U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________
FORM 10-QSB
/X/ Quarterly Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended September 30, 1995
or
/ / Transition Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period From __________ to ___________
______________________
Commission File Number 0-7406
______________________
PrimeEnergy Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
84-0637348
(IRS employer identification number)
One Landmark Square, Stamford, Connecticut 06901
(Address of principal executive offices)
(203) 358-5700
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
The number of shares outstanding of each class of the Registrant's
Common Stock as of November 13, 1995 was: Common Stock, $0.10 par
value, 5,262,136 shares.
PrimeEnergy Corporation
Index to Form 10-QSB
September 30, 1995
Part I - Financial Information
Consolidated Balance Sheets - September 30, 1995 and
December 31, 1994 3-4
Consolidated Statements of Operations for the nine months
ended September 30, 1995 and 1994 5
Consolidated Statements of Operations for the three months
ended September 30, 1995 and 1994 6
Consolidated Statement of Stockholders' Equity for the
nine months ended September 30, 1995 7
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1995 and 1994 8
Notes to Consolidated Financial Statements 9-16
Management's Discussion and Analysis of Financial Condition
and Results of Operations 17-20
Part II - Other Information 21
Signatures 22
PrimeEnergy Corporation
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994
September 30, December 31,
1995 1994
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 530,000 $ 2,361,000
Restricted cash and cash
equivalents (Note 2) 727,000 1,257,000
Accounts receivable (Note 3) 2,051,000 2,093,000
Due from related parties (Note 9) 5,206,000 2,420,000
Other current assets 172,000 201,000
Prepaid expenses 191,000 109,000
Deferred income taxes 144,000 144,000
---------- ----------
Total current assets 9,021,000 8,585,000
---------- ----------
Property and equipment, at cost(Notes 1 and 4):
Oil and gas properties (successful
efforts method) - developed 25,177,000 24,282,000
Furniture, fixtures and equipment
including leasehold improvements 4,819,000 4,507,000
---------- ----------
29,996,000 28,789,000
Accumulated depreciation and depletion (17,996,000) (16,134,000)
---------- ----------
Net property and equipment 12,000,000 12,655,000
---------- ----------
Other assets 461,000 462,000
Due from affiliates 325,000 325,000
---------- ----------
Total assets $ 21,807,000 $22,027,000
========== ==========
See accompanying notes to the consolidated financial statements.
PrimeEnergy Corporation
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994
September 30, December 31,
1995 1994
(Unaudited) (Audited)
Current liabilities:
Current portion of other long-term
obligations (Note 6) $ 207,000 $ 224,000
Accounts payable 1,908,000 3,941,000
Accrued liabilities:
Taxes (Note 1) 19,000 24,000
Interest and other 1,340,000 793,000
Due to related parties (Note 9) 2,163,000 895,000
---------- ----------
Total current liabilities 5,637,000 5,877,000
---------- ----------
Long-term bank debt (Note 5) 8,097,000 7,742,000
Other long-term obligations (Note 6) 536,000 546,000
Deferred income taxes (Note 1) 265,000 265,000
Stockholder's equity:
Preferred stock, $.10 par, authorized
10,000 shares; none issued -- --
Common stock, $.10 par value, authorized
15,000,000 shares; issued 7,597,970
in 1995 and 1994 760,000 760,000
Paid in capital 10,888,000 10,888,000
Accumulated deficit (1,048,000) (1,519,000)
---------- ----------
10,600,000 10,129,000
Treasury stock, at cost, 2,257,188
common shares in 1995 and 1,919,038
common shares in 1994 (3,328,000) (2,532,000)
---------- ----------
Total stockholders' equity 7,272,000 7,597,000
---------- ----------
Total liabilities and equity $ 21,807,000 $22,027,000
========== ==========
See accompanying notes to the consolidated financial statements
PrimeEnergy Corporation
Consolidated Statements of Operations
Nine Months Ended September 30, 1995 and 1994
(Unaudited)
1995 1994
Revenue:
Oil and gas sales $ 4,392,000 $ 4,006,000
District operating income 7,234,000 6,848,000
Administrative revenue (Note 9) 1,243,000 1,399,000
Reporting and management fees (Note 9) 275,000 290,000
Interest and other income 102,000 113,000
---------- ----------
Total revenue 13,246,000 12,656,000
---------- ----------
Costs and expenses:
Lease operating expense 3,031,000 2,667,000
District operating expense 5,324,000 4,818,000
Depreciation and depletion of
oil and gas properties 1,576,000 1,557,000
Exploration Costs 26,000 2,000
General and administrative expense 2,294,000 2,727,000
Interest expense (Notes 5 and 6) 511,000 374,000
---------- ----------
Total costs and expenses 12,762,000 12,145,000
---------- ----------
Income from operations 484,000 511,000
Gain on sale and exchange of assets 39,000 40,000
---------- ----------
Net income before income taxes 523,000 551,000
Provision for income taxes 52,000 50,000
---------- ----------
Net income $ 471,000 $ 501,000
