<PAGE>
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number: 0-7062
NOBLE AFFILIATES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 73-0785597
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
110 West Broadway
Ardmore, Oklahoma 73401
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(405) 223-4110
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
_____ _____
Number of shares of common stock outstanding as of August 8, 1995:
50,042,299
===============================================================================
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOBLE AFFILIATES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1995 1994
----------- ------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and short-term cash investments............................ $ 32,431 $ 22,192
Accounts receivable-trade....................................... 52,288 49,692
Materials and supplies inventories.............................. 3,518 3,591
Other current assets............................................ 8,485 28,412
---------- ----------
Total Current Assets............................................ 96,722 103,887
---------- ----------
Property, Plant and Equipment..................................... 1,666,209 1,588,459
Less: accumulated depreciation, depletion and amortization...... (828,642) (775,079)
---------- ----------
837,567 813,380
Other Assets...................................................... 24,988 16,249
---------- ----------
Total Assets.................................................... $ 959,277 $ 933,516
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable................................................ $ 65,115 $ 46,473
Other current liabilities....................................... 25,734 21,747
Income taxes.................................................... 2,071 3,768
---------- ----------
Total Current Liabilities....................................... 92,920 71,988
---------- ----------
Deferred Income Taxes............................................. 66,076 61,802
---------- ----------
Other Deferred Credits and Noncurrent Liabilities................. 11,011 10,704
---------- ----------
Long-term Debt.................................................... 376,974 376,956
---------- ----------
Contingency
Shareholders' Equity:
Common stock.................................................... 171,879 171,790
Capital in excess of par value.................................. 142,255 141,911
Retained earnings............................................... 113,580 113,783
---------- ----------
427,714 427,484
Less common stock in treasury (at cost, 1,524,900 shares)......... (15,418) (15,418)
---------- ----------
Total Shareholders' Equity.................................... 412,296 412,066
---------- ----------
Total Liabilities and Shareholders' Equity.................... $ 959,277 $ 933,516
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 2
<PAGE>
FORM 10-Q
NOBLE AFFILIATES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1995 1994
---- ----
<S> <C> <C>
REVENUES
Oil and gas sales and royalties......................$154,291 $161,895
Gathering, marketing and processing revenues......... 42,086 8,483
Other income......................................... 2,607 5,195
-------- --------
198,984 175,573
-------- --------
COSTS AND EXPENSES:
Oil and gas operations............................... 40,733 36,497
Oil and gas exploration.............................. 11,395 17,570
Gathering, marketing and processing costs............ 41,589 8,385
Depreciation, depletion and amortization............. 70,820 64,440
Selling, general and administrative.................. 18,995 18,851
Interest expense..................................... 10,794 14,290
Interest capitalized................................. (1,479) (4,186)
-------- --------
192,847 155,847
-------- --------
INCOME BEFORE INCOME TAXES............................. 6,137 19,726
INCOME TAX PROVISION................................... 2,340(1) 6,932(1)
-------- --------
NET INCOME.............................................$ 3,797 $ 12,794
======== ========
NET INCOME PER SHARE...................................$ .08(2) $ .26(2)
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 3
<PAGE>
FORM 10-Q
NOBLE AFFILIATES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1995 1994
---- ----
<S> <C> <C>
REVENUES:
Oil and gas sales and royalties......................$ 80,470 $ 80,993
Gathering, marketing and processing revenues......... 25,031 8,483
Other income......................................... 1,629 2,556
-------- --------
107,130 92,032
-------- --------
COSTS AND EXPENSES:
Oil and gas operations............................... 18,422 18,286
Oil and gas exploration.............................. 6,989 13,575
Gathering, marketing and processing costs............ 24,622 8,385
Depreciation, depletion and amortization............. 37,433 30,888
Selling, general and administrative.................. 9,478 9,618
Interest expense .................................... 5,546 6,695
Interest capitalized................................. (786) (2,163)
-------- --------
101,704 85,284
-------- --------
