<PAGE> 1
UNITED STATES
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 and
Exchange Act of 1934 For the Period Ended June 30, 1995
[ ] 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 0-10526
ALEXANDER ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
OKLAHOMA 73-1088777
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
701 CEDAR LAKE BOULEVARD 73114-7800
OKLAHOMA CITY, OKLAHOMA (Zip Code)
(Address of principal offices)
(405) 478-8686
(Registrant's telephone number, including area code)
NOT APPLICABLE
(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
----- -----
Outstanding shares of $.03 par value common stock at August 11, 1995:
12,441,756
<PAGE> 2
ALEXANDER ENERGY CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - June 30, 1995 (unaudited) and
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Condensed Consolidated Statements of Operations (unaudited) - Three months and
six months ended June 30, 1994 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Condensed Consolidated Statements of Cash Flows (unaudited) - Six months ended
June 30, 1994 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-11
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ALEXANDER ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Information at June 30, 1995 is unaudited.)
ASSETS
<TABLE>
<CAPTION>
December 31, June 30,
1994 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 792,752 $ 1,173,552
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,402,352 4,574,987
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . 451,755 837,565
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 6,646,859 6,586,104
Properties and equipment, less accumulated amortization and
depreciation of $38,330,143 as of December 31, 1994 and $42,698,950
as of June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,545,171 90,175,720
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,622,105 1,629,686
------------ ------------
$ 99,814,135 $ 98,391,510
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . $ 11,211,748 $ 8,492,094
Long-term debt due within one year . . . . . . . . . . . . . . . . . . . . 1,016,253 1,020,020
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 12,228,001 9,512,114
Long-term debt due after one year (Note 5) . . . . . . . . . . . . . . . . . 46,513,732 48,498,457
Noncurrent gas balancing, gas prepayments and
other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . 4,047,859 4,168,525
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,800,000 2,416,000
Stockholders' equity:
Preferred stock - none issued and outstanding . . . . . . . . . . . . . . . --- ---
Common stock - issued - 12,271,563 and 12,279,756 shares at
December 31, 1994 and June 30, 1995, respectively . . . . . . . . . . . 368,147 368,393
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,405,383 39,630,817
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,548,987) (6,202,796)
------------ ------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 34,224,543 33,796,414
------------ ------------
$ 99,814,135 $ 98,391,510
============ ============
</TABLE>
See accompanying notes.
1
<PAGE> 4
ALEXANDER ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Notes 1 and 2)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------------- ------------------------------
1994 1995 1994 1995
----------- ----------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales . . . . . . . . . . . . $ 4,286,327 $ 4,565,975 $ 8,857,621 $ 9,089,608
Interest and other (Note 3) . . . . . . . 94,558 115,604 470,091 150,625
Management fees and well operator
reimbursements . . . . . . . . . . . . 585,501 716,418 1,201,894 1,414,570
----------- ----------- ----------- -----------
Total revenues . . . . . . . . . 4,966,386 5,397,997 10,529,606 10,654,803
----------- ----------- ----------- -----------
Costs and expenses:
Direct lifting costs . . . . . . . . . . 1,021,585 1,355,524 2,092,797 2,761,513
Gross production and severance tax . . . 266,642 280,057 544,193 557,517
Amortization and depreciation . . . . . . 1,399,742 2,111,320 2,755,864 4,368,807
General and administrative expenses . . . 1,002,174 974,977 2,058,720 1,721,640
Interest expense . . . . . . . . . . . . 533,803 1,012,626 994,032 1,983,135
Nonrecurring abandoned merger costs
(Note 4) . . . . . . . . . . . . . . . --- --- --- 300,000
----------- ----------- ----------- -----------
Total costs and expenses . . . . 4,223,946 5,734,504 8,445,606 11,692,612
----------- ----------- ----------- -----------
Income (loss) before provision (benefit)
for income taxes . . . . . . . . . . . . 742,440 (336,507) 2,084,000 (1,037,809)
Provision (benefit) for deferred income
