<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-20100
BELDEN & BLAKE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
OHIO 34-1686642
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
</TABLE>
5200 STONEHAM ROAD
NORTH CANTON, OHIO 44720-1543
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 499-1660
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, WITHOUT PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ___
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 16, 1995 was $86,708,657.
The number of shares outstanding of registrant's common stock, without
par value, as of March 16, 1995 was 7,106,246.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement to be filed pursuant to
Regulation 14A with respect to the Annual Meeting of Shareholders to be held on
or about May 25, 1995 are incorporated in Part III of this Form.
<PAGE> 2
PART I
Item 1. BUSINESS
GENERAL
Belden & Blake Corporation, an Ohio corporation (the "Company"), is
primarily engaged in producing oil and natural gas, acquiring and enhancing the
economic performance of producing oil and gas properties, exploring for and
developing natural gas and oil reserves and gathering and marketing natural gas.
Until 1995, the Company conducted business exclusively in the Appalachian Basin
where it has operated since 1942 through several predecessor entities. It is now
one of the largest exploration and production companies operating in the
Appalachian Basin in terms of reserves, acreage held and wells operated. In
early 1995, the Company commenced operations in the Michigan Basin through the
acquisition of Ward Lake Drilling, Inc., an exploration and production company
which owns and operates oil and gas properties in Michigan's lower peninsula.
See "Recent Developments."
At December 31, 1994, the Company owned interests in 4,589 gross (3,899
net) productive gas and oil wells in Ohio, West Virginia, Pennsylvania and New
York with proved reserves totaling 123 Bcf (billion cubic feet) of gas and 4.1
million Bbls (barrels) of oil. The estimated future net revenues from these
reserves had a present value before income taxes of approximately $116.5 million
at December 31, 1994. At that date, the Company held leases on 544,063 gross
(533,983 net) acres, including 226,507 gross (220,791 net) undeveloped acres.
At December 31, 1994, the Company operated more than 4,900 wells,
including wells operated for third parties. The Company owned and operated
approximately 1,900 miles of gas gathering systems with access to the commercial
and industrial gas markets of the northeastern United States at December 31,
1994. At December 31, 1994, the Company's net production was approximately 26.8
million cubic feet of gas and 1,400 Bbls of oil per day. At that date, the
Company was marketing approximately 46 million cubic feet of gas per day,
consisting of its own production and gas purchased from third parties.
The Company was formed through the combination of a group of companies
and assets owned by Henry S. Belden IV (the "Belden Interests") with Belden &
Blake Energy Company (the "Partnership"), a master limited partnership listed on
the American Stock Exchange, and Belden & Blake International Limited ("BBI"), a
Bermuda corporation listed on the Luxembourg Stock Exchange. The transactions
combining these entities were effected on March 31, 1992. The Company's
succession to the Belden Interests was recorded on the basis of historical cost
in a manner similar to a pooling of interests and the consolidation of the
Partnership and BBI (the "Consolidation") was accounted for as a purchase.
Accordingly, prior to March 31, 1992, the Consolidated Financial Statements of
the Company reflect only the historical results of the Belden Interests and do
not include the results of operations of the Partnership or BBI prior to that
date.
The Company maintains its corporate offices at 5200 Stoneham Road,
North Canton, Ohio 44720-1543. Its telephone number at that location is (216)
499-1660. Unless the context otherwise requires, all references herein to the
"Company" are to Belden & Blake Corporation, its subsidiaries and predecessor
entities.
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SIGNIFICANT EVENTS
In January 1994, the Company purchased substantially all of TGX
Corporation's New York and Ohio assets for $15.5 million. The assets acquired
included an average working interest of 88% in 1,034 gross (910 net) oil and gas
wells on approximately 121,000 leasehold acres in northeastern Ohio and
southwestern New York, approximately 15,000 undeveloped leasehold acres in the
proximity of the existing production, and related inventory, real estate and
oilfield equipment. At December 31, 1993, the properties acquired had estimated
proved reserves of 22.0 Bcf of natural gas and 28,700 Bbls of oil.
RECENT DEVELOPMENTS
PURCHASE OF WARD LAKE DRILLING, INC.
Effective in January 1995, the Company made its initial entry into the
Michigan Basin by acquiring Ward Lake Drilling, Inc. ("Ward Lake"), a
privately-held exploration and production company headquartered in Gaylord,
Michigan for $15.1 million. Ward Lake holds production payment and working
interests averaging 13.6% in approximately 500 Antrim Shale gas wells in
Michigan's lower peninsula and approximately 5,500 undeveloped leasehold acres
in the proximity of the wells.
The wells had estimated proved developed gas reserves of 98 Bcf (13.7
Bcf net to Ward Lake's interest) at December 31, 1994. Gross production from the
wells in 1995 is expected to total approximately 37 million cubic feet of gas
per day. Approximately one-half of the purchase price was paid for the proved
reserves, with the balance associated with operating rights and other corporate
assets.
PURCHASE OF THE EAST OHIO GAS COMPANY'S PRODUCING PROPERTIES
In March 1995, the Company entered into an agreement to purchase all of
the producing properties of The East Ohio Gas Company in Ohio for $6.5 million.
The assets to be acquired include a 100% working interest in 378 natural gas
wells and drilling rights on more than 250,000 acres of adjacent properties. A
substantial majority of the wells are adjacent to producing properties currently
being operated by the Company. The wells had estimated proved reserves at
December 31, 1994 of 8.5 Bcf of natural gas and 80,000 Bbls of oil. Production
from the wells in 1995 is expected to approximate 1.9 million cubic feet
equivalent per day. The purchase is subject to the satisfaction of certain due
diligence matters, consent requirements and other conditions.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company operates in two industry segments: (1) oil and gas
production and distribution and (2) oilfield sales and services. Oilfield sales
are generated by its wholly-owned subsidiaries, Target Oilfield Pipe & Supply
Company and Engine Power Systems, Inc., and oilfield services are provided by
its Arrow Oilfield Services division. The financial information with respect to
the industry segments is shown in Note 18 of the Consolidated Financial
Statements.
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DESCRIPTION OF BUSINESS
OVERVIEW
The Company is primarily engaged in oil and gas exploration,
development and production and the gathering and marketing of natural gas in the
Appalachian Basin and, to a lesser extent, the Michigan Basin.
The Appalachian Basin is the oldest and geographically one of the
largest oil and gas producing regions in the United States. Production in the
Appalachian Basin is derived primarily from shallow (1,000 to 7,500 feet)
blanket formations. Success rates of the Company and others drilling in these
formations historically have exceeded 90%, with production generally lasting
longer than 20 years.
The combination of long-lived production and high drilling success
rates at these shallower depths has resulted in a highly fragmented, extensively
drilled operating environment in the Appalachian Basin. As of December 31, 1994,
there were over 10,000 independent operators of record and approximately 180,000
producing oil and gas wells in Ohio, West Virginia, Pennsylvania and New York.
There has been very limited testing or development of the formations below the
existing shallow production in the Appalachian Basin. As a result, the Company
believes that there are significant exploration and development opportunities in
these less developed formations for those operators with the capital, technical
expertise and ability to assemble the large acreage positions needed to justify
the use of advanced exploration and production technologies.
The Michigan Basin is similar in many respects to the Appalachian
Basin. The Antrim Shale formation is a low porosity reservoir that blankets 95%
of the Michigan Basin. Present production is from depths between 700 and 1,700
feet. The wells initially produce at rates of 100 to 175 Mcf (thousand cubic
feet) per day and decline very slowly. Containment of operating costs is
critical and properties are primarily held by small, private independent
companies. The Michigan Basin also contains deeper, more prolific formations --
principally the Niagaran Limestone and Prairie du Chien Sandstone.
The proximity of the Appalachian and Michigan Basins to large
commercial and industrial natural gas markets has generally resulted in wellhead
gas prices that since 1985 have ranged from $.42 to $1.30 per Mcf above national
wellhead prices.
BUSINESS STRATEGY
One of the Company's primary operating objectives is to build and
maintain a dominant position as a gas and oil producer and natural gas marketer
in the Appalachian and Michigan Basins. To accomplish this objective, the
Company's specific business strategy is to:
- make strategic acquisitions of additional producing oil and gas
properties;
- expand production and reserves through a conservative mix of
developmental and exploratory drilling;
- improve profit margins on the production from existing and
acquired properties through advanced production technologies,
operating efficiencies, mechanical improvements and the use of
enhanced recovery techniques;
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<PAGE> 5
- use advanced exploration and production technologies to increase
recoverable reserves and to explore and develop the less
developed formations in the Appalachian and Michigan Basins; and
- expand and vertically integrate its gas gathering and marketing
activities.
This strategy is particularly intended to enable the Company to utilize
its sizeable acreage position, technological capability and financial resources
to take advantage of (i) the increased availability of producing properties for
acquisition in the Appalachian and Michigan Basins as capital constrained
operators seek liquidity or operating capital as a result of declining oil and
gas prices and the reduced availability of tax shelter investment capital and
(ii) the significant exploration and development opportunities in the less
developed and potentially more productive formations in the Appalachian and
Michigan Basins.
ACQUISITIONS OF PRODUCING PROPERTIES
The Company's acquisition strategy focuses on producing properties that
(i) the Company already owns an interest in and operates or that are
strategically located in relation to its existing operations, (ii) can be
increased in value through operating cost reductions, advanced production
technology, mechanical improvements, recompleting or reworking wells and the use
of enhanced and secondary recovery techniques, (iii) provide development
drilling opportunities or enhance the Company's acreage position, (iv) have the
potential for increased revenues from gas production through the Company's gas
marketing capabilities or (v) are of sufficient size to allow the Company to
operate efficiently in new areas.
In 1994, the Company made eleven acquisitions of producing oil and gas
properties having proved reserves of 26.9 Bcf of natural gas and 222,981 Bbls of
oil at a cost of $20.3 million.
OIL AND GAS OPERATIONS AND PRODUCTION
Operations. The Company serves as the operator of substantially all of
the wells in which it holds working interests. The Company seeks to maximize the
value of its properties through operating cost reductions, advanced production
technology, mechanical improvements and the use of enhanced and secondary
recovery techniques.
Through its eight production field offices (three in Ohio, one in
Pennsylvania, two in West Virginia, one in New York and one in Michigan), the
Company continuously reviews its properties, especially recently acquired
properties, to determine what action can be taken to reduce operating costs and
improve production. The Company has reduced field level costs through improved
operating practices such as computerized production scheduling and the use of
hand-held computers to gather field production data. On acquired properties,
further efficiencies may be realized through improvements in production
scheduling and reductions in oilfield labor. Actions that may be taken to
improve production include modifying surface facilities and redesigning downhole
equipment. In 1989 and 1990, the Company participated in the development of an
advanced plunger lift system (the "JetStar"), a tool that is designed to improve
production on certain low-volume gas wells. As of December 31, 1994, a total of
217 JetStar systems have been installed on Company operated wells at a cost of
approximately $5,600 per well, resulting in an average net increase in
production to the Company of 8 Mcf per well per day during the first year
following installation.
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The Company may also implement enhanced and secondary recovery
techniques. Enhanced recovery techniques include the repressurization of a
productive field by injecting gases into formations that have significant
remaining reserves in place but which are no longer producing at satisfactory
levels. The Company initiated a pilot repressurization project in 1993. Gas has
been intermittently injected into four wells, resulting in increased oil
recovery from these wells. If successful, this pilot project could lead to a
larger program designed to improve oil production in one of the Company's
currently active fields. A combination of this gas injection process along with
in-fill drilling is being evaluated using advanced reservoir modeling techniques
that were performed at the University of Houston and Los Alamos National
Laboratory. The U.S. Department of Energy is providing funding for additional
studies of the modeled reservoir to integrate the previous modeling work with
the actual field pilot results. This additional study will better enable the
Company to determine the economic viability of the process for larger field-wide
development.
Secondary recovery methods typically involve all methods of oil
extraction in which extrinsic energy sources are applied to extract additional
reserves. The primary secondary recovery technique used by the Company is
waterflooding, which has been used extensively in Pennsylvania. Although the
Company has sold many of its older waterflood properties, it may use such
recovery methods in areas where favorable results can be attained.
Production. The following table sets forth certain information
regarding oil and gas production from the Company's properties:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------
1992 1993 1994
-------- ------- --------
<S> <C> <C> <C>
Production
Oil (thousands of Bbls) 351 453 496
Gas (Bcf) 3.7 7.4 9.6
Average Sales Price
Oil (per Bbl) $ 19.27 $ 17.15 $ 15.98
Gas (per Mcf) $ 2.20 $ 2.55 $ 2.58
Average production costs per equivalent
Mcf of natural gas $ 0.92 $ 0.71 $ 0.74
Total Oil and Gas Revenues (in thousands) $ 15,046 $26,631 $32,574
Total Production Expenses (in thousands) $ 5,362 $ 7,190 $ 9,292
</TABLE>
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EXPLORATION AND DEVELOPMENT
Ohio. Historically, the Company's drilling activities concentrated on
development drilling in the Clinton formation in eastern Ohio. The Clinton
formation is part of an extensive sandstone formation of varying thickness that
is found throughout the subsurface of the eastern half of Ohio at depths ranging
from 3,000 to 7,500 feet. The formation is a blanket sand not generally subject
to structural or stratigraphic features. Since 1963, the Company has drilled
more than 1,000 wells in the Clinton formation with a success rate of 97%.
Production from a Clinton well is largely dependent on the porosity and
permeability of the formation in the drainage area of the well bore. The Clinton
formation is a tight sand that is resistant to the flow of oil and gas.
Production from this type of reservoir has been improved through the use of
hydraulic fracturing to improve the flow of oil and gas into the well bore. Even
with hydraulic fracturing, the nature of the formation results in low recovery
of reserves, typically 10% to 15% of the oil and 35% of the gas in place. Based
on the Company's experience, the typical Clinton well produces 20% to 25% of its
recoverable reserves in the first year and 40% to 50% of its total recoverable
reserves in the first three years, with steady declines in subsequent years. The
Company's recent experience is that a typical Clinton gas well costs $110,000 to
drill and complete and has 85 to 100 million cubic feet equivalent of
recoverable reserves, while a typical Clinton oil well costs $135,000 to drill
and complete and has 21,000 Bbls of recoverable oil reserves.
The Company drilled five vertical wells to the Clinton formation in
1994. All of these wells were completed as producing oil and gas wells. In
addition, in 1994 the Company completed and successfully fracture treated a
horizontal well in the Clinton formation. This well was drilled in 1993 on a
co-funded basis with the U.S. Department of Energy to determine the economic
feasibility of horizontal drilling in the Clinton formation. The horizontal well
is currently producing both natural gas and oil. An economic assessment will be
made when sufficient quantities are extracted to determine ultimate recoverable
reserves. The Company intends to drill seven vertical wells to the Clinton
formation in 1995. The costs of drilling and completing these wells are expected
to be financed entirely through internally generated cash flow.
The less developed formations in Ohio include the Knox sequence of
sandstones and dolomites at depths ranging from 3,000 feet to 8,000 feet. The
Company is focusing on the Knox sequence of formations in Ohio, which includes
the Rose Run, Beekmantown and Trempeleau pay zones. The geographical boundaries
of the Knox sequence, which lies below the Clinton formation, are generally well
defined in Ohio. Nevertheless, the Knox group has been only lightly explored,
with fewer than 1,200 wells drilled to this sequence of formations during the
past 10 years.
In 1994, the Company drilled 25 gross (14.2 net) wells to the Knox
formations in Ohio, with 17 gross (9.8 net) wells completed as producing wells
in the Knox formations. In addition, two wells that were non-commercial in the
Knox were completed as producing wells in the shallower Clinton formation.
The Company's historical experience is that the average Knox well
produces 20% to 25% of its recoverable reserves in the first year of production
and approximately 50% of its recoverable reserves in the first three years with
a steady decline thereafter. Knox sequence wells have an expected productive
life ranging from 15 to 25 years. Based on the Company's experience, the average
cost to drill and complete a Knox well is $220,000 with an average dry hole cost
of $100,000.
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The Company's production from Knox formation wells has increased
steadily as additional wells have been drilled.
Production From Knox Formation Wells
<TABLE>
<CAPTION>
1992 1993 1994
------- ------- -------
<S> <C> <C> <C>
Producing Wells
Gross 16 23 41
Net 13.7 20.6 29.7
Net Production
Oil (Bbls) 4,664 13,868 67,112
Gas (Mcf) 339,604 730,834 1,041,459
Combined (Mcfe) (1) 367,588 814,042 1,444,131
Percent of Total Production
Oil 1.3 % 3.1 % 13.5 %
Gas 9.1 9.9 10.9
Combined 6.3 8.1 11.5
</TABLE>
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(1) Mcfe means a thousand cubic feet of natural gas equivalent, which is
determined using the ratio of six Mcf of natural gas to one barrel of
oil.
The Company is well positioned to exploit the undeveloped potential of
the Knox formations. It holds leases on approximately 293,000 net acres
overlying potential Knox drilling locations. Approximately 50% of this acreage
is held by production from shallower formations at no additional cost to the
Company. This sizable acreage position enables the Company to shoot seismic
surveys on a cost effective basis by spreading the costs over a large number of
potential well sites. Generally, the use of seismic analysis by smaller
operators is not economical as an exploration tool because they do not hold
sufficient acreage. The Company plans to drill 26 wells to the Knox formations
in Ohio in 1995. The costs of drilling and completing these wells are expected
to be financed entirely through internally generated cash flow.
