SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: SEPTEMBER 30, 1995
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: 0-10156
CAIRN ENERGY USA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 23- 2169839
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8235 DOUGLAS AVENUE, SUITE 1221, DALLAS, TEXAS 75225
(Address of principal executive offices) (Zip Code)
(214) 369-0316
(Registrant's telephone number, including area code)
____________________________________________________
(Former name, former address and former fiscal year, if changed since last
report.)
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
The number of shares outstanding of each of the issuer's classes of common
stock as of October 27, 1995:
17,547,095 shares of common stock, par value $.01
<PAGE>
CAIRN ENERGY USA, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Operations for the three and nine
months ended September 30, 1995 and 1994 ............................... 3
Balance Sheets at September 30, 1995 and December 31, 1994. ...............4
Statement of Changes in Stockholders' Equity for the
nine months ended September 30, 1995 ....................................6
Statements of Cash Flows for the nine months
ended September 30, 1995 and 1994 .......................................7
Notes to Financial Statements ............................................8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .......................................10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .................................................14
Item 2. Changes in Securities .............................................14
Item 3. Defaults Upon Senior Securities ...................................14
Item 4. Submission of Matters to a Vote of Security Holders ...............14
Item 5. Other Information .................................................14
Item 6. Exhibits and Reports on Form 8-K ..................................15
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CAIRN ENERGY USA, INC.
STATEMENTS OF OPERATIONS
For the Three and Nine months ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------- ----------------------
1995 1994 1995 1994
-------- -------- -------- --------
(in thousands except per share amounts)
Revenues:
<S> <C> <C> <C> <C>
Natural gas and crude oil. . ...$ 7,131 $ 1,893 $19,940 $ 7,248
Other revenue .................. 75 100 150 126
-------- -------- -------- --------
Total revenues .................... 7,206 1,993 20,090 7,374
-------- -------- -------- --------
Expenses:
Lease operating expenses
and production taxes ......... 833 527 2,397 1,805
Depreciation, depletion and
amortization ................. 3,909 926 10,680 3,244
Administrative expenses ........ 428 247 1,249 986
Interest ....................... 739 273 2,096 718
-------- -------- -------- --------
Total expenses .................... 5,909 1,973 16,422 6,753
-------- -------- -------- --------
Net income .......................$ 1,297 $ 20 $ 3,668 $ 621
======== ======== ======== ========
Net income per common and
common equivalent share .......$ 0.08 $ 0.00 $ 0.23 $ 0.05
======== ======== ======== ========
Weighted average common and common
equivalent shares outstanding .. 16,187 12,463 16,043 12,463
======== ======== ======== ========
</TABLE>
See accompanying notes.
<PAGE>
CAIRN ENERGY USA, INC.
BALANCE SHEETS
September 30, 1995 and December 31, 1994
ASSETS
---------
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
---------- ----------
(in thousands)
Current assets:
<S> <C> <C>
Cash and cash equivalents ...................................$ 2,945 $ 2,182
Accounts receivable ......................................... 4,525 2,031
Receivable from Cairn Energy PLC ............................ - 48
Prepaid expenses ............................................ 717 136
---------- ----------
Total current assets .......................................... 8,187 4,397
Property and equipment at cost:
Oil and gas properties, based on full cost accounting ....... 147,882 129,758
Other equipment ............................................. 652 564
---------- ----------
148,534 130,322
Less accumulated depreciation, depletion and amortization ... (56,972) (46,373)
---------- ----------
Net property and equipment ............................. 91,562 83,949
Deferred charges, net of amortization ......................... 623 835
---------- ----------
Total assets .................................................$100,372 $ 89,181
========== ==========
</TABLE>
See accompanying notes.
<PAGE>
CAIRN ENERGY USA, INC.
BALANCE SHEETS
September 30, 1995 and December 31, 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
----------
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
---------- ----------
(in thousands)
Current liabilities:
<S> <C> <C>
Accounts payable ...........................................$ 321 $ 1,286
Accrued lease operating expenses ............................ 581 528
Accrued well costs .......................................... 2,390 1,701
Deferred revenue ............................................ 15 152
Other accrued liabilities ................................... 400 216
Current maturities of long-term debt ........................ 3,625 -
---------- ----------
Total current liabilities ..................................... 7,332 3,883
Long-term debt ................................................ 10,875 23,500
Stockholders' equity:
Common stock, $.01 par value;
30,000,000 shares authorized;
Shares issued and outstanding:
September 30, 1995 - 17,545,650
December 31, 1994 - 15,963,080 .......................... 175 160
Additional paid-in capital .................................. 94,667 77,983
Accumulated deficit ......................................... (12,677) (16,345)
---------- ----------
Total stockholders' equity .................................... 82,165 61,798
---------- ----------
Total liabilities and stockholders' equity ....................$100,372 $ 89,181
</TABLE>
See accompanying notes.
