<PAGE>
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 September 30, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from____________________to_________________________
Commission file number 1-13446
BARRETT RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 84-0832476
(State or other jurisdiction of (I.R.S. Employer)
Incorporation or organization) Identification No.)
1515 Arapahoe Street, Tower 3, Suite
1000
Denver, Colorado 80202
(Address of principal executive (Zip Code)
offices)
(303) 572-3900
(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 [_]
There were 32,579,326 shares of the registrant's $.01 par value common
stock outstanding as of November 9, 1999.
<PAGE>
BARRETT RESOURCES CORPORATION
-----------------------------
INDEX
-----
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
September 30, 1999 and December 31, 1998.................. 3
Consolidated Condensed Statements of
Income - Three Months Ended
September 30, 1999 and 1998............................... 4
Consolidated Condensed Statements of
Income - Nine Months Ended
September 30, 1999 and 1998............................... 5
Consolidated Condensed Statements of
Cash Flows - Nine Months Ended
September 30, 1999 and 1998........................... 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations................................................ 11
Item 3. Quantitative and Qualitative Disclosures
About Market Risk ........................................ 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.......................... 15
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
BARRETT RESOURCES CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
Sept. 30, 1999 Dec.31, 1998
-------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 14,604 $ 14,339
Receivables, net 148,220 127,798
Inventory 21,274 8,968
Other current assets 5,963 2,053
-------------- ------------
Total current assets 190,061 153,158
Property and equipment, net 670,384 682,168
Other assets, net 3,227 3,553
-------------- ------------
$ 863,672 $ 838,879
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 119,126 $ 104,799
Amounts payable to oil and gas property owners 24,346 16,020
Production taxes payable 22,301 20,400
Accrued and other liabilities 10,617 17,047
-------------- ------------
Total current liabilities 176,390 158,266
Long-term debt 305,920 334,067
Deferred income taxes 22,678 13,294
Stockholders' equity:
Preferred stock, $.001 par value: 1,000,000
shares authorized, none outstanding -- --
Common stock, $.01 par value: 45,000,000
shares authorized; 32,602,013 issued
(32,002,304 at December 31, 1998) 326 320
Additional paid-in capital 271,902 261,998
Retained earnings 87,082 70,934
Treasury stock, at cost (626) --
-------------- ------------
Total stockholders' equity 358,684 333,252
-------------- ------------
$ 863,672 $ 838,879
============== ============
</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
-----------------------------------------
Sept. 30, 1999 Sept. 30, 1998
------------------ -----------------
<S> <C> <C>
Revenues:
Oil and gas production $ 57,670 $ 47,745
Trading revenues 219,869 98,582
Interest income 151 156
Other income 1,236 258
------------------ -----------------
278,926 146,741
Operating expenses:
Lease operating expenses 16,517 13,219
Cost of trading 220,091 94,460
Depreciation, depletion and amortization 24,106 25,502
General and administrative 5,816 5,066
Interest expense 5,419 5,255
Other 1 252
------------------ -----------------
271,950 143,754
------------------ -----------------
Income for the period before income taxes 6,976 2,987
Provision for income taxes 2,652 1,135
------------------ -----------------
Net income for the period $ 4,324 $ 1,852
================== =================
Earnings per common share
Basic $ 0.13 $ 0.06
================== =================
Assuming dilution $ 0.13 $ 0.06
================== =================
</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
-----------------------------------------
Sept. 30, 1999 Sept. 30, 1998
------------------ -----------------
<S> <C> <C>
Revenues:
Oil and gas production $ 153,718 $ 154,877
Trading revenues 568,337 249,700
Interest income 609 511
Other income 3,723 5,304
------------------ -----------------
726,387 410,392
Operating expenses:
Lease operating expenses 44,168 41,756
Cost of trading 550,489 240,236
Depreciation, depletion and amortization 71,572 74,738
General and administrative 17,936 19,354
Interest expense 16,000 14,672
Other 158 2,412
------------------ -----------------
700,323 393,168
------------------ -----------------
Income for the period before income taxes 26,064 17,224
Provision for income taxes 9,916 6,545
------------------ -----------------
Net income for the period $ 16,148 $ 10,679
================== =================
Earnings per common share
Basic $ 0.50 $ 0.34
================== =================
Assuming dilution $ 0.49 $ 0.33
================== =================
</TABLE>
See accompanying notes.