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1994 Ohio Drilling Results
<TABLE>
<CAPTION> ESTIMATED
RESERVES APPROXIMATE
GROSS NET DISCOVERED - COST -
WELLS WELLS NET (MCFE) NET
----- ----- ------------ -----------
<S> <C> <C> <C> <C>
Shallow Blanket Formations
Productive 5 4.5 381,000 $ 932,000 (1)
Dry 0 0 0 0
Less Developed Formations
Productive 17 9.8 3,808,000 2,379,000
Dry 8 (2) 4.4 137,000 509,000
</TABLE>
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(1) Includes approximately $400,000 associated with the horizontal well
previously discussed.
(2) Includes two Knox dry holes which were subsequently completed in the Clinton
formation.
West Virginia. In December 1992, the Company acquired interests in 784
natural gas wells from Presidio Exploration, Inc. ("Presidio"). In conjunction
with the purchase of these properties, the Company entered into a Drilling
Participation Agreement (the "DPA") with Presidio which provides for the joint
development of approximately 84,000 net undeveloped acres adjoining the acquired
properties. The DPA contemplates the development of low-risk long-lived reserves
from relatively shallow formations between 1,500 and 6,000 feet. Productive
horizons in the area include the Berea Sandstone, Devonian Brown Shale,
Ravencliff Sandstone and Big Lime Limestone. The horizons are similar in nature
to the Clinton formation in Ohio.
The DPA provides for equal cost and revenue sharing, with Presidio
receiving a 3.125% overriding royalty (net to the Company's interest) with
respect to each well drilled and contributing undeveloped acreage at a cost of
$90 per acre ($45 per acre net to the Company's interest assuming equal
participation by the Company and Presidio). The Company serves as operator under
the DPA and charges Presidio a well drilling fee and a fixed fee to cover
ongoing well management.
The Company drilled 23 gross (15.3 net) wells under the DPA in 1994,
with 20 gross (14.6 net) wells completed as producing gas wells. Presidio
elected to participate in ten of these wells and the Company acquired Presidio's
interests in the others. The Company also drilled seven gross (2.7 net) wells
outside the DPA, all of which were completed as producing wells.
The Company estimates that there are 100 drilling locations associated
with the remaining acreage available for development under the DPA containing
approximately 6.5 Bcf of proved undeveloped natural gas reserves net to the
Company's interest (assuming equal participation by the Company and Presidio).
The Company plans to drill 24 wells in West Virginia in 1995. The Company
estimates that the average cost to drill and complete wells in these West
Virginia horizons is approximately $160,000 per well. The Company's share of
drilling and completion costs in 1995 is expected to be financed entirely
through internally generated cash flow.
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<PAGE> 10
The Company's contract with Ravenswood Aluminum Company ("RAC"), its
principal gas purchaser in West Virginia, requires it to deliver 10 billion
British Thermal Units ("Btus") (approximately 9.5 million cubic feet) of gas per
day through 1998. At present, the Company is supplying this contract requirement
by delivering approximately 5.9 billion Btus of its own gas production, 3.3
billion Btus of production from royalty and joint working interest owners in
wells in which the Company holds an interest and 0.8 billion Btus of gas
purchased from third parties. To the extent that the Company is able to add
production in the northern region under the DPA, such production would be
available to replace gas presently purchased from third parties to satisfy the
contract requirements.
The contract provides for a discount from the contract price if gas is
available under the same terms and conditions from an arms-length third party at
a price of less than 70% of the contract price. Since July 1994, RAC has
unilaterally taken discounts totaling $334,000 through December 31, 1994. The
Company has contested RAC's interpretation of the contract and is negotiating to
recover part or all of the discounts taken.
At the time the Company purchased the properties subject to the RAC gas
contract, it required Presidio to partially secure the delivered gas price the
Company would receive under the contract with a declining letter of credit
issued by Citibank, N.A. and Chase Manhattan Bank, N.A. The Company is entitled
to draw against the letter of credit annually if the Company receives less than
a specified minimum average delivered price on gas delivered to RAC under the
contract. The Company intends to draw against the letter of credit or be
reimbursed directly by Presidio in early 1995 for a portion of the amount of the
discount taken by RAC.
1994 West Virginia Drilling Results
<TABLE>
<CAPTION>
ESTIMATED
RESERVES APPROXIMATE
GROSS NET DISCOVERED - COST -
WELLS WELLS NET (MCFE) NET
----- ----- ------------ -----------
<S> <C> <C> <C> <C>
Shallow Blanket Formations
Productive 27 17.3 3,369,000 $2,673,000
Dry 2 0.4 0 42,000
Less Developed Formations
Productive 0 0 0 0
Dry 1 0.3 0 82,000
</TABLE>
Pennsylvania and New York. In Pennsylvania, the shallow producing
formations are of Upper Devonian age and include the Bradford, Cherry Grove,
Clarendon, Glade and Tioga Sandstones at depths ranging from 1,100 to 1,500
feet. These reservoirs have been productive in the area since the mid-1800's and
today produce both gas and high quality Pennsylvania grade crude oil. The
expected productive life of these wells is 15 years. Based on the Company's
historical experience, these Upper Devonian wells cost $30,000 to $40,000 to
drill and complete.
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<PAGE> 11
In 1994, the Company drilled 20 wells to these shallow formations, all
of which were completed as producing wells. Reserves discovered as a result of
this drilling totaled 519 million cubic feet of gas and 36,910 barrels of oil.
Drilling and completion costs for the 20 wells totaled $635,000. The Company
plans to drill 18 wells to these formations in 1995, the costs of which are
expected to be funded through internally generated cash flow.
In Pennsylvania, the less developed formations include the Onondaga
Limestone and the Oriskany Sandstone. In 1990, the Company drilled three
exploratory wells to the Onondaga formation in northwestern Pennsylvania. One of
the three wells was productive and has produced 1.2 Bcf equivalent and $2.8
million in net revenues through December 31, 1994, and had estimated remaining
future net revenues as of that date of $1.3 million. Drilling and completion
costs for the three wells, including approximately $200,000 in seismic
expenditures, totaled $952,000. The Company intends to drill one well to test
this formation in 1995 at an estimated cost of $300,000 (excluding seismic
costs) which is expected to be funded through internally generated cash flow.
In November 1993, the Company entered into a joint venture to drill
four exploratory wells to the Oriskany formation in southwestern Pennsylvania.
The Company holds a 60% interest in the venture and serves as the operator. All
four wells were completed as producing wells in 1994. The Company plans to drill
four additional wells to the Oriskany formation in 1995 at an estimated total
cost of $1 million. The costs of drilling and completing these wells are
expected to be funded through internally generated cash flow.
In southwestern New York, the shallow producing formations are the
Whirlpool and Medina Sandstones at depths ranging from 3,000 to 3,500 feet. The
Medina Sandstone is analogous to the Clinton Sandstone in Ohio. In 1994, the
Company drilled 6 gross (3.7 net) wells to these shallow formations, all of
which were completed as producing wells. The primary less developed formation in
southwestern New York is the Theresa Sandstone, which is analogous to the Rose
Run Sandstone, one of the Knox group of formations in Ohio. The Company drilled
2 gross (.6 net) wells to the Knox formations in New York during 1994 with 1
gross (.5 net) well completed as a producing well. The Company plans to drill
seven wells to the Medina Sandstone formation and four wells to the Knox
formations in New York in 1995. The following table provides information on the
Company's drilling activities in New York and Pennsylvania in 1994.
1994 New York and Pennsylvania Drilling Results
<TABLE>
<CAPTION>
ESTIMATED
RESERVES APPROXIMATE
GROSS NET DISCOVERED - COST -
WELLS WELLS NET (MCFE) NET
----- ----- ------------ -----------
<S> <C> <C> <C> <C>
Shallow Blanket Formations
Productive 26 23.8 1,063,000 $1,107,000
Dry 0 0 0 0
Less Developed Formations
Productive 5 2.9 1,251,000 1,562,000
Dry 1 0.1 0 14,000
</TABLE>
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<TABLE>
Drilling Results. The following table sets forth drilling results with
respect to wells drilled during the past five years.
Shallow Blanket Formations(1)
<CAPTION>
1990 1991 1992 1993 1994
---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Development Wells(2)
Productive
Gross 78 6 4 42 58
Net 2.9 0.5 4 31.4 45.6
Dry
Gross 0 0 0 2 2
Net 0.04 0 0 0.7 0.4
</TABLE>
(No Exploratory Wells were drilled in Shallow Blanket Formations.)
Less Developed Formations(1)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Development Wells(3)
Productive
Gross 0 5 8 16 (4) 19 (5)
Net 0 0.4 6.4 8.8 11.1
Dry
Gross 1 1 7 11 6
Net 0.05 0.1 5.1 9.9 3.2
Exploratory Wells(3)
Productive
Gross 9 2 0 0 3 (5)
Net 0.5 0.1 0 0 1.6
Dry
Gross 10 5 0 3 4
Net 1.2 0.3 0 1.5 1.6
</TABLE>
- ----------------------
(1) Includes Belden Interests only through March 31, 1992. The Partnership
and BBI owned interests in substantially all of these wells.
(2) Consists of wells drilled to the Berea and Clinton Sandstone formations
in Ohio, the Berea Sandstone, Devonian Brown Shale, Ravencliff
Sandstone and Big Lime Limestone formations in West Virginia, and the
Glade and Clarendon Sandstone formations in Pennsylvania.
(3) Consists of wells drilled to the Trenton Limestone and Knox sequence of
formations in Ohio and the Oriskany Sandstone and Onondaga Limestone
formations in Pennsylvania.
12
<PAGE> 13
(4) Two additional wells which were dry in the Knox formations were
subsequently completed in the shallower Clinton formation.
(5) One additional well which was dry in the Knox formation was
subsequently completed in the shallower Clinton formation.
Exploring the deeper, less developed formations of the Appalachian
Basin requires technological expertise that has not been widely used in the
shallow blanket formations. While much of this technology has been widely used
in other oil and gas producing regions for years, its use has been recent and
limited in the Appalachian Basin. The Company has the acreage base and resources
necessary to utilize this technology in its exploration and development efforts.
By combining current technology with its in-depth knowledge of the Appalachian
Basin, the Company intends to continue to build its reserve base by developing
these deeper formations.
GAS GATHERING AND MARKETING
The Company operates approximately 2,000 miles of natural gas gathering
lines in Michigan, Ohio, New York, West Virginia and Pennsylvania. The gathering
lines in Ohio and Pennsylvania total approximately 1,200 miles and consist of
networks that collect natural gas produced from approximately 800 wells. The
Ohio networks connect primarily with pipelines owned by The East Ohio Gas
Company, which allows access to a large segment of the potential commercial and
industrial customer base in northeast Ohio. The Ohio and Pennsylvania gathering
lines collect and deliver gas from wells connected to the lines and operated by
the Company or third parties, as well as gas purchased by the Company from other
suppliers.
The gathering lines in West Virginia consist of two networks, one
located in the northern region and the other in the southern region, totaling
approximately 550 miles. These lines collect substantially all of the Company's
West Virginia gas production as well as gas from other producers. The gathering
lines interconnect with several major gas pipelines, including those of
Consolidated Natural Gas Company and Columbia Gas Transmission Corporation,
which afford potential marketing access to most of the East Coast gas markets.
During 1994, the Company's gathering lines collected and delivered
approximately 5.6 Bcf of gas, generating net revenues of $3.4 million, with
approximately 3.3 Bcf of this gas being delivered to RAC pursuant to a long-term
requirements contract. See "Exploration and Development." The gathering network
in the southern region of West Virginia does not generate third-party gathering
revenue because it is owned by the Company and the other working interest owners
in the wells connected to the network. Costs of operations are shared among the
Company and the joint owners.
The major industrial centers of Akron, Canton, Cleveland and Pittsburgh
are all located in close proximity to the Company's operations and provide a
large potential market for direct natural gas sales. At present, the Company
markets directly to approximately 150 customers in a five-state area. The
Company focuses its gas marketing efforts on small to mid-sized industrial
customers that require more service and have the potential to generate higher
margins than large industrial users.
13
<PAGE> 14
The Company sells the gas it produces to its commercial and industrial
customers, local distribution companies and on the spot market. In addition to
its own production, the Company buys gas from other producers and third parties
and resells it. The following table shows the type of buyer for the Company's
own gas production and gas purchased from others in 1994.
<TABLE>
<CAPTION>
COMPANY PRODUCED GAS PURCHASED FROM
GAS THIRD PARTIES
---------------- ------------------
PERCENT PERCENT
OF OF
Sold to Bcf TOTAL BCF TOTAL
- ---------------------------- --- ------- --- -------
<S> <C> <C> <C> <C>
End Users 3.9 41% 6.6 96%
Local Distribution Companies 4.3 45% -- --
Spot Markets 1.4 14% 0.3 4%
----- ----- ----- -----
Total 9.6 100% 6.9 100%
===== ===== ===== =====
</TABLE>
OILFIELD SUPPLIES AND SERVICES
Target Oilfield Pipe & Supply Company, a subsidiary of the Company,
currently operates six retail sales outlets in the Appalachian Basin from which
it sells a broad range of equipment, including pipe, tanks, fittings, valves,
pumping units and JetStar plunger lift systems. The Company originally entered
the oilfield supply business to ensure the quality and availability of supplies
for its own operations. In response to increasing third party sales, which
accounted for approximately 70% of total sales in 1994, the number of store
locations has expanded from one to six since 1990.
In the first quarter of 1994, the Company acquired the assets and
liabilities of Engine Power Systems, Inc. ("EPS"), a distributor of Waukesha
natural gas-fueled engines and gas-powered electric generation equipment in
Ohio, western Pennsylvania, West Virginia and Kentucky, in exchange for 31,656
restricted shares of the Company's common stock. EPS is engaged in engine sales,
application engineering and system packaging for power generation,
co-generation, gas compression, air compression and various other applications.
The Company believes the acquisition of EPS strengthens its gas gathering and
marketing capability, furthers its vertical integration in gas marketing and
provides a future entry into co-generation.
The Company has provided its own oilfield services for more than 30
years in order to assure quality control and operational and administrative
support to the exploration and production operations of the drilling programs
organized by the Company and its predecessors. In 1992, a separate service
division was organized which provides the Company and third party customers with
necessary oilfield services such as well workovers, well completions, JetStar
conversions, brine hauling and disposal and oil trucking. During the last half
of 1994, the Company acquired for $3.1 million substantially all the assets of
two Ohio-based oilfield servicing companies and a brine hauling and disposal
company operating primarily in Ohio. These acquisitions make the Company's
service division the largest oilfield service company in Ohio.
The Company plans to expand its oilfield supply and service business
through continued growth in its market area.
14
<PAGE> 15
EMPLOYEES
As of March 1, 1995, the Company had 437 full-time employees, including
339 field employees, 13 petroleum engineers, five geologists and one
geophysicist.
COMPETITION
The oil and gas industry is highly competitive. Competition is
particularly intense with respect to the acquisition of producing properties and
the sale of oil and gas production. There is competition among oil and gas
producers as well as with other industries in supplying energy and fuel to
users.
The competitors of the Company in oil and gas exploration, development,
production and marketing include major integrated oil and gas companies as well
as numerous independent oil and gas companies, individual proprietors, natural
gas pipelines and their affiliates and natural gas marketers and brokers. Many
of these competitors possess and employ financial and personnel resources
substantially in excess of those available to the Company. Such competitors may
be able to pay more for desirable prospects or producing properties and to
evaluate, bid for and purchase a greater number of properties or prospects than
the financial or personnel resources of the Company will permit. The ability of
the Company to add to its reserves in the future will be dependent on its
ability to exploit its current developed and undeveloped lease holdings and its
ability to select and acquire suitable producing properties and prospects for
future exploration and development.
REGULATION
Regulation of Oil and Gas Operations and Marketing. Oil and gas
production operations and economics are affected by tax statutes and other laws
relating to the petroleum industry, by changes in such laws and by changing
administrative regulations and the interpretation and application of such
regulations. Oil and gas industry legislation and agency regulation is
periodically changed for a variety of political, economic and other reasons.
Numerous departments and agencies, both federal and state, issue rules and
regulations applicable to the oil and gas industry, some of which carry
substantial penalties for noncompliance. Although the Company believes that it
is in material compliance with all such laws and regulations, there is no
assurance that new regulations or new interpretations of existing laws and
regulations will not increase substantially the cost of compliance or otherwise
adversely affect the Company's exploration for, and production, gathering and
marketing of, oil and gas.
In the past, the federal government has regulated the prices at which
oil and gas could be sold. Prices of oil and gas sold by the Company are not
currently regulated, and sales may be made at uncontrolled market prices.
In April 1992, the Federal Energy Regulatory Commission issued Order
636, which generally requires the unbundling of gas transportation, marketing
and storage services. Although the Company believes that its gas gathering
operations are not subject to Order 636, the effect of this Order has
contributed to increased competition in the marketing of natural gas, which has
adversely affected the profitability of the Company's gas gathering and
marketing operations.
