<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
Commission File Number 0-4597
FOREST OIL CORPORATION
(Exact name of registrant as specified in its charter)
New York 25-0484900
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 Broadway
Suite 2200
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 812-1400
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
----- -----
Number of Shares
Outstanding
Title of Class of Common Stock August 1, 1996
- ------------------------------ ----------------
Common Stock, Par Value $.10 Per Share 26,850,671
- --------------------------------------------------------------------------------
<PAGE>
PART I. FINANCIAL INFORMATION
FOREST OIL CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
June 30, December 31, December 31,
1996 1995 1995
-------- ------------ ------------
(In Thousands)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,176 3,287 3,287
Accounts receivable 44,104 35,763 17,395
Other current assets 3,636 4,612 2,557
-------- ------- -------
Total current assets 51,916 43,662 23,239
Net property and equipment, at cost 418,278 429,584 277,599
Investment in affiliate 11,307 11,301 11,301
Goodwill and other intangible assets,
net 30,617 24,539 --
Other assets 8,716 8,904 8,904
-------- ------- -------
$520,834 517,990 321,043
======== ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 1,010 2,055 2,055
Current portion of long-term debt 1,507 2,263 2,263
Current portion of gas balancing
liability 2,730 4,700 4,700
Accounts payable 48,066 37,561 17,456
Accrued interest 5,233 4,219 4,029
Other current liabilities 2,418 1,917 1,917
-------- ------- -------
Total current liabilities 60,964 52,715 32,420
Long-term debt 201,886 192,848 193,879
Gas balancing liability 3,328 3,841 3,841
Other liabilities 24,366 25,824 23,298
Deferred revenue 9,985 15,137 15,137
Deferred income taxes 33,124 38,502 --
Minority interest 8,644 8,882 8,171
Shareholders' equity:
Preferred stock 24,345 24,359 24,359
Common stock 2,460 2,280 1,066
Capital surplus 372,659 366,431 241,241
Common shares to be issued in
debt restructuring -- 6,073 6,073
Accumulated deficit (220,783) (217,495) (217,495)
Foreign currency translation (144) (1,407) (1,407)
Treasury stock, at cost -- -- (9,540)
-------- -------- --------
Total shareholders' equity 178,537 180,241 44,297
-------- -------- --------
$520,834 517,990 321,043
======== ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
<PAGE>
FOREST OIL CORPORATION
Condensed Consolidated Statements of Production and Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------- ------------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
--------- -------- -------- --------
(In Thousands Except Production and Per Share Amounts)
<S> <C> <C> <C> <C>
PRODUCTION
Gas, including deliveries under volumetric
production payments (mmcf) 10,202 8,640 19,444 17,937
======= ====== ======= =======
Oil, condensate and natural gas
liquids (thousands of barrels) 610 302 1,233 651
======= ====== ======= =======
STATEMENTS OF CONSOLIDATED OPERATIONS
Revenue:
Marketing and processing $50,842 -- 83,589 --
Oil and gas sales:
Gas 17,533 15,267 35,467 32,002
Oil, condensate and natural gas liquids 11,330 5,122 21,055 10,696
------- ------- ------- -------
Total oil and gas sales 28,863 20,389 56,522 42,698
Miscellaneous, net (161) 161 303 213
------- ------- ------- -------
Total revenue 79,544 20,550 140,414 42,911
Expenses:
Marketing and processing 48,986 -- 79,165 --
Oil and gas production 8,369 5,888 15,856 11,197
General and administrative 3,607 1,761 6,337 3,861
Interest 6,423 6,627 12,220 12,421
Depreciation and depletion 14,051 11,089 26,989 23,398
------- ------- -------- -------
Total expenses 81,436 25,365 140,567 50,877
------- ------- -------- -------
Income (loss) before income taxes and
minority interest (1,892) (4,815) (153) (7,966)
Income tax (expense) benefit (1,225) -- (3,305) 7
Minority interest in loss of subsidiary 216 -- 171 --
------- ------- -------- --------
Net loss $(2,901) (4,815) (3,287) (7,959)
======= ======= ======== ========
Weighted average number of common shares
outstanding 24,576 5,694 22,477 5,670
======= ======= ======== ========
Net loss attributable to common stock $(3,441) (5,355) (4,367) (9,039)
======= ======= ======== ========
Primary and fully diluted loss per common share $ (.14) (.94) (.19) (1.59)
======= ======= ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
FOREST OIL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
----------------------
June 30, June 30,
1996 1995
--------- --------
(In Thousands)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,287) (7,959)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation and depletion 26,989 23,398
Deferred income tax expense 738 --
Minority interest in loss of subsidiary (171) --
Other, net 1,556 1,192
(Increase) decrease in accounts receivable (5,771) 4,262
Decrease in other current assets 488 46
Increase (decrease) in accounts payable 5,764 (12,262)
Increase in accrued interest and other current
liabilities 799 80
Amortization of deferred revenue (5,152) (12,330)
-------- --------
Net cash provided (used) by operating
activities 21,953 (3,573)
Cash flows from investing activities:
Capital expenditures for property and equipment (27,490) (9,966)
Proceeds of sales of property and equipment 2,965 2,750
Acquisition of subsidiary:
Property and equipment (113,972) --
Goodwill and other intangible assets (24,684) --
Noncash working capital 1,258 --
Long-term assets and liabilities, net 1,207 --
Increase in other assets, net (511) (1,354)
-------- -------
Net cash used by investing activities (161,227) (8,570)
Cash flows from financing activities:
Proceeds from bank borrowings 118,704 40,200
Repayments of bank borrowings (111,814) (35,600)
Proceeds of convertible note -- 9,900
Proceeds from common stock offering, net of offering
costs 136,591 --
Repayments of nonrecourse secured loan -- (1,143)
Repayments of production payment obligation (1,589) (1,249)
Payment of preferred stock dividends -- (540)
Decrease in cash overdraft (1,045) (1,714)
Increase (decrease) in other liabilities, net (647) 2,729
-------- -------
Net cash provided by financing activities 140,200 12,583
Effect of exchange rate changes on cash (37) (3)
-------- -------
Net increase in cash and cash equivalents 889 437
Cash and cash equivalents at beginning of period 3,287 2,869
-------- -------
Cash and cash equivalents at end of period $ 4,176 3,306
======== =======
Cash paid during the period for:
Interest $ 10,352 11,147
======== =======
Income taxes $ 1,492 --
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
FOREST OIL CORPORATION
Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 1996 and 1995
(Unaudited)
(1) Basis of Presentation
The condensed consolidated financial statements included herein are
unaudited. In the opinion of management, all adjustments, consisting of
normal recurring accruals, have been made which are necessary for a fair
presentation of the financial position of the Company at June 30, 1996 and
the results of its operations for the six month periods ended June 30, 1996
and 1995. Quarterly results are not necessarily indicative of expected
annual results because of the impact of fluctuations in prices received for
liquids and natural gas and other factors. For a more complete
understanding of the Company's operations and financial position, reference
is made to the consolidated financial statements of the Company, and
related notes thereto, included in the Company's annual report on Form 10-K
for the year ended December 31, 1995, filed with the Securities and
Exchange Commission.
