SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1993
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ............to............
Commission file number 1-959
THE LOUISIANA LAND AND EXPLORATION COMPANY
Exact name of registrant as specified in its charter
MARYLAND 72-0244700
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
909 POYDRAS STREET, NEW ORLEANS, LA. 70112
Address of principal executive offices Zip Code
Registrant's telephone number, including area code 504-566-6500
NO CHANGE
Former name, former address and former fiscal year, if
changed since last report
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Outstanding at
Class November 9, 1993
CAPITAL STOCK, $.15 PAR VALUE 33,137,037 SHARES
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THE LOUISIANA LAND AND EXPLORATION COMPANY
INDEX
Page
Number
_________________________________________________________________
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
(The September 30, 1993 and 1992 consolidated financial
statements included in this filing on Form 10-Q have been
reviewed by KPMG Peat Marwick, independent auditors, in
accordance with established professional standards and
procedures for such a review. The report of KPMG Peat
Marwick commenting upon their review is included herein.)
Consolidated Balance Sheets - September 30, 1993 and
December 31, 1992............................. 3
Consolidated Statements of Earnings (Loss) - three
months and nine months ended September 30, 1993
and 1992...................................... 4
Consolidated Statements of Cash Flows - nine months
ended September 30, 1993 and 1992............. 5
Notes to Consolidated Financial Statements........ 6-10
Independent Auditors' Report...................... 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 12-15
Petroleum Segment Information......................... 16
Operating Data........................................ 17-18
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K............ 19
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<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE LOUISIANA LAND AND EXPLORATION COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Millions of dollars)
<CAPTION>
September 30, December 31,
ASSETS 1993 1992
_____________________________________________________________________________________
<S> <C> <C>
CURRENT ASSETS:
Cash, including cash equivalents (September 30,
1993-$2.7; December 31, 1992-$32.7) $ 9.4 40.5
Accounts and notes receivable, principally trade 131.5 74.6
Income taxes receivable 2.6 5.8
Inventories 26.9 25.6
Prepaid expenses 9.8 6.3
_____________________________________________________________________________________
TOTAL CURRENT ASSETS 180.2 152.8
_____________________________________________________________________________________
Investments in affiliates 23.3 31.1
Property, plant and equipment 2,820.2 2,330.6
Less accumulated depletion, depreciation and
amortization (1,428.1) (1,356.4)
_____________________________________________________________________________________
NET PROPERTY, PLANT AND EQUIPMENT 1,392.1 974.2
_____________________________________________________________________________________
Deferred income taxes 1.6 -
Other assets 65.1 51.0
_____________________________________________________________________________________
$ 1,662.3 1,209.1
_____________________________________________________________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY
_____________________________________________________________________________________
CURRENT LIABILITIES:
Accounts payable and accrued expenses 175.8 158.1
Income taxes payable 17.2 6.9
Deferred income taxes 2.1 8.0
_____________________________________________________________________________________
TOTAL CURRENT LIABILITIES 195.1 173.0
_____________________________________________________________________________________
Deferred income taxes 124.8 148.8
Long-term debt 747.7 343.0
Other liabilities 177.6 127.7
_____________________________________________________________________________________
STOCKHOLDERS' EQUITY:
Capital stock 5.7 5.7
Additional paid-in capital 43.9 41.5
Retained earnings 689.7 704.5
_____________________________________________________________________________________
739.3 751.7
Loans to ESOP (9.7) (11.8)
Cost of capital stock in treasury (312.5) (323.3)
_____________________________________________________________________________________
TOTAL STOCKHOLDERS' EQUITY 417.1 416.6
_____________________________________________________________________________________
$ 1,662.3 1,209.1
_____________________________________________________________________________________
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
THE LOUISIANA LAND AND EXPLORATION COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(UNAUDITED)
(Millions, except per share data)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1993 1992 1993 1992
_____________________________________________________________________________________
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas $ 86.6 82.1 258.9 237.8
Refined products 101.4 120.3 302.1 331.1
Other 5.5 6.1 14.1 14.8
_____________________________________________________________________________________
193.5 208.5 575.1 583.7
_____________________________________________________________________________________
COSTS AND EXPENSES:
Lease operating and facility expenses 26.3 23.7 76.7 76.4
Refinery cost of sales and operating
expenses 101.6 117.6 300.1 317.9
Dry holes and exploratory charges 13.1 13.1 34.5 33.2
Depletion, depreciation and amortization 28.2 26.5 81.0 80.5
Taxes, other than on earnings 6.3 6.4 19.0 18.7
General, administrative and other expenses 10.6 10.4 31.2 30.8
Interest and debt expenses 4.8 6.4 15.0 19.2
Restructuring and other nonrecurring
charges/credits - (8.0) - 27.4
_____________________________________________________________________________________
190.9 196.1 557.5 604.1
_____________________________________________________________________________________
Earnings (loss) before income taxes 2.6 12.4 17.6 (20.4)