taxes . . . . . . . . . . . . . . . . . . 252,000 (124,000) 648,000 (384,000)
----------- ----------- ----------- -----------
Net income (loss) . . . . . . . . . . . . . $ 490,440 $ (212,507) $ 1,436,000 $ (653,809)
=========== =========== =========== ===========
Weighted average common and common
equivalent shares outstanding . . . . . . 12,170,088 12,277,210 12,201,038 12,274,913
=========== =========== =========== ===========
Net income (loss) per common and common
equivalent share . . . . . . . . . . . . $ .04 $ (.02) $ .12 $ (.05)
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
2
<PAGE> 5
ALEXANDER ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Notes 1 and 2)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
----------------------------
1994 1995
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,436,000 $ (653,809)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Amortization and depreciation . . . . . . . . . . . . . . . . . . . . . . 2,755,864 4,368,807
Amortization of deferred compensation for stock awards . . . . . . . . . . --- 202,870
Accretion of imputed interest . . . . . . . . . . . . . . . . . . . . . . . 110,250 74,850
Provision (benefit) for deferred income taxes . . . . . . . . . . . . . . 648,000 (384,000)
Gain on sale of other property and equipment . . . . . . . . . . . . . . . (130,750) ---
Decrease in accounts receivable . . . . . . . . . . . . . . . . . . . . . . 324,629 827,365
Increase (decrease) in prepaid expenses and other . . . . . . . . . . . . . 224,847 (385,810)
Decrease in accounts payable and accrued liabilities . . . . . . . . . . . (3,178,286) (2,719,654)
Increase (decrease) in noncurrent gas balancing liability and
other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . (882,177) 45,816
----------- ------------
Net cash provided by operating activities . . . . . . . . . . . . . . . . 1,308,377 1,376,435
Cash flows from investing activities:
Increase in other assets, net . . . . . . . . . . . . . . . . . . . . . . . . (57,638) (7,581)
Additions to properties and equipment . . . . . . . . . . . . . . . . . . . . (9,300,012) (3,052,531)
Proceeds from the sale of other property and equipment . . . . . . . . . . . 505,000 53,175
----------- -----------
Net cash used by investing activities . . . . . . . . . . . . . . . . . . (8,852,650) (3,006,937)
Cash flows from financing activities:
Proceeds from borrowings on long-term debt . . . . . . . . . . . . . . . . . 7,600,000 3,000,000
Payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . (1,213,191) (1,011,508)
Proceeds from exercise of employee stock options . . . . . . . . . . . . . . 207,000 22,810
Collection of stock subscription receivable . . . . . . . . . . . . . . . . . 645,000 ---
----------- -----------
Net cash provided by financing activities . . . . . . . . . . . . . . . 7,238,809 2,011,302
----------- -----------
Net increase (decrease) in cash and cash equivalents during the period (305,464) 380,800
----------- -----------
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . 1,294,597 792,752
----------- -----------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . $ 989,133 $ 1,173,552
=========== ===========
</TABLE>
Interest paid amounted to $839,503 and $1,842,660 for the six months ended June
30, 1994 and 1995, respectively.
See accompanying notes.
3
<PAGE> 6
ALEXANDER ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated results presented for the six-month periods ended June
30, 1994 and 1995 are unaudited but the management of Alexander Energy
Corporation believes that all adjustments, which consist only of normal
recurring adjustments, necessary for a fair presentation of the consolidated
results of operations for the periods have been included. Amounts for the
period ended June 30, 1994 have been restated to give effect for the 1994
pooling of interests between the company and American Natural Energy
Corporation ("ANEC"). The consolidated results are not necessarily indicative
of those to be expected for the full year. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1994.
2. In November 1994, the Company acquired certain producing gas properties,
located principally in Oklahoma and Arkansas, from JMC Exploration, Inc. (the
"JMC Acquisition") for a net purchase price of approximately $18.2 million,
including the assumption of a net gas balancing liability of $320,000. The
operations of the JMC Acquisition have been included in the statements of
operations and cash flows beginning November 15, 1994.
The following unaudited pro forma combined data gives effect to the JMC
Acquisition as if such transaction had been consummated as of January 1, 1994.