(2) Acquisitions
On December 20, 1995 the Company purchased a 56% economic (49% voting)
interest in Saxon Petroleum Inc. (Saxon) of Calgary, Alberta for
approximately $23,700,000. In the transaction, Forest received from Saxon
32,000,000 voting common shares, 12,300,000 nonvoting common shares,
15,500,000 convertible preferred shares and warrants to purchase 5,300,000
common shares. In exchange, Forest transferred to Saxon its preferred
shares of Archean Energy Ltd., issued to Saxon 1,060,000 common shares of
Forest and paid Saxon $1,500,000 CDN.
The Forest common shares held by Saxon were recorded as treasury stock on
Forest's consolidated balance sheet at December 31, 1995. In January 1996,
Saxon sold these shares in a public offering of Forest common stock (the
1996 Public Offering) and used the proceeds to reduce its bank debt.
On January 31, 1996 the Company acquired ATCOR Resources Ltd. (ATCOR) of
Calgary, Alberta for approximately $136,000,000 including acquisition costs
of approximately $1,000,000. The purchase was funded by the net proceeds
of the 1996 Public Offering and approximately $8,300,000 drawn under the
Company's bank credit facility. The exploration and production business of
ATCOR was renamed Canadian Forest Oil Ltd. (Canadian Forest).
As part of the Canadian Forest acquisition, Forest also acquired ATCOR's
natural gas marketing business, which was renamed Producers Marketing Ltd.
(ProMark).
The consolidated balance sheet of Forest includes the accounts of Saxon and
Canadian Forest at June 30, 1996. The pro forma consolidated balance sheet
at December 31, 1995 gives effect to the 1996 Public Offering and the
Canadian Forest acquisition as if both had occurred on that date.
The consolidated statement of operations includes the results of operations
of Saxon effective January 1, 1996 and the results of operations of
Canadian Forest effective February 1, 1996. The following pro forma
consolidated statement of operations information assumes that the common
stock offering and the acquisitions of Saxon and Canadian Forest occurred
as of January 1, 1995.
4
<PAGE>
(2) Acquisitions (continued)
<TABLE>
<CAPTION>
Pro Forma Three Months Pro Forma Six Months
Ended June 30, Ended June 30,
---------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- --------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Revenue:
Marketing and processing $49,730 28,154 96,977 63,526
Oil and gas sales 28,830 32,058 60,166 66,457
Miscellaneous, net 357 (59) 788 213
------- ------ ------- -------
Total revenue $78,917 60,153 157,931 130,196
======= ====== ======= =======
Net loss $(2,629) (4,739) (2,635) (7,369)
======= ====== ======= =======
Primary and fully diluted
loss per share $ (.13) (.26) (.15) (.41)
======= ====== ======= =======
</TABLE>
(3) Common Stock Offering
On January 31, 1996, 13,200,000 shares of common stock were sold for $11.00
per share in the 1996 Public Offering. Of this amount 1,060,000 shares
were sold by Saxon and 12,140,000 shares were sold by Forest. The net
proceeds to Forest and Saxon from the issuance of shares totalled
approximately $136,590,000 after deducting issuance costs and underwriting
fees.
(4) Net Property and Equipment
The components of net property and equipment are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ------------
(In Thousands)
<S> <C> <C>
Oil and gas properties $1,382,736 1,216,027
Buildings, transportation and
other equipment 10,606 10,502
---------- ---------
1,393,342 1,226,529
Less accumulated depreciation,
depletion and valuation allowance 975,064 948,930
---------- ---------
$ 418,278 277,599
========== =========
</TABLE>
5
<PAGE>
(5) Long-term Debt
The components of long-term debt are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ------------
(In Thousands)
<S> <C> <C>
U.S. Credit Facility $ 5,300 23,800
Canadian Credit Facility 35,735 --
Saxon Credit Facility 6,978 16,437
Nonrecourse secured loan 41,358 40,322
Production payment obligation 14,629 16,218
11-1/4% Senior Subordinated Notes 99,393 99,365
--------- --------
203,393 196,142
Less current portion (1,507) (2,263)
--------- --------
Long-term debt $ 201,886 193,879
========= ========
</TABLE>
(6) Earnings (Loss) Per Share
Primary earnings (loss) per share is computed by dividing net earnings
(loss) attributable to common stock by the weighted average number of
common shares and common share equivalents outstanding during each period,
excluding treasury shares. Net earnings (loss) attributable to common
stock represents net earnings (loss) less preferred stock dividend
requirements. Common share equivalents include, when applicable, dilutive
stock options and warrants using the treasury stock method.
Fully diluted earnings (loss) per share assumes, in addition to the above,
(i) that convertible debentures were converted at the beginning of each
period or date of issuance, if later, with earnings being increased for
interest expense, net of taxes, that would not have been incurred had
conversion taken place, (ii) that convertible preferred stock was converted
at the beginning of each period or date of issuance, if later, and
(iii) any additional dilutive effect of stock options and warrants. The
assumed exercises and conversions were antidilutive for the six months
ended June 30, 1996 and 1995.