Income tax expense (benefit) 4.4 4.2 11.1 (7.5)
_____________________________________________________________________________________
Earnings (loss) before extraordinary
item and cumulative effect of changes
in accounting principles (1.8) 8.2 6.5 (12.9)
Loss on early retirement of debt (net of
income tax benefit of $2.8) - (5.6) - (5.6)
Cumulative effect on years prior to 1993
of changes in accounting principles - - .2 -
_____________________________________________________________________________________
NET EARNINGS (LOSS) $ (1.8) 2.6 6.7 (18.5)
_____________________________________________________________________________________
Primary and fully diluted earnings (loss)
per share before extraordinary item and
cumulative effect of changes in accounting
principles (0.06) 0.29 0.22 (0.45)
Loss on early retirement of debt - (0.20) - (0.20)
Cumulative effect on years prior to 1993
of changes in accounting principles - - 0.01 -
_____________________________________________________________________________________
PRIMARY AND FULLY DILUTED EARNINGS (LOSS)
PER SHARE $(0.06) 0.09 0.23 (0.65)
_____________________________________________________________________________________
AVERAGE SHARES 28.9 28.4 28.7 28.4
_____________________________________________________________________________________
CASH DIVIDENDS PER SHARE $ 0.25 0.25 0.75 0.75
_____________________________________________________________________________________
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
THE LOUISIANA LAND AND EXPLORATION COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Millions of dollars)
<CAPTION>
Nine months ended
September 30,
1993 1992
_____________________________________________________________________________________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 6.7 (18.5)
Adjustments to reconcile to cash flows
from operations:
Changes in accounting principles (.2) -
Restructuring and other nonrecurring charges/credits - 27.4
Loss on early retirement of debt - 8.4
Depletion, depreciation and amortization 81.0 80.5
Deferred income taxes (10.7) (5.5)
Dry holes and impairment charges 15.5 13.5
Other 10.0 7.6
_____________________________________________________________________________________
102.3 113.4
Changes in operating assets and liabilities:
Net (increase) decrease in receivables (17.0) .4
Net (increase) decrease in inventories 1.6 (6.8)
Net (increase) decrease in prepaid items (2.1) 5.2
Net increase (decrease) in payables 15.0 (3.5)
Other 10.1 (7.9)
_____________________________________________________________________________________
NET CASH FLOWS FROM OPERATING ACTIVITIES 109.9 100.8
_____________________________________________________________________________________
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of NERCO (359.1) -
Capital expenditures (128.1) (111.6)
Proceeds from asset sales 1.6 48.1
Other (33.9) (9.1)
_____________________________________________________________________________________
NET CASH FLOWS FROM INVESTING ACTIVITIES (519.5) (72.6)
_____________________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt 471.0 100.0
Repayments of long-term debt (68.6) (67.9)
Dividends (21.5) (21.2)
Repayment of loans to ESOP 2.2 2.4
Purchase of treasury stock (1.5) -
Other (3.1) (1.3)
_____________________________________________________________________________________
NET CASH FLOWS FROM FINANCING ACTIVITIES 378.5 12.0
_____________________________________________________________________________________
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (31.1) 40.2
_____________________________________________________________________________________
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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THE LOUISIANA LAND AND EXPLORATION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the financial
position as of September 30, 1993, and the results of operations and
cash flows for the three-month and nine-month periods ended
September 30, 1993 and 1992. Certain amounts have been reclassified
to conform with the current period's presentation.
2. In April 1993, the Company completed its second $100 million public
offering of debt securities under an existing shelf registration filed
in 1992 under the Securities and Exchange Commission's rules with the
issuance of 7-5/8% Debentures due 2013. Part of the net proceeds of
approximately $98 million was applied to the payment of the $66
million installment of the Term Loan due in July 1993; the balance was
used for general corporate purposes. The Company also intends to file
a registration statement on Form S-3 to register up to $500 million
of debt securities under the Securities and Exchange Commission's
shelf registration rules, which will include the $100 million
available under the shelf registration filed in 1992.
3. As indicated in Note 11 of "Notes to Consolidated Financial
Statements" in the Company's 1992 Annual Report to Shareholders, the
Company adopted SFAS No. 106 - "Employers' Accounting for
Postretirement Benefits Other Than Pensions," effective January 1,
1993. Upon adoption, the Company recorded a transition liability of
$20.5 million as a one-time noncash charge against earnings ($13.5
million after income taxes; $0.47 per share) in the first quarter of
1993. In addition, of the estimated $3 million net periodic benefit
cost applicable to 1993, approximately $0.7 million ($0.5 million
after income taxes; $0.02 per share) and $2.3 million ($1.5 million
after income taxes; $0.05 per share) were charged against earnings for
the three-month and nine-month periods ended September 30, 1993,
respectively.
4. As indicated in Note 10 of "Notes to Consolidated Financial
Statements" in the Company's 1992 Annual Report to Shareholders, the
Company adopted SFAS No. 109 - "Accounting for Income Taxes,"
effective January 1, 1993. Upon adoption, the Company recorded a non-
cash credit to earnings of $13.7 million ($0.48 per share) in the
first quarter of 1993, which represented the recognition of deferred
tax assets existing at December 31, 1992. The application of SFAS No.