<PAGE>
CAIRN ENERGY USA, INC.
Statement of Changes in Stockholders' Equity
Nine months ended September 30, 1995
(in thousands)
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-In Accumulated Stockholders'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
Balance at
December 31,
<S> <C> <C> <C> <C> <C>
1994 15,963 $160 $77,983 $(16,345) $61,798
Exercise of
stock options 20 - 102 102
Common stock
issued for
cash, net 1,563 15 16,582 16,598
Net income 3,668 3,668
------------------------------------------------------------
Balance at
September 30,
1995 17,546 $175 $94,667 $(12,677) $82,165
</TABLE>
====================================================================
See accompanying notes.
<PAGE>
CAIRN ENERGY USA, INC.
STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
September 30, September 30,
1995 1994
---------- ----------
(in thousands)
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
<S> <C> <C>
Net income .................................................$ 3,668 $ 621
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization ................. 10,680 3,244
Amortization of loan costs ............................... 266 138
Change in operating assets and liabilities:
Accounts receivable .................................... (2,494) 929
Prepaid expenses ....................................... (582) (1)
Accounts payable ....................................... (966) 9
Accrued liabilities .................................... 236 (1,050)
Deferred revenue ....................................... (137) -
Advances (repayments) from (to) Cairn Energy PLC ....... 50 16
---------- ----------
Net cash provided by operating activities ..................... 10,721 3,906
Cash flows from investing activities:
Exploration and development expenditures ..................... (19,275) (11,697)
Proceeds from sale of natural gas and crude oil properties ... 1,841 3,707
Increase in other equipment .................................. (169) (84)
Other ........................................................ - (602)
---------- ----------
Net cash used in investing activities ......................... (17,603) (8,676)
Cash flows from financing activities:
Proceeds from long-term debt ................................. 10,000 5,500
Repayment of long-term debt .................................. (19,000) (100)
Issuance of common stock, net ................................ 16,598 -
Exercise of stock options .................................... 102 -
Other ........................................................ (55) (131)
---------- ----------
Net cash provided by financing activities ..................... 7,645 5,269
---------- ----------
Net change in cash and cash equivalents ....................... 763 499
Cash and cash equivalents at beginning of period .............. 2,182 343
---------- ----------
Cash and cash equivalents at end of period ....................$ 2,945 $ 842
========== ==========
Supplemental cash flow information -
Interest paid in cash ........................................$ 1,832 $ 602
========== ==========
</TABLE>
See accompanying notes.
<PAGE>
CAIRN ENERGY USA, INC.
Notes to Financial Statements
1. Basis of Presentation
In the opinion of management, the accompanying unaudited financial statements
reflect all adjustments (consisting only of normal recurring adjustments)
which are necessary for a fair presentation of the financial position of the
Company at June 30, 1995, the results of its operations for the three and nine
months ended September 30, 1995 and 1994 and the results of its cash flows for
the nine months ended September 30, 1995 and 1994. These financial statements
should be read in conjunction with the notes to the Company's annual financial
statements, which were included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1994, filed with the Securities and Exchange
Commission (the "Commission") on March 15, 1995.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary. All intercompany accounts and transactions have
been eliminated in consolidation.
