<PAGE>
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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
JUNE 30, 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 11,978,003 shares of the registrant's $.01 par value
common stock outstanding as of June 30, 1995. There were 24,786,156 shares
of the registrant's $.01 par value common stock outstanding as of August 8,
1995.
--------------------------------------------------------------------------------
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<PAGE>
BARRETT RESOURCES CORPORATION
-----------------------------
INDEX
-----
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Consolidated Condensed Balance
Sheets - June 30, 1995 and
September 30, 1994............................ 3
Consolidated Condensed Statements of
Income - Three Months Ended
June 30, 1995 and 1994........................ 4
Consolidated Condensed Statements of
Income - Nine Months Ended
June 30, 1995 and 1994........................ 5
Consolidated Condensed Statements of
Cash Flows - Nine Months Ended
June 30, 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............................... 13
Item 6. Exhibits and Reports on Form 8-K .............. 13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
BARRETT RESOURCES CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
June 30, September 30,
1995 1994
---------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,071 $ 7,760
Short-term investments -- 1,970
Receivables 21,971 18,826
Other current assets 248 264
-------- --------
Total current assets 32,290 28,820
Property and equipment, net 103,667 76,925
Other assets 685 147
-------- --------
$136,642 $105,892
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,820 $ 20,371
Amounts payable to oil and gas property
owners 12,098 11,560
Accrued and other liabilities 1,832 1,089
-------- --------
Total current liabilities 24,750 33,020
Long-term debt 36,000 --
Stockholders' equity:
Preferred stock, $.001 par value: 1,000,000
shares authorized, none outstanding -- --
Common stock, $.01 par value: 17,000,000
shares authorized; 11,981,060 issued
(11,845,083 at September 30, 1994) 120 118
Additional paid-in capital 59,675 58,992
Retained earnings 16,169 13,762
Treasury stock, at cost: 3,057 shares (72) --
-------- --------
Total stockholders' equity 75,892 72,872
-------- --------
$136,642 $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
------------------------
June 30, June 30,
1995 1994
---------- ----------
<S> <C> <C>
Revenues:
Oil and gas production $ 6,850 $ 4,016
Trading revenues 7,522 5,656
Revenue from gas gathering 218 43
Interest income 142 219
Other income -- 10
---------- ----------
14,732 9,944
Operating expenses:
Lease operating expense 1,469 802
Cost of trading 7,263 5,556
Depreciation, depletion and amortization 3,108 1,701
General and administrative 1,091 1,013
Interest expense 481 1
---------- ----------
13,412 9,073
---------- ----------
Income for the period before income taxes 1,320 871
Provision for income taxes 23 72
---------- ----------
Net income for the period $ 1,297 $ 799
========== ==========
Net income per common share and common
share equivalent $ .11 $ .07
========== ==========
Weighted average number of shares of
common stock and common stock equivalents 12,247,587 11,979,945
========== ==========
</TABLE>
See accompanying notes.
4
<PAGE>
BARRETT RESOURCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------
June 30, June 30,
1995 1994
---------- ----------
<S> <C> <C>
Revenues:
Oil and gas production $17,193 $ 13,432
Trading revenues 26,042 15,054
Revenue from gas gathering 660 180
Interest income 347 691
Other income 41 54
---------- ----------
44,283 29,411
Operating expenses:
Lease operating expense 3,859 2,544
Cost of trading 25,132 14,510
Depreciation, depletion and amortization 7,914 5,186
General and administrative 4,074 3,436
Interest expense 851 5
---------- ----------
41,830 25,681
---------- ----------
Income for the period before income taxes 2,453 3,730
Provision for income taxes 46 129
---------- ----------
Net income for the period $ 2,407 $ 3,601
========== ==========
Net income per common share and common
share equivalent $ .20 $ .30
========== ==========
Weighted average number of shares of
common stock and common stock equivalents 12,154,791 11,923,448
========== ==========
</TABLE>
See accompanying notes.