The pro forma information is based on the historical financial statements of
the Company and the JMC Acquisition, giving effect to the transaction under the
purchase method of accounting. The unaudited pro forma combined data are
presented for illustrative purposes and are not necessarily indicative of the
actual results that would have occurred had the acquisition been consummated as
of January 1, 1994, or of future results of the combined operations. The data
reflect adjustments for (i) amortization and depreciation of the JMC
Acquisition's oil and gas properties, (ii) incremental general and
administrative expenses of the JMC Acquisition, (iii) incremental interest
expense resulting from the borrowings on the new credit facility used to fund
the cash requirements of the acquisition, and (iv) certain other pro forma
adjustments.
<TABLE>
<CAPTION>
Six months ended
June 30, 1994
----------------------
(In thousands,
except per share data)
<S> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,604
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,805
Net income per common share and common equivalent share . . . . . . . . . . . . . .15
</TABLE>
3. In the three-month period ended March 31, 1994, the Company recognized
approximately $235,000 ($135,000 net of related income tax effect) of other
revenue in connection with the finalization and termination of a take-or-pay
contract.
4. On May 10, 1995, the Company announced the termination of discussions
regarding the possible outstanding merger with Abraxas Petroleum Corporation
and, accordingly, expensed $300,000 of related costs in the three-month period
ended March 31, 1995.
4
<PAGE> 7
5. As of March 31, 1995 and June 30, 1995 the Company was not in
compliance with the interest coverage ratio covenant contained in the Company's
revolving credit facility. As of June 30, 1995, the Company was also not in
compliance with the current ratio covenant, as defined, contained in the
agreement. In July 1995, the Company obtained a written waiver from the lender
for the March 31, 1995 interest coverage ratio violation and an amendment
reducing the ratio from 4.0:1.0 to 3.0:1.0 for the quarterly periods ended June
30, 1995, September 30, 1995 and December 31, 1995 and from 4.0:1.0 to 3.5:1.0
for the quarterly periods ended March 31, 1996 and June 30, 1996; thereafter,
the ratio will remain 4.0:1.0. This amendment also reduced the current ratio
covenant from 1.0:1.0 to .85:1.0 for the quarter ended June 30, 1995. In August
1995, the lender approved a second amendment to the interest coverage ratio
covenant for the quarterly-period ended September 30, 1995. Upon execution of
the amendment, the Company will be required to satisfy an interest coverage
ratio of 2.8:1.0 instead of 3.0:1.0. After such amendments, the Company expects
to comply with the covenants of the credit facility in future periods.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
On July 19, 1994, Alexander Energy Corporation completed the Merger
with American Natural Energy Corporation ("ANEC"). The Merger was accounted
for under the pooling of interests method of accounting. Accordingly, the
Merger has been given retroactive effect and the Company's financial statements
for periods prior to the merger represent the combined financial statements of
the previously separate entities adjusted to conform ANEC's accounting policies
to those used by the Company.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1994 AND 1995
Total Revenues; Oil and Gas Sales. Total revenues increased for the
three months ended June 30, 1995 compared to the three months ended June 30,
1994. The increase in total revenues was comprised of increased oil and
natural gas sales and increased well operator reimbursements.
The increased oil and natural gas sales are attributable to higher
production volumes for natural gas as a result of the wells drilled during 1994
and the first quarter of 1995 and the producing gas properties acquired from
JMC Exploration, Inc. ("JMC Acquisition") in November 1994, offset by lower oil
production and a decrease in product price for natural gas.
Oil revenues decreased by 10% due to a 20% decrease in production
quantities and a 11% increase in the average price per Bbl of production for
the three months ended June 30, 1995 as compared to 1994. Natural gas revenues
increased by 12% due to a 28% increase in production quantities, offset by a
13% decrease in the average price per Mcf of natural gas produced for the three
months ended June 30, 1995 as compared to 1994.
Well Operator and Management Fees. Well operator and management fees
increased 22% for the three months ended June 30, 1995 compared to the same
period in 1994. This increase is attributable to an increase in the number of
operated producing properties related to the 1994 drilling program and the JMC
Acquisition.
Oil and Gas Prices. Oil prices received by the Company increased 11%
during the three months ended June 30, 1995, resulting in an average price of
$18.32 per Bbl compared to the average price per
5
<PAGE> 8
Bbl of $16.45 for the same period in 1994. Revenues and operating results for
future periods will continue to be impacted by price fluctuations which are
largely influenced by market conditions and the quantity of the oil sold by
OPEC.