2. Long-term debt.
Long-term debt at September 30, 1995 and December 31, 1994, consisted of the
following:
September 30, December 31,
1995 1994
------------- ------------
Revolving credit agreement .............$14,500,000 $23,500,000
Less: Current maturities of
long-term debt .................... 3,625,000 -
------------- ------------
Long-term debt less current maturities ...$10,875,000 $23,500,000
============= ============
On December 20, 1994, the Company entered into a credit agreement (the INCC
Restated Credit Agreement) with Internationale Nederlanden (U.S.) Capital
Corporation (INCC)
and MeesPierson, N.V. (MeesPierson) for the establishment of a credit facility
with a maximum loan amount of $50 million. On April 19, 1995, the current
borrowing base was established at $45 million. The INCC Restated Credit
Agreement is a revolving line of credit secured by substantially all of the
Company's assets. It contains financial covenants which require the Company
to maintain a ratio of current assets to current liabilities (excluding the
current portion of related debt) of no less than 1.0 to 1.0 and a tangible net
worth of not less than $40 million. The Company is currently in compliance
with all such financial covenants. At September 30, 1995, the Company had
outstanding borrowings of $14.5 million under this facility. Outstanding
borrowings accrue interest at either INCC's fluctuating base rate or INCC's
reserve adjusted Eurodollar rate plus 1.50%, at the Company's option. The
Company is obligated to pay a quarterly fee equal to one-half of 1% per annum
of the unused portion of the borrowing base under the facility. On March 31,
1996, the borrowings outstanding under this facility will be converted to a
term loan that requires various quarterly principal payments from June 30,
1996 through December 31, 1998. The Company has submitted a request to INCC
and MeesPierson that the revolving period under the facility be extended to
March 31, 1997 with a consequent deferral of the term loan repayments to June
30, 1997 through December 31, 1999. There can be no assurance that the
extension on the revolving period of the facility will be granted. The INCC
Restated Credit Agreement does not permit the Company to pay or declare any
cash or property dividends or otherwise make any distribution of capital.
<PAGE>
The Company's ability to borrow under the INCC Credit Agreement is dependent
upon the reserve value of its oil and gas properties. If the reserve value of
the Company's borrowing base declines, the amount available to the Company
under the INCC Restated Credit Agreement will be reduced and, to the extent
that the borrowing base is less than the amount then outstanding under the
INCC Restated Credit Agreement , the Company will be obligated to repay such
excess amount on thirty-day's notice from INCC or to provide additional
collateral. INCC and MeesPierson have substantial discretion in determining
the reserve value of the borrowing base.
3. Income Taxes.
At December 31, 1994, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $38 million. The net operating
losses will expire principally in 2005 through 2009, if not previously
utilized. Utilization of approximately $2 million of net operating losses is
subject to an annual limitation of $114,000 because of a change of control, as
defined in the Internal Revenue Code, of the Company's predecessor company,
Omni Exploration, Inc. As a result of a change in control of the Company, as
defined, which occurred in 1993, due to certain changes in ownership of Cairn
Energy PLC (a former stockholder of the Company) and the Company, the Company
estimates that utilization of $22 million of the net operating losses will be
limited to approximately $2 million per year. Utilization of approximately
$10.3 million of net operating losses is subject to an annual limitation of
approximately $1 million per year due to the change in control of Smith
Offshore Exploration Company II ("Smith"), the assets of which were acquired
by the Company in 1994. The transactions in connection with the acquisition
of the Smith properties and sales of Common Stock by Cairn Energy PLC in 1994
caused a further change in ownership of the Company as defined in the Internal
Revenue Code. The Company's annual limitation due to this change in ownership
exceeds $5 million per year. Additional net operating loss limitations may
be imposed because of subsequent changes in stock ownership of the Company.
4. Property and Equipment.
The Company capitalized approximately $941,000 and $629,000 of internal costs
during the nine months ended September 30, 1995 and 1994, respectively. Such
capitalized costs include salaries and related benefits of individuals
directly involved in the Company's acquisition, exploration, and development
activities, based on a percentage of their time devoted to such activities.
<PAGE>
CAIRN ENERGY USA, INC.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
The following table sets forth certain information regarding the production
volumes of, average sales prices received for, average production costs
associated with, and average depletion rate associated with the Company's
sales of oil and gas for the periods indicated.
<TABLE>
<CAPTION>
Three months Nine months
ended September 30, ended September 30,
----------------- -----------------
1995 1994 1995 1994
------ ------ ------ ------
Net Production:
<S> <C> <C> <C> <C>
Gas (MMcf) ................. 2,930 844 8,187 2,914
Oil (MBbl) .................. 130 18 350 72
Average Sales Price:
Gas (per Mcf) (1) .......... $ 1.61 $ 1.85 $ 1.64 $ 2.10
Oil (per Bbl) ............... $18.03 $15.34 $18.19 $13.74
Average Production Costs:
(per Mcfe) (2) .............. $ 0.22 $ 0.55 $ 0.23 $ 0.54
Depletion rate: (per Mcfe) ... $ 1.05 $ 0.96 $ 1.03 $ 0.96
</TABLE>
------------------
(1) Includes natural gas liquids.
