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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-8567-2
MAXUS ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-1891531
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
717 North Harwood Street, Dallas, Texas 75201-6594
(Address of principal executive offices) (Zip Code)
(214) 953-2000
(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, and (2) has been subject to the filing
requirements for the past 90 days.
YES (X) NO ( )
Shares of Common Stock outstanding at September 30, 1994: 134,744,417
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PART I. FINANCIAL INFORMATION
The accompanying consolidated financial statements have not been examined by
independent accountants, but in the opinion of the management of Maxus Energy
Corporation (the "Company") all adjustments (consisting only of normal accruals)
necessary for a fair presentation of the consolidated results of operations,
consolidated balance sheet and consolidated cash flows at the date and for the
periods indicated have been included.
2
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MAXUS ENERGY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited) (in millions, except per share)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended September 30, Three Months Nine Months
1994 1993 1994 1993
----------------------------------
<S> <C> <C> <C> <C>
REVENUES
Sales and operating revenues $170.2 $193.1 $524.8 $589.3
Settlement of litigation 0.8 0.8 6.8
Other revenues, net (7.2) 4.4 (7.0) 14.9
- --------------------------------------------------------------------------------
163.8 197.5 518.6 611.0
----------------------------------
COSTS AND EXPENSES
Operating expenses 59.8 64.4 177.7 185.9
Gas purchase costs 20.8 38.0 96.7 113.3
Exploration, including exploratory
dry holes 6.8 9.8 23.8 33.9
Depreciation, depletion and amortization 33.0 38.8 106.4 113.1
General and administrative expenses 7.4 8.4 24.1 26.1
Taxes other than income taxes 3.7 4.4 10.7 12.8
Interest and debt expenses 24.9 21.6 72.3 66.1
Restructuring:
Gain on sale of assets (201.9)
Restructuring costs 100.9
- --------------------------------------------------------------------------------
156.4 185.4 410.7 551.2
----------------------------------
Income Before Income Taxes, Extraordinary
Item and Cumulative Effect of Change in
Accounting Principle 7.4 12.1 107.9 59.8
Income Taxes 23.4 19.5 105.0 70.9
- --------------------------------------------------------------------------------
Income (Loss) Before Extraordinary Item and
Cumulative Effect of Change in Accounting
Principle (16.0) (7.4) 2.9 (11.1)
Extraordinary Item (3.2) (3.2)
Cumulative Effect of Change in Accounting
Principle (4.4)
- --------------------------------------------------------------------------------
NET INCOME (LOSS) (16.0) (10.6) 2.9 (18.7)
Dividend requirement on preferred stock (9.6) (10.5) (34.0) (31.3)
- --------------------------------------------------------------------------------
Loss Applicable to Common Shares $(25.6) $(21.1) $(31.1) $(50.0)
================================================================================
Loss before extraordinary item and cumulative
effect of change in accounting principle $(0.19) $(0.14) $(0.23) $(0.32)
Extraordinary item (0.02) (0.02)
Cumulative effect of change in accounting
principle (0.03)
- --------------------------------------------------------------------------------
Net Loss Per Common Share $(0.19) $(0.16) $(0.23) $(0.37)
================================================================================
Average Common Shares Outstanding
(in millions) 134.9 134.0 134.7 133.8
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
3
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MAXUS ENERGY CORPORATION
CONSOLIDATED BALANCE SHEET
(in millions, except shares)
- --------------------------------------------------------------------------------
September 30, December 31,
1994 1993
------------------------------
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 130.2 $ 128.7
Short-term investments 117.2 33.6
Receivables, less doubtful receivables 127.0 156.8
Inventories 28.0 24.1
Restricted cash 24.9 38.4
Deferred income taxes 2.1 2.1
Prepaids and other current assets 19.3 21.0
- -------------------------------------------------------------------------------
Total Current Assets 448.5 404.7
Properties and equipment, less accumulated
depreciation and depletion of $1,671.7; $2,063.2
in 1993 1,090.0 1,305.6
Investments and long-term receivables 12.4 94.2
Restricted cash 94.5 121.8
Intangible assets, less accumulated amortization
of $13.8; $12.9 in 1993 36.2 37.1
Deferred income taxes 8.9