During the three months ended June 30, 1995, the Company experienced a
decrease in natural gas prices. In recent years, the Company has been forced
to sell much of its natural gas under short-term (typically month-to-month)
contracts. Natural gas prices received by the Company decreased 13% during the
three months ended June 30, 1995, resulting in an average price of $1.52 per
Mcf compared to an average price per Mcf of $1.74 for the same period in 1994.
Future sales prices will be dependent upon the future supply and demand of
natural gas in the market and the quantities of gas sold under short-term
contracts as opposed to quantities sold under long-term contracts, which
currently command higher prices. The Company does not, however, expect any
significant increase in the price of natural gas based upon historical trends
until the fourth quarter of 1995.
Oil and Gas Production. Production and average prices received per
Bbl and Mcf are as follows:
<TABLE>
<CAPTION>
Three months ended
June 30,
----------------------------
1994 1995
---------- ----------
<S> <C> <C>
Crude oil:
Production (Bbls) . . . . . . . . . . . . . . . . . . . . . . . . 64,546 51,958
Average price received per barrel . . . . . . . . . . . . . . . . $16.45 $18.32
Natural gas:
Production (Mcf) . . . . . . . . . . . . . . . . . . . . . . . . . 1,851,060 2,378,207
Average price received per Mcf . . . . . . . . . . . . . . . . . . $ 1.74 $ 1.52
</TABLE>
Oil and natural gas production volumes for the three months ended June 30,
1995 on an Mcf equivalent (Mcfe) basis exceeded such volumes for the same
period in 1994 by 20%. This increase in production was from participation in
new wells drilled during the three months ended March 31, 1995 and during the
year ended 1994, from recompletions in the Cotton Valley properties in 1994 by
the Company and from production on properties acquired in the JMC Acquisition.
Although the Company experienced some curtailments of gas production, these
curtailments have not been material. The curtailments were primarily
attributable to excess supply and price competitiveness with oil. There can be
no assurance that the Company will not experience future curtailments.
Total Expenses; Oil and Gas Operating Expenses. Total costs and expenses
increased for the three months ended June 30, 1995 compared to the same period
in 1994. Oil and gas operating expenses increased for the three months ended
June 30, 1995 compared to the same period in 1994, due to additional operating
expenses attributable to a greater number of producing wells as previously
discussed. Oil and gas operating expenses increased 5% on an Mcfe basis to
$.61 for the three months ended June 30, 1995 compared to $.58 on an Mcfe basis
for the same period in 1994 due to several workovers on existing properties in
the latest period.
Amortization and Depreciation. The amortization and depreciation rate per
dollar of oil and gas sales for the three months ended June 30, 1995 increased
to $.46 compared to $.33 for the same period in 1994.
6
<PAGE> 9
The increased rate for the three months ended June 30, 1995 was due to the
decreased estimated future gross revenues resulting from the lower product
price for natural gas for the three months ended June 30, 1995. The
amortization and depreciation rates for future periods will increase or
decrease corresponding with the fluctuations in oil and gas prices, reserve
volumes and production.
General and Administrative Expenses. General and administrative expenses
decreased for the three months ended June 30, 1995 compared to the same period
in 1994. This decrease was primarily related to a lesser number of personnel
for the three months ended June 30, 1995 compared to the same period in 1994,
as 1994 included all personnel and other general and administrative expenses of
ANEC, some of which were not retained following the merger in July 1994,
partially offset by a decrease in amounts capitalized due to reduced
exploration and development activities. Well operator and management fees
offset 73% of net general and administrative expenses during the three months
ended June 30, 1995 compared to 58% during the same period in 1994.
Interest Expense. Interest expense increased for the three months ended
June 30, 1995 compared to the same period in 1994 due to an increase in the
outstanding borrowings, primarily due to the JMC Acquisition and the 1994
drilling program. The Company's credit facility bears interest at LIBOR plus
1.5% (aggregate rate of 7.5625% at June 30, 1995).
