SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
--------------------------
FORM 10-K/A
AMENDMENT NO. 2
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
--------------- --------------
Commission File Number: 1-8490
ALAMCO, INC.
(Exact name of registrant as specified in its charter)
Delaware 55-0615701
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
200 West Main Street, Clarksburg, WV 26301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (304) 623-6671
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
----------------------------- ----------------------
Common Stock - Par Value $.10 per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( X )
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based on the closing sale price of such stock on the American
Stock Exchange as of March 1, 1996, is set forth below:
Aggregate Market Value of the
Registrant's Voting Stock Held By
Class of Stock Non-Affiliates
--------------------------------- ---------------------------------
Common Stock, $.10 par value $41,121,302
The number of shares outstanding of the registrant's Common Stock as of
March 1, 1996 is 4,713,422 shares.
--------------------------------------------------
Page 1 of 40
Index to Exhibits begins on page 41
Item 6. Selected Financial Data
The information below should be read in conjunction with the Consolidated
Financial Statements and the related notes in Item 8 and in Item 7--Management's
Discussion and Analysis of Financial Condition and Results of Operations. This
information for the years 1992 to 1995 has been restated to reflect revised
accounting for certain stock options as described in Note 13.
Year Ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
STATEMENT OF INCOME
DATA:
Revenues (a) $18,539 $13,671 $11,900 $11,350 $9,653
Income (loss) from
operations 1,898 1,672 1,746 837 (180)
Income before
extraordinary
items and change in
DD&A accounting
principle 1,279 1,675 1,352 729 288
Extraordinary items (b) -- -- -- -- 404
Change in DD&A
accounting
principle (c) -- -- -- 1,058 --
------- ------- ------- ------- ------
Net income 1,279 1,675 1,352 1,787 692
------- ------- ------- ------- ------
Cash dividends -- -- -- -- --
BALANCE SHEET DATA:
Total assets $59,900 $56,132 $43,337 $40,275 $37,213
Working capital 610 719 1,202 2,415 2,214
Total long-term debt (d) 13,707 12,995 1,003 9,561 10,306
Stockholders' equity (d) 30,496 28,557 26,827 15,265 13,152
Year Ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
PER SHARE DATA:
Income (loss) from
operations: $.41 $.36 $ .51 $ .33 ($.07)
Income before
extraordinary
items and
change in DD&A
accounting principle .27 .36 .39 .29 .11
Extraordinary items (b) -- -- -- -- .16
Change in DD&A
accounting
principle (c) -- -- -- .41 --
----- ----- ----- ----- -----
Net income $.27 $.36 $ .39 $ .70 $ .27
----- ----- ----- ----- -----
FINANCIAL RATIO DATA:
Book value per share
(c) and (d) $6.49 $6.14 $5.79 $5.95 $5.18
Total debt to
stockholders' equity (d) .4 .5 -- .6 .8
Current ratio 1.1 1.1 1.2 1.4 1.5
SELECTED PRODUCTION DATA:
First Second Third Fourth
1995 Quarter Quarter Quarter Quarter
---- ------- ------- ------- -------
Production volumes
Gas (MMCF) 1,392 1,354 1,254 1,488
Oil (MBBL) 21 22 17 28
Average Product Price
Gas ($/MCF) $2.11 $1.99 $1.92 $2.33
Oil ($/BBL) $16.05 $16.50 $15.20 $15.74
1994
----
Production volumes
Gas (MMCF) 917 1,001 1,230 1,255
Oil (MBBL) 9 17 19 23
Average Product Price
Gas ($/MCF) $2.94 $2.60 $2.30 $2.30
Oil ($/BBL) $12.30 $14.68 $16.02 $14.08
Notes to Selected Financial Data:
(a) Revenues in 1995 include proceeds from the Columbia settlement in the
amount of $4,164,000. During 1994, Alamco acquired a total of 172.6
net producing wells from various third parties. In October 1991,
Alamco acquired working and royalty interests in 88 wells from Phillips
Petroleum.
(b) Alamco recorded an extraordinary gain of $404,000 after considering
certain expenses and income tax benefits associated with the
extinguishment of debt in 1991.
(c) During 1992, Alamco changed its method of computing unit-of-production
depreciation from a well-by-well basis to a depositional group basis.
(d) In 1993, Alamco consummated a public offering in which 2,071,404 new
shares of Common Stock were issued. The Company used the proceeds from
the stock offering in 1993 to repay the then outstanding balance on its
revolving credit facility with Bank One.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Management's discussion and analysis of changes in the Company's financial
condition, including liquidity and capital resources, and results of operations
during the twelve-month periods ended December 31, 1995, 1994 and 1993 are
presented below.
RESULTS OF OPERATIONS
Year Ended December 31, 1995 vs.
Year Ended December 31, 1994
- --------------------------------
Alamco reported net income of $1,279,000 for the year ended December 31,
1995, a decrease of $396,000, or 23.6 percent as compared to net income of
$1,675,000 in 1994. Income from operations for 1995 increased $226,000, or 13.5
percent, to $1,898,000 as compared to $1,672,000 for 1994.
Total revenues of $18,539,000 in 1995 were $4,868,000 or 35.6 percent
higher than total revenues of $13,671,000 in 1994.
Gas and oil sales totalled $12,636,000 in 1995, a $643,000, or 5.4
percent, increase over the same period last year. Higher gas and oil
sales volumes, resulting principally from the acquisition of producing
properties and the drilling of new wells, contributed $2,398,000 and
$288,000, respectively, and higher oil prices contributed $120,000 to the
increase but were offset by lower gas prices of $2,164,000. Gas and oil
sales volumes totalled 5,889,102 equivalent thousand cubic feet ("EMCF")
and 4,810,681 EMCF for the years ending December 31, 1995 and 1994,
respectively. Alamco received on average $2.10 per MCF and $15.90 per
barrel ("BBL") in 1995, compared to $2.50 per MCF and $14.52 per BBL last
year.
In July 1995, Hope informed the Company of a two week shut-in of
production volumes for system maintenance. In October 1994, Hope
requested temporary reductions in production volumes for approximately
four weeks due to oversupply of gas. The Company estimates revenues were
adversely affected $237,000 and $250,000 in 1995 and 1994, respectively,
due to these reductions in volumes.
Alamco reported revenues of $4,164,000 in December 1995 from the
settlement of claims with Columbia Gas Transmission Corporation
("Columbia"). (Note 4).
Well tending income decreased $289,000, or 23.4 percent, due principally
to the reduction in the number of wells the Company operates for outside
investors. Effective March 1, 1994, Alamco exchanged its interests in
approximately 141 gross wells for outside investors' interests in
approximately 237 gross wells. In addition, on August 1, 1994, but
effective January 1, 1994, Alamco acquired an outside owners'
approximately 80 percent interest in 114 gross wells. The Company
believes the reduction in well tending income, as a result of these
transactions, will be offset over time by the effect of higher gas and oil
revenues attributable to Alamco's greater ownership interest in the wells
(Note 2).
Other operating revenue increased $350,000 due primarily to the
recognition of income related to the transaction in which Alamco formed a
partnership with an East Coast financial institution (Note 3). The
partnership is structured so that the financial institution will be
allocated IRC Section 29 tax credits as a result of production from
properties contributed by the Company to the partnership. The financial
institution initially paid Alamco $1.0 million, less $100,000 for certain
expenses incurred by the financial institution. Alamco recognizes income
from this transaction as the tax credits are generated.
Total expenses in 1995 were $16,641,000, an increase of $4,642,000, or
38.7 percent, from expenses of $11,999,000 in 1994.
Operating expenses were higher by $1,252,000, or 22.9 percent, due
primarily to the acquisitions made, new wells drilled during 1995, higher
production related taxes and the write-off of certain land expenses
related primarily to the Company's unsuccessful effort to acquire the oil
and gas minerals underlying the Coopers Rock State Forest in Monongalia
County, West Virginia.
Alamco reported exploration expense of $641,000 in 1995 resulting from the
abandonment of the Douglas Prospect and a portion of the Hoffman Prospect
in Kentucky after drilling two unsuccessful exploratory wells. Alamco did
not drill any exploratory wells in 1994.
General and administrative expenses for 1995 were higher by $142,000, or
4.9 percent, as compared to last year due to, among other things, higher
employee-related costs.
As a result of exercises of nonqualified stock options in 1996, Alamco
reviewed its accounting for stock options and concluded that certain
options should have been treated as variable awards rather than fixed
awards. An employee tax reimbursement feature included in the option
agreements requires that variable award accounting be followed. Under
variable award accounting, periodic changes in the difference between the
market price of the Company's Common Stock and the exercise prices of
outstanding nonqualified stock options should be recognized as non-cash
compensation expense. As a result, option plan compensation expense was
$784,000 in 1995 and option plan compensation benefit was $41,000 in
1994. The increase of $825,000 was due to the increase in Alamco's
year-end stock price and increased options granted. Option plan
compensation amounts equal to $102,000 and $6,000 in 1995 and 1994,
respectively, were previously recorded as general and administrative
expense in those years and have been reclassified as option plan
compensation.