5
<PAGE>
BARRETT RESOURCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------
June 30, June 30,
1995 1994
--------- --------
<S> <C> <C>
Cash flows from operations:
Net income $ 2,407 $ 3,601
Adjustments needed to reconcile to
net cash provided by operations:
Depreciation, depletion, and amortization 7,914 5,186
Reversal of gas trading allowance -- 100
Change in other assets (593) 5
-------- --------
9,728 8,892
Change in current assets and liabilities:
Increase in current receivables (3,676) (1,704)
Decrease in other current assets 16 40
Increase (decrease) in accounts payable (9) 398
Increase in accrued and other liabilities 743 59
-------- --------
Net cash flow provided by operations 6,802 7,685
-------- --------
Cash flows from investing activities:
Maturity of short-term investments 1,970 7,936
Purchase of short-term investments -- (14,781)
Proceeds from sale of oil and gas properties 12 387
Acquisition of property and equipment (42,641) (22,958)
Other 55 55
-------- --------
Net cash flow used in investing activities (40,604) (29,361)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock 613 144
Decrease (increase) in cash from operating oil
and gas properties (500) 1,423
Borrowings on line of credit 36,000 --
-------- --------
Net cash flow provided by financing activities 36,113 1,567
-------- --------
Increase (decrease) in cash and cash equivalents 2,311 (20,109)
Cash and cash equivalents at beginning of period 7,760 33,187
-------- --------
Cash and cash equivalents at end of period $ 10,071 $ 13,078
======== ========
</TABLE>
See accompanying notes.
6
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 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 June 30, 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. (See note 4 for discussion of change in fiscal year.)
2. INCOME TAXES
For the nine months ended June 30, 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 entire current fiscal year. The estimated tax
rate for the quarter and nine months ended June 30, 1995 is approximately
two percent.
3. LONG-TERM DEBT
As of June 30, 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. At June 30, 1995, $36 million was outstanding on the line of
credit. (See note 4 for discussion of a replacement line of credit.)
4. SUBSEQUENT EVENTS
On July 18, 1995 a wholly owned subsidiary of the Company merged with
Plains Petroleum Company (the "merger"). As a result of the merger, Plains
Petroleum Company became a wholly subsidiary of the Company. The merger
will be accounted for using the pooling of interests method which provides
that previously reported results of the separate companies will be restated
on a comparable, combined basis. The merger costs will be recorded as an
expense in the results of operations of the combined entity in the period
incurred.
7
<PAGE>
On July 18, 1995, the Company changed its fiscal year end from September 30
to December 31. A transition report for the period October 1, 1994 through
December 31, 1994 was filed with the Securities & Exchange Commission.
On July 19, 1995, the Company entered into a credit agreement with five
banks. The credit agreement provides for an unsecured line of credit of
$200 million, with a current borrowing base of $160 million. This credit
agreement replaces the previously existing separate lines of credit of the
Company and Plains Petroleum Company. As of August 8, 1995 the outstanding
balance is $80 million.
5. CAPITALIZED INTEREST
During the nine months ended June 30, 1995, the Company borrowed against
the line of credit to fund its oil and gas development. 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.
Total interest costs incurred for the quarter ended June 30, 1995 were
$643,000. Of this amount $162,000 was capitalized to the specific proj-
ects and $481,000 was recorded as interest expense. For the nine month
period $428,000 was capitalized and $851,000 was recorded as interest
expense.
8
<PAGE>
BARRETT RESOURCES CORPORATION
For the Quarter Ended
June 30, 1995
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
On July 18, 1995 the Company consummated the merger of a wholly owned
subsidiary of the Company with Plains Petroleum Company ("Plains") by
issuing 12,804,134 shares of its common stock to the former Plains
shareholders. As a result of this merger, Plains became a wholly owned
subsidiary of the Company. Also on July 18, 1995, the Company changed its
fiscal year end from September 30 to December 31 effective January 1, 1995.
Subsequent to the merger, the Company replaced the previous bank lines of
credit of both companies with a single line of credit as discussed below.
The financial statements included in this Form 10-Q do not reflect the
merger. Rather these financial statements report only the financial
position and results of operations for Barrett Resources Corporation as of
June 30, 1995 and for the nine months then ended. The financial statements
for the quarter ended September 30, 1995 will report combined operations
under the pooling of interests method of reporting the combination.
Liquidity and Capital Resources
-------------------------------
As of June 30, 1995, total assets were $136.6 million compared to $105.9
million at September 30, 1994, an increase of $30.7 million or 29 percent.
Property and equipment increased $26.7 million or 35 percent while accounts
receivable increased $3.1 million or 17 percent. Working capital increased
to $7.5 million from a deficit of $4.2 million. These increases are
primarily the result of increased investment in oil and gas properties and
borrowings on the line of credit.