INCOME BEFORE INCOME TAXES............................. 5,426 6,748
INCOME TAX PROVISION................................... 2,069(1) 2,371(1)
-------- --------
NET INCOME.............................................$ 3,357 $ 4,377
======== ========
NET INCOME PER SHARE...................................$ .07(2) $ .09(2)
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 4
<PAGE>
FORM 10-Q
NOBLE AFFILIATES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1995 1994
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income..........................................$ 3,797 $ 12,794
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization.......... 70,820 64,440
Amortization of undeveloped lease costs, net...... 4,329 3,290
Change in deferred credits........................ 4,580 14,640
Change in other noncash items, net................ (1,828) (10,210)
Changes in working capital, not including cash:
(Increase) decrease in accounts receivable........ (2,596) (1,340)
(Increase) decrease in other current assets....... 20,000 (2,446)
Increase (decrease) in accounts payable........... 18,642 24,287
Increase (decrease) in other current liabilities.. 2,290 (1,209)
--------- ---------
Net Cash Provided by Operating Activities............. 120,034 104,246
--------- ---------
Cash Flows From Investing Activities:
Capital expenditures................................ (108,078) (84,972)
Proceeds from sale of property, plant and equipment 1,851 1,380
--------- ---------
Net Cash Provided by (Used in) Investing Activities... (106,227) (83,592)
--------- ---------
Cash Flows From Financing Activities:
Retirement of long-term debt........................ (125,000)
Retirement of short-term debt for property
acquisition........................................ (95,600)
Proceeds from line of credit borrowings............. 48,000
Exercise of stock options........................... 434 554
Cash dividends...................................... (4,002) (3,996)
--------- ---------
Net Cash Used in Financing Activities................. (3,568) (176,042)
--------- ---------
Increase (Decrease) in Cash and Short-term Cash
Investments......................................... 10,239 (155,388)
Cash and Short-term Cash Investments at Beginning
of Period........................................... 22,192 176,432
--------- ---------
Cash and Short-term Cash Investments at End
of Period............................................$ 32,431 $ 21,044
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest (net of amount capitalized)................$ 8,776 $ 11,752
Income taxes........................................ $ 5,000
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 5
<PAGE>
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, consisting only of
necessary and normal recurring adjustments, necessary to present fairly the
Company's financial position as of June 30, 1995 and December 31, 1994, and
the results of operations for the three month and six month periods ended
June 30, 1995 and 1994 and the cash flows for the six month periods ended
June 30, 1995 and 1994. These consolidated condensed financial statements
should be read in conjunction with the financial statements and the notes
thereto incorporated in the Company's annual report on Form 10-K for the year
ended December 31, 1994.
(1) INCOME TAX PROVISION
For the six months ended June 30:
<TABLE>
<CAPTION>
(In thousands)
----------------------
1995 1994
---- ----
<S> <C> <C>
Current................................... $(1,933) $(3,485)
Deferred.................................. 4,273 10,417
------- -------
$ 2,340 $ 6,932
======= =======
</TABLE>
For the three months ended June 30:
<TABLE>
<CAPTION>
(In thousands)
----------------------
1995 1994
---- ----
<S> <C> <C>
Current.................................... $(1,995) $(1,192)
Deferred................................... 4,064 3,563
------- -------
$ 2,069 $ 2,371
======= =======
</TABLE>
(2) NET INCOME PER SHARE
The earnings per share of common stock was computed using the weighted
average number of shares of common stock outstanding during the period as
follows:
<TABLE>
<CAPTION>
(In thousands)
----------------------
1995 1994
---- ----
<S> <C> <C>
For the six months ended June 30:...............50,025 49,948
For the three months ended June 30:.............50,032 49,955
</TABLE>
(3) CONTINGENCY
Over the past several years, Samedan Oil Corporation (Samedan), a wholly
owned subsidiary of the Company, has settled various claims which it had
against parties who had contracted to purchase gas at fixed prices which were
greater than market or who had take-or-pay contracts with the Samedan in which
such obligation to take-or-pay for quantities of gas was not fulfilled. It
is the Company's policy, which is consistent with general industry practice,
that such payments do not represent payment for gas produced, and therefore,
are not subject to royalty payments. The federal government, with respect to
leases on both onshore and offshore federal lands, certain other governmental
bodies, and some private land owners have, in recent years, begun to assert
claims against oil and gas companies for royalties on some or all of such
settlement amounts.
