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 March 31, 1996
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 May 9, 1996 was: Common Stock, $0.10 par value,
5,213,799 shares.
PrimeEnergy Corporation
Index to Form 10-QSB
March 31, 1996
Part I - Financial Information
Consolidated Balance Sheets - March 31, 1996 and
December 31, 1995 3-4
Consolidated Statements of Operations for the three months
ended March 31, 1996 and 1995 5
Consolidated Statement of Stockholders' Equity for the
three months ended March 31, 1996 6
Consolidated Statements of Cash Flows for the three months
ended March 31, 1996 and 1995 7
Notes to Consolidated Financial Statements 9-13
Management's Discussion and Analysis of Financial Condition
and Results of Operations 14-16
Part II - Other Information 16
Signatures 17
PrimeEnergy Corporation
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995
March 31, December 31,
1996 1995
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 843,000 $ 1,009,000
Restricted cash and cash
equivalents (Note 2) 893,000 713,000
Accounts receivable (Note 3) 1,915,000 2,311,000
Due from related parties (Note 9) 2,125,000 2,939,000
Other current assets 594,000 597,000
Prepaid expenses 104,000 151,000
Deferred income taxes 198,000 198,000
---------- ----------
Total current assets 6,672,000 7,918,000
---------- ----------
Property and equipment, at cost(Notes 1 and 4):
Oil and gas properties (successful
efforts method) - developed 25,391,000 25,024,000
Furniture, fixtures and equipment
including leasehold improvements 4,786,000 4,696,000
---------- ----------
30,177,000 29,720,000
Accumulated depreciation and depletion (18,549,000) (17,766,000)
---------- ----------
Net property and equipment 11,628,000 11,954,000
---------- ----------
Other assets 501,000 487,000
Due from affiliates 325,000 325,000
---------- ----------
Total assets $ 19,126,000 $20,684,000
========== ==========
See accompanying notes to the consolidated financial statements.
PrimeEnergy Corporation
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995
March 31, December 31,
1996 1995
(Unaudited) (Audited)
Current liabilities:
Current portion of other long-term
obligations (Note 6) $ 195,000 $ 202,000
Accounts payable 2,908,000 2,691,000
Accrued liabilities:
Taxes (Note 1) 25,000 26,000
Interest and other 1,246,000 1,139,000
Due to related parties (Note 9) 856,000 1,319,000
---------- ----------
Total current liabilities 5,230,000 5,377,000
---------- ----------
Long-term bank debt (Note 5) 6,025,000 7,400,000
Other long-term obligations (Note 6) 463,000 507,000
Deferred income taxes (Note 1) 331,000 333,000
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 1996 and 1995 760,000 760,000
Paid in capital 10,888,000 10,888,000
Accumulated deficit (956,000) (992,000)
---------- ----------
10,692,000 10,656,000
Treasury stock, at cost, 2,372,271
common shares in 1996 and 2,361,961
common shares in 1995 (3,615,000) (3,589,000)
---------- ----------
Total stockholders' equity 7,077,000 7,067,000
---------- ----------
Total liabilities and equity $19,126,000 $20,684,000
========== ===========
See accompanying notes to the consolidated financial statements.
PrimeEnergy Corporation
Consolidated Statements of Operations
Three Months Ended March 31, 1996 and 1995
(Unaudited)
1996 1995
Revenue:
Oil and gas sales $ 1,621,000 $ 1,485,000
District operating income 2,294,000 2,376,000
Administrative revenue (Note 9) 386,000 386,000
Reporting and management fees (Note 9) 87,000 88,000
Interest and other income 58,000 34,000
---------- ----------
Total revenue 4,446,000 4,369,000
---------- ----------
Costs and expenses:
Lease operating expense 1,037,000 966,000
District operating expense 1,765,000 1,768,000
Depreciation and depletion of
oil and gas properties 624,000 539,000
General and administrative expense 688,000 750,000
Exploration costs 184,000 --
Interest expense (Notes 5 and 6) 138,000 142,000
---------- ----------
Total costs and expenses 4,436,000 4,165,000
---------- ----------
Income (loss) from operations 10,000 204,000
Gain on sale and exchange of assets 45,000 58,000
---------- ----------
Net income before income taxes 55,000 262,000
Provision for income taxes 19,000 26,000
---------- ----------
Net income $ 36,000 $ 236,000
========== ==========
Primary income per common share (Note 11) $0.01 $0.04
==== ====
Fully diluted income per common share (Note 11) $0.01 $0.04
==== ====
See accompanying notes to consolidated financial statements.
