<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1994 Commission file number 1-8674
GLOBAL NATURAL RESOURCES INC.
(Exact name of Registrant as specified in its charter)
New Jersey 93-0835865
(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation or organization)
5300 Memorial Drive 77007
Suite 800 (Zip Code)
Houston, Texas
(Address of principal
executive offices)
Registrant's telephone number, including area code: (713) 880-5464
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.
X YES NO
_________ _________
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
As of November 1, 1994, 29,428,968 shares of common stock were
outstanding.
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Balance Sheets - September 30, 1994 and December 31, 1993 . . . . . . . . 1
Consolidated Statements of Operations for the Three Months and the Nine Months
Ended September 30, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 3. Defaults upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . 10
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
i
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
GLOBAL NATURAL RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands, Except Share and Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $ 12,000 $ 16,045
Short-term liquid investments . . . . . . . . . . . . . . . . . . . . . . 34,936 49,947
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,749 14,081
Current investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 832 1,663
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 928 891
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 57,445 82,627
-------- --------
Properties and equipment, at cost:
Oil and gas properties (successful efforts method) . . . . . . . . . . . 95,101 91,036
Pipeline facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,348 18,976
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,491 10,054
-------- --------
124,940 120,066
Less: accumulated depletion, depreciation and amortization . . . . . . . (53,533) (54,156)
-------- --------
Net properties and equipment . . . . . . . . . . . . . . . . . . . . . 71,407 65,910
-------- --------
Investment in Russian joint venture . . . . . . . . . . . . . . . . . . . . 13,888 8,783
Indonesian venture advances, net . . . . . . . . . . . . . . . . . . . . . 2,589 3,099
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 284
-------- --------
$145,545 $160,703
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,915 $ 14,319
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,176 6,248
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804 785
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 15,895 21,352
-------- --------
Deferred credits and other . . . . . . . . . . . . . . . . . . . . . . . . 741 600
Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . - -
Redeemable bearer shares . . . . . . . . . . . . . . . . . . . . . . . . . 17,667 18,375
Shareholders' equity:
Common Stock; authorized 100,000,000 shares at $1.00 par value;
issued and outstanding 33,332,287 in 1994 and 33,190,287 in 1993 . . . 33,332 33,190
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . 138,331 137,648
Retained deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,640) (35,914)
-------- --------
Less: treasury stock; 3,903,319 shares in 1994 and 3,186,329 in 1993 . . 131,023 134,924
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . (19,781) (14,548)
-------- --------
111,242 120,376
-------- --------
$145,545 $160,703
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
GLOBAL NATURAL RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Share and Per Share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Oil and gas . . . . . . . . . . . . . . . . $ 8,119 $ 7,643 $ 23,074 $ 23,304
Pipeline . . . . . . . . . . . . . . . . . . 5,124 10,932 14,379 27,185
Other . . . . . . . . . . . . . . . . . . . 210 166 718 566
------------ ----------- ----------- -----------
13,453 18,741 38,171 51,055
------------ ----------- ----------- -----------
Expenses:
Production . . . . . . . . . . . . . . . . . 754 933 2,416 2,898
Exploration . . . . . . . . . . . . . . . . 4,732 1,376 12,706 5,445
Pipeline cost of sales . . . . . . . . . . . 4,667 10,664 13,581 26,250
Depletion, depreciation and amortization . . 2,237 1,939 5,173 5,930
Administrative . . . . . . . . . . . . . . . 1,672 1,437 5,002 5,026
------------ ----------- ----------- -----------
14,062 16,349 38,878 45,549
------------ ----------- ----------- -----------
Income (loss) from operations . . . . . (609) 2,392 (707) 5,506
Other income (expense):
Distribution from IPI . . . . . . . . . . . -- -- -- 1,267
Interest income . . . . . . . . . . . . . . 507 596 1,560 1,384
Interest expense . . . . . . . . . . . . . . (17) (22) (56) (73)
Other . . . . . . . . . . . . . . . . . . . (561) 294 (717) 1,052
------------ ----------- ----------- -----------
(71) 868 787 3,630
------------ ----------- ----------- -----------
Income (loss) before income tax expense (680) 3,260 80 9,136
Income tax expense . . . . . . . . . . . . . . . 1,735 1,648 4,806 5,027
------------ ----------- ----------- -----------
Net income (loss) . . . . . . . . . . . . . $ (2,415) $ 1,612 $ (4,726) $ 4,109
============ ========== ========== ==========