During the nine month period ended June 30, 1995 the Company borrowed $36
million on its line of credit with a bank. On July 19, 1995, the Company
entered into a $200 million credit agreement with five banks to replace
both the Company's and Plain's lines of credit. The new credit agreement
provides for an initial borrowing base of $160 million. The existing bank
debt of both the Company and Plains was retired with proceeds from the new
line of credit. As of August 8, 1995 the outstanding balance under the
line of credit was $80 million.
For the respective nine months ended June 30, 1995 and 1994, operations
provided $9.7 million and $8.9 million of cash flow before working capital
changes. The increase is primarily due to increased oil and gas
production.
The Company invested $42.6 million in the acquisition of property and
9
<PAGE>
equipment during the nine months ended June 30, 1995 compared to $23.0
million for the same period of 1994. During the current year, 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.
Beginning December 1994, the Company began production of its Cave Gulch
field in the Wind River Basin and began operation of its gas plant and
gathering system extension in the Piceance Basin. These actions
significantly increased the Company's productive capacity. Subject to
market availability, these production increases should continue to generate
a corresponding increase in cash flow.
The July 18, 1995 merger with Plains Petroleum Company substantially
increased the Company's reserve position and production capacity. As of
December 31, 1994 Plains reported reserve estimates of 313 Bcf of gas and
11 million barrels of oil compared to the Company's reserve estimates of
226 Bcf of gas and 900,000 barrels of oil as of March 31, 1995. Depending
on oil and gas sales prices the increased production from the combined
reserves should substantially increase the Company's cash flow from
operations. In addition to expected production increases, the increased
reserve position increases the Company's borrowing availability. The
Company's current borrowing availability under its new credit arrangement
is $160 million compared to a borrowing base of $40 million (based on
September 30, 1994 reserve estimates) prior to the merger.
The Company is re-evaluating its investing activities in oil and gas
properties due to low gas prices. 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. Management believes
that its current cash position, anticipated cash flow and borrowing
availabilities will adequately fund its anticipated exploration and
development activities for the next year.
Results of Operations
---------------------
Net income for the quarters ended June 30, 1995 and 1994 was $1.3 million
($.11 per share) and $.8 million ($.07 per share), respectively. The
increase in net income of $.5 million is primarily due to increased oil and
gas sales net of related lease operating expense and depreciation,
depletion and amortization. Other factors affecting net income are an
increase in gross profit from trading and an increase in interest expense.
For the nine months ended June 30, 1995 and 1994, net income was $2.4
million ($.20 per share) and $3.6 million ($.30 per share), respectively.
Production revenues increased $3.8 million and gross margins on trading
activities increased $.4 million for the period. These increases were
offset by lease operating expenses increasing by $1.3 million,
depreciation, depletion and amortization increasing by $2.7 million,
interest expense increasing by $.8 million and general and administrative
expenses increasing by $.6 million.
10
<PAGE>
Total revenues were $14.7 million and $9.9 million for the quarters ended
June 30, 1995 and 1994 and total expenses were $13.4 million and $9.1
million, respectively. For the nine month periods, total revenues were
$44.3 million and $29.4 million, and expenses were $41.8 million and $25.7
million. The largest portion of the increases in revenues and expenses for
the quarter and the nine months is attributable to increased oil and gas
production and to trading activities.
Production revenue for the third quarter of 1995 increased from $4.0
million in 1994 to $6.9 million. During the quarter, the Company sold
4,329,700 mcf of gas and 23,700 barrels of oil at an average price of $1.48
per mcf of gas and $18.34 per barrel of oil. During the comparable quarter
of 1994, the Company sold 2,175,000 mcf of gas and 14,200 barrels of oil at
an average price of $1.76 per mcf of gas and $13.73 per barrel of oil.
Production quantities increased 99 percent on a gas equivalent basis, while
product prices decreased 14 percent. Daily sales on an mcfe basis were
49,140 and 24,800 for the respective quarters ended June 30, 1995 and 1994.
For the nine months ended June 30, 1995, production revenue was $17.2
million compared to revenues of $13.4 million for the nine months ended
June 30, 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.
For the quarter ended June 30, 1995, trading revenues were $7.5 million
($5.7 million in 1994) and $26.0 million for the nine month period ($15.1
million in 1994). The associated costs of trading were $7.3 million and
$5.6 million for the quarters ended June 30, 1995 and 1994, respectively,
and $25.1 million and $14.5 million for the respective nine months. Gross
profit from trading for the quarter increased to $.3 million from $.1
million and to $.9 million from $.5 million for the nine months.