109 had no effect on income tax expense for the first nine months of
1993. No valuation allowance for deferred tax assets was considered
necessary as of September 30, 1993.
5. With the enactment of the Budget Reconciliation Act of 1993, the
federal statutory corporate income tax rate was increased from 34% to
35% retroactive to January 1, 1993. As a result, the Company
increased its deferred income tax liabilities as of January 1, 1993
with a charge to income tax expense of $3 million ($0.10 per share)
during the quarter ended September 30, 1993. The rate increase had
an immaterial effect on income tax expense for the nine months ended
September 30, 1993. PAGE
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. For the three months ended September 30, 1993 and 1992, interest costs
incurred were $9.3 million and $9.5 million, respectively, of which
$4.5 million and $3.1 million, respectively, were capitalized as part
of the cost of property, plant and equipment. For nine-months ended
September 30, 1993 and 1992, interest costs incurred were $27.9
million and $28.7 million, respectively, of which $12.9 million and
$9.5 million, respectively, were capitalized as part of the cost of
property, plant and equipment.
7. Primary earnings (loss) per share are calculated on the weighted
average number of shares outstanding during each period for capital
stock and, when dilutive, capital stock equivalents, which assumes
exercise of stock options. Fully diluted earnings (loss) per share
were calculated on the same basis, but also assumed conversion, when
dilutive, of the convertible subordinated debentures for the period
outstanding prior to the call for redemption on September 25, 1992,
and elimination of the related interest expense, net of income taxes.
8. In accordance with Regulation S-X, Rule 3-09, the audited consolidated
financial statements of the Company's 50%-owned affiliate, MaraLou
Netherlands Partnership (MaraLou) and its wholly-owned consolidated
subsidiary, CLAM Petroleum Company (CLAM), were filed with the
Company's Annual Report on Form 10-K for the year ended December 31,
1992.
Accordingly, the following unaudited summarized consolidated income
statement information for MaraLou and its consolidated subsidiary,
CLAM, for the three-month and nine-month periods ended September 30,
1993 and 1992 are presented in accordance with Regulation S-X, Rule
10-01(b).
<TABLE>
<CAPTION>
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
1993 1992 1993 1992
_________________________________________________________________________________
<S> <C> <C> <C> <C>
Gross revenues $ 5.1 10.0 43.5 59.0
_________________________________________________________________________________
Operating profit .9 1.1 22.6 29.0
_________________________________________________________________________________
Earnings (loss) before cumulative
effect of change in accounting
principle (1.2) 4.4 7.5 10.7
Cumulative effect on years prior to
1993 of change in accounting
principle for income taxes - - (6.0) -
_________________________________________________________________________________
Net earnings (loss) $(1.2) 4.4 1.5 10.7
_________________________________________________________________________________
</TABLE>
9. In August 1989, the State of Louisiana, in connection with its claim
against Texaco in the Texaco bankruptcy proceedings, filed an Amended
and Restated Objection, Amended and Restated Proof of Claim and
Complaint naming, as class action defendants, all persons having
overriding royalty, working or other mineral interests in State
mineral leases held by Texaco. The State sought cancellation of
certain interests in State mineral leases, including the interests of
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
class members. The Company was a potential class member as a result
of its ownership of royalty interests in State mineral leases
subleased to Texaco and its ownership of overriding royalty and
working interests in other State leases with Texaco. The State also
asserted claims against Texaco based on Texaco's alleged underpayment
of royalties on certain State leases, including six State leases which
Texaco has operated under subleases from the Company.
In July 1991, the Company entered into an agreement with Texaco which
resolved all claims and issues related to certain Department of Energy
matters. Following this settlement, the previously established
accrual for the DOE matter, net of certain litigation expenses, was
retained with respect to loss contingencies associated with the State
of Louisiana gas royalty claim.
In January 1992, the United States District Court for the Middle
District of Louisiana denied the State's motion to certify a defendant
class and denied the State's motion for summary judgment, which had
sought a declaration that Texaco could not assume State mineral leases
under bankruptcy law. A subsequent appeal by the State was dismissed.
On January 10, 1992, the Company was served with a Second Amendment
and Supplement to Amended and Restated Objection, Amended and Restated
Proof of Claim and Complaint of the State of Louisiana, wherein the
Company was added as a defendant in its capacity as a sublessor to
Texaco. The State has asserted a monetary claim of $210.9 million in
principal and $264.8 million in interest, plus penalties, damages
equal to double the amount of royalties allegedly due, and attorneys'
fees, against Texaco and the Company based on Texaco's alleged
underpayment of royalties on six State leases which Texaco has
operated under subleases from the Company. The monetary amount of the
State's claims substantially exceeds amounts provided in the financial
statements. However, the Company believes the State's claims are
significantly overstated. The State further seeks cancellation of the
State mineral leases subleased to Texaco based on Texaco's alleged
conduct in operating those leases. Lease cancellation is an extra-
ordinary remedy under Louisiana Law. The Company believes it has
contractual and legal rights to obtain indemnity, reimbursement and
damages from Texaco for any amounts claimed by the State or any other
losses sustained as a result of the State's action. In the opinion
of Management, the ultimate resolution of these claims should not have
a material adverse affect upon the results of operations, cash flows
or financial position of the Company.