5
<PAGE>
BARRETT RESOURCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------------
Sept. 30, 1999 Sept. 30, 1998
------------------- ------------------
<S> <C> <C>
Cash flows from operations:
Net income $ 16,148 $ 10,679
Adjustments needed to reconcile to net cash
provided by operations:
Depreciation, depletion and amortization 71,898 75,061
Deferred income taxes 9,384 6,284
Other (576) (1,392)
------------------- ------------------
96,854 90,632
Change in current assets and liabilities:
Accounts receivable (20,422) 13,895
Other current assets (16,031) (11,646)
Accounts payable 14,327 14,878
Amounts due oil and gas owners 8,326 (11,442)
Production taxes payable 1,901 3,519
Accrued and other liabilities (4,966) (8,661)
------------------- ------------------
Net cash flow provided by operations 79,989 91,175
------------------- ------------------
Cash flows from investing activities:
Proceeds from sale of oil and gas properties 12,550 4,021
Acquisition of property and equipment (72,523) (156,333)
------------------- ------------------
Net cash flow used in investing activities (59,973) (152,312)
------------------- ------------------
Cash flows from financing activities:
Borrowings under line of credit 35,000 91,000
Proceeds from issuance of common stock 9,285 3,999
Payments under line of credit (60,000) (36,000)
Payments on other long-term debt (4,035) (612)
Treasury stock purchased (1) --
Other -- (151)
------------------- ------------------
Net cash flow provided by (used in) financing activities (19,751) 58,236
------------------- ------------------
Increase (decrease) in cash and cash equivalents 265 (2,901)
Cash and cash equivalents at beginning of period 14,339 14,479
------------------- ------------------
Cash and cash equivalents at end of period $ 14,604 $ 11,578
=================== ==================
Non-cash investing and financing activities:
Issuance of common stock for property acquisition -- $ 9,116
Common Stock/treasury share options exercised $ 627 $ 60
</TABLE>
See accompanying notes.
6
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1999
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 Barrett Resources Corporation and its
subsidiaries, collectively referred to as the "Company", as of September
30, 1999 and the results of operations and cash flows for the periods
presented. All of the Company's subsidiaries are wholly owned. 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 December
31, 1998. These financial statements should be read in conjunction with the
financial statements and notes included in the Form 10-K.
2. INCOME TAXES
Provisions for income taxes were calculated in accordance with Statement of
Financial Accounting Standards No. 109 which provides that a deferred tax
liability or asset be determined based on the timing differences between
the basis used for financial versus tax reporting of assets and liabilities
as measured by the effective tax rates. For the quarter ended September 30,
1999, the Company used an estimated effective tax rate of 38 percent.
In July 1999, Plains Petroleum Company ("Plains"), a wholly owned
subsidiary of the Company, received a favorable ruling from the United
States Tax Court in a case stemming from an Internal Revenue Service
("IRS") examination of Plains' federal tax returns filed for the years 1991
through 1993. As a result of its examination, the IRS in 1996 had issued a
"Notice of Deficiency" of $5.3 million with penalties and an undetermined
amount of interest. The deficiency resulted primarily from the IRS's
disallowance of certain net operating loss deductions claimed during the
periods under examination. The IRS has until January 25, 2000 to appeal the
ruling from the United States Tax Court.
The IRS has also examined the federal tax returns of the Company for the
periods ended July 1995, December 1995 and December 1996. The IRS issued a
letter proposing changes to tax for those periods totaling $5.7 million.
The proposed tax changes resulted primarily from the disallowance of net
operating loss and merger related deductions claimed for the periods ended
December 1995 and 1996. The net operating losses relate to the same net
operating loss carry forwards involved in the Plains tax returns for years
1991 through 1993.