========== ==========
Primary income per common share (Note 10) $0.08 $0.08
==== ====
Fully diluted income per common share (Note 10) $0.08 $0.08
==== ====
See accompanying notes to consolidated financial statements
PrimeEnergy Corporation
Consolidated Statements of Operations
Three Months Ended September 30, 1995 and 1994
(Unaudited)
1995 1994
Revenue:
Oil and gas sales $ 1,352,000 $ 1,420,000
District operating income 2,446,000 2,480,000
Administrative revenue (Note 9) 436,000 461,000
Reporting and management fees (Note 9) 99,000 106,000
Interest and other income 24,000 40,000
---------- ----------
Total revenue 4,357,000 4,507,000
---------- ----------
Costs and expenses:
Lease operating expense 1,006,000 992,000
District operating expense 1,770,000 1,697,000
Depreciation and depletion of
oil and gas properties 568,000 584,000
Exploration costs 26,000 2,000
General and administrative expense 712,000 959,000
Interest expense (Notes 5 and 6) 188,000 147,000
---------- ----------
Total costs and expenses 4,270,000 4,381,000
---------- ----------
Income from operations 87,000 126,000
Gain (loss) on sale and exchange of assets 5,000 12,000
---------- ----------
Net income before income taxes 92,000 138,000
Provision for income taxes 9,000 8,000
---------- ----------
Net income $ 83,000 $ 130,000
========== ==========
Primary income per common share (Note 10) $0.01 $0.02
==== ====
Fully diluted income per common share (Note 10) $0.01 $0.02
==== ====
See accompanying notes to consolidated financial statements
PrimeEnergy Corporation
Consolidated Statement of Stockholder's Equity
Nine Months Ended September 30, 1995
<TABLE>
<CAPTION> Add'l
Common Stock Paid-In Accumulated Treasury
Shares Amount Capital Deficit Stock Total
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance @ December 31, 1994 7,597,970 $760,000 $10,880,000 ($1,519,000) ($2,532,000) $7,597,000
Purchased 338,150 shares of -- -- -- -- --
common stock (796,000) (796,000)
Net income -- -- -- 471,000 -- 471,000
--------- --------- ------------- ------------ ---------- -----------
- ---
Balance at September 30, 1995 7,597,970 $760,000 $10,888,000 ($1,048,000) ($3,328,000) $7,272,000
========== ========= ============ ============ ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements
PrimeEnergy Corporation
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1994
(Unaudited)
1995 1994
Net cash provided by operating activities $ 81,000 $ 2,071,000
---------- ----------
Cash flows from investing activities:
Additions to property and equipment (1,533,000) (2,882,000)
Proceeds from sale of property
and equipment 89,000 87,000
---------- ----------
Net cash used in investing activities (1,444,000) (2,795,000)
---------- ----------
Cash flows from financing activities:
Distributions paid to related parties -- (3,415,000)
Purchase of treasury stock (796,000) (235,000)
Increase in long-term bank debt and
other long-term obligations 9,834,000 1,775,000
Repayment of long-term bank debt and
other long-term obligations (9,506,000) (618,000)
---------- ----------
Net cash used in financing activities (468,000) (2,493,000)
---------- ----------
Net increase (decrease) in cash and
cash equivalents (1,831,000) (3,217,000)
Cash and cash equivalents at the
beginning of the period 2,361,000 4,789,000
---------- ----------
Cash and cash equivalents at the
end of the period $ 530,000 $ 1,572,000
========== ==========
See accompanying notes to consolidated financial statements
PrimeEnergy Corporation
Notes to Consolidated Financial Statements
September 30, 1995
(1) Summary of Significant Accounting Policies:
(a) Company operations-
PrimeEnergy Corporation ("PEC"), a Delaware corporation, was
organized in March 1973, and in September 1989 acquired
PrimeEnergy Management Corporation ("PEMC") as a wholly-owned
subsidiary. In September 1990, PEC acquired field service
equipment from the Eastern Service Joint Venture and established
Eastern Oil Well Service Company ("EOWSC") as a wholly-owned
subsidiary. During 1992, Prime Operating Company ("POC") was
formed as a wholly-owned subsidiary of PEC to act as operator for
the majority of the producing oil and gas properties owned by the
Company and affiliated entities. Also during 1992, PEC acquired
additional field service equipment and formed Southwest Oilfield
Construction Company ("SOCC") as a wholly-owned subsidiary. The
Consolidated Financial Statements include the accounts of
PrimeEnergy Corporation and its subsidiaries (collectively, the
"Company"). In the opinion of the Company, the accompanying
unaudited consolidated financial statements reflect all necessary
adjustments and elimination of all significant intercompany
transactions and balances to present fairly the financial
position as of September 30, 1995 and December 31, 1994, and the
results of operations and cash flows for the periods ended
September 30, 1995 and 1994. All such adjustments are of a
normal recurring nature. The results of operations for the above
periods are not necessarily indicative of the results to be
expected for the full year.