PrimeEnergy Corporation
Consolidated Statement of Stockholder's Equity
Three Months Ended March 31, 1996
<TABLE>
<CAPTION>
Add'l
Common Stock paid in Accumulated Treasury
Shares Amount Capital Deficit Stock Total
-------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $7,597,970 $760,000 $10,888,000 ($992,000 3,589,000) $7,067,000
Purchased 10,310 shares of
common stock (26,000) (26,000)
Net income 36,000 36,000
----------- --------- ------------ --------- ----------- ----------
Balance at March 31, 1996 $7,597,970 $760,000 $10,888,000 ($956,000) ($3,615,000) $7,077,000
=========== ========= ============ ========== ============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
PrimeEnergy Corporation
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995
(Unaudited)
March 31 March 31
1996 1995
Net cash provided by operating activities $ 1,722,000 $ (99,000)
---------- ----------
Cash flows from investing activities:
Additions to property and equipment (490,000) (412,000)
Proceeds from sale of property
and equipment 54,000 80,000
---------- ----------
Net cash used in investing activities (436,000) (332,000)
---------- ----------
Cash flows from financing activities:
Purchase of treasury stock (26,000) (165,000)
Increase in long-term bank debt and
other long-term obligations 2,707,000 2,670,000
Repayment of long-term bank debt and
other long-term obligations (4,133,000) (4,916,000)
Cash overdraft -- 840,000
---------- ----------
Net cash used in financing activities 1,452,000 (1,571,000)
---------- ----------
Net increase (decrease) in cash and
cash equivalents (166,000) (2,002,000)
Cash and cash equivalents at the
beginning of the period 1,009,000 2,197,000
---------- ----------
Cash and cash equivalents at the
end of the period $ 843,000 $ 195,000
========== ==========
See accompanying notes to consolidated financial statements.
PrimeEnergy Corporation
Notes to Consolidated Financial Statements
March 31, 1996
(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 March 31, 1996 and December 31, 1995, and the
results of operations and cash flows for the periods ended March
31, 1996 and 1995. 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, including development dry holes 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. 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) Hedging-
From time to time the Company may enter into futures contracts in
order to reduce its exposure related to changes in oil and gas
prices. In accordance with Statement of Financial Accounting
Standards No. 80, any gain or loss on such contracts is treated
as an adjustment to oil and gas revenue.
(i) Use of Estimates-
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(j) Recently Issued Accounting Standards-
In March 1995, FAS Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Asset to Be
Disposed Of" was issued, effective January 1, 1996. FAS No. 121
requires that in the event certain facts and circumstances
indicate an asset may be impaired, an evaluation of
recoverability must be performed to determine whether or not the
carrying amount of the asset is required to be written down. The
adoption of this standard resulted in additional depletion
expense of $78,000 in the first quarter of 1996.
In October 1995, FAS Statement NO. 123, "Accounting for Stock-
Based Compensation" was issued, effective January 1, 1996. The
Company will continue to measure compensation costs for its
employee stock compensation as prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees", and comply with the
disclosure requirements of FAS Statement No. 123 rather than
record compensation expense in accordance with the new standard.
(2) Restricted Cash and Cash Equivalents:
Restricted cash and cash equivalents includes $426,000 and
$467,000 at March 31, 1996 and December 31, 1995, respectively,
of cash primarily pertaining to unclaimed royalty payments. There
were corresponding accounts payable recorded at March 31, 1996
and December 31, 1995 for these liabilities.
Restricted cash also includes $467,000 and $246,000 at March 31,
1996 and December 31, 1995, respectively, relating to the 1994-I
and 1995-I Development Programs. These funds are committed for
the use on the Development Programs; however, they are available
to satisfy any working capital needs of the Company.
