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: June 30, 1996
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 July 31, 1996:
17,559,542 shares of common stock, par value $.01
1
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CAIRN ENERGY USA, INC.
INDEX
Page No.
------------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Operations for the three and six
months ended June 30, 1996 and 1995................................. 3
Balance Sheets at June 30, 1996 and December 31, 1995................. 4
Statement of Changes in Stockholders' Equity for the
six months ended June 30, 1996...................................... 6
Statements of Cash Flows for the six months
ended June 30, 1996 and 1995........................................ 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................................................ 15
Item 6. Exhibits and Reports on Form 8-K................................. 15
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CAIRN ENERGY USA, INC.
STATEMENTS OF OPERATIONS
Three and six months ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------------- ---------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(in thousands except per share amounts)
Revenues:
<S> <C> <C> <C> <C>
Oil and gas......................................................... $ 7,488 $ 7,807 $14,741 $12,808
Other revenue....................................................... 28 43 62 75
----- ------- ------- -----------
Total revenues......................................................... 7,516 7,850 14,803 12,883
----- ------- ------- -----------
Expenses:
Lease operating expenses and production taxes....................... 1,004 1,034 1,632 1,563
Depreciation, depletion and amortization............................ 4,653 4,022 7,897 6,772
Administrative expenses............................................. 396 493 778 820
Interest............................................................ 592 737 1,035 1,357
----- ------- ------- -----------
Total expenses......................................................... 6,645 6,286 11,342 10,512
----- ------- ------- -----------
Net income ............................................................ $ 871 $ 1,564 $ 3,461 $ 2,371
===== ======= ======= ======
Net income per common and common equivalent share..................... $ 0.05 $ 0.10 $ 0.20 $ 0.15
===== ======= ======= ======
Weighted average common and common
equivalent shares outstanding....................................... 17,559 15,976 17,557 15,970
===== ======= ======= ======
</TABLE>
See accompanying notes.
3
<PAGE>
CAIRN ENERGY USA, INC.
BALANCE SHEETS
June 30, 1996 and December 31, 1995
ASSETS
------------
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------------------------------------
(in thousands)
Current assets:
<S> <C> <C>
Cash and cash equivalents.................................................................. $ 1,577 $ 3,553
Accounts receivable........................................................................ 4,908 4,340
Prepaid expenses........................................................................... 760 447
-------- --------
Total current assets......................................................................... 7,245 8,340
Property and equipment at cost:
Oil and gas properties, based on full cost accounting ..................................... 186,058 157,100
Other equipment............................................................................ 862 712
-------- --------
186,920 157,812
Less accumulated depreciation, depletion and amortization.................................. (67,802) (59,905)
--------- --------
Net property and equipment........................................................ 119,118 97,907
Deferred charges, net of amortization........................................................ 385 564
-------- --------
Total assets ................................................................................ $126,748 $106,811
======== ========
</TABLE>
See accompanying notes.
4
<PAGE>
CAIRN ENERGY USA, INC.
BALANCE SHEETS
June 30, 1996 and December 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
-----------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------------- -------------------
(in thousands)
Current liabilities:
<S> <C> <C>
Accounts payable .............................................................................. $ 1,018 $ 499
Accrued lease operating expenses............................................................... 466 578
Accrued well costs............................................................................. 3,754 6,194
Other accrued liabilities...................................................................... 200 254
Current maturities of long-term debt........................................................... 4,281 -
--------- --------
Total current liabilities........................................................................ 9,719 7,525
Long-term debt................................................................................... 29,719 15,500
Stockholders' equity:
Common stock, $.01 par value;
30,000,000 shares authorized;
Shares issued and outstanding:
June 30, 1996 - 17,559,173
December 31, 1995 - 17,550,480............................................................. 176 176
Additional paid-in capital..................................................................... 94,783 94,720
Accumulated deficit............................................................................ (7,649) (11,110)
---------- ---------
Total stockholders' equity....................................................................... 87,310 83,786
---------- ---------
Total liabilities and stockholders' equity....................................................... $126,748 $106,811
========== =========
</TABLE>
See accompanying notes.
5
<PAGE>
CAIRN ENERGY USA, INC.
Statement of Changes in Stockholders' Equity
Six months ended June 30, 1996
(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>
1995 17,550 $176 $94,720 $(11,110) $83,786
Exercise of
stock options 7 - 42 - 42
Other 2 - 21 - 21
Net income - - - 3,461 3,461
--------------------------------------------------------------------------------------
Balance at
June 30, 1996 17,559 $176 $94,783 $( 7,649) $87,310
======================================================================================
</TABLE>
See accompanying notes.
