<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
September 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 November 20, 1995:
12,452,105
<PAGE> 2
ALEXANDER ENERGY CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - September 30, 1995 (unaudited)
and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Condensed Consolidated Statements of Operations (unaudited) - Three months and
nine months ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . 2
Condensed Consolidated Statements of Cash Flows (unaudited) - Nine months ended
September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Notes to Condensed Consolidated Financial Statements (unaudited) . . . . . . . . . . . . . . 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 September 30, 1995 is unaudited.)
ASSETS
<TABLE>
<CAPTION>
December 31, September 30,
1994 1995
----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 792,752 $ 2,823,336
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,402,352 4,321,811
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . 451,755 707,574
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 6,646,859 7,852,721
Properties and equipment, less accumulated amortization and
depreciation of $38,330,143 as of December 31, 1994 and $44,716,768
as of September 30,1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 91,545,171 87,754,539
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,622,105 1,452,844
----------- -----------
$99,814,135 $97,060,104
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,771,468 $ 2,398,747
Gas balancing, deferred revenue and oil and gas proceeds . . . . . . . . . 4,440,280 5,268,258
Long-term debt due within one year . . . . . . . . . . . . . . . . . . . . 1,016,253 1,012,475
----------- -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 12,228,001 8,679,480
Long-term debt due after one year (Note 5) . . . . . . . . . . . . . . . . . 46,513,732 48,504,506
Noncurrent gas balancing, gas prepayments and
other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . 4,047,859 4,170,207
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,800,000 2,030,000
Stockholders' equity:
Preferred stock - none issued and outstanding . . . . . . . . . . . . . . . --- ---
Common stock - issued - 12,271,563 and 12,452,105 shares at
December 31, 1994 and September 30, 1995, respectively . . . . . . . . . 368,147 373,563
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,405,383 40,161,357
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,548,987) (6,859,009)
----------- -----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 34,224,543 33,675,911
----------- -----------
$99,814,135 $97,060,104
=========== ===========
</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 Nine months ended
September 30, September 30,
---------------------------- ----------------------------
1994 1995 1994 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales . . . . . . . . . . . . $ 4,392,116 $ 3,703,547 $13,250,116 $12,793,155
Well operator and management fees . . . . 687,770 667,455 1,888,770 2,082,025
Interest and other (Note 3) . . . . . . . 159,947 117,398 630,947 268,023
----------- ----------- ----------- -----------
Total revenues . . . . . . . . . . 5,239,833 4,488,400 15,769,833 15,143,203
----------- ----------- ----------- -----------
Costs and expenses:
Direct lifting costs . . . . . . . . . . . 1,454,461 1,082,042 3,546,461 3,843,555
Gross production and severance tax . . . . 264,101 227,161 809,101 784,678
Amortization and depreciation . . . . . . . 1,683,869 2,017,818 4,439,869 6,386,625
General and administrative expenses . . . . 937,672 772,606 2,996,672 2,494,246
Interest expense . . . . . . . . . . . . . 594,866 999,083 1,588,866 2,982,218
Nonrecurring expenses (Note 4) . . . . . . 2,148,422 431,903 2,148,422 731,903
----------- ----------- ----------- -----------
Total costs and expenses . . . . . 7,083,391 5,530,613 15,529,391 17,223,225
----------- ----------- ----------- -----------
Income (loss) before provision (benefit)
for income taxes . . . . . . . . . . . . . (1,843,558) (1,042,213) 240,442 (2,080,022)
Provision (benefit) for deferred income
taxes . . . . . . . . . . . . . . . . . . 102,000 (386,000) 750,000 (770,000)
----------- ----------- ----------- -----------
Net loss . . . . . . . . . . . . . . . . . $(1,945,558) $ (656,213) $ (509,558) $(1,310,022)
=========== =========== =========== ===========
Weighted average common and common
equivalent shares outstanding . . . . . . . 12,071,219 12,377,637 12,120,905 12,309,154
=========== =========== =========== ===========
Net loss per common and
common equivalent share . . . . . . . . . $(.16) $(.05) $(.04) $(.11)
===== ===== ===== =====
</TABLE>
See accompanying notes.