(b) Property and equipment-
The Company follows the "successful efforts" method of accounting
for its oil and gas properties. Under the successful efforts
method, costs of acquiring undeveloped oil and gas leasehold
acreage, including lease bonuses, brokers' fees and other related
costs are capitalized. Provisions for impairment of undeveloped
oil and gas leases are based on periodic evaluations. Annual
lease rentals and exploration expenses, including geological and
geophysical expenses and exploratory dry hole costs, are charged
against income as incurred. Costs of drilling and equipping
productive wells and related production facilities are
capitalized.
Depreciation and depletion of oil and gas production equipment
and properties are determined under the unit-of-production method
based on estimated proved recoverable oil and gas reserves.
Depreciation of all other equipment is determined under the
straight-line method using various rates based on useful lives.
(c) Income taxes-
The Company records income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes". SFAS No. 109 is an asset and liability approach
to accounting for income taxes, which requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the Company's
financial statements or tax returns.
Deferred tax liabilities or assets are established for temporary
differences between financial and tax reporting bases and are
subsequently adjusted to reflect changes in the rates expected to
be in effect when the temporary differences reverse. A valuation
allowance is established for any deferred tax asset for which
realization is not likely.
(d) General and administrative expenses-
General and administrative expenses represent costs and expenses
associated with the operation of the Company. Certain
partnerships and trusts sponsored by the Company reimburse
general and administrative expenses incurred on their behalf.
(e) Income per share-
Income per share of common stock has been computed based on the
weighted average number of common shares and common stock
equivalents outstanding during the respective periods.
(f) Statements of cash flows-
For purposes of the consolidated statements of cash flows, the
Company considers short-term, highly liquid investments with
original maturities of less than ninety days to be cash
equivalents.
(g) Concentration of Credit Risk-
The Company maintains significant banking relationships with
financial institutions in the State of Texas. The Company limits
its risk by periodically evaluating the relative credit standing
of these financial institutions.
(h) Reclassifications-
Certain reclassifications were made to the prior year's financial
statements to conform to the current year presentation.
(2) Restricted Cash and Cash Equivalents:
Restricted cash and cash equivalents includes $435,000 and
$412,000 at September 30, 1995 and December 31, 1994,
respectively, of cash primarily pertaining to unclaimed royalty
and revenue interest payments. There were corresponding accounts
payable recorded at September 30, 1995 and December 31, 1994 for
these liabilities.
Restricted cash also includes $292,000 and $844,000 at September
30, 1995 and December 31, 1994, respectively, relating to the
1994-I Development Program. These funds are committed for the
use on the Development Program; however, they are available to
satisfy any working capital needs of the Company.