3. LONG-TERM DEBT
The Company's long-term debt consists of the following (in thousands):
7
<PAGE>
September 30, December 31,
1999 1998
------------- -------------
Line of Credit $ 150,000 $ 175,000
7.55% Senior Notes 150,000 150,000
Production Payments 10,364 14,399
------------- -------------
Total 310,364 339,399
Less: current portion 4,444 5,332
------------- -------------
Long-term debt $ 305,920 $ 334,067
============= =============
As of September 30, 1999 the Company's effective interest rate, on an
outstanding balance of $150 million on its line of credit, was 5.71% per
annum.
Total interest expense paid for the nine months ended September 30, 1999
was $18.8 million compared to $16.8 million for the nine months ended
September 30, 1998.
4. EARNINGS PER SHARE
The following data show the amounts used in computing earnings per share
and the effect on income and the weighted average number of shares of
dilutive potential common stock.
<TABLE>
<CAPTION>
Three Months Ended
Sept. 30, Sept. 30,
(in thousands) 1999 1998
----------- -----------
<S> <C> <C>
Income available to common stockholders $ 4,324 $ 1,852
=========== ===========
Weighted average number of common shares used in
basic EPS 32,431 31,890
Effect of dilutive securities:
Stock options 778 234
Written put option 56 150
----------- -----------
Weighted number of common shares and dilutive
potential common stock used in EPS -
assuming dilution 33,265 32,274
=========== ===========
Nine Months Ended
Sept. 30, Sept. 30,
(in thousands) 1999 1998
----------- -----------
Income available to common stockholders $ 16,148 $ 10,679
=========== ===========
Weighted average number of common shares used in
basic EPS 32,212 31,693
Effect of dilutive securities:
Stock options 357 353
Written put option 118 150
----------- -----------
Weighted number of common shares and dilutive
potential common stock used in EPS -
assuming dilution 32,687 32,196
=========== ===========
</TABLE>
8
<PAGE>
On August 3, 1999, the holder of the written put option elected to exercise
such option and, accordingly, the Company issued 150,000 shares of its
common stock. In conjunction with the exercise of this option, the Company
received the holders' one percent interest in a subsidiary of the Company.
In addition, with the exercise of the put option, the Company's written
call option, as described in the financial statements and notes of the
Company's Form 10-K, was terminated.
5. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137 ("SFAS 137"), "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133". FASB Statement No. 133 ("SFAS 133")
establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. It also requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the
hedged item in the income statement, and requires that a company must
formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting. FASB Statement No. 133 is effective for
fiscal years beginning after June 15, 2000, as amended in SFAS 137, and
cannot be applied retroactively. The Company has not yet quantified the
impacts of adopting SFAS 133 on its financial statements and has not
determined the timing of or method of adoption of SFAS 133. However, SFAS
133 could increase volatility in earnings and other comprehensive income.
6. BUSINESS SEGMENT INFORMATION
The Company operates principally in two business segments: natural gas
trading and oil and gas exploration, development and production. In
addition to marketing its own gas, the Company engages in natural gas
trading activities, which involves purchasing natural gas from third
parties and selling natural gas to other parties at prices and volumes that
management anticipates will result in profits to the Company.