The Company recently participated in a joint effort with the Independent
Petroleum Association of America wherein Samedan was a party in a test case
involving such a claim made with respect to a lease on Indian lands. In the
U.S. District Court for the District of Columbia, Samedan and the other
plaintiffs challenged the determination by the U.S. Minerals Management
Service (MMS) that royalties were payable to the government on certain
proceeds received by Samedan (and the other plaintiffs) with respect to a
contract settlement. The district court recently ruled in favor of the MMS,
and a judgment in the amount of $20,000 was awarded against Samedan.
Page 6
<PAGE>
FORM 10-Q
Samedan has appealed this judgment and intends to vigorously pursue its
appeal. The Company intends to continue to follow its current policies in
regard to these matters unless and until the issues have been settled by
controlling precedent.
Although the amount in controversy applicable to Samedan in the above
described lawsuit is not material, the decision in such case, if not reversed
or otherwise limited on appeal, could have an adverse impact with respect to
other take-or-pay or contract settlements entered into by Samedan. To date no
other similar claims for royalties have been made against Samedan. There can
be no assurance, however, that Samedan will prevail on appeal in the above
described lawsuit or that Samedan would prevail if similar claims are
asserted against it in the future based on other take-or-pay or contract
settlements, including, for example, any final settlement with respect to the
Columbia Transmission bankruptcy case described in Item 2 of this 10-Q. The
Company is unable at this time to estimate the possible amount of loss, if
any, associated with this contingency.
Page 7
<PAGE>
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased to $120.0 million in
the six months ended June 30, 1995 from $104.2 million in the same period of
1994. Cash and short-term cash investments increased from $22.2 million at
December 31, 1994 to $32.4 million at June 30, 1995.
The Company expended approximately $108.1 million of its $205 million
capital budget through June 30, 1995 and currently plans to expend all of its
remaining capital budget in the remainder of the year. The Company plans to
maintain an active drilling program and will also continue to evaluate
reserve acquisition opportunities for the remainder of 1995. Such
acquisitions, if significant, would exceed the Company's ability to fund from
its internal cash flow, and as such would require external sources of
financing.
During 1994 the Company reduced its debt $172.6 million. On January 4,
1994, the Company paid the $95.6 million installment note used to acquire a
producing property in 1993. On June 1, 1994, the Company borrowed $48 million
under its bank credit agreement and used the proceeds, plus available cash,
to redeem its $125,000,000 10 1/8% notes which were due June 1, 1997. There
have been no changes to the Company's outstanding debt in 1995. An additional
$52.0 million in borrowing capacity is currently available to the Company
under its bank credit agreement should the Company determine to access such
capacity.
On May 1, 1995 the Company announced that its wholly owned subsidiary,
Samedan Oil Corporation (Samedan), has become a party to a comprehensive
producer settlement agreement which was entered into with Columbia Gas
Transmission Corporation (Columbia Transmission) and Columbia Gas Systems,
Inc. in connection with their plans of reorganization filed in the Bankruptcy
Court on April 17, 1995. The producer settlement agreement, if approved,
would provide Samedan with a right to receive a distribution, upon
confirmation of a Columbia Transmission plan of reorganization, in the amount
of $48,925,000, which amount would be based on an agreed claim against
Columbia Transmission of $71,034,483. In addition, the proposed settlement
would give Samedan a contingent right to receive approximately $2,575,000
upon the resolution of certain other contested producer claims. Although the
producer settlement agreement has been approved by the Bankruptcy Court, the
agreement contains numerous conditions to closing, including confirmation of
plans of reorganization with respect to Columbia Transmission and Columbia
Gas Systems, Inc. in their ongoing bankruptcy proceedings, which currently
make it impossible for the Company to determine the timing of the receipt of
this settlement. For additional information concerning the proposed
settlement reference is made to the Company's press release dated May 1,
1995, a copy of which is filed as Exhibit 99.1 to the Company's Form 10-Q for
the quarter ended March 31, 1995.
The Company's current ratio (current assets divided by current
liabilities) was 1.04 at June 30, 1995 compared to 1.44 at December 31, 1994.
The reduction in the current ratio is due primarily to the impact on working
capital of the Company's capital expenditures program and the decline in
natural gas prices in the first six months of 1995.