The Company is subject to other legal proceedings, claims and
liabilities, including environmental matters, which arise in the
ordinary course of its business. In the opinion of Management, the
amount of ultimate liability with respect to these actions will not
materially affect the financial position of the Company.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. On September 28, 1993, the Company completed the acquisition of all
of the issued and outstanding common stock of NERCO Oil & Gas, Inc.
("NERCO"). The cash purchase price of approximately $354 million was
financed initially through the credit facility discussed below. The
cost of the acquisition was allocated under the purchase method of
accounting based on the fair value of the assets acquired and
liabilities assumed.
The results of NERCO's operations will be consolidated with the
Company's effective October 1, 1993. Pro forma combined results of
operations of the Company and NERCO, including appropriate purchase
accounting adjustments for the periods ending September 30, 1993 and
1992, as though the acquisition had taken place on January 1 of the
respective years, are as follows:
<TABLE>
<CAPTION>
(Millions, except per share data)
Three months ended Nine months ended
September 30, September 30,
1993 1992 1993 1992
_________________________________________________________________________________
<S> <C> <C> <C> <C>
Revenues $217.1 243.0 666.8 684.1
_________________________________________________________________________________
Earnings (loss) before extraordinary
item and cumulative effect of changes
in accounting principle (13.4) 3.0 (6.5) (24.5)
_________________________________________________________________________________
Net earnings (loss) $(13.4) (2.6) (6.3) (30.1)
_________________________________________________________________________________
Primary and fully diluted earnings
(loss) per share $(0.40) (0.08) (0.19) (0.92)
_________________________________________________________________________________
</TABLE>
11. On August 12, 1993, the Company entered into a definitive agreement
with British Gas Exploration and Production Limited for the
acquisition of its 14% working interest in Block 16/17 in the U.K.
North Sea ("T-Block") for $232 million in cash. On October 5, 1993,
the Company agreed to reduce the working interest it would acquire to
11.26% (and its purchase price to $186.6 million) and permit Murphy
Petroleum Limited, one of the T-Block partners, to acquire the
remaining 2.74% interest for $45.4 million on substantially the same
terms and conditions as the Company (the "Murphy Sale"). The other
partners in T-Block have agreed to waive their preemption rights. The
purchase is subject to certain U.K. government approvals. The
purchase will be financed initially through the credit facility
discussed below and is anticipated to be consummated in December.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. To finance the aforementioned acquisitions, refinance certain existing
indebtedness and fund general corporate activities, the Company has
entered into a $790 million credit facility with a syndicate of banks.
Availability under the agreement consists of (i) a $540 million
revolving credit facility, which will be reduced by $25 million on the
last day of each fiscal quarter commencing June 30, 1994 and will
expire on September 30, 1999 and (ii) a $250 million term loan
facility which will be reduced to $100 million on June 30, 1994
followed by $25 million reductions on the last day of each fiscal
quarter commencing September 30, 1994 and will expire on June 30,
1995. Total availability under the agreement will be reduced to $745
million upon consummation of the aforementioned Murphy Sale. Amounts
outstanding under the agreement bear interest at fluctuating rates
subject to certain options chosen in advance by the Company.
13. On November 9, 1993, the Company completed a public offering of 4.4
million shares of capital stock at a price of $44.625 per share. The
capital stock was taken from the Company's treasury at an average cost
of $33.125 per share. The excess of net proceeds over the cost of
treasury stock issued was credited to additional paid-in capital. The
net proceeds of the offering, after underwriting commissions and
expenses, were approximately $188.8 million and were applied to the
repayment of indebtedness under the aforementioned credit facility.
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INDEPENDENT AUDITORS' REPORT
The Board of Directors
The Louisiana Land and Exploration Company:
We have reviewed the consolidated balance sheet of The Louisiana Land and
Exploration Company and subsidiaries as of September 30, 1993, and the
related consolidated statements of earnings (loss) and cash flows for the
three-month and nine-month periods ended September 30, 1993 and 1992.
These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of The Louisiana Land and
Exploration Company and subsidiaries as of December 31, 1992, and the
related consolidated statements of earnings (loss), stockholders' equity,
and cash flows for the year then ended (not presented herein); and in our
report dated February 8, 1993, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information
set forth in the accompanying condensed consolidated balance sheet as of
December 31, 1992, is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
KPMG PEAT MARWICK
New Orleans, Louisiana
November 1, 1993
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
REVIEW OF OPERATIONS
Pretax operating results for the 1993 third quarter totaled $2.6
million, down from the $4.4 million generated in the comparable 1992
quarter (after excluding the nonrecurring pretax gain of $8 million
resulting from the sale of oil and gas properties). This decline resulted
primarily from the reduced profits from refining operations, which more
than offset the higher revenues from oil and gas operations.