Depreciation, depletion and amortization expense was higher by $748,000
due to, among other things, higher depletion expenses related to the
increased gas and oil investments and higher production levels. Higher
depreciation expenses associated with fixed assets also contributed to the
increase.
Interest expense for 1995 was $1,188,000, an increase of $1,034,000 over
the same period last year due primarily to the increased utilization of
the Company's revolving credit facility. During 1995, interest incurred
by the Company totalled $1,360,000, of which $172,000 was capitalized. In
1994 interest incurred was $471,000 of which $317,000 was capitalized.
Non-operating income in 1995 totalled $192,000, an increase of $37,000, as
compared to $155,000 for 1994, due principally to higher interest income in
1995.
Alamco's provision for income tax (after giving effect to the change in
accounting for stock options) totalled $811,000 in 1995 as compared to an income
tax provision of $152,000 last year. The 1995 provision is made up of the
provision resulting from the Columbia settlement revenue of $1,627,000 and a tax
benefit of $816,000 resulting from the current year loss from operations,
excluding Columbia.
Year Ended December 31, 1994 vs.
Year Ended December 31, 1993
- --------------------------------
Alamco reported net income of $1,675,000 for the year ended December 31,
1994, an increase of $323,000, or 23.9 percent, as compared to net income of
$1,352,000 in 1993. Income from operations for 1994 decreased $74,000, or
4.2 percent, to $1,672,000 as compared to $1,746,000 for 1993.
Total revenues of $13,671,000 in 1994 were $1,771,000, or 14.9 percent,
higher than total revenues of $11,900,000 in 1993.
Gas and oil sales totalled $11,993,000 in 1994 which represents a
$2,489,000 increase over the same period last year. Higher gas and oil
sales volumes, resulting principally from the acquisition of producing
properties and the drilling of new wells, contributed $3,362,000 and
$486,000, respectively, to the increase and were offset by lower gas
prices of $1,258,000 and lower oil prices of $101,000. Gas and oil sales
volumes totalled 4,810,681 EMCF and 3,421,510 EMCF for the years ending
December 31, 1994 and 1993, respectively. Alamco received on average
$2.50 per MCF and $14.52 per BBL in 1994, compared to $2.79 per MCF and
$16.01 per BBL last year.
In early September 1994, Hope informed the Company and other local
suppliers that its gas supply exceeded its sales market requirements,
which could create an imbalance with CNG, its pipeline transporter, and
requested a temporary reduction of production volumes for an unstated
period of time. The Company agreed to temporarily reduce its production
by approximately 50 percent beginning September 12, 1994. Beginning
October 21, 1994, all of the affected wells produced at unrestricted
levels. The Company estimates revenues were adversely affected by
$250,000 due to this reduction in volumes.
Well tending income decreased $940,000, or 43.3 percent, due principally
to the reduction in the number of wells the Company operates for outside
investors. Effective March 1, 1994, Alamco exchanged its interests in
approximately 141 gross wells for outside investors' interests in
approximately 237 gross wells. In addition, on August 1, 1994, but
effective January 1, 1994, Alamco acquired an outside owners'
approximately 80 percent interest in 114 gross wells. The Company
believes the reduction in well tending income, as a result of these
transactions, will be offset over time by the effect of higher gas and oil
revenues attributable to Alamco's greater ownership interest in the wells
(Note 2).
Other operating revenue increased $222,000 due primarily to the
recognition of income related to the transaction in which Alamco formed a
partnership with an East Coast financial institution (Note 3). The
partnership is structured so that the financial institution will be
allocated IRC Section 29 tax credits as a result of production from
properties contributed by the Company to the partnership. The financial
institution initially paid Alamco $1.0 million, less $100,000 for certain
expenses incurred by the financial institution. Alamco recognizes income
from this transaction as the tax credits are generated.
Total expenses in 1994 were $11,999,000, an increase of $1,845,000, or
18.2 percent, from expenses of $10,154,000 in 1993.
Operating expenses were higher by $1,199,000, or 28.1 percent, due
primarily to the significant property acquisitions made and new wells
drilled during 1994 and higher employee-related expenses due principally
to the expansion of the Company's drilling operations in 1994. Staff
levels have increased in those departments that identify and acquire
drilling prospects as well as the engineering staff which oversees the
drilling of the wells.
General and administrative expenses for 1994 were higher by $561,000, or
24.0 percent, as compared to last year due to, among other things, higher
business franchise taxes due to the increase in Alamco's equity as a
result of the 1993 stock offering. In addition, higher employee-related
costs as well as expenses associated with the Company's Stockholders'
Rights Plan contributed to the increase. Also, amounts paid under its
bank credit facility were higher due to increased commitment fees and
other fees which are based upon the unused portion of the Company's credit
facility.
As a result of exercises of nonqualified stock options in 1996, Alamco
reviewed its accounting for stock options and concluded that certain
options should have been treated as variable awards rather than fixed
awards. An employee tax reimbursement feature included in the option
agreement requires that variable award accounting be followed. Under
variable award accounting, periodic changes in the difference between the
market price of the Company's Common Stock and the exercise prices of
outstanding nonqualified stock options should be recognized as non-cash
compensation expense. As a result, option plan compensation benefits were
$41,000 in 1994 and option plan compensation expense was $360,000 in
1993. The decrease of $401,000 was due to the decrease in Alamco's year
end stock price. Option plan compensation amounts equal to $6,000 and
$32,000 in 1994 and 1993, respectively, were previously recorded as
general and administrative expense in those years and have been
reclassified as option plan compensation.
Depreciation, depletion and amortization expense was higher by $717,000
due to, among other things, higher depletion expenses related to the
increased gas and oil investments and higher production levels. Higher
depreciation expenses associated with fixed assets also contributed to the
increase.
Interest expense for 1994 was $154,000, a decrease of $231,000 from the
same period last year due primarily to capitalization of interest expense
related to drilling activities. During 1994, interest incurred by the
Company totalled $471,000 of which $317,000 was capitalized.
Non-operating income in 1994 totalled $155,000, a decrease of $166,000, as
compared to $321,000 for 1993 due principally to the absence in 1994 of certain
asset sales and franchise tax adjustments.
Alamco's provision for income tax (after giving effect to the change in
accounting for stock options) totalled $152,000 in 1994 as compared to $715,000
last year. The reduction of $563,000 is due to, among other things, a change in
the effective state tax rate to reflect new business activities in states with
lower tax rates and recently implemented tax planning activities, an increase in
the deductions associated with percentage depletion and lower income from
operations.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital. At December 31, 1995, Alamco had working capital of
$610,000, as compared to $719,000 at December 31, 1994. Because the Bank One
credit facility agreement, as amended, calls for the payment of interest only
until July 1, 1998, current liabilities on the Company's December 31, 1995
balance sheet do not include any principal payments relative to the Bank One
credit facility.
Cash and cash equivalents totalled $3,297,000 at December 31, 1995. Of
this amount, approximately $694,000 was available for general corporate purposes
and the balance was held for third parties (Note 7). Operating activities
provided a net $8,359,000 while investing activities used a net $7,625,000.
Financing activities used a net $69,000.
Revolving Credit Facility. Currently, Alamco has in place a $30.0 million
revolving credit facility with Bank One (Note 6). As of March 12, 1996, $14.6
million was available for borrowing under the credit facility. The Company is
required to pay interest only until July 1, 1998, at which time all principal
and accrued interest are due and payable. Interest accrues and is paid monthly
at a rate of Bank One's prime rate plus one-fourth of one percent.
Alamco is not prohibited from paying dividends to its stockholders under
the Bank One credit agreement; however, certain other financial covenants, such
as debt coverage and equity covenants, may restrict the payment of cash
dividends. The Company presently intends to retain its funds for operations and
expansion of its business and does not expect to pay any cash dividends in the
foreseeable future.
Capital Expenditures and Commitments. Alamco's 1995 capital investments
totalled $7,931,000, including $6,769,000 for the acquisition of producing
properties and drilling of new wells. These activities were funded from
internal sources and the Bank One revolving credit facility. In the future, the
Company intends to continue to use internally generated cash flows and amounts
available under the credit facility to fund the exploration and development of
its gas and oil reserves and property acquisitions. (See Part I, Item 1.
"Business".)
Most of Alamco's capital spending is discretionary and the ultimate level
of spending will be dependent, among other things, on the Company's assessment
of the gas and oil business environment, the number of gas and oil prospects,
and gas and oil business opportunities in general. The level of Alamco's 1996
capital expenditures will to a great extent depend upon the gas prices received
by the Company. Based on current gas futures prices, Alamco plans to expand
annual drilling activities to an estimated 30 wells. Alamco will continue with
its enhancement program on existing wells, particularly the wells acquired in
Kentucky and where the Company has established a significant acreage position.