Environmental Regulation. The Company's operations are subject to
various federal, state and local laws and regulations limiting the discharge of
materials into the environment or otherwise relating to the protection of the
environment. Environmental protection laws and regulations have become
increasingly stringent over the past decade, and further changes may affect the
Company's operations and
15
<PAGE> 16
costs as a result of their effect on oil and gas development, exploration and
production operations. In particular, Congress has considered reauthorization of
the federal Resource Conservation and Recovery Act, under which oil and gas
exploration and production wastes are currently classified as non-hazardous.
Such reauthorization may result in the reclassification of some oil and gas
exploration and production wastes as hazardous or semi-hazardous and the
imposition of substantial obligations with respect to such wastes on domestic
oil and gas producers, including the Company. Initiatives to further regulate
the disposal of oil and gas wastes are also proposed periodically at the state
level and could affect the Company's operations if enacted in states where the
Company operates.
CUSTOMERS
See Note 15 to the Consolidated Financial Statements of the Company for
information regarding the Company's major customers.
Item 2. PROPERTIES
OIL AND GAS RESERVES
The following table sets forth proved oil and gas reserves as of
December 31, 1992, 1993 and 1994 determined in accordance with the rules and
regulations of the Securities and Exchange Commission. Proved reserves are the
estimated quantities of oil and gas which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions.
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------------
1992 1993 1994
---- ---- ----
<S> <C> <C> <C>
Estimated Proved Reserves
Gas (Bcf) 79.2 94.3 123.0
Oil (thousands of Bbls) 4,163 3,533 4,113
</TABLE>
See Note 17 to the Consolidated Financial Statements for more detailed
information regarding the Company's oil and gas reserves. The following table
sets forth the estimated future net revenues from the proved reserves of the
Company and the present value of such future net revenues as of December 31,
1994 determined in accordance with the rules and regulations of the Securities
and Exchange Commission.
<TABLE>
<C> <S>
Estimated future net revenues (before income taxes)
attributable to estimated production during
1995............................................................ $ 20,384,652
1996............................................................ 18,155,852
1997............................................................ 15,975,099
1998 and thereafter............................................. 175,328,786
------------
Total........................................................... $229,844,389
============
Present value before income taxes
(discounted at 10% per annum)............................................ $116,470,945
============
Present value after income taxes
(discounted at 10% per annum)............................................ $ 89,853,987
============
</TABLE>
16
<PAGE> 17
Estimated future net revenues represent estimated future gross revenues
from the production and sale of proved reserves, net of estimated production
costs (including production taxes and ad valorem taxes and operating costs) and
development costs. Estimated future net revenues were calculated on the basis of
prices and costs estimated to be in effect at December 31, 1994 without
escalation, except where changes in prices were fixed and readily determinable
under existing contracts.
PRODUCING WELL DATA
The following table summarizes by state the Company's productive wells
at December 31, 1994:
<TABLE>
<CAPTION>
DECEMBER 31, 1994
--------------------------------------------------------------
OIL WELLS GAS WELLS TOTAL
-------------- -------------- --------------
State GROSS NET GROSS NET GROSS NET
- ------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Ohio 1,390 1,188 1,212 976 2,602 2,164
West Virginia 47 45 730 512 777 557
Pennsylvania 144 136 176 167 320 303
New York 1 1 889 874 890 875
----- ----- ----- ----- ----- -----
1,582 1,370 3,007 2,529 4,589 3,899
===== ===== ===== ===== ===== =====
</TABLE>
ACREAGE DATA
The following table summarizes by state the Company's gross and net
developed and undeveloped leasehold acreage at December 31, 1994:
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------------------------------------------------------
DEVELOPED ACREAGE UNDEVELOPED ACREAGE TOTAL ACREAGE
----------------- ------------------- ------------------
State GROSS NET GROSS NET GROSS NET
- ------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Ohio 173,819 173,209 119,762 119,762 293,581 292,971
West Virginia 45,322 43,956 1,360 1,118 46,682 45,074
Pennsylvania 4,726 3,923 85,057 79,754 89,783 83,677
New York 93,689 92,104 20,328 20,157 114,017 112,261
------- ------- ------- ------- ------- -------
317,556 313,192 226,507 220,791 544,063 533,983
======= ======= ======= ======= ======= =======
</TABLE>
Item 3. LEGAL PROCEEDINGS
On February 17, 1994, the Estate of Judith C. Bookman filed a complaint
in the Court of Common Pleas of Portage County, Ohio against Harold D. Miller,
Inc. and the Company seeking the recovery of $5,110,000 in compensatory damages
and $2,000,000 in punitive damages for the death of Mrs. Bookman in an
automobile accident involving a tractor-trailer owned and operated by
co-defendant Harold D. Miller, Inc. The co-defendant is an independent
contractor who was transporting oilfield supplies to one of the Company's well
sites at the time of the accident. The Company intends to
17
<PAGE> 18
vigorously defend itself, and to seek third party indemnification, against these
claims. Any liability of the Company with respect to this action would be
covered by insurance except for any punitive damages awarded.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Executive officers of the Company as of February 28, 1995 were as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------- --- ------------------------------------
<S> <C> <C>
Henry S. Belden, IV 55 Chairman of the Board and Chief Executive Officer
Max L. Mardick 60 President and Chief Operating Officer and Director
Ronald E. Huff 40 Senior Vice President and Chief Financial Officer and
Director
Joseph M. Vitale 53 Senior Vice President Legal, General Counsel, Secretary
and Director
Ronald L. Clements 52 Senior Vice President Exploration and Production
Leo A. Schrider 56 Senior Vice President Technical Development
Dennis D. Belden 49 Vice President Supply and Service
L. Charles Duplain 51 Vice President Gas Marketing
Charles P. Faber 53 Vice President Corporate Development
Donald A. Rutishauser 38 Vice President and Treasurer
Dean A. Swift 42 Vice President, Assistant General Counsel and Assistant
Secretary
</TABLE>
All executive officers of the Company serve at the pleasure of its
Board of Directors. None of the executive officers of the Company is related to
any other executive officer or director, except that Henry S. Belden, IV and
Dennis D. Belden are brothers. The business experience of each executive officer
is summarized below.
18
<PAGE> 19
HENRY S. BELDEN, IV has been Chairman and Chief Executive Officer of
the Company since 1982. Mr. Belden has been involved in oil and gas production
since 1955 and associated with Belden & Blake since 1967. Prior to joining
Belden & Blake, he was employed by Ashland Oil & Refining Company and
Halliburton Services, Incorporated.
Mr. Belden attended Florida State University and the University of
Akron and is a member of the Society of Petroleum Engineers, the Mid-Continent
Oil & Gas Association and the Board of Trustees of the Ohio Oil and Gas
Association. He is also a member of the Regional Advisory Board of the
Independent Petroleum Association of America and a director and a member of the
Executive Committee of the Pennsylvania Grade Crude Oil Association. He is a
member of the Interstate Oil Compact Commission. Other professional memberships
include the World Business Council and the Association of Ohio Commodores.
MAX L. MARDICK has been President and Chief Operating Officer of the
Company since 1990, a director since 1992 and a director of predecessor
companies from 1988 to 1992. He previously served as Executive Vice President
and Chief Operating Officer from 1988 to 1990. Mr. Mardick is a Petroleum
Engineer with more than 35 years of experience in domestic and international
production, engineering, drilling operations and property evaluation. Prior to
joining Belden & Blake, he was employed for more than 30 years by Shell Oil
Company in various engineering, supervisory and senior management positions,
including: Manager, Property Acquisitions and Business Development (1986-1988);
Production Manager for Shell's Onshore and Eastern Divisions (1981-1986);
Production Manager of Shell's Rocky Mountain Division (1980-1981); Operations
Manager (1977-1980); and Engineering Manager (1975-1977).
Mr. Mardick holds a BS degree in Petroleum Engineering from the
University of Kansas. He is a member of the Society of Petroleum Engineers and
the Ohio Oil and Gas Association. He has served as Vice Chairman of the Alabama
- - Mississippi section of the Mid-Continent Oil and Gas Association.
RONALD E. HUFF has been Senior Vice President and Chief Financial
Officer of the Company since 1989, having previously served as its Senior
Controller from 1986 to 1989. Mr. Huff has been a director of Belden & Blake
since 1991. He is a Certified Public Accountant with over 15 years of experience
in oil and gas production accounting. From 1983 to 1986, Mr. Huff served as Vice
President and Chief Accounting Officer of Towner Petroleum Company. From 1980 to
1983 he worked for Sonat Exploration Company as Manager of Financial Accounting;
and from 1977 to 1980 he served as Corporate Accounting Supervisor for Transco
Companies, Incorporated. Mr. Huff received a BS degree in Accounting from the
University of Wyoming. He is a member of the Ohio Petroleum Accountants Society.
JOSEPH M. VITALE has been Senior Vice President Legal of the Company
since 1989 and has served as its General Counsel since 1974. He has been a
director of the Company since 1991. Prior to joining Belden & Blake, Mr. Vitale
served for four years in the Army Judge Advocate General's Corps. He holds a BS
degree from John Carroll University and a JD degree from Case Western Reserve
Law School. He is a member of the Ohio Oil and Gas Association, the Stark
County, Ohio State and American Bar Associations, and the Interstate Oil Compact
Commission. Mr. Vitale recently served as the Chairman of the Natural Resources
Law Committee of the Ohio State Bar Association.
19
<PAGE> 20
RONALD L. CLEMENTS has been Senior Vice President of Exploration and
Production of the Company since 1993 and manages the Company's Exploration and
Production Division. He joined Belden & Blake in 1990 and served as Vice
President of Ohio Operations until appointment to his current position in 1993.
He has more than 25 years of petroleum engineering and production experience.
Prior to joining Belden & Blake Corporation he served as Vice President and
District Manager of TXO Production Corporation in Corpus Christi, Texas. From
1967 to 1982, Mr. Clements held various operational management positions with
Shell Oil Company in Texas and Louisiana.
Mr. Clements received a BS degree in Electrical Engineering from the
University of North Dakota and a MS degree in Petroleum Engineering from the
University of Tulsa. He is a member of the Society of Petroleum Engineers and
the Ohio Oil and Gas Association.
LEO A. SCHRIDER has been Senior Vice President of Technical Development
since 1993. He previously served as Senior Vice President of Exploration,
Drilling and Engineering for the Company since 1986. Mr. Schrider is a Petroleum
Engineer with 34 years of experience in oil and gas production, principally in
the Appalachian Basin. Prior to joining Belden & Blake in 1981, he served as
Assistant and Deputy Director of Morgantown Energy Technology Center from 1976
to 1980. From 1973 to 1976, Mr. Schrider served as Project Manager of the
Laramie Energy Research Center. He has also held various research positions with
the U.S. Department of Energy in Wyoming and West Virginia.
Mr. Schrider received his BS degree from the University of Pittsburgh
in 1961 and did graduate work at West Virginia University. He has published more
than 35 technical papers on oil and gas production. He was an Adjunct Professor
at West Virginia University and currently serves as Co-Chairman of the
University of Pittsburgh Alumni Council. He also served as a member of the
International Board of Directors of the Society of Petroleum Engineers. Mr.
Schrider is also a member of the Ohio Oil and Gas Association and the
Independent Petroleum Association of America.
DENNIS D. BELDEN has served as Vice President of Supply and Service for
the Company since 1989 and has managed this division since 1992. He joined
Belden & Blake in 1980 and served as the Company's land manager from 1980 to
1989. From 1976 to 1980 he was employed by Wilmot Mining Company as Special
Projects Manager; from 1974 to 1976 he was Treasurer and General Manager of
Cabbages & Kings Restaurant of Ohio; and from 1972 to 1974 he was employed by T
& M Fuel as General Supervisor. Mr. Belden attended Kent State University. He is
a member of the Ohio Oil and Gas Association.
L. CHARLES DUPLAIN has served as Vice President of Gas Marketing for
Belden & Blake Corporation since 1989 and manages the Company's Gas Marketing
Division. He has served in various supervisory and managerial positions with the
company since 1974. From 1963 to 1974 he was employed by G. G. Dunlap Sons as
Crew Chief of the surveying and engineering group. From 1962 to 1963 Mr. Duplain
was employed as a surveyor by Stark County, Ohio. He is a member of the Society
of Professional Engineers and Surveyors and the Ohio Oil and Gas Association.
CHARLES P. FABER has been Vice President of Corporate Development for
the Company since 1993. He previously served as Senior Vice President of Capital
Markets from 1988 to 1993. Prior to joining Belden & Blake, Mr. Faber was
employed as Senior Vice President of Marketing for Heritage Asset Management
from 1986 to 1988. From 1983 to 1986 he served as President and Chief Executive
Officer of Samson Properties, Incorporated. Mr. Faber holds a BA degree in
Marketing and an MBA in Finance from the University of Wisconsin.
20
<PAGE> 21
DONALD A. RUTISHAUSER has been Vice President and Treasurer of Belden &
Blake Corporation since 1989, having previously served as Senior Financial
Analyst from 1987 to 1989. Prior to joining Belden & Blake, he was employed by
Grace Energy Corporation as Financial Project Manager. Mr. Rutishauser received
a BA degree in Economics from Dartmouth College and an MBA in Accounting and
Finance from the University of Michigan.
DEAN A. SWIFT has served as Vice President, Assistant General Counsel
and Assistant Secretary of the Company since 1989. He served as Assistant
General Counsel of the Company from 1981 to 1989. From 1978 to 1981 he was
associated with the law firm of Hahn, Loeser and Parks in Cleveland, Ohio. Mr.
Swift received a BA degree from the University of the South and a JD degree from
the University of Virginia. He is a member of the Stark County, Ohio State and
American Bar Associations.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock has been traded on The Nasdaq Stock Market
under the symbol "BELD" since March 31, 1992.
The following table sets forth the high and low sales prices and the
average daily volume for the Common Stock of the Company for the periods
indicated as reported by The Nasdaq Stock Market.
<TABLE>
<CAPTION>
Sale Price Average
--------------------
1993 High Low Daily Volume
- -------------- ------ ------- ------------
<S> <C> <C> <C>
First Quarter $11.75 $ 9.75 7,801
Second Quarter 15.00 11.00 42,784
Third Quarter 14.75 10.00 42,174
Fourth Quarter 14.75 9.75 30,691
</TABLE>
<TABLE>
<CAPTION>
Average
1994 High Low Daily Volume
- -------------- -------------------- ------------
<S> <C> <C> <C>
First Quarter $13.25 $ 9.75 22,567
Second Quarter 13.00 12.00 14,376
Third Quarter 14.75 11.50 18,909
Fourth Quarter 15.00 13.25 26,388
</TABLE>
<TABLE>
<CAPTION>
Average
1995 High Low Daily Volume
- ---------------------- ------ ------ ------------
<S> <C> <C> <C>
First Quarter (through
March 16, 1995) $14.25 $11.50 18,585
</TABLE>
21
<PAGE> 22
The approximate number of record holders of the Company's equity
securities at February 28, 1995 was as follows:
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Common Stock............................... 2,050
Class II Serial Preferred Stock
$7.50 Series A.................... 1
</TABLE>
No dividends have been paid on the Company's Common Stock and none are
expected to be paid in the foreseeable future. The Class II Serial Preferred
Stock $7.50 Series A is entitled to cumulative quarterly dividends at the annual
rate of $7.50 per share.
Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION> BELDEN & BLAKE CORPORATION (1)
As of or for the Year Ended December 31,
---------------------------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Operations
Revenues $68,105 $49,871 $ 52,550 $ 73,098 $83,104
Depreciation, depletion
and amortization 1,894 1,748 4,853 9,703 12,021
Net income (loss) 1,588 (709) 1,139 3,220 3,843
Preferred dividends
paid/cash withdrawals 1,355 1,541 -- 180 180
Balance sheet data
Working capital (deficit) (7,074) (4,563) 1,465 28,850 13,611
Oil and gas properties and
gathering systems, net 10,308 8,713 82,751 86,192 106,710
Total assets 22,724 20,399 102,253 135,174 148,173
Long-term liabilities,
less current portion 6,978 8,551 59,311 43,516 47,858
Preferred stock -- -- 2,400 2,400 2,400
Total owners' equity
(deficit) 152 (787) 29,023 76,857 81,142
</TABLE>
(1) Operating data for periods prior to March 31, 1992 and balance sheet
data for years prior to 1992 are for the Belden Interests, the
acquisition of which was accounted for in a manner similar to a pooling
of interests.
22
<PAGE> 23
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto and the Selected
Financial Information included elsewhere in this report.
GENERAL
On March 31, 1992, the Company succeeded to the Belden Interests. The
transaction was accounted for on the basis of historical cost in a manner
similar to a pooling of interests. As a result, the consolidated financial
statements of the Company reflect the combined historical results of operations
of only the Belden Interests prior to March 31, 1992.
Also on March 31, 1992, the Company acquired the assets and assumed the
liabilities of the Partnership and BBI in exchange for shares of Common Stock
pursuant to the Consolidation. The Consolidation was accounted for as a
purchase, and the results of operations of the Partnership and BBI have been
included from that date.
Prior to March 31, 1992, the Company was engaged principally in
managing the assets and business activities of the Partnership, BBI and
non-affiliated entities and in gas gathering and marketing. Accordingly, a
significant portion of the Company's income was derived from transactions with
the Partnership and BBI, including well operating fees, sales of oilfield
supplies and services at fixed mark-ups over cost and fees for accounting and
related services. Since March 31, 1992, the Company's principal business has
been the acquisition, development and production of, and exploration for, oil
and gas reserves, principally in Ohio, West Virginia, Pennsylvania and New York,
and the gathering and marketing of natural gas. Consequently, the historical
statements of operations prior to the Consolidation do not reflect the Company's
current or planned business activities.