6
<PAGE>
CAIRN ENERGY USA, INC.
STATEMENTS OF CASH FLOWS
Six months ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
June 30, June 30,
1996 1995
------------- -------------
(in thousands)
Increase (decrease) in cash and cash equivalents Cash flows from operating
activities:
<S> <C> <C>
Net income....................................................................$ 3,461 $ 2,371
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization................................... 7,897 6,772
Amortization of loan costs................................................. 191 177
Change in operating assets and liabilities:
Accounts receivable...................................................... (568) (3,420)
Prepaid expenses......................................................... (313) (489)
Accounts payable......................................................... 520 (841)
Accrued liabilities...................................................... (139) 177
Deferred revenue......................................................... - (85)
Advances (repayments) from (to) Cairn Energy PLC......................... (6) 48
-------- --------
Net cash provided by operating activities....................................... 11,043 4,710
Cash flows from investing activities:
Exploration and development expenditures.......................................(31,902) (17,066)
Proceeds from sale of natural gas and crude oil properties..................... 502 1,833
Increase in other equipment.................................................... (150) (153)
-------- --------
Net cash used in investing activities...........................................(31,550) (15,386)
Cash flows from financing activities:
Proceeds from long-term debt................................................... 18,500 10,000
Exercise of stock options...................................................... 42 102
Other ....................................................................... (11) (55)
-------- --------
Net cash provided by financing activities....................................... 18,531 10,047
-------- --------
Net change in cash and cash equivalents......................................... (1,976) (629)
Cash and cash equivalents at beginning of period................................ 3,553 2,182
-------- --------
Cash and cash equivalents at end of period......................................$ 1,577 $ 1,553
======== ========
Supplemental cash flow information -
Interest paid in cash..........................................................$ 838 $ 1,185
======== ========
</TABLE>
See accompanying notes.
7
<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, 1996, the results of its operations for the three and six months
ended June 30, 1996 and 1995 and the results of its cash flows for the six
months ended June 30, 1996 and 1995. 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, 1995, filed with the Securities and Exchange Commission (the
"Commission") on March 5, 1996.
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 June 30, 1996 and December 31, 1995, consisted of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ --------------
<S> <C> <C>
Revolving credit agreement ............................$34,000,000 $15,500,000
Less: Current maturities of long-term debt............. 4,281,000 -
------------ --------------
Long-term debt less current maturities.................$29,719,000 $15,500,000
============ ==============
</TABLE>
The Company has a $50 million credit facility (the "INCC" Credit Agreement")
with Internationale Nederlanden (U.S.) Capital Corporation (INCC) and
MeesPierson, N.V. The INCC Credit Agreement is 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
such financial covenants. At June 30, 1996, the Company had outstanding
borrowings of $34.0 million under this facility. Prior to June 28, 1996,
outstanding borrowings accrued interest at either INCC's fluctuating base rate
or INCC's reserve adjusted Eurodollar rate plus 1.5%, at the Company's option.
On June 28, 1996, the INCC Credit Agreement was amended, (the "Amended INCC
Credit Agreement") to decrease the addition to the INCC reserve adjusted
Eurodollar rate from 1.5% to 1.25% as long as outstanding borrowings are less
than 75% of the borrowing base. The borrowing base was also increased from $45
million to $50 million. On March 31, 1997, the borrowings outstanding under this
facility will be converted to a term loan that requires various quarterly
principal payments from June 30, 1997 through December 31, 1999. Interest is
payable quarterly on any base rate borrowings and payable on maturity of any
Eurodollar borrowings.
The Amended INCC Credit Agreement does not permit the Company to pay or declare
any cash or property dividends or otherwise make any distribution of capital.
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 and a
Letter of Credit fee for each Letter of Credit in the amount of one and one-half
percent (1.5%) per annum of the face amount of such Letter of Credit.
8
<PAGE>
The Company's ability to borrow under the Amended 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 Amended INCC Credit Agreement will be reduced and, to the
extent that the borrowing base is less than the amount then outstanding under
the Amended INCC Credit Agreement, the Company will be obligated to repay such
excess amount on 30-days notice from INCC or to provide additional collateral.
INCC and MeesPierson, N.V. have substantial discretion in determining the
reserve value of the borrowing base. Under the terms of the Amended INCC Credit
Agreement, the borrowing base is determined based on the reserve value of the
Company's oil and gas properties as of each January 1 and June 30.