The Company evaluates segment performance based on the profit or loss from
operations before income taxes. Corporate general and administrative
expenses are unallocated except for certain direct costs associated with
the Company's trading activity. Consolidated and segment financial
information is as follows:
<TABLE>
<CAPTION>
Quarter ended Sept. 30, 1999 Natural
- --------------------------- Gas Oil & Gas Segment Corporation
(in thousands) Trading E&P Total & Unallocated Consolidated
---------------
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $219,869 $57,742 $277,611 $ 1,164 $278,775
Interest Income 0 0 0 151 151
--------------------------------------------------------------------------
Total Revenues 219,869 57,742 277,611 1,315 278,926
DD&A 0 22,997 22,997 1,109 24,106
Profit (loss) (222) 18,228 18,006 (11,030) 6,976
Expenditures for assets 0 19,465 19,465 774 20,239
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Quarter ended Sept. 30, 1998 Natural
- ---------------------------- Gas Oil & Gas Segment Corporation
(in thousands) Trading E&P Total & Unallocated Consolidated
---------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 98,582 $ 46,800 $145,382 $1,203 $146,585
Interest Income 0 0 0 156 156
----------------------------------------------------------------------
Total Revenues 98,582 46,800 145,382 1,359 146,741
DD&A 0 24,444 24,444 1,058 25,502
Profit (loss) 4,122 9,136 13,258 (10,271) 2,987
Expenditures for assets 0 56,366 56,366 378 56,744
Nine Months ended Natural
- ----------------- Gas Oil & Gas Segment Corporation
Sept. 30, 1999 Trading E&P Total & Unallocated Consolidated
--------------
(in thousands)
--------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $568,337 $153,876 $722,213 $3,565 $725,778
Interest Income 0 0 0 609 609
----------------------------------------------------------------------
Total Revenues 568,337 153,876 722,213 4,174 726,387
DD&A 0 68,282 68,282 3,290 71,572
Profit (loss) 17,848 41,426 59,274 (33,210) 26,064
Expenditures for assets 0 58,499 58,499 1,474 59,973
Nine Months ended Natural
- ----------------- Gas Oil & Gas Segment Corporation
Sept. 30, 1998 Trading E&P Total & Unallocated Consolidated
--------------
(in thousands)
--------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $249,700 $156,006 $405,706 $4,175 $409,881
Interest Income 0 0 0 511 511
----------------------------------------------------------------------
Total Revenues 249,700 156,006 405,706 4,686 410,392
DD&A 0 71,619 71,619 3,119 74,738
Profit (loss) 9,464 42,631 52,095 (34,871) 17,224
Expenditures for assets 0 158,926 158,926 2,501 161,427
</TABLE>
10
<PAGE>
BARRETT RESOURCES CORPORATION
For the Quarter Ended and Nine Months Ended
September 30, 1999
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Liquidity and Capital Resources
- -------------------------------
For the nine months ended September 30, 1999, total assets increased $24.8
million, or 3 percent, to $863.7 million as compared with total assets of
$838.9 million at December 31, 1998. Cash and cash equivalents increased
$0.3 million to $14.6 million, working capital increased $18.8 million to
$13.7 million, and net property and equipment decreased $11.8 million to
$670.4 million.
Operating cash flows before working capital adjustments totaled $30.9
million in the third quarter of 1999 compared with $28.2 million in the
third quarter of 1998. After working capital adjustments, cash flow
provided by operations decreased by $11.4 million to $9.7 million as
compared with the same period in 1998.
Capital expenditures of $29.1 million for the quarter represent a decrease
of $19.1 million from the same period in 1998. These expenditures, funded
by operating cash flows, consisted principally of drilling and development
activities and acquisitions of oil and gas properties. Of these capital
expenditures, approximately 89 percent was invested in the Rocky Mountain
Region, principally in the Piceance, Powder River and Wind River Basins,
and 6 percent in the Mid-Continent Region. The Company recently increased
the 1999 capital expenditures budget from $111 million to $130 million. The
1998 capital expenditures budget was $206 million. In an effort to maintain
debt levels, management continues to be sensitive to fluctuations in
product prices and will reassess the capital expenditure levels relative to
such fluctuations and the Company's cash flows.
On October 29, 1999, the Company sold certain gas properties principally
located in the Texas and Oklahoma panhandles, effective September 1, 1999,
for $8.2 million. These properties represented less than two percent of the
Company's proved reserves and production. On November 1, 1999, the Company
sold its interests in certain non-producing oil and gas leases in the Gulf
of Mexico for $7.0 million.
The Company plans to continue actively acquiring, exploring and developing
oil and gas properties. The Company expects cash flow from its producing
properties and its borrowing capacity to be sufficient to fund its
anticipated capital and operating requirements, including any
contingencies.
Information regarding the Company's Year 2000 readiness is contained in the
Company's annual report on Form 10-K for the year ended December 31, 1998
and reference is made to the information contained there. There has been no
material change in the status of the Company's Year 2000 readiness program.