Net income (loss) per share based on weighted
average shares outstanding:
Net income (loss) primary . . . . . . . . . $ (.08) $ .05 $ (.16) $ .15
=========== ========== ========== ==========
Net income (loss) assuming full dilution . . $ (.08) $ .05 $ (.16) $ .14
=========== ========== ========== ==========
Weighted average common shares outstanding:
Primary . . . . . . . . . . . . . . . . . . 29,426,779 29,928,777 29,736,810 27,817,346
============ =========== =========== ===========
Assuming full dilution . . . . . . . . . . . 29,426,779 29,928,777 29,736,810 29,874,272
============ =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
GLOBAL NATURAL RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1994 1993
------- --------
<S> <C> <C>
Cash Flow from Operating Activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . $(4,726) $ 4,109
Adjustments to reconcile net income to net cash
provided by operating activities:
Depletion, deprecation and amortization . . . . . . . . . . . . 5,173 5,930
Leasehold impairments and dry hole expense . . . . . . . . . . . 9,181 3,513
Unrealized loss on short-term liquid and current investments . . 431 -
(Gain) loss on asset sales . . . . . . . . . . . . . . . . . . . 90 (1,751)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 131
Changes in:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . 5,332 (1,590)
Other current assets . . . . . . . . . . . . . . . . . . . . . 794 2,517
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . (4,404) 1,597
Accured liabilities . . . . . . . . . . . . . . . . . . . . . (1,072) 39
Short-term liquid investments . . . . . . . . . . . . . . . . 14,580 -
Deferred credits . . . . . . . . . . . . . . . . . . . . . . . 141 (42)
------- --------
Net cash provided by operating activities . . . . . . . . . . . 25,520 14,453
------- --------
Cash Flows from Investing Activities:
Additions to oil and gas properties . . . . . . . . . . . . . . (25,559) (10,304)
Additions to pipeline facilities and other properties
and equipment . . . . . . . . . . . . . . . . . . . . . . . . (881) (822)
Decrease in other assets . . . . . . . . . . . . . . . . . . . . - 123
Purchases of short-term liquid investments . . . . . . . . . . . - (632,215)
Maturities of short-term liquid investments . . . . . . . . . . - 11,849
Proceeds from sales of short-term liquid investments . . . . . . - 594,696
Proceeds from asset sales . . . . . . . . . . . . . . . . . . . 6,583 4,752
Investment in Russian joint venture . . . . . . . . . . . . . . (5,105) (2,913)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436 51
------- --------
Net cash used in investing activities . . . . . . . . . . . . . (24,526) (34,783)
------- --------
Cash Flows from Financing Activities:
Proceeds from common stock issuance . . . . . . . . . . . . . . 825 548
Proceeds from redeemable bearer shares . . . . . . . . . . . . . - 19,149
Redemptions of bearer shares . . . . . . . . . . . . . . . . . . (708) -
Acquisition of treasury stock . . . . . . . . . . . . . . . . . (5,289) -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 (89)
------- --------
Net cash provided by (used in) financing activities . . . . . . (5,039) 19,608
------- --------
Net decrease in cash and cash equivalents . . . . . . . . . . . (4,045) (722)
Cash and cash equivalents at beginning of period . . . . . . . . 16,045 19,486
------- --------
Cash and cash equivalents at end of period . . . . . . . . . . . $12,000 $ 18,764
======= ========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4 $ 18
======= ========
Income taxes:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 150
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,782 4,609
------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,782 $ 4,759
======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
GLOBAL NATURAL RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
Supplemental disclosure of non-cash investing and financing activities:
In connection with the Company's Employees 401k Savings Plan, the Company
contributed to the plan 11,572 treasury shares with a market value of
approximately $82,500 during the nine months period ending September 30, 1994.
See accompanying notes to consolidated financial statements.
4
<PAGE> 7
GLOBAL NATURAL RESOURCES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(UNAUDITED)
(1) Basis for Preparation of Financial Statements
The consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to
such rules and regulations, although the Company believes that the disclosures
are adequate to make the information presented not misleading. It is suggested
that these consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.
In the opinion of Management of the Company, the accompanying unaudited
consolidated financial statements contain all necessary adjustments to present
fairly the financial position, the results of operations and cash flows for the
periods reported. All adjustments are of a normal recurring nature.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 ("Statement 115"), "Accounting for Certain
Investments in Debt and Equity Securities." The cumulative effect of this
accounting change as of January 1, 1994 had no material impact upon the
financial statements of the Company.