2
<PAGE> 5
ALEXANDER ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 1 and 2)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-----------------------------
1994 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (509,558) $ (1,310,022)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Provision for uncollectible accounts . . . . . . . . . . . . . . . . . --- 26,323
Amortization of deferred compensation for stock awards . . . . . . . . --- 304,308
Provision (benefit) for deferred income taxes . . . . . . . . . . . . . 750,000 (770,000)
Amortization and depreciation . . . . . . . . . . . . . . . . . . . . . 4,439,869 6,386,625
Accretion of imputed interest . . . . . . . . . . . . . . . . . . . . . 165,375 112,275
Gain on sale of other property and equipment . . . . . . . . . . . . . (130,750) ---
Changes in assets and liabilities
Decrease in accounts receivable . . . . . . . . . . . . . . . . . . 957,598 1,054,218
Decrease (increase) in prepaid expenses and other . . . . . . . . . 404,790 (255,819)
Decrease in accounts payable and accrued liabilities . . . . . . . (1,405,603) (3,544,743)
Increase (decrease) in noncurrent gas balancing liability, and
other noncurrent liabilities . . . . . . . . . . . . . . . . . . (631,086) 10,073
------------ ------------
Net cash provided by operating activities . . . . . . . . . . . . . . 4,040,635 2,013,238
Cash flows from investing activities:
Decrease in other assets, net . . . . . . . . . . . . . . . . . . . . . . 399,674 169,261
Additions to properties and equipment . . . . . . . . . . . . . . . . . . (13,467,094) (4,390,088)
Proceeds from the sale of other property and equipment . . . . . . . . . 3,828,000 1,794,095
------------ ------------
Net cash used by investing activities . . . . . . . . . . . . . . . . . (9,239,420) (2,426,732)
Cash flows from financing activities:
Proceeds from borrowings on long-term debt . . . . . . . . . . . . . . . 7,771,850 3,000,000
Payments on long-term and short-term debt . . . . . . . . . . . . . . . . (4,780,386) (1,013,004)
Exercise of employee stock options . . . . . . . . . . . . . . . . . . . 1,023,766 457,082
------------ ------------
Net cash provided by financing activities . . . . . . . . . . . . . . 4,015,230 2,444,078
------------ ------------
Net increase (decrease) in cash and cash equivalents during the period . . (1,183,555) 2,030,584
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . 1,294,597 792,752
------------ ------------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . $ 111,042 $ 2,823,336
============ ============
</TABLE>
Interest paid amounted to $1,261,524 and $2,771,535 for the nine months ended
September 30, 1994 and 1995.
See accompanying notes.
3
<PAGE> 6
ALEXANDER ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated results presented for the nine-month periods ended
September 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 September 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>
Nine months ended
September 30, 1994
--------------------------
(In thousands,
except per share data)
<S> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,381
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Net income per common share and common equivalent share . . . . . . . . . . . . . .00
</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. During August 1995, the Company postponed the "Senior
Note Offering" and deferred $432,000 of related
4
<PAGE> 7
costs. In the three-month period ended September 30, 1995 the Company expensed
this amount since the Senior Note Offering has not been reinitiated as of
November, 1995.
5. In connection with each of the three quarters ending September 30, 1995
the Company obtained written waivers from the lender for events of
noncompliance with the current and/or interest coverage ratio covenants of the
Company's revolving credit facility. In November 1995, the lender waived its
right to redetermine the borrowing base under the revolving credit facility
until December 31, 1995 and in lieu thereof, permanently reduced the maximum
commitment amount under the facility to $45 million. Additionally, the $45
million amount outstanding under this facility in November is to be reduced by
$1 million, payable in two equal installments of $500,000 in November and
December 1995.