Deferred charges 12.6 24.0
- -------------------------------------------------------------------------------
Total Assets $1,703.1 $1,987.4
===============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Long-term debt $ 8.6 $ 39.7
Accounts payable 41.6 99.9
Accrued liabilities 108.2 107.7
Taxes payable 19.1 16.1
- -------------------------------------------------------------------------------
Total Current Liabilities 177.5 263.4
Long-term debt 977.8 1,015.4
Deferred income taxes 201.1 198.3
Other liabilities and deferred credits 102.4 112.4
Redeemable Preferred Stock, $1.00 par value
Authorized and issued shares--1,250,000
and 2,500,000 125.0 250.0
Stockholders' Equity
$2.50 Preferred Stock, $1.00 par value
Authorized shares--5,000,000
Issued shares--3,500,000 3.5 3.5
$4.00 Preferred Stock, $1.00 par value
Authorized shares--5,915,017
Issued shares--4,358,658 4.4 4.4
Common Stock, $1.00 par value
Authorized shares--300,000,000
Issued shares--135,498,605 and 134,373,523 135.5 134.4
Paid-in capital 996.3 1,026.2
Accumulated deficit (990.8) (993.7)
Minimum pension liability (24.4) (24.4)
Valuation reserve on marketable securities (1.9)
Common Treasury Stock, at cost--265,373 and
173,963 shares (3.3) (2.5)
- --------------------------------------------------------------------------------
Total Stockholders' Equity 119.3 147.9
- --------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $1,703.1 $1,987.4
================================================================================
See Notes to Consolidated Financial Statements (Unaudited). The Company uses the
successful efforts method to account for its oil and gas producing activities.
4
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MAXUS ENERGY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited) (in millions)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended September 30,
1994 1993
---------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $2.9 ($18.7)
Adjustments to reconcile net income(loss) to net cash
provided by operating activities:
Extraordinary item 3.2
Cumulative effect of change in accounting principle 4.4
Depreciation, depletion and amortization 106.4 113.1
Dry hole costs 1.1 0.1
Income taxes 28.7 15.5
Gain or loss on sale of assets (166.5)
Restructuring costs 91.0
Other 25.7 13.9
Changes in components of working capital:
Receivables 23.4 (8.8)
Inventories, prepaids and other current assets (3.2) (6.1)
Accounts and taxes payable (42.8) (4.7)
Accrued liabilities (10.4) (1.6)
---------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 56.3 110.3
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for properties and equipment--including dry
hole costs (132.7) (249.3)
Expenditures for investments (20.1) (15.2)
Proceeds from sale of assets 376.1 5.2
Proceeds from sale/maturity of short-term investments 4.2 146.2
Purchases of short-term investments (89.5) (51.7)
Restricted cash 40.8 1.6
Other (5.8) (9.3)
---------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 173.0 (172.5)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from joint venture partners (4.4) 7.7
Proceeds from issuance of short-term debt 30.0 38.5
Repayment of short-term debt (65.3) (5.1)
Proceeds from issuance of long-term debt 101.3 210.0
Repayment of long-term debt (130.4) (124.3)
Redemption of preferred stock (125.0)
Proceeds from issuance of preferred stock 1.2
Dividends paid (34.0) (31.3)
---------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (227.8) 96.7
- --------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1.5 34.5
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 128.7 6.8
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $130.2 $41.3
================================================================================
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
5
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MAXUS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THIRD QUARTER 1994
(UNAUDITED)
RESTRUCTURING
--------------
A) ASSET SALES
On April 25, 1994, Diamond Shamrock Offshore Partners Limited Partnership
("DSP") sold its interests in Main Pass Blocks 72, 73 and 74 to Pogo
Producing Company. On April 26, 1994, Maxus and its subsidiaries sold all
of their partnership interests in DSP to affiliates of Burlington Resources
Inc. On June 22, 1994, Maxus also sold the McFarlan Field and Grand Isle
Block 25, both producing oil and gas properties, to affiliates of
Burlington Resources Inc. In total, the Company received $324.6 million of
proceeds and recorded a net gain of $201.9 million from these transactions.
B) RESTRUCTURING COSTS
In June 1994, the Company recorded a $100.9 million restructuring charge.