(2) Includes direct lifting costs (labor, repairs and maintenance, materials
and supplies) and the administrative costs of production offices,
insurance and property and severance taxes.
Three months ended September 30, 1995 and 1994
Revenues. Total revenues increased $5.2 million (262%) to $7.2 million for
the three months ended September 30, 1995 from $2.0 million for the three
months ended September 30, 1994. The primary reason for the increase was new
production from the Company's interest in East Cameron Blocks 331/332,
Matagorda Block 710 and Ship Shoal Block 251. Lower gas prices partially
offset the increased revenues from production.
Expenses. Total expenses increased $3.9 million (199%) to $5.9 million for
the three months ended September 30, 1995 from $2.0 million for the three
months ended September 30, 1994. An increase in depreciation, depletion and
amortization ("DD&A") is the primary reason for the increase in expenses.
DD&A increased $3.0 million (322%) to $3.9 million for the three months ended
September 30, 1995 from $926,000 for the same period in 1994 mainly due to
increased production but also due to an increase in the depletion rate.
Interest expense increased by $466,000 (170%) to $739,000 for the quarter
ended September 30, 1995 from $273,000 for the three months ended September
30, 1994. Interest expense increased because of an increase in average
outstanding debt coupled with higher average interest rates for the quarter
ended September 30, 1995 than for the same period in 1994. Lease operating
expenses and production taxes increased $307,000 (58%) to $833,000 for the
three months ended September 30, 1995 from $526,000 for the same period in
1994. Lease operating expenses are up because of increased production.
Reflected in the 1994 lease operating expenses amount are expenses related to
the Texas Panhandle properties that were sold in August 1994 and also the
properties in Texas and Oklahoma which were sold with effect from April 1,
1995. Production costs on a per unit basis decreased significantly because
East Cameron Blocks 331/332, Matagorda Block 710 and Ship Shoal Block 251 all
have a low per unit operating cost, while the Texas Panhandle properties sold
in August 1994 and the properties in Texas and Oklahoma which were sold with
effect from April 1, 1995 had a high per unit operating cost. Administrative
expenses increased $181,000 (73%) to $428,000 for the three months ended
September 30, 1995 from $247,000 for the same period in 1994 due primarily to
an increase in legal, salary and printing expenses partially offset by
increased overhead capitalization relating to technical staff associated with
exploration activity.
Net Income. Net income increased $1.3 million, or $0.08 per share to $1.3
million, or $0.08 per share for the three months ended September 30, 1995 from
$20,000, or $0.00 per share for the same period in 1994. The primary reason
for the increase in net income was the increase in production.
Nine months ended September 30, 1995 and 1994
Revenues. Total revenues increased $12.7 million (172%) to $20.1 million for
the nine months ended September 30, 1995, from $7.4 million for the nine
months ended September 30, 1994. The primary reason for the increase was new
production from the Company's interest in East Cameron Blocks 331/332,
Matagorda Block 710 and Ship Shoal Block 251 coupled with higher oil prices.
Lower gas prices partially offset the increased revenues from production.
Expenses. Total expenses increased $9.6 million (143%) to $16.4 million for
the nine months ended September 30, 1995 from $6.8 million for the nine months
ended September 30, 1994. An increase in DD&A is the primary reason for the
increase in expenses. DD&A increased $7.5 million (229%) to $10.7 million for
the nine months ended September 30, 1995 from $3.2 million for the same period
in 1994 due to increased production coupled with an increase in the depletion
rate. Interest expense increased by $1.4 million (192%) to $2.1 million for
the nine months ended September 30, 1995 from $718,000 for the nine months
ended September 30, 1994 because of an increase in average outstanding debt
and higher average interest rates. Lease operating expenses and production
taxes increased $592,000 (33%) to $2.4 million for the nine months ended
September 30, 1995 from $1.8 million for the same period in 1994. Lease
operating expenses increased because of increased production. Reflected in
the 1994 lease operating expenses amount are expenses related to the Texas
Panhandle properties that were sold in August 1994. Production costs on a per
unit basis decreased significantly because East Cameron Blocks 331/332,
Matagorda Block 710 and Ship Shoal Block 251 all have a low per unit operating
cost, while the Texas Panhandle properties sold in August 1994 had a high per
unit operating cost. Administrative expenses increased $262,000 (27%) to $1.2
million for the nine months ended September 30, 1995 from $987,000 for the
same period in 1994 due primarily to an increase in legal, salary and printing
expenses partially offset by increased overhead capitalization relating to
technical staff associated with exploration activity.