The Company utilizes the "successful efforts" method of accounting for
its oil and gas properties. Under this method, property acquisition and
development costs and productive exploration costs are capitalized while
non-productive exploration costs, which include geological and geophysical
costs, dry holes, expired leases and delay rentals, are expensed as incurred.
Capitalized costs related to proved properties are depleted using the
unit-of-production method. No gains or losses are recognized upon the
disposition of oil and gas properties except in extraordinary transactions.
Sales proceeds are credited to the carrying value of the properties.
Maintenance and repairs are expensed, and expenditures which enhance the value
of properties are capitalized.
The Company's gas gathering and marketing operations consist of
purchasing gas at the wellhead and from interstate pipelines and selling gas to
industrial customers and local gas distribution companies. The cost of gas
purchased from the Company is the wellhead price stipulated by the well
operating agreements and is included in "Cost of gas and gathering expense."
The Company provides oilfield sales and services to its own operations
and to third parties. Oilfield sales and service provided to the Company's own
operations are provided at cost and all intercompany revenues and expenses are
eliminated in consolidation. Prior to the Consolidation, revenues from oilfield
sales and service provided to the Partnership and BBI were accounted for as
third-party revenues.
23
<PAGE> 24
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
OIL AND GAS SALES. Oil and gas sales increased $5.9 million (22%) in
1994 compared to 1993 due primarily to an increase in oil and gas volumes sold
and a higher average price paid for the Company's natural gas which more than
offset a lower average price paid for the Company's oil.
Oil volumes increased 43,000 Bbls (10%) from 453,000 Bbls to 496,000
Bbls in 1994 resulting in an increase in oil sales of approximately $740,000.
The increase in oil volumes sold in 1994 was primarily due to the success of the
1994 drilling program and, to a lesser extent, 1994 acquisitions. Gas volumes
increased 2.2 Bcf (30%) from 7.4 Bcf in 1993 to 9.6 Bcf in 1994 resulting in an
increase in gas sales of approximately $5.6 million. The gas volume increase was
primarily due to the Company's 1994 acquisitions.
The average price paid for the Company's oil decreased from $17.15 per
barrel in 1993 to $15.98 per barrel in 1994 which reduced oil sales by
approximately $580,000. The average price paid for the Company's natural gas
increased $.03 per Mcf to $2.58 per Mcf in 1994 compared to 1993 resulting in
increased gas sales of approximately $190,000.
GAS MARKETING AND GATHERING REVENUE. Gas marketing and gathering
revenue decreased 5% in 1994 compared with 1993 due to a decrease in volumes and
selling price of gas purchased from third parties and resold.
OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service revenue
increased $5.8 million (52%) from $11.1 million in 1993 to $16.9 million in 1994
due primarily to sales by the Company's wholly-owned subsidiaries, Magnolia
Compression Services, Inc. and Engine Power Systems, Inc., and the acquisition
of the assets of three oilfield service companies in 1994. Magnolia Compression
Services, Inc. was merged into Engine Power Systems, Inc. in December 1994.
INTEREST AND OTHER REVENUE. Interest and other revenue decreased
$88,169 (14%) from $647,011 in 1993 to $558,842 in 1994 primarily because a gain
was recorded in 1993 on the sale of certain oil and gas properties and related
equipment in Pennsylvania and New York.
PRODUCTION EXPENSE. Production expense increased from $7.2 million in
1993 to $9.3 million in 1994. The increase was primarily due to the increased
production discussed above. The average production cost per equivalent Mcf of
natural gas increased from $.71 in 1993 to $.74 in 1994. This increase was
primarily due to the recognition of initial workover expense on recently
acquired wells designed to maximize future production volume.
COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense
decreased 5% in 1994 compared with 1993 due to a decrease in volumes of gas
purchased from third parties and resold.
OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service expense
increased $5.7 million (54%) from $10.6 million in 1993 to $16.3 million in 1994
primarily as a result of the increased cost of goods sold associated with sales
made by the two recently formed subsidiaries and the 1994 acquisitions described
above.
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EXPLORATION EXPENSE. Exploration expense increased $269,484 (11%) from
$2.5 million in 1993 to $2.8 million in 1994 primarily due to a lower level of
leasing activity resulting in less cost being capitalized in 1994.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased less than 1% in 1994 compared with 1993, notwithstanding the continued
growth of the Company.
INTEREST EXPENSE. Interest expense increased $388,223 (12%) from $3.2
million in 1993 to $3.6 million in 1994 primarily due to higher average debt
balances in 1994 incurred to finance acquisitions.
DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and
amortization increased by $2.3 million (24%) in 1994 compared to 1993. This
increase was primarily due to additional depletion expense associated with the
increased production volumes described above.
NET INCOME BEFORE INCOME TAXES. Net income before income taxes
increased $806,400 (16%) from $5.2 million in 1993 to $6.0 million in 1994. The
oil and gas operations segment increased operating income $1.5 million (20%)
from $7.6 million in 1993 to $9.1 million in 1994. The increase was attributable
to the items discussed above. The oilfield sales and service segment operating
income decreased $214,345 from operating income of $125,658 in 1993 to an
operating loss of $88,687 in 1994. The decrease in the oilfield sales and
service segment was attributable to operating losses from Magnolia Compression
Services, Inc., which was formed in 1993, and Engine Power Systems, Inc., which
was acquired in 1994. The operating losses of these subsidiaries totaled $41,748
in 1993 and $438,680 in 1994. The losses were the result of additional expenses
incurred in the initial development of these businesses. The operating income of
oilfield sales and services, exclusive of these activities, increased $182,587
(109%) from $167,406 in 1993 to $349,993 in 1994.
NET INCOME. Net income for 1994 was $3.8 million compared to net income
of $3.2 million in 1993. The increase in net income was primarily a result of
the Company's 1994 acquisitions as discussed in the items above. Provision for
income taxes increased from $2.0 million in 1993 to $2.2 million in 1994 due to
the increase in income before income taxes partially offset by a decrease in the
effective tax rate. Net income per common share decreased from $.54 per share in
1993 to $.52 per share in 1994. The decrease was primarily a result of the
factors discussed above combined with the increase in the average number of
common shares outstanding from 5,674,638 in 1993 to 7,080,227 in 1994. The
average number of shares outstanding increased primarily as a result of the
Company's sale of 3.45 million common shares in May 1993.
RESULTS OF OPERATIONS - HISTORICAL
1993 COMPARED TO 1992
THE HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY PRIOR
TO MARCH 31, 1992 REFLECT THE COMBINED HISTORICAL RESULTS OF OPERATIONS OF THE
BELDEN INTERESTS ONLY (SEE NOTE 1 TO THE CONSOLIDATED FINANCIAL STATEMENTS).
OIL AND GAS SALES. Oil and gas sales increased $11.6 million (77%) in
1993 compared to 1992 due primarily to an increase in oil and gas volumes sold
and a higher average price paid for the Company's natural gas which more than
offset a lower average price paid for the Company's oil.
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Oil volumes increased 102,000 Bbls (29%) from 351,000 Bbls to 453,000
Bbls and gas volumes increased 3.7 Bcf (100%) from 3.7 Bcf in 1992 to 7.4 Bcf in
1993. Increased oil and gas volumes were responsible for approximately $10.0
million of the Company's increased oil and gas sales. These volume increases
were due primarily to the Consolidation which added approximately 2,000 net
producing wells in March 1992 and the acquisition of the Company's West Virginia
properties which added 501 net producing wells in December 1992.
The average price paid for the Company's oil decreased from $19.27 per
barrel in 1992 to $17.15 per barrel in 1993 which reduced oil sales by $1.0
million. The average price paid for the Company's natural gas increased $.35 per
Mcf to $2.55 per Mcf in 1993 compared to 1992 resulting in increased gas sales
in 1993 of approximately $2.6 million.
GAS MARKETING AND GATHERING REVENUE. Gas marketing and gathering
revenue increased $8.2 million (31%) from $26.5 million in 1992 to $34.7 million
in 1993. This increase was primarily attributable to the acquisition of
additional interests in the Company's Ohio gas gathering system as a result of
the Consolidation in March 1992, the acquisition of the Company's West Virginia
gas gathering systems in December 1992 and an increase in the volume of gas
marketed in 1993.
OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service revenue
increased $1.6 million (17%) from $9.5 million in 1992 to $11.1 million in 1993
due primarily to an increase in sales by the Company's wholly-owned subsidiary,
Target Oilfield Pipe & Supply Company.
INTEREST AND OTHER REVENUE. Interest and other revenue decreased
$867,673 (57%) from $1.5 million in 1992 to $647,011 in 1993 primarily as a
result of the elimination of administrative charges to the Partnership and BBI
as a result of the Consolidation.
PRODUCTION EXPENSE. Production expense increased from $5.4 million in
1992 to $7.2 million in 1993. This increase was largely due to increased
production resulting from the Consolidation and other acquisitions. Production
expense per Mcfe decreased from $.92 per Mcfe in 1992 to $.71 per Mcfe in 1993.
This decrease was due to the Belden Interests bearing 100% of the field
production costs in the first quarter of 1992, but receiving only their net
revenue share of production volumes. The high level of production expense borne
by the Belden Interests in 1992 was offset by well operating fees charged to the
Partnership, BBI and non-affiliated parties.
COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense
increased from $24.9 million in 1992 to $30.7 million in 1993. This increase was
due to the acquisition of additional interests in the Company's Ohio gas
gathering systems as a result of the Consolidation, the acquisition of the
Company's gas gathering systems in West Virginia and an increase in the volume
of gas purchased for resale in 1993.
OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service expense
increased $3.1 million (41%) from $7.5 million in 1992 to $10.6 million in 1993
primarily as a result of the increased cost of goods sold associated with the
increase in oilfield supply and equipment sales.
EXPLORATION EXPENSE. Exploration expense increased $156,628 (7%) from
1992 to 1993 due to $157,000 in dry hole expense in 1993.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administration expense
increased from $3.7 million in 1992 to $3.9 million in 1993. The increase was
due primarily to loan fees and taxes
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incurred in 1993 and the elimination of certain fee income that was used to
offset general and administrative expenses prior to the Consolidation.
INTEREST EXPENSE. Interest expense increased from $2.2 million in 1992
to $3.2 million in 1993. This increase was primarily due to the assumption of
the debt of the Partnership and BBI as a result of the Consolidation and the
assumption of debt in acquiring the Company's West Virginia properties. These
increases were partially offset by the repayment of a substantial portion of
these debts in May and June of 1993.
DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and
amortization increased by $4.9 million (100%) in 1993 compared to 1992. This
increase was primarily due to additional depletion expense associated with the
higher production volumes resulting from the Consolidation and the Company's
acquisitions in 1992.
NET INCOME BEFORE INCOME TAXES. Net income before income taxes
increased $3.6 million (228%) from $1.6 million in 1992 to $5.2 million in 1993.
The oil and gas operations segment increased operating income $7.0 million from
$622,840 in 1992 to $7.6 million in 1993. The increase was attributable to the
items discussed above. The operating income of the oilfield sales and service
segment decreased $1.5 million from operating income of $1.6 million in 1992 to
$125,658 in 1993. In addition to the items discussed above, the decrease in the
operating income of the oilfield sales and service segment was attributable to
an operating loss of $41,748 in 1993 from Magnolia Compression Services, Inc.
which was formed in 1993. The operating income of oilfield sales and services,
exclusive of these activities, decreased $1.5 million from $1.6 million in 1992
to $167,406 in 1993.
NET INCOME. Net income for 1993 was $3.2 million compared to net income
of $1.1 million in 1992. This increase in net income was primarily a result of
the Consolidation and the addition of the Company's West Virginia properties as
discussed in the items above. Provision for income taxes increased from $446,121
in 1992 to $2.0 million in 1993 due to the increase in income before taxes as
well as an increase in the effective tax rate.
RESULTS OF OPERATIONS - PRO FORMA CONSOLIDATED
THE FOLLOWING DISCUSSION COMPARES THE COMPANY'S RESULTS OF OPERATIONS
FOR 1993 TO 1992 AS IF THE CONSOLIDATION HAD OCCURRED ON JANUARY 1, 1992. THE
COMPANY BELIEVES THAT THIS PRO FORMA COMPARISON IS MORE RELEVANT TO THE
COMPANY'S CURRENT OPERATIONS THAN THE HISTORICAL COMPARISON PRESENTED ABOVE (SEE
NOTES 1 AND 3 TO THE CONSOLIDATED FINANCIAL STATEMENTS).
1993 COMPARED TO 1992 PRO FORMA
OIL AND GAS SALES. Oil and gas sales increased $7.3 million (38%) from
$19.3 million in 1992 to $26.6 million in 1993 due primarily to an increase in
volumes and a higher average price paid for the Company's natural gas which more
than offset a lower price paid for the Company's oil.
Gas volumes increased 2.5 Bcf (51%) to 7.4 Bcf. Oil volumes increased
from 452,000 Bbl in 1992 to 453,000 Bbl in 1993. These volume changes were
responsible for approximately $5.5 million of the Company's increased oil and
gas sales. These volume increases were primarily attributable to the Company's
West Virginia properties acquired in December 1992.
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Gas prices increased from $2.19 per Mcf in 1992 to $2.55 per Mcf in
1993 which increased gas sales by approximately $2.7 million in 1993. Oil prices
decreased from $18.81 per Bbl in 1992 to $17.15 per Bbl in 1993 which reduced
oil sales by approximately $800,000 in 1993.
GAS MARKETING AND GATHERING REVENUE. Gas marketing and gathering
revenue increased from $28.5 million in 1992 to $34.7 million in 1993. This
increase was attributable to the West Virginia gathering systems acquired in
December 1992 which added approximately $5.6 million in sales and to an increase
in volumes of gas purchased from third parties and resold.
OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service revenue
increased $3.9 million (53%) due primarily to an increase in oilfield supply and
equipment sales by Target Oilfield Pipe & Supply Company.
INTEREST AND OTHER REVENUE. Interest and other revenue decreased by
$112,000 from 1992 to 1993.
PRODUCTION EXPENSE. Production expense increased from $5.3 million in
1992 to $7.2 million in 1993. The West Virginia properties added approximately
$1.0 million of production expense. A reduction of fee income of approximately
$450,000 which offset production expense in 1992, severance pay associated with
the sale of certain Pennsylvania properties and the accrual of additional ad
valorem and production taxes in 1993 account for the balance of the increase.
COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense
increased from $26.6 million to $30.7 million when comparing the 1992 and 1993
periods. This increase was attributable to expenses of gas gathering and
marketing associated with the West Virginia properties which added approximately
$3.3 million of cost and to the cost associated with increased volumes of gas
purchased for resale to third party customers.
OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service expense
increased $3.4 million primarily as a result of the increased cost of goods sold
associated with the increase in oilfield supply and equipment sales. Oilfield
sales and service operating margins increased from 0.9% in 1992 to 4.6% in 1993
primarily due to the fixed costs of the division being allocated over higher
sales volume.
EXPLORATION EXPENSE. Exploration expense increased $167,000 (7%) from
1992 to 1993 due to $157,000 in dry hole expense in 1993.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased from $3.4 million in 1992 to $3.9 million in 1993. The increase was
due primarily to loan fees, taxes and general expense increases in 1993.
INTEREST EXPENSE. Interest expense increased from $2.6 million in 1992
to $3.2 million in 1993. This increase was primarily due to the increase in debt
associated with the acquisition of the West Virginia properties, which was
partially offset by the repayment of a substantial portion of this debt late in
the second quarter of 1993.
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE. Depreciation,
depletion and amortization increased by $3.7 million (63%) in 1993 when compared
to 1992. This increase was primarily due to additional depletion expense of $2.6
million associated with the production from the West Virginia properties.
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NET INCOME. Net income for 1993 was $3.2 million compared to net income
of $1.8 million in 1992. This increase in net income was primarily a result of
the addition of the Company's West Virginia properties as discussed in the items
above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital is closely related to and dependent on
the current prices paid for its oil and gas.
The Company's current ratio at December 31, 1994 was 2.09 to 1.00.
During 1994, working capital decreased $15.2 million from $28.8 million to $13.6
million. The decrease was primarily the result of a decrease in cash due to the
purchase of oil and gas properties and the assets of three oilfield service
companies for approximately $24.9 million. The Company's operating activities
provided cash flow of $15.7 million during 1994.
On May 5, 1992, the Company entered into a three-year revolving credit
agreement with a group of banks. On November 15, 1993, this facility was amended
to accommodate the issuance of the Company's senior notes. The facility amount
was increased from $30 million to $100 million and is now unsecured. Outstanding
balances under the agreement bear interest at the Company's choice of either:
(1) the one, three, or six-month LIBOR plus 2% (9.00% for the six-month LIBOR
interest rate option at December 31, 1994) or (2) the bank's prime rate plus
1/4% (8.75% at December 31, 1994). The agreement restricts the sales of assets
to no more than 15% of shareholders' equity in any one year, and requires the
Company to maintain certain levels of net worth, working capital and debt
service coverage.