The charge included a $69.8 million write-off associated with undeveloped
Alaska coal leases, the development of which does not fit within the
Company's revised strategy to commit funds only to oil and gas exploration
and production. The charge also included costs associated with staff
reductions and the write-off of non-producing assets outside the Company's
core areas.
As a result of the Company's decision to reduce staff, the restructuring
costs included a $6.8 million charge against earnings related to a partial
curtailment of its postretirement benefit plans. This loss was related
primarily to the recognition of a portion of the transition obligation
arising from a change in accounting from the pay-as-you-go method to the
accrual method for recording postretirement benefit obligations.
Additionally, the Company's pension plans also experienced a partial
curtailment as a result of the staff reductions. The effect of the partial
curtailment on the pension plans was immaterial.
OTHER REVENUES, NET
-------------------
On September 9, 1994, the Company sold its geothermal subsidiary, Thermal
Power Company, to an affiliate of Calpine Corporation for consideration
consisting of approximately $58 million in cash and $6.5 million evidenced
by a promissory note payable in three years. The Company recorded a loss of
$12.6 million on the transaction. The Company accounted for its geothermal
subsidiary based on the equity method.
During the second quarter of 1994, the Company increased by $11.5 million
its reserve for future environmental costs.
INVESTMENTS IN MARKETABLE SECURITIES
------------------------------------
During 1994 the Company adopted Statement of Financial Accounting Standards
No. 115 ("SFAS 115"), "Accounting for Certain Investments in Debt and Equity
Securities," which requires that all investments in debt securities and
certain investments in equity securities be reported at fair value except
for those investments which management has the positive intent and the
ability to hold to maturity. Investments available for sale are classified
based on the stated maturity of the securities and changes in fair value are
6
<PAGE>
reported as a separate component of stockholders' equity. Trading
investments are classified as current regardless of the stated maturity of
the underlying securities and changes in fair value are reported in other
income. Investments that will be held to maturity are classified based on
the stated maturity of the securities. A $1.9 million valuation reserve in
stockholders' equity was recorded as a result of adopting this standard.
Adoption of this standard had no impact on current period earnings or cash
flow. Prior to the adoption of SFAS 115, the Company accounted for its
investments in debt securities at amortized cost and classified such
investments according to the stated maturity of the underlying securities.
RESTRICTED CASH
---------------
Maxus Venezuela (C.I.) Ltd., a subsidiary of the Company, signed an
agreement to grant a 45% interest in the Quiriquire Unit in Venezuela to BP
Exploracion de Venezuela S.A. As a result, the Company released
approximately $35.9 million of restricted cash during the third quarter of
1994, representing collateral for outstanding letters of credit supporting
development of the Quiriquire Unit.
LONG-TERM DEBT
--------------
On January 10, 1994, the Company issued $60.0 million of 9 3/8% notes due
2003 pursuant to a shelf registration statement which became effective in
May 1993. The proceeds from these debt securities were used to redeem $29.0
million of long-term debt maturing in 1994, and for general corporate
purposes.
During the second and third quarters of 1994, the Company repaid $60.4
million of outstanding medium-term notes maturing in 1994 and $40.7 million
of outstanding medium-term notes maturing in 1995 and beyond from the
proceeds of asset sales.
In the third quarter of 1994, Maxus issued an additional $40.0 million of
medium-term notes due 2004, the proceeds of which were used to repay $29.8
million of medium-term notes maturing in 1998 and 2001 and $2.3 million of 9
7/8% notes maturing in 2002.
SHORT-TERM DEBT
---------------
In the second quarter of 1994, the Company repaid $25.0 million outstanding
at the end of the first quarter of 1994 under the terms of a purchase and
sale agreement for crude oil.
PREFERRED STOCK
---------------
On February 1, 1994, the Company redeemed the 625,000 shares of its $9.75
Cumulative Convertible Preferred Stock which were subject to mandatory
redemption provisions for $62.5 million. On June 15, 1994, the Company
redeemed an additional 625,000 shares of its $9.75 Cumulative Convertible
Preferred Stock for $63.5 million, which fulfilled an obligation otherwise
due in February 1995.
