter ended March 31, 1995
increased $.3 million to $1.5 million from the comparable 1994 quarter.
For the six month period, these expenses increased from $2.4 million to
$3.1 million. These increases are primarily due to expenses related to the
Company expanding its oil and gas activities in both existing and new
prospect areas.
Depreciation, depletion and amortization increased from $1.8 million to
$3.0 million for the quarter and from $3.5 million to $4.8 million for the
six month period. The increase is due to production volume increases.
During fiscal 1995 and 1994, depletion on oil and gas production was
recorded at $3.90 and $4.26 per barrel of oil equivalent, respectively.
If consummated, the proposed merger with Plains Petroleum Company will
substantially increase the Company's total oil and gas production on a
consolidated basis. During the quarter ended March 31, 1995, Plains
Petroleum produced 7.4 Bcf of gas and 405,400 barrels of oil. The merger
will be accounted for using the pooling of interests method which provides
that previously reported results of the separate companies are restated on
a combined basis. Merger costs are recorded as an expense in the period
incurred.
The Company's largest source of operating income is from sales of its gas
and oil production. Therefore, the levels of the Company's revenues and
earnings are affected by prices at which natural gas and oil are being
sold. This is particularly true with respect to natural gas, which
accounts for approximately 94% of the Company's fiscal 1995 production
revenues to date. As a result, the Company's operating results for any
prior period are not necessarily indicative of future operating results
because of the fluctuations in gas and oil prices and the lack of
predictability of those fluctuations as well as changes in production
levels.
11
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On March 16, 1995, the Annual Meeting of the Stockholders of Barrett
Resources Corporation was held. At that meeting, the following matters
were voted upon by the stockholders with the results indicated below.
All three proposals were approved.
(1) The following directors were re-elected with these directors
constituting the entire Board of Directors: William J. Barrett,
C. Robert Buford, James M. Fitzgibbons, Hennie L.J.M. Gieskes, J.
Frank Keller, Paul M. Rady, A. Ralph Reed, James T. Rodgers,
Philippe S.E. Schreiber.
(2) A proposal to adopt the 1994 Stock Option Plan which provides
400,000 shares of Common Stock which may be granted either as
Incentive Options or Non-Qualified Options received 8,196,771
votes in favor of the proposal; 1,929,700 voted against the
proposal and 157,297 abstained.
(3) A proposal to ratify the selection by the Board of Directors of
Arthur Andersen LLP as the independent certified public
accountants for the Company for the fiscal year ending September
30, 1995 was approved with a total of 10,261,523 votes in favor;
4,599 votes against and 17,646 abstained.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) There are no exhibits filed as part of this report.
(b) Subsequent to the quarter ended March 31, 1995, a report on Form
8-K was filed reporting the event occurring on May 2, 1995, which
was the signing of an agreement and plan of merger for Plains
Petroleum Company to merge with a wholly owned subsidiary of
Barrett Resources Corporation.
12
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SIGNATURES
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Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BARRETT RESOURCES CORPORATION
May 09, 1995 By /s/ PAUL M. RADY
--------------------------------
Paul M. Rady
President
May 09, 1995 By /s/ ROBERT W. HOWARD
--------------------------------
Robert W. Howard
Senior Vice President - Treasurer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1995 SEP-30-1995
<PERIOD-START> JAN-01-1995 OCT-01-1994
<PERIOD-END> MAR-31-1995 MAR-31-1995
<CASH> 11,047 11,047
<SECURITIES> 0 0
<RECEIVABLES> 22,071 22,071
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 33,330 33,330
<PP&E> 98,360 98,360
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 131,840 131,840
<CURRENT-LIABILITIES> 26,717 26,717
<BONDS> 0 0
<COMMON> 119 119
0 0
0 0
<OTHER-SE> 74,004 74,004
<TOTAL-LIABILITY-AND-EQUITY> 131,840 131,840
<SALES> 14,134 28,863
<TOTAL-REVENUES> 13,623 29,551
<CGS> 8,908 20,259
<TOTAL-COSTS> 13,623 28,418
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 319 370
<INCOME-PRETAX> 922 1,133
<INCOME-TAX> 19 23
<INCOME-CONTINUING> 903 1,110
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 903 1,110
<EPS-PRIMARY> .07 .09
<EPS-DILUTED> .07 .09
</TABLE>