(3) Accounts Receivable
Accounts receivable at September 30, 1995 and December 31, 1994
consisted of the following:
September 30, December 31,
1995 1994
Joint Interest Billing $ 750,000 $ 912,000
Trade Receivables 111,000 115,000
Oil and Gas Sales 1,185,000 794,000
Other 53,000 372,000
--------- ---------
2,099,000 2,193,000
Less, Allowance for doubtful
accounts (48,000) (100,000)
--------- ---------
$ 2,051,000 $ 2,093,000
========= =========
(4) Property and equipment
Property and equipment at September 30, 1995 and December 31,
1994 consisted of the following:
September 30, December 31,
1995 1994
Oil and gas properties
at cost $25,177,000 $24,282,000
Less, accumulated depletion
and depreciation (15,134,000) (13,745,000)
---------- ----------
10,043,000 10,537,000
---------- ----------
Furniture, fixtures and
and equipment 4,819,000 4,507,000
Less, accum. depreciation (2,862,000) (2,389,000)
---------- ----------
1,957,000 2,118,000
---------- ----------
Total net property and
equipment $12,000,000 $12,655,000
========== ==========
(5) Long-Term Bank Debt
At December 31, 1994, the Company was party to a line of credit
agreement with a bank, with a borrowing base of $7.878 million.
On April 26, 1995, the Company entered into a new credit
agreement with the same bank, extending the borrowing base to a
non-reducing $12.5 million and syndicating 25% of the borrowing
to a second bank. The new agreement provides for interest at
1/2% over the bank's base rate as defined and payable monthly, or
2-3/4% over the London Inter-Bank Offered Rate (LIBOR) for the
interest period requested, payable at the end of the interest
period.
Advances pursuant to the agreement are limited to the borrowing
base as defined in the agreement. Most of the Company's oil and
gas properties as well as certain receivables and equipment were
pledged as security under this agreement. Under the Company's
credit agreement, the Company is required to maintain, as
defined, a minimum current ratio, tangible net worth, debt
coverage ratio and interest coverage ratio.
(6) Other Long-Term Obligations:
Other long-term obligations at September 30, 1995 and December
31, 1994 consisted of the following:
September 30, December
31,
1995 1994
Subordinated debentures due
December 31, 1996 $225,000 $225,000
Installment notes payable 322,000 310,000
Capital lease obligations 196,000 235,000
--------- ---------
743,000 770,000
Less, current portion (207,000) (224,000)
--------- ---------
$536,000 $546,000
========= =========
The secured subordinated debentures are held by affiliated
Partnerships in which PEMC is a general partner. Interest was
payable at 10% through 1994 and 9.25% thereafter. The
installment notes bear interest ranging from 5% to 10%.
(7) Contingent Liabilities:
PEMC is a managing general partner or managing trustee in several
limited partnerships and trusts (the "Partnerships"). As such,
PEMC is responsible for all Partnership activities, including the
review and analysis of oil and gas properties for acquisition,
the drilling of development wells and the production and sale of
oil and gas from productive wells. PEMC also provides the
administration, accounting and tax preparation work for the
Partnerships. PEMC is liable for all debts and liabilities of
the affiliated Partnerships, to the extent that the assets of a
given limited Partnership are not sufficient to satisfy its
obligations.
As a general partner, PEMC is committed to offer to purchase the
limited partners' interest in certain of its managed Partnerships
at various annual intervals. Under the terms of a partnership or
trust agreement, PEMC is not obligated to purchase an amount
greater than 10% of the total interest outstanding. In addition,
PEMC will be obligated to purchase interests tendered by the
limited partners only to the extent of one-hundred and fifty
(150) percent of the revenues received by it from such
Partnership in the previous year. Purchase prices are based upon
annual reserve reports of independent petroleum engineering firms
discounted by a risk factor. Based upon historical production
rates and prices, management estimates that if all such offers
were to be accepted, the maximum annual future purchase
commitment would be approximately $450,000.
(8) Stock Options and Other Compensation:
In May 1989, non-statutory stock options were granted by the
Company to four key executive officers for the purchase of shares
of common stock. In each case such options are for a term of ten
years ending May 15, 1999, and are exercisable, on a cumulative
basis, as to twenty percent of the shares subject to option in
each year, beginning one year after the granting of the option.
At September 30, 1995, options on 802,500 shares were outstanding
and exercisable at prices ranging from $1.00 to $1.25.
On January 27, 1983, the Company adopted the 1983 Incentive Stock
Option Plan. At September 30, 1995, options on 134,000 shares
were exercisable at $1.50 per share and no additional shares were
available for granting.