As of July 1999, the Company verified that all IT hardware systems,
including network and embedded systems, are Year 2000 compliant. All
software systems utilized by the Company are Year 2000 compliant with the
exception of one program used to access an outside database. The vendor
providing this program is continuing to perform Beta tests on its updated
software. The Company's costs associated with completing its Year 2000-
readiness program are not expected to exceed $250,000. Costs incurred to
date are nominal and are included in normal operating expense.
11
<PAGE>
The Company's operating results are directly affected by oil and gas
prices. Oil and gas prices also affect the reserve values used in
determining the "ceiling test" limitation for the Company's capitalized oil
and gas property costs accounted for under the full cost method. Should the
net capitalized costs of the Company's oil and gas properties exceed the
estimated present value of future net cash flows from proved oil and gas
reserves, such excess costs would be recognized as an impairment and
charged to current expense. A decline in oil and gas sales prices could
possibly result in the recognition of an impairment expense in future
periods.
Results of Operations
- ---------------------
Net income for the quarters ended September 30, 1999 and 1998 was $4.3
million ($.13 per share, assuming dilution) and $1.9 million ($.06 per
share, assuming dilution), respectively. This increase is primarily due to
higher average prices for oil and gas.
Total revenues for the quarter were $278.9 million, up 90 percent compared
to $146.7 million for the same period in 1998. This increase is principally
attributed to a $121.3 million increase in trading revenues.
Production revenue for the third quarter of 1999 increased from $47.7
million to $57.7 million. Production revenues and related volumes and
average prices during the periods presented were as follows:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
---------------- ------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gas Revenues (000's) $52,293 $42,538 $139,742 $135,691
Gas Production (Bcf) 24.3 23.0 71.2 70.5
Average Price per Mcf $ 2.15 $ 1.85 $ 1.96 $ 1.92
Oil Revenues (000's) $ 5,377 $ 5,207 $ 13,976 $ 19,186
Oil Production (MBbls) 358 492 1,125 1,619
Average Price per Barrel $ 15.02 $ 10.58 $ 12.42 $ 11.85
</TABLE>
(Note: Bcf = billion cubic feet; Mcf = thousand cubic feet; MBbls =
thousand barrels.)
Third quarter gas revenues increased 23 percent as compared with the same
period in 1998, principally due to a 16 percent increase in average prices
and a 6 percent increase in production volumes.
The 3 percent increase in third quarter 1999 oil revenues from the same
period in 1998 is attributed to a 42 percent increase in average oil prices
partially offset by a 27 percent decrease in production volumes. The
decline in oil production is primarily due to the selling of various Gulf
of Mexico wells and lower capital spending on oil projects in the first
nine months of 1999.
For the quarter ended September 30, 1999, revenues from trading were $219.9
million compared to $98.6 million for the same period in 1998. The
associated costs of trading increased to $220.1 million from $94.5 million.
Gross profit from trading was a negative $0.2 million for the quarter ended
September 30, 1999 compared to $4.1 million for the quarter ended September
30, 1998.
To reduce its exposure to volatile oil and gas price fluctuations, the
Company enters into hedging arrangements for both trading and producing
activities. During the third quarter ended September 30, 1999, the
12
<PAGE>
Company recognized net production hedging losses of approximately $1.5
million for oil and $4.6 million for gas. These hedging losses were
recorded in the consolidated statements of income as adjustments to oil and
gas production revenue. The Company realized net hedging income on its
trading activities of approximately $2.3 million during the third quarter.
Depreciation, depletion and amortization decreased in 1999 to $24.1 million
from $25.5 million in 1998 due to a decrease in the depletion rate from
$.94 to $.87 per Mcfe.
Interest expense for the third quarter increased from $5.3 million in 1998
to $5.4 million in 1999.