The Company plans to continue with its aggressive acreage acquisition strategy
and will position itself to increase both exploratory and development drilling.
Alamco remains committed to the acquisition of producing properties at favorable
prices.
Section 29 Tax Credits. Effective August 11, 1994, the Company, through a
series of transactions, formed a partnership with a major East Coast financial
institution (the "Institution"). The partnership is structured such that the
Institution will be allocated IRC Section 29 tax credits as a result of
production from properties contributed by Alamco to the partnership (Note 3).
The institution initially paid $1.0 million (reduced by $100,000 for certain
expenses incurred by the Institution), and will pay additional amounts, up to
$4.0 million, in installments prior to December 31, 2002, upon achieving certain
production minimums and satisfying other conditions. As part of the Section 29
tax credit transaction, the Company formed Alamco-Delaware, Inc. ("Aladel") as a
Delaware Investment Holding Company.
In early November 1995, Alamco acquired from an industry partner for $1.35
million in cash, interests in 47 gross (30.7 net) oil and gas wells and the
remaining 53 percent of the gas gathering system that it did not own in the
Company's Days Chapel Field in Tennessee. This Transaction increased the
Company's ownership of the wells in the field from 48.4 percent to 83.0
percent. Alamco used funds available on its credit facility with Bank One to
complete the transaction.
Alamco also acquired in November 1995 for $1.22 million, four
partnerships' share of the Company's claim against Columbia (see Columbia
Litigation Claim below). The Company used funds available on its credit
facility with Bank One to complete the transaction.
Columbia Litigation Claim. In November 1995, Alamco received $7.6 million
on its and other interest owners' behalf from Columbia under Columbia's Second
Amended Plan of Reorganization, As Further Amended Dated July 17, 1995 (the
"Plan"). This amount represents 68.875 percent of the Company's $11 million
claim against Columbia arising from the settlement of various gas purchase
claims. The Plan provides for a potential additional distribution of up to
3.625 percent of the allowed claim in the future depending upon various
contingencies. Alamco's share of the claim was approximately 74 percent.
Quarterly Financial Data (Unaudited)
- ------------------------------------
The following table sets forth selected historical quarterly financial
data (unaudited) with respect to the Company for the quarters indicated in 1995
and 1994. Alamco's results of operations are generally subject to quarterly
variations due to, among other factors, weather conditions and other supply and
demand factors affecting the natural gas markets. Historically, the demand and
price paid for natural gas has increased in the cold winter months and decreased
in the warm summer months. Such quarterly data is not necessarily indicative of
the Company's future performance. Because of quarterly variations, Alamco
believes that its results of operation should be viewed on an annual basis.
This information for all quarters of 1995 and 1994 has been restated to reflect
revised accounting for certain stock options as described in Note 13.
(in thousands, except per share data)
First Second Third Fourth
1995 Quarter Quarter Quarter Quarter
---- ------- ------- ------- -------
Sales and other operating
revenues (1) $3,460 $3,530 $3,149 $8,400
Gross profit (1) 883 892 392 4,747
Net income (loss) (1) (81) (412) (416) 2,188
Net income (loss) per share (1) ($0.02) ($0.09) ($0.09) $0.47
First Second Third Fourth
1994 Quarter Quarter Quarter Quarter
---- ------- ------- ------- -------
Sales and other operating
revenues $3,370 $3,208 $3,464 $3,629
Gross profit 1,347 1,128 1,161 1,051
Net income (2) 511 306 353 505
Net income per share (2) $0.11 $0.07 $0.08 $0.10
- ----------------------
(1) In the fourth quarter of 1995, Alamco recorded as revenue the proceeds
from the Columbia Settlement of $4,164,000. The tax effect of this one-
time event of $1,627,000 is included in the fourth quarter 1995 tax
provision of $1,361,000. Absent the Columbia Settlement, revenues in the
fourth quarter would have been $4,236,000 with a gross profit of $583,000,
a net loss of $349,000, and a net loss per share of $.07.
(2) In the fourth quarter of 1994, Alamco adjusted its provision for income
taxes by $256,000 to reflect a change in the effective state tax rate. In
addition, an increase in deductions associated with percentage depletion
and lower income from operations also reduced the income tax provision.
Item 8. Consolidated Financial Statements.
- ------- ----------------------------------
Index to Consolidated Financial Statements
------------------------------------------
Pages
-----
Independent Auditor's Report 13
Consolidated Statement of Income, for the
Years Ended December 31, 1995, 1994 and 1993 14
Consolidated Balance Sheet, as of December 31, 1995 and 1994 15-16
Consolidated Statement of Changes in Stockholders' Equity,
for the Years Ended December 31, 1995, 1994 and 1993 17
Consolidated Statement of Cash Flows for the
Years Ended December 31, 1995, 1994 and 1993 18-19
Notes to Consolidated Financial Statements 20-38
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Alamco, Inc.
We have audited the accompanying consolidated balance sheet of Alamco, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 13 of the Notes to Consolidated Financial Statements, the
accompanying financial statements have been adjusted to reflect revised
accounting for certain stock options.
In our opinion, the financial statements referred to above present fairly, in
all material respects the consolidated financial position of Alamco, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the consolidated results of
their operations and their consolidated cash flows for each of the three years
in the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand L.L.P.
600 Grant Street
Pittsburgh, Pennsylvania
February 28, 1996
ALAMCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Years Ended December 31, 1995, 1994 and 1993
(In thousands, except share data)
===============================================================================
1995 1994 1993
---- ---- ----
Revenues:
Gas and oil sales $12,636 $11,993 $ 9,504
Agreements with gas purchasers
-11-
(Note 4) 4,164 -- --
Well tending income 943 1,232 2,172
Other revenue 796 446 224
------- ------- -------
Total revenues 18,539 13,671 11,900
------- ------- -------
Expenses:
Operating 6,713 5,461 4,262
Exploration 641 -- --
General and administrative 3,044 2,902 2,341
Option plan compensation (Note 13) 784 (41) 360
Depreciation, depletion, and
amortization 4,271 3,523 2,806
Interest 1,188 154 385
------- ------- -------
Total expenses 16,641 11,999 10,154
------- ------- -------
Income from operations 1,898 1,672 1,746
Other nonoperating income 192 155 321
------- ------- -------
Income before income tax 2,090 1,827 2,067
Provision for income taxes 811 152 715
------- ------- -------
Net income $ 1,279 $ 1,675 $ 1,352
======= ======= =======
Net income per share $0.27 $0.36 $0.39
===== ===== =====
Weighted average number of shares
outstanding 4,679,703 4,645,154 3,438,594
========= ========= =========
Accompanying notes are an integral part of the consolidated financial
statements.
ALAMCO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1995 and 1994
(In thousands)
===============================================================================
ASSETS 1995 1994
------ ---- ----
Current assets:
Cash and cash equivalents $ 3,297 $ 2,632
Accounts receivable, net of allowance of
$59-1995; $9-1994; 3,116 2,693
Due from partnerships and programs 72 140
Inventories and other current assets 368 428
Deferred taxes 138 74
------- -------
Total current assets 6,991 5,967
------- -------
Property and equipment:
Gas and oil producing properties
(Successful Efforts Method) 78,076 71,782
Other property and equipment 5,740 5,270
------- -------
83,816 77,052
Less accumulated depreciation,
depletion and amortization 32,201 28,487
------- -------
51,615 48,565
Other assets 1,294 1,600
------- -------
Total assets $59,900 $56,132
======= =======
(Continued)
Accompanying notes are an integral part of the consolidated financial
statements.
ALAMCO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1995 and 1994
(In thousands, except share data)
===============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------------------------------ ---- ----
Current liabilities:
Current portion of long-term debt and capital
lease obligations $ 33 $ 106
Accounts payable 1,026 1,325
Accrued expenses 1,545 1,398
Due working interest and royalty owners 3,309 1,064
Deferred revenue 113 1,165
Cash compensation under stock option plan (Note 13) 355 190
------- -------
Total current liabilities 6,381 5,248
------- -------
Long-term debt and capital lease obligations 13,674 12,889
Due working interest and royalty owners 325 888
Deferred revenue 29 333
Deferred taxes 8,566 7,813
Other long-term liabilities 429 404
------- -------
Total liabilities 29,404 27,575
------- -------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $1.00 per share;
1,000,000 shares authorized, none issued -- --
Common stock, par value $0.10 per share;
15,000,000 shares authorized;
4,762,898 and 4,712,713 shares issued
and outstanding, respectively 476 471
Common stock issuable under options (Note 13) 948 507
Additional paid-in capital 31,245 30,995
Accumulated deficit (1,949) (3,228)
------- -------
30,720 28,745
Less treasury stock, at cost, 62,405 and 63,360
shares of common stock, respectively 224 188
------- -------
Total stockholders' equity 30,496 28,557
------- -------
Total liabilities and stockholders' equity $59,900 $56,132
======= =======
Accompanying notes are an integral part of the consolidated financial
statements.
ALAMCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1995, 1994 and 1993
(In thousands, except share data)
===============================================================================
Common
Common Addit- Stock
Stock ional Accumu- Issuable
Treasury Stock
------------- Paid-in lated Under -------------
Shares Dollars Capital Deficit Options Shares Dollars
------ --------------- -------- ------ ------- -------
Balance
January 1, 1993,
as originally
reported 1,569,110 $157 $21,164 ($6,045) -- 38,949 $157
Adjustment to
correct error in
stock option
accounting (Note 13) -- -- (10) (210) 263 -- --
-------- ---- ------ ------ ----- ----- ----
Balance
January 1, 1993,
as adjusted 1,569,110 157 21,154 (6,255) 263 38,949 157
Acquisition of
treasury stock -- -- -- -- -- 50,000 129
Issuance of
treasury stock -- -- 10 -- -- (18,236) (86)
Public stock
offering 3,105,000 310 9,741 -- -- -- --
Exercise of stock
options 29,567 3 66 -- -- 2,079 15
Stock option
compensation -- -- (17) -- 258 -- --
Net income -- -- -- 1,352 -- -- --
--------- ---- ------- ------- ------ ----- -----
Balance
December 31, 1993 4,703,677 470 30,954 (4,903) 521 72,792 215
Issuance of
treasury stock -- -- 36 -- -- (10,370) (34)
Issuance of common
stock 4,903 -- 32 -- -- -- --
Acquisition of
treasury stock -- -- -- -- -- 938 7
Exercise of stock
options 4,133 1 10 -- -- -- --
Public stock offering-
additional costs -- -- (20) -- -- -- --
Stock option
compensation -- -- (17) -- (14) -- --
Net income -- -- -- 1,675 -- -- --
--------- ---- ------ ------ ------- ----- ----
Balance
December 31, 1994 4,712,713 471 30,995 (3,228) 507 63,360 188
Issuance of
common stock 4,585 -- 35 -- -- -- --
Issuance of
treasury stock -- -- 36 -- -- (10,370) (34)
Acquisition of
treasury stock -- -- -- -- -- 9,415 70
Exercise of stock
options 45,600 5 133 -- -- -- --
Stock option
compensation -- -- 46 -- 441 -- --
Net income -- -- -- 1,279 -- -- --
--------- ---- ------- ------ ---- ----- ----
Balance
December 31, 1995 4,762,898 $476 $31,245 ($1,949) $948 62,405 $224
========= ==== ======= ======= ==== ====== ====
Accompanying notes are an integral part of the consolidated financial
statements.
ALAMCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended December 31, 1995, 1994 and 1993
(In thousands)
===============================================================================
1995 1994 1993
---- ---- ----
Cash flows from operating activities:
Net income $1,279 $1,675 $1,352
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation, depletion and
amortization 4,271 3,523 2,806
Deferred taxes 689 219 616
Provision for common stock
issuable under options 487 (31) 241
Dry hole costs 641 -- --
Gain on asset sales (31) (76) (141)
Issuance of stock for employee
benefits and compensation expense 105 102 86
Other factors, net 7 1 4
Increase (decrease) in cash from
changes in:
Accounts receivable (423) 1,282 (275)
Due from partnerships and programs 68 18 97
Due working interest and royalty
owners 2,245 (1,674) (340)
Inventories and other current assets 60 (167) (105)
Accounts payable and accrued expenses (152) 897 438
Deferred revenue (1,052) 474 231
Accrued cash compensation under stock
option plan 165 (5) 96
------ ------ ------
Net cash provided by
operating activities 8,359 6,238 5,106
------ ------ ------
Cash flows from investing activities:
Proceeds from disposal of fixed assets 156 278 150
Payment for the acquisition of
producing properties (1,384) (6,234) --
Capital expenditures (6,547) (10,500) (6,685)
Investment in limited partnership (5) (290) --
Other assets 155 (464) (161)
------ ------ ------
Net cash used in investing
activities (7,625) (17,210) (6,696)
------ ------ ------
(Continued)
Accompanying notes are an integral part of the consolidated financial
statements.
ALAMCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended December 31, 1995, 1994 and 1993
(In thousands)
===============================================================================
1995 1994 1993
---- ---- ----
Cash flows from financing activities:
Borrowings under line of credit $ 6,800 $13,300 $ 500
Payment on line of credit (6,000) (1,000) --
Principal payments on long-term debt
and capital lease obligations (95) (320) (9,098)
Acquisition of treasury stock (70) (7) (144)
Net proceeds from public offering of
common stock -- -- 9,948
Additional costs of public offering
of common stock -- (20) --
Proceeds from exercise of stock options 138 11 69
Other liabilities (842) (825) (1,012)
------ ------ ------
Net cash (used in) provided by
financing activities (69) 11,139 263
------ ------ ------
Net increase (decrease) in cash and
cash equivalents 665 167 (1,327)
Cash and cash equivalents -
beginning of period 2,632 2,465 3,792
------ ------ ------
Cash and cash equivalents -
end of period $3,297 $2,632 $2,465
====== ====== ======
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest $1,353 $216 $373
Income taxes 232 55 180
Supplemental Schedule of Non-Cash
Investment and Financing Activities:
Fixed assets acquired under capital
lease -- -- $27
Like-kind exchange of property -- $3,270 --
Accompanying notes are an integral part of the consolidated financial
statements.
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. These consolidated financial statements
include the combined accounts of Alamco and its subsidiaries, Alamco-Delaware,
Inc. ("Aladel"), HAWG HAULING & DISPOSAL, INC. ("HAWG") and Phoenix-Alamco
Ventures, a Limited Liability Company ("PAV"). Aladel and HAWG are wholly owned
subsidiaries of the Company. All significant intercompany balances have been
eliminated in consolidation.
Nature of Operations. Alamco, Inc. is an Appalachian-based independent gas
and oil producer actively engaged in the acquisition, exploitation, exploration,
development and production of domestic gas and oil. The Company's activities
are conducted in West Virginia, Tennessee and Kentucky, with an emphasis on
producing natural gas for ultimate sale to customers in the northeast gas
markets.
Revenue Recognition. Royalties, overrides and working interest revenues
are recognized based on production. No material difference would result if
revenues were recognized based on sales. Well tending income is recognized as
revenue as services are performed.
Cash and Cash Equivalents. The Company considers certificates of deposit,
U.S. government securities and other short-term securities with maturities of
three months or less as cash and cash equivalents.
Fair Value of Financial Instruments. The following methods and assumptions
were used by the Company in estimating the fair value of each class of financial
instruments for which it is practicable to estimate that value.
For cash and cash equivalents, receivables and payables, the carrying
amounts approximate fair value because of the short maturity of these instru-
ments. For long-term debt, including current maturities, the fair value of the
Company's long-term debt approximates historically recorded cost since interest
rates approximate market.
Off-Balance Sheet Risk. In accordance with industry practice, the Company
has gas and oil sales contracts with commitments to sell certain quantities of
gas and oil, primarily at market prices, for varying periods.
Use of Estimates. Preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from these estimates.
Gas and Oil Producing Properties. The Company uses the successful efforts
method of accounting for gas and oil producing properties. Under the successful
efforts method, certain expenditures, such as geological and geophysical costs,
exploratory dry hole costs, delay rentals, and other costs directly related to
exploration are recognized currently as expenses. All direct costs relating to
property acquisitions, successful exploratory wells, all development costs, and
support equipment and facilities are capitalized and depreciated, depleted or
amortized using the units-of-production method. Production overhead and other
costs are expensed as incurred. Gas and oil producing properties also include
well equipment covered by capital lease obligations. Amortization of the lease
assets is included in depreciation, depletion and amortization expense.
Interest costs incurred in the drilling of wells are capitalized and amortized
using the units-of-production method. The Company capitalized interest costs of
$172,000 in 1995, $317,000 in 1994, and none in 1993. Interest incurred in 1995
was $1,360,000 and in 1994 was $471,000.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121").
This statement, which is effective for financial statements for years beginning
after December 15, 1995, was adopted by the Company in 1995. The Company has
evaluated the impact of SFAS 121 by comparing the carrying value of its long-
lived assets, consisting of gas and oil producing properties, other property and
equipment, and intangibles, to the estimated future cash flow from such assets
in order to determine whether the carrying value of such properties should be
reduced. No adjustments to carrying values of assets were necessary as of
December 31, 1995.
Other Property and Equipment. Other property and equipment are stated at
cost. Depreciation of other property and equipment is computed using the
straight-line method over estimated useful lives of three to forty years,
without considering the recoverable value of equipment salvageable from the
wells.
On an annual basis, the Company estimates the costs of future
dismantlement, restoration, reclamation and abandonment of its gas and oil
producing properties. Concurrently, the Company evaluates the estimated salvage
value of equipment recoverable upon abandonment. At December 31, 1995 the
Company's estimate of equipment salvage values is in excess of the costs of
future dismantlement, restoration, reclamation and abandonment.