The carrying value of the Company's long-term debt approximates fair value.
3. Property and Equipment.
The Company capitalized approximately $758,000 and $670,000 of internal costs
during the six months ended June 30, 1996 and 1995, 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.
9
<PAGE>
CAIRN ENERGY USA, INC.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 2 of this document includes "forward looking" statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Although the Company believes that
the expectations reflected in such forward looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
achieved. Important factors ("Cautionary Disclosures") that could cause the
actual results to differ materially from the Company's expectations are set
forth under the caption "Risk Factors" in the Company's Prospectus, dated
September 14, 1995 and under the caption "Oil and Gas Revenues" in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, and are
disclosed in conjunction with the forward looking statements included herein.
Subsequent written and oral forward looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Disclosures, including without limitation the
President's Letter contained in the Second Quarter Report to Stockholders.
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 Six Months
ended June 30, ended June 30,
------------------------------- -------------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Net Production:
<S> <C> <C> <C> <C>
Gas (MMcf) .................................... 2,820 3,000 5,188 5,257
Oil (MBbl)..................................... 72 146 142 220
Average Sales Price:
Gas (per Mcf) (1) .............................$ 2.12 $ 1.68 $ 2.28 $ 1.65
Oil (per Bbl)..................................$ 20.30 $ 18.58 $ 20.08 $ 18.28
Average Production Costs:
(per Mcfe) (2).................................$ 0.31 $ 0.27 $ 0.27 $ 0.24
Depletion rate: (per Mcfe) ......................$ 1.42 $ 1.03 $ 1.29 $ 1.02
</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 June 30, 1996 and 1995
Revenues. Total revenues decreased $333,000 (4%) to $7.5 million for the three
months ended June 30, 1996 from $7.8 million for the three months ended June 30,
1995. Revenues decreased as a result of natural declining oil and gas production
coupled with production being shut-in on Vermilion 203 and Main Pass 262 for
several days due to pipeline repairs partially offset by higher oil and gas
prices. Hedging transactions also had an impact on revenues. Without hedging
transactions the average sales price for gas would have been $2.38 per Mcf for
the quarter ended June 30, 1996, resulting in an increase in revenues of
$732,000. In the second quarter of 1995, hedging transactions
10
<PAGE>
resulted in an increase in revenue of $77,000. Also, expected increases in
production from East Cameron 331/332 were not realized due to delays in
completing drilling and remedial work.
Expenses. Total expenses increased $360,000 (6%) to $6.6 million for the three
months ended June 30, 1996 from $6.3 million for the three months ended June 30,
1995. An increase in depreciation, depletion and amortization ("DD&A") is the
reason for the increase in expenses. DD&A increased $631,000 (16%) to $4.6
million for the three months ended June 30, 1996 from $4.0 million for the same
period in 1995 due to an increase in the depletion rate. A significant part of
the depletion rate increase is due to drilling and acquisition costs associated
with exploration wells which were drilled during the first half of the year
which were determined to be dry being added to the full cost pool without the
addition of new reserves. Also, at the end of the second quarter, based on the
advice of the Company's independent petroleum engineers, the Company reduced the
reserves which it had booked in the proven category at March 31, 1996, on the
Company's discovery on East Cameron Blocks 349/350. These reserves have been
reclassified as probable and possible. Administrative costs decreased $97,000
(20%) to $396,000 for the quarter ended June 30, 1996, from $493,000 for the
same period in 1995. Decreased legal fees coupled with an increase in
capitalized salaries and benefits of individuals directly involved in the
Company's acquisition, exploration and development activities accounted for the
majority of the reduction. Interest expense decreased $145,000 (20%) for the
three months ended June 30, 1996, to $592,000 from $737,000 for the same quarter
in 1995 due to lower interest rates. The changes in lease operating expenses and
production taxes were insignificant.
Net Income. Net income decreased $693,000 (44%), or $(0.05) per share to
$871,000, or $0.05 per share for the quarter ended June 30, 1996 from $1.6
million, or $0.10 per share for the same period in 1995. The primary reason for
the decrease was decreased oil and gas production coupled with a higher
depletion charge partially offset by increased oil and gas prices. Earnings per
share were also less due to an increase in the average number of shares
outstanding.