The Company's largest sources of operating income are from trading
activities and oil and gas production. The levels of the Company's revenues
and earnings from gas and oil production and trading activities are
affected by prices at which natural gas and oil are being sold. This is
particularly true with respect to natural gas, which accounted for
approximately 91 percent of the Company's production revenue and all of its
trading activities for the third quarter of 1999. 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.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
Commodity Price Risk
--------------------
The Company uses commodity derivative financial instruments, including
futures and swaps, to reduce the effect of natural gas price volatility on
a portion of its natural gas and crude oil production. Natural gas
commodity swap agreements are generally used to fix a price at the natural
gas market location or to fix a price differential between the price of
natural gas at Henry Hub and the price of gas at its market location.
Settlements are based on the difference between a fixed and a variable
price as specified in the agreement. The following table summarizes the
Company's derivative financial instrument position on its natural gas and
crude oil production as of September 30, 1999. The fair value of these
instruments reflects the estimated amounts that the Company would receive
or pay to settle the contracts as of September 30, 1999. Actual settlement
of these instruments as they mature will differ from these estimates. Gains
or losses realized from these instruments hedging the Company's production
are expected to be offset by corresponding changes in the sales value of
the Company's natural gas and crude oil production.
Natural Gas
----------------------------------------------------------------------
For the period | MMBtu |Price Range Per | Fair Value
| | MMBtu |
----------------------------------------------------------------------
9/1999 - 2/2003 | 77.1 million | $1.72 - $2.03 | $(42.9) million
----------------------------------------------------------------------
Crude Oil
----------------------------------------------------------------------
For the period | Barrels |Price Range Per | Fair Value
| | Barrel |
----------------------------------------------------------------------
9/1999 - 12/1999 | 0.6 million | $15.00 | $(2.1) million
----------------------------------------------------------------------
The Company also uses commodity derivative financial instruments in its
trading activities to hedge price fluctuations, to hedge the value of
stored gas and to lock in margins on its trading positions. The following
table summarizes the Company's derivative financial instrument position on
its natural gas and crude oil trading activities as of September 30, 1999.
The fair value of these instruments reflects the estimated amounts that the
Company would receive or pay to settle the
13
<PAGE>
contracts as of September 30, 1999. Actual settlement of these instruments
as they mature will differ from these estimates. Gains or losses realized
from these instruments hedging the Company's trading activities are
expected to be offset by corresponding changes in the settlement value of
actual natural gas and crude oil traded.
Natural Gas
-------------------------------------------------------------------
For the period | MMBtU | Price Range Per | Fair Value
| | MMBtu |
-------------------------------------------------------------------
9/1999 - 12/2004 | 578 million | $1.53 - $3.22 | $24.1 million
-------------------------------------------------------------------
Crude Oil
-------------------------------------------------------------------
For the period | Barrels | Price Range Per | Fair Value
| | Barrel |
-------------------------------------------------------------------
9/1999 - 10/2000 | 2.7 million | $13.98 - $22.20| $ 0.4 million
-------------------------------------------------------------------
Interest Rate Risk
- ------------------
The Company's use of fixed and variable rate long-term debt to partially
finance capital expenditures exposes the Company to market risk related
changes in interest rates. As of September 30, 1999, there have been no
material changes in the Company's interest rate risk exposure, from that
disclosed in the 1998 Form 10-K.
_______________________________________________________________________
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although the Company believes that the expectations
reflected in the forward-looking statements and the assumptions upon which
such forward-looking statements are based are reasonable, it can give no
assurance that such expectations and assumptions will prove to have been
correct. See the Company's Annual Report on Form 10-K for additional
statements concerning important factors that could cause actual results to
differ materially from the Company's expectations.
14
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) The following Exhibit is filed as part of this Quarterly Report
on Form 10-Q:
27.1 Financial Data Schedule
(b) During the quarter ended September 30, 1999, the Registrant
filed one report on Form 8-K reporting an event occurring on
August 20, 1999.
15
<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
November 12, 1999 By /s/ A. Ralph Reed
---------------------------------
A. Ralph Reed
President and Chief Operating Officer
November 12, 1999 By /s/ J. Frank Keller
---------------------------------
J. Frank Keller
Chief Financial Officer
16
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