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
- ------------------------------------------------------------------
FINANCIAL CONDITION - THIRD QUARTER 1994
- ----------------------------------------
RESULTS OF OPERATIONS
Maxus reported a third quarter 1994 net loss of $16 million or, after preferred
dividends, a loss of 19 cents per common share, compared to a net loss of $11
million or, after preferred dividends, a loss of 16 cents per common share in
the third quarter of 1993. For year-to-date 1994, the Company reported net
income of $3 million or, after preferred dividends, a loss of 23 cents per
common share, compared to a net loss of $19 million or, after preferred
dividends, a loss of 37 cents per common share in 1993.
The third quarter 1994 results reflect initial production from all three of the
Company's South American operations--Ecuador, Bolivia and Venezuela-- resulting
in $2 million of net income from these operations. The third quarter 1994
results also reflect a $13 million loss, recorded in "Other revenues, net," from
the sale of the Company's geothermal subsidiary, Thermal Power Company.
The 1994 nine-month results included a $101 million pre-tax net benefit from the
Company's restructuring activities, which included the sale of Maxus' interest
in Diamond Shamrock Offshore Partners ("DSP") and certain oil and gas
properties, resulting in a pre-tax gain of $202 million. This gain was offset
by restructuring costs, including a $70 million write-off associated with Alaska
coal leases, the development of which does not fit within the Company's revised
strategy to commit funds only to oil and gas exploration and production. The
restructuring also included costs associated with staff reductions and the
write-offs of non-producing assets outside the Company's core areas. As a
result of restructuring, Maxus expects annualized savings of approximately $35
million due to lower administrative costs and exploration expenditures.
Sales were $170 million for the third quarter 1994, compared to $193 million for
the same period last year. A decrease of $21 million was attributable to a
loss of production from properties sold. In addition, last year's results
included $14 million in sales of purchased gas which was aggregated and sold
with the production from the divested properties. Lower natural gas prices also
negatively affected sales, but the effect was largely offset by $16 million of
revenues from initial production in South America. Year-to-date 1994 sales and
operating revenues were $525 million, compared to $589 million for the same
period a year ago. The $64 million decrease was due primarily to the loss of
production from properties sold and lower oil prices partially offset by
revenues from initial production in South America and higher natural gas sales
in Northwest Java after completion of a major gas project in September 1993.
Net worldwide crude oil sales of 70 thousand barrels per day ("mbpd") in the
third quarter 1994 were 2 mbpd higher than the same period last year. Initial
crude oil sales volumes in South America were partially offset by lower
Indonesian oil entitlements. The average worldwide oil price received in the
third quarter 1994 was $16.54 per barrel compared to $16.86 per barrel for the
same period in 1993.
U.S. natural gas sales for the third quarter 1994 were 211 million cubic feet
per day ("mmcfpd"), a decrease of 156 mmcfpd from the third quarter 1993. The
decline was largely driven by the loss of production from properties sold as
well as lower quantities of gas purchased for resale. The average gas price
received in the United States was $1.72 per thousand cubic feet ("mcf") in the
third quarter 1994, down $0.32 per mcf from the same period last year.
Natural gas liquids sales in the U.S. were 18 mbpd for the third quarter 1994,
up 3 mbpd from the same period a year ago. The average sales price for natural
gas liquids in the third quarter 1994 was $10.45 per barrel, a decrease of
$0.41 per barrel from 1993.
Operating expenses for both the quarter and nine-month period ending September
30, 1994 were lower than the same periods a year ago partially due to the
elimination of operating costs for the properties sold. Additionally, higher
U.S. gathering and processing costs were incurred in the first five months of
1993 during the transition period from the old processing facility to the new
Sunray gas plant.
8
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Gas purchase costs of $21 million for the third quarter of 1994 were $17 million
lower than the third quarter 1993 primarily as a result of the reduction in
volumes of gas purchased for resale. Overall, exploration costs were lower in
1994 due to the Company's revised strategy.
Depreciation, depletion and amortization ("DD&A") for both the third quarter and
year-to-date 1994 was lower than the same periods last year due to the
elimination of DD&A from properties sold. Offsetting the reduction was higher
DD&A in Northwest Java resulting from new production facilities and a higher
DD&A rate, as well as higher DD&A in South America resulting from initial
production in third quarter 1994.