(7) Subsequent Event
On August 1, 1996 The Anschutz Corporation exercised its option to purchase
2,250,000 shares of Forest's common stock for $26,200,000 or approximately
$11.64 per share. The option was scheduled to expire on July 27, 1998.
Proceeds received by Forest are expected to be used primarily to fund a
portion of 1996 and 1997 capital expenditures.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and Notes thereto.
FORWARD-LOOKING STATEMENTS
The following discussion includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Although the Company believes that its
expectations are based on reasonable assumptions, it can give no assurance that
its goals will be achieved. Important factors that could cause actual results
to differ materially from those in the forward-looking statements herein include
the timing and extent of changes in commodity prices for oil and gas, the need
to develop and replace reserves, environmental risks, drilling and operating
risks, risks related to exploration and development, uncertainties about the
estimates of reserves, competition, government regulation and the ability of the
Company to meet its stated business goals.
RESULTS OF OPERATIONS FOR THE SECOND QUARTER OF 1996
NET LOSS
The net loss for the second quarter of 1996 was $2,901,000 or $.14 per
common share compared to a net loss of $4,815,000 or $.94 per common share in
the second quarter of 1995. The improved results for the second quarter of 1996
were attributable primarily to increased natural gas and liquids production as a
result of the acquisitions of Saxon Petroleum Inc. (Saxon) and Canadian Forest
Oil Ltd. (Canadian Forest) which were completed in December 1995 and January
1996, respectively, and the contribution made by Forest's Canadian marketing and
processing subsidiary (ProMark) that was also acquired in January 1996.
Decreased oil and natural gas volumes and lower natural gas prices in the second
quarter of 1995 contributed to the 1995 loss.
REVENUE
In the second quarter of 1996, the Company recorded $50,842,000 of
marketing and processing revenue, which relates primarily to the marketing
activities of ProMark subsequent to its purchase on January 31, 1996.
The Company's oil and gas sales revenue increased by 42% to $28,863,000 in
the second quarter of 1996 from $20,389,000 in the second quarter of 1995.
Production volumes for natural gas in the second quarter of 1996 increased 18%
from the comparable 1995 period due primarily to production increases associated
with the newly-acquired Canadian properties, partially offset by anticipated
production declines in the United States. The average sales price received for
natural gas in the second quarter of 1996 decreased 3% compared to the average
sales price received in the corresponding 1995 period. Production volumes for
liquids (consisting of oil, condensate and natural gas liquids) were 102% higher
in the second quarter of 1996 than in the second quarter of 1995 due primarily
to production increases associated with the newly-acquired Canadian properties.
The average sales price received by the Company for its liquids production
during the second quarter of 1996 increased 11% compared to the average sales
price received during the comparable 1995 period.
Oil and gas sales for the second quarter of 1996 includes revenue of
$1,062,000 related to a gas balancing adjustment based on revised information
received from the operator of one of the Company's onshore U.S. fields, and also
includes $585,000 for adjustments made pursuant to Alberta's restructured
royalty program. The changes in Canadian royalty amounts and volumes are
sensitive to changing prices, the effects of estimates, and revisions to
information received from third parties. Alberta's restructured royalty program
commenced in 1994 and remained uncertain throughout much of 1995. Canadian
Forest continues to receive additional information with respect to royalty
calculations and anticipates that revisions to such calculations will continue
to occur throughout 1996 and possibly 1997. The price and volume effects of
the above items are discussed below in notes 4 and 5 to the volume and sales
price disclosures for the quarter.
7
<PAGE>
Production volumes and weighted average sales prices during the periods
were as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30,
--------------------------------------------------
1996 1995
-------------------------------- -------------
United States Canada Total United States
(5)
<S> <C> <C> <C> <C>
NATURAL GAS
Total production (MMCF) (1) (4) 6,667 3,535 10,202 8,640
Sales price received (per MCF) $ 2.18 1.22 1.85 1.67
Effects of energy swaps (per MCF) (2) (.17) (.05) (.13) .10
------ ----- ------ -----
Average sales price (per MCF) (4) $ 2.01 1.17 1.72 1.77
LIQUIDS
Oil and condensate:
Total production (MBBLS) (3) 199 323 522 290
Sales price received (per BBL) $19.48 21.89 20.98 17.51
Effects of energy swaps (per BBL) (2) (2.11) (2.66) (2.45) (.89)
------ ----- ------ -----
Average sales price (per BBL) $17.37 19.23 18.53 16.62
Natural gas liquids:
Total production (MBBLS) 29 59 88 12
Average sales price (per BBL) $ 9.44 22.05 17.88 16.84
Total liquids production (MBBLS) 228 382 610 302
Average sales price (per BBL) $16.37 19.66 18.44 16.63
</TABLE>
(1) Total natural gas production includes scheduled deliveries under volumetric
production payments, net of royalties, of 868 MMCF and 2,544 MMCF in 1996
and 1995, respectively. Natural gas delivered pursuant to volumetric
production payment agreements represented approximately 9% and 29% of total
natural gas production in 1996 and 1995, respectively.
(2) Energy swaps were entered into to hedge the price of spot market volumes
against price fluctuation. Hedged natural gas volumes were 3,058 MMCF and
2,480 MMCF for 1996 and 1995, respectively. Hedged oil and condensate
volumes were 357,000 barrels and 120,000 barrels for 1996 and 1995,
respectively.
(3) An immaterial amount of oil production is covered by scheduled deliveries
under volumetric production payments.
(4) Natural gas production in the United States for the second quarter of 1996
includes 532 MMCF attributable to a gas balancing adjustment. This
adjustment had no effect on the average sales price reported for the
quarter.
(5) Natural gas royalty adjustments in Canada in the second quarter of 1996
increased the average sales price to $1.17 per MCF from $1.07 per MCF, or
by approximately 9%. The related volume adjustments were not significant.
Liquids production in Canada for the second quarter of 1996 was reduced by
31,000 barrels of oil and condensate and by 66,000 barrels of natural gas
liquids as a result of royalty adjustments. The related revenue
adjustments resulted in higher oil and gas sales. The net result of these
royalty adjustments increased the reported average sales price for oil and
condensate to $19.23 per barrel from $17.33, or by approximately 11%, and
increased the reported average sales price for natural gas liquids to
$22.05 per barrel from $9.34 or by approximately 136%. The effect on the
average sales price for total liquids production was an increase to $19.66
per barrel from $15.24, or approximately 29%. The effects of future royalty
adjustments cannot be predicted at this time.