Costs of individual gas and oil wells determined to be uneconomical are
charged to accumulated depreciation, depletion and amortization, with no gain or
loss being recognized until the depositional group in which the well is included
is abandoned. When other property and equipment are retired or otherwise
disposed of, the cost and related accumulated depreciation are removed from the
accounts, and any gain or loss is reflected in income for the period. The cost
of maintenance and repairs is expensed as incurred; significant renewals and
betterments are capitalized.
Intangible Assets. Intangible assets, which are reported in other assets
on the Company's balance sheet, consist of a non-compete and a consulting
agreement arising from the acquisition of 62 wells in Southeastern Kentucky.
The values assigned to intangible assets are being amortized on a straight line
basis over the life of the agreements which range from four to five years.
Covenant not to compete . . . . . . $312,000
Consulting agreement . . . . . . . . 390,000
Less accumulated amortization . . . (234,000)
--------
$468,000
========
Income Taxes. The Company accounts for certain income and expense items
differently for financial reporting purposes than for purposes of computing
income taxes currently payable. Deferred tax liabilities and assets are
determined based on the differences between the financial statement and tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. Deferred tax expense is the
result of changes in such basis differences and enacted rates.
Income Per Share. Income per share amounts are computed by dividing the
net income by the weighted average number of shares outstanding in 1995, 1994
and 1993.
2 - PROPERTY ACQUISITIONS AND WELL SWAP
In early November 1995, the Company acquired from an industry partner, for
$1.35 million in cash, interests in 47 gross (30.7 net) oil and gas wells and
the remaining 53 percent of the gas gathering system that it did not own in the
Company's Days Chapel Field in Tennessee. This transaction increased the
Company's ownership of the wells in the field from 48.4 percent to 83.0
percent. The Company used funds available under its credit facility with Bank
One to complete the transaction.
On March 31, 1994, the Company exchanged its interests (the "Well
Exchange") in 141 gross wells for outside investors' interests in 237 gross
wells. The exchange was effective March 1, 1994. The exchange has been treated
as a like-kind exchange and no gain or loss has been recognized on this
transaction.
In a separate transaction, the Company received a note in exchange for the
sale of operating rights in a number of wells. Further, the Company sold its
wholly-owned subsidiary, Interstate Resources, Inc. ("IRI"), in exchange for a
note. The sale of the Company's operating rights and IRI were to the same non-
affiliated party and combined into a single interest bearing note in the
principal amount of $272,000. The gain resulting from the sale of operating
rights and sale of IRI was deferred and is being recognized as principal
payments are received.
On July 18, 1994, the Company acquired certain gas and oil properties and
intangible assets located in Southeastern Kentucky for $2.5 million in cash
(Note 1). The Company acquired 62 wells (56.4 net wells) together with 34,000
gross acres (30,000 net acres) and became the operator of the wells.
On August 1, 1994, the Company acquired all of the interests held by a
number of limited partnerships in 114 West Virginia gas wells (91.2 net wells),
of which 102 were already operated by the Company (the "West Virginia
Acquisition"). The Company acquired these wells for a net $3.8 million in cash.
Also, on August 1, 1994 the Company acquired seven wells and 1,275 acres in
Whitley County, Kentucky, for $185,000. The Company became the operator
effective as of the purchase date.
The Company also acquired 2.5 net wells producing from the Oriskany
formation in the South Burns Chapel Field for $500 effective as of July 1, 1994.
These transactions have been accounted for under the purchase method and,
accordingly, the operating results for the transactions have been included in
the Company's consolidated operating results from the dates of the respective
acquisitions forward.
As the West Virginia Acquisition and the Well Exchange represent a
substantial majority of the assets acquired during 1994, the following summary,
prepared on a pro forma basis, presents the consolidated results of operations
as if the two transactions had been consummated as of January 1, 1994.
1994
(Unaudited and in
thousands of dollars,
except per share amount)
Revenues $14,340
Expenses 12,410
Income from operations 1,930
Net income 1,843
Net income per share $ 0.40
The pro forma results are not necessarily indicative of what actually
would have occurred if the acquisitions had been in effect for the entire
periods presented. In addition, they are not intended to be a projection
of future results and do not reflect any synergies that might be achieved
from combined operations.
3 - SECTION 29 TAX CREDITS
The Company currently produces approximately 800,000 MMBtu per year of
natural gas that is eligible for a tax credit of $1.01 per MMBtu under Internal
Revenue Code ("IRC") Section 29. The tax credit applies to natural gas produced
from "nonconventional" fuel sources, as defined, including gas production from
Devonian Shale formations in certain West Virginia counties where the Company
has production operations. In addition to producing from certain
nonconventional fuel sources, the production must have been from wells drilled
between December 31, 1979 and December 31, 1992, and the gas must be sold before
December 31, 2002. The tax credit is allowed to reduce a taxpayer's regular tax
liability but may not be used to reduce a taxpayer's alternative minimum tax
("AMT") liability. The credits also must be used in the tax year in which they
are generated.
The Company is currently, and is projected to be in the future, an AMT
taxpayer and therefore is unable to fully use the tax credits to reduce its tax
liability. In order to receive benefit from these credits which would otherwise
expire unused, through a series of transactions, the Company formed a
partnership with a large East Coast financial institution (the "Institution").
The partnership is structured such that the Institution will be allocated IRC
Section 29 tax credits as a result of production from properties contributed by
the Company to the partnership. The Institution initially paid $1.0 million
(reduced by $100,000 for certain expenses incurred by the Institution), and will
pay additional amounts, up to $4.0 million, in installments prior to
December 31, 2002, upon achieving certain production minimums and satisfying
other conditions. The Company estimates that this transaction, which was
effective August 11, 1994, will allow it to realize $0.65 for each $1.00 in
available Section 29 tax credits generated by the producing properties.
As of August 11 1994, the effective date of the transaction, the Company
recognized $1.0 million in deferred revenues and will recognize income from this
transaction as the required gas production levels are achieved. In 1995 and
1994 the Company recognized $645,000 and $249,000, respectively, in income
relative to this transaction. Accordingly, as of December 31, 1995, the
Company's balance sheet includes $105,000 in deferred revenues, all of which is
current.
4 - SETTLEMENT OF COLUMBIA LITIGATION CLAIMS
The Company received in November 1995 the proceeds from the settlement of
its contract rejection claims from Columbia. The initial distribution was the
result of the confirmation by the U.S. Bankruptcy Court of Columbia's Plan of
Reorganization on November 15, 1995. The Company received proceeds of $7.6
million, of which its share was $5.6 million. The Company recognized revenue of
$4,164,000 in the fourth quarter of 1995, net of claims purchased from other
owners, and after tax income of $2,537,000 ($0.54 per share).
The Company could receive an additional settlement distribution from
Columbia of up to 3.625 percent of its original claim of $11,000,000 with the
Company's share being revenue of $295,000 and after tax income of $180,000
($0.04 per share). The timing and amount of this additional recovery is
contingent upon Columbia settling various outstanding claims with other gas
producers.
5 - PUBLIC STOCK OFFERING
On July 29, 1993, the Company consummated a public offering at a price to
the public of $5.50 per share for 2,700,000 shares of Common Stock, of which
2,000,000 shares were sold by the Company and 700,000 shares were sold by PNC.
The Company's net proceeds from this sale approximated $10.2 million before
considering expenses associated with the stock offering. The Company used
approximately $8.6 million of the net proceeds to repay its revolving credit
facility loan balance with Bank One.
On August 18, 1993, the underwriters exercised their option to purchase at
a price to the public of $5.50 per share an additional 405,000 shares, of which
the first 333,596 shares were sold by PNC and the remaining 71,404 shares were
newly issued shares sold by the Company. The aggregate 1,033,596 shares sold by
PNC represented all of the non-voting Class A Common Stock issued to PNC by the
Company as part of the 1988 debt restructuring. Upon the sale of the 1,033,596
shares in the stock offering, the shares automatically converted to voting
Common Stock on a one-for-one basis.
6 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
The Company has a $30.0 million revolving credit facility with Bank One
which calls for the payment of interest only until July 1, 1998 at which time
all outstanding principal and interest amounts are due. Interest accrues and is
paid monthly at a rate of Bank One's prime rate plus one-fourth of one percent.
During 1993, using a portion of the 1993 stock offering, the Company repaid all
amounts outstanding under the Bank One credit facility. As of December 31, 1995
the aggregate amount of borrowing under the Bank One revolving credit facility
was $13.6 million. Bank One's prime interest rate on December 31, 1995, was 8.5
percent.
The credit facility is subject to semiannual borrowing base revisions (in
March and September of each year) to be made in accordance with borrowing base
recalculations performed by Bank One. Revisions could result in the extension
of credit and repayment terms or, in the case of erosion of the borrowing base,
the reduction of outstanding principal amounts or the amount of the credit
facility. Based on the latest Bank One recalculation, performed in September
1995, the borrowing base is sufficient to allow full utilization of the maximum
$30.0 million credit facility.