Pretax earnings of $17.6 million for the first nine months of 1993 were
up from the $12.5 million earned in the comparable 1992 period (after
excluding the 1992 nonrecurring charges/credits amounting to $32.9 million
for the restructuring of the Company's domestic oil and gas operations,
for the uninsured costs associated with a gas well blowout and for the
reversal of a portion of a litigation provision). This increase was
primarily due to higher revenues from oil and gas operations, which was
partially offset by reduced refining operating profits and lower equity
in the earnings of the Company's 50%-owned affiliate, CLAM Petroleum
Company ("CLAM"). CLAM's reduced earnings for 1993 reflect the adverse
effects of the one-time noncash charge of $6 million to income taxes ($3
million net to LL&E) in the first quarter for the adoption of SFAS No. 109
and lower gas deliveries due to a mechanical failure at a gas processing
facility which was shut down for most of the third quarter.
Income tax expense for the three- and nine-month periods of 1993
reflect the $3 million charge recorded in the third quarter to adjust the
Company's deferred income taxes for the increase (retroactive to
January 1, 1993) in the federal corporate income tax rate to 35% resulting
from the enactment of the Budget Reconciliation Act of 1993. Exclusive
of this adjustment, the effective income tax rate exceeded the statutory
federal income tax rate due to the higher tax rates experienced in foreign
jurisdictions.
OIL AND GAS OPERATIONS
Revenues from the Company's oil and gas operations in the third quarter
of 1993 increased over $4 million from the 1992 quarter due to higher
natural gas revenues and the favorable settlement of a lease ownership
dispute which added over $3 million to revenues. With increases in
domestic natural gas volumes ($2 million) and prices ($6 million), natural
gas revenues were up $11 million. Liquids revenues were down $6 million
as the effects of lower worldwide crude oil prices ($13 million) more than
offset the benefit of higher volumes ($7 million).
In the first nine months of 1993, revenues from oil and gas operations
also benefitted from the aforementioned lease settlement ($6 million) and
from higher natural gas revenues and were up over $21 million from the
comparable prior year period. Natural gas revenues were up $23 million
primarily as a result of an increase in domestic prices. Liquids revenues
were down almost $4 million due to lower prices ($13 million) which were
partially offset by higher volumes ($9 million).
PAGE
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
Crude oil volumes in the third quarter and the first nine months of
1993 increased from the prior year periods primarily as a result of the
purchase of working interests in domestic, North Sea and other foreign
proved properties since the third quarter of 1992, new domestic wells
coming onstream, and increased production from domestic wells that were
shut-in for repairs and maintenance during the prior year periods.
Partially offsetting these increases were natural declines and reduced
production resulting from wells shut-in for repairs and maintenance at
domestic and foreign properties.
The improvement in domestic natural gas deliveries in both the third
quarter and the first nine months of 1993 from the prior year periods was
primarily attributable to new domestic wells coming onstream, the return
to production of wells previously shut-in for repairs and maintenance and
the inclusion of volumes associated with a lease ownership settlement
amounting to over 16 million and 10 million cubic feet per day,
respectively. These increases were partially offset by the effects of
natural declines at mature producing properties, wells shut-in for repairs
and maintenance, and the early 1993 disposition of South Marsh Island 141.
Lease operating and facility expenses were higher than in the prior
year periods primarily due to operating expenses on properties recently
acquired and, for existing properties, higher repair and maintenance costs
and facilities expenses. The 1992 nine-month period also included a $5.5
million pretax charge related to a gas well blowout. Depletion,
depreciation and amortization (DD&A) was also higher in both the 1993
third quarter and nine-month period due to DD&A associated with new
producing properties, offset somewhat by reduced DD&A on domestic and
North Sea properties due to declining production rates. Although
exploration activities increased in the 1993 periods, dry holes and
exploratory charges were only marginally higher due to higher success
rates. General, administrative and other expenses increased from the 1992
periods primarily due to the inclusion of current year costs associated
with postretirement benefits other than pensions. Interest and debt
expenses declined in both the third quarter and first nine months of 1993
from the 1992 periods primarily due to an increase in interest capitalized
on qualifying projects.
REFINING AND MARKETING OPERATIONS
Refined product demand and prices in the 1993 third quarter declined
from the comparable 1992 quarter. Reduced sales prices during the 1993
third quarter as compared to the 1992 third quarter resulted in a $18
million decline in revenues. While feedstock costs decreased $16 million,
this was not enough to offset the adverse impact of the lower revenues on
profit margins resulting in a $2 million operating loss for the third
quarter. Profits from crude oil marketing activities were also marginally
lower than in the prior year quarter.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
The refining profit margins for the first nine months of 1993 were also
significantly below those of 1992. Lower revenues from a decline in
prices ($29 million) and higher operating expenses more than offset the
favorable impact of lower feedstock costs ($20 million) resulting in a $3
million operating loss. A $2 million profit from crude oil marketing
activities partially offset the operating loss, but was also lower than
in the prior year period.