The Company follows an entitlements method of accounting for its gas
imbalances. The Company's gas imbalance receivables were $10.3 million at
June 30, 1995 and $11.7 million at December 31, 1994. Gas imbalance
liabilities of $10.5 million at June 30, 1995 were unchanged from December
31, 1994. These imbalances are valued at the amount which is expected to be
received or paid to settle the imbalances. The settlement of the imbalances
can occur either over the life or at the end of the life of a well, on a
volume basis or by cash settlement. The Company does not expect that a
significant portion of the settlements will occur in any one year. Thus, the
Company believes the settlement of gas imbalances will have little impact on
its liquidity.
Page 8
<PAGE>
FORM 10-Q
RESULTS OF OPERATIONS
During the second quarter of 1995, the Company recorded net income of
$3.4 million, or 7 cents per share, compared to net income of $4.4 million,
or 9 cents per share, in the second quarter of 1994. During the first six
months of 1995, the Company recorded net income of $3.8 million, or 8 cents
per share, compared to net income of $12.8 million, or 26 cents per share, in
the first six months of 1994.
Sales of the Company's natural gas marketing subsidiary, Noble Gas
Marketing, Inc. (NGM), began in June 1994 and sales of the Company's oil
trading subsidiary, Noble Trading, Inc. (NTI), began in May 1995. Sales
between all Company subsidiaries are eliminated and third party sales are
recorded as gathering, marketing and processing revenues. These revenues from
third party sales totaled $25,031,000 and $42,086,000, respectively, in the
second quarter and first half of 1995, compared with $8,483,000 in the same
periods of 1994.
The decreased income for the six months ended June 30, 1995 compared to
1994 resulted from lower natural gas prices which were offset somewhat by
higher oil prices. Both oil and gas production volumes increased slightly for
the second quarter of 1995 compared to the same period of 1994. While gas
volumes were greater than in comparable periods in 1994, production fell
below Company expectations primarily as a result of production declines at
greater rates than expected on existing producing properties and production
commencing on new properties, principally offshore, on dates later than
originally scheduled. The Company believes that such lower production levels
and delays in timing of production, coupled with normal declines in
production of older properties, as well as declines in natural gas prices and
the potential impact of such price declines on decisions to curtail
production, will prevent the Company from achieving its original production
goal for 1995. Exploration expense decreased significantly in the second
quarter of 1995 compared to the second quarter of 1994 as the Company drilled
fewer dry holes in the current quarter. Decreases in exploration expenses
were offset by increases in lease operating expense and depreciation,
depletion and amortization expense.
Gas sales, excluding third party sales by NGM, decreased 14 percent and
22 percent, respectively, for the three months and six months ended June 30,
1995. The decrease in sales is primarily due to an 18 percent and 23 percent
decrease, respectively, in the average gas price for the three months and six
months ended June 30, 1995 compared to the same periods in 1994.
Oil sales increased 20 percent and 27 percent, respectively, for the
three months and six months ended June 30, 1995 compared with the same
periods in 1994. The increase in sales is primarily due to a 12 percent and
21 percent increase, respectively, in the average oil price and a 10 percent
and 6 percent increase, respectively, in average daily production for the
three months and six months ended June 30, 1995 compared to the same periods
in 1994.
The Company through two of its subsidiaries, NGM and Samedan, uses oil
and gas swap agreements to hedge both fixed term sales and sales of its own
oil and gas production in order to obtain a fixed margin and minimize price
risk. The marketing of natural gas results in price risk due to a fixed
supply cost and a variable market or, conversely, a variable supply cost and
a fixed market.
NGM employs various hedging arrangements to lock in profits or limit
exposure to oil and gas price risk. Most of the purchases made by NGM are on
an index basis; however, many of the markets to which NGM sells want fixed or
NYMEX related pricing. NGM will use a hedge to convert the fixed or NYMEX
sale to an index basis and minimize the risk of price volatility. When the
fixed or NYMEX sale is converted to an index basis the margin is determined.
During the second quarter of 1995 NGM had hedging transactions with
broker-dealers that represented approximately 105,000 MMBTU per day at prices
linked to certain indices. Hedges for July 1995, through January 1996, which
range from 45,500 to 7,500 MMBTU per day at prices ranging from $.06 per
MMBTU above to $.01 per MMBTU below index, were not closed by June 30, 1995.
These hedges are in place to lock in margins on future physical transactions.