Borrowings under the revolving credit agreement are limited by a
"borrowing base" which is based on the Company's proved developed reserves and
is determined semi-annually by the bank group. The borrowing base at December
31, 1994 was $30 million. The banks may, at their discretion, make more frequent
redeterminations of the borrowing base. If at any time the loan balance exceeds
the borrowing base, the Company, within 30 business days of notice, is obligated
to (a) prepay such excess, (b) provide additional collateral or (c) effect any
combination of the alternatives described in (a) and (b). The Company is
required to pay a commitment fee in the amount of .5% of the average amount of
the unborrowed commitment.
On July 22, 1994, the banks extended the maturity date on the facility
to March 31, 1998. At December 31, 1994, the Company had $4 million outstanding
under this facility.
On January 5, 1993, the Company entered into an interest rate swap
agreement with Chase Manhattan Bank covering $22 million in floating-rate debt
on an acquisition loan. The Company swapped floating three-month LIBOR + 2% for
a fixed rate of 7.95% for three years. The notional amount covered by this swap
agreement declined to $18 million in 1994 and was scheduled to decline to $15
million in 1995. The Company paid off the acquisition loan in 1993. On August
31, 1994, the Company took advantage of the increase in short-term interest
rates to close out the swap agreement on favorable terms. The Company had no
derivative financial instruments at December 31, 1994.
During 1993, the Company placed $35 million of 7% fixed-rate senior
notes with five insurance companies in a private placement. These notes, which
are interest-only for four years, mature on September 30, 2005. Equal annual
principal payments of $3,888,888 will be required on each September 30
commencing in 1997.
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The note agreement limits the Company's senior debt to 50% of the
Company's discounted present value (at 10%) of its oil and gas reserves plus the
net book value of its gas gathering systems. Other terms and covenants are
substantially the same as those contained in the $100 million revolving credit
facility.
The Company issued 3,450,000 shares of common stock in a public
offering at a price of $13.25 per share pursuant to an underwriting agreement
dated May 11, 1993. Net proceeds of approximately $42.2 million were used to
repay the outstanding balance under the Company's revolving credit agreement,
under which $25 million was outstanding at April 30, 1993, and to repay certain
other indebtedness as described above.
The Company currently expects to spend approximately $15.4 million
during 1995 on its drilling activities and approximately $3.6 million for other
capital expenditures. The Company's acquisition program is expected to be
financed with its remaining available cash flow and with its available bank
credit lines. The Company believes that its existing sources of working capital
are sufficient to satisfy all currently anticipated working capital
requirements.
The level of the Company's cash flow in the future will depend on a
number of factors including the demand and price levels for oil and gas, its
ability to acquire additional producing properties and the scope and success of
its drilling activities. The Company intends to finance such activities
principally through its available cash flow, through additional borrowings and,
to the extent necessary, the issuance of additional common or preferred stock.
INFLATION AND CHANGES IN PRICES
During 1992, the price received for the Company's crude oil fluctuated
from a low of $16.00 per barrel to a high of $20.75 per barrel with an average
price of $19.27 per barrel. During 1993, the price paid for the Company's crude
oil fell from a high of $19.00 per barrel at the beginning of the year to a low
of $13.50 per barrel at year-end with an average price of $17.15 per barrel.
During 1994, the price paid for the Company's crude oil increased from $13.50
per barrel to a high of $18.00 per barrel, then decreased to $15.50 per barrel
at year-end with an average price of $15.98 per barrel. The average price of the
Company's natural gas increased from $2.20 per Mcf in 1992 to $2.55 per Mcf in
1993 to $2.58 per Mcf in 1994.
The price of oil and gas has a significant impact on the Company's
results of operations. Oil and gas prices fluctuate based on market conditions
and, accordingly, cannot be predicted. As a result of increased competition
among drilling contractors and suppliers and reduced levels of drilling, costs
to drill, complete, and service wells have remained relatively constant in
recent years.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Index to Consolidated Financial Statements and Schedules on page
F-1 sets forth the financial statements and supplementary schedules included in
this Annual Report on Form 10-K and their location herein. Schedules have been
omitted as not required or not applicable because the information required to be
presented is included in the financial statements and related notes.
The financial statements have been prepared by management in conformity
with generally accepted accounting principles. Management is responsible for the
fairness and reliability of the
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financial statements and other financial data included in this report. In the
preparation of the financial statements, it is necessary to make informed
estimates and judgments based on currently available information on the effects
of certain events and transactions.
The Company maintains accounting and other controls which management
believes provide reasonable assurance that financial records are reliable,
assets are safeguarded, and that transactions are properly recorded.
Nevertheless, limitations exist in any system of internal control based upon the
recognition that the cost of the system should not exceed benefits derived.
The Company's independent auditors, Ernst & Young LLP, are engaged to
audit the financial statements and to express an opinion thereon. Their audit is
conducted in accordance with generally accepted auditing standards to enable
them to report whether the financial statements present fairly, in all material
respects, the financial position, results of operations and cash flows in
accordance with generally accepted accounting principles.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to the directors of the Company set forth
under the caption "Election of Directors" in the Company's proxy statement to be
filed for the Annual Meeting of Shareholders to be held on or about May 25, 1995
is incorporated herein by reference. See pages 18 through 21 of this report for
information regarding executive officers.
Item 11. EXECUTIVE COMPENSATION
The information with respect to executive compensation set forth under
the captions "Executive Compensation" and "Information about the Board of
Directors" in the Company's proxy statement to be filed for the Annual Meeting
of Shareholders to be held on or about May 25, 1995 is incorporated herein by
reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information with respect to security ownership of certain
beneficial owners and management set forth under the caption "Ownership of
Voting Securities" in the Company's proxy statement to be filed for the Annual
Meeting of Shareholders to be held on or about May 25, 1995 is incorporated
herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Transactions" in
the Company's proxy statement to be filed for the Annual Meeting of Shareholders
on or about May 25, 1995 is incorporated herein by reference.
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PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as a part of this report:
1. Financial Statements
The financial statements listed in the accompanying Index to
Consolidated Financial Statements and Schedules are filed as part of this Annual
Report on Form 10-K.
2. Financial Statement Schedules
No financial statement schedules are required to be filed as part of
this Annual Report on Form 10-K.
3. Exhibits
No. Description
3.1 Articles of Incorporation of the Company--incorporated by
reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-4 (Registration No. 33-43209)
3.2 Amended Articles of Incorporation of the
Company--incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-4 (Registration
No. 33-43209)
3.2(a) Amendment to Amended Articles of Incorporation of the
Company--incorporated by reference to Exhibit 4 to the
Company's Current Report on Form 8-K dated December 30,
1992
3.3 Amended Code of Regulations of the Company--incorporated
by reference to Exhibit 3.3 to the Company's Registration
Statement on Form S-4 (Registration No. 33-43209)
4.1 Amended and Restated Debenture Agreement between the
Company and Petercam Securities--incorporated by reference
to Exhibit 4.1 to the Company's Registration Statement on
Form S-4 (Registration No. 33-43209)
4.2 Credit Agreement among the Company, The Canton Oil & Gas
Company, Peake Energy, Inc., Peake Operating Company, Bank
One, Texas, National Association and NBD Bank, N.A. dated
November 1993--incorporated by reference to Exhibit 4.2 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1993
4.3 Fourth Amendment and Restatement of Credit Agreement among
the Company, Belden & Blake Acquisition, Inc., Peake
Operating Company, Peake Energy, Inc. and The Chase
Manhattan Bank (National Association) dated as of
December 22, 1992--incorporated by reference to Exhibit
4.3 to the Company's Registration Statement on Form S-1
(Registration No. 33-60228)
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4.4 Warrant Assumption Agreement between Belden & Blake
Corporation and Belden & Blake Energy
Company--incorporated by reference to Exhibit 4.4 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992
4.5 Note Purchase Agreement dated as of November 15, 1993
among the Company, The Canton Oil & Gas Company, Peake
Operating Company and Peake Energy, Inc. and the
purchasers listed on Annex I thereto--incorporated by
reference to Exhibit 4.5 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993
4.6 None of the other instruments defining the rights of
holders of long-term debt of the Company or its
subsidiaries involve long-term debt in an amount which
exceeds ten percent of the total assets of the Company and
its subsidiaries on a consolidated basis. The Company
agrees to furnish a copy of such other instruments to the
Commission upon request.
10.1 Employment Agreement between the Company and Henry S.
Belden IV dated September 16, 1991--incorporated by
reference to Exhibit 10.3 to the Company's Registration
Statement on Form S-4 (Registration No. 33-43209)
10.2 Contract of Employment between Belden & Blake (U.K.), Inc.
and David P. Quint dated March 1, 1984, as
amended--incorporated by reference to Exhibit 10.5 to the
Company's Registration Statement on Form S-4 (Registration
Statement No. 33-43209)
10.3 Form of Severance Agreement between the Company and each
of the officers of the Company (except Henry S. Belden IV)
officers--incorporated by reference to Exhibit 10.6 to the
Company's Registration Statement on Form S-4 (Registration
No. 33-43209)
10.4 Stock Option Plan of the Company--incorporated by
reference to Exhibit 10.7 to the Company's Registration
Statement on Form S-4 (Registration No. 33-43209)
10.5 Restricted Stock Grant Plan of The Canton Oil & Gas
Company (formerly known as Belden & Blake
Corporation)--incorporated by reference to Exhibit 10.8 to
the Company's Registration Statement on Form S-4
(Registration No. 33-43209)
10.6 Belden & Blake Corporation Non-employee Director Stock
Option Plan--incorporated by reference to Exhibit 10.6 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1993
10.7 Plan and Agreement of Consolidation dated as of October
10, 1991, as amended, among Belden & Blake Energy Company,
Henry S. Belden IV, Belden & Blake International Limited
and the Company--incorporated by reference to Exhibit 2.1
to the Company's Registration Statement on Form S-4
(Registration No. 33-43209)
10.8 Stock Purchase Agreement dated as of December 7, 1992
between Presidio Exploration, Inc. and Belden & Blake
Acquisition, Inc. (a wholly-owned subsidiary of the
Company)--incorporated by reference to Exhibit 2 to the
Company's Current Report on Form 8-K dated December 22,
1992
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10.9 Amended and Restated Gas Sales and Purchase Contract
between Peake Energy, Inc. and Kaiser Aluminum & Chemical
Corporation dated as of August 27, 1987--incorporated by
reference to Exhibit 10.11 to the Company's Registration
Statement on Form S-1 (Registration No. 33-60228)
10.10 Agreement of Purchase and Sale between the Company and TGX
Corporation dated December 17, 1993 -- incorporated by
reference to Exhibit 2 to the Company's Current Report on
Form 8-K dated January 14, 1994.
10.11 Stock Purchase Agreement dated January 3, 1995 among Keith
Hardin Gornick, R. David Briney, William F. Rolinski,
Charles Nelson and the Company--incorporated by reference
to Exhibit 2.1 to the Company's Current Report on Form 8-K
dated February 10, 1995
10.11(a) Agreement of Amendment dated January 16, 1995 among Keith
Hardin Gornick, R. David Briney, William F. Rolinski,
Charles Nelson and the Company--incorporated by reference
to Exhibit 2.2 to the Company's Current Report on Form 8-K
dated February 10, 1995
10.11(b) Second Agreement of Amendment dated February 10, 1995
among Keith Hardin Gornick, R. David Briney, William F.
Rolinski, Charles Nelson and the Company--incorporated by
reference to Exhibit 2.3 to the Company's Current Report
on Form 8-K dated February 10, 1995
21.1* Subsidiaries of the Registrant
23.1* Consent of Ernst & Young LLP
27* Financial Data Schedule
*Filed herewith
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the last
quarter of the year covered by this report.
(c) Exhibits required by Item 601 of Regulation S-K
Exhibits required to be filed by the Company pursuant to Item
601 of Regulation S-K are contained in the Exhibits listed under Item 14(a)3.
(d) Financial Statement Schedules required by Regulation S-X
The items listed in the accompanying index to financial
statements are filed as part of this Annual Report on Form 10-K.
34
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BELDEN & BLAKE CORPORATION
March 30, 1995
- -------------- By: Henry S. Belden, IV
Date -------------------------------
Henry S. Belden, IV
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Henry S. Belden, IV Chairman of the Board, March 30, 1995
- -------------------------- Chief Executive Officer ---------------
Henry S. Belden, IV and Director Date
(Principal Executive Officer)
Ronald E. Huff Senior Vice President, March 30, 1995
- -------------------------- Chief Financial Officer ----------------
Ronald E. Huff and Director Date
(Principal Financial and
Accounting Officer)
Max L. Mardick President, Chief Operating March 30, 1995
- -------------------------- Officer and Director ---------------
Max L. Mardick Date
Joseph M. Vitale Senior Vice President Legal, March 30, 1995
- -------------------------- Secretary and Director ---------------
Joseph M. Vitale Date
Director
- --------------------------- ----------------
Paul R. Bishop Date
Theodore V. Boyd Director March 30, 1995
- --------------------------- -----------------
Theodore V. Boyd Date
</TABLE>
35
<PAGE> 36
<TABLE>
<S> <C> <C>
Director
- ---------------------------- ----------------------
Gary R. Petersen Date
Director
- ---------------------------- ----------------------
David P. Quint Date
Director
- ---------------------------- ----------------------
Raymond D. Saunders Date
George M. Smart Director March 30, 1995
- ---------------------------- ----------------------
George M. Smart Date
*By:
------------------------- ---------------------
Attorney-in-Fact Date
</TABLE>
36
<PAGE> 37
BELDEN & BLAKE CORPORATION
INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS AND SCHEDULES
(ITEM 14(A) (1) AND (2))
CONSOLIDATED FINANCIAL STATEMENTS
- ---------------------------------
Report of Independent Auditors ....................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1993 ..........F-3
Consolidated Statements of Operations for the years ended
December 31, 1994, 1993 and 1992 ................................... F-5
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1994, 1993 and 1992 ............................. F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992 ................................... F-7
Notes to Consolidated Financial Statements ........................... F-8
All financial statement schedules have been omitted since the required
information is not present in amounts sufficient to require submission of the
schedule or because the information required is included in the financial
statements.
F-1
<PAGE> 38
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Belden & Blake Corporation
We have audited the accompanying consolidated balance sheets of Belden & Blake
Corporation as of December 31, 1994 and 1993, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Belden & Blake
Corporation at December 31, 1994 and 1993, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Cleveland, Ohio
March 7, 1995
F-2
<PAGE> 39
BELDEN & BLAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
--------------------------
1994 1993
============ ============
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,649,005 $ 22,244,231
Accounts receivable, net 13,068,663 10,586,108
Inventories 6,676,884 3,875,529
Deferred income taxes 1,741,093 1,068,502
Other current assets 956,699 1,499,404
------------ ------------
TOTAL CURRENT ASSETS 26,092,344 39,273,774
PROPERTY AND EQUIPMENT
Oil and gas properties (successful efforts method) 122,279,367 92,057,489
Gas gathering systems 18,120,365 17,741,220
Land, buildings, machinery and equipment 19,564,247 13,239,728
------------ ------------
159,963,979 123,038,437
Less accumulated depreciation, depletion
and amortization 40,788,899 29,229,820
------------ ------------
PROPERTY AND EQUIPMENT, NET 119,175,080 93,808,617
OTHER ASSETS 2,905,371 2,091,537
------------ ------------
$148,172,795 $135,173,928
============ ============
</TABLE>
F-3
<PAGE> 40
BELDEN & BLAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
---------------------------
1994 1993
============ ============
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,593,811 $ 3,531,300
Accrued expenses 8,440,315 6,258,792
Current portion of long-term liabilities 447,257 633,819
------------ ------------
TOTAL CURRENT LIABILITIES 12,481,383 10,423,911
LONG-TERM LIABILITIES
Senior notes 35,000,000 35,000,000
Convertible subordinated debentures 7,350,000 7,350,000
Bank and other long-term debt 4,239,682 192,740
Capitalized lease obligations 645,314 973,505
Other 623,162 --
------------ ------------
TOTAL LONG-TERM LIABILITIES 47,858,158 43,516,245
DEFERRED INCOME TAXES 6,691,408 4,376,610
SHAREHOLDERS' EQUITY
Common stock without par value; $.10 stated value
per share; authorized 12,000,000 shares; issued
and outstanding 7,084,737 and 7,053,081 shares 708,474 705,308
Preferred stock without par value; $100 stated value
per share; authorized 8,000,000 shares;
issued and outstanding 24,000 shares 2,400,000 2,400,000
Paid in capital 70,378,839 69,865,292
Retained earnings 7,879,483 4,216,562
Unearned portion of restricted stock (224,950) (330,000)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 81,141,846 76,857,162
------------ ------------
$148,172,795 $135,173,928
============ ============
</TABLE>
See accompanying notes.