Effective the second quarter of 1994, the Company changed its method of
accounting for natural gas revenues from the sales method, whereby the Company
recorded natural gas revenues based on the amount of gas sold, to the
entitlements method. Under the entitlements method, the Company records
natural gas revenues based upon the Company's entitled share of gas production.
The Company believes that the entitlement method will provide a more meaningful
presentation of the Company's financial position and will produce a better
matching of current revenues and costs. For all periods presented, the
Company had no material gas imbalances, therefore the effect of the change in
accounting method on income for the current period is immaterial. In addition,
the Company estimates that this accounting change would have had no material
impact on net income reported in previous periods.
Certain reclassifications have been made to the 1993 financial statements
to conform to the presentation used in 1994.
The results of operations for the above periods are not necessarily
indicative of the results to be expected for the full year.
(2) Investments
The Company adopted the provisions of Statement 115 at January 1, 1994.
Under Statement 115, the Company classifies its debt and marketable equity
securities in one of three categories: trading, available-for-sale, or
held-to-maturity. Trading securities are bought and held principally for the
purpose of selling them in the near term. Held-to-maturity securities are
those securities for which the Company has the ability and intent to hold until
maturity. Any securities not classified as trading or held-to-maturity are
classified as available-for-sale.
The Company has no held-to-maturity or available-for-sale securities.
Trading securities are recorded at fair value. Unrealized holding gains and
losses on trading securities are included in earnings. Dividend and interest
income are recognized when earned.
Marketable investment securities at December 31, 1993 and September 30,
1994 consist of certificates of deposit and U.S. government and corporate debt
securities (included in short-term liquid investments), and equity securities
(included in current investments). During the nine month period ending
September 30, 1994, the Company recorded approximately $431,000 of unrealized
losses resulting from changes in the differences between cost and market value
of short-term liquid investments and current investments.
5
<PAGE> 8
Short-term liquid investments at December 31, 1993 are carried at cost
which approximates fair value. Current investments at December 31, 1993 are
carried at the lower of aggregate cost ($1.7 million) or market value ($1.9
million).
Investment in Russian joint venture
In 1990, the company formed Texneft Inc. ("Texneft") to participate in a
joint venture in Russia with Tatneft, a Russian oil production amalgamation
which operates the oil fields of Tatarstan, Russia. Texneft, an 80% owned
subsidiary, has a 50% interest in the joint venture, Tatex. An agreement
between the minority shareholders of Texneft and the Company requires the
Company to advance to Texneft sufficient cash to fund its administrative
expenses and its contributions to Tatex. In turn, Texneft will make no
distributions to its shareholders until the Company has been repaid a sum equal
to the total of its advances to Texneft. As of December 31, 1993 and September
30, 1994, the Company's outstanding advances totaled $11.7 million and $17.2
million, respectively.
The impact that the Russian joint venture has had on the Company's
financial statements for the nine month periods ending September 30, 1993 and
1994 is summarized in thousands in the following table. The revenue and
expense information presented is the Company's pro-rata share (80%) of
Texneft's consolidated financial statements, which include 50% of Tatex
activities.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1994 1993
---- ----
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,318 $ 2,597
------- -------
Expenses
Operating and administrative . . . . . . . . . . . . . . . . 4,512 2,354
Export taxes . . . . . . . . . . . . . . . . . . . . . . . . 2,155 1,005
------- -------
Total expenses . . . . . . . . . . . . . . . . . . . . . 6,667 3,359
------- -------
Loss before U. S. income tax . . . . . . . . . . . . . . . . . . (349) (762)
Advances from Company, net . . . . . . . . . . . . . . . . . . . 5,454 3,675
------- -------
Net increase in equity investment . . . . . . . . . . . . . . . . 5,105 2,913
Investment at beginning of period . . . . . . . . . . . . . . . . 8,783 6,319
------- -------
Investment at end of period . . . . . . . . . . . . . . . . . . . $13,888 $9,232
======= ======
</TABLE>
(3) Redeemable Bearer Shares
In August 1993, the Company received $19.2 million from the Hambros Channel
Islands Trust Corporation Limited ("Trust"), in the form of an interest-free
loan. The loan is repayable on demand only to the extent necessary to redeem
bearer share warrants presented for exchange until July 2008. Each bearer
share warrant presented during this period will be redeemed for $6.66. As of
September 30, 1994, there were 2,715,462 outstanding bearer share warrants.