NGM had no oil hedges or related deposits in place at June 30, 1995. NGM
records hedging gains or losses relating to fixed term sales as gathering,
marketing and processing revenues in the period in which the related contract
is completed.
Page 9
<PAGE>
FORM 10-Q
Samedan, from time to time, enters into hedging arrangements primarily
to protect against oil and gas price volatility. In May 1995, Samedan entered
into a series of oil swap agreements effective May through December, 1995.
The May and June swap agreements were closed resulting in income of $81,000
and $225,000, respectively. In July, the remaining swap agreements for July
through December were closed at prices ranging from $18.56 to $19.52
resulting in income of approximately $1,430,000 which was deferred and a
portion of which will be recognized each month as the contracts would have
been closed through December. Samedan had no other oil swap agreements or
related deposits in place and had no gas swap agreements or related deposits
in place at June 30, 1995. Samedan records hedging gains or losses relating
to its own oil and gas production in oil and gas sales and royalties.
Although these hedging arrangements expose the Company to credit risks,
the Company monitors the credit worthiness of its counter parties and
believes that losses from nonperformance are unlikely to occur.
Certain selected gas and oil operating statistics follow:
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
-------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gas revenues (in thousands).......$ 39,450 $ 46,131 $ 77,827 $ 100,176
Average daily gas - MCFS........... 263,764 253,941 267,678 261,826
Average gas price per MCF..........$ 1.68 $ 2.04 $ 1.65 $ 2.15
Oil revenues (in thousands)........$ 39,248 $ 32,619 $ 72,833 $ 57,387
Average daily oil - BBLS........... 25,204 22,923 24,294 22,849
Average oil price per BBL..........$ 17.49 $ 15.67 $ 16.96 $ 13.96
</TABLE>
BBLS - BARRELS
MCF - THOUSAND CUBIC FEET
Oil and gas exploration expense decreased $6.6 million or 49 percent and
$6.2 million or 35 percent, respectively, for the three months and six months
ended June 30, 1995, compared to the same periods in 1994. The decrease is
primarily attributable to a $7.2 million decrease in dry hole expense which
was offset somewhat by a $1.0 million increase in undeveloped lease
amortization and impairment expense during the first six months of 1995.
Depreciation, depletion and amortization (DD&A) expense increased 21
percent and 10 percent, respectively, for the three months and six months
ended June 30, 1995, compared to the same periods in 1994. The increase is
due primarily to higher production volumes and reserve revisions. Reserve
revisions on certain producing properties were recorded in June 1995. Such
revisions reflected a net upward revision in oil reserves of 344,000 barrels
and a net downward revision in gas reserves of 7.3 BCF. Such downward
revisions on producing properties at mid year 1995 increased the unit rate
for the Company. The unit rate of DD&A per equivalent barrel, converting gas
to oil on the basis of 6 MCF per barrel, was $5.68 for the first six months
of 1995 compared to $5.35 for the same period of 1994. The Company has
recorded, through charges to DD&A, a reserve for future liabilities related
to dismantlement and reclamation costs for offshore facilities. This reserve
is based on the best estimates of Company engineers of such costs to be
incurred in future years.
Interest expense decreased $1.1 million for the three months ended June
30, 1995 and $3.5 million for the six months ended June 30, 1995, compared to
the same periods in 1994, as a result of the overall reduction in outstanding
long-term debt in 1994 as discussed in Liquidity and Capital Resources.
Interest capitalized decreased $1.4 million for the three months ended
June 30, 1995 and $2.7 million for the six months ended June 30, 1995, when
compared to the same periods in 1994. This decrease is primarily due to
discontinuing the capitalization of interest on certain Gulf of Mexico
properties that have started producing and are no longer in the construction
phase.
Page 10
<PAGE>
FORM 10-Q
FUTURE TRENDS
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of." The Company is required to adopt SFAS No. 121 no
later than 1996, although earlier implementation is permitted. The Company
has not yet completed its evaluation of the impact of SFAS No. 121 on the
Company's consolidated financial position or results of operations. The
Company currently anticipates completion of its evaluation and adoption of
SFAS No. 121 in the fourth quarter of 1995.
Over the past several years, Samedan has settled various claims which it
had against parties who had contracted to purchase gas at fixed prices which
were greater than market or who had take-or-pay contracts with Samedan in
which such obligation to take-or-pay for quantities of gas was not fulfilled.