Net Income. Net income increased $3.0 million (491%), or $0.18 per share to
$3.7 million, or $0.23 per share for the nine months ended September 30, 1995
from $621,000, or $0.05 per share for the same period in 1994. The primary
reason for the increase in net income was the increase in production.
Capital Resources and Liquidity
At September 30, 1995, the Company had existing cash and cash investments of
$2.9 million. Net cash provided by operating activities was $10.7 million for
the nine months ended September 30, 1995 compared with $3.9 million for the
same period in 1994. The primary reason for this increase in cash provided by
operating activities was higher results of operations (or earnings before
depreciation, depletion and amortization) partially offset by increased
working capital requirements. Net cash used in investing activities for the
nine months ended September 30, 1995 was $17.6 million compared with $8.7
million for the same period in 1994. This increase was principally due to
expenditures for exploration and development prospects.
Net cash provided by financing activities for the first nine months of 1995
was $7.6 million compared with $5.3 million for the same period in 1994. The
cash provided by financing activities for the period consisted of $16.6
million in net proceeds from a public offering of common stock, borrowings
under the Company's revolving credit facility of $10.0 million and the
exercise of stock options. Proceeds from the stock offering along with funds
from operations were used to paydown $19.0 million on the Company's revolving
credit facility. Subsequently, the Company will utilize the amount of the
revolving line of credit made available by such reduction to finance a portion
of the Company's capital expenditures with respect to its exploration and
development activities.
In general, because the Company's oil and gas reserves are depleted by
production, the success of its business strategy is dependent on a continuous
exploration and development program. Therefore, the Company's capital
requirements relate primarily to the acquisition of undeveloped leasehold
acreage and exploration and development activities. In addition to pursuing a
number of existing exploration prospects, the Company was the high bidder on
three blocks in the Western Gulf of Mexico lease sale held in September 1995.
To date, one block has been awarded by the Minerals Management Service
("MMS"). The Company's interest in these blocks ranges from 50 to 100
percent. If all three blocks are awarded, the Company's obligation for the
lease rentals and bonuses will be approximately $282,000 and will be funded
from cash flow from operations.
The Company's average net production for the quarter ended September 30, 1995
was approximately 31.8 MMcf of gas per day and 1,412 Bbls of oil and
condensate per day compared with average per day production during the same
quarter in 1994 of 0.9 MMcf of gas and 197 Bbls of oil and condensate. The
average net production for the nine months ended September 30, 1995 was 30.0
MMcf of gas per day and 1,282 Bbls of oil and condensate per day compared with
average per day production during the same period in 1994 of 10.7 MMcf of gas
and 263 Bbls of oil and condensate.
The Company's operating needs and capital spending programs have been funded
by borrowings under its bank credit facilities, proceeds of public offerings
of its common stock and cash flow from operations. The Company expects to
continue with an active exploration program and to drill up to a further 6
exploration wells in the last quarter of the year. The Company expects
capital expenditures during 1995 to total approximately $40 million. At
September 30, 1995, the Company's capital resources consisted primarily of
available borrowing capacity under the INCC Restated Credit Agreement and cash
flow from operations. Management believes that cash flow from operations
along with the amount available under the INCC Restated Credit Agreement will
be sufficient to finance the currently planned exploration and development
expenditures.
If the Company is successful in substantially all of its currently scheduled
exploration prospects, additional funds may be required in order to conduct
the necessary development activities. If necessary, the Company may seek to
raise additional capital in public or private equity or debt markets. No
assurance can be given that the Company will be able to raise such capital if
needed or on terms that are favorable to the Company. Any resulting lack of
sufficient capital may require the Company to reduce its interest in such
properties or to forego developing such reserves. In addition, the Company
does not act as operator with respect to any of its properties. The Company
may not be able to control the development activities or the associated costs
with respect to properties operated by other parties.
<PAGE>
The Company's revenues and the value of its oil and gas properties have been
and will continue to be affected by changes in oil and gas prices. The
Company's ability to maintain current borrowing capacity and to obtain
additional capital on attractive terms is also substantially dependent on oil
and gas prices (Note 2). Oil and gas prices are subject to significant
seasonal and other fluctuations that are beyond the Company's ability to
control or predict. Although certain of the Company's costs and expenses are
affected by the level of inflation, inflation has not had a significant effect
on the Company's results of operations during 1994 or the first nine months of
1995.