The loan is secured by a letter of credit from a bank. The letter of credit is
secured by certain of the Company's short-term liquid investments. During 1994
and 1993 there were no drawings under the letter of credit. In July 2008, the
obligation of the Company to holders of bearer share warrants will cease, the
interest-free loan will terminate, and any remaining cash will revert to the
Company and will be accounted for as an increase to capital in excess of par
value.
(4) Shareholders' Equity
On May 31, 1994, the Company purchased in a private transaction 705,196
shares of its common stock from Noel Group Inc. ("Noel"). The purchase price
was $7.50 per share or approximately $5.3 million. In connection with the
repurchase of the shares, two of the four representatives of Noel on the
Company's Board of Directors, Gilbert H. Lamphere and Donald T. Pascal,
resigned from the Company's Board of Directors.
6
<PAGE> 9
(5) Earnings per Share
Earnings per share is computed based upon the weighted average common shares
outstanding, determined on a monthly basis. Unexercised stock options do not
have a dilutive effect on the reported earnings per common share. Fully
diluted earnings per share for the three and nine months ended September 30,
1993 were calculated assuming conversion of Prudential's Preferred Stock into
Company common stock effective January 1, 1993.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Introduction
The Company recorded a net loss of $4.7 million ($.16 per share) for the
first nine months of 1994, as compared to net income of $4.1 million ($.15 per
share) for the same period in 1993. The 1994 results include dry hole expenses
of $7.4 million, while 1993 results include $1.8 million of similar expenses.
The 1993 results also include a gain of $1.8 million on asset sales, while 1994
results include a loss of $0.3 million from similar transactions.
During the second quarter of 1993, the Company recorded a $1.3 million
liquidating distribution from Investment Properties International, Limited
("IPI"). No such distribution was recorded during the nine month period ended
September 30, 1994.
Results of Operations - Nine Months Ended September 30, 1994 and 1993
Oil and Gas Revenues are summarized for the nine months ended September 30,
1994 and 1993 in the following table:
<TABLE>
<CAPTION>
Revenues Price Volumes
----------------------- ---------------------- -----------------------
1994 1993 1994 1993 1994 1993
-------- -------- ------- ------- -------- --------
(thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
United States
Oil . . . . . . . $ 2,575 $ 3,638 $ 15.53 $ 17.65 166 Mbls 206 Mbls
Gas . . . . . . . $ 11,960 $ 11,145 $ 1.93 $ 2.13 6.2 Bcf 5.2 Bcf
Indonesia
Oil . . . . . . . $ 559 $ 657 n/a n/a n/a n/a
Gas . . . . . . . $ 7,980 $ 7,637 n/a n/a n/a n/a
Argentina
Oil . . . . . . . $ - $ 227 $ - $ 16.69 - 14 Mbls
</TABLE>
United States gas sales volumes increased 1 Bcf (19%), primarily due to
increased production from the Company's Taylor Lake field and from High Island
Block 23L which began initial production in August, 1994. United States oil
sales volumes decreased 40 Mbls (19%), principally due to the disposition of
certain domestic producing properties during 1993.
The average sales price per Mcf in 1993 included pricing dispute settlement
proceeds of approximately $0.7 million. The 1993 gas price excluding these
settlements would have been $2.01 per Mcf. There were no price settlements
included during the same period in 1994.
Indonesian liquefied natural gas (LNG) liftings for the nine months ended
September 30, 1994 totalled 317 as compared to 273 for the same period in 1993.
The Company has not been advised as to changes in any additional factors (i.e.
prices or oil and gas production) which would affect Indonesian oil and gas
revenues.
The Company sold its working interest in its Argentinean properties during
1993.
Pipeline Operations contributed $14.4 million to consolidated revenues and
incurred $13.6 million in pipeline operating expenses, exclusive of
depreciation, for the nine months ended September 30, 1994 as compared to $27.2
million and $26.3 million, respectively, for the same period in 1993. The
primary reason for the decrease in revenues and expenditures in 1994 as
compared to 1993 was a decrease in marketing activities for working interest
7
<PAGE> 10
partners at the Taylor Lake Field. In addition, the Company has temporarily
shut down operations of the nitrogen rejection unit at its McLeod plant
because of insufficient quantities of nitrogen laden natural gas. The Company
is not certain when or if sufficient quantities of nitrogen laden natural gas
will be available to resume operations. The pipeline segment generated a net
loss from operations before taxes of approximately $0.3 million for the nine
months ended September 30, 1994 as compared to a loss of $0.4 million for the
same period in 1993.