The Company and the lender are currently negotiating terms and conditions
of a revised credit facility, the details of which are not yet final; however,
the company has obtained a letter from the lender confirming that no principal
amounts under such revised facility will be due within the next twelve months.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Total Revenues; Oil and Gas Sales. Total revenues decreased for the
three months ended September 30, 1995 compared to the three months ended
September 30, 1994. The decrease in total revenues was comprised of decreased
oil and natural gas sales, decreased well operator reimbursements and decreased
other revenues. The decreased oil and natural gas sales are attributable to
lower oil production and a decrease in product price for both oil and natural
gas offset by higher production volumes for natural gas as a result of the
wells drilled during 1994 and the producing gas properties acquired from JMC
Exploration, Inc. ("JMC Acquisition") in November 1994.
Oil revenues decreased by 35% due to a 32% decrease in production
quantities and a 5% decrease in the average price per Bbl of production for the
three months ended September 30, 1995 as compared to 1994. Natural gas
revenues decreased by 10% due to a 16% decrease in the average price per Mcf of
natural gas produced for the three months ended September 30, 1995, offset by a
7% increase in production quantities as compared to 1994.
Well Operator and Management Fees. Well operator and management fees
decreased 3% for the three months ended September 30, 1995 compared to the same
period in 1994. This decrease is attributable to a decrease in the number of
operated producing properties, which were sold during the quarter ended
September 30, 1995.
Interest and Other Revenues. Interest and other revenue decreased for
the three months ended September 30, 1995 compared to 1994 due to the inclusion
of salt water hauling fees in the 1994 period, a service which is no longer
provided by the Company.
5
<PAGE> 8
Oil and Gas Prices. Oil prices received by the Company decreased 5%
during the three months ended September 30, 1995, resulting in an average price
of $15.57 per Bbl compared to the average price per Bbl of $16.44 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 oil sold by OPEC.
During the three months ended September 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 16% during the three months ended September 30, 1995, resulting in an
average price of $1.38 per Mcf compared to an average price per Mcf of $1.64
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 however,
expect an increase in the price of natural gas based upon historical trends in
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
September 30,
---------------------------
1994 1995
---------- ----------
<S> <C> <C>
Crude oil:
Production (Bbls) . . . . . . . . . . . . . . . . . . . . . . 61,212 41,779
Average price received per barrel . . . . . . . . . . . . . . $16.44 $15.57
Natural gas:
Production (Mcf) . . . . . . . . . . . . . . . . . . . . . . 2,064,507 2,210,423
Average price received per Mcf . . . . . . . . . . . . . . . $ 1.64 $ 1.38
</TABLE>
Oil and natural gas production volumes for the three months ended
September 30, 1995 on an Mcf equivalent (Mcfe) basis exceeded such volumes for
the same period in 1994 by 1%. This increase in production was from
participation in new wells drilled during the twelve months ended September 30,
1995, from recompletions in the Cotton Valley properties in 1994 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
decreased for the three months ended September 30, 1995 compared to the same
period in 1994. Oil and gas operating expenses decreased for the three months
ended September 30, 1995 compared to the same period in 1994, due to reduced
operating expenses attributable to a lesser number of producing wells, which
were sold during the third quarter of 1995 and reduce remedial workovers
performed during the quarter. Oil and gas operating expenses decreased 25% on
an Mcfe basis to $.53 for the three months ended September 30, 1995 compared to
$.71 on an Mcfe basis for the same period in 1994.
6
<PAGE> 9
Amortization and Depreciation. The amortization and depreciation rate per
dollar of oil and gas sales for the three months ended September 30, 1995
increased to $.54 compared to $.38 for the same period in 1994. The increased
rate for the three months ended September 30, 1995 was due to the decreased
estimated future gross revenues resulting from the lower product price for both
oil and natural gas for the three months ended September 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 18% for the three months ended September 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 September 30, 1995 compared to the same
period in 1994, as 1994 included personnel and other general and
administrative expenses of ANEC, some of which were not retained following the
merger in July 1994. Well operator and management fees offset 86% of net
general and administrative expenses during the three months ended September 30,
1995 compared to 73% during the same period in 1994.