Six months ended June 30, 1996 and 1995
Revenues. Total revenues increased $1.9 million (15%) to $14.8 million for the
six months ended June 30, 1996, from $12.9 million for the six months ended June
30, 1995. The primary reason for the increase was higher oil and gas prices
partially offset by decreased production. Hedging transactions also had an
impact on revenues. Without hedging transactions the average sales price for gas
would have been $2.58 per Mcf for the six months ended June 30, 1996, resulting
in an increase in revenues of $1.6 million. In the first six months of 1995
hedging transactions increased revenue by $102,000.
Expenses. Total expenses increased $830,000 (8%) to $11.3 million for the six
months ended June 30, 1996, from $10.5 million for the six months ended June 30,
1995. An increase in depreciation, depletion and amortization ("DD&A") is the
primary reason for the increase in expenses. DD&A increased $1.1 million (17%)
to $7.9 million for the six months ended June 30, 1996, from $6.8 million for
the same period in 1995 due to an increase in the depletion rate. A significant
part of the depletion rate increase is due to drilling and acquisition costs
associated with exploration wells that were determined to be dry being added to
the full cost pool without the addition of new reserves. Interest expense
decreased $321,000 (24%) to $1.0 million for the quarter ended June 30, 1996,
from $1.3 million for the same period in 1995 due to lower interest rates. The
changes in lease operating expenses and administrative expenses were
insignificant.
Net Income. Net income increased $1.1 million (46%), or $0.05 per share to $3.5
million or $0.20 per share for the six months ended June 30, 1996, from $2.4
million, or $0.15 per share for the same period in 1995. The primary reason for
the increase was higher oil and gas prices partially offset by decreased
production and increased depletion costs.
Capital Resources and Liquidity
At June 30, 1996, the Company had existing cash and cash investments of $1.6
million. Net cash provided by operating activities was $11.0 million for the six
months ended June 30, 1996 compared with $4.7 million for the same period in
1995. The primary reason for this increase in cash provided by operating
activities was higher results of operations (or earnings before depreciation,
depletion and amortization) coupled with decreased working capital
11
<PAGE>
requirements. Net cash used in investing activities for the six months ended
June 30, 1996 was $31.6 million compared with $15.4 million for the same period
in 1995. This increase was principally due to expenditures for exploration and
development projects.
Net cash provided by financing activities for the first six months of 1996 was
$18.5 million compared with $10.0 million for the same period in 1995. The cash
provided by financing activities for the period consisted mainly of borrowings
under the Company's revolving credit facility which were used to fund a portion
of the Company's capital spending program.
In the second quarter, the Company participated in a total of five exploration
wells, three of which were successful. Two exploration wells, Vermilion Block
203 #A-5 (Cairn WI 50%) and Main Pass 301 #A-5 (Cairn WI 15.3%), were drilled
from existing platforms and are already on production. Another exploration well,
West Cameron 263 #1 (Cairn WI 50%), was suspended in July after encountering the
targeted sands. The rig which drilled that well has moved to a second location
and has commenced drilling West Cameron 263 #2, an exploration well targeting a
separate structure on the same block. Although an exploration well drilled on
Brazos Block 397 encountered pay, the Company did not believe it to be
commercial and elected not to participate in a completion. An exploration well,
East Cameron 332 #A-11 (Cairn WI 13%), targeting an objective in Block 337, was
unsuccessful. The well was suspended and will be sidetracked to the main field
pay in Block 332 as a development well.
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 26
blocks in the Gulf of Mexico Central Area Lease Sale held on April 24, 1996. The
Company's interest in these blocks ranges from 25 to 60 percent. To date,
twenty- four of the blocks have been awarded and related lease bonuses paid
through June 30, 1996 totaled $4.7 million. If all 26 blocks are awarded, the
Company's additional obligation for lease bonuses will be approximately $2.5
million which is expected to be funded from cash flow from operations.
12
<PAGE>
Effective May 1, 1996 the Company sold its interest in the 8" pipeline which
connects the Vermilion 203 platform to Tenneco's 12" pipeline. Proceeds of
$550,000 were credited to the full-cost pool, resulting in no recognition of
gain or loss for accounting purposes.
The Company's operating needs and capital spending programs have been funded by
borrowings under its bank credit facilities, proceeds from public offerings of
its Common Stock and cash flows from operations. The Company expects to continue
with an active exploration program and to participate in a further seven to nine
exploration wells in the remainder of 1996 including the West Cameron 263 #2 and
the East Cameron 331 #A-12 which are currently drilling. The Company expects
capital expenditures during 1996 to total approximately $56 million. At June 30,
1996, the Company's capital resources consisted primarily of available borrowing
capacity under the Amended INCC Credit Agreement ($16.0 million) and cash flow
from operations. Management believes that cash flow from operations along with
the amount available under the Amended INCC 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 most 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.