General and administrative expenses for the quarter ended June 30, 1995
increased $.1 million to $1.1 million from the comparable 1994 quarter.
For the nine month period, these expenses increased from $3.4 million to
$4.1 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 $1.7 million to
$3.1 million for the quarter and from $5.2 million to $7.9 million for the
nine 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.
The July 18 merger with Plains Petroleum Company will substantially
increase the Company's total oil and gas production on a consolidated
basis. During the quarter ended June 30, 1995, Plains Petroleum produced
11
<PAGE>
6.9 Bcf of gas and 397,700 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 will be restated on a combined
basis. Merger costs will be recorded as an expense in the results of
operations of the combined entity 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 percent 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.
12
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
During the quarter ended June 30, 1995, a Notice of Special Meeting of
Stockholders and Proxy Statement were sent to the Company's common
stockholders with respect to a special meeting of stockholders that was
held on July 18, 1995. At the special meeting, the stockholders
approved an amendment to the Company's Certificate of Incorporation to
increase the Company's authorized Common Stock from 17,000,000 shares
to 35,000,000 (the "Charter Amendment") and the issuance of shares of
the Company's Common Stock (the "Stock Issuance") in connection with
the Agreement and Plan of Merger (the "Merger Agreement") among the
Company, Barrett Energy Inc., a wholly owned subsidiary of the Company
("Sub"), and Plains Petroleum Company ("Plains"), including the
issuance of shares of the Company's Common Stock in the merger of Sub
with and into Plains (the "Merger") and the reservation of shares of
the Company's Common Stock for issuance upon exercise of certain stock
options of Plains which, following the Merger, constitute options to
purchase the Company's Common Stock. The Charter Amendment was approved
by a vote of 9,834,398 shares voting for and 11,660 shares voting
against, with 6,380 abstentions and 45 broker non-votes. The Stock
Issuance was approved by a vote of 9,749,622 shares voting for and
3,840 shares voting against, with 6,027 abstentions and 92,994 broker
non-votes.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) During the quarter ended June 30, 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.
(b) Subsequent to the quarter ended June 30, 1995, a report on Form 8-K was
filed reporting the Company's decision on July 18, 1995 to change its
fiscal year end from September 30 to December 31. The change in the
year end is effective January 1, 1995.
(c) Subsequent to the quarter ended June 30, 1995, a report on Form 8-K, as
amended by a report on Form 8-K/A-1, was filed reporting the merger on
July 18, 1995 of Barrett Energy, Inc., a wholly owned subsidiary of the
Company and Plains Petroleum Company that resulted in Plains Petroleum
Company becoming a wholly owned subsidiary of the Company.
(d) The following Exhibit is filed as part of this Quarterly Report on
Form 10-Q.
Financial data schedule.
13
<PAGE>
SIGNATURES
----------
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
August 14, 1995 By /s/ PAUL M. RADY
--------------------------------
Paul M. Rady
President
August 14, 1995 By /s/ ROBERT W. HOWARD
--------------------------------
Robert W. Howard
Senior Vice President - Treasurer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> SEP-30-1995 SEP-30-1995
<PERIOD-START> APR-01-1995 OCT-01-1995
<PERIOD-END> JUN-30-1995 JUN-30-1995
<CASH> 10,071 10,071
<SECURITIES> 0 0
<RECEIVABLES> 21,971 21,971
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 32,290 32,290
<PP&E> 103,667 103,667
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 136,642 136,642
<CURRENT-LIABILITIES> 24,750 24,750
<BONDS> 0 0
<COMMON> 120 120
0 0
0 0
<OTHER-SE> 75,772 75,772
<TOTAL-LIABILITY-AND-EQUITY> 136,642 136,642
<SALES> 14,372 43,235
<TOTAL-REVENUES> 14,732 44,283
<CGS> 7,263 25,132
<TOTAL-COSTS> 8,732 28,991
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 481 851
<INCOME-PRETAX> 1,320 2,453
<INCOME-TAX> 23 46
<INCOME-CONTINUING> 1,297 2,407
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,297 2,407
<EPS-PRIMARY> .11 .20
<EPS-DILUTED> .11 .20
</TABLE>