In addition to interest payments, the Company is required to pay a
commitment fee equal to the difference between the facility amount and the
amount borrowed multiplied by one-half of one percent prorated into quarterly
payments. The agreement also contains covenants which, among other things,
require that the Company maintain specified levels of cash flow, stockholders'
equity and ratio of current assets to current liabilities. The credit facility
is collateralized by all of the Company's assets including the Company's gas and
oil reserves.
The aggregate maturities of long-term debt for each of the next five years
and thereafter are as follows (in thousands):
1996 $ 33
1997 37
1998 13,620
1999 17
2000 and thereafter 0
-------
$ 13,707
=======
The Company also leases certain equipment used in the production of gas and
oil under three lease programs with McJunkin. These equipment leases are for
varying terms with purchase options at the end of the lease term. In addition,
as part of a 1988 restructuring with McJunkin, the leases were amended to permit
the Company to extend the leases for varying periods with rentals due with
respect to the extension periods to be paid from a 2-1/2 percent working
interest of the Company on the wells where the leased equipment is situated.
The Company has extended the lease periods for all three programs through
November 30, 2002. Since rental payments due under such extensions are
contingent upon the proceeds of gas and oil production, such payments will be
expensed as incurred. There are no future minimum lease payments due.
7 - CASH AND CASH EQUIVALENTS
Cash and cash equivalents totalled $3,297,000 at December 31, 1995. Of
this amount, approximately $694,000 was available for general corporate purposes
and the balance was held for third parties, including $372,000 in gas and oil
sales proceeds held for eventual distribution to outside working interests and
royalty owners, $1,928,000 representing the outside interests' estimated share
of Columbia settlement proceeds, $113,000 representing outside interests' share
of cash prepaid by CNG, and $190,000 withheld from outside working interests'
proceed distributions to be utilized for future ad valorem tax payments
(Note 8). The Company's cash balance at December 31, 1995 includes $2,962,000
invested in commercial paper, U.S. Government and Agency Securities and Bankers'
Acceptances, with an annualized 5.5 percent return.
8 - PLUGGING AND AD VALOREM TAX FUNDS
The Company retains a portion of outside investors' monthly gas and oil
production proceeds to be utilized for future well plugging and abandonment
costs and ad valorem tax payments. The funds, totalling $515,000 at
December 31, 1995, are invested in securities issued or guaranteed by the United
States Treasury in accounts segregated from those of the Company. Interest
earned on the funds accrues to the benefit of the working interest owners.
Included in other assets is $325,000 for future plugging and abandonments.
Corresponding amounts recorded in assets are included in liabilities.
9 - INCOME TAXES
The following table details the components of the Company's income tax
expense for the year 1993 through 1995.
1995 1994 1993
---- ---- ----
(In thousands)
Federal:
Current $107 ($67) $ 99
Deferred 592 433 512
---- ---- ----
Total Federal 699 366 611
---- ---- ----
State:
Current 15 -- --
Deferred 97 (214) 104
---- ---- ----
Total State 112 (214) 104
---- ---- ----
Total $811 $152 $715
==== ==== ====
Reconciliations of the income tax provision computed at the statutory rate
and the provision for income taxes as shown on the Statement of Income are
summarized below:
Year Ended December 31,
--------------------------
1995 1994 1993
---- ---- ----
(In thousands)
Tax provision computed at statutory rate $676 $610 $686
State taxes 139 104 126
Change in effective state tax rate -- (255) --
Sale of partnership interest 249 -- --
Use of percentage depletion (1,029) (321) (103)
Valuation allowance 750 -- --
Other 26 14 6
---- ---- ----
Provision for income taxes $811 $152 $715
==== ==== ====
The 1994 change in effective state tax rate reflects the Company's new
business activities in states with lower tax rates and recently implemented tax
planning activities.
The deferred tax assets of $138,000, $74,000 and $76,000 for 1995, 1994 and
1993, respectively, relate to accrued cash compensation resulting from stock
options (Note 13).
The components of the net deferred tax liability are as follows:
December 31,
----------------------------
1995 1994 1993
---- ---- ----
(In thousands)
Depreciation, depletion and amortization $13,150 $12,293 $10,668
Option plan compensation (370) (198) (203)
Percentage depletion carryover (750) -- --
Accounts receivable write-off (30) (30) (31)
Future litigation payments (39) (72) (126)
Net operating loss carryforwards (1,553) (1,704) (490)
Sale of partnership interest (374) (293) --
AMT credits (821) (746) (837)
ITC carryforwards (1,375) (1,394) (1,371)
Other (22) (43) (3)
Valuation allowance 750 -- --
------- ------ ------
Net deferred tax liability $8,566 $7,813 $7,607
======= ====== ======
The Company's investment tax credit carryforwards expire between the years
1996 and 2000. The Company has recorded a valuation allowance applicable to
these credits because the ability to use a portion of them is uncertain.
Prior to August 1994, the Company owned interests in 504 gas wells which
qualified for Devonian Shale tax credits. These credits which approximate $1.01
per MMBtu of qualified gas produced in 1995 can be applied to reduce regular
income taxes payable only in the years the gas is produced. Effective
August 11, 1994, the Company formed a partnership structured such that a large
East Coast financial institution will be allocated substantially all of the
Devonian Shale tax credits previously allocated to the Company (see Note 3). No
Devonian Shale tax credits were used by the Company in years 1995, 1994 or 1993.
Statement 109 requires recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the differences between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
10 - STOCKHOLDERS RIGHTS PLAN
On November 30, 1994, the Board of Directors of the Company adopted a
Preferred Stock Purchase Rights Plan (the "Rights Plan"). Under the Rights
Plan, the Board declared a dividend of one preferred share purchase Right for
each outstanding share of Alamco Common Stock. In the event that any entity
acquires 15% or more of the outstanding shares of Common Stock of the Company,
the Rights will become exercisable subject to the terms of the Rights Plan and
will entitle each holder of a Right (other than the acquiring person or group)
under certain circumstances to purchase that number of shares of Alamco Common
Stock having a market value equal to two times the exercise price of the Right.
Rights were distributed to stockholders of record at the close of business
on December 12, 1994. The Rights will trade with the Company's Common Stock
until the Rights become exercisable and no separate certificates will be issued
until that time. The rights will expire on December 12, 2004. The Rights Plan
is designed to enable the Company and its Board to develop and preserve long-
term value for stockholders and to protect stockholders in the event an attempt
is made to acquire control of the Company through certain coercive or unfair
tactics or without a bona fide offer at fair value to all of the stockholders of
the Company.
11 - SALES CONCENTRATION
The following table illustrates the Company's gas and oil sales
concentration with purchasers greater than 10 percent:
Purchasers 1995 1994 1993
PAV 44.2% 53.8% 0.0%
Hope 28.9% 28.2% 25.2%
CNG 7.1% 5.3% 24.1%
Phoenix 0.0% 0.0% 14.4%
Enron 0.0% 0.0% 14.2%
Phoenix-Alamco Ventures, a Limited Liability Company ("PAV"), which is
owned jointly by the Company and Phoenix Energy Sales Company, is engaged in the
marketing of Alamco's and other working interest owners' gas. PAV seeks
diversification for Alamco's gas sales to other marketing entities, local
distribution companies and industrial users with contracts of various
durations.
12 - COMMITMENTS AND CONTINGENCIES
CNG Agreement. In November 1989, CNG made a $3,800,000 prepayment for
1,565,000 MMBtu of gas to be produced from the Company's Tallmansville
production area. CNG has the right, within certain specified limitations, to
take deliveries of this gas up to December 31, 1999. As of December 31, 1995,
CNG has taken delivery of all of the Tallmansville gas for which it has
prepaid.
The Company recognized its proportionate share of this deferred revenue as
volumes were recouped in accordance with the CNG Agreement.
13 - STOCK OPTIONS AND BENEFIT PLANS
Employee Stock Option Plans. Stock options have been granted to Company
employees through two stock option plans, the 1992 Employees' Stock Option Plan
(the "1992 Stock Option Plan") and the 1982 Employees' Stock Option Plan (the
"1982 Stock Option Plan").
The 1992 Stock Option Plan was established March 20, 1992 and amended on
March 24, 1995, to increase the number of shares available for issuance from
100,000 to 250,000. This plan provides for the grant to officers and other key
management employees of the Company of stock options covering an aggregate of up
to 250,000 shares of the Company's Common Stock. Options may be designated as
either non-qualified stock options or incentive stock options, the latter of
which must be exercised sequentially in grant date order. The Compensation
Committee of the Company's Board of Directors administers the 1992 Stock Option
Plan. The exercise price for each option granted must be equal to the fair
market value per share of the Company's Common Stock on the date of the granting
of the options (except when incentive stock options are granted to any person
who owns more than 10% of the total combined voting power of all classes of
stock of the Company, the exercise price of each option will be at least 110% of
the fair market value of the Common Stock). At December 31, 1995, there were
154,500 shares available for future grants.