It is the Company's policy, which is consistent with general industry
practice, that such payments do not represent payment for gas produced, and
therefore, are not subject to royalty payments. The federal government, with
respect to leases on both onshore and offshore federal lands, certain other
governmental bodies, and some private land owners have, in recent years,
begun to assert claims against oil and gas companies for royalties on some or
all of such settlement amounts.
The Company recently participated in a joint effort with the Independent
Petroleum Association of America wherein Samedan was a party in a test case
involving such a claim made with respect to a lease on Indian lands. In the
U.S. District Court for the District of Columbia, Samedan and the other
plaintiffs challenged the determination by the U.S. Minerals Management
Service (MMS) that royalties were payable to the government on certain
proceeds received by Samedan (and the other plaintiffs) with respect to a
contract settlement. The district court recently ruled in favor of the MMS,
and a judgment in the amount of $20,000 was awarded against Samedan. Samedan
has appealed this judgment and intends to vigorously pursue its appeal. The
Company intends to continue to follow its current policies in regard to these
matters unless and until the issues have been settled by controlling
precedent.
Although the amount in controversy applicable to Samedan in the above
described lawsuit is not material, the decision in such case, if not reversed
or otherwise limited on appeal, could have an adverse impact with respect to
other take-or-pay or contract settlements entered into by Samedan. To date no
other similar claims for royalties have been made against Samedan. There can
be no assurance, however, that Samedan will prevail on appeal in the above
described lawsuit or that Samedan would prevail if similar claims are
asserted against it in the future based on other take-or-pay or contract
settlements, including, for example, any final settlement with respect to the
Columbia Transmission bankruptcy case described above under "Liquidity and
Capital Resources". The Company is unable at this time to estimate the
possible amount of loss, if any, associated with this contingency.
Management believes that the Company is well positioned with its
balanced reserves of oil and gas to take advantage of future price increases
that may occur. However, the uncertainty of oil and gas prices continues to
affect the domestic oil and gas industry. The monthly index natural gas price
at the Henry Hub for January through August 1995, has ranged from $.07 to
$.97 per MMBTU's below the same periods of 1994. As discussed above, the
lower natural gas prices in 1995 have contributed to the decreased income for
the six months ended June 30, 1995, as compared to the same period of 1994.
An extended period of low natural gas prices would have a material adverse
effect on the Company's cash flow, results of operations and financial
position. Due to the volatility of oil and gas prices, the Company, from time
to time, has used hedging and may do so in the future as a means of reducing
its exposure to price changes. The Company cannot predict the extent to which
its revenues will be affected by inflation, government regulation or changing
prices.
Page 11
<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The information required by this Item 6 (a) is set forth in the Index to
Exhibits accompanying this quarterly report and is incorporated herein by
reference.
(b) The Company did not file any reports on Form 8-K during the three months
ended June 30, 1995.
Page 12
<PAGE>
FORM 10-Q
SIGNATURE
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.
NOBLE AFFILIATES, INC.
-----------------------------------
(Registrant)
Date August 14, 1995 WM. D. DICKSON
------------------------- -----------------------------------
WM. D. DICKSON, Vice President-Finance
and Treasurer
(Principal Financial Officer
and Authorized Signatory)
Page 13
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Exhibit Page
------ ------- ------------
<S> <C> <C>
27.1 Financial Data Schedule
</TABLE>
E-1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 32,431
<SECURITIES> 0
<RECEIVABLES> 52,288
<ALLOWANCES> 0
<INVENTORY> 3,518
<CURRENT-ASSETS> 96,722
<PP&E> 1,666,209
<DEPRECIATION> (828,642)
<TOTAL-ASSETS> 959,277
<CURRENT-LIABILITIES> 92,920
<BONDS> 376,974
<COMMON> 171,879
0
0
<OTHER-SE> 240,417
<TOTAL-LIABILITY-AND-EQUITY> 959,277
<SALES> 154,291
<TOTAL-REVENUES> 198,984
<CGS> 41,589
<TOTAL-COSTS> 192,847
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,794
<INCOME-PRETAX> 6,137
<INCOME-TAX> 2,340
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,797
<EPS-PRIMARY> .08
<EPS-DILUTED> 0
</TABLE>