LIQUIDITY AND CAPITAL RESOURCES
In the first nine months of 1993, the Company generated approximately
$110 million in cash from operations which, with the proceeds from the
debt offerings discussed below, was utilized for the acquisition of NERCO
as discussed below, exploration and development projects ($128 million),
the repayment of $69 million of long-term debt, payments for prior year
accrued capital expenditures included in other investing activities ($36
million) and dividends ($22 million).
In April 1993, the Company completed its second $100 million public
offering of debt securities under an existing shelf registration filed in
1992 under the Securities and Exchange Commission's rules with the
issuance of 7-5/8% Debentures due 2013. Part of the net proceeds of
approximately $98 million was applied to the payment of the $66 million
installment of the Term Loan due in July 1993; the balance was used for
general corporate purposes.
On September 28, 1993, the Company completed the acquisition of NERCO
Oil & Gas, Inc. ("NERCO") for $354 million in cash. The Black Lake Field,
a significant onshore property owned by NERCO, was not included in the
sale and was disposed of by NERCO prior to the closing of the transaction.
The properties acquired include working interests averaging over 50% in
50 producing oil and gas fields located predominately in the Gulf of
Mexico, a substantial portion of which are operated by NERCO. Production
from these properties for the first nine months of 1993 averaged
approximately 124 million cubic feet of natural gas and nearly 6,200
barrels of liquids per day. Also, included in the acquisition are NERCO's
interests in leases on 53 undeveloped blocks in the Gulf.
In August 1993, the Company agreed to purchase British Gas Exploration
and Production Limited's 14% working interest in Block 16/17 in the U.K.
North Sea ("T-Block") for $232 million in cash. On October 5, 1993, the
Company agreed to reduce the working interest it would acquire to 11.26%
(and its purchase price to $186.6 million) and permit Murphy Petroleum
Limited, one of the T-Block partners, to acquire the remaining 2.74%
interest for $45.4 million (the "Murphy Sale"). The other partners in
T-Block have agreed to waive their preemption rights. T-Block contains
two oil fields which are under development: the Tiffany Field and the
satellite field, Toni, where production from both fields is scheduled to
begin later in 1993. The development of two additional fields, Thelma and
Southeast Thelma, is in the advanced planning stage. The purchase is
subject to certain U.K. government approvals and is anticipated to be
consummated in December.
PAGE
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
To finance the aforementioned acquisitions, refinance certain existing
indebtedness and fund general corporate activities, the Company has
entered into a $790 million credit facility with a syndicate of banks.
Availability under the agreement consists of (i) a $540 million revolving
credit facility, which will be reduced by $25 million on the last day of
each fiscal quarter commencing June 30, 1994 and will expire on September
30, 1999 and (ii) a $250 million term loan facility which will be reduced
to $100 million on June 30, 1994 followed by $25 million reductions on the
last day of each fiscal quarter commencing September 30, 1994 and will
expire on June 30, 1995. Total availability under the agreement will be
reduced to $745 million upon consummation of the Murphy Sale. Amounts
outstanding under the agreement bear interest at fluctuating rates subject
to certain options chosen in advance by the Company.
On November 9, 1993, the Company completed a public offering of 4.4
million shares of capital stock at a price of $44.625 per share. The
capital stock was taken from the Company's treasury at an average cost of
$33.125 per share. The excess of net proceeds over the cost of treasury
stock issued was credited to additional paid-in capital. The net proceeds
of the offering, after underwriting commissions and expenses, were
approximately $188.8 million and were applied to the repayment of
indebtedness under the aforementioned credit facility.
The Company also intends to file a registration statement on Form S-3
to register up to $500 million of debt securities under the Securities and
Exchange Commission's shelf registration rules, which will include the
$100 million available under the shelf registration filed in 1992. The
proceeds from the offering of debt securities will be utilized to
refinance existing debt and for general corporate purposes.
NOTE: The accompanying consolidated financial statements and notes
thereto included in Item 1. of this Form 10-Q and the petroleum
segment information and operating data following this Item 2. are
an integral part of this discussion and analysis and should be
read in conjunction herewith.