The 1982 Stock Option Plan provided for the grant of stock options to
officers and other employees of the Company for up to 65,000 shares of the
Company's Common Stock. As of November 8, 1992, no additional options may be
granted from the 1982 Stock Option Plan. Options are designated as either non-
qualified stock options or incentive stock options. Information with respect to
the options granted under each plan follows:
1982 EMPLOYEES' 1992 EMPLOYEES'
STOCK OPTION PLAN STOCK OPTION PLAN
----------------- -----------------
Option Option
Number of Price Range Number of Price Range
Shares Per Share* Shares Per Share*
------ ---------- ------ ----------
Outstanding at January 1, 1993 50,500 $1.25--3.15 17,500 $4.875
Granted -- 36,000 6.75
Exercised 17,100 1.25--2.50 --
Canceled -- --
------ ------
Outstanding at December 31, 1993 33,400 1.875-3.15 53,500 4.875-6.75
------ ------
Granted -- 18,500 6.75
Exercised -- --
Canceled 19,900 1.875-3.15 7,500 4.875
------ ------
Outstanding at December 31, 1994 13,500 1.875-3.15 64,500 4.875-6.75
------ ------
Granted -- 35,000 8.00
Exercised 3,500 2.50 2,000 6.75
Canceled -- 4,000 6.75
------ ------
Outstanding at December 31, 1995 10,000 1.875-3.15 93,500 4.875-8.00
------ ------
Exercisable at December 31, 1995 10,000 1.875-3.15 36,164 4.875-6.75
------ ------
- ------------------------
*Reflects the option price range applicable to only those installments included
in the total number of shares with respect to which the options are or were
exercisable.
Non-Qualified Stock Options. At December 31, 1995, non-qualified stock
options granted outside of any stockholder-approved plan totalled 330,000 shares
of Common Stock and were held by 7 employees. No options were granted or
expired in 1995; 2,000 shares were cancelled in 1995. The stock option exercise
prices range from $1.875 to $6.75 per share. Employees exercised 40,100, 4,133
and no shares during 1995, 1994 and 1993, respectively, with option prices
ranging from $1.875 to $6.75 in 1995, and an option price of $3.15 in 1994. At
December 31, 1995, 263,332 shares were exercisable with the remaining stock
options becoming exercisable in November 1996.
The 1992 Equity Compensation Plan for Outside Directors. The 1992 Equity
Compensation Plan for Outside Directors (the "1992 Outside Directors' Plan") was
established March 20, 1992 and provides for a maximum number of 75,000 shares of
Common Stock from the Company's authorized and unissued shares of Common Stock
and/or treasury shares to be available for issuance, subject to adjustments in
certain instances. Outside Directors receive 50 percent of their annual
retainer in the form of Common Stock and may elect to receive any or all of the
remaining cash balance of their retainer in the form of Common Stock. In 1995,
4,585 shares were issued to directors at a market price of $7.75 per share. The
Company adopted the Alamco, Inc. Directors' Deferred Income Plan (the "Plan")
effective June 15, 1995, which permits eligible directors of the Company to
elect to defer receipt of future compensation that would otherwise be payable in
cash currently by the Company and have such deferred amounts credited to
individual bookkeeping accounts maintained by the Company in the names of the
participants.
Outside Directors' Stock Option Plan. The 1982 Outside Directors' Stock
Option Plan (the "Outside Directors' Plan") provided for the automatic grant of
options of the Company's Common Stock to non-employee Directors of the Company.
As of November 9, 1991, stock options may not be granted under the Outside
Directors' Plan. At December 31, 1995, 4,400 shares remain outstanding and
exercisable with option prices ranging from $2.50 to $3.875. No options were
exercised in 1995.
Employee Savings and Protection Plan. Effective October 1, 1987, the
Company instituted a 401(k) Plan titled the Alamco, Inc. Employee Savings and
Protection Plan. In addition to employee contributions, the Company contributed
cash and stock of approximately $117,000, $110,000 and $97,000 in 1995, 1994 and
1993, respectively.
As a result of exercises of nonqualified stock options in 1996, Alamco
reviewed its accounting for stock options and concluded that certain options
should have been treated as variable awards rather than fixed awards. An
employee tax reimbursement feature included in the option agreements requires
that variable award accounting be followed. Under variable award accounting,
periodic changes in the differences between the market price of the Company's
common stock and the exercise prices of outstanding nonqualified stock options
should be recognized as non-cash compensation expense. The variable award
accounting has been reflected retroactively in the accompanying financial
statements as a correction of an error. As a result, retained earnings as of
January 1, 1993, has been reduced by $210,000 (net of applicable taxes of
$134,000). Cash flow from operations was not affected.
The effects of these adjustments on the consolidated statement of
operations from amounts previously reported are as follows:
Year Ended December 31,
-------------------------------
Increase (Decrease) In: 1995 1994 1993
---- ---- ----
-28-
Option Plan Compensation $784 ($41) $360
General and administrative expense (102) (6) (32)
Income Tax (266) 18 (128)
Net Income (416) 29 (200)
Net Income Per Share (.09) .01 (.06)
14 - SUPPLEMENTAL INFORMATION RELATED TO GAS AND OIL PRODUCING ACTIVITIES
(Unaudited)
Costs incurred by the Company in gas and oil property acquisition,
exploration, and development are presented below:
Year Ended December 31,
---------------------------
1995 1994 1993
---- ---- ----
(In thousands)
Costs (capitalized or expensed) for:
Property acquisition $1,281 $ 6,740 $ 592
Exploration 641 -- --
Development 5,476 9,578 5,479
------ ------- ------
$7,398 $16,318 $6,071
====== ======= ======
Property acquisition costs include costs incurred to purchase, lease, or
otherwise acquire a property. Exploration costs include the costs of geological
and geophysical activity, dry holes, and drilling and equipping exploratory
wells. Development costs include costs incurred to gain access to and prepare
development well locations for drilling, to drill and equip development wells
and to provide facilities to extract, treat, gather, and store gas and oil, and
depreciation of support equipment used in development activities.
Aggregate capitalized costs for the Company related to gas and oil
exploration and production activities, with applicable accumulated depreciation,
depletion and amortization, are presented below:
1995 1994
---------------------- ------------------------
Accumu- Accumu-
lated lated
Cost DD&A Net Cost DD&A Net
---- ---- --- ---- ---- ---
(In thousands)
Proved developed
properties $78,076 $28,996 $49,080 $71,782 $25,880 $45,902
Pipelines and processing
equipment 1,924 671 1,253 1,734 562 1,172
Vehicles, machinery and
equipment consisting
principally of assets
used in gas and oil
producing activities 2,068 1,380 688 1,913 1,024 889
Buildings used in gas
and oil producing
activities 224 99 125 206 84 122
------- ------- ------- ------- ------- -------
$82,292 $31,146 $51,146 $75,635 $27,550 $48,085
======= ======= ======= ======= ======= =======
The results of operations for gas and oil producing activities are
presented below:
Year Ended December 31,
---------------------------
1995 1994 1993
---- ---- ----
(In thousands)
Gas and oil sales revenues $12,636 $11,993 $9,504
------- ------- ------
Expenses:
Production 4,194 3,287 2,259
Depreciation, depletion and amortization 3,467 2,790 2,734
Exploration 641 -- --
------- ------- ------
8,302 6,077 4,993
------- ------- ------
Results of operations for gas and oil
producing activities before provision
for income taxes 4,334 5,916 4,511
Provision for income tax 650 887 677
------- ------- ------
Results of operations for gas and oil
producing activities $3,684 $5,029 $3,834
======= ======= ======
Production expenses include those costs incurred to operate and maintain
productive wells and related equipment and include costs such as labor, repairs
and maintenance, materials, supplies, fuel consumed and other production taxes.
Depreciation, depletion and amortization expense includes those costs associated
with capitalized acquisition, exploration, and development costs including the
depreciation applicable to support equipment. Exploration expenses would
include the cost of exploratory dry holes, the geological and geophysical costs
associated with undeveloped properties and write-offs or amortization of lease
acquisition and other costs associated with undeveloped properties. The
provision for income taxes is computed considering the Company's status as an
alternative minimum tax payor.
The decrease in the results of operation for gas and oil producing
activities between 1995 and 1994 resulted from lower gas prices which was
partially offset by increased production from the Company's successful
acquisition and drilling programs.
The increase in the results of operations for gas and oil producing
activities between 1994 and 1993 resulted from higher gas and oil sales revenues
due primarily to the Company's successful 1994 acquisition and drilling
programs.