8
<PAGE>
EXPENSES
In the second quarter of 1996 the Company recorded $48,986,000 of marketing
and processing expense, which relates primarily to the marketing activities of
ProMark subsequent to its purchase on January 31, 1996.
Oil and gas production expense of $8,369,000 in the second quarter of 1996
increased 42% from $5,888,000 in the comparable period of 1995 due primarily to
production expenses associated with newly-acquired Canadian properties. On an
MCFE basis (MCFE means thousands of cubic feet of natural gas equivalents, using
a conversion ratio of one barrel of oil to six MCF of natural gas), production
expense increased approximately 7% in the second quarter of 1996 to $.60 per
MCFE from $.56 per MCFE in the second quarter of 1995. The increase is due
primarily to higher per-unit costs in the United States where fixed costs are
being allocated over a lower production base.
General and administrative expense was $3,607,000 in the second quarter of
1996, an increase of 105% from $1,761,000 in the comparable period of 1995.
Total overhead costs (capitalized and expensed general and administrative costs)
of $5,627,000 in the second quarter of 1996 increased 70% from $3,317,000 in the
comparable period of 1995. The increase is due to the addition of Canadian
operations, which increased Forest's salaried workforce to 173 at June 30, 1996
compared to 115 at December 31, 1995.
Interest expense was $6,423,000 and $6,627,000 in the second quarter of
1996 and 1995, respectively.
Depreciation and depletion expense increased 27% to $14,051,000 in the
second quarter of 1996 from $11,089,000 in the second quarter of 1995. On a
per-unit basis, depletion expense was approximately $.93 per MCFE in the second
quarter of 1996 compared to $1.05 per MCFE in the corresponding 1995 period.
The decrease in per unit depletion expense is the result of lower than average
cost of reserves acquired in Canada.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996
NET LOSS
The net loss for the first six months of 1996 was $3,287,000 or $.19 per
common share compared to a net loss of $7,959,000 or $1.59 per common share in
the first six months of 1995. The improved results for the first six months of
1996 were attributable primarily to increased natural gas and liquids production
as a result of the acquisitions of Saxon and Canadian Forest and the
contribution made by ProMark. Decreased oil and natural gas volumes and lower
natural gas prices in the first six months of 1995 contributed to the 1995 loss.
REVENUE
In the first six months of 1996, the Company recorded $83,589,000 of
marketing and processing revenue, which relates primarily to the marketing
activities of ProMark subsequent to its purchase on January 31, 1996.
The Company's oil and gas sales revenue increased by 32% to $56,522,000 in
the first half of 1996 from $42,698,000 in the first half of 1995. Production
volumes for natural gas in the first half of 1996 increased 8% from the
comparable 1995 period due primarily to production increases associated with the
newly-acquired Canadian properties, partially offset by anticipated production
declines in the United States. The average sales price received for natural gas
in the first half of 1996 increased 2% compared to the average sales price
received in the corresponding 1995 period. Production volumes for liquids
(consisting of oil, condensate and natural gas liquids) were 89% higher in the
first half of 1996 than in the first half of 1995 due primarily to production
increases associated with the newly-acquired Canadian properties. The average
sales price received by the Company for its liquids production during the first
half of 1996 increased 5% compared to the average sales price received during
the comparable 1995 period.
9
<PAGE>
Production volumes and weighted average sales prices during the periods
were as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------
1996 1995
-------------------------------- -------------
United States Canada Total United States
(4)
<S> <C> <C> <C> <C>
NATURAL GAS
Total production (MMCF) (1) 13,092 6,352 19,444 17,937
Sales price received (per MCF) $ 2.27 1.43 1.99 1.63
Effects of energy swaps (per MCF) (2) (.24) (.03) (.17) .15
------- ----- ------ ------
Average sales price (per MCF) $ 2.03 1.40 1.82 1.78
LIQUIDS
Oil and condensate:
Total production (MBBLS) (3) 435 621 1,056 624
Sales price received (per BBL) $ 18.20 19.83 19.16 16.81
Effects of energy swaps (per BBL) (2) (1.61) (1.58) (1.59) (.63)
------- ----- ------ ------
Average sales price (per BBL) $ 16.59 18.25 17.57 16.18
Natural gas liquids:
Total production (MBBLS) 46 131 177 27
Average sales price (per BBL) $ 9.31 15.20 13.66 16.11
Total liquids production (MBBLS) 481 752 1,233 651
Average sales price (per BBL) $ 15.90 17.72 17.01 16.18
</TABLE>
(1) Total natural gas production includes scheduled deliveries under volumetric
production payments, net of royalties, of 2,082 MMCF and 5,499 MMCF in 1996
and 1995, respectively. Natural gas delivered pursuant to volumetric
production payment agreements represented approximately 11% and 31% of
total natural gas production in 1996 and 1995, respectively.
(2) Energy swaps were entered into to hedge the price of spot market volumes
against price fluctuation. Hedged natural gas volumes were 5,525 MMCF and
5,492 MMCF for 1996 and 1995, respectively. Hedged oil and condensate
volumes were 597,000 barrels and 240,000 barrels for 1996 and 1995,
respectively.
(3) An immaterial amount of oil production is covered by scheduled deliveries
under volumetric production payments.
(4) Royalty adjustments in Canada for the first six months of 1996 did not have
a significant effect on reported volumes or average sales prices for
natural gas or oil and condensate. Production of natural gas liquids was
reduced by 79,000 barrels as a result of royalty adjustments, resulting in
an increase in the reported average sales price for natural gas liquids to
$15.20 per barrel from $9.14 or by approximately 66%. The effect on the
average sales price for total liquids production was an increase to $17.72
per barrel from $15.53, or approximately 14%. The effects of future
royalty adjustments cannot be predicted at this time. For further
information regarding Canadian royalty adjustments, see "Results of
Operations for the Second Quarter of 1996."