F-4
<PAGE> 41
BELDEN & BLAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (NOTE 1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------
1994 1993 1992
-------------- -------------- ---------------
<S> <C> <C> <C>
REVENUES
Oil and gas sales $ 32,574,114 $ 26,630,871 $ 15,045,865
Gas marketing and gathering 33,085,304 34,709,298 26,493,619
Oilfield sales and service 16,885,669 11,111,188 9,495,556
Interest and other 558,842 647,011 1,514,684
-------------- -------------- ---------------
83,103,929 73,098,368 52,549,724
EXPENSES
Production expense 9,292,349 7,189,822 5,361,578
Cost of gas and gathering expense 29,133,553 30,736,165 24,921,427
Oilfield sales and service 16,296,539 10,598,571 7,529,089
Exploration expense 2,807,278 2,537,794 2,381,166
General and administrative expense 3,965,754 3,939,983 3,717,954
Interest expense 3,587,207 3,198,984 2,199,767
Depreciation, depletion and amortization 12,021,258 9,703,458 4,853,358
-------------- -------------- ---------------
77,103,938 67,904,777 50,964,339
-------------- -------------- ---------------
INCOME BEFORE INCOME TAXES 5,999,991 5,193,591 1,585,385
Provision for income taxes 2,157,070 1,973,565 446,121
-------------- -------------- ---------------
NET INCOME $ 3,842,921 $ 3,220,026 $ 1,139,264
============== ============== ===============
NET INCOME PER COMMON SHARE $ 0.52 $ 0.54 $ 0.48
============== ============== ===============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 7,080,227 5,674,638 2,373,114
============== ============== ===============
</TABLE>
See accompanying notes.
F-5
<PAGE> 42
BELDEN & BLAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (NOTE 1)
<TABLE>
<CAPTION>
Unearned
Common Owner's Preferred Common Paid in Retained Restricted
Shares Equity Stock Stock Capital Earnings Stock Total
========= ========= ========== ======== =========== ========== ========== ===========
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1992 $(787,079) $ (787,079)
Stock issued per
consolidation agreement 2,780,241 824,351 $278,024 $20,887,661 21,990,036
Net income (loss) (37,272) $1,176,536 1,139,264
Stock issued 555,000 55,500 3,857,250 3,912,750
Preferred stock issued
(24,000 shares) $2,400,000 2,400,000
Restricted stock grant 657,800 $(440,000) 217,800
Employee stock bonus 20,000 2,000 148,000 150,000
- ---------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1992 3,355,241 -- 2,400,000 335,524 25,550,711 1,176,536 (440,000) 29,022,771
Stock issued 60,000 6,000 491,150 497,150
Stock issued 168,000 16,800 1,658,702 1,675,502
Stock issued 3,450,000 345,000 41,817,720 42,162,720
Net income 3,220,026 3,220,026
Preferred stock dividend (180,000) (180,000)
Employee stock bonus 22,325 2,232 237,762 239,994
Restricted stock grant 108,999 110,000 218,999
Other (2,485) (248) 248 --
- ---------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1993 7,053,081 -- 2,400,000 705,308 69,865,292 4,216,562 (330,000) 76,857,162
Stock issued 31,656 3,166 384,622 387,788
Net income 3,842,921 3,842,921
Preferred stock dividend (180,000) (180,000)
Restricted stock grant 128,925 105,050 233,975
- ---------------------------------------------------------------------------------------------------------------------------------
December 31, 1994 7,084,737 $ -- $2,400,000 $708,474 $70,378,839 $7,879,483 $(224,950) $81,141,846
=================================================================================================================================
</TABLE>
See accompanying notes.
F-6
<PAGE> 43
BELDEN & BLAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 1)
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,842,921 $ 3,220,026 $ 1,139,264
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 12,021,258 9,703,458 4,853,358
Loss (gain) on disposal of property and equipment 90,865 (117,841) (11,693)
Deferred income taxes 1,569,547 1,551,935 (172,398)
Deferred compensation and stock grants 358,639 458,993 367,800
Change in operating assets and liabilities, net of
effects of purchases of businesses:
Accounts receivable (2,186,365) (4,942,658) 206,818
Inventories (2,327,553) (1,392,832) (195,397)
Other current assets 564,239 (1,007,539) 688,499
Accounts payable and accrued expenses 1,775,371 1,912,173 (212,926)
------------ ------------ ------------
Net cash provided by operating activities 15,708,922 9,385,715 6,663,325
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (17,968,534) (559,919) (4,993,964)
Proceeds from property and equipment disposals 437,845 1,388,357 1,134,551
Additions to property and equipment (19,843,872) (13,465,314) (5,066,329)
Decrease (increase) in other assets 88,428 (971,057) (1,151,469)
------------ ------------ ------------
Net cash used in investing activities (37,286,133) (13,607,933) (10,077,211)
Cash flows from financing activities:
Proceeds from revolving line of credit and long-term debt 6,100,000 5,025,000 26,500,000
Proceeds from senior note placement -- 35,000,000 --
Repayment of long-term debt (2,640,277) (59,202,764) (24,071,133)
Repayment of capital lease obligations (297,738) (146,371) (131,662)
Preferred stock dividends (180,000) (180,000) --
Proceeds from sale of common stock -- 46,222,500 4,162,500
Common stock placement cost -- (3,562,630) (249,750)
------------ ------------ ------------
Net cash provided by financing activities 2,981,985 23,155,735 6,209,955
------------ ------------ ------------
Net (decrease) increase in cash
and cash equivalents (18,595,226) 18,933,517 2,796,069
Cash and cash equivalents at beginning of year 22,244,231 3,310,714 514,645
------------ ------------ ------------
Cash and cash equivalents at end of the year $ 3,649,005 $ 22,244,231 $ 3,310,714
============ ============ ============
</TABLE>
See accompanying notes.
F-7
<PAGE> 44
BELDEN & BLAKE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND NATURE OF BUSINESS
On March 31, 1992, Belden & Blake Corporation (the "Company") succeeded
to a group of companies and assets (and related liabilities) (the "Belden
Interests") owned by Henry S. Belden IV ("HSB IV"). Also on that date, pursuant
to a Plan and Agreement of Consolidation, the Company acquired the assets and
assumed the liabilities of Belden & Blake Energy Company, a publicly-traded
master limited partnership (the "Partnership"), and Belden & Blake International
Limited, a Bermuda registered corporation ("BBI"), in exchange for shares of its
common stock (the "Consolidation"). The Consolidation was accounted for as a
purchase, and the results of operations of the Partnership and BBI have been
included from that date.
Since March 31, 1992, the Company's principal business has been the
acquisition, exploration, development and production of oil and gas reserves,
and the gathering and marketing of natural gas. The Company currently conducts
operations in Michigan, New York, Ohio, Pennsylvania and West Virginia.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND FINANCIAL PRESENTATION
The accompanying consolidated financial statements include the
financial statements of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
INVENTORIES
Inventories of material, pipe and supplies are valued at average cost.
Crude oil and natural gas inventories are stated at average cost.
PROPERTY AND EQUIPMENT
The Company utilizes the "successful efforts" method of accounting for
its oil and gas properties. Under this method, property acquisition and
development costs and certain productive exploration costs are capitalized while
non-productive exploration costs, which include geological and geophysical
costs, dry holes, expired leases and delay rentals, are expensed as incurred.
Capitalized costs related to proved properties are depleted using the
unit-of-production method. No gains or losses are recognized upon the
disposition of oil and gas properties except in extraordinary transactions.
Sales proceeds are credited to the carrying value of the properties. Maintenance
and repairs are expensed, and expenditures which enhance the value of properties
are capitalized.
Additional depreciation, depletion and amortization is recorded to the
extent that the aggregate net carrying value of producing oil and gas properties
exceeds the corresponding undiscounted future pretax net cash flows relating to
estimated proved oil and gas reserves computed in accordance with the provisions
of Statement of Financial Accounting Standards ("SFAS") 69, "Disclosures About
Oil and Gas Producing Activities".
F-8
<PAGE> 45
Unproved oil and gas properties are stated at cost and consist of
undeveloped leases. These costs are assessed periodically to determine whether
their value has been impaired, and if impairment is indicated, the costs are
charged to expense.
Gathering systems are stated at cost. Depreciation expense is computed
using the straight-line method over 15 years.
Property, plant and equipment are stated at cost. Depreciation of
non-oil and gas properties, including capital leases, is computed using the
straight-line method over the useful lives of the assets. When assets other than
oil and gas properties are retired or otherwise disposed of, the cost and
related accumulated depreciation are removed from the accounts, and any
resulting gain or loss is reflected in income for the period. The cost of
maintenance and repairs is charged to income as incurred, and significant
renewals and betterments are capitalized.
OTHER ASSETS
Other assets include deferred financing costs which are amortized over
the term of the financing acquired.
NET INCOME PER COMMON SHARE
Net income per common share is computed by subtracting preferred
dividends from net income and dividing the difference by the weighted average
number of common and common equivalent shares outstanding. Outstanding options
and warrants are included in the computation of net income per common share when
their effect is dilutive.
CASH EQUIVALENTS
For purposes of the statements of cash flows, cash equivalents are
defined as all highly liquid debt instruments purchased with an initial maturity
of three months or less.
REVENUE RECOGNITION
Oilfield sales and service revenues are recognized after the goods or
services have been provided. Oil and gas marketing revenues are recognized when
title passes. Oil and gas production revenue is recognized as production and
delivery take place. Administrative service revenues are recognized as fees are
earned.
INCOME TAXES
The Company uses the liability method of accounting for income taxes in
accordance with the provisions of SFAS No. 109, "Accounting for Income Taxes."
The provision for income taxes gives effect to certain items that are included
in the financial statements in different years than they were included in the
tax returns of the Company and its predecessors. The differences are primarily
intangible drilling costs and depreciation. Deferred income taxes are provided
for the temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. Deferred taxes also are recognized for operating losses that are
available to offset future taxable income and tax credits that are available to
offset future federal income taxes.
F-9
<PAGE> 46
RECLASSIFICATIONS
Certain reclassifications have been made in the 1993 and 1992
Statements of Operations to conform to the presentation in 1994.
(3) THE CONSOLIDATION
As described in Note 1, the Company acquired the assets and assumed the
liabilities of the Partnership and BBI on March 31, 1992 in a transaction
accounted for as a purchase. The results of operations of the Partnership and
BBI are included in the Company's operations from that date.
The following table presents the actual consolidated results of
operations for the years ended December 31, 1994 and 1993 and the unaudited pro
forma consolidated results of operations for the year ended December 31, 1992 as
if the Consolidation discussed in Note 1 had occurred on January 1, 1992. These
pro forma results have been prepared for comparative purposes only and do not
purport to be indicative of the results that would have occurred had the
Consolidation occurred as of that date.
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA
CONSOLIDATED
ACTUAL (UNAUDITED)
----------------------- ------------
1994 1993 1992
----------- ---------- ------------
<S> <C> <C> <C>
REVENUES
Oil and gas sales $ 32,574 $ 26,631 $ 19,294
Gas marketing and gathering 33,085 34,709 28,547
Oilfield sales and service 16,886 11,111 7,242
Interest and other 559 647 759
----------- ---------- ---------
83,104 73,098 55,842
EXPENSES
Production expense 9,292 7,189 5,261
Cost of gas and gathering expense 29,134 30,736 26,606
Oilfield sales and service 16,297 10,599 7,175
Exploration expense 2,807 2,538 2,371
General and administrative expense 3,966 3,940 3,350
Interest expense 3,587 3,199 2,596
Depreciation, depletion and amortization 12,021 9,703 5,961
----------- ---------- ---------
77,104 67,904 53,320
----------- ---------- ---------
INCOME BEFORE INCOME TAXES 6,000 5,194 2,522
Provision for income taxes 2,157 1,974 698
----------- ---------- ---------
NET INCOME $ 3,843 $ 3,220 $ 1,824
=========== ========== =========
NET INCOME PER COMMON SHARE $ .52 $ .54 $ .65
=========== ========== =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 7,080 5,675 2,797
=========== ========== =========
</TABLE>
F-10
<PAGE> 47
(4) ACQUISITIONS
In September and October 1994, the Company acquired substantially all
of the assets of two well servicing companies and a brine hauling and disposal
company operating primarily in Ohio and Pennsylvania for $3.1 million. The
assets acquired in these transactions included eleven salt water disposal wells,
along with various oilfield service equipment.
In February 1994, the Company acquired certain assets and assumed
certain liabilities of the former Engine Power Systems in exchange for 31,656
restricted shares of the Company's common stock valued at $12.25 per share. The
newly formed Engine Power Systems, Inc. ("EPS") operates as a wholly-owned
subsidiary of the Company. EPS is a distributor of, and provides parts and
service for, Waukesha natural gas-fueled engines in Ohio, western Pennsylvania,
West Virginia and Kentucky. EPS is engaged in engine sales, application
engineering and system packaging for power generation, co-generation, gas
compression, air compression and various other applications. EPS also sells and
rents electric generator sets.
In addition to the TGX acquisition discussed below, the Company
completed a number of small acquisitions of oil and gas properties in 1994
which, in the aggregate, added the equivalent of approximately 7.5 Bcf of
natural gas to the Company's proved developed reserve base. The reserves added
were acquired for $4.9 million or an average cost of $.65 per equivalent Mcf of
gas.
The operations of the above businesses are included in the consolidated
earnings of the Company from their respective acquisition dates and are not
material to the Company's operations.
In January 1994, the Company purchased substantially all of TGX
Corporation's Appalachian Basin assets for $15.5 million. The assets acquired
included 1,034 gross (910 net) gas and oil wells on approximately 121,000 acres
located in northeastern Ohio and southwestern New York and 15,000 undeveloped
acres and related inventory, real estate and oilfield equipment. At December 31,
1993, the properties acquired had estimated proved reserves of 22.0 Bcf of
natural gas and 28,700 Bbls of oil. Discounted future net cash flows (at 10%
discount) before income taxes were $17.4 million. After provision for future
income taxes, the standardized measure of discounted future net cash flows is
estimated to be $13.6 million, excluding proved undeveloped reserves and
expected operational enhancements to existing properties.
The pro forma table below presents the actual results of operations for
the year ended 1994 and the unaudited pro forma consolidated results of
operations for the year ended 1993 as if the acquisition of the TGX properties
had occurred on January 1, 1993.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
1994 1993
-------------- ------------
(in thousands except per share data)
<S> <C> <C>
Total revenues $ 83,104 $ 77,862
Net income 3,843 3,705
Net income per common share $ .52 $ .62
</TABLE>
In June 1994, the Company purchased TGX's option to participate in a
50% working interest in wells drilled on the 15,000 undeveloped acres described
above for $750,000. Also in June 1994, the Company purchased additional working
interests in 81 wells in New York from TGX for $621,000.
F-11
<PAGE> 48
On December 31, 1992, the Company acquired approximately 67,000
undeveloped acres from Witco Corporation. The Company also acquired certain
waterflood production facilities, oilfield equipment and related real estate
interests. The undeveloped acreage and other assets are located in Pennsylvania
and Ohio in areas where the Company has existing operations. In exchange for the
acreage and other assets, the Company issued 24,000 shares of Class II Serial
Preferred Stock - $7.50 Series A.
In December 1992, the Company purchased all the outstanding stock of
two subsidiaries from Presidio Exploration, Inc. for $4.6 million, and the
assumption, on a non-recourse basis, of $28 million of existing bank debt of the
companies acquired. The acquisition was accounted for as a purchase, and
accordingly, the assets and liabilities are included in the consolidated
financial statements effective December 31, 1992.
On December 8, 1992, the Company purchased for $1.5 million additional
working interests in 1,037 producing oil and gas wells that it operates.
(5) DETAILS OF BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1994 1993
--------------- -------------
<S> <C> <C>
ACCOUNTS RECEIVABLE
Accounts receivable $ 7,399,001 $ 5,927,489
Allowance for doubtful accounts (169,754) (92,885)
Oil and gas production receivable 5,709,880 4,751,504
Current portion of notes receivable 129,536 --
--------------- -------------
$ 13,068,663 $ 10,586,108
=============== =============
INVENTORIES
Oil $ 1,187,120 $ 1,295,281
Natural gas 1,375,077 371,937
Material, pipe and supplies 4,114,687 2,208,311
--------------- -------------
$ 6,676,884 $ 3,875,529
=============== =============
PROPERTY AND EQUIPMENT, GROSS
OIL AND GAS PROPERTIES
Non-producing properties $ 5,057,900 $ 3,582,080
Producing properties 117,221,467 88,475,409
--------------- -------------
$ 122,279,367 $ 92,057,489
=============== =============
LAND, BUILDINGS, MACHINERY AND EQUIPMENT
Land, buildings and improvements $ 5,632,887 $ 3,231,694
Machinery and equipment 13,931,360 10,008,034
--------------- -------------
$ 19,564,247 $ 13,239,728
=============== =============
ACCRUED EXPENSES
Accrued expenses $ 2,775,027 $ 2,442,533
Accrued income taxes 298,097 --
Ad valorem and other taxes 1,269,681 708,000
Bank overdraft 1,291,439 629,639
Compensation and related benefits 1,513,835 1,148,180
Undistributed production revenue 1,292,236 1,330,440
--------------- -------------
$ 8,440,315 $ 6,258,792
=============== =============
</TABLE>
F-12
<PAGE> 49
(6) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1994 1993
--------------- --------------
<S> <C> <C>
Senior notes $ 35,000,000 $ 35,000,000
Convertible subordinated debentures 7,350,000 7,350,000
Revolving line of credit 4,000,000 --
Other 345,678 494,260
--------------- --------------
46,695,678 42,844,260
Less current portion 105,996 301,520
--------------- --------------
Long-term debt $ 46,589,682 $ 42,542,740
=============== ==============
</TABLE>
On May 5, 1992, the Company entered into a three-year revolving credit
agreement with a group of banks. On November 15, 1993, the facility was amended
to accommodate the issuance of the Company's senior notes. The facility amount
was increased from $30 million to $100 million and is now unsecured. Outstanding
balances under the agreement bear interest at the Company's choice of either:
(1) the one, three, or six-month LIBOR plus 2% ( 9.00% for the six-month LIBOR
interest rate option at December 31, 1994) or (2) the bank's prime rate plus
1/4% ( 8.75% at December 31, 1994). On July 22, 1994, the banks extended the
maturity date on the facility to March 31, 1998. Borrowings under the credit
agreement are limited to the borrowing base as established semi-annually by the
bank group. The borrowing base at December 31, 1994 was $30 million.