PAGE
<PAGE>
<TABLE> THE LOUISIANA LAND AND EXPLORATION COMPANY
PETROLEUM SEGMENT INFORMATION
(Millions of dollars)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1993 1992 1993 1992
_____________________________________________________________________________________
<S> <C> <C> <C> <C>
Sales to Unaffiliated Customers:
Domestic $169.7 182.2 500.7 507.6
North Sea 9.5 11.4 30.1 35.9
Other foreign 8.8 8.8 30.2 25.4
_____________________________________________________________________________________
188.0 202.4 561.0 568.9
Interest and other income 5.5 6.1 14.1 14.8
_____________________________________________________________________________________
Total revenues $193.5 208.5 575.1 583.7
_____________________________________________________________________________________
Earnings (Loss) before Income Taxes:
Operating profit (loss):
Domestic 19.1 25.1 65.0 18.8
North Sea (1.8) .1 (4.2) 3.7
Other foreign (2.7) (.4) (5.1) (2.5)
_____________________________________________________________________________________
14.6 24.8 55.7 20.0
Other income (expense), net (12.0) (12.4) (38.1) (40.4)
_____________________________________________________________________________________
Earnings (loss) before income taxes $ 2.6 12.4 17.6 (20.4)
_____________________________________________________________________________________
Capital Expenditures:
Exploration:
Domestic 10.1 3.1 21.1 18.0
North Sea .7 1.5 1.6 2.4
Other foreign 2.3 - 7.4 3.5
_____________________________________________________________________________________
13.1 4.6 30.1 23.9
_____________________________________________________________________________________
Development:
Domestic 18.4 11.2 39.7 32.2
North Sea 4.7 6.5 28.3 22.2
Other foreign .4 1.6 .8 2.7
_____________________________________________________________________________________
23.5 19.3 68.8 57.1
_____________________________________________________________________________________
36.6 23.9 98.9 81.0
Refining and marketing 4.1 8.3 14.0 18.6
_____________________________________________________________________________________
40.7 32.2 112.9 99.6
Capitalized interest 4.4 3.1 12.8 9.5
Other 1.0 .6 2.4 2.5
_____________________________________________________________________________________
$ 46.1 35.9 128.1 111.6
_____________________________________________________________________________________
</TABLE>
PAGE
<PAGE>
<TABLE>
THE LOUISIANA LAND AND EXPLORATION COMPANY
OPERATING DATA
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1993 1992 1993 1992
_____________________________________________________________________________________
<S> <C> <C> <C> <C>
OIL AND GAS OPERATIONS1
CRUDE AND CONDENSATE2
Production (thousands of barrels per day):
Domestic 21.4 18.9 20.8 19.4
North Sea 6.2 5.9 6.3 6.5
Other foreign 6.6 5.4 6.8 5.8
_____________________________________________________________________________________
34.2 30.2 33.9 31.7
_____________________________________________________________________________________
Average price received (per barrel):
Domestic $16.13 20.39 17.63 19.12
North Sea 15.79 19.95 16.87 19.20
Other foreign 13.84 16.53 15.07 14.91
Consolidated 15.63 19.60 16.97 18.36
_____________________________________________________________________________________
PLANT PRODUCTS
Production (thousands of barrels per day):
Domestic 2.3 2.4 2.4 2.3
North Sea .5 .4 .4 .5
_____________________________________________________________________________________
2.8 2.8 2.8 2.8
_____________________________________________________________________________________
Average price received (per barrel):
Domestic $10.75 13.18 11.55 12.78
North Sea 12.53 13.11 12.92 14.19
Consolidated 11.05 13.17 11.74 13.00
_____________________________________________________________________________________
NATURAL GAS
Production (millions of cubic feet per day):
Domestic 165.5 132.6 150.2 143.3
North Sea .2 .2 .2 .2
Other foreign 3.6 3.8 5.1 4.8
CLAM Petroleum Company 10.8 18.5 31.6 38.1
_____________________________________________________________________________________
180.1 155.1 187.1 186.4
_____________________________________________________________________________________
Average price received (per MCF):
Domestic $ 2.15 1.78 2.14 1.55
North Sea 1.36 2.22 1.51 1.84
Other foreign 1.24 0.81 1.28 0.83
CLAM Petroleum Company 2.93 2.87 2.51 2.78
Consolidated 2.18 1.88 2.18 1.78
_____________________________________________________________________________________
<FN>
1 Includes the Company's 50% equity interest in its unconsolidated affiliate, CLAM
Petroleum Company.
2 Before the elimination of intercompany transfers.
</TABLE>
<PAGE>
<PAGE>
<TABLE> THE LOUISIANA LAND AND EXPLORATION COMPANY
OPERATING DATA (CONTINUED)
<CAPTION> Three months ended Nine months ended
September 30, September 30,
1993 1992 1993 1992
_____________________________________________________________________________________
<S> <C> <C> <C> <C>
REFINING AND MARKETING OPERATIONS
Refining Operating Profit (Loss):
Revenues:
Refined products* $108.1 126.1 318.1 346.9
Other .3 - 1.6 .3
_____________________________________________________________________________________
108.4 126.1 319.7 347.2
_____________________________________________________________________________________
Cost and expenses:
Cost of sales* 99.1 115.2 289.8 310.0
Operating expenses 9.2 8.2 26.3 23.8
Depreciation 1.3 1.2 3.8 3.6
Taxes, other than income .7 .9 2.7 2.4
_____________________________________________________________________________________
110.3 125.5 322.6 339.8
_____________________________________________________________________________________
(1.9) .6 (2.9) 7.4
Crude Marketing Gain .8 1.5 1.8 4.3
_____________________________________________________________________________________
$ (1.1) 2.1 (1.1) 11.7
_____________________________________________________________________________________
*Before the elimination of intercompany
transfers to the Company's refinery $ 6.7 5.8 16.0 15.9
_____________________________________________________________________________________
Sales (thousands of barrels per day) 57.1 57.4 53.6 53.5
_____________________________________________________________________________________
Average price received (per barrel) $20.57 23.90 21.75 23.68
_____________________________________________________________________________________
_____________________________________________________________________________________
GROSS WELLS DRILLED
WORKING INTEREST
Exploratory:
Oil 8 5 21 14
Gas 3 1 6 4
Dry 5 6 16 14
_____________________________________________________________________________________
16 12 43 32
_____________________________________________________________________________________
Development:
Oil 4 - 7 5
Gas 2 - 6 3
Dry 1 - 1 1
_____________________________________________________________________________________
7 - 14 9
_____________________________________________________________________________________
Total working interest 23 12 57 41
ROYALTY INTEREST 4 7 23 15
_____________________________________________________________________________________
Total wells 27 19 80 56
_____________________________________________________________________________________
NET WELLS DRILLED
Exploratory:
Oil 5.0 2.5 10.7 7.3
Gas 1.2 .2 2.6 1.5
Dry 2.7 2.3 7.8 6.1
_____________________________________________________________________________________
8.9 5.0 21.1 14.9
_____________________________________________________________________________________
Development:
Oil 1.0 .3 1.8 1.2
Gas .3 - 1.0 1.1
Dry .3 - .3 .5
_____________________________________________________________________________________
1.6 .3 3.1 2.8
_____________________________________________________________________________________
Total net wells 10.5 5.3 24.2 17.7
_____________________________________________________________________________________
/TABLE
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
The following Exhibit has been filed with the Securities and
Exchange Commission:
Exhibit 11
Computation of Primary and Fully Diluted Earnings
(Loss) Per Share - Three Months and Nine Months Ended
September 30, 1993 and 1992.