Interest Expense. Interest expense increased for the three months ended
September 30, 1995 compared to the same period in 1994 due to an increase in
the outstanding borrowings, primarily due to the JMC Acquisition. The
Company's credit facility bears interest at LIBOR plus 1.5% (a rate of 7.31% at
September 30, 1995).
Nonrecurring Expense. During August 1995, the Company postponed the
"Senior Note Offering" and deferred $432,000 of related costs. In the
three-month period ended September 30, 1995 the Company expensed this amount
since the Senior Note Offering has not been reinitiated as of November, 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 - NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Total Revenues; Oil and Gas Sales. Total revenues decreased for the nine
months ended September 30, 1995 compared to the nine months ended September 30,
1994. The decrease in total revenues was comprised of decreased oil and
natural gas sales, increased well operator reimbursements and decreased other
revenues. The decreased oil and natural gas sales are attributable to lower
oil production and a decrease in product price for natural gas offset by
increased oil prices, higher production volume for natural gas as a result of
the wells drilled during 1994 and the producing gas properties acquired from
JMC Exploration, Inc. ("JMC Acquisition") in November 1994.
Oil revenues decreased by 10% due to a 19% decrease in production
quantities and a 11% increase in the average price per Bbl of production for
the nine months ended September 30, 1995 as compared to 1994. Natural gas
revenues decreased by 2% due to a 21% increase in production quantities, offset
by a 19% decrease in the average price per Mcf of natural gas produced for the
nine months ended September 30, 1995 as compared to 1994.
7
<PAGE> 10
Well Operator and Management Fees. Well operator and management fees
increased 10% for the nine months ended September 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. Included in the management fees were reimbursements of overhead
expense of $10,000 per month from each of the AEJH 1987 and AEJH 1989 Limited
Partnerships.
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) remained constant for the nine months ended
September 30, 1995 compared to 1994.
Oil and Gas Prices. Oil prices received by the Company increased 11%
during the nine months ended September 30, 1995, resulting in an average price
of $17.02 per Bbl compared to the average price per Bbl of $15.39 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 nine months ended September 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 19% during the
nine months ended September 30, 1995, resulting in an average price of $1.45
per Mcf compared to an average price per Mcf of $1.79 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, however, expect an increase
in the price of natural gas based upon historical trends in the fourth quarter
of 1995.
Oil and Gas Production. Production and average prices received per Bbl
and Mcf are as follows:
<TABLE>
<CAPTION>
Nine months ended
September 30,
----------------------------
1994 1995
---------- ----------
<S> <C> <C>
Crude oil:
Production (Bbls) . . . . . . . . . . . . . . . . . . . . . . 182,188 148,106
Average price received per barrel . . . . . . . . . . . . . . $15.39 $17.02
Natural gas:
Production (Mcf) . . . . . . . . . . . . . . . . . . . . . . 5,857,594 7,091,493
Average price received per Mcf . . . . . . . . . . . . . . . $ 1.79 $ 1.45
</TABLE>
Oil and natural gas production volumes for the nine months ended September
30, 1995 on an Mcf equivalent (Mcfe) basis exceeded such volumes for the same
period in 1994 by 15%. This increase in production was from participation in
new wells drilled during the twelve months ended September 30, 1995, from
recompletions in the Cotton Valley properties in 1994 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
8
<PAGE> 11
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 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 nine months ended September 30, 1995 compared to the same
period in 1994. Oil and gas operating expenses increased for the nine months
ended September 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 and additional workovers in the first half of 1995,
partially offset by reduced operating expenses attributable to the sale of
producing properties in the third quarter of 1995. Oil and gas operating
expenses decreased 8% on an Mcfe basis to $.58 for the nine months ended
September 30, 1995 compared to $.63 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 nine months ended September 30, 1995
increased to $.50 compared to $.34 for the same period in 1994. The increased
rate for the nine months ended September 30, 1995 was due to the decreased
estimated future gross revenues resulting from the lower product price for
natural gas for the nine months ended September 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 17% for the nine months ended September 30, 1995 compared to the same
period in 1994. This decrease was primarily related to a lesser number of
personnel for the nine months ended September 30, 1995 compared to the same
period in 1994, as 1994 included personnel and other general and
administrative expenses of ANEC, some of which were not retained following the
merger in July 1994. Well operator and management fees offset 83% of net
general and administrative expenses during the nine months ended September 30,
1995 compared to 63% during the same period in 1994.