Interest and debt expenses for both the third quarter and year-to-date 1994 was
lower than the comparable periods last year primarily as a result of higher
average debt balances and lower capitalized interest. However, throughout 1994,
interest income was higher due to higher temporary investments on hand.
Income tax expense was $4 million higher in the third quarter of 1994 as
compared to the third quarter of 1993 as a result of foreign taxes associated
with initial revenue recognition in South America. Year-to-date 1994 income tax
expense was $34 million higher than the same period last year largely driven by
the U.S. tax impact from the sale of DSP and oil and gas producing properties in
1994.
The 1993 year-to-date results included a $7 million gain, recorded in
"Settlement of litigation," resulting from partial payment of an agreed
judgment against Ivan Boesky in a lawsuit arising out of transactions related to
the Natomas Company acquisition in 1983. Additionally, a $4 million loss was
recorded as a cumulative effect of a change in accounting principle arising from
the adoption of Statement of Financial Accounting Standards ("SFAS") No. 112,
"Employers' Accounting for Post-employment Benefits," which requires an accrual
method of recognizing post employment benefits. This expense primarily
represents accrued medical benefits for long-term disability recipients. Also
included in the 1993 year-to-date results was a $3 million after tax loss
representing call premium and unamortized issuance costs for the early
retirement of debt.
ACCOUNTING STANDARDS
During 1994, the Company adopted SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," which requires that all investments
in debt securities and certain investments in equity securities be reported at
fair value except for those investments which management has the positive intent
and the ability to hold to maturity. Investments available-for-sale are
classified based on the stated maturity of the securities and changes in fair
value are reported as a separate component of stockholders' equity. Trading
investments are classified as current regardless of the stated maturity of the
underlying securities and changes in fair value are reported in other income.
Investments that will be held to maturity are classified based on the stated
maturity of the securities. A $2 million valuation reserve in stockholders'
equity was recorded as a result of adopting this standard. Adoption of this
standard had no impact on current period earnings or cash flow. Prior to the
adoption of SFAS No. 115, the Company accounted for its investments in debt
securities at amortized cost and classified such investments according to the
stated maturity of the underlying securities.
FINANCIAL CONDITION
The Company's net cash provided by operating activities was $56 million for
year-to-date 1994 compared to $110 million for the same period last year. Net
cash from operating activities before working capital declined $42 million
during 1994. Cash flow from operations was negatively impacted by lower crude
oil prices, loss of production from U.S. properties sold and costs associated
with staff reductions, but was partially offset by additional gas volumes from
Northwest Java ($24 million). The 1993 cash flow from operations included the
$7 million litigation settlement from Ivan Boesky. Net working capital
requirements of $33 million for year-to-date 1994 were $12 million higher than
the same time last year due to lower accounts payable as a result of timing of
expenditures in Ecuador.
9
<PAGE>
The Company began 1994 with $129 million of cash and cash equivalents. For the
nine-month period of 1994, additional cash was provided by operations ($56
million), proceeds from the sale of assets ($376 million) and the release of $41
million in restricted cash. In 1994, the Company redeemed $125 million of its
$9.75 Cumulative Convertible Preferred Stock, which was subject to mandatory
redemption in 1994 and 1995. The Company also purchased an additional $90
million in short-term investments with a portion of the proceeds from asset
sales. After funding expenditures for properties and equipment of $133 million,
paying the preferred dividends of $34 million and repaying debt ($69 million net
activity), the balance of cash and cash equivalents remained relatively flat
compared to the beginning of 1994. In the first nine months of 1993, cash
balances on hand of $7 million, cash provided by operations of $110 million, net
borrowings of $127 million and net proceeds from the sale/purchase of short-term
investments ($95 million) were used to fund expenditures for properties and
equipment and preferred dividends.
Expenditures for properties and equipment, including dry hole costs, were $133
million, down $117 million from the same period last year. The Ecuador
development project comprised almost half of the 1994 spending. Overall,
spending declined as a result of Maxus' reduced capital program for 1994,
following the completion in 1993 of the Sunray gas plant and the first phase of
the Northwest Java gas project.