(9) Related Party Transactions:
PEMC is a general partner or trustee in several oil and gas
partnerships and trusts in which certain directors have limited
and general partnership or trustee interests. Substantially all
of the assets and revenues of PEMC are derived from its
sponsorship of the Partnerships and the interests of PEMC in the
oil and gas properties acquired by the Partnerships. As the
managing general partner in each of the Partnerships, PEMC
receives approximately 5% to 12% of the net revenues of each
Partnership as a carried interest in the Partnerships'
properties.
The Partnership agreements allow PEMC to receive management fees
for various services to the Partnerships as well as reimbursement
for property acquisition and development costs and general and
administrative overhead incurred on behalf of the Partnerships.
In 1991, the Company loaned approximately $325,000 at 12%
interest to a real estate limited partnership of which a Company
Officer and Director is a general partner. This loan is secured
by a second mortgage on the underlying real estate in the
partnership and the Company received a 23% equity participation
in the partnership. The loan agreement provides for interest
payments on a quarterly basis provided the cash flow from
operations of the limited partnership are sufficient to pay
interest for the quarter. If cash flows are not sufficient, then
the accrued interest is added to the principal. This loan is
included in other non-current assets on the balance sheet.
Due to related parties at September 30, 1995 and December 31,
1994 primarily represent receipts collected by the Company, as
agent, from oil and gas sales net of expenses. Receivables from
affiliates consist of reimbursable general and administrative
costs, lease operating expenses and reimbursements for property
acquisition and development costs.
10) Income per share:
The weighted average number of common shares and common stock
equivalents outstanding used in the income per share calculation
are as follows:
Nine Months Ended Three Months Ended
September 30, September 30,
1995 1994 1995 1994
Primary 6,080,871 6,402,541 5,955,344 6,298,280
========= ========= ========= =========
Fully diluted 6,070,150 6,435,328 5,959,526 6,382,519
========= ========= ========= =========
PART I
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion should be read in conjunction with the financial
statements of the Company and notes thereto. The Company's
subsidiaries are defined in Note 1 of the financial statements. PEMC
is the managing general partner or managing trustee in several Limited
Partnerships and Trusts (collectively, the "Partnerships").
LIQUIDITY AND CAPITAL RESOURCES
In April, the Company entered into a revised credit agreement with
Bank One, Texas, NA providing for a $12.5 million revolving line of
credit on a $50 million master promissory note. This new agreement
introduces Den Norske Bank AS as a 25% syndication partner in the
line, once the Company reaches borrowings of $12.5 million for over
one month. The agreement also provides for a lower floating rate
compared to previous agreements as well as the ability to borrow based
upon the London Inter-Bank Offered Rate (LIBO). The borrowing base
will be non-reducing and will be revised every six months by the
banks.
Most of the Company's oil and gas properties as well as certain
receivables and equipment are pledged as security under the new
agreement. The Company is required to maintain, as defined, a minimum
current ratio, tangible net worth, and debt and interest coverage
ratios. The line of credit now bears interest at 1/2% over the bank's
base rate, as defined, payable monthly, or 2-3/4% over the published
LIBO rate, payable at the end of the applicable interest period.
As of October 6, 1995, the loan agreement was amended to allow the
company to purchase up to $1,250,000 in treasury stock in any fiscal
year.
The Company's primary source of working capital during the first nine
months of 1995 was cash balances at the end of the prior year, coupled
with internally generated funds and bank borrowings. Net cash
provided by operations was used primarily for the development of the
company's oil and gas properties, as well as the purchase of treasury
stock.
The Company continues to focus on the acquisition of producing oil and
gas properties, with an increased emphasis on those with potential for
future development drilling. It also continues to attempt to expand
its service and operating functions, both by taking over operations of
wells in which it has purchased an interest, and by providing more
services to third parties.
During the first nine months, the Company spent approximately $553,000
acquiring properties for development or developing properties already
owned. The Company also spent $428,000 on the repurchase of limited
partnership interests in the Partnerships.
Also during the first nine months, the Company spent approximately
$311,000 on trucks and automobiles used in connection with field
service operations. An additional $92,000 was spent on computers and
related equipment and software, and $19,000 was spent on furniture and
fixtures.
The expansion of the Company's operating and servicing subsidiaries
through property and equipment acquisitions during 1995 is expected to
show a positive impact on earnings in the future. Additionally, the
Company receives cash flows through PEMC from the management of
existing limited partnerships and trusts.