10
<PAGE>
EXPENSES
In the first six months of 1996 the Company recorded $79,165,000 of
marketing and processing expense, which relates primarily to the marketing
activities of ProMark subsequent to its purchase on January 31, 1996.
Oil and gas production expense of $15,856,000 in the first half of 1996
increased 42% from $11,197,000 in the comparable period of 1995 due primarily to
production expenses associated with newly-acquired Canadian properties. On an
MCFE basis, production expense increased approximately 16% in the first half of
1996 to $.59 per MCFE from $.51 per MCFE in the first half of 1995. The
increase is due primarily to higher per-unit costs in the United States where
fixed costs are being allocated over a lower production base.
General and administrative expense was $6,337,000 in the first half of
1996, an increase of 64% from $3,861,000 in the comparable period of 1995.
Total overhead costs (capitalized and expensed general and administrative costs)
of $10,171,000 in the first half of 1996 increased 44% from $7,060,000 in the
comparable period of 1995. The increase is due to the addition of Canadian
operations, which increased Forest's salaried workforce to 173 at June 30, 1996
compared to 115 at December 31, 1995.
The following table summarizes the total overhead costs incurred during the
periods:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
------- ------ ------ -----
(In Thousands)
<S> <C> <C> <C> <C>
Overhead costs capitalized $2,020 1,556 3,834 3,199
General and administrative costs
expensed (1) 3,607 1,761 6,337 3,861
------ ----- ------ -----
Total overhead costs $5,627 3,317 10,171 7,060
====== ===== ====== =====
</TABLE>
(1) Includes $908,000 and $1,457,000 related to marketing and processing
operations for the three and six month periods ended June 30, 1996,
respectively.
Interest expense was $12,220,000 and $12,421,000 in the first half of 1996
and 1995, respectively.
Depreciation and depletion expense increased 15% to $26,989,000 in the
first half of 1996 from $23,398,000 in the first half of 1995. On a per-unit
basis, depletion expense was approximately $.94 per MCFE in the first half of
1996 compared to $1.06 per MCFE in the corresponding 1995 period. The decrease
in per unit depletion expense is the result of lower than average cost of
reserves acquired in Canada. At June 30, 1996, the Company had undeveloped
properties with a cost basis of approximately $48,510,000 which were excluded
from depletion, compared to $26,752,000 at June 30, 1995. The increase is due
primarily to the acquisition of undeveloped properties in the Canadian Forest
purchase.
The Company was not required to record a writedown of the carrying value of
its United States or Canadian oil and gas properties in the first half of 1996
or 1995. Writedowns of the full cost pools in the United States and Canada may
be required, however, if prices decrease, estimated proved reserve volumes are
revised downward or costs incurred in exploration, development, or acquisition
activities in the respective full cost pools exceed the discounted future net
cash flows from the additional reserves, if any, attributable to each of the
cost pools.
11
<PAGE>
CHANGES IN ACCOUNTING
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets to Be Disposed Of" (SFAS No. 121). Oil and gas properties
accounted for under the full cost method of accounting are excluded from the
scope of SFAS No. 121, but will continue to be subject to the ceiling test
limitation. SFAS No. 121 requires that impairment losses be recorded on other
long-lived assets used in operations when indicators of impairment are present
and either the undiscounted future cash flows estimated to be generated by those
assets or the fair market value are less than the assets' carrying amount. SFAS
No. 121 also addresses the accounting for long-lived assets that are expected to
be disposed of. The Company adopted SFAS No. 121 effective January 1, 1996.
The effect of such adoption was not material.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation" (SFAS No. 123), was issued by the Financial Accounting
Standards Board in October 1995. SFAS No. 123 establishes financial accounting
and reporting standards for stock-based employee compensation plans as well as
transactions in which an entity issues its equity instruments to acquire goods
or services from non-employees. The Company adopted SFAS No. 123 effective
January 1, 1996, and will continue to use the measurement method prescribed by
APB Opinion 25, as permitted under SFAS No. 123. The Company will include the
pro forma disclosures required by SFAS No. 123 in the notes to future financial
statements.
LIQUIDITY AND CAPITAL RESOURCES
During 1995 the Company took various steps and committed to various actions
to improve its liquidity and capital resources. In early 1995, in response to
market conditions, the Company reduced its general and administrative
expenditures through a workforce reduction effective March 1, 1995. In
addition, the Company reduced its capital expenditures during the first six
months of 1995. In July 1995, the Company received $45,000,000 of equity
capital from The Anschutz Corporation (Anschutz) and restructured $62,400,000 of
indebtedness to Joint Energy Development Investments Limited Partnership (JEDI),
a Delaware limited partnership the general partner of which is an affiliate of
Enron Corp. (Enron).
In December 1995 and January 1996, the Company completed the acquisitions
of Saxon and Canadian Forest. For a description of these transactions, see Note
2 of Notes to Condensed Consolidated Financial Statements.
The Company has historically addressed its long-term liquidity needs
through the issuance of debt and equity securities, when market conditions
permit, and through the use of nonrecourse production-based financing. On
January 31, 1996, the Company issued 13,200,000 shares of Common Stock for
$11.00 per share in a public offering (the 1996 Public Offering). Of this
amount, 1,060,000 shares were sold by Saxon and 12,140,000 shares were sold by
Forest. The net proceeds to Forest from the issuance of the shares totalled
approximately $125,600,000 after deducting issuance costs and underwriting fees
and were used, along with an additional approximately $8,300,000 drawn from the
Company's Credit Facility, to complete the purchase of Canadian Forest. The net
proceeds to Saxon of approximately $11,046,000 were used to reduce its bank
debt.
The pro forma effect of the acquisitions and the public offering was to
increase total assets to $517,990,000 compared to $321,043,000 at December 31,
1995; to increase shareholders' equity to $180,241,000 compared to $44,297,000
at December 31, 1995; and to reduce the Company's debt-to-capitalization ratio
to 53% compared to 98% at December 31, 1994.