Taxes. As a result of the Company's and ANEC's secondary public offerings
in 1993, both entities had an ownership change pursuant to Section 382 of the
Internal Revenue Code. Accordingly, in 1994 and 1995, the Company is providing
income taxes and/or accruing benefits at near statutory rates after considering
permanent differences.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1994 AND 1995
Total Revenues; Oil and Gas Sales. Total revenues increased for the six
months ended June 30, 1995 compared to the six months ended June 30, 1994. The
increase in total revenues was comprised of increased oil and natural gas sales
and increased well operator reimbursements.
The increased oil and natural gas sales are attributable to higher
production volumes for natural gas as a result of the wells drilled during 1994
and the first quarter of 1995 and the producing gas properties acquired from
JMC Exploration, Inc. ("JMC Acquisition") in November 1994, offset by lower
oil production and a decrease in product price for natural gas.
Oil revenues increased by 4% due to a 12% decrease in production
quantities and a 18% increase in the average price per Bbl of production for
the six months ended June 30, 1995 as compared to 1994. Natural gas revenues
increased by 2% due to a 30% increase in production quantities, offset by a 21%
decrease in the average price per Mcf of natural gas produced for the six
months ended June 30, 1995 as compared to 1994.
Well Operator and Management Fees. Well operator and management fees
increased 18% for the six months ended June 30, 1995 compared to the same
period in 1994. This increase is attributable to an increase in the number of
operated producing properties related to the 1994 drilling program and the JMC
Acquisition.
7
<PAGE> 10
Interest and Other Revenues. Interest and other revenue (excluding the
gains from the Company's sale of other property and equipment of approximately
$130,000 and the finalization and termination of a take-or-pay contract of
approximately $235,000 in 1994) for the six months ended June 30, 1995 was
comparable to that in 1994.
Oil and Gas Prices. Oil prices received by the Company increased 18%
during the six months ended June 30, 1995, resulting in an average price of
$17.59 per Bbl compared to the average price per Bbl of $14.86 for the same
period in 1994. Revenues and operating results for future periods will
continue to be impacted by price fluctuations which are largely influenced by
market conditions and the quantity of the oil sold by OPEC.
During the six months ended June 30, 1995, the Company experienced a
decrease in natural gas prices. In recent years, the Company has been forced
to sell much of its natural gas under short-term (typically month-to-month)
contracts. Natural gas prices received by the Company decreased 21% during the
six months ended June 30, 1995, resulting in an average price of $1.48 per Mcf
compared to an average price per Mcf of $1.88 for the same period in 1994.
Future sales prices will be dependent upon the future supply and demand of
natural gas in the market and the quantities of gas sold under short-term
contracts as opposed to quantities sold under long-term contracts, which
currently command higher prices. The Company does not, however, expect any
significant increase in the price of natural gas based upon historical trends
until the fourth quarter of 1995.
Oil and Gas Production. Production and average prices received per Bbl
and Mcf are as follows:
<TABLE>
<CAPTION>
Six months ended
June 30,
----------------------------
1994 1995
---------- ----------
<S> <C> <C>
Crude oil:
Production (Bbls) . . . . . . . . . . . . . . . . . . . . . . . . 120,976 106,327
Average price received per barrel . . . . . . . . . . . . . . . . $14.86 $17.59
Natural gas:
Production (Mcf) . . . . . . . . . . . . . . . . . . . . . . . . . 3,758,434 4,881,070
Average price received per Mcf . . . . . . . . . . . . . . . . . . $ 1.88 $ 1.48
</TABLE>
Oil and natural gas production volumes for the six months ended June 30,
1995 on an Mcf equivalent (Mcfe) basis exceeded such volumes for the same
period in 1994 by 23%. This increase in production was from participation in
new wells drilled during the three months ended March 31, 1995 and during the
year ended 1994, from recompletions in the Cotton Valley properties in 1994 by
the Company and from production on properties acquired in the JMC Acquisition.
Although the Company experienced some curtailments of gas production, these
curtailments have not been material. The curtailments were primarily
attributable to excess supply and price competitiveness with oil. There can be
no assurance that the Company will not experience future curtailments.