On April 25, 1994, DSP sold its interests in Main Pass Blocks 72, 73 and 74 to
Pogo Producing Company. On April 26, 1994, Maxus and its subsidiaries sold all
of their partnership interests in DSP to affiliates of Burlington Resources Inc.
As a result of the sale, Meridian Offshore Company, a Burlington Resources Inc.
affiliate, became the managing general partner of DSP. In second quarter 1994,
Maxus also sold the McFarlan Field and Grand Isle Block 25, both producing oil
and gas properties, to affiliates of Burlington Resources Inc. In total, the
Company received $325 million of proceeds and recorded a net gain of $202
million ($155 million net of tax) from these transactions. In the third quarter
1994, the Company sold its geothermal subsidiary, Thermal Power Company, to an
affiliate of Calpine Corporation for approximately $58 million in cash and $7
million evidenced by a promissory note payable in three years. Overall, the
proceeds from these sales were used to reduce debt by approximately $100
million, redeem $63 million of $9.75 Cumulative Convertible Preferred Stock due
in February 1995 and repay $25 million outstanding under the terms of a purchase
and sale agreement for crude oil. The remaining cash and investment balances
will supplement cash flow from operations to fund program spending and repay
maturing debt obligations over the next two years.
During the second quarter of 1994, Maxus Bolivia, Inc., a subsidiary of the
Company, signed an agreement to take BHP Petroleum as a partner in its Bolivian
oil development project. The Company received $10 million from BHP in exchange
for a 50% interest in the project.
In January 1994, the Company issued $60 million of 9 3/8% notes due in 2003.
The proceeds from these debt securities were used to redeem $29 million of long-
term debt maturing in 1994 and for general corporate purposes. In the third
quarter of 1994, Maxus issued an additional $40 million of medium-term notes due
2004, the proceeds of which were used to repay $30 million of medium-term notes
maturing in 1998 and 2001 and $2 million of 9 7/8% notes maturing in 2002.
Working capital (current assets less current liabilities) increased $130 million
from December 31, 1993, primarily from the sale of assets during 1994. A
portion of the sales proceeds was used to invest in short-term investments and
repay current maturities of long-term debt.
With the current level of cash, short-term investments and expected cash from
operations, adequate funding is available to meet planned program spending and
short-term debt maturities. For the longer term, the Company continues to
evaluate alternatives to improve its ability to capitalize on potential growth
opportunities.
OTHER EVENTS
In Ecuador, third quarter 1994 gross oil production averaged 23 mbpd from
fifteen wells in the Tivacuno, Bogi and Capiron fields. Seven wells in
Tivacuno, four in Bogi and four in Capiron are currently on-stream. Total
production for the year will be less than previously anticipated because of
delays in commencement of production and because initial rates are below
expectations.
10
<PAGE>
In September 1994, Maxus Bolivia Inc. signed an oil purchase, sale and transport
agreement with Yacimientos Petroliferos Fiscales Bolivianos ("YPFB"), the
Bolivian state oil company, under which YPFB was invoiced for Maxus' 55% share
of crude oil produced from the Surubi Field in the Mamore 1 block. In the third
quarter of 1994, gross oil production averaged 3 mbpd from four wells in
Bolivia. As a result of the signing of the purchase, sale and transport
agreement with YPFB, quarterly results for Bolivia included approximately 1
million barrels of crude oil from long-term tests and actual production, which
began in November 1993. Further development drilling is planned later this year
and in 1995.
In Venezuela, third quarter 1994 gross oil production averaged 1 mbpd from two
wells. One well workover is scheduled to be completed later this year and
development drilling of Quiriquire deep fields will begin in 1995 along with
shallow well reactivation.
Northwest Java gas volumes during 1994 have been below planned volumes. While
deliverability is available at or above contract quantities, the purchaser is
taking approximately one-half the contract volume during the transition from
traditional sources of fuel to natural gas for electric power generation.
11
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information.
The ratio of earnings to fixed charges and the ratio of earnings to
combined fixed charges and preferred stock dividends for the nine-month period
ended September 30, 1994 have been computed on a consolidated basis to be 2.24
and 1.39, respectively. Before non-recurring transactions, the ratio of
earnings to fixed charges would have been 1.06 and earnings would have been
inadequate to cover combined fixed charges and preferred stock dividends for
such period by $47.6 million.