On August 1, 1996 The Anschutz Corporation exercised its option to purchase
2,250,000 shares of Forest's common stock for $26,200,000 or approximately
$11.64 per share. The option was scheduled to expire on July 27, 1998. Proceeds
received by Forest are expected to be used primarily to fund a portion of 1996
and 1997 capital expenditures. The effect of the exercise of this option was to
reduce the Company's debt to capitalization ratio to 47%, on a pro forma basis,
from 53% at June 30, 1996.
As a result of the above, Forest's financial position and liquidity have
improved considerably. The Company expects to be able to meet its 1996 and 1997
capital expenditure financing requirements
12
<PAGE>
using cash flows generated by operations, proceeds from the exercise of the
Anschutz option, and borrowings under existing lines of credit. However, there
can be no assurance that the Company will have access to sufficient capital to
meet its capital requirements. The planned levels of capital expenditures could
be reduced if the Company experiences lower than anticipated net cash provided
by operations or other liquidity needs or could be increased if the Company
experiences increased cash flow. The prices the Company receives for its
future oil and natural gas production will significantly impact future
operating cash flows. No prediction can be made as to the prices the Company
will receive for its future oil and gas production.
Many of the factors which may affect the Company's future operating
performance and long-term liquidity are beyond the Company's control, including,
but not limited to, oil and natural gas prices, governmental actions and taxes,
the availability and attractiveness of properties for acquisition, the adequacy
and attractiveness of financing and operational results. The Company continues
to examine alternative sources of long-term capital, including bank borrowings
or the issuance of debt instruments, the sale of production payments or other
nonrecourse financing, the sale of Common Stock, preferred stock or other equity
securities of the Company, the issuance of net profits interests, sales of non-
strategic properties, prospects and technical information, or joint venture
financing. Availability of these sources of capital and, therefore, the
Company's ability to execute its operating strategy will depend upon a number of
factors, some of which are beyond the control of the Company.
13
<PAGE>
CASH FLOW
Historically, one of the Company's primary sources of capital has been
funds provided by operations.
The following summary table reflects comparative cash flows for the Company
for the periods ended June 30, 1996 and 1995. Funds provided by operations
consists of net cash provided (used) by operating activities exclusive of
adjustments for working capital items, proceeds from volumetric production
payments, if any, and amortization of deferred revenue. This information is
being presented in accordance with industry practice and is not intended to be a
substitute for cash provided by operating activities, a measure of performance
prepared in accordance with generally accepted accounting principles, and should
not be relied upon as such.
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1995
---------- ---------
(In Thousands)
<S> <C> <C>
Funds provided by operations $ 25,825 16,631
Net cash provided (used) by operating activities 21,953 (3,573)
Net cash used by investing activities (161,227) (8,570)
Net cash provided by financing activities 140,200 12,583
</TABLE>
Higher prices received for natural gas, increased natural gas and liquids
production as a result of the Saxon and Canadian Forest acquisitions and the
contribution made by ProMark resulted in a 55% increase in funds provided by
operations to $25,825,000 in the first half of 1996 from $16,631,000 in the
first half of 1995. Net cash provided by operating activities increased to
$21,953,000 in the first half of 1996 compared to a net use of cash for
operating activities of $3,573,000 in the first half of 1995, also due to the
higher natural gas prices, increased production, marketing and processing income
and and increase in accounts payable during the 1996 period as compared to a
decrease in accounts payable during the 1995 period. The Company used
$161,227,000 for investing activities in the first half of 1996 compared to
$8,570,000 in the comparable period of the prior year. The increase is due
primarily to the use of funds to acquire Canadian Forest. Cash provided by
financing activities was $140,200,000 in the first half of 1996 compared to
$12,583,000 in the comparable period of the prior year. The increase is due
primarily to the net proceeds received from the 1996 Public Offering.
HEDGING PROGRAM
In addition to the volumes of natural gas and oil dedicated to volumetric
production payments, the Company has also used energy swaps and other financial
agreements to hedge against the effects of fluctuations in the sales prices for
oil and natural gas. In a typical swap agreement, the Company receives the
difference between a fixed price per unit of production and a price based on an
agreed upon third-party index if the index price is lower. If the index price
is higher, the Company pays the difference. The Company's current swaps are
settled on a monthly basis. At June 30, 1996, the Company had natural gas swaps
and collars for an aggregate of approximately 37.9 BBTU (billion British Thermal
Units) per day of natural gas during the remainder of 1996 at fixed prices
ranging from $1.14 per MMBTU (million British Thermal Units) on an Alberta
Energy Company "C" (AECO "C") basis to $2.42 per MMBTU on a New York Mercantile
Exchange (NYMEX) basis and an aggregate of approximately 20.4 BBTU per day of
natural gas during 1997 at fixed prices ranging from $1.14 (AECO "C" basis) to
$2.42 (NYMEX basis) per MMBTU. At June 30, 1996 the Company had oil swaps for
an aggregate of 1,326 barrels per day of oil during the remainder of 1996 at
fixed prices ranging from $17.90 to $19.13 per barrel (NYMEX basis). The
Company currently has no material oil swaps in place for 1997.
14
<PAGE>
CAPITAL EXPENDITURES
The Company's expenditures for property acquisition, exploration and
development for the first six months of 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1995
---------- ---------
(In Thousands)
<S> <C> <C>
Property acquisition costs:
Proved properties $ 3,209 84
Undeveloped properties -- --
------- -----
3,209 84
Exploration costs:
Direct costs 9,713 3,089
Overhead capitalized 1,196 255
------- -----
10,909 3,344
Development costs:
Direct costs 10,468 3,550
Overhead capitalized 2,638 2,944
------- -----
13,106 6,494
------- -----
$27,224 9,922
======= =====
</TABLE>
The Company's 1996 expected capital expenditures total approximately
$82,500,000, including capitalized overhead of approximately $7,300,000. This
amount represents a significant increase compared to original estimates as a
result of a planned property acquisition of approximately $9,000,000 and
increased expenditures for exploration and development. The Company's 1996
direct expenditures for exploration and development are expected to total
approximately $63,000,000. The Company also estimates that its 1997 capital
program for exploration and development is expected to include direct
expenditures of approximately $90,000,000 of which approximately two-thirds
will be expended in the United States and one-third in Canada.