Interest Expense. Interest expense increased for the nine months ended
September 30, 1995 compared to the same period in 1994 due to an increase in
the outstanding borrowings, primarily due to the JMC Acquisition. The
Company's credit facility bears interest at LIBOR plus 1.5% (a rate of 7.31% at
September 30, 1995).
Nonrecurring Expenses. 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 nine-month period ended September 30, 1995. During August 1995,
the Company postponed the Senior Note Offering and deferred $432,000 of related
costs. In the nine-month period ended September 30, 1995, the Company expensed
this amount since the Senior Note Offering has not been reinitiated as of
November 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
9
<PAGE> 12
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.
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. The Company's capital resources available to fund capital
requirements consist primarily of cash flow from operations, and proceeds from
the sale of non-key properties. The Company is considering opportunities
existing to supplement its working capital through various financing
arrangements.
Cash Flows. For the nine months ended September 30, 1995, the Company's
cash provided by operating activities was approximately $2.0 million, a
decrease of 50%, compared to $4.0 for the same period in 1994. The $2.7 million
net change in assets and liabilities resulting from operating activities
primarily is the result of reduced drilling activities and reduced oil and gas
product prices which caused a reduction in accounts payable and accounts
receivable, respectively, for the nine months ended September 30, 1995 compared
with the same period in 1994. The Company has a $2.6 million net gas balancing
liability attributable to 2.0 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 September 30, 1995, approximately $1.1 million was
included in current liabilities associated with such net excess sales
liability.
Net cash used by investing activities for the nine months ended September
30, 1995 decreased approximately $6.8 million from the same period in 1994.
Additions to oil and gas properties decreased by approximately $9.1 million due
to the Company's curtailment of capital expenditures during 1995 in response to
the significantly lower product price for natural gas.
Net cash provided by financing activities was approximately $2.4 million
for the nine months ended September 30, 1995 compared to$4.0 for the
corresponding period in 1994. Net cash provided for the nine months ended
September 30, 1995 resulted from net borrowings on long-term debt and proceeds
from the exercise of employee stock options. At September 30, 1995, the Company
had a working capital deficit of $.8 million and had $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. At September 30, 1995, the Company's borrowing base
was $46.5 million, $45 million of which was outstanding. 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,
10
<PAGE> 13
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.
In connection with each of the three quarters ending September 30, 1995
the Company obtained written waivers from the lender for events of
noncompliance with the current and/or interest coverage ratio covenants of the
Company's revolving credit facility. In November 1995, the lender waived its
right to redetermine the borrowing base under the revolving credit facility
until December 31, 1995 and in lieu thereof, permanently reduced the maximum
commitment amount under the facility to $45 million. Additionally, the $45
million amount outstanding under this facility in November is to be reduced by
$1 million, payable in two equal installments of $500,000 in November and
December 1995.
The Company and the lender are currently negotiating terms and conditions
of a revised credit facility, the details of which are not yet final; however,
the Company has obtained a letter from the lender confirming that no principal
amounts under such revised facility will be due within the next twelve months.
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 $1.8
million), based on the Company's expected cash flows and available cash balance
of $2.8 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 September 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 7.31%).
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 minimum ratios of
current assets to current liabilities and cash flow to interest expense; 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.
Other. At the product prices existing at September 30, 1995, the
Company's net oil and gas property carrying cost approximates the ceiling
amount, as prescribed by the Securities and Exchange Commission. Any
significant downward revision in reserve quantities and/or decline in product
prices could result in the recording of an impairment provision related thereto
in future periods.