For the purposes of these computations, earnings consist of income before
income taxes and fixed charges (excluding interest capitalized, net of
amortization). Fixed charges represent interest incurred, amortization of debt
expense and that portion of rental expense deemed to be the equivalent of
interest.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
12.1 --Statement re Computation of Ratios.
27.1 --Financial Statement Schedule
(b) Reports on Form 8-K.
Date of Report Items Reported
-------------- --------------
September 9, 1994 2 and 7
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.
MAXUS ENERGY CORPORATION
By: G. R. Brown
G. R. Brown, Vice President
and Controller, on behalf of
the registrant and as its
chief accounting officer
November 11, 1994
12
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Exhibit Index
Exhibit Title Exhibit No.
Statement re Computation of Ratios 12.1
Financial Statement Schedule 27.1
<PAGE>
Exhibit 12.1
MAXUS ENERGY CORPORATION
STATEMENT RE COMPUTATION OF RATIOS
(in millions, except ratios)
<TABLE>
<CAPTION>
Nine Months
Ended
September 30,
1994
-------------
<S> <C>
Earnings:
Net income ................................................. $2.9
Add:
Provision for income taxes ........................... 105.0
Interest and debt expenses ........................... 72.3
Other fixed charges (a) .............................. 1.2
Rentals (b) .......................................... 9.7
-----------
Total earnings .................................... $191.1
===========
Fixed Charges:
Interest and debt expenses .............................. $72.3
Rentals ................................................. 9.7
Capitalized interest .................................... 3.1
Proportionate share of fixed charges of
unconsolidated associated companies 50% owned......... 0.3
-----------
Total fixed charges ............................... $85.4
-----------
Preferred stock dividend requirement (c) ................ 52.3
-----------
Combined fixed charges and preferred stock $137.7
===========
Ratio of earnings to fixed charges (d)...................... 2.24
Ratio of earnings to combined fixed charges and preferred
stock dividends (e)..................................... 1.39
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[FN]
(a) Other fixed charges include amortization of capitalized
interest and the proportionate share of fixed charges of
unconsolidated associated companies 50% owned.
(b) The amount shown above for rentals represents that portion of
rental expense representative of the interest factor (which
approximates 45%).
(c) The preferred stock dividend requirement was increased by the
amount representing pre-tax earnings which would be required
to cover such dividend requirement. Due to the mix of foreign
and domestic income and losses, use of the Company's effective
tax rate per the consolidated financial statements yielded
meaningless results. Accordingly, the Company chose the U.S.
statutory federal income tax rate to better reflect the pre-tax
earnings necessary to cover the preferred stock dividend
requirement.
(d) Without income in the amount of $101.0 million from restructuring
activities ($201.9 million from gain on sale of assets, net of
restructuring costs of $100.9 million), the ratio of earnings to
fixed charges would have been 1.06 for the nine months ended
September 30, 1994.
(e) Before the non-recurring transactions referenced in (d), the
ratio of earnings to combined fixed charges and preferred dividends
would have been 0.65 for the nine months ended September 30,1994 and
earnings were inadequate to cover combined fixed charges and
preferred stock dividends for the nine months ended
September 30,1994 by $47.6 million.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 130
<SECURITIES> 117
<RECEIVABLES> 127
<ALLOWANCES> 1
<INVENTORY> 28
<CURRENT-ASSETS> 449
<PP&E> 1,090
<DEPRECIATION> 1,672
<TOTAL-ASSETS> 1,703
<CURRENT-LIABILITIES> 178
<BONDS> 978
<COMMON> 136
125
8
<OTHER-SE> (24)
<TOTAL-LIABILITY-AND-EQUITY> 1,703
<SALES> 525
<TOTAL-REVENUES> 519
<CGS> 274
<TOTAL-COSTS> 392
<OTHER-EXPENSES> (53)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72
<INCOME-PRETAX> 108
<INCOME-TAX> 105
<INCOME-CONTINUING> 3
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3
<EPS-PRIMARY> (0.23)
<EPS-DILUTED> 0
</TABLE>