The Company feels that it has the ability to generate sufficient
amounts of cash to meet long-term liquidity needs, as well as debt
service. The Company expects to generate increased cash flows by
increasing its reserve base through continued acquisitions and the
development of existing properties. By increasing its reserve base,
the Company's borrowing ability is increased due to additional
properties available as collateral.
RESULTS OF OPERATIONS
Oil and gas sales of $4.39 million for the first nine months of 1995
increased approximately 10% compared to the first nine months of 1994.
Both of these increases are primarily due to increased overall oil and
gas production resulting from acquisitions made in May and December of
1994. Average prices received for directly owned oil production
increased substantially from approximately $15.19 per barrel in 1994
to $16.65 per barrel in the first nine months of 1995. Average gas
prices decreased substantially from $2.56 per Mcf received in the
first nine months of 1994 to $1.79 per Mcf received during the
comparable period in 1995.
Oil and gas sales for the third quarter decreased 4.8% compared to the
third quarter of 1994. The average price received for directly owned
oil production declined from $17.15 in the third quarter of 1994 to
$16.06 for the comparable period in 1995, and the average price
received for directly owned gas production declined from $2.16 per Mcf
in the third quarter of 1994 to 1.91 during the comparable period in
1995. The effect of these price declines more than offset the
production from the Walker acquisition made in December of 1994.
Oil and gas sales related to PEMC's carried interest in the
Partnerships and other ventures was fairly consistent with 1994.
Approximately 20% of the companies gas production during the first
nine months of 1995 was sold under a fixed price gas contract at
prices substantially in excess of current spot prices. This contract,
which covers production from the San Pedro Ranch property, expires at
the end of March, 1996. Management is currently examining various
means of reducing costs on the property in order to offset, to the
extent possible, the anticipated decline in gross revenue.
District operating income increased $385,703 or 6% compared to the
first nine months of 1994. This increase is fueled largely by the
overall expansion of operating activities and acquisitions made by the
Company and the Partnerships during 1994.
Administrative revenue for the first nine months of 1995 decreased
11% compared to the first nine months of 1994. Amounts received in
both years from certain Partnerships are substantially less than the
amounts allocable to those Partnerships under the Partnership
agreements. The lower amounts reflect PEMC's efforts to limit costs
incurred and those allocated to the Partnerships.
Lease operating expenses for the first nine months of 1995 increased
14% compared to the first nine months of 1994, and for the third
quarter increased 1% compared to the third quarter of 1994. Expenses
on directly owned properties increased primarily due to the addition
of the Excelco and Walker acquisitions late in 1994. Average lifting
costs per equivalent unit on directly owned properties, however,
decreased from $10.56 during the first nine months of 1994 to $9.27 in
1995. Expenses on properties in which the Company has a carried
interest were consistent with the first nine months of 1994.
Depreciation and depletion of oil and gas properties for the first
nine months decreased remained consistent with the first nine months
of 1994 as the depletion expense on properties acquired during the
latter part of 1994 was offset by lower depletable cost basis on
existing properties.
The Company receives reimbursement for costs incurred related to the
evaluation, acquisition and development of properties on behalf of its
related partnerships, trusts, and other joint venture partners. To
the extent that these costs are expended at the district level, the
reimbursements reduce total district operating expenses.
Alternatively, if the expenses are incurred by PEMC, such
reimbursements reduce total general and administrative expenses.
Property acquisition cost reimbursement amounted to approximately
$1,125,000 for the first nine months of both 1995 and 1994.
District operating expense increased $506,000 or 10% for the first
nine months compared to the same period in 1994, and $73,000 or 4% for
the quarter ended September 30, 1995 as compared to the same period in
1994. The overall increases are primarily due to the expansion of
district operations and higher depreciation costs due to depreciation
of assets acquired in 1994 and 1995, in addition to a decrease in the
reimburesement of acquisition costs at the district level.
During the third quarter of 1995 the company shifted responsibility
for the accounting and administrative work formerly performed in its
Midland, Texas office to its office in Houston, Texas. This change
resulted in staff reductions and other cost efficiencies and will
eventually lead to the closing of the Midland office. While no
material reduction in costs were achieved in the third quarter due to
severance payments and other one time costs related to this change, it
is expected that the change will result in a reduction of district
operating expense in the future.
General and administrative expenses decreased $433,000, or 16%
compared to the first nine months of 1994. The large decrease is
primarily due to a decrease in the amount spent on acquisition
analysis and property development, combined with an increase in
reimbursement at the PEMC level.