11
<PAGE> 14
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 purported to be a derivative
action on behalf of the Company against the Board of Directors. No damages are
being sought against the Company. The suit asked that the Company's share
rights plan and certain severance contracts and policies be invalidated, and
sought an injunction against the Company's Senior Note Offering and damages to
the Company from the directors in excess of $10,000. In August 1995, the
Company elected to defer its proposed Senior Note Offering. The Company filed
a motion for dismissal which was granted by the court in October 1995. The
court also granted the plaintiffs leave to file an amended petition which was
filed on November 13, 1995. The Company believes the derivative action is
without merit and that it will be vigorously defended.
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
September 30, 1995.
12
<PAGE> 15
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 November , 1995 /s/ Bob G. Alexander
------------------- -----------------------------------
Bob G. Alexander, President
DATE November , 1995 /s/ David E. Grose
------------------- -----------------------------------
David E. Grose, Vice President,
Treasurer and Chief Financial Officer
13
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
11 Computation of Earnings (Loss) Per Share
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11
ALEXANDER ENERGY CORPORATION
COMPUTATION OF EARNINGS (LOSS) PER SHARE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
For the Three Months Ended
------------------------------------------
March 31, June 30, September 30,
----------- ----------- -------------
<S> <C> <C> <C> <C>
1995
Weighted average common and common
equivalent shares:
Common stock outstanding from beginning
of period . . . . . . . . . . . . . . . 12,271,563 12,273,993 12,279,756
Common stock issued . . . . . . . . . . . 1,053 3,217 97,881
Common stock equivalents . . . . . . . . --- --- ---
----------- ----------- -----------
12,272,616 12,277,210 12,377,637
=========== =========== ===========
Net loss . . . . . . . . . . . . . . . . . . $ (441,302) $ (212,507) $ (656,213)
=========== =========== ===========
Net loss per common and common
equivalent share . . . . . . . . . . . $ (.04) $ (.02) $ (.05)
=========== =========== ===========
Weighted average shares (sum of quarters above divided by three) . . . . . . . . . . . . . . 12,309,154
===========
Net loss (sum of quarters above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,310,022)
===========
Net loss per common and common equivalent share . . . . . . . . . . . . . . . . . . . . . . . $ (.11)
===========
1994
Weighted average common and common
equivalent shares:
Common stock outstanding from
beginning of period . . . . . . . . . . 11,715,504 11,715,504 11,715,504
Common stock issued . . . . . . . . . . . . --- --- 355,715
Common stock equivalents . . . . . . . . . 516,483 454,584 ---
----------- ----------- -----------
12,231,987 12,170,088 12,071,219
=========== =========== ===========
Net income (loss) . . . . . . . . . . . . . . $ 945,560 $ 490,440 $(1,945,558)
=========== =========== ===========
Net income (loss) per common and common
equivalent share . . . . . . . . . . . $ .08 $ .04 $ (.16)
=========== =========== ===========
Weighted average shares (sum of quarters above divided by three) . . . . . . . . . . . . . . 12,157,765
===========
Net loss (sum of quarters above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (509,558)
===========
Net loss per common and common equivalent share . . . . . . . . . . . . . . . . . . . . . . . $ (.04)
===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEET, CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
IS QULALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q SEPTEMBER 30, 1995.
</LEGEND>
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1,000
<CASH> 2,823,336
<SECURITIES> 0
<RECEIVABLES> 4,321,811
<ALLOWANCES> 0
<INVENTORY> 383,969
<CURRENT-ASSETS> 7,852,721
<PP&E> 132,471,307
<DEPRECIATION> 44,716,768
<TOTAL-ASSETS> 97,060,104
<CURRENT-LIABILITIES> 8,679,480
<BONDS> 48,504,506
<COMMON> 373,563
0
0
<OTHER-SE> 33,302,348
<TOTAL-LIABILITY-AND-EQUITY> 97,060,104
<SALES> 12,793,155
<TOTAL-REVENUES> 15,143,203
<CGS> 4,628,233
<TOTAL-COSTS> 17,223,225
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,982,218
<INCOME-PRETAX> (2,080,022)
<INCOME-TAX> (770,000)
<INCOME-CONTINUING> (1,310,022)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,310,022)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