While the Company intends to continue a strategy of acquiring reserves that
meet its investment criteria, no assurance can be given that the Company can
locate or finance any property acquisitions. If adequate sources of capital are
not available to the Company in 1996 and 1997, the amount currently expected to
be invested in exploration, development and reserve acquisitions will be
required to be reduced significantly.
BANK CREDIT FACILITIES
CREDIT FACILITY. The Company has a secured credit facility (the Credit
Facility) with The Chase Manhattan Bank, NA. (Chase) as agent for a group of
banks. Under the Credit Facility as amended, the Company may borrow up to
$40,000,000 for working capital and/or general corporate purposes. The
borrowing base is subject to formal redeterminations semi-annually, but may be
changed at the banks' discretion at any time.
The Credit Facility is secured by a lien on, and a security interest in, a
majority of the Company's proved oil and gas properties and related assets
(subject to prior security interests granted to holders of volumetric production
payment agreements), a pledge of accounts receivable, material contracts and the
stock of material subsidiaries. The maturity date of the Credit Facility is
July 1, 1998. Under the terms of the Credit Facility, the Company is subject to
certain covenants and financial tests, including restrictions or requirements
with respect to working capital, cash flow, additional debt, liens, asset sales,
investments, mergers, cash dividends and reporting responsibilities. At
August 12, 1996 there was no balance outstanding under this facility. The
Company has used the facility for a $1,500,000 letter of credit.
15
<PAGE>
CANADIAN CREDIT FACILITY. On February 8, 1996 a newly-formed Canadian
subsidiary of Forest entered into a credit agreement (the Canadian Credit
Facility) with The Chase Manhattan Bank of Canada for the benefit of Canadian
Forest and ProMark. The initial borrowing base under the Canadian Credit
Facility is $60,000,000 CDN. The borrowing base is subject to formal
redeterminations semi-annually, but may be changed by the bank at its discretion
at any time. The Canadian Credit Facility has a three-year term and is
indirectly secured by substantially all the assets of Canadian Forest. Funds
drawn under the Canadian Credit Facility can be used for general corporate
purposes. Under the terms of the Canadian Credit Facility, the three Canadian
subsidiaries are subject to certain covenants and financial tests, including
restrictions or requirements with respect to working capital, cash flow,
additional debt, liens, asset sales, investments, mergers, cash dividends and
reporting responsibilities. At August 12, 1996, the outstanding balance under
this facility was $45,500,000 CDN. The Company has also used this facility for
two letters of credit in the amount of $3,084,000 CDN.
SAXON LOAN. Saxon has a demand revolving credit facility with a borrowing
base of $22,000,000 CDN. The loan is subject to semi-annual review and has
demand features; however, repayments are not required provided that borrowings
are not in excess of the borrowing base and Saxon complies with other existing
covenants. At August 12, 1996 the outstanding balance under this facility was
$10,600,000 CDN.
OTHER FINANCING
VOLUMETRIC PRODUCTION PAYMENTS. Under the terms of volumetric production
payments covering certain U.S. properties, the Company is required to deliver
the scheduled volumes from the subject properties or to make a cash payment for
volumes produced but not delivered, in combination not to exceed a specified
percentage of monthly production. If production levels are not sufficient to
meet scheduled delivery commitments, the Company must account for and make up
such shortages, at market-based prices, from future production. Amounts
received for volumetric production payments are recorded as deferred revenue,
which is amortized as sales are recorded based upon the scheduled deliveries
under the production payment agreements. As of June 30, 1996, the volumes
remaining to be delivered were approximately 4.6 BCF of natural gas and 16,000
barrels of oil, and the related deferred revenue was $9,985,000.
NONRECOURSE SECURED LOAN. Under the terms of a nonrecourse secured loan,
the Company is required to make payments based on the net proceeds, as defined,
from certain subject properties located in the U.S. The outstanding loan
balance as of June 30, 1996 was $41,358,000. Properties to which approximately
12% of the Company's estimated total proved reserves are attributable, on an
MCFE equivalent basis, are dedicated to repayment of the nonrecourse secured
loan.
PRODUCTION PAYMENT. Under the terms of a production payment obligation,
the Company must make a monthly cash payment based on net proceeds from subject
properties located in the U.S. This obligation has been recorded at a discount
to reflect a market rate of interest. At June 30, 1996 the remaining principal
amount was $18,710,000 and the recorded liability was $14,629,000. Properties
to which approximately 4% of the Company's estimated total proved reserves are
attributable, on an MCFE basis, are dedicated to this production payment
financing.
DIVIDENDS
On February 1, 1996, a stock dividend of .013605 shares of Common Stock on
each share of its outstanding $.75 Convertible Preferred Stock was paid to
holders of record on January 10, 1996. On May 1, 1996 a stock dividend of
0.017863 shares of Common Stock on each share of its outstanding $.75
Convertible Preferred Stock was paid to holders of record on April 10, 1996. On
August 1, 1996 a cash dividend of $.1875 on each share of its outstanding $.75
Convertible Preferred Stock was paid to holders of record on July 10, 1996. The
Indenture executed in connection with the 11 1/4% Senior Subordinated Notes due
2003 and the Credit Facility contain restrictive provisions governing dividend
payments.
GAS BALANCING
It is customary in the industry for various working interest partners to
produce more or less than their entitlement share of natural gas from time to
time. The Company's net overproduced position
16
<PAGE>
decreased in the first six months of 1996 to approximately 3 BCF from
approximately 5 BCF at December 31, 1995. At June 30, 1996 the undiscounted
value of this imbalance is approximately $6,058,000, of which $2,730,000 is
reflected on the balance sheet as a short-term liability and the remaining
$3,328,000 is reflected on the balance sheet as a long-term liability. In the
absence of a gas balancing agreement, the Company is unable to determine when
its partners may choose to make up their share of production. If and when the
Company's partners do make up their share of production, the Company's
deliverable natural gas volumes could decrease, adversely affecting cash flow.
17
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting held on May 8, 1996, the shareholders of
the Company (a) elected three (3) Class II directors and one (1) Class III
director; (b) amended and restated the Company's 1992 Stock Option Plan; and (c)
ratified the appointment of KPMG Peat Marwick as independent auditors for the
Company in 1996.