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 1995 or the first six months of 1996.
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 such that no transaction may fix an oil
and gas price for a term of more than 12 months, and the aggregate oil and gas
production covered by all transactions may not exceed 50% of the Company's
budgeted production for any 12-month period from the date of the transaction or
75% of the Company's budgeted production for any single month from the date of
the transaction. By hedging its oil and gas prices, the Company intends to
mitigate the risk of future declines in oil and gas prices. Under certain
contracts should oil or gas prices increase above the contract rate, the Company
will not participate in the higher prices for the production.
The Company has entered into a number of gas price swap transactions under which
the Company receives a fixed price per MMBtu and pays a floating price based on
the settlement prices for the NYMEX Natural Gas futures contract for the
delivery month. In total under these contracts the Company has fixed the price
of 3,345,000 MMBtu of gas for the period January to December 1996 at an average
price of $1.957 per MMBtu. During the first six months of 1996 and 1995 oil and
gas revenues were decreased $1.6 million and increased $102,000, respectively,
as a result of hedging transactions.
The Company may enter into certain interest rate hedging contracts. By hedging
its interest rate under its credit facility, the Company would intend to
mitigate the risk of future increases in interest rates. Should interest rates
decrease below the contract rate, the Company will not participate in the lower
interest rate for the portion of the credit facility under the hedging contract.
The Company currently has no interest rate hedging contracts in place.
13
<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
(a) The Registrant held its annual meeting of stockholders on May 22, 1996
("the Annual Meeting").
(b) Proxies for the Annual Meeting were solicited pursuant to Regulation
14; there was no solicitation in opposition to management's nominees
for directors as listed in the Proxy Statement for the Annual Meeting
and all such nominees were elected.
Directors elected were Messrs. Michael R. Gilbert, J. Munro Sutherland,
Jack O. Nutter, II, R. Daniel Robins, John C. Halsted, James M.
Alexander, Thomas R. Hix and Robert P. Murphy.
(c) Briefly described below are other matters voted upon at the Annual
Meeting and the number of votes for, against and abstaining with
respect to such matters.
Proposal to amend the Company's 1993 Stock Option Plan, as amended, to
increase the number of shares reserved for issuance upon exercise of
options granted pursuant to the 1993 Stock Option Plan from 650,000
shares to 1,150,000 shares.
For 9,361,691
Against 2,080,692
Abstain 35,240
Proposal to amend the Company's 1993 Stock Option Plan, as amended, to
amend certain provisions regarding the excercisability of options.
For 10,424,881
Against 1,016,672
Abstain 36,070
Proposal to amend the Company's 1993 Directors Stock Option Plan, as
amended, to increase the number of shares reserved for issuance upon
exercise of options granted pursuant to the 1993 Directors Stock Option
Plan from 150,000 shares to 270,000 shares.
For 11,341,491
Against 102,122
Abstain 34,010
No other business was brought before the Annual Meeting.
14
<PAGE>
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
Each of the following exhibits is filed herewith:
4.1+ Amendment No. 3 to Cairn Energy USA, Inc. 1993 Stock Option
Plan, as amended (Incorporated by reference to Exhibit 4.3 to
the Company's Registration Statement on Form S-8, registration
no. 333-5165; filed with the Commission on June 4, 1996).
4.2+ Form of Incentive Stock Option Agreement under the Cairn
Energy USA, Inc. 1993 Stock Option Plan (Incorporated by
reference to Exhibit 4.4 to the Company's Registration
Statement on Form S-8, registration no. 333-5165; filed with
the Commission on June 4, 1996).
4.3+ Form on Nonstatutory Stock Option Agreement under the Cairn
Energy USA, Inc. 1993 Stock Option Plan (Incorporated by
reference to Exhibit 4.5 to the Company's Registration
Statement on Form S-8, registration no. 333-5165; filed with
the Commission on June 4, 1996).
4.4+ Cairn Energy USA, Inc. 1993 Directors Stock Option Plan, as
amended (Incorporated by reference to Exhibit 4.6 to the
Company's Registration Statement on Form S-8, registration no.
333-5165; filed with the Commission on June 4, 1996).
27.1 Financial Data Schedule
- ------------------
+ Stock option plan, management contract or compensatory
arrangement.
15
<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: August 1, 1996 /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)
16
<PAGE>
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