(3) Accounts Receivable
Accounts receivable at March 31, 1996 and December 31, 1995
consisted of the following:
March 31, December 31,
1996 1995
Joint Interest Billing $ 692,000 $ 918,000
Trade Receivables 92,000 98,000
Oil and Gas Sales 1,111,000 994,000
Other 92,000 399,000
--------- ---------
1,987,000 2,409,000
Less, Allowance for doubtful
accounts (72,000) ( 98,000)
--------- ---------
$ 1,915,000 $ 2,311,000
========= =========
(4) Property and equipment
Property and equipment at March 31, 1996 and December 31, 1995
consisted of the following:
March 31, December 31,
1996 1995
Oil and gas properties
at cost $25,391,000 $25,024,000
Less, accumulated depletion
and depreciation (15,580,000) (14,956,000)
------------ ------------
9,811,000 10,068,000
------------ ------------
Furniture, fixtures and
and equipment 4,786,000 4,696,000
Less, accum. depreciation (2,969,000) (2,810,000)
---------- ----------
1,817,000 1,886,000
---------- ----------
Total net property and
equipment $11,628,000 $11,954,000
========== ==========
(5) Long-Term Bank Debt
At December 31, 1995, the Company was party to a line of credit
agreement with a bank with a borrowing base of $12.5 million. On
May 3, 1996, the bank extended the borrowing base to a non-
reducing $15 million. Twenty-five percent of the borrowing is
syndicated to a second bank. The agreement provides for interest
at 1/2% over the bank's base rate as defined, 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 March 31, 1996 and December 31,
1995 consisted of the following:
March 31, December 31,
1996 1995
Subordinated debentures due
December 31, 1998 $ 225,000 $ 225,000
Installment notes payable 292,000 321,000
Capital lease obligations 141,000 163,000
--------- ---------
658,000 709,000
Less, current portion (195,000) (202,000)
--------- ---------
$ 463,000 $ 507,000
========= =========
The secured subordinated debentures are held by affiliated
Partnerships in which PEMC is a general partner. Interest was
payable at 9.25% through 1995, 6.5% through 1996 and 1% above
year end money market rates thereafter. The installment notes
bear interest ranging from 5% to 10%.
(7) Contingent Liabilities:
PEMC, as managing general partner of the affiliated Partnerships,
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
agreement, PEMC is not obligated to purchase an amount greater
than 10% of the total partnership interest outstanding. In
addition, PEMC will be obligated to purchase interests tendered
by the limited partners only to the extent of one-hundred 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 $500,000.
(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 March 31, 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 March 31, 1996 and 1995, options on 124,000 and
134,000 shares were exercisable at $1.50 per share, respectively,
and no additional shares were available for granting.
(9) Related Party Transactions:
PEMC is a general partner in several oil and gas Partnerships in
which certain directors have limited and general partnership
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 a
reimbursement for property acquisition and development costs
incurred on behalf of the Partnerships and general and
administrative overhead, which is reported in the statements of
operations as administrative revenue.
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 March 31, 1996 and December 31, 1995
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
acquisitions and related costs.
11) 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:
Three Months Ended
March 31,
1996 1995
Primary 5,745,674 6,121,384
========= =========
Fully diluted 5,747,695 6,121,488
========= =========
12) Subsequent events:
The Company has agreed to purchase certain oil and gas properties and
other assets of an unrelated company for a cash consideration of
approximately $7,000,000. The Company will utilize funds available
under its existing line of credit to complete this transaction.
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
On April 26, 1995, 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.
Pursuant to the semi-annual redetermination of the borrowing base, the
Company's line of credit was increased to $15,000,000. The Company
will utilize the funds available under this line to fulfill the
Company's commitments related to certain agreements to purchase and
develop oil and gas properties. (See Item 5 Other Information)
Most of the Company's oil and gas properties as well as certain
receivables and equipment are pledged as security under the 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.
The Company's primary source of working capital during the first three
months of 1996 was through internally generated funds coupled with
cash balances at the prior year-end. Net cash provided by operations
was used primarily to repay bank debt and continue property
development.
The Company's focus is on the acquisition of producing oil and gas
properties and the expansion of its service and operating functions
and it intends to continue to seek additional opportunities in these
areas.