On January 5, 1993, the Company entered into an interest rate swap
agreement covering $22 million of the outstanding balance of an acquisition loan
that was paid off in 1993. The interest rate on this portion of the loan was
fixed at 7.95% for three years. The notional amount covered by this swap
agreement declined to $18 million in 1994 and was scheduled to decline to $15
million in 1995. On August 31, 1994, the Company closed out this swap agreement.
The Company had no derivative financial instruments at December 31, 1994.
During 1993, the Company placed $35 million of 7% fixed-rate senior
notes with five insurance companies in a private placement. These notes, which
are interest-only for four years, mature on September 30, 2005. Equal principal
payments of $3,888,888 will be required on each September 30 commencing in 1997.
The $7,350,000 of convertible subordinated debentures have a fixed
interest rate of 9.25% and mature on June 30, 2000. The debentures are currently
convertible by the debenture holders at the rate of one share of the Company's
common stock for each $20.30 of principal.
The debt agreements contain various covenants restricting payment of
dividends on common stock to $5 million plus 50% of cumulative net income,
restricting sales of assets to 15% of shareholders' equity in any one year and
requiring the maintenance of certain levels of net worth, working capital and
other financial ratios.
At December 31, 1994, the aggregate long-term debt maturing in the next
five years is as follows: $106,000 (1995); $35,000 (1996); $3,907,000 (1997);
$7,907,000 (1998) and $3,907,000 (1999) and $30,833,000 (2000 and thereafter).
F-13
<PAGE> 50
(7) LEASES
The Company leases certain computer equipment, vehicles and office
space under noncancelable agreements with lease periods of one to five years.
Rent expense amounted to $741,575, $1,082,130, and $1,058,816 for the years
ended December 31, 1994, 1993, and 1992, respectively.
The Company also leases certain computer equipment accounted for as
capital leases. Property and equipment includes $1.4 million and $1.6 million of
computer equipment under capital leases at December 31, 1994 and 1993,
respectively. Accumulated depreciation for such equipment includes approximately
$690,000 and $337,000 at December 31, 1994 and 1993, respectively.
Future minimum commitments under leasing arrangements at December 31,
1994 were as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR ENDING DECEMBER 31 LEASES LEASES
- ----------------------- -------------- --------------
<S> <C> <C>
1995 $ 447,000 $ 397,000
1996 218,000 365,000
1997 12,000 289,000
1998 11,000 32,000
1999 and thereafter 12,000 7,000
-------------- --------------
Total minimum rental payments $ 700,000 1,090,000
==============
Less amount representing interest 103,425
--------------
Present value of net minimum rental payments 986,575
Less current portion 341,261
--------------
Long-term capitalized lease obligations $ 645,314
==============
</TABLE>
(8) SHAREHOLDERS' EQUITY
On March 27, 1992, the Company succeeded to the Belden Interests and
acquired in the Consolidation all of the assets and assumed all of the
liabilities of the Partnership and BBI in exchange for 2,780,241 shares of its
common stock, of which 882,030 shares were distributed to the holders of units
of limited partnership interest in the Partnership (other than HSB IV) in
liquidation of the Partnership, 821,950 shares were distributed to the
shareholders of BBI in liquidation of BBI, and 1,076,261 shares were distributed
to HSB IV.
Outstanding warrants for the purchase of 13,801 shares of the Company's
common stock at a price of $21.74 per share are exercisable by the holder in
whole or part any time prior to February 15, 1997.
The 9.25% convertible subordinated debentures due June 30, 2000, are
currently convertible at the rate of one share of common stock for each $20.30
of principal.
F-14
<PAGE> 51
On December 31, 1992, the Company issued 24,000 shares of Class II
Serial Preferred Stock with a stated value of $100 per share. In preference to
shares of common stock, each share is entitled to cumulative cash dividends of
$7.50 per year, payable quarterly. The Preferred Stock is subject to redemption
at $100 per share at any time by the Company and is convertible into common
stock, at the holder's election, at any time after five years from the date of
issuance at a conversion price of $15.00 per common share. Holders of the
Preferred Stock are entitled to one vote per preferred share.
The Company has reserved a total of 535,870 shares of common stock for
the conversion of the convertible subordinated debentures and the Class II
Serial Preferred Stock and the exercise of the outstanding warrants referred to
above.
On December 21, 1992, the Company issued in a private placement 555,000
shares of common stock at the price of $7.50 per share.
On December 22, 1992, an additional 20,000 shares of the Company's
common stock were awarded to the employees as bonuses.
On January 25, 1993, the Company issued 60,000 shares of common stock
in a private placement at $8.50 per share.
On May 5, 1993, the Company issued 168,000 shares of common stock for
additional interests in certain oil and gas properties.
In May 1993, the Company sold 3,450,000 shares of common stock in a
public offering at $13.25 per share. Net proceeds to the Company after
underwriting discounts and offering costs were approximately $42.2 million.
In December 1994, the Company awarded 21,509 shares of common stock to
employees as profit sharing bonuses. These shares were issued in January 1995.
On December 30, 1993, the Company awarded and issued 22,325 shares of common
stock to employees as profit sharing bonuses.
In February 1994, the Company issued 31,656 restricted shares of common
stock valued at $12.25 per share in exchange for certain acquired assets and
assumed liabilities of the former Engine Power Systems.
In May 1994 and March 1993, non-statutory stock options to purchase
183,000 and 87,000 common shares, respectively, of the Company's stock were
granted to certain executive officers and employees under the Company's Stock
Option Plan. The exercise price of options may not be less than the fair market
value of a share of common stock on the date of grant. Options granted in 1994
and 1993 expire in 2004 and 2003, respectively, unless cessation of employment
causes earlier termination. The options become exercisable in 25% increments
over a four-year period beginning one year from date of grant. At the date of
grant, the exercise price of the options equaled the market price of $12.375 per
share on May 27, 1994 and $10.00 per share on March 17, 1993.
F-15
<PAGE> 52
On May 27, 1994, the shareholders approved the Non-Employee Directors
Stock Option Plan. In May 1994 and March 1993 non-statutory stock options to
purchase 10,000 and 8,000 common shares of the Company's stock were granted
under the Plan. Additional options for 2,000 shares will be granted each year to
each non-employee director. The exercise price of options under the Plan is
equal to the fair market value on the date of grant. Options expire on the tenth
anniversary of the grant date. The options become exercisable on the anniversary
of the grant date at a rate of one third of the shares each year. The exercise
price of the options granted on May 27, 1994 and March 17, 1993 were $12.375 per
share and $10.00 per share, respectively. As of December 31, 1994, 102,000
shares were available for grant under the Plan.
The Company's Articles of Incorporation include certain anti-takeover
provisions. The provisions grant the Board of Directors the authority to issue
and fix the terms of preferred stock as well as the ability to take certain
other actions that could have the effect of discouraging unsolicited takeover
attempts. In addition, the Company has entered into contracts with its officers
that provide for severance payments, in certain circumstances, in the event that
their employment is terminated following a change in control. The senior notes
may, at the noteholder's discretion, be accelerated and become due and payable
upon a change in control of the Company.
(9) RESTRICTED STOCK GRANT AND BONUS PLAN
During May 1992, HSB IV contributed a total of 119,600 shares of the
Company's common stock to fund the Company's Restricted Stock Grant and Bonus
Plan, as amended (the "Plan"). The shares contributed by HSB IV were used to
make restricted stock grant and bonus awards to employees of the Company.
The shares of common stock awarded to an employee under the Plan are
fully paid and nonassessable and are represented by a certificate or
certificates registered in the employee's name. The employee has all the rights
of a shareholder with respect to such shares, including the right to vote the
shares and receive all dividends paid with respect to such shares.
Certain shares awarded are subject to forfeiture and to restrictions
prohibiting their sale, transfer, pledge or other disposition until the
restrictions are released. Such shares will be released from such restrictions
at the rate of 25% for each full year of employment completed by the employee
after the date of the award and will be fully vested after four full years of
continued employment, except that the shares will immediately vest and be
released from restrictions in the event of the death, retirement at normal
retirement age or permanent disability of the employee. The employee will
forfeit all rights to shares not previously released from restrictions in the
event of the termination of his or her employment with the Company for any
reason other than death, retirement at normal retirement age or permanent
disability or in the event of a change in control of the Company. The ownership
of all forfeited shares shall revert to HSB IV or his estate.
Unearned compensation was charged for the market value of the
restricted shares on the date of grant and is amortized over the restricted
period. The unamortized unearned compensation value is shown as a reduction of
shareholders' equity in the accompanying consolidated balance sheet.
F-16
<PAGE> 53
(10) INCOME TAXES
The provision (benefit) for income taxes in the Consolidated Statements
of Operations includes the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
CURRENT
Federal $ 397,815 $ 262,219 $ 581,000
State 189,708 159,411 37,519
------------- ------------- -------------
587,523 421,630 618,519
DEFERRED
Federal 1,423,871 1,356,994 (155,174)
State 145,676 194,941 (17,224)
------------- ------------- -------------
1,569,547 1,551,935 (172,398)
------------- ------------- -------------
TOTAL $ 2,157,070 $ 1,973,565 $ 446,121
============= ============= =============
</TABLE>
The effective tax rate differs from the U.S. federal statutory tax rate, as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
---- ---- -----
<S> <C> <C> <C>
Statutory federal income tax rate 34.0 % 34.0 % 34.0 %
Increases (reductions) in taxes
resulting from:
State income taxes, net of federal
tax benefit 3.7 4.5 1.6
Statutory depletion (2.6) -- (14.5)
Expenses which provided no tax benefit .7 .2 6.4
Other, net .2 (.7) 0.6
---- ---- -----
Effective income tax rate for the year 36.0 % 38.0 % 28.1 %
==== ==== =====
</TABLE>
F-17
<PAGE> 54
Significant components of the Company's deferred income tax liabilities
and assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1994 1993
--------------- --------------
<S> <C> <C>
Deferred income tax liabilities:
Property and equipment, net $ 9,859,291 $ 7,350,666
Production accruals and accounts receivable 135,109 211,351
Other, net 77,829 21,228
--------------- --------------
Total deferred income tax liabilities 10,072,229 7,583,245
Deferred income tax assets:
Accrued expenses 1,558,738 929,159
Inventories 216,992 291,127
Net operating loss carryforwards 1,580,049 1,938,381
Tax credit carryforwards 1,355,953 865,715
Depletion carryforwards 157,035 --
Other, net 253,147 250,755
--------------- --------------
Total deferred income tax assets 5,121,914 4,275,137
--------------- --------------
Net deferred income tax liability $ 4,950,315 $ 3,308,108
=============== ==============
Long-term liability $ 6,691,408 $ 4,376,610
Current asset (1,741,093) (1,068,502)
--------------- --------------
Net deferred income tax liability $ 4,950,315 $ 3,308,108
=============== ==============
</TABLE>
At December 31, 1994, the Company had approximately $4,200,000 of net
operating loss carryforwards and $800,000 of statutory depletion carryforwards
available for federal income tax reporting purposes. Substantially all of the
net operating loss and statutory depletion carryforwards are limited as to their
annual utilization as a result of prior ownership changes. In addition, the
Company has approximately $69,000 of investment tax credit carryforwards, the
annual utilization of which is also subject to limitations under the provisions
of the Internal Revenue Code. The Company has alternative minimum tax credit
carryforwards of approximately $1,287,000 which have no expiration date. The net
operating loss carryforwards, if unused, will expire from 2000 to 2009 and the
investment tax credit carryforward, if unused, will expire from 1998 to 2000.
There is no expiration date for the utilization of statutory depletion
carryforwards.
(11) RETIREMENT PLANS
The Company has a 401(k) salary reduction plan covering substantially
all of the employees of the Company. Under the plan, an amount equal to 2% of
participants' compensation is contributed by the Company to the plan each year.
Eligible employees may also make voluntary plan contributions which the Company
matches $.25 for every $1.00 contributed up to 6% of an employee's annual
compensation. Retirement plan expense for the years ended December 31, 1994,
1993 and 1992 was $286,446, $251,305 and $235,588, respectively.
The Company established non-qualified deferred compensation plans in
1994 which permit certain key employees and directors to elect to defer a
portion of their compensation.
F-18
<PAGE> 55
(12) RELATED PARTY TRANSACTIONS
Prior to the Consolidation, HSB IV and an affiliated company that was
part of the Belden Interests were general partners in the Partnership, a
publicly-traded master limited partnership, and HSB IV was a shareholder of BBI.
The Belden Interests provided substantially all developmental services, well
maintenance, supplies and other services to the Partnership and BBI and charged
these entities various fees. In 1992, the Belden Interests charged affiliates
$302,000 for well operator's fees, $786,000 for general and administrative fees
which included costs associated with final tax reporting and wind-up of the
Partnership and BBI, and $188,000 for other fees and services. Due to the
consolidation discussed in Notes 1 and 3, these amounts represent only the first
three months of 1992.
In 1993, the Company acquired 6.1 acres of land from HSB IV for
$339,000. Also in 1993, the Company purchased all the assets of Southgate
Petroleum Corporation, of which HSB IV was the sole shareholder, for $348,000.
These assets consisted of heavy equipment, undeveloped acreage and operating
rights.
(13) COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal actions arising in the normal
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the financial position
of the Company.
(14) CONCENTRATIONS OF CREDIT RISK
The Company operates primarily in the oil and gas industry. Sales of
oil and gas are ultimately made to refineries, gas utilities and industrial
consumers in Ohio, West Virginia, New York and Pennsylvania. The Company is also
a distributor of a broad range of oilfield equipment and supplies. Its customers
include other independent oil and gas companies, dealers and operators
throughout Ohio, West Virginia, New York and Pennsylvania. Credit limits,
ongoing credit evaluation and account monitoring procedures are utilized to
minimize the risk of loss. Collateral is generally not required. Expected losses
are provided for currently and actual losses have been within management's
expectations.
(15) MAJOR CUSTOMERS
Oil and gas sales and gas marketing and gathering revenue from one
customer that exceeded 10% of total revenue during the years ended December 31,
1994 and 1993 amounted to $9,600,612 and $8,616,069, respectively. Oil and gas
sales to one customer that exceeded 10% of total revenue during the year ended
December 31, 1992 amounted to $5,313,193.
F-19
<PAGE> 56
(16) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
CASH PAID DURING THE YEAR FOR:
Interest $ 3,145,724 $ 3,206,786 $ 2,218,447
Income taxes 90,018 775,713 174,245
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of assets in exchange for long-term liabilities $ 527,094 $ 1,006,068 $28,007,065
Acquisition of assets in exchange for stock 387,788 1,680,000 2,400,000
Assets and liabilities of the Partnership and BBI
in exchange for common stock -- -- 23,980,706
Sale of assets in exchange for note receivable 689,289 -- --
</TABLE>
(17) SUPPLEMENTARY INFORMATION ON OIL AND GAS ACTIVITIES
The following disclosures are presented in accordance with the
Financial Accounting Standards Board's (FASB) Statement of Financial Accounting
Standards No. 69 (SFAS 69). The following table sets forth costs incurred
including pro rata consolidated amounts attributable to the Company.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1994 1993 1992
--------------- -------------- ---------------
<S> <C> <C> <C>
Costs incurred
Acquisition
Proved properties $ 20,274,350 $ 3,883,204 $ 62,606,242
Unproved properties 1,744,345 621,789 1,751,818
Developmental 9,141,520 6,364,665 2,203,963
Exploratory 2,129,696 1,895,216 1,308,900
</TABLE>
PROVED OIL AND GAS RESERVES (UNAUDITED)
The Company's proved developed and undeveloped reserves are all located
within the United States. Proved undeveloped reserves have been included
beginning in 1993. The Company cautions that there are many uncertainties
inherent in estimating proved reserve quantities and in projecting future
production rates and the timing of development expenditures. In addition,
estimates of new discoveries are more imprecise than those of properties with a
production history. Accordingly, these estimates are expected to change as
future information becomes available. Material revisions of reserve estimates
may occur in the future, development and production of the oil and gas reserves
may not occur in the periods assumed, and actual prices realized and actual
costs incurred may vary significantly from those used. Proved reserves represent
estimated quantities of natural gas, crude oil and condensate that geological
and engineering data demonstrate, with reasonable certainty, to be recoverable
in future years from known reservoirs under economic and operating conditions
existing at the time the estimates were made. Proved developed reserves are
proved reserves expected to be recovered through wells and equipment in place
and under operating methods being utilized at the time the estimates were made.
F-20
<PAGE> 57
The estimates of proved developed reserves have been reviewed by the
Company's independent petroleum engineers. The estimates of proved undeveloped
reserves were prepared by the Company's petroleum engineers.