Interest expense during the first nine months increased substantially
due to higher debt levels resulting from 1994 oil and gas property
acquisitions and development costs, and treasury stock purchases,
coupled with higher interest rates.
OTHER
In March, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
(SFAS No. 121) which is effective for fiscal years beginning after
December 15, 1995. This statement establishes accounting standards
for the impairment of long-lived assets, requiring such assets to be
reported at the lower of carrying amount or fair value, less selling
costs. The statement amends SFAS No. 19, "Financial Accounting and
Reporting by Oil and Gas Producing Companies" by adding an impairment
test for proved properties in accordance with SFAS No. 121.
The Company currently performs a "ceiling test" by comparing the total
carrying value of oil and gas properties to the total future net cash
flows from the estimated production of proved oil and gas properties.
The effect of SFAS No. 121, which would change the way this test is
performed, is not known at this time.
PART II - OTHER MATTERS
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Registrant was held on June
14, 1995. The only matter submitted to the stockholders was the
election of fourteen Directors (named below), nominated by management,
all of whom were currently serving as Directors. Proxies were
solicited pursuant to Regulation 14A under the Securities Act of 1934,
definitive copies of which were filed with he Commission. There was
no solicitation in opposition to management's nominees, and all of the
Directors nominated for re-election were elected. The number of
shares of persons nominated and elected as Directors and the number of
shares voting for or withheld for each, is shown below. There were no
abstentions or broker non-votes.
For Withheld
Samuel R. Campbell 4,142,346 22,337
Beverly A. Cummings 4,142,346 22,337
Charles E. Drimal, Jr. 4,139,846 24,837
Charles E. Drimal, Sr. 4,139,846 24,837
Matthias Eckenstein 4,142,146 22,537
H. Gifford Fong 4,142,346 22,337
Thomas S. T. Gimbel 4,142,346 22,337
Clint Hurt 4,142,346 22,337
Robert de Rothschild 4,142,346 22,337
Jarvis J. Slade 4,142,046 22,637
Jan K. Smeets 4,142,146 22,537
Bennie H. Wallace, Jr. 4,142,146 22,537
Gaines Wehrle 4,142,096 22,587
Michael H. Wehrle 4,142,096 22,587
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
A report on Form 8-K was filed for events that occurred on April 26,
1995 whereby the Company entered into a revolving credit agreement
with a borrowing base of $12.5 million and a master promissory note of
$50 million.
Exhibit 27 - Financial Data Schedule is attached to the electronic
filing of this report only.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
PrimeEnergy Corporation
(Registrant)
November 13, 1995 /s/ Charles E. Drimal, Jr.
(Date) --------------------------
Charles E. Drimal, Jr.
President
Principal Executive Officer
November 13, 1995 /s/ Beverly A. Cummings
(Date) --------------------------
Beverly A. Cummings
Executive Vice President
Principal Financial and
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
PrimeEnergy Corporation's form 10Q for the quarter ended September 30,
1995, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,257,000
<SECURITIES> 0
<RECEIVABLES> 2,099,000
<ALLOWANCES> 48,000
<INVENTORY> 0
<CURRENT-ASSETS> 9,021,000
<PP&E> 29,996,000
<DEPRECIATION> 17,996,000
<TOTAL-ASSETS> 21,807,000
<CURRENT-LIABILITIES> 5,637,000
<BONDS> 8,840,000<F1>
<COMMON> 760,000
0
0
<OTHER-SE> 6,512,000<F2>
<TOTAL-LIABILITY-AND-EQUITY> 21,807,000
<SALES> 13,246,000
<TOTAL-REVENUES> 13,246,000
<CGS> 0
<TOTAL-COSTS> 12,251,000<F3>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 511,000
<INCOME-PRETAX> 523,000
<INCOME-TAX> 52,000
<INCOME-CONTINUING> 471,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 471,000
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
<FN>
<F1>INCLUDES $207,000 CURRENT PORTION OF LONG-TERM DEBT
<F2>INCLUDES $1,048,000 ACCUMULATED DEFICIT AND $3,328,000 TREASURY STOCK
<F3>DOES NOT INCLUDE INTEREST EXPENSE WHICH IS INCLUDED IN TOTAL EXPENSES ON THE
STATEMENT OF OPERATIONS
</FN>
</TABLE>