Oil and natural gas production volumes for the year ended December 31,
1995 are expected to be higher than those for 1994. This expected increase in
production should be from participation in new wells
8
<PAGE> 11
to be drilled in 1995, from additional production attributable to properties in
the JMC Acquisition and from additional production attributable to
recompletions during 1994 in the Cotton Valley properties.
Total Expenses; Oil and Gas Operating Expenses. Total costs and expenses
increased for the six months ended June 30, 1995 compared to the same period in
1994. Oil and gas operating expenses increased for the six months ended June
30, 1995 compared to the same period in 1994, due to additional operating
expenses attributable to a greater number of producing wells as previously
discussed. Oil and gas operating expenses increased 2% on an Mcfe basis to
$.60 for the six months ended June 30, 1995 compared to $.59 on an Mcfe basis
for the same period in 1994.
Amortization and Depreciation. The amortization and depreciation rate per
dollar of oil and gas sales for the six months ended June 30, 1995 increased to
$.48 compared to $.31 for the same period in 1994. The increased rate for the
six months ended June 30, 1995 was due to the decreased estimated future gross
revenues resulting from the lower product price for natural gas for the six
months ended June 30, 1995. The amortization and depreciation rates for future
periods will increase or decrease corresponding with the fluctuations in oil
and gas prices, reserve volumes and production.
General and Administrative Expenses. General and administrative expenses
decreased for the six months ended June 30, 1995 compared to the same period in
1994. This decrease was primarily related to a lesser number of personnel for
the six months ended June 30, 1995 compared to the same period in 1994, as 1994
included all personnel and other general and administrative expenses of ANEC,
some of which were not retained following the merger in July 1994, partially
offset by a decrease in amounts capitalized due to reduced exploration and
development activities. Well operator and management fees offset 82% of net
general and administrative expenses during the six months ended June 30, 1995
compared to 58% during the same period in 1994.
Interest Expense. Interest expense increased for the six months ended
June 30, 1995 compared to the same period in 1994 due to an increase in the
outstanding borrowings, primarily due to the JMC Acquisition and the 1994
drilling program. The Company's credit facility bears interest at LIBOR plus
1.5% (aggregate rate of 7.5625% at June 30, 1995).
Nonrecurring Abandoned Merger Costs. On May 10, 1995, the Company
announced the termination of discussions regarding the possible outstanding
merger with Abraxas Petroleum Corporation and, accordingly, expensed $300,000
of related costs in the six-month period ended June 30, 1995.
Taxes. As a result of the Company's and ANEC's secondary public offerings
in 1993, both entities had an ownership change pursuant to Section 382 of the
Internal Revenue Code. Accordingly, in 1994 and 1995, the Company is providing
income taxes and/or accruing benefits at near statutory rates after considering
permanent differences.
LIQUIDITY AND CAPITAL RESOURCES
General. The Company's capital requirements relate primarily to
exploitation, development, exploration and acquisition activities. In general,
because the Company's oil and gas reserves are depleted by production, the
success of its business strategy is dependent upon a continuous exploitation,
development, exploration and acquisition program.
9
<PAGE> 12
Historically, the Company has funded its capital requirements through cash
flow from operations, bank borrowings, various carried interest arrangements
(whereby other parties paid a portion of the Company's share of costs) and
equity sales. During 1994, the Company executed a new credit facility with a
bank to provide additional borrowing capacity under a revolving line of credit.
See Long-Term Debt.
The Company's capital resources consist primarily of cash flow from
operations, available borrowing capacity under a new credit facility and
proceeds from the sale of non-key properties which the Company believes may
aggregate as much as $40 million in the last six months of 1995. The Company
is considering opportunities existing to supplement its working capital through
other financing arrangements, including the possible issuance of long-term
debentures. In August 1995, the Company elected to defer its proposed issuance
of long-term debentures under current conditions. As of June 30, 1995, the
Company has deferred approximately $130,000 of costs associated with this
offering (which the Company expects to ultimately aggregate approximately
$350,000) pending a decision as to whether to pursue this financing option in
the third or fourth quarter of 1995.