During the first quarter, the Company spent approximately $622,000 on
the acquisition and development of its oil and gas interests,
including $184,000 of dry hole costs and $96,000 of limited partner
buybacks. Additionally, the Company spent approximately $49,000 on
trucks and automobiles used in connection with field service
operations, and an additional $73,000 on computer and related
equipment and software.
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. By
increasing its reserve base, the Company's borrowing ability is
increased due to additional properties available as collateral.
It is management's opinion that the current market conditions are
creating some industry opportunities for those well managed companies
with staying power to take advantage of the situation through mergers
and acquisitions. The Company intends to continue to explore and
pursue this course.
RESULTS OF OPERATIONS
Net income declined to $36,000 in the first quarter of 1996 as
compared to $236,000 during the same period in 1995. The primary
reason for this decline was $184,000 in dry hole costs incurred in
1996. Also, additional depletion expense of $78,000 was recorded in
1996 due to the adoption of Statement of Financial Accounting
Standards number 121.
Oil and gas sales from directly owned properties of $1,222,000 for the
first quarter of 1996 represented a 3% increase over sales in the
first quarter of 1995, as a decrease in production volumes from the
natural decline curves of properties was offset by increases in
average oil and gas prices received. Average prices received for
directly owned oil production increased substantially from
approximately $16.33 per barrel in 1995 to $18.13 in the first quarter
of 1996. Average gas prices also increased substantially from $1.85
per Mcf received in the first quarter of 1995 to $2.15 per Mcf
received during the comparable period in 1996.
Oil and gas sales related to PEMC's carried interest in the
Partnerships and other ventures increased approximately 35%, or
$103,000, primarily due to substantially higher oil and gas prices
received by those entities and additional properties acquired and
developed during 1995.
The majority of the production from the companies San Pedro Ranch
property was formerly sold under a fixed price gas contact which
expired at the beginning of March 1996. Based on spot prices
currently being received, the expiration of this contract will result
in a decrease in oil and gas revenue of approximately $26,000 per
month.
District operating income decreased $82,000 or 3% compared to the
first quarter of 1995. This decrease is primarily due to decreased
activity on the San Pedro Ranch property operated by the Company.
Administrative revenue for the first quarter of 1996 was consistent
with the first quarter of 1995. 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 expense for the first quarter of 1996 increased 7% or
$72,000 compared to the first quarter of 1995. A decrease in expense
on existing directly owned properties of $62,000 was more than offset
by expense of $88,000 on such properties acquired during the year.
Expenses related to PEMC's carried interest in the partnerships and
other ventures increase $52,000 primarily due to the acquisition of
new properties and development of existing properties by these
entities during the year.
Depreciation and depletion of oil and gas properties for the first
quarter increased $84,000, or 16% compared to the first quarter of
1995. This increase is primarily due to a charge of $78,000 to
depletion expense due to the adoption of FASB 121 in the first quarter
of 1996.
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 decreased to $300,000 in the
first quarter of 1996 as compared to $375,000 in the comparable period
in 1995, as less time was spent analyzing possible acquisitions on
behalf of partnerships, trusts and joint venture partners.
District operating expense remained relatively constant with the first
quarter of 1995.
General and administrative expenses decreased $61,000, or 8% compared
to the first quarter of 1995. The large decrease is primarily due to
staff reductions and other cost cutting measures implemented in the
second half of 1995.
The Company incurred $184,000 in exploration costs in the first
quarter of 1996 related to the drilling of a dry hole in Victoria
County, Texas. No comparable expense was incurred in the first
quarter of 1995.
Interest expense during the first quarter decreased approximately 3%
as debt levels decreased slightly due to a portion of 1995 operating
cash flow being used to pay down bank debt.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Registrant will be held on
Wednesday, June 20, 1996 to elect a Board of Directors and to transact
such other procedural business as may properly be brought before the
meeting.
Item 5. Other Information
The Company has agreed to purchase oil and gas properties and other
assets of an unrelated company for a cash consideration of
approximately $7,000,000, to be provided through the Company's
existing bank credit facility. These transactions have not been
finalized and it is anticipated that the acquisition will be completed
in the near future and will be reported on a Form 8-K.
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)
May 13, 1996 /s/ Charles E. Drimal, Jr.
(Date) --------------------------
Charles E. Drimal, Jr.
President
Principal Executive Officer
May 13, 1996 /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 10QSB and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
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