Estimates of net proved reserves of gas and oil for the Company, all of
which are within the United States, are as follows:
Year Ended December 31,
--------------------------------------------------
1995 1994 1993
------------ ----------- -----------
MCF BBL MCF BBL MCF BBL
--- --- --- --- --- ---
(In thousands)
Proved reserves,
beginning of year 119,625 1,399 82,617 897 58,830 881
Extensions, discoveries
and other additions 11,534 2 13,529 435 23,727 142
Acquisitions 3,242 376 16,888 131 988 5
Revisions of previous
estimates (1,744) (53) 10,995 4 2,269 (94)
Production (5,364) (88) (4,404) (68) (3,197) (37)
------- ----- ------ ----- ------ ---
Proved reserves,
end of year 127,293 1,636 119,625 1,399 82,617 897
------- ----- ------ ----- ------ ---
Proved developed
reserves 97,169 1,405 85,654 1,164 56,560 605
------- ----- ------ ----- ------ ---
These estimates are based primarily on the reports of independent petroleum
and geological engineers. Such reports are, by their very nature, inexact and
subject to changes and revisions. Proved reserves are the estimated quantities
which geological and engineering data demonstrate with reasonable certainty to
be recoverable in future years from known reservoirs under existing economic and
operating conditions. Proved reserves increased in 1995 and 1994 due to the
success of the Company's acquisition and development drilling programs.
Reserves were also added due to the inclusion of several additional drilling
prospects on existing company acreage and on acreage leased in 1994 and 1995.
The estimates include only those amounts considered to be proved reserves and do
not include additional amounts that may result from new discoveries in the
future. Proved developed reserves are those reserves that are expected to be
recovered through existing wells with existing equipment and operating methods.
The estimated future net cash flow and the present value of the proved
reserves before taxes are presented below.
Proved Proved Total
Developed Undeveloped Proved
--------- ----------- ------
(In thousands)
Estimated future net cash
flow attributable to
production during
1996 11,175 (2,721) 8,454
1997 9,839 (1,076) 8,763
1998 9,332 1,609 10,941
1999 8,871 2,504 11,375
2000 and thereafter 119,254 47,306 166,560
_______ ______ _______
Total 158,471 47,622 206,093
Present value of future
cash flow 69,874 13,613 83,487
Estimated future net cash flow represents future cash inflows generated by
the sale of the proved reserves less estimated production and future development
cost. For production from wells under fixed priced gas purchase contracts, the
gas price used is the contractual gas price for the term of the contract. The
average gas price used is $2.50 per MCF and the average oil price used is $16.89
per barrel. Production costs are based on those in effect at December 31,
1995. The estimated future net cash flow is based on a large number of
estimates and arbitrary assumptions. Reserve quantities cannot be measured with
precision and their estimation requires many judgmental determinations and
frequent revisions. No assurance of levels of gas and oil prices and costs can
be given nor can assurance be given that proved reserves will be developed
within the periods indicated. Present value is calculated by discounting
estimated future net revenue by 10 percent.
Summarized in the following table is information for the Company with
respect to the standardized measure of discounted future net cash flows relating
to proved oil and gas reserves. Estimated future net cash flow represents
future cash inflows generated by the sale of the proved reserves less estimated
production and future development cost. Future income tax expenses are computed
by applying the statutory rate and tax laws applicable to the future pre-tax net
cash flows for each year, less the tax basis of the properties, and giving
effect to permanent differences and net operating loss, investment tax credit,
and percentage depletion carryforwards which exist as of the end of each year.
In addition, 504 of the Company's gas wells qualify for Devonian Shale tax
credits under Section 29 of the Internal Revenue Code. These tax credits, which
in 1995, 1994 and 1993, are approximately $1.010, $1.000 and $.977,
respectively, per MMBtu, of qualified gas produced, must be used in the year in
which they originated and cannot be carried forward or back. During 1994, the
Company entered into a transaction which allocated substantially all of its
Devonian Shale tax credits to a third party (Note 3). Therefore, no Devonian
Shale tax credits were included in the 1995 and 1994 tax calculations. For
1993, Devonian Shale tax credits expected to be generated from qualified wells
were reflected as reductions of future income tax expense on gas and oil
producing activities.
Year Ended December 31,
--------------------------
1995 1994 1993
---- ---- ----
(In thousands)
Future cash inflows $344,066 $275,745 $225,423
Future production and development costs (137,973) (108,241) (82,499)
Future income tax expense (52,524) (42,915) (33,874)
-------- -------- --------
Future net cash flows 153,569 124,589 109,050
10% annual discount for estimated timing
of cash flows (90,378) (77,184) (65,395)
-------- -------- --------
Standardized measure of discounted
future net cash flows $ 63,191 $ 47,405 $ 43,655
======== ======== ========
Approximately 93 percent of the Company's reserves are natural gas
reserves, the price for which has increased since year-end 1995. The following
table summarizes the principal sources of change in the standardized measure of
discounted future cash flows:
Year Ended December 31,
--------------------------
1995 1994 1993
---- ---- ----
(In thousands)
Sales and transfers of gas and oil
produced, net of production costs ($8,442) ($8,706) ($7,245)
Net changes in prices, production and
development costs, and quality
estimates 41,458 26,825 48,702
Addition of proved undeveloped reserves 11,049 16,039 17,590
Development costs incurred during the
period (5,476) (9,578) (5,479)
Accretion of discount 7,718 6,540 3,967
Net change in income taxes (9,609) (9,041) (15,347)
Other, including changes in the discount
other than due to accretion (20,912) (18,329) (29,689)
------- ------- -------
$15,786 $ 3,750 $12,499
======= ======= =======
It is necessary to emphasize that the data presented above should not be
viewed as necessarily representing the expected cash flow from, or current value
of, existing proved reserves since the computations are based on a large number
of estimates and arbitrary assumptions. Reserve quantities cannot be measured
with precision and their estimation requires many judgmental determinations and
frequent revisions. The required projection of production and related
expenditures over time requires further estimates with respect to pipeline
availability, rates of demand, and governmental control, among other factors.
Furthermore, actual prices and costs are likely to be substantially different
from the current prices and costs utilized in the computation of reported
amounts. In addition, the reported data are applicable only to gas and oil
reserves classified as proved; no amounts are included with respect to
additional reserves that may become proved in the future. Any analysis or
evaluation of the reported amounts should give specific recognition to the
computational methods utilized and the limitations inherent therein.
Item 9. Changes In and Disagreements With Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
None.
PART IV
Item 14. Exhibits and Reports on Form 8-K
--------------------------------
(a) 1. and 2. Financial Statements
--------------------
Financial Statements included in this report:
Alamco, Inc., a Delaware corporation
Independent Auditor's Report
Consolidated Statement of Income for the
Years Ended December 31, 1995, 1994 and 1993
Consolidated Balance Sheet as of December 31, 1995 and 1994
Consolidated Statement of Changes in Stockholders' Equity for the
Years Ended December 31, 1995, 1994 and 1993
Consolidated Statement of Cash Flows for the
Years Ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Signatures
- ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this amendment number 2 to be signed
on its behalf of the undersigned, thereunto duly authorized.
ALAMCO, INC.
(Registrant)
By: /s/ John L. Schwager
----------------------------------
John L. Schwager, President, Chief Executive
Officer, Principal Executive Officer and
Principal Financial Officer
Dated: January 15, 1997
INDEX TO EXHIBITS
The following exhibits to this report are filed herewith or, if marked with an
asterisk (*), are incorporated herein by reference:
Exhibit Prior Filing or Subsequential
No. Description Page No. Herein
21.1 Subsidiaries of the Company:
HAWG Hauling & Disposal, Inc., a
West Virginia corporation
Alamco-Delaware, Inc., a
Delaware corporation
Phoenix-Alamco Ventures, a
West Virginia limited liability
23.1 Independent Auditors Consent Filed herewith
dated January 15, 1997
27 Financial Data Schedule Filed herewith
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
Alamco, Inc. and subsidiaries on Form S-8 (Registration Nos. 33-61843, 33-75500
and 33-86452) of our report dated February 28, 1996, on our audits of the
consolidated financial statements of Alamco, Inc. and subsidiaries as of
December 31, 1995 and 1994, and for the years ended December 31, 1995, 1994 and
1993, which report is included in the Annual Report on Form 10-K/A for the year
ended December 31, 1995.
/s/ Coopers & Lybrand L.L.P.
600 Grant Street
Pittsburgh, Pennsylvania
January 15, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
statement of income and balance sheet and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,297
<SECURITIES> 0
<RECEIVABLES> 3,175
<ALLOWANCES> 59
<INVENTORY> 62
<CURRENT-ASSETS> 6,991
<PP&E> 83,816
<DEPRECIATION> 32,201
<TOTAL-ASSETS> 59,900
<CURRENT-LIABILITIES> 6,381
<BONDS> 13,674
0
0
<COMMON> 476
<OTHER-SE> 30,020
<TOTAL-LIABILITY-AND-EQUITY> 59,900
<SALES> 16,800
<TOTAL-REVENUES> 18,539
<CGS> 7,354
<TOTAL-COSTS> 4,271
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,188
<INCOME-PRETAX> 2,090
<INCOME-TAX> 811
<INCOME-CONTINUING> 1,279
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,279
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0
</TABLE>