Cash Flows. For the six months ended June 30, 1995, the Company's cash
provided by operating activities was approximately $1.4 million compared to
approximately $1.3 million for the same period in 1994. The Company has a $4.0
million gas balancing liability attributable to 3.0 Bcf of natural gas
production in excess of the Company's entitled natural gas volumes. The
majority of these excess sales are from properties that have gas balancing
agreements which provide for recoupments by the underproduced owners from 25%
of volumes attributable to the Company's interest. At June 30, 1995,
approximately $900,000 was included in current liabilities associated with such
excess sales liability.
Net cash used by investing activities for the six months ended June 30,
1995 decreased approximately $5.8 million from the same period in 1994.
Additions to oil and gas properties decreased by approximately $6.2 million due
to the Company's curtailment of capital expenditures during the first six
months of 1995 in response to the significantly lower product price for natural
gas.
Net cash provided by financing activities was approximately $2.0 million
for the six months ended June 30, 1995 compared to net cash provided by
financing activities of $7.2 for the corresponding period in 1994. Net cash
provided for the six months ended June 30, 1995 resulted from borrowings on
long-term debt. At June 30, 1995, the Company had a working capital deficit of
$2.9 million and had approximately $1.5 million available under its revolving
line of credit. (See "Long Term Debt").
Long-Term Debt. The Company negotiated a new credit facility (the "Credit
Agreement") with a bank in the fourth quarter of 1994 which provides for a
revolving line of credit. The borrowing base and outstanding borrowings were
$46.5 million and $45 million, respectively, at June 30, 1995. The borrowing
base, which principally relates to the Company's oil and gas reserve base, is
subject to a semiannual redetermination each April and October until January 1,
1997, at which time the borrowing base is reduced quarterly by 1/16th through
December 31, 2000. In addition to the foregoing semiannual redeterminations,
the lender has the right, at its discretion, to redetermine the borrowing base,
subject to certain limitations, at any time until the stated maturity of
December 31, 2000.
The April 1995 semiannual redetermination was completed by the bank with
the significant decrease in product price for natural gas resulting in a
reduction in the borrowing base to $46.5 million. This reduction in
availability is not expected to cause a significant curtailment in the
Company's revised capital expenditures program (which anticipates total
remaining 1995 capital expenditures of approximately $5
10
<PAGE> 13
million), based on the Company's expected cash flows, availability under the
Credit Agreement and proceeds from the sale of non-key oil and gas properties,
which sale proceeds are expected to total $4.1 million.
Under the terms of the Credit Agreement, outstanding borrowings bear
interest based upon three variable indices plus applicable margins. The
Company has the ability to choose the index the rate will be based on and can
fix the rate for a period of up to one year. At June 30, 1995, all outstanding
borrowings under the line bear interest based upon the one-month London
Interbank Offering Rate plus the applicable margin (aggregate rate of 7.5625%).
Borrowings under the Credit Agreement are unsecured with a negative
pledge, as specified in the Agreement, on all oil and gas properties. Terms of
the Credit Agreement include, among other things, requirements to maintain
minimum amounts of tangible net worth (as defined) and a minimum ratio of
current assets to current liabilities; and limitations on investments,
indebtedness, capital expenditures, sales of oil and gas properties and
equipment, liquidations, mergers, consolidations, acquisitions, gas balancing
and gas prepayment liabilities and the payment of dividends on common stock.
As of March 31, 1995 and June 30, 1995 the Company was not in compliance
with the interest coverage ratio covenant contained in the Company's revolving
credit facility. As of June 30, 1995, the Company was also not in compliance
with the current ratio covenant, as defined, contained in the agreement. In
July 1995, the Company obtained a written waiver from the lender for the March
31, 1995 interest coverage ratio violation and an amendment reducing the ratio
from 4.0:1.0 to 3.0:1.0 for the quarterly periods ended June 30, 1995,
September 30, 1995 and December 31, 1995 and from 4.0:1.0 to 3.5:1.0 for the
quarterly periods ended March 31, 1996 and June 30, 1996; thereafter, the ratio
will remain 4.0:1.0. This amendment also reduced the current ratio covenant
from 1.0:1.0 to .85:1.0 for the quarter ended June 30, 1995. In August 1995,
the lender approved a second amendment to the interest coverage ratio covenant
for the quarterly- period ended September 30, 1995. Upon execution of the
amendment, the Company will be required to satisfy an interest coverage ratio
of 2.8:1.0 instead of 3.0:1.0. After such amendments, the Company expects to
comply with the covenants of the credit facility in future periods.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
A petition was filed in Oklahoma County District Court on July 25,
1995, against the Company and its directors. The suit purports to be a
derivative action on behalf of the Company against the Board of Directors. The
suit asks that the Company's share rights plan and certain severance contracts
and policies be invalidated, and seeks an injunction against the Company's
private debentures offering and damages to the Company from the directors in
excess of $10,000. In August 1995, the Company elected to defer its proposed
private debentures offering under current conditions. The Company believes the
lawsuit is without merit and that it will be vigorously defended. No damages
are being sought against the Company.