(b) Reports on Form 8-K:
A current Report on Form 8-K dated September 2, 1993, as amended on
Form 8-K/A, was filed reporting the Company's agreements to purchase
NERCO Oil & Gas, Inc., to purchase a part of British Gas Exploration
and Production Limited's working interest in Block 16/17 in the U.K.
Sector of the North Sea and to enter into a credit facility with a
syndicate of banks to finance the above purchases.
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.
THE LOUISIANA LAND AND EXPLORATION COMPANY
(REGISTRANT)
By: /s/ Jerry D. Carlisle
____________________________________________
JERRY D. CARLISLE
VICE PRESIDENT AND CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
Dated: November 9, 1993
<PAGE>
<PAGE>
THE LOUISIANA LAND AND EXPLORATION COMPANY
INDEX TO EXHIBITS
(Item 6(a))
The following Exhibit has been filed with the Securities and Exchange
Commission:
Exhibit 11 Computation of Primary and Fully Diluted Earnings (Loss)
Per Share - Three Months and Nine Months Ended September
30, 1993 and 1992.
PAGE
<PAGE>
<TABLE>
EXHIBIT 11
THE LOUISIANA LAND AND EXPLORATION COMPANY
COMPUTATION OF PRIMARY AND FULLY DILUTED
EARNINGS (LOSS) PER SHARE
(Millions, except per share data)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1993 1992 1993 1992
_____________________________________________________________________________________
<S> <C> <C> <C> <C>
PRIMARY EARNINGS (LOSS) PER SHARE:
Earnings (loss) before extraordinary
item and cumulative effect of
changes in accounting principles $ (1.8) 8.2 6.5 (12.9)
Loss on early retirement of debt - (5.6) - (5.6)
Cumulative effect on years prior to 1993
of changes in accounting principles - - .2 -
_____________________________________________________________________________________
Net earnings (loss) $ (1.8) 2.6 6.7 (18.5)
_____________________________________________________________________________________
Weighted average shares outstanding 28.7 28.3 28.6 28.3
Incremental shares attributable to
outstanding stock options .2 .1 .1 .1
_____________________________________________________________________________________
Weighted average shares, as adjusted 28.9 28.4 28.7 28.4
_____________________________________________________________________________________
Primary earnings (loss) per share
before extraordinary item and
cumulative effect of changes
in accounting principles (0.06) 0.29 0.22 (0.45)
Loss on early retirement of debt - (0.20) - (0.20)
Cumulative effect on years prior to
1993 of changes in accounting
principles - - 0.01 -
_____________________________________________________________________________________
Primary earnings (loss) per share $(0.06) 0.09 0.23 (0.65)
_____________________________________________________________________________________
_____________________________________________________________________________________
FULLY DILUTED EARNINGS (LOSS) PER SHARE:
Net earnings (loss) N/A $ 2.6 N/A (18.5)
Add back interest expense applicable to
convertible subordinated debentures,
net of income taxes " .5 " 1.6
_____________________________________________________________________________________
Net earnings (loss), as adjusted " $ 3.1 " (16.9)
_____________________________________________________________________________________
Weighted average shares outstanding " 28.3 " 28.3
Incremental shares attributable to
outstanding stock options " .1 " -
Shares attributable to assumed
conversion of convertible
subordinated debentures " .3 " .4
_____________________________________________________________________________________
Weighted average shares, as adjusted " 28.7 " 28.7
_____________________________________________________________________________________
Fully diluted earnings (loss) per share " $0.11* " (0.59)*
_____________________________________________________________________________________
<FN>
* This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to APB Opinion No. 15 because it
produces an anti-dilutive result.
</TABLE>