The following table sets forth changes in estimated proved and proved
developed reserves for the three years ended December 31, 1994.
<TABLE>
<CAPTION>
OIL GAS
(BBL) (MCF)
--------- -----------
<S> <C> <C>
DECEMBER 31, 1991 621,253 5,400,038
Extensions and discoveries 33,653 1,907,956
Purchase of reserves in place 3,883,508 75,110,695
Sales of reserves in place (17,845) (91,080)
Revisions of previous estimates (6,284) 557,120
Production (351,262) (3,726,728)
--------- -----------
DECEMBER 31, 1992 4,163,023 79,158,001
Extensions and discoveries 182,957 5,198,126
Purchase of reserves in place 119,216 4,121,079
Sales of reserves in place (52,072) (9,557)
Revisions of previous estimates (815,743) (6,516,472)
Inclusion of proved undeveloped reserves (1) 388,342 19,687,024
Production (452,844) (7,373,252)
--------- -----------
DECEMBER 31, 1993 3,532,879 94,264,949
Extensions and discoveries 242,365 8,554,382
Purchase of reserves in place 222,981 26,876,534
Sale of reserves in place (11,178) (1,022,027)
Revisions of previous estimates 622,462 3,880,633
Production (496,039) (9,562,862)
--------- -----------
DECEMBER 31, 1994 4,113,470 122,991,609
========= ===========
PROVED DEVELOPED RESERVES
December 31, 1993 3,144,537 74,577,925
========= ===========
December 31, 1994 3,714,671 101,355,451
========= ===========
</TABLE>
(1) Prior to 1993, the Company did not disclose its proved undeveloped
reserves because the effect on total proved reserves was insignificant.
In 1994 and 1993, the Company acquired properties with significant
undeveloped reserve potential and plans to develop these undeveloped
locations. As a result, the Company elected to include its proved
undeveloped reserves in 1993 and subsequent years to more accurately
present its total proved reserves.
F-21
<PAGE> 58
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL
AND GAS RESERVES (UNAUDITED)
The following tables, which present a standardized measure of
discounted future net cash flows and changes therein relating to proved oil and
gas reserves, are presented pursuant to SFAS 69. In computing this data,
assumptions other than those required by the FASB could produce different
results. Accordingly, the data should not be construed as representative of the
fair market value of the Company's proved oil and gas reserves. The following
assumptions have been made:
_ Future revenues were based on year-end oil and gas prices.
Future price changes were included only to the extent provided
by existing contractual agreements.
_ Production and development costs were computed using year-end
costs assuming no change in present economic conditions.
_ Future net cash flows were discounted at an annual rate of
10%.
_ Future income taxes were computed using the approximate
statutory tax rate and giving effect to available net
operating losses, tax credits and statutory depletion.
The standardized measure of discounted future net cash flows relating
to proved oil and gas reserves at December 31, 1994, 1993 and 1992 is presented
below:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------
1994 1993 1992
---------------- ---------------- -----------------
<S> <C> <C> <C>
Estimated future cash inflows (outflows)
Revenues from the sale of oil and gas $ 395,610,738 $ 315,270,912 $ 292,051,715
Production and development costs (165,766,349) (132,313,945) (114,367,184)
---------------- ---------------- -----------------
Future net cash flows before income taxes 229,844,389 182,956,967 177,684,531
Future income taxes (54,762,015) (39,955,545) (29,155,723)
---------------- ---------------- -----------------
Future net cash flows 175,082,374 143,001,422 148,528,808
10% timing discount (85,228,387) (71,915,400) (71,989,247)
---------------- ---------------- -----------------
Standardized measure of discounted
future net cash flows $ 89,853,987 $ 71,086,022 $ 76,539,561
================ ================ =================
</TABLE>
F-22
<PAGE> 59
The principal sources of changes in the standardized measure of future
net cash flows for the three years ended December 31, 1994 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1994 1993 1992
--------------- --------------- --------------
<S> <C> <C> <C>
Beginning of year $ 71,086,022 $ 76,539,561 $ 6,609,864
Sale of oil and gas, net of
production costs (23,287,185) (19,451,432) (9,672,623)
Extensions and discoveries, less
related estimated future
development and production costs 14,317,120 9,667,774 3,228,728
Purchase of reserves in place less
estimated future production costs 20,715,526 4,806,990 81,670,287
Sale of reserves in place less
estimated future production costs (635,406) (179,749) (153,002)
Revisions of previous quantity estimates 4,971,843 (9,772,684) 765,204
Inclusion of proved undeveloped reserves -- 6,611,352 --
Net changes in prices and production
costs 93,790 (2,564,031) 4,059,860
Change in income taxes (8,851,583) (4,443,113) (13,356,703)
Accretion of 10% timing discount 8,943,892 9,087,098 820,310
Changes in production rates (timing)
and other 2,499,968 784,256 2,567,636
--------------- --------------- --------------
End of year $ 89,853,987 $ 71,086,022 $ 76,539,561
=============== =============== ==============
</TABLE>
F-23
<PAGE> 60
(18) INDUSTRY SEGMENT FINANCIAL INFORMATION
The table below presents certain financial information regarding the
Company's industry segments. Intersegment sales are billed on an intercompany
basis at prices for comparable third party goods and services.
<TABLE>
<CAPTION>
1994 1993 1992
------------------ ----------------- ----------------
<S> <C> <C> <C>
REVENUES
Oil and gas operations $ 65,659,418 $ 61,340,169 $ 41,539,484
Oilfield sales and service 21,204,781 14,382,414 11,888,315
Intersegment sales (4,319,112) (3,271,226) (2,392,759)
------------------ ----------------- ----------------
$ 82,545,087 $ 72,451,357 $ 51,035,040
================== ================= ================
OPERATING INCOME (LOSS)
Oil and gas operations $ 9,117,043 $ 7,619,906 $ 622,840
Oilfield sales and service (1) (88,687) 125,658 1,647,628
------------------ ----------------- ----------------
$ 9,028,356 $ 7,745,564 $ 2,270,468
================== ================= ================
IDENTIFIABLE ASSETS
Oil and gas operations $ 132,537,620 $ 128,352,821 $ 98,010,238
Oilfield sales and service 15,635,175 6,821,107 4,242,841
------------------ ----------------- ----------------
$ 148,172,795 $ 135,173,928 $ 102,253,079
================== ================= ================
DEPRECIATION, DEPLETION AND
AMORTIZATION EXPENSE
Oil and gas operations $ 11,343,441 $ 9,316,499 $ 4,534,519
Oilfield sales and service 677,817 386,959 318,839
------------------ ----------------- ----------------
$ 12,021,258 $ 9,703,458 $ 4,853,358
================== ================= ================
CAPITAL EXPENDITURES
Oil and gas operations $ 33,955,736 $ 15,976,914 $ 80,850,149
Oilfield sales and service 4,445,681 1,014,612 238,021
------------------ ----------------- ----------------
$ 38,401,417 $ 16,991,526 $ 81,088,170
================== ================= ================
</TABLE>
(1) The 1994 amount includes operating losses of $438,680 attributable to
the operations of Magnolia Compression Services, Inc. and Engine Power
Systems, Inc. which were primarily the result of expenses incurred in the
initial development of these businesses. The 1992 amount includes
operating income generated by the Belden Interests from sales and
services to the Partnership and BBI during the first quarter of 1992.
F-24
<PAGE> 61
(19) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The results of operations for the four quarters of 1994 and 1993 are
shown below.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
1994
Sales and other operating revenues $ 20,620,601 $ 20,417,568 $ 21,435,564 $ 20,071,354
Gross profit 3,096,358 3,849,597 3,309,537 2,738,618
Net income 807,241 1,104,926 1,079,937 850,817
Net income per common share .11 .15 .15 .11
1993
Sales and other operating revenues $ 19,237,590 $ 16,425,888 $ 17,291,240 $ 19,496,639
Gross profit 3,207,398 3,094,093 2,845,065 2,538,991
Net income 656,510 865,447 1,004,185 693,884
Net income per common share .18 .17 .14 .09
</TABLE>
(20) SUBSEQUENT EVENTS
Effective in January 1995, the Company purchased Ward Lake Drilling,
Inc. ("Ward Lake"), a privately-held exploration and production company
headquartered in Gaylord, Michigan, for $15.1 million. The purchase was funded
by borrowings under the Company's existing credit facility. Ward Lake operates
and holds a production payment interest and working interests averaging 13.6% in
approximately 500 Antrim Shale gas wells located in Michigan's lower peninsula.
The purchase also included approximately 5,500 undeveloped leasehold acres that
Ward Lake owns in Michigan.
At December 31, 1994, the wells had estimated proved natural gas
reserves totaling 98 Bcf gross (13.7 net). Gross production from the wells is
expected to total approximately 37 million cubic feet of gas per day in 1995.
Approximately one half of the purchase price represented payment for the proved
reserves, with the balance associated with the operating rights and other
corporate assets.
In March 1995, the Company entered into an agreement to purchase all
the producing properties of The East Ohio Gas Company for $6.5 million. The
assets to be acquired include a 100% working interest in 378 natural gas wells
and drilling rights on more than 250,000 acres of adjacent properties. A
substantial majority of the wells acquired are adjacent to properties currently
being operated by the Company. The wells had estimated proved reserves of 8.5
Bcf of natural gas and 80,000 Bbls of oil at December 31, 1994. Production from
the wells is expected to total approximately 1.9 million cubic feet equivalent
per day in 1995. The purchase is subject to the satisfaction of certain due
diligence matters, consent requirements and other conditions.
F-25
<PAGE> 62
EXHIBIT INDEX
<TABLE>
<CAPTION>
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3.1 Articles of Incorporation of the Company -- incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement
on Form S-4 (Registration No. 33-43209)
3.2 Amended Articles of Incorporation of the Company -- incorporated
by reference to Exhibit 3.2 to the Company's Registration
Statement on Form S-4 (Registration No. 33-43209)
3.2(a) Amendment to Amended Articles of Incorporation of the Company --
incorporated by reference to Exhibit 4 to the Company's Current
Report on Form 8-K dated December 30, 1992
3.3 Amended Code of Regulations of the Company -- incorporated by
reference to Exhibit 3.3 to the Company's Registration Statement
on Form S-4 (Registration No. 33-43209)
4.1 Amended and Restated Debenture Agreement between the Company and
Petercam Securities -- incorporated by reference to Exhibit 4.1 to
the Company's Registration Statement on Form S-4 (Registration No.
33-43209)
4.2 Credit Agreement among the Company, The Canton Oil & Gas Company,
Peake Energy, Inc., Peake Operating Company, Bank One, Texas,
National Association and NBD Bank, N.A. dated November 1993 --
incorporated by reference to Exhibit 4.2 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993
4.3 Fourth Amendment and Restatement of Credit Agreement among the
Company, Belden & Blake Acquisition, Inc., Peake Operating
Company, Peake Energy, Inc. and The Chase Manhattan Bank (National
Association) dated as of December 22, 1992 -- incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement
on Form S-1 (Registration No. 33-60228)
4.4 Warrant Assumption Agreement between Belden & Blake Corporation
and Belden & Blake Energy Company -- incorporated by reference to
Exhibit 4.4 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
Location in
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No. Description Copy
- --- ----------- ------------
<S> <C>
4.5 Note Purchase Agreement dated as of November 15, 1993 among the
Company, The Canton Oil & Gas Company, Peake Operating Company and
Peake Energy, Inc. and the purchasers listed on Annex I thereto --
incorporated by reference to Exhibit 4.5 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993
4.6 None of the other instruments defining the rights of holders of
long-term debt of the Company or its subsidiaries involve
long-term debt in an amount which exceeds ten percent of the total
assets of the Company and its subsidiaries on a consolidated
basis. The Company agrees to furnish a copy of such other
instruments to the Commission upon request.
10.1 Employment Agreement between the Company and Henry S. Belden IV
dated September 16, 1991 -- incorporated by reference to Exhibit
10.3 to the Company's Registration Statement on Form S-4
(Registration No. 33-43209)
10.2 Contract of Employment between Belden & Blake (U.K.), Inc. and
David P. Quint dated March 1, 1984, as amended -- incorporated by
reference to Exhibit 10.5 to the Company's Registration Statement
on Form S-4 (Registration Statement No. 33-43209)
10.3 Form of Severance Agreement between the Company and each of the
officers of the Company (except Henry S. Belden IV) officers --
incorporated by reference to Exhibit 10.6 to the Company's
Registration Statement on Form S-4 (Registration No. 33-43209)
10.4 Stock Option Plan of the Company -- incorporated by reference to
Exhibit 10.7 to the Company's Registration Statement on Form S-4
(Registration No. 33-43209)
10.5 Restricted Stock Grant Plan of The Canton Oil & Gas Company
(formerly known as Belden & Blake Corporation) -- incorporated by
reference to Exhibit 10.8 to the Company's Registration Statement
on Form S-4 (Registration No. 33-43209)
10.6 Belden & Blake Corporation Non-employee Director Stock Option Plan
-- incorporated by reference to Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993
</TABLE>
<PAGE> 64
<TABLE>
<CAPTION>
Location in
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No. Description Copy
- --- ----------- ------------
<S> <C>
10.7 Plan and Agreement of Consolidation dated as of October 10, 1991,
as amended, among Belden & Blake Energy Company, Henry S. Belden
IV, Belden & Blake International Limited and the Company --
incorporated by reference to Exhibit 2.1 to the Company's
Registration Statement on Form S-4 (Registration No. 33-43209)
10.8 Stock Purchase Agreement dated as of December 7, 1992 between
Presidio Exploration, Inc. and Belden & Blake Acquisition, Inc. (a
wholly-owned subsidiary of the Company) -- incorporated by
reference to Exhibit 2 to the Company's Current Report on Form 8-K
dated December 22, 1992
10.9 Amended and Restated Gas Sales and Purchase Contract between Peake
Energy, Inc. and Kaiser Aluminum & Chemical Corporation dated as
of August 27, 1987 -- incorporated by reference to Exhibit 10.11
to the Company's Registration Statement on Form S-1 (Registration
No. 33-60228)
10.10 Agreement of Purchase and Sale between the Company and TGX
Corporation dated December 17, 1993 -- incorporated by reference
to Exhibit 2 to the Company's Current Report on Form 8-K dated
January 14, 1994.
10.11 Stock Purchase Agreement dated January 3, 1995 among Keith Hardin
Gornick, R. David Briney, William F. Rolinski, Charles Nelson and
the Company -- incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated February 10, 1995
10.11(a) Agreement of Amendment dated January 16, 1995 among Keith Hardin
Gornick, R. David Briney, William F. Rolinski, Charles Nelson and
the Company -- incorporated by reference to Exhibit 2.2 to the
Company's Current Report on Form 8-K dated February 10, 1995
10.11(b) Second Agreement of Amendment dated February 10, 1995 among Keith
Hardin Gornick, R. David Briney, William F. Rolinski, Charles
Nelson and the Company -- incorporated by reference to Exhibit 2.3
to the Company's Current Report on Form 8-K dated February 10,
1995
21.1* Subsidiaries of the Registrant
23.1* Consent of Ernst & Young LLP
27* Financial Data Schedule
<FN>
*Filed herewith
</TABLE>
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
Belden & Blake Corporation Jurisdiction of
Subsidiaries Incorporation
- -------------------------- ---------------
Belden & Blake Investments A.G. ....................... Switzerland
Belden & Blake Securities, Inc. ....................... Ohio
Belden & Blake (U.K.), Inc. ........................... Ohio
The Canton Oil & Gas Company .......................... Ohio
Engine Power Systems, Inc. ............................ Ohio
Peake Energy, Inc. .................................... Delaware
Target Oilfield Pipe & Supply Company ................. Ohio
Ward Lake Drilling, Inc. .............................. Michigan
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Belden & Blake Corporation
We consent to the incorporation by reference in the Registration Statements
Nos. 33-62800 and 33-87556 on Forms S-3 and in the Registration Statement No.
33-69802 on Form S-8 and in the related Prospectuses of our report dated March
7, 1995, with respect to the consolidated financial statements of Belden &
Blake Corporation included in this Annual Report (Form 10-K) for the year ended
December 31, 1994.
ERNST & YOUNG LLP
Cleveland, Ohio
March 27, 1995
<TABLE> <S> <C>
<ARTICLE> 5
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<NAME> BELDEN & BLAKE CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 3,649,005
<SECURITIES> 0
<RECEIVABLES> 13,068,663
<ALLOWANCES> 0
<INVENTORY> 6,676,884
<CURRENT-ASSETS> 26,092,344
<PP&E> 159,963,979
<DEPRECIATION> 40,788,899
<TOTAL-ASSETS> 148,172,795
<CURRENT-LIABILITIES> 12,481,383
<BONDS> 47,858,158
<COMMON> 708,474
0
2,400,000
<OTHER-SE> 78,033,372
<TOTAL-LIABILITY-AND-EQUITY> 148,172,795
<SALES> 82,545,087
<TOTAL-REVENUES> 83,103,929
<CGS> 54,722,441
<TOTAL-COSTS> 54,722,441
<OTHER-EXPENSES> 18,794,290
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,587,207
<INCOME-PRETAX> 5,999,991
<INCOME-TAX> 2,157,070
<INCOME-CONTINUING> 3,842,921
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,842,921
<EPS-PRIMARY> .52
<EPS-DILUTED> .52
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