In an effort to reduce the effects of the volatility of the price of oil and
gas on the Company's operations, management has adopted a policy of hedging
oil and gas prices, usually when such prices are at or in excess of the prices
anticipated in the Company's operating budget, through the use of commodity
futures, options, forward contracts and swap agreements. Hedging transactions
are limited by the Board of Directors to 50% of budgeted production for the
succeeding 12 months and no more than 75% of budgeted production in any one
month. The Company has entered into four commodity swap transactions governed
by the terms of a Master Agreement with INCC (the "Master Agreement"). Under
one commodity swap transaction, which has now expired, the Company received a
fixed price of $19.50 per barrel and paid a floating price of WTI-NYMEX for
the first nearby month for 500 barrels per day for the period June 1 to
September 30, 1995. Under a second swap transaction, which has also expired,
the Company received a fixed price of $1.75 per MMBtu and paid a floating
price of Natural Gas - NYMEX for the first nearby contract month for 5,000
MMBtu per day for the contract months July to September 1995. Under a third
commodity swap transaction the Company is receiving a fixed price of $1.7525
per MMBtu and is paying a floating price of Natural Gas-NYMEX for the first
nearby contract month for 5,000 MMBtu per day for the contract months
September 1995 to February 1996. Under a fourth commodity swap transaction
the Company is receiving a fixed price of $1.80 per MMBtu and is paying a
floating price of Natural Gas-NYMEX for 5,000 MMBtu per day for the contract
months October 1, 1995 to December 31, 1995.
<PAGE>
CAIRN ENERGY USA, INC.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
No new material developments.
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER INFORMATION
On Mustang Island Block 858, all three wells have been successfully flow-
tested and completed. Installation of the deck and facility is scheduled for
December. Pipeline installation will follow immediately. First production
from the field is expected in late December or early in the first quarter of
1996. The Company owns a 17.5% working interest in this block.
Completion operations are underway on the Company's Vermilion Block 203
development. Four successful exploration wells have been drilled targeting
certain shallow formations on this block. One well has been successfully
completed and flow-tested. The remaining three will be completed with first
production expected to begin in late December 1995. It is expected that a
well to target certain deeper formations on the block will begin drilling
prior to year-end 1995. The Company owns a 50% working interest in this
block.
On Main Pass Block 262, one of the blocks that the Company acquired in the
Gulf of Mexico Central Lease Sale held in May, 1995, the Company and partners
have purchased a jacket and deck for an accelerated development on this block.
Installation of the jacket is scheduled for mid-November. This will be
immediately followed by the drilling of two wells which are expected to be
completed by the end of January 1996. One of the wells will target a gas
reservoir which is currently being produced from an adjacent block by another
operator. The second well will target a similar structure which has been
identified on the block. First production from the block is scheduled for
February 1996. The Company owns a 33% working interest in this block.
Production from the East Cameron 331/332 field is currently slightly lower
than expected due to mechanical problems with completions on two of the wells
in the field. A program of remedial work is currently underway, and it is
expected that production will remain at current levels through December 1995.
<PAGE>
Six exploratory wells and one development well are currently scheduled to
begin drilling in the fourth quarter of 1995. These are wells on Main Pass
Block 262 (2 wells), East Cameron Blocks 350 and 356, Ship Shoal Blocks 251
and 261 and a well to test certain deeper targets on Vermilion Block 203.
Three or four of these wells should reach target depth before year-end and the
results from all seven wells are expected no later than the end of the first
quarter 1996.
The Company and Phemus Corporation completed a public sale of 1,562,500 shares
and 2,750,000 shares, respectively, of Company common stock on September 14,
1995, at a price of $11.25 per share. Net proceeds to the company from the
stock offering of $16.6 million were used to paydown a portion of the
Company's revolving credit facility. Subsequently, the Company will utilize
the amount of the revolving line of credit made available by such reduction to
finance a portion of the Company's capital expenditures with respect to its
exploration and development activities. The sale was made pursuant to a
registration statement filed on Form S-3 under the Securities Act of 1933, as
amended.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
None
<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 thereunto duly authorized.
CAIRN ENERGY USA, INC. (Registrant)
Date: October 30, 1995 /S/ MICHAEL R. GILBERT
Michael R. Gilbert
President
/S/ J. MUNRO M. SUTHERLAND
J. Munro M. Sutherland
Senior Vice President and Treasurer
(Principal Financial Officer)
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