With respect to the election of the Class II directors, votes for and
withheld with respect to each director are as follows:
Robert S. Boswell
For 19,839,284 votes
Withheld 142,916 votes
Drake S. Tempest
For 19,838,202 votes
Withheld 143,998 votes
William L. Britton
For 19,731,960 votes
Withheld 250,240 votes
With respect to the election of the Class III director, votes for and
withheld are as follows:
Jordan L. Haines
For 19,839,862 votes
Withheld 142,338 votes
In all such cases, there were no broker non-votes.
The terms of the following directors continued after the meeting: Philip
F. Anschutz, Richard J. Callahan, William L. Dorn, James H. Lee, Craig D. Slater
and Michael B. Yanney.
16,855,985 votes were cast in favor of the amendment and restatement of the
1992 Stock Option Plan. 3,019,633 votes were cast against the amendment and
106,582 votes abstained. There were no broker non-votes.
With respect to the ratification of the appointment of KPMG Peat Marwick
LLP as independent auditors for the Company for 1996, 19,956,833 votes were cast
in favor of such ratification, 11,386 votes were cast against such ratification,
13,981 votes abstained from voting and there were no broker non-votes.
Under New York law and the Company's By-laws, abstentions and broker
non-votes have no effect on the outcome of the vote on any of the matters
considered at the Annual Meeting. A broker non-vote occurs if a broker or other
nominee does not have discretionary authority and has not received instructions
with respect to a particular item.
18
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*Exhibit 11 Forest Oil Corporation and Subsidiaries - Calculation of
Earnings per Share of Common Stock.
*Exhibit 27 Financial Data Schedule.
*Filed with this report.
(b) Reports on Form 8-K
The following report on Form 8-K/A was filed by Forest during the second
quarter of 1996:
Date of Report: April 15, 1996
Item Reported: Item 7
Financial Statements Filed: The financial statements filed were
incorporated by reference to the registration statement, as amended,
(No. 33-64949) on Form S-2 filed by Forest Oil Corporation.
(a) Consolidated Financial Statements of ATCOR Resources Ltd.:
Auditors' Report
Consolidated Balance Sheet, September 30, 1995 and 1994 (Unaudited),
December 31, 1994 and 1993
Consolidated Statement of Earnings and Retained Earnings, Nine Months
ended September 30, 1995 and 1994 (Unaudited), Years ended
December 31, 1994, 1993 and 1992
Consolidated Statement of Changes in Financial Position, Nine Months
ended September 30, 1995 and 1994 (Unaudited), Years ended
December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements (Unaudited)
(b) Condensed Pro Forma Combined Financial Statements of Forest Oil
Corporation:
Condensed Pro Forma Combined Balance Sheet, September 30, 1995
(Unaudited)
Condensed Pro Forma Combined Statement of Operations, Nine Months
ended September 30, 1995 (Unaudited)
Condensed Pro Forma Combined Statement of Operations, Years ended
December 31, 1994 (Unaudited)
Notes to Condensed Pro Forma Combined Financial Statements (Unaudited)
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FOREST OIL CORPORATION
(Registrant)
Date: August 14, 1996 /s/ Daniel L. McNamara
------------------------------------
Daniel L. McNamara
Corporate Counsel and Secretary
(Signed on behalf of the registrant)
/s/ David H. Keyte
------------------------------------
David H. Keyte
Vice President and Chief
Financial Officer
(Principal Financial Officer)
20
<PAGE>
Exhibit 11
FOREST OIL CORPORATION
Calculation of Loss Per Share of Common Stock
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- ---------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- --------
(In Thousands Except Per Share Amounts)
<S> <C> <C> <C> <C>
PRIMARY LOSS PER SHARE:
Net loss $(2,901) (4,815) (3,287) (7,959)
Less dividends payable on:
$.75 Convertible Preferred Stock (540) (540) (1,080) (1,080)
------- ------ ------ ------
Net loss attributable to common stock
for primary loss per share calculation $(3,441) (5,355) (4,367) (9,039)
======= ====== ====== ======
Weighted average number of common
shares outstanding 24,576 5,694 22,477 5,670
======= ====== ====== ======
Primary loss per share of common stock $ (.14) (.94) (.19) (1.59)
======= ====== ====== ======
FULLY DILUTED LOSS PER SHARE:
Net loss attributable to common stock, as above $(3,441) (5,355) (4,367) (9,039)
Add:
Dividend requirements on:
$.75 Convertible Preferred Stock 540 540 1,080 1,080
------- ------ ------ ------
Loss applicable to fully diluted calculation $(2,901) (4,815) (3,287) (7,959)
======= ====== ====== ======
Common shares applicable to fully diluted calculation:
Weighted average number of common shares
outstanding, as above 24,576 5,694 22,477 5,670
Add:
Weighted average number of shares issuable
upon assumed conversion of Convertible
Preferred Stock 2,014 2,017 2,014 2,017
------- ------ ------ ------
Common shares applicable to fully diluted calculation 26,590 7,711 24,491 7,687
======= ====== ====== ======
Fully diluted loss per share* $ (.11) (.62) (.13) (1.04)
======= ====== ====== ======
*The fully diluted loss per share is not presented in the Company's financial statements because the effects of assumed
exercises and conversions were anti-dilutive.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF
INCOME AND NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF THE
COMPANY'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDING JUNE 30, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,176
<SECURITIES> 0
<RECEIVABLES> 44,104
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 51,916
<PP&E> 1,393,342
<DEPRECIATION> 975,064
<TOTAL-ASSETS> 520,834
<CURRENT-LIABILITIES> 60,964
<BONDS> 201,886
0
24,345
<COMMON> 2,460
<OTHER-SE> 151,732
<TOTAL-LIABILITY-AND-EQUITY> 520,834
<SALES> 140,111
<TOTAL-REVENUES> 140,414
<CGS> 95,021
<TOTAL-COSTS> 101,358
<OTHER-EXPENSES> 26,989
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,220
<INCOME-PRETAX> (153)
<INCOME-TAX> 3,305
<INCOME-CONTINUING> (3,287)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,287)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