Expenses decreased to $38.9 million for the nine months ended September 30,
1994 as compared to $45.5 million for the same period in 1993. This 14%
decrease is primarily due to decreases in pipeline and depletion expenses of
$12.7 million and $0.8 million, respectively. The decrease in depletion
expense in 1994 is primarily the result of additions to the Company's oil and
gas reserve base during the last half of 1993 which results in lower depletion
rates for subsequent periods.
The decreases in pipeline and depletion expenses were partially offset by
an increase in exploration expenditures of $7.3 million. This increase
reflects the Company's expanded Gulf Coast exploration activities and is
primarily the result of increases of $5.6 million and $1.2 million in dry hole
costs and geological and geophysical expenses, respectively.
Other Income decreased approximately $2.8 million for the nine months ended
September 30, 1994 compared to the same period in 1993. This decrease is
primarily the result of decreases in gains from asset sales and the 1993 IPI
distribution.
Results of Operations -- Three Months Ended September 30, 1994 and 1993
Oil and Gas Revenues are summarized for the three months ended September 30,
1994 and 1993 in the following table:
<TABLE>
<CAPTION>
Revenues Price Volumes
----------------------- ---------------------- ----------------------
1994 1993 1994 1993 1994 1993
-------- -------- ------- ------- ------ -------
(thousands of dollars)
<S> <C> <C> <C> <C> <C>
United States
Oil . . . . . . $ 1,031 $ 977 $ 16.87 $ 15.95 61 Mbls 61 Mbls
Gas . . . . . . $ 4,014 $ 3,819 $ 1.76 $ 2.12 2.3 Bcf 1.8 Bcf
Indonesia
Oil . . . . . . $ 279 $ 230 n/a n/a n/a n/a
Gas . . . . . . $ 2,795 $ 2,559 n/a n/a n/a n/a
Argentina
Oil . . . . . . $ - $ 58 $ - $ 14.42 - 4 Mbls
</TABLE>
United States gas sales volumes increased 0.5 Bcf (28%), primarily due to
increased production from the Company's Taylor Lake field and from High Island
Block 23L which began initial production in August, 1994.
The average sales price per Mcf in 1993 included pricing dispute settlement
proceeds of approximately $0.1 million. The 1993 gas price excluding these
settlements would have been $2.07 per Mcf. There were no price settlements
included during the same period of 1994.
Indonesian LNG liftings for the three months ended September 30, 1994
totalled 106 as compared to 94 for the same period in 1993. The Company has
not been advised as to changes in any additional factors (i.e. prices or oil
and gas production) which would affect Indonesian oil and gas revenues.
Expenses decreased to $14.1 million for the three months ended September 30,
1994 as compared to $16.3 million for the same period in 1993. This decrease
is primarily due to a $6 million decrease in pipeline expenses. This
previously discussed decrease was partially offset by an increase in
exploration expenses of $3.4 million. This increase in exploration expenses
reflects the Company's expanded Gulf Coast exploration activities and is
primarily the result of increases in dry hole costs and geological and
geophysical expenses of $2.5 million and $0.7 million, respectively.
Other Income decreased approximately $0.9 million for the three months ended
September 30, 1994 compared to the same period in 1993. This decrease is
primarily the result of losses on the disposition of assets and unrealized
losses in marketable securities of $0.3 million and $0.1 million, respectively.
8
<PAGE> 11
Liquidity and Capital Resources
Cash and cash equivalents decreased by $4 million during the first nine
months of 1994. This decrease was primarily due to the $5.3 million treasury
stock purchase and increases in the Company's investment in its Russian and
Ivory Coast activities of $5.1 million and $2.7 million, respectively. These
decreases were partially offset by the $6.3 million proceeds from the Company's
sale of the Oak Hill properties.
Cash provided by operations for the nine months ended September 30, 1994
was $25.5 million compared to $14.5 million for the same period in 1993. The
Company expended approximately $26.4 million for additions to properties and
equipment in the first nine months of 1994 compared to $11.1 million for the
same period in 1993. Working capital for the first nine months of 1994
decreased by $19.7 million. This decrease was primarily the result of
decreases in cash and cash equivalents and short-term liquid investments of $4
million and $15 million, respectively.