11
<PAGE> 14
Item 6. Exhibits and reports on Form 8-K
(a) (i) Exhibit 11 - Computation of Earnings (Loss) Per Share
(ii) Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the three months
ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ALEXANDER ENERGY CORPORATION
DATE August 11, 1995 /s/ J. L. David
J. L. David, Executive Vice-President
DATE August 11, 1995 /s/ David E. Grose
David E. Grose, Vice President, Treasurer
and Chief Financial Officer
12
<PAGE> 15
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
EX-11 Computation of Earnings (Loss) Per Share
EX-27 Financial Data Schedule
<PAGE> 1
ALEXANDER ENERGY CORPORATION
COMPUTATION OF EARNINGS (LOSS) PER SHARE
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
For the Three Months Ended
------------------------------------------
March 31, June 30,
------------ ------------
<S> <C> <C>
1995
Weighted average common and common
equivalent shares:
Common stock outstanding from
beginning of period . . . . . . . . . . . 12,271,563 12,273,993
Common stock issued . . . . . . . . . . . . 1,053 3,217
Common stock equivalents . . . . . . . . . --- ---
------------ ------------
12,272,616 12,277,210
============ ============
Net loss $ (441,302) $ (212,507)
============ ============
Net loss per common and common
equivalent share . . . . . . . . . . . . $ (.04) $ (.02)
============ ============
Weighted average shares (sum of quarters above divided by two) . . . . . . . . . . . . . . . 12,274,913
===========
Net loss (sum of quarters above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (653,809)
===========
Net loss per common and common equivalent share . . . . . . . . . . . . . . . . . . . . . . . $ (.05)
===========
1994
Weighted average common and common
equivalent shares:
Common stock outstanding from
beginning of period . . . . . . . . . . . 11,715,504 11,715,504
Common stock issued . . . . . . . . . . . . --- ---
Common stock equivalents . . . . . . . . . 516,483 454,584
------------ ------------
12,231,987 12,170,088
============ ============
Net income $ 945,560 $ 490,440
============ ============
Net income per common and common
equivalent share . . . . . . . . . . . . $ .08 $ .04
============ ============
Weighted average shares (sum of quarters above divided by two) . . . . . . . . . . . . . . . 12,201,038
===========
Net income (sum of quarters above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,436,000
===========
Net income per common and common equivalent share . . . . . . . . . . . . . . . . . . . . . . $ .12
===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONDENSED CONSOLIDATED BALANCE SHEET, CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10Q
JUNE 30, 1995
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,173,552
<SECURITIES> 0
<RECEIVABLES> 4,574,987
<ALLOWANCES> 0
<INVENTORY> 355,000
<CURRENT-ASSETS> 6,586,104
<PP&E> 132,874,670
<DEPRECIATION> 42,698,950
<TOTAL-ASSETS> 98,391,510
<CURRENT-LIABILITIES> 9,512,114
<BONDS> 48,498,457
<COMMON> 368,393
0
0
<OTHER-SE> 33,428,021
<TOTAL-LIABILITY-AND-EQUITY> 98,391,510
<SALES> 9,089,608
<TOTAL-REVENUES> 10,654,803
<CGS> 3,319,030
<TOTAL-COSTS> 11,692,612
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,983,135
<INCOME-PRETAX> (1,037,809)
<INCOME-TAX> (384,000)
<INCOME-CONTINUING> (653,809)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (653,809)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