Traditionally, the Company has budgeted its exploration and development
expenditures for each year based on cash to be provided from operating
activities. In 1994, the Company intends to direct its internally generated
cash toward growing the Company's domestic asset base while directing a portion
of its balance sheet cash (cash and cash equivalents and short-term liquid
investments) toward international opportunities.
The Russian and the Ivory Coast activities are currently the primary focus
of the Company's international operations. As of September 30, 1994, the
Company's net investments in these activities were approximately $13.9 million
and $6.5 million, respectively.
The Russian joint venture currently includes three projects in various
stages of operation: 1) vapor recovery, 2) the drilling, development and
operation of the Onbysk field, and 3) a well stimulation program in and
adjacent to the sizable Romashkino field. A fourth project, the development of
undeveloped reserves underlying urban areas within the Romashkino field, has
been agreed to in principle. The execution of final documents has been
deferred pending further action with respect to the export tax.
In May 1993, the Company acquired an interest in 335,320 gross acres in the
CI-11 contract area approximately eight miles offshore of the Ivory Coast, West
Africa. The Company acquired a 10% working interest in an area referred to as
the "Special Area" and an 18% working interest in an area referred to as the
"Remaining Area."
During 1993, the Panthere #1 well was drilled in the Remaining Area to a
total depth of 10,575 feet and tested gas and condensate at the rate of 34.8
Mmcf per day plus 675 Bbls per day on a 56/64 inch choke with a flowing tubing
pressure of 1,909 pounds per square inch from 66 feet of perforations between
9,316 and 9,382 feet. The well was drilled in 264 feet of water and a
production caisson was set over the well.
During the first quarter of 1994, the Lion #1 well was drilled to test a
separate structure in the Special Area. This well was directionally drilled to
a total depth of 11,270 feet and encountered seven separate intervals totaling
approximately 205 feet of net hydrocarbon pay. In total, the well flowed a
combined 23,696 barrels of oil and condensate and 65 mmcf of gas per day. A
production caisson was set adjacent to the Lion #1 well. Future plans include
re-entry of the B1-8X well and the drilling of additional wells on this
structure. The B1-8X well, in the Special Area, tested significant oil
production from two of the intervals found in the Lion #1 before being
abandoned by the previous operator.
The joint venture has signed a definitive long-term contract with the Ivory
Coast government to sell natural gas produced from these areas to the
government for its use in power generation. In addition, the government has
formally approved the development plan for Block CI-11. The plan includes the
drilling of six additional delineation wells on the contract areas and the
construction of processing facilities and the laying of oil and gas pipelines.
Development drilling is expected to resume in November, 1994.
In addition, the Company has a 25% working interest in the Qarun
concession located southwest of Cairo Egypt. The first exploratory well the El
Sagha #1A has provided encouraging preliminary indications. Based on an
intermediate logging run, certain zones of the well are targeted for production
testing. Results of testing are not expected until late 1994.
9
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings:
None.
ITEM 2. Changes in Securities:
None.
ITEM 3. Defaults upon Senior Securities:
None.
ITEM 4. Submission of Matters to a Vote of Security Holders:
None.
ITEM 5. Other Information:
None.
ITEM 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
The following document is included as an Exhibit to this
report.
27. Financial Data Schedule for the quarter ended September
30, 1994.
(b) Reports on Form 8-K
None.
10
<PAGE> 13
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.
GLOBAL NATURAL RESOURCES INC.
----------------------------
(Registrant)
Date: November 11, 1994 By /s/ Eric Lynn Hill
__________________________
Eric Lynn Hill
Senior Vice President-Finance and
Administration and
Secretary-Treasurer
11
<PAGE> 14
EXHIBIT INDEX
Exhibit No.
27. Financial Data Schedule for the quarter ended September 30, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 12,000
<SECURITIES> 34,936
<RECEIVABLES> 8,749
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 57,445
<PP&E> 124,940
<DEPRECIATION> 53,533
<TOTAL-ASSETS> 145,545
<CURRENT-LIABILITIES> 15,895
<BONDS> 17,667
<COMMON> 33,332
0
0
<OTHER-SE> 77,910
<TOTAL-LIABILITY-AND-EQUITY> 145,545
<SALES> 37,453
<TOTAL-REVENUES> 38,171
<CGS> 13,581
<TOTAL-COSTS> 38,878
<OTHER-EXPENSES> 717
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56
<INCOME-PRETAX> 80
<INCOME-TAX> 4,806
<INCOME-CONTINUING> (4,726)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,726)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
